Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-16598 October 3, 1921

H. E. HEACOCK COMPANY, plaintiff-appellant,

vs.
MACONDRAY & COMPANY, INC., defendant-appellant.

Fisher & DeWitt for plaintiff-appellant.

Wolfson, Wolfson & Schwarzkopf for defendant-appellant.

JOHNSON, J.:

This action was commenced in the Court of First Instance of the City of Manila to recover the sum of P240 together
with interest thereon. The facts are stipulated by the parties, and are, briefly, as follows:

(1) On or about the 5th day of June, 1919, the plaintiff caused to be delivered on board of steamship Bolton
Castle, then in the harbor of New York, four cases of merchandise one of which contained twelve (12) 8-
day Edmond clocks properly boxed and marked for transportation to Manila, and paid freight on said
clocks from New York to Manila in advance. The said steampship arrived in the port of Manila on or about
the 10th day of September, 1919, consigned to the defendant herein as agent and representative of said
vessel in said port. Neither the master of said vessel nor the defendant herein, as its agent, delivered to the
plaintiff the aforesaid twelve 8-day Edmond clocks, although demand was made upon them for their
delivery.

(2) The invoice value of the said twelve 8-day Edmond clocks in the city of New York was P22 and the
market value of the same in the City of Manila at the time when they should have been delivered to the
plaintiff was P420.

(3) The bill of lading issued and delivered to the plaintiff by the master of the said steamship Bolton
Castle contained, among others, the following clauses:

1. It is mutually agreed that the value of the goods receipted for above does not exceed $500 per
freight ton, or, in proportion for any part of a ton, unless the value be expressly stated herein and
ad valorem freight paid thereon.

9. Also, that in the event of claims for short delivery of, or damage to, cargo being made, the
carrier shall not be liable for more than the net invoice price plus freight and insurance less all
charges saved, and any loss or damage for which the carrier may be liable shall be adjusted pro
rata on the said basis.

(4) The case containing the aforesaid twelve 8-day Edmond clocks measured 3 cubic feet, and the freight
ton value thereof was $1,480, U. S. currency.

(5) No greater value than $500, U. S. currency, per freight ton was declared by the plaintiff on the aforesaid
clocks, and no ad valorem freight was paid thereon.
 (6) On or about October 9, 1919, the defendant tendered to the plaintiff P76.36, the proportionate freight
ton value of the aforesaid twelve 8-day Edmond clocks, in payment of plaintiff's claim, which tender
plaintiff rejected.

The lower court, in accordance with clause 9 of the bill of lading above quoted, rendered judgment in favor of the
plaintiff against the defendant for the sum of P226.02, this being the invoice value of the clocks in question plus the
freight and insurance thereon, with legal interest thereon from November 20, 1919, the date of the complaint,
together with costs. From that judgment both parties appealed to this court.

The plaintiff-appellant insists that it is entitled to recover from the defendant the market value of the clocks in
question, to wit: the sum of P420. The defendant-appellant, on the other hand, contends that, in accordance with
clause 1 of the bill of lading, the plaintiff is entitled to recover only the sum of P76.36, the proportionate freight ton
value of the said clocks. The claim of the plaintiff is based upon the argument that the two clause in the bill of lading
above quoted, limiting the liability of the carrier, are contrary to public order and, therefore, null and void. The
defendant, on the other hand, contends that both of said clauses are valid, and the clause 1 should have been applied
by the lower court instead of clause 9.

I. The appeal of the plaintiff presents this question; May a common carrier, by stipulations inserted in the bill of
lading, limit its liability for the loss of or damage to the cargo to an agreed valuation of the latter? 1awph!l.net

Three kinds of stipulations have often been made in a bill of lading. The first is one exempting the carrier from any
and all liability for loss or damage occasioned by its own negligence. The second is one providing for an unqualified
limitation of such liability to an agreed valuation. And the third is one limiting the liability of the carrier to an
agreed valuation unless the shipper declares a higher value and pays a higher rate of freight. According to an almost
uniform weight of authority, the first and second kinds of stipulations are invalid as being contrary to public policy,
but the third is valid and enforceable.

The authorities relied upon by the plaintiff-appellant (the Harter Act [Act of Congress of February 13, 1893]:
Louisville Ry. Co. vs. Wynn, 88 Tenn., 320; and Galt vs. Adams Express Co., 4 McAr., 124; 48 Am. Rep., 742)
support the proposition that the first and second stipulations in a bill of lading are invalid which either exempt the
carrier from liability for loss or damage occasioned by its negligence, or provide for an unqualified limitation of
such liability to an agreed valuation.

A reading of clauses 1 and 9 of the bill of lading here in question, however, clearly shows that the present case falls
within the third stipulation, to wit: That a clause in a bill of lading limiting the liability of the carrier to a certain
amount unless the shipper declares a higher value and pays a higher rate of freight, is valid and enforceable. This
proposition is supported by a uniform lien of decisions of the Supreme Court of the United States rendered both
prior and subsequent to the passage of the Harter Act, from the case of Hart vs. Pennsylvania R. R. Co. (decided
Nov. 24, 1884; 112 U. S., 331), to the case of the Union Pacific Ry. Co. vs. Burke (decided Feb. 28, 1921, Advance
Opinions, 1920-1921, p. 318).

In the case of Hart vs. Pennsylvania R. R. Co., supra, it was held that "where a contract of carriage, signed by the
shipper, is fairly made with a railroad company, agreeing on a valuation of the property carried, with the rate of
freight based on the condition that the carrier assumes liability only to the extent of the agreed valuation, even in
case of loss or damage by the negligence of the carrier, the contract will be upheld as proper and lawful mode of
securing a due proportion between the amount for which the carrier may be responsible and the freight he receives,
and protecting himself against extravagant and fanciful valuations."

In the case of Union Pacific Railway Co. vs. Burke, supra, the court said: "In many cases, from the decision in
Hart vs. Pennsylvania R. R. Co. (112 U. S. 331; 28 L. ed., 717; 5 Sup. Ct. Rep., 151, decided in 1884), to Boston
and M. R. Co. vs. Piper (246 U. S., 439; 62 L. ed., 820; 38 Sup. Ct. Rep., 354; Ann. Cas. 1918 E, 469, decided in
1918), it has been declared to be the settled Federal law that if a common carrier gives to a shipper the choice of two
rates, the lower of the conditioned upon his agreeing to a stipulated valuation of his property in case of loss, even by
the carrier's negligence, if the shipper makes such a choice, understandingly and freely, and names his valuation, he
cannot thereafter recover more than the value which he thus places upon his property. As a matter of legal
distinction, estoppel is made the basis of this ruling, — that, having accepted the benefit of the lower rate, in
common honesty the shipper may not repudiate the conditions on which it was obtained, — but the rule and the
effect of it are clearly established."

The syllabus of the same case reads as follows: "A carrier may not, by a valuation agreement with a shipper, limit its
liability in case of the loss by negligence of an interstate shipment to less than the real value thereof, unless the
shipper is given a choice of rates, based on valuation."

A limitation of liability based upon an agreed value to obtain a lower rate does not conflict with any sound
principle of public policy; and it is not conformable to plain principles of justice that a shipper may
understate value in order to reduce the rate and then recover a larger value in case of loss. (Adams Express
Co. vs.Croninger 226 U. S. 491, 492.) See also Reid vs. Farbo (130 C. C. A., 285); Jennings vs. Smith (45
C. C. A., 249); George N. Pierce Co. vs. Wells, Fargo and Co. (227 U. S., 278); Wells, Fargo &
Co. vs. Neiman-Marcus Co. (227 U. S., 469).

It seems clear from the foregoing authorities that the clauses (1 and 9) of the bill of lading here in question are not
contrary to public order. Article 1255 of the Civil Code provides that "the contracting parties may establish any
agreements, terms and conditions they may deem advisable, provided they are not contrary to law, morals or public
order." Said clauses of the bill of lading are, therefore, valid and binding upon the parties thereto.

II. The question presented by the appeal of the defendant is whether clause 1 or clause 9 of the bill of lading here in
question is to be adopted as the measure of defendant's liability. Clause 1 provides as follows:

1. It is mutually agreed that the value of the goods receipted for above does not exceed $500 per freight
ton, or, in proportion for any part of a ton, unless the value be expressly stated herein and ad valorem
freight paid thereon. Clause 9 provides:

9. Also, that in the even of claims for short delivery of, or damage to, cargo being made, the carrier shall
not be liable for more than the net invoice price plus freight and insurance less all charges saved, and any
loss or damage for which the carrier may be liable shall be adjusted pro rata on the said basis.

The defendant-appellant contends that these two clauses, if construed together, mean that the shipper and the carrier
stipulate and agree that the value of the goods receipted for does not exceed $500 per freight ton, but should the
invoice value of the goods be less than $500 per freight ton, then the invoice value governs; that since in this case
the invoice value is more than $500 per freight ton, the latter valuation should be adopted and that according to that
valuation, the proportionate value of the clocks in question is only P76.36 which the defendant is ready and willing
to pay to the plaintiff.

It will be noted, however, that whereas clause 1 contains only an implied undertaking to settle in case of loss on the
basis of not exceeding $500 per freight ton, clause 9 contains an express undertaking to settle on the basis of the net
invoice price plus freight and insurance less all charges saved. "Any loss or damage for which the carrier may be
liable shall be adjusted pro rata on the said basis," clause 9 expressly provides. It seems to us that there is an
irreconcilable conflict between the two clauses with regard to the measure of defendant's liability. It is difficult to
reconcile them without doing violence to the language used and reading exceptions and conditions into the
undertaking contained in clause 9 that are not there. This being the case, the bill of lading in question should be
interpreted against the defendant carrier, which drew said contract. "A written contract should, in case of doubt, be
interpreted against the party who has drawn the contract." (6 R. C. L. 854.) It is a well-known principle of
construction that ambiguity or uncertainty in an agreement must be construed most strongly against the party
causing it. (6 R. C. L., 855.) These rules as applicable to contracts contained in bills of lading. "In construing a bill
of lading given by the carrier for the safe transportation and delivery of goods shipped by a consignor, the contract
will be construed most strongly against the carrier, and favorably to the consignor, in case of doubt in any matter of
construction." (Alabama, etc. R. R. Co. vs. Thomas, 89 Ala., 294; 18 Am. St. Rep., 119.)It follows from all of the
foregoing that the judgment appealed from should be affirmed, without any finding as to costs. So ordered.
 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. L-25783 February 25, 1975

MACONDRAY AND COMPANY INC., in its capacity as ship agent of the S/S "TAI PING", petitioner,
vs.
ACTING COMMISSIONER OF CUSTOMS, respondent.

Ross, Selph, Salcedo, Del Rosario, Bito and Misa for petitioner.

Office of the Solicitor General Antonio P. Barredo, Assistant Solicitor General Felicisimo R. Rosete and Solicitor
Sumilang Bernardo for respondent.

ESGUERRA, J.:

Petition for review on certiorari of a decision of the Court of Tax Appeals dated November 15, 1965, affirming a
decision of the Collector of Customs which imposed a fine of P1,000.00 upon petitioner for violation of Section
1005 in relation to Section 2521 of the Tariff and Customs Code on unmanifested cargoes.

On November 2, 1962, the vessel S/S TAI PING", of which petitioner is the local agent, arrived at the port of
Manila from San Francisco, California, U.S.A., conveying various shipments of merchandise, among which was a
shipment of one (1) coil carbon steel, one (1) bundle carbon steel flat and one (1) carton containing carbon tool
holders carbide cutters, ground, all of which appeared in the Bill of Lading No. 22, consigned to Bogo Medellin
Millings Co., Inc. The shipment, except the one (1) coil carbon steel was not reflected in the Inward Cargo Manifest
as required by Section 1005 in relation to Section 2521 of the Tariff and Customs Code of the Philippines. Allied
Brokerage Corporation, acting for and in behalf of Bogo Medellin Milling Co. requested petitioner Macondray &
Co., agent of the vessel S/S TAI PING", to correct the manifest of the steamer so that it may take delivery of the
goods at Customs House. Meanwhile, the Collector of Customs required herein petitioner to explain and show cause
why no administrative fine should be imposed upon said vessel. On August 15, 1963, counsel for petitioner wrote a
letter to the Collector of Customs pertinent portion of which reads as follows:

It appears from our client's records that the disputed shipment was described in the ship's manifest
as "1 coil carbon steel" only. However, the bill of lading issued and surrendered to our client, duly
endorsed by the consignee, called for the delivery of 1 coil carbon steel, 1 bundle carbon steel flat
and 1 carbon containing tool holders carbide cutters ground. Upon investigation by our client, it
was verified that the vessel actually carried on board and discharged at Manila 3 as called for in
the bill of lading. By a letter dated November 15, 1962, our client immediately applied with your
Bureau for the appropriate amendment on an approved customs form to reflect the true correct
description of the shipment and to effect its release from the customs house.

To said letter, the Collector of Customs replied on September 26, 1963, as follows:
 On August 13, 1963 you wrote this Office informing that this case would be referred to your
lawyers who would in turn take the matter with us. However, this Office would like to inform you
that under Section 2308, in relation to Section 2312, of the Tariff and Customs Code, you are free
to contest by appropriate protest the action of this Office in imposing the fine, but you have to pay
the fine first.

The records of this Office show that the vesels under your agency have oftentimes failed to declare
correctly the cargoes they convey as covered by the pertinent bill of lading. Intentionally, or
otherwise, such incorrect preparation of cargo manifests cannot be tolerated for it does not only
enhance the commission of fraud but also makes smuggling suspicious since it renders difficult
tracing of the source of contraband goods. In passing, it may be stated that your vessels have been
found committing the same violations despite the warnings heretofore given and which your
company has not given any concern. As a matter of fact, your vessel have oftentimes been reported
committing the same violations, which conduct is tantamount to willful and deliberate defiance of
constituted authority. (p. 5 Customs Record)

The fine of P1,000 was paid by herein petitioner under protest on December 4, 1963.

Hearing on the protest, docketed as Manila Protest No. 812, proceeded thereafter. On August 24, 1964, the Collector
of Customs of the Port of Manila ordered the dismissal of said protest for lack of merit. (Customs Record pp. 92-95)
On appeal to the Commissioner of Customs (Customs Case No. 725) the latter sustained the Collector of Customs.
Herein petitioner filed a petition for review with the Court of Tax Appeals where the parties submitted the case on
the pleadings and the customs record. The Court of Tax Appeals affirmed the decision of the Collector of Customs
as affirmed by the Commissioner of Customs. (p. 39 Customs Record) Hence this petition for review with the
petitioner assigning as errors the following:

1. The Court of Tax Appeals erred in holding that the bill of lading whereon the shipment was
correctly manifested was not a substantial compliance with the provision of Section 1005 of the
Tariff and Customs Code;

2. The Court of Tax Appeals erred in holding that the original manifest was not amended to reflect
the true and accurate description of the shipment;

3. The Court of Tax Appeals erred in affirming the decision of respondent with costs against
petitioner.

The sole question to be resolved is whether or not the Collector of Customs erred in imposing a fine on the vessel,
S/S TAI PING, for alleged violation of section 1005 in relation to section 2521 of the Tariff and Customs Code for
landing unmanifested cargo at the port of Manila.

On the first assigned error, petitioner herein contends that from "the fact the whole shipment was indicated in the bill
of lading, it is clear that the deficiency of the original vessel's manifest was adequately supplied by the entries of
said bill of lading and, therefore, no violation of the provision of the Tariff and Customs Code, was committed."
(Brief for petitioner pp. 6-7.)We do not subscribe to such conclusion. Sections 1004 and 1005, in relation to section
2521 of the Tariff and Customs Code, explicitly provide:

Section 1004. Documents to be produced by master upon entry of a vessel — For the purpose of
making entry of a vessel engaged in foreign trade, the master thereof shall present the following
documents, duly certified by him, to the customs boarding official:.
 a. The original manifest of all cargo destined for the port, to be returned with the indorsement of
the boarding official;

b. Three copies of the same manifest, one of which upon certification by the boarding official as to
the correctness of the copy, shall be returned to the master;

c. ...

Section 1005. Manifest required of vessel from foreign port. — Every vessel from a foreign port
must have on board a complete manifest of all her cargo.

All of the cargo intended to be landed at a port, in the Philippines, must be described in separate
manifests for each port of call therein. Each manifest shall include the port of departure and the
port of delivery with the marks, numbers, quantity and description of the packages and the names
of the consignees thereof. Every vessel from a foreign port must have on board complete manifests
of passengers and their baggage, in the prescribed form, setting forth their destination and all
particulars required by the immigration laws; ...

Section 2521. Failure to supply requisite manifests. — If any vessel or aircraft enters or departs
from a port of entry without submitting the proper manifests to the customs authorities, or shall
enter or depart conveying unmanifested cargo other than as stated in the next proceeding section
hereof, such vessel or aircraft shall be fined in a sum not exceeding ten thousand pesos.

The same fine shall be imposed upon any arriving or departing vessel or aircraft if the master or
pilot in command shall fail to deliver or mail to the Auditor General a true copy of the manifest of
the incoming or outgoing cargo, as required by law.

The inclusion of the unmanifested cargoes in the Bill of Lading does not satisfy the requirement of the aforequoted
sections of the Tariff and Customs Code. It is to be noted that nowhere in the said section is the presentation of a
Bill of Lading required, but only the presentation of a Manifest containing a true and accurate description of the
cargoes. This is for the simple reason that while a manifest is a declaration of the entire cargo, a bill of lading is but
a declaration of a specific part of the cargo and is a matter of business convenience based exclusively on a
contract.1 The object of a manifest is to furnish the customs officers with a list to check against, to inform our
revenue officers what goods are being brought into the country, and to provide a safeguard against goods being
brought into this country on a vessel and then smuggled ashore. 2 In short, while a bill of lading is ordinarily merely a
convenient commercial instrument designed to protect the importer or consignee, a manifest of the cargo is
absolutely essential to the exportation or importation of property in all vessels, the evident intent and object of which
is to impose upon the owners and officers of such vessel an imperative obligation to submit lists of the entire loading
of the ship in the prescribed form, to facilitate the labors of the customs and immigration officers and to defeat any
attempt to make use of such vessels to secure the unlawful entry of persons or things into the country. 3 Since
therefore, the purpose served by the manifest is far different from that of the bill of lading, We cannot acceptor place
an imprimatur on the contention of petitioner that the entries in the bill of lading adequately supplied the deficiency
of the manifest and cured it of its infirmity. The mandate of the law is clear and We cannot settle for less. The law
imposes the absolute obligation, under penalty for failure, upon every vessel from a foreign port to have "on board
complete written or typewritten manifests of all her cargo, signed by the master". Where the law requires a manifest
to be kept or delivered, it is not complied with unless the manifest is true and accurate. (U.S. vs. The S.S. Islas
Filipinos, No. 8746, 28 Phil. 291.297).

II

On the second assigned error, petitioner would want Us to believe that an amendment was made on the manifest to
reflect the true and accurate description of the shipment. We have, however, gone over the record very carefully but
found no evidence to substantiate the allegation of herein petitioner. The testimony of Irineo Lumabi, (t.s.n. March
2, 1964, p. 78 Customs Record), manifest clerk of the Marine Division, that he prepared the amending entries
himself is of no moment. In the first place, Lumabi alleged in his testimony that he "made" the entries reflecting the
unmanifested cargoes without prior approval from either the Collector of Customs, his Deputy, or the chief of the
Marine Division and, therefore, in contravention of the usual and accepted office procedure. Secondly, no amended
manifest was ever presented during the hearing inspite of ample time requested by and granted to petitioners to
enable them to produce this document. Also, the supposed amendments were never attached to the manifest itself as
required by Section 1005 4 but as mentioned earlier, said "amendments were allegedly annotated" by Irineo Lumabi
on the manifest itself after he "noted" the discrepancy between the entries in the original manifest and the entry
papers.

Likewise, petitioner Macondray & Co. presented Dominador Bergano, its chief of claims but whose testimony did
not in any way bolster up petitioner's stand. All he testified to was the fact that they (Macondray & Co.) approved
the amendment to the manifest and filed the same with the Bureau of Customs (t.s.n. p. 68 Customs Record) without
even knowing whether or not the same was approved by the Collector of Customs. What is evident on record is the
fact that no valid amendment to the ship's manifest was made conformably with Section 1005 of the Tariff and
Customs Code supra. Since there was no valid amendment, liability attached as to the unmanifested cargoes and this
is clearly provided for in Section 2521, supra, of the Tariff and Customs Code. And as ably argued by then Solicitor
General, now Justice Antonio Barredo, in respondent's well prepared brief; "that even granting arguendo, that the
amendment was approved and therefore valid it does not in any way relieve the vessel from the liability which she
had already incurred prior to the amendment. The philosophy and purpose behind the law authorizing amendment,
under paragraph 3 of Section 1005 of the Tariff and Customs Code, is to protect innocent importers or consignees
from the mistake or unlawful acts of the master. In the case of Dobbins Distillery vs. US 96 US 295-400, it was held
that by the General Maritime Law, vessels are made responsible for the unlawful acts of their masters and crews.
Likewise, in the case of Gillam vs. US (C.C.A, S.C. 1928) 27F (2d) 296, USCA-Title 19, 1994, it was ruled that '...
statutory penalties are incurred where vessel bound for US failed to produce manifest, or has on board unmanifested
merchandise.' "

WHEREFORE, We affirm the decision appealed from.

Without pronouncement as to costs.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 95529 August 22, 1991

MAGELLAN MANUFACTURING MARKETING CORPORATION,* petitioner,

vs.
COURT OF APPEALS, ORIENT OVERSEAS CONTAINER LINES and F.E. ZUELLIG, INC. respondents.

REGALADO, J.:

Petitioner, via this petition for review on certiorari, seeks the reversal of the judgment of respondent Court of
Appeals in CA-G.R. CV No. 18781,1 affirming in part the decision of the trial court,2 the dispositive portion of
which reads:

Premises considered, the decision appealed from is affirmed insofar as it dismisses the complaint. On the
counter-claim, however, appellant is ordered to pay appellees the amount of P52,102.45 with legal interest
from date of extra-judicial demand. The award of attorney's fees is deleted. 3

The facts as found by respondent appellate court are as follows:

On May 20, 1980, plaintiff-appellant Magellan Manufacturers Marketing Corp. (MMMC) entered into a
contract with Choju Co. of Yokohama, Japan to export 136,000 anahaw fans for and in consideration of
$23,220.00. As payment thereof, a letter of credit was issued to plaintiff MMMC by the buyer. Through its
president, James Cu, MMMC then contracted F.E. Zuellig, a shipping agent, through its solicitor, one Mr.
King, to ship the anahaw fans through the other appellee, Orient Overseas Container Lines, Inc., (OOCL)
specifying that he needed an on-board bill of lading and that transhipment is not allowed under the letter of
credit (Exh. B-1). On June 30, 1980, appellant MMMC paid F.E. Zuellig the freight charges and secured a
copy of the bill of lading which was presented to Allied Bank. The bank then credited the amount of
US$23,220.00 covered by the letter of credit to appellant's account. However, when appellant's president
James Cu, went back to the bank later, he was informed that the payment was refused by the buyer
allegedly because there was no on-board bill of lading, and there was a transhipment of goods. As a result
of the refusal of the buyer to accept, upon appellant's request, the anahaw fans were shipped back to Manila
by appellees, for which the latter demanded from appellant payment of P246,043.43. Appellant abandoned
the whole cargo and asked appellees for damages.

In their Partial Stipulation of Facts, the parties admitted that a shipment of 1,047 cartons of 136,000 pieces
of Anahaw Fans contained in 1 x 40 and 1 x 20 containers was loaded at Manila on board the MV 'Pacific
Despatcher' freight prepaid, and duly covered by Bill of Lading No. MNYK201T dated June 27, 1980
issued by OOCL; that the shipment was delivered at the port of discharge on July 19, 1980, but was
subsequently returned to Manila after the consignee refused to accept/pay the same. 4

Elaborating on the above findings of fact of respondent court and without being disputed by herein private
respondents, petitioner additionally avers that:

When petitioner informed private respondents about what happened, the latter issued a certificate stating
that its bill of lading it issued is an on board bill of lading and that there was no actual transhipment of the
 fans. According to private respondents when the goods are transferred from one vessel to another which
both belong to the same owner which was what happened to the Anahaw fans, then there is (no)
transhipment. Petitioner sent this certification to Choju Co., Ltd., but the said company still refused to
accept the goods which arrived in Japan on July 19, 1980.

Private respondents billed petitioner in the amount of P16,342.21 for such shipment and P34,928.71 for
demurrage in Japan from July 26 up to August 31, 1980 or a total of P51,271.02. In a letter dated March 20,
1981, private respondents gave petitioner the option of paying the sum of P51,271.02 or to abandon the
Anahaw fans to enable private respondents to sell them at public auction to cover the cost of shipment and
demurrages. Petitioner opted to abandon the goods. However, in a letter dated June 22, 1981 private
respondents demanded for payment of P298,150.93 from petitioner which represents the freight charges
from Japan to Manila, demurrage incurred in Japan and Manila from October 22, 1980 up to May 20, 1981;
and charges for stripping the container van of the Anahaw fans on May 20, 1981.

On July 20, 1981 petitioner filed the complaint in this case praying that private respondents be ordered to
pay whatever petitioner was not able to earn from Choju Co., Ltd., amounting to P174,150.00 and other
damages like attorney's fees since private respondents are to blame for the refusal of Choju Co., Ltd. to
accept the Anahaw fans. In answer thereto the private respondents alleged that the bill of lading clearly
shows that there will be a transhipment and that petitioner was well aware that MV (Pacific) Despatcher
was only up to Hongkong where the subject cargo will be transferred to another vessel for Japan. Private
respondents also filed a counterclaim praying that petitioner be ordered to pay freight charges from Japan
to Manila and the demurrages in Japan and Manila amounting to P298,150.93.

The lower court decided the case in favor of private respondents. It dismissed the complaint on the ground
that petitioner had given its consent to the contents of the bill of lading where it is clearly indicated that
there will be transhipment. The lower court also said that petitioner is liable to pay to private respondent the
freight charges from Japan to Manila and demurrages since it was the former which ordered the reshipment
of the cargo from Japan to Manila.

On appeal to the respondent court, the finding of the lower (court) that petitioner agreed to a transhipment
of the goods was affirmed but the finding that petitioner is liable for P298,150.93 was modified. It was
reduced to P52,102.45 which represents the freight charges and demurrages incurred in Japan but not for
the demurrages incurred in Marta. According to the respondent (court) the petitioner can not be held liable
for the demurrages incurred in Manila because Private respondents did not timely inform petitioner that the
goods were already in Manila in addition to the fact that private respondent had given petitioner the option
of abandoning the goods in exchange for the demurrages.5

Petitioner, being dissatisfied with the decision of respondent court and the motion for reconsideration thereof having
been denied, invokes the Court's review powers for the resolution of the issues as to whether or not respondent court
erred (1) in affirming the decision of the trial court which dismissed petitioner's complaint; and (2) in holding
petitioner liable to private respondents in the amount of P52,102.45. 6

I. Petitioner obstinately faults private respondents for the refusal of its buyer, Choju Co., Ltd., to take delivery of the
exported anahaw fans resulting in a loss of P174,150.00 representing the purchase price of the said export items
because of violation of the terms and conditions of the letter of credit issued in favor of the former which specified
the requirement for an on board bill of lading and the prohibition against transhipment of goods, inasmuch as the bill
of lading issued by the latter bore the notation "received for shipment" and contained an entry indicating
transhipment in Hongkong.

We find no fault on the part of private respondents. On the matter of transhipment, petitioner maintains that "...
while the goods were transferred in Hongkong from MV Pacific Despatcher, the feeder vessel, to MV Oriental
Researcher, a mother vessel, the same cannot be considered transhipment because both vessels belong to the same
shipping company, the private respondent Orient Overseas Container Lines, Inc." 7 Petitioner emphatically goes on
to say: "To be sure, there was no actual transhipment of the Anahaw fans. The private respondents have executed a
certification to the effect that while the Anahaw fans were transferred from one vessel to another in Hong Kong,
since the two vessels belong to one and the same company then there was no transhipment. 8

Transhipment, in maritime law, is defined as "the act of taking cargo out of one ship and loading it in another,"9 or
"the transfer of goods from the vessel stipulated in the contract of affreightment to another vessel before the place of
destination named in the contract has been reached," 10 or "the transfer for further transportation from one ship or
conveyance to another."11 Clearly, either in its ordinary or its strictly legal acceptation, there is transhipment whether
or not the same person, firm or entity owns the vessels. In other words, the fact of transhipment is not dependent
upon the ownership of the transporting ships or conveyances or in the change of carriers, as the petitioner seems to
suggest, but rather on the fact of actual physical transfer of cargo from one vessel to another.

That there was transhipment within this contemplation is the inescapable conclusion, as there unmistakably appears
on the face of the bill of lading the entry "Hong Kong" in the blank space labeled "Transhipment," which can only
mean that transhipment actually took place.12 This fact is further bolstered by the certification13 issued by private
respondent F.E. Zuellig, Inc. dated July 19, 1980, although it carefully used the term "transfer" instead of
transhipment. Nonetheless, no amount of semantic juggling can mask the fact that transhipment in truth occurred in
this case.

Petitioner insists that "(c)onsidering that there was no actual transhipment of the Anahaw fans, then there is no
occasion under which the petitioner can agree to the transhipment of the Anahaw fans because there is nothing like
that to agree to" and "(i)f there is no actual transhipment but there appears to be a transhipment in the bill of lading,
then there can be no possible reason for it but a mistake on the part of the private respondents. 14

Petitioner, in effect, is saying that since there was a mistake in documentation on the part of private respondents,
such a mistake militates against the conclusiveness of the bill of lading insofar as it reflects the terms of the contract
between the parties, as an exception to the parol evidence rule, and would therefore permit it to explain or present
evidence to vary or contradict the terms of the written agreement, that is, the bill of lading involved herein.

It is a long standing jurisprudential rule that a bill of lading operates both as a receipt and as a contract. It is a receipt
for the goods shipped and a contract to transport and deliver the same as therein stipulated. As a contract, it names
the parties, which includes the consignee, fixes the route, destination, and freight rates or charges, and stipulates the
rights and obligations assumed by the parties.15 Being a contract, it is the law between the parties who are bound by
its terms and conditions provided that these are not contrary to law, morals, good customs, public order and public
policy.16 A bill of lading usually becomes effective upon its delivery to and acceptance by the shipper. It is
presumed that the stipulations of the bill were, in the absence of fraud, concealment or improper conduct, known to
the shipper, and he is generally bound by his acceptance whether he reads the bill or not. 17

The holding in most jurisdictions has been that a shipper who receives a bill of lading without objection after an
opportunity to inspect it, and permits the carrier to act on it by proceeding with the shipment is presumed to have
accepted it as correctly stating the contract and to have assented to its terms. In other words, the acceptance of the
bill without dissent raises the presumption that all the terms therein were brought to the knowledge of the shipper
and agreed to by him and, in the absence of fraud or mistake, he is estopped from thereafter denying that he assented
to such terms. This rule applies with particular force where a shipper accepts a bill of lading with full knowledge of
its contents and acceptance under such circumstances makes it a binding contract. 18

In the light of the series of events that transpired in the case at bar, there can be no logical conclusion other than that
the petitioner had full knowledge of, and actually consented to, the terms and conditions of the bill of lading thereby
making the same conclusive as to it, and it cannot now be heard to deny having assented thereto. As borne out by the
records, James Cu himself, in his capacity as president of MMMC, personally received and signed the bill of lading.
On practical considerations, there is no better way to signify consent than by voluntarry signing the document which
embodies the agreement. As found by the Court of Appeals —

Contrary to appellant's allegation that it did not agree to the transhipment, it could be gleaned from the
record that the appellant actually consented to the transhipment when it received the bill of lading
 personally at appellee's (F.E. Zuellig's) office. There clearly appears on the face of the bill of lading under
column "PORT OF TRANSHIPMENT" an entry "HONGKONG' (Exhibits'G-l'). Despite said entries he
still delivered his voucher (Exh. F) and the corresponding check in payment of the freight (Exhibit D),
implying that he consented to the transhipment (Decision, p. 6, Rollo). 19

Furthermore and particularly on the matter of whether or not there was transhipment, James Cu, in his testimony on
crossexamination, categorically stated that he knew for a fact that the shipment was to be unloaded in Hong Kong
from the MV Pacific Despatcher to be transferred to a mother vessel, the MV Oriental Researcher in this wise:

Q Mr. Cu, are you not aware of the fact that your shipment is to be transferred or transhipped at the port of
Hongkong?

A I know. It's not transport, they relay, not trans... yes, that is why we have an agreement if they should not
put a transhipment in Hongkong, that's why they even stated in the certification.

xxx xxx xxx

Q In layman's language, would you agree with me that transhipment is the transfer of a cargo from one
vessel to the other?

A As a layman, yes.

Q So, you know for a fact that your shipment is going to be unloaded in Hongkong from M. V. Dispatcher
(sic) and then transfer (sic) to another vessel which was the Oriental Dispatcher, (sic) you know that for a
fact?

A Yes, sir. (Emphasis supplied.)20

Under the parol evidence rule,21 the terms of a contract are rendered conclusive upon the parties, and
evidence aliunde is not admissible to vary or contradict a complete and enforceable agreement embodied in a
document, subject to well defined exceptions which do not obtain in this case. The parol evidence rule is based on
the consideration that when the parties have reduced their agreement on a particular matter into writing, all their
previous and contemporaneous agreements on the matter are merged therein. Accordingly, evidence of a prior or
contemporaneous verbal agreement is generally not admissible to vary, contradict or defeat the operation of a valid
instrument.22 The mistake contemplated as an exception to the parol evidence rule is one which is a mistake of fact
mutual to the parties.23 Furthermore, the rules on evidence, as amended, require that in order that parol evidence may
be admitted, said mistake must be put in issue by the pleadings, such that if not raised inceptively in the complaint or
in the answer, as the case may be, a party can not later on be permitted to introduce parol evidence
thereon.24 Needless to say, the mistake adverted to by herein petitioner, and by its own admission, was supposedly
committed by private respondents only and was raised by the former rather belatedly only in this instant petition.
Clearly then, and for failure to comply even only with the procedural requirements thereon, we cannot admit
evidence to prove or explain the alleged mistake in documentation imputed to private respondents by petitioner.

Petitioner further argues that assuming that there was transhipment, it cannot be deemed to have agreed thereto even
if it signed the bill of lading containing such entry because it had made known to private respondents from the start
that transhipment was prohibited under the letter of credit and that, therefore, it had no intention to allow
transhipment of the subject cargo. In support of its stand, petitioner relies on the second paragraph of Article 1370 of
the Civil Code which states that "(i)f the words appear to be contrary to the evident intention of the parties, the latter
shall prevail over the former," as wen as the supposed ruling in Caltex Phil., Inc. vs. Intermediate Appellate Court,
et al.25 that "where the literal interpretation of a contract is contrary to the evident intention of the parties, the latter
shall prevail."
As between such stilted thesis of petitioner and the contents of the bill of lading evidencing the intention of the
parties, it is irremissible that the latter must prevail. Petitioner conveniently overlooks the first paragraph of the very
article that he cites which provides that "(i)f the terms of the contract are clear and leave no doubt upon the intention
of the contracting parties, the literal meaning of the stipulations shall control." In addition, Article 1371 of the same
Code provides that "(i)n order to judge the intention of the contracting parties, their contemporaneous and
subsequent acts shall be principally considered."

The terms of the contract as embodied in the bill of lading are clear and thus obviates the need for any interpretation.
The intention of the parties which is the carriage of the cargo under the terms specified thereunder and the wordings
of the bill of lading do not contradict each other. The terms of the contract being conclusive upon the parties and
judging from the contemporaneous and subsequent actuations of petitioner, to wit, personally receiving and signing
the bill of lading and paying the freight charges, there is no doubt that petitioner must necessarily be charged with
full knowledge and unqualified acceptance of the terms of the bill of lading and that it intended to be bound thereby.

Moreover, it is a well-known commercial usage that transhipment of freight without legal excuse, however
competent and safe the vessel into which the transfer is made, is a violation of the contract and an infringement of
the right of the shipper, and subjects the carrier to liability if the freight is lost even by a cause otherwise
excepted.26 It is highly improbable to suppose that private respondents, having been engaged in the shipping
business for so long, would be unaware of such a custom of the trade as to have undertaken such transhipment
without petitioner's consent and unnecessarily expose themselves to a possible liability. Verily, they could only have
undertaken transhipment with the shipper's permission, as evidenced by the signature of James Cu.

Another ground for the refusal of acceptance of the cargo of anahaw fans by Choju Co., Ltd. was that the bill of
lading that was issued was not an on board bill of lading, in clear violation of the terms of the letter of credit issued
in favor of petitioner. On cross-examination, it was likewise established that petitioner, through its aforesaid
president, was aware of this fact, thus:

Q If the container van, the loaded container van, was transported back to South Harbor on June 27, 1980,
would you tell us, Mr. Cu, when the Bill of Lading was received by you?

A I received on June 30, 1980. I received at the same time so then I gave the check.

xxx xxx xxx

Q So that in exchange of the Bill of Lading you issued your check also dated June 30, 1980?

A Yes, sir.

Q And June 27, 1980 was the date of the Bill of Lading, did you notice that the Bill of Lading states:
'Received for shipment'only? .

A Yes, sir.

Q What did you say?

A I requested to issue me on board bill of lading.

Q When?

A In the same date of June 30.

Q What did they say?

 A They said, they cannot.

xxx xxx xxx

Q Do you know the difference between a "received for shipment bill of lading" and "on board bill of
lading"?

A Yes, sir.

Q What's the difference?

A Received for shipment, you can receive the cargo even you don't ship on board, that is placed in the
warehouse; while on-board bill of lading means that is loaded on the vessel, the goods.

xxx xxx xxx

Q In other words, it was not yet on board the vessel?

A During that time, not yet.

xxx xxx xxx

Q Do you know, Mr. Cu, that under the law, if your shipment is received on board a vessel you can demand
an on-board bill of lading not only a received for shipment bill of lading.?

A Yes sir.

Q And did you demand from F.E. Zuellig the substitution of that received for shipment bill of lading with
an on-board bill of lading?

A Of course, instead they issue me a certification.

Q They give you a ... ?

A ... a certification that it was loaded on board on June 30.

xxx xxx xxx

Q Mr. Cu, are you aware of the conditions of the Letter of Credit to the effect that there should be no
transhipment and that it should also get an on board bill of lading.?

A Yes sir.27

Undoubtedly, at the outset, petitioner knew that its buyer, Choju Co., Ltd., particularly required that there be an on
board bill of lading, obviously due to the guaranty afforded by such a bill of lading over any other kind of bill of
lading. The buyer could not have insisted on such a stipulation on a pure whim or caprice, but rather because of its
reliance on the safeguards to the cargo that having an on board bill of lading ensured. Herein petitioner cannot feign
ignorance of the distinction between an "on board" and a "received for shipment" bill of lading, as manifested by
James Cu's testimony. It is only to be expected that those long engaged in the export industry should be familiar
with business usages and customs.
In its petition, MMMC avers that "when petitioner teamed of what happened, it saw private respondent F.E. Zuellig
which, in turn, issued a certification that as of June 30, 1980, the Anahaw fans were already on board MV Pacific
Despatcher (which means that the bill of lading is an on- board-bill of lading or 'shipped' bill of lading as
distinguished from a 'received for shipment'bill of lading as governed by Sec. 3, par. 7, Carriage of Goods by Sea
Act) ...."28 What the petitioner would suggest is that said certification issued by F.E. Zuellig, Inc., dated July 19,
1980, had the effect of converting the original "received for shipment only" bill of lading into an "on board" bill of
lading as required by the buyer and was, therefore, by substantial compliance, not violative of the contract.

An on board bill of lading is one in which it is stated that the goods have been received on board the vessel which is
to carry the goods, whereas a received for shipment bill of lading is one in which it is stated that the goods have
been received for shipment with or without specifying the vessel by which the goods are to be shipped. Received for
shipment bills of lading are issued whenever conditions are not normal and there is insufficiency of shipping
space.29An on board bill of lading is issued when the goods have been actually placed aboard the ship with every
reasonable expectation that the shipment is as good as on its way. 30 It is, therefore, understandable that a party to a
maritime contract would require an on board bill of lading because of its apparent guaranty of certainty of shipping
as well as the seaworthiness of the vessel which is to carry the goods.

It cannot plausibly be said that the aforestated certification of F.E. Zuellig, Inc. can qualify the bill of lading, as
originally issued, into an on board bill of lading as required by the terms of the letter of credit issued in favor of
petitioner. For one, the certification was issued only on July 19, 1980, way beyond the expiry date of June 30, 1980
specified in the letter of credit for the presentation of an on board bill of lading. Thus, even assuming that by a
liberal treatment of the certification it could have the effect of converting the received for shipment bill of lading
into an on board of bill of lading, as petitioner would have us believe, such an effect may be achieved only as of the
date of its issuance, that is, on July 19, 1980 and onwards.

The fact remains, though, that on the crucial date of June 30, 1980 no on board bill of lading was presented by
petitioner in compliance with the terms of the letter of credit and this default consequently negates its entitlement to
the proceeds thereof. Said certification, if allowed to operate retroactively, would render illusory the guaranty
afforded by an on board bill of lading, that is, reasonable certainty of shipping the loaded cargo aboard the vessel
specified, not to mention that it would indubitably be stretching the concept of substantial compliance too far.

Neither can petitioner escape hability by adverting to the bill of lading as a contract of adhesion, thus warranting a
more liberal consideration in its favor to the extent of interpreting ambiguities against private respondents as
allegedly being the parties who gave rise thereto. The bill of lading is clear on its face. There is no occasion to speak
of ambiguities or obscurities whatsoever. All of its terms and conditions are plainly worded and commonly
understood by those in the business.

It will be recalled that petitioner entered into the contract with Choju Co., Ltd. way back on May 20,1980 or over a
month before the expiry date of the letter of credit on June 30, 1980, thus giving it more than ample time to find a
carrier that could comply with the requirements of shipment under the letter of credit. It is conceded that bills of
lading constitute a class of contracts of adhesion. However, as ruled in the earlier case of Ong Yiu vs. Court of
Appeals, et al.31 and reiterated in Servando, et al. vs. Philippine Steam Navigation Co.,32 plane tickets as well as bills
of lading are contracts not entirely prohibited. The one who adheres to the contract is in reality free to reject it
entirely; if he adheres, he gives his consent. The respondent court correctly observed in the present case that "when
the appellant received the bill of lading, it was tantamount to appellant's adherence to the terms and conditions as
embodied therein.33

In sum, petitioner had full knowledge that the bill issued to it contained terms and conditions clearly violative of the
requirements of the letter of credit. Nonetheless, perhaps in its eagerness to conclude the transaction with its
Japanese buyer and in a race to beat the expiry date of the letter of credit, petitioner took the risk of accepting the
bill of lading even if it did not conform with the indicated specifications, possibly entertaining a glimmer of hope
and imbued with a touch of daring that such violations may be overlooked, if not disregarded, so long as the cargo is
delivered on time. Unfortunately, the risk did not pull through as hoped for. Any violation of the terms and
conditions of the letter of credit as would defeat its right to collect the proceeds thereof was, therefore, entirely of
the petitioner's making for which it must bear the consequences. As finally averred by private respondents, and with
which we agree, "... the questions of whether or not there was a violation of the terms and conditions of the letter of
credit, or whether or not such violation was the cause or motive for the rejection by petitioner's Japanese buyer
should not affect private respondents therein since they were not privies to the terms and conditions of petitioner's
letter of credit and cannot therefore be held liable for any violation thereof by any of the parties thereto." 34

II. Petitioner contends that respondent court erred in holding it liable to private respondents for P52,102.45 despite
its exercise of its option to abandon the cargo. It will be recalled that the trial court originally found petitioner liable
for P298,150.93, which amount consists of P51,271.02 for freight, demurrage and other charges during the time that
the goods were in Japan and for its reshipment to Manila, P831.43 for charges paid to the Manila International Port
Terminal, and P246,043.43 for demurrage in Manila from October 22, 1980 to June 18, 1981. On appeal, the Court
of Appeals limited petitioner's liability to P52,102.45 when it ruled:

As regards the amount of P51,271.02, which represents the freight charges for the return shipment to
Manila and the demurrage charges in Japan, the same is supported by appellant's own letter request (Exh. 2)
for the return of the shipment to Manila at its (appellant's) expense, and hence, it should be held liable
therefor. The amount of P831.43 was paid to the Manila International Port Terminal upon arrival of the
shipment in Manila for appellant's account. It should properly be charged to said appellant. 35

However, respondent court modified the trial court's decision by excluding the award for P246,043.43 for demurrage
in Manila from October 22, 1980 to June 18, 1981.

Demurrage, in its strict sense, is the compensation provided for in the contract of affreightment for the detention of
the vessel beyond the time agreed on for loading and unloading. Essentially, demurrage is the claim for damages for
failure to accept delivery. In a broad sense, every improper detention of a vessel may be considered a demurrage.
Liability for demurrage, using the word in its strictly technical sense, exists only when expressly stipulated in the
contract. Using the term in its broader sense, damages in the nature of demurrage are recoverable for a breach of the
implied obligation to load or unload the cargo with reasonable dispatch, but only by the party to whom the duty is
owed and only against one who is a party to the shipping contract. 36 Notice of arrival of vessels or conveyances, or
of their placement for purposes of unloading is often a condition precedent to the right to collect demurrage charges.

Private respondents, admittedly, have adopted the common practice of requiring prior notice of arrival of the goods
shipped before the shipper can be held liable for demurrage, as declared by Wilfredo Hans, head of the accounting
department of F.E. Zuellig, Inc., on cross-examination as a witness for private respondents:

Q ... you will agree with me that before one could be charged with demurrage the shipper should be
notified of the arrival of the shipment?

A Yes sir.

Q Without such notification, there is no way by which the shipper would know (of) such arrival?

A Yes.

Q And no charges of demurrage before the arrival of the cargo?

A Yes sir.37

Accordingly, on this score, respondent court ruled:

However, insofar as the demurrage charges of P246,043.43 from October up to May 1980, arriv(al) in
Manila, are concerned, We are of the view that appellant should not be made to shoulder the same, as it was
not at fault nor was it responsible for said demurrage charges. Appellee's own witness (Mabazza) testified
that while the goods arrived in Manila in October 1980, appellant was notified of said arrival only in March
 1981. No explanation was given for the delay in notifying appellant. We agree with appellant that before it
could be charged for demurrage charges it should have been notified of the arrival of the goods
first.1âwphi1 Without such notification it could not- be so charged because there was no way by which it
would know that the goods had already arrived for it to take custody of them. Considering that it was only
in March 1981 (Exh. K) that appellant was notified of the arrival of the goods, although the goods had
actually arrived in October 1980 (tsn, Aug. 14, 1986, pp. 10-14), appellant cannot be charged for
demurrage from October 1980 to March 1981. ...38

While being satisfied with the exclusion of demurrage charges in Manila for the period from October 22,1980 to
June 18,1981, petitioner nevertheless assails the Court of Appeals' award of P52,102.43 in favor of private
respondents, consisting of P51,271.01 as freight and demurrage charges in Japan and P831.43 for charges paid at the
Manila International Port Termninal.

Petitioner asserts that by virtue of the exercise of its option to abandon the goods so as to allow private respondents
to sell the same at a public auction and to apply the proceeds thereof as payment for the shipping and demurrage
charges, it was released from liability for the sum of P52,102.43 since such amount represents the shipping and
demurrage charges from which it is considered to have been released due to the abandonment of goods. It further
argues that the shipping and demurrage charges from which it was released by the exercise of the option to abandon
the goods in favor of private respondents could not have referred to the demurrage charges in Manila because
respondent court ruled that the same were not chargeable to petitioner. Private respondents would rebut this
contention by saying in their memorandum that the abandonment of goods by petitioner was too late and made in
bad faith.39

On this point, we agree with petitioner. Ordinarily, the shipper is liable for freightage due to the fact that the
shipment was made for its benefit or under its direction and, correspondingly, the carrier is entitled to collect
charges for its shipping services. This is particularly true in this case where the reshipment of the goods was made at
the instance of petitioner in its letter of August 29, 1980. 40

However, in a letter dated March 20, 1981,41 private respondents belatedly informed petitioner of the arrival of its
goods from Japan and that if it wished to take delivery of the cargo it would have to pay P51,271.02, but with the
last paragraph thereof stating as follows:

Please can you advise within 15 days of receipt of this letter whether you intend to take delivery of this
shipment, as alternatively we will have to take legal proceedings in order to have the cargo auctioned to
recover the costs involved, as well as free the container which are (sic) urgently required for export
cargoes.

Clearly, therefore, private respondents unequivocally offered petitioner the option of paying the shipping and
demurrage charges in order to take delivery of the goods or of abandoning the same so that private respondents
could sell them at public auction and thereafter apply the proceeds in payment of the shipping and other charges.

Responding thereto, in a letter dated April 3, 1981, petitioner seasonably communicated its decision to abandon to
the goods in favor of private respondents with the specific instruction that any excess of the proceeds over the legal
costs and charges be turned over to petitioner. Receipt of said letter was acknowledged by private respondents, as
revealed by the testimony of Edwin Mabazza, a claim officer of F.E. Zuellig, Inc., on cross-examination.42

Despite petitioner's exercise of the option to abandon the cargo, however, private respondents sent a demand letter
on June 22, 198143 insisting that petitioner should pay the entire amount of P298,150.93 and, in another letter dated
Apiril 30, 1981,44 they stated that they win not accept the abandonment of the goods and demanded that the
outstanding account be settled. The testimony of said Edwin Mabazza definitely admits and bears this out. 45

Now, there is no dispute that private respondents expressly and on their own volition granted petitioner an option
with respect to the satisfaction of freightage and demurrage charges. Having given such option, especially since it
was accepted by petitioner, private respondents are estopped from reneging thereon. Petitioner, on its part, was well
within its right to exercise said option. Private respondents, in giving the option, and petitioner, in exercising that
option, are concluded by their respective actions. To allow either of them to unilaterally back out on the offer and on
the exercise of the option would be to countenance abuse of rights as an order of the day, doing violence to the long
entrenched principle of mutuality of contracts.

It will be remembered that in overland transportation, an unreasonable delay in the delivery of transported goods is
sufficient ground for the abandonment of goods. By analogy, this can also apply to maritime transportation. Further,
with much more reason can petitioner in the instant case properly abandon the goods, not only because of the
unreasonable delay in its delivery but because of the option which was categorically granted to and exercised by it as
a means of settling its liability for the cost and expenses of reshipment. And, said choice having been duly
communicated, the same is binding upon the parties on legal and equitable considerations of estoppel.

WHEREFORE, the judgment of respondent Court of Appeals is AFFIRMED with the MODIFICATION that
petitioner is likewise absolved of any hability and the award of P52,102.45 with legal interest granted by respondent
court on private respondents' counterclaim is SET ASIDE, said counterclaim being hereby DISMISSED, without
pronouncement as to costs.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 89757 August 6, 1990

ABOITIZ SHIPPING CORPORATION, petitioner,

vs.
COURT OF APPEALS AND GENERAL ACCIDENT FIRE AND LIFE ASSURANCE CORPORATION,
LTD., respondents.

Sycip, Salazar, Hernandez & Gatmaitan for petitioner.

Dollete, Blanco, Ejercito & Associates for private respondent.

GANCAYCO, J.:

The extent of the liability of a carrier of goods is again brought to the fore in this case.

On October 28, 1980, the vessel M/V "P. Aboitiz" took on board in Hongkong for shipment to Manila some
cargo consisting of one (1) twenty (20)-footer container holding 271 rolls of goods for apparel covered by Bill
of Lading No. 515-M and one (1) forty (40)-footer container holding four hundred forty- seven (447) rolls, ten
(10) bulk and ninety-five (95) cartons of goods for apparel covered by Bill of Lading No. 505-M. The total
value, including invoice value, freightage, customs duties, taxes and similar imports amounts to US$39,885.85
for the first shipment while that of the second shipment amounts to US$94,190.55. Both shipments were
consigned to the Philippine Apparel, Inc. and insured with the General Accident Fire and Life Assurance
Corporation, Ltd. (GAFLAC for short). The vessel is owned and operated by Aboitiz Shipping Corporation
(Aboitiz for short).

On October 31, 1980 on its way to Manila the vessel sunk and it was declared lost with all its cargoes.
GAFLAC paid the consignee the amounts US$39,885.85 or P319,086.80 and US$94,190.55 or P753,524.40 for
the lost cargo. As GAFLAC was subrogated to all the rights, interests and actions of the consignee against
Aboitiz, it filed an action for damages against Aboitiz in the Regional Trial Court of Manila alleging that the
loss was due to the fault and negligence of Aboitiz and the master and crew of its vessel in that they did not
observe the extraordinary diligence required by law as regards common carriers.

After the issues were joined and the trial on the merits a decision was rendered by the trial court on June 29,
1985, the dispositive part of which reads as follows:

PREMISES CONSIDERED, the Court finds in favor of the plaintiff and against the
defendant, ordering the latter to pay the former actual damages in the sum of P1,072,611.20
plus legal interest from the date of the filing of the complaint on October 28, 1981, until full
payment thereof, attorney's fees in the amount of 20% of the total claim and to pay the costs.

SO ORDERED. 1

Not satisfied therewith, Aboitiz appealed to the Court of Appeals wherein in due course a decision was rendered on
March 9, 1989 affirming in toto the appealed decision, with costs against defendant Aboitiz . 2
A motion for reconsideration of said decision filed by Aboitiz was denied in a resolution dated August 15, 1989.

Hence the herein petition for review alleging that the Court of Appeals decided the case not in accordance with law
when —

1. The Court of Appeals held that "findings of administrative bodies are not always binding on
court . This is especially so in the case at bar where GAFLAC was not a party in the BMI
proceedings and which proceedings was not adversary in characther." This ruling is contrary to the
principle established in Vasquez vs. Court of Appeals (138 SCRA 559), where it was held that
since the BMI possesses the required expertise in shipping matters and is imbued with quasi-
judicial powers, its factual findings are conclusive and binding on the court. Likewise, the case
of Timber Export Inc. vs. Retla Steamship Co. (CA-G.R. No. 66143-R) also established the rule
that decision of BMI must be given "great materiality and weight to the determination and
resolution of the case."

2. The Court of Appeals also held that the trial court did not err when it fixed the liability of
Aboitiz not on the basis of the stipulation in the bills of lading at US$500.00 per
package/container but on the actual value of the shipment lost notwithstanding the long line of
cases decided by this Honorable Supreme Court holding a contrary opinion, as shown below.

3. The Court of Appeals also held that the trial court did not abuse its discretion in granting
GAFLAC's motion for execution pending appeal notwithstanding the absence of reasonable and
justifiable grounds to support the same. 3

Under the first issue petitioner state that the sinking of the vessel M/V "P. Aboitiz" was the subject of an
administrative investigation conducted by the Board of Marine Inquiry (BMI) whereby in a decision dated
December 26, 1984, it was found that the sinking of the vessel may be attributed to force majeure on account of a
typhoon. Petitioner contends that these findings are conclusive on the courts.

In rejecting the evidence offered by the petitioner the appellate court ruled—

But over and above all these considerations, the trial court did not err in not giving weight to the
finding of the BMI that the vessel sank due to a fortuitous event. Findings of administrative bodies
are not always binding on courts. This is especially so in the case at bar where plaintiff was not a
party in the BMI proceedings and which proceeding was not adversary in character. 4

As a general rule, administrative findings of facts are not disturbed by the courts when supported by substantial
evidence unless it is tainted with unfairness or arbitrariness that would amount to abuse of discretion or lack of
jurisdiction. 5 Even in Vasquez vs. Court of Appeals, 6 which is cited by petitioner, this Court ruled that We
nevertheless disagree with the conclusion of the BMI exonerating the captain from any negligence "since it
obviously had not taken into account the legal responsibility of a common carrier towards the security of the
passengers involved."

This case was brought to court on October 28, 1981. The trial court was never informed of a parallel administrative
investigation that was being conducted by the BMI in any of the pleadings of the petitioner. It was only on March
22, 1985 when petitioner revealed to the trial court the decision of the BMI dated December 26, 1984 (one day after
Christmas day). 7 The said decision appears to have been rendered over three (3) years after the case was brought to
court.

Moreover, said administrative investigation was conducted unilaterally. Private respondent GAFLAC was not
notified or given an opportunity to participate therein. It cannot thereby be bound by said findings and conclusions
of the BMI.
The trial court and the appellate court found that the sinking of the M/V "P. Aboitiz" was not due to the waves
caused by tropical storm "Yoning" but due to the fault and negligence of petitioner, its master and crew. The court
reproduces with approval said findings —

xxx xxx xxx

After a careful examination of the evidence, the Court is convinced in the plaintiffs claim that the
M/V "Aboitiz" and its cargo were not lost due to fortuitous event or force majeure.

To begin with, paragraph 4 of the marine protest (Exh. "4", also Exhibit "M"), which is
defendant's own evidence, shows that the wind force when the ill-fated ship foundered was 10 to
15 knots. According to the Beaufort Scale (Exhibit "I"), which is admittedly an accurate reference
for measuring wind velocity, the wind force of 10 to 15 knots is classified as scale No. 4 and
described as "moderate breeze," small waves, becoming longer, fairly frequent white horses.
Meteorologist Justo Iglesias, Jr. himself affirms the above description of a wind force of 10 to 15
knots and adds that the weather condition prevailing under said wind force is usual and forseeable.
Thus Iglesias, Jr. testified:

Q. In the marine protest of the master of the vessel of Aboitiz, there is reference
to wind force from ten to 15 knots. In this Beaufort Scale, will you be able to
clarify what this wind force of 10 to 15 as stated in the marine protest?

A. It will be under Force 4 of the Beaufort Scale.

Q. What is the basis of your answer?

A. 10 to 15 falls within this scale of the Beaufort Scale, Force 4.

Atty. Dollete:

May I read into the records, Your Honor. Force 4, descriptive term moderate
breeze. Near velocity in knots 11-16 meters per second, 5.5-7.9 in kilometers per
hour to 20 to 28 kilometers per hour and 13 to 18 miles per hour. Sea the
description of this will be small waves becoming longer fairly frequent white
horse (sic).

Q. In the layman's language how do you interpret this white horses?

A. It means white forms. At the top of the crest they were beginning to form
white foams.

Q. How about this moderate breeze as described under this Force 4 of the
Beaufort Scale, how will you interpret that?

A. Moderate breeze will only give winds of 29 kilometers per hour which is
equivalent to just extending your hand out of a running car at that speed.

Q. This weather condition between October 28 and November 1, 1980, will you
classify this as extraordinary or ordinary?

A. It was ordinary.
 Q. When you said ordinary, was it usual or unusual?

A. It is usual.

Q. When you said it is usual it is foreseeable and predictable?

A. For an experienced meteorologist like a ship captain, it is foreseeable.

Q. When it is foreseeable, necessarily it follows that the weather could be

predicted based on the weather bulletin or report?

A. Yes, sir.

Q. And usually the bulletin states the condition in other words, this weather
condition which you testified to and reflected in your Exhibit "7" is an ordinary
occurrence within that area of Philippine responsibility?

A. Yes, sir.

Q. And in fact this weather condition is to be anticipated at that time of the year
with respect to weather condition which is reflected in Exhibit "7"?

A. It is a regular occurrence.

xxx xxx xxx

Moreover, Capt. Racines again admitted in Court that his ill-fated vessel was
200 miles away from the storm 'Yoning when it sank. Said Capt. Racines:

Q. How far were you from this depression or weather disturbance on October
30, 1980?

A. Two hundred miles.

xxx xxx xxx

Q. In other words, this depression was far from your route because it took a
northern approach whereas you were towards the south approach?

A. As I have said, I was 200 miles away from the disturbance.

xxx xxx xxx

Considering the foregoing reasons, the Court holds that the vessel M/V "Aboitiz" and its cargo
were not lost due to fortuitous event or force majeure.

In accordance with Article 1732 of the Civil Code, the defendant common carrier, from the nature
of its business and for reasons of public policy, is bound to observe extraordinary diligence in the
vigilance over the goods and for the safety of the passengers transported by it according to all the
circumstances of each case. While the goods are in the possession of the carrier, it is but fair that it
exercise extra ordinary diligence in protecting them from loss or damage, and if its occurs the law
presumes that it was due to the carrier's fault or negligence; that is necessary to protect the interest
 of the shipper which is at the mercy of the carrier (Article 1756, Civil Code; Anuran vs. Puno, 17
SCRA 224; Nocum vs. Laguna Tayabas Bus Co., 30 SCRA 69; Landigan vs. Pangasinan
Transportation Company, 88 SCRA 284). In the case at bar, the defendant failed to prove that the
loss of the subject cargo was not due to its fault or negligence. 8

The said factual findings of the appellate court and the trial court are finding on this Court. Its conclusion as to the
negligence of the petitioner is supported by the evidence.

The second issue raised to the effect that the liability of the petitioner should be fixed at US$500.00 per
package/container, as stipulated in the bill of lading and not at the actual value of the cargo, should be resolved
against petitioner.

While it is true that in the bill of lading there is such stipulation that the liability of the carrier is US$500.00 per
package/container/customary freight, there is an exception, that is, when the nature and value of such goods have
been declared by the shipper before shipment and inserted in the bill of lading. This is provided for in Section 4(5)
of the Carriage of Goods by Sea Act to wit —

(5) Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to
or in connection with the transportation of goods in an amount exceeding $500 per package of
lawful money of the United States, or in case of goods not shipped in packages, per customary
freight unit, or the equivalent of that sum in other currency, unless the nature and value of such
goods have been inserted in the bill of lading. This declaration, if embodied in the bill of lading,
shall be prima facie evidence, but shall not be conclusive on the carrier.

By agreement between the carrier, master or agent of the carrier, and the shipper another
maximum amount than that mentioned in this paragraph may be fixed: Provided, that such
maximum shall not be less than the figure above named. In no event shall the carrier be liable for
more than the amount of damage actually sustained.

Neither the carrier nor the ship shall be responsible in any event for loss or damage to or in
connection with the transportation of the goods if the nature or value thereof has been knowingly
and fraudulently mis-stated by the shipper in the bill of lading. (Emphasis supplied.)

In this case the description of the nature and the value of the goods shipped are declared and reflected in the bills of
lading. Thus, it is the basis of the liability of the carrier as the actual value of the loss.

Moreover, it is absurd to interpret "container," as provided in the bill of lading to be valued at US$500.00 each, to
refer to the container which is the modern substitute for the hold of the vessel. 9 The package/container contemplated
by the law to limit the liability of the carrier should be sensibly related to the unit in which the shipper packed the
goods and described them, not a large metal object, functionally a part of the ship, in which the carrier used them to
be contained. 10 Such "container" must be given the same meaning and classification as a "package" and "customary
freight unit."

The appellate court in disposing this issue quoted its decision in Allied Guarantee Insurance Co. Inc. vs. Aboitiz
Shipping Corporation, CA GR. CV No. 04121, March 23, 1987, viz;

Third. Still it is contended that the carrier's liability is limited to $500.00, pursuant to section 8 of
the Bill of Lading which provides that 'The liability of the Carrier for any loss or damage to the
goods shall in no case exceed the sum of U.S. $500.00 per package/container/customary freight
unit, unless the value of the goods has been correctly declared and extra freight paid, prior to the
shipment and a signed declaration to this effect appears in the bill of lading, duly confirmed by the
Carrier. ... It is contended that the Bill of Lading does not indicate the value of the goods. Nor was
the corresponding freight ... paid prior to shipment.
 Generally speaking a stipulation, limiting the common carrier's liability to the value of the goods
appearing in the bill of lading, unless the shipper or owner declares a greater value, is valid. (Civil
Code, Art. 1749). Such stipulation, however, must be reasonable and just under the circumstances
and must have been fairly and freely agreed upon. (St. Paul Fire — & Marine Insurance Co. vs.
Macondray Co., 70 SCRA 122, 126-127 (1976) In the case at bar, the goods shipped on the M/V
"P. Aboitiz" were insured for P278,530.50, which may be taken as their value. To limit the
liability of the carrier to $500.00 would obviously put it in its power to have taken the whole
cargo. In Juan Ysmael & Co. vs. Gabino Barreto & Co., 51 Phil. 90 (1927), it was held that a
stipulation limiting the carrier's liability to $500.00 per package of silk when the value of such
package was P2,500.00 unless the true value had been declared and the corresponding freight paid
was "void as against public policy." That ruling applies to this case.

Moreover, by the weight of modern authority, a carrier cannot limit its liability for injury or loss of
goods shipped where such injury or loss was caused by its own negligence. (Juan Ysmael & Co. v.
Gabino Barreto & Co., supra) Here to limit the liability of Aboitiz Shipping to $500.00 would
nullify the policy of the law imposing on common carriers the duty to observe extraordinary
diligence in the carriage of goods.

Indeed, it is even doubtful whether the word "container" in section 8 of the Bill of Lading includes
containers which are a substitute for the hold of a vessel. This provision limits the carrier's liability
to "the sum of US$500.00 per package /container customary freight unit." By the rule of noscitur
a sociisthe word "container" must be given the same meaning as package and customary freight
unit and therefore cannot possibly refer to modern containers which are used for shipment of
goods in bulk. 11

In the same light, the third issue questioning the order of execution pending appeal of the trial court must be
resolved against petitioner as well.

The averments in the motion for execution pending appeal dated December 8, 1985 are as follows —

Aside from the fact that petitioner can easily post a supersedeas bond to stay execution, still other
circumstances are present peculiar in the incident of the sinking of M/V P. Aboitiz which would
justify the issuance of execution pending appeal. There are other decided cases adjudging
petitioner liable in the lower court in the same incident. Other cases are on appeal, upcoming and
about to be decided. The value of cargo loss caused by the sinking of petitioner's vessel is in the
tune of no less than fifty million pesos inclusive of interests fees and all claims. Its insurer has
gone bankrupt and petitioner alone must face and answer for all these claims. In one branch of the
Regional Trial Court of Manila alone there are twenty five (25) cases pending against petitioner
involving the same loss of cargoes aboard M/V "P. Aboitiz" as per certification herewith attached
as Annex "A". This claim do not include others, pending in various courts in Metro Manila which
would have to be satisfied ultimately by petitioner, it being a common carrier which failed to
exercise extraordinary diligence over the goods lost. The judgment sought to be enforced may
indeed be rendered imminently ineffectual in the ultimate analysis.

The purpose of Sec. 2 Rule 39 would not be achieved or execution pending appeal would not be
achieved if insolvency would still be awaited. The remedy is available to petitioner under Sec. 3
Rule 39 of the Rules of Court but to place insolvency as a condition to issuance of a writ of
execution pending appeal would render it illusory and ineffectual.

Justice and equity therefore dictates, that as a consequence of the bond posted by private
respondent and there being several other cases against petitioner, decided as well as pending, the
totality of which claims may render the appealed decision imminently ineffectual and the further
fact that the appeal being interposed is evidently for delay as a consequence of the several adverse
decisions against it as a common carrier in the lower court, a reconsideration of the decision dated
 November 25, 1985 of the Honorable Court will be in consonance with law, jurisprudence and
equity.

In order to erase all apprehensions that the aforesaid judgment award will wind up ineffectual
when not immediately executed, it is most respectfully prayed that herein respondent be required
to post a supersedeas bond. The statutory undertaking of posting a bond will then achieve a three-
pronged direction of justice, (1) it will cast no doubt on the solvency of the herein petitioner; (2) it
will not defeat or render phyrric a just resolution of the case whichever party prevails in the end or
in the main case on appeal, since both of their claims are secured by their corresponding bonds;
and (3) it will put to equitable operation Sec. 3 Rule 39 of the Revised Rules of Court. 12

The foregoing allegations which were not traversed that petitioner is facing many law suits arising from said sinking
of its vessel involving cargo loss of no less than 50 million pesos, in some cases of which judgment had been
rendered against Aboitiz, and considering that its insurer is now bankrupt, leaving Aboitiz alone to face and answer
the suits, which may render any judgment for GAFLAC ineffectual, that the appeal is interposed manifestly for
delay and the willingness of GAFLAC to put up a bond certainly are cogent bases for the issuance of an order of
execution pending appeal.

Finally, in a similar case for damages arising from the same incident entitled Aboitiz Shipping Corporation vs.
Honorable Court of Appeals and Allied Guaranteed Insurance Company, Inc., G.R. No. 88159, this Court in a
resolution dated November 13, 1989 dismissed the petition for lack of merit. Therein this Court held in part —

The appellate court affirmed the decision of the lower court based on its findings that the cause of
sinking of the vessel was due to its unseaworthiness and the failure of its crew and the master to
exercise extraordinary diligence.

The petitioner, however, contends that the appellate court erred on this matter and insists that the
contrary findings of the Board of Marine Inquiry (BMI), which conducted a separate investigation
to the effect that the proximate cause of the sinking of the vessel was due to force majeure and that
the officers and crew had exhausted all preventive measures to save the vessel and her cargo but to
no avail, should prevail. This, according to the petitioner is based on the doctrine of primary
administrative jurisdiction.

This argument is untenable.

A cursory reading of the decision and resolution of the appellate court shows that the same took
into consideration not only the findings of the lower court but also the findings of the BMI. Thus,
the appellate court stated:

Indeed, the decision of the Board was based simply on its finding that the
Philippine Coast Guard had certified the vessel to be seaworthy and that it sank
because it was exposed later to an oncoming typhoon plotted within the radius
where the vessel was positioned. This generalization certainly cannot prevail
over the detailed explanation of the trial court in this case as basis for its
contrary conclusion. (Rollo, at p. 42)

We find no cogent reason to deviate from the factual findings of the appellate court and rule that
the doctrine of primary administrative jurisdiction is not applicable in the case at bar.

The other issue raised is whether or not the carrier's liability is limited to $500.00 pursuant to
section 8 of the Bill of Lading. The petitioner claims that the appellate court erred in disregarding
the limitation of liability stipulated in the bill of lading. It argues that the consignee agreed to this
amount (and) therefore is bound by this rate and that there is no basis for the appellate court's
finding that the rate is unreasonable.
The argument is not well-taken. As aptly stated by the appellate court:

Generally speaking any stipulation, limiting the common carrier's liability to the value of the
goods appearing in the bill of lading, unless the shipper or owner declares a greater value is valid.
(Civil Code, Art. 1749) Such stipulation, however, must be reasonable and just under the
circumstances and must have been fairly and freely agreed upon. (St. Paul Fire & Marine
Insurance Co. v. Macondray & Co., 70 SCRA 122, 126-127 [1976] In the case at bar, the goods
shipped on the M/V "P. Aboitiz" were insured for P278,536.50, which may be taken as their value.
To limit the liability of the carrier to $500.00 would obviously put in its power to have taken the
whole cargo. In Juan Ysmael & Co. v. Gabino Barretto & Co., 51 Phil. 90 [1927], it was held that
a stipulation limiting the carrier's liability to P300.00 per package of silk, when the value of such
package was P2,500.00, unless the true value had been declared and the corresponding freight
paid; was void as against public policy. That ruling applies to this case.

As argued by the respondent, a limitation of liability in this case would render inefficacious the
extraordinary diligence required by law of common carriers. 13

The motion for reconsideration of said resolution filed by petitioner was denied with finality in a resolution dated
January 8, 1990. Said resolution of the case had become final and executory, entry of judgment having been made
and the records remanded for execution on March 22, 1990.

Said case is now the law of the case applicable to the present petition.

WHEREFORE, the petition is dismissed with costs against petitioner.

SO ORDERED.
 FIRST DIVISION
[G.R. No. 71929 : December 4, 1990.]
192 SCRA 9
ALITALIA, Petitioner, vs. INTERMEDIATE APPELLATE COURT and FELIPA E. PABLO, Respondents.

DECISION

NARVASA, J.:

Dr. Felipa Pablo — an associate professor in the University of the Philippines, 1 and a research grantee of the
Philippine Atomic Energy Agency — was invited to take part at a meeting of the Department of Research and Isotopes
of the Joint FAO-IAEA Division of Atomic Energy in Food and Agriculture of the United Nations in Ispra, Italy. 2
She was invited in view of her specialized knowledge in "foreign substances in food and the agriculture environment."
She accepted the invitation, and was then scheduled by the organizers, to read a paper on "The Fate of Radioactive
Fusion Products Contaminating Vegetable Crops." 3 The program announced that she would be the second speaker
on the first day of the meeting. 4 To fulfill this engagement, Dr. Pablo booked passage on petitioner airline,
ALITALIA.
She arrived in Milan on the day before the meeting in accordance with the itinerary and time table set for her by
ALITALIA. She was however told by the ALITALIA personnel there at Milan that her luggage was "delayed
inasmuch as the same . . . (was) in one of the succeeding flights from Rome to Milan." 5 Her luggage consisted of two
(2) suitcases: one contained her clothing and other personal items; the other, her scientific papers, slides and other
research material. But the other flights arriving from Rome did not have her baggage on board.
By then feeling desperate, she went to Rome to try to locate her bags herself. There, she inquired about her suitcases
in the domestic and international airports, and filled out the forms prescribed by ALITALIA for people in her
predicament. However, her baggage could not be found. Completely distraught and discouraged, she returned to
Manila without attending the meeting in Ispra, Italy. : nad
Once back in Manila she demanded that ALITALIA make reparation for the damages thus suffered by her. ALITALIA
offered her "free airline tickets to compensate her for any alleged damages. . . ." She rejected the offer, and forthwith
commenced the action 6 which has given rise to the present appellate proceedings.
As it turned out, Prof. Pablo's suitcases were in fact located and forwarded to Ispra, 7 Italy, but only on the day after
her scheduled appearance and participation at the U.N. meeting there. 8 Of course Dr. Pablo was no longer there to
accept delivery; she was already on her way home to Manila. And for some reason or other, the suitcases were not
actually restored to Prof. Pablo by ALITALIA until eleven (11) months later, and four (4) months after institution of
her action. 9
After appropriate proceedings and trial, the Court of First Instance rendered judgment in Dr. Pablo's favor: 10
"(1) Ordering the defendant (ALITALIA) to pay . . . (her) the sum of TWENTY THOUSAND PESOS
(P20,000.00), Philippine Currency, by way of nominal damages;
(2) Ordering the defendant to pay . . . (her) the sum of FIVE THOUSAND PESOS (P5,000.00), Philippine
Currency, as and for attorney's fees; (and)
(3) Ordering the defendant to pay the costs of the suit."
ALITALIA appealed to the Intermediate Appellate Court but failed to obtain a reversal of the judgment. 11 Indeed,
the Appellate Court not only affirmed the Trial Court's decision but also increased the award of nominal damages
payable by ALITALIA to P40,000.00. 12 That increase it justified as follows: 13
"Considering the circumstances, as found by the Trial Court and the negligence committed by defendant, the
amount of P20,000.00 under present inflationary conditions as awarded . . . to the plaintiff as nominal
damages, is too little to make up for the plaintiff's frustration and disappointment in not being able to appear
 at said conference; and for the embarrassment and humiliation she suffered from the academic community
for failure to carry out an official mission for which she was singled out by the faculty to represent her
institution and the country. After weighing carefully all the considerations, the amount awarded to the
plaintiff for nominal damages and attorney's fees should be increased to the cost of her round trip air fare or
at the present rate of peso to the dollar at P40,000,00."
ALITALIA has appealed to this Court on Certiorari. Here, it seeks to make basically the same points it tried to make
before the Trial Court and the Intermediate Appellate Court, i.e.:
1) that the Warsaw Convention should have been applied to limit ALITALIA'S liability; and
2) that there is no warrant in fact or in law for the award to Dr. Pablo of nominal damages and attorney's fees.
14
In addition, ALITALIA postulates that it was error for the Intermediate Appellate Court to have refused to pass on all
the assigned errors and in not stating the facts and the law on which its decision is based. 15
Under the Warsaw Convention, 16 an air carrier is made liable for damages for:
1) the death, wounding or other bodily injury of a passenger if the accident causing it took place on board the
aircraft or in the course of its operations of embarking or disembarking; 17
2) the destruction or loss of, or damage to, any registered luggage or goods, if the occurrence causing it took
place during the carriage by air;" 18 and
3) delay in the transportation by air of passengers, luggage or goods. 19
In these cases, it is provided in the Convention that the "action for damages, however, founded, can only be brought
subject to conditions and limits set out" therein. 20
The Convention also purports to limit the liability of the carriers in the following manner: 21
1. In the carriage of passengers the liability of the carrier for each passenger is limited to the sum of 250,000
francs . . . Nevertheless, by special contract, the carrier and the passenger may agree to a higher limit of
liability.: nad
2. a) In the carriage of registered baggage and of cargo, the liability of the carrier is limited to a sum of 250
francs per kilogramme, unless the passenger or consignor has made, at the time when the package was handed
over to the carrier, a special declaration of interest in delivery at destination and has paid a supplementary
sum if the case so requires. In that case the carrier will be liable to pay a sum not exceeding the declared sum,
unless he proves that sum is greater than the actual value to the consignor at delivery.
b) In the case of loss, damage or delay of part of registered baggage or cargo, or of any object contained
therein, the weight to be taken into consideration in determining the amount to which the carrier's liability is
limited shall be only the total weight of the package or packages concerned. Nevertheless, when the loss,
damage or delay of a part of the registered baggage or cargo, or of an object contained therein, affects the
value of other packages covered by the same baggage check or the same air way bill, the total weight of such
package or packages shall also be taken into consideration in determining the limit of liability.
3. As regards objects of which the passenger takes charge himself the liability of the carrier is limited to 5000
francs per passenger.
4. The limits prescribed . . shall not prevent the court from awarding, in accordance with its own law, in
addition, the whole or part of the court costs and of the other expenses of litigation incurred by the plaintiff.
The foregoing provision shall not apply if the amount of the damages awarded, excluding court costs and
other expenses of the litigation, does not exceed the sum which the carrier has offered in writing to the
plaintiff within a period of six months from the date of the occurrence causing the damage, or before the
commencement of the action, if that is later.
The Warsaw Convention however denies to the carrier availment "of the provisions which exclude or limit his liability,
if the damage is caused by his wilful misconduct or by such default on his part as, in accordance with the law of the
court seized of the case, is considered to be equivalent to wilful misconduct," or "if the damage is (similarly) caused .
. by any agent of the carrier acting within the scope of his employment." 22 The Hague Protocol amended the Warsaw
Convention by removing the provision that if the airline took all necessary steps to avoid the damage, it could
exculpate itself completely, 23 and declaring the stated limits of liability not applicable "if it is proved that the damage
resulted from an act or omission of the carrier, its servants or agents, done with intent to cause damage or recklessly
and with knowledge that damage would probably result." The same deletion was effected by the Montreal Agreement
of 1966, with the result that a passenger could recover unlimited damages upon proof of wilful misconduct. 24
The Convention does not thus operate as an exclusive enumeration of the instances of an airline's liability, or as an
absolute limit of the extent of that liability. Such a proposition is not borne out by the language of the Convention, as
this Court has now, and at an earlier time, pointed out. 25 Moreover, slight reflection readily leads to the conclusion
that it should be deemed a limit of liability only in those cases where the cause of the death or injury to person, or
destruction, loss or damage to property or delay in its transport is not attributable to or attended by any wilful
misconduct, bad faith, recklessness, or otherwise improper conduct on the part of any official or employee for which
the carrier is responsible, and there is otherwise no special or extraordinary form of resulting injury. The Convention's
provisions, in short, do not "regulate or exclude liability for other breaches of contract by the carrier" 26 or misconduct
of its officers and employees, or for some particular or exceptional type of damage. Otherwise, "an air carrier would
be exempt from any liability for damages in the event of its absolute refusal, in bad faith, to comply with a contract of
carriage, which is absurd." 27 Nor may it for a moment be supposed that if a member of the aircraft complement
should inflict some physical injury on a passenger, or maliciously destroy or damage the latter's property, the
Convention might successfully be pleaded as the sole gauge to determine the carrier's liability to the passenger. Neither
may the Convention be invoked to justify the disregard of some extraordinary sort of damage resulting to a passenger
and preclude recovery therefor beyond the limits set by said Convention. It is in this sense that the Convention has
been applied, or ignored, depending on the peculiar facts presented by each case.:-cralaw
In Pan American World Airways, Inc. v. I.A.C., 28 for example, the Warsaw Convention was applied as regards the
limitation on the carrier's liability, there being a simple loss of baggage without any otherwise improper conduct on
the part of the officials or employees of the airline or other special injury sustained by the passenger.
On the other hand, the Warsaw Convention has invariably been held inapplicable, or as not restrictive of the carrier's
liability, where there was satisfactory evidence of malice or bad faith attributable to its officers and employees. 29
Thus, an air carrier was sentenced to pay not only compensatory but also moral and exemplary damages, and attorney's
fees, for instance, where its employees rudely put a passenger holding a first-class ticket in the tourist or economy
section, 30 or ousted a brown Asiatic from the plane to give his seat to a white man, 31 or gave the seat of a passenger
with a confirmed reservation to another, 32 or subjected a passenger to extremely rude, even barbaric treatment, as
by calling him a "monkey." 33
In the case at bar, no bad faith or otherwise improper conduct may be ascribed to the employees of petitioner airline;
and Dr. Pablo's luggage was eventually returned to her, belatedly, it is true, but without appreciable damage. The fact
is, nevertheless, that some special species of injury was caused to Dr. Pablo because petitioner ALITALIA misplaced
her baggage and failed to deliver it to her at the time appointed — a breach of its contract of carriage, to be sure —
with the result that she was unable to read the paper and make the scientific presentation (consisting of slides,
autoradiograms or films, tables and tabulations) that she had painstakingly labored over, at the prestigious international
conference, to attend which she had traveled hundreds of miles, to her chagrin and embarrassment and the
disappointment and annoyance of the organizers. She felt, not unreasonably, that the invitation for her to participate
at the conference, extended by the Joint FAO/IAEA Division of Atomic Energy in Food and Agriculture of the United
Nations, was a singular honor not only to herself, but to the University of the Philippines and the country as well, an
opportunity to make some sort of impression among her colleagues in that field of scientific activity. The opportunity
to claim this honor or distinction was irretrievably lost to her because of Alitalia's breach of its contract.
Apart from this, there can be no doubt that Dr. Pablo underwent profound distress and anxiety, which gradually turned
to panic and finally despair, from the time she learned that her suitcases were missing up to the time when, having
gone to Rome, she finally realized that she would no longer be able to take part in the conference. As she herself put
it, she "was really shocked and distraught and confused."
Certainly, the compensation for the injury suffered by Dr. Pablo cannot under the circumstances be restricted to that
prescribed by the Warsaw Convention for delay in the transport of baggage.
She is not, of course, entitled to be compensated for loss or damage to her luggage. As already mentioned, her baggage
was ultimately delivered to her in Manila, tardily but safely. She is however entitled to nominal damages — which,
as the law says, is adjudicated in order that a right of the plaintiff, which has been violated or invaded by the defendant,
may be vindicated and recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered — and
this Court agrees that the respondent Court of Appeals correctly set the amount thereof at P40,000.00. As to the purely
technical argument that the award to her of such nominal damages is precluded by her omission to include a specific
claim therefor in her complaint, it suffices to draw attention to her general prayer, following her plea for moral and
exemplary damages and attorney's fees, "for such other and further just and equitable relief in the premises," which
certainly is broad enough to comprehend an application as well for nominal damages. Besides, petitioner should have
realized that the explicit assertion, and proof, that Dr. Pablo's right had been violated or invaded by it — absent any
claim for actual or compensatory damages, the prayer thereof having been voluntarily deleted by Dr. Pablo upon the
return to her of her baggage — necessarily raised the issue of nominal damages.: rd
This Court also agrees that respondent Court of Appeals correctly awarded attorney's fees to Dr. Pablo, and the amount
of P5,000.00 set by it is reasonable in the premises. The law authorizes recovery of attorney's fees inter alia where, as
here, "the defendant's act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to
protect his interest," 34 or "where the court deems it just and equitable." 35
WHEREFORE, no error being perceived in the challenged decision of the Court of Appeals, it appearing on the
contrary to be entirely in accord with the facts and the law, said decision is hereby AFFIRMED, with costs against the
petitioner.
SO ORDERED.
Cruz, Gancayco, Griño-Aquino and Medialdea, J
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 70462 August 11, 1988

PAN AMERICAN WORLD AIRWAYS, INC., petitioner,

vs.
INTERMEDIATE APPELLATE COURT, RENE V. PANGAN, SOTANG BASTOS PRODUCTIONS and
ARCHER PRODUCTIONS, respondents.

Guerrero & Torres for petitioner.

Jose B. Layug for private respondents.

CORTES, J.:

Before the Court is a petition filed by an international air carrier seeking to limit its liability for lost baggage,
containing promotional and advertising materials for films to be exhibited in Guam and the U.S.A., clutch bags,
barong tagalogs and personal belongings, to the amount specified in the airline ticket absent a declaration of a higher
valuation and the payment of additional charges.

The undisputed facts of the case, as found by the trial court and adopted by the appellate court, are as follows:

On April 25, 1978, plaintiff Rene V. Pangan, president and general manager of the plaintiffs
Sotang Bastos and Archer Production while in San Francisco, Califonia and Primo Quesada of
Prime Films, San Francisco, California, entered into an agreement (Exh. A) whereby the former,
for and in consideration of the amount of US $2,500.00 per picture, bound himself to supply the
latter with three films. 'Ang Mabait, Masungit at ang Pangit,' 'Big Happening with Chikiting and
Iking,' and 'Kambal Dragon' for exhibition in the United States. It was also their agreement that
plaintiffs would provide the necessary promotional and advertising materials for said films on or
before May 30, 1978.

On his way home to the Philippines, plaintiff Pangan visited Guam where he contacted Leo
Slutchnick of the Hafa Adai Organization. Plaintiff Pangan likewise entered into a verbal
agreement with Slutchnick for the exhibition of two of the films above-mentioned at the Hafa
Adai Theater in Guam on May 30, 1978 for the consideration of P7,000.00 per picture (p. 11, tsn,
June 20, 1979). Plaintiff Pangan undertook to provide the necessary promotional and advertising
materials for said films on or before the exhibition date on May 30,1978.

By virtue of the above agreements, plaintiff Pangan caused the preparation of the requisite
promotional handbills and still pictures for which he paid the total sum of P12,900.00 (Exhs. B, B-
1, C and C1). Likewise in preparation for his trip abroad to comply with his contracts, plaintiff
Pangan purchased fourteen clutch bags, four capiz lamps and four barong tagalog, with a total
value of P4,400.00 (Exhs. D, D-1, E, and F).

On May 18, 1978, plaintiff Pangan obtained from defendant Pan Am's Manila Office, through the
Your Travel Guide, an economy class airplane ticket with No. 0269207406324 (Exh. G) for
passage from Manila to Guam on defendant's Flight No. 842 of May 27,1978, upon payment by
 said plaintiff of the regular fare. The Your Travel Guide is a tour and travel office owned and
managed by plaintiffs witness Mila de la Rama.

On May 27, 1978, two hours before departure time plaintiff Pangan was at the defendant's ticket
counter at the Manila International Airport and presented his ticket and checked in his two
luggages, for which he was given baggage claim tickets Nos. 963633 and 963649 (Exhs. H and H-
1). The two luggages contained the promotional and advertising materials, the clutch bags, barong
tagalog and his personal belongings. Subsequently, Pangan was informed that his name was not in
the manifest and so he could not take Flight No. 842 in the economy class. Since there was no
space in the economy class, plaintiff Pangan took the first class because he wanted to be on time in
Guam to comply with his commitment, paying an additional sum of $112.00.

When plaintiff Pangan arrived in Guam on the date of May 27, 1978, his two luggages did not
arrive with his flight, as a consequence of which his agreements with Slutchnick and Quesada for
the exhibition of the films in Guam and in the United States were cancelled (Exh. L). Thereafter,
he filed a written claim (Exh. J) for his missing luggages.

Upon arrival in the Philippines, Pangan contacted his lawyer, who made the necessary
representations to protest as to the treatment which he received from the employees of the
defendant and the loss of his two luggages (Exh. M, O, Q, S, and T). Defendant Pan Am assured
plaintiff Pangan that his grievances would be investigated and given its immediate consideration
(Exhs. N, P and R). Due to the defendant's failure to communicate with Pangan about the action
taken on his protests, the present complaint was filed by the plaintiff. (Pages 4-7, Record On
Appeal). [Rollo, pp. 27-29.]

On the basis of these facts, the Court of First Instance found petitioner liable and rendered judgment as follows:

(1) Ordering defendant Pan American World Airways, Inc. to pay all the plaintiffs the sum of
P83,000.00, for actual damages, with interest thereon at the rate of 14% per annum from
December 6, 1978, when the complaint was filed, until the same is fully paid, plus the further sum
of P10,000.00 as attorney's fees;

(2) Ordering defendant Pan American World Airways, Inc. to pay plaintiff Rene V. Pangan the
sum of P8,123.34, for additional actual damages, with interest thereon at the rate of 14% per
annum from December 6, 1978, until the same is fully paid;

(3) Dismissing the counterclaim interposed by defendant Pan American World Airways, Inc.; and

(4) Ordering defendant Pan American World Airways, Inc. to pay the costs of suit. [Rollo, pp.
106-107.]

On appeal, the then Intermediate Appellate Court affirmed the trial court decision.

Hence, the instant recourse to this Court by petitioner.

The petition was given due course and the parties, as required, submitted their respective memoranda. In due time
the case was submitted for decision.

In assailing the decision of the Intermediate Appellate Court petitioner assigned the following errors:

1. The respondent court erred as a matter of law in affirming the trial court's award of actual damages beyond the
limitation of liability set forth in the Warsaw Convention and the contract of carriage.
2. The respondent court erred as a matter of law in affirming the trial court's award of actual damages consisting of
alleged lost profits in the face of this Court's ruling concerning special or consequential damages as set forth
in Mendoza v. Philippine Airlines [90 Phil. 836 (1952).]

The assigned errors shall be discussed seriatim

1. The airline ticket (Exh. "G') contains the following conditions:

NOTICE

If the passenger's journey involves an ultimate destination or stop in a country other than the
country of departure the Warsaw Convention may be applicable and the Convention governs and
in most cases limits the liability of carriers for death or personal injury and in respect of loss of or
damage to baggage. See also notice headed "Advice to International Passengers on Limitation of
Liability.

CONDITIONS OF CONTRACT

1. As used in this contract "ticket" means this passenger ticket and baggage check of which these
conditions and the notices form part, "carriage" is equivalent to "transportation," "carrier" means
all air carriers that carry or undertake to carry the passenger or his baggage hereunder or perform
any other service incidental to such air carriage. "WARSAW CONVENTION" means the
convention for the Unification of Certain Rules Relating to International Carriage by Air signed at
Warsaw, 12th October 1929, or that Convention as amended at The Hague, 28th September 1955,
whichever may be applicable.

2. Carriage hereunder is subject to the rules and limitations relating to liability established by the
Warsaw Convention unless such carriage is not "international carriage" as defined by that
Convention.

3. To the extent not in conflict with the foregoing carriage and other services performed by each
carrier are subject to: (i) provisions contained in this ticket, (ii) applicable tariffs, (iii) carrier's
conditions of carriage and related regulations which are made part hereof (and are available on
application at the offices of carrier), except in transportation between a place in the United States
or Canada and any place outside thereof to which tariffs in force in those countries apply.

xxx xxx xxx

NOTICE OF BAGGAGE LIABILITY LIMITATIONS

Liability for loss, delay, or damage to baggage is limited as follows unless a higher value is
declared in advance and additional charges are paid: (1)for most international travel (including
domestic portions of international journeys) to approximately $9.07 per pound ($20.00 per kilo)
for checked baggage and $400 per passenger for unchecked baggage: (2) for travel wholly
between U.S. points, to $750 per passenger on most carriers (a few have lower limits). Excess
valuation may not be declared on certain types of valuable articles. Carriers assume no liability for
fragile or perishable articles. Further information may be obtained from the carrier. [Emphasis
supplied.].

On the basis of the foregoing stipulations printed at the back of the ticket, petitioner contends that its liability for the
lost baggage of private respondent Pangan is limited to $600.00 ($20.00 x 30 kilos) as the latter did not declare a
higher value for his baggage and pay the corresponding additional charges.
To support this contention, petitioner cites the case of Ong Yiu v. Court of Appeals [G.R. No. L-40597, June 29,
1979, 91 SCRA 223], where the Court sustained the validity of a printed stipulation at the back of an airline ticket
limiting the liability of the carrier for lost baggage to a specified amount and ruled that the carrier's liability was
limited to said amount since the passenger did not declare a higher value, much less pay additional charges.

We find the ruling in Ong Yiu squarely applicable to the instant case. In said case, the Court, through Justice
Melencio Herrera, stated:

Petitioner further contends that respondent Court committed grave error when it limited PAL's
carriage liability to the amount of P100.00 as stipulated at the back of the ticket....

We agree with the foregoing finding. The pertinent Condition of Carriage printed at the back of
the plane ticket reads:

8. BAGGAGE LIABILITY ... The total liability of the Carrier for lost or
damage baggage of the passenger is LIMITED TO P100.00 for each ticket
unless a passenger declares a higher valuation in excess of P100.00, but not in
excess, however, of a total valuation of Pl,000.00 and additional charges are
paid pursuant to Carrier's tariffs.

There is no dispute that petitioner did not declare any higher value for his luggage, much less (lid
he pay any additional transportation charge.

But petitioner argues that there is nothing in the evidence to show that he had actually entered into
a contract with PAL limiting the latter's liability for loss or delay of the baggage of its passengers,
and that Article 1750 * of the Civil Code has not been complied with.

While it may be true that petitioner had not signed the plane ticket (Exh. "12"), he is nevertheless
bound by the provisions thereof. "Such provisions have been held to be a part of the contract of
carriage, and valid and binding upon the passenger regardless of the latter's lack of knowledge or
assent to the regulation." [Tannebaum v. National Airline, Inc., 13 Misc. 2d 450,176 N.Y.S. 2d
400; Lichten v. Eastern Airlines, 87 Fed. Supp. 691; Migoski v. Eastern Air Lines, Inc., Fla., 63
So. 2d 634.] It is what is known as a contract of "adhesion," in regards which it has been said that
contracts of adhesion wherein one party imposes a ready made form of contract on the other, as
the plane ticket in the case at bar, are contracts not entirely prohibited. The one who adheres to the
contract is in reality free to reject it entirely; if he adheres, he gives his consent,[Tolentino, Civil
Code, Vol. IV, 1962 ed., p. 462, citing Mr. Justice J.B.L. Reyes, Lawyer's Journal, Jan. 31, 1951,
p. 49]. And as held in Randolph v. American Airlines, 103 Ohio App. 172,144 N.E. 2d 878;
Rosenchein v. Trans World Airlines, Inc., 349 S.W. 2d 483.] "a contract limiting liability upon an
agreed valuation does not offend against the policy of the law forbidding one from contracting
against his own negligence."

Considering, therefore, that petitioner had failed to declare a higher value for his baggage, he
cannot be permitted a recovery in excess of P100.00....

On the other hand, the ruling in Shewaram v. Philippine Air Lines, Inc. [G.R. No. L-20099, July 2, 1966, 17 SCRA
606], where the Court held that the stipulation limiting the carrier's liability to a specified amount was invalid, finds
no application in the instant case, as the ruling in said case was premised on the finding that the conditions printed at
the back of the ticket were so small and hard to read that they would not warrant the presumption that the passenger
was aware of the conditions and that he had freely and fairly agreed thereto. In the instant case, similar facts that
would make the case fall under the exception have not been alleged, much less shown to exist.

In view thereof petitioner's liability for the lost baggage is limited to $20.00 per kilo or $600.00, as stipulated at the
back of the ticket.
At this juncture, in order to rectify certain misconceptions the Court finds it necessary to state that the Court of
Appeal's reliance on a quotation from Northwest Airlines, Inc. v. Cuenca [G.R. No. L-22425, August 31, 1965, 14
SCRA 1063] to sustain the view that "to apply the Warsaw Convention which limits a carrier's liability to US$9.07
per pound or US$20.00 per kilo in cases of contractual breach of carriage ** is against public policy" is utterly
misplaced, to say the least. In said case, while the Court, as quoted in the Intermediate Appellate Court's decision,
said:

Petitioner argues that pursuant to those provisions, an air "carrier is liable only" in the event of
death of a passenger or injury suffered by him, or of destruction or loss of, or damages to any
checked baggage or any goods, or of delay in the transportation by air of passengers, baggage or
goods. This pretense is not borne out by the language of said Articles. The same merely declare
the carrier liable for damages in enumerated cases, if the conditions therein specified are present.
Neither said provisions nor others in the aforementioned Convention regulate or exclude liability
for other breaches of contract by the carrier. Under petitioner's theory, an air carrier would be
exempt from any liability for damages in the event of its absolute refusal, in bad faith, to comply
with a contract of carriage, which is absurd.

it prefaced this statement by explaining that:

...The case is now before us on petition for review by certiorari, upon the ground that the lower
court has erred: (1) in holding that the Warsaw Convention of October 12, 1929, relative to
transportation by air is not in force in the Philippines: (2) in not holding that respondent has no
cause of action; and (3) in awarding P20,000 as nominal damages.

We deem it unnecessary to pass upon the First assignment of error because the same is the basis
of the second assignment of error, and the latter is devoid of merit, even if we assumed the former
to be well taken. (Emphasis supplied.)

Thus, it is quite clear that the Court never intended to, and in fact never did, rule against the validity of provisions of
the Warsaw Convention. Consequently, by no stretch of the imagination may said quotation from Northwest be
considered as supportive of the appellate court's statement that the provisions of the Warsaw Convention limited a
carrier's liability are against public policy.

2. The Court finds itself unable to agree with the decision of the trial court, and affirmed by the Court of Appeals,
awarding private respondents damages as and for lost profits when their contracts to show the films in Guam and
San Francisco, California were cancelled.

The rule laid down in Mendoza v. Philippine Air Lines, Inc. [90 Phil. 836 (1952)] cannot be any clearer:

...Under Art.1107 of the Civil Code, a debtor in good faith like the defendant herein, may be held
liable only for damages that were foreseen or might have been foreseen at the time the contract of
transportation was entered into. The trial court correctly found that the defendant company could
not have foreseen the damages that would be suffered by Mendoza upon failure to deliver the can
of film on the 17th of September, 1948 for the reason that the plans of Mendoza to exhibit that film
during the town fiesta and his preparations, specially the announcement of said exhibition by
posters and advertisement in the newspaper, were not called to the defendant's attention.

In our research for authorities we have found a case very similar to the one under consideration. In the case of
Chapman vs. Fargo, L.R.A. (1918 F) p. 1049, the plaintiff in Troy, New York, delivered motion picture films to the
defendant Fargo, an express company, consigned and to be delivered to him in Utica. At the time of shipment the
attention of the express company was called to the fact that the shipment involved motion picture films to be
exhibited in Utica, and that they should be sent to their destination, rush. There was delay in their delivery and it was
found that the plaintiff because of his failure to exhibit the film in Utica due to the delay suffered damages or loss of
profits. But the highest court in the State of New York refused to award him special damages. Said appellate court
observed:

But before defendant could be held to special damages, such as the present alleged loss of profits
on account of delay or failure of delivery, it must have appeared that he had notice at the time of
delivery to him of the particular circumstances attending the shipment, and which probably would
lead to such special loss if he defaulted. Or, as the rule has been stated in another form, in order
to purpose on the defaulting party further liability than for damages naturally and directly, i.e., in
the ordinary course of things, arising from a breach of contract, such unusual or extraordinary
damages must have been brought within the contemplation of the parties as the probable result of
breach at the time of or prior to contracting. Generally, notice then of any special circumstances
which will show that the damages to be anticipated from a breach would be enhanced has been
held sufficient for this effect.

As may be seen, that New York case is a stronger one than the present case for the reason that the attention of the
common carrier in said case was called to the nature of the articles shipped, the purpose of shipment, and the desire
to rush the shipment, circumstances and facts absent in the present case. [Emphasis supplied.]

Thus, applying the foregoing ruling to the facts of the instant case, in the absence of a showing that petitioner's
attention was called to the special circumstances requiring prompt delivery of private respondent Pangan's luggages,
petitioner cannot be held liable for the cancellation of private respondents' contracts as it could not have foreseen
such an eventuality when it accepted the luggages for transit.

The Court is unable to uphold the Intermediate Appellate Court's disregard of the rule laid down in Mendoza and
affirmance of the trial court's conclusion that petitioner is liable for damages based on the finding that "[tlhe
undisputed fact is that the contracts of the plaintiffs for the exhibition of the films in Guam and California were
cancelled because of the loss of the two luggages in question." [Rollo, p. 36] The evidence reveals that the
proximate cause of the cancellation of the contracts was private respondent Pangan's failure to deliver the
promotional and advertising materials on the dates agreed upon. For this petitioner cannot be held liable. Private
respondent Pangan had not declared the value of the two luggages he had checked in and paid additional charges.
Neither was petitioner privy to respondents' contracts nor was its attention called to the condition therein requiring
delivery of the promotional and advertising materials on or before a certain date.

3. With the Court's holding that petitioner's liability is limited to the amount stated in the ticket, the award of
attorney's fees, which is grounded on the alleged unjustified refusal of petitioner to satisfy private respondent's just
and valid claim, loses support and must be set aside.

WHEREFORE, the Petition is hereby GRANTED and the Decision of the Intermediate Appellate Court is SET
ASIDE and a new judgment is rendered ordering petitioner to pay private respondents damages in the amount of US
$600.00 or its equivalent in Philippine currency at the time of actual payment.

SO ORDERED.
 THIRD DIVISION

G.R. No. 152122 July 30, 2003

CHINA AIRLINES, petitioner,

vs.
DANIEL CHIOK, respondent.

PANGANIBAN, J.:

A common carrier has a peculiar relationship with and an exacting responsibility to its passengers. For reasons of
public interest and policy, the ticket-issuing airline acts as principal in a contract of carriage and is thus liable for the
acts and the omissions of any errant carrier to which it may have endorsed any sector of the entire, continuous trip.

The Case

Before the Court is a Petition for Review on Certiorari1 under Rule 45 of the Rules of Court, seeking to reverse the
August 7, 2001 Decision2 and the February 7, 2002 Resolution3 of the Court of Appeals (CA) in CA-GR CV No.
45832. The challenged Decision disposed as follows:

"WHEREFORE, premises considered, the assailed Decision dated July 5, 1991 of Branch 31, Regional
Trial Court, National Capital Judicial Region, Manila, in Civil Case No. 82-13690, is hereby MODIFIED
by deleting that portion regarding defendants-appellants’ liabilities for the payment of the actual damages
amounting to HK$14,128.80 and US$2,000.00 while all other respects are AFFIRMED. Costs against
defendants-appellants."4

The assailed Resolution denied Petitioner’s Motion for Partial Reconsideration.

The Facts

The facts are narrated by the CA5 as follows:

"On September 18, 1981, Daniel Chiok (hereafter referred to as Chiok) purchased from China Airlines,
Ltd. (CAL for brevity) airline passenger ticket number 297:4402:004:278:5 for air transportation covering
Manila-Taipei-Hongkong-Manila. Said ticket was exclusively endorseable to Philippine Airlines, Ltd.
(PAL for brevity).

"Subsequently, on November 21, 1981, Chiok took his trip from Manila to Taipei using [the] CAL ticket.
Before he left for said trip, the trips covered by the ticket were pre-scheduled and confirmed by the former.
When he arrived in Taipei, he went to the CAL office and confirmed his Hongkong to Manila trip on board
PAL Flight No. PR 311. The CAL office attached a yellow sticker appropriately indicating that his flight
status was OK.

"When Chiok reached Hongkong, he went to the PAL office and sought to reconfirm his flight back to
Manila. The PAL office confirmed his return trip on board Flight No. PR 311 and attached its own sticker.
On November 24, 1981, Chiok proceeded to Hongkong International Airport for his return trip to Manila.
However, upon reaching the PAL counter, Chiok saw a poster stating that PAL Flight No. PR 311 was
cancelled because of a typhoon in Manila. He was then informed that all the confirmed ticket holders of
PAL Flight No. PR 311 were automatically booked for its next flight, which was to leave the next day. He
then informed PAL personnel that, being the founding director of the Philippine Polysterene Paper
Corporation, he ha[d] to reach Manila on November 25, 1981 because of a business option which he ha[d]
to execute on said date.
 "On November 25, 1981, Chiok went to the airport. Cathay Pacific stewardess Lok Chan (hereafter referred
to as Lok) ha[d] taken and received Chiok’s plane ticket and his luggage. Lok called the attention of
Carmen Chan (hereafter referred to as Carmen), PAL’s terminal supervisor, and informed the latter that
Chiok’s name was not in the computer list of passengers. Subsequently, Carmen informed Chiok that his
name did not appear in PAL’s computer list of passengers and therefore could not be permitted to board
PAL Flight No. PR 307.

"Meanwhile, Chiok requested Carmen to put into writing the alleged reason why he was not allowed to take
his flight. The latter then wrote the following, to wit: ‘PAL STAFF CARMEN CHAN CHKD WITH R/C
KENNY AT 1005H NO SUCH NAME IN COMPUTER FOR 311/24 NOV AND 307/25 NOV.’ The latter
sought to recover his luggage but found only 2 which were placed at the end of the passengers line.
Realizing that his new Samsonite luggage was missing, which contained cosmetics worth HK$14,128.80,
he complained to Carmen.

"Thereafter, Chiok proceeded to PAL’s Hongkong office and confronted PAL’s reservation officer, Carie
Chao (hereafter referred to as Chao), who previously confirmed his flight back to Manila. Chao told Chiok
that his name was on the list and pointed to the latter his computer number listed on the PAL confirmation
sticker attached to his plane ticket, which number was ‘R/MN62’.

"Chiok then decided to use another CAL ticket with No. 297:4402:004:370:5 and asked Chao if this ticket
could be used to book him for the said flight. The latter, once again, booked and confirmed the former’s
trip, this time on board PAL Flight No. PR 311 scheduled to depart that evening. Later, Chiok went to the
PAL check-in counter and it was Carmen who attended to him. As this juncture, Chiok had already placed
his travel documents, including his clutch bag, on top of the PAL check-in counter.

"Thereafter, Carmen directed PAL personnel to transfer counters. In the ensuing commotion, Chiok lost his
clutch bag containing the following, to wit: (a) $2,000.00; (b) HK$2,000.00; (c) Taipei $8,000.00; (d)
P2,000.00; (e) a three-piece set of gold (18 carats) cross pens valued at P3,500; (f) a Cartier watch worth
about P7,500.00; (g) a tie clip with a garnet birthstone and diamond worth P1,800.00; and (h) a [pair of]
Christian Dior reading glasses. Subsequently, he was placed on stand-by and at around 7:30 p.m., PAL
personnel informed him that he could now check-in.

"Consequently, Chiok as plaintiff, filed a Complaint on November 9, 1982 for damages, against PAL and
CAL, as defendants, docketed as Civil Case No. 82-13690, with Branch 31, Regional Trial Court, National
Capital Judicial Region, Manila.

"He alleged therein that despite several confirmations of his flight, defendant PAL refused to accommodate
him in Flight No. 307, for which reason he lost the business option aforementioned. He also alleged that
PAL’s personnel, specifically Carmen, ridiculed and humiliated him in the presence of so many people.
Further, he alleged that defendants are solidarily liable for the damages he suffered, since one is the agent
of the other."6

The Regional Trial Court (RTC) of Manila held CAL and PAL jointly and severally liable to respondent. It did not,
however, rule on their respective cross-claims. It disposed as follows:

"WHEREFORE, judgment is hereby rendered in favor of plaintiff and against the defendants to jointly and
severally pay:

1. Actual damages in the amount of HK$14,128.80 or its equivalent in Philippine Currency at the time of
the loss of the luggage consisting of cosmetic products;

2. US$2,000.00 or its equivalent at the time of the loss of the clutch bag containing the money;
 3. P200,000.00 by way of moral damages;

4. P50,000.00 by way of exemplary damages or corrective damages;

5. Attorney[’]s fees equivalent to 10% of the amounts due and demandable and awarded in favor of the
plaintiff; and

6. The costs of this proceedings." 7

The two carriers appealed the RTC Decision to the CA.

Ruling of the Court of Appeals

Affirming the RTC, the Court of Appeals debunked petitioner’s claim that it had merely acted as an issuing agent
for the ticket covering the Hong Kong-Manila leg of respondent’s journey. In support of its Decision, the CA quoted
a purported ruling of this Court in KLM Royal Dutch Airlines v. Court of Appeals8 as follows:

"Article 30 of the Warsaw providing that in case of transportation to be performed by various successive
carriers, the passenger can take action only against the carrier who performed the transportation during
which the accident or the delay occurred presupposes the occurrence of either an accident or delay in the
course of the air trip, and does not apply if the damage is caused by the willful misconduct on the part of
the carrier’s employee or agent acting within the scope of his employment.

"It would be unfair and inequitable to charge a passenger with automatic knowledge or notice of a
condition which purportedly would excuse the carrier from liability, where the notice is written at the back
of the ticket in letters so small that one has to use a magnifying glass to read the words. To preclude any
doubt that the contract was fairly and freely agreed upon when the passenger accepted the passage ticket,
the carrier who issued the ticket must inform the passenger of the conditions prescribed in the ticket or, in
the very least, ascertain that the passenger read them before he accepted the passage ticket. Absent any
showing that the carrier’s officials or employees discharged this responsibility to the passenger, the latter
cannot be bound by the conditions by which the carrier assumed the role of a mere ticket-issuing agent for
other airlines and limited its liability only to untoward occurrences in its own lines.

"Where the passage tickets provide that the carriage to be performed thereunder by several successive
carriers ‘is to be regarded as a single operation,’ the carrier which issued the tickets for the entire trip in
effect guaranteed to the passenger that the latter shall have sure space in the various carriers which would
ferry him through the various segments of the trip, and the ticket-issuing carrier assumes full responsibility
for the entire trip and shall be held accountable for the breach of that guaranty whether the breach occurred
in its own lines or in those of the other carriers."9

On PAL’s appeal, the appellate court held that the carrier had reneged on its obligation to transport respondent
when, in spite of the confirmations he had secured for Flight PR 311, his name did not appear in the computerized
list of passengers. Ruling that the airline’s negligence was the proximate cause of his excoriating experience, the
appellate court sustained the award of moral and exemplary damages.

The CA, however, deleted the RTC’s award of actual damages amounting to HK$14,128.80 and US$2,000.00,
because the lost piece of luggage and clutch bag had not actually been "checked in" or delivered to PAL for
transportation to Manila.

On August 28, 2001, petitioner filed a Motion for Partial Reconsideration, contending that the appellate court had
erroneously relied on a mere syllabus of KLM v. CA, not on the actual ruling therein. Moreover, it argued that
respondent was fully aware that the booking for the PAL sector had been made only upon his request; and that only
PAL, not CAL, was liable for the actual carriage of that segment. Petitioner likewise prayed for a ruling on its cross-
claim against PAL, inasmuch as the latter’s employees had acted negligently, as found by the trial court.

Denying the Motion, the appellate court ruled that petitioner had failed to raise any new matter or issue that would
warrant a modification or a reversal of the Decision. As to the alleged misquotation, the CA held that while the
portion it had cited appeared to be different from the wording of the actual ruling, the variance was "more apparent
than real since the difference [was] only in form and not in substance." 10

CAL and PAL filed separate Petitions to assail the CA Decision. In its October 3, 2001 Resolution, this Court
denied PAL’s appeal, docketed as GR No. 149544, for failure to serve the CA a copy of the Petition as required by
Section 3, Rule 45, in relation to Section 5(d) of Rule 56 and paragraph 2 of Revised Circular No. 1-88 of this Court.
PAL’s Motion for Reconsideration was denied with finality on January 21, 2002.

Only the appeal of CAL11 remains in this Court.

Issues

In its Memorandum, petitioner raises the following issues for the Court’s consideration:

"1. The Court of Appeals committed judicial misconduct in finding liability against the petitioner on the
basis of a misquotation from KLM Royal Dutch Airlines vs. Court of Appeals, et al., 65 SCRA 237 and in
magnifying its misconduct by denying the petitioner’s Motion for Reconsideration on a mere syllabus,
unofficial at that.

"2. The Court of Appeals committed an error of law when it did not apply applicable precedents on the case
before it.

"3. The Court of Appeals committed a non sequitur when it did not rule on the cross-claim of the
petitioner."12

The Court’s Ruling

The Petition is not meritorious.

First Issue:

Alleged Judicial Misconduct

Petitioner charges the CA with judicial misconduct for quoting from and basing its ruling against the two airlines on
an unofficial syllabus of this Court’s ruling in KLM v. CA. Moreover, such misconduct was allegedly aggravated
when the CA, in an attempt to justify its action, held that the difference between the actual ruling and the syllabus
was "more apparent than real." 13

We agree with petitioner that the CA committed a lapse when it relied merely on the unofficial syllabus of our ruling
in KLM v. CA. Indeed, lawyers and litigants are mandated to quote decisions of this Court accurately. 14 By the same
token, judges should do no less by strictly abiding by this rule when they quote cases that support their judgments
and decisions. Canon 3 of the Code of Judicial Conduct enjoins them to perform official duties diligently by being
faithful to the law and maintaining their professional competence.

However, since this case is not administrative in nature, we cannot rule on the CA justices’ administrative liability,
if any, for this lapse. First, due process requires that in administrative proceedings, the respondents must first be
given an opportunity to be heard before sanctions can be imposed. Second, the present action is an appeal from the
CA’s Decision, not an administrative case against the magistrates concerned. These two suits are independent of and
separate from each other and cannot be mixed in the same proceedings.

By merely including the lapse as an assigned error here without any adequate and proper administrative case
therefor, petitioner cannot expect the imposition of an administrative sanction.

In the case at bar, we can only determine whether the error in quotation would be sufficient to reverse or modify the
CA Decision.

Applicability of KLM v. CA

In KLM v. CA, the petitioner therein issued tickets to the Mendoza spouses for their world tour. The tour included a
Barcelona-Lourdes route, which was serviced by the Irish airline Aer Lingus. At the KLM office in Frankfurt,
Germany, they obtained a confirmation from Aer Lingus of their seat reservations on its Flight 861. On the day of
their departure, however, the airline rudely off-loaded them.

When sued for breach of contract, KLM sought to be excused for the wrongful conduct of Aer Lingus by arguing
that its liability for damages was limited only to occurrences on its own sectors. To support its argument, it cited
Article 30 of the Warsaw Convention, stating that when transportation was to be performed by various successive
carriers, the passenger could take action only against the carrier that had performed the transportation when the
accident or delay occurred.

In holding KLM liable for damages, we ruled as follows:

"1. The applicability insisted upon by the KLM of article 30 of the Warsaw Convention cannot be
sustained. That article presupposes the occurrence of either an accident or a delay, neither of which took
place at the Barcelona airport; what is here manifest, instead, is that the Aer Lingus, through its manager
there, refused to transport the respondents to their planned and contracted destination.

"2. The argument that the KLM should not be held accountable for the tortious conduct of Aer Lingus
because of the provision printed on the respondents' tickets expressly limiting the KLM's liability for
damages only to occurrences on its own lines is unacceptable. As noted by the Court of Appeals that
condition was printed in letters so small that one would have to use a magnifying glass to read the words.
Under the circumstances, it would be unfair and inequitable to charge the respondents with automatic
knowledge or notice of the said condition so as to preclude any doubt that it was fairly and freely agreed
upon by the respondents when they accepted the passage tickets issued to them by the KLM. As the airline
which issued those tickets with the knowledge that the respondents would be flown on the various legs of
their journey by different air carriers, the KLM was chargeable with the duty and responsibility of
specifically informing the respondents of conditions prescribed in their tickets or, in the very least, to
ascertain that the respondents read them before they accepted their passage tickets. A thorough search of
the record, however, inexplicably fails to show that any effort was exerted by the KLM officials or
employees to discharge in a proper manner this responsibility to the respondents. Consequently, we hold
that the respondents cannot be bound by the provision in question by which KLM unilaterally assumed the
role of a mere ticket-issuing agent for other airlines and limited its liability only to untoward occurrences
on its own lines.

"3. Moreover, as maintained by the respondents and the Court of Appeals, the passage tickets of the
respondents provide that the carriage to be performed thereunder by several successive carriers ‘is to be
regarded as a single operation,’ which is diametrically incompatible with the theory of the KLM that the
respondents entered into a series of independent contracts with the carriers which took them on the various
segments of their trip. This position of KLM we reject. The respondents dealt exclusively with the KLM
which issued them tickets for their entire trip and which in effect guaranteed to them that they would have
sure space in Aer Lingus flight 861. The respondents, under that assurance of the internationally prestigious
KLM, naturally had the right to expect that their tickets would be honored by Aer Lingus to which, in the
 legal sense, the KLM had indorsed and in effect guaranteed the performance of its principal engagement to
carry out the respondents' scheduled itinerary previously and mutually agreed upon between the parties.

"4. The breach of that guarantee was aggravated by the discourteous and highly arbitrary conduct of an
official of the Aer Lingus which the KLM had engaged to transport the respondents on the Barcelona-
Lourdes segment of their itinerary. It is but just and in full accord with the policy expressly embodied in
our civil law which enjoins courts to be more vigilant for the protection of a contracting party who occupies
an inferior position with respect to the other contracting party, that the KLM should be held responsible for
the abuse, injury and embarrassment suffered by the respondents at the hands of a supercilious boor of the
Aer Lingus."15

In the instant case, the CA ruled that under the contract of transportation, petitioner -- as the ticket-issuing carrier
(like KLM) -- was liable regardless of the fact that PAL was to perform or had performed the actual carriage. It
elucidated on this point as follows:

"By the very nature of their contract, defendant-appellant CAL is clearly liable under the contract of
carriage with [respondent] and remains to be so, regardless of those instances when actual carriage was to
be performed by another carrier. The issuance of a confirmed CAL ticket in favor of [respondent] covering
his entire trip abroad concretely attests to this. This also serves as proof that defendant-appellant CAL, in
effect guaranteed that the carrier, such as defendant-appellant PAL would honor his ticket, assure him of a
space therein and transport him on a particular segment of his trip." 16

Notwithstanding the errant quotation, we have found after careful deliberation that the assailed Decision is
supported in substance by KLM v. CA. The misquotation by the CA cannot serve as basis for the reversal of its
ruling.

Nonetheless, to avert similar incidents in the future, this Court hereby exhorts members of the bar and the bench to
refer to and quote from the official repository of our decisions, the Philippine Reports, whenever practicable.17 In
the absence of this primary source, which is still being updated, they may resort to unofficial sources like the
SCRA.18We remind them that the Court’s ponencia, when used to support a judgment or ruling, should be quoted
accurately.19

Second Issue:

Liability of the Ticket-Issuing Airline

We now come to the main issue of whether CAL is liable for damages. Petitioner posits that the CA Decision must
be annulled, not only because it was rooted on an erroneous quotation, but also because it disregarded jurisprudence,
notably China Airlines v. Intermediate Appellate Court20 and China Airlines v. Court of Appeals.21

Jurisprudence Supports CA Decision

It is significant to note that the contract of air transportation was between petitioner and respondent, with the former
endorsing to PAL the Hong Kong-to-Manila segment of the journey. Such contract of carriage has always been
treated in this jurisdiction as a single operation. This jurisprudential rule is supported by the Warsaw
Convention,22to which the Philippines is a party, and by the existing practices of the International Air Transport
Association (IATA).

Article 1, Section 3 of the Warsaw Convention states:

"Transportation to be performed by several successive air carriers shall be deemed, for the purposes of this
Convention, to be one undivided transportation, if it has been regarded by the parties as a single operation,
whether it has been agreed upon under the form of a single contract or of a series of contracts, and it shall
 not lose its international character merely because one contract or a series of contracts is to be performed
entirely within a territory subject to the sovereignty, suzerainty, mandate, or authority of the same High
Contracting Party."23

Article 15 of IATA-Recommended Practice similarly provides:

"Carriage to be performed by several successive carriers under one ticket, or under a ticket and any
conjunction ticket issued therewith, is regarded as a single operation."

In American Airlines v. Court of Appeals,24 we have noted that under a general pool partnership agreement, the
ticket-issuing airline is the principal in a contract of carriage, while the endorsee-airline is the agent.

"x x x Members of the IATA are under a general pool partnership agreement wherein they act as agent of
each other in the issuance of tickets to contracted passengers to boost ticket sales worldwide and at the
same time provide passengers easy access to airlines which are otherwise inaccessible in some parts of the
world. Booking and reservation among airline members are allowed even by telephone and it has become
an accepted practice among them. A member airline which enters into a contract of carriage consisting of a
series of trips to be performed by different carriers is authorized to receive the fare for the whole trip and
through the required process of interline settlement of accounts by way of the IATA clearing house an
airline is duly compensated for the segment of the trip serviced. Thus, when the petitioner accepted the
unused portion of the conjunction tickets, entered it in the IATA clearing house and undertook to transport
the private respondent over the route covered by the unused portion of the conjunction tickets, i.e., Geneva
to New York, the petitioner tacitly recognized its commitment under the IATA pool arrangement to act as
agent of the principal contracting airline, Singapore Airlines, as to the segment of the trip the petitioner
agreed to undertake. As such, the petitioner thereby assumed the obligation to take the place of the carrier
originally designated in the original conjunction ticket. The petitioner’s argument that it is not a designated
carrier in the original conjunction tickets and that it issued its own ticket is not decisive of its liability. The
new ticket was simply a replacement for the unused portion of the conjunction ticket, both tickets being for
the same amount of US$ 2,760 and having the same points of departure and destination. By constituting
itself as an agent of the principal carrier the petitioner’s undertaking should be taken as part of a single
operation under the contract of carriage executed by the private respondent and Singapore Airlines in
Manila."25

Likewise, as the principal in the contract of carriage, the petitioner in British Airways v. Court of Appeals26 was held
liable, even when the breach of contract had occurred, not on its own flight, but on that of another airline. The
Decision followed our ruling in Lufthansa German Airlines v. Court of Appeals,27 in which we had held that the
obligation of the ticket-issuing airline remained and did not cease, regardless of the fact that another airline had
undertaken to carry the passengers to one of their destinations.

In the instant case, following the jurisprudence cited above, PAL acted as the carrying agent of CAL. In the same
way that we ruled against British Airways and Lufthansa in the aforementioned cases, we also rule that CAL cannot
evade liability to respondent, even though it may have been only a ticket issuer for the Hong Kong-Manila sector.

Moral and Exemplary Damages

Both the trial and the appellate courts found that respondent had satisfactorily proven the existence of the factual
basis for the damages adjudged against petitioner and PAL. As a rule, the findings of fact of the CA affirming those
of the RTC will not be disturbed by this Court.28 Indeed, the Supreme Court is not a trier of facts. As a rule also,
only questions of law -- as in the present recourse -- may be raised in petitions for review under Rule 45.

Moral damages cannot be awarded in breaches of carriage contracts, except in the two instances contemplated in
Articles 1764 and 2220 of the Civil Code, which we quote:
 "Article 1764. Damages in cases comprised in this Section shall be awarded in accordance with Title XVIII
of this Book, concerning Damages. Article 2206 shall also apply to the death of a passenger caused by the
breach of contract by a common carrier.

xxx xxx xxx

"Article 2220. Willful injury to property may be a legal ground for awarding moral damages if the court
should find that, under the circumstances, such damages are justly due. The same rule applies to breaches
of contract where the defendant acted fraudulently or in bad faith." (Italics supplied)

There is no occasion for us to invoke Article 1764 here. We must therefore determine if CAL or its agent (PAL) is
guilty of bad faith that would entitle respondent to moral damages.

In Lopez v. Pan American World Airways,29 we defined bad faith as a breach of a known duty through some motive
of interest or ill will.

In the case at bar, the known duty of PAL was to transport herein respondent from Hong Kong to Manila. That duty
arose when its agent confirmed his reservation for Flight PR 311, 30 and it became demandable when he presented
himself for the trip on November 24, 1981.

It is true that due to a typhoon, PAL was unable to transport respondent on Flight PR 311 on November 24, 1981.
This fact, however, did not terminate the carrier’s responsibility to its passengers. PAL voluntarily obligated itself to
automatically transfer all confirmed passengers of PR 311 to the next available flight, PR 307, on the following
day.31 That responsibility was subsisting when respondent, holding a confirmed ticket for the former flight,
presented himself for the latter.

The records amply establish that he secured repeated confirmations of his PR 311 flight on November 24, 1981.
Hence, he had every reason to expect that he would be put on the replacement flight as a confirmed passenger.
Instead, he was harangued and prevented from boarding the original and the replacement flights. Thus, PAL
breached its duty to transport him. After he had been directed to pay the terminal fee, his pieces of luggage were
removed from the weighing-in counter despite his protestations.32

It is relevant to point out that the employees of PAL were utterly insensitive to his need to be in Manila on
November 25, 1981, and to the likelihood that his business affairs in the city would be jeopardized because of a
mistake on their part. It was that mistake that had caused the omission of his name from the passenger list despite his
confirmed flight ticket. By merely looking at his ticket and validation sticker, it is evident that the glitch was the
airline’s fault. However, no serious attempt was made by PAL to secure the all-important transportation of
respondent to Manila on the following day. To make matters worse, PAL allowed a group of non-revenue
passengers, who had no confirmed tickets or reservations, to board Flight PR 307. 33

Time and time again, this Court has stressed that the business of common carriers is imbued with public interest and
duty; therefore, the law governing them imposes an exacting standard. 34 In Singson v. Court of Appeals,35 we said:

"x x x [T]he carrier's utter lack of care and sensitivity to the needs of its passengers, clearly constitutive of
gross negligence, recklessness and wanton disregard of the rights of the latter, [are] acts evidently
indistinguishable or no different from fraud, malice and bad faith. As the rule now stands, where in
breaching the contract of carriage the defendant airline is shown to have acted fraudulently, with malice or
in bad faith, the award of moral and exemplary damages, in addition to actual damages, is proper." 36 (Italics
supplied)

In Saludo v. Court of Appeals,37 the Court reminded airline companies that due to the nature of their business, they
must not merely give cursory instructions to their personnel to be more accommodating towards customers,
passengers and the general public; they must require them to be so.
The acts of PAL’s employees, particularly Chan, clearly fell short of the extraordinary standard of care that the law
requires of common carriers.38 As narrated in Chan’s oral deposition,39 the manner in which the airline discharged
its responsibility to respondent and its other passengers manifested a lack of the requisite diligence and due regard
for their welfare. The pertinent portions of the Oral Deposition are reproduced as follows:

"Q Now you said that flight PR 311 on 24th November was cancelled due to [a] typhoon and naturally
the passengers on said flight had to be accommodated on the first flight the following day or the first flight
subsequently. [W]ill you tell the Honorable Deposition Officer the procedure followed by Philippine
Airlines in the handling of passengers of cancelled flight[s] like that of PR 311 which was cancelled due to
[a] typhoon?

A The procedure will be: all the confirmed passengers from [PR] 311 24th November [are]
automatically transfer[red] to [PR] 307, 25th November[,] as a protection for all disconfirmed passengers.

Q Aside from this procedure[,] what do you do with the passengers on the cancelled flight who are
expected to check-in on the flights if this flight is cancelled or not operating due to typhoon or other
reasons[?] In other words, are they not notified of the cancellation?

A I think all these passengers were not notified because of a typhoon and Philippine Airlines
Reservation were [sic] not able to call every passenger by phone.

Atty. Fruto:

Q Did you say ‘were not notified?’

A I believe they were not, but believe me, I was on day-off.

Atty. Calica:

Q Per procedure, what should have been done by Reservations Office when a flight is cancelled for
one reason or another?

A If there is enough time, of course, Reservations Office x x x call[s] up all the passengers and tell[s]
them the reason. But if there [is] no time[,] then the Reservations Office will not be able to do that." 40

xxx xxx xxx

"Q I see. Miss Chan, I [will] show you a ticket which has been marked as Exh. A and A-1. Will you
please go over this ticket and tell the court whether this is the ticket that was used precisely by Mr. Chiok
when he checked-in at [F]light 307, 25 November ‘81?

A [Are you] now asking me whether he used this ticket with this sticker?

Q No, no, no. That was the ticket he used.

A Yes, [are you] asking me whether I saw this ticket?

Atty. Fruto: Yes.

A I believe I saw it.

Q You saw it, O.K. Now of course you will agree with me Miss Chan that this yellow stub here which
has been marked as Exh. A-1-A, show[s] that the status on flight 311, 24th November, is O.K., correct?

A Yes.

Q You agree with me. And you will also agree with me that in this ticket of flight 311, on this, another
sticker Exh. A-1-B for 24 November is O.K.?

A May I x x x look at them. Yes, it says O.K. x x x, but [there is] no validation.

Q O.K. Miss Chan what do you understand by these entries here R bar M N 6 V? 41

A This is what we call a computer reference.

Q I see. This is a computer reference showing that the name of Mr. Chiok has been entered in
Philippine Airline’s computer, and this is his computer number.

A Yes.

Q Now you stated in your answer to the procedure taken, that all confirmed passengers on flight 311,
24 November[,] were automatically transferred to 307 as a protection for the passengers, correct?

A Correct.

Q So that since following the O.K. status of Mr. Chiok’s reservation [on] flight 311, [he] was also
automatically transferred to flight 307 the following day?

A Should be.

Q Should be. O.K. Now do you remember how many passengers x x x were transferred from flight
311, 24 November to flight 307, 25 November 81?

A I can only give you a very brief idea because that was supposed to be air bus so it should be able to
accommodate 246 people; but how many [exactly], I don’t know." 42

xxx xxx xxx

"Q So, between six and eight o’clock in the evening of 25 November ‘81, Mr. Chiok already told you
that he just [came] from the Swire Building where Philippine Airlines had [its] offices and that he told you
that his space for 311 25 November 81 was confirmed?

A Yes.

Q That is what he told you. He insisted on that flight?

A Yes.

Q And did you not try to call up Swire Building-- Philippine Airlines and verify indeed if Mr. Chiok
was there?

A Swire House building is not directly under Philippine Airlines. it is just an agency for selling
Philippine Airlines ticket. And besides around six o’ clock they’re close[d] in Central.
 Q So this Swire Building is an agency authorized by Philippine Airlines to issue tickets for and on
behalf of Philippine Airlines and also...

A Yes.

Q And also to confirm spaces for and on behalf of Philippine Airlines.

A Yes."43

Under the foregoing circumstances, we cannot apply our 1989 ruling in China Airlines v. Intermediate Appellate
Court,44 which petitioner urges us to adopt. In that case, the breach of contract and the negligence of the carrier in
effecting the immediate flight connection for therein private respondent was incurred in good faith. 45 Having found
no gross negligence or recklessness, we thereby deleted the award of moral and exemplary damages against it. 46

This Court’s 1992 ruling in China Airlines v. Court of Appeals47 is likewise inapplicable. In that case, we found no
bad faith or malice in the airline’s breach of its contractual obligation.48 We held that, as shown by the flow of
telexes from one of the airline’s offices to the others, petitioner therein had exercised diligent efforts in assisting the
private respondent change his flight schedule. In the instant case, petitioner failed to exhibit the same care and
sensitivity to respondent’s needs.

In Singson v. Court of Appeals,49 we said:

"x x x Although the rule is that moral damages predicated upon a breach of contract of carriage may only
be recoverable in instances where the mishap results in the death of a passenger, or where the carrier is
guilty of fraud or bad faith, there are situations where the negligence of the carrier is so gross and reckless
as to virtually amount to bad faith, in which case, the passenger likewise becomes entitled to recover moral
damages."

In the present case, we stress that respondent had repeatedly secured confirmations of his PR 311 flight on
November 24, 1981 -- initially from CAL and subsequently from the PAL office in Hong Kong. The status of this
flight was marked "OK" on a validating sticker placed on his ticket. That sticker also contained the entry "RMN6V."
Ms Chan explicitly acknowledged that such entry was a computer reference that meant that respondent’s name had
been entered in PAL’s computer.

Since the status of respondent on Flight PR 311 was "OK," as a matter of right testified to by PAL’s witness, he
should have been automatically transferred to and allowed to board Flight 307 the following day. Clearly resulting
from negligence on the part of PAL was its claim that his name was not included in its list of passengers for the
November 24, 1981 PR 311 flight and, consequently, in the list of the replacement flight PR 307. Since he had
secured confirmation of his flight -- not only once, but twice -- by personally going to the carrier’s offices where he
was consistently assured of a seat thereon -- PAL’s negligence was so gross and reckless that it amounted to bad
faith.

In view of the foregoing, we rule that moral and exemplary50 damages were properly awarded by the lower courts. 51

Third Issue:

Propriety of the Cross-Claim

We now look into the propriety of the ruling on CAL’s cross-claim against PAL. Petitioner submits that the CA
should have ruled on the cross-claim, considering that the RTC had found that it was PAL’s employees who had
acted negligently.

Section 8 of Rule 6 of the Rules of Court reads:

 "Sec. 8. Cross-claim. - A cross claim is any claim by one party against a co-party arising out of the
transaction or occurrence that is the subject matter either of the original action or of a counterclaim therein.
Such cross-claim may include a claim that the party against whom it is asserted is or may be liable to the
cross-claimant for all or part of a claim asserted in the action against the cross-claimant."

For purposes of a ruling on the cross-claim, PAL is an indispensable party. In BA Finance Corporation v. CA,52 the
Court stated:

"x x x. An indispensable party is one whose interest will be affected by the court’s action in the litigation,
and without whom no final determination of the case can be had. The party’s interest in the subject matter
of the suit and in the relief sought are so inextricably intertwined with the other parties that his legal
presence as a party to the proceeding is an absolute necessity. In his absence there cannot be a resolution of
the dispute of the parties before the court which is effective, complete, or equitable.

xxx xxx xxx

"Without the presence of indispensable parties to a suit or proceeding, judgment of a court cannot attain
real finality."

PAL’s interest may be affected by any ruling of this Court on CAL’s cross-claim. Hence, it is imperative and in
accordance with due process and fair play that PAL should have been impleaded as a party in the present
proceedings, before this Court can make a final ruling on this matter.

Although PAL was petitioner’s co-party in the case before the RTC and the CA, petitioner failed to include the
airline in the present recourse. Hence, the Court has no jurisdiction over it. Consequently, to make any ruling on the
cross-claim in the present Petition would not be legally feasible because PAL, not being a party in the present case,
cannot be bound thereby.53

WHEREFORE, the Petition is DENIED. Costs against petitioner.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. 101538 June 23, 1992

AUGUSTO BENEDICTO SANTOS III, represented by his father and legal guardian, Augusto Benedicto
Santos, petitioner,
vs.
NORTHWEST ORIENT AIRLINES and COURT OF APPEALS, respondents.

CRUZ, J.:

This case involves the Proper interpretation of Article 28(1) of the Warsaw Convention, reading as follows:

Art. 28. (1) An action for damage must be brought at the option of the plaintiff, in the territory of
one of the High Contracting Parties, either before the court of the domicile of the carrier or of his
principal place of business, or where he has a place of business through which the contract has
been made, or before the court at the place of destination.

The petitioner is a minor and a resident of the Philippines. Private respondent Northwest Orient Airlines (NOA) is a
foreign corporation with principal office in Minnesota, U.S.A. and licensed to do business and maintain a branch
office in the Philippines.

On October 21, 1986, the petitioner purchased from NOA a round-trip ticket in San Francisco. U.S.A., for his flight
from San Francisco to Manila via Tokyo and back. The scheduled departure date from Tokyo was December 20,
1986. No date was specified for his return to San Francisco. 1

On December 19, 1986, the petitioner checked in at the NOA counter in the San Francisco airport for his scheduled
departure to Manila. Despite a previous confirmation and re-confirmation, he was informed that he had no
reservation for his flight from Tokyo to Manila. He therefore had to be wait-listed.

On March 12, 1987, the petitioner sued NOA for damages in the Regional Trial Court of Makati. On April 13, 1987,
NOA moved to dismiss the complaint on the ground of lack of jurisdiction. Citing the above-quoted article, it
contended that the complaint could be instituted only in the territory of one of the High Contracting Parties, before:

1. the court of the domicile of the carrier;

2. the court of its principal place of business;

3. the court where it has a place of business through which the contract had been made;

4. the court of the place of destination.

The private respondent contended that the Philippines was not its domicile nor was this its principal place of
business. Neither was the petitioner's ticket issued in this country nor was his destination Manila but San Francisco
in the United States.

On February 1, 1988, the lower court granted the motion and dismissed the case. 2 The petitioner appealed to the
Court of Appeals, which affirmed the decision of the lower court. 3 On June 26, 1991, the petitioner filed a motion
for reconsideration, but the same was denied. 4 The petitioner then came to this Court, raising substantially the same
issues it submitted in the Court of Appeals.

The assignment of errors may be grouped into two major issues, viz:

(1) the constitutionality of Article 28(1) of the Warsaw Convention; and

(2) the jurisdiction of Philippine courts over the case.

The petitioner also invokes Article 24 of the Civil Code on the protection of minors.

THE ISSUE OF CONSTITUTIONALITY

A. The petitioner claims that the lower court erred in not ruling that Article 28(1) of the Warsaw
Convention violates the constitutional guarantees of due process and equal protection.

The Republic of the Philippines is a party to the Convention for the Unification of Certain Rules Relating to
International Transportation by Air, otherwise known as the Warsaw Convention. It took effect on February 13,
1933. The Convention was concurred in by the Senate, through its Resolution No. 19, on May 16, 1950. The
Philippine instrument of accession was signed by President Elpidio Quirino on October 13, 1950, and was deposited
with the Polish government on November 9, 1950. The Convention became applicable to the Philippines on
February 9, 1951. On September 23, 1955, President Ramon Magsaysay issued Proclamation No. 201, declaring our
formal adherence thereto. "to the end that the same and every article and clause thereof may be observed and
fulfilled in good faith by the Republic of the Philippines and the citizens thereof." 5

The Convention is thus a treaty commitment voluntarily assumed by the Philippine government and, as such, has the
force and effect of law in this country.

The petitioner contends that Article 28(1) cannot be applied in the present case because it is unconstitutional. He
argues that there is no substantial distinction between a person who purchases a ticket in Manila and a person who
purchases his ticket in San Francisco. The classification of the places in which actions for damages may be brought
is arbitrary and irrational and thus violates the due process and equal protection clauses.

It is well-settled that courts will assume jurisdiction over a constitutional question only if it is shown that the
essential requisites of a judicial inquiry into such a question are first satisfied. Thus, there must be an actual case or
controversy involving a conflict of legal rights susceptible of judicial determination; the constitutional question must
have been opportunely raised by the proper party; and the resolution of the question is unavoidably necessary to the
decision of the case itself. 6

Courts generally avoid having to decide a constitutional question. This attitude is based on the doctrine of separation
of powers, which enjoins upon the departments of the government a becoming respect for each other's acts.

The treaty which is the subject matter of this petition was a joint legislative-executive act. The presumption is that it
was first carefully studied and determined to be constitutional before it was adopted and given the force of law in
this country.
The petitioner's allegations are not convincing enough to overcome this presumption. Apparently, the Convention
considered the four places designated in Article 28 the most convenient forums for the litigation of any claim that
may arise between the airline and its passenger, as distinguished from all other places. At any rate, we agree with the
respondent court that this case can be decided on other grounds without the necessity of resolving the constitutional
issue.

B. The petitioner claims that the lower court erred in not ruling that Art. 28(1) of the Warsaw
Convention is inapplicable because of a fundamental change in the circumstances that served as
its basis.

The petitioner goes at great lengths to show that the provisions in the Convention were intended to protect airline
companies under "the conditions prevailing then and which have long ceased to exist." He argues that in view of the
significant developments in the airline industry through the years, the treaty has become irrelevant. Hence, to the
extent that it has lost its basis for approval, it has become unconstitutional.

The petitioner is invoking the doctrine of rebus sic stantibus. According to Jessup, "this doctrine constitutes an
attempt to formulate a legal principle which would justify non-performance of a treaty obligation if the conditions
with relation to which the parties contracted have changed so materially and so unexpectedly as to create a situation
in which the exaction of performance would be unreasonable." 7 The key element of this doctrine is the vital change
in the condition of the contracting parties that they could not have foreseen at the time the treaty was concluded.

The Court notes in this connection the following observation made in Day v. Trans World Airlines, Inc.: 8

The Warsaw drafters wished to create a system of liability rules that would cover all the hazards of
air travel . . . The Warsaw delegates knew that, in the years to come, civil aviation would change
in ways that they could not foresee. They wished to design a system of air law that would be both
durable and flexible enough to keep pace with these changes . . . The ever-changing needs of the
system of civil aviation can be served within the framework they created.

It is true that at the time the Warsaw Convention was drafted, the airline industry was still in its infancy. However,
that circumstance alone is not sufficient justification for the rejection of the treaty at this time. The changes recited
by the petitioner were, realistically, not entirely unforeseen although they were expected in a general sense only. In
fact, the Convention itself, anticipating such developments, contains the following significant provision:

Article 41. Any High Contracting Party shall be entitled not earlier than two years after the
coming into force of this convention to call for the assembling of a new international conference in
order to consider any improvements which may be made in this convention. To this end, it will
communicate with the Government of the French Republic which will take the necessary measures
to make preparations for such conference.

But the more important consideration is that the treaty has not been rejected by the Philippine government. The
doctrine of rebus sic stantibus does not operate automatically to render the treaty inoperative. There is a necessity
for a formal act of rejection, usually made by the head of State, with a statement of the reasons why compliance with
the treaty is no longer required.

In lieu thereof, the treaty may be denounced even without an expressed justification for this action. Such
denunciation is authorized under its Article 39, viz:

Article 39. (1) Any one of the High Contracting Parties may denounce this convention by a
notification addressed to the Government of the Republic of Poland, which shall at once inform
the Government of each of the High Contracting Parties.
 (2) Denunciation shall take effect six months after the notification of denunciation, and shall
operate only as regards the party which shall have proceeded to denunciation.

Obviously. rejection of the treaty, whether on the ground of rebus sic stantibus or pursuant to Article 39, is not a
function of the courts but of the other branches of government. This is a political act. The conclusion and
renunciation of treaties is the prerogative of the political departments and may not be usurped by the judiciary. The
courts are concerned only with the interpretation and application of laws and treaties in force and not with their
wisdom or efficacy.

C. The petitioner claims that the lower court erred in ruling that the plaintiff must sue in the
United States, because this would deny him the right to access to our courts.

The petitioner alleges that the expenses and difficulties he will incur in filing a suit in the United States would
constitute a constructive denial of his right to access to our courts for the protection of his rights. He would
consequently be deprived of this vital guaranty as embodied in the Bill of Rights.

Obviously, the constitutional guaranty of access to courts refers only to courts with appropriate jurisdiction as
defined by law. It does not mean that a person can go to any court for redress of his grievances regardless of the
nature or value of his claim. If the petitioner is barred from filing his complaint before our courts, it is because they
are not vested with the appropriate jurisdiction under the Warsaw Convention, which is part of the law of our land.

II

THE ISSUE OF JURISDICTION.

A. The petitioner claims that the lower court erred in not ruling that Article 28(1) of the Warsaw
Convention is a rule merely of venue and was waived by defendant when it did not move to dismiss
on the ground of improper venue.

By its own terms, the Convention applies to all international transportation of persons performed by aircraft for hire.

International transportation is defined in paragraph (2) of Article 1 as follows:

(2) For the purposes of this convention, the expression "international transportation" shall mean
any transportation in which, according to the contract made by the parties, the place of departure
and the place of destination, whether or not there be a break in the transportation or a
transshipment, are situated [either] within the territories of two High Contracting Parties . . .

Whether the transportation is "international" is determined by the contract of the parties, which in the case of
passengers is the ticket. When the contract of carriage provides for the transportation of the passenger between
certain designated terminals "within the territories of two High Contracting Parties," the provisions of the
Convention automatically apply and exclusively govern the rights and liabilities of the airline and its passenger.

Since the flight involved in the case at bar is international, the same being from the United States to the Philippines
and back to the United States, it is subject to the provisions of the Warsaw Convention, including Article 28(1),
which enumerates the four places where an action for damages may be brought.

Whether Article 28(1) refers to jurisdiction or only to venue is a question over which authorities are sharply divided.
While the petitioner cites several cases holding that Article 28(1) refers to venue rather than jurisdiction, 9 there are
later cases cited by the private respondent supporting the conclusion that the provision is jurisdictional. 10

Venue and jurisdiction are entirely distinct matters. Jurisdiction may not be conferred by consent or waiver upon d
court which otherwise would have no jurisdiction over the subject-matter of an action; but the venue of an action as
fixed by statute may be changed by the consent of the parties and an objection that the plaintiff brought his suit in
the wrong county may be waived by the failure of the defendant to make a timely objection. In either case, the court
may render a valid judgment. Rules as to jurisdiction can never be left to the consent or agreement of the parties,
whether or not a prohibition exists against their alteration. 11

A number of reasons tends to support the characterization of Article 28(1) as a jurisdiction and not a venue
provision. First, the wording of Article 32, which indicates the places where the action for damages "must" be
brought, underscores the mandatory nature of Article 28(1). Second, this characterization is consistent with one of
the objectives of the Convention, which is to "regulate in a uniform manner the conditions of international
transportation by air." Third, the Convention does not contain any provision prescribing rules of jurisdiction other
than Article 28(1), which means that the phrase "rules as to jurisdiction" used in Article 32 must refer only to Article
28(1). In fact, the last sentence of Article 32 specifically deals with the exclusive enumeration in Article 28(1) as
"jurisdictions," which, as such, cannot be left to the will of the parties regardless of the time when the damage
occurred.

This issue was analyzed in the leading case of Smith v. Canadian Pacific Airways, Ltd., 12 where it was held:

. . . Of more, but still incomplete, assistance is the wording of Article 28(2), especially when
considered in the light of Article 32. Article 28(2) provides that "questions of procedure shall be
governed by the law of the court to which the case is submitted" (Emphasis supplied). Section (2)
thus may be read to leave for domestic decision questions regarding the suitability and location of
a particular Warsaw Convention case.

In other words, where the matter is governed by the Warsaw Convention, jurisdiction takes on a dual concept.
Jurisdiction in the international sense must be established in accordance with Article 28(1) of the Warsaw
Convention, following which the jurisdiction of a particular court must be established pursuant to the applicable
domestic law. Only after the question of which court has jurisdiction is determined will the issue of venue be taken
up. This second question shall be governed by the law of the court to which the case is submitted.

The petitioner submits that since Article 32 states that the parties are precluded "before the damages occurred" from
amending the rules of Article 28(1) as to the place where the action may be brought, it would follow that the
Warsaw Convention was not intended to preclude them from doing so "after the damages occurred."

Article 32 provides:

Art. 32. Any clause contained in the contract and all special agreements entered into before the
damage occurred by which the parties purport to infringe the rules laid down by this convention,
whether by deciding the law to be applied, or by altering the rules as to jurisdiction, shall be null
and void. Nevertheless for the transportation of goods, arbitration clauses shall be allowed, subject
to this convention, if the arbitration is to take place within one of the jurisdictions referred to in the
first paragraph of Article 28.

His point is that since the requirements of Article 28(1) can be waived "after the damages (shall have) occurred," the
article should be regarded as possessing the character of a "venue" and not of a "jurisdiction" provision. Hence, in
moving to dismiss on the ground of lack of jurisdiction, the private respondent has waived improper venue as a
ground to dismiss.

The foregoing examination of Article 28(1) in relation to Article 32 does not support this conclusion. In any event,
we agree that even granting arguendo that Article 28(1) is a venue and not a jurisdictional provision, dismissal of
the case was still in order. The respondent court was correct in affirming the ruling of the trial court on this matter,
thus:

Santos' claim that NOA waived venue as a ground of its motion to dismiss is not correct. True it is
that NOA averred in its MOTION TO DISMISS that the ground thereof is "the Court has no
 subject matter jurisdiction to entertain the Complaint" which SANTOS considers as equivalent to
"lack of jurisdiction over the subject matter . . ." However, the gist of NOA's argument in its
motion is that the Philippines is not the proper place where SANTOS could file the action —
meaning that the venue of the action is improperly laid. Even assuming then that the specified
ground of the motion is erroneous, the fact is the proper ground of the motion — improper venue
— has been discussed therein.

Waiver cannot be lightly inferred. In case of doubt, it must be resolved in favor of non-waiver if there are special
circumstances justifying this conclusion, as in the petition at bar. As we observed in Javier vs. Intermediate Court of
Appeals: 13

Legally, of course, the lack of proper venue was deemed waived by the petitioners when they
failed to invoke it in their original motion to dismiss. Even so, the motivation of the private
respondent should have been taken into account by both the trial judge and the respondent court in
arriving at their decisions.

The petitioner also invokes KLM Royal Dutch Airlines v. RTC, 14 a decision of our Court of Appeals, where it was
held that Article 28(1) is a venue provision. However, the private respondent avers that this was in effect reversed by
the case of Aranas v. United Airlines, 15 where the same court held that Article 28(1) is a jurisdictional provision.
Neither of these cases is binding on this Court, of course, nor was either of them appealed to us. Nevertheless, we
here express our own preference for the later case of Aranas insofar as its pronouncements on jurisdiction conform
to the judgment we now make in this petition.

B. The petitioner claims that the lower court erred in not ruling that under Article 28(1) of the
Warsaw Convention, this case was properly filed in the Philippines, because Manila was the
destination of the plaintiff.

The Petitioner contends that the facts of this case are analogous to those in Aanestad v. Air Canada. 16 In that case,
Mrs. Silverberg purchased a round-trip ticket from Montreal to Los Angeles and back to Montreal. The date and
time of departure were specified but not of the return flight. The plane crashed while on route from Montreal to Los
Angeles, killing Mrs. Silverberg. Her administratrix filed an action for damages against Air Canada in the U.S.
District Court of California. The defendant moved to dismiss for lack of jurisdiction but the motion was denied thus:

. . . It is evident that the contract entered into between Air Canada and Mrs. Silverberg as
evidenced by the ticket booklets and the Flight Coupon No. 1, was a contract for Air Canada to
carry Mrs. Silverberg to Los Angeles on a certain flight, a certain time and a certain class, but that
the time for her to return remained completely in her power. Coupon No. 2 was only a continuing
offer by Air Canada to give her a ticket to return to Montreal between certain dates. . . .

The only conclusion that can be reached then, is that "the place of destination" as used in the
Warsaw Convention is considered by both the Canadian C.T.C. and the United States C.A.B. to
describe at least two "places of destination," viz., the "place of destination" of a particular flight
either an "outward destination" from the "point of origin" or from the "outward point of
destination" to any place in Canada.

Thus the place of destination under Art. 28 and Art. 1 of the Warsaw Convention of the flight on
which Mrs. Silverberg was killed, was Los Angeles according to the ticket, which was the contract
between the parties and the suit is properly filed in this Court which has jurisdiction.

The Petitioner avers that the present case falls squarely under the above ruling because the date and time of his
return flight to San Francisco were, as in the Aanestad case, also left open. Consequently, Manila and not San
Francisco should be considered the petitioner's destination.
The private respondent for its part invokes the ruling in Butz v. British Airways, 17 where the United States District
Court (Eastern District of Pennsylvania) said:

. . . Although the authorities which addressed this precise issue are not extensive, both the cases
and the commentators are almost unanimous in concluding that the "place of destination" referred
to in the Warsaw Convention "in a trip consisting of several parts . . . is the ultimate
destination that is accorded treaty jurisdiction." . . .

But apart from that distinguishing feature, I cannot agree with the Court's analysis in Aanestad;
whether the return portion of the ticket is characterized as an option or a contract, the carrier was
legally bound to transport the passenger back to the place of origin within the prescribed time and.
the passenger for her part agreed to pay the fare and, in fact, did pay the fare. Thus there was
mutuality of obligation and a binding contract of carriage, The fact that the passenger could forego
her rights under the contract does not make it any less a binding contract. Certainly, if the parties
did not contemplate the return leg of the journey, the passenger would not have paid for it and the
carrier would not have issued a round trip ticket.

We agree with the latter case. The place of destination, within the meaning of the Warsaw Convention, is
determined by the terms of the contract of carriage or, specifically in this case, the ticket between the passenger and
the carrier. Examination of the petitioner's ticket shows that his ultimate destination is San Francisco. Although the
date of the return flight was left open, the contract of carriage between the parties indicates that NOA was bound to
transport the petitioner to San Francisco from Manila. Manila should therefore be considered merely an agreed
stopping place and not the destination.

The petitioner submits that the Butz case could not have overruled the Aanestad case because these decisions are
from different jurisdictions. But that is neither here nor there. In fact, neither of these cases is controlling on this
Court. If we have preferred the Butz case, it is because, exercising our own freedom of choice, we have decided that
it represents the better, and correct, interpretation of Article 28(1).

Article 1(2) also draws a distinction between a "destination" and an "agreed stopping place." It is the "destination"
and not an "agreed stopping place" that controls for purposes of ascertaining jurisdiction under the Convention.

The contract is a single undivided operation, beginning with the place of departure and ending with the ultimate
destination. The use of the singular in this expression indicates the understanding of the parties to the Convention
that every contract of carriage has one place of departure and one place of destination. An intermediate place where
the carriage may be broken is not regarded as a "place of destination."

C. The petitioner claims that the lower court erred in not ruling that under Art. 28(1) of the
Warsaw Convention, this case was properly filed in the Philippines because the defendant has its
domicile in the Philippines.

The petitioner argues that the Warsaw Convention was originally written in French and that in interpreting its
provisions, American courts have taken the broad view that the French legal meaning must govern. 18 In French, he
says, the "domicile" of the carrier means every place where it has a branch office.

The private respondent notes, however, that in Compagnie Nationale Air France vs. Giliberto, 19 it was held:

The plaintiffs' first contention is that Air France is domiciled in the United States. They say that
the domicile of a corporation includes any country where the airline carries on its business on "a
regular and substantial basis," and that the United States qualifies under such definition. The
meaning of domicile cannot, however, be so extended. The domicile of a corporation is
customarily regarded as the place where it is incorporated, and the courts have given the meaning
to the term as it is used in article 28(1) of the Convention. (See Smith v. Canadian Pacific
Airways, Ltd. (2d Cir. 1971), 452 F2d 798, 802; Nudo v. Societe Anonyme Belge d' Exploitation
 de la Navigation Aerienne Sabena Belgian World Airlines (E.D. pa. 1962). 207 F. Supp, 191;
Karfunkel v. Compagnie Nationale Air France (S.D.N.Y. 1977), 427 F. Suppl. 971, 974).
Moreover, the structure of article 28(1), viewed as a whole, is also incompatible with the plaintiffs'
claim. The article, in stating that places of business are among the bases of the jurisdiction, sets
out two places where an action for damages may be brought; the country where the carrier's
principal place of business is located, and the country in which it has a place of business through
which the particular contract in question was made, that is, where the ticket was bought, Adopting
the plaintiffs' theory would at a minimum blur these carefully drawn distinctions by creating a
third intermediate category. It would obviously introduce uncertainty into litigation under the
article because of the necessity of having to determine, and without standards or criteria, whether
the amount of business done by a carrier in a particular country was "regular" and "substantial."
The plaintiff's request to adopt this basis of jurisdiction is in effect a request to create a new
jurisdictional standard for the Convention.

Furthermore, it was argued in another case 20 that:

. . . In arriving at an interpretation of a treaty whose sole official language is French, are we bound
to apply French law? . . . We think this question and the underlying choice of law issue warrant
some discussion
. . . We do not think this statement can be regarded as a conclusion that internal French law is to be
"applied" in the choice of law sense, to determine the meaning and scope of the Convention's
terms. Of course, French legal usage must be considered in arriving at an accurate English
translation of the French. But when an accurate English translation is made and agreed upon, as
here, the inquiry into meaning does not then revert to a quest for a past or present French law to be
"applied" for revelation of the proper scope of the terms. It does not follow from the fact that the
treaty is written in French that in interpreting it, we are forever chained to French law, either as it
existed when the treaty was written or in its present state of development. There is no suggestion
in the treaty that French law was intended to govern the meaning of Warsaw's terms, nor have we
found any indication to this effect in its legislative history or from our study of its application and
interpretation by other courts. Indeed, analysis of the cases indicates that the courts, in interpreting
and applying the Warsaw Convention, have, not considered themselves bound to apply French law
simply because the Convention is written in French. . . .

We agree with these rulings.

Notably, the domicile of the carrier is only one of the places where the complaint is allowed to be filed under Article
28(1). By specifying the three other places, to wit, the principal place of business of the carrier, its place of business
where the contract was made, and the place of destination, the article clearly meant that these three other places were
not comprehended in the term "domicile."

D. The petitioner claims that the lower court erred in not ruling that Art. 28(1) of the Warsaw
Convention does not apply to actions based on tort.

The petitioner alleges that the gravamen of the complaint is that private respondent acted arbitrarily and in bad faith,
discriminated against the petitioner, and committed a willful misconduct because it canceled his confirmed
reservation and gave his reserved seat to someone who had no better right to it. In short. the private respondent
committed a tort.

Such allegation, he submits, removes the present case from the coverage of the Warsaw Convention. He argues that
in at least two American cases, 21 it was held that Article 28(1) of the Warsaw Convention does not apply if the
action is based on tort.

This position is negated by Husserl v. Swiss Air Transport Company, 22 where the article in question was
interpreted thus:
 . . . Assuming for the present that plaintiff's claim is "covered" by Article 17, Article 24 clearly
excludes any relief not provided for in the Convention as modified by the Montreal Agreement. It
does not, however, limit the kind of cause of action on which the relief may be founded; rather it
provides that any action based on the injuries specified in Article 17 "however founded," i.e.,
regardless of the type of action on which relief is founded, can only be brought subject to the
conditions and limitations established by the Warsaw System. Presumably, the reason for the use
of the phrase "however founded," in two-fold: to accommodate all of the multifarious bases on
which a claim might be founded in different countries, whether under code law or common law,
whether under contract or tort, etc.; and to include all bases on which a claim seeking relief for an
injury might be founded in any one country. In other words, if the injury occurs as described in
Article 17, any relief available is subject to the conditions and limitations established by the
Warsaw System, regardless of the particular cause of action which forms the basis on which a
plaintiff could seek
relief . . .

The private respondent correctly contends that the allegation of willful misconduct resulting in a tort is insufficient
to exclude the case from the comprehension of the Warsaw Convention. The petitioner has apparently misconstrued
the import of Article 25(l) of the Convention, which reads as follows:

Art. 25 (1). The carrier shall not be entitled to avail himself of the provisions of this Convention
which exclude or limit his liability. if the damage is caused by his willful misconduct or by such
default on his part as, in accordance with the law of the court to which the case is submitted, is
considered to be equivalent to willful misconduct.

It is understood under this article that the court called upon to determine the applicability of the limitation provision
must first be vested with the appropriate jurisdiction. Article 28(1) is the provision in the Convention which defines
that jurisdiction. Article 22 23 merely fixes the monetary ceiling for the liability of the carrier in cases covered by
the Convention. If the carrier is indeed guilty of willful misconduct, it can avail itself of the limitations set forth in
this article. But this can be done only if the action has first been commenced properly under the rules on jurisdiction
set forth in Article 28(1).

III

THE ISSUE OF PROTECTION TO MINORS

The petitioner calls our attention to Article 24 of the Civil Code, which states:

Art. 24. In all contractual property or other relations, when one of the parties is at a disadvantage
on account of his moral dependence, ignorance, indigence, mental weakness, tender age or other
handicap, the courts must be vigilant for his protection.

Application of this article to the present case is misplaced. The above provision assumes that the court is vested with
jurisdiction to rule in favor of the disadvantaged minor, As already explained, such jurisdiction is absent in the case
at bar.

CONCLUSION

A number of countries have signified their concern over the problem of citizens being denied access to their own
courts because of the restrictive provision of Article 28(1) of the Warsaw Convention. Among these is the United
States, which has proposed an amendment that would enable the passenger to sue in his own domicile if the carrier
does business in that jurisdiction. The reason for this proposal is explained thus:
 In the event a US citizen temporarily residing abroad purchases a Rome to New York to Rome
ticket on a foreign air carrier which is generally subject to the jurisdiction of the US, Article 28
would prevent that person from suing the carrier in the US in a "Warsaw Case" even though such a
suit could be brought in the absence of the Convention.

The proposal was incorporated in the Guatemala Protocol amending the Warsaw Convention, which was adopted at
Guatemala City on March 8,
1971. 24 But it is still ineffective because it has not yet been ratified by the required minimum number of
contracting parties. Pending such ratification, the petitioner will still have to file his complaint only in any of the
four places designated by Article 28(1) of the Warsaw Convention.

The proposed amendment bolsters the ruling of this Court that a citizen does not necessarily have the right to sue in
his own courts simply because the defendant airline has a place of business in his country.

The Court can only sympathize with the petitioner, who must prosecute his claims in the United States rather than in
his own country at least inconvenience. But we are unable to grant him the relief he seeks because we are limited by
the provisions of the Warsaw Convention which continues to bind us. It may not be amiss to observe at this point
that the mere fact that he will have to litigate in the American courts does not necessarily mean he will litigate in
vain. The judicial system of that country in known for its sense of fairness and, generally, its strict adherence to the
rule of law.

WHEREFORE, the petition is DENIED, with costs against the petitioner. It is so ordered.
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 127768 November 19, 1999

UNITED AIRLINES, petitioner,

vs.
WILLIE J. UY, respondent.

BELLOSILLO, J.:

UNITED AIRLINES assails in this petition for review on certiorari under Rule 45 the 29 August 1995 Decision of
the Court of Appeals in CA-G.R. CV No. 39761 which reversed the 7 August 1992 order issued by the trial court in
Civil Case No. Q-92-12410 1 granting petitioner's motion to dismiss based on prescription of cause of action. The
issues sought to be resolved are whether the notice of appeal to the appellate court was timely filed, and whether
Art. 29 of the Warsaw Convention 2 should apply to the case at bar.

On 13 October 1989 respondent Willie J. Uy, a revenue passenger on United Airlines Flight No. 819 for the San
Francisco — Manila route, checked in together with his luggage one piece of which was found to be overweight at
the airline counter. To his utter humiliation, an employee of petitioner rebuked him saying that he should have
known the maximum weight allowance to be 70 kgs. per bag and that he should have packed his things accordingly.
Then, in a loud voice in front of the milling crowd, she told respondent to repack his things and transfer some of
them from the overweight luggage to the lighter ones. Not wishing to create further scene, respondent acceded only
to find his luggage still overweight. The airline then billed him overweight charges which he offered to pay with a
miscellaneous charge order (MCO) or an airline pre-paid credit. However, the airline's employee, and later its
airport supervisor, adamantly refused to honor the MCO pointing out that there were conflicting figures listed on it.
Despite the explanation from respondent that the last figure written on the MCO represented his balance, petitioner's
employees did not accommodate him. Faced with the prospect of leaving without his luggage, respondent paid the
overweight charges with his American Express credit card.

Respondent's troubles did not end there. Upon arrival in Manila, he discovered that one of his bags had been slashed
and its contents stolen. He particularized his losses to be around US $5,310.00. In a letter dated 16 October 1989
respondent bewailed the insult, embarrassment and humiliating treatment he suffered in the hands of United Airlines
employees, notified petitioner of his loss and requested reimbursement thereof. Petitioner United Airlines, through
Central Baggage Specialist Joan Kroll, did not refute any of respondent's allegations and mailed a check
representing the payment of his loss based on the maximum liability of US $9.70 per pound. Respondent, thinking
the amount to be grossly inadequate to compensate him for his losses, as well as for the indignities he was subjected
to, sent two (2) more letters to petitioner airline, one dated 4 January 1990 through a certain Atty. Pesigan, and
another dated 28 October 1991 through Atty. Ramon U. Ampil demanding an out-of-court settlement of
P1,000,000.00. Petitioner United Airlines did not accede to his demands.

Consequently, on 9 June 1992 respondent filed a complaint for damages against United Airlines alleging that he was
a person of good station, sitting in the board of directors of several top 500 corporations and holding senior
executive positions for such similar firms; 3 that petitioner airline accorded him ill and shabby treatment to his
extreme embarrassment and humiliation; and, as such he should be paid moral damages of at least P1,000,000.00,
exemplary damages of at least P500,000.00, plus attorney's fees of at least P50,000.00. Similarly, he alleged that the
damage to his luggage and its stolen contents amounted to around $5,310.00, and requested reimbursement therefor.
United Airlines moved to dismiss the complaint on the ground that respondent's cause of action had prescribed,
invoking Art. 29 of the Warsaw Convention which provides —

Art. 29 (1) The right to damages shall be extinguished if an action is not brought within two (2)
years, reckoned from the date of arrival at the destination, or from the date on which the aircraft
ought to have arrived, or from the date on which the transportation stopped.

(2) The method of calculating the period of limitation shall be determined by the law of the court
to which the case is submitted.

Respondent countered that par. (1) of Art. 29 of the Warsaw Convention must be reconciled with par. (2) thereof
which states that "the method of calculating the period of limitation shall be determined by the law of the court to
which the case is submitted." Interpreting thus, respondent noted that according to Philippine laws the prescription
of actions is interrupted "when they are filed before the court, when there is a written extrajudicial demand by the
creditors, and when there is any written acknowledgment of the debt by the debtor." 4 Since he made several
demands upon United Airlines: first, through his personal letter dated 16 October 1989; second, through a letter
dated 4 January 1990 from Atty. Pesigan; and, finally, through a letter dated 28 October 1991 written for him by
Atty. Ampil, the two (2)-year period of limitation had not yet been exhausted.

On 2 August 1992 the trial court ordered the dismissal of the action holding that the language of Art. 29 is clear that
the action must be brought within two (2) years from the date of arrival at the destination. It held that although the
second paragraph of Art. 29 speaks of deference to the law of the local court in "calculating the period of limitation,"
the same does not refer to the local forum's rules in interrupting the prescriptive period but only to the rules of
determining the time in which the action may be deemed commenced, and within our jurisdiction the action shall be
deemed "brought" or commenced by the filing of a complaint. Hence, the trial court concluded that Art. 29 excludes
the application of our interruption rules.

Respondent received a copy of the dismissal order on 17 August 1992. On 31 August 1992, or fourteen (14) days
later, he moved for the reconsideration of the trial court's order. The trial court denied the motion and respondent
received copy of the denial order on 28 September 1992. Two (2) days later, on 1 October 1992 respondent filed his
notice of appeal.

United Airlines once again moved for the dismissal of the case this time pointing out that respondent's fifteen (15)-
day period to appeal had already elapsed. Petitioner argued that having used fourteen (14) days of the reglementary
period for appeal, respondent Uy had only one (1) day remaining to perfect his appeal, and since he filed his notice
of appeal two (2) days later, he failed to meet the deadline.

In its questioned Decision dated 29 August 1995 5 the appellate court gave due course to the appeal holding that
respondent's delay of two (2) days in filing his notice of appeal did not hinder it from reviewing the appealed order
of dismissal since jurisprudence dictates that an appeal may be entertained despite procedural lapses anchored on
equity and justice.

On the applicability of the Warsaw Convention, the appellate court ruled that the Warsaw Convention did not
preclude the operation of the Civil Code and other pertinent laws. Respondent's failure to file his complaint within
the two (2)-year limitation provided in the Warsaw Convention did not bar his action since he could still hold
petitioner liable for breach of other provisions of the Civil Code which prescribe a different period or procedure for
instituting an action. Further, under Philippine laws, prescription of actions is interrupted where, among others, there
is a written extrajudicial demand by the creditors, and since respondent Uy sent several demand letters to petitioner
United Airlines, the running of the two (2)-year prescriptive period was in effect suspended. Hence, the appellate
court ruled that respondent's cause of action had not yet prescribed and ordered the records remanded to the Quezon
City trial court for further proceedings.

Petitioner now contends that the appellate court erred in assuming jurisdiction over respondent's appeal since it is
clear that the notice of appeal was filed out of time. It argues that the courts relax the stringent rule on perfection of
appeals only when there are extraordinary circumstances, e.g., when the Republic stands to lose hundreds of
hectares of land already titled and used for educational purposes; when the counsel of record was already dead; and
wherein appellant was the owner of the trademark for more than thirty (30) years, and the circumstances of the
present case do not compare to the above exceptional cases. 6

Sec. 1 of Rule 45 of the 1997 Rules of Civil Procedure provides that "a party may appeal by certiorari, from a
judgment of the Court of Appeals, by filing with the Supreme Court a petition for certiorari, within fifteen (15) days
from notice of judgment or of the denial of his motion for reconsideration filed in due time . . . ." This Rule however
should not be interpreted as "to sacrifice the substantial right of the appellant in the sophisticated altar of
technicalities with impairment of the sacred principles of justice." 7 It should be borne in mind that the real purpose
behind the limitation of the period of appeal is to forestall or avoid an unreasonable delay in the administration of
justice. Thus, we have ruled that delay in the filing of a notice of appeal does not justify the dismissal of the appeal
where the circumstances of the case show that there is no intent to delay the administration of justice on the part of
appellant's counsel, 8 or when there are no substantial rights affected, 9 or when appellant's counsel committed a
mistake in the computation of the period of appeal, an error not attributable to negligence or bad faith. 10

In the instant case, respondent filed his notice of appeal two (2) days later than the prescribed period. Although his
counsel failed to give the reason for the delay, we are inclined to give due course to his appeal due to the unique and
peculiar facts of the case and the serious question of law it poses. In the now almost trite but still good principle,
technicality, when it deserts its proper office as an aid to justice and becomes its great hindrance and chief enemy,
deserves scant consideration. 11

Petitioner likewise contends that the appellate court erred in ruling that respondent's cause of action has not
prescribed since delegates to the Warsaw Convention clearly intended the two (2)-year limitation incorporated in
Art. 29 as an absolute bar to suit and not to be made subject to the various tolling provisions of the laws of the
forum. Petitioner argues that in construing the second paragraph of Art. 29 private respondent cannot read into it
Philippine rules on interruption of prescriptive periods and state that his extrajudicial demand has interrupted the
period of prescription. 12 American jurisprudence has declared that "Art. 29 (2) was not intended to permit forums to
consider local limitation tolling provisions but only to let local law determine whether an action had been
commenced within the two-year period, since the method of commencing a suit varies from country to country." 13

Within our jurisdiction we have held that the Warsaw Convention can be applied, or ignored, depending on the
peculiar facts presented by each case. 14 Thus, we have ruled that the Convention's provisions do not regulate or
exclude liability for other breaches of contract by the carrier or misconduct of its officers and employees, or for
some particular or exceptional type of damage. 15 Neither may the Convention be invoked to justify the disregard of
some extraordinary sort of damage resulting to a passenger and preclude recovery therefor beyond the limits set by
said Convention. 16 Likewise, we have held that the Convention does not preclude the operation of the Civil Code
and other pertinent laws. 17 It does not regulate, much less exempt, the carrier from liability for damages for
violating the rights of its passengers under the contract of carriage, especially if willful misconduct on the part of the
carrier's employees is found or established. 18

Respondent's complaint reveals that he is suing on two (2) causes of action: (a) the shabby and humiliating treatment
he received from petitioner's employees at the San Francisco Airport which caused him extreme embarrassment and
social humiliation; and, (b) the slashing of his luggage and the loss of his personal effects amounting to US
$5,310.00.

While his second cause of action — an action for damages arising from theft or damage to property or goods — is
well within the bounds of the Warsaw Convention, his first cause of action — an action for damages arising from
the misconduct of the airline employees and the violation of respondent's rights as passenger — clearly is not.

Consequently, insofar as the first cause of action is concerned, respondent's failure to file his complaint within the
two (2)-year limitation of the Warsaw Convention does not bar his action since petitioner airline may still be held
liable for breach of other provisions of the Civil Code which prescribe a different period or procedure for instituting
the action, specifically, Art. 1146 thereof which prescribes four (4) years for filing an action based on torts.
As for respondent's second cause of action, indeed the travaux preparatories of the Warsaw Convention reveal that
the delegates thereto intended the two (2)-year limitation incorporated in Art. 29 as an absolute bar to suit and not to
be made subject to the various tolling provisions of the laws of the forum. This therefore forecloses the application
of our own rules on interruption of prescriptive periods. Article 29, par. (2), was intended only to let local laws
determine whether an action had been commenced within the two (2)-year period, and within our jurisdiction an
action shall be deemed commenced upon the filing of a complaint. Since it is indisputable that respondent filed the
present action beyond the two (2)-year time frame his second cause of action must be barred. Nonetheless, it cannot
be doubted that respondent exerted efforts to immediately convey his loss to petitioner, even employed the services
of two (2) lawyers to follow up his claims, and that the filing of the action itself was delayed because of petitioner's
evasion.

In this regard, Philippine Airlines, Inc. v. Court of Appeals 19 is instructive. In this case of PAL, private respondent
filed an action for damages against petitioner airline for the breakage of the front glass of the microwave oven which
she shipped under PAL Air Waybill No. 0-79-1013008-3. Petitioner averred that, the action having been filed seven
(7) months after her arrival at her port of destination, she failed to comply with par. 12, subpar. (a) (1), of the Air
Waybill which expressly provided that the person entitled to delivery must make a complaint to the carrier in writing
in case of visible damage to the goods, immediately after discovery of the damage and at the latest within 14 days
from receipt of the goods. Despite non-compliance therewith the Court held that by private respondent's immediate
submission of a formal claim to petitioner, which however was not immediately entertained as it was referred from
one employee to another, she was deemed to have substantially complied with the requirement. The Court noted that
with private respondent's own zealous efforts in pursuing her claim it was clearly not her fault that the letter of
demand for damages could only be filed, after months of exasperating follow-up of the claim, on 13 August 1990,
and that if there was any failure at all to file the formal claim within the prescriptive period contemplated in the Air
Waybill, this was largely because of the carrier's own doing, the consequences of which could not in all fairness be
attributed to private respondent.

In the same vein must we rule upon the circumstances brought before us. Verily, respondent filed his complaint
more than two (2) years later, beyond the period of limitation prescribed by the Warsaw Convention for filing a
claim for damages. However, it is obvious that respondent was forestalled from immediately filing an action because
petitioner airline gave him the runaround, answering his letters but not giving in to his demands. True, respondent
should have already filed an action at the first instance when his claims were denied by petitioner but the same could
only be due to his desire to make an out-of-court settlement for which he cannot be faulted. Hence, despite the
express mandate of Art. 29 of the Warsaw Convention that an action for damages should be filed within two (2)
years from the arrival at the place of destination, such rule shall not be applied in the instant case because of the
delaying tactics employed by petitioner airline itself. Thus, private respondent's second cause of action cannot be
considered as time-barred under Art. 29 of the Warsaw Convention.

WHEREFORE, the assailed Decision of the Court of Appeals reversing and setting aside the appealed order of the
trial court granting the motion to dismiss the complaint, as well as its Resolution denying reconsideration, is
AFFIRMED. Let the records of the case be remanded to the court of origin for further proceedings taking its
bearings from this disquisition.

SO ORDERED.