G.R. No.

L-49407 August 19, 1988

NATIONAL DEVELOPMENT COMPANY

vs.
THE COURT OF APPEALS and DEVELOPMENT INSURANCE & SURETY
CORPORATION

No. L-49469 August 19, 1988

MARITIME COMPANY OF THE PHILIPPINES,

vs.
THE COURT OF APPEALS and DEVELOPMENT INSURANCE & SURETY
CORPORATION

In 1962, defendants NDC and MCP entered into a memorandum of agreement, where
NDC as the first preferred mortgagee of three ocean going vessels including one with the
name 'Dona Nati' appointed MCP as its agent to manage and operate said vessel for and
in its behalf and account.
Thus, in 1964 the E. Philipp Corporation of New York loaded on board the vessel "Dona
Nati" at San Francisco, California, a total of 1,200 bales of American raw cotton
consigned to the order of Manila Banking Corporation, Manila and the People's Bank and
Trust Company in behalf of the Pan Asiatic Commercial Company, Inc., who represents
Riverside Mills Corporation. Also loaded on the same vessel at Tokyo, Japan, were the
cargo of Kyokuto Boekui, Kaisa, Ltd., consigned to the order of Manila Banking
Corporation consisting of 200 cartons of sodium lauryl sulfate and 10 cases of aluminum
foil. En route to Manila the vessel Dofia Nati figured in a collision at Ise Bay, Japan with a
Japanese vessel as a result of which 550 bales of American raw cotton were lost and/or
destroyed, of which 535 bales as damaged were landed and sold and 15 bales were not
landed and deemed lost.
Thus, the plaintiff had paid as insurer the total amount of P364,915.86 to the consignees
or their successors-in-interest, for the said lost or damaged cargoes. Hence, this
complaint to recover said amount from the defendants-NDC and MCP as owner and ship
agent respectively, of the said 'Dona Nati' vessel.
In 1969, the trial court rendered a decision ordering the defendants MCP and NDC to pay
jointly and solidarity to DISC the sum of P364,915.86 plus the legal rate of interest. On
appeal, CA promulgated its decision affirming in toto the decision of the trial court.
Hence these appeals by certiorari.
Issue: Which law governs loss or destruction of goods due to collision of vessels outside
Philippine waters and the extent of liability as well as the rules of prescription provided
thereunder
Ruling:
In Eastern Shipping Lines Inc. v. IAC, it was held under similar circumstance "that the law
of the country to which the goods are to be transported governs the liability of the
common carrier in case of their loss, destruction or deterioration" (Article 1753, Civil
Code). Thus, the rule was specifically laid down that for cargoes transported from Japan
to the Philippines, the liability of the carrier is governed primarily by the Civil Code and in
all matters not regulated by said Code, the rights and obligations of common carrier shall
be governed by the Code of commerce and by laws (Article 1766, Civil Code). Hence, the
Carriage of Goods by Sea Act, a special law, is merely suppletory to the provision of the
Civil Code.
PREMISES CONSIDERED, the subject petitions are DENIED for lack of merit and the
assailed decision of the respondent Appellate Court is AFFIRMED.

[G.R. No. 121824. January 29, 1998]

BRITISH AIRWAYS, petitioner, vs. COURT OF APPEALS, GOP MAHTANI, and

PHILIPPINE AIRLINES, respondents
In 1989, Mahtani decided to visit his relatives in Bombay, India. In anticipation of his
visit, he obtained the services of a certain Mr. Gumar to prepare his travel plans.
The latter, in turn, purchased a ticket from BA.
Since BA had no direct flights from Manila to Bombay, Mahtani had to take a flight to
Hongkong via PAL, and upon arrival in Hongkong he had to take a connecting flight to
Bombay on board BA.
Prior to his departure, Mahtani checked in at the PAL counter in Manila his two pieces
of luggage containing his clothings and personal effects, confident that upon reaching
Hongkong, the same would be transferred to the BA flight bound for Bombay.
Unfortunately, when Mahtani arrived in Bombay he discovered that his luggage was
missing and was told by the BA representatives that the same might have been diverted
to London. After patiently waiting for his luggage for one week, BA finally advised him to
file a claim by accomplishing the Property Irregularity Report.
Back in the Philippines, Mahtani filed his complaint for damages and attorneys fees
against BA and Mr. Gumar before the trial court.
BA filed its answer with counter claimi to the complaint raising, that Mahtani did not
have a cause of action against it. Likewise, it filed a third-party complaint ii against PAL
alleging that the reason for the non-transfer of the luggage was due to the latter’s late
arrival in Hongkong, thus leaving hardly any time for the proper transfer of Mahtanis
luggage to the BA aircraft bound for Bombay.
PAL filed its answer to the third-party complaint, wherein it disclaimed any liability. The
trial court rendered its decision in favor of Mahtani.
BA is now seeking the reversal of the Court of Appeals decision.
Issue: BA assails the award of compensatory damages and attorneys fees, as
well as the dismissal of its third-party complaint against PAL. iii
Ruling:
The nature of an airlines contract of carriage partakes of two types, namely: a contract to
deliver a cargo or merchandise to its destination and a contract to transport passengers
to their destination. A business intended to serve the travelling public primarily, it is
imbued with public interest, hence, the law governing common carriers imposes an
exacting standard.iv Neglect or malfeasance by the carriers employees could predictably
furnish bases for an action for damages.v
In the instant case, it is apparent that the contract of carriage was between Mahtani
and BA. Moreover, it is indubitable that his luggage never arrived in Bombay on time.
Therefore, as in a number of cases vi we have assessed the airlines culpability in the form
of damages for breach of contract involving misplaced luggage.
However, as earlier stated, it is the position of BA that there should have been no
separate award for the luggage and the contents thereof since Mahtani failed to declare
a separate higher valuation for the luggage, vii and therefore, its liability is limited, at
most, only to the amount stated in the ticket.
We sustain the trial courts ruling dismissing appellants third-party complaint against
PAL.
The rule that carriage by plane although performed by successive carriers is
regarded as a single operation and that the carrier issuing the passengers ticket is
considered the principal party and the other carrier merely subcontractors or
agent, is a settled issue.
Since the instant petition was based on breach of contract of carriage, Mahtani can
only sue BA alone, and not PAL, since the latter was not a party to the contract. However,
this is not to say that PAL is relieved from any liability due to any of its negligent acts.
WHEREFORE, in view of the foregoing, the decision of the Court of Appeals is hereby
MODIFIED, reinstating the third-party complaint filed by British Airways against Philippine
Airlines. No costs.
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ii

iii

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vii