F.

DAMAGES RECOVERABLE
G.R. No. 128820 December 23, 1999
PEOPLE OF THE PHILIPPINES, plaintiff-appellee,
vs.
GAUDIOSO MORE, ERNESTO MORE and JERWIN MORE, accused-appellants.
 
BELLOSILLO, J.:
GAUDIOSO, ERNESTO and JERWIN, all surnamed MORE, were found guilty of murder by the trial court for the
killing of Valentino Pagumay on 22 February 1994 and sentenced to reclusion perpetua with all its accessory
penalties and to pay P28,977.00 for funeral services and other expenses, P133,333.00 for loss of income for five
(5) years, P100,000.00 for moral damages, and the costs. 1 They now come to us appealing their conviction.
The factual backdrop: On 22 February 1994 at about six o'clock in the evening, Valentino Pagumay and Romeo
Muralla were walking along the river in Brgy. Igsoligue, Miag-ao, Iloilo, on their way to nearby Brgy. Igbogo to get
some tuba when they chanced upon the More brothers Gaudioso alias "Nono," Ernesto alias "Didoy" and Jerwin
alias "Max" some three hundred (300) meters away. As they drew near, the accused who were armed with a gun
and knives, inexplicably shouted why Valentino and Romeo were pointing guns at them. Both Valentino and
Romeo were unarmed. When Valentino nervously told Romeo, who had no quarrel with the accused, that the
More brothers were going to kill him, the due ran as fast as they could. But the accused chased them.
About three hundred (300) meters from where the chase began, the accused led by Jerwin finally caught up with
Valentino who was lagging behind Romeo. Jerwin stabbed Valentino at the left side of his mouth. Ernesto
followed by stabbing the victim in the chest. While Jerwin and Ernesto were stabbing Valentino Gaudioso held
their captive by the shoulders. Gaudioso then took his turn and stabbed Valentino on the chest causing the latter
to fall to the ground. The three (3) accused persisted in their criminal design and pinned their victim down with
their hands and knees. They took turns in stabbing him again several times.
As the stabbing progressed Romeo was having an unobstructed view of the occurrence some ten (10) meters
away. After they were through with Valentino the accused turned to Romeo and warned him against telling
anybody about the incident and ordered him to go home. The three (3) More brothers then ran away.
When the More brothers were already farther down the river Romeo noticed Juanito Faromal standing a few
meters away from the crime scene. After seeing Valentino already lifeless Romeo left to inform the victim's wife,
but on the way he met Sgt. Romeo Gersa so he reported the matter to him. 2 Sgt. Gersa pursued the accused
but could not apprehend them as he already got tired. When he fired a warning shot the three (3) accused
retaliated and fired three (3) shots instead. Juanito corroborated the testimony of Romeo regarding the assault
except that according to him it was only Gaudioso who stabbed the victim while his brothers Jerwin and Ernesto
only assisted in restraining the victim.
The accused, on their part, invoked self defense. The version of Ernesto and Jerwin was that at about six o'clock
in the evening of 22 February 1994 they were walking along a road in Brgy. Igsoligue about ten (10) arms' length
ahead of their brother Gaudioso when they heard someone ask the latter for a light for his cigarette. Ernesto and
Jerwin did not recognize the voice. About two (2) minutes later they heard a gun explode. They looked back and
saw Gaudioso and Valentino already on the ground wrestling with each other. Gaudioso was sitting astride
Valentino as he stabbed the latter. 3 Ernesto and Jerwin rushed towards the two (2) — Gaudioso and Valentino
— entreating Gaudioso to stop, but to no avail. Gaudioso only stopped when Valentino was already dead.
Gaudioso then explained to his brothers that he stabbed Valentino because the latter was going to shoot him.
Afterwards they went home and did not report the incident anymore to the barangay captain since it was already
late.
Gaudioso claimed that when he handed his cigarette to Valentino upon the latter's request he, instead of taking
the cigarette, suddenly drew a .38 caliber gun and pointed it at him with the words: "I will shoot you." 4 Reacting
immediately, Gaudioso, using both hands, frustrated Valentino's attempt by grabbing the latter's right hand that
was holding the gun, twisted it, and then used his foot to outbalance Valentino sending the latter to the ground.
Thus Valentino was not able to fire his gun. Gaudioso then straddled Valentino and pinned his left hand with his
right knee while his left hand held Valentino's right that was clutching the gun. In this position, Gaudioso
repeatedly stabbed Valentino until the latter died. 5
On 9 May 1996 the trial court found all three (3) accused, Gaudioso, Ernesto and Jerwin More, guilty as
principals by conspiracy for the murder of Valentino Pagumay, qualified by abuse of superior strength. The trial
court sustained the version of the prosecution and rejected the theory of self-defense primarily in view of the
eighteen (18) stab wounds sustained by the victim and the fact that they were caused by at least two (2) different
knives, one single-bladed and the other double-bladed, indicating that there were at least two (2) assailants. The
three (3) accused were accordingly sentenced to suffer the penalty of reclusion perpetua with all its accessory
penalties, and to pay damages in the total amount of P262,310.00 plus the costs.
Accused-appellants contend in this appeal that the trial court erred: (a) in not appreciating in their favor the
justifying circumstance of self-defense, insisting that all the elements thereof were successfully established, and,
(b) in finding them guilty beyond reasonable doubt of murder notwithstanding the inconsistencies in the
testimonies of prosecution witnesses Romeo Muralla, Juanito Faromal and Sgt. Gersa.
We find no merit in the appeal. When self-defense is invoked by an accused charged with murder or homicide he
necessarily owns up to the killing but may escape criminal liability by proving that it was justified and that he
incurred no criminal liability therefor. 6 Hence, the three (3) elements of self-defense, namely: (a) unlawful
aggression on the part of the victim; (b) reasonable necessity of the means employed to prevent or repel the
aggression; and, (c) lack of sufficient provocation on the part of the person defending himself, which must be
proved by clear and convincing evidence. 7 However, without unlawful aggression there can be no self-defense,
either complete or incomplete. 8
In the instant case, accused-appellants sought to establish unlawful aggression on the part of Valentino
Pagumay by testifying that the latter, after asking Gaudioso for a light for his cigarette, suddenly and for no
reason at all, drew his gun and pointed it at Gaudioso with the threatening words, "I will shoot you." However,
quite an enlightening and revealing narrative follows thus:
Q: When Valentino Pagumay drew his gun from his waist what did you do?
A: Both my hands caught his hand holding the firearm . . . .
Q: When you were able to grab the hand of Valentino Pagumay what happened
next?
A: He fell to the ground.
Q: So you want to tell the Court that immediately after you grabbed or took hold
of his hand he immediately fell to the ground?
A: Yes sir because he wrestled with me when I took hold both of his hand ( sic)
and twisted his arm.
Q: When Valentino Pagumay fell to the ground what did you do?
A: After he fell to the ground I sat on his abdomen. My right knee was pinning
down his left hand while my left hand was pinning on the ground his right hand
and then I delivered several successive stab blows on his breast . . . .
Q: And how many times did you stab him?
A: I was not able to count the number of times because I was stabbing him
successively.
Q: And you cannot estimate the number of stab blows you delivered to him?
A: I was not able to count the number of blows because I was stabbing and
hitting him until his death. (emphasis ours.) 9
Clearly, the unlawful aggression allegedly started by Valentino — assuming it to be true — had already ceased
by the time Gaudioso repeatedly stabbed Valentino to death. Gaudioso himself testified that after Valentino
threatened to shoot him, he was able to grab Valentino's right hand which was holding the gun, outbalance him,
and then pin both his hands while the latter was lying prone on the ground. Having thus immobilized Valentino,
there was obviously no more reason for Gaudioso to stab Valentino eighteen (18) times as he did because the
alleged unlawful aggression from Valentino had stopped. In legitimate self-defense the aggression must still be
existing or continuing when the person making the defense attacks or injures the aggressor. 10 Thus when the
unlawful aggression ceases to exist, the one making the defense has no more right to kill the former aggressor.
11 In such cases, less violent means would have sufficed; hence, if not resorted to, the plea of self-defense must
fail. 12
In the instant case Valentino was already effectively immobilized by Gaudioso, hence, the latter could have
either simply boxed the former with his free right hand, hit him on a non-vital part of his body, 13 or better yet,
summoned his brothers Ernesto and Jerwin who were just standing a few meters away to help him in ensuring
no further aggression from Valentino. However, quite inconsistent with his plea of self-defense, Gaudioso did
none of these things. Instead, he even ignored his brothers' entreaties for him to stop, rebuffed their efforts to the
extent of even accidentally hitting Jerwin as claimed by the latter, 14 and continued stabbing Valentino
successively until the latter died. 15 Considering all these, the plea of self-defense cannot but be received with
incredulity and disbelief.
In addition to the foregoing, several other circumstances exist to further undermine the plea of self-defense and
establish accused-appellants' collective guilt.
First, the trial court correctly noted that the victim sustained a total of eighteen (18) stab wounds, fourteen (14) of
which were inflicted on the anterior chest alone, and four (4) of which were fatal. It is an oft-repeated rule that the
presence of a large number of wounds on the part of the victim negates self-defense because, rather than
suggest an effort to defend oneself, it instead strongly indicates a determined effort to kill the victim. 16
Second, the claim that Gaudioso alone killed Valentino in self-defense and that Ernesto and Jerwin had nothing
to do with the killing was disproved not only by Romeo and Juanito's positive identification of Ernesto and Jerwin
as co-conspirators (at least) to the crime but, more importantly, by the fact that the stab wounds themselves
indicated that there was actually more than one assailant. As testified to by Dr. Mary Joyce M. Faeldan, the
Acting Municipal Health Officer of Miag-ao who autopsied the cadaver, the eighteen (18) stab wounds sustained
by the by the victim were not all caused by a single weapon but by two (2) kinds of knives, i.e., one single-
bladed, and the other, double-bladed. While three (3) stab wounds had blunt and contussed extremities
indicating that they were inflicted with the use of a blunt single-bladed knife, the remaining fourteen (14) stab
wounds had regular distinct clean-cut edges and sharp extremities indicating a sharp double-bladed knife as the
murder
weapon. 17 Since only Gaudioso's right hand was free to hold a weapon, his left hand already gripping
Valentino's right hand, then it is quite obvious that his brothers likewise participated in the assault as claimed by
the prosecution witnesses because Gaudioso, evidently, could not have managed two (2) weapons at the same
time with only his right hand free.
Third, accused-appellants did not inform the authorities about the incident. If they were really innocent as they
claimed to be, they should have told the authorities about the accidental killing. 18 Their excuse that it was
already late is not only shallow but quite incredible considering three (3) factors: (a) accused-appellants
managed to get home at the relatively early hour of 6:30 in the evening; 19 (b) the house of the barangay captain
to whom they could have reported the incident was a mere fifty (50) meters away from their own house; 20 and,
(c) Gaudioso was himself a barangay official making it easier for him to approach the other barangay authorities
who were but his
colleagues. 21
Fourth, accused-appellants do not deny that they did not surrender to Sgt. Gersa when the latter saw them
immediately after the killing. In fact, they ignored his warning shot and ran away. Worse, accused-appellants
even returned fire with three (3) gunshots of their own, continued their flight until Sgt. Gersa gave up the chase
through sheer exhaustion, and yielded only when they were already invited for questioning by the police after
having been identified as the killers by eyewitnesses Romeo Muralla and Juanito Faromal.
On the alleged inconsistencies in the testimonies of the prosecution witnesses, suffice it to say that
inconsistencies on minor and trivial matters do not diminish but rather bolster a witness's credibility as they in
fact manifest spontaneity and lack of scheming. 22 In other words, they are badges of truth rather than indicia of
falsehood. 23 Thus the alleged contradictions on the relative positions of Romeo and Valentino while the latter
was being stabbed, whether it was Romeo or Juanito who informed the victim's wife about the incident, and
whether Juanito was indeed taken by Sgt. Gersa to Camp Monteclaro after the incident, are but trivial and minor
inconsistencies which neither detract from the essential integrity of the prosecution's evidence nor strengthen
accused-appellants' flagging plea of self-defense. Having already pleaded self-defense, accused-appellants
could not invoke the alleged weakness of the prosecution's evidence, for, even if the latter were weak (which is
certainly not so in the instant case), it could not be disbelieved in view of their open admission of responsibility
for the killing. 24
On the civil liabilities of accused-appellants a modification of the amounts awarded by the trial court is in order.
By way of moral damages, the trial court awarded P100,000.00. Since the award is not meant to enrich the heirs
of the victim but only to compensate them for injuries sustained to their feelings we reduce the amount to
P50,000.00 consistent with prevailing jurisprudence. 25 A reduction of the actual damages awarded is likewise
proper. The trial court awarded P28,977.00 for various expenses incurred by the victim's widow as a result of the
killing. However, since only the costs of the tomb, coffin, embalming and funeral services in the total amount of
P8,977.00 were properly receipted 26 the estimated amount of P20,000.00 allegedly spent for food and drinks
consumed during the wake must be disallowed for not having been competently proved. The Court can only give
credit to expenses which have been duly substantiated. 27
On the victim's loss of earning capacity, Victoria Pagumay testified that her husband, a farmer, was 53 years old
when he was killed, with an average annual income of P40,000.000 to P50,000.00. 28 Using P40,000.00 as the
deceased's average annual income while still alive, the trial court awarded P133,333.00 for loss of earning
capacity after multiplying two-thirds (P26,666.67) of the victim's average annual income 29 by five (5) years. No
reason was given, and no legal basis exists, why lost income was awarded for only five (5) years. On the
contrary, the victim's lost earnings are to be computed according to the formula adopted by the Court in several
decided cases, 30 to wit: net earning capacity ("X") equals life expectancy 31 multiplied by gross annual income
32 less living expenses. 33 Thus, the victim's lost earning capacity amounted to P405,000.00 as may be shown
hereunder —
X = 2(80-53) x [P45,000 - P22,500]
————
3
X = 2(27) x P22,500
———
3
X = 54 x P22,500
—
3
X = 18 x P22. 500
——————
X = P405 000 00
=========
Finally, an award of another P50,000.00 is warranted as civil indemnity for the death of the victim without need of
evidence or proof of damages. 34
WHEREFORE, the appealed Decision dated 9 May 1996 of the Regional Trial Court of Iloilo City, Branch 25,
finding accused-appellants GAUDIOSO MORE, ERNESTO MORE and JERWIN MORE guilty beyond
reasonable doubt of Murder is AFFIRMED. Accused-appellants are ordered to pay, jointly and severally, the heirs
of Valentino Pagumay the following amounts: (a) P50,000.00 as civil indemnity; (b) P50,000.00 as moral
damages; (c) P8,977.00 as actual damages; and, (d) P405,000.00 for loss of earning capacity. Costs against
accused-appellants.
SO ORDERED.
CONTRACT OF CARRIAGE OF CARGO
G.R. No. L-49407 August 19, 1988
NATIONAL DEVELOPMENT COMPANY, petitioner-appellant,
vs.
THE COURT OF APPEALS and DEVELOPMENT INSURANCE & SURETY CORPORATION, respondents-
appellees.
No. L-49469 August 19, 1988
MARITIME COMPANY OF THE PHILIPPINES, petitioner-appellant,
vs.
THE COURT OF APPEALS and DEVELOPMENT INSURANCE & SURETY CORPORATION, respondents-
appellees.
Balgos & Perez Law Office for private respondent in both cases.

PARAS, J.:
These are appeals by certiorari from the decision * of the Court of Appeals in CA G.R. No: L- 46513-R entitled
"Development Insurance and Surety Corporation plaintiff-appellee vs. Maritime Company of the Philippines and
National Development Company defendant-appellants," affirming in toto the decision ** in Civil Case No. 60641
of the then Court of First Instance of Manila, Sixth Judicial District, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered ordering the defendants National Development
Company and Maritime Company of the Philippines, to pay jointly and severally, to the plaintiff
Development Insurance and Surety Corp., the sum of THREE HUNDRED SIXTY FOUR
THOUSAND AND NINE HUNDRED FIFTEEN PESOS AND EIGHTY SIX CENTAVOS
(364,915.86) with the legal interest thereon from the filing of plaintiffs complaint on April 22, 1965
until fully paid, plus TEN THOUSAND PESOS (Pl0,000.00) by way of damages as and for
attorney's fee.
On defendant Maritime Company of the Philippines' cross-claim against the defendant National
Development Company, judgment is hereby rendered, ordering the National Development
Company to pay the cross-claimant Maritime Company of the Philippines the total amount that
the Maritime Company of the Philippines may voluntarily or by compliance to a writ of execution
pay to the plaintiff pursuant to the judgment rendered in this case.
With costs against the defendant Maritime Company of the Philippines.
(pp. 34-35, Rollo, GR No. L-49469)
The facts of these cases as found by the Court of Appeals, are as follows:
The evidence before us shows that in accordance with a memorandum agreement entered into
between defendants NDC and MCP on September 13, 1962, defendant NDC as the first
preferred mortgagee of three ocean going vessels including one with the name 'Dona Nati'
appointed defendant MCP as its agent to manage and operate said vessel for and in its behalf
and account (Exh. A). Thus, on February 28, 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 acting for and in behalf of the Pan Asiatic Commercial Company, Inc., who
represents Riverside Mills Corporation (Exhs. K-2 to K7-A & L-2 to L-7-A). 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 (Exhs. M & M-1). En route to Manila the vessel Dofia Nati figured in a
collision at 6:04 a.m. on April 15, 1964 at Ise Bay, Japan with a Japanese vessel 'SS Yasushima
Maru' as a result of which 550 bales of aforesaid cargo of American raw cotton were lost and/or
destroyed, of which 535 bales as damaged were landed and sold on the authority of the General
Average Surveyor for Yen 6,045,-500 and 15 bales were not landed and deemed lost (Exh. G).
The damaged and lost cargoes was worth P344,977.86 which amount, the plaintiff as insurer,
paid to the Riverside Mills Corporation as holder of the negotiable bills of lading duly endorsed
 (Exhs. L-7-A, K-8-A, K-2-A, K-3-A, K-4-A, K-5-A, A- 2, N-3 and R-3}. Also considered totally lost
were the aforesaid shipment of Kyokuto, Boekui Kaisa Ltd., consigned to the order of Manila
Banking Corporation, Manila, acting for Guilcon, Manila, The total loss was P19,938.00 which
the plaintiff as insurer paid to Guilcon as holder of the duly endorsed bill of lading (Exhibits M-1
and S-3). 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, plaintiff
filed this complaint to recover said amount from the defendants-NDC and MCP as owner and
ship agent respectively, of the said 'Dofia Nati' vessel. (Rollo, L-49469, p.38)
On April 22, 1965, the Development Insurance and Surety Corporation filed before the then Court of First
Instance of Manila an action for the recovery of the sum of P364,915.86 plus attorney's fees of P10,000.00
against NDC and MCP (Record on Appeal), pp. 1-6).
Interposing the defense that the complaint states no cause of action and even if it does, the action has
prescribed, MCP filed on May 12, 1965 a motion to dismiss (Record on Appeal, pp. 7-14). DISC filed an
Opposition on May 21, 1965 to which MCP filed a reply on May 27, 1965 (Record on Appeal, pp. 14-24). On
June 29, 1965, the trial court deferred the resolution of the motion to dismiss till after the trial on the merits
(Record on Appeal, p. 32). On June 8, 1965, MCP filed its answer with counterclaim and cross-claim against
NDC.
NDC, for its part, filed its answer to DISC's complaint on May 27, 1965 (Record on Appeal, pp. 22-24). It also
filed an answer to MCP's cross-claim on July 16, 1965 (Record on Appeal, pp. 39-40). However, on October 16,
1965, NDC's answer to DISC's complaint was stricken off from the record for its failure to answer DISC's written
interrogatories and to comply with the trial court's order dated August 14, 1965 allowing the inspection or
photographing of the memorandum of agreement it executed with MCP. Said order of October 16, 1965 likewise
declared NDC in default (Record on Appeal, p. 44). On August 31, 1966, NDC filed a motion to set aside the
order of October 16, 1965, but the trial court denied it in its order dated September 21, 1966.
On November 12, 1969, after DISC and MCP presented their respective evidence, 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 to be computed from the filing of the complaint on April 22, 1965, until fully paid and
attorney's fees of P10,000.00. Likewise, in said decision, the trial court granted MCP's crossclaim against NDC.
MCP interposed its appeal on December 20, 1969, while NDC filed its appeal on February 17, 1970 after its
motion to set aside the decision was denied by the trial court in its order dated February 13,1970.
On November 17,1978, the Court of Appeals promulgated its decision affirming in toto the decision of the trial
court.
Hence these appeals by certiorari.
NDC's appeal was docketed as G.R. No. 49407, while that of MCP was docketed as G.R. No. 49469. On July
25,1979, this Court ordered the consolidation of the above cases (Rollo, p. 103). On August 27,1979, these
consolidated cases were given due course (Rollo, p. 108) and submitted for decision on February 29, 1980
(Rollo, p. 136).
In its brief, NDC cited the following assignments of error:
I
THE COURT OF APPEALS ERRED IN APPLYING ARTICLE 827 OF THE CODE OF COMMERCE AND NOT
SECTION 4(2a) OF COMMONWEALTH ACT NO. 65, OTHERWISE KNOWN AS THE CARRIAGE OF GOODS
BY SEA ACT IN DETERMINING THE LIABILITY FOR LOSS OF CARGOES RESULTING FROM THE
COLLISION OF ITS VESSEL "DONA NATI" WITH THE YASUSHIMA MARU"OCCURRED AT ISE BAY, JAPAN
OR OUTSIDE THE TERRITORIAL JURISDICTION OF THE PHILIPPINES.
II
THE COURT OF APPEALS ERRED IN NOT DISMISSING THE C0MPLAINT FOR REIMBURSEMENT FILED
BY THE INSURER, HEREIN PRIVATE RESPONDENT-APPELLEE, AGAINST THE CARRIER, HEREIN
PETITIONER-APPELLANT. (pp. 1-2, Brief for Petitioner-Appellant National Development Company; p. 96,
Rollo).
On its part, MCP assigned the following alleged errors:
I
THE RESPONDENT COURT OF APPEALS ERRED IN NOT HOLDING THAT RESPONDENT DEVELOPMENT
INSURANCE AND SURETY CORPORATION HAS NO CAUSE OF ACTION AS AGAINST PETITIONER
MARITIME COMPANY OF THE PHILIPPINES AND IN NOT DISMISSING THE COMPLAINT.
II
THE RESPONDENT COURT OF APPEALS ERRED IN NOT HOLDING THAT THE CAUSE OF ACTION OF
RESPONDENT DEVELOPMENT INSURANCE AND SURETY CORPORATION IF ANY EXISTS AS AGAINST
HEREIN PETITIONER MARITIME COMPANY OF THE PHILIPPINES IS BARRED BY THE STATUTE OF
LIMITATION AND HAS ALREADY PRESCRIBED.
III
THE RESPONDENT COURT OF APPEALS ERRED IN ADMITTING IN EVIDENCE PRIVATE RESPONDENTS
EXHIBIT "H" AND IN FINDING ON THE BASIS THEREOF THAT THE COLLISION OF THE SS DONA NATI
AND THE YASUSHIMA MARU WAS DUE TO THE FAULT OF BOTH VESSELS INSTEAD OF FINDING THAT
THE COLLISION WAS CAUSED BY THE FAULT, NEGLIGENCE AND LACK OF SKILL OF THE
COMPLEMENTS OF THE YASUSHIMA MARU WITHOUT THE FAULT OR NEGLIGENCE OF THE
COMPLEMENT OF THE SS DONA NATI
IV
THE RESPONDENT COURT OF APPEALS ERRED IN HOLDING THAT UNDER THE CODE OF COMMERCE
PETITIONER APPELLANT MARITIME COMPANY OF THE PHILIPPINES IS A SHIP AGENT OR NAVIERO OF
SS DONA NATI OWNED BY CO-PETITIONER APPELLANT NATIONAL DEVELOPMENT COMPANY AND
THAT SAID PETITIONER-APPELLANT IS SOLIDARILY LIABLE WITH SAID CO-PETITIONER FOR LOSS OF
OR DAMAGES TO CARGO RESULTING IN THE COLLISION OF SAID VESSEL, WITH THE JAPANESE
YASUSHIMA MARU.
V
THE RESPONDENT COURT OF APPEALS ERRED IN FINDING THAT THE LOSS OF OR DAMAGES TO THE
CARGO OF 550 BALES OF AMERICAN RAW COTTON, DAMAGES WERE CAUSED IN THE AMOUNT OF
P344,977.86 INSTEAD OF ONLY P110,000 AT P200.00 PER BALE AS ESTABLISHED IN THE BILLS OF
LADING AND ALSO IN HOLDING THAT PARAGRAPH 1O OF THE BILLS OF LADING HAS NO APPLICATION
IN THE INSTANT CASE THERE BEING NO GENERAL AVERAGE TO SPEAK OF.
VI
THE RESPONDENT COURT OF APPEALS ERRED IN HOLDING THE PETITIONERS NATIONAL
DEVELOPMENT COMPANY AND COMPANY OF THE PHILIPPINES TO PAY JOINTLY AND SEVERALLY TO
HEREIN RESPONDENT DEVELOPMENT INSURANCE AND SURETY CORPORATION THE SUM OF
P364,915.86 WITH LEGAL INTEREST FROM THE FILING OF THE COMPLAINT UNTIL FULLY PAID PLUS
P10,000.00 AS AND FOR ATTORNEYS FEES INSTEAD OF SENTENCING SAID PRIVATE RESPONDENT TO
PAY HEREIN PETITIONERS ITS COUNTERCLAIM IN THE AMOUNT OF P10,000.00 BY WAY OF
ATTORNEY'S FEES AND THE COSTS. (pp. 1-4, Brief for the Maritime Company of the Philippines; p. 121,
Rollo)
The pivotal issue in these consolidated cases is the determination of which laws govern 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.
The main thrust of NDC's argument is to the effect that the Carriage of Goods by Sea Act should apply to the
case at bar and not the Civil Code or the Code of Commerce. Under Section 4 (2) of said Act, the carrier is not
responsible for the loss or damage resulting from the "act, neglect or default of the master, mariner, pilot or the
servants of the carrier in the navigation or in the management of the ship." Thus, NDC insists that based on the
findings of the trial court which were adopted by the Court of Appeals, both pilots of the colliding vessels were at
fault and negligent, NDC would have been relieved of liability under the Carriage of Goods by Sea Act. Instead,
Article 287 of the Code of Commerce was applied and both NDC and MCP were ordered to reimburse the
insurance company for the amount the latter paid to the consignee as earlier stated.
This issue has already been laid to rest by this Court of Eastern Shipping Lines Inc. v. IAC (1 50 SCRA 469-470
[1987]) where 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.
In the case at bar, it has been established that the goods in question are transported from San Francisco,
California and Tokyo, Japan to the Philippines and that they were lost or due to a collision which was found to
have been caused by the negligence or fault of both captains of the colliding vessels. Under the above ruling, it
is evident that the laws of the Philippines will apply, and it is immaterial that the collision actually occurred in
foreign waters, such as Ise Bay, Japan.
Under Article 1733 of the Civil Code, common carriers from the nature of their business and for reasons of public
policy are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the
passengers transported by them according to all circumstances of each case. Accordingly, under Article 1735 of
the same Code, in all other than those mentioned is Article 1734 thereof, the common carrier shall be presumed
to have been at fault or to have acted negigently, unless it proves that it has observed the extraordinary diligence
required by law.
It appears, however, that collision falls among matters not specifically regulated by the Civil Code, so that no
reversible error can be found in respondent courses application to the case at bar of Articles 826 to 839, Book
Three of the Code of Commerce, which deal exclusively with collision of vessels.
More specifically, Article 826 of the Code of Commerce provides that where collision is imputable to the
personnel of a vessel, the owner of the vessel at fault, shall indemnify the losses and damages incurred after an
expert appraisal. But more in point to the instant case is Article 827 of the same Code, which provides that if the
collision is imputable to both vessels, each one shall suffer its own damages and both shall be solidarily
responsible for the losses and damages suffered by their cargoes.
Significantly, under the provisions of the Code of Commerce, particularly Articles 826 to 839, the shipowner or
carrier, is not exempt from liability for damages arising from collision due to the fault or negligence of the captain.
Primary liability is imposed on the shipowner or carrier in recognition of the universally accepted doctrine that the
shipmaster or captain is merely the representative of the owner who has the actual or constructive control over
the conduct of the voyage (Y'eung Sheng Exchange and Trading Co. v. Urrutia & Co., 12 Phil. 751 [1909]).
There is, therefore, no room for NDC's interpretation that the Code of Commerce should apply only to domestic
trade and not to foreign trade. Aside from the fact that the Carriage of Goods by Sea Act (Com. Act No. 65) does
not specifically provide for the subject of collision, said Act in no uncertain terms, restricts its application "to all
contracts for the carriage of goods by sea to and from Philippine ports in foreign trade." Under Section I thereof,
it is explicitly provided that "nothing in this Act shall be construed as repealing any existing provision of the Code
of Commerce which is now in force, or as limiting its application." By such incorporation, it is obvious that said
law not only recognizes the existence of the Code of Commerce, but more importantly does not repeal nor limit
its application.
On the other hand, Maritime Company of the Philippines claims that Development Insurance and Surety
Corporation, has no cause of action against it because the latter did not prove that its alleged subrogers have
either the ownership or special property right or beneficial interest in the cargo in question; neither was it proved
that the bills of lading were transferred or assigned to the alleged subrogers; thus, they could not possibly have
transferred any right of action to said plaintiff- appellee in this case. (Brief for the Maritime Company of the
Philippines, p. 16).
The records show that the Riverside Mills Corporation and Guilcon, Manila are the holders of the duly endorsed
bills of lading covering the shipments in question and an examination of the invoices in particular, shows that the
actual consignees of the said goods are the aforementioned companies. Moreover, no less than MCP itself
issued a certification attesting to this fact. Accordingly, as it is undisputed that the insurer, plaintiff appellee paid
the total amount of P364,915.86 to said consignees for the loss or damage of the insured cargo, it is evident that
said plaintiff-appellee has a cause of action to recover (what it has paid) from defendant-appellant MCP
(Decision, CA-G.R. No. 46513-R, p. 10; Rollo, p. 43).
MCP next contends that it can not be liable solidarity with NDC because it is merely the manager and operator of
the vessel Dona Nati not a ship agent. As the general managing agent, according to MCP, it can only be liable if
it acted in excess of its authority.
As found by the trial court and by the Court of Appeals, the Memorandum Agreement of September 13, 1962
(Exhibit 6, Maritime) shows that NDC appointed MCP as Agent, a term broad enough to include the concept of
Ship-agent in Maritime Law. In fact, MCP was even conferred all the powers of the owner of the vessel, including
the power to contract in the name of the NDC (Decision, CA G.R. No. 46513, p. 12; Rollo, p. 40). Consequently,
under the circumstances, MCP cannot escape liability.
It is well settled that both the owner and agent of the offending vessel are liable for the damage done where both
are impleaded (Philippine Shipping Co. v. Garcia Vergara, 96 Phil. 281 [1906]); that in case of collision, both the
owner and the agent are civilly responsible for the acts of the captain (Yueng Sheng Exchange and Trading Co.
v. Urrutia & Co., supra citing Article 586 of the Code of Commerce; Standard Oil Co. of New York v. Lopez
Castelo, 42 Phil. 256, 262 [1921]); that while it is true that the liability of the naviero in the sense of charterer or
agent, is not expressly provided in Article 826 of the Code of Commerce, it is clearly deducible from the general
doctrine of jurisprudence under the Civil Code but more specially as regards contractual obligations in Article 586
of the Code of Commerce. Moreover, the Court held that both the owner and agent (Naviero) should be declared
jointly and severally liable, since the obligation which is the subject of the action had its origin in a tortious act
and did not arise from contract (Verzosa and Ruiz, Rementeria y Cia v. Lim, 45 Phil. 423 [1923]). Consequently,
the agent, even though he may not be the owner of the vessel, is liable to the shippers and owners of the cargo
transported by it, for losses and damages occasioned to such cargo, without prejudice, however, to his rights
against the owner of the ship, to the extent of the value of the vessel, its equipment, and the freight (Behn Meyer
Y Co. v. McMicking et al. 11 Phil. 276 [1908]).
As to the extent of their liability, MCP insists that their liability should be limited to P200.00 per package or per
bale of raw cotton as stated in paragraph 17 of the bills of lading. Also the MCP argues that the law on averages
should be applied in determining their liability.
MCP's contention is devoid of merit. The declared value of the goods was stated in the bills of lading and
corroborated no less by invoices offered as evidence ' during the trial. Besides, common carriers, in the
language of the court in Juan Ysmael & Co., Inc. v. Barrette et al., (51 Phil. 90 [1927]) "cannot limit its liability for
injury to a loss of goods where such injury or loss was caused by its own negligence." Negligence of the
captains of the colliding vessel being the cause of the collision, and the cargoes not being jettisoned to save
some of the cargoes and the vessel, the trial court and the Court of Appeals acted correctly in not applying the
law on averages (Articles 806 to 818, Code of Commerce).
MCP's claim that the fault or negligence can only be attributed to the pilot of the vessel SS Yasushima Maru and
not to the Japanese Coast pilot navigating the vessel Dona Nati need not be discussed lengthily as said claim is
not only at variance with NDC's posture, but also contrary to the factual findings of the trial court affirmed no less
by the Court of Appeals, that both pilots were at fault for not changing their excessive speed despite the thick fog
obstructing their visibility.
Finally on the issue of prescription, the trial court correctly found that the bills of lading issued allow trans-
shipment of the cargo, which simply means that the date of arrival of the ship Dona Nati on April 18,1964 was
merely tentative to give allowances for such contingencies that said vessel might not arrive on schedule at
Manila and therefore, would necessitate the trans-shipment of cargo, resulting in consequent delay of their
arrival. In fact, because of the collision, the cargo which was supposed to arrive in Manila on April 18, 1964
arrived only on June 12, 13, 18, 20 and July 10, 13 and 15, 1964. Hence, had the cargoes in question been
saved, they could have arrived in Manila on the above-mentioned dates. Accordingly, the complaint in the instant
case was filed on April 22, 1965, that is, long before the lapse of one (1) year from the date the lost or damaged
cargo "should have been delivered" in the light of Section 3, sub-paragraph (6) of the Carriage of Goods by Sea
Act.
PREMISES CONSIDERED, the subject petitions are DENIED for lack of merit and the assailed decision of the
respondent Appellate Court is AFFIRMED.
SO ORDERED.
 6. Obligation of carrier
7. Defenses in Carriage of Cargo

G.R. No. L-31379 August 29, 1988

COMPAÑIA MARITIMA, petitioner,
vs.
COURT OF APPEALS and VICENTE CONCEPCION, respondents.
Rafael Dinglasan for petitioner.
Benjamin J. Molina for private respondent.

FERNAN, C.J.:
Petitioner Compañia Maritima seeks to set aside through this petition for review on certiorari the decision 1 of the
Court of Appeals dated December 5, 1965, adjudging petitioner liable to private respondent Vicente E.
Concepcion for damages in the amount of P24,652.97 with legal interest from the date said decision shall have
become final, for petitioner's failure to deliver safely private respondent's payloader, and for costs of suit. The
payloader was declared abandoned in favor of petitioner.
The facts of the case are as follows:
Private respondent Vicente E. Concepcion, a civil engineer doing business under the name and style of
Consolidated Construction with office address at Room 412, Don Santiago Bldg., Taft Avenue, Manila, had a
contract with the Civil Aeronautics Administration (CAA) sometime in 1964 for the construction of the airport in
Cagayan de Oro City Misamis Oriental.
Being a Manila — based contractor, Vicente E. Concepcion had to ship his construction equipment to Cagayan
de Oro City. Having shipped some of his equipment through petitioner and having settled the balance of
P2,628.77 with respect to said shipment, Concepcion negotiated anew with petitioner, thru its collector, Pacifico
Fernandez, on August 28, 1964 for the shipment to Cagayan de Oro City of one (1) unit payloader, four (4) units
6x6 Reo trucks and two (2) pieces of water tanks. He was issued Bill of Lading 113 on the same date upon
delivery of the equipment at the Manila North Harbor. 2
These equipment were loaded aboard the MV Cebu in its Voyage No. 316, which left Manila on August 30, 1964
and arrived at Cagayan de Oro City in the afternoon of September 1, 1964. The Reo trucks and water tanks
were safely unloaded within a few hours after arrival, but while the payloader was about two (2) meters above
the pier in the course of unloading, the swivel pin of the heel block of the port block of Hatch No. 2 gave way,
causing the payloader to fall. 3 The payloader was damaged and was thereafter taken to petitioner's compound
in Cagayan de Oro City.
On September 7, 1964, Consolidated Construction, thru Vicente E. Concepcion, wrote Compañia Maritima to
demand a replacement of the payloader which it was considering as a complete loss because of the extent of
damage. 4 Consolidated Construction likewise notified petitioner of its claim for damages. Unable to elicit
response, the demand was repeated in a letter dated October 2, 1964. 5
Meanwhile, petitioner shipped the payloader to Manila where it was weighed at the San Miguel Corporation.
Finding that the payloader weighed 7.5 tons and not 2.5 tons as declared in the B-111 of Lading, petitioner
denied the claim for damages of Consolidated Construction in its letter dated October 7, 1964, contending that
had Vicente E. Concepcion declared the actual weight of the payloader, damage to their ship as well as to his
payloader could have been prevented. 6
To replace the damaged payloader, Consolidated Construction in the meantime bought a new one at P45,000.00
from Bormaheco Inc. on December 3, 1964, and on July 6, 1965., Vicente E. Concepcion filed an action for
damages against petitioner with the then Court of First Instance of Manila, Branch VII, docketed as Civil Case
No. 61551, seeking to recover damages in the amount of P41,225.00 allegedly suffered for the period of 97 days
that he was not able to employ a payloader in the construction job at the rate of P450.00 a day; P34,000.00
representing the cost of the damaged payloader; Pl 1, 000. 00 representing the difference between the cost of
the damaged payloader and that of the new payloader; P20,000.00 representing the losses suffered by him due
to the diversion of funds to enable him to buy a new payloader; P10,000.00 as attorney's fees; P5,000.00 as
exemplary damages; and cost of the suit. 7
After trial, the then Court of First Instance of Manila, Branch VII, dismissed on April 24, 1968 the complaint with
costs against therein plaintiff, herein private respondent Vicente E. Concepcion, stating that the proximate cause
of the fall of the payloader was Vicente E. Concepcion's act or omission in having misrepresented the weight of
the payloader as 2.5 tons instead of its true weight of 7.5 tons, which underdeclaration was intended to defraud
Compañia Maritima of the payment of the freight charges and which likewise led the Chief Officer of the vessel
to use the heel block of hatch No. 2 in unloading the payloader. 8
From the adverse decision against him, Vicente E. Concepcion appealed to the Court of Appeals which, on
December 5, 1965 rendered a decision, the dispositive portion of which reads:
IN VIEW WHEREOF, judgment must have to be as it is hereby reversed; defendant is
condemned to pay unto plaintiff the sum in damages of P24,652.07 with legal interest from the
date the present decision shall have become final; the payloader is declared abandoned to
defendant; costs against the latter. 9
Hence, the instant petition.
The principal issue in the instant case is whether or not the act of private respondent Vicente E. Concepcion in
furnishing petitioner Compañia Maritima with an inaccurate weight of 2.5 tons instead of the payloader's actual
weight of 7.5 tons was the proximate and only cause of the damage on the Oliver Payloader OC-12 when it fell
while being unloaded by petitioner's crew, as would absolutely exempt petitioner from liability for damages under
paragraph 3 of Article 1734 of the Civil Code, which provides:
Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the
goods, unless the same is due to any of the following causes only:
xxx xxx xxx
(3) Act or omission of the shipper or owner of the goods.
Petitioner claims absolute exemption under this provision upon the reasoning that private respondent's act of
furnishing it with an inaccurate weight of the payloader constitutes misrepresentation within the meaning of "act
or omission of the shipper or owner of the goods" under the above- quoted article. It likewise faults the
respondent Court of Appeals for reversing the decision of the trial court notwithstanding that said appellate court
also found that by representing the weight of the payloader to be only 2.5 tons, private respondent had led
petitioner's officer to believe that the same was within the 5 tons capacity of the heel block of Hatch No. 2.
Petitioner would thus insist that the proximate and only cause of the damage to the payloader was private
respondent's alleged misrepresentation of the weight of the machinery in question; hence, any resultant damage
to it must be borne by private respondent Vicente E. Concepcion.
The general rule under Articles 1735 and 1752 of the Civil Code is that common carriers are presumed to have
been at fault or to have acted negligently in case the goods transported by them are lost, destroyed or had
deteriorated. To overcome the presumption of liability for the loss, destruction or deterioration of the goods under
Article 1735, the common carriers must prove that they observed extraordinary diligence as required in Article
1733 of the Civil Code. The responsibility of observing extraordinary diligence in the vigilance over the goods is
further expressed in Article 1734 of the same Code, the article invoked by petitioner to avoid liability for
damages.
Corollary is the rule that mere proof of delivery of the goods in good order to a common carrier, and of their
arrival at the place of destination in bad order, makes out prima facie case against the common carrier, so that if
no explanation is given as to how the loss, deterioration or destruction of the goods occurred, the common
carrier must be held responsible. 10 Otherwise stated, it is incumbent upon the common carrier to prove that the
loss, deterioration or destruction was due to accident or some other circumstances inconsistent with its liability.
In the instant case, We are not persuaded by the proferred explanation of petitioner alleged to be the proximate
cause of the fall of the payloader while it was being unloaded at the Cagayan de Oro City pier. Petitioner seems
to have overlooked the extraordinary diligence required of common carriers in the vigilance over the goods
transported by them by virtue of the nature of their business, which is impressed with a special public duty.
Thus, Article 1733 of the Civil Code provides:
Art. 1733. Common carriers, from the nature of their business and for reason of public policy, are
 bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the
passengers transported by them according to all the circumstances of each case.
Such extraordinary diligence in the vigilance over the goods is further expressed in Articles 1734,
1735 and 1745, Nos. 5, 6 and 7, ...
The extraordinary diligence in the vigilance over the goods tendered for shipment requires the common carrier to
know and to follow the required precaution for avoiding damage to, or destruction of the goods entrusted to it for
safe carriage and delivery. It requires common carriers to render service with the greatest skill and foresight and
"to use all reasonable means to ascertain the nature and characteristic of goods tendered for shipment, and to
exercise due care in the handling and stowage including such methods as their nature requires." 11 Under Article
1736 of the Civil Code, the responsibility to observe extraordinary diligence commences and lasts from the time
the goods are unconditionally placed in the possession of, and received by the carrier for transportation until the
same are delivered, actually or constructively, by the carrier to the consignee, or to the person who has the right
to receive them without prejudice to the provisions of Article 1738.
Where, as in the instant case, petitioner, upon the testimonies of its own crew, failed to take the necessary and
adequate precautions for avoiding damage to, or destruction of, the payloader entrusted to it for safe carriage
and delivery to Cagayan de Oro City, it cannot be reasonably concluded that the damage caused to the
payloader was due to the alleged misrepresentation of private respondent Concepcion as to the correct and
accurate weight of the payloader. As found by the respondent Court of Appeals, the fact is that petitioner used a
5-ton capacity lifting apparatus to lift and unload a visibly heavy cargo like a payloader. Private respondent has,
likewise, sufficiently established the laxity and carelessness of petitioner's crew in their methods of ascertaining
the weight of heavy cargoes offered for shipment before loading and unloading them, as is customary among
careful persons.
It must be noted that the weight submitted by private respondent Concepcion appearing at the left-hand portion
of Exhibit 8 12 as an addendum to the original enumeration of equipment to be shipped was entered into the bill
of lading by petitioner, thru Pacifico Fernandez, a company collector, without seeing the equipment to be
shipped.13 Mr. Mariano Gupana, assistant traffic manager of petitioner, confirmed in his testimony that the
company never checked the information entered in the bill of lading. 14 Worse, the weight of the payloader as
entered in the bill of lading was assumed to be correct by Mr. Felix Pisang, Chief Officer of MV Cebu. 15
The weights stated in a bill of lading are prima facie evidence of the amount received and the fact that the
weighing was done by another will not relieve the common carrier where it accepted such weight and entered it
on the bill of lading. 16 Besides, common carriers can protect themselves against mistakes in the bill of lading as
to weight by exercising diligence before issuing the same. 17
While petitioner has proven that private respondent Concepcion did furnish it with an inaccurate weight of the
payloader, petitioner is nonetheless liable, for the damage caused to the machinery could have been avoided by
the exercise of reasonable skill and attention on its part in overseeing the unloading of such a heavy equipment.
And circumstances clearly show that the fall of the payloader could have been avoided by petitioner's crew.
Evidence on record sufficiently show that the crew of petitioner had been negligent in the performance of its
obligation by reason of their having failed to take the necessary precaution under the circumstances which
usage has established among careful persons, more particularly its Chief Officer, Mr. Felix Pisang, who is tasked
with the over-all supervision of loading and unloading heavy cargoes and upon whom rests the burden of
deciding as to what particular winch the unloading of the payloader should be undertaken. 18 While it was his
duty to determine the weight of heavy cargoes before accepting them. Mr. Felix Pisang took the bill of lading on
its face value and presumed the same to be correct by merely "seeing" it. 19 Acknowledging that there was a
"jumbo" in the MV Cebu which has the capacity of lifting 20 to 25 ton cargoes, Mr. Felix Pisang chose not to use
it, because according to him, since the ordinary boom has a capacity of 5 tons while the payloader was only 2.5
tons, he did not bother to use the "jumbo" anymore. 20
In that sense, therefore, private respondent's act of furnishing petitioner with an inaccurate weight of the
payloader upon being asked by petitioner's collector, cannot be used by said petitioner as an excuse to avoid
liability for the damage caused, as the same could have been avoided had petitioner utilized the "jumbo" lifting
apparatus which has a capacity of lifting 20 to 25 tons of heavy cargoes. It is a fact known to the Chief Officer of
MV Cebu that the payloader was loaded aboard the MV Cebu at the Manila North Harbor on August 28, 1964 by
means of a terminal crane. 21 Even if petitioner chose not to take the necessary precaution to avoid damage by
checking the correct weight of the payloader, extraordinary care and diligence compel the use of the "jumbo"
lifting apparatus as the most prudent course for petitioner.
While the act of private respondent in furnishing petitioner with an inaccurate weight of the payloader cannot
successfully be used as an excuse by petitioner to avoid liability to the damage thus caused, said act constitutes
a contributory circumstance to the damage caused on the payloader, which mitigates the liability for damages of
petitioner in accordance with Article 1741 of the Civil Code, to wit:
Art. 1741. If the shipper or owner merely contributed to the loss, destruction or deterioration of
the goods, the proximate cause thereof being the negligence of the common carrier, the latter
shall be liable in damages, which however, shall be equitably reduced.
We find equitable the conclusion of the Court of Appeals reducing the recoverable amount of damages by 20%
or 1/5 of the value of the payloader, which at the time the instant case arose, was valued at P34,000. 00, thereby
reducing the recoverable amount at 80% or 4/5 of P34,000.00 or the sum of P27,200.00. Considering that the
freight charges for the entire cargoes shipped by private respondent amounting to P2,318.40 remained unpaid..
the same would be deducted from the P27,000.00 plus an additional deduction of P228.63 representing the
freight charges for the undeclared weight of 5 tons (difference between 7.5 and 2.5 tons) leaving, therefore, a
final recoverable amount of damages of P24,652.97 due to private respondent Concepcion.
Notwithstanding the favorable judgment in his favor, private respondent assailed the Court of Appeals' decision
insofar as it limited the damages due him to only P24,652.97 and the cost of the suit. Invoking the provisions on
damages under the Civil Code, more particularly Articles 2200 and 2208, private respondent further seeks
additional damages allegedly because the construction project was delayed and that in spite of his demands,
petitioner failed to take any steps to settle his valid, just and demandable claim for damages.
We find private respondent's submission erroneous. It is well- settled that an appellee, who is not an appellant,
may assign errors in his brief where his purpose is to maintain the judgment on other grounds, but he may not do
so if his purpose is to have the judgment modified or reversed, for, in such case, he must appeal. 22 Since
private respondent did not appeal from the judgment insofar as it limited the award of damages due him, the
reduction of 20% or 1/5 of the value of the payloader stands.
WHEREFORE, in view of the foregoing, the petition is DENIED. The decision of the Court of Appeals is hereby
AFFIRMED in all respects with costs against petitioner. In view of the length of time this case has been pending,
this decision is immediately executory.
Gutierrez, Jr., Feliciano, Bidin and Cortes JJ., concur.
G.R. No. 119197 May 16, 1997
TABACALERA INSURANCE CO., PRUDENTIAL GUARANTEE & ASSURANCE, INC., and NEW ZEALAND
INSURANCE CO., LTD., petitioners,
vs.
NORTH FRONT SHIPPING SERVICES, INC., and COURT OF APPEALS, respondents.

BELLOSILLO, J.:
TABACALERA INSURANCE CO., Prudential Guarantee & Assurance, Inc., and New Zealand Insurance Co.,
Ltd., in this petition for review on certiorari, assail the 22 December 1994 decision of the Court of Appeals and its
Resolution of 16 February 1995 which affirmed the 1 June 1993 decision of the Regional Trial Court dismissing
their complaint for damages against North Front Shipping Services, Inc.
On 2 August 1990, 20,234 sacks of corn grains valued at P3,500,640.00 were shipped on board North Front
777, a vessel owned by North Front Shipping Services, Inc. The cargo was consigned to Republic Flour Mills
Corporation in Manila under Bill of Lading No. 001 1 and insured with the herein mentioned insurance
companies. The vessel was inspected prior to actual loading by representatives of the shipper and was found fit
to carry the merchandise. The cargo was covered with tarpaulins and wooden boards. The hatches were sealed
and could only be opened by representatives of Republic Flour Mills Corporation.
The vessel left Cagayan de Oro City on 2 August 1990 and arrived Manila on 16 August 1990. Republic Flour
Mills Corporation was advised of its arrival but it did not immediately commence the unloading operations. There
were days when unloading had to be stopped due to variable weather conditions and sometimes for no apparent
reason at all. When the cargo was eventually unloaded there was a shortage of 26.333 metric tons. The
remaining merchandise was already moldy, rancid and deteriorating. The unloading operations were completed
on 5 September 1990 or twenty (20) days after the arrival of the barge at the wharf of Republic Flour Mills
Corporation in Pasig City.
Precision Analytical Services, Inc., was hired to examine the corn grains and determine the cause of
deterioration. A Certificate of Analysis was issued indicating that the corn grains had 18.56% moisture content
and the wetting was due to contact with salt water. The mold growth was only incipient and not sufficient to make
the corn grains toxic and unfit for consumption. In fact the mold growth could still be arrested by drying.
Republic Flour Mills Corporation rejected the entire cargo and formally demanded from North Front Shipping
Services, Inc., payment for the damages suffered by it. The demands however were unheeded. The insurance
companies were perforce obliged to pay Republic Flour Mills Corporation P2,189,433.40.
By virtue of the payment made by the insurance companies they were subrogated to the rights of Republic Flour
Mills Corporation. Thusly, they lodged a complaint for damages against North Front Shipping Services, Inc.,
claiming that the loss was exclusively attributable to the fault and negligence of the carrier. The Marine Cargo
Adjusters hired by the insurance companies conducted a survey and found cracks in the bodega of the barge
and heavy concentration of molds on the tarpaulins and wooden boards. They did not notice any seals in the
hatches. The tarpaulins were not brand new as there were patches on them, contrary to the claim of North Front
Shipping Services, Inc., thus making it possible for water to seep in. They also discovered that the bulkhead of
the barge was rusty.
North Front Shipping Services, Inc., averred in refutation that it could not be made culpable for the loss and
deterioration of the cargo as it was never negligent. Captain Solomon Villanueva, master of the vessel, reiterated
that the barge was inspected prior to the actual loading and was found adequate and seaworthy. In addition, they
were issued a permit to sail by the Coast Guard. The tarpaulins were doubled and brand new and the hatches
were properly sealed. They did not encounter big waves hence it was not possible for water to seep in. He
further averred that the corn grains were farm wet and not properly dried when loaded.
The court below dismissed the complaint and ruled that the contract entered into between North Front Shipping
Services, Inc., and Republic Flour Mills Corporation was a charter-party agreement. As such, only ordinary
diligence in the care of goods was required of North Front Shipping Services, Inc. The inspection of the barge by
the shipper and the representatives of the shipping company before actual loading, coupled with the Permit to
Sail issued by the Coast Guard, sufficed to meet the degree of diligence required of the carrier.
On the other hand, the Court of Appeals ruled that as a common carrier required to observe a higher degree of
diligence North Front 777 satisfactorily complied with all the requirements hence was issued a Permit to Sail
after proper inspection. Consequently, the complaint was dismissed and the motion for reconsideration rejected.
The charter-party agreement between North Front Shipping Services, Inc., and Republic Flour Mills Corporation
did not in any way convert the common carrier into a private carrier. We have already resolved this issue with
finality in Planters Products, Inc. v. Court of Appeals 2 thus —
A "charter-party" is defined as a contract by which an entire ship, or some principal part thereof,
is let by the owner to another person for a specified time or use; a contract of affreightment by
which the owner of a ship or other vessel lets the whole or a part of her to a merchant or other
person for the conveyance of goods, on a particular voyage, in consideration of the payment of
freight . . . Contract of affreightment may either be time charter, wherein the vessel is leased to
the charterer for a fixed period of time, or voyage charter, wherein the ship is leased for a single
voyage. In both cases, the charter-party provides for the hire of the vessel only, either for a
determinate period of time or for a single or consecutive voyage, the ship owner to supply the
ship's store, pay for the wages of the master of the crew, and defray the expenses for the
maintenance of the ship.
Upon the other hand, the term "common or public carrier" is defined in Art. 1732 of the Civil
Code. The definition extends to carriers either by land, air or water which hold themselves out as
ready to engage in carrying goods or transporting passengers or both for compensation as a
public employment and not as a casual occupation . . .
It is therefore imperative that a public carrier shall remain as such, notwithstanding the charter of
the whole or portion of a vessel by one or more persons, provided the charter is limited to the
shin only, as in the case of a time-charter or voyage-charter (emphasis supplied).
North Front Shipping Services, Inc., is a corporation engaged in the business of transporting cargo and offers its
services indiscriminately to the public. It is without doubt a common carrier. As such it is required to observe
extraordinary diligence in its vigilance over the goods it transports. 3 When goods placed in its care are lost or
damaged, the carrier is presumed to have been at fault or to have acted negligently. 4 North Front Shipping
Services, Inc., therefore has the burden of proving that it observed extraordinary diligence in order to avoid
responsibility for the lost cargo.
North Front Shipping Services, Inc., proved that the vessel was inspected prior to actual loading by
representatives of the shipper and was found fit to take a load of corn grains. They were also issued Permit to
Sail by the Coast Guard. The master of the vessel testified that the corn grains were farm wet when loaded.
However, this testimony was disproved by the clean bill of lading issued by North Front Shipping Services, Inc.,
which did not contain a notation that the corn grains were wet and improperly dried. Having been in the service
since 1968, the master of the vessel would have known at the outset that corn grains that were farm wet and not
properly dried would eventually deteriorate when stored in sealed and hot compartments as in hatches of a ship.
Equipped with this knowledge, the master of the vessel and his crew should have undertaken precautionary
measures to avoid or lessen the cargo's possible deterioration as they were presumed knowledgeable about the
nature of such cargo. But none of such measures was taken.
In Compania Maritima v. Court of Appeals 5 we ruled —
. . . Mere proof of delivery of the goods in good order to a common carrier, and of their arrival at
the place of destination in bad order, makes out prima facie case against the common carrier, so
that if no explanation is given as to how the loss, deterioration or destruction of the goods
occurred, the common carrier must be held responsible. Otherwise stated, it is incumbent upon
the common carrier to prove that the loss, deterioration or destruction was due to accident or
some other circumstances inconsistent with its liability . . .
The extraordinary diligence in the vigilance over the goods tendered for shipment requires the
common carrier to know and to follow the required precaution for avoiding damage to, or
destruction of the goods entrusted to it for safe carriage and delivery. It requires common
carriers to render service with the greatest skill and foresight and "to use all reasonable means
to ascertain the nature and characteristics of goods tendered for shipment, and to exercise due
care in the handling and stowage, including such methods as their nature requires" (emphasis
supplied).
In fine, we find that the carrier failed to observe the required extraordinary diligence in the vigilance over the
goods placed in its care. The proofs presented by North Front Shipping Services, Inc., were insufficient to rebut
the prima facie presumption of private respondent's negligence, more so if we consider the evidence adduced by
petitioners.
It is not denied by the insurance companies that the vessel was indeed inspected before actual loading and that
North Front 777 was issued a Permit to Sail. They proved the fact of shipment and its consequent loss or
damage while in the actual possession of the carrier. Notably, the carrier failed to volunteer any explanation why
there was spoilage and how it occurred. On the other hand, it was shown during the trial that the vessel had
rusty bulkheads and the wooden boards and tarpaulins bore heavy concentration of molds. The tarpaulins used
were not new, contrary to the claim of North Front Shipping Services, Inc., as there were already several patches
on them, hence, making it highly probable for water to enter.
Laboratory analysis revealed that the corn grains were contaminated with salt water. North Front Shipping
Services, Inc., failed to rebut all these arguments. It did not even endeavor to establish that the loss, destruction
or deterioration of the goods was due to the following: (a) flood, storm, earthquake, lightning, or other natural
disaster or calamity; (b) act of the public enemy in war, whether international or civil; (c) act or omission of the
shipper or owner of the goods; (d) the character of the goods or defects in the packing or in the containers; (e)
order or act of competent public authority. 6 This is a closed list. If the cause of destruction, loss or deterioration
is other than the enumerated circumstances, then the carrier is rightly liable therefor.
However, we cannot attribute the destruction, loss or deterioration of the cargo solely to the carrier. We find the
consignee Republic Flour Mills Corporation guilty of contributory negligence. It was seasonably notified of the
arrival of the barge but did not immediately start the unloading operations. No explanation was proffered by the
consignee as to why there was a delay of six (6) days. Had the unloading been commenced immediately the
loss could have been completely avoided or at least minimized. As testified to by the chemist who analyzed the
corn samples, the mold growth was only at its incipient stage and could still be arrested by drying. The corn
grains were not yet toxic or unfit for consumption. For its contributory negligence, Republic Flour Mills
Corporation should share at least 40% of the loss. 7
WHEREFORE, the Decision of the Court of Appeals of 22 December 1994 and its Resolution of 16 February
1995 are REVERSED and SET ASIDE. Respondent North Front Shipping Services, Inc., is ordered to pay
petitioners Tabacalera Insurance Co., Prudential Guarantee & Assurance, Inc., and New Zealand Insurance Co.
Ltd., P1,313,660.00 which is 60% of the amount paid by the insurance companies to Republic Flour Mills
Corporation, plus interest at the rate of 12% per annum from the time this judgment becomes final until full
payment.
SO ORDERED.
8. PRESUMPTION OF NEGLIGENCE

G.R. No. 97412 July 12, 1994

EASTERN SHIPPING LINES, INC., petitioner,
vs.
HON. COURT OF APPEALS AND MERCANTILE INSURANCE COMPANY, INC., respondents.
Alojada & Garcia and Jimenea, Dala & Zaragoza for petitoner.
Zapa Law Office for private respondent.

VITUG, J.:
The issues, albeit not completely novel, are: (a) whether or not a claim for damage sustained on a shipment of
goods can be a solidary, or joint and several, liability of the common carrier, the arrastre operator and the
customs broker; (b) whether the payment of legal interest on an award for loss or damage is to be computed
from the time the complaint is filed or from the date the decision appealed from is rendered; and (c) whether the
applicable rate of interest, referred to above, is twelve percent (12%) or six percent (6%).
The findings of the court a quo, adopted by the Court of Appeals, on the antecedent and undisputed facts that
have led to the controversy are hereunder reproduced:
This is an action against defendants shipping company, arrastre operator and broker-forwarder
for damages sustained by a shipment while in defendants' custody, filed by the insurer-subrogee
who paid the consignee the value of such losses/damages.
On December 4, 1981, two fiber drums of riboflavin were shipped from Yokohama, Japan for
delivery vessel "SS EASTERN COMET" owned by defendant Eastern Shipping Lines under Bill
of Lading
No. YMA-8 (Exh. B). The shipment was insured under plaintiff's Marine Insurance Policy No.
81/01177 for P36,382,466.38.
Upon arrival of the shipment in Manila on December 12, 1981, it was discharged unto the
custody of defendant Metro Port Service, Inc. The latter excepted to one drum, said to be in bad
order, which damage was unknown to plaintiff.
On January 7, 1982 defendant Allied Brokerage Corporation received the shipment from
defendant Metro Port Service, Inc., one drum opened and without seal (per "Request for Bad
Order Survey." Exh. D).
On January 8 and 14, 1982, defendant Allied Brokerage Corporation made deliveries of the
shipment to the consignee's warehouse. The latter excepted to one drum which contained
spillages, while the rest of the contents was adulterated/fake (per "Bad Order Waybill" No.
10649, Exh. E).
Plaintiff contended that due to the losses/damage sustained by said drum, the consignee
suffered losses totaling P19,032.95, due to the fault and negligence of defendants. Claims were
presented against defendants who failed and refused to pay the same (Exhs. H, I, J, K, L).
As a consequence of the losses sustained, plaintiff was compelled to pay the consignee
P19,032.95 under the aforestated marine insurance policy, so that it became subrogated to all
the rights of action of said consignee against defendants (per "Form of Subrogation", "Release"
and Philbanking check, Exhs. M, N, and O). (pp. 85-86, Rollo.)
There were, to be sure, other factual issues that confronted both courts. Here, the appellate court said:
Defendants filed their respective answers, traversing the material allegations of the complaint
contending that: As for defendant Eastern Shipping it alleged that the shipment was discharged
in good order from the vessel unto the custody of Metro Port Service so that any damage/losses
incurred after the shipment was incurred after the shipment was turned over to the latter, is no
longer its liability (p. 17, Record); Metroport averred that although subject shipment was
discharged unto its custody, portion of the same was already in bad order (p. 11, Record); Allied
Brokerage alleged that plaintiff has no cause of action against it, not having negligent or at fault
for the shipment was already in damage and bad order condition when received by it, but
nonetheless, it still exercised extra ordinary care and diligence in the handling/delivery of the
cargo to consignee in the same condition shipment was received by it.
From the evidence the court found the following:
The issues are:
1. Whether or not the shipment sustained losses/damages;
2. Whether or not these losses/damages were sustained while in the custody of
defendants (in whose respective custody, if determinable);
3. Whether or not defendant(s) should be held liable for the losses/damages
(see plaintiff's pre-Trial Brief, Records, p. 34; Allied's pre-Trial Brief, adopting
plaintiff's Records, p. 38).
As to the first issue, there can be no doubt that the shipment sustained
losses/damages. The two drums were shipped in good order and condition, as
clearly shown by the Bill of Lading and Commercial Invoice which do not indicate
any damages drum that was shipped (Exhs. B and C). But when on December
12, 1981 the shipment was delivered to defendant Metro Port Service, Inc., it
excepted to one drum in bad order.
Correspondingly, as to the second issue, it follows that the losses/damages were
sustained while in the respective and/or successive custody and possession of
defendants carrier (Eastern), arrastre operator (Metro Port) and broker (Allied
Brokerage). This becomes evident when the Marine Cargo Survey Report (Exh.
G), with its "Additional Survey Notes", are considered. In the latter notes, it is
stated that when the shipment was "landed on vessel" to dock of Pier # 15,
South Harbor, Manila on December 12, 1981, it was observed that "one (1) fiber
drum (was) in damaged condition, covered by the vessel's Agent's Bad Order
Tally Sheet No. 86427." The report further states that when defendant Allied
Brokerage withdrew the shipment from defendant arrastre operator's custody on
January 7, 1982, one drum was found opened without seal, cello bag partly torn
but contents intact. Net unrecovered spillages was
15 kgs. The report went on to state that when the drums reached the consignee,
one drum was found with adulterated/faked contents. It is obvious, therefore,
that these losses/damages occurred before the shipment reached the consignee
while under the successive custodies of defendants. Under Art. 1737 of the New
Civil Code, the common carrier's duty to observe extraordinary diligence in the
vigilance of goods remains in full force and effect even if the goods are
temporarily unloaded and stored in transit in the warehouse of the carrier at the
place of destination, until the consignee has been advised and has had
reasonable opportunity to remove or dispose of the goods (Art. 1738, NCC).
Defendant Eastern Shipping's own exhibit, the "Turn-Over Survey of Bad Order
Cargoes" (Exhs. 3-Eastern) states that on December 12, 1981 one drum was
found "open".
and thus held:
WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered:
A. Ordering defendants to pay plaintiff, jointly and severally:
1. The amount of P19,032.95, with the present legal interest of 12% per annum
from October 1, 1982, the date of filing of this complaints, until fully paid (the
liability of defendant Eastern Shipping, Inc. shall not exceed US$500 per case or
the CIF value of the loss, whichever is lesser, while the liability of defendant
Metro Port Service, Inc. shall be to the extent of the actual invoice value of each
package, crate box or container in no case to exceed P5,000.00 each, pursuant
to Section 6.01 of the Management Contract);
 2. P3,000.00 as attorney's fees, and
3. Costs.
B. Dismissing the counterclaims and crossclaim of
defendant/cross-claimant Allied Brokerage Corporation.
SO ORDERED. (p. 207, Record).
Dissatisfied, defendant's recourse to US.
The appeal is devoid of merit.
After a careful scrutiny of the evidence on record. We find that the conclusion drawn therefrom is
correct. As there is sufficient evidence that the shipment sustained damage while in the
successive possession of appellants, and therefore they are liable to the appellee, as subrogee
for the amount it paid to the consignee. (pp. 87-89, Rollo.)
The Court of Appeals thus affirmed in toto the judgment of the court
a quo.
In this petition, Eastern Shipping Lines, Inc., the common carrier, attributes error and grave abuse of discretion
on the part of the appellate court when —
I. IT HELD PETITIONER CARRIER JOINTLY AND SEVERALLY LIABLE WITH THE ARRASTRE
OPERATOR AND CUSTOMS BROKER FOR THE CLAIM OF PRIVATE RESPONDENT AS
GRANTED IN THE QUESTIONED DECISION;
II. IT HELD THAT THE GRANT OF INTEREST ON THE CLAIM OF PRIVATE RESPONDENT
SHOULD COMMENCE FROM THE DATE OF THE FILING OF THE COMPLAINT AT THE RATE
OF TWELVE PERCENT PER ANNUM INSTEAD OF FROM THE DATE OF THE DECISION OF
THE TRIAL COURT AND ONLY AT THE RATE OF SIX PERCENT PER ANNUM, PRIVATE
RESPONDENT'S CLAIM BEING INDISPUTABLY UNLIQUIDATED.
The petition is, in part, granted.
In this decision, we have begun by saying that the questions raised by petitioner carrier are not all that novel.
Indeed, we do have a fairly good number of previous decisions this Court can merely tack to.
The common carrier's duty to observe the requisite diligence in the shipment of goods lasts from the time the
articles are surrendered to or unconditionally placed in the possession of, and received by, the carrier for
transportation until delivered to, or until the lapse of a reasonable time for their acceptance by, the person
entitled to receive them (Arts. 1736-1738, Civil Code; Ganzon vs. Court of Appeals, 161 SCRA 646; Kui Bai vs.
Dollar Steamship Lines, 52 Phil. 863). When the goods shipped either are lost or arrive in damaged condition, a
presumption arises against the carrier of its failure to observe that diligence, and there need not be an express
finding of negligence to hold it liable (Art. 1735, Civil Code; Philippine National Railways vs. Court of Appeals,
139 SCRA 87; Metro Port Service vs. Court of Appeals, 131 SCRA 365). There are, of course, exceptional cases
when such presumption of fault is not observed but these cases, enumerated in Article 1734 1 of the Civil Code,
are exclusive, not one of which can be applied to this case.
The question of charging both the carrier and the arrastre operator with the obligation of properly delivering the
goods to the consignee has, too, been passed upon by the Court. In Fireman's Fund Insurance vs. Metro Port
Services (182 SCRA 455), we have explained, in holding the carrier and the arrastre operator liable in solidum,
thus:
The legal relationship between the consignee and the arrastre operator is akin to that of a
depositor and warehouseman (Lua Kian v. Manila Railroad Co., 19 SCRA 5 [1967]. The
relationship between the consignee and the common carrier is similar to that of the consignee
and the arrastre operator (Northern Motors, Inc. v. Prince Line, et al., 107 Phil. 253 [1960]).
Since it is the duty of the ARRASTRE to take good care of the goods that are in its custody and
to deliver them in good condition to the consignee, such responsibility also devolves upon the
CARRIER. Both the ARRASTRE and the CARRIER are therefore charged with the obligation to
deliver the goods in good condition to the consignee.
We do not, of course, imply by the above pronouncement that the arrastre operator and the customs broker are
themselves always and necessarily liable solidarily with the carrier, or vice-versa, nor that attendant facts in a
given case may not vary the rule. The instant petition has been brought solely by Eastern Shipping Lines, which,
being the carrier and not having been able to rebut the presumption of fault, is, in any event, to be held liable in
this particular case. A factual finding of both the court a quo and the appellate court, we take note, is that "there
is sufficient evidence that the shipment sustained damage while in the successive possession of appellants" (the
herein petitioner among them). Accordingly, the liability imposed on Eastern Shipping Lines, Inc., the sole
petitioner in this case, is inevitable regardless of whether there are others solidarily liable with it.
It is over the issue of legal interest adjudged by the appellate court that deserves more than just a passing
remark.
Let us first see a chronological recitation of the major rulings of this Court:
The early case of Malayan Insurance Co., Inc., vs. Manila Port
Service,2 decided3 on 15 May 1969, involved a suit for recovery of money arising out of short deliveries and
pilferage of goods. In this case, appellee Malayan Insurance (the plaintiff in the lower court) averred in its
complaint that the total amount of its claim for the value of the undelivered goods amounted to P3,947.20. This
demand, however, was neither established in its totality nor definitely ascertained. In the stipulation of facts later
entered into by the parties, in lieu of proof, the amount of P1,447.51 was agreed upon. The trial court rendered
judgment ordering the appellants (defendants) Manila Port Service and Manila Railroad Company to pay
appellee Malayan Insurance the sum of P1,447.51 with legal interest thereon from the date the complaint was
filed on 28 December 1962 until full payment thereof. The appellants then assailed, inter alia, the award of legal
interest. In sustaining the appellants, this Court ruled:
Interest upon an obligation which calls for the payment of money, absent a stipulation, is the
legal rate. Such interest normally is allowable from the date of demand, judicial or extrajudicial.
The trial court opted for judicial demand as the starting point.
But then upon the provisions of Article 2213 of the Civil Code, interest "cannot be recovered
upon unliquidated claims or damages, except when the demand can be established with
reasonable certainty." And as was held by this Court in Rivera vs. Perez,4 L-6998, February 29,
1956, if the suit were for damages, "unliquidated and not known until definitely ascertained,
assessed and determined by the courts after proof (Montilla c. Corporacion de P.P. Agustinos,
25 Phil. 447; Lichauco v. Guzman,
38 Phil. 302)," then, interest "should be from the date of the decision." (Emphasis supplied)
The case of Reformina vs. Tomol,5 rendered on 11 October 1985, was for "Recovery of Damages for Injury to
Person and Loss of Property." After trial, the lower court decreed:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and third party defendants
and against the defendants and third party plaintiffs as follows:
Ordering defendants and third party plaintiffs Shell and Michael, Incorporated to pay jointly and
severally the following persons:
xxx xxx xxx
(g) Plaintiffs Pacita F. Reformina and Francisco Reformina the sum of P131,084.00 which is the
value of the boat F B Pacita III together with its accessories, fishing gear and equipment minus
P80,000.00 which is the value of the insurance recovered and the amount of P10,000.00 a
month as the estimated monthly loss suffered by them as a result of the fire of May 6, 1969 up to
the time they are actually paid or already the total sum of P370,000.00 as of June 4, 1972 with
legal interest from the filing of the complaint until paid and to pay attorney's fees of P5,000.00
with costs against defendants and third party plaintiffs. (Emphasis supplied.)
On appeal to the Court of Appeals, the latter modified the amount of damages awarded but sustained
the trial court in adjudging legal interest from the filing of the complaint until fully paid. When the
appellate court's decision became final, the case was remanded to the lower court for execution, and this
was when the trial court issued its assailed resolution which applied the 6% interest per annum
prescribed in Article 2209 of the Civil Code. In their petition for review on certiorari, the petitioners
contended that Central Bank Circular
No. 416, providing thus —
By virtue of the authority granted to it under Section 1 of Act 2655, as amended, Monetary Board
in its Resolution No. 1622 dated July 29, 1974, has prescribed that the rate of interest for the
 loan, or forbearance of any money, goods, or credits and the rate allowed in judgments, in the
absence of express contract as to such rate of interest, shall be twelve (12%) percent per
annum. This Circular shall take effect immediately. (Emphasis found in the text) —
should have, instead, been applied. This Court6 ruled:
The judgments spoken of and referred to are judgments in litigations involving loans or
forbearance of any money, goods or credits. Any other kind of monetary judgment which has
nothing to do with, nor involving loans or forbearance of any money, goods or credits does not
fall within the coverage of the said law for it is not within the ambit of the authority granted to the
Central Bank.
xxx xxx xxx
Coming to the case at bar, the decision herein sought to be executed is one rendered in an
Action for Damages for injury to persons and loss of property and does not involve any loan,
much less forbearances of any money, goods or credits. As correctly argued by the private
respondents, the law applicable to the said case is Article 2209 of the New Civil Code which
reads —
Art. 2209. — If the obligation consists in the payment of a sum of money, and the
debtor incurs in delay, the indemnity for damages, there being no stipulation to
the contrary, shall be the payment of interest agreed upon, and in the absence of
stipulation, the legal interest which is six percent per annum.
The above rule was reiterated in Philippine Rabbit Bus Lines, Inc., v. Cruz,7 promulgated on 28 July 1986. The
case was for damages occasioned by an injury to person and loss of property. The trial court awarded private
respondent Pedro Manabat actual and compensatory damages in the amount of P72,500.00 with legal interest
thereon from the filing of the complaint until fully paid. Relying on the Reformina v. Tomol case, this Court8
modified the interest award from 12% to 6% interest per annum but sustained the time computation thereof, i.e.,
from the filing of the complaint until fully paid.
In Nakpil and Sons vs. Court of Appeals,9 the trial court, in an action for the recovery of damages arising from
the collapse of a building, ordered,
inter alia, the "defendant United Construction Co., Inc. (one of the petitioners)
. . . to pay the plaintiff, . . . , the sum of P989,335.68 with interest at the legal rate from November 29, 1968, the
date of the filing of the complaint until full payment . . . ." Save from the modification of the amount granted by
the lower court, the Court of Appeals sustained the trial court's decision. When taken to this Court for review, the
case, on 03 October 1986, was decided, thus:
WHEREFORE, the decision appealed from is hereby MODIFIED and considering the special
and environmental circumstances of this case, we deem it reasonable to render a decision
imposing, as We do hereby impose, upon the defendant and the third-party defendants (with the
exception of Roman Ozaeta) a solidary (Art. 1723, Civil Code, Supra.
p. 10) indemnity in favor of the Philippine Bar Association of FIVE MILLION (P5,000,000.00)
Pesos to cover all damages (with the exception to attorney's fees) occasioned by the loss of the
building (including interest charges and lost rentals) and an additional ONE HUNDRED
THOUSAND (P100,000.00) Pesos as and for attorney's fees, the total sum being payable upon
the finality of this decision. Upon failure to pay on such finality, twelve (12%) per cent interest per
annum shall be imposed upon aforementioned amounts from finality until paid . Solidary costs
against the defendant and third-party defendants (Except Roman Ozaeta). (Emphasis supplied)
A motion for reconsideration was filed by United Construction, contending that "the interest of twelve
(12%) per cent per annum imposed on the total amount of the monetary award was in contravention of
law." The Court10 ruled out the applicability of the Reformina and Philippine Rabbit Bus Lines cases
and, in its resolution of 15 April 1988, it explained:
There should be no dispute that the imposition of 12% interest pursuant to Central Bank Circular
No. 416 . . . is applicable only in the following: (1) loans; (2) forbearance of any money, goods or
credit; and
(3) rate allowed in judgments (judgments spoken of refer to judgments involving loans or
forbearance of any money, goods or credits. (Philippine Rabbit Bus Lines Inc. v. Cruz, 143 SCRA
160-161 [1986]; Reformina v. Tomol, Jr., 139 SCRA 260 [1985]). It is true that in the instant case,
 there is neither a loan or a forbearance, but then no interest is actually imposed provided the
sums referred to in the judgment are paid upon the finality of the judgment. It is delay in the
payment of such final judgment, that will cause the imposition of the interest.
It will be noted that in the cases already adverted to, the rate of interest is imposed on the total
sum, from the filing of the complaint until paid; in other words, as part of the judgment for
damages. Clearly, they are not applicable to the instant case. (Emphasis supplied.)
The subsequent case of American Express International, Inc., vs. Intermediate Appellate Court11 was a petition
for review on certiorari from the decision, dated 27 February 1985, of the then Intermediate Appellate Court
reducing the amount of moral and exemplary damages awarded by the trial court, to P240,000.00 and
P100,000.00, respectively, and its resolution, dated 29 April 1985, restoring the amount of damages awarded by
the trial court, i.e., P2,000,000.00 as moral damages and P400,000.00 as exemplary damages with interest
thereon at 12% per annum from notice of judgment, plus costs of suit. In a decision of 09 November 1988, this
Court, while recognizing the right of the private respondent to recover damages, held the award, however, for
moral damages by the trial court, later sustained by the IAC, to be inconceivably large. The Court 12 thus set
aside the decision of the appellate court and rendered a new one, "ordering the petitioner to pay private
respondent the sum of One Hundred Thousand (P100,000.00) Pesos as moral damages, with
six (6%) percent interest thereon computed from the finality of this decision until paid. (Emphasis supplied)
Reformina came into fore again in the 21 February 1989 case of Florendo v. Ruiz13 which arose from a breach
of employment contract. For having been illegally dismissed, the petitioner was awarded by the trial court moral
and exemplary damages without, however, providing any legal interest thereon. When the decision was
appealed to the Court of Appeals, the latter held:
WHEREFORE, except as modified hereinabove the decision of the CFI of Negros Oriental dated
October 31, 1972 is affirmed in all respects, with the modification that defendants-appellants,
except defendant-appellant Merton Munn, are ordered to pay, jointly and severally, the amounts
stated in the dispositive portion of the decision, including the sum of P1,400.00 in concept of
compensatory damages, with interest at the legal rate from the date of the filing of the complaint
until fully paid (Emphasis supplied.)
The petition for review to this Court was denied. The records were thereupon transmitted to the trial
court, and an entry of judgment was made. The writ of execution issued by the trial court directed that
only compensatory damages should earn interest at 6% per annum from the date of the filing of the
complaint. Ascribing grave abuse of discretion on the part of the trial judge, a petition for certiorari
assailed the said order. This Court said:
. . . , it is to be noted that the Court of Appeals ordered the payment of interest "at the legal rate"
from the time of the filing of the complaint. . . Said circular [Central Bank Circular No. 416] does
not apply to actions based on a breach of employment contract like the case at bar. (Emphasis
supplied)
The Court reiterated that the 6% interest per annum on the damages should be computed from the time
the complaint was filed until the amount is fully paid.
Quite recently, the Court had another occasion to rule on the matter. National Power Corporation vs. Angas,14
decided on 08 May 1992, involved the expropriation of certain parcels of land. After conducting a hearing on the
complaints for eminent domain, the trial court ordered the petitioner to pay the private respondents certain sums
of money as just compensation for their lands so expropriated "with legal interest thereon . . . until fully paid."
Again, in applying the 6% legal interest per annum under the Civil Code, the Court15 declared:
. . . , (T)he transaction involved is clearly not a loan or forbearance of money, goods or credits
but expropriation of certain parcels of land for a public purpose, the payment of which is without
stipulation regarding interest, and the interest adjudged by the trial court is in the nature of
indemnity for damages. The legal interest required to be paid on the amount of just
compensation for the properties expropriated is manifestly in the form of indemnity for damages
for the delay in the payment thereof. Therefore, since the kind of interest involved in the joint
judgment of the lower court sought to be enforced in this case is interest by way of damages,
and not by way of earnings from loans, etc. Art. 2209 of the Civil Code shall apply.
Concededly, there have been seeming variances in the above holdings. The cases can perhaps be classified
into two groups according to the similarity of the issues involved and the corresponding rulings rendered by the
court. The "first group" would consist of the cases of Reformina v. Tomol (1985), Philippine Rabbit Bus Lines v.
Cruz (1986), Florendo v. Ruiz (1989)
and National Power Corporation v. Angas (1992). In the "second group" would be Malayan Insurance Company
v. Manila Port Service (1969), Nakpil and Sons v. Court of Appeals (1988), and American Express International
v. Intermediate Appellate Court (1988).
In the "first group", the basic issue focuses on the application of either the 6% (under the Civil Code) or 12%
(under the Central Bank Circular) interest per annum. It is easily discernible in these cases that there has been a
consistent holding that the Central Bank Circular imposing the 12% interest per annum applies only to loans or
forbearance16 of money, goods or credits, as well as to judgments involving such loan or forbearance of money,
goods or credits, and that the 6% interest under the Civil Code governs when the transaction involves the
payment of indemnities in the concept of damage arising from the breach or a delay in the performance of
obligations in general. Observe, too, that in these cases, a common time frame in the computation of the 6%
interest per annum has been applied, i.e., from the time the complaint is filed until the adjudged amount is fully
paid.
The "second group", did not alter the pronounced rule on the application of the 6% or 12% interest per annum,17
depending on whether or not the amount involved is a loan or forbearance, on the one hand, or one of indemnity
for damage, on the other hand. Unlike, however, the "first group" which remained consistent in holding that the
running of the legal interest should be from the time of the filing of the complaint until fully paid, the "second
group" varied on the commencement of the running of the legal interest.
Malayan held that the amount awarded should bear legal interest from the date of the decision of the court a
quo, explaining that "if the suit were for damages, 'unliquidated and not known until definitely ascertained,
assessed and determined by the courts after proof,' then, interest 'should be from the date of the decision.'"
American Express International v. IAC, introduced a different time frame for reckoning the 6% interest by
ordering it to be "computed from the finality of (the) decision until paid." The Nakpil and Sons case ruled that
12% interest per annum should be imposed from the finality of the decision until the judgment amount is paid.
The ostensible discord is not difficult to explain. The factual circumstances may have called for different
applications, guided by the rule that the courts are vested with discretion, depending on the equities of each
case, on the award of interest. Nonetheless, it may not be unwise, by way of clarification and reconciliation, to
suggest the following rules of thumb for future guidance.
I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts18 is
breached, the contravenor can be held liable for damages.19 The provisions under Title XVIII on "Damages" of
the Civil Code govern in determining the measure of recoverable damages.20
II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate
of interest, as well as the accrual thereof, is imposed, as follows:
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance
of money, the interest due should be that which may have been stipulated in writing.21 Furthermore, the interest
due shall itself earn legal interest from the time it is judicially demanded.22 In the absence of stipulation, the rate
of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under
and subject to the provisions of Article 116923 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of
damages awarded may be imposed at the discretion of the court24 at the rate of 6% per annum.25 No interest,
however, shall be adjudged on unliquidated claims or damages except when or until the demand can be
established with reasonable certainty.26 Accordingly, where the demand is established with reasonable certainty,
the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code)
but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall
begin to run only from the date the judgment of the court is made (at which time the quantification of damages
may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest
shall, in any case, be on the amount finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal
interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such
finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of
credit.
WHEREFORE, the petition is partly GRANTED. The appealed decision is AFFIRMED with the MODIFICATION
that the legal interest to be paid is SIX PERCENT (6%) on the amount due computed from the decision, dated
03 February 1988, of the court a quo. A TWELVE PERCENT (12%) interest, in lieu of SIX PERCENT (6%), shall
be imposed on such amount upon finality of this decision until the payment thereof.
SO ORDERED.
G.R. No. 114167 July 12, 1995
COASTWISE LIGHTERAGE CORPORATION, petitioner,
vs.
COURT OF APPEALS and the PHILIPPINE GENERAL INSURANCE COMPANY, respondents.
RESOLUTION

FRANCISCO, R., J.:

This is a petition for review of a Decision rendered by the Court of Appeals, dated December 17, 1993, affirming
Branch 35 of the Regional Trial Court, Manila in holding that herein petitioner is liable to pay herein private
respondent the amount of P700,000.00, plus legal interest thereon, another sum of P100,000.00 as attorney's
fees and the cost of the suit.
The factual background of this case is as follows:
Pag-asa Sales, Inc. entered into a contract to transport molasses from the province of Negros to Manila with
Coastwise Lighterage Corporation (Coastwise for brevity), using the latter's dumb barges. The barges were
towed in tandem by the tugboat MT Marica, which is likewise owned by Coastwise.
Upon reaching Manila Bay, while approaching Pier 18, one of the barges, "Coastwise 9", struck an unknown
sunken object. The forward buoyancy compartment was damaged, and water gushed in through a hole "two
inches wide and twenty-two inches long"1 As a consequence, the molasses at the cargo tanks were
contaminated and rendered unfit for the use it was intended. This prompted the consignee, Pag-asa Sales, Inc.
to reject the shipment of molasses as a total loss. Thereafter, Pag-asa Sales, Inc. filed a formal claim with the
insurer of its lost cargo, herein private respondent, Philippine General Insurance Company (PhilGen, for short)
and against the carrier, herein petitioner, Coastwise Lighterage. Coastwise Lighterage denied the claim and it
was PhilGen which paid the consignee, Pag-asa Sales, Inc., the amount of P700,000.00, representing the value
of the damaged cargo of molasses.
In turn, PhilGen then filed an action against Coastwise Lighterage before the Regional Trial Court of Manila,
seeking to recover the amount of P700,000.00 which it paid to Pag-asa Sales, Inc. for the latter's lost cargo.
PhilGen now claims to be subrogated to all the contractual rights and claims which the consignee may have
against the carrier, which is presumed to have violated the contract of carriage.
The RTC awarded the amount prayed for by PhilGen. On Coastwise Lighterage's appeal to the Court of Appeals,
the award was affirmed.
Hence, this petition.
There are two main issues to be resolved herein. First, whether or not petitioner Coastwise Lighterage was
transformed into a private carrier, by virtue of the contract of affreightment which it entered into with the
consignee, Pag-asa Sales, Inc. Corollarily, if it were in fact transformed into a private carrier, did it exercise the
ordinary diligence to which a private carrier is in turn bound? Second, whether or not the insurer was subrogated
into the rights of the consignee against the carrier, upon payment by the insurer of the value of the consignee's
goods lost while on board one of the carrier's vessels.
On the first issue, petitioner contends that the RTC and the Court of Appeals erred in finding that it was a
common carrier. It stresses the fact that it contracted with Pag-asa Sales, Inc. to transport the shipment of
molasses from Negros Oriental to Manila and refers to this contract as a "charter agreement". It then proceeds to
cite the case of Home Insurance Company vs. American Steamship Agencies, Inc.2 wherein this Court held: ". . .
a common carrier undertaking to carry a special cargo or chartered to a special person only becomes a private
carrier."
Petitioner's reliance on the aforementioned case is misplaced. In its entirety, the conclusions of the court are as
follows:
Accordingly, the charter party contract is one of affreightment over the whole vessel, rather than
a demise. As such, the liability of the shipowner for acts or negligence of its captain and crew,
would remain in the absence of stipulation.3
The distinction between the two kinds of charter parties (i.e. bareboat or demise and contract of affreightment) is
more clearly set out in the case of Puromines, Inc. vs. Court of Appeals,4 wherein we ruled:
 Under the demise or bareboat charter of the vessel, the charterer will generally be regarded as
the owner for the voyage or service stipulated. The charterer mans the vessel with his own
people and becomes the owner pro hac vice, subject to liability to others for damages caused by
negligence. To create a demise, the owner of a vessel must completely and exclusively
relinquish possession, command and navigation thereof to the charterer, anything short of such
a complete transfer is a contract of affreightment (time or voyage charter party) or not a charter
party at all.
On the other hand a contract of affreightment is one in which the owner of the vessel leases part
or all of its space to haul goods for others. It is a contract for special service to be rendered by
the owner of the vessel and under such contract the general owner retains the possession,
command and navigation of the ship, the charterer or freighter merely having use of the space in
the vessel in return for his payment of the charter hire. . . . .
. . . . An owner who retains possession of the ship though the hold is the property of the
charterer, remains liable as carrier and must answer for any breach of duty as to the care,
loading and unloading of the cargo. . . .
Although a charter party may transform a common carrier into a private one, the same however is not true in a
contract of affreightment on account of the aforementioned distinctions between the two.
Petitioner admits that the contract it entered into with the consignee was one of affreightment.5 We agree. Pag-
asa Sales, Inc. only leased three of petitioner's vessels, in order to carry cargo from one point to another, but the
possession, command and navigation of the vessels remained with petitioner Coastwise Lighterage.
Pursuant therefore to the ruling in the aforecited Puromines case, Coastwise Lighterage, by the contract of
affreightment, was not converted into a private carrier, but remained a common carrier and was still liable as
such.
The law and jurisprudence on common carriers both hold that the mere proof of delivery of goods in good order
to a carrier and the subsequent arrival of the same goods at the place of destination in bad order makes for a
prima facie case against the carrier.
It follows then that the presumption of negligence that attaches to common carriers, once the goods it transports
are lost, destroyed or deteriorated, applies to the petitioner. This presumption, which is overcome only by proof
of the exercise of extraordinary diligence, remained unrebutted in this case.
The records show that the damage to the barge which carried the cargo of molasses was caused by its hitting an
unknown sunken object as it was heading for Pier 18. The object turned out to be a submerged derelict vessel.
Petitioner contends that this navigational hazard was the efficient cause of the accident. Further it asserts that
the fact that the Philippine Coastguard "has not exerted any effort to prepare a chart to indicate the location of
sunken derelicts within Manila North Harbor to avoid navigational accidents"6 effectively contributed to the
happening of this mishap. Thus, being unaware of the hidden danger that lies in its path, it became impossible
for the petitioner to avoid the same. Nothing could have prevented the event, making it beyond the pale of even
the exercise of extraordinary diligence.
However, petitioner's assertion is belied by the evidence on record where it appeared that far from having
rendered service with the greatest skill and utmost foresight, and being free from fault, the carrier was culpably
remiss in the observance of its duties.
Jesus R. Constantino, the patron of the vessel "Coastwise 9" admitted that he was not licensed. The Code of
Commerce, which subsidiarily governs common carriers (which are primarily governed by the provisions of the
Civil Code) provides:
Art. 609. — Captains, masters, or patrons of vessels must be Filipinos, have legal capacity to
contract in accordance with this code, and prove the skill capacity and qualifications necessary
to command and direct the vessel, as established by marine and navigation laws, ordinances or
regulations, and must not be disqualified according to the same for the discharge of the duties of
the position. . . .
Clearly, petitioner Coastwise Lighterage's embarking on a voyage with an unlicensed patron violates this rule. It
cannot safely claim to have exercised extraordinary diligence, by placing a person whose navigational skills are
questionable, at the helm of the vessel which eventually met the fateful accident. It may also logically, follow that
a person without license to navigate, lacks not just the skill to do so, but also the utmost familiarity with the usual
and safe routes taken by seasoned and legally authorized ones. Had the patron been licensed, he could be
presumed to have both the skill and the knowledge that would have prevented the vessel's hitting the sunken
derelict ship that lay on their way to Pier 18.
As a common carrier, petitioner is liable for breach of the contract of carriage, having failed to overcome the
presumption of negligence with the loss and destruction of goods it transported, by proof of its exercise of
extraordinary diligence.
On the issue of subrogation, which petitioner contends as inapplicable in this case, we once more rule against
the petitioner. We have already found petitioner liable for breach of the contract of carriage it entered into with
Pag-asa Sales, Inc. However, for the damage sustained by the loss of the cargo which petitioner-carrier was
transporting, it was not the carrier which paid the value thereof to Pag-asa Sales, Inc. but the latter's insurer,
herein private respondent PhilGen.
Article 2207 of the Civil Code is explicit on this point:
Art. 2207. If the plaintiffs property has been insured, and he has received indemnity from the
insurance company for the injury or loss arising out of the wrong or breach of contract
complained of, the insurance company shall be subrogated to the rights of the insured against
the wrongdoer or the person who violated the contract. . . .
This legal provision containing the equitable principle of subrogation has been applied in a long line of cases
including Compania Maritima v. Insurance Company of North America;7 Fireman's Fund Insurance Company v.
Jamilla & Company, Inc.,8 and Pan Malayan Insurance Corporation v. Court of Appeals,9 wherein this Court
explained:
Article 2207 of the Civil Code is founded on the well-settled principle of subrogation. If the
insured property is destroyed or damaged through the fault or negligence of a party other than
the assured, then the insurer, upon payment to the assured will be subrogated to the rights of the
assured to recover from the wrongdoer to the extent that the insurer has been obligated to pay.
Payment by the insurer to the assured operated as an equitable assignment to the former of all
remedies which the latter may have against the third party whose negligence or wrongful act
caused the loss. The right of subrogation is not dependent upon, nor does it grow out of, any
privity of contract or upon written assignment of claim. It accrues simply upon payment of the
insurance claim by the insurer.
Undoubtedly, upon payment by respondent insurer PhilGen of the amount of P700,000.00 to Pag-asa Sales,
Inc., the consignee of the cargo of molasses totally damaged while being transported by petitioner Coastwise
Lighterage, the former was subrogated into all the rights which Pag-asa Sales, Inc. may have had against the
carrier, herein petitioner Coastwise Lighterage.
WHEREFORE, premises considered, this petition is DENIED and the appealed decision affirming the order of
Branch 35 of the Regional Trial Court of Manila for petitioner Coastwise Lighterage to pay respondent Philippine
General Insurance Company the "principal amount of P700,000.00 plus interest thereon at the legal rate
computed from March 29, 1989, the date the complaint was filed until fully paid and another sum of P100,000.00
as attorney's fees and costs"10 is likewise hereby AFFIRMED
SO ORDERED.
G.R. No. 168151               September 4, 2009
REGIONAL CONTAINER LINES (RCL) OF SINGAPORE and EDSA SHIPPING AGENCY, Petitioners,
vs.
THE NETHERLANDS INSURANCE CO. (PHILIPPINES), INC., Respondent.
DECISION
BRION, J.:
For our resolution is the petition for review on certiorari filed by petitioners Regional Container Lines of
Singapore (RCL) and EDSA Shipping Agency (EDSA Shipping) to annul and set aside the decision 1 and
resolution2 of the Court of Appeals (CA) dated May 26, 2004 and May 10, 2005, respectively, in CA-G.R. CV No.
76690.
RCL is a foreign corporation based in Singapore. It does business in the Philippines through its agent, EDSA
Shipping, a domestic corporation organized and existing under Philippine laws. Respondent Netherlands
Insurance Company (Philippines), Inc. (Netherlands Insurance) is likewise a domestic corporation engaged in
the marine underwriting business.
FACTUAL ANTECEDENTS
The pertinent facts, based on the records are summarized below.
On October 20, 1995, 405 cartons of Epoxy Molding Compound were consigned to be shipped from Singapore
to Manila for Temic Telefunken Microelectronics Philippines (Temic). U-Freight Singapore PTE Ltd.3 (U-Freight
Singapore), a forwarding agent based in Singapore, contracted the services of Pacific Eagle Lines PTE. Ltd.
(Pacific Eagle) to transport the subject cargo. The cargo was packed, stored, and sealed by Pacific Eagle in its
Refrigerated Container No. 6105660 with Seal No. 13223. As the cargo was highly perishable, the inside of the
container had to be kept at a temperature of 0º Celsius. Pacific Eagle then loaded the refrigerated container on
board the M/V Piya Bhum, a vessel owned by RCL, with which Pacific Eagle had a slot charter agreement. RCL
duly issued its own Bill of Lading in favor of Pacific Eagle.
To insure the cargo against loss and damage, Netherlands Insurance issued a Marine Open Policy in favor of
Temic, as shown by MPO-21-05081-94 and Marine Risk Note MRN-21 14022, to cover all losses/damages to
the shipment.
On October 25, 1995, the M/V Piya Bhum docked in Manila. After unloading the refrigerated container, it was
plugged to the power terminal of the pier to keep its temperature constant. Fidel Rocha (Rocha), Vice-President
for Operations of Marines Adjustment Corporation, accompanied by two surveyors, conducted a protective
survey of the cargo. They found that based on the temperature chart, the temperature reading was constant from
October 18, 1995 to October 25, 1995 at 0º Celsius. However, at midnight of October 25, 1995 – when the cargo
had already been unloaded from the ship – the temperature fluctuated with a reading of 33º Celsius. Rocha
believed the fluctuation was caused by the burnt condenser fan motor of the refrigerated container.
On November 9, 1995, Temic received the shipment. It found the cargo completely damaged. Temic filed a claim
for cargo loss against Netherlands Insurance, with supporting claims documents. The Netherlands Insurance
paid Temic the sum of ₱1,036,497.00 under the terms of the Marine Open Policy. Temic then executed a loss
and subrogation receipt in favor of Netherlands Insurance.
Seven months from delivery of the cargo or on June 4, 1996, Netherlands Insurance filed a complaint for
subrogation of insurance settlement with the Regional Trial Court, Branch 5, Manila, against "the unknown owner
of M/V Piya Bhum" and TMS Ship Agencies (TMS), the latter thought to be the local agent of M/V Piya Bhum’s
unknown owner.4 The complaint was docketed as Civil Case No. 96-78612.
Netherlands Insurance amended the complaint on January 17, 1997 to implead EDSA Shipping, RCL, Eagle
Liner Shipping Agencies, U-Freight Singapore, and U-Ocean (Phils.), Inc. (U-Ocean), as additional defendants. A
third amended complaint was later made, impleading Pacific Eagle in substitution of Eagle Liner Shipping
Agencies.
TMS filed its answer to the original complaint. RCL and EDSA Shipping filed their answers with cross-claim and
compulsory counterclaim to the second amended complaint. U-Ocean likewise filed an answer with compulsory
counterclaim and cross-claim. During the pendency of the case, U-Ocean, jointly with U-Freight Singapore, filed
another answer with compulsory counterclaim. Only Pacific Eagle and TMS filed their answers to the third
amended complaint.
The defendants all disclaimed liability for the damage caused to the cargo, citing several reasons why
Netherland Insurance’s claims must be rejected. Specifically, RCL and EDSA Shipping denied negligence in the
transport of the cargo; they attributed any negligence that may have caused the loss of the shipment to their co-
defendants. They likewise asserted that no valid subrogation exists, as the payment made by Netherlands
Insurance to the consignee was invalid. By way of affirmative defenses, RCL and EDSA Shipping averred that
the Netherlands Insurance has no cause of action, and is not the real party-in-interest, and that the claim is
barred by laches/prescription.
After Netherlands Insurance had made its formal offer of evidence, the defendants including RCL and EDSA
Shipping sought leave of court to file their respective motions to dismiss based on demurrer to evidence.
RCL and EDSA Shipping, in their motion, insisted that Netherlands Insurance had (1) failed to prove any valid
subrogation, and (2) failed to establish that any negligence on their part or that the loss was sustained while the
cargo was in their custody.
On May 22, 2002, the trial court handed down an Order dismissing Civil Case No. 96-78612 on demurrer to
evidence. The trial court ruled that while there was valid subrogation, the defendants could not be held liable for
the loss or damage, as their respective liabilities ended at the time of the discharge of the cargo from the ship at
the Port of Manila.
Netherlands Insurance seasonably appealed the order of dismissal to the CA.
On May 26, 2004, the CA disposed of the appeal as follows:
WHEREFORE, in view of the foregoing, the dismissal of the complaint against defendants Regional Container
Lines and Its local agent, EDSA Shipping Agency, is REVERSED and SET ASIDE. The dismissal of the
complaint against the other defendants is AFFIRMED. Pursuant to Section 1, Rule 33 of the 1997 Rules of Civil
Procedure, defendants Regional Container Lines and EDSA Shipping Agency are deemed to have waived the
right to present evidence.
As such, defendants Regional Container Lines and EDSA Shipping Agency are ordered to reimburse plaintiff in
the sum of ₱1,036,497.00 with interest from date hereof until fully paid.
No costs.
SO ORDERED. [Emphasis supplied.]
The CA dismissed Netherland Insurance’s complaint against the other defendants after finding that the claim had
already been barred by prescription.5
Having been found liable for the damage to the cargo, RCL and EDSA Shipping filed a motion for
reconsideration, but the CA maintained its original conclusions.
The sole issue for our resolution is whether the CA correctly held RCL and EDSA Shipping liable as common
carriers under the theory of presumption of negligence.
THE COURT’S RULING
The present case is governed by the following provisions of the Civil Code:
ART. 1733. Common carriers, from the nature of their business and for reasons of public policy, are bound to
observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported
by them according to all the circumstances of each case.
Such extraordinary diligence in the vigilance over the goods is further expressed in articles 1734, 1735, and
1745, Nos. 5, 6, and 7, while the extraordinary diligence for the safety of the passengers is further set forth in
articles1755 and 1756.
ART. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the
same is due to any of the following causes only:
1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
2) Act of the public enemy in war, whether international or civil;
3) Act of omission of the shipper or owner of the goods;
4) The character of the goods or defects in the packing or in the containers;
 5) Order or act of competent public authority.
ART. 1735. In all cases other that those mentioned in Nos. 1, 2, 3, 4 and 5 of the preceding article, if the goods
are lost, destroyed, or deteriorated, common carriers are presumed to have been at fault or to have acted
negligently, unless they prove that they observed extraordinary diligence as required by article 1733.
ART. 1736. The extraordinary responsibility of the common carrier lasts from the time the goods are
unconditionally placed in the possession of, and received by the carrier for transportation until the sane are
delivered, actually or constructively, by the carrier to the consignee, or to the person who has a right to receive
them, without prejudice to the provisions of articles 1738.
ART. 1738. The extraordinary liability of the common carrier continues to be operative even during the time the
goods are stored in a warehouse of the carrier at the place of destination, until the consignee has been advised
of the arrival of the goods and has had reasonable opportunity thereafter to remove them or otherwise dispose of
them.
ART. 1742. Even if the loss, destruction, or deterioration of the goods should be caused by the character of the
goods, or the faulty nature of the packing or of the containers, the common carrier must exercise due diligence to
forestall or lessen the loss.
In Central Shipping Company, Inc. v. Insurance Company of North America, 6 we reiterated the rules for the
liability of a common carrier for lost or damaged cargo as follows:
(1) Common carriers are bound to observe extraordinary diligence over the goods they transport,
according to all the circumstances of each case;
(2) In the event of loss, destruction, or deterioration of the insured goods, common carriers are
responsible, unless they can prove that such loss, destruction, or deterioration was brought about by,
among others, "flood, storm, earthquake, lightning, or other natural disaster or calamity"; and
(3) In all other cases not specified under Article 1734 of the Civil Code, common carriers are presumed
to have been at fault or to have acted negligently, unless they observed extraordinary diligence. 7
In the present case, RCL and EDSA Shipping disclaim any responsibility for the loss or damage to the goods in
question. They contend that the cause of the damage to the cargo was the "fluctuation of the temperature in the
reefer van," which fluctuation occurred after the cargo had already been discharged from the vessel; no
fluctuation, they point out, arose when the cargo was still on board M/V Piya Bhum. As the cause of the damage
to the cargo occurred after the same was already discharged from the vessel and was under the custody of the
arrastre operator (International Container Terminal Services, Inc. or ICTSI), RCL and EDSA Shipping posit that
the presumption of negligence provided in Article 1735 of the Civil Code should not apply. What applies in this
case is Article 1734, particularly paragraphs 3 and 4 thereof, which exempts the carrier from liability for loss or
damage to the cargo when it is caused either by an act or omission of the shipper or by the character of the
goods or defects in the packing or in the containers. Thus, RCL and EDSA Shipping seek to lay the blame at the
feet of other parties.
We do not find the arguments of RCL and EDSA Shipping meritorious.
A common carrier is presumed to have been negligent if it fails to prove that it exercised extraordinary vigilance
over the goods it transported. 8 When the goods shipped are either lost or arrived in damaged condition, a
presumption arises against the carrier of its failure to observe that diligence, and there need not be an express
finding of negligence to hold it liable.91avvphi1
To overcome the presumption of negligence, the common carrier must establish by adequate proof that it
exercised extraordinary diligence over the goods. It must do more than merely show that some other party could
be responsible for the damage.10
In the present case, RCL and EDSA Shipping failed to prove that they did exercise that degree of diligence
required by law over the goods they transported. Indeed, there is sufficient evidence showing that the fluctuation
of the temperature in the refrigerated container van, as recorded in the temperature chart, occurred after the
cargo had been discharged from the vessel and was already under the custody of the arrastre operator, ICTSI.
This evidence, however, does not disprove that the condenser fan – which caused the fluctuation of the
temperature in the refrigerated container – was not damaged while the cargo was being unloaded from the ship.
It is settled in maritime law jurisprudence that cargoes while being unloaded generally remain under the custody
of the carrier;11 RCL and EDSA Shipping failed to dispute this.1avvphi1
RCL and EDSA Shipping could have offered evidence before the trial court to show that the damage to the
condenser fan did not occur: (1) while the cargo was in transit; (2) while they were in the act of discharging it
from the vessel; or (3) while they were delivering it actually or constructively to the consignee. They could have
presented proof to show that they exercised extraordinary care and diligence in the handling of the goods, but
they opted to file a demurrer to evidence. As the order granting their demurrer was reversed on appeal, the CA
correctly ruled that they are deemed to have waived their right to present evidence, 12 and the presumption of
negligence must stand.
It is for this reason as well that we find RCL and EDSA Shipping’s claim that the loss or damage to the cargo was
caused by a defect in the packing or in the containers. To exculpate itself from liability for the loss/damage to the
cargo under any of the causes, the common carrier is burdened to prove any of the causes in Article 1734 of the
Civil Code claimed by it by a preponderance of evidence. If the carrier succeeds, the burden of evidence is
shifted to the shipper to prove that the carrier is negligent. 13 RCL and EDSA Shipping, however, failed to satisfy
this standard of evidence and in fact offered no evidence at all on this point; a reversal of a dismissal based on a
demurrer to evidence bars the defendant from presenting evidence supporting its allegations.
WHEREFORE, we DENY the petition for review on certiorari filed by the Regional Container Lines of Singapore
and EDSA Shipping Agency. The decision of the Court of Appeals dated May 26, 2004 in CA-G.R. CV No. 76690
is AFFIRMED IN TOTO. Costs against the petitioners.
SO ORDERED.
APPLICATION OF WARSAW CONVENTION

G.R. No. 92501 March 6, 1992

PHILIPPINE AIR LINES, petitioner,
vs.
HON. COURT OF APPEALS and ISIDRO CO, respondents.
 
GRIÑO-AQUINO, J.:
This is a petition for review of the decision dated July 19, 1989 of the Court of Appeals affirming the decision of
the Regional Trial Court of Pasay City which awarded P72,766.02 as damages and attorney's fees to private
respondent Isidro Co for the loss of his checked-in baggage as a passenger of petitioner airline.
The findings of the trial court, which were adopted by the appellate court, are:
"At about 5:30 a.m. on April 17, 1985, plaintiff [Co], accompanied by his wife and son, arrived at
the Manila International Airport aboard defendant airline's PAL Flight No. 107 from San
Francisco, California, U.S.A. Soon after his embarking (sic), plaintiff proceeded to the baggage
retrieval area to claim his checks in his possession. Plaintiff found eight of his luggage, but
despite diligent search, he failed to locate ninth luggage, with claim check number 729113 which
is the one in question in this case.
"Plaintiff then immediately notified defendant company through its employee, Willy Guevarra,
who was then in charge of the PAL claim counter at the airport. Willy Guevarra, who testified
during the trial court on April 11, 1986, filled up the printed form known as a Property Irregularity
Report (Exh. "A"), acknowledging one of the plaintiff's luggages to be missing (Exh. "A-1"), and
signed after asking plaintiff himself to sign the same document (Exh. "A-2"). In accordance with
this procedure in cases of this nature, Willy Guevarra asked plaintiff to surrender to him the nine
claim checks corresponding to the nine luggages, i.e., including the one that was missing.
The incontestable evidence further shows that plaintiff lost luggage was a Samsonite suitcase
measuring about 62 inches in length, worth about US$200.00 and containing various personal
effects purchased by plaintiff and his wife during their stay in the United States and similar other
items sent by their friends abroad to be given as presents to relatives in the Philippines.
Plaintiff's invoices evidencing their purchases show their missing personal effects to be worth
US$1,243.01, in addition to the presents entrusted to them by their friends which plaintiffs
testified to be worth about US$500.00 to US$600.00 (Exhs. "D", "D-1", to "D-17"; tsn, p. 4, July
11, 1985; pp. 5-14, March 7, 1986).
Plaintiff on several occasions unrelentingly called at defendant's office in order to pursue his
complaint about his missing luggage but no avail. Thus, on April 15, 1985, plaintiff through his
lawyer wrote a demand letter to defendant company though Rebecca V. Santos, its manager,
Central Baggage Services (Exhs. "B" & "B-1"). On April 17, 1985, Rebecca Santos replied to the
demand letter (Exh. "B") acknowledging "that to date we have been unable to locate your client's
(plaintiff's) baggage despite our careful search" and requesting plaintiff's counsel to "please
extend to him our sincere apologies for the inconvenience he was caused by this unfortunate
incident" (Exh. "C"). Despite the letter (Exh. "C"), however, defendants never found plaintiff's
missing luggage or paid its corresponding value. Consequently, on May 3, 1985, plaintiff filed his
present complaint against said defendants. (pp. 38-40, Rollo.)
Co sued the airline for damages. The Regional Trial Court of Pasay City found the defendant airline (now
petitioner) liable, and rendered judgment on June 3, 1986, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered sentencing defendant Philippine Airlines, Inc. to
pay plaintiff Isidro Co:
1) P42,766.02 by way of actual damages;
2) P20,000.00 by way of exemplary damages;
3) P10,000.00 as attorney's fees;
all in addition to the costs of the suit.
 "Defendants' counterclaim is hereby dismissed for lack of merit."
(p. 40, Rollo.)
On appeal, the Court of Appeals affirmed in toto the trial court's award.
In his petition for review of the Court of Appeal's decision, petitioner alleges that the appellate court erred:
1. in affirming the conclusion of the trial court that the petitioner's retrieval baggage report was a
fabrication;
2. in not applying the limit of liability under the Warsaw Convention which limits the liability of an
air carrier of loss, delay or damage to checked-in baggage to US$20.00 based on weight; and
3. in awarding private respondent Isidro Co actual and exemplary damages, attorney's fees, and
costs.
The first and third assignments of error raise purely factual issues which are not reviewable by this Court (Sec. 2,
Rule 45, Rules of Court). The Court reviews only questions of law which must be distinctly set forth in the
petition. (Hodges vs. People, 68 Phil. 178.) The probative value of petitioner's retrieval report was passed upon
by the Regional Trial Court of Pasay City, whose finding was affirmed by the Court of Appeals as follows:
In this respect, it is further argued that appellee should produce his claim tag if he had not
surrendered it because there was no baggage received. It appeared, however, that appellee
surrendered all the nine claim checks corresponding to the nine luggages, including the one that
was missing, to the PAL officer after accomplishing the Property, Irregularity Report. Therefore, it
could not be possible for appellee to produce the same in court. It is now for appellant airlines to
produce the veracity of their Baggage Retrieval Report by corroborating evidence other than
testimonies of their employees. Such document is within the control of appellant and necessarily
requires other corroborative evidence. Since there is no compelling reason to reverse the factual
findings of the lower court, this Court resolves not to disturb the same. (p. 41, Rollo.)
Whether or not the lost luggage was ever retrieved by the passenger, and whether or not the actual and
exemplary damages awarded by the court to him are reasonable, are factual issues which we may not pass
upon in the absence of special circumstances requiring a review of the evidence.
In Alitalia vs. IAC (192 SCRA 9, 18, citing Pan American World Airways, Inc. vs. IAC 164 SCRA 268), the
Warsaw Convention limiting the carrier's liability was applied because of a simple loss of baggage without any
improper conduct on the part of the officials or employees of the airline, or other special injury sustained by the
passengers. The petitioner therein did not declare a higher value for his luggage, much less did he pay an
additional transportation charge.
Petitioner contends that under the Warsaw Convention, its liability, if any, cannot exceed US $20.00 based on
weight as private respondent Co did not declare the contents of his baggage nor pay traditional charges before
the flight (p. 3, tsn, July 18, 1985).
We find no merit in that contention. In Samar Mining Company, Inc. vs. Nordeutscher Lloyd (132 SCRA 529), this
Court ruled:
The liability of the common carrier for the loss, destruction or deterioration of goods transported
from a foreign country to the Philippines is governed primarily by the New Civil Code. In all
matters not regulated by said Code, the rights and obligations of common carriers shall be
governed by the Code of Commerce and by Special Laws.
The provisions of the New Civil Code on common carriers are Articles 1733, 1735 and 1753 which provide:
Art. 1733. Common carriers, from the nature of their business and for reasons of public policy,
are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of
the passengers transported by them, according to all the circumstances of each case.
Art. 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4 and 5 of the preceding article
if the goods are lost, destroyed or deteriorated, common carriers are presumed to have been at
fault or to have acted negligently, unless they prove that they observed extraordinary diligence
as required in article 1733.
Art. 1753. The law of the country to which the goods are to be transported shall govern the
liability of the common carrier for their loss, destruction or deterioration.
Since the passenger's destination in this case was the Philippines, Philippine law governs the liability of the
carrier for the loss of the passenger's luggage.
In this case, the petitioner failed to overcome, not only the presumption, but more importantly, the private
respondent's evidence, proving that the carrier's negligence was the proximate cause of the loss of his baggage.
Furthermore, petitioner acted in bad faith in faking a retrieval receipt to bail itself out of having to pay Co's claim.
The Court of Appeals therefore did not err in disregarding the limits of liability under the Warsaw Convention.
The award of exemplary damages and attorney's fees to the private respondent was justified. In the cases of
Imperial Insurance, Inc. vs. Simon, 122 Phil. 189 and Bert Osmeña and Associates vs. CA, 120 SCRA 396, the
appellant was awarded attorney's fees because of appellee's failure to satisfy the former's just and valid
demandable claim which forced the appellant to litigate. Likewise, in the case of Phil. Surety Ins. Co., Inc. vs.
Royal Oil Products, 102 Phil. 326, this Court justified the grant of exemplary damages and attorney's fees to the
petitioner's failure, even refusal, to pay the private respondent's valid claim.
WHEREFORE, the petition for review is DENIED for lack of merit. Costs against the petitioner.
SO ORDERED.
[G.R. No. L-44936. September 25, 1992.]

PHILIPPINE AIRLINES, INC., Petitioner, v. THE COURT OF APPEALS and CHUA MIN, Respondents.

Siguion Reyna, Montecillo and Ongsiako for Petitioner.

Plaridel C. Jose for Private Respondent.

DECISION

MELO, J.:

On December 10, 1974, the Honorable Francisco de la Rosa, at that time Presiding Judge of Branch 7 of the
then Court of First Instance of Rizal of the Seventh Judicial District stationed in Pasay City, adjudged the
accountability of herein petitioner as defendant in a suit for a sum of money in this
manner:jgc:chanrobles.com.ph

"WHEREFORE, judgment is hereby rendered in favor of Plaintiff:chanrob1es virtual 1aw library

(a) Ordering Defendant to pay Plaintiff the amount in Philippine Pesos equivalent to U.S.$4,000.00 at the rate of
exchange obtaining in March, 1972, with legal interest from the filing of this suit until fully paid;

(b) Ordering Defendant to pay the costs; and

(c) Dismissing Defendants’ Compulsory Counterclaim." (p. 70, Record on Appeal).

The foregoing conclusion was formulated by the court of origin on the basis of the following facts: chanrob1es
virtual 1aw library

On April 4, 1972, private respondent boarded herein petitioner’s Flight PR 301 from Hongkong to Manila and
checked in four (4) pieces of baggage. When the plane landed in Manila, private respondent was not able to
locate the two pieces of baggage containing cinematographic films despite diligent search therefor. Private
respondent made the claim for such loss to petitioner which admitted the loss and offered to compensate private
respondent (Annex "3", Answer; page 17, Record on Appeal; page 64, Rollo).

Instead of accepting the offer, private respondent opted to file the case below to principally recover the value of
the lost items which he estimated to be worth P20,000.00 (paragraph 7, Complaint; page 3, Record on Appeal).
Herein petitioner responded by asserting that:chanrobles virtualawlibrary chanrobles.com:chanrobles.com.ph

"(4) Plaintiff has no cause of action against defendant.

(5) On 4 April 1972, plaintiff was a passenger, economy class on defendant’s Flight No. PR 301/4 April 1972,
from Hongkong to Manila, under Passenger Ticket No. 2974-231418. As such passenger, plaintiff checked-in
four (4) pieces of baggage, with a total weight of only twenty (20) kilos, inclusive of their contents such that it
would be physically impossible for the two alleged lost pieces, to have in themselves an aggregate weight of
twenty-five (25) kilos.

(6) As such passenger the contractual relationship between plaintiff and defendant is wholly governed by the
terms, conditions and stipulations which are clearly printed on plaintiff’s Passenger Ticket No. 2974-231418.
Among the stipulations embodied in said ticket is a provision granting plaintiff a free baggage allowance of
twenty (20) kilos. A copy of this provision, as embodied in plaintiff’s ticket is attached hereto as Annex "1" and
made part hereof.

(7) In accordance with and in pursuant of this free baggage allowance Annex "1") plaintiff checked-in his four (4)
pieces of baggage on Flight No. PR301/4 April 1972, for which he was issued corresponding baggage checks
among them baggage checks Nos. PR 24-89-61 and PR 24-89-76, covering plaintiff’s two alleged lost pieces of
baggage.

(8) Under Passenger Ticket No. 2974-231-418, which is the contract of carriage between plaintiff and defendant,
it is an express condition of the contract that the same shall be ‘subject to the rules and limitations relating to
liability established by the Warsaw Convention.’ A xerox copy of page 2 of plaintiff’s Passenger Ticket No. 2974-
231418 which contains the aforesaid condition is hereto attached as Annex "2" and made part hereof.

(9) Under applicable rules and regulations of the Warsaw Convention on International Carriage by Air (as
amended by the Hague Protocol of 1955), which is the convention referred to in Annex "2" hereof, defendant’s
liability for plaintiff’s two (2) alleged lost pieces of baggage is limited to a maximum of US$6.50 per kilogram.

(10) The total weight of plaintiff’s four (4) pieces of checked-in baggage, inclusive of their contents, was only
twenty (20) kilograms, such that each baggage would have an average weight of five (5) kilograms, and the two
alleged lost pieces, an average total weight of only ten (10) kilograms. Accordingly, defendant’s maximum liability
to plaintiff is US$165.00, or its equivalent in Philippine currency." (pp. 6-8, Record on Appeal)

After issues were joined, then plaintiff, now private respondent Chua Min testified and presented four documents
(p. 57, Record on Appeal) while petitioner did not call any witness and merely adopted three exhibits of herein
private respondent (p. 58, Record on Appeal).chanrobles.com : virtual law library

Petitioner attempted to challenge private respondent’s personality to file the suit on the ground that the film rolls
belonged to the Hongkong firm of "Loong Kee Pen Co., Film Exchange Dept.", apart from the vacillating
testimony spewed by Chua Min on the witness stand which supposedly suggests that he has no right to seek
restitution for the lost films, including the damages resulting therefrom. On the merits of private respondent’s
plea for relief, petitioner tried to call the attention of the trial judge to the herein below quoted provisions of the
Warsaw Convention which limit the liability of petitioner as an air carrier to 250 francs per kilogram,
thus:jgc:chanrobles.com.ph

"ARTICLE 3 (1). For the transportation of passengers the carrier must deliver a passenger ticket which shall
contain the following particulars:chanrob1es virtual 1aw library

(a) . . .

(b) . . .

(c) . . .

(d) . . .

(e) A statement that the transportation is subject to the rules relating to liability established by this
convention."cralaw virtua1aw library

"ARTICLE 22 (2). In the transportation of checked baggage and of goods, the liability of the carrier shall be
limited to a sum of 250 francs per kilogram, unless the consignor has made, at the time when the package was
handed over to the carrier, a special declaration of the value at delivery 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 the sum is greater than the actual value to the consignor at delivery." cralaw virtua1aw library

In resolving the issue of private respondent’s legal standing to sue, the trial court expressed the view that he can
be considered as if he were the owner on account of his responsibility for any eventuality that may occur to the
film rolls. Verily, private respondent was considered to be a consignee of the lost goods since he accompanied
the films aboard petitioner’s plane who is presumed to have accepted the contract of carriage between the
consignor and petitioner when he later demanded the delivery to him of the movie films (p. 63, Record on
Appeal).

Anent the aspect of liability, the trial court opined that since petitioner did not introduce a single piece of
document and merely adopted private respondent’s exhibits, it may not invoke the limitation of its liability with
respect to ‘checked baggage’ under the provisions of the Warsaw Convention. The apathy of petitioner seems to
have extended its impact on the outcome of the case when the trial court ruled that the films were worth
$4,000.00 based on private respondent’s Exhibit "A" which, as aforesaid, was nonchalantly adopted by petitioner
as its Exhibit "1" (p. 69, Record on Appeal).chanroblesvirtualawlibrary

Realizing the vacuum insofar as the evidence is concerned, petitioner tried to fill the hiatus by starting with the
proposition in its motion for reconsideration that the ticket under which private respondent was a passenger on
petitioner’s plane was a passenger ticket and baggage check at the same time. This tactic was resorted to in
order to establish the conclusion that petitioner could not have produced the same since the ticket is usually
retained by the passenger. Petitioner continued to asseverate that Article 4 paragraph 4 of the Warsaw
Convention which reads:jgc:chanrobles.com.ph

"(4) The absence, irregularity, or loss of the baggage checks shall not affect the existence or the validity of the
contract of transportation which shall nonetheless be subject to the rules of this convention. Nevertheless, if the
carrier accepts baggage without a baggage check having been delivered, or if the baggage check does not
contain the particulars set out at (d), (f), and (h) above, the carrier shall not be entitled to avail himself of those
provisions of the convention which exclude or limit his liability." (p. 66, Record on Appeal; p. 23, Motion for
Reconsideration, p. 65, Rollo)

upon which provision the trial court allegedly relied in rejecting petitioner’s contention, is in fact applicable
judging from what is explicitly stated under the first sentence of the proviso. These ideas, however, did not
persuade the trial judge to reconsider his findings of accountability on the part of petitioner (p. 111, Record on
Appeal).

The appeal interposed therefrom to the Court of Appeals was likewise rebuffed on September 17, 1976 by the
Fifth Division (Fernandez (ponente), Serrano, Batacan, JJ.,) which sustained the observations and dispositions
reached by the trial court on the same grounds, except that the sum of $4,000.00 was directed to be paid by
petitioner in Philippine Currency, at the exchange rate obtaining on the date the amount is actually paid to herein
private respondent (pp. 43-44, Rollo). Petitioner’s subsequent recourse to secure re-evaluation of the judgment
did not merit the nod of approval of the respondent Court of Appeals (p. 56, Rollo).

Thereupon, petitioner elevated to Us the matter of its liability under the contract of carriage via the instant
petition for review on certiorari, asking this Court:chanrob1es virtual 1aw library

"I

WHETHER OR NOT PETITIONER CAN AVAIL OF THE LIMITATIONS ON LIABILITY UNDER THE WARSAW
CONVENTION.

II

WHETHER OR NOT RESPONDENT IS THE REAL PARTY-IN-INTEREST TO ASSERT THE CLAIM FOR
COMPENSATION IN THIS CASE."cralaw virtua1aw library

Before discussing the intrinsic worth of petitioner’s discourse, We shall address the issue of private respondent’s
personality to seek redress for the loss of the films. We believe, and so hold, that Chua Min is no stranger to the
cause of action instituted at the court of origin in spite of the message conveyed by him when he sat on the
witness stand which seems to lead to the opposite conclusion, thus:chanrobles lawlibrary : rednad

"ATTY. LAURETA:chanrob1es virtual 1aw library

Q. Mr. Chua Min, may I invite your attention to Exhibit A, particularly the entry which reads: ‘To De Mil Theatrical
Corporation.’ This is the corporation which bought supposedly the motion picture films listed in this invoice?

WITNESS:chanrob1es virtual 1aw library

A. It was not bought by the company, sir. It was only entrusted by Loong kee Pen to be distributed here in the
Philippines.

ATTY. LAURETA:chanrob1es virtual 1aw library

Q. So that the films listed here (Exhibit ‘A’ for plaintiff) is owned by Loong Kee Pen Company of Hongkong?

WITNESS:chanrob1es virtual 1aw library

A. Yes sir, and it was only entrusted to De Mil Theatrical Corporation.

Q. This De Mil Theatrical Corporation, is this an existing corporation?

A. Yes, sir.

Q. Now, these films listed herein which numbers 5 in all are still owned by the supplier, Loong Kee Pen Company
of Hongkong. Do I understand then that those films which were supposedly lost were not paid for by De Mil
Theatrical Corporation?

A. It was not paid, sir. It was authorized to be the distributor but we take responsibility of all losses, of everything.

Q. Now, when your made reference to ‘we’, you refer actually to the De Mil Theatrical Corporation?

A. Yes, sir.

Q. Do I understand, therefore, that you, De Mil Theatrical Corporation, has already paid for the films in cartoons
No. 3, 4 and 5, as specified in the invoice?

A. It’s not yet paid, sir. (pp. 73-75, Record on Appeal)

since what is important, per his narration, is that he assume the loss while these films are in his custody and that
he is accountable either to Loong Kee Pen Company or to the De Mil Theatrical Corporation should he fail to
produce the films upon demand. On the hypothetical scenario, had the judgment of the trial court been adverse
in the sense that the complaint was ordered dismissed, the pecuniary burden for the loss will certainly fall on
private respondent’s shoulders, which obligation, it is needless to stress, will constitute a material and substantial
injury to him. Withal, another pivotal factor to consider is the letter from petitioner on August 28, 1972 addressed
to herein private respondent that says:jgc:chanrobles.com.ph

"We are an receipt of your claim for loss of baggage in connection with your travel to Manila from Hongkong on
our Flight. We sincerely regret that this loss occurred and that despite a careful search we have been
unsuccessful in recovering your property. We feel we should settle your claim without further delay.

We wish we could compensate you for the total amount of your loss. However, existing rules and regulations
established pursuant to the Warsaw Convention on International Carriage by Air (as amended by the Hague
Protocol) limit our liability for losses of this nature to the sum of US$16.50 for every kilogram of checked-in
baggage. The weight of your 4 pieces of baggage inclusive of its contents as stated in the Property Irregularity
Report (PIR) and your ticket shows a total weight of 20 kilos. Based thereon, the average weight of 2 pieces of
your lost baggage would come out to 10 kilos. Therefore, our maximum liability for the 2 pieces should be for a
total amount of US$165.00 (10 kilos x US$16.50).

Upon receipt of your advise, we shall have payment remitted in your favor." (pp. 17-18, Record on Appeal)

which seems to be at least a failure to object to, if not an admission of, the personality of private respondent to
initiate the suit below. The assurance made by petitioner that it will compensate private respondent’s loss is a
sufficient admission that indeed, private respondent has the right to avail himself of the suit for the sum of
money.

It follows, therefore, that whatever testimony may have been extracted through cross-examination from Chua
Min, is of no legal bearing to what was expressly conceded previously by petitioner. Otherwise, We will in effect
take the cudgels for petitioner and in the process, permit it to extricate itself from the fatal aftermath of an
admission as a tenet under substantive law. Of course, the plea of avoidance raised by petitioner along this line
is akin to lack of cause of action which may be utilized even for the first time on appeal (Section 1 (g), Rule 16;
Section 2, Rule 9, Revised Rules of Court), but the adjective norm permitting such a belated defense under
Section 2, Rule 9 of the Revised Rules of Court does not totally rule out the application of other legal doctrines
under substantive law, like estoppel, to the elastic undertones of petitioner.

Now, as to whether petitioner may utilize the provision under Article 22(2) of the Warsaw Convention which limits
the liability of a common carrier for loss of baggage, We have to consider other salient features thereof such as
Article 4, paragraph 1 that reads:cralawnad

"For the transportation of baggage, other than small personal objects of which the passenger takes charge
himself, the carrier must deliver a baggage check."cralaw virtua1aw library

and the explicit wordings of Article 4, paragraph 4 of the same Convention that:jgc:chanrobles.com.ph

"The absence, irregularity, or loss of the baggage checks shall not affect the existence or the validity of the
contract of transportation which shall nonetheless be subject to the rules of this Convention. Nevertheless, if the
carrier accepts baggage without a baggage check having been delivered, or if the baggage check does not
contain the particulars set out at (d), (f), and (h) above, the carrier shall not be entitled to avail himself of those
provisions of the Convention which exclude or limit his liability."cralaw virtua1aw library

because these axioms will spell the difference between success and failure of the petition at bar.

It may be recalled that petitioner made a categorical distinction between a passenger ticket and a baggage
check when petitioner responded to the complaint for a sum of money (paragraphs 7 and 8, Answers; pp. 6-8,
Record on Appeal; p. 2, supra). In its motion for reconsideration before the court a quo, petitioner had a sudden
change of heart by asserting that the passenger ticket and the baggage check are one and the same thing (p.
81, Record on appeal). On a later occasion, it stressed that the ‘baggage tags’ were erroneously labeled as
‘baggage checks’ under paragraph 7 of its Answer to the Complaint (p. 3, Reply Brief for the Petitioner; p. 97,
Rollo). But the question of semantics on whether the passenger ticket, the baggage check, and the tag refer to
the same object is undoubtedly without legal significance and will not obliterate the fact that the baggage check
was not presented by petitioner in the trial court inasmuch as it merely relied on, and adopted private
respondent’s exhibits, none of which was offered for the purpose of proving the missing link, so to speak (pp. 57-
58, Record on Appeal). To rectify these lapses, petitioner argued that it is not in a position to introduce the
baggage check in evidence since private respondent as passenger, is the one who retains possession thereof.
Yet, such pretense does not sit well with what is expected of petitioner as an air carrier under Article 4 (2),
Section II of the Warsaw Convention that:jgc:chanrobles.com.ph

"The baggage check shall be made out in duplicate, one part for the passenger and the other part for the
carrier."cralaw virtua1aw library

Consequently, petitioner can not capitalize on the limited liability clause under Article 22 (2) of the Warsaw
Convention because of the unequivocal condition set forth under the second sentence of Article 4, paragraph 4
that:chanrobles.com:cralaw:red

". . . if the carrier accepts baggage without a baggage check having been delivered, a if the baggage check does
not contain the particulars set out at (d), (f), and (h) above, the carrier shall not be entitled to avail himself of
those provisions of the Convention which exclude or limit his liability."cralaw virtua1aw library

Petitioner contends that it is covered by the first and not by the second sentence of Article 4, paragraph 4 (page
8, supra). But the argument as proferred, requires Us to read something which is not so stated between the lines
for the first sentence speaks only of the "existence" or the "validity" of the contract of transportation while the
query on "liability" is particularly and directly resolved by the second sentence. To be sure, and even assuming in
gratia argumenti that an inconsistency exists, the first sentence must be construed as the general proposition
governing the existence or validity of the contract of transportation which must yield to the particular rule under
the second sentence regarding liability. Furthermore, even if We consider the two sentences as particular in
nature, the rule has been laid down that the clause which comes later shall be given effect upon the presumption
that it expresses the dominant purpose of the instrument (Graham Paper Co. v. National Newspapers Asso. (Mo.
App.) 193 S.W. 1003; Barnett v. Merchants’ L. Ins. Co., 87 Okl. 42).
WHEREFORE, the petition for review is hereby DISMISSED for lack of merit.

SO ORDERED.
G.R. No. 60673 May 19, 1992
PAN AMERICAN WORLD AIRWAYS, INC., petitioner,
vs.
JOSE K. RAPADAS and THE COURT OF APPEALS, respondents.
Froilan P. Pobre for private respondent.

GUTIERREZ, JR., J.:

This is a petition for review assailing the decision of the respondent Court of Appeals which affirmed in toto the
trial court decision on the liability of petitioner Pan American World Airways for damages due to private
respondent. The trial court ruled that the petitioner can not avail of a limitation of liabilities for lost baggages of a
passenger. The dispositive portion of the trial court decision reads:
WHEREFORE, in view of the foregoing considerations, judgment is hereby rendered ordering
defendant to pay plaintiff by way of actual damages the equivalent peso value of the amount of
$5,228.90 and 100 paengs, nominal damages in the amount of P20,000.00 and attorney's fees
of P5,000.00, and the costs of the suit. Defendant's counterclaim is dismissed. (Rollo, p. 13)
On January 16, 1975, private respondent Jose K. Rapadas held Passenger Ticket and Baggage Claim Check
No. 026-394830084-5 for petitioner's Flight No. 841 with the route from Guam to Manila. While standing in line to
board the flight at the Guam airport, Rapadas was ordered by petitioner's handcarry control agent to check-in his
Samsonite attache case. Rapadas protested pointing to the fact that other co-passengers were permitted to
handcarry bulkier baggages. He stepped out of the line only to go back again at the end of it to try if he can get
through without having to register his attache case. However, the same man in charge of handcarry control did
not fail to notice him and ordered him again to register his baggage. For fear that he would miss the plane if he
insisted and argued on personally taking the valise with him, he acceded to checking it in. He then gave his
attache case to his brother who happened to be around and who checked it in for him, but without declaring its
contents or the value of its contents. He was given a Baggage Claim Tag No. P-749-713. (Exhibit "B" for the
plaintiff-respondent)
Upon arriving in Manila on the same date, January 16, 1975, Rapadas claimed and was given all his checked-in
baggages except the attache case. Since Rapadas felt ill on his arrival, he sent his son, Jorge Rapadas to
request for the search of the missing luggage. The petitioner exerted efforts to locate the luggage through the
Pan American World Airways-Manila International Airport (PAN AM-MIA) Baggage Service.
On January 30, 1975, the petitioner required the private respondent to put the request in writing. The respondent
filled in a Baggage Claim Blank Form. Thereafter, Rapadas personally followed up his claim. For several times,
he called up Mr. Panuelos, the head of the Baggage Section of PAN AM. He also sent letters demanding and
reminding the petitioner of his claim.
Rapadas received a letter from the petitioner's counsel dated August 2, 1975 offering to settle the claim for the
sum of one hundred sixty dollars ($160.00) representing the petitioner's alleged limit of liability for loss or
damage to a passenger's personal property under the contract of carriage between Rapadas and PAN AM.
Refusing to accept this kind of settlement, Rapadas filed the instant action for damages on October 1, 1975.
Rapadas alleged that PAN AM discriminated or singled him out in ordering that his luggage be checked in. He
also alleged that PAN AM neglected its duty in the handling and safekeeping of his attache case from the point of
embarkation in Guam to his destination in Manila. He placed the value of the lost attache case and its contents
at US$42,403.90. According to him, the loss resulted in his failure to pay certain monetary obligations, failure to
remit money sent through him to relatives, inability to enjoy the fruits of his retirement and vacation pay earned
from working in Tonga Construction Company (he retired in August 1974) and inability to return to Tonga to
comply with then existing contracts.
In its answer, petitioner-defendant PAN AM acknowledged responsibility for the loss of the attache case but
asserted that the claim was subject to the "Notice of Baggage Liability Limitations" allegedly attached to and
forming part of the passenger ticket. The petitioner argued that the same notice was also conspicuously posted
in its offices for the guidance of the passengers.
At the trial, private respondent showed proof of his retirement award and vacation pay amounting to $4,750.00.
He claimed that the attache case also contained other money consisting of $1,400 allegedly given to him by his
son, Jaime, as a round trip fare of his (plaintiff-respondent) wife, but which amount was later found to be actually
intended by Jaime as payment for arrears of a lot purchased from Tropical Homes, Inc.; $3,000 allegedly given
by his brothers for payment of taxes and for constructing improvements on the Rapadas estates; and $300.00
birthday present of the spouses Mr. and Mrs. Ruben Canonizado to plaintiff-respondent's wife. He also claimed
having kept several items in the attache case, namely –– (1) contracts and records of employment, letters of
commendation, testimonials and newspaper clippings on his achievement for 13 years in Tonga, New Zealand
and Australia, drafts of manuscripts, photographs and drivers license alleged to be worth $20,000.00; a Polaroid
camera, films, calculator, and other personal items worth $403.90; memorabilia, autographs personally acquired
from Charles Lindberg, Lawrence Rockefeller and Ryoichi Sasakawa, a commemorative palladium coin worth
Tongan 100 paengs and unused Tongan stamps, all totalling $7,500.00; and a plan worth $5,000.00 drawn by
his son Jaime, who is an architect, for the construction of a residential house and a 6-story commercial building.
Rapadas claimed the amount of the attache case itself to be $25.50. (See Decision in Civil Case No. 99564 in
Amended Record on Appeal, pp. 61-85)
The lower court ruled in favor of complainant Rapadas after finding no stipulation giving notice to the baggage
liability limitation. The court rejected the claim of defendant PANAM that its liability under the terms of the
passenger ticket is only up to $160.00. However, it scrutinized all the claims of the plaintiff. It discredited
insufficient evidence to show discriminatory acts or bad faith on the part of petitioner PANAM.
On appeal, the Court of Appeals affirmed the trial court decision. Hence, this petition.
The main issue raised in the case at bar is whether or not a passenger is bound by the terms of a passenger
ticket declaring that the limitations of liability set forth in the Warsaw Convention (October 12, 1929; 137 League
of Nations Treaty Series II; See Proclamation No. 201 [1955], 51 O.G. 4933 [October, 1955]) as amended by the
Hague Protocol (September 28, 1955; 478 UNTS 373; III PTS 515), shall apply in case of loss, damage or
destruction to a registered luggage of a passenger.
The petitioner maintains that its liability for the lost baggage of respondent Rapadas was limited to $160.00 since
the latter did not declare a higher value for his baggage and did not pay the corresponding additional charges.
The private respondent, on the other hand, insists that he is entitled to as much damages as those awarded by
the court and affirmed by the respondent appellate court.
After a review of the various arguments of the opposing parties as well as the records of the case, the Court
finds sufficient basis under the particular facts of this case for the availment of the liability limitations under the
Warsaw Convention.
There is no dispute, and the courts below admit, that there was such a Notice appearing on page two (2) of the
airline ticket stating that the Warsaw Convention governs in case of death or injury to a passenger or of loss,
damage or destruction to a passenger's luggage.
The Notice states:
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." (The latter notice refers to limited liability for death or personal injury to
passengers with proven damages not exceeding US $75,000 per passenger; Exhibit "K" for
plaintiff respondent, Table of Exhibits, p. 19)
Furthermore, paragraph 2 of the "Conditions of Contract" also appearing on page 2 of the ticket states:
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. (Exhibit "K", supra)
We note that plaintiff-respondent Rapadas presented as proof of the Passenger Ticket and Baggage Check No.
026-394830084-5 a xerox copy of its page 2 which contains the Notice and Conditions of Contract, and also
page 3 which recites the Advice to International Passengers on Limitation of Liability. He also presented two
xerox copies of Flight Coupon No. 3 of the same passenger ticket showing the fares paid for the trips Honolulu to
Guam, Guam to Manila, and Manila to Honolulu to prove his obligations which remained unpaid because of the
unexpected loss of money allegedly placed inside the missing attache case. Rapadas explained during the trial
that the same passenger ticket was returned by him to one Mr. S.L. Faupula of the Union Steam Ship Company
of New Zealand, Ltd., Tonga who demanded the payment of the fares or otherwise, the return of the unused
plane tickets (including the subject Passenger Ticket & Baggage Check No. 026-394830084-5). The issuance of
these tickets was facilitated by Mr. Faupula on credit.
Meanwhile, the petitioner offered as evidence Exhibit "1" also showing page 2 of the passenger ticket to prove
the notice and the conditions of the contract of carriage. It likewise offered Exhibit "1-A", a xerox copy of a
"Notice of Baggage Liability Limitations" which the trial court disregarded and held to be non-existent. The same
Exhibit "1-A" contained the following stipulations:
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 $8.16 per pound ($18.00 per kilo; now $20.00 per Exhibit "13") for
checked baggage and $360 (now $400 per Exhibit "13") per passenger for unchecked baggage;
(2) for travel wholly between U.S. points, to $500 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. (Table of Exhibits, p. 45)
The original of the Passenger Ticket and Baggage Check No. 026-394830084-5 itself was not presented as
evidence as it was among those returned to Mr. Faupula. Thus, apart from the evidence offered by the defendant
airline, the lower court had no other basis for determining whether or not there was actually a stipulation on the
specific amounts the petitioner had expressed itself to be liable for loss of baggage.
Although the trial court rejected the evidence of the defendant-petitioner of a stipulation particularly specifying
what amounts it had bound itself to pay for loss of luggage, the Notice and paragraph 2 of the "Conditions of
Contract" should be sufficient notice showing the applicability of the Warsaw limitations.
The Warsaw Convention, as amended, specifically provides that it is applicable to international carriage which it
defines in Article 1, par. 2 as follows:
(2) For the purposes of this Convention, the expression "international carriage" means any
carriage in which, according to the agreement between the parties, the place of departure and
the place of destination, whether or not there be a breach in the carriage or a transhipment, are
situated either within the territories of two High Contracting Parties or within the territory of a
single High Contracting Party if there is an agreed stopping place within the territory of another
State, even if that State is not a High Contracting Party. Carriage between two points within the
territory of a single High Contracting Party without an agreed stopping place within the territory of
another State is not international carriage for the purposes of this Convention. ("High Contracting
Party" refers to a state which has ratified or adhered to the Convention, or which has not
effectively denounced the Convention [Article 40A(l)]).
Nowhere in the Warsaw Convention, as amended, is such a detailed notice of baggage liability limitations
required. Nevertheless, it should become a common, safe and practical custom among air carriers to indicate
beforehand the precise sums equivalent to those fixed by Article 22 (2) of the Convention.
The Convention governs the availment of the liability limitations where the baggage check is combined with or
incorporated in the passenger ticket which complies with the provisions of Article 3, par. l (c). (Article 4, par. 2) In
the case at bar, the baggage check is combined with the passenger ticket in one document of carriage. The
passenger ticket complies with Article 3, par. l (c) which provides:
(l) In respect of the carriage of passengers a ticket shall be delivered containing:
(a) . . .
(b) . . .
(c) a notice to the effect that, 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 that 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.
We have held in the case of Ong Yiu v. Court of Appeals, supra, and reiterated in a similar case where herein
petitioner was also sued for damages, Pan American World Airways v. Intermediate Appellate Court (164 SCRA
268 [1988]) that:
 It (plane ticket) 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,
January 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 . . . (91 SCRA 223 at page 231)
We hasten to add that while contracts of adhesion are not entirely prohibited, neither is a blind reliance on them
encouraged. In the face of facts and circumstances showing they should be ignored because of their basically
one sided nature, the Court does not hesitate to rule out blind adherence to their terms. (See Sweet Lines, Inc. v.
Teves, 83 SCRA 361, 368-369[1978])
The arguments of the petitioner do not belie the fact that it was indeed accountable for the loss of the attache
case. What the petitioner is concerned about is whether or not the notice, which it did not fail to state in the plane
ticket and which it deemed to have been read and accepted by the private respondent will be considered by this
Court as adequate under the circumstances of this case. As earlier stated, the Court finds the provisions in the
plane ticket sufficient to govern the limitations of liabilities of the airline for loss of luggage. The passenger, upon
contracting with the airline and receiving the plane ticket, was expected to be vigilant insofar as his luggage is
concerned. If the passenger fails to adduce evidence to overcome the stipulations, he cannot avoid the
application of the liability limitations.
The facts show that the private respondent actually refused to register the attache case and chose to take it with
him despite having been ordered by the PANAM agent to check it in. In attempting to avoid registering the
luggage by going back to the line, private respondent manifested a disregard of airline rules on allowable
handcarried baggages. Prudence of a reasonably careful person also dictates that cash and jewelry should be
removed from checked-in-luggage and placed in one's pockets or in a handcarried Manila-paper or plastic
envelope.
The alleged lack of enough time for him to make a declaration of a higher value and to pay the corresponding
supplementary charges cannot justify his failure to comply with the requirement that will exclude the application
of limited liability. Had he not wavered in his decision to register his luggage, he could have had enough time to
disclose the true worth of the articles in it and to pay the extra charges or remove them from the checked-in-
luggage. Moreover, an airplane will not depart meantime that its own employee is asking a passenger to comply
with a safety regulation.
Passengers are also allowed one handcarried bag each provided it conforms to certain prescribed dimensions. If
Mr. Rapadas was not allowed to handcarry the lost attache case, it can only mean that he was carrying more
than the allowable weight for all his luggages or more than the allowable number of handcarried items or more
than the prescribed dimensions for the bag or valise. The evidence on any arbitrary behavior of a Pan Am
employee or inexcusable negligence on the part of the carrier is not clear from the petition. Absent such proof,
we cannot hold the carrier liable because of arbitrariness, discrimination, or mistreatment.
We are not by any means suggesting that passengers are always bound to the stipulated amounts printed on a
ticket, found in a contract of adhesion, or printed elsewhere but referred to in handouts or forms. We simply
recognize that the reasons behind stipulations on liability limitations arise from the difficulty, if not impossibility, of
establishing with a clear preponderance of evidence the contents of a lost valise or suitcase. Unless the contents
are declared, it will always be the word of a passenger against that of the airline. If the loss of life or property is
caused by the gross negligence or arbitrary acts of the airline or the contents of the lost luggage are proved by
satisfactory evidence other than the self-serving declarations of one party, the Court will not hesitate to disregard
the fine print in a contract of adhesion. (See Sweet Lines Inc. v. Teves, supra) Otherwise, we are constrained to
rule that we have to enforce the contract as it is the only reasonable basis to arrive at a just award.
We note that the finding on the amount lost is more of a probability than a proved conclusion.
The trial court stated:
xxx xxx xxx
 We come now to the actual loss of $4,750.00 which the plaintiff claims was the amount of his
retirement award and vacation pay. According to the plaintiff, this was in cash of $100
denominations and was placed in an envelope separate from the other money he was carrying.
Plaintiff presented the memorandum award, Exhibit T-1 and the vouchers of payment, Exhibits T-
2 and T-3. Under the circumstances, recited by the plaintiff in which the loss occurred, the Court
believes that plaintiff could really have placed this amount in the attache case considering that
he was originally handcarrying said attache case and the same was looked, and he did not
expect that he would be required to check it in. . . . (Amended Record on Appeal, p. 75;
Emphasis ours)
The above conclusion of the trial court does not arise from the facts. That the attache case was originally
handcarried does not beg the conclusion that the amount of $4,750.00 in cash could have been placed inside. It
may be noted that out of a claim for US$42,403.90 as the amount lost, the trial court found for only US$5,228.90
and 100 paengs. The court had doubts as to the total claim.
The lost luggage was declared as weighing around 18 pounds or approximately 8 kilograms. At $20.00 per
kilogram, the petitioner offered to pay $160.00 as a higher value was not declared in advance and additional
charges were not paid. We note, however, that an amount of $400.00 per passenger is allowed for unchecked
luggage. Since the checking-in was against the will of the respondent, we treat the lost bag as partaking of
involuntarily and hurriedly checked-in luggage and continuing its earlier status as unchecked luggage. The fair
liability under the petitioner's own printed terms is $400.00. Since the trial court ruled out discriminatory acts or
bad faith on the part of Pan Am or other reasons warranting damages, there is no factual basis for the grant of
P20,000.00 damages.
As to the question of whether or not private respondent should be paid attorney's fees, the Court sustains the
finding of the trial court and the respondent appellate court that it is just and equitable for the private respondent
to recover expenses for litigation in the amount of P5,000.00. Article 22(4) of the Warsaw Convention, as
amended does not preclude an award of attorney's fees. That provision states that the limits of liability
prescribed in the instrument "shall not prevent the court from awarding, in accordance with its own law, in
addition, the whole or part of the court costs and other expenses of litigation incurred by the plaintiff." We,
however, raise the award to P10,000.00 considering the resort to the Court of Appeals and this Court.
WHEREFORE, the petition is hereby GRANTED and the decision of the respondent Court of Appeals is
REVERSED and SET ASIDE. The petitioner is ordered to pay the private respondent damages in the amount of
US$400.00 or its equivalent in Philippine Currency at the time of actual payment, P10,000.00 in attorney's fees,
and costs of the suit.
SO ORDERED.
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.
I
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.
PROVISION IN THE BILL OF LADING LIMITING LIABILITY

G.R. No. 122494 October 8, 1998

EVERETT STEAMSHIP CORPORATION, petitioner,
vs.
COURT OF APPEALS and HERNANDEZ TRADING CO. INC., respondents.

MARTINEZ, J.:
Petitioner Everett Steamship Corporation, through this petition for review, seeks the reversal of the decision 1 of
the Court of Appeals, dated June 14, 1995, in CA-G.R. No. 428093, which affirmed the decision of the Regional
Trial Court of Kalookan City, Branch 126, in Civil Case No. C-15532, finding petitioner liable to private
respondent Hernandez Trading Co., Inc. for the value of the lost cargo.
Private respondent imported three crates of bus spare parts marked as MARCO C/No. 12, MARCO C/No. 13
and MARCO C/No. 14, from its supplier, Maruman Trading Company, Ltd. (Maruman Trading), a foreign
corporation based in Inazawa, Aichi, Japan. The crates were shipped from Nagoya, Japan to Manila on board
"ADELFAEVERETTE," a vessel owned by petitioner's principal, Everett Orient Lines. The said crates were
covered by Bill of Lading No. NGO53MN.
Upon arrival at the port of Manila, it was discovered that the crate marked MARCO C/No. 14 was missing. This
was confirmed and admitted by petitioner in its letter of January 13, 1992 addressed to private respondent,
which thereafter made a formal claim upon petitioner for the value of the lost cargo amounting to One Million
Five Hundred Fifty Two Thousand Five Hundred (Y1,552,500.00) Yen, the amount shown in an Invoice No.
MTM-941, dated November 14, 1991. However, petitioner offered to pay only One Hundred Thousand
(Y100,000.00) Yen, the maximum amount stipulated under Clause 18 of the covering bill of lading which limits
the liability of petitioner.
Private respondent rejected the offer and thereafter instituted a suit for collection docketed as Civil Case No. C-
15532, against petitioner before the Regional Trial Court of Caloocan City, Branch 126.
At the pre-trial conference, both parties manifested that they have no testimonial evidence to offer and agreed
instead to file their respective memoranda.
On July 16, 1993, the trial court rendered judgment 2 in favor of private respondent, ordering petitioner to pay:
(a) Y1,552,500.00; (b) Y20,000.00 or its peso equivalent representing the actual value of the lost cargo and the
material and packaging cost; (c) 10% of the total amount as an award for and as contingent attorney's fees; and
(d) to pay the cost of the suit. The trial court ruled:
Considering defendant's categorical admission of loss and its failure to overcome the
presumption of negligence and fault, the Court conclusively finds defendant liable to the plaintiff.
The next point of inquiry the Court wants to resolve is the extent of the liability of the defendant.
As stated earlier, plaintiff contends that defendant should be held liable for the whole value for
the loss of the goods in the amount of Y1,552,500.00 because the terms appearing at the back
of the bill of lading was so written in fine prints and that the same was not signed by plaintiff or
shipper thus, they are not bound by clause stated in paragraph 18 of the bill of lading. On the
other hand, defendant merely admitted that it lost the shipment but shall be liable only up to the
amount of Y100,000.00.
The Court subscribes to the provisions of Article 1750 of the New Civil Code —
Art. 1750. "A contract fixing the sum that may be recovered by the owner or
shipper for the loss, destruction or deterioration of the goods is valid, if it is
reasonable and just under the circumstances, and has been fairly and freely
agreed upon."
It is required, however, that the contract must be reasonable and just under the circumstances
and has been fairly and freely agreed upon. The requirements provided in Art. 1750 of the New
Civil Code must be complied with before a common carrier can claim a limitation of its pecuniary
liability in case of loss, destruction or deterioration of the goods it has undertaken to transport.
In the case at bar, the Court is of the view that the requirements of said article have not been
 met. The fact that those conditions are printed at the back of the bill of lading in letters so small
that they are hard to read would not warrant the presumption that the plaintiff or its supplier was
aware of these conditions such that he had "fairly and freely agreed" to these conditions. It can
not be said that the plaintiff had actually entered into a contract with the defendant, embodying
the conditions as printed at the back of the bill of lading that was issued by the defendant to
plaintiff.
On appeal, the Court of Appeals deleted the award of attorney's fees but affirmed the trial court's findings with
the additional observation that private respondent can not be bound by the terms and conditions of the bill of
lading because it was not privy to the contract of carriage. It said:
As to the amount of liability, no evidence appears on record to show that the appellee
(Hernandez Trading Co.) consented to the terms of the Bill of Lading. The shipper named in the
Bill of Lading is Maruman Trading Co., Ltd. whom the appellant (Everett Steamship Corp.)
contracted with for the transportation of the lost goods.
Even assuming arguendo that the shipper Maruman Trading Co., Ltd. accepted the terms of the
bill of lading when it delivered the cargo to the appellant, still it does not necessarily follow that
appellee Hernandez Trading, Company as consignee is bound thereby considering that the latter
was never privy to the shipping contract.
x x x           x x x          x x x
Never having entered into a contract with the appellant, appellee should therefore not be bound
by any of the terms and conditions in the bill of lading.
Hence, it follows that the appellee may recover the full value of the shipment lost, the basis of
which is not the breach of contract as appellee was never a privy to the any contract with the
appellant, but is based on Article 1735 of the New Civil Code, there being no evidence to prove
satisfactorily that the appellant has overcome the presumption of negligence provided for in the
law.
Petitioner now comes to us arguing that the Court of Appeals erred (1) in ruling that the consent of the consignee
to the terms and conditions of the bill of lading is necessary to make such stipulations binding upon it; (2) in
holding that the carrier's limited package liability as stipulated in the bill of lading does not apply in the instant
case; and (3) in allowing private respondent to fully recover the full alleged value of its lost cargo.
We shall first resolve the validity of the limited liability clause in the bill of lading.
A stipulation in the bill of lading limiting the common carrier's liability for loss or destruction of a cargo to a certain
sum, unless the shipper or owner declares a greater value, is sanctioned by law, particularly Articles 1749 and
1750 of the Civil Code which provide:
Art. 1749. A stipulation that the common carrier's liability is limited to the value of the goods
appearing in the bill of lading, unless the shipper or owner declares a greater value, is binding.
Art. 1750. A contract fixing the sum that may be recovered by the owner or shipper for the loss,
destruction, or deterioration of the goods is valid, if it is reasonable and just under the
circumstances, and has been freely and fairly agreed upon.
Such limited-liability clause has also been consistently upheld by this Court in a number of cases.3 Thus, in Sea
Land Service, Inc. vs. Intermediate Appellate Court 4, we ruled:
It seems clear that even if said section 4 (5) of the Carriage of Goods by Sea Act did not exist,
the validity and binding effect of the liability limitation clause in the bill of lading here are
nevertheless fully sustainable on the basis alone of the cited Civil Code Provisions. That said
stipulation is just and reasonable is arguable from the fact that it echoes Art. 1750 itself in
providing a limit to liability only if a greater value is not declared for the shipment in the bill of
lading. To hold otherwise would amount to questioning the justness and fairness of the law itself,
and this the private respondent does not pretend to do. But over and above that consideration,
the just and reasonable character of such stipulation is implicit in it giving the shipper or owner
the option of avoiding accrual of liability limitation by the simple and surely far from onerous
expedient of declaring the nature and value of the shipment in the bill of lading.
Pursuant to the afore-quoted provisions of law, it is required that the stipulation limiting the common carrier's
liability for loss must be "reasonable and just under the circumstances, and has been freely and fairly agreed
upon."
The bill of lading subject of the present controversy specifically provides, among others:
18. All claims for which the carrier may be liable shall be adjusted and settled on the basis of the
shipper's net invoice cost plus freight and insurance premiums, if paid, and in no event shall the
carrier be liable for any loss of possible profits or any consequential loss.
The carrier shall not be liable for any loss of or any damage to or in any connection with, goods
in an amount exceeding One Hundred thousand Yen in Japanese Currency (Y100,000.00) or its
equivalent in any other currency per package or customary freight unit (whichever is least)
unless the value of the goods higher than this amount is declared in writing by the shipper
before receipt of the goods by the carrier and inserted in the Bill of Lading and extra freight is
paid as required. (Emphasis supplied)
The above stipulations are, to our mind, reasonable and just. In the bill of lading, the carrier made it clear that its
liability would only be up to One Hundred Thousand (Y100,000.00) Yen. However, the shipper, Maruman
Trading, had the option to declare a higher valuation if the value of its cargo was higher than the limited liability
of the carrier. Considering that the shipper did not declare a higher valuation, it had itself to blame for not
complying with the stipulations.
The trial court's ratiocination that private respondent could not have "fairly and freely" agreed to the limited
liability clause in the bill of lading because the said conditions were printed in small letters does not make the bill
of lading invalid.
We ruled in PAL, Inc. vs. Court of Appeals5 that the "jurisprudence on the matter reveals the consistent holding
of the court that contracts of adhesion are not invalid per se and that it has on numerous occasions upheld the
binding effect thereof." Also, in Philippine American General Insurance Co., Inc. vs. Sweet Lines, Inc. 6 this
Court, speaking through the learned Justice Florenz D. Regalado, held:
. . . Ong Yiu vs. Court of Appeals, et. al., instructs us that "contracts of adhesion wherein one
party imposes a ready-made form of contract on the other . . . are contracts not entirely
prohibited. The one who adheres to the contract is in reality free to reject it entirely; if the
adheres he gives his consent." In the present case, not even an allegation of ignorance of a
party excuses non-compliance with the contractual stipulations since the responsibility for
ensuring full comprehension of the provisions of a contract of carriage devolves not on the
carrier but on the owner, shipper, or consignee as the case may be. (Emphasis supplied)
It was further explained in Ong Yiu vs. Court of Appeals 7 that stipulations in contracts of adhesion are valid and
binding.
While it may be true that petitioner had not signed the plane
ticket . . ., 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." 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. . . ., 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. (Emphasis supplied)
Greater vigilance, however, is required of the courts when dealing with contracts of adhesion in that the said
contracts must be carefully scrutinized "in order to shield the unwary (or weaker party) from deceptive schemes
contained in ready-made covenants,"8 such as the bill of lading in question. The stringent requirement which the
courts are enjoined to observe is in recognition of Article 24 of the Civil Code which mandates that "(i)n 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."
The shipper, Maruman Trading, we assume, has been extensively engaged in the trading business. It can not be
said to be ignorant of the business transactions it entered into involving the shipment of its goods to its
customers. The shipper could not have known, or should know the stipulations in the bill of lading and there it
should have declared a higher valuation of the goods shipped. Moreover, Maruman Trading has not been heard
to complain that it has been deceived or rushed into agreeing to ship the cargo in petitioner's vessel. In fact, it
was not even impleaded in this case.
The next issue to be resolved is whether or not private respondent, as consignee, who is not a signatory to the
bill of lading is bound by the stipulations thereof.
Again, in Sea-Land Service, Inc. vs. Intermediate Appellate Court (supra), we held that even if the consignee
was not a signatory to the contract of carriage between the shipper and the carrier, the consignee can still be
bound by the contract. Speaking through Mr. Chief Justice Narvasa, we ruled:
To begin with, there is no question of the right, in principle, of a consignee in a bill of lading to
recover from the carrier or shipper for loss of, or damage to goods being transported under said
bill, although that document may have been-as in practice it oftentimes is-drawn up only by the
consignor and the carrier without the intervention of the
onsignee. . . . .
. . . the right of a party in the same situation as respondent here, to recover for loss of a
shipment consigned to him under a bill of lading drawn up only by and between the shipper and
the carrier, springs from either a relation of agency that may exist between him and the shipper
or consignor, or his status as stranger in whose favor some stipulation is made in said contract,
and who becomes a party thereto when he demands fulfillment of that stipulation, in this case
the delivery of the goods or cargo shipped. In neither capacity can he assert personally, in bar to
any provision of the bill of lading, the alleged circumstance that fair and free agreement to such
provision was vitiated by its being in such fine print as to be hardly readable. Parenthetically, it
may be observed that in one comparatively recent case (Phoenix Assurance Company vs.
Macondray & Co., Inc., 64 SCRA 15) where this Court found that a similar package limitation
clause was "printed in the smallest type on the back of the bill of lading," it nonetheless ruled that
the consignee was bound thereby on the strength of authority holding that such provisions on
liability limitation are as much a part of a bill of lading as through physically in it and as though
placed therein by agreement of the parties.
There can, therefore, be no doubt or equivocation about the validity and enforceability of freely-
agreed-upon stipulations in a contract of carriage or bill of lading limiting the liability of the carrier
to an agreed valuation unless the shipper declares a higher value and inserts it into said contract
or bill. This proposition, moreover, rests upon an almost uniform weight of authority. (Emphasis
supplied).
When private respondent formally claimed reimbursement for the missing goods from petitioner and
subsequently filed a case against the latter based on the very same bill of lading, it (private respondent)
accepted the provisions of the contract and thereby made itself a party thereto, or at least has come to court to
enforce it.9 Thus, private respondent cannot now reject or disregard the carrier's limited liability stipulation in the
bill of lading. In other words, private respondent is bound by the whole stipulations in the bill of lading and must
respect the same.
Private respondent, however, insists that the carrier should be liable for the full value of the lost cargo in the
amount of Y1,552,500.00, considering that the shipper, Maruman Trading, had "fully declared the shipment . . .,
the contents of each crate, the dimensions, weight and value of the contents," 10 as shown in the commercial
Invoice No. MTM-941.
This claim was denied by petitioner, contending that it did not know of the contents, quantity and value of "the
shipment which consisted of three pre-packed crates described in Bill of Lading No. NGO-53MN merely as '3
CASES SPARE PARTS.'" 11
The bill of lading in question confirms petitioner's contention. To defeat the carrier's limited liability, the aforecited
Clause 18 of the bill of lading requires that the shipper should have declared in writing a higher valuation of its
goods before receipt thereof by the carrier and insert the said declaration in the bill of lading, with extra freight
paid. These requirements in the bill of lading were never complied with by the shipper, hence, the liability of the
carrier under the limited liability clause stands. The commercial Invoice No. MTM-941 does not in itself
sufficiently and convincingly show that petitioner has knowledge of the value of the cargo as contended by
private respondent. No other evidence was proffered by private respondent to support is contention. Thus, we
are convinced that petitioner should be liable for the full value of the lost cargo.
In fine, the liability of petitioner for the loss of the cargo is limited to One Hundred Thousand (Y100,000.00) Yen,
pursuant to Clause 18 of the bill of lading.
WHEREFORE, the decision of the Court of Appeals dated June 14, 1995 in C.A.-G.R. CV No. 42803 is hereby
REVERSED and SET ASIDE.
SO ORDERED.
PROVISION IN PRIVATE CARRIER ARRANGMENT LIMITING LIABILITY

G.R. No. 102316 June 30, 1997

VALENZUELA HARDWOOD AND INDUSTRIAL SUPPLY INC., petitioner,
vs.
COURT OF APPEALS AND SEVEN BROTHERS SHIPPING CORPORATION, respondents.

PANGANIBAN, J.:
Is a stipulation in a charter party that the "(o)wners shall not be responsible for loss, split, short-landing,
breakages and any kind of damages to the cargo" 1 valid? This is the main question raised in this petition for
review assailing the Decision of Respondent Court of Appeals 2 in CA-G.R. No. CV-20156 promulgated on
October 15, 1991. The Court of Appeals modified the judgment of the Regional Trial Court of Valenzuela, Metro
Manila, Branch 171, the dispositive portion of which reads:
WHEREFORE, Judgment is hereby rendered ordering South Sea Surety and Insurance Co., Inc.
to pay plaintiff the sum of TWO MILLION PESOS (P2,000,000.00) representing the value of the
policy of the lost logs with legal interest thereon from the date of demand on February 2, 1984
until the amount is fully paid or in the alternative, defendant Seven Brothers Shipping
Corporation to pay plaintiff the amount of TWO MILLION PESOS (2,000,000.00) representing
the value of lost logs plus legal interest from the date of demand on April 24, 1984 until full
payment thereof; the reasonable attorney's fees in the amount equivalent to five (5) percent of
the amount of the claim and the costs of the suit.
Plaintiff is hereby ordered to pay defendant Seven Brothers Shipping Corporation the sum of
TWO HUNDRED THIRTY THOUSAND PESOS (P230,000.00) representing the balance of the
stipulated freight charges.
Defendant South Sea Surety and Insurance Company's counterclaim is hereby dismissed.
In its assailed Decision, Respondent Court of Appeals held:
WHEREFORE, the appealed judgment is hereby AFFIRMED except in so far (sic) as the liability
of the Seven Brothers Shipping Corporation to the plaintiff is concerned which is hereby
REVERSED and SET ASIDE. 3
The Facts
The factual antecedents of this case as narrated in the Court of Appeals Decision are as follows:
It appears that on 16 January 1984, plaintiff (Valenzuela Hardwood and Industrial Supply, Inc.)
entered into an agreement with the defendant Seven Brothers (Shipping Corporation) whereby
the latter undertook to load on board its vessel M/V Seven Ambassador the former's lauan round
logs numbering 940 at the port of Maconacon, Isabela for shipment to Manila.
On 20 January 1984, plaintiff insured the logs against loss and/or damage with defendant South
Sea Surety and Insurance Co., Inc. for P2,000,000.00 and the latter issued its Marine Cargo
Insurance Policy No. 84/24229 for P2,000,000.00 on said date.
On 24 January 1984, the plaintiff gave the check in payment of the premium on the insurance
policy to Mr. Victorio Chua.
In the meantime, the said vessel M/V Seven Ambassador sank on 25 January 1984 resulting in
the loss of the plaintiff's insured logs.
On 30 January 1984, a check for P5,625.00 (Exh. "E") to cover payment of the premium and
documentary stamps due on the policy was tendered due to the insurer but was not accepted.
Instead, the South Sea Surety and Insurance Co., Inc. cancelled the insurance policy it issued
as of the date of the inception for non-payment of the premium due in accordance with Section
77 of the Insurance Code.
On 2 February 1984, plaintiff demanded from defendant South Sea Surety and Insurance Co.,
Inc. the payment of the proceeds of the policy but the latter denied liability under the policy.
Plaintiff likewise filed a formal claim with defendant Seven Brothers Shipping Corporation for the
 value of the lost logs but the latter denied the claim.
After due hearing and trial, the court a quo rendered judgment in favor of plaintiff and against
defendants. Both defendants shipping corporation and the surety company appealed.
Defendant-appellant Seven Brothers Shipping Corporation impute (sic) to the court a quo the
following assignment of errors, to wit:
A. The lower court erred in holding that the proximate cause of the sinking of the vessel Seven
Ambassadors, was not due to fortuitous event but to the negligence of the captain in stowing and
securing the logs on board, causing the iron chains to snap and the logs to roll to the portside.
B. The lower court erred in declaring that the non-liability clause of the Seven Brothers Shipping
Corporation from logs (sic) of the cargo stipulated in the charter party is void for being contrary to
public policy invoking article 1745 of the New Civil Code.
C. The lower court erred in holding defendant-appellant Seven Brothers Shipping Corporation
liable in the alternative and ordering/directing it to pay plaintiff-appellee the amount of two million
(2,000,000.00) pesos representing the value of the logs plus legal interest from date of demand
until fully paid.
D. The lower court erred in ordering defendant-appellant Seven Brothers Shipping Corporation
to pay appellee reasonable attorney's fees in the amount equivalent to 5% of the amount of the
claim and the costs of the suit.
E. The lower court erred in not awarding defendant-appellant Seven Brothers Corporation its
counter-claim for attorney's fees.
F. The lower court erred in not dismissing the complaint against Seven Brothers Shipping
Corporation.
Defendant-appellant South Sea Surety and Insurance Co., Inc. assigns the following errors:
A. The trial court erred in holding that Victorio Chua was an agent of defendant-appellant South
Sea Surety and Insurance Company, Inc. and likewise erred in not holding that he was the
representative of the insurance broker Columbia Insurance Brokers, Ltd.
B. The trial court erred in holding that Victorio Chua received compensation/commission on the
premiums paid on the policies issued by the defendant-appellant South Sea Surety and
Insurance Company, Inc.
C. The trial court erred in not applying Section 77 of the Insurance Code.
D. The trial court erred in disregarding the "receipt of payment clause" attached to and forming
part of the Marine Cargo Insurance Policy No. 84/24229.
E. The trial court in disregarding the statement of account or bill stating the amount of premium
and documentary stamps to be paid on the policy by the plaintiff-appellee.
F. The trial court erred in disregarding the endorsement of cancellation of the policy due to non-
payment of premium and documentary stamps.
G. The trial court erred in ordering defendant-appellant South Sea Surety and Insurance
Company, Inc. to pay plaintiff-appellee P2,000,000.00 representing value of the policy with legal
interest from 2 February 1984 until the amount is fully paid,
H. The trial court erred in not awarding to the defendant-appellant the attorney's fees alleged
and proven in its counterclaim.
The primary issue to be resolved before us is whether defendants shipping corporation and the
surety company are liable to the plaintiff for the latter's lost logs. 4
The Court of Appeals affirmed in part the RTC judgment by sustaining the liability of South Sea Surety and
Insurance Company ("South Sea"), but modified it by holding that Seven Brothers Shipping Corporation ("Seven
Brothers") was not liable for the lost cargo. 5 In modifying the RTC judgment, the respondent appellate court
ratiocinated thus:
It appears that there is a stipulation in the charter party that the ship owner would be exempted
 from liability in case of loss.
The court a quo erred in applying the provisions of the Civil Code on common carriers to
establish the liability of the shipping corporation. The provisions on common carriers should not
be applied where the carrier is not acting as such but as a private carrier.
Under American jurisprudence, a common carrier undertaking to carry a special cargo or
chartered to a special person only, becomes a private carrier.
As a private carrier, a stipulation exempting the owner from liability even for the negligence of its
agent is valid (Home Insurance Company, Inc. vs. American Steamship Agencies, Inc., 23 SCRA
24).
The shipping corporation should not therefore be held liable for the loss of the logs. 6
South Sea and herein Petitioner Valenzuela Hardwood and Industrial Supply, Inc. ("Valenzuela") filed separate
petitions for review before this Court. In a Resolution dated June 2, 1995, this Court denied the petition of South
Sea. 7 There the Court found no reason to reverse the factual findings of the trial court and the Court of Appeals
that Chua was indeed an authorized agent of South Sea when he received Valenzuela's premium payment for
the marine cargo insurance policy which was thus binding on the insurer. 8
The Court is now called upon to resolve the petition for review filed by Valenzuela assailing the CA Decision
which exempted Seven Brothers from any liability for the lost cargo.
The Issue
Petitioner Valenzuela's arguments resolve around a single issue: "whether or not respondent Court (of Appeals)
committed a reversible error in upholding the validity of the stipulation in the charter party executed between the
petitioner and the private respondent exempting the latter from liability for the loss of petitioner's logs arising
from the negligence of its (Seven Brothers') captain." 9
The Court's Ruling
The petition is not meritorious.
Validity of Stipulation is Lis Mota
The charter party between the petitioner and private respondent stipulated that the "(o)wners shall not be
responsible for loss, split, short-landing, breakages and any kind of damages to the cargo." 10 The validity of this
stipulation is the lis mota of this case.
It should be noted at the outset that there is no dispute between the parties that the proximate cause of the
sinking of M/V Seven Ambassadors resulting in the loss of its cargo was the "snapping of the iron chains and the
subsequent rolling of the logs to the portside due to the negligence of the captain in stowing and securing the
logs on board the vessel and not due to fortuitous event." 11 Likewise undisputed is the status of Private
Respondent Seven Brothers as a private carrier when it contracted to transport the cargo of Petitioner
Valenzuela. Even the latter admits this in its petition. 12
The trial court deemed the charter party stipulation void for being contrary to public policy, 13 citing Article 1745
of the Civil Code which provides:
Art. 1745. Any of the following or similar stipulations shall be considered unreasonable, unjust
and contrary to public policy:
(1) That the goods are transported at the risk of the owner or shipper;
(2) That the common carrier will not be liable for any loss, destruction, or deterioration of the
goods;
(3) That the common carrier need not observe any diligence in the custody of the goods;
(4) That the common carrier shall exercise a degree of diligence less than that of a good father
of a family, or of a man of ordinary prudence in the vigilance over the movables transported;
(5) That the common carrier shall not be responsible for the acts or omissions of his or its
employees;
(6) That the common carrier's liability for acts committed by thieves, or of robbers who do not act
with grave or irresistible threat, violence or force, is dispensed with or diminished;
 (7) That the common carrier is not responsible for the loss, destruction, or deterioration of goods
on account of the defective condition of the car, vehicle, ship, airplane or other equipment used
in the contract of carriage.
Petitioner Valenzuela adds that the stipulation is void for being contrary to Articles 586 and 587 of the Code of
Commerce 14 and Articles 1170 and 1173 of the Civil Code. Citing Article 1306 and paragraph 1, Article 1409 of
the Civil Code, 15 petitioner further contends that said stipulation "gives no duty or obligation to the private
respondent to observe the diligence of a good father of a family in the custody and transportation of the cargo."
The Court is not persuaded. As adverted to earlier, it is undisputed that private respondent had acted as a
private carrier in transporting petitioner's lauan logs. Thus, Article 1745 and other Civil Code provisions on
common carriers which were cited by petitioner may not be applied unless expressly stipulated by the parties in
their charter party. 16
In a contract of private carriage, the parties may validly stipulate that responsibility for the cargo rests solely on
the charterer, exempting the shipowner from liability for loss of or damage to the cargo caused even by the
negligence of the ship captain. Pursuant to Article 1306 17 of the Civil Code, such stipulation is valid because it
is freely entered into by the parties and the same is not contrary to law, morals, good customs, public order, or
public policy. Indeed, their contract of private carriage is not even a contract of adhesion. We stress that in a
contract of private carriage, the parties may freely stipulate their duties and obligations which perforce would be
binding on them. Unlike in a contract involving a common carrier, private carriage does not involve the general
public. Hence, the stringent provisions of the Civil Code on common carriers protecting the general public cannot
justifiably be applied to a ship transporting commercial goods as a private carrier. Consequently, the public policy
embodied therein is not contravened by stipulations in a charter party that lessen or remove the protection given
by law in contracts involving common carriers.
The issue posed in this case and the arguments raised by petitioner are not novel; they were resolved long ago
by this Court in Home Insurance Co. vs. American Steamship Agencies, Inc. 18 In that case, the trial court
similarly nullified a stipulation identical to that involved in the present case for being contrary to public policy
based on Article 1744 of the Civil Code and Article 587 of the Code of Commerce. Consequently, the trial court
held the shipowner liable for damages resulting for the partial loss of the cargo. This Court reversed the trial
court and laid down, through Mr. Justice Jose P. Bengzon, the following well-settled observation and doctrine:
The provisions of our Civil Code on common carriers were taken from Anglo-American law.
Under American jurisprudence, a common carrier undertaking to carry a special cargo or
chartered to a special person only, becomes a private carrier. As a private carrier, a stipulation
exempting the owner from liability for the negligence of its agent is not against public policy, and
is deemed valid.
Such doctrine We find reasonable. The Civil Code provisions on common carriers should not be
applied where the carrier is not acting as such but as a private carrier. The stipulation in the
charter party absolving the owner from liability for loss due to the negligence of its agent would
be void if the strict public policy governing common carriers is applied. Such policy has no force
where the public at large is not involved, as in this case of a ship totally chartered for the used of
a single party. 19 (Emphasis supplied.)
Indeed, where the reason for the rule ceases, the rule itself does not apply. The general public enters into a
contract of transportation with common carriers without a hand or a voice in the preparation thereof. The riding
public merely adheres to the contract; even if the public wants to, it cannot submit its own stipulations for the
approval of the common carrier. Thus, the law on common carriers extends its protective mantle against one-
sided stipulations inserted in tickets, invoices or other documents over which the riding public has no
understanding or, worse, no choice. Compared to the general public, a charterer in a contract of private carriage
is not similarly situated. It can — and in fact it usually does — enter into a free and voluntary agreement. In
practice, the parties in a contract of private carriage can stipulate the carrier's obligations and liabilities over the
shipment which, in turn, determine the price or consideration of the charter. Thus, a charterer, in exchange for
convenience and economy, may opt to set aside the protection of the law on common carriers. When the
charterer decides to exercise this option, he takes a normal business risk.
Petitioner contends that the rule in Home Insurance is not applicable to the present case because it "covers only
a stipulation exempting a private carrier from liability for the negligence of his agent, but it does not apply to a
stipulation exempting a private carrier like private respondent from the negligence of his employee or servant
which is the situation in this case." 20 This contention of petitioner is bereft of merit, for it raises a distinction
without any substantive difference. The case Home Insurance specifically dealt with "the liability of the shipowner
for acts or negligence of its captain and crew" 21 and a charter party stipulation which "exempts the owner of the
vessel from any loss or damage or delay arising from any other source, even from the neglect or fault of the
captain or crew or some other person employed by the owner on
board, for whose acts the owner would ordinarily be liable except for said paragraph." 22 Undoubtedly, Home
Insurance is applicable to the case at bar.
The naked assertion of petitioner that the American rule enunciated in Home Insurance is not the rule in the
Philippines 23 deserves scant consideration. The Court there categorically held that said rule was "reasonable"
and proceeded to apply it in the resolution of that case. Petitioner miserably failed to show such circumstances
or arguments which would necessitate a departure from a well-settled rule. Consequently, our ruling in said case
remains a binding judicial precedent based on the doctrine of stare decisis and Article 8 of the Civil Code which
provides that "(j)udicial decisions applying or interpreting the laws or the Constitution shall form part of the legal
system of the Philippines."
In fine, the respondent appellate court aptly stated that "[in the case of] a private carrier, a stipulation exempting
the owner from liability even for the negligence of its agents is valid." 24
Other Arguments
On the basis of the foregoing alone, the present petition may already be denied; the Court, however, will discuss
the other arguments of petitioner for the benefit and satisfaction of all concerned.
Articles 586 and 587, Code of Commerce
Petitioner Valenzuela insists that the charter party stipulation is contrary to Articles 586 and 587 of the Code of
Commerce which confer on petitioner the right to recover damages from the shipowner and ship agent for the
acts or conduct of the captain. 25 We are not persuaded. Whatever rights petitioner may have under the
aforementioned statutory provisions were waived when it entered into the charter party.
Article 6 of the Civil Code provides that "(r)ights may be waived, unless the waiver is contrary to law, public
order, public policy, morals, or good customs, or prejudicial to a person with a right recognized by law." As a
general rule, patrimonial rights may be waived as opposed to rights to personality and family rights which may
not be made the subject of waiver. 26 Being patently and undoubtedly patrimonial, petitioner's right conferred
under said articles may be waived. This, the petitioner did by acceding to the contractual stipulation that it is
solely responsible or any damage to the cargo, thereby exempting the private carrier from any responsibility for
loss or damage thereto. Furthermore, as discussed above, the contract of private carriage binds petitioner and
private respondent alone; it is not imbued with public policy considerations for the general public or third persons
are not affected thereby.
Articles 1170 and 1173, Civil Code
Petitioner likewise argues that the stipulation subject of this controversy is void for being contrary to Articles 1170
and 1173 of the Civil Code 27 which read:
Art. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or
delay, and those who in any manner contravene the tenor thereof, are liable for damages
Art. 1173. The fault or negligence of the obligor consists in the omission of that diligence which is
required by the nature of the obligation and corresponds with the circumstances of the persons,
of the time and of the place. When negligence shows bad faith, the provisions of articles 1171
and 2201, shall apply.
If the law does not state the diligence which is to be observed in the performance, that which is
expected of a good father of a family shall be required.
The Court notes that the foregoing articles are applicable only to the obligor or the one with an obligation to
perform. In the instant case, Private Respondent Seven Brothers is not an obligor in respect of the cargo, for this
obligation to bear the loss was shifted to petitioner by virtue of the charter party. This shifting of responsibility, as
earlier observed, is not void. The provisions cited by petitioner are, therefore, inapplicable to the present case.
Moreover, the factual milieu of this case does not justify the application of the second paragraph of Article 1173
of the Civil Code which prescribes the standard of diligence to be observed in the event the law or the contract is
silent. In the instant case, Article 362 of the Code of Commerce 28 provides the standard of ordinary diligence
for the carriage of goods by a carrier. The standard of diligence under this statutory provision may, however, be
modified in a contract of private carriage as the petitioner and private respondent had done in their charter party.
Cases Cited by Petitioner Inapplicable
Petitioner cites Shewaram vs. Philippine Airlines, Inc. 29 which, in turn, quoted Juan Ysmael & Co. vs. Gabino
Barreto & Co. 30 and argues that the public policy considerations stated there vis-a-vis contractual stipulations
limiting the carrier's liability be applied "with equal force" to this case. 31 It also cites Manila Railroad Co. vs.
Compañia Transatlantica 32 and contends that stipulations exempting a party from liability for damages due to
negligence "should not be countenanced" and should be "strictly construed" against the party claiming its
benefit. 33 We disagree.
The cases of Shewaram and Ysmael both involve a common carrier; thus, they necessarily justify the application
of such policy considerations and concomitantly stricter rules. As already discussed above, the public policy
considerations behind the rigorous treatment of common carriers are absent in the case of private carriers.
Hence, the stringent laws applicable to common carriers are not applied to private carries. The case of Manila
Railroad is also inapplicable because the action for damages there does not involve a contract for transportation.
Furthermore, the defendant therein made a "promise to use due care in the lifting operations" and, consequently,
it was "bound by its undertaking"'; besides, the exemption was intended to cover accidents due to hidden defects
in the apparatus or other unforseeable occurrences" not caused by its "personal negligence." This promise was
thus constructed to make sense together with the stipulation against liability for damages. 34 In the present
case, we stress that the private respondent made no such promise. The agreement of the parties to exempt the
shipowner from responsibility for any damage to the cargo and place responsibility over the same to petitioner is
the lone stipulation considered now by this Court.
Finally, petitioner points to Standard Oil Co. of New York vs. Lopez Costelo, 35 Walter A. Smith & Co. vs.
Cadwallader Gibson Lumber Co., 36 N. T . Hashim and Co. vs. Rocha and Co., 37 Ohta Development Co. vs.
Steamship "Pompey" 38 and Limpangco Sons vs. Yangco Steamship Co. 39 in support of its contention that the
shipowner be held liable for damages. 40 These however are not on all fours with the present case because they
do not involve a similar factual milieu or an identical stipulation in the charter party expressly exempting the
shipowner form responsibility for any damage to the cargo.
Effect of the South Sea Resolution
In its memorandum, Seven Brothers argues that petitioner has no cause of action against it because this Court
has earlier affirmed the liability of South Sea for the loss suffered by petitioner. Private respondent submits that
petitioner is not legally entitled to collect twice for a single loss. 41 In view of the above disquisition upholding the
validity of the questioned charter party stipulation and holding that petitioner may not recover from private
respondent, the present issue is moot and academic. It suffices to state that the Resolution of this Court dated
June 2, 1995 42 affirming the liability of South Sea does not, by itself, necessarily preclude the petitioner from
proceeding against private respondent. An aggrieved party may still recover the deficiency for the person
causing the loss in the event the amount paid by the insurance company does not fully cover the loss. Article
2207 of the Civil Code provides:
Art. 2207. If the plaintiff's property has been insured, and he has received indemnity for the
insurance company for the injury or loss arising out of the wrong or breach of contract
complained of, the insurance company shall be subrogated to the rights of the insured against
the wrongdoer or the person who has violated the contract. If the amount paid by the insurance
company does not fully cover the injury or loss, the aggrieved party shall be entitled to recover
the deficiency form the person causing the loss or injury.
WHEREFORE, premises considered, the petition is hereby DENIED for its utter failure to show any reversible
error on the part of Respondent Court. The assailed Decision is AFFIRMED.
SO ORDERED.
WHEN THE WAYBILL PROVIDES FOR THE PERIOD TO FILE FORMAL CLAIMS

G.R. No. 119706 March 14, 1996

PHILIPPINE AIRLINES, INC., petitioner,
vs.
COURT OF APPEALS and GILDA C. MEJIA, respondents.
 
REGALADO, J.:p
This is definitely not a case of first impression. The incident which eventuated in the present controversy is a
drama of common contentious occurrence between passengers and carriers whenever loss is sustained by the
former. Withal, the exposition of the factual ambience and the legal precepts in this adjudication may hopefully
channel the assertiveness of passengers and the intransigence of carriers into the realization that at times a bad
extrajudicial compromise could be better than a good judicial victory.
Assailed in this petition for review is the decision of respondent Court of Appeals in CA-G.R. CV No. 427441
which affirmed the decision of the lower court 2 finding petitioner Philippine Air Lines, Inc. (PAL) liable as follows:
ACCORDINGLY, judgment is hereby rendered ordering defendant Philippine Air Lines, Inc., to
pay plaintiff Gilda C. Mejia:
(1) P30,000.00 by way of actual damages of the microwave oven;
(2) P10,000.00 by way of moral damages;
(3) P20,000.00 by way of exemplary damages;
(4) P10,000.00 as attorney's fee;
all in addition to the costs of the suit.
Defendant's counterclaim is hereby dismissed for lack of merit.3
The facts as found by respondent Court of Appeals are as follows:
On January 27, 1990, plaintiff Gilda C. Mejia shipped thru defendant, Philippine Airlines, one (1)
unit microwave oven, with a gross weight of 33 kilograms from San Francisco, U.S.A. to Manila,
Philippines. Upon arrival, however, of said article in Manila, Philippines, plaintiff discovered that
its front glass door was broken and the damage rendered it unserviceable. Demands both oral
and written were made by plaintiff against the defendant for the reimbursement of the value of
the damaged microwave oven, and transportation charges paid by plaintiff to defendant
company. But these demands fell on deaf ears.
On September 25, 1990, plaintiff Gilda C. Mejia filed the instant action for damages against
defendant in the lower court.
In its answer, defendant Airlines alleged inter alia, by way of special and affirmative defenses,
that the court has no jurisdiction over the case; that plaintiff has no valid cause of action against
defendant since it acted only in good faith and in compliance with the requirements of the law,
regulations, conventions and contractual commitments; and that defendant had always
exercised the required diligence in the selection, hiring and supervision of its employees.4
What had theretofore transpired at the trial in the court a quo is narrated as follows:
Plaintiff Gilda Mejia testified that sometime on January 27, 1990, she took defendant's plane
from San Francisco, U.S.A. for Manila, Philippines (Exh. "F"). Amongst her baggages (sic) was a
slightly used microwave oven with the brand name "Sharp" under PAL Air Waybill No. 0-79-
1013008-3 (Exh. "A"). When shipped, defendant's office at San Francisco inspected it. It was in
good condition with its front glass intact. She did not declare its value upon the advice of
defendant's personnel at San Francisco.
When she arrived in Manila, she gave her sister Concepcion C. Diño authority to claim her
baggag(e) (Exh. "G") and took a connecting flight for Bacolod City.
When Concepcion C. Diño claimed the baggag(e) (Exh. "B") with defendant, then with the
 Bureau of Customs, the front glass of the microwave oven was already broken and cannot be
repaired because of the danger of radiation. They demanded from defendant thru Atty. Paco
P30,000.00 for the damages although a brand new one costs P40,000.00, but defendant refused
to pay.
Hence, plaintiff engaged the services of counsel. Despite demand (Exh. "E") by counsel,
defendant still refused to pay.
The damaged oven is still with defendant. Plaintiff is engaged in (the) catering and restaurant
business. Hence, the necessity of the oven. Plaintiff suffered sleepless nights when defendant
refused to pay her (for) the broken oven and claims P10,000.00 moral damages, P20,000.00
exemplary damages, P10,000.00 attorney's fees plus P300.00 per court appearance and
P15,000.00 monthly loss of income in her business beginning February, 1990.
Defendant Philippine Airlines thru its employees Rodolfo Pandes and Vicente Villaruz posited
that plaintiff's claim was not investigated until after the filing of the formal claim on August 13,
1990 (Exh. "6" also Exh. "E"). During the investigations, plaintiff failed to submit positive proof of
the value of the cargo. Hence her claim was denied.
Also plaintiff's claim was filed out of time under paragraph 12, a (1) of the Air Waybill (Exh. "A",
also Exh. "1") which provides: "(a) the person entitled to delivery must make a complaint to the
carrier in writing in case: (1) of visible damage to the goods, immediately after discovery of the
damage and at the latest within 14 days from the receipt of the goods. 5
As stated at the outset, respondent Court of Appeals similarly ruled in favor of private respondent by affirming in
full the trial court's judgment in Civil Case No. 6210, with costs against petitioner.6 Consequently, petitioner now
impugns respondent appellate court's ruling insofar as it agrees with (1) the conclusions of the trial court that
since the air waybill is a contract of adhesion, its provisions should be strictly construed against herein petitioner;
(2) the finding of the trial court that herein petitioner's liability is not limited by the provisions of the air waybill;
and (3) the award by the trial court to private respondent of moral and exemplary damages, attorney's fees and
litigation expenses.
The trial court relied on the ruling in the case of Fieldmen's Insurance Co., Inc. vs. Vda. De Songco, et al.7 in
finding that the provisions of the air waybill should be strictly construed against petitioner. More particularly, the
court below stated its findings thus:
In this case, it is seriously doubted whether plaintiff had read the printed conditions at the back of
the Air Waybill (Exh. "1"), or even if she had, if she was given a chance to negotiate on the
conditions for loading her microwave oven. Instead she was advised by defendant's employee at
San Francisco, U.S.A., that there is no need to declare the value of her oven since it is not brand
new. Further, plaintiff testified that she immediately submitted a formal claim for P30,000.00 with
defendant. But their claim was referred from one employee to another th(e)n told to come back
the next day, and the next day, until she was referred to a certain Atty. Paco. When they got tired
and frustrated of coming without a settlement of their claim in sight, they consulted a lawyer who
demanded from defendant on August 13, 1990 (Exh. "E", an[d] Exh. "6").
The conclusion that inescapably emerges from the above findings of fact is to concede it with
credence. . . . .8
Respondent appellate court approved said findings of the trial court in this manner:
We cannot agree with defendant-appellant's above contention. Under our jurisprudence, the Air
Waybill is a contract of adhesion considering that all the provisions thereof are prepared and
drafted only by the carrier (Sweet Lines v. Teves, 83 SCRA 361). The only participation left of the
other party is to affix his signature thereto (BPI Credit Corporation vs. Court of Appeals, 204
SCRA 601; Saludo, Jr. vs. C.A., 207 SCRA 498; Maersk vs. Court of Appeals, 222 SCRA 108,
among the recent cases). In the earlier case of Angeles v. Calasanz, 135 SCRA 323, the
Supreme Court ruled that "the terms of a contract [of adhesion] must be interpreted against the
party who drafted the same." . . . .9
Petitioner airlines argues that the legal principle enunciated in Fieldmen's Insurance does not apply to the
present case because the provisions of the contract involved here are neither ambiguous nor obscure. The front
portion of the air waybill contains a simple warning that the shipment is subject to the conditions of the contract
on the dorsal portion thereof regarding the limited liability of the carrier unless a higher valuation is declared, as
well as the reglementary period within which to submit a written claim to the carrier in case of damage or loss to
the cargo. Granting that the air waybill is a contract of adhesion, it has been ruled by the Court that such
contracts are not entirely prohibited and are in fact binding regardless of whether or not respondent herein read
the provisions thereof. Having contracted the services of petitioner carrier instead of other airlines, private
respondent in effect negotiated the terms of the contract and thus became bound thereby. 10
Counsel for private respondent refutes these arguments by saying that due to her eagerness to ship the
microwave oven to Manila, private respondent assented to the terms and conditions of the contract without any
opportunity to question or change its terms which are practically on a "take-it-or-leave-it" basis, her only
participation therein being the affixation of her signature. Further, reliance on the Fieldmen's Insurance case is
misplaced since it is not the ambiguity or obscurity of the stipulation that renders necessary the strict
interpretation of a contract of adhesion against the drafter, but the peculiarity of the transaction wherein one
party, normally a corporation, drafts all the provisions of the contract without any participation whatsoever on the
part of the other party other than affixment of signature. 11
A review of jurisprudence on the matter reveals the consistent holding of the Court that contracts of adhesion are
not invalid per se and that it has on numerous occasions upheld the binding effect thereof. 12 As explained in
Ong Yiu vs. Court of Appeals, et al., supra:
. . . . 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. 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. . . , 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.
As rationalized in Saludo, Jr. vs. Court of Appeals, et al., supra:
. . . , it should be borne in mind that a contract of adhesion may be struck down as void and
unenforceable, for being subversive of public policy, only when the weaker party is imposed
upon in dealing with the dominant bargaining party and is reduced to the alternative of taking it
or leaving it, completely deprived of the opportunity to bargain on equal footing. . . . .
but subject to the caveat that —
. . . . Just because we have said that Condition No. 5 of the airway bill is binding upon the parties
to and fully operative in this transaction, it does not mean, and let this serve as fair warning to
respondent carriers, that they can at all times whimsical seek refuge from liability in the
exculpatory sanctuary of said Condition No. 5 . . . .
The peculiar nature of such contracts behooves the Court to closely scrutinize the factual milieu to which the
provisions are intended to apply. Thus, just as consistently and unhesitatingly, but without categorically
invalidating such contracts, the Court has construed obscurities and ambiguities in the restrictive provisions of
contracts of adhesion strictly albeit not unreasonably against the drafter thereof when justified in light of the
operative facts and surrounding circumstances. 13
We find nothing objectionable about the lower court's reliance upon the Fieldmen's Insurance case, the
principles wherein squarely apply to the present petition. The parallelism between the aforementioned case and
this one is readily apparent for, just as in the instant case, it is the binding effect of the provisions in a contract of
adhesion (an insurance policy in Fieldmen's Insurance) that is put to test.
A judicious reading of the case reveals that what was pivotal in the judgment of liability against petitioner
insurance company therein, and necessarily interpreting the provisions of the insurance policy as ineffective,
was the finding that the representations made by the agent of the insurance company rendered it impossible to
comply with the conditions of the contract in question, rather than the mere ambiguity of its terms. The extended
pronouncements regarding strict construction of ambiguous provisions in an adhesion contract against its drafter,
which although made by the Court as an aside but has perforce evolved into a judicial tenet over time, was
actually an incidental statement intended to emphasize the duty of the court to protect the weaker, as against the
more dominant, party to a contract, as well as to prevent the iniquitous situation wherein the will of one party is
imposed upon the other in the course of negotiation.
Thus, there can be no further question as to the validity of the terms of the air waybill, even if the same
constitutes a contract of adhesion. Whether or not the provisions thereof particularly on the limited liability of the
carrier are binding on private respondent in this instance must be determined from the facts and circumstances
involved vis-a-vis the nature of the provisions sought to be enforced, taking care that equity and fair play should
characterize the transaction under review.
On petitioner's insistence that its liability for the damage to private respondent's microwave oven, if any, should
be limited by the provisions of the air waybill, the lower court had this to say:
By and large, defendant's evidence is anchored principally on plaintiff's alleged failure to comply
with paragraph 12, a(1) (Exh. "1-C-2") of the Air waybill (Exh. "A," also Exh. "1"), by filing a
formal claim immediately after discovery of the damage. Plaintiff filed her formal claim only on
August 13, 1990 (Exh. "6", also Exh. "E"). And, failed to present positive proof on the value of the
damaged microwave oven. Hence, the denial of her claim.
This Court has misgivings about these pretensions of defendant.
xxx xxx xxx
Finally, the Court finds no merit to defendant's contention that under the Warsaw Convention, its
liability if any, cannot exceed U.S. $20.00 based on weight as plaintiff did not declare the
contents of her baggage nor pay additional charges before the flight. 14
The appellate court declared correct the non-application by the trial court of the limited liability of therein
defendant-appellant under the "Conditions of the Contract" contained in the air waybill, based on the ruling in
Cathay Pacific Airways, Ltd. vs. Court of Appeals, et al., 15 which substantially enunciates the rule that while the
Warsaw Convention has the force and effect of law in the Philippines, being a treaty commitment by the
government and as a signatory thereto, the same does not operate as an exclusive enumeration of the instances
when a carrier shall be liable for breach of contract or as an absolute limit of the extent of liability, nor does it
preclude the operation of the Civil Code or other pertinent laws.
Petitioner insists that both respondent court and the trial court erred in finding that petitioner's liability, if any, is
not limited by the provisions of the air waybill, for, as evidence of the contract of carriage between petitioner and
private respondent, it substantially states that the shipper certifies to the correctness of the entries contained
therein and accepts that the carrier's liability is limited to US $20 per kilogram of goods lost, damaged or
destroyed unless a value is declared and a supplementary charge paid. Inasmuch as no such declaration was
made by private respondent, as she admitted during cross-examination, the liability of petitioner, if any, should
be limited to 28 kilograms multiplied by US $20, or $560. Moreover, the validity of these conditions has been
upheld in the leading case of Ong Yiu vs. Court of Appeals, et al., supra, and subsequent cases, for being a
mere reiteration of the limitation of liability under the Warsaw Convention, which treaty has the force and effect of
law. 16
It is additionally averred that since private respondent was merely advised, not ordered, that she need not
declare a higher value for her cargo, the final decision of refraining from making such a declaration fell on private
respondent and should not put the petitioner in estoppel from invoking its limited liability.17
In refutation, private respondent explains that the reason for the absence of a declaration of a higher value was
precisely because petitioner's personnel in San Francisco, U.S.A. advised her not to declare the value of her
cargo, which testimony has not at all been rebutted by petitioner. This being so, petitioner is estopped from
faulting private respondent for her failure to declare the value of the microwave oven. 18
The validity of provisions limiting the liability of carriers contained in bills of lading have been consistently upheld
for the following reason:
. . . . The stipulation in the bill of lading limiting the common carrier's liability to the value of
goods appearing in the bill, unless the shipper or owner declares a greater value, is valid and
binding. The limitation of the carrier's liability is sanctioned by the freedom of the contracting
parties to establish such stipulations, clauses, terms, or conditions as they may deem
convenient, provided they are not contrary to law, morals, good customs and public policy. . . . .
19
However, the Court has likewise cautioned against blind reliance on adhesion contracts where the facts
and circumstances warrant that they should be disregarded. 20
In the case at bar, it will be noted that private respondent signified an intention to declare the value of the
microwave oven prior to shipment, but was explicitly advised against doing so by PAL's personnel in San
Francisco, U.S.A., as borne out by her testimony in court:
x x x           x x x          x x x
Q Did you declare the value of the shipment?
A No. I was advised not to.
Q Who advised you?
A At the PAL Air Cargo. 21
It cannot be denied that the attention of PAL through its personnel in San Francisco was sufficiently called to the
fact that private respondent's cargo was highly susceptible to breakage as would necessitate the declaration of
its actual value. Petitioner had all the opportunity to check the condition and manner of packing prior to
acceptance for shipment, 22 as well as during the preparation of the air waybill by PAL's Acceptance Personnel
based on information supplied by the shipper, 23 and to reject the cargo if the contents or the packing did not
meet the company's required specifications. Certainly, PAL could not have been otherwise prevailed upon to
merely accept the cargo.
While Vicente Villaruz, officer-in-charge of the PAL Import Section at the time of incident, posited that there may
have been inadequate and improper packing of the cargo, 24 which by itself could be a ground for refusing
carriage of the goods presented for shipment, he nonetheless admitted on cross-examination that private
respondent's cargo was accepted by PAL in its San Francisco office:
ATTY. VINCO
So that, be that as it may, my particular concern is that, it is the
PAL personnel that accepts the baggage?
WITNESS
Yes, sir.
ATTY. VINCO
Also, if he comes from abroad like in this particular case, it is the
PAL personnel who accepts the baggage?
WITNESS
Yes, sir.
ATTY. VINCO
And the PAL personnel may or may not accept the baggage?
WITNESS
Yes, sir.
ATTY. VINCO
According to what is stated as in the acceptance of the cargo, it
is to the best interest of the airlines, that is, he want(s) also that
the airlines would be free from any liability. Could that be one of
the grounds for not admitting a baggage?
WITNESS
Safety is number one (1)
x x x           x x x          x x x
ATTY. VINCO
So, this baggage was accepted and admitted in San Francisco?
WITNESS
Yes, sir.
 ATTY. VINCO
And you could not show any document to the Court that would
suggest that this baggage was denied admittance by your office
at San Francisco?
WITNESS
No, I cannot show.
ATTY. VINCO
Now, can you show any document that would suggest that there
was insufficient pac(k)aging on this particular baggage from
abroad?
WITNESS
No, sir. 25
In response to the trial court's questions during the trial, he also stated that while the passenger's declaration
regarding the general or fragile character of the cargo is to a certain extent determinative of its classification, PAL
nevertheless has and exercises discretion as to the manner of handling required by the nature of the cargo it
accepts for carriage. He further opined that the microwave oven was only a general, not a fragile, cargo which
did not require any special handling. 26
There is no absolute obligation on the part of a carrier to accept a cargo. Where a common carrier accepts a
cargo for shipment for valuable consideration, it takes the risk of delivering it in good condition as when it was
loaded. And if the fact of improper packing is known to the carrier or its personnel, or apparent upon observation
but it accepts the goods notwithstanding such condition, it is not relieved of liability for loss or injury resulting
therefrom. 27
The acceptance in due course by PAL of private respondent's cargo as packed and its advice against the need
for declaration of its actual value operated as an assurance to private respondent that in fact there was no need
for such a declaration. Petitioner can hardly be faulted for relying on the representations of PAL's own personnel.
In other words, private respondent Mejia could and would have complied with the conditions stated in the air
waybill, i.e., declaration of a higher value and payment of supplemental transportation charges, entitling her to
recovery of damages beyond the stipulated limit of US $20 per kilogram of cargo in the event of loss or damage,
had she not been effectively prevented from doing so upon the advice of PAL's personnel for reasons best
known to themselves.
As pointed out by private respondent, the aforestated facts were not denied by PAL in any of its pleadings nor
rebutted by way of evidence presented in the course of the trial, and thus in effect it judicially admitted that such
an advice was given by its personnel in San Francisco, U.S.A. Petitioner, therefore, is estopped from blaming
private respondent for not declaring the value of the cargo shipped and which would have otherwise entitled her
to recover a higher amount of damages. The Court's bidding in the Fieldmen's Insurance case once again rings
true:
. . . As estoppel is primarily based on the doctrine of good faith and the avoidance of harm that
will befall an innocent party due to its injurious reliance, the failure to apply it in this case would
result in gross travesty of justice.
We likewise uphold the lower court's finding that private respondent complied with the requirement for the
immediate filing of a formal claim for damages as required in the air waybill or, at least, we find that there was
substantial compliance therewith.
Private respondent testified that she authorized her sister, Concepcion Diño, to claim her cargo consisting of a
microwave oven since the former had to take a connecting flight to Bacolod City on the very same afternoon of
the day of her arrival. 28 As instructed, Concepcion Diño promptly proceeded to PAL's Import Section the next
day to claim the oven. Upon discovering that the glass door was broken, she immediately filed a claim by way of
the baggage freight claim 29 on which was duly annotated the damage sustained by the oven. 30
Her testimony relates what took place thereafter:
ATTY. VINCO
 So, after that inspection, what did you do?
WITNESS
After that annotation placed by Mr. Villaruz, I went home and I
followed it up the next day with the Clerk of PAL cargo office.
ATTY. VINCO
What did the clerk tell you?
WITNESS
She told me that the claim was being processed and I made
several phone calls after that. I started my follow-ups February
up to June 1990.
ATTY. VINCO
And what results did those follow-ups produce?
WITNESS
All they said (was) that the document was being processed, that
they were waiting for Atty. Paco to report to the office and they
could refer the matter to Atty. Paco.
ATTY. VINCO
Who is this Atty. Paco?
WITNESS
He was the one in-charge of approving our claim.
ATTY. VINCO
Were you able to see Atty. Paco?
WITNESS
Yes, sir. I personally visited Atty. Paco together with my auntie
who was a former PAL employee.
x x x           x x x          x x x
ATTY. VINCO
So, what did you do, did you make a report or did you tell Atty.
Paco of your scouting around for a possible replacement?
WITNESS
I did call him back at his office. I made a telephone call.
ATTY. VINCO
And what answer did Atty. Paco make after you have reported
back to him?
WITNESS
They told me that they were going to process the claim based on
the price that I gave them but there was no definite result.
ATTY. VINCO
How many times did you go and see Atty. Paco regarding the
claim of your sister?
WITNESS
I made one personal visit and several follow-up calls. With Atty.
 Paco, I made one phone call but I made several phone calls with
his secretary or the clerk at PAL cargo office and I was trying to
locate him but unfortunately, he was always out of his office. 31
PAL claims processor, Rodolfo Pandes, * confirmed having received the baggage freight claim on January 30,
1990 32 and the referral to and extended pendency of the private respondent's claim with the office of Atty. Paco,
to wit:
ATTY. VINCO:
Q And you did instruct the claimant to see the Claim Officer of the company,
right?
WITNESS:
A Yes, sir.
ATTY. VINCO:
Q And the Claim Officer happened to be Atty. Paco?
WITNESS:
A Yes, sir.
ATTY. VINCO:
Q And you know that the plaintiff thru her authorized representative Concepcion
Diño, who is her sister had many times gone to Atty. Paco, in connection with
this claim of her sister?
WITNESS:
A Yes, sir.
ATTY. VINCO:
Q As a matter of fact even when the complaint was already filed here in Court
the claimant had continued to call about the settlement of her claim with Atty.
Paco, is that correct?
x x x           x x x          x x x
WITNESS:
A Yes, sir.
ATTY. VINCO:
Q You know this fact because a personnel saw you in one of the pre-trial here
when this case was heard before the sala of Judge Moscardon, is that correct?
WITNESS:
A Yes.
ATTY. VINCO:
Q In other words, the plaintiff rather had never stop(ped) in her desire for your
company to settle this claim, right?
WITNESS:
A Yes, sir. 33
Considering the abovementioned incidents and private respondent Mejia's own zealous efforts in following up
the claim, 34 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 August 13, 1990. 35 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 PAL's own doing, the
consequences of which cannot, in all fairness, be attributed to private respondent.
Even if the claim for damages was conditioned on the timely filing of a formal claim, under Article 1186 of the
Civil Code that condition was deemed fulfilled, considering that the collective action of PAL's personnel in tossing
around the claim and leaving it unresolved for an indefinite period of time was tantamount to "voluntarily
preventing its fulfillment." On grounds of equity, the filing of the baggage freight claim, which sufficiently informed
PAL of the damage sustained by private respondent's cargo, constituted substantial compliance with the
requirement in the contract for the filing of a formal claim.
All told, therefore, respondent appellate court did not err in ruling that the provision on limited liability is not
applicable in this case. We, however, note in passing that while the facts and circumstances of this case do not
call for the direct application of the provisions of the Warsaw Convention, it should be stressed that, indeed,
recognition of the Warsaw Convention does not preclude the operation of the Civil Code and other pertinent laws
in the determination of the extent of liability of the common carrier. 36
The Warsaw Convention, being a treaty to which the Philippines is a signatory, is as much a part of Philippine
law as the Civil Code, Code of Commerce and other municipal special laws. 3 7 The provisions therein
contained, specifically on the limitation of carrier's liability, are operative in the Philippines but only in appropriate
situations.
Petitioner ascribes ultimate error in the award of moral and exemplary damages and attorney's fees in favor of
private respondent in that other than the statement of the trial court that petitioner acted in bad faith in denying
private respondent's claim, which was affirmed by the Court of Appeals, there is no evidence on record that the
same is true. The denial of private respondent's claim was supposedly in the honest belief that the same had
prescribed, there being no timely formal claim filed; and despite having been given an opportunity to submit
positive proof of the value of the damaged microwave oven, no such proof was submitted. Petitioner insists that
its failure to deliver the oven in the condition in which it was shipped could hardly be considered as amounting to
bad faith. 38
Private respondent counters that petitioner's failure to deliver the microwave oven in the condition in which it was
received can be described as gross negligence amounting to bad faith, on the further consideration that it failed
to prove that it exercised the extraordinary diligence required by law, and that no explanation whatsoever was
given as to why the front glass of the oven was broken. 39
The trial court justified its award of actual, moral and exemplary damages, and attorney's fees in favor of private
respondent in this wise:
Since the plaintiff's baggage destination was the Philippines, Philippine law governs the liability
of the defendant for damages for the microwave oven.
The provisions of the New Civil Code on common carriers are Article(s) 1733, 1735 and 1753 . . .
.
xxx xxx xxx
In this case, defendant failed to overcome, not only the presumption but more importantly,
plaintiff's evidence that defendant's negligence was the proximate cause of the damages of the
microwave oven. Further plaintiff has established that defendant acted in bad faith when it
denied the former's claim on the ground that the formal claim was filed beyond the period as
provided in paragraph 12 (a-1) (Exh. "1-C-2") of the Air Waybill (Exh. "1", also Exh. "A"), when
actually, Concepcion Diño, sister of plaintiff has immediately filed the formal claim upon
discovery of the damage. 40
Respondent appellate court was in full agreement with the trial court's finding of bad faith on the part of petitioner
as a basis for the award of the aforestated damages, declaring that:
As to the last assigned error, a perusal of the facts and law of the case reveals that the lower
court's award of moral and exemplary damages, attorney's fees and costs of suit to plaintiff-
appellee is in accordance with current laws and jurisprudence on the matter. Indeed, aside from
the fact that defendant-appellant acted in bad faith in breaching the contract and in denying
plaintiff's valid claim for damages, plaintiff-appellee underwent profound distress, sleepless
nights, and anxiety upon knowledge of her damaged microwave oven in possession of
defendant-appellant, entitling her to the award of moral and exemplary damages (Cathay Pacific
Airways, Ltd. vs. C.A., supra; Arts. 2219 & 2221, New Civil Code), and certainly plaintiff-
appellant's unjust refusal to comply with her valid demand for payment, thereby also entitling her
to reasonable attorney's fees [Art. 2208 (2) and (11), id.]. 41
It will be noted that petitioner never denied that the damage to the microwave oven was sustained while the
same was in its custody. The possibility that said damage was due to causes beyond the control of PAL has
effectively been ruled out since the entire process in handling of the cargo — from the unloading thereof from the
plane, the towing and transfer to the PAL warehouse, the transfer to the Customs examination area, and its
release thereafter to the shipper — was done almost exclusively by, and with the intervention or, at the very
least, under the direct supervision of a responsible PAL personnel. 42
The very admissions of PAL, through Vicente Villaruz of its Import Section, as follows:
ATTY. VINCO
So that, you now claim, Mr. Witness, that from the time the cargo
was unloaded from the plane until the time it reaches the
Customs counter where it was inspected, all the way, it was the
PAL personnel who did all these things?
WITNESS
Yes, however, there is also what we call the Customs
storekeeper and the Customs guard along with the cargo.
ATTY. VINCO
You made mention about a locator?
WITNESS
Yes, sir.
ATTY. VINCO
This locator, is he an employee of the PAL or the Customs?
WITNESS
He is a PAL employee. 43
lead to the inevitable conclusion that whatever damage may have been sustained by the cargo is due to
causes attributable to PAL's personnel or, at all events, under their responsibility.
Moreover, the trial court underscored the fact that petitioner was not able to overcome the statutory presumption
of negligence in Article 1735 which, as a common carrier, it was laboring under in case of loss, destruction or
deterioration of goods, through proper showing of the exercise of extraordinary diligence. Neither did it prove that
the damage to the microwave oven was because of any of the excepting causes under Article 1734, all of the
same Code. Inasmuch as the subject item was received in apparent good condition, no contrary notation or
exception having been made on the air waybill upon its acceptance for shipment, the fact that it was delivered
with a broken glass door raises the presumption that PAL's personnel were negligent in the carriage and
handling of the cargo. 44
Furthermore, there was glaringly no attempt whatsoever on the part of petitioner to explain the cause of the
damage to the oven. The unexplained cause of damage to private respondent's cargo constitutes gross
carelessness or negligence which by itself justifies the present award of damages. 45 The equally unexplained
and inordinate delay in acting on the claim upon referral thereof to the claims officer, Atty. Paco, and the
noncommittal responses to private respondent's entreaties for settlement of her claim for damages belies
petitioner's pretension that there was no bad faith on its part. This unprofessional indifference of PAL's personnel
despite full and actual knowledge of the damage to private respondent's cargo, just to be exculpated from liability
on pure technicality and bureaucratic subterfuge, smacks of willful misconduct and insensitivity to a passenger's
plight tantamount to bad faith 46 and renders unquestionable petitioner's liability for damages. In sum, there is
no reason to disturb the findings of the trial court in this case, especially with its full affirmance by respondent
Court of Appeals.
On this note, the case at bar goes into the annals of our jurisprudence after six years and recedes into the
memories of our legal experience as just another inexplicable inevitability. We will never know exactly how many
man-hours went into the preparation, litigation and adjudication of this simple dispute over an oven, which the
parties will no doubt insist they contested as a matter of principle. One thing, however, is certain. As long as the
first letter in "principle" is somehow outplaced by the peso sign, the courts will always have to resolve similar
controversies although mutual goodwill could have dispensed with judicial recourse.
IN VIEW OF ALL OF THE FOREGOING, the assailed judgment of respondent Court of Appeals is AFFIRMED in
toto.
SO ORDERED.
BAREBOAT OR DEMISE CHARTER DOES NOT CONVERT CARRIER INTO PRIVATE CARRIER