SPS. FERNANDO vs. NORTHWEST AIRLINES, INC.

SPS. FERNANDO vs. NORTHWEST AIRLINES, INC.

G.R. No. 212038
February 08, 2017

FACTS:

Spouses Jesus and Elizabeth S. Fernando are frequent flyers of Northwest Airlines, Inc. and are holders
of Elite Platinum World Perks Card, the highest category given to frequent flyers of the carrier.

The Fernandos initiated the filing of the instant case which arose from two separate incidents: first, when
Jesus Fernando arrived at Los Angeles Airport on December 20, 2001; second, when the Fernandos
were to depart from the LA Airport on January 29, 2002.

Jesus Fernando arrived at the LA Airport via Northwest Airlines Flight No. NW02 to join his family for
Christmas, however upon arrival at the airport it was found out that his documents reflect his return ticket
as August 2001. So he approached Northwest personnel who was later identified as Linda
Puntawongdaycha, but the latter merely glanced at his ticket without checking its status with the computer
and peremptorily said that the ticket has been used and could not be considered as valid.
The Immigration Officer brought Jesus Fernando to the interrogation room of the Immigration and
Naturalization Services where he was asked humiliating questions for more than two (2) hours. When he
was finally cleared by the Immigration Officer, he was granted only a twelve-day stay in the United States,
instead of the usual six months.

When the Fernandos reached the gate area where boarding passes need to be presented, Northwest
supervisor Linda Tang stopped them and demanded for the presentation of their paper tickets (coupon
type). They failed to present the same since, according to them, Northwest issued electronic tickets
(attached to the boarding passes) which they showed to the supervisor. In the presence of the other
passengers, Linda Tang rudely pulled them out of the queue. Elizabeth Fernando explained to Linda
Tang that the matter could be sorted out by simply verifying their electronic tickets in her computer and all
she had to do was click and punch in their Elite Platinum World Perks Card number. But when the
Fernandos reached the boarding gate, the plane had already departed. They were able to depart, instead,
the day after, or on January 30, 2002, and arrived in the Philippines on January 31, 2002.

Northwest airlines employees on the other hand claim that they were “courteous” and “was very kind
enough” to assist them. Northwest also offered them free hotel accommodations but they, again, rejected
the offer Northwest then made arrangements for the transportation of the Fernandos from the airport to
their house in LA, and booked the Fernandos on a Northwest flight that would leave the next day, January
30, 2002. On January 30, 2002, the Fernandos flew to Manila on business class seats.

ISSUES:

(1) Whether or not there was breach of contract of carriage and whether it was done In a wanton,
malevolent or reckless manner amounting to bad faith.
(2) Whether or not Northwest is liable for the payment of moral damages and attorney’s fees and whether
it is liable to pay more than that awarded by the RTC.

HELD:

(1). Yes. The Fernandos’ cause of action against Northwest stemmed from a breach of contract of
carriage. A contract is a meeting of minds between two persons whereby one agrees to give something or
render some service to another for a consideration. There is no contract unless the following requisites
concur:

1. consent of the contracting parties; 

2. an object certain which is the subject of the contract; and 
3. the cause of the obligation which is established.

A contract of carriage is defined as one whereby a certain person or association of persons obligate
themselves to transport persons, things, or goods from one place to another for a fixed price.
Under Article 1732 of the Civil Code, this “persons, corporations, firms, or associations engaged in the
business of carrying or transporting passengers or goods or both, by land, water, or air, for compensation,
offering their services to the public” is called a common carrier. Undoubtedly, a contract of carriage
existed between Northwest and the Fernandos. They voluntarily and freely gave their consent to an
agreement whose object was the transportation of the Fernandos from LA to Manila, and whose cause or
consideration was the fare paid by the Fernandos to Northwest.

(2) Yes. Northwest is in bad faith. While We agree that the discrepancy between the date of actual travel
and the date appearing on the tickets of the Fernandos called for some verification, however, the
Northwest personnel failed to exercise the utmost diligence in assisting the Fernandos. The actuations of
Northwest personnel in both subject incidents are constitutive of bad faith.
On the first incident, Jesus Fernando even gave the Northwest personnel the number of his Elite Platinum
World Perks Card for the latter to access the ticket control record with the airline’s computer for her to see
that the ticket is still valid. But Linda Puntawongdaycha refused to check the validity of the ticket in the
computer. As a result, the Immigration Officer brought Jesus Fernando to the interrogation room of the
INS where he was interrogated for more than two (2) hours. When he was finally cleared by the
Immigration Officer, he was granted only a twelve (12)-day stay in the United States (US), instead of the
usual six (6) months.
LOADSTAR SHIPPING CO., INC. V.
MALAYAN INSURANCE CO., INC.,
G.R. NO. 185565, [NOVEMBER 26,
2014]
FACTS: Loadstar International Shipping, Inc. (Loadstar Shipping) and Philippine
Associated Smelting and Refining Corporation (PASAR) entered into a Contract of
Affreightment for domestic bulk transport of the latter’s copper concentrates for a
period of one year from November 1, 1998 to October 31, 1999. The contract was
extended up to the end of October 2000.

On September 10, 2000, 5,065.47 wet metric tons (WMT) of copper concentrates
were loaded in Cargo Hold. Nos. 1 and 2 of MV “Bobcat”, a marine vessel owned by
Loadstar International Shipping Co., Inc. (Loadstar International) and operated by
Loadstar Shipping under a charter party agreement. The shipper and consignee
under the Bill of Lading are Philex Mining Corporation (Philex) and PASAR,
respectively. The cargo was insured with Malayan Insurance Company, Inc.
(Malayan) under Open Policy No. M/OP/2000/001-582. P & I Association is the third
party liability insurer of Loadstar Shipping.

On said date (September 10, 2000), MV “Bobcat” sailed from Poro Point, San
Fernando, La Union bound for Isabel, Leyte. On September 12, 2000, while in the
vicinity of Cresta de Gallo, the vessel’s chief officer on routine inspection found a
crack on starboard side of the main deck which caused seawater to enter and wet the
cargo inside Cargo Hold No. 2 forward/aft. The cracks at the top deck starboard side
of Cargo Hold No. 2, measuring 1.21 meters long x 0.39 meters wide, and at top deck
aft section starboard side on other point, measuring 0.82 meters long x 0.32 meters
wide, were welded.

Immediately after the vessel arrived at Isabel, Leyte anchorage area, on September
13, 2000, PASAR and Philex’s representatives boarded and inspected the vessel and
undertook sampling of the copper concentrates. In its preliminary report dated
September 15, 2000, the Elite Adjusters and Surveyor, Inc. (Elite Surveyor) confirmed
that samples of copper concentrates from Cargo Hold No. 2 were contaminated by
seawater. Consequently, PASAR rejected 750 MT of the 2,300 MT cargo discharged
from Cargo Hold No. 2.

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On November 6, 2000, PASAR sent a formal notice of claim in the amount of
[P]37,477,361.31 to Loadstar Shipping. In its final report dated November 16, 2000,
Elite Surveyor recommended payment to the assured the amount of [P]32,351,102.32
as adjusted. On the basis of such recommendation, Malayan paid PASAR the amount
of [P]32,351,102.32.

Meanwhile, on November 24, 2000, Malayan wrote Loadstar Shipping informing the
latter of a prospective buyer for the damaged copper concentrates and the
opportunity to nominate/refer other salvage buyers to PASAR. On November 29,
2000, Malayan wrote Loadstar Shipping informing the latter of the acceptance of
PASAR’s proposal to take the damaged copper concentrates at a residual value of
US$90,000.00. On December 9, 2000, Loadstar Shipping wrote Malayan requesting
for the reversal of its decision to accept PASAR’s proposal and the conduct of a
public bidding to allow Loadstar Shipping to match or top PASAR’s bid by 10%.

On January 23, 2001, PASAR signed a subrogation receipt in favor of Malayan. To

recover the amount paid and in the exercise of its right of subrogation, Malayan
demanded reimbursement from Loadstar Shipping, which refused to comply.
Consequently, on September 19, 2001, Malayan instituted with the RTC a complaint
for damages. The complaint was later amended to include Loadstar International as
party defendant.

ISSUE: WON THE INSURER IS VALIDLY SUBROGATED TO THE RIGHTS OF THE

CONSIGNEE.

HELD: NO. Malayan’s claim against the petitioners is based on subrogation to the

rights possessed by PASAR as consignee of the allegedly damaged goods. The right
of subrogation stems from Article 2207 of the New Civil Code which states:

Art. 2207. If the plaintiff’s 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 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 from the person causing the
loss or injury.

“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.” The right of subrogation is however, not absolute.
“There are a few recognized exceptions to this rule. For instance, if the assured by his
own act releases the wrongdoer or third party liable for the loss or damage, from
liability, the insurer’s right of subrogation is defeated. . . . Similarly, where the insurer
 pays the assured the value of the lost goods without notifying the carrier who has in
good faith settled the assured’s claim for loss, the settlement is binding on both the
assured and the insurer, and the latter cannot bring an action against the carrier on
his right of subrogation. . . . And where the insurer pays the assured for a loss which
is not a risk covered by the policy, thereby effecting ‘voluntary payment,’ the former
has no right of subrogation against the third party liable for the loss . . . .”

The rights of a subrogee cannot be superior to the rights possessed by a subrogor.

“Subrogation is the substitution of one person in the place of another with reference to
a lawful claim or right, so that he who is substituted succeeds to the rights of the other
in relation to a debt or claim, including its remedies or securities. The rights to which
the subrogee succeeds are the same as, but not greater than, those of the person for
whom he is substituted, that is, he cannot acquire any claim, security or remedy the
subrogor did not have. In other words, a subrogee cannot succeed to a right not
possessed by the subrogor. A subrogee in effect steps into the shoes of the insured
and can recover only if the insured likewise could have recovered.”

Consequently, an insurer indemnifies the insured based on the loss or injury the latter
actually suffered from. If there is no loss or injury, then there is no obligation on the
part of the insurer to indemnify the insured. Should the insurer pay the insured and it
turns out that indemnification is not due, or if due, the amount paid is excessive, the
insurer takes the risk of not being able to seek recompense from the alleged
wrongdoer. This is because the supposed subrogor did not possess the right to be
indemnified and therefore, no right to collect is passed on to the subrogee.

Pioneer Insurance & Surety Corp v APL Co

Pte Ltd
CaseID: 
CMI1496
Summary: 
This petition for review on certiorari seeks to reverse and set aside the judgment of the Court of
Appeals (CA) in CA-GR SP No 143912.
On 13 January 2012, the shipper, Chillies Export House Ltd, turned over to the respondent, APL Co
Pte Ltd (APL), 250 bags of chili pepper for transport from the port of Chennai, India, to Manila. The
shipment, with a total declared value of USD 12,272.50, was loaded onto the M/V Wan Hai 262. The
consignee, BSFIL Technologies Inc (BSFIL), insured the cargo with the petitioner. On 2 February
2012, the shipment arrived at the port of Manila and was temporarily stored at North Harbour,
Manila. On 6 February 2012, the bags of chili were withdrawn and delivered to BSFIL. Upon receipt,
it discovered that 76 bags were wet and heavily infested with mould. The shipment was declared
unfit for human consumption and was eventually declared as a total loss. As a result, BSFIL made a
formal claim against APL and the petitioner. The latter paid BSFIL PHP 195,505.65 after evaluating
the claim, and then sued APL.
The trial Court granted the complaint, and ordered APL to pay the petitioner the amount claimed.
The trial Court declared that as a common carrier, APL was bound to observe extraordinary
diligence. It noted that, because the goods were damaged while in APL's custody, it was presumed
that APL did not exercise extraordinary diligence, and that the latter failed to overcome such
presumption. The regional trial Court upheld the trial Court's ruling. APL appealed to the CA. The CA
reversed the decisions of the trial Courts, and ruled that the action was barred by prescription. The
CA noted that under cl 8 of the bill of lading, the carrier is absolved from any liability unless a case is
filed within nine months after the delivery of the goods. It explained that a shorter prescriptive period
may be stipulated upon, provided that it is reasonable. The CA held that the nine-month prescriptive
period set out in the bill of lading was reasonable, and provided a sufficient period of time within
which an action to recover any loss or damage arising from the contract of carriage might be
instituted. The petitioner appealed to the Supreme Court.
Held: The petition is granted. The decision of the regional trial Court is reinstated.
The petitioner insists that the action, which was filed on 1 February 2013, was within the one-year
prescriptive period under COGSA after BSFIL received the goods on 6 February 2012. It argues that
the nine-month period provided under the bill of lading is inapplicable, because the bill of lading itself
states that in the event that this time period is found to be contrary to any law compulsorily
applicable, the period prescribed by that law shall apply. The stipulation in the bill of lading is
subordinate to COGSA. While parties are free to stipulate the terms and conditions of their contract,
the same should not be contrary to law, morals, good customs, public order, or public policy.
APL counters that the nine-month period under the bill of lading applies, unless there is a law to the
contrary. APL explains that 'absence' differs from 'contrary'. The nine-month period is applicable
because it is not contrary to any applicable law.
The petition is meritorious. It is true that in Philippine American General Insurance Co Inc v Sweet
Lines Inc 287 Phil 212 (1992), this Court recognised that stipulated prescriptive periods shorter than
their statutory counterparts are generally valid because they do not affect the liability of the carrier
but merely affect the shipper's remedy. The CA, nevertheless, erred in applying Philippine
American to this case as it does not fall squarely within the present circumstances.
The present case involves lost or damaged cargo. It has long been settled that in the case of loss or
damage of cargoes, the one-year prescriptive period under the COGSA applies: see Mitsui OSK
Lines Ltd v CA 350 Phil 813, 817-818 (1998) (CMI1497); Belgian Overseas Chartering & Shipping
NV v Philippine First Insurance Co Inc 432 Phil 567, 585 (2002) (CMI1495); Asian Terminals Inc v
Philam Insurance Co Inc 715 Phil 78, 98 (2013) (CMI1498).
A reading of the bill of lading reveals that the nine-month prescriptive period is not applicable in all
actions or claims. As an exception, the nine-month period is inapplicable when there is a different
period provided by a law for a particular claim or action - unlike in Philippine American, where the bill
of lading stipulated a prescriptive period for actions without exceptions. The exception under the bill
of lading became operative, because there is a compulsory law applicable which provides for a
different prescriptive period. Hence, strictly applying the terms of the bill of lading, the one-year
prescriptive period under COGSA should govern, because the present case involves loss of goods.
In finding so, the Court does not construe the bill of lading any further, but merely applies its terms
according to its plain and literal meaning.
Parties: 
Pioneer Insurance & Surety Corp, APL Co Pte Ltd, Chillies Export House Ltd, the M/V Wan Hai 262,
BSFIL Technologies Inc
Other Reference: 
Pioneer Insurance & Surety Corp v APL Co Pte Ltd, GR No 226345, 815 Phil 439
Date: 
02/08/2017
Tribunal: 
Supreme Court, Second Division
Judges: 
Mendoza, Carpio, Peralta, Leonen, Martires JJ
Keywords: 
Carriage of goods by sea, cargo damage, time bar, limitation of actions, prescription, shorter
contractual time bar contrary to Convention
Web URL: 
https://elibrary.judiciary.gov.ph/thebookshelf/showdocs/1/63272
Year:

 2017

Jurisdiction:

 Philippines

G.R. No. 209969, September 27, 2017JOSE SANICO AND VICENTE CASTRO
v.
WERHERLINA P. COLIPANOFacts:
at 4:00 P.M. more or less of December 25, 1993,
Christmas Day
, she and her daughter were; paying passengers inthe jeepney operated by Sanico, which was driven
by Castro.5 Colipano claimed she was made to sit on an emptybeer case at the edge of the rear
entrance/exit of the jeepney with her sleeping child on her lap.6 And, at an uphillincline in the road to
Natimao-an, Carmen, Cebu, the jeepney slid backwards because it did not have the power toreach the
top.7 Colipano pushed both her feet against the step board to prevent herself and her child from
beingthrown out of the exit, but because the step board was wet, her left foot slipped and got
crushed between the stepboard and a coconut tree which the jeepney bumped, causing the jeepney
to stop its backward movement.8 Colipano'sleg was badly injured and was eventually amputated.RTC:
Sanico and Castro liable for breach of' contract of carriageCA: affirmed with modifications
Issue:
Whether the CA erred in finding that Sanico and Castro breached the contract of carriage with
Colipano;Whether the Affidavit of Desistance and Release of Claim is binding on Colipano
Held:
Only Sanico breached the contract of carriage.
Since the cause of action is based on a breach of a contract of carriage, the liability of Sanico is direct
as the contractis between him and Colipano. Castro, being merely the driver of Sanico's jeepney,
cannot be made liable as he is nota party to the contract of carriage. In Soberano v. Manila Railroad
Co.,18 the Court ruled that a complaint for breachof a contract of carriage is dismissible as against the
employee who was driving the bus because the parties to thecontract of carriage are only the
passenger, the bus owner, and the operator, viz.:The complaint against Caccam was therefore
properly dismissed. He was not a party to the contract; he was a mereemployee of the BAL. The
parties to that contract are Juana Soberano, the passenger, and the MRR and its subsidiary,the BAL,
the bus owner and operator, respectively; and consequent to the inability of the defendant
companies to carryJuana Soberano and her baggage arid personal effects securely and safely to her
destination as imposed by law (art.1733, in relation to arts. 1736 and 1755, N.C.C.), their liability to
her becomes direct and immediate.19Since Castro was not a party to the contract of carriage,
Colipano had no cause of action against him and the pomplaintagainst him should be dismissed.
Although he was driving the jeepney, he was a mere employee of Sanico, who wasthe operator and
owner of the jeepney. The obligation to carry Colipano safely to her destination was with Sanico.
Infact, the elements of a contract of carriage existeid between Colipano and Sanico: consent, as
shown when Castro, asemployee of Sanico, accepted Colipano as a passenger when he allowed
Colipano to board the jeepney, and as toColipano, when she boarded the jeepney; cause or
consideration, when Colipano, for her part, paid her fare; and,object, the transportation of Colipano
from the place of departure to the place of destination.Sanico is liable as operator and owner of a
common carrier.Being an operator and owner of a common carrier, Sanico was required to observe
extraordinary diligence in safelytransporting Colipano. When Colipano's leg was injured while she was
a passenger in Sanico's jeepney, the presumptionof fault or negligence on Sanico's part arose and he
had the burden to prove that he exercised the extraordinarydiligence required of him. He failed to do
this. Sanico failed to rebut the presumption of fault or negligence under theCivil Code. More than this,
the evidence indubitably established Sanico's negligence when Castro made Colipano sit onan empty
beer case at the edge of the rear entrance/exit of the jeepney with her sleeping child on her lap,
which puther and her child in greater peril than the other passengers. The CA also correctly held that
the!defense of enginefailure, instead of exonerating Sanico, only aggravated his already precarious
position.26 The engine failure "hintedlack of regular check and maintenance to ensure that the
engine is at its best, considering that the jeepney regularlypasses through a mountainous area."27
This failure to ensure that the jeepney can safely transport passengers throughits route which
required navigation through a mountainous area is proof of fault on Sanico's part. In the face of
suchevidence, there is no question as to Sanico's fault or negligence