qwertyuiopasdfghjklzxcvbnmqw

ertyuiopasdfghjklzxcvbnmqwert
yuiopasdfghjklzxcvbnmqwertyui
opasdfghjklzxcvbnmqwertyuiopa
Transportation Law

sdfghjklzxcvbnmqwertyuiopasdf
Case Digest

ghjklzxcvbnmqwertyuiopasdfghj
BARCENA

klzxcvbnmqwertyuiopasdfghjklzx
cvbnmqwertyuiopasdfghjklzxcvb
nmqwertyuiopasdfghjklzxcvbnm
qwertyuiopasdfghjklzxcvbnmqw
ertyuiopasdfghjklzxcvbnmqwert
yuiopasdfghjklzxcvbnmqwertyui
opasdfghjklzxcvbnmqwertyuiopa
sdfghjklzxcvbnmqwertyuiopasdf
ghjklzxcvbnmqwertyuiopasdfghj
klzxcvbnmqwertyuiopasdfghjklzx
cvbnmrtyuiopasdfghjklzxcvbnmq
wertyuiopasdfghjklzxcvbnmqwer
tyuiopasdfghjklzxcvbnmqwertyui
 Table of Contents

BIENVENIDO GELISAN, vs. BENITO ALDAY..................................................................5

Ma.Louisa Benedicto v. International Appellate Court................................................7

ALBERTA YOBIDO and CRESENCIO YOBIDO, vs. COURT OF APPEALS, LENY TUMBOY,
ARDEE TUMBOY and JASMIN TUMBOY.......................................................................11

VALENZUELA HARDWOOD AND INDUSTRIAL SUPPLY INC., vs. COURT OF APPEALS

AND SEVEN BROTHERS SHIPPING CORPORATION.....................................................15

MAURO GANZON vs. COURT OF APPEALS and GELACIO E. TUMAMBING..................19

SARKIES TOURS PHILIPPINES, INC. vs. C.A., DR. ELINO G. FORTADES, MARISOL A.
FORTADES and FATIMA MINERVA A. FORTADES.........................................................22

COMPAIA MARITIMA, v INSURANCE COMPANY OF NORTH AMERICA.......................25

LU DO & LU YM CORPORATION vs I. V. BINAMIRA.....................................................30

AMPARO C. SERVANDO, CLARA UY BICO vs PHILIPPINE STEAM NAVIGATION CO.......33

ANICETO G. SALUDO, JR., et.al vs CA - TRANS WORLD AIRLINES, INC., and

PHILIPPINE AIRLINES, INC......................................................................................... 36

BENITO MACAM vs. COURT OF APPEALS - CHINA OCEAN SHIPPING CO., and/or
WALLEM PHILIPPINES SHIPPING, INC.........................................................................60

MAERSK LINE, vs. CA - CASTILLO,.............................................................................67

SWEET LINES, INC., vs. HON. BERNARDO TEVES......................................................72

NORBERTO QUISUMBING, SR., and GUNTHER LOEFFLER vs. CA - PAL......................76

PAN AMERICAN WORLD AIRWAYS, INC., V. RAPADAS.................................................80

ALITALIA v IAC........................................................................................................... 82

H. E. HEACOCK COMPANY, vs. MACONDRAY & COMPANY, INC..................................87

FIRST PHILIPPINE INDUSTRIAL CORPORATION, vs. COURT OF APPEALS TAC-AN.....91

NORBERTO QUISUMBING, SR., and GUNTHER LOEFFLER vs. COURT OF APPEALS and
PHILIPPINE AIR LINES, INC........................................................................................ 96

Pan American World Airways, Inc., v. Rapadas.......................................................100

HERMINIO L. NOCUM vs.LAGUNA TAYABAS BUS COMPANY.....................................105

JOSE P. MECENAS et.al vs. CA - SANTISTEBAN and NEGROS NAVIGATION CO., INC.
............................................................................................................................... 108

NEGROS NAVIGATION CO., INC., v. CA - MIRANDA, SPS. DE LA VICTORIA...............111

KOREAN AIRLINES CO., LTD., vs. CA - LAPUZ.........................................................114

BIENVENIDO GELISAN, vs. BENITO ALDAY
G.R. No. L-30212 September 30, 1987
FACTS:

On January 31, 1962, Bienvenido Gelisan [petitioner] and Roberto Espiritu entered
into a contract, under which Espiritu hired the freight truck of Gelisan for the
purpose of hauling rice, sugar, flour and fertilizer at an agreed price of P18.00 per
trip within the limits of the City of Manila provided the loads shall not exceed 200
sacks. It was also agreed that Espiritu shall bear and pay all losses and damages
attending the carriage of the goods to be hauled by him. The truck was taken by a
driver of Roberto Espiritu on February 1, 1962.

Benito Alday [respondent], a trucking operator, and who owns about 15 freight
trucks, had known the defendant Roberto Espiritu since 1948 as a truck operator.
Alday then had a contract to haul the fertilizers of the Atlas Fertilizer Corporation
from Pier 4, North Harbor, to its Warehouse in Mandaluyong. Alday met Espiritu and
the latter offered the use of his truck with the driver and helper at 9 centavos per
bag of fertilizer. The offer was accepted by Alday and he instructed his checker
Celso Henson to let Roberto Espiritu haul the fertilizer.

Espiritu made two hauls of 200 bags of fertilizer per trip. The fertilizer was delivered
to the driver and helper of Espiritu with the necessary way bill receipts. Espiritu,
however, did not deliver the fertilizer to the Atlas Fertolizer bodega at Mandaluyong.
The signatures appearing in the way bill receipts of the Alday Transportation
admittedly not the signature of any representative or employee of the Atlas
Fertilizer Corporation. Roberto Espiritu could not be found, and Alday reported the
loss to the Manila Police Department. Roberto Espiritu was later arrested and
booked for theft.

Benito Alday was compelled to pay the value of the 400 bags of fertilizer, in the
amount of P5,397.33, to Atlas Fertilizer Corporation so that, on 12 February 1962,
he (Alday) filed a complaint against Roberto Espiritu and Bienvenido Gelisan with
the Court of First Instance of Manila, docketed therein as Civil Case No. 49603, for
the recovery of damages suffered by him thru the criminal acts committed by the
defendants.

The defendant, Roberto Espiritu failed to file an answer and was, accordingly,
declared in default.

The defendant, Bienvenido Gelisan, upon the other hand, disowned responsibility.
He claimed that he had no contractual relations with the plaintiff Benito Alday as
regards the hauling and/or delivery of the 400 bags of fertilizer mentioned in the
complaint; that the alleged misappropriation or nondelivery by defendant Roberto
Espiritu of plaintiff's 400 bags of fertilizer, was entirely beyond his (Gelisan's)
control and knowledge, and which fact became known to him, for the first time, on 8
February 1962 when his freight truck, with plate No. TH-2377, was impounded by
the Manila Police Department, at the instance of the plaintiff; and that in his written
contract of hire with Roberto Espiritu, it was expressly provided that the latter will
bear and pay all loss and damages attending the carriage of goods to be hauled by
said Roberto Espiritu.

After trial, the Court of First Instance of Manila ruled that Roberto Espiritu alone was
liable to Benito Alday, since Bienvenido Gelisan was not privy to the contract
between Espiritu and Alday.

On appeal, however, the Court of Appeals, citing the case of Montoya vs.
Ignacio, found that Bienvenido Gelisan is likewise liable for being the registered
owner of the truck; and that the lease contract, executed by and between
Bienvenido Gelisan and Roberto Espiritu, is not binding upon Benito Alday for not
having been previously approved by the Public Service Commission. Accordingly, it
sentenced Bienvenido Gelisan to pay, jointly and severally with Roberto Espiritu,
Benito Alday the amount of P5,397.30, with legal interest thereon from the filing of
the complaint; and to pay the costs. Roberto Espiritu, in turn, was ordered to pay or
refund Bienvenido Gelisan whatever amount the latter may have paid to Benito
Alday by virtue of the judgment.

Hence, the present recourse by Bienvenido Gelisan.

ISSUE: WON Gelisan is liable.

HELD:

The Court has invariably held in several decisions that the registered owner of a
public service vehicle is responsible for damages that may arise from consequences
incident to its operation or that may be caused to any of the passengers
therein. The claim of the petitioner that he is not hable in view of the lease contract
executed by and between him and Roberto Espiritu which exempts him from liability
to third persons, cannot be sustained because it appears that the lease contract,
adverted to, had not been approved by the Public Service Commission. It is settled
in our jurisprudence that if the property covered by a franchise is transferred or
leased to another without obtaining the requisite approval, the transfer is not
binding upon the public and third persons.

Bienvenido Gelisan, the registered owner, is not however without recourse. He has a
right to be indemnified by Roberto Espiritu for the amount titat he may be required
to pay as damages for the injury caused to Benito Alday, since the lease contract in
question, although not effective against the public for not having been approved by
the Public Service Commission, is valid and binding between the contracting
parties.
Ma.Louisa Benedicto v. International Appellate Court
G.R. No. 70876 July 19, 1990
FACTS:

Private respondent Greenhills, a lumber manufacturing firm with business address

at Dagupan City, operates sawmill in Maddela, Quirino.

Sometime in May 1980, private respondent bound itself to sell and deliver to Blue
Star Mahogany, Inc., ("Blue Star") a company with business operations in
Valenzuela, Bulacan 100,000 board feet of sawn lumber with the understanding that
an initial delivery would be made on 15 May 1980. 1To effect its first delivery,
private respondent's resident manager in Maddela, Dominador Cruz, contracted
Virgilio Licuden, the driver of a cargo truck bearing Plate No. 225 GA TH to transport
its sawn lumber to the consignee Blue Star in Valenzuela, Bulacan. This cargo truck
was registered in the name of petitioner Ma. Luisa Benedicto, the proprietor of
Macoven Trucking, a business enterprise engaged in hauling freight, with main
office in B.F. Homes, Paraaque.

On 15 May 1980, Cruz in the presence and with the consent of driver Licuden,
supervised the loading of 7,690 board feet of sawn lumber with invoice value of
P16,918.00 aboard the cargo truck. Before the cargo truck left Maddela for
Valenzuela, Bulacan, Cruz issued to Licuden Charge Invoices Nos. 3259 and 3260
both of which were initialed by the latter at the bottom left corner. 2 The first invoice
was for the amount of P11,822.80 representing the value of 5,374 board feet of
sawn lumber, while the other set out the amount of P5,095.20 as the value of 2,316
board feet. Cruz instructed Licuden to give the original copies of the two (2) invoices
to the consignee upon arrival in Valenzuela, Bulacan 3 and to retain the duplicate
copies in order that he could afterwards claim the freightage from private
respondent's Manila office. 4

On 16 May 1980, the Manager of Blue Star called up by long distance telephone
Greenhills' president, Henry Lee Chuy, informing him that the sawn lumber on board
the subject cargo truck had not yet arrived in Valenzuela, Bulacan. The latter in turn
informed Greenhills' resident manager in its Maddela saw-mill of what had
happened. In a letter 5 dated 18 May 1980, Blue Star's administrative and personnel
manager, Manuel R. Bautista, formally informed Greenhills' president and general
manager that Blue Star still had not received the sawn lumber which was supposed
to arrive on 15 May 1980 and because of this delay, "they were constrained to look
for other suppliers."

On 25 June 1980, after confirming the above with Blue Star and after trying vainly to
persuade it to continue with their contract, private respondent Greenhill's filed
Criminal Case No. 668 against driver Licuden for estafa. Greenhills also filed against
petitioner Benedicto Civil Case No. D-5206 for recovery of the value of the lost sawn
lumber plus damages before the RTC of Dagupan City.

In her answer, 6 petitioner Benedicto denied liability alleging that she was a
complete stranger to the contract of carriage, the subject truck having been earlier
sold by her to Benjamin Tee, on 28 February 1980 as evidenced by a deed of
sale. 7 She claimed that the truck had remained registered in her name
notwithstanding its earlier sale to Tee because the latter had paid her only
P50,000.00 out of the total agreed price of P68,000.00 However, she averred that
Tee had been operating the said truck in Central Luzon from that date (28 February
1980) onwards, and that, therefore, Licuden was Tee's employee and not hers.

On 20 June 1983, based on the finding that petitioner Benedicto was still the
registered owner of the subject truck, and holding that Licuden was her employee,
the trial court found Benedicto liable and ordered her to pay GWI Co. Inc.

On 30 January 1985, upon appeal by petitioner, the Intermediate Appellate Court

affirmed 9 the decision of the trial court in toto. Like the trial court, the appellate
court held that since petitioner was the registered owner of the subject vehicle,
Licuden the driver of the truck, was her employee, and that accordingly petitioner
should be responsible for the negligence of said driver and bear the loss of the sawn
lumber plus damages. Petitioner moved for reconsideration, without success. 10

ISSUE:

WON under the facts and applicable law, the appellate court was correct in finding
that petitioner, being the registered owner of the carrier, liable for the value of the
undelivered or lost sawn lumber.

WON the principle should apply only to cases involving negligence and resulting
injury to or death of passengers, and not to cases involving merely carriage of
goods.

WON there was no perfected contract of carriage.

RULING:

There is no dispute that petitioner Benedicto has been holding herself out to the
public as engaged in the business of hauling or transporting goods for hire or
compensation. Petitioner Benedicto is, in brief, a common carrier.

The prevailing doctrine on common carriers makes the registered owner liable for
consequences flowing from the operations of the carrier, even though the specific
vehicle involved may already have been transferred to another person. This
doctrine rests upon the principle that in dealing with vehicles registered under the
Public Service Law, the public has the right to assume that the registered owner is
the actual or lawful owner thereof It would be very difficult and often impossible as
a practical matter, for members of the general public to enforce the rights of action
that they may have for injuries inflicted by the vehicles being negligently operated
if they should be required to prove who the actual owner is. 11 The registered owner
is not allowed to deny liability by proving the identity of the alleged transferee.
Thus, contrary to petitioner's claim, private respondent is not required to go beyond
the vehicle's certificate of registration to ascertain the owner of the carrier. In this
regard, the letter presented by petitioner allegedly written by Benjamin Tee
admitting that Licuden was his driver, had no evidentiary value not only because
Benjamin Tee was not presented in court to testify on this matter but also because
of the aforementioned doctrine. To permit the ostensible or registered owner to
prove who the actual owner is, would be to set at naught the purpose or public
policy which infuses that doctrine.

In fact, private respondent had no reason at all to doubt the authority of Licuden to
enter into a contract of carriage on behalf of the registered owner. It appears that,
earlier, in the first week of May 1980, private respondent Greenhills had contracted
Licuden who was then driving the same cargo truck to transport and carry a load of
sawn lumber from the Maddela sawmill to Dagupan City. 12 No one came forward to
question that contract or the authority of Licuden to represent the owner of the
carrier truck.

Moreover, assuming the truth of her story, petitioner Benedicto retained registered
ownership of the freight truck for her own benefit and convenience, that is, to
secure the payment of the balance of the selling price of the truck. She may have
been unaware of the legal security device of chattel mortgage; or she, or her buyer,
may have been unwilling to absorb the expenses of registering a chattel mortgage
over the truck. In either case, considerations both of public policy and of equity
require that she bear the consequences flowing from registered ownership of the
subject vehicle.

In the second issue:

A common carrier, both from the nature of its business and for insistent reasons of
public policy, is burdened by the law with the duty of exercising extraordinary
diligence not only in ensuring the safety of passengers but also in caring for goods
transported by it. 13 The loss or destruction or deterioration of goods turned over to
the common carrier for conveyance to a designated destination, raises instantly a
presumption of fault or negligence on the part of the carrier, save only where such
loss, destruction or damage arises from extreme circumstances such as a natural
disaster or calamity or act of the public enemy in time of war, or from an act or
omission of the shipper himself or from the character of the goods or their
packaging or container. 14

This presumption may be overcome only by proof of extraordinary diligence on the

part of the carrier. 15 Clearly, to permit a common carrier to escape its responsibility
for the passengers or goods transported by it by proving a prior sale of the vehicle
or means of transportation to an alleged vendee would be to attenuate drastically
the carrier's duty of extraordinary diligence. It would also open wide the door to
collusion between the carrier and the supposed vendee and to shifting liability from
the carrier to one without financial capability to respond for the resulting damages.
In other words, the thrust of the public policy here involved is as sharp and real in
the case of carriage of goods as it is in the transporting of human beings. Thus, to
sustain petitioner Benedicto's contention, that is, to require the shipper to go behind
a certificate of registration of a public utility vehicle, would be utterly subversive of
the purpose of the law and doctrine.

On the third Issue:

Once more, we are not persuaded by petitioner's arguments which appear to be a
transparent attempt to evade statutory responsibilities. Driver Licuden was
entrusted with possession and control of the freight truck by the registered owner
(and by the alleged secret owner, for that matter) Driver Licuden, under the
circumstances, was clothed with at least implied authority to contract to carry
goods and to accept delivery of such goods for carriage to a specified destination.
That the freight to be paid may-not have been fixed before loading and carriage, did
not prevent the contract of carriage from arising, since the freight was at least
determinable if not fixed by the tariff schedules in petitioner's main business office.
Put in somewhat different terms, driver Licuden is in law regarded as the employee
and agent of the petitioner, for whose acts petitioner must respond. A contract of
carriage of goods was shown; the sawn lumber was loaded on board the freight
truck; loss or non-delivery of the lumber at Blue Star's premises in Valenzuela,
Bulacan was also proven; and petitioner has not proven either that she had
exercised extraordinary diligence to prevent such loss or non-delivery or that the
loss or non-delivery was due to some casualty or force majeure inconsistent with
her liability. 16 Petitioner's liability to private respondent Greenhills was thus fixed
and complete, without prejudice to petitioner's right to proceed against her putative
transferee Benjamin Tee and driver Licuden for reimbursement or contribution. 17

WHEREFORE, the Petition for Review is DENIED for lack of merit and the Decision of
the former Intermediate Appellate Court dated 30 January 1985 is hereby
AFFIRMED.
ALBERTA YOBIDO and CRESENCIO YOBIDO, vs.
COURT OF APPEALS, LENY TUMBOY, ARDEE TUMBOY and JASMIN TUMBOY
GR NO. 113003 October 17, 1997
FACTS:

On April 26, 1988, spouses Tito and Leny Tumboy and their minor children named
Ardee and Jasmin, bearded at Mangagoy, Surigao del Sur, a Yobido Liner bus bound
for Davao City. Along Picop Road in Km. 17, Sta. Maria, Agusan del Sur, the left front
tire of the bus exploded. The bus fell into a ravine around three (3) feet from the
road and struck a tree. The incident resulted in the death of 28-year-old Tito Tumboy
and physical injuries to other passengers.

On November 21, 1988, a complaint for breach of contract of carriage, damages

and attorney's fees was filed by Leny and her children against Alberta Yobido, the
owner of the bus, and Cresencio Yobido, its driver, before the Regional Trial Court of
Davao City. When the defendants therein filed their answer to the complaint, they
raised the affirmative defense of caso fortuito. They also filed a third-party
complaint against Philippine Phoenix Surety and Insurance, Inc. This third-party
defendant filed an answer with compulsory counterclaim. At the pre-trial
conference, the parties agreed to a stipulation of facts. 1

Upon a finding that the third party defendant was not liable under the insurance
contract, the lower court dismissed the third party complaint. No amicable
settlement having been arrived at by the parties, trial on the merits ensued.

The plaintiffs asserted that violation of the contract of carriage between them and
the defendants was brought about by the driver's failure to exercise the diligence
required of the carrier in transporting passengers safely to their place of
destination. According to Leny Tumboy, the bus left Mangagoy at 3:00 o'clock in the
afternoon. The winding road it traversed was not cemented and was wet due to the
rain; it was rough with crushed rocks. The bus which was full of passengers had
cargoes on top. Since it was "running fast," she cautioned the driver to slow down
but he merely stared at her through the mirror. At around 3:30 p.m., in Trento, she
heard something explode and immediately, the bus fell into a ravine.

For their part, the defendants tried to establish that the accident was due to a
fortuitous event. Abundio Salce, who was the bus conductor when the incident
happened, testified that the 42-seater bus was not full as there were only 32
passengers, such that he himself managed to get a seat. He added that the bus was
running at a speed of "60 to 50" and that it was going slow because of the zigzag
road. He affirmed that the left front tire that exploded was a "brand new tire" that
he mounted on the bus on April 21, 1988 or only five (5) days before the incident.
The Yobido Liner secretary, Minerva Fernando, bought the new Goodyear tire from
Davao Toyo Parts on April 20, 1988 and she was present when it was mounted on
the bus by Salce. She stated that all driver applicants in Yobido Liner underwent
actual driving tests before they were employed. Defendant Cresencio Yobido
underwent such test and submitted his professional driver's license and clearances
from the barangay, the fiscal and the police.
On August 29, 1991, the lower court rendered a decision 2 dismissing the action for
lack of merit. On the issue of whether or not the tire blowout was a caso fortuito, it
found that "the falling of the bus to the cliff was a result of no other outside factor
than the tire blow-out." It held that the ruling in the La Mallorca and Pampanga Bus
Co. v. De Jesus 3 that a tire blowout is "a mechanical defect of the conveyance or a
fault in its equipment which was easily discoverable if the bus had been subjected
to a more thorough or rigid check-up before it took to the road that morning" is
inapplicable to this case. It reasoned out that in said case, it was found that the
blowout was caused by the established fact that the inner tube of the left front tire
"was pressed between the inner circle of the left wheel and the rim which had
slipped out of the wheel." In this case, however, "the cause of the explosion remains
a mystery until at present." As such, the court added, the tire blowout was "a caso
fortuito which is completely an extraordinary circumstance independent of the will"
of the defendants who should be relieved of "whatever liability the plaintiffs may
have suffered by reason of the explosion pursuant to Article 1174 4 of the Civil
Code."

Dissatisfied, the plaintiffs appealed to the Court of Appeals. CA ruled in their favour.

Hence the petition.

ISSUE:

WON the explosion of a newly installed tire of a passenger vehicle is a fortuitous

event that exempts the carrier from liability for the death of a passenger.

RULING:

The Court did re-examine the facts and evidence in this case because of the
inapplicability of the established principle that the factual findings of the Court of
Appeals are final and may not be reviewed on appeal by this Court. This general
principle is subject to exceptions such as the one present in this case, namely, that
the lower court and the Court of Appeals arrived at diverse factual
findings. 8 However, upon such re-examination, we found no reason to overturn the
findings and conclusions of the Court of Appeals.

As a rule, when a passenger boards a common carrier, he takes the risks incidental
to the mode of travel he has taken. After all, a carrier is not an insurer of the safety
of its passengers and is not bound absolutely and at all events to carry them safely
and without injury. 9 However, when a passenger is injured or dies while travelling,
the law presumes that the common carrier is negligent. Thus, the Civil Code
provides:

Art. 1756. In case of death or injuries to passengers, common carriers are

presumed to have been at fault or to have acted negligently, unless they
prove that they observed extraordinary diligence as prescribed in articles
1733 and 1755.
Article 1755 provides that "(a) common carrier is bound to carry the passengers
safely as far as human care and foresight can provide, using the utmost diligence of
very cautious persons, with a due regard for all the circumstances." Accordingly,
in culpa contractual, once a passenger dies or is injured, the carrier is presumed to
have been at fault or to have acted negligently. This disputable presumption may
only be overcome by evidence that the carrier had observed extraordinary diligence
as prescribed by Articles 1733, 10 1755 and 1756 of the Civil Code or that the death
or injury of the passenger was due to a fortuitous event. 11 Consequently, the court
need not make an express finding of fault or negligence on the part of the carrier to
hold it responsible for damages sought by the passenger. 12

In view of the foregoing, petitioners' contention that they should be exempt from
liability because the tire blowout was no more than a fortuitous event that could not
have been foreseen, must fail.

A fortuitous event is possessed of the following characteristics:

(a) the cause of the unforeseen and unexpected occurrence, or the failure of the
debtor to comply with his obligations, must be independent of human will;

(b) it must be impossible to foresee the event which constitutes the caso fortuito, or
if it can be foreseen, it must be impossible to avoid;

(c) the occurrence must be such as to render it impossible for the debtor to fulfill his
obligation in a normal manner; and

(d) the obliger must be free from any participation in the aggravation of the injury
resulting to the creditor. 13

As Article 1174 provides, no person shall be responsible for a fortuitous event which
could not be foreseen, or which, though foreseen, was inevitable. In other words,
there must be an entire exclusion of human agency from the cause of injury or
loss. 14

Under the circumstances of this case, the explosion of the new tire may not be
considered a fortuitous event. There are human factors involved in the situation.
The fact that the tire was new did not imply that it was entirely free from
manufacturing defects or that it was properly mounted on the vehicle. Neither may
the fact that the tire bought and used in the vehicle is of a brand name noted for
quality, resulting in the conclusion that it could not explode within five days' use. Be
that as it may, it is settled that an accident caused either by defects in the
automobile or through the negligence of its driver is not a caso fortuito that would
exempt the carrier from liability for damages. 15

Moreover, a common carrier may not be absolved from liability in case of force
majeure or fortuitous event alone. The common carrier must still prove that it
was not negligent in causing the death or injury resulting from an accident.
It is interesting to note that petitioners proved through the bus conductor, Salce,
that the bus was running at "60-50" kilometers per hour only or within the
prescribed lawful speed limit. However, they failed to rebut the testimony of Leny
Tumboy that the bus was running so fast that she cautioned the driver to slow
down. These contradictory facts must, therefore, be resolved in favor of liability in
view of the presumption of negligence of the carrier in the law. Coupled with this is
the established condition of the road rough, winding and wet due to the rain. It
was incumbent upon the defense to establish that it took precautionary measures
considering partially dangerous condition of the road. As stated above, proof that
the tire was new and of good quality is not sufficient proof that it was not negligent.
Petitioners should have shown that it undertook extraordinary diligence in the care
of its carrier, such as conducting daily routinary check-ups of the vehicle's parts.

Having failed to discharge its duty to overthrow the presumption of negligence with
clear and convincing evidence, petitioners are hereby held liable for damages.
Article 1764 19 in relation to Article 2206 20 of the Civil Code prescribes the amount of
at least three thousand pesos as damages for the death of a passenger. Under
prevailing jurisprudence, the award of damages under Article 2206 has been
increased to fifty thousand pesos (P50,000.00). 21

Moral damages are generally not recoverable in culpa contractual except when bad
faith had been proven. However, the same damages may be recovered when
breach of contract of carriage results in the death of a passenger, 22 as in this case.
Exemplary damages, awarded by way of example or correction for the public good
when moral damages are awarded, 23 may likewise be recovered in contractual
obligations if the defendant acted in wanton, fraudulent, reckless, oppressive, or
malevolent manner. 24 Because petitioners failed to exercise the extraordinary
diligence required of a common carrier, which resulted in the death of Tito Tumboy,
it is deemed to have acted recklessly. 25 As such, private respondents shall be
entitled to exemplary damages.

WHEREFORE, the Decision of the Court of Appeals is hereby AFFIRMED subject to

the modification that petitioners shall, in addition to the monetary awards therein,
be liable for the award of exemplary damages in the amount of P20,000.00. Costs
against petitioners.

SO ORDERED
VALENZUELA HARDWOOD AND INDUSTRIAL SUPPLY INC., vs.
COURT OF APPEALS AND SEVEN BROTHERS SHIPPING CORPORATION
G.R. No. 102316 June 30, 1997
FACTS:

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.

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.

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

Hence the petition.

ISSUE:

WON CA committed a reversible error in upholding the validity of the stipulation in

the charter party.

RULING:

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

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.
MAURO GANZON vs. COURT OF APPEALS and GELACIO E. TUMAMBING

G.R. No. L-48757 May 30, 1988

FACTS:

On November 28, 1956, Gelacio Tumambing contracted the services of Mauro B.

Ganzon to haul 305 tons of scrap iron from Mariveles, Bataan, to the port of Manila
on board the lighter LCT "Batman". Pursuant to that agreement, Mauro B. Ganzon
sent his lighter "Batman" to Mariveles where it docked in three feet of water.

On December 1, 1956, Gelacio Tumambing delivered the scrap iron to defendant

Filomeno Niza, captain of the lighter, for loading which was actually begun on the
same date by the crew of the lighter under the captain's supervision. When about
half of the scrap iron was already loaded, Mayor Jose Advincula of Mariveles,
Bataan, arrived and demanded P5,000.00 from Gelacio Tumambing. The latter
resisted the shakedown and after a heated argument between them, Mayor Jose
Advincula drew his gun and fired at Gelacio Tumambing The gunshot was not fatal
but Tumambing had to be taken to a hospital in Balanga, Bataan, for treatment.

After sometime, the loading of the scrap iron was resumed. But on December 4,
1956, Acting Mayor Basilio Rub, accompanied by three policemen, ordered captain
Filomeno Niza and his crew to dump the scrap iron where the lighter was docked.
The rest was brought to the compound of NASSCO. Later on Acting Mayor Rub
issued a receipt stating that the Municipality of Mariveles had taken custody of the
scrap iron.

CA reversed the decision and set it aside and ordered petitioner to pay private
respondent.

Hence the petition.

ISSUE:

WON there was a breach of contract

WON there was a fortuitous event that occurred, exempting the petitioner from
liability for the loss of the item in question.

WON should the employer be liable for the acts committed by his employees.

RULING:

The petitioner, in his first assignment of error, insists that the scrap iron had not
been unconditionally placed under his custody and control to make him liable.
However, he completely agrees with the respondent Court's finding that on
December 1, 1956, the private respondent delivered the scraps to Captain Filomeno
Niza for loading in the lighter "Batman," That the petitioner, thru his employees,
actually received the scraps is freely admitted. Significantly, there is not the
slightest allegation or showing of any condition, qualification, or restriction
accompanying the delivery by the private respondent-shipper of the scraps, or the
receipt of the same by the petitioner. On the contrary, soon after the scraps were
delivered to, and received by the petitioner-common carrier, loading was
commenced.

By the said act of delivery, the scraps were unconditionally placed in the possession
and control of the common carrier, and upon their receipt by the carrier for
transportation, the contract of carriage was deemed perfected. Consequently, the
petitioner-carrier's extraordinary responsibility for the loss, destruction or
deterioration of the goods commenced. Pursuant to Art. 1736, such extraordinary
responsibility would cease only upon the delivery, actual or constructive, by the
carrier to the consignee, or to the person who has a right to receive them. 5The fact
that part of the shipment had not been loaded on board the lighter did not impair
the said contract of transportation as the goods remained in the custody and control
of the carrier, albeit still unloaded.

The petitioner has failed to show that the loss of the scraps was due to any of the
following causes enumerated in Article 1734 of the Civil Code, namely:

(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 or 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.

Hence, the petitioner is presumed to have been at fault or to have acted

negligently. 6 By reason of this presumption, the court is not even required to make
an express finding of fault or negligence before it could hold the petitioner
answerable for the breach of the contract of carriage. Still, the petitioner could have
been exempted from any liability had he been able to prove that he observed
extraordinary diligence in the vigilance over the goods in his custody, according to
all the circumstances of the case, or that the loss was due to an unforeseen event
or to force majeure. As it was, there was hardly any attempt on the part of the
petitioner to prove that he exercised such extraordinary diligence.

It is in the second and third assignments of error where the petitioner maintains
that he is exempt from any liability because the loss of the scraps was due mainly
to the intervention of the municipal officials of Mariveles which constitutes a caso
fortuito as defined in Article 1174 of the Civil Code. 7

We cannot sustain the theory of caso fortuito. In the courts below, the petitioner's
defense was that the loss of the scraps was due to an "order or act of competent
public authority," and this contention was correctly passed upon by the Court of
Appeals which ruled that:

... In the second place, before the appellee Ganzon could be absolved from
responsibility on the ground that he was ordered by competent public authority to
unload the scrap iron, it must be shown that Acting Mayor Basilio Rub had the power
to issue the disputed order, or that it was lawful, or that it was issued under legal
process of authority. The appellee failed to establish this. Indeed, no authority or
power of the acting mayor to issue such an order was given in evidence. Neither has
it been shown that the cargo of scrap iron belonged to the Municipality of Mariveles.
What we have in the record is the stipulation of the parties that the cargo of scrap
iron was accilmillated by the appellant through separate purchases here and there
from private individuals (Record on Appeal, pp. 38-39). The fact remains that the
order given by the acting mayor to dump the scrap iron into the sea was part of the
pressure applied by Mayor Jose Advincula to shakedown the appellant for P5,000.00.
The order of the acting mayor did not constitute valid authority for appellee Mauro
Ganzon and his representatives to carry out.

Now the petitioner is changing his theory to caso fortuito. Such a change of theory
on appeal we cannot, however, allow. In any case, the intervention of the municipal
officials was not In any case, of a character that would render impossible the
fulfillment by the carrier of its obligation. The petitioner was not duty bound to obey
the illegal order to dump into the sea the scrap iron. Moreover, there is absence of
sufficient proof that the issuance of the same order was attended with such force or
intimidation as to completely overpower the will of the petitioner's employees. The
mere difficulty in the fullfilment of the obligation is not considered force majeure.
We agree with the private respondent that the scraps could have been properly
unloaded at the shore or at the NASSCO compound, so that after the dispute with
the local officials concerned was settled, the scraps could then be delivered in
accordance with the contract of carriage.

There is no incompatibility between the Civil Code provisions on common carriers

and Articles 361 8 and 362 9 of the Code of Commerce which were the basis for this
Court's ruling in Government of the Philippine Islands vs. Ynchausti & Co.10 and
which the petitioner invokes in tills petition. For Art. 1735 of the Civil Code,
conversely stated, means that the shipper will suffer the losses and deterioration
arising from the causes enumerated in Art. 1734; and in these instances, the burden
of proving that damages were caused by the fault or negligence of the carrier rests
upon him. However, the carrier must first establish that the loss or deterioration
was occasioned by one of the excepted causes or was due to an unforeseen event
or to force majeure. Be that as it may, insofar as Art. 362 appears to require of the
carrier only ordinary diligence, the same is .deemed to have been modified by Art.
1733 of the Civil Code.

WHEREFORE, the petition is DENIED; the assailed decision of the Court of Appeals is
hereby AFFIRMED. Costs against the petitioner.

This decision is IMMEDIATELY EXECUTORY.

SARKIES TOURS PHILIPPINES, INC. vs. C.A., DR. ELINO G. FORTADES, MARISOL A.
FORTADES and FATIMA MINERVA A. FORTADES

G.R. No. 108897 October 2, 1997

FACTS:

On August 31, 1984, Fatima boarded petitioner's De Luxe Bus No. 5 in Manila on her
way to Legazpi City. Her brother Raul helped her load three pieces of luggage
containing all of her optometry review books, materials and equipment, trial lenses,
trial contact lenses, passport and visa, as well as her mother Marisol's U.S.
immigration (green) card, among other important documents and personal
belongings. Her belongings were kept in the baggage compartment of the bus, but
during a stopover at Daet, it was discovered that only one bag remained in the open
compartment. The others, including Fatima's things, were missing and might have
dropped along the way. Some of the passengers suggested retracing the route of
the bus to try to recover the lost items, but the driver ignored them and proceeded
to Legazpi City.

Fatima immediately reported the loss to her mother who, in turn, went to
petitioner's office in Legazpi City and later at its head office in Manila. Petitioner,
however, merely offered her P1,000.00 for each piece of luggage lost, which she
turned down. After returning to Bicol, disappointed but not defeated, mother and
daughter asked assistance from the radio stations and even from Philtranco bus
drivers who plied the same route on August 31st. The effort paid off when one of
Fatima's bags was recovered. Marisol further reported the incident to the National
Bureau of Investigation's field office in Legazpi City and to the local police.

On September 20, 1984, respondents, through counsel, formally demanded

satisfaction of their complaint from petitioner. In a letter dated October 1, 1984, the
latter apologized for the delay and said that "(a) team has been sent out to Bicol for
the purpose of recovering or at least getting the full detail" 1 of the incident.

After more than nine months of fruitless waiting, respondents decided to file the
case below to recover the value of the remaining lost items, as well as moral and
exemplary damages, attorney's fees and expenses of litigation. They claimed that
the loss was due to petitioner's failure to observe extraordinary diligence in the care
of Fatima's luggage and that petitioner dealt with them in bad faith from the start.
Petitioner, on the other hand, disowned any liability for the loss on the ground that
Fatima allegedly did not declare any excess baggage upon boarding its bus.

Trial Court ruled in favour of the private respondents, and the appellate court
affirmed the trial court's judgment, but deleted the award of moral and exemplary
damages. Petitioners then filed for a motion for review before the CA, but CA
denied said petition.

Hence the petition.

ISSUE:

WON a common carrier may be responsible for the loss of the passengers
baggages

RULING:

Under the Civil Code, "(c)ommon 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 . . . transported by them," 6 and this liability "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 person who has a right to receive them," 7 unless the loss is
due to any of the excepted causes under Article 1734 thereof. 8

The cause of the loss in the case at bar was petitioner's negligence in not ensuring
that the doors of the baggage compartment of its bus were securely fastened. As a
result of this lack of care, almost all of the luggage was lost, to the prejudice of the
paying passengers. As the Court of Appeals correctly observed:

. . . . Where the common carrier accepted its passenger's baggage for

transportation and even had it placed in the vehicle by its own employee, its
failure to collect the freight charge is the common carrier's own lookout. It is
responsible for the consequent loss of the baggage. In the instant case,
defendant appellant's employee even helped Fatima Minerva Fortades and
her brother load the luggages/baggages in the bus' baggage compartment,
without asking that they be weighed, declared, receipted or paid for (TSN,
August 4, 1986, pp. 29, 34, 54, 57, 70; December 23, 1987, p. 35). Neither
was this required of the other passengers (TSN, August 4, 1986, p. 104;
February 5, 1988; p. 13).

WHEREFORE, the assailed decision of the Court of Appeals dated January 13, 1993,
and its resolution dated February 19, 1993, are hereby AFFIRMED with the
MODIFICATION that petitioner is ordered to pay respondents an additional
P20,000.00 as moral damages and P5,000.00 as exemplary damages. Costs against
petitioner.

SO ORDERED.
COMPAIA MARITIMA, v INSURANCE COMPANY OF NORTH AMERICA
G.R. No. L-18965 October 30, 1964

FACTS:

Sometime in October, 1952, Macleod and Company of the Philippines contracted by

telephone the services of the Compaia Maritima, a shipping corporation, for the
shipment of 2,645 bales of hemp from the former's Sasa private pier at Davao City
to Manila and for their subsequent transhipment to Boston, Massachusetts, U.S.A.
on board the S.S. Steel Navigator. This oral contract was later on confirmed by a
formal and written booking issued by Macleod's branch office in Sasa and
handcarried to Compaia Maritima's branch office in Davao in compliance with
which the latter sent to Macleod's private wharf LCT Nos. 1023 and 1025 on which
the loading of the hemp was completed on October 29, 1952. These two lighters
were manned each by a patron and an assistant patron. The patrons of both barges
issued the corresponding carrier's receipts and that issued by the patron of Barge
No. 1025 stating that the shipment was received in behalf of S.S. Bowline Knot in
good order and condition from MACLEOD AND COMPANY OF PHILIPPINES, Sasa
Davao, for transhipment at Manila onto S.S. Steel Navigator. FINAL DESTINATION:
Boston.

Thereafter, the two loaded barges left Macleod's wharf and proceeded to and
moored at the government's marginal wharf in the same place to await the arrival
of the S.S. Bowline Knot belonging to Compaia Maritima on which the hemp was to
be loaded.

During the night of October 29, 1952, or at the early hours of October 30, LCT No.
1025 sank, resulting in the damage or loss of 1,162 bales of hemp loaded therein.
On October 30, 1952, Macleod promptly notified the carrier's main office in Manila
and its branch in Davao advising it of its liability. The damaged hemp was brought
to Odell Plantation in Madaum, Davao, for cleaning, washing, reconditioning, and
redrying.

During the period from November 1-15, 1952, the carrier's trucks and lighters
hauled from Odell to Macleod at Sasa a total of 2,197.75 piculs of the reconditioned
hemp out of the original cargo of 1,162 bales weighing 2,324 piculs which had a
total value of 116,835.00. After reclassification, the value of the reconditioned hemp
was reduced to P84,887.28, or a loss in value of P31,947.72. Adding to this last
amount the sum of P8,863.30 representing Macleod's expenses in checking,
grading, rebating, and other fees for washing, cleaning and redrying in the amount
of P19.610.00, the total loss adds up to P60,421.02.

All abaca shipments of Macleod, including the 1,162 bales loaded on the carrier's
LCT No. 1025, were insured with the Insurance Company of North America against
all losses and damages. In due time, Macleod filed a claim for the loss it suffered as
above stated with said insurance company, and after the same had been processed,
the sum of P64,018.55 was paid, which was noted down in a document which aside
from being a receipt of the amount paid, was a subrogation agreement between
Macleod and the insurance company wherein the former assigned to the latter its
rights over the insured and damaged cargo. Having failed to recover from the
carrier the sum of P60,421.02, which is the only amount supported by receipts, the
insurance company instituted the present action on October 28, 1953. After trial,
the court a quo rendered judgment ordering the carrier to pay the insurance
company the sum of P60,421.02, with legal interest thereon from the date of the
filing of the complaint until fully paid, and the costs. This judgment was affirmed by
the Court of Appeals on December 14, 1960.

Hence, this petition for review.

ISSUE:

WON there was a contract of carriage between the carrier and the shipper even if
the loss occurred when the hemp was loaded on a barge owned by the carrier which
was loaded free of charge and was not actually loaded on the S.S. Bowline Knot
which would carry the hemp to Manila and no bill of lading was issued therefore?;

WON that the damage caused to the cargo or the sinking of the barge where it was
loaded due to a fortuitous event, storm or natural disaster that would exempt the
carrier from liability?;

WON can respondent insurance company sue the carrier under its insurance
contract as assignee of Macleod in spite of the fact that the liability of the carrier as
insurer is not recognized in this jurisdiction?;

WON CA erred in regarding Exhibit NNN-1 as an implied admission by the carrier of

the correctness and sufficiency of the shipper's statement of accounts contrary to
the burden of proof rule?; and

WON can the insurance company maintain this suit without proof of its personality
to do so?

RULING

1. This issue should be answered in the affirmative. As found by the Court of

Appeals, Macleod and Company contracted by telephone the services of petitioner
to ship the hemp in question from the former's private pier at Sasa, Davao City, to
Manila, to be subsequently transhipped to Boston, Massachusetts, U.S.A., which oral
contract was later confirmed by a formal and written booking issued by the
shipper's branch office, Davao City, in virtue of which the carrier sent two of its
lighters to undertake the service. It also appears that the patrons of said lighters
were employees of the carrier with due authority to undertake the transportation
and to sign the documents that may be necessary therefor so much so that the
patron of LCT No. 1025 signed the receipt covering the cargo of hemp loaded
therein.
The fact that the carrier sent its lighters free of charge to take the hemp from
Macleod's wharf at Sasa preparatory to its loading onto the ship Bowline Knot does
not in any way impair the contract of carriage already entered into between the
carrier and the shipper, for that preparatory step is but part and parcel of said
contract of carriage. The lighters were merely employed as the first step of the
voyage, but once that step was taken and the hemp delivered to the carrier's
employees, the rights and obligations of the parties attached thereby subjecting
them to the principles and usages of the maritime law. In other words, here we have
a complete contract of carriage the consummation of which has already begun: the
shipper delivering the cargo to the carrier, and the latter taking possession thereof
by placing it on a lighter manned by its authorized employees, under which Macleod
became entitled to the privilege secured to him by law for its safe transportation
and delivery, and the carrier to the full payment of its freight upon completion of
the voyage.

The receipt of goods by the carrier has been said to lie at the foundation of
the contract to carry and deliver, and if actually no goods are received there
can be no such contract. The liability and responsibility of the carrier under a
contract for the carriage of goods commence on their actual delivery to,
or receipt by, the carrier or an authorized agent. ... and delivery to a lighter in
charge of a vessel for shipment on the vessel, where it is the custom to
deliver in that way, is a good delivery and binds the vessel receiving the
freight, the liability commencing at the time of delivery to the lighter. ... and,
similarly, where there is a contract to carry goods from one port to another,
and they cannot be loaded directly on the vessel and lighters are sent by the
vessel to bring the goods to it, the lighters are for the time its substitutes, so
that the bill of landing is applicable to the goods as soon as they are placed
on the lighters. (80 C.J.S., p. 901, emphasis supplied)

... The test as to whether the relation of shipper and carrier had been
established is, Had the control and possession of the cotton been completely
surrendered by the shipper to the railroad company? Whenever the control
and possession of goods passes to the carrier and nothing remains to be
done by the shipper, then it can be said with certainty that the relation of
shipper and carrier has been established. Railroad Co. v. Murphy, 60 Ark. 333,
30 S.W. 419, 46 A. St. Rep. 202; Pine Bluff & Arkansas River Ry. v. MaKenzie,
74 Ark. 100, 86 S.W. 834; Matthews & Hood v. St. L., I.M. & S.R. Co., 123 Ark.
365, 185 S.W. 461, L.R.A. 1916E, 1194. (W.F. Bogart & Co., et al. v. Wade, et
al., 200 S.W. 148).

The claim that there can be no contract of affreightment because the hemp was not
actually loaded on the ship that was to take it from Davao City to Manila is of no
moment, for, as already stated, the delivery of the hemp to the carrier's lighter is in
line with the contract. In fact, the receipt signed by the patron of the lighter that
carried the hemp stated that he was receiving the cargo "in behalf of S.S. Bowline
Knot in good order and condition." On the other hand, the authorities are to the
effect that a bill of lading is not indispensable for the creation of a contract of
carriage.
 Bill of lading not indispensable to contract of carriage. As to the issuance
of a bill of lading, although article 350 of the Code of Commerce provides that
"the shipper as well as the carrier of merchandise or goods may mutua-lly
demand that a bill of lading is not indispensable. As regards the form of the
contract of carriage it can be said that provided that there is a meeting of the
minds and from such meeting arise rights and obligations, there should be no
limitations as to form." The bill of lading is not essential to the contract,
although it may become obligatory by reason of the regulations of railroad
companies, or as a condition imposed in the contract by the agreement of the
parties themselves. The bill of lading is juridically a documentary proof of the
stipulations and conditions agreed upon by both parties. (Del Viso, pp. 314-
315; Robles vs. Santos, 44 O.G. 2268). In other words, the Code does not
demand, as necessary requisite in the contract of transportation, the delivery
of the bill of lading to the shipper, but gives right to both the carrier and the
shipper to mutually demand of each other the delivery of said bill. (Sp. Sup.
Ct. Decision, May 6, 1895). (Martin, Philippine Commercial Laws, Vol. II,
Revised Edition, pp. 12-13)

The liability of the carrier as common carrier begins with the actual delivery
of the goods for transportation, and not merely with the formal execution of a
receipt or bill of lading; the issuance of a bill of lading is not necessary to
complete delivery and acceptance. Even where it is provided by statute that
liability commences with the issuance of the bill of lading, actual delivery and
acceptance are sufficient to bind the carrier. (13 C.J.S., p. 288)

2. Petitioner disclaims responsibility for the damage of the cargo in question

shielding itself behind the claim of force majeure or storm which occurred on the
night of October 29, 1952. But the evidence fails to bear this out.

Rather, it shows that the mishap that caused the damage or loss was due, not
to force majeure, but to lack of adequate precautions or measures taken by the
carrier to prevent the loss as may be inferred from the following findings of the
Court of Appeals:

Aside from the fact that, as admitted by appellant's own witness, the ill-fated
barge had cracks on its bottom (pp. 18-19, t.s.n., Sept. 13, 1959) which
admitted sea water in the same manner as rain entered "thru tank man-
holes", according to the patron of LCT No. 1023 (exh. JJJ-4) conclusively
showing that the barge was not seaworthy it should be noted that on the
night of the nautical accident there was no storm, flood, or other natural
disaster or calamity. Certainly, winds of 11 miles per hour, although stronger
than the average 4.6 miles per hour then prevailing in Davao on October 29,
1952 (exh. 5), cannot be classified as storm. For according to Beaufort's wind
scale, a storm has wind velocities of from 64 to 75 miles per hour; and by
Philippine Weather Bureau standards winds should have a velocity of from 55
to 74 miles per hour in order to be classified as storm (Northern Assurance
Co., Ltd. vs. Visayan Stevedore Transportation Co., CA-G.R. No. 23167-R,
March 12, 1959).
The Court of Appeals further added: "the report of R. J. del Pan & Co., Inc., marine
surveyors, attributes the sinking of LCT No. 1025 to the 'non-water-tight conditions
of various buoyancy compartments' (exh. JJJ); and this report finds confirmation on
the above-mentioned admission of two witnesses for appellant concerning the
cracks of the lighter's bottom and the entrance of the rain water 'thru manholes'."
We are not prepared to dispute this finding of the Court of Appeals.

3. There can also be no doubt that the insurance company can recover from the
carrier as assignee of the owner of the cargo for the insurance amount it paid to the
latter under the insurance contract. And this is so because since the cargo that was
damaged was insured with respondent company and the latter paid the amount
represented by the loss, it is but fair that it be given the right to recover from the
party responsible for the loss. The instant case, therefore, is not one between the
insured and the insurer, but one between the shipper and the carrier, because the
insurance company merely stepped into the shoes of the shipper. And since the
shipper has a direct cause of action against the carrier on account of the damage of
the cargo, no valid reason is seen why such action cannot be asserted or availed of
by the insurance company as a subrogee of the shipper. Nor can the carrier set up
as a defense any defect in the insurance policy not only because it is not a privy to
it but also because it cannot avoid its liability to the shipper under the contract of
carriage which binds it to pay any loss that may be caused to the cargo involved
therein. Thus, we find fitting the following comments of the Court of Appeals:

It was not imperative and necessary for the trial court to pass upon the
question of whether or not the disputed abaca cargo was covered by Marine
Open Cargo Policy No. MK-134 isued by appellee. Appellant was neither a
party nor privy to this insurance contract, and therefore cannot avail itself of
any defect in the policy which may constitute a valid reason for appellee, as
the insurer, to reject the claim of Macleod, as the insured. Anyway, whatever
defect the policy contained, if any, is deemed to have been waived by the
subsequent payment of Macleod's claim by appellee. Besides, appellant is
herein sued in its capacity as a common carrier, and appellee is suing as the
assignee of the shipper pursuant to exhibit MM. Since, as above
demonstrated, appellant is liable to Macleod and Company of the Philippines
for the los or damage to the 1,162 bales of hemp after these were received in
good order and condition by the patron of appellant's LCT No. 1025, it
necessarily follows that appellant is likewise liable to appellee who, as
assignee of Macleod, merely stepped into the shoes of and substi-tuted the
latter in demanding from appellant the payment for the loss and damage
aforecited.

4. It should be recalled in connection with this issue that during the trial of this case
the carrier asked the lower court to order the production of the books of accounts of
the Odell Plantation containing the charges it made for the loss of the damaged
hemp for verification of its accountants, but later it desisted therefrom on the claim
that it finds their production no longer necessary. This desistance notwithstanding,
the shipper however pre-sented other documents to prove the damage it suffered in
connection with the cargo and on the strength thereof the court a quo ordered the
carrier to pay the sum of P60,421.02. And after the Court of Appeals affirmed this
award upon the theory that the desistance of the carrier from producing the books
of accounts of Odell Plantation implies an admission of the correctness of the
statements of accounts contained therein, petitioner now contends that the Court of
Appeals erred in basing the affirmance of the award on such erroneous
interpretation.

There is reason to believe that the act of petitioner in waiving its right to have the
books of accounts of Odell Plantation presented in court is tantamount to an
admission that the statements contained therein are correct and their verification
not necessary because its main defense here, as well as below, was that it is not
liable for the loss because there was no contract of carriage between it and the
shipper and the loss caused, if any, was due to a fortuitous event. Hence, under the
carrier's theory, the correctness of the account representing the loss was not so
material as would necessitate the presentation of the books in question. At any rate,
even if the books of accounts were not produced, the correctness of the accounts
cannot now be disputed for the same is supported by the original documents on
which the entries in said books were based which were presented by the shipper as
part of its evidence. And according to the Court of Appeals, these documents alone
sufficiently establish the award of P60,412.02 made in favor of respondent.

5. Finally, with regard to the question concerning the personality of the insurance
company to maintain this action, we find the same of no importance, for the
attorney himself of the carrier admitted in open court that it is a foreign corporation
doing business in the Philippines with a personality to file the present action.

WHEREFORE, the decision appealed from is affirmed, with costs against petitioner.

Bengzon, C.J., Concepcion, Reyes, J.B.L., Barrera, Paredes, Dizon, Regala,

Makalintal, Bengzon, J.P. and Zaldivar JJ., concur.
LU DO & LU YM CORPORATION vs I. V. BINAMIRA

G.R. No. L-9840 April 22, 1957

FACTS:

On April 4, 1954, plaintiff filed an action in the Court of First Instance of Cebu
against defendant to recover the sum of P324.63 as value of certain missing
shipment, P150 as actual and compensatory damages, and P600 as moral and
pecuniary damages. After trial, the court rendered judgment ordering defendant to
pay plaintiff the sum of P216.84, with legal interest. On appeal, the Court of Appeals
affirmed the judgment, hence the present petition for review.

On August 10, 1951, the Delta Photo Supply Company of New York shipped on board
the M/S "FERNSIDE" at New York, U.S.A., six cases of films and/or photographic
supplies consigned to the order of respondent I. V. Binamira. For this shipment, Bill
of Lading No. 29 was issued. The ship arrived at the port of Cebu on September 23,
1951 and discharged her cargo on September 23, and 24, 1951, including the
shipment in question, placing it in the possession and custody of the arrastre
operator of said port, the Visayan Cebu Terminal Company, Inc.

Petitioner, as agent of the carrier, hired the Cebu Stevedoring Company, Inc. to
unload its cargo. During the discharge, good order cargo was separated from the
bad order cargo on board the ship, and a separate list of bad order cargo was
prepared by Pascual Villamor, checker of the stevedoring company. All the cargo
unloaded was received at the pier by the Visayan Cebu Terminal Company Inc,
arrastre operator of the port. This terminal company had also its own checker,
Romeo Quijano, who also recorded and noted down the good cargo from the bad
one. The shipment in question, was not included in the report of bad order cargo of
both checkers, indicating that it was discharged from the, ship in good order and
condition.

On September 26, 1951, three days after the goods were unloaded from the ship,
respondent took delivery of his six cases of photographic supplies from the arrastre
operator. He discovered that the cases showed signs of pilferage and, consequently,
he hired marine surveyors, R. J. del Pan & Company, Inc., to examine them. The
surveyors examined the cases and made a physical count of their contents in the
presence of representatives of petitioner, respondent and the stevedoring company.
The surveyors examined the cases and made a physical count of their contents in
the presence of representatives of petitioner, respondent and the stevedoring
company. The finding of the surveyors showed that some films and photographic
supplies were missing valued at P324.63.

It appears from the evidence that the six cases of films and photographic supplies
were discharged from the ship at the port of Cebu by the stevedoring company
hired by petitioner as agent of the carrier. All the unloaded cargo, including the
shipment in question, was received by the Visayan Cebu Terminal Company Inc., the
arrastre operator appointed by the Bureau of Customs. It also appears that during
the discharge, the cargo was checked both by the stevedoring company hired by
petitioner as well as by the arrastre operator of the port, and the shipment in
question, when discharged from the ship, was found to be in good order and
condition. But after it was delivered to respondent three days later, the same was
examined by a marine surveyor who found that some films and supplies were
missing valued at P324.63.

ISSUE:

WON CA erred in its decision holding the carrier responsible for the loss considering
that the same occurred after the shipment was discharged from the ship and placed
in the possession and custody of the customs authorities?

RULING:

We believe this contention is well taken. It is true that, as a rule, a common carrier
is responsible for the loss, destruction or deterioration of the goods it assumes to
carry from one place to another unless the same is due to any to any of the causes
mentioned in Article 1734 on the new Civil Code, and that, if the goods are lost,
destroyed or deteriorated, for causes other that those mentioned, the common
carrier is presumed to have been at fault or to have acted negligently, unless it
proves that it has observed extraordinary diligence in their care (Article 1735,
Idem.), and that this extraordinary liability lasts from the time the goods are placed
in the possession of the carrier until they are delivered to the consignee, or "to the
person who has the right to receive them" (Article 1736, Idem.), but these
provisions only apply when the loss, destruction or deterioration takes place while
the goods are in the possession of the carrier, and not after it has lost control of
them. The reason is obvious. While the goods are in its possession, it is but fair that
it exercise extraordinary diligence in protecting them from damage, and if loss
occurs, the law presumes that it was due to its fault or negligence. This is necessary
to protect the interest the interest of the owner who is at its mercy. The situation
changes after the goods are delivered to the consignee.

While we agree with the Court of Appeals that while delivery of the cargo to the
consignee, or to the person who has a right to receive them", contemplated in
Article 1736, because in such case the goods are still in the hands of the
Government and the owner cannot exercise dominion over them, we believe
however that the parties may agree to limit the liability of the carrier considering
that the goods have still to through the inspection of the customs authorities before
they are actually turned over to the consignee. This is a situation where we may say
that the carrier losses control of the goods because of a custom regulation and it is
unfair that it be made responsible for what may happen during the interregnum.
And this is precisely what was done by the parties herein. In the bill of lading that
was issued covering the shipment in question, both the carrier and the consignee
have stipulated to limit the responsibility of the carrier for the loss or damage that
may because to the goods before they are actually delivered by insert in therein the
following provisions:

1. . . . The Carrier shall not be liable in any capacity whatsoever for any delay,
nondelivery or misdelivery, or loss of or damage to the goods occurring while
the goods are not in the actual custody of the Carrier. . . . (Emphasis ours.)
(Paragraph 1, Exhibit "1")

2. . . . The responsibility of the Carrier in any capacity shall altogether cease

and the goods shall be considered to be delivered and at their own risk and
expense in every respect when taken into the custody of customs or other
authorities. The Carrier shall not be required to give any notification of
disposition of the goods. . . . (Emphasis ours.)

(Paragraph 12, Exhibit "1")

3. Any provisions herein to the contrary notwithstanding, goods may be . . .

by Carrier at ship's tackle . . . and delivery beyond ship's tackle shall been
tirely at the option of the Carrier and solely at the expense of the shipper or
consignee.

(Paragraph 22, Exhibit "1")

It therefore appears clear that the carrier does not assume liability for any loss or
damage to the goods once they have been "taken into the custody of customs or
other authorities", or when they have been delivered at ship's tackle. These
stipulations are clear. They have been adopted precisely to mitigate the
responsibility of the carrier considering the present law on the matter, and we find
nothing therein that is contrary to morals or public policy that may justify their
nullification. We are therefore persuaded to conclude that the carrier is not
responsible for the loss in question, it appearing that the same happened after the
shipment had been delivered to the customs authorities.

Wherefore, the decision appealed from is reversed, without pronouncement as to

costs.

Bengzon, Padilla, Montemayor, Reyes, A., Labrador, Concepcion, Reyes, J.B.L.

Endencia and Felix, JJ., concur.
AMPARO C. SERVANDO, CLARA UY BICO vs PHILIPPINE STEAM NAVIGATION CO.

G.R. No. L-36481-2 October 23, 1982

This appeal, originally brought to the Court of Appeals, seeks to set aside the
decision of the Court of First Instance of Negros Occidental in Civil Cases Nos. 7354
and 7428, declaring appellant Philippine Steam Navigation liable for damages for
the loss of the appellees' cargoes as a result of a fire which gutted the Bureau of
Customs' warehouse in Pulupandan, Negros Occidental.

The Court of Appeals certified the case to Us because only pure questions of law are
raised therein.

FACTS:

On November 6, 1963, appellees Clara Uy Bico and Amparo Servando loaded on

board the appellant's vessel, FS-176, for carriage from Manila to Pulupandan,
Negros Occidental, the following cargoes, to wit:

Clara Uy Bico

1,528 cavans of rice valued

at P40,907.50;

Amparo Servando

44 cartons of colored paper,

toys and general merchandise valued at P1,070.50;

1
as evidenced by the corresponding bills of lading issued by the appellant.

Upon arrival of the vessel at Pulupandan, in the morning of November 18, 1963, the
cargoes were discharged, complete and in good order, unto the warehouse of the
Bureau of Customs. At about 2:00 in the afternoon of the same day, said warehouse
was razed by a fire of unknown origin, destroying appellees' cargoes. Before the fire,
however, appellee Uy Bico was able to take delivery of 907 cavans of
rice 2 Appellees' claims for the value of said goods were rejected by the appellant.

On the bases of the foregoing facts, the lower court rendered a decision ordering
the defendant to pay the aforementioned parties.

ISSUE:
WON the lower court erred in its decision ordering the defendant to pay the
petitioners?

RULING:

Article 1736 of the Civil Code imposes upon common carriers the duty to observe
extraordinary diligence from the moment the goods are unconditionally placed in
their possession "until the same 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 Article 1738. "

The court a quo held that the delivery of the shipment in question to the warehouse
of the Bureau of Customs is not the delivery contemplated by Article 1736; and
since the burning of the warehouse occurred before actual or constructive delivery
of the goods to the appellees, the loss is chargeable against the appellant.

It should be pointed out, however, that in the bills of lading issued for the cargoes in
question, the parties agreed to limit the responsibility of the carrier for the loss or
damage that may be caused to the shipment by inserting therein the following
stipulation:

Clause 14. Carrier shall not be responsible for loss or damage to

shipments billed 'owner's risk' unless such loss or damage is due to
negligence of carrier. Nor shall carrier be responsible for loss or
damage caused by force majeure, dangers or accidents of the sea or
other waters; war; public enemies; . . . fire . ...

We sustain the validity of the above stipulation; there is nothing therein that is
contrary to law, morals or public policy.

Appellees would contend that the above stipulation does not bind them because it
was printed in fine letters on the back-of the bills of lading; and that they did not
sign the same. This argument overlooks the pronouncement of this Court in Ong Yiu
vs. Court of Appeals, promulgated June 29, 1979, 3 where the same issue was
resolved in this wise:

While it may be true that petitioner had not signed the plane ticket
(Exh. '12'), he is nevertheless bound by the provisions thereof. 'Such
provisions have been held to be a part of the contract of carriage, and
valid and binding upon the passenger regardless of the latter's lack of
knowledge or assent to the regulation'. It is what is known as a
contract of 'adhesion', in regards which it has been said that contracts
of adhesion wherein one party imposes a ready made form of contract
on the other, as the plane ticket in the case at bar, are contracts not
entirely prohibited. The one who adheres to the contract is in reality
free to reject it entirely; if he adheres, he gives his consent." (Tolentino,
Civil Code, Vol. IV, 1962 Ed., p. 462, citing Mr. Justice J.B.L. Reyes,
Lawyer's Journal, Jan. 31, 1951, p. 49).
Besides, the agreement contained in the above quoted Clause 14 is a mere iteration
of the basic principle of law written in Article 1 1 7 4 of the Civil Code:

Article 1174. Except in cases expressly specified by the law, or when it

is otherwise declared by stipulation, or when the nature of the
obligation requires the assumption of risk, no person shall be
responsible for those events which could not be foreseen, or which,
though foreseen, were inevitable.

Thus, where fortuitous event or force majeure is the immediate and proximate
cause of the loss, the obligor is exempt from liability for non-performance. The
Partidas, 4 the antecedent of Article 1174 of the Civil Code, defines 'caso fortuito' as
'an event that takes place by accident and could not have been foreseen. Examples
of this are destruction of houses, unexpected fire, shipwreck, violence of robbers.'

In its dissertation of the phrase 'caso fortuito' the Enciclopedia Juridicada

Espanola 5 says: "In a legal sense and, consequently, also in relation to contracts, a
'caso fortuito' presents the following essential characteristics: (1) the cause of the
unforeseen and unexpected occurrence, or of the failure of the debtor to comply
with his obligation, must be independent of the human will; (2) it must be
impossible to foresee the event which constitutes the 'caso fortuito', or if it can be
foreseen, it must be impossible to avoid; (3) the occurrence must be such as to
render it impossible for the debtor to fulfill his obligation in a normal manner; and
(4) the obligor must be free from any participation in the aggravation of the injury
resulting to the creditor." In the case at bar, the burning of the customs warehouse
was an extraordinary event which happened independently of the will of the
appellant. The latter could not have foreseen the event.

There is nothing in the record to show that appellant carrier ,incurred in delay in the
performance of its obligation. It appears that appellant had not only notified
appellees of the arrival of their shipment, but had demanded that the same be
withdrawn. In fact, pursuant to such demand, appellee Uy Bico had taken delivery of
907 cavans of rice before the burning of the warehouse.

Nor can the appellant or its employees be charged with negligence. The storage of
the goods in the Customs warehouse pending withdrawal thereof by the appellees
was undoubtedly made with their knowledge and consent. Since the warehouse
belonged to and was maintained by the government, it would be unfair to impute
negligence to the appellant, the latter having no control whatsoever over the same.

The lower court in its decision relied on the ruling laid down in Yu Biao Sontua vs.
Ossorio 6, where this Court held the defendant liable for damages arising from a fire
caused by the negligence of the defendant's employees while loading cases of
gasoline and petroleon products. But unlike in the said case, there is not a shred of
proof in the present case that the cause of the fire that broke out in the Custom's
warehouse was in any way attributable to the negligence of the appellant or its
employees. Under the circumstances, the appellant is plainly not responsible.

WHEREFORE, the judgment appealed from is hereby set aside. No costs.

SO ORDERED.
ANICETO G. SALUDO, JR., et.al vs CA - TRANS WORLD AIRLINES, INC., and
PHILIPPINE AIRLINES, INC.

G.R. No. 95536 March 23, 1992

Assailed in this petition for review on certiorari is the decision in CA-G.R. CV No.
20951 of respondent Court of Appeals 1 which affirmed the decision of the trial
court 2 dismissing for lack of evidence herein petitioners' complaint in Civil Case No
R-2101 of the then Court of First Instance of Southern Leyte, Branch I.

The facts, as recounted by the court a quo and adopted by respondent court after
"considering the evidence on record," are as follows:

After the death of plaintiffs' mother, Crispina Galdo Saludo, in Chicago

Illinois, (on) October 23, 1976 (Exh. A), Pomierski and Son Funeral
Home of Chicago, made the necessary preparations and arrangements
for the shipment, of the remains from Chicago to the Philippines. The
funeral home had the remains embalmed (Exb. D) and secured a
permit for the disposition of dead human body on October 25, 1976
(Exh. C), Philippine Vice Consul in Chicago, Illinois, Bienvenido M.
Llaneta, at 3:00 p.m. on October 26, 1976 at the Pomierski & Son
Funeral Home, sealed the shipping case containing a hermetically
sealed casket that is airtight and waterproof wherein was contained
the remains of Crispina Saludo Galdo (sic) (Exb. B). On the same date,
October 26, 1976, Pomierski brought the remains to C.M.A.S.
(Continental Mortuary Air Services) at the airport (Chicago) which
made the necessary arrangements such as flights, transfers, etc.;
C.M.A.S. is a national service used by undertakers to throughout the
nation (U.S.A.), they furnish the air pouch which the casket is enclosed
in, and they see that the remains are taken to the proper air freight
terminal (Exh. 6-TWA). C.M.A.S. booked the shipment with PAL thru the
carrier's agent Air Care International, with Pomierski F.H. as the shipper
and Mario (Maria) Saludo as the consignee. PAL Airway Bill No. 079-
01180454 Ordinary was issued wherein the requested routing was from
Chicago to San Francisco on board TWA Flight 131 of October 27, 1976
and from San Francisco to Manila on board PAL Flight No. 107 of the
same date, and from Manila to Cebu on board PAL Flight 149 of
October 29, 1976 (See Exh. E., Also Exh. 1-PAL).

In the meantime, plaintiffs Maria Salvacion Saludo and Saturnino

Saludo, thru a travel agent, were booked with United Airlines from
Chicago to California, and with PAL from California to Manila. She then
went to the funeral director of Pomierski Funeral Home who had her
mother's remains and she told the director that they were booked with
United Airlines. But the director told her that the remains were booked
with TWA flight to California. This upset her, and she and her brother
had to change reservations from UA to the TWA flight after she
confirmed by phone that her mother's remains should be on that TWA
flight. They went to the airport and watched from the look-out area.
She saw no body being brought. So, she went to the TWA counter
again, and she was told there was no body on that flight. Reluctantly,
they took the TWA flight upon assurance of her cousin, Ani Bantug,
that he would look into the matter and inform her about it on the plane
or have it radioed to her. But no confirmation from her cousin reached
her that her mother was on the West Coast.

Upon arrival at San Francisco at about 5:00 p.m., she went to the TWA
counter there to inquire about her mother's remains. She was told they
did not know anything about it.

She then called Pomierski that her mother's remains were not at the
West Coast terminal, and Pomierski immediately called C.M.A.S., which
in a matter of 10 minutes informed him that the remains were on a
plane to Mexico City, that there were two bodies at the terminal, and
somehow they were switched; he relayed this information to Miss
Saludo in California; later C.M.A.S. called and told him they were
sending the remains back to California via Texas (see Exh. 6-TWA).

It-turned out that TWA had carried a shipment under PAL Airway Bill
No. 079-ORD-01180454 on TWA Flight 603 of October 27, 1976, a flight
earlier than TWA Flight 131 of the same date. TWA delivered or
transferred the said shipment said to contain human remains to PAL at
1400H or 2:00 p.m. of the same date, October 27, 1976 (Bee Exh. 1-
TWA). "Due to a switch(ing) in Chicago", this shipment was withdrawn
from PAL by CMAS at 1805H (or 6:05 p.m.) of the same date, October
27 (Exh. 3-PAL, see Exh. 3-a-PAL).

What transpired at the Chicago (A)irport is explained in a memo or

incident report by Pomierski (Exh. 6-TWA) to Pomierski's lawyers who in
turn referred to said' memo and enclosed it in their (Pomierski's
lawyers) answer dated July 18, 1981 to herein plaintiff's counsel (See
Exh. 5-TWA). In that memo or incident report (Exh. 6-TWA), it is stated
that the remains (of Crispina Saludo) were taken to CMAS at the
airport; that there were two bodies at the (Chicago Airport) terminal,
and somehow they were switched, that the remains (of Crispina
Saludo) were on a plane to Mexico City; that CMAS is a national service
used by undertakers throughout the nation (U.S.A.), makes all the
necessary arrangements, such as flights, transfers, etc., and see(s) to
it that the remains are taken to the proper air freight terminal.

The following day October 28, 1976, the shipment or remains of

Crispina Saludo arrived (in) San Francisco from Mexico on board
American Airlines. This shipment was transferred to or received by PAL
at 1945H or 7:45 p.m. (Exh. 2-PAL, Exh. 2-a-PAL). This casket bearing
the remains of Crispina Saludo, which was mistakenly sent to Mexico
and was opened (there), was resealed by Crispin F. Patagas for
shipment to the Philippines (See Exh. B-1). The shipment was
immediately loaded on PAL flight for Manila that same evening and
 arrived (in) Manila on October 30, 1976, a day after its expected arrival
on October 29, 1976. 3

In a letter dated December 15, 1976, 4 petitioners' counsel informed private

respondent Trans World Airlines (TWA) of the misshipment and eventual delay in the
delivery of the cargo containing the remains of the late Crispin Saludo, and of the
discourtesy of its employees to petitioners Maria Salvacion Saludo and Saturnino
Saludo. In a separate letter on June 10, 1977 addressed to co-respondent Philippine
Airlines (PAL), 5 petitioners stated that they were holding PAL liable for said delay in
delivery and would commence judicial action should no favorable explanation be
given.

Both private respondents denied liability. Thus, a damage suit 6 was filed by
petitioners before the then Court of First Instance, Branch III, Leyte, praying for the
award of actual damages of P50,000.00, moral damages of P1,000,000.00,
exemplary damages, attorney's fees and costs of suit.

As earlier stated, the court below absolved the two respondent airlines companies
of liability. The Court of Appeals affirmed the decision of the lower court in toto, and
in a subsequent resolution, 7 denied herein petitioners' motion for reconsideration
for lack of merit.

In predictable disagreement and dissatisfaction with the conclusions reached by

respondent appellate court, petitioners now urge this Court to review the appealed
decision and to resolve whether or not (1) the delay in the delivery of the casketed
remains of petitioners' mother was due to the fault of respondent airline companies,
(2) the one-day delay in the delivery of the same constitutes contractual breach as
would entitle petitioners to damages, (3) damages are recoverable by petitioners
for the humiliating, arrogant and indifferent acts of the employees of TWA and PAL,
and (4) private respondents should be held liable for actual, moral and exemplary
damages, aside from attorney's fees and litigation expenses. 8

At the outset and in view of the spirited exchanges of the parties on this aspect, it is
to be stressed that only questions of law may be raised in a petition filed in this
Court to review on certiorari the decision of the Court of Appeals. 9 This being so, the
factual findings of the Court of Appeals are final and conclusive and cannot be
reviewed by the Supreme Court. The rule, however, admits of established
exceptions, to wit: (a) where there is grave abuse of discretion; (b) when the finding
is grounded entirely on speculations, surmises or conjectures;(c) when the inference
made is manifestly-mistaken, absurd or impossible; (d) when the judgment of the
Court of Appeals was based on a misapprehension of facts; (e) when the factual
findings are conflicting; (f) when the Court of Appeals, in making its findings, went
beyond the issues of the case and the same are contrary to the admissions of both
appellant and appellee; 10 (g) when the Court of Appeals manifestly overlooked
certain relevant facts not disputed by the parties and which, if properly considered,
would justify a different conclusion; 11and (h) where the findings of fact of the Court
of Appeals are contrary to those of the trial court, or are mere conclusions without
citation of specific evidence, or where the facts of set forth by the petitioner are not
disputed by the respondent, or where the findings of fact of the Court of Appeals are
premised on the absence of evidence and are contradicted by the evidence on
record. 12

To distinguish, a question of law is one which involves a doubt or controversy on

what the law is on a certain state of facts; and, a question of fact, contrarily, is one
in which there is a doubt or difference as to the truth or falsehood of the alleged
facts. 13 One test, it has been held, is whether the appellate court can determine the
issue raised without reviewing or evaluating the evidence, in which case it is a
question of law, otherwise it will be a question of fact. 14

Respondent airline companies object to the present recourse of petitioners on the

ground that this petition raises only factual questions. 15 Petitioners maintain
otherwise or, alternatively, they are of the position that, assuming that the petition
raises factual questions, the same are within the recognized exceptions to the
general rule as would render the petition cognizable and worthy of review by the
Court. 16

Since it is precisely the soundness of the inferences or conclusions that may be

drawn from the factual issues which are here being assayed, we find that the issues
raised in the instant petition indeed warrant a second look if this litigation is to
come to a reasonable denouement. A discussion seriatim of said issues will further
reveal that the sequence of the events involved is in effect disputed. Likewise to be
settled is whether or not the conclusions of the Court of Appeals subject of this
review indeed find evidentiary and legal support.

I. Petitioners fault respondent court for "not finding that private respondents failed
to exercise extraordinary diligence required by law which resulted in the switching
and/or misdelivery of the remains of Crispina Saludo to Mexico causing gross delay
in its shipment to the Philippines, and consequently, damages to petitioners." 17

Petitioner allege that private respondents received the casketed remains of

petitioners' mother on October 26, 1976, as evidenced by the issuance of PAL Air
Waybill No. 079-01180454 18 by Air Care International as carrier's agent; and from
said date, private respondents were charged with the responsibility to exercise
extraordinary diligence so much so that for the alleged switching of the caskets on
October 27, 1976, or one day after private respondents received the cargo, the
latter must necessarily be liable.

To support their assertion, petitioners rely on the jurisprudential dictum, both under
American and Philippine law, that "(t)he issuance of a bill of lading carries the
presumption that the goods were delivered to the carrier issuing the bill, for
immediate shipment, and it is nowhere questioned that a bill of lading is prima
facie evidence of the receipt of the goods by the carrier. . . . In the absence of
convincing testimony establishing mistake, recitals in the bill of lading showing that
the carrier received the goods for shipment on a specified date control (13 C.J.S.
235)."19

A bill of lading is a written acknowledgment of the receipt of the goods and an

agreement to transport and deliver them at a specified place to a person named or
on his order. Such instrument may be called a shipping receipt, forwarder's receipt
and receipt for transportation. 20 The designation, however, is immaterial. It has
been hold that freight tickets for bus companies as well as receipts for cargo
transported by all forms of transportation, whether by sea or land, fall within the
definition. Under the Tariff and Customs Code, a bill of lading includes airway bills of
lading. 21 The two-fold character of a bill of lading is all too familiar; it is a receipt as
to the quantity and description of the goods shipped and a contract to transport the
goods to the consignee or other person therein designated, on the terms specified
in such instrument. 22

Logically, since a bill of lading acknowledges receipt of goods to be transported,

delivery of the goods to the carrier normally precedes the issuance of the bill; or, to
some extent, delivery of the goods and issuance of the bill are regarded in
commercial practice as simultaneous acts. 23 However, except as may be prohibited
by law, there is nothing to prevent an inverse order of events, that is, the execution
of the bill of lading even prior to actual possession and control by the carrier of the
cargo to be transported. There is no law which requires that the delivery of the
goods for carriage and the issuance of the covering bill of lading must coincide in
point of time or, for that matter, that the former should precede the latter.

Ordinarily, a receipt is not essential to a complete delivery of goods to the carrier

for transportation but, when issued, is competent and prima facie, but not
conclusive, evidence of delivery to the carrier. A bill of lading, when properly
executed and delivered to a shipper, is evidence that the carrier has received the
goods described therein for shipment. Except as modified by statute, it is a general
rule as to the parties to a contract of carriage of goods in connection with which a
bill of lading is issued reciting that goods have been received for transportation,
that the recital being in essence a receipt alone, is not conclusive, but may be
explained, varied or contradicted by parol or other evidence. 24

While we agree with petitioners' statement that "an airway bill estops the carrier
from denying receipt of goods of the quantity and quality described in the bill," a
further reading and a more faithful quotation of the authority cited would reveal
that "(a) bill of lading may contain constituent elements of estoppel and thus
become something more than a contract between the shipper and the carrier. . . .
(However), as between the shipper and the carrier, when no goods have been
delivered for shipment no recitals in the bill can estop the carrier from showing the
true facts . . . Between the consignor of goods and receiving carrier, recitals in a bill
of lading as to the goods shipped raise only a rebuttable presumption that such
goods were delivered for shipment. As between the consignor and a receiving
carrier, the fact must outweigh the recital." 25 (Emphasis supplied)

For this reason, we must perforce allow explanation by private respondents why,
despite the issuance of the airway bill and the date thereof, they deny having
received the remains of Crispina Saludo on October 26, 1976 as alleged by
petitioners.

The findings of the trial court, as favorably adopted by the Court of Appeals and
which we have earner quoted, provide us with the explanation that sufficiently over
comes the presumption relied on by petitioners in insisting that the remains of their
mother were delivered to and received by private respondents on October 26, 1976.
Thus

. . . Philippine Vice Consul in Chicago, Illinois, Bienvenido M. Llaneta, at

3:00 p.m. on October 26, 1976 at the Pomierski & Son Funeral Home,
sealed the shipping case containing a hermetically sealed casket that
is airtight and waterproof wherein was contained the remains of
Crispina Saludo Galdo (sic) (Exh. B). On the same date October 26,
1976, Pomierski brought the remains to C.M.A.S. (Continental Mortuary
Air Services) at the airport (Chicago) which made the necessary
arrangements such as flights, transfers, etc; C.M.A.S. is a national
service used by undertakers throughout the nation (U.S.A.), they
furnish the air pouch which the casket is enclosed in, and they see that
the remains are taken to the proper air freight terminal (Exh. G-TWA).
C.M.A.S. booked the shipment with PAL thru the carrier's agent Air
Care International, with Pomierski F.H. as the shipper and Mario (Maria)
Saludo as the consignee. PAL Airway Bill No. 079- 01180454 Ordinary
was issued wherein the requested routing was from Chicago to San
Francisco on board TWA Flight-131 of October 27;1976, and from San
Francisco to Manila on board PAL Flight No. 107 of the same date, and
from Manila to Cebu on board PAL Flight 149 of October 29, 1976 (See
Exh. E, also Exh. 1-PAL). 26 (Emphasis ours.)

Moreover, we are persuaded to believe private respondent PAL's account as to what

transpired October 26, 1976:

. . . Pursuant thereto, on 26 October 1976, CMAS acting upon the

instruction of Pomierski, F.H., the shipper requested booking of the
casketed remains of Mrs. Cristina (sic) Saludo on board PAL's San
Francisco-Manila Flight No. PR 107 on October 27, 1976.

2. To signify acceptance and confirmation of said booking, PAL issued

to said Pomierski F.H., PAL Airway Bill No. 079-01180454 dated October
27, 1976 (sic, "10/26/76"). PAL confirmed the booking and transporting
of the shipment on board of its Flight PR 107 on October 27, 1976 on
the basis of the representation of the shipper and/or CMAS that the
said cargo would arrive in San Francisco from Chicago on board United
Airlines Flight US 121 on 27 October 1976. 27

In other words, on October 26, 1976 the cargo containing the casketed remains of
Crispina Saludo was booked for PAL Flight Number PR-107 leaving San Francisco for
Manila on October 27, 1976, PAL Airway Bill No. 079-01180454 was issued, not as
evidence of receipt of delivery of the cargo on October 26, 1976, but merely as a
confirmation of the booking thus made for the San Francisco-Manila flight scheduled
on October 27, 1976. Actually, it was not until October 28, 1976 that PAL received
physical delivery of the body at San Francisco, as duly evidenced by the Interline
Freight Transfer Manifest of the American Airline Freight System and signed for by
Virgilio Rosales at 1945H, or 7:45 P.M. on said date. 28
Explicit is the rule under Article 1736 of the Civil Code that the extraordinary
responsibility of the common carrier begins from the time the goods are delivered to
the carrier. This responsibility remains in full force and effect even when they are
temporarily unloaded or stored in transit, unless the shipper or owner exercises the
right of stoppage in transitu, 29 and terminates only after the lapse of a reasonable
time for the acceptance, of the goods by the consignee or such other person
entitled to receive them. 30 And, there is delivery to the carrier when the goods are
ready for and have been placed in the exclusive possession, custody and control of
the carrier for the purpose of their immediate transportation and the carrier has
accepted them. 31 Where such a delivery has thus been accepted by the carrier, the
liability of the common carrier commences eo instanti. 32

Hence, while we agree with petitioners that the extraordinary diligence statutorily
required to be observed by the carrier instantaneously commences upon delivery of
the goods thereto, for such duty to commence there must in fact have been delivery
of the cargo subject of the contract of carriage. Only when such fact of delivery has
been unequivocally established can the liability for loss, destruction or deterioration
of goods in the custody of the carrier, absent the excepting causes under Article
1734, attach and the presumption of fault of the carrier under Article 1735 be
invoked.

As already demonstrated, the facts in the case at bar belie the averment that there
was delivery of the cargo to the carrier on October 26, 1976. Rather, as earlier
explained, the body intended to be shipped as agreed upon was really placed in the
possession and control of PAL on October 28, 1976 and it was from that date that
private respondents became responsible for the agreed cargo under their
undertakings in PAL Airway Bill No. 079-01180454. Consequently, for the switching
of caskets prior thereto which was not caused by them, and subsequent events
caused thereby, private respondents cannot be held liable.

Petitioners, proceeding on the premise that there was delivery of the cargo to
private respondents on October 26,1976 and that the latter's extraordinary
responsibility had by then become operative, insist on foisting the blame on private
respondents for the switching of the two caskets which occurred on October 27,
1976. It is argued that since there is no clear evidence establishing the fault
Continental Mortuary Air Services (CMAS) for the mix-up, private respondents are
presumably negligent pursuant to Article 1735 of the Civil Code and, for failure to
rebut such presumption, they must necessarily be held liable; or, assuming that
CMAS was at fault, the same does not absolve private respondents of liability
because whoever brought the cargo to the airport or loaded it on the plane did so as
agent of private respondents.

This contention is without merit. As pithily explained by the Court of Appeals:

The airway bill expressly provides that "Carrier certifies goods

described below were received for carriage", and said cargo was
"casketed human remains of Crispina Saludo," with "Maria Saludo as
Consignee; Pomierski F.H. as Shipper; Air Care International as carrier's
agent." On the face of the said airway bill, the specific flight numbers,
specific routes of shipment and dates of departure and arrival were
typewritten, to wit: Chicago TWA Flight 131/27 to San Francisco and
from San Francisco by PAL 107 on, October 27, 1976 to Philippines and
to Cebu via PAL Flight 149 on October 29, 1976. The airway bill also
contains the following typewritten words, as follows: all documents
have been examined (sic). Human remains of Crispina Saludo. Please
return back (sic) first available flight to SFO.

But, as it turned out and was discovered later the casketed human
remains which was issued PAL Airway Bill #079-1180454 was not the
remains of Crispina Saludo, the casket containing her remains having
been shipped to Mexico City.

However, it should be noted that, Pomierski F.H., the shipper of Mrs.

Saludo's remains, hired Continental Mortuary Services (hereafter
referred to as C.M.A.S.), which is engaged in the business of
transporting and forwarding human remains. Thus, C.M.A.S. made all
the necessary arrangements such as flights, transfers, etc. for
shipment of the remains of Crispina Saludo.

The remains were taken on October 26th, 1976, to

C.M.A.S. at the airport. These people made all the
necessary arrangements, such as flights, transfers, etc.
This is a national service used by undertakers throughout
the nation. They furnished the air pouch which the casket
is enclosed in, and they see that the remains are taken to
the proper air frieght terminal. I was very surprised when
Miss Saludo called me to say that the remains were not at
the west coast terminal. I immediately called C.M.A.S.
They called me back in a matter of ten minutes to inform
me that the remains were on a plane to Mexico City. The
man said that there were two bodies at the terminal, and
somehow they were switched. . . . (Exb. 6 "TWA", which
is the memo or incident report enclosed in the stationery
of Walter Pomierski & Sons Ltd.)

Consequently, when the cargo was received from C.M.A.S. at the

Chicago airport terminal for shipment, which was supposed to contain
the remains of Crispina Saludo, Air Care International and/or TWA, had
no way of determining its actual contents, since the casket was
hermetically sealed by the Philippine Vice-Consul in Chicago and in an
air pouch of C.M.A.S., to the effect that Air Care International and/or
TWA had to rely on the information furnished by the shipper regarding
the cargo's content. Neither could Air Care International and/or TWA
open the casket for further verification, since they were not only
without authority to do so, but even prohibited.

Thus, under said circumstances, no fault and/or negligence can be

attributed to PAL (even if Air Care International should be considered
as an agent of PAL) and/or TWA, the entire fault or negligence being
exclusively with C.M.A.S. 33 (Emphasis supplied.)
It can correctly and logically be concluded, therefore, that the switching occurred or,
more accurately, was discovered on October 27, 1976; and based on the above
findings of the Court of appeals, it happened while the cargo was still with CMAS,
well before the same was place in the custody of private respondents.

Thus, while the Air Cargo Transfer Manifest of TWA of October 27, 1976 34 was signed
by Garry Marcial of PAL at 1400H, or 2:00 P.M., on the same date, thereby indicating
acknowledgment by PAL of the transfer to them by TWA of what was in truth the
erroneous cargo, said misshipped cargo was in fact withdrawn by CMAS from PAL as
shown by the notation on another copy of said manifest 35 stating "Received by
CMAS Due to switch in Chicago 10/27-1805H," the authenticity of which was
never challenged. This shows that said misshipped cargo was in fact withdrawn by
CMAS from PAL and the correct shipment containing the body of Crispina Saludo
was received by PAL only on October 28, 1976, at 1945H, or 7:45 P.M., per American
Airlines Interline Freight Transfer Manifest No. AA204312. 36

Witness the deposition of TWA's ramp serviceman, Michael Giosso, on this matter:

ATTY. JUAN COLLAS, JR.:

On that date, do (sic) you have occasion to handle or deal

with the transfer of cargo from TWA Flight No. 603 to PAL
San Francisco?

MICHAEL GIOSSO:

Yes, I did.

ATTY. JUAN COLLAS, JR.:

What was your participation with the transfer of the

cargo?

MICHAEL GIOSSO:

I manifested the freight on a transfer manifest and

physically moved it to PAL and concluded the transfer by
signing it off.

ATTY. JUAN COLLAS, JR.:

You brought it there yourself?

MICHAEL GIOSSO:

Yes sir.

ATTY. JUAN COLIAS, JR.:

 Do you have anything to show that PAL received the cargo
from TWA on October 27, 1976?

MICHAEL GIOSSO:

Yes, I do.

(Witness presenting a document)

ATTY. JUAN COLLAS, JR.:

For purposes of clarity, Exhibit I is designated as Exhibit I-

TWA.

xxx xxx xxx

ATTY. JUAN COLLAS, JR.:

This Exhibit I-TWA, could you tell what it is, what it shows?

MICHAEL GIOSSO:

It shows transfer of manifest on 10-27-76 to PAL at 1400

and verified with two signatures as it completed the
transfer.

ATTY. JUAN COLLAS, JR.:

Very good,. Who was the PAL employee who received the
cargo?

MICHAEL GIOSSO:

37
The name is Garry Marcial."

The deposition of Alberto A. Lim, PAL's cargo supervisor at San Francisco, as

deponent-witness for PAL, makes this further clarification:

ATTY. CESAR P. MANALAYSAY:

You mentioned Airway Bill, Mr. Lim. I am showing to you a

PAL Airway Bill Number 01180454 which for purposes of
evidence, I would like to request that the same be marked
as evidence Exhibit I for PAL.

xxx xxx xxx

In what circumstances did you encounter Exhibit I-PAL?

ALBERTO A. LIM:

If I recall correctly, I was queried by Manila, our Manila

office with regard to a certain complaint that a consignee
filed that this shipment did not arrive on the day that the
consignee expects the shipment to arrive.

ATTY CESAR P. MANALAYSAY:

Okay. Now, upon receipt of that query from your Manila

office, did you conduct any investigation to pinpoint the
possible causes of mishandling?

ALBERTO A. LIM:

Yes.

xxx xxx xxx

ATTY. CESAR P. MANALAYSAY:

What is the result of your investigation?

ALBERTO A. LIM:

In the course of my investigation, I found that we received

the body on October 28, 1976, from American Airlines.

ATTY. CESAR P. MANALAYSAY:

What body are you referring to?

xxx xxx xxx

ALBERTO A. LIM:

The remains of Mrs. Cristina (sic) Saludo.

ATTY. CESAR P. MANALAYSAY:

Is that the same body mentioned in this Airway Bill?

ALBERTO A. LIM:

Yes.

ATTY. CESAR P. MANALAYSAY:

What time did you receive said body on October 28,
1976?

ALBERTO A. LIM:

If I recall correctly, approximately 7:45 of October 28,

1976.

ATTY. CESAR P. MANALAYSAY:

Do you have any proof with you to back the statement?

ALBERTO A. LIM:

Yes. We have on our records a Transfer Manifest from

American Airlines Number 204312 showing that we
received a human remains shipment belong to Mrs.
Cristina (sic) Saludo or the human remains of Mrs. Cristina
(sic) Saludo.

ATTY. CESAR P. MAIALAYSAY:

At this juncture, may I request that the Transfer Manifest

referred to by the witness be marked as an evidence as
Exhibit II-PAL.

xxx xxx xxx

Mr. Lim, yesterday your co-defendant TWA presented as

their Exhibit I evidence tending to show that on October
27, 1976 at about 2:00 in the, afternoon they delivered to
you a cargo bearing human remains. Could you go over
this Exhibit I and please give us your comments as to that
exhibit?

ATTY. ALBERTO C. MENDOZA:

That is a vague question. I would rather request that

counsel propound specific questions rather than asking
for comments on Exhibit I-TWA.

ATTY. CESAR P. MANALAYSAY:

In that case, I will reform my question. Could you tell us

whether TWA in fact delivered to you the human remains
as indicated in that Transfer Manifest?

ALBERTO A. LIM:
 Yes, they did.

ATTY. CESAR P. MANALAYSAY:

I noticed that the Transfer Manifest of TWA marked as

Exhibit I-TWA bears the same numbers or the same
entries as the Airway Bill marked as Exhibit I-A PAL
tending to show that this is the human remains of Mrs
Cristina (sic) Saludo. Could you tell us whether this is
true?

ALBERTO A. LIM:

It is true that we received human remains shipment from

TWA as indicated on this Transfer Manifest. But in the
course of investigation, it was found out that the human
remains transferred to us is not the remains of Mrs.
Cristina (sic) Saludo this is the reason why we did not
board it on our flight. 38

Petitioners consider TWA's statement that "it had to rely on the information
furnished by the shipper" a lame excuse and that its failure to prove that its
personnel verified and identified the contents of the casket before loading the same
constituted negligence on the part of TWA. 39

We upbold the favorable consideration by the Court of Appeals of the following

findings of the trial court:

It was not (to) TWA, but to C.M.A.S. that the Pomierski & Son Funeral
Home delivered the casket containing the remains of Crispina Saludo.
TWA would have no knowledge therefore that the remains of Crispina
Saludo were not the ones inside the casket that was being presented
to it for shipment. TWA would have to rely on there presentations of
C.M.A.S. The casket was hermetically sealed and also sealed by the
Philippine Vice Consul in Chicago. TWA or any airline for that matter
would not have opened such a sealed casket just for the purpose of
ascertaining whose body was inside and to make sure that the remains
inside were those of the particular person indicated to be by C.M.A.S.
TWA had to accept whatever information was being furnished by the
shipper or by the one presenting the casket for shipment. And so as a
matter of fact, TWA carried to San Francisco and transferred to
defendant PAL a shipment covered by or under PAL Airway Bill No. 079-
ORD-01180454, the airway bill for the shipment of the casketed
remains of Crispina Saludo. Only, it turned out later, while the casket
was already with PAL, that what was inside the casket was not the
body of Crispina Saludo so much so that it had to be withdrawn by
C.M.A.S. from PAL. The body of Crispina Saludo had been shipped to
Mexico. The casket containing the remains of Crispina Saludo was
transshipped from Mexico and arrived in San Francisco the following
 day on board American Airlines. It was immediately loaded by PAL on
its flight for Manila.

The foregoing points at C.M.A.S., not defendant TWA much less

defendant PAL, as the ONE responsible for the switching or mix-up of
the two bodies at the Chicago Airport terminal, and started a chain
reaction of the misshipment of the body of Crispina Saludo and a one-
day delay in the delivery thereof to its destination. 40

Verily, no amount of inspection by respondent airline companies could have

guarded against the switching that had already taken place. Or, granting that they
could have opened the casket to inspect its contents, private respondents had no
means of ascertaining whether the body therein contained was indeed that of
Crispina Saludo except, possibly, if the body was that of a male person and such
fact was visually apparent upon opening the casket. However, to repeat, private
respondents had no authority to unseal and open the same nor did they have any
reason or justification to resort thereto.

It is the right of the carrier to require good faith on the part of those persons who
deliver goods to be carried, or enter into contracts with it, and inasmuch as the
freight may depend on the value of the article to be carried, the carrier ordinarily
has the right to inquire as to its value. Ordinarily, too, it is the duty of the carrier to
make inquiry as to the general nature of the articles shipped and of their value
before it consents to carry them; and its failure to do so cannot defeat the shipper's
right to recovery of the full value of the package if lost, in the absence of showing of
fraud or deceit on the part of the shipper. In the absence of more definite
information, the carrier has a the right to accept shipper's marks as to the contents
of the package offered for transportation and is not bound to inquire particularly
about them in order to take advantage of a false classification and where a shipper
expressly represents the contents of a package to be of a designated character, it is
not the duty of the carrier to ask for a repetition of the statement nor disbelieve it
and open the box and see for itself. 41 However, where a common carrier has
reasonable ground to suspect that the offered goods are of a dangerous or illegal
character, the carrier has the right to know the character of such goods and to insist
on an inspection, if reasonable and practical under the circumstances, as a
condition of receiving and transporting such goods. 42

It can safely be said then that a common carrier is entitled to fair representation of
the nature and value of the goods to be carried, with the concomitant right to rely
thereon, and further noting at this juncture that a carrier has no obligation to inquire
into the correctness or sufficiency of such information. 43 The consequent duty to
conduct an inspection thereof arises in the event that there should be reason to
doubt the veracity of such representations. Therefore, to be subjected to unusual
search, other than the routinary inspection procedure customarily undertaken, there
must exist proof that would justify cause for apprehension that the baggage is
dangerous as to warrant exhaustive inspection, or even refusal to accept carriage of
the same; and it is the failure of the carrier to act accordingly in the face of such
proof that constitutes the basis of the common carrier's liability. 44
In the case at bar, private respondents had no reason whatsoever to doubt the truth
of the shipper's representations. The airway bill expressly providing that "carrier
certifies goods received below were received for carriage," and that the cargo
contained "casketed human remains of Crispina Saludo," was issued on the basis of
such representations. The reliance thereon by private respondents was reasonable
and, for so doing, they cannot be said to have acted negligently. Likewise, no
evidence was adduced to suggest even an iota of suspicion that the cargo
presented for transportation was anything other than what it was declared to be, as
would require more than routine inspection or call for the carrier to insist that the
same be opened for scrutiny of its contents per declaration.

Neither can private respondents be held accountable on the basis of petitioners'

preposterous proposition that whoever brought the cargo to the airport or loaded it
on the airplane did so as agent of private respondents, so that even if CMAS whose
services were engaged for the transit arrangements for the remains was indeed at
fault, the liability therefor would supposedly still be attributable to private
respondents.

While we agree that the actual participation of CMAS has been sufficiently and
correctly established, to hold that it acted as agent for private respondents would
be both an inaccurate appraisal and an unwarranted categorization of the legal
position it held in the entire transaction.

It bears repeating that CMAS was hired to handle all the necessary shipping
arrangements for the transportation of the human remains of Crispina Saludo to
Manila. Hence, it was to CMAS that the Pomierski & Son Funeral Home, as shipper,
brought the remains of petitioners' mother for shipment, with Maria Saludo as
consignee. Thereafter, CMAS booked the shipment with PAL through the carrier's
agent, Air Care International. 45 With its aforestated functions, CMAS may
accordingly be classified as a forwarder which, by accepted commercial practice, is
regarded as an agent of the shipper and not of the carrier. As such, it merely
contracts for the transportation of goods by carriers, and has no interest in the
freight but receives compensation from the shipper as his agent. 46

At this point, it can be categorically stated that, as culled from the findings of both
the trial court and appellate courts, the entire chain of events which culminated in
the present controversy was not due to the fault or negligence of private
respondents. Rather, the facts of the case would point to CMAS as the culprit.
Equally telling of the more likely possibility of CMAS' liability is petitioners' letter to
and demanding an explanation from CMAS regarding the statement of private
respondents laying the blame on CMAS for the incident, portions of which, reading
as follows:

. . . we were informed that the unfortunate a mix-up occurred due to

your negligence. . . .

Likewise, the two airlines pinpoint the responsibility upon your agents.
Evidence were presented to prove that allegation.
 On the face of this overwhelming evidence we could and should have
filed a case against you. . . . 47

clearly allude to CMAS as the party at fault. This is tantamount to an admission by

petitioners that they consider private respondents without fault, or is at the very
least indicative of the fact that petitioners entertained serious doubts as to whether
herein private respondents were responsible for the unfortunate turn of events.

Undeniably, petitioners' grief over the death of their mother was aggravated by the
unnecessary inconvenience and anxiety that attended their efforts to bring her
body home for a decent burial. This is unfortunate and calls for sincere
commiseration with petitioners. But, much as we would like to give them
consolation for their undeserved distress, we are barred by the inequity of allowing
recovery of the damages prayed for by them at the expense of private respondents
whose fault or negligence in the very acts imputed to them has not been
convincingly and legally demonstrated.

Neither are we prepared to delve into, much less definitively rule on, the possible
liability of CMAS as the evaluation and adjudication of the same is not what is
presently at issue here and is best deferred to another time and addressed to
another forum.

II. Petitioners further fault the Court of Appeals for ruling that there was no
contractual breach on the part of private respondents as would entitle petitioners to
damages.

Petitioners hold that respondent TWA, by agreeing to transport the remains of

petitioners' mother on its Flight 131 from Chicago to San Francisco on October 27,
1976, made itself a party to the contract of carriage and, therefore, was bound by
the terms of the issued airway bill. When TWA undertook to ship the remains on its
Flight 603, ten hours earlier than scheduled, it supposedly violated the express
agreement embodied in the airway bill. It was allegedly this breach of obligation
which compounded, if not directly caused, the switching of the caskets.

In addition, petitioners maintain that since there is no evidence as to who placed

the body on board Flight 603, or that CMAS actually put the cargo on that flight, or
that the two caskets at the Chicago airport were to be transported by the same
airline, or that they came from the same funeral home, or that both caskets were
received by CMAS, then the employees or agents of TWA presumably caused the
mix-up by loading the wrong casket on the plane. For said error, they contend, TWA
must necessarily be presumed negligent and this presumption of negligence stands
undisturbed unless rebutting evidence is presented to show that the switching or
misdelivery was due to circumstances that would exempt the carrier from liability.

Private respondent TWA professes otherwise. Having duly delivered or transferred

the cargo to its co-respondent PAL on October 27, 1976 at 2:00 P.M., as supported
by the TWA Transfer Manifest, TWA faithfully complied with its obligation under the
airway bill. Said faithful compliance was not affected by the fact that the remains
were shipped on an earlier flight as there was no fixed time for completion of
carriage stipulated on. Moreover, the carrier did not undertake to carry the cargo
aboard any specified aircraft, in view of the condition on the back of the airway bill
which provides:

CONDITIONS OF CONTRACT

xxx xxx xxx

It is agreed that no time is fixed for the completion of carriage

hereunder and that Carrier may without notice substitute alternate
carriers or aircraft. Carrier assumes no obligation to carry the goods by
any specified aircraft or over any particular route or routes or to make
connection at any point according to any particular schedule, and
Carrier is hereby authorized to select, or deviate from the route or
routes of shipment, notwithstanding that the same may be stated on
the face hereof. The shipper guarantees payment of all charges and
advances. 48

Hence, when respondent TWA shipped the body on earlier flight and on a different
aircraft, it was acting well within its rights. We find this argument tenable.

The contention that there was contractual breach on the part of private respondents
is founded on the postulation that there was ambiguity in the terms of the airway
bill, hence petitioners' insistence on the application of the rules on interpretation of
contracts and documents. We find no such ambiguity. The terms are clear enough
as to preclude the necessity to probe beyond the apparent intendment of the
contractual provisions.

The hornbook rule on interpretation of contracts consecrates the primacy of the

intention of the parties, the same having the force of law between them. When the
terms of the agreement are clear and explicit, that they do not justify an attempt to
read into any alleged intention of the parties, the terms are to be understood
literally just as they appear on the face of the contract. 49 The various stipulations of
a contract shall be interpreted together 50and such a construction is to be adopted
as will give effect to all provisions thereof. 51 A contract cannot be construed by
parts, but its clauses should be interpreted in relation to one another. The whole
contract must be interpreted or read together in order to arrive at its true meaning.
Certain stipulations cannot be segregated and then made to control; neither do
particular words or phrases necessarily determine the character of a contract. The
legal effect of the contract is not to be determined alone by any particular provision
disconnected from all others, but in the ruling intention of the parties as gathered
from all the language they have used and from their contemporaneous and
subsequent acts. 52

Turning to the terms of the contract at hand, as presented by PAL Air Waybill No.
079-01180454, respondent court approvingly quoted the trial court's disquisition on
the aforequoted condition appearing on the reverse side of the airway bill and its
disposition of this particular assigned error:
 The foregoing stipulation fully answers plaintiffs' objections to the one-
day delay and the shipping of the remains in TWA Flight 603 instead of
TWA Flight 131. Under the stipulation, parties agreed that no time was
fixed to complete the contract of carriage and that the carrier may,
without notice, substitute alternate carriers or aircraft. The carrier did
not assume the obligation to carry the shipment on any specified
aircraft.

xxx xxx xxx

Furthermore, contrary to the claim of plaintiffs-appellants, the

conditions of the Air Waybill are big enough to be read and noticed.
Also, the mere fact that the cargo in question was shipped in TWA
Flight 603, a flight earlier on the same day than TWA Flight 131, did
not in any way cause or add to the one-day delay complained of and/or
the switching or mix-up of the bodies. 53

Indubitably, that private respondent can use substitute aircraft even without notice
and without the assumption of any obligation whatsoever to carry the goods on any
specified aircraft is clearly sanctioned by the contract of carriage as
specifically provided for under the conditions thereof.

Petitioners' invocation of the interpretative rule in the Rules of Court that written
words control printed words in documents, 54 to bolster their assertion that the
typewritten provisions regarding the routing and flight schedule prevail over the
printed conditions, is tenuous. Said rule may be considered only when there is
inconsistency between the written and printed words of the contract.

As previously stated, we find no ambiguity in the contract subject of this case that
would call for the application of said rule. In any event, the contract
has provided for such a situation by explicitly stating that the above condition
remains effective "notwithstanding that the same (fixed time for completion of
carriage, specified aircraft, or any particular route or schedule) may be stated on
the face hereof." While petitioners hinge private respondents' culpability on the fact
that the carrier "certifies goods described below were received for carriage," they
may have overlooked that the statement on the face of the airway bill properly and
completely reads

Carrier certifies goods described below were received for

carriage subject to the Conditions on the reverse hereof the goods
then being in apparent good order and condition except as noted
hereon. 55 (Emphasis ours.)

Private respondents further aptly observe that the carrier's certification regarding
receipt of the goods for carriage "was of a smaller print than the condition of the Air
Waybill, including Condition No. 5 and thus if plaintiffs-appellants had recognized
the former, then with more reason they were aware of the latter. 56
In the same vein, it would also be incorrect to accede to the suggestion of
petitioners that the typewritten specifications of the flight, routes and dates of
departures and arrivals on the face of the airway bill constitute a special contract
which modifies the printed conditions at the back thereof. We reiterate that
typewritten provisions of the contract are to be read and understood subject to and
in view of the printed conditions, fully reconciling and giving effect to the manifest
intention of the parties to the agreement.

The oft-repeated rule regarding a carrier's liability for delay is that in the absence of
a special contract, a carrier is not an insurer against delay in transportation of
goods. When a common carrier undertakes to convey goods, the law implies a
contract that they shall be delivered at destination within a reasonable time, in the
absence, of any agreement as to the time of delivery. 57 But where a carrier has
made an express contract to transport and deliver property within a specified time,
it is bound to fulfill its contract and is liable for any delay, no matter from what
cause it may have arisen. 58 This result logically follows from the well-settled rule
that where the law creates a duty or charge, and the party is disabled from
performing it without any default in himself, and has no remedy over, then the law
will excuse him, but where the party by his own contract creates a duty or charge
upon himself, he is bound to make it good notwithstanding any accident or delay by
inevitable necessity because he might haveprovided against it by contract. Whether
or not there has been such an undertaking on the part of the carrier to be
determined from the circumstances surrounding the case and by application of the
ordinary rules for the interpretation of contracts. 59

Echoing the findings of the trial court, the respondent court correctly declared that

In a similar case of delayed delivery of air cargo under a very similar

stipulation contained in the airway bill which reads: "The carrier does
not obligate itself to carry the goods by any specified aircraft or on a
specified time. Said carrier being hereby authorized to deviate from
the route of the shipment without any liability therefor", our Supreme
Court ruled that common carriers are not obligated by law to carry and
to deliver merchandise, and persons are not vested with the right to
prompt delivery, unless such common carriers previously assume the
obligation. Said rights and obligations are created by a specific
contract entered into by the parties (Mendoza vs. PAL, 90 Phil. 836).

There is no showing by plaintiffs that such a special or specific contract

had been entered into between them and the defendant airline
companies.

And this special contract for prompt delivery should call the attention
of the carrier to the circumstances surrounding the case and the
approximate amount of damages to be suffered in case of delay (See
Mendoza vs. PAL, supra). There was no such contract entered into in
the instant case. 60
Also, the theory of petitioners that the specification of the flights and dates of
departure and arrivals constitute a special contract that could prevail over the
printed stipulations at the back of the airway bill is vacuous. To countenance such a
postulate would unduly burden the common carrier for that would have the effect of
unilaterally transforming every single bill of lading or trip ticket into a special
contract by the simple expedient of filling it up with the particulars of the flight, trip
or voyage, and thereby imposing upon the carrier duties and/or obligations which it
may not have been ready or willing to assume had it been timely, advised thereof.

Neither does the fact that the challenged condition No. 5 was printed at the back of
the airway bill militate against its binding effect on petitioners as parties to the
contract, for there were sufficient indications on the face of said bill that would alert
them to the presence of such additional condition to put them on their guard.
Ordinary prudence on the part of any person entering or contemplating to enter into
a contract would prompt even a cursory examination of any such conditions, terms
and/or stipulations.

There is a holding in most jurisdictions that the acceptance of a bill of lading without
dissent raises a presumption that all terms therein were brought to the knowledge
of the shipper and agreed to by him, and in the absence of fraud or mistake, he is
estopped from thereafter denying that he assented to such terms. This rule applies
with particular force where a shipper accepts a bill of lading with full knowledge of
its contents, and acceptance under such circumstances makes it a binding contract.
In order that any presumption of assent to a stipulation in a bill of lading limiting the
liability of a carrier may arise, it must appear that the clause containing this
exemption from liability plainly formed a part of the contract contained in the bill of
lading. A stipulation printed on the back of a receipt or bill of lading or on papers
attached to such receipt will be quite as effective as if printed on its face, if it is
shown that the consignor knew of its terms. Thus, where a shipper accepts a receipt
which states that its conditions are to be found on the back, such receipt comes
within the general rule, and the shipper is held to have accepted and to be bound
by the conditions there to be found. 61

Granting arguendo that Condition No. 5 partakes of the nature of a contract of

adhesion and as such must be construed strictly against the party who drafted the
same or gave rise to any ambiguity therein, 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. 62However, Ong Yiu vs. Court of Appeals, et al 63 instructs us that contracts
of adhesion are not entirely prohibited. The one who adheres to the contract is in
reality free to reject it entirely; if he adheres, be gives his consent. Accordingly,
petitioners, far from being the weaker party in this situation, duly signified their
presumed assent to all terms of the contract through their acceptance of the airway
bill and are consequently bound thereby. It cannot be gainsaid that petitioners' were
not without several choices as to carriers in Chicago with its numerous airways and
airliner servicing the same.
We wish to allay petitioners' apprehension that Condition No. 5 of the airway bill is
productive of mischief as it would validate delay in delivery, sanction violations of
contractual obligations with impunity or put a premium on breaches of contract.

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 whimsically seek
refuge from liability in the exculpatory sanctuary of said Condition No. 5 or
arbitrarily vary routes, flights and schedules to the prejudice of their customers.
This condition only serves to insulate the carrier from liability in those instances
when changes in routes, flights and schedules are clearly justified by the peculiar
circumstances of a particular case, or by general transportation practices, customs
and usages, or by contingencies or emergencies in aviation such as weather
turbulence, mechanical failure, requirements of national security and the like. And
even as it is conceded that specific routing and other navigational arrangements for
a trip, flight or voyage, or variations therein, generally lie within the discretion of
the carrier in the absence of specific routing instructions or directions by the
shipper, it is plainly incumbent upon the carrier to exercise its rights with due
deference to the rights, interests and convenience of its customers.

A common carrier undertaking to transport property has the implicit duty to carry
and deliver it within reasonable time, absent any particular stipulation regarding
time of delivery, and to guard against delay. In case of any unreasonable delay, the
carrier shall be liable for damages immediately and proximately resulting from such
neglect of duty. 64 As found by the trial court, the delay in the delivery of the
remains of Crispina Saludo, undeniable and regrettable as it was, cannot be
attributed to the fault, negligence or malice of private respondents, 65 a conclusion
concurred in by respondent court and which we are not inclined to disturb.

We are further convinced that when TWA opted to ship the remains of Crispina
Saludo on an earlier flight, it did so in the exercise of sound discretion and with
reasonable prudence, as shown by the explanation of its counsel in his letter of
February 19, 1977 in response to petitioners' demand letter:

Investigation of TWA's handling of this matter reveals that although the

shipment was scheduled on TWA Flight 131 of October 27, 1976, it was
actually boarded on TWA Flight 603 of the same day, approximately 10
hours earlier, in order to assure that the shipment would be received in
San Francisco in sufficient time for transfer to PAL. This transfer was
effected in San Francisco at 2:00 P.M. on October 27, 1976. 66

Precisely, private respondent TWA knew of the urgency of the shipment by reason of
this notation on the lower portion of the airway bill: "All documents have been
certified. Human remains of Cristina (sic) Saludo. Please return bag first available
flight to SFO." Accordingly, TWA took it upon itself to carry the remains of Crispina
Saludo on an earlier flight, which we emphasize it could do under the terms of the
airway bill, to make sure that there would be enough time for loading said remains
on the transfer flight on board PAL.
III. Petitioners challenge the validity of respondent court's finding that private
respondents are not liable for tort on account of the humiliating, arrogant and
indifferent acts of their officers and personnel. They posit that since their mother's
remains were transported ten hours earlier than originally scheduled, there was no
reason for private respondents' personnel to disclaim knowledge of the arrival or
whereabouts of the same other than their sheer arrogance, indifference and
extreme insensitivity to the feelings of petitioners. Moreover, being passengers and
not merely consignors of goods, petitioners had the right to be treated with
courtesy, respect, kindness and due consideration.

In riposte, TWA claims that its employees have always dealt politely with all clients,
customers and the public in general. PAL, on the other hand, declares that in the
performance of its obligation to the riding public, other customers and clients, it has
always acted with justice, honesty, courtesy and good faith.

Respondent appellate court found merit in and reproduced the trial court's
refutation of this assigned error:

About the only evidence of plaintiffs that may have reference to the
manner with which the personnel of defendants treated the two
plaintiffs at the San Francisco Airport are the following pertinent
portions of Maria Saludo's testimony:

Q When you arrived there, what did you do, if any?

A I immediately went to the TWA counter and I inquired

about whether my mother was there or if' they knew
anything about it.

Q What was the answer?

A They said they do not know. So, we waited.

Q About what time was that when you reached San

Francisco from Chicago?

A I think 5 o'clock. Somewhere around that in the

afternoon.

Q You made inquiry it was immediately thereafter?

A Right after we got off the plane.

Q Up to what time did you stay in the airport to wait until

the TWA people could tell you the whereabouts?

A Sorry, Sir, but the TWA did not tell us anything. We

stayed there until about 9 o'clock. They have not heard
anything about it. They did not say anything.
Q Do you want to convey to the Court that from 5 up to 9
o'clock in the evening you yourself went back to the TWA
and they could not tell you where the remains of your
mother were?

A Yes sir.

Q And after nine o'clock, what did you do?

A I told my brother my Mom was supposed to be on the

Philippine Airlines flight. "Why don't" we check with PAL
instead to see if she was there?" We tried to comfort each
other. I told him anyway that was a shortest flight from
Chicago to California. We will be with our mother on this
longer flight. So, we checked with the PAL.

Q What did you find?

A We learned, Yes, my Mom would be on the flight.

Q Who was that brother?

A Saturnino Saludo.

Q And did you find what was your flight from San
Francisco to the Philippines?

A I do not know the number. It was the evening flight of

the Philippine Airline(s) from San Francisco to Manila.

Q You took that flight with your mother?

A We were scheduled to, Sir.

Q Now, you could not locate the remains of your mother

in San Francisco could you tell us what did you feel?

A After we were told that my mother was not there?

Q After you learned that your mother could not fly with
you from Chicago to California?

A Well, I was very upset. Of course, I wanted the

confirmation that my mother was in the West Coast. The
fliqht was about 5 hours from Chicago to California. We
waited anxiously all that time on the plane. I wanted to be
assured about my mother's remains. But there was
nothing and we could not get any assurance from anyone
about it.
 Q Your feeling when you reached San Francisco and you
could not find out from the TWA the whereabouts of the
remains, what did you feel?

A Something nobody would be able to describe unless he

experiences it himself. It is a kind of panic. I think it's a
feeling you are about to go crazy. It is something I do not
want to live through again. (Inting, t.s.n., Aug. 9, 1983,
pp. 14-18).

The foregoing does not show any humiliating or arrogant manner with
which the personnel of both defendants treated the two plaintiffs. Even
their alleged indifference is not clearly established. The initial answer
of the TWA personnel at the counter that they did not know anything
about the remains, and later, their answer that they have not heard
anything about the remains, and the inability of the TWA counter
personnel to inform the two plaintiffs of the whereabouts of the
remains, cannot be said to be total or complete indifference to the said
plaintiffs. At any rate, it is any rude or discourteous conduct,
malfeasance or neglect, the use of abusive or insulting language
calculated to humiliate and shame passenger or had faith by or on the
part of the employees of the carrier that gives the passenger an action
for damages against the carrier (Zulueta vs. Pan American World
Airways, 43 SCRA 397; Air France vs. Carrascoso, et al., 18 SCRA 155;
Lopez, et al. vs. Pan American World Airways, 16 SCRA 431; Northwest
Airlines, Inc. vs. Cuenca, 14 SCRA 1063), and none of the above is
obtaining in the instant case. 67

We stand by respondent court's findings on this point, but only to the extent where
it holds that the manner in which private respondent TWA's employees dealt with
petitioners was not grossly humiliating, arrogant or indifferent as would assume the
proportions of malice or bad faith and lay the basis for an award of the damages
claimed. It must however, be pointed out that the lamentable actuations of
respondent TWA's employees leave much to be desired, particularly so in the face of
petitioners' grief over the death of their mother, exacerbated by the tension and
anxiety wrought by the impasse and confusion over the failure to ascertain over an
appreciable period of time what happened to her remains.

Airline companies are hereby sternly admonished that it is their duty not only to
cursorily instruct but to strictly require their personnel to be more accommodating
towards customers, passengers and the general public. After all, common carriers
such as airline companies are in the business of rendering public service, which is
the primary reason for their enfranchisement and recognition in our law. Because
the passengers in a contract of carriage do not contract merely for transportation,
they have a right to be treated with kindness, respect, courtesy and
consideration. 68 A contract to transport passengers is quite different in kind and
degree from any other contractual relation, and generates a relation attended with
public duty. The operation of a common carrier is a business affected with public
interest and must be directed to serve the comfort and convenience of
passengers.69 Passengers are human beings with human feelings and emotions;
they should not be treated as mere numbers or statistics for revenue.

The records reveal that petitioners, particularly Maria and Saturnino Saludo,
agonized for nearly five hours, over the possibility of losing their mother's mortal
remains, unattended to and without any assurance from the employees of TWA that
they were doing anything about the situation. This is not to say that petitioners
were to be regaled with extra special attention. They were, however, entitled to the
understanding and humane consideration called for by and commensurate with the
extraordinary diligence required of common carriers, and not the cold insensitivity
to their predicament. It is hard to believe that the airline's counter personnel were
totally helpless about the situation. Common sense would and should have dictated
that they exert a little extra effort in making a more extensive inquiry, by
themselves or through their superiors, rather than just shrug off the problem with a
callous and uncaring remark that they had no knowledge about it. With all the
modern communications equipment readily available to them, which could have
easily facilitated said inquiry and which are used as a matter of course by airline
companies in their daily operations, their apathetic stance while not legally
reprehensible is morally deplorable.

Losing a loved one, especially one's, parent, is a painful experience. Our culture
accords the tenderest human feelings toward and in reverence to the dead. That the
remains of the deceased were subsequently delivered, albeit belatedly, and
eventually laid in her final resting place is of little consolation. The imperviousness
displayed by the airline's personnel, even for just that fraction of time, was
especially condemnable particularly in the hour of bereavement of the family of
Crispina Saludo, intensified by anguish due to the uncertainty of the whereabouts of
their mother's remains. Hence, it is quite apparent that private respondents'
personnel were remiss in the observance of that genuine human concern and
professional attentiveness required and expected of them.

The foregoing observations, however, do not appear to be applicable or imputable

to respondent PAL or its employees. No attribution of discourtesy or indifference has
been made against PAL by petitioners and, in fact, petitioner Maria Saludo testified
that it was to PAL that they repaired after failing to receive proper attention from
TWA. It was from PAL that they received confirmation that their mother's remains
would be on the same flight to Manila with them.

We find the following substantiation on this particular episode from the deposition of
Alberto A. Lim, PAL's cargo supervisor earlier adverted to, regarding their
investigation of and the action taken on learning of petitioner's problem:

ATTY. ALBERTO C. MENDOZA:

Yes.

Mr. Lim, what exactly was your procedure adopted in your

so called investigation?
 ALBERTO A. LIM:

I called the lead agent on duty at that time and requested

for a copy of airway bill, transfer manifest and other
documents concerning the shipment.

ATTY ALBERTO C. MENDOZA:

Then, what?

ALBERTO A. LIM:

They proceeded to analyze exactly where PAL failed, if

any, in forwarding the human remains of Mrs. Cristina
(sic) Saludo. And I found out that there was not (sic) delay
in shipping the remains of Mrs. Saludo to Manila. Since we
received the body from American Airlines on 28 October
at 7:45 and we expedited the shipment so that it could
have been loaded on our flight leaving at 9:00 in the
evening or just barely one hour and 15 minutes prior to
the departure of the aircraft. That is so (sic) being the
case, I reported to Manila these circumstances. 70

IV. Finally, petitioners insist, as a consequence of the delay in the shipment of their
mother's remains allegedly caused by wilful contractual breach, on their entitlement
to actual, moral and exemplary damages as well as attorney's fees, litigation
expenses, and legal interest.

The uniform decisional tenet in our jurisdiction bolds that moral damages may be
awarded for wilful or fraudulent breach of contract 71 or when such breach is
attended by malice or bad faith. 72 However, in the absence of strong and positive
evidence of fraud, malice or bad faith, said damages cannot be awarded. 73 Neither
can there be an award of exemplary damages 74 nor of attorney's fees 75 as an item
of damages in the absence of proof that defendant acted with malice, fraud or bad
faith.

The censurable conduct of TWA's employees cannot, however, be said to have

approximated the dimensions of fraud, malice or bad faith. It can be said to be more
of a lethargic reaction produced and engrained in some people by the mechanically
routine nature of their work and a racial or societal culture which stultifies what
would have been their accustomed human response to a human need under a
former and different ambience.

Nonetheless, the facts show that petitioners' right to be treated with due courtesy in
accordance with the degree of diligence required by law to be exercised by every
common carrier was violated by TWA and this entitles them, at least, to nominal
damages from TWA alone. Articles 2221 and 2222 of the Civil Code make it clear
that nominal damages are not intended for indemnification of loss suffered but for
the vindication or recognition of a right violated of invaded. They are recoverable
where some injury has been done but the amount of which the evidence fails to
show, the assessment of damages being left to the discretion of the court according
to the circumstances of the case. 76 In the exercise of our discretion, we find an
award of P40,000.00 as nominal damages in favor of, petitioners to be a reasonable
amount under the circumstances of this case.

WHEREFORE, with the modification that an award of P40,000.00 as and by way of

nominal damages is hereby granted in favor of petitioners to be paid by respondent
Trans World Airlines, the appealed decision is AFFIRMED in all other respects.

SO ORDERED.

Melencio-Herrera, Paras, Padilla and Nocon, JJ., concur.

BENITO MACAM vs. COURT OF APPEALS - CHINA OCEAN SHIPPING CO., and/or
WALLEM PHILIPPINES SHIPPING, INC.
G.R. No. 125524 August 25, 1999
On 4 April 1989 petitioner Benito Macam, doing business under the name and
style Ben-Mac Enterprises, shipped on board the vessel Nen Jiang, owned and
operated by respondent China Ocean Shipping Co., through local agent respondent
Wallem Philippines Shipping, Inc. (hereinafter WALLEM), 3,500 boxes of watermelons
valued at US$5,950.00 covered by Bill of Lading No. HKG 99012 and exported
through Letter of Credit No. HK 1031/30 issued by National Bank of Pakistan,
Hongkong (hereinafter PAKISTAN BANK) and 1,611 boxes of fresh mangoes with a
value of US$14,273.46 covered by Bill of Lading No. HKG 99013 and exported
through Letter of Credit No. HK 1032/30 also issued by PAKISTAN BANK. The Bills of
Lading contained the following pertinent provision: "One of the Bills of Lading must
be surrendered duly endorsed in exchange for the goods or delivery order. 1 The
shipment was bound for Hongkong with PAKISTAN BANK as consignee and Great
Prospect Company of Kowloon, Hongkong (hereinafter GPC) as notify party.

On 6 April 1989, per letter of credit requirement, copies of the bills of lading and
commercial invoices were submitted to petitioner's depository bank, Consolidated
Banking Corporation (hereinafter SOLIDBANK), which paid petitioner in advance the
total value of the shipment of US$20,223.46.1wphi1.nt

Upon arrival in Hongkong, the shipment was delivered by respondent WALLEM

directly to GPC, not to PAKISTAN BANK, and without the required bill of lading having
been surrendered. Subsequently, GPC failed to pay PAKISTAN BANK such that the
latter, still in possession of the original bills of lading, refused to pay petitioner
through SOLIDBANK. Since SOLIDBANK already pre-paid petitioner the value of the
shipment, it demanded payment from respondent WALLEM through five (5) letters
but was refused. Petitioner was thus allegedly constrained to return the amount
involved to SOLIDBANK, then demanded payment from respondent WALLEM in
writing but to no avail.

On 25 September 1991 petitioner sought collection of the value of the shipment of

US$20,223.46 or its equivalent of P546,033.42 from respondents before the
Regional Trial Court of Manila, based on delivery of the shipment to GPC without
presentation of the bills of lading and bank guarantee.

Respondents contended that the shipment was delivered to GPC without

presentation of the bills of lading and bank guarantee per request of petitioner
himself because the shipment consisted of perishable goods. The telex dated 5 April
1989 conveying such request read

AS PER SHPR'S REQUEST KINDLY ARRANGE DELIVERY OF A/M SHIPT TO

RESPECTIVE CNEES WITHOUT PRESENTATION OF OB/L2 and bank guarantee
since for prepaid shipt ofrt charges already fully paid our end . . . . 3

Respondents explained that it is a standard maritime practice, when immediate

delivery is of the essence, for the shipper to request or instruct the carrier to deliver
the goods to the buyer upon arrival at the port of destination without requiring
presentation of the bill of lading as that usually takes time. As proof thereof,
respondents apprised the trial court that for the duration of their two-year business
relationship with petitioner concerning similar shipments to GPC deliveries were
effected without presentation of the bills of lading. 4 Respondents advanced next
that the refusal of PAKISTAN BANK to pay the letters of credit to SOLIDBANK was
due to the latter's failure to submit a Certificate of Quantity and Quality.
Respondents counterclaimed for attorney's fees and costs of suit.

On 14 May 1993 the trial court ordered respondents to pay, jointly and severally,
the following amounts: (1) P546,033.42 plus legal interest from 6 April 1989 until
full payment; (2) P10,000.00 as attorney's fees; and, (3) the costs. The
counterclaims were dismissed for lack of merit. 5 The trial court opined that
respondents breached the provision in the bill of lading requiring that "one of the
Bills of Lading must be surrendered duly endorsed in exchange for the goods or
delivery order," when they released the shipment to GPC without presentation of
the bills of lading and the bank guarantee that should have been issued by
PAKISTAN BANK in lieu of the bills of lading. The trial court added that the shipment
should not have been released to GPC at all since the instruction contained in the
telex was to arrange delivery to the respective consignees and not to any party. The
trial court observed that the only role of GPC in the transaction as notify party was
precisely to be notified of the arrival of the cargoes in Hongkong so it could in turn
duly advise the consignee.

Respondent Court of Appeals appreciated the evidence in a different manner.

According to it, as established by previous similar transactions between the parties,
shipped cargoes were sometimes actually delivered not to the consignee but to
notify party GPC without need of the bills of lading or bank guarantee. 6 Moreover,
the bills of lading were viewed by respondent court to have been properly
superseded by the telex instruction and to implement the instruction, the delivery of
the shipment must be to GPC, the real importer/buyer of the goods as shown by the
export invoices,7 and not to PAKISTAN BANK since the latter could very well present
the bills of lading in its possession; likewise, if it were the PAKISTAN BANK to which
the cargoes were to be strictly delivered it would no longer be proper to require a
bank guarantee. Respondent court noted that besides, GPC was listed as a
consignee in the telex. It observed further that the demand letter of petitioner to
respondents never complained of misdelivery of goods. Lastly, respondent court
found that petitioner's claim of having reimbursed the amount involved to
SOLIDBANK was unsubstantiated. Thus, on 13 March 1996 respondent court set
aside the decision of the trial court and dismissed the complaint together with the
counterclaims.8 On 5 July 1996 reconsideration was denied. 9

Petitioner submits that the fact that the shipment was not delivered to the
consignee as stated in the bill of lading or to a party designated or named by the
consignee constitutes a misdelivery thereof. Moreover, petitioner argues that from
the text of the telex, assuming there was such an instruction, the delivery of the
shipment without the required bill of lading or bank guarantee should be made only
to the designated consignee, referring to PAKISTAN BANK.
We are not persuaded. The submission of petitioner that "the fact that the shipment
was not delivered to the consignee as stated in the Bill of Lading or to a party
designated or named by the consignee constitutes a misdelivery thereof" is a
deviation from his cause of action before the trial court. It is clear from the
allegation in his complaint that it does not deal with misdelivery of the cargoes but
of delivery to GPC without the required bills of lading and bank guarantee

6. The goods arrived in Hongkong and were released by the defendant

Wallem directly to the buyer/notify party, Great Prospect Company and not to
the consignee, the National Bank of Pakistan, Hongkong, without the required
bills of lading and bank guarantee for the release of the shipment issued by
the consignee of the goods . . . . 10

Even going back to an event that transpired prior to the filing of the present case or
when petitioner wrote respondent WALLEM demanding payment of the value of the
cargoes, misdelivery of the cargoes did not come into the picture

We are writing you on behalf of our client, Ben-Mac Enterprises who informed
us that Bills of Lading No. 99012 and 99013 with a total value of
US$20,223.46 were released to Great Prospect, Hongkong without the
necessary bank guarantee. We were further informed that the consignee of
the goods, National Bank of Pakistan, Hongkong, did not release or endorse
the original bills of lading. As a result thereof, neither the consignee, National
Bank of Pakistan, Hongkong, nor the importer, Great Prospect Company,
Hongkong, paid our client for the goods . . . . 11

At any rate, we shall dwell on petitioner's submission only as a prelude to our

discussion on the imputed liability of respondents concerning the shipped goods.
Article 1736 of the Civil Code provides

Art. 1736. The extraordinary responsibility of the common carriers 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 a right to receive them, without prejudice to the provisions of article
1738.12

We emphasize that the extraordinary responsibility of the common carriers lasts

until actual or constructive delivery of the cargoes to the consignee or to the person
who has a right to receive them. PAKISTAN BANK was indicated in the bills of lading
as consignee whereas GPC was the notify party. However, in the export invoices
GPC was clearly named as buyer/importer. Petitioner also referred to GPC as such in
his demand letter to respondent WALLEM and in his complaint before the trial court.
This premise draws us to conclude that the delivery of the cargoes to GPC as
buyer/importer which, conformably with Art. 1736 had, other than the consignee,
the right to receive them14 was proper.

The real issue is whether respondents are liable to petitioner for releasing the goods
to GPC without the bills of lading or bank guarantee.
Respondents submitted in evidence a telex dated 5 April 1989 as basis for
delivering the cargoes to GPC without the bills of lading and bank guarantee. The
telex instructed delivery of various shipments to the respective consignees without
need of presenting the bill of lading and bank guarantee per the respective
shipper's request since "for prepaid shipt ofrt charges already fully paid." Petitioner
was named therein as shipper and GPC as consignee with respect to Bill of Lading
Nos. HKG 99012 and HKG 99013. Petitioner disputes the existence of such
instruction and claims that this evidence is self-serving.

From the testimony of petitioner, we gather that he has been transacting with GPC
as buyer/importer for around two (2) or three (3) years already. When mangoes and
watermelons are in season, his shipment to GPC using the facilities of respondents
is twice or thrice a week. The goods are released to GPC. It has been the practice of
petitioner to request the shipping lines to immediately release perishable cargoes
such as watermelons and fresh mangoes through telephone calls by himself or his
"people." In transactions covered by a letter of credit, bank guarantee is normally
required by the shipping lines prior to releasing the goods. But for buyers using
telegraphic transfers, petitioner dispenses with the bank guarantee because the
goods are already fully paid. In his several years of business relationship with GPC
and respondents, there was not a single instance when the bill of lading was first
presented before the release of the cargoes. He admitted the existence of the telex
of 3 July 1989 containing his request to deliver the shipment to the consignee
without presentation of the bill of lading 15 but not the telex of 5 April 1989 because
he could not remember having made such request.

Consider pertinent portions of petitioner's testimony

Q: Are you aware of any document which would indicate or show that your
request to the defendant Wallem for the immediate release of your fresh
fruits, perishable goods, to Great Prospect without the presentation of the
original Bill of Lading?

A: Yes, by telegraphic transfer, which means that it is fully paid. And I

requested immediate release of the cargo because there was immediate
payment.

Q: And you are referring, therefore, to this copy Telex release that you
mentioned where your Company's name appears Ben-Mac?

Atty. Hernandez: Just for the record, Your Honor, the witness is showing
a Bill of Lading referring to SKG (sic) 93023 and 93026 with Great
Prospect Company.

Atty. Ventura:

Q: Is that the telegraphic transfer?

A: Yes, actually, all the shippers partially request for the immediate release of
the goods when they are perishable. I thought Wallem Shipping Lines is not
neophyte in the business. As far as LC is concerned, Bank guarantee is
needed for the immediate release of the goods . . . . 15

Q: Mr. Witness, you testified that if is the practice of the shipper of the
perishable goods to ask the shipping lines to release immediately the
shipment. Is that correct?

A: Yes, sir.

Q: Now, it is also the practice of the shipper to allow the shipping lines to
release the perishable goods to the importer of goods without a Bill of Lading
or Bank guarantee?

A: No, it cannot be without the Bank Guarantee.

Atty. Hernandez:

Q: Can you tell us an instance when you will allow the release of the
perishable goods by the shipping lines to the importer without the Bank
guarantee and without the Bill of Lading?

A: As far as telegraphic transfer is concerned.

Q: Can you explain (to) this Honorable Court what telegraphic transfer is?

A: Telegraphic transfer, it means advance payment that I am already fully

paid . . . .

Q: Mr. Macam, with regard to Wallem and to Great Prospect, would you know
and can you recall that any of your shipment was released to Great Prospect
by Wallem through telegraphic transfer?

A: I could not recall but there were so many instances sir.

Q: Mr. Witness, do you confirm before this Court that in previous shipments of
your goods through Wallem, you requested Wallem to release immediately
your perishable goods to the buyer?

A: Yes, that is the request of the shippers of the perishable goods . . . . 16

Q: Now, Mr. Macam, if you request the Shipping Lines for the release of your
goods immediately even without the presentation of OBL, how do you course
it?

A: Usually, I call up the Shipping Lines, sir . . . . 17

Q: You also testified you made this request through phone calls. Who of you
talked whenever you made such phone call?
 A: Mostly I let my people to call, sir. (sic)

Q: So everytime you made a shipment on perishable goods you let your

people to call? (sic)

A: Not everytime, sir.

Q: You did not make this request in writing?

A: No, sir. I think I have no written request with Wallem . . . . 18

Against petitioner's claim of "not remembering" having made a request for delivery
of subject cargoes to GPC without presentation of the bills of lading and bank
guarantee as reflected in the telex of 5 April 1989 are damaging disclosures in his
testimony. He declared that it was his practice to ask the shipping lines to
immediately release shipment of perishable goods through telephone calls by
himself or his "people." He no longer required presentation of a bill of lading nor of a
bank guarantee as a condition to releasing the goods in case he was already fully
paid. Thus, taking into account that subject shipment consisted of perishable goods
and SOLIDBANK pre-paid the full amount of the value thereof, it is not hard to
believe the claim of respondent WALLEM that petitioner indeed requested the
release of the goods to GPC without presentation of the bills of lading and bank
guarantee.

The instruction in the telex of 5 April 1989 was "to deliver the shipment to
respective consignees." And so petitioner argues that, assuming there was such an
instruction, the consignee referred to was PAKISTAN BANK. We find the argument
too simplistic. Respondent court analyzed the telex in its entirety and correctly
arrived at the conclusion that the consignee referred to was not PAKISTAN BANK but
GPC

There is no mistake that the originals of the two (2) subject Bills of Lading are
still in the possession of the Pakistani Bank. The appealed decision affirms
this fact. Conformably, to implement the said telex instruction, the delivery of
the shipment must be to GPC, the notify party or real importer/buyer of the
goods and not the Pakistani Bank since the latter can very well present the
original Bills of Lading in its possession. Likewise, if it were the Pakistani Bank
to whom the cargoes were to be strictly delivered, it will no longer be proper
to require a bank guarantee as a substitute for the Bill of Lading. To construe
otherwise will render meaningless the telex instruction. After all, the cargoes
consist of perishable fresh fruits and immediate delivery thereof to the
buyer/importer is essentially a factor to reckon with. Besides, GPC is listed as
one among the several consignees in the telex (Exhibit 5-B) and the
instruction in the telex was to arrange delivery of A/M shipment (not any
party) to respective consignees without presentation of OB/L and bank
guarantee . . . .20

Apart from the foregoing obstacles to the success of petitioner's cause, petitioner
failed to substantiate his claim that he returned to SOLIDBANK the full amount of
the value of the cargoes. It is not far-fetched to entertain the notion, as did
respondent court, that he merely accommodated SOLIDBANK in order to recover the
cost of the shipped cargoes from respondents. We note that it was SOLIDBANK
which initially demanded payment from respondents through five (5) letters.
SOLIDBANK must have realized the absence of privity of contract between itself and
respondents. That is why petitioner conveniently took the cudgels for the bank.

In view of petitioner's utter failure to establish the liability of respondents over the
cargoes, no reversible error was committed by respondent court in ruling against
him.

WHEREFORE, the petition is DENIED. The decision of respondent Court of Appeals of

13 March 1996 dismissing the complaint of petitioner Benito Macam and the
counterclaims of respondents China Ocean Shipping Co. and/or Wallem Philippines
Shipping, Inc., as well as its resolution of 5 July 1996 denying reconsideration, is
AFFIRMED.1wphi1.nt

SO ORDERED.

Mendoza, Quisumbing and Buena, JJ., concur.

MAERSK LINE, vs. CA - CASTILLO,

G.R. No. 94761 May 17, 1993

FACTS:

Petitioner Maersk Line is engaged in the transportation of goods by sea, doing

business in the Philippines through its general agent Compania General de Tabacos
de Filipinas.

Private respondent Efren Castillo, on the other hand, is the proprietor of Ethegal
Laboratories, a firm engaged in the manutacture of pharmaceutical products.

On November 12, 1976, private respondent ordered from Eli Lilly. Inc. of Puerto Rico
through its (Eli Lilly, Inc.'s) agent in the Philippines, Elanco Products, 600,000 empty
gelatin capsules for the manufacture of his pharmaceutical products. The capsules
were placed in six (6) drums of 100,000 capsules each valued at US $1,668.71.

Through a Memorandum of Shipment (Exh. "B"; AC GR CV No.10340, Folder of

Exhibits, pp. 5-6), the shipper Eli Lilly, Inc. of Puerto Rico advised private respondent
as consignee that the 600,000 empty gelatin capsules in six (6) drums of 100,000
capsules each, were already shipped on board MV "Anders Maerskline" under
Voyage No. 7703 for shipment to the Philippines via Oakland, California. In said
Memorandum, shipper Eli Lilly, Inc. specified the date of arrival to be April 3, 1977.

For reasons unknown, said cargo of capsules were mishipped and diverted to
Richmond, Virginia, USA and then transported back Oakland, Califorilia. The goods
finally arrived in the Philippines on June 10, 1977 or after two (2) months from the
date specified in the memorandum. As a consequence, private respondent as
consignee refused to take delivery of the goods on account of its failure to arrive on
time.

Private respondent alleging gross negligence and undue delay in the delivery of the
goods, filed an action before the court a quo for rescission of contract with damages
against petitioner and Eli Lilly, Inc. as defendants.

Denying that it committed breach of contract, petitioner alleged in its that answer
that the subject shipment was transported in accordance with the provisions of the
covering bill of lading and that its liability under the law on transportation of good
attaches only in case of loss, destruction or deterioration of the goods as provided
for in Article 1734 of Civil Code (Rollo, p. 16).

Defendant Eli Lilly, Inc., on the other hand, filed its answer with compulsory and
cross-claim. In its cross-claim, it alleged that the delay in the arrival of the the
subject merchandise was due solely to the gross negligence of petitioner Maersk
Line.
The issues having been joined, private respondent moved for the dismissal of the
complaint against Eli Lilly, Inc.on the ground that the evidence on record shows that
the delay in the delivery of the shipment was attributable solely to petitioner.

Acting on private respondent's motion, the trial court dismissed the complaint
against Eli Lilly, Inc. Correspondingly, the latter withdraw its cross-claim against
petitioner in a joint motion dated December 3, 1979.

After trial held between respondent and petitioner, the court a quo rendered
judgment dated January 8, 1982 in favor of respondent Castillo, believing and
holding that there was a breach of performance of their obligation by the defendant
Maersk Line consisting of their negligence to ship the 6 drums of empty Gelatin
Capsules which under their own memorandum shipment would arrive in the
Philippines on April 3, 1977 which under Art. 1170 of the New Civil Code, they stood
liable for damages.

Hence the petition.

ISSUE:

WON CA erred in its decision entitling respondent Castillo to damages resulting from
delay in the delivery of the shipment in the absence in the bill of lading of a
stipulation on the period of delivery.

RULING:

Respondent court, erred in declaring that the trial court based petitioner's liability
on the cross-claim of Eli Lilly, Inc. As borne out by the record, the trial court
anchored its decision on petitioner's delay or negligence to deliver the six (6) drums
of gelatin capsules within a reasonable time on the basis of which petitioner was
held liable for damages under Article 1170 of the New Civil Code which provides
that 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.

Nonetheless, petitioner maintains that it cannot be held for damages for the alleged
delay in the delivery of the 600,000 empty gelatin capsules since it acted in good
faith and there was no special contract under which the carrier undertook to deliver
the shipment on or before a specific date (Rollo, p. 103).

On the other hand, private respondent claims that during the period before the
specified date of arrival of the goods, he had made several commitments and
contract of adhesion. Therefore, petitioner can be held liable for the damages
suffered by private respondent for the cancellation of the contracts he entered into.

We have carefully reviewed the decisions of respondent court and the trial court and
both of them show that, in finding petitioner liable for damages for the delay in the
delivery of goods, reliance was made on the rule that contracts of adhesion are
void. Added to this, the lower court stated that the exemption against liability for
delay is against public policy and is thus, void. Besides, private respondent's action
is anchored on Article 1170 of the New Civil Code and not under the law on
Admiralty (AC-GR CV No. 10340, Rollo, p. 14).

The bill of lading covering the subject shipment among others, reads:

6. GENERAL

(1) The Carrier does not undertake that the goods shall arive at the
port of discharge or the place of delivery at any particular time or to
meet any particular market or use and save as is provided in clause 4
the Carrier shall in no circumstances be liable for any direct, indirect or
consequential loss or damage caused by delay. If the Carrier should
nevertheless be held legally liable for any such direct or indirect or
consequential loss or damage caused by delay, such liability shall in no
event exceed the freight paid for the transport covered by this Bill of
Lading. (Exh. "1-A"; AC-G.R. CV No. 10340, Folder of Exhibits, p. 41)

It is not disputed that the aforequoted provision at the back of the bill of lading, in
fine print, is a contract of adhesion. Generally, contracts of adhesion are considered
void since almost all the provisions of these types of contracts are prepared and
drafted only by one party, usually the carrier (Sweet Lines v. Teves, 83 SCRA 361
[1978]). The only participation left of the other party in such a contract is the
affixing of his signature thereto, hence the term "Adhesion" (BPI Credit Corporation
v. Court of Appeals, 204 SCRA 601 [1991]; Angeles v. Calasanz, 135 SCRA 323
[1985]).

Nonetheless, settled is the rule that bills of lading are contracts not entirely
prohibited (Ong Yiu v. Court of Appeals, et al., 91 SCRA 223 [1979]; Servando, et al.
v. Philippine Steam Navigation Co., 117 SCRA 832 [1982]). One who adheres to the
contract is in reality free to reject it in its entirety; if he adheres, he gives his
consent (Magellan Manufacturing Marketing Corporation v. Court of Appeals, et al.,
201 SCRA 102 [1991]).

In Magellan, (supra), we ruled:

It is a long standing jurisprudential rule that a bill of lading operates

both as a receipt and as contract to transport and deliver the same a
therein stipulated. As a contract, it names the parties, which includes
the consignee, fixes the route, destination, and freight rates or
charges, and stipulates the rights and obligations assumed by the
parties. Being a contract, it is the law between the parties who are
bound by its terms and conditions provided that these are not contrary
to law, morals, good customs, public order and public policy. A bill of
lading usually becomes effective upon its delivery to and acceptance
by the shipper. It is presumed that the stipulations of the bill were, in
the absence of fraud, concealment or improper conduct, known to the
shipper, and he is generally bound by his acceptance whether he reads
the bill or not. (Emphasis supplied)
However, the aforequoted ruling applies only if such contracts will not create an
absurd situation as in the case at bar. The questioned provision in the subject bill of
lading has the effect of practically leaving the date of arrival of the subject
shipment on the sole determination and will of the carrier.

While it is true that common carriers are not obligated by law to carry and to deliver
merchandise, and persons are not vested with the right to prompt delivery, unless
such common carriers previously assume the obligation to deliver at a given date or
time (Mendoza v. Philippine Air Lines, Inc., 90 Phil. 836 [1952]), delivery of shipment
or cargo should at least be made within a reasonable time.

In Saludo, Jr. v. Court of Appeals (207 SCRA 498 [1992]) this Court held:

The oft-repeated rule regarding a carrier's liability for delay is that in

the absence of a special contract, a carrier is not an insurer against
delay in transportation of goods. When a common carrier undertakes
to convey goods, the law implies a contract that they shall be
delivered at destination within a reasonable time, in the absence, of
any agreement as to the time of delivery. But where a carrier has
made an express contract to transport and deliver properly within a
specified time, it is bound to fulfill its contract and is liable for any
delay, no matter from what cause it may have arisen. This result
logically follows from the well-settled rule that where the law creates a
duty or charge, and the default in himself, and has no remedy over,
then his own contract creates a duty or charge upon himself, he is
bound to make it good notwithstanding any accident or delay by
inevitable necessity because he might have provided against it by
contract. Whether or not there has been such an undertaking on the
part of the carrier is to be determined from the circumstances
surrounding the case and by application of the ordinary rules for the
interpretation of contracts.

An examination of the subject bill of lading (Exh. "1"; AC GR CV No. 10340, Folder of
Exhibits, p. 41) shows that the subject shipment was estimated to arrive in Manila
on April 3, 1977. While there was no special contract entered into by the parties
indicating the date of arrival of the subject shipment, petitioner nevertheless, was
very well aware of the specific date when the goods were expected to arrive as
indicated in the bill of lading itself. In this regard, there arises no need to execute
another contract for the purpose as it would be a mere superfluity.

In the case before us, we find that a delay in the delivery of the goods spanning a
period of two (2) months and seven (7) days falls was beyond the realm of
reasonableness. Described as gelatin capsules for use in pharmaceutical products,
subject shipment was delivered to, and left in, the possession and custody of
petitioner-carrier for transport to Manila via Oakland, California. But through
petitioner's negligence was mishipped to Richmond, Virginia. Petitioner's insitence
that it cannot be held liable for the delay finds no merit.
Petition maintains that the award of actual, moral and exemplary dames and
attorney's fees are not valid since there are no factual findings or legal bases stated
in the text of the trial court's decision to support the award thereof.

Indeed, it is settled that actual and compensataory damages requires substantial

proof (Capco v. Macasaet. 189 SCRA 561 [1990]). In the case at bar, private
respondent was able to sufficiently prove through an invoice (Exh. 'A-1'),
certification from the issuer of the letter of credit (Exh.'A-2') and the Memorandum
of Shipment (Exh. "B"), the amount he paid as costs of the credit line for the subject
goods. Therefore, respondent court acted correctly in affirming the award of eleven
thousand six hundred eighty pesos and ninety seven centavos (P11,680.97) as costs
of said credit line.

As to the propriety of the award of moral damages, Article 2220 of the Civil Code
provides that moral damages may be awarded in "breaches of contract where the
defendant acted fraudulently or in bad faith" (Pan American World Airways v.
Intermediate Appellate Court, 186 SCRA 687 [1990]).

In the case before us, we that the only evidence presented by petitioner was the
testimony of Mr. Rolando Ramirez, a claims manager of its agent Compania General
de Tabacos de Filipinas, who merely testified on Exhs. '1' to '5' (AC-GR CV No.
10340, p. 2) and nothing else. Petitioner never even bothered to explain the course
for the delay, i.e. more than two (2) months, in the delivery of subject shipment.
Under the circumstances of the case, we hold that petitioner is liable for breach of
contract of carriage through gross negligence amounting to bad faith. Thus, the
award of moral damages if therefore proper in this case.

In line with this pronouncement, we hold that exemplary damages may be awarded
to the private respondent. In contracts, exemplary damages may be awarded if the
defendant acted in a wanton, fraudulent, reckless, oppresive or malevolent manner.
There was gross negligence on the part of the petitioner in mishiping the subject
goods destined for Manila but was inexplicably shipped to Richmond, Virginia, U.S.A.
Gross carelessness or negligence contitutes wanton misconduct, hence, exemplary
damages may be awarded to the aggrieved party (Radio Communication of the
Phils., Inc. v. Court of Appeals, 195 SCRA 147 [1991]).

Although attorney's fees are generally not recoverable, a party can be held liable for
such if exemplary damages are awarded (Artice 2208, New Civil Code). In the case
at bar, we hold that private respondent is entitled to reasonable attorney`s fees
since petitioner acted with gross negligence amounting to bad faith.

However, we find item 4 in the dispositive portion of respondent court`s decision

which awarded thirty (30) percent of the total damages awarded except item 3
regarding attorney`s fees and litigation expenses in favor of private respondent, to
be unconsionable, the same should be deleted.

WHEREFORE, with the modification regarding the deletion of item 4 of respondent

court`s decision, the appealed decision is is hereby AFFIRMED in all respects.
SO ORDERED.
SWEET LINES, INC., vs. HON. BERNARDO TEVES

G.R. No. L-37750 May 19, 1978

FACTS:

Private respondents Atty. Leovigildo Tandog and Rogelio Tiro, a contractor by

professions, bought tickets Nos. 0011736 and 011737 for Voyage 90 on December
31, 1971 at the branch office of petitioner, a shipping company transporting inter-
island passengers and cargoes, at Cagayan de Oro City.

Respondents were to board petitioner's vessel, M/S "Sweet Hope" bound for
Tagbilaran City via the port of Cebu. Upon learning that the vessel was not
proceeding to Bohol, since many passengers were bound for Surigao, private
respondents per advice, went to the branch office for proper relocation to M/S
"Sweet Town". Because the said vessel was already filled to capacity, they were
forced to agree "to hide at the cargo section to avoid inspection of the officers of
the Philippine Co0061stguard."

Private respondents alleged that they were, during the trip," "exposed to the
scorching heat of the sun and the dust coming from the ship's cargo of corn grits,"
and that the tickets they bought at Cagayan de Oro City for Tagbilaran were not
honored and they were constrained to pay for other tickets.

In view thereof, private respondents sued petitioner for damages and for breach of
contract of carriage in the alleged sum of P10,000.00 before respondents Court of
First Instance of Misamis Oriental. 2

Petitioner moved to dismiss the complaint on the ground of improper venue. This
motion was premised on the condition printed at the back of the tickets, i.e.,
Condition No. 14, which reads:

14. It is hereby agreed and understood that any and all actions arising
out of the conditions and provisions of this ticket, irrespective of where
it is issued, shall be filed in the competent courts in the City of Cebu. 3

4
The motion was denied by the trial court. Petitioner moved to reconsider the order
of denial, but no avail.

Hence the Petition.

ISSUE:

WON there was a breach of contract

RULING:

There is no question that there was a valid contract of carriage entered into by
petitioner and private respondents and that the passage tickets, upon which the
latter based their complaint, are the best evidence thereof. All the essential
elements of a valid contract, i.e., consent, cause or consideration and object, are
present.

It should be borne in mind, however, that with respect to the fourteen (14)
conditions one of which is "Condition No. 14" which is in issue in this case
printed at the back of the passage tickets, these are commonly known as "contracts
of adhesion," the validity and/or enforceability of which will have to be determined
by the peculiar circumstances obtaining in each case and the nature of the
conditions or terms sought to be enforced. For, "(W)hile generally, stipulations in a
contract come about after deliberate drafting by the parties thereto, ... there are
certain contracts almost all the provisions of which have been drafted only by one
party, usually a corporation. Such contracts are called contracts of
adhesion, because the only participation of the party is the signing of his signature
or his 'adhesion' thereto. Insurance contracts, bills of lading, contracts of make of
lots on the installment plan fall into this category" 16

By the peculiar circumstances under which contracts of adhesion are entered into
namely, that it is drafted only by one party, usually the corporation, and is sought to
be accepted or adhered to by the other party, in this instance the passengers,
private respondents, who cannot change the same and who are thus made to
adhere thereto on the "take it or leave it" basis certain guidelines in the
determination of their validity and/or enforceability have been formulated in order
to that justice and fan play characterize the relationship of the contracting parties.
Thus, this Court speaking through Justice J.B.L. Reyes in Qua Chee Gan v. Law Union
and Rock Insurance Co., 17 and later through Justice Fernando in Fieldman Insurance
v. Vargas, 18 held

The courts cannot ignore that nowadays, monopolies, cartels and

concentration of capital endowed with overwhelm economic power,
manage to impose upon parties d with them y prepared 'agreements'
that the weaker party may not change one whit his participation in the
'agreement' being reduced to the alternative 'to take it or leave it,'
labelled since Raymond Saleilles 'contracts by adherence' (contracts d'
adhesion) in contrast to those entered into by parties bargaining on an
equal footing. Such contracts (of which policies of insurance and
international bill of lading are prime examples) obviously cap for
greater strictness and vigilance on the part of the courts of justice with
a view to protecting the weaker party from abuses and imposition, and
prevent their becoming traps for the unwary.

To the same effect and import, and, in recognition of the character of contracts of
this kind, the protection of the disadvantaged is expressly enjoined by the New Civil
Code

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 and other handicap, the
courts must be vigilant for his
protection. 19
Considered in the light Of the foregoing norms and in the context Of circumstances
Prevailing in the inter-island ship. ping industry in the country today, We find and
hold that Condition No. 14 printed at the back of the passage tickets should be held
as void and unenforceable for the following reasons first, under circumstances
obligation in the inter-island ship. ping industry, it is not just and fair to bind
passengers to the terms of the conditions printed at the back of the passage tickets,
on which Condition No. 14 is Printed in fine letters, and second, Condition No. 14
subverts the public policy on transfer of venue of proceedings of this nature, since
the same will prejudice rights and interests of innumerable passengers in different s
of the country who, under Condition No. 14, will have to file suits against petitioner
only in the City of Cebu.

It is a matter of public knowledge, of which We can take judicial notice, that there is
a dearth of and acute shortage in inter- island vessels plying between the country's
several islands, and the facilities they offer leave much to be desired. Thus, even
under ordinary circumstances, the piers are congested with passengers and their
cargo waiting to be transported. The conditions are even worse at peak and/or the
rainy seasons, when Passengers literally scramble to whatever accommodations
may be availed of, even through circuitous routes, and/or at the risk of their safety
their immediate concern, for the moment, being to be able to board vessels with
the hope of reaching their destinations. The schedules are as often as not if not
more so delayed or altered. This was precisely the experience of private
respondents when they were relocated to M/S "Sweet Town" from M/S "Sweet Hope"
and then any to the scorching heat of the sun and the dust coming from the ship's
cargo of corn grits, " because even the latter was filed to capacity.

Under these circumstances, it is hardly just and proper to expect the passengers to
examine their tickets received from crowded/congested counters, more often than
not during rush hours, for conditions that may be printed much charge them with
having consented to the conditions, so printed, especially if there are a number of
such conditions m fine print, as in this case. 20

Again, it should be noted that Condition No. 14 was prepared solely at the ms of the
petitioner, respondents had no say in its preparation. Neither did the latter have the
opportunity to take the into account prior to the purpose chase of their tickets. For,
unlike the small print provisions of contracts the common example of contracts of
adherence which are entered into by the insured in his awareness of said
conditions, since the insured is afforded the op to and co the same, passengers of
inter-island v do not have the same chance, since their alleged adhesion is
presumed only from the fact that they purpose chased the tickets.

It should also be stressed that slapping companies are franchise holders of

certificates of public convenience and therefore, posses a virtual monopoly over the
business of transporting passengers between the ports covered by their franchise.
This being so, shipping companies, like petitioner, engaged in inter-island shipping,
have a virtual monopoly of the business of transporting passengers and may thus
dictate their terms of passage, leaving passengers with no choice but to buy their
tickets and avail of their vessels and facilities. Finally, judicial notice may be taken
of the fact that the bulk of those who board these inter-island vested come from the
low-income groups and are less literate, and who have little or no choice but to avail
of petitioner's vessels.

2. Condition No. 14 is subversive of public policy on transfers of venue of actions.

For, although venue may be changed or transferred from one province to another by
agreement of the parties in writing t to Rule 4, Section 3, of the Rules of Court, such
an agreement will not be held valid where it practically negates the action of the
claimants, such as the private respondents herein. The philosophy underlying the
provisions on transfer of venue of actions is the convenience of the plaintiffs as well
as his witnesses and to promote 21 the ends of justice. Considering the expense and
trouble a passenger residing outside of Cebu City would incur to prosecute a claim
in the City of Cebu, he would most probably decide not to file the action at all. The
condition will thus defeat, instead of enhance, the ends of justice. Upon the other
hand, petitioner has branches or offices in the respective ports of call of its vessels
and can afford to litigate in any of these places. Hence, the filing of the suit in the
CFI of Misamis Oriental, as was done in the instant case, will not cause
inconvenience to, much less prejudice, petitioner.

Public policy is ". . . that principle of the law which holds that no subject or citizen
can lawfully do that which has a tendency to be injurious to the public or against the
public good ... 22 Under this principle" ... freedom of contract or private dealing is
restricted by law for the good of the public. 23 Clearly, Condition No. 14, if enforced,
will be subversive of the public good or interest, since it will frustrate in meritorious
cases, actions of passenger cants outside of Cebu City, thus placing petitioner
company at a decided advantage over said persons, who may have perfectly
legitimate claims against it. The said condition should, therefore, be declared void
and unenforceable, as contrary to public policy to make the courts accessible to
all who may have need of their services.

WHEREFORE, the petition for prohibition is DISMISS. ED. The restraining order issued
on November 20, 1973, is hereby LIFTED and SET ASIDE. Costs against petitioner.
NORBERTO QUISUMBING, SR., and GUNTHER LOEFFLER vs. CA - PAL

G.R. No. L-50076 September 14, 1990

FACTS:

Norberto Quisumbing, Sr. and Gunther Leoffler were among the of ... (PAL's) Fokker
'Friendship' PIC-536 plane in its flight of November 6,1968 which left Mactan City at
about 7:30 in the evening with Manila for its destination.

After the plane had taken off, Florencio O. Villarin, a Senior NBI Agent who was also
a passenger of the said plane, noticed a certain 'Zaldy,' a suspect in the killing of
Judge Valdez, seated at the front seat near the door leading to the cockpit of the
plane. A check by Villarin with the passenger's ticket in the possession of flight
Stewardess Annie Bontigao, who was seated at the last seat right row, revealed that
'Zaldy' had used the name 'Cardente,' one of his aliases known to Villarin. Villarin
also came to know from the stewardess that 'Zaldy' had three companions on board
the plane."

Villarin then scribbled a note addressed to the pilot of the plane requesting the
latter to contact NBI duty agents in Manila for the said agents to ask the Director of
the NBI to send about six NBI agents to meet the plane because the suspect in the
killing of Judge Valdez was on board (Exh. 'G'). The said note was handed by Villarin
to the stewardess who in tum gave the same to the pilot.

After receiving the note, which was about 15 minutes after take off, the pilot of the
plane, Capt. Luis Bonnevie, Jr., came out of the cockpit and sat beside Villarin at the
rear portion of the plane and explained that he could not send the message
because it would be heard by all ground aircraft stations. Villarin, however, told the
pilot of the danger of commission of violent acts on board the plane by the
notorious 'Zaldy' and his three companions.

While the pilot and Villarin were talking, 'Zaldy' and one of his companions walked
to the rear and stood behind them. Capt. Bonnevie then stood up and went back to
the cockpit. 'Zaldy' and his companions returned to their seats, but after a few
minutes they moved back to the rear throwing ugly looks at Villarin who, sensing
danger, stood up and went back to his original seat across the aisle on the second
to the last seat near the window. 'Zaldy and his companion likewise went back to
their respective seats in front.

Soon thereafter an exchange of gunshots ensued between Villarin and 'Zaldy' and
the latter's companions. 'Zaldy' announced to the passengers and the pilots in the
cockpit that it was a hold-up and ordered the pilot not to send any SOS. The hold-
uppers divested passengers of their belongings.

Specifically, ... Norberto Quisumbing, Sr. was divested of jewelries and cash in the
total amount of P18,650.00 out of which recoveries were made amounting to
P4,550.00. . . Gunther Leoffler was divested of a wrist watch, cash and a wallet in
the total of P1,700.00. As a result of the incident ... Quisumbing, Sr.suffered shock,
because a gun had been pointed at him by one of the holduppers.

Upon landing at the Manila International Airport. 'Zaldy' and his three companions
succeeded in escaping.

Demands were thereafter made on PAL by Quisumbing and Loeffler "to indemnify ...
(them) on their aforesaid loss, but ... (PAL) refused ... (averring that) it is not liable
to (them) in law or in fact." 2

Contending that the "aforesaid loss is a result of breach of ... (PAL's) contractual
obligation to carry ... (them) and their belongings and effects to their Manila
destination without loss or damage, and constitutes a serious dereliction of ...
(PAL's) legal duty to exercise extraordinary diligence in the vigilance over the
same." , Quisumbing and Loeffler brought suit against PAL in the Court of First
Instance of Rizal, as stated in this opinion's opening paragraph, to recover the value
of the property lost by them to the robbers as well as moral and exemplary
damages, attorney's fees and expenses of litigation. 3 The plaintiffs declared that
their suit was instituted "... pursuant to Civil Code articles 1754, 998, 2000 and
2001 and on the ground that in relation to said Civil Code article 2001 the
complained-of act of the armed robbers is not a force majeure, as the 'use of arms'
or 'irresistible force' was not taken advantage of by said armed robbers in gaining
entrance to defendant's ill-fated plane in questions. And, with respect to said Civil
Code article 1998, it is not essential that the lost effects and belongings of plaintiffs
were actually delivered to defendant's plane personnel or that the latter were
notified thereof (De los Santos v. Tamn Khey, [CA] 58 O.G. 7693)." 4

PAL filed answer denying liability, alleging inter alia that the robbery during
the flight and after the aircraft was forcibly landed at the Manila Airport did indeed
constitute force majeure, and neither of the plaintiffs had notified PAL "or its crew or
employees that they were in possession of cash, German marks and valuable
jewelries and watches" or surrendered said items to "the crew or personnel on
board the aircraft." 5

After trial, the Court of First Instance rendered judgment 'dismissing plaintiffs'
complaint with costs against ... (them)." 6 The Court opined that since the plaintiffs
"did not notify defendant or its employees that they were in possession of the cash,
jewelries, and the wallet they are now claiming," the very provision of law invoked
by them, Article 1998 of the Civil Code, denies them any recourse against PAL. The
Court also pointed out that-

... while it is true that the use of gems was not taken advantage of by
the robbers in gaining entrance to defendant's ill-fated plane, the
armed robbery that took place constitutes force majeure for which
defendant is not liable because the robbers were able to gain entrance
to the plane with the guns they used already in their possession, which
fact could not have been prevented nor avoided by the defendant
since it was not authorized to search its passengers for firearms and
deadly weapons as shown in Exhibits '6', '7', '8,' and '8-A.' As its
robbery constitutes force majeure, defendant is not liable.
The plaintiffs appealed to the Court of Appeals. 7 The Court affirmed the trial court's
judgment. 8 It rejected the argument that "the use of arms or ... irresistible force"
referred to in Article 2001 constitutes force majeure only if resorted to gain entry
into the airplane, and not if it attends "the robbery itself." The Court ruled that
under the facts, "the highjacking-robbery was force majeure," observing that

... hijackers do not board an airplane through a blatant display of

firepower and violent fury. Firearms, hand-grenades, dynamite, and
explosives are introduced into the airplane surreptitiously and with the
utmost cunning and stealth, although there is an occasional use of
innocent hostages who will be coldly murdered unless a plane is given
to the hijackers' complete disposal. The objective of modern-day
hijackers is to display the irresistible force amounting to force majeure
only when it is most effective and that is when the jetliner is winging
its way at Himalayan altitudes and ill-advised heroics by either crew or
passengers would send the multi-million peso airplane and the
priceless lives of all its occupants into certain death and destruction. ...

The Appellate Court also ruled that in light of the evidence PAL could not be faulted
for want of diligence, particularly for failing "to take positive measures to implement
Civil Aeronautics Administration regulations prohibiting civilians from carrying
firearms on board aircrafts;" and that "the absence of coded transmissions, the
amateurish behaviour of the pilot in dealing with the NBI agent, the allegedly open
cockpit door, and the failure to return to Mactan, in the light of the circumstances of
the case ..., were not negligent acts sufficient to overcome the force majeure nature
of the armed robbery." In fact, the Court went on to says, 9

... it is illusive to assume that had these precautions been taken, the
hijacking or the robbery would not have succeeded. The mandatory
use of the most sophisticated electronic detection devices and
magnetometers, the imposition of severe penalties, the development
of screening procedures, the compilation of hijacker behavioural
profiles, the assignment of sky marshals, and the weight of outraged
world opinion may have minimized hijackings but all these have proved
ineffective against truly determined hijackers. World experience shows
that if a group of armed hijackers want to take over a plane in flight,
they can elude the latest combined government and airline industry
measures. And as our own experience in Zamboanga City illustrates,
the use of force to overcome hijackers, results in the death and injury
of innocent passengers and crew members. We are not in the least bit
suggesting that the Philippine Airlines should not do everything
humanly possible to protect passengers from hijackers' acts. We
merely state that where the defendant has faithfully complied with the
requirements of government agencies and adhered to the established
procedures and precautions of the airline industry at any particular
time, its failure to take certain steps that a passenger in hindsight
believes should have been taken is not the negligence or misconduct
which mingles with force majeure as an active and cooperative cause.
 Under the circumstance of the instant case, the acts of the airline and
its crew cannot be faulted as negligence. The hijackers had already
shown their willingness to kill. One passenger was in fact killed and
another survived gunshot wounds. The lives of the rest of the
passengers and crew were more important than their properties.
Cooperation with the hijackers until they released their hostages at the
runway end near the South Superhighway was dictated by the
circumstances.

Insisting that the evidence demonstrates negligence on the part of the PAL crew
"occurring before and exposing them to hijacking," Quisumbing and Loeffler have
come up to this Court praying that the judgments of the trial Court and the Court of
Appeals be reversed and another rendered in their favor. Once again, the issue will
be resolved against them.

ISSUE:

WON PAL should be liable for the loss of petitioners

WON PAL had observed proper diligence over the passengers welfare and cargos

RULING:

A careful analysis of the record in relation to the memoranda and other pleadings of
the parties, convinces this Court of the correctness of the essential conclusion of
both the trial and appellate courts that the evidence does indeed fail to prove any
want of diligence on the part of PAL, or that, more specifically, it had failed to
comply with applicable regulations or universally accepted and observed
procedures to preclude hijacking; and that the particular acts singled out by the
petitioners as supposedly demonstrative of negligence were, in the light of the
circumstances of the case, not in truth negligent acts "sufficient to overcome the
force majeure nature of the armed robbery." The Court quite agrees, too, with the
Appellate Tribunal's wry observation that PAL's "failure to take certain steps that a
passenger in hindsight believes should have been taken is not the negligence or
misconduct which mingles with force majeure as an active and cooperative cause."

No success can therefore attend petitioners' appeal, not only because they wish to
have a review and modification of factual conclusions of the Court of Appeals, which
established and uniformly observed axiom proscribes, 10 but also because those
factual conclusions have in this Court's view been correctly drawn from the proofs
on record.

WHEREFORE, the petition is DENIED and the appealed Decision of the Court of
Appeals is AFFIRMED, with costs against petitioners.
PAN AMERICAN WORLD AIRWAYS, INC., V. RAPADAS

GR NO. 606 73, May 19, 1992

FACTS:

On January 16, 1975, Jose K. Rapadas held Passenger Ticket and Baggage Claim
Check No. 026-394830084-5 for Flight No. 841 for Guam to Manila. While standing
inline to board the flight at the Guam airport, Rapadas was ordered by Pan
Americans (PAN AM) handcarry control agent to check-in his Samsonite attach
case. Rapadas protested and pointed out that other co-passengers were allowed to
handcarry bulkier baggages. On the fear that he would miss his flight, he gave the
case to his brother to check it in for him, but without declaring its contents and its
value. He was given with the Baggage claim Tag no. P-749-713.

Upon arriving in Manila on the same date, Rapadas claimed and was given all his
checked-in baggages except the attach case, but he felt ill upon arrival and asked
his son to request for the search of the missing luggage in the PAN AM-MIA Baggage
Service.

On January 30, 1975 PAN AM required Rapadas to put the request in writing, filling
up a Baggage Claim Blank Form. Thereafter, Rapadas himself followed up said claim
for several times calling the head of the baggage section as well as sending letters
demanding and reminding the petitioner of his claim.

ON August 2, 1975, Rapadas received a letter offering to settle said claim for the
sum of $160.00 representing petitioners alleged limit of liability of loss or damage
to petitioners passengers personal property under the contract of carriage
between Rapadas and PAN AM.

Rapadas refused said settlement and filed an instant action for damages against the
petitioner alleging that he was discriminated by being ordered to check-in his
luggage, that PAN AM had neglected its duty in handling and safekeeping his
baggage from the point of embarkation in Guam to Manila. Also Rapadas placed the
value of his lost attach case and its contents for the amount of USD$42,403.90,
based on the result the loss have caused in him failing to pay a certain monetary
obligation, inability to enjoy the fruits of his retirement and vacation pay earned
from working in Tonga Construction Company and inability to return to Tonga to
comply with then existing contracts.

In response PAN AM acknowledged its responsibility for the loss but asserted that
the claim was subject to the Notice of Baggage Liability Limitations allegedly
attached to and forming part of the passengers ticket. Arguing that the same notice
was conspicuously posted in its offices for guidance of passengers.

On trial, Rapadas showed proof of his claims and the lower court ruled in his favor
finding no stipulation giving notice to the baggage liability limitation, rejecting PAN
AMs claim. CA also affirmed the lower courts decision. Hence the petition

ISSUE:

WON the passenger is bound by the terms of a passenger ticket declaring that the
limitations of liability setforth in the Warsaw Convention as amended by the Hague
Protocol, shall apply in case of loss, damage or destruction to a registered luggage
of a passenger.

RULING:

The court ruled that the passenger is bound to the terms of a passenger ticket,
however it is not always so because it is a contract of adhesion, in the case at bar
because Rapadas failed to declare the contents of his baggage to the airline it will
always be the airlines word versus his word. Also, the findings on the amount lost
was more of a probability than a proved conclusion.

Though RApadas is bound to the terms of a passenger ticket, the fact that he had
hurriedly checked-in his luggage, his baggage will be considered as unchecked.
Thus the fair liability is $400 not $160 as previously stated.

Petition granted, CAs decision reversed and set aside. Petitioner is ordered to pay
$400 for damages and Php 10,000.00 for atorneys fees and cost of the suit.
ALITALIA v IAC
GR No. 71929, Dec. 4, 1990

FACTS:

Dr. Felipa Pablo, an associate professor in the University of the Philippines, 1 and a
research grantee of the Philippine Atomic Energy Agency was invited to take part
at a meeting of the Department of Research and Isotopes of the Joint FAO-IAEA
Division of Atomic Energy in Food and Agriculture of the United Nations in Ispra,
Italy. 2 She was invited in view of her specialized knowledge in "foreign substances
in food and the agriculture environment."
She accepted the invitation, and was then scheduled by the organizers, to read a
paper on "The Fate of Radioactive Fusion Products Contaminating Vegetable Crops."
3 The program announced that she would be the second speaker on the first day of
the meeting. 4 To fulfill this engagement, Dr. Pablo booked passage on petitioner
airline, ALITALIA.
She arrived in Milan on the day before the meeting in accordance with the itinerary
and time table set for her by ALITALIA. She was however told by the ALITALIA
personnel there at Milan that her luggage was "delayed inasmuch as the same . . .
(was) in one of the succeeding flights from Rome to Milan." 5
Her luggage consisted of two (2) suitcases: one contained her clothing and other
personal items; the other, her scientific papers, slides and other research material.
But the other flights arriving from Rome did not have her baggage on board.
By then feeling desperate, she went to Rome to try to locate her bags herself.
There, she inquired about her suitcases in the domestic and international airports,
and filled out the forms prescribed by ALITALIA for people in her predicament.
However, her baggage could not be found. Completely distraught and discouraged,
she returned to Manila without attending the meeting in Ispra, Italy.
Once back in Manila she demanded that ALITALIA make reparation for the damages
thus suffered by her. ALITALIA offered her "free airline tickets to compensate her for
any alleged damages . . ." She rejected the offer, and forthwith commenced the
action 6 which has given rise to the present appellate proceedings.

As it turned out, Prof. Pablo's suitcases were in fact located and forwarded to Ispra,
7 Italy, but only on the day after her scheduled appearance and participation at the
U.N. meeting there. 8 Of course Dr. Pablo was no longer there to accept delivery;
she was already on her way home to Manila. And for some reason or other, the
suitcases were not actually restored to Prof. Pablo by ALITALIA until eleven (11)
months later, and four (4) months after institution of her action. 9
Trial Court rendered a decision infavor of Dr. Pablo, then when ALITALIA filed an
appeal before the IAC to reverse said order, IAC not only affirmed the TCs decision
but also increased the nominal damages payable by ALITALIA. Hence the Petition.

ISSUE:
WON IAC erred in its decision.
WON the Warsaw Convention exemption applies to the said liability.
RULING:

ALITALIA appealed to the Intermediate Appellate Court but failed to obtain a

reversal of the judgment. 11 Indeed, the Appellate Court not only affirmed the Trial
Court's decision but also increased the award of nominal damages payable by
ALITALIA to P40,000.00. 12 That increase it justified as follows: 13

"Considering the circumstances, as found by the Trial Court and the negligence
committed by defendant, the amount of P20,000.00 under present inflationary
conditions as awarded . . . to the plaintiff as nominal damages, is too little to make
up for the plaintiff's frustration and disappointment in not being able to appear at
said conference; and for the embarrassment and humiliation she suffered from the
academic community for failure to carry out an official mission for which she was
singled out by the faculty to represent her institution and the country. After
weighing carefully all the considerations, the amount awarded to the plaintiff for
nominal damages and attorney's fees should be increased to the cost of her round
trip air fare or at the present rate of peso to the dollar at P40,000,00."

ALITALIA has appealed to this Court on certiorari. Here, it seeks to make basically
the same points it tried to make before the Trial Court and the Intermediate
Appellate Court, i.e.:

1) that the Warsaw Convention should have been applied to limit ALITALIA'S
liability; and

2) that there is no warrant in fact or in law for the award to Dr. Pablo of nominal
damages and attorney's fees. 14

In addition, ALITALIA postulates that it was error for the Intermediate Appellate
Court to have refused to pass on all the assigned errors and in not stating the facts
and the law on which its decision is based. 15

Under the Warsaw Convention, 16 an air carrier is made liable for damages for:

1) the death, wounding or other bodily injury of a passenger if the accident

causing it took place on board the aircraft or in the course of its operations of
embarking or disembarking; 17

2) the destruction or loss of, or damage to, any registered luggage or goods, if
the occurrence causing it took place during the carriage by air" 18 and

3) delay in the transportation by air of passengers, luggage or goods. 19

In these cases, it is provided in the Convention that the "action for damages,
however, founded, can only be brought subject to conditions and limits set out"
therein. 20

The Convention also purports to limit the liability of the carriers in the following
manner: 21

1. In the carriage of passengers the liability of the carrier for each passenger is
limited to the sum of 250,000 francs . . . Nevertheless, by special contract, the
carrier and the passenger may agree to a higher limit of liability.
 2. a) In the carriage of registered baggage and of cargo, the liability of the carrier
is limited to a sum of 250 francs per kilogramme, unless the passenger or consignor
has made, at the time when the package was handed over to the carrier, a special
declaration of interest in delivery at destination and has paid a supplementary sum
if the case so requires. In that case the carrier will be liable to pay a sum not
exceeding the declared sum, unless he proves that sum is greater than the actual
value to the consignor at delivery.

b) In the case of loss, damage or delay of part of registered baggage or cargo,

or of any object contained therein, the weight to be taken into consideration in
determining the amount to which the carrier's liability is limited shall be only the
total weight of the package or packages concerned.
Nevertheless, when the loss, damage or delay of a part of the registered baggage or
cargo, or of an object contained therein, affects the value of other packages
covered by the same baggage check or the same air way bill, the total weight of
such package or packages shall also be taken into consideration in determining the
limit of liability.

3. As regards objects of which the passenger takes charge himself the liability of
the carrier is limited to 5000 francs per passenger.

4. The limits prescribed . . shall not prevent the court from awarding, in
accordance with its own law, in addition, the whole or part of the court costs and of
the other expenses of litigation incurred by the plaintiff. The foregoing provision
shall not apply if the amount of the damages awarded, excluding court costs and
other expenses of the litigation, does not exceed the sum which the carrier has
offered in writing to the plaintiff within a period of six months from the date of the
occurrence causing the damage, or before the commencement of the action, if that
is later.

The Warsaw Convention however denies to the carrier availment "of the provisions
which exclude or limit his liability, if the damage is caused by his wilful misconduct
or by such default on his part as, in accordance with the law of the court seized of
the case, is considered to be equivalent to wilful misconduct," or "if the damage is
(similarly) caused . . by any agent of the carrier acting within the scope of his
employment." 22 The Hague Protocol amended the Warsaw Convention by
removing the provision that if the airline took all necessary steps to avoid the
damage, it could exculpate itself completely, 23 and declaring the stated limits of
liability not applicable "if it is proved that the damage resulted from an act or
omission of the carrier, its servants or agents, done with intent to cause damage or
recklessly and with knowledge that damage would probably result." The same
deletion was effected by the Montreal Agreement of 1966, with the result that a
passenger could recover unlimited damages upon proof of wilful misconduct. 24

The Convention does not thus operate as an exclusive enumeration of the instances
of an airline's liability, or as an absolute limit of the extent of that liability. Such a
proposition is not borne out by the language of the Convention, as this Court has
now, and at an earlier time, pointed out. 25
Moreover, slight reflection readily leads to the conclusion that it should be deemed
a limit of liability only in those cases where the cause of the death or injury to
person, or destruction, loss or damage to property or delay in its transport is not
attributable to or attended by any wilful misconduct, bad faith, recklessness, or
otherwise improper conduct on the part of any official or employee for which the
carrier is responsible, and there is otherwise no special or extraordinary form of
resulting injury. The Convention's provisions, in short, do not "regulate or exclude
liability for other breaches of contract by the carrier" 26 or misconduct of its
officers and employees, or for some particular or exceptional type of damage.
Otherwise, "an air carrier would be exempt from any liability for damages in the
event of its absolute refusal, in bad faith, to comply with a contract of carriage,
which is absurd." 27 Nor may it for a moment be supposed that if a member of the
aircraft complement should inflict some physical injury on a passenger, or
maliciously destroy or damage the latter's property, the Convention might
successfully be pleaded as the sole gauge to determine the carrier's liability to the
passenger. Neither may the Convention be invoked to justify the disregard of some
extraordinary sort of damage resulting to a passenger and preclude recovery
therefor beyond the limits set by said Convention. It is in this sense that the
Convention has been applied, or ignored, depending on the peculiar facts presented
by each case.

In Pan American World Airways, Inc. v. I.A.C., 28 for example, the Warsaw
Convention was applied as regards the limitation on the carrier's liability, there
being a simple loss of baggage without any otherwise improper conduct on the part
of the officials or employees of the airline or other special injury sustained by the
passenger.

On the other hand, the Warsaw Convention has invariably been held inapplicable, or
as not restrictive of the carrier's liability, where there was satisfactory evidence of
malice or bad faith attributable to its officers and employees. 29 Thus, an air carrier
was sentenced to pay not only compensatory but also moral and exemplary
damages, and attorney's fees, for instance, where its employees rudely put a
passenger holding a first-class ticket in the tourist or economy section, 30 or
ousted a brown Asiatic from the plane to give his seat to a white man, 31 or gave
the seat of a passenger with a confirmed reservation to another, 32 or subjected a
passenger to extremely rude, even barbaric treatment, as by calling him a
"monkey." 33

In the case at bar, no bad faith or otherwise improper conduct may be ascribed to
the employees of petitioner airline; and Dr. Pablo's luggage was eventually returned
to her, belatedly, it is true, but without appreciable damage. The fact is,
nevertheless, that some special species of injury was caused to Dr. Pablo because
petitioner ALITALIA misplaced her baggage and failed to deliver it to her at the time
appointed a breach of its contract of carriage, to be sure with the result that she
was unable to read the paper and make the scientific presentation (consisting of
slides, autoradiograms or films, tables and tabulations) that she had painstakingly
labored over, at the prestigious international conference, to attend which she had
traveled hundreds of miles, to her chagrin and embarrassment and the
disappointment and annoyance of the organizers. She felt, not unreasonably, that
the invitation for her to participate at the conference, extended by the Joint
FAO/IAEA Division of Atomic Energy in Food and Agriculture of the United Nations,
was a singular honor not only to herself, but to the University of the Philippines and
the country as well, an opportunity to make some sort of impression among her
colleagues in that field of scientific activity. The opportunity to claim this honor or
distinction was irretrievably lost to her because of Alitalia's breach of its contract.

Apart from this, there can be no doubt that Dr. Pablo underwent profound distress
and anxiety, which gradually turned to panic and finally despair, from the time she
learned that her suitcases were missing up to the time when, having gone to Rome,
she finally realized that she would no longer be able to take part in the conference.
As she herself put it, she "was really shocked and distraught and confused."

Certainly, the compensation for the injury suffered by Dr. Pablo cannot under the
circumstances be restricted to that prescribed by the Warsaw Convention for delay
in the transport of baggage.

She is not, of course, entitled to be compensated for loss or damage to her luggage.
As already mentioned, her baggage was ultimately delivered to her in Manila, tardily
but safely. She is however entitled to nominal damages which, as the law says, is
adjudicated in order that a right of the plaintiff, which has been violated or invaded
by the defendant, may be vindicated and recognized, and not for the purpose of
indemnifying the plaintiff for any loss suffered and this Court agrees that the
respondent Court of Appeals correctly set the amount thereof at P40,000.00. As to
the purely technical argument that the award to her of such nominal damages is
precluded by her omission to include a specific claim therefor in her complaint, it
suffices to draw attention to her general prayer, following her plea for moral and
exemplary damages and attorney's fees, "for such other and further just and
equitable relief in the premises," which certainly is broad enough to comprehend an
application as well for nominal damages. Besides, petitioner should have realized
that the explicit assertion, and proof, that Dr. Pablo's right had been violated or
invaded by it absent any claim for actual or compensatory damages, the prayer
thereof having been voluntarily deleted by Dr. Pablo upon the return to her of her
baggage necessarily raised the issue of nominal damages.

This Court also agrees that respondent Court of Appeals correctly awarded
attorney's fees to Dr. Pablo, and the amount of P5,000.00 set by it is reasonable in
the premises. The law authorizes recovery of attorney's fees inter alia where, as
here, "the defendant's act or omission has compelled the plaintiff to litigate with
third persons or to incur expenses to protect his interest," 34 or "where the court
deems it just and equitable." 35

WHEREFORE, no error being perceived in the challenged decision of the Court of

Appeals, it appearing on the contrary to be entirely in accord with the facts and the
law, said decision is hereby AFFIRMED, with costs against the petitioner.

SO ORDERED.
H. E. HEACOCK COMPANY, vs. MACONDRAY & COMPANY, INC.
G.R. No. 16598, 1921 Oct 3

FACTS:

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

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

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

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

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

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

(5) No greater value than $500, U. S. currency, per freight ton was declared by the
plaintiff on the aforesaid clocks, and no ad valorem freight was paid thereon.

(6) On or about October 9, 1919, the defendant tendered to the plaintiff P76.36, the
proportionate freight ton value of the aforesaid twelve 8-day Edmond clocks, in
payment of plaintiff's claim, which tender plaintiff rejected.

The lower court, in accordance with clause 9 or the bill of lading above quoted,
rendered judgment in favor of the plaintiff against the defendant for the sum of
P226.02, this being the invoice value of the clocks in question plus the freight and
insurance thereon, with legal interest thereon from November 20, 1919, the date of
the complaint, together with costs. From that judgment both parties appealed to
this court.
The plaintiff-appellant insists that it is entitled to recover from the defendant the
market value of the clocks in question to wit: the sum of P420. The defendant-
appellant, on he other hand, contends that, in accordance with clause 1 a the bill of
lading, the plaintiff is entitled to recover only the sum of P76.36, the proportionate
freight ton value of the said clocks. The claim of the plaintiff is based upon the
argument that the two clauses in the bill of lading above quoted, limiting the
liability of the carrier, are contrary to public order and, therefore, null and void. The
defendant, on the other hand, contends that both of said clauses are valid, and that
clause 1 should have been applied by the lower court instead of clause 9.

ISSUE:

WON a common carrier, by stipulations inserted in the bill of lading, limit its liability
for the loss of or damage to the cargo to an agreed valuation of the latter.

RULING:

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

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

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

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

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

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

"A limitation of liability based upon an agreed value to obtain a lower rate does not
conflict with any sound principle of public policy; and it is not conformable to plain
principle of justice that a shipper may understate value in order to reduce the rate
and then recover a larger value in case of loss." (Adams Express Co. vs. Croninger,
226 U. S, 491, 492.) See also Reid vs. Fargo (130 C. C. A., 285); Jennings vs. Smith
(45 C. C. A., 249); George N. Pierce Co. vs. Wells, Fargo & Co. (236 U. S., 278); Wells,
Fargo & Co. vs. Neiman-Marcus Co. (227 U. S., 469).

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

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

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

"9. Also, that in the event of claims for short delivery of, or damage to, cargo being
made, the carrier shall not be liable for more than the net invoice price plus freight
and insurance less all charges saved, and any loss or damage for which the carrier
may be liable shall be adjusted pro rata on the said basis."
The defendant-appellant contends that these two clauses, if construed together,
mean that the shipper and the carrier stipulate and agree that the value of the
goods receipted for does not exceed $500 per freight ton, but should the invoice
value of the goods be less than $500 per freight ton, then the invoice value
governs; that since in this case the invoice value is more than $500 per freight ton,
the latter valuation should be adopted and that according to that valuation, the
proportionate value of the clocks in question is only P76.36, which the defendant is
ready and willing to pay to the plaintiff.

It will be noted, however, that whereas clause 1 contains only an implied

undertaking to settle in case of l085 on the basis of not exceeding $500 per freight
ton, clause 9 contains an express undertaking to settle on the basis of the net
invoice price plus freight and insurance less all charges saved. "Any loss or damage
for which the carrier may be liable shall be adjusted pro rata on the said basis,"
clause 9 expressly provides. It seems to us that there is an irreconcilable conflict
between the two clauses with regard to the measure of defendant's liability. It is
difficult to reconcile them without doing violence to the language used and reading
exceptions and conditions into the undertaking contained in clause 9 that are not
there. This being the case, the bill of lading in question should be interpreted
against the defendant carrier, which drew said contract. "A written contract should,
in case of doubt, be interpreted against the party who has drawn the contract." (6 R.
C. L., 854.) It is a well-known principle of construction that ambiguity or uncertainty
in an agreement must be construed most strongly against the party causing it. (6 R.
C. L., 855.) These rules are applicable to contracts contained in bills of lading. "In
construing a bill of lading given by the carrier for the safe transportation and
delivery of goods shipped by a consignor, the contract will be construed most
strongly against the carrier, and favorably to the consignor, in case of doubt in any
matter of construction." (Alabama, etc. R. R. Co. vs. Thomas, 89 Ala., 294; 18 Am.
St. Rep., 119.)

It follows from all of the foregoing that the judgment appealed from should be
affirmed, without any finding as to costs. So ordered.
FIRST PHILIPPINE INDUSTRIAL CORPORATION, vs. COURT OF APPEALS TAC-AN
G.R. No. 125948 December 29, 1998

FACTS:

Petitioner is a grantee of a pipeline concession under Republic Act No. 387, as

amended, to contract, install and operate oil pipelines. The original pipeline
concession was granted in 1967[1] and renewed by the Energy Regulatory Board in
1992.[2]

Sometime in January 1995, petitioner applied for a mayor's permit with the Office of
the Mayor of Batangas City. However, before the mayor's permit could be issued,
the respondent City Treasurer required petitioner to pay a local tax based on its
gross receipts for the fiscal year 1993 pursuant to the Local Government Code.[3]
The respondent City Treasurer assessed a business tax on the petitioner amounting
to P956,076.04 payable in four installments based on the gross receipts for products
pumped at GPS-1 for the fiscal year 1993 which amounted to P181,681,151.00. In
order not to hamper its operations, petitioner paid the tax under protest in the
amount of P239,019.01 for the first quarter of 1993.

On January 20, 1994, petitioner filed a letter-protest addressed to the respondent

City Treasurer, the pertinent portion of which reads:

"Please note that our Company (FPIC) is a pipeline operator with a government
concession granted under the Petroleum Act. It is engaged in the business of
transporting petroleum products from the Batangas refineries, via pipeline, to Sucat
and JTF Pandacan Terminals. As such, our Company is exempt from paying tax on
gross receipts under Section 133 of the Local Government Code of 1991 x x x x

"Moreover, Transportation contractors are not included in the enumeration of

contractors under Section 131, Paragraph (h) of the Local Government Code.
Therefore, the authority to impose tax 'on contractors and other independent
contractors' under Section 143, Paragraph (e) of the Local Government Code does
not include the power to levy on transportation contractors.

"The imposition and assessment cannot be categorized as a mere fee authorized

under Section 147 of the Local Government Code. The said section limits the
imposition of fees and charges on business to such amounts as may be
commensurate to the cost of regulation, inspection, and licensing. Hence, assuming
arguendo that FPIC is liable for the license fee, the imposition thereof based on
gross receipts is violative of the aforecited provision. The amount of P956,076.04
(P239,019.01 per quarter) is not commensurate to the cost of regulation, inspection
and licensing. The fee is already a revenue raising measure, and not a mere
regulatory imposition."[4]

On March 8, 1994, the respondent City Treasurer denied the protest contending that
petitioner cannot be considered engaged in transportation business, thus it cannot
claim exemption under Section 133 (j) of the Local Government Code.[5]
On June 15, 1994, petitioner filed with the Regional Trial Court of Batangas City a
complaint[6] for tax refund with prayer for a writ of preliminary injunction against
respondents City of Batangas and Adoracion Arellano in her capacity as City
Treasurer. In its complaint, petitioner alleged, inter alia, that: (1) the imposition and
collection of the business tax on its gross receipts violates Section 133 of the Local
Government Code; (2) the authority of cities to impose and collect a tax on the
gross receipts of "contractors and independent contractors" under Sec. 141 (e) and
151 does not include the authority to collect such taxes on transportation
contractors for, as defined under Sec. 131 (h), the term "contractors" excludes
transportation contractors; and, (3) the City Treasurer illegally and erroneously
imposed and collected the said tax, thus meriting the immediate refund of the tax
paid.[7]

Traversing the complaint, the respondents argued that petitioner cannot be exempt
from taxes under Section 133 (j) of the Local Government Code as said exemption
applies only to "transportation contractors and persons engaged in the
transportation by hire and common carriers by air, land and water." Respondents
assert that pipelines are not included in the term "common carrier" which refers
solely to ordinary carriers such as trucks, trains, ships and the like. Respondents
further posit that the term "common carrier" under the said code pertains to the
mode or manner by which a product is delivered to its destination.[8]

On October 3, 1994, the trial court rendered a decision dismissing the complaint,
ruling in this wise:

"xxx Plaintiff is either a contractor or other independent contractor.

xxx the exemption to tax claimed by the plaintiff has become unclear. It is a rule
that tax exemptions are to be strictly construed against the taxpayer, taxes being
the lifeblood of the government. Exemption may therefore be granted only by clear
and unequivocal provisions of law.

"Plaintiff claims that it is a grantee of a pipeline concession under Republic Act 387,
(Exhibit A) whose concession was lately renewed by the Energy Regulatory Board
(Exhibit B). Yet neither said law nor the deed of concession grant any tax exemption
upon the plaintiff.

"Even the Local Government Code imposes a tax on franchise holders under Sec.
137 of the Local Tax Code. Such being the situation obtained in this case
(exemption being unclear and equivocal) resort to distinctions or other
considerations may be of help:

1. That the exemption granted under Sec. 133 (j) encompasses only
common carriers so as not to overburden the riding public or commuters with taxes.
Plaintiff is not a common carrier, but a special carrier extending its services and
facilities to a single specific or "special customer" under a "special contract."
2. The Local Tax Code of 1992 was basically enacted to give more and
effective local autonomy to local governments than the previous enactments, to
make them economically and financially viable to serve the people and discharge
their functions with a concomitant obligation to accept certain devolution of powers,
x x x So, consistent with this policy even franchise grantees are taxed (Sec. 137)
and contractors are also taxed under Sec. 143 (e) and 151 of the Code."[9]

Petitioner assailed the aforesaid decision before this Court via a petition for review.
On February 27, 1995, we referred the case to the respondent Court of Appeals for
consideration and adjudication.[10] On November 29, 1995, the respondent court
rendered a decision[11] affirming the trial court's dismissal of petitioner's complaint.
Petitioner's motion for reconsideration was denied on July 18, 1996.[12]

Hence, this petition.

ISSUE:
WON the petitioner is not a common carrier or a transportation contractor, and
WON the exemption sought for by petitioner is not clear under the law.

There is merit in the petition.

A "common carrier" may be defined, broadly, as one who holds himself out to the
public as engaged in the business of transporting persons or property from place to
place, for compensation, offering his services to the public generally.

Article 1732 of the Civil Code defines a "common carrier" as "any person,
corporation, firm or association 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."

The test for determining whether a party is a common carrier of goods is:

1. He must be engaged in the business of carrying goods for others as a public

employment, and must hold himself out as ready to engage in the transportation of
goods for person generally as a business and not as a casual occupation;

2. He must undertake to carry goods of the kind to which his business is

confined;

3. He must undertake to carry by the method by which his business is

conducted and over his established roads; and

4. The transportation must be for hire.[15]

Based on the above definitions and requirements, there is no doubt that petitioner
is a common carrier. It is engaged in the business of transporting or carrying goods,
i.e. petroleum products, for hire as a public employment. It undertakes to carry for
all persons indifferently, that is, to all persons who choose to employ its services,
and transports the goods by land and for compensation. The fact that petitioner
has a limited clientele does not exclude it from the definition of a common carrier.
In De Guzman vs. Court of Appeals[16] we ruled that:

"The above article (Art. 1732, Civil Code) makes no distinction between one whose
principal business activity is the carrying of persons or goods or both, and one who
does such carrying only as an ancillary activity (in local idiom, as a 'sideline').
Article 1732 x x x avoids making any distinction between a person or enterprise
offering transportation service on a regular or scheduled basis and one offering such
service on an occasional, episodic or unscheduled basis. Neither does Article 1732
distinguish between a carrier offering its services to the 'general public,' i.e., the
general community or population, and one who offers services or solicits business
only from a narrow segment of the general population. We think that Article 1877
deliberately refrained from making such distinctions.

So understood, the concept of 'common carrier' under Article 1732 may be seen to
coincide neatly with the notion of 'public service,' under the Public Service Act
(Commonwealth Act No. 1416, as amended) which at least partially supplements
the law on common carriers set forth in the Civil Code. Under Section 13, paragraph
(b) of the Public Service Act, 'public service' includes:

'every person that now or hereafter may own, operate, manage, or control in the
Philippines, for hire or compensation, with general or limited clientele, whether
permanent, occasional or accidental, and done for general business purposes, any
common carrier, railroad, street railway, traction railway, subway motor vehicle,
either for freight or passenger, or both, with or without fixed route and whatever
may be its classification, freight or carrier service of any class, express service,
steamboat, or steamship line, pontines, ferries and water craft, engaged in the
transportation of passengers or freight or both, shipyard, marine repair shop, wharf
or dock, ice plant, ice-refrigeration plant, canal, irrigation system gas, electric light
heat and power, water supply and power petroleum, sewerage system, wire or
wireless communications systems, wire or wireless broadcasting stations and other
similar public services.' "(Underscoring Supplied)

Also, respondent's argument that the term "common carrier" as used in Section 133
(j) of the Local Government Code refers only to common carriers transporting goods
and passengers through moving vehicles or vessels either by land, sea or water, is
erroneous.

As correctly pointed out by petitioner, the definition of "common carriers" in the

Civil Code makes no distinction as to the means of transporting, as long as it is by
land, water or air. It does not provide that the transportation of the passengers or
goods should be by motor vehicle. In fact, in the United States, oil pipe line
operators are considered common carriers.[17]

Under the Petroleum Act of the Philippines (Republic Act 387), petitioner is
considered a "common carrier." Thus, Article 86 thereof provides that:

"Art. 86. Pipe line concessionaire as a common carrier. - A pipe line shall have the
preferential right to utilize installations for the transportation of petroleum owned by
him, but is obligated to utilize the remaining transportation capacity pro rata for the
transportation of such other petroleum as may be offered by others for transport,
and to charge without discrimination such rates as may have been approved by the
Secretary of Agriculture and Natural Resources."

Republic Act 387 also regards petroleum operation as a public utility. Pertinent
portion of Article 7 thereof provides:

"that everything relating to the exploration for and exploitation of petroleum x x and
everything relating to the manufacture, refining, storage, or transportation by
special methods of petroleum, is hereby declared to be a public utility."
(Underscoring Supplied)

The Bureau of Internal Revenue likewise considers the petitioner a "common

carrier." In BIR Ruling No. 069-83, it declared:

"x x x since [petitioner] is a pipeline concessionaire that is engaged only in

transporting petroleum products, it is considered a common carrier under Republic
Act No. 387 x x x. Such being the case, it is not subject to withholding tax
prescribed by Revenue Regulations No. 13-78, as amended."

It is clear that the legislative intent in excluding from the taxing power of the local
government unit the imposition of business tax against common carriers is to
prevent a duplication of the so-called "common carrier's tax."

Petitioner is already paying three (3%) percent common carrier's tax on its gross
sales/earnings under the National Internal Revenue Code.[19] To tax petitioner
again on its gross receipts in its transportation of petroleum business would defeat
the purpose of the Local Government Code.

WHEREFORE, the petition is hereby GRANTED. The decision of the respondent Court
of Appeals dated November 29, 1995 in CA-G.R. SP No. 36801 is REVERSED and SET
ASIDE.
NORBERTO QUISUMBING, SR., and GUNTHER LOEFFLER vs. COURT OF APPEALS and
PHILIPPINE AIR LINES, INC.

G.R. No. L-50076 September 14, 1990

FACTS:

Petitioner, Norberto Quisumbing, Sr. and Gunther Leoffler were among the of ...
(PAL's) Fokker 'Friendship' PIC-536 plane in its flight of November 6,1968 which left
Mactan City at about 7:30 in the evening with Manila for its destination.

After the plane had taken off, Florencio O. Villarin, a Senior NBI Agent who was also
a passenger of the said plane, noticed a certain 'Zaldy,' a suspect in the killing of
Judge Valdez, seated at the front seat near the door leading to the cockpit of the
plane. A check by Villarin with the passenger's ticket in the possession of flight
Stewardess Annie Bontigao, who was seated at the last seat right row, revealed that
'Zaldy' had used the name 'Cardente,' one of his aliases known to Villarin. Villarin
also came to know from the stewardess that 'Zaldy' had three companions on board
the plane."

Villarin then scribbled a note addressed to the pilot of the plane requesting the
latter to contact NBI duty agents in Manila for the said agents to ask the Director of
the NBI to send about six NBI agents to meet the plane because the suspect in the
killing of Judge Valdez was on board . The said note was handed by Villarin to the
stewardess who in tum gave the same to the pilot.

After receiving the note, which was about 15 minutes after take off, the pilot of the
plane, Capt. Luis Bonnevie, Jr., came out of the cockpit and sat beside Villarin at the
rear portion of the plane and explained that he could not send the message
because it would be heard by all ground aircraft stations. Villarin, however, told the
pilot of the danger of commission of violent acts on board the plane by the
notorious 'Zaldy' and his three companions.

While the pilot and Villarin were talking, 'Zaldy' and one of his companions walked
to the rear and stood behind them. Capt. Bonnevie then stood up and went back to
the cockpit. 'Zaldy' and his companions returned to their seats, but after a few
minutes they moved back to the rear throwing ugly looks at Villarin who, sensing
danger, stood up and went back to his original seat across the aisle on the second
to the last seat near the window. 'Zaldy and his companion likewise went back to
their respective seats in front.

Soon thereafter an exchange of gunshots ensued between Villarin and 'Zaldy' and
the latter's companions. 'Zaldy' announced to the passengers and the pilots in the
cockpit that it was a hold-up and ordered the pilot not to send any SOS. The hold-
uppers divested passengers of their belongings.
Specifically, ... Norberto Quisumbing, Sr. was divested of jewelries and cash in the
total amount of P18,650.00 out of which recoveries were made amounting to
P4,550.00. . . Gunther Leoffler was divested of a wrist watch, cash and a wallet in
the total of P1,700.00. As a result of the incident ... Quisumbing, Sr.suffered shock,
because a gun had been pointed at him by one of the holduppers.

Upon landing at the Manila International Airport. 'Zaldy' and his three companions
succeeded in escaping.

Demands were thereafter made on PAL by Quisumbing and Loeffler "to indemnify ...
(them) on their aforesaid loss, but ... (PAL) refused ... (averring that) it is not liable
to (them) in law or in fact." 2

Contending that the "aforesaid loss is a result of breach of ... (PAL's) contractual
obligation to carry ... (them) and their belongings and effects to their Manila
destination without loss or damage, and constitutes a serious dereliction of ...
(PAL's) legal duty to exercise extraordinary diligence in the vigilance over the
same." , Quisumbing and Loeffler brought suit against PAL in the Court of First
Instance of Rizal, as stated in this opinion's opening paragraph, to recover the value
of the property lost by them to the robbers as well as moral and exemplary
damages, attorney's fees and expenses of litigation. 3 The plaintiffs declared that
their suit was instituted "... pursuant to Civil Code articles 1754, 998, 2000 and
2001 and on the ground that in relation to said Civil Code article 2001 the
complained-of act of the armed robbers is not a force majeure, as the 'use of arms'
or 'irresistible force' was not taken advantage of by said armed robbers in gaining
entrance to defendant's ill-fated plane in questions. And, with respect to said Civil
Code article 1998, it is not essential that the lost effects and belongings of plaintiffs
were actually delivered to defendant's plane personnel or that the latter were
notified thereof (De los Santos v. Tamn Khey, [CA] 58 O.G. 7693)." 4

PAL filed answer denying liability, alleging inter alia that the robbery during
the flight and after the aircraft was forcibly landed at the Manila Airport did indeed
constitute force majeure, and neither of the plaintiffs had notified PAL "or its crew or
employees that they were in possession of cash, German marks and valuable
jewelries and watches" or surrendered said items to "the crew or personnel on
board the aircraft." 5

After trial, the Court of First Instance rendered judgment 'dismissing plaintiffs'
complaint with costs against ... (them)." 6 The Court opined that since the plaintiffs
"did not notify defendant or its employees that they were in possession of the cash,
jewelries, and the wallet they are now claiming," the very provision of law invoked
by them, Article 1998 of the Civil Code, denies them any recourse against PAL. The
Court also pointed out that-

... while it is true that the use of gems was not taken advantage of by the
robbers in gaining entrance to defendant's ill-fated plane, the armed robbery
that took place constitutes force majeure for which defendant is not liable
because the robbers were able to gain entrance to the plane with the guns
they used already in their possession, which fact could not have been
prevented nor avoided by the defendant since it was not authorized to search
 its passengers for firearms and deadly weapons as shown in Exhibits '6', '7',
'8,' and '8-A.' As its robbery constitutes force majeure, defendant is not liable.

The plaintiffs appealed to the Court of Appeals. 7 The Court affirmed the trial court's
judgment. 8 It rejected the argument that "the use of arms or ... irresistible force"
referred to in Article 2001 constitutes force majeure only if resorted to gain entry
into the airplane, and not if it attends "the robbery itself." The Court ruled that
under the facts, "the highjacking-robbery was force majeure," observing that

... hijackers do not board an airplane through a blatant display of firepower

and violent fury. Firearms, hand-grenades, dynamite, and explosives are
introduced into the airplane surreptitiously and with the utmost cunning and
stealth, although there is an occasional use of innocent hostages who will be
coldly murdered unless a plane is given to the hijackers' complete disposal.
The objective of modern-day hijackers is to display the irresistible force
amounting to force majeure only when it is most effective and that is when
the jetliner is winging its way at Himalayan altitudes and ill-advised heroics
by either crew or passengers would send the multi-million peso airplane and
the priceless lives of all its occupants into certain death and destruction. ...

The Appellate Court also ruled that in light of the evidence PAL could not be faulted
for want of diligence, particularly for failing "to take positive measures to implement
Civil Aeronautics Administration regulations prohibiting civilians from carrying
firearms on board aircrafts;" and that "the absence of coded transmissions, the
amateurish behaviour of the pilot in dealing with the NBI agent, the allegedly open
cockpit door, and the failure to return to Mactan, in the light of the circumstances of
the case ..., were not negligent acts sufficient to overcome the force majeure nature
of the armed robbery."

Insisting that the evidence demonstrates negligence on the part of the PAL crew
"occurring before and exposing them to hijacking," Quisumbing and Loeffler have
come up to this Court praying that the judgments of the trial Court and the Court of
Appeals be reversed and another rendered in their favor. Once again, the issue will
be resolved against them.

ISSUE:

WON PAL should be liable for the loss of petitioners

WON PAL had observed proper diligence over the passengers welfare and cargos

RULING:

A careful analysis of the record in relation to the memoranda and other pleadings of
the parties, convinces this Court of the correctness of the essential conclusion of
both the trial and appellate courts that the evidence does indeed fail to prove any
want of diligence on the part of PAL, or that, more specifically, it had failed to
comply with applicable regulations or universally accepted and observed
procedures to preclude hijacking; and that the particular acts singled out by the
petitioners as supposedly demonstrative of negligence were, in the light of the
circumstances of the case, not in truth negligent acts "sufficient to overcome the
force majeure nature of the armed robbery." The Court quite agrees, too, with the
Appellate Tribunal's wry observation that PAL's "failure to take certain steps that a
passenger in hindsight believes should have been taken is not the negligence or
misconduct which mingles with force majeure as an active and cooperative cause."

No success can therefore attend petitioners' appeal, not only because they wish to
have a review and modification of factual conclusions of the Court of Appeals, which
established and uniformly observed axiom proscribes, 10 but also because those
factual conclusions have in this Court's view been correctly drawn from the proofs
on record.

WHEREFORE, the petition is DENIED and the appealed Decision of the Court of
Appeals is AFFIRMED, with costs against petitioners.
Pan American World Airways, Inc., v. Rapadas

GR NO. 606 73, May 19, 1992

FACTS:

On January 16, 1975, Jose K. Rapadas held Passenger Ticket and Baggage Claim
Check No. 026-394830084-5 for Flight No. 841 for Guam to Manila. While standing
inline to board the flight at the Guam airport, Rapadas was ordered by Pan
Americans (PAN AM) handcarry control agent to check-in his Samsonite attach
case. Rapadas protested and pointed out that other co-passengers were allowed to
handcarry bulkier baggages. On the fear that he would miss his flight, he gave the
case to his brother to check it in for him, but without declaring its contents and its
value. He was given with the Baggage claim Tag no. P-749-713.

Upon arriving in Manila on the same date, Rapadas claimed and was given all his
checked-in baggages except the attach case, but he felt ill upon arrival and asked
his son to request for the search of the missing luggage in the PAN AM-MIA Baggage
Service.

On January 30, 1975 PAN AM required Rapadas to put the request in writing, filling
up a Baggage Claim Blank Form. Thereafter, Rapadas himself followed up said claim
for several times calling the head of the baggage section as well as sending letters
demanding and reminding the petitioner of his claim.

ON August 2, 1975, Rapadas received a letter offering to settle said claim for the
sum of $160.00 representing petitioners alleged limit of liability of loss or damage
to petitioners passengers personal property under the contract of carriage
between Rapadas and PAN AM.

Rapadas refused said settlement and filed an instant action for damages against the
petitioner alleging that he was discriminated by being ordered to check-in his
luggage, that PAN AM had neglected its duty in handling and safekeeping his
baggage from the point of embarkation in Guam to Manila. Also Rapadas placed the
value of his lost attach case and its contents for the amount of USD$42,403.90,
based on the result the loss have caused in him failing to pay a certain monetary
obligation, inability to enjoy the fruits of his retirement and vacation pay earned
from working in Tonga Construction Company and inability to return to Tonga to
comply with then existing contracts.

In response PAN AM acknowledged its responsibility for the loss but asserted that
the claim was subject to the Notice of Baggage Liability Limitations allegedly
attached to and forming part of the passengers ticket. Arguing that the same notice
was conspicuously posted in its offices for guidance of passengers.

On trial, Rapadas showed proof of his claims and the lower court ruled in his favor
finding no stipulation giving notice to the baggage liability limitation, rejecting PAN
AMs claim. CA also affirmed the lower courts decision. Hence the petition

ISSUE:

WON the passenger is bound by the terms of a passenger ticket declaring that the
limitations of liability setforth in the Warsaw Convention as amended by the Hague
Protocol, shall apply in case of loss, damage or destruction to a registered luggage
of a passenger.

RULING:

The court ruled that the passenger is bound to the terms of a passenger ticket,
however it is not always so because it is a contract of adhesion, in the case at bar
because Rapadas failed to declare the contents of his baggage to the airline it will
always be the airlines word versus his word. Also, the findings on the amount lost
was more of a probability than a proved conclusion.

Though RApadas is bound to the terms of a passenger ticket, the fact that he had
hurriedly checked-in his luggage, his baggage will be considered as unchecked.
Thus the fair liability is $400 not $160 as previously stated.

Petition granted, CAs decision reversed and set aside. Petitioner is ordered to pay
$400 for damages and Php 10,000.00 for atorneys fees and cost of the suit.
BRITISH AIRWAYS, vs. COURT OF APPEALS, GOP MAHTANI, and PHILIPPINE AIRLINES
G.R. No. 121824 January 29, 1998

FACTS:

On April 16, 1989, Mahtani decided to visit his relatives in Bombay, India. In
anticipation of his visit, he obtained the services of a certain Mr. Gumar to prepare
his travel plans.

Since BA had no direct flights from Manila to Bombay, Mahtani had to take a flight
to Hongkong via PAL, and upon arrival in Hongkong he had to take a connecting
flight to Bombay on board BA.

Prior to his departure, Mahtani checked in at the PAL counter in Manila his two
pieces of luggage containing his clothings and personal effects, confident that upon
reaching Hongkong, the same would be transferred to the BA flight bound for
Bombay.

Unfortunately, when Mahtani arrived in Bombay he discovered that his luggage was
missing and that upon inquiry from the BA representatives, he was told that the
same might have been diverted to London. After patiently waiting for his luggage
for one week, BA finally advised him to file a claim by accomplishing the "Property
Irregularity Report." 4

Back in the Philippines, specifically on June 11, 1990, Mahtani filed his complaint for
damages and attorney's fees5 against BA and Mr. Gumar before the trial court,
docketed as Civil Case No. CEB-9076.

On September 4, 1990, BA filed its answer with counter claim 6 to the complaint
raising, as special and affirmative defenses, that Mahtani did not have a cause of
action against it. Likewise, on November 9, 1990, BA filed a third-party
complaint 7 against PAL alleging that the reason for the non-transfer of the luggage
was due to the latter's late arrival in Hongkong, thus leaving hardly any time for the
proper transfer of Mahtani's luggage to the BA aircraft bound for Bombay.

On February 25, 1991, PAL filed its answer to the third-party complaint, wherein it
disclaimed any liability, arguing that there was, in fact, adequate time to transfer
the luggage to BA facilities in Hongkong. Furthermore, the transfer of the luggage to
Hongkong authorities should be considered as transfer to BA. 8

After appropriate proceedings and trial, on March 4, 1993, the trial court rendered
its decision in favor of Mahtani. Dissatisfied, BA appealed to the Court of Appeals,
which however, affirmed the trial court's findings.

BA is now before us seeking the reversal of the Court of Appeals' decision.

ISSUE:
WON there is a breach of contract of carriage?

WON petitioners failure to declare the higher valuation of the luggage, makes BAs
liability limited?

WON the dismissal of the third party complain valid?

RULING:

ON THE FIRST issue, the court ruled that the nature of an airline's contract of
carriage partakes of two types, namely: a contract to deliver a cargo or merchandise
to its destination and a contract to transport passengers to their destination. A
business intended to serve the traveling public primarily, it is imbued with public
interest, hence, the law governing common carriers imposes an exacting
standard. 14 Neglect or malfeasance by the carrier's employees could predictably
furnish bases for an action for damages. 15

In the instant case, it is apparent that the contract of carriage was between Mahtani
and BA. Moreover, it is indubitable that his luggage never arrived in Bombay on
time. Hence there is a breach of contract of carriage.

ON THE SECOND issue, the court ruled that BAs argument of limiting its liability due
to private respondents failure to declare the valuation for the luggage is without
merit, though admittedly that in a contract of air carriage, such declaration is
needed to recover a greater amount, as provided by Art 22(1) of the Warsaw
Convention, and the American jurisprudence on an air carriers liability is recognized
by our courts, the court still ruled against blind reliance of adhesion contracts
where the facts and circumstances justify that they should be disregarded.

Hence the court held that benefits of limited liability are subject to waiver such as
when the air carrier failed to raise timely objections during the trial when questions
and answers regarding the actual claims and damages sustained by the passenger
were asked.

Which the petitioners counsel failed on both counts, and that the factual findings of
the trial court, as affirmed by the Court of Appeals, are entitled to great respect.
Since the actual value of the luggage involved appreciation of evidence, a task
within the competence of the Court of Appeals, its ruling regarding the amount is
assuredly a question of fact, thus, a finding not reviewable by this Court.

AND LASTLY ON THE THIRD ISSUE, as to the dismissal of the third-party complaint
against pal, the court ruled that such dismissal is invalid as per the case of
Firestone Tire and Rubber Company of the Philippines v. Tempengko, wherein it was
expounded the nature of a third-party complaint, as a procedural device whereby a
"third party" who is neither a party nor privy to the act or deed complained of by
the plaintiff, may be brought into the case with leave of court, by the defendant,
who acts, as third-party plaintiff to enforce against such third-party defendant a
right for contribution, indemnity, subrogation or any other relief, in respect of the
plaintiff's claim.
The third-party complaint is actually independent of and separate and distinct from
the plaintiff's complaint. Were it not for this provision of the Rules of Court, it would
have to be filed independently and separately from the original complaint by the
defendant against the third-party. But the Rules permit defendant to bring in a third-
party defendant or so to speak, to litigate his separate cause of action in respect of
plaintiff's claim against a third-party in the original and principal case with the
object of avoiding circuitry of action and unnecessary proliferation of law suits and
of disposing expeditiously in one litigation the entire subject matter arising from one
particular set of facts.

Undeniably, for the loss of his luggage, Mahtani is entitled to damages from BA, in
view of their contract of carriage. Yet, BA adamantly disclaimed its liability and
instead imputed it to PAL which the latter naturally denies. In other words, BA and
PAL are blaming each other for the incident.

In resolving this issue, it is worth observing that the contract of air transportation
was exclusively between Mahtani and BA, the latter merely endorsing the Manila to
Hongkong leg of the former's journey to PAL, as its subcontractor or agent. In fact,
the fourth paragraph of the "Conditions of Contracts" of the ticket 32 issued by BA to
Mahtani confirms that the contract was one of continuous air transportation from
Manila to Bombay.

Prescinding from the above discussion, it is undisputed that PAL, in transporting

Mahtani from Manila to Hongkong acted as the agent of BA.

Parenthetically, the Court of Appeals should have been cognizant of the well-settled
rule that an agent is also responsible for any negligence in the performance of its
function. 33 and is liable for damages which the principal may suffer by reason of its
negligent act. 34 Hence, the Court of Appeals erred when it opined that BA, being the
principal, had no cause of action against PAL, its agent or sub-contractor.

Also, it is worth mentioning that both BA and PAL are members of the International
Air Transport Association (IATA), wherein member airlines are regarded as agents of
each other in the issuance of the tickets and other matters pertaining to their
relationship. Therefore, in the instant case, the contractual relationship between BA
and PAL is one of agency, the former being the principal, since it was the one which
issued the confirmed ticket, and the latter the agent.

Since the instant petition was based on breach of contract of carriage, Mahtani can
only sue BA alone, and not PAL, since the latter was not a party to the contract.
However, this is not to say that PAL is relieved from any liability due to any of its
negligent acts. In China Air Lines, Ltd. v. Court of Appeals, 37 while not exactly in
point, the case, however, illustrates the principle which governs this particular
situation. In that case, we recognized that a carrier (PAL), acting as an agent of
another carrier, is also liable for its own negligent acts or omission in the
performance of its duties.

Accordingly, to deny BA the procedural remedy of filing a third-party complaint

against PAL for the purpose of ultimately determining who was primarily at fault as
between them, is without legal basis. After all, such proceeding is in accord with the
doctrine against multiplicity of cases which would entail receiving the same or
similar evidence for both cases and enforcing separate judgments therefor. It must
be borne in mind that the purpose of a third-party complaint is precisely to avoid
delay and circuitry of action and to enable the controversy to be disposed of in one
suit. 38 It is but logical, fair and equitable to allow BA to sue PAL for indemnification,
if it is proven that the latter's negligence was the proximate cause of Mahtani's
unfortunate experience, instead of totally absolving PAL from any liability.

WHEREFORE, in view of the foregoing, the decision of the Court of Appeals in CA-
G.R. CV No. 43309 dated September 7, 1995 is hereby MODIFIED, reinstating the
third-party complaint filed by British Airways dated November 9, 1990 against
Philippine Airlines. No costs.

SO ORDERED.
HERMINIO L. NOCUM vs.LAGUNA TAYABAS BUS COMPANY
G.R. No. L-23733 October 31, 1969

FACTS:

On December 5, 1960, a passenger for Bus no 120 loaded a baggage which

weighed about 12 kilos, who was assisted by the bus conductor. Due to the weight,
the conductor charged him 25 centavos per company regulation. The conductor
asked the owner of its contents, the owner informed him that it was just
miscellaneous items and clothes, since there was nothing unusual about the box,
the conductor trusted the word of the passenger and did not open it to verify, since
they were also not allowed to open the baggages of the passengers.

Then, around 11:30 in the morning after the Bus no 120 left the Manila terminal for
Lucena, an explosion occurred which caused the injury of the 37 passengers.

After the said incident, it was found that the cause of the explosion was not due to a
mechanical defect, but to the explosion of firecrackers boarded inside the bus by a
co-passenger.

Then after, Herminio l. Nocum filed for actual damages for breach of contract and
actual damages, the court ruled in his favor hence the petition.

ISSUE:

WON LTB observed extraordinary or utmost diligence of a very cautious person

required by the Civil Code.

Ruling:

We cannot agree. No doubt, the views of His Honor do seem to be in line with the
reasons that the Code Commission had for incorporating the above-quoted
provisions in its draft of the Civil Code. Indeed, in approving the said draft, Congress
must have concurred with the Commission that by requiring the highest degree of
diligence from common carriers in the safe transport of their passengers and by
creating a presumption of negligence against them, the recklessness of their drivers
which is a common sight even in crowded areas and, particularly, on the highways
throughout the country may, somehow, if not in a large measure, be curbed. We are
not convinced, however, that the exacting criterion of said provisions has not been
met by appellant in the circumstances of this particular case.

It is undisputed that before the box containing the firecrackers were allowed to be
loaded in the bus by the conductor, inquiry was made with the passenger carrying
the same as to what was in it, since its "opening ... was folded and tied with abaca."
(Decision p. 16, Record on Appeal.) According to His Honor, "if proper and rigid
inspection were observed by the defendant, the contents of the box could have
been discovered and the accident avoided. Refusal by the passenger to have the
package opened was no excuse because, as stated by Dispatcher Cornista,
employees should call the police if there were packages containing articles against
company regulations." That may be true, but it is Our considered opinion that the
law does not require as much. Article 1733 is not as unbending as His Honor has
held, for it reasonably qualifies the extraordinary diligence required of common
carriers for the safety of the passengers transported by them to be "according to all
the circumstances of each case." In fact, Article 1755 repeats this same
qualification: "A common carrier is bound to carry the passengers safely as far as
human care and foresight can provide, using the utmost diligence of very cautious
persons, with due regard for all the circumstances."

In this particular case before Us, it must be considered that while it is true the
passengers of appellant's bus should not be made to suffer for something over
which they had no control, as enunciated in the decision of this Court cited by His
Honor,1 fairness demands that in measuring a common carrier's duty towards its
passengers, allowance must be given to the reliance that should be reposed on the
sense of responsibility of all the passengers in regard to their common safety. It is to
be presumed that a passenger will not take with him anything dangerous to the
lives and limbs of his co-passengers, not to speak of his own. Not to be lightly
considered must be the right to privacy to which each passenger is entitled. He
cannot be subjected to any unusual search, when he protests the innocuousness of
his baggage and nothing appears to indicate the contrary, as in the case at bar. In
other words, inquiry may be verbally made as to the nature of a passenger's
baggage when such is not outwardly perceptible, but beyond this, constitutional
boundaries are already in danger of being transgressed. Calling a policeman to his
aid, as suggested by the service manual invoked by the trial judge, in compelling
the passenger to submit to more rigid inspection, after the passenger had already
declared that the box contained mere clothes and other miscellaneous, could not
have justified invasion of a constitutionally protected domain. Police officers acting
without judicial authority secured in the manner provided by law are not beyond the
pale of constitutional inhibitions designed to protect individual human rights and
liberties. Withal, what must be importantly considered here is not so much the
infringement of the fundamental sacred rights of the particular passenger herein
involved, but the constant threat any contrary ruling would pose on the right of
privacy of all passengers of all common carriers, considering how easily the duty to
inspect can be made an excuse for mischief and abuse. Of course, when there are
sufficient indications that the representations of the passenger regarding the nature
of his baggage may not be true, in the interest of the common safety of all, the
assistance of the police authorities may be solicited, not necessarily to force the
passenger to open his baggage, but to conduct the needed investigation consistent
with the rules of propriety and, above all, the constitutional rights of the passenger.
It is in this sense that the mentioned service manual issued by appellant to its
conductors must be understood.

Decisions in other jurisdictions cited by appellant in its brief, evidently because of

the paucity of local precedents squarely in point, emphasize that there is need, as
We hold here, for evidence of circumstances indicating cause or causes for
apprehension that the passenger's baggage is dangerous and that it is failure of the
common carrier's employee to act in the face of such evidence that constitutes the
cornerstone of the common carrier's liability in cases similar to the present one.
The principle that must control the servants of the carrier in a case like the one
before us is correctly stated in the opinion in the case of Clarke v. Louisville & N.R.
Co. 20 Ky L. Rep. 839, 49 S.W. 1120. In that case Clarke was a passenger on the
defendant's train. Another passenger took a quantity of gasoline into the same
coach in which Clarke was riding. It ignited and exploded, by reason of which he was
severely injured. The trial court peremptorily instructed the jury to find for the
defendant. In the opinion, affirming the judgment, it is said: "It may be stated
briefly, in assuming the liability of a railroad to its passengers for injury done by
another passenger, only where the conduct of this passenger had been such before
the injury as to induce a reasonably prudent and vigilant conductor to believe that
there was reasonable ground to apprehend violence and danger to the other
passengers, and in that case asserting it to be the duty of the conductor of the
railroad train to use all reasonable means to prevent such injury, and if he neglects
this reasonable duty, and injury is done, that then the company is responsible; that
otherwise the railroad is not responsible."

The opinion quotes with approval from the case of Gulf, C. & S. F. R. Co. vs. Shields,
9 Tex. Civ. App. 652, 29 S. W. 652, in which case the plaintiff was injured
by alcohol which had been carried upon the train by another passenger. In the
opinion in that case it is said: "It was but a short period of time after the alcohol was
spilt when it was set on fire and the accident occurred, and it was not shown that
appellant's employees knew that the jug contained alcohol. In fact, it is not shown
that the conductor or any other employee knew that Harris had a jug with him until
it fell out of the sack, though the conductor had collected ... (his) fare, and
doubtless knew that he had the sack on the seat with him. ... It cannot be
successfully denied that Harris had the right as a passenger to carry baggage on
the train, and that he had a right to carry it in a sack if he chose to do so. We think
it is equally clear that, in the absence of some intimation or circumstance indicating
that the sack contained something dangerous to other passengers, it was not the
duty of appellant's conductor or any other employee to open the sack and examine
its contents."

Explosive or Dangerous Contents. A carrier is ordinarily not liable for

injuries to passengers from fires or explosions caused by articles brought into
its conveyances by other passengers, in the absence of any evidence that the
carrier, through its employees, was aware of the nature of the article or had
any reason to anticipate danger therefrom.

Appellant further invokes Article 1174 of the Civil Code which relieves all obligors,
including, of course, common carriers like appellant, from the consequence of
fortuitous events. The court a quo held that "the breach of contract (in this case)
was not due to fortuitous event and that, therefore, the defendant is liable in
damages." Since We hold that appellant has succeeded in rebutting the
presumption of negligence by showing that it has exercised extraordinary diligence
for the safety of its passengers, "according to the circumstances of the (each) case",
We deem it unnecessary to rule whether or not there was any fortuitous event in
this case.

ACCORDINGLY, the appealed judgment of the trial court is reversed and the case is
dismissed, without costs.
JOSE P. MECENAS et.al vs. CA - SANTISTEBAN and NEGROS NAVIGATION CO., INC.
G.R. No. 88052 December 14, 1989

FACTS:

At 6:20 o'clock in the morning of 22 April 1980, the M/T "Tacloban City," a barge-
type oil tanker of Philippine registry, with a gross tonnage of 1,241,68 tons, owned
by the Philippine National Oil Company (PNOC) and operated by the PNOC Shipping
and Transport Corporation (PNOC Shipping), having unloaded its cargo of petroleum
products, left Amlan, Negros Occidental, and headed towards Bataan. At about 1:00
o'clock in the afternoon of that same day, the M/V "Don Juan," an interisland vessel,
also of Philippine registry, of 2,391.31 tons gross weight, owned and operated by
the Negros Navigation Co., Inc. (Negros Navigation) left Manila bound for Bacolod
with seven hundred fifty (750) passengers listed in its manifest, and a complete set
of officers and crew members.

On the evening of that same day, 22 April 1980, at about 10:30 o'clock, the
"Tacloban City" and the "Don Juan" collided at the Talbas Strait near Maestra de
Ocampo Island in the vicinity of the island of Mindoro. When the collision occurred,
the sea was calm, the weather fair and visibility good. As a result of this collision,
the M/V "Don Juan" sank and hundreds of its passengers perished. Among the ill-
fated passengers were the parents of petitioners, the spouses Perfecto Mecenas and
Sofia Mecenas, whose bodies were never found despite intensive search by
petitioners.

On 29 December 1980, petitioners filed a complaint in the then Court- of First

Instance of Quezon City, docketed as Civil Case No. Q-31525, against private
respondents Negros Navigation and Capt. Roger Santisteban, the captain of the
"Don Juan" without, however, impleading either PNOC or PNOC Shipping. In their
complaint, petitioners alleged that they were the seven (7) surviving legitimate
children of Perfecto Mecenas and Sofia Mecenas and that the latter spouses
perished in the collision which had resulted from the negligence of Negros
Navigation and Capt. Santisteban. Petitioners prayed for actual damages of not less
than P100,000.00 as well as moral and exemplary damages in such amount as the
Court may deem reasonable to award to them.

Another complaint, docketed as Civil Case No. Q-33932, was filed in the same court
by Lilia Ciocon claiming damages against Negros Navigation, PNOC and PNOC
Shipping for the death of her husband Manuel Ciocon, another of the luckless
passengers of the "Don Juan." Manuel Ciocon's body, too, was never found.

The two (2) cases were consolidated and heard jointly by the Regional Trial Court of
Quezon City, Branch 82. And held Negros Navigation Co., Inc. and Capt. Roger
Santisteban jointly and severally liable to pay plaintiffs in Civil Case No Q-31525,
the sum of P400,000.00 for the death of plaintiffs' parents, Perfecto A. Mecenas and
Sofia P. Mecenas; to pay said plaintiff's the sum of P15.000,00 as and for attorney's
fees
Negros Navigation, Capt. Santisteban, PNOC and PNOC Shipping appealed the trial
court's decision to the Court of Appeals. Later, PNOC and PNOC Shipping withdrew
their appeal citing a compromise agreement reached by them with Negros
Navigation; the Court of Appeals granted the motion by a resolution dated 5
September 1988, subject to the reservation made by Lilia Ciocon that she could not
be bound by the compromise agreement and would enforce the award granted her
by the trial court.

In time, the Court of Appeals rendered a decision dated 26 January 1989 affirmed as
modified with respect to Civil Case No. 31525, wherein defendant appellant Negros
Navigation Co. Inc. and Capt. Roger Santisteban are held jointly and severally liable
to pay the plaintiffs the amount of P100,000. 00 as actual and compensatory
damages and P15,000.00 as attorney's fees and the cost of the suit. 2

ISSUE:

WON there is a breach of the contract of carriage

WON petitioners should be given exemplary damages

RULING:

ON THE FIRST ISSUE, the court ruled that the contract of carriage was between the
deceased parents of the petitioners and the private respondents, and in an action
based upon a breach of the contract of carriage, the carrier under our civil law is
liable for the death of passengers arising from the negligence or willful act of the
carrier's employees although such employees may have acted beyond the scope of
their authority or even in violation of the instructions of the carrier, which liability
may include liability for moral damages. It follows that petitioners would be entitled
to moral damages so long as the collision with the "Tacloban City" and the sinking of
the "Don Juan" were caused or attended by negligence on the part of private
respondents.

ON THE SECOND ISSUE, the court referred to Article 2232 of the Civil Code, where
the damages to be received is based on the actions of the private respondents,
acting with gross negligence.

Based on the evidences, there is no question that the "Don Juan" was at least as
negligent as the M/T "Tacloban City" in the events leading up to the collision and the
sinking of the "Don Juan." The remaining question is whether the negligence on the
part of the "Don Juan" reached that level of recklessness or gross negligence that
our Civil Code requires for the imposition of exemplary damages. Our own review of
the record in the case at bar requires us to answer this in the affirmative, on the
following grounds:

1. Capt. Santisteban and his officers and crew were found playing mahjong
"before and up to the time of collision constitutes behaviour that is simply
unacceptable on the part of the master of a vessel to whose hands the lives
and welfare of at least seven hundred fifty (750) passengers had been
 entrusted. Whether or not Capt. Santisteban was "off-duty" or "on-duty" at or
around the time of actual collision is quite immaterial; there is, both
realistically speaking and in contemplation of law, no such thing as "off-duty"
hours for the master of a vessel at sea that is a common carrier upon whom
the law imposes the duty of extraordinary diligence-: [t]he duty to carry the
passengers safely as far as human care and foresight can provide, using the
utmost diligence of very cautious persons, with a due regard for all the
circumstances.

2. There is also evidence that the "Don Juan" was carrying more passengers
than she had been certified as allowed to carry. The report of the Philippine
Coast Guard , stated that the "Don Juan" had been "officially cleared with 878
passengers on board when she sailed from the port of Manila on April 22,
1980 at about 1:00 p.m." This head-count of the passengers "did not include
the 126 crew members, children below three (3) years old and two (2) half-
paying passengers" which had been counted as one adult passenger. Thus,
the total number of persons on board the "Don Juan" on that ill-starred night
of 22 April 1 980 was 1,004, or 140 persons more than the maximum lumber
that could be safely carried by the "Don Juan," per its own Certificate of
Inspection.

We hold that under these circumstances, a presumption of gross negligence on the

part of the vessel (her officers and crew) and of its ship-owner arises; this
presumption was never rebutted by Negros Navigation.

The grossness of the negligence of the "Don Juan" is underscored when one
considers the foregoing circumstances in the context of the following facts:

Firstly, the "Don Juan" was more than twice as fast as the "Tacloban City." The
"Don Juan's" top speed was 17 knots; while that of the "Tacloban City" was
6.3. knots.
Secondly, the "Don Juan" carried the full complement of officers and crew
members specified for a passenger vessel of her class.
Thirdly, the "Don Juan" was equipped with radar which was functioning that
night.
Fourthly, the "Don Juan's" officer on-watch had sighted the "Tacloban City" on
his radar screen while the latter was still four (4) nautical miles away. Visual
confirmation of radar contact was established by the "Don Juan" while the
"Tacloban City" was still 2.7 miles away.

In the total set of circumstances which existed in the instant case, the "Don Juan,"
had it taken seriously its duty of extraordinary diligence, could have easily avoided
the collision with the "Tacloban City," Indeed, the "Don Juan" might well have
avoided the collision even if it had exercised ordinary diligence merely.
In the petition at bar, the "Don Juan" having sighted the "Tacloban City" when it was
still a long way off was negligent in failing to take early preventive action and in
allowing the two (2) vessels to come to such close quarters as to render the collision
inevitable when there was no necessity for passing so near to the "Tacloban City" as
to create that hazard or inevitability, for the "Don Juan" could choose its own
distance. 26, It is noteworthy that the "Tacloban City," upon turning hard to port
shortly before the moment of collision, signalled its intention to do so by giving two
(2) short blasts with horn. 26A The "Don Juan " gave no answering horn blast to
signal its own intention and proceeded to turn hatd to starboard. 26B

We conclude that Capt. Santisteban and Negros Navigation are properly held liable
for gross negligence in connection with the collision of the "Don Juan" and "Tacloban
City" and the sinking of the "Don Juan" leading to the death of hundreds of
passengers. We find no necessity for passing upon the degree of negligence or
culpability properly attributable to PNOC and PNOC Shipping or the master of the
"Tacloban City," since they were never impleaded here.
NEGROS NAVIGATION CO., INC., v. CA - MIRANDA, SPS. DE LA VICTORIA

G.R. No. 110398 November 7, 1997

FACTS:

In April of 1980, private respondent Ramon Miranda purchased from the Negros
Navigation Co., Inc. four special cabin tickets (#74411, 74412, 74413 and 74414)
for his wife, daughter, son and niece who were going to Bacolod City to attend a
family reunion. The tickets were for Voyage No. 457-A of the M/V Don Juan, leaving
Manila at 1:00 p.m. on April 22, 1980.

The ship sailed from the port of Manila on schedule.

At about 10:30 in the evening of April 22, 1980, the Don Juan collided off the Tablas
Strait in Mindoro, with the M/T Tacloban City, an oil tanker owned by the Philippine
National Oil Company (PNOC) and the PNOC Shipping and Transport Corporation
(PNOC/STC). As a result, the M/V Don Juan sank. Several of her passengers perished
in the sea tragedy. The bodies of some of the victims were found and brought to
shore, but the four members of private respondents' families were never found.

Private respondents filed a complaint on July 16, 1980 in the Regional Trial Court of
Manila, Branch 34, against the Negros Navigation, the Philippine National Oil
Company (PNOC), and the PNOC Shipping and Transport Corporation (PNOC/STC),
seeking damages for the death of Ardita de la Victoria Miranda, 48, Rosario V.
Miranda, 19, Ramon V. Miranda, Jr., 16, and Elfreda de la Victoria, 26.

In its answer, petitioner admitted that private respondents purchased ticket

numbers 74411, 74412, 74413 and 74414; that the ticket numbers were listed in
the passenger manifest; and that the Don Juan left Pier 2, North Harbor, Manila on
April 22, 1980 and sank that night after being rammed by the oil tanker
M/T Tacloban City, and that, as a result of the collision, some of the passengers of
the M/V Don Juan died.

Petitioner, however, denied that the four relatives of private respondents actually
boarded the vessel as shown by the fact that their bodies were never recovered.
Petitioner further averred that the Don Juan was seaworthy and manned by a full
and competent crew, and that the collision was entirely due to the fault of the crew
of the M/T Tacloban City.

On January 20, 1986, the PNOC and petitioner Negros Navigation Co., Inc. entered
into a compromise agreement whereby petitioner assumed full responsibility for the
payment and satisfaction of all claims arising out of or in connection with the
collision and releasing the PNOC and the PNOC/STC from any liability to it. The
agreement was subsequently held by the trial court to be binding upon petitioner,
PNOC and PNOC/STC. Private respondents did not join in the agreement.
After trial, the court rendered an order infavor of the plaintiffs, on appeal, the Court
of Appeals 1 affirmed the decision of the Regional Trial Court with modification

Hence this petition.

ISSUE:

WON the ruling in the Mecenas v. CA case is binding on the said case

WON the total loss of the M/V Don Juan extinguished petitioner's liability

RULING:

ON THE FIRST ISSUE, the court ruled that in finding petitioner guilty of negligence
and in failing to exercise the extraordinary diligence required of it in the carriage of
passengers, both the trial court and the appellate court relied on the findings of this
Court inMecenas v. Intermediate Appellate Court, 4 which case was brought for the
death of other passengers. In that case it was found that although the proximate
cause of the mishap was the negligence of the crew of the M/TTacloban City, the
crew of the Don Juan was equally negligent as it found that the latter's master,
Capt. Rogelio Santisteban, was playing mahjong at the time of collision, and the
officer on watch, Senior Third Mate Rogelio De Vera, admitted that he failed to call
the attention of Santisteban to the imminent danger facing them. This Court found
that Capt. Santisteban and the crew of the M/V Don Juan failed to take steps to
prevent the collision or at least delay the sinking of the ship and supervise the
abandoning of the ship.

Petitioner Negros Navigation was found equally negligent in tolerating the playing of
mahjong by the ship captain and other crew members while on board the ship and
failing to keep the M/V Don Juan seaworthy so much so that the ship sank within 10
to 15 minutes of its impact with the M/T Tacloban City.

In addition, the Court found that the Don Juan was overloaded. The Certificate of
Inspection, dated August 27, 1979, issued by the Philippine Coast Guard
Commander at Iloilo City stated that the total number of persons allowed on the
ship was 864, of whom 810 are passengers, but there were actually 1,004 on board
the vessel when it sank, 140 persons more than the maximum number that could
be safely carried by it.

Taking these circumstances together, and the fact that the M/V Don Juan, as the
faster and better-equipped vessel, could have avoided a collision with the PNOC
tanker, this Court held that even if the Tacloban City had been at fault for failing to
observe an internationally-recognized rule of navigation, the Don Juan was guilty of
contributory negligence.

Petitioner criticizes the lower court's reliance on the Mecenas case, arguing that,
although this case arose out of the same incident as that involved in Mecenas, the
parties are different and trial was conducted separately. Petitioner contends that the
decision in this case should be based on the allegations and defenses pleaded and
evidence adduced in it or, in short, on the record of this case.

The contention is without merit. What petitioner contends may be true with respect
to the merits of the individual claims against petitioner but not as to the cause of
the sinking of its ship on April 22, 1980 and its liability for such accident, of which
there can only be one truth. Otherwise, one would be subscribing to the sophistry:
truth on one side of the Pyrenees, falsehood on the other!

Adherence to the Mecenas case is dictated by this Court's policy of maintaining

stability in jurisprudence in accordance with the legal maxim "stare decisis et non
quieta movere" (Follow past precedents and do not disturb what has been settled.)
Where, as in this case, the same questions relating to the same event have been
put forward by parties similarly situated as in a previous case litigated and decided
by a competent court, the rule of stare decisis is a bar to any attempt to relitigate
the same issue.

Nor is it true that the trial court merely based its decision on the Mecenas case. The
trial court made its own independent findings on the basis of the testimonies of
witnesses, such as Senior Third Mate Rogelio de Vera, who incidentally gave
substantially the same testimony on petitioner's behalf before the Board of Marine
Inquiry. The trial court agreed with the conclusions of the then Minister of National
Defense finding both vessels to be negligent.

AND ON THE SECOND ISSUE, whether petitioner is liable to pay damages

notwithstanding the total loss of its ship. The issue is not one of first impression.
The rule is well-entrenched in our jurisprudence that a shipowner may be held liable
for injuries to passengers notwithstanding the exclusively real and hypothecary
nature of maritime law if fault can be attributed to the shipowner. 15

In Mecenas, this Court found petitioner guilty of negligence in (1) allowing or

tolerating the ship captain and crew members in playing mahjong during the
voyage, (2) in failing to maintain the vessel seaworthy and (3) in allowing the ship
to carry more passengers than it was allowed to carry. Petitioner is, therefore,
clearly liable for damages to the full extent.
KOREAN AIRLINES CO., LTD., vs. CA - LAPUZ

G.R. No. 114061 August 3, 1994

FACTS:

Sometime in 1980, Juanito C. Lapuz, an automotive electrician, was contracted for

employment in Jeddah, Saudi Arabia, for a period of one year through Pan Pacific
Overseas Recruiting Services, Inc. Lapuz was supposed to leave on November 8,
1980, via Korean Airlines. Initially, he was "wait-listed," which meant that he could
only be accommodated if any of the confirmed passengers failed to show up at the
airport before departure. When two of such passengers did not appear, Lapuz and
another person by the name of Perico were given the two unclaimed seats.

According to Lapuz, he was allowed to check in with one suitcase and one shoulder
bag at the check-in counter of KAL. He passed through the customs and immigration
sections for routine check-up and was cleared for departure as Passenger No. 157 of
KAL Flight No. KE 903. Together with the other passengers, he rode in the shuttle
bus and proceeded to the ramp of the KAL aircraft for boarding. However, when he
was at the third or fourth rung of the stairs, a KAL officer pointed to him and
shouted "Down! Down!" He was thus barred from taking the flight. When he later
asked for another booking, his ticket was canceled by KAL. Consequently, he was
unable to report for his work in Saudi Arabia within the stipulated 2-week period and
so lost his employment.

KAL, on the other hand, alleged that on November 8, 1980, Pan Pacific Recruiting
Services Inc. coordinated with KAL for the departure of 30 contract workers, of
whom only 21 were confirmed and 9 were wait-listed passengers. The agent of Pan
Pacific, Jimmie Joseph, after being informed that there was a possibility of having
one or two seats becoming available, gave priority to Perico, who was one of the
supervisors of the hiring company in Saudi Arabia. The other seat was won through
lottery by Lapuz. However, only one seat became available and so, pursuant to the
earlier agreement that Perico was to be given priority, he alone was allowed to
board.

After trial, the Regional Trial Court of Manila, Branch 30, 1 adjudged KAL liable for
damages, which was also affirmed by the Court of Appeals, with modification.

Hence the petition.

ISSUE:

WON there is a breach of contract of carriage

WON Court of Appeals erred in concluding that the standby passenger status of
private respondent Lapuz was changed to a confirmed status when his name was
entered into the passenger manifest.
RULING:

The status of Lapuz as standby passenger was changed to that of a confirmed

passenger when his name was entered in the passenger manifest of KAL for its
Flight No. KE 903. His clearance through immigration and customs clearly shows
that he had indeed been confirmed as a passenger of KAL in that flight. KAL thus
committed a breach of the contract of carriage between them when it failed to bring
Lapuz to his destination.

This Court has held that a contract to transport passengers is different in kind and
degree from any other contractual relation. 3 The business of the carrier is mainly
with the traveling public. It invites people to avail themselves of the comforts and
advantages it offers. The contract of air carriage generates a relation attended with
a public duty. Passengers have the right to be treated by the carrier's employees
with kindness, respect, courtesy and due consideration. They are entitled to be
protected against personal misconduct, injurious language, indignities and abuses
from such employees. 4 So it is that any discourteous conduct on the part of these
employees toward a passenger gives the latter an action for damages against the
carrier.

The breach of contract was aggravated in this case when, instead of courteously
informing Lapuz of his being a "wait-listed" passenger, a KAL officer rudely shouted
"Down! Down!" while pointing at him, thus causing him embarrassment and public
humiliation.

KAL argues that "the evidence of confirmation of a chance passenger status is not
through the entry of the name of a chance passenger in the passenger manifest nor
the clearance from the Commission on Immigration and Deportation, because they
are merely means of facilitating the boarding of a chance passenger in case his
status is confirmed." We are not persuaded.

The evidence presented by Lapuz shows that he had indeed checked in at the
departure counter, passed through customs and immigration, boarded the shuttle
bus and proceeded to the ramp of KAL's aircraft. In fact, his baggage had already
been loaded in KAL's aircraft, to be flown with him to Jeddah. The contract of
carriage between him and KAL had already been perfected when he was summarily
and insolently prevented from boarding the aircraft.

KAL's allegation that the respondent court abused its discretion in awarding moral
and exemplary damages is also not tenable.

The Court of Appeals granted moral and exemplary damages because:

The findings of the court a quo that the defendant-appellant has committed
breach of contract of carriage in bad faith and in wanton, disregard of
plaintiff-appellant's rights as passenger laid the basis and justification of an
award for moral damages.

xxxx
In the instant case, we find that defendant-appellant Korean Air Lines acted in
a wanton, fraudulent, reckless, oppressive or malevolent manner when it
"bumped off" plaintiff-appellant on November 8, 1980, and in addition treated
him rudely and arrogantly as a "patay gutom na contract worker fighting
Korean Air Lines," which clearly shows malice and bad faith, thus entitling
plaintiff-appellant to moral damages.

xxxx

Considering that the plaintiff-appellant's entitlement to moral damages has

been fully established by oral and documentary evidence, exemplary
damages may be awarded. In fact, exemplary damages may be awarded,
even though not so expressly pleaded in the complaint (Kapoe vs. Masa, 134
SCRA 231). By the same token, to provide an example for the public good, an
award of exemplary damages is also proper (Armovit vs. Court of
Appeals, supra).