TRANSPO CASE DIGESTS

I. Contract of Transportation
A. Concept, parties and perfection

Dangwa Transportation Co. vs. Court of Appeals:

Facts:
On March 25, 1985, a vehicular accident took place at Marivic, Sapid, Mankayan, Benguet which killed one Pedrito Cudiamat. Private respondents then filed a
complaint for damages against petitioners for such death. It was alleged that petitioner Theodore M. Lardizabal was driving a passenger bus belonging to petitioner
corporation in a reckless and imprudent manner and without due regard to traffic rules and regulations and safety to persons and property, it ran over its passenger,
Pedrito Cudiamat. However, instead of bringing Pedrito immediately to the nearest hospital, the said driver, in utter bad faith and without regard to the welfare of the
victim, first brought his other passengers and cargo to their respective destinations before banging said victim to the Lepanto Hospital where he expired.

On the other hand, petitioners set up the defense that they had observed and continued to observe the extraordinary diligence required in the operation of
the transportation company and the supervision of the employees, even as they add that they are not absolute insurers of the safety of the public at large. Further, it was
alleged that it was the victim's own carelessness and negligence which gave rise to the subject incident, hence they prayed for the dismissal of the complaint plus an
award of damages in their favor by way of counterclaim.

The trial court rendered a decision in favor of the petitioners. Private respondents appealed. The CA set aside the decision of the lower court. Petitioner's
motion for reconsideration having been denied, they brought the matter to the Supreme Court.

Issues:
whether respondent court erred in reversing the decision of the trial court and in finding petitioners negligent and liable for the damages claimed.

SC Ruling:

The SC affirmed the CA's decision.

In the case at bar, the trial court and the Court of Appeal have discordant positions as to who between the petitioners an the victim is guilty of negligence.
Perforce, we have had to conduct an evaluation of the evidence in this case for the prope calibration of their conflicting factual findings and legal conclusions.

The lower court, in declaring that the victim was negligent, made the following findings:
This Court is satisfied that Pedrito Cudiamat was negligent in trying to board a moving vehicle, especially with one of his hands holding an umbrella. And, without having
given the driver or the conductor any indication that he wishes to board the bus. But defendants can also be found wanting of the necessary diligence. In this connection,
it is safe to assume that when the deceased Cudiamat attempted to board defendants' bus, the vehicle's door was open instead of being closed. This should be so, for it is
hard to believe that one would even attempt to board a vehicle (i)n motion if the door of said vehicle is closed. Here lies the defendant's lack of diligence. Under such
circumstances, equity demands that there must be something given to the heirs of the victim to assuage their feelings. This, also considering that initially, defendant
common carrier had made overtures to amicably settle the case. It did offer a certain monetary consideration to the victim's heirs. 7

However, respondent court, in arriving at a different opinion, declares that:

From the testimony of appellees'own witness in the person of Vitaliano Safarita, it is evident that the subject bus was at full stop when the victim Pedrito Cudiamat
boarded the same as it was precisely on this instance where a certain Miss Abenoja alighted from the bus. Moreover, contrary to the assertion of the appellees, the victim
did indicate his intention to board the bus as can be seen from the testimony of the said witness when he declared that Pedrito Cudiamat was no longer walking and
made a sign to board the bus when the latter was still at a distance from him. It was at the instance when Pedrito Cudiamat was closing his umbrella at the platform of the
bus when the latter made a sudden jerk movement (as) the driver commenced to accelerate the bus.
Evidently, the incident took place due to the gross negligence of the appellee-driver in prematurely stepping on the accelerator and in not waiting for the passenger to
first secure his seat especially so when we take into account that the platform of the bus was at the time slippery and wet because of a drizzle. The defendants-appellees
utterly failed to observe their duty and obligation as common carrier to the end that they should observe extra-ordinary diligence in the vigilance over the goods and for
the safety of the passengers transported by them according to the circumstances of each case (Article 1733, New Civil Code).

The foregoing testimonies show that the place of the accident and the place where one of the passengers alighted were both between Bunkhouses 53 and 54, hence the
finding of the Court of Appeals that the bus was at full stop when the victim boarded the same is correct. They further confirm the conclusion that the victim fell from the
platform of the bus when it suddenly accelerated forward and was run over by the rear right tires of the vehicle, as shown by the physical evidence on where he was
thereafter found in relation to the bus when it stopped. Under such circumstances, it cannot be said that the deceased was guilty of negligence.
The contention of petitioners that the driver and the conductor had no knowledge that the victim would ride on the bus, since the latter had supposedly not manifested
his intention to board the same, does not merit consideration. When the bus is not in motion there is no necessity for a person who wants to ride the same to signal his
intention to board. A public utility bus, once it stops, is in effect making a continuous offer to bus riders. Hence, it becomes the duty of the driver and the conductor, every
time the bus stops, to do no act that would have the effect of increasing the peril to a passenger while he was attempting to board the same. The premature acceleration
of the bus in this case was a breach of such duty.
It is the duty of common carriers of passengers, including common carriers by railroad train, streetcar, or motorbus, to stop their conveyances a reasonable length of time
in order to afford passengers an opportunity to board and enter, and they are liable for injuries suffered by boarding passengers resulting from the sudden starting up or
jerking of their conveyances while they are doing so.
It is not negligence per se, or as a matter of law, for one attempt to board a train or streetcar which is moving slowly. An ordinarily prudent person would have made the
attempt board the moving conveyance under the same or similar circumstances. The fact that passengers board and alight from slowly moving vehicle is a matter of
common experience both the driver and conductor in this case could not have been unaware of such an ordinary practice.
The victim herein, by stepping and standing on the platform of the bus, is already considered a passenger and is entitled all the rights and protection pertaining to such a
contractual relation. Hence, it has been held that the duty which the carrier passengers owes to its patrons extends to persons boarding cars as well as to those alighting
therefrom.
Common carriers, from the nature of their business and reasons of public policy, are bound to observe extraordinary diligence for the safety of the passengers transported
by the according to all the circumstances of each case. 16 A common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using
the utmost diligence very cautious persons, with a due regard for all the circumstances.
An action based on a contract of carriage, the court need not make an express finding of fault or negligence on the part of the carrier in order to hold it responsible to pay
the damages sought by the passenger. By contract of carriage, the carrier assumes the express obligation to transport the passenger to his destination safely and observe
extraordinary diligence with a due regard for all the circumstances, and any injury that might be suffered by the passenger is right away attributable to the fault or
negligence of the carrier. This is an exception to the general rule that negligence must be proved, and it is therefore incumbent upon the carrier to prove that it has
exercised extraordinary diligence as prescribed in Articles 1733 and 1755 of the Civil Code.

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Moreover, the circumstances under which the driver and the conductor failed to bring the gravely injured victim immediately to the hospital for medical treatment is a
patent and incontrovertible proof of their negligence. It defies understanding and can even be stigmatized as callous indifference. The evidence shows that after the
accident the bus could have forthwith turned at Bunk 56 and thence to the hospital, but its driver instead opted to first proceed to Bunk 70 to allow a passenger to alight
and to deliver a refrigerator, despite the serious condition of the victim.

2.Korean Airlines Co. vs. CA:

Facts:
This case has its origin in an action filed before the RTC where the Korean Airlines (KAL) was ordered to pay actual/compensatory damages, with legal interest,
attorney's fees and costs of suit in favor of Juanito C. Lapuz, the plaintiff in that case. Both parties appealed to the CA but the decision therein was merely modified. The
parties elevated the case to the SC which merely modifed the CA's decision as to the commencement date of the award of legal interest. i.e. from the date of the decision
of the trial court and not from the date of filing of the complaint. KAL then assailed the Court's lack of jurisdiction to impose legal interest as the complaint allegedly failed
to pray for its award.

Issue: Whether or not the Court lacks jurisdiction to award legal interest.

SC Ruling:
Petition is devoid of merit.
Both the complaint and amended complaint against KAL dated November 27, 1980, and January 5, 1981, respectively, prayed for reliefs and remedies to which
Lapuz may be entitled in law and equity. The award of legal interest is one such relief, as it is based on equitable grounds duly sanctioned by Article 2210 of the Civil Code
which provides that: "[i]nterest may, in the discretion of the Court, be allowed upon damages awarded for breach of contract".
Furthermore, in its petition for review before the Court of Appeals, KAL did not question the trial court's imposition of legal interest. Likewise, in its appeal before the
Court, KAL never bewailed the award of legal interest. In fact, KAL took exception only with respect to the date when legal interest should commence to run. Indeed, it
was only in its motion for reconsideration when suddenly its imposition was assailed for having been rendered without jurisdiction. To strengthen its languid position,
KAL's subsequent pleadings clothed its attack with constitutional import for alleged violation of its right to due process.
While it is a rule that jurisdictional question may be raised at any time, this, however, admits of an exception where, as in this case, estoppel has supervened. This court
has time and again frowned upon the undesirable practice of a party submitting his case for decision and then accepting the judgment, only if favorable, and attacking it
for lack of jurisdiction when adverse. The Court shall not countenance KAL's undesirable moves.
KAL's filing of numerous pleadings delayed the disposition of the case which for fifteen years remained pending. This practice may constitute abuse of the Court's
processes for it tends to impede, obstruct and degrade the administration of justice.
Counsel for KAL is reminded that it is his duty not to unduly delay a case, impede the execution of a judgment or misuse Court processes.

LRTA vs. Navidad:

Facts:
On 14 October 1993, about half an hour past seven o’clock in the evening, Nicanor Navidad, then drunk, entered the EDSA LRT station after purchasing a "token"
(representing payment of the fare). While Navidad was standing on the platform near the LRT tracks, Junelito Escartin, the security guard (employed by Prudent Security
Agency) assigned to the area approached Navidad. A misunderstanding or an altercation between the two apparently ensued that led to a fist fight. No evidence,
however, was adduced to indicate how the fight started or who, between the two, delivered the first blow or how Navidad later fell on the LRT tracks. At the exact
moment that Navidad fell, an LRT train, operated by petitioner Rodolfo Roman, was coming in. Navidad was struck by the moving train, and he was killed instantaneously.
On 08 December 1994, the widow of Nicanor, herein respondent Marjorie Navidad, along with her children, filed a complaint for damages against Junelito Escartin,
Rodolfo Roman, the LRTA, the Metro Transit Organization, Inc. (Metro Transit), and Prudent for the death of her husband. LRTA and Roman filed a counterclaim against
Navidad and a cross-claim against Escartin and Prudent. Prudent, in its answer, denied liability and averred that it had exercised due diligence in the selection and
supervision of its security guards.
The lower court held Prudent liable. When Prudent appealed to the CA, the latter held LRT and Roman jointly and severally liable and exonerated Prudent.
Petitioners would contend that the appellate court ignored the evidence and the factual findings of the trial court by holding them liable on the basis of a sweeping
conclusion that the presumption of negligence on the part of a common carrier was not overcome. Petitioners would insist that Escartin’s assault upon Navidad, which
caused the latter to fall on the tracks, was an act of a stranger that could not have been foreseen or prevented. The LRTA would add that the appellate court’s conclusion
on the existence of an employer-employee relationship between Roman and LRTA lacked basis because Roman himself had testified being an employee of Metro Transit
and not of the LRTA.
Respondents, supporting the decision of the appellate court, contended that a contract of carriage was deemed created from the moment Navidad paid the fare at the
LRT station and entered the premises of the latter, entitling Navidad to all the rights and protection under a contractual relation, and that the appellate court had correctly
held LRTA and Roman liable for the death of Navidad in failing to exercise extraordinary diligence imposed upon a common carrier.

Issues: What is the extent, if any, of LRT and Roman's as well as Prudent's liability over the death of Navidad?

SC Ruling:
Law and jurisprudence dictate that a common carrier, both from the nature of its business and for reasons of public policy, is burdened with the duty of exercising utmost
diligence in ensuring the safety of passengers.
Applicable provisions in the Civil Code are the following: Arts. 1755, 1756, 1759, and 1763.
The law requires common carriers to carry passengers safely using the utmost diligence of very cautious persons with due regard for all circumstances.5 Such duty of a
common carrier to provide safety to its passengers so obligates it not only during the course of the trip but for so long as the passengers are within its premises and where
they ought to be in pursuance to the contract of carriage.6 The statutory provisions render a common carrier liable for death of or injury to passengers (a) through the
negligence or willful acts of its employees or b) on account of willful acts or negligence of other passengers or of strangers if the common carrier’s employees through the
exercise of due diligence could have prevented or stopped the act or omission. In case of such death or injury, a carrier is presumed to have been at fault or been
negligent, and by simple proof of injury, the passenger is relieved of the duty to still establish the fault or negligence of the carrier or of its employees and the burden
shifts upon the carrier to prove that the injury is due to an unforeseen event or to force majeure. In the absence of satisfactory explanation by the carrier on how the
accident occurred, which petitioners, according to the appellate court, have failed to show, the presumption would be that it has been at fault, an exception from the
general rule that negligence must be proved.
The foundation of LRTA’s liability is the contract of carriage and its obligation to indemnify the victim arises from the breach of that contract by reason of its failure to
exercise the high diligence required of the common carrier. In the discharge of its commitment to ensure the safety of passengers, a carrier may choose to hire its own
employees or avail itself of the services of an outsider or an independent firm to undertake the task. In either case, the common carrier is not relieved of its
responsibilities under the contract of carriage.
Should Prudent be made likewise liable? If at all, that liability could only be for tort under the provisions of Article 2176 12 and related provisions, in conjunction with
Article 2180,13 of the Civil Code. The premise, however, for the employer’s liability is negligence or fault on the part of the employee. Once such fault is established, the
employer can then be made liable on the basis of the presumption juris tantum that the employer failed to exercise diligentissimi patris families in the selection and

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supervision of its employees. The liability is primary and can only be negated by showing due diligence in the selection and supervision of the employee, a factual matter
that has not been shown. Absent such a showing, one might ask further, how then must the liability of the common carrier, on the one hand, and an independent
contractor, on the other hand, be described? It would be solidary. A contractual obligation can be breached by tort and when the same act or omission causes the injury,
one resulting in culpa contractual and the other in culpa aquiliana, Article 219414 of the Civil Code can well apply.15 In fine, a liability for tort may arise even under a
contract, where tort is that which breaches the contract. 16 Stated differently, when an act which constitutes a breach of contract would have itself constituted the source
of a quasi-delictual liability had no contract existed between the parties, the contract can be said to have been breached by tort, thereby allowing the rules on tort to
apply.
Regrettably for LRT, as well as perhaps the surviving spouse and heirs of the late Nicanor Navidad, this Court is concluded by the factual finding of the Court of Appeals
that "there is nothing to link (Prudent) to the death of Nicanor (Navidad), for the reason that the negligence of its employee, Escartin, has not been duly proven x x x."
This finding of the appellate court is not without substantial justification in our own review of the records of the case.
There being, similarly, no showing that petitioner Rodolfo Roman himself is guilty of any culpable act or omission, he must also be absolved from liability. Needless to say,
the contractual tie between the LRT and Navidad is not itself a juridical relation between the latter and Roman; thus, Roman can be made liable only for his own fault or
negligence.
The award of nominal damages in addition to actual damages is untenable. Nominal damages are adjudicated in order that a right of the plaintiff, which has been violated
or invaded by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by him. 18 It is an established rule
that nominal damages cannot co-exist with compensatory damages.

B. Common Carriers

G.R. No. L-25599 April 4, 1968

HOME INSURANCE COMPANY, plaintiff appellee, vs. AMERICAN STEAMSHIP AGENCIES, INC. and LUZON STEVEDORING CORPORATION, defendants,
AMERICAN STEAMSHIP AGENCIES, INC., defendant-appellant.

When the cargo was delivered to consignee San Miguel Brewery Inc., there were shortages amounting to P12,033.85, causing the latter to lay claims against Luzon
Stevedoring Corporation, Home Insurance Company and the American Steamship Agencies, owner and operator of SS Crowborough.

Luzon Stevedoring and American Steamship denied their liability, Home Insurance paid for the same in the amount of 14, 870.71. But when both Luzon and American
refused to reimbursed Home Insurance, the latter filed a complaint for the recovery of 14, 870.71 plus attorney’s fees.

In both their Answer, they alleged that hey exercised due diligence hence they cannot be liable for the loss.

American Steamship further alleged that as a mere forwarding agent, it was not responsible for losses or damages to the cargo basing on the provisions of the Charter
party referred to in the bills of lading which states, the charterer, not the shipowner, was responsible for any loss or damage of the cargo

On November 17, 1965, the Court of First Instance, after trial, absolved Luzon Stevedoring Corporation, having found the latter to have merely delivered what it received
from the carrier in the same condition and quality, and ordered American Steamship Agencies to pay plaintiff P14,870.71 with legal interest plus P1,000 attorney's fees.
Said court cited the following grounds:

(a) The non-liability claim of American Steamship Agencies under the charter party contract is not tenable because Article 587 of the Code of Commerce makes
the ship agent also civilly liable for damages in favor of third persons due to the conduct of the captain of the carrier;

(b) The stipulation in the charter party contract exempting the owner from liability is against public policy under Article 1744 of the Civil Code;

(c) In case of loss, destruction or deterioration of goods, common carriers are presumed at fault or negligent under Article 1735 of the Civil Code unless they
prove extraordinary diligence, and they cannot by contract exempt themselves from liability resulting from their negligence or that of their servants; and

(d) When goods are delivered to the carrier in good order and the same are in bad order at the place of destination, the carrier is prima facie liable.

Finding that the decision was adverse to them, American Steamship appealed to the Supreme Court

ISSUE:

Is the stipulation in the charter party of the owner's non-liability valid so as to absolve the American Steamship Agencies from liability for loss?

RULINGS:

The bills of lading, 1 covering the shipment of Peruvian fish meal provide at the back thereof that the bills of lading shall be governed by and subject to the terms and
conditions of the charter party, if any, otherwise, the bills of lading prevail over all the agreements.

Regarding the stipulation, the Court of First Instance declared the contract as contrary to Article 587 of the Code of Commerce making the ship agent civilly liable for
indemnities suffered by third persons arising from acts or omissions of the captain in the care of the goods and Article 1744 of the Civil Code under which a stipulation
between the common carrier and the shipper or owner limiting the liability of the former for loss or destruction of the goods to a degree less than extraordinary diligence
is valid provided it be reasonable, just and not contrary to public policy. The release from liability in this case was held unreasonable and contrary to the public policy on
common carriers.

Under American jurisprudence, a common carrier undertaking to carry a special cargo or chartered to a special person only, becomes a private carrier. 8 As a private carrier,
a stipulation exempting the owner from liability for the negligence of its agent is not against public policy, 9 and is deemed valid.

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 only 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 the case of a ship totally chartered for the use of a single party.

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Accordingly, the consignees under the bills of lading must likewise abide by the terms of the charter party. And as stated, recovery cannot be had thereunder, for loss or
damage to the cargo, against the shipowners, unless the same is due to personal acts or negligence of said owner or its manager, as distinguished from its other agents or
employees. In this case, no such personal act or negligence has been proved.

WHEREFORE, the judgment appealed from is hereby reversed and appellant is absolved from liability to plaintiff. No costs. So ordered

G.R. No. L-47822 December 22, 1988

PEDRO DE GUZMAN, petitioner,

vs.
COURT OF APPEALS and ERNESTO CENDANA, respondents.

Respondent Ernesto Cendana, a junk dealer, was engaged in buying up used bottles and scrap metal in Pangasinan. As a sideline business, he would engage in backhauling
services of different merchandise and in turn would charge his clients a much lower freight rates than the usual.

On November 1970, petitioner Pedro de Guzman, a merchant and authorized dealer of General Milk contracted with respondent for the hauling of 750 cartons of Liberty
filled milk from a warehouse of General Milk in Makati, Rizal, to petitioner's establishment in Urdaneta on or before 4 December 1970. Accordingly, on 1 December 1970,
respondent loaded in Makati the merchandise on to his trucks: 150 cartons were loaded on a truck driven by respondent himself, while 600 cartons were placed on board
the other truck which was driven by Manuel Estrada, respondent's driver and employee.

Only 150 boxes of Liberty filled milk were delivered to petitioner. The other 600 boxes never reached petitioner, since the truck which carried these boxes was hijacked
somewhere along the MacArthur Highway in Paniqui, Tarlac, by armed men who took with them the truck, its driver, his helper and the cargo.

With that, petitioner commenced action against private respondent in demanding payment of P 22,150.00, the claimed value of the lost merchandise, plus damages and
attorney's fees. Petitioner alleged that private respondent, being a common carrier, and having failed to exercise the extraordinary diligence required of him by the law,
should be held liable for the value of the undelivered goods.

In his Answer, private respondent denied that he was a common carrier and argued that he could not be held responsible for the value of the lost goods, such loss having
been due to force majeure.

On 10 December 1975, the trial court rendered a Decision 1 finding private respondent to be a common carrier and holding him liable for the value of the undelivered
goods (P 22,150.00) as well as for P 4,000.00 as damages and P 2,000.00 as attorney's fees.

However on appeal, the court reversed the judgment of the trial court and held that respondent had been engaged in transporting return loads of freight "as a casual
occupation — a sideline to his scrap iron business" and not as a common carrier.
ISSUE:
1.) W/N respondent is considered a common carrier.
2.) W/N respondent is liable, if found to be a common carrier

RULINGS:

The Civil Code defines "common carriers" in the following terms:

Article 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or
goods or both, by land, water, or air for compensation, offering their services to the public.

It appears to the Court that private respondent is properly characterized as a common carrier even though he merely "back-hauled" goods for other merchants from
Manila to Pangasinan, although such back-hauling was done on a periodic or occasional rather than regular or scheduled manner, and even though private respondent's
principal occupation was not the carriage of goods for others. There is no dispute that private respondent charged his customers a fee for hauling their goods; that fee
frequently fell below commercial freight rates is not relevant here.

Even granting that he held no certificate of public convenience, such certificate is not a requisite for the incurring of liability under the Civil Code provisions governing
common carriers. That liability arises the moment a person or firm acts as a common carrier, without regard to whether or not such carrier has also complied with the
requirements of the applicable regulatory statute and implementing regulations and has been granted a certificate of public convenience or other franchise.

Hence, the respondent is considered a common carrier.

Common carriers, "by the nature of their business and for reasons of public policy" 2 are held to a very high degree of care and diligence ("extraordinary diligence") in the
carriage of goods as well as of passengers. The specific import of extraordinary diligence in the care of goods transported by a common carrier is, according to Article
1733, "further expressed in Articles 1734,1735 and 1745, numbers 5, 6 and 7" of the Civil Code.

Article 1734 establishes the general rule that common carriers are responsible for the loss, destruction or deterioration of the goods which they carry, "unless the same is
due to any of the following causes only:

(1) Flood, storm, earthquake, lightning or other natural disaster or calamity;

(2) Act of the public enemy in war, whether international or civil;
(3) Act 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; and
(5) Order or act of competent public authority.

Applying the above-quoted Articles 1734 and 1735, we note firstly that the specific cause alleged in the instant case — the hijacking of the carrier's truck — does not fall
within any of the five (5) categories of exempting causes listed in Article 1734. It would follow, therefore, that the hijacking of the carrier's vehicle must be dealt with

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under the provisions of Article 1735, in other words, that the private respondent as common carrier is presumed to have been at fault or to have acted negligently. This
presumption, however, may be overthrown by proof of extraordinary diligence on the part of private respondent.

Under Article 1745 (6) above, a common carrier is held responsible — and will not be allowed to divest or to diminish such responsibility — even for acts of strangers like
thieves or robbers, except where such thieves or robbers in fact acted "with grave or irresistible threat, violence or force." We believe and so hold that the limits of the
duty of extraordinary diligence in the vigilance over the goods carried are reached where the goods are lost as a result of a robbery which is attended by "grave or
irresistible threat, violence or force."

In the light of the pecularcir cumstances, we hold that the occurrence of the loss must reasonably be regarded as quite beyond the control of the common carrier and
properly regarded as a fortuitous event. It is necessary to recall that even common carriers are not made absolute insurers against all risks of travel and of transport of
goods, and are not held liable for acts or events which cannot be foreseen or are inevitable, provided that they shall have complied with the rigorous standard of
extraordinary diligence.

Hence the Court agrees with the result reached by the Court of Appeals that private respondent Cendana is not liable for the value of the undelivered merchandise which
was lost because of an event entirely beyond private respondent's control.

ACCORDINGLY, the Petition for Review on certiorari is hereby DENIED and the Decision of the Court of Appeals dated 3 August 1977 is AFFIRMED.

Planters Products vs. CA (GR 101503, 15 September 1993)

First Division, Bellosillo (J): 2 concur, 1 on leave, 1 took no part

Facts:
Planters Products, Inc. (PPI), purchased from Mitsubishi International Corporation of New York, USA, 9,329.7069 metric tons (M/T) of Urea 46% fertilizer which
the latter shipped in bulk on 16 June 1974 aboard the cargo vessel M/V “Sun Plum” owned by Kyosei Kisen Kabushiki Kaisha (KKKK) from Kenai, Alaska, USA, to Poro Point,
San Fernando, La Union, Philippines, as evidenced by Bill of Lading KP-1 signed by the master of the vessel and issued on the date of departure. On 17 May 1974, or prior
to its voyage, a time charter-party on the vessel M/V “Sun Plum” pursuant to the Uniform General Charter was entered into between Mitsubishi as shipper/charterer and
KKKK as shipowner, in Tokyo, Japan. Riders to the aforesaid charter-party starting from paragraph 16 to 40 were attached to the pre-printed agreement. Addenda 1, 2, 3
and 4 to the charter-party were also subsequently entered into on the 18th, 20th, 21st and 27th of May 1974, respectively. Before loading the fertilizer aboard the vessel, 4 of
her holds were all presumably inspected by the charterer’s representative and found fit to take a load of urea in bulk pursuant to paragraph 16 of the charter-party. After
the Urea fertilizer was loaded in bulk by stevedores hired by and under the supervision of the shipper, the steel hatches were closed with heavy iron lids, covered with 3
layers of tarpaulin, then tied with steel bonds. The hatches remained closed and tightly sealed throughout the entire voyage. Upon arrival of the vessel at her port of call
on 3 July 1974, the steel pontoon hatches were opened with the use of the vessel’s boom. PPI unloaded the cargo from the holds into its steel-bodied dump trucks which
were parked alongside the berth, using metal scoops attached to the ship, pursuant to the terms and conditions of the charter-party (which provided for an FIOS clause).
The hatches remained open throughout the duration of the discharge. Each time a dump truck was filled up, its load of Urea was covered with tarpaulin before it was
transported to the consignee’s warehouse located some 50 meters from the wharf. Midway to the warehouse, the trucks were made to pass through a weighing scale
where they were individually weighed for the purpose of ascertaining the net weight of the cargo. The port area was windy, certain portions of the route to the
warehouse were sandy and the weather was variable, raining occasionally while the discharge was in progress. PPI’s warehouse was made of corrugated galvanized iron
(GI) sheets, with an opening at the front where the dump trucks entered and unloaded the fertilizer on the warehouse floor. Tarpaulins and GI sheets were placed in-
between and alongside the trucks to contain spillages of the fertilizer. It took 11 days for PPI to unload the cargo, from 5 July to 18 July 1974 (except July 12 th, 14th and
18th). A private marine and cargo surveyor, Cargo Superintendents Company Inc. (CSCI), was hired by PPI to determine the “outturn” of the cargo shipped, by taking draft
readings of the vessel prior to and after discharge. The survey report submitted by CSCI to the consignee (PPI) dated 19 July 1974 revealed a shortage in the cargo of
106.726 M/T and that a portion of the Urea fertilizer approximating 18 M/T was contaminated with dirt. The same results were contained in a Certificate of
Shortage/Damaged Cargo dated 18 July 1974 prepared by PPI which showed that the cargo delivered was indeed short of 94.839 M/T and about 23 M/T were rendered
unfit for commerce, having been polluted with sand, rust and dirt. Consequently, PPI sent a claim letter dated 18 December 1974 to Soriamont Steamship Agencies (SSA),
the resident agent of the carrier, KKKK, for P245,969.31 representing the cost of the alleged shortage in the goods shipped and the diminution in value of that portion said
to have been contaminated with dirt. SSA explained that they were not able to respond to the consignee’s claim for payment because, according to them, what they
received was just a request for shortlanded certificate and not a formal claim, and that this “request” was denied by them because they “had nothing to do with the
discharge of the shipment.”
On 18 July 1975, PPI filed an action for damages with the Court of First Instance of Manila. The court a quo however sustained the claim of PPI against the carrier for the
value of the goods lost or damaged.
On appeal, the Court of Appeals reversed the lower court and absolved the carrier from liability for the value of the cargo that was lost or damaged. PPI appealed by way
of petition for review.
The Supreme Court dismissed the petition; affirmed the assailed decision of the Court of Appeals, which reversed the trial court; and consequently, dismissed Civil Case
98623 of the then CFI, now RTC, of Manila; with costs against PPI.
1. Charter party definedA “charter-party” is defined as a contract by which an entire ship, or some principal part thereof, is let by the owner to another person for a
specified time or use; a contract of affreightment by which the owner of a ship or other vessel lets the whole or a part of her to a merchant or other person for the
conveyance of goods, on a particular voyage, in consideration of the payment of freight.
2. Types of charter parties Charter parties are of two types: (a) contract of affreightment which involves the use of shipping space on vessels leased by the owner in
part or as a whole, to carry goods for others; and, (b) charter by demise or bareboat charter, by the terms of which the whole vessel is let to the charterer with a
transfer to him of its entire command and possession and consequent control over its navigation, including the master and the crew, who are his servants.
3. Kinds of contract of affreightmentContract of affreightment may either be time charter, wherein the vessel is leased to the charterer for a fixed period of time, or
voyage charter, wherein the ship is leased for a single voyage. In both cases, the charter-party provides for the hire of the vessel only, either for a determinate
period of time or for a single or consecutive voyage, the shipowner to supply the ship’s stores, pay for the wages of the master and the crew, and defray the
expenses for the maintenance of the ship.
4. Common or public carrier defined; Scope of definitionThe term “common or public carrier” is defined in Article 1732 of the Civil Code. The definition extends to
carriers either by land, air or water which hold themselves out as ready to engage in carrying goods or transporting passengers or both for compensation as a public
employment and not as a casual occupation.
5. Distinction between common or public carrier, and private or special carrierThe distinction between a “common or public carrier” and a “private or special carrier”
lies in the character of the business, such that if the undertaking is a single transaction, not a part of the general business or occupation, although involving the
carriage of goods for a fee, the person or corporation offering such service is a private carrier.
6. Extraordinary diligence required of common carriers (Article 1733); Ordinary diligence required of private carriersArticle 1733 of the New Civil Code mandates
that common carriers, by reason of the nature of their business, should observe extraordinary diligence in the vigilance over the goods they carry. In the case of
private carriers, however, the exercise of ordinary diligence in the carriage of goods will suffice.
5
7. Common carriers presumed negligent in case of loss, etc. of goods; No presumption in private carriersIn case of loss, destruction or deterioration of the goods,
common carriers are presumed to have been at fault or to have acted negligently, and the burden of proving otherwise rests on them. On the contrary, no such
presumption applies to private carriers, for whosoever alleges damage to or deterioration of the goods carried has the onus of proving that the cause was the
negligence of the carrier.
8. Kyosei Kisen Kabushiki Kaisha a common carrier, remained as so in charter partyKyosei Kisen Kabushiki Kaisha, in the ordinary course of business, operates as a
common carrier, transporting goods indiscriminately for all persons. When PPI chartered the vessel M/V “Sun Plum”, the ship captain, its officers and compliment
were under the employ of the shipowner and therefore continued to be under its direct supervision and control. Considering that the steering of the ship, the
manning of the decks, the determination of the course of the voyage and other technical incidents of maritime navigation were all consigned to the officers and
crew who were screened, chosen and hired by the shipowner, the charterer is a stranger to the crew and to the ship. Thus, a public carrier shall remain as such,
notwithstanding the charter of the whole or portion of a vessel by one or more persons, provided the charter is limited to the ship only, as in the case of a time-
charter or voyage-charter. Indubitably, a shipowner in a time or voyage charter retains possession and control of the ship, although her holds may, for the moment,
be the property of the charterer.
9. When charter party converts common carrier to private carrierIt is only when the charter includes both the vessel and its crew, as in a bareboat or demise that a
common carrier becomes private, at least insofar as the particular voyage covering the charter-party is concerned.
10. Reliance on case of Home Insurance vs. American Steamship misplacedThe carrier’s heavy reliance on the case of Home Insurance Co. v. American Steamship
Agencies is misplaced for the reason that the meat of the controversy therein was the validity of a stipulation in the charter-party exempting the shipowner from
liability for loss due to the negligence of its agent, and not the effects of a special charter on common carriers.
11. American rule as to shipper carrying special cargo not applicable in the Philippines; Stricter interpretation of admiralty lawsThe rule in the United States that a ship
chartered by a single shipper to carry special cargo is not a common carrier, does not find application in Philippine jurisdiction, for the Court has observed that the
growing concern for safety in the transportation of passengers and/or carriage of goods by sea requires a more exacting interpretation of admiralty laws, more
particularly, the rules governing common carriers.
12. Observations of Raoul Colinvaux, the learned barrister-at-law“As a matter of principle, it is difficult to find a valid distinction between cases in which a ship is used
to convey the goods of one and of several persons. Where the ship herself is let to a charterer, so that he takes over the charge and control of her, the case is
different; the shipowner is not then a carrier. But where her services only are let, the same grounds for imposing a strict responsibility exist, whether he is employed
by one or many. The master and the crew are in each case his servants, the freighter in each case is usually without any representative on board the ship; the same
opportunities for fraud or collussion occur; and the same difficulty in discovering the truth as to what has taken place arises . . .”
13. Burden of proof in an action for recovery of damages against a common carrierIn an action for recovery of damages against a common carrier on the goods
shipped, the shipper or consignee should first prove the fact of shipment and its consequent loss or damage while the same was in the possession, actual or
constructive, of the carrier. Thereafter, the burden of proof shifts to respondent to prove that he has exercised extraordinary diligence required by law or that the
loss, damage or deterioration of the cargo was due to fortuitous event, or some other circumstances inconsistent with its liability.
14. Carrier has sufficiently overcome, by clear and convincing proof, the prima facie presumption of negligence(1) The master of the carrying vessel, Captain Lee Tae
Bo, in his deposition taken on 19 April 1977 before the Philippine Consul and Legal Attache in the Philippine Embassy in Tokyo, Japan, testified that before the
fertilizer was loaded, the 4 hatches of the vessel were cleaned, dried and fumigated. After completing the loading of the cargo in bulk in the ship’s holds, the steel
pontoon hatches were closed and sealed with iron lids, then covered with 3 layers of serviceable tarpaulins which were tied with steel bonds. The hatches remained
close and tightly sealed while the ship was in transit as the weight of the steel covers made it impossible for a person to open without the use of the ship’s boom. (2)
It was also shown during the trial that the hull of the vessel was in good condition, foreclosing the possibility of spillage of the cargo into the sea or seepage of water
inside the hull of the vessel. When M/V “Sun Plum” docked at its berthing place, representatives of the consignee boarded, and in the presence of a representative
of the shipowner, the foreman, the stevedores, and a cargo surveyor representing CSCI, opened the hatches and inspected the condition of the hull of the vessel.
The stevedores unloaded the cargo under the watchful eyes of the shipmates who were overseeing the whole operation on rotation basis. Verily, the presumption of
negligence on the part of respondent carrier has been efficaciously overcome by the showing of extraordinary zeal and assiduity exercised by the carrier in the care
of the cargo.
15. Period which carrier was to observe degree of diligence; Limitation clause of FIOS meaningThe period during which the carrier was to observe the degree of
diligence required of it as a public carrier began from the time the cargo was unconditionally placed in its charge after the vessel’s holds were duly inspected and
passed scrutiny by the shipper, up to and until the vessel reached its destination and its hull was re-examined by the consignee, but prior to unloading. This is clear
from the limitation clause agreed upon by the parties in the Addendum to the standard “GENCON” time charter-party which provided for an F.I.O.S., meaning, that
the loading, stowing, trimming and discharge of the cargo was to be done by the charterer, free from all risk and expense to the carrier. Moreover, a shipowner is
liable for damage to the cargo resulting from improper stowage only when the stowing is done by stevedores employed by him, and therefore under his control and
supervision, not when the same is done by the consignee or stevedores under the employ of the latter.16. When common carriers not liable for loss, destruction
or deterioration of goodsArticle 1734 of the New Civil Code provides that common carriers are not responsible for the loss, destruction or deterioration of the goods
if caused by the character of the goods or defects in the packaging or in the containers. The Code of Commerce also provides that all losses and deteriorations which
the goods may suffer during the transportation by reason of fortuitous event, force majeure, or the inherent defect of the goods, shall be for the account and risk of
the shipper, and that proof of these accidents is incumbent upon the carrier. The carrier, nonetheless, shall be liable for the loss and damage resulting from the
preceding causes if it is proved, as against him, that they arose through his negligence or by reason of his having failed to take the precautions which usage has
established among careful persons.
17. Characteristics of ureaUrea is a chemical compound consisting mostly of ammonia and carbon monoxide compounds which are used as fertilizer. Urea also contains
46% nitrogen and is highly soluble in water. However, during storage, nitrogen and ammonia do not normally evaporate even on a long voyage, provided that the
temperature inside the hull does not exceed 80 degrees centigrade.
18. Expected risks of bulk shipping(1) In unloading fertilizer in bulk with the use of a clamped shell, losses due to spillage during such operation amounting to one
percent (1%) against the bill of lading is deemed “normal” or “tolerable.” The primary cause of these spillages is the clamped shell which does not seal very tightly.
Also, the wind tends to blow away some of the materials during the unloading process. (2) The dissipation of quantities of fertilizer, or its deterioration in value, is
caused either by an extremely high temperature in its place of storage, or when it comes in contact with water. When Urea is drenched in water, either fresh or
saline, some of its particles dissolve. But the salvaged portion which is in liquid form still remains potent and usable although no longer saleable in its original market
value. (3) The probability of the cargo being damaged or getting mixed or contaminated with foreign particles was made greater by the fact that the fertilizer was
transported in “bulk,” thereby exposing it to the inimical effects of the elements and the grimy condition of the various pieces of equipment used in transporting and
hauling it.
19. Hull of vessel in good condition; Improbable that sea water seep in vessel’s holdIt was highly improbable for sea water to seep into the vessel’s holds during the
voyage since the hull of the vessel was in good condition and her hatches were tightly closed and firmly sealed, making the M/V “Sun Plum” in all respects
seaworthy to carry the cargo she was chartered for. If there was loss or contamination of the cargo, it was more likely to have occurred while the same was being
transported from the ship to the dump trucks and finally to the consignee’s warehouse. This may be gleaned from the testimony of the marine and cargo surveyor of
CSCI who supervised the unloading. He explained that the 18 M/T of alleged “bad order cargo” as contained in their report to PPI was just an approximation or
estimate made by them after the fertilizer was discharged from the vessel and segregated from the rest of the cargo.
20. Variable weather condition a risk of loss or damage which owner or shipper of goods has to faceHerein, it was in the month of July when the vessel arrived port
and unloaded her cargo. It rained from time to time at the harbor area while the cargo was being discharged according to the supply officer of PPI, who also testified
that it was windy at the waterfront and along the shoreline where the dump trucks passed enroute to the consignee’s warehouse. Bulk shipment of highly soluble
goods like fertilizer carries with it the risk of loss or damage; more so, with a variable weather condition prevalent during its unloading. This is a risk the shipper or
the owner of the goods has to face.

Bascos vs. CA (GR 101089, 7 April 1993)Second Division, Campos Jr. (J): 4 concur
Facts: Rodolfo A. Cipriano representing Cipriano Trading Enterprise (CIPTRADE) entered into a hauling contract with Jibfair Shipping Agency Corp. whereby the former
6
bound itself to haul the latter’s 2,000 m/tons of soya bean meal from Magallanes Drive, Del Pan, Manila to the warehouse of Purefoods Corporation in Calamba, Laguna.
To carry out its obligation, CIPTRADE, through Rodolfo Cipriano, subcontracted with Estrellita Bascos to transport and to deliver 400 sacks of soya bean meal worth
P156,404.00 from the Manila Port Area to Calamba, Laguna at the rate of P50.00 per metric ton. Bascos failed to deliver the said cargo. As a consequence of that failure,
Cipriano paid Jibfair Shipping Agency the amount of the lost goods in accordance with the contract. Cipriano demanded reimbursement from Bascos but the latter refused
to pay.
Eventually, Cipriano filed a complaint for a sum of money and damages with writ of preliminary attachment for breach of a contract of carriage. The trial court granted the
writ of preliminary attachment on 17 February 1987. After trial, the trial court rendered a decision, ordering Bascos to pay Cipriano (1) the amount of P156,404.00 for
actual damages with legal interest of 12% per cent per annum to be counted from 4 December 1986 until fully paid; (2) the amount of P5,000.00 as and for attorney’s
fees; and (3) the costs of the suit. The court further denied the “Urgent Motion To Dissolve/Lift preliminary Attachment” dated 10 March 1987 filed by Bascos for being
moot and academic.
Bascos appealed to the Court of Appeals (CA-GR CV 25216) but the appellate court affirmed the trial court’s judgment. Hence, the petition for review on certiorari.
The Supreme Court dismissed the petition and affirmed the decision of the Court of Appeals.
1. Article 1732 NCC defines common carrierArticle 1732 of the Civil Code defines a common carrier as “(a) person, corporation or 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.”
2. Test to determine common carrierThe test to determine a common carrier is “whether the given undertaking is a part of the business engaged in by the carrier
which he has held out to the general public as his occupation rather than the quantity or extent of the business transacted.”
3. Judicial admissions are conclusiveJudicial admissions are conclusive and no evidence is required to prove the same. Herein, Bascos herself has made the admission
that she was in the trucking business, offering her trucks to those with cargo to move.
4. No distinctions in Article 1732 as to common carriers; De Guzman vs. CAIn referring to Article 1732 of the Civil Code, it held in De Guzman vs. Court of Appeals that
“The above article 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 also carefully 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 1732 deliberately refrained from making such distinctions.”
5. Factual conclusions of the appellate court conclusive upon the Supreme Court; Court’s role in a petition for review on certiorariRegarding the affidavits (lease
agreements) presented by Bascos to the court, both the trial and appellate courts have dismissed them as self-serving. The Supreme Court is bound by the appellate
court’s factual conclusions. In a petition for review on certiorari, the court is not to determine the probative value of evidence but to resolve questions of law.
6. Contracts are understood as what the law defines them to be and not what parties call them; Burden of proofGranting that the said evidence were not self-
serving, the same were not sufficient to prove that the contract was one of lease. It must be understood that a contract is what the law defines it to be and not what
it is called by the contracting parties. Furthermore, Bascos presented no other proof of the existence of the contract of lease. He who alleges a fact has the burden
of proving it.
7. Extraordinary diligence; Presumption of negligence; Exceptions in Article 1734; Burden of ProofCommon carriers are obliged to observe extraordinary diligence in
the vigilance over the goods transported by them. Accordingly, they are presumed to have been at fault or to have acted negligently if the goods are lost, destroyed
or deteriorated. There are very few instances when the presumption of negligence does not attach and these instances are enumerated in Article 1734. In those
cases where the presumption is applied, the common carrier must prove that it exercised extraordinary diligence in order to overcome the presumption.
8. Hijacking not included in Article 1734; Article 1745 NCC, Ruling in De Guzman vs. CAIn De Guzman vs. Court of Appeals, the Court held that hijacking, not being
included in the provisions of Article 1734, must be dealt with under the provisions of Article 1735 and thus, the common carrier is presumed to have been at fault or
negligent. To exculpate the carrier from liability arising from hijacking, he must prove that the robbers or the hijackers acted with grave or irresistible threat,
violence, or force. This is in accordance with Article 1745 of the Civil Code.
9. Article 1745 (6) NCCArticle 1745 of the Civil Code provides that “Any of the following or similar stipulations shall be considered unreasonable, unjust and contrary to
public policy; xxx (6) That the common carrier’s liability for acts committed by thieves, or of robbers who do not act with grave or irresistible threat, violences or
force, is dispensed with or diminished.”
10. When armed robbery a force majeure“Under Article 1745 (6) above, a common carrier is held responsible — and will not be allowed to divest or to diminish such
responsibility — even for acts of strangers like thieves or robbers except where such thieves or robbers in fact acted with grave or irresistible threat, violence or
force. We believe and so hold that the limits of the duty of extraordinary diligence in the vigilance over the goods carried are reached where the goods are lost as a
result of a robbery which is attended by “grave or irresistible threat, violence or force.”
11. Grave and irresistible force not shownTo establish grave and irresistible force, Bascos presented her accusatory affidavit, Jesus Bascos’ affidavit, and Juanito
Morden’s “Salaysay”. However, both the trial court and the Court of Appeals have concluded that these affidavits were not enough to overcome the presumption. (1)
Bascos’s affidavit about the hijacking was based on what had been told her by Juanito Morden. It was not a first-hand account. While it had been admitted in court
for lack of objection on the part of Cipriano, the lower court had discretion in assigning weight to such evidence. (2) The affidavit of Jesus Bascos did not dwell on
how the hijacking took place. (3) While the affidavit of Juanito Morden, the truck helper in the hijacked truck, was presented as evidence in court, he himself was a
witness as could be gleaned from the contents of the petition.
12. Affidavits not considered best evidence if affiants are available as witnessesAffidavits are not considered the best evidence if the affiants are available as
witnesses. The subsequent filing of the information for carnapping and robbery against the accused named in said affidavits did not necessarily mean that the
contents of the affidavits were true because they were yet to be determined in the trial of the criminal cases.

Fabre, Jr. v. CA 259 SCRA 426

FACTS:

Petitioners Engracio Fabre, Jr. and his wife were owners of a 1982 model Mazda minibus which they used principally in connection with a bus service for school
children which they operated in Manila. The couple had a driver, Porfirio J. Cabil, whom they hired in 1981, after trying him out for two weeks. Private respondent Word
for the World Christian Fellowship Inc. (WWCF) arranged with petitioners for the transportation of 33 members of its Young Adults Ministry from Manila to La Union and
back in consideration of which private respondent paid petitioners the amount of P3,000.00.

On the arranged date, petitioner Porfirio Cabil drove the minibus. Instead of passing through its regular route to La Union, Cabil was forced to make a detour on another
town since a bridge on the regular route was under repair. At 11:30 that night, petitioner Cabil came upon a sharp curve on the highway. The road was slippery because it
was raining, causing the bus, which was running at the speed of 50 kilometers per hour, to skid to the left road shoulder and crashed causing injury to several passengers.
After investigation, the Lingayen police filed a criminal case against Cabil. Amyline Antonio, who was seriously injured, brought this case in the RTC of Makati, Metro
Manila.

RTC: Rendered judgement against Mr. and Mrs. Fabre and Cabil and awarded damages to plaintiff.

CA: Affirmed RTC with modifications in the amount awarded.

7
ISSUE: W/N petitioners were negligent.

RULING: Petition is devoid of merit. This case actually involves a contract of carriage. Cabil drove his bus negligently and his employers, the Fabres, failed to exercise the
diligence of a good father of a family in the selection and supervision of their employees as supported by evidence. As admitted by Cabil, it was raining the night of the
incident causing the road to be slippery and that it was dark. However, it remains undisputed that Cabil drove his bus at the speed of 50 km/h and only slowed down
when he noticed the curve.

With regards to the Fabres, they allowed Cabil to drive the bus to La Union and apparently did not consider the fact that Cabil had been driving for school
children only, from their homes to their schools in Metro Manila.

As common carriers(Art. 1732), the Fabres were bound to exercise “extraordinary diligence” for the safe transportation of the passengers to their desination.

National Steel Corp. VS. CA

FACTS:

A dispute arose between petitioner National Steel Corporation (NSC) and respondent NSC-HDCTC Monthly/Daily Employees Organization-FFW (union) regarding the grant
of Productivity and Quality Bonus and the Fiscal Year-End Incentive Award in the company which was submitted for voluntary arbitration. The union was of the position
that the company violated Article XII, Section 3 of their CBA when it stopped, since 1993, giving Productivity and Quality Bonus and Fiscal Year-End Incentive Award which
was a bonus separate from the 13th month pay. The union claimed that these benefits were demandable because the granting of such benefits was not only provided for
by the CBA but had also become the practice in the firm from 1989 to 1993. Both the Arbitrator and the CA ruled against petitioners.

Issue: w/N the award by the Voluntary artbitrator was valid

Ruling: The SC ruled in favor of petitioners. The Court finds the award of the 1993 year-end incentive to be patently erroneous which amounts not only to grave abuse of
discretion but also to denial of substantial justice. . The Voluntary Arbitrator himself found that the mid-year incentive pay for 1993 was given by petitioner as an advance
payment of the fiscal year-end incentive award for the same year. Indubitably, to require petitioner to pay again the same incentive pay at the year-end of 1993 is
obviously a great injustice that would be committed against petitioners.

Valenzuela Hardwood and Industrial Supply, Inc

vs
CA and Seven Brothers Shipping Corporation
June 30, 1997 GR No. 102316

Facts:
On 16 January 1984, Valenzuela Hardwood and Industrial Supply, Inc. entered into an agreement with 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
with a stipulation that the “owners shall not be responsible for loss, split, short-handing, breakages and any other damages to the cargo”.
On 20 January 1984, Valenzuela Hardwood 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
Valenzuela Hardwod's insured logs. On 30 January 1984, a check for P5,625.00 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. Valenzuela hardwood likewise filed a formal claim
with Seven Brothers Shipping Corporation for the value of the lost logs but the latter denied the claim.

Issue:
Whether or not the stipulation in a charter party that the “owners shall not be responsible for loss, split, short-landing, breakages and any kind of damages to the cargo”?

Ruling:
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 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. 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.
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
8
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.

First Philippine Industrial Corporation vs

CA and Adoracion C. Arellano, in her official capacity as City Treasurer of Batangas
December 29, 1998 GR No. 125948

Facts:
First Philippine Industrial Corporation (FPIC) 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 and renewed by the Energy Regulatory Board in 1992. Sometime in January 1995, FPIC 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 FPIC to pay a local tax based on
its gross receipts for the fiscal year 1993 pursuant to the Local Government Code . 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, FPIC 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 . . . .
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.

Issue:
Whether or not First Philippine Industrial Corporation is a common carrier or transportation contractor.

Ruling:
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.
Art. 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.

Based on the above definitions and requirements, there is no doubt that FPIC 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 . . . 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,

9
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. (Emphasis Supplied)
Also, respondent City Treasurer'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 FPIC, 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.

LOADSTAR SHIPPING CO. VS CA, MANILA INSURANCE CO. (MIC)

Facts:
LOADSTAR received on board its M/V “Cherokee” goods for shipment. The goods, amounting to P6,067,178, were insured for the same amount with MIC against various
risks including “TOTAL LOSS BY TOTAL LOSS OF THE VESSEL.” The vessel, in turn, was insured by Prudential Guarantee & Assurance, Inc. (hereafter PGAI). On its way to
Manila, the Vessel sank off. MIC filed a complaint against LOADSTAR and PGAI, alleging that the sinking of the vessel was due to the fault and negligence of LOADSTAR and
its employees. It also prayed that PGAI be ordered to pay the insurance proceeds from the loss of the vessel directly to MIC, said amount to be deducted from MIC’s claim
from LOADSTAR. RTC and CA rendered judgment in favor of MIC.

Issue: W/N M/V "Cherokee" is a private or a common carrier

W/N Loadstar observe due and/or ordinary diligence

Held:

We hold that LOADSTAR is a common carrier. It is not necessary that the carrier be issued a certificate of public convenience, and this public character is not altered by
the fact that the carriage of the goods in question was periodic, occasional, episodic or unscheduled.

The Civil Code defines “common carriers” in the following terms:

“Article 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land,
water, or air for compensation, offering their services to the public.”

M/V “Cherokee” was not seaworthy when it embarked on its voyage on 19 November 1984. The vessel was not even sufficiently manned at the time. “For a vessel to be
seaworthy, it must be adequately equipped for the voyage and manned with a sufficient number of competent officers and crew. The failure of a common carrier to
maintain in seaworthy condition its vessel involved in a contract of carriage is a clear breach of its duty prescribed in Article 1755 of the Civil Code.”

Three kinds of stipulations have often been made in a bill of lading. The first is one exempting the carrier from any and all liability for loss or damage occasioned by its
own negligence. The second is one providing for an unqualified limitation of such liability to an agreed valuation. And the third is one limiting the liability of the carrier to
an agreed valuation unless the shipper declares a higher value and pays a higher rate of freight. According to an almost uniform weight of authority, the first and second
kinds of stipulations are invalid as being contrary to public policy, but the third is valid and enforceable.[21]

Since the stipulation in question is null and void, it follows that when MIC paid the shipper, it was subrogated to all the rights which the latter has against the common
carrier, LOADSTAR.

CALVO VS UCPB

Facts:
Virgines Calvo is the owner of Transorient Container Terminal Services, Inc. (TCTSI), a sole proprietorship customs broker. Calvo entered into a contract with San Miguel
Corp. for the transfer of 114 reels of semi-chemical fluting paper and 124 reels of kraft liner board from the Port Area in Manila to SMC's warehouse . The shipment in
question, contained in 30 metal vans, arrived in Manila on board "M/V Hayakawa Maru" and were unloaded from the vessel to the custody of the arrastre operator,
Manila Port Services, Inc. After several days, Calvo withdrew the cargo from the arrastre operator. Upon inspection of the goods by Marine Cargo surveyors, they found
that 15 reels of the semi-chemical fluting paper were "wet/stained/torn" and 3 reels of kraft liner board were likewise torn.
SMC collected payment from respondent UCPB under its insurance contract. UCPB brought suit against petitioner. RTC find Calvo liable for the damage to the shipment.
CA affirmed the decision.

Issue: W/N Calvo is a common carrier or a private carrier

W/N Calvo is liable to UCPB for damages

Held:

Calvo is a common carrier. Calvo is liable.

"Article 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land,
water, or air for compensation, offering their services to the public."

The above article 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 . . . Article 1732 also carefully 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.

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.

" x x x 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

10
systems, wire or wireless broadcasting stations and other similar public services. x x x" 8

There is greater reason for holding petitioner to be a common carrier because the transportation of goods is an integral part of her business. To uphold petitioner's
contention would be to deprive those with whom she contracts the protection which the law affords them notwithstanding the fact that the obligation to carry goods for
her customers, as already noted, is part and parcel of petitioner's business.

Moreover, when the shipper transferred the cargo in question to the arrastre operator, these were covered by clean Equipment Interchange Report (EIR). Had there been
any damage to the shipment, there would have been a report to that effect made by the arrastre operator.

Art. 1734(4), Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the same is due to any of the following causes only:

(4) The character of the goods or defects in the packing or in the containers.

For this provision to apply, the rule is that if the improper packing or, in this case, the defect/s in the container, is/are known to the carrier or his employees or apparent
upon ordinary observation, but he nevertheless accepts the same without protest or exception notwithstanding such condition, he is not relieved of liability for damage
resulting therefrom.14 In this case, petitioner accepted the cargo without exception despite the apparent defects in some of the container vans. Hence, for failure of
petitioner to prove that she exercised extraordinary diligence in the carriage of goods in this case or that she is exempt from liability, the presumption of negligence as
provided under Art. 173515.

G.R. No. 141910 August 6, 2002

FGU INSURANCE CORPORATION, petitioner,
vs.
G.P. SARMIENTO TRUCKING CORPORATION and LAMBERT M. EROLES, respondents.

G.P. Sarmiento Trucking Corporation (GPS) undertook to deliver on 18 June 1994 thirty (30) units of Condura S.D. refrigerators aboard one of its Isuzu truck, driven by
Lambert Eroles, from the plant site of Concepcion Industries, Inc. While the truck was traversing the north diversion road along the highway, it collided with an
unidentified truck, causing it to fall into a deep canal, resulting in damage to the cargoes.

FGU Insurance Corporation (FGU), an insurer of the shipment, paid to Concepcion Industries, Inc., the value of the covered cargoes in the sum of P204,450.00. FGU, in
turn, being the subrogee of the rights and interests of Concepcion Industries, Inc., sought reimbursement of the amount it had paid to the latter from GPS. Since the
trucking company failed to heed the claim, FGU filed a complaint for damages and breach of contract of carriage against GPS and its driver Lambert Erolesn. In its answer,
respondents asserted that GPS was the exclusive hauler only of Concepcion Industries, Inc., since 1988, and it was not so engaged in business as a common carrier.

SC: GPS, being an exclusive contractor and hauler of Concepcion Industries, Inc., rendering or offering its services to no other individual or entity, cannot be considered a
common carrier.

(thus, if not common carrier, then there is no presumption of negligence)

G.R. No. 147246 August 19, 2003

ASIA LIGHTERAGE AND SHIPPING, INC., petitioner,

vs.
COURT OF APPEALS and PRUDENTIAL GUARANTEE AND ASSURANCE, INC., respondents.

On July 25, 1990, the carrying vessel arrived in Manila and the cargo was transferred to the custody of the petitioner Asia Lighterage and Shipping, Inc. The petitioner was
contracted by the consignee as carrier to deliver the cargo to consignee's warehouse.

On September 5, 1990, Upon reaching the Sta. Mesa spillways, the barge again ran aground due to strong current. To avoid the complete sinking of the barge, a portion of
the goods was transferred to three other barges. The next day, September 6, 1990, the towing bits of the barge broke. It sank completely, resulting in the total loss of the
remaining cargo.

Petitioner contends that it is not a common carrier but a private carrier. Allegedly, it has no fixed and publicly known route, maintains no terminals, and issues no tickets.
It points out that it is not obliged to carry indiscriminately for any person. It is not bound to carry goods unless it consents. In short, it does not hold out its services to the
general public.

SC: The principal business of the petitioner is that of lighterage and drayage and it offers its barges to the public for carrying or transporting goods by water for
compensation. Petitioner is clearly a common carrier. Therefore the petitioner is a common carrier whether its carrying of goods is done on an irregular rather than
scheduled manner, and with an only limited clientele. A common carrier need not have fixed and publicly known routes. Neither does it have to maintain terminals or
issue tickets.
The petitioner admitted that it is engaged in the business of shipping and lighterage, offering its barges to the public, despite its limited clientele for carrying or
transporting goods by water for compensation.

[G.R. No. 138334. August 25, 2003]

ESTELA L. CRISOSTOMO vs. CA and CARAVAN TRAVEL & TOURS INTERNATIONAL, INC.

FACTS:

In May 1991, petitioner Estela L. Crisostomo contracted the services of respondent Caravan Travel and Tours International, Inc. to arrange and facilitate her booking,
ticketing and accommodation in a tour dubbed “Jewels of Europe”. The package tour included the countries of England, Holland, Germany, Austria, Liechstenstein,
Switzerland and France at a total cost of P74,322.70. Petitioner was given a 5% discount on the amount, which included airfare, and the booking fee was also waived
because petitioner’s niece, Meriam Menor, was respondent company’s ticketing manager.

Pursuant to said contract, Menor went to her aunt’s residence on June 12, 1991 to deliver petitioner’s travel documents and plane tickets. Petitioner, in turn, gave Menor
the full payment for the package tour. Menor then told her to be at the Ninoy Aquino International Airport (NAIA) on Saturday, two hours before her flight on board
British Airways.

11
Without checking her travel documents, petitioner went to NAIA on Saturday, June 15, 1991 only to discover that the flight she was supposed to take had already
departed the previous day. She learned that her plane ticket was for the flight scheduled on June 14, 1991.

Subsequently, Menor prevailed upon petitioner to take another tour – the “British Pageant” – which included England, Scotland and Wales in its itinerary. For this tour
package, petitioner was asked anew to pay US$785.00 or P20,881.00.

Upon petitioner’s return from Europe, she demanded from respondent the reimbursement of P61,421.70, representing the difference between the sum she paid for
“Jewels of Europe” and the amount she owed respondent for the “British Pageant” tour. Despite several demands, respondent company refused to reimburse the
amount, contending that the same was non-refundable.

The trial court held that respondent was negligent in erroneously advising petitioner of her departure date through its employee.

The Court of Appeals, which likewise found both parties to be at fault. However, the appellate court held that petitioner is more negligent than respondent because as a
lawyer and well-traveled person, she should have known better than to simply rely on what was told to her.

ISSUE:

W/N the respondent observed the standard of care required of a common carrier.

RULING:

Petitioner’s contention has no merit.

By definition, a contract of carriage or transportation is one whereby a certain person or association of persons obligate themselves to transport persons, things, or news
from one place to another for a fixed price. Such person or association of persons are regarded as carriers and are classified as private or special carriers and common or
public carriers. A common carrier is defined under Article 1732 of the Civil Code as persons, corporations, firms or associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water or air, for compensation, offering their services to the public.

It is obvious from the above definition that respondent is not an entity engaged in the business of transporting either passengers or goods and is therefore, neither a
private nor a common carrier. Respondent did not undertake to transport petitioner from one place to another since its covenant with its customers is simply to make
travel arrangements in their behalf.

The object of petitioner’s contractual relation with respondent is the latter’s service of arranging and facilitating petitioner’s booking, ticketing and accommodation in the
package tour. In contrast, the object of a contract of carriage is the transportation of passengers or goods. It is in this sense that the contract between the parties in this
case was an ordinary one for services and not one of carriage.

Since the contract between the parties is an ordinary one for services, the standard of care required of respondent is that of a good father of a family under Article 1173
of the Civil Code.

In sum, we do not agree with the finding of the lower court that Menor’s negligence concurred with the negligence of petitioner and resultantly caused damage to the
latter.

Contrary to petitioner’s claim, the evidence on record shows that respondent exercised due diligence in performing its obligations under the contract and followed
standard procedure in rendering its services to petitioner. As correctly observed by the lower court, the plane ticket issued to petitioner clearly reflected the departure
date and time, contrary to petitioner’s contention. The travel documents, were likewise delivered to petitioner two days prior to the trip. Respondent also properly
booked petitioner for the tour and arranged petitioner’s hotel accommodation in accordance with its avowed undertaking.

Therefore, it is clear that respondent performed its prestation under the contract as well as everything else that was essential to book petitioner for the tour. Needless to
say, after the travel papers were delivered to petitioner, it became incumbent upon her to take ordinary care of her concerns. This undoubtedly would require that she at
least read the documents in order to assure herself of the important details regarding the trip.

In the case at bar, the evidence on record shows that respondent company performed its duty diligently and did not commit any contractual breach. Hence, petitioner
cannot recover and must bear her own damage.

G.R. No. 147079 December 21, 2004

A.F. SANCHEZ BROKERAGE INC. vs.THE HON. COURT OF APPEALS and FGU INSURANCE CORPORATION

FACTS:

On July 8, 1992, Wyeth-Pharma GMBH shipped on board an aircraft of KLM Royal Dutch Airlines at Dusseldorf, Germany oral contraceptives consisting of 86,800 Blisters
Femenal tablets, 14,000 Blisters Nordiol tablets and 42,000 Blisters Trinordiol tablets for delivery to Manila in favor of the consignee, Wyeth-Suaco Laboratories, Inc..

Wyeth-Suaco insured the shipment against all risks with FGU Insurance which issued Marine Risk Note No. 4995 pursuant to Marine Open Policy No. 138.

Upon arrival of the shipment on July 11, 1992 at the Ninoy Aquino International Airport (NAIA),5 it was discharged "without exception" and delivered to the warehouse of
the Philippine Skylanders, Inc. (PSI) located also at the NAIA for safekeeping.

In order to secure the release of the cargoes from the PSI and the Bureau of Customs, Wyeth-Suaco engaged the services of Sanchez Brokerage which had been its
licensed broker since 1984. As its customs broker, Sanchez Brokerage calculates and pays the customs duties, taxes and storage fees for the cargo and thereafter delivers it
to Wyeth-Suaco.

On July 29, 1992, representatives of Sanchez Brokerage, paid PSI the storage fee. On the receipt, another representative of acknowledged that he received the cargoes
consisting of three pieces in good condition.

Wyeth-Suaco being a regular importer, the customs examiner did not inspect the cargoes which were thereupon stripped from the aluminum containers and loaded inside
two transport vehicles hired by Sanchez Brokerage.

Upon instructions of Wyeth-Suaco, the cargoes were delivered to Hizon Laboratories Inc. in Antipolo City for quality control check. Upon inspection, however, a
12
representative of Wyeth-Suaco, together with Ruben Alonzo of Elite Surveyors, discovered that 44 cartons containing Femenal and Nordiol tablets were in bad order.

Wyeth-Suaco later demanded, by letter of August 25, 1992, from Sanchez Brokerage the payment of P191,384.25 representing the value of its loss arising from the
damaged tablets.

Sanchez Brokerage disclaimed liability for the damaged goods, positing that the damage was due to improper and insufficient export packaging.

ISSUE:

W/N petitioner is a "common carrier" within the context of Article 1732 of the New Civil Code.

RULING:

The petition fails.

The appellate court did not err in finding petitioner, a customs broker, to be also a common carrier, as defined under Article 1732 of the Civil Code, to wit:

Art. 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land,
water, or air, for compensation, offering their services to the public.

Anacleto F. Sanchez, Jr., the Manager and Principal Broker of Sanchez Brokerage, himself testified that the services the firm offers include the delivery of goods to the
warehouse of the consignee or importer.

Article 1732 does not distinguish between one whose principal business activity is the carrying of goods and one who does such carrying only as an ancillary activity.

In this light, petitioner as a common carrier is mandated to observe, under Article 173345 of the Civil Code, extraordinary diligence in the vigilance over the goods it
transports according to all the circumstances of each case. In the event that the goods are lost, destroyed or deteriorated, it is presumed to have been at fault or to have
acted negligently, unless it proves that it observed extraordinary diligence.

In the case at bar, it was established that petitioner received the cargoes from the PSI warehouse in NAIA in good order and condition; and that upon delivery by
petitioner to Hizon Laboratories Inc., some of the cargoes were found to be in bad order.

In an attempt to free itself from responsibility for the damage to the goods, petitioner posits that they were damaged due to the fault or negligence of the shipper for
failing to properly pack them and to the inherent characteristics of the goods; and that it should not be faulted for following the instructions of Calicdan of Wyeth-Suaco
to proceed with the delivery despite information conveyed to the latter that some of the cartons, on examination outside the PSI warehouse, were found to be wet.

While paragraph No. 4 of Article 173455 of the Civil Code exempts a common carrier from liability if the loss or damage is due to the character of the goods or defects in
the packing or in the containers, the rule is that if the improper packing is known to the carrier or his employees or is apparent upon ordinary observation, but he
nevertheless accepts the same without protest or exception notwithstanding such condition, he is not relieved of liability for the resulting damage.

LEAMER vs. Malayan insurance inc.

FACTS: Ilian Silica Mining entered into a contract of carriage with Lea Mer Industries, Inc., for the shipment of 900 metric tons of silica sand valued at P565,000. Consigned
to Vulcan Industrial and Mining Corporation, the cargo was to be transported from Palawan to Manila. During the voyage, the vessel sank, resulting in the loss of the
cargo.

Malayan Insurance Co., Inc., as insurer, paid Vulcan the value of the lost cargo after which they demanded reimbursement from Lea Mer who refused to comply. This led
Malayan to institute a Complaint in the RTC of Makati for collection of sum of money.

RTC: Dismissed the complaint after finding that the loss was due to a fortuitous event brought about by typhoon Trining. The court ruled that petitioner had no advance
knowledge of the incoming typhoon, and that the vessel had been cleared by the Philippine Coast Guard to travel from Palawan to Manila.

CA: Reversed the decision of RTC and held that the vessel was not seaworthy when it sailed for Manila.

Issue: W/N the loss of the cargo was due to a fortuitous event or not

Ruling: Petition has no merit. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods, or
both -- by land, water, or air -- when this service is offered to the public for compensation. Petitioner is clearly a common carrier, because it offers to the public its
business of transporting goods through its vessels. The finding of the RTC that petitioner became a private carrier when Vulcan chartered it is incorrect.

Charter parties are classified as contracts of demise (or bareboat) and affreightment. A demise or bareboat charter indicates a business undertaking
that is private in character. Consequently, the rights and obligations of the parties to a contract of private carriage are governed principally by their stipulations, not by
the law on common carriers. The Contract in the present case was one of affreightment. Necessarily, petitioner was a common carrier, and the pertinent law governs the
present factual circumstances. Common carriers are bound to observe extraordinary diligence in their vigilance over the goods and the safety of the passengers
they transport, as required by the nature of their business and for reasons of public policy. Extraordinary diligence requires rendering service with the greatest skill and
foresight to avoid damage and destruction to the goods entrusted for carriage and delivery. Common carriers are presumed to have been at fault or to have acted
negligently for loss or damage to the goods that they have transported. This presumption can be rebutted only by proof that they observed extraordinary diligence, or
that the loss or damage was occasioned by any of the following causes:

“(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.

With regards to fortuitous event, for a common carrierto be excused fully of any liability, the fortuitous event must have been the proximate and only cause of
the loss. Moreover, it should have exercised due diligence to prevent or minimize the loss before, during and after the occurrence of the fortuitous event. Lea Mer claimed
that the loss of the cargo was due to the bad weather condition brought about by Typhoon Trining. On October 25, 1991, the date on which the voyage commenced and

13
the barge sank, Typhoon Trining was allegedly far from Palawan, where the storm warning was only “Signal No. 1”. The evidence presented by petitioner in support of its
defense of fortuitous event was sorely insufficient

G.R. No. 157481 January 24, 2006

LOADSTAR SHIPPING CO., INC., Petitioner, vs.

PIONEER ASIA INSURANCE CORP., Respondent.

Facts:

Loadstar entered into a voyage-charter with Northern Mindanao Transport Company, Inc. for the carriage of 65,000 bags of cement from Iligan City to Manila. On June 24,
1984, 67,500 bags of cement were loaded on board M/V Weasel and stowed in the cargo holds for delivery to the consignee. Prior to the voyage, the consignee insured
the shipment of cement with respondent Pioneer Asia Insurance Corporation for P1,400,000, for which respondent issued Marine Open Policy No. MOP-006 dated
September 17, 1980, covering all shipments made on or after September 30, 1980.

However, during its voyage, the entire shipment of cement was exposed to sea water which caused its loss. Consequently, Petitioner failed to deliver the goods to the
consignee in Manila. The consignee demanded from petitioner full reimbursement of the cost of the lost shipment, however, petitioner refused to reimburse the
consignee despite repeated demands.

Nonetheless, on March 11, 1985, respondent insurance company paid the consignee P1,400,000 plus an additional amount of P500,000, the value of the lost shipment of
cement. In return, the consignee executed a Loss and Subrogation Receipt in favor of respondent concerning the latter’s subrogation rights against petitioner.

Respondent then filed a complaint against petitioner and alleged that petitioner was negligent in the course of the shipment. In its reply, Loadstar contended that it
exercised due diligence over the goods it transported and the destruction of the cement was due to force majeure. A judgment was rendered in favor of the respondent
which caused petitioner to appeal to the COA but it affirmed and modified the decision of the RTC. Hence, this petition.

Issues:

Whether or not Loadstar is a common or a private carrier.

Whether or not Loadstar exercised the required diligence i.e., the extraordinary diligence of a common carrier or the ordinary diligence of a private carrier?

Ruling:

The SC ruled that since Petitioner is a corporation engaged in the business of transporting cargo by water and for compensation, offering its services indiscriminately to
the public, it is without doubt a common carrier. Even if petitioner entered into a voyage-charter with the Northern Mindanao Transport Company, it did not in any way
convert the common carrier into a private carrier.

It is therefore imperative that a public carrier shall remain as such, notwithstanding the charter of the whole or portion of a vessel by one or more persons, provided the
charter is limited to the ship only, as in the case of a time-charter or voyage-charter. It is only when the charter includes both the vessel and its crew, as in a bareboat or
demise that a common carrier becomes private, at least insofar as the particular voyage covering the charter-party is concerned. Indubitably, a shipowner in a time or
voyage charter retains possession and control of the ship, although her holds may, for the moment, be the property of the charterer.

In the case at bar, since the said charter is limited to the ship only and does not involve both the vessel and its crew, it remains as a common carrier. As such petitioner is
required to observe extraordinary diligence in the vigilance over the goods it transports. When the goods placed in its care are lost, petitioner is presumed to have been at
fault or to have acted negligently. Petitioner therefore has the burden of proving that it observed extraordinary diligence in order to avoid responsibility for the lost cargo.

Records also show that in the evening of June 24, 1984, the sea and weather conditions in the vicinity of Negros Occidental were calm. The records reveal that petitioner
took a shortcut route, instead of the usual route, which exposed the voyage to unexpected hazard. Petitioner has only itself to blame for its misjudgment.

The petition was dismissed and the SC affirmed the decision of the COA.

G.R. No. 150403 January 25, 2007

CEBU SALVAGE CORPORATION, Petitioner, vs.

PHILIPPINE HOME ASSURANCE CORPORATION, Respondent.

Facts:

Cebu Salvage and Maria Christina Chemicals Industries entered into a voyage charter wherein the former would deliver silica quartz to Tacloban, Misamis Oriental.
However, the goods never reached its destination because the ship sank during its voyage which resulted to the total loss of the cargo. MCCII filed a claim for the loss of
the shipment with its insurer, respondent Philippine Home Assurance Corporation. Respondent paid the claim in the amount of P211,500 and was subrogated to the
rights of MCCII. Thereafter, it filed a case in the RTC against petitioner for reimbursement of the amount it paid MCCII. After trial, the RTC rendered judgment in favor of
respondent. It ordered petitioner to pay respondent P211,500 plus legal interest, attorney’s fees equivalent to 25% of the award and costs of suit. On appeal, the CA
affirmed the decision of the RTC. Hence, this petition.

Issue:

Whether or not a carrier may be held liable for the loss of cargo resulting from the sinking of a ship it does not own.

Ruling:

The petition was denied.

Cebu Salvage was liable as a common carrier. At the time of the loss of the cargo, it was engaged in the business of carrying and transporting goods by water, for
compensation, and offered its services to the public. From the nature of their business and for reasons of public policy, common carriers are bound to observe
extraordinary diligence over the goods they transport according to the circumstances of each case.In the event of loss of the goods, common carriers are responsible,
unless they can prove that this was brought about by the causes specified in Article 1734 of the Civil Code.

14
In the case at bar, a contract of carriage of goods was shown to exist. The cargo was loaded on board the vessel; loss or non-delivery of the cargo was proven; and
petitioner failed to prove that it exercised extraordinary diligence to prevent such loss or that it was due to some casualty or force majeure. The voyage charter here being
a contract of affreightment, the carrier was answerable for the loss of the goods received for transportation.

The idea proposed by petitioner is not only preposterous, it is also dangerous. It says that a carrier that enters into a contract of carriage is not liable to the charterer or
shipper if it does not own the vessel it chooses to use. MCCII never dealt with ALS and yet petitioner insists that MCCII should sue ALS for reimbursement for its loss.
Certainly, to permit a common carrier to escape its responsibility for the goods it agreed to transport (by the expedient of alleging non-ownership of the vessel it
employed) would radically derogate from the carrier's duty of extraordinary diligence. It would also open the door to collusion between the carrier and the supposed
owner and to the possible shifting of liability from the carrier to one without any financial capability to answer for the resulting damages.

C. Obligations of Parties and Defenses

G.R. No. L-18965 October 30, 1964, COMPAÑIA MARITIMA, petitioner, vs.
INSURANCE COMPANY OF NORTH AMERICA, respondent.

(1) Was there 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?;
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.

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 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.

(2) Was 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?;

The evidence fails to bear this out. 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.

CA’s finding is not disputed; The ill-fated barge had cracks on its bottom; 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.

G.R. No. L-36481-2 October 23, 1982 , AMPARO C. SERVANDO, CLARA UY BICO, vs. PHILIPPINE STEAM NAVIGATION CO.

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. 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 . ...

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

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

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.

15
 4
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,
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

Planters Products vs. CA (GR 101503, 15 September 1993)

First Division, Bellosillo (J): 2 concur, 1 on leave, 1 took no part

Facts:
Planters Products, Inc. (PPI), purchased from Mitsubishi International Corporation of New York, USA, 9,329.7069 metric tons (M/T) of Urea 46% fertilizer which
the latter shipped in bulk on 16 June 1974 aboard the cargo vessel M/V “Sun Plum” owned by Kyosei Kisen Kabushiki Kaisha (KKKK) from Kenai, Alaska, USA, to Poro Point,
San Fernando, La Union, Philippines, as evidenced by Bill of Lading KP-1 signed by the master of the vessel and issued on the date of departure. On 17 May 1974, or prior
to its voyage, a time charter-party on the vessel M/V “Sun Plum” pursuant to the Uniform General Charter was entered into between Mitsubishi as shipper/charterer and
KKKK as shipowner, in Tokyo, Japan. Riders to the aforesaid charter-party starting from paragraph 16 to 40 were attached to the pre-printed agreement. Addenda 1, 2, 3
and 4 to the charter-party were also subsequently entered into on the 18th, 20th, 21st and 27th of May 1974, respectively. Before loading the fertilizer aboard the vessel, 4 of
her holds were all presumably inspected by the charterer’s representative and found fit to take a load of urea in bulk pursuant to paragraph 16 of the charter-party. After
the Urea fertilizer was loaded in bulk by stevedores hired by and under the supervision of the shipper, the steel hatches were closed with heavy iron lids, covered with 3
layers of tarpaulin, then tied with steel bonds. The hatches remained closed and tightly sealed throughout the entire voyage. Upon arrival of the vessel at her port of call
on 3 July 1974, the steel pontoon hatches were opened with the use of the vessel’s boom. PPI unloaded the cargo from the holds into its steel-bodied dump trucks which
were parked alongside the berth, using metal scoops attached to the ship, pursuant to the terms and conditions of the charter-party (which provided for an FIOS clause).
The hatches remained open throughout the duration of the discharge. Each time a dump truck was filled up, its load of Urea was covered with tarpaulin before it was
transported to the consignee’s warehouse located some 50 meters from the wharf. Midway to the warehouse, the trucks were made to pass through a weighing scale
where they were individually weighed for the purpose of ascertaining the net weight of the cargo. The port area was windy, certain portions of the route to the
warehouse were sandy and the weather was variable, raining occasionally while the discharge was in progress. PPI’s warehouse was made of corrugated galvanized iron
(GI) sheets, with an opening at the front where the dump trucks entered and unloaded the fertilizer on the warehouse floor. Tarpaulins and GI sheets were placed in-
between and alongside the trucks to contain spillages of the fertilizer. It took 11 days for PPI to unload the cargo, from 5 July to 18 July 1974 (except July 12 th, 14th and
18th). A private marine and cargo surveyor, Cargo Superintendents Company Inc. (CSCI), was hired by PPI to determine the “outturn” of the cargo shipped, by taking draft
readings of the vessel prior to and after discharge. The survey report submitted by CSCI to the consignee (PPI) dated 19 July 1974 revealed a shortage in the cargo of
106.726 M/T and that a portion of the Urea fertilizer approximating 18 M/T was contaminated with dirt. The same results were contained in a Certificate of
Shortage/Damaged Cargo dated 18 July 1974 prepared by PPI which showed that the cargo delivered was indeed short of 94.839 M/T and about 23 M/T were rendered
unfit for commerce, having been polluted with sand, rust and dirt. Consequently, PPI sent a claim letter dated 18 December 1974 to Soriamont Steamship Agencies (SSA),
the resident agent of the carrier, KKKK, for P245,969.31 representing the cost of the alleged shortage in the goods shipped and the diminution in value of that portion said
to have been contaminated with dirt. SSA explained that they were not able to respond to the consignee’s claim for payment because, according to them, what they
received was just a request for shortlanded certificate and not a formal claim, and that this “request” was denied by them because they “had nothing to do with the
discharge of the shipment.”
On 18 July 1975, PPI filed an action for damages with the Court of First Instance of Manila. The court a quo however sustained the claim of PPI against the carrier for the
value of the goods lost or damaged.
On appeal, the Court of Appeals reversed the lower court and absolved the carrier from liability for the value of the cargo that was lost or damaged. PPI appealed by way
of petition for review.
The Supreme Court dismissed the petition; affirmed the assailed decision of the Court of Appeals, which reversed the trial court; and consequently, dismissed Civil Case
98623 of the then CFI, now RTC, of Manila; with costs against PPI.
1. Charter party definedA “charter-party” is defined as a contract by which an entire ship, or some principal part thereof, is let by the owner to another person for a
specified time or use; a contract of affreightment by which the owner of a ship or other vessel lets the whole or a part of her to a merchant or other person for the
conveyance of goods, on a particular voyage, in consideration of the payment of freight.
2. Types of charter parties Charter parties are of two types: (a) contract of affreightment which involves the use of shipping space on vessels leased by the owner in
part or as a whole, to carry goods for others; and, (b) charter by demise or bareboat charter, by the terms of which the whole vessel is let to the charterer with a
transfer to him of its entire command and possession and consequent control over its navigation, including the master and the crew, who are his servants.
3. Kinds of contract of affreightmentContract of affreightment may either be time charter, wherein the vessel is leased to the charterer for a fixed period of time, or
voyage charter, wherein the ship is leased for a single voyage. In both cases, the charter-party provides for the hire of the vessel only, either for a determinate
period of time or for a single or consecutive voyage, the shipowner to supply the ship’s stores, pay for the wages of the master and the crew, and defray the
expenses for the maintenance of the ship.

16
4. Common or public carrier defined; Scope of definitionThe term “common or public carrier” is defined in Article 1732 of the Civil Code. The definition extends to
carriers either by land, air or water which hold themselves out as ready to engage in carrying goods or transporting passengers or both for compensation as a public
employment and not as a casual occupation.
5. Distinction between common or public carrier, and private or special carrierThe distinction between a “common or public carrier” and a “private or special carrier”
lies in the character of the business, such that if the undertaking is a single transaction, not a part of the general business or occupation, although involving the
carriage of goods for a fee, the person or corporation offering such service is a private carrier.
6. Extraordinary diligence required of common carriers (Article 1733); Ordinary diligence required of private carriersArticle 1733 of the New Civil Code mandates
that common carriers, by reason of the nature of their business, should observe extraordinary diligence in the vigilance over the goods they carry. In the case of
private carriers, however, the exercise of ordinary diligence in the carriage of goods will suffice.
7. Common carriers presumed negligent in case of loss, etc. of goods; No presumption in private carriersIn case of loss, destruction or deterioration of the goods,
common carriers are presumed to have been at fault or to have acted negligently, and the burden of proving otherwise rests on them. On the contrary, no such
presumption applies to private carriers, for whosoever alleges damage to or deterioration of the goods carried has the onus of proving that the cause was the
negligence of the carrier.
8. Kyosei Kisen Kabushiki Kaisha a common carrier, remained as so in charter partyKyosei Kisen Kabushiki Kaisha, in the ordinary course of business, operates as a
common carrier, transporting goods indiscriminately for all persons. When PPI chartered the vessel M/V “Sun Plum”, the ship captain, its officers and compliment
were under the employ of the shipowner and therefore continued to be under its direct supervision and control. Considering that the steering of the ship, the
manning of the decks, the determination of the course of the voyage and other technical incidents of maritime navigation were all consigned to the officers and
crew who were screened, chosen and hired by the shipowner, the charterer is a stranger to the crew and to the ship. Thus, a public carrier shall remain as such,
notwithstanding the charter of the whole or portion of a vessel by one or more persons, provided the charter is limited to the ship only, as in the case of a time-
charter or voyage-charter. Indubitably, a shipowner in a time or voyage charter retains possession and control of the ship, although her holds may, for the moment,
be the property of the charterer.
9. When charter party converts common carrier to private carrierIt is only when the charter includes both the vessel and its crew, as in a bareboat or demise that a
common carrier becomes private, at least insofar as the particular voyage covering the charter-party is concerned.
10. Reliance on case of Home Insurance vs. American Steamship misplacedThe carrier’s heavy reliance on the case of Home Insurance Co. v. American Steamship
Agencies is misplaced for the reason that the meat of the controversy therein was the validity of a stipulation in the charter-party exempting the shipowner from
liability for loss due to the negligence of its agent, and not the effects of a special charter on common carriers.
11. American rule as to shipper carrying special cargo not applicable in the Philippines; Stricter interpretation of admiralty lawsThe rule in the United States that a ship
chartered by a single shipper to carry special cargo is not a common carrier, does not find application in Philippine jurisdiction, for the Court has observed that the
growing concern for safety in the transportation of passengers and/or carriage of goods by sea requires a more exacting interpretation of admiralty laws, more
particularly, the rules governing common carriers.
12. Observations of Raoul Colinvaux, the learned barrister-at-law“As a matter of principle, it is difficult to find a valid distinction between cases in which a ship is used
to convey the goods of one and of several persons. Where the ship herself is let to a charterer, so that he takes over the charge and control of her, the case is
different; the shipowner is not then a carrier. But where her services only are let, the same grounds for imposing a strict responsibility exist, whether he is employed
by one or many. The master and the crew are in each case his servants, the freighter in each case is usually without any representative on board the ship; the same
opportunities for fraud or collussion occur; and the same difficulty in discovering the truth as to what has taken place arises . . .”
13. Burden of proof in an action for recovery of damages against a common carrierIn an action for recovery of damages against a common carrier on the goods
shipped, the shipper or consignee should first prove the fact of shipment and its consequent loss or damage while the same was in the possession, actual or
constructive, of the carrier. Thereafter, the burden of proof shifts to respondent to prove that he has exercised extraordinary diligence required by law or that the
loss, damage or deterioration of the cargo was due to fortuitous event, or some other circumstances inconsistent with its liability.
14. Carrier has sufficiently overcome, by clear and convincing proof, the prima facie presumption of negligence(1) The master of the carrying vessel, Captain Lee Tae
Bo, in his deposition taken on 19 April 1977 before the Philippine Consul and Legal Attache in the Philippine Embassy in Tokyo, Japan, testified that before the
fertilizer was loaded, the 4 hatches of the vessel were cleaned, dried and fumigated. After completing the loading of the cargo in bulk in the ship’s holds, the steel
pontoon hatches were closed and sealed with iron lids, then covered with 3 layers of serviceable tarpaulins which were tied with steel bonds. The hatches remained
close and tightly sealed while the ship was in transit as the weight of the steel covers made it impossible for a person to open without the use of the ship’s boom. (2)
It was also shown during the trial that the hull of the vessel was in good condition, foreclosing the possibility of spillage of the cargo into the sea or seepage of water
inside the hull of the vessel. When M/V “Sun Plum” docked at its berthing place, representatives of the consignee boarded, and in the presence of a representative
of the shipowner, the foreman, the stevedores, and a cargo surveyor representing CSCI, opened the hatches and inspected the condition of the hull of the vessel.
The stevedores unloaded the cargo under the watchful eyes of the shipmates who were overseeing the whole operation on rotation basis. Verily, the presumption of
negligence on the part of respondent carrier has been efficaciously overcome by the showing of extraordinary zeal and assiduity exercised by the carrier in the care
of the cargo.
15. Period which carrier was to observe degree of diligence; Limitation clause of FIOS meaningThe period during which the carrier was to observe the degree of
diligence required of it as a public carrier began from the time the cargo was unconditionally placed in its charge after the vessel’s holds were duly inspected and
passed scrutiny by the shipper, up to and until the vessel reached its destination and its hull was re-examined by the consignee, but prior to unloading. This is clear
from the limitation clause agreed upon by the parties in the Addendum to the standard “GENCON” time charter-party which provided for an F.I.O.S., meaning, that
the loading, stowing, trimming and discharge of the cargo was to be done by the charterer, free from all risk and expense to the carrier. Moreover, a shipowner is
liable for damage to the cargo resulting from improper stowage only when the stowing is done by stevedores employed by him, and therefore under his control and
supervision, not when the same is done by the consignee or stevedores under the employ of the latter.16. When common carriers not liable for loss, destruction
or deterioration of goodsArticle 1734 of the New Civil Code provides that common carriers are not responsible for the loss, destruction or deterioration of the goods
if caused by the character of the goods or defects in the packaging or in the containers. The Code of Commerce also provides that all losses and deteriorations which
the goods may suffer during the transportation by reason of fortuitous event, force majeure, or the inherent defect of the goods, shall be for the account and risk of
the shipper, and that proof of these accidents is incumbent upon the carrier. The carrier, nonetheless, shall be liable for the loss and damage resulting from the
preceding causes if it is proved, as against him, that they arose through his negligence or by reason of his having failed to take the precautions which usage has
established among careful persons.
17. Characteristics of ureaUrea is a chemical compound consisting mostly of ammonia and carbon monoxide compounds which are used as fertilizer. Urea also contains
46% nitrogen and is highly soluble in water. However, during storage, nitrogen and ammonia do not normally evaporate even on a long voyage, provided that the
temperature inside the hull does not exceed 80 degrees centigrade.
18. Expected risks of bulk shipping(1) In unloading fertilizer in bulk with the use of a clamped shell, losses due to spillage during such operation amounting to one
percent (1%) against the bill of lading is deemed “normal” or “tolerable.” The primary cause of these spillages is the clamped shell which does not seal very tightly.
Also, the wind tends to blow away some of the materials during the unloading process. (2) The dissipation of quantities of fertilizer, or its deterioration in value, is
caused either by an extremely high temperature in its place of storage, or when it comes in contact with water. When Urea is drenched in water, either fresh or
saline, some of its particles dissolve. But the salvaged portion which is in liquid form still remains potent and usable although no longer saleable in its original market
value. (3) The probability of the cargo being damaged or getting mixed or contaminated with foreign particles was made greater by the fact that the fertilizer was
transported in “bulk,” thereby exposing it to the inimical effects of the elements and the grimy condition of the various pieces of equipment used in transporting and
hauling it.
19. Hull of vessel in good condition; Improbable that sea water seep in vessel’s holdIt was highly improbable for sea water to seep into the vessel’s holds during the
voyage since the hull of the vessel was in good condition and her hatches were tightly closed and firmly sealed, making the M/V “Sun Plum” in all respects
seaworthy to carry the cargo she was chartered for. If there was loss or contamination of the cargo, it was more likely to have occurred while the same was being
transported from the ship to the dump trucks and finally to the consignee’s warehouse. This may be gleaned from the testimony of the marine and cargo surveyor of
CSCI who supervised the unloading. He explained that the 18 M/T of alleged “bad order cargo” as contained in their report to PPI was just an approximation or
estimate made by them after the fertilizer was discharged from the vessel and segregated from the rest of the cargo.

17
20. Variable weather condition a risk of loss or damage which owner or shipper of goods has to faceHerein, it was in the month of July when the vessel arrived port
and unloaded her cargo. It rained from time to time at the harbor area while the cargo was being discharged according to the supply officer of PPI, who also testified
that it was windy at the waterfront and along the shoreline where the dump trucks passed enroute to the consignee’s warehouse. Bulk shipment of highly soluble
goods like fertilizer carries with it the risk of loss or damage; more so, with a variable weather condition prevalent during its unloading. This is a risk the shipper or
the owner of the goods has to face.

G.R. No. 94761 May 17, 1993

MAERSK LINE, petitioner, vs.
COURT OF APPEALS AND EFREN V. CASTILLO, doing business under the name and style of Ethegal Laboratories, respondents.
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 while private respondent Efren Castillo, on the other hand, is the proprietor of Ethegal Laboratories, a firm engaged in the manutacture of
pharmaceutical products.
Private respondent ordered from Eli Lilly. Inc. (ELI) of Puerto Rico through its agent in the Philippines, Elanco Products, 600,000 empty gelatin capsules for the
manufacture of his pharmaceutical products. The shipper ELI advised Castillo as consignee that the gelatin capsules contained in 6 drums were already shipped on board
MV "Anders Maerskline for shipment to the Philippines via Oakland, California, which according to the memo sent, was to arrive on April 3, 1977.
For reasons unknown, the cargo of capsules were mishipped and diverted to Richmond, Virginia, USA and then transported back Oakland, Califorilia causing it
to arrive 2 months after it was specified in the memo. Castillo refused to receive the delivery of the goods due to the delay. Castillo filed before the rescission of the
contract and damages against ELI.
ELI’s argument was that it 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 and ELI filed a croos-
claim against Maerskline. 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.
RTC: ruled in favor of Castillo on the ground that breach in the performance of their obligation consisting of their negligence to deliver the goods on time.
CA: Affirmed the Decision of the RTC.
ISSUE: W/N maerskline may be held liable for the delay
Ruling: The SC, in their ruling made reference to the stipulations in the bill of lading. A provision in said bill of lading states that “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”. According to the SC, 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. Nonetheless, settled is the rule that bills of lading are contracts not entirely prohibited. 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 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. It was due to petitioner’s negligence that the goods were mishipped to Richmond, Virginia.

DSR-SENATOR LINES AND C.F SHARP AND COMPANY, INC.,

vs
FERAL PHOENIX ASSURANCE CO., INC.,
GR No. 135377 October 7, 2003

Facts:
Berde Plants, Inc. (Berde Plants) delivered 632 units of artificial trees to C.F. Sharp and Company, Inc. (C.F. Sharp), the General Ship Agent of DSR-Senator Lines, a foreign
shipping corporation, for transportation and delivery to the consignee, Al-Mohr International Group, in Riyadh, Saudi Arabia. C.F. Sharp issued International Bill of Lading
No. SENU MNL-26548 for the cargo with an invoice value of $34,579.60. Under the Bill of Lading, the port of discharge for the cargo was at the Khor Fakkan port and the
port of delivery was Riyadh, Saudi Arabia, via Port Dammam. The cargo was loaded in M/S "Arabian Senator." Federal Phoenix Assurance Company, Inc. (Federal Phoenix
Assurance) insured the cargo against all risks in the amount of P941,429.61. On June 7, 1993, M/S "Arabian Senator" left the Manila South Harbor for Saudi Arabia with
the cargo on board. When the vessel arrived in Khor Fakkan Port, the cargo was reloaded on board DSR-Senator Lines’ feeder vessel, M/V "Kapitan Sakharov," bound for
Port Dammam, Saudi Arabia. However, while in transit, the vessel and all its cargo caught fire.

Issue:
Whether or not the liability of Dsr-Senator Lines and C.F Sharp was extinguished when the vessel was gutted with fire.

Ruling:
Article 1734 of the Civil Code provides:
"Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the same is due to any of the following causes only:
(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."
Fire is not one of those enumerated under the above provision which exempts a carrier from liability for loss or destruction of the cargo.
In Eastern Shipping Lines, Inc. vs. Intermediate Appellate Court, we ruled that since the peril of fire is not comprehended within the exceptions in Article 1734, then the
common carrier shall be presumed to have been at fault or to have acted negligently, unless it proves that it has observed the extraordinary diligence required by law.
Even if fire were to be considered a natural disaster within the purview of Article 1734, it is required under Article 1739 of the same Code that the natural disaster must
have been the proximate and only cause of the loss, and that the carrier has exercised due diligence to prevent or minimize the loss before, during or after the occurrence
of the disaster.
We have held that a common carrier’s duty to observe the requisite diligence in the shipment of goods lasts from the time the articles are surrendered to or
unconditionally placed in the possession of, and received by, the carrier for transportation until delivered to or until the lapse of a reasonable time for their acceptance by
the person entitled to receive them. When the goods shipped either are lost or arrive in damaged condition, a presumption arises against the carrier of its failure to
observe that diligence, and there need not be an express finding of negligence to hold it liable.
Common carriers are obliged to observe extraordinary diligence in the vigilance over the goods transported by them. Accordingly, they are presumed to have been at fault
or to have acted negligently if the goods are lost, destroyed or deteriorated. There are very few instances when the presumption of negligence does not attach and these
instances are enumerated in Article 1734. In those cases where the presumption is applied, the common carrier must prove that it exercised extraordinary diligence in

18
order to overcome the presumption.
Respondent Federal Phoenix Assurance raised the presumption of negligence against petitioners. However, they failed to overcome it by sufficient proof of extraordinary
diligence.

BENITO MACAM vs CA, CHINA OCEAN SHIPPING CO., and/or WALLEM PHILIPPINES SHIPPING, INC.,
GR No. 125524 August 25, 1999

Facts:
On 4 April 1989 petitioner Benito Macam (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. (China Ocean), through local agent respondent Wallem Philippines Shipping, Inc. ( 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 (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. The shipment was bound for Hongkong with Pakistan Bank as consignee and Great Prospect Company of Kowloon,
Hongkong (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 Macam's
depository bank, Consolidated Banking Corporation (Solidbank), which paid Macam in advance the total value of the shipment of US$20,223.46. 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 Macam the value of the shipment, it demanded payment from respondent Wallem through five (5) letters but was refused. Macam was thus
allegedly constrained to return the amount involved to Solidbank, then demanded payment from respondent Wallem in writing but to no avail.
China Ocean and Wallem 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, China
Ocean and Wallem apprised the trial court that for the duration of their two-year business relationship with Macam concerning similar shipments to GPC deliveries were
effected without presentation of the bills of lading.
From the testimony of Macam, it was gathered 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
Macam 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, Macam 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 but not the telex of 5 April 1989 because he could not
remember having made such request.

Issue:
Whether or not China Ocean Sipping Co., and Wallem Philippines Shipping, Inc., are liable for releasing the goods to GPC without the bill of lading or bank guarantee.

Ruling:
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 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 . . . .
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.

WILLIAM TIU VS ARRIESGADO

Facts:
A cargo truck was loaded with firewood. Just as the truck passed over a bridge, one of its rear tires exploded. Pedrano, the driver, left his helper, Jose Mitante, Jr. to keep
watch over the stalled vehicle, and instructed the latter to place a spare tire six fathoms away 4 behind the stalled truck to serve as a warning for oncoming vehicles. The
truck’s tail lights were also left on. It was about 12:00 a.m.
Laspinas, driver of a D’ Rough Riders passenger bus rummed into the truck’s left rear. The impact damaged the right side of the bus and left several passengers injured.
Pedro Arriesgado lost consciousness and suffered a fracture in his right colles.His wife died.
Arriesgado filed a complaint for breach of contract of marriage against the bus operator and his driver. RTC ruled in favor of Arriesgado. CA affirmed.

Issue: W/N Tiu and driver liable to Arriesgado

Held:
Laspiñas was driving at a very fast speed before the bus owned by petitioner Tiu collided with respondent Condor’s stalled truck. Petitioner Laspiñas Was negligent in
driving the Ill-fated bus.
A man must use common sense, and exercise due reflection in all his acts; it is his duty to be cautious, careful and prudent, if not from instinct, then through
fear of recurring punishment. He is responsible for such results as anyone might foresee and for acts which no one would have performed except through
culpable abandon. Otherwise, his own person, rights and property, and those of his fellow beings, would ever be exposed to all manner of danger and injury. 27

19
By his own admission, he had just passed a bridge and was traversing the highway of Compostela, Cebu at a speed of 40 to 50 kilometers per hour before the collision
occurred. The maximum speed allowed by law on a bridge is only 30 kilometers per hour. And, as correctly pointed out by the trial court, petitioner Laspiñas also violated
Section 35 of the Land Transportation and Traffic Code, Republic Act No. 4136, as amended:
Sec. 35. Restriction as to speed. – (a) Any person driving a motor vehicle on a highway shall drive the same at a careful and prudent speed, not greater nor less
than is reasonable and proper, having due regard for the traffic, the width of the highway, and or any other condition then and there existing; and no person
shall drive any motor vehicle upon a highway at such speed as to endanger the life, limb and property of any person, nor at a speed greater than will permit
him to bring the vehicle to a stop within the assured clear distance ahead. 30
Under Article 2185 of the Civil Code, a person driving a vehicle is presumed negligent if at the time of the mishap, he was violating any traffic regulation. 31

Petitioner Tiu failed to Overcome the presumption Of negligence against him as One engaged in the business Of common carriage
In actions for breach of contract, only the existence of such contract, and the fact that the obligor, in this case the common carrier, failed to transport his
passenger safely to his destination are the matters that need to be proved. 36 This is because under the said contract of carriage, the petitioners assumed the express
obligation to transport the respondent and his wife to their destination safely and to observe extraordinary diligence with due regard for all circumstances. 37 Any injury
suffered by the passengers in the course thereof is immediately attributable to the negligence of the carrier. 38 Upon the happening of the accident, the presumption of
negligence at once arises, and it becomes the duty of a common carrier to prove that he observed extraordinary diligence in the care of his passengers. 39 It must be
stressed that in requiring the highest possible degree of diligence from common carriers and in creating a presumption of negligence against them, the law compels them
to curb the recklessness of their drivers.40

CENTRAL SHIPPING COMPANY, INC., petitioner, vs.

INSURANCE COMPANY OF NORTH AMERICA, respondent.

Facts:
A cargo vessel commenced to voyage to Manila sunk. The cargo was totally lost.
The RTC was unconvinced that the sinking of M/V Central Bohol had been caused by the weather or any other caso fortuito. It noted that monsoons, which were common
occurrences during the months of July to December, could have been foreseen and provided for by an ocean-going vessel. Applying the rule of presumptive fault or
negligence against the carrier, the trial court held petitioner liable for the loss of the cargo.CA affirmed.

Issue: whether the carrier is liable for the loss of the cargo; and
whether the doctrine of limited liability is applicable

Held:
From the nature of their business and for reasons of public policy, common carriers are bound to observe extraordinary diligence over the goods they
transport, according to all the circumstances of each case.10 In the event of loss, destruction or deterioration of the insured goods, common carriers are responsible; that
is, unless they can prove that such loss, destruction or deterioration was brought about -- among others -- by "flood, storm, earthquake, lightning or other natural disaster
or calamity."11 In all other cases not specified under Article 1734 of the Civil Code, common carriers are presumed to have been at fault or to have acted negligently,
unless they prove that they observed extraordinary diligence. 12
In the present case, petitioner disclaims responsibility for the loss of the cargo by claiming the occurrence of a "storm" under Article 1734(1). Nonetheless, to our mind it
would not be sufficient to categorize the weather condition at the time as a "storm" within the absolutory causes enumerated in the law. Significantly, no typhoon was
observed within the Philippine area of responsibility during that period. 25 Consequently, the strong winds accompanying the southwestern monsoon could not be
classified as a "storm." Such winds are the ordinary vicissitudes of a sea voyage. 26
Hence, if a common carrier fails to exercise due diligence -- or that ordinary care that the circumstances of the particular case demand -- to prevent or minimize the loss
before, during and after the occurrence of the natural disaster, the carrier shall be deemed to have been negligent. The loss or injury is not, in a legal sense, due to a
natural disaster under Article 1734(1).
After carefully studying the records, we are inclined to believe that the logs did indeed shift, and that they had been improperly loaded.
The doctrine of limited liability under Article 587 of the Code of Commerce36 is not applicable to the present case. This rule does not apply to situations in
which the loss or the injury is due to the concurrent negligence of the shipowner and the captain. 37 It has already been established that the sinking of M/V Central Bohol
had been caused by the fault or negligence of the ship captain and the crew, as shown by the improper stowage of the cargo of logs. "Closer supervision on the part of the
ship owner could have prevented this fatal miscalculation." 38 As such, the shipowner was equally negligent. It cannot escape liability by virtue of the limited liability rule.

G.R. No. 161730 January 28, 2005

JAPAN AIRLINES, petitioner vs.

MICHAEL ASUNCION and JEANETTE ASUNCION, respondents.

FACTS:

On March 27, 1992, respondents Michael and Jeanette Asuncion left Manila on board Japan Airlines’ (JAL) Flight 742 bound for Los Angeles. Their itinerary included a
stop-over in Narita and an overnight stay at Hotel Nikko Narita. Upon arrival at Narita, Mrs. Noriko Etou-Higuchi of JAL endorsed their applications for shore pass and
directed them to the Japanese immigration official. A shore pass is required of a foreigner aboard a vessel or aircraft who desires to stay in the neighborhood of the port
of call for not more than 72 hours.

During their interview, the Japanese immigration official noted that Michael appeared shorter than his height as indicated in his passport. Because of this inconsistency,
respondents were denied shore pass entries and were brought instead to the Narita Airport Rest House where they were billeted overnight.

Mr. Atsushi Takemoto of the International Service Center (ISC), the agency tasked by Japan’s Immigration Department to handle passengers who were denied shore pass
entries, brought respondents to the Narita Airport Rest House where they stayed overnight until their departure the following day for Los Angeles. Respondents were
charged US$400.00 each for their accommodation, security service and meals.

ISSUE: Is Japan Airlines liable for breach of contract?

HELD:

JAL did not breach its contract of carriage with respondents. It may be true that JAL has the duty to inspect whether its passengers have the necessary travel documents,
however, such duty does not extend to checking the veracity of every entry in these documents. JAL could not vouch for the authenticity of a passport and the correctness
of the entries therein. Moreover, the power to admit or not an alien into the country is a sovereign act which cannot be interfered with even by JAL. This is not within the
ambit of the contract of carriage entered into by JAL and herein respondents.

JAL or any of its representatives have no authority to interfere with or influence the immigration authorities. The most that could be expected of JAL is to endorse
respondents’ applications,

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Under Article 1755 of the Civil Code, a common carrier such as JAL is bound to carry its 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. When an airline issues a ticket to a passenger, confirmed for a particular flight on a certain
date, a contract of carriage arises.

If the passenger is not so transported or if in the process of transporting he dies or is injured, the carrier may be held liable for a breach of contract of carriage.

[G.R. No. 137775. March 31, 2005]

FGU INSURANCE CORPORATION, petitioner, vs. THE COURT OF APPEALS, SAN MIGUEL CORPORATION, and ESTATE OF ANG GUI, represented by LUCIO, JULIAN, and
JAIME, all surnamed ANG, and CO TO, respondents.

FACTS:
Anco Enterprises Company (ANCO) was a partnership owned by Ang Gui and Co To. It was engaged in the shipping business. The partnership owns one barge
(D/B Lucio) and one tugboat (M/T ANCO). The barge has no engine of its own so the tugboat is used to tow it for it to be moved from one place to another in carrying its
clients’ goods.
San Miguel Corporation (SMC) availed of the services of ANCO for shipment of its goods to Antique. A substantial portion of the goods to be transported was
insured by FGU Insurance Corporation. When the boat arrived in the port of destination, the clouds were already dark and the waves began to get bigger. Only a few of
the goods were unloaded or delivered to the custody of the arrastre operator. The rest was still in the barge. The consignee of the goods advised the captain to seek
shelter for fear that the barge cannot withstand the big waves. The captain of the barge did not heed the advice. The tugboat nonetheless, did. As a result, the barge run
aground and was broken and the cargoes of beer in the barge were swept away.

ISSUE: Is the common carrier liable?

HELD: The common carrier is liable for blatant negligence of the crewmembers of the barge such that the Insurance company cannot be held to answer for the loss of the
SMC goods.

As the two vessels arrived at the port of San Jose, Antique, signs of the impending storm were already manifest. Since it is the duty of the defendant to exercise and
observe extraordinary diligence in the vigilance over the cargo of the plaintiff, the patron or captain of M/T ANCO, representing the defendant could have placed D/B
Lucio in a very safe location before they left knowing or sensing at that time the coming of a typhoon. The presence of big waves and dark clouds could have warned the
patron or captain of M/T ANCO to insure the safety of D/B Lucio including its cargo.

Had the patron or captain of M/T ANCO, the representative of the defendants observed extraordinary diligence in placing the D/B Lucio in a safe place, the loss to the
cargo of the plaintiff could not have occurred.

Extraordinary diligence in vigilance over the goods is further expressed in Articles 1734, 1735, and 1745 Nos. 5, 6, and 7 . . .

Art. 1739. In order that the common carrier may be exempted from responsibility, the natural disaster must have been the proximate and only cause of the
loss. However, the common carrier must exercise due diligence to prevent or minimize loss before, during and after the occurrence of flood, storm, or other natural
disaster in order that the common carrier may be exempted from liability for the loss, destruction, or deterioration of the goods .

PHILIPPINE CHARTER INSURANCE CORPORATION VS. CHEMOIL LIGHTERAGE HITE GOLD CORPORATION
G.R. No. 136888. June 29, 2005

Facts:
Philippine Charter Insurance Corporation is a domestic corporation engaged in the business of non-life insurance. Respondent Chemoil Lighterage Corporation is also a
domestic corporation engaged in the transport of goods. On 24 January 1991, Samkyung Chemical Company, Ltd., based in South Korea, shipped 62.06 metric tons of the
liquid chemical DIOCTYL PHTHALATE (DOP) on board MT “TACHIBANA” which was valued at US$90,201.57 and another 436.70 metric tons of DOP valued at
US$634,724.89 to the Philippines. The consignee was Plastic Group Phils., Inc. in Manila. PGP insured the cargo with Philippine Charter Insurance Corporation against all
risks. The insurance was under Marine Policies No. MRN-30721 dated 06 February 1991. Marine Endorsement No. 2786 dated 11 May 1991 was attached and formed part
of MRN-30721, amending the latter’s insured value to P24, 667,422.03, and reduced the premium accordingly. The ocean tanker MT “TACHIBANA” unloaded the cargo to
the tanker barge, which shall transport the same to Del Pan Bridge in Pasig River and haul it by land to PGP’s storage tanks in Calamba, Laguna. Upon inspection by PGP,
the samples taken from the shipment showed discoloration demonstrating that it was damaged. PGP then sent a letter where it formally made an insurance claim for the
loss it sustained.
Petitioner requested the GIT Insurance Adjusters, Inc. (GIT), to conduct a Quantity and Condition Survey of the shipment which issued a report stating that DOP samples
taken were discolored. Inspection of cargo tanks showed manhole covers of ballast tanks’ ceilings loosely secured and that the rubber gaskets of the manhole covers of
the ballast tanks re-acted to the chemical causing shrinkage thus, loosening the covers and cargo ingress. Petitioner paid PGP the full and final payment for the loss and
issued a Subrogation Receipt. Meanwhile, PGP paid the respondent the as full payment for the latter’s services.
On 15 July 1991, an action for damages was instituted by the petitioner-insurer against respondent-carrier before the RTC, Br.16, City of Manila. Respondent filed an
answer which admitted that it undertook to transport the shipment, but alleged that before the DOP was loaded into its barge, the representative of PGP, Adjustment
Standard Corporation, inspected it and found the same clean, dry, and fit for loading, thus accepted the cargo without any protest or notice. As carrier, no fault and
negligence can be attributed against respondent as it exercised extraordinary diligence in handling the cargo. After due hearing, the trial court rendered a Decision in
favor of plaintiff. On appeal, the Court of Appeals promulgated its Decision reversing the trial court. The petitioner filed a petition for review on certiorari with this Court.

Issues:
1. Whether or not the Notice of Claim was filed within the required period.
2.Whether or not the damage to the cargo was due to the fault or negligence of the respondent.
Held:
Article 366 of the Code of Commerce has profound application in the case at bar, which provides that; “Within twenty-four hours following the receipt of the merchandise
a claim may be made against the carrier on account of damage or average found upon opening the packages, provided that the indications of the damage or average
giving rise to the claim cannot be ascertained from the exterior of said packages, in which case said claim shall only be admitted at the time of the receipt of the
packages.” After the periods mentioned have elapsed, or after the transportation charges have been paid, no claim whatsoever shall be admitted against the carrier with
regard to the condition in which the goods transported were delivered.

21
As to the first issue, the petitioner contends that the notice of contamination was given by PGP employee, to Ms. Abastillas, at the time of the delivery of the cargo, and
therefore, within the required period. The respondent, however, claims that Ms. Abastillas denied the supposed notice given by PGP over the telephone. The Court of
Appeals declared:that a telephone call made to defendant-company could constitute substantial compliance with the requirement of notice. However, it must be pointed
out that compliance with the period for filing notice is an essential part of the requirement, i.e.. immediately if the damage is apparent, or otherwise within twenty-four
hours from receipt of the goods, the clear import being that prompt examination of the goods must be made to ascertain damage if this is not immediately apparent. We
have examined the evidence, and We are unable to find any proof of compliance with the required period, which is fatal to the accrual of the right of action against the
carrier.
Nothing in the trial court’s decision stated that the notice of claim was relayed or filed with the respondent-carrier immediately or within a period of twenty-four hours
from the time the goods were received. The Court of Appeals made the same finding. Having examined the entire records of the case, we cannot find a shred of evidence
that will precisely and ultimately point to the conclusion that the notice of claim was timely relayed or filed.
The requirement that a notice of claim should be filed within the period stated by Article 366 of the Code of Commerce is not an empty or worthless proviso.
The object sought to be attained by the requirement of the submission of claims in pursuance of this article is to compel the consignee of goods entrusted to a carrier to
make prompt demand for settlement of alleged damages suffered by the goods while in transport, so that the carrier will be enabled to verify all such claims at the time
of delivery or within twenty-four hours thereafter, and if necessary fix responsibility and secure evidence as to the nature and extent of the alleged damages to the goods
while the matter is still fresh in the minds of the parties.
The filing of a claim with the carrier within the time limitation therefore actually constitutes a condition precedent to the accrual of a right of action against a carrier for
loss of, or damage to, the goods. The shipper or consignee must allege and prove the fulfillment of the condition. If it fails to do so, no right of action against the carrier
can accrue in favor of the former. The aforementioned requirement is a reasonable condition precedent; it does not constitute a limitation of action.
We do not believe so. As discussed at length above, there is no evidence to confirm that the notice of claim was filed within the period provided for under Article 366 of
the Code of Commerce. Petitioner’s contention proceeds from a false presupposition that the notice of claim was timely filed.
Considering that we have resolved the first issue in the negative, it is therefore unnecessary to make a resolution on the second issue.

LEAMER vs. Malayan insurance inc.

FACTS: Ilian Silica Mining entered into a contract of carriage with Lea Mer Industries, Inc., for the shipment of 900 metric tons of silica sand valued at P565,000. Consigned
to Vulcan Industrial and Mining Corporation, the cargo was to be transported from Palawan to Manila. During the voyage, the vessel sank, resulting in the loss of the
cargo.

Malayan Insurance Co., Inc., as insurer, paid Vulcan the value of the lost cargo after which they demanded reimbursement from Lea Mer who refused to comply. This led
Malayan to institute a Complaint in the RTC of Makati for collection of sum of money.

RTC: Dismissed the complaint after finding that the loss was due to a fortuitous event brought about by typhoon Trining. The court ruled that petitioner had no advance
knowledge of the incoming typhoon, and that the vessel had been cleared by the Philippine Coast Guard to travel from Palawan to Manila.

CA: Reversed the decision of RTC and held that the vessel was not seaworthy when it sailed for Manila.

Issue: W/N the loss of the cargo was due to a fortuitous event or not

Ruling: Petition has no merit. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods, or
both -- by land, water, or air -- when this service is offered to the public for compensation. Petitioner is clearly a common carrier, because it offers to the public its
business of transporting goods through its vessels. The finding of the RTC that petitioner became a private carrier when Vulcan chartered it is incorrect.

Charter parties are classified as contracts of demise (or bareboat) and affreightment. A demise or bareboat charter indicates a business undertaking
that is private in character. Consequently, the rights and obligations of the parties to a contract of private carriage are governed principally by their stipulations, not by
the law on common carriers. The Contract in the present case was one of affreightment. Necessarily, petitioner was a common carrier, and the pertinent law governs the
present factual circumstances. Common carriers are bound to observe extraordinary diligence in their vigilance over the goods and the safety of the passengers
they transport, as required by the nature of their business and for reasons of public policy. Extraordinary diligence requires rendering service with the greatest skill and
foresight to avoid damage and destruction to the goods entrusted for carriage and delivery. Common carriers are presumed to have been at fault or to have acted
negligently for loss or damage to the goods that they have transported. This presumption can be rebutted only by proof that they observed extraordinary diligence, or
that the loss or damage was occasioned by any of the following causes:

“(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.

With regards to fortuitous event, for a common carrierto be excused fully of any liability, the fortuitous event must have been the proximate and only cause of
the loss. Moreover, it should have exercised due diligence to prevent or minimize the loss before, during and after the occurrence of the fortuitous event. Lea Mer claimed
that the loss of the cargo was due to the bad weather condition brought about by Typhoon Trining. On October 25, 1991, the date on which the voyage commenced and
the barge sank, Typhoon Trining was allegedly far from Palawan, where the storm warning was only “Signal No. 1”. The evidence presented by petitioner in support of its
defense of fortuitous event was sorely insufficient.

LOADSTAR SHIPPING CO. VS CA, MANILA INSURANCE CO. (MIC)

Facts:
LOADSTAR received on board its M/V “Cherokee” goods for shipment. The goods, amounting to P6,067,178, were insured for the same amount with MIC against various
risks including “TOTAL LOSS BY TOTAL LOSS OF THE VESSEL.” The vessel, in turn, was insured by Prudential Guarantee & Assurance, Inc. (hereafter PGAI). On its way to
Manila, the Vessel sank off. MIC filed a complaint against LOADSTAR and PGAI, alleging that the sinking of the vessel was due to the fault and negligence of LOADSTAR and
its employees. It also prayed that PGAI be ordered to pay the insurance proceeds from the loss of the vessel directly to MIC, said amount to be deducted from MIC’s claim
from LOADSTAR. RTC and CA rendered judgment in favor of MIC.

Issue: W/N M/V "Cherokee" is a private or a common carrier

W/N Loadstar observe due and/or ordinary diligence

Held:

22
We hold that LOADSTAR is a common carrier. It is not necessary that the carrier be issued a certificate of public convenience, and this public character is not altered by
the fact that the carriage of the goods in question was periodic, occasional, episodic or unscheduled.

The Civil Code defines “common carriers” in the following terms:

“Article 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land,
water, or air for compensation, offering their services to the public.”

M/V “Cherokee” was not seaworthy when it embarked on its voyage on 19 November 1984. The vessel was not even sufficiently manned at the time. “For a vessel to be
seaworthy, it must be adequately equipped for the voyage and manned with a sufficient number of competent officers and crew. The failure of a common carrier to
maintain in seaworthy condition its vessel involved in a contract of carriage is a clear breach of its duty prescribed in Article 1755 of the Civil Code.”

Three kinds of stipulations have often been made in a bill of lading. The first is one exempting the carrier from any and all liability for loss or damage occasioned by its
own negligence. The second is one providing for an unqualified limitation of such liability to an agreed valuation. And the third is one limiting the liability of the carrier to
an agreed valuation unless the shipper declares a higher value and pays a higher rate of freight. According to an almost uniform weight of authority, the first and second
kinds of stipulations are invalid as being contrary to public policy, but the third is valid and enforceable.[21]

Since the stipulation in question is null and void, it follows that when MIC paid the shipper, it was subrogated to all the rights which the latter has against the common
carrier, LOADSTAR.

G.R. No. 149019 August 15, 2006

DELSAN TRANSPORT LINES, INC., Petitioner, vs.

AMERICAN HOME ASSURANCE CORPORATION, Respondent.

Delsan is a domestic corporation which owns and operates the vessel MT Larusan. On the other hand, respondent American Home Assurance Corporation (AHAC for
brevity) is a foreign insurance company duly. It is engaged, among others, in insuring cargoes for transportation within the Philippines.

Unloading operations commenced, discharging of the diesel oil. The discharging had to be stopped on account of the discovery that the port bow mooring of the vessel
was intentionally cut or stolen by unknown persons. Because there was nothing holding it, the vessel drifted westward, ultimately caused the diesel oil to spill into the
sea.

As a result of spillage and backflow of diesel oil, Caltex sought recovery of the loss from Delsan, but the latter refused to pay. As insurer, AHAC paid Caltex. AHAC, as
Caltex’s subrogee, instituted Civil Case against Delsan. caused by the spillage. It likewise prayed that it be indemnified for damages suffered

Delsan insists that the rule on contributory negligence against Caltex, the shipper-owner of the cargo, and the diesel oil was already completely delivered to Caltex.

SC: Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the same is due to any of the following causes only:

1) Flood storm, earthquake, lightning, or other natural disaster or calamity;

2) Act of the public enemy in war, whether international or civil;
3) Act 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.

Delsan failed to prove its claim that there was a contributory negligence on the part of the owner of the goods – Caltex. Dlesan, as the owner of the vessel, was obliged to
prove that the loss was caused by one of the excepted causes if it were to seek exemption from responsibility. 7 Unfortunately, it miserably failed to discharge this burden
by the required quantum of proof.

Delsan’s argument that it should not be held liable for the loss of diesel oil due to backflow because the same had already been actually and legally delivered to Caltex at
the time it entered the shore tank holds no water. It had been settled that the subject cargo was still in the custody of Delsan because the discharging thereof has not
yet been finished.

D. Extraordinary Diligence

G.R. No. L-28028 November 25, 1927

JUAN YSMAEL & CO., INC., plaintiff-appellee, vs. GABINO BARRETTO & CO., LTD., ET AL., defendants. ANDRES H. LIMGENGCO and VICENTE JAVIER, appellants.

In this action plaintiff, a domestic corporation, seeks to recover from the defendants P9,940.95 the alleged value of four cases of merchandise which it delivered to the
steamship Andres on October 25, 1922. The goods were never delivered to Salomon Sharuff, the consignee, or returned to the plaintiff.

Bill of lading stipulation: “All claims for shortage or damage must be made at the time of delivery to consignee or his agent, if the packages or containers show exterior
signs of damage; otherwise to be made in writing to the carrier within twenty-four hours from the time of delivery. Claims for nondelivery or shipment must be presented
in writing to the carrier within thirty days from the date of accrual. Suits based upon claims arising from shortage, damage, or nondelivery of shipment shall be instituted
within sixty days from date of accrual of the right of action. Failure to make claims or to institute judicial proceedings as herein provided shall constitute a waiver of the
claim or right of action.”

The goods in question were shipped from Manila on October 25, 1922, to be delivered to Salomon Sharuff in Surigao, Plaintiff's original complaint was filed on April 17,
1923, or a little less than six months after the shipment was made.

SC: Such a provision is prohibited by no rule of law nor by any consideration of public policy. Nor is it all affected by the existence within the jurisdiction of a statutory or
constitutional prohibition against carriers limiting or restricting their common law liability, since it is held that such a stipulation does not in any way defeat the complete
vestiture of the right to recover, but merely requires the assertion of that right by action at an earlier period than would be necessary to defeat it through the operation of
the ordinary statute of limitations. But the limitation must be reasonable, and if the period of time specified is such that under the facts of the particular case the shipper
could not with reasonable diligence be enabled to bring suit before it expired, the attempted limitation is void. Thus, a provision that suit must be brought within thirty

23
days after the loss or damage occurred has been held unreasonable where it appeared that the transit might reasonably consume the whole of that time. A period of
forty days has on the other hand been held to be a reasonable limitation.

Assuming, however, that the above quoted conditions came to the knowledge of the plaintiff, the Supreme court of the Philippine Islands, has held that such stipulations
in the bill of lading are not reasonable, and therefore, do not bar an action.

Granting, without deciding, that said conditions appearing on the back of the originals might have legal effect, the court is of the opinion that in view of the fact that said
conditions are not printed on the triplicate copies which were delivered to the plaintiff, such conditions are not binding upon the plaintiff.

[G.R. No. 119197. May 16, 1997] TABACALERA INSURANCE CO., PRUDENTIAL GUARANTEE & ASSURANCE, INC., and NEW ZEALAND INSURANCE CO., LTD., vs. NORTH
FRONT SHIPPING SERVICES, INC., and COURT OF APPEALS

FACTS:.

On 2 August 1990, 20,234 sacks of corn grains were shipped on board North Front 777, a vessel owned by North Front Shipping Services, Inc. The cargo was
consigned to Republic Flour Mills Corporation in Manila under Bill of Lading No. 001 [1] and insured with the herein mentioned insurance companies. The vessel was
inspected prior to actual loading by representatives of the shipper and was found fit to carry the merchandise.
The vessel left Cagayan de Oro City on 2 August 1990 and arrived Manila on 16 August 1990. Republic Flour Mills Corporation was advised of its arrival but it
did not immediately commence the unloading operations. When the cargo was eventually unloaded there was a shortage of 26.333 metric tons. The remaining
merchandise was already moldy, rancid and deteriorating.
Precision Analytical Services, Inc., was hired to examine the corn grains and determine the cause of deterioration. A Certificate of Analysis was issued
indicating that the corn grains had 18.56% moisture content and the wetting was due to contact with salt water.
Republic Flour Mills Corporation rejected the entire cargo and formally demanded from North Front Shipping Services, Inc., payment for the damages suffered
by it. The demands however were unheeded. The insurance companies were perforce obliged to pay Republic Flour Mills Corporation
By virtue of the payment made by the insurance companies they were subrogated to the rights of Republic Flour Mills Corporation. Thusly, they lodged a
complaint for damages against North Front Shipping Services, Inc., claiming that the loss was exclusively attributable to the fault and negligence of the carrier.

ISSUE:

W/N North Front Shipping Services, Inc., should be made culpable for the loss and deterioration of the cargo

RULING:

The charter-party agreement between North Front Shipping Services, Inc., and Republic Flour Mills Corporation did not in any way convert the common carrier
into a private carrier.
North Front Shipping Services, Inc., is a corporation engaged in the business of transporting cargo and offers its services indiscriminately to the public. It is without doubt
a common carrier. As such it is required to observe extraordinary diligence in its vigilance over the goods it transports. [3]. When goods placed in its care are lost or
damaged, the carrier is presumed to have been at fault or to have acted negligently. [4]
In fine, we find that the carrier failed to observe the required extraordinary diligence in the vigilance over the goods placed in its care
It is not denied by the insurance companies that the vessel was indeed inspected before actual loading and that North Front 777 was issued a Permit to Sail.
They proved the fact of shipment and its consequent loss or damage while in the actual possession of the carrier. Notably, the carrier failed to volunteer any explanation
why there was spoilage and how it occurred. On the other hand, it was shown during the trial that the vessel had rusty bulkheads and the wooden boards and tarpaulins
bore heavy concentration of molds. The tarpaulins used were not new, contrary to the claim of North Front Shipping Services, Inc., as there were already several patches
on them, hence, making it highly probable for water to enter.
However, we cannot attribute the destruction, loss or deterioration of the cargo solely to the carrier. We find the consignee Republic Flour Mills Corporation
guilty of contributory negligence. It was seasonably notified of the arrival of the barge but did not immediately start the unloading operations. No explanation was
proffered by the consignee as to why there was a delay of six (6) days. Had the unloading been commenced immediately the loss could have been completely avoided or
at least minimized. As testified to by the chemist who analyzed the corn samples, the mold growth was only at its incipient stage and could still be arrested by drying.
The corn grains were not yet toxic or unfit for consumption. For its contributory negligence, Republic Flour Mills Corporation should share at least 40% of the loss. [7]

G.R. No. 136048. January 23, 2001

JOSE BARITUA and JB LINE, petitioners, vs. NIMFA DIVINA MERCADER in her capacity and as guardian of DARWIN, GIOVANNI et al,
The Facts

The late Dominador Mercader is a [b]usinessman mainly engaged in the buy and sell of dry goods in Laoang, N. Samar. He buys his goods from Manila and
bring[s] them to Laoang, Northern Samar for sale at his store located in the said locality;
Sometime on March 16, 1983, the late Dominador Mercader boarded [petitioners’] bus No. 142 with Plate No. 484 EU at [petitioners’] Manila
Station/terminal, bound for Brgy. Rawis, Laoang Northern Samar as a paying passenger;
At that time, Mercader had with him as his baggage, assorted goods. He was not able to reach his destination considering that on March 17, 1983, the said
bus fell into the river as a result of which Mercader died.
The accident happened because [petitioners’] driver negligently and recklessly operated the bus at a fast speed in wanton disregard of traffic rules and
regulations and the prevailing conditions then existing that caused [the] bus to fall into the river.’
“[Respondents] then filed a motion to declare [petitioners] in default which motion was opposed by [petitioners]. [Respondents] withdrew the said motion
prompting the trial court to cancel the scheduled hearing of the said motion to declare [petitioners] in default in an Order dated January 23, 1985.
“In its answer, [petitioners] denied specifically all the material allegations in the complaint.
The Issue

W/N Petitioners exercised extraordinary diligence.

The Court’s Ruling

The Petition is devoid of merit.

A contract of carriage existed between petitioners and Dominador Mercader when he boarded Bus No. 142 in Pasay City on March 16, 1983. Petitioners failed to
transport him to his destination, because the bus fell into a river while traversing the Bugko Bailey Bridge. Although he survived the fall, he later died of asphyxia
secondary to drowning.
We agree with the findings of both courts that petitioners failed to observe extraordinary diligence i[18] that fateful morning. It must be noted that a common carrier,
by the nature of its business and for reasons of public policy, is bound to carry passengers safely as far as human care and foresight can provide. It is supposed to do so by
using the utmost diligence of very cautious persons, with due regard for all the circumstances. ii[19] In case of death or injuries to passengers, it is presumed to have been at
fault or to have acted negligently, unless it proves that it observed extraordinary diligence as prescribed in Articles 1733 and 1755 iii[20] of the Civil Code.
We sustain the ruling of the CA that petitioners failed to prove that they had observed extraordinary diligence.
First, petitioners did not present evidence on the skill or expertise of the driver of Bus No. 142 or the condition of that vehicle at the time of the incident.
Second, the bus was overloaded at the time. In fact, several individuals were standing when the incident occurred. iv[21]

24
Third, the bus was overspeeding. Its conductor testified that it had overtaken several buses before it reached the Bugko Bailey Bridge. v[22] Moreover, prior to crossing the
bridge, it had accelerated and maintained its speed towards the bridge

Republic of the Philippines vs Lorenzo Shipping Corp. g.r. 153563, Feb. 07, 2005

Facts:

RP, though DOH and the Cooperative for American Relief Everywhere (CARE) signed an agreement where USA through CARE donate non-fat dried milk and
other products to the Philippines. The Philippines would transport and distribute these goods to its intended beneficiaries. RP entered into a contract of carriage with
National Trucking and Forwarding Corporation. NTFC shipped it through respondent Lozenco Shipping Corporation to Zamboangga City. The consignee named in the bill of
lading was Abdurahman Jama, petitioner NTFC’s branch supervisor in Zamboanga City. Before each delivery, Rogelio Rizada and Ismael Zamora, both delivery checkers of
Efren Ruste Shipping Agency which is the respondent LSP’s agent, requested Abdurahman to surrender the original bills of lading, but the latter merely presented certified
true copies thereof. Upon completion of each delivery, Rogelio and Ismael asked Abdurahman to sign the delivery receipts. However, at times when Abdurahman had to
attend to other business before a delivery was completed, he instructed his subordinates to sign the delivery receipts for him. NTFC alleged that it did not receive the
goods. Abdurahman resigned from the company. Now, RP, NTFC and CARE filed for breach of contract of carriage against respondent LSC. They insisted that LSC was
wanting of extraordinary diligence in the shipment of the goods thereby breaching its contract of carriage.

Issue:

Is respondent LSC presumed at fault or negligent as common carrier for the loss or deterioration of the goods in the absence of the original bill of lading
despite the presence of a certified copy of bill of lading?

Held:

Article 1733 of the Civil Code demands that a common carrier observe extraordinary diligence over the goods transported by it. Extraordinary diligence is that
extreme measure of care and caution which persons of unusual prudence and circumspection use for securing and preserving their own property or rights. This exacting
standard imposed on common carriers in a contract of carriage of goods is intended to tilt the scales in favor of the shipper who is at the mercy of the common carrier
once the goods have been lodged for shipment. Hence, in case of loss of goods in transit, the common carrier is presumed under the law to have been at fault or
negligent. However, the presumption of fault or negligence may be overturned by competent evidence showing that the common carrier has observed extraordinary
diligence over the goods.

In the instant case, we agree with the court a quo that the respondent adequately proved that it exercised extraordinary diligence. Although the original bills of
lading remained with petitioner, respondent’s agents demanded from Abdurahman the certified true copies of the bills of lading. They also asked the latter and in his
absence, his designated subordinates, to sign the cargo delivery receipts.

This practice, which respondent’s agents testified to be their standard operating procedure, finds support in Article 353 of the Code of Commerce:

After the contract has been complied with, the bill of lading which the carrier has issued shall be returned to him, and by virtue of the exchange of this title
with the thing transported, the respective obligations and actions shall be considered cancelled, ….

In case the consignee, upon receiving the goods, cannot return the bill of lading subscribed by the carrier, because of its loss or of any other cause, he must give the
latter a receipt for the goods delivered, this receipt producing the same effects as the return of the bill of lading.

Sulpicio lines vs First Lepanto-Taisho Insurance Corp. g.r. 140349, February 07, 2005
Facts:
Taiyo Yuden Philippines (owner of the goods) and Delbros (shipper) entered into a contract whereby Delbros will ship the goods (136 cartons of inductors) from
Cebu City to Singapore in favor of the consignee Taiyo Yuden Singapore. For the carriage of the said shipment has to passed by Manila, Delbros engaged the services of
Sulpicio Lines. During the unloading of the shipment by Sulpicio in Manila, a crate containing 42 cartons of inductors dropped from the cargo hatch and was rendered
unusable, and was returned to Cebu City. Taisho insurance, upon payment of the insurance to the owner of the goods, was subrogated to its rights and continued a claim
for the recovery of value against Delbros and Sulpicio Lines. Both parties filed their respected counter claims and cross claims. Sulpicio insisted that the damage cause was
attributable to the damaged packaging.
Issue:
Did Sulpicio Lines observed extraordinary diligence in the handling, storage and general care of the shipment?
Held:
When the goods are placed at a common carrier’s possession for delivery to a specified consignee, they are in good order and condition and are supposed to
be transported and delivered to the consignee in the same state. In the case herein, the goods were received by defendant-appellee Delbros in Cebu properly packed in
cardboard cartons and then placed in wooden crates, for delivery to the consignee in Singapore. However, before the shipment reached Singapore (while it was in Manila)
one crate and 2 cartons contained therein were not anymore in their original state. They were no longer fit to be sent to Singapore.
The falling of the crate during the unloading is evidence of petitioner-carrier’s negligence in handling the cargo. As a common carrier, it is expected to observe
extraordinary diligence in the handling of goods placed in its possession for transport. The standard of extraordinary diligence imposed upon common carriers is
considerably more demanding than the standard of ordinary diligence, i.e., the diligence of a good paterfamilias established in respect of the ordinary relations between
members of society. A common carrier is bound to transport its cargo and its passengers safely "as far as human care and foresight can provide, using the utmost
diligence of a very cautious person, with due regard to all circumstances." The extraordinary diligence in the vigilance over the goods tendered for shipment requires the
common carrier to know and to follow the required precaution for avoiding the damage to, or destruction of, the goods entrusted to it for safe carriage and delivery.

Petitioner-carrier miserably failed to adduce any shred of evidence of the required extraordinary diligence to overcome the presumption that it was negligent
in transporting the cargo.

VICTORY LINER VS. RACE

G.R. No. 164820, March 28, 2007

Facts:

25
 In June 1993, petitioner Victory Liner employed respondent Pablo Race as a bus driver. On the night of August 24, 1994, respondent drove his assigned bus from
Alaminos, Pangasinan, destined to Cubao, Quezon City. While traversing Moncada, Tarlac, the bus he was driving was bumped by a Dagupan-bound bus. As a consequence
thereof, respondent suffered a fractured left leg and was rushed to the Country Medical and Trauma Center in Tarlac City where he was operated on and confined from
August 24, 1994 up to 10 October 1994. One month after his release from the said hospital, the respondent was confined again for further treatment of his fractured left
leg at the Specialist Group Hospital in Dagupan City. His confinement therein lasted a month. Petitioner shouldered the doctor’s professional fee and the operation,
medication and hospital expenses of the respondent in the aforestated hospitals.
In January 1998, the respondent, still limping heavily, went to the petitioner’s office to report for work. He was, however, informed by the petitioner that he was
considered resigned from his job.
On June 30, 1999, respondent, through his counsel, sent a letter to the petitioner demanding employment-related money claims.
NLRC ordered Victory Liner to reinstate complainant-appellant to his former position without loss of seniority rights and other privileges and benefits with full
backwages computed from the time of his illegal dismissal on January 1988 up to his actual reinstatement.
Petitioner filed a petition assailing the Decision of the NLRC but it was denied. Hence it filed a petition with the Supreme Court. Petitioner argued that the order for
the reinstatement was contrary to law; that as a common carrier, it is obliged under the law to observe extra-ordinary diligence in the conduct of its business; that it will
violate such obligation if it will reinstate the respondent as bus driver; that to allow the respondent to drive a bus, despite the fact that the latter sustained a fractured left
leg and was still limping, would imperil the lives of the passengers and the property of the petitioner; and that the award of backwages to the respondent was unjustified.

ISSUE:
Whether or not respondent is entitled to reinstatement.

RULING:
It appeared that respondent was not seeking for reinstatement. Even assuming that respondent is willing to be reinstated as petitioner’s bus driver, the
reinstatement is still unwarranted. There is a serious doubt as to whether the respondent is physically capable of driving a bus based on the following undisputed facts: (1)
respondent was operated on and confined twice in two different hospitals for a fractured left leg; (2) steel plates were attached to his fractured leg;(3) each confinement
lasted for a month; (4) after his discharge from the second confinement, respondent was still limping heavily; (5) when respondent had reported for work to the petitioner
in January 1998, he was also limping; and (6) respondent does not have a medical certificate which guarantees that his leg injury has already healed and that he is now
physically capable of driving a bus.

It should be stressed that petitioner is a common carrier and, as such, is obliged to exercise extra-ordinary diligence in transporting its passengers safely.40 To allow
the respondent to drive the petitioner’s bus under such uncertain condition would, undoubtedly, expose to danger the lives of the passengers and the property of the
petitioner. This would place the petitioner in jeopardy of violating its extra-ordinary diligence obligation and, thus, may be subjected to numerous complaints and court
suits. It is clear therefore that the reinstatement of respondent not only would be deleterious to the riding public but would also put unreasonable burden on the business
and interest of the petitioner. In this regard, it should be remembered that an employer might not be compelled to continue to employ such persons whose continuance
in the service will patently be inimical to his interests.

Based on the foregoing facts and circumstances, the reinstatement of the respondent is no longer feasible. Thus, in lieu of reinstatement, payment to respondent of
separation pay equivalent to one-month pay for every year of service is in order.

G.R. No. 167346 April 2, 2007

SOLIDBANK CORPO
SPOUSES PETER an RATION/ METROPOLITAN BANK AND TRUST COMPANY, * Petitioner,
vs. SUSAN TAN, Respondents
FACTS:

On December 2, 1991, respondents’ (Tan) representative, Remigia Frias, deposited with petitioner ten checks worth P455,962. The teller received two deposit slips for the
checks, an original and a duplicate. In accordance with the usual practice between petitioner and respondents, the latter’s passbook was left with petitioner for the
recording of the deposits on the bank’s ledger. Later, respondents retrieved the passbook and discovered that one of the checks, Metropolitan Bank and Trust Company
(Metrobank) check no. 403954, payable to cash in the sum of P250,000 was not posted therein. Respondents demanded that petitioner pay the amount of the check but
it refused, hence, they filed a case for collection of a sum of money in the RTC.
Petitioner averred that the deposit slips Frias used when she deposited the checks were spurious. Petitioner accused respondents of engaging in a scheme to illegally
exact money from it.
RTC: Ruled in favor of Tan and against the bank on the ground that loss of Metrobank Check No. 403954 in the sum of P250,000.00 was due to the fault of the bank.
CA: Affirmed the decision of the RTC.
ISSUE: W/N petitioner bank was negligent in its transaction with respondents.
RULING: The business of banking is impressed with public interest and great reliance is made on the bank’s sworn profession of diligence and meticulousness in giving
irreproachable service. the trial court did not commit any error in ruling that the bank has been negligent. A cursory reading of its decision reveals that it anchored its
conclusion that petitioner was negligent on Article 1173 of the Civil Code.
In citing the different provisions of the Civil Code on common carriers, 15 the trial court merely made reference to the kind of diligence that petitioner should have
performed under the circumstances. In other words, like a common carrier whose business is also imbued with public interest, petitioner should have exercised
extraordinary diligence to negate its liability to respondents.
In one particular case, the SC enunciated that the degree of diligence required of banks is more than that of a good father of a family in keeping with their responsibility to
exercise the necessary care and prudence in handling their clients’ money.

[G.R. No. 160219, July 21, 2008]

VECTOR SHIPPING CORPORATION AND FRANCISCO SORIANO, PETITIONERS, VS. ADELFO B. MACASA, EMELIA B. MACASA, TIMOTEO B. MACASA, CORNELIO B.
MACASA, JR., AND ROSARIO C. MACASA, SULPICIO LINES, INC., GO GUIOC SO, ENRIQUE S. GO, EUSEBIO S. GO, RICARDO S. GO, VICTORIANO S. GO, EDWARD S. GO,
ARTURO S. GO, EDGAR S. GO AND EDMUNDO S. GO, RESPONDENTS.

Facts:
Spouses Cornelio and Anacleta Macasa with their grandson Ritchie boarded MV Dona Paz on Dec. 19, 1987. The vessel was owned by Sulpicio lines and is bound for
Manila from Tacloban. The ship collided with MT Vector, an oil tanker owned by Vector Shipping Corp. Both vessels were never retrieved. Worse, only a few of the victims'
bodies, who either drowned or were burned alive, were recovered. Cornelio, Anacleta and Ritchie were among the victims whose bodies have yet to be recovered up to
this day.

The Macasas went to the office of Sulpicio Lines to check on the veracity of the news, but the latter denied that such an incident occurred. According to the Macasas,
Sulpicio Lines was uncooperative and was reluctant to entertain their inquiries. Later, they were forced to rely on their own efforts to search for the bodies of their loved
ones, but to no avail.

26
Macasas filed a Complaint for Damages arising out of breach of contract of carriage against Sulpicio Lines before the RTC. The complaint imputed negligence to Sulpicio
Lines because it was remiss in its obligations as a common carrier.
Sulpicio Lines filed a Third-Party Complaint against Vector Shipping, Soriano and Caltex Philippines Inc. (Caltex), the charterer of MT Vector.
RTC awarded civil indemnity and damages for the death of the said victims and damages. Sulpicio was also entitled for reimbursement from Vector. CA affirmed.

Issue:
May VECTOR and SORIANO be held liable to indemnify/reimburse SULPICIO the amounts it is ordered to pay the MACASA's because SULPICIO's liability arises from breach
of contract of carriage, inasmuch as in "culpa contractual" it is sufficient to prove the existence of the contract, because carrier is presumed to be at fault or to have acted
negligently it being its duty to exercise extraordinary diligence, and cannot make the [safety] of its passengers dependent upon the diligence of VECTOR and SORIANO?

Held:
Petition lacks merit.
The provisions owed their conception to the nature of the business of common carriers. This business is impressed with a special public duty. The public must of necessity
rely on the care and skill of common carriers in the vigilance over the goods and safety of the passengers, especially because with the modern development of science
and invention, transportation has become more rapid, more complicated and somehow more hazardous. For these reasons, a passenger or a shipper of goods is under no
obligation to conduct an inspection of the ship and its crew, the carrier being obliged by law to impliedly warrant its seaworthiness.
Thus, we are disposed to agree with the findings of the CA when it aptly held:
We are not swayed by the lengthy disquisition of MT Vector and Francisco Soriano urging this Court to absolve them from liability. All evidence points to the fact that it
was MT Vector's negligent officers and crew which caused it to ram into MV Doña Paz. More so, MT Vector was found to be carrying expired coastwise license and
permits and was not properly manned. As the records would also disclose, there is a defect in the ignition system of the vessel, and it was not convincingly shown
whether the necessitated repairs were in fact undertaken before the said ship had set to sea. In short, MT Vector was unseaworthy at the time of the mishap. That the
said vessel was allowed to set sail when it was, to everyone in the group's knowledge, not fit to do so translates into rashness and imprudence.

[G.R. No. 168402, August 06, 2008]

ABOITIZ SHIPPING CORPORATION, PETITIONER, VS. INSURANCE COMPANY OF NORTH AMERICA, RESPONDENT.

Facts:
In 1993, MSAS Cargo International Limited and/or Associated and/or Subsidiary Companies (MSAS) procured a marine insurance policy from respondent ICNA UK Limited
of London. The insurance was for a transshipment of certain wooden work tools and workbenches purchased for the consignee Science Teaching Improvement Project
(STIP), Ecotech Center, Sudlon Lahug, Cebu City, Philippines. [3] ICNA issued an "all-risk" open marine policy.
The cargo packed inside a container van was shipped from Germany. A clean bill of lading [6] was issued by Hapag-Lloyd which stated the consignee to be STIP, Ecotech
Center, Sudlon Lahug, Cebu City.
The van was off-loaded at Singapore and transshipped to Manila where the van was again off-loaded and received by Aboitiz shipping Corp. The bill of lading [7] issued by
Aboitiz contained the notation "grounded outside warehouse."
The container van was stripped and transferred to another crate/container van without any notation on the condition of the cargo on the Stuffing/Stripping Report. The
van was loaded on board petitioner’s vessel bound for Cebu. When it arrived in Cebu, it was brought to Cebu Bonded Warehousing Corp. In the stripping report,
petitioner's checker noted that the crates were slightly broken or cracked at the bottom.

, the cargo was withdrawn by the representative of the consignee, Science Teaching Improvement Project (STIP) and delivered to Don Bosco Technical High School, Punta
Princesa, Cebu City. It was received by Mr. Bernhard Willig.
Perez, claims head of petitioner, received a telephone call from Willig informing him that the cargo sustained water damage. Perez, upon receiving the call, immediately
went to the bonded warehouse and checked the condition of the container and other cargoes stuffed in the same container. He found that the container van and other
cargoes stuffed there were completely dry and showed no sign of wetness. Willig informed Aboitiz of the damage noticed upon opening of the cargo.
STIP, the consignee, contacted the Phil. Office of ICNA for insurance claims. STIP filed for damages against Aboitiz. Aboitiz refused to settle the claim. ICNA, the insurer,
paid the consignee. A subrogation receipt was duly signed by Willig. ICNA formally advised Aboitiz of the claim and subrogation receipt executed in its favor. Despite
follow-ups, however, no reply was received from Aboitiz.
ICNA filed a civil complaint against Aboitiz. RTC rendered judgment against ICNA. CA reversed and set aside the decision of RTC.

Issue: (a) Is respondent ICNA the real party-in-interest that possesses the right of subrogation to claim reimbursement from petitioner Aboitiz?

(b) Was there a timely filing of the notice of claim as required under Article 366 of the Code of Commerce?

(c) If so, can petitioner be held liable on the claim for damages?

Held:

Affirmative.
A foreign corporation not licensed to do business in the Philippines is not absolutely incapacitated from filing a suit in local courts . Only when that foreign corporation
is "transacting" or "doing business" in the country will a license be necessary before it can institute suits. [24] It may, however, bring suits on isolated business transactions,
which is not prohibited under Philippine law. [25] Thus, this Court has held that a foreign insurance company may sue in Philippine courts upon the marine insurance
policies issued by it abroad to cover international-bound cargoes shipped by a Philippine carrier, even if it has no license to do business in this country. It is the act of
engaging in business without the prescribed license, and not the lack of license per se, which bars a foreign corporation from access to our courts.
, We uphold the CA observation that while it was the ICNA UK Limited which issued the subject marine policy, the present suit was filed by the said company's authorized
agent in Manila. It was the domestic corporation that brought the suit and not the foreign company. Its authority is expressly provided for in the open policy which
includes the ICNA office in the Philippines as one of the foreign company's agents.

Respondent's cause of action is founded on it being subrogated to the rights of the consignee of the damaged shipment . The right of subrogation springs from Article
2207 of the Civil Code, which states:
Article 2207. If the plaintiff's property has been insured, and he has received indemnity from the insurance company for the injury or loss arising out of the wrong or
breach of contract complained of, the insurance company shall be subrogated to the rights of the insured against the wrongdoer or the person who has violated the
contract. If the amount paid by the insurance company does not fully cover the injury or loss, the aggrieved party shall be entitled to recover the deficiency from the
person causing the loss or injury.
As this Court held in the case of Pan Malayan Insurance Corporation v. Court of Appeals,[28] payment by the insurer to the assured operates as an equitable assignment of
all remedies the assured may have against the third party who caused the damage. Subrogation is not dependent upon, nor does it grow out of, any privity of contract or
upon written assignment of claim. It accrues simply upon payment of the insurance claim by the insurer. [29]

Upon payment to the consignee of indemnity for damage to the insured goods, ICNA's entitlement to subrogation equipped it with a cause of action against petitioner in
case of a contractual breach or negligence. [30] This right of subrogation, however, has its limitations. First, both the insurer and the consignee are bound by the contractual

27
stipulations under the bill of lading. [31] Second, the insurer can be subrogated only to the rights as the insured may have against the wrongdoer. If by its own acts after
receiving payment from the insurer, the insured releases the wrongdoer who caused the loss from liability, the insurer loses its claim against the latter.
The giving of notice of loss or injury is a condition precedent to the action for loss or injury or the right to enforce the carrier's liability. Circumstances peculiar to this
case lead Us to conclude that the notice requirement was complied with. As held in the case of Philippine American General Insurance Co., Inc. v. Sweet Lines, Inc.,[33] this
notice requirement protects the carrier by affording it an opportunity to make an investigation of the claim while the matter is still fresh and easily investigated. It is
meant to safeguard the carrier from false and fraudulent claims.

Under the Code of Commerce, the notice of claim must be made within twenty four (24) hours from receipt of the cargo if the damage is not apparent from the outside of
the package. For damages that are visible from the outside of the package, the claim must be made immediately. The law provides:
Article 366. Within twenty four hours following the receipt of the merchandise, the claim against the carrier for damages or average which may be found therein upon
opening the packages, may be made, provided that the indications of the damage or average which give rise to the claim cannot be ascertained from the outside part of
such packages, in which case the claim shall be admitted only at the time of receipt.

After the periods mentioned have elapsed, or the transportation charges have been paid, no claim shall be admitted against the carrier with regard to the condition in
which the goods transported were delivered. (Emphasis supplied)
The periods above, as well as the manner of giving notice may be modified in the terms of the bill of lading, which is the contract between the parties. Notably, neither of
the parties in this case presented the terms for giving notices of claim under the bill of lading issued by petitioner for the goods.

Stipulations requiring notice of loss or claim for damage as a condition precedent to the right of recovery from a carrier must be given a reasonable and practical
construction, adapted to the circumstances of the case under adjudication, and their application is limited to cases falling fairly within their object and purpose. [36]

Bernhard Willig, the representative of consignee who received the shipment, relayed the information that the delivered goods were discovered to have sustained water
damage to no less than the Claims Head of petitioner, Mayo B. Perez. Immediately, Perez was able to investigate the claims himself and he confirmed that the goods were,
indeed, already corroded.

Provisions specifying a time to give notice of damage to common carriers are ordinarily to be given a reasonable and practical, rather than a strict construction. [37] We give
due consideration to the fact that the final destination of the damaged cargo was a school institution where authorities are bound by rules and regulations governing their
actions. Understandably, when the goods were delivered, the necessary clearance had to be made before the package was opened. Upon opening and discovery of the
damaged condition of the goods, a report to this effect had to pass through the proper channels before it could be finalized and endorsed by the institution to the claims
department of the shipping company.

The call to petitioner was made two days from delivery, a reasonable period considering that the goods could not have corroded instantly overnight such that it could only
have sustained the damage during transit. Moreover, petitioner was able to immediately inspect the damage while the matter was still fresh. In so doing, the main
objective of the prescribed time period was fulfilled. Thus, there was substantial compliance with the notice requirement in this case.

To recapitulate, We have found that respondent, as subrogee of the consignee, is the real party in interest to institute the claim for damages against petitioner; and pro
hac vice, that a valid notice of claim was made by respondent.
Appellee carrier having failed to discharge the burden of proving that it exercised extraordinary diligence in the vigilance over such goods it contracted for carriage, the
presumption of fault or negligence on its part from the time the goods were unconditionally placed in its possession (July 26, 1993) up to the time the same were delivered
to the consignee (August 11, 1993), therefore stands. The presumption that the carrier was at fault or that it acted negligently was not overcome by any countervailing
evidence.

VICTORY LINER VS. RACE

G.R. No. 164820, March 28, 2007

Facts:
In June 1993, petitioner Victory Liner employed respondent Pablo Race as a bus driver. On the night of August 24, 1994, respondent drove his assigned bus from
Alaminos, Pangasinan, destined to Cubao, Quezon City. While traversing Moncada, Tarlac, the bus he was driving was bumped by a Dagupan-bound bus. As a consequence
thereof, respondent suffered a fractured left leg and was rushed to the Country Medical and Trauma Center in Tarlac City where he was operated on and confined from
August 24, 1994 up to 10 October 1994. One month after his release from the said hospital, the respondent was confined again for further treatment of his fractured left
leg at the Specialist Group Hospital in Dagupan City. His confinement therein lasted a month. Petitioner shouldered the doctor’s professional fee and the operation,
medication and hospital expenses of the respondent in the aforestated hospitals.
In January 1998, the respondent, still limping heavily, went to the petitioner’s office to report for work. He was, however, informed by the petitioner that he was
considered resigned from his job.
On June 30, 1999, respondent, through his counsel, sent a letter to the petitioner demanding employment-related money claims.
NLRC ordered Victory Liner to reinstate complainant-appellant to his former position without loss of seniority rights and other privileges and benefits with full
backwages computed from the time of his illegal dismissal on January 1988 up to his actual reinstatement.
Petitioner filed a petition assailing the Decision of the NLRC but it was denied. Hence it filed a petition with the Supreme Court. Petitioner argued that the order for
the reinstatement was contrary to law; that as a common carrier, it is obliged under the law to observe extra-ordinary diligence in the conduct of its business; that it will
violate such obligation if it will reinstate the respondent as bus driver; that to allow the respondent to drive a bus, despite the fact that the latter sustained a fractured left
leg and was still limping, would imperil the lives of the passengers and the property of the petitioner; and that the award of backwages to the respondent was unjustified.

ISSUE:
Whether or not respondent is entitled to reinstatement.

RULING:
It appeared that respondent was not seeking for reinstatement. Even assuming that respondent is willing to be reinstated as petitioner’s bus driver, the
reinstatement is still unwarranted. There is a serious doubt as to whether the respondent is physically capable of driving a bus based on the following undisputed facts: (1)
respondent was operated on and confined twice in two different hospitals for a fractured left leg; (2) steel plates were attached to his fractured leg;(3) each confinement
lasted for a month; (4) after his discharge from the second confinement, respondent was still limping heavily; (5) when respondent had reported for work to the petitioner
in January 1998, he was also limping; and (6) respondent does not have a medical certificate which guarantees that his leg injury has already healed and that he is now
physically capable of driving a bus.

It should be stressed that petitioner is a common carrier and, as such, is obliged to exercise extra-ordinary diligence in transporting its passengers safely.40 To allow
the respondent to drive the petitioner’s bus under such uncertain condition would, undoubtedly, expose to danger the lives of the passengers and the property of the
petitioner. This would place the petitioner in jeopardy of violating its extra-ordinary diligence obligation and, thus, may be subjected to numerous complaints and court
suits. It is clear therefore that the reinstatement of respondent not only would be deleterious to the riding public but would also put unreasonable burden on the business

28
and interest of the petitioner. In this regard, it should be remembered that an employer might not be compelled to continue to employ such persons whose continuance
in the service will patently be inimical to his interests.

Based on the foregoing facts and circumstances, the reinstatement of the respondent is no longer feasible. Thus, in lieu of reinstatement, payment to respondent of
separation pay equivalent to one-month pay for every year of service is in order.

ARMANDO G. YRASUEGUI vs PHILIPPINE AIRLINES, INC

G.R. No. 168081 October 17, 2008

This case portrays the peculiar story of an international flight steward who was dismissed because of his failure to adhere to the weight standards of the airline
company.
Petitioner Armando G. Yrasuegui was a former international flight steward of Philippine Airlines, Inc. (PAL). He stands five feet and eight inches (5’8”) with a
large body frame. The proper weight for a man of his height and body structure is from 147 to 166 pounds, the ideal weight being 166 pounds, as mandated by the Cabin
and Crew Administration Manual of PAL. The weight problem of petitioner dates back to 1984. Back then, PAL advised him to go on an extended vacation leave to address
his weight concerns. Apparently, petitioner failed to meet the company’s weight standards, prompting another leave without pay . After meeting the required weight,
petitioner was allowed to return to work. But petitioner’s weight problem recurred. He again went on leave without pay . Not having attained his ideal weight, . he was
formally requested to trim down to his ideal weight and report for weight checks on several dates. He was also told that he may avail of the services of the company
physician should he wish to do so. He was advised that his case will be evaluated on July 3, 1989.] On February 25, 1989, petitioner underwent weight check. It was
discovered that he gained, instead of losing, weight. He was overweight at 215 pounds, which is 49 pounds beyond the limit. Consequently, his off-duty status was
retained. Despite the lapse of a ninety-day period given him to reach his ideal weight, petitioner remained overweight. On January 3, 1990, he was informed of the PAL
decision for him to remain grounded until such time that he satisfactorily complies with the weight standards. Again, he was directed to report every two weeks for
weight checks. Petitioner failed to report for weight checks. Despite that, he was given one more month to comply with the weight requirement. As usual, he was asked
to report for weight check on different dates. He was reminded that his grounding would continue pending satisfactory compliance with the weight standards.
On June 15, 1993, petitioner was formally informed by PAL that due to his inability to attain his ideal weight, “and considering the utmost leniency” extended
to him “which spanned a period covering a total of almost five (5) years,” his services were considered terminated “effective immediately.”

Issue:
Whether or not the dismissal of petitioner can be predicated on the bonafide occupational qualification defense.

Ruling:
Employment in particular jobs may not be limited to persons of a particular sex, religion, or national origin unless the employer can show that sex, religion, or national
origin is an actual qualification for performing the job. The qualification is called a bona fide occupational qualification (BFOQ). BFOQ is valid “provided it reflects an
inherent quality reasonably necessary for satisfactory job performance.”
Verily, there is no merit to the argument that BFOQ cannot be applied if it has no supporting statute. Too, the Labor Arbiter, NLRC, and CA are one in holding
that the weight standards of PAL are reasonable. A common carrier, from the nature of its business and for reasons of public policy, is bound to observe extraordinary
diligence for the safety of the passengers it transports. It is bound to carry its 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
The law leaves no room for mistake or oversight on the part of a common carrier. Thus, it is only logical to hold that the weight standards of PAL show its effort
to comply with the exacting obligations imposed upon it by law by virtue of being a common carrier.
The business of PAL is air transportation. As such, it has committed itself to safely transport its passengers. In order to achieve this, it must necessarily rely on
its employees, most particularly the cabin flight deck crew who are on board the aircraft. The weight standards of PAL should be viewed as imposing strict norms of
discipline upon its employees.
In other words, the primary objective of PAL in the imposition of the weight standards for cabin crew is flight safety. It cannot be gainsaid that cabin attendants
must maintain agility at all times in order to inspire passenger confidence on their ability to care for the passengers when something goes wrong. It is not farfetched to
say that airline companies, just like all common carriers, thrive due to public confidence on their safety records. People, especially the riding public, expect no less than
that airline companies transport their passengers to their respective destinations safely and soundly. A lesser performance is unacceptable.
The task of a cabin crew or flight attendant is not limited to serving meals or attending to the whims and caprices of the passengers. The most important
activity of the cabin crew is to care for the safety of passengers and the evacuation of the aircraft when an emergency occurs. Passenger safety goes to the core of the job
of a cabin attendant. Truly, airlines need cabin attendants who have the necessary strength to open emergency doors, the agility to attend to passengers in cramped
working conditions, and the stamina to withstand grueling flight schedules.
On board an aircraft, the body weight and size of a cabin attendant are important factors to consider in case of emergency. Aircrafts have constricted cabin
space, and narrow aisles and exit doors. Thus, the arguments of respondent that “[w]hether the airline’s flight attendants are overweight or not has no direct relation to
its mission of transporting passengers to their destination”; and that the weight standards “has nothing to do with airworthiness of respondent’s airlines,” must fail.
The rationale in Western Air Lines v. Criswell relied upon by petitioner cannot apply to his case. What was involved there were two (2) airline pilots who were
denied reassignment as flight engineers upon reaching the age of 60, and a flight engineer who was forced to retire at age 60. They sued the airline company, alleging
that the age-60 retirement for flight engineers violated the Age Discrimination in Employment Act of 1967. Age-based BFOQ and being overweight are not the same. The
case of overweight cabin attendants is another matter. Given the cramped cabin space and narrow aisles and emergency exit doors of the airplane, any overweight cabin
attendant would certainly have difficulty navigating the cramped cabin area.
In short, there is no need to individually evaluate their ability to perform their task. That an obese cabin attendant occupies more space than a slim one is an
unquestionable fact which courts can judicially recognize without introduction of evidence. It would also be absurd to require airline companies to reconfigure the aircraft
in order to widen the aisles and exit doors just to accommodate overweight cabin attendants like petitioner.
The biggest problem with an overweight cabin attendant is the possibility of impeding passengers from evacuating the aircraft, should the occasion call for it.
The job of a cabin attendant during emergencies is to speedily get the passengers out of the aircraft safely. Being overweight necessarily impedes mobility. Indeed, in an
emergency situation, seconds are what cabin attendants are dealing with, not minutes. Three lost seconds can translate into three lost lives. Evacuation might slow down
just because a wide-bodied cabin attendant is blocking the narrow aisles. These possibilities are not remote.
Petitioner is also in estoppel. He does not dispute that the weight standards of PAL were made known to him prior to his employment. He is presumed to
know the weight limit that he must maintain at all times. In fact, never did he question the authority of PAL when he was repeatedly asked to trim down his weight.
Bona fides exigit ut quod convenit fiat. Good faith demands that what is agreed upon shall be done. Kung ang tao ay tapat kanyang tutuparin ang napagkasunduan.
Too, the weight standards of PAL provide for separate weight limitations based on height and body frame for both male and female cabin attendants. A
progressive discipline is imposed to allow non-compliant cabin attendants sufficient opportunity to meet the weight standards. Thus, the clear-cut rules obviate any
possibility for the commission of abuse or arbitrary action on the part of PAL

Herminio Mariano vs Ildefonso Callejas and Edgar de Borja

Facts: Petitioner Herminio Mariano, Jr. is the surviving spouse of Dr. Frelinda Mariano who was a passenger of a Celyrosa Express bus bound for Tagaytay when she met
her death. Respondent Ildefonso C. Callejas is the registered owner of Celyrosa Express, while respondent Edgar de Borja was the driver of the bus on which the deceased
was a passenger.

29
the Celyrosa Express bus, carrying Dr. Mariano as its passenger, collided with an Isuzu truck with trailer bearing plate numbers PJH 906 and TRH 531. The trailer truck
bumped the passenger bus on its left middle portion. Due to the impact, the passenger bus fell on its right side on the right shoulder of the highway and caused the
death of Dr. Mariano and physical injuries to four other passengers.
Petitioner filed a complaint for breach of contract of carriage and damages against respondents for their failure to transport his wife and mother of his three minor
children safely to her destination.
Respondent Callejas filed a third-party complaint against Liong Chio Chang, doing business under the name and style of La Perla Sugar Supply, the owner of the trailer
truck, for indemnity in the event that he would be held liable for damages to petitioner.RTC rendered judgment finding Callejas, Borja with Liong Chio Chang, jointly and
severally liable to pay petitioner damages. Callajas and Borja appealed to CA. CA reversed decision.

Issue: W/N respondents are liable

Held:
In accord with the above provisions, Celyrosa Express, a common carrier, through its driver, respondent De Borja, and its registered owner, respondent Callejas,
has the express obligation “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,” and to observe extraordinary diligence in the discharge of its duty. The death of the wife of the petitioner in the course of transporting
her to her destination gave rise to the presumption of negligence of the carrier. To overcome the presumption, respondents have to show that they observed
extraordinary diligence in the discharge of their duty, or that the accident was caused by a fortuitous event.
This Court interpreted the above quoted provisions in Pilapil v. Court of Appeals. We elucidated:
While the law requires the highest degree of diligence from common carriers in the safe transport of their passengers and creates a
presumption of negligence against them, it does not, however, make the carrier an insurer of the absolute safety of its passengers.
Article 1755 of the Civil Code qualifies the duty of extraordinary care, vigilance and precaution in the carriage of passengers by common
carriers to only such as human care and foresight can provide. What constitutes compliance with said duty is adjudged with due regard to all the
circumstances.
Article 1756 of the Civil Code, in creating a presumption of fault or negligence on the part of the common carrier when its passenger is
injured, merely relieves the latter, for the time being, from introducing evidence to fasten the negligence on the former, because the presumption
stands in the place of evidence. Being a mere presumption, however, the same is rebuttable by proof that the common carrier had exercised
extraordinary diligence as required by law in the performance of its contractual obligation, or that the injury suffered by the passenger was
solely due to a fortuitous event.
In fine, we can only infer from the law the intention of the Code Commission and Congress to curb the recklessness of drivers and
operators of common carriers in the conduct of their business.
Thus, it is clear that neither the law nor the nature of the business of a transportation company makes it an insurer of the passenger's
safety, but that its liability for personal injuries sustained by its passenger rests upon its negligence, its failure to exercise the degree of diligence
that the law requires.
In the case at bar, petitioner cannot succeed in his contention that respondents failed to overcome the presumption of negligence against them. The totality of
evidence shows that the death of petitioner’s spouse was caused by the reckless negligence of the driver of the Isuzu trailer truck which lost its brakes and bumped the
Celyrosa Express bus, owned and operated by respondents.
In fine, the evidence shows that before the collision, the passenger bus was cruising on its rightful lane along the Aguinaldo Highway when the trailer truck coming from
the opposite direction, on full speed, suddenly swerved and encroached on its lane, and bumped the passenger bus on its left middle portion. Respondent driver De
Borja had every right to expect that the trailer truck coming from the opposite direction would stay on its proper lane. He was not expected to know that the trailer truck
had lost its brakes. The swerving of the trailer truck was abrupt and it was running on a fast speed as it was found 500 meters away from the point of collision.

E. Bill of Lading

G.R. No. 147724 June 8, 2004

LORENZO SHIPPING CORP., petitioner,
vs.
CHUBB and SONS, Inc., GEARBULK, Ltd. and PHILIPPINE TRANSMARINE CARRIERS, INC., respondents.

FACTS:

Petitioner Lorenzo Shipping Corporation (Lorenzo Shipping, for short), a domestic corporation engaged in coastwise shipping, was the carrier of 581 bundles of black steel
pipes, the subject shipment, from Manila to Davao City. From Davao City, respondent Gearbulk, Ltd., a foreign corporation licensed as a common carrier under the laws of
Norway and doing business in the Philippines through its agent, respondent Philippine Transmarine Carriers, Inc. (Transmarine Carriers, for short), a domestic corporation,
carried the goods on board its vessel M/V San Mateo Victory to the United States, for the account of Sumitomo Corporation. The latter, the consignee, is a foreign
corporation organized under the laws of the United States of America. It insured the shipment with respondent Chubb and Sons, Inc., a foreign corporation organized and
licensed to engage in insurance business under the laws of the United States of America.

M/V Lorcon IV (Lorenzo Shipping’s unit) arrived at the Sasa Wharf in Davao city. Transmarine Carriers received the subject shipment which was discharged accordingly.
However, the latter discovered seawater in the hatch M/V Lorcon IV, and found the steel pipes submerged in it. Gearbulk loaded the shipment on board its vessel M/V San
Mateo Victory, for carriage to the US. It issued bills of lading which were marked “ALL UNITS HEAVILY RUSTED”.

ISSUE: Whether petitioner Lorenzo Shipping is negligent in carrying the subject cargo.

HELD: We affirm the findings of the lower courts that petitioner Lorenzo Shipping was negligent in its care and custody of the consignee’s goods.

The steel pipes, subject of this case, were in good condition when they were loaded at the port of origin (Manila) on board petitioner Lorenzo Shipping’s M/V Lorcon IV en
route to Davao City. Petitioner Lorenzo Shipping issued clean bills of lading covering the subject shipment. A bill of lading, aside from being a contract, and a receipt, is
also a symbol of the goods covered by it. A bill of lading which has no notation of any defect or damage in the goods is called a "clean bill of lading." A clean bill of lading
constitutes prima facie evidence of the receipt by the carrier of the goods as therein described.

Mere proof of delivery of goods in good order to a carrier and the subsequent arrival in damaged condition at the place of destination raises a prima facie case against the
carrier. In the case at bar, M/V Lorcon IV of petitioner Lorenzo Shipping received the steel pipes in good order and condition, evidenced by the clean bills of lading it
issued. When the cargo was unloaded from petitioner Lorenzo Shipping’s vessel at the Sasa Wharf in Davao City, the steel pipes were rusted all over.

In the case at bar, not only did the legal presumption of negligence attach to petitioner Lorenzo Shipping upon the occurrence of damage to the cargo. More so, the
negligence of petitioner was sufficiently established. Petitioner Lorenzo Shipping failed to keep its vessel in seaworthy condition. R.J. Del Pan Surveyors found the tank top
of M/V Lorcon IV to be "rusty, thinning, and with several holes at different places."

KLM ROYAL DUTCH AIRLINES VS. CA

30
FACTS:

Sometime in March 1965, private respondents Consuelo and Rufino Mendoza consulted a travel agency for a world tour they were intending to make with
their daughter and niece. They were given an itinerary by the agency which prescribed a trip or 35 legs, aboard different airlines and the longest of which would be via
KLM. Respondents approved the itinerary and asked the agency to make reservations and thereafter, KLM secured seat reservations which included tickets for Aer Lingus,
an agent of KLM, for the respondents and their 2 companions.
On June 22, 1965 at the Barcelona Airport, as instructed by a manager of Aer Lingus, cheked-in and they were accepted for passage. However, although their
daughter and niece were allowed to take the plane, the respondents were off-loaded on orders of the Aer Lingus manager who brusquely shoved them aside with the aid
of a policeman and who shouted at them.What the respondents did instead was to take a train trip for which they spent $50 while the plane trip would have cost only
$43.35.
Respondents, referring to KLM as the principal of Aer Lingus, filed a complaint for damages with the Court of First Instance of Manila arising from breach of
contract of carriage and for the humiliating treatment received by them at the hands of the Aer Lingus manager in Barcelona
RTC: Ruled in favor of the Mendoza’s.
CA: Affirmed RTC decision with increase on award for damages.
ISSUE: W/N KLM can be held liable for damages
RULING: The SC ruled affirming the decision of the CA, in favor of the respondents. KLM based their argument on the following provisions of the Warsaw convention:
ART. 30. (1) In the case of transportation to be performed by various successive carriers and failing within the definition set out in the third
paragraph of Article I, each carrier who accepts passengers, baggage, or goods shall be subject to the rules set out in the convention, and shall be
deemed to be one of the contracting parties to the contract of transportation insofar as the contract deals with that part of transportation which is
performed under his supervision. 2
(2) In the case of transportation of this nature, the passenger or his representative can take action only
against the carrier who performed the t ransportation during which the accident or the delay occured, save in the case
where, by express agreement, the first carrier has assumed liability for the whole journey.
The applicability insisted upon by the KLM of article 30 of the Warsaw Convention cannot be sustained. That article presupposes the occurrence of either an accident or a
delay, neither of which took place at the Barcelona airport. What happened instead is that the Aer Lingus, through its manager there, refused to transport the
respondents to their planned and contracted destination.
Another argument of KLM was based on a provision on the inside front cover the each ticket captioned “Conditions of Contract” which reads:
1 ... (a) Liability of carrier for damages shall be limited to occurrences on its own line, except in the case of checked baggage as to which
the passenger also has a right of action against the first or last carrier. A carrier issuing a ticket or checking baggage for carriage over the lines of
others does so only as agent..
According to the SC, the argument that the KLM should not be held accountable for the tortious conduct of Aer Lingus because of the provision printed on the
respondents' tickets expressly limiting the KLM's liability for damages only to occurrences on its own lines is unacceptable. As noted by the Court of Appeals that
condition was printed in letters so small that one would have to use a magnifying glass to read the words. Under the circumstances, it would be unfair and inequitable to
charge the respondents with automatic knowledge or notice of the said condition so as to preclude any doubt that it was fairly and freely agreed upon by the respondents
when they accepted the passage tickets issued to them by the KLM.
Moreover, as maintained by the respondents and the Court of Appeals, the passage tickets of the respondents provide that the carriage to be performed thereunder by
several successive carriers "is to be regarded as a single operation," which is diametrically incompatible with the theory of the KLM that the respondents entered into a
series of independent contracts with the carriers which took them on the various segments of their trip.
The breach of that guarantee was aggravated by the discourteous and highly arbitrary conduct of an official of the Aer Lingus which the KLM had engaged to transport the
respondents on the Barcelona-Lourdes segment of their itinerary

G.R. No. L-22425 August 31, 1965

NORTHWEST AIRLINES, INC., vs. NICOLAS L. CUENCA and COURT OF APPEALS (SPECIAL SIXTH DIVISION),

CONCEPCION, J.:

This is an action for damages for alleged breach of contract. After appropriate proceedings the Court of First Instance of Manila, in which the case was originally filed,
rendered judgment sentencing defendant Northwest Airlines, Inc. — hereinafter referred to as petitioner — to pay to plaintiff Cuenca — hereinafter referred to as
respondent — the sum of P20,000 as moral damages, together with the sum of P5,000 as exemplary damages, with legal interest thereon from the date of the filing of
complaint," December 12, 1959, "until fully paid, plus the further sum of P2,000 as attorney's fees and expenses of litigation." On appeal taken by petitioner, said decision
was affirmed by the Court of Appeals, except as to the P5,000.00 exemplary damages, which was eliminated, and the P20,000.00 award for moral damages, which was
converted into nominal damages. The case is now before us on petition for review by certiorari filed by petitioner, upon the ground that the lower court has erred: (1) in
holding that the Warsaw Convention of October 12, 1929, relative to transportation by air is not in force in the Philippines; (2) in not holding that respondent has no cause
of action; and (3) in awarding P20,000 as nominal damages.

We deem it unnecessary to pass upon the first assignment of error because the same is the basis of the second assignment of error, and the latter is devoid of merit, even
if we assumed the former to be well-taken. Indeed the second assignment of error is predicated upon Articles 17, 18 and 19 of said Convention, reading:

ART. 17. The carrier shall be liable for damages sustained in the event of the death or wounding of a passenger or any other bodily injury suffered by a
passenger, if the accident which caused the damage so sustained took place on board the aircraft or in the course of any of the operations of embarking or
disembarking.

ART. 18. (1) The carrier shall be liable for damage sustained in the event of the destruction or loss of, or of damage to, any checked baggage, or any goods, if
the occurrence which caused the damage so sustained took place during the transportation by air.

(2) The transportation by air within the meaning of the preceding paragraph shall comprise the period during which the baggage or goods are in charge of the
carrier, whether in an airport or on board an aircraft, or, in the case of a landing outside an airport, in any place whatsoever.

(3) The period of the transportation by air shall not extend to any transportation by land, by sea, or by river performed outside an airport. If, however, such
transportation takes place in the performance of a contract for transportation by air, for the purpose of loading, delivery, or transhipment, any damage is
presumed, subject to proof to the contrary, to have been the result of an event which took place during the transportation by air.

ART. 19. The carrier shall be liable for damage occasioned by delay in the transportation by air of passengers, baggage, or goods.

31
Petitioner argues that pursuant to those provisions, an air "carrier is liable only" in the event of death of a passenger or injury suffered by him, or of destruction or loss of,
or damage to any checked baggage or any goods, or of delay in the transportation by air of passengers, baggage or goods. This pretense is not borne out by the language
of said Articles. The same merely declare the carrier liable for damages in the enumerated cases, if the conditions therein specified are present. Neither said provisions
nor others in the aforementioned Convention regulate or exclude liability for other breaches of contract by the carrier. Under petitioner's theory, an air carrier would be
exempt from any liability for damages in the event of its absolute refusal, in bad faith, to comply with a contract of carriage, which is absurd.

The third assignment of error is based upon Medina vs. Cresencia (52 Off. Gaz. 4606), and Quijano vs. Philippine Air Lines (CA-G.R. No. 21804-R). Neither case is, however,
in point, aside from the fact that the latter is not controlling upon us. In the first case, this Court eliminated a P10,000 award for nominal damages, because the aggrieved
party had already been awarded P6,000 as compensatory damages, P30,000 as moral damages and P10,000 as exemplary damages, and "nominal damages cannot co-
exist with compensatory damages." In the case at bar, the Court of Appeals has adjudicated no such compensatory, moral and exemplary damages to respondent herein.

Moreover, there are special reasons why the P20,000.00 award in favor of respondent herein is justified, even if said award were characterized as nominal damages.
When his contract of carriage was violated by the petitioner, respondent held the office of Commissioner of Public Highways of the Republic of the Philippines. Having
boarded petitioner's plane in Manila with a first class ticket to Tokyo, he was, upon arrival at Okinawa, transferred to the tourist class compartment. Although he revealed
that he was traveling in his official capacity as official delegate of the Republic to a conference in Tokyo, an agent of petitioner rudely compelled him in the presence of
other passengers to move, over his objection, to the tourist class, under threat of otherwise leaving him in Okinawa. In order to reach the conference on time, respondent
had no choice but to obey.

It is true that said ticket was marked "W/L," but respondent's attention was not called thereto. Much less was he advised that "W/L" meant "wait listed." Upon the other
hand, having paid the first class fare in full and having been given first class accommodation as he took petitioner's plane in Manila, respondent was entitled to believe
that this was a confirmation of his first class reservation and that he would keep the same until his ultimate destination, Tokyo. Then, too, petitioner has not tried to
explain or even alleged that the person to whom respondent's first class seat was given had a better right thereto. In other words, since the offense had been committed
with full knowledge of the fact that respondent was an official representative of the Republic of the Philippines, the sum of P20,000 awarded as damages may well be
considered as merely nominal. At any rate, considering that petitioner's agent had acted in a wanton, reckless and oppressive manner, said award may also be considered
as one for exemplary damages.

ALITALIA vs. AIC

G.R. No. 71929, December 4, 1990
192 SCRA 9

FACTS:
Dr. Felipa Pablo, an associate professor in the U.P. 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- LAEA Division of Atomic Energy in Food and Agriculture of the U.N. in Ispra, Italy. 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”. 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 by ALITALIA. She was, however, told by the ALITALIA
personnel at Milan that her baggage (including her suitcase containing her paper) was “delayed inasmuch as the same was in one of the succeeding flights from Rome to
Milan. But the other flights arriving from Rome did not have her luggage on board. Completely distraught and discouraged she returned to Manila w/o attending the
meeting at Ispra.
Once back in Manila, she demanded that ALITALIA make reparation for the damages thus suffered by her. She rejected Alitalia’s offer “for airline tickets “ and
forthwith commenced the action for damages.
As it turned out, Prof. Pablo’s suitcase were in fact located and forwarded to Ispra, Italy, but only on the day after her scheduled appearance and participation at the
U.N. meeting there. Of course, Dr. Pablo was no longer there to accept delivery; she as on her way home to Manila. And for some reason or another, the suitcase was not
restored to Prof. Pablo by ALITALIA until 11 months later, and 4 months after institution of her action.
The CFI rendered judgment in favor of Dr. Pablo. On appeal, I.A.C. affirmed but increased the award of nominal damages. ALITALIA appealed to he S.C. on certiorari
predicated basically on the same points, to wit:
1. that 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 to nominal and attorney’s fees.

RULING:
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. 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 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 willful 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”, 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.” 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 extra-ordinary sort of damage resulting to a passenger and preclude recovery therefore 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 Word Airways, Inc. vs. IAC, for example, the Warsaw Convention was applied as regards the limitation on the carrier’s liability, there being a simple
loss of luggage w/o any otherwise improper conduct on the part of the official 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 he carrier’s liability, where there was satisfactory evidence
of malice or bad faith attributable to its officers and employees. Thus, an air carrier was sentenced to pay not only compensation but also moral and exemplary damages
and attorney’s fees, where its employees rudely puts a passenger holding a first class ticket in the tourist or economy section, or ousted a brown Asiatic from the plane to
give a seat to a white man; or gave the seat of a passenger with a confirmed reservation to another, or subjected a passenger to extremely rude, even barbaric treatment,
as by calling him a “monkey”

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 w/o appreciable damage. The facts is, nevertheless, that some special species of injury was caused to Dr. Pablo because petitioner
ALITALIA misplaced her luggage and failed to deliver it to her at the time of appointed – a breach of its contract of carriage, to be sure-with the result that she unable to
read the paper and make the scientific presentation that she has painstakingly labored over, at the prestigious international conference, to attend which she has traveled
hundred 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

32
participate at the conference, was a singular honor not only to herself but to the University of the Philippines and the country as well, an opportunity to claim this honor
or distinction was irretrievably lost to her because of Alitalia’s breach of its contract.

PanAm World Airways vs. Rapadas (GR 60673, 19 May 1992)

Third Division, Gutierrez Jr. (J): 4 concur

Facts: On 16 January 1975, Jose K. Rapadas held Passenger Ticket and Baggage Claim Check 026-394830084-5 for Pan American World Airways Inc.’s (PanAm) Flight 841
with the route from Guam to Manila. While standing in line to board the flight at the Guam airport, Rapadas was ordered by PanAm’s handcarry control agent to check-in
his Samsonite attache case. Rapadas protested pointing to the fact that other co-passengers were permitted to handcarry bulkier baggages. He stepped out of the line
only to go back again at the end of it to try if he can get through without having to register his attache case. However, the same man in charge of handcarry control did not
fail to notice him and ordered him again to register his baggage. For fear that he would miss the plane if he insisted and argued on personally taking the valise with him,
he acceded to checking it in. He then gave his attache case to his brother who happened to be around and who checked it in for him, but without declaring its contents or
the value of its contents. He was given a Baggage Claim Tag P-749-713. Upon arriving in Manila on the same date, 16 January 1975, Rapadas claimed and was given all his
checked-in baggages except the attache case. Since Rapadas felt ill on his arrival, he sent his son, Jorge Rapadas to request for the search of the missing luggage. PanAm
exerted efforts to locate the luggage through the Pan American World Airways-Manila International Airport (PAN AM-MIA) Baggage Service. On 30 January 1975, PanAm
required the Rapadas to put the request in writing. Rapadas filled in a Baggage Claim Blank Form. Thereafter, Rapadas personally followed up his claim. For several times,
he called up Mr. Panuelos, the head of the Baggage Section of PAN AM. He also sent letters demanding and reminding the petitioner of his claim. Rapadas received a
letter from PanAm’s counsel dated 2 August 1975 offering to settle the claim for the sum of $160.00 representing PanAm’s alleged limit of liability for loss or damage to a
passenger’s personal property under the contract of carriage between Rapadas and PANAM.

Refusing to accept this kind of settlement, Rapadas filed the instant action for damages on 1 October 1975. Rapadas alleged that PanAm discriminated or singled him out
in ordering that his luggage be checked in. He also alleged that PanAm neglected its duty in the handling and safekeeping of his attache case from the point of
embarkation in Guam to his destination in Manila. He placed the value of the lost attache case and its contents at US$42,403.90. According to him, the loss resulted in his
failure to pay certain monetary obligations, failure to remit money sent through him to relatives, inability to enjoy the fruits of his retirement and vacation pay earned
from working in Tonga Construction Company (he retired in August 1974) and inability to return to Tonga to comply with then existing contracts. The lower court ruled in
favor of complainant Rapadas after finding no stipulation giving notice to the baggage liability limitation. The court rejected the claim of PanAm that its liability under the
terms of the passenger ticket is only up to $160.00. However, it scrutinized all the claims of Rapadas. It discredited insufficient evidence to show discriminatory acts or bad
faith on the part of PanAm. The trial court ordered PanAm to pay Rapadas by way of actual damages the equivalent peso value of the amount of $5,228.90 and 100
paengs (Tongan money), nominal damages in the amount of P20,000.00 and attorney’s fees of P5,000.00, and the costs of the suit. The trial court also dismissed PanAm’s
counterclaim.

On appeal, the Court of Appeals affirmed the trial court decision. Hence, the petition for review.

The Supreme Court granted the petition, and reversed and set aside the decision of the Court of Appeals. The Court ordered PanAm to pay Rapadas damages in the
amount of US$400.00 or its equivalent in Philippine Currency at the time of actual payment, P10,000.00 in attorney’s fees, and costs of the suit.

1. Notice of limited liability in airline ticket

Herein, there was such a Notice appearing on page two (2) of the airline ticket stating that the Warsaw Convention governs in case of death or injury to a passenger or of
loss, damage or destruction to a passenger’s luggage. The Notice states that “If the passenger’s journey involves an ultimate destination or stop in a country other than
the country of departure the Warsaw Convention may be applicable and the Convention governs and in most cases limits the liability of carriers for death or personal
injury and in respect of loss of or damage to baggage. See also notice headed “Advice to International Passengers on Limitation of Liability.” (The latter notice refers to
limited liability for death or personal injury to passengers with proven damages not exceeding US $75,000 per passenger). Furthermore, paragraph 2 of the “Conditions of
Contracts” also appearing on page 2 of the ticket states that “(2) Carriage hereunder is subject to the rules and limitations relating to liability established by the Warsaw
Convention unless such carriage is not ‘international carriage’ as defined by that Convention.”

2. Paragraph 2 of Conditions of Contract sufficient notice of applicability of Warsaw limitations

Herein, the original of the Passenger Ticket and Baggage Check 026-394830084-5 itself was not presented as evidence as it was among those returned to Mr. Faupula (of
the Union Steam Ship Company of New Zealand, Ltd., Tonga; who facilitated the issuance of the tickets on credit). Thus, apart from the evidence offered by the airline, the
lower court had no other basis for determining whether or not there was actually a stipulation on the specific amounts PanAm had expressed itself to be liable for loss of
baggage. Although the trial court rejected the evidence of the PanAm of a stipulation particularly specifying what amounts it had bound itself to pay for loss of luggage,
the Notice and paragraph 2 of the “Conditions of Contract” should be sufficient notice showing the applicability of the Warsaw limitations.

3. Warsaw Convention, Article 1, paragraph 2

The Warsaw Convention, as amended, specifically provides that it is applicable to international carriage which it defines in Article 1, par. 2 as follows, “(2) For the purposes
of this Convention, the expression ‘international carriage’ means any carriage in which, according to the agreement between the parties, the place of departure and the
place of destination, whether or not there be a breach in the carriage or a transshipment, are situated either within the territories of two High Contracting Parties or
within the territory of a single High Contracting Party if there is an agreed stopping place within the territory of another State, even if that State is not a High Contracting
Party. Carriage between two points within the territory of a single High Contracting Party without an agreed stopping place within the territory of another State is not
international carriage for the purposes of this Convention.” (”High Contracting Party” refers to a state which has ratified or adhered to the Convention, or which has not
effectively denounced the Convention [Article 40A (1)])”

4. No detailed notice of baggage liability required; Article 22 (2) of Convention

Nowhere in the Warsaw Convention, as amended, is such a detailed notice of baggage liability limitations required. Nevertheless, it should become a common, safe and
practical custom among air carriers to indicate beforehand the precise sums equivalent to those fixed by Article 22 (2) of the Convention.

5. Passenger ticket complies with Article 3, paragraph 1(c) of the Warsaw Convention
The Convention governs the availment of the liability limitations where the baggage check is combined with or incorporated in the passenger ticket which complies with
the provisions of Article 3, par. 1(c). (Article 4, par. 2) Herein, the baggage check is combined with the passenger ticket in one document of carriage. The passenger ticket
complies with Article 3, par. 1(c) which provides: “(1) In respect of the carriage of passengers a ticket shall be delivered containing: xxx (c) a notice to the effect that, if the
passenger’s journey involves an ultimate destination or stop in a country other than the country of departure, the Warsaw Convention may be applicable and that the
Convention governs and in most cases limits the liability of carriers for death or personal injury and in respect of loss of or damage to baggage.”

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6. Contracts of adhesion; Ong Yiu vs. CA, and PanAm vs. IAC
As held in the case of Ong Yiu v. Court of Appeals, supra, and reiterated in Pan American World Airways v. Intermediate Appellate Court (164 SCRA 268 [1988]) that “It
(plane ticket) is what is known as a contract of ‘adhesion’, in regards which it has been said that contracts of adhesion wherein one party imposes a ready made form of
contract on the other, as the plane ticket in the case at bar, are contracts not entirely prohibited. The one who adheres to the contract is in reality free to reject it entirely;
if he adheres, he gives his consent. And as held in Randolph v. American Airlines, 103 Ohio App. 172, 144 N.E. 2d 878; Rosenchein v. Trans World Airlines, Inc., 349 S.W. 2d
483, ‘a contract limiting liability upon an agreed valuation does not offend against the policy of the law forbidding one from contracting against his own negligence.’”

7. Contracts of adhesion not prohibited; Blind reliance not encouraged

While contracts of adhesion are not entirely prohibited, neither is a blind reliance on them encouraged. In the face of facts and circumstances showing they should be
ignored because of their basically one sided nature, the Court does not hesitate to rule out blind adherence to their terms. (See Sweet Lines, Inc. v. Teves, 83 SCRA 361,
368-369 [1978])

8. Passenger expected to be vigilant insofar as his luggage is concerned

The provisions in the plane ticket sufficient to govern the limitations of liabilities of the airline for loss of luggage. The passenger, upon contracting with the airline and
receiving the plane ticket, was expected to be vigilant insofar as his luggage is concerned. If the passenger fails to adduce evidence to overcome the stipulations, he
cannot avoid the application of the liability limitations. Herein, Rapadas actually refused to register the attache case and chose to take it with him despite having been
ordered by the PanAm agent to check it in. In attempting to avoid registering the luggage by going back to the line, Rapadas manifested a disregard of airline rules on
allowable handcarried baggages. Prudence of a reasonably careful person also dictates that cash and jewelry should be removed from checked-in-luggage and placed in
one’s pockets or in a handcarried Manila-paper or plastic envelope.

9. Alleged lack of enough time to make declaration of higher value and payment of charges not a defense
The alleged lack of enough time for him to make a declaration of a higher value and to pay the corresponding supplementary charges cannot justify his failure to comply
with the requirement that will exclude the application of limited liability. Had he not wavered in his decision to register his luggage, he could have had enough time to
disclose the true worth of the articles in it and to pay the extra charges or remove them from the checked-in-luggage. Moreover, an airplane will not depart meantime
that its own employee is asking a passenger to comply with a safety regulation.

10. No proof of arbitrary behavior; Carrier not liable for discrimination or mistreatment
Passengers are also allowed one handcarried bag each provided it conforms to certain prescribed dimensions. If Mr. Rapadas was not allowed to handcarry the lost
attache case, it can only mean that he was carrying more than the allowable weight for all his luggages or more than the allowable number of handcarried items or more
than the prescribed dimensions for the bag or valise. The evidence on any arbitrary behavior of a Pan Am employee or inexcusable negligence on the part of the carrier is
not clear from the petition. Absent such proof, the Court cannot hold the carrier liable because of arbitrariness, discrimination, or mistreatment.

11. Reason behind limited liability clauses

By no means is it suggested that passengers are always bound to the stipulated amounts printed on a ticket, found in a contract of adhesion, or printed elsewhere but
referred to in handouts or forms. The Court simply recognize that the reasons behind stipulations on liability limitations arise from the difficulty, if not impossibility, of
establishing with a clear preponderance of evidence the contents of a lost valise or suitcase. Unless the contents are declared, it will always be the word of a passenger
against that of the airline. If the loss of life or property is caused by the gross negligence or arbitrary acts of the airline or the contents of the lost luggage are proved by
satisfactory evidence other than the self-serving declarations of one party, the Court will not hesitate to disregard the fine print in a contract of adhesion. (See Sweet Lines
Inc. v. Teves, supra) Otherwise, the Court is constrained to rule that it has to enforce the contract as it is the only reasonable basis to arrive at a just award.

12. Trial Court’s finding on the amount lost is more of a probability than a proved conclusion
The conclusion of the trial court does not arise from the facts. That the attache case was originally handcarried does not beg the conclusion that the amount of $4,750.00
in cash could have been placed inside. It may be noted that out of a claim for US$42,403.90 as the amount lost, the trial court found for only US$5,228.90 and 100
paengs. The court had doubts as to the total claim.

13. Lost luggage considered as unchecked luggage; $400.00 instead of $160

The lost luggage was declared as weighing around 18 pounds or approximately 8 kilograms. At $20.00 per kilogram, Pan Am offered to pay $160.00 as a higher value was
not declared in advance and additional charges were not paid. The Court notes, however, that an amount of $400.00 per passenger is allowed for unchecked luggage.
Since the checking-in was against the will of Rapadas, the Court treats the lost bag as partaking of involuntarily and hurriedly checked-in luggage and continuing its earlier
status as unchecked luggage. The fair liability under PanAm’s own printed terms is $400.00.

14. Damages not supported by factual basis

Since the trial court ruled out discriminatory acts or bad faith on the part of Pan Am or other reasons warranting damages, there is no factual basis for the grant of
P20,000.00 damages.

15. Warsaw convention does not preclude award of attorney’s fees

It is just and equitable for Rapadas to recover expenses for litigation in the amount of P5,000.00. Article 22 (4) of the Warsaw Convention, as amended does not precluded
an award of attorney’s fees. That provision states that the limits of liability prescribed in the instrument “shall not prevent the court from awarding, in accordance with its
own law, in addition, the whole or part of the court costs and other expenses of litigation incurred by the plaintiff.” The Court, however, raise the award to P10,000.00
considering the resort to the Court of Appeals and the Supreme Court.

G.R. No. 101538 June 23, 1992

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

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

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

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

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

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

1. the court of the domicile of the carrier;

2. the court of its principal place of business;

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

4. the court of the place of destination.

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

SC: The Court can only sympathize with the petitioner, who must prosecute his claims in the United States rather than in his own country at least inconvenience. But we
are unable to grant him the relief he seeks because we are limited by the provisions of the Warsaw Convention which continues to bind us.

LUNA V. CA
Facts:
On 19 May 1989, at around 8:00 in the morning, petitioners Rufino Luna, Rodolfo Alonso and Porfirio Rodriguez boarded Flight 020 of private respondent Northwest
Airlines bound for Seoul, South Korea, to attend the four-day Rotary International Convention from the 21st to the 24th of May 1992. They checked in one (1) piece of
luggage each. After boarding, however, due to engine trouble, they were asked to disembark and transfer to a Korean Airlines plane scheduled to depart four (4) hours
later. They were assured that their baggage would be with them in the same flight.
When petitioners arrived in Seoul, they discovered that their personal belongings were nowhere to be found instead, they were allegedly flown to Seattle, U.S.A. It was
not until four (4) days later, and only after repeated representations with Northwest Airlines personnel at the airport in Korea were petitioners able to retrieve their
luggage. By then the Convention, which they were hardly able to attend, was almost over.
Issue:
Whether or not the Warsaw Convention is applicable.
Ruling:
Previously, We ruled that the Warsaw Convention was a treaty commitment voluntarily assumed by the Philippine government; consequently, it has the force and effect of
law in this country. But, in the same token, We are also aware of jurisprudence that the Warsaw Convention does not operate as an exclusive enumeration of the
instances for declaring an airline liable for breach of contract of carriage or as an absolute limit of the extent of that liability. The Convention merely declares the carrier
liable for damages in the enumerated cases, if the conditions therein specified are present. For sure, it does not regulate the liability, much less exempt, the carrier for
violating the rights of others which must simply be respected in accordance with their contracts of carriage. The application of the Convention must not therefore be
construed to preclude the operation of the Civil Code and other pertinent laws. In fact, in Alitalia v. IAC, We awarded Dr. Felipa Pablo nominal damages, the provisions of
the Convention notwithstanding.

PAL V. IAC, 70481

Facts:
Before boarding petitioner's airplane on August 4, 1974 for their business sojourn from Manila to Honolulu via Tokyo, private respondents, the spouses George and
Veronica Lorenzana, checked in two pieces of baggage for which they were given baggage claim tickets.
On the Tokyo-Honolulu leg, they changed planes from PAL to Pan Am. When they arrived in Honolulu, only the luggage containing George's personal effects was located.
It turned out that the missing luggage was not turned over by the employees of the Philippines Airlines to the Pan Am Office in Tokyo and that the baggage was returned
to Manila on September 16, 1974.
Issue:
Whether the limited liability under Warsaw Convention is applicable
Ruling:
NO.
To bring the case within the ambit of the limited liability clause for loss, damage, or delay under Article 22 in conjunction with the second paragraph of Article 26 of the
Warsaw Convention, petitioner is inclined to construe its accountability by arguing that the missing bag was merely delayed. Petitioner is categorical in its disputation that
since the bag was neither lost nor damaged, the baggage was merely delayed, hence the caveat must perforce apply. (Page 10, Memorandum; Page 133 Rollo). This
process of exclusion typifies the classic fallacy of non-sequitur because the fact of the matter is that the missing luggage was not turned over by the employees of
petitioner to the Pan Am Office in Tokyo and was returned to Manila on September 16, 1974 (page 3, Decision in Civil Case No. 103684; Page 38, Record on Appeal). Still
worse, the luggage was not forthwith delivered to private respondents who returned from their trip to the U.S. and Canada on September 24, 1974. It was not until more
than a year thereafter, or on December 5, 1975, when the luggage was finally delivered to private respondents. There is thus no occasion to speak of delay since the
baggage was not delivered at all to the passenger for purposes of the trip in contravention of a common carrier's undertaking to transport the goods from the place of
embarkation to the ultimate point of destination.

CATHAY PACIFIC AIRWAYS VS CA G.R. 60501, MARCH 5, 1993

Facts:
Respondent Tomas Alcantara was a first class passenger of Cathay Pacific departing from Manila to Jakarta via Hong Kong. When he arrived at Jakarta, he found
out that his luggage was missing which contained all his clothes and documents for the business trip. He was told by the carrier that his luggage was left at Hong Kong and
was given $20 inconvenience fee. The luggage later arrived at Jakarta 24 hrs after his arrival, but was not delivered to him, rather required by Cathay to be picked up by an
official of the Phil. Embassy. Upon his return, he sue for breach of contract, moral, exemplary, temperate damages.
Issue:
Was their a breach of contract of carriage?
Does the Warsaw Convention operate in this particular case?
Held:
Petitioner breached its contract of carriage with private respondent when it failed to deliver his luggage at the designated place and time , it being the
obligation of a common carrier to carry its passengers and their luggage safely to their destination, which includes the duty not to delay their transportation, and the
evidence shows that petitioner acted fraudulently or in bad faith.

35
 The Warsaw Convention itself provides in Art. 25 that —
"(1) The carrier shall not be entitled to avail himself of the provisions of this convention which exclude or limit his liability, if the damage is caused
by his wilfull misconduct or by such default on his part as, in accordance with the law of the court to which the case is submitted, is considered to be
equivalent to wilfull misconduct."
(2) Similarly the carrier shall not be entitled to avail himself of the said provisions, if the damage is caused under the same circumstances by any
agent of the carrier acting within the scope of his employment."
The Warsaw Convention has the force and effect of law in this country, being a treaty commitment assumed by the Philippine government, said convention
does not operate as an exclusive enumeration of the instances for declaring a carrier liable for breach of contract of carriage or as an absolute limit of the extent of that
liability. The Warsaw Convention declares the carrier liable for damages in certain enumerated cases and under certain limitations. However, it must not be construed to
preclude the operation of the Civil Code and other pertinent laws. It does not regulate, much less exempt, the carrier from liability for damages for violating the rights of
its passengers under the contract of carriage, especially if willful misconduct on the part of the carrier's employees is found or established, which is clearly the case before
Us.

MARIA LOPEZ VS NORTHWEST AIRLINES AND RTC MAKATI, BR. 65 G.R. NO. 106973 JUNE 17, 1993
Facts:
Maria Lopez bought in New York a ticket covering the following destinations “New York – Seattle – Manila – Tokyo – New York.” 2 days before her
trip back to New York via Tokyo, she was informed that she could not be accommodated despite that earlier confirmation by the said private respondent Northwest
Airlines on the said date, and instead rescheduled her flight a day later. Consequently she filed before the RTC Makati Br. 65 a complaint for damages alleging that in bad
faith and utter disregard of her rights as well as its own obligation under the contract of carriage. The RTC refused to take jurisdiction of the case.

Issue:
Are Philippines Courts precluded from exercising jurisdiction over the subject matter of the action under the Warsaw Convention?

Held:
Article 28(1) of the Warsaw Convention which provides:
Art. 28(1). An action for damages must be brought, at the option of the plaintiff, in the territory of one of the High Contracting Parties, either before the court of the
domicile of the carrier or of his principal place of business, or where he has a place of business through which the contract has been made, or before the court at the
place of destination.
A decision in KLM Royal Dutch Airlines vs. Tamayo, 8 a case wherein the Court of Appeals ruled that even "off-loading or bumping off" does not come under the
contemplation of Article 28(1) just Article 28 thereof should not be interpreted to be a rule on jurisdiction but of mere venue.
The trial court should have seriously taken into consideration the earlier case of Pan American World Airways, Inc. vs. Intermediate Appellate Court, wherein this
Court affirmed a decision of the appellant court awarding damages to the private respondent therein arising from Pan American World Airways (PAN AM) refusal to
accommodate the latter on PAN AM Flight No. 431 from Sto. Domingo, Republica Dominica, to San Juan, Puerto Rico on 29 April 1973 notwithstanding the fact that said
private respondent had a confirmed plane ticket which she purchased from PAN AM's office in Sto. Domingo. We have ruled in a number of cases that posterior changes
in the doctrine of this Court cannot retroactively be applied to nullify a prior final ruling in the same proceeding where the prior adjudication was had, whether the case
should be civil or criminal in nature.

G.R. No. 83612 November 24, 1994

LUFTHANSA GERMAN AIRLINES, petitioner,
vs.
COURT OF APPEALS and TIRSO V. ANTIPORDA, SR., respondents.

FACTS:

Tirso V. Antiporda, Sr. was an associate director of the Central Bank of the Philippines and a registered consultant of the Asian Development Bank, the World Bank and the
UNDP. He was, contracted by Sycip, Gorres, Velayo & Co. (SGV) to be the institutional financial specialist for the agricultural credit institution project of the Investment and
Development Bank of Malawi in Africa.
Through SGV, Lufthansa, issued a confirmed ticket No. 3477712678 for Antiporda's confirmed flights to Malawi, Africa. The ticket particularized his itinerary as
follows:
Carrier Flight Date Time Status

Manila to SQ 081 25-9-84 1530 OK

Singapore
Singapore to LH 695 25-9-84 2200 OK
Bombay
Bombay to KQ 203 26-9-84 0215 OK
Nairobi
Nairobi to QM 335 26-9-84 1395 OK
Lilongwe
Lilongwe to QM 031 26-9-84 1600 OK
Blantyre

When Antiporda arrived in Bombay, Gerard Matias, Lufthansa’s traffic officer, told him that his seat in the Air Kenya Flight 203 bound for Nairobi was given to
another. The man was discourteous to him and he was made to stay at the terminal until he was able to secure a seat in another flight bound for Nairobi the following
day. As a result, he missed his important appointment in Blantyre, Malawi as he was delayed for two days from schedule.

ISSUE:

Whether or not petitioner Lufthansa German Airlines which issued a confirmed Lufthansa ticket to private respondent Antiporda covering a five-leg trip abroad different
airlines should be held liable for damages occasioned by the "bumping-off" of said private respondent Antiporda by Air Kenya, one of the airlines contracted to carry him
to a particular destination of the five-leg trip.

HELD: Lufthansa German Airlines is liable.

We hold that the term "delay" does not encompass the instance of "bumping-off," the latter having been defined as refusal to carry or transport a passenger.

Antiporda was issued a confirmed Lufthansa ticket all throughout the five-leg trip. The fourth paragraph of the "Conditions of Contract" stipulated in the ticket indubitably
showed that the contract of carriage was considered as one of continuous air transportation from Manila to Blantyre, Malawi, thus:
4. . . . carriage to be performed hereunder by several successive carriers is regarded as a single operation.

36
In the very nature of their contract, Lufthansa is clearly the principal in the contract of carriage with Antiporda and remains to be so, regardless of those instances when
actual carriage was to be performed by various carriers. The issuance of a confirmed Lufthansa ticket in favor of Antiporda covering his entire five-leg trip abroad
successive carriers concretely attests to this. This also serves as proof that Lufthansa, in effect guaranteed that the successive carriers, such as Air Kenya would honor his
ticket; assure him of a space therein and transport him on a particular segment of his trip.

Surely, Lufthansa before confirming the ticket of the plaintiff-appellee must have confirmed the flight with Kenya Airways. If it was impossible to get a seat upon its own
investigation in Bombay, then it should have not confirmed the ticket of the plaintiff-appellee. It is the defendant-appellant who was negligent in the performance of its
duties, and plaintiff-appellee was just plainly deceived.

Clearly, bad faith attended the performance of the contract of carriage, for even while Antiporda was in Bombay, representatives of Lufthansa already tried to evade
liability first, by claiming that the contract of carriage between Lufthansa and Antiporda ceased at Bombay airport, in disregard of the fact that Antiporda was holding a
Lufthansa ticket for the entire five-leg trip; second, despite Berndt Loewe's knowledge that Antiporda's seat was allowed to be given to another passenger, the same
suppressed the information and feigned ignorance of the matter, presenting altogether another reason why Antiporda was not listed in the manifest, i.e. that Air Kenya
Boeing 707 was overbooked, notwithstanding clear proof that Lufthansa in Manila confirmed his reservation for said flight.

PHILIPPINE AIRLINES, INC. vs. COURT OF APPEALS, DR. JOSEFINO MIRANDA and LUISA MIRANDA, May 17, 1996

FACTS:
From the US, Josefino and Luisa Miranda obtained confirmed bookings from PAL’s San Francisco Office for PAL Flight PR 101 from San Francisco to Manila via Honolulu;
PAL flight PR 851 from Manila to Cebu; and PAL Flight PR 905 from Cebu to Surigao.

After a stopover at Honolulu, and upon arrival in Manila on June 23, 1988, they were told by the PAL personnel that their baggage consisting of two balikbayan boxes, two
pieces of luggage and one fishing rod case were off-loaded at Honolulu, Hawaii due to weight limitations. Consequently, private respondents missed their connecting flight
from Manila to Cebu City, as originally scheduled, since they had to wait for their baggage which arrived the following day, June 24, 1988, after their pre-scheduled
connecting flight had left. They consequently also missed their other scheduled connecting flight from Cebu City to Surigao City.

The Miranda’s sued plaintiff for damages

ISSUE:
Do the Miranda’s entitled to damages?
Is the Warsaw Convention applicable to limit PAL’s liability?

HELD:
The SC adopts the findings of the CA and the trial court. The Miranda’s are entitled to damages and the Warsaw Convention does not apply to the case.

The Court of Appeals affirmed these findings of the trial court by stating that —

While we recognize an airline's prerogative to off-load baggag(e) to conform with weight limitations for the purpose of ensuring the safety of passengers, We,
however, cannot sanction the motion (sic) and manner it was carried out in this case.

It is uncontroverted that appellees' baggag(e) were properly weighed and loaded in the plane when it left San Francisco for Honolulu. When they reached
Honolulu, they were not informed that their baggag(e) would be off-loaded. Ironically, if the purpose of the off-loading was to conform with the weight
limitations, why were other containers loaded in Honolulu? The real reason was revealed by Edgar Montejar, baggage service representative of the
appellant. . . .

xxx xxx xxx

As earlier noted, the off-loading of appellees' baggag(e) was done in bad faith because it was not really for the purpose of complying with weight limitations
but to give undue preference to newly-loaded baggag(e) in Honolulu. This was followed by another mishandling of said baggag(e) in the twice-cancelled
connecting flight from Cebu to Surigao. Appellees' sad experience was further aggravated by the misconduct of appellant's personnel in Cebu, who lied to
appellees in denying their request to be billeted at Cebu Plaza Hotel.

xxx xxx xxx

In Cathay Pacific Airways, Ltd. vs. Court of Appeals, et al., a case which is virtually on all fours with the present controversy, we stated:

In the case at bar, both the trial court and the appellate court found that CATHAY was grossly negligent and reckless when it failed to deliver the luggage of
petitioner at the appointed place and time. We agree. . . . While the mere failure of CATHAY to deliver respondent's luggage at the agreed place and time did
not ipso facto amount to willful misconduct since the luggage was eventually delivered to private respondent, albeit belatedly, We are persuaded that the
employees of CATHAY acted in bad faith, . . .

. . ., if the defendant airline is shown to have acted fraudulently or in bad faith, the award of moral and exemplary damages is proper.

xxx xxx xxx

There was no error on the part of the Court of Appeals when it refused to apply the provisions of the Warsaw Convention, for in the words of this Court in the
aforequoted Cathay Pacific case:

. . . although the Warsaw Convention has the force and effect of law in this country, being a treaty commitment assumed by the Philippine government, said
convention does not operate as an exclusive enumeration of the instances for declaring a carrier liable for breach of contract of carriage or as an absolute limit
of the extent of that liability. The Warsaw Convention declares the carrier liable in the enumerated cases and under certain limitations. However, it must not be
construed to preclude the operation of the Civil Code and pertinent laws. It does not regulate, much less exempt, the carrier from liability for damages for
violating the rights of its passengers under the contract of carriage, especially if willful misconduct on the part of the carrier's employees is found or
established, which is the case before Us. . . .

37
PURITA S. MAPA, CARMINA S. MAPA and CORNELIO P. MAPA vs. COURT OF APPEALS and TRANS-WORLD AIRLINES INC., July 8, 1997

FACTS:
Plaintiffs Mapa purchased in Bangkok, Thailand Trans-World Airlines tickets for Los Angeles-New York-Boston-St. Louis-Chicago. Plaintiffs went to Los Angeles from Manila
on board a PAL airline. They took the flight from Los Angeles using their TWA tickets. Upon arriving in Boston, plaintiffs lost 4 baggages out of 7. TWA offered to pay the
plaintiffs the amount of $2,560.00 for the lost baggages but plaintiffs insisted that the value of the lost baggages was $11,283.00. Plaintiffs then filed a complaint for
damages here in the Philippines. TWA in its answer contended that the trial court lacks jurisdiction pursuant to Article 28(1) of the Warsaw Convention, the action could
only be brought either in Bangkok where the contract was entered into, or in Boston which was the place of destination, or in Kansas City which is the carrier's domicile
and principal place of business.

ISSUE:
Do Philippine courts have jurisdiction over the case filed by plaintiffs?

HELD:
Yes, Philippine courts have jurisdiction over the case. The Airline boarded by plaintiffs from Manila to Los Angeles was not a TWA airline and of different tickets. The
contract of transportation entered into by plaintiffs with TWA was only for Los Angeles-New York-Boston-St. Louis-Chicago, and not from Manila-Los Angeles-New York-
Boston-St. Louis-Chicago. The contract was not for international transportation; therefore it is not covered by the Warsaw Convention. Los Angeles, New York, Boston, St.
Louis and Chicago are all within the territory of one sovereign, the USA.

There are then two categories of international transportation, viz., (1) that where the place of departure and the place of destination are situated within the territories of
two High Contracting Parties regardless of whether or not there be a break in the transportation or a transshipment; and (2) that where the place of departure and the
place of destination are within the territory of a single High Contracting Party if there is an agreed stopping place within a territory subject to the sovereignty, mandate, or
authority of another power, even though the power is not a party of the Convention.

The contracts of transportation in this case are evidenced by the two TWA tickets, No. 015:9475:153:304 and No. 015:9475:153:305, both purchased and issued in
Bangkok, Thailand. On the basis alone of the provisions therein, it is obvious that the place of departure and the place of destination are all in the territory of the United
States, or of a single High Contracting Party. The contracts, therefore, cannot come within the purview of the first category of international transportation. Neither can it
be under the second category since there was NO agreed stopping place within a territory subject to the sovereignty, mandate, or authority of another power.

NORTHWEST AIRLINES, INC. vs. COURT OF APPEALS and ROLANDO TORRES, January 20, 1998

FACTS:
Plaintiff Torres purchased firearms from the United States. He checked-in the firearms with Northwest. Upon arrival at Manila, he was not able to claim the baggage
containing the firearms. When the baggage was already brought to Manila, it was found out to be empty. After continuous refusal of Northwest to settle amicably, Torres
brought suit against Northwest for actual damages, moral damages, temperate damages, exemplary damages and attorney’s fee.

In its answer, Northwest pleaded: a) that it was the agents from the US Customs who ordered for the return of the weapons which plaintiff checked-in; b) that when
opened in the presence of US Customs agents the box contained no firearms; and c) that since the baggage which was returned back to Chicago did not contain any
firearms, then the baggage which plaintiff received upon arrival in Manila must have contained the firearms. After Torres presented his evidence, Northwest moved for
the dismissal of the case.

Northwest also argued in its motion for summary judgment that the Warsaw Convention and the contract of carriage limited its liability to US$640 and that the evidence
presented by TORRES did not entitle him to moral, exemplary, and temperate damages and attorney's fees.

The trial court and the Court of appeals awarded Torres actual damages since Northwest had, in effect, admitted the loss of the firearms when it insisted that its liability
was limited to $9.07 per pound or $20 per kilo. The CA then concluded that Northwest’s guessing of which luggage contained the firearms amounted to willful
misconduct under Section 25(1) of the Warsaw Convention which entitled TORRES to claim actual damages in excess of the limitation provided for under Section 22(2) of
said Convention.

ISSUES:
Is the Warsaw Convention applicable in the present case?
Assuming that the Warsaw Convention is applicable, is Torres entitled damages?

HELD:
We, however, agree with both the trial court and the Court of Appeals that Northwest’s liability for actual damages may not be limited to that prescribed in Section 22(2)
of the Warsaw Convention. In Alitalia v. Intermediate Appellate Court, we held:

The [Warsaw] Convention does not 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. 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 willful 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" or misconduct of its
officers and employees, or for some particular or exceptional type of damage.

G.R. No. 127768 November 19, 1999

UNITED AIRLINES, petitioner, vs. WILLIE J. UY, respondent.

FACTS

On 13 October 1989 respondent Willie J. Uy, a passenger on United Airlines for San Francisco — Manila route, checked in together with his luggage where one piece of
which was found to be overweight. An employee of petitioner rebuked him saying that he should have known the maximum weight allowance. Then, in a loud voice in
front of the milling crowd, she told respondent to repack his things and transfer some of them from the overweight luggage to the lighter ones. The airline then billed him
overweight charges which he offered to pay with a miscellaneous charge order (MCO). However, the airline's employee, and later its airport supervisor, adamantly
refused to honor the MCO pointing out that there were conflicting figures listed on it. Petitioner's employees did not accommodate him.

38
Upon arrival in Manila, he discovered that one of his bags had been slashed and its contents stolen. In a letter dated 16 October 1989 respondent bewailed the insult,
embarrassment and humiliating treatment he suffered in the hands of United Airlines employees, notified petitioner of his loss and requested reimbursement thereof.
Petitioner United Airlines, through Central Baggage Specialist Joan Kroll mailed a check representing the payment of his loss based on the maximum liability. Respondent,
thinking the amount to be grossly inadequate to compensate him for his losses, sent two (2) more letters to petitioner airline.

United Airlines moved to dismiss the complaint on the ground that respondent's cause of action had prescribed, invoking Art. 29 of the Warsaw Convention which
provides —

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

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

ISSUE

Whether or not Warsaw convention is applicable in the case at bar.

RULING

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

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

Insofar as the first cause of action is concerned, respondent's failure to file his complaint within the two (2)-year limitation of the Warsaw Convention does not bar his
action since petitioner airline may still be held liable for breach of other provisions of the Civil Code which prescribe a different period or procedure for instituting the
action, specifically, Art. 1146 thereof which prescribes four (4) years for filing an action based on torts.

As for respondent's second cause of action, it cannot be doubted that respondent exerted efforts to immediately convey his loss to petitioner, even employed the services
of two (2) lawyers to follow up his claims, and that the filing of the action itself was delayed because of petitioner's evasion.

Verily, respondent filed his complaint more than two (2) years later, beyond the period of limitation prescribed by the Warsaw Convention for filing a claim for damages.
However, it is obvious that respondent was forestalled from immediately filing an action because petitioner airline gave him the runaround, answering his letters but not
giving in to his demands. Hence, despite the express mandate of Art. 29 of the Warsaw Convention that an action for damages should be filed within two (2) years from
the arrival at the place of destination, such rule shall not be applied in the instant case because of the delaying tactics employed by petitioner airline itself. Thus, private
respondent's second cause of action cannot be considered as time-barred under Art. 29 of the Warsaw Convention.

G.R. No. 151783 July 8, 2003 , VICTORINO SAVELLANO, VIRGINIA B. SAVELLANO and DEOGRACIAS B. SAVELLANO, petitioners, vs.
NORTHWEST AIRLINES, respondent.

FACTS

On October 27, 1991, at around 1:45 p.m., petitioners departed from San Francisco, USA on board Northwest Airlines , Business Class, bound for Manila, Philippines using
the NW round-trip tickets which were issued at respondent's Manila ticketing office.

After being airborne, pilot made an emergency landing in Seattle after announcing that a fire had started in one of the plane's engines.

Petitioners and the other passengers were instructed to go home to Manila the next day, 'using the same boarding passes with the same seating arrangements'.

Respondent's shuttle bus thereafter brought all passengers to the Seattle Red Lion Hotel where they were billeted by, and at the expense of respondent. Then
respondent’s personnel advised them to be at the Seattle Airport by 7a.m. the following day for departure.

When petitioners reached the Seattle Airport, respondent's ground stewardess belatedly advised them that instead of flying to Manila they were bound for a 3-hour flight
to Los Angeles for a connecting flight to Manila.

Before boarding for Manila via Seoul, petitioners encountered another problem. Their three small handcarried items which were not padlocked as they were
merely closed by zippers were 'not allowed' to be placed inside the passengers' baggage compartments of the plane by an arrogant NW ground stewardess.

When petitioners claimed their luggage at the baggage carousel, they discovered that the would-have-been handcarried items which were not allowed to be placed inside
the passengers' baggage compartment had been ransacked and the contents thereof stolen.

By letter of November 22, 1991, [petitioners] through counsel demanded from respondent] the amount of P3,000,000.00 as damages for what they claimed to be the
humiliation and inconvenience they suffered in the hands of its personnel. Respondent did not accede to the demand.

ISSUES
39
Whether or not the petitioner’s can claim damages from the respondent for rerouting them.

Whether or not the petitioner’s can claim damages for the lost baggage.

RULING

Petitioners have failed to show convincingly that they were rerouted by respondent to Los Angeles and Seoul because of malice, profit motive or self-interest. Good faith
is presumed, while bad faith is a matter of fact that needs to be proved 21 by the party alleging it.

In the absence of bad faith, ill will, malice or wanton conduct, respondent cannot be held liable for moral damages. Neither are exemplary damages proper in the present
case. The Civil Code provides that "[i]n contracts and quasi-contracts, the court may award exemplary damages if the defendant acted in a wanton, fraudulent, reckless,
oppressive, or malevolent manner."25 Respondent has not been proven to have acted in that manner. At most, it can only be found guilty of having acted without first
considering and weighing all other possible courses of actions it could have taken, and without consulting petitioners and securing their consent to the new stopping
places.

Nevertheless, herein petitioners will not be totally deprived of compensation. Nominal damages may be awarded as provided by the Civil Code, from which we quote:

"Art. 2221. Nominal damages are adjudicated in order that a right of the plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized,
and not for the purpose of indemnifying the plaintiff for any loss suffered by him."

"Art. 2222. The court may award nominal damages in every obligation arising from any source enumerated in article 1157, or in every case where any property right has
been invaded."

Nominal damages are recoverable if no actual, substantial or specific damages were shown to have resulted from the breach. 26 The amount of such damages is addressed
to the sound discretion of the court, taking into account the relevant circumstances. 27

In the present case, we must consider that petitioners suffered the inconvenience of having to wake up early after a bad night and having to miss breakfast; as well as the
fact that they were business class passengers. We also consider their social and official status. Victorino Savellano was a former mayor, regional trial court judge and
chairman of the Commission on Elections. Virginia B. Savellano was the president of five rural banks, and Deogracias Savellano was then the incumbent vice governor of
Ilocos Sur. Hence, it will be proper to grant one hundred fifty thousand pesos (P150,000) as nominal damages28 to each of them, in order to vindicate and recognize their
right29 to be notified and consulted before their contracted stopping place was changed.

A claim for the alleged lost items from the baggage of petitioners cannot prosper, because they failed to give timely notice of the loss to respondent. The Conditions
printed on the airline ticket plainly read:

G.R. No. 116044-45 March 9, 2000

AMERICAN AIRLINES petitioner, vs.

COURT OF APPEALS, HON. BERNARDO LL. SALAS and DEMOCRITO MENDOZA, respondents.

FACTS

Private respondent purchased from Singapore Airlines in Manila conjunction tickets for Manila-Singapore-Athens-Larnaca-Rome-Turin-Zurich-Geneva-Copenhagen-New
York. The petitioner was not a participating airline in any of the segments in the itinerary under the said conjunction tickets. In Geneva the petitioner decided to forego his
trip to Copenhagen and to go straight to New York and in the absence of a direct flight under his conjunction tickets from Geneva to New York, the private respondent on
June 7, 1989 exchanged the unused portion of the conjunction ticket for a one-way ticket from Geneva to New York from the petitioner airline. Petitioner issued its own
ticket to the private respondent in Geneva and claimed the value of the unused portion of the conjunction ticket.

In September 1989, private respondent filed an action for damages before the regional trial court of Cebu for the alleged embarrassment and mental anguish he suffered
at the Geneva Airport when the petitioner's security officers prevented him from boarding the plane, detained him for about an hour and allowed him to board the plane
only after all the other passengers have boarded.

ISSUE

Whether or not the Regional Trial Court of Cebu has jurisdiction to take cognizance of the action for damages.

The Warsaw Convention to which the Republic of the Philippines is a party and which has the force and effect of law in this country applies to all international
transportation of persons, baggage or goods performed by an aircraft gratuitously or for hire. The contract of carriage entered into by the private respondent with
Singapore Airlines, and subsequently with the petitioner, to transport him to nine cities in different countries with New York as the final destination is a contract of
international transportation and the provisions of the Convention automatically apply and exclusively govern the rights and liabilities of the airline and its passengers.

The threshold issue of jurisdiction of Philippine courts under Art 28 (1) must first be resolved. The objections raised by the private respondent that this case is released
from the terms of the Convention because the incident on which this action is predicated did not occur in the process of embarking and disembarking from the carrier
under Art 17 9 and that the employees of the petitioner airline acted with malice and bad faith under Art 25 (1) 10 pertain to the merits of the case which may be
examined only if the action has first been properly commenced under the rules on jurisdiction set forth in Art. 28 (1).

Art 28 (1) of the Warsaw Convention states:

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

40
There is no dispute that petitioner issued the ticket in Geneva which was neither the domicile nor the principal place of business of petitioner nor the respondent's place
of destination.

The contract of carriage between the private respondent and Singapore Airlines although performed by different carriers under a series of airline tickets, including that
issued by the petitioner, constitutes a single operation.

The quoted provision of the Warsaw Convention Art. 1(3) clearly states that a contract of air transportation is taken as a single operation whether it is founded on a single
contract or a series of contracts.

The third option of the plaintiff under Art 28 (1) of the Warsaw Convention e.g., to sue in the place of business of the carrier wherein the contract was made, is therefore,
Manila, and Philippine courts are clothed with jurisdiction over this case. We note that while this case was filed in Cebu and not in Manila the issue of venue is no longer
an issue as the petitioner is deemed to have waived it when it presented evidence before the trial court.

G.R. No. 152122 July 30, 2003 CHINA AIRLINES, petitioner, vs.
DANIEL CHIOK, respondent.

PANGANIBAN, J.:

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

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

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

""When Chiok reached Hongkong, he went to the PAL office and sought to reconfirm his flight back to Manila. The PAL office confirmed his return trip on board Flight No.
PR 311 and attached its own sticker. On November 24, 1981, Chiok proceeded to Hongkong International Airport for his return trip to Manila. However, upon reaching the
PAL counter, Chiok saw a poster stating that PAL Flight No. PR 311 was cancelled because of a typhoon in Manila. He was then informed that all the confirmed ticket
holders of PAL Flight No. PR 311 were automatically booked for its next flight, which was to leave the next day. He then informed PAL personnel that, being the founding
director of the Philippine Polysterene Paper Corporation, he ha[d] to reach Manila on November 25, 1981 because of a business option which he ha[d] to execute on said
date.

Issue:

Whether or not whether CAL is liable for damages?

Ruling:

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

Article 1, Section 3 of the Warsaw Convention states:

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

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

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

Moral damages cannot be awarded in breaches of carriage contracts, except in the two instances contemplated in Articles 1764 and 2220 of the Civil Code, which we
quote:

"Article 1764. Damages in cases comprised in this Section shall be awarded in accordance with Title XVIII of this Book, concerning Damages. Article 2206 shall also apply
to the death of a passenger caused by the breach of contract by a common carrier.

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

41
[G.R. No. 150094. August 18, 2004]
FEDERAL EXPRESS CORPORATION, petitioner, vs. AMERICAN HOME ASSURANCE COMPANY and PHILAM INSURANCE COMPANY, INC., respondents

Basic is the requirement that before suing to recover loss of or damage to transported goods, the plaintiff must give the carrier notice of the loss or damage, within the
period prescribed by the Warsaw Convention and/or the airway bill.

Facts:

“On January 26, 1994, SMITHKLINE Beecham (SMITHKLINE for brevity) of Nebraska, USA delivered to Burlington Air Express (BURLINGTON), an agent of
[Petitioner] Federal Express Corporation, a shipment of 109 cartons of veterinary biologicals for delivery to consignee SMITHKLINE and French Overseas Company in
Makati City, Metro Manila. The shipment was covered by Burlington Airway Bill No. 11263825 with the words, ‘REFRIGERATE WHEN NOT IN TRANSIT’ and ‘PERISHABLE’
stamp marked on its face. That same day, Burlington insured the cargoes in the amount of $39,339.00 with American Home Assurance Company (AHAC). The following
day, Burlington turned over the custody of said cargoes to Federal Express which transported the same to Manila. The first shipment, consisting of 92 cartons arrived in
Manila on January 29, 1994 in Flight No. 0071-28NRT and was immediately stored at [Cargohaus Inc.’s] warehouse. While the second, consisting of 17 cartons, came in
two (2) days later, or on January 31, 1994, in Flight No. 0071-30NRT which was likewise immediately stored at Cargohaus’ warehouse. Prior to the arrival of the cargoes,
Federal Express informed GETC Cargo International Corporation, the customs broker hired by the consignee to facilitate the release of its cargoes from the Bureau of
Customs, of the impending arrival of its client’s cargoes.

“On February 10, 1994, DARIO C. DIONEDA (‘DIONEDA’), twelve (12) days after the cargoes arrived in Manila, a non-licensed custom’s broker who was assigned by GETC to
facilitate the release of the subject cargoes, found out, while he was about to cause the release of the said cargoes, that the same [were] stored only in a room with two
(2) air conditioners running, to cool the place instead of a refrigerator. When he asked an employee of Cargohaus why the cargoes were stored in the ‘cool room’ only, the
latter told him that the cartons where the vaccines were contained specifically indicated therein that it should not be subjected to hot or cold temperature. Thereafter,
DIONEDA, upon instructions from GETC, did not proceed with the withdrawal of the vaccines and instead, samples of the same were taken and brought to the Bureau of
Animal Industry of the Department of Agriculture in the Philippines by SMITHKLINE for examination wherein it was discovered that the ‘ELISA reading of vaccinates sera
are below the positive reference serum.’

“As a consequence of the foregoing result of the veterinary biologics test, SMITHKLINE abandoned the shipment and, declaring ‘total loss’ for the unusable shipment, filed
a claim with AHAC through its representative in the Philippines, the Philam Insurance Co., Inc. (‘PHILAM’) which recompensed SMITHKLINE for the whole insured amount
of THIRTY NINE THOUSAND THREE HUNDRED THIRTY NINE DOLLARS ($39,339.00). Thereafter, [respondents] filed an action for damages against the [petitioner] imputing
negligence on either or both of them in the handling of the cargo.

Issue:

Whether or not respondent has no personality to sue?

Ruling:

In this jurisdiction, the filing of a claim with the carrier within the time limitation therefor actually constitutes a condition precedent to the accrual of a right of
action against a carrier for loss of or damage to the goods. The shipper or consignee must allege and prove the fulfillment of the condition. If it fails to do so, no right of
action against the carrier can accrue in favor of the former. The aforementioned requirement is a reasonable condition precedent; it does not constitute a limitation of
action.

The requirement of giving notice of loss of or injury to the goods is not an empty formalism. The fundamental reasons for such a stipulation are (1) to inform the carrier
that the cargo has been damaged, and that it is being charged with liability therefor; and (2) to give it an opportunity to examine the nature and extent of the injury. “This
protects the carrier by affording it an opportunity to make an investigation of a claim while the matter is fresh and easily investigated so as to safeguard itself from false
and fraudulent claims.”

When an airway bill -- or any contract of carriage for that matter -- has a stipulation that requires a notice of claim for loss of or damage to goods shipped and the
stipulation is not complied with, its enforcement can be prevented and the liability cannot be imposed on the carrier. To stress, notice is a condition precedent, and the
carrier is not liable if notice is not given in accordance with the stipulation. Failure to comply with such a stipulation bars recovery for the loss or damage suffered.

Being a condition precedent, the notice must precede a suit for enforcement.In the present case, there is neither an allegation nor a showing of respondents’ compliance
with this requirement within the prescribed period. While respondents may have had a cause of action then, they cannot now enforce it for their failure to comply with
the aforesaid condition precedent.

In view of the foregoing, we find no more necessity to pass upon the other issues raised by petitioner.

G.R. No. 149547 July 4, 2008

PHILIPPINE AIRLINES, INC. vs SAVILLO

FACTS:
 Private respondent was invited to participate in the 1993 ASEAN Seniors Annual Golf Tournament held in Jakarta, Indonesia. He and several companions decided to
purchase their respective passenger tickets from PAL with the following points of passage: MANILA-SINGAPORE-JAKARTA-SINGAPORE-MANILA. Private respondent
and his companions were made to understand by PAL that its plane would take them from Manila to Singapore, while Singapore Airlines would take them from
Singapore to Jakarta.
 On 3 October 1993, private respondent and his companions took the PAL flight to Singapore and arrived at about 6:00 o’clock in the evening. Upon their arrival, they
proceeded to the Singapore Airlines office to check-in for their flight to Jakarta scheduled at 8:00 o’clock in the same evening.
 Singapore Airlines rejected the tickets of private respondent and his group because they were not endorsed by PAL. Private respondent tried to contact PAL’s office at
the airport, only to find out that it was closed.
 Stranded at the airport in Singapore and left with no recourse, private respondent was in panic and at a loss where to go; and was subjected to humiliation,
embarrassment, mental anguish, serious anxiety, fear and distress. Eventually, private respondent and his companions were forced to purchase tickets from Garuda

42
 Airlines and board its last flight bound for Jakarta. When they arrived in Jakarta at about 12:00 o’clock midnight, the party who was supposed to fetch them from the
airport had already left and they had to arrange for their transportation to the hotel at a very late hour. After the series of nerve-wracking experiences, private
respondent became ill and was unable to participate in the tournament.
 Upon his return to the Philippines, private respondent brought the matter to the attention of PAL. He sent a demand letter to PAL on 20 December 1993 and another
to Singapore Airlines on 21 March 1994. However, both airlines disowned liability and blamed each other for the fiasco.
 Instead of filing an answer to private respondent’s Complaint, PAL filed a Motion to Dismiss dated 18 September 1998 on the ground that the said complaint was
barred on the ground of prescription under Section 1(f) of Rule 16 of the Rules of Court. PAL argued that the Warsaw Convention, particularly Article 29 thereof,
governed this case, as it provides that any claim for damages in connection with the international transportation of persons is subject to the prescription period of
two years. Since the Complaint was filed on 15 August 1997, more than three years after PAL received the demand letter on 25 January 1994, it was already barred by
prescription.

ISSUE:
1. WON Warsaw Convention applies.
2. WON the complaint filed beyond the two-year period provided under the Warsaw Convention is already barred by prescription.

RULING: The provisions of the Civil Code and other pertinent laws of the Philippines, not the Warsaw Convention, were applicable to the present case.

The instant case is comparable to the case of Lathigra v. British Airways.

In Lathigra, it was held that the airlines’ negligent act of reconfirming the passenger’s reservation days before departure and failing to inform the latter that the flight had
already been discontinued is not among the acts covered by the Warsaw Convention, since the alleged negligence did not occur during the performance of the contract of
carriage but, rather, days before the scheduled flight.

In the case at hand, Singapore Airlines barred private respondent from boarding the Singapore Airlines flight because PAL allegedly failed to endorse the tickets of private
respondent and his companions, despite PAL’s assurances to respondent that Singapore Airlines had already confirmed their passage. While this fact still needs to be
heard and established by adequate proof before the RTC, an action based on these allegations will not fall under the Warsaw Convention, since the purported negligence
on the part of PAL did not occur during the performance of the contract of carriage but days before the scheduled flight. Thus, the present action cannot be dismissed
based on the statute of limitations provided under Article 29 of the Warsaw Convention.

Had the present case merely consisted of claims incidental to the airlines’ delay in transporting their passengers, the private respondent’s Complaint would have been
time-barred under Article 29 of the Warsaw Convention. However, the present case involves a special species of injury resulting from the failure of PAL and/or Singapore
Airlines to transport private respondent from Singapore to Jakarta.

These claims are covered by the Civil Code provisions on tort, and not within the purview of the Warsaw Convention. Hence, the applicable prescription period is that
provided under Article 1146 of the Civil Code:

Art. 1146. The following actions must be instituted within four years:
(1) Upon an injury to the rights of the plaintiff;
(2) Upon a quasi-delict.

Private respondent’s Complaint was filed with the RTC on 15 August 1997, which was less than four years since PAL received his extrajudicial demand on 25 January 1994.
Thus, private respondent’s claims have not yet prescribed and PAL’s Motion to Dismiss must be denied.

G.R. No. 156654 November 20, 2008

PHILIPPINE AIRLINES, INC., petitioner vs. VICENTE LOPEZ, JR., respondent.

FACTS:
In a Complaint dated February 11, 1992, Lopez claimed that PAL had unjustifiably downgraded his seat from business to economy class in his return flight from Bangkok to
Manila last November 30, 1991, and that, in view thereof, PAL should be directed to pay him moral damages of at least P100,000, exemplary damages of at least P20,000,
attorney's fees in the sum of P30,000, as well as the costs of suit.

To support his claim, Lopez averred that he purchased a Manila-Hongkong-Bangkok-Manila PAL business class ticket and that his return flight to Manila was confirmed by
PAL's booking personnel in Bangkok on November 26, 1991. He also mentioned that he was surprised to learn during his check-in for the said return flight that his status
as business class passenger was changed to economy class, and that PAL was not able to offer any valid explanation for the sudden change when he protested the change.
Lopez added that although aggrieved, he nevertheless took the said flight as an economy class passenger because he had important appointments in Manila.

For its part, PAL denied any liability and claimed that whatever damage Lopez had suffered was due to his own fault. PAL explained that the terms and conditions of the
contract of carriage required Lopez to reconfirm his booking for the Bangkok-to-Manila leg of his trip, and that he did not protest the economy seat given to him when the
change in his accommodations was read to him by the person who received his phone reconfirmation. PAL also asserted that Lopez did not complain against his economy
seat during the check-in and that he raised the issue only after the flight was over.

It also noted that the following showed that PAL's employees had been negligent in booking and confirming Lopez's travel accommodations from Bangkok to Manila: (1)
the admission of PAL's booking personnel that she affixed the validation sticker on Lopez's ticket on the basis of the passenger's name list showing that his reservation was
for an economy class seat without examining or checking the latter's ticket during his booking validation; and (2) the admission of PAL's check-in clerk at the Bangkok
Airport that when Lopez checked-in for his return trip to Manila, she similarly gave Lopez an economy boarding pass based on the information found in the coupon of the
ticket and the passenger manifest without checking the latter's ticket. The trial court said that had PAL's employees examined his ticket in those instances, the error or
oversight which might have resulted from the phoned-in booking could have been easily rectified.

ISSUES: WON PAL is liable for damages.

RULING:

43
PAL's procedural lapses notwithstanding, we had nevertheless carefully reviewed the records of this case and found no compelling reason to depart from the uniform
factual findings of the trial court and the Court of Appeals that: (1) it was the negligence of PAL which caused the downgrading of the seat of Lopez; and (2) the aforesaid
negligence of PAL amounted to fraud or bad faith.

Moreover, we cannot agree with PAL that the amount of moral damages awarded by the trial court, as affirmed by the Court of Appeals, was excessive. In Mercury Drug
Corporation v. Baking, we had stated that "there is no hard-and-fast rule in determining what would be a fair and reasonable amount of moral damages, since each case
must be governed by its own peculiar facts. However, it must be commensurate to the loss or injury suffered." Taking into account the attending circumstances here, we
believe that the amount of P100,000 awarded as moral damages is appropriate.

44
i
ii

F. ACTIONS AND DAMAGES

(GR No. 155550, Northwest v. Chiong, January 31, 2008)

The Supreme Court has ordered an international airline to pay nearly a millon pesos in total damages to a Filipino passenger who missed a year of
employment and income as seafarer based in California after he had been deliberately prevented by the said airline personnel from checking-in for a
flight bound for the United States.

In a 19-page decision penned by Justice Antonio Eduardo B. Nachura, the SC’s Third Division affirmed the ruling of the Court of Appeals and the
Manila Regional Trial Court, Branch 54 decision awarding damages to respondent Steven P. Chiong. It held that Northwest Airlines, Inc. had breached
its contract of carriage with Chiong on April 1, 1989 when it denied Chiong access to the flight that would bring him to the United States. Chiong was
hired as an engineer by Philimare Shipping and Seagull Maritime Corporation (Philimare) for a vessel docked at the San Diego, California Port. Due to
his failure to take the flight, he was unable to claim his employment aboard the said vessel.

The Court likewise found that Chiong was barred from boarding the flight to accommodate an American, W. Costine, whose name was merely
inserted in the Flight Manifest and who did not even personally check-in at the counter.

Despite Northwest’s contention that Chiong was a “no-show” passenger on said date, the Court found that Chiong satisfied the burden of proof in
establishing Northwest’s breach of their contract of carriage by presenting his confirmed Northwest ticket for the April 1, 1989 Flight No. 24, his
passport, his seaman service record book duly stamped at the Philippine Coast Guard (PCG) counter, and the testimonies of Philimare’s liaison officer
and assistant manager.

Held:
We are in complete accord with the common ruling of the lower courts that Northwest breached the contract of carriage with Chiong, and as such,
he is entitled to compensatory, actual, moral and exemplary damages, attorneys fees and costs of suit.From the foregoing disquisition, the
ineluctable conclusion is that Northwest breached its contract of carriage with Chiong.

Time and again, we have declared that a contract of carriage, in this case, air transport, is primarily intended to serve the traveling public and thus,
imbued with public interest. The law governing common carriers consequently imposes an exacting standard of conduct. As the aggrieved party,
Chiong only had to prove the existence of the contract and the fact of its non-performance by Northwest, as carrier, in order to be awarded
compensatory and actual damages.
Under Article 2220 of the Civil Code of the Philippines, an award of moral damages, in breaches of contract, is in order upon a showing that the
defendant acted fraudulently or in bad faith. Bad faith does not simply connote bad judgment or negligence.It imports a dishonest purpose or some
moral obliquity and conscious doing of a wrong.It means breach of a known duty through some motive, interest or ill will that partakes of the nature
of fraud. Bad faith is in essence a question of intention.
Attorneys fees may be awarded when a party is compelled to litigate or incur expenses to protect his interest,or where the defendant acted in gross
and evident bad faith in refusing to satisfy the plaintiffs plainly valid, just and demandable claim. In the case at bench, Northwest deliberately
breached its contract of carriage with Chiong and then repeatedly refused to satisfy Chiongs valid, just and demandable claim. This unjustified
refusal constrained Chiong to not only lose income under the crew agreement, but to further incur expenses and exert effort for almost two (2)
decades in order to protect his interests and vindicate his right. Therefore, this Court deems it just and equitable to grant Chiong P200,000.00 as
attorneys fees. The award is reasonable in view of the time it has taken for this case to be resolved.

PHILIPPINE CHARTER INSURANCE CORPORATION VS. CHEMOIL LIGHTERAGE HITE GOLD CORPORATION
G.R. No. 136888. June 29, 2005

Facts:

Philippine Charter Insurance Corporation is a domestic corporation engaged in the business of non-life insurance. Respondent Chemoil
Lighterage Corporation is also a domestic corporation engaged in the transport of goods. On 24 January 1991, Samkyung Chemical Company, Ltd.,
based in South Korea, shipped 62.06 metric tons of the liquid chemical DIOCTYL PHTHALATE (DOP) on board MT “TACHIBANA” which was valued at
US$90,201.57 and another 436.70 metric tons of DOP valued at US$634,724.89 to the Philippines. The consignee was Plastic Group Phils., Inc. in
Manila. PGP insured the cargo with Philippine Charter Insurance Corporation against all risks. The insurance was under Marine Policies No. MRN-
30721[5] dated 06 February 1991. Marine Endorsement No. 2786[7] dated 11 May 1991 was attached and formed part of MRN-30721, amending
the latter’s insured value to P24,667,422.03, and reduced the premium accordingly. The ocean tanker MT “TACHIBANA” unloaded the cargo to the
tanker barge, which shall transport the same to Del Pan Bridge in Pasig River and haul it by land to PGP’s storage tanks in Calamba, Laguna. Upon
inspection by PGP, the samples taken from the shipment showed discoloration demonstrating that it was damaged. PGP then sent a letter where it
formally made an insurance claim for the loss it sustained. Petitioner requested the GIT
Insurance Adjusters, Inc. (GIT), to conduct a Quantity and Condition Survey of the shipment which issued a report stating that DOP samples taken
were discolored. Inspection of cargo tanks showed manhole covers of ballast tanks’ ceilings loosely secured and that the rubber gaskets of the
manhole covers of the ballast tanks re-acted to the chemical causing shrinkage thus, loosening the covers and cargo ingress. Petitioner paid PGP the
full and final payment for the loss and issued a Subrogation Receipt. Meanwhile, PGP paid the respondent the as full payment for the latter’s
services. On 15 July 1991, an action
for damages was instituted by the petitioner-insurer against respondent-carrier before the RTC, Br.16, City of Manila. Respondent filed an answer
which admitted that it undertook to transport the shipment, but alleged that before the DOP was loaded into its barge, the representative of PGP,
Adjustment Standard Corporation, inspected it and found the same clean, dry, and fit for loading, thus accepted the cargo without any protest or
notice. As carrier, no fault and negligence can be attributed against respondent as it exercised extraordinary diligence in handling the cargo. After
due hearing, the trial court rendered a Decision in favor of plaintiff. On appeal, the Court of Appeals promulgated its Decision reversing the trial
court. A petition for review on certiorar[ was filed by the petitioner with this Court.
Issues:
1. Whether or not the Notice of Claim was filed within the required period.

2.Whether or not the damage to the cargo was due to the fault or negligence of the respondent.

Held:
Article 366 of the Code of Commerce has profound application in the case at bar, which provides that; “Within twenty-four hours
following the receipt of the merchandise a claim may be made against the carrier on account of damage or average found upon opening the
packages, provided that the indications of the damage or average giving rise to the claim cannot be ascertained from the exterior of said packages,
in which case said claim shall only be admitted at the time of the receipt of the packages.” After the periods mentioned have elapsed, or after the
transportation charges have been paid, no claim whatsoever shall be admitted against the carrier with regard to the condition in which the goods
transported were delivered. As to the first issue, the
petitioner contends that the notice of contamination was given by PGP employee, to Ms. Abastillas, at the time of the delivery of the cargo, and
therefore, within the required period. The respondent, however, claims that the supposed notice given by PGP over the telephone was denied by
Ms. Abastillas. The Court of Appeals declared:that a telephone call made to defendant-company could constitute substantial compliance with the
requirement of notice. However, it must be pointed out that compliance with the period for filing notice is an essential part of the requirement, i.e..
immediately if the damage is apparent, or otherwise within twenty-four hours from receipt of the goods, the clear import being that prompt
examination of the goods must be made to ascertain damage if this is not immediately apparent. We have examined the evidence, and We are
unable to find any proof of compliance with the required period, which is fatal to the accrual of the right of action against the carrier.
Nothing in the trial court’s
decision stated that the notice of claim was relayed or filed with the respondent-carrier immediately or within a period of twenty-four hours from
the time the goods were received. The Court of Appeals made the same finding. Having examined the entire records of the case, we cannot find a
shred of evidence that will precisely and ultimately point to the conclusion that the notice of claim was timely relayed or filed.
The requirement that a notice of claim should be filed within the
period stated by Article 366 of the Code of Commerce is not an empty or worthless proviso.
The object sought to be attained by the requirement of the submission of claims in pursuance of this article is to compel the consignee of
goods entrusted to a carrier to make prompt demand for settlement of alleged damages suffered by the goods while in transport, so that the carrier
will be enabled to verify all such claims at the time of delivery or within twenty-four hours thereafter, and if necessary fix responsibility and secure
evidence as to the nature and extent of the alleged damages to the goods while the matter is still fresh in the minds of the parties.
The filing of a claim with the carrier within the time limitation therefore actually constitutes a condition precedent
to the accrual of a right of action against a carrier for loss of, or damage to, the goods. The shipper or consignee must allege and prove the
fulfillment of the condition. If it fails to do so, no right of action against the carrier can accrue in favor of the former. The aforementioned
requirement is a reasonable condition precedent; it does not constitute a limitation of action. We do not
believe so. As discussed at length above, there is no evidence to confirm that the notice of claim was filed within the period provided for under
Article 366 of the Code of Commerce. Petitioner’s contention proceeds from a false presupposition that the notice of claim was timely filed.
Considering that we have resolved the first issue in the negative, it is therefore unnecessary to make a resolution on the second issue.
EXEMPTION SHOULD BE PROVEN IN ORDER TO QUALIFY UNDEREXCEPTION CLAUSE OF INSURANCE POLICY

Cebu Salvage vs. Philippine Home Assurance

512 SCRA 667 (2007)

FACTS:
Cebu Salvage and Maria Christina Chemicals Industries entered into a voyage charter wherein the former would deliver silica quartz. During the
voyage, the ship (which Cebu does not own) sank.

HELD: Cebu Salvage was liable as a common carrier.

A. The parties entered into a contract of affreightment wherein the ship was leased for a single voyage for the conveyance of goods, in consideration
of payment of the freight.

B. Rule: The fact that a common carrier did not own the vessel (when it decided to use another to consummate the contract of carriage) did not
negate its character and duties as a common carrier.

Subject: Law of Transportation and Public Utilities

Title: Japan Airlines vs Simangan
Topic: Contract of Transportation: Actions and Damages
By: Grateful Vedd

Intent on getting to the United States in order to donate his kidney to an ailing cousin there, respondent Jesus Simangan successfully
procured an emergency US visa and bought from Japan Airlines (JAL) a round-trip plane ticket. While already inside the plane, however, he was
suspected by the crew of carrying falsified travel documents, was scoffed at and accused of using the trip to the United States as a “pretext to stay
and work in Japan,” and, despite his pleas and protestations (even challenging the crew to “monitor his movements”), forced out. He was then made
to wait in JAL’s ground office for three (3) hours, supposedly for confirmation/verification of his impugned travel papers. The plane, meanwhile, took
off eventually and left the poor chap behind. The sun almost a-settin’, he was later told that, hey hey, his papers were “in order” after all.
Simangan’s suit flying onto it like a vulture, JAL claimed that “its failure to allow respondent to fly on his scheduled departure was due to
‘a need for his travel documents to be authenticated by the United States Embassy’ because no one from JAL's airport staff had encountered a
parole visa before.” It also argued that “the authentication required additional time,” and thus the plane had to leave. Moreover, it cried over the
lower courts’ awarding of moral and exemplary damages to M. Simangan.

Ruling:
The Court adjudicated against Japanese Airlines.
 “Apart from the fact that respondent's plane ticket, boarding pass, travel authority and personal articles already passed the rigid
immigration and security routines, JAL, as a common carrier, ought to know the kind of valid travel documents respondent carried. As provided in
Article 1755 of the New Civil Code: 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. Thus, We find untenable JAL's defense of "verification of
respondent's documents" in its breach of contract of carriage.”

Plus, for its insulting treatment of M. Simangan (characterized as being “without the least courtesy every human being is entitled to”), it
was held liable for damages. Moral and exemplary.

“Clearly, JAL is liable for moral damages. It is firmly settled that moral damages are recoverable in suits predicated on breach of a
contract of carriage where it is proved that the carrier was guilty of fraud or bad faith , as in this case. Inattention to and lack of care for the
interests of its passengers who are entitled to its utmost consideration, particularly as to their convenience, amount to bad faith which entitles
the passenger to an award of moral damages. What the law considers as bad faith which may furnish the ground for an award of moral damages
would be bad faith in securing the contract and in the execution thereof, as well as in the enforcement of its terms, or any other kind of deceit.
JAL is also liable for exemplary damages as its above-mentioned acts constitute wanton, oppressive and malevolent acts against
respondent. Exemplary damages, which are awarded by way of example or correction for the public good, may be recovered in contractual
obligations, as in this case, if defendant acted in wanton, fraudulent, reckless, oppressive, or malevolent manner.
…Neglect or malfeasance of the carrier's employees could give ground for an action for damages. Passengers have a right to be treated
by the carrier's employees with kindness, respect, courtesy and due consideration and are entitled to be protected against personal misconduct,
injurious language, indignities and abuses from such employees.”

Bleed, thus.
Title: Aboitiz Shipping Corporation vs. Insurance Company of North America
Topic: Contract of Transportation: Extraordinary Diligence
By: Grateful Vedd

Aboitiz Shipping Corporation received a cargo shipped by MSAS Cargo International Limited and/or Associated and/or Subsidiary
Companies (MSAS) for a Cebuano consignee called Science Teaching Improvement Project (STIP). Thereon, Aboitiz issued a bill of lading obligating
itself to transport the cargo to STIP, said bill containing the notation “grounded outside warehouse.”
Delivery was made accordingly. However, a series of inspections conducted by the consignee revealed that the goods inside the cargo
sustained damages: “the crate was broken at its bottom part such that the contents were exposed….the work tools and workbenches were found to
have been completely soaked in water with most of the packing cartons already disintegrating.” The same led to the conclusion that “the damage
was caused by water entering through the broken parts of the crate”. This finding was subsequently confirmed by the ocular inspection and survey
made to be done by the shipper’s insurer, respondent Insurance Company of North America (ICNA), which added molds and corrosion among the
damages.
Moreover, the ICNA found via the Philippine Atmospheric, Geophysical and Astronomical Services Administration (PAG-ASA) that heavy
rains occurred on July 28 and 29, 1993, during which the cargo was still in the custody of Aboitiz; it was likewise unveiled that the shipment was
placed outside Aboitiz’s warehouse, as can be deduced from the bill of lading issued by the carrier which contained the said notation "grounded
outside warehouse"—making ICNA infer that such downpour was what caused the water damage to the shipment, and that Aboitiz was culpable.
A formal claim was thereafter made by the consignee with petitioner Aboitiz, who refused to go for a settlement. Having satisfied the
aforestated claims as insurer, ICNA became subrogated to the rights of the consignee, and, consequently, it itself filed a claim for damages against
the haughty carrier.

Ruling:
The Court ruled, without difficulty, against petitioner Aboitiz, affirming the unanimous findings thereon by the RTC and the CA.

“…the surveyor has confirmed that it was rainwater that seeped into the cargo based on official data from the PAGASA that there was,
indeed, rainfall in the Port Area of Manila from July 26 to 31, 1993. The Surveyor specifically noted that the subject cargo was under the custody of
appellee carrier from the time it was delivered by the shipper on July 26, 1993 until it was stuffed inside Container No. ACCU-213798-4 on July 31,
1993. No other inevitable conclusion can be deduced from the foregoing established facts that damage from "wettage" suffered by the subject
cargo was caused by the negligence of appellee carrier in grounding the shipment outside causing rainwater to seep into the cargoes.”

Per its consequent liability for damages, the Court let the ax fall upon petitioner’s head by saying:

“To prove the exercise of extraordinary diligence, petitioner must do more than merely show the possibility that some other party could
be responsible for the damage. It must prove that it used "all reasonable means to ascertain the nature and characteristic of the goods tendered
for transport and that it exercised due care in handling them. Extraordinary diligence must include safeguarding the shipment from damage
coming from natural elements such as rainfall.”

Title: Philippine Airlines vs Court of Appeals, et al [September 22, 2008]

Topic: Contract of Transportation: Bill of Lading, International Air Transportation
By: Grateful Vedd
 A couple purchased from petitioner Philippine Airlines (PAL) two plane tickets for their children, for a flight to San Francisco, California.
Since their buds will be traveling as “unaccompanied minors”, the airline company required the parents to accomplish and submit an indemnity
bond. They complied, and PAL thereby undertook to carry the children to San Francisco, with the additional obligation of having them further
transported through a connecting flight to Los Angeles, California, via United Airlines 996, another airline.
On the second leg of their trip, however, the staff of United Airlines 996 refused to take the kids aboard, for lack of an indemnity bond.
Turns out that the bond was lost by PAL’s personnel during a previous stop-over in Hawaii. As a result, the children were left high and dry in a San
Francisco airport, and had to sleep over in the Lead Traffic Agent’s residence for the night, not getting to Los Angeles until the next day.
Defending against the claims for damages (moral and exemplary) lodged against it, PAL asserted that “even though it was negligent in
overlooking the indemnity bond, there was still no liability on its part because mere carelessness of the carrier does not per se constitute or justify
an inference of malice or bad faith.” It furthermore argued that it “cannot be entirely blamed” for the loss of the indemnity bond, having
purportedly left it with an immigration officer in Hawaii as a matter of procedure, and that the latter’s failure to return it (the bond) was the
ultimate cause of the claimant’s woes.

Ruling:
An easy call for the gods.

“In breach of contract of air carriage, moral damages may be recovered where (1) the mishap results in the death of a passenger; or (2)
where the carrier is guilty of fraud or bad faith; or (3) where the negligence of the carrier is so gross and reckless as to virtually amount to bad
faith.
… Evidently, petitioner was fully aware that Deanna and Nikolai would travel as unaccompanied minors and, therefore, should be
specially taken care of considering their tender age and delicate situation. Petitioner also knew well that the indemnity bond was required for
Deanna and Nikolai to make a connecting flight from San Francisco to Los Angeles, and that it was its duty to produce the indemnity bond to the staf
of United Airways 996 so that Deanna and Nikolai could board the connecting flight. Yet, despite knowledge of the foregoing, it did not exercise
utmost care in handling the indemnity bond resulting in its loss in Honolulu, Hawaii. This was the proximate cause why Deanna and Nikolai were
not allowed to take the connecting flight and were thus stranded overnight in San Francisco…
The foregoing circumstances reflect petitioner's utter lack of care for and inattention to the welfare of Deanna and Nikolai as
unaccompanied minor passengers. They also indicate petitioner's failure to exercise even slight care and diligence in handling the indemnity bond .
Clearly, the negligence of petitioner was so gross and reckless that it amounted to bad faith.”

Per its attempted attribution of culpability to the Hawaiian immigration officer, the Court quipped:

“It was petitioner's obligation to ensure that it had the indemnity bond in its custody before leaving Honolulu, Hawaii for San Francisco.
Petitioner should have asked for the indemnity bond from the immigration office during the stop-over instead of partly blaming the said office
later on for the loss of the indemnity bond. Petitioner's insensitivity on this matter indicates that it fell short of the extraordinary care that the
law requires of common carriers.”

CANADA VS. ALL COMMODITIES :

Parties:
Canada – a person engaged in the business of providing trucking and hauling services.
All Commodities - long time customer of Canada.

Facts:
1.) all commodities hired Canada to deliver 1000 sacks of sugar.
2.) The transaction was covered by way bills / delivery receipt which was signed by the driver.
3.) The sugar was never delivered.
4.) All commodities sued for damages for the lost sugar.
5.) RTC decided in favor of all commodities .
6.) Canada went to the CA , this time arguing for the first time that he was not the common carrier for the respondent.
7.) And therefore he can not be held liable for the lost sugar.
8.) CA said Canada was already estopped from claiming this.
9.) Canada went to the SC denying his contract of carriage and passes responsibility to All Star Transport Inc. whose name was in the way bill
or delivery receipt.
Issue: w/on Canada’s argument is meritorious and w/on the award of actual damages was proper?
Ruling:
1st issue: Canada’s argument is devoid of merit. He admitted during trial of the contract between him and respondent. He accepted that he
was a common carrier. (judicial admission). Further more his argument that it was lost due to a fortuitous event is also unacceptable. The law
requires conditions to be complied with before a common carrier can use a caso fortuito to escape liability. We find no such conditions present
in the case.

2nd issue: (this is our topic)

Award of actual damages is not proper.
Rule: TO REWARD DAMAGES THERE MUST BE A PLEADING AND PROOF OF ACTUAL DAMAGES SUFFERED.
All commodities did not give sufficient proof. No actual damages must be awarded. However, they will be awarded TEMPERATE OR MODERATE
DAMAGES.

Temperate damages - may be allowed in cases where from the nature of the case , definite proof of pecuniary loss can not be adduced but the
court is convinced that the aggrieved party suffered some pecuniary loss.

So the award of 350 k in actual damages will be changed to 250 k in temperate damages.
 2. UCPB general insurance Co. vs. Aboitiz et al.
Parties:
UCPB – is the petitioner and is the insurer of San Miguel Corp.
Aboitiz – transported the equipment from manila to cebu.
There were other firms that also participated in the transportation.
Facts:
1.) San Miguel Corp. ordered waste water treatment machinery from the US.
2.) They had it shipped thru DAMCO intermodal services. Aboitiz shipping Corp. , Eagle express lines , these firms shared the work in
delivering the machinery to SMC plant in Cebu.
3.) However , SMC discovered that a part costing approx. 1.7 Million was damaged . So the UCPB insurance paid for it.
4.) Now UCPB is claiming reimbursement from the transport companies. Aboitiz et. Al .
5.) RTC decided in favor of UCPB.
6.) CA however reversed the decision : the relevant portion of which reads. “ UCPB’s right of action against Aboitiz et. Al did not accrue
because UCPB failed to file a formal notice of claim within 24 hours from SMC’s receipt of the damaged merchandise . This is based
on Art. 366 of the code of commerce.
7.) Art. 366 is a condition precedent to the accrual of right of action against the carrier for the damages caused to the merchandise.
8.) UCPB argues that under the Carriage of Good by Sea Act (COGSA) notice of loss need not be given if the condition of the cargo has
been subject to joint inspection. That is to say the carrier and the shipper.
9.) It seems a representative of Eagle Express was present when the cargo was opened in Manila and they noticed the damage.
Issue: w/on UCPB’s argument is correct?
Ruling:
No merit. Eagle express had acted as the agent of the freight consolidator and not that of the carrier to whom notice should have been
made.

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