TOPIC: DURATION OF LIABILITY

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

AMPARO C. SERVANDO, CLARA UY BICO, plaintiffs-appellees,
vs.
PHILIPPINE STEAM NAVIGATION CO., defendant-appellant.
Doctrine: No extraordinary diligence by the carrier could have prevented the loss of goods after they have been
deposited in the warehouse of the Bureau of Customs.
Facts: On November 6, 1963, appellees Clara Uy Bico and Amparo Servando loaded on board the appellant's
vessel, FS-176, for carriage from Manila to Pulupandan, Negros Occidental, the following cargoes, to wit:
Clara Uy Bico
1,528 cavans of rice valued
at P40,907.50;
Amparo Servando
44 cartons of colored paper,
toys and general merchandise valued at P1,070.50;
as evidenced by the corresponding bills of lading issued by the appellant. 1
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.
RTCs Decision: Article 1736 of the Civil Code imposes upon common carriers the duty to observe extraordinary
diligence from the moment the goods are unconditionally placed in their possession "until the same are delivered,
actually or constructively, by the carrier to the consignee or to the person who has a right to receive them, without
prejudice to the provisions of Article 1738.
The court a quo held that the delivery of the shipment in question to the warehouse of the Bureau of Customs is not
the delivery contemplated by Article 1736; and since the burning of the warehouse occurred before actual or
constructive delivery of the goods to the appellees, the loss is chargeable against the appellant.
Issue: WON the defendant carrier was liable as contemplated in Art. 1736 in relation to Art. 1738.
Ruling: 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that the same be withdrawn.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.
G.R. No. 119641 May 17, 1996
PHILIPPINE AIRLINES, INC., petitioner,
vs.
COURT OF APPEALS, DR. JOSEFINO MIRANDA and LUISA MIRANDA, respondents.

Facts: Sometime in May, 1988, Dr. Josefino Miranda and his wife, Luisa, who were residents of Surigao City, went to
the United States of America on a regular flight of Philippine Airlines, Inc. (PAL). On June 19, 1988, after a stay of
over a month there, they obtained confirmed bookings from PAL's San Francisco Office for PAL Flight PR 101 from
San Francisco to Manila via Honolulu on June 21, 1988; PAL flight PR 851 from Manila to Cebu on June 24, 1988;
and PAL Flight PR 905 from Cebu to Surigao also on June 24, 1988.
Accordingly, on June 21, 1988, private respondents boarded PAL Flight PR 101 in San Francisco with five (5) pieces
of baggage. 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.
On June 25, 1988, they departed for Cebu City and there from private respondents had to transfer to PAL Flight 471
for Surigao City. On the way to Surigao City, the pilot announced that they had to return to Mactan Airport due to
some mechanical problem. While at Mactan Airport, the passengers were provided by PAL with lunch and were
booked for the afternoon flight to Surigao City. However, said flight was also cancelled.
Series of unfortunate events befell the Mirandas. They again missed their flight to Surigao as it was already night time
(no lights during that time). They stayed in Cebu and ask to retrieve their luggage at PAL but they were told that it was
already boarded on the earlier flight that theyve missed. Thus, they proceeded to stay in a hotel without their
luggage. Finally, when they were able to arrived at Surigao, they instituted an action against PAL. Both courts
decided on their favor.
Petitioner PAL has come to us via the instant petition for review on certiorari, wherein it challenges the affirmatory
decision of respondent Court of Appeals 3 (1) for applying Articles 2220, 2232 and 2208 of the Civil Code when it
sustained the award of the court a quo for moral and exemplary damages and attorney's fees despite absence of bad
faith on its part; and (2) for not applying the express provisions of the contract of carriage and pertinent provisions of
the Warsaw Convention limiting its liability to US$20.00 per kilo of baggage.
Issue: WON the CA erred in not applying the provisions of the contract of carriage and pertinent provisions of the
Warsaw Convention limiting its liability to US$20.00 per kilo of baggage.
Ruling: No. The court upheld the decision of the lower courts.
The court a quo debunked petitioner's arguments by this holding:
The defense raised by defendant airlines that it can be held liable only under the terms of the Warsaw Convention
(Answer, Special and Affirmative Defenses, dated October 26, 1988) is of no moment. For it has also been held that
Articles 17, 18 and 19 of the Warsaw Convention of 1929 merely declare the air carriers liable for damages in the
cases enumerated therein, if the conditions specified are present. Neither the provisions of said articles nor others
regulate or exclude liability for other breaches of contract by air carriers (Northwest Airlines, Inc. vs. Nicolas Cuenca,
et al., 14 SCRA 1063). 23
This ruling of the trial court was affirmed by respondent Court of Appeals, thus:
We are not persuaded. Appellees do not seek payment for loss of any baggage. They are claiming damages arising
from the discriminatory off-loading of their baggag(e). That cannot be limited by the printed conditions in the tickets
and baggage checks. Neither can the Warsaw Convention exclude nor regulate the liability for other breaches of
contract by air carriers. A recognition of the Warsaw Convention does not preclude the operation of our Civil Code
and related laws in determining the extent of liability of common carriers in breach of contract of carriage, particularly
for willful misconduct of their employees. 24
The congruent finding of both the trial court and respondent court that there was discriminatory off-loading being a
factual question is, as stated earlier, binding upon and can no longer be passed upon by this Court, especially in view
of and in deference to the affirmance of the same by respondent appellate court.
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. . . .

TOPIC: AGREEMENT LIMITING LIABILITY

SUBTOPIC: AS TO DILIGENCE REQUIRED
G.R. No. 102316 June 30, 1997
VALENZUELA HARDWOOD AND INDUSTRIAL SUPPLY INC., petitioner,
vs.
COURT OF APPEALS AND SEVEN BROTHERS SHIPPING CORPORATION, respondents.
Facts: It appears that on 16 January 1984, plaintiff (Valenzuela Hardwood and Industrial Supply, Inc.) entered into an
agreement with the defendant Seven Brothers (Shipping Corporation) whereby the latter undertook to load on board
its vessel M/V Seven Ambassador the former's lauan round logs numbering 940 at the port of Maconacon, Isabela for
shipment to Manila.
On 20 January 1984, plaintiff insured the logs against loss and/or damage with defendant South Sea Surety and
Insurance Co., Inc. for P2,000,000.00 and the latter issued its Marine Cargo Insurance Policy No. 84/24229 for
P2,000,000.00 on said date.
On 24 January 1984, the plaintiff gave the check in payment of the premium on the insurance policy to Mr. Victorio
Chua.
In the meantime, the said vessel M/V Seven Ambassador sank on 25 January 1984 resulting in the loss of the
plaintiff's insured logs.
On 30 January 1984, a check for P5,625.00 (Exh. "E") to cover payment of the premium and documentary stamps
due on the policy was tendered due to the insurer but was not accepted. Instead, the South Sea Surety and
Insurance Co., Inc. cancelled the insurance policy it issued as of the date of the inception for non-payment of the
premium due in accordance with Section 77 of the Insurance Code.
On 2 February 1984, plaintiff demanded from defendant South Sea Surety and Insurance Co., Inc. the payment of the
proceeds of the policy but the latter denied liability under the policy. Plaintiff likewise filed a formal claim with
defendant Seven Brothers Shipping Corporation for the value of the lost logs but the latter denied the claim.
Issue: Is a stipulation in a charter party that the "(o)wners shall not be responsible for loss, split, short-landing,
breakages and any kind of damages to the cargo" valid?
Ruling: The Court is not persuaded. As adverted to earlier, it is undisputed that private respondent had acted as a
private carrier in transporting petitioner's lauan logs. Thus, Article 1745 and other Civil Code provisions on common
carriers which were cited by petitioner may not be applied unless expressly stipulated by the parties in their charter
party.
In a contract of private carriage, the parties may validly stipulate that responsibility for the cargo rests solely on the
charterer, exempting the shipowner from liability for loss of or damage to the cargo caused even by the negligence of
the ship captain. Pursuant to Article 1306 17 of the Civil Code, such stipulation is valid because it is freely entered
into by the parties and the same is not contrary to law, morals, good customs, public order, or public policy. Indeed,
their contract of private carriage is not even a contract of adhesion. We stress that in a contract of private carriage,
the parties may freely stipulate their duties and obligations which perforce would be binding on them. Unlike in a
contract involving a common carrier, private carriage does not involve the general public.
Hence, the stringent provisions of the Civil Code on common carriers protecting the general public cannot justifiably
be applied to a ship transporting commercial goods as a private carrier. Consequently, the public policy embodied
therein is not contravened by stipulations in a charter party that lessen or remove the protection given by law in
contracts involving common carriers.

In fine, the respondent appellate court aptly stated that "[in the case of] a private carrier, a stipulation exempting the
owner from liability even for the negligence of its agents is valid."
SUBTOPIC: AS TO THE AMOUNT OF LIABILITY
G.R. No. 122494 October 8, 1998
EVERETT STEAMSHIP CORPORATION, petitioner,
vs.
COURT OF APPEALS and HERNANDEZ TRADING CO. INC., respondents.
Doctrine: A stipulation in the Bill of Lading limiting the common carriers liability for loss or destruction of a cargo to a
certain sum, unless the shipper or owner declares a greater value, is sanctioned by the law.
Facts: Private respondent imported three crates of bus spare parts marked as MARCO C/No. 12, MARCO C/No. 13
and MARCO C/No. 14, from its supplier, Maruman Trading Company, Ltd. (Maruman Trading), a foreign corporation
based in Inazawa, Aichi, Japan. The crates were shipped from Nagoya, Japan to Manila on board
"ADELFAEVERETTE," a vessel owned by petitioner's principal, Everett Orient Lines. The said crates were covered
by Bill of Lading No. NGO53MN.
Upon arrival at the port of Manila, it was discovered that the crate marked MARCO C/No. 14 was missing. This was
confirmed and admitted by petitioner in its letter of January 13, 1992 addressed to private respondent, which
thereafter made a formal claim upon petitioner for the value of the lost cargo amounting to One Million Five Hundred
Fifty Two Thousand Five Hundred (Y1,552,500.00) Yen, the amount shown in an Invoice No. MTM-941, dated
November 14, 1991. However, petitioner offered to pay only One Hundred Thousand (Y100,000.00) Yen, the
maximum amount stipulated under Clause 18 of the covering bill of lading which limits the liability of petitioner.
Private respondent rejected the offer and thereafter instituted a suit for collection docketed as Civil Case No. C15532, against petitioner before the Regional Trial Court of Caloocan City, Branch 126.
Issue: Whether the limited liability clause as stipulated in the bill of lading is be applied.
Ruling: A stipulation in the bill of lading limiting the common carrier's liability for loss or destruction of a cargo to a
certain sum, unless the shipper or owner declares a greater value, is sanctioned by law, particularly Articles 1749 and
1750 of the Civil Code which provide:
Art. 1749. A stipulation that the common carrier's liability is limited to the value of the goods appearing in the bill of
lading, unless the shipper or owner declares a greater value, is binding.
Art. 1750. A contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction, or
deterioration of the goods is valid, if it is reasonable and just under the circumstances, and has been freely and fairly
agreed upon.
Pursuant to the afore-quoted provisions of law, it is required that the stipulation limiting the common carrier's liability
for loss must be "reasonable and just under the circumstances, and has been freely and fairly agreed upon."
The bill of lading subject of the present controversy specifically provides, among others:
18. All claims for which the carrier may be liable shall be adjusted and settled on the basis of the shipper's net invoice
cost plus freight and insurance premiums, if paid, and in no event shall the carrier be liable for any loss of possible
profits or any consequential loss.
The carrier shall not be liable for any loss of or any damage to or in any connection with, goods in an amount
exceeding One Hundred thousand Yen in Japanese Currency (Y100,000.00) or its equivalent in any other currency
per package or customary freight unit (whichever is least) unless the value of the goods higher than this amount is
declared in writing by the shipper before receipt of the goods by the carrier and inserted in the Bill of Lading and extra
freight is paid as required. (Emphasis supplied)
The above stipulations are, to our mind, reasonable and just. In the bill of lading, the carrier made it clear that its
liability would only be up to One Hundred Thousand (Y100,000.00) Yen. However, the shipper, Maruman Trading, had
the option to declare a higher valuation if the value of its cargo was higher than the limited liability of the carrier.

Considering that the shipper did not declare a higher valuation, it had itself to blame for not complying with the
stipulations.
SUBTOPIC: PASSENGER BAGGAGE
44 OG 2268 | September 6, 1947 | Pres. J. Montemayor
Doctrine:
If the damage or loss was not due to fortuitous events, force majeure or inherent nature and defect of goods, but was
traceable to the own negligence of the common carrier, then he is liable.
Facts: Plaintiff Rufina Robles brought the present action against defendant operator and driver Jose Santos to
recover the value of her lost goods. Sitting in the front seat of Santos old Roadster with her large buri bag containing
two bolts of cloth called gris and 10 undershirts, Robles was told by Santos to transfer her baggage to the trunk
compartment possibly because of its bulk. Robles objected because it might get lost but later on agreed upon the
reassurance of Santos that the compartment will be locked. On the way to Manila, the compartment was opened from
time to time as other passengers got their baggage. Upon arrival in Bambang, Manila, Robles found that her bag with
its contents is missing.
Issue: Whether defendant operator is liable
Ruling: Yes. Judgment was modified as to amount of damages.
The defendant, being habitually engaged in transportation for the public, is bound and governed by the Code of
Commerce in his relations and responsibility to his passengers and their baggage or goods. The last paragraph of
Article 361 of the Code of Commerce, placing upon the carrier the burden of proof to show that the loss or damage
was caused by fortuitous events, force majeure or inherent nature and defect of goods, implies that if the damage or
loss was traceable to the own negligence of the common carrier, then he is liable.
Had defendant allowed plaintiff to keep her bag near her and guard it, the loss would never have occurred. There was
misdelivery resulting in complete loss. The defendant as a carrier failed to exercise the necessary supervision and
care to prevent the loss.
TOPIC: DELAY IN THE DELIVERY OF CARGO
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: On November 12, 1976, private respondent ordered from Eli Lilly. Inc. of Puerto Rico through its (Eli Lilly,
Inc.'s) agent in the Philippines, Elanco Products, 600,000 empty gelatin capsules for the manufacture of his
pharmaceutical products. The capsules were placed in six (6) drums of 100,000 capsules each valued at US
$1,668.71.
Through a Memorandum of Shipment (Exh. "B"; AC GR CV No.10340, Folder of Exhibits, pp. 5-6), the shipper Eli
Lilly, Inc. of Puerto Rico advised private respondent as consignee that the 600,000 empty gelatin capsules in six (6)
drums of 100,000 capsules each, were already shipped on board MV "Anders Maerskline" under Voyage No. 7703
for shipment to the Philippines via Oakland, California. In said Memorandum, shipper Eli Lilly, Inc. specified the date
of arrival to be April 3, 1977.
For reasons unknown, said cargo of capsules were mishipped and diverted to Richmond, Virginia, USA and then
transported back Oakland, Califorilia. The goods finally arrived in the Philippines on June 10, 1977 or after two (2)
months from the date specified in the memorandum. As a consequence, private respondent as consignee refused to
take delivery of the goods on account of its failure to arrive on time.
Private respondent alleging gross negligence and undue delay in the delivery of the goods, filed an action before the
court a quo for rescission of contract with damages against petitioner and Eli Lilly, Inc. as defendants.
Issue: Whether petitioner negligently incurred in delay in the delivery of the shipment.
Ruling: An examination of the subject bill of lading (Exh. "1"; AC GR CV No. 10340, Folder of Exhibits, p. 41) shows
that the subject shipment was estimated to arrive in Manila on April 3, 1977. While there was no special contract

entered into by the parties indicating the date of arrival of the subject shipment, petitioner nevertheless, was very well
aware of the specific date when the goods were expected to arrive as indicated in the bill of lading itself. In this
regard, there arises no need to execute another contract for the purpose as it would be a mere superfluity.
In the case before us, we find that a delay in the delivery of the goods spanning a period of two (2) months and seven
(7) days falls was beyond the realm of reasonableness. Described as gelatin capsules for use in pharmaceutical
products, subject shipment was delivered to, and left in, the possession and custody of petitioner-carrier for transport
to Manila via Oakland, California. But through petitioner's negligence was mishipped to Richmond, Virginia.
Petitioner's insitence that it cannot be held liable for the delay finds no merit.