Asia Lighterage and Shipping Inc. v.

CA
Gr, No. 147246, August 19, 2003
FACTS:
Petitioner was contracted as carrier by a corporation from Portland, Oregon to deliver a
cargo to the consignee's warehouse at Pasig City. The cargo, however, never reached
the consignee as the barge that carried the cargo sank completely, resulting in damage
to the cargo. Private respondent, as insurer, indemnified the consignee for the lost car-
go and thus, as subrogee, sought recovery from petitioner. Both the trial court and the
appellate court ruled in favor of private respondent. The Court ruled in favor of private
respondent. Whether or not petitioner is a common carrier, the Court ruled in the affir-
mative. The principal business of petitioner is that of lighterage and drayage, offering its
barges to the public, although for limited clientele, for carrying or transporting goods by
water for compensation. Whether or not petitioner failed to exercise extraordinary dili-
gence in its care and custody of the consignee's goods, the Court also ruled in the af-
firmative. The barge completely sank after its towing bits broke, resulting in the loss of
the cargo. Petitioner failed to prove that the typhoon was the proximate and only cause
of the loss and that it has exercised due diligence before, during and after the occur-
rence.

ISSUE:
Whether or Not the petitioner is a common carrier.

RULING:
YES. Petitioner is a common carrier whether its carrying of goods is done on an irregu-
lar 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 termi-
nals or issue tickets. To be sure, petitioner fits the test of a common carrier as laid down
in Bascos vs. Court of Appeals. The 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 busi-
ness transacted." In the case at bar, 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. Article 1732 of
the Civil Code defines common carriers 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.

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Gatchalian V. Delim (1991)

G.R. No. L-56487 October 21, 1991

FACTS:
• July 11,1973: Reynalda Gatchalian boarded Thames" mini bus at Aringay, La
Union bound for Bauang, of the same province. The bus bumped a cement
 flower pot on the side of the road, went off the road, turned turtle and fell into a
ditch.
• Gatchalian got injured with physical injuries on the leg, arm and forehead
• Mrs. Adela Delim visited the passenger and later paid for their hospitalization and
medical expenses. She also gave transportation expense of P12 in going home
from the hospital and they were made to sign a Joint Affidavit stating that they
are no longer interested to file a complaint, criminal or civil against the said driver
and owner of the said Thames.
• Gatchalian filed in the CFI an action extra contractu to recover compensatory and
moral damages stating that the mishap had left her with a conspicuous white
scar measuring 1 by 1/2 inches on the forehead, generating mental suffering and
an inferiority complex on her part
• as a result, she had to retire in seclusion and stay away from her friends
• scar diminished her facial beauty and deprived her of opportunities for
employment
• Delim averred that it was a fortuitous event
• CFI: dismissed because of the Joint Affidavit
• CA: affirmed

ISSUE: W/N Gatchalian is entitled to damages

HELD: YES. CA, CFI REVERSED and SET ASIDE 1) P15,000 actual or compensatory
damages to cover the cost of plastic surgery for the removal of the scar on petitioner's
forehead; 2) P30,000 moral damages; and 3) P1,000 attorney's fees, the aggregate
amount to bear interest at the legal rate of 6% per annum counting from the promulga-
tion of this decision until full payment thereof

• A waiver, to be valid and effective, must in the first place be couched in clear and
unequivocal terms which leave no doubt as to the intention of a person to give up
a right or benefit which legally pertains to him.
• while reading the same, she experienced dizziness but that, seeing the
other passengers who had also suffered injuries sign the document, she
too signed without bothering to read the Joint Affidavit in its entirety. Con-
sidering these circumstances there appears substantial doubt whether pe-
titioner understood fully the import of the Joint Affidavit
• To uphold a supposed waiver of any right to claim damages by an injured
passenger, under circumstances like those exhibited in this case, would
be to dilute and weaken the standard of extraordinary diligence exacted by
the law from common carriers and hence to render that standard unen-
forceable.
• To exempt a common carrier from liability for death or physical injuries to
passengers upon the ground of force majeure, the carrier must clearly
show not only that the efficient cause of the casualty was entirely inde-
pendent of the human will, but also that it was impossible to avoid.
• The driver did not stop to check if anything had gone wrong with the bus
after the snapping sound
 • Court of Appeals, however, found that at the time of the accident, she was
no longer employed in a public school since, being a casual employee and
not a Civil Service eligible, she had been laid off. Her employment as a
substitute teacher was occasional and episodic, contingent upon the
availability of vacancies for substitute teachers.
• A person is entitled to the physical integrity of his or her body; if that
integrity is violated or diminished, actual injury is suffered for which actual
or compensatory damages are due and assessable. Petitioner Gatchalian
is entitled to be placed as nearly as possible in the condition that she was
before the mishap. A scar, especially one on the face of the woman, result-
ing from the infliction of injury upon her, is a violation of bodily integrity,
giving raise to a legitimate claim for restoration to her conditio ante. If the
scar is relatively small and does not grievously disfigure the victim, the
cost of surgery may be expected to be correspondingly modest.
• In view of the testimony, and the fact that a considerable amount of time
has lapsed since the mishap in 1973 which may be expected to increase
not only the cost but also very probably the difficulty of removing the scar,
we consider that the amount of P15,000.00 to cover the cost of such plas-
tic surgery is not unreasonable
• moral damages may be awarded where gross negligence on the part of
the common carrier

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Compania Maritima vs Court of Appeals and Vicente Concepcion

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

FACTS:
Vicente Concepcion, a contractor, had his construction equipment shipped from Manila
to Cagayan de Oro. His equipment were loaded aboard MV Cebu, a vessel owned by
Compania Maritima. During unloading, the payloader fell and was damaged. The carrier
had the payloader weighed in Manila and found that it weighed 7.5 tons not 2.5 tons as
declared in the Bill of Lading. Concepcion demanded a replacement of the payloader
but to no avail. The shipper denied the claim for damages.

ISSUE:
Whether or not the furnishing of an inaccurate weight of 2.5 tons was the proximate and
only cause of the damage on the payloader.

RULING:
NO. The furnishing of an inaccurate weight of 2.5 tons is only a contributory circum-
stance to the damaged cause. It mitigates the liability making the recoverable amount
reduced to 80%. The standard diligence required for the carrier in handling the goods is
EXTRAORDINARY. The carrier failed to establish that it exercised the necessary dili-
gence when they did not check the equipment and accepted the bill of lading on its face
value. Moreover, they did not use the jumbo lifter (20-25 tons capacity) but the 5-ton ca-
pacity lifting apparatus to lift and unload a visibly heavy cargo like a payloader. The
crew were careless in ascertaining the weight of heavy cargoes. The extraordinary dili-
gence requires common carriers to render service with the greatest skill and foresight
and “to use all reasonable means to ascertain the nature and characteristic of goods
tendered for shipment, and to exercise due care in the handling and stowage, including
such methods as their nature requires.

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EASTERN SHIPPING LINES INC., Petitioner,

vs.
BPI/MS INSURANCE CORP. and MITSUI SUM TOMO INSURANCE CO. LTD., Re-
spondents.
G.R. No. 193986 January 15, 2014

PONENTE: Villarama Jr., J.

TOPIC: Negligence
FACTS:
Sumitomo Corporation shipped through vessels of Eastern Shipping Lines
various steel sheets in coil in favor of the consignee Calamba Steel. In each of the three
shipments, several coils were observed to be in bad condition as evidenced by the Turn
Over Survey of Bad Order Cargo. The cargoes were then turned over to Asian Termi-
nals, Inc. (ATI) for stevedoring, storage and safekeeping pending Calamba Steel’s with-
drawal of the goods. When ATI delivered the cargo to Calamba Steel, the latter rejected
its damaged portion for being unfit for its intended purpose.

Calamba Steel filed an insurance claim with Mitsui through the latter’s settling
agent, respondent BPI/MS Insurance Corporation (BPI/MS), and the former was paid
the sums of US$7,677.12, US$14,782.05 and US$7,751.15 for the damage suffered by
all three shipments. Correlatively, on August 31, 2004, as insurer and subrogee of
Calamba Steel, Mitsui and BPI/MS filed a Complaint for Damages against petitioner and
ATI.

ISSUE:
Whether or not Eastern Shipping was solidarily liable with ATI on account of
the damage incurred by the goods.

HELD:
YES. The Court held that both Eastern Shipping and ATI were negligent in
handling and transporting the goods.

Verily, it is settled in maritime law jurisprudence that cargoes while being un-
loaded generally remain under the custody of the carrier. As hereinbefore found by the
RTC and affirmed by the CA based on the evidence presented, the goods were dam-
aged even before they were turned over to ATI. Such damage was even compounded
by the negligent acts of petitioner and ATI which both mishandled the goods during the
discharging operations. Thus, it bears stressing unto petitioner that common carriers,
from the nature of their business and for reasons of public policy, are bound to observe
extraordinary diligence in the vigilance over the goods transported by them.
Subject to certain exceptions enumerated under Article 1734 of the Civil
Code, common carriers are responsible for the loss, destruction, or deterioration of the
goods. The extraordinary responsibility of the common carrier lasts from the time the
goods are unconditionally placed in the possession of, and received by the carrier for
transportation until the same are delivered, actually or constructively, by the carrier to
the consignee, or to the person who has a right to receive them.

Owing to this high degree of diligence required of them, common carriers, as

a general rule, are presumed to have been at fault or negligent if the goods they trans-
ported deteriorated or got lost or destroyed. That is, unless they prove that they exer-
cised extraordinary diligence in transporting the goods. In order to avoid responsibility
for any loss or damage, therefore, they have the burden of proving that they observed
such high level of diligence. In this case, petitioner failed to hurdle such burden.

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Ganzon v. Court of Appeals

G.R. NO. L-48757, 30 May 1988, 161 SCRA 646

FACTS:
On November 28, 1956, Gelacio Tumambing contracted the services of Mauro B. Gan-
zon to haul 305 tons of scrap iron from Mariveles, Bataan, to the port of Manila on board
the lighter LCT “Batman. Pursuant to that agreement, Mauro B. Ganzon sent his lighter
“Batman” to Mariveles where it docked in three feet of water. Gelacio Tumambing deliv-
ered the scrap iron to defendant Filomeno Niza, captain of the lighter, for loading which
was actually begun on the same date by the crew of the lighter under the captain’s su-
pervision. When about half of the scrap iron was already loaded, Mayor Jose Advincula
of Mariveles, Bataan, arrived and demanded P5,000.00 from Gelacio Tumambing. The
latter resisted the shakedown and after a heated argument between them, Mayor Jose
Advincula drew his gun and fired at Gelacio Tumambing who sustained injuries.

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

Tumabing sued Ganzon; the latter alleged that the goods have not been unconditionally
placed under his custody and control to make him liable. The trial court dismissed the
case but on appeal, respondent Court rendered a decision reversing the decision of the
trial court and ordering Ganzon to pay damages.

ISSUE:
Whether or not a contract of carriage has been perfected.

HELD:
Yes.
By the said act of delivery, the scraps were unconditionally placed in the possession
and control of the common carrier, and upon their receipt by the carrier for transporta-
tion, the contract of carriage was deemed perfected. Consequently, the petitioner-carri-
er’s extraordinary responsibility for the loss, destruction or deterioration of the goods
commenced. Pursuant to Art. 1736, such extraordinary responsibility would cease only
upon the delivery, actual or constructive, by the carrier to the consignee, or to the per-
son who has a right to receive them. The fact that part of the shipment had not been
loaded on board the lighter did not impair the said contract of transportation as the
goods remained in the custody and control of the carrier, albeit still unloaded.
Before Ganzon could be absolved from responsibility on the ground that he was ordered
by competent public authority to unload the scrap iron, it must be shown that Acting
Mayor Basilio Rub had the power to issue the disputed order, or that it was lawful, or
that it was issued under legal process of authority. The appellee failed to establish this.
Indeed, no authority or power of the acting mayor to issue such an order was given in
evidence. Neither has it been shown that the cargo of scrap iron belonged to the Munic-
ipality of Mariveles. What we have in the record is the stipulation of the parties that the
cargo of scrap iron was accumulated by the appellant through separate purchases here
and there from private individuals. The fact remains that the order given by the acting
mayor to dump the scrap iron into the sea was part of the pressure applied by Mayor
Jose Advincula to shakedown Tumambing for P5,000.00. The order of the acting mayor
did not constitute valid authority for Ganzon and his representatives to carry out.

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BASCOS vs. COURT OF APPEALS and RODOLFO A. CIPRIANO

G.R. No. 101089
April 7, 1993

FACTS: Rodolfo A. Cipriano representing Cipriano Trading Enterprise (CIPTRADE for

short) entered into a hauling contract with Jibfair Shipping Agency Corp whereby the
former bound itself to haul the latter’s 2,000 m/tons of soya bean meal to the warehouse
in Calamba, Laguna. To carry out its obligation, CIPTRADE, through Cipriano, subcon-
tracted with Bascos to transport and to deliver 400 sacks of soya bean meal from the
Manila Port Area to Calamba, Laguna. Petitioner 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 their contract. Cipriano demanded reimbursement from
petitioner 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 car-
riage. The trial court granted the writ of preliminary attachment.

In her answer, petitioner interposed the defense that there was no contract of carriage
since CIPTRADE leased her cargo truck to load the cargo from Manila Port Area to La-
guna and that the truck carrying the cargo was hijacked and being a force majeure, ex-
culpated petitioner from any liability. After trial, the trial court rendered a decision in fa-
vor of Cipriano and against Bascos ordering the latter to pay the former for actual dam-
ages for attorney’s fees and cost of suit. The “Urgent Motion To Dissolve/Lift preliminary
Attachment” Bascos is DENIED for being moot and academic. Petitioner appealed to
the Court of Appeals but respondent Court affirmed the trial court’s judgment.

Hence this petition for review on certiorari

ISSUE:
(1) WON petitioner a common carrier
(2) WON the hijacking referred to a force majeure

HELD: The petition is DISMISSED and the decision of the Court of Appeals is hereby
AFFIRMED.
1. YES
In disputing the conclusion of the trial and appellate courts that petitioner was a com-
mon carrier, she alleged in this petition that the contract between her and Cipriano was
lease of the truck. She also stated that: she was not catering to the general public.
Thus, in her answer to the amended complaint, she said that she does business under
the same style of A.M. Bascos Trucking, offering her trucks for lease to those who have
cargo to move, not to the general public but to a few customers only in view of the fact
that it is only a small business.

We agree with the respondent Court in its finding that petitioner is a common carrier.
Article 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 pub-
lic.” The 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.” 12 In this
case, petitioner herself has made the admission that she was in the trucking business,
offering her trucks to those with cargo to move. Judicial admissions are conclusive and
no evidence is required to prove the same.

But petitioner argues that there was only a contract of lease because they offer their
services only to a select group of people. Regarding the first contention, the holding of
the Court in De Guzman vs. Court of Appeals 14 is instructive. In referring to Article
1732 of the Civil Code, it held thus:

“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 mak-
ing 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 popula-
tion. We think that Article 1732 deliberately refrained from making such distinctions.”

2. NO
Likewise, We affirm the holding of the respondent court that the loss of the goods was
not due to force majeure.

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. 19 In those cases where the presumption is applied, the
common carrier must prove that it exercised extraordinary diligence in order to over-
come the presumption.

In this case, petitioner alleged that hijacking constituted force majeure which exculpated
her from liability for the loss of the cargo. In 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 hijack-
ing, 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 which
provides:
“Art. 1745. Any of the following or similar stipulations shall be considered unreasonable,
unjust and contrary to public policy; xx
(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 dimin-
ished;” xx

NOTES:
1. She cited as evidence certain affidavits which referred to the contract as “lease”.
These affidavits were made by Jesus Bascos and by petitioner herself and Cipriano and
CIPTRADE did not object to the presentation of affidavits by petitioner where the trans-
action was referred to as a lease contract. Both the trial and appellate courts have dis-
missed them as self-serving and petitioner contests the conclusion. We are bound by
the appellate court’s factual conclusions. Yet, granting 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, petitioner presented no other proof of the
existence of the contract of lease. He who alleges a fact has the burden of proving it.

2. Having affirmed the findings of the respondent Court on the substantial issues in-
volved, We find no reason to disturb the conclusion that the motion to lift/dissolve the
writ of preliminary attachment has been rendered moot and academic by the decision
on the merits.
——————————————————————————————————————-

TRANSIMEX CO. vs MAFRE ASIAN INSURANCE CORP

G.R. No. 190271, September 14, 2016
PARTIES:

Transimex Co, ship agent of the common carrier

–
Petitioner (SC case) Respondent (Original Case)
Mafre Asian Insurance Corp, insurer of Fertiphil
–
Respondent (SC case) Petitioner (Original Case)
Fertiphil- the consignee of a shipment of Prilled Urea Fertilizer transported by
M/V Meryem Ana
.
FACTS:
On 21 May 1996,M/V Meryem Ana received a shipment consisting of 21,857 metric
tons of Prilled Urea Fertilizer from Helm Duengemittel GMBH at Odessa, Ukraine. The
shipment was covered by two separate bills of lading and consigned to Fertiphil for de-
livery to two ports - one in Poro Point, San Fernando, La Union; and the other in Taba-
co, Albay. Fertiphil insured the cargo against all risks under Marine Risk Note Nos. MN-
MAR-HO-0001341 and MN-MAR-HO-0001347 issued by respondent. M/V Meryem Ana
arrived at Poro Point, La Union, and discharged 14,339.507 metric tons of fertilizer un-
der the first bill of lading. The ship sailed on to Tabaco, Albay, to unload the remainder of
the cargo. The fertilizer unloaded at Albay appeared to have a gross weight of 7,700
metric tons. The present controversy involves only this second delivery. As soon as the
vessel docked at the Tabaco port, the fertilizer was bagged and stored inside a ware-
house. When the cargo was subsequently weighed, it was discovered that only
7,350.35 metric tons of fertilizer had been delivered. The present controversy involves
on the second delivery because of the alleged shortage of 349.65 metric tons. Fertiphil
filed a claim with respondent for P1,617,527.37. After payment, respondent MAFRE
Asian Insurance demanded reimbursement from petitioner on the basis of the right of
subrogation. The claim was denied, prompting respondent to file a Complaint with the
RTC and ordered petitioner to pay the claim ofP1,617,527.37 was affirmed by the CA
and denied petitioner’s appeal.

Hence, this Petition for Review on Certiorari.

CAUSE OF ACTION:
Recovery of sum of money filed by Mafre Insurance Co. against Transimex Co because
when it demanded reimbursement from petitioner on the basis of the right of subroga-
tion, the latter denied the claim.

RULING OF RTC:
 The RTC ruled in favor of respondent and ordered petitioner to pay the claim of
P1,617,527.37. In its Decision, the trial court found that there was indeed a shortage in
the cargo delivered, for which the common carrier must be held responsible under Arti-
cle 1734 of the Civil Code. The RTC also refused to give credence to petitioner's claim
of coverage and noted that the presumption of fault and/or negligence on the part of the
carrier remained unrebutted.

RULING OF CA:
The CA affirmed the ruling of the RTC and denied petitioner's appeal. After evaluating
the evidence presented during trial, the appellate court found no reason to disturb the
trial court's conclusion that there was indeed a shortage in the shipment. The CA also
rejected the assertion that petitioner was not a common carrier. Because the latter of-
fered services to the public for the transport of goods in exchange for compensation, it
was considered a common carrier in accordance with Article 1732 of the Civil Code.

ISSUES:
1. Whether the transaction is governed by the provisions of the Civil Code on common
carriers or by the provisions of COGSA; and 2. Whether petitioner is liable for the loss
or damage sustained by the cargo because of bad weather.

HELD:
1. The Court upholds the ruling of the CA with respect to the applicable law. As ex-
pressly provided in Article 1753 of the Civil Code, "[t]he law of the country to which the
goods are to be transported shall govern the liability of the common carrier for their loss,
destruction or deterioration." Since the cargo in this case was transported from Odessa,
Ukraine, to Tabaco, Albay, the liability of petitioner for the alleged shortage must be de-
termined in accordance with the provisions of the Civil Code on common carriers.

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FEDERAL EXPRESS CORPORATION, Petitioner, -versus- LUWALHATI R. AN-

TONINO AND ELIZA BETTINA RICASA ANTONINO, Respondents.
G.R. No. 199455, THIRD DIVISION, June 27, 2018, LEONEN, J

It is settled in jurisprudence that checks, being only negotiable instruments, are only
substitutes for money and are not legal tender; more so when the check has a named
payee and is not payable to bearer.
The checks involved here are payable to specific payees, Maxwell-Kates, Inc. and the
New York County Department of Finance. Thus, they are order instruments. They are
not payable to their bearer, i.e., bearer instruments. Under the Negotiable Instruments
Law, aside from following the requisites as stated in Section 1, an order instrument re-
quires an indorsement from the payee or holder before it may be validly negotiated. A
bearer instrument, on the other hand, does not require an indorsement to be validly ne-
gotiated. An order instrument, which has to be endorsed by the payee before it may be
negotiated, cannot be a negotiable instrument equivalent to cash. It is worth emphasiz-
ing that the instruments given as further examples under the Air Waybill must be en-
dorsed to be considered equivalent to cash.

FACTS:
Eliza was the owner of Unit 22-A in Allegro Condominium, located at New York, United
States. In November 2003, monthly common charges on the Unit became due for the
period of July 2003 to November 2003, and were for a total amount of US$9,742.81. On
December 15, 2003, while Luwalhati and Eliza were in the Philippines they decided to
send several Citibank checks, amounting to US$17,726.18 for the payment of monthly
charges and US$11,619.35 for the payment of real estate taxes to Veronica Z. Sison,
who was based in New York and such were sent by Luwalhati through FedEx. The
package was addressed to Sison who was tasked to deliver the checks payable to
Maxwell- Kates, Inc. and to the New York County Department of Finance. Sison alleged-
ly did not receive the package, resulting in the non-payment of Luwalhati and Eliza's
obligations and the foreclosure of the Unit. Upon learning that the checks were sent on
December 15, 2003, Sison contacted FedEx to inquire about the non-delivery. She was
informed that the package was delivered to her neighbor but there was no signed re-
ceipt.

On March 14, 2004, Luwalhati and Eliza sent a demand letter to FedEx for payment of
damages due to the non-delivery of the package, but FedEx refused to heed their de-
mand. Hence, on April 5, 2004, they filed their Complaint for damages. As for FedEx de-
fenses, it claimed that Luwalhati and Eliza "had no cause of action against it because
they failed to comply with a condition precedent, that of filing a written notice of claim
within the 45 calendar days from the acceptance of the shipment." It added that it was
absolved of liability as Luwalhati and Eliza shipped prohibited items and misdeclared
these items as "documents." It pointed to conditions under its Air Waybill prohibiting the
"transportation of money”.

The Regional Trial Court ruled for Luwalhati and Eliza. The Court of Appeals affirmed
the ruling of the RTC.

ISSUE:
Whether or Not petitioner Federal Express Corporation may be held liable for damages
on account of its failure to deliver the checks shipped by respondents Luwalhati R. An-
tonino and Eliza Bettina Ricasa Antonino to the consignee Veronica Sison? (YES)

RULING:
SUBSTANTIAL COMPLIANCE TO THE PROVISION OF CONTRACT OF CARRIAGE
The provision in a contract of carriage requiring the filing of a formal claim within a spec-
ified period is a valid stipulation. Jurisprudence maintains that compliance with this pro-
vision is a legitimate condition precedent to an action for damages arising from loss of
the shipment. The fundamental reason or purpose of such a stipulation is not to relieve
the carrier from just liability, but reasonably to inform it that the shipment has been
damaged and that it is charged with liability therefor, and to give it an opportunity to ex-
amine the nature and extent of the injury.
For their claim to prosper, respondents must, thus, surpass 2 hurdles: the filing of their
formal claim within 45 days; and the subsequent filing of the action within 2 years. There
is no dispute on respondents' compliance with the second period as their Complaint was
filed on April 5, 2004. For the former, this Court is guided by settled standards in the
case of PAL v. CA; “xxx there was substantial compliance with the period because of the
zealous efforts demonstrated by Mejia in following up her claim. These efforts coupled
with Philippine Airlines' "tossing around the claim and leaving it unresolved for an indefi-
nite period of time" led this Court to deem the requisite period satisfied. This is pursuant
to Article 1186 of the New Civil Code which provides that the condition shall be deemed
fulfilled when the obligor voluntarily prevents its fulfillment.” Luwalhati showed ardent
campaign in following up the claim. It is beyond her control why the demand letter for
damages was only sent subsequent to her infuriating follow-ups regarding the where-
abouts of the said package. Petitioner has been unable to persuasively refute Luwal-
hati's recollection of the efforts that she and Sison exerted, and of the responses it gave
them. It instead insists that the 45-day period stated in its Air Waybill is sacrosanct. It is
one with the RTC and the CA in stressing that respondents' inability to expediently file a
formal claim can only be attributed to petitioner hampering its fulfillment. Thus, respon-
dents must be deemed to have substantially complied with the requisite 45-day period
for filing a formal claim.

EXTRAORDINARY DILIGENCE OF COMMON CARRIERS

The Civil Code mandates common carriers to observe extraordinary diligence in caring
for the goods they are transporting. Extraordinary diligence is that extreme measure of
care and caution which persons of unusual prudence and circumspection use for secur-
ing and preserving their own property or rights." The Civil Code stipulates that in case of
loss or damage to goods, common carriers are presumed to be negligent or at fault, ex-
cept in the following instances: (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 authori-
ty. In all other cases, common carriers must prove that they exercised extraordinary dili-
gence in the performance of their duties, if they are to be absolved of liability.

The responsibility of common carriers to exercise extraordinary diligence lasts from the
time the goods are unconditionally placed in their possession until they are delivered "to
the consignee, or to the person who has a right to receive them." Thus, part of the ex-
traordinary responsibility of common carriers is the duty to ensure that shipments are
received by none but "the person who has a right to receive them." Common carriers
must ascertain the identity of the recipient. Failing to deliver shipment to the designated
recipient amounts to a failure to deliver. The shipment shall then be considered lost, and
liability for this loss ensues.

Petitioner is unable to prove that it exercised extraordinary diligence in ensuring delivery

of the package to its designated consignee. It claims to have made a delivery but it even
admits that it was not to the designated consignee. It asserts instead that it was autho-
rized to release the package without the signature of the designated recipient and that
the neighbor of the consignee, one identified only as "LGAA 385507," received it. The
assertion that receipt was made by "LGAA 385507" amounts to little, if any, value in
proving petitioner's successful discharge of its duty. It is nothing but an alphanumeric
code that outside of petitioner's personnel and internal systems signifies nothing. Re-
liance on this code is tantamount to reliance on nothing more than petitioner's bare, self-
serving allegations. Certainly, this cannot satisfy the requisite of extraordinary diligence
consummated through delivery to none but "the person who has a right to receive" the
package.

Given the circumstances in this case, the more reasonable conclusion is that the pack-
age was not delivered. The package shipped by respondents should then be considered
lost, thereby engendering the liability of a common carrier for this loss. It failed to ensure
that the package was delivered to the named consignee. It admitted to delivering to a
mere neighbor. Even as it claimed this, it failed to identify that neighbor.
VIOLATION OF THE TERMS OF THE AIRWAY BILL
6

D. Rights of the holder

1. Holder in due course

Petitioner's International Air Waybill states:

Items Not Acceptable for Transportation. We do not accept transportation of money (in-
cluding but not limited to coins or negotiable instruments equivalent to cash such as en-
dorsed stocks and bonds). We exclude all liability for shipments of such items accepted
by mistake. xxx

The prohibition has a singular object: money. The additional phrase, enclosed as it is in
parentheses, is not the object of the prohibition, but merely a postscript to the word
"money." Moreover, its introductory words "including but not limited to" signify that the
items that follow are illustrative examples; they are not qualifiers that are integral to or
inseverable from "money." Money is "what is generally acceptable in exchange for
goods." Laws usually define what can be considered as a generally acceptable medium
of exchange. The New Central Bank Act, defines legal tender as; “All notes and coins
issued by the Bangko Sentral shall be fully guaranteed by the Government of the Re-
public of the Philippines and shall be legal tender in the Philippines for all debts, both
public and private. It is settled in jurisprudence that checks, being only negotiable in-
struments, are only substitutes for money and are not legal tender; more so when the
check has a named payee and is not payable to bearer.

The Air Waybill's prohibition mentions "negotiable instruments" only in the course of
making an example. Thus, they are not prohibited items themselves. Moreover, the illus-
trative example does not even pertain to negotiable instruments per se but to "nego-
tiable instruments equivalent to cash." The checks involved here are payable to specific
payees, Maxwell-Kates, Inc. and the New York County Department of Finance. Thus,
they are order instruments. They are not payable to their bearer, i.e., bearer instru-
ments. Under the Negotiable Instruments Law, aside from following the requisites as
stated in Section 1, an order instrument requires an indorsement from the payee or
holder before it may be validly negotiated. A bearer instrument, on the other hand, does
not require an indorsement to be validly negotiated. An order instrument, which has to
be endorsed by the payee before it may be negotiated, cannot be a negotiable instru-
ment equivalent to cash. It is worth emphasizing that the instruments given as further
examples under the Air Waybill must be endorsed to be considered equivalent to cash

What this Court's protracted discussion reveals is that petitioner's Air Waybill lends itself
to a great deal of confusion. The clarity of its terms leaves much to be desired. This lack
of clarity can only militate against petitioner's cause. The contract between petitioner
and respondents is a contract of adhesion; it was prepared solely by petitioner for re-
spondents to conform to. Although not automatically void, any ambiguity in a contract of
adhesion is construed strictly against the party that prepared it. Accordingly, the prohibi-
tion against transporting money must be restrictively construed against petitioner and
liberally for respondents. Viewed through this lens, with greater reason should respon-
dents be exculpated from liability for shipping documents or instruments, which are rea-
sonably understood as not being money, and for being unable to declare them as such.

———————————————————————————————————————

Shewaram v. Philippine Airlines, Inc.

G.R. No. L-20099, 7 July 1966, 17 SCRA 606

FACTS:
Shewaram, petitioner herein, is a Hindu from Davao. He boarded a PAL plane for a trip
to Manila. He checked in 3 pieces of baggage, a suitcase and 2 other pieces. One of
the suitcases were mistagged by the defendant and as a result the said suitcase did not
arrive with him in Manila. Among his things in the suitcase was a Rollflex camera and
Transistor Radio 7. His baggage was later on returned but the camera and radio were
missing. He demanded indemnity for his loss from PAL. The latter offered to pay P100
for his loss but Shewaram. Defendant herein claimed that the PAL ticket, on the reverse
side, stated in fine print that if the value of baggage is not stated, and the baggage is
lost, the maximum liability of PAL is P100.00. If value in excess of P100.00 is stated,
PAL will charge extra because PAL is being held liable for an amount exceeding
P100.00. Shewaram rejected the offer and demanded full payment of P800.00 for the
amount of the things he lost. PAL refused to do so.

ISSUE:
Whether the stipulation limiting the liability of PAL shall apply in the case at bar.

HELD:
The Court held that PAL is liable for the loss of the petitioner herein. The stipulation in at
the back of the ticket shall not be binding against the petitioner. Article 1750 of the NCC
provides that the pecuniary liability of a common carrier may, by contract, be limited to a
fixed amount. It is required, however, that the contract must be “reasonable and just un-
der the circumstances and has been fairly and freely agreed upon.” In this case, the
court believes that the requirements of said article have not been met. It cannot be said
that the petitioner had actually entered into a contract with the PAL, embodying the con-
ditions as printed at the back of the ticket stub that was to the petitioner. The fact that
those conditions are printed at the back of the ticket stub in letters so small that they are
hard to read would not warrant the presumption that the petitioner was aware of those
conditions such that he had “fairly and freely agreed” to those conditions.