1. HE Heacock Company vs.

Macondray
G.R. No. L-16598 | October 3, 1921

Doctrine: (1) A clause in a bill of lading limiting the liability of the carrier to a certain amount
unless the shipper declares a higher value and pays a higher rate of freight, is valid and
enforceable. (2) In construing a bill of lading given by the carrier for the safe transportation and
delivery of goods shipped by a consignor, the contract will be construed most strongly against
the carrier, and favorably to the consignor, in case of doubt in any matter of construction.

Facts: Petitioner shipped Edmond Clocks from New York to Manila through the Steamship
Bolton Castle, when it arrived at the port of Manila, no delivery was made even after demand.
Petitioner demands for payment of the market value of the clocks valued at P420 while the
defendant common carrier tendered payment for only P76 which was rejected by the petitioner.
Petitioner instituted an action to recover the sum of money.

The Bill of Lading issued and delivered by the master of Bolton Castle contained the
following clauses:

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

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

CFI of Manila ordered the defendant to pay the petitioner for P226 computed according to the
Invoice Value Receipt of the Clocks + Freight + Insurance + Legal Interest in accordance to
clause 9 of the Bill of Lading.

Both Petitioner and Defendant appealed to this court.

Petitioner’s Contention: The two clauses in the bill of lading limiting the liability of Common
Carrier is against public policy and therefore null and void.

Defendant’s Contention: CFI should have decided in accordance with Clause 1 (not clause 9)
from which the proportionate freight ton value is only P76.

Issues: (1) Whether or not a common carrier, by stipulations inserted in the bill of lading, limit its
liability for the loss of or damage to the cargo to an agreed valuation of the latter. – YES –
petitioner’s contention that clause 1 and 9 is null and void has no merit.

(2) Whether or not clause 1 or clause 9 of the bill of lading here in question is to be
adopted as the measure of defendant's liability – Clause 9 in this specific case – Clause 1
and 9 limiting liability of common carrier are irreconcilable - therefore interpretation
should be against the one who drew the contract (the carrier who made the bill of lading)
and in construing a bill of lading given by the carrier for the safe transportation and
delivery of goods shipped by a consignor, the contract will be construed most strongly
against the carrier, and favorably to the consignor, in case of doubt in any matter of
construction.

-Ending nung case – CFI’s decision was correct.

Held: (1) Yes. 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.
 A reading of clauses 1 and 9 of the bill of lading here in question, however, clearly
shows that the present case falls within the third stipulation, to wit: That a clause in a bill of
lading limiting the liability of the carrier to a certain amount unless the shipper declares a higher
value and pays a higher rate of freight, is valid and enforceable.

In the case of Union Pacific Railway Co. vs. Burke it has been declared to be the settled
Federal law that if a common carrier gives to a shipper the choice of two rates, the lower of the
conditioned upon his agreeing to a stipulated valuation of his property in case of loss, even by
the carrier's negligence, if the shipper makes such a choice, understandingly and freely, and
names his valuation, he cannot thereafter recover more than the value which he thus places
upon his property. As a matter of legal distinction, estoppel is made the basis of this ruling, —
that, having accepted the benefit of the lower rate, in common honesty the shipper may not
repudiate the conditions on which it was obtained, — but the rule and the effect of it are clearly
established."

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

It seems clear from the foregoing authorities that the clauses (1 and 9) of the bill of lading here
in question are not contrary to public order.

(2) Clause 1 contains only an implied undertaking to settle in case of loss on the basis of not
exceeding $500 per freight ton, clause 9 contains an express undertaking to settle on the basis
of the net invoice price plus freight and insurance less all charges saved. "Any loss or damage
for which the carrier may be liable shall be adjusted pro rata on the said basis," clause 9
expressly provides. It seems to us that there is an irreconcilable conflict between the two
clauses with regard to the measure of defendant's liability. It is difficult to reconcile them
without doing violence to the language used and reading exceptions and conditions into the
undertaking contained in clause 9 that are not there. This being the case, the bill of lading in
question should be interpreted against the defendant carrier, which drew said contract.
"A written contract should, in case of doubt, be interpreted against the party who has
drawn the contract." (6 R. C. L. 854.) It is a well-known principle of construction that ambiguity
or uncertainty in an agreement must be construed most strongly against the party causing it. (6
R. C. L., 855.) These rules as applicable to contracts contained in bills of lading. "In construing
a bill of lading given by the carrier for the safe transportation and delivery of goods
shipped by a consignor, the contract will be construed most strongly against the carrier,
and favorably to the consignor, in case of doubt in any matter of construction." (Alabama,
etc. R. R. Co. vs. Thomas, 89 Ala., 294; 18 Am. St. Rep., 119.)

It follows from all of the foregoing that the judgment appealed from should be affirmed, without
any finding as to costs. So ordered.
 2. Ong Yiu vs. Court of Appeals
G.R. No. L-40597 | June 29, 1979

DOCTRINE:
While it may be true that the passenger had not signed the plane ticket, he is
nevertheless bound by the provisions thereof. "Such provisions have been held to be a part of
the contract of carriage, and valid and binding upon the passenger regardless of the latter's lack
of knowledge or assent to the regulation". It is what is known as a contract of "adhesion", in
regards which it has been said that contracts of adhesion wherein one party imposes a ready-
made form of contract on the other, as the plane ticket in the case at bar, are contracts not
entirely prohibited. The one who adheres to the contract is in reality free to reject it entirely; if he
adheres, he gives his consent. 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.

FACTS:
On August 26, 1967, Ong Yiu was a fare paying passenger of respondent PAL from
Mactan, Cebu to Butuan City where he was scheduled to attend a trial. He checked in one piece
of luggage for which he was issued a claim ticket. Upon arrival at Butuan City, petitioner claimed
his luggage but it could not be found. The missing luggage was forwarded to Butuan City the
next day. Early morning, petitioner went to the Butuan Airport to inquire about the luggage but
did not wait for the arrival of the morning flight at 10:00am which carried his luggage. A certain
Dagorro, a driver of a colorum car, who also used to drive the petitioner volunteered to take the
luggage to the petitioner but observed that the maleta has been opened. Upon inspection,
petitioner found that his documents for trial were missing. Petitioner refused to accept the
luggage.
The lower court ruled in favor of the petitioner and held that PAL acted in bad faith and
with malice. The appellate court reversed the findings, held that PAL was only guilty of simple
negligence, and ordered PAL to pay the petitioner P100, the baggage liability assumed by it
printed at the back of the ticket.

ISSUE: WON CA committed a grave error when it limited PAL’s carriage liability to the amount
of P100 as stipulated at the back of the ticket.

RULING:
No, the Court agreed with the findings of the appellate court and held that PAL’s
liability is limited to P100 only.
The pertinent Condition of Carriage printed at the back of the plane ticket reads: "8.
BAGGAGE LIABILITY . . . The total liability of the Carrier for lost or damaged baggage of the
passenger is LIMITED TO P100.00 for each ticket unless a passenger declares a higher
valuation in excess of P100.00, but not in excess, however, of a total valuation of P1,000.00 and
additional charges are paid pursuant to Carrier's tariffs."
While it may be true that petitioner had not signed the plane ticket, he is nevertheless
bound by the provisions thereof. "Such provisions have been held to be a part of the contract of
carriage, and valid and binding upon the passenger regardless of the latter's lack of knowledge
or assent to the regulation". It is what is known as a contract of "adhesion", in regards which it
has been said that contracts of adhesion wherein one party imposes a ready made form of
contract on the other, as the plane ticket in the case at bar, are contracts not entirely prohibited.
The one who adheres to the contract is in reality free to reject it entirely; if he adheres, he gives
his consent. And as held in Randolph v. American Airlines and Rosenchein vs. Trans World
Airlines, "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."
WHEREFORE, for lack of merit, the instant Petition is hereby denied, and the judgment
sought to be reviewed hereby affirmed in toto.
 3. Sea-Land Service vs. Intermediate Appellate Court
G.R. No. 75118 | Aug. 31, 1987
Doctrine: The consignee, although the instrument is oftentimes drawn up only by the consignor
and carrier, becomes bound by all the stipulations contained therein by making a claim for loss
on the basis of said bill of lading. Private respondent consignee, by making claim for loss on the
basis of the bill of lading, to all intents and purposes accepted said bill. Having done so, he
“becomes bound by all stipulations contained therein whether on the front or the back thereof”.

Facts:
On or about January 8, 1981, Sea-Land Service, Inc. (Sea-Land), a foreign shipping and
forwarding company licensed to do business in the Philippines, received from Seaborne Trading
Company in Oakland, California a shipment consigned to Sen Hiap Hing the business name
used by Paulino Cue in the wholesale and retail trade which he operated out of an
establishment located on Borromeo and Plaridel Streets, Cebu City. The shipper did not declare
the value of the shipmen and no value was indicated in the bill of lading. The bill described the
shipment only as “8 CTNS on 2 SKIDS-FILES.”

The shipment arrived in Manila on February 12, 1981, and there discharged into the
custody of the arrastre contractor and the customs and port authorities. Sometime between
February 13 and 16, 1981, after the shipment had been transferred near Warehouse 3 at Pier 3
in South Harbor, Manila, awaiting trans-shipment to Cebu, it was stolen by pilferers and has
never been recovered. On March 10, 1981, Paulino Cue, the consignee, made formal claim
upon Sea-Land for the value of the lost shipment allegedly amounting to P179,643.48. Sea-
Land offered to settle for US$4,000.00, or its then Philippine peso equivalent of P30,600.00,
asserting that said amount represented its maximum liability for the loss of the shipment under
the package limitation clause in the covering bill of lading. Cue rejected the offer and thereafter
brought suit for damages against Sea-Land in the then Court of First Instance of Cebu.
The trial court rendered judgment in favor of Cue.The Intermediate Appellate Court
affirmed said decision.

Issue:
a. Whether or not the “package limitation clause,” a stipulation limiting the liability of the
carrier for loss and damage to the shipment to the amount fixed in the bill of lading, is
valid and binding against the shipper and the consignee in view of the shipper’s failure to
declare the actual value of the shipment.
b. Whether or not the consignee of seaborne freight is bound by stipulations in the covering
bill of lading limiting to a fixed amount the liability of the carrier for loss or damage to the
cargo where its value is not declared in the bill.

Held:
a. Yes. There is nothing in the Civil Code which absolutely prohibits agreements between
shipper and carrier limiting the latter’s liability for loss of or damage to cargo shipped
under contracts of carriage. The Civil Code in fact has agreements of such character in
contemplation in providing, in its Articles 1749 and 1750, that:
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 fairly and freely
agreed upon.

Here, the just and reasonable character of the questioned stipulation is implicit from the
fact that the shipper or owner is given the option under Article 1749 of avoiding accrual of
liability limitation by simply declaring the nature and value of the shipment in the bill of lading.
Also, the shipper here did not complain of having been “rushed,” imposed upon or deceived in
any significant way into agreeing to ship the cargo under a bill of lading carrying such a
stipulation; therefore, there is no ground to assume that its agreement to the said stipulation
was not freely and fairly sought and given.

Furthermore, since the liability of a common carrier for loss of or damage to goods
transported by it under a contract of carriage is governed by the laws of the country of
destination and the goods in question were shipped from the United States to the Philippines,
the liability of petitioner Sea-Land to the respondent consignee while governed primarily by the
Civil Code may suppletorily be governed, in all matters not determined thereby, by the Code of
Commerce and special laws. One of these suppletory special laws is the Carriage of Goods by
Sea Act (COGSA) and Sec. 4(5) of the said act provides that:
“Neither the carrier nor the ship shall in any event be or become liable for
any loss or damage to or in connection with the transportation of goods in an
amount exceeding $500 per package lawful money of the United States, or in
case of goods not shipped in packages, per customary freight unit, or the
equivalent of that sum in other currency, unless the nature and value of such
goods have been declared by the shipper before shipment and inserted in the bill
of lading. This declaration, if embodied in the bill of lading, shall be prima facie
evidence, but shall not be conclusive on the carrier.
By agreement between the carrier, master, or agent of the carrier, and the
shipper another maximum amount than that mentioned in this paragraph may be
fixed: Provided That such maximum shall not be less than the figure above
named. In no event shall the carrier be liable for more than the amount of
damage actually sustained.”

Therefore, there can be no doubt or equivocation about the validity and enforceability of
freely-agreed-upon stipulations in a contract of carriage or bill of lading limiting the liability of the
carrier to an agreed valuation unless the shipper declares a higher value and inserts it into said
contract or bill. This pro position, moreover, rests upon an almost uniform weight of authority.

b. Yes. To begin with, there is no question of the right, in principle, of a consignee in a bill
of lading to recover from the carrier or shipper for loss of, or damage to, goods being
transported under said bill, although that document may have been — as in practice it
oftentimes is — drawn up only by the consignor and the carrier without the intervention
of the consignee. The right of the shipper to countermand the shipment terminates when
the consignee or legitimate holder of the bill of lading appears with such bill of lading
before the carrier and makes himself a party to the contract. Prior to that time he is a
stranger to the contract.

Art. 1257, paragraph 2, of the old Civil Code (now Art. 1311, second paragraph) reads:
Should the contract contain any stipulation in favor of a third person, he
may demand its fulfillment provided he has given notice of his acceptance to the
person bound before the stipulation has been revoked.'

The private respondent had no direct part or intervention in the execution of the contract
of carriage between the shipper and the carrier as set forth in the bill of lading in question. The
right of a party in the same situation as respondent here, to recover for loss of a shipment
consigned to him under a bill of lading drawn up only by and between the shipper and the
carrier, springs from either a relation of agency that may exist between him and the shipper or
consignor, or his status as a stranger in whose favor some stipulation is made in said contract,
and who becomes a party thereto when he demands fulfillment of that stipulation, in this case
the delivery of the goods or cargo shipped. In neither capacity can he assert personally, in bar
to any provision of the bill of lading, the alleged circumstance that fair and free agreement to
such provision was vitiated by its being in such fine print as to be hardly readable. In one case
where this Court found that a similar package limitation clause was "printed in the smallest type
on the back of the bill of lading," it nonetheless ruled that the consignee was bound thereby on
the strength of authority holding that such provisions on liability limitation are as much a part of
a bill of lading as though physically in it and as though placed therein by agreement of the
parties.

Private respondent, by making claim for loss on the basis of the bill of lading, to all
intents and purposes accepted said bill. Having done so, he —
". . . becomes bound by all stipulations contained therein whether on the
front or the back thereof. Respondent cannot elude its provisions simply because
they prejudice him and take advantage of those that are beneficial. Secondly, the
fact that respondent shipped his goods on board the ship of petitioner and paid
the corresponding freight thereon shows that he impliedly accepted the bill of
lading which was issued in connection with the shipment in question, and so it
may be said that the same is finding upon him as if it had been actually signed by
him or by any other person in his behalf. . .”

WHEREFORE, the Decision of the Intermediate Appellate Court complained of is

reversed and set aside. The stipulation in the questioned bill of lading limiting Sea- Land's
liability for loss of or damage to the shipment covered by said bill to US$500.00 per package is
held valid and binding on private respondent. There being no question of the fact that said
shipment consisted of eight (8) cartons or packages, for the loss of which Sea-Land is therefore
liable in the aggregate amount of US$4,000.00, it is the judgment of the Court that said
petitioner discharge that obligation by paying private respondent the sum of P32,000.00, the
equivalent in Philippine currency of US$4,000.00 at the conversion rate of P8.00 to $1.00. Costs
against private respondent.
 4. Citadel Lines vs. Court of Appeals
G.R. No. 88092 | April 25, 1990

Petitioner Citadel Lines, Inc. (hereafter referred to as the CARRIER) is the general agent of the
vessel "Cardigan Bay/Strait Enterprise," while respondent Manila Wine Merchants, Inc.
(hereafter, the CONSIGNEE) is the importer of the subject shipment of Dunhill cigarettes from
England.

The vessel loaded on board at Southampton, England, for carriage to Manila, 180 Filbrite
cartons of mixed British manufactured cigarettes called "Dunhill International Filter" and
"Dunhill International Menthol," as evidenced by Bill of Lading No. 70621374 2 and Bill of
Lading No. 70608680 of the Ben Line Containers Ltd. The shipment arrived at the Port of Manila
Pier 13, on in container van No. BENU 204850-9. The said container was received by E. Razon,
Inc. (ARRASTRE) under Cargo Receipt No. 71923 dated April 18, 1979.

On April 30, 1979, the container van, which contained two shipments was stripped. One
shipment was delivered and the other shipment consisting of the imported British manufactured
cigarettes was palletized. Due to lack of space at the Special Cargo Coral, the aforesaid
cigarettes were placed in two containers with two pallets in container No. BENU 204850-9, the
original container, and four pallets in container No. BENU 201009-9, with both containers duly
padlocked and sealed by the representative of the CARRIER.

On the next day, the CARRIER'S headchecker discovered that container van No. BENU
201009-9 had a different padlock and the seal was tampered with. The matter was reported to
Superintendent Sibucao and upon verification, it was found that 90 cases of imported British
manufactured cigarettes were missing. This was confirmed in the report of said Superintendent
Sibucao to Ricardo Cosme, Assistant Operations Manager, dated May 1, 1979 and the Official
Report/Notice of Claim of Citadel Lines, Inc. to E. Razon, Inc. dated May 8, 1979. Per
investigation conducted by the ARRASTRE, it was revealed that the cargo in question was not
formally turned over to it by the CARRIER but was kept inside container van No. BENU 201009-
9 which was padlocked and sealed by the representatives of the CARRIER without any
participation of the ARRASTRE.

The CONSIGNEE filed a formal claim with the CARRIER demanding the payment of
P315,000.00 representing the market value of the missing cargoes. The CARRIER, in its reply
admitted the loss but alleged that the same occurred at Pier 13, an area absolutely under the
control of the ARRASTRE. In view thereof, the CONSIGNEE filed a formal claim with the
ARRASTRE, demanding payment of the value of the goods but said claim was denied.

After trial, the lower court rendered a decision on August 30, 1985, exonerating the ARRASTRE
of any liability on the ground that the subject container van was not formally turned over to its
custody, and adjudging the CARRIER liable for the principal amount of P312,480.00
representing the market value of the lost shipment, and the sum of P30,000.00 as and for
attorney's fees and the costs of suit.

ISSUE:

Whether the stipulation limiting the liability of the carrier contained in the bill of lading is binding
on the consignee. - YES

RULING:

It is clearly and expressly provided under Clause 6 of the aforementioned bills of lading issued
by the CARRIER that its liability is limited to $2.00 per kilo. Basic is the rule, long since
enshrined as a statutory provision, that a stipulation limiting the liability of the carrier to the value
of the goods appearing in the bill of lading, unless the shipper or owner declares a greater
value, is binding. 14 Further, 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 fairly and freely agreed upon.
The CONSIGNEE itself admits in its memorandum that the value of the goods shipped does not
appear in the bills of lading. Hence, the stipulation on the carrier's limited liability applies. There
is no question that the stipulation is just and reasonable under the circumstances and have
been fairly and freely agreed upon.

The bill of lading shows that 120 cartons weigh 2,978 kilos or 24.82 kilos per carton. Since 90
cartons were lost and the weight of said cartons is 2,233.80 kilos, at $2.00 per kilo the
CARRIER's liability amounts to only US$4,467.60.

WHEREFORE, the judgment of respondent court is hereby MODIFIED and petitioner Citadel
Lines, Inc. is ordered to pay private respondent Manila Wine Merchants, Inc. the sum of
US$4,465.60. or its equivalent in Philippine currency at the exchange rate obtaining at the time
of payment thereof. In all other respects, said judgment of respondent Court is AFFIRMED.

5. Everett Steamship Corporation vs. Court of Appeals

G.R. No. 122494 | October 8, 1998

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 Everett Steamship
Corporation'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 which was confirmed by petitioner’s through its letter to the private respondent. Hence, the
private respondent made a formal claim upon petitioner for the value of the lost cargo amounting
to Y1,552,500.00. Petitioner offered to pay only Y100,000.00, 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 instituted a suit for collection docketed as Civil Case No.
C-15532 before the RTC. The RTC ruled in favor of private respondent, ordering petitioner to pay:
(a) Y1,552,500.00; (b) Y20,000.00 or its peso equivalent representing the actual value of the lost
cargo and the material and packaging cost; (c) 10% of the total amount as an award for and as
contingent attorney's fees; and (d) to pay the cost of the suit. The CA deleted the award of
attorney's fees but affirmed the RTC's ruling with the additional observation that private
respondent cannot be bound by the terms and conditions of the bill of lading because it was not
privy to the contract of carriage.

ISSUE:

Whether the private respondent, as consignee, who is not a signatory to the bill of lading bound by
the stipulations thereof?

HELD:

YES. The consignee who is not a signatory to the contract of carriage between the shipper and the
carrier, the consignee can still be bound by the contract.

Again, in Sea-land Service, Inc. vs. Intermediate Appellate Court (Supra), we held that even in the
consignee between the shipper and the carrier, the consignee can still be bound by the contract.
Speaking through Mr. Chief Justice Narvasa, we ruled: “To begin with, there is no question of the
right, in the principle, of a consignee in a bill of lading to recover from the carrier or shipper for loss
of, or damage to goods being transported under the said bill, although that document may have
been-as in practice it oftentimes is-drawn up only by the consignor and the carrier without the
intervention of the consignee.

When private respondent formally claimed reimbursement for the missing goods from petitioner
and subsequently filed a case against the latter based on the very same bill of lading, it (private
respondent) accepted the provisions of the contract and thereby made itself a party thereto, or at
least has come to court to enforce it. Thus private respondent cannot now reject or disregard the
carrier’s limited liability stipulation in the bill of lading. In other words, private respondents is
bound by the whole stipulations in the bill of lading and must respect the same.
 6. Saludo, Jr. vs. Court of Appeals
G.R. No. 95536 | March 23, 1992
Facts:

After the death of plaintiffs' mother, Crispina Galdo Saludo, in Chicago Illinois, Pomierski
and Son Funeral Home of Chicago, made the necessary preparations and arrangements for the
shipment of the remains from Chicago to the Philippines. Pomierski brought the remains to
C.M.A.S. (Continental Mortuary Air Services) at the airport (Chicago) which made the necessary
arrangements such as flights, transfers, etc. C.M.A.S. booked the shipment with PAL thru the
carrier's agent Air Care International, with Pomierski F.H. as the shipper and Mario (Maria)
Saludo as the consignee. PAL Airway Bill No. 079-01180454 Ordinary was issued wherein the
requested routing was from Chicago to San Francisco on board TWA Flight 131 of October 27,
1976 and from San Francisco to Manila on board PAL Flight No. 107 of the same date, and
from Manila to Cebu on board PAL Flight 149 of October 29, 1976.

In the meantime, plaintiff Maria Salvacion Saludo went to the funeral director of
Pomierski Funeral Home who had her mother's remains and she told the director that they were
booked with United Airlines. But the director told her that the remains were booked with TWA
flight to California. They went to the airport and watched from the look-out area. She saw no
body being brought. So, she went to the TWA counter again, and she was told there was no
body on that flight. Upon arrival at San Francisco, she went to the TWA counter there to inquire
about her mother's remains. She was told they did not know anything about it. It turned out that
TWA had carried a shipment under PAL Airway Bill No. 079-ORD-01180454 on TWA Flight 603
of October 27, 1976, a flight earlier than TWA Flight 131 of the same date. TWA delivered or
transferred the said shipment said to contain human remains to PAL at 1400H or 2:00 p.m. of
the same date, October 27, 1976. Due to a switching in Chicago, this shipment was withdrawn
from PAL by CMAS at 1805H of the same date, October 27.

What transpired is explained in a memo or incident report by Pomierski. In that memo or

incident report, it is stated that the remains of Crispina Saludo were taken to CMAS at the
airport; that there were two bodies at the Chicago Airport terminal, and somehow they were
switched, that the remains of Crispina Saludo were on a plane to Mexico City.

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

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

The court absolved the two respondent airlines companies of liability. The Court of
Appeals affirmed the decision of the lower court, and in a subsequent resolution, denied herein
petitioners' motion for reconsideration for lack of merit. Hence, this petition.

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

Petitioner allege that private respondents received the casketed remains of petitioners'
mother on October 26, 1976, as evidenced by the issuance of PAL Air Waybill No. 079-
01180454 by Air Care International as carrier's agent; and from said date, private respondents
were charged with the responsibility to exercise extraordinary diligence so much so that for the
alleged switching of the caskets on October 27, 1976, or one day after private respondents
received the cargo, the latter must necessarily be liable.
 To support their assertion, petitioners rely on the jurisprudential dictum, both under
American and Philippine law, that "(t)he issuance of a bill of lading carries the presumption that
the goods were delivered to the carrier issuing the bill, for immediate shipment, and it is
nowhere questioned that a bill of lading is prima facie evidence of the receipt of the goods by
the carrier. . . . In the absence of convincing testimony establishing mistake, recitals in the bill of
lading showing that the carrier received the goods for shipment on a specified date control (13
C.J.S. 235)."

Issue:

Whether or not the private respondents are liable to the petitioner given that the
issuance of a bill of lading carries the presumption that the goods were delivered to the carrier
issuing the bill, for immediate shipment.

Held:

No, the private respondents are not liable to the petitioner as the issuance of a bill
of lading, in the case at bar, does not carry the presumption that the goods were
delivered to the carrier issuing the bill, for immediate shipment.

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

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

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

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

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

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

While we agree with petitioners' statement that "an airway bill estops the carrier from
denying receipt of goods of the quantity and quality described in the bill," a further reading and a
more faithful quotation of the authority cited would reveal that "(a) bill of lading may contain
constituent elements of estoppel and thus become something more than a contract between the
shipper and the carrier. . . . (However), as between the shipper and the carrier, when no goods
have been delivered for shipment no recitals in the bill can estop the carrier from showing the
true facts . . . Between the consignor of goods and receiving carrier, recitals in a bill of lading as
to the goods shipped raise only a rebuttable presumption that such goods were delivered for
shipment. As between the consignor and a receiving carrier, the fact must outweigh the recital."
(Emphasis supplied)
 For this reason, we must perforce allow explanation by private respondents why, despite
the issuance of the airway bill and the date thereof, they deny having received the remains of
Crispina Saludo on October 26, 1976 as alleged by petitioners.

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

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

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

transpired October 26, 1976:

. . . Pursuant thereto, on 26 October 1976, CMAS acting upon the instruction of Pomierski, F.H.,
the shipper requested booking of the casketed remains of Mrs. Cristina (sic) Saludo on board
PAL's San Francisco-Manila Flight No. PR 107 on October 27, 1976.

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

In other words, on October 26, 1976 the cargo containing the casketed remains of
Crispina Saludo was booked for PAL Flight Number PR-107 leaving San Francisco for Manila
on October 27, 1976, PAL Airway Bill No. 079-01180454 was issued, not as evidence of receipt
of delivery of the cargo on October 26, 1976, but merely as a confirmation of the booking thus
made for the San Francisco-Manila flight scheduled on October 27, 1976. Actually, it was not
until October 28, 1976 that PAL received physical delivery of the body at San Francisco, as duly
evidenced by the Interline Freight Transfer Manifest of the American Airline Freight System and
signed for by Virgilio Rosales at 1945H, or 7:45 P.M. on said date.

Explicit is the rule under Article 1736 of the Civil Code that the extraordinary
responsibility of the common carrier begins from the time the goods are delivered to the carrier.
This responsibility remains in full force and effect even when they are temporarily unloaded or
stored in transit, unless the shipper or owner exercises the right of stoppage in transitu, and
terminates only after the lapse of a reasonable time for the acceptance, of the goods by the
consignee or such other person entitled to receive them. And, there is delivery to the carrier
when the goods are ready for and have been placed in the exclusive possession, custody and
control of the carrier for the purpose of their immediate transportation and the carrier has
accepted them. Where such a delivery has thus been accepted by the carrier, the liability of the
common carrier commences eo instanti.

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

As already demonstrated, the facts in the case at bar belie the averment that there was
delivery of the cargo to the carrier on October 26, 1976. Rather, as earlier explained, the body
intended to be shipped as agreed upon was really placed in the possession and control of PAL
on October 28, 1976 and it was from that date that private respondents became responsible for
the agreed cargo under their undertakings in PAL Airway Bill No. 079-01180454.
Consequently, for the switching of caskets prior thereto which was not caused by them,
and subsequent events caused thereby, private respondents cannot be held liable.
 7. Northwest Airlines vs. Cuenca
G.R. No. L-22425 | August 31, 1965

FACTS:
Respondent Nicolas L. Cuenca filed an action for damages against petitioner Northwest
Airlines, Inc. for alleged breach of contract of carriage before the CFI of Manila. It was alleged
that Cuenca, 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. He was compelled to
transfer in the presence of other passengers, to his humiliation. The CFI ruled in favor of
Cuenca, awarding the sume of Php20,000.00 as moral damages and Php5,000.00 as
exemplary damages. On appeal by petitioner, the CA affirmed the CFI's decision. Hence,
Northwest filed the present petition for review on the ground that the lower court erred in holding
(1) that the Warsaw Convention of October 12, 1929, relative to transportation by air is not in
force in the Philippines, and in not holding; (2) that Cuenca has no cause of action; and (3) in
awarding Php20,000.00 nominal damages. In short, Northwest denies liability invoking Articles
17, 18, and 19 of the Warsaw 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.

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.

ISSUE:
Whether or not the petitioner is liable for breach of contract of carriage.

RULING:
YES. Petitioner’s argument 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, and Quijano vs. Philippine
Air Lines. 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.
 8. Alitalia vs. IAC
G.R. No. 71929 | December 4, 1990

FACTS:
Dr. Felipa Pablo is an associate professor in the University of the Philippines 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 Joint FAO- IAEA Division of Atomic Energy in Food
and Agriculture of the United Nations in Ispra, Italy. The program announced that she would be
the second speaker on the first day of the meeting. To fulfill this engagement, Dr. Pablo booked
passage on petitioner airline, ALITALIA.

She arrived in Milan on the day before the meeting in accordance with the itinerary and time
table set for her by ALITALIA. She was however told by the ALITALIA personnel there at Milan
that her luggage was "delayed inasmuch as the same x x (was) in one of the succeeding flights
from Rome to Milan." By then feeling desperate, she went to Rome to try to locate her bags
herself. There, she inquired about her suitcases in the " domestic and international airports, and
filled out the forms prescribed by ALITALIA for people in her predicament. However, her
baggage could not be found. Completely distraught and discouraged, she returned to Manila
without attending the meeting in Ispra, Italy.

Dr. Pablo was compensated for her damages but she rejected the offer, and forthwith
commenced the action which has given rise to the present appellate proceedings. And for some
reason or other, the suitcases were not actually restored to Prof. Pablo by ALITALIA until eleven
(11) months later, and four (4) months after located and forwarded to Ispra, Italy, but only on the
day institution of her action. After appropriate proceedings and trial, the CFI rendered judgment
in favor of Dr. Pablo.

ALITALIA has appealed to this Court on certiorari. Here, it seeks to make basically the same
points it tried to make before the Trial Court and the Intermediate Appellate Court, i.e.that the
Warsaw Convention should have been applied to limit ALITALIA'S liability and that there is no
warrant in fact or in law for the award to Dr. Pablo of nominal damages and attorney's fees.

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

ISSUE:
Whether or not Warsaw Convention should have been applied to limit ALITALIA'S liability

RULING:
No. Under the Warsaw Convention, an air carrier is made liable for damages for:
a. The death, wounding or other bodily injury of a passenger if the accident causing it
took place on board the aircraft or I the course of its operations of embarking or
disembarking;
b. The destruction or loss of, or damage to, any registered luggage or goods, if the
occurrence causing it took place during the carriage by air; and
c. Delay in the transportation by air of passengers, luggage or goods.

The convention however denies to the carrier availment of the provisions which exclude or limit
his liability, if the damage is caused by his willful misconduct, or by such default on his part as is
considered to be equivalent to willful misconduct. 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. It should be deemed a limit of liability only in those cases where the cause
of the death or injury to person, or destruction, loss or damage to property or delay in its
transport is not attributable to or attended by any wilful misconduct, bad faith, recklessness, or
otherwise improper conduct on the part of any official or employee for which the carrier is
responsible, and there is otherwise no special or extraordinary form of resulting injury.
In the case at bar, no bad faith or otherwise improper conduct may be ascribed to the
employees of petitioner airline; and Dr. Pablo's luggage was eventually returned to her,
belatedly, it is true, but without appreciable damage.

The fact is, nevertheless, that some species of injury was caused to Dr. Pablo because
petitioner ALITALIA misplaced her baggage and failed to deliver it to her at the time appointed -
a breach of its contract of carriage. Certainly, the compensation for the injury suffered by Dr.
Pablo cannot under the circumstances be restricted to that prescribed by the Warsaw
Convention for delay in the transport of baggage.
 9. Pan American World Airways vs. IAC
G.R. No. 70462 | August 11, 1988

FACTS:

Plaintiff Rene V. Pangan, president and general manager of the plaintiffs Sotang Bastos and
Archer Production and Primo Quesada of Prime Films, San Francisco, California, entered into
an agreement whereby the former bound himself to supply the latter with three films: 'Ang
Mabait, Masungit at ang Pangit,' 'Big Happening with Chikiting and Iking,' and 'Kambal Dragon'
for exhibition in the United States. It was also their agreement that plaintiffs would provide the
necessary promotional and advertising materials for said films on or before May 30, 1978.
Plaintiff Pangan likewise entered into a verbal agreement with Slutchnick for the exhibition of
two of the films mentioned at the Hafa Adai Theater in Guam. Plaintiff Pangan undertook to
provide the necessary promotional and advertising materials for said films on or before the
exhibition date on May 30,1978.

Plaintiff Pangan caused the preparation of the requisite promotional handbills and still
pictures. He also purchased fourteen clutch bags, four capiz lamps and four barong tagalog. On
May 18, 1978, plaintiff Pangan obtained from defendant Pan Am's Manila Office, through the
Your Travel Guide (owned and managed by plaintiffs witness Mila de la Rama), an economy
class airplane ticket for passage from Manila to Guam on defendant's Flight No. 842 of May
27,1978, upon payment by said plaintiff of the regular fare. Two hours before departure time,
plaintiff Pangan was at the defendant's ticket counter at the Manila International Airport and
presented his ticket and checked in his two luggages, for which he was given baggage claim
tickets. The two luggages contained the promotional and advertising materials, the clutch bags,
barong tagalog and his personal belongings. Subsequently, Pangan was informed that his name
was not in the manifest and so he could not take Flight No. 842 in the economy class. Since
there was no space in the economy class, plaintiff Pangan took the first class because he
wanted to be on time in Guam to comply with his commitment.

When plaintiff Pangan arrived in Guam, his two luggages did not arrive with his flight, as
a consequence of which his agreements with Slutchnick and Quesada for the exhibition of the
films in Guam and in the United States were cancelled. Thereafter, he filed a written claim for
his missing luggages. Upon arrival in the Philippines, Pangan contacted his lawyer, who made
the necessary representations to protest as to the treatment which he received from the
employees of the defendant and the loss of his two luggages. The CFI ordered Pan American
World Airways, Inc. to pay all the plaintiffs the sum of P83,000.00, for actual damages, with
interest and to pay plaintiff Rene V. Pangan the sum of P8,123.34, for additional actual
damages, with interest. This was affirmed by the Intermediate Appellate Court. On appeal,
petitioner contends that its liability for the lost baggage of private respondent Pangan is limited
to $600.00 ($20.00 x 30 kilos) as the latter did not declare a higher value for his baggage and
pay the corresponding additional charges.

At the back of the airline ticket, there was a limiting the liability of the carrier for lost
baggage to a specified amount and ruled that the carrier's liability was limited to said amount
since the passenger did not declare a higher value, much less pay additional charges.

ISSUES:

1. Whether or not the stipulation limiting the carrier’s liability to a specified amount is valid.
– YES

2. Whether or not the petitioner could be held liable for cancellation of private respondents'
contracts as it could not have foreseen such an eventuality when it accepted the luggages
for transit. – NO

HELD:

1. In the case of Ong Yiu v. Court of Appeals, the Court sustained the validity of a printed
stipulation at the back of an airline ticket limiting the liability of the carrier for lost
baggage to a specified amount and ruled that the carrier's liability was limited to said
 amount since the passenger did not declare a higher value, much less pay additional
charges. We find the ruling in Ong Yiu squarely applicable to the instant case.

2. Under Art.1107 of the Civil Code, a debtor in good faith may be held liable only for
damages that were foreseen or might have been foreseen at the time the contract of
transportation was entered into. Before defendant could be held to special damages,
such as the present alleged loss of profits on account of delay or failure of delivery, it
must have appeared that he had notice at the time of delivery to him of the particular
circumstances attending the shipment, and which probably would lead to such special
loss if he defaulted. Or, as the rule has been stated in another form, in order to purpose
on the defaulting party further liability than for damages naturally and directly, i.e., in the
ordinary course of things, arising from a breach of contract, such unusual or
extraordinary damages must have been brought within the contemplation of the parties
as the probable result of breach at the time of or prior to contracting. Generally, notice
then of any special circumstances which will show that the damages to be anticipated
from a breach would be enhanced has been held sufficient for this effect.

As may be seen, that New York case is a stronger one than the present case for the reason
that the attention of the common carrier in said case was called to the nature of the articles
shipped, the purpose of shipment, and the desire to rush the shipment, circumstances and
facts absent in the present case.

In the absence of a showing that petitioner's attention was called to the special
circumstances requiring prompt delivery of private respondent Pangan's luggages,
petitioner cannot be held liable for the cancellation of private respondents' contracts
as it could not have foreseen such an eventuality when it accepted the luggages for
transit.

The Court is unable to uphold the Intermediate Appellate Court's disregard of the rule laid
down in Mendoza and affirmance of the trial court's conclusion that petitioner is liable for
damages based on the finding that "the undisputed fact is that the contracts of the plaintiffs
for the exhibition of the films in Guam and California were cancelled because of the loss of
the two luggages in question." The evidence reveals that the proximate cause of the
cancellation of the contracts was private respondent Pangan's failure to deliver the
promotional and advertising materials on the dates agreed upon. For this petitioner cannot
be held liable. Private respondent Pangan had not declared the value of the two luggages
he had checked in and paid additional charges. Neither was petitioner privy to respondents'
contracts nor was its attention called to the condition therein requiring delivery of the
promotional and advertising materials on or before a certain date.

With the Court's holding that petitioner's liability is limited to the amount stated in the ticket,
the award of attorney's fees, which is grounded on the alleged unjustified refusal of
petitioner to satisfy private respondent's just and valid claim, loses support and must be set
aside.

WHEREFORE, the Petition is hereby GRANTED and the Decision of the Intermediate Appellate
Court is SET ASIDE and a new judgment is rendered ordering petitioner to pay private
respondents damages in the amount of US $600.00 or its equivalent in Philippine currency at
the time of actual payment.

10. China Airlines vs. Daniel Chiok

G.R. No. 152122 | July 30, 2003

FACTS:

On September 18, 1981, Daniel Chiok bought from China Airlines, Ltd. (CAL) a ticket for air
transportation covering Manila - Taipei - Hongkong - Manila, that said ticket was exclusively
endorseable to Philippine Airlines, Ltd. (PAL). On November 21, 1981, he took his trip from
Manila to Taipei using th 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.

When he reached Hongkong, he also went to the PAL office and sought to reconfirm his flight
back to Manila, which was confirmed by the airline. On November 24, 1981, he proceeded to
Hongkong International Airport for his return trip to Manila. However, upon reaching the PAL
counter, Chiok saw a poster stating that his flight was cancelled because of a typhoon in Manila.
He was then informed that the passengers were automatically booked for its next flight, which
was to leave the next day. He then informed PAL personnel that he had to reach Manila on
November 25, 1981 because he had some errands to do on that day.

Next day, Chiok went to the airport. Cathay Pacific stewardess Lok Chan taken and received
Chioks plane ticket and his luggage. Lok called the attention of Carmen Chan, and informed the
latter that Chioks name was not in the computer list of passengers. Subsequently, Carmen
informed Chiok that his name did not appear in PALs computer list of passengers and therefore
could not be permitted to board on that flight.

Meanwhile, Chiok requested Carmen to put into writing the alleged reason why he was not
allowed to take his flight. Chiok sought to recover his luggage but found only 2 which were
placed at the end of the passengers line. Realizing that his new Samsonite luggage was
missing, he complained to Carmen. Thereafter, Chiok proceeded to PALs Hongkong office and
confronted PALs reservation officer, Carie Chao who previously confirmed his flight back to
Manila. Chao told Chiok that his name was on the list and pointed to the latter his computer
number listed on the PAL confirmation sticker attached to his plane ticket, which number was
R/MN62.

Chiok then decided to use another CAL ticket and asked Chao if this ticket could be used to
book him for the said flight. The latter, once again, booked and confirmed the formers trip, this
time on board PAL scheduled to depart that evening. Later, Chiok went to the PAL check-in
counter and it was Carmen who attended to him. As this juncture, Chiok had already placed his
travel documents, including his clutch bag, on top of the PAL check-in counter.

Thereafter, Carmen directed PAL personnel to transfer counters. In the ensuing commotion,
Chiok lost his clutch bag together with expensive personal items in it. Subsequently, he was
placed on stand-by and at around 7:30 p.m., PAL personnel informed him that he could now
check-in. Consequently, Chiok as plaintiff, filed a Complain for damages, against PAL and CAL.

The Regional Trial Court (RTC) of Manila held CAL and PAL jointly and severally liable to
respondent. It did not, however, rule on their respective cross-claims. Affirming the RTC, the
Court of Appeals debunked petitioners claim that it had merely acted as an issuing agent for the
ticket covering the Hong Kong-Manila leg of respondents journey. Hence, this case.

ISSUE:

Whether or not CAL is liable for damages? YES.

HELD:

CAL is liable even if PAL was the one that would perform/had performed the contract of
carriage. The issuance of a confirmed CAL ticket in favor of CHIOK guaranteed that the
carrier (PAL) would honor his ticket, assure him of space and transport him. 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. In the
instant case, PAL as the carrying agent of CAL, the latter cannot evade liability to respondent,
Chiok, even though it may have been only a ticket issuer for Hong Kong- Manila sector.

This jurisprudential rule is supported by the Warsaw Convention, 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.”

Article 15 of IATA-Recommended Practice similarly provides: “Carriage to be performed by

several successive carriers under one ticket, or under a ticket and any conjunction ticket issued
therewith, is regarded as a single operation.”

In American Airlines v. Court of Appeals, the Supreme Court have noted that under a general
pool partnership agreement, the ticket-issuing airline is the principal in a contract of carriage,
while the endorsee-airline is the agent. Likewise, as the principal in the contract of carriage, the
petitioner in British Airways v. Court of Appeals was held liable, even when the breach of
contract had occurred, not on its own flight, but on that of another airline.

In the instant case, following the jurisprudence cited above, PAL acted as the carrying agent of
CAL. In the same way that the Court ruled against British Airways in the aforementioned cases,
the Supreme Court also rule that CAL cannot evade liability to respondent, even though
it may have been only a ticket issuer for the Hong Kong-Manila sector.

The employees of PAL were utterly insensitive to his need to be in Manila on November 25,
1981, and to the likelihood that his business affairs in the city would be jeopardized because of
a mistake on their part.

It was that mistake that had caused the omission of his name from the passenger list despite his
confirmed flight ticket. By merely looking at his ticket and validation sticker, it is evident that the
glitch was the airline‘s fault.

However, no serious attempt was made by PAL to secure the all-important transportation of
respondent to Manila on the following day. To make matters worse, PAL allowed a group of
non-revenue passengers, who had no confirmed tickets or reservations, to board the re-booked
flight.

Since the status of CHIOK in the 1st flight was "OK," as a matter of right testified to by PAL‘s
witness, he should have been automatically transferred to and allowed to board Flight 307 the
following day. Clearly resulting from negligence on the part of PAL was its claim that his name
was not included in its list of passengers for the first flight and, consequently, in the list of the
replacement flight. Since he had secured confirmation of his flight -- not only once, but twice --
by personally going to the carrier’s offices where he was consistently assured of a seat thereon
-- PAL’s negligence was so gross and reckless that it amounted to bad faith.

Moral and exemplary damages should be awarded (note: only CAL held liable, as PAL was
not impleaded)
 11. Santos III vs. Northwest Airlines
G.R. No. 101538 | June 23, 1992

FACTS:

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.

The petitioner is a minor and a resident of the Philippines. Private respondent Northwest
Orient Airlines (NOA) is a foreign corporation with a principal office in Minnesota, U.S.A. and
licensed to do business and maintain a branch office in the Philippines. 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.

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.

The petitioner sued NOA for damages in the RTC of Makati. NOA moved to dismiss the
complaint on the ground of lack of jurisdiction. Citing Article 28(1) of the Warsaw Convention, 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.

The lower court granted the motion and dismissed the case. The CA affirmed the
decision of the lower court.

ISSUES:

1. Whether or not Article 28(1) of the Warsaw Convention is unconstitutional for violation of
the constitutional guarantees of due process and equal protection.
2. Whether Article 28(1) of the Warsaw Convention is a rule merely of venue and was
waived by defendant when it did not move to dismiss on the ground of improper venue.
3. Whether or not Philippine courts have jurisdiction over the case.

HELD:

1. NO, Article 28(1) of the Warsaw Convention is not unconstitutional. The Republic of the
Philippines is a party to the Convention for the Unification of Certain Rules Relating to
International Transportation by Air, otherwise known as the Warsaw Convention. The
Convention became applicable to the Philippines on February 9, 1951. On September 23, 1955,
President Ramon Magsaysay issued Proclamation No. 201, declaring our formal adherence
thereto. "to the end that the same and every article and clause thereof may be observed and
fulfilled in good faith by the Republic of the Philippines and the citizens thereof. The
Convention is thus a treaty commitment voluntarily assumed by the Philippine
government and, as such, has the force and effect of law in this country.

It is well-settled that courts will assume jurisdiction over a constitutional question only if it
is shown that the essential requisites of a judicial inquiry into such a question are first satisfied.
Thus, there must be an actual case or controversy involving a conflict of legal rights susceptible
of judicial determination; the constitutional question must have been opportunely raised by the
proper party; and the resolution of the question is unavoidably necessary to the decision of the
case itself.

The treaty which is the subject matter of this petition was a joint legislative-executive act.
The presumption is that it was first carefully studied and determined to be constitutional before it
was adopted and given the force of law in this country. The petitioner's allegations are not
convincing enough to overcome this presumption. Apparently, the Convention considered the
four places designated in Article 28 the most convenient forums for the litigation of any claim
that may arise between the airline and its passenger, as distinguished from all other places. At
any rate, we agree with the respondent court that this case can be decided on other grounds
without the necessity of resolving the constitutional issue.

2. NO. By its own terms, the Convention applies to all international transportation of
persons performed by aircraft for hire. “International transportation” is defined in paragraph 2,
Article 1 of the Warsaw Convention as “any transportation in which, according to the contract
made by the parties, the place of departure and the place of destination, whether or not there be
a break in the transportation or a transshipment, are situated [either] within the territories of two
High Contracting Parties . . .” Whether the transportation is "international" is determined
by the contract of the parties, which in the case of passengers is the ticket. When the
contract of carriage provides for the transportation of the passenger between certain
designated terminals "within the territories of two High Contracting Parties," the
provisions of the Convention automatically apply and exclusively govern the rights and
liabilities of the airline and its passenger.

Venue and jurisdiction are entirely distinct matters. Jurisdiction may not be conferred by
consent or waiver upon the court which otherwise would have no jurisdiction over the subject-
matter of an action; but the venue of an action as fixed by statute may be changed by the
consent of the parties and an objection that the plaintiff brought his suit in the wrong county may
be waived by the failure of the defendant to make a timely objection. In either case, the court
may render a valid judgment. Rules as to jurisdiction can never be left to the consent or
agreement of the parties, whether or not a prohibition exists against their alteration.

Since the flight involved in the case at bar is international, the same being from the
United States to the Philippines and back to the United States, it is subject to the provisions of
the Warsaw Convention, including Article 28(1), which enumerates the four places where an
action for damages may be brought.

A number of reasons tends to support the characterization of Article 28(1) as a

jurisdiction and not a venue provision. First, the wording of Article 32, which indicates the
places where the action for damages "must" be brought, underscores the mandatory nature of
Article 28(1). Second, this characterization is consistent with one of the objectives of the
Convention, which is to "regulate in a uniform manner the conditions of international
transportation by air." Third, the Convention does not contain any provision prescribing rules of
jurisdiction other than Article 28(1), which means that the phrase "rules as to jurisdiction" used
in Article 32 must refer only to Article 28(1). In fact, the last sentence of Article 32 specifically
deals with the exclusive enumeration in Article 28(1) as "jurisdictions," which, as such, cannot
be left to the will of the parties regardless of the time when the damage occurred.

Where the matter is governed by the Warsaw Convention, jurisdiction takes on a dual
concept. Jurisdiction in the international sense must be established in accordance with
Article 28(1) of the Warsaw Convention, following which the jurisdiction of a particular court
must be established pursuant to the applicable domestic law. Only after the question of which
court has jurisdiction is determined will the issue of venue be taken up. This second question
shall be governed by the law of the court to which the case is submitted.

Even granting arguendo that Article 28(1) is a venue and not a jurisdictional provision,
dismissal of the case was still in order. The respondent court was correct in affirming the ruling
of the trial court on this matter, thus:

Santos' claim that NOA waived venue as a ground of its motion to dismiss is not correct.
True it is that NOA averred in its MOTION TO DISMISS that the ground thereof is "the
Court has no subject matter jurisdiction to entertain the Complaint" which SANTOS
considers as equivalent to "lack of jurisdiction over the subject matter . . ." However, the
gist of NOA's argument in its motion is that the Philippines is not the proper place where
SANTOS could file the action — meaning that the venue of the action is improperly laid.
Even assuming then that the specified ground of the motion is erroneous, the fact is the
proper ground of the motion — improper venue — has been discussed therein.
 Waiver cannot be lightly inferred. In case of doubt, it must be resolved in favor of non-
waiver if there are special circumstances justifying this conclusion, as in the petition at bar.

3. NO. The place of destination, within the meaning of the Warsaw Convention, is
determined by the terms of the contract of carriage or, specifically in this case, the ticket
between the passenger and the carrier. The contract is a single undivided operation, beginning
with the place of departure and ending with the ultimate destination. The use of the singular in
this expression indicates the understanding of the parties to the Convention that every contract
of carriage has one place of departure and one place of destination. An intermediate place
where the carriage may be broken is not regarded as a "place of destination." It is the
“destination” and not an “agreed stopping place” that controls for purposes of ascertaining
jurisdiction under the Convention.

Examination of the petitioner's ticket shows that his ultimate destination is San
Francisco. Although the date of the return flight was left open, the contract of carriage between
the parties indicates that NOA was bound to transport the petitioner to San Francisco from
Manila. Manila should therefore be considered merely an agreed stopping place and not the
destination.

The Court can only sympathize with the petitioner, who must prosecute his claims in the
United States rather than in his own country at less 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.

WHEREFORE, the petition is DENIED, with costs against the petitioner. It is so ordered

12. United Airlines vs. Willie Uy

G.R. No. 127768 | November 19, 1999

TOPIC: Relevant Provisions of Warsaw Convention; Article 29 of the Warsaw Convention

DOCTRINES:
1. Within our jurisdiction, the Warsaw Convention can be applied or ignored, depending on
the peculiar facts presented by each case.
2. A cause of action arising from the slashing and loss of personal effects by an airline
passenger is well within the bounds of the Warsaw Convention while a cause of action arising
from the shabby and humiliating treatment received from the airline employees is not.
3. The two (2)-year limitation incorporated in Art. 29 of the Warsaw Convention as an
absolute bar to suit and not to be made subject to the various tolling provisions of the laws of
the forum—it therefore forecloses the application of the forum’s rules on interruption of
prescriptive periods, as Article 29, par. (2) was intended only to let local laws determine whether
an action had been commenced within the two (2)-year period.
4. Despite the express mandate of Article 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 where the airline employed delaying tactics.

PETITIONER: UNITED AIRLINES

RESPONDENT: WILLIE J. UY
NATURE: PETITION for review on certiorari of a decision of the Court of Appeals

FACTS
1. On October 13, 1989, [Respondent] Uy was a revenue passenger on United
Airlines Flight No. 819 for the San Francisco-Manila route. He checked in together
with his luggage one piece of which was found to be overweight.
2. To his utter humiliation, the following occurred:
 a. An employee of [petitioner] rebuked him saying that he should have
known the maximum weight allowance to be 70 kgs. per bag and that he
should have packed his things accordingly.
b. 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.
3. [Respondent] acceded to repack, but his luggage was still overweight. As such,
he was billed overweight charges which he offered to pay with a miscellaneous
charge order (MCO) or an airline pre-paid credit.
a. Said credit was not honored by both the airline’s employee and airport’s
supervisor due to the conflicting figures listed on it. Even if [respondent]
explained that the last figure written on the MCO represented his balance,
[petitioner’s] employees did not accommodate him.
b. As such, [respondent] paid the overweight charges with his American
Express credit card.
4. Upon arrival in Manila, [respondent] discovered that one of his bags had been
slashed and its contents stolen. He particularized his losses to be around US
$5,310.00.
5. To recover his losses, [respondent] did the following:
a. In a letter dated October 16, 1989, he asked reimbursement from the
[petitioner].
i. [Petitioner] United Airlines, through Central Baggage Specialist
Joan Kroll, mailed a check representing the payment of his loss based
on the maximum liability of US $9.70 per pound.
b. Finding the amount to be grossly inadequate, [respondent] sent two (2)
more letters, one dated January 4, 1990 through a certain Atty. Pesigan, and
another dated October 28, 1991 through Atty. Ramon U. Ampil demanding an
out-of-court settlement of P1,000,000.00.
i. [Petitioner] did not accede to the demands.
6. On June 9, 1992 [respondent] filed a complaint for damages against [petitioner]
airlines.

RESPONDENT’S GROUNDS FOR DAMAGES

● [Petitioner] airline accorded him ill and shabby treatment to his extreme embarrassment
and humiliation.
● He should be paid moral damages of at least P1,000,000.00, exemplary damages of at
least P500,000.00, plus attorney’s fees of at least P50,000.00.
● He also alleged that the damage to his luggage and its stolen contents amounted to
around $5,310.00, and requested reimbursement therefor.

PETITIONER’S ARGUMENT
Cause of action has prescribed pursuant to Article 29 of Warsaw Convention.

TRIAL COURT RULING

1. Dismissed the action on the ground that the action has prescribed. The trial court concluded
that Art. 29 excludes the application of our interruption rules.
2. Respondent filed his notice of appeal, but it was beyond the 15-day period (2 days late).
Despite this, the appellate court gave due course to the appeal.

APPELLATE COURT RULING

1. The Warsaw Convention did not preclude the operation of the Civil Code and other pertinent
laws. Assuming there was failure to file within the 2-year period, respondent could still hold
petitioner liable for breach of other provisions of the Civil Code which prescribe a different
period or procedure.
2. Respondent’s cause of action had not yet prescribed, by virtue of prescription of actions
under Philippine Laws.
3. The court ordered the records to be remanded to the Quezon City trial court for further
proceedings.

ISSUES
1. Whether the Warsaw Convention applies to this case—YES (QUALIFIED ANSWER)
2. Whether respondent’s causes of action have prescribed—NO.
RULING
1. YES. The Warsaw Convention does apply, however, it should be limited to an action for
damages arising from theft or damage to property or goods.

Within our jurisdiction we have held that the Warsaw Convention can be applied, or
ignored, depending on the peculiar facts presented by each case. Thus, we have ruled that
the Convention’s provisions 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. Neither may the Convention be invoked to justify the disregard of some
extraordinary sort of damage resulting to a passenger and preclude recovery therefor beyond
the limits set by said Convention. Likewise, we have held that the Convention does not preclude
the operation of the Civil Code and other pertinent laws.

Respondent’s complaint reveals that he is suing on two (2) causes of action: (a) the shabby and
humiliating treatment the 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.

While his second cause of action—an action for damages arising from theft or damage to
property or goods—is well within the bounds of the Warsaw Convention, his first cause of
action—an action for damages arising from the misconduct of the airline employees and the
violation of respondent’s rights as passenger—clearly is not.

2. NO. The respondent’s causes of action have not prescribed in the case herein.

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, indeed the travaux preparatories of the Warsaw
Convention reveal that the delegates thereto intended the two (2)-year limitation
incorporated in Art. 29 as an absolute bar to suit and not to be made subject to the
various tolling provisions of the laws of the forum. This therefore forecloses the application
of our own rules on interruption of prescriptive periods. Article 29, par. (2), was intended only to
let local laws determine whether an action had been commenced within the two (2)-year period,
and within our jurisdiction an action shall be deemed commenced upon the filing of a complaint.
Since it is indisputable that respondent filed the present action beyond the two (2)-year time
frame his second cause of action must be barred. NONETHELESS, 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. 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.

WHEREFORE, the assailed Decision of the Court of Appeals reversing and setting aside the
appealed order of the trial court granting the motion to dismiss the complaint, as well as its
Resolution denying reconsideration, is AFFIRMED.

NOTES
1. Warsaw Convention. Article 29. The right to damages shall be extinguished if an:
(1) 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.