1.

Heacock company vs Macondray

Heacock company insists that it is entitled to recover from the Macondray, the carrier the
market value of its goods. However, the carrier contends that, in accordance with the bill of
lading, the shipper is entitled to recover only a lower value of the goods. The claim of the
carrier is based upon the argument that under the bill of lading, there is a limitation of the
liability of the carrier.

 May 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?

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.

the first and second stipulations in a bill of lading are invalid which either exempt the
carrier from liability for loss or damage occasioned by its negligence or provide for an
unqualified limitation of such liability to an agreed valuation.

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

A limitation of liability based upon an agreed value to obtain a lower rate does not conflict with
any sound principle of public policy; and it is not conformable to plain principles of justice that a
shipper may understate value in order to reduce the rate and then recover a larger value in
case of loss.

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

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

9. Also, that in the even 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.

2. Ong You vs. CA

On august 26, 1967, Ong Yiu was a fare paying passenger of respondent PAL from Mactan,
Cebu to Butuan City wherein he was scheduled to attend a trial. As a passenger, he checked in
one piece of luggage, blue maleta for which he was issued a claim ticket. Upon arrival at
Butuan City, petitioner claimed his luggage, but it could not be found. PAL Butuan sent a
message to PAL Cebu which in turn sent a message to PAL Manila that same afternoon. PAL
Manila advised PAL Cebu that the luggage has been over carried to Manila and that it would be
forwarded to PAL Cebu that same day. PAL Cebu then advised PAL Butuan that the luggage will
be forwarded the following day, on scheduled morning flight. This message was not received by
PAL Butuan as all the personnel had already gone for the day. Meanwhile, Ong Yiu was worried
about the missing luggage because it contained vital documents needed for the trial the next
day so he wired PAL Cebu demanding delivery of his luggage before noon that next day or he
would hold PAL liable for damages based on gross negligence. 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. He revelaed
that the documents were lost. Ong Yiu demanded from PAL Cebu actual and compensatory
damages as an incident of breach of contract of carriage.

ISSUES:

1. Whether or not PAL is guilty of only simple negligence and not gross negligence?

2. Whether the doctrine of limited liability doctrine applies in the instant case?

HELD:

1. PAL had not acted in bad faith. It exercised due diligence in looking for petitioner’s
luggage which had been miscarried. Had petitioner waited or caused someone to wait at the
airport for the arrival of the morning flight which carried his luggage, he would have been able
to retrieve his luggage sooner. In the absence of a wrongful act or omission or fraud, the
petitioner is not entitled to moral damages. Neither is he entitled to exemplary damages absent
any proof that the defendant acted in a wanton, fraudulent, reckless manner.

2. The limited liability applies in this case. On the presumed negligence of PAL, its liability
for the loss however, is limited on the stipulation written on the back of the plane
ticket which is P100 per baggage. The petitioner not having declared a greater value
and not having called the attention of PAL on its true value and paid the tariff
therefore. The stipulation is printed in reasonably and fairly big letters and is easily
readable. Moreso, petitioner had been a frequent passenger of PAL from Cebu to Butuan City
and back and he being a lawyer and a businessman, must be fully aware of these conditions.
3. Sea Land Services v. IAC

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 clausein 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

ISSUE:

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.

HELD:

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.

4. Northwest Airlines v. Cuenca

Northwest Airlines argues that pursuant to the provisions of the Warsaw convention, 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.

However, the SC held that this pretense is not borne out by the language of said Articles. The
same merely declare the carrier liable for damages in the enumerated cases if the conditions
therein specified are present. Neither said provisions nor others in the aforementioned
Convention regulate or exclude liability for other breaches of contract by the carrier.
Under petitioner's theory, an air carrier would be exempt from any liability for damages in the
event of its absolute refusal, in bad faith, to comply with a contract of carriage, which is absurd.

Hence, the award in favor of Cuenca 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

5. Alitalia v. IAC

Dr. Felipa Pablo, a professor, was invited to take part at a meeting in Ispra, Italy. To fulfill this
engagement, Dr. Pablo booked passage on petitioner airline, ALITALIA.

She arrived in Milan on the day before the meeting in accordance with the itinerary and time
table set for her by ALITALIA. She was however told by the ALITALIA personnel there at Milan
that her luggage was “delayed inasmuch as the same (was) in one of the succeeding flights
from Rome to Milan.” But the other flights arriving from Rome did not have her baggage on
board. She returned to Manila without attending the meeting in Ispra, Italy.

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

1) the death, wounding or other bodily injury of a passenger if the accident causing it took
place on board the aircraft or in the course of its operations of embarking or
disembarking.
2) the destruction or loss of, or damage to, any registered luggage or goods, if the
occurrence causing it took place during the carriage by air;" and
3) delay in the transportation by air of passengers, luggage or goods.

Alitalia now argues that it shall not be compelled to pay damages to Dr. Pablo since Dr. Pablo
did not suffer any other injury other than not being able to read her paper in Italy. This was
due to the fact that Alitalia misplaced her luggage. There was no bad faith or malice on the part
of Alitalia in the said delay in the arrival of her luggage. Dr. Pablo received all her things which
were returned to her in good condition although 11 months late.

Issue

Whether or not the Warsaw Convention can restrict compensation for the injury suffered by Dr.
Pablo.

Ruling

The Convention does not thus operate as an exclusive enumeration of the instances
of an airline’s liability, or as an absolute limit of the extent of that liability. Such a
proposition is not borne out by the language of the Convention, as this Court has now, and at
an earlier time, pointed out. 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.
6. Pan American World Airways v. IAC

Pangan contracted the services of Pan American World Airways for his trip Guam. When Pangan
arrived in Guam, his two luggage 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 luggage.

Upon arrival in the Philippines, Pangan made protest as to the treatment which he received
from the employees of the defendant and the loss of his two luggage.

Issue

Whether or not respondent is entitled for damages for loss of profits on account of delay or
failure of delivery of his luggage.

RULING: Yes. but petitioner's liability is limited to the amount stated in the ticket. In
view thereof petitioner's liability for the lost baggage is limited to $20.00 per kilo or $600.00, as
stipulated at the back of the ticket. The SC held that the ruling in Ong Yiu squarely applicable to
the instant case. In the said case, 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.

7. Magellan Manufacturing v. CA

Magellan Manufacturers Marketing Corp. (MMMC) entered into a contract with Choju Co. of
Yokohama, Japan to export 136,000 anahaw fans for and in consideration of $23,220.00. The
shipping agent of the carrier notified the shipper that it needed an on-board bill of lading and
that transshipment is not allowed under the letter of credit. Since there was no on-board bill of
lading that was transferred to the carrier, The anahaw fans were shipped back to Manila
through the carrier’s agent who are demanding from the shipper the freight charges from Japan
to Manila, demurrage incurred in Japan and Manila from October 22, 1980 up to May 20, 1981
and additional charges.

ISSUE: W/N the bill of lading which reflected the transshipment against the letter of credit is
consented by MMMC.

Held:

The SC ordered the shipper to pay for the expenses incurred by the carrier since the holding in
most jurisdictions has been that a shipper who receives a bill of lading without objection
after an opportunity to inspect it and permits the carrier to act on it by proceeding
with the shipment is presumed to have accepted it correctly stating the contract and to
have assented to its terms. Acceptance of the bill without dissent raises the presumption that all
the terms therein were brought to the knowledge of the shipper and agreed to by him and, in
the absence of fraud or mistake, he is estopped from thereafter denying that he assented to
such term.

In the absence of fraud or mistake, he is estopped from denying that he assented to

such terms. This rule applies with particular force where a shipper accepts a bill of lading with
full knowledge of its contents and acceptance under such circumstances makes it a binding
contract.