Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-16598

October 3, 1921

H. E. HEACOCK COMPANY, plaintiff-appellant,

vs.
MACONDRAY & COMPANY, INC., defendant-appellant.
Fisher & DeWitt for plaintiff-appellant.
Wolfson, Wolfson & Schwarzkopf for defendant-appellant.

JOHNSON, J.:
This action was commenced in the Court of First Instance of the City of Manila to recover the
sum of P240 together with interest thereon. The facts are stipulated by the parties, and are,
briefly, as follows:
(1) On or about the 5th day of June, 1919, the plaintiff caused to be delivered on
board of steamship Bolton Castle, then in the harbor of New York, four cases of
merchandise one of which contained twelve (12) 8-day Edmond clocks properly
boxed and marked for transportation to Manila, and paid freight on said clocks
from New York to Manila in advance. The said steampship arrived in the port of
Manila on or about the 10th day of September, 1919, consigned to the defendant
herein as agent and representative of said vessel in said port. Neither the master
of said vessel nor the defendant herein, as its agent, delivered to the plaintiff the
aforesaid twelve 8-day Edmond clocks, although demand was made upon them
for their delivery.
(2) The invoice value of the said twelve 8-day Edmond clocks in the city of New
York was P22 and the market value of the same in the City of Manila at the time
when they should have been delivered to the plaintiff was P420.
(3) The bill of lading issued and delivered to the plaintiff by the master of the said
steamship Bolton Castle contained, among others, the following clauses:
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.
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.
(4) The case containing the aforesaid twelve 8-day Edmond clocks measured 3
cubic feet, and the freight ton value thereof was $1,480, U. S. currency.

(5) No greater value than $500, U. S. currency, per freight ton was declared by
the plaintiff on the aforesaid clocks, and no ad valorem freight was paid thereon.

(6) On or about October 9, 1919, the defendant tendered to the plaintiff P76.36,
the proportionate freight ton value of the aforesaid twelve 8-day Edmond clocks,
in payment of plaintiff's claim, which tender plaintiff rejected.
The lower court, in accordance with clause 9 of the bill of lading above quoted, rendered
judgment in favor of the plaintiff against the defendant for the sum of P226.02, this being the
invoice value of the clocks in question plus the freight and insurance thereon, with legal interest
thereon from November 20, 1919, the date of the complaint, together with costs. From that
judgment both parties appealed to this court.
The plaintiff-appellant insists that it is entitled to recover from the defendant the market value of
the clocks in question, to wit: the sum of P420. The defendant-appellant, on the other hand,
contends that, in accordance with clause 1 of the bill of lading, the plaintiff is entitled to recover
only the sum of P76.36, the proportionate freight ton value of the said clocks. The claim of the
plaintiff is based upon the argument that the two clause in the bill of lading above quoted, limiting
the liability of the carrier, are contrary to public order and, therefore, null and void. The defendant,
on the other hand, contends that both of said clauses are valid, and the clause 1 should have
been applied by the lower court instead of clause 9.
I. The appeal of the plaintiff presents this question; 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?
1awph!l.net

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 authorities relied upon by the plaintiff-appellant (the Harter Act [Act of Congress of February
13, 1893]: Louisville Ry. Co. vs. Wynn, 88 Tenn., 320; and Galt vs. Adams Express Co., 4 McAr.,
124; 48 Am. Rep., 742) support the proposition that 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. This proposition is supported by a uniform lien of
decisions of the Supreme Court of the United States rendered both prior and subsequent to the
passage of the Harter Act, from the case of Hart vs. Pennsylvania R. R. Co. (decided Nov. 24,
1884; 112 U. S., 331), to the case of the Union Pacific Ry. Co. vs. Burke (decided Feb. 28, 1921,
Advance Opinions, 1920-1921, p. 318).
In the case of Hart vs. Pennsylvania R. R. Co., supra, it was held that "where a contract of
carriage, signed by the shipper, is fairly made with a railroad company, agreeing on a valuation of
the property carried, with the rate of freight based on the condition that the carrier assumes
liability only to the extent of the agreed valuation, even in case of loss or damage by the
negligence of the carrier, the contract will be upheld as proper and lawful mode of securing a due
proportion between the amount for which the carrier may be responsible and the freight he
receives, and protecting himself against extravagant and fanciful valuations."
In the case of Union Pacific Railway Co. vs. Burke, supra, the court said: "In many cases, from
the decision in Hart vs. Pennsylvania R. R. Co. (112 U. S. 331; 28 L. ed., 717; 5 Sup. Ct. Rep.,
151, decided in 1884), to Boston and M. R. Co. vs. Piper (246 U. S., 439; 62 L. ed., 820; 38 Sup.
Ct. Rep., 354; Ann. Cas. 1918 E, 469, decided in 1918), 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."
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. (Adams Express Co. vs.
Croninger 226 U. S. 491, 492.) See also Reid vs. Farbo (130 C. C. A., 285);
Jennings vs. Smith (45 C. C. A., 249); George N. Pierce Co. vs. Wells, Fargo and
Co. (227 U. S., 278); Wells, Fargo & Co. vs. Neiman-Marcus Co. (227 U. S.,
469).
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. Article 1255 of the Civil Code provides that "the
contracting parties may establish any agreements, terms and conditions they may deem
advisable, provided they are not contrary to law, morals or public order." Said clauses of the bill
of lading are, therefore, valid and binding upon the parties thereto.
II. 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.
The defendant-appellant contends that these two clauses, if construed together, mean that the
shipper and the carrier stipulate and agree that the value of the goods receipted for does not
exceed $500 per freight ton, but should the invoice value of the goods be less than $500 per
freight ton, then the invoice value governs; that since in this case the invoice value is more than
$500 per freight ton, the latter valuation should be adopted and that according to that valuation,
the proportionate value of the clocks in question is only P76.36 which the defendant is ready and
willing to pay to the plaintiff.
It will be noted, however, that whereas 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.
Araullo, street, Avancea and Villamor, JJ., concur.
The Lawphil Project - Arellano Law Foundation

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-40597 June 29, 1979
AGUSTINO B. ONG YIU, petitioner,
vs.
HONORABLE COURT OF APPEALS and PHILIPPINE AIR LINES, INC., respondents.

MELENCIO-HERRERA, J.:
In this Petition for Review by Certiorari, petitioner, a practicing lawyer and businessman, seeks a
reversal of the Decision of the Court of Appeals in CA-G.R. No. 45005-R, which reduced his
claim for damages for breach of contract of transportation.
The facts are as follows:
On August 26, 1967, petitioner was a fare paying passenger of respondent Philippine Air Lines,
Inc. (PAL), on board Flight No. 463-R, from Mactan Cebu, bound for Butuan City. He was
scheduled to attend the trial of Civil Case No. 1005 and Spec. Procs. No. 1125 in the Court of
First Instance, Branch II, thereat, set for hearing on August 28-31, 1967. As a passenger, he
checked in one piece of luggage, a blue "maleta" for which he was issued Claim Check No.
2106-R (Exh. "A"). The plane left Mactan Airport, Cebu, at about 1:00 o'clock P.M., and arrived at
Bancasi airport, Butuan City, at past 2:00 o'clock P.M., of the same day. Upon arrival, petitioner
claimed his luggage but it could not be found. According to petitioner, it was only after reacting
indignantly to the loss that the matter was attended to by the porter clerk, Maximo Gomez, which,
however, the latter denies, At about 3:00 o'clock P.M., PAL Butuan, sent a message to PAL,
Cebu, inquiring about the missing luggage, which message was, in turn relayed in full to the
Mactan Airport teletype operator at 3:45 P.M. (Exh. "2") that same afternoon. It must have been
transmitted to Manila immediately, for at 3:59 that same afternoon, PAL Manila wired PAL Cebu
advising that the luggage had been over carried to Manila aboard Flight No. 156 and that it would
be forwarded to Cebu on Flight No. 345 of the same day. Instructions were also given that the
luggage be immediately forwarded to Butuan City on the first available flight (Exh. "3"). At 5:00
P.M. of the same afternoon, PAL Cebu sent a message to PAL Butuan that the luggage would be
forwarded on Fright No. 963 the following day, August 27, 196'(. However, this message was not

received by PAL Butuan as all the personnel had already left since there were no more incoming
flights that afternoon.
In the meantime, petitioner was worried about the missing luggage because it contained vital
documents needed for trial the next day. At 10:00 o'clock that evening, petitioner wired PAL Cebu
demanding the delivery of his baggage before noon the next day, otherwise, he would hold PAL
liable for damages, and stating that PAL's gross negligence had caused him undue
inconvenience, worry, anxiety and extreme embarrassment (Exh. "B"). This telegram was
received by the Cebu PAL supervisor but the latter felt no need to wire petitioner that his luggage
had already been forwarded on the assumption that by the time the message reached Butuan
City, the luggage would have arrived.
Early in the morning of the next day, August 27, 1967, petitioner went to the Bancasi Airport to
inquire about his luggage. He did not wait, however, for the morning flight which arrived at 10:00
o'clock that morning. This flight carried the missing luggage. The porter clerk, Maximo Gomez,
paged petitioner, but the latter had already left. A certain Emilio Dagorro a driver of a "colorum"
car, who also used to drive for petitioner, volunteered to take the luggage to petitioner. As
Maximo Gomez knew Dagorro to be the same driver used by petitioner whenever the latter was
in Butuan City, Gomez took the luggage and placed it on the counter. Dagorro examined the lock,
pressed it, and it opened. After calling the attention of Maximo Gomez, the "maleta" was opened,
Gomez took a look at its contents, but did not touch them. Dagorro then delivered the "maleta" to
petitioner, with the information that the lock was open. Upon inspection, petitioner found that a
folder containing certain exhibits, transcripts and private documents in Civil Case No. 1005 and
Sp. Procs. No. 1126 were missing, aside from two gift items for his parents-in-law. Petitioner
refused to accept the luggage. Dagorro returned it to the porter clerk, Maximo Gomez, who
sealed it and forwarded the same to PAL Cebu.
Meanwhile, petitioner asked for postponement of the hearing of Civil Case No. 1005 due to loss
of his documents, which was granted by the Court (Exhs. "C" and "C-1"). Petitioner returned to
Cebu City on August 28, 1967. In a letter dated August 29, 1967 addressed to PAL, Cebu,
petitioner called attention to his telegram (Exh. "D"), demanded that his luggage be produced
intact, and that he be compensated in the sum of P250,000,00 for actual and moral damages
within five days from receipt of the letter, otherwise, he would be left with no alternative but to file
suit (Exh. "D").
On August 31, 1967, Messrs. de Leon, Navarsi, and Agustin, all of PAL Cebu, went to petitioner's
office to deliver the "maleta". In the presence of Mr. Jose Yap and Atty. Manuel Maranga the
contents were listed and receipted for by petitioner (Exh. "E").
On September 5, 1967, petitioner sent a tracer letter to PAL Cebu inquiring about the results of
the investigation which Messrs. de Leon, Navarsi, and Agustin had promised to conduct to
pinpoint responsibility for the unauthorized opening of the "maleta" (Exh. "F").
The following day, September 6, 1967, PAL sent its reply hereinunder quoted verbatim:
Dear Atty. Ong Yiu:
This is with reference to your September 5, 1967, letter to Mr. Ricardo G.
Paloma, Acting Manager, Southern Philippines.
First of all, may we apologize for the delay in informing you of the result of
our investigation since we visited you in your office last August 31, 1967.
Since there are stations other than Cebu which are involved in your case,
we have to communicate and await replies from them. We regret to
inform you that to date we have not found the supposedly lost folder of
papers nor have we been able to pinpoint the personnel who allegedly
pilferred your baggage.

You must realize that no inventory was taken of the cargo upon loading
them on any plane. Consequently, we have no way of knowing the real
contents of your baggage when same was loaded.
We realized the inconvenience you encountered of this incident but we
trust that you will give us another opportunity to be of better service to
you.

Very truly yours,

PHI
LIP
PIN
E
AIR
LIN
ES,
INC
.
(Sg
d)
JE
RE
MIA
S
S.
AG
US
TIN
Bra
nch
Sup
ervi
sor
Ce
bu
(Exhibit G, Folder of Exhibits) 1
On September 13, 1967, petitioner filed a Complaint against PAL for damages for breach of
contract of transportation with the Court of First Instance of Cebu, Branch V, docketed as Civil
Case No. R-10188, which PAL traversed. After due trial, the lower Court found PAL to have acted
in bad faith and with malice and declared petitioner entitled to moral damages in the sum of
P80,000.00, exemplary damages of P30,000.00, attorney's fees of P5,000.00, and costs.
Both parties appealed to the Court of Appeals petitioner in so far as he was awarded only the
sum of P80,000.00 as moral damages; and defendant because of the unfavorable judgment
rendered against it.
On August 22, 1974, the Court of Appeals,* finding that PAL was guilty only of simple negligence,
reversed the judgment of the trial Court granting petitioner moral and exemplary damages, but
ordered PAL to pay plaintiff the sum of P100.00, the baggage liability assumed by it under the
condition of carriage printed at the back of the ticket.
Hence, this Petition for Review by Certiorari, filed on May 2, 1975, with petitioner making the
following Assignments of Error:

I. THE HONORABLE COURT OF APPEALS ERRED IN HOLDING

RESPONDENT PAL GUILTY ONLY OF SIMPLE NEGLIGENCE AND
NOT BAD FAITH IN THE BREACH OF ITS CONTRACT OF
TRANSPORTATION WITH PETITIONER.
II. THE HONORABLE COURT OF APPEALS MISCONSTRUED THE
EVIDENCE AND THE LAW WHEN IT REVERSED THE DECISION OF
THE LOWER COURT AWARDING TO PETITIONER MORAL DAMAGES
IN THE AMOUNT OF P80,000.00, EXEMPLARY DAMAGES OF
P30,000.00, AND P5,000.00 REPRESENTING ATTORNEY'S FEES, AND
ORDERED RESPONDENT PAL TO COMPENSATE PLAINTIFF THE
SUM OF P100.00 ONLY, CONTRARY TO THE EXPLICIT PROVISIONS
OF ARTICLES 2220, 2229, 2232 AND 2234 OF THE CIVIL CODE OF
THE PHILIPPINES.
On July 16, 1975, this Court gave due course to the Petition.
There is no dispute that PAL incurred in delay in the delivery of petitioner's luggage. The question
is the correctness of respondent Court's conclusion that there was no gross negligence on the
part of PAL and that it had not acted fraudulently or in bad faith as to entitle petitioner to an award
of moral and exemplary damages.
From the facts of the case, we agree with respondent Court that PAL had not acted in bad faith.
Bad faith means a breach of a known duty through some motive of interest or ill will. 2 It was the
duty of PAL to look for petitioner's luggage which had been miscarried. PAL exerted due diligence in
complying with such duty.
As aptly stated by the appellate Court:
We do not find any evidence of bad faith in this. On the contrary, We find
that the defendant had exerted diligent effort to locate plaintiff's baggage.
The trial court saw evidence of bad faith because PAL sent the
telegraphic message to Mactan only at 3:00 o'clock that same afternoon,
despite plaintiff's indignation for the non-arrival of his baggage. The
message was sent within less than one hour after plaintiff's luggage could
not be located. Efforts had to be exerted to locate plaintiff's maleta. Then
the Bancasi airport had to attend to other incoming passengers and to the
outgoing passengers. Certainly, no evidence of bad faith can be inferred
from these facts. Cebu office immediately wired Manila inquiring about
the missing baggage of the plaintiff. At 3:59 P.M., Manila station agent at
the domestic airport wired Cebu that the baggage was over carried to
Manila. And this message was received in Cebu one minute thereafter, or
at 4:00 P.M. The baggage was in fact sent back to Cebu City that same
afternoon. His Honor stated that the fact that the message was sent at
3:59 P.M. from Manila and completely relayed to Mactan at 4:00 P.M., or
within one minute, made the message appear spurious. This is a forced
reasoning. A radio message of about 50 words can be completely
transmitted in even less than one minute depending upon atmospheric
conditions. Even if the message was sent from Manila or other distant
places, the message can be received within a minute. that is a scientific
fact which cannot be questioned. 3
Neither was the failure of PAL Cebu to reply to petitioner's rush telegram indicative of bad faith,
The telegram (Exh. B) was dispatched by petitioner at around 10:00 P.M. of August 26, 1967.
The PAL supervisor at Mactan Airport was notified of it only in the morning of the following day. At
that time the luggage was already to be forwarded to Butuan City. There was no bad faith,
therefore, in the assumption made by said supervisor that the plane carrying the bag would
arrive at Butuan earlier than a reply telegram. Had petitioner waited or caused someone to wait

at the Bancasi airport for the arrival of the morning flight, he would have been able to retrieve his
luggage sooner.
In the absence of a wrongful act or omission or of fraud or bad faith, petitioner is not entitled to
moral damages.
Art. 2217. Moral damages include physical suffering, mental anguish,
fright, serious anxiety, besmirched reputation, wounded feelings, moral
shock, social humiliation, and similar injury. Though incapable of
pecuniary computation, moral damages may be recovered if they are the
proximate result of the defendant's wrongful act of omission.
Art. 2220. Willful injury to property may be a legal ground for awarding
moral damages if the court should find that, under the circumstances,
such damages are justly due. The same rule applies to breaches of
contract where the defendant acted fraudulently or in bad faith.
Petitioner is neither entitled to exemplary damages. In contracts, as provided for in Article 2232
of the Civil Code, exemplary damages can be granted if the defendant acted in a wanton,
fraudulent, reckless, oppressive, or malevolent manner, which has not been proven in this case.
Petitioner further contends that respondent Court committed grave error when it limited PAL's
carriage liability to the amount of P100.00 as stipulated at the back of the ticket. In this
connection, respondent Court opined:
As a general proposition, the plaintiff's maleta having been pilfered while
in the custody of the defendant, it is presumed that the defendant had
been negligent. The liability, however, of PAL for the loss, in accordance
with the stipulation written on the back of the ticket, Exhibit 12, is limited
to P100.00 per baggage, plaintiff not having declared a greater value, and
not having called the attention of the defendant on its true value and paid
the tariff therefor. The validity of this stipulation is not questioned by the
plaintiff. They are printed in reasonably and fairly big letters, and are
easily readable. Moreover, plaintiff had been a frequent passenger of PAL
from Cebu to Butuan City and back, and he, being a lawyer and
businessman, must be fully aware of these conditions. 4
We agree with the foregoing finding. 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.
There is no dispute that petitioner did not declare any higher value for his luggage, much less did
he pay any additional transportation charge.
But petitioner argues that there is nothing in the evidence to show that he had actually entered
into a contract with PAL limiting the latter's liability for loss or delay of the baggage of its
passengers, and that Article 1750* of the Civil Code has not been complied with.
While it may be true that petitioner had not signed the plane ticket (Exh. "12"), 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". 5 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. 6 And as held in
Randolph v. American Airlines, 103 Ohio App. 172, 144 N.E. 2d 878; Rosenchein vs. Trans World
Airlines, Inc., 349 S.W. 2d 483, "a contract limiting liability upon an agreed valuation does not offend
against the policy of the law forbidding one from contracting against his own negligence.

Considering, therefore, that petitioner had failed to declare a higher value for his baggage, he
cannot be permitted a recovery in excess of P100.00.Besides, passengers are advised not to
place valuable items inside their baggage but "to avail of our V-cargo service " (Exh. "1"). I t is
likewise to be noted that there is nothing in the evidence to show the actual value of the goods
allegedly lost by petitioner.
There is another matter involved, raised as an error by PAL the fact that on October 24, 1974
or two months after the promulgation of the Decision of the appellate Court, petitioner's widow
filed a Motion for Substitution claiming that petitioner died on January 6, 1974 and that she only
came to know of the adverse Decision on October 23, 1974 when petitioner's law partner
informed her that he received copy of the Decision on August 28, 1974. Attached to her Motion
was an Affidavit of petitioner's law partner reciting facts constitutive of excusable negligence. The
appellate Court noting that all pleadings had been signed by petitioner himself allowed the widow
"to take such steps as she or counsel may deem necessary." She then filed a Motion for
Reconsideration over the opposition of PAL which alleged that the Court of Appeals Decision,
promulgated on August 22, 1974, had already become final and executory since no appeal had
been interposed therefrom within the reglementary period.
Under the circumstances, considering the demise of petitioner himself, who acted as his own
counsel, it is best that technicality yields to the interests of substantial justice. Besides, in the 'last
analysis, no serious prejudice has been caused respondent PAL.
In fine, we hold that the conclusions drawn by respondent Court from the evidence on record are
not erroneous.
WHEREFORE, for lack of merit, the instant Petition is hereby denied, and the judgment sought to
be reviewed hereby affirmed in toto.
No costs.
SO ORDERED.
Teehankee, (Chairman), Makasiar, Fernandez, Guerrero and De Castro, JJ., concur.

#Footnotes
1 pp. 47-48, Rollo.
* Decision penned by Justice Jose Leuterio, with Justice Roseller Lim and
Francisco Tantuico, Jr., concurring.
2 Air France vs. Carrascoso, 18 SCRA 166 (1966); Lopez vs. Pan
American World Airways, 16 SCRA 431 (1966).
3 pp. 12-13, Decision. on pp. 53-54, Rollo.
4 pp. 8-9, Decision on pp. 27-28, Rollo.
* 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.

5 Tannebaum v. National Airline, Inc. 13 Misc. 2d 450, 176 N.Y.S. 2d 400;

Lichten vs. Eastern Airlines, 87 Fed. Supp. 691; Migoski v. Eastern Air
Lines, Inc., Fla. 63 So. 2d 634.
6 Tolentino, Civil Code, Vol. IV, 1962 ed., p, 462, citing Mr. Justice J.B.L. Reyes, Lawyer's
Journal, Jan. 31, 195 1, p. 49.

Ong v. CA
Facts:
Petitioner Jaime Ong, on the one hand, and respondent spouses Miguel K.
Robles and Alejandra Robles, on the other hand, executed an "Agreement
of Purchase and Sale" respecting two parcels of land situated at Barrio Puri,
San Antonio, Quezon. On May 15, 1983, petitioner Ong took possession of
the subject parcels of land together with the piggery, building, ricemill,
residential house and other improvements thereon.
For failure of the vendee to pay the price as agreed upon, a complaint for
rescission of contract and recovery of properties with damages. Later, while
the case was still pending with the trial court, petitioner introduced major
improvements on the subject properties. These prompted the respondent
spouses to ask for a writ of preliminary injunction. The trial court granted
the application and enjoined petitioner from introducing improvements on
the properties except for repairs. Eventually, the trial court ordered the
rescission of the contract.
Issues:
(1) whether the contract entered into by the parties may be validly
rescinded under Article 1191 of the New Civil Code
(2) whether the parties had novated their original contract as to the time
and manner of payment
Held:
Article 1191 of the New Civil Code refers to rescission applicable to
reciprocal obligations. Reciprocal obligations are those which arise from
the same cause, and in which each party is a debtor and a creditor of the
other, such that the obligation of one is dependent upon the obligation of
the other. They are to be performed simultaneously such that the
performance of one is conditioned upon the simultaneous fulfillment of the
other.
A careful reading of the parties' "Agreement of Purchase and Sale" shows
that it is in the nature of a contract to sell, as distinguished from a contract
of sale. In a contract of sale, the title to the property passes to the vendee
upon the delivery of the thing sold; while in a contract to sell, ownership is,

by agreement, reserved in the vendor and is not to pass to the vendee until
full payment of the purchase price. In a contract to sell, the payment of the
purchase price is a positive suspensive condition, the failure of which is not
a breach, casual or serious, but a situation that prevents the obligation of
the vendor to convey title from acquiring an obligatory force. The nonfulfillment of the condition of full payment rendered the contract to sell
ineffective and without force and effect. It must be stressed that the breach
contemplated in Article 1191 of the New Civil Code is the obligor's failure to
comply with an obligation. Failure to pay, in this instance, is not even a
breach but merely an event which prevents the vendor's obligation to
convey title from acquiring binding force. Hence, the agreement of the
parties in the case at bench may be set aside, but not because of a breach on
the part of petitioner for failure to complete payment of the purchase price.
Rather, his failure to do so brought about a situation which prevented the
obligation of respondent spouses to convey title from acquiring an
obligatory force.
Novation is never presumed, it must be proven as a fact either by express
stipulation of the parties or by implication derived from an irreconcilable
incompatibility between the old and the new obligation. In order for
novation to take place, the concurrence of the following requisites is
indispensable: (1) there must be a previous valid obligation; (2) there must
be an agreement of the parties concerned to a new contract; (3) there must
be the extinguishment of the old contract; and (4) there must be the validity
of the new contract. The aforesaid requisites are not found in the case at
bench. The subsequent acts of the parties hardly demonstrate their intent
to dissolve the old obligation as a consideration for the emergence of the
new one.

Ong Yui vs. CA Case Digest

Ong Yui vs. Court of Appeals
(91 SCRA 223)

Facts: 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 luggae, 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 overcarried 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.

Issue:
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: PAL had not acted in bad faith. It exercised due diligence in looking for petitioners 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.

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.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 75118 August 31, 1987
SEA-LAND SERVICE, INC., petitioner,
vs.
INTERMEDIATE APPELLATE COURT and PAULINO CUE, doing business under the name
and style of "SEN HIAP HING," respondents.

NARVASA, J.:
The main issue here is 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.
The factual antecedents, for the most part, are not in dispute.

On or about January 8, 1981, Sea-Land Service, Inc. (Sea-Land for brevity), 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 not having declared the value of the shipment, no value was indicated in the bill of
lading. The bill described the shipment only as "8 CTNS on 2 SKIDS-FILES. 1 Based on volume
measurements Sea-land charged the shipper the total amount of US$209.28 2 for freight age and other charges. The
shipment was loaded on board the MS Patriot, a vessel owned and operated by Sea-Land, for
discharge at the Port Of Cebu.
The shipment arrived in Manila on February 12, 1981, and there discharged in Container No.
310996 into the custody of the arrastre contractor and the customs and port
authorities. 3 Sometime between February 13 and 16, 1981, after the shipment had been transferred,
along with other cargoes to Container No. 40158 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. 4
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. 5 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. 6 Cue rejected the offer and thereafter brought suit for damages against
Sea-Land in the then Court of First Instance of Cebu, Branch X. 7 Said Court, after trial, rendered
judgment in favor of Cue, sentencing Sea-Land to pay him P186,048.00 representing the Philippine
currency value of the lost cargo, P55,814.00 for unrealized profit with one (1%) percent monthly
interest from the filing of the complaint until fully paid, P25,000.00 for attorney's fees and P2,000.00
as litigation expenses. 8
Sea-Land appealed to the Intermediate Appellate Court. 9 That Court however affirmed the decision
of the Trial Court xxx in all its parts ... . 10 Sea-Land thereupon filed the present petition for review which, as already
stated, poses the question of whether, upon the facts above set forth, it can be held liable for the loss of the shipment in any amount
beyond the limit of US$600.00 per package stipulated in the bill of lading.

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. In Mendoza vs. Philippine
Air Lines, Inc. 11 the Court delved at some length into the reasons behind this when, upon a claim made by the consignee of a
motion picture film shipped by air that he was never a party to the contract of transportation and was a complete stranger thereto, it
said:

But appellant now contends that he is not suing on a breach of contract but on a
tort as provided for in Art. 1902 of the Civil Code. We are a little perplexed as to
this new theory of the appellant. First, he insists that the articles of the Code of
Commerce should be applied: that he invokes the provisions of aid Code
governing the obligations of a common carrier to make prompt delivery of goods
given to it under a contract of transportation. Later, as already said, he says that
he was never a party to the contract of transportation and was a complete
stranger to it, and that he is now suing on a tort or a violation of his rights as a
stranger (culpa aquiliana) If he does not invoke the contract of carriage entered
into with the defendant company, then he would hardly have any leg to stand on.
His right to prompt delivery of the can of film at the Phil. Air Port stems and is
derived from the contract of carriage under which contract, the PAL undertook to
carry the can of film safely and to deliver it to him promptly. Take away or ignore
that contract and the obligation to carry and to deliver and right to prompt delivery
disappear. Common carriers are not obligated by law to carry and to deliver
merchandise, and persons are not vested with the right to prompt delivery, unless
such common carriers previously assume the obligation. Said rights and
obligations are created by a specific contract entered into by the parties. In the

present case, the findings of the trial court which as already stated, are accepted
by the parties and which we must accept are to the effect that the LVN Pictures
Inc. and Jose Mendoza on one side, and the defendant company on the other,
entered into a contract of transportation (p. 29, Rec. on Appeal). One
interpretation of said finding is that the LVN Pictures Inc. through previous
agreement with Mendoza acted as the latter's agent. When he negotiated with
the LVN Pictures Inc. to rent the film "Himala ng Birhen" and show it during the
Naga town fiesta, he most probably authorized and enjoined the Picture
Company to ship the film for him on the PAL on September 17th. Another
interpretation is that even if the LVN Pictures Inc. as consignor of its own
initiative, and acting independently of Mendoza for the time being, made
Mendoza as consignee, a stranger to the contract if that is possible, nevertheless
when he, Mendoza appeared at the Phil Air Port armed with the copy of the Air
Way Bill (Exh. 1) demanding the delivery of the shipment to him, he thereby
made himself a party to the contract of transportation. The very citation made by
appellant in his memorandum supports this view. Speaking of the possibility of a
conflict between the order of the shipper on the one hand and the order of the
consignee on the other, as when the shipper orders the shipping company to
return or retain the goods shipped while the consignee demands their delivery,
Malagarriga in his book Codigo de Comercio Comentado, Vol. 1, p. 400, citing a
decision of the Argentina Court of Appeals on commercial matters, cited by
Tolentino in Vol. II of his book entitled "Commentaries and Jurisprudence on the
Commercial Laws of the Philippines" p. 209, says that the right of the shipper to
countermand the shipment terminates when the consignee or legitimate holder of
the bill of lading appears with such big of lading before the carrier and makes
himself a party to the contract. Prior to that time he is a stranger to the contract.
Still another view of this phase of the case is that contemplated in Art. 1257,
paragraph 2, of the old Civil Code (now Art, 1311, second paragraph) which reads
thus:
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.
Here, the contract of carriage between the LVN Pictures Inc. and the defendant
carrier contains the stipulations of delivery to Mendoza as consignee. His
demand for the delivery of the can of film to him at the Phil Air Port may be
regarded as a notice of his acceptance of the stipulation of the delivery in his
favor contained in the contract of carriage and delivery. In this case he also made
himself a party to the contract, or at least has come to court to enforce it. His
cause of action must necessarily be founded on its breach.
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 12 and the goods in question
were shipped from the United States to the Philippines, the liability of petitioner Sea-Land to the respondent consignee is governed
primarily by the Civil Code, and as ordained by the said Code, suppletorily, in all matters not determined thereby, by the Code of
Commerce and special laws. 13 One of these suppletory special laws is the Carriage of Goods by Sea Act, U.S. Public Act No. 521
which was made applicable to all contracts for the carriage of goods by sea to and from Philippine ports in foreign trade by
Commonwealth Act No. 65, approved on October 22, 1936. Sec. 4(5) of said Act in part reads:

(5) 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.
xxx xxx xxx
Clause 22, first paragraph, of the long form bill of lading customarily issued by Sea-Land to its
shipping clients 14 is a virtual copy of the first paragraph of the foregoing provision. It says:
22. VALUATION. In the event of any loss, damage or delay to or in connection
with goods exceeding in actual value $500 per package, lawful money of the
United States, or in case of goods not shipped in packages, per customary freight
unit, the value of the goods shall be deemed to be $500 per package or per
customary freight unit, as the case may be, and the carrier's liability, if any, shall
be determined on the basis of a value of $500 per package or customary freight
unit, unless the nature and a higher value shall be declared by the shipper in
writing before shipment and inserted in this Bill of Lading.
And in its second paragraph, the bill states:
If a value higher than $500 shag have been declared in writing by the shipper
upon delivery to the carrier and inserted in this bill of lading and extra freight paid,
if required and in such case if the actual value of the goods per package or per
customary freight unit shall exceed such declared value, the value shall
nevertheless be deemed to be declared value and the carrier's liability, if any,
shall not exceed the declared value and any partial loss or damage shall be
adjusted pro rata on the basis of such declared value.
Since, as already pointed out, Article 1766 of the Civil Code expressly subjects the rights and
obligations of common carriers to the provisions of the Code of Commerce and of special laws in
matters not regulated by said (Civil) Code, the Court fails to fathom the reason or justification for
the Appellate Court's pronouncement in its appealed Decision that the Carriage of Goods by Sea
Act " ... has no application whatsoever in this case. 15 Not only is there 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; it is also quite clear that said 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.
Nothing contained in section 4(5) of the Carriage of Goods by Sea Act already quoted is
repugnant to or inconsistent with any of the just-cited provisions of the Civil Code. Said section
merely gives more flesh and greater specificity to the rather general terms of Article 1749
(without doing any violence to the plain intent thereof) and of Article 1750, to give effect to just
agreements limiting carriers' liability for loss or damage which are freely and fairly entered into.
It seems clear that even if said section 4(5) of the Carriage of Goods by Sea Act did not exist, the
validity and binding effect of the liability limitation clause in the bill of lading here are nevertheless
fully sustainable on the basis alone of the cited Civil Code provisions. That said stipulation is just

and reasonable is arguable from the fact that it echoes Art. 1750 itself in providing a limit to
liability only if a greater value is not declared for the shipment in the bill of lading. To hold
otherwise would amount to questioning the justice and fairness of that law itself, and this the
private respondent does not pretend to do. But over and above that consideration, the lust and
reasonable character of such stipulation is implicit in it giving the shipper or owner the option of
avoiding acrrual of liability limitation by the simple and surely far from onerous expedient of
declaring the nature and value of the shipment in the bill of lading. And since the shipper here
has not been heard to complaint 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
in fact, it does not appear that said party has been heard from at all insofar as this dispute is
concerned there is simply no ground for assuming that its agreement thereto was not as the
law would require, freely and fairly sought and given.
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. As
pointed out in Mendoza vs. PAL, supra, 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. Parenthetically, it may be observed that in one comparatively
recent case 16 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.

There can, therefore, be no doubt or equivocation about the validity and enforceability of freelyagreed-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. 17
The issue of alleged deviation is also settled by Clause 13 of the bill of lading which expressly
authorizes trans-shipment of the goods at any point in the voyage in these terms:
13. THROUGH CARGO AND TRANSSHIPMENT. The carrier or master, in the
exercise of its or his discretion and although transshipment or forwarding of the
goods may not have been contemplated or provided for herein, may at port of
discharge or any other place whatsoever transship or forward the goods or any
part thereof by any means at the risk and expense of the goods and at any time,
whether before or after loading on the ship named herein and by any route,
whether within or outside the scope of the voyage or beyond the port of discharge
or destination of the goods and without notice to the shipper or consignee. The
carrier or master may delay such transshipping or forwarding for any reason,
including but not limited to awaiting a vessel or other means of transportation
whether by the carrier or others.
Said provision obviates the necessity to offer any other justification for offloading the shipment in
question in Manila for transshipment to Cebu City, the port of destination stipulated in the bill of
lading. Nonetheless, the Court takes note of Sea-Land's explanation that it only directly serves
the Port of Manila from abroad in the usual course of voyage of its carriers, hence its
maintenance of arrangements with a local forwarder. Aboitiz and Company, for delivery of its
imported cargo to the agreed final point of destination within the Philippines, such arrangements
not being prohibited, but in fact recognized, by law. 18
Furthermore, this Court has also ruled 19 that the Carriage of Goods by Sea Act is applicable up to the final port of
destination and that the fact that transshipment was made on an interisland vessel did not remove the contract of carriage of goods
from the operation of said Act.

Private respondent also contends that the aforecited Clauses 22 and 13 of the bill of lading relied
upon by petitioner Sea Land form no part of the short-form bill of lading attached to his complaint
before the Trial Court and appear only in the long form of that document which, he claims.
SeaLand offered (as its Exhibit 2) as an unused blank form with no entries or signatures therein.
He, however, admitted in the Trial Court that several times in the past shipments had been
delivered to him through Sea-Land, 20 from which the assumption may fairly follow that by the time
of the consignment now in question, he was already reasonably apprised of the usual terms covering
contracts of carriage with said petitioner.
At any rate, as observed earlier, it has already been held that the provisions of the Carriage of
Goods by Sea Act on package limitation [sec 4(5) of the Act hereinabove referred to] are as
much a part of a bill of lading as though actually placed therein by agreement of the parties. 21
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. ... 22.
There is one final consideration. The private respondent admits 23 that as early as on April 22,
1981, Sea-Land had offered to settle his claim for US$4,000.00, the limit of said carrier's liability for
loss of the shipment under the bill of lading. This Court having reached the conclusion that said sum is
all that is justly due said respondent, it does not appear just or equitable that Sea-Land, which offered
that amount in good faith as early as six years ago, should, by being made to pay at the current
conversion rate of the dollar to the peso, bear for its own account all of the increase in said rate since
the time of the offer of settlement. The decision of the Regional Trial Court awarding the private
respondent P186,048.00 as the peso value of the lost shipment is clearly based on a conversion rate
of P8.00 to US$1.00, said respondent having claimed a dollar value of $23,256.00 for said
shipment. 24 All circumstances considered, it is just and fair that Sea-Land's dollar obligation be
convertible at the same rate.
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.
SO ORDERED.
Teehankee, C.J., Cruz, Paras and Gancayco, JJ., concur.

Footnotes
1 Exhibits 1, 1-B: TSN Dec. 14, 1982, pp. 19-20.
2 Petition, p. 2; Rollo, p. 11.
3 Exhibits 6, 6-A: TSN Jan. 26, 1983, pp. 18-20

4 Exhibits E 3-A, 4, 8 and 9; TSN Id.

5 Exhibit F.
6 Exhibits 2, 2-A.
7 Civil Case No. 20810.
8 Rollo, p. 21.
9 AC-G.R. CV No. 06150.
10 Rollo, p. 12, 21-32.
11 90 Phil 836, 845-846; see also American Express Co. vs. Natividad, 46 Phil.
207 and Phoenix Assurance Co., Ltd. vs. United States Lines, 22 SCRA 675.
12 Art. 1753, Civil Code.
13 Art. 1766, Civil Code, Samar Mining Co., Inc. vs. Nordeutscher Lloyd, 132
SCRA 529; Eastern Shipping Lines, Inc. vs. The Nisshin Fire & Marine Insurance
Co., et al., G. R. Nos. 69044 and 71478, May 29,1987.
14 Exhibit 2.
15 Rollo, pp. 26-27.
16 Phoenix Assurance Company vs. Macondray & Co., Inc., 64 SCRA 15, May
15,1973.
17 Freixas and Co. vs. Pacific Mail Steamship Co., 42 Phil. 198; H.E. Heacock
Co. vs. Macondray & Co., 43 Phil. 205; American President Lines vs. Klepper
infra; Phoenix Assurance Co. vs. Macondray & Co., supra.
18 Art. 373, Code of Commerce.
19 American Insurance Company vs. Compaia Maritima, 21 SCRA 998.
20 Reply to Comment, p. 11, Rollo, p. 87, citing TSN, Sept. 1, 1982.
21 Phoenix Assurance Company vs. Macondray & Company supra, citing
Shackman vs. Cunard White Star, D.C.N.Y. 1940; see also Eastern Shipping
Lines, Inc. vs. IAC, supra, which cites the same American case.
22 American President Lines vs. Klepper supra.
23 Appellee's brief, p. 6; Rollo, p. 53.
24 Appellee's Brief, p. 5; Rollo, p. 53.

Sea-Land Service, Inc. v. Intermediate Appellate Court

(153 SCRA 552 )
Post under case digests, Commercial Law at Thursday, February 23, 2012 Posted by Schizophrenic Mind

Facts: Sea-Land, a foreign shipping and forwarding

company licensed to do business in the Philippines,
received from Sea-borne Trading Company in California,

a shipment consigned to Sen Hiap Hing, the business

name used by Cue. The shipper not having declared the
value of the shipment , no value was indicated in thebill
of lading. The shipment was discharged in Manila, and
while awaiting transshipment to Cebu, the cargo was
stolen and never recovered.
The trial court sentenced Sea-Land to pay Cue
P186,048 representing the Philippine currency value of
the lost cargo, P55, 814 for unrealized profit and
P25,000 for attorneys fees. CA affirmed the trial courts
decision.
Issue: Whether or not Sea-Land is liable to pay Cue.
Held: There is no question of the right 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 drawn
up only by the consignor and the carrier without the
intervention of the consignee.
Since the liability of a common carrier for loss of or
damage to goods transported by it under a contract of
carriage os 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 SeaLand has Cue is governed primarily by the Civil Code,
and as ordained by the said Code, supplementary, in all
matters not cluttered thereby, by the Code of Commerce
and special laws. One of these supplementary special
laws is the Carriage of goods by Sea Act (COGSA),
made applicable to all contracts for the carriage by sea

to and from the Philippines Ports in Foreign Trade by

Comm. Act. 65.
Even if Section 4(5) of COGSA did not list the validity
and binding effect of the liability limitation clause in
the bill of lading here are fully substantial on the basis
alone of Article 1749 and 1750 of the Civil Code. The
justices of such stipulation is implicit in its giving the
owner or shipper the option of avoiding accrual of
liability limitation by the simple expedient of declaring
the value of the shipment in thebill of lading.
The stipulation in the bill of lading limiting the liability of
Sea-Land for loss or damages to the shipment covered
by said rule to US$500 per package unless the shipper
declares the value of the shipmentand pays additional
charges is valid and binding on Cue.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 88092

April 25, 1990

CITADEL LINES, INC., petitioner,

vs.
COURT OF APPEALS * and MANILA WINE MERCHANTS, INC., respondents.
Del Rosario & Del Rosario Law Offices for petitioner.
Limqueco and Macaraeg Law Office for private respondent.

REGALADO, J.:
Through this petition, we are asked to review the decision of the Court of Appeals dated
December 20, 1988, in CA-G.R. No. CV-10070, 1 which affirmed the August 30, 1985 decision of
the Regional Trial Court of Manila, Branch 27, in Civil Case No. 126415, entitled Manila Wine
Merchants, Inc. vs. Citadel Lines, Inc. and E. Razon, Inc., with a modification by deleting the
award of attorney's fees and costs of suit.
The following recital of the factual background of this case is culled from the findings in the
decision of the court a quo and adopted by respondent court based on the evidence of record.

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.
On or about March 17, 1979, the vessel "Cardigan Bay/Strait Enterprise" 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 3 of the Ben Line Containers Ltd.
The shipment arrived at the Port of Manila Pier 13, on April 18, 1979 in container van No. BENU
204850-9. The said container was received by E. Razon, Inc. (later known as Metro Port Service,
Inc. and referred to herein as the ARRASTRE) under Cargo Receipt No. 71923 dated April 18,
1979. 4
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.
In the morning of May 1, 1979, 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 Jose G. Sibucao, Pier Superintendent, Pier 13, 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 5 and the Official Report/Notice of Claim of Citadel Lines, Inc. to E. Razon,
Inc. dated May 8, 1979. 6 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.
When the CONSIGNEE learned that 90 cases were missing, it filed a formal claim dated May 21,
1979, 7 with the CARRIER, demanding the payment of P315,000.00 representing the market
value of the missing cargoes. The CARRIER, in its reply letter dated May 23, 1979, 8 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, dated June 4, 1979, 9 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.
As earlier stated, the court of Appeals affirmed the decision of the court a quo but deleted the
award of attorney's fees and costs of suit.
The two main issues for resolution are:
1. Whether the loss occurred while the cargo in question was in the custody of E. Razon, Inc. or
of Citadel Lines, Inc; and
2. Whether the stipulation limiting the liability of the carrier contained in the bill of lading is binding
on the consignee.
The first issue is factual in nature. The Court of Appeals declared in no uncertain terms that, on
the basis of the evidence presented, the subject cargo which was placed in a container van,
padlocked and sealed by the representative of the CARRIER was still in its possession and

control when the loss occurred, there having been no formal turnover of the cargo to the
ARRASTRE. Besides, there is the categorical admission made by two witnesses, namely, Atty.
Lope M. Velasco and Ruben Ignacio, Claims Manager and Head Checker, respectively, of the
CARRIER, 10 that for lack of space the containers were not turned over to and as the
responsibility of E. Razon Inc. The CARRIER is now estopped from claiming otherwise.
Common carriers, from the nature of their business and for reasons of public policy, are bound to
observe extraordinary diligence in the vigilance over the goods and for the safety of the
passengers transported by them, according to all the circumstances of each case. 11 If the goods
are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to
have acted negligently, unless they prove that they observed extra ordinary diligence as required
in Article 1733 of the Civil Code. 12 The duty of the consignee is to prove merely that the goods
were lost. Thereafter, the burden is shifted to the carrier to prove that it has exercised the
extraordinary diligence required by law. And, its extraordinary responsibility lasts from the time
the goods are unconditionally placed in the possession of, and received by the carrier for
transportation until the same are delivered, actually or constructively, by the carrier to the
consignee or to the person who has the right to receive them. 13
Considering, therefore, that the subject shipment was lost while it was still in the custody of
herein petitioner CARRIER, and considering further that it failed to prove that the loss was
occasioned by an excepted cause, the inescapable conclusion is that the CARRIER was
negligent and should be held liable therefor.
The cases cited by petitioner in support of its allegations to the contrary do not find proper
application in the case at bar simply because those cases involve a situation wherein the
shipment was turned over to the custody and possession of the arrastre operator.
We, however, find the award of damages in the amount of P312,800.00 for the value of the
goods lost, based on the alleged market value thereof, to be erroneous. 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. 15
The CONSIGNEE itself admits in its memorandum that the value of the goods shipped does not
appear in the bills of lading. 16 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. In Sea-land Service, Inc. vs. Intermediate Appellate Court, et
al. 17 we there explained what is a just and reasonable, and a fair and free, stipulation, in this
wise:
. . . That said stipulation is just and reasonable arguable from the fact that it echoes Art.
1750 itself in providing a limit to liability only if a greater value is not declared for the
shipment in the bill of lading. To hold otherwise would amount to questioning the justice
and fairness of that law itself, and this the private respondent does not pretend to do. But
over and above that consideration the just and reasonable character of such stipulation is
implicit in it giving the shipper or owner the option of avoiding accrual of liability limitation
by the simple and surely far from onerous expedient of declaring the nature and value of
the shipment in the bill of lading. And since the shipper here has not been heard to
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 in fact, it
does not appear, that said party has been heard from at all insofar as this dispute is
concerned there is simply no ground for assuming that its agreement thereto was not
as the law would require, freely and fairly sought and well.

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.
SO ORDERED.
Melencio-Herrera, Paras, Padilla and Sarmiento, JJ., concur.
Footnotes
Impleaded as a respondent and added to complete the title of the case stated in the
petition.
*

Justice Josue N. Bellosillo, ponente, and Justices Felipe B. Kalalo and Regina G.
Ordoez-Benitez concurring.
1

Exh. A; Exh. 7-Citadel.

Exh. B; Exh. 8-Citadel.

Exh. 1-Citadel

Exh. 10-D-Razon.

Exh. 4-Citadel.

Exh. C.

Exh. D.

Exh. E.

10

Rollo, 45.

11

Art. 1733, Civil Code.

12

Art. 1735, Id.

13

Art. 1736, Id.

14

Art. 1749, Id.

15

Art. 1750, Id.

16

Rollo, 120.

17

153 SCRA 552 (1987).

ECOND DIVISION

[G.R. No. 122494. October 8, 1998]

EVERETT STEAMSHIP CORPORATION, petitioner, vs. COURT OF

APPEALS and HERNANDEZ TRADING CO. INC., respondents.
DECISION
MARTINEZ, J.:

Petitioner Everett Steamship Corporation, through this petition for review, seeks the
reversal of the decision[1] of the Court of Appeals, dated June 14, 1995, in CA-G.R. No.
428093, which affirmed the decision of the Regional Trial Court of Kalookan City, Branch
126, in Civil Case No. C-15532, finding petitioner liable to private respondent Hernandez
Trading Co., Inc. for the value of the lost cargo.
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 petitioners principal, Everett Orient Lines. The said
crates were covered by Bill of Lading No. NGO53MN.
Upon arrival at the port of Manila, it was discovered that the crate marked MARCO
C/No. 14 was missing. This was confirmed and admitted by petitioner in its letter of January
13, 1992 addressed to private respondent, which thereafter made a formal claim upon
petitioner for the value of the lost cargo amounting to One Million Five Hundred Fifty Two
Thousand Five Hundred (Y1,552,500.00) Yen, the amount shown in an Invoice No. MTM941, dated November 14, 1991. However, petitioner offered to pay only One Hundred
Thousand (Y100,000.00) Yen, the maximum amount stipulated under Clause 18 of the
covering bill of lading which limits the liability of petitioner.
Private respondent rejected the offer and thereafter instituted a suit for collection
docketed as Civil Case No. C-15532, against petitioner before the Regional Trial Court of
Caloocan City, Branch 126.
At the pre-trial conference, both parties manifested that they have no testimonial
evidence to offer and agreed instead to file their respective memoranda.
On July 16, 1993, the trial court rendered judgment [2] 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 attorneys fees; and (d) to pay the cost of
the suit. The trial court ruled:

Considering defendants categorical admission of loss and its failure to

overcome the presumption of negligence and fault, the Court conclusively
finds defendant liable to the plaintiff. The next point of inquiry the Court
wants to resolve is the extent of the liability of the defendant. As stated
earlier, plaintiff contends that defendant should be held liable for the whole
value for the loss of the goods in the amount of Y1,552,500.00 because the

terms appearing at the back of the bill of lading was so written in fine prints
and that the same was not signed by plaintiff or shipper thus, they are not
bound by the clause stated in paragraph 18 of the bill of lading. On the
other hand, defendant merely admitted that it lost the shipment but shall be
liable only up to the amount of Y100,000.00.
The Court subscribes to the provisions of Article 1750 of the New Civil
Code 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.
It is required, however, that the contract must be reasonable and just under
the circumstances and has been fairly and freely agreed upon. The
requirements provided in Art. 1750 of the New Civil Code must be
complied with before a common carrier can claim a limitation of its
pecuniary liability in case of loss, destruction or deterioration of the goods
it has undertaken to transport.
In the case at bar, the Court is of the view that the requirements of said
article have not been met. The fact that those conditions are printed at the
back of the bill of lading in letters so small that they are hard to read would
not warrant the presumption that the plaintiff or its supplier was aware of
these conditions such that he had fairly and freely agreed to these
conditions. It can not be said that the plaintiff had actually entered into a
contract with the defendant, embodying the conditions as printed at the
back of the bill of lading that was issued by the defendant to plaintiff.
On appeal, the Court of Appeals deleted the award of attorneys fees but affirmed the trial
courts findings with the additional observation that private respondent can not be bound by
the terms and conditions of the bill of lading because it was not privy to the contract of
carriage. It said:

As to the amount of liability, no evidence appears on record to show that

the appellee (Hernandez Trading Co.) consented to the terms of the Bill of
Lading. The shipper named in the Bill of Lading is Maruman Trading Co.,
Ltd. whom the appellant (Everett Steamship Corp.) contracted with for the
transportation of the lost goods.
Even assuming arguendo that the shipper Maruman Trading Co., Ltd.
accepted the terms of the bill of lading when it delivered the cargo to the
appellant, still it does not necessarily follow that appellee Hernandez
Trading Company as consignee is bound thereby considering that the latter
was never privy to the shipping contract.
xxxxxxxxx

Never having entered into a contract with the appellant, appellee should
therefore not be bound by any of the terms and conditions in the bill of
lading.
Hence, it follows that the appellee may recover the full value of the
shipment lost, the basis of which is not the breach of contract as appellee
was never a privy to the any contract with the appellant, but is based on
Article 1735 of the New Civil Code, there being no evidence to prove
satisfactorily that the appellant has overcome the presumption of
negligence provided for in the law.
Petitioner now comes to us arguing that the Court of Appeals erred (1) in ruling that the
consent of the consignee to the terms and conditions of the bill of lading is necessary to make
such stipulations binding upon it; (2) in holding that the carriers limited package liability as
stipulated in the bill of lading does not apply in the instant case; and (3) in allowing private
respondent to fully recover the full alleged value of its lost cargo.
We shall first resolve the validity of the limited liability clause in the bill of lading.
A stipulation in the bill of lading limiting the common carriers liability for loss or
destruction of a cargo to a certain sum, unless the shipper or owner declares a greater value, is
sanctioned by law, particularly Articles 1749 and 1750 of the Civil Code which provide:

ART. 1749. A stipulation that the common carriers liability is limited to the
value of the goods appearing in the bill of lading, unless the shipper or
owner declares a greater value, is binding.
ART. 1750. A contract fixing the sum that may be recovered by the owner
or shipper for the loss, destruction, or deterioration of the goods is valid, if
it is reasonable and just under the circumstances, and has been freely and
fairly agreed upon.
Such limited-liability clause has also been consistently upheld by this Court in a number
of cases.[3] Thus, in Sea Land Service, Inc. vs Intermediate Appellate Court[4], we ruled:

It seems clear that even if said section 4 (5) of the Carriage of Goods by Sea Act
did not exist, the validity and binding effect of the liability limitation clause in the
bill of lading here are nevertheless fully sustainable on the basis alone of the cited
Civil Code Provisions. That said stipulation is just and reasonable is arguable from
the fact that it echoes Art. 1750 itself in providing a limit to liability only if a
greater value is not declared for the shipment in the bill of lading. To hold
otherwise would amount to questioning the justness and fairness of the law itself,
and this the private respondent does not pretend to do. But over and above that
consideration, the just and reasonable character of such stipulation is implicit in it
giving the shipper or owner the option of avoiding accrual of liability limitation by
the simple and surely far from onerous expedient of declaring the nature and value
of the shipment in the bill of lading..

Pursuant to the afore-quoted provisions of law, it is required that the stipulation limiting
the common carriers liability for loss must be reasonable and just under the circumstances,
and has been freely and fairly agreed upon.
The bill of lading subject of the present controversy specifically provides, among others:

18. All claims for which the carrier may be liable shall be adjusted and
settled on the basis of the shippers net invoice cost plus freight and
insurance premiums, if paid, and in no event shall the carrier be liable for
any loss of possible profits or any consequential loss.
The carrier shall not be liable for any loss of or any damage to or in any
connection with, goods in an amount exceeding One Hundred Thousand
Yen in Japanese Currency (Y100,000.00) or its equivalent in any other
currency per package or customary freight unit (whichever is least) unless
the value of the goods higher than this amount is declared in writing by the
shipper before receipt of the goods by the carrier and inserted in the Bill of
Lading and extra freight is paid as required. (Emphasis supplied)
The above stipulations are, to our mind, reasonable and just. In the bill of lading, the
carrier made it clear that its liability would only be up to One Hundred Thousand
(Y100,000.00) Yen. However, the shipper, Maruman Trading, had the option to declare a
higher valuation if the value of its cargo was higher than the limited liability of the
carrier. Considering that the shipper did not declare a higher valuation, it had itself to
blame for not complying with the stipulations.
The trial courts ratiocination that private respondent could not have fairly and freely
agreed to the limited liability clause in the bill of lading because the said conditions were
printed in small letters does not make the bill of lading invalid.
We ruled in PAL, Inc. vs. Court of Appeals[5] that the jurisprudence on the matter reveals
the consistent holding of the court that contracts of adhesion are not invalid per se and that it
has on numerous occasions upheld the binding effect thereof. Also, in Philippine American
General Insurance Co., Inc. vs. Sweet Lines , Inc .[6] this Court , speaking through the
learned Justice Florenz D. Regalado, held:

x x x Ong Yiu vs. Court of Appeals, et.al., instructs us that contracts of

adhesion wherein one party imposes a ready-made form of contract on the
other x x x 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. In the present case, not even an allegation of ignorance of a party
excuses non-compliance with the contractual stipulations since the
responsibility for ensuring full comprehension of the provisions of a
contract of carriage devolves not on the carrier but on the owner, shipper,
or consignee as the case may be. (Emphasis supplied)
It was further explained in Ong Yiu vs Court of Appeals[7] that stipulations in contracts of
adhesion are valid and binding.

While it may be true that petitioner had not signed the plane ticket x x, 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 latters 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 readymade 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. x x x , 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. (Emphasis supplied)
Greater vigilance, however, is required of the courts when dealing with contracts of
adhesion in that the said contracts must be carefully scrutinized in order to shield the unwary
(or weaker party) from deceptive schemes contained in ready-made covenants, [8] such as the
bill of lading in question. The stringent requirement which the courts are enjoined to observe
is in recognition of Article 24 of the Civil Code which mandates that (i)n all contractual,
property or other relations, when one of the parties is at a disadvantage on account of his
moral dependence, ignorance, indigence, mental weakness, tender age or other
handicap, the courts must be vigilant for his protection.
The shipper, Maruman Trading, we assume, has been extensively engaged in the trading
business. It can not be said to be ignorant of the business transactions it entered into
involving the shipment of its goods to its customers. The shipper could not have known, or
should know the stipulations in the bill of lading and there it should have declared a higher
valuation of the goods shipped. Moreover, Maruman Trading has not been heard to complain
that it has been deceived or rushed into agreeing to ship the cargo in petitioners vessel. In
fact, it was not even impleaded in this case.
The next issue to be resolved is whether or not private respondent, as consignee, who is
not a signatory to the bill of lading is bound by the stipulations thereof.
Again, in Sea-Land Service, Inc. vs. Intermediate Appellate Court (supra), we held that
even if the consignee was not a signatory to the contract of carriage 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 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. x x x.
x x x 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 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. Parenthetically, it may be observed that in one comparatively
recent case (Phoenix Assurance Company vs. Macondray & Co., Inc., 64
SCRA 15) 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.
There can, therefore, 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 proposition, moreover, rests upon an almost
uniform weight of authority. (Underscoring supplied)
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. [9] Thus, private respondent cannot
now reject or disregard the carriers limited liability stipulation in the bill of lading. In other
words, private respondent is bound by the whole stipulations in the bill of lading and must
respect the same.
Private respondent, however, insists that the carrier should be liable for the full value of
the lost cargo in the amount of Y1,552,500.00, considering that the shipper, Maruman
Trading, had "fully declared the shipment x x x, the contents of each crate, the dimensions,
weight and value of the contents,"[10] as shown in the commercial Invoice No. MTM-941.
This claim was denied by petitioner, contending that it did not know of the contents,
quantity and value of "the shipment which consisted of three pre-packed crates described in
Bill of Lading No. NGO-53MN merely as 3 CASES SPARE PARTS. [11]
The bill of lading in question confirms petitioners contention. To defeat the carriers
limited liability, the aforecited Clause 18 of the bill of lading requires that the shipper should
have declared in writing a higher valuation of its goods before receipt thereof by the carrier
and insert the said declaration in the bill of lading, with the extra freight paid. These
requirements in the bill of lading were never complied with by the shipper, hence, the liability
of the carrier under the limited liability clause stands. The commercial Invoice No. MTM-941
does not in itself sufficiently and convincingly show that petitioner has knowledge of the

value of the cargo as contended by private respondent. No other evidence was proffered by
private respondent to support is contention. Thus, we are convinced that petitioner should be
liable for the full value of the lost cargo.
In fine, the liability of petitioner for the loss of the cargo is limited to One Hundred
Thousand (Y100,000.00) Yen, pursuant to Clause 18 of the bill of lading.
WHEREFORE, the decision of the Court of Appeals dated June 14, 1995 in C.A.-G.R.
CV No. 42803 is hereby REVERSED and SET ASIDE.
SO ORDERED.
Regalado, (Acting Chief Justice), Melo, Puno, and Mendoza, JJ., concur.

[1]

Penned by Justice Pacita Canizares-Nye and concurred in by Justices Conchita Carpio-Morales and Antonio
P. Solano; Rollo, pp. 33-40.
[2]
Penned by Judge Oscar M. Payawal, Rollo, pp. 43-50 .
[3]
St. Paul Fire and Marine Insurance Co. vs Macondray & Co., 70 SCRA 122 [1976]; Sea Land Services,
Inc. vs Intermediate Appellate Court, 153 SCRA 552 [1987]; Pan American World Airways, Inc. vs Intermediate
Appellate Court, 164 SCRA 268 [1988]; Phil. Airlines, Inc. vs Court of Appeals, 255 SCRA 63 [1996].
[4]
153 SCRA 552 [1987]
[5]
255 SCRA 48, 58 [1996].
[6]
212 SCRA 194, 212-213 [1992].
[7]
91 SCRA 223 [1979]; Philippine Airlines, Inc. vs Court of Appeals, 255 SCRA 63 [1996].
[8]
Ayala Corporation vs. Ray Burton Development Corporation, G.R. No. 126699, August 7, 1998. See also Qua
Chee Gan vs. Law Union and Rock Insurance Co., Ltd., 98 Phil. 95 [1955].
[9]
See Mendoza vs. Philippine Air Lines, Inc. 90 Phil. 836, 845-846.
[10]
Rollo, p. 116.
[11]
Rollo, p. 13.

Alitalia v. Intermediate Appellate Court (192 SCRA 9 )

Post under case digests, Commercial Law at Thursday, February 23, 2012 Posted by Schizophrenic Mind

Facts: Dr. Felipa Pablo, a professor from UP was invited

to attend a meeting by the United Nations in Ispra, Italy.
She was to read a paper regarding foreign substances
in food and the agriculture environment which she had
specialized knowledge of. She booked a flight to Italy
with Alitalia airlines, petitioner herein. She had arrived in
Milan the day before the meeting however her luggage
did not arrive with her. The airline informed her that her
luggage wasdelayed because it was placed in one of the
succeeding flights to Italy. She never got her luggage.

When she got back to Manila she demanded that Alitalia

compensate her for the damages that she suffered.
Petitioner herein offered free airline tickets in order to
compensate for the alleged damages, however she
rejected this offer and instead filed a case. Subsequently
it was found out that the luggages of Dr. Pablo were not
placed in the succeeding flights. She received her
luggage 11 months after and after she had already
instituted a case against Alitalia.
The lower court rendered a decision in favor of Dr. Pablo
and ordered plaintiff to pay damages. On appeal, the
Court of Appeals affirmed the decision and even
increased the amount of damages to be awarded to Dr.
Pablo. Hence this petition for certiorari.
Issue: Whether or not Alitalia is liable for damages
incurred by Dr. Pablo.
Held: The Court held that Alitalia is liable to pay Dr.
Pablo for nominal damages. The Warsaw Convention
provides that an air carrier is made liable for damages
when: (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. However, the claim for
damages may be brought subject to limitations provided
in the said convention.

In this case, 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. Therefore she
shall receive nominal damages for the special injury
caused.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 95536 March 23, 1992

ANICETO G. SALUDO, JR., MARIA SALVACION SALUDO, LEOPOLDO G. SALUDO and
SATURNINO G. SALUDO, petitioners,
vs.
HON. COURT OF APPEALS, TRANS WORLD AIRLINES, INC., and PHILIPPINE AIRLINES,
INC., respondents.

REGALADO, J.:
Assailed in this petition for review on certiorari is the decision in CA-G.R. CV No. 20951 of
respondent Court of Appeals 1 which affirmed the decision of the trial court 2 dismissing for lack of
evidence herein petitioners' complaint in Civil Case No R-2101 of the then Court of First Instance of
Southern Leyte, Branch I.
The facts, as recounted by the court a quo and adopted by respondent court after "considering
the evidence on record," are as follows:
After the death of plaintiffs' mother, Crispina Galdo Saludo, in Chicago Illinois,
(on) October 23, 1976 (Exh. A), Pomierski and Son Funeral Home of Chicago,
made the necessary preparations and arrangements for the shipment, of the
remains from Chicago to the Philippines. The funeral home had the remains
embalmed (Exb. D) and secured a permit for the disposition of dead human body
on October 25, 1976 (Exh. C), 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) (Exb. 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 to 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. 6-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).
In the meantime, plaintiffs Maria Salvacion Saludo and Saturnino Saludo, thru a
travel agent, were booked with United Airlines from Chicago to California, and
with PAL from California to Manila. She then 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. This upset her, and she and
her brother had to change reservations from UA to the TWA flight after she
confirmed by phone that her mother's remains should be on that TWA flight. 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. Reluctantly, they took the TWA flight upon assurance of her
cousin, Ani Bantug, that he would look into the matter and inform her about it on
the plane or have it radioed to her. But no confirmation from her cousin reached
her that her mother was on the West Coast.
Upon arrival at San Francisco at about 5:00 p.m., she went to the TWA counter
there to inquire about her mother's remains. She was told they did not know
anything about it.
She then called Pomierski that her mother's remains were not at the West Coast
terminal, and Pomierski immediately called C.M.A.S., which in a matter of 10
minutes informed him that the remains were on a plane to Mexico City, that there
were two bodies at the terminal, and somehow they were switched; he relayed
this information to Miss Saludo in California; later C.M.A.S. called and told him
they were sending the remains back to California via Texas (see Exh. 6-TWA).
It-turned out that TWA had carried a shipment under PAL Airway Bill No. 079ORD-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 (Bee Exh. 1- TWA). "Due to a switch(ing) in Chicago", this
shipment was withdrawn from PAL by CMAS at 1805H (or 6:05 p.m.) of the same
date, October 27 (Exh. 3-PAL, see Exh. 3-a-PAL).
What transpired at the Chicago (A)irport is explained in a memo or incident report
by Pomierski (Exh. 6-TWA) to Pomierski's lawyers who in turn referred to said'
memo and enclosed it in their (Pomierski's lawyers) answer dated July 18, 1981
to herein plaintiff's counsel (See Exh. 5-TWA). In that memo or incident report
(Exh. 6-TWA), 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; that CMAS is a national service used by undertakers
throughout the nation (U.S.A.), makes all the necessary arrangements, such as
flights, transfers, etc., and see(s) to it that the remains are taken to the proper air
freight terminal.
The following day October 28, 1976, the shipment or remains of Crispina Saludo
arrived (in) San Francisco from Mexico on board American Airlines. This shipment

was transferred to or received by PAL at 1945H or 7:45 p.m. (Exh. 2-PAL, Exh. 2a-PAL). This casket bearing the remains of Crispina Saludo, which was
mistakenly sent to Mexico and was opened (there), was resealed by Crispin F.
Patagas for shipment to the Philippines (See Exh. B-1). The shipment was
immediately loaded on PAL flight for Manila that same evening and arrived (in)
Manila on October 30, 1976, a day after its expected arrival on October 29,
1976. 3
In a letter dated December 15, 1976, 4 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 on June 10, 1977 addressed to corespondent Philippine Airlines (PAL), 5 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 6 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.
As earlier stated, the court below absolved the two respondent airlines companies of liability. The
Court of Appeals affirmed the decision of the lower court in toto, and in a subsequent
resolution, 7 denied herein petitioners' motion for reconsideration for lack of merit.
In predictable disagreement and dissatisfaction with the conclusions reached by respondent
appellate court, petitioners now urge this Court to review the appealed decision and to resolve
whether or not (1) the delay in the delivery of the casketed remains of petitioners' mother was
due to the fault of respondent airline companies, (2) the one-day delay in the delivery of the
same constitutes contractual breach as would entitle petitioners to damages, (3) damages are
recoverable by petitioners for the humiliating, arrogant and indifferent acts of the employees of
TWA and PAL, and (4) private respondents should be held liable for actual, moral and exemplary
damages, aside from attorney's fees and litigation expenses. 8
At the outset and in view of the spirited exchanges of the parties on this aspect, it is to be
stressed that only questions of law may be raised in a petition filed in this Court to review
on certiorari the decision of the Court of Appeals. 9 This being so, the factual findings of the Court of
Appeals are final and conclusive and cannot be reviewed by the Supreme Court. The rule, however,
admits of established exceptions, to wit: (a) where there is grave abuse of discretion; (b) when the
finding is grounded entirely on speculations, surmises or conjectures;(c) when the inference made is
manifestly-mistaken, absurd or impossible; (d) when the judgment of the Court of Appeals was based
on a misapprehension of facts; (e) when the factual findings are conflicting; (f) when the Court of
Appeals, in making its findings, went beyond the issues of the case and the same are contrary to the
admissions of both appellant and appellee; 10 (g) when the Court of Appeals manifestly overlooked
certain relevant facts not disputed by the parties and which, if properly considered, would justify a
different conclusion; 11 and (h) where the findings of fact of the Court of Appeals are contrary to those
of the trial court, or are mere conclusions without citation of specific evidence, or where the facts of
set forth by the petitioner are not disputed by the respondent, or where the findings of fact of the Court
of Appeals are premised on the absence of evidence and are contradicted by the evidence on
record. 12
To distinguish, a question of law is one which involves a doubt or controversy on what the law is
on a certain state of facts; and, a question of fact, contrarily, is one in which there is a doubt or
difference as to the truth or falsehood of the alleged facts. 13 One test, it has been held, is whether
the appellate court can determine the issue raised without reviewing or evaluating the evidence, in
which case it is a question of law, otherwise it will be a question of fact. 14
Respondent airline companies object to the present recourse of petitioners on the ground that
this petition raises only factual questions. 15 Petitioners maintain otherwise or, alternatively, they are
of the position that, assuming that the petition raises factual questions, the same are within the
recognized exceptions to the general rule as would render the petition cognizable and worthy of
review by the Court. 16

Since it is precisely the soundness of the inferences or conclusions that may be drawn from the
factual issues which are here being assayed, we find that the issues raised in the instant petition
indeed warrant a second look if this litigation is to come to a reasonable denouement. A
discussion seriatim of said issues will further reveal that the sequence of the events involved is in
effect disputed. Likewise to be settled is whether or not the conclusions of the Court of Appeals
subject of this review indeed find evidentiary and legal support.
I. 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." 17
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 18 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)." 19
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. 20 The designation, however, is immaterial. It has been hold 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. 21 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. 22
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. 23 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. 24
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." 25 (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. 07901180454 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). 26(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. 27
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. 28
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, 29 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. 30 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. 31 Where such a delivery has
thus been accepted by the carrier, the liability of the common carrier commences eo instanti. 32
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.
Petitioners, proceeding on the premise that there was delivery of the cargo to private
respondents on October 26,1976 and that the latter's extraordinary responsibility had by then
become operative, insist on foisting the blame on private respondents for the switching of the two
caskets which occurred on October 27, 1976. It is argued that since there is no clear evidence
establishing the fault Continental Mortuary Air Services (CMAS) for the mix-up, private
respondents are presumably negligent pursuant to Article 1735 of the Civil Code and, for failure
to rebut such presumption, they must necessarily be held liable; or, assuming that CMAS was at
fault, the same does not absolve private respondents of liability because whoever brought the
cargo to the airport or loaded it on the plane did so as agent of private respondents.
This contention is without merit. As pithily explained by the Court of Appeals:
The airway bill expressly provides that "Carrier certifies goods described below
were received for carriage", and said cargo was "casketed human remains of
Crispina Saludo," with "Maria Saludo as Consignee; Pomierski F.H. as Shipper;
Air Care International as carrier's agent." On the face of the said airway bill, the
specific flight numbers, specific routes of shipment and dates of departure and
arrival were typewritten, to wit: Chicago TWA Flight 131/27 to San Francisco and
from San Francisco by PAL 107 on, October 27, 1976 to Philippines and to Cebu
via PAL Flight 149 on October 29, 1976. The airway bill also contains the
following typewritten words, as follows: all documents have been examined (sic).
Human remains of Crispina Saludo. Please return back (sic) first available flight
to SFO.
But, as it turned out and was discovered later the casketed human remains which
was issued PAL Airway Bill #079-1180454 was not the remains of Crispina
Saludo, the casket containing her remains having been shipped to Mexico City.
However, it should be noted that, Pomierski F.H., the shipper of Mrs. Saludo's
remains, hired Continental Mortuary Services (hereafter referred to as C.M.A.S.),
which is engaged in the business of transporting and forwarding human remains.
Thus, C.M.A.S. made all the necessary arrangements such as flights, transfers,
etc. for shipment of the remains of Crispina Saludo.

The remains were taken on October 26th, 1976, to C.M.A.S. at

the airport. These people made all the necessary arrangements,
such as flights, transfers, etc. This is a national service used by
undertakers throughout the nation. They furnished the air pouch
which the casket is enclosed in, and they see that the remains are
taken to the proper air frieght terminal. I was very surprised when
Miss Saludo called me to say that the remains were not at the
west coast terminal. I immediately called C.M.A.S. They called
me back in a matter of ten minutes to inform me that the remains
were on a plane to Mexico City. The man said that there were two
bodies at the terminal, and somehow they were switched. . . .
(Exb. 6 "TWA", which is the memo or incident report enclosed
in the stationery of Walter Pomierski & Sons Ltd.)
Consequently, when the cargo was received from C.M.A.S. at the Chicago airport
terminal for shipment, which was supposed to contain the remains of Crispina
Saludo, Air Care International and/or TWA, had no way of determining its actual
contents, since the casket was hermetically sealed by the Philippine Vice-Consul
in Chicago and in an air pouch of C.M.A.S., to the effect that Air Care
International and/or TWA had to rely on the information furnished by the shipper
regarding the cargo's content. Neither could Air Care International and/or TWA
open the casket for further verification, since they were not only without authority
to do so, but even prohibited.
Thus, under said circumstances, no fault and/or negligence can be attributed to
PAL (even if Air Care International should be considered as an agent of PAL)
and/or TWA, the entire fault or negligence being exclusively with
C.M.A.S. 33 (Emphasis supplied.)
It can correctly and logically be concluded, therefore, that the switching occurred or, more
accurately, was discovered on October 27, 1976; and based on the above findings of the Court of
appeals, it happened while the cargo was still with CMAS, well before the same was place in the
custody of private respondents.
Thus, while the Air Cargo Transfer Manifest of TWA of October 27, 1976 34 was signed by Garry
Marcial of PAL at 1400H, or 2:00 P.M., on the same date, thereby indicating acknowledgment by PAL
of the transfer to them by TWA of what was in truth the erroneous cargo, said misshipped cargo was
in fact withdrawn by CMAS from PAL as shown by the notation on another copy of said
manifest 35 stating "Received by CMAS Due to switch in Chicago 10/27-1805H," the authenticity of
which was never challenged. This shows that said misshipped cargo was in fact withdrawn by CMAS
from PAL and the correct shipment containing the body of Crispina Saludo was received by PAL only
on October 28, 1976, at 1945H, or 7:45 P.M., per American Airlines Interline Freight Transfer Manifest
No. AA204312. 36
Witness the deposition of TWA's ramp serviceman, Michael Giosso, on this matter:
ATTY. JUAN COLLAS, JR.:
On that date, do (sic) you have occasion to handle or deal with
the transfer of cargo from TWA Flight No. 603 to PAL San
Francisco?
MICHAEL GIOSSO:
Yes, I did.
ATTY. JUAN COLLAS, JR.:
What was your participation with the transfer of the cargo?

MICHAEL GIOSSO:
I manifested the freight on a transfer manifest and physically
moved it to PAL and concluded the transfer by signing it off.
ATTY. JUAN COLLAS, JR.:
You brought it there yourself?
MICHAEL GIOSSO:
Yes sir.
ATTY. JUAN COLIAS, JR.:
Do you have anything to show that PAL received the cargo from
TWA on October 27, 1976?
MICHAEL GIOSSO:
Yes, I do.
(Witness presenting a document)
ATTY. JUAN COLLAS, JR.:
For purposes of clarity, Exhibit I is designated as Exhibit I-TWA.
xxx xxx xxx
ATTY. JUAN COLLAS, JR.:
This Exhibit I-TWA, could you tell what it is, what it shows?
MICHAEL GIOSSO:
It shows transfer of manifest on 10-27-76 to PAL at 1400 and
verified with two signatures as it completed the transfer.
ATTY. JUAN COLLAS, JR.:
Very good,. Who was the PAL employee who received the cargo?
MICHAEL GIOSSO:
The name is Garry Marcial." 37
The deposition of Alberto A. Lim, PAL's cargo supervisor at San Francisco, as deponent-witness
for PAL, makes this further clarification:
ATTY. CESAR P. MANALAYSAY:
You mentioned Airway Bill, Mr. Lim. I am showing to you a PAL
Airway Bill Number 01180454 which for purposes of evidence, I
would like to request that the same be marked as evidence
Exhibit I for PAL.
xxx xxx xxx
In what circumstances did you encounter Exhibit I-PAL?
ALBERTO A. LIM:

If I recall correctly, I was queried by Manila, our Manila office with

regard to a certain complaint that a consignee filed that this
shipment did not arrive on the day that the consignee expects the
shipment to arrive.
ATTY CESAR P. MANALAYSAY:
Okay. Now, upon receipt of that query from your Manila office, did
you conduct any investigation to pinpoint the possible causes of
mishandling?
ALBERTO A. LIM:
Yes.
xxx xxx xxx
ATTY. CESAR P. MANALAYSAY:
What is the result of your investigation?
ALBERTO A. LIM:
In the course of my investigation, I found that we received the
body on October 28, 1976, from American Airlines.
ATTY. CESAR P. MANALAYSAY:
What body are you referring to?
xxx xxx xxx
ALBERTO A. LIM:
The remains of Mrs. Cristina (sic) Saludo.
ATTY. CESAR P. MANALAYSAY:
Is that the same body mentioned in this Airway Bill?
ALBERTO A. LIM:
Yes.
ATTY. CESAR P. MANALAYSAY:
What time did you receive said body on October 28, 1976?
ALBERTO A. LIM:
If I recall correctly, approximately 7:45 of October 28, 1976.
ATTY. CESAR P. MANALAYSAY:
Do you have any proof with you to back the statement?
ALBERTO A. LIM:
Yes. We have on our records a Transfer Manifest from American
Airlines Number 204312 showing that we received a human
remains shipment belong to Mrs. Cristina (sic) Saludo or the
human remains of Mrs. Cristina (sic) Saludo.

ATTY. CESAR P. MAIALAYSAY:

At this juncture, may I request that the Transfer Manifest referred
to by the witness be marked as an evidence as Exhibit II-PAL.
xxx xxx xxx
Mr. Lim, yesterday your co-defendant TWA presented as their
Exhibit I evidence tending to show that on October 27, 1976 at
about 2:00 in the, afternoon they delivered to you a cargo bearing
human remains. Could you go over this Exhibit I and please give
us your comments as to that exhibit?
ATTY. ALBERTO C. MENDOZA:
That is a vague question. I would rather request that counsel
propound specific questions rather than asking for comments on
Exhibit I-TWA.
ATTY. CESAR P. MANALAYSAY:
In that case, I will reform my question. Could you tell us whether
TWA in fact delivered to you the human remains as indicated in
that Transfer Manifest?
ALBERTO A. LIM:
Yes, they did.
ATTY. CESAR P. MANALAYSAY:
I noticed that the Transfer Manifest of TWA marked as Exhibit ITWA bears the same numbers or the same entries as the Airway
Bill marked as Exhibit I-A PAL tending to show that this is the
human remains of Mrs Cristina (sic) Saludo. Could you tell us
whether this is true?
ALBERTO A. LIM:
It is true that we received human remains shipment from TWA as
indicated on this Transfer Manifest. But in the course of
investigation, it was found out that the human remains transferred
to us is not the remains of Mrs. Cristina (sic) Saludo this is the
reason why we did not board it on our flight. 38
Petitioners consider TWA's statement that "it had to rely on the information furnished by the
shipper" a lame excuse and that its failure to prove that its personnel verified and identified the
contents of the casket before loading the same constituted negligence on the part of TWA. 39
We upbold the favorable consideration by the Court of Appeals of the following findings of the
trial court:
It was not (to) TWA, but to C.M.A.S. that the Pomierski & Son Funeral Home
delivered the casket containing the remains of Crispina Saludo. TWA would have
no knowledge therefore that the remains of Crispina Saludo were not the ones
inside the casket that was being presented to it for shipment. TWA would have to
rely on there presentations of C.M.A.S. The casket was hermetically sealed and
also sealed by the Philippine Vice Consul in Chicago. TWA or any airline for that
matter would not have opened such a sealed casket just for the purpose of
ascertaining whose body was inside and to make sure that the remains inside

were those of the particular person indicated to be by C.M.A.S. TWA had to

accept whatever information was being furnished by the shipper or by the one
presenting the casket for shipment. And so as a matter of fact, TWA carried to
San Francisco and transferred to defendant PAL a shipment covered by or under
PAL Airway Bill No. 079-ORD-01180454, the airway bill for the shipment of the
casketed remains of Crispina Saludo. Only, it turned out later, while the casket
was already with PAL, that what was inside the casket was not the body of
Crispina Saludo so much so that it had to be withdrawn by C.M.A.S. from PAL.
The body of Crispina Saludo had been shipped to Mexico. The casket containing
the remains of Crispina Saludo was transshipped from Mexico and arrived in San
Francisco the following day on board American Airlines. It was immediately
loaded by PAL on its flight for Manila.
The foregoing points at C.M.A.S., not defendant TWA much less defendant PAL,
as the ONE responsible for the switching or mix-up of the two bodies at the
Chicago Airport terminal, and started a chain reaction of the misshipment of the
body of Crispina Saludo and a one-day delay in the delivery thereof to its
destination. 40
Verily, no amount of inspection by respondent airline companies could have guarded against the
switching that had already taken place. Or, granting that they could have opened the casket to
inspect its contents, private respondents had no means of ascertaining whether the body therein
contained was indeed that of Crispina Saludo except, possibly, if the body was that of a male
person and such fact was visually apparent upon opening the casket. However, to repeat, private
respondents had no authority to unseal and open the same nor did they have any reason or
justification to resort thereto.
It is the right of the carrier to require good faith on the part of those persons who deliver goods to
be carried, or enter into contracts with it, and inasmuch as the freight may depend on the value
of the article to be carried, the carrier ordinarily has the right to inquire as to its value. Ordinarily,
too, it is the duty of the carrier to make inquiry as to the general nature of the articles shipped
and of their value before it consents to carry them; and its failure to do so cannot defeat the
shipper's right to recovery of the full value of the package if lost, in the absence of showing of
fraud or deceit on the part of the shipper. In the absence of more definite information, the carrier
has a the right to accept shipper's marks as to the contents of the package offered for
transportation and is not bound to inquire particularly about them in order to take advantage of a
false classification and where a shipper expressly represents the contents of a package to be of
a designated character, it is not the duty of the carrier to ask for a repetition of the statement nor
disbelieve it and open the box and see for itself. 41 However, where a common carrier has
reasonable ground to suspect that the offered goods are of a dangerous or illegal character, the
carrier has the right to know the character of such goods and to insist on an inspection, if reasonable
and practical under the circumstances, as a condition of receiving and transporting such goods. 42
It can safely be said then that a common carrier is entitled to fair representation of the nature and
value of the goods to be carried, with the concomitant right to rely thereon, and further noting at
this juncture that a carrier has no obligation to inquire into the correctness or sufficiency of such
information. 43 The consequent duty to conduct an inspection thereof arises in the event that there
should be reason to doubt the veracity of such representations. Therefore, to be subjected to unusual
search, other than the routinary inspection procedure customarily undertaken, there must exist proof
that would justify cause for apprehension that the baggage is dangerous as to warrant exhaustive
inspection, or even refusal to accept carriage of the same; and it is the failure of the carrier to act
accordingly in the face of such proof that constitutes the basis of the common carrier's liability. 44
In the case at bar, private respondents had no reason whatsoever to doubt the truth of the
shipper's representations. The airway bill expressly providing that "carrier certifies goods
received below were received for carriage," and that the cargo contained "casketed human
remains of Crispina Saludo," was issued on the basis of such representations. The reliance
thereon by private respondents was reasonable and, for so doing, they cannot be said to have

acted negligently. Likewise, no evidence was adduced to suggest even an iota of suspicion that
the cargo presented for transportation was anything other than what it was declared to be, as
would require more than routine inspection or call for the carrier to insist that the same be
opened for scrutiny of its contents per declaration.
Neither can private respondents be held accountable on the basis of petitioners' preposterous
proposition that whoever brought the cargo to the airport or loaded it on the airplane did so as
agent of private respondents, so that even if CMAS whose services were engaged for the transit
arrangements for the remains was indeed at fault, the liability therefor would supposedly still be
attributable to private respondents.
While we agree that the actual participation of CMAS has been sufficiently and correctly
established, to hold that it acted as agent for private respondents would be both an inaccurate
appraisal and an unwarranted categorization of the legal position it held in the entire transaction.
It bears repeating that CMAS was hired to handle all the necessary shipping arrangements for
the transportation of the human remains of Crispina Saludo to Manila. Hence, it was to CMAS
that the Pomierski & Son Funeral Home, as shipper, brought the remains of petitioners' mother
for shipment, with Maria Saludo as consignee. Thereafter, CMAS booked the shipment with PAL
through the carrier's agent, Air Care International. 45 With its aforestated functions, CMAS may
accordingly be classified as a forwarder which, by accepted commercial practice, is regarded as an
agent of the shipper and not of the carrier. As such, it merely contracts for the transportation of goods
by carriers, and has no interest in the freight but receives compensation from the shipper as his
agent. 46
At this point, it can be categorically stated that, as culled from the findings of both the trial court
and appellate courts, the entire chain of events which culminated in the present controversy was
not due to the fault or negligence of private respondents. Rather, the facts of the case would
point to CMAS as the culprit. Equally telling of the more likely possibility of CMAS' liability is
petitioners' letter to and demanding an explanation from CMAS regarding the statement of
private respondents laying the blame on CMAS for the incident, portions of which, reading as
follows:
. . . we were informed that the unfortunate a mix-up occurred due to your
negligence. . . .
Likewise, the two airlines pinpoint the responsibility upon your agents. Evidence
were presented to prove that allegation.
On the face of this overwhelming evidence we could and should have filed a case
against you. . . . 47
clearly allude to CMAS as the party at fault. This is tantamount to an admission by petitioners
that they consider private respondents without fault, or is at the very least indicative of the fact
that petitioners entertained serious doubts as to whether herein private respondents were
responsible for the unfortunate turn of events.
Undeniably, petitioners' grief over the death of their mother was aggravated by the unnecessary
inconvenience and anxiety that attended their efforts to bring her body home for a decent burial.
This is unfortunate and calls for sincere commiseration with petitioners. But, much as we would
like to give them consolation for their undeserved distress, we are barred by the inequity of
allowing recovery of the damages prayed for by them at the expense of private respondents
whose fault or negligence in the very acts imputed to them has not been convincingly and legally
demonstrated.
Neither are we prepared to delve into, much less definitively rule on, the possible liability of
CMAS as the evaluation and adjudication of the same is not what is presently at issue here and
is best deferred to another time and addressed to another forum.

II. Petitioners further fault the Court of Appeals for ruling that there was no contractual breach on
the part of private respondents as would entitle petitioners to damages.
Petitioners hold that respondent TWA, by agreeing to transport the remains of petitioners' mother
on its Flight 131 from Chicago to San Francisco on October 27, 1976, made itself a party to the
contract of carriage and, therefore, was bound by the terms of the issued airway bill. When TWA
undertook to ship the remains on its Flight 603, ten hours earlier than scheduled, it supposedly
violated the express agreement embodied in the airway bill. It was allegedly this breach of
obligation which compounded, if not directly caused, the switching of the caskets.
In addition, petitioners maintain that since there is no evidence as to who placed the body on
board Flight 603, or that CMAS actually put the cargo on that flight, or that the two caskets at the
Chicago airport were to be transported by the same airline, or that they came from the same
funeral home, or that both caskets were received by CMAS, then the employees or agents of
TWA presumably caused the mix-up by loading the wrong casket on the plane. For said error,
they contend, TWA must necessarily be presumed negligent and this presumption of negligence
stands undisturbed unless rebutting evidence is presented to show that the switching or
misdelivery was due to circumstances that would exempt the carrier from liability.
Private respondent TWA professes otherwise. Having duly delivered or transferred the cargo to
its co-respondent PAL on October 27, 1976 at 2:00 P.M., as supported by the TWA Transfer
Manifest, TWA faithfully complied with its obligation under the airway bill. Said faithful compliance
was not affected by the fact that the remains were shipped on an earlier flight as there was no
fixed time for completion of carriage stipulated on. Moreover, the carrier did not undertake to
carry the cargo aboard any specified aircraft, in view of the condition on the back of the airway
bill which provides:
CONDITIONS OF CONTRACT
xxx xxx xxx
It is agreed that no time is fixed for the completion of carriage hereunder and that
Carrier may without notice substitute alternate carriers or aircraft. Carrier
assumes no obligation to carry the goods by any specified aircraft or over any
particular route or routes or to make connection at any point according to any
particular schedule, and Carrier is hereby authorized to select, or deviate from
the route or routes of shipment, notwithstanding that the same may be stated on
the face hereof. The shipper guarantees payment of all charges and advances. 48
Hence, when respondent TWA shipped the body on earlier flight and on a different aircraft, it was
acting well within its rights. We find this argument tenable.
The contention that there was contractual breach on the part of private respondents is founded
on the postulation that there was ambiguity in the terms of the airway bill, hence petitioners'
insistence on the application of the rules on interpretation of contracts and documents. We find
no such ambiguity. The terms are clear enough as to preclude the necessity to probe beyond the
apparent intendment of the contractual provisions.
The hornbook rule on interpretation of contracts consecrates the primacy of the intention of the
parties, the same having the force of law between them. When the terms of the agreement are
clear and explicit, that they do not justify an attempt to read into any alleged intention of the
parties, the terms are to be understood literally just as they appear on the face of the
contract. 49 The various stipulations of a contract shall be interpreted together 50 and such a
construction is to be adopted as will give effect to all provisions thereof. 51 A contract cannot be
construed by parts, but its clauses should be interpreted in relation to one another. The whole contract
must be interpreted or read together in order to arrive at its true meaning. Certain stipulations cannot
be segregated and then made to control; neither do particular words or phrases necessarily determine
the character of a contract. The legal effect of the contract is not to be determined alone by any

particular provision disconnected from all others, but in the ruling intention of the parties as gathered
from all the language they have used and from their contemporaneous and subsequent acts. 52

Turning to the terms of the contract at hand, as presented by PAL Air Waybill No. 079-01180454,
respondent court approvingly quoted the trial court's disquisition on the aforequoted condition
appearing on the reverse side of the airway bill and its disposition of this particular assigned
error:
The foregoing stipulation fully answers plaintiffs' objections to the one-day delay
and the shipping of the remains in TWA Flight 603 instead of TWA Flight 131.
Under the stipulation, parties agreed that no time was fixed to complete the
contract of carriage and that the carrier may, without notice, substitute alternate
carriers or aircraft. The carrier did not assume the obligation to carry the shipment
on any specified aircraft.
xxx xxx xxx
Furthermore, contrary to the claim of plaintiffs-appellants, the conditions of the Air
Waybill are big enough to be read and noticed. Also, the mere fact that the cargo
in question was shipped in TWA Flight 603, a flight earlier on the same day than
TWA Flight 131, did not in any way cause or add to the one-day delay
complained of and/or the switching or mix-up of the bodies. 53
Indubitably, that private respondent can use substitute aircraft even without notice and without
the assumption of any obligation whatsoever to carry the goods on any specified aircraft is
clearly sanctioned by the contract of carriage as specifically provided for under the conditions
thereof.
Petitioners' invocation of the interpretative rule in the Rules of Court that written words control
printed words in documents, 54 to bolster their assertion that the typewritten provisions regarding the
routing and flight schedule prevail over the printed conditions, is tenuous. Said rule may be
considered only when there is inconsistency between the written and printed words of the contract.
As previously stated, we find no ambiguity in the contract subject of this case that would call for
the application of said rule. In any event, the contract has provided for such a situation by
explicitly stating that the above condition remains effective "notwithstanding that the same (fixed
time for completion of carriage, specified aircraft, or any particular route or schedule) may be
stated on the face hereof." While petitioners hinge private respondents' culpability on the fact that
the carrier "certifies goods described below were received for carriage," they may have
overlooked that the statement on the face of the airway bill properly and completely reads
Carrier certifies goods described below were received for carriage subject to the
Conditions on the reverse hereof the goods then being in apparent good order
and condition except as noted hereon.55 (Emphasis ours.)
Private respondents further aptly observe that the carrier's certification regarding receipt of the
goods for carriage "was of a smaller print than the condition of the Air Waybill, including
Condition No. 5 and thus if plaintiffs-appellants had recognized the former, then with more
reason they were aware of the latter. 56
In the same vein, it would also be incorrect to accede to the suggestion of petitioners that the
typewritten specifications of the flight, routes and dates of departures and arrivals on the face of
the airway bill constitute a special contract which modifies the printed conditions at the back
thereof. We reiterate that typewritten provisions of the contract are to be read and understood
subject to and in view of the printed conditions, fully reconciling and giving effect to the manifest
intention of the parties to the agreement.
The oft-repeated rule regarding a carrier's liability for delay is that in the absence of a special
contract, a carrier is not an insurer against delay in transportation of goods. When a common

carrier undertakes to convey goods, the law implies a contract that they shall be delivered at
destination within a reasonable time, in the absence, of any agreement as to the time of
delivery. 57 But where a carrier has made an express contract to transport and deliver property within
a specified time, it is bound to fulfill its contract and is liable for any delay, no matter from what cause
it may have arisen. 58 This result logically follows from the well-settled rule that where the law creates
a duty or charge, and the party is disabled from performing it without any default in himself, and has
no remedy over, then the law will excuse him, but where the party by his own contract creates a duty
or charge upon himself, he is bound to make it good notwithstanding any accident or delay by
inevitable necessity because he might have provided against it by contract. Whether or not there has
been such an undertaking on the part of the carrier to be determined from the circumstances
surrounding the case and by application of the ordinary rules for the interpretation of contracts. 59
Echoing the findings of the trial court, the respondent court correctly declared that
In a similar case of delayed delivery of air cargo under a very similar stipulation
contained in the airway bill which reads: "The carrier does not obligate itself to
carry the goods by any specified aircraft or on a specified time. Said carrier being
hereby authorized to deviate from the route of the shipment without any liability
therefor", our Supreme Court ruled that common carriers are not obligated by law
to carry and to deliver merchandise, and persons are not vested with the right to
prompt delivery, unless such common carriers previously assume the obligation.
Said rights and obligations are created by a specific contract entered into by the
parties (Mendoza vs. PAL, 90 Phil. 836).
There is no showing by plaintiffs that such a special or specific contract had been
entered into between them and the defendant airline companies.
And this special contract for prompt delivery should call the attention of the carrier
to the circumstances surrounding the case and the approximate amount of
damages to be suffered in case of delay (See Mendoza vs. PAL, supra). There
was no such contract entered into in the instant case. 60
Also, the theory of petitioners that the specification of the flights and dates of departure and
arrivals constitute a special contract that could prevail over the printed stipulations at the back of
the airway bill is vacuous. To countenance such a postulate would unduly burden the common
carrier for that would have the effect of unilaterally transforming every single bill of lading or trip
ticket into a special contract by the simple expedient of filling it up with the particulars of the flight,
trip or voyage, and thereby imposing upon the carrier duties and/or obligations which it may not
have been ready or willing to assume had it been timely, advised thereof.
Neither does the fact that the challenged condition No. 5 was printed at the back of the airway bill
militate against its binding effect on petitioners as parties to the contract, for there were sufficient
indications on the face of said bill that would alert them to the presence of such additional
condition to put them on their guard. Ordinary prudence on the part of any person entering or
contemplating to enter into a contract would prompt even a cursory examination of any such
conditions, terms and/or stipulations.
There is a holding in most jurisdictions that the acceptance of a bill of lading without dissent
raises a presumption that all 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 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. In order that any presumption of assent to a stipulation in a bill of
lading limiting the liability of a carrier may arise, it must appear that the clause containing this
exemption from liability plainly formed a part of the contract contained in the bill of lading. A
stipulation printed on the back of a receipt or bill of lading or on papers attached to such receipt
will be quite as effective as if printed on its face, if it is shown that the consignor knew of its
terms. Thus, where a shipper accepts a receipt which states that its conditions are to be found on

the back, such receipt comes within the general rule, and the shipper is held to have accepted
and to be bound by the conditions there to be found. 61
Granting arguendo that Condition No. 5 partakes of the nature of a contract of adhesion and as
such must be construed strictly against the party who drafted the same or gave rise to any
ambiguity therein, it should be borne in mind that a contract of adhesion may be struck down as
void and unenforceable, for being subversive of public policy, only when the weaker party is
imposed upon in dealing with the dominant bargaining party and is reduced to the alternative of
taking it or leaving it, completely deprived of the opportunity to bargain on equal
footing. 62However, Ong Yiu vs. Court of Appeals, et al 63 instructs us that contracts of adhesion are
not entirely prohibited. The one who adheres to the contract is in reality free to reject it entirely; if he
adheres, be gives his consent. Accordingly, petitioners, far from being the weaker party in this
situation, duly signified their presumed assent to all terms of the contract through their acceptance of
the airway bill and are consequently bound thereby. It cannot be gainsaid that petitioners' were not
without several choices as to carriers in Chicago with its numerous airways and airliner servicing the
same.
We wish to allay petitioners' apprehension that Condition No. 5 of the airway bill is productive of
mischief as it would validate delay in delivery, sanction violations of contractual obligations with
impunity or put a premium on breaches of contract.
Just because we have said that condition No. 5 of the airway bill is binding upon the parties to
and fully operative in this transaction, it does not mean, and let this serve as fair warning to
respondent carriers, that they can at all times whimsically seek refuge from liability in the
exculpatory sanctuary of said Condition No. 5 or arbitrarily vary routes, flights and schedules to
the prejudice of their customers. This condition only serves to insulate the carrier from liability in
those instances when changes in routes, flights and schedules are clearly justified by the
peculiar circumstances of a particular case, or by general transportation practices, customs and
usages, or by contingencies or emergencies in aviation such as weather turbulence, mechanical
failure, requirements of national security and the like. And even as it is conceded that specific
routing and other navigational arrangements for a trip, flight or voyage, or variations therein,
generally lie within the discretion of the carrier in the absence of specific routing instructions or
directions by the shipper, it is plainly incumbent upon the carrier to exercise its rights with due
deference to the rights, interests and convenience of its customers.
A common carrier undertaking to transport property has the implicit duty to carry and deliver it
within reasonable time, absent any particular stipulation regarding time of delivery, and to guard
against delay. In case of any unreasonable delay, the carrier shall be liable for damages
immediately and proximately resulting from such neglect of duty. 64 As found by the trial court, the
delay in the delivery of the remains of Crispina Saludo, undeniable and regrettable as it was, cannot
be attributed to the fault, negligence or malice of private respondents, 65 a conclusion concurred in by
respondent court and which we are not inclined to disturb.
We are further convinced that when TWA opted to ship the remains of Crispina Saludo on an
earlier flight, it did so in the exercise of sound discretion and with reasonable prudence, as
shown by the explanation of its counsel in his letter of February 19, 1977 in response to
petitioners' demand letter:
Investigation of TWA's handling of this matter reveals that although the shipment
was scheduled on TWA Flight 131 of October 27, 1976, it was actually boarded
on TWA Flight 603 of the same day, approximately 10 hours earlier, in order to
assure that the shipment would be received in San Francisco in sufficient time for
transfer to PAL. This transfer was effected in San Francisco at 2:00 P.M. on
October 27, 1976. 66
Precisely, private respondent TWA knew of the urgency of the shipment by reason of this
notation on the lower portion of the airway bill: "All documents have been certified. Human
remains of Cristina (sic) Saludo. Please return bag first available flight to SFO." Accordingly, TWA
took it upon itself to carry the remains of Crispina Saludo on an earlier flight, which we

emphasize it could do under the terms of the airway bill, to make sure that there would be
enough time for loading said remains on the transfer flight on board PAL.
III. Petitioners challenge the validity of respondent court's finding that private respondents are not
liable for tort on account of the humiliating, arrogant and indifferent acts of their officers and
personnel. They posit that since their mother's remains were transported ten hours earlier than
originally scheduled, there was no reason for private respondents' personnel to disclaim
knowledge of the arrival or whereabouts of the same other than their sheer arrogance,
indifference and extreme insensitivity to the feelings of petitioners. Moreover, being passengers
and not merely consignors of goods, petitioners had the right to be treated with courtesy, respect,
kindness and due consideration.
In riposte, TWA claims that its employees have always dealt politely with all clients, customers
and the public in general. PAL, on the other hand, declares that in the performance of its
obligation to the riding public, other customers and clients, it has always acted with justice,
honesty, courtesy and good faith.
Respondent appellate court found merit in and reproduced the trial court's refutation of this
assigned error:
About the only evidence of plaintiffs that may have reference to the manner with
which the personnel of defendants treated the two plaintiffs at the San Francisco
Airport are the following pertinent portions of Maria Saludo's testimony:
Q When you arrived there, what did you do, if any?
A I immediately went to the TWA counter and I inquired about
whether my mother was there or if' they knew anything about it.
Q What was the answer?
A They said they do not know. So, we waited.
Q About what time was that when you reached San Francisco
from Chicago?
A I think 5 o'clock. Somewhere around that in the afternoon.
Q You made inquiry it was immediately thereafter?
A Right after we got off the plane.
Q Up to what time did you stay in the airport to wait until the TWA
people could tell you the whereabouts?
A Sorry, Sir, but the TWA did not tell us anything. We stayed there
until about 9 o'clock. They have not heard anything about it. They
did not say anything.
Q Do you want to convey to the Court that from 5 up to 9 o'clock
in the evening you yourself went back to the TWA and they could
not tell you where the remains of your mother were?
A Yes sir.
Q And after nine o'clock, what did you do?
A I told my brother my Mom was supposed to be on the Philippine
Airlines flight. "Why don't" we check with PAL instead to see if she
was there?" We tried to comfort each other. I told him anyway that

was a shortest flight from Chicago to California. We will be with

our mother on this longer flight. So, we checked with the PAL.
Q What did you find?
A We learned, Yes, my Mom would be on the flight.
Q Who was that brother?
A Saturnino Saludo.
Q And did you find what was your flight from San Francisco to the
Philippines?
A I do not know the number. It was the evening flight of the
Philippine Airline(s) from San Francisco to Manila.
Q You took that flight with your mother?
A We were scheduled to, Sir.
Q Now, you could not locate the remains of your mother in San
Francisco could you tell us what did you feel?
A After we were told that my mother was not there?
Q After you learned that your mother could not fly with you from
Chicago to California?
A Well, I was very upset. Of course, I wanted the confirmation that
my mother was in the West Coast. The fliqht was about 5 hours
from Chicago to California. We waited anxiously all that time on
the plane. I wanted to be assured about my mother's remains. But
there was nothing and we could not get any assurance from
anyone about it.
Q Your feeling when you reached San Francisco and you could
not find out from the TWA the whereabouts of the remains, what
did you feel?
A Something nobody would be able to describe unless he
experiences it himself. It is a kind of panic. I think it's a feeling you
are about to go crazy. It is something I do not want to live through
again. (Inting, t.s.n., Aug. 9, 1983, pp. 14-18).
The foregoing does not show any humiliating or arrogant manner with which the
personnel of both defendants treated the two plaintiffs. Even their alleged
indifference is not clearly established. The initial answer of the TWA personnel at
the counter that they did not know anything about the remains, and later, their
answer that they have not heard anything about the remains, and the inability of
the TWA counter personnel to inform the two plaintiffs of the whereabouts of the
remains, cannot be said to be total or complete indifference to the said plaintiffs.
At any rate, it is any rude or discourteous conduct, malfeasance or neglect, the
use of abusive or insulting language calculated to humiliate and shame
passenger or had faith by or on the part of the employees of the carrier that gives
the passenger an action for damages against the carrier (Zulueta vs. Pan
American World Airways, 43 SCRA 397; Air France vs. Carrascoso, et al., 18
SCRA 155; Lopez, et al. vs. Pan American World Airways, 16 SCRA 431;
Northwest Airlines, Inc. vs. Cuenca, 14 SCRA 1063), and none of the above is
obtaining in the instant case. 67

We stand by respondent court's findings on this point, but only to the extent where it holds that
the manner in which private respondent TWA's employees dealt with petitioners was not grossly
humiliating, arrogant or indifferent as would assume the proportions of malice or bad faith and lay
the basis for an award of the damages claimed. It must however, be pointed out that the
lamentable actuations of respondent TWA's employees leave much to be desired, particularly so
in the face of petitioners' grief over the death of their mother, exacerbated by the tension and
anxiety wrought by the impasse and confusion over the failure to ascertain over an appreciable
period of time what happened to her remains.
Airline companies are hereby sternly admonished that it is their duty not only to cursorily instruct
but to strictly require their personnel to be more accommodating towards customers, passengers
and the general public. After all, common carriers such as airline companies are in the business
of rendering public service, which is the primary reason for their enfranchisement and recognition
in our law. Because the passengers in a contract of carriage do not contract merely for
transportation, they have a right to be treated with kindness, respect, courtesy and
consideration. 68 A contract to transport passengers is quite different in kind and degree from any
other contractual relation, and generates a relation attended with public duty. The operation of a
common carrier is a business affected with public interest and must be directed to serve the comfort
and convenience of passengers. 69 Passengers are human beings with human feelings and emotions;
they should not be treated as mere numbers or statistics for revenue.
The records reveal that petitioners, particularly Maria and Saturnino Saludo, agonized for nearly
five hours, over the possibility of losing their mother's mortal remains, unattended to and without
any assurance from the employees of TWA that they were doing anything about the situation.
This is not to say that petitioners were to be regaled with extra special attention. They were,
however, entitled to the understanding and humane consideration called for by and
commensurate with the extraordinary diligence required of common carriers, and not the cold
insensitivity to their predicament. It is hard to believe that the airline's counter personnel were
totally helpless about the situation. Common sense would and should have dictated that they
exert a little extra effort in making a more extensive inquiry, by themselves or through their
superiors, rather than just shrug off the problem with a callous and uncaring remark that they had
no knowledge about it. With all the modern communications equipment readily available to them,
which could have easily facilitated said inquiry and which are used as a matter of course by
airline companies in their daily operations, their apathetic stance while not legally reprehensible
is morally deplorable.
Losing a loved one, especially one's, parent, is a painful experience. Our culture accords the
tenderest human feelings toward and in reverence to the dead. That the remains of the deceased
were subsequently delivered, albeit belatedly, and eventually laid in her final resting place is of
little consolation. The imperviousness displayed by the airline's personnel, even for just that
fraction of time, was especially condemnable particularly in the hour of bereavement of the family
of Crispina Saludo, intensified by anguish due to the uncertainty of the whereabouts of their
mother's remains. Hence, it is quite apparent that private respondents' personnel were remiss in
the observance of that genuine human concern and professional attentiveness required and
expected of them.
The foregoing observations, however, do not appear to be applicable or imputable to respondent
PAL or its employees. No attribution of discourtesy or indifference has been made against PAL by
petitioners and, in fact, petitioner Maria Saludo testified that it was to PAL that they repaired after
failing to receive proper attention from TWA. It was from PAL that they received confirmation that
their mother's remains would be on the same flight to Manila with them.
We find the following substantiation on this particular episode from the deposition of Alberto A.
Lim, PAL's cargo supervisor earlier adverted to, regarding their investigation of and the action
taken on learning of petitioner's problem:
ATTY. ALBERTO C. MENDOZA:
Yes.

Mr. Lim, what exactly was your procedure adopted in your so

called investigation?
ALBERTO A. LIM:
I called the lead agent on duty at that time and requested for a
copy of airway bill, transfer manifest and other documents
concerning the shipment.
ATTY ALBERTO C. MENDOZA:
Then, what?
ALBERTO A. LIM:
They proceeded to analyze exactly where PAL failed, if any, in
forwarding the human remains of Mrs. Cristina (sic) Saludo. And I
found out that there was not (sic) delay in shipping the remains of
Mrs. Saludo to Manila. Since we received the body from American
Airlines on 28 October at 7:45 and we expedited the shipment so
that it could have been loaded on our flight leaving at 9:00 in the
evening or just barely one hour and 15 minutes prior to the
departure of the aircraft. That is so (sic) being the case, I reported
to Manila these circumstances. 70
IV. Finally, petitioners insist, as a consequence of the delay in the shipment of their mother's
remains allegedly caused by wilful contractual breach, on their entitlement to actual, moral and
exemplary damages as well as attorney's fees, litigation expenses, and legal interest.
The uniform decisional tenet in our jurisdiction bolds that moral damages may be awarded for
wilful or fraudulent breach of contract 71 or when such breach is attended by malice or bad
faith. 72 However, in the absence of strong and positive evidence of fraud, malice or bad faith, said
damages cannot be awarded. 73 Neither can there be an award of exemplary damages 74 nor of
attorney's fees 75 as an item of damages in the absence of proof that defendant acted with malice,
fraud or bad faith.
The censurable conduct of TWA's employees cannot, however, be said to have approximated the
dimensions of fraud, malice or bad faith. It can be said to be more of a lethargic reaction
produced and engrained in some people by the mechanically routine nature of their work and a
racial or societal culture which stultifies what would have been their accustomed human
response to a human need under a former and different ambience.
Nonetheless, the facts show that petitioners' right to be treated with due courtesy in accordance
with the degree of diligence required by law to be exercised by every common carrier was
violated by TWA and this entitles them, at least, to nominal damages from TWA alone. Articles
2221 and 2222 of the Civil Code make it clear that nominal damages are not intended for
indemnification of loss suffered but for the vindication or recognition of a right violated of invaded.
They are recoverable where some injury has been done but the amount of which the evidence
fails to show, the assessment of damages being left to the discretion of the court according to the
circumstances of the case. 76 In the exercise of our discretion, we find an award of P40,000.00 as
nominal damages in favor of, petitioners to be a reasonable amount under the circumstances of this
case.
WHEREFORE, with the modification that an award of P40,000.00 as and by way of nominal
damages is hereby granted in favor of petitioners to be paid by respondent Trans World Airlines,
the appealed decision is AFFIRMED in all other respects.
SO ORDERED.
Melencio-Herrera, Paras, Padilla and Nocon, JJ., concur.

Footnotes
1 Justice Jorge S. Imperial, ponente, with Justices Filemon D. Mendoza and
Artemon D. Luna, concurring; Petition, Annet C; Rollo, 154.
2 Penned by Judge Lucio F. Saavedra; Petition, Annex A; Rollo, 51.
3 Rollo, 159-163.
4 Exhibit G, Bill of Exhibits, 7.
5 Exhibit H, ibid., 9.
6 Original Record, 1.
7 Petition, Annex E; Rollo, 200.
8 Rollo, 16-17.
9 Section 2, Rule 45, Rules of Court.
10 Ramos, et al. vs. Pepsi Cola bottling Co. of the P.I., et al., 19 SCRA 289
(1967); Malaysian Airline System Bernad vs. Court of Appeals, et al., 156 SCRA
321 (1987).
11 Abellana, et al. vs. Dosdos, etc., et al., 13 SCRA 244 (1965); Uytiepo, et al. vs.
Aggabao, et al., 35 SCRA 186 (1970); Carolina Industries, Inc. vs. CMS Stock
Brokerage, Inc., et al., 97 SCRA 734 (1980).
12 Garcia vs. Court of Appeals, et al., 33 SCRA 622 (1970); Sacay vs.
Sandiganbayan, 142 SCRA 593 (1986); Manlapaz vs. Court of Appeals, et al.,
147 SCRA 236 (1987).
13 Pilar Development Corporation vs. Intermediate Appellate Court, et al., 146
SCRA 215 (1986).
14 Vda. de Arroyo vs. El Beaterio del Santissimo Rosario de Molo, et al, 23
SCRA 525 (1968).
15 Comment of Respondent TWA, 5; Rollo, 206; Comment of Respondent PAL,
10-11; Rollo, 213.
16 Consolidated Reply, ibid., 229.
17 Rollo, 17-26.
18 Exhibit E, Bill of Exhibits, 5; Exhibit 1-PAL, Bill of Exhibits, 32.
19 Rollo, 20.
20 13 Am. Jur. 2d, Carriers 771.
21 4 Alcantara, Commercial Laws of the Philippines, 118 (1987).
22 13 C.J.S., Carriers, 233.
23 13 Am. Jur. 2d, Carriers 775.
24 13 C.J.S., Carriers 232.

25 Op. cit., 240-243.

26 Rollo, 160.
27 Memorandum for Private Respondent PAL, 1-2.
28 Exhibits 2 and 2-A-PAL; Bill of Exhibits, 31.
29 Article 1737, Civil Code.
30 Article 1738, id.
31 13 Am. Jur. 2d, Carriers 763-764.
32 Op. cit., 762-763.
33 Rollo, 163-165.
34 Exhibit 1-TWA, Bill of Exhibits, 33.
35 Exhibit 3-PAL, ibid., 30.
36 Exhibit 2-PAL, ibid., 101.
37 Exhibit 5-PAL, ibid., 39-41.
38 Exhibit 5-PAL, ibid., 58-63, 71-73.
39 Rollo, 229-230.
40 Ibid., 166-167.
41 13 C.J.S., Carriers 148.
42 13 Am. Jur. 2d, Carriers 751.
43 Manuel ,A. Barcelona, Liabilities of Carriers: Airline Practices and
Procedures, in CURRENT ISSUES AFFECTING AIRLINES IN THE
PHILIPPINES, 103 (1989).
44 Nocum vs. Lagupa Tayabas Bus Co., 30 SCRA 69 (1969).
45 Rollo, 160.
46 13 C.J.S., Carriers 41; 13 Am. Jur. 2d, Carriers 572.
47 Annex 2, Opposition to Joint Motion to Dismiss, 1-2, Original Record, 253-254;
Memorandum of Private Respondent TWA, 250.
48 Exhibit 2-A-TWA, Bill of Exhibits, 26.
49 Article 1370, Civil Code; Philippine Airlines vs. Philippine Airlines Employees
Association, 70 SCRA 180(1976); Government Service Insurance System vs.
Court of Appeals, et al., 145 SCRA 311 (1986); Honrado, Jr. vs. Court of Appeals,
et al., 198 SCRA 326 (1991).
50 Article 1374, Civil Code.
51 See Section 9, Rule 130, Rules of Court.

52 Ruiz, et al. vs. Sheriff, et al., 34 SCRA 83 (1970); National Union Fire
Insurance Company of Pittsburg, et al. vs. Stolt-Nielsen Philippines, Inc., et al.,
184 SCRA 682 (1990).
53 Rollo, 168-169.
54 Section 13, Rule 130, Rules of Court.
55 Exhibit E, Bill of Exhibits, 5.
56 Comment of Private Respondent PAL, 9; Rollo, 221.
57 13 C.J.S., Carriers 390, 392; Mason vs. Chicago & N.W. Ry. Co., 262 I11. App
580.
58 13 Am. Jur. 2d, Carriers 854; Chicago & A.R. Co. vs. Kirby, 225 US 155, 56
Led 1033, 32 Sct 648; Harmony vs. Bingham, 12 NY 99.
59 13 C.J.S., Carriers 395; Frey vs. New York Cent., etc., R. Co., 100 N.Y.S. 225,
114 App. Div. 747.
60 Rollo, 168-169.
61 13 Am. Jur. 2d, Carriers 778-779; See Ong Yiu vs. Court of Appeals, et al., 91
SCRA 223 (1979) and Pan American World Airways, Inc. vs. Intermediate
Appellate Court, et al., 164 SCRA 268 (1988).
62 Qua Chee Gan vs. Law Union and Rock Insurance Co., Ltd., etc., 98 Phil. 85
(1955); Fieldman's Insurance Co., Inc. vs. Vda. de Songco, 25 SCRA 70 (1968);
Sweet Lines, Inc. vs. Teves, 83 SCRA 361 (1978).
63 Supra, Fn. 61.
64 Chicago & A.R. Co. vs. Kirby, supra; Warren vs. Portland. Terminal Co., 121
Me 157, 116 A 411, 26 ALR 304.
65 Petition, Annex A; Rollo, 79.
66 Exhibit F and Exhibit 4-TWA, Bill of Exhibits, 6.
67 Petition, Annex C; Rollo, 169-172.
68 Alitalia Airways vs. Court of Appeals, et al., 187 SCRA 763 (1990); cf. Air
France vs. Carrascoso, et al., 18 SCRA 168 (1966).
69 See Philippine Airlines, Inc. vs. Court of Appeals, et al., 188 SCRA 461 (1990).
70 Exhibit 5-PAL, 50-51; Bill of Exhibits, 83-84.
71 Article 2220, Civil Code; Tamayo vs. Aquino, et al., 105 Phil. 949 (1959); China
Airlines Ltd. vs. Court of Appeals, et al., 169 SCRA 226 (1989).
72 Perez vs. Court of Appeals, et al., 13 SCRA 137 (1965); Sabena Belgian
World Airlines vs. Court of Appeals, et al., 171 SCRA 620 (1989).
73 Coscolluela vs. Valderrama, 2 SCRA 1095 (1961); Pan American World
Airways, Inc. vs. Intermediate Appellate Court, et al., 186 SCRA 687 (1990).
74 Article 2232, Civil Code; Davila, et al. vs. Philippine Airlines, 49 SCRA 497
(1973); Philippine National Bank vs. Court of Appeals, et al., 159 SCRA 433
(1988); Esguerra vs. Court of Appeals, et al., 173 SCRA 1 (1989).

75 Article 2208, Civil Code; Federation of United NAMARCO Distributors, Inc. et

al. vs. National Marketing Corporation, 4 SCRA 867 (1962); Songcuan vs.
Intermediate Appellate Court, et al., 191 SCRA 28 (1990).
76 See Northwest Airlines, Inc. vs. Cuenca, et al., 14 SCRA 1063 (1965); RobesFrancisco Realty & Development Corporation vs. Court of First Instance of Rizal
(Branch XXXIV), et al., 84 SCRA 59 (1978); Alitalia vs. Intermediate Appellate
Court, et al., 192 SCRA 9 (1990).
Saludo Jr. v. CA
Facts:
Crispina Galdo Saludo, mother of the petitioners, died 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 Continental Mortuary Air Services (CMAS) at the Chicago Airport which made
the necessary arrangements such as flights, transfers, etc. CMAS booked the shipment
with PAL thru the carriers agent Air Care International. PAL Airway Bill Ordinary was
issued wherein the requested routing was from Chicago to San Francisco on board Trans
World Airline (TWA) and from San Francisco to Manila on board PAL.
Salvacion (one of the petitioners), upon arrival at San Francisco, went to the TWA to
inquire about her mothers remains. But she was told they did not know anything about
it. She then called Pomierski that her mothers remains were not at the West Coast
terminal. Pomierski immediately called CMAS which informed that the remains were on a
plane to Mexico City, that there were two bodies at the terminal, and somehow they were
switched. CMAS called and told Pomierski that they were sending the remains back to
California via Texas.
Petitioners filed a complaint against TWA and PAL fir the misshipment and delay in the
delay of the cargo containing the remains of the late Crispina Saludo. Petitioners alleged
that private respondents received the casketed remains of Crispina on October 26, 1976,
as evidenced by the issuance of PAL Airway Bill by Air Care and from said date, private
respondents were charged with the responsibility to exercise extraordinary diligence so
much so that the alleged switching of the caskets on October 27, 1976, or one day after
the private respondents received the cargo, the latter must necessarily be liable.
Issues:
Whether or not there was delivery of the cargo upon mere issuance of the airway bill
Whether or not the delay in the delivery of the casketed remains of petitioners mother
was due to the fault of respondent airline companies
Held:
NO to both, but TWA was held to pay petitioners nominal damages of P40,000 for its
violation of the degree of diligence required by law to be exercised by every common
carrier
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.
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.
The oft-repeated rule regarding a carrier's liability for delay is that in the absence of a
special contract, a carrier is not an insurer against delay in transportation of goods. When
a common carrier undertakes to convey goods, the law implies a contract that they shall
be delivered at destination within a reasonable time, in the absence, of any agreement
as to the time of delivery. But where a carrier has made an express contract to transport
and deliver property within a specified time, it is bound to fulfill its contract and is liable
for any delay, no matter from what cause it may have arisen. This result logically follows
from the well-settled rule that where the law creates a duty or charge, and the party is
disabled from performing it without any default in himself, and has no remedy over, then

the law will excuse him, but where the party by his own contract creates a duty or charge
upon himself, he is bound to make it good notwithstanding any accident or delay by
inevitable necessity because he might have provided against it by contract. Whether or
not there has been such an undertaking on the part of the carrier to be determined from
the circumstances surrounding the case and by application of the ordinary rules for the
interpretation of contracts.
Echoing the findings of the trial court, the respondent court correctly declared that
In a similar case of delayed delivery of air cargo under a very similar stipulation
contained in the airway bill which reads: "The carrier does not obligate itself to
carry the goods by any specified aircraft or on a specified time. Said carrier being
hereby authorized to deviate from the route of the shipment without any liability
therefor", our Supreme Court ruled that common carriers are not obligated by law
to carry and to deliver merchandise, and persons are not vested with the right to
prompt delivery, unless such common carriers previously assume the obligation.
Said rights and obligations are created by a specific contract entered into by the
parties (Mendoza vs. PAL, 90 Phil. 836).
There is no showing by plaintiffs that such a special or specific contract had been
entered into between them and the defendant airline companies.
And this special contract for prompt delivery should call the attention of the
carrier to the circumstances surrounding the case and the approximate amount of
damages to be suffered in case of delay (See Mendoza vs. PAL, supra). There was
no such contract entered into in the instant case.
A common carrier undertaking to transport property has the implicit duty to carry and
deliver it within reasonable time, absent any particular stipulation regarding time of
delivery, and to guard against delay. In case of any unreasonable delay, the carrier shall
be liable for damages immediately and proximately resulting from such neglect of duty.
As found by the trial court, the delay in the delivery of the remains of Crispina Saludo,
undeniable and regrettable as it was, cannot be attributed to the fault, negligence or
malice of private respondents, a conclusion concurred in by respondent court and which
we are not inclined to disturb.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-22425

August 31, 1965

NORTHWEST AIRLINES, INC., petitioner,

vs.
NICOLAS L. CUENCA and COURT OF APPEALS (SPECIAL SIXTH DIVISION), respondents.
Ross, Selph and Carrascoso for petitioner.
Bengzon, Villegas and Zarraga for respondents.
CONCEPCION, J.:

This is an action for damages for alleged breach of contract. After appropriate proceedings the
Court of First Instance of Manila, in which the case was originally filed, rendered judgment
sentencing defendant Northwest Airlines, Inc. hereinafter referred to as petitioner to pay to
plaintiff Cuenca hereinafter referred to as respondent the sum of P20,000 as moral
damages, together with the sum of P5,000 as exemplary damages, with legal interest thereon
from the date of the filing of complaint," December 12, 1959, "until fully paid, plus the further sum
of P2,000 as attorney's fees and expenses of litigation." On appeal taken by petitioner, said
decision was affirmed by the Court of Appeals, except as to the P5,000.00 exemplary damages,
which was eliminated, and the P20,000.00 award for moral damages, which was converted into
nominal damages. The case is now before us on petition for review by certiorari filed by
petitioner, upon the ground that the lower court has erred: (1) in holding that the Warsaw
Convention of October 12, 1929, relative to transportation by air is not in force in the Philippines;
(2) in not holding that respondent has no cause of action; and (3) in awarding P20,000 as
nominal damages.
We deem it unnecessary to pass upon the first assignment of error because the same is the
basis of the second assignment of error, and the latter is devoid of merit, even if we assumed the
former to be well-taken. Indeed the second assignment of error is predicated upon Articles 17, 18
and 19 of said Convention, reading:
ART. 17. The carrier shall be liable for damages sustained in the event of the death or
wounding of a passenger or any other bodily injury suffered by a passenger, if the
accident which caused the damage so sustained took place on board the aircraft or in the
course of any of the operations of embarking or disembarking.
ART. 18. (1) The carrier shall be liable for damage sustained in the event of the
destruction or loss of, or of damage to, any checked baggage, or any goods, if the
occurrence which caused the damage so sustained took place during the transportation
by air.
(2) The transportation by air within the meaning of the preceding paragraph shall
comprise the period during which the baggage or goods are in charge of the carrier,
whether in an airport or on board an aircraft, or, in the case of a landing outside an
airport, in any place whatsoever.
(3) The period of the transportation by air shall not extend to any transportation by land,
by sea, or by river performed outside an airport. If, however, such transportation takes
place in the performance of a contract for transportation by air, for the purpose of loading,
delivery, or transhipment, any damage is presumed, subject to proof to the contrary, to
have been the result of an event which took place during the transportation by air.
ART. 19. The carrier shall be liable for damage occasioned by delay in the transportation
by air of passengers, baggage, or goods.
Petitioner argues that pursuant to those provisions, an air "carrier is liable only" in the event of
death of a passenger or injury suffered by him, or of destruction or loss of, or damage to any
checked baggage or any goods, or of delay in the transportation by air of passengers, baggage
or goods. This pretense is not borne out by the language of said Articles. The same merely
declare the carrier liable for damages in the enumerated cases, if the conditions therein specified
are present. Neither said provisions nor others in the aforementioned Convention regulate or
exclude liability for other breaches of contract by the carrier. Under petitioner's theory, an air
carrier would be exempt from any liability for damages in the event of its absolute refusal, in bad
faith, to comply with a contract of carriage, which is absurd.
The third assignment of error is based upon Medina vs. Cresencia (52 Off. Gaz. 4606),
and Quijano vs. Philippine Air Lines (CA-G.R. No. 21804-R). Neither case is, however, in point,
aside from the fact that the latter is not controlling upon us. In the first case, this Court eliminated
a P10,000 award for nominal damages, because the aggrieved party had already been awarded
P6,000 as compensatory damages, P30,000 as moral damages and P10,000 as exemplary

damages, and "nominal damages cannot co-exist with compensatory damages." In the case at
bar, the Court of Appeals has adjudicated no such compensatory, moral and exemplary damages
to respondent herein.
Moreover, there are special reasons why the P20,000.00 award in favor of respondent herein is
justified, even if said award were characterized as nominal damages. When his contract of
carriage was violated by the petitioner, respondent held the office of Commissioner of Public
Highways of the Republic of the Philippines. Having boarded petitioner's plane in Manila with a
first class ticket to Tokyo, he was, upon arrival at Okinawa, transferred to the tourist class
compartment. Although he revealed that he was traveling in his official capacity as official
delegate of the Republic to a conference in Tokyo, an agent of petitioner rudely compelled him in
the presence of other passengers to move, over his objection, to the tourist class, under threat of
otherwise leaving him in Okinawa. In order to reach the conference on time, respondent had no
choice but to obey.
It is true that said ticket was marked "W/L," but respondent's attention was not called thereto.
Much less was he advised that "W/L" meant "wait listed." Upon the other hand, having paid the
first class fare in full and having been given first class accommodation as he took petitioner's
plane in Manila, respondent was entitled to believe that this was a confirmation of his first class
reservation and that he would keep the same until his ultimate destination, Tokyo. Then, too,
petitioner has not tried to explain or even alleged that the person to whom respondent's first
class seat was given had a better right thereto. In other words, since the offense had been
committed with full knowledge of the fact that respondent was an official representative of the
Republic of the Philippines, the sum of P20,000 awarded as damages may well be considered as
merely nominal. At any rate, considering that petitioner's agent had acted in a wanton, reckless
and oppressive manner, said award may also be considered as one for exemplary damages.
WHEREFORE, the decision appealed from is hereby affirmed, with costs against the petitioner. It
is so ordered.
Bengzon, C.J., Bautista Angelo, Reyes, J.B.L., Dizon, Regala, Makalintal and Zaldivar, JJ.,
concur.
Bengzon, J.P., took no part.
Barrera, J., is on leave.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 70462 August 11, 1988
PAN AMERICAN WORLD AIRWAYS, INC., petitioner,
vs.
INTERMEDIATE APPELLATE COURT, RENE V. PANGAN, SOTANG BASTOS
PRODUCTIONS and ARCHER PRODUCTIONS, respondents.
Guerrero & Torres for petitioner.
Jose B. Layug for private respondents.

CORTES, J.:
Before the Court is a petition filed by an international air carrier seeking to limit its liability for lost
baggage, containing promotional and advertising materials for films to be exhibited in Guam and

the U.S.A., clutch bags, barong tagalogs and personal belongings, to the amount specified in the
airline ticket absent a declaration of a higher valuation and the payment of additional charges.
The undisputed facts of the case, as found by the trial court and adopted by the appellate court,
are as follows:
On April 25, 1978, plaintiff Rene V. Pangan, president and general manager of
the plaintiffs Sotang Bastos and Archer Production while in San Francisco,
Califonia and Primo Quesada of Prime Films, San Francisco, California, entered
into an agreement (Exh. A) whereby the former, for and in consideration of the
amount of US $2,500.00 per picture, 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.
On his way home to the Philippines, plaintiff Pangan visited Guam where he
contacted Leo Slutchnick of the Hafa Adai Organization. Plaintiff Pangan likewise
entered into a verbal agreement with Slutchnick for the exhibition of two of the
films above-mentioned at the Hafa Adai Theater in Guam on May 30, 1978 for the
consideration of P7,000.00 per picture (p. 11, tsn, June 20, 1979). Plaintiff
Pangan undertook to provide the necessary promotional and advertising
materials for said films on or before the exhibition date on May 30,1978.
By virtue of the above agreements, plaintiff Pangan caused the preparation of the
requisite promotional handbills and still pictures for which he paid the total sum of
P12,900.00 (Exhs. B, B-1, C and C1). Likewise in preparation for his trip abroad
to comply with his contracts, plaintiff Pangan purchased fourteen clutch bags,
four capiz lamps and four barong tagalog, with a total value of P4,400.00 (Exhs.
D, D-1, E, and F).
On May 18, 1978, plaintiff Pangan obtained from defendant Pan Am's Manila
Office, through the Your Travel Guide, an economy class airplane ticket with No.
0269207406324 (Exh. G) 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. The
Your Travel Guide is a tour and travel office owned and managed by plaintiffs
witness Mila de la Rama.
On May 27, 1978, 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 Nos. 963633 and 963649 (Exhs. H and H-1). 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,
paying an additional sum of $112.00.
When plaintiff Pangan arrived in Guam on the date of May 27, 1978, 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 (Exh. L). Thereafter, he filed a written claim (Exh. J)
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 (Exh. M, O, Q,
S, and T). Defendant Pan Am assured plaintiff Pangan that his grievances would

be investigated and given its immediate consideration (Exhs. N, P and R). Due to
the defendant's failure to communicate with Pangan about the action taken on his
protests, the present complaint was filed by the plaintiff. (Pages 4-7, Record On
Appeal). [Rollo, pp. 27-29.]
On the basis of these facts, the Court of First Instance found petitioner liable and rendered
judgment as follows:
(1) Ordering defendant Pan American World Airways, Inc. to pay all the plaintiffs
the sum of P83,000.00, for actual damages, with interest thereon at the rate of
14% per annum from December 6, 1978, when the complaint was filed, until the
same is fully paid, plus the further sum of P10,000.00 as attorney's fees;
(2) Ordering defendant Pan American World Airways, Inc. to pay plaintiff Rene V.
Pangan the sum of P8,123.34, for additional actual damages, with interest
thereon at the rate of 14% per annum from December 6, 1978, until the same is
fully paid;
(3) Dismissing the counterclaim interposed by defendant Pan American World
Airways, Inc.; and
(4) Ordering defendant Pan American World Airways, Inc. to pay the costs of suit.
[Rollo, pp. 106-107.]
On appeal, the then Intermediate Appellate Court affirmed the trial court decision.
Hence, the instant recourse to this Court by petitioner.
The petition was given due course and the parties, as required, submitted their respective
memoranda. In due time the case was submitted for decision.
In assailing the decision of the Intermediate Appellate Court petitioner assigned the following
errors:
1. The respondent court erred as a matter of law in affirming the trial court's award of actual
damages beyond the limitation of liability set forth in the Warsaw Convention and the contract of
carriage.
2. The respondent court erred as a matter of law in affirming the trial court's award of actual
damages consisting of alleged lost profits in the face of this Court's ruling concerning special or
consequential damages as set forth inMendoza v. Philippine Airlines [90 Phil. 836 (1952).]
The assigned errors shall be discussed seriatim
1. The airline ticket (Exh. "G') contains the following conditions:
NOTICE
If the passenger's journey involves an ultimate destination or stop in a country
other than the country of departure the Warsaw Convention may be applicable
and the Convention governs and in most cases limits the liability of carriers for
death or personal injury and in respect of loss of or damage to baggage. See also
notice headed "Advice to International Passengers on Limitation of Liability.
CONDITIONS OF CONTRACT
1. As used in this contract "ticket" means this passenger ticket and baggage
check of which these conditions and the notices form part, "carriage" is
equivalent to "transportation," "carrier" means all air carriers that carry or
undertake to carry the passenger or his baggage hereunder or perform any other

service incidental to such air carriage. "WARSAW CONVENTION" means the

convention for the Unification of Certain Rules Relating to International Carriage
by Air signed at Warsaw, 12th October 1929, or that Convention as amended at
The Hague, 28th September 1955, whichever may be applicable.
2. Carriage hereunder is subject to the rules and limitations relating to liability
established by the Warsaw Convention unless such carriage is not "international
carriage" as defined by that Convention.
3. To the extent not in conflict with the foregoing carriage and other services
performed by each carrier are subject to: (i) provisions contained in this ticket, (ii)
applicable tariffs, (iii) carrier's conditions of carriage and related regulations which
are made part hereof (and are available on application at the offices of carrier),
except in transportation between a place in the United States or Canada and any
place outside thereof to which tariffs in force in those countries apply.
xxx xxx xxx
NOTICE OF BAGGAGE LIABILITY LIMITATIONS
Liability for loss, delay, or damage to baggage is limited as follows unless a
higher value is declared in advance and additional charges are paid: (1)for most
international travel (including domestic portions of international journeys) to
approximately $9.07 per pound ($20.00 per kilo) for checked baggage and $400
per passenger for unchecked baggage: (2) for travel wholly between U.S. points,
to $750 per passenger on most carriers (a few have lower limits). Excess
valuation may not be declared on certain types of valuable articles. Carriers
assume no liability for fragile or perishable articles. Further information may be
obtained from the carrier. [Emphasis supplied.].
On the basis of the foregoing stipulations printed at the back of the ticket, 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.
To support this contention, petitioner cites the case of Ong Yiu v. Court of Appeals [G.R. No. L40597, June 29, 1979, 91 SCRA 223], where 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. In said case, the Court,
through Justice Melencio Herrera, stated:
Petitioner further contends that respondent Court committed grave error when it
limited PAL's carriage liability to the amount of P100.00 as stipulated at the back
of the ticket....
We agree with the foregoing finding. 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 damage 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 Pl,000.00 and additional charges are paid pursuant to Carrier's
tariffs.

There is no dispute that petitioner did not declare any higher value for his
luggage, much less (lid he pay any additional transportation charge.
But petitioner argues that there is nothing in the evidence to show that he had
actually entered into a contract with PAL limiting the latter's liability for loss or
delay of the baggage of its passengers, and that Article 1750 * of the Civil Code has not
been complied with.

While it may be true that petitioner had not signed the plane ticket (Exh. "12"), 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."
[Tannebaum v. National Airline, Inc., 13 Misc. 2d 450,176 N.Y.S. 2d 400; Lichten
v. Eastern Airlines, 87 Fed. Supp. 691; Migoski v. Eastern Air Lines, Inc., Fla., 63
So. 2d 634.] 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,[Tolentino, Civil Code,
Vol. IV, 1962 ed., p. 462, citing Mr. Justice J.B.L. Reyes, Lawyer's Journal, Jan.
31, 1951, p. 49]. And as held in Randolph v. American Airlines, 103 Ohio App.
172,144 N.E. 2d 878; Rosenchein v. Trans World Airlines, Inc., 349 S.W. 2d 483.]
"a contract limiting liability upon an agreed valuation does not offend against the
policy of the law forbidding one from contracting against his own negligence."
Considering, therefore, that petitioner had failed to declare a higher value for his
baggage, he cannot be permitted a recovery in excess of P100.00....
On the other hand, the ruling in Shewaram v. Philippine Air Lines, Inc. [G.R. No. L-20099, July 2,
1966, 17 SCRA 606], where the Court held that the stipulation limiting the carrier's liability to a
specified amount was invalid, finds no application in the instant case, as the ruling in said case
was premised on the finding that the conditions printed at the back of the ticket were so small
and hard to read that they would not warrant the presumption that the passenger was aware of
the conditions and that he had freely and fairly agreed thereto. In the instant case, similar facts
that would make the case fall under the exception have not been alleged, much less shown to
exist.
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.
At this juncture, in order to rectify certain misconceptions the Court finds it necessary to state that
the Court of Appeal's reliance on a quotation from Northwest Airlines, Inc. v. Cuenca [G.R. No. L22425, August 31, 1965, 14 SCRA 1063] to sustain the view that "to apply the Warsaw
Convention which limits a carrier's liability to US$9.07 per pound or US$20.00 per kilo in cases of
contractual breach of carriage ** is against public policy" is utterly misplaced, to say the least. In said case, while the Court,
as quoted in the Intermediate Appellate Court's decision, said:

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 damages to any checked baggage or any goods, or of delay in the
transportation by air of passengers, baggage or goods. This pretense is not
borne out by the language of said Articles. The same merely declare the carrier
liable for damages in 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.

it prefaced this statement by explaining that:

...The case is now before us on petition for review by certiorari, upon the ground
that the lower court has erred: (1) in holding that the Warsaw Convention of
October 12, 1929, relative to transportation by air is not in force in the Philippines:
(2) in not holding that respondent has no cause of action; and (3) in awarding
P20,000 as nominal damages.
We deem it unnecessary to pass upon the First assignment of error because the
same is the basis of the second assignment of error, and the latter is devoid of
merit, even if we assumed the former to be well taken. (Emphasis supplied.)
Thus, it is quite clear that the Court never intended to, and in fact never did, rule against the
validity of provisions of the Warsaw Convention. Consequently, by no stretch of the imagination
may said quotation from Northwest be considered as supportive of the appellate court's
statement that the provisions of the Warsaw Convention limited a carrier's liability are against
public policy.
2. The Court finds itself unable to agree with the decision of the trial court, and affirmed by the
Court of Appeals, awarding private respondents damages as and for lost profits when their
contracts to show the films in Guam and San Francisco, California were cancelled.
The rule laid down in Mendoza v. Philippine Air Lines, Inc. [90 Phil. 836 (1952)] cannot be any
clearer:
...Under Art.1107 of the Civil Code, a debtor in good faith like the defendant
herein, 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. The
trial court correctly found that the defendant company could not have foreseen
the damages that would be suffered by Mendoza upon failure to deliver the can
of filmon the 17th of September, 1948 for the reason that the plans of Mendoza to
exhibit that film during the town fiesta and his preparations, specially the
announcement of said exhibition by posters and advertisement in the newspaper,
were not called to the defendant's attention.
In our research for authorities we have found a case very similar to the one under consideration.
In the case of Chapman vs. Fargo, L.R.A. (1918 F) p. 1049, the plaintiff in Troy, New York,
delivered motion picture films to the defendant Fargo, an express company, consigned and to be
delivered to him in Utica. At the time of shipment the attention of the express company was
called to the fact that the shipment involved motion picture films to be exhibited in Utica, and that
they should be sent to their destination, rush. There was delay in their delivery and it was found
that the plaintiff because of his failure to exhibit the film in Utica due to the delay suffered
damages or loss of profits. But the highest court in the State of New York refused to award him
special damages. Said appellate court observed:
But 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. [Emphasis supplied.]
Thus, applying the foregoing ruling to the facts of the instant 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 "[tlhe 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." [Rollo, p. 36] 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.
3. 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.
SO ORDERED.
Fernan, C.J., Feliciano and Bidin JJ., concur.
Gutierrez, Jr., J., took no part.

Footnotes
* 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.
** The Warsaw Convention actually provides that "[i]n the transportation of
checked baggage and of goods, the liability of the carrier shall be limited to a sum
of 250 francs per kilogram, unless the consignor has made, at the time when the
package was handed over to the carrier, a special declaration of the value of
delivery and has paid a supplementary sum if the case so requires. In that case,
the carrier will be liable to pay a sum not exceeding the declared sum, unless he
proves that the sum is greater than the actual value to the consignor at delivery....
The sums mentioned above shall be deemed to refer to the French franc
consisting of 65-1/2 milligrams of gold at the standard of fineness of nine hundred
thousandths. These sums may be converted into any national currency in round
figures. [51 O.G. 5084, 5091.]

Proclamation No. 201, (September 23, 1955) made public the adherence of the
Republic of the Philippines to the Warsaw Convention. [51 O.G. 4933.]

THIRD DIVISION

[G.R. No. 152122. July 30, 2003]

CHINA AIRLINES, petitioner, vs. DANIEL CHIOK, respondent.

DECISION
PANGANIBAN, J.:

A common carrier has a peculiar relationship with and an exacting responsibility

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

The Case
Before the Court is a Petition for Review on Certiorari [1] under Rule 45 of the
Rules of Court, seeking to reverse the August 7, 2001 Decision [2] and the February 7,
2002 Resolution[3] of the Court of Appeals (CA) in CA-GR CV No. 45832. The
challenged Decision disposed as follows:

WHEREFORE, premises considered, the assailed Decision dated July 5, 1991 of

Branch 31, Regional Trial Court, National Capital Judicial Region, Manila, in Civil
Case No. 82-13690, is hereby MODIFIED by deleting that portion regarding
defendants-appellants liabilities for the payment of the actual damages amounting
to HK$14,128.80 and US$2,000.00 while all other respects are AFFIRMED. Costs
against defendants-appellants.
[4]

The assailed Resolution denied Petitioners Motion for Partial Reconsideration.

The Facts
The facts are narrated by the CA[5] as follows:

On September 18, 1981, Daniel Chiok (hereafter referred to as Chiok) purchased

from China Airlines, Ltd. (CAL for brevity) airline passenger ticket number
297:4402:004:278:5 for air transportation covering Manila-Taipei-HongkongManila. Said ticket was exclusively endorseable to Philippine Airlines, Ltd. (PAL
for brevity).
Subsequently, on November 21, 1981, Chiok took his trip from Manila to Taipei
using [the] CAL ticket. Before he left for said trip, the trips covered by the ticket
were pre-scheduled and confirmed by the former. When he arrived in Taipei, he
went to the CAL office and confirmed his Hongkong to Manila trip on board PAL
Flight No. PR 311. The CAL office attached a yellow sticker appropriately
indicating that his flight status was OK.
When Chiok reached Hongkong, he went to the PAL office and sought to
reconfirm his flight back to Manila. The PAL office confirmed his return trip on
board Flight No. PR 311 and attached its own sticker. On November 24, 1981,
Chiok proceeded to Hongkong International Airport for his return trip to
Manila. However, upon reaching the PAL counter, Chiok saw a poster stating that
PAL Flight No. PR 311 was cancelled because of a typhoon in Manila. He was then
informed that all the confirmed ticket holders of PAL Flight No. PR 311 were
automatically booked for its next flight, which was to leave the next day. He then
informed PAL personnel that, being the founding director of the Philippine
Polysterene Paper Corporation, he ha[d] to reach Manila on November 25, 1981
because of a business option which he ha[d] to execute on said date.
On November 25, 1981, Chiok went to the airport. Cathay Pacific stewardess Lok
Chan (hereafter referred to as Lok) ha[d] taken and received Chioks plane ticket
and his luggage. Lok called the attention of Carmen Chan (hereafter referred to as
Carmen), PALs terminal supervisor, 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 PAL Flight No. PR 307.
Meanwhile, Chiok requested Carmen to put into writing the alleged reason why he
was not allowed to take his flight. The latter then wrote the following, to wit: PAL
STAFF CARMEN CHAN CHKD WITH R/C KENNY AT 1005H NO SUCH NAME
IN COMPUTER FOR 311/24 NOV AND 307/25 NOV. The latter 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, which contained cosmetics
worth HK$14,128.80, he complained to Carmen.
Thereafter, Chiok proceeded to PALs Hongkong office and confronted PALs
reservation officer, Carie Chao (hereafter referred to as 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 with No. 297:4402:004:370:5 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 Flight
No. PR 311 scheduled to depart that evening. Later, Chiok went to the PAL checkin 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 containing the following, to wit: (a)
$2,000.00; (b) HK$2,000.00; (c) Taipei $8,000.00; (d) P2,000.00; (e) a three-piece
set of gold (18 carats) cross pens valued at P3,500; (f) a Cartier watch worth
about P7,500.00; (g) a tie clip with a garnet birthstone and diamond
worth P1,800.00; and (h) a [pair of] Christian Dior reading glasses. 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 Complaint on November 9, 1982 for
damages, against PAL and CAL, as defendants, docketed as Civil Case No. 8213690, with Branch 31, Regional Trial Court, National Capital Judicial Region,
Manila.
He alleged therein that despite several confirmations of his flight, defendant PAL
refused to accommodate him in Flight No. 307, for which reason he lost the
business option aforementioned. He also alleged that PALs personnel, specifically
Carmen, ridiculed and humiliated him in the presence of so many people. Further,
he alleged that defendants are solidarily liable for the damages he suffered, since
one is the agent of the other.
[6]

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. It
disposed as follows:

WHEREFORE, judgment is hereby rendered in favor of plaintiff and against the

defendants to jointly and severally pay:
1. Actual damages in the amount of HK$14,128.80 or its equivalent in
Philippine Currency at the time of the loss of the luggage
consisting of cosmetic products;
2. US$2,000.00 or its equivalent at the time of the loss of the clutch
bag containing the money;
3. P200,000.00 by way of moral damages;
4. P50,000.00 by way of exemplary damages or corrective damages;

5. Attorney[]s fees equivalent to 10% of the amounts due and

demandable and awarded in favor of the plaintiff; and
6. The costs of this proceedings.

[7]

The two carriers appealed the RTC Decision to the CA.

Ruling of the Court of Appeals

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. In support of its Decision, the CA quoted a purported ruling of
this Court in KLM Royal Dutch Airlines v. Court of Appeals[8] as follows:

Article 30 of the Warsaw providing that in case of transportation to be performed

by various successive carriers, the passenger can take action only against the
carrier who performed the transportation during which the accident or the delay
occurred presupposes the occurrence of either an accident or delay in the course of
the air trip, and does not apply if the damage is caused by the willful misconduct
on the part of the carriers employee or agent acting within the scope of his
employment.
It would be unfair and inequitable to charge a passenger with automatic knowledge
or notice of a condition which purportedly would excuse the carrier from liability,
where the notice is written at the back of the ticket in letters so small that one has
to use a magnifying glass to read the words. To preclude any doubt that the
contract was fairly and freely agreed upon when the passenger accepted the
passage ticket, the carrier who issued the ticket must inform the passenger of the
conditions prescribed in the ticket or, in the very least, ascertain that the passenger
read them before he accepted the passage ticket. Absent any showing that the
carriers officials or employees discharged this responsibility to the passenger, the
latter cannot be bound by the conditions by which the carrier assumed the role of a
mere ticket-issuing agent for other airlines and limited its liability only to untoward
occurrences in its own lines.
Where the passage tickets provide that the carriage to be performed thereunder by
several successive carriers is to be regarded as a single operation, the carrier which
issued the tickets for the entire trip in effect guaranteed to the passenger that the
latter shall have sure space in the various carriers which would ferry him through
the various segments of the trip, and the ticket-issuing carrier assumes full
responsibility for the entire trip and shall be held accountable for the breach of that
guaranty whether the breach occurred in its own lines or in those of the other
carriers.
[9]

On PALs appeal, the appellate court held that the carrier had reneged on its
obligation to transport respondent when, in spite of the confirmations he had secured
for Flight PR 311, his name did not appear in the computerized list of
passengers. Ruling that the airlines negligence was the proximate cause of his
excoriating experience, the appellate court sustained the award of moral and
exemplary damages.
The CA, however, deleted the RTCs award of actual damages amounting to
HK$14,128.80 and US$2,000.00, because the lost piece of luggage and clutch bag
had not actually been checked in or delivered to PAL for transportation to Manila.
On August 28, 2001, petitioner filed a Motion for Partial Reconsideration,
contending that the appellate court had erroneously relied on a mere syllabus
of KLM v. CA, not on the actual ruling therein. Moreover, it argued that respondent
was fully aware that the booking for the PAL sector had been made only upon his
request; and that only PAL, not CAL, was liable for the actual carriage of that
segment. Petitioner likewise prayed for a ruling on its cross-claim against PAL,
inasmuch as the latters employees had acted negligently, as found by the trial court.
Denying the Motion, the appellate court ruled that petitioner had failed to raise
any new matter or issue that would warrant a modification or a reversal of the
Decision. As to the alleged misquotation, the CA held that while the portion it had
cited appeared to be different from the wording of the actual ruling, the variance was
more apparent than real since the difference [was] only in form and not in substance.
[10]

CAL and PAL filed separate Petitions to assail the CA Decision. In its October 3,
2001 Resolution, this Court denied PALs appeal, docketed as GR No. 149544, for
failure to serve the CA a copy of the Petition as required by Section 3, Rule 45, in
relation to Section 5(d) of Rule 56 and paragraph 2 of Revised Circular No. 1-88 of
this Court. PALs Motion for Reconsideration was denied with finality on January 21,
2002.
Only the appeal of CAL[11] remains in this Court.

Issues
In its Memorandum, petitioner raises the following issues for the Courts
consideration:

1. The Court of Appeals committed judicial misconduct in finding liability

against the petitioner on the basis of a misquotation from KLM Royal
Dutch Airlines vs. Court of Appeals, et al., 65 SCRA 237 and in
magnifying its misconduct by denying the petitioners Motion for
Reconsideration on a mere syllabus, unofficial at that.

2. The Court of Appeals committed an error of law when it did not apply
applicable precedents on the case before it.
3. The Court of Appeals committed a non sequitur when it did not rule on
the cross-claim of the petitioner.
[12]

The Courts Ruling

The Petition is not meritorious.

First Issue:
Alleged Judicial Misconduct
Petitioner charges the CA with judicial misconduct for quoting from and basing its
ruling against the two airlines on an unofficial syllabus of this Courts ruling in KLM v.
CA. Moreover, such misconduct was allegedly aggravated when the CA, in an
attempt to justify its action, held that the difference between the actual ruling and the
syllabus was more apparent than real.[13]
We agree with petitioner that the CA committed a lapse when it relied merely on
the unofficial syllabus of our ruling in KLM v. CA. Indeed, lawyers and litigants are
mandated to quote decisions of this Court accurately. [14] By the same token, judges
should do no less by strictly abiding by this rule when they quote cases that support
their judgments and decisions. Canon 3 of the Code of Judicial Conduct enjoins
them to perform official duties diligently by being faithful to the law and maintaining
their professional competence.
However, since this case is not administrative in nature, we cannot rule on the
CA justices administrative liability, if any, for this lapse. First, due process requires
that in administrative proceedings, the respondents must first be given an
opportunity to be heard before sanctions can be imposed. Second, the present
action is an appeal from the CAs Decision, not an administrative case against the
magistrates concerned. These two suits are independent of and separate from each
other and cannot be mixed in the same proceedings.
By merely including the lapse as an assigned error here without any adequate
and proper administrative case therefor, petitioner cannot expect the imposition of an
administrative sanction.
In the case at bar, we can only determine whether the error in quotation would
be sufficient to reverse or modify the CA Decision.

Applicability of KLM v. CA

In KLM v. CA, the petitioner therein issued tickets to the Mendoza spouses for
their world tour. The tour included a Barcelona-Lourdes route, which was serviced by
the Irish airline Aer Lingus. At the KLM office in Frankfurt, Germany, they obtained a
confirmation from Aer Lingus of their seat reservations on its Flight 861. On the day
of their departure, however, the airline rudely off-loaded them.
When sued for breach of contract, KLM sought to be excused for the wrongful
conduct of Aer Lingus by arguing that its liability for damages was limited only to
occurrences on its own sectors. To support its argument, it cited Article 30 of the
Warsaw Convention, stating that when transportation was to be performed by
various successive carriers, the passenger could take action only against the carrier
that had performed the transportation when the accident or delay occurred.
In holding KLM liable for damages, we ruled as follows:

1. The applicability insisted upon by the KLM of article 30 of the Warsaw

Convention cannot be sustained. That article presupposes the occurrence of either
an accident or a delay, neither of which took place at the Barcelona airport; what is
here manifest, instead, is that the Aer Lingus, through its manager there, refused to
transport the respondents to their planned and contracted destination.
2. The argument that the KLM should not be held accountable for the tortious
conduct of Aer Lingus because of the provision printed on the respondents' tickets
expressly limiting the KLM's liability for damages only to occurrences on its own
lines is unacceptable. As noted by the Court of Appeals that condition was printed
in letters so small that one would have to use a magnifying glass to read the words.
Under the circumstances, it would be unfair and inequitable to charge the
respondents with automatic knowledge or notice of the said condition so as to
preclude any doubt that it was fairly and freely agreed upon by the respondents
when they accepted the passage tickets issued to them by the KLM. As the airline
which issued those tickets with the knowledge that the respondents would be flown
on the various legs of their journey by different air carriers, the KLM was
chargeable with the duty and responsibility of specifically informing the
respondents of conditions prescribed in their tickets or, in the very least, to
ascertain that the respondents read them before they accepted their passage tickets.
A thorough search of the record, however, inexplicably fails to show that any effort
was exerted by the KLM officials or employees to discharge in a proper manner
this responsibility to the respondents. Consequently, we hold that the respondents
cannot be bound by the provision in question by which KLM unilaterally assumed
the role of a mere ticket-issuing agent for other airlines and limited its liability only
to untoward occurrences on its own lines.
3. Moreover, as maintained by the respondents and the Court of Appeals, the
passage tickets of the respondents provide that the carriage to be performed
thereunder by several successive carriers is to be regarded as a single operation,
which is diametrically incompatible with the theory of the KLM that the
respondents entered into a series of independent contracts with the carriers which

took them on the various segments of their trip. This position of KLM we reject.
The respondents dealt exclusively with the KLM which issued them tickets for
their entire trip and which in effect guaranteed to them that they would have sure
space in Aer Lingus flight 861. The respondents, under that assurance of the
internationally prestigious KLM, naturally had the right to expect that their tickets
would be honored by Aer Lingus to which, in the legal sense, the KLM had
indorsed and in effect guaranteed the performance of its principal engagement to
carry out the respondents' scheduled itinerary previously and mutually agreed upon
between the parties.
4. The breach of that guarantee was aggravated by the discourteous and highly
arbitrary conduct of an official of the Aer Lingus which the KLM had engaged to
transport the respondents on the Barcelona-Lourdes segment of their itinerary. It is
but just and in full accord with the policy expressly embodied in our civil law which
enjoins courts to be more vigilant for the protection of a contracting party who
occupies an inferior position with respect to the other contracting party, that the
KLM should be held responsible for the abuse, injury and embarrassment suffered
by the respondents at the hands of a supercilious boor of the Aer Lingus.
[15]

In the instant case, the CA ruled that under the contract of transportation,
petitioner -- as the ticket-issuing carrier (like KLM) -- was liable regardless of the fact
that PAL was to perform or had performed the actual carriage. It elucidated on this
point as follows:

By the very nature of their contract, defendant-appellant CAL is clearly liable

under the contract of carriage with [respondent] and remains to be so, regardless of
those instances when actual carriage was to be performed by another carrier. The
issuance of a confirmed CAL ticket in favor of [respondent] covering his entire trip
abroad concretely attests to this. This also serves as proof that defendant-appellant
CAL, in effect guaranteed that the carrier, such as defendant-appellant PAL would
honor his ticket, assure him of a space therein and transport him on a particular
segment of his trip.
[16]

Notwithstanding the errant quotation, we have found after careful deliberation

that the assailed Decision is supported in substance by KLM v. CA. The misquotation
by the CA cannot serve as basis for the reversal of its ruling.
Nonetheless, to avert similar incidents in the future, this Court hereby exhorts
members of the bar and the bench to refer to and quote from the official repository of
our decisions, thePhilippine Reports, whenever practicable.[17] In the absence of this
primary source, which is still being updated, they may resort to unofficial sources like
the SCRA.[18] We remind them that the Courts ponencia, when used to support a
judgment or ruling, should be quoted accurately.[19]

Second Issue:
Liability of the Ticket-Issuing Airline

We now come to the main issue of whether CAL is liable for damages. Petitioner
posits that the CA Decision must be annulled, not only because it was rooted on an
erroneous quotation, but also because it disregarded jurisprudence, notably China
Airlines v. Intermediate Appellate Court[20] and China Airlines v. Court of Appeals.[21]

Jurisprudence Supports
CA Decision
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-toManila segment of the journey.Such contract of carriage has always been treated in
this jurisdiction as a single operation. This jurisprudential rule is supported by the
Warsaw Convention,[22] to which the Philippines is a party, and by the existing
practices of the International Air Transport Association (IATA).
Article 1, Section 3 of the Warsaw Convention states:

Transportation to be performed by several successive air carriers shall be deemed,

for the purposes of this Convention, to be one undivided transportation, if it has
been regarded by the parties as a single operation, whether it has been agreed upon
under the form of a single contract or of a series of contracts, and it shall not lose
its international character merely because one contract or a series of contracts is to
be performed entirely within a territory subject to the sovereignty, suzerainty,
mandate, or authority of the same High Contracting Party.
[23]

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,[24] we 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.

x x x Members of the IATA are under a general pool partnership agreement

wherein they act as agent of each other in the issuance of tickets to contracted
passengers to boost ticket sales worldwide and at the same time provide passengers
easy access to airlines which are otherwise inaccessible in some parts of the
world. Booking and reservation among airline members are allowed even by
telephone and it has become an accepted practice among them. A member airline
which enters into a contract of carriage consisting of a series of trips to be
performed by different carriers is authorized to receive the fare for the whole trip
and through the required process of interline settlement of accounts by way of the
IATA clearing house an airline is duly compensated for the segment of the trip

serviced. Thus, when the petitioner accepted the unused portion of the conjunction
tickets, entered it in the IATA clearing house and undertook to transport the private
respondent over the route covered by the unused portion of the conjunction tickets,
i.e., Geneva to New York, the petitioner tacitly recognized its commitment under
the IATA pool arrangement to act as agent of the principal contracting airline,
Singapore Airlines, as to the segment of the trip the petitioner agreed to
undertake. As such, the petitioner thereby assumed the obligation to take the place
of the carrier originally designated in the original conjunction ticket. The
petitioners argument that it is not a designated carrier in the original conjunction
tickets and that it issued its own ticket is not decisive of its liability. The new ticket
was simply a replacement for the unused portion of the conjunction ticket, both
tickets being for the same amount of US$ 2,760 and having the same points of
departure and destination. By constituting itself as an agent of the principal carrier
the petitioners undertaking should be taken as part of a single operation under the
contract of carriage executed by the private respondent and Singapore Airlines in
Manila.
[25]

Likewise, as the principal in the contract of carriage, the petitioner in British

Airways v. Court of Appeals[26] was held liable, even when the breach of contract had
occurred, not on its own flight, but on that of another airline. The Decision followed
our ruling in Lufthansa German Airlines v. Court of Appeals, [27] in which we had held
that the obligation of the ticket-issuing airline remained and did not cease, regardless
of the fact that another airline had undertaken to carry the passengers to one of their
destinations.
In the instant case, following the jurisprudence cited above, PAL acted as the
carrying agent of CAL. In the same way that we ruled against British Airways and
Lufthansa in the aforementioned cases, we also rule that CAL cannot evade liability
to respondent, even though it may have been only a ticket issuer for the Hong KongManila sector.

Moral and Exemplary Damages

Both the trial and the appellate courts found that respondent had satisfactorily
proven the existence of the factual basis for the damages adjudged against
petitioner and PAL. As a rule, the findings of fact of the CA affirming those of the
RTC will not be disturbed by this Court. [28] Indeed, the Supreme Court is not a trier of
facts. As a rule also, only questions of law -- as in the present recourse -- may be
raised in petitions for review under Rule 45.
Moral damages cannot be awarded in breaches of carriage contracts, except in
the two instances contemplated in Articles 1764 and 2220 of the Civil Code, which
we quote:

Article 1764. Damages in cases comprised in this Section shall be awarded in

accordance with Title XVIII of this Book, concerning Damages. Article 2206 shall
also apply to the death of a passenger caused by the breach of contract by a
common carrier.
xxxxxxxxx

Article 2220. Willful injury to property may be a legal ground for awarding moral
damages if the court should find that, under the circumstances, such damages are
justly due. The same rule applies tobreaches of contract where the defendant acted
fraudulently or in bad faith. (Italics supplied)
There is no occasion for us to invoke Article 1764 here. We must therefore
determine if CAL or its agent (PAL) is guilty of bad faith that would entitle respondent
to moral damages.
In Lopez v. Pan American World Airways,[29] we defined bad faith as a breach of a
known duty through some motive of interest or ill will.
In the case at bar, the known duty of PAL was to transport herein respondent
from Hong Kong to Manila. That duty arose when its agent confirmed his reservation
for Flight PR 311,[30]and it became demandable when he presented himself for the trip
on November 24, 1981.
It is true that due to a typhoon, PAL was unable to transport respondent on Flight
PR 311 on November 24, 1981. This fact, however, did not terminate the carriers
responsibility to its passengers. PAL voluntarily obligated itself to automatically
transfer all confirmed passengers of PR 311 to the next available flight, PR 307, on
the following day.[31] That responsibility was subsisting when respondent, holding a
confirmed ticket for the former flight, presented himself for the latter.
The records amply establish that he secured repeated confirmations of his PR
311 flight on November 24, 1981. Hence, he had every reason to expect that he
would be put on the replacement flight as a confirmed passenger. Instead, he was
harangued and prevented from boarding the original and the replacement
flights. Thus, PAL breached its duty to transport him. After he had been directed to
pay the terminal fee, his pieces of luggage were removed from the weighing-in
counter despite his protestations.[32]
It is relevant to point out that 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 airlines 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 Flight PR 307. [33]

Time and time again, this Court has stressed that the business of common
carriers is imbued with public interest and duty; therefore, the law governing them
imposes an exacting standard.[34] In Singson v. Court of Appeals,[35] we said:

x x x [T]he carrier's utter lack of care and sensitivity to the needs of its passengers,
clearly constitutive of gross negligence, recklessness and wanton disregard of the
rights of the latter, [are] acts evidently indistinguishable or no different from fraud,
malice and bad faith. As the rule now stands, where in breaching the contract of
carriage the defendant airline is shown to have acted fraudulently, with malice or in
bad faith, the award of moral and exemplary damages, in addition to actual
damages, is proper. (Italics supplied)
[36]

In Saludo v. Court of Appeals,[37] the Court reminded airline companies that due to
the nature of their business, they must not merely give cursory instructions to their
personnel to be more accommodating towards customers, passengers and the
general public; they must require them to be so.
The acts of PALs employees, particularly Chan, clearly fell short of the
extraordinary standard of care that the law requires of common carriers. [38] As
narrated in Chans oral deposition, [39] the manner in which the airline discharged its
responsibility to respondent and its other passengers manifested a lack of the
requisite diligence and due regard for their welfare. The pertinent portions of the Oral
Deposition are reproduced as follows:
Q Now you said that flight PR 311 on 24th November was cancelled due to [a]
typhoon and naturally the passengers on said flight had to be accommodated
on the first flight the following day or the first flight subsequently. [W]ill you tell
the Honorable Deposition Officer the procedure followed by Philippine Airlines
in the handling of passengers of cancelled flight[s] like that of PR 311 which
was cancelled due to [a] typhoon?
A The procedure will be: all the confirmed passengers from [PR] 311 24th
November [are] automatically transfer[red] to [PR] 307, 25th November[,] as a
protection for all disconfirmed passengers.
Q Aside from this procedure[,] what do you do with the passengers on the cancelled
flight who are expected to check-in on the flights if this flight is cancelled or not
operating due to typhoon or other reasons[?] In other words, are they not
notified of the cancellation?
A I think all these passengers were not notified because of a typhoon and Philippine
Airlines Reservation were [sic] not able to call every passenger by phone.
Atty. Fruto:
Q Did you say were not notified?
A I believe they were not, but believe me, I was on day-off.
Atty. Calica:

Q Per procedure, what should have been done by Reservations Office when a flight
is cancelled for one reason or another?
A If there is enough time, of course, Reservations Office x x x call[s] up all the
passengers and tell[s] them the reason. But if there [is] no time[,] then the
Reservations Office will not be able to do that.[40]

xxxxxxxxx
Q I see. Miss Chan, I [will] show you a ticket which has been marked as Exh. A and
A-1. Will you please go over this ticket and tell the court whether this is the
ticket that was used precisely by Mr. Chiok when he checked-in at [F]light 307,
25 November 81?
A [Are you] now asking me whether he used this ticket with this sticker?
Q No, no, no. That was the ticket he used.
A Yes, [are you] asking me whether I saw this ticket?
Atty. Fruto: Yes.
A I believe I saw it.
Q You saw it, O.K. Now of course you will agree with me Miss Chan that this yellow
stub here which has been marked as Exh. A-1-A, show[s] that the status on
flight 311, 24th November, is O.K., correct?
A Yes.
Q You agree with me. And you will also agree with me that in this ticket of flight 311,
on this, another sticker Exh. A-1-B for 24 November is O.K.?
A May I x x x look at them. Yes, it says O.K. x x x, but [there is] no validation.
Q O.K. Miss Chan what do you understand by these entries here R bar M N 6 V?[41]
A This is what we call a computer reference.
Q I see. This is a computer reference showing that the name of Mr. Chiok has been
entered in Philippine Airlines computer, and this is his computer number.
A Yes.
Q Now you stated in your answer to the procedure taken, that all confirmed
passengers on flight 311, 24 November[,] were automatically transferred to 307
as a protection for the passengers, correct?
A Correct.
Q So that since following the O.K. status of Mr. Chioks reservation [on] flight 311,
[he] was also automatically transferred to flight 307 the following day?

A Should be.
Q Should be. O.K. Now do you remember how many passengers x x x were
transferred from flight 311, 24 November to flight 307, 25 November 81?
A I can only give you a very brief idea because that was supposed to be air bus so
it should be able to accommodate 246 people; but how many [exactly], I dont
know.[42]

xxxxxxxxx
Q So, between six and eight oclock in the evening of 25 November 81, Mr. Chiok
already told you that he just [came] from the Swire Building where Philippine
Airlines had [its] offices and that he told you that his space for 311 25
November 81 was confirmed?
A Yes.
Q That is what he told you. He insisted on that flight?
A Yes.
Q And did you not try to call up Swire Building-- Philippine Airlines and verify indeed
if Mr. Chiok was there?
A Swire House building is not directly under Philippine Airlines. it is just an agency
for selling Philippine Airlines ticket. And besides around six o clock theyre
close[d] in Central.
Q So this Swire Building is an agency authorized by Philippine Airlines to issue
tickets for and on behalf of Philippine Airlines and also...
A Yes.
Q And also to confirm spaces for and on behalf of Philippine Airlines.
A Yes.[43]

Under the foregoing circumstances, we cannot apply our 1989 ruling in China
Airlines v. Intermediate Appellate Court, [44] which petitioner urges us to adopt. In that
case, the breach of contract and the negligence of the carrier in effecting the
immediate flight connection for therein private respondent was incurred in good faith.
[45]
Having found no gross negligence or recklessness, we thereby deleted the award
of moral and exemplary damages against it. [46]
This Courts 1992 ruling in China Airlines v. Court of Appeals [47] is likewise
inapplicable. In that case, we found no bad faith or malice in the airlines breach of its
contractual obligation.[48]We held that, as shown by the flow of telexes from one of the
airlines offices to the others, petitioner therein had exercised diligent efforts in
assisting the private respondent change his flight schedule. In the instant case,
petitioner failed to exhibit the same care and sensitivity to respondents needs.

In Singson v. Court of Appeals,[49] we said:

x x x Although the rule is that moral damages predicated upon a breach of contract
of carriage may only be recoverable in instances where the mishap results in the
death of a passenger, or where the carrier is guilty of fraud or bad faith, there are
situations where the negligence of the carrier is so gross and reckless as to virtually
amount to bad faith, in which case, the passenger likewise becomes entitled to
recover moral damages.
In the present case, we stress that respondent had repeatedly secured
confirmations of his PR 311 flight on November 24, 1981 -- initially from CAL and
subsequently from the PAL office in Hong Kong. The status of this flight was marked
OK on a validating sticker placed on his ticket. That sticker also contained the entry
RMN6V. Ms Chan explicitly acknowledged that such entry was a computer reference
that meant that respondents name had been entered in PALs computer.
Since the status of respondent on Flight PR 311 was OK, as a matter of right
testified to by PALs 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 November 24, 1981 PR 311 flight and, consequently, in the list of the
replacement flight PR 307. Since he had secured confirmation of his flight -- not only
once, but twice -- by personally going to the carriers offices where he was
consistently assured of a seat thereon -- PALs negligence was so gross and reckless
that it amounted to bad faith.
In view of the foregoing, we rule that moral and exemplary [50] damages were
properly awarded by the lower courts.[51]

Third Issue:
Propriety of the Cross-Claim
We now look into the propriety of the ruling on CALs cross-claim against PAL.
Petitioner submits that the CA should have ruled on the cross-claim, considering that
the RTC had found that it was PALs employees who had acted negligently.
Section 8 of Rule 6 of the Rules of Court reads:

Sec. 8. Cross-claim. - A cross claim is any claim by one party against a co-party
arising out of the transaction or occurrence that is the subject matter either of the
original action or of a counterclaim therein.Such cross-claim may include a claim
that the party against whom it is asserted is or may be liable to the cross-claimant
for all or part of a claim asserted in the action against the cross-claimant.
For purposes of a ruling on the cross-claim, PAL is an indispensable party. In BA
Finance Corporation v. CA,[52] the Court stated:

x x x. An indispensable party is one whose interest will be affected by the courts

action in the litigation, and without whom no final determination of the case can be
had. The partys interest in the subject matter of the suit and in the relief sought are
so inextricably intertwined with the other parties that his legal presence as a party
to the proceeding is an absolute necessity. In his absence there cannot be a
resolution of the dispute of the parties before the court which is effective,
complete, or equitable.
xxxxxxxxx

Without the presence of indispensable parties to a suit or proceeding, judgment of a

court cannot attain real finality.
PALs interest may be affected by any ruling of this Court on CALs crossclaim. Hence, it is imperative and in accordance with due process and fair play that
PAL should have been impleaded as a party in the present proceedings, before this
Court can make a final ruling on this matter.
Although PAL was petitioners co-party in the case before the RTC and the CA,
petitioner failed to include the airline in the present recourse. Hence, the Court has
no jurisdiction over it.Consequently, to make any ruling on the cross-claim in the
present Petition would not be legally feasible because PAL, not being a party in the
present case, cannot be bound thereby.[53]
WHEREFORE, the Petition is DENIED. Costs against petitioner.
SO ORDERED.
Puno, (Chairman), Corona, and Carpio-Morales, JJ., concur.
Sandoval-Gutierrez, J., on official leave.

[1]

Rollo, pp. 3-20.

[2]

Id., pp. 21-37; Penned by Justice Mercedes Gozo-Dadole and concurred in by Presiding Justice Ma.
Alicia Austria-Martinez (now a member of this Court) and Justice Portia Alio-Hormachuelos.

[3]

Id., pp. 38-39.

[4]

CA Decision, p. 16; rollo, p. 36.

[5]

This narration was reproduced also in the Petition and in the Memoranda of both petitioner and
respondent.

[6]

Id., pp. 2-5; rollo, pp. 22-25. Citations omitted.

[7]

RTC Decision, pp. 5-6; CA rollo, pp. 131-132. Penned by Judge Regino T. Veridiano II.

[8]

65 SCRA 237, July 22, 1975.

[9]

CA Decision, p. 15; rollo, p. 35.

[10]

CA Resolution, p. 2; rollo, p. 39.

[11]

This case was deemed submitted for decision on October 18, 2002, upon the Courts receipt of
respondents Memorandum signed by Atty. Edgar S. Asuncion of Padilla Jimenez Kintanar &
Asuncion. Petitioners Memorandum, signed by Atty. Marcial O. T. Balgos of Balgos & Perez,
was filed earlier on October 4, 2002.

[12]

Petitioners Memorandum, p. 7; rollo, p. 78. Original in upper case.

[13]

See CA Resolution, p. 2; rollo, p. 39.

[14]

Rule 10.02, Canon 10 of the Code of Professional Responsibility, provides:

A lawyer shall not knowingly misquote or misrepresent the contents of a paper, the language or the
argument of opposing counsel, or the text of a decision or authority, or knowingly cite as law a
provision already rendered inoperative by repeal or amendment, or assert as a fact that which
has not been proved.
[15]

KLM v. CA, supra, pp. 243-244, per Castro, J.

[16]

CA Decision, p. 16; rollo, p. 36.

[17]

In the present case, Philippine Reports are cited whenever possible.

[18]

Supreme Court Reports Annotated.

[19]

French Oil Mill Machinery Co., Inc. v. Court of Appeals, 356 Phil. 780, September 11, 1998.

[20]

169 SCRA 226, January 17, 1989.

[21]

211 SCRA 897, July 29, 1992.

[22]

Also known as the Convention for the Unification of Certain Rules Relating to International
Transportation by Air. The Philippine adherence to the Convention on November 9, 1950, was
made public through Proclamation No. 201, 51 OG 10, pp. 4933-4934.

[23]

51 OG 10, p. 5085.

[24]

384 Phil. 227, March 9, 2000.

[25]

Id., pp. 238-239, per Gonzaga-Reyes, J.

[26]

285 SCRA 450, January 29, 1998.

[27]

238 SCRA 290, November 24, 1994.

[28]

Guerrero v. Court of Appeals, 349 Phil. 605, January 30, 1998; Batingal v. Court of Appeals, 351
SCRA 60, February 1, 2001.

[29]

123 Phil. 256, 264-265, March 30, 1966.

[30]

TSN, January 10, 1984, pp. 11-14.

[31]

Id., pp. 16-18.

[32]

Id., pp. 21-24; TSN, April 9, 1985, p. 40.

[33]

Oral Deposition, pp. 45-48.

[34]

British Airways v. Court of Appeals, supra.

[35]

346 Phil. 831, November 18, 1997.

[36]

Id., p. 845, per Bellosillo, J.

[37]

207 SCRA 498, March 23, 1992.

[38]

Article 1733 of the Civil Code.

[39]

The oral deposition was taken before Consul Jesus I. Yabes at the Philippine Consulate General in
Hong Kong on March 17, 1987. The deposition was thereafter admitted as Exhibit 5 for PAL.

[40]

Deposition, March 17, 1987, pp. 4-5; folder of exhibits for PAL, pp. 8-9.

[41]

Also referred to as R/MN62 in some parts of the record.

[42]

Id., pp. 27-28 and 31-32.

[43]

Id., pp. 41-42 and 45-46.

[44]

Supra at 20.

[45]

Id., p. 235.

[46]

Id., p. 236.

[47]

Supra at 21.

[48]

Recently, in Savellano v. Northwest, GR No. 151783, July 8, 2003, the Court awarded nominal, not
moral and exemplary, damages -- in the absence of bad faith, ill will, malice or wanton
conduct in the breach of the carriage contract.

[49]

346 Phil. 831, 842, November 18, 1997, per Bellosillo, J.

[50]

The Civil Code provides:

Art. 2229. Exemplary or corrective damages are imposed, by way of example or correction for the
public good, in addition to the moral, temperate, liquidated or compensatory damages.
Art. 2232. In contracts and quasi-contracts, the court may award exemplary damages if the defendant
acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner.
[51]

Considering that the incident, subject of this case, happened more then 20 years ago, the Court
believes that the amounts awarded are more than reasonable.

[52]

BA Finance Corporation v. Court of Appeals, 327 Phil. 716, 727-728, July 5, 1996, per Vitug, J;
citing Imson v. Court of Appeals, 239 SCRA 58, December 8, 1994, per Puno, J. (Cited
in Bank of Philippine Islands v. Court of Appeals et al., GR No. 146923, April 30, 2003).

[53]

Padilla v. Court of Appeals, 370 SCRA 208, November 22, 2001; Matuguina Integrated Wood
Products, Inc. v. Court of Appeals, 331 Phil. 795, October 24, 1996; Buazon v. Court of
Appeals, 220 SCRA 182, March 19, 1993.