G.R. No.

L-49407 August 19, 1988

NATIONAL DEVELOPMENT COMPANY

vs.
THE COURT OF APPEALS and DEVELOPMENT INSURANCE & SURETY CORPORATION

No. L-49469 August 19, 1988

MARITIME COMPANY OF THE PHILIPPINES,

vs.
THE COURT OF APPEALS and DEVELOPMENT INSURANCE & SURETY CORPORATION

In 1962, defendants NDC and MCP entered into a memorandum of agreement, where NDC as the first preferred
mortgagee of three ocean going vessels including one with the name 'Dona Nati' appointed MCP as its agent to
manage and operate said vessel for and in its behalf and account.
Thus, in 1964 the E. Philipp Corporation of New York loaded on board the vessel "Dona Nati" at San Francisco,
California, a total of 1,200 bales of American raw cotton consigned to the order of Manila Banking Corporation,
Manila and the People's Bank and Trust Company in behalf of the Pan Asiatic Commercial Company, Inc., who
represents Riverside Mills Corporation. Also loaded on the same vessel at Tokyo, Japan, were the cargo of Kyokuto
Boekui, Kaisa, Ltd., consigned to the order of Manila Banking Corporation consisting of 200 cartons of sodium
lauryl sulfate and 10 cases of aluminum foil. En route to Manila the vessel Dofia Nati figured in a collision at Ise
Bay, Japan with a Japanese vessel as a result of which 550 bales of American raw cotton were lost and/or
destroyed, of which 535 bales as damaged were landed and sold and 15 bales were not landed and deemed lost.
Thus, the plaintiff had paid as insurer the total amount of P364,915.86 to the consignees or their successors-in-
interest, for the said lost or damaged cargoes. Hence, this complaint to recover said amount from the defendants-
NDC and MCP as owner and ship agent respectively, of the said 'Dona Nati' vessel.
In 1969, the trial court rendered a decision ordering the defendants MCP and NDC to pay jointly and solidarity to
DISC the sum of P364,915.86 plus the legal rate of interest. On appeal, CA promulgated its decision affirming in
toto the decision of the trial court. Hence these appeals by certiorari.
Issue: Which law governs loss or destruction of goods due to collision of vessels outside Philippine waters and the
extent of liability as well as the rules of prescription provided thereunder
Ruling:
In Eastern Shipping Lines Inc. v. IAC, it was held under similar circumstance "that the law of the country to which
the goods are to be transported governs the liability of the common carrier in case of their loss, destruction or
deterioration" (Article 1753, Civil Code). Thus, the rule was specifically laid down that for cargoes transported
from Japan to the Philippines, the liability of the carrier is governed primarily by the Civil Code and in all matters
not regulated by said Code, the rights and obligations of common carrier shall be governed by the Code of
commerce and by laws (Article 1766, Civil Code). Hence, the Carriage of Goods by Sea Act, a special law, is merely
suppletory to the provision of the Civil Code.
PREMISES CONSIDERED, the subject petitions are DENIED for lack of merit and the assailed decision of the
respondent Appellate Court is AFFIRMED.
 [G.R. No. 121824. January 29, 1998]

BRITISH AIRWAYS, petitioner, vs. COURT OF APPEALS, GOP MAHTANI, and PHILIPPINE AIRLINES, respondents
In 1989, Mahtani decided to visit his relatives in Bombay, India. In anticipation of his visit, he obtained the services
of a certain Mr. Gumar to prepare his travel plans. The latter, in turn, purchased a ticket from BA.
Since BA had no direct flights from Manila to Bombay, Mahtani had to take a flight to Hongkong via PAL, and
upon arrival in Hongkong he had to take a connecting flight to Bombay on board BA.
Prior to his departure, Mahtani checked in at the PAL counter in Manila his two pieces of luggage containing
his clothings and personal effects, confident that upon reaching Hongkong, the same would be transferred to the
BA flight bound for Bombay.
Unfortunately, when Mahtani arrived in Bombay he discovered that his luggage was missing and was told by
the BA representatives that the same might have been diverted to London. After patiently waiting for his luggage
for one week, BA finally advised him to file a claim by accomplishing the Property Irregularity Report.
Back in the Philippines, Mahtani filed his complaint for damages and attorneys fees against BA and Mr. Gumar
before the trial court.
BA filed its answer with counter claimi to the complaint raising, that Mahtani did not have a cause of action
against it. Likewise, it filed a third-party complaintii against PAL alleging that the reason for the non-transfer of
the luggage was due to the latter’s late arrival in Hongkong, thus leaving hardly any time for the proper transfer
of Mahtanis luggage to the BA aircraft bound for Bombay.
PAL filed its answer to the third-party complaint, wherein it disclaimed any liability. The trial court rendered its
decision in favor of Mahtani.
BA is now seeking the reversal of the Court of Appeals decision.
Issue: BA assails the award of compensatory damages and attorneys fees, as well as the dismissal of its third-party
complaint against PAL.iii
Ruling:
The nature of an airlines contract of carriage partakes of two types, namely: a contract to deliver a cargo or
merchandise to its destination and a contract to transport passengers to their destination. A business intended
to serve the travelling public primarily, it is imbued with public interest, hence, the law governing common
carriers imposes an exacting standard.iv Neglect or malfeasance by the carriers employees could predictably
furnish bases for an action for damages.v
In the instant case, it is apparent that the contract of carriage was between Mahtani and BA. Moreover, it is
indubitable that his luggage never arrived in Bombay on time. Therefore, as in a number of casesvi we have
assessed the airlines culpability in the form of damages for breach of contract involving misplaced luggage.
However, as earlier stated, it is the position of BA that there should have been no separate award for the
luggage and the contents thereof since Mahtani failed to declare a separate higher valuation for the luggage, vii
and therefore, its liability is limited, at most, only to the amount stated in the ticket.
We sustain the trial courts ruling dismissing appellants third-party complaint against PAL.
The rule that carriage by plane although performed by successive carriers is regarded as a single
operation and that the carrier issuing the passengers ticket is considered the principal party and the
other carrier merely subcontractors or agent, is a settled issue.
 Since the instant petition was based on breach of contract of carriage, Mahtani can only sue BA alone, and
not PAL, since the latter was not a party to the contract. However, this is not to say that PAL is relieved from any
liability due to any of its negligent acts.
WHEREFORE, in view of the foregoing, the decision of the Court of Appeals is hereby MODIFIED, reinstating
the third-party complaint filed by British Airways against Philippine Airlines. No costs.