TRANSPORTATION DIGEST CARRIAGE OF GOOD BY SEA ACT TRANSPORTATION Atty.

Abao

A.M.+D.G.

PHIL CHARTER vs. NEPTUNE ORIENT FACTS L.T. Garments Manufacturing Corp. Ltd. shipped from Hong Kong 3 sets of warp yarn on returnable beams aboard respondent Neptune Orient Lines' vessel, M/V Baltimar Orion, for transport and delivery to Fukuyama Manufacturing Corporation (Fukuyama) in Manila. The said cargoes were loaded in a container under a bill of lading. Fukuyama insured the shipment against all risks with petitioner Philippine Charter Insurance Corporation (PCIC) under Marine Cargo Policy. During the course of the voyage, the container with the cargoes fell overboard and was lost. Thus, Fukuyama wrote a letter to respondent Overseas Agency Services, Inc, the agent of Neptune Orient, and claimed for the value of the lost cargoes. However, Overseas Agency ignored the claim. Hence, Fukuyama sought payment from its insurer, PCIC, for the insured value which claim was fully satisfied by PCIC. PCIC then demanded from respondents reimbursement of the entire amount it paid to Fukuyama, but respondents refused payment. Hence, PCIC filed a complaint for damages against respondents. Respondents denied liability and alleged that during the voyage, the vessel encountered strong winds and heavy seas making the vessel pitch and roll, which caused the subject container with the cargoes to fall overboard. They claim that the occurrence was a fortuitous event which exempted them from any liability, and that their liability, if any, should not exceed US$500 or the limit of liability in the bill of lading, whichever is lower. 3B Digest Group SY 09-10 Ad Deum Per Excellentia The RTC held that respondents, as common carrier, failed to prove that they observed the required extraordinary diligence to prevent loss of the subject cargoes and ordered them to pay the plaintiff the amount claimed. The CA on the other hand found respondents liability to be only US$1,500 or US$500 per package under the limited liability provision of the Carriage of Goods by Sea Act (COGSA). Hence, the instant appeal. Petitioners Contention: The vessel committed a "quasi deviation" which is a breach of the contract of carriage when it intentionally threw overboard the container for its own benefit. Such breach of contract resulted in the abrogation of respondents' rights under the contract and COGSA including the US$500 per package limitation. ISSUE W/N the liability of the respondents is only US$1,500 or US$500 per package as provided in the COGSA - Yes RULING The facts as found by the RTC do not support the new allegation regarding the intentional throwing overboard of the subject cargoes and quasi deviation. The Court notes that the petitioner's Complaint and the survey report provide that the shipment were lost/fell overboard. The records show that the subject cargoes fell overboard the ship and petitioner should not vary the facts of the case on appeal. Since the subject cargoes were lost while being transported by respondent common carrier from Hong Kong to the RP Philippine law applies pursuant to the Civil Code. The rights

TRANSPORTATION DIGEST CARRIAGE OF GOOD BY SEA ACT TRANSPORTATION Atty. Abao

A.M.+D.G.

and obligations of respondent common carrier are thus governed by the provisions of the Civil Code, and the COGSA, which is a special law applying suppletorily. The pertinent provisions of the Civil Code applicable to this case are as follows: 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. In addition, Sec. 4, paragraph (5) of the COGSA, which is applicable to all contracts for the carriage of goods by sea to and from Philippine ports in foreign trade, provides: 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 be conclusive on the carrier. In this case, Bill of Lading stipulates: Neither the Carrier nor the vessel shall in any event become liable for any loss of or 3B Digest Group SY 09-10 Ad Deum Per Excellentia

damage to or in connection with the transportation of Goods in an amount exceeding US$500 (which is the package or shipping unit limitation under U.S. COGSA) unless the nature and value of such Goods have been declared by the Shipper before shipment and inserted in this Bill of Lading and the Shipper has paid additional charges on such declared value. . . . The bill of lading submitted in evidence by petitioner did not show that the shipper in Hong Kong declared the actual value of the goods as insured by Fukuyama before shipment and that the said value was inserted in the Bill of Lading, and so no additional charges were paid. Hence, the stipulation in the bill of lading that the carrier's liability shall not exceed US$500 per package applies. A stipulation in the bill of lading limiting the common carrier's liability for loss or destruction of a cargo to a certain sum, unless the shipper or owner declares a greater value, is sanctioned and allowed by law. It seems clear that even if said section 4 (5) of the Carriage of Goods by Sea Act did not exist, the validity and binding effect of the liability limitation clause in the bill of lading here are nevertheless fully sustainable on the basis alone of the cited Civil Code Provisions. EASTERN SHIPPING vs. MARGARINE FACTS Respondent corporation, a West German corporation not engaged in business in the RP, was the consignee of 500 long tons of Philippine copra in bulk with a total value of US$ 108,750.00 shipped from Cebu on board petitioner's (a

TRANSPORTATION DIGEST CARRIAGE OF GOOD BY SEA ACT TRANSPORTATION Atty. Abao

A.M.+D.G.

Philippine corporation) vessel, the SS "EASTERN PLANET" for discharge at Hamburg, Germany. Petitioner's bill of lading for the cargo provided as follows: Except as otherwise stated herein and in - the Charter Party, this contract shall be governed by the laws of the Flag of the Ship carrying the goods. In case of average, same shall be adjusted according to York-Antwerp Rules of 1950 While the vessel was at sea, a fire broke out aboard and caused water damage to the copra shipment in the amount of $591.38. Petitioner corporation rejected respondent's claim for payment and so respondent filed a complaint for recovery of the same plus attorney's fees and expenses of litigation. After trial, the LC rejected petitioner's defense that it was not liable under RP law for the damage did not exceed 5% of respondent's interest in the cargo. It then ordered defendant, Eastern Shipping to pay to the plaintiff the sum with interest plus attorney's fees and the costs of the suit. Petitioner filed an appeal directly to the SC. Petitioners Contention: Article 848 of the Code of Commerce which would bar claims for averages not exceeding 5% of the claimant's interest should be applied rather than the LCs ruling that petitioner's bill of lading expressly contained "an agreement to the contrary," i.e. for the application of the York-Antwerp Rules which provide for respondent's fun recovery of the damage loss. ISSUE W/N the court was in error in not applying the 5% rule in the Code of Commerce? - No

RULING There is no error in the LCs ruling sustaining respondent's damage claim although the amount thereof did not exceed 5% of respondent's interest in the cargo. The Code of Commerce is not applicable in this particular case for the reason that the bill of lading contains "an agreement to the contrary" for it is expressly provided in the last sentence of the first paragraph that "In case of average, same shall be adjusted according to York-Antwerp Rules of 1950." The insertion of said condition is expressly authorized by Commonwealth Act No. 65 which has adopted in toto the U.S. Carriage of Goods by Sea Act. Now, it has not been shown that said rules limit the recovery of damage to cases within a certain percentage or proportion that said damage may bear to claimant's interest either in the vessel or cargo as provided in Article 848 of the Code of Commerce On the contrary, Rule 3 of said York-Antwerp Rules expressly states that "Damage done to a ship and cargo, or either of them, by water or otherwise, including damage by breaching or scuttling a burning ship, in extinguishing a fire on board the ship, shall be made good as general average. ... " There is a clear and irreconcilable inconsistency between the York-Antwerp Rules expressly adopted by the parties as their contract under the bill of lading which sustains respondent's claim and the cited article in the Code of Commerce which would bar the same. Furthermore, as correctly contended by respondent, what is here involved is a contract of adhesion as embodied in the printed bill of lading issued by petitioner for the shipment to which respondent as the consignee merely adhered, having no choice in the matter, and consequently, any ambiguity therein must be construed against petitioner as the author.

3B Digest Group SY 09-10 Ad Deum Per Excellentia

TRANSPORTATION DIGEST CARRIAGE OF GOOD BY SEA ACT TRANSPORTATION Atty. Abao

A.M.+D.G.

MALAYAN STEEL vs. CA FACTS There were six shipments of flour on board different vessels with Manila as the port of discharge. All the shipments were insured against all risks with the plaintiff. Upon arrival of the vessels, the cargo was discharged into the custody of Manila Port Service, the Arraste Contractor. In due time, the cargo was delivered by the Manila Port Service to the customs broker of the respective consignees. In all the shipments, different numbers of bags of flour were received by the consignees in bad order while others were also short deliveries. Upon request of the consignees, examinations were made by MPS of the portion of the damaged cargo. Similarly, the Arrastre Contractor issued certificates indicating the number of bags of flour delivered by it to and by the consignees. The consignees filed provisional claims with the Manila Port Service, which were supplemented by formal claim. After processing the claims, the plaintiff paid the consignees the damages they suffered and the former was then subrogated to the rights of the latter with respect to the payment of their claims against the MPS. When the Manila Port Service rejected the claims, the insurance company filed an action before the municipal court for the recovery of the sums of money it paid. The court ordered the defendants to pay the amounts claimed. The defendants appealed to the CFI, where they filed an answer denying the material allegations of the complaint and 3B Digest Group SY 09-10 Ad Deum Per Excellentia

claiming, by way of special defense, that the defendant Manila Port Service, as arrastre contractor, delivered to the consignees the same number of bags of flour in the same condition as when it received them from the carrying vessels, and that the consignees failed to file their claims within 15 days from the date of discharge of the last package from the carrying vessel. The CFI ruled infavor of the plaintiffs. ISSUE 1. Whether or not the provisional claims constitute claims for value required to be filed under the managment contract. 2. Whether or not some of the provisional claims were filed out of time. 3. Whether or not proof was presented to show the number and/or condition of the merchandise as actually unloaded unti appellants custody. 4. Whether or not the award should be limited to the established invoice value of the damaged goods and not its CIF (Cost, Insurance Freight) value 5. Whether or not the trial court erred in awarding to the appellee an amount higher than that prayed for in the complaint. RULING 1. Yes. The appellants contend that the provisional claims filed by the consignees did not constitute claims for value required to be filed under paragraph 15 of the Management Contract for they did not state the value of the particular packages alleged to have been lost or damaged; hence, the provisional claims are invalid.

TRANSPORTATION DIGEST CARRIAGE OF GOOD BY SEA ACT TRANSPORTATION Atty. Abao

A.M.+D.G.

The contention is without merit. The filing of a provisional claim within 15 days from the discharge of the goods from the carrying vessel is sufficient compliance with the requirement of Sec. 15 of the Management Contract. Jurisprudence provides that the purpose of a provisions claim being to afford the arrastre operator a reasonable opportunity to check the validity of the claim while the facts are still fresh and the absence of a statement therein as to the precise amount of the loss does not render the claim invalid as a substantial compliance. 2. No. The appellants claim that Sec. 15 of the Management Contract expressly provides that the claim should be filed within 15 days from the date of discharge of the last package from the carrying vessel-consequently, the provisional claims filed by the consignees under the appellee's second, fourth, and sixth causes of action, which were received by the appellant arrastre operator 2 days before the discharge of the last package of the shipments, were imaginary, speculative, and misleading. Indeed, under Sec. 15 of the Management Contract, the claim should be made after the discharge of the last cargo from the carrying vessel. However, it has been held that if the consignee or broker was informed of a shortage or damage to the goods before the unloading of the last package, or even during the unloading, a provisional claim may properly be presented. This constitutes substantial compliance. 3. Yes. The trial court found that there was short delivery in that the number of bags delivered to the consignees was less than the quantity of the manifested cargo. This case being a direct appeal from the CFI the review must be confined to

points of law and the findings of fact of the court below can no longer be questioned. 4. No. The arrastre operator is responsible not only for the invoice value of the goods damaged or lost, but also for all damages that may be suffered by the consignee on account of their loss, destruction or injury. 5. Yes. In its complaint, the appellee asked for the "sum of P3,236.46 on all causes of action, plus interest thereon from the time of first demand until complete and full payment thereof; the sum of P500.00 by way of attorney's fees, and costs. The trial court, however, awarded to the appellee the total amount of P4,564.77, with interests thereon at the rate of 6% per annum from the filing of the complainant attorney's fees in the amount of P300.00; and the costs of suit. This Court ruled that where the plaintiff failed to amend the prayer of its complaint as to the amount of damages so as to make it conform to the evidence, the amount in the complaint should be awarded as damages. MAYER STEEL vs. CA FACTS In 1983, petitioner Hongkong Government Supplies Department (Hongkong) contracted petitioner Mayer Steel Pipe Corporation (Mayer) to manufacture and supply various steel pipes and fittings. Prior to the shipping, petitioner Mayer insured the pipes and fittings against all risks with private respondents South Sea Surety and Insurance Co., Inc. (South Sea) and Charter Insurance Corp. (Charter). Industrial Inspection, inspector procured by parties to examine the condition of the pipes as regards its compliance with the

3B Digest Group SY 09-10 Ad Deum Per Excellentia

TRANSPORTATION DIGEST CARRIAGE OF GOOD BY SEA ACT TRANSPORTATION Atty. Abao

A.M.+D.G.

contract, certified all the pipes and fittings to be in good order condition before they were loaded in the vessel. Nonetheless, when the goods reached Hongkong, a substantial portion thereof was damaged. Petitioners filed a claim against private respondents for indemnity under the insurance contract. Respondent Charter paid petitioner Hongkong the amount of HK$64,904.75. Petitioners demanded payment of the balance of HK$299,345.30 representing the cost of repair of the damaged pipes. Private respondents refused to pay because the insurance surveyor's report allegedly showed that the damage is a factory defect. On April 17, 1986, petitioners filed an action against private respondents to recover the sum of HK$299,345.30. For their defense, private respondents averred that they have no obligation to pay because the damage to the goods is due to factory defects which are not covered by the insurance policies. The trial court ruled in favor of petitioners. It found that the damage to the goods is not due to manufacturing defects. The Court of Appeals affirmed the said finding of the trial court but reversed its decision due to prescription because they filed the suit after more than 2 years. It ruled that Section 3(6) of COGSA, which provides that the carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is brought within one year after delivery of the goods or the date when the goods should have been deliveredapplies not only to the carrier but also to the insurer citing Filipino Merchants Insurance Co. v. Alejandro. ISSUE 3B Digest Group SY 09-10 Ad Deum Per Excellentia

Does Sec. 3(6) of COGSA apply to cases where the shipper files a suit against the insurer? RULING NO. Under Sec. 3(6) of COGSA, only the carrier's liability is extinguished if no suit is brought within one year. But the liability of the insurer is not extinguished because the insurer's liability is based not on the contract of carriage but on the contract of insurance. The Filipino Merchants case is different from the case at bar. In Filipino Merchants, it was the insurer which filed a claim against the carrier for reimbursement of the amount it paid to the shipper. In the case at bar, it was the shipper which filed a claim against the insurer. The ruling in Filipino Merchants does not apply in this case because when the Court said that Section 3(6) of the Carriage of Goods by Sea Act applies to the insurer, it meant that the insurer, like the shipper, may no longer file a claim against the carrier beyond the one-year period provided in the law. But it does not mean that the shipper may no longer file a claim against the insurer because the basis of the insurer's liability is the insurance contract and not the carriage contract.

FILIPRO vs. MRR FACTS

TRANSPORTATION DIGEST CARRIAGE OF GOOD BY SEA ACT TRANSPORTATION Atty. Abao

A.M.+D.G.

Filipro was the consignee of 7 shipments of goods. The arrastre operatior was Manila Port Service, a subsidiary of Manila Railroad Company. There was a Management Contract between Filipro and Manila Port Services covering the discharge of the cargo. Section 15 of the contract says in part, . ...in any event the CONTRACTOR (arrastre operator) shall be relieved and released of any and all liability for loss, damage, misdelivery and/or non-delivery of goods, unless suit in the court of proper jurisdiction is brought within ... one (1) year from the date of discharge of the goods or from the date when the claim for the value of such goods has been rejected or denied by the CONTRACTOR within fifteen (15) days from the date of discharge of the last package from the carrying vessel. Note: Filipro could file a suit within one year from date of discharge of the goods, meaning the date of discharge of the last package OR from date of denial of claim. The 7 shipments had problems of non-delivery or delivery in bad order and condition. Filipro filed PROVISIONAL CLAIMS for each of the shipment within 15 days of date discharge of the last package for each shipment and these were later on followed with FORMAL CLAIMS. The formal claims were all filed on various dates in1962 but beyond 15 days from discharge of the last package for each shipment. In short, only the provisional claims were filed within 15 days. Manila Port claims the provisional claims did not contain any reference to an amount or value of the damage to the goods. Manila Port DID NOT REPLY TO THE CLAIMS of Filipro. 3B Digest Group SY 09-10 Ad Deum Per Excellentia

Since there was no action on the part of Manila Port, Filipro decided to sue both Manila Port and Manila Railroad. Filipro filed a suit at the CFI of Manila for recovery of the losses and damages to the shipped goods as well as for lost profits. The parties submitted a stipulation of facts and the only issue submitted for judicial determination was: whether Filipro had complied with the provisions of paragraph 15 of the Management Contract in the filing of its claims. Based in the stipulation of facts thus submitted, the Court rendered judgment in favor of Filipro. ISSUE W/N Filipro had complied with the provisions of paragraph 15 of the Management Contract in the filing of its claims. YES RULING Manila Port and Manila Railroad contend that the period for filing the plaintiff's complaint should be computed solely from the date of discharge of the goods from the carrying vessel inasmuch as the claims made by the plaintiff have not been expressly rejected or denied by them. Since the complaint was filed one (1) year after the date of the last discharge of the goods, appellants maintain that it should be deemed barred. The contention is without merit for it overlooks the fact that Filipro has, under the management contract, two (2) periods within which to file its action, namely: [a] one (1) year from the date of discharge of the goods, and [b] one (1) year from the rejection or denial of its claim for the value thereof. Obviously, Manila Port cannot, by not acting on Filipros claims, one way or another, deprive the latter of one of these

TRANSPORTATION DIGEST CARRIAGE OF GOOD BY SEA ACT TRANSPORTATION Atty. Abao

A.M.+D.G.

alternatives. Such would be the result, were we to accept Manila Ports and Manila Railroads contention. Considering however, that no action, implied or express, was taken by the defendants-appellants on plaintiff's claims, how then shall the one (1) year prescriptive period be computed? The right of the plaintiff to sue the defendants might be questionable in the absence of any act or omission clearly indicating the rejection or denial of said claims by the defendants. Hence, it has been repeatedly held, the latest of which is Union Carbide Phil., Inc. (formerly National Carbon Phil., Inc.) vs. Manila Railroad Co., substituted by the Philippine National Railways, Manila Port Service and American Steamship Agencies, Inc. [L-277798, June 15, 1977, 77 SCRA 359] that, in case of inaction on the part of the arrastre operator, he shall be deemed to have rejected or denied the importer's claim upon the expiration of one (1) year from the date when the last package was discharged and that the period within which to file suit shall then begin to run xxx Furthermore, the SC said that the filing of the provisional claims within 15 days from the discharge of the last package was substantial compliance with the requirements of Section 15 of the management contract. The cited provision does not require the filing of a formal claim which state the value of the damaged goods. A provisional claim may be sufficient even if the value of the goods involved were not stated therein, provided it describes said goods sufficiently to permit its Identification by the operator and the determination by the latter of the facts relevant thereto, such as the name of the carrying vessel, its date of arrival, the 3B Digest Group SY 09-10 Ad Deum Per Excellentia

corresponding bill of lading or other shipping documents in which the value of the goods is set forth, etc., "while the facts are still fresh in the minds of the persons who took part in the transaction and while the pertinent documents are still available. EASTERN SHIPPING vs. IAC FACTS These two cases, both for the recovery of the value of cargo insurance, arose from the same incident, the sinking of the M/S ASIATICA when it caught fire, resulting in the total loss of ship and cargo. First Case: Sometime June, 1977, the M/S ASIATICA, a vessel operated by petitioner Eastern Shipping Lines, Inc., (referred to hereinafter as Petitioner Carrier) loaded at Kobe, Japan for transportation to Manila, 5,000 pieces of calorized lance pipes in 28 packages valued at P256,039.00 consigned to Philippine Blooming Mills Co., Inc., and 7 cases of spare parts valued at P92,361.75, consigned to Central Textile Mills, Inc. Both sets of goods were insured against marine risk for their stated value with respondent Development Insurance and Surety Corporation. During the same period, the same vessel took on board 128 cartons of garment fabrics and accessories, in two (2) containers, consigned to Mariveles Apparel Corporation, and two cases of surveying instruments consigned to Aman Enterprises and General Merchandise. The 128 cartons were insured for their stated value by respondent Nisshin Fire & Marine Insurance Co., for US $46,583.00, and the 2 cases by

TRANSPORTATION DIGEST CARRIAGE OF GOOD BY SEA ACT TRANSPORTATION Atty. Abao

A.M.+D.G.

respondent Dowa Fire & Marine Insurance Co., Ltd., for US $11,385.00. Enroute for Kobe, Japan, to Manila, the vessel caught fire and sank, resulting in the total loss of ship and cargo. The respective respondent Insurers paid the corresponding marine insurance values to the consignees concerned and were thus subrogated unto the rights of the latter as the insured. On May 11, 1978, respondent Development Insurance & Surety Corporation (Development Insurance, for short), having been subrogated unto the rights of the two insured companies, filed suit against petitioner Carrier for the recovery of the amounts it had paid to the insured before the then Court of First instance of Manila, Branch XXX (Civil Case No. 6087). Petitioner-Carrier denied liability mainly on the ground that the loss was due to an extraordinary fortuitous event, hence, it is not liable under the law. On August 31, 1979, the Trial Court rendered judgment in favor of Development Insurance in the amounts of P256,039.00 and P92,361.75, respectively, with legal interest, plus P35,000.00 as attorney's fees and costs. Petitioner Carrier took an appeal to the then Court of Appeals which, on August 14, 1984, affirmed. Second Case: On June 16, 1978, respondents Nisshin Fire & Marine Insurance Co. NISSHIN for short), and Dowa Fire & Marine Insurance Co., Ltd. (DOWA, for brevity), as subrogees of the insured, filed suit against Petitioner Carrier for the 3B Digest Group SY 09-10 Ad Deum Per Excellentia

recovery of the insured value of the cargo lost, imputing unseaworthiness of the ship and non-observance of extraordinary diligence by petitioner Carrier. Petitioner Carrier denied liability on the principal grounds that the fire which caused the sinking of the ship is an exempting circumstance under Section 4(2) (b) of the Carriage of Goods by Sea Act (COGSA); and that when the loss of fire is established, the burden of proving negligence of the vessel is shifted to the cargo shipper. On September 15, 1980, the Trial Court rendered judgment in favor of NISSHIN and DOWA in the amounts of US $46,583.00 and US $11,385.00, respectively, with legal interest, plus attorney's fees of P5,000.00 and costs. On appeal by petitioner, the then Court of Appeals on September 10, 1984, affirmed with modification the Trial Court's judgment by decreasing the amount recoverable by DOWA to US $1,000.00 because of $500 per package limitation of liability under the COGSA. ISSUE 1) Which law should govern the Civil Code provisions on Common carriers or the Carriage of Goods by Sea Act? COGSA. (2) Who has the burden of proof to show negligence of the carrier? RULING On the Law Applicable: 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. As the cargoes in question were transported

TRANSPORTATION DIGEST CARRIAGE OF GOOD BY SEA ACT TRANSPORTATION Atty. Abao

A.M.+D.G.

from Japan to the Philippines, the liability of Petitioner Carrier is governed primarily by the Civil Code. However, 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 special laws. Thus, the Carriage of Goods by Sea Act, a special law, is suppletory to the provisions of the Civil Code. On the Burden of Proof : Under the Civil Code, common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over goods, according to all the circumstances of each case. Petitioner Carrier claims that the loss of the vessel by fire exempts it from liability under the phrase "natural disaster or calamity. " However, we are of the opinion that fire may not be considered a natural disaster or calamity. This must be so as it arises almost invariably from some act of man or by human means. 10 It does not fall within the category of an act of God unless caused by lightning or by other natural disaster or calamity It may even be caused by the actual fault or privity of the carrier. As the peril of the fire is not comprehended within the exception in Article 1734, supra, Article 1735 of the Civil Code provides that all cases than those mention in Article 1734, the common carrier shall be presumed to have been at fault or to have acted negligently, unless it proves that it has observed the extraordinary deligence required by law. In this case, the respective Insurers. as subrogees of the cargo shippers, have proven that the transported goods have been lost. Petitioner Carrier has also proved that the loss was caused by fire. The burden then is upon Petitioner Carrier to proved that it has exercised the extraordinary diligence 3B Digest Group SY 09-10 Ad Deum Per Excellentia

required by law. In this regard, the Trial Court, concurred in by the Appellate Court, made the following Finding of fact: The cargoes in question were, according to the witnesses defendant placed in hatches No, 2 and 3 of the vessel, Boatswain Ernesto Pastrana noticed that smoke was coming out from hatch No. 2 and hatch No. 3; that where the smoke was noticed, the fire was already big; that the fire must have started twenty-four (24) hours before the same was noticed; that carbon dioxide was ordered released and the crew was ordered to open the hatch covers of No, 2 tor commencement of fire fighting by sea water: that all of these effort were not enough to control the fire. Having failed to discharge the burden of proving that it had exercised the extraordinary diligence required by law, Petitioner Carrier cannot escape liability for the loss of the cargo. And even if fire were to be considered a "natural disaster" within the meaning of Article 1734 of the Civil Code, it is required under Article 1739 of the same Code that the "natural disaster" must have been the "proximate and only cause of the loss," and that the carrier has "exercised due diligence to prevent or minimize the loss before, during or after the occurrence of the disaster. " This Petitioner Carrier has also failed to establish satisfactorily. Nor may Petitioner Carrier seek refuge from liability under the Carriage of Goods by Sea Act, It is provided therein that:

TRANSPORTATION DIGEST CARRIAGE OF GOOD BY SEA ACT TRANSPORTATION Atty. Abao

A.M.+D.G.

Sec. 4(2). Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from (b) Fire, unless caused by the actual fault or privity of the carrier. In this case, both the Trial Court and the Appellate Court, in effect, found, as a fact, that there was "actual fault" of the carrier shown by "lack of diligence" in that "when the smoke was noticed, the fire was already big; that the fire must have started twenty-four (24) hours before the same was noticed; " and that "after the cargoes were stored in the hatches, no regular inspection was made as to their condition during the voyage." The foregoing suffices to show that the circumstances under which the fire originated and spread are such as to show that Petitioner Carrier or its servants were negligent in connection therewith. Consequently, the complete defense afforded by the COGSA when loss results from fire is unavailing to Petitioner Carrier. On the US $500 Per Package Limitation: Petitioner Carrier avers that its liability if any, should not exceed US $500 per package as provided in section 4(5) of the COGSA. Article 1749 of the New Civil Code also allows the limitations of liability. It is to be noted that the Civil Code does not of itself limit the liability of the common carrier to a fixed amount per package although the Code expressly permits a stipulation limiting such liability. Thus, the COGSA which is suppletory to the provisions of the Civil Code, steps in and supplements the Code by establishing a statutory provision limiting the carrier's liability in the absence of a declaration of a higher 3B Digest Group SY 09-10 Ad Deum Per Excellentia

value of the goods by the shipper in the bill of lading. The provisions of the Carriage of Goods by Sea Act on limited liability are as much a part of a bill of lading as though physically in it and as much a part thereof as though placed therein by agreement of the parties. There is no stipulation in the respective Bills of Lading limiting the carrier's liability for the loss or destruction of the goods. Nor is there a declaration of a higher value of the goods. Hence, Petitioner Carrier's liability should not exceed US $500 per package, or its peso equivalent, at the time of payment of the value of the goods lost, but in no case "more than the amount of damage actually sustained." The actual total loss for the 5,000 pieces of calorized lance pipes was P256,039 which was exactly the amount of the insurance coverage by Development Insurance and the amount affirmed to be paid by respondent Court. The goods were shipped in 28 packages Multiplying 28 packages by $500 would result in a product of $14,000 which, at the current exchange rate of P20.44 to US $1, would be P286,160, or "more than the amount of damage actually sustained." Consequently, the aforestated amount of P256,039 should be upheld. With respect to the seven (7) cases of spare parts, their actual value was P92,361.75 which is likewise the insured value of the cargo and amount was affirmed to be paid by respondent Court. However, multiplying seven (7) cases by $500 per package at the present prevailing rate of P20.44 to US $1 (US $3,500 x P20.44) would yield P71,540 only, which is the amount that should be paid by Petitioner Carrier for those spare parts, and not P92,361.75.

TRANSPORTATION DIGEST CARRIAGE OF GOOD BY SEA ACT TRANSPORTATION Atty. Abao

A.M.+D.G.

The amount awarded to DOWA which was already reduced to $1,000 by the Appellate Court following the statutory $500 liability per package, is in order. In respect of the shipment of 128 cartons of garment fabrics in two (2) containers and insured with NISSHIN, the Appellate Court also limited Petitioner Carrier's liability to $500 per package and affirmed the award of $46,583 to NISSHIN. it multiplied 128 cartons (considered as COGSA packages) by $500 to arrive at the figure of $64,000, and explained that "since this amount is more than the insured value of the goods, that is $46,583, the Trial Court was correct in awarding said amount only for the 128 cartons, which amount is less than the maximum limitation of the carrier's liability." We find no reversible error. The 128 cartons and not the two (2) containers should be considered as the shipping unit. Considering, that the Bill of Lading clearly disclosed the contents of the containers, the number of cartons or units, as well as the nature of the goods, and applying the ruling in the Mitsui and Eurygenes cases it is clear that the 128 cartons, not the two (2) containers should be considered as the shipping unit subject to the $500 limitation of liability. True, the evidence does not disclose whether the containers involved herein were carrier-furnished or not. Usually, however, containers are provided by the carrier. In this case, the probability is that they were so furnished for Petitioner Carrier was at liberty to pack and carry the goods in containers if they were not so packed. Thus, at the dorsal

side of the Bill of Lading appears the following stipulation in fine print: 11. (Use of Container) Where the goods receipt of which is acknowledged on the face of this Bill of Lading are not already packed into container(s) at the time of receipt, the Carrier shall be at liberty to pack and carry them in any type of container(s). The foregoing would explain the use of the estimate "Say: Two (2) Containers Only" in the Bill of Lading, meaning that the goods could probably fit in two (2) containers only. It cannot mean that the shipper had furnished the containers for if so, "Two (2) Containers" appearing as the first entry would have sufficed. and if there is any ambiguity in the Bill of Lading, it is a cardinal principle in the construction of contracts that the interpretation of obscure words or stipulations in a contract shall not favor the party who caused the obscurity. This applies with even greater force in a contract of adhesion where a contract is already prepared and the other party merely adheres to it, like the Bill of Lading in this case, which is draw. up by the carrier. ICTS vs. PRUDENTIAL GUARANTEE FACTS On April 25, 1990, mother vessel Tao He loaded and received on board in San Francisco, a shipment of 5 lots of canned foodstuff complete and in good order and condition for transport to Manila in favor of Duel Food Enterprises-"consignee". China Ocean Shipping Company

3B Digest Group SY 09-10 Ad Deum Per Excellentia

TRANSPORTATION DIGEST CARRIAGE OF GOOD BY SEA ACT TRANSPORTATION Atty. Abao

A.M.+D.G.

issued the corresponding bill of lading. Consignee insured the shipment with Prudential Guarantee and Assurance, Inc. (PG) against all risks for P1,921,827.00 under Marine Insurance Policy. On May 30, 1990, the shipment arrived at the Port of Manila and discharged by vessel MS Wei He in favor of International Container Terminal Services, Inc. (ICTS) for safekeeping. On June 1, 1990, A. D. Reyna Customs Brokerage-brokerage" withdrew the shipment and delivered the same to [consignee. An inspection thereof revealed that 161 cartons were missing valued at P85,984.40. Claim for indemnification of the loss was denied by ICTSI and brokerage, so consignee sought payment from PG under the marine cargo policy. Consignee received a compromised sum of P66,730.12 in settlement. As subrogee, PG instituted instant ICTSI and brokerage. ICTSI contentios: it observed extraordinary diligence over the subject shipment while under its custody; that the loss is not attributable to its fault or its agent, representative or employee; that consignee failed to file a formal claim against it in accordance with PPA Administrative Order No. 10-81; and that the complaint states no cause of action. By way of crossclaim, it sought reimbursement from brokerage in the event it is adjudged to pay the loss. TC: dismissed complaint against brokerage based on lack of evidence. Later on, it likewise dismissed PGs complaint due to failure of consignee to comply with the terms and 3B Digest Group SY 09-10 Ad Deum Per Excellentia

conditions of contract with ICTS; thus PG is not in a better position than consignee CA: reversed and found 1) ICTS negligent in its duty to exercise due diligence over the shipment. It concluded that the shortage was due to pilferage of the shipment while the sea vans were stored at the container yard of ICTSI. 2) It also ruled that the filing of a claim depended on the issuance of a certificate of loss by ICTSI based on the liability clause printed on the back of the arrastre and wharfage receipt. Since ICTSI did not issue a certificate despite being informed of the shortage, the 15-day period given to the consignee for filing a formal claim never began. By subrogation, PG was entitled to hold the ICTSI liable for the shortage. ISSUE W/N CA committed reversible errors in the following rulings? RULING YES. CAs judgement set aside 1) On Negligence of ICTS The legal relationship between an arrastre operator and a consignee is akin to that between a warehouseman and a depositor. As to both the nature of the functions and the place of their performance, an arrastre operators services are clearly not maritime in character. In a claim for loss filed by a consignee, the burden of proof to show compliance with the obligation to deliver the goods to the appropriate party devolves upon the arrastre operator. Since the safekeeping of the goods rests within its knowledge, it must prove that the losses were not due to its negligence or that of its employees.

TRANSPORTATION DIGEST CARRIAGE OF GOOD BY SEA ACT TRANSPORTATION Atty. Abao

A.M.+D.G.

ICTS claims that the absence of a request for a bad order survey belied \consignees assertion that the shipment was filched while in its custody; thus, did not stop the 15-day period from running. Normally, a request for a bad order survey is made in case there is an apparent or presumed loss or damage. The consignee made no such request despite being provided by the petitioner a form therefor. The lack of a bad order survey does not toll the prescriptive period for filing a claim for loss, because the consignee can always file a provisional claim within 15 days from the time it discovers the loss or damage. Such a claim would place the arrastre operator on notice that the shipment sustained damage or loss, even if the exact amount thereof could not be specified at the moment. In this manner, the arrastre operator can immediately verify its culpability and liability. A provisional claim seasonably filed is sufficient compliance with the liability clause 2) Period to File a Claim for Loss ICTS contends that the CA misconstrued the liability clause printed on the dorsal side of the Arrastre and Wharfage Bill/Receipt. The provisions of this document reads:1
1

In order to hold the arrastre operator liable for lost or damaged goods, the claimant should file with the operator a claim for the value of said goods within 15 days from the date of discharge of the last package from the carrying vessel which is in the nature of a prescriptive period for bringing an action; thus, a condition precedent to holding the arrastre operator liable. This requirement is a defense made available to the arrastre operator, who may use or waive it as a matter of personal discretion. PURPOSE: to give arrastre contractor a reasonable opportunity to check the validity of the claim, while the facts are still fresh in the minds of the persons who took part in the transaction, and while the pertinent documents are still available. The period of 15 days is sufficient for the consignee to file a provisional claim after the discharge of the goods from the vessel. A long line of cases has held that the 15-day period for filing claims should be counted from the date the consignee learns of the loss, damage or misdelivery of goods. In the case at bar, consignee had all the time to make a formal claim from the day it discovered the shortage in the shipment, which was June 4, 1990. According to the independent adjuster, the stripping or opening of the sea vans containing the shipped canned goods was made at the consignees place upon receipt of the shipment. After discovering the loss, the consignee asked the adjuster to investigate the reason for
the discharge of the cargo and corresponding port charges ha[ve] been fully paid. This provision shall only apply upon filing of a formal claim within 15 days from the date of issuance of the Bad Order Certificate or certificate of loss, damage or non-delivery by ICTSI.

The duly authorized representative of herein named CONSIGNEE, and ICTSI hereby certify to the correctness of the description of the containerized cargo covered by this CY GATEPASS, the issuance of which constitutes delivery to and receipt by Consignee of the containerized cargo as described in this CY GATEPASS, in good order and condition, unless otherwise indicated. This CY GATEPASS is subject to all terms and conditions defined in the Existing Management Contract between the PPA & ICTSI[;] PPA Administrative Order No. 10-81, ICTSI shall, however, be liable to the extent of the local invoice value of each package but not to exceed P3,500 Philippine currency for imported cargoes and P1,000 for domestic cargoes (consistent with Administrative Order 10-81 unless revised), unless the value thereof is otherwise specified or manifested or communicated in writing together with the invoice value and supported by a certified packing list to ICTSI by any interested party/ies before

3B Digest Group SY 09-10 Ad Deum Per Excellentia

TRANSPORTATION DIGEST CARRIAGE OF GOOD BY SEA ACT TRANSPORTATION Atty. Abao

A.M.+D.G.

the short-landing of the shipment. By the time the claim for loss was filed on October 2, 1990, 4 months had already elapsed from the date of delivery. NORTHWEST AIRLINES vs. CA FACTS Torres was on a special mission to purchase firearms for the Philippine Senate. He bought roundtrip tickets from Northwest Airlines (NWA) for Chicago-Manila. When he was on his way back to manila, he checked-in and presented before NWAs representative his 2 identical baggage, one of which contained firearms. NWA staff required the baggage to be opened and the supporting evidence be presented. Torres showed the authorization from the Philippine govt and purchase receipts. Plaintiff sealed the baggage, and placed a red tag marking CONTAINS FIREARMS. Upon arrival in Manila, Torres was not able to claim one of his baggages. He was informed that his baggage containing firearms was recalled back to Chicago by NWA for US Customs verification. A telex to this effect was shown to him. A few days after, after being advised of the arrival of his other baggage, plaintiff claimed and opened the baggage in the presence of defendant's representative and found out that the firearms were missing. A Personal Property Missing Damage Report was issued by defendant to plaintiff.Plaintiff filed a case against NWA for actual, moral, temperate and exemplary damages and atty fees. Defendant pleaded: a) that it was the agents from the US Customs who ordered for the return of the weapons which plaintiff checked-in; b) that when opened in the presence of 3B Digest Group SY 09-10 Ad Deum Per Excellentia

US Customs agents the box contained no firearms; and c) that since the baggage which was returned back to Chicago did not contain any firearms, then the baggage which plaintiff received upon arrival in Manila must have contained the firearms. It likewise added that the Warsaw Convention and the contract of carriage limited its liability to US$640 and that the evidence presented by TORRES did not entitle him to moral, exemplary, and temperate damages and attorney's fees. RTC ordered NWA to pay Torres. According to the trial court, such act constituted willful misconduct which brought the case beyond the application of Section 22(2) of the Warsaw Convention, thereby depriving NORTHWEST of the limitation of the liability provided for in said section. CA sustained RTCs decision since NWA had in effect admitted the loss of the firearms when it insisted that its liability was limited to $9.07 per pound. It then concluded that NORTHWEST's guessing of which luggage contained the firearms amounted to willful misconduct under Section 25(1) of the Warsaw Convention which entitled TORRES to claim actual damages in excess of the limitation provided for under Section 22(2) of said Convention. CA only affirmed RTCs decision on the actual damages. ISSUE W/N Northwest was liable for actual damages. YES RULING NORTHWEST denied in its Answer the material allegations in the complaint and asserted, in fact, that it was not liable for actual damages because the box containing the alleged lost firearms was the one received by TORRES when

TRANSPORTATION DIGEST CARRIAGE OF GOOD BY SEA ACT TRANSPORTATION Atty. Abao

A.M.+D.G.

he arrived in Manila. It likewise contended that, even granting that the firearms were lost, its liability was limited by the Warsaw Convention and the contract of transportation to $9.07 per pound, or a total of $640 as the box weighed 70 pounds. It also denied having acted fraudulently or in bad faith. In thus submitting for summary judgment the matter of its liability only to the maximum allowed in Section 22(2) of the Warsaw Convention, NORTHWEST was deemed to have hypothetically admitted arguendo that the firearms were lost. It did not waive the presentation of evidence that it was not in fact liable for the alleged loss of firearms. And even if it was not liable beyond the maximum provided in said Section 22(2). Notably, TORRES prayed for actual damages in the amounts of (1) $9,009.32 representing the value of the lost firearms; and (2) P39,065 representing the cost of his place tickets. We, however, agree with both the trial court and the Court of Appeals that NORTHWEST's liability for actual damages may not be limited to that prescribed in Section 22(2) of the Warsaw Convention. In Alitalia v. IAC, it was held that:The [Warsaw] Convention does not operate as an exclusive enumeration of the instances of an airline's liability, or as an absolute limit of the extent of that liability. Such a proposition is not borne out by the language of the Convention, as this Court has now, and at an earlier time, pointed out. Moreover, slight reflection readily leads to the conclusion that it should be deemed a limit of liability only in those cases where the cause of the death or injury to person, or destruction, loss or damage to property or delay in its transport is not attributable to or attended by any willful 3B Digest Group SY 09-10 Ad Deum Per Excellentia

misconduct, bad faith, recklessness, or otherwise improper conduct on the part of any official or employee for which the carrier is responsible, and there is otherwise no special or extraordinary form of resulting injury. The Convention's provisions, in short, do not "regulate or exclude liability for other breaches of contract by the carrier" or misconduct of its officers and employees, or for some particular or exceptional type of damage. UNITED AIRLINES vs. UY FACTS On October 13, 1989, respondent Willie Uy, a revenue passenger on a United Airlines flight for the San FranciscoManila route, checked in together with his language one piece which was found to be overweight. An airline personnel rebuked him saying that he should have known the maximum weight allowance (70kgs per bag) and in a loud voice ordered Uy to repack his luggages. Respondent Uy acceded but the luggage was still overweight and so the airline billed him overweight charges which he offered to pay with a miscellaneous charge order (MCO) or an airline prepaid credit. However, the MCO was not accepted due to conflicting figures listed on it. In addition, upon arrival in Manila, he discovered that one of his bags had been slashed and its contents stolen, claiming the value lost to be around US$ 5,310. Respondent Uy sent three demand letters dated Oct. 16, 1989, Jan. 4, 1990, Oct. 28, 1991. The petitioner airline in response to the first demand, mailed a check representing to the payment of loss based on the maximum liability of $9.70 per pound. Uy was not satisfied and sent the said second and third letter

TRANSPORTATION DIGEST CARRIAGE OF GOOD BY SEA ACT TRANSPORTATION Atty. Abao

A.M.+D.G.

demanding an out-of-court settlement of P1,000,000. United Airlines did not accede to his demands. Consequently on June 9, 1992, respondent Uy filed a complaint for damages alleging that he was a person of good station, sitting in the board of directors of several top 500 corporations and holding senior executive positions for such similar firms, that petitioner airline accorded him ill and shabby treatment to his extreme embarrassment and humiliation. He prayed for P1 million for moral damages, P500k for exemplary, P50k attorneys fees and $5,310 for actual damages. United Airlines moved to dismiss on the ground that Uys cause of action had prescribed invoking Art. 29 of the Warsaw Convention: Art. 29 (1) The right to damages shall be extinguished if an action is not brought within two (2) years, reckoned from the date of arrival at the destination, or from the date on which the aircraft ought to have arrived, or from the date on which the transportation stopped. (2) The method of calculating the period of limitation shall be determined by the law of the court to which the case is submitted. Trial court ordered the dismissal of the action while the CA reversed stating that the Warsaw Convention did not preclude the operation of the Civil Code and other pertinent laws. ISSUE W/N the 2 year prescriptive period of the Warsaw Convention bar respondent Uys action for damages? No. 3B Digest Group SY 09-10 Ad Deum Per Excellentia

RULING Within Philippine jurisdiction the SC has held that the Warsaw Convention can be applied, or ignored, depending on the peculiar facts presented by each case. Thus, the Convention's provisions do not regulate or exclude liability for other breaches of contract by the carrier or misconduct of its officers and employees, or for some particular or exceptional type of damage. Insofar as the first cause of action (action for damages arising from misconduct) is concerned, respondent's failure to file his complaint within the 2 year limitation of the Warsaw Convention does not bar his action since petitioner airline may still be held liable for breach of other provisions of the Civil Code which prescribe a different period or procedure for instituting the action, specifically, Art. 1146 thereof which prescribes 4 years for filing an action based on torts. As for respondent's second cause of action (action for damages arising from damage to property), indeed the travaux preparatories of the Warsaw Convention reveal that the delegates thereto intended the 2 year limitation incorporated in Art. 29 as an absolute bar to suit and not to be made subject to the various tolling provisions of the laws of the forum. This therefore forecloses the application of our own rules on interruption of prescriptive periods. Article 29, par. (2), was intended only to let local laws determine whether an action had been commenced within the 2 year period, and within our jurisdiction an action shall be deemed commenced upon the filing of a complaint. Since it is indisputable that respondent filed the present action beyond

TRANSPORTATION DIGEST CARRIAGE OF GOOD BY SEA ACT TRANSPORTATION Atty. Abao

A.M.+D.G.

the 2 year time frame his second cause of action must be barred. However in spite of this, the SC declared that although respondent filed his complaint more than 2 years later, beyond the period of limitation prescribed by the Warsaw Convention for filing a claim for damages, it is obvious that respondent was forestalled from immediately filing an action because petitioner airline gave him the runaround, answering his letters but not giving in to his demands. Hence, despite the express mandate of Art. 29 of the Warsaw Convention that an action for damages should be filed within 2 years from the arrival at the place of destination, such rule shall not be applied in the instant case because of the delaying tactics employed by petitioner airline itself. Therefore, Uy's second cause of action cannot be considered as time-barred under Art. 29 of the Warsaw Convention.

PAL would take them from Manila to Signapore, while Singapore Airlines would take them from Singapore to Jakarta. When they arrived in Singapore, Singapore Airlines rejected the tickets of Savillo because they were not endorsed by PAL. It was explained that if Singapore Airlines honoured the tickets without PALS endorsement, PAL would not pay Singapore Airlines for their passage. Savillo demanded compensation from both PAL and Singapore Airlines, but his efforts were futile. He then sued PAL after 3 years, demanding moral damages. PAL , in its MTD, claimed that the cause of action has already prescribed invoking the Warsaw Convention (providing for a 2 year prescriptive period). Both RTC and CA ruled against PAL.

ISSUE What is the applicable law, the Civil Code or the Warsaw Convention? Has the action prescribed? RULING The Civil Code is applicable. Therefore the action has not yet prescribed for the prescription period is 4 years. If cause of action claims moral damages, not covered by Warsaw Convention. Article 19 of the Warsaw Convention provides for liability on the part of a carrier for damages occasioned by delay in the transportation by air of passengers, baggage or goods. Article 24 excludes other remedies by further providing that (1) in the cases covered by articles 18 and 19, any action for damages, however founded, can only be brought subject to the conditions and

PAL vs. SAVILLO FACTS Savillo was a judge of the RTC of Iloilo He was invited to participate in the 1993 ASEAN Seniors Annual Golf Tournament in Jakarta Indonesia. So, in order to take part in such event, he purchased a ticket from PAL with the following itinerary: ManilaSingapore-Jakarta-Singapore-Manila.

3B Digest Group SY 09-10 Ad Deum Per Excellentia

TRANSPORTATION DIGEST CARRIAGE OF GOOD BY SEA ACT TRANSPORTATION Atty. Abao

A.M.+D.G.

limits set out in this convention. Therefore, a claim covered by the Warsaw Convention can no longer be recovered under local law, if the statue of limitations of two years has elapsed. Nevertheless, this Court notes that jurisprudence in Philippines and the United States also recognizes that Warsaw Convention does not exclusively regulate relationship between passenger and carrier on international flight. the the the an

which resulted in his being subjected to humiliation, embarrassment, mental anguish, serious anxiety, fear and distress therefore this case is not covered by the Warsaw Convention. When the negligence happened before the performance of the contract of carriage, not covered by the Warsaw Convention. Also, this case is comparable to Lathigra v. British Airways. In that case, it was held that the airlines negligent act of reconfirming the passengers reservation days before departure and failing to inform the latter that the flight had already been discontinued is not among the acts covered by the Warsaw Convention, since the alleged negligence did not occur during the performance of the contract of carriage but, rather, days before the scheduled flight. In the case at hand, Singapore Airlines barred Savillo from boarding the Singapore Airlines flight because PAL allegedly failed to endorse the tickets of private respondent and his companions, despite PALs assurances to Savillo that Singapore Airlines had already confirmed their passage. While this fact still needs to heard and established by adequate proof before the RTC, an action based on these allegations will not fall under the Warsaw Convention, since the purported negligence on the party of PAL did not occur during the performance of the contract of carriage but days before the scheduled flight. Thus, the present action cannot be dismissed based on the Statue of Limitations provided under Article 29 of the Warsaw Convention. AMERICAN AIRLINES vs. CA *to follow

In U.S. v. Uy, this Court distinguished between the (1) damage to the passengers baggage and (2) humiliation he suffered at the hands of the airlines employees. The First cause of action was covered by the Warsaw Convention which prescribes in two years, while the second was covered by the provisions of the Civil Code on torts, which prescribes in four years. In Mahaney v. Air France (US case), the court therein ruled that if the plaintiff were to claim damages based solely on the delay she experienced- for instance, the costs of renting a van, which she had to arrange on her own as a consequence of the delay the complaint would be barred by the twoyear statute of limitations. However, where the plaintiff alleged that the airlines subjected her to unjust discrimination or undue or unreasonable preference or disadvantage, an act punishable under the US law, then the plaintiff may claim purely nominal compensatory damages for humiliation and hurt feelings, which are not provided for by the Warsaw Convention. In the Petition at bar, Savillos Complaint alleged that both PAL and Singapore Airlines were guilty of gross negligence, 3B Digest Group SY 09-10 Ad Deum Per Excellentia