epublic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 171092

March 15, 2010

EDNA DIAGO LHUILLIER, Petitioner,

vs.
BRITISH AIRWAYS, Respondent.
DECISION
DEL CASTILLO, J.:
Jurisdictio est potestas de publico introducta cum necessitate juris dicendi. Jurisdiction is a
power introduced for the public good, on account of the necessity of dispensing justice.1
Factual Antecedents
On April 28, 2005, petitioner Edna Diago Lhuillier filed a Complaint2 for damages against
respondent British Airways before the Regional Trial Court (RTC) of Makati City. She alleged
that on February 28, 2005, she took respondents flight 548 from London, United Kingdom to
Rome, Italy. Once on board, she allegedly requested Julian Halliday (Halliday), one of the
respondents flight attendants, to assist her in placing her hand-carried luggage in the overhead
bin. However, Halliday allegedly refused to help and assist her, and even sarcastically remarked
that "If I were to help all 300 passengers in this flight, I would have a broken back!"
Petitioner further alleged that when the plane was about to land in Rome, Italy, another flight
attendant, Nickolas Kerrigan (Kerrigan), singled her out from among all the passengers in the
business class section to lecture on plane safety. Allegedly, Kerrigan made her appear to the other
passengers to be ignorant, uneducated, stupid, and in need of lecturing on the safety rules and
regulations of the plane. Affronted, petitioner assured Kerrigan that she knew the planes safety
regulations being a frequent traveler. Thereupon, Kerrigan allegedly thrust his face a mere few
centimeters away from that of the petitioner and menacingly told her that "We dont like your
attitude."
Upon arrival in Rome, petitioner complained to respondents ground manager and demanded an
apology. However, the latter declared that the flight stewards were "only doing their job."

Thus, petitioner filed the complaint for damages, praying that respondent be ordered to pay P5
million as moral damages, P2 million as nominal damages, P1 million as exemplary damages,
P300,000.00 as attorneys fees, P200,000.00 as litigation expenses, and cost of the suit.
On May 16, 2005, summons, together with a copy of the complaint, was served on the
respondent through Violeta Echevarria, General Manager of Euro-Philippine Airline Services,
Inc.3
On May 30, 2005, respondent, by way of special appearance through counsel, filed a Motion to
Dismiss4 on grounds of lack of jurisdiction over the case and over the person of the respondent.
Respondent alleged that only the courts of London, United Kingdom or Rome, Italy, have
jurisdiction over the complaint for damages pursuant to the Warsaw Convention,5 Article 28(1)
of which provides:
An action for damages must be brought at the option of the plaintiff, either before the court of
domicile of the carrier or his principal place of business, or where he has a place of business
through which the contract has been made, or before the court of the place of destination.
Thus, since a) respondent is domiciled in London; b) respondents principal place of business is
in London; c) petitioner bought her ticket in Italy (through Jeepney Travel S.A.S, in Rome);6 and
d) Rome, Italy is petitioners place of destination, then it follows that the complaint should only
be filed in the proper courts of London, United Kingdom or Rome, Italy.
Likewise, it was alleged that the case must be dismissed for lack of jurisdiction over the person
of the respondent because the summons was erroneously served on Euro-Philippine Airline
Services, Inc. which is not its resident agent in the Philippines.
On June 3, 2005, the trial court issued an Order requiring herein petitioner to file her
Comment/Opposition on the Motion to Dismiss within 10 days from notice thereof, and for
respondent to file a Reply thereon.7 Instead of filing a Comment/Opposition, petitioner filed on
June 27, 2005, an Urgent Ex-Parte Motion to Admit Formal Amendment to the Complaint and
Issuance of Alias Summons.8 Petitioner alleged that upon verification with the Securities and
Exchange Commission, she found out that the resident agent of respondent in the Philippines is
Alonzo Q. Ancheta. Subsequently, on September 9, 2005, petitioner filed a Motion to Resolve
Pending Incident and Opposition to Motion to Dismiss.9
Ruling of the Regional Trial Court
On October 14, 2005, the RTC of Makati City, Branch 132, issued an Order10 granting
respondents Motion to Dismiss. It ruled that:

The Court sympathizes with the alleged ill-treatment suffered by the plaintiff. However, our
Courts have to apply the principles of international law, and are bound by treaty stipulations
entered into by the Philippines which form part of the law of the land. One of this is the Warsaw
Convention. Being a signatory thereto, the Philippines adheres to its stipulations and is bound by
its provisions including the place where actions involving damages to plaintiff is to be instituted,
as provided for under Article 28(1) thereof. The Court finds no justifiable reason to deviate from
the indicated limitations as it will only run counter to the provisions of the Warsaw Convention.
Said adherence is in consonance with the comity of nations and deviation from it can only be
effected through proper denunciation as enunciated in the Santos case (ibid). Since the
Philippines is not the place of domicile of the defendant nor is it the principal place of business,
our courts are thus divested of jurisdiction over cases for damages. Neither was plaintiffs ticket
issued in this country nor was her destination Manila but Rome in Italy. It bears stressing
however, that referral to the court of proper jurisdiction does not constitute constructive denial of
plaintiffs right to have access to our courts since the Warsaw Convention itself provided for
jurisdiction over cases arising from international transportation. Said treaty stipulations must be
complied with in good faith following the time honored principle of pacta sunt servanda.
The resolution of the propriety of service of summons is rendered moot by the Courts want of
jurisdiction over the instant case.
WHEREFORE, premises considered, the present Motion to Dismiss is hereby GRANTED and
this case is hereby ordered DISMISSED.
Petitioner filed a Motion for Reconsideration but the motion was denied in an Order11 dated
January 4, 2006.
Petitioner now comes directly before us on a Petition for Review on Certiorari on pure questions
of law, raising the following issues:
Issues
I. WHETHER X X X PHILIPPINE COURTs HAVE JURISDICTION OVER A TORTIOUS
CONDUCT COMMITTED AGAINST A FILIPINO CITIZEN AND RESIDENT BY AIRLINE
PERSONNEL OF A FOREIGN CARRIER TRAVELLING BEYOND THE TERRITORIAL
LIMIT OF ANY FOREIGN COUNTRY; AND THUS IS OUTSIDE THE AMBIT OF THE
WARSAW CONVENTION.
II. WHETHER x x x RESPONDENT AIR CARRIER OF PASSENGERS, IN FILING ITS
MOTION TO DISMISS BASED ON LACK OF JURISDICTION OVER THE SUBJECT
MATTER OF THE CASE AND OVER ITS PERSON MAY BE DEEMED AS HAVING IN
FACT AND IN LAW SUBMITTED ITSELF TO THE JURISDICTION OF THE LOWER

COURT, ESPECIALLY SO, WHEN THE VERY LAWYER ARGUING FOR IT IS HIMSELF
THE RESIDENT AGENT OF THE CARRIER.
Petitioners Arguments
Petitioner argues that her cause of action arose not from the contract of carriage, but from the
tortious conduct committed by airline personnel of respondent in violation of the provisions of
the Civil Code on Human Relations. Since her cause of action was not predicated on the contract
of carriage, petitioner asserts that she has the option to pursue this case in this jurisdiction
pursuant to Philippine laws.
Respondents Arguments
In contrast, respondent maintains that petitioners claim for damages fell within the ambit of
Article 28(1) of the Warsaw Convention. As such, the same can only be filed before the courts of
London, United Kingdom or Rome, Italy.
Our Ruling
The petition is without merit.
The Warsaw Convention has the force and effect of law in this country.
It is settled that the Warsaw Convention has the force and effect of law in this country. In Santos
III v. Northwest Orient Airlines,12 we held that:
The Republic of the Philippines is a party to the Convention for the Unification of Certain Rules
Relating to International Transportation by Air, otherwise known as the Warsaw Convention. It
took effect on February 13, 1933. The Convention was concurred in by the Senate, through its
Resolution No. 19, on May 16, 1950. The Philippine instrument of accession was signed by
President Elpidio Quirino on October 13, 1950, and was deposited with the Polish government
on November 9, 1950. The Convention became applicable to the Philippines on February 9,
1951. On September 23, 1955, President Ramon Magsaysay issued Proclamation No. 201,
declaring our formal adherence thereto, "to the end that the same and every article and clause
thereof may be observed and fulfilled in good faith by the Republic of the Philippines and the
citizens thereof."
The Convention is thus a treaty commitment voluntarily assumed by the Philippine government
and, as such, has the force and effect of law in this country.13

The Warsaw Convention applies because the air travel, where the alleged tortious conduct
occurred, was between the United Kingdom and Italy, which are both signatories to the Warsaw
Convention.
Article 1 of the Warsaw Convention provides:
1. This Convention applies to all international carriage of persons, luggage or goods
performed by aircraft for reward. It applies equally to gratuitous carriage by aircraft
performed by an air transport undertaking.
2. For the purposes of this Convention the expression "international carriage" means any
carriage in which, according to the contract made by the parties, the place of departure
and the place of destination, whether or not there be a break in the carriage or a
transhipment, are situated either within the territories of two High Contracting Parties, or
within the territory of a single High Contracting Party, if there is an agreed stopping place
within a territory subject to the sovereignty, suzerainty, mandate or authority of another
Power, even though that Power is not a party to this Convention. A carriage without such
an agreed stopping place between territories subject to the sovereignty, suzerainty,
mandate or authority of the same High Contracting Party is not deemed to be
international for the purposes of this Convention. (Emphasis supplied)
Thus, when the place of departure and the place of destination in a contract of carriage are
situated within the territories of two High Contracting Parties, said carriage is deemed an
"international carriage". The High Contracting Parties referred to herein were the signatories to
the Warsaw Convention and those which subsequently adhered to it.14
In the case at bench, petitioners place of departure was London, United Kingdom while her
place of destination was Rome, Italy.15 Both the United Kingdom16 and Italy17 signed and ratified
the Warsaw Convention. As such, the transport of the petitioner is deemed to be an "international
carriage" within the contemplation of the Warsaw Convention.
Since the Warsaw Convention applies in the instant case, then the jurisdiction over the subject
matter of the action is governed by the provisions of the Warsaw Convention.
Under Article 28(1) of the Warsaw Convention, the plaintiff may bring the action for damages
before
1. the court where the carrier is domiciled;
2. the court where the carrier has its principal place of business;

3. the court where the carrier has an establishment by which the contract has been made;
or
4. the court of the place of destination.
In this case, it is not disputed that respondent is a British corporation domiciled in London,
United Kingdom with London as its principal place of business. Hence, under the first and
second jurisdictional rules, the petitioner may bring her case before the courts of London in the
United Kingdom. In the passenger ticket and baggage check presented by both the petitioner and
respondent, it appears that the ticket was issued in Rome, Italy. Consequently, under the third
jurisdictional rule, the petitioner has the option to bring her case before the courts of Rome in
Italy. Finally, both the petitioner and respondent aver that the place of destination is Rome, Italy,
which is properly designated given the routing presented in the said passenger ticket and baggage
check. Accordingly, petitioner may bring her action before the courts of Rome, Italy. We thus
find that the RTC of Makati correctly ruled that it does not have jurisdiction over the case filed
by the petitioner.
Santos III v. Northwest Orient Airlines18 applies in this case.
Petitioner contends that Santos III v. Northwest Orient Airlines19 cited by the trial court is
inapplicable to the present controversy since the facts thereof are not similar with the instant
case.
We are not persuaded.
In Santos III v. Northwest Orient Airlines,20 Augusto Santos III, a resident of the Philippines,
purchased a ticket from Northwest Orient Airlines in San Francisco, for transport between San
Francisco and Manila via Tokyo and back to San Francisco. He was wait-listed in the Tokyo to
Manila segment of his ticket, despite his prior reservation. Contending that Northwest Orient
Airlines acted in bad faith and discriminated against him when it canceled his confirmed
reservation and gave his seat to someone who had no better right to it, Augusto Santos III sued
the carrier for damages before the RTC. Northwest Orient Airlines moved to dismiss the
complaint on ground of lack of jurisdiction citing Article 28(1) of the Warsaw Convention. The
trial court granted the motion which ruling was affirmed by the Court of Appeals. When the case
was brought before us, we denied the petition holding that under Article 28(1) of the Warsaw
Convention, Augusto Santos III must prosecute his claim in the United States, that place being
the (1) domicile of the Northwest Orient Airlines; (2) principal office of the carrier; (3) place
where contract had been made (San Francisco); and (4) place of destination (San Francisco).21
We further held that Article 28(1) of the Warsaw Convention is jurisdictional in character. Thus:

A number of reasons tends to support the characterization of Article 28(1) as a jurisdiction and
not a venue provision. First, the wording of Article 32, which indicates the places where the
action for damages "must" be brought, underscores the mandatory nature of Article 28(1).
Second, this characterization is consistent with one of the objectives of the Convention, which is
to "regulate in a uniform manner the conditions of international transportation by air." Third, the
Convention does not contain any provision prescribing rules of jurisdiction other than Article
28(1), which means that the phrase "rules as to jurisdiction" used in Article 32 must refer only to
Article 28(1). In fact, the last sentence of Article 32 specifically deals with the exclusive
enumeration in Article 28(1) as "jurisdictions," which, as such, cannot be left to the will of the
parties regardless of the time when the damage occurred.
xxxx
In other words, where the matter is governed by the Warsaw Convention, jurisdiction takes on a
dual concept. Jurisdiction in the international sense must be established in accordance with
Article 28(1) of the Warsaw Convention, following which the jurisdiction of a particular court
must be established pursuant to the applicable domestic law. Only after the question of which
court has jurisdiction is determined will the issue of venue be taken up. This second question
shall be governed by the law of the court to which the case is submitted.22
Contrary to the contention of petitioner, Santos III v. Northwest Orient Airlines23 is analogous to
the instant case because (1) the domicile of respondent is London, United Kingdom;24 (2) the
principal office of respondent airline is likewise in London, United Kingdom;25 (3) the ticket was
purchased in Rome, Italy;26 and (4) the place of destination is Rome, Italy.27 In addition,
petitioner based her complaint on Article 217628 of the Civil Code on quasi-delict and Articles
1929 and 2130 of the Civil Code on Human Relations. In Santos III v. Northwest Orient Airlines,31
Augusto Santos III similarly posited that Article 28 (1) of the Warsaw Convention did not apply
if the action is based on tort. Hence, contrary to the contention of the petitioner, the factual
setting of Santos III v. Northwest Orient Airlines32 and the instant case are parallel on the
material points.
Tortious conduct as ground for the petitioners complaint is within the purview of the Warsaw
Convention.
Petitioner contends that in Santos III v. Northwest Orient Airlines,33 the cause of action was
based on a breach of contract while her cause of action arose from the tortious conduct of the
airline personnel and violation of the Civil Code provisions on Human Relations.34 In addition,
she claims that our pronouncement in Santos III v. Northwest Orient Airlines35 that "the
allegation of willful misconduct resulting in a tort is insufficient to exclude the case from the
comprehension of the Warsaw Convention," is more of an obiter dictum rather than the ratio

decidendi.36 She maintains that the fact that said acts occurred aboard a plane is merely
incidental, if not irrelevant.37
We disagree with the position taken by the petitioner. Black defines obiter dictum as "an opinion
entirely unnecessary for the decision of the case" and thus "are not binding as precedent."38 In
Santos III v. Northwest Orient Airlines,39 Augusto Santos III categorically put in issue the
applicability of Article 28(1) of the Warsaw Convention if the action is based on tort.
In the said case, we held that the allegation of willful misconduct resulting in a tort is insufficient
to exclude the case from the realm of the Warsaw Convention. In fact, our ruling that a cause of
action based on tort did not bring the case outside the sphere of the Warsaw Convention was our
ratio decidendi in disposing of the specific issue presented by Augusto Santos III. Clearly, the
contention of the herein petitioner that the said ruling is an obiter dictum is without basis.
Relevant to this particular issue is the case of Carey v. United Airlines,40 where the passenger
filed an action against the airline arising from an incident involving the former and the airlines
flight attendant during an international flight resulting to a heated exchange which included
insults and profanity. The United States Court of Appeals (9th Circuit) held that the "passenger's
action against the airline carrier arising from alleged confrontational incident between passenger
and flight attendant on international flight was governed exclusively by the Warsaw Convention,
even though the incident allegedly involved intentional misconduct by the flight attendant."41
In Bloom v. Alaska Airlines,42 the passenger brought nine causes of action against the airline in
the state court, arising from a confrontation with the flight attendant during an international flight
to Mexico. The United States Court of Appeals (9th Circuit) held that the "Warsaw Convention
governs actions arising from international air travel and provides the exclusive remedy for
conduct which falls within its provisions." It further held that the said Convention "created no
exception for an injury suffered as a result of intentional conduct" 43 which in that case involved
a claim for intentional infliction of emotional distress.
It is thus settled that allegations of tortious conduct committed against an airline passenger
during the course of the international carriage do not bring the case outside the ambit of the
Warsaw Convention.
Respondent, in seeking remedies from the trial court through special appearance of counsel, is
not deemed to have voluntarily submitted itself to the jurisdiction of the trial court.
Petitioner argues that respondent has effectively submitted itself to the jurisdiction of the trial
court when the latter stated in its Comment/Opposition to the Motion for Reconsideration that
"Defendant [is at a loss] x x x how the plaintiff arrived at her erroneous impression that it is/was
Euro-Philippines Airlines Services, Inc. that has been making a special appearance since x x x

British Airways x x x has been clearly specifying in all the pleadings that it has filed with this
Honorable Court that it is the one making a special appearance."44
In refuting the contention of petitioner, respondent cited La Naval Drug Corporation v. Court of
Appeals45 where we held that even if a party "challenges the jurisdiction of the court over his
person, as by reason of absence or defective service of summons, and he also invokes other
grounds for the dismissal of the action under Rule 16, he is not deemed to be in estoppel or to
have waived his objection to the jurisdiction over his person."46
This issue has been squarely passed upon in the recent case of Garcia v. Sandiganbayan,47 where
we reiterated our ruling in La Naval Drug Corporation v. Court of Appeals48 and elucidated thus:
Special Appearance to Question a Courts Jurisdiction Is Not
Voluntary Appearance
The second sentence of Sec. 20, Rule 14 of the Revised Rules of Civil Procedure clearly
provides:
Sec. 20. Voluntary appearance. The defendants voluntary appearance in the action shall be
equivalent to service of summons. The inclusion in a motion to dismiss of other grounds aside
from lack of jurisdiction over the person of the defendant shall not be deemed a voluntary
appearance.
Thus, a defendant who files a motion to dismiss, assailing the jurisdiction of the court over his
person, together with other grounds raised therein, is not deemed to have appeared voluntarily
before the court. What the rule on voluntary appearance the first sentence of the above-quoted
rule means is that the voluntary appearance of the defendant in court is without qualification, in
which case he is deemed to have waived his defense of lack of jurisdiction over his person due to
improper service of summons.
The pleadings filed by petitioner in the subject forfeiture cases, however, do not show that she
voluntarily appeared without qualification. Petitioner filed the following pleadings in Forfeiture
I: (a) motion to dismiss; (b) motion for reconsideration and/or to admit answer; (c) second
motion for reconsideration; (d) motion to consolidate forfeiture case with plunder case; and (e)
motion to dismiss and/or to quash Forfeiture I. And in Forfeiture II: (a) motion to dismiss and/or
to quash Forfeiture II; and (b) motion for partial reconsideration.
The foregoing pleadings, particularly the motions to dismiss, were filed by petitioner solely for
special appearance with the purpose of challenging the jurisdiction of the SB over her person and
that of her three children. Petitioner asserts therein that SB did not acquire jurisdiction over her
person and of her three children for lack of valid service of summons through improvident

substituted service of summons in both Forfeiture I and Forfeiture II. This stance the petitioner
never abandoned when she filed her motions for reconsideration, even with a prayer to admit
their attached Answer Ex Abundante Ad Cautelam dated January 22, 2005 setting forth
affirmative defenses with a claim for damages. And the other subsequent pleadings, likewise, did
not abandon her stance and defense of lack of jurisdiction due to improper substituted services of
summons in the forfeiture cases. Evidently, from the foregoing Sec. 20, Rule 14 of the 1997
Revised Rules on Civil Procedure, petitioner and her sons did not voluntarily appear before the
SB constitutive of or equivalent to service of summons.
Moreover, the leading La Naval Drug Corp. v. Court of Appeals applies to the instant case. Said
case elucidates the current view in our jurisdiction that a special appearance before the court
challenging its jurisdiction over the person through a motion to dismiss even if the movant
invokes other groundsis not tantamount to estoppel or a waiver by the movant of his objection
to jurisdiction over his person; and such is not constitutive of a voluntary submission to the
jurisdiction of the court.1avvphi1
Thus, it cannot be said that petitioner and her three children voluntarily appeared before the SB
to cure the defective substituted services of summons. They are, therefore, not estopped from
questioning the jurisdiction of the SB over their persons nor are they deemed to have waived
such defense of lack of jurisdiction. Consequently, there being no valid substituted services of
summons made, the SB did not acquire jurisdiction over the persons of petitioner and her
children. And perforce, the proceedings in the subject forfeiture cases, insofar as petitioner and
her three children are concerned, are null and void for lack of jurisdiction. (Emphasis supplied)
In this case, the special appearance of the counsel of respondent in filing the Motion to Dismiss
and other pleadings before the trial court cannot be deemed to be voluntary submission to the
jurisdiction of the said trial court. We hence disagree with the contention of the petitioner and
rule that there was no voluntary appearance before the trial court that could constitute estoppel or
a waiver of respondents objection to jurisdiction over its person.
WHEREFORE, the petition is DENIED. The October 14, 2005 Order of the Regional Trial Court
of Makati City, Branch 132, dismissing the complaint for lack of jurisdiction, is AFFIRMED.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 149547

July 4, 2008

PHILIPPINE AIRLINES, INC., petitioner,

vs.
HON. ADRIANO SAVILLO, Presiding Judge of RTC Branch 30 , Iloilo City, and
SIMPLICIO GRIO, respondents.
DECISION
CHICO-NAZARIO, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the
Decision1 dated 17 August 2001, rendered by the Court of Appeals in CA-G.R. SP No. 48664,
affirming in toto the Order2 dated 9 June 1998, of Branch 30 of the Regional Trial Court (RTC)
of Iloilo City, dismissing the Motion to Dismiss filed by petitioner Philippine Airlines Inc. (PAL)
in the case entitled, Simplicio Grio v. Philippine Airlines, Inc. and Singapore Airlines, docketed
as Civil Case No. 23773.
PAL is a corporation duly organized under Philippine law, engaged in the business of providing
air carriage for passengers, baggage and cargo.3
Public respondent Hon. Adriano Savillo is the presiding judge of Branch 30 of the Iloilo RTC,
where Civil Case No. 23773 was filed; while private respondent Simplicio Grio is the plaintiff
in the aforementioned case.
The facts are undisputed.
Private respondent was invited to participate in the 1993 ASEAN Seniors Annual Golf
Tournament held in Jakarta, Indonesia. He and several companions decided to purchase their
respective passenger tickets from PAL with the following points of passage: MANILASINGAPORE-JAKARTA-SINGAPORE-MANILA. Private respondent and his companions were
made to understand by PAL that its plane would take them from Manila to Singapore, while
Singapore Airlines would take them from Singapore to Jakarta.4
On 3 October 1993, private respondent and his companions took the PAL flight to Singapore and
arrived at about 6:00 oclock in the evening. Upon their arrival, they proceeded to the Singapore

Airlines office to check-in for their flight to Jakarta scheduled at 8:00 oclock in the same
evening. Singapore Airlines rejected the tickets of private respondent and his group because they
were not endorsed by PAL. It was explained to private respondent and his group that if Singapore
Airlines honored the tickets without PALs endorsement, PAL would not pay Singapore Airlines
for their passage. Private respondent tried to contact PALs office at the airport, only to find out
that it was closed.5
Stranded at the airport in Singapore and left with no recourse, private respondent was in panic
and at a loss where to go; and was subjected to humiliation, embarrassment, mental anguish,
serious anxiety, fear and distress. Eventually, private respondent and his companions were forced
to purchase tickets from Garuda Airlines and board its last flight bound for Jakarta. When they
arrived in Jakarta at about 12:00 oclock midnight, the party who was supposed to fetch them
from the airport had already left and they had to arrange for their transportation to the hotel at a
very late hour. After the series of nerve-wracking experiences, private respondent became ill and
was unable to participate in the tournament. 6
Upon his return to the Philippines, private respondent brought the matter to the attention of PAL.
He sent a demand letter to PAL on 20 December 1993 and another to Singapore Airlines on 21
March 1994. However, both airlines disowned liability and blamed each other for the fiasco. On
15 August 1997, private respondent filed a Complaint for Damages before the RTC docketed as
Civil Case No. 23773, seeking compensation for moral damages in the amount of P1,000,000.00
and attorneys fees.7
Instead of filing an answer to private respondents Complaint, PAL filed a Motion to Dismiss8
dated 18 September 1998 on the ground that the said complaint was barred on the ground of
prescription under Section 1(f) of Rule 16 of the Rules of Court.9 PAL argued that the Warsaw
Convention,10 particularly Article 29 thereof,11 governed this case, as it provides that any claim
for damages in connection with the international transportation of persons is subject to the
prescription period of two years. Since the Complaint was filed on 15 August 1997, more than
three years after PAL received the demand letter on 25 January 1994, it was already barred by
prescription.
On 9 June 1998, the RTC issued an Order12 denying the Motion to Dismiss. It maintained that the
provisions of the Civil Code and other pertinent laws of the Philippines, not the Warsaw
Convention, were applicable to the present case.
The Court of Appeals, in its assailed Decision dated 17 August 2001, likewise dismissed the
Petition for Certiorari filed by PAL and affirmed the 9 June 1998 Order of the RTC. It
pronounced that the application of the Warsaw Convention must not be construed to preclude the
application of the Civil Code and other pertinent laws. By applying Article 1144 of the Civil
Code,13 which allowed for a ten-year prescription period, the appellate court declared that the
Complaint filed by private respondent should not be dismissed.14
Hence, the present Petition, in which petitioner raises the following issues:
I

THE COURT OF APPEALS ERRED IN NOT GIVING DUE COURSE TO THE

PETITION AS RESPONDENT JUDGE COMMITED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OF JURSIDICTION IN DENYING PALS
MOTION TO DISMISS.
II
THE COURT OF APPEALS ERRED IN NOT APPLYING THE PROVISIONS OF THE
WARSAW CONVENTION DESPITE THE FACT THAT GRIOS CAUSE OF
ACTION AROSE FROM A BREACH OF CONTRACT FOR INTERNATIONAL AIR
TRANSPORT.
III
THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE COMPLAINT
FILED BY GRIO BEYOND THE TWO (2)-YEAR PERIOD PROVIDED UNDER
THE WARSAW CONVENTION IS ALREADY BARRED BY PRESCRIPTION.15
The petition is without merit.
In determining whether PALs Motion to Dismiss should have been granted by the trial court, it
must be ascertained if all the claims made by the private respondent in his Complaint are covered
by the Warsaw Convention, which effectively bars all claims made outside the two-year
prescription period provided under Article 29 thereof. If the Warsaw Convention covers all of
private respondents claims, then Civil Case No. 23773 has already prescribed and should
therefore be dismissed. On the other hand, if some, if not all, of respondents claims are outside
the coverage of the Warsaw Convention, the RTC may still proceed to hear the case.
The Warsaw Convention applies to "all international transportation of persons, baggage or goods
performed by any aircraft for hire." It seeks to accommodate or balance the interests of
passengers seeking recovery for personal injuries and the interests of air carriers seeking to limit
potential liability. It employs a scheme of strict liability favoring passengers and imposing
damage caps to benefit air carriers.16 The cardinal purpose of the Warsaw Convention is to
provide uniformity of rules governing claims arising from international air travel; thus, it
precludes a passenger from maintaining an action for personal injury damages under local law
when his or her claim does not satisfy the conditions of liability under the Convention.17
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
limits set out in this convention." Therefore, a claim covered by the Warsaw Convention can no
longer be recovered under local law, if the statute of limitations of two years has already lapsed.
Nevertheless, this Court notes that jurisprudence in the Philippines and the United States also
recognizes that the Warsaw Convention does not "exclusively regulate" the relationship between

passenger and carrier on an international flight. This Court finds that the present case is
substantially similar to cases in which the damages sought were considered to be outside the
coverage of the Warsaw Convention.
In United Airlines v. Uy,18 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.
Similar distinctions were made in American jurisprudence. In Mahaney v. Air France,19 a
passenger was denied access to an airline flight between New York and Mexico, despite the fact
that she held a confirmed reservation. 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 two-year 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 United States laws, then the plaintiff may claim purely
nominal compensatory damages for humiliation and hurt feelings, which are not provided for by
the Warsaw Convention. In another case, Wolgel v. Mexicana Airlines,20 the court pronounced
that actions for damages for the "bumping off" itself, rather than the incidental damages due to
the delay, fall outside the Warsaw Convention and do not prescribe in two years.
In the Petition at bar, private respondents Complaint alleged that both PAL and Singapore
Airlines were guilty of gross negligence, which resulted in his being subjected to "humiliation,
embarrassment, mental anguish, serious anxiety, fear and distress."21 The emotional harm
suffered by the private respondent as a result of having been unreasonably and unjustly
prevented from boarding the plane should be distinguished from the actual damages which
resulted from the same incident. Under the Civil Code provisions on tort,22 such emotional harm
gives rise to compensation where gross negligence or malice is proven.
The instant case is comparable to the case of Lathigra v. British Airways.23
In Lathigra, 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 private respondent from boarding the Singapore
Airlines flight because PAL allegedly failed to endorse the tickets of private respondent and his
companions, despite PALs assurances to respondent that Singapore Airlines had already
confirmed their passage. While this fact still needs to be 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 part 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 statute of limitations provided under Article 29 of the Warsaw
Convention.
Had the present case merely consisted of claims incidental to the airlines delay in transporting
their passengers, the private respondents Complaint would have been time-barred under Article
29 of the Warsaw Convention. However, the present case involves a special species of injury
resulting from the failure of PAL and/or Singapore Airlines to transport private respondent from
Singapore to Jakarta the profound distress, fear, anxiety and humiliation that private respondent
experienced when, despite PALs earlier assurance that Singapore Airlines confirmed his passage,
he was prevented from boarding the plane and he faced the daunting possibility that he would be
stranded in Singapore Airport because the PAL office was already closed.
These claims are covered by the Civil Code provisions on tort, and not within the purview of the
Warsaw Convention. Hence, the applicable prescription period is that provided under Article
1146 of the Civil Code:
Art. 1146. The following actions must be instituted within four years:
(1) Upon an injury to the rights of the plaintiff;
(2) Upon a quasi-delict.
Private respondents Complaint was filed with the RTC on 15 August 1997, which was less than
four years since PAL received his extrajudicial demand on 25 January 1994. Thus, private
respondents claims have not yet prescribed and PALs Motion to Dismiss must be denied.
Moreover, should there be any doubt as to the prescription of private respondents Complaint, the
more prudent action is for the RTC to continue hearing the same and deny the Motion to
Dismiss. Where it cannot be determined with certainty whether the action has already prescribed
or not, the defense of prescription cannot be sustained on a mere motion to dismiss based on
what appears to be on the face of the complaint.24 And where the ground on which prescription is
based does not appear to be indubitable, the court may do well to defer action on the motion to
dismiss until after trial on the merits.25
IN VIEW OF THE FOREGOING, the instant Petition is DENIED. The assailed Decision of
the Court of Appeals in CA-G.R. SP No. 48664, promulgated on 17 August 2001 is
AFFIRMED. Costs against the petitioner.
SO ORDERED.
Ynares-Santiago, Chairperson, Austria-Martinez, Nachura, Reyes, JJ., concur.

Footnotes

Penned by Associate Justice Alicia L. Santos with Associate Justices Ramon A.

Barcelona and Mercedes Gozo-Dadole, concurring. Rollo, pp. 39-46.
2

Penned by Judge Adriano S. Savillo. CA rollo, pp. 29-31.

CA rollo, p. 33.

Id.

Id.

Id. at 34.

Id.

Id. at 37-40.

Section 1. Grounds. Within the time for but before filing the answer to the complaint or
pleading asserting a claim, a motion to dismiss may be made on any of the following
grounds:
xxxx
(f) That the cause of action is barred by a prior judgment or by the Statute of
Limitations.
xxxx
10

The official title of the Warsaw Convention is "The Convention for the Unification of
Certain Rules Relating to International Carriage by Air," 12 October 1929. In the case of
the Philippines, the Warsaw Convention was concurred in by the Senate, through
Resolution No. 19, on 16 May 1950. The Philippine instrument of accession was signed
by President Elpidio Quirino on 13 October 1950 and was deposited with the Polish
Government on 9 November 1950. The Convention became applicable to the Philippines
on 9 February 1951. On 23 September 1955, President Ramon Magsaysay issued
Proclamation No. 201, declaring the Philippines formal adherence thereto, "to the end
that the same and every article and clause thereof may be observed and fulfilled in good
faith by the Republic of the Philippines and the citizens thereof." (Mapa v. Court of
Appeals, 341 Phil. 281, 295-296 [1997].)
11

Article 29. (1) The right to damages shall be extinguished if an action is not brought
within two 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 carriage 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.

12

CA rollo, pp. 29-31.

13

The following actions must be brought within ten years from the time the right of
action accrues:
(1) Upon a written contract;
(2)Upon an obligation created by law;
(3) Upon a judgment.
14

Rollo, pp. 14-17.

15

Id. at 25.

16

Pennington v. British Airways, 275 F.Supp. 2d 601, 11 July 2003.

17

Robertson v. American Airlines, 277 F.Supp. 2d 91, 18 August 2003.

18

376 Phil. 688 (1999).

19

474 F. Supp. 532, 28 June 1979.

20

821 F. 2d 442, 12 June 1987.

21

CA rollo, p. 34.

22

Art 2176. Whoever by act or omission causes damage to another, there being fault or
negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no
pre-existing contractual relation between parties, is called a quasi-delict and is governed
by the provisions of this Chapter.
Art.19. Every person must, in the exercise of his rights and in the performance of
his duties, act with justice, give everyone his due, and observe honesty and good
faith.
Art. 21. Any person who willfully causes loss or injury to another in a manner that
is contrary to morals, good customs or public policy shall compensate the latter
for the damage.
23

41 F. 3d 535, 1 December 1994.

24

Sison v. McQuaid, 94 Phil 201, 203-204 (1953).

25

Cordova v. Cordova, 102 Phil 1182 (1958).

epublic 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,
PHILI
PPINE
AIR
LINES
, INC.

(Sgd)
JERE
MIAS
S.
AGUS
TIN
Branc
h
Super
visor
Cebu
(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.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 122494 October 8, 1998

EVERETT STEAMSHIP CORPORATION, petitioner,
vs.
COURT OF APPEALS and HERNANDEZ TRADING CO. INC., respondents.

MARTINEZ, J.:
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.
Petitioner Everett Steamship Corporation, through this petition for review, seeks the reversal of the decision

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 petitioner's principal, Everett Orient Lines. The
said crates were covered by Bill of Lading No. NGO53MN.

Upon arrival at the port of Manila, it was discovered that the crate marked MARCO C/No. 14 was missing.
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. MTM-941, 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
attorney's fees; and (d) to pay the cost of the suit. The trial court ruled:
Considering defendant's 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 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 attorney's fees but affirmed the trial court's 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.
xxx xxx xxx
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 carrier's 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 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 by law, particularly
Articles 1749 and 1750 of the Civil Code which provide:
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 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
carrier's 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 shipper's 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 court's 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:

. . . 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 . . . are contracts not
entirely prohibited. The one who adheres to the contract is in reality free to reject it
entirely; if the 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 . . ., he is nevertheless bound by the provisions thereof. "Such provisions have been held to be a part of the
contract of carriage, and valid and binding upon the passenger regardless of the latter's lack of knowledge or assent to
the regulation." It is what is known as a contract of "adhesion," in regards which it has been said that contracts of
adhesion wherein one party imposes a ready-made form of contract on the other, as the plane ticket in the case at bar,
are contracts not entirely prohibited. The one who adheres to the contract is in reality free to reject it entirely; if he
adheres, he gives his consent. . . ., a contract limiting liability upon an agreed valuation does not offend against the
policy of the law forbidding one from contracting against his own negligence. (Emphasis supplied)
Greater vigilance, however, is required of the courts when dealing with contracts of adhesion in that the said contracts must be carefully
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."
scrutinized "in order to shield the unwary (or weaker party) from deceptive schemes contained in ready-made covenants,"

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
petitioner's 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
onsignee. . . . .
. . . 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 through 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. (Emphasis 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 carrier's 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 . . ., 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 petitioner's contention. To defeat the carrier's 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 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, Melo, Puno and Mendoza, JJ., concur.
Footnotes
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. Philippines 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 was delayed 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.

[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 Certiorari1[1] under Rule 45 of the Rules of Court,
seeking to reverse the August 7, 2001 Decision2[2] and the February 7, 2002 Resolution3[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[4]
The assailed Resolution denied Petitioners Motion for Partial Reconsideration.
The Facts
The facts are narrated by the CA5[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-Hongkong-Manila. Said ticket was exclusively
endorseable to Philippine Airlines, Ltd. (PAL for brevity).
1
2
3
4
5

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 check-in counter and it was Carmen who attended to him.
As this juncture, Chiok had already placed his travel documents, including his clutch bag, on top
of the PAL check-in counter.
Thereafter, Carmen directed PAL personnel to transfer counters. In the ensuing commotion,
Chiok lost his clutch bag 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. 82-13690, 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[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;

6.

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

The costs of this proceedings.7[7]

The two carriers appealed the RTC Decision to the CA.

Ruling of the Court of Appeals

6
7

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 Appeals8[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 ticketissuing 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[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.

8
9

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[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 CAL11[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 crossclaim of the petitioner.12[12]
The Courts Ruling
The Petition is not meritorious.
10
11
12

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[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[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 offloaded 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
13
14

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[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[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, the
Philippine Reports, whenever practicable.17[17] In the absence of this primary source, which is
still being updated, they may resort to unofficial sources like the SCRA.18[18] We remind them
that the Courts ponencia, when used to support a judgment or ruling, should be quoted
accurately.19[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

15
16
17
18
19

also because it disregarded jurisprudence, notably China Airlines v. Intermediate Appellate

Court20[20] and China Airlines v. Court of Appeals.21[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-to-Manila 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[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[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[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
20
21
22
23
24

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[25]
Likewise, as the principal in the contract of carriage, the petitioner in British Airways v. Court of
Appeals26[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[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 Kong-Manila 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[28]
25
26
27
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.
x x xx x x

xxx

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 to breaches 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[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[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[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.
29
30
31

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[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[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[34] In
Singson v. Court of Appeals,35[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.36[36] (Italics supplied)
In Saludo v. Court of Appeals,37[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[38] As narrated in Chans oral deposition,39[39] the
manner in which the airline discharged its responsibility to respondent and its other passengers
32
33
34
35
36
37

manifested a lack of the requisite diligence and due regard for their welfare. The pertinent
portions of the Oral Deposition are reproduced as follows:
QNow 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?

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[40]
x x xx x x

38
39
40

xxx

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?

No, no, no. That was the ticket he used.

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.

O.K. Miss Chan what do you understand by these entries here R bar M N 6 V?41[41]

AThis 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
41

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[42]
x x xx x x

xxx

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.

That is what he told you. He insisted on that flight?

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.

And also to confirm spaces for and on behalf of Philippine Airlines.

Yes.43[43]

Under the foregoing circumstances, we cannot apply our 1989 ruling in China Airlines v.
Intermediate Appellate Court,44[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

42
43
44

private respondent was incurred in good faith.45[45] Having found no gross negligence or
recklessness, we thereby deleted the award of moral and exemplary damages against it.46[46]
This Courts 1992 ruling in China Airlines v. Court of Appeals47[47] is likewise inapplicable. In
that case, we found no bad faith or malice in the airlines breach of its contractual obligation.48[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[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.

45
46
47
48
49

In view of the foregoing, we rule that moral and exemplary50[50] damages were properly awarded
by the lower courts.51[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[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.
x x xx x x

xxx

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 cross-claim. 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.

50
51
52

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[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.

G.R. No. 101538 June 23, 1992

AUGUSTO BENEDICTO SANTOS III, represented by his father and legal guardian, Augusto Benedicto Santos, petitioner,
vs.
NORTHWEST ORIENT AIRLINES and COURT OF APPEALS, respondents.

CRUZ, J.:
This case involves the Proper interpretation of Article 28(1) of the Warsaw Convention, reading as follows:
Art. 28. (1) An action for damage must be brought at the option of the plaintiff, in the territory of one of the High
Contracting Parties, either before the court of the domicile of the carrier or of his principal place of business, or where
he has a place of business through which the contract has been made, or before the court at the place of destination.
The petitioner is a minor and a resident of the Philippines. Private respondent Northwest Orient Airlines (NOA) is a foreign corporation with
principal office in Minnesota, U.S.A. and licensed to do business and maintain a branch office in the Philippines.
On October 21, 1986, the petitioner purchased from NOA a round-trip ticket in San Francisco. U.S.A., for his flight from San Francisco to
Manila via Tokyo and back. The scheduled departure date from Tokyo was December 20, 1986. No date was specified for his return to San
Francisco.

On December 19, 1986, the petitioner checked in at the NOA counter in the San Francisco airport for his
scheduled departure to Manila. Despite a previous confirmation and re-confirmation, he was informed that
he had no reservation for his flight from Tokyo to Manila. He therefore had to be wait-listed.

53

On March 12, 1987, the petitioner sued NOA for damages in the Regional Trial Court of Makati. On April
13, 1987, NOA moved to dismiss the complaint on the ground of lack of jurisdiction. Citing the abovequoted article, it contended that the complaint could be instituted only in the territory of one of the High
Contracting Parties, before:
1. the court of the domicile of the carrier;
2. the court of its principal place of business;
3. the court where it has a place of business through which the contract had been made;
4. the court of the place of destination.
The private respondent contended that the Philippines was not its domicile nor was this its principal place
of business. Neither was the petitioner's ticket issued in this country nor was his destination Manila but
San Francisco in the United States.
On February 1, 1988, the lower court granted the motion and dismissed the case. 2 The petitioner
appealed to the Court of Appeals, which affirmed the decision of the lower court. 3 On June 26, 1991, the
petitioner filed a motion for reconsideration, but the same was denied. 4 The petitioner then came to this
Court, raising substantially the same issues it submitted in the Court of Appeals.
The assignment of errors may be grouped into two major issues, viz:
(1) the constitutionality of Article 28(1) of the Warsaw Convention; and
(2) the jurisdiction of Philippine courts over the case.
The petitioner also invokes Article 24 of the Civil Code on the protection of minors.
I
THE ISSUE OF CONSTITUTIONALITY
A. The petitioner claims that the lower court erred in not ruling that Article 28(1) of the
Warsaw Convention violates the constitutional guarantees of due process and equal
protection.
The Republic of the Philippines is a party to the Convention for the Unification of Certain Rules Relating to
International Transportation by Air, otherwise known as the Warsaw Convention. It took effect on February
13, 1933. The Convention was concurred in by the Senate, through its Resolution No. 19, on May 16,
1950. The Philippine instrument of accession was signed by President Elpidio Quirino on October 13,
1950, and was deposited with the Polish government on November 9, 1950. The Convention became
applicable to the Philippines on February 9, 1951. On September 23, 1955, President Ramon Magsaysay
issued Proclamation No. 201, declaring our formal adherence thereto. "to the end that the same and
every article and clause thereof may be observed and fulfilled in good faith by the Republic of the
Philippines and the citizens thereof." 5

The Convention is thus a treaty commitment voluntarily assumed by the Philippine government and, as
such, has the force and effect of law in this country.
The petitioner contends that Article 28(1) cannot be applied in the present case because it is
unconstitutional. He argues that there is no substantial distinction between a person who purchases a
ticket in Manila and a person who purchases his ticket in San Francisco. The classification of the places
in which actions for damages may be brought is arbitrary and irrational and thus violates the due process
and equal protection clauses.
It is well-settled that courts will assume jurisdiction over a constitutional question only if it is shown that
the essential requisites of a judicial inquiry into such a question are first satisfied. Thus, there must be an
actual case or controversy involving a conflict of legal rights susceptible of judicial determination; the
constitutional question must have been opportunely raised by the proper party; and the resolution of the
question is unavoidably necessary to the decision of the case itself. 6
Courts generally avoid having to decide a constitutional question. This attitude is based on the doctrine of
separation of powers, which enjoins upon the departments of the government a becoming respect for
each other's acts.
The treaty which is the subject matter of this petition was a joint legislative-executive act. The
presumption is that it was first carefully studied and determined to be constitutional before it was adopted
and given the force of law in this country.
The petitioner's allegations are not convincing enough to overcome this presumption. Apparently, the
Convention considered the four places designated in Article 28 the most convenient forums for the
litigation of any claim that may arise between the airline and its passenger, as distinguished from all other
places. At any rate, we agree with the respondent court that this case can be decided on other grounds
without the necessity of resolving the constitutional issue.
B. The petitioner claims that the lower court erred in not ruling that Art. 28(1) of the
Warsaw Convention is inapplicable because of a fundamental change in the
circumstances that served as its basis.
The petitioner goes at great lengths to show that the provisions in the Convention were intended to
protect airline companies under "the conditions prevailing then and which have long ceased to exist." He
argues that in view of the significant developments in the airline industry through the years, the treaty has
become irrelevant. Hence, to the extent that it has lost its basis for approval, it has become
unconstitutional.
The petitioner is invoking the doctrine of rebus sic stantibus. According to Jessup, "this doctrine
constitutes an attempt to formulate a legal principle which would justify non-performance of a treaty
obligation if the conditions with relation to which the parties contracted have changed so materially and so
unexpectedly as to create a situation in which the exaction of performance would be unreasonable." 7 The
key element of this doctrine is the vital change in the condition of the contracting parties that they could
not have foreseen at the time the treaty was concluded.
The Court notes in this connection the following observation made in Day v. Trans World Airlines, Inc.: 8

The Warsaw drafters wished to create a system of liability rules that would cover all the hazards of air travel . . . The
Warsaw delegates knew that, in the years to come, civil aviation would change in ways that they could not foresee.
They wished to design a system of air law that would be both durable and flexible enough to keep pace with these
changes . . . The ever-changing needs of the system of civil aviation can be served within the framework they created.
It is true that at the time the Warsaw Convention was drafted, the airline industry was still in its infancy. However, that circumstance alone is
not sufficient justification for the rejection of the treaty at this time. The changes recited by the petitioner were, realistically, not entirely
unforeseen although they were expected in a general sense only. In fact, the Convention itself, anticipating such developments, contains the
following significant provision:
Article 41. Any High Contracting Party shall be entitled not earlier than two years after the coming into force of this
convention to call for the assembling of a new international conference in order to consider any improvements which
may be made in this convention. To this end, it will communicate with the Government of the French Republic which will
take the necessary measures to make preparations for such conference.
But the more important consideration is that the treaty has not been rejected by the Philippine government. The doctrine of rebus sic
stantibus does not operate automatically to render the treaty inoperative. There is a necessity for a formal act of rejection, usually made by
the head of State, with a statement of the reasons why compliance with the treaty is no longer required.
In lieu thereof, the treaty may be denounced even without an expressed justification for this action. Such denunciation is authorized under its
Article 39, viz:
Article 39. (1) Any one of the High Contracting Parties may denounce this convention by a notification addressed to the
Government of the Republic of Poland, which shall at once inform the Government of each of the High Contracting
Parties.
(2) Denunciation shall take effect six months after the notification of denunciation, and shall operate only as regards the
party which shall have proceeded to denunciation.
Obviously. rejection of the treaty, whether on the ground of rebus sic stantibus or pursuant to Article 39, is not a function of the courts but of
the other branches of government. This is a political act. The conclusion and renunciation of treaties is the prerogative of the political
departments and may not be usurped by the judiciary. The courts are concerned only with the interpretation and application of laws and
treaties in force and not with their wisdom or efficacy.
C. The petitioner claims that the lower court erred in ruling that the plaintiff must sue in the United States, because this
would deny him the right to access to our courts.
The petitioner alleges that the expenses and difficulties he will incur in filing a suit in the United States would constitute a constructive denial
of his right to access to our courts for the protection of his rights. He would consequently be deprived of this vital guaranty as embodied in
the Bill of Rights.
Obviously, the constitutional guaranty of access to courts refers only to courts with appropriate jurisdiction as defined by law. It does not
mean that a person can go to any court for redress of his grievances regardless of the nature or value of his claim. If the petitioner is barred
from filing his complaint before our courts, it is because they are not vested with the appropriate jurisdiction under the Warsaw Convention,
which is part of the law of our land.
II
THE ISSUE OF JURISDICTION.
A. The petitioner claims that the lower court erred in not ruling that Article 28(1) of the Warsaw Convention is a rule
merely of venue and was waived by defendant when it did not move to dismiss on the ground of improper venue.
By its own terms, the Convention applies to all international transportation of persons performed by aircraft for hire.
International transportation is defined in paragraph (2) of Article 1 as follows:

(2) For the purposes of this convention, the expression "international transportation" shall mean any transportation in
which, according to the contract made by the parties, the place of departure and the place of destination, whether or
not there be a break in the transportation or a transshipment, are situated [either] within the territories of two High
Contracting Parties . . .
Whether the transportation is "international" is determined by the contract of the parties, which in the case of passengers is the ticket. When
the contract of carriage provides for the transportation of the passenger between certain designated terminals "within the territories of two
High Contracting Parties," the provisions of the Convention automatically apply and exclusively govern the rights and liabilities of the airline
and its passenger.
Since the flight involved in the case at bar is international, the same being from the United States to the Philippines and back to the United
States, it is subject to the provisions of the Warsaw Convention, including Article 28(1), which enumerates the four places where an action for
damages may be brought.
Whether Article 28(1) refers to jurisdiction or only to venue is a question over which authorities are sharply divided. While the petitioner cites
9

there are later cases cited by the private

respondent supporting the conclusion that the provision is jurisdictional. 10
several cases holding that Article 28(1) refers to venue rather than jurisdiction,

Venue and jurisdiction are entirely distinct matters. Jurisdiction may not be conferred by consent or waiver
upon d court which otherwise would have no jurisdiction over the subject-matter of an action; but the
venue of an action as fixed by statute may be changed by the consent of the parties and an objection that
the plaintiff brought his suit in the wrong county may be waived by the failure of the defendant to make a
timely objection. In either case, the court may render a valid judgment. Rules as to jurisdiction can never
be left to the consent or agreement of the parties, whether or not a prohibition exists against their
alteration. 11
A number of reasons tends to support the characterization of Article 28(1) as a jurisdiction and not a
venue provision. First, the wording of Article 32, which indicates the places where the action for damages
"must" be brought, underscores the mandatory nature of Article 28(1). Second, this characterization is
consistent with one of the objectives of the Convention, which is to "regulate in a uniform manner the
conditions of international transportation by air." Third, the Convention does not contain any provision
prescribing rules of jurisdiction other than Article 28(1), which means that the phrase "rules as to
jurisdiction" used in Article 32 must refer only to Article 28(1). In fact, the last sentence of Article 32
specifically deals with the exclusive enumeration in Article 28(1) as "jurisdictions," which, as such, cannot
be left to the will of the parties regardless of the time when the damage occurred.
This issue was analyzed in the leading case of Smith v. Canadian Pacific Airways, Ltd., 12 where it was
held:
. . . Of more, but still incomplete, assistance is the wording of Article 28(2), especially
when considered in the light of Article 32. Article 28(2) provides that "questions of
procedure shall be governed by the law of the court to which the case is submitted"
(Emphasis supplied). Section (2) thus may be read to leave for domestic decision
questions regarding the suitability and location of a particular Warsaw Convention case.
In other words, where the matter is governed by the Warsaw Convention, jurisdiction takes on a dual
concept. Jurisdiction in the international sense must be established in accordance with Article 28(1) of the
Warsaw Convention, following which the jurisdiction of a particular court must be established pursuant to
the applicable domestic law. Only after the question of which court has jurisdiction is determined will the
issue of venue be taken up. This second question shall be governed by the law of the court to which the
case is submitted.

The petitioner submits that since Article 32 states that the parties are precluded "before the damages
occurred" from amending the rules of Article 28(1) as to the place where the action may be brought, it
would follow that the Warsaw Convention was not intended to preclude them from doing so "after the
damages occurred."
Article 32 provides:
Art. 32. Any clause contained in the contract and all special agreements entered into
before the damage occurred by which the parties purport to infringe the rules laid down
by this convention, whether by deciding the law to be applied, or by altering the rules as
to jurisdiction, shall be null and void. Nevertheless for the transportation of goods,
arbitration clauses shall be allowed, subject to this convention, if the arbitration is to take
place within one of the jurisdictions referred to in the first paragraph of Article 28.
His point is that since the requirements of Article 28(1) can be waived "after the damages (shall have)
occurred," the article should be regarded as possessing the character of a "venue" and not of a
"jurisdiction" provision. Hence, in moving to dismiss on the ground of lack of jurisdiction, the private
respondent has waived improper venue as a ground to dismiss.
The foregoing examination of Article 28(1) in relation to Article 32 does not support this conclusion. In any
event, we agree that even granting arguendo that Article 28(1) is a venue and not a jurisdictional
provision, dismissal of the case was still in order. The respondent court was correct in affirming the ruling
of the trial court on this matter, thus:
Santos' claim that NOA waived venue as a ground of its motion to dismiss is not correct.
True it is that NOA averred in its MOTION TO DISMISS that the ground thereof is "the
Court has no subject matter jurisdiction to entertain the Complaint" which SANTOS
considers as equivalent to "lack of jurisdiction over the subject matter . . ." However, the
gist of NOA's argument in its motion is that the Philippines is not the proper place where
SANTOS could file the action meaning that the venue of the action is improperly laid.
Even assuming then that the specified ground of the motion is erroneous, the fact is the
proper ground of the motion improper venue has been discussed therein.
Waiver cannot be lightly inferred. In case of doubt, it must be resolved in favor of non-waiver if there are
special circumstances justifying this conclusion, as in the petition at bar. As we observed in Javier vs.
Intermediate Court of Appeals: 13
Legally, of course, the lack of proper venue was deemed waived by the petitioners when
they failed to invoke it in their original motion to dismiss. Even so, the motivation of the
private respondent should have been taken into account by both the trial judge and the
respondent court in arriving at their decisions.
The petitioner also invokes KLM Royal Dutch Airlines v. RTC, 14 a decision of our Court of Appeals, where
it was held that Article 28(1) is a venue provision. However, the private respondent avers that this was in
effect reversed by the case of Aranas v. United Airlines, 15 where the same court held that Article 28(1) is
a jurisdictional provision. Neither of these cases is binding on this Court, of course, nor was either of them
appealed to us. Nevertheless, we here express our own preference for the later case of Aranas insofar as
its pronouncements on jurisdiction conform to the judgment we now make in this petition.

B. The petitioner claims that the lower court erred in not ruling that under Article 28(1) of
the Warsaw Convention, this case was properly filed in the Philippines, because Manila
was the destination of the plaintiff.
The Petitioner contends that the facts of this case are analogous to those in Aanestad v. Air Canada. 16 In
that case, Mrs. Silverberg purchased a round-trip ticket from Montreal to Los Angeles and back to
Montreal. The date and time of departure were specified but not of the return flight. The plane crashed
while on route from Montreal to Los Angeles, killing Mrs. Silverberg. Her administratrix filed an action for
damages against Air Canada in the U.S. District Court of California. The defendant moved to dismiss for
lack of jurisdiction but the motion was denied thus:
. . . It is evident that the contract entered into between Air Canada and Mrs. Silverberg as
evidenced by the ticket booklets and the Flight Coupon No. 1, was a contract for Air
Canada to carry Mrs. Silverberg to Los Angeles on a certain flight, a certain time and a
certain class, but that the time for her to return remained completely in her power.
Coupon No. 2 was only a continuing offer by Air Canada to give her a ticket to return to
Montreal between certain dates. . . .
The only conclusion that can be reached then, is that "the place of destination" as used in
the Warsaw Convention is considered by both the Canadian C.T.C. and the United States
C.A.B. to describe at least two "places of destination," viz., the "place of destination" of a
particular flight either an "outward destination" from the "point of origin" or from the
"outward point of destination" to any place in Canada.
Thus the place of destination under Art. 28 and Art. 1 of the Warsaw Convention of the
flight on which Mrs. Silverberg was killed, was Los Angeles according to the ticket, which
was the contract between the parties and the suit is properly filed in this Court which has
jurisdiction.
The Petitioner avers that the present case falls squarely under the above ruling because the date and
time of his return flight to San Francisco were, as in the Aanestad case, also left open. Consequently,
Manila and not San Francisco should be considered the petitioner's destination.
The private respondent for its part invokes the ruling in Butz v. British Airways, 17 where the United States
District Court (Eastern District of Pennsylvania) said:
. . . Although the authorities which addressed this precise issue are not extensive, both
the cases and the commentators are almost unanimous in concluding that the "place of
destination" referred to in the Warsaw Convention "in a trip consisting of several parts . . .
is the ultimate destination that is accorded treaty jurisdiction." . . .
But apart from that distinguishing feature, I cannot agree with the Court's analysis in
Aanestad; whether the return portion of the ticket is characterized as an option or a
contract, the carrier was legally bound to transport the passenger back to the place of
origin within the prescribed time and. the passenger for her part agreed to pay the fare
and, in fact, did pay the fare. Thus there was mutuality of obligation and a binding
contract of carriage, The fact that the passenger could forego her rights under the
contract does not make it any less a binding contract. Certainly, if the parties did not

contemplate the return leg of the journey, the passenger would not have paid for it and
the carrier would not have issued a round trip ticket.
We agree with the latter case. The place of destination, within the meaning of the Warsaw Convention, is
determined by the terms of the contract of carriage or, specifically in this case, the ticket between the
passenger and the carrier. Examination of the petitioner's ticket shows that his ultimate destination is San
Francisco. Although the date of the return flight was left open, the contract of carriage between the parties
indicates that NOA was bound to transport the petitioner to San Francisco from Manila. Manila should
therefore be considered merely an agreed stopping place and not the destination.
The petitioner submits that the Butz case could not have overruled the Aanestad case because these
decisions are from different jurisdictions. But that is neither here nor there. In fact, neither of these cases
is controlling on this Court. If we have preferred the Butz case, it is because, exercising our own freedom
of choice, we have decided that it represents the better, and correct, interpretation of Article 28(1).
Article 1(2) also draws a distinction between a "destination" and an "agreed stopping place." It is the
"destination" and not an "agreed stopping place" that controls for purposes of ascertaining jurisdiction
under the Convention.
The contract is a single undivided operation, beginning with the place of departure and ending with the
ultimate destination. The use of the singular in this expression indicates the understanding of the parties
to the Convention that every contract of carriage has one place of departure and one place of destination.
An intermediate place where the carriage may be broken is not regarded as a "place of destination."
C. The petitioner claims that the lower court erred in not ruling that under Art. 28(1) of the
Warsaw Convention, this case was properly filed in the Philippines because the
defendant has its domicile in the Philippines.
The petitioner argues that the Warsaw Convention was originally written in French and that in interpreting
its provisions, American courts have taken the broad view that the French legal meaning must govern. 18
In French, he says, the "domicile" of the carrier means every place where it has a branch office.
The private respondent notes, however, that in Compagnie Nationale Air France vs. Giliberto, 19 it was
held:
The plaintiffs' first contention is that Air France is domiciled in the United States. They say
that the domicile of a corporation includes any country where the airline carries on its
business on "a regular and substantial basis," and that the United States qualifies under
such definition. The meaning of domicile cannot, however, be so extended. The domicile
of a corporation is customarily regarded as the place where it is incorporated, and the
courts have given the meaning to the term as it is used in article 28(1) of the Convention.
(See Smith v. Canadian Pacific Airways, Ltd. (2d Cir. 1971), 452 F2d 798, 802; Nudo v.
Societe Anonyme Belge d' Exploitation de la Navigation Aerienne Sabena Belgian World
Airlines (E.D. pa. 1962). 207 F. Supp, 191; Karfunkel v. Compagnie Nationale Air France
(S.D.N.Y. 1977), 427 F. Suppl. 971, 974). Moreover, the structure of article 28(1), viewed
as a whole, is also incompatible with the plaintiffs' claim. The article, in stating that places
of business are among the bases of the jurisdiction, sets out two places where an action
for damages may be brought; the country where the carrier's principal place of business

is located, and the country in which it has a place of business through which the
particular contract in question was made, that is, where the ticket was bought, Adopting
the plaintiffs' theory would at a minimum blur these carefully drawn distinctions by
creating a third intermediate category. It would obviously introduce uncertainty into
litigation under the article because of the necessity of having to determine, and without
standards or criteria, whether the amount of business done by a carrier in a particular
country was "regular" and "substantial." The plaintiff's request to adopt this basis of
jurisdiction is in effect a request to create a new jurisdictional standard for the
Convention.
Furthermore, it was argued in another case 20 that:
. . . In arriving at an interpretation of a treaty whose sole official language is French, are
we bound to apply French law? . . . We think this question and the underlying choice of
law issue warrant some discussion
. . . We do not think this statement can be regarded as a conclusion that internal French
law is to be "applied" in the choice of law sense, to determine the meaning and scope of
the Convention's terms. Of course, French legal usage must be considered in arriving at
an accurate English translation of the French. But when an accurate English translation is
made and agreed upon, as here, the inquiry into meaning does not then revert to a quest
for a past or present French law to be "applied" for revelation of the proper scope of the
terms. It does not follow from the fact that the treaty is written in French that in
interpreting it, we are forever chained to French law, either as it existed when the treaty
was written or in its present state of development. There is no suggestion in the treaty
that French law was intended to govern the meaning of Warsaw's terms, nor have we
found any indication to this effect in its legislative history or from our study of its
application and interpretation by other courts. Indeed, analysis of the cases indicates that
the courts, in interpreting and applying the Warsaw Convention, have, not considered
themselves bound to apply French law simply because the Convention is written in
French. . . .
We agree with these rulings.
Notably, the domicile of the carrier is only one of the places where the complaint is allowed to be filed
under Article 28(1). By specifying the three other places, to wit, the principal place of business of the
carrier, its place of business where the contract was made, and the place of destination, the article clearly
meant that these three other places were not comprehended in the term "domicile."
D. The petitioner claims that the lower court erred in not ruling that Art. 28(1) of the
Warsaw Convention does not apply to actions based on tort.
The petitioner alleges that the gravamen of the complaint is that private respondent acted arbitrarily and
in bad faith, discriminated against the petitioner, and committed a willful misconduct because it canceled
his confirmed reservation and gave his reserved seat to someone who had no better right to it. In short.
the private respondent committed a tort.

Such allegation, he submits, removes the present case from the coverage of the Warsaw Convention. He
argues that in at least two American cases, 21 it was held that Article 28(1) of the Warsaw Convention
does not apply if the action is based on tort.
This position is negated by Husserl v. Swiss Air Transport Company, 22 where the article in question was
interpreted thus:
. . . Assuming for the present that plaintiff's claim is "covered" by Article 17, Article 24
clearly excludes any relief not provided for in the Convention as modified by the Montreal
Agreement. It does not, however, limit the kind of cause of action on which the relief may
be founded; rather it provides that any action based on the injuries specified in Article 17
"however founded," i.e., regardless of the type of action on which relief is founded, can
only be brought subject to the conditions and limitations established by the Warsaw
System. Presumably, the reason for the use of the phrase "however founded," in two-fold:
to accommodate all of the multifarious bases on which a claim might be founded in
different countries, whether under code law or common law, whether under contract or
tort, etc.; and to include all bases on which a claim seeking relief for an injury might be
founded in any one country. In other words, if the injury occurs as described in Article 17,
any relief available is subject to the conditions and limitations established by the Warsaw
System, regardless of the particular cause of action which forms the basis on which a
plaintiff could seek
relief . . .
The private respondent correctly contends that the allegation of willful misconduct resulting in a tort is
insufficient to exclude the case from the comprehension of the Warsaw Convention. The petitioner has
apparently misconstrued the import of Article 25(l) of the Convention, which reads as follows:
Art. 25 (1). The carrier shall not be entitled to avail himself of the provisions of this
Convention which exclude or limit his liability. if the damage is caused by his willful
misconduct or by such default on his part as, in accordance with the law of the court to
which the case is submitted, is considered to be equivalent to willful misconduct.
It is understood under this article that the court called upon to determine the applicability of the limitation
provision must first be vested with the appropriate jurisdiction. Article 28(1) is the provision in the
Convention which defines that jurisdiction. Article 22 23 merely fixes the monetary ceiling for the liability of
the carrier in cases covered by the Convention. If the carrier is indeed guilty of willful misconduct, it can
avail itself of the limitations set forth in this article. But this can be done only if the action has first been
commenced properly under the rules on jurisdiction set forth in Article 28(1).
III
THE ISSUE OF PROTECTION TO MINORS
The petitioner calls our attention to Article 24 of the Civil Code, which states:
Art. 24. In 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.

Application of this article to the present case is misplaced. The above provision assumes that the court is
vested with jurisdiction to rule in favor of the disadvantaged minor, As already explained, such jurisdiction
is absent in the case at bar.
CONCLUSION
A number of countries have signified their concern over the problem of citizens being denied access to
their own courts because of the restrictive provision of Article 28(1) of the Warsaw Convention. Among
these is the United States, which has proposed an amendment that would enable the passenger to sue in
his own domicile if the carrier does business in that jurisdiction. The reason for this proposal is explained
thus:
In the event a US citizen temporarily residing abroad purchases a Rome to New York to
Rome ticket on a foreign air carrier which is generally subject to the jurisdiction of the US,
Article 28 would prevent that person from suing the carrier in the US in a "Warsaw Case"
even though such a suit could be brought in the absence of the Convention.
The proposal was incorporated in the Guatemala Protocol amending the Warsaw Convention, which was
adopted at Guatemala City on March 8,
1971. 24 But it is still ineffective because it has not yet been ratified by the required minimum number of
contracting parties. Pending such ratification, the petitioner will still have to file his complaint only in any of
the four places designated by Article 28(1) of the Warsaw Convention.
The proposed amendment bolsters the ruling of this Court that a citizen does not necessarily have the
right to sue in his own courts simply because the defendant airline has a place of business in his country.
The Court can only sympathize with the petitioner, who must prosecute his claims in the United States
rather than in his own country at least inconvenience. But we are unable to grant him the relief he seeks
because we are limited by the provisions of the Warsaw Convention which continues to bind us. It may
not be amiss to observe at this point that the mere fact that he will have to litigate in the American courts
does not necessarily mean he will litigate in vain. The judicial system of that country in known for its
sense of fairness and, generally, its strict adherence to the rule of law.
WHEREFORE, the petition is DENIED, with costs against the petitioner. It is so ordered.
Narvasa, C.J., Gutierrez, Jr., Paras, Feliciano, Padilla, Bidin, Grio-Aquino, Medialdea, Regalado,
Davide, Jr., Romero, Nocon and Bellosillo, JJ., concur.

Footnotes
1 Annex "A," Orig. Records, pp. 4-5.
2 Ibid., pp. 205-207; penned by Judge Pedro N. Laggui.
3 Rollo, p. 60; penned by Buena, J., with Gonzaga-Reyes and Abad Santos, Jr., JJ.,
concurring.

4 Ibid., p. 79.
5 51 O.G. 4933-4934.
6 Association of Small Landowners in the Philippines, Inc. v. Secretary of Agrarian
Reform, 175 SCRA 343; Dumlao v. Comelec, 95 SCRA 392.
7 A Modern Law of Nations (1950), p. 150.
8 528 F. 2d 31.
9 Berner v. United Airlines, Inc., 149 NYS 2d, 335, 343, 1956; Doering v. Scandinavian
Airlines System, 329 F Supp 1081, 1082, 1971; Spencer v. Northwest Orient Airlines, 201
F. Supp. 504, 506, 1962.
10 Smith v. Canadian Pacific Airways Ltd., 452 F. 2d 798 1971; Campagnie Nationale Air
France v. Giliberto, 1838 N.E., 2d 977, 1978; MacCarthy v. East African Airways Corp., 13
Av 17, 385, Records, p. 113, 1974; Sabharwal v. Kuwait Airways Corp., 18 Av 8, 380;
Records, p. 115, 1984: Duff v. Varig Airlines, Inc., S.A., 22 Avi, Rollo, p. 186, 1989.
11 Francisco, Rules of Court, Vol. I, 1973, p. 331.
12 452 F. 2d 798.
13 171 SCRA 605.
14 CA G.R.-SP No. 09259, January 22, 1987.
15 CA G.R.-CV No. 19974, April 8, 1991.
16 390 F. Supp. 1165, 1975.
17 421 F. Suppl. 127.
18 Block v. Compagnie, 386 F. 2d 232.
19 838 N.E. 2d 977, 1978.
20 Rosman v. TWA, 1974; 34 NY 2d 385; 358 NYS 2d 97; 314 N.E. 2d 848; 72 A.L.R. 3d
1282.
21 Eck v. United Arab, S.A.A., 241 F. Supp. 804-807; Spencer v. Northwest Orient
Airlines, 201 F. Supp. 504-507.
22 Rollo, pp. 189-199; 388 F. Supp. 1238.
23 Article 22. (1) In the transportation of passengers, the liability of the carrier for each
passenger shall be limited to the sum of 125,000 francs. Where in accordance with the

law of the court to which the case is submitted, damages may be awarded in the form of
periodical payments, the equivalent capital value of the said payments shall not exceed
125,000 francs. Nevertheless, by special contract, the carrier and the passenger may
agree to a higher limit of liability.
(2) In 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.
(3) As regards objects of which the passenger takes charge himself, the liability of the
carrier shall be limited to 5,000 francs per passenger.
(4) 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.
24 Varkonyi v. S.A. Impress De Viacao Airea Rio Grandense (Varig) 1972; 336 NYS 2d
1973.

SECOND DIVISION

[G.R. No. 127768. November 19, 1999]

UNITED AIRLINES, petitioner, vs. WILLIE J. UY, respondent.
DECISION
BELLOSILLO, J.:

UNITED AIRLINES assails in this petition for review on certiorari under Rule 45 the 29 August
1995 Decision of the Court of Appeals in CA-G.R. CV No. 39761 which reversed the 7 August
1992 order issued by the trial court in Civil Case No. Q-92-12410i[1] granting petitioner's motion
to dismiss based on prescription of cause of action. The issues sought to be resolved are whether
the notice of appeal to the appellate court was timely filed, and whether Art. 29 of the Warsaw
Conventionii[2] should apply to the case at bar.
On 13 October 1989 respondent Willie J. Uy, a revenue passenger on United Airlines Flight No.
819 for the San Francisco - Manila route, checked in together with his luggage one piece of

which was found to be overweight at the airline counter. To his utter humiliation, an employee of
petitioner rebuked him saying that he should have known the maximum weight allowance to be
70 kgs. per bag and that he should have packed his things accordingly. Then, in a loud voice in
front of the milling crowd, she told respondent to repack his things and transfer some of them
from the overweight luggage to the lighter ones. Not wishing to create further scene, respondent
acceded only to find his luggage still overweight. The airline then billed him overweight charges
which he offered to pay with a miscellaneous charge order (MCO) or an airline pre-paid credit.
However, the airlines employee, and later its airport supervisor, adamantly refused to honor the
MCO pointing out that there were conflicting figures listed on it. Despite the explanation from
respondent that the last figure written on the MCO represented his balance, petitioners
employees did not accommodate him. Faced with the prospect of leaving without his luggage,
respondent paid the overweight charges with his American Express credit card.
Respondents troubles did not end there. Upon arrival in Manila, he discovered that one of his
bags had been slashed and its contents stolen. He particularized his losses to be around US
$5,310.00. In a letter dated 16 October 1989 respondent bewailed the insult, embarrassment and
humiliating treatment he suffered in the hands of United Airlines employees, notified petitioner
of his loss and requested reimbursement thereof. Petitioner United Airlines, through Central
Baggage Specialist Joan Kroll, did not refute any of respondents allegations and mailed a check
representing the payment of his loss based on the maximum liability of US $9.70 per pound.
Respondent, thinking the amount to be grossly inadequate to compensate him for his losses, as
well as for the indignities he was subjected to, sent two (2) more letters to petitioner airline, one
dated 4 January 1990 through a certain Atty. Pesigan, and another dated 28 October 1991
through Atty. Ramon U. Ampil demanding an out-of-court settlement of P1,000,000.00.
Petitioner United Airlines did not accede to his demands.
Consequently, on 9 June 1992 respondent filed a complaint for damages against United Airlines
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;iii[3] that petitioner
airline accorded him ill and shabby treatment to his extreme embarrassment and humiliation;
and, as such he should be paid moral damages of at least P1,000,000.00, exemplary damages of
at least P500,000.00, plus attorney's fees of at least P50,000.00. Similarly, he alleged that the
damage to his luggage and its stolen contents amounted to around $5,310.00, and requested
reimbursement therefor.
United Airlines moved to dismiss the complaint on the ground that respondents cause of action
had prescribed, invoking Art. 29 of the Warsaw Convention which provides 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.

Respondent countered that par. (1) of Art. 29 of the Warsaw Convention must be reconciled with
par. (2) thereof which states that "the method of calculating the period of limitation shall be
determined by the law of the court to which the case is submitted." Interpreting thus, respondent
noted that according to Philippine laws the prescription of actions is interrupted "when they are
filed before the court, when there is a written extrajudicial demand by the creditors, and when
there is any written acknowledgment of the debt by the debtor."iv[4] Since he made several
demands upon United Airlines: first, through his personal letter dated 16 October 1989; second,
through a letter dated 4 January 1990 from Atty. Pesigan; and, finally, through a letter dated 28
October 1991 written for him by Atty. Ampil, the two (2)-year period of limitation had not yet
been exhausted.
On 2 August 1992 the trial court ordered the dismissal of the action holding that the language of
Art. 29 is clear that the action must be brought within two (2) years from the date of arrival at the
destination. It held that although the second paragraph of Art. 29 speaks of deference to the law
of the local court in "calculating the period of limitation," the same does not refer to the local
forums rules in interrupting the prescriptive period but only to the rules of determining the time
in which the action may be deemed commenced, and within our jurisdiction the action shall be
deemed "brought" or commenced by the filing of a complaint. Hence, the trial court concluded
that Art. 29 excludes the application of our interruption rules.
Respondent received a copy of the dismissal order on 17 August 1992. On 31 August 1992, or
fourteen (14) days later, he moved for the reconsideration of the trial courts order. The trial court
denied the motion and respondent received copy of the denial order on 28 September 1992. Two
(2) days later, on 1 October 1992 respondent filed his notice of appeal.
United Airlines once again moved for the dismissal of the case this time pointing out that
respondents fifteen (15)-day period to appeal had already elapsed. Petitioner argued that having
used fourteen (14) days of the reglementary period for appeal, respondent Uy had only one (1)
day remaining to perfect his appeal, and since he filed his notice of appeal two (2) days later, he
failed to meet the deadline.
In its questioned Decision dated 29 August 1995v[5] the appellate court gave due course to the
appeal holding that respondents delay of two (2) days in filing his notice of appeal did not hinder
it from reviewing the appealed order of dismissal since jurisprudence dictates that an appeal may
be entertained despite procedural lapses anchored on equity and justice.
On the applicability of the Warsaw Convention, the appellate court ruled that the Warsaw
Convention did not preclude the operation of the Civil Code and other pertinent laws.
Respondents failure to file his complaint within the two (2)-year limitation provided in the
Warsaw Convention did not bar his action since he could still hold petitioner liable for breach of
other provisions of the Civil Code which prescribe a different period or procedure for instituting
an action. Further, under Philippine laws, prescription of actions is interrupted where, among
others, there is a written extrajudicial demand by the creditors, and since respondent Uy sent
several demand letters to petitioner United Airlines, the running of the two (2)-year prescriptive
period was in effect suspended. Hence, the appellate court ruled that respondents cause of action

had not yet prescribed and ordered the records remanded to the Quezon City trial court for
further proceedings.
Petitioner now contends that the appellate court erred in assuming jurisdiction over respondent's
appeal since it is clear that the notice of appeal was filed out of time. It argues that the courts
relax the stringent rule on perfection of appeals only when there are extraordinary circumstances,
e.g., when the Republic stands to lose hundreds of hectares of land already titled and used for
educational purposes; when the counsel of record was already dead; and wherein appellant was
the owner of the trademark for more than thirty (30) years, and the circumstances of the present
case do not compare to the above exceptional cases.vi[6]
Section 1 of Rule 45 of the 1997 Rules of Civil Procedure provides that "a party may appeal by
certiorari, from a judgment of the Court of Appeals, by filing with the Supreme Court a petition
for certiorari, within fifteen (15) days from notice of judgment or of the denial of his motion for
reconsideration filed in due time x x x x" This Rule however should not be interpreted as "to
sacrifice the substantial right of the appellant in the sophisticated altar of technicalities with
impairment of the sacred principles of justice."vii[7] It should be borne in mind that the real
purpose behind the limitation of the period of appeal is to forestall or avoid an unreasonable
delay in the administration of justice. Thus, we have ruled that delay in the filing of a notice of
appeal does not justify the dismissal of the appeal where the circumstances of the case show that
there is no intent to delay the administration of justice on the part of appellant's counsel,viii[8] or
when there are no substantial rights affected,ix[9] or when appellant's counsel committed a
mistake in the computation of the period of appeal, an error not attributable to negligence or bad
faith.x[10]
In the instant case, respondent filed his notice of appeal two (2) days later than the prescribed
period. Although his counsel failed to give the reason for the delay, we are inclined to give due
course to his appeal due to the unique and peculiar facts of the case and the serious question of
law it poses. In the now almost trite but still good principle, technicality, when it deserts its
proper office as an aid to justice and becomes its great hindrance and chief enemy, deserves scant
consideration.xi[11]
Petitioner likewise contends that the appellate court erred in ruling that respondent's cause of
action has not prescribed since delegates to the Warsaw Convention clearly intended the two (2)year limitation incorporated in Art. 29 as an absolute bar to suit and not to be made subject to the
various tolling provisions of the laws of the forum. Petitioner argues that in construing the
second paragraph of Art. 29 private respondent cannot read into it Philippine rules on
interruption of prescriptive periods and state that his extrajudicial demand has interrupted the
period of prescription.xii[12] American jurisprudence has declared that "Art. 29 (2) was not
intended to permit forums to consider local limitation tolling provisions but only to let local law
determine whether an action had been commenced within the two-year period, since the method
of commencing a suit varies from country to country."xiii[13]
Within our jurisdiction we have held that the Warsaw Convention can be applied, or ignored,
depending on the peculiar facts presented by each case.xiv[14] Thus, we have ruled that the
Convention's provisions do not regulate or exclude liability for other breaches of contract by the

carrier or misconduct of its officers and employees, or for some particular or exceptional type of
damage.xv[15] Neither may the Convention be invoked to justify the disregard of some
extraordinary sort of damage resulting to a passenger and preclude recovery therefor beyond the
limits set by said Convention.xvi[16] Likewise, we have held that the Convention does not
preclude the operation of the Civil Code and other pertinent laws.xvii[17] It does not regulate,
much less exempt, the carrier from liability for damages for violating the rights of its passengers
under the contract of carriage, especially if willful misconduct on the part of the carrier's
employees is found or established.xviii[18]
Respondent's complaint reveals that he is suing on two (2) causes of action: (a) the shabby and
humiliating treatment he received from petitioner's employees at the San Francisco Airport
which caused him extreme embarrassment and social humiliation; and, (b) the slashing of his
luggage and the loss of his personal effects amounting to US $5,310.00.
While his second cause of action - an action for damages arising from theft or damage to
property or goods - is well within the bounds of the Warsaw Convention, his first cause of action
-an action for damages arising from the misconduct of the airline employees and the violation of
respondent's rights as passenger - clearly is not.
Consequently, insofar as the first cause of action is concerned, respondent's failure to file his
complaint within the two (2)-year limitation of the Warsaw Convention does not bar his action
since petitioner airline may still be held liable for breach of other provisions of the Civil Code
which prescribe a different period or procedure for instituting the action, specifically, Art. 1146
thereof which prescribes four (4) years for filing an action based on torts.
As for respondent's second cause of action, indeed the travaux preparatories of the Warsaw
Convention reveal that the delegates thereto intended the two (2)-year limitation incorporated in
Art. 29 as an absolute bar to suit and not to be made subject to the various tolling provisions of
the laws of the forum. This therefore forecloses the application of our own rules on interruption
of prescriptive periods. Article 29, par. (2), was intended only to let local laws determine whether
an action had been commenced within the two (2)-year period, and within our jurisdiction an
action shall be deemed commenced upon the filing of a complaint. Since it is indisputable that
respondent filed the present action beyond the two (2)-year time frame his second cause of action
must be barred. Nonetheless, it cannot be doubted that respondent exerted efforts to immediately
convey his loss to petitioner, even employed the services of two (2) lawyers to follow up his
claims, and that the filing of the action itself was delayed because of petitioner's evasion.
In this regard, Philippine Airlines, Inc. v. Court of Appealsxix[19] is instructive. In this case of
PAL, private respondent filed an action for damages against petitioner airline for the breakage of
the front glass of the microwave oven which she shipped under PAL Air Waybill No. 0-791013008-3. Petitioner averred that, the action having been filed seven (7) months after her arrival
at her port of destination, she failed to comply with par. 12, subpar. (a) (1), of the Air Waybill
which expressly provided that the person entitled to delivery must make a complaint to the
carrier in writing in case of visible damage to the goods, immediately after discovery of the
damage and at the latest within 14 days from receipt of the goods. Despite non-compliance
therewith the Court held that by private respondent's immediate submission of a formal claim to

petitioner, which however was not immediately entertained as it was referred from one employee
to another, she was deemed to have substantially complied with the requirement. The Court
noted that with private respondent's own zealous efforts in pursuing her claim it was clearly not
her fault that the letter of demand for damages could only be filed, after months of exasperating
follow-up of the claim, on 13 August 1990, and that if there was any failure at all to file the
formal claim within the prescriptive period contemplated in the Air Waybill, this was largely
because of the carrier's own doing, the consequences of which could not in all fairness be
attributed to private respondent.
In the same vein must we rule upon the circumstances brought before us. Verily, respondent filed
his complaint more than two (2) years later, beyond the period of limitation prescribed by the
Warsaw Convention for filing a claim for damages. However, it is obvious that respondent was
forestalled from immediately filing an action because petitioner airline gave him the runaround,
answering his letters but not giving in to his demands. True, respondent should have already filed
an action at the first instance when his claims were denied by petitioner but the same could only
be due to his desire to make an out-of-court settlement for which he cannot be faulted. Hence,
despite the express mandate of Art. 29 of the Warsaw Convention that an action for damages
should be filed within two (2) years from the arrival at the place of destination, such rule shall
not be applied in the instant case because of the delaying tactics employed by petitioner airline
itself. Thus, private respondent's second cause of action cannot be considered as time-barred
under Art. 29 of the Warsaw Convention.
WHEREFORE, the assailed Decision of the Court of Appeals reversing and setting aside the
appealed order of the trial court granting the motion to dismiss the complaint, as well as its
Resolution denying reconsideration, is AFFIRMED. Let the records of the case be remanded to
the court of origin for further proceedings taking its bearings from this disquisition.
SO ORDERED.
Mendoza, Quisumbing, Buena, and De Leon, Jr., JJ., concur.

[G.R. No. 116863. February 12, 1998]

KENG HUA PAPER PRODUCTS CO. INC., petitioner, vs. COURT OF APPEALS;
REGIONAL TRIAL COURT OF MANILA, BR. 21; and SEA-LAND SERVICE, INC.,
respondents.
DECISION

PANGANIBAN, J.:
What is the nature of a bill of lading? When does a bill of lading become binding on a
consignee? Will an alleged overshipment justify the consignees refusal to receive the
goods described in the bill of lading? When may interest be computed on unpaid
demurrage charges?
Statement of the Case
These are the main questions raised in this petition assailing the Decision xx[1] of the
Court of Appealsxxi[2] promulgated on May 20, 1994 in C.A.-G.R. CV No. 29953 affirming
in toto the decisionxxii[3] dated September 28, 1990 in Civil Case No. 85-33269 of the
Regional Trial Court of Manila, Branch 21. The dispositive portion of the said RTC
decision reads:
WHEREFORE, the Court finds by preponderance of evidence that Plaintiff has
proved its cause of action and right to relief. Accordingly, judgment is hereby
rendered in favor of the Plaintiff and against Defendant, ordering the Defendant
to pay plaintiff:
1.The sum of P67,340.00 as demurrage charges, with interest at the legal rate from the
date of the extrajudicial demand until fully paid;
2.
A sum equivalent to ten (10%) percent of the total amount due as Attorneys fees
and litigation expenses.
Send copy to respective counsel of the parties.
SO ORDERED.xxiii[4]
The Facts
The factual antecedents of this case as found by the Court of Appeals are as follows:
Plaintiff (herein private respondent), a shipping company, is a foreign
corporation licensed to do business in the Philippines. On June 29, 1982,
plaintiff received at its Hong Kong terminal a sealed container, Container No.
SEAU 67523, containing seventy-six bales of unsorted waste paper for
shipment to defendant (herein petitioner), Keng Hua Paper Products, Co. in
Manila. A bill of lading (Exh. A) to cover the shipment was issued by the plaintiff.
On July 9, 1982, the shipment was discharged at the Manila International
Container Port. Notices of arrival were transmitted to the defendant but the
latter failed to discharge the shipment from the container during the free time
period or grace period. The said shipment remained inside the plaintiffs
container from the moment the free time period expired on July 29, 1982 until
the time when the shipment was unloaded from the container on November 22,

1983, or a total of four hundred eighty-one (481) days. During the 481-day
period, demurrage charges accrued. Within the same period, letters demanding
payment were sent by the plaintiff to the defendant who, however, refused to
settle its obligation which eventually amounted to P67,340.00. Numerous
demands were made on the defendant but the obligation remained unpaid.
Plaintiff thereafter commenced this civil action for collection and damages.
In its answer, defendant, by way of special and affirmative defense, alleged that
it purchased fifty (50) tons of waste paper from the shipper in Hong Kong, Ho
Kee Waste Paper, as manifested in Letter of Credit No. 824858 (Exh. 7. p. 110.
Original Record) issued by Equitable Banking Corporation, with partial
shipment permitted; that under the letter of credit, the remaining balance of the
shipment was only ten (10) metric tons as shown in Invoice No. H-15/82 (Exh.
8, p. 111, Original Record); that the shipment plaintiff was asking defendant to
accept was twenty (20) metric tons which is ten (10) metric tons more than the
remaining balance; that if defendant were to accept the shipment, it would be
violating Central Bank rules and regulations and custom and tariff laws; that
plaintiff had no cause of action against the defendant because the latter did not
hire the former to carry the merchandise; that the cause of action should be
against the shipper which contracted the plaintiffs services and not against
defendant; and that the defendant duly notified the plaintiff about the wrong
shipment through a letter dated January 24, 1983 (Exh. D for plaintiff, Exh. 4 for
defendant, p. 5. Folder of Exhibits).
As previously mentioned, the RTC found petitioner liable for demurrage, attorneys fees
and expenses of litigation. The petitioner appealed to the Court of Appeals, arguing that
the lower court erred in (1) awarding the sum of P67,340 in favor of the private
respondent, (2) rejecting petitioners contention that there was overshipment, (3) ruling
that petitioners recourse was against the shipper, and (4) computing legal interest from
date of extrajudicial demand.xxiv[5]
Respondent Court of Appeals denied the appeal and affirmed the lower courts decision
in toto. In a subsequent resolution,xxv[6] it also denied the petitioners motion for
reconsideration.
Hence, this petition for review.xxvi[7]
The Issues
In its memorandum, petitioner submits the following issues:
I.Whether or not petitioner had accepted the bill of lading;
II.
Whether or not the award of the sum of P67,340.00 to private respondent was
proper;
III.

Whether or not petitioner was correct in not accepting the overshipment;

IV.
Whether or not the award of legal interest from the date of private respondents
extrajudicial demand was proper;xxvii[8]
In the main, the case revolves around the question of whether petitioner was bound by
the bill of lading. We shall, thus, discuss the above four issues as they intertwine with
this main question.
The Courts Ruling
The petition is partly meritorious. We affirm petitioners liability for demurrage, but modify
the interest rate thereon.
Main Issue: Liability Under the Bill of Lading
A bill of lading serves two functions. First, it is a receipt for the goods shipped. Second,
it is a contract by which three parties, namely, the shipper, the carrier, and the
consignee undertake specific responsibilities and assume stipulated obligations. xxviii[9] A
bill of lading delivered and accepted constitutes the contract of carriage even though not
signed,xxix[10] because the (a)cceptance of a paper containing the terms of a proposed
contract generally constitutes an acceptance of the contract and of all of its terms and
conditions of which the acceptor has actual or constructive notice. xxx[11] In a nutshell, the
acceptance of a bill of lading by the shipper and the consignee, with full knowledge of its
contents, gives rise to the presumption that the same was a perfected and binding
contract.xxxi[12]
In the case at bar, both lower courts held that the bill of lading was a valid and perfected
contract between the shipper (Ho Kee), the consignee (Petitioner Keng Hua), and the
carrier (Private Respondent Sea-Land). Section 17 of the bill of lading provided that the
shipper and the consignee were liable for the payment of demurrage charges for the
failure to discharge the containerized shipment beyond the grace period allowed by tariff
rules. Applying said stipulation, both lower courts found petitioner liable. The
aforementioned section of the bill of lading reads:
17. COOPERAGE FINES. The shipper and consignee shall be liable for,
indemnify the carrier and ship and hold them harmless against, and the carrier
shall have a lien on the goods for, all expenses and charges for mending
cooperage, baling, repairing or reconditioning the goods, or the van, trailers or
containers, and all expenses incurred in protecting, caring for or otherwise
made for the benefit of the goods, whether the goods be damaged or not, and
for any payment, expense, penalty fine, dues, duty, tax or impost, loss,
damage, detention, demurrage, or liability of whatsoever nature, sustained or
incurred by or levied upon the carrier or the ship in connection with the goods
or by reason of the goods being or having been on board, or because of
shippers failure to procure consular or other proper permits, certificates or any
papers that may be required at any port or place or shippers failure to supply
information or otherwise to comply with all laws, regulations and requirements

of law in connection with the goods of from any other act or omission of the
shipper or consignee: (Underscoring supplied.)
Petitioner contends, however, that it should not be bound by the bill of lading because it
never gave its consent thereto. Although petitioner admits physical acceptance of the
bill of lading, it argues that its subsequent actions belie the finding that it accepted the
terms and conditions printed therein. xxxii[13] Petitioner cites as support the Notice of
Refused or On Hand Freight it received on November 2, 1982 from private respondent,
which acknowledged that petitioner declined to accept the shipment. Petitioner adds
that it sent a copy of the said notice to the shipper on December 29, 1982. Petitioner
points to its January 24, 1983 letter to the private respondent, stressing that its
acceptance of the bill of lading would be tantamount to an act of smuggling as the
amount it had imported (with full documentary support) was only (at that time) for
10,000 kilograms and not for 20,313 kilograms as stated in the bill of lading and could
lay them vulnerable to legal sanctions for violation of customs and tariff as well as
Central Bank laws.xxxiii[14] Petitioner further argues that the demurrage was a
consequence of the shippers mistake of shipping more than what was bought. The
discrepancy in the amount of waste paper it actually purchased, as reflected in the
invoice vis--vis the excess amount in the bill of lading, allegedly justifies its refusal to
accept the shipment.xxxiv[15]
Petitioner Bound by the Bill of Lading
We are not persuaded. Petitioner admits that it received the bill of lading immediately
after the arrival of the shipmentxxxv[16] on July 8, 1982.xxxvi[17] Having been afforded an
opportunity to examine the said document, petitioner did not immediately object to or
dissent from any term or stipulation therein. It was only six months later, on January 24,
1983, that petitioner sent a letter to private respondent saying that it could not accept
the shipment. Petitioners inaction for such a long period conveys the clear inference
that it accepted the terms and conditions of the bill of lading. Moreover, said letter spoke
only of petitioners inability to use the delivery permit, i.e. to pick up the cargo, due to the
shippers failure to comply with the terms and conditions of the letter of credit, for which
reason the bill of lading and other shipping documents were returned by the banks to
the shipper.xxxvii[18] The letter merely proved petitioners refusal to pick up the cargo, not
its rejection of the bill of lading.
Petitioners reliance on the Notice of Refused or On Hand Freight, as proof of its
nonacceptance of the bill of lading, is of no consequence. Said notice was not written by
petitioner; it was sent by private respondent to petitioner in November 1982, or four
months after petitioner received the bill of lading. If the notice has any legal significance
at all, it is to highlight petitioners prolonged failure to object to the bill of lading. Contrary
to petitioners contention, the notice and the letter support not belie the findings of the
two lower courts that the bill of lading was impliedly accepted by petitioner.
As aptly stated by Respondent Court of Appeals:

In the instant case, (herein petitioner) cannot and did not allege non-receipt of
its copy of the bill of lading from the shipper. Hence, the terms and conditions
as well as the various entries contained therein were brought to its knowledge.
(Herein petitioner) accepted the bill of lading without interposing any objection
as to its contents. This raises the presumption that (herein petitioner) agreed to
the entries and stipulations imposed therein.
Moreover, it is puzzling that (herein petitioner) allowed months to pass, six (6)
months to be exact, before notifying (herein private respondent) of the wrong
shipment. It was only on January 24, 1983 that (herein petitioner) sent (herein
private respondent) such a letter of notification (Exh D for plaintiff, Exh. 4 for
defendant; p. 5, Folder of Exhibits). Thus, for the duration of those six months
(herein private respondent never knew the reason for (herein petitioners)
refusal to discharge the shipment.
After accepting the bill of lading, receiving notices of arrival of the shipment,
failing to object thereto, (herein petitioner) cannot now deny that it is bound by
the terms in the bill of lading. If it did not intend to be bound, (herein petitioner)
would not have waited for six months to lapse before finally bringing the matter
to (herein private respondents attention. The most logical reaction in such a
case would be to immediately verify the matter with the other parties involved.
In this case, however, (herein petitioner) unreasonably detained (herein private
respondents) vessel to the latters prejudice.xxxviii[19]
Petitioners attempt to evade its obligation to receive the shipment on the pretext that
this may cause it to violate customs, tariff and central bank laws must likewise fail. Mere
apprehension of violating said laws, without a clear demonstration that taking delivery of
the shipment has become legally impossible,xxxix[20] cannot defeat the petitioners
contractual obligation and liability under the bill of lading.
In any event, the issue of whether petitioner accepted the bill of lading was raised for
the first time only in petitioners memorandum before this Court. Clearly, we cannot now
entertain an issue raised for the very first time on appeal, in deference to the wellsettled doctrine that (a)n issue raised for the first time on appeal and not raised timely in
the proceedings in the lower court is barred by estoppel. Questions raised on appeal
must be within the issues framed by the parties and, consequently, issues not raised in
the trial court cannot be raised for the first time on appeal. xl[21]
In the case at bar, the prolonged failure of petitioner to receive and discharge the cargo
from the private respondents vessel constitutes a violation of the terms of the bill of
lading. It should thus be liable for demurrage to the former.
In The Apollon,xli[22] Justice Story made the following relevant comment on the nature of
demurrage:
In truth, demurrage is merely an allowance or compensation for the delay or
detention of a vessel. It is often a matter of contract, but not necessarily so. The

very circumstance that in ordinary commercial voyages, a particular sum is

deemed by the parties a fair compensation for delays, is the very reason why it
is, and ought to be, adopted as a measure of compensation, in cases ex
delicto. What fairer rule can be adopted than that which founds itself upon
mercantile usage as to indemnity, and fixes a recompense upon the deliberate
consideration of all the circumstances attending the usual earnings and
expenditures in common voyages? It appears to us that an allowance, by way
of demurrage, is the true measure of damages in all cases of mere detention,
for that allowance has reference to the ships expenses, wear and tear, and
common employment.xlii[23]
Amount of Demurrage Charges
Petitioner argues that it is not obligated to pay any demurrage charges because, prior to
the filing of the complaint, private respondent made no demand for the sum of P67,340.
Moreover, private respondents loss and prevention manager, Loi Gillera, demanded
P50,260, but its counsel, Sofronio Larcia, subsequently asked for a different amount of
P37,800.
Petitioners position is puerile. The amount of demurrage charges in the sum of P67,340
is a factual conclusion of the trial court that was affirmed by the Court of Appeals and,
thus, binding on this Court.xliii[24] Besides such factual finding is supported by the extant
evidence.xliv[25] The apparent discrepancy was a result of the variance of the dates when
the two demands were made. Necessarily, the longer the cargo remained unclaimed,
the higher the demurrage. Thus, while in his letter dated April 24, 1983, xlv[26] private
respondents counsel demanded payment of only P37,800, the additional demurrage
incurred by petitioner due to its continued refusal to receive delivery of the cargo
ballooned to P67,340 by November 22, 1983. The testimony of Counsel Sofronio Larcia
as regards said letter of April 24, 1983 elucidates, viz:
QNow, after you sent this letter, do you know what happened?
A
Defendant continued to refuse to take delivery of the shipment and the shipment
stayed at the port for a longer period.
Q

So, what happened to the shipment?

A
The shipment incurred additional demurrage charges which amounted to
P67,340.00 as of November 22, 1983 or more than a year after - almost a year after the
shipment arrived at the port.
Q

So, what did you do?

We requested our collection agency to pursue the collection of this amount. xlvi[27]

Bill of Lading Separate from

Other Letter of Credit Arrangements

In a letter of credit, there are three distinct and independent contracts: (1) the contract of
sale between the buyer and the seller, (2) the contract of the buyer with the issuing
bank, and (3) the letter of credit proper in which the bank promises to pay the seller
pursuant to the terms and conditions stated therein. Few things are more clearly settled
in law than that the three contracts which make up the letter of credit arrangement are
to be maintained in a state of perpetual separation. xlvii[28] A transaction involving the
purchase of goods may also require, apart from a letter of credit, a contract of
transportation specially when the seller and the buyer are not in the same locale or
country, and the goods purchased have to be transported to the latter.
Hence, the contract of carriage, as stipulated in the bill of lading in the present case,
must be treated independently of the contract of sale between the seller and the buyer,
and the contract for the issuance of a letter of credit between the buyer and the issuing
bank. Any discrepancy between the amount of the goods described in the commercial
invoice in the contract of sale and the amount allowed in the letter of credit will not affect
the validity and enforceability of the contract of carriage as embodied in the bill of
lading. As the bank cannot be expected to look beyond the documents presented to it
by the seller pursuant to the letter of credit,xlviii[29] neither can the carrier be expected to
go beyond the representations of the shipper in the bill of lading and to verify their
accuracy vis--vis the commercial invoice and the letter of credit. Thus, the discrepancy
between the amount of goods indicated in the invoice and the amount in the bill of
lading cannot negate petitioners obligation to private respondent arising from the
contract of transportation. Furthermore, private respondent, as carrier, had no
knowledge of the contents of the container. The contract of carriage was under the
arrangement known as Shippers Load And Count, and the shipper was solely
responsible for the loading of the container while the carrier was oblivious to the
contents of the shipment. Petitioners remedy in case of overshipment lies against the
seller/shipper, not against the carrier.
Payment of Interest
Petitioner posits that it first knew of the demurrage claim of P67,340 only when it
received, by summons, private respondents complaint. Hence, interest may not be
allowed to run from the date of private respondents extrajudicial demands on March 8,
1983 for P50,260 or on April 24, 1983 for P37,800, considering that, in both cases, there
was no demand for interest.xlix[30] We agree.
Jurisprudence teaches us:
2. When an obligation, not constituting a loan or forbearance of money, is breached, an
interest on the amount of damages awarded may be imposed at the discretion of the
court at the rate of 6% per annum. No interest, however, shall be adjudged on
unliquidated claims or damages except when or until the demand can be established
with reasonable certainty. Accordingly, where the demand is established with

reasonable certainty, the interest shall begin to run from the time the claim is made
judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so
reasonably established at the time the demand is made, the interest shall begin to run
only from the date the judgment of the court is made (at which time the quantification of
damages may be deemed to have been reasonably ascertained). The actual base for
the computation of legal interest shall, in any case, be on the amount finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and
executory, the rate of legal interest, whether the case falls under paragraph 1 or
paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this
interim period being deemed to be by then an equivalent to a forbearance of credit. l[31]
The case before us involves an obligation not arising from a loan or forbearance of
money; thus, pursuant to Article 2209 of the Civil Code, the applicable interest rate is six
percent per annum. Since the bill of lading did not specify the amount of demurrage,
and the sum claimed by private respondent increased as the days went by, the total
amount demanded cannot be deemed to have been established with reasonable
certainty until the trial court rendered its judgment. Indeed, (u)nliquidated damages or
claims, it is said, are those which are not or cannot be known until definitely
ascertained, assessed and determined by the courts after presentation of proof. li[32]
Consequently, the legal interest rate is six percent, to be computed from September 28,
1990, the date of the trial courts decision. And in accordance with Philippine Natonal
Banklii[33] and Eastern Shipping,liii[34] the rate of twelve percent per annum shall be
charged on the total then outstanding, from the time the judgment becomes final and
executory until its satisfaction.
Finally, the Court notes that the matter of attorneys fees was taken up only in the
dispositive portion of the trial courts decision. This falls short of the settled requirement
that the text of the decision should state the reason for the award of attorneys fees, for
without such justification, its award would be a conclusion without a premise, its basis
being improperly left to speculation and conjecture. liv[35]
WHEREFORE, the assailed Decision is hereby AFFIRMED with the MODIFICATION
that the legal interest of six percent per annum shall be computed from September 28,
1990 until its full payment before finality of judgment. The rate of interest shall be
adjusted to twelve percent per annum, computed from the time said judgment became
final and executory until full satisfaction. The award of attorneys fees is DELETED.
SO ORDERED.
Davide, Jr., (Chairman), Bellosillo, Vitug, and Quisumbing, JJ., concur.

i[1] RTC-Br. 97, Quezon City.

ii[2] Convention for the Unification of Certain Rules Relating to International

Transportation by Air. Philippine adherence embodied in Presidential Proclamation No. 201
signed on 23 September 1965 by President Ramon Magsaysay.

iii[3] Willie J. Uy is a graduate of Master of Business Administration of the Ateneo

Graduate School of Business, and Bachelor of Science and Marketing Management from
De La Salle University as well as of Xavier School and Council High School of Idaho, USA.
He is presently the Vice President for Operations of Phinma Property Holdings
Corporation; Senior Vice-President/Chief Operating Officer of Phinma-Dee Construction
Venture Corporation; Vice-President and General Manager of Trans-Oceanic Insurance
Agencies, Inc; Treasurer of Phinma Fisheries, Inc.; Treasurer/Director of Uni-Products
Company, Inc.; Asst. Vice-Pres./Asst. Treasurer of Phinma Consultants, Inc; Asst. Treasurer
of Filmag (PHILS), Inc.; Vice-President of Fil-House of Consumer Products, Inc.; Vice-Pres.
of Mariposa Properties, Inc.; Director of SANAEA International Corp.; and, Director of
Southeast Asia Tour & Travel Corp.; Asst. Corporate Secretary/Director of Harrison
Industrial Corporation.

iv[4] Art. 1155, Civil Code.

v[5] With Justice Ruben T. Reyes as ponente and Justices Antonio M. Martinez and
Consuelo Ynares-Santiago, concurring.

vi[6] Rollo, p. 18.

vii[7] Pan American World Airways, Inc. v. Espiritu, No. L-35401, 20 January 1976, 69 SCRA
36.

viii[8] De las Alas v. Court of Appeals, No. L-38006, 16 May 1978, 83 SCRA 200; American
Home Assurance Company v. Court of Appeals, No. L-45026, 12 November 1981, 109
SCRA 180.

ix[9] Margate v. Court of Appeals, No. L-42366, 15 December 1982, 119 SCRA 259.

x[10] Ibid.

xi[11] See Note 7.

xii[12] Ibid.

xiii[13] Split End Ltd. v. Dimerco Express (Phils.), 19 Avi. 18363, as cited in Petition; Rollo,
p. 12.

xiv[14] Alitalia v. Intermediate Appellate Court, G.R. No. 71929, 4 December 1990, 192
SCRA 9.

xv[15] Ibid.

xvi[16] Ibid.

xvii[17] Cathay Pacific Airways Ltd. v. Court of Appeals, G.R. No. 60501, 5 March 1993,
219 SCRA 520; Luna v. Northwestern Airways, G.R. Nos. 100374-75, 27 November 1992,
216 SCRA 107.

xviii[18] Ibid.

xix[19] G.R. No. 119706, 14 March 1996, 255 SCRA 48.

xx

xxi

xxii

xxiii

xxivFIRST DIVISIONG.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
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.
measurements Sea-land charged the shipper the total amount of US$209.28

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 freely-agreed-upon stipulations in a contract of carriage or bill
of lading limiting the liability of the carrier to an agreed valuation unless the shipper declares a higher value and inserts it into said contract or bill. This
pro position, moreover, rests upon an almost uniform weight of authority. 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
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.
the past shipments had been delivered to him through Sea-Land,

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.

xxv

xxvi

xxvii

xxviii

xxix
G.R. No. 87434 August 5, 1992PHILIPPINE AMERICAN GENERAL INSURANCE CO., INC. and TAGUM PLASTICS, INC., petitioners,
vs.
SWEET LINES, INC., DAVAO VETERANS ARRASTRE AND PORT SERVICES, INC. and HON. COURT OF APPEALS, respondents.
De Lara, De Lunas & Rosales for petitioners.
Carlo L. Aquino for Sweet Lines, Inc.

REGALADO, J.:
1

was commenced on May 12, 1978 by herein Petitioner Philippine American General Insurance Co.,
Inc. (Philamgen) and Tagum Plastics, Inc. (TPI) against private respondents Sweet Lines, Inc. (SLI) and Davao
Veterans Arrastre and Port Services, Inc. (DVAPSI), along with S.C.I. Line (The Shipping Corporation of India
Limited) and F.E. Zuellig, Inc., as co-defendants in the court a quo, seeking recovery of the cost of lost or
damaged shipment plus exemplary damages, attorney's fees and costs allegedly due to defendants' negligence,
with the following factual backdrop yielded by the findings of the court below and adopted by respondent court:
A maritime suit

It would appear that in or about March 1977, the vessel SS "VISHVA YASH" belonging to or
operated by the foreign common carrier, took on board at Baton Rouge, LA, two (2)
consignments of cargoes for shipment to Manila and later for transhipment to Davao City,
consisting of 600 bags Low Density Polyethylene 631 and another 6,400 bags Low Density
Polyethylene 647, both consigned to the order of Far East Bank and Trust Company of Manila,
with arrival notice to Tagum Plastics, Inc., Madaum, Tagum, Davao City. Said cargoes were
covered, respectively, by Bills of Lading Nos. 6 and 7 issued by the foreign common carrier
(Exhs. E and F). The necessary packing or Weight List (Exhs. A and B), as well as the
Commercial Invoices (Exhs. C and D) accompanied the shipment. The cargoes were likewise
insured by the Tagum Plastics Inc. with plaintiff Philippine American General Insurance Co., Inc.,

(Exh. G).
In the course of time, the said vessel arrived at Manila and discharged its cargoes in the Port of
Manila for transhipment to Davao City. For this purpose, the foreign carrier awaited and made
use of the services of the vessel called M/V "Sweet Love" owned and operated by defendant
interisland carrier.
Subject cargoes were loaded in Holds Nos. 2 and 3 of the interisland carrier. These were
commingled with similar cargoes belonging to Evergreen Plantation and also Standfilco.
On May 15, 1977, the shipment(s) were discharged from the interisland carrier into the custody
of the consignee. A later survey conducted on July 8, 1977, upon the instance of the plaintiff,
shows the following:
Of the cargo covered by Bill of Lading No. 25 or (2)6, supposed to contain 6,400 bags of Low
Density Polyethylene 647 originally inside 160 pallets, there were delivered to the consignee
5,413 bags in good order condition. The survey shows shortages, damages and losses to be as
follows:
Undelivered/Damaged bags as tallied during discharge from vessel-173 bags;
undelivered and damaged as noted and observed whilst stored at the pier-699
bags; and shortlanded-110 bags (Exhs. P and P-1).
Of the 600 bags of Low Density Polyethylene 631, the survey conducted on the same day
shows an actual delivery to the consignee of only 507 bags in good order condition. Likewise
noted were the following losses, damages and shortages, to wit:
Undelivered/damaged bags and tally sheets during discharge from vessel-17
bags.
Undelivered and damaged as noted and observed whilst stored at the pier-66
bags; Shortlanded-10 bags.
Therefore, of said shipment totalling 7,000 bags, originally contained in 175 pallets, only a total
of 5,820 bags were delivered to the consignee in good order condition, leaving a balance of
1,080 bags. Such loss from this particular shipment is what any or all defendants may be
answerable to (sic).
As already stated, some bags were either shortlanded or were missing, and some of the 1,080
bags were torn, the contents thereof partly spilled or were fully/partially emptied, but, worse, the
contents thereof contaminated with foreign matters and therefore could no longer serve their
intended purpose. The position taken by the consignee was that even those bags which still had
some contents were considered as total losses as the remaining contents were contaminated
with foreign matters and therefore did not (sic) longer serve the intended purpose of the
material. Each bag was valued, taking into account the customs duties and other taxes paid as
well as charges and the conversion value then of a dollar to the peso, at P110.28 per bag (see
Exhs. L and L-1 M and O). 2
Before trial, a compromise agreement was entered into between petitioners, as plaintiffs, and defendants S.C.I.
Line and F.E. Zuellig, upon the latter's payment of P532.65 in settlement of the claim against them. Whereupon,

the trial court in its order of August 12, 1981 3 granted plaintiffs' motion to dismiss grounded on said amicable
settlement and the case as to S.C.I. Line and F.E. Zuellig was consequently "dismissed with prejudice and
without pronouncement as to costs."
The trial court thereafter rendered judgment in favor of herein petitioners on this dispositive portion:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff Philippine General American
Insurance Company Inc. and against the remaining defendants, Sweet Lines Inc. and Davao
Veterans Arrastre Inc. as follows:
Defendant Sweet Lines, Inc. is ordered to pay said plaintiff the sum of P34,902.00, with legal
interest thereon from date of extrajudicial demand on April 28, 1978 (Exh. M) until fully paid;
Defendant Sweet Lines Inc. and Davao Veterans Arrastre and (Port) Services Inc. are directed
to pay jointly and severally, the plaintiff the sum of P49,747.55, with legal interest thereon from
April 28, 1978 until fully paid;
Each of said defendants are ordered to pay the plaintiffs the additional sum of P5,000 is
reimbursable attorney's fees and other litigation expenses;
Each of said defendants shall pay one-fourth (1/4) costs.

Due to the reversal on appeal by respondent court of the trial court's decision on the ground of prescription, 5 in
effect dismissing the complaint of herein petitioners, and the denial of their motion for reconsideration, 6
petitioners filed the instant petition for review on certiorari, faulting respondent appellate court with the following
errors: (1) in upholding, without proof, the existence of the so-called prescriptive period; (2) granting arguendo
that the said prescriptive period does exist, in not finding the same to be null and void; and (3) assuming
arguendo that the said prescriptive period is valid and legal, in failing to conclude that petitioners substantially
complied therewith. 7
Parenthetically, we observe that herein petitioners are jointly pursuing this case, considering their common
interest in the shipment subject of the present controversy, to obviate any question as to who the real party in
interest is and to protect their respective rights as insurer and insured. In any case, there is no impediment to the
legal standing of Petitioner Philamgen, even if it alone were to sue herein private respondents in its own capacity
as insurer, it having been subrogated to all rights of recovery for loss of or damage to the shipment insured
under its Marine Risk Note No. 438734 dated March 31, 1977 8 in view of the full settlement of the claim thereunder as
9
evidenced by the subrogation receipt issued in its favor by Far East Bank and Trust Co., Davao Branch, for the account
of petitioner TPI.
Upon payment of the loss covered by the policy, the insurer's entitlement to subrogation pro tanto, being of the
highest equity, equips it with a cause of action against a third party in case of contractual breach. 10 Further, the
insurer's subrogatory right to sue for recovery under the bill of lading in case of loss of or damage to the cargo is
jurisprudentially upheld. 11 However, if an insurer, in the exercise of its subrogatory right, may proceed against
the erring carrier and for all intents and purposes stands in the place and in substitution of the consignee, a
fortiori such insurer is presumed to know and is just as bound by the contractual terms under the bill of lading as
the insured.
On the first issue, petitioners contend that it was error for the Court of Appeals to reverse the appealed decision
on the supposed ground of prescription when SLI failed to adduce any evidence in support thereof and that the
bills of lading said to contain the shortened periods for filing a claim and for instituting a court action against the

carrier were never offered in evidence. Considering that the existence and tenor of this stipulation on the
aforesaid periods have allegedly not been established, petitioners maintain that it is inconceivable how they can
possibly comply therewith. 12 In refutation, SLI avers that it is standard practice in its operations to issue bills of
lading for shipments entrusted to it for carriage and that it in fact issued bills of lading numbered MD-25 and MD26 therefor with proof of their existence manifest in the records of the case. 13 For its part, DVAPSI insists on the
propriety of the dismissal of the complaint as to it due to petitioners' failure to prove its direct responsibility for the
loss of and/or damage to the cargo. 14
On this point, in denying petitioner's motion for reconsideration, the Court of Appeals resolved that although the
bills of lading were not offered in evidence, the litigation obviously revolves on such bills of lading which are
practically the documents or contracts sued upon, hence, they are inevitably involved and their provisions cannot
be disregarded in the determination of the relative rights of the parties thereto. 15
Respondent court correctly passed upon the matter of prescription, since that defense was so considered and
controverted by the parties. This issue may accordingly be taken cognizance of by the court even if not
inceptively raised as a defense so long as its existence is plainly apparent on the face of relevant pleadings. 16 In
the case at bar, prescription as an affirmative defense was seasonably raised by SLI in its answer, 17 except that
the bills of lading embodying the same were not formally offered in evidence, thus reducing the bone of
contention to whether or not prescription can be maintained as such defense and, as in this case, consequently
upheld on the strength of mere references thereto.
As petitioners are suing upon SLI's contractual obligation under the contract of carriage as contained in the bills
of lading, such bills of lading can be categorized as actionable documents which under the Rules must be
properly pleaded either as causes of action or defenses, 18 and the genuineness and due execution of which are
deemed admitted unless specifically denied under oath by the adverse party. 19 The rules on actionable
documents cover and apply to both a cause of action or defense based on said documents. 20
In the present case and under the aforestated assumption that the time limit involved is a prescriptive period,
respondent carrier duly raised prescription as an affirmative defense in its answer setting forth paragraph 5 of
the pertinent bills of lading which comprised the stipulation thereon by parties, to wit:
5. Claims for shortage, damage, must be made at the time of delivery to consignee or agent, if
container shows exterior signs of damage or shortage. Claims for non-delivery, misdelivery, loss
or damage must be filed within 30 days from accrual. Suits arising from shortage, damage or
loss, non-delivery or misdelivery shall be instituted within 60 days from date of accrual of right of
action. Failure to file claims or institute judicial proceedings as herein provided constitutes
waiver of claim or right of action. In no case shall carrier be liable for any delay, non-delivery,
misdelivery, loss of damage to cargo while cargo is not in actual custody of carrier. 21
In their reply thereto, herein petitioners, by their own assertions that
2. In connection with Pars. 14 and 15 of defendant Sweet Lines, Inc.'s Answer, plaintiffs state
that such agreements are what the Supreme Court considers as contracts of adhesion (see
Sweet Lines, Inc. vs. Hon. Bernardo Teves, et al., G.R. No. L-37750, May 19, 1978) and,
consequently, the provisions therein which are contrary to law and public policy cannot be
availed of by answering defendant as valid defenses. 22
thereby failed to controvert the existence of the bills of lading and the aforequoted provisions therein, hence they
impliedly admitted the same when they merely assailed the validity of subject stipulations.

Petitioners' failure to specifically deny the existence, much less the genuineness and due execution, of the
instruments in question amounts to an admission. Judicial admissions, verbal or written, made by the parties in
the pleadings or in the course of the trial or other proceedings in the same case are conclusive, no evidence
being required to prove the same, and cannot be contradicted unless shown to have been made through
palpable mistake or that no such admission was made. 23 Moreover, when the due execution and genuineness of
an instrument are deemed admitted because of the adverse party's failure to make a specific verified denial
thereof, the instrument need not be presented formally in evidence for it may be considered an admitted fact. 24
Even granting that petitioners' averment in their reply amounts to a denial, it has the procedural earmarks of
what in the law on pleadings is called a negative pregnant, that is, a denial pregnant with the admission of the
substantial facts in the pleading responded to which are not squarely denied. It is in effect an admission of the
averment it is directed to. 25 Thus, while petitioners objected to the validity of such agreement for being contrary
to public policy, the existence of the bills of lading and said stipulations were nevertheless impliedly admitted by
them.
We find merit in respondent court's comments that petitioners failed to touch on the matter of the nonpresentation of the bills of lading in their brief and earlier on in the appellate proceedings in this case, hence it is
too late in the day to now allow the litigation to be overturned on that score, for to do so would mean an overindulgence in technicalities. Hence, for the reasons already advanced, the non-inclusion of the controverted bills
of lading in the formal offer of evidence cannot, under the facts of this particular case, be considered a fatal
procedural lapse as would bar respondent carrier from raising the defense of prescription. Petitioners' feigned
ignorance of the provisions of the bills of lading, particularly on the time limitations for filing a claim and for
commencing a suit in court, as their excuse for non-compliance therewith does not deserve serious attention.
It is to be noted that the carriage of the cargo involved was effected pursuant to an "Application for Delivery of
Cargoes without Original Bill of Lading" issued on May 20, 1977 in Davao City 26 with the notation therein that
said application corresponds to and is subject to the terms of bills of lading MD-25 and MD-26. It would be a safe
assessment to interpret this to mean that, sight unseen, petitioners acknowledged the existence of said bills of
lading. By having the cargo shipped on respondent carrier's vessel and later making a claim for loss on the basis
of the bills of lading, petitioners for all intents and purposes accepted said bills. Having done so they are bound
by all stipulations contained therein. 27 Verily, as petitioners are suing for recovery on the contract, and in fact
even went as far as assailing its validity by categorizing it as a contract of adhesion, then they necessarily admit
that there is such a contract, their knowledge of the existence of which with its attendant stipulations they cannot
now be allowed to deny.
On the issue of the validity of the controverted paragraph 5 of the bills of lading above quoted which
unequivocally prescribes a time frame of thirty (30) days for filing a claim with the carrier in case of loss of or
damage to the cargo and sixty (60) days from accrual of the right of action for instituting an action in court, which
periods must concur, petitioners posit that the alleged shorter prescriptive period which is in the nature of a
limitation on petitioners' right of recovery is unreasonable and that SLI has the burden of proving otherwise,
citing the earlier case of Southern Lines, Inc. vs. Court of Appeals, et al. 28 They postulate this on the theory that
the bills of lading containing the same constitute contracts of adhesion and are, therefore, void for being contrary
to public policy, supposedly pursuant to the dictum in Sweet Lines, Inc. vs. Teves, et al. 29
Furthermore, they contend, since the liability of private respondents has been clearly established, to bar
petitioners' right of recovery on a mere technicality will pave the way for unjust enrichment. 30 Contrarily, SLI
asserts and defends the reasonableness of the time limitation within which claims should be filed with the carrier;
the necessity for the same, as this condition for the carrier's liability is uniformly adopted by nearly all shipping
companies if they are to survive the concomitant rigors and risks of the shipping industry; and the countervailing
balance afforded by such stipulation to the legal presumption of negligence under which the carrier labors in the

event of loss of or damage to the cargo. 31

It has long been held that Article 366 of the Code of Commerce applies not only to overland and river
transportation but also to maritime
transportation. 32 Moreover, we agree that in this jurisdiction, as viewed from another angle, it is more accurate to
state that the filing of a claim with the carrier within the time limitation therefor under Article 366 actually
constitutes a condition precedent to the accrual of a right of action against a carrier for damages caused to the
merchandise. The shipper or the consignee must allege and prove the fulfillment of the condition and if he omits
such allegations and proof, no right of action against the carrier can accrue in his favor. As the requirements in
Article 366, restated with a slight modification in the assailed paragraph 5 of the bills of lading, are reasonable
conditions precedent, they are not limitations of action. 33 Being conditions precedent, their performance must
precede a suit for enforcement 34 and the vesting of the right to file spit does not take place until the happening of
these conditions. 35
Now, before an action can properly be commenced all the essential elements of the cause of action must be in
existence, that is, the cause of action must be complete. All valid conditions precedent to the institution of the
particular action, whether prescribed by statute, fixed by agreement of the parties or implied by law must be
performed or complied with before commencing the action, unless the conduct of the adverse party has been
such as to prevent or waive performance or excuse non-performance of the condition. 36
It bears restating that a right of action is the right to presently enforce a cause of action, while a cause of action
consists of the operative facts which give rise to such right of action. The right of action does not arise until the
performance of all conditions precedent to the action and may be taken away by the running of the statute of
limitations, through estoppel, or by other circumstances which do not affect the cause of action. 37 Performance
or fulfillment of all conditions precedent upon which a right of action depends must be sufficiently alleged, 38
considering that the burden of proof to show that a party has a right of action is upon the person initiating the
suit. 39
More particularly, where the contract of shipment contains a reasonable requirement of giving notice of loss of or
injury to the goods, the giving of such notice is a condition precedent to the action for loss or injury or the right to
enforce the carrier's liability. Such requirement is not an empty formalism. The fundamental reason or purpose of
such a stipulation is not to relieve the carrier from just liability, but reasonably to inform it that the shipment has
been damaged and that it is charged with liability therefor, and to give it an opportunity to examine the nature
and extent of the injury. This protects the carrier by affording it an opportunity to make an investigation of a claim
while the matter is fresh and easily investigated so as to safeguard itself from false and fraudulent claims. 40
Stipulations in bills of lading or other contracts of shipment which require notice of claim for loss of or damage to
goods shipped in order to impose liability on the carrier operate to prevent the enforcement of the contract when
not complied with, that is, notice is a condition precedent and the carrier is not liable if notice is not given in
accordance with the stipulation, 41 as the failure to comply with such a stipulation in a contract of carriage with
respect to notice of loss or claim for damage bars recovery for the loss or damage suffered. 42
On the other hand, the validity of a contractual limitation of time for filing the suit itself against a carrier shorter
than the statutory period therefor has generally been upheld as such stipulation merely affects the shipper's
remedy and does not affect the liability of the carrier. In the absence of any statutory limitation and subject only
to the requirement on the reasonableness of the stipulated limitation period, the parties to a contract of carriage
may fix by agreement a shorter time for the bringing of suit on a claim for the loss of or damage to the shipment
than that provided by the statute of limitations. Such limitation is not contrary to public policy for it does not in any
way defeat the complete vestiture of the right to recover, but merely requires the assertion of that right by action
at an earlier period than would be necessary to defeat it through the operation of the ordinary statute of

limitations. 43
In the case at bar, there is neither any showing of compliance by petitioners with the requirement for the filing of
a notice of claim within the prescribed period nor any allegation to that effect. It may then be said that while
petitioners may possibly have a cause of action, for failure to comply with the above condition precedent they
lost whatever right of action they may have in their favor or, token in another sense, that remedial right or right to
relief had prescribed. 44
The shipment in question was discharged into the custody of the consignee on May 15, 1977, and it was from
this date that petitioners' cause of action accrued, with thirty (30) days therefrom within which to file a claim with
the carrier for any loss or damage which may have been suffered by the cargo and thereby perfect their right of
action. The findings of respondent court as supported by petitioners' formal offer of evidence in the court below
show that the claim was filed with SLI only on April 28, 1978, way beyond the period provided in the bills of
lading 45 and violative of the contractual provision, the inevitable consequence of which is the loss of petitioners'
remedy or right to sue. Even the filing of the complaint on May 12, 1978 is of no remedial or practical
consequence, since the time limits for the filing thereof, whether viewed as a condition precedent or as a
prescriptive period, would in this case be productive of the same result, that is, that petitioners had no right of
action to begin with or, at any rate, their claim was time-barred.
What the court finds rather odd is the fact that petitioner TPI filed a provisional claim with DVAPSI as early as
June 14, 1977 46 and, as found by the trial court, a survey fixing the extent of loss of and/or damage to the cargo
was conducted on July 8, 1977 at the instance of petitioners. 47 If petitioners had the opportunity and awareness
to file such provisional claim and to cause a survey to be conducted soon after the discharge of the cargo, then
they could very easily have filed the necessary formal, or even a provisional, claim with SLI itself 48 within the
stipulated period therefor, instead of doing so only on April 28, 1978 despite the vessel's arrival at the port of
destination on May 15, 1977. Their failure to timely act brings us to no inference other than the fact that
petitioners slept on their rights and they must now face the consequences of such inaction.
The ratiocination of the Court of Appeals on this aspect is worth reproducing:
xxx xxx xxx
It must be noted, at this juncture, that the aforestated time limitation in the presentation of claim
for loss or damage, is but a restatement of the rule prescribed under Art. 366 of the Code of
Commerce which reads as follows:
Art. 366. Within the twenty-four hours following the receipt of the merchandise,
the claim against the carrier for damage or average which may be found therein
upon opening the packages, may be made, provided that the indications of the
damage or average which gives rise to the claim cannot be ascertained from the
outside part of the packages, in which case the claims shall be admitted only at
the time of the receipt.
After the periods mentioned have elapsed, or the transportation charges have
been paid, no claim shall be admitted against the carrier with regard to the
condition in which the goods transported were delivered.
Gleanable therefrom is the fact that subject stipulation even lengthened the period for
presentation of claims thereunder. Such modification has been sanctioned by the Supreme
Court. In the case of Ong Yet (M)ua Hardware Co., Inc. vs. Mitsui Steamship Co., Ltd., et al., 59

O.G. No. 17, p. 2764, it ruled that Art. 366 of the Code of Commerce can be modified by a bill of
lading prescribing the period of 90 days after arrival of the ship, for filing of written claim with the
carrier or agent, instead of the 24-hour time limit after delivery provided in the aforecited legal
provision.
Tested, too, under paragraph 5 of said Bill of Lading, it is crystal clear that the commencement
of the instant suit on May 12, 1978 was indeed fatally late. In view of the express provision that
"suits arising from
. . . damage or loss shall be instituted within 60 days from date of accrual of right of action," the
present action necessarily fails on ground of prescription.
In the absence of constitutional or statutory prohibition, it is usually held or
recognized that it is competent for the parties to a contract of shipment to agree
on a limitation of time shorter than the statutory period, within which action for
breach of the contract shall be brought, and such limitation will be enforced if
reasonable . . . (13 C.J.S. 496-497)
A perusal of the pertinent provisions of law on the matter would disclose that there is no
constitutional or statutory prohibition infirming paragraph 5 of subject Bill of Lading. The
stipulated period of 60 days is reasonable enough for appellees to ascertain the facts and
thereafter to sue, if need be, and the 60-day period agreed upon by the parties which shortened
the statutory period within which to bring action for breach of contract is valid and binding. . . .
(Emphasis in the original text.) 49
As explained above, the shortened period for filing suit is not unreasonable and has in fact been generally
recognized to be a valid business practice in the shipping industry. Petitioners' advertence to the Court's holding
in the Southern Lines case, supra, is futile as what was involved was a claim for refund of excess payment. We
ruled therein that non-compliance with the requirement of filing a notice of claim under Article 366 of the Code of
Commerce does not affect the consignee's right of action against the carrier because said requirement applies
only to cases for recovery of damages on account of loss of or damage to cargo, not to an action for refund of
overpayment, and on the further consideration that neither the Code of Commerce nor the bills of lading therein
provided any time limitation for suing for refund of money paid in excess, except only that it be filed within a
reasonable time.
The ruling in Sweet Lines categorizing the stipulated limitation on venue of action provided in the subject bill of
lading as a contract of adhesion and, under the circumstances therein, void for being contrary to public policy is
evidently likewise unavailing in view of the discrete environmental facts involved and the fact that the restriction
therein was unreasonable. In any case, Ong Yiu vs. Court of Appeals, et al., 50 instructs us that "contracts of
adhesion wherein one party imposes a ready-made form of contract on the other . . . 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.
While it is true that substantial compliance with provisions on filing of claim for loss of or damage to cargo may
sometimes suffice, the invocation of such an assumption must be viewed vis-a-vis the object or purpose which
such a provision seeks to attain and that is to afford the carrier a reasonable opportunity to determine the merits
and validity of the claim and to protect itself against unfounded impositions. 51 Petitioners' would nevertheless
adopt an adamant posture hinged on the issuance by SLI of a "Report on Losses and Damages," dated May 15,
1977, 52 from which petitioners theorize that this charges private respondents with actual knowledge of the loss

and damage involved in the present case as would obviate the need for or render superfluous the filing of a
claim within the stipulated period.
Withal, it has merely to be pointed out that the aforementioned report bears this notation at the lower part
thereof: "Damaged by Mla. labor upon unloading; B/L noted at port of origin," as an explanation for the cause of
loss of and/or damage to the cargo, together with an iterative note stating that "(t)his Copy should be submitted
together with your claim invoice or receipt within 30 days from date of issue otherwise your claim will not be
honored."
Moreover, knowledge on the part of the carrier of the loss of or damage to the goods deducible from the
issuance of said report is not equivalent to nor does it approximate the legal purpose served by the filing of the
requisite claim, that is, to promptly apprise the carrier about a consignee's intention to file a claim and thus cause
the prompt investigation of the veracity and merit thereof for its protection. It would be an unfair imposition to
require the carrier, upon discovery in the process of preparing the report on losses or damages of any and all
such loss or damage, to presume the existence of a claim against it when at that time the carrier is expectedly
concerned merely with accounting for each and every shipment and assessing its condition. Unless and until a
notice of claim is therewith timely filed, the carrier cannot be expected to presume that for every loss or damage
tallied, a corresponding claim therefor has been filed or is already in existence as would alert it to the urgency for
an immediate investigation of the soundness of the claim. The report on losses and damages is not the claim
referred to and required by the bills of lading for it does not fix responsibility for the loss or damage, but merely
states the condition of the goods shipped. The claim contemplated herein, in whatever form, must be something
more than a notice that the goods have been lost or damaged; it must contain a claim for compensation or
indicate an intent to claim. 53
Thus, to put the legal effect of respondent carrier's report on losses or damages, the preparation of which is
standard procedure upon unloading of cargo at the port of destination, on the same level as that of a notice of
claim by imploring substantial compliance is definitely farfetched. Besides, the cited notation on the carrier's
report itself makes it clear that the filing of a notice of claim in any case is imperative if carrier is to be held liable
at all for the loss of or damage to cargo.
Turning now to respondent DVAPSI and considering that whatever right of action petitioners may have against
respondent carrier was lost due to their failure to seasonably file the requisite claim, it would be awkward, to say
the least, that by some convenient process of elimination DVAPSI should proverbially be left holding the bag,
and it would be pure speculation to assume that DVAPSI is probably responsible for the loss of or damage to
cargo. Unlike a common carrier, an arrastre operator does not labor under a presumption of negligence in case
of loss, destruction or deterioration of goods discharged into its custody. In other words, to hold an arrastre
operator liable for loss of and/or damage to goods entrusted to it there must be preponderant evidence that it did
not exercise due diligence in the handling and care of the goods.
Petitioners failed to pinpoint liability on any of the original defendants and in this seemingly wild goose-chase,
they cannot quite put their finger down on when, where, how and under whose responsibility the loss or damage
probably occurred, or as stated in paragraph 8 of their basic complaint filed in the court below, whether "(u)pon
discharge of the cargoes from the original carrying vessel, the SS VISHVA YASH," and/or upon discharge of the
cargoes from the interisland vessel the MV "SWEET LOVE," in Davao City and later while in the custody of
defendant arrastre operator. 54
The testimony of petitioners' own witness, Roberto Cabato, Jr., Marine and Aviation Claims Manager of petitioner
Philamgen, was definitely inconclusive and the responsibility for the loss or damage could still not be ascertained
therefrom:

Q In other words, Mr. Cabato, you only computed the loss on the basis of the
figures submitted to you and based on the documents like the survey certificate
and the certificate of the arrastre?
A Yes, sir.
Q Therefore, Mr. Cabato, you have no idea how or where these losses were
incurred?
A No, sir.
xxx xxx xxx
Q Mr. Witness, you said that you processed and investigated the claim involving
the shipment in question. Is it not a fact that in your processing and investigation
you considered how the shipment was transported? Where the losses could
have occurred and what is the extent of the respective responsibilities of the
bailees and/or carriers involved?
xxx xxx xxx
A With respect to the shipment being transported, we have of course to get into
it in order to check whether the shipment coming in to this port is in accordance
with the policy condition, like in this particular case, the shipment was
transported to Manila and transhipped through an interisland vessel in
accordance with the policy. With respect to the losses, we have a general view
where losses could have occurred. Of course we will have to consider the
different bailees wherein the shipment must have passed through, like the
ocean vessel, the interisland vessel and the arrastre, but definitely at that point
and time we cannot determine the extent of each liability. We are only interested
at that point and time in the liability as regards the underwriter in accordance
with the policy that we issued.
xxx xxx xxx
Q Mr. Witness, from the documents, namely, the survey of Manila Adjusters and
Surveyors Company, the survey of Davao Arrastre contractor and the bills of
lading issued by the defendant Sweet Lines, will you be able to tell the
respective liabilities of the bailees and/or carriers concerned?
A No, sir. (Emphasis ours.) 55
Neither did nor could the trial court, much less the Court of Appeals, precisely establish the stage in the course
of the shipment when the goods were lost, destroyed or damaged. What can only be inferred from the factual
findings of the trial court is that by the time the cargo was discharged to DVAPSI, loss or damage had already
occurred and that the same could not have possibly occurred while the same was in the custody of DVAPSI, as
demonstrated by the observations of the trial court quoted at the start of this opinion.
ACCORDINGLY, on the foregoing premises, the instant petition is DENIED and the dismissal of the complaint in
the court a quo as decreed by respondent Court of Appeals in its challenged judgment is hereby AFFIRMED.

SO ORDERED.
Narvasa, C.J., Padilla and Nocon, JJ., concur.

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