Transportation Case Digest: Magellan Mfg. Marketing Corp. V.

CA Supra
(1991)
FACTS:
Choju Co., Ltd purchased from Magellan Manufacturers Marketing Corp.
(MMMC) 136,000 anahaw fans for $23,220

MMMC contracted with F.E. Zuellig, a shipping agent of Orient Overseas

Container Lines, Inc., (OOCL) specifying that he needed an on-board bill of
lading and that transhipment is not allowed under the letter of credit

MMMC paid F.E. Zuellig the freight charges and secured a copy of the
bill of lading which was presented to Allied Bank. The bank then credited
the amount of US$23,220 covered by the letter of credit to MMMC

When MMMC's President James Cu, went back to the bank later, he was
informed that the payment was refused by the buying for lack of bill of
lading and there was a transhipment of goods

The anahaw fans were shipped back to Manila through OOCL who are
demanding from MMMC P246,043.43 (freight charges from Japan to
Manila, demurrage incurred in Japan and Manila from October 22, 1980 up
to May 20, 1981 and charges for stripping the container van of the
Anahaw fans on May 20, 1981)

MMMC abandoned the whole cargo and asked OOCL for damages

OOCL: bill of lading clearly shows that there will be a

transhipment and that petitioner was well aware that MV (Pacific)
Despatcher was only up to Hongkong where the subject cargo will be
transferred to another vessel for Japan

RTC: favored OOCL:

consented because the bill of lading where it is clearly indicated

that there will be transhipment

MMMC was the one who ordered the reshipment of the cargo
from Japan to Manila

CA: Affirmed with modification of excluding demurrage in Manila

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

HELD: YES. CA Affirmed with modification

Transhipment

act of taking cargo out of one ship and loading it in another

the transfer of goods from the vessel stipulated in the contract of
affreightment to another vessel before the place of destination named in
the contract has been reached
transfer for further transportation from one ship or conveyance
to another
the fact of transhipment is not dependent upon the ownership of the
transporting ships or conveyances or in the change of carriers, as the
petitioner seems to suggest, but rather on the fact of actual physical
transfer of cargo from one vessel to another
appears on the face of the bill of lading the entry "Hong Kong" in the
blank space labeled "Transhipment," which can only mean that
transhipment actually took place
bill of lading
operates both as a receipt and as a contract
receipt for the goods shipped
contract to transport and deliver the same as therein
stipulated
names the parties, which includes the consignee,
fixes the route, destination, and freight rates or charges, and stipulates
the rights and obligations assumed by the parties
law between the parties who are bound by its terms
and conditions provided that these are not contrary to law, morals, good
customs, public order and public policy
GR: acceptance of the bill without dissent raises the presumption that
all the terms therein were brought to the knowledge of the shipper and
agreed to by him and, in the absence of fraud or mistake, he is estopped
from thereafter denying that he assented to such term
There clearly appears on the face of the bill of lading under column
"PORT OF TRANSHIPMENT" an entry "HONGKONG'
On board bill of lading vs. received for shipment bill of lading:
on board bill of lading
stated that the goods have been received on board the
vessel which is to carry the goods
received for shipment bill of lading
stated that the goods have been received for shipment
with or without specifying the vessel by which the goods are to be
shipped

issued whenever conditions are not normal and there is

insufficiency of shipping space
certification of F.E. Zuellig, Inc. cannot qualify the bill of lading, as
originally issued, into an on board bill of lading as required by the terms of
the letter of credit issued in favor of petitioner - it is a received for
shipment bill of lading
issued only on July 19, 1980, way beyond the expiry date of June
30, 1980 specified in the letter of credit for the presentation of an on
board bill of lading
Demurrage
compensation provided for in the contract of affreightment for
the detention of the vessel beyond the time agreed on for loading and
unloading
claim for damages for failure to accept delivery
before it could be charged for demurrage charges it should have been
notified of the arrival of the goods first
Since abandon option was communicated, the same is binding upon
the parties on legal and equitable considerations of estoppel

LORENZO SHIPPING CORPORATION V. CHUBB AND SONS

G.R. NO. 147724 JUNE 8, 2004
FACTS:
Petitioner Lorenzo Shipping Corporation is a domestic corporation engaged in
coast wise shipping of steel pipes. This case is on appeal in CA which favored
the respondent Chubb and Sons Corporation, a foreign corporation not
licensed to do business in the Philippines. they complaint about the rust
information, thinning, and several holes at different places of pipes on board
after shipment made by Lorenzo Shipping to Davao City. The court found the
petitioner guilty to pay all the damages and attorneys fees.
ISSUE:

Whether or not Chubb and Sons can validly claim the damages?
HELD:
No, foreign corporations transacting business in the Philippines without
license or its successor or assigns shall be permitted to maintain or intervene
any action, suit or proceedings in any court or administrative agency of the
Philippines; but such corporation maybe sued or proceed against before the
Philippine courts or administrative tribunals or any valid cause recognized
under Philippine laws. The decision of the lower court was affirmed. Cost
against petitioners.
Insurance Case Digest: Qua Chee Gan V. Law Union And Rock Insurance Co.,
Ltd. (1955)
FACTS:

Qua Chee Gan, a merchant of Albay, owned four bodegas which he

insured with Law Union & Rock Insurance Co., Ltd (Law Union) since
1937 and the lose made payable to the Philippine National Bank (PNB) as
mortgage of the hemp and crops, to the extent of its interest

July 21, 1940 morning: fire broke out in bodegas 1,2 and 4 which lasted
for almost a week.

Qua Chee Gan informed Law Union by telegram

Law Union rejected alleging that it was a fraudulent claim that the fire
had been deliberately caused by the insured or by other persons in
connivance with him

Que Chee Gan, with his brother, Qua Chee Pao, and some employees
of his, were indicted and tried in 1940 for the crime of arson but was
subsequently acquitted

During the pendency of the suit, Que Chee Gan paid PNB

Law Union states that ff. assignment of errors:

1. memo of warranty requires 11 hydrants instead of 2

2. violation of hemp warranty against storage of gasoline since it

prohibits oils

3. fire was due to fraud

4. burned bodegas could not possibly have contained the

quantities of copra and hemp stated in the fire claims
ISSUE: W/N Qua Chee Gan should be allowed to claim.

HELD: YES. Affirmed.

1. It is a well settled rule of law that an insurer which with knowledge

of facts entitling it to treat a policy as no longer in force, receives and
accepts a preium on the policy, estopped to take advantage of the
forfeiture

2. oils (animal and/or vegetable and/or mineral and/or their liquid

products having a flash point below 300o Fahrenheit", and is decidedly
ambiguous and uncertain; for in ordinary parlance, "Oils" mean
"lubricants" and not gasoline or kerosene

by reason of the exclusive control of the insurance company over

the terms and phraseology of the contract, the ambiguity must be held
strictly against the insurer and liberraly in favor of the insured, specially
to avoid a forfeiture

3. trial Court found that the discrepancies were a result of the insured's
erroneous interpretation of the provisions of the insurance policies and
claim forms, caused by his imperfect knowledge of English, and that the
misstatements were innocently made and without intent to defraud.

4. Similarly, the 20 per cent overclaim on 70 per cent of the hemo

stock, was explained by the insured as caused by his belief that he was
entitled to include in the claim his expected profit on the 70 per cent of
the hemp, because the same was already contracted for and sold to other
parties before the fire occurred
FIELDMEN'S INSURANCE CO., INC., vs. MERCEDES VARGAS VDA. DE SONGCO,
ET AL. and COURT OF APPEALS G.R. No. L-24833 September 23, 1968
FACTS: Federico Songco, a man of scant education being only a first grader,
applied for a Common Carrier's Liability Insurance Policy for his private
jeepney after being induced by agent Benjamin Sambat. After paying the
annual premium, Fieldmen's Insurance issued the policy with effectivity on
September 15, 1960 to September 15, 1961. On September 22, 1961,
Songco renewed the policy coverage from October 15, 1961 to October 15,
1962. On October 29, 1961, the insured vehicle collided with a car leaving
Songco and companions dead while Jose Manuel was injured. Fieldmen's
Insurance declined to pay the insurance proceeds on the grounds of breach

of warranty and condition in the policy. They alleged that the insured jeepney
is not a common carrier. The surviving widow and children, as well as Jose
Manuel prevailed in the lower court as well as in the CA. Thus a petition was
filed in the SC.
ISSUE: Whether or not the respondents are estopped from claiming the
insurance proceeds on the grounds of breach of warranty and condition in
the policy.
RULING: As much, if not much more so than the Qua Chee Gan decision, this
is a case where the doctrine of estoppel undeniably calls for application.
After petitioner Fieldmen's Insurance Co., Inc. had led the insured Federico
Songco to believe that he could qualify under the common carrier liability
insurance policy, and to enter into contract of insurance paying the
premiums due, it could not, thereafter, in any litigation arising out of such
representation, be permitted to change its stand to the detriment of the heirs
of the insured. As estoppel is primarily based on the doctrine of good faith
and the avoidance of harm that will befall the innocent party due to its
injurious reliance, the failure to apply it in this case would result in a gross
travesty of justice. The conclusion that inescapably emerges from the above
is the correctness of the decision of respondent Court of Appeals sought to
be reviewed. For, to borrow once again from the language of the Qua Chee
Gan opinion: "The contract of insurance is one of perfect good faith (uberima
fides) not for the insured alone,but equally so for the insurer; in fact, it is
more so for the latter, since its dominant bargaining position carries with it
stricter responsibility." This is merely to stress that while the morality of the
business world is not the morality of institutions of rectitude like the pulpit
and the academe, it cannot descend so low as to be another name for guile
or deception. Moreover, should it happen thus, no court of justice should
allow itself to lend its approval and support.

Ong Yui vs. Court of Appeals

(91 SCRA 223)
Facts: On august 26, 1967, Ong Yiu was a fare paying passenger of
respondent PAL from Mactan, Cebu to Butuan City wherein he was scheduled
to attend a trial. As a passenger, he checked in one piece of luggae, blue
maleta for which he was issued a claim ticket. Upon arrival at Butuan City,
petitioner claimed his luggage but it could not be found. PAL Butuan sent a
message to PAL Cebu which in turn sent a message to PAL Manila that same
afternoon. PAL Manila advised PAL Cebu that the luggage has been
overcarried to Manila and that it would be forwarded to PAL Cebu that same
day. PAL Cebu then advised PAL Butuan that the luggage will be forwarded

the following day, on scheduled morning flight. This message was not
received by PAL Butuan as all the personnel had already gone for the day.
Meanwhile, Ong Yiu was worried about the missing luggage because it
contained vital documents needed for the trial the next day so he wired PAL
Cebu demanding delivery of his luggage before noon that next day or he
would hold PAL liable for damages based on gross negligence. Early morning,
petitioner went to the Butuan Airport to inquire about the luggage but did
not wait for the arrival of the morning flight at 10:00am. which carried his
luggage. A certain Dagorro, a driver of a colorum car, who also used to drive
the petitioner volunteered to take the luggage to the petitioner. He revelaed
that the documents were lost. Ong Yiu demanded from PAL Cebu actual and
compensatory damages as an incident of breach of contract of carriage.
Issue:
1.
Whether or not PAL is guilty of only simple negligence and not gross
negligence?
2.
Whether the doctrine of limited liability doctrine applies in the instant
case?
Held: PAL had not acted in bad faith. It exercised due diligence in looking for
petitioners luggage which had been miscarried. Had petitioner waited or
caused someone to wait at the airport for the arrival of the morning flight
which carried his luggage, he would have been able to retrieve his luggage
sooner. In the absence of a wrongful act or omission or fraud, the petitioner
is not entitled to moral damages. Neither is he entitled to exemplary
damages absent any proof that the defendant acted in a wanton, fraudulent,
reckless manner.
The limited liability applies in this case. On the presumed negligence of PAL,
its liability for the loss however, is limited on the stipulation written on the
back of the plane
Ticket which is P100 per baggage. The petitioner not having declared a
greater value and not having called the attention of PAL on its true value and
paid the tariff therefore. The stipulation is printed in reasonably and fairly big
letters and is easily readable. Moreso, petitioner had been a frequent
passenger of PAL from Cebu to Butuan City and back and he being a lawyer
and a businessman, must be fully aware of these conditions.

Transportation Case Digest: Servando V. Philippine Steam Navigation Co.

(1982)

FACTS:
Clara Uy Bico (1,528 cavans of rice worth P40,907.50) and Amparo
Servando (44 cartons of colored paper toys and general merchandise
worth P1,070.50) loaded on board Philippine Steam Navigation
Co.'s vessel, FS-176 for carriage from Manila to Pulupandan, Negros
Occidental

Bill of Lading:

Clause 14. Carrier shall not be responsible for loss or

damage to shipments billed 'owner's risk' unless such loss or damage is
due to negligence of carrier. Nor shall carrier be responsible for loss or
damage caused by force majeure, dangers or accidents of the sea or
other waters; war; public enemies; . . . fire . ...

Upon arrival of the vessel at Pulupandan, in the morning of November

18, 1963, the cargoes were discharged, complete and in good order, unto
the warehouse of the Bureau of Customs

2 pm: warehouse was razed by fire

Before the fire, 907 cavans of rice were delivered by Uy Bico

Uy Bico and Servando filed a claim for the value but was rejected by
Philippine Steam

CFI: favored UY Bico and Sercando

delivery of the shipment in question to the warehouse of the

Bureau of Customs is not the delivery contemplated by Article 1736
ISSUE: W/N Philippine Steam should not be liable because of the stipulation
in the bill of lading exempting it from fortuitous event

HELD: YES. set aside

Agreement was in iteration of

Article 1174. Except in cases expressly specified by the law, or
when it is otherwise declared by stipulation, or when the nature of the
obligation requires the assumption of risk, no person shall be responsible
for those events which could not be foreseen, or which, though foreseen,
were inevitable.
'caso fortuito' presents the following essential characteristics: (1) the
cause of the unforeseen and unexpected occurrence, or of the failure of
the debtor to comply with his obligation, must be independent of the
human will; (2) it must be impossible to foresee the event which
constitutes the 'caso fortuito', or if it can be foreseen, it must be

impossible to avoid; (3) the occurrence must be such as to render it

impossible for the debtor to fulfill his obligation in a normal manner; and
(4) the obligor must be free from any participation in the aggravation of
the injury resulting to the creditor." In the case at bar, the burning of the
customs warehouse was an extraordinary event which happened
independently of the will of the appellant. The latter could not have
foreseen the event.
nothing in the record to show that appellant carrier ,incurred in delay in
the performance of its obligation

CALTEX vs IAC Case Digest

CALTEX (PHILIPPINES), INC. VS. The INTERMEDIATE APPELLATE
COURT and ASIA PACIFIC AIRWAYS, INC.

November 13, 1992

G.R. No. 72703

FACTS: On January 12, 1978, private respondent Asia Pacific Airways Inc.
entered into an agreement with petitioner Caltex (Philippines) Inc., whereby
petitioner agreed to supply private respondent's aviation fuel requirements
for two (2) years, covering the period from January 1, 1978 until December
31, 1979. Pursuant thereto, petitioner supplied private respondent's fuel
supply requirements.

As of June 30, 1980, private respondent had an outstanding obligation to

petitioner in the total amount of P4,072,682.13, representing the unpaid
price of the fuel supplied. To settle this outstanding obligation, private
respondent executed a Deed of Assignment dated July 31, 1980, wherein it
assigned to petitioner its receivables or refunds of Special Fund Import
Payments from the National Treasury of the Philippines to be applied as
payment of the amount of P4,072,683.13 which private respondent owed to
petitioner. On February 12, 1981, pursuant to the Deed of Assignment,
Treasury Warrant No. B04708613 in the amount of P5,475,294.00
representing the refund to respondent of Special Fund Import Payment on its
fuel purchases was issued by the National Treasury in favor of petitioner. Four
days later, on February 16, 1981, private respondent, having learned that the
amount remitted to petitioner exceeded the amount covered by the Deed of
Assignment, wrote a letter to petitioner, requesting a refund of said excess.

Petitioner, acting on said request, made a refund in the amount of

P900,000.00 plus in favor of private respondent. The latter, believing that it
was entitled to a larger amount by way of refund, wrote petitioner anew,
demanding the refund of the remaining amount. In response thereto,
petitioner informed private respondent that the amount not returned
(P510,550.63) represented interest and service charges at the rate of 18%
per annum on the unpaid and overdue account of respondent from June 1,
1980 to July 31, 1981.

Thus, on September 13, 1982, private respondent filed a complaint against

petitioner in the Regional Trial Court of Manila, to collect the sum of
P510,550.63.00.

Petitioner (defendant in the trial court) filed its answer, reiterating that the
amount not returned represented interest and service charges on the unpaid
and overdue account at the rate of 18% per annum. It was further alleged
that the collection of said interest and service charges is sanctioned by law,
and is in accordance with the terms and conditions of the sale of petroleum
products to respondent, which was made with the conformity of said private
respondent who had accepted the validity of said interest and service
charges.

On November 7, 1983, the trial court rendered its decision dismissing the
complaint, as well as the counterclaim filed by defendant therein. Private
respondent (plaintiff) appealed to the Intermediate Appellate Court (IAC). On
August 27, 1985, a decision was rendered by the said appellate court
reversing the decision of the trial court, and ordering petitioner to return the
amount of P510,550.63 to private respondent.

ISSUE: Whether or not there is a valid dation in payment in this case.

RULING: The Supreme Court ruled that the Deed of Assignment executed by
the parties on July 31, 1980 is not a dation in payment and did not totally
extinguish respondent's obligations as stated therein.

The then Intermediate Appellate Court ruled that the three (3) requisites of
dacion en pago are all present in the instant case, and concluded that the
Deed of Assignment of July 31, 1980) constitutes a dacion in payment
provided for in Article 1245 of the Civil Code which has the effect of
extinguishing the obligation, thus supporting the claim of private respondent
for the return of the amount retained by petitioner.

The Supreme Court, speaking of the concept of dation in payment, in the

case of Lopez vs. Court of Appeals, among others, stated: "'The dation in
payment extinguishes the obligation to the extent of the value of the thing
delivered, either as agreed upon by the parties or as may be proved, unless
the parties by agreement, express or implied, or by their silence, consider
the thing as equivalent to the obligation, in which case the obligation is
totally extinguished."

From the above, it is clear that a dation in payment does not necessarily
mean total extinguishment of the obligation. The obligation is totally
extinguished only when the parties, by agreement, express or implied, or by
their silence, consider the thing as equivalent to the obligation. In the instant
case, the then Intermediate Appellate Court failed to take into account the
express recitals of the Deed of Assignment.

"That Whereas, ASSIGNOR has an outstanding obligation with ASSIGNEE in

the amount of P4,072,682.13 as of June 30, 1980, plus any applicable
interest on overdue account. Now therefore in consideration of the foregoing
premises, ASSIGNOR by virtue of these presents, does hereby irrevocably
assign and transfer unto ASSIGNEE any and all funds and/or Refund of
Special Fund Payments, including all its rights and benefits accruing out of
the same, that ASSIGNOR might be entitled to, by virtue of and pursuant to
the decision in BOE Case No. 80-123, in payment of ASSIGNOR's outstanding
obligation plus any applicable interest charges on overdue account and other
avturbo fuel lifting and deliveries that ASSIGNOR may from time to time
receive from the ASSIGNEE, and ASSIGNEE does hereby accepts such
assignment in its favor."

Hence, it could easily be seen that the Deed of Assignment speaks of three
(3) obligations (1) the outstanding obligation of P4,072,682.13 as of June 30,
1980; (2) the applicable interest charges on overdue accounts; and (3) the

other avturbo fuel lifting and deliveries that assignor (private respondent)
may from time to time receive from assignee (Petitioner). As aptly argued by
petitioner, if it were the intention of the parties to limit or fix respondent's
obligation to P4,072.682.13, they should have so stated and there would
have been no need for them to qualify the statement of said amount with the
clause "as of June 30, 1980 plus any applicable interest charges on overdue
account" and the clause "and other avturbo fuel lifting and deliveries that
ASSIGNOR may from time to time receive from the ASSIGNEE".

The terms of the Deed of Assignment being clear, the literal meaning of its
stipulations should control. In the construction of an instrument where there
are several provisions or particulars, such a construction is, if possible, to be
adopted as will give effect to all.

Likewise, the then Intermediate Appellate Court failed to take into

consideration the subsequent acts of the parties which clearly show that
they did not intend the Deed of Assignment to totally extinguish the
obligation: (1) After the execution of the Deed of Assignment on July 31,
1980, petitioner continued to charge respondent with interest on its overdue
account up to January 31, 1981. This was pursuant to the Deed of
Assignment which provides for respondent's obligation for "applicable
interest charges on overdue account". The charges for interest were made
every month and not once did respondent question or take exception to the
interest; and (2) In its letter of February 16, 1981, respondent addressed the
following request to petitioner:

In order to judge the intention of the contracting parties, their

contemporaneous and subsequent acts shall be principally considered (Art.
1253, Civil Code). The foregoing subsequent acts of the parties clearly show
that they did not intend the Deed of Assignment to have the effect of totally
extinguishing the obligations of private respondent without payment of the
applicable interest charges on the overdue account.

Finally, the payment of applicable interest charges on overdue account,

separate from the principal obligation of P4,072,682.13 was expressly
stipulated in the Deed of Assignment. The law provides that "if the debt
produces interest, payment of the principal shall not be deemed to have
been made until the interests have been covered." (Art. 1253, Civil Code).

Behn Meyer vs. Yangco

Saturday, September 13, 2014
Facts:

A sale of 80 drums of caustic soda was agreed between Behn, Meyer &
Co. and Teodoro Yanco. The merchandise was shipped from New York to
Manila.
However, the ship carrying the cargo was detained at Penang and the
71 of the 80 drums were removed. Respondent Yangco also refused to accept
the 9 remaining and also refused to accept the offer of Behn Meyer to have
the products substituted with other merchandise, which however were
different from what was ordered.
It must be noted that the contract provided for "c.i.f. Manila, pagadero
against delivery of documents."
Yanco filed an action seeking for damages for alleged breach of
contract.
Issue: WON Behn, Meyer & Co. should bear the burden of the loss of the
merchandise? YES

Held:
Rule as to delivery of goods by a vendor via a common carrier (If
contract is silent delivery of seller to common carrier transfer
ownership to buyer)
Determination of the place of delivery always resolves itself into a question
of act. If the contract be silent as to the person or mode by which the goods
are to be sent, delivery by the vendor to a common carrier, in the usual and
ordinary course of business, transfers the property to the vendee.

Payment of freight by the buyer = acquires ownership at the point

of shipment
A specification in a contact relative to the payment of freight can be taken to
indicate the intention of the parties in regard to the place of delivery. If the
buyer is to pay the freight, it is reasonable to suppose that he does so
because the goods become his at the point of shipment.

Payment of freight by the seller = title of property does not pass

until the goods have reached their destination
On the other hand, if the seller is to pay the freight, the inference is equally
so strong that the duty of the seller is to have the goods transported to their
ultimate destination and that title to property does not pass until the goods
have reached their destination.

c.i.f. means Cost, Insurance and Freight = CFI is paid by the seller
The letters "c.i.f." found in British contracts stand for cost, insurance, and
freight. They signify that the price fixed covers not only the cost of the
goods, but the expense of freight and insurance to be paid by the seller.

F.O.B. stands for Free on Board = seller bear all expenses until
goods are delivered
In this case, in addition to the letters "c.i.f.," has the word following, "Manila."
In mercantile contracts of American origin the letters "F.O.B." standing for the
words "Free on Board," are frequently used. The meaning is that the seller
shall bear all expenses until the goods are delivered where they are to be
"F.O.B."

According as to whether the goods are to be delivered "F.O.B." at the point of

shipment or at the point of destination determines the time when property
passes. However, both the terms "c.i.f." and "F.O.B." merely make rules of
presumption which yield to proof of contrary intention.

Delivery was to be made at Manila

Hence, we believe that the word Manila in conjunction with the letters "c.i.f."
must mean that the contract price, covering costs, insurance, and freight,
signifies that delivery was to made at Manila. If petitioner Behn Meyer has
seriously thought that the place of delivery was New York and Not Manila, it
would not have gone to the trouble of making fruitless attempts to substitute
goods for the merchandise named in the contract, but would have permitted
the entire loss of the shipment to fall upon the defendant.

Behn Meyer failed to prove that it performed its part in the contract
In this case, the place of delivery was Manila and plaintiff (Behn Meyer) has
not legally excused default in delivery of the specified merchandise at that
place. In resume, we find that the plaintiff has not proved the performance
on its part of the conditions precedent in the contract.

For breach of warranty, the buyer (Yanco) may demand rescission of

the contract of sale
The warranty the material promise of the seller to the buyer has not
been complied with. The buyer may therefore rescind the contract of sale
because of a breach in substantial particulars going to the essence of the
contract. As contemplated by article 1451 of the Civil Code, the vendee can
demand fulfillment of the contract, and this being shown to be impossible, is
relieved of his obligation. There thus being sufficient ground for rescission,
the defendant is not liable.
Belgian Overseas Chartering and Shipping N.V. v. Philippine First Insurance
Co.
Facts:

- CMC Trading A.G. shipped on board the M/V Anangel Sky at Hamburg,
Germany 242 coils of various Prime Cold Rolled Steel sheets for
transportation to Manila consigned to the Philippine Steel Trading
Corporation.
- On July 28, 1990, M/V Anangel Sky arrived at the port of Manila and,
within the subsequent days, discharged the subject cargo. Four (4) coils were
found to be in bad order.
- Finding the four (4) coils in their damaged state to be unfit for the
intended purpose, the consignee Philippine Steel Trading Corporation
declared the same as total loss.
- Philippine First Insurance paid the claim of Philippine Steel and was thus
subrogated.
- Philippine First then instituted a complaint for recovery of the amount
paid to the consignee as insured.
- Belgian claims that the damage and/or loss was due to pre-shipment
damage, to the inherent nature, vice or defect of the goods, or to perils,
danger and accidents of the sea, or to insufficiency of packing thereof, or to
the act or omission of the shipper of the goods or their representatives.
Belgian further argued that their liability, if there be any, should not exceed

the limitations of liability provided for in the bill of lading and other pertinent
laws. Finally, Belgian averred that, in any event, they exercised due diligence
and foresight required by law to prevent any damage/loss to said shipment.
- The RTC dismissed the complaint.
- The CA reversed and ruled that Belgian were liable for the loss or the
damage of the goods shipped, because they had failed to overcome the
presumption of negligence imposed on common carriers. As to the extent of
Belgians liability, the CA held that the package limitation under COGSA was
not applicable, because the words "L/C No. 90/02447" indicated that a higher
valuation of the cargo had been declared by the shipper.

Issues:

- Whether the notice of loss was timely filed. (Belgian claims that pursuant
to Section 3, paragraph 6 of COGSA, respondent should have filed its Notice
of Loss within three days from delivery. They assert that the cargo was
discharged on July 31, 1990, but that respondent filed its Notice of Claim only
on September 18, 1990.)
Whether the package limitation of liability under COGSA is applicable.
(Belgian contends that assuming that they are liable their liability should be
limited to US$500 per package as provided in the Bill of Lading and by
Section 4(5)of COGS

Held:

- NO. Mere proof of delivery of the goods in good order to a common carrier
and of their arrival in bad order at their destination constitutes a prima facie
case of fault or negligence against the carrier.
- In this case, Belgian failed to rebut the prima facie presumption of
negligence. First, as stated in the Bill of Lading, Belgian received the subject
shipment in good order and condition in Germany. Second, prior to the
unloading of the cargo, an Inspection Report prepared and signed by
representatives of both parties showed the steel bands broken, the metal
envelopes rust-stained and heavily buckled, and the contents thereof
exposed and rusty. Third, Bad Order Tally Sheet issued by Jardine Davies
Transport Services stated that the four coils were in bad order and condition.
Normally, a request for a bad order survey is made in case there is an
apparent or a presumed loss or damage.Fourth, the Certificate of Analysis

stated that, based on the sample submitted and tested, the steel sheets
found in bad order were wet with fresh water. Fifth, Belgian -- in a
letteraddressed to the Philippine Steel --admitted that they were aware of
the condition of the four coils found in bad order and condition.
- YES. First, the provision of COGSA provides that the notice of claim need
not be given if the state of the goods, at the time of their receipt, has been
the subject of a joint inspection or survey. Here, prior to unloading the cargo,
an Inspection Report as to the condition of the goods was prepared and
signed by representatives of both parties. Second, as stated in the same
provision, a failure to file a notice of claim within three days will not bar
recovery if it is nonetheless filed within one year. This one-year prescriptive
period also applies to the shipper, the consignee, the insurer of the goods or
any legal holder of the bill of lading.
- A claim is not barred by prescription as long as the one-year period has
not lapsed. In the present case, the cargo was discharged on July 31, 1990,
while the Complaint51 was filed by respondent on July 25, 1991, within the
one-year prescriptive period.
- YES. In this case, there was no stipulation in the Bill of Lading limiting the
carrier's liability. Neither did the shipper declare a higher valuation of the
goods to be shipped. This fact notwithstanding, the insertion of the words
"L/C No. 90/02447 cannot be the basis for Belgians liability.
- First, a notation in the Bill of Lading which indicated the amount of the
Letter of Credit obtained by the shipper for the importation of steel sheets
did not effect a declaration of the value of the goods as required by the bill.
That notation was made only for the convenience of the shipper and the
bank processing the Letter of Credit.
- Second, a bill of lading is separate from the Other Letter of Credit
arrangements. Thus, Belgians liability should be computed based on US$500
per package and not on the per metric ton price declared in the Letter of
Credit.

Ludo & Luym Corp. vs. I.V. Binamira

Facts:
Delta Photo Supply Company of New York shipped on board the M/S
FERNSIDE at New York, U.S.A., 6 cases of films and/or photographic
supplies consigned to the order of I. V. Binamira. A Bill of Lading was issued

where the carrier and the consignee have stipulated to limit the
responsibility of the carrier for the loss or damage that may be caused to the
goods before they are actually delivered. The films were discharged at the
port of Cebu by the stevedoring company hired by petitioner as agent of the
carrier. The cargo was received by the Visayan Cebu Terminal Company, Inc.,
the arrastre operator appointed by the Bureau of Customs. During the
discharge, the cargo was inspected by both the stevedoring company and
the arrastre operator, and the films were found to be in good condition. But
after it was delivered to respondent after 3 days, the same was examined by
a surveyor and found out that some films and supplies were missing.
Issue:
WON the carrier is responsible for the loss though the films were lost after
the shipment was discharged from the ship and placed in the possession and
custody of the customs arrastre.
Held: NO.
It is true that, as a rule, a common carrier is responsible for the loss,
destruction or deterioration of the goods it assumes to carry from one place
to another unless the same is due to any to any of the causes mentioned
in Article 1734 on the new Civil Code. But this shall only apply when the loss,
destruction or deterioration takes place while the goods are in the possession
of the carrier, and not after it has lost control of them.
The parties may agree to limit the liability of the carrier considering that the
goods have still to go through the inspection of the customs authorities
before they are actually turned over to the consignee. This is a situation
where we may say that the carrier losses control of the goods because of a
custom regulation and it is unfair that it be made responsible for what may
happen during the interregnum. And this is precisely what was done by the
parties herein. In the bill of lading that was issued covering the shipment in
question, both the carrier and the consignee have stipulated to limit the
responsibility of the carrier for the loss or damage that may be caused to the
goods before they are actually delivered.
ANICETO G. SALUDO, JR. Petitioner, VS. AMERICAN EXPRESS
INTERNATIONAL, INC. Respondents.
FACTS: Aniceto G. Saludo, Jr. filed a complaint for damages against the
American Express International, Inc. (AMEX) and/or its officers Ian T. Fish,
Vice-President and Country Manager, and Dominic Mascrinas, Head of
Operations, with the RTC of Maasin City, Southern Leyte. The case was
raffled to Branch 25 of the said court.

The complaint alleged, inter alia, that plaintiff (herein petitioner Saludo) "is a
Filipino citizen, of legal age, and a member of the House of Representatives
and a resident of Ichon, Macrohon, Southern Leyte, Philippines." On the other
hand, defendant (herein respondent AMEX, Inc.) "is a corporation doing
business in the Philippines and engaged in providing credit and other credit
facilities and allied services with office address at 4th floor, ACE Building,
Rada Street, Legaspi Village, Makati City." The other defendants (herein
respondents Fish and Mascrinas) are officers of respondent AMEX, and may
be served with summons and other court processes at their office address.
The complaint's cause of action stemmed from the alleged wrongful dishonor
of petitioner Saludo's AMEX credit card and the supplementary card issued to
his daughter. The first dishonor happened when petitioner Saludo's daughter
used her supplementary credit card to pay her purchases in the United
States some time in April 2000. The second dishonor occurred when
petitioner Saludo used his principal credit card to pay his account at the
Hotel Okawa in Tokyo, Japan while he was there with other delegates from
the Philippines to attend the Congressional Recognition in honor of Mr.
Hiroshi Tanaka.
The dishonor of these AMEX credit cards were allegedly unjustified as they
resulted from respondents' unilateral act of suspending petitioner Saludo's
account for his failure to pay its balance covering the period of March 2000.
Petitioner Saludo denied having received the corresponding statement of
account. Further, he was allegedly wrongfully charged for late payment in
June 2000. Subsequently, his credit card and its supplementary cards were
canceled by respondents on July 20, 2000.
Petitioner Saludo claimed that he suffered great inconvenience, wounded
feelings, mental anguish, embarrassment, humiliation and besmirched
political and professional standing as a result of respondents' acts which
were committed in gross and evident bad faith, and in wanton, reckless and
oppressive manner. He thus prayed that respondents be adjudged to pay
him, jointly and severally, actual, moral and exemplary damages, and
attorney's fees.
PROCEDURAL HISTORY: Before the Court is the Petition for Review on
Certiorari filed by Aniceto G. Saludo, Jr. seeking to reverse and set aside the
Decision1 dated May 22, 2003 of the Court of Appeals in CA-G.R. SP No.
69553. The assailed decision directed the Regional Trial Court (RTC) of
Maasin City, Southern Leyte, Branch 25 thereof, to vacate and set aside its
Orders dated September 10, 2001 and January 2, 2002 in Civil Case No. R3172, and enjoined the presiding judge2thereof from conducting further
proceedings in said case, except to dismiss the complaint filed therewith on
ground of improper venue. The petition also seeks to reverse and set aside

the appellate court's Resolution dated August 14, 2003 denying the motion
for reconsideration of the assailed decision.
ISSUES:
1. Whether the term resides' means the actual residence or domicile of the
decedent at the time of his death?
2. whether the appellate court committed reversible error in holding that venue
was improperly laid in the court a quo in Civil Case No. R-3172 because not
one of the parties, including petitioner Saludo, as plaintiff therein, was a
resident of Southern Leyte at the time of filing of the complaint
3. Whether Saludo's motive in filing his complaint with the court a quo was only
to vex and unduly inconvenience respondents or even to wield influence in
the outcome of the case, petitioner Saludo being a powerful and influential
figure in the said province could be regarded as a "specie of forum shopping"
HOLDING: The term "resides" as employed in the rule on venue on personal
actions filed with the courts of first instance means the place of abode,
whether permanent or temporary, of the plaintiff or the defendant, as
distinguished from "domicile" which denotes a fixed permanent residence to
which, when absent, one has the intention of returning.
Residence in civil law is a material fact, referring to the physical presence of
a person in a place. A person can have two or more residences, such as a
country residence and a city residence. (Quetulio v. Ruiz, S.C. Off. Gaz. 156,
Commentaries and Jurisprudence in Civil Law, Vol. 1, page 211, Tolentino).
Residence is acquired by living in a place; on the other hand, domicile can
exist without actually living in the place. The important thing for domicile is
that, once residence has been established in one place, there be an intention
to stay there permanently, even if residence is also established in some
other place.
Thus, if a person lives with his family habitually in Quezon City, he would
have his domicile in Quezon City. If he also has a house for vacation purposes
in the City of Baguio, and another house in connection with his business in
the City of Manila, he would have residence in all three places (Tolentino,
Commentaries and Jurisprudence on Civil Law, Vol. 1, Page 212, 1990
Edition) so that one[']s legal residence or domicile can also be his actual,
personal or physical residence or habitation or place of abode if he stays
there with intention to stay there permanently.
'resides' should be viewed or understood in its popular sense, meaning, the
personal, actual or physical habitation of a person, actual residence or place
of abode. It signifies physical presence in a place and actual stay thereat. In

this popular sense, the term means merely residence, that is, personal
residence, not legal residence or domicile. Residence simply requires bodily
presence as an inhabitant in a given place, while domicile requires bodily
presence in that place and also an intention to make it one's domicile. No
particular length of time of residence is required though; however, the
residence must be more than temporary
In the instant case, since plaintiff has a house in Makati City for the purpose
of exercising his profession or doing business and also a house in Ichon,
Macrohon, Southern Leyte, for doing business and/or for election or political
purposes where he also lives or stays physically, personally and actually then
he can have residences in these two places. Because it would then be
preposterous to acknowledge and recognize plaintiff Aniceto G. Saludo, Jr. as
congressman of Southern Leyte without also recognizing him as actually,
personally and physically residing thereat, when such residence is required
by law.28
DISPOSITION: WHEREFORE, premises considered, the petition is GRANTED.
The Decision dated May 22, 2003 and Resolution dated August 14, 2003 of
the Court of Appeals in CA-G.R. SP No. 69553 are REVERSED and SET ASIDE.
The Orders dated September 10, 2001 and January 2, 2002 of the Regional
Trial Court of Maasin City, Southern Leyte, Branch 25 thereof, in Civil Case
No. R-3172 are REINSTATED.
Wallem Philippines Shipping Inc. and Seacoast Maritime Corporation v
Prudential Guarantee & Assurance Inc. and Court of Appeals
G.R.No. 152158
February 7, 2003
Bill of Lading
Facts:
Respondent Prudential Guarantee & Assurance Inc (Prudential) brought an
action for damages against petitioner Wallem Philippines Shipping (Wallem)
and Seacost Maritime Corporation (Seacoast) filed with the RTC of Makati for
the recovery of the amount it aid to its insured General Milling Corporation
(GMC) for alleged shortage incurred in shipment of Indian toasted soyabean
extraction meal, yellow. The RTC ruled that Prudential failed to prove by
clear, convincing and competent evidence that there was shortage in the
shipment when it failed to establish by competent evidence the genuineness
and due execution of the bill of lading and, therefore, the true and exact
weight of the shipment when it was loaded unto the vessel. Having no way
by which a shortage could be determined, then it is not entitled for damages.
On appeal, the CA reversed the RTCs decision.
Issue:

Whether there was shortage in the shipment and whether Wallem could be
held liable for the shortage
Ruling:
No. The CA erred in finding that shortage had taken place. The Prudential
claims processor had no personal knowledge of the contents of the
documents as she had no participation in the preparation of the documents
upon which it based its cause of action against Wallem. Ms. Suarezs
testimony regarding the contents of the documents is thus hearsay, based as
it is on the knowledge of another person not presented on the witness
stand.23
Nor has the genuineness and due execution of these documents been
established. In the absence of clear, convincing, and competent evidence to
prove that the shipment indeed weighed 4,415.35 metric tons at the port of
origin when it was loaded on the M/V Gao Yang, it cannot be determined
whether there was a shortage of the shipment upon its arrival in Batangas.
The contents of the bill of lading can be controverted by evidence to the
contrary as the said bill of lading indicated that the contract of carriage was
under a said to weigh clause.

Jose Cangco vs Manila Railroad Co

On January 20, 1915, Cangco was riding the train of Manila Railroad Co
(MRC). He was an employee of the latter and he was given a pass so that he
could ride the train for free. When he was nearing his destination at about
7pm, he arose from his seat even though the train was not at full stop. When
he was about to alight from the train (which was still slightly moving) he
accidentally stepped on a sack of watermelons which he failed to notice due
to the fact that it was dim. This caused him to lose his balance at the door
and he fell and his arm was crushed by the train and he suffered other

serious injuries. He was dragged a few meters more as the train slowed
down.
It was established that the employees of MRC were negligent in piling the
sacks of watermelons. MRC raised as a defense the fact that Cangco was also
negligent as he failed to exercise diligence in alighting from the train as he
did not wait for it to stop.
ISSUE: Whether or not Manila Railroad Co is liable for damages.
HELD: Yes. Alighting from a moving train while it is slowing down is a
common practice and a lot of people are doing so every day without
suffering injury. Cangco has the vigor and agility of young manhood, and it
was by no means so risky for him to get off while the train was yet moving as
the same act would have been in an aged or feeble person. He was also
ignorant of the fact that sacks of watermelons were there as there were no
appropriate warnings and the place was dimly lit.
Fabre vs CA Case Digest
Fabre vs. Court of Appeals
259 SCRA 426
G.R. No. 111127
July 26, 1996

Facts: Petitioners Engracio Fabre, Jr. and his wife were owners of a Mazda
minibus. They used the bus principally in connection with a bus service for
school children which they operated in Manila. It was driven by Porfirio Cabil.

On November 2, 1984 private respondent Word for the World Christian

Fellowship Inc. (WWCF) arranged with the petitioners for the transportation
of 33 members of its Young Adults Ministry from Manila to La Union and back
in consideration of which private respondent paid petitioners the amount of
P3,000.00.

The usual route to Caba, La Union was through Carmen, Pangasinan.

However, the bridge at Carmen was under repair, so that petitioner Cabil,
who was unfamiliar with the area (it being his first trip to La Union), was
forced to take a detour through the town of Ba-ay in Lingayen, Pangasinan.
At 11:30 that night, petitioner Cabil came upon a sharp curve on the

highway. The road was slippery because it was raining, causing the bus,
which was running at the speed of 50 kilometers per hour, to skid to the left
road shoulder. The bus hit the left traffic steel brace and sign along the road
and rammed the fence of one Jesus Escano, then turned over and landed on
its left side, coming to a full stop only after a series of impacts. The bus came
to rest off the road. A coconut tree which it had hit fell on it and smashed its
front portion. Because of the mishap, several passengers were injured
particularly Amyline Antonio.

Criminal complaint was filed against the driver and the spouses were also
made jointly liable. Spouses Fabre on the other hand contended that they are
not liable since they are not a common carrier. The RTC of Makati ruled in
favor of the plaintiff and the defendants were ordered to pay jointly and
severally to the plaintiffs. The Court of Appeals affirmed the decision of the
trial court.

Issue: Whether the spouses Fabre are common carriers?

Held: Petition was denied. Spouses Fabre are common carriers.

The Supreme Court held that this case actually involves a contract of
carriage. Petitioners, the Fabres, did not have to be engaged in the business
of public transportation for the provisions of the Civil Code on common
carriers to apply to them. As this Court has held: 10 Art. 1732, Common
carriers are persons, corporations, firms or associations engaged in the
business of carrying or transporting passengers or goods or both, by land,
water, or air for compensation, offering their services to the public.

The above article makes no distinction between one whose principal

business activity is the carrying of persons or goods or both, and one who
does such carrying only as an ancillary activity (in local idiom, as "a
sideline"). Article 1732 also carefully avoids making any distinction between
a person or enterprise offering transportation service on a regular or
scheduled basis and one offering such service on an occasional, episodic or
unscheduled basis. Neither does Article 1732 distinguish between a carrier
offering its services to the "general public," i.e., the general community or
population, and one who offers services or solicits business only from a

narrow segment of the general population. We think that Article 1732

deliberately refrained from making such distinctions.
UCPB General Insurance Co., Inc.
vs Aboitiz Shipping Corp.
Ponente: Tinga
Facts:
On June 1991, 3 units of waste water treatment plant with accessories were
purchased by San Miguel Corp from Super Max Engineering. The goods came
from Charleston, USA and arrived in port of Manila on board MV Scandutch
Star. From Manila it was transported to Cebu on board of Aboitiz Supercon II.
In Cebu, with clearance from the Bureau of Customs, the goods were
delivered and received by San Miguel at its plant site. It was then discovered
that the motor of the unit was damaged.
Pursuant to the insurance agreement, UCPB General Insurance paid San
Miguel P1,703,381.40 representing the value of the damaged unit. In turn,
San Miguel executed a subrogation form in favor of UCPB. Then, UCPB filed a
complaint on Kuly 1992 as subrogee of San Miguel seeking to recover from
Aboitiz. Aboitiz moved to admit East Asiatic Co. as general agent of DAMCO
Intermodal System. RTC held Aboitiz, East Asiatic and DAMCO solidarily
liable.
CA reversed the decision of the RTC and ruled that UCPBs right of action did
not accrue because UCPB failed to file a formal notice within 24 hours from
the damaged. In a memorandum, UCPB asserts that the claim requirement
does not apply to cases concerning damages to the merchandise had already
been known to the carrier. UCPB revealed that the damage to the cargo was
found upon discharge from the foreign carrier witnessed by the carriers
representative who signed the request for bad order survey and the turnover
of bad order cargoes. This knowledge, UCPB argues, dispenses with the need
to give the carrier a formal notice of claim. Incidentally, the carriers
representative mentioned by UCPB as present at the time the merchandise
was unloaded was in fact a representative of respondent Eagle Express Lines
(Eagle Express). UCPB further claims that the issue of the applicability of Art.
366 of the Code of Commerce was never raised before the trial court and
should, therefore, not have been considered by the CA.

Eagle Express, in its Memorandum dated February 7, 2007, asserts that it

cannot be held liable for the damage to the merchandise as it acted merely
as a freight forwarders agent in the transaction. It allegedly facilitated the
transhipment of the cargo from Manila to Cebu but represented the interest
of the cargo owner, and not the carriers.
Aboitiz, on the other hand, points out, in its Memorandum dated March 29,
2007, that it obviously cannot be held liable for the damage to the cargo
which, by UCPBs admission, was incurred not during transhipment to Cebu
on board one of Aboitizs vessels, but was already existent at the time of
unloading in Manila. Aboitiz also argues that Art. 366 of the Code of
Commerce is applicable and serves as a condition precedent to the accrual
of UCPBs cause of action against it.
Issue: Whether any of the remaining parties may still be held liable by UCPB.
Ruling:
UCPB obviously made a gross misrepresentation to the Court when it claimed
that the issue regarding the applicability of the Code of Commerce,
particularly the 24-hour formal claim rule, was not raised as an issue before
the trial court. The appellate court, therefore, correctly looked into the
validity of the arguments raised by Eagle Express, Aboitiz and Pimentel
Customs on this point after the trial court had so ill-advisedly centered its
decision merely on the matter of extraordinary diligence.
Interestingly enough, UCPB itself has revealed that when the shipment was
discharged and opened at the ICTSI in Manila in the presence of an Eagle
Express representative, the cargo had already been found damaged. In fact,
a request for bad order survey was then made and a turnover survey of bad
order cargoes was issued, pursuant to the procedure in the discharge of bad
order cargo. The shipment was then repacked and transhipped from Manila
to Cebu on board MV Aboitiz Supercon II. When the cargo was finally received
by SMC at its Mandaue City warehouse, it was found in bad order, thereby
confirming the damage already uncovered in Manila.
We have construed the 24-hour claim requirement as a condition precedent
to the accrual of a right of action against a carrier for loss of, or damage to,
the goods. The shipper or consignee must allege and prove the fulfilment of
the condition. Otherwise, no right of action against the carrier can accrue in
favor of the former.

The shipment in this case was received by SMC on August 2, 1991. However,
as found by the Court of Appeals, the claims were dated October 30, 1991,
more than three (3) months from receipt of the shipment and, at that, even
after the extent of the loss had already been determined by SMCs surveyor.
The claim was, therefore, clearly filed beyond the 24-hour time frame
prescribed by Art. 366 of the Code of Commerce.

Petition was denied. CA's decision was affirmed.

PHILIPPINE CHARTER INSURANCE CORPORATION VS. CHEMOIL LIGHTERAGE
HITE
GOLD
CORPORATION
G.R.
No.
136888.
June
29,
2005
Facts: Philippine Charter Insurance Corporation is a domestic corporation
engaged in the business of non-life insurance. Respondent Chemoil
Lighterage Corporation is also a domestic corporation engaged in the
transport of goods. On 24 January 1991, Samkyung Chemical Company, Ltd.,
based in South Korea, shipped 62.06 metric tons of the liquid chemical
DIOCTYL PHTHALATE (DOP) on board MT TACHIBANA which was valued at
US$90,201.57 and another 436.70 metric tons of DOP valued at
US$634,724.89 to the Philippines. The consignee was Plastic Group Phils.,
Inc. in Manila. PGP insured the cargo with Philippine Charter Insurance
Corporation against all risks. The insurance was under Marine Policies No.
MRN-30721[5] dated 06 February 1991. Marine Endorsement No.
2786[7] dated 11 May 1991 was attached and formed part of MRN-30721,
amending the latters insured value to P24,667,422.03, and reduced the
premium accordingly. The ocean tanker MT TACHIBANA unloaded the cargo
to the tanker barge, which shall transport the same to Del Pan Bridge in Pasig
River and haul it by land to PGPs storage tanks in Calamba, Laguna. Upon
inspection by PGP, the samples taken from the shipment showed
discoloration demonstrating that it was damaged. PGP then sent a letter
where it formally made an insurance claim for the loss it sustained.
Petitioner requested the GIT Insurance Adjusters, Inc. (GIT), to conduct a
Quantity and Condition Survey of the shipment which issued a report stating
that DOP samples taken were discolored. Inspection of cargo tanks showed
manhole covers of ballast tanks ceilings loosely secured and that the rubber
gaskets of the manhole covers of the ballast tanks re-acted to the chemical
causing shrinkage thus, loosening the covers and cargo ingress. Petitioner

paid PGP the full and final payment for the loss and issued a Subrogation
Receipt. Meanwhile, PGP paid the respondent the as full payment for the
latters
services.
On 15 July 1991, an action for damages was instituted by the petitionerinsurer against respondent-carrier before the RTC, Br.16, City of Manila.
Respondent filed an answer which admitted that it undertook to transport the
shipment, but alleged that before the DOP was loaded into its barge, the
representative of PGP, Adjustment Standard Corporation, inspected it and
found the same clean, dry, and fit for loading, thus accepted the cargo
without any protest or notice. As carrier, no fault and negligence can be
attributed against respondent as it exercised extraordinary diligence in
handling the cargo. After due hearing, the trial court rendered a Decision in
favor of plaintiff. On appeal, the Court of Appeals promulgated its Decision
reversing the trial court. A petition for review on certiorar[ was filed by the
petitioner
with
this
Court.
Issues: 1. Whether or not the Notice of Claim was filed within the required
period.
2.Whether or not the damage to the cargo was due to the fault or negligence
of
the
respondent.
Held: Article 366 of the Code of Commerce has profound application in the
case at bar, which provides that; Within twenty-four hours following the
receipt of the merchandise a claim may be made against the carrier on
account of damage or average found upon opening the packages, provided
that the indications of the damage or average giving rise to the claim cannot
be ascertained from the exterior of said packages, in which case said claim
shall only be admitted at the time of the receipt of the packages. After the
periods mentioned have elapsed, or after the transportation charges have
been paid, no claim whatsoever shall be admitted against the carrier with
regard to the condition in which the goods transported were delivered.
As to the first issue, the petitioner contends that the notice of contamination
was given by PGP employee, to Ms. Abastillas, at the time of the delivery of
the cargo, and therefore, within the required period. The respondent,
however, claims that the supposed notice given by PGP over the telephone
was denied by Ms. Abastillas. The Court of Appeals declared:that a telephone
call made to defendant-company could constitute substantial compliance
with the requirement of notice. However, it must be pointed out that

compliance with the period for filing notice is an essential part of the
requirement, i.e.. immediately if the damage is apparent, or otherwise within
twenty-four hours from receipt of the goods, the clear import being that
prompt examination of the goods must be made to ascertain damage if this
is not immediately apparent. We have examined the evidence, and We are
unable to find any proof of compliance with the required period, which is
fatal to the accrual of the right of action against the carrier.[27]
Nothing in the trial courts decision stated that the notice of claim was
relayed or filed with the respondent-carrier immediately or within a period of
twenty-four hours from the time the goods were received. The Court of
Appeals made the same finding. Having examined the entire records of the
case, we cannot find a shred of evidence that will precisely and ultimately
point to the conclusion that the notice of claim was timely relayed or filed.
The requirement that a notice of claim should be filed within the period
stated by Article 366 of the Code of Commerce is not an empty or worthless
proviso.
The object sought to be attained by the requirement of the submission of
claims in pursuance of this article is to compel the consignee of goods
entrusted to a carrier to make prompt demand for settlement of alleged
damages suffered by the goods while in transport, so that the carrier will be
enabled to verify all such claims at the time of delivery or within twenty-four
hours thereafter, and if necessary fix responsibility and secure evidence as to
the nature and extent of the alleged damages to the goods while the matter
is
still
fresh
in
the
minds
of
the
parties.
The filing of a claim with the carrier within the time limitation therefore
actually constitutes a condition precedent to the accrual of a right of action
against a carrier for loss of, or damage to, the goods. The shipper or
consignee must allege and prove the fulfillment of the condition. If it fails to
do so, no right of action against the carrier can accrue in favor of the former.
The aforementioned requirement is a reasonable condition precedent; it does
not
constitute
a
limitation
of
action.[31]
We do not believe so. As discussed at length above, there is no evidence to
confirm that the notice of claim was filed within the period provided for
under Article 366 of the Code of Commerce. Petitioners contention proceeds
from a false presupposition that the notice of claim was timely filed.
Considering that we have resolved the first issue in the negative, it is
therefore unnecessary to make a resolution on the second issue.

FEDEX vs. AHAC and PHILAM INSURANCE COMPANY, INC

G.R. No. 150094
August 18, 2004

FACTS: shipper SMITHKLINE USA delivered to carrier Burlington Air

Express (BURLINGTON), an agent of [Petitioner] Federal Express Corporation,
a shipment of 109 cartons of veterinary biologicals for delivery to consignee
SMITHKLINE and French Overseas Company in Makati City. The shipment
was covered by Burlington Airway Bill No. 11263825 with the words,
REFRIGERATE WHEN NOT IN TRANSIT and PERISHABLE stamp marked on
its face. That same day, Burlington insured the cargoes with American Home
Assurance Company (AHAC). The following day, Burlington turned over the
custody of said cargoes to FEDEX which transported the same to Manila.
The shipments arrived in Manila and was immediately stored at [Cargohaus
Inc.s] warehouse. Prior to the arrival of the cargoes, FEDEX informed GETC
Cargo International Corporation, the customs broker hired by the consignee
to facilitate the release of its cargoes from the Bureau of Customs, of the
impending arrival of its clients cargoes.
12 days after the cargoes arrived in Manila, DIONEDA, a non-licensed
customs broker who was assigned by GETC, found out, while he was about
to cause the release of the said cargoes, that the same [were] stored only in
a room with 2 air conditioners running, to cool the place instead of a
refrigerator. DIONEDA, upon instructions from GETC, did not proceed with
the withdrawal of the vaccines and instead, samples of the same were taken

and brought to the Bureau of Animal Industry of the Department of

Agriculture in the Philippines by SMITHKLINE for examination wherein it was
discovered that the ELISA reading of vaccinates sera are below the positive
reference serum.
As a consequence of the foregoing result of the veterinary biologics test,
SMITHKLINE abandoned the shipment and, declaring total loss for the
unusable shipment, filed a claim with AHAC through its representative in the
Philippines, the Philam Insurance Co., Inc. (PHILAM) which recompensed
SMITHKLINE for the whole insured amount. Thereafter, PHILAM filed an action
for damages against the FEDEX imputing negligence on either or both of
them in the handling of the cargo.
Trial ensued and ultimately concluded with the FEDEX being held solidarily
liable for the loss. Aggrieved, petitioner appealed to the CA. The appellate
court ruled in favor of PHILAM and held that the shipping Receipts were a
prima facie proof that the goods had indeed been delivered to the carrier in
good condition.
ISSUE: Is FEDEX liable for damage to or loss of the insured goods

HELD: petition granted. Assailed decision reversed insofar as it pertains to

FEDEX
Prescription of Claim
From the initial proceedings in the trial court up to the present, petitioner has
tirelessly pointed out that respondents claim and right of action are already

barred. Indeed, this fact has never been denied by respondents and is
plainly evident from the records.
Airway Bill No. 11263825, issued by Burlington as agent of petitioner, states:
6.

No action shall be maintained in the case of damage to or partial loss

of the shipment unless a written notice, sufficiently describing the goods

concerned, the approximate date of the damage or loss, and the details of
the claim, is presented by shipper or consignee to an office of Burlington
within (14) days from the date the goods are placed at the disposal of the
person entitled to delivery, or in the case of total loss (including nondelivery) unless presented within (120) days from the date of issue of the
[Airway Bill]. xxx
Relevantly, petitioners airway bill states:
12./12.1 The person entitled to delivery must make a complaint to the
carrier in writing in the case:
12.1.1 of visible damage to the goods, immediately after discovery of the
damage and at the latest within fourteen (14) days from receipt of the
goods; xxx
Article 26 of the Warsaw Convention, on the other hand, provides:
Xxx (2)

In case of damage, the person entitled to delivery must complain

to the carrier forthwith after the discovery of the damage, and, at the latest,
within 3 days from the date of receipt in the case of baggage and 7 days
from the date of receipt in the case of goods. xx

(3)

Every complaint must be made in writing upon the document of

transportation or by separate notice in writing dispatched within the times

aforesaid.
(4)

Failing complaint within the times aforesaid, no action shall lie against

the carrier, save in the case of fraud on his part. xxx

Condition Precedent
In this jurisdiction, the filing of a claim with the carrier within the time
limitation therefor actually constitutes a condition precedent to the accrual of
a right of action against a carrier for loss of or damage to the goods. The
shipper or consignee must allege and prove the fulfillment of the condition.
If it fails to do so, no right of action against the carrier can accrue in favor of
the former. The aforementioned requirement is a reasonable condition
precedent; it does not constitute a limitation of action.
The requirement of giving notice of loss of or injury to the goods is not an
empty formalism. The fundamental reasons for such a stipulation are (1) to
inform the carrier that the cargo has been damaged, and that it is being
charged with liability therefor; and (2) 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.
NOTES: as to proper payee:
The Certificate specifies that loss of or damage to the insured cargo is
payable to order x x x upon surrender of this Certificate. Such wording

conveys the right of collecting on any such damage or loss, as fully as if the
property were covered by a special policy in the name of the holder itself. At
the back of the Certificate appears the signature of the representative of
Burlington. This document has thus been duly indorsed in blank and is
deemed a bearer instrument.
Since the Certificate was in the possession of Smithkline, the latter had the
right of collecting or of being indemnified for loss of or damage to the
insured shipment, as fully as if the property were covered by a special policy
in the name of the holder. Hence, being the holder of the Certificate and
having an insurable interest in the goods, Smithkline was the proper payee
of the insurance proceeds.
Subrogation
Upon receipt of the insurance proceeds, the consignee (Smithkline) executed
a subrogation Receipt in favor of respondents. The latter were thus
authorized to file claims and begin suit against any such carrier, vessel,
person, corporation or government. Undeniably, the consignee had a legal
right to receive the goods in the same condition it was delivered for transport
to petitioner. If that right was violated, the consignee would have a cause of
action against the person responsible therefor.
October 30, 1963. Elser vs. CA L-6517, Nov. 29, 1954
FACTS: On Dec. 1945, the goods specified in the Bill of Lading were
shipped on the 'S.S. Sea Hydra,' of Isthmian Steamship Company, from New
York to Manila, and were received by the consignee 'Udharam Bazar and Co.',
except one case of vanishing cream valued at P159.78. The goods were
insured against damage or loss by the 'Atlantic Mutual Insurance Co.'
'Udaharam Bazar and Co.' claimed for indemnity of the loss from Atlantic
Mutual and was paid by its agent 'E. E. Elser Inc. The Court of Appeals held
that petitioners have already lost their right to press their claim against

respondent because of their failure to serve notice thereof upon the carrier
within 30 days after receipt of the notice of loss or damage as required by
clause 18 of the bill of lading which was issued concerning the shipment of
the merchandise which had allegedly disappeared.
ISSUES: 1) Which provision should prevail? Is it that contained in clause 18 of
the bill of lading or the Carriage of goods by sea act? 2) Whether or not the
period had prescribed
RULING: 1) Clause 18 must of necessity yields to the provisions of the
Carriage of Goods by Sea Act which says: "any clause, covenant, or
agreement in a contract of carriage relieving the carrier or the ship from
liability for loss or damage to or in connection with the goods . . . or
lessening such liability otherwise than as provided in this Act, shall be null
and void and of no effect." (section 3.) This means that a carrier cannot limit
its liability in a manner contrary to what is provided for in said act. Clause 18
of the bill of lading must of necessity be null and void. *Isthmian Steamship
contends: that the Philippines was still a territory or possession of the United
States and it may be said that the trade then between the Phils. and the US
was not a "foreign trade. Therefore, Sea Act does not apply to the
shipment. - we are of the opinion that the Carriage of Goods by Sea Act of
1936 may have application to the present case it appearing that the parties
have expressly agreed to make and incorporate the provisions of said Act as
integral part of their contract of carriage. This is an exception to the rule
regarding the applicability of said Act. This is expressly recognized by section
13 of said Act. 2) Action of Elser has not yet lapsed or prescribed it appearing
that the present action was brought within one year after the delivery of the
shipment. According to Sea Act, a carrier can only be discharged from
liability in respect of loss or damage if the suit is not brought within one year
after the delivery of the goods or the date when the goods should have been
delivered, and that, even if a notice of loss or damage is not given as
required, "that fact shall not affect or prejudice the right of the shipper to
bring suit within one year after the delivery of the goods." In other words,
regardless of whether the notice of loss or damage has been given, the
shipper can still bring an action to recover said loss or damage within one
year after the delivery of the goods.
Eastern Shipping Lines, Inc. v CA (Credit Transactions)
G.R. No. 97412 July 12, 1994

EASTERN SHIPPING LINES, INC., petitioner, vs. HON. COURT OF APPEALS AND
MERCANTILE INSURANCE COMPANY, INC., respondents.

VITUG, J.:

FACTS:

This is an action against defendants shipping company, arrastre operator and

broker-forwarder for damages sustained by a shipment while in defendants'
custody, filed by the insurer-subrogee who paid the consignee the value of
such losses/damages.

the losses/damages were sustained while in the respective and/or successive

custody and possession of defendants carrier (Eastern), arrastre operator
(Metro Port) and broker (Allied Brokerage).

As a consequence of the losses sustained, plaintiff was compelled to pay the

consignee P19,032.95 under the aforestated marine insurance policy, so that
it became subrogated to all the rights of action of said consignee against
defendants.

DECISION OF LOWER COURTS: * trial court: ordered payment of damages,

jointly and severally * CA: affirmed trial court.

ISSUES AND RULING:

(a) whether or not a claim for damage sustained on a shipment of goods can
be a solidary, or joint and several, liability of the common carrier, the
arrastre operator and the customs broker;

YES, it is solidary. Since it is the duty of the ARRASTRE to take good care of
the goods that are in its custody and to deliver them in good condition to the
consignee, such responsibility also devolves upon the CARRIER. Both the
ARRASTRE and the CARRIER are therefore charged with the obligation to
deliver the goods in good condition to the consignee.

The common carrier's duty to observe the requisite diligence in the shipment
of goods lasts from the time the articles are surrendered to or
unconditionally placed in the possession of, and received by, the carrier for
transportation until delivered to, or until the lapse of a reasonable time for
their acceptance by, the person entitled to receive them (Arts. 1736-1738,
Civil Code; Ganzon vs. Court of Appeals, 161 SCRA 646; Kui Bai vs. Dollar
Steamship Lines, 52 Phil. 863). When the goods shipped either are lost or
arrive in damaged condition, a presumption arises against the carrier of its
failure to observe that diligence, and there need not be an express finding of
negligence to hold it liable.

(b) whether the payment of legal interest on an award for loss or damage is
to be computed from the time the complaint is filed or from the date the
decision appealed from is rendered; and

FOLLOW THESE VERY IMPORTANT RULES (GUIDANCE BY THE SUPREME

COURT)

I. When an obligation, regardless of its source, i.e., law, contracts, quasicontracts, delicts or quasi-delicts is breached, the contravenor can be held
liable for damages. The provisions under Title XVIII on "Damages" of the Civil
Code govern in determining the measure of recoverable damages.

II. With regard particularly to an award of interest in the concept of actual

and compensatory damages, the rate of interest, as well as the accrual
thereof, is imposed, as follows:

1. When the obligation is breached, and it consists in the payment of a sum

of money, i.e., a loan or forbearance of money, the interest due should be
that which may have been stipulated in writing. Furthermore, the interest

due shall itself earn legal interest from the time it is judicially demanded. In
the absence of stipulation, the rate of interest shall be 12% per annum to be
computed from default, i.e., from judicial or extrajudicial demand under and
subject to the provisions of Article 1169 of the Civil Code.

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.

(c) whether the applicable rate of interest, referred to above, is twelve

percent (12%) or six percent (6%).

SIX PERCENT (6%) on the amount due computed from the decision, dated 03
February 1988, of the court a quo (Court of Appeals) AND A TWELVE
PERCENT (12%) interest, in lieu of SIX PERCENT (6%), shall be imposed on
such amount upon finality of the Supreme Court decision until the payment
thereof.

RATIO: when the judgment awarding a sum of money becomes final and
executory, the monetary award shall earn interest at 12% per annum from
the date of such finality until its satisfaction, regardless of whether the case

involves a loan or forbearance of money. The reason is that this interim

period is deemed to be by then equivalent to a forbearance of credit.

NOTES: the Central Bank Circular imposing the 12% interest per annum
applies only to loans or forbearance of money, goods or credits, as well as to
judgments involving such loan or forbearance of money, goods or credits,
and that the 6% interest under the Civil Code governs when the transaction
involves the payment of indemnities in the concept of damage arising from
the breach or a delay in the performance of obligations in general. Observe,
too, that in these cases, a common time frame in the computation of the 6%
interest per annum has been applied, i.e., from the time the complaint is
filed until the adjudged amount is fully paid.
SINGSON vs. COURT OF APPEALS and CATHAY PACIFIC AIRWAYS
(G.R. No. 119995. November 18, 1997)
FACTS:
Petitioner CARLOS SINGSON and his cousin Crescentino Tiongson bought
from respondent Cathay Pacific Airways two (2) open-dated, identically
routed, round trip plane tickets (Manila to LA and vice versa). Each ticket
consisted of six (6) flight coupons, each would be detached at the start of
each
leg
of
the
trip.
Singson failed to obtain a booking in LA for their to Manila; apparently, the
coupon corresponding to the 5th leg of the trip was missing and instead the
3rd was still attached. It was not until few days later that the defendant
finally
was
able
to
arrange
for
his
return
to
Manila.
Singson commenced an action for damages based on breach of contract of
carriage
against
CATHAY
before
the
Regional
Trial
Court.
CATHAY alleged that there was no contract of carriage yet existing such that
CATHAYs refusal to immediately book him could not be construed as breach
of
contract
of
carriage.
The trial court rendered a decision in favor of petitioner herein holding that
CATHAY was guilty of gross negligence amounting to malice and bad faith for

which it was adjudged to pay petitioner P20,000.00 for actual damages with
interest at the legal rate of twelve percent (12%) per annum from 26 August
1988 when the complaint was filed until fully paid, P500,000.00 for moral
damages, P400,000.00 for exemplary damages, P100,000.00 for attorneys
fees,
and,
to
pay
the
costs.
On appeal by CATHAY, the Court of Appeals reversed the trial courts finding
that there was gross negligence amounting to bad faith or fraud and,
accordingly, modified its judgment by deleting the awards for moral and
exemplary
damages,
and
the
attorneys
fees
as
well.
ISSUES:
1.) whether a breach of contract was committed by CATHAY when it failed to
confirm
the
booking
of
petitioner.
2.) whether the carrier was liable not only for actual damages but also for
moral
and
exemplary
damages,
and
attorneys
fees.
HELD:
1.) Yes. x x x the round trip ticket issued by the carrier to the passenger was
in itself a complete written contract by and between the carrier and the
passenger. It had all the elements of a complete written contract, to wit: (a)
the consent of the contracting parties manifested by the fact that the
passenger agreed to be transported by the carrier to and from Los Angeles
via San Francisco and Hong Kong back to the Philippines, and the carriers
acceptance to bring him to his destination and then back home; (b) cause or
consideration, which was the fare paid by the passenger as stated in his
ticket; and, (c) object, which was the transportation of the passenger from
the place of departure to the place of destination and back, which are also
stated in his ticket. In fact, the contract of carriage in the instant case was
already partially executed as the carrier complied with its obligation to
transport the passenger to his destination, i.e., Los Angeles. , x x x the loss
of the coupon was attributable to the negligence of CATHAYs agents and
was the proximate cause of the non-confirmation of petitioner's return flight.
2.) Yes. 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.
x x x these circumstances reflect the carriers 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,
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.
However, the P500,000.00 moral damages and P400,000.00 exemplary
damages awarded by the trial court have to be reduced. The well-entrenched
principle is that the grant of moral damages depends upon the discretion of
the court based on the circumstances of each case. This discretion is limited
by the principle that the "amount awarded should not be palpably and
scandalously excessive" as to indicate that it was the result of prejudice or
corruption on the part of the trial court. Damages are not intended to enrich
the complainant at the expense of the defendant. They are awarded only to
alleviate the moral suffering that the injured party had undergone by reason
of the defendant's culpable action. There is no hard-and-fast rule in the
determination of what would be a fair amount of moral damages since each
case
must
be
governed
by
its
own
peculiar
facts.
In the instant
extensive as
assessment of
damages in

case, the injury suffered by petitioner is not so serious or

to warrant an award amounting to P900,000.00. The
P200,000.00 as moral damages and P50,000.00 as exemplary
his favor is, in our view, reasonable and realistic.

On the issue of actual damages, we agree with the Court of Appeals that the
amount of P20,000.00 granted by the trial court to petitioner should not be
disturbed.
As regards attorney's fees, they may be awarded when the defendant's act
or omission has compelled the plaintiff to litigate with third persons or to
incur expenses to protect his interest. It was therefore erroneous for the

Court of Appeals to delete the award made by the trial court; consequently,
petitioner should be awarded attorney's fees and the amount of P25,000.00,
instead of P100,000.00 earlier awarded, may be considered rational, fair and
reasonable.

Torts And Damages Case Digest: Expert Travel V. CA (1999)

Lessons Applicable: Cases where Moral Damage is allowed (Torts and
damages)
Laws Applicable: Article 2219, Article 1764, Article 2206

FACTS:
October 7, 1987: Exper travel & Tours, Inc. issued to Ricardo Lo 4
round-trip plane tickets for Hongkong with hotel accommodations and
transfers for P39,677.20

Failing to pay the amount due, Expert filed a complaint for recovery
plus damages

CA affirmed RTC: Lo remitted the Monte de Piedad Check for

P42,175.20 to Expert's chairperson Ms. Ma. Rocio de Vega who in turn
issued City Trust Check of P50,000
ISSUE: W/N moral damages for negligence or quasi-delict that did not result
to physical injury be awarded to Lo

HELD: NO. petition is GRANTED and the award of moral damages to

respondent Ricardo Lo under the assailed decision is DELETED

An award of moral damages would require certain conditions to be

met; to wit: (1) First, there must be an injury, whether physical, mental or
psychological, clearly sustained by the claimant; (2) second, there must
be a culpable act or omission factually established; (3) third, the wrongful
act or omission of the defendant is the proximate cause of the injury
sustained by the claimant; and (4) fourth, the award of damages is
predicated on any of the cases stated in Article 2219
in culpa contractual or breach of contract:

moral damages may be recovered when the defendant

acted in bad faith or was guilty of gross negligence (amounting to bad
faith) or in wanton disregard of his contractual obligation and,
exceptionally, when the act of breach of contract itself is constitutive of
tort resulting in physical injuries
By special rule in Article 1764, in relation to Article 2206, of the
Civil Code
moral damages may also be awarded in case the death of
a passenger results from a breach of carriage
In culpa aquiliana, or quasi-delict and contracts when breached
by tort
(a) when an act or omission causes physical injuries, or (b)
where the defendant is guilty of intentional tort
In culpa criminal
moral damages could be lawfully due when the accused is
found guilty of physical injuries, lascivious acts, adultery or concubinage,
illegal or arbitrary detention, illegal arrest, illegal search, or defamation
Malicious prosecution can also give rise to a claim for moral
damages
The term "analogous cases," referred to in Article 2219, following
the ejusdem generis rule, must be held similar to those expressly
enumerated by the law
Excludes clearly unfounded civil suit

ORTIGAS V. LUFTHANSA Francisco Ortigas, and defendant Luthansa German

Airlines, from the decision of the Court of First Instance of Manila Branch Y,
condemning the defendant to pay plaintiff the amount of P100,000 as moral
damages, P30,000 as exemplary or corrective damages, with interest of both
sums at the legal rate from the commencement of this suit until fully paid,
P20,000 as attorneys fees and the costs for the former failure to comply
with its obligation to give first accommodation to (the latter) a (Filipino)
passenger holding a first class ticket, aggravated by the giving of the space
instead to a Belgian and the improper conduct of its agents in dealing with
him during the occasion of such discriminatory violence of its contract of
carriage. Issue: Whether Lufthansa is liable for damages? Held: The court
said that when it comes to contracts of common carriage, inattention and
lack of care on the part of the carrier resulting in the failure of the passenger
to be accommodated in class contracted for amounts to bad faith and fraud

which entitles the passenger to the award of moral damages in accordance

with the 2220 of the Civil Code. But in the instant case, the breach appears
to the graver nature, since the preference given to the Belgian passenger
over plaintiff was done willfully and in wanton disregard of plaintiffs rights
and his dignity as a human being and as a Filipino, who may not be
discriminated against with impunity, as found by the court below what
worsened the situation of Ortigas was that Lufthansa succeeded in keeping
him as its passenger by assuring him that he would be given first class
accommodation at Cairo, the next station, the proper arrangements
therefore having been made already, when in truth such was not the case.
Transportation Law Case DigestsPetitioner is booked on a first class
accommodation in defendants airline from Rome to Manila. T h e b o o k i n g
w a s c o n f i r m e d b y i t s a i r l i n e s o f f ice. The airline employee
upong seeing his Filipino nationality disallowed his boarding and the seat was
given to a Belgian. Petitioner has a heart ailment and is advised by physician
to take only frst class accommodations. He was promised to be transferredto
first class on all succeeding layovers from Cairo to Hongkong to no avail.
Damages was filed. Trialcourt awarded Moral and Exemplary damages.
Issue: Whether or not defendant is liable for damages.
Held: Yes. Inattenton and lack of care on the carrier rsul ting in the failure of
the passenger to beaccommodated in a class availed of and contracted
amounts to bad faith and fraud. Furthermore, the p r e f e r e n c e t o a B e l
g i a n p a s s e n g e r i s also a wanton disregard of his right from d i s c r i
m i n a t i o n . T h e successive false representations of transferring him to
first class is an act of malice and bad faith. Thisentitles petitioner to moral
damages in accordance to Articlec 2220. Moral damages is increased
toPhp15,000 and Exemplary damages to Php100,000.
Zulueta v. Pan American World Airways, Inc. G.R. No. L-28589, February 29,
1972 Concepcion, C.J. FACTS: Spouses Rafael Zulueta and Telly Albert
Zulueta, with their daughter boarded a PANAM plane from Honolulu to
Manila, the first leg of which was Wake Island. While on stopover, Mr. Zulueta
found the need to relieve himself and after finding the terminals comfort
rooms full, he walked down the beach to do his business. Meanwhile, the
flight was called and Mr. Zuluetas absence was noticed. Heading towards
the ram, plaintiff remarked, You people almost made me miss your flight.
You have a defective announcing system and I was not paged. Instead of
allowing plaintiff to board the plane, however, the airport manager stopped

plaintiff and asked him to surrender his baggages for inspection. Refusing to
comply with the order, plaintiff was not allowed to board the plane. His wife
and daughter were able to proceed but were instructed to leave their
baggages behind. Plaintiff instituted present petition for recovery of
damages against respondents for breach of contract. The defendants,
however, maintain that plaintiffs reason for going to the beach was not to
relieve himself but because he had a quarrel with his wife.
ISSUE: Whether or not plaintiff is entitled to damages for breach of contract.
HELD: YES, plaintiff is entitled to damages. Firstly, plaintiffs testimony about
what he did upon reaching the beach is uncontradicted. Furthermore, there is
absolutely no direct evidence about said alleged quarrel. If such was true,
surely, plaintiff would not have walked back from the beach to the terminal
before the plane had resumed its flight to Manila, thereby exposing his
presence to the full view of those who were looking for him. Anent the
request of the common carrier to inspect the bags of plaintiff, it appears that
Captain Zentner received information that one of the passengers expressed
a fear of a bomb on board the plane. As a result, he asked for the plaintiffs
bags to verify the bomb. Nevertheless, this claim is unfounded. The Captain
failed to explain why he seemingly assumed that the alleged apprehension of
his information was justified. Plaintiff himself intimated to them that he was
well known to the US State Department and that the Captain was not even
aware of the informants name or any circumstances which may substantiate
the latters fear of a certain bomb. Defendants further argue that plaintiff
was also guilty of contributory negligence for failure to reboard the plane
within the 30 minutes announced before the passengers debarked therefrom.
This may have justified a reduction of the damages had plaintiff been
unwittingly left by the plane, owing to the negligence of PANAM personnel, or
even, wittingly, if he could not be found before the planes departure. It does
not, and cannot have such justification in the case at bar, plaintiff having
shown up before the plane had taken off and he having been off-loaded
intentionally and with malice. With all the foregoing, it is clear that plaintiff is
entitled to damages from respondent company.

Air France vs Rafael Carrascoso

In March 1958, Rafael Carrascoso and several other Filipinos were tourists en
route to Rome from Manila. Carrascoso was issued a first class round trip
ticket by Air France. But during a stop-over in Bangkok, he was asked by the
plane manager of Air France to vacate his seat because a white man
allegedly has a better right than him. Carrascoso protested but when

things got heated and upon advise of other Filipinos on board, Carrascoso
gave up his seat and was transferred to the planes tourist class.
After their tourist trip when Carrascoso was already in the Philippines, he
sued Air France for damages for the embarrassment he suffered during his
trip. In court, Carrascoso testified, among others, that he when he was forced
to take the tourist class, he went to the planes pantry where he was
approached by a plane purser who told him that he noted in the planes
journal the following:
First-class passenger was forced to go to the tourist class against his will,
and that the captain refused to intervene
The said testimony was admitted in favor of Carrascoso. The trial court
eventually awarded damages in favor of Carrascoso. This was affirmed by
the Court of Appeals.
Air France is assailing the decision of the trial court and the CA. It avers that
the issuance of a first class ticket to Carrascoso was not an assurance that
he will be seated in first class because allegedly in truth and in fact, that
was not the true intent between the parties.
Air France also questioned the admissibility of Carrascosos testimony
regarding the note made by the purser because the said note was never
presented in court.
ISSUE 1: Whether or not Air France is liable for damages and on what basis.
ISSUE 2: Whether or not the testimony of Carrasoso regarding the note
which was not presented in court is admissible in evidence.
HELD 1: Yes. It appears that Air Frances liability is based on culpacontractual and on culpa aquiliana.
Culpa Contractual
There exists a contract of carriage between Air France and Carrascoso. There
was a contract to furnish Carrasocoso a first class passage; Second, That said
contract was breached when Air France failed to furnish first class
transportation at Bangkok; and Third, that there was bad faith when Air

Frances employee compelled Carrascoso to leave his first class

accommodation berth after he was already, seated and to take a seat in
the tourist class, by reason of which he suffered inconvenience,
embarrassments and humiliations, thereby causing him mental anguish,
serious anxiety, wounded feelings and social humiliation, resulting in moral
damages.
The Supreme Court did not give credence to Air Frances claim that the
issuance of a first class ticket to a passenger is not an assurance that he will
be given a first class seat. Such claim is simply incredible.
Culpa Aquiliana
Here, the SC ruled, even though there is a contract of carriage between Air
France and Carrascoso, there is also a tortuous act based on culpa aquiliana.
Passengers do not contract merely for transportation. They have a right to be
treated by the carriers employees with kindness, respect, courtesy and due
consideration. They are entitled to be protected against personal
misconduct, injurious language, indignities and abuses from such employees.
So it is, that any rule or discourteous conduct on the part of employees
towards a passenger gives the latter an action for damages against the
carrier. Air Frances contract with Carrascoso is one attended with public
duty. The stress of Carrascosos action is placed upon his wrongful expulsion.
This is a violation of public duty by the Air France a case of quasi-delict.
Damages are proper.
HELD: 2: Yes. The testimony of Carrascoso must be admitted based on res
gestae. The subject of inquiry is not the entry, but the ouster incident.
Testimony on the entry does not come within the proscription of the best
evidence rule. Such testimony is admissible. Besides, when the dialogue
between Carrascoso and the purser happened, the impact of the startling
occurrence was still fresh and continued to be felt. The excitement had not
as yet died down. Statements then, in this environment, are admissible as
part of the res gestae. The utterance of the purser regarding his entry in the
notebook was spontaneous, and related to the circumstances of the ouster
incident. Its trustworthiness has been guaranteed. It thus escapes the
operation of the hearsay rule. It forms part of the res gestae.
Armovit v. CA

Facts: Atty. Raymundo Armovit filed a petition for his claim of attorneys fee
against Bengson. Armovit was the counsel of Bengson in a complaint against
GSIS for an extrajudicial foreclosure of their properties, and agreed to pay
Armovit P 15,000.00 as initial compensation and 20% contingent fee. After
favorable judgment was rendered to them, Armovit was given P 300,000
instead of P 552,000 which is the 20% of the
P2,760,000 that was
recovered from the said case, and assured that the balance is forthcoming.
But Bengson did not pay the balance and averred to the court that the
P
300,000 was the final payment. Armovit appealed that there is nothing in the
evidence receipt that shows that P 300,000 was the full payment of the
agreed contingent fee.
Issue: Whether or not Armovits claim of attorneys fee is reasonable.
Held: Armovits claim of attorneys fee is reasonable for it is stipulated in the
agreement with Bengson that he will be given 20% of contingent fee, and
since the case obtained favorable judgment, the agreement must therefore
be followed. A Contingent Fee Contract is an agreement in writing in which
the lawyers professional fee, usually a fixed percentage of what may be
recovered in the action, is made to depend upon the success of the litigation;
and if in case the client acted in bad faith and refuse to pay what is due to
the lawyer then the lawyer is entitled to recover the full amount as fixed in a
valid written agreement. Thus, the petition of Armovit is granted and
Bengson is ordered to pay P252,000.00 as balance of the contingent fee.
Expert Travel &Tours Inc. vs CA
GR 152392, May 26, 2005
Callejo Sr. J.
Facts: Korean Air Lines (KAL) filed a complaint against Expert Travel & Tours
Inc (ETI) with the RTC of Manila for collection of sum of money plus attorneys
fees and damages. The verification and certification against non-forum
shopping was signed by Atty. Mario Aguinaldo, who indicated therein that he
was the resident agent and legal counsel of KAL and had caused the
preparation of the complaint. ETI moved to dismiss the complaint on the
ground that said lawyer was not authorized to execute the verification and
certification against non-forum shopping as required by Section 5 Rule 7 of
the Rules of Court. KAL opposed the motion, contending that Atty. Aguinaldo
was its resident agent and was reported as such with the SEC as required by

the Corporation Code of the Philippines. Also, it further alleged that Atty.
Aguinaldo was the Corporate Secretary of KAL.
At the hearing, Atty. Aguinaldo claimed that thru a resolution of KAL Board of
Directors approved during a special meeting, he was authorized to file the
complaint. Thru an affidavit submitted by its general manager, it was alleged
that a special teleconference was held and and in that same teleconference
the Board approved a resolution authorizing him to execute the certification
against non-forum shopping and to file the complaint. However, the general
manager provided no written copy of the said resolution.
The trial court gave due credence to the claim of Atty. Aguinaldo and the
general manager. ETI filed a motion for reconsideration, contending that the
court cannot take judicial notice of the said teleconference without any
hearing, which was denied by the RTC. CA also denied the appeal.
Issue: Whether or not the court can take judicial notice of the said
teleconference.
Held: Things of common knowledge of which courts take judicial matters
coming to the knowledge of men generally in the course of the ordinary
experiences of life, or they may be matters which are generally accepted by
mankind as true and are capable of ready and unquestionable determination.
As the common knowledge of man ranges far and wide, a wide variety of
particular facts have been judicially noticed as being matters of common
knowledge. But a court cannot take judicial notice of any fact which, in part,
is dependent on the existence or non-existence of a fact of which the court
has no constructive knowledge.
In this age of modern technology, the courts may take judicial notice that
business transactions may be made by individuals through teleconferencing.
Teleconferencing is interactive group communication through an electronic
medium, bringing people together under one roof even though they are
separated by hundreds of miles.
In the Philippines, teleconferencing and videoconferencing of members of the
board of directors of private corporation is is a reality, in light of RA 8792.

The SEC issued SEC memorandum Circular No. 15, on November 30, 2001,
providing the guidelines to be complied with related to such conferences.
The Court is not convinced that one was conducted; even if there had been
one, the Court is not inclined to believe that a board resolution was duly
passed specifically authorizing Atty. Aguinaldo to file the complaint and
execute the required certification against non forum shopping.
Petition granted.
Japan Airlines vs Court of Appeals (G.R. No. 118664)
Facts: Private respondents boarded a JAL flight in San Francisco, California
bound for Manila. It included an overnight stopover at Narita, Japan at JALs
expense. Due to the Mt. Pinatubo eruption, private respondents trip to
Manila was cancelled. JAL rebooked all the Manila-bound passengers and
paid for the hotel expenses of their unexpected overnight stay. The flight of
private respondents was again cancelled due to NAIAs indefinite closure. JAL
informed the respondents that it would no longer defray their hotel and
accommodation expense during their stay in Narita. The respondents were
forced to pay for their accommodations and meal expenses for 5 days.
Issues:
1. Whether or not JAL has the obligation to shoulder the hotel and meal
expenses even if the delay was caused by force majeure
2. Whether or not the award of damages was proper
Held:
1. When a party is unable to fulfill his obligation because of force
majeure, the general rule is that he cannot be held liable for damages
for non-performance. When JAL was prevented from resuming its flight
to Manila due to the effects of the eruption, whatever losses or
damages in the form of hotel and meal expenses the stranded
passengers incurred cannot be charged to JAL. The predicament of the
private respondents was not due to the fault or negligence of JAL. JAL
had the duty to arrange the respondents flight back to Manila.

However, it failed to look after the comfort and convenience of its

passengers when it made the passengers arrange their flight back to
Manila on their own and after waiting in the airport for a whole day.
2. Yes, the award of nominal damages is proper. Nominal damages are
adjudicated in order that a right of a plaintiff, which has been violated
or invaded by the defendant, may be vindicated or recognized and not
for the purpose of indemnifying any loss suffered by him.

Northwest Airlines V. Cuenca G.R. L-22425 August 31, 1965

FACTS When his contract of carriage was violated by the petitioner,
respondent held theoffice of Commissioner of Public Highways of the
Republic of the Philippines.Having boarded petitioner's plane in Manila with a
first class ticket to Tokyo, he was, upon arrival at Okinawa, transferred to the
tourist class compartment. Although he revealed that he was traveling in his
official capacity as official delegateof the Republic to a conference in Tokyo,
an agent of petitioner rudely compelledhim in the presence of other
passengers to move, over his objection, to the touristclass, under threat of
otherwise leaving him in Okinawa. In order to reach theconference on time,
respondent had no choice but to obey. This is an action for damages for
alleged breach of contract. After appropriate proceedings the Court of First
Instance of Manila, in which the case was originally filed, rendered judgment
sentencing defendant Northwest Airlines, Inc. hereinafter referred to as
petitioner to pay to plaintiff Cuenca hereinafterreferred to as
respondent the sum of P20,000 as moral damages, together withthe sum
of P5,000 as exemplary damages, with legal interest thereon from the dateof
the filing of complaint," December 12, 1959, "until fully paid, plus the
furthersum of P2,000 as attorney's fees and expenses of litigation." On
appeal taken by petitioner, said decision was affirmed by the Court of
Appeals, except as to theP5,000.00 exemplary damages, which was
eliminated, and the P20,000.00 award formoral damages, which was
converted into nominal damages.

Trans World Airlines (TWA) vs. CA

Facts: Vinluan, a practicing lawyer in Manila had to travel to several cities in
Europe and US. While in Paris, he went to the office of TWA to confirm his
reservation for first class accommodation. It was confirmed twice. During the
time of the flight, he was told that there was no 1st class seat available.

Hence, he was downgraded to economy. He protested but he was arrogantly

treated by a TWA employee. And while waiting for his flight, he saw white
Caucasians who arrived much later than him, in first class seats.
Issue: WON Vinluan is entitled to damages.
Held: Yes. 1 The discrimination is obvious and the humiliation to which
private respondent was subjected is undeniable. Consequently, the award of
moral and exemplary damages by the respondent court is in order. 2
Inattention and lack of care for the interest of its passengers who are entitled
to its utmost consideration, particularly as to their convenience, amount to
bad faith which entitles the passenger to the award of moral damages. More
so in this case where instead of courteously informing private respondent of
his being downgraded under the circumstances, he was angrily rebuffed by
an employee of petitioner.

R Transport Corp. vs. Eduardo Pante 599 SCRA 747 (2009)

FACTS:
R Transport operates a bus line which transports passengers from
Cubao, Quezon City to Gapan, Nueva Ecija.
27 January 1995: Pante rode a bus from Cubao (P48 fare). Along a
highway in Bulacan, the bus hit a tree and a house due to the reckless
driving of Johnny Mediquia.
Pante sustained a laceration frontal area, with fracture of the right
humerous1.
o His operation, confinement, and medications caused him P30K.
He became unemployed as Goldilocks refused to re-employ him
due to his condition.
o He had to undergo a second operation after four years. He spent
another P15k.
o The only assistance petitioner gave was the amount of P7K to
reimburse him for the stainless steel plate placed in his arm.
Other than that, petitioner refused to assist Pante.
14 March 1995: Pante sued for damages.
Petitioner in its answer denied fault claiming that it exercised the
diligence of a good father of the family in the selection and supervision
of employees, and that the accident was force majeure.
The case went on for 7 years. The delays were due to the multiple
postponements and unexplained absence of petitioners counsel. Its
rights to cross-examine and present evidence were eventually forfeited
as a consequence.
1

RTC ruled in favour of Pante. CA affirmed RTCs decision.

ISSUE:
W/N Petitioner is liable for damages despite Pante not presenting substantial
evidence to support his claim.
HELD:
YES. Petitioner is liable for damages.

Petitioner, as a common carrier, is expected to exercise extraordinary

diligence, and has the duty to transport its passengers safely to their
destination.
ARTICLE 1756 OF THE CIVIL CODE: In case of death or injuries to
passengers, common carriers are presumed at fault or negligent unless
they are able to prove their exercise of extraordinary diligence.
ARTICLE 1759: Common carriers are also liable for the negligence of
their employees.
o The liability of common carriers does not cease upon proof that
they exercised extraordinary diligence of a good father of the
family in the selection and supervision of employees.
Petitioner cannot claim that it was denied due process which prevented
it from presenting evidence in his defense. Due to the unexplained
absences of his counsel, the hearings had to be constantly postponed,
which resulted in a 7-year delay of the case. It was given the
opportunity to present its evidence, but was considered to have waived
its right.
Petitioner also contends that the CA and TC erred in awarding damages
in favour of Pante in the amount of P22,000 based on a statement
issued by the Baliuag Hospital and not based on the receipt. The Court
held that this was without merit since in another case, the Court
awarded damages for hospitalization expenses based on the statement
of account issued by the Makati Medical Center.
The Court also affirmed the award of moral damages, citing Spouses
Ong vs. CA where moral damages were given to passengers who
suffered physical injuries. It is the usual practice to award moral
damages for physical injuries sustained. Pante here suffered physical
pain, mental anguish and anxiety as a result of the accident. P50,000
is proper.
An award of exemplary damages is also proper, as the driver was
manning the bus in a reckless, negligent, and imprudent manner. This
will provide as an example or as a correction for the public good.

PETITION IS DENIED.

Mecenas v CA
Facts:
M/T Tacloban (barge-type oil tanker) collided with M/V Don Juan ( inter-island
vessel carrying 750 passengers). When the collision occurred, the sea was
calm, the weather fair and visibility good. As a result, M/V Don Juan sank and
the passengers perished.
Petitioner was the parent of the passenger who died. They file an action for
damages alleging the negligence of Capt. Santisteban (captain of Don Juan)
and Negros Navigation (owner of Don Juan).
Issue:
1. Who was negligent?
2. Whether or not Capt. Santisteban and Negros Navigation was negligent.
Held:
1. M/V Tacloban was primarily and solely at fault. M/V Don Juan was also at
fault.
Rule 18 of the International Rules of the Road which requires 2 power-driven
vessels meeting end on or nearly end on each to alter her course to
starboard so that each vessel may pass on the port side of each other.
In the case, M/V Tacloban, as held by the report of the Commandant of the
Philippine Coast Guard, failed to follow the Rules. Hence, she was deemed
negligent.
However, route observance of the International Rules of the Road will not
relieve a vessel from responsibility if the collision could have been avoided
by proper skill on her part or even a departure from the rules.
M/V Don Juan having sighted M/V Tacloban when it was still a long way off
was negligent in failing to take early preventive action and in allowing the 2
vessels to come into close quarters as to render the collision inevitable when
there was no necessity for passing so near M/V Tacloban for Don Juan could
choose its own distance. It is noteworthy that M/V Tacloban upon turning
hard to port shortly before the moment of collision, signaled its intention to
do so by giving 2 short blasts with its horn. Don Juan gave no answering horn
blast to signal it's own intention and proceeded to turn hard to starboard.
2. Yes. The behavior of the captain -playing mahjong "before and up to the
time of collision" constituted gross negligence. This behavior is unacceptable

on the part of the master of a vessel to whose hands the lives of at least 750
passengers were entrusted.
It does not matter that the Captain was off-duty or on-duty. Realistically
speaking, there is no such thing as off-duty hours for the master of the
vessel at sea that is a common carrier who is required extraordinary
diligence. Hence, Negros Navigation in permitting or in failing to discover and
correct such behavior is also grossly negligent.