Magboo vs.

Bernardo (GR L-16790, 30 April 1963)

En Banc, Makalintal (J): 8 concur, 1 took no part
Facts: Urbano and Emilia Magboo are the parents of Cesar Magboo, a child of 8 years old,
who lived with them and was under their custody until his death on 24 October 1956 when he
was killed in a motor vehicle accident, the fatal vehicle being a passenger jeepney with Plate
AC-1963 (56) owned by Delfin Bernardo. At the time of the accident, said passenger jeepney
was driven by Conrado Roque. The contract between Roque and Bernardo was that Roque was
to pay to Bernardo the sum of P8.00, which he paid to Bernardo, for privilege of driving the
jeepney on 24 October 1956, it being their agreement that whatever earnings Roque could
make out of the use of the jeepney in transporting passengers from one point to another in the
City of Manila would belong entirely to Roque. As a consequence of the accident and as a
result of the death of Cesar Magboo in said accident, Roque was prosecuted for homicide thru
reckless imprudence before the CDI of Manila (Criminal Case 37736), and that upon
arraignment Roque pleaded guilty to the information and was sentenced to 6 months of arresto
mayor, with the accessory penalties of the law; to indemnify the heirs of the deceased in the
sum of P3,000.00, with subsidiary imprisonment in case of insolvency, and to pay the costs.
Pursuant to said judgment Roque served his sentence but he was not able to pay the indemnity
because he was insolvent.
An action was filed by the spouses Magboo against Bernardo is for enforcement of his
subsidiary liability as employer in accordance with Article 103, Revised Penal Code. The trial
court (CFI of Manila) ordered Bernardo to pay the spouses P3,000.00 and costs. Bernardo
appealed to the Court of Appeals, which certified the case to the Supreme Court on the ground
that only questions of law are involved.
The Supreme Court affirmed the judgment appealed from, with costs against Bernardo.
1. Boundary system; Employer-Employee relationship exists; NLU vs. Dinglasan as cited
in Doce vs. WCC
In National Labor Union vs. Dinglasan, 52 O.G. No. 4, 1933, it was held that the features
which characterize the “boundary system” — namely, the fact that the driver does not receive a
fixed wage but gets only the excess of the amount of fares collected by him over the amount he
pays to the jeep-owner, and that the gasoline consumed by the jeep is for the account of the
driver — are not sufficient to withdraw the relationship between them from that of the
employer and employee. The ruling was subsequently cited and applied in Doce vs. Workmen’s
Compensation Commission, L9417, 22 December 1958, which involved the liability of a bus
owner for injury compensation to a conductor working under the “boundary system.”
2. Principle applied in negligence cases concerning right of third parties to recover
damages for injuries sustained
The same principle applies with greater reason in negligence cases concerning the right of third
parties to recover damages for injuries sustained. In Montoya vs. Ignacio, L-5868, December
29, 1953, the owner and operator of a passenger jeepney leased it to another, but without the
approval of the Public Service Commission. In a subsequent collision a passenger died. The
Court ruled that since the lease was made without such approval, which was required by law,
the owner continued to be the operator of the vehicle in legal contemplation and as such was
responsible for the consequences incident to its operation. The same responsibility was held to
attach in a case where the injured party was not a passenger but a third person, who sued on the
theory of culpa aquiliana (Timbol vs. Osias, L-7547, April 30, 1955). There is no reason why a
different rule should be applied in a subsidiary liability case under Article 103 of the Revised
Penal Code. As in the existence of an employer-employee relationship between the owner of
the vehicle and the driver. Indeed to exempt from liability the owner of a public vehicle who
operates it under the “boundary system” on the ground that he is a mere lessor would be not
only to abet flagrant violations of the Public Service Law but also to place the riding public at
the mercy of reckless and irresponsible drivers — reckless because the measure of their
earnings depends largely upon the number of trips they make and, hence, the speed at which
they drive; and irresponsible because most if not all of them are in no position to pay the
damages they might cause. (See Erezo vs. Jepte, L-9605, September 30, 1957).
3. Bernardo did not aid Roque in criminal case, cannot escape subsidiary liability as
provided by Article 103 RPC
With respect to Bernardo’s contention that he was taken unaware by the spontaneous plea of
guilt entered by Roque, and that he did not have a chance to prove the innocence of Roque, the
Court holds that at this stage, it is already too late to try the criminal case all over again. His
allegation that he relied on his belief that Roque would defend himself and they had sufficient
proof to show that Roque was not guilty of the crime charged cannot be entertained. He should
have taken it to himself to aid in the defense of Roque. Having failed to take this step and the
accused having been declared guilty by final judgment of the crime of homicide thru reckless
imprudence, there appears no more way for him to escape his subsidiary liability as provided
for in Article 103 of the Revised Penal Code.

Eastern Shipping Lines vs. CA (GR 97412, 12 July 1994)

En Banc, Vitug (J): 13 concur, 1 took no part
Facts: On 4 December 1981, 2 fiber drums of riboflavin were shipped from Yokohama, Japan
for delivery vessel “SS Eastern Comet” owned by Eastern Shipping Lines under Bill of Lading
YMA-8. The shipment was insured under Mercantile Insurance Company’s Marine Insurance
Policy 81/01177 for P36,382,466.38. Upon arrival of the shipment in Manila on 12 December
1981, it was discharged unto the custody of Metro Port Services, Inc. The latter excepted to one
drum, said to be in bad order, which damage was unknown to Mercantile Insurance. On 7
January 1982, Allied Brokerage Corporation received the shipment from Metro Port Service,
one drum opened and without seal. On January 8 and 14, 1982, Allied Brokerage made
deliveries of the shipment to the consignees’ warehouse. The latter excepted to one drum which
contained spillages, while the rest of the contents was adulterated/fake. Due to the losses/
damage sustained by said drum, the consignee suffered losses totaling P19,032.95, due to the
fault and negligence of the shipping company, arrastre operator and broker-forwarder. Claims
were presented against them who failed and refused to pay the same. As a consequence of the
losses sustained, Mercantile Insurance 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 the shipping company, etc.
After trial, the trial court rendered judgment (1) ordering the shipping company, the arrastre
operator and the broker-forwarder to pay Mercantile Insurance, in solidum, the amount of
P19,032.95 with the present legal interest of 12% per annum from October 1, 1982, the date of
filing of this complaints, until fully paid (the liability of defendant Eastern Shipping, Inc. shall
not exceed US$500 per case or the CIF value of the loss, whichever is lesser, while the liability
of defendant Metro Port Service, Inc. shall be to the extent of the actual invoice value of each
package, crate box or container in no case to exceed P5,000.00 each, pursuant to Section 6.01
of the Management Contract); P3,000.00 as attorney’s fees, and costs; and dismissing the
counterclaims and crossclaim of defendant/cross-claimant Allied Brokerage Corporation.
Dissatisfied, Eastern Shipping Lines appealed to the Court of Appeals. The Court of Appeal
affirmed in toto the judgment of the court a quo.
The Supreme Court partly granted the petition. The Court affirmed the appealed decision with
the modification that the legal interest to be paid is 6% on the amount due computed from the
decision, dated 3 February 1988, of the court a quo. A 12% interest, in lieu of 6%, shall be
imposed on such amount upon finality of this decision until the payment thereof.
1. Duration of common carrier’s duty to observe requisite diligence
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).
2. Presumption of carrier’s negligence in case of loss, damage of goods; None of the
exclusive exceptions can be applied
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 (Art. 1735, Civil Code; Philippine National Railways vs.
Court of Appeals, 139 SCRA 87; Metro Port Service vs. Court of Appeals, 131 SCRA 365).
There are, of course, exceptional cases when such presumption of fault is not observed but
these cases, enumerated in Article 1734 1 of the Civil Code, are exclusive, not one of which can
be applied to the case at bar.
3. The rationale why the carrier and arrastre operator are made liable in solidum
In Fireman’s Fund Insurance vs. Metro Port Services (182 SCRA 455), the Court has explained
in holding the carrier and the arrastre operator liable in solidum, in the manner that “The legal
relationship between the consignee and the arrastre operator is akin to that of a depositor and
warehouseman (Lua Kian v. Manila Railroad Co., 19 SCRA 5 [1967]. The relationship between
the consignee and the common carrier is similar to that of the consignee and the arrastre
operator (Northern Motors, Inc. v. Prince Line, et al., 107 Phil. 253 [1960]). 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 goods condition
to the consignee.” The pronouncement, however, does not imply that the arrastre operator and
the customs broker are themselves always and necessarily liable solidarily with the carrier, or
vice-versa, nor that attendant facts in a given case may not vary the rule.
4. First group of cases on variances on the Court’s ruling on legal interest
In the cases of the cases of Reformina v. Tomol (1985), Philippine Rabbit Bus Lines v. Cruz
(1986), Florendo v. Ruiz (1989) and National Power Corporation v. angas (1992), the basic
issue focus on the application of either the 6% (under the Civil Code) or 12% (under the
Central Bank Circular) interest per annum. It is easily discernible in these cases that there has
been a consistent holding that the Central Bank Circular imposing the 12% interest per annum
applies only to loans or forbearance 16 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 of 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.
5. Second group of cases on variances on the Court’s ruling on legal interest
The cases of Malayan Insurance Company v. Manila Port Service (1969), Nakpil and Sons v.
Court of Appeals (1988), and American Express International v. Intermediate Appellate Court
(1988), did not alter the pronounced rule on the application of the 6% or 12% interest per
annum, depending on whether or not the amount involved is a loan or forbearance, on the one
hand, or one of indemnity for damage, on the other hand. Unlike, however, the “first group”
which remained consistent in holding that the running of the legal interest should be from the
time of the filing of the complaint until fully paid, the “second group” varied on the
commencement of the running of the legal interest. Malayan held that the amount awarded
should bear legal interest from the date of the decision of the court a quo, explaining that “if the
suit were for damages, ‘unliquidated and not known until definitely ascertained, assessed and
determined by the courts after proof,’ then, interest ‘should be from the date of the decision.’”
American Express International v. IAC, introduced a different time frame for reckoning the 6%
interest by ordering it to be “computed from the finality of (the) decision until paid.” The
Nakpil and Sons case ruled that 12% interest per annum should be imposed from the finality of
the decision until the judgment amount is paid. The factual circumstances may have called for
different applications, guided by the rule that the courts are vested with discretion, depending
on the equities of each case, on the award of interest.
6. Rules in the determination of legal interests
a. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts
or quasi- delicts 18 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 reoverable damages. 


b. 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 a 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 (Article 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 of 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 of 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. 


Sarkies Tours v. Court of Appeals

FACTS:
On August 31, 1984, Fatima boarded petitioners De Luxe Bus No. 5 in Manila on her way to
Legazpi City. Her brother Raul helped her load three pieces of luggage containing all of her
optometry review books, materials and equipment, trial lenses, trial contact lenses, passport and
visa, as well as her mother Marisols U.S. immigration (green) card, among other important
documents and personal belongings. Her belongings was kept in the baggage compartment of
the bus, but during a stopover at Daet, it was discovered that all but one bag remained in the
open compartment. Fatima immediately reported the loss to her mother who, in turn, went to
petitioners office in Legazpi City and later at its head office in Manila. The latter, however,
merely offered her P1,000.00 for each piece of luggage lost, which she turned down. Marisol
also reported the incident to the National Bureau of Investigations field office in Legazpi City,
and to the local police. On September 20, 1984, respondents, through counsel, formally
demanded satisfaction of their complaint from petitioner. In a letter dated October 1, 1984, the
latter apologized for the delay and said that (a) team has been sent out to Bicol for the purpose
of recovering or at least getting the full detail1 of the incident. After more than nine months of
fruitless waiting, respondents decided to file the case below to recover the value of the
remaining lost items, as well as moral and exemplary damages, attorneys fees and expenses of
litigation. They claimed that the loss was due to petitioners failure to observe extraordinary
diligence in the care of Fatimas luggage and that petitioner dealt with them in bad faith from
the start. Petitioner, on the other hand, disowned any liability for the loss on the ground that
Fatima allegedly did not declare any excess baggage upon boarding its bus.
LOWER COURT’S RULING: court a quo adjudged the case in favor of herein respondents,
ordering inter alia to pay to the former sum of P30,000.00 equivalent to the value of the
personal belongings of plaintiff etc. less the value of one luggage recovered to be paid by
defendant Sarkies Tours Philippines, Inc. to the plaintiffs within 30 days from receipt of the
Decision.
On appeal, the appellate court affirmed the trial courts judgment, but deleted the award of
moral and exemplary damages.
ISSUE: Is the Petitioner Company not liable for damages against the baggage lost by private
respondents?
HELD: NO. In its letter dated October 1, 1984, petitioner tacitly admitted its liability by
apologizing to respondents and assuring them that efforts were being made to recover the lost
items. The records also reveal that respondents went to great lengths just to salvage their loss.
The incident was reported to the police, the NBI, and the regional and head offices of petitioner.
Private respondent even sought the assistance of Philtranco bus drivers and the radio stations.
To expedite the replacement of her mothers lost U.S. immigration documents, Fatima also had
to execute an affidavit of loss. Clearly, they would not have gone through all that trouble in
pursuit of a fancied loss. The cause of the loss in the case at bar was petitioners negligence in
not ensuring that the doors of the baggage compartment of its bus were securely fastened. As a
result of this lack of care, almost all of the luggage was lost, to the prejudice of the paying
passengers. Petition dismissed.
DOCTRINE:Where the common carrier accepted its passengers baggage for transportation and
even had it placed in the vehicle by its own employee, its failure to collect the freight charge is
the common carriers own lookout.
Yobido vs. CA (GR 113003, 17 October 1997)
Third Division, Romero (J): 4 concur
Facts: On 26 April 1988, spouses Tito and Leny Tumboy and their minor children named
Ardee and Jasmin, boarded at Mangagoy, Surigao del Sur, a Yobido Liner bus bound for Davao
City. Along Picop Road in Km. 17, Sta. Maria, Agusan del Sur, the left front tire of the bus
exploded. The bus fell into a ravine around 3 feet from the road and struck a tree. The incident
resulted in the death of 28-year-old Tito Tumboy, and physical injuries to other passengers.
On 21 November 1988, a complaint for breach of contract of carriage, damages and attorney’s
fees was filed by Leny and her children against Alberta Yobido, the owner of the bus, and
Cresencio Yobido, its driver, before the RTC of Davao City. When the Yobidos filed their
answer to the complaint, they raised the affirmative defense of caso fortuito. They also filed a
third-party complaint against Philippine Phoenix Surety and Insurance, Inc. This third-party
defendant filed an answer with compulsory counterclaim. At the pre-trial conference, the parties
agreed to a stipulation of facts. Upon a finding that the third party defendant was not liable
under the insurance contract, the lower court dismissed the third party complaint. No amicable
settlement having been arrived at by the parties, trial on the merits ensued. On 29 August 1991,
the lower court rendered a decision dismissing the action for lack of merit.
Dissatisfied, the Tumboys appealed to the Court of Appeals. On 23 August 1993, the Court of
Appeals rendered the Decision reversing that of the lower court, ordering the Yobidos to pay
the Tumboys the sum of P50,000.00 for the death of Tito Tumboy, P30,000.00 in moral
damages, and P7,000.00 for funeral and burial expenses. The Yobidos filed a motion for
reconsideration of said decision which was denied on 4 November 1993 by the Court of
Appeals. Hence, the petition for review on certiorari.
The Supreme Court affirmed the Decision of the Court of Appeals subject to the modification
that the Yobidos shall, in addition to the monetary awards therein, be liable for the award of
exemplary damages in the amount of P20,000.00; with costs against the Yobidos.
1. Ruling of the Court of Appeals; Explosion of the tire not in itself a fortuitous event
The explosion of the tire is not in itself a fortuitous event. The cause of the blow-out, if due to a
factory defect, improper mounting, excessive tire pressure, is not an unavoidable event. On the
other hand, there may have been adverse conditions on the road that were unforeseeable and/or
inevitable, which could make the blow-out a caso fortuito. The fact that the cause of the blow-
out was not known does not relieve the carrier of liability. Owing to the statutory presumption
of negligence against the carrier and its obligation to exercise the utmost diligence of very
cautious persons to carry the passenger safely as far as human care and foresight can provide, it
is the burden of the defendants to prove that the cause of the blow-out was a fortuitous event. It
is not incumbent upon the plaintiff to prove that the cause of the blow-out is not caso fortuito.
Proving that the tire that exploded is a new Goodyear tire is not sufficient to discharge
defendants’ burden. As enunciated in Necesito vs. Paras, the passenger has neither choice nor
control over the carrier in the selection and use of its equipment and the good repute of the
manufacturer will not necessarily, relieve the carrier from liability. Moreover, there is evidence
that the bus was moving fast, and the road was wet and rough. The driver could have explained
that the blow out that precipitated the accident that caused the death of the passenger could not
have been prevented even if he had exercised due care to avoid the same, but he was not
presented as witness.
2. Factual findings may not be reviewed on appeal by the Supreme Court; Exception
The Court did re-examine the facts and evidence because of the inapplicability of the
established principle that the factual findings of the Court of Appeals are final and may not be
reviewed on appeal by the Supreme Court. This general principle is subject to exceptions such
as that the lower court and the Court of Appeals arrived at diverse factual findings. Herein,
however, upon such re-examination, the Court found no reason to overturn the findings and
conclusions of the Court of Appeals.
3. Carrier not an insurer of safety of its passengers; However, when passenger injured or
dies, common carrier presumed negligent
As a rule, when a passenger boards a common carrier, he takes the risks incidental to the mode
of travel he has taken. After all, a carrier is not an insurer of the safety of its passengers and is
not bound absolutely and at all events to carry them safely and without injury. However, when a
passenger is injured or dies, while traveling, the law presumes that the common carrier is
negligent.
4. Article 1755 NCC; Diligence required
Article 1755 provides that “(a) common carrier is bound to carry the passengers safely as far as
human care and foresight can provide, using the utmost diligence of very cautious persons, with
a due regard for all the circumstances.”
5. Article 1756 of the Civil Code; Presumption of negligence
Article 1756 of the Civil Code provides that “In case of death or injuries to passengers,
common carriers are presumed to have been at fault or to have acted negligently, unless they
prove that they observed extraordinary diligence as prescribed in articles 1733 and 1755.”
6. Culpa contractual; Disputable presumption of negligence, how to overcome
In culpa contractual, once a passenger dies or is injured, the carrier is presumed to have been at
fault or to have acted negligently. This disputable presumption may only be overcome by
evidence that the carrier had observed extraordinary diligence as prescribed by Articles 1733,
1755 and 1756 of the Civil Code or that the death or injury of the passenger was due to a
fortuitous event. Consequently, the court need not make an express finding of fault or
negligence on the part of the carrier to hold it responsible for damages sought by the passenger.
7. Characteristics of a fortuitous event
A fortuitous event is possessed of the following characteristics: (a) the cause of the unforeseen
and unexpected occurrence, or the failure of the debtor to comply with his obligations, must be
independent of human will; (b) 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; (c) the occurrence must be
such as to render it impossible for the debtor to fulfill his obligation in a normal manner; and
(d) the obligor must be free from any participation in the aggravation of the injury resulting to
the creditor.
8. Article 1174 NCC
As Article 1174 provides, no person shall be responsible for a fortuitous event which could not
be foreseen, or which, though foreseen, was inevitable.
9. There must be an entire exclusion of human agency from the cause of injury or loss
Herein, the explosion of the new tire may not be considered a fortuitous event. There are
human factors involved in the situation. The fact that the tire was new did not imply that it was
entirely free from manufacturing defects or that it was properly mounted on the vehicle.
Neither may the fact that the tire bought and used in the vehicle is of a brand name noted for
quality, resulting in the conclusion that it could not explode within 5 days’ use. Be that as it
may, it is settled that an accident caused either by defects in the automobile or through the
negligence of its driver is not a caso fortuito that would exempt the carrier from liability for
damages.
10. Common carrier not absolved by force majeure alone, should prove not negligent
A common carrier may not be absolved from liability in case of force majeure or fortuitous
event alone. The common carrier must still prove that it was not negligent in causing the death
or injury resulting from an accident.
11. Contradictory facts as to bus’ speed resolved in favor of liability due to presumption of
negligence of carrier
The Yobidos proved through the bus conductor, Salce, that the bus was running at “60-50”
kilometers per hour only or within the prescribed lawful speed limit. However, they failed to
rebut the testimony of Leny Tumboy that the bus was running so fast that she cautioned the
driver to slow down. These contradictory facts must, therefore, be resolved in favor of liability
in view of the presumption of negligence of the carrier in the law. Coupled with this is the
established condition of the road — rough, winding and wet due to the rain. It was incumbent
upon the defense to establish that it took precautionary measures considering partially
dangerous condition of the road.
12. Routinary check-ups of vehicle’s parts part of exercise of extraordinary diligence of
the carrier
Proof that the tire was new and of good quality is not sufficient proof that it was not negligent.
The Yobidos should have shown that it undertook extraordinary diligence in the care of its
carrier, such as conducting daily routinary check-ups of the vehicle’s parts. Although it may be
impracticable, to require of carriers to test the strength of each and every part of its vehicles
before each trip; due regard for the carrier’s obligations toward the traveling public demands
adequate periodical tests to determine the condition and strength of those vehicle portions the
failure of which may endanger the safety of the passengers.
13. Failure of carrier to overthrow presumption of negligence makes it liable for damages
Having failed to discharge its duty to overthrow the presumption of negligence with clear and
convincing evidence, the Yobidos held liable for damages.
14. Amount of damages for death of passenger
Article 1764 in relation to Article 2206 of the Civil Code prescribes the amount of at least
P3,000 as damages for the death of a passenger. Under prevailing jurisprudence, the award of
damages under Article 2206 has been increased to P50,000.00.
15. Moral damages
Moral damages are generally not recoverable in culpa contractual except when bad faith had
been proven. However, the same damages may be recovered when breach of contract of
carriage results in the death of a passenger as in the present case.
16. Exemplary damages
Exemplary damages, awarded by way of example or correction for the public good when moral
damages are awarded, may likewise be recovered in contractual obligations if the defendant
acted in wanton, fraudulent, reckless, oppressive, or malevolent manner. Herein, because the
Yobidos failed to exercise the extraordinary diligence required of a common carrier, which
resulted in the death of Tito Tumboy, it is deemed to have acted recklessly. As such, the
Tumboys shall be entitled to exemplary damages.

Saludo vs. CA (GR 95536, 23 March 1992)

Second Division, Regalado (J): 4 concur
Facts: After the death of Crispina Galdo Saludo, mother of Aniceto G. Saludo Jr., Maria
Salvacion Saludo, Leopoldo G. Saludo, and Saturnino G. Saludo, in Chicago, Illinois, on 23
October 1976, Pomierski and Son Funeral Home of Chicago, made the necessary preparations
and arrangements for the shipment of the remains from Chicago to the Philippines. The funeral
home had the remains embalmed and secured a permit for the disposition of dead human body
on 25 October 1976. Philippine Vice Consul in Chicago, Illinois, Bienvenido M. Llaneta, at
3:00 p.m. on 26 October 1976 at the Pomierski & Son Funeral Home, sealed the shipping case
containing a hermetically sealed casket that is airtight and waterproof wherein was contained
the remains of Crispina Galdo Saludo. On the same date, 26 October 1976, Pomierski brought
the remains to C.M.A.S. (Continental Mortuary Air Services) at the airport (Chicago) which
made the necessary arrangements such as flights, transfers, etc.; C.M.A.S. is a national service
used by undertakers throughout the nation (U.S.A.), they furnish the air pouch which the casket
is enclosed in, and they see that the remains are taken to the proper air freight terminal.
C.M.A.S. booked the shipment with PAL thru the carrier’s agent Air Care International, with
Pomierski F.H. as the shipper and Mario (Maria) Saludo as the consignee. PAL Airway Bill
079-01180454 Ordinary was issued wherein the requested routing was from Chicago to San
Francisco on board TWA Flight 131 of 27 October 1976, and from San Francisco to Manila on
board PAL Flight 107 of the same date, and from Manila to Cebu on board PAL Flight 149 of
29 October 1976. In the meantime, Maria Salvacion Saludo and Saturnino Saludo, thru a travel
agent, were booked with United Airlines from Chicago to California, and with PAL from
California to Manila. She then went to the funeral director of Pomierski Funeral Home who had
her mother’s remains and she told the director that they were booked with United Airlines. But
the director told her that the remains were booked with TWA flight to California. This upset her,
and she and her brother had to change reservations from UA to the TWA flight after she
confirmed by phone that her mother’s remains would be on that TWA flight. They went to the
airport and watched from the look-out area. She saw no body being brought. So, she went to the
TWA counter again, and she was told there was no body on that flight. Reluctantly, they took
the TWA flight upon assurance of her cousin, Ani Bantug, that he would look into the matter
and inform her about it on the plane or have it radioed to her. But no confirmation from her
cousin reached her that her mother was on the West Coast. Upon arrival at San Francisco at
about 5:00 p.m., she went to the TWA counter there to inquire about her mother’s remains. She
was told they did not know anything about it. She then called Pomierski that her mother’s
remains were not at the West Coast terminal, and Pomierski immediately called C.M.A.S.,
which in a matter of 10 minutes informed him that the remains were on a place to Mexico City,
that there were two bodies at the terminal, and somehow they were switched; he relayed this
information to Miss Saludo in California; later C.M.A.S. called and told him they were sending
the remains back to California via Texas. The following day, 28 October 1976, the shipment or
remains of Crispina Saludo arrived in San Francisco from Mexico on board American Airlines.
This shipment was transferred to or received by PAL at 7:45 p.m. This casket bearing the
remains of Crispina Saludo, which was mistakenly sent to Mexico and was opened (there), was
resealed by Crispin F. Padagas for shipment to the Philippines. The shipment was immediately
loaded on PAL flight for Manila that same evening and arrived in Manila on 30 October 1976, a
day after its expected arrival on 29 October 1976. In a letter dated 15 December 1976, the
counsel of the Saludos informed Trans World Airlines (TWA) of the misshipment and eventual
delay in the delivery of the cargo containing the remains of the late Crispina Saludo, and of the
discourtesy of its employees to Maria Salvacion Saludo and Saturnino Saludo. In a separate
letter on 10 June 1977 addressed to Philippine Airlines (PAL), the Saludos stated that they were
holding PAL liable for said delay in delivery and would commence judicial action should no
favorable explanation be given. Both TWA and PAL denied liability.
A damage suit was filed by the Saludos before the then Court of First Instance, Branch III,
Southern Leyte, praying for the award of actual damages of P50,000.00, moral damages of
P1,000,000.00, exemplary damages, attorney’s fees and costs of suit. The trial court absolved
the two airline companies of liability.
The Court of Appeals affirmed the decision of the lower court in toto, and in a subsequent
resolution, denied the Saludos’ motion for reconsideration for lack of merit. Hence, the petition
for review on certiorari.
The Supreme Court affirmed the appealed decision, with the modification that an award or
P40,000.00 as and by way of nominal damages is granted in favor of the Saludos to be paid by
TWA.
1. Factual findings of the Court of Appeals binding upon the Supreme Court; Exceptions
Only questions of law may be raised in a petition filed in the Supreme Court to review on
certiorari the decision of the Court of Appeals. This being so, the factual findings of the Court
of Appeals are final and conclusive and cannot be reviewed by the Supreme Court. The rule,
however, admits of established exceptions, to wit: (a) where there is grave abuse of discretion;
(b) when the finding is grounded entirely on speculations, surmises or conjectures; (c) when the
inference made is manifestly mistaken, absurd or impossible; (d) when the judgment of the
Court of Appeals was based on a misapprehension of facts; (e) when the factual findings are
conflicting; (f) when the Court of Appeals, in making its findings, went beyond the issues of the
case and the same are contrary to the admissions of both appellant and appellee; (g) when the
Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties and
which, if properly considered, would justify a different conclusion; and (h) where the findings
of fact of the Court of Appeals are contrary to those of the trial court, or are mere conclusions
without citation of specific evidence, or where the facts set forth by the petitioner are not
disputed by the respondent, or where the findings of fact of the Court of Appeals are premised
on the absence of evidence and are contradicted by the evidence on record.
2. Distinction between question of law and question of fact; Test to determine
A question of law is one which involves a doubt or controversy on what the law is on a certain
state of facts; and, a question of fact, contrarily, is one in which there is a doubt or difference as
to the truth or falsehood of the alleged facts. One test, it has been held, is whether the appellate
court can determine the issue raised without reviewing or evaluating the evidence, in which
case it is a question of law, otherwise it will be a question of fact.
3. Issues warrant second look at facts
Since it is the soundness of the inferences or conclusions that may be drawn from the factual
issues which are being assayed, the Court finds that the issues raised in the present petition
indeed warrant a second look if this litigation is to come to a reasonable denouement. A
discussion seriatim of said issues will further reveal that the sequence of the events involved is
in effect disputed. Likewise to be settled is whether or not the conclusions of the Court of
Appeals subject of the review indeed find evidentiary and legal support.
4. Nature of bill of lading
A bill of lading is a written acknowledgment of the receipt of the goods and an agreement to
transport and deliver them at a specified place to a person named or on his order. The two-fold
character of a bill of lading is all too familiar: it is a receipt as to the quantity and description of
the goods shipped and a contract to transport the goods to the consignee or other person therein
designated, on the terms specified in such instrument.
5. Designation of bill of lading immaterial
The designation is immaterial. Such instrument may be called a shipping receipt, forwarder’s
receipt and receipt for transportation. Freight tickets for bus companies as well as receipts for
cargo transported by all forms of transportation, whether by sea or land, fall within the
definition. Under the Tariff and Customs Code, a bill of lading includes airway bills of lading.
6. When bill of lading issued; Inverse order not prohibited by law
Since a bill of lading acknowledges receipt of goods to be transported, delivery of the goods to
the carrier normally precedes the issuance of the bill; or, to some extent, delivery of the goods
and issuance of the bill are regarded in commercial practice as simultaneous acts. However,
except as may be prohibited by law, there is nothing to prevent an inverse order of events, that
is, the execution of the bill, of lading even prior to actual possession and control by the carrier
of the cargo to be transported. There is no law which requires that the delivery of the goods for
carriage and the issuance of the covering bill of lading must coincide in point of time or, for
that matter, that the former should precede the latter.
7. Receipt a prima facie evidence of delivery to carrier
Ordinarily, a receipt is not essential to a complete delivery of goods to the carrier for
transportation but, when issued, is competent and prima facie, but not conclusive, evidence of
delivery to the carrier. A bill of lading, when properly executed and delivered to a shipper, is
evidence that the carrier has received the goods described therein for shipment. Except as
modified by statute, it is a general rule as to the parties to a contract of carriage of goods in
connection with which a bill of lading is issued reciting that goods have been received for
transportation, that the recital being in essence a receipt alone, is not conclusive, but may be
explained, varied or contradicted by parol or other evidence.
8. Bill of lading vis-à-vis estoppel
An airway bill estops the carrier from denying receipt of goods of the quantity and quality
described in the bill. However, a bill of lading may contain constituent elements of estoppel and
thus become something more than a contract between the shipper and the carrier. However, as
between the shipper and the carrier, when no goods have been delivered for shipment no
recitals in the bill can estop the carrier from showing the true facts. Between the consignor of
goods and a receiving carrier, recitals in a bill of lading as to the goods shipped raise only a
rebuttable presumption that such goods were delivered for shipment. As between the consignor
and a receiving carrier, the fact must outweigh the recital.
9. Explanation overcoming presumption that remains were delivered and received by
TWA and PAL
Herein, Philippine Vice Consul in Chicago, Illinois, Bienvenido M. Llaneta, at 3:00 p.m. on 26
October 1976 at the Pomierski & Son Funeral Home, sealed the shipping case containing a
hermetically sealed casket that is airtight and waterproof wherein was contained the remains of
Crispina Galdo Saludo. On the same date, Pomierski brought the remains to C.M.A.S.
(Continental Mortuary Air Services) at the airport (Chicago) which made the necessary
arrangements such as flights, transfers, etc; C.M.A.S. is a national service used by undertakers
throughout the nation (U.S.A.), they furnish the air pouch which the casket is enclosed in, and
they see that the remains are taken to the proper air freight terminal. C.M.A.S. booked the
shipment with PAL thru the carrier’s agent Air Care International, with Pomierski F.H. as the
shipper and Mario (Maria) Saludo as the consignee. PAL Airway Bill 079- 01180454 Ordinary
was issued wherein the requested routing was from Chicago to San Francisco on board TWA
Flight 131 of 27 October 1976, and from San Francisco to Manila on board PAL Flight 107 of
the same date, and from Manila to Cebu on board PAL Flight 149 of 29 October 1976.
10. PAL’s explanation
On 26 October 1976 the cargo containing the casketed remains of Crispina Saludo was booked
for PAL Flight PR-107 leaving San Francisco for Manila on 27 October 1976. PAL Airway Bill
079-01180454 was issued, not as evidence of receipt of delivery of the Cargo on 26 October
1976, but merely as a confirmation of the booking thus made for the San Francisco-Manila
flight scheduled on 27 October 1976. Actually, it was not until 28 October 1976 that PAL
received physical delivery of the body at San Francisco, as duly evidenced by the Interline
Freight Transfer Manifest of the American Airline Freight System and signed for by Virgilio
Rosales at 7:45 p.m. on said date.
11. Article 1736 NCC; Period where extraordinary responsibility observed by common
carrier; When delivery made
Explicit is the rule under Article 1736 of the Civil Code that the extraordinary responsibility of
the common carrier begins from the time the goods are delivered to the carrier. This
responsibility remains in full force and effect even when they are temporarily unloaded or
stored in transit, unless the shipper or owner exercises the right of stoppage in transitu, and
terminates only after the lapse of a reasonable time for the acceptance of the goods by the
consignee or such other person entitled to receive them. And, there is delivery to the carrier
when the goods are ready for and have been placed in the exclusive possession, custody and
control of the carrier for the purpose of their immediate transportation and the carrier has
accepted them. Where such a delivery has thus been accepted by the carrier, the liability of the
common carrier commences eo instanti.
12. PAL and TWA not liable for switching of caskets prior to their receipt of agreed cargo
While the extraordinary diligence statutorily required to be observed by the carrier
instantaneously commences upon delivery of the goods thereto, for such duty to commence
there must in fact have been delivery of the cargo subject of the contract of carriage; only when
such fact of delivery has been unequivocally established can the liability for loss, destruction or
deterioration of goods in the custody of the carrier, absent the excepting causes under Article
1734, attach and the presumption of fault of the carrier under Article 1735 be invoked. Herein,
the body intended to be shipped as agreed upon was really placed in the possession and control
of PAL on 28 October 1976 and it was from that date that TWA and PAL became responsible
for the agreed cargo under their undertakings in PAL Airway Bill 079-01180454. Consequently,
for the switching of caskets prior thereto which was not caused by them., and subsequent
events caused thereby, TWA and PAL cannot be held liable.
13. TWA without authority, even prohibited, to verify contents of casket
When the cargo was received from C.M.A.S. at the Chicago airport terminal for shipment,
which was supposed to contain the remains of Crispina Saludo, Air Care International and/or
TWA, had no way of determining its actual contents, since the casket was hermetically sealed
by the Philippine Vice-Consul in Chicago and in an air pouch of C.M.A.S., to the effect that Air
Care International and/or TWA had to rely on the information furnished by the shipper
regarding the cargo’s content. Neither could Air Care International and/or TWA open the casket
for further verification, since they were not only without authority to do so, but even prohibited.
14. Pomierski & Son delivered casket to CMAS, and not to TWA
It was not to TWA, but to C.M.A.S. that the Pomierski & Son Funeral Home delivered the
casket containing the remains of Crispina Saludo. TWA would have no knowledge therefore
that the remains of Crispina Saludo were not the ones inside the casket that was being presented
to it for shipment. TWA would have to rely on the representations of C.M.A.S. The casket was
hermetically sealed and also sealed by the Philippine Vice Consul in Chicago. TWA or any
airline for that matter would not have opened such sealed casket just for the purpose of
ascertaining whose body was inside and to make sure that the remains inside were those of the
particular person indicated to be by C.M.A.S. TWA had to accept whatever information was
being furnished by the shipper or by the one presenting the casket for shipment.And so as a
matter of fact, TWA carried to San Francisco and transferred to defendant PAL a shipment
covered by or under PAL Airway Bill 079-ORD-01180454, the airway bill for the shipment of
the casketed remains of Crispina Saludo. Only, it turned out later, while the casket was already
with PAL, that what was inside the casket was not the body of Crispina Saludo so much so that
it had to be withdrawn by C.M.A.S. from PAL. The body of Crispina Saludo had been shipped
to Mexico. The casket containing the remains of Crispina Saludo was transshipped from
Mexico and arrived in San Francisco the following day on board American Airlines. It was
immediately loaded by PAL on its flight for Manila. The foregoing points at C.M.A.S. as the
one responsible for the switching or mix-up of the two bodies at the Chicago Airport terminal,
and started a chain reaction of the misshipment of the body of Crispina Saludo and a one-day
delay in the delivery thereof to its destination.
15. Right of carrier to require good faith on part of persons delivering goods; Right of
carrier to know contents when it has reasonable ground to suspect goods are dangerous or
of illegal character
It is the right of the carrier to require good faith on the part of those persons who deliver goods
to be carried, and enter into contracts with it, and inasmuch as the freight may depend on the
value of the article to be carried, the carrier ordinarily has the right to inquire as to its value.
Ordinarily, too, it is the duty of the carrier to make inquiry as to the general nature of the
articles shipped and of their value before it consents to carry them; and its failure to do so
cannot defeat the shipper’s right to recovery of the full value of the package if lost, in the
absence of showing of fraud or deceit on the part of the shipper. In the absence of more definite
information, the carrier has the right to accept shipper’s marks as to the contents of the package
offered for transportation and is not bound to inquire particularly about them in order to take
advantage of a false classification and where a shipper expressly represents the contents of a
package to be of a designated character, it is not the duty of the carrier to ask for a repetition of
the statement nor disbelieve it and open the box and see for itself. However, where a common
carrier has reasonable ground to suspect that the offered goods are of a dangerous or illegal
character, the carrier has the right to know the character of such goods and to insist on an
inspection, if reasonable and practical under the circumstances, as a condition of receiving and
transporting such goods.
16. Common carrier entitled to fair representation of nature and value of goods to be
carried; Right of carrier to conduct an inspection
A common carrier is entitled to fair representation of the nature and value of the goods to be
carried, with the concomitant right to rely thereon, and further noting at this juncture that a
carrier has no obligation to inquire into the correctness or sufficiency of such information. The
consequent duty to conduct an inspection thereof arises in the event that there should be reason
to doubt the veracity of such representations. Therefore, to be subjected to unusual search, other
than the routinary inspection procedure customarily undertaken, there must exist proof that
would justify cause for apprehension that the baggage is dangerous as to warrant exhaustive
inspection, or even refusal to accept carriage of the same; and it is the failure of the carrier to
act accordingly in the face of such proof that constitutes the basis of the common carrier’s
liability.
17. CMAS classified as forwarder, is an agent of the shipper and not of the carrier
While the actual participation of CMAS has been sufficiently and correctly established, to hold
that it acted as agent for TWA and PAL would be both an inaccurate appraisal and an
unwarranted categorization of the legal position it held in the entire transaction. It bears
repeating that CMAS was hired to handle all the necessary shipping arrangements for the
transportation of the human remains of Crispina Saludo to Manila. Hence, it was to CMAS that
the Pomierski & Son Funeral Home, as shipper, brought the remains of Saludo for shipment,
with Maria Saludo as consignee. Thereafter, CMAS booked the shipment with PAL through the
carrier’s agent, Air Care International. With its functions, CMAS may accordingly be classified
as a forwarder which, by accepted commercial practice, is regarded as an agent of the shipper
and not of the carrier. As such, it merely contracts for the transportation of goods by carriers,
and has no interest in the freight but receives compensation from the shipper as his agent.
18. CMAS is actual culprit
The facts of the case would point to CMAS as the culprit. Equally telling of the more likely
possibility of CMAS’ liability is the Saludos’ letter to and demanding an explanation from
CMAS, regarding the statement of TWA and PAL laying the blame on CMAS for the incident,
clearly allude to CMAS as the party at fault. This is tantamount to an admission by the Saludos
that they consider TWA and PAL without fault, or is at the very least indicative of the fact that
the Saludos entertained serious doubts as to whether TWA and PAL were responsible for the
unfortunate turn of events.
19. Court cannot grant damages at expense of TWA and PAL; Possible liability of CMAS
best deferred to another time and addressed to another forum
The Saludos’ grief over the death of their mother was aggravated by the unnecessary
inconvenience and anxiety that attended their efforts to bring her body home for a decent
burial. But, as much as the Court would like to give them consolation for their undeserved
distress, the Court is barred by the inequity of allowing recovery of the damages prayed for by
them at the expense of TWA and PAL whose fault or negligence in the very acts imputed to
them has not been convincingly and legally demonstrated. Neither was the Court prepared to
delve into, much less definitively rule on, the possible liability of CMAS as the evaluation and
adjudication of the same is not what is presently at issue and is best deferred to another time
and addressed to another forum.
20. Carrier did not undertake to carry cargo aboard any specified aircraft
The carrier did not undertake to carry the cargo aboard any specified aircraft, in view of the
condition on the back of the airway bill which provides that “It is agreed that no time is fixed
for the completion of carriage hereunder and that Carrier may without notice substitute
alternate carriers or aircraft. Carrier assumes no obligation to carry the goods by any specified
aircraft or over any particular route or routes or to make connection at any point according to
any particular schedule, and Carrier is hereby authorized to select, or deviate from the route or
routes of shipment, notwithstanding that the same may be stated on the face hereof. The shipper
guarantees payment of all charges and advances.” Hence, when TWA shipped the body on an
earlier flight and on a different aircraft, it was acting well within its rights. TWA can use
substitute aircraft even without notice and without the assumption of any obligation whatsoever
to carry the goods on any specified aircraft is clearly sanctioned by the contract of carriage as
specifically provided for under the conditions thereof.
21. Terms clear, no interpretation needed
The terms are clear enough as to preclude the necessity to probe beyond the apparent
intendment of the contractual provisions. There is no ambiguity in the terms of the airway bill
to warrant the application of the rules on interpretation of contracts and documents.
22. Interpretation of contracts
The hornbook rule on interpretation of contracts consecrates the primacy of the intention of the
parties, the same having the force of law between them. When the terms of the agreement are
clear and explicit, that they do not justify an attempt to read into any alleged intention of the
parties, the terms are to be understood literally just as they appear on the face of the contract.
The various stipulations of a contract shall be interpreted together and such a construction is to
be adopted as will give effect to all provisions thereof. A contract cannot be construed by parts,
but its clauses should be interpreted in relation to one another. The whole contract must be
interpreted or read together in order to arrive at its true meaning. Certain stipulations cannot be
segregated and then made to control; neither do particular words or phrases necessarily
determine the character of a contract. The legal effect of the contract is not to be determined
alone by any particular provision disconnected from all others, but in the ruling intention of the
parties as gathered from all the language they have used and from their contemporaneous and
subsequent acts.
23. Interpretative rule in Rules of Court applies only if there is inconsistency between
written and printed words
The interpretative rule in the Rules of Court that written words control printed words in
documents may be considered only when there is inconsistency between the written and printed
words of the contract. As previously stated, there was no ambiguity in the contract subject of
this case that would call for the application of said rule. In any event, the contract has provided
for such a situation by explicitly stating that the condition remains effective “notwithstanding
that the same (fixed time for completion of carriage, specified aircraft, or any particular route or
schedule) may be stated on the face hereof.” Herein, the typewritten specifications of the flight,
routes and dates of departures and arrivals on the face of the airway bill does not constitute a
special contract which modifies the printed conditions at the back thereof. The typewritten
provisions of the contract are to be read and understood subject to and in view of the printed
conditions, fully reconciling and giving effect to the manifest intention of the parties to the
agreement.
24. Statement on the face of the airway bill
The statement on the face of the airway bill properly and completely reads “Carrier certifies
goods described below were received for carriage subject to the Conditions on the reverse
hereof the goods then being in apparent good order and condition except as noted hereon.”
25. Carrier not an insurer against delay in transportation of goods in absence of a special
contract
The oft-repeated rule regarding a carrier’s liability for delay is that in the absence of a special
contract, a carrier is not an insurer against delay in transportation of goods. When a common
carrier undertakes to convey goods, the law implies a contract that they shall be delivered at
destination within a reasonable time, in the absence of any agreement as to the time of delivery.
But where a carrier has made an express contract to transport and deliver property within a
specified time, it is bound to fulfill its contract and is liable for any delay, no matter from what
cause it may have arisen. This result logically follows from the well-settled rule that where the
law creates a duty or charge, and the party is disabled from performing it without any default in
himself, and has no remedy over, then the law will excuse him, but where the party by his own
contract creates a duty or charge upon himself, he is bound to make it good notwithstanding
any accident or delay by inevitable necessity because he might have provided against it by
contract. Whether or not there has been such an undertaking on the part of the carrier is to be
determined from the circumstances surrounding the case and by application of the ordinary
rules for the interpretation of contracts.
26. Mendoza vs. PAL; Delayed delivery of air cargo
In a similar case of delayed delivery of air cargo under a very similar stipulation contained in
the airway bill which reads: “The carrier does not obligate itself to carry the goods by any
specified aircraft or on a specified time. Said carrier being hereby authorized to deviate from
the route of the shipment without any liability therefore,” the Supreme Court ruled that
common carriers are not obligated by law to carry and to deliver merchandise, and persons are
not vested with the right to prompt delivery, unless such common carriers previously assume
the obligation. Said rights and obligations are created by a specific contract entered into by the
parties (Mendoza vs. PAL, 90 Phil. 836).
27. Specification of flights does not constitute a special contract
To countenance a postulate that the specification of the flights and dates of departures and
arrivals constitute a special contract (that would prevail over the printed stipulations at the back
of the airway bill) would unduly burden the common carrier for that would have the effect of
unilaterally transforming every single bill of lading or trip ticket into a special contract by the
simple expedient of filling it up with the particulars of the flight, trip or voyage, and thereby
imposing upon the carrier duties and/or obligations which it may not have been ready or willing
to assume had it been timely advised thereof.
28. Ordinary prudence required of person entering in contract
The fact that the challenged condition 5 was printed at the back of the airway bill militate
against its binding effect on the Saludos as parties to the contract, for there were sufficient
indications on the face of said bill that would alert them to the presence of such additional
condition to put them on their guard. Ordinary prudence on the part of any person entering or
contemplating to enter into a contract would prompt even a cursory examination of any such
conditions, terms and/or stipulations.
29. Acceptance of bill of lading without dissent raises presumption that all terms brought
to knowledge of shipper and agreed to by him
The acceptance of a bill of lading without dissent raises a presumption that all terms therein
were brought to the knowledge of the shipper and agreed to by him, and in the absence of fraud
or mistake, he is estopped from thereafter denying that he assented to such terms. This rule
applies with particular force where a shipper accepts a bill of lading with full knowledge of its
contents, and acceptance, under such circumstances makes it a binding contract. In order that
any presumption of assent to a stipulation in a bill of lading limiting the liability of a carrier
may arise, it must appear that the clause containing this exemption from liability plainly formed
a part of the contract contained in the bill of lading. A stipulation printed on the back of a
receipt or bill of lading or on papers attached to such receipt will be quite as effective as if
printed on its face, if it is shown that the consignor knew of its terms. Thus, where a shipper
accepts a receipt which states that its conditions are to be found on the back, such receipt comes
within the general rule, and the shipper is held to have accepted and to be bound by the
conditions there to be found.
30. When contract of adhesion void and unenforceable
A contract of adhesion may be struck down as void and unenforceable, for being subversive of
public policy, only when the weaker party is imposed upon in dealing with the dominant
bargaining party and is reduced to the alternative of taking it or leaving it, completely deprived
of the opportunity to bargain on equal footing.
31. Ong Yiu vs. CA; Contracts of adhesion not entirely prohibited
The case of Ong Yiu vs. Court of Appeals, et al. instructs that contracts of adhesion are not
entirely prohibited. The one who adheres to the contract is in reality free to reject it entirely; if
he adheres, he gives his consent. Herein, the Saludos, far from being the weaker party in the
situation, duly signified their presumed assent to all terms of the contract through their
acceptance of the airway bill and are consequently bound thereby. It cannot be gainsaid that the
Saludos were not without several choices as to carriers in Chicago with its numerous airways
and airlines servicing the same.
32. Condition serves as insulation to liability when flight routes and schedules change;
Changes should be justified
Although Condition 5 of the airway bill is binding upon the parties to and fully operative in the
present transaction, it does not mean, that the carriers can at all times whimsically seek refuge
from liability in the exculpatory sanctuary of Condition 5 or arbitrarily vary routes, flights and
schedules to the prejudice of their customers. This condition only serves to insulate the carrier
from liability in those instances when changes in routes, flights and schedules are clearly
justified by the peculiar circumstances of a particular case, or by general transportation
practices, customs and usages, or by contingencies or emergencies in aviation such as weather
turbulence, mechanical failure, requirements of national security and the like. And even as it is
conceded that specific routing and other navigational arrangements for a trip, flight or voyage,
or variations therein, generally lie within the discretion of the carrier in the absence of specific
routing instructions or directions by the shipper, it is plainly incumbent upon the carrier to
exercise its rights with due deference to the rights, interests and convenience of its customers.
33. Common carrier has implicit duty to carry property within reasonable time and guard
against delay; Liability of carrier for unreasonable delay
A common carrier undertaking to transport property has the implicit duty to carry and deliver it
within a reasonable time, absent any particular stipulation regarding time of delivery, and to
guard against delay. In case of any unreasonable delay, the carrier shall be liable for damages
immediately and proximately resulting from such neglect of duty. Herein, the delay in the
delivery of the remains of Crispina Saludo, undeniable and regrettable as it was, cannot be
attributed to the fault, negligence or malice of PAL and TWA.
34. TWA knew urgency of shipment and actually carried the remains on earlier flight
Herein, TWA knew of the urgency of the shipment by reason of this notation on the lower
portion of the airway bill: “All documents have been certified. Human remains of Cristina (sic)
Saludo. Please return bag first available flight to SFO.” Accordingly, TWA took it upon itself to
carry the remains of Crispina Saludo on an earlier flight, which it could do under the terms of
the airway bill, to make sure that there would be enough time for loading said remains on the
transfer flight on board PAL.
35. No showing that personnel treated the Saludos in humiliating or arrogant manner;
What constitutes rude or discourteous conduct
There was no showing of any humiliating or arrogant manner with which the personnel of both
TWA and PAL treated the Saludos. Even their alleged indifference is not clearly established.
The initial answer of the TWA personnel at the counter that they did not know anything about
the remains, and later, their answer that they have not heard anything about the remains, and the
inability of the TWA counter personnel to inform the Saludos of the whereabouts of the
remains, cannot be said to be total or complete indifference to the latter. At any rate, it is any
rude or discourteous conduct, malfeasance or neglect, the use of abusive or insulting language
calculated to humiliate and shame passenger or bad faith by or on the part of the employees of
the carrier that gives the passenger an action for damages against the carrier, and none of the
above is obtaining in the present case.
36. Although not in bad faith, actuations of TWA’s employees leave must to be desired
The manner in which TWA’s employees dealt with the Saludos was not grossly humiliating,
arrogant or indifferent as would assume the proportions of malice or bad faith and lay the basis
for an award of the damages claimed. It must however, be pointed out that the lamentable
actuations of TWA’s employees leave much to be desired, particularly so in the face of the
Saludos’ grief over the death of their mother, exacerbated by the tension and anxiety wrought
by the impasse and confusion over the failure to ascertain over an appreciable period of time
what happened to her remains.
37. Airline companies admonished to require personnel to be more accommodating
towards customers and general public; Contract of carriage different from other
contractual relations, and is not a mere contract for transportation but also treatment
with courtesy and consideration
Airline companies are hereby sternly admonished that it is their duty not only to cursorily
instruct but to strictly require their personnel to be more accommodating towards customers,
passengers and the general public. After all, common carriers such as airline companies are in
the business of rendering public service, which is the primary reason for their enfranchisement
and recognition in our law. Because the passengers in a contract of carriage do not contract
merely for transportation, they have a right to be treated with kindness, respect, courtesy and
consideration. A contract to transport passengers is quite different in kind and degree from any
other contractual relation, and generates a relation attended with public duty. The operation of a
common carrier is a business affected with public interest and must be directed to serve the
comfort and convenience of passengers. Passengers are human beings with human feelings and
emotions; they should not be treated as mere numbers or statistics for revenue.
38. Apathy not legally reprehensible but is morally deplorable
Herein, the Saludos were not to be regaled with extra special attention. They were, however,
entitled to the understanding and humane consideration called for by and commensurate with
the extraordinary diligence required of common carriers, and not the cold insensitivity to their
predicament. The airline’s counter personnel were totally helpless about the situation. Common
Sense could and should have dictated that they exert a little extra effort in making a more
extensive inquiry, by themselves or through their superiors, rather than just shrug off the
problem with a callous and uncaring remark that they had no knowledge about it. With all the
modern communications equipment readily available to them, which could have easily
facilitated said inquiry and which are used as a matter of course by airline companies in their
daily operations, their apathetic stance while not legally reprehensible is morally deplorable.
39. No attribution of discourtesy or indifference against PAL
No attribution of discourtesy or indifference has been made against PAL by the Saludos and, in
fact, Maria Saludo testified that it was to PAL that they repaired after failing to receive proper
attention from TWA. It was from PAL that they received confirmation that their mother’s
remains would be on the same flight to Manila with them.
40. When moral and exemplary damages, or attorney’s fees, awarded
Moral damages may be awarded for willful or fraudulent breach of contract or when such
breach is attended by malice or bad faith. However, in the absence of strong and positive
evidence of fraud, malice or bad faith, said damages cannot be awarded. Neither can, there be
an award of exemplary damages nor of attorney’s fees as an item of damages in the absence of
proof that defendant acted with malice, fraud or bad faith.
41. Censurable conduct of TWA employees do not approximate dimensions of fraud,
malice or good faith
The censurable conduct of TWA’s employees cannot, however, be said to have approximated
the dimensions of fraud, malice or bad faith. It can be said to be more of a lethargic reaction
produced and engrained in some people by the mechanically routine nature of their work and a
racial or societal culture which stultifies what would have been their accustomed human
response to a human need under a former and different ambience.
42. Award of nominal damages warranted; Articles 2221 and 2222 NCC
The facts show that the Saludos’ right to be treated with due courtesy in accordance with the
degree of diligence required by law to be exercised by every common carrier was violated by
TWA and this entitles them, at least, to nominal damages from TWA alone. Articles 2221 and
2222 of the Civil Code make it clear that nominal damages are not intended for indemnification
of loss suffered but for the vindication or recognition of a right violated or invaded. They are
recoverable where some injury has been done but the amount of which the evidence fails to
show, the assessment of damages being left to the discretion of the court according to the
circumstances of the case. In the exercise of the Court’s discretion, the Court find an award of
P40,000.00 as nominal damages in favor of the Salufos to be a reasonable amount under the
circumstances of the present case.

Macam vs. CA (GR 125524, 25 August 1999)

Second Division, Bellosillo (J): 3 concur
Facts: On 4 April 1989, Benito Macam, doing business under the name and style Ben-Mac
Enterprises, shipped on board the vessel Nen Jiang, owned and operated by China Ocean
Shipping Co., through local agent Wallem Philippines Shipping, Inc. 3,500 boxes of
watermelons valued at US$5,950.00 covered by Bill of Lading HKG 99012 and exported
through Letter of Credit HK 1031/30 issued by National Bank of Pakistan, Hongkong and
1,611 boxes of fresh mangoes with a value of US$14,273.46 covered by Bill of Lading HKG
99013 and exported through Letter of Credit HK 1032/30 also issued by Pakistan Bank. The
Bills of Lading contained the following pertinent provision: “One of the Bills of Lading must
be surrendered duly endorsed in exchange for the goods or delivery order.” The shipment was
bound for Hongkong with Pakistan Bank as consignee and Great Prospect Company (GPC) of
Kowloon, Hongkong as notify party. On 6 April 1989, per letter of credit requirement, copies of
the bills of lading and commercial invoices were submitted to Macam’s depository bank,
Consolidated Banking Corporation (SolidBank), which paid Macam in advance the total value
of the shipment of US$20,223.46. Upon arrival in Hongkong, the shipment was delivered by
Wallem directly to GPC, not to Pakistan Bank, and without the required bill of lading having
been surrendered. Subsequently, GPC failed to pay Pakistan Bank such that the latter, still in
possession of the original bills of lading, refused to pay Macam through SolidBank. Since
SolidBank already pre-paid Macam the value of the shipment, it demanded payment from
respondent Wallem through 5 letters but was refused. Macam was thus allegedly constrained to
return the amount involved to SolidBank, then demanded payment from Wallem in writing but
to no avail.
On 25 September 1991, Macam sought collection of the value of the shipment of US
$20,223.46 or its equivalent of P546,033.42 from China Ocean Shipping and/or Wallem before
the RTC of Manila, based on delivery of the shipment to GPC without presentation of the bills
of lading and bank guarantee. On 14 May 1993, the trial court ordered China Ocean Shipping
and Wallem to pay, jointly and severally, (1) P546,033.42 plus legal interest from 6 April 1989
until full payment; (2) P10,000.00 as attorney’s fees; and, (3) the costs. The counterclaims were
dismissed for lack of merit.
The Court of Appeals appreciated the evidence in a different manner. Thus, on 13 March 1996,
the appellate court set aside the decision of the trial court and dismissed the complaint together
with the counterclaims. On 5 July 1996 reconsideration was denied. Hence, the petition for
review.
The Supreme Court denied the petition; and affirmed the decision of respondent Court of
Appeals of 13 March 1996, as well as its resolution of 5 July 1996 denying reconsideration.
1. Content of telex of 5 April 1989
The telex dated 5 April 1989 conveying Macam’s request read “AS PER SHPR’S REQUEST
KINDLY ARRANGE DELIVERY OF A/M SHIPT TO RESPECTIVE CNEES WITHOUT
PRESENTATION OF OB/L 2 and bank guarantee since for prepaid ship ofrt charges already
fully paid our end.”
2. Explanation for the delivery without presentation of bills of lading and bank guarantee
The shipment was delivered to GPC without presentation of the bills of lading and bank
guarantee per request of Macam himself because the shipment consisted of perishable goods. It
is a standard maritime practice, when immediate delivery is of the essence, for the shipper to
request or instruct the carrier to deliver the goods to the buyer upon arrival at the port of
destination without requiring presentation of the bill of lading as that usually takes time.
3. Allegation of complaint does not deal with misdelivery of cargoes
The submission of Macam that “the fact that the shipment was not delivered to the consignee as
stated in the Bill of Lading or to a party designated or named by the consignee constitutes a
misdelivery thereof” is a deviation from his cause of action before the trial court. It is clear
from the allegation in his complaint that it does not deal with misdelivery of the cargoes but of
delivery to GPC without the required bills of lading and bank guarantee, i.e. “(6) The goods
arrived in Hongkong and were released by the defendant Wallem directly to the buyer/notify
party, Great Prospect Company and not to the consignee, the National Bank of Pakistan,
Hongkong, without the required bills of lading and bank guarantee for the release of the
shipment issued by the consignee of the goods.”
4. Misdelivery never an issue when Macam wrote Wallem for the payment of the value of
the cargoes
Herein, when Macam wrote Wallem demanding payment of the value of the cargoes,
misdelivery of the cargoes did not come into the picture. The letter, in part, states “We are
writing you on behalf of our client, Ben-Mac Enterprises who informed us that Bills of Lading
No. 99012 and 99013 with a total value of US$20,223.46 were released to Great Prospect,
Hongkong without the necessary bank guarantee. We were further informed that the consignee
of the goods, National Bank of Pakistan, Hongkong, did not release or endorse the original bills
of lading. As a result thereof, neither the consignee, National Bank of Pakistan, Hongkong, nor
the importer, Great Prospect Company, Hongkong, paid our client for the goods.”
5. Article 1736 NCC
Article 1736 of the Civil Code provides that “The extraordinary responsibility of the common
carriers lasts from the time the goods are unconditionally placed in the possession of, and
received by the carrier for transportation until the same are delivered, actually or constructively,
by the carrier to the consignee, or to the person who has a right to receive them, without
prejudice to the provisions of article 1738.”
6. When contract of carriage ends; Delivery to party other than actual consignee
The extraordinary responsibility of the common carriers lasts until actual or constructive
delivery of the cargoes to the consignee or to the person who has a right to receive them.
Herein, Pakistan Bank was indicated in the bills of lading as consignee whereas GPC was the
notify party. However, in the export invoices GPC was clearly named as buyer/importer. The
delivery of the cargoes to GPC as buyer/importer which, conformably with Article 1736 had,
other than the consignee, the right to receive them was proper.
7. Effect of telegraphic transfers as to bank guarantee
The telex of 5 April 1989 instructed delivery of various shipments to the respective consignees
without need of presenting the bill of lading and bank guarantee per the respective shipper’s
request since “for prepaid shipt ofrt charges already fully paid.” Macam was named therein as
shipper and GPC as consignee with respect to Bill of Lading HKG 99012 and HKG 99013. In
transactions covered by a letter of credit, bank guarantee is normally required by the shipping
lines prior to releasing the goods. But for buyers using telegraphic transfers, Macam dispenses
with the bank guarantee because the goods are already fully paid.
8. Prior conduct between Macam and GPC as to perishable good; Bill of Lading not
presented
Macam has been transacting with GPC as buyer/importer for around 2 or 3 years already. When
mangoes and watermelons are in season, his shipment to GPC using the facilities of Wallem is
twice or thrice a week. The goods are released to GPC. It has been the practice of Macam to
request the shipping lines to immediately release perishable cargoes such as watermelons and
fresh mangoes through telephone calls by himself or his “people.” In his several years of
business relationship with GPC and Wallem, there was not a single instance when the bill of
lading was first presented before the release of the cargoes.
9. On account of perishable goods as cargoes and prepayment by bank, Macam requested
release of goods
Against Macam’s claim of “not remembering” having made a request for delivery of subject
cargoes to GPC without presentation of the bills of lading and bank guarantee as reflected in the
telex of 5 April 1989 are damaging disclosures in his testimony. He declared that it was his
practice to ask the shipping lines to immediately release shipment of perishable goods through
telephone calls by himself or his “people.” He no longer required presentation of a bill of
lading nor of a bank guarantee as a condition to releasing the goods in case he was already fully
paid. Thus, taking into account that subject shipment consisted of perishable goods and
SolidBank pre-paid the full amount of the value thereof, it is not hard to believe the claim of
Wallem that Macam indeed requested the release of the goods to GPC without presentation of
the bills of lading and bank guarantee.
10. GPC, not Pakistan Bank, is the consignee referred in telex
The instruction in the telex of 5 April 1989 was “to deliver the shipment to respective
consignees.” The originals of the 2 subject Bills of Lading are still in the possession of the
Pakistani Bank. Conformably, to implement the said telex instruction, the delivery of the
shipment must be to GPC, the notify party or real importer/buyer of the goods and not the
Pakistani Bank since the latter can very well present the original Bills of Lading in its
possession. Likewise, if it were the Pakistani Bank to whom the cargoes were to be strictly
delivered, it will no longer be proper to require a bank guarantee as a substitute for the Bill of
Lading. To construe otherwise will render meaningless the telex instruction. After all, the
cargoes consist of perishable fresh fruits and immediate delivery thereof to the buyer/importer
is essentially a factor to reckon with. Besides, GPC is listed as one among the several
consignees in the telex and the instruction in the telex was to arrange delivery of A/M shipment
(not any party) to respective consignees without presentation of OB/L and bank guarantee.
11. Return of money to bank mere accommodation of SolidBank by Macam
Herein, Macam failed to substantiate his claim that he returned to SolidBank the full amount of
the value of the cargoes. It is not far-fetched to entertain the notion that he merely
accommodated SolidBank in order to recover the cost of the shipped cargoes from Wallem.
SolidBank initially demanded payment from respondents through 5 letters. SolidBank must
have realized the absence of privity of contract between itself and Wallem. That is why Macam
conveniently took the cudgels for the bank.

Maersk Line vs. CA (GR 94761, 17 May 1993)

Third Division, Bidin (J): 4 concur
Facts: Maersk Line is engaged in the transportation of goods by sea, doing business in the
Philippines through its general agent Compania General de Tabacos de Filipinas. Efren
Castillo, on the other hand, is the proprietor of Ethegal Laboratories, a firm engaged in the
manufacture of pharmaceutical products. On 12 November 1976, Castillo ordered from Eli
Lilly, Inc. of Puerto Rico through the latter’s agent in the Philippines, Elanco Products, 600,000
empty gelatin capsules for the manufacture of his pharmaceutical products. The capsules were
placed in 6 drums of 100,000 capsules each valued at US $1,668.71. Through a Memorandum
of Shipment, the shipper Eli Lilly, Inc. of Puerto Rico advised Castillo as consignee that the
600,000 empty gelatin capsules in 6 drums of 100,000 capsules each, were already shipped on
board MV “Anders Maerskline” under Voyage 7703 for shipment to the Philippines via
Oakland, California. In said Memorandum, shipper Eli Lilly, Inc. specified the date of arrival to
be 3 April 1977. For reasons unknown, said cargo of capsules were misshipped and diverted to
Richmond, Virginia, USA and then transported back to Oakland, California. The goods finally
arrived in the Philippines on 10 June 1977 or after 2 months from the date specified in the
memorandum. As a consequence, Castillo as consignee refused to take delivery of the goods on
account of its failure to arrive on time.
Castillo, alleging gross negligence and undue delay in the delivery of the goods, filed an action
before the trial court for rescission of contract with damages against Maersk Line and Eli Lilly,
Inc. as defendants. Later, Castillo moved for the dismissal of the complaint against Eli Lilly on
the ground that the evidence on record shows that the delay in the delivery of the shipment was
attributable solely to Maersk Line. Acting on said motion, the trial court dismissed the
complaint against Eli Lilly; and correspondingly, the latter withdrew its cross-claim against
Maersk Line in a joint motion dated 3 December 1979. After trial, the trial court rendered
judgment dated 8 January 1982 in favor of Castillo, ordered Maersk Line, through its agent
Compania General de Tabacos de Filipinas, to pay Castillo the amount of P369,000.00 as
unrealized profit; P200,000.00 as moral damages; P10,000.00 as exemplary damages;
P11,680.97 as cost of credit line; and P50,000.00, as attorney’s fees and to pay the costs of suit.
The court also held that sums due to Castillo will bear the legal rate of interest until they are
fully paid from the time the case was filed.
On appeal, the appellate court rendered its decision dated 1 August 1990 affirming with
modifications the lower court’s decision; ordering Maersk Line to pay Castillo (1)
compensatory damages of P11,680.97 at 6% annual interest from filing of the complaint until
fully paid, (2) moral damages of P50,000.00, (3) exemplary damages of P20,000,00, (3)
attorney’s fees, per appearance fees, and litigation expenses of P30,000.00, (4) 30% of the total
damages awarded except item (3) above, and the costs of suit.
The Supreme Court affirmed the appealed decision, with the modification regarding the
deletion of item 4 of the appellate court’s decision.
1. Dismissal of Eli Lilly cross-claim against Maersk Line did not dismiss original
complaint against it
The complaint was filed originally against Eli Lilly, Inc. as shipper-supplier and Maersk Line as
carrier. Maersk Line, being an original party defendant upon whom the delayed shipment is
imputed, cannot claim that the dismissal of the complaint against Eli Lilly, Inc. inured to its
benefit. Hence, the appellate court erred in declaring that the trial court based Maersk Line’s
liability on the cross-claim of Eli Lilly. As borne out by the record, the trial court anchored its
decision on Maersk Line’s delay or negligence to deliver the 6 drums of gelatin capsules within
a reasonable time on the basis of which Maersk Line was held liable for damages under Article
1170 of the New Civil Code which provides that those who in the performance of their
obligations are guilty of fraud, negligence, or delay and those who in any manner contravene
the tenor thereof, are liable for damages.
2. Content of bills of lading
The bill of lading covering the subject shipment among others, reads “(6) GENERAL – (1) The
Carrier does not undertake that the Goods shall arrive at the port of discharge or the place of
delivery at any particular time or to meet any particular market or use and save as is provided in
clause 4 the Carrier shall in no circumstances be liable for any direct, indirect or consequential
loss or damage caused by delay. If the Carrier should nevertheless be held legally liable for any
such direct or indirect or consequential loss or damage caused by delay, such liability shall in
no event exceed the freight paid for the transport covered by this Bill of Lading.” This
provision in the bill of lading has the effect of practically leaving the date of arrival of the
subject shipment on the sole determination and will of the carrier.
3. Contract of adhesion generally void, but not entirely prohibited
The provision at the back of the bill of lading, in fine print, is a contract of adhesion. Generally,
contracts of adhesion are considered void since almost all the provisions of these types of
contracts are prepared and drafted only by one party, usually the carrier. The only participation
left of the other party in such a contract is the affixing of his signature thereto, hence the term
“adhesion”. Nonetheless, settled is the rule that bills of lading are contracts not entirely
prohibited. One who adheres to the contract is in reality free to reject it in its entirety; if he
adheres, he gives his consent.
4. Nature of bill of lading; Magellan Manufacturing Marketing Corp.v. CA
It is a long standing jurisprudential rule that a bill of lading operates both as a receipt and as a
contract. It is a receipt for the goods shipped and a contract to transport and deliver the same as
therein stipulated. As a contract, it 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. Being a contract, it is the 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. A bill of lading usually becomes effective upon its delivery to and acceptance by
the shipper. It is presumed that the stipulations of the bill were, in the absence of fraud,
concealment or improper conduct, known to the shipper, and he is generally bound by his
acceptance whether he reads the bill or not.
5. Delivery of shipment or cargo must be made within a reasonable time
While it is true that common carriers are not obligated by law to carry and to deliver
merchandise, and persons are not vested with the right to prompt delivery, unless such common
carriers previously assume the obligation to deliver at a given date or time, delivery of
shipment or cargo should at least be made within a reasonable time.
6. Carrier generally not an insurer of delay in transportation of goods; Saludo vs. CA
In Saludo, Jr. v. Court of Appeals (207 SCRA 498 [1992]) the Court held that “the oft-repeated
rule regarding a carrier’s liability for delay is that in the absence of a special contract, a carrier
is not an insurer against delay in transportation of goods. When a common carrier undertakes to
convey goods, the law implies a contract that they shall be delivered at destination within a
reasonable time, in the absence, of any agreement as to the time of delivery. But where a carrier
has made an express contract to transport and deliver property within a specified time, it is
bound to fulfill its contract and is liable for any delay, no matter from what cause it may have
arisen. This result logically follows from the well-settled rule that where the law creates a duty
or charge, and the party is disabled from performing it without any default in himself, and has
no remedy over, then the law will excuse him, but where the party by his own contract creates a
duty or charge upon himself, he is bound to make it good notwithstanding any accident or delay
by inevitable necessity because he might have provided against it by contract. Whether or not
there has been such an undertaking on the part of the carrier is to be determined from the
circumstances surrounding the case and by application of the ordinary rules for the
interpretation of contracts.”
7. Awareness of shipment’s arrival makes execution of another contract to indicate date of
arrival of shipment a superfluity
An examination of the subject bill of lading shows that the subject shipment was estimated to
arrive in Manila on 3 April 1977. While there was no special contract entered into by the parties
indicating the date of arrival of the subject shipment, Maersk Line nevertheless, was very well
aware of the specific date when the goods were expected to arrive as indicated in the bill of
lading itself. In this regard, there arises no need to execute another contract for the purpose as it
would be a mere superfluity.
8. Delay in present case beyond reasonableness
Herein, a delay in the delivery of the goods spanning a period of 2 months and 7 days falls way
beyond the realm of reasonableness. Described as gelatin capsules for use in pharmaceutical
products, subject shipment was delivered to, and left in, the possession and custody of Maersk
Line for transport to Manila via Oakland, California; but through Maersk Line’s negligence was
misshipped to Richmond, Virginia. Maersk Lines’ insistence that it cannot be held liable for the
delay finds no merit.
9. Award of actual and compensatory damages proper
It is settled that actual and compensatory damages require substantial proof. Herein, Castillo
was able to sufficiently prove through an invoice, certification from the issuer of the letter of
credit and the Memorandum of Shipment, the amount he paid as costs of the credit line for the
subject goods. Therefore, appellate court acted correctly in affirming the award of P11,680.97
as costs of said credit line.
10. Award of moral damages proper
As to the propriety of the award of moral damages, Article 2220 of the Civil Code provides that
moral damages may be awarded in “breaches of contract where the defendant acted
fraudulently or in bad faith.” Herein, Maersk Line never even bothered to explain the cause for
the delay, i.e. more than 2 months, in the delivery of the subject shipment. Under the
circumstances of the case, Maersk Line is liable for breach of contract of carriage through gross
negligence amounting to bad faith. Thus, the award of moral damages is therefore proper in the
case.
11. Award of exemplary damages proper
Exemplary damages may be awarded to Castillo. In contracts, exemplary damages may be
awarded if the defendant acted in a wanton, fraudulent, reckless, oppressive or malevolent
manner. There was gross negligence on the part of the petitioner mishipping the subject goods
destined for Manila but was inexplicably shipped to Richmond, Virginia, U.S.A. Gross
carelessness or negligence constitutes wanton misconduct, hence, exemplary damages may be
awarded to the aggrieved party.
12. Award of attorney’s fees proper; Award of 30% of total damages unconscionable
Although attorney’s fees are generally not recoverable, a party can be held liable for such if
exemplary damages are awarded (Article 2208, New Civil Code). Herein, Castillo is entitled to
reasonable attorney’s fees since Maersk Line acted with gross negligence amounting to bad
faith. However, the award of 30% of the total damages awarded, except those pertaining to
attorney’s fees and litigation expenses in favor of Castillo, are unconscionable. The same
should then be deleted.

Everett Steamship Corp. vs. CA (GR 122494, 8 October 1998)

Second Division, Martinez (J): 4 concur
Facts: Hernandez Trading Co. Inc. imported three crates of bus spare parts marked as MARCO
C/No. 12, MARCO C/No. 13 and MARCO C/No. 14, from its supplier, Maruman Trading
Company, Ltd. (Maruman Trading), a foreign corporation based in Inazawa, Aichi, Japan. The
crates were shipped from Nagoya, Japan to Manila on board “ADELFAEVERETTE,” a vessel
owned by Everett Steamship Corporation’s principal, Everett Orient Lines. The said crates were
covered by Bill of Lading NGO53MN. Upon arrival at the port of Manila, it was discovered
that the crate marked MARCO C/No. 14 was missing. This was confirmed and admitted by
Everett Steamship in its letter of 13 January 1992 addressed to Hernandez Trading, which
thereafter made a formal claim upon petitioner for the value of the lost cargo amounting to Y
1,552,500.00 Yen, the amount shown in an Invoice MTM-941, dated 14 November 1991.
However, Everett Steamship offered to pay Y100,000.00, the maximum amount stipulated
under Clause 18 of the covering bill of lading which limits the liability of Everett Steamship.
Hernandez Trading rejected the offer and thereafter instituted a suit for collection (Civil Case
C-15532), against Everett Shipping before the RTC of Caloocan City (Branch 126). At the pre-
trial conference, both parties manifested that they have no testimonial evidence to offer and
agreed instead to file their respective memoranda. On 16 July 1993, the trial court rendered
judgment in favor of Hernandez Trading, ordering Everett Steamship to pay: (a)
Y1,552,500.00; (b) Y20,000.00 or its peso equivalent representing the actual value of the lost
cargo and the material and packaging cost; (c) 10% of the total amount as an award for and as
contingent attorney’s fees; and (d) to pay the cost of the suit.
On appeal, and on 14 June 1995, the Court of Appeals deleted the award of attorney’s fees but
affirmed the trial court’s findings with the additional observation that Hernandez Trading can
not be bound by the terms and conditions of the bill of lading because it was not privy to the
contract of carriage. Everett Steamship filed a petition for review.
The Supreme Court reversed and set aside the decision of the Court of Appeals.
1. Limited liability clause sanctioned by law
A stipulation in the bill of lading limiting the common carrier’s liability for loss or destruction
of a cargo to a certain sum, unless the shipper or owner declares a greater value, is sanctioned
by law, particularly Articles 1749 and 1750 of the Civil Code.
2. Article 1749 NCC
Article 1749 of the Civil Code provides that “A stipulation that the common carrier’s liability is
limited to the value of the goods appearing in the bill of lading, unless the shipper or owner
declares a greater value, is binding.”
3. Article 1750 NCC
Article 1750 of the Civil Code provides that “A contract fixing the sum that may be recovered
by the owner or shipper for the loss, destruction, or deterioration of the goods is valid, if it is
reasonable and just under the circumstances, and has been freely and fairly agreed upon.”
4. Limited liability clause upheld by Court; Sea Land vs. IAC
Such limited-liability clause has also been consistently upheld by this Court in a number of
cases. Thus, in Sea Land Service, Inc. vs. IAC, the Court ruled that “It seems clear that even if
said section 4 (5) of the Carriage of Goods by Sea Act did not exist, the validity and binding
effect of the liability limitation clause in the bill of lading here are nevertheless fully
sustainable on the basis alone of the cited Civil Code Provisions. That said stipulation is just
and reasonable is arguable from the fact that it echoes Article 1750 itself in providing a limit to
liability only if a greater value is not declared for the shipment in the bill of lading. To hold
otherwise would amount to questioning the justness and fairness of the law itself, and this the
private respondent does not pretend to do. But over and above that consideration, the just and
reasonable character of such stipulation is implicit in it giving the shipper or owner the option
of avoiding accrual of liability limitation by the simple and surely far from onerous expedient
of declaring the nature and value of the shipment in the bill of lading . . .”
5. Conditions for the validity of limited liability clause
Pursuant to the provisions of law, it is required that the stipulation limiting the common
carrier’s liability for loss must be “reasonable and just under the circumstances, and has been
freely and fairly agreed upon.”
6. Contents of bill of lading (clause 18)
The bill of lading specifically provides, among others, “(18) All claims for which the carrier
may be liable shall be adjusted and settled on the basis of the shipper’s net invoice cost plus
freight and insurance premiums, if paid, and in no event shall the carrier be liable for any loss
of possible profits or any consequential loss. The carrier shall not be liable for any loss of or
any damage to or in any connection with, goods in an amount exceeding One Hundred
Thousand Yen in Japanese Currency (Y100,000.00) or its equivalent in any other currency per
package or customary freight unit (whichever is least) unless the value of the goods higher than
this amount is declared in writing by the shipper before receipt of the goods by the carrier and
inserted in the Bill of Lading and extra freight is paid as required.”
7. Stipulations are reasonable and just
The stipulations are reasonable and just. In the bill of lading, the carrier made it clear that its
liability would only be up to Y100,000.00. However, the shipper, Maruman Trading, had the
option to declare a higher valuation if the value of its cargo was higher than the limited liability
of the carrier. Considering that the shipper did not declare a higher valuation, it had itself to
blame for not complying with the stipulations.
8. Contracts of adhesion not invalid per se; PAL vs. CA
As ruled in PAL, Inc. vs. Court of Appeals, the “jurisprudence on the matter reveals the
consistent holding of the court that contracts of adhesion are not invalid per se and that it has on
numerous occasions upheld the binding effect thereof.”
9. Contracts of adhesion; Consent by adhering
In Philippine American General Insurance Co., Inc. vs. Sweet Lines, Inc. the Court held that
“Ong Yiu vs. Court of Appeals, et al., instructs us that ‘contracts of adhesion wherein one party
imposes a ready- made form of contract on the other . . . are contracts not entirely prohibited.
The one who adheres to the contract is in reality free to reject it entirely; if he adheres he gives
his consent. . . Not even an allegation of ignorance of a party excuses non-compliance with the
contractual stipulations since the responsibility for ensuring full comprehension of the
provisions of a contract of carriage devolves not on the carrier but on the owner, shipper, or
consignee as the case may be.”
10. Contract of adhesion; Ong Yiu vs. CA
As further explained in Ong Yiu vs. Court of Appeals, stipulations in contracts of adhesion are
valid and binding. While it may be true that the plane ticket was not signed. . ., he is
nevertheless bound by the provisions thereof. Such provisions have been held to be a part of the
contract of carriage, and valid and binding upon the passenger regardless of the latter’s lack of
knowledge or assent to the regulation. It is what is known as a contract of ”adhesion,” in
regards which it has been said that contracts of adhesion wherein one party imposes a ready-
made form of contract on the other, as the plane ticket in the case at bar, are contracts not
entirely prohibited. The one who adheres to the contract is in reality free to reject it entirely; if
he adheres, he gives his consent. . . ., a contract limiting liability upon an agreed valuation does
not offend against the policy of the law forbidding one from contracting against his own
negligence.
11. Greater vigilance required of courts when dealing with contracts of adhesion; Article
24 NCC
Greater vigilance, however, is required of the courts when dealing with contracts of adhesion in
that the said contracts must be carefully scrutinized “in order to shield the unwary (or weaker
party) from deceptive schemes contained in ready-made covenants,” such as the bill of lading.
The stringent requirement which the courts are enjoined to observe is in recognition of Article
24 of the Civil Code which mandates that “in all contractual, property or other relations, when
one of the parties is at a disadvantage on account of his moral dependence, ignorance,
indigence, mental weakness, tender age or other handicap, the courts must be vigilant for his
protection.”
12. Shipper extensively engaged in trading business, cannot be said to be ignorant of
transactions as to shipment
The shipper, Maruman Trading, has been extensively engaged in the trading business. It can not
be said to be ignorant of the business transactions it entered into involving the shipment of its
goods to its customers. The shipper could not have known, or should know the stipulations in
the bill of lading and there it should have declared a higher valuation of the goods shipped.
Moreover, Maruman Trading has not been heard to complain that it has been deceived or
rushed into agreeing to ship the cargo in Everett Steamship’s vessel. In fact, it was not even
impleaded in the case.
13. Consignee may be bound by contract of carriage although not a signatory thereto
(Agency); Sea Land vs. IAC
In Sea-Land Service, Inc. vs. IAC, the Court held that even if the consignee was not a signatory
to the contract of carriage between the shipper and the carrier, the consignee can still be bound
by the contract. To begin with, there is no question of the right, in principle, of a consignee in a
bill of lading to recover from the carrier or shipper for loss of, or damage to goods being
transported under said bill, although that document may have been — as in practice it
oftentimes is-drawn up only by the consignor and the carrier without the intervention of the
consignee. . . . . . . the right of a party to recover for loss of a shipment consigned to him under
a bill of lading drawn up only by and between the shipper and the carrier, springs from either a
relation of agency that may exist between him and the shipper or consignor, or his status as
stranger in whose favor some stipulation is made in said contract, and who becomes a party
thereto when he demands fulfillment of that stipulation, such as the delivery of the goods or
cargo shipped.
14. Consignee may be bound by contract of carriage although not a signatory thereto and
even if stipulations in fine print; Phoenix Assurance Co. vs. Macondray
In neither capacity can he assert personally, in bar to any provision of the bill of lading, the
alleged circumstance that fair and free agreement to such provision was vitiated by its being in
such fine print as to be hardly readable. Parenthetically, it may be observed that in one
comparatively recent case (Phoenix Assurance Company vs. Macondray & Co., Inc., 64 SCRA
15) where the Court found that a similar package limitation clause was “printed in the smallest
type on the back of the bill of lading,” it nonetheless ruled that the consignee was bound
thereby on the strength of authority holding that such provisions on liability limitation are as
much a part of a bill of lading as though physically in it and as though placed therein by
agreement of the parties.
15. Act of consignee that effected acceptance of provisions of contract of carriage
When Hernandez Trading formally claimed reimbursement for the missing goods from Everett
Steamship and subsequently filed a case against the latter based on the very same bill of lading,
the former accepted the provisions of the contract and thereby made itself a party thereto, or at
least has come to court to enforce it. Thus, Hernandez Trading cannot now reject or disregard
the carrier’s limited liability stipulation in the bill of lading. In other words, Hernandez Trading
is bound by the whole stipulations in the bill of lading and must respect the same.
16. Bill of lading proves carrier unaware of contents, quantity and value of crates
The bill of lading confirms the fact that Everett Steamship that it does not know of the contents,
quantity and value of “the shipment which consisted of three pre-packed crates described in
Bill of Lading NGO-53MN (Cases Spare Parts). To defeat the carrier’s limited liability, Clause
18 of the bill of lading requires that the shipper should have declared in writing a higher
valuation of its goods before receipt thereof by the carrier and insert the said declaration in the
bill of lading, with the extra freight paid. These requirements in the bill of lading were never
complied with by the shipper, hence, the liability of the carrier under the limited liability clause
stands. The commercial Invoice MTM-941 does not in itself sufficiently and convincingly show
that Everett Steamship has knowledge of the value of the cargo as contended by Hernandez
Trading.

British Airways vs. CA (GR 121824, 29 January 1998)

Third Division, Romero (J): 3 concur, 1 concur in result
Facts: On 16 April 1989, GOP Mahtani decided to visit his relatives in Bombay, India. In
anticipation of his visit, he obtained the services of a certain Mr. Gumar to prepare his travel
plans. The latter, in turn, purchased a ticket from British Airways (BA) where the following
itinerary was indicated (Manila [MNL], PR 310Y, 16 April, 1730H, Status OK; Hongkong
[HKG] BA 20M, 16 April, 2100H, Status OK; Bombay [BOM], BA 19M, 23 April, 0840H,
Status OK; Hongkong [HKG], PR 311 Y; Manila [MNL].” Since BA had no direct flights from
Manila to Bombay, Mahtani had to take a flight to Hongkong via Philippine Airlines (PAL), and
upon arrival in Hongkong he had to take a connecting flight to Bombay on board BA. Prior to
his departure, Mahtani checked in at the PAL counter in Manila his two pieces of luggage
containing his clothings and personal effects, confident that upon reaching Hongkong, the same
would be transferred to the BA flight bound for Bombay.Unfortunately, when Mahtani arrived
in Bombay he discovered that his luggage was missing and that upon inquiry from the BA
representatives, he was told that the same might have been diverted to London. After patiently
waiting for his luggage for one week, BA finally advised him to file a claim by accomplishing
the “Property Irregularity Report.”
Back in the Philippines, specifically on 11 June 1990, Mahtani filed his complaint for damages
and attorney’s fees against BA and Mr. Gumar before the trial court (Civil Case CEB-9076).
After appropriate proceedings and trial, on 4 March 1993, the trial court rendered its decision in
favor of Mahtani, ordering BA to pay Mahtani the sum of P7,000.00 for the value of the two (2)
suit cases; US$400.00 representing the value of the contents of Mahtani’s luggage; P50,000.00
Pesos for moral and actual damages and 20% of the total amount imposed against BA for
attorney’s fees and costs of the action. The Court dismissed BA’s third party complaint against
PAL. Dissatisfied, BA appealed to the Court of Appeals, which however, on 7 September 1995,
affirmed the trial court’s findings in toto, with costs against BA. Hence, the appeal by
certiorary.
The Supreme Court modified the decision of the Court of Appeals, reinstating the third-party
complaint filed by British Airways dated 9 November 1990 against Philippine Airlines. No
costs.
1. Nature of airline’s contract of carriage
The nature of an airline’s contract of carriage partakes of two types, namely: a contract to
deliver a cargo or merchandise to its destination and a contract to transport passengers to their
destination. A business intended to serve the travelling public primarily, it is imbued with
public interest, hence, the law governing common carriers imposes an exacting standard.
Neglect or malfeasance by the carrier’s employees could predictably furnish bases for an action
for damages.
2. Culpability of airline for lost damages; Claimant must prove existence of factual basis
for damages
As in a number of cases, the Court has assessed the airlines’ culpability in the form of damages
for breach of contract involving misplaced luggage. In determining the amount of
compensatory damages in this kind of cases, it is vital that the claimant satisfactorily prove
during the trial the existence of the factual basis of the damages and its causal connection to
defendant’s acts.
3. Declaration of higher value needed to recover greater amount; Article 22 (1) of the
Warsaw Convention
In a contract of air carriage a declaration by the passenger of a higher value is needed to
recover a greater amount. Article 22(2) of the Warsaw Convention provides that “In the
transportation of checked baggage and goods, the liability of the carrier shall be limited to a
sum of 250 francs per kilogram, unless the consignor has made, at the time the package was
handed over to the carrier, a special declaration of the value at delivery and has paid a
supplementary sum if the case so requires. In that case the carrier will be liable to pay a sum
not exceeding the declared sum, unless he proves that the sum is greater than the actual value to
the consignor at delivery.”
4. Carrier not liable for loss of baggage in amount in excess of limits specified in tariff
American jurisprudence provides that an air carrier is not liable for the loss of baggage in an
amount in excess of the limits specified in the tariff which was filed with the proper authorities,
such tariff being binding on the passenger regardless of the passenger’s lack of knowledge
thereof or assent thereto. This doctrine is recognized in this jurisdiction.
5. No blind reliance on adhesion contracts; Benefits of limited liability subject to waiver
The Court, however, has ruled against blind reliance on adhesion contracts where the facts and
circumstances justify that they should be disregarded. Further, benefits of limited liability are
subject to waiver such as when the air carrier failed to raise timely objections during the trial
when questions and answers regarding the actual claims and damages sustained by the
passenger were asked. Herein, given the foregoing postulates, the inescapable conclusion is that
BA had waived the defense of limited liability when it allowed Mahtani to testify as to the
actual damages he incurred due to the misplacement of his luggage, without any objection.
6. Right to object actually a mere privilege that can be waived; Objection must be made at
earliest opportunity
It is a well-settled doctrine that where the proponent offers evidence deemed by counsel of the
adverse party to be inadmissible for any reason, the latter has the right to object. However, such
right is a mere privilege which can be waived. Necessarily, the objection must be made at the
earliest opportunity, lest silence when there is opportunity to speak may operate as a waiver of
objections. Herein, BA has precisely failed in this regard.
7. Proper time to object; Abrenica vs. Gonda
In the early case of Abrenica v. Gonda, that court ruled that “it has been repeatedly laid down as
a rule of evidence that a protest or objection against the admission of any evidence must be
made at the proper time, and that if not so made it will be understood to have been waived. The
proper time to make a protest or objection is when, from the question addressed to the witness,
or from the answer thereto, or from the presentation of proof, the inadmissibility of evidence is,
or may be inferred.” Herein, to compound matters for BA, its counsel failed not only to
interpose a timely objection but even conducted his own cross-examination as well.
8. Factual findings of trial court entitled to great respect
Needless to say, factual findings of the trial court, as affirmed by the Court of Appeals, are
entitled to great respect. Herein, since the actual value of the luggage involved appreciation of
evidence, a task within the competence of the Court of Appeals, its ruling regarding the amount
is assuredly a question of fact, thus, a finding not reviewable by the Supreme Court.
9. Nature of third party complaint; Firestone Tire Rubber vs. Tempengko
The third-party complaint is a procedural device whereby a ‘third party’ who is neither a party
nor privy to the act or deed complained of by the plaintiff, may be brought into the case with
leave of court, by the defendant, who acts as third-party plaintiff to enforce against such third-
party defendant a right for contribution, indemnity, subrogation or any other relief, in respect of
the plaintiff’s claim. The third-party complaint is actually independent of and separate and
distinct from the plaintiff’s complaint. Were it not for this provision of the Rules of Court, it
would have to be filed independently and separately from the original complaint by the
defendant against the third-party. But the Rules permit defendant to bring in a third-party
defendant or so to speak, to litigate his separate cause of action in respect of plaintiff’s claim
against a third- party in the original and principal case with the object of avoiding circuitry of
action and unnecessary proliferation of law suits and of disposing expeditiously in one
litigation the entire subject matter arising from one particular set of facts.
10. PAL a subcontractor or agent of BA
The contract of air transportation was exclusively between Mahtani and BA, the latter merely
endorsing the Manila to Hongkong leg of the former’s journey to PAL, as its subcontractor or
agent. In fact, the fourth paragraph of the “Conditions of Contracts” of the ticket 32 issued by
BA to Mahtani confirms that the contract was one of continuous air transportation from Manila
to Bombay (“4. carriage to be performed hereunder by several successive carriers is regarded as
a single operation.”) It is undisputed that PAL, in transporting Mahtani from Manila to
Hongkong acted as the agent of BA.
11. Agent responsible for any negligence in performance of its function, and liable for
damages which principal may suffer
It is a well-settled rule that an agent is also responsible for any negligence in the performance
of its function and is liable for damages which the principal may suffer by reason of its
negligent act. Hence, the Court of Appeals erred when it opined that BA, being the principal,
had no cause of action against PAL, its agent or sub-contractor.
12. Contractual relationship between BA and PAL, both members of the IATA, is one of
agency
Both BA and PAL are members of the International Air Transport Association (IATA), wherein
member airlines are regarded as agents of each other in the issuance of the tickets and other
matters pertaining to their relationship. Therefore, herein, the contractual relationship between
BA and PAL is one of agency, the former being the principal, since it was the one which issued
the confirmed ticket, and the latter the agent.
13. BA is principal; Pronouncement consistent with Lufthansa vs. CA
The pronouncement that BA is the principal is consistent with the ruling in Lufthansa German
Airlines v. Court of Appeals. In that case, Lufthansa issued a confirmed ticket to Tirso
Antiporda covering five-leg trip aboard different airlines. Unfortunately, Air Kenya, one of the
airlines which was to carry Antiporda to a specific destination “bumped” him off. An action for
damages was filed against Lufthansa which, however, denied any liability, contending that its
responsibility towards its passenger is limited to the occurrence of a mishap on its own line.
Consequently, when Antiporda transferred to Air Kenya, its obligation as a principal in the
contract of carriage ceased; from there on, it merely acted as a ticketing agent for Air Kenya: In
rejecting Lufthansa’s argument, the court ruled that “In the very nature of their contract,
Lufthansa is clearly the principal in the contract of carriage with Antiporda and remains to be
so, regardless of those instances when actual carriage was to be performed by various carriers.
The issuance of confirmed Lufthansa ticket in favor of Antiporda covering his entire five-leg
trip aboard successive carriers concretely attest to this.”
14. Mahtani can sue BA alone, not PAL; PAL however not relieved from liability
Since the present petition was based on breach of contract of carriage, Mahtani can only sue
BA alone, and not PAL, since the latter was not a party to the contract. However, this is not to
say that PAL is relieved from any liability due to any of its negligent acts. In China Air Lines,
Ltd. v. Court of Appeals, while not exactly in point, the case, however, illustrates the principle
which governs the particular situation. In that case, the Court recognized that a carrier (PAL),
acting as an agent of another carrier, is also liable for its own negligent acts or omission in the
performance of its duties.
15. Proceedings in third party complaint in accord with doctrine against multiplicity of
suits
To deny BA the procedural remedy of filing a third-party complaint against PAL for the purpose
of ultimately determining who was primarily at fault as between them, is without legal basis.
After all, such proceeding is in accord with the doctrine against multiplicity of cases which
would entail receiving the same or similar evidence for both cases and enforcing separate
judgments therefor. It must be borne in mind that the purpose of a third-party complaint is
precisely to avoid delay and circuity of action and to enable the controversy to be disposed of
in one suit. It is but logical, fair and equitable to allow BA to sue PAL for indemnification, if it
is proven that the latter’s negligence was the proximate cause of Mahtani’s unfortunate
experience, instead of totally absolving PAL from any liability.
Alitalia v. IAC

Parties:
Dr. Felipa Pablo ALITALIA
Fact:
Dr. Felipa Pablo, an associate professor in the University of the Philippines was invited to take
part in the meeting if the United Nations in Ispra, Italy. She accepted the invitation and booked
a passage with petitioner airline, Alitalia.
She arrived in Milan on the day before the meeting in accordance with the itinerary set for her
by Alitalia. The Alitalia personnel told her that her luggage would be transported by succeeding
flights from Rome to Milan. She was told however, that the other flights from Rome did not
have her baggage on board.
Feeling desperate, she went to Rome to try to locate her bags herself. Despite efforts of locating
her baggage, her baggage cannot be found. She returned to Manila without attending the
meeting. As reparation she was offered free airline tickets, she however rejected the offer.
As it turned out, her baggage was forwarded on the day after her scheduled appearance. In
Manila, the suitcase were not actually restored only until 11 months later and 4 months after the
institution of her action.
Issue:
Whether the Warsaw Convention should have been applied to limit the liability of Alitalia.
Trial Court:
Alitalia was ordered to pay for nominal damages to Dr. Pablo. The trial court found the
defendant negligent and shall be made liable for the frustration and disappointment of not
carrying out his mission as well as the embarrassment and humiliation she suffered from the
academic community.
Held:
The Warsaw Convention provided that all carrier shall be made liable for damages for the delay
in the transportation by air passengers, luggage and goods. The convention purport to limit the
liability of the carrier: 1) that in the contract of carrier for each passenger is limited to the sum
of 250,000 francs. Nevertheless, by special contract, the carrier and the passenger may agree to
higher limit or liability; 2) and in case of loss, damage or delay on the part of registered
baggage or cargo or of any object contained therein, the weight sum shall be taken in
consideration.
The Convention denies the availment of the carrier of provisions which exclude or limit its
liability, if the damage is caused by wilful conduct default on his part or if the damage is caused
by any agent of the carrier within the scope of his employment. The Hague Protocol amended
the Warsaw Convention by removing the provision that if the airline took all the necessary
steps to avoid the damage, it would exculpate itself completely. The Convention do not exclude
liability for other breaches of contract of carrier or misconduct of its officers and employees or
for some particular or exceptional type of damage.
In the case at bar, no bad faith or otherwise improper conduct may be attributed to the
employees of the petitioner airline, and Dr. Pablo’s luggage was returned, belatedly but without
any appreciable damage. Nevertheless, there is a breach of contract of carriage for its failure to
deliver the baggage to her at the time appointed, resulting to Dr, Pablo’s failure to read the
paper and make the scientific presentation that she has painstakingly worked for.
Certainly, the compensation for the injury suffered by Dr, Pablo cannot be restricted to that
presented by the Warsaw Convention for the delay in the transport of baggage.
She is not, of course, entitled to be compensated for the loss or damage of her luggage.