G.R. No.

L-31150 July 22, 1975
KONINKLIJKE LUCHTVAART MAATSHAPPIJ N.V., otherwise known as
KLM ROYAL DUTCH AIRLINES, petitioner,
vs.
THE HONORABLE COURT OF APPEALS, CONSUELO T. MENDOZA and
RUFINO T. MENDOZA, respondents.
Picazo, Agcaoili, Santayana, Reyes and Tayao for petitioner.
Bengzon, Villegas, Zarraga, Narciso and Cudala for respondents.
(without their young wards who had enplaned much earlier), they were
issued KLM tickets for their entire trip. However, their coupon for the Aer
Lingus portion (Flight 861 for June 22, 1965) was marked "RQ" which meant
"on request".
After sightseeing in American and European cities (they were in the
meantime joined by their two young companions), the respondents arrived in
Frankfurt, Germany. They went to a KLM office there and obtained a
confirmation from Aer Lingus of seat reservations on flight 861. After
meandering in London, Paris and Lisbon, the foursome finally took wing to
Barcelona for their trip to Lourdes, France.

CASTRO, J.:
In this appeal by way of certiorari the Koninklijke Luchtvaart Maatschappij
N.V., otherwise known as the KLM Royal Dutch Airlines (hereinafter referred
to as the KLM) assails the award of damages made by the Court of Appeals
in CA-G.R. 40620 in favor of the spouses Rufino T. Mendoza and Consuelo
T. Mendoza (hereinafter referred to as the respondents).1äwphï1.ñët
Sometime in March 1965 the respondents approached Tirso Reyes,
manager of a branch of the Philippine Travel Bureau, a travel agency, for
consultations about a world tour which they were intending to make with their
daughter and a niece. Reyes submitted to them, after preliminary
discussions, a tentative itinerary which prescribed a trip of thirty-five legs; the
respondents would fly on different airlines. Three segments of the trip, the
longest, would be via KLM. The respondents expressed a desire to visit
Lourdes, France, and discussed with Reyes two alternate routes, namely,
Paris to Lourdes and Barcelona to Lourdes. The respondents decided on the
Barcelona-Lourdes route with knowledge that only one airline, Aer Lingus,
serviced it.
The Philippine Travel Bureau to which Reyes was accredited was an agent
for international air carriers which are members of the International Air
Transport Association, popularly known as the "IATA," of which both the KLM
and the Aer Lingus are members.
After about two weeks, the respondents approved the itinerary prepared for
them, and asked Reyes to make the necessary plane reservations. Reyes
went to the KLM, for which the respondents had expressed preference. The
KLM thereafter secured seat reservations for the respondents and their two
companions from the carriers which would ferry them throughout their trip,
with the exception of Aer Lingus. When the respondents left the Philippines
In the afternoon of June 22, 1965 the respondents with their wards went to
the Barcelona airport to take their plane which arrived at 4:00 o'clock. At the
airport, the manager of Aer Lingus directed the respondents to check in.
They did so as instructed and were accepted for passage. However,
although their daughter and niece were allowed to take the plane, the
respondents were off-loaded on orders of the Aer Lingus manager who
brusquely shoved them aside with the aid of a policeman and who shouted at
them, "Conos! Ignorantes Filipinos!"
Mrs. Mendoza later called up the manager of Aer Lingus and requested that
they provide her and her husband means to get to Lourdes, but the request
was denied. A stranger, however, advised them to take a train, which the two
did; despite the third class accommodations and lack of food service, they
reached Lourdes the following morning. During the train trip the respondents
had to suffer draft winds as they wore only minimum clothing, their luggage
having gone ahead with the Aer Lingus plane. They spent $50 for that train
trip; their plane passage was worth $43.35.
On March 17, 1966 the respondents, referring to KLM as the principal of Aer
Lingus, filed a complaint for damages with the Court of First Instance of
Manila arising from breach of contract of carriage and for the humiliating
treatment received by them at the hands of the Aer Lingus manager in
Barcelona. After due hearing, the trial court awarded damages to the
respondents as follows: $43.35 or its peso equivalent as actual damages,
P10,000 as moral damages, P5,000 as exemplary damages, and P5,000 as
attorney's fees, and expenses of litigation.
Both parties appealed to the Court of Appeals. The KLM sought complete
exoneration; the respondents prayed for an increase in the award of
damages. In its decision of August 14, 1969 the Court of Appeals decreed as
follows: "Appellant KLM is condemned to pay unto the plaintiffs the sum of
$43.35 as actual damages; P50,000 as moral damages; and P6,000 as
attorney's fees and costs."
Hence, the present recourse by the KLM.
The KLM prays for exculpation from damages on the strength of the following
particulars which were advanced to but rejected by the Court of Appeals:
(a) The air tickets issued to the respondents stipulate that carriage
thereunder is subject to the "Convention for the Unification of Certain Rules
Relating to International Transportation by Air," otherwise known as the
"Warsaw Convention," to which the Philippine Government is a party by
adherence, and which pertinently provides.1
ART. 30. (1) In the case of transportation to be performed by
various successive carriers and failing within the definition
set out in the third paragraph of Article I, each carrier who
accepts passengers, baggage, or goods shall be subject to
the rules set out in the convention, and shall be deemed to
be one of the contracting parties to the contract of
transportation insofar as the contract deals with that part of
transportation which is performed under his supervision.2
(2) In the case of transportation of this nature, the passenger
or his representative can take action only against the carrier
who performed the transportation during which the accident
or the delay occured, save in the case where, by express
agreement, the first carrier has assumed liability for the
whole journey. (emphasis supplied)
(b) On the inside front cover of each ticket the following appears under the
heading "Conditions of Contract":
1 ... (a) Liability of carrier for damages shall be limited to
occurrences on its own line, except in the case of checked
baggage as to which the passenger also has a right of action
against the first or last carrier. A carrier issuing a ticket or
checking baggage for carriage over the lines of others does
so only as agent..
(c) All that the KLM did after the respondents completed their arrangements
with the travel agency was to request for seat reservations among the
airlines called for by the itinerary submitted to the KLM and to issue tickets
for the entire flight as a ticket-issuing agent.
The respondents rebut the foregoing arguments, thus:
(a) Article 30 of the Warsaw Convention has no application in the case at bar
which involves, not an accident or delay, but a willful misconduct on the part
of the KLM's agent, the Aer Lingus. Under article 25 of the same Convention
the following is prescribed:
ART. 25. (1) The carrier shall not be entitled to avail himself
of the provisions of this convention which exclude or limit his
liability, if the damage is caused by his willful misconduct or
by such default on his part as, in accordance with the law of
the court to which the case is submitted, is considered to be
equivalent to willful misconduct.3
(2) Similarly, the carrier shall not be entitled to avail himself
of the said provisions, if the damage is caused under the
same circumstances by any agent of the carrier acting within
the scope of his employment. (emphasis by respondents)
(b) The condition in their tickets which purportedly excuse the KLM from
liability appears in very small print, to read which, as found by the Court of
Appeals, one has practically to use a magnifying glass.
(c) The first paragraph of the "Conditions of Contract" appearing identically
on the KLM tickets issued to them idubitably shows that their contract was
one of continuous air transportation around the world:
1 ... "carriage" includes the air carrier issuing this ticket and
all carriers that carry or undertake to carry the passenger or
his baggage hereunder or perform any other service
incidental to such air carriage... Carriage to be performed
hereunder by several successive carrier is regarded as a
single operation.
(d) The contract of air transportation was exclusively between the
respondents and the KLM, the latter merely endorsing its performance to
other carriers, like Aer Lingus, as its subcontractors or agents, as evidenced
by the passage tickets themselves which on their face disclose that they are
KLM tickets. Moreover, the respondents dealt only with KLM through the
travel agency.
1. The applicability insisted upon by the KLM of article 30 of the Warsaw
Convention cannot be sustained. That article presupposes the occurrence of
either an accident or a delay, neither of which took place at the Barcelona
airport; what is here manifest, instead, is that the Aer Lingus, through its
manager there, refused to transport the respondents to their planned and
contracted destination.
2. The argument that the KLM should not be held accountable for the tortious responsible for the abuse, injury and embarrassment suffered by the
conduct of Aer Lingus because of the provision printed on the respondents' respondents at the hands of a supercilious boor of the Aer Lingus.
tickets expressly limiting the KLM's liability for damages only to occurrences
on its own lines is unacceptable. As noted by the Court of Appeals that ACCORDINGLY, the judgment of the Court of Appeals dated August 14,
condition was printed in letters so small that one would have to use a 1969 is affirmed, at KLM's cost.
magnifying glass to read the words. Under the circumstances, it would be
unfair and inequitable to charge the respondents with automatic knowledge
or notice of the said condition so as to preclude any doubt that it was fairly
and freely agreed upon by the respondents when they accepted the passage
tickets issued to them by the KLM. As the airline which issued those tickets
with the knowledge that the respondents would be flown on the various legs
of their journey by different air carriers, the KLM was chargeable with the
duty and responsibility of specifically informing the respondents of conditions
prescribed in their tickets or, in the very least, to ascertain that the
respondents read them before they accepted their passage tickets. A
thorough search of the record, however, inexplicably fails to show that any
effort was exerted by the KLM officials or employees to discharge in a proper
manner this responsibility to the respondents. Consequently, we hold that the
respondents cannot be bound by the provision in question by which KLM
unilaterally assumed the role of a mere ticket-issuing agent for other airlines
and limited its liability only to untoward occurrences on its own lines.

3. Moreover, as maintained by the respondents and the Court of Appeals, the

passage tickets of the respondents provide that the carriage to be performed
thereunder by several successive carriers "is to be regarded as a single
operation," which is diametrically incompatible with the theory of the KLM
that the respondents entered into a series of independent contracts with the
carriers which took them on the various segments of their trip. This position
of KLM we reject. The respondents dealt exclusively with the KLM which
issued them tickets for their entire trip and which in effect guaranteed to them
that they would have sure space in Aer Lingus flight 861. The respondents,
under that assurance of the internationally prestigious KLM, naturally had the
right to expect that their tickets would be honored by Aer Lingus to which, in
the legal sense, the KLM had indorsed and in effect guaranteed the
performance of its principal engagement to carry out the respondents'
scheduled itinerary previously and mutually agreed upon between the
parties.

4. The breach of that guarantee was aggravated by the discourteous and

highly arbitrary conduct of an official of the Aer Lingus which the KLM had
engaged to transport the respondents on the Barcelona-Lourdes segment of
their itinerary. It is but just and in full accord with the policy expressly
embodied in our civil law which enjoins courts to be more vigilant for the
protection of a contracting party who occupies an inferior position with
respect to the other contracting party, that the KLM should be held
G.R. No. 60673 May 19, 1992
PAN AMERICAN WORLD AIRWAYS, INC., petitioner,
vs.
JOSE K. RAPADAS and THE COURT OF APPEALS, respondents.
Froilan P. Pobre for private respondent.
GUTIERREZ, JR., J.:
This is a petition for review assailing the decision of the respondent Court of
Appeals which affirmed in toto the trial court decision on the liability of
petitioner Pan American World Airways for damages due to private
respondent. The trial court ruled that the petitioner can not avail of a
limitation of liabilities for lost baggages of a passenger. The dispositive
portion of the trial court decision reads:
WHEREFORE, in view of the foregoing considerations, judgment is hereby
rendered ordering defendant to pay plaintiff by way of actual damages the
equivalent peso value of the amount of $5,228.90 and 100 paengs, nominal
damages in the amount of P20,000.00 and attorney's fees of P5,000.00, and
the costs of the suit. Defendant's counterclaim is dismissed. (Rollo, p. 13)
On January 16, 1975, private respondent Jose K. Rapadas held Passenger
Ticket and Baggage Claim Check No. 026-394830084-5 for petitioner's Flight
No. 841 with the route from Guam to Manila. While standing in line to board
the flight at the Guam airport, Rapadas was ordered by petitioner's handcarry
control agent to check-in his Samsonite attache case. Rapadas protested
pointing to the fact that other co-passengers were permitted to handcarry
bulkier baggages. He stepped out of the line only to go back again at the end
of it to try if he can get through without having to register his attache case.
However, the same man in charge of handcarry control did not fail to notice
him and ordered him again to register his baggage. For fear that he would
miss the plane if he insisted and argued on personally taking the valise with
him, he acceded to checking it in. He then gave his attache case to his
brother who happened to be around and who checked it in for him, but
without declaring its contents or the value of its contents. He was given a
Baggage Claim Tag No. P-749-713. (Exhibit "B" for the plaintiff-respondent)
Upon arriving in Manila on the same date, January 16, 1975, Rapadas
claimed and was given all his checked-in baggages except the attache case.
Since Rapadas felt ill on his arrival, he sent his son, Jorge Rapadas to
request for the search of the missing luggage. The petitioner exerted efforts
to locate the luggage through the Pan American World Airways-Manila
International Airport (PAN AM-MIA) Baggage Service.
On January 30, 1975, the petitioner required the private respondent to put
the request in writing. The respondent filled in a Baggage Claim Blank Form.
Thereafter, Rapadas personally followed up his claim. For several times, he
called up Mr. Panuelos, the head of the Baggage Section of PAN AM. He
also sent letters demanding and reminding the petitioner of his claim.
Rapadas received a letter from the petitioner's counsel dated August 2, 1975
offering to settle the claim for the sum of one hundred sixty dollars ($160.00)
representing the petitioner's alleged limit of liability for loss or damage to a
passenger's personal property under the contract of carriage between
Rapadas and PAN AM. Refusing to accept this kind of settlement, Rapadas
filed the instant action for damages on October 1, 1975. Rapadas alleged
that PAN AM discriminated or singled him out in ordering that his luggage be
checked in. He also alleged that PAN AM neglected its duty in the handling
and safekeeping of his attache case from the point of embarkation in Guam
to his destination in Manila. He placed the value of the lost attache case and
its contents at US$42,403.90. According to him, the loss resulted in his
failure to pay certain monetary obligations, failure to remit money sent
through him to relatives, inability to enjoy the fruits of his retirement and
vacation pay earned from working in Tonga Construction Company (he
retired in August 1974) and inability to return to Tonga to comply with then
existing contracts.
In its answer, petitioner-defendant PAN AM acknowledged responsibility for
the loss of the attache case but asserted that the claim was subject to the
"Notice of Baggage Liability Limitations" allegedly attached to and forming
part of the passenger ticket. The petitioner argued that the same notice was
also conspicuously posted in its offices for the guidance of the passengers.
At the trial, private respondent showed proof of his retirement award and
vacation pay amounting to $4,750.00. He claimed that the attache case also
contained other money consisting of $1,400 allegedly given to him by his
son, Jaime, as a round trip fare of his (plaintiff-respondent) wife, but which
amount was later found to be actually intended by Jaime as payment for
arrears of a lot purchased from Tropical Homes, Inc.; $3,000 allegedly given
by his brothers for payment of taxes and for constructing improvements on
the Rapadas estates; and $300.00 birthday present of the spouses Mr. and
Mrs. Ruben Canonizado to plaintiff-respondent's wife. He also claimed
having kept several items in the attache case, namely –– (1) contracts and
records of employment, letters of commendation, testimonials and
newspaper clippings on his achievement for 13 years in Tonga, New Zealand
and Australia, drafts of manuscripts, photographs and drivers license alleged
to be worth $20,000.00; a Polaroid camera, films, calculator, and other
personal items worth $403.90; memorabilia, autographs personally acquired
from Charles Lindberg, Lawrence Rockefeller and Ryoichi Sasakawa, a
commemorative palladium coin worth Tongan 100 paengs and unused
Tongan stamps, all totalling $7,500.00; and a plan worth $5,000.00 drawn by
his son Jaime, who is an architect, for the construction of a residential house
and a 6-story commercial building. Rapadas claimed the amount of the
attache case itself to be $25.50. (See Decision in Civil Case No. 99564 in
Amended Record on Appeal, pp. 61-85)
The lower court ruled in favor of complainant Rapadas after finding no
stipulation giving notice to the baggage liability limitation. The court rejected
the claim of defendant PANAM that its liability under the terms of the
passenger ticket is only up to $160.00. However, it scrutinized all the claims
of the plaintiff. It discredited insufficient evidence to show discriminatory acts
or bad faith on the part of petitioner PANAM.
On appeal, the Court of Appeals affirmed the trial court decision. Hence, this
petition.
The main issue raised in the case at bar is whether or not a passenger is
bound by the terms of a passenger ticket declaring that the limitations of
liability set forth in the Warsaw Convention (October 12, 1929; 137 League of
Nations Treaty Series II; See Proclamation No. 201 [1955], 51 O.G. 4933
[October, 1955]) as amended by the Hague Protocol (September 28, 1955;
478 UNTS 373; III PTS 515), shall apply in case of loss, damage or
destruction to a registered luggage of a passenger.
The petitioner maintains that its liability for the lost baggage of respondent
Rapadas was limited to $160.00 since the latter did not declare a higher
value for his baggage and did not pay the corresponding additional charges.
The private respondent, on the other hand, insists that he is entitled to as
much damages as those awarded by the court and affirmed by the
respondent appellate court.
After a review of the various arguments of the opposing parties as well as the
records of the case, the Court finds sufficient basis under the particular facts
of this case for the availment of the liability limitations under the Warsaw
Convention.
There is no dispute, and the courts below admit, that there was such a Notice
appearing on page two (2) of the airline ticket stating that the Warsaw
Convention governs in case of death or injury to a passenger or of loss,
damage or destruction to a passenger's luggage.
The Notice states:
If the passenger's journey involves an ultimate destination or stop in a
country other than the country of departure the Warsaw Convention may be
applicable and the Convention governs and in most cases limits the liability
of carriers for death or personal injury and in respect of loss of or damage to
baggage. See also notice headed "Advice to International Passengers on
Limitation of Liability." (The latter notice refers to limited liability for death or
personal injury to passengers with proven damages not exceeding US
$75,000 per passenger; Exhibit "K" for plaintiff respondent, Table of Exhibits,
p. 19)
Furthermore, paragraph 2 of the "Conditions of Contract" also appearing on
page 2 of the ticket states:
2. Carriage hereunder is subject to the rules and limitations relating to liability
established by the Warsaw Convention unless such carriage is not
"international carriage" as defined by that Convention. (Exhibit "K", supra)
We note that plaintiff-respondent Rapadas presented as proof of the
Passenger Ticket and Baggage Check No. 026-394830084-5 a xerox copy of
its page 2 which contains the Notice and Conditions of Contract, and also
page 3 which recites the Advice to International Passengers on Limitation of
Liability. He also presented two xerox copies of Flight Coupon No. 3 of the
same passenger ticket showing the fares paid for the trips Honolulu to Guam,
Guam to Manila, and Manila to Honolulu to prove his obligations which
remained unpaid because of the unexpected loss of money allegedly placed
inside the missing attache case. Rapadas explained during the trial that the
same passenger ticket was returned by him to one Mr. S.L. Faupula of the
Union Steam Ship Company of New Zealand, Ltd., Tonga who demanded
the payment of the fares or otherwise, the return of the unused plane tickets
(including the subject Passenger Ticket & Baggage Check No. 026-
394830084-5). The issuance of these tickets was facilitated by Mr. Faupula
on credit.
Meanwhile, the petitioner offered as evidence Exhibit "1" also showing page
2 of the passenger ticket to prove the notice and the conditions of the
contract of carriage. It likewise offered Exhibit "1-A", a xerox copy of a
"Notice of Baggage Liability Limitations" which the trial court disregarded and
held to be non-existent. The same Exhibit "1-A" contained the following
stipulations:
NOTICE OF BAGGAGE LIABILITY LIMITATIONS –– Liability for loss, delay,
or damage to baggage is limited as follows unless a higher value is declared
in advance and additional charges are paid: (1) for most international travel
(including domestic portions of international journeys) to approximately $8.16
per pound ($18.00 per kilo; now $20.00 per Exhibit "13") for checked
baggage and $360 (now $400 per Exhibit "13") per passenger for unchecked
baggage; (2) for travel wholly between U.S. points, to $500 per passenger on
most carriers (a few have lower limits). Excess valuation may not be declared
on certain types of valuable articles. Carriers assume no liability for fragile or
perishable articles. Further information may be obtained from the carrier.
(Table of Exhibits, p. 45)
The original of the Passenger Ticket and Baggage Check No. 026-
394830084-5 itself was not presented as evidence as it was among those
returned to Mr. Faupula. Thus, apart from the evidence offered by the
defendant airline, the lower court had no other basis for determining whether
or not there was actually a stipulation on the specific amounts the petitioner
had expressed itself to be liable for loss of baggage.
Although the trial court rejected the evidence of the defendant-petitioner of a
stipulation particularly specifying what amounts it had bound itself to pay for
loss of luggage, the Notice and paragraph 2 of the "Conditions of Contract"
should be sufficient notice showing the applicability of the Warsaw
limitations.
The Warsaw Convention, as amended, specifically provides that it is
applicable to international carriage which it defines in Article 1, par. 2 as
follows:
(2) For the purposes of this Convention, the expression "international
carriage" means any carriage in which, according to the agreement between
the parties, the place of departure and the place of destination, whether or
not there be a breach in the carriage or a transhipment, are situated either
within the territories of two High Contracting Parties or within the territory of a
single High Contracting Party if there is an agreed stopping place within the
territory of another State, even if that State is not a High Contracting Party.
Carriage between two points within the territory of a single High Contracting
Party without an agreed stopping place within the territory of another State is
not international carriage for the purposes of this Convention. ("High
Contracting Party" refers to a state which has ratified or adhered to the
Convention, or which has not effectively denounced the Convention [Article
40A(l)]).
Nowhere in the Warsaw Convention, as amended, is such a detailed notice
of baggage liability limitations required. Nevertheless, it should become a
common, safe and practical custom among air carriers to indicate
beforehand the precise sums equivalent to those fixed by Article 22 (2) of the
Convention.
The Convention governs the availment of the liability limitations where the
baggage check is combined with or incorporated in the passenger ticket
which complies with the provisions of Article 3, par. l (c). (Article 4, par. 2) In
the case at bar, the baggage check is combined with the passenger ticket in
one document of carriage. The passenger ticket complies with Article 3, par. l
(c) which provides:
(l) In respect of the carriage of passengers a ticket shall be delivered
containing:
(a) . . .
(b) . . .
(c) a notice to the effect that, if the passenger's journey involves an ultimate
destination or stop in a country other than the country of departure, the
Warsaw Convention may be applicable and that the Convention governs and
in most cases limits the liability of carriers for death or personal injury and in
respect of loss of or damage to baggage.
We have held in the case of Ong Yiu v. Court of Appeals, supra, and
reiterated in a similar case where herein petitioner was also sued for
damages, Pan American World Airways v. Intermediate Appellate Court (164
SCRA 268 [1988]) that:
It (plane ticket) 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. (Tolentino, Civil Code, Vol. IV, 1962 ed., p. 462, citing Mr. Justice
J.B.L. Reyes, Lawyer's Journal, January 31, 1951, p. 49) And as held in
Randolph v. American Airlines, 103 Ohio App. 172, 144 N.E. 2d 878;
Rosenchein v. Trans World Airlines, Inc., 349 S.W. 2d 483, "a contract
limiting liability upon an agreed valuation does not offend against the policy
of the law forbidding one from contracting against his own negligence.
Considering, therefore, that petitioner had failed to declare a higher value for
his baggage, he cannot be permitted a recovery in excess of P100.00 . . . (91
SCRA 223 at page 231)
We hasten to add that while contracts of adhesion are not entirely prohibited,
neither is a blind reliance on them encouraged. In the face of facts and
circumstances showing they should be ignored because of their basically one
sided nature, the Court does not hesitate to rule out blind adherence to their
terms. (See Sweet Lines, Inc. v. Teves, 83 SCRA 361, 368-369[1978])
The arguments of the petitioner do not belie the fact that it was indeed
accountable for the loss of the attache case. What the petitioner is concerned
about is whether or not the notice, which it did not fail to state in the plane
ticket and which it deemed to have been read and accepted by the private
respondent will be considered by this Court as adequate under the
circumstances of this case. As earlier stated, the Court finds the provisions in
the plane ticket sufficient to govern the limitations of liabilities of the airline for
loss of luggage. The passenger, upon contracting with the airline and
receiving the plane ticket, was expected to be vigilant insofar as his luggage
is concerned. If the passenger fails to adduce evidence to overcome the
stipulations, he cannot avoid the application of the liability limitations.
The facts show that the private respondent actually refused to register the
attache case and chose to take it with him despite having been ordered by
the PANAM agent to check it in. In attempting to avoid registering the
luggage by going back to the line, private respondent manifested a disregard
of airline rules on allowable handcarried baggages. Prudence of a
reasonably careful person also dictates that cash and jewelry should be
removed from checked-in-luggage and placed in one's pockets or in a
handcarried Manila-paper or plastic envelope.
The alleged lack of enough time for him to make a declaration of a higher
value and to pay the corresponding supplementary charges cannot justify his
failure to comply with the requirement that will exclude the application of
limited liability. Had he not wavered in his decision to register his luggage, he
could have had enough time to disclose the true worth of the articles in it and
to pay the extra charges or remove them from the checked-in-luggage.
Moreover, an airplane will not depart meantime that its own employee is
asking a passenger to comply with a safety regulation.
Passengers are also allowed one handcarried bag each provided it conforms
to certain prescribed dimensions. If Mr. Rapadas was not allowed to
handcarry the lost attache case, it can only mean that he was carrying more
than the allowable weight for all his luggages or more than the allowable
number of handcarried items or more than the prescribed dimensions for the
bag or valise. The evidence on any arbitrary behavior of a Pan Am employee
or inexcusable negligence on the part of the carrier is not clear from the
petition. Absent such proof, we cannot hold the carrier liable because of
arbitrariness, discrimination, or mistreatment.
We are not by any means suggesting that passengers are always bound to
the stipulated amounts printed on a ticket, found in a contract of adhesion, or
printed elsewhere but referred to in handouts or forms. We simply recognize
that the reasons behind stipulations on liability limitations arise from the
difficulty, if not impossibility, of establishing with a clear preponderance of
evidence the contents of a lost valise or suitcase. Unless the contents are
declared, it will always be the word of a passenger against that of the airline.
If the loss of life or property is caused by the gross negligence or arbitrary
acts of the airline or the contents of the lost luggage are proved by
satisfactory evidence other than the self-serving declarations of one party,
the Court will not hesitate to disregard the fine print in a contract of adhesion.
(See Sweet Lines Inc. v. Teves, supra) Otherwise, we are constrained to rule
that we have to enforce the contract as it is the only reasonable basis to
arrive at a just award.
We note that the finding on the amount lost is more of a probability than a
proved conclusion.
The trial court stated:
xxx xxx xxx
We come now to the actual loss of $4,750.00 which the plaintiff claims was
the amount of his retirement award and vacation pay. According to the
plaintiff, this was in cash of $100 denominations and was placed in an
envelope separate from the other money he was carrying. Plaintiff presented
the memorandum award, Exhibit T-1 and the vouchers of payment, Exhibits
T-2 and T-3. Under the circumstances, recited by the plaintiff in which the
loss occurred, the Court believes that plaintiff could really have placed this
amount in the attache case considering that he was originally handcarrying
said attache case and the same was looked, and he did not expect that he
would be required to check it in. . . . (Amended Record on Appeal, p. 75;
Emphasis ours)
and other expenses of litigation incurred by the plaintiff." We, however, raise
the award to P10,000.00 considering the resort to the Court of Appeals and
this Court.
WHEREFORE, the petition is hereby GRANTED and the decision of the
respondent Court of Appeals is REVERSED and SET ASIDE. The petitioner
is ordered to pay the private respondent damages in the amount of
US$400.00 or its equivalent in Philippine Currency at the time of actual
payment, P10,000.00 in attorney's fees, and costs of the suit.
SO ORDERED.

The above conclusion of the trial court does not arise from the facts. That the
attache case was originally handcarried does not beg the conclusion that the
amount of $4,750.00 in cash could have been placed inside. It may be noted
that out of a claim for US$42,403.90 as the amount lost, the trial court found
for only US$5,228.90 and 100 paengs. The court had doubts as to the total
claim.

The lost luggage was declared as weighing around 18 pounds or

approximately 8 kilograms. At $20.00 per kilogram, the petitioner offered to
pay $160.00 as a higher value was not declared in advance and additional
charges were not paid. We note, however, that an amount of $400.00 per
passenger is allowed for unchecked luggage. Since the checking-in was
against the will of the respondent, we treat the lost bag as partaking of
involuntarily and hurriedly checked-in luggage and continuing its earlier
status as unchecked luggage. The fair liability under the petitioner's own
printed terms is $400.00. Since the trial court ruled out discriminatory acts or
bad faith on the part of Pan Am or other reasons warranting damages, there
is no factual basis for the grant of P20,000.00 damages.

As to the question of whether or not private respondent should be paid

attorney's fees, the Court sustains the finding of the trial court and the
respondent appellate court that it is just and equitable for the private
respondent to recover expenses for litigation in the amount of P5,000.00.
Article 22(4) of the Warsaw Convention, as amended does not preclude an
award of attorney's fees. That provision states that the limits of liability
prescribed in the instrument "shall not prevent the court from awarding, in
accordance with its own law, in addition, the whole or part of the court costs
G.R. No. 103338 January 4, 1994
FEDERICO SERRA, petitioner,
vs.
THE HON. COURT OF APPEALS AND RIZAL COMMERCIAL BANKING
CORPORATION, respondents.
Andres R. Amante, Jr. for petitioner.
R.C. Domingo, Jr. & Associates for private respondent.
NOCON, J.:
A promise to buy and sell a determinate thing for a price certain is
reciprocally demandable. An accepted unilateral promise to buy and sell a
determinate thing for a price certain is binding upon the promisor if the
promise is supported by a consideration distinct from the price. (Article 1479,
New Civil Code) The first is the mutual promise and each has the right to
demand from the other the fulfillment of the obligation. While the second is
merely an offer of one to another, which if accepted, would create an
obligation to the offeror to make good his promise, provided the acceptance
is supported by a consideration distinct from the price.
Disputed in the present case is the efficacy of a "Contract of Lease with
Option to Buy", entered into between petitioner Federico Serra and private
respondent Rizal Commercial Banking Corporation. (RCBC).
Petitioner is the owner of a 374 square meter parcel of land located at
Quezon St., Masbate, Masbate. Sometime in 1975, respondent bank, in its
desire to put up a branch in Masbate, Masbate, negotiated with petitioner for
the purchase of the then unregistered property. On May 20, 1975, a contract
of LEASE WITH OPTION TO BUY was instead forged by the parties, the
pertinent portion of which reads:
1. The LESSOR leases unto the LESSEE, an the LESSEE hereby accepts in
lease, the parcel of land described in the first WHEREAS clause, to have and
to hold the same for a period of twenty-five (25) years commencing from
June 1, 1975 to June 1, 2000. The LESSEE, however, shall have the option
to purchase said parcel of land within a period of ten (10) years from the date
of the signing of this Contract at a price not greater than TWO HUNDRED
TEN PESOS (P210.00) per square meter. For this purpose, the LESSOR
undertakes, within such ten-year period, to register said parcel of land under
the TORRENS SYSTEM and all expenses appurtenant thereto shall be for
his sole account.
If, for any reason, said parcel of land is not registered under the TORRENS
SYSTEM within the aforementioned ten-year period, the LESSEE shall have
the right, upon termination of the lease to be paid by the LESSOR the market
value of the building and improvements constructed on said parcel of land.
The LESSEE is hereby appointed attorney-in-fact for the LESSOR to register
said parcel of land under the TORRENS SYSTEM in case the LESSOR, for
any reason, fails to comply with his obligation to effect said registration within
reasonable time after the signing of this Agreement, and all expenses
appurtenant to such registration shall be charged by the LESSEE against the
rentals due to the LESSOR.
2. During the period of the lease, the LESSEE covenants to pay the
LESSOR, at the latter's residence, a monthly rental of SEVEN HUNDRED
PESOS (P700.00), Philippine Currency, payable in advance on or before the
fifth (5th) day of every calendar month, provided that the rentals for the first
four (4) months shall be paid by the LESSEE in advance upon the signing of
this Contract.
3. The LESSEE is hereby authorized to construct as its sole expense a
building and such other improvements on said parcel of land, which it may
need in pursuance of its business and/or operations; provided, that if for any
reason the LESSEE shall fail to exercise its option mentioned in paragraph
(1) above in case the parcel of land is registered under the TORRENS
SYSTEM within the ten-year period mentioned therein, said building and/or
improvements, shall become the property of the LESSOR after the expiration
of the 25-year lease period without the right of reimbursement on the part of
the LESSEE. The authority herein granted does not, however, extend to the
making or allowing any unlawful, improper or offensive used of the leased
premises, or any use thereof, other than banking and office purposes. The
maintenance and upkeep of such building, structure and improvements shall
likewise be for the sole account of the LESSEE. 1
The foregoing agreement was subscribed before Notary Public Romeo F.
Natividad.
Pursuant to said contract, a building and other improvements were
constructed on the land which housed the branch office of RCBC in Masbate,
Masbate. Within three years from the signing of the contract, petitioner
complied with his part of the agreement by having the property registered
and
placed under the TORRENS SYSTEM, for which Original Certificate of Title
No. 0-232 was issued by the Register of Deeds of the Province of Masbate.
Petitioner alleges that as soon as he had the property registered, he kept on
pursuing the manager of the branch to effect the sale of the lot as per their
agreement. It was not until September 4, 1984, however, when the
respondent bank decided to exercise its option and informed petitioner,
through a letter, 2 of its intention to buy the property at the agreed price of not
greater than P210.00 per square meter or a total of P78,430.00. But much to
the surprise of the respondent, petitioner replied that he is no longer selling
the property.3
Hence, on March 14, 1985, a complaint for specific performance and
damages were filed by respondent against petitioner. In the complaint,
respondent alleged that during the negotiations it made clear to petitioner
that it intends to stay permanently on property once its branch office is
opened unless the exigencies of the business requires otherwise. Aside from
its prayer for specific performance, it likewise asked for an award of
P50,000.00 for attorney's fees P100,000.00 as exemplary damages and the
cost of the suit.4
A special and affirmative defenses, petitioner contended:
1. That the contract having been prepared and drawn by RCBC, it took
undue advantage on him when it set in lopsided terms.
2. That the option was not supported by any consideration distinct from the
price and hence not binding upon him.
3. That as a condition for the validity and/or efficacy of the option, it should
have been exercised within the reasonable time after the registration of the
land under the Torrens System; that its delayed action on the option have
forfeited whatever its claim to the same.
4. That extraordinary inflation supervened resulting in the unusual decrease
in the purchasing power of the currency that could not reasonably be forseen
or was manifestly beyond the contemplation of the parties at the time of the
establishment of the obligation, thus, rendering the terms of the contract
unenforceable, inequitable and to the undue enrichment of RCBC. 5
and as counterclaim petitioner alleged that:
1. The rental of P700.00 has become unrealistic and unreasonable, that
justice and equity will require its adjustment.
2. By the institution of the complaint he suffered moral damages which may
be assessed at P100,000.00 and award of attorney's fee of P25,000.00 and
exemplary damages at P100,000.00.6
Initially, after trial on the merits, the court dismissed the complaint. Although
it found the contract to be valid, the court nonetheless ruled that the option to
buy in unenforceable because it lacked a consideration distinct from the price
and RCBC did not exercise its option within reasonable time. The prayer for
readjustment of rental was denied, as well as that for moral and exemplary
damages.7
Nevertheless, upon motion for reconsideration of respondent, the court in the
order of January 9, 1989, reversed itself, the dispositive portion reads:
WHEREFORE, the Court reconsiders its decision dated June 6, 1988, and
hereby renders judgment as follows:
1. The defendant is hereby ordered to execute and deliver the proper deed of
sale in favor of plaintiff selling, transferring and
conveying the property covered by and described in the Original Certificate of
Title 0-232 of the Registry of Deeds of Masbate for the sum of Seventy Eight
Thousand Five Hundred Forty Pesos (P78,540,00), Philippine Currency;
2. Defendant is ordered to pay plaintiff the sum of Five Thousand
(P5,000.00) Pesos as attorney's fees;
3. The counter claim of defendant is hereby dismissed; and
4. Defendants shall pay the costs of suit.8
In a decision promulgated on September 19, 1991,9 the Court of Appeals
affirmed the findings of the trial court that:
1. The contract is valid and that the parties perfectly understood the contents
thereof;
2. The option is supported by a distinct and separate consideration as
embodied in the agreement;
3. There is no basis in granting an adjustment in rental.
Assailing the judgment of the appellate court, petitioner would like us to
consider mainly the following:
1. The disputed contract is a contract of adhesion.
2. There was no consideration to support the option, distinct from the price,
hence the option cannot be exercised.
3. Respondent court gravely abused its discretion in not granting currency
adjustment on the already eroded value of the stipulated rentals for twenty-
five years.
The petition is devoid of merit.
There is no dispute that the contract is valid and existing between the parties,
as found by both the trial court and the appellate court. Neither do we find the
terms of the contract unfairly lopsided to have it ignored.
A contract of adhesion is one wherein a party, usually a corporation,
prepares the stipulations in the contract, while the other party merely affixes
his signature or his "adhesion" thereto. These types of contracts are as
binding as ordinary contracts. Because in reality, the party who adheres to
the contract is free to reject it entirely. Although, this Court will not hesitate to
rule out blind adherence to terms where facts and circumstances will show
that it is basically one-sided. 10
We do not find the situation in the present case to be inequitable. Petitioner
is a highly educated man, who, at the time of the trial was already a CPA-
Lawyer, and when he entered into the contract, was already a CPA, holding
a respectable position with the Metropolitan Manila Commission. It is evident
that a man of his stature should have been more cautious in transactions he
enters into, particularly where it concerns valuable properties. He is amply
equipped to drive a hard bargain if he would be so minded to.
Petitioner contends that the doctrines laid down in the cases of
Atkins Kroll v. Cua Hian Tek, 11 Sanchez v. Rigos, 12 and Vda. de Quirino
v. Palarca 13 were misapplied in the present case, because 1) the option
given to the respondent bank was not supported by a consideration distinct
from the price; and 2) that the stipulated price of "not greater than P210.00
per square meter" is not certain or definite.
Article 1324 of the Civil Code provides that when an offeror has allowed the
offeree a certain period to accept, the offer maybe withdrawn at anytime
before acceptance by communicating such withdrawal, except when the
option is founded upon consideration, as something paid or promised. On the
other hand, Article 1479 of the Code provides that an accepted unilateral
promise to buy and sell a determinate thing for a price certain is binding upon
the promisor if the promise is supported by a consideration distinct from the
price.
In a unilateral promise to sell, where the debtor fails to withdraw the promise
before the acceptance by the creditor, the transaction becomes a bilateral
contract to sell and to buy, because upon acceptance by the creditor of the
offer to sell by the debtor, there is already a meeting of the minds of the
parties as to the thing which is determinate and the price which is
certain. 14 In which case, the parties may then reciprocally demand
performance.
Jurisprudence has taught us that an optional contract is a privilege existing
only in one party — the buyer. For a separate consideration paid, he is given
the right to decide to purchase or not, a certain merchandise or property, at
any time within the agreed period, at a fixed price. This being his prerogative,
he may not be compelled to exercise the option to buy before the time
expires. 15
On the other hand, what may be regarded as a consideration separate from
the price is discussed in the case of Vda. de Quirino v. Palarca 16 wherein the
facts are almost on all fours with the case at bar. The said case also involved
a lease contract with option to buy where we had occasion to say that "the
consideration for the lessor's obligation to sell the leased premises to the
lessee, should he choose to exercise his option to purchase the same, is the
obligation of the lessee to sell to the lessor the building and/or improvements
constructed and/or made by the former, if he fails to exercise his option to
buy leased premises." 17
In the present case, the consideration is even more onerous on the part of
the lessee since it entails transferring of the building and/or improvements on
the property to petitioner, should respondent bank fail to exercise its option
within the period stipulated. 18
The bugging question then is whether the price "not greater than TWO
HUNDRED PESOS" is certain or definite. A price is considered certain if it is
so with reference to another thing certain or when the determination thereof
is left to the judgment of a specified person or persons. 19 And generally,
gross inadequacy of price does not affect a contract of sale. 20
Contracts are to be construed according to the sense and meaning of the
terms which the parties themselves have used. In the present dispute, there
is evidence to show that the intention of the parties is to peg the price at
P210 per square meter. This was confirmed by petitioner himself in his
testimony, as follows:
of the Philippine currency, or fluctuation in the value of pesos manifestly
beyond the contemplation of the parties at the time of the establishment of
the obligation. 23
Premises considered, we find that the contract of "LEASE WITH OPTION TO
BUY" between petitioner and respondent bank is valid, effective and
enforceable, the price being certain and that there was consideration distinct
from the price to support the option given to the lessee.

Q. Will you please tell this Court what was the offer? WHEREFORE, this petition is hereby DISMISSED, and the decision of the
appellate court is hereby AFFIRMED.
A. It was an offer to buy the property that I have in Quezon City (sic).
SO ORDERED.
Q. And did they give you a specific amount?
Narvasa, C.J., Padilla, Regalado and Puno, JJ., concur.
xxx xxx xxx

A. Well, there was an offer to buy the property at P210 per square meters
(sic).

Q. And that was in what year?

A . 1975, sir.

Q. And did you accept the offer?

A. Yes, sir. 21

Moreover, by his subsequent acts of having the land titled under the Torrens
System, and in pursuing the bank manager to effect the sale immediately,
means that he understood perfectly the terms of the contract. He even had
the same property mortgaged to the respondent bank sometime in 1979,
without the slightest hint of wanting to abandon his offer to sell the property
at the agreed price of P210 per square meter. 22

Finally, we agree with the courts a quo that there is no basis, legal or factual,
in adjusting the amount of the rent. The contract is the law between the
parties and if there is indeed reason to adjust the rent, the parties could by
themselves negotiate for the amendment of the contract. Neither could we
consider the decline of the purchasing power of the Philippine peso from
1983 to the time of the commencement of the present case in 1985, to be so
great as to result in an extraordinary inflation. Extraordinary inflation exists
when there in an unimaginable increase or decrease of the purchasing power
G.R. No. L-37750 May 19, 1978
SWEET LINES, INC., petitioner,
vs.
HON. BERNARDO TEVES, Presiding Judge, CFI of Misamis Oriental Branch VII, LEOVIGILDO
TANDOG, JR., and ROGELIO TIRO, respondents.
Filiberto Leonardo, Abelardo C. Almario & Samuel B. Abadiano for petitioner.
Leovigildo Vallar for private respondents.
SANTOS, J.:
This is an original action for Prohibition with Pre Injunction filed October 3, 1973 to restrain respondent Judge
from proceeding further with Civil Case No. 4091, entitled Leovigildo D. Tandog, Jr. and Rogelio Tiro v. Sweet
Lines, Inc." after he denied petitioner's Motion to Dismiss the complaint, and the Motion for Reconsideration of
said order. 1
Briefly, the facts of record follow. Private respondents Atty. Leovigildo Tandog and Rogelio Tiro, a contractor
by professions, bought tickets Nos. 0011736 and 011737 for Voyage 90 on December 31, 1971 at the branch
office of petitioner, a shipping company transporting inter-island passengers and cargoes, at Cagayan de Oro
City. Respondents were to board petitioner's vessel, M/S "Sweet Hope" bound for Tagbilaran City via the port
of Cebu. Upon learning that the vessel was not proceeding to Bohol, since many passengers were bound for
Surigao, private respondents per advice, went to the branch office for proper relocation to M/S "Sweet Town".
Because the said vessel was already filled to capacity, they were forced to agree "to hide at the cargo section
to avoid inspection of the officers of the Philippine Coastguard." Private respondents alleged that they were,
during the trip," "exposed to the scorching heat of the sun and the dust coming from the ship's cargo of corn
grits," and that the tickets they bought at Cagayan de Oro City for Tagbilaran were not honored and they were
constrained to pay for other tickets. In view thereof, private respondents sued petitioner for damages and for
breach of contract of carriage in the alleged sum of P10,000.00 before respondents Court of First Instance of
Misamis Oriental. 2
Petitioner moved to dismiss the complaint on the ground of improper venue. This motion was premised on the
condition printed at the back of the tickets, i.e., Condition No. 14, which reads:
14. It is hereby agreed and understood that any and all actions arising out of the
conditions and provisions of this ticket, irrespective of where it is issued, shall be filed
in the competent courts in the City of Cebu. 3
The motion was denied by the trial court. 4 Petitioner moved to reconnsider the order of denial, but no
avail. 5 Hence, this instant petition for prohibition for preliminary injunction, 'alleging that the respondent judge
has departed from the accepted and usual course of judicial preoceeding" and "had acted without or in excess
or in error of his jurisdicton or in gross abuse of discretion. 6
In Our resolution of November 20, 1973, We restrained respondent Judge from proceeding further with the
case and required respondent to comment. 7 On January 18, 1974, We gave due course to the petition and
required respondent to answer. 8 Thereafter, the parties submitted their respesctive memoranda in support of
their respective contentions. 9
Presented thus for Our resolution is a question is aquestion which, to all appearances, is one of first
impression, to wit — Is Condition No. 14 printed at the back of the petitioner's passage tickets purchased by
private respondents, which limits the venue of actions arising from the contract of carriage to theCourt of First
Instance of Cebu, valid and enforceable? Otherwise stated, may a common carrier engaged in inter-island
shipping stipulate thru condition printed at the back of passage tickets to its vessels that any and all actions
arising out of the ocntract of carriage should be filed only in a particular province or city, in this case the City of
Cebu, to the exclusion of all others?
Petitioner contends thaty Condition No. 14 is valid and enforceable, since private respndents acceded to tit
when they purchased passage tickets at its Cagayan de Oro branch office and took its vessel M/S "Sweet
Town" for passage to Tagbilaran, Bohol — that the condition of the venue of actions in the City of Cebu is
proper since venue may be validly waived, citing cases; 10 that is an effective waiver of venue, valid and
binding as such, since it is printed in bold and capital letters and not in fine print and merely assigns the place
where the action sing from the contract is institution likewise citing cases; 11 and that condition No. 14 is
unequivocal and mandatory, the words and phrases "any and all", "irrespective of where it is issued," and
"shag" leave no doubt that the intention of Condition No. 14 is to fix the venue in the City of Cebu, to the
exclusion of other places; that the orders of the respondent Judge are an unwarranted departure from
established jurisprudence governing the case; and that he acted without or in excess of his jurisdiction in is the
orders complained of. 12
On the other hand, private respondents claim that Condition No. 14 is not valid, that the same is not an
essential element of the contract of carriage, being in itself a different agreement which requires the mutual
consent of the parties to it; that they had no say in its preparation, the existence of which they could not
refuse, hence, they had no choice but to pay for the tickets and to avail of petitioner's shipping facilities out of
necessity; that the carrier "has been exacting too much from the public by inserting impositions in the passage
tickets too burdensome to bear," that the condition which was printed in fine letters is an imposition on the
riding public and does not bind respondents, citing cases; 13 that while venue 6f actions may be transferred
from one province to another, such arrangement requires the "written agreement of the parties", not to be
imposed unilaterally; and that assuming that the condition is valid, it is not exclusive and does not, therefore,
exclude the filing of the action in Misamis Oriental, 14
There is no question that there was a valid contract of carriage entered into by petitioner and private
respondents and that the passage tickets, upon which the latter based their complaint, are the best evidence
thereof. All the essential elements of a valid contract, i.e., consent, cause or consideration and object, are
present. As held in Peralta de Guerrero, et al. v. Madrigal Shipping Co., Inc., 15
It is a matter of common knowledge that whenever a passenger boards a ship for
transportation from one place to another he is issued a ticket by the shipper which has
all the elements of a written contract, Namely: (1) the consent of the contracting parties
manifested by the fact that the passenger boards the ship and the shipper consents or
accepts him in the ship for transportation; (2) cause or consideration which is the fare
paid by the passenger as stated in the ticket; (3) object, which is the transportation of
the passenger from the place of departure to the place of destination which are stated
in the ticket.
It should be borne in mind, however, that with respect to the fourteen (14) conditions — one of which is
"Condition No. 14" which is in issue in this case — printed at the back of the passage tickets, these are
commonly known as "contracts of adhesion," the validity and/or enforceability of which will have to be
determined by the peculiar circumstances obtaining in each case and the nature of the conditions or terms
sought to be enforced. For, "(W)hile generally, stipulations in a contract come about after deliberate drafting by
the parties thereto, ... there are certain contracts almost all the provisions of which have been drafted only by
one party, usually a corporation. Such contracts are called contracts of adhesion, because the only
participation of the party is the signing of his signature or his 'adhesion' thereto. Insurance contracts, bills of
lading, contracts of make of lots on the installment plan fall into this category" 16
By the peculiar circumstances under which contracts of adhesion are entered into — namely, that it is drafted
only by one party, usually the corporation, and is sought to be accepted or adhered to by the other party, in
this instance the passengers, private respondents, who cannot change the same and who are thus made to
adhere thereto on the "take it or leave it" basis — certain guidelines in the determination of their validity and/or
enforceability have been formulated in order to that justice and fan play characterize the relationship of the
contracting parties. Thus, this Court speaking through Justice J.B.L. Reyes in Qua Chee Gan v. Law Union
and Rock Insurance Co., 17 and later through Justice Fernando in Fieldman Insurance v. Vargas, 18 held —
The courts cannot ignore that nowadays, monopolies, cartels and concentration of
capital endowed with overwhelm economic power, manage to impose upon parties d
with them y prepared 'agreements' that the weaker party may not change one whit his
participation in the 'agreement' being reduced to the alternative 'to take it or leave it,'
labelled since Raymond Saleilles 'contracts by adherence' (contracts d' adhesion) in
contrast to those entered into by parties bargaining on an equal footing. Such contracts
(of which policies of insurance and international bill of lading are prime examples)
 obviously cap for greater strictness and vigilance on the part of the courts of justice
with a view to protecting the weaker party from abuses and imposition, and prevent
their becoming traps for the unwary.
To the same effect and import, and, in recognition of the character of contracts of this kind, the protection of
the disadvantaged is expressly enjoined by the New Civil Code —
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 and other handicap, the courts must be vigilant for his
protection. 19
Considered in the light Of the foregoing norms and in the context Of circumstances Prevailing in the inter-
island ship. ping industry in the country today, We find and hold that Condition No. 14 printed at the back of
the passage tickets should be held as void and unenforceable for the following reasons first, under
circumstances obligation in the inter-island ship. ping industry, it is not just and fair to bind passengers to the
terms of the conditions printed at the back of the passage tickets, on which Condition No. 14 is Printed in fine
letters, and second, Condition No. 14 subverts the public policy on transfer of venue of proceedings of this
nature, since the same will prejudice rights and interests of innumerable passengers in different s of the
country who, under Condition No. 14, will have to file suits against petitioner only in the City of Cebu.
1. It is a matter of public knowledge, of which We can take judicial notice, that there is a dearth of and acute
shortage in inter- island vessels plying between the country's several islands, and the facilities they offer leave
much to be desired. Thus, even under ordinary circumstances, the piers are congested with passengers and
their cargo waiting to be transported. The conditions are even worse at peak and/or the rainy seasons, when
Passengers literally scramble to whatever accommodations may be availed of, even through circuitous routes,
and/or at the risk of their safety — their immediate concern, for the moment, being to be able to board vessels
with the hope of reaching their destinations. The schedules are — as often as not if not more so — delayed or
altered. This was precisely the experience of private respondents when they were relocated to M/S "Sweet
Town" from M/S "Sweet Hope" and then any to the scorching heat of the sun and the dust coming from the
ship's cargo of corn grits, " because even the latter was filed to capacity.
Under these circumstances, it is hardly just and proper to expect the passengers to examine their tickets
received from crowded/congested counters, more often than not during rush hours, for conditions that may be
printed much charge them with having consented to the conditions, so printed, especially if there are a number
of such conditions m fine print, as in this case. 20
Again, it should be noted that Condition No. 14 was prepared solely at the ms of the petitioner, respondents
had no say in its preparation. Neither did the latter have the opportunity to take the into account prior to the
purpose chase of their tickets. For, unlike the small print provisions of contracts — the common example of
contracts of adherence — which are entered into by the insured in his awareness of said conditions, since the
insured is afforded the op to and co the same, passengers of inter-island v do not have the same chance,
since their alleged adhesion is presumed only from the fact that they purpose chased the tickets.
It should also be stressed that slapping companies are franchise holders of certificates of public convenience
and therefore, posses a virtual monopoly over the business of transporting passengers between the ports
covered by their franchise. This being so, shipping companies, like petitioner, engaged in inter-island shipping,
have a virtual monopoly of the business of transporting passengers and may thus dictate their terms of
passage, leaving passengers with no choice but to buy their tickets and avail of their vessels and facilities.
Finally, judicial notice may be taken of the fact that the bulk of those who board these inter-island vested come
from the low-income groups and are less literate, and who have little or no choice but to avail of petitioner's
vessels.
2. Condition No. 14 is subversive of public policy on transfers of venue of actions. For, although venue may be
changed or transferred from one province to another by agreement of the parties in writing t to Rule 4, Section
3, of the Rules of Court, such an agreement will not be held valid where it practically negates the action of the
claimants, such as the private respondents herein. The philosophy underlying the provisions on transfer of
venue of actions is the convenience of the plaintiffs as well as his witnesses and to promote 21 the ends of
justice. Considering the expense and trouble a passenger residing outside of Cebu City would incur to
prosecute a claim in the City of Cebu, he would most probably decide not to file the action at all. The condition
will thus defeat, instead of enhance, the ends of justice. Upon the other hand, petitioner has branches or
offices in the respective ports of call of its vessels and can afford to litigate in any of these places. Hence, the
filing of the suit in the CFI of Misamis Oriental, as was done in the instant case, will not cause inconvenience
to, much less prejudice, petitioner.
Public policy is ". . . that principle of the law which holds that no subject or citizen can lawfully do that which
has a tendency to be injurious to the public or against the public good ... 22 Under this principle" ... freedom of
contract or private dealing is restricted by law for the good of the public. 23 Clearly, Condition No. 14, if
enforced, will be subversive of the public good or interest, since it will frustrate in meritorious cases, actions of
passenger cants outside of Cebu City, thus placing petitioner company at a decided advantage over said
persons, who may have perfectly legitimate claims against it. The said condition should, therefore, be declared
void and unenforceable, as contrary to public policy — to make the courts accessible to all who may have
need of their services.
WHEREFORE, the petition for prohibition is DISMISS. ED. The restraining order issued on November 20,
1973, is hereby LIFTED and SET ASIDE. Costs against petitioner.
Fernando (Chairman), Aquino, Concepcion, Jr., JJ., concur.
Antonio, J., reserves his vote.
Separate Opinions
BARREDO, J., concurring:
I concur in the dismissal of the instant petition.
Only a few days ago, in Hoechst Philippines, Inc. vs. Francisco Torres, et al., G. R. No. L-44351, promulgated
May 18, 1978, We made it clear that although generally, agreements regarding change of venue are
enforceable, there may be instances where for equitable considerations and in the better interest of justice, a
court may justify the laying of, the venue in the place fixed by the rules instead of following written stipulation
of the parties.
In the particular case at bar, there is actually no written agreement as to venue between the parties in the
sense contemplated in Section 3 of Rule 4, which governs the matter. I take it that the importance that a
stipulation regarding change of the venue fixed by law entails is such that nothing less than mutually
conscious agreement as to it must be what the rule means. In the instant case, as well pointed out in the main
opinion, the ticket issued to private respondents by petitioner constitutes at best a "contract of adhesion". In
other words, it is not that kind of a contract where the parties sit down to deliberate, discuss and agree
specifically on all its terms, but rather, one which respondents took no part at all in preparing, since it was just
imposed upon them when they paid for the fare for the freight they wanted to ship. It is common knowledge
that individuals who avail of common carriers hardly read the fine prints on such tickets to note anything more
than the price thereof and the destination designated therein.
Under these circumstances, it would seem that, since this case is already in respondent court and there is no
showing that, with its more or less known resources as owner of several inter-island vessels plying between
the different ports of the Philippines for sometime already, petitioner would be greatly inconvenienced by
submitting to the jurisdiction of said respondent court, it is best to allow the proceedings therein to continue. I
cannot conceive of any juridical injury such a step can cause to anyone concerned. I vote to dismiss the
petition.
Separate Opinions

BARREDO, J., concurring: