CENTRAL SHIPPING COMPANY vs INSURANCE COMPANY OF NORTH AMERICA Case

Digest
CENTRAL SHIPPING COMPANY, INC., petitioner, vs. INSURANCE COMPANY OF NORTH
AMERICA, respondent.
G.R. No. 150751 September 20, 2004
121 SCRA 769

Facts: On July 25, 1990 at Puerto Princesa, Palawan, the petitioner received on board its vessel,
the M/V Central Bohol, 376 pieces of Round Logs and undertook to transport said shipment to
Manila for delivery to Alaska Lumber Co., Inc. The cargo is insured for P3, 000, 000.00 against total
lost under respondents MarineCargo Policy.

After loading the logs, the vessel starts its voyage. After few hours of the trip, the ship tilts 10
degrees to its side, due to the shifting of the logs in the hold. It continues to tilt causing the captain
and the crew to abandon ship. The ship sank.

Respondent alleged that the loss is due to the negligence and fault of the captain. While petitioner
contends that the happening is due to monsoons which is unforeseen or casa fortuito.

Issue: Whether or not petitioner is liable for the loss of cargo?

Held: From the nature of their business and for reasons of public policy, common carriers are bound
to observe extraordinary diligence over the goods they transport, according to all the circumstances
of each case. In the event of loss, destruction or deterioration of the insured goods, common carriers
are responsible; that is, unless they can prove that such loss, destruction or deterioration was
brought about -- among others -- by "flood, storm, earthquake, lightning or other natural disaster or
calamity." In all other cases not specified under Article 1734 of the Civil Code, common carriers are
presumed to have been at fault or to have acted negligently, unless they prove that they observed
extraordinary diligence.

The contention of the petitioner that the loss is due to casa fortuito exempting them from liability is
untenable. Petitioner failed to show that such natural disaster or calamity was the proximate and
only cause of the loss. Human agency must be entirely excluded from the cause of injury or loss. In
other words, the damaging effects blamed on the event or phenomenon must not have been caused,
contributed to, or worsened by the presence of human participation. The defense of fortuitous event
or natural disaster cannot be successfully made when the injury could have been avoided by human
precaution.

The monsoon is not the proximate cause of the sinking but is due to the improper stowage of logs.
The logs were not secured by cable wires, causing the logs to shift and later on the sinking the ship.
This shows that they did not exercise extraordinary diligence, making them liable for such loss.

Everett Steamship Corporation vs. Court of Appeals

Private respondent imported 3 crates of bus spare parts marked as MARCO C/No.
12,MARCO C/No. 13 and MARCO C/No. 14, from its supplier, Maruman Trading
Company,Ltd. (Maruman Trading), a foreign corporation based in Inazawa, Aichi,
Japan. The crates were shipped from Nagoya, Japan to Manila on board
“ADELFAEVERETTE,” a vessel owned by petitioner’s principal, Everett Orient Lines.
Upon arrival at the port of Manila, it was discovered that the crate marked MARCO
C/No. 14 was missing. Privaterespondent claim upon petitioner for the value of the lost
cargo amounting to One Million Five Hundred Fifty Two Thousand Five Hundred (Y1,
552,500.00) Yen, theamount shown in an Invoice No. MTM-941, dated November 14,
1991. However,petitioner offered to pay only One Hundred Thousand (Y100,000.00)
Yen, the maximum amount stipulated under Clause 18 of the covering bill of lading
which limits the liability of petitioner. Private respondent rejected the offer and thereafter
instituted a suit for collection. The trial court rendered a decision in favour of the private
respondents and this was affirmed by the Court of Appeals. Thus, this instant petition.

ISSUE

Is private respondent, as consignee, who is not a signatory to the bill of lading bound by
the stipulations thereof?

HELD
Yes. The consignee who is not a signatory to the contract of carriage between the
shipper and the carrier, the consignee can still be bound by the contract.

The next issue to be resolved is whether or not private respondent, as consignee, who
is not a signatory to the bill of lading is bound by the stipulations thereof. Again, in Sea-
land Service, Inc. vs. Intermediate Appellate Court (Supra), we held that even in the
consignee between the shipper and the carrier, the consignee can still be bound by the
contract. Speaking through Mr. Chief Justice Narvasa, we ruled: “To begin with, there is
no question of the right, in the 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 the 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.

When private respondent formally claimed reimbursement for the missing goods from
petitioner and subsequently filed a case against the latter based on the very same bill of
lading, it (private respondent) accepted the provisions of the contract and thereby made
itself a party thereto, or at least has come to court to enforce it. Thus private respondent
cannot now reject or disregard the carrier’s limited liability stipulation in the bill of lading.
In other words, private respondents is bound by the whole stipulations in the bill of
lading and must respect the same.

Southern Lines v. CA (G.R. No. L-16629)

The City of Iloilo requisitioned for rice from the National Rice and Corn Corporation (NARIC) in
Manila. NARIC, pursuant to the order, shipped 1,726 sacks of rice consigned to the City of Iloilo
on board the SS “General Wright” belonging to the Southern Lines, Inc.
The City of Iloilo received the shipment and paid the total charged amount. However, it was
discovered in the bill of lading that there was shortage equivalent to 41 sacks of rice. The City of
Iloilo filed a complaint against NARIC and the Southern Lines, Inc. for the recovery of the
amount representing the value of the shortage of the shipment of rice. The lower court
absolved NARIC, but held Southern Lines, Inc. liable to pay the shortage. CA affirmed the trial
court’s decision, hence, this petition.
Issues:
(1) W/N Southern Lines is liable for the loss or shortage of the rice shipped;
(2) W/N the action was filed on time.

Ruling:

(1) YES. Under the provisions of Article 361, the defendant-carrier in order to free itself from
liability was only obliged to prove that the damages suffered by the goods were “by virtue of
the nature or defect of the articles.” Under the provisions of Article 362, the plaintiff, in order
to hold the defendant liable, was obliged to prove that the damages to the goods by virtue of
their nature, occurred on account of its negligence or because the defendant did not take the
precaution adopted by careful persons.
The contention is untenable, for, if the fact of improper packing is known to the carrier or his
servants, or apparent upon ordinary observation, but it accepts the goods notwithstanding such
condition, it is not relieved of liability for loss or injury resulting therefrom. Petitioner itself
frankly admitted that the strings that tied the bags of rice were broken; some bags were with
holes and plenty of rice were spilled inside the hull of the boat, and that the personnel of the
boat collected no less than 26 sacks of rice which they had distributed among themselves. This
finding, which is binding upon this Court, shows that the shortage resulted from the negligence
of petitioner.

(2) YES. Respondent filed the present action, within a reasonable time after the short delivery in
the shipment of the rice was made. It should be recalled that the present action is one for the
refund of the amount paid in excess, and not for damages or the recovery of the shortage; for
admittedly the respondent had paid the entire value of the 1726 sacks of rice, subject to
subsequent adjustment, as to shortages or losses. The bill of lading does not at all limit the time
for filing an action for the refund of money paid in excess.

MITSUI VS. CA, 287 SCRA 366

MENDOZA, J.:

Facts:

Petitioner Mitsui O.S.K. Lines Ltd. is a foreign corporation represented in the

Philippines by its agent, Magsaysay Agencies. It entered into a contract of carriage
through Meister Transport, Inc., an international freight forwarder, with private
respondent Lavine Loungewear Manufacturing Corporation to transport goods of the
latter from Manila to Le Havre, France. Petitioner undertook to deliver the goods to
France 28 days from initial loading. On July 24, 1991, petitioner's vessel loaded
private respondent's container van for carriage at the said port of origin.

However, in Kaoshiung, Taiwan the goods were not transshipped immediately, with
the result that the shipment arrived in Le Havre only on November 14, 1991. The
consignee allegedly paid only half the value of the said goods on the ground that
they did not arrive in France until the "off season" in that country. The remaining
half was allegedly charged to the account of private respondent which in turn
demanded payment from petitioner through its agent.

Issue:

Whether or not private respondent's action is for "loss or damage" to goods

shipped, within the meaning of the Carriage of Goods by Sea Act (COGSA).

Ruling:

No. The suit is not for "loss or damage" to goods contemplated in §3(6), the
question of prescription of action is governed not by the COGSA but by Art. 1144 of
the Civil Code which provides for a prescriptive period of ten years. As defined in
the Civil Code and as applied to Section 3(6), paragraph 4 of the Carriage of Goods
by Sea Act, "loss" contemplates merely a situation where no delivery at all was
made by the shipper of the goods because the same had perished, gone out of
commerce, or disappeared in such a way that their existence is unknown or they
cannot be recovered.

There would be some merit in appellant's insistence that the damages suffered by him as a
result of the delay in the shipment of his cargo are not covered by the prescriptive provision
of the Carriage of Goods by Sea Act above referred to, if such damages were due, not to the
deterioration and decay of the goods while in transit, but to other causes independent of the
condition of the cargo upon arrival, like a drop in their market value.

Sulpicio Lines, Inc. vs. First Lepanto-Taisho Insurance

GR No. 140349, June 29, 2005

FACTS:

Taiyo Yuden Philippines, Inc. (owner of the goods) and Delbros, Inc. (shipper) entered into a
contract, evidenced by Bill of Lading issued by the latter in favor of the owner of the goods, for Delbros,
Inc. to transport a shipment of goods consisting of 3 wooden crates containing 136 cartons of inductors
and LC compound on board the V Singapore V20 from Cebu City to Singapore in favor of the consignee,
Taiyo Yuden Singapore Pte, Ltd. For the carriage of said shipment from Cebu City to Manila, Delbros,
Inc. engaged the services of the vessel M/V Philippine Princess, owned and operated by petitioner
Sulpicio Lines, Inc. (carrier). During the unloading of the shipment, one crate containing 42 cartons
dropped from the cargo hatch to the pier apron. The owner of the goods examined the dropped cargo,
and upon an alleged finding that the contents of the crate were no longer usable for their intended
purpose, they were rejected as a total loss and returned to Cebu City. The owner of the goods filed a
claim with herein petitioner-carrier for the recovery of the value of the rejected cargo which was refused
by the latter. Thereafter, the owner of the goods sought payment from respondent First Lepanto-Taisho
Insurance Corporation (insurer) under a marine insurance policy issued to the former. Respondent-
insurer paid the claim less thirty-five percent (35%) salvage value or P194, 220.31. The payment of the
insurance claim of the owner of the goods by the respondent-insurer subrogated the latter to whatever
right or legal action the owner of the goods may have against Delbros, Inc. and petitioner-carrier, Sulpicio
Lines, Inc. Thus, respondent-insurer then filed claims for reimbursement from Delbros, Inc. and petitioner-
carrier Sulpicio Lines, Inc. which were subsequently denied. In 1992, respondent-insurer filed a suit for
damages with the trial court against Delbros, Inc. and herein petitioner-carrier. Delbros, Inc. filed on 15
April 1993 its Answer with Counterclaim and Cross-claim, alleging that assuming the contents of the crate
in question were trulyin bad order, fault is with herein petitioner-carrier which was responsible forthe
unloading of the crates. Petitioner-carrier filed its Answer to Delbros, Inc.’s cross-claim asserting that it
observed extraordinary diligence in the handling, storage and general care of the goods
ISSUE:

Whether or not petitioner is liable for the breach of contract of carriage (vigilance over goods)?

RULING:

YES. There was damage suffered by the goods which consisted in the destruction of one wooden
crate and the tearing of two (2) cardboard boxes therein which rendered them unfit to be sent to
Singapore. The falling of the crate was negligence on the part of Sulpicio Lines, Inc. for which it cannot
exculpate itself from liability because it failed to prove that it exercised extraordinary diligence.

Coastwise Lighterage Corporation v. CA

Facts:

Pag-asa Sales Inc. entered into a contract to transport molasses from the province of Negros to Manila
with Coastwise Lighterage Corporation (Coastwise for brevity), using the latter's dumb barges. The barges
were towed in tandem by the tugboat MT Marica, which is likewise owned by Coastwise. Upon reaching
Manila Bay, one of the barges, "Coastwise 9", struck an unknown sunken object. The forward buoyancy
compartment was damaged, and water gushed in through a hole "two inches wide and twenty-two inches
long". As a consequence, the molasses at the cargo tanks were contaminated. Pag-asa filed a claim against
Philippine General Insurance Company, the insurer of its cargo. Philgen paid P700,000 for the value of
the molasses lost.

Philgen then filed an action against Coastwise to recover the money it paid, claiming to be subrogated to
the claims which the consignee may have against the carrier. Both the trial court and the Court of Appeals
ruled against Coastwise.

Issues:

(1) Whether Coastwise was transformed into a private carrier by virtue of the contract it entered into with
Pag-asa, and whether it exercised the required degree of diligence

(2) Whether Philgen was subrogated into the rights of the consignee against the carrier

Held:

(1) Pag-asa Sales, Inc. only leased three of petitioner's vessels, in order to carry cargo from one point to
another, but the possession, command mid navigation of the vessels remained with petitioner Coastwise
Lighterage. Coastwise Lighterage, by the contract of affreightment, was not converted into a private
carrier, but remained a common carrier and was still liable as such. The law and jurisprudence on
common carriers both hold that the mere proof of delivery of goods in good order to a carrier and the
subsequent arrival of the same goods at the place of destination in bad order makes for a prima facie case
against the carrier. It follows then that the presumption of negligence that attaches to common carriers,
once the goods it is sports are lost, destroyed or deteriorated, applies to the petitioner. This presumption,
which is overcome only by proof of the exercise of extraordinary diligence, remained unrebutted in this
case. Jesus R. Constantino, the patron of the vessel "Coastwise 9" admitted that he was not licensed.
Coastwise Lighterage cannot safely claim to have exercised extraordinary diligence, by placing a person
whose navigational skills are questionable, at the helm of the vessel which eventually met the fateful
accident. It may also logically, follow that a person without license to navigate, lacks not just the skill to do
so, but also the utmost familiarity with the usual and safe routes taken by seasoned and legally authorized
ones. Had the patron been licensed he could be presumed to have both the skill and the knowledge that
would have prevented the vessel's hitting the sunken derelict ship that lay on their way to Pier 18. As a
common carrier, petitioner is liable for breach of the contract of carriage, having failed to overcome the
presumption of negligence with the loss and destruction of goods it transported, by proof of its exercise of
extraordinary diligence.

(2) Article 2207 of the Civil Code is founded on the well-settled principle of subrogation. If the insured
property is destroyed or damaged through the fault or negligence of a party other than the assured, then
the insurer, upon payment to the assured will be subrogated to the rights of the assured to recover from
the wrongdoer to the extent that the insurer has been obligated to pay. Payment by the insurer to the
assured operated as an equitable assignment to the former of all remedies which the latter may have
against the third party whose negligence or wrongful act caused the loss. The right of subrogation is not
dependent upon, nor does it grow out of, any private of contract or upon written assignment of, claim. It
accrues simply upon payment of the insurance claim by the insurer.

Philippine First Insurance v. Wallem First Shipping

FACTS: Anhui Chemicals Import & Export Corporation loaded on board M/S Offshore
Master a shipment consisting of 10,000 bags of sodium sulphate anhydrous 99 PCT Min.
(shipment) to be delivered at the port of Manila for L.G. Atkimson Import-Export, Inc.
(consignee). The shipper of the shipment is Shanghai Fareast Ship Business Company. Both
are foreign firms doing business in the Philippines, thru its local ship agent, respondent
Wallem Philippines Shipping, Inc. (Wallem). It was disclosed during the discharge of the
shipment from the carrier that 2,426 poly bags were in bad order and condition.

The consignee filed a formal claim with Wallem for the value of the damaged shipment. The
former filed a formal claim with petitioner for the damage and losses sustained by the
shipment. Consequently, petitioner paid the consignee the sum of P397, 879.69 and the
latter signed a subrogation receipt. In this regard, petitioner sent a demand letter to
Wallem for the recovery of the amount paid by petitioner to the consignee to which Wallem
did not respond.

Consequently, petitioner instituted an action before the RTC for damages against
respondents representing the actual damages suffered by petitioner plus legal interest
thereon.

ISSUE: Whether or not as a common carrier, the carrier’s duties extend to the obligation to
safely discharge the cargo from the vessel;

RULING: YES. Common carriers, from the nature of their business and for reasons of public
policy, are bound to observe extraordinary diligence in the vigilance over the goods
transported by them. Subject to certain exceptions enumerated under Article 1734 of the
Civil Code, common carriers are responsible for the loss, destruction, or deterioration of
the goods. The extraordinary responsibility of the common carrier 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.

The responsibility of the carrier shall commence from the time when the goods are loaded
on board the vessel and shall cease when they are discharged from the vessel.

The Carrier shall not be liable of loss of or damage to the goods before loading and after
discharging from the vessel, howsoever such loss or damage arises.

On the other hand, the functions of an arrastre operator involve the handling of cargo
deposited on the wharf or between the establishment of the consignee or shipper and the
ship's tackle. Being the custodian of the goods discharged from a vessel, an arrastre
operator's duty is to take good care of the goods and to turn them over to the party entitled
to their possession.

Handling cargo is mainly the arrastre operator's principal work so its drivers/operators or
employees should observe the standards and measures necessary to prevent losses and
damage to shipments under its custody

The records show that the damage to the bags happened before and after their discharge
and that it was caused by the stevedores of the arrastre operator who were then under the
supervision of Wallem.1awphi1.net

It is settled in maritime law jurisprudence that cargoes while being unloaded generally
remain under the custody of the carrier. In the instant case, the damage or losses were
incurred during the discharge of the shipment while under the supervision of the carrier.
Consequently, the carrier is liable for the damage or losses caused to the shipment.
Samar Mining Co., Inc. vs. Nordeutscher Lloyd
(132 SCRA 529)

Facts: Samar Mining imported 1 crate optima welded wire (amounting to around USD 424 or PhP
1,700) from Germany, which was shipped on a vessel owned by Nordeutscher Lloyd (M/S
Schwabenstein). The shipment was unloaded in Manila into a barge for transshipment to Davao and
temporarily stored in a bonded warehouse owned by AMCYL. The goods never reached Davao and
were never delivered to or received by the consignee, Samar Mining Co.

CFI ruled in favor of Samar Mining holding Nordeutscher Lloyd liable. However, defendants may
recoup whatever they may pay Samar Mining by enforcing the judgment against third party
defendant AMCYL.

Issue: Whether Nordeustscher Lloyd is liable for the loss of the goods as common carrier?

Held: No. At the time of the loss of the goods, the character of possession of Nordeutscher Lloyd
shifted from common carrier to agent of Samar Mining Co.

The Bill of Lading is serves both as a receipt of goods and is likewise the contract to transport and
deliver the same as stipulated. It is a contract and is therefore the law between the parties. The Bill
of Lading in question stipulated that Nordeutscher Lloyd only undertook to transport the goods in its
vessel only up to the port of discharge from ship, which is Manila. The Bill of Lading further
stipulated that the goods were to be transshipped by the carrier from Manila to the port of destination
– Davao. By unloading the shipment in Manila and delivering the goods to the warehouse of
AMCYL, the appellant was acting within the contractual stipulations contained in the Bill of Lading.

Article 1736 of the Civil Code relives the carrier of responsibility over the shipment as soon as the
carrier makes actual or constructive delivery of the goods to the consignee or to the person who has
a right to receive them.

Under the Civil Code provisions governing Agency, an agent can only be held liable in cases where
his acts are attended by fraud, negligence, deceit or if there is a conflict of interest between him and
the principal. Under the same law an agent is likewise liable if he appoints a substitute when he was
not given the power to appoint one or otherwise appoints one that is notoriously incompetent or
insolvent. These facts were not proven in the record.

Ganzon v. CA (G.R. No. L-48757)

Facts:

Private respondent Tumambing contracted the services of petitioner Ganzon to haul 305
tons of scrap iron from Bataan to the port of Manila on board the lighter LCT “Batman.”
Petitioner sent his lighter with its Captain Filomeno to dock at Mariveles, where
respondent Tumambing delivered the scrap irons for loading which also begun on the
same day. Mayor Advincula arrived at the port and demanded P 5,000 shakedown from
respondent. The two ended up in a heated argument where respondent had to be taken to
a hospital to be treated of a gunshot wound. After sometime, the loading of the scrap iron
was resumed. But now, the Acting Mayor together with 3 policemen ordered Captain
Filomeno to dump the scrap iron where the lighter was docked and the rest to be brought
to NASSCO compound. Later, the Acting Mayor issued a receipt stating that the
Municipality had taken custody of the scrap iron. Respondent instituted an action for
damages against petitioner. Respondent Court found in favor for Tumambing.

Issue:
Whether or not petitioner Ganzon, a common carrier, can be exempt from liability by
invoking order of competent authority.

Ruling: NO.

The petitioner has failed to show that the loss of the scraps was due to any of the
following causes enumerated in Article 1734 of the Civil Code.

Before the appellee Ganzon could be absolved from responsibility on the ground that he
was ordered by competent public authority to unload the scrap iron, it must be shown that
Acting Mayor Basilio Rub had the power to issue the disputed order, or that it was
lawful, or that it was issued under legal process of authority. The appellee failed to
establish this. Indeed, no authority or power of the acting mayor to issue such an order
was given in evidence. Neither has it been shown that the cargo of scrap iron belonged to
the Municipality of Mariveles. The fact remains that the order given by the acting mayor
to dump the scrap iron into the sea was part of the pressure applied by Mayor Jose
Advincula to shakedown the appellant for P5,000.00. The order of the acting mayor did
not constitute valid authority for appellee Mauro Ganzon and his representatives to carry
out. The petitioner was not duty bound to obey the illegal order to dump into the sea the
scrap iron.

ANICETO G. SALUDO, JR., MARIA SALVACION SALUDO, LEOPOLDO G. SALUDO and SATURNINO
G. SALUDO, petitioners, vs. HON. COURT OF APPEALS, TRANS WORLD AIRLINES, INC., and
PHILIPPINE AIRLINES, INC., respondents.

G.R. No. 95536, March 23, 1992, Second Division, REGALADO, J.

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.

Facts:

Petitioners herein together with Pomierski and Son Funeral Home of Chicago brought the
remains of petitioners’ mother to Continental Mortuary Air Services (CMAS) which booked the
shipment of the remains from Chicago to San Francisco by Trans World Airways (TWA) and from
San Francisco to Manila with Philippine Airlines (PAL).

The remains were taken to the Chicago Airport, but it turned out that there were two (2)
bodies in the said airport. Somehow the two (2) bodies were switched, and the remains of
petitioners’ mother was shipped to Mexico instead.

The shipment was immediately loaded on another PAL flight and it arrived the day after the
expected arrival. Petitioners filed a claim for damages in court. Petitioners consider TWA's
statement that "it had to rely on the information furnished by the shipper" a lame excuse and that
its failure to prove that its personnel verified and identified the contents of the casket before
loading the same constituted negligence on the part of TWA.

The lower court absolved both airlines and upon appeal it was affirmed by the court.
Issue:
Whether or not private respondents is liable for damages for the switching of the two
caskets.

Ruling:

No. The Supreme Court concluded that the switching occurred or, more accurately, was
discovered on October 27, 1976; and based on the above findings of the Court of appeals, it
happened while the cargo was still with CMAS, well before the same was place in the custody of
private respondents. Verily, no amount of inspection by respondent airline companies could have
guarded against the switching that had already taken place. Or, granting that they could have
opened the casket to inspect its contents, private respondents had no means of ascertaining
whether the body therein contained was indeed that of Crispina Saludo except, possibly, if the body
was that of a male person and such fact was visually apparent upon opening the casket. However, to
repeat, private respondents had no authority to unseal and open the same nor did they have any
reason or justification to resort thereto.

It is the right of the carrier to require good faith on the part of those persons who deliver
goods to be carried, or 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 a
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.

It can safely be said then that 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.

In the case at bar, private respondents had no reason whatsoever to doubt the truth of the
shipper's representations. The airway bill expressly providing that "carrier certifies goods received
below were received for carriage," and that the cargo contained "casketed human remains of
Crispina Saludo," was issued on the basis of such representations. The reliance thereon by private
respondents was reasonable and, for so doing, they cannot be said to have acted negligently.
Likewise, no evidence was adduced to suggest even an iota of suspicion that the cargo presented for
transportation was anything other than what it was declared to be, as would require more than
routine inspection or call for the carrier to insist that the same be opened for scrutiny of its
contents per declaration.

Nonetheless, the facts show that petitioners' 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 of invaded.
MACAM vs. COURT OF APPEALS
Facts: Benito Macam, doing business under name Ben-Mac
Enterprises, shipped on board vessel Nen-Jiang, owned and operated by
respondent China Ocean Shipping Co. through local agent Wallem
Philippines Shipping Inc., 3,500 boxes of watermelon covered by Bill of
Lading No. HKG 99012, and 1,611 boxes of fresh mangoes covered
byBill of Lading No. HKG 99013. The shipment was bound for Hongkong
with PAKISTAN BANK as consignee and Great Prospect Company of
Rowloon (GPC) as notify party.

Upon arrival in Hongkong, shipment was delivered by respondent

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
original bill of lading, refused to pay petitioner thru SOLIDBANK. Since
SOLIDBANK already pre-paid the value of shipment, it demanded
payment from respondent WALLEM but was refused. MACAM
constrained to return the amount paid by SOLIDBANK and demanded
payment from WALLEM but to no avail.

WALLEM submitted in evidence a telex dated 5 April 1989 as basis for

delivering the cargoes to GPC without the bills of lading and bank
guarantee. The telex 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, however, argued that,
assuming there was such an instruction, the consignee referred to was
PAKISTAN BANK and not GPC.

The RTC ruled for MACAM and ordered value of shipment. CA reversed
RTC’s decision.

Issue: Are the respondents liable to the petitioner for releasing the
goods to GPC without the bills of lading or bank guarantee?

Held: It is a standard maritime practice when immediate deliveryis

of the essence, for 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 bill of lading as that usually takes time. Thus,
taking into account that subject shipment consisted of perishable goods
and SOLIDBANK pre-paid the full amount of value thereof, it is not hard
to believe the claim of respondent WALLEM that petitioner indeed
requested the release of the goods to GPC without presentation of
the bills of lading and bank guarantee.

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 the buyer/importer is essentially a
factor to reckon with.

We emphasize that the extraordinary responsibility of the

commoncarriers lasts until actual or constructive delivery of the
cargoes to the consignee or to the person who has a right to receive
them. 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. Petitioner also referred to GPC
as such in his demand letter to respondent WALLEM and in
his complaint before the trial court. This premise draws us to conclude
that the delivery of the cargoes to GPC as buyer/importer which,
conformably with Art. 1736 had, other than the consignee, the right to
receive them was prope

PHILIPPINE AIR LINES, petitioner,

vs.
HON. COURT OF APPEALS and ISIDRO CO, respondents.

GRIÑO-AQUINO, J.:

This is a petition for review of the decision dated July 19, 1989 of the Court of Appeals affirming the
decision of the Regional Trial Court of Pasay City which awarded P72,766.02 as damages and
attorney's fees to private respondent Isidro Co for the loss of his checked-in baggage as a
passenger of petitioner airline.

The findings of the trial court, which were adopted by the appellate court, are:

"At about 5:30 a.m. on April 17, 1985, plaintiff [Co], accompanied by his wife and
son, arrived at the Manila International Airport aboard defendant airline's PAL Flight
No. 107 from San Francisco, California, U.S.A. Soon after his embarking (sic),
plaintiff proceeded to the baggage retrieval area to claim his checks in his
possession. Plaintiff found eight of his luggage, but despite diligent search, he failed
to locate ninth luggage, with claim check number 729113 which is the one in
question in this case.

"Plaintiff then immediately notified defendant company through its employee, Willy
Guevarra, who was then in charge of the PAL claim counter at the airport. Willy
Guevarra, who testified during the trial court on April 11, 1986, filled up the printed
form known as a Property Irregularity Report (Exh. "A"), acknowledging one of the
plaintiff's luggages to be missing (Exh. "A-1"), and signed after asking plaintiff himself
to sign the same document (Exh. "A-2"). In accordance with this procedure in cases
of this nature, Willy Guevarra asked plaintiff to surrender to him the nine claim
checks corresponding to the nine luggages, i.e., including the one that was missing.

The incontestable evidence further shows that plaintiff lost luggage was a Samsonite
suitcase measuring about 62 inches in length, worth about US$200.00 and
containing various personal effects purchased by plaintiff and his wife during their
stay in the United States and similar other items sent by their friends abroad to be
given as presents to relatives in the Philippines. Plaintiff's invoices evidencing their
purchases show their missing personal effects to be worth US$1,243.01, in addition
to the presents entrusted to them by their friends which plaintiffs testified to be worth
about US$500.00 to US$600.00 (Exhs. "D", "D-1", to "D-17"; tsn, p. 4, July 11, 1985;
pp. 5-14, March 7, 1986).

Plaintiff on several occasions unrelentingly called at defendant's office in order to

pursue his complaint about his missing luggage but no avail. Thus, on April 15, 1985,
plaintiff through his lawyer wrote a demand letter to defendant company though
Rebecca V. Santos, its manager, Central Baggage Services (Exhs. "B" & "B-1"). On
April 17, 1985, Rebecca Santos replied to the demand letter (Exh. "B")
acknowledging "that to date we have been unable to locate your client's (plaintiff's)
baggage despite our careful search" and requesting plaintiff's counsel to "please
extend to him our sincere apologies for the inconvenience he was caused by this
unfortunate incident" (Exh. "C"). Despite the letter (Exh. "C"), however, defendants
never found plaintiff's missing luggage or paid its corresponding value.
Consequently, on May 3, 1985, plaintiff filed his present complaint against said
defendants. (pp. 38-40, Rollo.)

Co sued the airline for damages. The Regional Trial Court of Pasay City found the defendant airline
(now petitioner) liable, and rendered judgment on June 3, 1986, the dispositive portion of which
reads:
 WHEREFORE, judgment is hereby rendered sentencing defendant Philippine
Airlines, Inc. to pay plaintiff Isidro Co:

1) P42,766.02 by way of actual damages;

2) P20,000.00 by way of exemplary damages;

3) P10,000.00 as attorney's fees;

all in addition to the costs of the suit.

"Defendants' counterclaim is hereby dismissed for lack of merit."

(p. 40, Rollo.)

On appeal, the Court of Appeals affirmed in toto the trial court's award.

In his petition for review of the Court of Appeal's decision, petitioner alleges that the appellate court
erred:

1. in affirming the conclusion of the trial court that the petitioner's retrieval baggage
report was a fabrication;

2. in not applying the limit of liability under the Warsaw Convention which limits the
liability of an air carrier of loss, delay or damage to checked-in baggage to US$20.00
based on weight; and

3. in awarding private respondent Isidro Co actual and exemplary damages,

attorney's fees, and costs.

The first and third assignments of error raise purely factual issues which are not reviewable by this
Court (Sec. 2, Rule 45, Rules of Court). The Court reviews only questions of law which must be
distinctly set forth in the petition. (Hodges vs. People, 68 Phil. 178.) The probative value of
petitioner's retrieval report was passed upon by the Regional Trial Court of Pasay City, whose
finding was affirmed by the Court of Appeals as follows:

In this respect, it is further argued that appellee should produce his claim tag if he
had not surrendered it because there was no baggage received. It appeared,
however, that appellee surrendered all the nine claim checks corresponding to the
nine luggages, including the one that was missing, to the PAL officer after
accomplishing the Property, Irregularity Report. Therefore, it could not be possible for
appellee to produce the same in court. It is now for appellant airlines to produce the
veracity of their Baggage Retrieval Report by corroborating evidence other than
testimonies of their employees. Such document is within the control of appellant and
necessarily requires other corroborative evidence. Since there is no compelling
reason to reverse the factual findings of the lower court, this Court resolves not to
disturb the same. (p. 41, Rollo.)

Whether or not the lost luggage was ever retrieved by the passenger, and whether or not the actual
and exemplary damages awarded by the court to him are reasonable, are factual issues which we
may not pass upon in the absence of special circumstances requiring a review of the evidence.

In Alitalia vs. IAC (192 SCRA 9, 18, citing Pan American World Airways, Inc. vs. IAC 164 SCRA
268), the Warsaw Convention limiting the carrier's liability was applied because of a simple loss of
baggage without any improper conduct on the part of the officials or employees of the airline, or
other special injury sustained by the passengers. The petitioner therein did not declare a higher
value for his luggage, much less did he pay an additional transportation charge.

Petitioner contends that under the Warsaw Convention, its liability, if any, cannot exceed US $20.00
based on weight as private respondent Co did not declare the contents of his baggage nor pay
traditional charges before the flight (p. 3, tsn, July 18, 1985).

We find no merit in that contention. In Samar Mining Company, Inc. vs. Nordeutscher Lloyd (132
SCRA 529), this Court ruled:

The liability of the common carrier for the loss, destruction or deterioration of goods
transported from a foreign country to the Philippines is governed primarily by the
New Civil Code. In all matters not regulated by said Code, the rights and obligations
 of common carriers shall be governed by the Code of Commerce and by Special
Laws.

The provisions of the New Civil Code on common carriers are Articles 1733, 1735 and 1753 which
provide:

Art. 1733. Common carriers, from the nature of their business and for reasons of
public policy, are bound to observe extraordinary diligence in the vigilance over the
goods and for the safety of the passengers transported by them, according to all the
circumstances of each case.

Art. 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4 and 5 of the
preceding article if the goods are lost, destroyed or deteriorated, common carriers
are presumed to have been at fault or to have acted negligently, unless they prove
that they observed extraordinary diligence as required in article 1733.

Art. 1753. The law of the country to which the goods are to be transported shall
govern the liability of the common carrier for their loss, destruction or deterioration.

Since the passenger's destination in this case was the Philippines, Philippine law governs the liability
of the carrier for the loss of the passenger's luggage.

In this case, the petitioner failed to overcome, not only the presumption, but more importantly, the
private respondent's evidence, proving that the carrier's negligence was the proximate cause of the
loss of his baggage. Furthermore, petitioner acted in bad faith in faking a retrieval receipt to bail itself
out of having to pay Co's claim.

The Court of Appeals therefore did not err in disregarding the limits of liability under the Warsaw
Convention.

The award of exemplary damages and attorney's fees to the private respondent was justified. In the
cases of Imperial Insurance, Inc. vs. Simon, 122 Phil. 189 and Bert Osmeña and Associates vs.
CA, 120 SCRA 396, the appellant was awarded attorney's fees because of appellee's failure to
satisfy the former's just and valid demandable claim which forced the appellant to litigate. Likewise,
in the case of Phil. Surety Ins. Co., Inc. vs. Royal Oil Products, 102 Phil. 326, this Court justified the
grant of exemplary damages and attorney's fees to the petitioner's failure, even refusal, to pay the
private respondent's valid claim.

WHEREFORE, the petition for review is DENIED for lack of merit. Costs against the petitioner.

SO ORDERED.

Cathay Pacific Airways vs. CA

G.R. No. 60501. March 5, 1993

Facts:

Respondent Tomas Alcantara was a first class passenger of petitioner Cathay Pacific
Airways from Manila to Hongkong and onward from Hongkong to Jakarta. The
purpose of his trip was to attend the following day, a conference with the Director
General of Trade of Indonesia. He checked in his luggage which contained not
only his clothing and articles for personal use but also papers and documents
he needed for the conference.

Upon his arrival in Jakarta, respondent discovered that his luggage was
missing. Private respondent was told that his luggage was left behind in Hongkong.

For this, respondent Alcantara was offered $20.00 as “inconvenience money" to

buy his immediate personal needs until the luggage could be delivered to
him. The respondent, as a result of the incident had to seek postponement of
his pre-arranged conference.
Issue:
1. WoN there was breach of contract
2. WoN Cathay Pacific is liable for damages
3. WoN the Warsaw Convention is applicable to this case

Held:
1. Petitioner breached its contract of carriage with private respondent when
it failed to deliver his luggage at the designated place and time, it being
the obligation of a common carrier to carry its passengers and their
luggage safely to their destination, which includes the duty not to delay
their transportation, and the evidence shows that petitioner acted
fraudulently or in bad faith.
2. Moral damages predicated upon a breach of contract of carriage may only
be recoverable in instances where the mishap results in death of a
passenger, or where the carrier is guilty of fraud or bad faith. But in the
case at bar, the inconvenience money offered to Alcantara was insulting
considering that he paid for a first class accommodation. Petitioner or its
agents should have been more courteous and accommodating. The
conduct of petitioner's representative towards respondent justifies the
grant of moral and exemplary damages.

3. Although the Warsaw Convention has the force and effect of law in this
country, said convention does not operate as an exclusive enumeration of
the instances for declaring a carrier liable for breach of contract of
carriage or as an absolute limit of the extent of that liability. It must not
be construed to preclude the operation of the Civil Code and other
pertinent laws. It does not regulate, much less exempt, the carrier from
liability for damages for violating the rights of its passengers under the
contract of carriage, especially if wilful misconduct on the part of the
carrier's employees is found or established.

Trans-Asia Shipping Lines, Inc. VS Court of Appeals

GR 118126 4 March 1996

FACTS:

Atty Renato Arroyo purchased a ticket from Trans-Asia Shipping lines, Inc. for the voyage of M/V Asia
Thailand vessel to Cagayan de Oro from Cebu Sity. Upon boarding he noticed that engines of the vessel
were being repaired. Regardless, he boarded the same.

The vessel departed on time with only 1 engine running. It stopped near Kawit Island and after half an
hour of stillness, the passengers, who already were suffering from mental distress, demanded that they
be brought back to their port of origin.

At Cebu City, passengers who wished to disembark were allowed and given 10 minutes. Atty. Arroyo as
one of the passengers. After which, the vessel continued its voyage.

On this account, Passenger Arroyo filed before the trial court a complaint for damages against Trans-Asia
Shipping Inc. for failure of transporting the former to his place of destination.

ISSUE:

WON a vessel being unworthy of the sea is tantamount to a breach of contract?

HELD:

Under Article 1733 of the Civil Code, the petitioner was bound to observe extraordinary diligence in
ensuring the safety of the private respondent. That meant that the petitioner was, pursuant to Article 1755
of the said Code, bound to carry the private respondent safely as far as human care and foresight could
provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances. In
this case, we are in full accord with the Court of Appeals that the petitioner failed to discharge this
obligation.

Before commencing the contracted voyage, the petitioner undertook some repairs on the cylinder head of
one of the vessel's engines. But even before it could finish these repairs, it allowed the vessel to leave the
port of origin on only one functioning engine, instead of two. Moreover, even the lone functioning engine
was not in perfect condition as sometime after it had run its course, it conked out. This caused the vessel
to stop and remain a drift at sea, thus in order to prevent the ship from capsizing, it had to drop anchor.
Plainly, the vessel was unseaworthy even before the voyage began. For a vessel to be seaworthy, it must
be adequately equipped for the voyage and manned with a sufficient number of competent officers and
crew. 21 The failure of a common carrier to maintain in seaworthy condition its vessel involved in a
contract of carriage is a clear breach of its duty prescribed in Article 1755 of the Civil Code.

Sweet Lines, Inc. v. Teves

G.R. No. L-37750, 19 May 1978, 83 SCRA 361

FACTS:

Atty. Leovigildo Tandog and Rogelio Tiro bought tickets for Tagbiliran City via the port of Cebu.
Since many passengers were bound for Surigao, “M/S Sweet Hope” would not be proceeding to
Bohol. They went to the proper branch office and were relocated to “M/S Sweet Town” where they
were forced to agree “to hide at the cargo section to avoid inspection of the officers of the Philippines
Coastguard.” They were exposed to the scorching heat of the sun and the dust coming from the
ship’s cargo of corn grits and their tickets were not honored so they had to purchase a new one.
Because of the terrible experience they had, they sued Sweet Lines for damages and for breach of
contract of carriage before the Court of First Instance of Misamis Oriental who dismissed the
complaint for improper venue. A motion was premised on the condition printed at the back of the
tickets and was later dismissed. Hence this instant petition for prohibition for preliminary injunction.

ISSUE:

Whether or not, 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 contract of
carriage should be filed only in a particular province or city.

HELD:

No. Actions arising out of the contract of carriage should be filed not only in a particular province or
city. Contract of adhesions are not the kind of 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. It is only imposed upon them when they paid for the fare for the freight they wanted to
ship.
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:
1. Circumstances obligation in the inter-island ship will prejudice rights and interests of innumerable
passengers in different parts of the country who, under Condition No. 14, will have to file suits
against petitioner only in the City of Cebu;
2. Subversive of public policy on transfers of venue of actions; and
3. Philosophy underlying the provisions of transfers of venue of actions is the convenience of the
plaintiffs as well as his witnesses and to promote the ends of justice.
Hence, petition for prohibition is hereby dismissed. The restraining order is LIFTED and SET ASIDE.

***CONTRACT OF ADHESION ONE PARTY LANG NAGDECIDE

CENTRAL SHIPPING COMPANY vs INSURANCE COMPANY OF NORTH AMERICA Case
Digest
CENTRAL SHIPPING COMPANY, INC., petitioner, vs. INSURANCE COMPANY OF NORTH
AMERICA, respondent.
G.R. No. 150751 September 20, 2004
121 SCRA 769

Facts: On July 25, 1990 at Puerto Princesa, Palawan, the petitioner received on board its vessel,
the M/V Central Bohol, 376 pieces of Round Logs and undertook to transport said shipment to
Manila for delivery to Alaska Lumber Co., Inc. The cargo is insured for P3, 000, 000.00 against total
lost under respondents MarineCargo Policy.

After loading the logs, the vessel starts its voyage. After few hours of the trip, the ship tilts 10
degrees to its side, due to the shifting of the logs in the hold. It continues to tilt causing the captain
and the crew to abandon ship. The ship sank.

Respondent alleged that the loss is due to the negligence and fault of the captain. While petitioner
contends that the happening is due to monsoons which is unforeseen or casa fortuito.

Issue: Whether or not petitioner is liable for the loss of cargo?

Held: From the nature of their business and for reasons of public policy, common carriers are bound
to observe extraordinary diligence over the goods they transport, according to all the circumstances
of each case. In the event of loss, destruction or deterioration of the insured goods, common carriers
are responsible; that is, unless they can prove that such loss, destruction or deterioration was
brought about -- among others -- by "flood, storm, earthquake, lightning or other natural disaster or
calamity." In all other cases not specified under Article 1734 of the Civil Code, common carriers are
presumed to have been at fault or to have acted negligently, unless they prove that they observed
extraordinary diligence.

The contention of the petitioner that the loss is due to casa fortuito exempting them from liability is
untenable. Petitioner failed to show that such natural disaster or calamity was the proximate and
only cause of the loss. Human agency must be entirely excluded from the cause of injury or loss. In
other words, the damaging effects blamed on the event or phenomenon must not have been caused,
contributed to, or worsened by the presence of human participation. The defense of fortuitous event
or natural disaster cannot be successfully made when the injury could have been avoided by human
precaution.

The monsoon is not the proximate cause of the sinking but is due to the improper stowage of logs.
The logs were not secured by cable wires, causing the logs to shift and later on the sinking the ship.
This shows that they did not exercise extraordinary diligence, making them liable for such loss.

Everett Steamship Corporation vs. Court of Appeals

Private respondent imported 3 crates of bus spare parts marked as MARCO C/No.
12,MARCO C/No. 13 and MARCO C/No. 14, from its supplier, Maruman Trading
Company,Ltd. (Maruman Trading), a foreign corporation based in Inazawa, Aichi,
Japan. The crates were shipped from Nagoya, Japan to Manila on board
“ADELFAEVERETTE,” a vessel owned by petitioner’s principal, Everett Orient Lines.
Upon arrival at the port of Manila, it was discovered that the crate marked MARCO
C/No. 14 was missing. Privaterespondent claim upon petitioner for the value of the lost
cargo amounting to One Million Five Hundred Fifty Two Thousand Five Hundred (Y1,
552,500.00) Yen, theamount shown in an Invoice No. MTM-941, dated November 14,
1991. However,petitioner offered to pay only One Hundred Thousand (Y100,000.00)
Yen, the maximum amount stipulated under Clause 18 of the covering bill of lading
which limits the liability of petitioner. Private respondent rejected the offer and thereafter
instituted a suit for collection. The trial court rendered a decision in favour of the private
respondents and this was affirmed by the Court of Appeals. Thus, this instant petition.

ISSUE

Is private respondent, as consignee, who is not a signatory to the bill of lading bound by
the stipulations thereof?
HELD

Yes. The consignee who is not a signatory to the contract of carriage between the
shipper and the carrier, the consignee can still be bound by the contract.

The next issue to be resolved is whether or not private respondent, as consignee, who
is not a signatory to the bill of lading is bound by the stipulations thereof. Again, in Sea-
land Service, Inc. vs. Intermediate Appellate Court (Supra), we held that even in the
consignee between the shipper and the carrier, the consignee can still be bound by the
contract. Speaking through Mr. Chief Justice Narvasa, we ruled: “To begin with, there is
no question of the right, in the 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 the 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.

When private respondent formally claimed reimbursement for the missing goods from
petitioner and subsequently filed a case against the latter based on the very same bill of
lading, it (private respondent) accepted the provisions of the contract and thereby made
itself a party thereto, or at least has come to court to enforce it. Thus private respondent
cannot now reject or disregard the carrier’s limited liability stipulation in the bill of lading.
In other words, private respondents is bound by the whole stipulations in the bill of
lading and must respect the same.

Southern Lines v. CA (G.R. No. L-16629)

The City of Iloilo requisitioned for rice from the National Rice and Corn Corporation (NARIC) in
Manila. NARIC, pursuant to the order, shipped 1,726 sacks of rice consigned to the City of Iloilo
on board the SS “General Wright” belonging to the Southern Lines, Inc.
The City of Iloilo received the shipment and paid the total charged amount. However, it was
discovered in the bill of lading that there was shortage equivalent to 41 sacks of rice. The City of
Iloilo filed a complaint against NARIC and the Southern Lines, Inc. for the recovery of the
amount representing the value of the shortage of the shipment of rice. The lower court
absolved NARIC, but held Southern Lines, Inc. liable to pay the shortage. CA affirmed the trial
court’s decision, hence, this petition.
Issues:
(1) W/N Southern Lines is liable for the loss or shortage of the rice shipped;
(2) W/N the action was filed on time.

Ruling:

(1) YES. Under the provisions of Article 361, the defendant-carrier in order to free itself from
liability was only obliged to prove that the damages suffered by the goods were “by virtue of
the nature or defect of the articles.” Under the provisions of Article 362, the plaintiff, in order
to hold the defendant liable, was obliged to prove that the damages to the goods by virtue of
their nature, occurred on account of its negligence or because the defendant did not take the
precaution adopted by careful persons.
The contention is untenable, for, if the fact of improper packing is known to the carrier or his
servants, or apparent upon ordinary observation, but it accepts the goods notwithstanding such
condition, it is not relieved of liability for loss or injury resulting therefrom. Petitioner itself
frankly admitted that the strings that tied the bags of rice were broken; some bags were with
holes and plenty of rice were spilled inside the hull of the boat, and that the personnel of the
boat collected no less than 26 sacks of rice which they had distributed among themselves. This
finding, which is binding upon this Court, shows that the shortage resulted from the negligence
of petitioner.

(2) YES. Respondent filed the present action, within a reasonable time after the short delivery in
the shipment of the rice was made. It should be recalled that the present action is one for the
refund of the amount paid in excess, and not for damages or the recovery of the shortage; for
admittedly the respondent had paid the entire value of the 1726 sacks of rice, subject to
subsequent adjustment, as to shortages or losses. The bill of lading does not at all limit the time
for filing an action for the refund of money paid in excess.

MITSUI VS. CA, 287 SCRA 366

MENDOZA, J.:

Facts:

Petitioner Mitsui O.S.K. Lines Ltd. is a foreign corporation represented in the

Philippines by its agent, Magsaysay Agencies. It entered into a contract of carriage
through Meister Transport, Inc., an international freight forwarder, with private
respondent Lavine Loungewear Manufacturing Corporation to transport goods of the
latter from Manila to Le Havre, France. Petitioner undertook to deliver the goods to
France 28 days from initial loading. On July 24, 1991, petitioner's vessel loaded
private respondent's container van for carriage at the said port of origin.

However, in Kaoshiung, Taiwan the goods were not transshipped immediately, with
the result that the shipment arrived in Le Havre only on November 14, 1991. The
consignee allegedly paid only half the value of the said goods on the ground that
they did not arrive in France until the "off season" in that country. The remaining
half was allegedly charged to the account of private respondent which in turn
demanded payment from petitioner through its agent.

Issue:

Whether or not private respondent's action is for "loss or damage" to goods

shipped, within the meaning of the Carriage of Goods by Sea Act (COGSA).

Ruling:

No. The suit is not for "loss or damage" to goods contemplated in §3(6), the
question of prescription of action is governed not by the COGSA but by Art. 1144 of
the Civil Code which provides for a prescriptive period of ten years. As defined in
the Civil Code and as applied to Section 3(6), paragraph 4 of the Carriage of Goods
by Sea Act, "loss" contemplates merely a situation where no delivery at all was
made by the shipper of the goods because the same had perished, gone out of
commerce, or disappeared in such a way that their existence is unknown or they
cannot be recovered.

There would be some merit in appellant's insistence that the damages suffered by him as a
result of the delay in the shipment of his cargo are not covered by the prescriptive provision
of the Carriage of Goods by Sea Act above referred to, if such damages were due, not to the
deterioration and decay of the goods while in transit, but to other causes independent of the
condition of the cargo upon arrival, like a drop in their market value.

Sulpicio Lines, Inc. vs. First Lepanto-Taisho Insurance

GR No. 140349, June 29, 2005

FACTS:

Taiyo Yuden Philippines, Inc. (owner of the goods) and Delbros, Inc. (shipper) entered into a
contract, evidenced by Bill of Lading issued by the latter in favor of the owner of the goods, for Delbros,
Inc. to transport a shipment of goods consisting of 3 wooden crates containing 136 cartons of inductors
and LC compound on board the V Singapore V20 from Cebu City to Singapore in favor of the consignee,
Taiyo Yuden Singapore Pte, Ltd. For the carriage of said shipment from Cebu City to Manila, Delbros,
Inc. engaged the services of the vessel M/V Philippine Princess, owned and operated by petitioner
Sulpicio Lines, Inc. (carrier). During the unloading of the shipment, one crate containing 42 cartons
dropped from the cargo hatch to the pier apron. The owner of the goods examined the dropped cargo,
and upon an alleged finding that the contents of the crate were no longer usable for their intended
purpose, they were rejected as a total loss and returned to Cebu City. The owner of the goods filed a
claim with herein petitioner-carrier for the recovery of the value of the rejected cargo which was refused
by the latter. Thereafter, the owner of the goods sought payment from respondent First Lepanto-Taisho
Insurance Corporation (insurer) under a marine insurance policy issued to the former. Respondent-
insurer paid the claim less thirty-five percent (35%) salvage value or P194, 220.31. The payment of the
insurance claim of the owner of the goods by the respondent-insurer subrogated the latter to whatever
right or legal action the owner of the goods may have against Delbros, Inc. and petitioner-carrier, Sulpicio
Lines, Inc. Thus, respondent-insurer then filed claims for reimbursement from Delbros, Inc. and petitioner-
carrier Sulpicio Lines, Inc. which were subsequently denied. In 1992, respondent-insurer filed a suit for
damages with the trial court against Delbros, Inc. and herein petitioner-carrier. Delbros, Inc. filed on 15
April 1993 its Answer with Counterclaim and Cross-claim, alleging that assuming the contents of the crate
in question were trulyin bad order, fault is with herein petitioner-carrier which was responsible forthe
unloading of the crates. Petitioner-carrier filed its Answer to Delbros, Inc.’s cross-claim asserting that it
observed extraordinary diligence in the handling, storage and general care of the goods
ISSUE:

Whether or not petitioner is liable for the breach of contract of carriage (vigilance over goods)?

RULING:

YES. There was damage suffered by the goods which consisted in the destruction of one wooden
crate and the tearing of two (2) cardboard boxes therein which rendered them unfit to be sent to
Singapore. The falling of the crate was negligence on the part of Sulpicio Lines, Inc. for which it cannot
exculpate itself from liability because it failed to prove that it exercised extraordinary diligence.

Coastwise Lighterage Corporation v. CA

Facts:

Pag-asa Sales Inc. entered into a contract to transport molasses from the province of Negros to Manila
with Coastwise Lighterage Corporation (Coastwise for brevity), using the latter's dumb barges. The barges
were towed in tandem by the tugboat MT Marica, which is likewise owned by Coastwise. Upon reaching
Manila Bay, one of the barges, "Coastwise 9", struck an unknown sunken object. The forward buoyancy
compartment was damaged, and water gushed in through a hole "two inches wide and twenty-two inches
long". As a consequence, the molasses at the cargo tanks were contaminated. Pag-asa filed a claim against
Philippine General Insurance Company, the insurer of its cargo. Philgen paid P700,000 for the value of
the molasses lost.

Philgen then filed an action against Coastwise to recover the money it paid, claiming to be subrogated to
the claims which the consignee may have against the carrier. Both the trial court and the Court of Appeals
ruled against Coastwise.

Issues:

(1) Whether Coastwise was transformed into a private carrier by virtue of the contract it entered into with
Pag-asa, and whether it exercised the required degree of diligence

(2) Whether Philgen was subrogated into the rights of the consignee against the carrier

Held:

(1) Pag-asa Sales, Inc. only leased three of petitioner's vessels, in order to carry cargo from one point to
another, but the possession, command mid navigation of the vessels remained with petitioner Coastwise
Lighterage. Coastwise Lighterage, by the contract of affreightment, was not converted into a private
carrier, but remained a common carrier and was still liable as such. The law and jurisprudence on
common carriers both hold that the mere proof of delivery of goods in good order to a carrier and the
subsequent arrival of the same goods at the place of destination in bad order makes for a prima facie case
against the carrier. It follows then that the presumption of negligence that attaches to common carriers,
once the goods it is sports are lost, destroyed or deteriorated, applies to the petitioner. This presumption,
which is overcome only by proof of the exercise of extraordinary diligence, remained unrebutted in this
case. Jesus R. Constantino, the patron of the vessel "Coastwise 9" admitted that he was not licensed.
Coastwise Lighterage cannot safely claim to have exercised extraordinary diligence, by placing a person
whose navigational skills are questionable, at the helm of the vessel which eventually met the fateful
accident. It may also logically, follow that a person without license to navigate, lacks not just the skill to do
so, but also the utmost familiarity with the usual and safe routes taken by seasoned and legally authorized
ones. Had the patron been licensed he could be presumed to have both the skill and the knowledge that
would have prevented the vessel's hitting the sunken derelict ship that lay on their way to Pier 18. As a
common carrier, petitioner is liable for breach of the contract of carriage, having failed to overcome the
presumption of negligence with the loss and destruction of goods it transported, by proof of its exercise of
extraordinary diligence.

(2) Article 2207 of the Civil Code is founded on the well-settled principle of subrogation. If the insured
property is destroyed or damaged through the fault or negligence of a party other than the assured, then
the insurer, upon payment to the assured will be subrogated to the rights of the assured to recover from
the wrongdoer to the extent that the insurer has been obligated to pay. Payment by the insurer to the
assured operated as an equitable assignment to the former of all remedies which the latter may have
against the third party whose negligence or wrongful act caused the loss. The right of subrogation is not
dependent upon, nor does it grow out of, any private of contract or upon written assignment of, claim. It
accrues simply upon payment of the insurance claim by the insurer.

Philippine First Insurance v. Wallem First Shipping

FACTS: Anhui Chemicals Import & Export Corporation loaded on board M/S Offshore
Master a shipment consisting of 10,000 bags of sodium sulphate anhydrous 99 PCT Min.
(shipment) to be delivered at the port of Manila for L.G. Atkimson Import-Export, Inc.
(consignee). The shipper of the shipment is Shanghai Fareast Ship Business Company. Both
are foreign firms doing business in the Philippines, thru its local ship agent, respondent
Wallem Philippines Shipping, Inc. (Wallem). It was disclosed during the discharge of the
shipment from the carrier that 2,426 poly bags were in bad order and condition.

The consignee filed a formal claim with Wallem for the value of the damaged shipment. The
former filed a formal claim with petitioner for the damage and losses sustained by the
shipment. Consequently, petitioner paid the consignee the sum of P397, 879.69 and the
latter signed a subrogation receipt. In this regard, petitioner sent a demand letter to
Wallem for the recovery of the amount paid by petitioner to the consignee to which Wallem
did not respond.

Consequently, petitioner instituted an action before the RTC for damages against
respondents representing the actual damages suffered by petitioner plus legal interest
thereon.

ISSUE: Whether or not as a common carrier, the carrier’s duties extend to the obligation to
safely discharge the cargo from the vessel;

RULING: YES. Common carriers, from the nature of their business and for reasons of public
policy, are bound to observe extraordinary diligence in the vigilance over the goods
transported by them. Subject to certain exceptions enumerated under Article 1734 of the
Civil Code, common carriers are responsible for the loss, destruction, or deterioration of
the goods. The extraordinary responsibility of the common carrier 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.

The responsibility of the carrier shall commence from the time when the goods are loaded
on board the vessel and shall cease when they are discharged from the vessel.

The Carrier shall not be liable of loss of or damage to the goods before loading and after
discharging from the vessel, howsoever such loss or damage arises.

On the other hand, the functions of an arrastre operator involve the handling of cargo
deposited on the wharf or between the establishment of the consignee or shipper and the
ship's tackle. Being the custodian of the goods discharged from a vessel, an arrastre
operator's duty is to take good care of the goods and to turn them over to the party entitled
to their possession.

Handling cargo is mainly the arrastre operator's principal work so its drivers/operators or
employees should observe the standards and measures necessary to prevent losses and
damage to shipments under its custody

The records show that the damage to the bags happened before and after their discharge
and that it was caused by the stevedores of the arrastre operator who were then under the
supervision of Wallem.1awphi1.net

It is settled in maritime law jurisprudence that cargoes while being unloaded generally
remain under the custody of the carrier. In the instant case, the damage or losses were
incurred during the discharge of the shipment while under the supervision of the carrier.
Consequently, the carrier is liable for the damage or losses caused to the shipment.
Samar Mining Co., Inc. vs. Nordeutscher Lloyd
(132 SCRA 529)

Facts: Samar Mining imported 1 crate optima welded wire (amounting to around USD 424 or PhP
1,700) from Germany, which was shipped on a vessel owned by Nordeutscher Lloyd (M/S
Schwabenstein). The shipment was unloaded in Manila into a barge for transshipment to Davao and
temporarily stored in a bonded warehouse owned by AMCYL. The goods never reached Davao and
were never delivered to or received by the consignee, Samar Mining Co.

CFI ruled in favor of Samar Mining holding Nordeutscher Lloyd liable. However, defendants may
recoup whatever they may pay Samar Mining by enforcing the judgment against third party
defendant AMCYL.

Issue: Whether Nordeustscher Lloyd is liable for the loss of the goods as common carrier?

Held: No. At the time of the loss of the goods, the character of possession of Nordeutscher Lloyd
shifted from common carrier to agent of Samar Mining Co.

The Bill of Lading is serves both as a receipt of goods and is likewise the contract to transport and
deliver the same as stipulated. It is a contract and is therefore the law between the parties. The Bill
of Lading in question stipulated that Nordeutscher Lloyd only undertook to transport the goods in its
vessel only up to the port of discharge from ship, which is Manila. The Bill of Lading further
stipulated that the goods were to be transshipped by the carrier from Manila to the port of destination
– Davao. By unloading the shipment in Manila and delivering the goods to the warehouse of
AMCYL, the appellant was acting within the contractual stipulations contained in the Bill of Lading.

Article 1736 of the Civil Code relives the carrier of responsibility over the shipment as soon as the
carrier makes actual or constructive delivery of the goods to the consignee or to the person who has
a right to receive them.

Under the Civil Code provisions governing Agency, an agent can only be held liable in cases where
his acts are attended by fraud, negligence, deceit or if there is a conflict of interest between him and
the principal. Under the same law an agent is likewise liable if he appoints a substitute when he was
not given the power to appoint one or otherwise appoints one that is notoriously incompetent or
insolvent. These facts were not proven in the record.

Ganzon v. CA (G.R. No. L-48757)

Facts:

Private respondent Tumambing contracted the services of petitioner Ganzon to haul 305
tons of scrap iron from Bataan to the port of Manila on board the lighter LCT “Batman.”
Petitioner sent his lighter with its Captain Filomeno to dock at Mariveles, where
respondent Tumambing delivered the scrap irons for loading which also begun on the
same day. Mayor Advincula arrived at the port and demanded P 5,000 shakedown from
respondent. The two ended up in a heated argument where respondent had to be taken to
a hospital to be treated of a gunshot wound. After sometime, the loading of the scrap iron
was resumed. But now, the Acting Mayor together with 3 policemen ordered Captain
Filomeno to dump the scrap iron where the lighter was docked and the rest to be brought
to NASSCO compound. Later, the Acting Mayor issued a receipt stating that the
Municipality had taken custody of the scrap iron. Respondent instituted an action for
damages against petitioner. Respondent Court found in favor for Tumambing.

Issue:
Whether or not petitioner Ganzon, a common carrier, can be exempt from liability by
invoking order of competent authority.

Ruling: NO.

The petitioner has failed to show that the loss of the scraps was due to any of the
following causes enumerated in Article 1734 of the Civil Code.

Before the appellee Ganzon could be absolved from responsibility on the ground that he
was ordered by competent public authority to unload the scrap iron, it must be shown that
Acting Mayor Basilio Rub had the power to issue the disputed order, or that it was
lawful, or that it was issued under legal process of authority. The appellee failed to
establish this. Indeed, no authority or power of the acting mayor to issue such an order
was given in evidence. Neither has it been shown that the cargo of scrap iron belonged to
the Municipality of Mariveles. The fact remains that the order given by the acting mayor
to dump the scrap iron into the sea was part of the pressure applied by Mayor Jose
Advincula to shakedown the appellant for P5,000.00. The order of the acting mayor did
not constitute valid authority for appellee Mauro Ganzon and his representatives to carry
out. The petitioner was not duty bound to obey the illegal order to dump into the sea the
scrap iron.

ANICETO G. SALUDO, JR., MARIA SALVACION SALUDO, LEOPOLDO G. SALUDO and SATURNINO
G. SALUDO, petitioners, vs. HON. COURT OF APPEALS, TRANS WORLD AIRLINES, INC., and
PHILIPPINE AIRLINES, INC., respondents.

G.R. No. 95536, March 23, 1992, Second Division, REGALADO, J.

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.

Facts:

Petitioners herein together with Pomierski and Son Funeral Home of Chicago brought the
remains of petitioners’ mother to Continental Mortuary Air Services (CMAS) which booked the
shipment of the remains from Chicago to San Francisco by Trans World Airways (TWA) and from
San Francisco to Manila with Philippine Airlines (PAL).

The remains were taken to the Chicago Airport, but it turned out that there were two (2)
bodies in the said airport. Somehow the two (2) bodies were switched, and the remains of
petitioners’ mother was shipped to Mexico instead.

The shipment was immediately loaded on another PAL flight and it arrived the day after the
expected arrival. Petitioners filed a claim for damages in court. Petitioners consider TWA's
statement that "it had to rely on the information furnished by the shipper" a lame excuse and that
its failure to prove that its personnel verified and identified the contents of the casket before
loading the same constituted negligence on the part of TWA.

The lower court absolved both airlines and upon appeal it was affirmed by the court.
Issue:
Whether or not private respondents is liable for damages for the switching of the two
caskets.

Ruling:

No. The Supreme Court concluded that the switching occurred or, more accurately, was
discovered on October 27, 1976; and based on the above findings of the Court of appeals, it
happened while the cargo was still with CMAS, well before the same was place in the custody of
private respondents. Verily, no amount of inspection by respondent airline companies could have
guarded against the switching that had already taken place. Or, granting that they could have
opened the casket to inspect its contents, private respondents had no means of ascertaining
whether the body therein contained was indeed that of Crispina Saludo except, possibly, if the body
was that of a male person and such fact was visually apparent upon opening the casket. However, to
repeat, private respondents had no authority to unseal and open the same nor did they have any
reason or justification to resort thereto.

It is the right of the carrier to require good faith on the part of those persons who deliver
goods to be carried, or 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 a
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.

It can safely be said then that 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.

In the case at bar, private respondents had no reason whatsoever to doubt the truth of the
shipper's representations. The airway bill expressly providing that "carrier certifies goods received
below were received for carriage," and that the cargo contained "casketed human remains of
Crispina Saludo," was issued on the basis of such representations. The reliance thereon by private
respondents was reasonable and, for so doing, they cannot be said to have acted negligently.
Likewise, no evidence was adduced to suggest even an iota of suspicion that the cargo presented for
transportation was anything other than what it was declared to be, as would require more than
routine inspection or call for the carrier to insist that the same be opened for scrutiny of its
contents per declaration.

Nonetheless, the facts show that petitioners' 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 of invaded.
MACAM vs. COURT OF APPEALS
Facts: Benito Macam, doing business under name Ben-Mac
Enterprises, shipped on board vessel Nen-Jiang, owned and operated by
respondent China Ocean Shipping Co. through local agent Wallem
Philippines Shipping Inc., 3,500 boxes of watermelon covered by Bill of
Lading No. HKG 99012, and 1,611 boxes of fresh mangoes covered
byBill of Lading No. HKG 99013. The shipment was bound for Hongkong
with PAKISTAN BANK as consignee and Great Prospect Company of
Rowloon (GPC) as notify party.

Upon arrival in Hongkong, shipment was delivered by respondent

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
original bill of lading, refused to pay petitioner thru SOLIDBANK. Since
SOLIDBANK already pre-paid the value of shipment, it demanded
payment from respondent WALLEM but was refused. MACAM
constrained to return the amount paid by SOLIDBANK and demanded
payment from WALLEM but to no avail.

WALLEM submitted in evidence a telex dated 5 April 1989 as basis for

delivering the cargoes to GPC without the bills of lading and bank
guarantee. The telex 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, however, argued that,
assuming there was such an instruction, the consignee referred to was
PAKISTAN BANK and not GPC.

The RTC ruled for MACAM and ordered value of shipment. CA reversed
RTC’s decision.

Issue: Are the respondents liable to the petitioner for releasing the
goods to GPC without the bills of lading or bank guarantee?

Held: It is a standard maritime practice when immediate deliveryis

of the essence, for 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 bill of lading as that usually takes time. Thus,
taking into account that subject shipment consisted of perishable goods
and SOLIDBANK pre-paid the full amount of value thereof, it is not hard
to believe the claim of respondent WALLEM that petitioner indeed
requested the release of the goods to GPC without presentation of
the bills of lading and bank guarantee.

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 the buyer/importer is essentially a
factor to reckon with.

We emphasize that the extraordinary responsibility of the

commoncarriers lasts until actual or constructive delivery of the
cargoes to the consignee or to the person who has a right to receive
them. 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. Petitioner also referred to GPC
as such in his demand letter to respondent WALLEM and in
his complaint before the trial court. This premise draws us to conclude
that the delivery of the cargoes to GPC as buyer/importer which,
conformably with Art. 1736 had, other than the consignee, the right to
receive them was prope

PHILIPPINE AIR LINES, petitioner,

vs.
HON. COURT OF APPEALS and ISIDRO CO, respondents.

GRIÑO-AQUINO, J.:

This is a petition for review of the decision dated July 19, 1989 of the Court of Appeals affirming the
decision of the Regional Trial Court of Pasay City which awarded P72,766.02 as damages and
attorney's fees to private respondent Isidro Co for the loss of his checked-in baggage as a
passenger of petitioner airline.

The findings of the trial court, which were adopted by the appellate court, are:

"At about 5:30 a.m. on April 17, 1985, plaintiff [Co], accompanied by his wife and
son, arrived at the Manila International Airport aboard defendant airline's PAL Flight
No. 107 from San Francisco, California, U.S.A. Soon after his embarking (sic),
plaintiff proceeded to the baggage retrieval area to claim his checks in his
possession. Plaintiff found eight of his luggage, but despite diligent search, he failed
to locate ninth luggage, with claim check number 729113 which is the one in
question in this case.

"Plaintiff then immediately notified defendant company through its employee, Willy
Guevarra, who was then in charge of the PAL claim counter at the airport. Willy
Guevarra, who testified during the trial court on April 11, 1986, filled up the printed
form known as a Property Irregularity Report (Exh. "A"), acknowledging one of the
plaintiff's luggages to be missing (Exh. "A-1"), and signed after asking plaintiff himself
to sign the same document (Exh. "A-2"). In accordance with this procedure in cases
of this nature, Willy Guevarra asked plaintiff to surrender to him the nine claim
checks corresponding to the nine luggages, i.e., including the one that was missing.

The incontestable evidence further shows that plaintiff lost luggage was a Samsonite
suitcase measuring about 62 inches in length, worth about US$200.00 and
containing various personal effects purchased by plaintiff and his wife during their
stay in the United States and similar other items sent by their friends abroad to be
given as presents to relatives in the Philippines. Plaintiff's invoices evidencing their
purchases show their missing personal effects to be worth US$1,243.01, in addition
to the presents entrusted to them by their friends which plaintiffs testified to be worth
about US$500.00 to US$600.00 (Exhs. "D", "D-1", to "D-17"; tsn, p. 4, July 11, 1985;
pp. 5-14, March 7, 1986).

Plaintiff on several occasions unrelentingly called at defendant's office in order to

pursue his complaint about his missing luggage but no avail. Thus, on April 15, 1985,
plaintiff through his lawyer wrote a demand letter to defendant company though
Rebecca V. Santos, its manager, Central Baggage Services (Exhs. "B" & "B-1"). On
April 17, 1985, Rebecca Santos replied to the demand letter (Exh. "B")
acknowledging "that to date we have been unable to locate your client's (plaintiff's)
baggage despite our careful search" and requesting plaintiff's counsel to "please
extend to him our sincere apologies for the inconvenience he was caused by this
unfortunate incident" (Exh. "C"). Despite the letter (Exh. "C"), however, defendants
never found plaintiff's missing luggage or paid its corresponding value.
Consequently, on May 3, 1985, plaintiff filed his present complaint against said
defendants. (pp. 38-40, Rollo.)

Co sued the airline for damages. The Regional Trial Court of Pasay City found the defendant airline
(now petitioner) liable, and rendered judgment on June 3, 1986, the dispositive portion of which
reads:
 WHEREFORE, judgment is hereby rendered sentencing defendant Philippine
Airlines, Inc. to pay plaintiff Isidro Co:

1) P42,766.02 by way of actual damages;

2) P20,000.00 by way of exemplary damages;

3) P10,000.00 as attorney's fees;

all in addition to the costs of the suit.

"Defendants' counterclaim is hereby dismissed for lack of merit."

(p. 40, Rollo.)

On appeal, the Court of Appeals affirmed in toto the trial court's award.

In his petition for review of the Court of Appeal's decision, petitioner alleges that the appellate court
erred:

1. in affirming the conclusion of the trial court that the petitioner's retrieval baggage
report was a fabrication;

2. in not applying the limit of liability under the Warsaw Convention which limits the
liability of an air carrier of loss, delay or damage to checked-in baggage to US$20.00
based on weight; and

3. in awarding private respondent Isidro Co actual and exemplary damages,

attorney's fees, and costs.

The first and third assignments of error raise purely factual issues which are not reviewable by this
Court (Sec. 2, Rule 45, Rules of Court). The Court reviews only questions of law which must be
distinctly set forth in the petition. (Hodges vs. People, 68 Phil. 178.) The probative value of
petitioner's retrieval report was passed upon by the Regional Trial Court of Pasay City, whose
finding was affirmed by the Court of Appeals as follows:

In this respect, it is further argued that appellee should produce his claim tag if he
had not surrendered it because there was no baggage received. It appeared,
however, that appellee surrendered all the nine claim checks corresponding to the
nine luggages, including the one that was missing, to the PAL officer after
accomplishing the Property, Irregularity Report. Therefore, it could not be possible for
appellee to produce the same in court. It is now for appellant airlines to produce the
veracity of their Baggage Retrieval Report by corroborating evidence other than
testimonies of their employees. Such document is within the control of appellant and
necessarily requires other corroborative evidence. Since there is no compelling
reason to reverse the factual findings of the lower court, this Court resolves not to
disturb the same. (p. 41, Rollo.)

Whether or not the lost luggage was ever retrieved by the passenger, and whether or not the actual
and exemplary damages awarded by the court to him are reasonable, are factual issues which we
may not pass upon in the absence of special circumstances requiring a review of the evidence.

In Alitalia vs. IAC (192 SCRA 9, 18, citing Pan American World Airways, Inc. vs. IAC 164 SCRA
268), the Warsaw Convention limiting the carrier's liability was applied because of a simple loss of
baggage without any improper conduct on the part of the officials or employees of the airline, or
other special injury sustained by the passengers. The petitioner therein did not declare a higher
value for his luggage, much less did he pay an additional transportation charge.

Petitioner contends that under the Warsaw Convention, its liability, if any, cannot exceed US $20.00
based on weight as private respondent Co did not declare the contents of his baggage nor pay
traditional charges before the flight (p. 3, tsn, July 18, 1985).

We find no merit in that contention. In Samar Mining Company, Inc. vs. Nordeutscher Lloyd (132
SCRA 529), this Court ruled:

The liability of the common carrier for the loss, destruction or deterioration of goods
transported from a foreign country to the Philippines is governed primarily by the
New Civil Code. In all matters not regulated by said Code, the rights and obligations
 of common carriers shall be governed by the Code of Commerce and by Special
Laws.

The provisions of the New Civil Code on common carriers are Articles 1733, 1735 and 1753 which
provide:

Art. 1733. Common carriers, from the nature of their business and for reasons of
public policy, are bound to observe extraordinary diligence in the vigilance over the
goods and for the safety of the passengers transported by them, according to all the
circumstances of each case.

Art. 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4 and 5 of the
preceding article if the goods are lost, destroyed or deteriorated, common carriers
are presumed to have been at fault or to have acted negligently, unless they prove
that they observed extraordinary diligence as required in article 1733.

Art. 1753. The law of the country to which the goods are to be transported shall
govern the liability of the common carrier for their loss, destruction or deterioration.

Since the passenger's destination in this case was the Philippines, Philippine law governs the liability
of the carrier for the loss of the passenger's luggage.

In this case, the petitioner failed to overcome, not only the presumption, but more importantly, the
private respondent's evidence, proving that the carrier's negligence was the proximate cause of the
loss of his baggage. Furthermore, petitioner acted in bad faith in faking a retrieval receipt to bail itself
out of having to pay Co's claim.

The Court of Appeals therefore did not err in disregarding the limits of liability under the Warsaw
Convention.

The award of exemplary damages and attorney's fees to the private respondent was justified. In the
cases of Imperial Insurance, Inc. vs. Simon, 122 Phil. 189 and Bert Osmeña and Associates vs.
CA, 120 SCRA 396, the appellant was awarded attorney's fees because of appellee's failure to
satisfy the former's just and valid demandable claim which forced the appellant to litigate. Likewise,
in the case of Phil. Surety Ins. Co., Inc. vs. Royal Oil Products, 102 Phil. 326, this Court justified the
grant of exemplary damages and attorney's fees to the petitioner's failure, even refusal, to pay the
private respondent's valid claim.

WHEREFORE, the petition for review is DENIED for lack of merit. Costs against the petitioner.

SO ORDERED.

Cathay Pacific Airways vs. CA

G.R. No. 60501. March 5, 1993

Facts:

Respondent Tomas Alcantara was a first class passenger of petitioner Cathay Pacific
Airways from Manila to Hongkong and onward from Hongkong to Jakarta. The
purpose of his trip was to attend the following day, a conference with the Director
General of Trade of Indonesia. He checked in his luggage which contained not
only his clothing and articles for personal use but also papers and documents
he needed for the conference.

Upon his arrival in Jakarta, respondent discovered that his luggage was
missing. Private respondent was told that his luggage was left behind in Hongkong.

For this, respondent Alcantara was offered $20.00 as “inconvenience money" to

buy his immediate personal needs until the luggage could be delivered to
him. The respondent, as a result of the incident had to seek postponement of
his pre-arranged conference.
Issue:
4. WoN there was breach of contract
5. WoN Cathay Pacific is liable for damages
6. WoN the Warsaw Convention is applicable to this case

Held:
4. Petitioner breached its contract of carriage with private respondent when
it failed to deliver his luggage at the designated place and time, it being
the obligation of a common carrier to carry its passengers and their
luggage safely to their destination, which includes the duty not to delay
their transportation, and the evidence shows that petitioner acted
fraudulently or in bad faith.
5. Moral damages predicated upon a breach of contract of carriage may only
be recoverable in instances where the mishap results in death of a
passenger, or where the carrier is guilty of fraud or bad faith. But in the
case at bar, the inconvenience money offered to Alcantara was insulting
considering that he paid for a first class accommodation. Petitioner or its
agents should have been more courteous and accommodating. The
conduct of petitioner's representative towards respondent justifies the
grant of moral and exemplary damages.

6. Although the Warsaw Convention has the force and effect of law in this
country, said convention does not operate as an exclusive enumeration of
the instances for declaring a carrier liable for breach of contract of
carriage or as an absolute limit of the extent of that liability. It must not
be construed to preclude the operation of the Civil Code and other
pertinent laws. It does not regulate, much less exempt, the carrier from
liability for damages for violating the rights of its passengers under the
contract of carriage, especially if wilful misconduct on the part of the
carrier's employees is found or established.

Trans-Asia Shipping Lines, Inc. VS Court of Appeals

GR 118126 4 March 1996

FACTS:

Atty Renato Arroyo purchased a ticket from Trans-Asia Shipping lines, Inc. for the voyage of M/V Asia
Thailand vessel to Cagayan de Oro from Cebu Sity. Upon boarding he noticed that engines of the vessel
were being repaired. Regardless, he boarded the same.

The vessel departed on time with only 1 engine running. It stopped near Kawit Island and after half an
hour of stillness, the passengers, who already were suffering from mental distress, demanded that they
be brought back to their port of origin.

At Cebu City, passengers who wished to disembark were allowed and given 10 minutes. Atty. Arroyo as
one of the passengers. After which, the vessel continued its voyage.

On this account, Passenger Arroyo filed before the trial court a complaint for damages against Trans-Asia
Shipping Inc. for failure of transporting the former to his place of destination.

ISSUE:

WON a vessel being unworthy of the sea is tantamount to a breach of contract?

HELD:

Under Article 1733 of the Civil Code, the petitioner was bound to observe extraordinary diligence in
ensuring the safety of the private respondent. That meant that the petitioner was, pursuant to Article 1755
of the said Code, bound to carry the private respondent safely as far as human care and foresight could
provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances. In
this case, we are in full accord with the Court of Appeals that the petitioner failed to discharge this
obligation.

Before commencing the contracted voyage, the petitioner undertook some repairs on the cylinder head of
one of the vessel's engines. But even before it could finish these repairs, it allowed the vessel to leave the
port of origin on only one functioning engine, instead of two. Moreover, even the lone functioning engine
was not in perfect condition as sometime after it had run its course, it conked out. This caused the vessel
to stop and remain a drift at sea, thus in order to prevent the ship from capsizing, it had to drop anchor.
Plainly, the vessel was unseaworthy even before the voyage began. For a vessel to be seaworthy, it must
be adequately equipped for the voyage and manned with a sufficient number of competent officers and
crew. 21 The failure of a common carrier to maintain in seaworthy condition its vessel involved in a
contract of carriage is a clear breach of its duty prescribed in Article 1755 of the Civil Code.

Sweet Lines, Inc. v. Teves

G.R. No. L-37750, 19 May 1978, 83 SCRA 361

FACTS:

Atty. Leovigildo Tandog and Rogelio Tiro bought tickets for Tagbiliran City via the port of Cebu.
Since many passengers were bound for Surigao, “M/S Sweet Hope” would not be proceeding to
Bohol. They went to the proper branch office and were relocated to “M/S Sweet Town” where they
were forced to agree “to hide at the cargo section to avoid inspection of the officers of the Philippines
Coastguard.” They were exposed to the scorching heat of the sun and the dust coming from the
ship’s cargo of corn grits and their tickets were not honored so they had to purchase a new one.
Because of the terrible experience they had, they sued Sweet Lines for damages and for breach of
contract of carriage before the Court of First Instance of Misamis Oriental who dismissed the
complaint for improper venue. A motion was premised on the condition printed at the back of the
tickets and was later dismissed. Hence this instant petition for prohibition for preliminary injunction.

ISSUE:

Whether or not, 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 contract of
carriage should be filed only in a particular province or city.

HELD:

No. Actions arising out of the contract of carriage should be filed not only in a particular province or
city. Contract of adhesions are not the kind of 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. It is only imposed upon them when they paid for the fare for the freight they wanted to
ship.
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:
1. Circumstances obligation in the inter-island ship will prejudice rights and interests of innumerable
passengers in different parts of the country who, under Condition No. 14, will have to file suits
against petitioner only in the City of Cebu;
2. Subversive of public policy on transfers of venue of actions; and
3. Philosophy underlying the provisions of transfers of venue of actions is the convenience of the
plaintiffs as well as his witnesses and to promote the ends of justice.
Hence, petition for prohibition is hereby dismissed. The restraining order is LIFTED and SET ASIDE.

***CONTRACT OF ADHESION ONE PARTY LANG NAGDECIDE

CENTRAL SHIPPING COMPANY vs INSURANCE COMPANY OF NORTH AMERICA Case
Digest
CENTRAL SHIPPING COMPANY, INC., petitioner, vs. INSURANCE COMPANY OF NORTH
AMERICA, respondent.
G.R. No. 150751 September 20, 2004
121 SCRA 769

Facts: On July 25, 1990 at Puerto Princesa, Palawan, the petitioner received on board its vessel,
the M/V Central Bohol, 376 pieces of Round Logs and undertook to transport said shipment to
Manila for delivery to Alaska Lumber Co., Inc. The cargo is insured for P3, 000, 000.00 against total
lost under respondents MarineCargo Policy.

After loading the logs, the vessel starts its voyage. After few hours of the trip, the ship tilts 10
degrees to its side, due to the shifting of the logs in the hold. It continues to tilt causing the captain
and the crew to abandon ship. The ship sank.

Respondent alleged that the loss is due to the negligence and fault of the captain. While petitioner
contends that the happening is due to monsoons which is unforeseen or casa fortuito.

Issue: Whether or not petitioner is liable for the loss of cargo?

Held: From the nature of their business and for reasons of public policy, common carriers are bound
to observe extraordinary diligence over the goods they transport, according to all the circumstances
of each case. In the event of loss, destruction or deterioration of the insured goods, common carriers
are responsible; that is, unless they can prove that such loss, destruction or deterioration was
brought about -- among others -- by "flood, storm, earthquake, lightning or other natural disaster or
calamity." In all other cases not specified under Article 1734 of the Civil Code, common carriers are
presumed to have been at fault or to have acted negligently, unless they prove that they observed
extraordinary diligence.

The contention of the petitioner that the loss is due to casa fortuito exempting them from liability is
untenable. Petitioner failed to show that such natural disaster or calamity was the proximate and
only cause of the loss. Human agency must be entirely excluded from the cause of injury or loss. In
other words, the damaging effects blamed on the event or phenomenon must not have been caused,
contributed to, or worsened by the presence of human participation. The defense of fortuitous event
or natural disaster cannot be successfully made when the injury could have been avoided by human
precaution.

The monsoon is not the proximate cause of the sinking but is due to the improper stowage of logs.
The logs were not secured by cable wires, causing the logs to shift and later on the sinking the ship.
This shows that they did not exercise extraordinary diligence, making them liable for such loss.

Everett Steamship Corporation vs. Court of Appeals

Private respondent imported 3 crates of bus spare parts marked as MARCO C/No.
12,MARCO C/No. 13 and MARCO C/No. 14, from its supplier, Maruman Trading
Company,Ltd. (Maruman Trading), a foreign corporation based in Inazawa, Aichi,
Japan. The crates were shipped from Nagoya, Japan to Manila on board
“ADELFAEVERETTE,” a vessel owned by petitioner’s principal, Everett Orient Lines.
Upon arrival at the port of Manila, it was discovered that the crate marked MARCO
C/No. 14 was missing. Privaterespondent claim upon petitioner for the value of the lost
cargo amounting to One Million Five Hundred Fifty Two Thousand Five Hundred (Y1,
552,500.00) Yen, theamount shown in an Invoice No. MTM-941, dated November 14,
1991. However,petitioner offered to pay only One Hundred Thousand (Y100,000.00)
Yen, the maximum amount stipulated under Clause 18 of the covering bill of lading
which limits the liability of petitioner. Private respondent rejected the offer and thereafter
instituted a suit for collection. The trial court rendered a decision in favour of the private
respondents and this was affirmed by the Court of Appeals. Thus, this instant petition.

ISSUE

Is private respondent, as consignee, who is not a signatory to the bill of lading bound by
the stipulations thereof?
HELD

Yes. The consignee who is not a signatory to the contract of carriage between the
shipper and the carrier, the consignee can still be bound by the contract.

The next issue to be resolved is whether or not private respondent, as consignee, who
is not a signatory to the bill of lading is bound by the stipulations thereof. Again, in Sea-
land Service, Inc. vs. Intermediate Appellate Court (Supra), we held that even in the
consignee between the shipper and the carrier, the consignee can still be bound by the
contract. Speaking through Mr. Chief Justice Narvasa, we ruled: “To begin with, there is
no question of the right, in the 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 the 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.

When private respondent formally claimed reimbursement for the missing goods from
petitioner and subsequently filed a case against the latter based on the very same bill of
lading, it (private respondent) accepted the provisions of the contract and thereby made
itself a party thereto, or at least has come to court to enforce it. Thus private respondent
cannot now reject or disregard the carrier’s limited liability stipulation in the bill of lading.
In other words, private respondents is bound by the whole stipulations in the bill of
lading and must respect the same.

Southern Lines v. CA (G.R. No. L-16629)

The City of Iloilo requisitioned for rice from the National Rice and Corn Corporation (NARIC) in
Manila. NARIC, pursuant to the order, shipped 1,726 sacks of rice consigned to the City of Iloilo
on board the SS “General Wright” belonging to the Southern Lines, Inc.
The City of Iloilo received the shipment and paid the total charged amount. However, it was
discovered in the bill of lading that there was shortage equivalent to 41 sacks of rice. The City of
Iloilo filed a complaint against NARIC and the Southern Lines, Inc. for the recovery of the
amount representing the value of the shortage of the shipment of rice. The lower court
absolved NARIC, but held Southern Lines, Inc. liable to pay the shortage. CA affirmed the trial
court’s decision, hence, this petition.
Issues:
(1) W/N Southern Lines is liable for the loss or shortage of the rice shipped;
(2) W/N the action was filed on time.

Ruling:

(1) YES. Under the provisions of Article 361, the defendant-carrier in order to free itself from
liability was only obliged to prove that the damages suffered by the goods were “by virtue of
the nature or defect of the articles.” Under the provisions of Article 362, the plaintiff, in order
to hold the defendant liable, was obliged to prove that the damages to the goods by virtue of
their nature, occurred on account of its negligence or because the defendant did not take the
precaution adopted by careful persons.
The contention is untenable, for, if the fact of improper packing is known to the carrier or his
servants, or apparent upon ordinary observation, but it accepts the goods notwithstanding such
condition, it is not relieved of liability for loss or injury resulting therefrom. Petitioner itself
frankly admitted that the strings that tied the bags of rice were broken; some bags were with
holes and plenty of rice were spilled inside the hull of the boat, and that the personnel of the
boat collected no less than 26 sacks of rice which they had distributed among themselves. This
finding, which is binding upon this Court, shows that the shortage resulted from the negligence
of petitioner.

(2) YES. Respondent filed the present action, within a reasonable time after the short delivery in
the shipment of the rice was made. It should be recalled that the present action is one for the
refund of the amount paid in excess, and not for damages or the recovery of the shortage; for
admittedly the respondent had paid the entire value of the 1726 sacks of rice, subject to
subsequent adjustment, as to shortages or losses. The bill of lading does not at all limit the time
for filing an action for the refund of money paid in excess.

MITSUI VS. CA, 287 SCRA 366

MENDOZA, J.:

Facts:

Petitioner Mitsui O.S.K. Lines Ltd. is a foreign corporation represented in the

Philippines by its agent, Magsaysay Agencies. It entered into a contract of carriage
through Meister Transport, Inc., an international freight forwarder, with private
respondent Lavine Loungewear Manufacturing Corporation to transport goods of the
latter from Manila to Le Havre, France. Petitioner undertook to deliver the goods to
France 28 days from initial loading. On July 24, 1991, petitioner's vessel loaded
private respondent's container van for carriage at the said port of origin.

However, in Kaoshiung, Taiwan the goods were not transshipped immediately, with
the result that the shipment arrived in Le Havre only on November 14, 1991. The
consignee allegedly paid only half the value of the said goods on the ground that
they did not arrive in France until the "off season" in that country. The remaining
half was allegedly charged to the account of private respondent which in turn
demanded payment from petitioner through its agent.

Issue:

Whether or not private respondent's action is for "loss or damage" to goods

shipped, within the meaning of the Carriage of Goods by Sea Act (COGSA).

Ruling:

No. The suit is not for "loss or damage" to goods contemplated in §3(6), the
question of prescription of action is governed not by the COGSA but by Art. 1144 of
the Civil Code which provides for a prescriptive period of ten years. As defined in
the Civil Code and as applied to Section 3(6), paragraph 4 of the Carriage of Goods
by Sea Act, "loss" contemplates merely a situation where no delivery at all was
made by the shipper of the goods because the same had perished, gone out of
commerce, or disappeared in such a way that their existence is unknown or they
cannot be recovered.

There would be some merit in appellant's insistence that the damages suffered by him as a
result of the delay in the shipment of his cargo are not covered by the prescriptive provision
of the Carriage of Goods by Sea Act above referred to, if such damages were due, not to the
deterioration and decay of the goods while in transit, but to other causes independent of the
condition of the cargo upon arrival, like a drop in their market value.

Sulpicio Lines, Inc. vs. First Lepanto-Taisho Insurance

GR No. 140349, June 29, 2005

FACTS:

Taiyo Yuden Philippines, Inc. (owner of the goods) and Delbros, Inc. (shipper) entered into a
contract, evidenced by Bill of Lading issued by the latter in favor of the owner of the goods, for Delbros,
Inc. to transport a shipment of goods consisting of 3 wooden crates containing 136 cartons of inductors
and LC compound on board the V Singapore V20 from Cebu City to Singapore in favor of the consignee,
Taiyo Yuden Singapore Pte, Ltd. For the carriage of said shipment from Cebu City to Manila, Delbros,
Inc. engaged the services of the vessel M/V Philippine Princess, owned and operated by petitioner
Sulpicio Lines, Inc. (carrier). During the unloading of the shipment, one crate containing 42 cartons
dropped from the cargo hatch to the pier apron. The owner of the goods examined the dropped cargo,
and upon an alleged finding that the contents of the crate were no longer usable for their intended
purpose, they were rejected as a total loss and returned to Cebu City. The owner of the goods filed a
claim with herein petitioner-carrier for the recovery of the value of the rejected cargo which was refused
by the latter. Thereafter, the owner of the goods sought payment from respondent First Lepanto-Taisho
Insurance Corporation (insurer) under a marine insurance policy issued to the former. Respondent-
insurer paid the claim less thirty-five percent (35%) salvage value or P194, 220.31. The payment of the
insurance claim of the owner of the goods by the respondent-insurer subrogated the latter to whatever
right or legal action the owner of the goods may have against Delbros, Inc. and petitioner-carrier, Sulpicio
Lines, Inc. Thus, respondent-insurer then filed claims for reimbursement from Delbros, Inc. and petitioner-
carrier Sulpicio Lines, Inc. which were subsequently denied. In 1992, respondent-insurer filed a suit for
damages with the trial court against Delbros, Inc. and herein petitioner-carrier. Delbros, Inc. filed on 15
April 1993 its Answer with Counterclaim and Cross-claim, alleging that assuming the contents of the crate
in question were trulyin bad order, fault is with herein petitioner-carrier which was responsible forthe
unloading of the crates. Petitioner-carrier filed its Answer to Delbros, Inc.’s cross-claim asserting that it
observed extraordinary diligence in the handling, storage and general care of the goods
ISSUE:

Whether or not petitioner is liable for the breach of contract of carriage (vigilance over goods)?

RULING:

YES. There was damage suffered by the goods which consisted in the destruction of one wooden
crate and the tearing of two (2) cardboard boxes therein which rendered them unfit to be sent to
Singapore. The falling of the crate was negligence on the part of Sulpicio Lines, Inc. for which it cannot
exculpate itself from liability because it failed to prove that it exercised extraordinary diligence.

Coastwise Lighterage Corporation v. CA

Facts:

Pag-asa Sales Inc. entered into a contract to transport molasses from the province of Negros to Manila
with Coastwise Lighterage Corporation (Coastwise for brevity), using the latter's dumb barges. The barges
were towed in tandem by the tugboat MT Marica, which is likewise owned by Coastwise. Upon reaching
Manila Bay, one of the barges, "Coastwise 9", struck an unknown sunken object. The forward buoyancy
compartment was damaged, and water gushed in through a hole "two inches wide and twenty-two inches
long". As a consequence, the molasses at the cargo tanks were contaminated. Pag-asa filed a claim against
Philippine General Insurance Company, the insurer of its cargo. Philgen paid P700,000 for the value of
the molasses lost.

Philgen then filed an action against Coastwise to recover the money it paid, claiming to be subrogated to
the claims which the consignee may have against the carrier. Both the trial court and the Court of Appeals
ruled against Coastwise.

Issues:

(1) Whether Coastwise was transformed into a private carrier by virtue of the contract it entered into with
Pag-asa, and whether it exercised the required degree of diligence

(2) Whether Philgen was subrogated into the rights of the consignee against the carrier

Held:

(1) Pag-asa Sales, Inc. only leased three of petitioner's vessels, in order to carry cargo from one point to
another, but the possession, command mid navigation of the vessels remained with petitioner Coastwise
Lighterage. Coastwise Lighterage, by the contract of affreightment, was not converted into a private
carrier, but remained a common carrier and was still liable as such. The law and jurisprudence on
common carriers both hold that the mere proof of delivery of goods in good order to a carrier and the
subsequent arrival of the same goods at the place of destination in bad order makes for a prima facie case
against the carrier. It follows then that the presumption of negligence that attaches to common carriers,
once the goods it is sports are lost, destroyed or deteriorated, applies to the petitioner. This presumption,
which is overcome only by proof of the exercise of extraordinary diligence, remained unrebutted in this
case. Jesus R. Constantino, the patron of the vessel "Coastwise 9" admitted that he was not licensed.
Coastwise Lighterage cannot safely claim to have exercised extraordinary diligence, by placing a person
whose navigational skills are questionable, at the helm of the vessel which eventually met the fateful
accident. It may also logically, follow that a person without license to navigate, lacks not just the skill to do
so, but also the utmost familiarity with the usual and safe routes taken by seasoned and legally authorized
ones. Had the patron been licensed he could be presumed to have both the skill and the knowledge that
would have prevented the vessel's hitting the sunken derelict ship that lay on their way to Pier 18. As a
common carrier, petitioner is liable for breach of the contract of carriage, having failed to overcome the
presumption of negligence with the loss and destruction of goods it transported, by proof of its exercise of
extraordinary diligence.

(2) Article 2207 of the Civil Code is founded on the well-settled principle of subrogation. If the insured
property is destroyed or damaged through the fault or negligence of a party other than the assured, then
the insurer, upon payment to the assured will be subrogated to the rights of the assured to recover from
the wrongdoer to the extent that the insurer has been obligated to pay. Payment by the insurer to the
assured operated as an equitable assignment to the former of all remedies which the latter may have
against the third party whose negligence or wrongful act caused the loss. The right of subrogation is not
dependent upon, nor does it grow out of, any private of contract or upon written assignment of, claim. It
accrues simply upon payment of the insurance claim by the insurer.

Philippine First Insurance v. Wallem First Shipping

FACTS: Anhui Chemicals Import & Export Corporation loaded on board M/S Offshore
Master a shipment consisting of 10,000 bags of sodium sulphate anhydrous 99 PCT Min.
(shipment) to be delivered at the port of Manila for L.G. Atkimson Import-Export, Inc.
(consignee). The shipper of the shipment is Shanghai Fareast Ship Business Company. Both
are foreign firms doing business in the Philippines, thru its local ship agent, respondent
Wallem Philippines Shipping, Inc. (Wallem). It was disclosed during the discharge of the
shipment from the carrier that 2,426 poly bags were in bad order and condition.

The consignee filed a formal claim with Wallem for the value of the damaged shipment. The
former filed a formal claim with petitioner for the damage and losses sustained by the
shipment. Consequently, petitioner paid the consignee the sum of P397, 879.69 and the
latter signed a subrogation receipt. In this regard, petitioner sent a demand letter to
Wallem for the recovery of the amount paid by petitioner to the consignee to which Wallem
did not respond.

Consequently, petitioner instituted an action before the RTC for damages against
respondents representing the actual damages suffered by petitioner plus legal interest
thereon.

ISSUE: Whether or not as a common carrier, the carrier’s duties extend to the obligation to
safely discharge the cargo from the vessel;

RULING: YES. Common carriers, from the nature of their business and for reasons of public
policy, are bound to observe extraordinary diligence in the vigilance over the goods
transported by them. Subject to certain exceptions enumerated under Article 1734 of the
Civil Code, common carriers are responsible for the loss, destruction, or deterioration of
the goods. The extraordinary responsibility of the common carrier 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.

The responsibility of the carrier shall commence from the time when the goods are loaded
on board the vessel and shall cease when they are discharged from the vessel.

The Carrier shall not be liable of loss of or damage to the goods before loading and after
discharging from the vessel, howsoever such loss or damage arises.

On the other hand, the functions of an arrastre operator involve the handling of cargo
deposited on the wharf or between the establishment of the consignee or shipper and the
ship's tackle. Being the custodian of the goods discharged from a vessel, an arrastre
operator's duty is to take good care of the goods and to turn them over to the party entitled
to their possession.

Handling cargo is mainly the arrastre operator's principal work so its drivers/operators or
employees should observe the standards and measures necessary to prevent losses and
damage to shipments under its custody

The records show that the damage to the bags happened before and after their discharge
and that it was caused by the stevedores of the arrastre operator who were then under the
supervision of Wallem.1awphi1.net

It is settled in maritime law jurisprudence that cargoes while being unloaded generally
remain under the custody of the carrier. In the instant case, the damage or losses were
incurred during the discharge of the shipment while under the supervision of the carrier.
Consequently, the carrier is liable for the damage or losses caused to the shipment.
Samar Mining Co., Inc. vs. Nordeutscher Lloyd
(132 SCRA 529)

Facts: Samar Mining imported 1 crate optima welded wire (amounting to around USD 424 or PhP
1,700) from Germany, which was shipped on a vessel owned by Nordeutscher Lloyd (M/S
Schwabenstein). The shipment was unloaded in Manila into a barge for transshipment to Davao and
temporarily stored in a bonded warehouse owned by AMCYL. The goods never reached Davao and
were never delivered to or received by the consignee, Samar Mining Co.

CFI ruled in favor of Samar Mining holding Nordeutscher Lloyd liable. However, defendants may
recoup whatever they may pay Samar Mining by enforcing the judgment against third party
defendant AMCYL.

Issue: Whether Nordeustscher Lloyd is liable for the loss of the goods as common carrier?

Held: No. At the time of the loss of the goods, the character of possession of Nordeutscher Lloyd
shifted from common carrier to agent of Samar Mining Co.

The Bill of Lading is serves both as a receipt of goods and is likewise the contract to transport and
deliver the same as stipulated. It is a contract and is therefore the law between the parties. The Bill
of Lading in question stipulated that Nordeutscher Lloyd only undertook to transport the goods in its
vessel only up to the port of discharge from ship, which is Manila. The Bill of Lading further
stipulated that the goods were to be transshipped by the carrier from Manila to the port of destination
– Davao. By unloading the shipment in Manila and delivering the goods to the warehouse of
AMCYL, the appellant was acting within the contractual stipulations contained in the Bill of Lading.

Article 1736 of the Civil Code relives the carrier of responsibility over the shipment as soon as the
carrier makes actual or constructive delivery of the goods to the consignee or to the person who has
a right to receive them.

Under the Civil Code provisions governing Agency, an agent can only be held liable in cases where
his acts are attended by fraud, negligence, deceit or if there is a conflict of interest between him and
the principal. Under the same law an agent is likewise liable if he appoints a substitute when he was
not given the power to appoint one or otherwise appoints one that is notoriously incompetent or
insolvent. These facts were not proven in the record.

Ganzon v. CA (G.R. No. L-48757)

Facts:

Private respondent Tumambing contracted the services of petitioner Ganzon to haul 305
tons of scrap iron from Bataan to the port of Manila on board the lighter LCT “Batman.”
Petitioner sent his lighter with its Captain Filomeno to dock at Mariveles, where
respondent Tumambing delivered the scrap irons for loading which also begun on the
same day. Mayor Advincula arrived at the port and demanded P 5,000 shakedown from
respondent. The two ended up in a heated argument where respondent had to be taken to
a hospital to be treated of a gunshot wound. After sometime, the loading of the scrap iron
was resumed. But now, the Acting Mayor together with 3 policemen ordered Captain
Filomeno to dump the scrap iron where the lighter was docked and the rest to be brought
to NASSCO compound. Later, the Acting Mayor issued a receipt stating that the
Municipality had taken custody of the scrap iron. Respondent instituted an action for
damages against petitioner. Respondent Court found in favor for Tumambing.

Issue:
Whether or not petitioner Ganzon, a common carrier, can be exempt from liability by
invoking order of competent authority.

Ruling: NO.

The petitioner has failed to show that the loss of the scraps was due to any of the
following causes enumerated in Article 1734 of the Civil Code.

Before the appellee Ganzon could be absolved from responsibility on the ground that he
was ordered by competent public authority to unload the scrap iron, it must be shown that
Acting Mayor Basilio Rub had the power to issue the disputed order, or that it was
lawful, or that it was issued under legal process of authority. The appellee failed to
establish this. Indeed, no authority or power of the acting mayor to issue such an order
was given in evidence. Neither has it been shown that the cargo of scrap iron belonged to
the Municipality of Mariveles. The fact remains that the order given by the acting mayor
to dump the scrap iron into the sea was part of the pressure applied by Mayor Jose
Advincula to shakedown the appellant for P5,000.00. The order of the acting mayor did
not constitute valid authority for appellee Mauro Ganzon and his representatives to carry
out. The petitioner was not duty bound to obey the illegal order to dump into the sea the
scrap iron.

ANICETO G. SALUDO, JR., MARIA SALVACION SALUDO, LEOPOLDO G. SALUDO and SATURNINO
G. SALUDO, petitioners, vs. HON. COURT OF APPEALS, TRANS WORLD AIRLINES, INC., and
PHILIPPINE AIRLINES, INC., respondents.

G.R. No. 95536, March 23, 1992, Second Division, REGALADO, J.

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.

Facts:

Petitioners herein together with Pomierski and Son Funeral Home of Chicago brought the
remains of petitioners’ mother to Continental Mortuary Air Services (CMAS) which booked the
shipment of the remains from Chicago to San Francisco by Trans World Airways (TWA) and from
San Francisco to Manila with Philippine Airlines (PAL).

The remains were taken to the Chicago Airport, but it turned out that there were two (2)
bodies in the said airport. Somehow the two (2) bodies were switched, and the remains of
petitioners’ mother was shipped to Mexico instead.

The shipment was immediately loaded on another PAL flight and it arrived the day after the
expected arrival. Petitioners filed a claim for damages in court. Petitioners consider TWA's
statement that "it had to rely on the information furnished by the shipper" a lame excuse and that
its failure to prove that its personnel verified and identified the contents of the casket before
loading the same constituted negligence on the part of TWA.

The lower court absolved both airlines and upon appeal it was affirmed by the court.
Issue:
Whether or not private respondents is liable for damages for the switching of the two
caskets.

Ruling:

No. The Supreme Court concluded that the switching occurred or, more accurately, was
discovered on October 27, 1976; and based on the above findings of the Court of appeals, it
happened while the cargo was still with CMAS, well before the same was place in the custody of
private respondents. Verily, no amount of inspection by respondent airline companies could have
guarded against the switching that had already taken place. Or, granting that they could have
opened the casket to inspect its contents, private respondents had no means of ascertaining
whether the body therein contained was indeed that of Crispina Saludo except, possibly, if the body
was that of a male person and such fact was visually apparent upon opening the casket. However, to
repeat, private respondents had no authority to unseal and open the same nor did they have any
reason or justification to resort thereto.

It is the right of the carrier to require good faith on the part of those persons who deliver
goods to be carried, or 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 a
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.

It can safely be said then that 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.

In the case at bar, private respondents had no reason whatsoever to doubt the truth of the
shipper's representations. The airway bill expressly providing that "carrier certifies goods received
below were received for carriage," and that the cargo contained "casketed human remains of
Crispina Saludo," was issued on the basis of such representations. The reliance thereon by private
respondents was reasonable and, for so doing, they cannot be said to have acted negligently.
Likewise, no evidence was adduced to suggest even an iota of suspicion that the cargo presented for
transportation was anything other than what it was declared to be, as would require more than
routine inspection or call for the carrier to insist that the same be opened for scrutiny of its
contents per declaration.

Nonetheless, the facts show that petitioners' 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 of invaded.
MACAM vs. COURT OF APPEALS
Facts: Benito Macam, doing business under name Ben-Mac
Enterprises, shipped on board vessel Nen-Jiang, owned and operated by
respondent China Ocean Shipping Co. through local agent Wallem
Philippines Shipping Inc., 3,500 boxes of watermelon covered by Bill of
Lading No. HKG 99012, and 1,611 boxes of fresh mangoes covered
byBill of Lading No. HKG 99013. The shipment was bound for Hongkong
with PAKISTAN BANK as consignee and Great Prospect Company of
Rowloon (GPC) as notify party.

Upon arrival in Hongkong, shipment was delivered by respondent

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
original bill of lading, refused to pay petitioner thru SOLIDBANK. Since
SOLIDBANK already pre-paid the value of shipment, it demanded
payment from respondent WALLEM but was refused. MACAM
constrained to return the amount paid by SOLIDBANK and demanded
payment from WALLEM but to no avail.

WALLEM submitted in evidence a telex dated 5 April 1989 as basis for

delivering the cargoes to GPC without the bills of lading and bank
guarantee. The telex 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, however, argued that,
assuming there was such an instruction, the consignee referred to was
PAKISTAN BANK and not GPC.

The RTC ruled for MACAM and ordered value of shipment. CA reversed
RTC’s decision.

Issue: Are the respondents liable to the petitioner for releasing the
goods to GPC without the bills of lading or bank guarantee?

Held: It is a standard maritime practice when immediate deliveryis

of the essence, for 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 bill of lading as that usually takes time. Thus,
taking into account that subject shipment consisted of perishable goods
and SOLIDBANK pre-paid the full amount of value thereof, it is not hard
to believe the claim of respondent WALLEM that petitioner indeed
requested the release of the goods to GPC without presentation of
the bills of lading and bank guarantee.

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 the buyer/importer is essentially a
factor to reckon with.

We emphasize that the extraordinary responsibility of the

commoncarriers lasts until actual or constructive delivery of the
cargoes to the consignee or to the person who has a right to receive
them. 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. Petitioner also referred to GPC
as such in his demand letter to respondent WALLEM and in
his complaint before the trial court. This premise draws us to conclude
that the delivery of the cargoes to GPC as buyer/importer which,
conformably with Art. 1736 had, other than the consignee, the right to
receive them was prope

PHILIPPINE AIR LINES, petitioner,

vs.
HON. COURT OF APPEALS and ISIDRO CO, respondents.

GRIÑO-AQUINO, J.:

This is a petition for review of the decision dated July 19, 1989 of the Court of Appeals affirming the
decision of the Regional Trial Court of Pasay City which awarded P72,766.02 as damages and
attorney's fees to private respondent Isidro Co for the loss of his checked-in baggage as a
passenger of petitioner airline.

The findings of the trial court, which were adopted by the appellate court, are:

"At about 5:30 a.m. on April 17, 1985, plaintiff [Co], accompanied by his wife and
son, arrived at the Manila International Airport aboard defendant airline's PAL Flight
No. 107 from San Francisco, California, U.S.A. Soon after his embarking (sic),
plaintiff proceeded to the baggage retrieval area to claim his checks in his
possession. Plaintiff found eight of his luggage, but despite diligent search, he failed
to locate ninth luggage, with claim check number 729113 which is the one in
question in this case.

"Plaintiff then immediately notified defendant company through its employee, Willy
Guevarra, who was then in charge of the PAL claim counter at the airport. Willy
Guevarra, who testified during the trial court on April 11, 1986, filled up the printed
form known as a Property Irregularity Report (Exh. "A"), acknowledging one of the
plaintiff's luggages to be missing (Exh. "A-1"), and signed after asking plaintiff himself
to sign the same document (Exh. "A-2"). In accordance with this procedure in cases
of this nature, Willy Guevarra asked plaintiff to surrender to him the nine claim
checks corresponding to the nine luggages, i.e., including the one that was missing.

The incontestable evidence further shows that plaintiff lost luggage was a Samsonite
suitcase measuring about 62 inches in length, worth about US$200.00 and
containing various personal effects purchased by plaintiff and his wife during their
stay in the United States and similar other items sent by their friends abroad to be
given as presents to relatives in the Philippines. Plaintiff's invoices evidencing their
purchases show their missing personal effects to be worth US$1,243.01, in addition
to the presents entrusted to them by their friends which plaintiffs testified to be worth
about US$500.00 to US$600.00 (Exhs. "D", "D-1", to "D-17"; tsn, p. 4, July 11, 1985;
pp. 5-14, March 7, 1986).

Plaintiff on several occasions unrelentingly called at defendant's office in order to

pursue his complaint about his missing luggage but no avail. Thus, on April 15, 1985,
plaintiff through his lawyer wrote a demand letter to defendant company though
Rebecca V. Santos, its manager, Central Baggage Services (Exhs. "B" & "B-1"). On
April 17, 1985, Rebecca Santos replied to the demand letter (Exh. "B")
acknowledging "that to date we have been unable to locate your client's (plaintiff's)
baggage despite our careful search" and requesting plaintiff's counsel to "please
extend to him our sincere apologies for the inconvenience he was caused by this
unfortunate incident" (Exh. "C"). Despite the letter (Exh. "C"), however, defendants
never found plaintiff's missing luggage or paid its corresponding value.
Consequently, on May 3, 1985, plaintiff filed his present complaint against said
defendants. (pp. 38-40, Rollo.)

Co sued the airline for damages. The Regional Trial Court of Pasay City found the defendant airline
(now petitioner) liable, and rendered judgment on June 3, 1986, the dispositive portion of which
reads:
 WHEREFORE, judgment is hereby rendered sentencing defendant Philippine
Airlines, Inc. to pay plaintiff Isidro Co:

1) P42,766.02 by way of actual damages;

2) P20,000.00 by way of exemplary damages;

3) P10,000.00 as attorney's fees;

all in addition to the costs of the suit.

"Defendants' counterclaim is hereby dismissed for lack of merit."

(p. 40, Rollo.)

On appeal, the Court of Appeals affirmed in toto the trial court's award.

In his petition for review of the Court of Appeal's decision, petitioner alleges that the appellate court
erred:

1. in affirming the conclusion of the trial court that the petitioner's retrieval baggage
report was a fabrication;

2. in not applying the limit of liability under the Warsaw Convention which limits the
liability of an air carrier of loss, delay or damage to checked-in baggage to US$20.00
based on weight; and

3. in awarding private respondent Isidro Co actual and exemplary damages,

attorney's fees, and costs.

The first and third assignments of error raise purely factual issues which are not reviewable by this
Court (Sec. 2, Rule 45, Rules of Court). The Court reviews only questions of law which must be
distinctly set forth in the petition. (Hodges vs. People, 68 Phil. 178.) The probative value of
petitioner's retrieval report was passed upon by the Regional Trial Court of Pasay City, whose
finding was affirmed by the Court of Appeals as follows:

In this respect, it is further argued that appellee should produce his claim tag if he
had not surrendered it because there was no baggage received. It appeared,
however, that appellee surrendered all the nine claim checks corresponding to the
nine luggages, including the one that was missing, to the PAL officer after
accomplishing the Property, Irregularity Report. Therefore, it could not be possible for
appellee to produce the same in court. It is now for appellant airlines to produce the
veracity of their Baggage Retrieval Report by corroborating evidence other than
testimonies of their employees. Such document is within the control of appellant and
necessarily requires other corroborative evidence. Since there is no compelling
reason to reverse the factual findings of the lower court, this Court resolves not to
disturb the same. (p. 41, Rollo.)

Whether or not the lost luggage was ever retrieved by the passenger, and whether or not the actual
and exemplary damages awarded by the court to him are reasonable, are factual issues which we
may not pass upon in the absence of special circumstances requiring a review of the evidence.

In Alitalia vs. IAC (192 SCRA 9, 18, citing Pan American World Airways, Inc. vs. IAC 164 SCRA
268), the Warsaw Convention limiting the carrier's liability was applied because of a simple loss of
baggage without any improper conduct on the part of the officials or employees of the airline, or
other special injury sustained by the passengers. The petitioner therein did not declare a higher
value for his luggage, much less did he pay an additional transportation charge.

Petitioner contends that under the Warsaw Convention, its liability, if any, cannot exceed US $20.00
based on weight as private respondent Co did not declare the contents of his baggage nor pay
traditional charges before the flight (p. 3, tsn, July 18, 1985).

We find no merit in that contention. In Samar Mining Company, Inc. vs. Nordeutscher Lloyd (132
SCRA 529), this Court ruled:

The liability of the common carrier for the loss, destruction or deterioration of goods
transported from a foreign country to the Philippines is governed primarily by the
New Civil Code. In all matters not regulated by said Code, the rights and obligations
 of common carriers shall be governed by the Code of Commerce and by Special
Laws.

The provisions of the New Civil Code on common carriers are Articles 1733, 1735 and 1753 which
provide:

Art. 1733. Common carriers, from the nature of their business and for reasons of
public policy, are bound to observe extraordinary diligence in the vigilance over the
goods and for the safety of the passengers transported by them, according to all the
circumstances of each case.

Art. 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4 and 5 of the
preceding article if the goods are lost, destroyed or deteriorated, common carriers
are presumed to have been at fault or to have acted negligently, unless they prove
that they observed extraordinary diligence as required in article 1733.

Art. 1753. The law of the country to which the goods are to be transported shall
govern the liability of the common carrier for their loss, destruction or deterioration.

Since the passenger's destination in this case was the Philippines, Philippine law governs the liability
of the carrier for the loss of the passenger's luggage.

In this case, the petitioner failed to overcome, not only the presumption, but more importantly, the
private respondent's evidence, proving that the carrier's negligence was the proximate cause of the
loss of his baggage. Furthermore, petitioner acted in bad faith in faking a retrieval receipt to bail itself
out of having to pay Co's claim.

The Court of Appeals therefore did not err in disregarding the limits of liability under the Warsaw
Convention.

The award of exemplary damages and attorney's fees to the private respondent was justified. In the
cases of Imperial Insurance, Inc. vs. Simon, 122 Phil. 189 and Bert Osmeña and Associates vs.
CA, 120 SCRA 396, the appellant was awarded attorney's fees because of appellee's failure to
satisfy the former's just and valid demandable claim which forced the appellant to litigate. Likewise,
in the case of Phil. Surety Ins. Co., Inc. vs. Royal Oil Products, 102 Phil. 326, this Court justified the
grant of exemplary damages and attorney's fees to the petitioner's failure, even refusal, to pay the
private respondent's valid claim.

WHEREFORE, the petition for review is DENIED for lack of merit. Costs against the petitioner.

SO ORDERED.

Cathay Pacific Airways vs. CA

G.R. No. 60501. March 5, 1993

Facts:

Respondent Tomas Alcantara was a first class passenger of petitioner Cathay Pacific
Airways from Manila to Hongkong and onward from Hongkong to Jakarta. The
purpose of his trip was to attend the following day, a conference with the Director
General of Trade of Indonesia. He checked in his luggage which contained not
only his clothing and articles for personal use but also papers and documents
he needed for the conference.

Upon his arrival in Jakarta, respondent discovered that his luggage was
missing. Private respondent was told that his luggage was left behind in Hongkong.

For this, respondent Alcantara was offered $20.00 as “inconvenience money" to

buy his immediate personal needs until the luggage could be delivered to
him. The respondent, as a result of the incident had to seek postponement of
his pre-arranged conference.
Issue:
7. WoN there was breach of contract
8. WoN Cathay Pacific is liable for damages
9. WoN the Warsaw Convention is applicable to this case

Held:
7. Petitioner breached its contract of carriage with private respondent when
it failed to deliver his luggage at the designated place and time, it being
the obligation of a common carrier to carry its passengers and their
luggage safely to their destination, which includes the duty not to delay
their transportation, and the evidence shows that petitioner acted
fraudulently or in bad faith.
8. Moral damages predicated upon a breach of contract of carriage may only
be recoverable in instances where the mishap results in death of a
passenger, or where the carrier is guilty of fraud or bad faith. But in the
case at bar, the inconvenience money offered to Alcantara was insulting
considering that he paid for a first class accommodation. Petitioner or its
agents should have been more courteous and accommodating. The
conduct of petitioner's representative towards respondent justifies the
grant of moral and exemplary damages.

9. Although the Warsaw Convention has the force and effect of law in this
country, said convention does not operate as an exclusive enumeration of
the instances for declaring a carrier liable for breach of contract of
carriage or as an absolute limit of the extent of that liability. It must not
be construed to preclude the operation of the Civil Code and other
pertinent laws. It does not regulate, much less exempt, the carrier from
liability for damages for violating the rights of its passengers under the
contract of carriage, especially if wilful misconduct on the part of the
carrier's employees is found or established.

Trans-Asia Shipping Lines, Inc. VS Court of Appeals

GR 118126 4 March 1996

FACTS:

Atty Renato Arroyo purchased a ticket from Trans-Asia Shipping lines, Inc. for the voyage of M/V Asia
Thailand vessel to Cagayan de Oro from Cebu Sity. Upon boarding he noticed that engines of the vessel
were being repaired. Regardless, he boarded the same.

The vessel departed on time with only 1 engine running. It stopped near Kawit Island and after half an
hour of stillness, the passengers, who already were suffering from mental distress, demanded that they
be brought back to their port of origin.

At Cebu City, passengers who wished to disembark were allowed and given 10 minutes. Atty. Arroyo as
one of the passengers. After which, the vessel continued its voyage.

On this account, Passenger Arroyo filed before the trial court a complaint for damages against Trans-Asia
Shipping Inc. for failure of transporting the former to his place of destination.

ISSUE:

WON a vessel being unworthy of the sea is tantamount to a breach of contract?

HELD:

Under Article 1733 of the Civil Code, the petitioner was bound to observe extraordinary diligence in
ensuring the safety of the private respondent. That meant that the petitioner was, pursuant to Article 1755
of the said Code, bound to carry the private respondent safely as far as human care and foresight could
provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances. In
this case, we are in full accord with the Court of Appeals that the petitioner failed to discharge this
obligation.

Before commencing the contracted voyage, the petitioner undertook some repairs on the cylinder head of
one of the vessel's engines. But even before it could finish these repairs, it allowed the vessel to leave the
port of origin on only one functioning engine, instead of two. Moreover, even the lone functioning engine
was not in perfect condition as sometime after it had run its course, it conked out. This caused the vessel
to stop and remain a drift at sea, thus in order to prevent the ship from capsizing, it had to drop anchor.
Plainly, the vessel was unseaworthy even before the voyage began. For a vessel to be seaworthy, it must
be adequately equipped for the voyage and manned with a sufficient number of competent officers and
crew. 21 The failure of a common carrier to maintain in seaworthy condition its vessel involved in a
contract of carriage is a clear breach of its duty prescribed in Article 1755 of the Civil Code.

Sweet Lines, Inc. v. Teves

G.R. No. L-37750, 19 May 1978, 83 SCRA 361

FACTS:

Atty. Leovigildo Tandog and Rogelio Tiro bought tickets for Tagbiliran City via the port of Cebu.
Since many passengers were bound for Surigao, “M/S Sweet Hope” would not be proceeding to
Bohol. They went to the proper branch office and were relocated to “M/S Sweet Town” where they
were forced to agree “to hide at the cargo section to avoid inspection of the officers of the Philippines
Coastguard.” They were exposed to the scorching heat of the sun and the dust coming from the
ship’s cargo of corn grits and their tickets were not honored so they had to purchase a new one.
Because of the terrible experience they had, they sued Sweet Lines for damages and for breach of
contract of carriage before the Court of First Instance of Misamis Oriental who dismissed the
complaint for improper venue. A motion was premised on the condition printed at the back of the
tickets and was later dismissed. Hence this instant petition for prohibition for preliminary injunction.

ISSUE:

Whether or not, 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 contract of
carriage should be filed only in a particular province or city.

HELD:

No. Actions arising out of the contract of carriage should be filed not only in a particular province or
city. Contract of adhesions are not the kind of 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. It is only imposed upon them when they paid for the fare for the freight they wanted to
ship.
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:
1. Circumstances obligation in the inter-island ship will prejudice rights and interests of innumerable
passengers in different parts of the country who, under Condition No. 14, will have to file suits
against petitioner only in the City of Cebu;
2. Subversive of public policy on transfers of venue of actions; and
3. Philosophy underlying the provisions of transfers of venue of actions is the convenience of the
plaintiffs as well as his witnesses and to promote the ends of justice.
Hence, petition for prohibition is hereby dismissed. The restraining order is LIFTED and SET ASIDE.

***CONTRACT OF ADHESION ONE PARTY LANG NAGDECIDE