chapter 4 cases with page numbers

8/12/2019 Chapter 4 Cases With Page Numbers

1/29

1

Macondray and Co Inc v. Acting Commissioner of Customs

FACTS:

On November 2, 1962, the vessel S/S TAI PING, of which petitioner is the local agent, arrived at the port of Manilafrom San Francisco, California, U.S.A., conveying various shipments of merchandise, among which was a shipment ofone (1) coil carbon steel, one (1 bundle carbon steel flat and one (1) carbon containing carbon tool holders carbidecutters, ground, all of which appeared in the Bill of Lading No. 22, consigned to Bogo Medellin Millings Co., Inc. Theshipment, except the one (1) coil carbon steel was not reflected in the Inward Cargo Manifest as required by Section

1005 in relation to Section 2521 of the Tariff and Custom Code of the Philippines. Allied Brokerage Corporation, actingfor and in behalf of Bogo Medellin Milling Co. requested petitioner Macondray & Co., agent of the vessel S/S TAIPING, to correct the manifest of the steamer so that it may take delivery of the goods at Customs House. Collector ofCustom required petitioner to explain and show cause why no administrative fine should be imposed upon saidvessel. The fine of 1,000.00 was paid by petitioner under protest. Hearing of the protest proceeded thereafter.

Collector of Customs of the Port of Manila ordered the dismissal of said protest for lack of merit. On appeal to theCommissioner of Customs the latter sustained the Collector of Customs. Petitioner filed a petition for review with theCourt of Tax Appeals. The CTA affirmed the decision of the Collector of Customs as affirmed by the Commissioner ofCustoms.

ISSUE:Whether or not the Collector of Customs erred in imposing a fine on vessel, S/S TAI PING, for alleged violation ofSection 1005 in relation to Section 2521 of the Tariff and Customs Code for landing unmanifested cargo at the port of

Manila.

HELD:

sThe inclusion of the unmanifested cargoes in the Bill of Lading does not satisfy the requirement of the aforequotedsections of the Tariff and Customs Code. It is to be noted that nowhere in the said sections is the presentation of a Billof Lading required required, but only the presentation of a Manifest containing a true and accurate description of thecargoes. This is for the simple reason that while a manifest is a declaration of the entire cargo, a bill of lading is but adeclaration of a specific part of the cargo and is a matter of business convenience based exclusively on a contract. TheCourt cannot accept or place an implied imprimatur on the contention of petitioner that the entries in the bill of ladingadequately supplied the deficiency of the manifest and cured its infirmity. The mandate of the law is clear and Courtcannot settle for less. The law imposes the absolute obligation, under penalty for failure, upon every vessel from aforeign port to have on board complete written or typewritten manifests of all her cargo, signed by the master. Wherethe law requires a manifest to be kept or delivered, it is not complied with unless the manifest is true and accurate

Amendment of cargo manifest even if later approved by customs authorities does not relieve carrying vessel oliability of fine incurred prior to its correction. The philosophy and purpose behind the law authorizing amendment,under paragraph 3 of Section 1005 of the Tariff and Customs Code, is to protect innocent importers or consigneesfrom the mistake or unlawful acts of the master.

BILL OF LADING VS CARGO MANIFEST

Manifest

It is a declaration of the entire cargo. OBJECTS:

1.) Furnish the customs officers with a list to check against;2.) Inform our revenue officers what goods are being brought into the country; and3.) Provide a safeguard against goods being brought into this country on a vessel and then smuggled ashore.

Bill of Ladingis but a declaration of a specific part of the cargo and is a matter of business convenience based exclusively on acontract.

It is ordinarily merely a convenient commercial instrument designed to protect the importer or consignee, a manifestof the cargo is absolutely essential to the exportation or importation of property in all vessels, the evident intent andobject of which is to impose upon the owners and officers of such vessel an imperative obligation to submit lists of theentire loading of the ship in the prescribed form, to facilitate the labors of the customs and immigration officers and todefeat any attempt to make use of such vessels to secure the unlawful entry of persons or things into the country.


2/29

2

Magellan Manufaturers vs. CA G.R. No. 95529 August 22, 1991

Lessons Applicable: Bill of Lading (Transportation)

Laws Applicable:

FACTS:

-Choju Co., Ltd purchased from Magellan Manufacturers Marketing Corp. (MMMC) 136,000 anahaw fans for $23,220.

-through its president James Cu, MMMC contracted with F.E. Zuellig, a shipping agent of Orient Overseas Container Lines, Inc.(OOCL), through Mr. King, specifying that he needed an on-board bill of lading and that transhipment is not allowed under theletter of credit

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

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

-The anahaw fans were shipped back to Manila through OOCL who are demanding from MMMC P246,043.43 (freight chargesfrom Japan to Manila, demurrage incurred in Japan and Manila from October 22, 1980 up to May 20, 1981 and charges forstripping the container van of the Anahaw fans on May 20, 1981) this was due to the lack of an on-board bill of lading

-MMMC abandoned the whole cargo and asked OOCL for damages

OOCL: bill of lading clearly shows that there will be a transhipment and that petitioner was well aware that MV (Pacific)Despatcher was only up to Hongkong where the subject cargo will be transferred to another vessel for Japan

RTC: favored OOCL:

consented because the bill of lading where it is clearly indicated that there will be transhipment

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

CA: Affirmed with modification of excluding demurrage in Manila

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

HELD: YES. CA Affirmed with modification

Transhipment

We find no fault on the part of private respondents. On the matter of transhipment, petitioner maintains that "... while thegoods were transferred in Hongkong from MV Pacific Despatcher, the feeder vessel, to MV Oriental Researcher, a mothervessel, the same cannot be considered transhipment because both vessels belong to the same shipping company, the privaterespondent Orient Overseas Container Lines, Inc." 7 Petitioner emphatically goes on to say: "To be sure, there was no actuatranshipment of the Anahaw fans. The private respondents have executed a certification to the effect that while the Anahawfans were transferred from one vessel to another in Hong Kong, since the two vessels belong to one and the same companythen there was no transhipment. 8

Transhipment, in maritime law, is defined as "the act of taking cargo out of one ship and loading it in another," 9 or "thetransfer of goods from the vessel stipulated in the contract of affreightment to another vessel before the place of destinationnamed in the contract has been reached," 10 or "the transfer for further transportation from one ship or conveyance toanother." 11 Clearly, either in its ordinary or its strictly legal acceptation, there is transhipment whether or not the sameperson, firm or entity owns the vessels. In other words, the fact of transhipment is not dependent upon the ownership of thetransporting ships or conveyances or in the change of carriers, as the petitioner seems to suggest, but rather on the fact ofactual physical transfer of cargo from one vessel to another.

The terms of the contract as embodied in the bill of lading are clear and thus obviates the need for any interpretation. Theintention of the parties which is the carriage of the cargo under the terms specified thereunder and the wordings of the bill olading do not contradict each other. The terms of the contract being conclusive upon the parties and judging from the


3/29

3

contemporaneous and subsequent actuations of petitioner, to wit, personally receiving and signing the bill of lading andpaying the freight charges, there is no doubt that petitioner must necessarily be charged with full knowledge and unqualifiedacceptance of the terms of the bill of lading and that it intended to be bound thereby.

Bill of lading

An on board bill of lading is one in which it is stated that the goods have been received on board the vessel which is to carrythe goods, whereas a received for shipment bill of lading is one in which it is stated that the goods have been received forshipment with or without specifying the vessel by which the goods are to be shipped.

Received for shipment bills of lading are issued whenever conditions are not normal and there is insufficiency of shippingspace. 29 An on board bill of lading is issued when the goods have been actually placed aboard the ship with every reasonableexpectation that the shipment is as good as on its way. 30 It is, therefore, understandable that a party to a maritime contractwould require an on board bill of lading because of its apparent guaranty of certainty of shipping as well as the seaworthinessof the vessel which is to carry the goods.

petitioner had full knowledge that the bill issued to it contained terms and conditions clearly violative of the requirements ofthe letter of credit.

Nonetheless, perhaps in its eagerness to conclude the transaction with its Japanese buyer and in a race to beat the expiry dateof the letter of credit, petitioner took the risk of accepting the bill of lading even if it did not conform with the indicatedspecifications, possibly entertaining a glimmer of hope and imbued with a touch of daring that such violations may beoverlooked, if not disregarded, so long as the cargo is delivered on time. Unfortunately, the risk did not pull through as hoped

for.

Any violation of the terms and conditions of the letter of credit as would defeat its right to collect the proceeds thereof wastherefore, entirely of the petitioner's making for which it must bear the consequences. As finally averred by privaterespondents, and with which we agree, "... the questions of whether or not there was a violation of the terms and conditions ofthe letter of credit, or whether or not such violation was the cause or motive for the rejection by petitioner's Japanese buyershould not affect private respondents therein since they were not privies to the terms and conditions of petitioner's letter ofcredit and cannot therefore be held liable for any violation thereof by any of the parties thereto." 34

Demurrage

Demurrage, in its strict sense, is the compensation provided for in the contract of affreightment for the detention of the vesselbeyond the time agreed on for loading and unloading.

Essentially, demurrage is the claim for damages for failure to accept delivery. In a broad sense, every improper detention of avessel may be considered a demurrage. Liability for demurrage, using the word in its strictly technical sense, exists only whenexpressly stipulated in the contract. Using the term in its broader sense, damages in the nature of demurrage are recoverablefor a breach of the implied obligation to load or unload the cargo with reasonable dispatch, but only by the party to whom theduty is owed and only against one who is a party to the shipping contract. 36 Notice of arrival of vessels or conveyances, or oftheir placement for purposes of unloading is often a condition precedent to the right to collect demurrage charge

Now, there is no dispute that private respondents expressly and on their own volition granted petitioner an option withrespect to the satisfaction of freightage and demurrage charges. Having given such option, especially since it was accepted bypetitioner, private respondents are estopped from reneging thereon. Petitioner, on its part, was well within its right to exercisesaid option. Private respondents, in giving the option, and petitioner, in exercising that option, are concluded by theirrespective actions. To allow either of them to unilaterally back out on the offer and on the exercise of the option would be tocountenance abuse of rights as an order of the day, doing violence to the long entrenched principle of mutuality of contracts.

It will be remembered that in overland transportation, an unreasonable delay in the delivery of transported goods is sufficientground for the abandonment of goods. By analogy, this can also apply to maritime transportation. Further, with much morereason can petitioner in the instant case properly abandon the goods, not only because of the unreasonable delay in itsdelivery but because of the option which was categorically granted to and exercised by it as a means of settling its liability forthe cost and expenses of reshipment. And, said choice having been duly communicated, the same is binding upon the partieson legal and equitable considerations of estoppel.

G.R. No. L-28028 November 25, 1927


4/29

4

JUAN YSMAEL & CO., INC. vs. GABINO BARRETTO & CO., LTD., ET AL., defendants. ANDRES H. LIMGENGCO and VICENTE

JAVIER

Facts: A domestic corporation, seeks to recover from the defendants P9,940.95 the alleged value of four cases of

merchandise which it delivered to the steamship Andres on October 25, 1922, at Manila to be shipped to Surigao, but which

were never delivered to Salomon Sharuff, the consignee, or returned to the plaintiff.

Defendants make a specific denial of all of the material allegations of the complaint, and as special defense allege that

the four cases of merchandise in question were never delivered to them, and that under the provisions of paragraph the

provisions of paragraph 7 of the printed conditions appearing on the back of the bill of lading, plaintiff's right of action isbarred for the reason that it was not brought within sixty days from the time the cause of action accrued.

Defendants further alleged that under and by virtue of provision 12 of the bill of lading referred to in plaintiff's

amended complaint, the defendants are not liable in excess of three hundred pesos (P300) for any package of silk unless the

value and contents of such packages are correctly declared in the bill of lading at the time of shipment, etc.

Lower court:Judgment in favor of plaintiff for the full amount of its claim

Issue: Whether or not the lower court erred in ruling in favor of plaintiff and disregarding the stipulation limiting the value

of defendants liability under clause 12 printed in the Bill of lading.

Ruling: The SC upheld the findings of the trial court that the defendants received from the plaintiff corporation 164 cases o

merchandise, and delivered at Surigao only 160 cases of such merchandise, and that defendants failed to deliver the said four

cases in Surigao when plaintiff's representative took delivery of the cargo at that port, and that the original figure "1" and the

word "bulto" appearing on the back of Exhibit 1 were changed by Galleros to read "5" and "bultos."

The testimony of Claro Galleros to the effect that, according to the tallies made by him on the back of Exhibit 1 during the

course of loading, only 160 cases were loaded, on board the steamer Andres stands uncorroborated, and it is not supported by

the tallies themselves, as these tallies give a total of 161 cases.

Appellants rely on clause 12 of the bill of lading, which is as follows:

It is expressly understood that carrier shall not be liable for loss or damage from any cause or for any reason to an

amount exceeding three hundred pesos (P300) Philippine currency for any single package of silk or other valuable cargo, nor

for an amount exceeding one hundred pesos (P100) Philippine currency for any single package of other cargo, unless the

value and contents of such packages are correctly declared in this bill of lading at the time of shipment and freight paid in

accord with the actual measurement or weight of the cargo shipped.

That condition is printed on the back of the bill of lading. The ship in question was a common carrier and, as such,must have been operated as a public utility. It is a matter of common knowledge that large quantities of silk are imported in

the Philippine Islands, and that after being imported, they are sold by the merchants in Manila and other large seaports, and

then shipped to different points and places in the Islands. Hence, there is nothing unusual about the shipment of silk. In truth

and in fact, it is a matter of usual and ordinary business. There was no fraud or concealment in the shipment in question

Clause 12 above quoted places a limit of P300 "for any single package of silk." The evidence shows that 164 "cases" were

shipped, and that the value of each case was very near P2,500. In this situation, the limit of defendants' liability for each case of

silk "for loss or damage from any cause or for any reason" would put it in the power of the defendants to have taken the whole

cargo of 164 cases of silk at a valuation of P300 for each case, or less than one-eight of its actual value. If that rule of law should

be sustained, no silk would ever be shipped from one island to another in the Philippines. Such a limitation of value is

unconscionable and void as against public policy.

Citing case law:

PAR. 194. 6. Reasonable of Limitation. The validity of stipulations limiting the carriers liability is to be determined by their

reasonableness and their conformity to the sound public policy, in accordance with which the obligations of the carrier to the

public are settled. It cannot lawfully stipulate for exemption from liability, unless such exemption is just and reasonable, and

unless the contract is freely and fairly made. No contractual limitation is reasonable which is subversive of public policy.

PAR. 195. 7. What Limitations of Liability Permissible. a.

Negligence (1) Rule in America (a) In Absence of Organic or Statutory Provisions Regulating Subjectaa. Majority Rule.

In the absence of statute, it is settled by the weight of authority in the United States, that whatever limitations against its


5/29

5

common-law liability are permissible to a carrier, it cannot limit its liability for injury to or loss of goods shipped, where

such injury or loss is caused by its own negligence.This is the common-law doctrine and it makes no difference that there is no

statutory prohibition against contracts of this character.

PAR. 196. bb. Considerations on Which Rule Based. The rule, it is said, rests on considerations of public policy. The undertaking

is to carry the goods, and to relieve the shipper from all liability for loss or damage arising from negligence in performing its

contract is to ignore the contract itself. The natural effect of a limitation of liability against negligence is to induce want of care on

the part of the carrier in the performance of its duty. The shipper and the common carrier are not on equal terms; the shipper

must send his freight by the common carrier, or not at all; he is therefore entirely at the mercy of the carrier, unless protected by

the higher power of the law against being forced into contracts limiting the carrier's liability. Such contracts are wanting in theelement of voluntary assent.

PAR. 197. cc. Application and Extent of Rule (aa) Negligence of Servants. The rule prohibiting limitation of liability for

negligence is often stated as a prohibition of any contract relieving the carrier from loss or damage caused by its own negligence

or misfeasance, or that of its servants; and it has been specifically decided in many cases that no contract limitation will relieve

the carrier from responsibility for the negligence, unskillfulness, or carelessness of its employees.

Based upon the findings of fact of the trial court which are sustained by the evidence, the plaintiff delivered to the

defendants 164 cases of silk consigned and to be delivered by the defendants to Salomon Sharuff in Surigao. Four of such cases

were never delivered, and the evidence shows that their value is the alleged in the complaint.

There is no merit in the appeal. The judgment of the lower court is affirmed, with costs.

Prohibited and Limiting StipulationsShewaram vs. PALG.R. No. L-200999, July 7, 1966

Facts:

On November 23, 1959, Paramanand (plaintiff), a paying passenger with ticket No. 4-30976, on defendant's aircraftflight No. 976/910 from Zamboanga City bound for Manila; that defendant is a common carrier engaged in air linetransportation in the Philippines, offering its services to the public to carry and transport passengers and cargoes from and todifferent points in the Philippines; that on the above-mentioned date of November 23, 1959, he checked in three (3) pieces ofbaggages a suitcase and two (2) other pieces; that the suitcase was mistagged by defendant's personnel in Zamboanga Cityas I.G.N. (for Iligan) with claim check No. B-3883, instead of MNL (for Manila). When plaintiff Parmanand Shewaram arrived inManila on the date of November 23, 1959, his suitcase did not arrive with his flight because it was sent to Iligan. So, he made aclaim with defendant's personnel in Manila airport and another suitcase similar to his own which was the only baggage left forthat flight, the rest having been claimed and released to the other passengers of said flight, was given to the plaintiff for him totake delivery but he did not and refused to take delivery of the same on the ground that it was not his, alleging that all hisclothes were white and the National transistor 7 and a Rollflex camera were not found inside the suitcase, and moreover, itcontained a pistol which he did not have nor placed inside his suitcase; that after inquiries made by defendant's personnel inManila from different airports where the suitcase in question must have been sent, it was found to have reached Iligan and thestation agent of the PAL in Iligan caused the same to be sent to Manila for delivery to Mr. Shewaram and which suitcasebelonging to the plaintiff herein arrived in Manila airport on November 24, 1959; that it was also found out that the suitcaseshown to and given to the plaintiff for delivery which he refused to take delivery belonged to a certain Del Rosario who wasbound for Iligan in the same flight with Mr. Shewaram; that when the plaintiff's suitcase arrived in Manila as stated above onNovember 24, 1959, he was informed by Mr. Tomas Blanco, Jr., the acting station agent of the Manila airport of the arrival ohis suitcase but of course minus his Transistor Radio 7 and the Rollflex Camera; that Shewaram made demand for these two(2) items or for the value thereof but the same was not complied with by defendant.

It is admitted by defendant that there was mistake in tagging the suitcase of plaintiff as IGN. The tampering of the suitcase ismore apparent when on November 24, 1959, when the suitcase arrived in Manila, defendant's personnel could open the samein spite of the fact that plaintiff had it under key when he delivered the suitcase to defendant's personnel in Zamboanga CityMoreover, it was established during the hearing that there was space in the suitcase where the two items in question couldhave been placed. It was also shown that as early as November 24, 1959, when plaintiff was notified by phone of the arrival ofthe suitcase, plaintiff asked that check of the things inside his suitcase be made and defendant admitted that the two itemscould not be found inside the suitcase. There was no evidence on record sufficient to show that plaintiff's suitcase was neveropened during the time it was placed in defendant's possession and prior to its recovery by the plaintiff. However, defendanthad presented evidence that it had authority to open passengers' baggage to verify and find its ownership or identity. Exhibi


6/29

6

"1" of the defendant would show that the baggage that was offered to plaintiff as his own was opened and the plaintiff deniedownership of the contents of the baggage. This proven fact that baggage may and could be opened without the necessaryauthorization and presence of its owner, applied too, to the suitcase of plaintiff which was mis-sent to Iligan City because ofmistagging. The possibility of what happened in the baggage of Mr. Del Rosario at the Manila Airport in his absence could havealso happened to plaintiffs suitcase at Iligan City in the absence of plaintiff. Hence, the Court believes that these two itemswere really in plaintiff's suitcase and defendant should be held liable for the same by virtue of its contract of carriage.

Issue:

Whether the limited liability rule shall apply in the case at bar?

Held:

No.

The law that may be invoked, in this connection is Article 1750 of the New Civil Code which provides as follows:

A contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction, or deterioration ofthe goods is valid, if it is reasonable and just under the circumstances, and has been fairly and freely agreed upon.

In accordance with the above-quoted provision of Article 1750 of the New Civil Code, the pecuniary liability of a common

carrier may, by contract, be limited to a fixed amount. It is required, however, that the contract must be "reasonable and justunder the circumstances and has been fairly and freely agreed upon."

The requirements provided in Article 1750 of the New Civil Code must be complied with before a common carrier can claim alimitation of its pecuniary liability in case of loss, destruction or deterioration of the goods it has undertaken to transport. Inthe case before us We believe that the requirements of said article have not been met. It can not be said that the appellee hadactually entered into a contract with the appellant, embodying the conditions as printed at the back of the ticket stub that wasissued by the appellant to the appellee. The fact that those conditions are printed at the back of the ticket stub in letters sosmall that they are hard to read would not warrant the presumption that the appellee was aware of those conditions such thathe had "fairly and freely agreed" to those conditions. The trial court has categorically stated in its decision that the "Defendantadmits that passengers do not sign the ticket, much less did plaintiff herein sign his ticket when he made the flight onNovember 23, 1959." We hold, therefore, that the appellee is not, and can not be, bound by the conditions of carriage found atthe back of the ticket stub issued to him when he made the flight on appellant's plane on November 23, 1959.

The liability of the appellant in the present case should be governed by the provisions of Articles 1734 and 1735 of the NewCivil Code, which We quote as follows:

ART. 1734. Common carries are responsible for the loss, destruction, or deterioration of the goods, unless the same isdue to any of the following causes only:

(1) Flood, storm, earthquake, or other natural disaster or calamity;

(2) Act of the public enemy in war, whether international or civil;

(3) Act or omission of the shipper or owner of the goods;

(4) The character of the goods or defects in the packing or in the containers;

(5) Order or act of competent public authority.1wph1.t

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 provethat they observed extraordinary diligence as required in Article 1733.


7/29

7

It having been clearly found by the trial court that the transistor radio and the camera of the appellee were lost as a result ofthe negligence of the appellant as a common carrier, the liability of the appellant is clear it must pay the appellee the valueof those two articles.

In the case of Ysmael and Co. vs. Barreto, 51 Phil. 90, cited by the trial court in support of its decision, this Court had laid downthe rule that the carrier can not limit its liability for injury to or loss of goods shipped where such injury or loss was caused byits own negligence.

Corpus Juris, volume 10, p. 154, says:

"Par. 194, 6. Reasonableness of Limitations. The validity of stipulations limiting the carrier's liability is to bedetermined by their reasonableness and their conformity to the sound public policy, in accordance with which theobligations of the carrier to the public are settled. It cannot lawfully stipulate for exemption from liability, unless suchexemption is just and reasonable, and unless the contract is freely and fairly made. No contractual limitation isreasonable which is subversive of public policy.

"Par. 195. 7. What Limitations of Liability Permissible. a. Negligence (1) Rule in America (a) In Absence oOrganic or Statutory Provisions Regulating Subject aa. Majority Rule. In the absence of statute, it is settled by theweight of authority in the United States, that whatever limitations against its common-law liability are permissible toa carrier, it cannot limit its liability for injury to or loss of goods shipped, where such injury or loss is caused by itsown negligence. This is the common law doctrine and it makes no difference that there is no statutory prohibitionagainst contracts of this character.

"Par. 196. bb. Considerations on which Rule Based. The rule, it is said, rests on considerations of public policy. Theundertaking is to carry the goods, and to relieve the shipper from all liability for loss or damage arising fromnegligence in performing its contract is to ignore the contract itself. The natural effect of a limitation of liability againstnegligence is to induce want of care on the part of the carrier in the performance of its duty. The shipper and thecommon carrier are not on equal terms; the shipper must send his freight by the common carrier, or not at all; he istherefore entirely at the mercy of the carrier unless protected by the higher power of the law against being forced intocontracts limiting the carrier's liability. Such contracts are wanting in the element of voluntary assent.

"Par. 197. cc.Application and Extent of Rule(aa) Negligence of Servants. The rule prohibiting limitation of liabilityfor negligence is often stated as a prohibition of any contract relieving the carrier from loss or damage caused by itsown negligence or misfeasance, or that of its servants; and it has been specifically decided in many cases that no

contract limitation will relieve the carrier from responsibility for the negligence, unskillfulness, or carelessness of itsemployer." (Cited in Ysmael and Co. vs. Barreto, 51 Phil. 90, 98, 99).

Ong Yiu vs. CAG.R. No. L-40597, June 29, 1979J. Melencio-Herrera:

FACTS:Ong Yiu was a fare paying passenger of respondent PAL on board a flight from Mactan Cebu, bound for Butuan City. He

was scheduled to attend the trial of a civil case and a special proceeding. He checked in one piece of luggage, a blue "maleta"for which he was issued a Claim Check. The plane left Mactan Airport, Cebu, at about 1:00 o'clock P.M., and arrived at Bancasiairport, Butuan City, at past 2:00 o'clock P.M., of the same day. Upon arrival, petitioner claimed his luggage but it could not befound. According to petitioner, it was only after reacting indignantly to the loss that the matter was attended to by the porter

clerk, Maximo Gomez, which, however, the latter denies, At about 3:00 o'clock P.M., PAL Butuan, sent a message to PAL, Cebuinquiring about the missing luggage, which message was, in turn relayed in full to the Mactan Airport teletype operator at 3:45P.M that same afternoon. It must have been transmitted to Manila immediately, for at 3:59 that same afternoon, PAL Manilawired PAL Cebu advising that the luggage had been over carried to Manila and that it would be forwarded to Cebu on the sameday. Instructions were also given that the luggage be immediately forwarded to Butuan City on the first available flight. At 5:00P.M. of the same afternoon, PAL Cebu sent a message to PAL Butuan that the luggage would be forwarded on a flight thefollowing day. However, this message was not received by PAL Butuan as all the personnel had already left since there were nomore incoming flights that afternoon.

In the meantime, petitioner was worried about the missing luggage because it contained vital documents needed fortrial the next day. At 10:00 o'clock that evening, petitioner wired PAL Cebu demanding the delivery of his baggage before noon


8/29

8

the next day, otherwise, he would hold PAL liable for damages, and stating that PAL's gross negligence had caused him undueinconvenience, worry, anxiety and extreme embarrassment. This telegram was received by the Cebu PAL supervisor but thelatter felt no need to wire petitioner that his luggage had already been forwarded on the assumption that by the time themessage reached Butuan City, the luggage would have arrived.

Early in the morning of the next day, petitioner went to the Bancasi Airport to inquire about his luggage. He did notwait, however, for the morning flight which arrived at 10:00 o'clock that morning. This flight carried the missing luggage. Theporter clerk, Maximo Gomez, paged petitioner, but the latter had already left. A certain Emilio Dagorro a driver of a "colorum"car, who also used to drive for petitioner, volunteered to take the luggage to petitioner. As Maximo Gomez knew Dagorro to bethe same driver used by petitioner whenever the latter was in Butuan City, Gomez took the luggage and placed it on the

counter. Dagorro examined the lock, pressed it, and it opened. After calling the attention of Maximo Gomez, the "maleta" wasopened, Gomez took a look at its contents, but did not touch them. Dagorro then delivered the "maleta" to petitioner, with theinformation that the lock was open. Upon inspection, petitioner found that a folder containing certain exhibits, transcripts andprivate documents was missing, aside from two gift items for his parents-in-law. Petitioner refused to accept the luggage.Dagorro returned it to the porter clerk, Maximo Gomez, who sealed it and forwarded the same to PAL Cebu.

Meanwhile, petitioner asked for postponement of the hearing of Civil Case No. 1005 due to loss of his documents,which was granted. Petitioner returned to Cebu City and in a letter demanded that his luggage be produced intact, and that hebe compensated for actual and moral damages within five days from receipt of the letter, otherwise, he would be left with noalternative but to file suit.

Messrs. de Leon, Navarsi, and Agustin, all of PAL Cebu, went to petitioner's office to deliver the "maleta". In thepresence of Mr. Jose Yap and Atty. Manuel Maranga the contents were listed and receipted for by petitioner. Petitioner thensent a tracer letter to PAL Cebu inquiring about the results of the investigation which Messrs. de Leon, Navarsi, and Agustinhad promised to conduct to pinpoint responsibility for the unauthorized opening of the "maleta.The following day, PAL sentits reply containing the latters apology for the delay in informing petitioner of the result of the investigation and that they stilhave not found the supposedly lost folder of papers nor have they been able to pinpoint the personnel who allegedly pilferredhis baggage. Thus, petitioner filed a Complaint against PAL for damages for breach of contract of transportation.

ISSUE:Whether or not the court erred in limiting the carriers carriage liability to the amount of P100.00 as printed at the

back of the ticket.

HELD:As a general proposition, the plaintiff's maleta having been pilfered while in the custody of the defendant, it is

presumed that the defendant had been negligent. The liability, however, of PAL for the loss, in accordance with the stipulationwritten on the back of the ticket, Exhibit 12, is limited to P100.00 per baggage, plaintiff not having declared a greater value,and not having called the attention of the defendant on its true value and paid the tariff therefor. The validity of this stipulationis not questioned by the plaintiff. They are printed in reasonably and fairly big letters, and are easily readable. Moreoverplaintiff had been a frequent passenger of PAL from Cebu to Butuan City and back, and he, being a lawyer and businessman,must be fully aware of these conditions. The pertinent Condition of Carriage printed at the back of the plane ticket reads:

8. BAGGAGE LIABILITY ... The total liability of the Carrier for lost or damaged baggage of the passenger isLIMITED TO P100.00 for each ticket unless a passenger declares a higher valuation in excess of P100.00, butnot in excess, however, of a total valuation of P1,000.00 and additional charges are paid pursuant to Carrier'stariffs.

There is no dispute that petitioner did not declare any higher value for his luggage, much less did he pay any additionaltransportation charge. But petitioner argues that there is nothing in the evidence to show that he had actually entered into acontract with PAL limiting the latter's liability for loss or delay of the baggage of its passengers, and that Article 1750* of theCivil Code has not been complied with.

While it may be true that petitioner had not signed the plane ticket, he is nevertheless bound by the provisionsthereof. "Such provisions have been held to be a part of the contract of carriage, and valid and binding upon the passengerregardless of the latter's lack of knowledge or assent to the regulation". It is what is known as a contract of "adhesion", inregards which it has been said that contracts of adhesion wherein one party imposes a ready made form of contract on theother, as the plane ticket in the case at bar, are contracts not entirely prohibited. The one who adheres to the contract is inreality free to reject it entirely; if he adheres, he gives his consent.

Considering, therefore, that petitioner had failed to declare a higher value for his baggage, he cannot be permitted arecovery in excess of P100.00.Besides, passengers are advised not to place valuable items inside their baggage but "to avail oour V-cargo service." I t is likewise to be noted that there is nothing in the evidence to show the actual value of the goodsallegedly lost by petitioner.

Aboitiz vs CA


9/29

9

Facts:

- October 28, 1990 MV P Aboitiz had:

- 1 20-footer container: 271 rolls of goods of apparel

- 1 40-footer container: 447 rolls + 10 bulk + 95 cartons of goods of apparel

- Route: HK to Manila

- Total value: US$ 39,885.85 + US$ 94,190.55

- Consignee: Philippine Apparel

- Insured with: General Accident Fire and life Aassurance (GAFLAC)

- October 31, 19080: it sank

- GAFLAC paid entore value to consignee

- RTC: Aboitiz to pay GAFLAC

- CA: afgirmed RTC ruling

- Aboitiz' claim: based on administrative investigation by Board of Marine Inquiry, the sinking may be attributed to forcemajeure on account of typhoon and such finding is conclusive to the courts.

Issues:

- WON there is force majeure?

- WON the liability should be fixed at $500 per package

Held:

NO

- RTC was never informed of the parallel administrativeinvestigation and such was conducted unilaterally. The findings werepresented three years after the start of the trial and GAFLAC was not given the opportunity to join the investigation.

- RTC found fault on the master and crew of the vessel, thus, there ws negligence on the part of the vessel

- the was only moderate breeze and small waves

NO

- That is the general rule but the execption is when the natire and value of good have been declared and inserted in the bill oflafing as provided in Section 4(5) of COGSA and such was provided by the shipper and reflected in the bill of lading.

- Aboitiz must pay the entire value of goods.

SEA-LAND SERVICE, INC. v INTERMEDIATE APPELLATE COURT and PAULINO CUE


10/29

10

FACTS: On or about January 8, 1981, Sea-Land, a foreign shipping and forwarding company licensed to do business in thePhilippines, received from Seaborne Trading Company in Oakland, California a shipment consigned to Sen Hiap Hing thebusiness name used by Paulino Cue in the wholesale and retail trade which he operated out of an establishment located onBorromeo and Plaridel Streets, Cebu City. The shipper not having declared the value of the shipment, no value was indicated inthe bill of lading.The shipment arrived in Manila on February 12, 1981, and there discharged into the custody of the arrastrecontractor and the customs and port authorities.

Sometime between February 13 and 16, 1981, after the shipment had been transferred, along with other cargoes to Containernear Warehouse 3 at Pier 3 in South Harbor, Manila, awaiting trans-shipment to Cebu, it was stolen by pilferers and has neverbeen recovered.

On March 10, 1981, Paulino Cue, the consignee, made a claim upon Sea-Land for the value of the lost shipment allegedlyamounting to P179,643.48. Sea-Land offered to settle for US$4,000.00, or its then Philippine peso equivalent of P30,600.00asserting that said amount represented its maximum liability for the loss of the shipment under the package limitation clausein the covering bill of lading. Cue rejected it and brought suit for damages against Sea-Land in CFI Cebu. Said Court, renderedjudgment in favor of Cue. IAC affirmed CFI.

ISSUE:

Whether the consignee of seaborne freight is bound by stipulations in the covering bill of lading limiting to a fixed amount theliability of the carrier for loss or damage to the cargo where its value is not declared in the bill.

RULING:

IAC's judgement was reversed. The stipulation in the questioned bill of lading limiting Sea-Land's liability for loss of ordamage to the shipment covered by said bill to US$500.00 per package is held valid and binding on private respondent.

To begin with, there is no question of the right, in principle, of a consignee in a bill of lading to recover from the carrier orshipper for loss of, or damage to, goods being transported under said bill, although that document may have been as inpractice it oftentimes is drawn up only by the consignor and the carrier without the intervention of the consignee.

Article 1766 of the Civil Code expressly subjects the rights and obligations of common carriers to the provisions of the Code oCommerce and of special laws in matters not regulated by said (Civil) Code. Not only is there nothing in the Civil Code whichabsolutely prohibits agreements between shipper and carrier limiting the latter's liability for loss of or damage to cargoshipped under contracts of carriage; it is also quite clear that said Code in fact has agreements of such character incontemplation in providing, in its Articles 1749 and 1750, that:

ART. 1749 A stipulation that the common carrier's liability is limited to the value of the goods appearing in the bill of ladingunless the shipper or owner declares a greater value, is binding.

ART. 1750. A contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction, or deteriorationof the goods is valid, if it is reasonable and just under the circumstances, and has been fairly and freely agreed upon.

Nothing contained in section 4(5) of the Carriage of Goods by Sea Act already quoted is repugnant to or inconsistent with anyof the just-cited provisions of the Civil Code. Said section merely gives more flesh and greater specificity to the rather generalterms of Article 1749 and Article 1750, to give effect to just agreements limiting carriers' liability for loss or damage which arefreely and fairly entered into.

It seems clear that even if said ***section 4(5) of the Carriage of Goods by Sea Act did not exist, the validity and binding effectof the liability limitation clause in the bill of lading here are nevertheless fully sustainable on the basis alone of the cited Civi

Code provisions. That said stipulation is just and reasonable is arguable from the fact that it echoes Art. 1750 itself inproviding a limit to liability only if a greater value is not declared for the shipment in the bill of lading. To hold otherwisewould amount to questioning the justice and fairness of that law itself, and this the private respondent does not pretend to do.

There can, therefore, be no doubt or equivocation about the validity and enforceability of freely-agreed-upon stipulations in acontract of carriage or bill of lading limiting the liability of the carrier to an agreed valuation unless the shipper declares ahigher value and inserts it into said contract or bill. This pro position, moreover, rests upon an almost uniform weight ofauthority.

The private respondent admits that as early as on April 22, 1981, Sea-Land had offered to settle his claim for US$4,000.00, thelimit of said carrier's liability for loss of the shipment under the bill of lading. The decision of the Regional Trial Court


11/29

11

awarding the private respondent P186,048.00 as the peso value of the lost shipment is clearly based on a conversion rate ofP8.00 to US$1.00, said respondent having claimed a dollar value of $23,256.00 for said shipment. All circumstancesconsidered, it is just and fair that Sea-Land's dollar obligation be convertible at the same rate.

CITADEL LINES, INC., petitioner,vs.COURT OF APPEALS and MANILA WINE MERCHANTS, INC., respondents.

FACTS:

Petitioner Citadel Lines, (CARRIER) Inc. is the general agent of the vessel "Cardigan Bay/Strait Enterprise," Respondent Manila Wine Merchants, (IMPORTER) Inc. is the importer of the subject shipment of Dunhill cigarettes

from England. The vessel "Cardigan Bay/Strait Enterprise" loaded on board at Southampton, England, for carriage to Manila, 180

Filbrite cartons of mixed British manufactured cigarettes called "Dunhill International Filter" and "DunhilInternational Menthol,"as evidenced by Bill of Lading No. 706213742and Bill of Lading No. 706086803of the BenLine Containers Ltd.

The shipment arrived at the Port of Manila Pier 13, on April 18, 1979 in container van No. BENU 204850-9. The saidcontainer was received by E. Razon, Inc. (later known as Metro Port Service, Inc. and ARRASTRE).

The container van, which contained two shipments was stripped. One shipment was deliveredand the other shipment consisting of the imported British manufactured cigarettes

was palletized. (Due to lack of space at the Special Cargo Coral, the aforesaid cigarettes were placed in two containers

with two pallets) The CARRIER'S headchecker discovered that container van had a different padlock and the seal was tampered with. It was reported to Jose G. Sibucao, Pier Superintendent, Pier 13, and upon verification, it was found that 90 cases of

imported British manufactured cigarettes were missing. Per investigation conducted by the ARRASTRE, it was revealed that the cargo in question was not formally turned

over to it by the CARRIERbut was kept inside container van which was padlocked and sealed by the representativesof the CARRIER without any participation of the ARRASTRE.

TRIAL COURT

When the CONSIGNEE learned that 90 cases were missing, it filed a formal claim with the CARRIER, demanding thepayment of P315,000.00 representing the market value of the missing cargoes.

The CARRIER, in admitted the loss but alleged that the same occurred at Pier 13, an area absolutely under thecontrol of the ARRASTRE.

In view thereof, the CONSIGNEE filed a formal claim, with the ARRASTRE, demanding payment of the value of thegoods butsaid claim was denied.

DECISION: Exonerating the ARRASTRE of any liability on the ground that the subject container van was notformally turned over to its custody, and adjudging the CARRIER liable for the principal amount of P312,480.00representing the market value of the lost shipment, and the sum of P30,000.00 as and for attorney's fees and the costsof suit

COURT OF APPEALS

The CA affirmed the decision of the court a quo but deleted the award of attorney's fees and costs of suit.ISSUES:

1. Whether the loss occurred while the cargo in question was in the custody of E. Razon, Inc. or of Citadel Lines, Inc; and

2. Whether the stipulation limiting the liability of the carrier contained in the bill of lading is binding on the consignee.

RULING:


12/29

12

1. The subject shipment was lost while it was still in the custody of the CARRIER, and considering further that it failed to provethat the loss was occasioned by an excepted cause, the inescapable conclusion is that the CARRIER was negligent and shouldbe held liable.

Common carriers, from the nature of their business and for reasons of public policy, are bound to observeextraordinary 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.

If the goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to have actednegligently, unless they prove that they observed extra ordinary diligence as required in Article 1733 of the Civil

Code. The duty of the consignee is to prove merely that the goods were lost. Thereafter, the burden is shifted to the carrier

to prove that it has exercised the extraordinary diligence required by law.

2. The Court find the award of damages in the amount of P312,800.00 for the value of the goods lost, based on the allegedmarket value, to be erroneous.

It is clearly and expressly provided under Clause 6 of the aforementioned bills of ladingissued by the CARRIER thatits liability is limited to $2.00 per kilo.

A stipulation limiting the liability of the carrier to the value of the goods appearing in the bill of lading, unless theshipper or owner declares a greater value, is binding.

A contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction or deterioration ofthe goods is valid, if it is reasonable and just under the circumstances, and has been fairly and freely agreed upon.

The CONSIGNEE itself admits in its memorandum that the value of the goods shipped does not appear in the bills oflading.

Hence, the stipulation on the carrier's limited liability applies. There is no question that the stipulation is just andreasonable under the circumstances and has been fairly and freely agreed upon.

Art. 1750 itself in providing a limit to liability only if a greater value is not declared for the shipment in the bill oflading.

The bill of lading shows that 120 cartons weigh 2,978 kilos or 24.82 kilos per carton. Since 90 cartons were lost andthe weight of said cartons is 2,233.80 kilos, at $2.00 per kilo the CARRIER's liability amounts to only US$4,467.60.

Everett Steamship Corp vs CA

Facts: Private respondent Hernandez Trading Co. imported three crates of bus spare parts marked as MARCO C/No

12, MARCO C/No. 13 and MARCO C/No. 14, from its supplier, Maruman Trading Company, Ltd. (Maruman Trading). The

crates were shipped from Nagoya, Japan to Manila on board ADELFAEVERETTE, a vessel owned by petitioners principal

Everett Orient Lines. The said crates were covered by Bill of Lading No. NGO53MN. Upon arrival at the port of Manila, it was

discovered that the crate marked MARCO C/No. 14 was missing. Thereafter, private respondent made a formal claim upon

petitioner for the value of the lost cargo amounting to Y1,552,500.00, the amount shown in an Invoice No. MTM-941. 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. Both the lower court and the respondent ruled that the

petitioner should pay Y1,552,500.00.

Issue: Whether the stipulation in the bill of lading which limits the liability of the petitioner is valid and thus limits its liability

to Y100,000.00

Held: Yes. A stipulation in the bill of lading limiting the common carriers liability for loss or destruction of a cargo to a certainsum, unless the shipper or owner declares a greater value, is sanctioned by law, particularly Articles 1749 and 1750 of theCivil Code. In the present case, the stipulations are reasonable and just. In the bill of lading, the carrier made it clear that itsliability would only be up to One Hundred Thousand (Y100,000.00) Yen. However, the shipper, Maruman Trading, had theoption to declare a higher valuation if the value of its cargo was higher than the limited liability of thecarrier. Considering that the shipper did not declare a higher valuation, it had itself to blame for not complying withthe stipulations.The trial courts ratiocination that private respondent could not have fairly and freely agreed to the limitedliability clause in the bill of lading because the said conditions were printed in small letters does not make the bill of ladinginvalid.


13/29

13

Further, private respondents argument that it was not privy to the contract between Maruman and the petitioner was notaccepted by the Court. When private respondent formally claimed reimbursement for the missing goods from petitioner andsubsequently filed a case against the latter based on the very same bill of lading, it (private respondent) accepted theprovisions of the contract and thereby made itself a party thereto, or at least has come to court to enforce it.Thus, privaterespondent cannot now reject or disregard the carriers limited liability stipulation in the bill of lading. In other words, privaterespondent is bound by the whole stipulations in the bill of lading and must respect the same.

BRITISH AIRWAYS vs. COURT OF APPEALS, GOP MAHTANI, and PHILIPPINE AIRLINES

DOCTRINE: Benefits of limited liability are subject to waiver such as when the air carrier failed to raise timely objections

during the trial when questions and answers regarding the actual claims and damages sustained by the passenger were asked

FACTS:

On April 16, 1989, Mahtani decided to visit his relatives in Bombay, India. In anticipation of his visit, he obtained theservices of a certain Mr. Gumar to prepare his travel plans.

Since BA had no direct flights from Manila to Bombay, Mahtani had to take a flight to Hongkong via PAL, and upon arrivalin Hongkong he had to take a connecting flight to Bombay on board British Airways.

Prior to his departure, Mahtani checked in at the PAL counter in Manila his two pieces of luggage containing his clothingsand personal effects, confident that upon reaching Hongkong, the same would be transferred to the BA flight bound forBombay.

o The luggage contained:

1. personal belonging P10,000.00 2. gifts for his parents and relatives $5,000.00 Unfortunately, when Mahtani arrived in Bombay he discovered that his luggage was missing and that upon inquiry from

the BA representatives, he was told that the same might have been diverted to London. After patiently waiting for hisluggage for one week, BA finally advised him to file a claim by accomplishing the "Property Irregularity Report.

Back in the Philippines, Mahtani filed a civil case against BA and Gumar As defense, BA contended that Mahtani has no cause of action BA filed a third-party liability against PAL alleging that the reason for the non-transfer of the luggage was due to the

latter's late arrival in Hongkong, thus leaving hardly any time for the proper transfer of Mahtani's luggage to the BAaircraft bound for Bombay

PAL filed its answer to the third-party complaint, wherein it disclaimed any liability, arguing that there was, in factadequate time to transfer the luggage to BA facilities in Hongkong. Furthermore, the transfer of the luggage to Hongkongauthorities should be considered as transfer to BA.

RTC ruled in favour of Mahtani and Third-Party Complaint against third-party defendant Philippine Airlines is DISMISSEDfor lack of cause of action.

o Damages awarded: 7 000 for the value of two suitcases $400 representing the value of the contents of plaintiff's luggage 50 000 for moral and actual damages 20% of the total amount imposed against the defendant for attorney's fees and costs of this action

On appeal, CA affirmed trial courts findings Hence, this petition. BA assails the award of compensatory damages and attorney's fees, as well as the dismissal of its

third-party complaint against PAL.

ISSUE: W/N there can be a separate award for damages for the luggage and contents although Mahtani failed to declare a

higher valuation for his luggage

RULING:YES

In a contract of air carriage a declaration by the passenger of a higher value is needed to recover a greater amount. Article22(1) of the Warsaw Convention, provides as follows:

xxx xxx xxx


14/29

14

(2) In the transportation of checked baggage and goods, the liability of the carrier shall be limited to a sum of 250francs per kilogram, unless the consignor has made, at time the package was handed over to the carrier, a specialdeclaration of the value at delivery and has paid a supplementary sum if the case so requires. In that case the carrierwill be liable to pay a sum not exceeding the declared sum, unless he proves that the sum is greater than the actualvalue to the consignor at delivery.

American jurisprudence provides that an air carrier is not liable for the loss of baggage in an amount in excess of the limitsspecified in the tariff which was filed with the proper authorities, such tariff being binding, on the passenger regardless ofthe passenger's lack of knowledge thereof or assent thereto. This doctrine is recognized in this jurisdiction

Inescapable conclusion is that BA had waived the defense of limited liability when it allowed Mahtani to testify as to theactual damages he incurred due to the misplacement of his luggage, without any objection. Benefits of limited liability aresubject to waiver such as when the air carrier failed to raise timely objections during the trial when questions andanswers regarding the actual claims and damages sustained by the passenger were asked

It is a well-settled doctrine that where the proponent offers evidence deemed by counsel of the adverse party to beinadmissible for any reason, the latter has the right to object. However, such right is a mere privilege which can be waivedNecessarily, the objection must be made at the earliest opportunity, in case of silence when there is opportunity to speakmay operate as a waiver of objections. BA has precisely failed in this regard.

CA decision is MODIFIED, reinstating the third-party complaint filed by British Airways dated November 9, 1990 againstPhilippine Airlines.

o Third Party Complaint reinstated because: it is worth observing that the contract of air transportation was exclusively between Mahtani and BA, the

latter merely endorsing the Manila to Hongkong leg of the former's journey to PAL, as its subcontractor

or agent. It is undisputed that PAL, in transporting Mahtani from Manila to Hongkong acted as the agentof BA. BA has cause of action against PAL because an agent is also responsible for any negligence in the

performance of his principals action To deny BA the procedural remedy of filing a third-party complaint against PAL for the purpose of

ultimately determining who was primarily at fault as between them, is without legal basis. After all, suchproceeding is in accord with the doctrine against multiplicity of cases which would entail receiving thesame or similar evidence for both cases and enforcing separate judgments therefor. It must be borne inmind that the purpose of a third-party complaint is precisely to avoid delay and circuitry of action and toenable the controversy to be disposed of in one suit.

F. PROHIBITED AND LIMITING STIPULATIONS

G.R. No. L-16598 October 3, 1921

H. E. HEACOCK COMPANY,plaintiff-appellant,vs.

MACONDRAY & COMPANY, INC.,defendant-appellant.

FACTS:

On or about the 5th day of June, 1919, the plaintiff (Heacock) caused to be delivered on board of steamship BoltonCastle, then in the harbor of New York, four cases of merchandise one of which contained twelve (12) 8-day Edmond

clocks properly boxed and marked for transportation to Manila, and paid freight on said clocks from New York toManila in advance. The said steampship arrived in the port of Manila on or about the 10th day of September, 1919,consigned to the defendant (Macondray) as agent and representative of said vessel in said port. Neither the master ofsaid vessel nor the defendant herein, as its agent, delivered to the plaintiff the aforesaid twelve 8-day Edmond clocks,although demand was made upon them for their delivery.

The invoice value of the said twelve 8-day Edmond clocks in the city of New York was P22 and the market value of thesame in the City of Manila at the time when they should have been delivered to the plaintiff was P420.


15/29

15

The bill of lading issued and delivered to the plaintiff by the master of the said steamship Bolton Castle containedamong others, the following clauses:

1. It is mutually agreed that the value of the goods receipted for above does not exceed $500 per freight tonor, in proportion for any part of a ton, unless the value be expressly stated herein and ad valorem freight paidthereon.

9. Also, that in the event of claims for short delivery of, or damage to, cargo being made, the carrier shall notbe liable for more than the net invoice price plus freight and insurance less all charges saved, and any loss or

damage for which the carrier may be liable shall be adjusted pro rata on the said basis.

No greater value than $500, U. S. currency, per freight ton was declared by the plaintiff on the aforesaid clocks, and noad valorem freight was paid thereon.

On or about October 9, 1919, the defendant tendered to the plaintiff P76.36, the proportionate freight ton value of theaforesaid twelve 8-day Edmond clocks, in payment of plaintiff's claim, which tender plaintiff rejected.

The lower court, in accordance with clause 9 of the bill of lading above quoted, rendered judgment in favor of the plaintiffagainst the defendant for the sum of P226.02, this being the invoice value of the clocks in question plus the freight andinsurance thereon, with legal interest thereon from November 20, 1919, the date of the complaint, together with costs. Fromthat judgment both parties appealed to this court.

The plaintiff-appellant (Heacock) insists that it is entitled to recover from the defendant the market value of the clocks inquestion, to wit: the sum of P420. The defendant-appellant (Macondray), on the other hand, contends that, in accordance withclause 1 of the bill of lading, the plaintiff is entitled to recover only the sum of P76.36, the proportionate freight ton value of thesaid clocks. The claim of the plaintiff is based upon the argument that the two clause in the bill of lading above quoted, limitingthe liability of the carrier, are contrary to public order and, therefore, null and void. The defendant, on the other handcontends that both of said clauses are valid, and the clause 1 should have been applied by the lower court instead of clause 9.

ISSUES:

1. May a common carrier, by stipulations inserted in the bill of lading, limit its liability for the loss of or damage to thecargo to an agreed valuation of the latter?

2. Whether clause 1 or clause 9 of the bill of lading is to be adopted as the measure of defendant's liability.HELD:

1. Yes, it may do so.

Three kinds of stipulations have often been made in a bill of lading. The first is one exempting the carrier from any and alliability for loss or damage occasioned by its own negligence. The secondis one providing for an unqualified limitation of suchliability to an agreed valuation. And the third is one limiting the liability of the carrier to an agreed valuation unless the shipperdeclares a higher value and pays a higher rate of freight.

According to an almost uniform weight of authority, the first and second kinds of stipulations are invalid as being contrary topublic policy, but the third is valid and enforceable.

The authorities relied upon by the plaintiff-appellant (Heacock) support the proposition that the first and second stipulationsin a bill of lading are invalid which either exempt the carrier from liability for loss or damage occasioned by its negligence , orprovide for an unqualified limitation of such liability to an agreed valuation.

A reading of clauses 1 and 9 of the bill of lading, however, clearly shows that the present case falls within the third stipulationto wit: That a clause in a bill of lading limiting the liability of the carrier to a certain amount unless the shipper declares ahigher value and pays a higher rate of freight, is valid and enforceable.


16/29

16

A limitation of liability based upon an agreed value to obtain a lower rate does not conflict with any sound principle of publicpolicy; and it is not conformable to plain principles of justice that a shipper may understate value in order to reduce the rateand then recover a larger value in case of loss.

It seems clear from the foregoing authorities that the clauses (1 and 9) of the bill of lading here in question are not contrary topublic order. Article 1255 of the Civil Code provides that "the contracting parties may establish any agreements, terms andconditions they may deem advisable, provided they are not contrary to law, morals or public order."Said clauses of the bill olading are, therefore, valid and binding upon the parties thereto.

2. It will be noted, however, that whereas clause 1 contains only an implied undertaking to settle in case of loss on the basis ofnot exceeding $500 per freight ton, clause 9 contains an express undertaking to settle on the basis of the net invoice price plusfreight and insurance less all charges saved. "Any loss or damage for which the carrier may be liable shall be adjustedprorata on the said basis," clause 9 expressly provides. It seems to the Court that there is an irreconcilable conflict between thetwo clauses with regard to the measure of defendant's liability. It is difficult to reconcile them without doing violence to thelanguage used and reading exceptions and conditions into the undertaking contained in clause 9 that are not there. This beingthe case, the bill of lading in question should be interpreted against the defendant carrier, which drew said contract. "A writtencontract should, in case of doubt, be interpreted against the party who has drawn the contract. It is a well-known principle of

construction that ambiguity or uncertainty in an agreement must be construed most strongly against the party causing it. These

rules as applicable to contracts contained in bills of lading. "In construing a bill of lading given by the carrier for the safetransportation and delivery of goods shipped by a consignor, the contract will be construed most strongly against the carrierand favorably to the consignor, in case of doubt in any matter of construction."

It follows from all of the foregoing that the judgment appealed from should be affirmed.

SWEET LINES, INC. vs. HON. BERNARDO TEVES, Presiding Judge, CFI of Misamis Oriental Branch VII, LEOVIGILDOTANDOG, JR., and ROGELIO TIRO G.R. No. L-37750 May 19, 1978

FACts:Private respondents Atty. Leovigildo Tandog and Rogelio Tiro, a contractor by professions, bought tickets for Voyage 90 onDecember 31, 1971 at the branch office of petitioner, a shipping company transporting inter-island passengers and cargoes, atCagayan de Oro City. Respondents were to board petitioner's vessel, M/S "Sweet Hope" bound for Tagbilaran City via the portof Cebu. Upon learning that the vessel was not proceeding to Bohol, since many passengers were bound for Surigao, privaterespondents per advice, went to the branch office for proper relocation to M/S "Sweet Town". Because the said vessel wasalready filled to capacity, they were forced to agree "to hide at the cargo section to avoid inspection of the officers of thePhilippine Coastguard." Private respondents alleged that they were, during the trip," "exposed to the scorching heat of the sunand the dust coming from the ship's cargo of corn grits," and that the tickets they bought at Cagayan de Oro City for Tagbilaranwere not honored and they were constrained to pay for other tickets. In view thereof, private respondents sued petitioner fordamages and for breach of contract of carriage in the alleged sum of P10,000.00 before respondents Court of First Instance ofMisamis Oriental. 2

Petitioner moved to dismiss the complaint on the ground of improper venue. This motion was premised on the conditionprinted at the back of the tickets, i.e., Condition No. 14, which reads:

14. It is hereby agreed and understood that any and all actions arising out of the conditions and provisions of thisticket, irrespective of where it is issued, shall be filed in the competent courts in the City of Cebu.

The motion was denied by the trial court. Hence, Petitioner filed with the Supreme Court for a prohibition for preliminary

injunction, 'alleging that the respondent judge has departed from the accepted and usual course of judicial proceeding" and"had acted without or in excess or in error of his jurisdiction or in gross abuse of discretion.

Petitioner contends that Condition No. 14 is valid and enforceable, since private respondents acceded to it when theypurchased passage tickets at its Cagayan de Oro branch office and took its vessel M/S "Sweet Town" for passage to Tagbilaran,Bohol that the condition of the venue of actions in the City of Cebu is proper since venue may be validly waived.

On the other hand, private respondents claim that Condition No. 14 is not valid, that the same is not an essential element of thecontract of carriage, being in itself a different agreement which requires the mutual consent of the parties to it; that they hadno say in its preparation, the existence of which they could not refuse, hence, they had no choice but to pay for the tickets and


17/29

17

to avail of petitioner's shipping facilities out of necessity; that the carrier "has been exacting too much from the public byinserting impositions in the passage tickets too burdensome to bear," that the condition which was printed in fine letters is animposition on the riding public and does not bind respondents.

Issue:Whether or not a common carrier engaged in inter-island shipping may stipulate thru condition printed at the back of passagetickets to its vessels that any and all actions arising out of the contract of carriage should be filed only in a particular provinceor city, in this case the City of Cebu, to the exclusion of all others?

Held:No. The Supreme Court held that with respect to the fourteen (14) conditions one of which is "Condition No. 14" which is in

issue in this case printed at the back of the passage tickets, these are commonly known as "contracts of adhesion," the

validity and/or enforceability of which will have to be determined by the peculiar circumstances obtaining in each case and

the nature of the conditions or terms sought to be enforced. For, "(W)hile generally, stipulations in a contract come about after

deliberate drafting by the parties thereto, ... there are certain contracts almost all the provisions of which have been drafted

only by one party, usually a corporation. Such contracts are called contracts of adhesion, because the only participation of the

party is the signing of his signature or his 'adhesion' thereto. Insurance contracts, bills of lading, contracts of make of lots on

the installment plan fall into this category"

By the peculiar circumstances under which contracts of adhesion are entered into namely, that it is drafted only by one

party, usually the corporation, and is sought to be accepted or adhered to by the other party, in this instance the passengers,

private respondents, who cannot change the same and who are thus made to adhere thereto on the "take it or leave it" basis

certain guidelines in the determination of their validity and/or enforceability have been formulated in order to that justice and

fair play characterize the relationship of the contracting parties.

Considered in the light of the foregoing norms and in the context of circumstances prevailing in the inter-island shippingindustry in the country today, We find and hold thatCondition No. 14 printed at the back of the passage tickets should beheld as void and unenforceable for the following reasons first, under circumstances obligation in the inter-islandshipping industry, it is not just and fair to bind passengers to the terms of the conditions printed at the back of thepassage tickets, on which Condition No. 14 is Printed in fine letters, and second, Condition No. 14 subverts the publicpolicy on transfer of venue of proceedings of this nature, since the same will prejudice rights and interests ofinnumerable passengers in different parts of the country who, under Condition No. 14, will have to file suits againstpetitioner only in the City of Cebu.

Under these circumstances, it is hardly just and proper to expect the passengers to examine their tickets received fromcrowded/congested counters, more often than not during rush hours, for conditions that may be printed much charge themwith having consented to the conditions, so printed, especially if there are a number of such conditions in fine print, as in thiscase.

Again, it should be noted that Condition No. 14 was prepared solely at the ms of the petitioner, respondents had no say in itspreparation. Neither did the latter have the opportunity to take the conditions into account prior to the purchase of theirtickets. For, unlike the small print provisions of contracts the common example of contracts of adherence which areentered into by the insured in his awareness of said conditions, since the insured is afforded the op to and co the same,passengers of inter-island vessels do not have the same chance, since their alleged adhesion is presumed only from the factthat they purchased the tickets.

Condition No. 14 is subversive of public policy on transfers of venue of actions. For, although venue may be changed ortransferred from one province to another by agreement of the parties in writing to Rule 4, Section 3, of the Rules of Court, suchan agreement will not be held valid where it practically negates the action of the claimants, such as the private respondentsherein. The philosophy underlying the provisions on transfer of venue of actions is the convenience of the plaintiffs as well ashis witnesses and to promote the ends of justice. Considering the expense and trouble a passenger residing outside of CebuCity would incur to prosecute a claim in the City of Cebu, he would most probably decide not to file the action at all. Thecondition will thus defeat, instead of enhance, the ends of justice. Upon the other hand, petitioner has branches or offices in therespective ports of call of its vessels and can afford to litigate in any of these places. Hence, the filing of the suit in the CFI ofMisamis Oriental, as was done in the instant case, will not cause inconvenience to, much less prejudice, petitioner.


18/29

18

ALITALIA v. INTERMEDIATE APPELLATE COURT and FELIPA E. PABLO

Facts:

Dr. Felipa Pablo, an associate professor in the University of the Philippines and a research grantee of the PhilippineAtomic Energy Agency, was invited to take part at a meeting of the Department of Research and Isotopes in Italy in

view of her specialized knowledge in foreign substances in food and the agriculture environment. She would be the

second speaker on the first day of the meeting.

Dr. Pablo booked passage on petitioner Alitalia. She arrived in Milan on the day before the meeting, but was told that her luggage was delayed and was in a succeeding

flight from Rome to Milan. The luggage included her materials for the presentation.

The succeeding flights did not carry her luggage. Desperate, she went to Rome to try to locate the luggage herself, but to no avail. She returned to Manila without

attending the meeting.

She demanded reparation for the damages. She rejected Alitalias offer of free airline tickets and commenced an actionfor damages.

As it turned out, the luggage was actually forwarded to Ispra, but only a day after the scheduled appearance. It wasreturned to her after 11 months.

The trial court ruled in favor of Dr. Pablo, and this was affirmed by the Court of Appeals.

Issues:WON the Warsaw Convention should be applied to limit Alitalias liability.

WON Dr. Pablo is entitled to nominal damages.

Held:

NO.Under the Warsaw Convention, an air carrier is made liable for damages for:

a. The death, wounding or other bodily injury of a passenger if the accident causing it took place on board the aircraft or I the

course of its operations of embarking or disembarking;

b. The destruction or loss of, or damage to, any registered luggage or goods, if the occurrence causing it took place during the

carriage by air; and

c. Delay in the transportation by air of passengers, luggage or goods.

The convention however denies to the carrier availment of the provisions which exclude or limit his liability, if the damage is

caused by his wilful misconduct, or by such default on his part as is considered to be equivalent to wilful misconduct. The

Convention does not thus operate as an exclusive enumeration of the instances of an airline's liability, or as an absolute limit of

the extent of that liability. It should be deemed a limit of liability only in those cases where the cause of the death or injury to

person, or destruction, loss or damage to property or delay in its transport is not attributable to or attended by any wilfu

misconduct, bad faith, recklessness, or otherwise improper conduct on the part of any official or employee for which the

carrier is responsible, and there is otherwise no special or extraordinary form of resulting injury.

In the case at bar, no bad faith or otherwise improper conduct may be ascribed to the employees of petitioner airline; and Dr.

Pablo's luggage was eventually returned to her, belatedly, it is true, but without appreciable damage. The fact is, nevertheless,

that some species of injury was caused to Dr. Pablo because petitioner ALITALIA misplaced her baggage and failed to deliver it

to her at the time appointed - a breach of its contract of carriage. Certainly, the compensation for the injury suffered by Dr.Pablo cannot under the circumstances be restricted to that prescribed by the Warsaw Convention for delay in the transport of

baggage.

YES.She is not, of course, entitled to be compensated for loss or damage to her luggage. She is however entitled to nominal

damages which, as the law says, is adjudicated in order that a right of the plaintiff, which has been violated or invaded by the

defendant, may be vindicated and recognized, and not for the purpose of indemnifying the plaintiff that for any loss suffered

and this Court agrees that the respondent Court of Appeals correctly set the amount thereof at PhP 40,000.00.


19/29

19

The Court also agrees that respondent Court of Appeals correctly awarded attorneys fees to Dr. Pablo and the amount of PhP

5,000.00 set by it is reasonable in the premises. The law authorizes recovery of attorneys fees inter alia where, as here, the

defendants act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest

or where the court deems it just and equitable.

The opportunity to claim the honor or distinction was irretrievably lost by Dr. Pablo because of Alitalia's breach of its contract

Apart from this, there can be no doubt that Dr. Pablo underwent profound distress and anxiety, which gradually turned to

panic and finally despair, from the time she learned that her suitcases were missing up to the time when, having gone to Rome

she finally realized that she would no longer be able to take part in the conference. As she herself put it, she was reallyshocked and distraught and confused. Certainly, the compensation for the injury suffered by Dr. Pablo cannot under the

circumstances be restricted to that prescribed by the Warsaw Convention for delay in the transport of baggage.

Pan American Airways vs. IAC. GR L-70462, 11 August 1988

FACTS: On 25 April 1978, Rene V. Pangan, president and general manager of the Sotang Bastos and Archer Productions, whilein San Francisco, California and Primo Quesada of Prime Films, San Francisco, California, entered into an agreement wherebythe former, for and in consideration of the amount of US $2,500.00 per picture, bound himself to supply the latter with threefilms. Ang Mabait, Masungit at ang Pangit, Big Happening with Chikiting and Iking, and Kambal Dragon for exhibition in theUnited States. It was also their agreement that Pangan, et. al. would provide the necessary promotional and advertisingmaterials for said films on or before 30 May 1978.

On his way home to the Philippines, Pangan visited Guam where he contacted Leo Slutchnick of the Hafa Adai

Organization. Pangan likewise entered into a verbal agreement with Slutchnick for the exhibition of two of the films a at theHafa Adai Theater in Guam on 30 May 1978 for the consideration of P7,000.00 per picture. Pangan undertook to provide thenecessary promotional and advertising materials for said films on or before the exhibition date on 30 May 1978.

By virtue of the agreements, Pangan caused the preparation of the requisite promotional handbills and still picturesfor which he paid the total sum of P12,900.00. Likewise in preparation for his trip abroad to comply with his contracts, Panganpurchased 14 clutch bags, 4 capiz lamps and 4 barong tagalog, with a total value of P4,400.00.

On 18 May 1978, Pangan obtained from Pan Ams Manila Office, through the Your Travel Guide, an economy classairplane ticket 0269207406324 for passage from Manila to Guam on Pan Ams Flight 842 of 27 May 1978, upon payment byPangan of the regular fare. The Your Travel Guide is a tour and travel office owned and managed by plaintiffs witness Mila dela Rama.

On 27 May 1978, two hours before departure time Pangan was at Pan Ams ticket counter at the Manila InternationalAirport and presented his ticket and checked in his two luggages, for which he was given baggage claim tickets 963633 and963649. The two luggages contained the promotional and advertising materials, the clutch bags, barong tagalog and his

personal belongings. Subsequently, Pangan was informed that his name was not in the manifest and so he could not take Flight842 in the economy class. Since there was no space in the economy class, Pangan took the first class because he wanted to beon time in Guam to comply with his commitment, paying an additional sum of $112.00.

When Pangan arrived in Guam on the date of 27 May 1978, his two luggages did not arrive with his flight, as aconsequence of which his agreements with Slutchnick and Quesada for the exhibition of the films in Guam and in the UnitedStates were cancelled. Thereafter, he filed a written claim for his missing luggages.

Upon arrival in the Philippines, Pangan contacted his lawyer, who made the necessary representations to protest asto the treatment which he received from the employees of PanAm and the loss of his two luggages. Pan Am assured Panganthat his grievances would be investigated and given its immediate consideration. Due to Pan Ams failure to communicate withPangan about the action taken on his protests, a complaint was filed by Pangan.

The CFI found Pan Am liable and (1) ordered Pan Am to pay Pangan, et. al. the sum of P83,000.00, for actual damageswith interest thereon at the rate of 14% per annum from 6 December 1978, when the complaint was filed, until the same isfully paid, plus the further sum of P10,000.00 as attorneys fees; (2) ordered Pan Am to pay Pangan the sum of P8,123.34, for

additional actual damages, with interest thereon at the rate of 14% per annum from 6 December 1978, until the same is fullypaid; (3) dismissed the counterclaim interposed by Pan-Am; and (4) ordered Pan-Am to pay the costs of suit.

On appeal, the then Intermediate Appellate Court affirmed the trial court decision. Hence, the petition for review.

ISSUES: 1. Whether or not the respondent court erred as a matter of law in affirming the trial court's award of actual damagesbeyond the limitation of liability set forth in the Warsaw Convention and the contract of carriage.

2. Whether or not the respondent court erred as a matter of law in affirming the trial court's award of actual damagesconsisting of alleged lost profits in the face of this Court's ruling concerning special or consequential damages as set forth inMendoza v. PhilippineAirlines [90 Phil. 836 (1952).


20/29

20

HELD:1. The Supreme Court granted the Petition, set aside the Decision of the Intermediate Appellate Court, and rendered anew judgment ordering Pan Am to pay Pangan damages in the amount of US$600.00 or its equivalent in Philippinecurrency at the time of actual payment.

- Pertinent Condition of Carriage printed at the back of the ticketThe pertinent Condition of Carriage printed at the back of the plane ticket reads: (8) BAGGAGE LIABILITY . . . The

total liability of the Carrier for lost or damage baggage of the passenger is LIMITED TO P100.00 for each ticket unless apassenger declares a higher valuation in excess of P100.00, but not in excess, however, of a total valuation of P1,000.00 and

additional charges are paid pursuant to Carriers tariffs.

-Ong Yiu case applicableIn the case of Ong Yiu v. Court of Appeals [G.R. No. L-40597, June 29, 1979, 91 SCRA 223), the Court sustained the

validity of a printed stipulation at the back of an airline ticket limiting the liability of the carrier for lost baggage to a specifiedamount and ruled that the carriers liability was limited to said amount s ince the passenger did not declare a higher valuemuch less pay

chapter 4 cases with page numbers

Documents