Edna Diago Lhuillier vs British AirwaysGR 171092March 15, 2010

FACTS: On February 28, 2005, petitioner Lhuillier took respondent British Airwayss flight 548 from London, United Kingdom to Rome, Italy. Once on board, she allegedly requested Julian Halliday, one of the respondents flight attendants, to assist her in placing her hand-carried luggage in the overhead bin. However, Halliday allegedly refused to help and assist her, and even sarcastically remarked that "If I were to help all 300 passengers in this flight, I would have a broken back!" Petitioner further alleged that when the plane was about to land in Rome, Italy, another flight attendant, Nickolas Kerrigan, singled her out from among all the passengers in the business class section to lecture on plane safety. Allegedly, Kerrigan made her appear to the other passengers to be ignorant, uneducated, stupid, and in need of lecturing on the safety rules and regulations of the plane.

Upon arrival in Rome, petitioner complained to respondents ground manager and demanded an apology. However, the latter declared that the flight stewards were "only doing their job; prompting petitioner to file herein complaint for damages.

On April 28, 2005, petitioner filed a Complaint for damages against respondent before the RTC of Makati City. Respondent filed a Motion to Dismiss on grounds of lack of jurisdiction over the case and over the person of the respondent. Respondent alleged that only the courts of London, United Kingdom or Rome, Italy, have jurisdiction over the complaint for damages pursuant to the Warsaw Convention, Article 28(1) of which provides that:

An action for damages must be brought at the option of the plaintiff, either before the court of domicile of the carrier or his principal place of business, or where he has a place of business through which the contract has been made, or before the court of the place of destination.

Petitioner argues that her cause of action arose not from the contract of carriage, but from the tortious conduct committed by airline personnel of respondent in violation of the provisions of the Civil Code on Human Relations. Since her cause of action was not predicated on the contract of carriage, petitioner asserts that she has the option to pursue this case in this jurisdiction pursuant to Philippine laws.In contrast, respondent maintains that petitioners claim for damages fell within the ambit of Article 28(1) of the Warsaw Convention. As such, the same can only be filed before the courts of London, United Kingdom or Rome, Italy.

The RTC dismissed the case hence this petition.

ISSUE: Whether or not Philippine courts have jurisdiction over a tortious conduct committed against a Filipino citizen and resident by an airline personnel of a foreign carrier.

HELD: NO. It is settled that the Warsaw Convention has the force and effect of law in this country. In Santos III v. NOA we held that:

The Republic of the Philippines is a party to the Convention for the Unification of Certain Rules Relating to International Transportation by Air, otherwise known as the Warsaw Convention. It took effect on February 13, 1933. The Convention was concurred in by the Senate, through its Resolution No. 19, on May 16, 1950. The Philippine instrument of accession was signed by President Elpidio Quirino on October 13, 1950, and was deposited with the Polish government on November 9, 1950. The Convention became applicable to the Philippines on February 9, 1951. On September 23, 1955, President Ramon Magsaysay issued Proclamation No. 201, declaring our formal adherence thereto, to the end that the same and every article and clause thereof may be observed and fulfilled in good faith by the Republic of the Philippines and the citizens thereof.

The Convention is thus a treaty commitment voluntarily assumed by the Philippine government and, as such, has the force and effect of law in this country. The Warsaw Convention applies because the air travel, where the alleged tortious conduct occurred, was between the United Kingdom and Italy, which are both signatories to the Warsaw Convention. Article 1 of the Warsaw Convention provides:

1. This Convention applies to all international carriage of persons, luggage or goods performed by aircraft for reward. It applies equally to gratuitous carriage by aircraft performed by an air transport undertaking.

2. For the purposes of this Convention the expression "international carriage" means any carriage in which, according to the contract made by the parties, the place of departure and the place of destination, whether or not there be a break in the carriage or a transhipment, are situated either within the territories of two High Contracting Parties, or within the territory of a single High Contracting Party, if there is an agreed stopping place within a territory subject to the sovereignty, suzerainty, mandate or authority of another Power, even though that Power is not a party to this Convention. A carriage without such an agreed stopping place between territories subject to the sovereignty, suzerainty, mandate or authority of the same High Contracting Party is not deemed to be international for the purposes of this Convention. (Emphasis supplied)

Thus, when the place of departure and the place of destination in a contract of carriage are situated within the territories of two High Contracting Parties, said carriage is deemed an "international carriage". The High Contracting Parties referred to herein (UK and Italy) were the signatories to the Warsaw Convention and those which subsequently adhered to it. Under Article 28(1) of the Warsaw Convention, the plaintiff may bring the action for damages before

1. the court where the carrier is domiciled;2. the court where the carrier has its principal place of business;3. the court where the carrier has an establishment by which the contract has been made; or4. the court of the place of destination.In this case, it is not disputed that respondent is a British corporation domiciled in London, United Kingdom with London as its principal place of business. Hence, under the first and second jurisdictional rules, the petitioner may bring her case before the courts of London in the United Kingdom. In the passenger ticket and baggage check presented by both the petitioner and respondent, it appears that the ticket was issued in Rome, Italy. Consequently, under the third jurisdictional rule, the petitioner has the option to bring her case before the courts of Rome in Italy. Finally, both the petitioner and respondent aver that the place of destination is Rome, Italy, which is properly designated given the routing presented in the said passenger ticket and baggage check. Accordingly, petitioner may bring her action before the courts of Rome, Italy. We thus find that the RTC of Makati correctly ruled that it does not have jurisdiction over the case filed by the petitioner.

PAL v HON. ADRIANO SAVILLO, Presiding Judge of RTC Branch 30 , Iloilo City, and SIMPLICIO GRIOGR No. 149547July 4, 2008

FACTS: Private respondent Simplicio was invited to participate in the 1993 ASEAN Seniors Annual Golf Tournament held in Jakarta, Indonesia. He and several companions decided to purchase their respective passenger tickets from PAL with the following points of passage: MANILA-SINGAPORE-JAKARTA-SINGAPORE-MANILA. Private respondent and his companions were made to understand by PAL that its plane would take them from Manila to Singapore, while Singapore Airlines would take them from Singapore to Jakarta.

Upon arrival in Singaore, Grio and his companions proceeded to the Singapore Airlines office to check-in for their flight to Jakarta however Singapore Airlines rejected the tickets because they were not endorsed by PAL. It was explained that if Singapore Airlines honored the tickets without PALs endorsement, PAL would not pay Singapore Airlines for their passage. Grio tried to contact PALs office at the airport but it was closed. Eventually, Grio and his companions were forced to purchase tickets from Garuda Airlines and board its last flight bound for Jakarta and they had to arrange for their transportation to the hotel at a very late hour.

Upon his return to the Philippines, Grio sent demand letters seeking compensation for moral damages to PAL and to Singapore Airlines. However, both airlines disowned liability and blamed each other for the fiasco. Later, Grio filed a Complaint for Damages before the RTC.

PAL filed a Motion to Dismiss arguing that the Warsaw Convention,particularly Article 29 thereof, governed this case, as it provides that any claim for damages in connection with the international transportation of persons is subject to the prescription period of two years. Since the Complaint was filed more than three years after PAL received the demand letter on, it was already barred by prescription.

The RTC denied the Motion to Dismiss and maintained that the provisions of the Civil Code and other pertinent laws of the Philippines, not the Warsaw Convention, were applicable to the present case. The CA likewise dismissed the petition filed by PAL and applied Article 1144 of the Civil Code, which allowed for a ten-year prescription period.

ISSUE: Whether or not the provisions of the Warsaw Convention are applicable in this case

RULING: NO. The Warsaw Convention does not "exclusively regulate" the relationship between passenger and carrier on an international flight.InUnited Airlines v. Uy,18this Court distinguished between the (1) damage to the passengers baggage and (2) humiliation he suffered at the hands of the airlines employees. The first cause of action was covered by the Warsaw Convention which prescribes in two years, while the second was covered by the provisions of the Civil Code on torts, which prescribes in four years.

In the case at hand, Singapore Airlines barred private respondent from boarding the Singapore Airlines flight because PAL allegedly failed to endorse the tickets of private respondent and his companions, despite PALs assurances to respondent that Singapore Airlines had already confirmed their passage. While this fact still needs to be heard and established by adequate proof before the RTC, an action based on these allegations will not fall under the Warsaw Convention, since the purported negligence on the part of PAL did not occur during the performance of the contract of carriage but days before the scheduled flight. Thus, the present action cannot be dismissed based on the statute of limitations provided under Article 29 of the Warsaw Convention.

These claims are covered by the Civil Code provisions on tort, and not within the purview of the Warsaw Convention. Hence, the applicable prescription period is that provided under Article 1146 of the Civil Code:

Art. 1146. The following actions must be instituted within four years:(1) Upon an injury to the rights of the plaintiff;(2) Upon a quasi-delict.

Grios Complaint was filed with the RTC on 15 August 1997, which was less than four years since PAL received his extrajudicial demand on 25 January 1994. Thus, Grios claims have not yet prescribed and PALs Motion to Dismiss must be denied.

Agustino B. Ong Yiu vs. Court of Appeals and PALG.R. No. L- 40597June 29, 1979

FACTS: Ong Yiu, a practicing lawyer, the herein petitioner, engaged on the service of PAL as a paying passenger. On August 26, 1967, Ong Yiu was bound for Butuan City from Cebu City, for a scheduled trial. As a passenger, he checked in one piece of luggage which he was issued a Claim Check. Upon arrival at Butuan City, he found out that his luggage was missing. He then approached the porter clerk about the matter. It was then found out that the said luggage was transported to Manila, instead of doing so to Butuan City. The porter clerk informed Ong Yiu that the said luggage will be transported from Manila to Cebu to Butuan City on the following day. The next day, Ong Yiu went back to Butuan City airport to check if the luggage has already arrived. Knowing that the same was not yet delivered at the Butuan City airport, Ong Yiu left the premises. After few hours, the luggage arrived but since the latter has already left, the driver who used to drive the petitioner delivered the luggage to the latter with the notification that the luggage has arrived with its lock opened. Upon inspection, Ong Yiu noticed that a folder containing documents was missing. As a consequence, Ong Yiu requested for the postponement of the trial he was supposed to attend in Butuan City.

Petitioner asked for the investigation of his missing folder but the PAL failed to trace where the folder is. Petitioner then demanded for damages for breach of contract of transportation against PAL. The trail court awarded the sum of P80,000 for moral damages and P30,000 for exemplary damages. Both parties appealed on the CA which the latter, on its decision,found out that PAL did not act in bad faith, hence, removed the moral and exemplary damages in favor of Ong Yiu and ordered PAL to pay the latter with P100, in pursuance to the stipulation written on the ticket issued by PAL to Ong Yiu; thus, this appeal.

ISSUE: Whether or not PAL acted in bad faith and Ong Yiu should be paid for moral and exemplary damages due to breach of contract of transportation.

RULING: NO. Although PAL is guilty of negligence, the SC found out that the latter is guilty of simple negligence only. The efforts of PAL on locating the luggage proved that it acted in good faith and with due diligence of duty. Moreover, it was stated that Ong Yiu should have received and checked his luggage upon the latters arrival on the airport if the former waited a little longer. Furthermore, petitioner is not entitled of the moral and exemplary damages due to following findings:

(a) Ong Yiu failed to declare a higher value of the luggage;(b) Ong Yiu did not pay for any additional transportation charge;(c) while it may be true that petitioner had not signed the plane ticket, he is bound by the provisions thereof.

The plane ticket is regarded as a contract. Nevertheless, it is a contract of adhesion. A contract of adhesion is that where one party imposes a ready-made form of contact on the other. It is not entirely prohibited by the law. The one who adhered to the contract is in reality free to reject it entirely; if he adheres, he gives his consent.

Therefore, the Supreme Court ruled that Ong Yiu cannot claim damages higher than P100 because of his failure to declare a greater value of the luggage and in accordance with the stipulation of the contract of adhesion, in which he consented, as in this case, the place ticket which was issued to him.

EVERETT STEAMSHIP CORPORATION v CA and HERNANDEZ TRADING CO. INC.G.R. No. 122494October 8, 1998

FACTS: Private respondent Hernandez Trading Co. Inc. imported three crates of bus spare parts from its supplier, Maruman Trading Company, Ltd. (Maruman Trading), a foreign corporation based in Aichi, Japan. The crates were shipped from Nagoya, Japan to Manila on board "ADELFAEVERETTE," a vessel owned by petitioner's 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 one of the crates was missing. This was confirmed and admitted by petitioner in its letter of January 13, 1992 addressed to private respondent, which thereafter 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 dated November 14, 1991. However, petitioner offered to pay only Y100,000.00,, 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 against petitioner.

ISSUE: Whether or not the limited liability clause in the bill of lading is valid.

RULING: YES. A stipulation in the bill of lading limiting the common carrier's liability for loss or destruction of a cargo to a certain sum, unless the shipper or owner declares a greater value, is sanctioned by law, particularly Articles 1749 and 1750 of the Civil Code which provide:Art. 1749. A stipulation that the common carrier's liability is limited to the value of the goods appearing in the bill of lading, unless the shipper or owner declares a greater value, is binding.

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

The bill of lading subject of the present controversy specifically provides, among others:

Clause 18. All claims for which the carrier may be liable shall be adjusted and settled on the basis of the shipper's net invoice cost plus freight and insurance premiums, if paid, and in no event shall the carrier be liable for any loss of possible profits or any consequential loss.

The carrier shall not be liable for any loss of or any damage to or in any connection with, goods in an amount exceeding One Hundred thousand Yen in Japanese Currency (Y100,000.00) or its equivalent in any other currency per package or customary freight unit (whichever is least) unless the value of the goods higher than this amount is declared in writing by the shipper before receipt of the goods by the carrier and inserted in the Bill of Lading and extra freight is paid as required.The above stipulations are, to our mind, reasonable and just. In the bill of lading, the carrier made it clear that its liability would only be up to One Hundred Thousand (Y100,000.00) Yen. However, the shipper, Maruman Trading, had the option to declare a higher valuation if the value of its cargo was higher than the limited liability of the carrier. Considering that the shipper did not declare a higher valuation, it had itself to blame for not complying with the stipulations.

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 respondent is bound by the whole stipulations in the bill of lading and must respect the same.

The bill of lading in question confirms petitioner's contention that it did not know of the contents, quantity and value of "the shipment which consisted of three pre-packed crates described in the Bill of Lading merely as 3 CASES SPARE PARTS." To defeat the carrier's limited liability, the aforecited Clause 18 of the bill of lading requires that the shipper should have declared in writing a higher valuation of its goods before receipt thereof by the carrier and insert the said declaration in the bill of lading, with extra freight paid. These requirements in the bill of lading were never complied with by the shipper, hence, the liability of the carrier under the limited liability clause stands. The commercial invoice does not in itself sufficiently and convincingly show that petitioner has knowledge of the value of the cargo as contended by private respondent. No other evidence was proffered by private respondent to support is contention.

DECISION: In fine, the liability of petitioner for the loss of the cargo is limited to One Hundred Thousand (Y100,000.00) Yen, pursuant to Clause 18 of the bill of lading.

ALITALIA v IAC and FELIPA E. PABLOGR No. 71929December 4, 1990

FACTS: Dr. Felipa Pabloan associate professor in the University of the Philippines, and a research grantee ofthe Philippine Atomic Energy Agencywas invited to take part at ameeting of the Department of Research and Isotopes of the United Nationsin Ispra, Italy. To fulfillthis engagement, Dr. Pablo booked passage on petitioner airline, ALITALIA. She arrived in Milan onthe day before the meeting. She was however told by the ALITALIA personnelthere atMilan that her luggage was "delayed inasmuch as the same . . . (was) in one of thesucceeding flights from Rome to Milan." Her luggage consisted of two(2) suitcases: one contained her clothing and other personal items; the other, her scientific papers, slides and other research material. But the other flights arriving from Rome did nothave her baggage on board. By then feeling desperate, she went to Rome to try to locate her bagsherself. However, her baggage could not be found. Completely distraught and discouraged, she returned to Manila without attending the meeting in Ispra, Italy.

Once back in Manila shedemanded that ALITALIA make reparation for the damages thus suffered by her. She rejected Alitalias offer of free airline tickets and commenced an action for damages. As it turned out, the luggage was actually forwarded to Ispra, but onlya day after the scheduled appearance. It was returned to her after 11 months.

The trial court ruled in favor ofDr. Pablo awarding P20,000 as nominal damages, the Appellate Court not only affirmed the Trial Court's decision but alsoincreased the award of nominal damage spayable by ALITALIA to P40,000.

ISSUE: Whether or not the Warsaw Convention should have been appliedto limit ALITALIA'S liability.

RULING: NO. The Warsaw Convention provides that an air carrier is made liable for damages when: (1) the death, wounding or other bodily injury of a passenger if the accident causing it took place on board the aircraft or in the course of its operations of embarking or disembarking; (2) the destruction or loss of, or damage to, any registered luggage or goods, if theoccurrencecausing it took place during the carriage by air"; and (3) delay in the transportation by air ofpassengers, luggage or goods.The Warsaw Convention however denies to the carrier availment "of the provisions which exclude or limit his liability, if the damage is caused byhis wilful misconduct or by such default on hispart as, in accordance with the law of the court seized ofthe case, is considered to beequivalent to willful misconduct," or "if the damage is (similarly) caused . . byany agent of the carrier acting within the scope ofhis employment.

The Convention's provisions, in short, do not"regulate or exclude liability for other breaches of contract by the carrier" or misconduct of its officers and employees, or for someparticular or exceptional type of damage. On the other hand, the Warsaw Convention has invariably been held inapplicable, or as notrestrictive of the carrier's liability, where there was satisfactory evidence of malice or bad faith attributable to its officers and employees.

In the case at bar, no bad faith or otherwise improper conduct may beascribed to the employees ofpetitioner airline; and Dr. Pablo's luggage waseventually returned to her, belatedly, it is true, but withoutappreciable damage. The fact is, nevertheless, that somespecies of injury was caused to Dr.Pablo because petitioner ALITALIA misplaced her baggage and failed to deliver itto her at the time appointed- a breach of its contract of carriage. Certainly, the compensation for the injury suffered by Dr. Pablo cannotunder the circumstances be restricted to that prescribed by the Warsaw Convention for delay in the transportof baggage.

CHINA AIRLINES v DANIEL CHIOKGR No. 152122July 30, 2003

FACTS: Daniel Chiok purchased from China Airlines, Ltd. (CAL for brevity) airline passenger ticket for air transportation covering Manila-Taipei-Hongkong-Manila. Said ticket was exclusively endorseable to Philippine Airlines, Ltd. (PAL for brevity). "Subsequently Chiok took his trip from Manila to Taipei using ticket. When he arrived in Taipei, he went to the CAL office and confirmed his Hongkong to Manila trip on board PAL Flight No. PR 311. The CAL office attached a yellow sticker appropriately indicating that his flight status was OK. When Chiok reached Hongkong, he went to the PAL office and sought to reconfirm his flight back to Manila. The PAL office confirmed his return trip on board Flight No. PR 311 and attached its own sticker.

On November 24, 1981, Chiok proceeded to Hongkong International Airport for his return trip to Manila. However, upon reaching the PAL counter, Chiok saw a poster stating that PAL Flight No. PR 311 was cancelled because of a typhoon in Manila. He was then informed that all the confirmed ticket holders of PAL Flight No. PR 311 were automatically booked for its next flight, which was to leave the next day. He then informed PAL personnel that, being the founding director of the Philippine Polysterene Paper Corporation, he ha[d] to reach Manila on November 25, 1981 because of a business option which he ha[d] to execute on said date.

On November 25, 1981, Chiok went to the airport. Cathay Pacific stewardess Lok ha[d] taken and received Chioks plane ticket and his luggage. Subsequently, Carmen (PALs terminal supervisor), informed Chiok that his name did not appear in PALs computer list of passengers and therefore could not be permitted to board PAL Flight No. PR 307.

Meanwhile, Chiok requested Carmen to put into writing the alleged reason why he was not allowed to take his flight. The latter then wrote the following, to wit: PAL STAFF CARMEN CHAN CHKD WITH R/C KENNY AT 1005H NO SUCH NAME IN COMPUTER FOR 311/24 NOV AND 307/25 NOV. The latter sought to recover his luggage but found only 2 which were placed at the end of the passengers line. Realizing that his new Samsonite luggage was missing, which contained cosmetics worth HK$14,128.80, he complained to Carmen.

Thereafter, Chiok confronted PALs reservation officer, Carie Chao who previously confirmed his flight back to Manila. Chao told Chiok that his name was on the list and pointed to the latter his computer number listed on the PAL confirmation sticker attached to his plane ticket. Chiok then decided to use another CAL ticket and asked Chao if this ticket could be used to book him for the said flight. The latter, once again, booked and confirmed the formers trip, this time on board PAL Flight No. PR 311 scheduled to depart that evening. Later, Chiok went to the PAL checkin counter and it was Carmen who attended to him. As this juncture, Chiok had already placed his travel documents, including his clutch bag, on top of the PAL checkin counter.

Thereafter, Carmen directed PAL personnel to transfer counters. In the ensuing commotion, Chiok lost his clutch bag containing the following, to wit: (a) $2,000.00 (b) HK$2,000.00 (c) Taipei $8,000.00 (d) P2,000.00 (e) a threepiece set of gold (18 carats) cross pens valued at P3,500 (f) a Cartier watch worth about P7,500.00 (g) a tie clip with a garnet birthstone and diamond worth P1,800.00 and (h) a [pair of] Christian Dior reading glasses. Subsequently, he was placed on standby and at around 7:30 p.m., PAL personnel informed him that he could now checkin.

"Consequently, Chiok as plaintiff, filed a Complaint on November 9, 1982 for damages, against PAL and CAL. He alleged therein that despite several confirmations of his flight, defendant PAL refused to accommodate him in Flight No. 307, for which reason he lost the business option aforementioned. He also alleged that PALs personnel, specifically Carmen, ridiculed and humiliated him in the presence of so many people. Further, he alleged that defendants are solidarily liable for the damages he suffered, since one is the agent of the other."

ISSUE: Whether or not CAL is liable for damages

RULING: Yes. It is significant to note that the contract of air transportation was between CAL and respondent, with the former endorsing to PAL the Hong Kong to Manila segment of the journey. Such contract of carriage has always been treated in this jurisdiction as a single operation. This jurisprudential rule is supported by the Warsaw Convention, to which the Philippines is a party, and by the existing practices of the International Air Transport Association (IATA).

Article 1, Section 3 of the Warsaw Convention states: "Transportation to be performed by several successive air carriers shall be deemed, for the purposes of this Convention, to be one undivided transportation, if it has been regarded by the parties as a single operation, whether it has been agreed upon under the form of a single contract or of a series of contracts, and it shall not lose its international character merely because one contract or a series of contracts is to be performed entirely within a territory subject to the sovereignty, suzerainty, mandate, or authority of the same High Contracting Party."

Article 15 of IATA Recommended Practice similarly provides: "Carriage to be performed by several successive carriers under one ticket, or under a ticket and any conjunction ticket issued therewith, is regarded as a single operation."

In American Airlines v. Court of Appeals, we have noted that under a general pool partnership agreement, the Ticket issuing airline is the principal in a contract of carriage, while the endorsee airline is the agent. "x x x Members of the IATA are under a general pool partnership agreement wherein they act as agent of each other in the issuance of tickets to contracted passengers to boost ticket sales worldwide and at the same time provide passengers easy access to airlines which are otherwise inaccessible in some parts of the world. Booking and reservation among airline members are allowed even by telephone and it has become an accepted practice among them. A member airline which enters into a contract of carriage consisting of a series of trips to be performed by different carriers is authorized to receive the fare for the whole trip and through the required process of interline settlement of accounts by way of the IATA clearing house an airline is duly compensated for the segment of the trip serviced.."

Likewise, as the principal in the contract of carriage, the petitioner in British Airways v. Court of Appeals26 was held liable, even when the breach of contract had occurred, not on its own flight, but on that of another airline.

The Decision followed our ruling in Lufthansa German Airlines v. Court of Appeals, in which we had held that the obligation of the ticket issuing airline remained and did not cease, regardless of the fact that another airline had undertaken to carry the passengers to one of their destinations.

In the instant case, following the jurisprudence cited above, PAL acted as the carrying agent of CAL. In the same way that we ruled against British Airways and Lufthansa in the aforementioned cases, we also rule that CAL cannot evade liability to respondent, even though it may have been only a ticket issuer for the Hong Kong-Manila sector.

Moral and Exemplary Damages Issue

We must determine if CAL or its agent (PAL) is guilty of bad faith that would entitle respondent to moral damages. In the present case, we stress that respondent had repeatedly secured confirmations of his PR 311 flight initially from CAL and subsequently from the PAL office in Hong Kong. The status of this flight was marked "OK" on a validating sticker placed on his ticket. Ms Chan explicitly acknowledged that such entry was a computer reference that meant that respondents name had been entered in PALs computer.

Since the status of respondent on Flight PR 311 was "OK," as a matter of right testified to by PALs witness, he should have been automatically transferred to and allowed to board Flight 307 the following day. Clearly resulting from negligence on the part of PAL was its claim that his name was not included in its list of passengers for the November 24, 1981 PR 311 flight and, consequently, in the list of the replacement flight PR 307. Since he had secured confirmation of his flight not only once, but twice by personally going to the carriers offices where he was consistently assured of a seat thereon PALs negligence was so gross and reckless that it amounted to bad faith.

In view of the foregoing, we rule that moral and exemplary damages were properly awarded by the lower courts.

Santos v Northwest Orient AirlinesGR 101538June 23, 1992

FACTS: The petitioner Augusto Santos III is a minor and a resident of the Philippines. Northwest Orient Airlines (NOA) is a foreign corporation with principal office in Minnesota, U.S.A. and licensed to do business in the Philippines. Petitioner purchased from NOA a round-trip ticket in San Francisco for his flight from San Francisco to Manila via Tokyo and back. The scheduled departure date from Tokyo was December 20, 1986 but no date was specified for his return to San Francisco.

On December 19, 1986, the petitioner checked in at the NOA counter in the San Francisco airport for his scheduled departure to Manila. Despite a previous confirmation, he was informed that he had no reservation for his flight from Tokyo to Manila. He therefore had to be wait-listed.

On March 12, 1987, the petitioner sued NOA for damages in the Regional Trial Court of Makati. NOA moved to dismiss the complaint on the ground of lack of jurisdiction.NOA contended that the complaint could be instituted only in the territory of one of the High Contracting Parties based on Article 28(1) of the Warsaw Convention which reads as follows:

Art. 28. (1) An action for damage must be brought at the option of the plaintiff, in the territory of one of the High Contracting Parties, either before the court of the domicile of the carrier or of his principal place of business, or where he has a place of business through which the contract has been made, or before the court at the place of destination.

NOA contended that the Philippines was not its domicile nor was this its principal place of business. Neither was the petitioner's ticket issued in this country nor was his destination Manila but San Francisco in the United States. The lower court granted the motion and dismissed the case and on appeal, the CA affirmed this decision. Petitioner filed a petition for review questioning the constitutionality of Article 28(1) and the jurisdiction of Philippine courts over the case.

ISSUE: Whether or not Philippine courts have jurisdiction over the case

RULING: NO. The Warsaw Convention is a treaty commitment voluntarily assumed by the Philippine government and, as such, has the force and effect of law in this country. By its own terms, it applies to all international transportation of persons performed by aircraft for hire. Since the flight involved in this case is international, it is subject to the provisions of the Warsaw Convention, including Article 28(1), which enumerates the four places where an action for damages may be bought.

The place of destination, within the meaning of the Warsaw Convention, is determined by the terms of the contract or carriage or, specifically in this case, the ticket. Examination of petitioners ticket shows that his ultimate destination is San Francisco. Although the date of the return flight was left open, the contract of carriage between the parties indicates that NOA was bound to transport petitioner from Manila to San Francisco. Manila should therefore be considered merely an agreed stopping place and not the destination.A number of countries have signified their concern over the problem of citizens being denied access to their own courts because of the restrictive provision of Article 28(1) of the Warsaw Convention. Among these is the United States, which has proposed an amendment that would enable the passenger to sue in his own domicile if the carrier does business in that jurisdiction. However,it is still ineffective because the required minimum number of contracting parties has not yet ratified it. Pending such ratification, the petitioner will still have to file his complaint only in any of the four places designated by Article 28(1) of the Warsaw Convention.United Airlines v Willie J. UyGR No. 127768Nov. 19, 1999

FACTS: October 13, 1989 Respondent Willie Uy is a passenger of petitioner United Airlines, bound fromSanFrancisco to Manila. While inSanFrancisco, it was found that one piece of his luggage was over the maximum weight allowance of 70 kg. per bag. A United Airlines employee rebuked him and in a loud voice, in front of the milling crowd, ordered him to repack his things accordingly. Wishing not to create a scene, Willie did as asked. Unfortunately, his luggage was still overweight so the airline billed him overweight charges. Willie offered to pay the charges with a Miscellaneous Charge Order (MCO) or an airline pre-paid credit but the same employee, and an airline supervisor, refused to honor it, contending that there were discrepancies in the figures. Thus, Willie was forced to pay the charges with hisAmerican Expresscredit card. Upon arrival in Manila, Willie discovered that one of his bags had been slashed and its contents, amounting to US$5,310.00, stolen.

October 16, 1989 he sent his first letter of demand to United Airlines. The airline did not refute Willies allegations and mailed a check representingpaymentof his loss based on the maximum liability of US$9.70 per pound. Willie, thinking the amount to be grossly inadequate to compensate him for his losses as well as for the indignities he was subjected to, sent two more letters to petitioner airline, one dated January 4, 1990 and the other dated October 28, 1991, demanding out-of-court settlement of P1,000,000.00.

June 9, 1992 Willie filed a complaint for damages before the Philippine courts. He had two causes of action: (1) the shabby and humiliating treatment he received from petitioners employees at theSanFrancisco Airport which caused him extreme embarrassment and social humiliation; and (2) the slashing of his luggage and the loss of personal effects amounting to US$5,310.00.

For its part, United Airlines moved to dismiss the complaint on the ground that it was filed out of time. Under Art. 29 of the Warsaw Convention, the right to damages shall be extinguished if an action is not brought within 2 years. However, the second paragraph of the said provision stated that the method of calculating the period of limitation shall be determined by the law of the court to which the case is submitted. It is Willies position that our rules on interruption of prescriptive period should apply. When he sent his letters of demand, the 2-year period was tolled, giving himampletime to file his complaint.

The trial court ordered the dismissal of the case, holding that Art. 29(2) refers not to the local forums rules in interrupting the prescriptive period but only to the rules of determining the time in which the action was deemed commenced (meaning filed). Willie filed his motion for reconsideration of the order of dismissal only on the 14th day. The trial court denied his motion and 2 days later Willie filed his notice of appeal. United Airlines this time contended that the notice of appeal was filed beyond the 15-day reglementary period and should therefore be dismissed. The CA, however, took cognizance of the case in the interest of justice and ruled in favour of respondent. Hence, this petition for certiorari.

ISSUE: Whether or not the action for damages is barred by the lapse of the 2-year prescriptive period under Art. 29 of the Warsaw Convention

HELD: Supreme Court held that although the 2-year prescriptive period under the Warsaw Convention has lapsed, it did not preclude the application of other pertinent provisions of the Civil Code which prescribe a different period or procedure for instituting the action, specifically, Art. 1146 thereof which prescribes four (4) years for filing an action based on torts. Thus, the action for damages could still be filed.

As for the action pertaining to the loss of the contents of the luggage, while it was well within the bounds of the Warsaw Convention, the Supreme Court found that there was an exception to the applicability of the 2-year prescriptive period that is when the airline employed delaying tactics and gave the passenger the run-around. Verily, respondent filed his complaint more than two (2) years later, beyond the period of limitation prescribed by the Warsaw Convention for filing a claim for damages. However, it is obvious that respondent was forestalled from immediately filing an action because petitioner airline gave him the runaround, answering his letters but not giving in to his demands.

The Warsaws Convention's provisions do not regulate or exclude liability for otherbreachesof contract bythe carrieror misconduct of its officers and employees, or for some particular or exceptional type of damage. Neither may the Convention be invoked to justify the disregard of some extraordinary sort of damage resulting to a passenger and preclude recovery therefor beyond the limits set by said Convention. Likewise, we have held that the Convention does not preclude the operation of the Civil Code and other pertinent laws. It does not regulate, much less exempt,the carrierfrom liability for damages for violating the rights of its passengers under the contract of carriage, especially if willful misconduct on the part ofthe carrier's employees is found or established.

Keng Hua Paper Products v CAGR No. 116863February 12, 1998

FACTS: Sea-Land Service, a shipping company, is a foreign corporation licensed to do business in the Philippines. On 29 June 1982, SeaLand received at its Hong Kong terminal a sealed container, Container SEAU 67523, containing 76 bales of unsorted waste paper for shipment to Keng Hua Paper Products, Co. in Manila. A bill of lading to cover the shipment was issued by Sea-Land. On 9 July 1982, the shipment was discharged at the Manila International Container Port. Notices of arrival were transmitted to Keng Hua but the latter failed to discharge the shipment from the container during the free time period or grace period. The said shipment remained inside the Sea-Lands container from the moment the free time period expired on 29 July 1982 until the time when the shipment was unloaded from the container on 22 November 1983, or a total of 481 days. During the 481-day period, demurrage charges accrued. Within the same period, letters demanding payment were sent by Sea-Land to Keng Hua who, however, refused to settle its obligation which eventually amounted to P67,340.00. Numerous demands were made on Keng Hua but the obligation remained unpaid; prompting Sea Land to commence herein civil action for collection and damages.

ISSUE: Whether or not petitioner Keng Hua was bound by the bill of lading.

RULING: YES. A bill of lading serves two functions. First, it is a receipt for the goods shipped. Second, it is a contract by which three parties, namely, the shipper, the carrier, and the consignee undertake specific responsibilities and assume stipulated obligations. A bill of lading delivered and accepted constitutes the contract of carriage even though not signed, because the acceptance of a paper containing the terms of a proposed contract generally constitutes an acceptance of the contract and of all of its terms and conditions of which the acceptor has actual or constructive notice. In a nutshell, the acceptance of a bill of lading by the shipper and the consignee, with full knowledge of its contents, gives rise to the presumption that the same was a perfected and binding contract. Section 17 of the bill of lading provided that the shipper and the consignee were liable for the payment of demurrage charges for the failure to discharge the containerized shipment beyond the grace period allowed by the tariff rules.

Keng Huas prolonged failure to receive and discharge the cargo from the Sea-Lands vessel constitutes a violation of the terms of the bill of lading. It should thus be liable for demurrage to the former. Keng Hua received the bill of lading immediately after the arrival of the shipment on 8 July 1982. Having been afforded an opportunity to examine the said document, it did not immediately object to or dissent from any term or stipulation therein. It was only six months later, on 24 January 1983, that it sent a lletter to private respondent saying that it could not accept the shipment. Its inaction for such a long period conveys the clear inference that it accepted the terms and conditions of the bill of lading. Moreover, said letter spoke only of petitioners inability to use the delivery permit, i.e. to pick up the cargo, due to the shippers failure to comply with the terms and conditions of the letter of credit, for which reason the bill of lading and other shipping documents were returned by the banks to the shipper. The letter merely proved its refusal to pick up the cargo, not its rejection of the bill of lading.

SEA LAND SERVICE INC v IAC and PAULINO CUE (SEN HIAP HING)GR No. 75118August 31, 1987

FACTS: Sea-Land, a foreign shipping and forwarding company licensed to do business in the Philippines, received from Sea-borne Trading Company in California, a shipment consigned to Sen Hiap Hing, the business name used by Cue. The shipper not having declared the value of the shipment , no value was indicated in the bill of lading. The shipment was discharged in Manila, and while awaiting transshipment to Cebu, the cargo was stolen and never recovered.

The trial court sentenced Sea-Land to pay Cue P186,048 representing the Philippine currency value of the lost cargo, P55, 814 for unrealized profit and P25,000 for attorneys fees. CA affirmed the trial courts decision.

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

RULING: There is no question of the right of a consignee in a bill of lading to recover from the carrier or shipper for loss of, or damage to, goods being transported under said bill, although that document may have been drawn up only by the consignor and the carrier without the intervention of the consignee.

Since the liability of a common carrier for loss of or damage to goods transported by it under a contract of carriage is governed by the laws of the country of destination and the goods in question were shipped from the United States to the Philippines, the liability of Sea-Land has Cue is governed primarily by the Civil Code, and as ordained by the said Code, supplementary, in all matters not cluttered thereby, by the Code of Commerce and special laws. One of these supplementary special laws is the Carriage of goods by Sea Act (COGSA), made applicable to all contracts for the carriage by sea to and from the Philippines Ports in Foreign Trade by Comm. Act. 65.

Even if Section 4(5) of COGSA did not list the validity and binding effect of the liability limitation clause in the bill of lading here are fully substantial on the basis alone of Article 1749 and 1750 of the Civil Code. The justices of such stipulation is implicit in its giving the owner or shipper the option of avoiding accrual of liability limitation by the simple expedient of declaring the value of the shipment in the bill of lading.

The stipulation in the bill of lading limiting the liability of Sea-Land for loss or damages to the shipment covered by said rule to US$500 per package unless the shipper declares the value of the shipment and pays additional charges is valid and binding on Cue.

PHILAMGEN and TPI v Sweet Lines, Inc., Davao Veterans Arrastre Port Services, Inc. (DVAPSI) and CAG.R. No. 87434August 5, 1992

FACTS: SS VISHVA YASH, a foreign common carried took on board cargoes consisting of 600 bags of Low Density Polyethylene 631 and 6,400 bags of Low Density Polyethylene 647, for transshipment from Manila to Davao with arrival notice to Tagum Plastics Inc. (TPI) which the latter insured the said cargoes to Philamgen. As the cargoes arrived in Manila, M/V Sweet Love, owned and operated by Sweet Lines Inc. transported the cargoes from Manila to Davao. A survey was conducted over the cargoes which then reveals that only a total of 5,820 bags were deleivered to the consignee (instead of 7,000 bags). Herein petitioners asked the herein respondents to answer the loss incurred by the former. The trial court ordered SLI to pay the sum of P34,902 with legal interest in favor of Philamgen.

SLI appealed to the CA in which the appellate court reversed the decision of the trial court due to prescription. Herein petitioners went before the SC by review on certiorari faulting the CA in upholding, without proof, the existence of the so-called prescriptive period .

ISSUE: Whether or not the Court of Appeals erred on ruling that the case at hand has already prescribed.

HELD: No. the Court of Appeals ruling is right and justifiable. First, we must distinguish the difference between right of action and cause of action. Right of action is the right to presently enforce a cause of action, while a cause of action consists of the operative facts which give rise to such right of action.

Going now the merits of the case, it was found out that the Bill of Lading issued by the private respondents embody the stipulation that the filing of the claim with the carrier of loss or damage to the cargo (cause of action) will prescribe in 30 days and the accrual of the right of action will prescribe in 60 days. Herein petitioners alleged that such stipulation limits their right of recovery and thus unreasonable. Nevertheless, the SC ruled that such stipulation of the Bill of Lading is valid as the law allows the contracting parties to do so. In fact, the 30-day prescriptive period of the cause of action, as stipulated on the Bill of Lading, extends the prescription laid down under Article 366 of the Code of Commerce. As with the stipulated prescription of right of action, the same is valid as being just and reasonable and as being, in fact, recognized to be a valid business practice in the shipping industry.

More particularly, where the contract of shipment contains a reasonable requirement of giving notice of loss to the goods, the giving of such notice is a condition precedent to the action for loss or to enforce the carriers liability. The reason is to inform the carrier that the shipment has been damaged and that it is charged with liability thereof, and to give it an opportunity to examine the nature and extent of the injury. Failure to comply with the stipulated requirement of notice bars the recovery for the loss or damage suffered.

It was found out that the goods were delivered to the petitioners on May 15, 1977 but the claim was filed only on April 28, 1978. The failure to timely act brings the Court to no interference other than the fact that petitioners slept on their rights and they must now face the consequences of such inaction.

DOLE PHILIPPINES, INC. v MARITIME COMPANY OF THE PHILIPPINESG.R. No. L-61352 February 27, 1987

FACTS: Appellant Dole Philippines, Inc. (Dole), as consignee, seeks to claim for loss and/or damage to a shipment of machine parts against the carrier, Maritime Company of the Philippines (Maritime), under the provisions of the Carriage of Goods by Sea Act. The subject cargo was discharged in Dadiangas unto the custody of the consignee on December 18, 1971. The plaintiff filed the corresponding claim for the damages sustained by the cargo with the defendant vessel on May 4, 1972. On June 11, 1973, the plaintiff filed a complaint in the CFI of Manila, embodying three causes of action involving three separate and different shipments. On December 11, 1974, Judge Serafin Cuevas dismissed the first two causes of action with prejudice and without pronouncement as to costs because the parties had settled or compromised the claims involved therein. The third cause of action, which covered the cargo subject of this case, now was likewise dismissed but without prejudice as it was not covered by the settlement. The parties upon a joint motion to dismiss filed the dismissal of that complaint containing the three causes of action.

Hence, this appeal. Maritime filed an answer pleading inter alia the affirmative defense of prescription under the provisions of the Carriage of Goods by Sea Act.

ISSUE: Whether or not Article 1155 of the Civil Code providing that the prescription of actions is interrupted by the making of an extrajudicial written demand by the creditor is applicable to actions brought under the Carriage of Goods by Sea Act (Sec 3(6)).

HELD: NO. In such a case, the general provisions of the new Civil Code (Art. 1155) cannot be made to apply, as such application would have the effect of extending the one-year period of prescription fixed in the law. It is desirable that matters affecting transportation of goods by sea be decided in as short a time as possible the application of the provisions of Article 1155 of the new Civil Code would unnecessarily extend the period and permit delays in the settlement of questions affecting transportation, contrary to the clear intent and purpose of the law.

The demand in this instance would be the claim for damage filed by Dole with Maritime on May 4, 1972. The effect of that demand would have been to renew the one year prescriptive period from the date of its making. Stated otherwise, under Dole's theory, when its claim was received by Maritime, the one-year prescriptive period was interrupted "tolled" would be the more precise term and began to run anew from May 4, 1972, affording Dole another period of one (1) year counted from that date within which to institute action on its claim for damage. Unfortunately, Dole let the new period lapse without filing action. It instituted the case only on June 11, 1973, more than one month after that period has expired and its right of action had prescribed.

Dole's contention that the prescriptive period remained tolled as of May 4, 1972 (and that) in legal contemplation (the) case was filed on January 6, 1975, well within the one-year prescriptive period in Sec. 3(6) of the Carriage of Goods by Sea Act." equates tolling with indefinite suspension. It is clearly fallacious and merits no consideration.

AIR FRANCE v GILLEGOG.R. No. 165266: December 15, 2010

FACTS: Bonifacio Gillego, then incumbent Congressman and Chairman of the House of Representatives Committee on Civil, Political and Human Rights, was invited to participate as one of the keynote speakers at the 89th Inter-Parliamentary Conference Symposium on Parliament Guardian of Human Rights to be held in Budapest, Hungary and Tokyo, Japan.

On May 16, 1993, Gillego left Manila on board Air Frances aircraft bound for Paris, France. While waiting at the Airport for his connecting flight to Budapest scheduled a few hours after his arrival learned that Air France had another aircraft bound for Budapest with an earlier departure time than his scheduled flight. He then made arrangements for the change in his booking. He was given a corresponding ticket and boarding pass and also a new baggage claim stub for his checked-in luggage. However, his baggage despite numerous follow-up was never delivered to him prompting Gillego to purchase new set of clothes and other personal effects.

Gillego filed a complaint for damages against the Air France alleging that by reason of its negligence and breach of obligation to transport and deliver his luggage, Gillego suffered inconvenience, serious anxiety, physical suffering and sleepless nights. It was further alleged that due to the physical, mental and emotional strain resulting from the loss of his luggage, aggravated by the fact that he failed to take his regular medication, Gillego had to be taken to a medical clinic in Tokyo, Japan for emergency treatment.

The RTC found there was gross negligence on the part of Air France. It likewise found Air France guilty of willful misconduct as it persistently disregarded the rights of Gillego. As to the applicability of the limited liability for lost baggage under the Warsaw Convention, the trial court rejected the argument of Air France. The CA affirmed the trial courts decision.

ISSUES:

I. Whether or not there is legal and factual basis that Air Frances actions were attended by gross negligence, bad faith and willful misconduct and that it acted in a wanton, fraudulent, reckless, oppressive or malevolent manner to justify award of moral and exemplary damages.

II. Whether or not the amount of damages awarded by the RTC and affirmed by the CA as moral and exemplary damages are excessive, unconscionable and unreasonable.

RULING: Petition is DENIED.

CIVIL LAW; CONTRACT OF CARRIAGE

First issue: In an action based on a breach of contract of carriage, the aggrieved party does not have to prove that the common carrier was at fault or was negligent. All that he has to prove is the existence of the contract and the fact of its non-performance by the carrier.

The action filed by the respondent is founded on such breach of the contract of carriage with petitioner who offered no satisfactory explanation for the unreasonable delay in the delivery of respondents baggage. The presumption of negligence was not overcome by the petitioner and hence its liability for the delay was sufficiently established.

The Court held that the trial and appellate courts did not err in finding that petitioner acted in bad faith in repeatedly ignoring respondents follow-up calls. Clearly, Air France did not give the attention and care due to its passenger whose baggage was not transported and delivered to him at his travel destination and scheduled time; inattention to and lack of care for the interest of its passengers who are entitled to its utmost consideration, particularly as to their convenience, amount to bad faith which entitles the passenger to an award of moral damages.

CIVIL LAW; DAMAGES

Second issue: The amount of damages must be fair, reasonable and proportionate to the injury suffered. The purpose of awarding moral damages is to enable the injured party to obtain means, diversion or amusement that will serve to alleviate the moral suffering he has undergone by reason of defendant's culpable action. On the other hand, the aim of awarding exemplary damages is to deter serious wrongdoings. Hence, the Court held that the sum of P1,000,000.00 awarded by the trial court is excessive and not proportionate to the loss or suffering inflicted on the passenger under the circumstances.

The Decision of the CA is hereby AFFIRMED with MODIFICATION.

SABENA BELGIAN WORLD AIRLINES v CA and MA. PAULA SAN AGUSTINGR No. 104685March 14, 1996

FACTS: On August 21, 1987, plaintiff (MA. PAULA SAN AGUSTIN) was a passenger on board Flight SN 284 of defendant (Sabena Airlines) airlines originating from Casablanca to Brussels, Belgium on her way back to Manila. Plaintiff checked in her luggage which contained her valuables. She stayed overnight in Brussels and her luggage was left on board Flight SN 284. Plaintiff arrived at Manila International Airport on September 2, 1987 and immediately submitted her Tag No. 71423 to facilitate the release of her luggage but the luggage was missing. She was advised to accomplish and submit a property Irregularity Report which she submitted and filed on the same day. She followed up her claim but the luggage remained to be missing.

On September 30, 1987, she was furnished copies of defendant's telexes with an information that the Burssel's Office of defendant found the luggage and that they have broken the locks for identification. Plaintiff was informed that the luggage will be shipped to Manila. But unfortunately plaintiff was informed that the luggage was lost for the second time. At the time of the filing of the complaint, the luggage with its content has not been found.

Plaintiff demanded from the defendant the money value of the luggage and its contents amounting to $4,265.00 or its exchange value, but defendant refused to settle the claim. Defendant asserts in its Answer and its evidence tend to show that the loss of the luggage was due to plaintiff's sole if not contributory negligence. Defendant cites Section 5(c), Article IX, of the General Conditions of Carriage, signed at Warsaw, Poland, on 02 October 1929, as amended by the Hague Protocol of 1955, generally observed by International carriers, stating, among other things, that: Passengers shall not include in his checked baggage, and the carrier may refuse to carry as checked baggage, fragile or perishable articles, money, jewelry, precious metals, negotiable papers, securitiesor other valuable.

ISSUE: Whether or not SABENA BELGIAN WORLD AIRLINES should be held liable.

RULING: Yes. Fault or negligence consists in the omission of that diligence which is demanded by the nature of an obligation and corresponds with the circumstances of the person, of the time, and of the place. When the source of an obligation is derived from a contract, the mere breach or nonfulfillment of the prestation gives rise to the presumption of fault on the part of the obligor. This rule is no different in the case of common carriers in the carriage of goods which, indeed, are bound to observe not just the due diligence of a good father of a family but that of "extraordinary" care in the vigilance over the goods. Thus, Article 1734 still apllies.

The above-stated facts, which certainly cannot be said to be without basis, foreclose whatever rights petitioner might have had to the possible limitation of liabilities enjoyed by international air carriers under the Warsaw Convention (Convention for the Unification of Certain Rules Relating to International Carriage by Air, as amended by the Hague Protocol of 1955, the Montreal Agreement of 1966, the Guatemala Protocol of 1971 and the Montreal Protocols of 1975).

The Warsaw 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, in accordance with the law of the court seized of the case, is considered to be equivalent to willful misconduct, or if the damage is (similarly) caused . . . by any agent of the carrier acting within the scope of his employment.

The Court thus sees no error in the preponderant application to the instant case by the appellate court, as well as by the trial court, of the usual rules on the extent of recoverable damages beyond the Warsaw limitations. Under domestic law and jurisprudence (the Philippines being the country of destination), the attendance of gross negligence (given the equivalent of fraud or bad faith) holds the common carrier liable for all damages which can be reasonably attributed, although unforeseen, to the nonperformance of the obligation, including moral and exemplary damages.

CHAPTER 4H.E. Heacock Company v MacondrayGR L-16598October 3, 1921

FACTS: Plaintiff H.E. Heacock Company caused to be delivered on board of steamshipBolton Castle, from New York to Manila, four cases of merchandise one of which contained twelve (12) 8-day Edmond clocks. When said steamship arrived in Manila, neither the master of said vessel nor Macondray Company Inc., as its agent, delivered to the plaintiff the aforesaid clocks, although demand was made upon them for their delivery. The invoice value of the said Edmond clocks in the city of New York was P22 and the market value of the same in the City of Manila at the time when they should have been delivered to the plaintiff was P420. The bill of lading issued and delivered to the plaintiff by the master of the said steamshipBolton Castle contained, among others, the following clauses:

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

9.Also, that in the event of claims for short delivery of, or damage to, cargo being made, the carrier shall not be 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.

H.E. Heacock insists that it is entitled to recover from the defendant the market value of theclocks inquestion, to wit: thesum of P420. Macondray, onthe otherhand, contends that, in accordance with clause 1 of the bill of lading, the plaintiff is entitled to recover only the sum of P76.36, the proportionate freight ton value of the said clocks. The claim of the plaintiff is based upon the argument that the two clause in the bill of lading above quoted, limiting the liability of the carrier, are contrary to public order and, therefore, null and void. The defendant, on the other hand, contends that both of said clauses are valid.

ISSUE: Whether or not a common carrier, by stipulations inserted in the bill of lading, limit its liability for the loss of or damage to the cargo to an agreed valuation

RULING: YES. Three kinds of stipulations have often been made in a bill of lading. Thefirstis one exempting the carrier from any and all liability for loss or damage occasioned by its own negligence. Thesecondis one providing for an unqualified limitation of such liability to an agreed valuation. And thethirdis one limiting the liability of the carrier to an agreed valuation unless the shipper declares 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 to public policy, but the third is valid and enforceable.

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

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

Citadel Lines v. CAG.R. No. 88092April 25, 1990

FACTS: Manila Wine Merchants (consignee) is the importer of Dunhill Cigarettes from England. Petitioner Citadel Lines (carrier) is the general agent of the vessel Cardigan Bay/Strait Enterprise.

On or about March 17, 1979, 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 "Dunhill International Menthol. The shipment arrived at the Port of Manila Pier 13, on April 18, 1979. Due to lack of space at the Special Cargo Coral, the aforesaid cigarettes were placed in two containers with two pallets in the original container, and four pallets in the other container, with both containers duly padlocked and sealed by the representative of the CARRIER.

In the morning of May 1, 1979, the CARRIER'S headchecker discovered that one of the container vans had a different padlock and the seal was tampered with. The matter 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 CARRIER but was kept the inside container van which was padlocked and sealed by the representatives of the CARRIER without any participation of the ARRASTRE.

When the CONSIGNEE learned that 90 cases were missing, it filed a formal claim with the CARRIER, demanding the payment of P315,000.00 representing the market value of the missing cargoes. The CARRIER, in its reply letter.admitted the loss but alleged that the same occurred at Pier 13, an area absolutely under the control of the ARRASTRE. In view thereof, the CONSIGNEE filed a formal claim with the ARRASTRE, demanding payment of the value of the goods but said claim was denied.

After trial, the lower court rendered a decision exonerating the ARRASTRE of any liability on the ground that the subject container van was not formally turned over to its custody.

ISSUES:1. Whether the loss occurred while the cargo in question was in the custody of E. Razon, Inc. or of Citadel Lines, Inc; and2. Whether the stipulation limiting the liability of the carrier contained in the bill of lading is binding on the consignee.

HELD: The first issue is factual in nature. On the basis of the evidence presented, the subject cargo which was placed in a container van, padlocked and sealed by the representative of the CARRIER was still in its possession and control when the loss occurred, there having been no formal turnover of the cargo to the ARRASTRE.

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.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 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. And, its extraordinary responsibility 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 the right to receive them.

Considering, therefore, that the subject shipment was lost while it was still in the custody of the CARRIER, and considering further that it failed to prove that the loss was occasioned by an excepted cause, the inescapable conclusion is that the CARRIER was negligent and should be held liable.

The CONSIGNEE itself admits in its memorandum that the value of the goods shipped does not appear in the bills of lading.16Hence, the stipulation on the carrier's limited liability applies. There is no question that the stipulation is just and reasonable under the circumstances and have been fairly and freely agreed upon.

The bill of lading shows that 120 cartons weigh 2,978 kilos or 24.82 kilos per carton. Since 90 cartons were lost and the 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.

INTERNATIONAL AIR TRANSPORTATION

Northwest Airlines, Inc. v Nicolas CuencaGR L-22425August 31, 1965

FACTS: When his contract of carriage was violated by the petitioner, respondent held the office of Commissioner of Public Highways of the Republic of the Philippines. Having boarded petitioner's plane in Manila with a first class ticket to Tokyo, he was, upon arrival at Okinawa, transferred to the tourist class compartment. Although he revealed that he was traveling in his official capacity as official delegate of the Republic to a conference in Tokyo, an agent of petitioner rudely compelled him in the presence of other passengers to move, over his objection, to the tourist class, under threat of otherwise leaving him in Okinawa. In order to reach the conference on time, respondent had no choice but to obey.

ISSUE/HELD:Warsaw Convention

ART. 17. The carrier shall be liable for damages sustained in the event of the death or wounding of a passenger or any other bodily injury suffered by a passenger, if the accident which caused the damage so sustained took place on board the aircraft or in the course of any of the operations of embarking or disembarking.

ART. 18. (1) The carrier shall be liable for damage sustained in the event of the destruction or loss of, or of damage to, any checked baggage, or any goods, if the occurrence which caused the damage so sustained took place during the transportation by air.

(2) The transportation by air within the meaning of the preceding paragraph shall comprise the period during which the baggage or goods are in charge of the carrier, whether in an airport or on board an aircraft, or, in the case of a landing outside an airport, in any place whatsoever.

(3) The period of the transportation by air shall not extend to any transportation by land, by sea, or by river performed outside an airport. If, however, such transportation takes place in the performance of a contract for transportation by air, for the purpose of loading, delivery, or transhipment, any damage is presumed, subject to proof to the contrary, to have been the result of an event which took place during the transportation by air.

ART. 19. The carrier shall be liable for damage occasioned by delay in the transportation by air of passengers, baggage, or goods.

Petitioner argues that pursuant to those provisions, an air "carrier is liable only" in the event of death of a passenger or injury suffered by him, or of destruction or loss of, or damage to any checked baggage or any goods, or of delay in the transportation by air of passengers, baggage or goods. This pretense is not borne out by the language of said Articles. The same merely declare the carrier liable for damages in the enumerated cases, if the conditions therein specified are present. Neither said provisions nor others in the aforementioned Convention regulate or exclude liability for other breaches of contract by the carrier. Under petitioner's theory, an air carrier would be exempt from any liability for damages in the event of its absolute refusal, in bad faith, to comply with a contract of carriage, which is absurd.

It is true that said ticket was marked "W/L," but respondent's attention was not called thereto. Much less was he advised that "W/L" meant "wait listed." Upon the other hand, having paid the first class fare in full and having been given first class accommodation as he took petitioner's plane in Manila, respondent was entitled to believe that this was a confirmation of his first class reservation and that he would keep the same until his ultimate destination, Tokyo. Then, too, petitioner has not tried to explain or even alleged that the person to whom respondent's first class seat was given had a better right thereto. In other words, since the offense had been committed with full knowledge of the fact that respondent was an official representative of the Republic of the Philippines, the sum of P20,000 awarded as damages may well be considered as merely nominal. At any rate, considering that petitioner's agent had acted in a wanton, reckless and oppressive manner, said award may also be considered as one for exemplary damages.

Monico G. Roldan v Lim Ponzo & Co.G.R. No. L-11325December 7, 1917

FACTS: Plaintiff Roldan executed a case against the Defendant Lim Ponzo &Co., to recover damages in the sum of P3,780 for the alleged failure of the defendant company to live up to its contract for the transportation of 2,244 packages of sugar to Roldans hacienda in Iloilo. Out of the 2,244 packages of sugar, only 1,022 were saved in a more or less damaged condition.

Nevertheless, at the trial, after the plaintiff offered his pieces of evidence, the trial court judge dismissed the case due to the alleged failure of the plaintiff to comply with the provisions laid down under Article 366 of the Code of Commerce thus, bars the plaintiff on making his claim against the respondents. Art. 366 provides that:

Article 366: Within the twenty-four hours following the receipt of the merchandise, a claim may be made against the carrier on account of damages or average found therein on opening the packages, provided that the indication of the damage or average giving rise the claim cannot be ascertained from the exterior of said packages, in which case said claim would only be admitted on the receipt of the packages.

After the periods mentione have elapsed, or after the transportation charges have been paid, no claim whatsoever shall be admitted against the carrier with regard to the condition in which the goods transported were delivered.

ISSUE: Whether or not the trial court judge erred on dismissing the case on the ground that the plaintiff failed to comply on the stipulations under Article 366 of the Code of Commerce.

HELD: NO. Article 366 of the Code of Commerce is limited on cases of claims for damaged goods actually turned over by the carrier and received by the consignee, whether those damages be apparent from the examination of the packages in which the goods are delivered, or of such a character that the nature and extent of the dame is not apparent until the packages are opened and the contents are examined. Clearly, it has no application on the case at hand because the lost goods to be delivered are, actually, not damaged, but the same were not delivered at all.

On the other hand, with regard to the saved 1,022 packages, the provision of Article 366 of the code will apply only if the defendant delivered the goods to the plaintiff. However, it appeared that the saved goods were recovered due to the plaintiffs effort of doing so; hence, requisite that the carrier should deliver the goods to the consignee is missing.

INTERNATIONAL CARRIAGE OF GOODS BY SEA

MARITIME AGENCIES & SERVICES, INC. v CA and UNION INSURANCE SOCIETY OF CANTON, LTD.G.R. No. 77638 July 12, 1990

FACTS: Transcontinental Fertilizer Company of London chartered from Hongkong Island Shipping Company of Hongkong the motor vessel named "Hongkong Island" for the shipment of 8073.35 MT (gross) bagged urea from Novorossisk, Odessa, USSR to the Philippines. Of the total shipment, 5,400.04 MT was for the account of Atlas Fertilizer Company as consignee, 3,400.04 to be discharged in Manila and the remaining 2,000 MT in Cebu. The goods were insured by the consignee with the Union Insurance Society of Canton, Ltd. for P6,779,214.00 against all risks. Maritime Agencies & Services, Inc. was appointed as the charterer's agent and Macondray Company, Inc. as the owner's agent. The vessel arrived in Manila on October 3, 1979, and unloaded part of the consignee's goods, then proceeded to Cebu on October 19, 1979, to discharge the rest of the cargo.

On October 31, 1979, the consignee filed a formal claim against Maritime, copy furnished Macondray, for the amount of P87,163.54, representing C & F value of the 1,383 shortlanded bags. On January 12, 1980, the consignee filed another formal claim, this time against Viva Customs Brokerage, for the amount of P36,030.23, representing the value of 574 bags of net unrecovered spillage. These claims having been rejected, the consignee then went to Union, which on demand paid the total indemnity of P113,123.86 pursuant to the insurance contract. As subrogee of the consignee, Union then filed on September 19, 1980, a complaint for reimbursement of this amount, with legal interest and attorney's fees, against Hongkong Island Company, Ltd., Maritime Agencies & Services, Inc. and/or Viva Customs Brokerage. On April 20, 1981, the complaint was amended to drop Viva and implead Macondray Company, Inc. as a new defendant.

The trial court rendered judgment holding the defendants liable to Union Insurance. The Court of Appeals modified the decision finding the charterer Transcontinental Fertilizer Co., Ltd. represented by its agent Maritime Agencies & Services, Inc. liable for the amount of P87,163.54 plus interest at 12% plus attorney's fees of P1,000.00. Defendant Hongkong Island Co., Ltd. represented by Macondray Co., Inc. were rendered exempted from any liability. Hence, this appeal. Maritime pleads non-liability on the ground that it was only the charterer's agent and should not answer for whatever responsibility might have attached to the principal. It also argues that the respondent court erred in applying Articles 1734 and 1735 of the Civil Code in determining the charterer's liability.

ISSUE: Whether or not Maritime Agencies, as the charterers agent, may be held liable for the short landed goods.

RULING: No. In the cases at bar, the trial court found that 1,383 bags were shortlanded, which could only mean that they were damaged or lost on board the vessel before unloading of the shipment. It is not denied that the entire cargo shipped by the charterer in Odessa was covered by a clean bill of lading. As the bags were in good order when received in the vessel, the presumption is that they were damaged or lost during the voyage as a result of their negligent improper stowage. For this the ship owner should be held liable. But we do agree that the period for filing the claim is one year, in accordance with the Carriage of Goods by Sea Act. This was adopted and embodied by our legislature in Com. Act No. 65 which, as a special law, prevails over the general provisions of the Civil Code on prescription of actions. The one-year period in the cases at bar should commence on October 20, 1979, when the last item was delivered to the consignee. Union's complaint was filed against Hongkong on September 19, 1980, but tardily against Macondray on April 20, 1981. The consequence is that the action is considered prescribed as far as Macondray is concerned but not against its principal, which is what matters anyway.

As regards the goods damaged or lost during unloading, the charterer is liable therefor, having assumed this activity under the charter party "free of expense to the vessel." The difficulty is that Transcontinental has not been impleaded in these cases and so is beyond our jurisdiction. The liability imposable upon it cannot be borne by Maritime which, as a mere agent, is not answerable for injury caused by its principal. It is a well-settled principle that the agent shall be liable for the act or omission of the principal only if the latter is undisclosed. The charterer did not represent itself as a carrier and indeed assumed responsibility ability only for the unloading of the cargo, i.e, after the goods were already outside the custody of the vessel. In supervising the unloading of the cargo and issuing Daily Operations Report and Statement of Facts indicating and describing the day-to-day discharge of the cargo, Maritime acted in representation of the charterer and not of the vessel. It thus cannot be considered a ship agent. As a mere charterer's agent, it cannot be held solidarily liable with Transcontinental for the losses/damages to the cargo outside the custody of the vessel. On the basis of the evidence, there is nothing found to disprove the finding of the marine and cargo surveyors that of the 66,390 bags of urea fertilizer, 65,547 bags were "discharged ex-vessel" and there were "shortlanded" 1,383 bags, valued at P87,163.54. This sum should be the principal and primary liability and responsibility of the carrying vessel. Under the contract for the transportation of goods, the vessel's responsibility commence upon the actual delivery to, and receipt by the carrier or its authorized agent, until its final discharge at the port of Manila. Defendant Hongkong Island Co., Ltd., as "shipowner" and represented by the defendant Macondray & Co., Inc., as its local agent in the Philippines, should be responsible for the value of the bags of urea fertilizer which were shortlanded. The remainder of the claim in the amount of P36,030.23, representing the value of the 574 bags of unrecovered spillages having occurred after the shipment was discharged from the vessel unto the ex-lighters as well as during the discharge from the lighters to the truck which transported the shipment to the consignee's warehouses should be for the account of the defendant Maritime Agencies & Services, Inc. However, the liability of Macondray can no longer be enforced because the claim against it has prescribed; and as for Maritime, it cannot be held liable for the acts of its known principal resulting in injury to Union.

DAMAGES

Rafael Zulueta v Pan American World AirwaysGR No. L-28589January 8, 1973

FACTS: Plaintiff Zulueta, his wife and daughter were passengers aboard defendants plane from Honolulu to Manila. Upon reaching Wake Island the passengers were advised that they could disembark for a stopover for about 30 minutes. Plaintiff went to the toilet at the terminal building but finding it full walked 200 yards away. Upon returning he told an employee of the defendant that they almost made him miss the flight because of a defective announcing system. He had a discussion with either the plan captain or the terminal manager. He was told that they would open his bags which he refused and he warned them of the consequences. Just the same they opened his bags and found nothing prohibited. They forced him to go out of the plane and left him at Wake Island. His wife had to send him money and he was able to leave Wake Island and return to Manila thru Honolulu and Tokyo after two days.

In other words, Mr. Zulueta was off-loaded,notto protect thesafetyof the aircraft and its passengers, but to retaliate andpunishhim for the embarrassment and loss of face thus suffered by defendant's agent. This vindictive motive is made more manifest by the note delivered to Mr. Zulueta by defendant's airport manager at Wake Island, Mr. Sitton, stating that the former's stay therein would be "for aminimumof one week," during which he would be charged $13.30 per day. This reference to a "minimum of one week" revealed the intention to keep him there stranded that long, for no other plane, headed for Manila, was expected within said period of time, although Mr. Zulueta managed to board, days later, a plane that brought him to Hawaii, whence he flew back to the Philippines, via Japan.This action was to recover damages from the defendant.

ISSUE: WON moral damages may be recovered.

RULING: It is urged by the defendant that exemplary damages are not recoverable in quasi-delicts, pursuant to Article 2231 of our Civil Code, except when the defendant has acted with "gross negligence," and that there is no specific finding that it had so acted. It is obvious, however, that in off-loading plaintiff at Wake Island, under the circumstances heretofore adverted to, defendant's agents had acted with malice aforethought and evident bad faith. If "gross negligence" warrants the award of exemplary damages, with more reason is its imposition justified when the act performed is deliberate, malicious and tainted with bad faith

It is urged by the defendant that exemplary damages are not recoverable in quasi-delicts, pursuant to Article 2231 of our Civil Code, except when the defendant has acted with "gross negligence," and that there is no specific finding that it had so acted. It is obvious, however, that in off-loading plaintiff at Wake Island, under the circumstances heretofore adverted to, defendant's agents had acted with malice aforethought and evident bad faith. If "gross negligence" warrants the award of exemplary damages, with more reason is its imposition justified when the act performed is deliberate, malicious and tainted with bad faith.

The records amply establish plaintiffs right to recover both moral and exemplary damages. Indeed, the rude and rough reception plaintiff received at the hands of Sitton or Captain Zentner when the latter met him at the ramp (What in the hell do you think you are? Get on that plane); the menacing attitude of Zentner or Sitton and the supercilious manner in which he had asked plaintiff to open his bags (open your bag, and when told that a fourth bag was missing, I dont give a damn); the abusive language and highly scornful reference to plaintiffs as monkeys by one of PAN AMs employees (who turning to Mrs. Zulueta remarked, will you pull these three monkeys out of here?); the unfriendly attitude, the ugly stares and unkind remarks to which plaintiffs were subjected, and their being cordoned by men in uniform as if they were criminals, while plaintiff was arguing with Sitton; the airline officials refusal to allow plaintiff to board the plane on the pretext that he was hiding a bomb in his luggage and their arbitrary and high-handed decisi