ONG YIU vs. COURT OF APPEALSFacts: Petitioner was paying passenger of respondent Philippine Airlines onboard f l i gh t No . 946 -R f ro m Ma ctan Cebu bound fo r Bu tua n Ci ty . He wasscheduled to attend the trial in the Court of First instance , Br. II thereat. As apassenger, he checked in one piece of luggage, a bull maleta. The plane leftMactan Airport, Cebu City at about 1pm and arrived at Bacasi Airport, ButuanCi ty a t pas t 2p m o f the sa me day . Upon a r r i va l , pe t i t i oner c l a ime d h i s luggage but it could not be found. According to petitioner, it was only af terreacting indignantly to the loss that the matter was attended by the porterclerk whi ch however, the later denied. When the luggage was delivered tothe petitioner with the information that the lock was open, he found out thatthe folder containing documents and transcripts were missing, aside from thet w o g i f t i t e m s f o r h i s p a r e n t s - i n -l a w . P e t i t i o n e r r e f u s e d t o a c c e p t t h e luggage. Petitioner fi led a Complaint against PAL for damages for breach of contract of transportation. The lower Court found PAL to have acted in badfaith and with malice and declared petitioner entitled to moral damages. CAheld that PAL was guilty only of simple negligence, reversed the judgment of the trial Court granting petitioner moral and exemplary damages, but orderedPAL to pay plaintiff the sum of P100.00, the baggage liabil ity assumed by itunder the condition of carriage printed at the back of the ticket. Hence thepresent petition.

Issue: Whether or not PAL acted with gross negligence.

Held: No . PAL d i d no t ac t i n bad fa i th . I t wa s the du t y o f PAL to l ook fo rpetitioner’s luggage which had been miscarried. PAL exerted diligent effortsto locate the plainti ff’s baggage. Petitioner is neither entitled to exemplarydamages. Exemplary damages can only be granted if the defendant asked ina wanton, fraudulent, reckless, oppressive or malevolent manner, which loss,in accordance with the stipulation written at the back of the ticket is limitedto P100 per luggage plaintiff not having declared a greater value and nothaving called the attention of the defendant on its value ad paid the tariff thereon.W hi l e i t ma y be t ru e th a t pe t i t i oner had no t s i gned the p l ane t i cke t , he i s nevertheless bound by the provisions thereof. "Such provisions have beenheld to be a part of the contract of carriage, and valid and binding upon thepassenger regard less o f the l a t te r ' s l ack o f kno wledge o r assen t to the regulation". It is what is known as a contract of "adhesion", in regards whichi t has been sa id tha t con t rac ts o f adhes ion wh ere in one par ty i mpose s a ready made form of contract on the other, as the plane ticket in the case atb a r , a r e c o n t r a c t s n o t e n t i r e l y p r o h i b i t e d . T h e o n e w h o a d h er e s t o t h e con t rac t i s i n rea l i t y f ree to re jec t i t en t i re l y ; i f he adheres , he g i ves h i s consent. A contract limiting liability upon an agreed valuation

does not offendagainst the policy of the law forbidding one from contracting against his ownnegligence.

SEA-LAND SERVICE, INC. vs. IAC

Facts: Sea-land, a foreign shipping and forwarding company licensed to

dobusiness in the Philippines, received from Seaborne Trading Company inCalifornia a shipment

consigned to Sen Hiap Hing. The shipper not havingdeclared the value of the shipment, no value was

indicated in the BOL. Theshipment was discharged in Manila, and while awaiting transshipment toCebu

the cargo was stolen and never recovered. The lower court sentencesSea-land to pay Cue the value of

the lost cargo, the unrealized profit andattorneys fees. The CA affirmed the decision, hence the petition.

Issue:

Whether or not the consignee of seaborne freight is bound bystipulations 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

notdeclared in the bill.

Held:

Yes.

There is no question of the right of a consignee in a bill of ladingto recover from the carrier or shipper

for loss of, or damage to, goods beingtransported under said bill, although that document may have

been drawn uponly by the consignor and the carrier without the intervention of theconsignee.

Since the liability of a common carrier for loss of or damage to goodstransported by it under a contract

of carriage so governed by the laws of thecountry of destination and

the goods in question were shipped from theUnited States to the Philippines, the liability of Sea-Land

has Cue is governedprimarily by the Civil Code, and as ordained by the said Code, supplementary,in all

matters not cluttered thereby, by the Code of Commerce and speciallaws. One of these supplementary

special laws is the Carriage of goods bySea Act (COGSA), made applicable to all contracts for the carriage

by sea toand 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 effectof the liability limitation clause in the bill of lading here are fully

substantialon 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 thevalue of the shipment in the bill of lading. The stipulation in the bill of

lading limiting the liability of Sea-Land forloss or damages to the shipment covered by said rule to

US$500 per packageunless the shipper declares the value of the shipment and pays additionalcharges is

valid and binding on Cue.

KENG HUA PAPER PRODUCTS CO. INC., petitioner v. COURT OF APPEALS,Regional Trial Court of

Manila, Br. 21 and Sea-Land Service, Inc., respondents[1998]

Sea-Land Service Inc. (SLSI) is a foreign shipping company licensed to do businessin the Phil.

Jun. 29, 1982: SLSI received sealed container of 76 bales of unsorted waste paper inits Hong Kong terminal for shipment to Keng Hua Paper Products (Keng Hua for short) in Manila. SLSI issued a bill of lading.

Jul. 9, 1982: shipment discharged at Manila International Container Port. Notices of arrival were sent to Keng Hua but they failed to retrieve the shipment from thecontai ner during the free time or grace period w/c lasted until Jul. 29, 1982. Itremained there until Nov. 22, 1983 when shipment was unloaded f container. A totalof 481 days.

SLSI sent letters to Keng Hua demanding payment for demurrage 1 charges for the481-day period amounting to P67,340.00. However, oblig remained unpaid w/cprompted SLSI to institute civil action for collection & damages.

Keng Hua’s defense:1. i t o n ly p u r c h a s e d 5 0 t on s o f w a s t e p a p e r f rom H on g K on g s h ip p e r , H o K e e Waste Paper as proven in a letter of credit issued by Equitable Banking Corp.and the remaining balance was only 10 tons whereas the shipment SLSI wasasking Keng Hua to accept was 20 metric tons or twice that of the shipment itwas expecting.2.Accepting the shipment would violate Central Bank rules & regulations & custom& tariff laws.3.SLSI has no cause of action since it was not Keng Hua that hired SLSI. Cause of action should be against Ho Kee w/c contracted SLSI’s services.4. T h e y in f o rm e d S L S I a b ou t t h e w ro n g s h i p m e n t t h r u a le t t e r d a t e d J a n . 2 4 , 1983.

RTC: Keng Hua liable for demurrage, atty.’s fees & expenses of litigation. Appealed toCA.

CA: denied appeal & affirmed RTC decision. Issues & Ratio:1.WON Keng Hua accepted the bill of lading sent by SLSI. – YES

A bill of lading has 2 functions:a . I t ’ s a re c e i p t f or t h e g o o d s s h i p p e d . b.A contract by w/c the shipper (Ho Kee), carrier (SLSI) & consignee (Keng Hua) undertake specific responsibilities & assume stipulated oblig.

Delivery & acceptance of a bill of lading, w/ full knowledge of its contents, gives riseto the presumption that the same was a perfected & binding contract.

Both RTC & CA ruled that the bill of lading was a valid & perfected contract amongthe 3 parties. Sec. 17 of the bill of lading provided that the shipper & consignee wereliable for the payment of demurrage charges for failure to discharge the shipmentbeyond the grace period, thus making Keng Hua liable.

Keng Hua’s defense:a.There was only “physical acceptance” but in reality , it did not really accept theterms & conditions printed in the bill of lading. It invokes the Notice of Refusedor On Hand Freight it received from SLSI w/c they claim acknowledges theirrefusal to accept the shipment.b.It sent a letter to SLSI stressing that acceptance of the bill of lading would betantamount to smuggling since it only imported 10k kg and not 20,313 kg. Thiscan make them susceptible to legal sanctions for violation of Central Bank laws.c.The demurrage was a consequence of Ho Kee’s mistake. 1 Demurrage – allowance/compensation for the delay/detention of a vessel. It’s a particular sum deemed fair by theparties as compensation for delays. It’s the true measure of damages in all cases of mere detention, for that allowancehas reference to the ship’s expenses, wear & tear, and common employment. (Justice Story, The Apollon)

Keng Hua admits that it received the bill of lading. It had the chance to examine thedocument but it did not object or dissent from any term or stipulation. Its letter toSLSI saying that it can’t accept the shipment was only sent 6 mos after it receivedthe bill of lading. One can infer that it has accepted the terms & conditions of the billof lading due to its inaction for a long time.

Notice of Refused or On Hand Freight does not prove anything but Keng Hua’sprolonged failure to object to the bill of lading. It actually supports the finding thatthe bill of lading was impliedly accepted by petitioner.

Petitioner can’t likewise invoke its fear of violating the law. Mere apprehension of violat ing said laws w/o clear demonstration that taking delivery of shipment hasbecome legally impossible can’t defeat its contractual oblig & liability under the bill of lading.

Petitioner actually raised this issue for the first time before the SC. Such can’t beentertained since an issue raised for the first time on appeal & not raised timely inthe lower court proceedings is barred by estoppel.

Thus, petitioner’s prolonged failure to receive & discharge cargo from SLSI’s vesselconstitutes a violation of the terms of the bill of lading. 2.WON there is a conflict WRT the amount of demurra ge charges demandedby SLSI. – NO The discrepancy between the amount demanded by SLSI’s loss & preventionmanager (P50,260.00) and its counsel (P37,800.00) can be

explained by the fact thatthese 2 demands were made at different t imes. Necessarily, the longer the cargoremained unclaimed, the higher the demurrage. CA affirmed P67,340.00 finding of RTCand such is binding on the SC. 3 . W O N t h e b i l l o f l a d i n g i s s e p a r a t e f r o m t h e o t h e r l e t t e r o f c r e d i t arrangements. – YES

3 distinct & independent contracts in a letter of credit w/c must be kept perpetuallyseparated from each other:a . c on t ra c t o f s a le b e t . B u y e r & s e l l e r b . c on t ra c t o f b u y e r w / is s u i n g b a n k c. letter of credit proper wherein bank promises t o pay seller pursuant to terms & conditions stated

Additional contract of carriage may be needed when buyer & seller are in differentc ou n t r ie s s u c h a s i n t h i s c a s e . T h is c on t ra c t o f c a r r ia g e m u s t b e t re a t e d independently of the other contracts as well. Any discrepancy on the amount of goods described in the contract of sale & letter of credit will not affect the validity & enforceability of the contract of carriage as embodied in the bill of lading. Meaning,even if the contract of sale & letter of credit stipulated 10 metric tons of waste paper,the contract of carriage stipulating 20 metric tons of such will still be valid & enforceable by virtue of the independence of these contracts.

Thus, Keng Hua can’t negate its oblig to SLSI arising from the contract of carriage.Besides, SLSI had no knowledge of the contents of the container s ince it was the shipper who was responsible for loading the container. Keng Hua’s remedy in case of overshipment lies against the shipper (Ho Kee), not against SLSI. 4.WON interest ran only from the time Keng Hua received the complaint bysummons. – YES.

This was the first time Keng Hua learned of the demurrage claim of P67,340.00 thusinterest can’t run from date of extrajudicial demands since during those times, nodemand for interest was made.

Oblig not constituting loan/forbearance of money is breached , interest on amt of damages may be imposed at court’s discretion at rate of 6% per annum. Wheredemand is established w/reasonable certainty, the interest shall begin to run fromthe time the claim is made judicially or extrajudicially (CC Art. 1169). But when certainty can’t be established at the time the demand is made, interest shall begin toru n on ly f ro m t h e d a t e t h e j u d g m e n t o f t h e c ou rt i s m a d e . A c t u a l b a s e f o rcomputation of leg interest shall be on the amount finally adjudged. Since bill of lading didn’t specify amt of demurrage, total amount demanded can’t bedeemed to have been established w/reasonable certainty until trial court rendered its judgment. Holding: CA affirmed w/modification. 1.Legal interest of 6% per annum shall be computed from Sept. 28, 1990 until its fullpayment before finality of judgment.2 . I n t e r e s t ra t e a d j u s t e d t o 1 2% p e r a n n u m

f r om f in a l i t y o f j u d g m e n t u n t i l f u l l satisfaction.3.Attorney’s fees deleted since no reason was stated for awarding such. Its bas is beingimproperly left to speculation & conjecture makes it tantamount to a conclusion w/o premise

Sea land services inc v ca Facts: Sea-Land, a foreign shipping and forwarding

company licensed to do business in the Philippines, received from Sea-borneTrading 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 attorney’s fees. CA affirmed the trial court’s decision.

Issue: Whether or not Sea-Land is liable to pay Cue.

Held: 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 os 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 thebill 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 perpackage unless the shipper declares the value of the shipment and pays additional charges is valid and binding on Cue.

EVERETT STEAMSHIP vs. CA FACTS Hernandez trading company imported three crates of bus spare parts marked as Marco 12, Marco 13, Marco 14 from its supplier Maruman trading company.

Said crates were shipped from Japan to Manila on noard the vessel owned by Everette Orient Lines. Upon arrival in Manila, it was discovered that Marco 14 was missing. Hernandez makes a formal claim to Everette in an amount of 1 mill ++ Yen, which is the amount of the cargo lost. However, Everett offers an amount of 100k because it is the amount that was stipulated in its Bill of Lading. Hernandez files a case at the RTC of Caloocan, RTC rules1 in favor of Hernandez holding Everett liable for the amount of !mill ++ Yen. THE CA affirmed the RTC’s ruling and made an additional observation that since Hernandez is not a privy to the contract in the bill of lading ( the contract was entered by Everett and Maruman trading [shipper]), and so the 100k limit stipulated will not bind Hernandez making Everett liable for the full amount of 1mill ++ Yen. ISSUE

1. Is Everett liable for the full amount or the amount that was stipulated in the contract?- what was stipulated in the contract

2. Is Hernandez a privy to the contract which says that Petitioner is liable only for 100k? Yes RULING

1. Controlling provisions for this issue would be 1749 and 1750 of the Civil Code. 2

In Sea Land Service, Inc. vs Intermediate Appellate Court

That said stipulation is just and reasonable is arguable from the fact that it echoes Art. 1750 itself in providing a limit to liability only if a greater value is not declared for the shipment in the bill of lading. To hold otherwise would amount to questioning the justness and fairness of the law itself, and this the private respondent does not pretend to do. But over and above that consideration, the just and reasonable character of such stipulation is implicit in it giving the shipper or owner the option of avoiding accrual of liability limitation by the simple and surely far from onerous expedient of declaring the nature and value of the shipment in the bill of lading The clause of the contract goes:

“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

1 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 fairly and freely agreed upon.’

“It is required, however, that the contract must be reasonable and just under the circumstances and has been fairly and freely agreed upon.XXX the Court is of the view that the requirements of said article have not been met. The fact that those conditions are printed at the back of the bill of lading in letters so small that they are hard to read would not warrant the presumption that the plaintiff or its supplier was aware of these conditions such that he had “fairly and freely agreed” to these conditions. It can not be said that the plaintiff had actually entered into a contract with the defendant, embodying the conditions as printed at the back of the bill of lading that was issued by the defendant to plaintiff.”

2 “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.”

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.” (Emphasis supplied)

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.

The trial court’s ratiocination that private respondent could not have “fairly and freely” agreed to the limited liability clause in the bill of lading because the said conditions were printed in small letters does not make the bill of lading invalid. In Ong Yiu VS. CA the court said that

“ contracts of adhesion wherein one party imposes a ready-made form of contract on the other, as the plane ticket in the case at bar, are contracts not entirely prohibited

A contract limiting liability upon an agreed valuation does not offend against the policy of the law forbidding one from contracting against his own negligence

The shipper, Maruman Trading, we assume, has been extensively engaged in the trading business. It can not be said to be ignorant of the business transactions it entered into involving the shipment of its goods to its customers. The shipper could not have known, or should know the stipulations in the bill of lading and there it should have declared a higher valuation of the goods shipped. Moreover, Maruman Trading has not been heard to complain that it has been deceived or rushed into agreeing to ship the cargo in petitioner’s vessel.

2. Even if the consignee was not a signatory to the contract of carriage between the shipper and the carrier.

The consignee can still be bound by the contract. private respondent (Hernandez) 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.

Alitalia v. IAC

Facts:

Dr. Felipa Pablo, an associate professor in the University of the Philippines and a research grantee of the Philippine Atomic 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 Alitalia’s offer of free airline tickets and commenced an action for damages. As it turned out, the luggage was actually forwarded to Ispra, but

only a day after the scheduled appearance. It was returned to her after 11 months. The trial court ruled in favor of Dr. Pablo, and this was affirmed by the Court of Appeals.

Issues:

(1) Whether the Warsaw Convention should be applied to limit Alitalia’s liability

(2) Whether Dr. Pablo is entitled to nominal damages

Held:

(1) 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 wilful 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.

(2) 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.

The Court also agrees that respondent Court of Appeals correctly awarded attorney’s 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 attorney’s feesinter alia where, as here, the defendant’s 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 equitabl

PHILAMGEN vs. SWEET LINES FACTS A total 7,000 bags of low density polyethylene (600 bags of polyethylene 641 and 6,400 bags of polyethylene 647) were shipped from Baton Rouge, LA to Manila on board SS Vishva Yash, a vessel belonging to the Shipping Corporation of India (SCI). From Manila, the cargoes were shipped to Davao on board MV Sweet Love, a vessel owned by Sweet Lines. The consignee was Far East Bank with arrival notice to Tagum Plastics, Inc., Tagum, Davao City. The cargoes were insured by Far East Bank with the Philippine American General Insurance Co (Philamgen) and were covered by bills of lading which contained the following stipulation in paragraph 5:

Claims for shortage, damage, must be made at the time of delivery to consignee or agent, if container shows exterior signs of damage or shortage. Claims for non-delivery, misdelivery, loss or damage must be filed within 30 days from accrual. Suits arising from shortage, damage or loss, non-delivery or misdelivery shall be instituted within 60 days from date of accrual of right of action. Failure to file claims or institute judicial proceedings as herein provided constitutes waiver of claim or right of action. In no case shall carrier be liable for any delay, non-delivery, misdelivery, loss of damage to cargo while cargo is not in actual custody of carrier.

On May 15, 1977, the shipment(s) were discharged from the interisland carrier into the custody of the consignee. A survey conducted on July 8, 1977 showed that of the shipment totalling 7,000 bags, originally contained in 175 pallets, only a total of 5,820 bags were delivered to the consignee in good order condition, leaving a balance of 1,080 bags. Some of the 1,080 bags were either MISSING OR DAMAGED beyond the point of being useful for the intended purpose. FEBTC and Tagum Plastics sued the international carrier, SCI, the inter-island carriers, Sweet Lines, the arrastre company, Davao Arrastre and FE Zuellig (which I assume is the shipper). Before trial, a compromise agreement was entered into between the complainants and SCI and F.E. Zuellig, thus, only Sweet Lines and Davao Arrastre remained as defendants. The trial court ruled in favour of Philamgen and Tagum Plastics. The CA reversed on the ground of prescription and denied the motion for reconsideration. ISSUES

(1) Was there a prescriptive period? (2) If yes, was the prescriptive period valid and legal? (3) If it was valid and legal, did Philamgen act within the prescriptive period?

RULING (1) Yes. There was a prescriptive period. When the complaint was filed, prescription as an affirmative defense was seasonably raised by Sweet Lines in its answer. Though the bills of lading were not presented in evidence, the SC said that: “As petitioners are suing upon SLI's contractual obligation under the contract of carriage as contained in the bills of lading, such bills of lading can be categorized as actionable documents which under the Rules must be properly pleaded either as causes of action or defenses, and the genuineness and due execution of which are deemed admitted unless specifically denied under oath by the adverse party. The rules

on actionable documents cover and apply to both a cause of action or defense based on said documents.” In their answer, Sweet Lines included the prescriptive period under paragraph 5 of the bills of lading. Philamgen did not deny the existence of the bill of lading under oath. Instead, in its reply to the answer, Philamgen asserted that the bills of lading were contracts of adhesion and that such provisions were “contrary to law and public policy” and thus, Sweet Lines cannot avail of such prescriptive period as a valid defense. The SC said that Philamgen’s failure to deny under oath the existence of the bills of lading was tantamount to an admission of its existence, together with paragraph 5 containing the prescriptive period. Thus, the existence of the prescriptive period was duly proved even if the bills of lading were not presented in court. (2) Yes. The prescriptive periods were valid and legal. Philamgen insists that the bills of lading were contracts of adhesion and that the prescriptive periods stated therein were void for being contrary to law and public policy. The SC, citing Ong Yu vs CA, said “that contracts of adhesion are not entirely prohibited. The one who adheres to the contract is in reality free to reject it entirely; if he adheres he gives his consent.” Philamgen, thus, gave its consent to the contracts – the bills of lading – including consent to the prescriptive periods therein. The SC also agreed with the CA that parties can stipulate a shorter prescriptive period for the filing of suits. The SC quoted the CA, “It must be noted, at this juncture, that the aforestated time limitation (paragraph 5) in the presentation of claim for loss or damage, is but a restatement of the rule prescribed under Art. 366 of the Code of Commerce... ” The SC said that, “... the validity of a contractual limitation of time for filing the suit itself against a carrier shorter than the statutory period therefor has generally been upheld as such stipulation merely affects the shipper's remedy and does not affect the liability of the carrier. In the absence of any statutory limitation and subject only to the requirement on the reasonableness of the stipulated limitation period, the parties to a contract of carriage may fix by agreement a shorter time for the bringing of suit on a claim for the loss of or damage to the shipment than that provided by the statute of limitations. Such limitation is not contrary to public policy for it does not in any way defeat the complete vestiture of the right to recover, but merely requires the assertion of that right by action at an earlier period than would be necessary to defeat it through the operation of the ordinary statute of limitations.” The SC also said that, “..., the shortened period for filing suit is not unreasonable and has in fact been generally recognized to be a valid business practice in the shipping industry.” This is in recognition of the inherent dangers of carriage by sea. (3) No. Philamgen did not act within the prescriptive period. The shipment was discharged into the custody of the consignee on May 15, 1977, and it was from this date that petitioners' cause of action accrued, with thirty (30) days therefrom within which to file a claim with the carrier for any loss or damage which may have been suffered by the cargo and thereby perfect their right of action. Claim was filed only on April 28, 1978, way beyond the period provided in the bills of lading and violative of the contractual provision, the inevitable consequence of which is the loss of petitioners' remedy or right to sue. The SC said, “Even the filing of the complaint on May 12, 1978 is of no remedial or practical consequence, since the time limits for the filing thereof, whether viewed as a condition precedent or as a prescriptive period, would in this case be productive of the same result, that is, that petitioners had no right of action to begin with or, at any rate, their claim was time-barred.” Other things discussed by the SC: 1. “...where the contract of shipment contains a reasonable requirement of giving notice of loss of or injury to the goods, the giving of such notice is a condition precedent to the action for loss or injury or the right to enforce the carrier's liability. Such requirement is not an empty formalism. The fundamental reason or purpose of such a stipulation is not to relieve the carrier from just liability, but reasonably to inform it that the shipment has been damaged and that it is charged with liability therefor, and to give it an opportunity to examine the nature and extent of the injury. This protects the carrier by affording it an opportunity to make an investigation of a claim while the matter is fresh and easily investigated so as to safeguard itself from false and fraudulent claims.” 2. Philamgen also asserted that since the purpose of the notice of claim or loss was to charge Sweet Lines with actual knowledge of the loss and damage involved, then the issuance of Sweet Lines of a

“Report on Losses and Damage” dated May 15, 1977, “would obviate the need for or render superfluous the filing of a claim within the stipulated period.” The SC said, “The report on losses and damages is not the claim referred to and required by the bills of lading for it does not fix responsibility for the loss or damage, but merely states the condition of the goods shipped. The claim contemplated herein, in whatever form, must be something more than a notice that the goods have been lost or damaged; it must contain a claim for compensation or indicate an intent to claim.” Furthermore, the report bears an annotation at its lower part that says “this Copy should be submitted together with your claim invoice or receipt within 30 days from date of issue otherwise your claim will not be honored." 3. The claim against the carrier, Sweet Lines, has prescribed but what about the claim against Davao Arrastre. The SC said that there was not enough proof to pinpoint the party responsible for the lost and damaged bags. (What I found surprising was that the SC also said, “Unlike a common carrier, an arrastre operator does not labor under a presumption of negligence in case of loss, destruction or deterioration of goods discharged into its custody. In other words, to hold an arrastre operator liable for loss of and/or damage to goods entrusted to it there must be preponderant evidence that it did not exercise due diligence in the handling and care of the goods.”

Chiina Airlines v Chiok

Facts: Daniel Chiok purchased from China Airlines, Ltd. an airline passenger ticket

for air transportation covering Manila-Taipei-Hongkong-Manila. Said ticket was

exclusively endorsable toPhilippine Airlines, Ltd. Before he left for said trip, the trips

covered by the ticket were pre-scheduled and confirmed by Chiok. 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 the next day, 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 had to reach Manila the following day because of a business option

which he had to execute on said date.

The following day Chiok went to the airport. Cathay Pacificstewardess Lok Chan took

and received Choik’s plane ticket and luggage. However, Carmen Chan, PAL’s terminal

supervisor, informed Chiok that his name did not appear in PAL’s computer list of

passengers and therefore could not be permitted to board PAL Flight No. PR 307.

Thereafter, Chiok proceeded to PAL’s Hongkongoffice and confronted

PAL’s reservation officer, Carie Chao (hereafter referred to as 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, which number was ‘R/MN62’. Chiok was not able to

return to Manila on time.

Consequently, Chiok as plaintiff, filed a Complaint on November 9, 1982 for damages,

against PAL and CAL, as defendants with the Regional Trial Court Manila. 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 PAL’s 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.

The Regional Trial Court (RTC) of Manila held CAL and PAL jointly and severally liable.

Ultimately, it was only the Appeal of CAL that reached the Supreme Court. It allege

among others that since it was only the ticket issuer, it should not be held liable unlike

PAL.

Issue: Considering the fact that CAL was only the ticket issuer, may it be held jointly

and severally liable for the acts of PAL’s employees?

Held: YES. It is significant to note that the contract of air transportation was between

petitioner 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).

In American Airlines v. Court of Appeals, the court 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. Thus, when the petitioner accepted

the unused portion of the conjunction tickets, entered it in the IATA clearing house and

undertook to transport the private respondent over the route covered by the unused

portion of the conjunction tickets, i.e., Geneva to New York, the petitioner tacitly

recognized its commitment under the IATA pool arrangement to act as agent of the

principal contracting airline, Singapore Airlines, as to the segment of the trip the

petitioner agreed to undertake. As such, the petitioner thereby assumed the obligation

to take the place of the carrier originally designated in the original conjunction ticket.

The petitioner’s argument that it is not a designated carrier in the original conjunction

tickets and that it issued its own ticket is not decisive of its liability. The new ticket was

simply a replacement for the unused portion of the conjunction ticket, both tickets being

for the same amount of US$ 2,760 and having the same points of departure and

destination. By constituting itself as an agent of the principal carrier the petitioner’s

undertaking should be taken as part of a single operation under the contract of carriage

executed by the private respondent and Singapore Airlines in Manila.”

Santos III vs. Northwest Orient Airlines

G.R. No. 101538, June 23, 1992

INTERNATIONAL LAW: Warsaw Convention is constitutional, a treaty commitment voluntarily assumed

by the Philippine government and, as such, has the force and effect of law in this country.

INTERNATIONAL LAW: Warsaw Convention, when applicable: To all "international transportations of

persons by aircraft for hire." Whether the transportation is "international" is determined by the contract

of the parties, which in the case of passengers is the ticket. When the contract of carriage provides for

the transportation of the passenger between certain designated terminals "within the territories of two

High Contracting Parties," the provisions of the Convention automatically apply and exclusively govern

the rights and liabilities of the airline and its passenger.

INTERNATIONAL LAW: Warsaw Convention, jurisdiction: Place of Destination vis-a-vis Agreed Stopping

Place: The contract is a single undivided operation, beginning with the place of departure and ending

with the ultimate destination. The use of the singular in this expression indicates the understanding of

the parties to the Convention that every contract of carriage has one place of departure and one place

of destination. An intermediate place where the carriage may be broken is not regarded as a "place

of destination."

FACTS:

Petitioner is a minor and a resident of the Philippines. Private respondent Nortwest Orient Airlines

(NOA) is a foreign corporation with principal office in Minnesota, U.S.A. and licensed to do business and

maintain a branch office in the Philippines. The petitioner purchased from NOA a round-trip ticket in San

Francisco, U.S.A. In December 19, 1986, the petitioner checked in the at the NOA counter in the San

Francisco airport for his departure to Manila. Despite a previous confirmation and re-confirmation, he

was informed that he had no reservation for his flight for Tokyo to Manila. He therefore had to be wait-

listed. On March 12, 1987, the petitioner sued NOA for damages in RTC Makati. NOA moved to dismiss

the complaint on the ground of lack of jurisdiction.

ISSUE:

Whether or not Article 28 (1) of the Warsaw Convention is in accordance with the constitution so as to

deprive the Philippine Courts jurisdiction over the case

HELD:

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.

Constitutionality of the Warsaw Convention

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.

Does the Warsaw Convention apply in this case?

By its own terms, the Convention applies to all international transportation of persons performed by

aircraft for hire.

International transportation is defined in paragraph (2) of Article 1 as follows:

(2) For the purposes of this convention, the expression "international transportation" shall mean any

transportation 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 transportation or a transshipment, are

situated [either] within the territories of two High Contracting Parties . . .

Whether the transportation is "international" is determined by the contract of the parties, which in the

case of passengers is the ticket. When the contract of carriage provides for the transportation of the

passenger between certain designated terminals "within the territories of two High Contracting Parties,"

the provisions of the Convention automatically apply and exclusively govern the rights and liabilities of

the airline and its passenger.

Since the flight involved in the case at bar is international, the same being from the United States to the

Philippines and back to the United States, 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 brought.

Does Article 28(1) refer to Jurisdiction or Venue?

...where the matter is governed by the Warsaw Convention, jurisdiction takes on a dual concept.

Jurisdiction in the international sense must be established in accordance with Article 28(1) of the

Warsaw Convention, following which the jurisdiction of a particular court must be established pursuant

to the applicable domestic law. Only after the question of which court has jurisdiction is determined will

the issue of venue be taken up. This second question shall be governed by the law of the court to which

the case is submitted.

Was the case properly filed in the Philippines, since the plaintiff’s destination was Manila?

The place of destination, within the meaning of the Warsaw Convention, is determined by the terms of

the contract of carriage or, specifically in this case, the ticket between the passenger and the

carrier. Examination of the petitioner'sticket 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 the petitioner to San Francisco from Manila. Manila should

therefore be considered merely an agreed stopping place and not the destination.

Article 1(2) also draws a distinction between a "destination" and an "agreed stopping place." It is the

"destination" and not an "agreed stopping place" that controls for purposes of ascertaining jurisdiction

under the Convention.

The contract is a single undivided operation, beginning with the place of departure and ending with the

ultimatedestination. The use of the singular in this expression indicates the understanding of the parties

to the Convention that every contract of carriage has one place of departure and one place

of destination. An intermediate place where the carriage may be broken is not regarded as a "place

of destination."

WHEREFORE, the petition is DENIED, with costs against the petitioner. It is so ordered.

UNITED AIRLINES vs. UY G.R. No. 127768, November 19,1999 Thursday, January 29, 2009 Posted by Coffeeholic Writes

Labels: Case Digests, Commercial Law

Facts: On October 13, 1989, respondent, a passenger of United

Airlines, checked in together with his luggage one piece of which was found

to be overweight at the airline counter. To his utter humiliation, an employee

of petitioner rebuked him saying that he should have known the maximum

weight allowance per bag and that he should have packed his things

accordingly. Then, in a loud voice in front of the milling crowd, she told

respondent to repair his things and transfer some of them to the light ones.

Respondent acceded but his luggage was still overweight. Petitioner billed

him overweight charges but its employee reused to honor the miscellaneous

charges under MCD which he offered to pay with. Not wanting to leave

without his luggage, he paid with his credit card. Upon arrival in manila, he

discovered that one of his bags had been slashed and its contents stolen. In

a letter dated October 16, 1989, he notified petitioner of his loss and

requested reimbursement. Petitioner paid for his loss based on the

maximum liability per pound. Respondent considered the amount grossly

inadequate. He sent two more letters to petition but to no avail. On June 9,

1992, respondent filed a complaint for damages against petitioner Airline.

Petitioner moved to dismiss the complaint invoking the provisions of Article

29 of the Warsaw Convention. Respondent countered that according to par.

2 of Article 29, “the method of calculating the period of limitation shall be

determined by the law of the court to which the case is submitted.”

Issues:

1) Does the Warsaw Convention preclude the operation of the Civil Code and

other pertinent laws?

2) Has the respondent’s cause of action prescribed?

Held: 1) No. Within our jurisdiction we have held that the Warsaw

Convention can be applied, or ignored, depending on the peculiar facts

presented by each case. Convention provisions do not regulate or exclude

liabilities for other breaches of contract by the carrier or 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 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 therefore3 beyond the limits et 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 carrier from liability for damages for

violating the rights of its passengers under the contract of carriage,

especially if willful misconduct on the part of the carriers employees is found

or established.

2) No. While his 2nd cause of action (an action for damages arising from

theft or damage to property or goods) is well within the bounds of the

Warsaw convention, his 1st cause of action (an action for damages arising

from the misconduct of the airline employees and the violation of

respondent’s rights as passengers) clearly is not.

The 2-yr limitation incorporated in Art. 29 of the Warsaw Convention as an

absolute bar to suit and not to be made subject to the various tolling

provisions of the laws of the forum, forecloses the applicationof our own

rules on interruption of prescriptive periods. (Art. 29, par. 2 was indented

only to let local laws determine whether an action shall be deemed

commenced upon the filing of a complaint.) Since, it is indisputable that

respondent filed the present action beyond the 2-yr time frame his 2nd

cause of action must be barred.

However, it is obvious that respondent was forestalled from immediately

filing an action because petitioner gave him the runaround, answering

his letters but not giving in to his demands. True, respondent should have

already filed an action at the first instance when petitioner denied his claims

but the same could only be due to his desire to make an out-of-court

settlement for which he cannot be faulted. Hence, despite

the express mandate of Article 29 of the Warsaw Convention that an action

for damages should be filed within 2 years from the arrival at the place

of destination, such rule shall not be applied in the instant case because of

the delaying tactics employed by petitioner airlines itself. Thus, respondent’s

2nd cause of action cannot be considered as time barred.

G.R. No. 171092 March 15, 2010EDNA DIAGO LHUILLIER, Petitioner,vs. BRITISH AIRWAYS, Respondent. Facts : On April 28, 2005, petitioner Edna Diago Lhuillier filed a Complaint 2for damagesagainst respondent British Airways before the Regional Trial Court (RTC) of Makati City.

Shealleged that on February 28, 2005, she took respondent’s flight 548 from London, UnitedKingdom to

Rome, Italy. Once on board, she allegedly requested Julian Halliday (Halliday),one of the respondent’s

flight attendants, to assist her in placing her hand-carried luggagein the overhead bin. However, Halliday

allegedly refused to help and assist her, and evensarcastically remarked that "If I were to help all 300

passengers in this flight, I would have abroken back!"Petitioner further alleged that when the plane was

about to land in Rome, Italy,another flight attendant, Nickolas Kerrigan (Kerrigan), singled her out from

among all thepassengers in the business class section to lecture on plane safety. Allegedly, Kerrigan

madeher appear to the other passengers to be ignorant, uneducated, stupid, and in need

of lecturing on the safety rules and regulations of the plane. Affronted, petitioner assuredKerrigan that

she knew the plane’s safety regulations being a frequent traveler. Thereupon,Kerrigan allegedly thrust

his face a mere few centimeters away from that of the petitionerand menacingly told her that "We don’t

like your attitude."Upon arrival in Rome, petitioner complained to respondent’s ground manager

anddemanded an apology. However, the latter declared that the flight stewards were "onlydoing their

job." Thus, petitioner filed the complaint for damages, praying that respondent be

orderedto pay P5 million as moral damages, P2 million as nominal damages, P1 million asexemplary dam

ages, P300,000.00 as attorney’s fees,P200,000.00 as litigation expenses,and cost of the suit.

Issue

Whether Philippine courts have jurisdiction over a tortious conduct committedagainst a Filipino citizen

and resident by airline personnel of a foreign carrier travellingbeyond the territorial limit of any foreign

country; and thus is outside the ambit of theWarsaw Convention.

Held

: The Warsaw Convention applies because the air travel, where the alleged tortiousconduct occurred,

was between the United Kingdom and Italy, which are both signatories tothe Warsaw Convention.Article

1 of the Warsaw Convention provides:1. This Convention applies to all international carriage of persons,

luggage or goodsperformed by aircraft for reward. It applies equally to gratuitous carriage by

aircraftperformed by an air transport undertaking.2. For the purposes of this Convention the expression

"international carriage" meansany 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 thecarriage

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 thereis 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 thisConvention. A carriage without such an agreed stopping place between

territoriessubject to the sovereignty, suzerainty, mandate or authority of the same HighContracting Part

y is not deemed to be international for the purposes of thisConvention. (Emphasis supplied) Thus, when

the place of departure and the place of destination in a contract of carriage aresituated within the

territories of two High Contracting Parties, said carriage is deemed an"international carriage". The

High Contracting Parties referred to herein were the signatoriesto the Warsaw Convention and those

which subsequently adhered to it.In the case at bench, petitioner’s place of departure was London,

United Kingdomwhile her place of destination was Rome, Italy. Both the United Kingdom and Italy

signedand ratified the Warsaw Convention. As such, the transport of the petitioner is deemed to bean

"international carriage" within the contemplation of the Warsaw Convention.

AIR FRANCE V. GILLEGO

In Air France vs. Gillego, G.R. No 165266, December 15, 2010, the Supreme Court discussed the

liability that airlines have for lost luggage, particularly in terms of moral damages due to a

passenger. Unfortunately for the airline, this was no ordinary passenger but a Congressman on his

way to deliver a speech.

In 1993, Congressman Gillego was the keynote speaker at the 89th Inter-Parliamentary Conference

Symposium on “Parliament: Guardian of Human Rights”. The Congressman left for Paris and was to

take a connecting flight to Budapest. He learned of an earlier flight to Budapest and made

arrangements for the same. He was given a ticket and a boarding pass for this new flight as well as

a new baggage claim stub for his checked-in luggage.

Upon arrival at Budapest, his luggage was not at the claims section. He sought assistance and was

advised to wait at the hotel. His luggage was never delivered despite inquiries.

Upon his return home, his lawyer wrote Air France complaining about the loss and the damages he

suffered while in Budapest arising from his loss of personal effects, medicines and even the

speeches he had prepared, among others. He only had his travel documents, pocket money and

the clothes on his back. He was constrained to shop for personal items including clothes and

medicines which amounted to $1,000. He even had to make another speech which was made more

difficult due to the lack of data and information that was in his luggage. He asked for P1,000,000.00

from the petitioner as compensation. Air France ignored his repeated follow-ups on his lost luggage.

He thereafter filed a complaint for damages against Air France.

The trial court awarded P1,000,000.00 as moral damages; P500,000.00 as exemplary damages and

P50,000.00 as attorney’s fees to the plaintiff. This was affirmed by the Court of Appeals.

Air France sought relief before the Supreme Court, arguing that the award of “extravagant sums to

respondent that already tend to punish the petitioner and enrich the respondent, which is not the

function at all of moral damages” and that “the damages awarded are definitely not proportionate

or commensurate to the wrong or injury supposedly inflicted.” The plaintiff was after all an expert

in the field of human rights who could have delivered his speech even without his notes.

The petition was found to be partly meritorious. The Supreme Court held that being a “business

intended to serve the travelling public primarily, a contract of carriage is imbued with public

interest.” “Article 1735 of the Civil Code provides that in case of lost or damaged goods, common

carriers are presumed to have been at fault or to have acted negligently, unless they prove that

they observed extraordinary diligence as required by Article 1733. Thus, 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.” [emphasis supplied]

There is no dispute that the checked-in luggage was not found upon arrival at plaintiff’s destination

and was only returned two years later. The action is founded on the breach of the contract of

carriage with Air France unable to offer any satisfactory explanation for the unreasonable delay in

the delivery of the baggage. Since the presumption of negligence was not overcome, liability for the

delay was established. Upon recovery of the baggage during trial, the plaintiff no longer pressed his

claim for actual or compensatory damages.

For moral damages to be awarded in the breach of contract of carriage, “the breach must be

wanton and deliberately injurious or the one responsible acted fraudulently or with malice or bad

faith. Not every case of mental anguish, fright or serious anxiety calls for the award of moral

damages.” Where there is no showing of fraud or bad faith, “liability for damages is limited to the

natural and probable consequences of the breach of the obligation which the parties had foreseen

or could have reasonably foreseen. In such a case the liability does not include moral and exemplary

damages.”

Air France was found liable for moral damages. Petitioner’s station manager testified that upon

receiving the letter-complaint, she immediately began working on the Property Irregularity Report

(PIR). This is issued at the airline station upon complaint by a passenger on missing baggage. From

the computer-printout, a PIR was initiated at the Budapest counter. A search telex was sent out on

three subsequent dates. Based on the PIR printout, the plaintiff only gave his Philippine address

and telephone number, and not the address and contact number of his Budapest hotel. The PIR

usually is printed in two originals, one for the station manager and the other copy is for the

passenger. There was no record or entry in the PIR of any follow-up call made by the plaintiff in

Budapest. Plaintiff claimed that he was not given a copy of this PIR and that his repeated telephone

calls were ignored.

It was found that Air France “acted in bad faith in repeatedly ignoring respondent’s follow-up

calls.” The alleged entries in the PIR were not to be considered since these were not authenticated

by the airline station representative in Budapest. The Court did not accept as justification that

plaintiff should be faulted in allegedly not giving his hotel address and phone number. It found

unbelievable that the plaintiff would not give his hotel and other information after he had promptly

filed a complaint. And even assuming that only the Philippine details were given, this does not

explain why Air France never communicated with plaintiff concerning the lost baggage long after he

had returned to the Philippines. The missing luggage was returned only after the trial.

In addition, the PIR only establishes that telex searches were made but there is no attempt to

explain the loss of the luggage. 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.” Bad faith may be “in securing the contract

and in the execution thereof, as well as in the enforcement of its terms, or any other kind of

deceit.” [emphasis supplied]

The failure to cite any act of discourtesy or rudeness does not make plaintiff’s “loss and moral

suffering insignificant and less deserving of compensation.” “In repeatedly ignoring respondent’s

inquiries, petitioner’s employees exhibited an indifferent attitude without due regard for the

inconvenience and anxiety he experienced after realizing that his luggage was missing. Petitioner

was thus guilty of bad faith in breaching its contract of carriage with the respondent, which

entitles the latter to the award of moral damages.” [emphasis supplied]

However, the sum of P1,000,000.00 is “excessive and not proportionate to the loss or suffering

inflicted on the passenger under the circumstances.” The Court cited Trans World Airlines v. Court

of Appeals where it considered the social standing of the aggrieved passenger who was a lawyer

and director of several companies but nonetheless reduced the award of moral damages.

Moral damages are awarded “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.” Exemplary damages are to “deter serious wrongdoings.” Under Article 2216 of the Civil

Code, the assessment of damages is left to the discretion of the court according to the

circumstances of each case. This is “limited by the principle that the amount awarded should not be

palpably excessive as to indicate that it was the result of prejudice or corruption on the part of the

trial court. Simply put, the amount of damages must be fair, reasonable and proportionate to the

injury suffered.”

Since Air France “failed to act timely on the passenger’s predicament caused by its employees’

mistake and more than ordinary inadvertence or inattention, and the passenger failed to show any

act of arrogance, discourtesy or rudeness committed by the air carrier’s employees, the amounts of

P200,000.00, P50,000.00 and P30,000.00 as moral damages, exemplary damages and attorney’s

fees would be sufficient and justified."

It is ironic that the award of damages, just like the luggage, comes too late since the plaintiff has

already passed away. Justice, just like baggage, can be just as delayed.

SABENA BELGIAN WORLD AIRLINES , petitioner,vs. HON. COURT OF APPEALS and MA. PAULA SAN AGUSTIN , respondents. [G.R. No. 104685. March 14, 1996] Facts:

On August 21, 1987, plaintiff (MA. PAULA SAN AGUSTIN) was a passenger on defendant airline

(SABENABELGIAN WORLD AIRLINES) from Casablanca to Brussels, Belgium on her way back to

Manila. Herluggage with valuables was left on board Flight SN 284. Upon arrival she submitted

documents to supporther baggage claim but luggage remained to be missing. A formal complaint

was filed by the plaintiff withthe manger of the airline.Plaintiff was furnished copies of telexes with an

information that the Brussel’s Office of defendant foundthe luggage and that they have broken the locks

for identification (Exhibit ‘B’). Plaintiff was assured bythe defendant that it has notified its Manila Office

that the luggage will be shipped to Manila on October27, 1987. But unfortunately plaintiff was informed

that the luggage was lost for the second time. At thetime of fiing of complaint the luggage is still

missing.Plaintiff demanded from the defendant the money value of the luggage and its contents or its

exchangevalue, but defendant refused to settle the claim, asserting that the loss of the luggage was due

toplaintiff’s sole if not contributory negligence; non-declaration of valuable items in her checked-in

luggageat the flight counter when she checked in.Trial court favored the plaintiff and ordered the

Sabena Belgian World Airlines to pay private respondentMa. Paula San Agustin. Hence this appeal.

Issue:

WON the private respondent is at fault on the loss of the luggage by negligence.

Ruling:

Fault or negligence consists in the omission of that diligence which is demanded by the nature of

anobligation and corresponds with the circumstances of the person, of the time, and of the place. When

thesource of an obligation is derived from a contract, the mere breach or non-fulfillment of the

prestationgives rise to the presumption of fault on the part of the obligor. This rule is not different in the

case of common carriers in the carriage of goods which, indeed, are bound to observe not just the due

diligenceof a good father of a family but that of “extraordinary” care in the vigilance over the goods.It

remained undisputed that private respondent’s luggage was lost while it was in the

custody of petitioner. When it was found missing the respondent, promptly processed all the necessary

documentbut to no avail. The “loss of said baggage not only once by twice,” said the appellate court,

“underscoresthe wanton negligence and lack of care” on the part of the carrier.Under domestic law and

jurisprudence (the Philippines being the country of destination), the attendanceof gross negligence

(given the equivalent of fraud or bad faith) holds the common carrier liable for alldamages which can be

reasonably attributed, although unforeseen, to the non-performance of theobligation, including moral

and exemplary damages.

WHEREFORE

, the decision appealed from is AFFIRMED.