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[G.R. No. 104685. March 14, 1996]


On August 21, 1987, plaintiff (MA. PAULA SAN AGUSTIN) was a passenger on defendant airline (SABENA
BELGIAN WORLD AIRLINES) from Casablanca to Brussels, Belgium on her way back to Manila. Her
luggage with valuables was left on board Flight SN 284. Upon arrival she submitted documents to support
her baggage claim but luggage remained to be missing. A formal complaint was filed by the plaintiff with
the manger of the airline.

Plaintiff was furnished copies of telexes with an information that the Brussel’s Office of defendant found
the luggage and that they have broken the locks for identification (Exhibit ‘B’). Plaintiff was assured by
the defendant that it has notified its Manila Office that the luggage will be shipped to Manila on October
27, 1987. But unfortunately plaintiff was informed that the luggage was lost for the second time. At the
time 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 exchange
value, but defendant refused to settle the claim, asserting that the loss of the luggage was due to
plaintiff’s sole if not contributory negligence; non-declaration of valuable items in her checked-in luggage
at the flight counter when she checked in.

Trial court favored the plaintiff and ordered the Sabena Belgian World Airlines to pay private respondent
Ma. Paula San Agustin. Hence this appeal.


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


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 non-fulfillment of the prestation
gives 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 diligence
of 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 document
but to no avail. The “loss of said baggage not only once by twice,” said the appellate court, “underscores
the 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 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 non-performance of the
obligation, including moral and exemplary damages.

WHEREFORE, the decision appealed from is AFFIRMED.

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BRITISH AIRWAYS, petitioner,
[G.R. No. 121824, January 29, 1998]


On April 16, 1989, Mahtani (respondent) decided to visit his relatives in Bombay, India. Mr. Gumar,
purchased a ticket from British Airlines when Mahtani obtained his services. Since BA had no direct flights
from Manila to Bombay, Mahtani had to take a flight to Hongkong via PAL, and upon arrival in Hongkong
he had to take a connecting flight to Bombay on board BA.

Mahtani checked in at the PAL counter in Manila his two pieces of luggage containing his clothings and
personal effects. When he arrived in Bombay he discovered that his luggage was missing. A week after, BA
finally advised him to file a claim by accomplishing the “Property Irregularity Report.”

Back in the Philippines, Mahtani filed his complaint for damages and attorney’s fees against BA and Mr.
Gumar before the trial court. BA filed its answer with counter claim to the complaint raising, as special
and affirmative defenses, that Mahtani did not have a cause of action against it.

BA filed a third-party complaint against PAL alleging that the reason for the non-transfer of the luggage
was due to the latter’s late arrival in Hongkong, thus leaving hardly any time for the proper transfer of
Mahtani’s luggage to the BA aircraft bound for Bombay. PAL filed its answer to the third-party complaint,
wherein it disclaimed any liability, arguing that there was, in fact, adequate time to transfer the luggage
to BA facilities in Hongkong. Furthermore, the transfer of the luggage to Hongkong authorities should be
considered as transfer to BA.

Trial Court favored Mahtani and ordered BA to pay for the valuables and for damages. Third party
complaint against PAL was dismissed. BA appealed to the Court of Appeals, which however, affirmed the
trial court’s findings. Hence, this appeal by certiorari.


WON the amount of compensatory damages was without basis.


It is apparent that the contract of carriage was between Mahtani and BA. And courts have assessed the
airlines’ culpability in the form of damages for breach of contract involving misplaced luggage based on a
number of decided cases.

Admittedly, in a contract of air carriage a declaration by the passenger of a higher value is needed to
recover a greater amount. American jurisprudence provides that an air carrier is not liable for the loss of
baggage in an amount in excess of the limits specified in the tariff which was filed with the proper
authorities, such tariff being binding on the passenger regardless of the passenger’s lack of knowledge
thereof or assent thereto. This doctrine is recognized in this jurisdiction.

SC have held that benefits of limited liability are subject to waiver such as when the air carrier failed to
raise timely objections during the trial when questions and answers regarding the actual claims and
damages sustained by the passenger were asked. BA had waived the defense of limited liability when it
allowed Mahtani to testify as to the actual damages he incurred due to the misplacement of his luggage,
without any objection when it has the right to do so. Objection must be made at the earliest opportunity,

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lest silence when there is opportunity to speak may operate as a waiver of objections. BA has precisely
failed in this regard.

SC, however, did not agree with the dismissal of the third-complaint.

Undeniably, for the loss of his luggage, Mahtani is entitled to damages from BA, in view of their contract
of carriage. Yet, BA adamantly disclaimed its liability and instead imputed it to PAL which the latter
naturally denies. In other words, BA and PAL are blaming each other for the incident.

It is worth observing that the contract of air transportation was exclusively between Mahtani and BA

Since the instant petition was based on breach of contract of carriage, Mahtani can only sue BA alone, and
not PAL, since the latter was not a party to the contract. However, this is not to say that PAL is relieved
from any liability due to any of its negligent acts. In China Air Lines, Ltd. v. Court of Appeals, while not
exactly in point, the case, however, illustrates the principle which governs this particular situation. In that
case, we recognized that a carrier (PAL), acting as an agent of another carrier, is also liable for its own
negligent acts or omission in the performance of its duties. It is but logical, fair and equitable to allow BA
to sue PAL for indemnification, if it is proven that the latter’s negligence was the proximate cause of
Mahtani’s unfortunate experience, instead of totally absolving PAL from any liability.

The decision of the Court of Appeals is MODIFIED, reinstating the third-party complaint filed by British
Airways dated November 9, 1990 against Philippine Airlines.


vs. COURT OF APPEALS and GILDA C. MEJIA, respondents.
[G.R. No. 119706. March 14, 1996]


Plaintiff, Gilda C. Mejia, shipped thru defendant, Philippine Airlines, one (1) unit microwave oven, from
San Francisco, U.S.A. to Manila, Philippines. Upon arrival, however, of said article in Manila, Philippines,
plaintiff discovered that its front glass door was broken and the damage rendered it unserviceable.
Demands both oral and written were made by plaintiff against the defendant for the reimbursement of
the value of the damaged microwave oven, and transportation charges paid by plaintiff to defendant

Plaintiff filed the instant action for damages against defendant in the lower court. Defendant Airlines
alleged inter alia, by way of special and affirmative defenses, that the court has no jurisdiction over the
case; that plaintiff has no valid cause of action against defendant since it acted only in good faith and in
compliance with the requirements of the law, regulations, conventions and contractual commitments;
and that defendant had always exercised the required diligence in the selection, hiring and supervision of
its employees.

Petitioner airlines argues that the legal principle enunciated in Fieldmen’s Insurance does not apply to the
present case because the provisions of the contract involved here are neither ambiguous nor obscure.

The trial court justified its award of actual, moral and exemplary damages, and attorney’s fees in favor of
private respondent that since the plaintiff’s baggage destination was the Philippines, Philippine law
governs the liability of the defendant for damages for the microwave oven. And that, plaintiff has
established that defendant acted in bad faith when it denied the former’s claim on the ground that the

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formal claim was filed beyond the period as provided in the Air Waybill when actually, Concepcion Diño,
sister of plaintiff has immediately filed the formal claim upon discovery of the damage.

The court finds that the petitioner acted in bad faith in denying private respondent’s claim, which was
affirmed by the Court of Appeals. Hence this appeal for Certiorari.


WON the air waybill should be strictly construed against petitioner.

WON PAL acted in bad faith justifying the grant for damages.


NO. SC held that there can be no further question as to the validity of the terms of the air waybill, even if
the same constitutes a contract of adhesion. Whether or not the provisions thereof particularly on the
limited liability of the carrier are binding on private respondent in this instance must be determined from
the facts and circumstances involved vis-a-vis the nature of the provisions sought to be enforced, taking
care that equity and fair play should characterize the transaction under review. However, it should be
borne in mind that a contract of adhesion may be struck down as void and unenforceable, for being
subversive of public policy, only when the weaker party is imposed upon in dealing with the dominant
bargaining party and is reduced to the alternative of taking it or leaving it, completely deprived of the
opportunity to bargain on equal footing.

Just because we have said that Condition No. 5 of the airway bill is binding upon the parties to and fully
operative in this transaction, it does not mean, and let this serve as fair warning to respondent carriers,
that they can at all times whimsically seek refuge from liability in the exculpatory sanctuary of said
Condition No. 5. We find nothing objectionable about the lower court’s reliance upon the Fieldmen’s
Insurance case, the principles wherein squarely apply to the present petition. The parallelism between
the aforementioned case and this one is readily apparent for, just as in the instant case, it is the binding
effect of the provisions in a contract of adhesion (an insurance policy in Fieldmen’s Insurance) that is put
to test.

YES. It will be noted that petitioner never denied that the damage to the microwave oven was sustained
while the same was in its custody. The possibility that said damage was due to causes beyond the control
of PAL has effectively been ruled out since the entire process in handling of the cargo was done almost
exclusively by, and with the intervention or, at the very least, under the direct supervision of a responsible
PAL personnel.

The acceptance in due course by PAL of private respondent’s cargo as packed and its advice against the
need for declaration of its actual value operated as an assurance to private respondent that in fact there
was no need for such a declaration. Petitioner can hardly be faulted for relying on the representations of
PAL’s own personnel.

There was glaringly no attempt what so ever on the part of petitioner to explain the cause of the damage
to the oven which constitutes gross carelessness or negligence which by itself justifies the present award
of damages. The unprofessional indifference of PAL’s personnel despite full and actual knowledge of the
damage to private respondent’s cargo, just to be exculpated from liability on pure technicality and
bureaucratic subterfuge, smacks of willful misconduct and insensitivity to a passenger’s plight tantamount
to bad faith and renders unquestionable petitioner’s liability for damages.

The assailed judgment of respondent Court of Appeals is AFFIRMED.

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G.R. No. L-22491


Yau Yue Commercial Bank Ltd. of Hongkong, sell 140 packages of galvanized steel durzinc sheets
to one Herminio G. Teves, shipped by Tokyo Boeki Ltd. of Tokyo, Japan. with American Steamship
Agencies, Inc. as the agent in the Philippines, under a shipping agreement. The bill of lading was indorsed
to the order of and delivered to Yau Yue by the shipper. Upon receipt thereof, Yau Yue drew a demand
draft together with the bill of lading against Herminio G. Teves, through the Hongkong & Shanghai Bank.
Upon arrival, Hongkong & Shanghai Bank notified Teves, the "notify party" under the bill of lading, of the
arrival of the goods and requested payment of the demand draft representing the purchase price of the
articles. Teves, however, did not pay the demand draft, prompting the bank to make the corresponding
protest. The bank likewise returned the bill of lading and demand draft to Yau Yue which indorsed the said
bill of lading to Domingo Ang.

Despite non-payment Teves was able to secure a "Permit To Deliver Imported Articles" which he
presented to the Bureau of Customs which in turn released to him the articles covered by the bill of

Subsequently, Domingo Ang claimed for the articles from American Steamship Agencies, Inc., by
presenting the indorsed bill of lading, but he was informed by the latter that it had delivered the articles
to Teves. A complaint was filed by Ang against American Steamship for having allegedly wrongfully
delivered and/or converted the goods covered by the bill of lading. Defendant filed a motion to dismiss
upon the ground that plaintiff's cause of action has prescribed under the Carriage of Goods by Sea Act.
Lower court dismissed the case on the ground of prescription. Hence, an appeal was filed to SC.


Has plaintiff-appellant's cause of action prescribed under Section 3(6), paragraph 4 of the
Carriage of Goods by Sea Act? What is to be resolved — in order to determine the applicability of the
prescriptive period of one year to the case at bar — is whether or not there was "loss" of the goods
subject matter of the complaint.


From the allegations of the complaint, therefore, the goods cannot be deemed "lost". They were
delivered to Herminio G. Teves, so that there can only be either delivery, if Teves really was entitled to
receive them, or misdelivery, if he was not so entitled. It is not for Us now to resolve whether or not
delivery of the goods to Teves was proper, that is, whether or not there was rightful delivery or
misdelivery. There being no loss or damage to the goods, the aforequoted provision of the Carriage of
Good by Sea Act stating that "In any event, the carrier and the ship shall be discharged from all liability in
respect of loss or damage unless suit is brought within one year after delivery of the goods or the date
when the goods should have been delivered," does not apply. It follows that for suits predicated not upon
loss or damage but on alleged misdelivery (or conversion) of the goods, the applicable rule on prescription
is that found in the Civil Code, namely, either ten years for breach of a written contract or four years for
quasi-delict. In either case, plaintiff's cause of action has not vet prescribed, since his right of action would
have accrued at the earliest on May 9, 1961 when the ship arrived in Manila and he filed suit on October
30, 1963.

Wherefore, the dismissal order appealed from is hereby reversed and set aside and this case is remanded
to the court a quo for further proceedings

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G.R. No. L-24515

On August 11, 1962, a certain cargo insured with plaintiff corporation (American Insurance) was shipped
in New York, U.S. aboard "M/S TOREADOR", of which the general agent in the Philippines is appellee
Macondray & Co., Inc. (hereinafter referred to as Macondray). On September 18, 1962, the " M/S
TOREADOR" arrived at the port of Manila and on the same date discharged the cargo in question.
Pursuant to the arrangement the cargo was subsequently loaded aboard the "SS SIQUIJOR", an inter-
island vessel. The shipment was finally discharged in Cebu on September 24, 1962.

Atlas Consolidated Mining and Development Corporation, the consignee took delivery of the shipment it
was found to be short of two (2) pieces of tractor parts. Plaintiff paid the insured value of the lost
merchandise to the consigned and filed a complaint against the Compañia Maritima and the Visayan Cebu
Terminal Co., Inc. being in-charged with the care and custody of all cargo discharged there. Maritima
claimed that the lost merchandise had not actually been delivered to it which the plaintiff opposed via
amended complaint.

Macondray moved to dismiss the amended complaint against it on the ground that plaintiff's action had
already prescribed under the provisions of the Carriage of Goods by Sea Act. Macondray contended that
since the amended complaint in which it was impleaded for the first time was filed only on November 6,
1964 and admitted on November 14, 1964, the period of one year had expired whether reckoned from
one or the other of two dates, namely September 18, 1962, when the "M/S TOREADOR" arrived at the
port of Manila and discharged the cargo for transshipment to Cebu on board the "SS SIQUIJOR," and
September 24, 1962, when the shipment finally arrived in Cebu and was discharged the same day.. This
was granted. Hence, this appeal.

Plaintiff avers that the one year prescriptive period does not apply in this case. In addition, it is pointed
out that the cargo in question was transshipment cargo; that the discharge thereof in Manila terminated
the obligation of Macondray as carrier; and that its obligation to transship the cargo to Cebu was merely
that of a "forwarding agent" of the shipper.

Issue: Whether or not the action has prescribed.


The transshipment of the cargo from Manila to Cebu was not a separate transaction from that originally
entered into by Macondray, as general agent for the "M/S TOREADOR". It was part of Macondray's
obligation under the contract of carriage and the fact that the transshipment was made via an inter-island
vessel did not operate to remove the transaction from the operation of the Carriage of Goods by Sea Act

The order appealed from is hereby affirmed

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