.R. No. L-15652 December 14, 1920 THE YNCHAUSTI STEAMSHIP COMPANY, petitioner, vs. I. B.

DEXTER, as Auditor of the Philippine Islands, and C. E. UNSON, as Acting Purchasing Agent of the Philippine Islands, respondents. Cohn & Fisher for petitioner. Attorney-General Paredes and Assistant Attorney-General A. Santos for respondents.

Thereafter, notwithstanding the protestations of the petitioner, Ynchausti Steamship Co., that said shortages were due to causes entirely unknown to it, and were not due to any fault or negligence on its part, or on the part of its agents or servants, the Acting Insular Purchasing Agent of the Philippine Islands notified the petitioners herein that after due investigation the Insular Auditor found and decided that the leakages of the two whole cases were due to its negligence and that the deduction of the sum of P22.53, the invoice value of the goods lost, and held by the Auditor to be the true value thereof had been authorized by the said Insular Auditor. Petitioner thereupon protested against the threatened deduction, and demanded that it be paid the full amount due for the transportation of the two said shipments of merchandise, to wit, the sum of P82.79, as shown by its transportation voucher presented in this cause, hereto attached. marked Exhibit C and made a part hereof. Thereafter, notwithstanding the protest and demand of the petitioner as aforesaid, the Insular Auditor, in conformity with his ruling, declined and still declines to issue to the petitioner a warrant for the full sum of P82.79, and has tendered to it a warrant for the sum of P60.26, which the petitioner has refused to accept.
lawphi1 .net

STREET, J.: This a petition for a writ of mandamus filed in this court of the Ynchausti Steamship Company to compel the Purchasing Agent of the Philippine Islands and the Insular Auditor to sign, countersign, and deliver to the petitioner a warrant upon the Treasurer of the Philippine Islands for the sum of P82.79 in satisfaction of a claim for that amount, which is alleged to be due the petitioner as a common carrier for freight earned in transporting for the Government two distinct consignments of mineral oil from Manila to two other ports in the Philippine Islands. After the defendants had duly answered, denying all the allegations of the petition except such as relate to the character and places of residence of the parties to the petition (which are admitted) the controversy was submitted for determination by this court upon an agreed statement of facts as follows: On July 23, 1918, the Government of the Philippine Islands, acting by and through the respondent Insular Purchasing Agent, employed the services of the petitioner, Ynchausti Steamship Co., a common carrier, for the transportation, on board the steamship Venus, from the port of Manila to the port of Aparri, Cagayan, of a consignment of merchandise, consisting of thirty (30) cases of "White Rose" mineral oil of two five-gallon cans to the case; and on September 18, 1918, the said Government likewise employed the services of petitioner for the transportation on board the steamship Venus, from Manila to Aparri, Cagayan, of ninety-six cases of "Cock" Brand mineral oil, ten gallons to the case. The goods were delivered by the shipper to the carrier, which accordingly received them, and to evidence the contract of transportation, the parties duly executed and delivered what is popularly called the Government bill of lading (General Form 9-A), hereto attached, marked Exhibit A and made a part hereof, wherein and whereby it was stipulated that the carrier, the petitioner Ynchausti & Co., received the above-mentioned supplies in apparent good condition, obligating itself to carry said supplies to the place agreed upon, in accordance with the authorized and prescribed rates and classifications, and subject to the law of common carriers in force on the date of the shipment, and to the conditions prescribed by the Insular Collector of Customs in Philippine Marine Regulations at page 16 under the heading of "Bill of Lading Conditions," hereto attached, marked Exhibit B and made a part hereof. Upon the delivery of the said shipment of "Cock" brand oil and consignee claimed that one case was delivered empty, and noted such claim upon the bill of lading; and upon the delivery of the said shipment of "White Rose," brand oil the consignee claimed that one case was delivered empty, and noted said claim upon the bill of lading.

The sum of P22.53 authorized to be deducted by the Insular Auditor, as appears herein, has not at any time been liquidated by consent, agreement, or by the judgment of any court of competent jurisdiction. Upon a perusal of the foregoing agreed statement it will be seen that the present litigation had its origin in a situation practically identical with that considered by this court in Compaia General de Tabacos vs. French and Unson (39 Phil., 34). It will be noted, however, that the case mentioned was decided upon demurrer, while the one now before us is to be heard and determined upon the petition, answer, and the admitted facts. We note that in this case, as in the case of Compaia General de Tabacos vs. French and Unson (supra), the petition alleges that the leakage of the lost gasoline was due to causes unknown to the petitioner and was not due to any fault or negligence of petitioner, its agents, or servants. The respondents, by demurring to the petition in the earlier case, admitted that allegation. In the case now before us that allegation is put in issue, and we find nothing in the admitted statement of facts to support it. It results that if that allegation is material to the relief here sought, the petition must fail. We are of the opinion that the allegation in question is material and that the belief sought in this case cannot be granted. In section 646 of the Administrative Code it is provided that when Government property is transmitted from one place to another by carrier, it shall be upon proper bill of lading, or receipt, from such carrier, and it shall be the duty of the consignee, or his representative, to make full notation of any evidence of loss, shortage, or damage, upon the bill of lading, or receipt, before accomplishing it. It is admitted by the petitioner in the agreed statement of facts that the consignee, at the time the oil was delivered, noted the loss in the present case upon the two respective bills of lading. The notation of these losses by the consignee, in obedience to the precept of section 646 of the Administrative Code, is competent evidence to show that the shortage in fact existed. As the petitioner admits that the oil was

received by it for carriage and inasmuch as the fact of loss is proved in the manner just stated, it results that there is a presumption that the petitioner was to blame for the loss; and it was incumbent upon the petitioner in order to entitle it to relief in the case to rebut that presumption by proving, as is alleged in the petition, that the loss was not due to any fault or negligence of the petitioner. The mere proof of delivery of goods in good order to a carrier, and of their arrival at the place of destination in bad order, makes out a prima facie case against the carrier, so that if no explanation is given as to how the injury occurred, the carrier must be held responsible. (4 R. C. L., p. 917.) It is incumbent upon the carrier to prove that the loss was due to accident or some other circumstance inconsistent with its liability. (Articles 361-363, Code of Commerce.) Indeed, if the Government of the Philippine Islands had instituted an action in a court of law against the petitioner to recover the value of the oil lost while these consignments were in the court of transportation, it would, upon the facts appearing before us, have been entitled to judgment. From this it is apparent that the mandamus prayed for cannot be granted. It is a rule of universal application that a petition for extraordinary relief of the character here sought must show merit. That is, the petitioner's right to relief must be clear. Such cannot be said to be the case where, as here, a presumption of responsibility on the part of the petitioner stands unrefuted upon the record. We are of the opinion that, in the absence of proof showing that the carrier was not at fault in respect to the matter under discussion, the Insular Auditor was entitled to withhold, from the amount admittedly due to the petitioner for the freight charges, a sum sufficient to cover the value of the oil lost in transit. The petition will be dismissed, with costs against the petitioner. So ordered. Mapa, C.J., Araullo, Avancea, and Villamor, JJ., concur. Malcolm, J., concurs in the result.

G.R. No. L-29721

March 27, 1929

unless a higher value is stated herein and ad valorem freight paid or assessed thereon," and that there was no other agreement. That no September 3, 1927 the plaintiff wrote the defendant a letter as follows: Therefore, I wish to file claim of damage to the meager maximum value that your bills of lading will indemnify me, that is $250 as per condition 13. As a fourth special defense, defendant alleges that the damage, if any, was caused by "sea water," and that the bill of lading exempts defendant from liability for that cause. That damage by "sea water" is a shipper's risk, and that defendant is not liable. As a result of the trial upon such issues, the lower court rendered judgment for the plaintiff for P2,080, with legal interest thereon from the date of the final judgment, with costs, from which both parties appealed, and the plaintiff assigns the following errors: I. The lower court erred in holding that plaintiff's damage on account of the loss of the damaged books in the partially damaged case can be compensated with an indemnity of P450 instead of P750 as claimed by plaintiff. II. The lower court, consequently, also erred in giving judgment for plaintiff for only P2,080 instead of P2,380. III. The lower court erred in not sentencing defendant to pay legal interest on the amount of the judgment, at least, from the date of the rendition of said judgment, namely, January 30, 1928. The defendant assigns the following errors: I. The lower court erred in failing to recognize the validity of the limited liability clause of the bill of lading, Exhibit 2. II. The lower court erred in holding defendant liable in any amount and in failing to hold, after its finding as a fact that the damage was caused by sea water, that the defendant is not liable for such damage by sea water. III. The lower court erred in awarding damages in favor of plaintiff and against defendant for P2,080 or in any other amount, and in admitting, over objection, Exhibits G, H, I and J. JOHNS, J.: Plaintiff's contention that he is entitled to P700 for his Encyclopedia Britannica is not tenable. The evidence shows that the P400 that the court allowed, he could buy a new set which could contain all of the material and the subject matter of the one which he lost. Plaintiff's third assignment of error is well taken, as under all of the authorities, he is entitled to legal interest from the date of his judgement rendered in the lower court and not the date when it becomes final. The lower court found that plaintiff's damage was P2,080, and that finding is sustained by that evidence. There was a total loss of one case and a partial loss of the other, and in the very nature of the things, plaintiff could not prove his

AMANDO MIRASOL, plaintiff-appellant, vs. THE ROBERT DOLLAR CO., defendant-appellant. Vicente Hilado for plaintiff-appellant. J.A. Wolfson for defendant-appellant. STATEMENT After the promulgation of the decision rendered by the Second Division of February 13, 1929,1 the defendant filed a motion to have the case heard and decided in banc, and inasmuch as the legal questions involved are important to the shipping interests, the court thought it best to do so. After the formal pleas, plaintiff alleges that he is the owner and consignee of two cases of books, shipped in good order and condition at New York, U.S.A., on board the defendant's steamship President Garfield, for transport and delivery to the plaintiff in the City of Manila, all freight charges paid. That the two cases arrived in Manila on September 1, 1927, in bad order and damaged condition, resulting in the total loss of one case and a partial loss of the other. That the loss in one case is P1,630, and the other P700, for which he filed his claims, and defendant has refused and neglected to pay, giving as its reason that the damage in question "was caused by sea water." That plaintiff never entered into any contract with the defendant limiting defendant's liability as a common carrier, and when he wrote the letter of September 3, 1927, he had not then ascertained the contents of the damaged case, and could not determine their value. That he never intended to ratify or confirm any agreement to limit the liability of the defendant. That on September 9, 1927, when the other case was found, plaintiff filed a claim for the real damage of the books therein named in the sum of $375. Plaintiff prays for corresponding judgment, with legal interest from the filing of the complaint and costs. For answer the defendant made a general and specific denial, and as a separate and special defense alleges that the steamship President Garfield at all the times alleged was in all respects seaworthy and properly manned, equipped and supplied, and fit for the voyage. That the damage to plaintiff's merchandise, if any, was not caused through the negligence of the vessel, its master, agent, officers, crew, tackle or appurtenances, nor by reason of the vessel being unseaworthy or improperly manned, "but that such damage, if any, resulted from faults or errors in navigation or in the management of said vessel." As a second separate and special defense, defendant alleges that in the bill of lading issued by the defendant to plaintiff, it was agreed in writing that defendant should not be "held liable for any loss of, or damage to, any of said merchandise resulting from any of the following causes, to wit: Acts of God, perils of the sea or other waters," and that plaintiff's damage, if any, was caused by "Acts of God" or "perils of the sea." As a third special defense, defendant quoted clause 13 of the bill of lading, in which it is stated that in no case shall it be held liable "for or in respect to said merchandise or property beyond the sum of two hundred and fifty dollars for any piece, package or any article not enclosed in a package,

loss in any other way or manner that he did prove it, and the trial court who heard him testify must have been convinced of the truth of his testimony. There is no claim or pretense that the plaintiff signed the bill of lading or that he knew of his contents at the time that it was issued. In that situation he was not legally bound by the clause which purports to limit defendant's liability. That question was squarely met and decided by this court in banc in Juan Ysmael and Co., vs. Gabino Baretto and Co., (51 Phil., 90; see numerous authorities there cited). Among such authorities in the case of The Kengsington decided by the Supreme Court of the U.S. January 6, 1902 (46 Law. Ed., 190), in which the opinion was written by the late Chief Justice White, the syllabus of which is as follows: 1. Restrictions of the liability of a steamship company for its own negligence or failure of duty toward the passenger, being against the public policy enforced by the courts of the United States, will not to be upheld, though the ticket was issued and accepted in a foreign country and contained a condition making it subject to the law thereof, which sustained such stipulation. 2. The stipulation in a steamship passenger's ticket, which compels him to value his baggage, at a certain sum, far less than it is worth, or, in order to have a higher value put upon it, to subject it to the provisions of the Harter Act, by which the carrier would be exempted from all the liability therefore from errors in navigation or management of the vessel of other negligence is unreasonable and in conflict with public policy. 3. An arbitrary limitation of 250 francs for the baggage of any steamship passenger unaccompanied by any right to increase the amount of adequate and reasonable proportional payment, is void as against public policy. Both the facts upon which it is based and the legal principles involved are square in point in this case. The defendant having received the two boxes in good condition, its legal duty was to deliver them to the plaintiff in the same condition in which it received them. From the time of their delivery to the defendant in New York until they are delivered to the plaintiff in Manila, the boxes were under the control and supervision of the defendant and beyond the control of the plaintiff. The defendant having admitted that the boxes were damaged while in transit and in its possession, the burden of proof then shifted, and it devolved upon the defendant to both allege and prove that the damage was caused by reason of some fact which exempted it from liability. As to how the boxes were damaged, when or where, was a matter peculiarly and exclusively within the knowledge of the defendant and in the very nature of things could not be in the knowledge of the plaintiff. To require the plaintiff to prove as to when and how the damage was caused would force him to call and rely upon the employees of the defendant's ship, which in legal effect would be to say that he could not recover any damage for any reason. That is not the law. Shippers who are forced to ship goods on an ocean liner or any other ship have some legal rights, and when goods are delivered on board ship in good order and condition, and the shipowner delivers them to the shipper in bad order and condition, it then devolves upon the shipowner to both allege and prove that the goods were damaged by the reason

of some fact which legally exempts him from liability; otherwise, the shipper would be left without any redress, no matter what may have caused the damage. The lower court in its opinion says: The defendant has not even attempted to prove that the two cases were wet with sea water by fictitious event, force majeure or nature and defect of the things themselves. Consequently, it must be presumed that it was by causes entirely distinct and in no manner imputable to the plaintiff, and of which the steamer President Garfield or any of its crew could not have been entirely unaware. And the evidence for the defendant shows that the damage was largely caused by "sea water," from which it contends that it is exempt under the provisions of its bill of lading and the provisions of the article 361 of the Code of Commerce, which is as follows: Merchandise shall be transported at the risk and venture of the shipper, if the contrary was not expressly stipulated. Therefore, all damages and impairment suffered by the goods during the transportation, by reason of accident, force majeure, or by virtue of the nature or defect of the articles, shall be for the account and risk of the shipper. The proof of these accidents is incumbent on the carrier. In the final analysis, the cases were received by the defendant in New York in good order and condition, and when they arrived in Manila, they were in bad condition, and one was a total loss. The fact that the cases were damaged by "sea water," standing alone and within itself, is not evidence that they were damaged by force majeure or for a cause beyond the defendant's control. The words "perils of the sea," as stated in defendant's brief apply to "all kinds of marine casualties, such as shipwreck, foundering, stranding," and among other things, it is said: "Tempest, rocks, shoals, icebergs and other obstacles are within the expression," and "where the peril is the proximate cause of the loss, the shipowner is excused." "Something fortuitous and out of the ordinary course is involved in both words 'peril' or 'accident'." Defendant also cites and relies on the case of Government of the Philippine Islands vs. Ynchausti & Company (40 Phil., 219), but it appears from a reading of that case that the facts are very different and, hence, it is not in point. In the instant case, there is no claim or pretense that the two cases were not in good order when received on board the ship, and it is admitted that they were in bad order on their arrival at Manila. Hence, they must have been damaged in transit. In the very nature of things, if they were damaged by reason of a tempest, rocks, icebergs, foundering, stranding or the perils of the sea, that would be a matter exclusively within the knowledge of the officers of defendant's ship, and in the very nature of things would not be within plaintiff's knowledge, and upon all of such questions, there is a failure of proof. The judgment of the lower court will be modified, so as to give the plaintiff legal interest on the amount of his judgment from the date of its rendition in the lower court, and in all respects affirmed, with costs. So ordered.

Johnson, Malcolm, Ostrand, Romualdez, and Villa-Real, JJ., concur.

Separate Opinions STREET, J., dissenting in part: I gave a hesitating adherence to the decision of this case in division, and upon further reflection, I am now constrained to record my belief that the decision is in part erroneous. I agree with the court that the defendant is liable to the plaintiff, but I think that its liability is limited, under clause 13, printed on the back of the bill of lading, to the amount of 250 dollars for each of the two boxes of books comprising this consignment. While the law does not permit a carrier gratuitously to exempt itself from liability for the negligence of its servants, it cannot effectually do so for a valuable consideration; and where freight rates are adjusted upon the basis of a reasonable limited value per package, where a higher value is not declared by the shipper, the limitation as to the value is binding. This court in two well considered decisions has heretofore upheld a limitation of exactly the character of that indicated in clause 13 (H.E. Heacock Co. vs. Macondray & Co., 42 Phil., 205; Freixas & Co. vs. Pacific Mail Steamship Co., 42 Phil., 198); and I am unable to see any sufficient reason for ignoring those decisions.

G.R. No. L-6092

March 8, 1912

TAN CHIONG SIAN, plaintiff-appellee, vs. INCHAUSTI AND CO., defendant-appellant. Haussermann, Cohn and Fisher for appellant. O'Brien and DeWitt for appellee. TORRES, J.: This is an appeal through bill of exceptions, by counsel for the firm of Inchausti & Co., from a judgment rendered by the Honorable A.S. Crossfield, judge. On January 11, 1909, the Chinaman, Tan Chiong Sian or Tan Chinto, filed a written complaint, which was amended on the 28th of the same month and again amended on October 27 of the same year, against the said firm, wherein he alleged, among other things, as a cause of action: That, on or about November 25, 1908, the plaintiff delivered to the defendant 205 bundles or cases of general merchandise belonging to him, which Inchausti & Co., upon receiving, bound themselves to deliver in the pueblo of Catarman, Province of Samar, to the Chinaman, Ong Bieng Sip, and in consideration of the obligations contracted by the defendant party, the plaintiff obligated himself to pay to the latter the sum of P250 Philippine currency, which payment should be made upon the delivery of the said merchandise in the said pueblo Catarman; but that the defendant company neither carried nor delivered the aforementioned merchandise to the said Ong Bieng Sip, in Catarman, but unjustly and negligently failed to do so, with the result that the said merchandise was almost totally lost; that, had the defendant party complied well and faithfully with its obligation, according to the agreement made, the merchandise concerned would have a value of P20,000 in the said pueblo of Catarman on the date when it should have been delivered there, wherefore the defendant party owed the plaintiff the said sum of P20,000, which it had not paid him, or any part thereof, notwithstanding the many demands of the plaintiff; therefore the latter prayed for judgment against the defendant for the said sum, together with legal interest thereon from November 25, 1908, and the costs of the suit. Counsel for the defendant company, in his answer, set forth, that he admitted the allegations of paragraphs 1 and 2 of the complaint, amended for the second time, and denied those paragraphs 3, 4, 5, 6 and 7 of the same. As his first special defense, he alleged that on or about November 28, 1908, his client, the said firm, received in Manila from Ong Bieng Sip 205 bundles, bales, or cases of merchandise to be placed on board the steamer Sorsogon, belonging to the defendant, for shipment to the port of Gubat, Province of Sorsogon, to be in the said port transshipped into another of the defendant's vessels for transportation to the port of Catarman, Samar, and delivered to the aforesaid Chinaman, Ong Bieng Sip; that the defendant company, upon receiving the said merchandise from the latter, Ong Bieng Sip, and on its entering into a contract of maritime transportation with him did not know and was not notified that the plaintiff, Tan Chiong Sian, had any interest whatever in the said merchandise and had made with the plaintiff no contract relative to the transportation of such goods, for, on receiving the latter from the said Ong Bieng Sip, for transportation, there were made out and delivered to him three bills

of lading, Nos. 38, 39 and 76, which contained a list of the goods received and, printed on the back thereof were the terms of the maritime transportation contract entered into by and between the plaintiff and the defendant company, copies of which bills of lading and contract, marked as Exhibits A, B, and C, are of record, attached to and made an integral part of the said answer; that Ong Bieng Sip accepted the said bills of lading and the contract extended on the backs thereof; that the merchandise mentioned was put on board the steamer Sorsogon and carried to the port of Gubat, Province of Sorsogon, where this vessel arrived on November 28, 1908, on which date the lorcha Pilar, into which the said merchandise was to be transshipped for carriage to Catarman, was not at Gubat, and therefore the goods had to be unloaded and stored in the defendant company's warehouses at Gubat; that, on the 4th of December of the same year, the lorcha Pilar arrived at Gubat and, after the termination of certain necessary work, the goods received from Chinaman, Ong Bieng Sip, were taken aboard the same, together with other merchandise belonging to the defendant party, for the purpose of transportation to the port of Catarman; that, before the said lorcha could leave for its destination, a strong wind arose which in the course of the day increased in force until, early in the morning of the following day, the lorcha was dragged and driven, by the force of the storm, upon the shore, despite the means employed by the crew to avoid the accident, and notwithstanding the five anchors that held the craft, which was thus wrecked and completely destroyed and the merchandise with which it was laden, including the 205 bundles or packages taken aboard for the said Chinaman, was scattered on the shore; that, on the occasion, the lorcha Pilar was in good condition, provided with all the proper and necessary equipment and accessories and carried a crew of sufficient number in command of a skillful patron or master, wherefore the wreck of the said craft was solely due to the irresistible force of the elements and of the storm which drove it upon the shore; that the defendant company, with the greatest possible diligence, gathered up the said shipwrecked goods that had been shipped by the Chinaman, Ong Bieng Sip, but, owing to the damage they had suffered, it was impossible to preserve them, so, after having offered to deliver them to him, the defendant proceeded, in the presence of a notary, to sell them at public auction and realized from the sale thereof P1,693.67, the reasonable value of the same in the condition in which they were after they had been gathered up and salved from the wreck of the lorcha Pilar; that the expenses occasioned by such salvage and sale of the said goods amounted to P151.35, which were paid by the defendant party; that the latter offered to the Chinese shipper, the plaintiff, the amount realized from the sale of the said merchandise, less P151.35, the amount of the expenses, and the sum of P250, the amount of the freight stipulated, and is still willing to pay such products of the said sale to the aforementioned Ong Bieng Sip or to any other person who should establish his subrogation to the rights of the Chinaman, Ong Bieng Sip, with respect to the said amount; that, as his client's second special defense, the defendant company alleged that one of the conditions of the shipping contract executed between it and the Chinaman, Ong Bieng Sip, relative to the transportation of the said merchandise, was that the said firm should not be held liable for more than P25 for any bundle or package, unless the value of its contents should be stated in the bill of lading, and that the shipper, Chinaman, Ong Bieng Sip, did not state in the bill of lading the value of any of the bundles or packages in which the goods shipped by him were packed. Counsel for the defendant company, therefore, prayed the court to absolve his client from the complaint, with costs against the plaintiff. After the hearing of the case and the introduction of testimony by the parties, judgment was rendered, on March 18, 1910, in favor of the plaintiff, Tan Chiong Sian or Tan Chinto, against the defendant Inchausti and Co., for the sum of P14,642.63, with interest at the rate of 6 per cent per annum from January 11, 1909, and for the costs of the trial. The defendant party appealed from this judgment.

This suit was brought for the purpose of collecting a certain sum which it is alleged the defendant firm owes the plaintiff for losses and damages suffered by the latter as a result of the former's noncompliance with the terms of an agreement or contract to transport certain merchandise by sea from this city to the pueblo of Catarman, Island of Samar, for the sum of P250. The principal question to be determined is whether the defendant is liable for the loss of the merchandise and for failure to deliver the same at the place of destination, or whether he is relieved from responsibility on the ground of force majeure. Article 1601 of the Civil Code prescribes: Carriers of goods by land or by water shall be subject with regard to the keeping and preservation of the things entrusted to them, to the same obligations as determined for innkeepers by articles 1783 and 1784. The provisions of this article shall be understood without prejudice to what is prescribed by the Code of Commerce with regard to transportation by sea and land. Article 1602 reads: Carriers are also liable for the loss of and damage to the things which they receive, unless they prove that the loss or damage arose from a fortuitous event or force majeure. The articles aforecited are as follows: ART. 1783. The depositum of goods made by travelers in inns or hostelries shall also be considered a necessary one. The keepers of inns and hostelries are liable for them as such bailees, provided that notice thereof may have been given to them or to their employees, and that the travelers on their part take the precautions which said innkeepers or their substitutes may have advised them concerning the care and vigilance of said goods. ART. 1784. The liability referred to in the preceding article shall include damages to the goods of the travelers caused the servants or employees of the keepers for inns or hostelries as well as by strangers, but not those arising from robbery or which may be caused by any other case of force majeure. Article 361 of the Code of Commerce provides: Merchandise shall be transported at the risk and venture of the shipper, unless the contrary was expressly stipulated. Therefore, all damages and impairment suffered by the goods in transportation, by reason of accident, force majeure, or by virtue of the nature or defect of the articles, shall be for the account and risk of the shipper.

The proof of these accidents in incumbent on the carrier. ART. 362. The carrier, however, shall be liable for the losses and damages arising from the causes mentioned in the foregoing article if it is proved that they occurred on account of his negligence or because he did not take the precautions usually adopted by careful persons, unless the shipper committed fraud in the bill of lading, stating that the goods were of a class or quality different from what they really were. If, notwithstanding the precaution referred to in this article, the goods transported run the risk of being lost on account of the nature or by reason of an unavoidable accident, without there being time for the owners of the same to dispose thereof, the carrier shall proceed to their sale, placing them for this purpose at the disposal of the judicial authority or of the officials determined by special provisions. ART. 363. With the exception of the cases prescribed in the second paragraph of article 361, the carrier shall be obliged to deliver the goods transported in the same condition in which, according to the bill of lading, they were at the time of their receipt, without any detriment or impairment, and should he not do so, he shall be obliged to pay the value of the goods not delivered at the point where they should have been and at the time the delivery should have taken place. If part of the goods transported should be delivered the consignee may refuse to receive them, when he proves that he can not make use thereof without the others. On November 25, 1908, Inchausti & Co. received in Manila from the Chinaman, Ong Bieng Sip, 205 bundles, bales or cases of goods to be conveyed by the steamer Sorsogon to the port of Gubat, Province of Sorsogon, where they were to be transshipped to another vessel belonging to the defendant company and by the latter transported to the pueblo of Catarman, Island of Samar, there to be delivered to the Chinese shipper with whom the defendant party made the shipping contract. To this end three bills of lading were executed, Nos. 38, 39, and 76, copies of which, marked as Exhibits A, B, and C, are found on pages 13, 14, and 15 of the record. The steamer Sorsogon, which carried the goods, arrived at the port of Gubat on the 28th of that month and as the lorcha Pilar, to which the merchandise was to be transshipped for its transportation to Catarman, was not yet there, the cargo was unloaded and stored in the defendant company's warehouses at that port. Several days later, the lorcha just mentioned arrived at Gubat and, after the cargo it carried had been unloaded, the merchandise belonging to the Chinaman, Ong Bieng Sip, together with other goods owned by the defendant Inchausti & Co., was taken aboard to be transported to Catarman; but on December 5, 1908, before the Pilar could leave for its destination, towed by the launch Texas, there arose and, as a result of the strong wind and heavy sea, the lorcha was driven upon the shore and wrecked, and its cargo, including the Chinese shipper's 205 packages of goods, scattered on the beach. Laborers or workmen of the defendant company, by its order, then proceeded to gather up the plaintiff's merchandise and, as it was impossible to preserve it after it was salved from the wreck of the lorcha, it was sold at public auction before a notary for the sum of P1,693.67.

The contract entered into between the Chinese shipper, Ong Bieng Sip, and the firm of Inchausti & Co., provided that transportation should be furnished from Manila to Catarman, although the merchandise taken aboard the steamer Sorsogon was to be transshipped at Gubat to another vessel which was to convey it from that port to Catarman; it was not stipulated in the said contract that the Sorsogon should convey the goods to their final destination, nor that the vessel into which they were to be transshipped, should be a steamer. The shipper, Ong Bieng Sip, therefore assented to these arrangements and made no protest when his 205 packages of merchandise were unloaded from the ship and, on account of the absence of the lorcha Pilar, stored in the warehouses at Gubat nor did he offer any objection to the lading of his merchandise on to this lorcha as soon as it arrived and was prepared to receive cargo; moreover, he knew that to reach the port of Catarman with promptness and dispatch, the lorcha had to be towed by some vessel like the launch Texas, which the defendant company had been steadily using for similar operations in those waters. Hence the shipper, Ong Bieng Sip, made no protest or objection to the methods adopted by the agents of the defendant for the transportation of his gods to the port of their destination, and the record does not show that in Gubat the defendant possessed any other means for the conveyance and transportation of merchandise, at least for Catarman, than the lorcha Pilar, towed by said launch and exposed during its passage to all sorts of accidents and perils from the nature and seafaring qualities of a lorcha, from the circumstances then present and the winds prevailing on the Pacific Ocean during the months of November and December. It is to be noted that a lorcha is not easily managed or steered when the traveling, for, out at sea, it can only be moved by wind and sails; and along the coast near the shore and in the estuaries where it customarily travels, it can only move by poling. For this reason, in order to arrive at the pueblo of Catarman with promptness and dispatch, the lorcha was usually towed by the launch Texas. The record does not show that, from the afternoon of the 4th of December, 1908, until the morning of the following day, the 5th, the patron or master of the lorcha which was anchored in the cove of Gubat, received any notice from the captain of the steamer Ton Yek, also anchored near by, of the near approach of a storm. The said captain, Juan Domingo Alberdi, makes no reference in his sworn testimony of having given any such notice to the patron of the lorcha, nor did the latter, Mariano Gadvilao, testify that he received such notice from the captain of the Ton Yek or from the person in charge of the Government observatory. Gadvilao, the patron, testified that only between 10 and 11 o'clock of Saturday morning, the 5th of December, was he informed by Inchausti & Co.'s agent in Gubat that a baguio was approaching; that thereupon, on account of the condition of the sea, he dropped the four anchors that the lorcha had on board and immediately went ashore to get another anchor and a new cable in order more securely to hold the boat in view of the predicted storm. This testimony was corroborated by the said representative, Melchor Muoz. So the lorcha, when the storm broke upon it, was held fast by five anchors and was, as testified by the defendant without contradiction or evidence to the contrary, well found and provided with all proper and necessary equipment and had a sufficient crew for its management and preservation. The patron of the lorcha testified specifically that at Gubat or in its immediate vicinity there is no port whatever adequate for the shelter and refuge of vessels in cases of danger, and that, even though there were, on being advised between 10 and 11 o'clock of the morning of the 5th, of the approach of a storm from the eastern Pacific, it would have been impossible to spread any sails or weigh anchor on the lorcha without being dragged or

driven against the reefs by the force of the wind. As the craft was not provided with steam or other motive power, it would not have been possible for it to change its anchorage, nor move from the place where it lay, even several hours before the notice was received by its patron. A lorcha can not be compared with a steamer which does not need the help or assistance of any other vessel in its movements. Due importance must be given to the testimony of the weather observer, Antonio Rocha, that the notice received from the Manila Observatory on the afternoon of December 4, with regard to a storm travelling from the east of the Pelew Islands toward the northwest, was not made known to the people of Gubat and that he merely left a memorandum notice on the desk of the station, intending to give explanations thereof to any person who should request them of him. So the notice of the storm sent by the Manila Observatory was only known to the said observer, and he did not apprise the public of the approach of the storm until he received another notice from Manila at 20 minutes past 8 o'clock on Saturday morning, December 5. Then he made a public announcement and advised the authorities of the storm that was coming. The patron of the lorcha Pilar is charged with gross negligence for not having endeavored to remove his craft to a safe place in the Sabang River, about half a mile from where it was anchored. In order to find out whether there was or was not such negligence on the part of the patron, it becomes necessary to determine, first, whether the lorcha, on the morning of December 5, could be moved by its own power and without being towed by any steamboat, since it had no steam engine of its own; second, whether the lorcha, on account of its draft and the shallowness of the mouth of the said river, could have entered the latter before the storm broke. The patron, Mariano Gadvilao, stated under oath that the weather during the night of December 4 was not threatening and he did not believe there would be a storm; that he knew the Sabang River; and that the lorcha Pilar, when loaded, could not enter as there was not sufficient water in its channel; that, according to an official chart of the port of Gubat, the bar of the Sabang River was covered by only a foot and a half of water at ordinary low tide and the lorcha Pilar, when loaded, drew 6 feet and a half; that aside from the fact that the condition of the sea would not have permitted the lorcha to take shelter in the said river, even could it have relied upon the assistance of a towboat, at half past 8 o'clock in the morning the tide was still low; there was but little water in the river and still less over the bar. It was proven by the said official chart of the port of Gubat, that the depth of water over the bar or entrance of the Sabang River is only one foot and a half at ordinary low tide; that the rise and fall of the tide is about 4__ feet, the highest tide being at 2 o'clock in the afternoon of every day; and at that hour, on the 5th of December, the hurricane had already made its appearance and the wind was blowing with all its fury and raising great waves. The lorcha Pilar, loaded as it had been from the afternoon of December 4, even though it could have been moved by means of poles, without being towed, evidently could not have entered the Sabang River on the morning of the 5th, when the wind began to increase and the sea to become rough, on account of the low tide, the shallowness of the channel, and the boat's draft.

The facts stated in the foregoing paragraph were proved by the said chart which was exhibited in evidence and not rejected or assailed by the plaintiff. They were also supported by the sworn testimony of the patron of the lorcha, unrebutted by any oral evidence on the part of the plaintiff such as might disprove the certainty of the facts related, and, according to section 275 of the Code of Civil Procedure, the natural phenomenon of the tides, mentioned in the official hydrographic map, Exhibit 7, which is prima facie evidence on the subject, of the hours of its occurrence and of the conditions and circumstances of the port of Gubat, shall be judicially recognized without the introduction of proof, unless the facts to the contrary be proven, which was not done by the plaintiff, nor was it proven that between the hours of 10 and 11 o'clock of the morning of December 5, 1908, there did not prevail a state of low tide in the port of Gubat. The oral evidence adduced by the plaintiff with respect to the depth of the Sabang River, was unable to overcome that introduced by the defendant, especially the said chart. According to section 320 of the Code of Civil Procedure, such a chart is prima facie evidence of particulars of general notoriety and interest, such as the existence of shoals of varying depths in the bar and mouth of the Sabang River and which obstruct the entrance into the same; the distance, length, and number of the said shoals, with other details apparently well known to the patron of the lorcha Pilar, to judge from his testimony. Vessels of considerable draft, larger than the said lorcha, might have entered the Sabang River some seven or nine years before, according to the testimony of the Chinaman, Antonio B. Yap Cunco, though he did not state whether they did so at high tide; but, since 1901, or previous years, until 1908, changes may have taken place in the bed of the river, its mouth and its bar. More shoals may have formed or those in existence may have increased in extent by the constant action of the sea. This is the reason why the patron, Gadvilao, who was acquainted with the conditions of the port and cove of Gubat, positively declared that the lorcha Pilar could not, on account of her draft, enter the Sabang River, on account of low water. The patron of the lorcha, after stating (p.58) that at Gubat or in its vicinity there is no port that affords shelter, affirmed that it was impossible to hoist the sails or weigh the anchors on the morning of the 5th of December, owing to the force of the wind and because the boat would immediately have been dragged or driven upon the shoals; that furthermore the lorcha was anchored in a channel some 300 brazas wide, but, notwithstanding this width, the Pilar was, for want of motive power, unable to move without being exposed to be dashed against the coast by the strong wind and the heavy sea then prevailing. The testimony of this witness was neither impugned nor offset by any evidence whatever; he was a patron of long years of service and of much practice in seafaring, especially in the port of Gubat and its vicinity, who had commanded or been intrusted with the command of other crafts similar to the lorcha Pilar and his testimony was absolutely uncontradicted. The patron Gadvilao, being cognizant of the duties imposed upon him by rules 14 and 15 of article 612, and others, of the Code of Commerce, remained with sailors, during the time the hurricane was raging, on board the lorcha from the morning of December 5 until early the following morning, the 6th, without abandoning the boat, notwithstanding the imminent peril to which he was exposed, and kept to his post until after the wreck and the lorcha had been dashed against the rocks. Then he solicited help from the captain of the steamer Ton Yek, and, thanks to the relief afforded by a small boat sent by the latter officer, Gadvilao with his crew succeeded in reaching land and immediately reported the occurrence to the representative of Inchausti & Co. and to the public official from whom he obtained the document of protest, Exhibit 1. By such procedure, he showed that, as a patron skilled in

the exercise of his vocation, he performed the duties imposed by law in cases of shipwreck brought about by force majeure. Treating of shipwrecks, article 840 of the Code of Commerce prescribes: The losses and damages suffered by a vessel and her cargo by reason of shipwreck or standing shall be individually for the account of the owners, the part of the wreck which may be saved belonging to them in the same proportion. And Article 841 of the same code reads: If the wreck or stranding should arise through the malice, negligence, or lack of skill of the captain, or because the vessel put to sea insufficiently repaired and supplied, the owner or the freighters may demand indemnity of the captain for the damages caused to the vessel or cargo by the accident, in accordance with the provisions contained in articles 610, 612, 614, and 621. The general rule established in the first of the foregoing articles is that the loss of the vessel and of its cargo, as the result of shipwreck, shall fall upon the respective owners thereof, save for the exceptions specified in the second of the said articles. These legal provisions are in harmony with those of articles 361 and 362 of the Code of Commerce, and are applicable whenever it is proved that the loss of, or damage to, the goods was the result of a fortuitous event or of force majeure; but the carrier shall be liable for the loss or the damage arising from the causes aforementioned, if it shall have been proven that they occurred through his own fault or negligence or by his failure to take the same precautions usually adopted by diligent and careful persons. In the contract made and entered into by and between the owner of the goods and the defendant, no term was fixed within which the said merchandise should be delivered to the former at Catarman, nor was it proved that there was any delay in loading the goods and transporting them to their destination. From the 28th of November, when the steamer Sorsogon arrived at Gubat and landed the said goods belonging to Ong Bieng Sip to await the lorcha Pilar which was to convey them to Catarman, as agreed upon, no vessel carrying merchandise made the voyage from Gubat to the said pueblo of the Island of Samar, and with Ong Bieng Sip's merchandise there were also to be shipped goods belonging to the defendant company, which goods were actually taken on board the said lorcha and suffered the same damage as those belonging to the Chinaman. So that there was no negligence, abandonment, or delay in the shipment of Ong Bieng Sip's merchandise, and all that was done by the carrier, Inchausti & Co., was what it regularly and usually did in the transportation by sea from Manila to Catarman of all classes of merchandise. No attempt has been made to prove that any course other than the foregoing was pursued by that firm on this occasion; therefore the defendant party is not liable for the damage occasioned as a result of the wreck or stranding of the lorcha Pilar because of the hurricane that overtook this craft while it was anchored in the port of Gubat, on December 5, 1908, ready to be conveyed to that of Catarman. It is a fact not disputed, and admitted by the plaintiff, that the lorcha Pilar was stranded and wrecked on the coast of Gubat during the night of the 5th or early in the morning of the 6th of December, 1908, as a result of a violent storm that came from the Pacific Ocean, and,

consequently, it is a proven fact that the loss or damage of the goods shipped on the said lorcha was due to the force majeure which caused the wreck of the said craft. According to the aforecited article 361 of the Code of Commerce, merchandise shall be transported at the risk and venture of the shipper, unless the contrary be expressly stipulated. No such stipulation appears of record, therefore, all damages and impairment suffered by the goods in transportation, by reason of accident, force majeure, or by virtue of the nature or defect of the articles, are for the account and risk of the shipper. A final clause of this same article adds that the burden of proof of these accidents is upon the carrier; the trial record fully discloses that the loss and damage of the goods shipped by the Chinaman, Ong Bieng Sip, was due to the stranding and wreck of the lorcha Pilar in the heavy storm or hurricane aforementioned; this the plaintiff did not deny, and admitted that it took place between the afternoon of the 5th and early in the morning of the 6th of December, 1908, so it is evident that the defendant is exempt from the obligation imposed by the law to prove the occurrence of the said storm, hurricane, or cyclone in the port of Gubat, and, therefore, if said goods were lost or damaged and could not be delivered in Catarman, it was due to a fortuitous event and a superior, irresistible natural force, or force majeure, which completely disabled the lorcha intended for their transportation to the said port of the Island of Samar. The record bears no proof that the said loss or damage caused by the stranding or wreck of the lorcha Pilar as a result of the storm mentioned, occurred through carelessness or negligence on the part of the defendant company, its agents or the patron of the said lorcha, or because they did not take the precautions usually adopted by careful and diligent persons, as required by article 362 of the Code of Commerce; the defendant company, as well as its agents and the patron of the lorcha, had a natural interest in preserving the craft and its own goods laden therein an interest equal to that of the Chinese shipper in preserving his own which were on board the ship lorcha and, in fact, the defendant, his agents and the patron did take the measures which they deemed necessary and proper in order to save the lorcha and its cargo from the impending danger; accordingly, the patron, as soon as he was informed that a storm was approaching, proceeded to clear the boat of all gear which might offer resistance to the wind, dropped the four anchors he had, and even procured an extra anchor from the land, together with a new cable, and cast it into the water, thereby adding, in so far as possible, to the stability and security of the craft, in anticipation of what might occur, as presaged by the violence of the wind and the heavy sea; and Inchausti & Company's agent furnished the articles requested by the patron of the lorcha for the purpose of preventing the loss of the boat; thus did they all display all the diligence and care such as might have been employed by anyone in similar circumstances, especially the patron who was responsible for the lorcha under his charge; nor is it possible to believe that the latter failed to adopt all the measures that were necessary to save his own life and those of the crew and to free himself from the imminent peril of shipwreck. In view of the fact that the lorcha Pilar had no means of changing its anchorage, even supposing that there was a better one, and was unable to accept help from any steamer that might have towed it to another point, as wherever it might have anchored, it would continually have been exposed to the lashing of the waves and to the fury of the hurricane, for the port of Gubat is a cove or open roadstead with no shelter whatever from the winds that sweep over it from the Pacific Ocean, and in view of the circumstances that it was impossible for the said lorcha, loaded as it then was, to have entered the Sabang River, even though there had been a steamer to tow it, not only because of an insufficient depth of water in its channel, but also on account of the very high bar at the entrance of the said

river, it is incontrovertible that the stranding and wreck of the lorcha Pilar was due to a fortuitous event or to force majeure and not to the fault and negligence of the defendant company and its agents or of the patron, Mariano Gadvilao, inasmuch as the record discloses it to have been duly proved that the latter, in difficult situation in which unfortunately the boat under his charge was placed, took all the precautions that any diligent man should have taken whose duty it was to save the boat and its cargo, and, by the instinct of self-preservation, his own life and those of the crew of the lorcha; therefore, considering the conduct of the patron of the lorcha and that of the defendant's agent in Gubat, during the time of the occurrence of the disaster, the defendant company has not incurred any liability whatever for the loss of the goods, the value of which is demanded by the plaintiff; it must, besides, be taken into account that the defendant itself also lost goods of its own and the lorcha too. From the moment that it is held that the loss of the said lorcha was due to force majeure, a fortuitous event, with no conclusive proof or negligence or of the failure to take the precautions such as diligent and careful persons usually adopt to avoid the loss of the boat and its cargo, it is neither just nor proper to attribute the loss or damage of the goods in question to any fault, carelessness, or negligence on the part of the defendant company and its agents and, especially, the patron of the lorcha Pilar. Moreover, it is to be noted that, subsequent to the wreck, the defendant company's agent took all the requisite measures for the salvage of such of the goods as could be recovered after the accident, which he did with the knowledge of the shipper, Ong Bieng Sip, and, in effecting their sale, he endeavored to secure all possible advantage to the Chinese shipper; in all these proceedings, as shown by the record, he acted in obedience to the law. From all the foregoing it is concluded that the defendant is not liable for the loss and damage of the goods shipped on the lorcha Pilar by the Chinaman, Ong Bieng Sip, inasmuch as such loss and damage were the result of a fortuitous event or force majeure, and there was no negligence or lack of care and diligence on the part of the defendant company or its agents. Therefore, we hold it proper to reverse the judgment appealed from, and to absolve, as we hereby do, the defendant, Inchausti & Co., without special findings as to costs. Arellano, C.J., Mapa and Johnson, JJ., concur. Carson and Trent, JJ., dissent.

Separate Opinions MORELAND, J., dissenting: In my opinion the decision of the court below, which this court reverses, is clearly in accordance with law and in strict conformity with equity and justice. The defendant, a shipowner, agreed with the plaintiff to transport P14,000 worth of property from Manila to Catarman, Province of Samar. The defendant never fulfilled its contract. Instead of delivering the property at Catarman, Province of Samar, it left it on board of a lorcha in the

waters of Gubat, a port in the southern part of the Island of Luzon, where, during a storm, the lorcha foundered and the property was lost. This court holds that the Chinaman must lose his property. This is the manner in which the defendant lost the goods of the plaintiff: The Sorsogon, on which the goods were loaded at Manila, arrived at Gubat about the 28th of November, 1908. A few days later the lorcha Pilar arrived at Gubat, towed by the tug Texas. The lorcha was without means of locomotion of its own, except its sails, which, from the record, appear never to have been used and were substantially useless, and could move about and protect itself from the weather only by being towed or "poled." The only boat on the coast owned by the defendant which could tow the lorcha was the tug Texas. Sometime before the 5th of December, at least one day before the storm broke, the goods belonging to the plaintiff were loaded on this lorcha. The tug Texas, under the orders of the defendant, left the locality where the lorcha was loaded and did not return until after it was wrecked. Let us see what were the conditions at the time the defendant voluntarily and unnecessarily placed the property of the plaintiff on the lorcha Pilar: (1) It must be remembered that Gubat is located on the Pacific coast. The waters of Gubat are not protected waters; they are not inclosed; they are in the form of a bay; they are directly open to the winds from the Pacific Ocean, without protection or shelter of any kind, except possibly the mouth of the river, a matter here in dispute and which will be referred to later. They are likewise open to the full sweep of the waves of the Pacific coming from its widest reaches. (2) At the time the plaintiff's goods were loaded upon the lorcha Pilar it was the height of the typhoon season in that locality. The prevailing winds were from the Pacific. Destructive baguios might reasonably be expected at any time. It was only with the exercise of diligence and prudence that shipping could be protected therefrom. (3) As I have before indicated, the lorcha Pilar had substantially no means of locomotion of its own and depended for its protection in stormy weather entirely upon the steam tug Texas or being "poled" into the mouth of the river by its crew. At the time of the storm which destroyed the lorcha, and for some time prior thereto and for some days thereafter, the Texas was at the port of Barcelona, on the coast several miles south of Gubat, having been sent by order of the defendant, its owner. Summarizing, then, we have the defendant voluntarily placing the property of the plaintiff upon the kind of craft above described, dispatching to a distant port substantially the only means of locomotion and protection which that craft had, except, as we have said, by being poled, placing that lorcha in waters directly exposed to the winds and waves of the Pacific and at the mercy of every baguio that blew; and this during a season of the year when winds were generally high and destructive baguios might be expected at any time, and with full knowledge that if a typhoon came while the agents of the defendant were unprepared the property of the plaintiff would in all probability be lost. Having these facts in mind, let us see what the agents of the defendant did to protect the property of the plaintiff which they had voluntarily placed in a situation of such peril.

(4) At the time of the destruction of the lorcha there was a Government weather observatory at Gubat which received advices many hours in advance of the approach of a typhoon toward the locality. It had been there for some years. The purpose of that observatory was to furnish information to the public concerning the formation and approach of typhoons from the Pacific and of warning the people with exposed shipping to take such precautions as were necessary for its protection. This was known to the defendant's agents at Gubat. They knew that the observatory had a public office, open to anybody who cared to visit it, in which would be found all of the latest information relating to storms and baguios coming from the Pacific Ocean. They knew that the officials of said observatory were there for the express purpose of giving such information. The defendant's agents had at Gubat a barometer and all the other instruments usually kept by seamen and navigators for forecasting the weather. (5) As we have said, the storm occurred on the 5th of December. It wrought its greatest havoc late in the afternoon and the early part of the night. At about 2 o'clock on the day before the storm, that is, on the 4th of December, the observatory at Gubat received notice from the Manila observatory that a baguio was forming in the Pacific Ocean. At about the same time at Barcelona, only 10 miles south of Gubat, the barometer on board the Texas dropped so rapidly as to indicate such dangerous weather probabilities that the captain of the Texas deemed it unsafe to venture out of the harbor. On the same afternoon the barometer on board the only steam vessel near Gubat, the Ton Yek, also went down. Although it does not expressly appear in the evidence, yet it is an inference entirely fair from the record, and against which nothing whatever can be urged, that the barometer in the possession of agents of the defendant also dropped with the same rapidity. In all human probability this could not be otherwise in view of the rapid and decisive fall of the barometer on board the Texas, only 10 miles away, and the fact that the typhoon broke over both places equally. At the same time, and more pronounced a little later, every symptom which men who have to deal with the sea could and would readily observe, and which the captain of the Ton Yek did observe as a matter of fact, indicated the approach of a heavy storm. These evidences were heeded by the captain of the Ton Yek, who, early on the morning of the 5th, without waiting for the appearance of a storm signal at the observatory, sent a messenger to the observatory for the purpose of ascertaining with more accuracy what was going to happen. In spite of all these things, most of which occurred on the afternoon or evening of the day preceding the storm, the agents of the defendant did absolutely nothing to inform themselves as to the prospective whether conditions or as to whether or not a baguio was approaching, and did absolutely nothing to preserve or protect the property which they had placed in so exposed and dangerous a place. (6) The morning of the 5th arrived. As we have already stated, all of the signs which men who have to do with the sea so readily read indicated unquestionably and decisively the approach of the storm which the advices received by the observatory at 2 o'clock on the afternoon before told the inhabitants of that locality was probably coming. Still the agents of the defendant did nothing. The captain of the Ton Yek, although his vessel was a steam vessel and was able to take care of itself by reason of its machinery, judging these signs and portents, found it advisable to consult with the observatory early on the morning of the 5th. The approach of a storm was apparent to him and he took precautions accordingly. Yet the agents of the defendant did nothing. Although the lorcha on which they had put the property of the plaintiff was, according to their own admissions, utterly unprotected, and although P14,000 worth of goods intrusted to their care was in great danger of being lost, still they did absolutely nothing, either by anticipation or otherwise, to protect that property therefrom.

(7) On the morning of the 5th at about 8.20 or 8.30 o'clock the observatory run up the first danger signal. Still the agents of the defendant noted nothing, did nothing. They paid absolutely no attention to it, as they had paid no attention whatever to the other indications. They left the lorcha to its fate without lifting a finger to save it. At 9 o'clock the wind had risen and the waves had commenced to roll. Still nothing was done. At 9.30 the winds were still stronger and the waves higher. Still nothing was done. At 10.30 the increase in the strength of the wind and of the height of the waves continued. And yet the agents of the defendant did nothing. It was well toward 11 o'clock before they began to move. And that time it was too late. The wind and waves were so high that, with the means at hand, the lorcha could not be moved from the exposed position in which it was, even if it be conceded that there was any safer place within those waters. The lorcha was prevented from dashing itself immediately upon the rocks only by virtue of its anchor. At between 10.30 and 11 o'clock the captain of the lorcha came to ashore to secure additional anchors. And that time, however, as we have observed, it was too late to unload the goods and too late to remove the lorcha to a safe place within the mouth of the river, even if that were possible. The agents of the defendant, having done absolutely nothing up to this time, now found, after they had awakened from their lethargy, that it was too late to do more than stand by and see the property, which had been intrusted to their care and for carrying of which they had been paid, dashed to pieces on the rock and swallowed up by the sea. (8) For nearly eighteen hours prior to the disaster the information that the disaster was coming lay under the very noses of the agents of the defendant. For nearly eighteen hours the barometer had been dropping steadily, so much so that their own vessel dared not leave a port only 10 miles distant on the afternoon before. For eighteen hours every warning which nature could give, indicating the disaster which subsequently came, had been repeatedly thrust upon them. Yet they did nothing. Having placed the goods of the plaintiff in an exposed and dangerous position, in waters open to the winds and waves of the Pacific Ocean, at the height of the typhoon season, in a vessel which had no motive power of its own, and having sent away that which they themselves substantially admit was its only protection, the agents of the defendant exercised no care or precaution whatever to the end that they might protect the goods which they themselves had so recklessly exposed. Yet this court, under such circumstances, holds that the defendant may go in peace and that the plaintiff is the one who must bear the burden of such negligence. With that decision I can not agree. An act of God can not be urged for the protection of a person who has been guilty of gross negligence in not trying to avert its results. One who has accepted responsibility for pay can not weakly fold his hands and say that he was prevented from meeting that responsibility by an act of God, when the exercise of the ordinary care and prudence would have averted the results flowing from that act. One who has placed the property of another, intrusted to his care, in an unseaworthy craft, upon dangerous waters, cannot absolve himself by crying, "an act of God," when every effect which a typhoon produced upon that property could have been avoided by the exercise of common care and prudence. When the negligence of the carrier concurs with an act of God producing a loss, the carrier is not exempted from liability by showing that the immediate cause of the damage was the act of God; or, as it has been expressed, "when the loss is caused by the act of God, if the negligence of the carrier mingles with it as an active and cooperative cause, he is still liable." The loss and damage to perishable articles in consequence of the weather will not excuse the carrier if it could have been prevented by due care and diligence. The carrier

must not only show that it did all that was usual, but all that was necessary to be done under the circumstances. (Wing vs. New York, etc., Ry. Co., 1 Hilt. (N.Y.), 235; Philleo vs. Sanford, 17 Tex., 228.) To be exempt from liability for loss because of an act of God, the common carrier must be free from any previous negligence or misconduct by which that loss or damage may have been occasioned. For, although the immediate or proximate cause of a loss in any given instance may have been what is termed an act of God, yet if the carrier unnecessarily exposed the property to such accident by any culpable act or omission of his own, he is not excused. (Mc-Graw vs. Baltimore and Ohio Ry. Co., 41 Am. Rep., 696.) In the case of Wolf vs. American Express Co,., 43 Mo., 421, Wagner, J., said: The act of God which excuses the carrier must not only be the proximate cause of the loss, but the better opinion is that it must be the sole cause. And where the loss is caused by the "act of God," if the negligence of the carrier mingles with it as an active and cooperative cause, he is still responsible. (Amies vs. Stevens, 1 Stra., 128.) Where perishable property, such as potatoes, is received by a common carrier at a season when a very low temperature may reasonably apprehended, great diligence should be used in forwarding such property with dispatch and haste; and where, by a delay of two or three days, the property is damaged by freezing, the carrier may be held liable for the damage. (Hewett vs. The Chicago, B & Q. Ry. Co., 63 Ia., 611.) A carrier is bound to provide a vessel in all respects adequate to the purpose, with a captain and crew of requisite skill or ability; and, failing in these particulars, though the loss be occasioned by an act of God, the carrier may not set up a providential calamity to protect himself against what may have arisen from his own folly. (Hart vs. Allen and Grant, 2 Watts (Pa.), 114.) This doctrine is fully supported by the Spanish authorities on the subject. Manresa in his commentaries to section 1105 of the Civil Code of Spain, volume 8, page 91, says: Elucidation of article 1105 and the idea of the accident is interesting under the following aspects; Relation between it and the blame; enumeration of the requisites that must be present; proof of the event and characterization thereof; and the consequence it produces. Let us examine them. Even when the distinction is simple and reasonable between blame for some exempting circumstance (because it may not be serious enough to involve such blame, under the law or the obligation) and accident, since the former admits an imputation which the latter excludes, even when the former may not be the basis for legal responsibility, and therefore it can not be said that where no responsible blame exists there the accident commences, yet the latter is undeniably characterized by unexpectedness and inevitability, circumstances susceptible of relative interpretation, and so whatever relates to the blame must be taken into account, because, as we shall see, it is in certain sense, especially in practical application, connected with the matter under consideration. Aside from this statement of ideas, there may be another of consequences, for in the complexity of facts, in the same obligation, there may be present blame enough to involve such and also accident. When both causes are present, with separation of time and affects, for partial breach due to one of them may be possible and then the other may operate to aggravate or complete these

consequences, the distinction is easy and to each cause may be assigned its own effect for the corresponding result, as neither exemption, on account of accident, can be extended to what may be imputed nor to what in any way depends upon it by basing responsibility arising from blame on the fact that the damage is the result thereof. The problem becomes more difficult when both causes concur to produce the same effect or when, even though the effect may be due to accident, the obligor has not exercised necessary diligence, however, blameless he was for the results arising from the breach. In the first of the last two suppositions, the solution is plain, because when the obligor incurs the blame of actually producing the result, or even when it is not the only cause, or even the principal one, there is still sufficient connection between it and the consequences to cause them to be imputed to him and, as a voluntary elements exists in the causes, there is lacking the circumstance indispensable to exemption on account of accident. The second supposition presents a very difficult problem of proof, which rests upon the obligor, and calls for a careful analysis of the origin of the breach. The difficulty in this case consists in that the blame, in addition to its subjective aspect for imputing the consequences to the obligor, has an objective aspect, to wit, that these consequences may rise, that the damage which must be repaired is caused, in such manner that due diligence may be lacking and yet not extend to the point of involving responsibility, because it produces no results. Now then, if an accident occurs under these conditions, absolutely independent of the negligence that may have existed, it may have occurred with or without negligence and therefore any derivation of consequences was lacking, then it can not be said that responsibility arises therefrom; but to reach this conclusion there first rests with the obligor proof so difficult that, in addition to overcoming the presumption of existence of blame, it involves the very fine distinction of the origin of the breach and perfectly reveals the occurrence of the accident, joined by their coexistence, and demonstrating absolute lack of consequences and influence of blame. In connection with this question, a judgment of November 22, 1904, declares that there are some events which, independent of the will of the obligor, hinder the fulfillment of the obligation, and yet do not constitute cases of force majeure for the purposes of such fulfillment, because the possibility that they would occur could have been foreseen, articles 1101 and 1104 being applicable and not article 1105, since negligence or blame is also present from not informing the obligee, either at first or later on, of the state of affairs and the situation, so as to avoid the consequent damage. This was the case of a bull fight that could not be held because the ring was not completed in time for reasons beyond the control of the contractor, but the fact that the contract did not state that the ring was unconstructed and the possibility that it would not be at the time specified, reveals, in the opinion of the court, the lack of foresight or the negligence which makes article 1105 inapplicable. In an essentially analogous way, judgments were pronounced on June 12, 1899 (Tribunal contencioso administrativo), and on October 27, 1905 (Sala tercera), against the company leasing the tobacco monopoly, for losses caused by theft and fire. It was further decided in these cases that the company and not the State must bear the losses, for while accidental fire in a tobacco factory and theft of stamped goods stored in a branch house may constitute accidents, yet they do

not deserve this characterization when they occur through omission, neglect or lack of care which imply breach of the contract. According to the text of article 1105, which agrees with the rational idea of accident, it is sufficient for the event to constitute such that it have any of the two characteristics enumerated; if it is foreseen, it is of little import that it be unavoidable; and if it is unavoidable it does not matter that it may have been foreseen. The first supposition requires some explanation: an event may be wholly unforeseen, but, after it has occurred, be very slow in producing effects, and in such case, although it could not have been foreseen, as there is time before it produces its effects, the latter must be considered. Besides this special supposition, in which, if carefully considered, the two characteristics do not concur, since the idea of unexpectedness, as is seen, is relative, it will be sufficient that one or the other be present. The possibility of foresight must be weighed rationally with consideration of all the circumstances, but this general rule has, strictly speaking, an exception when the event, although in a general way very difficult, almost impossible to be foreseen, should for some reason be known to the obligor in due time. The condition of inevitability can not be understood in so absolute a sense that it should take away the character of accident from many that are strictly such, because they are undoubtedly causes, however powerful they may be, whose injurious effects may have been avoided by exercising a number of precautions, so exaggerated and so out of proportion to the importance of the trouble anticipated, that they would be unreasonable and not required in law. In such cases, if the means which can and must rationally be employed are not effective, it will be held to have been unavoidable. So we see demonstrated how the idea of diligence is related, somewhat in the nature of limitation, to the accident. Such was the doctrine established in our ancient law regarding the obligor; the reasons whereof are theoretically set forth further on; and as a written provision, law 20, title 13, partida 5, which expressly laid down this principle in connection with pawn-broking contracts, and which was, by analogy, made the basis for extending a similar provision to the remaining cases. That the Civil Code is inspired by the same idea is clearly expressed in article 1183 thereof, the commentary on which should be consulted. Still such solution depends upon the nature of proof and of the accident, since its existence as an abnormal event hindering the fulfillment of the obligation must be proved and not presumed, and the burden of this proof rests upon the obligor, and not upon the obligee, whose proof would have to be negative. Moreover since an accident is the basis for exemption from responsibility, it must be proved by him who will benefit thereby and who objects to the requirement that he fulfill his obligations. To these reasons are joined those above set forth in connection with the proof of contractual blame, since they are, according to the same article, 1183, above cited, closely related questions, so much so that they become two phases of one question presumption against the existence of accident of what tends to establish presumption of blame, in the absence of proof to overcome it. Proof of accident must include these points; the occurrence of the event, the bearing it has upon breach of the obligation, and the concurrence of

unexpectedness and inevitably. In connection with the first two points, the proof resting upon the obligor must be specific and exact; but as for the last, although it may be admitted as a general proposition that, in addition to proving the event, he must also demonstrate that it involves the condition required to make it an accident, there are some of such magnitude and, by their nature, of almost impossible prevision, that proof of their occurrence demonstrates their condition. Undoubtedly, and differently from proof of the accident, the exceptional circumstance that the event (which should as a general proposition be regarded as unforeseen) was known to the obligor for some special reason, must be of proven by the obligee who asserts it, since the obligation of proof resting upon the former is fulfilled in this regard by demonstrating that the event ought rationally to be held to have been unforeseen. Since proof of the accident is related to proof of the blame, it is evident that the obligor must also prove, so far as he is concerned, that he is not to blame for breach of the obligation. Exemption from responsibility in accidents established by article 1105 has, according to its text, two exceptions, whereby an event may be plainly proven, and be unforeseen and unavoidable and still not produce such exemption, viz, when the execution is either stipulated in the obligation or is expressly mentioned by the law. The basis for these exceptions rests, according to this cases, either upon the freedom of contracts, which is opposed to prohibition of a compact, wherein, without immorality, there is merely an emphasized stipulation, which is meant to guarantee in every case an interest and indirectly to secure careful and special diligence in the fulfillment of the obligation; or upon the nature of the obligations when risk is an essential element therein; or finally upon cases whose circumstances, as happens with that provided for by the last paragraph of article 1096, justify the special strictness of the law. In conclusion, we shall point out that in order to relieve the obligor from his obligation, it must be remembered that the occurrence of the event does not suffice, but that the impossibility of fulfilling the obligation must be the direct consequences of the accident, so that when it can be fulfilled it will subsists, even if only in part, and therefore, in order to see whether or not the accident produces this result the nature of the obligation must be considered, and according to whether it be specific or general, etc., it will or will not be extinguished. To hold the carrier responsible in the case at bar, it is not necessary to go so far as the authorities just cited. The negligence is so clear that it is not necessary to strain doctrines or even press them to their limits. I do not agree here argue the assertion of the plaintiff denied by the defendant, that, at any time before nine o'clock of the day of the destruction of the lorcha, the defendant's agents could have placed the lorcha in the mouth of the river out of harm's way. I believe that a fair preponderance of the evidence shows that this could have been done. The defendant denies this, asserting that the water was too shallow. Nevertheless, fourteen days after the storm, the foundered lorcha, water-logged and undoubtedly containing water, was " poled" by its crew from the place where it went on the rocks to a place of safety inside the mouth of the river. It is more than probable that this could have been done at any time before the storm became too high. At last common prudence would have required the unloading of

the lorcha, which could easily have been accomplished before the storm if the agents of the defendant had awakened themselves to their duty.

Petitioner Carrier is now before us on a Petition for Review on Certiorari. G.R. NO. 71478 On June 16, 1978, respondents Nisshin Fire & Marine Insurance Co. NISSHIN for short), and Dowa Fire & Marine Insurance Co., Ltd. (DOWA, for brevity), as subrogees of the insured, filed suit against Petitioner Carrier for the recovery of the insured value of the cargo lost with the then Court of First Instance of Manila, Branch 11 (Civil Case No. 116151), imputing unseaworthiness of the ship and non-observance of extraordinary diligence by petitioner Carrier. Petitioner Carrier denied liability on the principal grounds that the fire which caused the sinking of the ship is an exempting circumstance under Section 4(2) (b) of the Carriage of Goods by Sea Act (COGSA); and that when the loss of fire is established, the burden of proving negligence of the vessel is shifted to the cargo shipper. On September 15, 1980, the Trial Court rendered judgment in favor of NISSHIN and DOWA in the amounts of US $46,583.00 and US $11,385.00, respectively, with legal interest, plus attorney's fees of P5,000.00 and costs. On appeal by petitioner, the then Court of Appeals on September 10, 1984, affirmed with modification the Trial Court's judgment by decreasing the amount recoverable by DOWA to US $1,000.00 because of $500 per package limitation of liability under the COGSA. Hence, this Petition for Review on certiorari by Petitioner Carrier. These two cases, both for the recovery of the value of cargo insurance, arose from the same incident, the sinking of the M/S ASIATICA when it caught fire, resulting in the total loss of ship and cargo. The basic facts are not in controversy: In G.R. No. 69044, sometime in or prior to June, 1977, the M/S ASIATICA, a vessel operated by petitioner Eastern Shipping Lines, Inc., (referred to hereinafter as Petitioner Carrier) loaded at Kobe, Japan for transportation to Manila, 5,000 pieces of calorized lance pipes in 28 packages valued at P256,039.00 consigned to Philippine Blooming Mills Co., Inc., and 7 cases of spare parts valued at P92,361.75, consigned to Central Textile Mills, Inc. Both sets of goods were insured against marine risk for their stated value with respondent Development Insurance and Surety Corporation. In G.R. No. 71478, during the same period, the same vessel took on board 128 cartons of garment fabrics and accessories, in two (2) containers, consigned to Mariveles Apparel Corporation, and two cases of surveying instruments consigned to Aman Enterprises and General Merchandise. The 128 cartons were insured for their stated value by respondent Nisshin Fire & Marine Insurance Co., for US $46,583.00, and the 2 cases by respondent Dowa Fire & Marine Insurance Co., Ltd., for US $11,385.00. Enroute for Kobe, Japan, to Manila, the vessel caught fire and sank, resulting in the total loss of ship and cargo. The respective respondent Insurers paid the corresponding marine insurance values to the consignees concerned and were thus subrogated unto the rights of the latter as the insured. G.R. NO. 69044 On May 11, 1978, respondent Development Insurance & Surety Corporation (Development Insurance, for short), having been subrogated unto the rights of the two insured companies, filed suit against petitioner Carrier for the recovery of the amounts it had paid to the insured before the then Court of First instance of Manila, Branch XXX (Civil Case No. 6087). Petitioner-Carrier denied liability mainly on the ground that the loss was due to an extraordinary fortuitous event, hence, it is not liable under the law. On August 31, 1979, the Trial Court rendered judgment in favor of Development Insurance in the amounts of P256,039.00 and P92,361.75, respectively, with legal interest, plus P35,000.00 as attorney's fees and costs. Petitioner Carrier took an appeal to the then Court of Appeals which, on August 14, 1984, affirmed. Both Petitions were initially denied for lack of merit. G.R. No. 69044 on January 16, 1985 by the First Division, and G. R. No. 71478 on September 25, 1985 by the Second Division. Upon Petitioner Carrier's Motion for Reconsideration, however, G.R. No. 69044 was given due course on March 25, 1985, and the parties were required to submit their respective Memoranda, which they have done. On the other hand, in G.R. No. 71478, Petitioner Carrier sought reconsideration of the Resolution denying the Petition for Review and moved for its consolidation with G.R. No. 69044, the lower-numbered case, which was then pending resolution with the First Division. The same was granted; the Resolution of the Second Division of September 25, 1985 was set aside and the Petition was given due course. At the outset, we reject Petitioner Carrier's claim that it is not the operator of the M/S Asiatica but merely a charterer thereof. We note that in G.R. No. 69044, Petitioner Carrier stated in its Petition: There are about 22 cases of the "ASIATICA" pending in various courts where various plaintiffs are represented by various counsel representing various consignees or insurance companies. The common defendant in these cases is petitioner herein, being the operator of said vessel. ... 1 Petitioner Carrier should be held bound to said admission. As a general rule, the facts alleged in a party's pleading are deemed admissions of that party and binding upon it. 2 And an admission in one pleading in one action may be received in evidence against the pleader or his successor-in-interest on the trial of another action to which he is a party, in favor of a party to the latter action. 3 The threshold issues in both cases are: (1) which law should govern the Civil Code provisions on Common carriers or the Carriage of Goods by Sea Act? and (2) who has the burden of proof to show negligence of the carrier? On the Law Applicable The law of the country to which the goods are to be transported governs the liability of the common carrier in case of their loss, destruction or deterioration. 4 As the cargoes in question were transported from Japan to the Philippines, the liability of Petitioner Carrier is governed primarily by the Civil Code. 5 However, in all matters not regulated by said Code, the rights and obligations of common carrier shall be governed by the Code of

G.R. No. L-69044 May 29, 1987 EASTERN SHIPPING LINES, INC., petitioner, vs. INTERMEDIATE APPELLATE COURT and DEVELOPMENT INSURANCE & SURETY CORPORATION, respondents. No. 71478 May 29, 1987 EASTERN SHIPPING LINES, INC., petitioner, vs. THE NISSHIN FIRE AND MARINE INSURANCE CO., and DOWA FIRE & MARINE INSURANCE CO., LTD., respondents.

MELENCIO-HERRERA, J.:

Commerce and by special laws. 6 Thus, the Carriage of Goods by Sea Act, a special law, is suppletory to the provisions of the Civil Code. 7 On the Burden of Proof Under the Civil Code, common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over goods, according to all the circumstances of each case. 8 Common carriers are responsible for the loss, destruction, or deterioration of the goods unless the same is due to any of the following causes only: (1) Flood, storm, earthquake, lightning or other natural disaster or calamity; xxx xxx xxx 9 Petitioner Carrier claims that the loss of the vessel by fire exempts it from liability under the phrase "natural disaster or calamity. " However, we are of the opinion that fire may not be considered a natural disaster or calamity. This must be so as it arises almost invariably from some act of man or by human means. 10 It does not fall within the category of an act of God unless caused by lightning 11 or by other natural disaster or calamity. 12 It may even be caused by the actual fault or privity of the carrier. 13 Article 1680 of the Civil Code, which considers fire as an extraordinary fortuitous event refers to leases of rural lands where a reduction of the rent is allowed when more than one-half of the fruits have been lost due to such event, considering that the law adopts a protection policy towards agriculture. 14 As the peril of the fire is not comprehended within the exception in Article 1734, supra, Article 1735 of the Civil Code provides that all cases than those mention in Article 1734, the common carrier shall be presumed to have been at fault or to have acted negligently, unless it proves that it has observed the extraordinary deligence required by law. In this case, the respective Insurers. as subrogees of the cargo shippers, have proven that the transported goods have been lost. Petitioner Carrier has also proved that the loss was caused by fire. The burden then is upon Petitioner Carrier to proved that it has exercised the extraordinary diligence required by law. In this regard, the Trial Court, concurred in by the Appellate Court, made the following Finding of fact: The cargoes in question were, according to the witnesses defendant placed in hatches No, 2 and 3 cf the vessel, Boatswain Ernesto Pastrana noticed that smoke was coming out from hatch No. 2 and hatch No. 3; that where the smoke was noticed, the fire was already big; that the fire must have started twenty-four 24) our the same was noticed; that carbon dioxide was ordered released and the crew was ordered to open the hatch covers of No, 2 tor commencement of fire fighting by sea water: that all of these effort were not enough to control the fire. Pursuant to Article 1733, common carriers are bound to extraordinary diligence in the vigilance over the goods. The evidence of the defendant did not show that extraordinary vigilance was observed by the vessel to prevent the occurrence of fire at hatches numbers 2 and 3. Defendant's evidence did not likewise show he amount of diligence made by the crew, on orders, in the care of the cargoes. What appears is that after the cargoes were stored in the hatches, no regular inspection was made as to their condition during the voyage. Consequently, the crew could not have even explain what could have caused the fire. The defendant, in the Court's mind, failed to satisfactorily show that extraordinary vigilance and care had been made by the crew to prevent the occurrence of the fire. The defendant, as a common carrier, is liable to the consignees for said lack of deligence required of it under Article 1733 of the Civil Code.

And even if fire were to be considered a "natural disaster" within the meaning of Article 1734 of the Civil Code, it is required under Article 1739 of the same Code that the "natural disaster" must have been the "proximate and only cause of the loss," and that the carrier has "exercised due diligence to prevent or minimize the loss before, during or after the occurrence of the disaster. " This Petitioner Carrier has also failed to establish satisfactorily. Nor may Petitioner Carrier seek refuge from liability under the Carriage of Goods by Sea Act, It is provided therein that: Sec. 4(2). Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from (b) Fire, unless caused by the actual fault or privity of the carrier. xxx xxx xxx In this case, both the Trial Court and the Appellate Court, in effect, found, as a fact, that there was "actual fault" of the carrier shown by "lack of diligence" in that "when the smoke was noticed, the fire was already big; that the fire must have started twenty-four (24) hours before the same was noticed; " and that "after the cargoes were stored in the hatches, no regular inspection was made as to their condition during the voyage." The foregoing suffices to show that the circumstances under which the fire originated and spread are such as to show that Petitioner Carrier or its servants were negligent in connection therewith. Consequently, the complete defense afforded by the COGSA when loss results from fire is unavailing to Petitioner Carrier. On the US $500 Per Package Limitation: Petitioner Carrier avers that its liability if any, should not exceed US $500 per package as provided in section 4(5) of the COGSA, which reads: (5) Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with the transportation of goods in an amount exceeding $500 per package lawful money of the United States, or in case of goods not shipped in packages, per customary freight unit, or the equivalent of that sum in other currency, unless the nature and value of such goods have been declared by the shipper before shipment and inserted in bill of lading. This declaration if embodied in the bill of lading shall be prima facie evidence, but all be conclusive on the carrier. By agreement between the carrier, master or agent of the carrier, and the shipper another maximum amount than that mentioned in this paragraph may be fixed: Provided, That such maximum shall not be less than the figure above named. In no event shall the carrier be Liable for more than the amount of damage actually sustained. xxx xxx xxx Article 1749 of the New Civil Code also allows the limitations of liability in this wise: Art. 1749. A stipulation that the common carrier's liability as limited to the value of the goods appearing in the bill of lading, unless the shipper or owner declares a greater value, is binding. It is to be noted that the Civil Code does not of itself limit the liability of the common carrier to a fixed amount per package although the Code expressly permits a stipulation limiting such liability. Thus, the COGSA which is suppletory to the provisions of the Civil Code, steps in and supplements the Code by establishing a statutory provision limiting the carrier's liability in the absence of a declaration of a higher value of the goods by the shipper in the bill of lading. The provisions of the Carriage of Goods by.Sea Act on limited liability are as much

15
Having failed to discharge the burden of proving that it had exercised the extraordinary diligence required by law, Petitioner Carrier cannot escape liability for the loss of the cargo.

a part of a bill of lading as though physically in it and as much a part thereof as though placed therein by agreement of the parties. 16 In G.R. No. 69044, there is no stipulation in the respective Bills of Lading (Exhibits "C-2" and "I-3") 1 7 limiting the carrier's liability for the loss or destruction of the goods. Nor is there a declaration of a higher value of the goods. Hence, Petitioner Carrier's liability should not exceed US $500 per package, or its peso equivalent, at the time of payment of the value of the goods lost, but in no case "more than the amount of damage actually sustained." The actual total loss for the 5,000 pieces of calorized lance pipes was P256,039 (Exhibit "C"), which was exactly the amount of the insurance coverage by Development Insurance (Exhibit "A"), and the amount affirmed to be paid by respondent Court. The goods were shipped in 28 packages (Exhibit "C-2") Multiplying 28 packages by $500 would result in a product of $14,000 which, at the current exchange rate of P20.44 to US $1, would be P286,160, or "more than the amount of damage actually sustained." Consequently, the aforestated amount of P256,039 should be upheld. With respect to the seven (7) cases of spare parts (Exhibit "I-3"), their actual value was P92,361.75 (Exhibit "I"), which is likewise the insured value of the cargo (Exhibit "H") and amount was affirmed to be paid by respondent Court. however, multiplying seven (7) cases by $500 per package at the present prevailing rate of P20.44 to US $1 (US $3,500 x P20.44) would yield P71,540 only, which is the amount that should be paid by Petitioner Carrier for those spare parts, and not P92,361.75. In G.R. No. 71478, in so far as the two (2) cases of surveying instruments are concerned, the amount awarded to DOWA which was already reduced to $1,000 by the Appellate Court following the statutory $500 liability per package, is in order. In respect of the shipment of 128 cartons of garment fabrics in two (2) containers and insured with NISSHIN, the Appellate Court also limited Petitioner Carrier's liability to $500 per package and affirmed the award of $46,583 to NISSHIN. it multiplied 128 cartons (considered as COGSA packages) by $500 to arrive at the figure of $64,000, and explained that "since this amount is more than the insured value of the goods, that is $46,583, the Trial Court was correct in awarding said amount only for the 128 cartons, which amount is less than the maximum limitation of the carrier's liability." We find no reversible error. The 128 cartons and not the two (2) containers should be considered as the shipping unit. In Mitsui & Co., Ltd. vs. American Export Lines, Inc. 636 F 2d 807 (1981), the consignees of tin ingots and the shipper of floor covering brought action against the vessel owner and operator to recover for loss of ingots and floor covering, which had been shipped in vessel supplied containers. The U.S. District Court for the Southern District of New York rendered judgment for the plaintiffs, and the defendant appealed. The United States Court of Appeals, Second Division, modified and affirmed holding that: When what would ordinarily be considered packages are shipped in a container supplied by the carrier and the number of such units is disclosed in the shipping documents, each of those units and not the container constitutes the "package" referred to in liability limitation provision of Carriage of Goods by Sea Act. Carriage of Goods by Sea Act, 4(5), 46 U.S.C.A.& 1304(5). Even if language and purposes of Carriage of Goods by Sea Act left doubt as to whether carrier-furnished containers whose contents are disclosed should be treated as packages, the interest in securing international uniformity would suggest that they should not be so treated. Carriage of Goods by Sea Act, 4(5), 46 U.S.C.A. 1304(5). ... After quoting the statement in Leather's Best, supra, 451 F 2d at 815, that treating a container as a package is inconsistent with the congressional purpose of establishing a reasonable minimum level of liability, Judge Beeks wrote, 414 F. Supp. at 907 (footnotes omitted):

Although this approach has not completely escaped criticism, there is, nonetheless, much to commend it. It gives needed recognition to the responsibility of the courts to construe and apply the statute as enacted, however great might be the temptation to "modernize" or reconstitute it by artful judicial gloss. If COGSA's package limitation scheme suffers from internal illness, Congress alone must undertake the surgery. There is, in this regard, obvious wisdom in the Ninth Circuit's conclusion in Hartford that technological advancements, whether or not forseeable by the COGSA promulgators, do not warrant a distortion or artificial construction of the statutory term "package." A ruling that these large reusable metal pieces of transport equipment qualify as COGSA packages at least where, as here, they were carrier owned and supplied would amount to just such a distortion. Certainly, if the individual crates or cartons prepared by the shipper and containing his goods can rightly be considered "packages" standing by themselves, they do not suddenly lose that character upon being stowed in a carrier's container. I would liken these containers to detachable stowage compartments of the ship. They simply serve to divide the ship's overall cargo stowage space into smaller, more serviceable loci. Shippers' packages are quite literally "stowed" in the containers utilizing stevedoring practices and materials analogous to those employed in traditional on board stowage. In Yeramex International v. S.S. Tando,, 1977 A.M.C. 1807 (E.D. Va.) rev'd on other grounds, 595 F 2nd 943 (4 Cir. 1979), another district with many maritime cases followed Judge Beeks' reasoning in Matsushita and similarly rejected the functional economics test. Judge Kellam held that when rolls of polyester goods are packed into cardboard cartons which are then placed in containers, the cartons and not the containers are the packages. xxx xxx xxx The case of Smithgreyhound v. M/V Eurygenes, 18 followed the Mitsui test: Eurygenes concerned a shipment of stereo equipment packaged by the shipper into cartons which were then placed by the shipper into a carrier- furnished container. The number of cartons was disclosed to the carrier in the bill of lading. Eurygenes followed the Mitsui test and treated the cartons, not the container, as the COGSA packages. However, Eurygenes indicated that a carrier could limit its liability to $500 per container if the bill of lading failed to disclose the number of cartons or units within the container, or if the parties indicated, in clear and unambiguous language, an agreement to treat the container as the package. (Admiralty Litigation in Perpetuum: The Continuing Saga of Package Limitations and Third World Delivery Problems by Chester D. Hooper & Keith L. Flicker, published in Fordham International Law Journal, Vol. 6, 1982-83, Number 1) (Emphasis supplied) In this case, the Bill of Lading (Exhibit "A") disclosed the following data: 2 Containers (128) Cartons)

Men's Garments Fabrics and Accessories Freight Prepaid Say: Two (2) Containers Only. Considering, therefore, that the Bill of Lading clearly disclosed the contents of the containers, the number of cartons or units, as well as the nature of the goods, and applying the ruling in the Mitsui and Eurygenes cases it is clear that the 128 cartons, not the two (2) containers should be considered as the shipping unit subject to the $500 limitation of liability. True, the evidence does not disclose whether the containers involved herein were carrier-furnished or not. Usually, however, containers are provided by the carrier. 19 In this case, the probability is that they were so furnished for Petitioner Carrier was at liberty to pack and carry the goods in containers if they were not so packed. Thus, at the dorsal side of the Bill of Lading (Exhibit "A") appears the following stipulation in fine print: 11. (Use of Container) Where the goods receipt of which is acknowledged on the face of this Bill of Lading are not already packed into container(s) at the time of receipt, the Carrier shall be at liberty to pack and carry them in any type of container(s). The foregoing would explain the use of the estimate "Say: Two (2) Containers Only" in the Bill of Lading, meaning that the goods could probably fit in two (2) containers only. It cannot mean that the shipper had furnished the containers for if so, "Two (2) Containers" appearing as the first entry would have sufficed. and if there is any ambiguity in the Bill of Lading, it is a cardinal principle in the construction of contracts that the interpretation of obscure words or stipulations in a contract shall not favor the party who caused the obscurity. 20 This applies with even greater force in a contract of adhesion where a contract is already prepared and the other party merely adheres to it, like the Bill of Lading in this case, which is draw. up by the carrier. 21 On Alleged Denial of Opportunity to Present Deposition of Its Witnesses: (in G.R. No. 69044 only) Petitioner Carrier claims that the Trial Court did not give it sufficient time to take the depositions of its witnesses in Japan by written interrogatories. We do not agree. petitioner Carrier was given- full opportunity to present its evidence but it failed to do so. On this point, the Trial Court found: xxx xxx xxx Indeed, since after November 6, 1978, to August 27, 1979, not to mention the time from June 27, 1978, when its answer was prepared and filed in Court, until September 26, 1978, when the pre-trial conference was conducted for the last time, the defendant had more than nine months to prepare its evidence. Its belated notice to take deposition on written interrogatories of its witnesses in Japan, served upon the plaintiff on August 25th, just two days before the hearing set for August 27th, knowing fully well that it was its undertaking on July 11 the that the deposition of the witnesses would be dispensed with if by next time it had not yet been obtained, only proves the lack of merit of the defendant's motion for postponement, for which reason it deserves no sympathy from the Court in that regard. The defendant has told the Court since February 16, 1979, that it was going to take the deposition of its witnesses in Japan. Why did it take until August 25, 1979, or more than six months, to prepare its written interrogatories. Only the defendant itself is to blame for its failure to adduce evidence in support of its defenses. xxx xxx xxx 22 Petitioner Carrier was afforded ample time to present its side of the case. 23 It cannot complain now that it was denied due process when the Trial Court rendered its Decision on the basis of the evidence adduced. What due process abhors is absolute lack of opportunity to be heard. 24

On the Award of Attorney's Fees: Petitioner Carrier questions the award of attorney's fees. In both cases, respondent Court affirmed the award by the Trial Court of attorney's fees of P35,000.00 in favor of Development Insurance in G.R. No. 69044, and P5,000.00 in favor of NISSHIN and DOWA in G.R. No. 71478. Courts being vested with discretion in fixing the amount of attorney's fees, it is believed that the amount of P5,000.00 would be more reasonable in G.R. No. 69044. The award of P5,000.00 in G.R. No. 71478 is affirmed. WHEREFORE, 1) in G.R. No. 69044, the judgment is modified in that petitioner Eastern Shipping Lines shall pay the Development Insurance and Surety Corporation the amount of P256,039 for the twenty-eight (28) packages of calorized lance pipes, and P71,540 for the seven (7) cases of spare parts, with interest at the legal rate from the date of the filing of the complaint on June 13, 1978, plus P5,000 as attorney's fees, and the costs. 2) In G.R.No.71478,the judgment is hereby affirmed. SO ORDERED. Narvasa, Cruz, Feliciano and Gancayco, JJ., concur.

Separate Opinions

YAP, J., concurring and dissenting: With respect to G.R. No. 71478, the majority opinion holds that the 128 cartons of textile materials, and not the two (2) containers, should be considered as the shipping unit for the purpose of applying the $500.00 limitation under the Carriage of Goods by Sea Act (COGSA). The majority opinion followed and applied the interpretation of the COGSA "package" limitation adopted by the Second Circuit, United States Court of Appeals, in Mitsui & Co., Ltd. vs. American Export Lines, Inc., 636 F. 2d 807 (1981) and the Smithgreyhound v. M/V Eurygenes, 666, F 2nd, 746. Both cases adopted the rule that carrier-furnished containers whose contents are fully disclosed are not "packages" within the meaning of Section 4 (5) of COGSA. I cannot go along with the majority in applying the Mitsui and Eurygenes decisions to the present case, for the following reasons: (1) The facts in those cases differ materially from those obtaining in the present case; and (2) the rule laid down in those two cases is by no means settled doctrine. In Mitsui and Eurygenes, the containers were supplied by the carrier or shipping company. In Mitsui the Court held: "Certainly, if the individual crates or cartons prepared by the shipper and containing his goods can rightly be considered "packages" standing by themselves, they do not suddenly lose that character upon being stowed in a carrier's container. I would liken these containers to detachable stowage compartments of the ship." Cartons or crates placed inside carrier-furnished containers are deemed stowed in the vessel itself, and do not lose their character as individual units simply by being placed inside container provided by the carrier, which are merely "detachable stowage compartments of the ship.

In the case at bar, there is no evidence showing that the two containers in question were carrier-supplied. This fact cannot be presumed. The facts of the case in fact show that this was the only shipment placed in containers. The other shipment involved in the case, consisting of surveying instruments, was packed in two "cases." We cannot speculate on the meaning of the words "Say: Two (2) Containers Only, " which appear in the bill of lading. Absent any positive evidence on this point, we cannot say that those words constitute a mere estimate that the shipment could fit in two containers, thereby showing that when the goods were delivered by the shipper, they were not yet placed inside the containers and that it was the petitioner carrier which packed the goods into its own containers, as authorized under paragraph 11 on the dorsal side of the bill of lading, Exhibit A. Such assumption cannot be made in view of the following words clearly stamped in red ink on the face of the bill of lading: "Shipper's Load, Count and Seal Said to Contain." This clearly indicates that it was the shipper which loaded and counted the goods placed inside the container and sealed the latter. The two containers were delivered by the shipper to the carrier already sealed for shipment, and the number of cartons said to be contained inside them was indicated in the bill of lading, on the mere say-so of the shipper. The freight paid to the carrier on the shipment was based on the measurement (by volume) of the two containers at $34.50 per cubic meter. The shipper must have saved on the freight charges by using containers for the shipment. Under the circumstances, it would be unfair to the carrier to have the limitation of its liability under COGSA fixed on the number of cartons inside the containers, rather than on the containers themselves, since the freight revenue was based on the latter. The Mitsui and Eurygenes decisions are not the last word on the subject. The interpretation of the COGSA package limitation is in a state of flux, 1 as the courts continue to wrestle with the troublesome problem of applying the statutory limitation under COGSA to containerized shipments. The law was adopted before modern technological changes have revolutionized the shipping industry. There is need for the law itself to be updated to meet the changes brought about by the container revolution, but this is a task which should be addressed by the legislative body. Until then, this Court, while mindful of American jurisprudence on the subject, should make its own interpretation of the COGSA provisions, consistent with what is equitable to the parties concerned. There is need to balance the interests of the shipper and those of the carrier. In the case at bar, the shipper opted to ship the goods in two containers, and paid freight charges based on the freight unit, i.e., cubic meters. The shipper did not declare the value of the shipment, for that would have entailed higher freight charges; instead of paying higher freight charges, the shipper protected itself by insuring the shipment. As subrogee, the insurance company can recover from the carrier only what the shipper itself is entitled to recover, not the amount it actually paid the shipper under the insurance policy. In our view, under the circumstances, the container should be regarded as the shipping unit or "package" within the purview of COGSA. However, we realize that this may not be equitable as far as the shipper is concerned. If the container is not regarded as a "package" within the terms of COGSA, then, the $500.00 liability limitation should be based on "the customary freight unit." Sec. 4 (5) of COGSA provides that in case of goods not shipped in packages, the limit of the carrier's liability shall be $500.00 "per customary freight unit." In the case at bar, the petitioner's liability for the shipment in question based on "freight unit" would be $21,950.00 for the shipment of 43.9 cubic meters. I concur with the rest of the decision. Sarmiento, J., concur.

YAP, J., concurring and dissenting: With respect to G.R. No. 71478, the majority opinion holds that the 128 cartons of textile materials, and not the two (2) containers, should be considered as the shipping unit for the purpose of applying the $500.00 limitation under the Carriage of Goods by Sea Act (COGSA). The majority opinion followed and applied the interpretation of the COGSA "package" limitation adopted by the Second Circuit, United States Court of Appeals, in Mitsui & Co., Ltd. vs. American Export Lines, Inc., 636 F. 2d 807 (1981) and the Smithgreyhound v. M/V Eurygenes, 666, F 2nd, 746. Both cases adopted the rule that carrier-furnished containers whose contents are fully disclosed are not "packages" within the meaning of Section 4 (5) of COGSA. I cannot go along with the majority in applying the Mitsui and Eurygenes decisions to the present case, for the following reasons: (1) The facts in those cases differ materially from those obtaining in the present case; and (2) the rule laid down in those two cases is by no means settled doctrine. In Mitsui and Eurygenes, the containers were supplied by the carrier or shipping company. In Mitsui the Court held: "Certainly, if the individual crates or cartons prepared by the shipper and containing his goods can rightly be considered "packages" standing by themselves, they do not suddenly lose that character upon being stowed in a carrier's container. I would liken these containers to detachable stowage compartments of the ship." Cartons or crates placed inside carrier-furnished containers are deemed stowed in the vessel itself, and do not lose their character as individual units simply by being placed inside container provided by the carrier, which are merely "detachable stowage compartments of the ship. In the case at bar, there is no evidence showing that the two containers in question were carrier-supplied. This fact cannot be presumed. The facts of the case in fact show that this was the only shipment placed in containers. The other shipment involved in the case, consisting of surveying instruments, was packed in two "cases." We cannot speculate on the meaning of the words "Say: Two (2) Containers Only, " which appear in the bill of lading. Absent any positive evidence on this point, we cannot say that those words constitute a mere estimate that the shipment could fit in two containers, thereby showing that when the goods were delivered by the shipper, they were not yet placed inside the containers and that it was the petitioner carrier which packed the goods into its own containers, as authorized under paragraph 11 on the dorsal side of the bill of lading, Exhibit A. Such assumption cannot be made in view of the following words clearly stamped in red ink on the face of the bill of lading: "Shipper's Load, Count and Seal Said to Contain." This clearly indicates that it was the shipper which loaded and counted the goods placed inside the container and sealed the latter. The two containers were delivered by the shipper to the carrier already sealed for shipment, and the number of cartons said to be contained inside them was indicated in the bill of lading, on the mere say-so of the shipper. The freight paid to the carrier on the shipment was based on the measurement (by volume) of the two containers at $34.50 per cubic meter. The shipper must have saved on the freight charges by using containers for the shipment. Under the circumstances, it would be unfair to the carrier to have the limitation of its liability under COGSA fixed on the number of cartons inside the containers, rather than on the containers themselves, since the freight revenue was based on the latter. The Mitsui and Eurygenes decisions are not the last word on the subject. The interpretation of the COGSA package limitation is in a state of flux, 1 as the courts continue to wrestle with the troublesome problem of applying the statutory limitation under COGSA to containerized shipments. The law was adopted before modern technological changes have revolutionized the shipping industry. There is need for the law itself to be updated to meet the changes brought about by the container revolution, but this is a task which should be addressed by the legislative body. Until then, this Court, while mindful of American jurisprudence on the subject, should make its own interpretation of the COGSA provisions, consistent with what is equitable to the parties concerned. There is need to balance the interests of the shipper and those of the carrier. In the case at bar, the shipper opted to ship the goods in two containers, and paid freight charges based on the freight unit, i.e., cubic meters. The shipper did not declare the value of the shipment, for that would have

Separate Opinions

entailed higher freight charges; instead of paying higher freight charges, the shipper protected itself by insuring the shipment. As subrogee, the insurance company can recover from the carrier only what the shipper itself is entitled to recover, not the amount it actually paid the shipper under the insurance policy. In our view, under the circumstances, the container should be regarded as the shipping unit or "package" within the purview of COGSA. However, we realize that this may not be equitable as far as the shipper is concerned. If the container is not regarded as a "package" within the terms of COGSA, then, the $500.00 liability limitation should be based on "the customary freight unit." Sec. 4 (5) of COGSA provides that in case of goods not shipped in packages, the limit of the carrier's liability shall be $500.00 "per customary freight unit." In the case at bar, the petitioner's liability for the shipment in question based on "freight unit" would be $21,950.00 for the shipment of 43.9 cubic meters. I concur with the rest of the decision. Sarmiento, J., concur.

16 Shackman v. Cunard White Star, D.C. N. Y. 1940, 31 F. Supp. 948. 46 USCA 866: cited in Phoenix Assurance Company vs. Macondray 64 SCRA 15 (1975), 17 Folio of Exhibits, pp. 6 and 23. 18 666 F. 2d 746, 1982 A.M.C. 320 (2d Circuits 1981). 19 A container is a permanent reusable article of transport equipment not packaging of goods durably made of metal, and equipped with doors for easy access to the goods and for repeated use. It is designed to facilitate the handling, loading, stowage aboard ship, carriage, discharge from ship, movement, and transfer of large numbers of packages simultaneously by mechanical means to minimize the cost and risks of manually processing each package individually, It functions primarily as ship's gear for cargo handling, and is usually provided by the carrier. (Simon, The Law of Shipping Containers) (Emphasis supplied). 20 Article 1377, Civil Code.

Footnotes 1 Petition, p. 6, Rollo of G.R. No. 69044, p. 15. 2 Granada vs. PNB, 18 SCRA 1 (1966); Gardner vs. CA, 131 SCRA 85 (1984) 3 p.51, Vol. 5, Rules of Court by Ruperto G. Martin, citing 31 C.J.S. 1075. 4 Article 1753, Civil Code. 5 See Samar Mining Co., Inc. vs. Nordeutscher Lloyd, 132 SCRA 529 (1984). 6 Art. 1766, Civil Code; Samar Mining Co. Inc. vs. Lloyd, supra. 7 See American President Lines vs. Klepper, 110 Phil. 243, 248 (1960). 8 Article 1733, Civil Code. 9 Article 1734, Civil Code. 10 Africa vs. Caltex Phil. 16 SCRA 448, 455 (1966). 11 Lloyd vs. Haugh & K. Storage & Transport Co., 293 Pa. 148, A 516; Forward v. Pittard, ITR 27, 99 Eng. Reprint, 953. 12 Article 1734, Civil Code. 13 Section 4, Carriage of Goods by Sea Act. 14 Manresa, cited in p. 147, V. Outline of the Civil Law, J.B.L. Reyes and R.C. Puno. 15 Decision, Court of Appeals in CA-G.R. No. 67848-R, appealed in G.R. No. 71478.

21 See Qua Chee Gan vs. Law Union & Rock Ins. Co., Ltd., 98 Phil. 85 (1956). 22 Amended Record on Appeal, Annex "D," p. 62; Rollo in G.R. No. 69044, p. 89. 23 Associated Citizens Bank vs. Ople, 103 SCRA 130 (1981). 24 Tajonera vs. Lamaroza, 110 SCRA 438 (1981). Yap, J.: 1 See R.M. Sharpe, Jr. and Mark E. Steiner, "The Container as Customary Freight Unit". Round Two of the Container Debate?", South Texas Law Journal Vol. 24, No. 2 (1983).

G.R. No. 14191

September 29, 1919

THE GOVERNMENT OF THE PHILIPPINE ISLANDS, plaintiff-appellant, vs. YNCHAUSTI & COMPANY, defendant-appellee. Attorney-General Paredes for the appellant. Charles C. Cohn for the appellee. JOHNSON, J.: The purpose of this action was to recover the sum of P200 as damages to certain cargo of roofing tiles shipped by the plaintiff from Manila to Iloilo on a vessel belonging to the defendant. The tiles were delivered by the defendant to the consignee of the plaintiff at Iloilo. Upon delivery it was found that some of the tiles had been damaged; that the damage amounted to about P200. Upon a submission of that question to the lower court a judgment was rendered against the plaintiff in favor of the defendant, absolving the latter from all liability under the complaint. There seems to be no dispute about the facts, except whether or not the tiles were broken by the negligence of the defendant. The defendant denied that the tiles were broken by reason of its negligence. The defendant proved, and the plaintiff did not attempt to dispute, that the roofing tiles in question were of a brittle and fragile nature; that they were delivered by the plaintiff to the defendant in bundles of ten each, tied with bejuco [rattan], without any packing or protective covering. The plaintiff did not even attempt to prove any negligence on the part of the defendant. On the hand, the defendant offered proof to show that there was no negligence on its part, by showing that the tiles were loaded, stowed, and discharged by handlabor, and not be mechanical devices which might have caused the breakage in question. It appears from the record that the tiles in question were received by the defendant from the plaintiff, as representative on a Government bill of lading known as "General Form No. 9-A," which was made out and submitted by a representative of the Bureau of Supply to the defendant. (Exhibit A.) At the head of Exhibit A is found the following: You are hereby authorized to receive, carry, and deliver the following described merchandise to treasurer of Iloilo at Iloilo in accordance with the authorized and prescribed rates and classifications, and according to the laws of common carriers in force on the date hereof, settlement and payment of charges to be made by Bureau of Supply. (Sgd.) T. R. SCHOON, Chief Division of Supplies, Bureau of Supply. On the said bill of lading we find the following, which was attempted thereon by the defendant: The goods have been accepted for transportation subject to the conditions prescribed by the Insular Collector of Customs in Philippine Marine Regulations, page 16, under the heading "Bill of Lading Conditions."

The lower court, in discussing the said bill of lading with the two conditions found thereon, reached the conclusion that the plaintiff was bound by the terms of the bill of lading as issued by the defendant and not by the terms which the plaintiff attempted to impose, that is to say, that such merchandise was to be carried at owner's risk only; that there was no presumption of negligence on the part of the defendant from the fact that the tiles were broken when received by the consignee; and that since the plaintiff did not prove negligence on the part of the defendant, the former was not entitled to recover damages from the latter. The lower court rendered judgment absolving the defendant from all liability under the complaint. The important questions presented by the appeal are: (a) Where the terms and conditions stamped by the defendant upon the Government's bill of lading binding upon the plaintiff? (b) Was there a presumption of negligence on the part of the defendant? The record shows that ever since the Government began to use the bill of lading, General Form No. 9-A, the shipowners had always used the "stamp" in question; that in the present case the defendant placed said stamp upon the bill of lading before the plaintiff shipped the tiles in question; that having shipped the goods under the said bill of lading, with the terms and conditions of the carriage stamped thereon, the appellant must be deemed to have assented to the said terms and conditions thereon stamped. The appellant contends also that it was not bound by the terms and conditions inserted by the appellee, because (a) the reference made by the appellee to the "Philippine Marine Regulations" prescribed by the Collector of Customs was vague; that the appellee should have expressed the conditions fully and clearly on the face of the bill of lading; and (b) that the Insular Collector of Customs had no authority to issue such regulations. As to the first contention, it seems that the appellant fully knew the import and significance of the reference made in said regulations. The appellant attempted to show that prior to the transaction in question the Government notified the defendant and other shipowners that it would not be bound by the "stamp" that was placed by the shipowners on the Government's bill of lading. With reference to the contention of the appellant that the Collector of Customs had no authority to make such regulations, it may be said in the present case that the binding effect of the conditions stamped on the bill of lading did not proceed from the authority of the Collector of Customs but from the actual contract which the parties made in the present case. Each bill of lading is a contract and the parties thereto are bound by its terms. Findings as we do that the tiles in question were shipped at the owner's risk, under the law in this jurisdiction, the carrier is only liable where the evidence shows that he was guilty of some negligence and that the damages claimed were the result of such negligence. As was said above, the plaintiff offered no proof whatever to show negligence on the part of the defendant. The plaintiff cites some American authorities to support its contention that the carrier is an absolute insurer of merchandise shipped and that the proof of breakage or damage to goods shipped in the hands of the carrier makes out a prima facie case of negligence against him, and that the burden of proof is thrown on him to show due care and diligence.

The law upon that question in this jurisdiction is found in articles 361 and 362 of the Commercial Code. Article 361 provides: ART. 361. Merchandise shall be transported at the risk and venture of the shipper, if the contrary be not expressly stipulated. Therefore, all damages and impairment, suffered by the goods in transportation by reason of accident, force majeure, or by virtue of the nature or defect of the articles, shall be for the account and risk of the shipper. The proof of these accidents is incumbent upon the carrier. Article 362 provides: ART. 362. The carrier, however, shall be liable for the losses and damages arising from the causes mentioned in the foregoing article, if it be proved against him that they occurred on account of his negligence or because he did not take the precautions usually adopted by careful persons, unless the shipper committed fraud in the bill of lading stating that the goods were of a class or quality different from what they really were. . . . Under the provisions of article 361 the defendant, in order to free itself from liability, was only obliged to prove that the damages suffered by the goods were "by virtue of the nature or defect of the articles." Under the provisions of article 362 the plaintiff, in order to hold the defendant liable, was obliged to prove that the damages to the goods by virtue of their nature, occurred on account of its negligence or because the defendant did not take the precaution usually adopted by careful persons. The defendant herein proved, and the plaintiff did not attempt to dispute, that the tiles in question were of a brittle and fragile nature and that they were delivered by the plaintiff to the defendant without any packing or protective covering. The defendant also offered proof to show that there was no negligence on its part, by showing that the tiles were loaded, stowed, and discharged in a careful and diligent manner. In this jurisdiction there is no presumption of negligence on the part of the carriers in case like the present. The plaintiff, not having proved negligence on the part of the defendant, is not entitled to recover damages. For the foregoing reasons, the judgment of the lower court is hereby affirmed, with costs. So ordered. Arellano, C.J., Araullo, Street, Malcolm and Avancea, JJ., concur.

G.R. No. L-16629

January 31, 1962

The only question to be determined in this petition is whether or not the defendant-carrier, the herein petitioner, is liable for the loss or shortage of the rice shipped. Article 361 of the Code of Commerce provides: . ART. 361. The merchandise shall be transported at the risk and venture of the shipper, if the contrary has not been expressly stipulated. As a consequence, all the losses and deteriorations which the goods may suffer during the transportation by reason of fortuitous event, force majeure, or the inherent nature and defect of the goods, shall be for the account and risk of the shipper.
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SOUTHERN LINES, INC., petitioner, vs. COURT OF APPEALS and CITY OF ILOILO, respondents. Jose Ma. Lopez Vito, Jr. for petitioner. The City Fiscal for respondents. DE LEON, J.: This is a petition to review on certiorari the decision of the Court of Appeals in CA-G.R. No. 15579-R affirming that of the Court of First Instance of Iloilo which sentenced petitioner Southern Lines, Inc. to pay respondent City of Iloilo the amount of P4,931.41. Sometime in 1948, the City of Iloilo requisitioned for rice from the National Rice and Corn Corporation (hereafter referred to as NARIC) in Manila. On August 24 of the same year, NARIC, pursuant to the order, shipped 1,726 sacks of rice consigned to the City of Iloilo on board the SS "General Wright" belonging to the Southern Lines, Inc. Each sack of rice weighed 75 kilos and the entire shipment as indicated in the bill of lading had a total weight of 129,450 kilos. According to the bill of lading, the cost of the shipment was P63,115.50 itemized and computed as follows: . Unit Price per bag P36.25 Handling at P0.13 per bag Trucking at P2.50 per bag T o t a l . . . . . .. . . . . P62,567.50 224.38 323.62 63,115.50

Proof of these accidents is incumbent upon the carrier. Article 362 of the same Code provides: . ART. 362. Nevertheless, the carrier shall be liable for the losses and damages resulting from the causes mentioned in the preceding article if it is proved, as against him, that they arose through his negligence or by reason of his having failed to take the precautions which usage his establisbed among careful persons, unless the shipper has committed fraud in the bill of lading, representing the goods to be of a kind or quality different from what they really were. If, notwithstanding the precautions referred to in this article, the goods transported run the risk of being lost, on account of their nature or by reason of unavoidable accident, there being no time for their owners to dispose of them, the carrier may proceed to sell them, placing them for this purpose at the disposal of the judicial authority or of the officials designated by special provisions. Under the provisions of Article 361, the defendant-carrier in order to free itself from liability, was only obliged to prove that the damages suffered by the goods were "by virtue of the nature or defect of the articles." Under the provisions of Article 362, the plaintiff, in order to hold the defendant liable, was obliged to prove that the damages to the goods by virtue of their nature, occurred on account of its negligence or because the defendant did not take the precaution adopted by careful persons. (Government v. Ynchausti & Co., 40 Phil. 219, 223). Petitioner claims exemption from liability by contending that the shortage in the shipment of rice was due to such factors as the shrinkage, leakage or spillage of the rice on account of the bad condition of the sacks at the time it received the same and the negligence of the agents of respondent City of Iloilo in receiving the shipment. The contention is untenable, for, if the fact of improper packing is known to the carrier or his servants, or apparent upon ordinary observation, but it accepts the goods notwithstanding such condition, it is not relieved of liability for loss or injury resulting thereform. (9 Am Jur. 869.) Furthermore, according to the Court of Appeals, "appellant (petitioner) itself frankly admitted that the strings that tied the bags of rice were broken; some bags were with holes and plenty of rice were spilled inside the hull of the boat, and that the personnel of the boat collected no less than 26 sacks of rice which they had distributed among themselves." This finding, which is binding upon this Court, shows that the shortage resulted from the negligence of petitioner.

On September 3, 1948, the City of Iloilo received the shipment and paid the amount of P63,115.50. However, it was noted that the foot of the bill of lading that the City of Iloilo 'Received the above mentioned merchandise apparently in same condition as when shipped, save as noted below: actually received 1685 sacks with a gross weight of 116,131 kilos upon actual weighing. Total shortage ascertained 13,319 kilos." The shortage was equivalent to 41 sacks of rice with a net weight of 13,319 kilos, the proportionate value of which was P6,486.35. On February 14, 1951 the City of Iloilo filed a complaint in the Court of First Instance of Iloilo against NARIC and the Southern Lines, Inc. for the recovery of the amount of P6,486.35 representing the value of the shortage of the shipment of rice. After trial, the lower court absolved NARIC from the complaint, but sentenced the Southern Lines, Inc. to pay the amount of P4,931.41 which is the difference between the sum of P6,486.35 and P1,554.94 representing the latter's counterclaim for handling and freight. The Southern Lines, Inc. appealed to the Court of Appeals which affirmed the judgment of the trial court. Hence, this petition for review.

Invoking the provisions of Article 366 of the Code of Commerce and those of the bill of lading, petitioner further contends that respondent is precluded from filing an action for damages on account of its failure to present a claim within 24 hours from receipt of the shipment. It also cites the cases of Government v. Ynchausti & Co., 24 Phil. 315 and Triton Insurance Co. v. Jose, 33 Phil. 194, ruling to the effect that the requirement that the claim for damages must be made within 24 hours from delivery is a condition precedent to the accrual of the right of action to recover damages. These two cases above-cited are not applicable to the case at bar. In the first cited case, the plaintiff never presented any claim at all before filing the action. In the second case, there was payment of the transportation charges which precludes the presentation of any claim against the carrier. (See Article 366, Code of Commerce.) It is significant to note that in the American case of Hoye v. Pennsylvania Railroad Co., 13 Ann. Case. 414, it has been said: . ... "It has been held that a stipulation in the contract of shipment requiring the owner of the goods to present a notice of his claim to the carrier within a specified time after the goods have arrived at their destination is in the nature of a condition precedent to the owner's right to enforce a recovery, that he must show in the first instance that be has complied with the condition, or that the circumstances were such that to have complied with it would have required him to do an unreasonable thing. The weight of authority, however, sustains the view that such a stipulation is more in the nature of a limitation upon the owner's right to recovery, and that the burden of proof is accordingly on the carrier to show that the limitation was reasonable and in proper form or within the time stated." (Hutchinson on Carrier, 3d ed., par. 44) Emphasis supplied. In the case at bar, the record shows that petitioner failed to plead this defense in its answer to respondent's complaint and, therefore, the same is deemed waived (Section 10, Rule 9, Rules of Court), and cannot be raised for the first time at the trial or on appeal. (Maxilom v. Tabotabo, 9 Phil. 390.) Moreover, as the Court of Appeals has said: . ... the records reveal that the appellee (respondent) filed the present action, within a reasonable time after the short delivery in the shipment of the rice was made. It should be recalled that the present action is one for the refund of the amount paid in excess, and not for damages or the recovery of the shortage; for admittedly the appellee (respondent) had paid the entire value of the 1726 sacks of rice, subject to subsequent adjustment, as to shortages or losses. The bill of lading does not at all limit the time for filing an action for the refund of money paid in excess. WHEREFORE, the decision of the Court of Appeals is hereby affirmed in all respects and the petition for certiorari denied. With costs against the petitioner. Padilla, Labrador, Concepcion, Reyes, J.B.L., Barrera, and Dizon, JJ., concur. Bengzon, C.J., Bautista Angelo and Paredes, JJ., took no part.

II G.R. No. L-48757 May 30, 1988 MAURO GANZON, petitioner, vs. COURT OF APPEALS and GELACIO E. TUMAMBING, respondents. Antonio B. Abinoja for petitioner. Quijano, Arroyo & Padilla Law Office for respondents. THE APPELLATE COURT FAILED TO CONSIDER THAT THE LOSS OF THE SCRAP WAS DUE TO A FORTUITOUS EVENT AND THE PETITIONER IS THEREFORE NOT LIABLE FOR LOSSES AS A CONSEQUENCE THEREOF. 4 The petitioner, in his first assignment of error, insists that the scrap iron had not been unconditionally placed under his custody and control to make him liable. However, he completely agrees with the respondent Court's finding that on December 1, 1956, the private respondent delivered the scraps to Captain Filomeno Niza for loading in the lighter "Batman," That the petitioner, thru his employees, actually received the scraps is freely admitted. Significantly, there is not the slightest allegation or showing of any condition, qualification, or restriction accompanying the delivery by the private respondent-shipper of the scraps, or the receipt of the same by the petitioner. On the contrary, soon after the scraps were delivered to, and received by the petitioner-common carrier, loading was commenced. By the said act of delivery, the scraps were unconditionally placed in the possession and control of the common carrier, and upon their receipt by the carrier for transportation, the contract of carriage was deemed perfected. Consequently, the petitioner-carrier's extraordinary responsibility for the loss, destruction or deterioration of the goods commenced. Pursuant to Art. 1736, such extraordinary responsibility would cease only upon the delivery, actual or constructive, by the carrier to the consignee, or to the person who has a right to receive them. 5 The fact that part of the shipment had not been loaded on board the lighter did not impair the said contract of transportation as the goods remained in the custody and control of the carrier, albeit still unloaded. The petitioner has failed to show that the loss of the scraps was due to any of the following causes enumerated in Article 1734 of the Civil Code, namely: (1) Flood, storm, earthquake, lightning, or other natural disaster or calamity; (2) Act of the public enemy in war, whether international or civil; (3) Act or omission of the shipper or owner of the goods; (4) The character of the goods or defects in the packing or in the containers; (5) Order or act of competent public authority. WHEREFORE, the decision appealed from is hereby reversed and set aside and a new one entered ordering defendant-appellee Mauro Ganzon to pay plaintiff-appellant Gelacio E. Tumambimg the sum of P5,895.00 as actual damages, the sum of P5,000.00 as exemplary damages, and the amount of P2,000.00 as attorney's fees. Costs against defendant-appellee Ganzon. 3 In this petition for review on certiorari, the alleged errors in the decision of the Court of Appeals are: I THE COURT OF APPEALS FINDING THE HEREIN PETITIONER GUILTY OF BREACH OF THE CONTRACT OF TRANSPORTATION AND IN IMPOSING A LIABILITY AGAINST HIM COMMENCING FROM THE TIME THE SCRAP WAS PLACED IN HIS CUSTODY AND CONTROL HAVE NO BASIS IN FACT AND IN LAW. It is in the second and third assignments of error where the petitioner maintains that he is exempt from any liability because the loss of the scraps was due mainly to the intervention of the municipal officials of Mariveles which constitutes a caso fortuito as defined in Article 1174 of the Civil Code. 7 Hence, the petitioner is presumed to have been at fault or to have acted negligently. 6 By reason of this presumption, the court is not even required to make an express finding of fault or negligence before it could hold the petitioner answerable for the breach of the contract of carriage. Still, the petitioner could have been exempted from any liability had he been able to prove that he observed extraordinary diligence in the vigilance over the goods in his custody, according to all the circumstances of the case, or that the loss was due to an unforeseen event or to force majeure. As it was, there was hardly any attempt on the part of the petitioner to prove that he exercised such extraordinary diligence. THE APPELLATE COURT ERRED IN CONDEMNING THE PETITIONER FOR THE ACTS OF HIS EMPLOYEES IN DUMPING THE SCRAP INTO THE SEA DESPITE THAT IT WAS ORDERED BY THE LOCAL GOVERNMENT OFFICIAL WITHOUT HIS PARTICIPATION. III

SARMIENTO, J.: The private respondent instituted in the Court of First Instance of Manila 1 an action against the petitioner for damages based on culpa contractual. The antecedent facts, as found by the respondent Court, 2 are undisputed: On November 28, 1956, Gelacio Tumambing contracted the services of Mauro B. Ganzon to haul 305 tons of scrap iron from Mariveles, Bataan, to the port of Manila on board the lighter LCT "Batman" (Exhibit 1, Stipulation of Facts, Amended Record on Appeal, p. 38). Pursuant to that agreement, Mauro B. Ganzon sent his lighter "Batman" to Mariveles where it docked in three feet of water (t.s.n., September 28, 1972, p. 31). On December 1, 1956, Gelacio Tumambing delivered the scrap iron to defendant Filomeno Niza, captain of the lighter, for loading which was actually begun on the same date by the crew of the lighter under the captain's supervision. When about half of the scrap iron was already loaded (t.s.n., December 14, 1972, p. 20), Mayor Jose Advincula of Mariveles, Bataan, arrived and demanded P5,000.00 from Gelacio Tumambing. The latter resisted the shakedown and after a heated argument between them, Mayor Jose Advincula drew his gun and fired at Gelacio Tumambing (t.s.n., March 19, 1971, p. 9; September 28, 1972, pp. 6-7). The gunshot was not fatal but Tumambing had to be taken to a hospital in Balanga, Bataan, for treatment (t.s.n., March 19, 1971, p. 13; September 28, 1972, p. 15).
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After sometime, the loading of the scrap iron was resumed. But on December 4, 1956, Acting Mayor Basilio Rub, accompanied by three policemen, ordered captain Filomeno Niza and his crew to dump the scrap iron (t.s.n., June 16, 1972, pp. 8-9) where the lighter was docked (t.s.n., September 28, 1972, p. 31). The rest was brought to the compound of NASSCO (Record on Appeal, pp. 20-22). Later on Acting Mayor Rub issued a receipt stating that the Municipality of Mariveles had taken custody of the scrap iron (Stipulation of Facts, Record on Appeal, p. 40; t.s.n., September 28, 1972, p. 10.) On the basis of the above findings, the respondent Court rendered a decision, the dispositive portion of which states:

We cannot sustain the theory of caso fortuito. In the courts below, the petitioner's defense was that the loss of the scraps was due to an "order or act of competent public authority," and this contention was correctly passed upon by the Court of Appeals which ruled that: ... In the second place, before the appellee Ganzon could be absolved from responsibility on the ground that he was ordered by competent public authority to unload the scrap iron, it must be shown that Acting Mayor Basilio Rub had the power to issue the disputed order, or that it was lawful, or that it was issued under legal process of authority. The appellee failed to establish this. Indeed, no authority or power of the acting mayor to issue such an order was given in evidence. Neither has it been shown that the cargo of scrap iron belonged to the Municipality of Mariveles. What we have in the record is the stipulation of the parties that the cargo of scrap iron was accilmillated by the appellant through separate purchases here and there from private individuals (Record on Appeal, pp. 38-39). The fact remains that the order given by the acting mayor to dump the scrap iron into the sea was part of the pressure applied by Mayor Jose Advincula to shakedown the appellant for P5,000.00. The order of the acting mayor did not constitute valid authority for appellee Mauro Ganzon and his representatives to carry out. Now the petitioner is changing his theory to caso fortuito. Such a change of theory on appeal we cannot, however, allow. In any case, the intervention of the municipal officials was not In any case, of a character that would render impossible the fulfillment by the carrier of its obligation. The petitioner was not duty bound to obey the illegal order to dump into the sea the scrap iron. Moreover, there is absence of sufficient proof that the issuance of the same order was attended with such force or intimidation as to completely overpower the will of the petitioner's employees. The mere difficulty in the fullfilment of the obligation is not considered force majeure. We agree with the private respondent that the scraps could have been properly unloaded at the shore or at the NASSCO compound, so that after the dispute with the local officials concerned was settled, the scraps could then be delivered in accordance with the contract of carriage. There is no incompatibility between the Civil Code provisions on common carriers and Articles 361 8 and 362 9 of the Code of Commerce which were the basis for this Court's ruling in Government of the Philippine Islands vs. Ynchausti & Co.10 and which the petitioner invokes in tills petition. For Art. 1735 of the Civil Code, conversely stated, means that the shipper will suffer the losses and deterioration arising from the causes enumerated in Art. 1734; and in these instances, the burden of proving that damages were caused by the fault or negligence of the carrier rests upon him. However, the carrier must first establish that the loss or deterioration was occasioned by one of the excepted causes or was due to an unforeseen event or to force majeure. Be that as it may, insofar as Art. 362 appears to require of the carrier only ordinary diligence, the same is .deemed to have been modified by Art. 1733 of the Civil Code. Finding the award of actual and exemplary damages to be proper, the same will not be disturbed by us. Besides, these were not sufficiently controverted by the petitioner. WHEREFORE, the petition is DENIED; the assailed decision of the Court of Appeals is hereby AFFIRMED. Costs against the petitioner. This decision is IMMEDIATELY EXECUTORY. Yap, C.J., Paras and Padilla, JJ., concur.

I am constrained to dissent. It is my view that petitioner can not be held liable in damages for the loss and destruction of the scrap iron. The loss of said cargo was due to an excepted cause an 'order or act of competent public authority" (Article 1734[5], Civil Code). The loading of the scrap iron on the lighter had to be suspended because of Municipal Mayor Jose Advincula's intervention, who was a "competent public authority." Petitioner had no control over the situation as, in fact, Tumambing himself, the owner of the cargo, was impotent to stop the "act' of said official and even suffered a gunshot wound on the occasion. When loading was resumed, this time it was Acting Mayor Basilio Rub, accompanied by three policemen, who ordered the dumping of the scrap iron into the sea right where the lighter was docked in three feet of water. Again, could the captain of the lighter and his crew have defied said order? Through the "order" or "act" of "competent public authority," therefore, the performance of a contractual obligation was rendered impossible. The scrap iron that was dumped into the sea was "destroyed" while the rest of the cargo was "seized." The seizure is evidenced by the receipt issues by Acting Mayor Rub stating that the Municipality of Mariveles had taken custody of the scrap iron. Apparently, therefore, the seizure and destruction of the goods was done under legal process or authority so that petitioner should be freed from responsibility. Art. 1743. If through order of public authority the goods are seized or destroyed, the common carrier is not responsible, provided said public authority had power to issue the order.

Separate Opinions MELENCIO-HERRERA, J., dissenting: I am constrained to dissent. It is my view that petitioner can not be held liable in damages for the loss and destruction of the scrap iron. The loss of said cargo was due to an excepted cause an 'order or act of competent public authority" (Article 1734[5], Civil Code). The loading of the scrap iron on the lighter had to be suspended because of Municipal Mayor Jose Advincula's intervention, who was a "competent public authority." Petitioner had no control over the situation as, in fact, Tumambing himself, the owner of the cargo, was impotent to stop the "act' of said official and even suffered a gunshot wound on the occasion. When loading was resumed, this time it was Acting Mayor Basilio Rub, accompanied by three policemen, who ordered the dumping of the scrap iron into the sea right where the lighter was docked in three feet of water. Again, could the captain of the lighter and his crew have defied said order? Through the "order" or "act" of "competent public authority," therefore, the performance of a contractual obligation was rendered impossible. The scrap iron that was dumped into the sea was "destroyed" while the rest of the cargo was "seized." The seizure is evidenced by the receipt issues by Acting Mayor Rub stating that the Municipality of Mariveles had taken custody of the scrap iron. Apparently, therefore, the seizure and destruction of the goods was done under legal process or authority so that petitioner should be freed from responsibility.

Separate Opinions

MELENCIO-HERRERA, J., dissenting:

Art. 1743. If through order of public authority the goods are seized or destroyed, the common carrier is not responsible, provided said public authority had power to issue the order. Footnotes 1 Presided by Judge Jesus P. Morfe 2 Pascual, Chairman, ponente; Agrava and Climaco, JJ., concurring. 3 Decision, 9; Rollo 19. 4 Petitioner's Brief, 3, 7, 9; Rollo, 41. 5 Article 1736, Civil Code of the Philippines: Art. 1736. The extraordinary responsibility of the common carriers lasts from the time the goods are unconditionally placed in the possession of, and received by the carrier for transportation until the same are delivered, actually or constructively, by the carrier to the consignee, or to the person who has a right to receive them, without prejudice to the provisions of article 1738. 6 Article 1735, supra. Art. 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4, and 5 of the preceding article, if the goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as required in Article 1733. 7 Art. 11 74, supra: Art. 1174. Except in cases expressly specified by the law, or when it is otherwise declared by stipulation, or when the nature of the obligation requires the assumption of risk, no person shall be responsible for those events which could not be foreseen, or which though for foreseen were inevitable. 8 Article 361, Code of Commerce: Art. 361. The merchandise shall be transported at the risk and venture of the shipper, if the contrary has not been expressly stipulated. As a consequence, all the losses and deterioration which the goods may suffer during the transportation by reason of fortuitous event, force majeure, or the inherent nature and defect of the goods, shall be for the account and risk of the shipper. Proof of these accidents is incumbent upon the carrier. 9 Article 362, Code of Commerce:

Art. 362. Nevertheless, the carrier shall be liable for the losses and damages resulting from the causes mentioned in the preceding article if it is proved, as against him, that they arose through his negligence or by reason of his having failed to take the precautions which usage has established among careful persons, unless the shipper has committed fraud in the bill of lading, representing the goods to be of a kind or quality different from what they really were. If, notwithstanding the precautions referred to in to article, the goods transported run the risk of being lost, on account of their nature or by reason of unavoidable accident, there being no time for their owners to dispose of them, the carrier may proceed to sell them, placing them for this purpose at the disposal of the judicial authority or of the officials designated by special provisions. 10 No. 14191, September 29, 1919, 40 Phil. 219.

The Lawphil Project - Arellano Law Foundation

G.R. No. L-18965

October 30, 1964

COMPAIA MARITIMA, petitioner, vs. INSURANCE COMPANY OF NORTH AMERICA, respondent. Rafael Dinglasan for petitioner. Ozaeta Gibbs & Ozaeta for respondent. BAUTISTA ANGELO, J.: Sometime in October, 1952, Macleod and Company of the Philippines contracted by telephone the services of the Compaia Maritima, a shipping corporation, for the shipment of 2,645 bales of hemp from the former's Sasa private pier at Davao City to Manila and for their subsequent transhipment to Boston, Massachusetts, U.S.A. on board the S.S. Steel Navigator. This oral contract was later on confirmed by a formal and written booking issued by Macleod's branch office in Sasa and handcarried to Compaia Maritima's branch office in Davao in compliance with which the latter sent to Macleod's private wharf LCT Nos. 1023 and 1025 on which the loading of the hemp was completed on October 29, 1952. These two lighters were manned each by a patron and an assistant patron. The patrons of both barges issued the corresponding carrier's receipts and that issued by the patron of Barge No. 1025 reads in part: Received in behalf of S.S. Bowline Knot in good order and condition from MACLEOD AND COMPANY OF PHILIPPINES, Sasa Davao, for transhipment at Manila onto S.S. Steel Navigator. FINAL DESTINATION: Boston. Thereafter, the two loaded barges left Macleod's wharf and proceeded to and moored at the government's marginal wharf in the same place to await the arrival of the S.S. Bowline Knot belonging to Compaia Maritima on which the hemp was to be loaded. During the night of October 29, 1952, or at the early hours of October 30, LCT No. 1025 sank, resulting in the damage or loss of 1,162 bales of hemp loaded therein. On October 30, 1952, Macleod promptly notified the carrier's main office in Manila and its branch in Davao advising it of its liability. The damaged hemp was brought to Odell Plantation in Madaum, Davao, for cleaning, washing, reconditioning, and redrying. During the period from November 1-15, 1952, the carrier's trucks and lighters hauled from Odell to Macleod at Sasa a total of 2,197.75 piculs of the reconditioned hemp out of the original cargo of 1,162 bales weighing 2,324 piculs which had a total value of 116,835.00. After reclassification, the value of the reconditioned hemp was reduced to P84,887.28, or a loss in value of P31,947.72. Adding to this last amount the sum of P8,863.30 representing Macleod's expenses in checking, grading, rebating, and other fees for washing, cleaning and redrying in the amount of P19.610.00, the total loss adds up to P60,421.02. All abaca shipments of Macleod, including the 1,162 bales loaded on the carrier's LCT No. 1025, were insured with the Insurance Company of North America against all losses and damages. In due time, Macleod filed a claim for the loss it suffered as above stated with said insurance company, and after the same had been processed, the sum of P64,018.55 was paid, which was noted down in a document which aside from being a receipt of the

amount paid, was a subrogation agreement between Macleod and the insurance company wherein the former assigned to the latter its rights over the insured and damaged cargo. Having failed to recover from the carrier the sum of P60,421.02, which is the only amount supported by receipts, the insurance company instituted the present action on October 28, 1953. After trial, the court a quo rendered judgment ordering the carrier to pay the insurance company the sum of P60,421.02, with legal interest thereon from the date of the filing of the complaint until fully paid, and the costs. This judgment was affirmed by the Court of Appeals on December 14, 1960. Hence, this petition for review. The issues posed before us are: (1) Was there a contract of carriage between the carrier and the shipper even if the loss occurred when the hemp was loaded on a barge owned by the carrier which was loaded free of charge and was not actually loaded on the S.S. Bowline Knot which would carry the hemp to Manila and no bill of lading was issued therefore?; (2) Was the damage caused to the cargo or the sinking of the barge where it was loaded due to a fortuitous event, storm or natural disaster that would exempt the carrier from liability?; (3) Can respondent insurance company sue the carrier under its insurance contract as assignee of Macleod in spite of the fact that the liability of the carrier as insurer is not recognized in this jurisdiction?; (4) Has the Court of Appeals erred in regarding Exhibit NNN-1 as an implied admission by the carrier of the correctness and sufficiency of the shipper's statement of accounts contrary to the burden of proof rule?; and (5) Can the insurance company maintain this suit without proof of its personality to do so? 1. This issue should be answered in the affirmative. As found by the Court of Appeals, Macleod and Company contracted by telephone the services of petitioner to ship the hemp in question from the former's private pier at Sasa, Davao City, to Manila, to be subsequently transhipped to Boston, Massachusetts, U.S.A., which oral contract was later confirmed by a formal and written booking issued by the shipper's branch office, Davao City, in virtue of which the carrier sent two of its lighters to undertake the service. It also appears that the patrons of said lighters were employees of the carrier with due authority to undertake the transportation and to sign the documents that may be necessary therefor so much so that the patron of LCT No. 1025 signed the receipt covering the cargo of hemp loaded therein as follows: . Received in behalf of S.S. Bowline Knot in good order and condition from MACLEOD AND COMPANY OF PHILIPPINES, Sasa Davao, for transhipment at Manila onto S.S. Steel Navigator. FINAL DESTINATION: Boston. The fact that the carrier sent its lighters free of charge to take the hemp from Macleod's wharf at Sasa preparatory to its loading onto the ship Bowline Knot does not in any way impair the contract of carriage already entered into between the carrier and the shipper, for that preparatory step is but part and parcel of said contract of carriage. The lighters were merely employed as the first step of the voyage, but once that step was taken and the hemp delivered to the carrier's employees, the rights and obligations of the parties attached thereby subjecting them to the principles and usages of the maritime law. In other words, here we have a complete contract of carriage the consummation of which has already begun: the shipper delivering the cargo to the carrier, and the latter taking possession thereof by placing it on a lighter manned by its authorized employees, under which Macleod became entitled to the privilege secured to him by law for its safe transportation and delivery, and the carrier to the full payment of its freight upon completion of the voyage.

The receipt of goods by the carrier has been said to lie at the foundation of the contract to carry and deliver, and if actually no goods are received there can be no such contract. The liability and responsibility of the carrier under a contract for the carriage of goods commence on their actual delivery to, or receipt by, the carrier or an authorized agent. ... and delivery to a lighter in charge of a vessel for shipment on the vessel, where it is the custom to deliver in that way, is a good delivery and binds the vessel receiving the freight, the liability commencing at the time of delivery to the lighter. ... and, similarly, where there is a contract to carry goods from one port to another, and they cannot be loaded directly on the vessel and lighters are sent by the vessel to bring the goods to it, the lighters are for the time its substitutes, so that the bill of landing is applicable to the goods as soon as they are placed on the lighters. (80 C.J.S., p. 901, emphasis supplied) ... The test as to whether the relation of shipper and carrier had been established is, Had the control and possession of the cotton been completely surrendered by the shipper to the railroad company? Whenever the control and possession of goods passes to the carrier and nothing remains to be done by the shipper, then it can be said with certainty that the relation of shipper and carrier has been established. Railroad Co. v. Murphy, 60 Ark. 333, 30 S.W. 419, 46 A. St. Rep. 202; Pine Bluff & Arkansas River Ry. v. MaKenzie, 74 Ark. 100, 86 S.W. 834; Matthews & Hood v. St. L., I.M. & S.R. Co., 123 Ark. 365, 185 S.W. 461, L.R.A. 1916E, 1194. (W.F. Bogart & Co., et al. v. Wade, et al., 200 S.W. 148). The claim that there can be no contract of affreightment because the hemp was not actually loaded on the ship that was to take it from Davao City to Manila is of no moment, for, as already stated, the delivery of the hemp to the carrier's lighter is in line with the contract. In fact, the receipt signed by the patron of the lighter that carried the hemp stated that he was receiving the cargo "in behalf of S.S. Bowline Knot in good order and condition." On the other hand, the authorities are to the effect that a bill of lading is not indispensable for the creation of a contract of carriage. Bill of lading not indispensable to contract of carriage. As to the issuance of a bill of lading, although article 350 of the Code of Commerce provides that "the shipper as well as the carrier of merchandise or goods may mutua-lly demand that a bill of lading is not indispensable. As regards the form of the contract of carriage it can be said that provided that there is a meeting of the minds and from such meeting arise rights and obligations, there should be no limitations as to form." The bill of lading is not essential to the contract, although it may become obligatory by reason of the regulations of railroad companies, or as a condition imposed in the contract by the agreement of the parties themselves. The bill of lading is juridically a documentary proof of the stipulations and conditions agreed upon by both parties. (Del Viso, pp. 314-315; Robles vs. Santos, 44 O.G. 2268). In other words, the Code does not demand, as necessary requisite in the contract of transportation, the delivery of the bill of lading to the shipper, but gives right to both the carrier and the shipper to mutually demand of each other the delivery of said bill. (Sp. Sup. Ct. Decision, May 6, 1895). (Martin, Philippine Commercial Laws, Vol. II, Revised Edition, pp. 12-13) The liability of the carrier as common carrier begins with the actual delivery of the goods for transportation, and not merely with the formal execution of a receipt or bill of lading; the issuance of a bill of lading is not necessary to complete delivery and acceptance. Even where it is provided by statute that liability commences

with the issuance of the bill of lading, actual delivery and acceptance are sufficient to bind the carrier. (13 C.J.S., p. 288) 2. Petitioner disclaims responsibility for the damage of the cargo in question shielding itself behind the claim of force majeure or storm which occurred on the night of October 29, 1952. But the evidence fails to bear this out. Rather, it shows that the mishap that caused the damage or loss was due, not to force majeure, but to lack of adequate precautions or measures taken by the carrier to prevent the loss as may be inferred from the following findings of the Court of Appeals: Aside from the fact that, as admitted by appellant's own witness, the ill-fated barge had cracks on its bottom (pp. 18-19, t.s.n., Sept. 13, 1959) which admitted sea water in the same manner as rain entered "thru tank man-holes", according to the patron of LCT No. 1023 (exh. JJJ-4) conclusively showing that the barge was not seaworthy it should be noted that on the night of the nautical accident there was no storm, flood, or other natural disaster or calamity. Certainly, winds of 11 miles per hour, although stronger than the average 4.6 miles per hour then prevailing in Davao on October 29, 1952 (exh. 5), cannot be classified as storm. For according to Beaufort's wind scale, a storm has wind velocities of from 64 to 75 miles per hour; and by Philippine Weather Bureau standards winds should have a velocity of from 55 to 74 miles per hour in order to be classified as storm (Northern Assurance Co., Ltd. vs. Visayan Stevedore Transportation Co., CA-G.R. No. 23167-R, March 12, 1959). The Court of Appeals further added: "the report of R. J. del Pan & Co., Inc., marine surveyors, attributes the sinking of LCT No. 1025 to the 'non-water-tight conditions of various buoyancy compartments' (exh. JJJ); and this report finds confirmation on the above-mentioned admission of two witnesses for appellant concerning the cracks of the lighter's bottom and the entrance of the rain water 'thru manholes'." We are not prepared to dispute this finding of the Court of Appeals. 3. There can also be no doubt that the insurance company can recover from the carrier as assignee of the owner of the cargo for the insurance amount it paid to the latter under the insurance contract. And this is so because since the cargo that was damaged was insured with respondent company and the latter paid the amount represented by the loss, it is but fair that it be given the right to recover from the party responsible for the loss. The instant case, therefore, is not one between the insured and the insurer, but one between the shipper and the carrier, because the insurance company merely stepped into the shoes of the shipper. And since the shipper has a direct cause of action against the carrier on account of the damage of the cargo, no valid reason is seen why such action cannot be asserted or availed of by the insurance company as a subrogee of the shipper. Nor can the carrier set up as a defense any defect in the insurance policy not only because it is not a privy to it but also because it cannot avoid its liability to the shipper under the contract of carriage which binds it to pay any loss that may be caused to the cargo involved therein. Thus, we find fitting the following comments of the Court of Appeals: It was not imperative and necessary for the trial court to pass upon the question of whether or not the disputed abaca cargo was covered by Marine Open Cargo Policy No. MK-134 isued by appellee. Appellant was neither a party nor privy to this insurance contract, and therefore cannot avail itself of any defect in the policy which may constitute a valid reason for appellee, as the insurer, to reject

the claim of Macleod, as the insured. Anyway, whatever defect the policy contained, if any, is deemed to have been waived by the subsequent payment of Macleod's claim by appellee. Besides, appellant is herein sued in its capacity as a common carrier, and appellee is suing as the assignee of the shipper pursuant to exhibit MM. Since, as above demonstrated, appellant is liable to Macleod and Company of the Philippines for the los or damage to the 1,162 bales of hemp after these were received in good order and condition by the patron of appellant's LCT No. 1025, it necessarily follows that appellant is likewise liable to appellee who, as assignee of Macleod, merely stepped into the shoes of and substi-tuted the latter in demanding from appellant the payment for the loss and damage aforecited. 4. It should be recalled in connection with this issue that during the trial of this case the carrier asked the lower court to order the production of the books of accounts of the Odell Plantation containing the charges it made for the loss of the damaged hemp for verification of its accountants, but later it desisted therefrom on the claim that it finds their production no longer necessary. This desistance notwithstanding, the shipper however pre-sented other documents to prove the damage it suffered in connection with the cargo and on the strength thereof the court a quo ordered the carrier to pay the sum of P60,421.02. And after the Court of Appeals affirmed this award upon the theory that the desistance of the carrier from producing the books of accounts of Odell Plantation implies an admission of the correctness of the statements of accounts contained therein, petitioner now contends that the Court of Appeals erred in basing the affirmance of the award on such erroneous interpretation. There is reason to believe that the act of petitioner in waiving its right to have the books of accounts of Odell Plantation presented in court is tantamount to an admission that the statements contained therein are correct and their verification not necessary because its main defense here, as well as below, was that it is not liable for the loss because there was no contract of carriage between it and the shipper and the loss caused, if any, was due to a fortuitous event. Hence, under the carrier's theory, the correctness of the account representing the loss was not so material as would necessitate the presentation of the books in question. At any rate, even if the books of accounts were not produced, the correctness of the accounts cannot now be disputed for the same is supported by the original documents on which the entries in said books were based which were presented by the shipper as part of its evidence. And according to the Court of Appeals, these documents alone sufficiently establish the award of P60,412.02 made in favor of respondent. 5. Finally, with regard to the question concerning the personality of the insurance company to maintain this action, we find the same of no importance, for the attorney himself of the carrier admitted in open court that it is a foreign corporation doing business in the Philippines with a personality to file the present action. WHEREFORE, the decision appealed from is affirmed, with costs against petitioner. Bengzon, C.J., Concepcion, Reyes, J.B.L., Barrera, Paredes, Dizon, Regala, Makalintal, Bengzon, J.P. and Zaldivar JJ., concur. The Lawphil Project - Arellano Law Foundation

G.R. No. L-9840

April 22, 1957

LU DO & LU YM CORPORATION, petitioner-defendant, vs. I. V. BINAMIRA, respondent-plaintiff. Ross, Selph, Carrascoso and Janda for petitioner. I. V. Binamira in his own behalf. BAUTISTA ANGELO, J.:

question, was received by the Visayan Cebu Terminal Company Inc., the arrastre operator appointed by the Bureau of Customs. It also appears that during the discharge, the cargo was checked both by the stevedoring company hired by petitioner as well as by the arrastre operator of the port, and the shipment in question, when discharged from the ship, was found to be in good order and condition. But after it was delivered to respondent three days later, the same was examined by a marine surveyor who found that some films and supplies were missing valued at P324.63. The question now to be considered is: Is the carrier responsible for the loss considering that the same occurred after the shipment was discharged from the ship and placed in the possession and custody of the customs authorities? The Court of Appeals found for the affirmative, making on this point the following comment:

On April 4, 1954, plaintiff filed an action in the Court of First Instance of Cebu against defendant to recover the sum of P324.63 as value of certain missing shipment, P150 as actual and compensatory damages, and P600 as moral and pecuniary damages. After trial, the court rendered judgment ordering defendant to pay plaintiff the sum of P216.84, with legal interest. On appeal, the Court of Appeals affirmed the judgment, hence the present petition for review. On August 10, 1951, the Delta Photo Supply Company of New York shipped on board the M/S "FERNSIDE" at New York, U.S.A., six cases of films and/or photographic supplies consigned to the order of respondent I. V. Binamira. For this shipment, Bill of Lading No. 29 was issued. The ship arrived at the port of Cebu on September 23, 1951 and discharged her cargo on September 23, and 24, 1951, including the shipment in question, placing it in the possession and custody of the arrastre operator of said port, the Visayan Cebu Terminal Company, Inc. Petitioner, as agent of the carrier, hired the Cebu Stevedoring Company, Inc. to unload its cargo. During the discharge, good order cargo was separated from the bad order cargo on board the ship, and a separate list of bad order cargo was prepared by Pascual Villamor, checker of the stevedoring company. All the cargo unloaded was received at the pier by the Visayan Cebu Terminal Company Inc, arrastre operator of the port. This terminal company had also its own checker, Romeo Quijano, who also recorded and noted down the good cargo from the bad one. The shipment in question, was not included in the report of bad order cargo of both checkers, indicating that it was discharged from the, ship in good order and condition. On September 26, 1951, three days after the goods were unloaded from the ship, respondent took delivery of his six cases of photographic supplies from the arrastre operator. He discovered that the cases showed signs of pilferage and, consequently, he hired marine surveyors, R. J. del Pan & Company, Inc., to examine them. The surveyors examined the cases and made a physical count of their contents in the presence of representatives of petitioner, respondent and the stevedoring company. The surveyors examined the cases and made a physical count of their contents in the presence of representatives of petitioner, respondent and the stevedoring company. The finding of the surveyors showed that some films and photographic supplies were missing valued at P324.63. It appears from the evidence that the six cases of films and photographic supplies were discharged from the ship at the port of Cebu by the stevedoring company hired by petitioner as agent of the carrier. All the unloaded cargo, including the shipment in

In this jurisdiction, a common carrier has the legal duty to deliver goods to a consignee in the same condition in which it received them. Except where the loss, destruction or deterioration of the merchandise was due to any of the cases enumerated in Article 1734 of the new Civil Code, a carrier is presumed to have been at fault and to have acted negligently, unless it could prove that it observed extraordinary diligence in the care and handling of the goods (Article 1735, supra). Such presumption and the liability of the carrier attach until the goods are delivered actually or constructively, to the consignee, or to the person who has a right to receive them (Article 1736, supra), and we believe delivery to the customs authorities is not the delivery contemplated by Article 1736, supra, in connection with second paragraph of Article 1498, supra, because, in such a case, the goods are then still in the hands of the Government and their owner could not exercise dominion whatever over them until the duties are paid. In the case at bar, the presumption against the carrier, represented appellant as its agent, has not been successfully rebutted. It is now contended that the Court of Appeals erred in its finding not only because it made wrong interpretation of the law on the matter, but also because it ignored the provisions of the bill of lading covering the shipment wherein it was stipulated that the responsibility of the carrier is limited only to losses that may occur while the cargo is still under its custody and control. We believe this contention is well taken. It is true that, as a rule, a common carrier is responsible for the loss, destruction or deterioration of the goods it assumes to carry from one place to another unless the same is due to any to any of the causes mentioned in Article 1734 on the new Civil Code, and that, if the goods are lost, destroyed or deteriorated, for causes other that those mentioned, the common carrier is presumed to have been at fault or to have acted negligently, unless it proves that it has observed extraordinary diligence in their care (Article 1735, Idem.), and that this extraordinary liability lasts from the time the goods are placed in the possession of the carrier until they are delivered to the consignee, or "to the person who has the right to receive them" (Article 1736, Idem.), but these provisions only apply when the loss, destruction or deterioration takes place while the goods are in the possession of the carrier, and not after it has lost control of them. The reason is obvious. While the goods are in its possession, it is but fair that it exercise extraordinary diligence in protecting them from damage, and if loss occurs, the law presumes that it was due to its fault or negligence. This is necessary to protect the interest the interest of the owner who is at its mercy. The situation changes after the goods are delivered to the consignee.

While we agree with the Court of Appeals that while delivery of the cargo to the consignee, or to the person who has a right to receive them", contemplated in Article 1736, because in such case the goods are still in the hands of the Government and the owner cannot exercise dominion over them, we believe however that the parties may agree to limit the liability of the carrier considering that the goods have still to through the inspection of the customs authorities before they are actually turned over to the consignee. This is a situation where we may say that the carrier losses control of the goods because of a custom regulation and it is unfair that it be made responsible for what may happen during the interregnum. And this is precisely what was done by the parties herein. In the bill of lading that was issued covering the shipment in question, both the carrier and the consignee have stipulated to limit the responsibility of the carrier for the loss or damage that may because to the goods before they are actually delivered by insert in therein the following provisions: 1. . . . The Carrier shall not be liable in any capacity whatsoever for any delay, nondelivery or misdelivery, or loss of or damage to the goods occurring while the goods are not in the actual custody of the Carrier. . . . (Emphasis ours.) (Paragraph 1, Exhibit "1") 2. . . . The responsibility of the Carrier in any capacity shall altogether cease and the goods shall be considered to be delivered and at their own risk and expense in every respect when taken into the custody of customs or other authorities. The Carrier shall not be required to give any notification of disposition of the goods. . . . (Emphasis ours.) (Paragraph 12, Exhibit "1") 3. Any provisions herein to the contrary notwithstanding, goods may be . . . by Carrier at ship's tackle . . . and delivery beyond ship's tackle shall been tirely at the option of the Carrier and solely at the expense of the shipper or consignee. (Paragraph 22, Exhibit "1") It therefore appears clear that the carrier does not assume liability for any loss or damage to the goods once they have been "taken into the custody of customs or other authorities", or when they have been delivered at ship's tackle. These stipulations are clear. They have been adopted precisely to mitigate the responsibility of the carrier considering the present law on the matter, and we find nothing therein that is contrary to morals or public policy that may justify their nullification. We are therefore persuaded to conclude that the carrier is not responsible for the loss in question, it appearing that the same happened after the shipment had been delivered to the customs authorities. Wherefore, the decision appealed from is reversed, without pronouncement as to costs. Bengzon, Padilla, Montemayor, Reyes, A., Labrador, Concepcion, Reyes, J.B.L. Endencia and Felix, JJ., concur.

G.R. No. 97412 July 12, 1994 EASTERN SHIPPING LINES, INC., petitioner, vs. HON. COURT OF APPEALS AND MERCANTILE INSURANCE COMPANY, INC., respondents. Alojada & Garcia and Jimenea, Dala & Zaragoza for petitoner. Zapa Law Office for private respondent.

"Form of Subrogation", "Release" and Philbanking check, Exhs. M, N, and O). (pp. 8586, Rollo.) There were, to be sure, other factual issues that confronted both courts. Here, the appellate court said: Defendants filed their respective answers, traversing the material allegations of the complaint contending that: As for defendant Eastern Shipping it alleged that the shipment was discharged in good order from the vessel unto the custody of Metro Port Service so that any damage/losses incurred after the shipment was incurred after the shipment was turned over to the latter, is no longer its liability (p. 17, Record); Metroport averred that although subject shipment was discharged unto its custody, portion of the same was already in bad order (p. 11, Record); Allied Brokerage alleged that plaintiff has no cause of action against it, not having negligent or at fault for the shipment was already in damage and bad order condition when received by it, but nonetheless, it still exercised extra ordinary care and diligence in the handling/delivery of the cargo to consignee in the same condition shipment was received by it. From the evidence the court found the following: The issues are: 1. Whether or not the shipment sustained losses/damages; 2. Whether or not these losses/damages were sustained while in the custody of defendants (in whose respective custody, if determinable); 3. Whether or not defendant(s) should be held liable for the losses/damages (see plaintiff's pre-Trial Brief, Records, p. 34; Allied's pre-Trial Brief, adopting plaintiff's Records, p. 38). As to the first issue, there can be no doubt that the shipment sustained losses/damages. The two drums were shipped in good order and condition, as clearly shown by the Bill of Lading and Commercial Invoice which do not indicate any damages drum that was shipped (Exhs. B and C). But when on December 12, 1981 the shipment was delivered to defendant Metro Port Service, Inc., it excepted to one drum in bad order. Correspondingly, as to the second issue, it follows that the losses/damages were sustained while in the respective and/or successive custody and possession of defendants carrier (Eastern), arrastre operator (Metro Port) and broker (Allied Brokerage). This becomes evident when the Marine Cargo Survey Report (Exh. G), with its "Additional Survey Notes", are considered. In the latter notes, it is stated that when the shipment was "landed on vessel" to dock of Pier # 15, South Harbor, Manila on December 12, 1981, it was observed that "one (1) fiber drum (was) in damaged condition, covered by the vessel's Agent's Bad Order Tally Sheet No. 86427." The report further states that when defendant Allied Brokerage withdrew the shipment from defendant arrastre operator's custody on January 7, 1982, one drum was found opened without seal, cello bag partly torn but contents intact. Net unrecovered spillages was 15 kgs. The report went on to state that when the drums reached the consignee, one drum was found with adulterated/faked contents. It is obvious, therefore, that these losses/damages occurred before the shipment reached the consignee while under the successive custodies of defendants.

VITUG, J.: The issues, albeit not completely novel, are: (a) whether or not a claim for damage sustained on a shipment of goods can be a solidary, or joint and several, liability of the common carrier, the arrastre operator and the customs broker; (b) whether the payment of legal interest on an award for loss or damage is to be computed from the time the complaint is filed or from the date the decision appealed from is rendered; and (c) whether the applicable rate of interest, referred to above, is twelve percent (12%) or six percent (6%). The findings of the court a quo, adopted by the Court of Appeals, on the antecedent and undisputed facts that have led to the controversy are hereunder reproduced: This is an action against defendants shipping company, arrastre operator and brokerforwarder for damages sustained by a shipment while in defendants' custody, filed by the insurer-subrogee who paid the consignee the value of such losses/damages. On December 4, 1981, two fiber drums of riboflavin were shipped from Yokohama, Japan for delivery vessel "SS EASTERN COMET" owned by defendant Eastern Shipping Lines under Bill of Lading No. YMA-8 (Exh. B). The shipment was insured under plaintiff's Marine Insurance Policy No. 81/01177 for P36,382,466.38. Upon arrival of the shipment in Manila on December 12, 1981, it was discharged unto the custody of defendant Metro Port Service, Inc. The latter excepted to one drum, said to be in bad order, which damage was unknown to plaintiff. On January 7, 1982 defendant Allied Brokerage Corporation received the shipment from defendant Metro Port Service, Inc., one drum opened and without seal (per "Request for Bad Order Survey." Exh. D). On January 8 and 14, 1982, defendant Allied Brokerage Corporation made deliveries of the shipment to the consignee's warehouse. The latter excepted to one drum which contained spillages, while the rest of the contents was adulterated/fake (per "Bad Order Waybill" No. 10649, Exh. E). Plaintiff contended that due to the losses/damage sustained by said drum, the consignee suffered losses totaling P19,032.95, due to the fault and negligence of defendants. Claims were presented against defendants who failed and refused to pay the same (Exhs. H, I, J, K, L). As a consequence of the losses sustained, plaintiff was compelled to pay the consignee P19,032.95 under the aforestated marine insurance policy, so that it became subrogated to all the rights of action of said consignee against defendants (per

Under Art. 1737 of the New Civil Code, the common carrier's duty to observe extraordinary diligence in the vigilance of goods remains in full force and effect even if the goods are temporarily unloaded and stored in transit in the warehouse of the carrier at the place of destination, until the consignee has been advised and has had reasonable opportunity to remove or dispose of the goods (Art. 1738, NCC). Defendant Eastern Shipping's own exhibit, the "Turn-Over Survey of Bad Order Cargoes" (Exhs. 3Eastern) states that on December 12, 1981 one drum was found "open". and thus held: WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered: A. Ordering defendants to pay plaintiff, jointly and severally: 1. The amount of P19,032.95, with the present legal interest of 12% per annum from October 1, 1982, the date of filing of this complaints, until fully paid (the liability of defendant Eastern Shipping, Inc. shall not exceed US$500 per case or the CIF value of the loss, whichever is lesser, while the liability of defendant Metro Port Service, Inc. shall be to the extent of the actual invoice value of each package, crate box or container in no case to exceed P5,000.00 each, pursuant to Section 6.01 of the Management Contract); 2. P3,000.00 as attorney's fees, and 3. Costs. B. Dismissing the counterclaims and crossclaim of defendant/cross-claimant Allied Brokerage Corporation. SO ORDERED. (p. 207, Record). Dissatisfied, defendant's recourse to US. The appeal is devoid of merit. After a careful scrutiny of the evidence on record. We find that the conclusion drawn therefrom is correct. As there is sufficient evidence that the shipment sustained damage while in the successive possession of appellants, and therefore they are liable to the appellee, as subrogee for the amount it paid to the consignee. (pp. 87-89, Rollo.) The Court of Appeals thus affirmed in toto the judgment of the court a quo. In this petition, Eastern Shipping Lines, Inc., the common carrier, attributes error and grave abuse of discretion on the part of the appellate court when I. IT HELD PETITIONER CARRIER JOINTLY AND SEVERALLY LIABLE WITH THE ARRASTRE OPERATOR AND CUSTOMS BROKER FOR THE CLAIM OF PRIVATE RESPONDENT AS GRANTED IN THE QUESTIONED DECISION;

II. IT HELD THAT THE GRANT OF INTEREST ON THE CLAIM OF PRIVATE RESPONDENT SHOULD COMMENCE FROM THE DATE OF THE FILING OF THE COMPLAINT AT THE RATE OF TWELVE PERCENT PER ANNUM INSTEAD OF FROM THE DATE OF THE DECISION OF THE TRIAL COURT AND ONLY AT THE RATE OF SIX PERCENT PER ANNUM, PRIVATE RESPONDENT'S CLAIM BEING INDISPUTABLY UNLIQUIDATED. The petition is, in part, granted. In this decision, we have begun by saying that the questions raised by petitioner carrier are not all that novel. Indeed, we do have a fairly good number of previous decisions this Court can merely tack to. The common carrier's duty to observe the requisite diligence in the shipment of goods lasts from the time the articles are surrendered to or unconditionally placed in the possession of, and received by, the carrier for transportation until delivered to, or until the lapse of a reasonable time for their acceptance by, the person entitled to receive them (Arts. 1736-1738, Civil Code; Ganzon vs. Court of Appeals, 161 SCRA 646; Kui Bai vs. Dollar Steamship Lines, 52 Phil. 863). When the goods shipped either are lost or arrive in damaged condition, a presumption arises against the carrier of its failure to observe that diligence, and there need not be an express finding of negligence to hold it liable (Art. 1735, Civil Code; Philippine National Railways vs. Court of Appeals, 139 SCRA 87; Metro Port Service vs. Court of Appeals, 131 SCRA 365). There are, of course, exceptional cases when such presumption of fault is not observed but these cases, enumerated in Article 1734 1 of the Civil Code, are exclusive, not one of which can be applied to this case. The question of charging both the carrier and the arrastre operator with the obligation of properly delivering the goods to the consignee has, too, been passed upon by the Court. In Fireman's Fund Insurance vs. Metro Port Services (182 SCRA 455), we have explained, in holding the carrier and the arrastre operator liable in solidum, thus: The legal relationship between the consignee and the arrastre operator is akin to that of a depositor and warehouseman (Lua Kian v. Manila Railroad Co., 19 SCRA 5 [1967]. The relationship between the consignee and the common carrier is similar to that of the consignee and the arrastre operator (Northern Motors, Inc. v. Prince Line, et al., 107 Phil. 253 [1960]). Since it is the duty of the ARRASTRE to take good care of the goods that are in its custody and to deliver them in good condition to the consignee, such responsibility also devolves upon the CARRIER. Both the ARRASTRE and the CARRIER are therefore charged with the obligation to deliver the goods in good condition to the consignee. We do not, of course, imply by the above pronouncement that the arrastre operator and the customs broker are themselves always and necessarily liable solidarily with the carrier, or vice-versa, nor that attendant facts in a given case may not vary the rule. The instant petition has been brought solely by Eastern Shipping Lines, which, being the carrier and not having been able to rebut the presumption of fault, is, in any event, to be held liable in this particular case. A factual finding of both the court a quo and the appellate court, we take note, is that "there is sufficient evidence that the shipment sustained damage while in the successive possession of appellants" (the herein petitioner among them). Accordingly, the liability imposed on Eastern Shipping Lines, Inc., the sole petitioner in this case, is inevitable regardless of whether there are others solidarily liable with it. It is over the issue of legal interest adjudged by the appellate court that deserves more than just a passing remark. Let us first see a chronological recitation of the major rulings of this Court: The early case of Malayan Insurance Co., Inc., vs. Manila Port Service, 2 decided 3 on 15 May 1969, involved a suit for recovery of money arising out of short deliveries and pilferage of goods. In this case, appellee Malayan Insurance (the plaintiff in the lower court) averred in its complaint that the total amount of its claim for the value of the undelivered goods amounted to P3,947.20. This demand, however, was neither established in its totality nor definitely ascertained. In the stipulation of facts later entered into by the parties, in lieu of proof, the amount of P1,447.51 was agreed upon. The trial court rendered judgment ordering the appellants (defendants) Manila Port Service and Manila Railroad Company to pay appellee Malayan Insurance the sum of P1,447.51 with legal interest thereon from the date the complaint

was filed on 28 December 1962 until full payment thereof. The appellants then assailed, inter alia, the award of legal interest. In sustaining the appellants, this Court ruled: Interest upon an obligation which calls for the payment of money, absent a stipulation, is the legal rate. Such interest normally is allowable from the date of demand, judicial or extrajudicial. The trial court opted for judicial demand as the starting point. But then upon the provisions of Article 2213 of the Civil Code, interest "cannot be recovered upon unliquidated claims or damages, except when the demand can be established with reasonable certainty." And as was held by this Court in Rivera vs.

The judgments spoken of and referred to are judgments in litigations involving loans or forbearance of any money, goods or credits. Any other kind of monetary judgment which has nothing to do with, nor involving loans or forbearance of any money, goods or credits does not fall within the coverage of the said law for it is not within the ambit of the authority granted to the Central Bank. xxx xxx xxx Coming to the case at bar, the decision herein sought to be executed is one rendered in an Action for Damages for injury to persons and loss of property and does not involve any loan, much less forbearances of any money, goods or credits. As correctly argued by the private respondents, the law applicable to the said case is Article 2209 of the New Civil Code which reads Art. 2209. If the obligation consists in the payment of a sum of money, and the debtor incurs in delay, the indemnity for damages, there being no stipulation to the contrary, shall be the payment of interest agreed upon, and in the absence of stipulation, the legal interest which is six percent per annum. The above rule was reiterated in Philippine Rabbit Bus Lines, Inc., v. Cruz, 7 promulgated on 28 July 1986. The case was for damages occasioned by an injury to person and loss of property. The trial court awarded private respondent Pedro Manabat actual and compensatory damages in the amount of P72,500.00 with legal interest thereon from the filing of the complaint until fully paid. Relying on the Reformina v. Tomol case, this Court 8 modified the interest award from 12% to 6% interest per annum but sustained the time computation thereof, i.e., from the filing of the complaint until fully paid. In Nakpil and Sons vs. Court of Appeals, 9 the trial court, in an action for the recovery of damages arising from the collapse of a building, ordered, inter alia, the "defendant United Construction Co., Inc. (one of the petitioners) . . . to pay the plaintiff, . . . , the sum of P989,335.68 with interest at the legal rate from November 29, 1968, the date of the filing of the complaint until full payment . . . ." Save from the modification of the amount granted by the lower court, the Court of Appeals sustained the trial court's decision. When taken to this Court for review, the case, on 03 October 1986, was decided, thus: WHEREFORE, the decision appealed from is hereby MODIFIED and considering the special and environmental circumstances of this case, we deem it reasonable to render a decision imposing, as We do hereby impose, upon the defendant and the third-party defendants (with the exception of Roman Ozaeta) a solidary (Art. 1723, Civil Code, Supra. p. 10) indemnity in favor of the Philippine Bar Association of FIVE MILLION (P5,000,000.00) Pesos to cover all damages (with the exception to attorney's fees) occasioned by the loss of the building (including interest charges and lost rentals) and an additional ONE HUNDRED THOUSAND (P100,000.00) Pesos as and for attorney's fees, the total sum being payable upon the finality of this decision. Upon failure to pay on such finality, twelve (12%) per cent interest per annum shall be imposed upon aforementioned amounts from finality until paid. Solidary costs against the defendant and third-party defendants (Except Roman Ozaeta). (Emphasis supplied) A motion for reconsideration was filed by United Construction, contending that "the interest of twelve (12%) per cent per annum imposed on the total amount of the monetary award was in contravention of law." The Court 10 ruled out the applicability of the Reformina and Philippine Rabbit Bus Lines cases and, in its resolution of 15 April 1988, it explained: There should be no dispute that the imposition of 12% interest pursuant to Central Bank Circular No. 416 . . . is applicable only in the following: (1) loans; (2) forbearance of any money, goods or credit; and (3) rate allowed in judgments (judgments spoken of refer to judgments involving loans or forbearance of any money, goods or credits. (Philippine Rabbit Bus Lines Inc. v. Cruz, 143 SCRA 160-161 [1986]; Reformina v. Tomol, Jr., 139 SCRA 260 [1985]). It is true that in the instant case, there is neither a loan or a forbearance, but then no

L-6998, February 29, 1956, if the suit were for damages, "unliquidated and not known until definitely ascertained, assessed and determined by the courts after proof (Montilla c. Corporacion de P.P. Agustinos, 25 Phil. 447; Lichauco v. Guzman, 38 Phil. 302)," then, interest "should be from the date of the decision." (Emphasis supplied)
Perez, 4 The case of Reformina vs. Tomol, 5 rendered on 11 October 1985, was for "Recovery of Damages for Injury to Person and Loss of Property." After trial, the lower court decreed: WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and third party defendants and against the defendants and third party plaintiffs as follows: Ordering defendants and third party plaintiffs Shell and Michael, Incorporated to pay jointly and severally the following persons: xxx xxx xxx (g) Plaintiffs Pacita F. Reformina and Francisco Reformina the sum of P131,084.00 which is the value of the boat F B Pacita III together with its accessories, fishing gear and equipment minus P80,000.00 which is the value of the insurance recovered and the amount of P10,000.00 a month as the estimated monthly loss suffered by them as a result of the fire of May 6, 1969 up to the time they are actually paid or already the total sum of P370,000.00 as of June 4, 1972 with legal interest from the filing of the complaint until paid and to pay attorney's fees of P5,000.00 with costs against defendants and third party plaintiffs. (Emphasis supplied.) On appeal to the Court of Appeals, the latter modified the amount of damages awarded but sustained the trial court in adjudging legal interest from the filing of the complaint until fully paid. When the appellate court's decision became final, the case was remanded to the lower court for execution, and this was when the trial court issued its assailed resolution which applied the 6% interest per annum prescribed in Article 2209 of the Civil Code. In their petition for review on certiorari, the petitioners contended that Central Bank Circular No. 416, providing thus By virtue of the authority granted to it under Section 1 of Act 2655, as amended, Monetary Board in its Resolution No. 1622 dated July 29, 1974, has prescribed that the rate of interest for the loan, or forbearance of any money, goods, or credits and the rate allowed in judgments, in the absence of express contract as to such rate of interest, shall be twelve (12%) percent per annum. This Circular shall take effect immediately. (Emphasis found in the text) should have, instead, been applied. This Court 6 ruled:

interest is actually imposed provided the sums referred to in the judgment are paid upon the finality of the judgment. It is delay in the payment of such final judgment, that will cause the imposition of the interest. It will be noted that in the cases already adverted to, the rate of interest is imposed on the total sum, from the filing of the complaint until paid; in other words, as part of the judgment for damages. Clearly, they are not applicable to the instant case. (Emphasis supplied.) The subsequent case of American Express International, Inc., vs. Intermediate Appellate Court 11 was a petition for review on certiorari from the decision, dated 27 February 1985, of the then Intermediate Appellate Court reducing the amount of moral and exemplary damages awarded by the trial court, to P240,000.00 and P100,000.00, respectively, and its resolution, dated 29 April 1985, restoring the amount of damages awarded by the trial court, i.e., P2,000,000.00 as moral damages and P400,000.00 as exemplary damages with interest thereon at 12% per annum from notice of judgment, plus costs of suit. In a decision of 09 November 1988, this Court, while recognizing the right of the private respondent to recover damages, held the award, however, for moral damages by the trial court, later sustained by the IAC, to be inconceivably large. The Court 12 thus set aside the decision of the appellate court and rendered a new one, "ordering the petitioner to pay private respondent the sum of One Hundred Thousand (P100,000.00) Pesos as moral damages, with six (6%) percent interest thereon computed from the finality of this decision until paid. (Emphasis supplied) Reformina came into fore again in the 21 February 1989 case of Florendo v. Ruiz 13 which arose from a breach of employment contract. For having been illegally dismissed, the petitioner was awarded by the trial court moral and exemplary damages without, however, providing any legal interest thereon. When the decision was appealed to the Court of Appeals, the latter held: WHEREFORE, except as modified hereinabove the decision of the CFI of Negros Oriental dated October 31, 1972 is affirmed in all respects, with the modification that defendants-appellants, except defendant-appellant Merton Munn, are ordered to pay, jointly and severally, the amounts stated in the dispositive portion of the decision, including the sum of P1,400.00 in concept of compensatory damages, with interest at the legal rate from the date of the filing of the complaint until fully paid (Emphasis supplied.) The petition for review to this Court was denied. The records were thereupon transmitted to the trial court, and an entry of judgment was made. The writ of execution issued by the trial court directed that only compensatory damages should earn interest at 6% per annum from the date of the filing of the complaint. Ascribing grave abuse of discretion on the part of the trial judge, a petition for certiorari assailed the said order. This Court said: . . . , it is to be noted that the Court of Appeals ordered the payment of interest "at the legal rate" from the time of the filing of the complaint. . . Said circular [Central Bank Circular No. 416] does not apply to actions based on a breach of employment contract like the case at bar. (Emphasis supplied) The Court reiterated that the 6% interest per annum on the damages should be computed from the time the complaint was filed until the amount is fully paid. Quite recently, the Court had another occasion to rule on the matter. National Power Corporation vs. Angas, 14 decided on 08 May 1992, involved the expropriation of certain parcels of land. After conducting a hearing on the complaints for eminent domain, the trial court ordered the petitioner to pay the private respondents certain sums of money as just compensation for their lands so expropriated "with legal interest thereon . . . until fully paid." Again, in applying the 6% legal interest per annum under the Civil Code, the Court 15 declared: . . . , (T)he transaction involved is clearly not a loan or forbearance of money, goods or credits but expropriation of certain parcels of land for a public purpose, the payment of which is without stipulation regarding interest, and the interest adjudged by the trial court is in the nature of indemnity for damages. The legal interest required to be paid on the amount of just compensation for the properties expropriated is manifestly in the form of indemnity for damages for the delay in the payment thereof. Therefore, since

the kind of interest involved in the joint judgment of the lower court sought to be enforced in this case is interest by way of damages, and not by way of earnings from loans, etc. Art. 2209 of the Civil Code shall apply. Concededly, there have been seeming variances in the above holdings. The cases can perhaps be classified into two groups according to the similarity of the issues involved and the corresponding rulings rendered by the court. The "first group" would consist of the cases of Reformina v. Tomol (1985), Philippine Rabbit Bus Lines v. Cruz (1986), Florendo v. Ruiz (1989) and National Power Corporation v. Angas (1992). In the "second group" would be Malayan Insurance Company v. Manila Port Service (1969), Nakpil and Sons v. Court of Appeals (1988), and American Express International v. Intermediate Appellate Court (1988). In the "first group", the basic issue focuses on the application of either the 6% (under the Civil Code) or 12% (under the Central Bank Circular) interest per annum. It is easily discernible in these cases that there has been a consistent holding that the Central Bank Circular imposing the 12% interest per annum applies only to loans or forbearance 16 of money, goods or credits, as well as to judgments involving such loan or forbearance of money, goods or credits, and that the 6% interest under the Civil Code governs when the transaction involves the payment of indemnities in the concept of damage arising from the breach or a delay in the performance of obligations in general. Observe, too, that in these cases, a common time frame in the computation of the 6% interest per annum has been applied, i.e., from the time the complaint is filed until the adjudged amount is fully paid. The "second group", did not alter the pronounced rule on the application of the 6% or 12% interest per annum, 17 depending on whether or not the amount involved is a loan or forbearance, on the one hand, or one of indemnity for damage, on the other hand. Unlike, however, the "first group" which remained consistent in holding that the running of the legal interest should be from the time of the filing of the complaint until fully paid, the "second group" varied on the commencement of the running of the legal interest. Malayan held that the amount awarded should bear legal interest from the date of the decision of the court a quo, explaining that "if the suit were for damages, 'unliquidated and not known until definitely ascertained, assessed and determined by the courts after proof,' then, interest 'should be from the date of the decision.'" American Express International v. IAC, introduced a different time frame for reckoning the 6% interest by ordering it to be "computed from the finality of (the) decision until paid." The Nakpil and Sons case ruled that 12% interest per annum should be imposed from the finality of the decision until the judgment amount is paid. The ostensible discord is not difficult to explain. The factual circumstances may have called for different applications, guided by the rule that the courts are vested with discretion, depending on the equities of each case, on the award of interest. Nonetheless, it may not be unwise, by way of clarification and reconciliation, to suggest the following rules of thumb for future guidance. I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts 18 is breached, the contravenor can be held liable for damages. 19 The provisions under Title XVIII on "Damages" of the Civil Code govern in determining the measure of recoverable damages. 20 II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as follows: 1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. 21 Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. 22 In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 23 of the Civil Code. 2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court 24 at the rate of 6% per annum. 25 No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. 26 Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification

of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged. 3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit. WHEREFORE, the petition is partly GRANTED. The appealed decision is AFFIRMED with the MODIFICATION that the legal interest to be paid is SIX PERCENT (6%) on the amount due computed from the decision, dated 03 February 1988, of the court a quo. A TWELVE PERCENT (12%) interest, in lieu of SIX PERCENT (6%), shall be imposed on such amount upon finality of this decision until the payment thereof. SO ORDERED. Narvasa, C.J., Cruz, Feliciano, Padilla, Bidin, Regalado, Davide, Jr., Romero, Bellosillo, Melo, Quiason, Puno and Kapunan, JJ., concur. Mendoza, J., took no part.

Lorenzo Relova, Hugo Gutierrez, Jr., Buenaventura de la Fuente, Nestor Alampay and Lino Patajo. Justice Ramon Aquino concurred in the result. Justice Efren Plana filed a concurring and dissenting opinion, concurred in by Justice Claudio Teehankee while Chief Justice Felix Makasiar concurred with the separate opinion of Justice Plana. 7 143 SCRA 158. 8 Penned by then Justice, now Chief Justice, Andres Narvasa, concurred in by Justices Pedro Yap, Ameurfina Melencio-Herrera, Isagani A. Cruz and Edgardo Paras. 9 160 SCRA 334. 10 Penned by Justice Edgardo Paras, with the concurrence of Justices Marcelo Fernan, Teodoro Padilla, Abdulwahid Bidin, and Irene Cortes. Justice Hugo Gutierrez, Jr., took no part because he was the ponente in the Court of Appeals. 11 167 SCRA 209. 12 Rendered per curiam with the concurrence of then Chief Justice Marcelo Fernan, Justices Andres Narvasa, Isagani A. Cruz, Emilio Gancayco, Teodoro Padilla, Abdulwahid Bidin, Abraham Sarmiento, Irene Cortes, Carolina Grio-Aquino, Leo Medialdea and Florenz Regalado. Justices Ameurfina Melencio-Herrera and Hugo Gutierrez, Jr., took no part because they did not participate in the deliberations. Justices Edgardo Paras and Florentino Feliciano also took no part. 13 170 SCRA 461. 14 208 SCRA 542.

Footnotes 1 Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the same is due to any of the following causes only: (1) Flood, storm, earthquake, lightning, or other natural disaster or calamity; (2) Act of the public enemy in war, whether international or civil; (3) Act or omission of the shipper or owner of the goods; (4) The character of the goods or defects in the packing or in the containers; (5) Order or act of competent public authority. 2 28 SCRA 65.

15 Penned by Justice Edgardo Paras with the concurrence of Justices Ameurfina Melencio-Herrera, Teodoro Padilla, Florenz Regalado and Rodolfo Nocon. 16 Black's Law Dictionary (1990 ed., 644) citing the case of Hafer v. Spaeth, 22 Wash. 2d 378, 156 P.2d 408, 411 defines the word forbearance, within the context of usury law, as a contractual obligation of lender or creditor to refrain, during given period of time, from requiring borrower or debtor to repay loan or debt then due and payable. 17 In the case of Malayan Insurance, the application of the 6% and 12% interest per annum has no bearing considering that this case was decided upon before the issuance of Circular No. 416 by the Central Bank. 18 Art. 1157. Obligations arise from.

3 Penned by Justice Conrado Sanchez, concurred in by Justices Jose B.L. Reyes, Arsenio Dizon, Querube Makalintal, Calixto Zaldivar, Enrique Fernando, Francisco Capistrano, Claudio Teehankee and Antonio Barredo, Chief Justice Roberto Concepcion and Justice Fred Ruiz Castro were on official leave. 4 The correct caption of the case is "Claro Rivera vs. Amadeo Matute, L-6998, 29 February 1956," 98 Phil. 516. 5 139 SCRA 260, 265. 6 Penned by Justice Serafin Cuevas, concurred in by Justices Hermogenes Concepcion, Jr., Vicente Abad Santos, Ameurfina Melencio-Herrera, Venicio Escolin,

(1) Law; (2) Contracts; (3) Quasi-contracts; (4) Acts or omissions punished by law; and (5) Qausi-delicts."

19 Art. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and those who in any manner contravene the tenor thereof, are liable for damages. 20 Art. 2195. The provisions of this Title (on Damages) shall be respectively applicable to all obligations mentioned in article 1157. 21 Art. 1956. No interest shall be due unless it has been expressly stipulated in writing. 22 Art. 2212. Interest due shall earn legal interest from the time it is judicially demanded, although the obligation may be silent upon this point. 23 Art. 1169. Those obliged to deliver or to do something incur in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of their obligation. "However, the demand by the creditor shall not be necessary in order that delay may exist: (1) When the obligation or the law expressly so declare; or (2) When from the nature and the circumstances of the obligation it appears that the designation of the time when the thing is to be delivered or the service is to be rendered was a controlling motive for the establishment of the contract; or (3) When demand would be useless, as when the obligor has rendered it beyond his power to perform. "In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him. From the moment one of the parties fulfills his obligation, delay by the other begins." 24 Art. 2210. Interest may, in the discretion of the court, be allowed upon damages awarded for breach of contract. Art. 2211. In crimes and quasi-delicts, interest as a part of the damages may, in a proper case, be adjudicated in the discretion of the court. 25 Art. 2209. If the obligation consists in the payment of a sum of money, and the debtor incurs in delay, the indemnity for damages, there being no stipulation to the contrary, shall be the payment of the interest agreed upon, and in the absence of stipulation, the legal interest, which is six per cent per annum. 26 Art. 2213. Interest cannot be recovered upon unliquidated claims or damages, except when the demand can be established with reasonable certainty.

The Lawphil Project - Arellano Law Foundation

G.R. No. L-20099

July 7, 1966

PARMANAND SHEWARAM, plaintiff and appellee, vs. PHILIPPINE AIR LINES, INC., defendant and appellant. Ponce Enrile, Siguion Reyna, Montecillo and Belo for defendant and appellant. Climaco and Associates for plaintiff and appellee. ZALDIVAR, J.: Before the municipal court of Zamboanga City, plaintiff-appellee Parmanand Shewaram instituted an action to recover damages suffered by him due to the alleged failure of defendant-appellant Philippines Air Lines, Inc. to observe extraordinary diligence in the vigilance and carriage of his luggage. After trial the municipal court of Zamboanga City rendered judgment ordering the appellant to pay appellee P373.00 as actual damages, P100.00 as exemplary damages, P150.00 as attorney's fees, and the costs of the action. Appellant Philippine Air Lines appealed to the Court of First Instance of Zamboanga City. After hearing the Court of First Instance of Zamboanga City modified the judgment of the inferior court by ordering the appellant to pay the appellee only the sum of P373.00 as actual damages, with legal interest from May 6, 1960 and the sum of P150.00 as attorney's fees, eliminating the award of exemplary damages. From the decision of the Court of First Instance of Zamboanga City, appellant appeals to this Court on a question of law, assigning two errors allegedly committed by the lower court a quo, to wit: 1. The lower court erred in not holding that plaintiff-appellee was bound by the provisions of the tariff regulations filed by defendant-appellant with the civil aeronautics board and the conditions of carriage printed at the back of the plane ticket stub. 2. The lower court erred in not dismissing this case or limiting the liability of the defendant-appellant to P100.00. The facts of this case, as found by the trial court, quoted from the decision appealed from, are as follows: That Parmanand Shewaram, the plaintiff herein, was on November 23, 1959, a paying passenger with ticket No. 4-30976, on defendant's aircraft flight No. 976/910 from Zamboanga City bound for Manila; that defendant is a common carrier engaged in air line transportation in the Philippines, offering its services to the public to carry and transport passengers and cargoes from and to different points in the Philippines; that on the above-mentioned date of November 23, 1959, he checked in three (3) pieces of baggages a suitcase and two (2) other pieces; that the suitcase was mistagged by defendant's personnel in Zamboanga City, as I.G.N. (for Iligan) with claim check No. B-3883, instead of MNL (for Manila). When plaintiff Parmanand Shewaram arrived in Manila on the date of

November 23, 1959, his suitcase did not arrive with his flight because it was sent to Iligan. So, he made a claim with defendant's personnel in Manila airport and another suitcase similar to his own which was the only baggage left for that flight, the rest having been claimed and released to the other passengers of said flight, was given to the plaintiff for him to take delivery but he did not and refused to take delivery of the same on the ground that it was not his, alleging that all his clothes were white and the National transistor 7 and a Rollflex camera were not found inside the suitcase, and moreover, it contained a pistol which he did not have nor placed inside his suitcase; that after inquiries made by defendant's personnel in Manila from different airports where the suitcase in question must have been sent, it was found to have reached Iligan and the station agent of the PAL in Iligan caused the same to be sent to Manila for delivery to Mr. Shewaram and which suitcase belonging to the plaintiff herein arrived in Manila airport on November 24, 1959; that it was also found out that the suitcase shown to and given to the plaintiff for delivery which he refused to take delivery belonged to a certain Del Rosario who was bound for Iligan in the same flight with Mr. Shewaram; that when the plaintiff's suitcase arrived in Manila as stated above on November 24, 1959, he was informed by Mr. Tomas Blanco, Jr., the acting station agent of the Manila airport of the arrival of his suitcase but of course minus his Transistor Radio 7 and the Rollflex Camera; that Shewaram made demand for these two (2) items or for the value thereof but the same was not complied with by defendant. xxx xxx xxx

It is admitted by defendant that there was mistake in tagging the suitcase of plaintiff as IGN. The tampering of the suitcase is more apparent when on November 24, 1959, when the suitcase arrived in Manila, defendant's personnel could open the same in spite of the fact that plaintiff had it under key when he delivered the suitcase to defendant's personnel in Zamboanga City. Moreover, it was established during the hearing that there was space in the suitcase where the two items in question could have been placed. It was also shown that as early as November 24, 1959, when plaintiff was notified by phone of the arrival of the suitcase, plaintiff asked that check of the things inside his suitcase be made and defendant admitted that the two items could not be found inside the suitcase. There was no evidence on record sufficient to show that plaintiff's suitcase was never opened during the time it was placed in defendant's possession and prior to its recovery by the plaintiff. However, defendant had presented evidence that it had authority to open passengers' baggage to verify and find its ownership or identity. Exhibit "1" of the defendant would show that the baggage that was offered to plaintiff as his own was opened and the plaintiff denied ownership of the contents of the baggage. This proven fact that baggage may and could be opened without the necessary authorization and presence of its owner, applied too, to the suitcase of plaintiff which was mis-sent to Iligan City because of mistagging. The possibility of what happened in the baggage of Mr. Del Rosario at the Manila Airport in his absence could have also happened to plaintiffs suitcase at Iligan City in the absence of plaintiff. Hence, the Court believes that these two items were really in plaintiff's suitcase and defendant should be held liable for the same by virtue of its contract of carriage. It is clear from the above-quoted portions of the decision of the trial court that said court had found that the suitcase of the appellee was tampered, and the transistor radio and the camera contained therein were lost, and that the loss of those articles was due to the

negligence of the employees of the appellant. The evidence shows that the transistor radio cost P197.00 and the camera cost P176.00, so the total value of the two articles was P373.00. There is no question that the appellant is a common carrier.1 As such common carrier the appellant, from the nature of its business and for reasons of public policy, is bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by it according to the circumstances of each case. 2 It having been shown that the loss of the transistor radio and the camera of the appellee, costing P373.00, was due to the negligence of the employees of the appellant, it is clear that the appellant should be held liable for the payment of said loss.3 It is, however, contended by the appellant that its liability should be limited to the amount stated in the conditions of carriage printed at the back of the plane ticket stub which was issued to the appellee, which conditions are embodied in Domestic Tariff Regulations No. 2 which was filed with the Civil Aeronautics Board. One of those conditions, which is pertinent to the issue raised by the appellant in this case provides as follows: The liability, if any, for loss or damage to checked baggage or for delay in the delivery thereof is limited to its value and, unless the passenger declares in advance a higher valuation and pay an additional charge therefor, the value shall be conclusively deemed not to exceed P100.00 for each ticket. The appellant maintains that in view of the failure of the appellee to declare a higher value for his luggage, and pay the freight on the basis of said declared value when he checked such luggage at the Zamboanga City airport, pursuant to the abovequoted condition, appellee can not demand payment from the appellant of an amount in excess of P100.00. The law that may be invoked, in this connection is Article 1750 of the New Civil Code which provides as follows: A contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction, or deterioration of the goods is valid, if it is reasonable and just under the circumstances, and has been fairly and freely agreed upon. In accordance with the above-quoted provision of Article 1750 of the New Civil Code, the pecuniary liability of a common carrier may, by contract, be limited to a fixed amount. It is required, however, that the contract must be "reasonable and just under the circumstances and has been fairly and freely agreed upon." The requirements provided in Article 1750 of the New Civil Code must be complied with before a common carrier can claim a limitation of its pecuniary liability in case of loss, destruction or deterioration of the goods it has undertaken to transport. In the case before us We believe that the requirements of said article have not been met. It can not be said that the appellee had actually entered into a contract with the appellant, embodying the conditions as printed at the back of the ticket stub that was issued by the appellant to the appellee. The fact that those conditions are printed at the back of the ticket stub in letters so small that they are hard to read would not warrant the presumption that the appellee was aware of those conditions such that he had "fairly and freely agreed" to those conditions. The trial court has categorically stated in its decision that the "Defendant admits that passengers do not sign the ticket, much less did plaintiff herein sign his ticket

when he made the flight on November 23, 1959." We hold, therefore, that the appellee is not, and can not be, bound by the conditions of carriage found at the back of the ticket stub issued to him when he made the flight on appellant's plane on November 23, 1959. The liability of the appellant in the present case should be governed by the provisions of Articles 1734 and 1735 of the New Civil Code, which We quote as follows: ART. 1734. Common carries are responsible for the loss, destruction, or deterioration of the goods, unless the same is due to any of the following causes only: (1) Flood, storm, earthquake, or other natural disaster or calamity; (2) Act of the public enemy in war, whether international or civil; (3) Act or omission of the shipper or owner of the goods; (4) The character of the goods or defects in the packing or in the containers; (5) Order or act of competent public authority.
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ART. 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4 and 5 of the preceding article, if the goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as required in Article 1733. It having been clearly found by the trial court that the transistor radio and the camera of the appellee were lost as a result of the negligence of the appellant as a common carrier, the liability of the appellant is clear it must pay the appellee the value of those two articles. In the case of Ysmael and Co. vs. Barreto, 51 Phil. 90, cited by the trial court in support of its decision, this Court had laid down the rule that the carrier can not limit its liability for injury to or loss of goods shipped where such injury or loss was caused by its own negligence. Corpus Juris, volume 10, p. 154, says: "Par. 194, 6. Reasonableness of Limitations. The validity of stipulations limiting the carrier's liability is to be determined by their reasonableness and their conformity to the sound public policy, in accordance with which the obligations of the carrier to the public are settled. It cannot lawfully stipulate for exemption from liability, unless such exemption is just and reasonable, and unless the contract is freely and fairly made. No contractual limitation is reasonable which is subversive of public policy. "Par. 195. 7. What Limitations of Liability Permissible. a. Negligence (1) Rule in America (a) In Absence of Organic or Statutory Provisions Regulating Subject aa. Majority Rule. In the absence of statute, it is settled by the weight of authority in the United States, that whatever limitations against its

common-law liability are permissible to a carrier, it cannot limit its liability for injury to or loss of goods shipped, where such injury or loss is caused by its own negligence. This is the common law doctrine and it makes no difference that there is no statutory prohibition against contracts of this character. "Par. 196. bb. Considerations on which Rule Based. The rule, it is said, rests on considerations of public policy. The undertaking is to carry the goods, and to relieve the shipper from all liability for loss or damage arising from negligence in performing its contract is to ignore the contract itself. The natural effect of a limitation of liability against negligence is to induce want of care on the part of the carrier in the performance of its duty. The shipper and the common carrier are not on equal terms; the shipper must send his freight by the common carrier, or not at all; he is therefore entirely at the mercy of the carrier unless protected by the higher power of the law against being forced into contracts limiting the carrier's liability. Such contracts are wanting in the element of voluntary assent. "Par. 197. cc. Application and Extent of Rule (aa) Negligence of Servants. The rule prohibiting limitation of liability for negligence is often stated as a prohibition of any contract relieving the carrier from loss or damage caused by its own negligence or misfeasance, or that of its servants; and it has been specifically decided in many cases that no contract limitation will relieve the carrier from responsibility for the negligence, unskillfulness, or carelessness of its employer." (Cited in Ysmael and Co. vs. Barreto, 51 Phil. 90, 98, 99). In view of the foregoing, the decision appealed from is affirmed, with costs against the appellant. Concepcion, C.J., Reyes, J.B.L., Barrera, Dizon, Regala, Makalintal, Bengzon, J.P. and Sanchez, JJ., concur. Footnotes
1

Article 1732, New Civil Code. Articles 1733, 1734, 1735 and 1745, New Civil Code. Articles 1734, 1735, 1736 and 1754, New Civil Code.

G.R. No. L-16598

October 3, 1921

(5) No greater value than $500, U. S. currency, per freight ton was declared by the plaintiff on the aforesaid clocks, and no ad valorem freight was paid thereon. (6) On or about October 9, 1919, the defendant tendered to the plaintiff P76.36, the proportionate freight ton value of the aforesaid twelve 8-day Edmond clocks, in payment of plaintiff's claim, which tender plaintiff rejected. The lower court, in accordance with clause 9 of the bill of lading above quoted, rendered judgment in favor of the plaintiff against the defendant for the sum of P226.02, this being the invoice value of the clocks in question plus the freight and insurance thereon, with legal interest thereon from November 20, 1919, the date of the complaint, together with costs. From that judgment both parties appealed to this court. The plaintiff-appellant insists that it is entitled to recover from the defendant the market value of the clocks in question, to wit: the sum of P420. The defendant-appellant, on the other hand, 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, and the clause 1 should have been applied by the lower court instead of clause 9. I. The appeal of the plaintiff presents this question; May 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 of the latter?
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H. E. HEACOCK COMPANY, plaintiff-appellant, vs. MACONDRAY & COMPANY, INC., defendant-appellant. Fisher & DeWitt for plaintiff-appellant. Wolfson, Wolfson & Schwarzkopf for defendant-appellant.

JOHNSON, J.: This action was commenced in the Court of First Instance of the City of Manila to recover the sum of P240 together with interest thereon. The facts are stipulated by the parties, and are, briefly, as follows: (1) On or about the 5th day of June, 1919, the plaintiff caused to be delivered on board of steamship Bolton Castle, then in the harbor of New York, four cases of merchandise one of which contained twelve (12) 8-day Edmond clocks properly boxed and marked for transportation to Manila, and paid freight on said clocks from New York to Manila in advance. The said steampship arrived in the port of Manila on or about the 10th day of September, 1919, consigned to the defendant herein as agent and representative of said vessel in said port. Neither the master of said vessel nor the defendant herein, as its agent, delivered to the plaintiff the aforesaid twelve 8-day Edmond clocks, although demand was made upon them for their delivery. (2) The invoice value of the said twelve 8-day 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. (3) The bill of lading issued and delivered to the plaintiff by the master of the said steamship Bolton Castle contained, among others, the following clauses: 1. It is mutually agreed that 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. (4) The case containing the aforesaid twelve 8-day Edmond clocks measured 3 cubic feet, and the freight ton value thereof was $1,480, U. S. currency.

Three kinds of stipulations have often been made in a bill of lading. The first is one exempting the carrier from any and all liability for loss or damage occasioned by its own negligence. The second is one providing for an unqualified limitation of such liability to an agreed valuation. And the third is 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. The authorities relied upon by the plaintiff-appellant (the Harter Act [Act of Congress of February 13, 1893]: Louisville Ry. Co. vs. Wynn, 88 Tenn., 320; and Galt vs. Adams Express Co., 4 McAr., 124; 48 Am. Rep., 742) support the proposition that the first and second stipulations in a bill of lading are invalid which either exempt the carrier from liability for loss or damage occasioned by its negligence, or provide for an unqualified limitation of such liability to an agreed valuation. 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. This proposition is supported by a uniform lien of decisions of the Supreme Court of the United States rendered both prior and subsequent to the passage of the Harter Act, from the case of Hart vs. Pennsylvania R. R. Co. (decided Nov. 24, 1884; 112 U. S., 331), to the case of the Union Pacific Ry. Co. vs. Burke (decided Feb. 28, 1921, Advance Opinions, 1920-1921, p. 318).

In the case of Hart vs. Pennsylvania R. R. Co., supra, it was held that "where a contract of carriage, signed by the shipper, is fairly made with a railroad company, agreeing on a valuation of the property carried, with the rate of freight based on the condition that the carrier assumes liability only to the extent of the agreed valuation, even in case of loss or damage by the negligence of the carrier, the contract will be upheld as proper and lawful mode of securing a due proportion between the amount for which the carrier may be responsible and the freight he receives, and protecting himself against extravagant and fanciful valuations." In the case of Union Pacific Railway Co. vs. Burke, supra, the court said: "In many cases, from the decision in Hart vs. Pennsylvania R. R. Co. (112 U. S. 331; 28 L. ed., 717; 5 Sup. Ct. Rep., 151, decided in 1884), to Boston and M. R. Co. vs. Piper (246 U. S., 439; 62 L. ed., 820; 38 Sup. Ct. Rep., 354; Ann. Cas. 1918 E, 469, decided in 1918), it has been declared to be the settled Federal law that if a common carrier gives to a shipper the choice of two rates, the lower of the conditioned upon his agreeing to a stipulated valuation of his property in case of loss, even by the carrier's negligence, if the shipper makes such a choice, understandingly and freely, and names his valuation, he cannot thereafter recover more than the value which he thus places upon his property. As a matter of legal distinction, estoppel is made the basis of this ruling, that, having accepted the benefit of the lower rate, in common honesty the shipper may not repudiate the conditions on which it was obtained, but the rule and the effect of it are clearly established." The syllabus of the same case reads as follows: "A carrier may not, by a valuation agreement with a shipper, limit its liability in case of the loss by negligence of an interstate shipment to less than the real value thereof, unless the shipper is given a choice of rates, based on valuation." A limitation of liability based upon an agreed value to obtain a lower rate does not conflict with any sound principle of public policy; and it is not conformable to plain principles of justice that a shipper may understate value in order to reduce the rate and then recover a larger value in case of loss. (Adams Express Co. vs. Croninger 226 U. S. 491, 492.) See also Reid vs. Farbo (130 C. C. A., 285); Jennings vs. Smith (45 C. C. A., 249); George N. Pierce Co. vs. Wells, Fargo and Co. (227 U. S., 278); Wells, Fargo & Co. vs. Neiman-Marcus Co. (227 U. S., 469). 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. II. The question presented by the appeal of the defendant is whether clause 1 or clause 9 of the bill of lading here in question is to be adopted as the measure of defendant's liability. Clause 1 provides as follows: 1. It is mutually agreed that 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. Clause 9 provides:

9. Also, that in the even 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. The defendant-appellant contends that these two clauses, if construed together, mean that the shipper and the carrier stipulate and agree that the value of the goods receipted for does not exceed $500 per freight ton, but should the invoice value of the goods be less than $500 per freight ton, then the invoice value governs; that since in this case the invoice value is more than $500 per freight ton, the latter valuation should be adopted and that according to that valuation, the proportionate value of the clocks in question is only P76.36 which the defendant is ready and willing to pay to the plaintiff. It will be noted, however, that whereas clause 1 contains only an implied undertaking to settle in case of loss on the basis of not exceeding $500 per freight ton, clause 9 contains an express undertaking to settle on the basis of the net invoice price plus freight and insurance less all charges saved. "Any loss or damage for which the carrier may be liable shall be adjusted pro rata on the said basis," clause 9 expressly provides. It seems to us that there is an irreconcilable conflict between the two clauses with regard to the measure of defendant's liability. It is difficult to reconcile them without doing violence to the language used and reading exceptions and conditions into the undertaking contained in clause 9 that are not there. This being the case, the bill of lading in question should be interpreted against the defendant carrier, which drew said contract. "A written contract should, in case of doubt, be interpreted against the party who has drawn the contract." (6 R. C. L. 854.) It is a well-known principle of construction that ambiguity or uncertainty in an agreement must be construed most strongly against the party causing it. (6 R. C. L., 855.) These rules as applicable to contracts contained in bills of lading. "In construing a bill of lading given by the carrier for the safe transportation and delivery of goods shipped by a consignor, the contract will be construed most strongly against the carrier, and favorably to the consignor, in case of doubt in any matter of construction." (Alabama, etc. R. R. Co. vs. Thomas, 89 Ala., 294; 18 Am. St. Rep., 119.) It follows from all of the foregoing that the judgment appealed from should be affirmed, without any finding as to costs. So ordered. Araullo, street, Avancea and Villamor, JJ., concur.

G.R. No. L-40597 June 29, 1979 AGUSTINO B. ONG YIU, petitioner, vs. HONORABLE COURT OF APPEALS and PHILIPPINE AIR LINES, INC., respondents.

(Exh. "D"), demanded that his luggage be produced intact, and that he be compensated in the sum of P250,000,00 for actual and moral damages within five days from receipt of the letter, otherwise, he would be left with no alternative but to file suit (Exh. "D"). On August 31, 1967, Messrs. de Leon, Navarsi, and Agustin, all of PAL Cebu, went to petitioner's office to deliver the "maleta". In the presence of Mr. Jose Yap and Atty. Manuel Maranga the contents were listed and receipted for by petitioner (Exh. "E"). On September 5, 1967, petitioner sent a tracer letter to PAL Cebu inquiring about the results of the investigation which Messrs. de Leon, Navarsi, and Agustin had promised to conduct to pinpoint responsibility for the unauthorized opening of the "maleta" (Exh. "F"). The following day, September 6, 1967, PAL sent its reply hereinunder quoted verbatim: Dear Atty. Ong Yiu: This is with reference to your September 5, 1967, letter to Mr. Ricardo G. Paloma, Acting Manager, Southern Philippines. First of all, may we apologize for the delay in informing you of the result of our investigation since we visited you in your office last August 31, 1967. Since there are stations other than Cebu which are involved in your case, we have to communicate and await replies from them. We regret to inform you that to date we have not found the supposedly lost folder of papers nor have we been able to pinpoint the personnel who allegedly pilferred your baggage. You must realize that no inventory was taken of the cargo upon loading them on any plane. Consequently, we have no way of knowing the real contents of your baggage when same was loaded. We realized the inconvenience you encountered of this incident but we trust that you will give us another opportunity to be of better service to you.

MELENCIO-HERRERA, J.: In this Petition for Review by Certiorari, petitioner, a practicing lawyer and businessman, seeks a reversal of the Decision of the Court of Appeals in CA-G.R. No. 45005-R, which reduced his claim for damages for breach of contract of transportation. The facts are as follows: On August 26, 1967, petitioner was a fare paying passenger of respondent Philippine Air Lines, Inc. (PAL), on board Flight No. 463-R, from Mactan Cebu, bound for Butuan City. He was scheduled to attend the trial of Civil Case No. 1005 and Spec. Procs. No. 1125 in the Court of First Instance, Branch II, thereat, set for hearing on August 28-31, 1967. As a passenger, he checked in one piece of luggage, a blue "maleta" for which he was issued Claim Check No. 2106-R (Exh. "A"). The plane left Mactan Airport, Cebu, at about 1:00 o'clock P.M., and arrived at Bancasi airport, Butuan City, at past 2:00 o'clock P.M., of the same day. Upon arrival, petitioner claimed his luggage but it could not be found. According to petitioner, it was only after reacting indignantly to the loss that the matter was attended to by the porter clerk, Maximo Gomez, which, however, the latter denies, At about 3:00 o'clock P.M., PAL Butuan, sent a message to PAL, Cebu, inquiring about the missing luggage, which message was, in turn relayed in full to the Mactan Airport teletype operator at 3:45 P.M. (Exh. "2") that same afternoon. It must have been transmitted to Manila immediately, for at 3:59 that same afternoon, PAL Manila wired PAL Cebu advising that the luggage had been over carried to Manila aboard Flight No. 156 and that it would be forwarded to Cebu on Flight No. 345 of the same day. Instructions were also given that the luggage be immediately forwarded to Butuan City on the first available flight (Exh. "3"). At 5:00 P.M. of the same afternoon, PAL Cebu sent a message to PAL Butuan that the luggage would be forwarded on Fright No. 963 the following day, August 27, 196'(. However, this message was not received by PAL Butuan as all the personnel had already left since there were no more incoming flights that afternoon. In the meantime, petitioner was worried about the missing luggage because it contained vital documents needed for trial the next day. At 10:00 o'clock that evening, petitioner wired PAL Cebu demanding the delivery of his baggage before noon the next day, otherwise, he would hold PAL liable for damages, and stating that PAL's gross negligence had caused him undue inconvenience, worry, anxiety and extreme embarrassment (Exh. "B"). This telegram was received by the Cebu PAL supervisor but the latter felt no need to wire petitioner that his luggage had already been forwarded on the assumption that by the time the message reached Butuan City, the luggage would have arrived. Early in the morning of the next day, August 27, 1967, petitioner went to the Bancasi Airport to inquire about his luggage. He did not wait, however, for the morning flight which arrived at 10:00 o'clock that morning. This flight carried the missing luggage. The porter clerk, Maximo Gomez, paged petitioner, but the latter had already left. A certain Emilio Dagorro a driver of a "colorum" car, who also used to drive for petitioner, volunteered to take the luggage to petitioner. As Maximo Gomez knew Dagorro to be the same driver used by petitioner whenever the latter was in Butuan City, Gomez took the luggage and placed it on the counter. Dagorro examined the lock, pressed it, and it opened. After calling the attention of Maximo Gomez, the "maleta" was opened, Gomez took a look at its contents, but did not touch them. Dagorro then delivered the "maleta" to petitioner, with the information that the lock was open. Upon inspection, petitioner found that a folder containing certain exhibits, transcripts and private documents in Civil Case No. 1005 and Sp. Procs. No. 1126 were missing, aside from two gift items for his parents-in-law. Petitioner refused to accept the luggage. Dagorro returned it to the porter clerk, Maximo Gomez, who sealed it and forwarded the same to PAL Cebu. Meanwhile, petitioner asked for postponement of the hearing of Civil Case No. 1005 due to loss of his documents, which was granted by the Court (Exhs. "C" and "C-1"). Petitioner returned to Cebu City on August 28, 1967. In a letter dated August 29, 1967 addressed to PAL, Cebu, petitioner called attention to his telegram

Very truly yo

PHILIPPINE

(Sgd) JEREM AGUSTIN

Branch Supe Cebu (Exhibit G, Folder of Exhibits) 1 On September 13, 1967, petitioner filed a Complaint against PAL for damages for breach of contract of transportation with the Court of First Instance of Cebu, Branch V, docketed as Civil Case No. R-10188, which PAL traversed. After due trial, the lower Court found PAL to have acted in bad faith and with malice and declared petitioner entitled to moral damages in the sum of P80,000.00, exemplary damages of P30,000.00, attorney's fees of P5,000.00, and costs. Both parties appealed to the Court of Appeals petitioner in so far as he was awarded only the sum of P80,000.00 as moral damages; and defendant because of the unfavorable judgment rendered against it.

On August 22, 1974, the Court of Appeals,* finding that PAL was guilty only of simple negligence, reversed the judgment of the trial Court granting petitioner moral and exemplary damages, but ordered PAL to pay plaintiff the sum of P100.00, the baggage liability assumed by it under the condition of carriage printed at the back of the ticket. Hence, this Petition for Review by Certiorari, filed on May 2, 1975, with petitioner making the following Assignments of Error: I. THE HONORABLE COURT OF APPEALS ERRED IN HOLDING RESPONDENT PAL GUILTY ONLY OF SIMPLE NEGLIGENCE AND NOT BAD FAITH IN THE BREACH OF ITS CONTRACT OF TRANSPORTATION WITH PETITIONER. II. THE HONORABLE COURT OF APPEALS MISCONSTRUED THE EVIDENCE AND THE LAW WHEN IT REVERSED THE DECISION OF THE LOWER COURT AWARDING TO PETITIONER MORAL DAMAGES IN THE AMOUNT OF P80,000.00, EXEMPLARY DAMAGES OF P30,000.00, AND P5,000.00 REPRESENTING ATTORNEY'S FEES, AND ORDERED RESPONDENT PAL TO COMPENSATE PLAINTIFF THE SUM OF P100.00 ONLY, CONTRARY TO THE EXPLICIT PROVISIONS OF ARTICLES 2220, 2229, 2232 AND 2234 OF THE CIVIL CODE OF THE PHILIPPINES. On July 16, 1975, this Court gave due course to the Petition. There is no dispute that PAL incurred in delay in the delivery of petitioner's luggage. The question is the correctness of respondent Court's conclusion that there was no gross negligence on the part of PAL and that it had not acted fraudulently or in bad faith as to entitle petitioner to an award of moral and exemplary damages. From the facts of the case, we agree with respondent Court that PAL had not acted in bad faith. Bad faith means a breach of a known duty through some motive of interest or ill will. 2 It was the duty of PAL to look for petitioner's luggage which had been miscarried. PAL exerted due diligence in complying with such duty. As aptly stated by the appellate Court: We do not find any evidence of bad faith in this. On the contrary, We find that the defendant had exerted diligent effort to locate plaintiff's baggage. The trial court saw evidence of bad faith because PAL sent the telegraphic message to Mactan only at 3:00 o'clock that same afternoon, despite plaintiff's indignation for the non-arrival of his baggage. The message was sent within less than one hour after plaintiff's luggage could not be located. Efforts had to be exerted to locate plaintiff's maleta. Then the Bancasi airport had to attend to other incoming passengers and to the outgoing passengers. Certainly, no evidence of bad faith can be inferred from these facts. Cebu office immediately wired Manila inquiring about the missing baggage of the plaintiff. At 3:59 P.M., Manila station agent at the domestic airport wired Cebu that the baggage was over carried to Manila. And this message was received in Cebu one minute thereafter, or at 4:00 P.M. The baggage was in fact sent back to Cebu City that same afternoon. His Honor stated that the fact that the message was sent at 3:59 P.M. from Manila and completely relayed to Mactan at 4:00 P.M., or within one minute, made the message appear spurious. This is a forced reasoning. A radio message of about 50 words can be completely transmitted in even less than one minute depending upon atmospheric conditions. Even if the message was sent from Manila or other distant places, the message can be received within a minute. that is a scientific fact which cannot be questioned. 3 Neither was the failure of PAL Cebu to reply to petitioner's rush telegram indicative of bad faith, The telegram (Exh. B) was dispatched by petitioner at around 10:00 P.M. of August 26, 1967. The PAL supervisor at Mactan Airport was notified of it only in the morning of the following day. At that time the luggage was already to be forwarded to Butuan City. There was no bad faith, therefore, in the assumption made by said supervisor that the plane carrying the bag would arrive at Butuan earlier than a reply telegram. Had petitioner waited or caused someone to wait at the Bancasi airport for the arrival of the morning flight, he would have been able to retrieve his luggage sooner.

In the absence of a wrongful act or omission or of fraud or bad faith, petitioner is not entitled to moral damages. Art. 2217. Moral damages include physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury. Though incapable of pecuniary computation, moral damages may be recovered if they are the proximate result of the defendant's wrongful act of omission. Art. 2220. Willful injury to property may be a legal ground for awarding moral damages if the court should find that, under the circumstances, such damages are justly due. The same rule applies to breaches of contract where the defendant acted fraudulently or in bad faith. Petitioner is neither entitled to exemplary damages. In contracts, as provided for in Article 2232 of the Civil Code, exemplary damages can be granted if the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner, which has not been proven in this case. Petitioner further contends that respondent Court committed grave error when it limited PAL's carriage liability to the amount of P100.00 as stipulated at the back of the ticket. In this connection, respondent Court opined: As a general proposition, the plaintiff's maleta having been pilfered while in the custody of the defendant, it is presumed that the defendant had been negligent. The liability, however, of PAL for the loss, in accordance with the stipulation written on the back of the ticket, Exhibit 12, is limited to P100.00 per baggage, plaintiff not having declared a greater value, and not having called the attention of the defendant on its true value and paid the tariff therefor. The validity of this stipulation is not questioned by the plaintiff. They are printed in reasonably and fairly big letters, and are easily readable. Moreover, plaintiff had been a frequent passenger of PAL from Cebu to Butuan City and back, and he, being a lawyer and businessman, must be fully aware of these conditions. 4 We agree with the foregoing finding. The pertinent Condition of Carriage printed at the back of the plane ticket reads: 8. BAGGAGE LIABILITY ... The total liability of the Carrier for lost or damaged baggage of the passenger is LIMITED TO P100.00 for each ticket unless a passenger declares a higher valuation in excess of P100.00, but not in excess, however, of a total valuation of P1,000.00 and additional charges are paid pursuant to Carrier's tariffs. There is no dispute that petitioner did not declare any higher value for his luggage, much less did he pay any additional transportation charge. But petitioner argues that there is nothing in the evidence to show that he had actually entered into a contract with PAL limiting the latter's liability for loss or delay of the baggage of its passengers, and that Article 1750* of the Civil Code has not been complied with. While it may be true that petitioner had not signed the plane ticket (Exh. "12"), he is nevertheless bound by the provisions thereof. "Such provisions have been held to be a part of the contract of carriage, and valid and binding upon the passenger regardless of the latter's lack of knowledge or assent to the regulation". 5 It is what is known as a contract of "adhesion", in regards which it has been 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. The one who adheres to the contract is in reality free to reject it entirely; if he adheres, he gives his consent. 6 And as held in Randolph v. American Airlines, 103 Ohio App. 172, 144 N.E. 2d 878; Rosenchein vs. Trans World Airlines, Inc., 349 S.W. 2d 483, "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. Considering, therefore, that petitioner had failed to declare a higher value for his baggage, he cannot be permitted a recovery in excess of P100.00.Besides, passengers are advised not to place valuable items inside

their baggage but "to avail of our V-cargo service " (Exh. "1"). I t is likewise to be noted that there is nothing in the evidence to show the actual value of the goods allegedly lost by petitioner. There is another matter involved, raised as an error by PAL the fact that on October 24, 1974 or two months after the promulgation of the Decision of the appellate Court, petitioner's widow filed a Motion for Substitution claiming that petitioner died on January 6, 1974 and that she only came to know of the adverse Decision on October 23, 1974 when petitioner's law partner informed her that he received copy of the Decision on August 28, 1974. Attached to her Motion was an Affidavit of petitioner's law partner reciting facts constitutive of excusable negligence. The appellate Court noting that all pleadings had been signed by petitioner himself allowed the widow "to take such steps as she or counsel may deem necessary." She then filed a Motion for Reconsideration over the opposition of PAL which alleged that the Court of Appeals Decision, promulgated on August 22, 1974, had already become final and executory since no appeal had been interposed therefrom within the reglementary period. Under the circumstances, considering the demise of petitioner himself, who acted as his own counsel, it is best that technicality yields to the interests of substantial justice. Besides, in the 'last analysis, no serious prejudice has been caused respondent PAL. In fine, we hold that the conclusions drawn by respondent Court from the evidence on record are not erroneous. WHEREFORE, for lack of merit, the instant Petition is hereby denied, and the judgment sought to be reviewed hereby affirmed in toto. No costs. SO ORDERED. Teehankee, (Chairman), Makasiar, Fernandez, Guerrero and De Castro, JJ., concur.

6 Tolentino, Civil Code, Vol. IV, 1962 ed., p, 462, citing Mr. Justice J.B.L. Reyes, Lawyer's Journal, Jan. 31, 195 1, p. 49.

#Footnotes 1 pp. 47-48, Rollo. * Decision penned by Justice Jose Leuterio, with Justice Roseller Lim and Francisco Tantuico, Jr., concurring. 2 Air France vs. Carrascoso, 18 SCRA 166 (1966); Lopez vs. Pan American World Airways, 16 SCRA 431 (1966). 3 pp. 12-13, Decision. on pp. 53-54, Rollo. 4 pp. 8-9, Decision on pp. 27-28, Rollo. * 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. 5 Tannebaum v. National Airline, Inc. 13 Misc. 2d 450, 176 N.Y.S. 2d 400; Lichten vs. Eastern Airlines, 87 Fed. Supp. 691; Migoski v. Eastern Air Lines, Inc., Fla. 63 So. 2d 634.

G.R. No. 70462 August 11, 1988 PAN AMERICAN WORLD AIRWAYS, INC., petitioner, vs. INTERMEDIATE APPELLATE COURT, RENE V. PANGAN, SOTANG BASTOS PRODUCTIONS and ARCHER PRODUCTIONS, respondents. Guerrero & Torres for petitioner. Jose B. Layug for private respondents.

and checked in his two luggages, for which he was given baggage claim tickets Nos. 963633 and 963649 (Exhs. H and H-1). The two luggages contained the promotional and advertising materials, the clutch bags, barong tagalog and his personal belongings. Subsequently, Pangan was informed that his name was not in the manifest and so he could not take Flight No. 842 in the economy class. Since there was no space in the economy class, plaintiff Pangan took the first class because he wanted to be on time in Guam to comply with his commitment, paying an additional sum of $112.00. When plaintiff Pangan arrived in Guam on the date of May 27, 1978, his two luggages did not arrive with his flight, as a consequence of which his agreements with Slutchnick and Quesada for the exhibition of the films in Guam and in the United States were cancelled (Exh. L). Thereafter, he filed a written claim (Exh. J) for his missing luggages. Upon arrival in the Philippines, Pangan contacted his lawyer, who made the necessary representations to protest as to the treatment which he received from the employees of the defendant and the loss of his two luggages (Exh. M, O, Q, S, and T). Defendant Pan Am assured plaintiff Pangan that his grievances would be investigated and given its immediate consideration (Exhs. N, P and R). Due to the defendant's failure to communicate with Pangan about the action taken on his protests, the present complaint was filed by the plaintiff. (Pages 4-7, Record On Appeal). [Rollo, pp. 27-29.] On the basis of these facts, the Court of First Instance found petitioner liable and rendered judgment as follows: (1) Ordering defendant Pan American World Airways, Inc. to pay all the plaintiffs the sum of P83,000.00, for actual damages, with interest thereon at the rate of 14% per annum from December 6, 1978, when the complaint was filed, until the same is fully paid, plus the further sum of P10,000.00 as attorney's fees; (2) Ordering defendant Pan American World Airways, Inc. to pay plaintiff Rene V. Pangan the sum of P8,123.34, for additional actual damages, with interest thereon at the rate of 14% per annum from December 6, 1978, until the same is fully paid; (3) Dismissing the counterclaim interposed by defendant Pan American World Airways, Inc.; and (4) Ordering defendant Pan American World Airways, Inc. to pay the costs of suit. [Rollo, pp. 106-107.] On appeal, the then Intermediate Appellate Court affirmed the trial court decision. Hence, the instant recourse to this Court by petitioner. The petition was given due course and the parties, as required, submitted their respective memoranda. In due time the case was submitted for decision. In assailing the decision of the Intermediate Appellate Court petitioner assigned the following errors: 1. The respondent court erred as a matter of law in affirming the trial court's award of actual damages beyond the limitation of liability set forth in the Warsaw Convention and the contract of carriage. 2. The respondent court erred as a matter of law in affirming the trial court's award of actual damages consisting of alleged lost profits in the face of this Court's ruling concerning special or consequential damages as set forth in Mendoza v. Philippine Airlines [90 Phil. 836 (1952).]

CORTES, J.: Before the Court is a petition filed by an international air carrier seeking to limit its liability for lost baggage, containing promotional and advertising materials for films to be exhibited in Guam and the U.S.A., clutch bags, barong tagalogs and personal belongings, to the amount specified in the airline ticket absent a declaration of a higher valuation and the payment of additional charges. The undisputed facts of the case, as found by the trial court and adopted by the appellate court, are as follows: On April 25, 1978, plaintiff Rene V. Pangan, president and general manager of the plaintiffs Sotang Bastos and Archer Production while in San Francisco, Califonia and Primo Quesada of Prime Films, San Francisco, California, entered into an agreement (Exh. A) whereby the former, for and in consideration of the amount of US $2,500.00 per picture, bound himself to supply the latter with three films. 'Ang Mabait, Masungit at ang Pangit,' 'Big Happening with Chikiting and Iking,' and 'Kambal Dragon' for exhibition in the United States. It was also their agreement that plaintiffs would provide the necessary promotional and advertising materials for said films on or before May 30, 1978. On his way home to the Philippines, plaintiff Pangan visited Guam where he contacted Leo Slutchnick of the Hafa Adai Organization. Plaintiff Pangan likewise entered into a verbal agreement with Slutchnick for the exhibition of two of the films above-mentioned at the Hafa Adai Theater in Guam on May 30, 1978 for the consideration of P7,000.00 per picture (p. 11, tsn, June 20, 1979). Plaintiff Pangan undertook to provide the necessary promotional and advertising materials for said films on or before the exhibition date on May 30,1978. By virtue of the above agreements, plaintiff Pangan caused the preparation of the requisite promotional handbills and still pictures for which he paid the total sum of P12,900.00 (Exhs. B, B-1, C and C1). Likewise in preparation for his trip abroad to comply with his contracts, plaintiff Pangan purchased fourteen clutch bags, four capiz lamps and four barong tagalog, with a total value of P4,400.00 (Exhs. D, D-1, E, and F). On May 18, 1978, plaintiff Pangan obtained from defendant Pan Am's Manila Office, through the Your Travel Guide, an economy class airplane ticket with No. 0269207406324 (Exh. G) for passage from Manila to Guam on defendant's Flight No. 842 of May 27,1978, upon payment by said plaintiff of the regular fare. The Your Travel Guide is a tour and travel office owned and managed by plaintiffs witness Mila de la Rama. On May 27, 1978, two hours before departure time plaintiff Pangan was at the defendant's ticket counter at the Manila International Airport and presented his ticket

The assigned errors shall be discussed seriatim 1. The airline ticket (Exh. "G') contains the following conditions: NOTICE If the passenger's journey involves an ultimate destination or stop in a country other than the country of departure the Warsaw Convention may be applicable and the Convention governs and in most cases limits the liability of carriers for death or personal injury and in respect of loss of or damage to baggage. See also notice headed "Advice to International Passengers on Limitation of Liability. CONDITIONS OF CONTRACT 1. As used in this contract "ticket" means this passenger ticket and baggage check of which these conditions and the notices form part, "carriage" is equivalent to "transportation," "carrier" means all air carriers that carry or undertake to carry the passenger or his baggage hereunder or perform any other service incidental to such air carriage. "WARSAW CONVENTION" means the convention for the Unification of Certain Rules Relating to International Carriage by Air signed at Warsaw, 12th October 1929, or that Convention as amended at The Hague, 28th September 1955, whichever may be applicable. 2. Carriage hereunder is subject to the rules and limitations relating to liability established by the Warsaw Convention unless such carriage is not "international carriage" as defined by that Convention. 3. To the extent not in conflict with the foregoing carriage and other services performed by each carrier are subject to: (i) provisions contained in this ticket, (ii) applicable tariffs, (iii) carrier's conditions of carriage and related regulations which are made part hereof (and are available on application at the offices of carrier), except in transportation between a place in the United States or Canada and any place outside thereof to which tariffs in force in those countries apply. xxx xxx xxx NOTICE OF BAGGAGE LIABILITY LIMITATIONS Liability for loss, delay, or damage to baggage is limited as follows unless a higher value is declared in advance and additional charges are paid: (1)for most international travel (including domestic portions of international journeys) to approximately $9.07 per pound ($20.00 per kilo) for checked baggage and $400 per passenger for unchecked baggage: (2) for travel wholly between U.S. points, to $750 per passenger on most carriers (a few have lower limits). Excess valuation may not be declared on certain types of valuable articles. Carriers assume no liability for fragile or perishable articles. Further information may be obtained from the carrier. [Emphasis supplied.]. On the basis of the foregoing stipulations printed at the back of the ticket, petitioner contends that its liability for the lost baggage of private respondent Pangan is limited to $600.00 ($20.00 x 30 kilos) as the latter did not declare a higher value for his baggage and pay the corresponding additional charges. To support this contention, petitioner cites the case of Ong Yiu v. Court of Appeals [G.R. No. L-40597, June 29, 1979, 91 SCRA 223], where the Court sustained the validity of a printed stipulation at the back of an airline ticket limiting the liability of the carrier for lost baggage to a specified amount and ruled that the carrier's liability was limited to said amount since the passenger did not declare a higher value, much less pay additional charges.

We find the ruling in Ong Yiu squarely applicable to the instant case. In said case, the Court, through Justice Melencio Herrera, stated: Petitioner further contends that respondent Court committed grave error when it limited PAL's carriage liability to the amount of P100.00 as stipulated at the back of the ticket.... We agree with the foregoing finding. The pertinent Condition of Carriage printed at the back of the plane ticket reads: 8. BAGGAGE LIABILITY ... The total liability of the Carrier for lost or damage baggage of the passenger is LIMITED TO P100.00 for each ticket unless a passenger declares a higher valuation in excess of P100.00, but not in excess, however, of a total valuation of Pl,000.00 and additional charges are paid pursuant to Carrier's tariffs. There is no dispute that petitioner did not declare any higher value for his luggage, much less (lid he pay any additional transportation charge. But petitioner argues that there is nothing in the evidence to show that he had actually entered into a contract with PAL limiting the latter's liability for loss or delay of the baggage of its passengers, and that Article 1750 *

of the Civil Code has not

been complied with.

While it may be true that petitioner had not signed the plane ticket (Exh. "12"), he is nevertheless bound by the provisions thereof. "Such provisions have been held to be a part of the contract of carriage, and valid and binding upon the passenger regardless of the latter's lack of knowledge or assent to the regulation." [Tannebaum v. National Airline, Inc., 13 Misc. 2d 450,176 N.Y.S. 2d 400; Lichten v. Eastern Airlines, 87 Fed. Supp. 691; Migoski v. Eastern Air Lines, Inc., Fla., 63 So. 2d 634.] It is what is known as a contract of "adhesion," in regards which it has been 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. The one who adheres to the contract is in reality free to reject it entirely; if he adheres, he gives his consent,[Tolentino, Civil Code, Vol. IV, 1962 ed., p. 462, citing Mr. Justice J.B.L. Reyes, Lawyer's Journal, Jan. 31, 1951, p. 49]. And as held in Randolph v. American Airlines, 103 Ohio App. 172,144 N.E. 2d 878; Rosenchein v. Trans World Airlines, Inc., 349 S.W. 2d 483.] "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." Considering, therefore, that petitioner had failed to declare a higher value for his baggage, he cannot be permitted a recovery in excess of P100.00.... On the other hand, the ruling in Shewaram v. Philippine Air Lines, Inc. [G.R. No. L-20099, July 2, 1966, 17 SCRA 606], where the Court held that the stipulation limiting the carrier's liability to a specified amount was invalid, finds no application in the instant case, as the ruling in said case was premised on the finding that the conditions printed at the back of the ticket were so small and hard to read that they would not warrant the presumption that the passenger was aware of the conditions and that he had freely and fairly agreed thereto. In the instant case, similar facts that would make the case fall under the exception have not been alleged, much less shown to exist. In view thereof petitioner's liability for the lost baggage is limited to $20.00 per kilo or $600.00, as stipulated at the back of the ticket. At this juncture, in order to rectify certain misconceptions the Court finds it necessary to state that the Court of Appeal's reliance on a quotation from Northwest Airlines, Inc. v. Cuenca [G.R. No. L-22425, August 31, 1965,

14 SCRA 1063] to sustain the view that "to apply the Warsaw Convention which limits a carrier's liability to US$9.07 per pound or US$20.00 per kilo in cases of contractual breach of carriage ** is against public policy" is utterly misplaced, to say the least. In said case, while the Court, as quoted in the Intermediate Appellate Court's decision, said: 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 damages 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 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 prefaced this statement by explaining that: ...The case is now before us on petition for review by certiorari, upon the ground that the lower court has erred: (1) in holding that the Warsaw Convention of October 12, 1929, relative to transportation by air is not in force in the Philippines: (2) in not holding that respondent has no cause of action; and (3) in awarding P20,000 as nominal damages. We deem it unnecessary to pass upon the First assignment of error because the same is the basis of the second assignment of error, and the latter is devoid of merit, even if we assumed the former to be well taken. (Emphasis supplied.) Thus, it is quite clear that the Court never intended to, and in fact never did, rule against the validity of provisions of the Warsaw Convention. Consequently, by no stretch of the imagination may said quotation from Northwest be considered as supportive of the appellate court's statement that the provisions of the Warsaw Convention limited a carrier's liability are against public policy. 2. The Court finds itself unable to agree with the decision of the trial court, and affirmed by the Court of Appeals, awarding private respondents damages as and for lost profits when their contracts to show the films in Guam and San Francisco, California were cancelled. The rule laid down in Mendoza v. Philippine Air Lines, Inc. [90 Phil. 836 (1952)] cannot be any clearer: ...Under Art.1107 of the Civil Code, a debtor in good faith like the defendant herein, may be held liable only for damages that were foreseen or might have been foreseen at the time the contract of transportation was entered into. The trial court correctly found that the defendant company could not have foreseen the damages that would be suffered by Mendoza upon failure to deliver the can of film on the 17th of September, 1948 for the reason that the plans of Mendoza to exhibit that film during the town fiesta and his preparations, specially the announcement of said exhibition by posters and advertisement in the newspaper, were not called to the defendant's attention. In our research for authorities we have found a case very similar to the one under consideration. In the case of Chapman vs. Fargo, L.R.A. (1918 F) p. 1049, the plaintiff in Troy, New York, delivered motion picture films to the defendant Fargo, an express company, consigned and to be delivered to him in Utica. At the time of shipment the attention of the express company was called to the fact that the shipment involved motion picture films to be exhibited in Utica, and that they should be sent to their destination, rush. There was delay in their delivery and it was found that the plaintiff because of his failure to exhibit the film in Utica due to the delay suffered damages or loss of profits. But the highest court in the State of New York refused to award him special damages. Said appellate court observed: But before defendant could be held to special damages, such as the present alleged loss of profits on account of delay or failure of delivery, it must have appeared that he

had notice at the time of delivery to him of the particular circumstances attending the shipment, and which probably would lead to such special loss if he defaulted. Or, as the rule has been stated in another form, in order to purpose on the defaulting party further liability than for damages naturally and directly, i.e., in the ordinary course of things, arising from a breach of contract, such unusual or extraordinary damages must have been brought within the contemplation of the parties as the probable result of breach at the time of or prior to contracting. Generally, notice then of any special circumstances which will show that the damages to be anticipated from a breach would be enhanced has been held sufficient for this effect. As may be seen, that New York case is a stronger one than the present case for the reason that the attention of the common carrier in said case was called to the nature of the articles shipped, the purpose of shipment, and the desire to rush the shipment, circumstances and facts absent in the present case. [Emphasis supplied.] Thus, applying the foregoing ruling to the facts of the instant case, in the absence of a showing that petitioner's attention was called to the special circumstances requiring prompt delivery of private respondent Pangan's luggages, petitioner cannot be held liable for the cancellation of private respondents' contracts as it could not have foreseen such an eventuality when it accepted the luggages for transit. The Court is unable to uphold the Intermediate Appellate Court's disregard of the rule laid down in Mendoza and affirmance of the trial court's conclusion that petitioner is liable for damages based on the finding that "[tlhe undisputed fact is that the contracts of the plaintiffs for the exhibition of the films in Guam and California were cancelled because of the loss of the two luggages in question." [Rollo, p. 36] The evidence reveals that the proximate cause of the cancellation of the contracts was private respondent Pangan's failure to deliver the promotional and advertising materials on the dates agreed upon. For this petitioner cannot be held liable. Private respondent Pangan had not declared the value of the two luggages he had checked in and paid additional charges. Neither was petitioner privy to respondents' contracts nor was its attention called to the condition therein requiring delivery of the promotional and advertising materials on or before a certain date. 3. With the Court's holding that petitioner's liability is limited to the amount stated in the ticket, the award of attorney's fees, which is grounded on the alleged unjustified refusal of petitioner to satisfy private respondent's just and valid claim, loses support and must be set aside. WHEREFORE, the Petition is hereby GRANTED and the Decision of the Intermediate Appellate Court is SET ASIDE and a new judgment is rendered ordering petitioner to pay private respondents damages in the amount of US $600.00 or its equivalent in Philippine currency at the time of actual payment. SO ORDERED. Fernan, C.J., Feliciano and Bidin JJ., concur. Gutierrez, Jr., J., took no part.

Footnotes * 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. ** The Warsaw Convention actually provides that "[i]n the transportation of checked baggage and of goods, the liability of the carrier shall be limited to a sum of 250 francs per kilogram, unless the consignor has made, at the time when the package was handed over to the carrier, a special declaration of the value of delivery and has paid a supplementary sum if the case so requires. In that case, the carrier will be liable to pay a sum not exceeding the declared sum, unless he proves that the sum is greater than the actual value to the consignor at delivery.... The sums mentioned above shall be

deemed to refer to the French franc consisting of 65-1/2 milligrams of gold at the standard of fineness of nine hundred thousandths. These sums may be converted into any national currency in round figures. [51 O.G. 5084, 5091.] Proclamation No. 201, (September 23, 1955) made public the adherence of the Republic of the Philippines to the Warsaw Convention. [51 O.G. 4933.]

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G.R. No. L-60501 March 5, 1993 CATHAY PACIFIC AIRWAYS, LTD, petitioner, vs. COURT OF APPEALS and TOMAS L. ALCANTARA respondents. Siguion-Reyna, Montecillo & Ongsiako and Tomacruz, Manguiat & Associates for petitioner. Tanjuatco, Oreta, Tanjuatco, Berenger & Corpus for private respondent.

P20,000.00 and temperate or moderate damages to P10,000.00. The award of P25,000.00 for attorney's fees was maintained. The same grounds raised by petitioner in the Court of Appeals are reiterated before Us. CATHAY contends that: (1) the Court of Appeals erred in holding petitioner liable to respondent Alcantara for moral, exemplary and temperate damages as well as attorneys fees; and, (2) the Court of Appeals erred in failing to apply the Warsaw Convention on the liability of a carrier to its passengers. On its first assigned error, CATHAY argues that although it failed to transport respondent Alcantara's luggage on time, the one-day delay was not made in bad faith so as to justify moral, exemplary and temperate damages. It submits that the conclusion of respondent appellate court that private respondent was treated rudely and arrogantly when he sought assistance from CATHAY's employees has no factual basis, hence, the award of moral damages has no leg to stand on. Petitioners first assigned error involves findings of fact which are not reviewable by this Court. 2 At any rate, it is not impressed with merit. Petitioner breached its contract of carriage with private respondent when it failed to deliver his luggage at the designated place and time, it being the obligation of a common carrier to carry its passengers and their luggage safely to their destination, which includes the duty not to delay their transportation, 3 and the evidence shows that petitioner acted fraudulently or in bad faith. Moral damages predicated upon a breach of contract of carriage may only be recoverable in instances where the mishap results in death of a passenger, 4 or where the carrier is guilty of fraud or bad faith. 5 In the case at bar, both the trial court and the appellate court found that CATHAY was grossly negligent and reckless when it failed to deliver the luggage of petitioner at the appointed place and time. We agree. CATHAY alleges that as a result of mechanical trouble, all pieces of luggage on board the first aircraft bound for Jakarta were unloaded and transferred to the second aircraft which departed an hour and a half later. Yet, as the Court of Appeals noted, petitioner was not even aware that it left behind private respondent's luggage until its attention was called by the Hongkong Customs authorities. More, bad faith or otherwise improper conduct may be attributed to the employees of petitioner. While the mere failure of CATHAY to deliver respondent's luggage at the agreed place and time did not ipso facto amount to willful misconduct since the luggage was eventually delivered to private respondent, albeit belatedly, 6 We are persuaded that the employees of CATHAY acted in bad faith. We refer to the deposition of Romulo Palma, Commercial Attache of the Philippine Embassy at Jakarta, who was with respondent Alcantara when the latter sought assistance from the employees of CATHAY. This deposition was the basis of the findings of the lower courts when both awarded moral damages to private respondent. Hereunder is part of Palma's testimony Q What did Mr. Alcantara say, if any? A Mr. Alcantara was of course . . . . I could understand his position. He was furious for the experience because probably he was thinking he was going to meet the Director-General the following day and, well, he was with no change of proper clothes and so, I would say, he was not happy about the situation. Q What did Mr. Alcantara say? A He was trying to press the fellow to make the report and if possible make the delivery of his baggage as soon as possible. Q And what did the agent or duty officer say, if any? A The duty officer, of course, answered back saying What can we do, the baggage is missing. I cannot do anything, something like it. "Anyhow you can buy anything you need, charged to Cathay Pacific."

BELLOSILLO, J.: This is a petition for review on certiorari of the decision of the Court of Appeals which affirmed with modification that of the trial court by increasing the award of damages in favor of private respondent Tomas L. Alcantara. The facts are undisputed: On 19 October 1975, respondent Tomas L. Alcantara was a first class passenger of petitioner Cathay Pacific Airways, Ltd. (CATHAY for brevity) on its Flight No. CX-900 from Manila to Hongkong and onward from Hongkong to Jakarta on Flight No. CX-711. The purpose of his trip was to attend the following day, 20 October 1975, a conference with the Director General of Trade of Indonesia, Alcantara being the Executive Vice-President and General Manager of Iligan Cement Corporation, Chairman of the Export Committee of the Philippine Cement Corporation, and representative of the Cement Industry Authority and the Philippine Cement Corporation. He checked in his luggage which contained not only his clothing and articles for personal use but also papers and documents he needed for the conference. Upon his arrival in Jakarta, respondent discovered that his luggage was missing. When he inquired about his luggage from CATHAY's representative in Jakarta, private respondent was told that his luggage was left behind in Hongkong. For this, respondent Alcantara was offered $20.00 as "inconvenience money" to buy his immediate personal needs until the luggage could be delivered to him. His luggage finally reached Jakarta more than twenty four (24) hours after his arrival. However, it was not delivered to him at his hotel but was required by petitioner to be picked up by an official of the Philippine Embassy. On 1 March 1976, respondent filed his complaint against petitioner with the Court of First Instance (now Regional Trial Court) of Lanao del Norte praying for temperate, moral and exemplary damages, plus attorney's fees. On 18 April 1978, the trial court rendered its decision ordering Cathay to pay plaintiff P20,000.00 for moral damages, P5,000.00 for temperate damages, P10,000.00 for exemplary damages, and P25,000.00 for attorney's fees, and the costs. 1 Both parties appealed to the Court of Appeals. CATHAY assailed the conclusion of the trial court that it was accountable for breach of contract and questioned the non-application by the court of the Warsaw Convention as well as the excessive damages awarded on the basis of its finding that respondent Alcantara was rudely treated by petitioners employees during the time that his luggage could not be found. For his part, respondent Alcantara assigned as error the failure of the trial court to grant the full amount of damages sought in his complaint. On 11 November 1981, respondent Court of Appeals rendered its decision affirming the findings of fact of the trial court but modifying its award by increasing the moral damages to P80,000.00, exemplary damages to

Q What was the demeanor or comportment of the duty officer of Cathay Pacific when he said to Mr. Alcantara "You can buy anything chargeable to Cathay Pacific"? A If I had to look at it objectively, the duty officer would like to dismiss the affair as soon as possible by saying indifferently "Don't worry. It can be found." 7 Indeed, the aforequoted testimony shows that the language and conduct of petitioner's representative towards respondent Alcantara was discourteous or arbitrary to justify the grant of moral damages. The CATHAY representative was not only indifferent and impatient; he was also rude and insulting. He simply advised Alcantara to buy anything he wanted. But even that was not sincere because the representative knew that the passenger was limited only to $20.00 which, certainly, was not enough to purchase comfortable clothings appropriate for an executive conference. Considering that Alcantara was not only a revenue passenger but even paid for a first class airline accommodation and accompanied at the time by the Commercial Attache of the Philippine Embassy who was assisting him in his problem, petitioner or its agents should have been more courteous and accommodating to private respondent, instead of giving him a curt reply, "What can we do, the baggage is missing. I cannot do anything . . . . Anyhow, you can buy anything you need, charged to Cathay Pacific." CATHAY's employees should have been more solicitous to a passenger in distress and assuaged his anxieties and apprehensions. To compound matters, CATHAY refused to have the luggage of Alcantara delivered to him at his hotel; instead, he was required to pick it up himself and an official of the Philippine Embassy. Under the circumstances, it is evident that petitioner was remiss in its duty to provide proper and adequate assistance to a paying passenger, more so one with first class accommodation. Where in breaching the contract of carriage the defendant airline is not shown to have acted fraudulently or in bad faith, liability for damages is limited to the natural and probable consequences of the breach of obligation which the parties had foreseen or could have reasonably foreseen. In that case, such liability does not include moral and exemplary damages. 8 Conversely, if the defendant airline is shown to have acted fraudulently or in bad faith, the award of moral and exemplary damages is proper. However, respondent Alcantara is not entitled to temperate damages, contrary to the ruling of the court a quo, in the absence of any showing that he sustained some pecuniary loss. 9 It cannot be gainsaid that respondent's luggage was ultimately delivered to him without serious or appreciable damage. As regards its second assigned error, petitioner airline contends that the extent of its liability for breach of contract should be limited absolutely to that set forth in the Warsaw Convention. We do not agree. As We have repeatedly held, although the Warsaw Convention has the force and effect of law in this country, being a treaty commitment assumed by the Philippine government, said convention does not operate as an exclusive enumeration of the instances for declaring a carrier liable for breach of contract of carriage or as an absolute limit of the extent of that liability. 10 The Warsaw Convention declares the carrier liable for damages in the enumerated cases and under certain limitations. 11 However, it must not be construed to preclude the operation of the Civil Code and other pertinent laws. It does not regulate, much less exempt, the carrier from liability for damages for violating the rights of its passengers under the contract of carriage, 12 especially if wilfull misconduct on the part of the carrier's employees is found or established, which is clearly the case before Us. For the Warsaw Convention itself provides in Art. 25 that (1) The carrier shall not be entitled to avail himself of the provisions of this convention which exclude or limit his liability, if the damage is caused by his wilfull misconduct or by such default on his part as, in accordance with the law of the court to which the case is submitted, is considered to be equivalent to wilfull misconduct. (2) Similarly the carrier shall not be entitled to avail himself of the said provisions, if the damage is caused under the same circumstances by any agent of the carrier acting within the scope of his employment. When petitioner airline misplaced respondent's luggage and failed to deliver it to its passenger at the appointed place and time, some special species of injury must have been caused to him. For sure, the latter underwent profound distress and anxiety, and the fear of losing the opportunity to fulfill the purpose of his trip. In fact, for want of appropriate clothings for the occasion brought about by the delay of the arrival of his luggage, to his embarrassment and consternation respondent Alcantara had to seek postponement of his pre-arranged conference with the Director General of Trade of the host country.

In one case, 13 this Court observed that a traveller would naturally suffer mental anguish, anxiety and shock when he finds that his luggage did not travel with him and he finds himself in a foreign land without any article of clothing other than what he has on. Thus, respondent is entitled to moral and exemplary damages. We however find the award by the Court of Appeals of P80,000.00 for moral damages excessive, hence, We reduce the amount to P30,000.00. The exemplary damages of P20,000.00 being reasonable is maintained, as well as the attorney's fees of P25,000.00 considering that petitioner's act or omission has compelled Alcantara to litigate with third persons or to incur expenses to protect his interest. 14 WHEREFORE, the assailed decision of respondent Court of Appeals is AFFIRMED with the exception of the award of temperate damages of P10,000.00 which is deleted, while the award of moral damages of P80,000.00 is reduced to P30,000.00. The award of P20,000.00 for exemplary damages is maintained as reasonable together with the attorney's fees of P25,000.00. The moral and exemplary damages shall earn interest at the legal rate from 1 March 1976 when the complaint was filed until full payment. SO ORDERED. Cruz, Grio-Aquino, and Quiason, JJ., concur.

# Footnotes 1 Record on Appeal, pp. 12-23; Rollo, p. 30. 2 Philippine Air Lines v. Court of Appeals, G.R. No. 92501, 6 March 1992, 207 SCRA 100. 3 Tan Liao v. American President Lines, 98 Phil. 203. 4 Arts. 1764 and 2206, New Civil Code. 5 Art. 2220, New Civil Code; China Airlines, Ltd. v. IAC, G.R. No. 73835, 17 January 1989, 169 SCRA 226. 6 Alitalia v. IAC, G.R. No. 71929, 4 December 1990, 192 SCRA 9. 7 Records, pp. 12-13. 8 China Airlines Limited v. Court of Appeals, G.R. No. 94590, 29 July 1992. 9 Art. 2224, New Civil Code. 10 See Note 6; Northwest Airlines, Inc. v. Cuenca, No. L-22425, 31 August 1965, 14 SCRA 1063. 11 Art. 22.1. In the carriage of passengers the liability of the carrier for each passenger is limited to the sum of 250,000 francs. . . . Nevertheless, by special contract, the carrier and the passenger may agree to a higher limit of liability. 2.a) In the carriage of registered baggage and of cargo, the liability of the carrier is limited to a sum of 250 francs per kilogramme, unless the passenger or consignor has

made, at the time when the package was handed over to the carrier, a special declaration of interest in delivery at destination and has paid a supplementary sum if the case so requires. In that case the carrier will be liable to pay a sum not exceeding the declared sum, unless he proves that the sum is greater than the actual value to the consignor at delivery. 2.b) In the case of loss, damage or delay of part of registered baggage or cargo, or of any object contained therein, the weight to be taken into consideration in determining the amount to which the carrier's liability is limited shall be only the total weight of the package or packages concerned. Nevertheless, when the loss, damage or delay of a part of the registered baggage or cargo, or of an object contained therein, affects the value of other packages covered by the same baggage check or the same air way bill, the total weight of such package or packages shall also be taken into consideration in determining the limit of liability." 12 See Note 6. 13 Pan American World Airways, Inc. v. IAC, G.R. No. 68988, 21 June 1990, 186 SCRA 687. 14 Art. 2208, par. (2), New Civil Code.