G.R. No.

L-18965

October 30, 1964

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.

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:

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?

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.

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 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.

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.

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 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 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)

... 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).

2. Petitioner disclaims responsibility for the

damage of the cargo in question shielding itself
behind the claim offorce 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:

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.

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).

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.

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 'nonwater-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:

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

It was not imperative and necessary for the

trial court to pass upon the question of
whether or not the disputed abaca cargo

sufficiently establish the award of P60,412.02

made in favor of respondent.

for assessment
Number of freight tickets per booklet
of 100 tickets each

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.

Total number of ticket booklets used

Jan. 1, 1948 to Sept. 16, 1953
Multiply by average number of freight tickets
per booklet
Documentary stamp tax on 261,736 Freight
Tickets
TOTAL AMOUNT DUE & COLLECTIBLE

WHEREFORE, the decision appealed from is

affirmed, with costs against petitioner.
G.R. No. L-14078

The assessment of the Collector was appealed to

the Court of Tax Appeals. In that court the
respondent Collector was declared in default and
the petitioner presented its evidence. The tax
court, modified the decision of the Collector and
ordered the petitioner to pay only P15,704.16 as
documentary stamp tax for the period abovestated, without any compromise penalty. Upon
petitioner's motion for reconsideration, the court
resolved to reopen the case, for the sole purpose of
allowing the petitioner to present as evidence the
500 booklets and 17 sackful, respectively, of
passenger and freight tickets of the petitioner.
During the rehearing of the case, the petitioner,
however, failed to submit the said evidence;
instead it presented stub tickets, Exhibits "X-1" and
"X-2, which were already in its possession during
the first hearing. The Court of Tax Appeals denied
the motion for reconsideration. Hence, this appeal.

February 24, 1961

MINDANAO BUS COMPANY, petitioner,

vs.
THE COLLECTOR OF INTERNAL
REVENUE, respondent.
Felimon B. Barria and I.V. Binamira for petitioner.
Office of the Solicitor General for respondent.
LABRADOR, J.:
Appeal by certiorari from a decision of the Court of
Tax Appeals, ordering the petitioner-appellant
Mindanao Bus Company to pay P15,704.16, as
documentary stamp taxes for the period from
January 1, 1948 up to September 16, 1953. The
decision sought to be reviewed modifies an
assessment by the Collector of Internal Revenue
eliminating the compromise penalty imposed by
the Collector.

In this Court, petitioner-appellant presents the

following assignments of error:
I. THE TAX COURT ERRED IN PRESUMING
THE CORRECTNESS OF THE ASSESSMENT,
AND IN NOT FINDING SAME NOT BASED
UPON THE BEST EVIDENCE OBTAINABLE,
BUT IS ARBITRARY, SPECULATIVE,
HYPOTHETICAL, GROSSLY EXAGGERATED
AND WITHOUT FACTUAL BASES.

Petitioner is a common carrier engaged in

transporting passengers and freight by means of
auto-buses in Northern Mindanao, under
certificates of public convenience issued by the
Public Service Commission. Sometime in
September, 1953, an agent of the respondent
Collector of Internal Revenue examined the books
of accounts of the petitioner and found that the
freight tickets used by it do not contain the
required documentary stamp tax. Said agent took
with him 500 booklets of tickets used by the
petitioner and counted the freight receipts
contained therein. He counted 1,305 freight tickets.
Assuming that each freight ticket covers baggage
valued at more than P5.00, the Collector of Internal
Revenue, upon recommendation of the agent,
assessed against the petitioner the sum of
P15,704.16, exclusive of compromise penalty, as
documentary stamp taxes from January 1, 1948 up
to September 16, 1953. The tax is computed in the
following manner:

II. THE TAX COURT ERRED IN HOLDING

THAT THE TICKETS ISSUED FOR EXCESS
BAGGAGE ARE BILLS OF LADING SUBJECT
TO THE DOCUMENTARY STAMP TAX.
III. THE TAX COURT ERRED IN NOT FINDING
AND DECLARING SECTION 127 OF
REGULATION NO. 26 OF THE DEPARTMENT
OF FINANCE UNCONSTITUTIONAL.
IV. THE TAX COURT ERRED IN HOLDING THE
PETITIONER LIABLE AND REQUIRING IT TO
PAY THE TAX ASSESSMENT OF P15,704.16.

Number of registered booklets of 100 tickets

each,
from Oct. 29, 1948 to September 16, 1953
Number of booklets assessed to have been
used
from Jan. 1, 1948 to Oct. 31, 1948
TOTAL NUMBER OF BOOKLETS USED FROM
Jan. 1, 1948 to Sept. 16, 1953
Number of Ticket Booklets verified as basis

In support of its first assignment of error, the

petitioner-appellant claims that the computation
made by the respondent is not based upon the
best available evidence, but on mere
presumptions. This claim is devoid of merit. The
agent of the Bureau of Internal Revenue who
investigated the petitioner's books of accounts
found it impossible to count one by one the freight
tickets contained in used booklets dumped inside
the petitioner's bodega, because the booklets were
so numerous and most of them were either torn or

destroyed. The procedure followed by said agent,

which is the average method, in ascertaining the
total number of freight tickets used during the
period under review, can not be improved because
an actual count of the freight tickets is practically
impossible. The average method is the only way by
which the agent could determine the number of
booklets used during the period in question.

is, in legal effect, a bill of lading." (9 Am.

Jur. 662, emphasis supplied) .
Section 227 of the National Internal
Revenue Code imposes the tax on receipts
for goods or effects shipped from one port
or place to another port or place in the
Philippines. The use of the word place after
port and of the, word 'receipt' shows that
the receipts for goods shipped on land are
included.

The agent also correctly assumed that the value of

the goods covered by each freight ticket is not less
than P5.00. It is a common practice of passengers
in the rural areas not to secure receipts for cargoes
of small value and to demand receipts only for
valuable cargo (Interprovincial Autobus Co., Inc. vs.
Collector of Internal Revenue, G.R. No. L-6741,
January 31, 1956.) If the freight tickets were
issued, the baggage carried must have been
valuable enough.

As its third assignment of error, the petitionerappellant questions the validity of Section 127 of
Regulation No. 26, insofar as it provides that chits,
memoranda and other papers not in the usual
commercial form of bill of lading, when used by the
common carrier in the transportation of goods for
the collection of fares, are to be considered bills of
lading subject to documentary stamp tax, alleging
that said section is beyond the powers of the
Secretary of Finance, which are contained in
Section 388 of the Tax Code. This argument should
also be dismissed for lack of merit. As the Solicitor
General correctly argues the validity of Section 127
of Regulation No. 26 should be upheld under the
principle of legislative approval by reenactment.
Section 127 of said regulation sought to implement
Section 1449 (q) and (r) of the Revised
Administrative Code, and the latter provisions were
reenacted in Section 227 of the National Internal
Revenue Code. Section 127 is in the same
Regulations as Section 121. We are quoting
hereunder a portion of the decision of this Court in
the case of Interprovincial Autobus Co., Inc. vs.
Collector, supra, to sustain our ruling that the third
assignment of error in the case at bar should be
dismissed:

On the other hand, it was the duty of petitioner to

present evidence to show inaccuracy in the above
method of assessment (Interprovincial Autobus Co.,
Inc. vs. Collector, supra; Perez vs. C.T.A., G.R. No. L9193, May 29, 1957; Perez vs. C.T.A., et al., G.R.
No. L-10507, May 30, 1958; Government of P. I. vs.
Monte de Piedad, 35 Phil. 42), but it failed to do so.
The claim of petitioner that the freight tickets
issued by it are not bills of lading subject to
documentary stamp tax must also be dismissed in
view of our ruling in the case of Interprovincial
Autobus Co., Inc. vs. Collector, supra: .
But the claim that freight tickets of bus
companies are not 'bills of lading or
receipts' within the meaning of the
Documentary Stamp Tax Law is without
merit. Bills of Lading, in modern
jurisprudence, are not those issued by
masters of vessels alone; they now
comprehend all forms of transportation,
whether by sea or land, and includes the
receipts for cargo transported.

Another reason for sustaining the validity

of the regulation, may be found in the
principle of legislative approval by
reenactment. The regulations were
approved on September 16, 1924. When
the National Internal Revenue Code was
approved on February 18, 1939, the same
provisions on stamp tax, bills of lading and
receipts were reenacted. There is a
presumption that the legislature reenacted
the law on the tax with full knowledge of
the contents of the regulations then in
force regarding bills of lading and receipts,
and that it approved or confirmed them
because they carry out the legislative
purpose.

The term 'bill of lading' is frequently

defined, especially by the older authorities
as a writing signed by the master of a
vessel acknowledging the receipts of goods
on board to be transported to a certain port
and there delivered to a designated person
or on his order. This definition was
formulated at a time when goods were
principally transported by sea and, while
adequate in view of the conditions existing
at that early day, is too narrow to suit
present conditions. As comprehending all
methods of transportation, a bill of lading
may be defined as a written
acknowledgment of the receipt of goods
and an agreement to transport and to
deliver them at a specified place to a
person named or on his order. Such
instruments are sometimes called 'shipping
receipts,' 'forwarders' receipts,' and
'receipts for transportation." The
designation, however, is not material, and
neither is the form of the instrument. If it
contains an acknowledgment by the carrier
of the receipt of goods for transportation, it

The fourth assignment of error, being only a

consequence of the first three, the same should
also be dismissed.
WHEREFORE, the decision appealed from should be
affirmed, with costs against petitioner-appellant.
G.R. No. L-9840

April 22, 1957

LU DO & LU YM CORPORATION, petitionerdefendant,

vs.
I. V. BINAMIRA, respondent-plaintiff.

Ross, Selph, Carrascoso and Janda for petitioner.

I. V. Binamira in his own behalf.

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.

BAUTISTA ANGELO, J.:

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.

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?

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.

The Court of Appeals found for the affirmative,

making on this point the following comment:
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.

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 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

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 question, was received by the Visayan

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.

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.

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:

Wherefore, the decision appealed from is reversed,

without pronouncement as to costs.
G.R. No. L-36481-2 October 23, 1982
AMPARO C. SERVANDO, CLARA UY
BICO, plaintiffs-appellees,
vs.
PHILIPPINE STEAM NAVIGATION
CO., defendant-appellant.
Zoilo de la Cruz, Jr. & Associate for plaintiffappellee Amparo Servando.
Benedicto, Sumbingco & Associate for appellee
Clara Uy Bico.
Ross, Salcedo, del Rosario, Bito & Misa for
defendant-appellant.

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.)

ESCOLIN, J.:
This appeal, originally brought to the Court of
Appeals, seeks to set aside the decision of the
Court of First Instance of Negros Occidental in Civil
Cases Nos. 7354 and 7428, declaring appellant
Philippine Steam Navigation liable for damages for
the loss of the appellees' cargoes as a result of a
fire which gutted the Bureau of Customs'
warehouse in Pulupandan, Negros Occidental.

(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.)

The Court of Appeals certified the case to Us

because only pure questions of law are raised
therein.
The facts culled from the pleadings and the
stipulations submitted by the parties are as follows:

(Paragraph 12, Exhibit "1")

On November 6, 1963, appellees Clara Uy Bico and
Amparo Servando loaded on board the appellant's
vessel, FS-176, for carriage from Manila to
Pulupandan, Negros Occidental, the following
cargoes, to wit:

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

Clara Uy Bico

burning of the warehouse occurred before actual or

constructive delivery of the goods to the appellees,
the loss is chargeable against the appellant.

1,528 cavans of
rice valued

It should be pointed out, however, that in the bills

of lading issued for the cargoes in question, the
parties agreed to limit the responsibility of the
carrier for the loss or damage that may be caused
to the shipment by inserting therein the following
stipulation:

at P40,907.50;
Amparo Servando
44 cartons of
colored paper,

Clause 14. Carrier shall not be

responsible for loss or damage to
shipments billed 'owner's risk'
unless such loss or damage is due
to negligence of carrier. Nor shall
carrier be responsible for loss or
damage caused by force majeure,
dangers or accidents of the sea or
other waters; war; public
enemies; . . . fire . ...

toys and general

merchandise
valued at
P1,070.50;
as evidenced by the corresponding bills of lading
issued by the appellant. 1
Upon arrival of the vessel at Pulupandan, in the
morning of November 18, 1963, the cargoes were
discharged, complete and in good order, unto the
warehouse of the Bureau of Customs. At about 2:00
in the afternoon of the same day, said warehouse
was razed by a fire of unknown origin, destroying
appellees' cargoes. Before the fire, however,
appellee Uy Bico was able to take delivery of 907
cavans of rice 2 Appellees' claims for the value of
said goods were rejected by the appellant.

We sustain the validity of the above stipulation;

there is nothing therein that is contrary to law,
morals or public policy.
Appellees would contend that the above stipulation
does not bind them because it was printed in fine
letters on the back-of the bills of lading; and that
they did not sign the same. This argument
overlooks the pronouncement of this Court in Ong
Yiu vs. Court of Appeals, promulgated June 29,
1979, 3 where the same issue was resolved in this
wise:

On the bases of the foregoing facts, the lower court

rendered a decision, the decretal portion of which
reads as follows:

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'. 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).

WHEREFORE, judgment is rendered

as follows:
1. In case No. 7354, the defendant
is hereby ordered to pay the
plaintiff Amparo C. Servando the
aggregate sum of P1,070.50 with
legal interest thereon from the date
of the filing of the complaint until
fully paid, and to pay the costs.
2. In case No. 7428, the defendant
is hereby ordered to pay to plaintiff
Clara Uy Bico the aggregate sum of
P16,625.00 with legal interest
thereon from the date of the filing
of the complaint until fully paid,
and to pay the costs.
Article 1736 of the Civil Code imposes upon
common carriers the duty to observe extraordinary
diligence from the moment the goods are
unconditionally placed in their possession "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. "

Besides, the agreement contained in the above

quoted Clause 14 is a mere iteration of the basic
principle of law written in Article 1 1 7 4 of the Civil
Code:

The court a quo held that the delivery of the

shipment in question to the warehouse of the
Bureau of Customs is not the delivery
contemplated by Article 1736; and since the

Article 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 foreseen, were
inevitable.

its employees. Under the circumstances, the

appellant is plainly not responsible.
WHEREFORE, the judgment appealed from is
hereby set aside. No costs.
G.R. No. L-28673 October 23, 1984

Thus, where fortuitous event or force majeure is

the immediate and proximate cause of the loss, the
obligor is exempt from liability for nonperformance. The Partidas, 4 the antecedent of
Article 1174 of the Civil Code, defines 'caso
fortuito' as 'an event that takes place by accident
and could not have been foreseen. Examples of
this are destruction of houses, unexpected fire,
shipwreck, violence of robbers.'

SAMAR MINING COMPANY, INC., plaintiffappellee,

vs.
NORDEUTSCHER LLOYD and C.F. SHARP &
COMPANY, INC., defendants-appellants.

CUEVAS, J.:+.wph!1
In its dissertation of the phrase 'caso fortuito' the
Enciclopedia Juridicada Espanola 5 says: "In a legal
sense and, consequently, also in relation to
contracts, a 'caso fortuito' presents the following
essential characteristics: (1) the cause of the
unforeseen and unexpected occurrence, or of the
failure of the debtor to comply with his obligation,
must be independent of the human will; (2) it must
be impossible to foresee the event which
constitutes the 'caso fortuito', or if it can be
foreseen, it must be impossible to avoid; (3) the
occurrence must be such as to render it impossible
for the debtor to fulfill his obligation in a normal
manner; and (4) the obligor must be free from any
participation in the aggravation of the injury
resulting to the creditor." In the case at bar, the
burning of the customs warehouse was an
extraordinary event which happened
independently of the will of the appellant. The
latter could not have foreseen the event.

This is an appeal taken directly to Us

on certiorari from the decision of the defunct Court
of First Instance of Manila, finding defendants
carrier and agent, liable for the value of goods
never delivered to plaintiff consignee. The issue
raised is a pure question of law, which is, the
liability of the defendants, now appellants, under
the bill of lading covering the subject shipment.
The case arose from an importation made by
plaintiff, now appellee, SAMAR MINING COMPANY,
INC., of one (1) crate Optima welded wedge wire
sieves through the M/S SCHWABENSTEIN a vessel
owned by defendant-appellant NORDEUTSCHER
LLOYD, (represented in the Philippines by its agent,
C.F. SHARP & CO., INC.), which shipment is covered
by Bill of Lading No. 18 duly issued to consignee
SAMAR MINING COMPANY, INC. Upon arrival of the
aforesaid vessel at the port of Manila, the
aforementioned importation was unloaded and
delivered in good order and condition to the
bonded warehouse of AMCYL. 1 The goods were
however never delivered to, nor received by, the
consignee at the port of destination Davao.

There is nothing in the record to show that

appellant carrier ,incurred in delay in the
performance of its obligation. It appears that
appellant had not only notified appellees of the
arrival of their shipment, but had demanded that
the same be withdrawn. In fact, pursuant to such
demand, appellee Uy Bico had taken delivery of
907 cavans of rice before the burning of the
warehouse.

When the letters of complaint sent to defendants

failed to elicit the desired response, consignee
herein appellee, filed a formal claim for P1,691.93,
the equivalent of $424.00 at the prevailing rate of
exchange at that time, against the former, but
neither paid. Hence, the filing of the instant suit to
enforce payment. Defendants-appellants brought
in AMCYL as third party defendant.

Nor can the appellant or its employees be charged

with negligence. The storage of the goods in the
Customs warehouse pending withdrawal thereof by
the appellees was undoubtedly made with their
knowledge and consent. Since the warehouse
belonged to and was maintained by the
government, it would be unfair to impute
negligence to the appellant, the latter having no
control whatsoever over the same.

The trial court rendered judgment in favor of

plaintiff, ordering defendants to pay the amount of
P1,691.93 plus attorney's fees and costs. However,
the Court stated that defendants may recoup
whatever they may pay plaintiff by enforcing the
judgment against third party defendant AMCYL
which had earlier been declared in default. Only
the defendants appealed from said decision.

The lower court in its decision relied on the ruling

laid down in Yu Biao Sontua vs. Ossorio 6, where
this Court held the defendant liable for damages
arising from a fire caused by the negligence of the
defendant's employees while loading cases of
gasoline and petroleon products. But unlike in the
said case, there is not a shred of proof in the
present case that the cause of the fire that broke
out in the Custom's warehouse was in any way
attributable to the negligence of the appellant or

The issue at hand demands a close scrutiny of Bill

of Lading No. 18 and its various clauses and
stipulations which should be examined in the light
of pertinent legal provisions and settled
jurisprudence. This undertaking is not only proper
but necessary as well because of the nature of the
bill of lading which operates both as a receipt for

the goods; and more importantly, as a contract to

transport and deliver the same as stipulated
therein. 2 Being a contract, it is the law between
the parties thereto 3 who are bound by its terms
and conditions 4 provided that these are not
contrary to law, morals, good customs, public order
and public policy. 5

Whenever the carrier or m aster

may deem it advisable or in any
case where the goods are placed at
carrier's disposal at or consigned to
a point where the ship does not
expect to load or discharge, the
carrier or master may, without
notice, forward the whole or any
part of the goods before or after
loading at the original port of
shipment, ... This carrier, in making
arrangements for any
transshipping or forwarding vessels
or means of transportation not
operated by this carrier shall be
considered solely the forwarding
agent of the shipper and without
any other responsibility whatsoever
even though the freight for the
whole transport has been collected
by him. ... Pending or during
forwarding or transshipping the
carrier may store the goods ashore
or afloat solely as agent of the
shipper and at risk and expense of
the goods and the carrier shall not
be liable for detention nor
responsible for the acts, neglect,
delay or failure to act of anyone to
whom the goods are entrusted or
delivered for storage, handling or
any service incidental thereto
(Emphasis supplied) 10

Bill of Lading No. 18 sets forth in page 2

thereof 6 that one (1) crate of Optima welded
wedge wire sieves was received by the carrier
NORDEUTSCHER LLOYD at the "port of loading"
which is Bremen, Germany, while the freight had
been prepaid up to the port of destination or the
"port of discharge of goods in this case, Davao, the
carrier undertook to transport the goods in its
vessel, M/S SCHWABENSTEIN only up to the "port
of discharge from ship-Manila. Thereafter, the
goods were to be transshipped by the carrier to the
port of destination or "port of discharge of goods
The stipulation is plainly indicated on the face of
the bill which contains the following phrase printed
below the space provided for the port of discharge
from ship", thus: t.hqw
if goods are to be transshipped at
port of discharge, show destination
under the column for "description
of contents" 7
As instructed above, the following words appeared
typewritten under the column for "description of
contents": t.hqw

Defendants-appellants now shirk liability for the

loss of the subject goods by claiming that they
have discharged the same in full and good
condition unto the custody of AMCYL at the port of
discharge from ship Manila, and therefore,
pursuant to the aforequoted stipulation (Sec. 11) in
the bill of lading, their responsibility for the cargo
had ceased. 11

PORT OF DISCHARGE OF GOODS:

DAVAO
FREIGHT PREPAID 8
It is clear, then, that in discharging the goods from
the ship at the port of Manila, and delivering the
same into the custody of AMCYL, the bonded
warehouse, appellants were acting in full accord
with the contractual stipulations contained in Bill of
Lading No. 18. The delivery of the goods to AMCYL
was part of appellants' duty to transship the goods
from Manila to their port of destination-Davao. The
word "transship" means: t.hqw

We find merit in appellants' stand. The validity of

stipulations in bills of lading exempting the carrier
from liability for loss or damage to the goods when
the same are not in its actual custody has been
upheld by Us in PHOENIX ASSURANCE CO., LTD. vs.
UNITED STATES LINES, 22 SCRA 674 (1968). Said
case matches the present controversy not only as
to the material facts but more importantly, as to
the stipulations contained in the bill of lading
concerned. As if to underline their awesome
likeness, the goods in question in both cases were
destined for Davao, but were discharged from ship
in Manila, in accordance with their respective bills
of lading.

to transfer for further

transportation from one ship or
conveyance to another 9
The extent of appellant carrier's responsibility
and/or liability in the transshipment of the goods in
question are spelled out and delineated under
Section 1, paragraph 3 of Bill of Lading No. 18, to
wit: t.hqw

The stipulations in the bill of lading in the PHOENIX

case which are substantially the same as the
subject stipulations before Us, provides: t.
hqw

The carrier shall not be liable in

any capacity whatsoever for any
delay, loss or damage occurring
before the goods enter ship's
tackle to be loaded or after the
goods leave ship's tackle to be
discharged, transshipped or
forwarded ... (Emphasis supplied)

The carrier shall not be liable in

any capacity whatsoever for any
loss or damage to the goods while
the goods are not in its actual
custody. (Par. 2, last subpar.)

and in Section 11 of the same Bill, which

provides: t.hqw

xxx xxx xxx

10

The carrier or master, in making

arrangements with any person for
or in connection with all
transshipping or forwarding of the
goods or the use of any means of
transportation or forwarding of
goods not used or operated by the
carrier, shall be considered solely
the agent of the shipper and
consignee and without any other
responsibility whatsoever or for the
cost thereof ... (Par. 16). 12

Article 1738 referred to in the foregoing provision

runs thus: t.hqw
Article 1738. The extraordinary
liability of the common carrier
continues to be operative even
during the time the goods are
stored in a warehouse of the carrier
at the place of destination, until the
consignee has been advised of the
arrival of the goods and has had
reasonable opportunity thereafter
to remove them or otherwise
dispose of them.

Finding the above stipulations not contrary to law,

morals, good customs, public order or public policy,
We sustained their validity 13 Applying said
stipulations as the law between the parties in the
aforecited case, the Court concluded that: t.
hqw

There is no doubt that Art. 1738 finds no

applicability to the instant case. The said article
contemplates a situation where the goods had
already reached their place of destination and are
stored in the warehouse of the carrier. The subject
goods were still awaiting transshipment to their
port of destination, and were stored in the
warehouse of a third party when last seen and/or
heard of. However, Article 1736 is applicable to the
instant suit. Under said article, the carrier may be
relieved of the responsibility for loss or damage to
the goods upon actual or constructive delivery of
the same by the carrier to the consignee, or to the
person who has a right to receive them. In sales,
actual delivery has been defined as the ceding of
corporeal possession by the seller, and the actual
apprehension of corporeal possession by the buyer
or by some person authorized by him to receive
the goods as his representative for the purpose of
custody or disposal. 17 By the same token, there is
actual delivery in contracts for the transport of
goods when possession has been turned over to
the consignee or to his duly authorized agent and a
reasonable time is given him to remove the
goods.18 The court a quo found that there was
actual delivery to the consignee through its duly
authorized agent, the carrier.

... The short form Bill of Lading ( )

states in no uncertain terms that
the port of discharge of the cargo is
Manila, but that the same was to
be transshipped beyond the port of
discharge to Davao City. Pursuant
to the terms of the long form Bill of
Lading ( ), appellee's responsibility
as a common carrier ceased the
moment the goods were unloaded
in Manila and in the matter of
transshipment, appellee acted
merely as an agent of the shipper
and consignee. ... (Emphasis
supplied) 14
Coming now to the case before Us, We hold, that
by the authority of the above pronouncements, and
in conformity with the pertinent provisions of the
New Civil Code, Section 11 of Bill of Lading No. 18
and the third paragraph of Section 1 thereof are
valid stipulations between the parties insofar as
they exempt the carrier from liability for loss or
damage to the goods while the same are not in the
latter's actual custody.

It becomes necessary at this point to dissect the

complex relationship that had developed between
appellant and appellee in the course of the
transactions that gave birth to the present suit.
Two undertakings appeared embodied and/or
provided for in the Bill of Lading 19 in question.
The first is FOR THE TRANSPORT OF GOODS from
Bremen, Germany to Manila. The second, THE
TRANSSHIPMENT OF THE SAME GOODS from Manila
to Davao, with appellant acting as agent of the
consignee. 20 At the hiatus between these two
undertakings of appellant which is the moment
when the subject goods are discharged in Manila,
its personality changes from that of carrier to that
of agent of the consignee. Thus, the character of
appellant's possession also changes, from
possession in its own name as carrier, into
possession in the name of consignee as the latter's
agent. Such being the case, there was, in effect,
actual delivery of the goods from appellant as
carrier to the same appellant as agent of the
consignee. Upon such delivery, the appellant, as
erstwhile carrier, ceases to be responsible for any
loss or damage that may befall the goods from that
point onwards. This is the full import of Article
1736, as applied to the case before Us.

The liability of the common carrier for the loss,

destruction or deterioration of goods transported
from a foreign country to the Philippines is
governed primarily by the New Civil Code. 15 In all
matters not regulated by said Code, the rights and
obligations of common carriers shall be governed
by the Code of Commerce and by special
laws. 16 A careful perusal of the provisions of the
New Civil Code on common carriers (Section 4,
Title VIII, Book IV) directs our attention to Article
1736 thereof, which reads: t.hqw
Article 1736. The extraordinary
responsibility of the common
carrier 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.

11

But even as agent of the consignee, the appellant

cannot be made answerable for the value of the
missing goods, It is true that the transshipment of
the goods, which was the object of the agency, was
not fully performed. However, appellant had
commenced said performance, the completion of
which was aborted by circumstances beyond its
control. An agent who carries out the orders and
instructions of the principal without being guilty of
negligence, deceit or fraud, cannot be held
responsible for the failure of the principal to
accomplish the object of the agency, 21 This can be
gleaned from the following provisions of the New
Civil Code on the obligations of the agent: t.
hqw

Civil Code on common carriers, agency and

contracts, they incur no liability for the loss of the
goods in question.
WHEREFORE, the appealed decision is hereby
REVERSED. Plaintiff-appellee's complaint is hereby
DISMISSED.
No costs.
G.R. No. L-16598

October 3, 1921

H. E. HEACOCK COMPANY, plaintiff-appellant,

vs.
MACONDRAY & COMPANY, INC., defendantappellant.

Article 1884. The agent is bound by

his acceptance to carry out the
agency, and is liable for the
damages which, through his nonperformance, the principal may
suffer.

Fisher & DeWitt for plaintiff-appellant.

Wolfson, Wolfson & Schwarzkopf for defendantappellant.

xxx xxx xxx

JOHNSON, J.:

Article 1889. The agent shall be

liable for damages if, there being a
conflict between his interests and
those of the principal, he should
prefer his own.

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:

Article 1892. The agent may

appoint a substitute if the principal
has not prohibited him from doing
so; but he shall be responsible for
the acts of the substitute:

(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.

(1) When he was not given the

power to appoint one;
(2) When he was given such power
but without designating the person
and the person appointed was
notoriously incompetent or
insolvent.
xxx xxx xxx
Article 1909. The agent is
responsible not only for fraud, but
also for negligence which shall be
judged with more or less rigor by
the courts, according to whether
the agency was or was not for a
compensation.

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

The records fail to reveal proof of negligence,

deceit or fraud committed by appellant or by its
representative in the Philippines. Neither is there
any showing of notorious incompetence or
insolvency on the part of AMCYT, which acted as
appellant's substitute in storing the goods awaiting
transshipment.

(3) The bill of lading issued and delivered

to the plaintiff by the master of the said
steamship Bolton Castlecontained, 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

The actions of appellant carrier and of its

representative in the Philippines being in full faith
with the lawful stipulations of Bill of Lading No. 18
and in conformity with the provisions of the New

12

expressly stated herein and ad

valorem freight paid thereon.

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.

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.

The authorities relied upon by the plaintiffappellant (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.

(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.

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).

(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.

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."

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.

In the case of Union Pacific Railway

Co. vs. Burke, supra, the court said: "In many
cases, from the decision in Hartvs. 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."

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? 1awph!l.net
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

13

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."

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.)

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:

It follows from all of the foregoing that the

judgment appealed from should be affirmed,
without any finding as to costs. So ordered.
G.R. No. L-20099

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:

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.

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.

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.

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.

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

14

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.

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.

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.

xxx

2. The lower court erred in not dismissing

this case or limiting the liability of the
defendant-appellant to P100.00.

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.

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 abovementioned 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

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,

15

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.

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.

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 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:

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.

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;

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.

(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;

The law that may be invoked, in this connection is

Article 1750 of the New Civil Code which provides
as follows:

(5) Order or act of competent public

authority.1wph1.t
ART. 1735. In all cases other than those
mentioned in Nos. 1, 2, 3, 4 and 5 of the
preceding article, if the goods are lost,
destroyed or deteriorated, common carriers
are presumed to have been at fault or to
have acted negligently, unless they prove
that they observed extraordinary diligence
as required in Article 1733.

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."

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.

16

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.

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.

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.

G.R. No. L-40597 June 29, 1979

AGUSTINO B. ONG YIU, petitioner,
vs.
HONORABLE COURT OF APPEALS and
PHILIPPINE AIR LINES, INC., respondents.

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.

"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 commonlaw 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.

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.

"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

In the meantime, petitioner was worried about the

missing luggage because it contained vital

17

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.

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.

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 parentsin-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.

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.

Very trul

PHILIPPIN

(Sgd) JER
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 (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").

Branch S
Cebu
(Exhibit G, Folder of Exhibits)

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.

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").

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 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").

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

The following day, September 6, 1967, PAL sent its

reply hereinunder quoted verbatim:

18

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.

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

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.

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.

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.

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.

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

Art. 2220. Willful injury to property

may be a legal ground for awarding
moral damages if the court should
find that, under the circumstances,

19

such damages are justly due. The

same rule applies to breaches of
contract where the defendant
acted fraudulently or in bad faith.

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.

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

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.

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.

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.

There is no dispute that petitioner did not declare

any higher value for his luggage, much less did he
pay any additional transportation charge.

WHEREFORE, for lack of merit, the instant Petition

is hereby denied, and the judgment sought to be
reviewed hereby affirmed in toto.

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.

No costs.

20

SO ORDERED.

materials for said films on or before

the exhibition date on May
30,1978.

G.R. No. 70462 August 11, 1988

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).

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.

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.

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 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 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.

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

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.

21

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 47, Record On Appeal). [Rollo, pp.
27-29.]

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 inMendoza v.
Philippine Airlines [90 Phil. 836 (1952).]
The assigned errors shall be discussed seriatim
1. The airline ticket (Exh. "G') contains the
following conditions:
NOTICE

On the basis of these facts, the Court of First

Instance found petitioner liable and rendered
judgment as follows:

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.

(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;

CONDITIONS OF CONTRACT

(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;

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.

(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.

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.

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.

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

In assailing the decision of the Intermediate

Appellate Court petitioner assigned the following
errors:

22

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.

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.

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
baggageand $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.].

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

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:

23

offend against the policy of the law

forbidding one from contracting
against his own negligence."

...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.

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.

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.

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.

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.

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:

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
filmon 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.

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.

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

it prefaced this statement by explaining that:

24

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:

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.

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.

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.
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.

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.]

MELENCIO-HERRERA, J.:
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.

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 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.

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

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,

25

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.

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.

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.

Hence, this Petition for Review on certiorari by

Petitioner Carrier.
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.

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).

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 lowernumbered 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.

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.

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:

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.

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 is now before us on a Petition for

Review on Certiorari.
G.R. NO. 71478

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-ininterest on the trial of another action to which he is
a party, in favor of a party to the latter action. 3

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.

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?

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 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

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,

26

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 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

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.

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:

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. 15

(1) Flood, storm, earthquake,

lightning or other natural disaster
or calamity;
xxx xxx xxx

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

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.

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.

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.

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:

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

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

(b) Fire, unless caused by the

actual fault or privity of the carrier.
xxx xxx xxx

27

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.

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 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."

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.

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.

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.

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.

xxx xxx xxx

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."

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

28

We find no reversible error. The 128 cartons and

not the two (2) containers should be considered as
the shipping unit.

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.

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 carrierfurnished 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).

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

... 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

29

employed in
traditional on board
stowage.

Men's Garments Fabrics and

Accessories Freight Prepaid
Say: Two (2) Containers Only.

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.

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:

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.

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

(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)

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:

In this case, the Bill of Lading (Exhibit "A")

disclosed the following data:

xxx xxx xxx

2 Containers

Indeed, since after November 6,

1978, to August 27, 1979, not to
mention the time from June 27,
1978, when its answer was

(128) Cartons)

30

prepared and filed in Court, until

September 26, 1978, when the pretrial 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

G.R. No. 75118 August 31, 1987

SEA-LAND SERVICE, INC., petitioner,
vs.
INTERMEDIATE APPELLATE COURT and
PAULINO CUE, doing business under the name
and style of "SEN HIAP HING," respondents.

NARVASA, J.:
The main issue here is whether or not the
consignee of seaborne freight is bound by
stipulations in the covering bill of lading limiting to
a fixed amount the liability of the carrier for loss or
damage to the cargo where its value is not
declared in the bill.
The factual antecedents, for the most part, are not
in dispute.
On or about January 8, 1981, Sea-Land Service, Inc.
(Sea-Land for brevity), a foreign shipping and
forwarding company licensed to do business in the
Philippines, received from Seaborne Trading
Company in Oakland, California a shipment
consigned to Sen Hiap Hing the business name
used by Paulino Cue in the wholesale and retail
trade which he operated out of an establishment
located on Borromeo and Plaridel Streets, Cebu
City.

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

The shipper not having declared the value of the

shipment, no value was indicated in the bill of
lading. The bill described the shipment only as "8
CTNS on 2 SKIDS-FILES. 1 Based on volume
measurements Sea-land charged the shipper the
total amount of US$209.28 2 for freight age and
other charges. The shipment was loaded on board
the MS Patriot, a vessel owned and operated by
Sea-Land, for discharge at the Port Of Cebu.

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.

The shipment arrived in Manila on February 12,

1981, and there discharged in Container No.
310996 into the custody of the arrastre contractor
and the customs and port authorities. 3 Sometime
between February 13 and 16, 1981, after the
shipment had been transferred, along with other
cargoes to Container No. 40158 near Warehouse 3
at Pier 3 in South Harbor, Manila, awaiting transshipment to Cebu, it was stolen by pilferers and
has never been recovered. 4

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.

On March 10, 1981, Paulino Cue, the consignee,

made formal claim upon Sea-Land for the value of
the lost shipment allegedly amounting to
P179,643.48. 5 Sea-Land offered to settle for
US$4,000.00, or its then Philippine peso equivalent
of P30,600.00. asserting that said amount
represented its maximum liability for the loss of the
shipment under the package limitation clause in
the covering bill of lading. 6 Cue rejected the offer
and thereafter brought suit for damages against
Sea-Land in the then Court of First Instance of
Cebu, Branch X. 7 Said Court, after trial, rendered
judgment in favor of Cue, sentencing Sea-Land to
pay him P186,048.00 representing the Philippine
currency value of the lost cargo, P55,814.00 for

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.

31

unrealized profit with one (1%) percent monthly

interest from the filing of the complaint until fully
paid, P25,000.00 for attorney's fees and P2,000.00
as litigation expenses. 8

specific contract entered into by

the parties. In the present case, the
findings of the trial court which as
already stated, are accepted by the
parties and which we must accept
are to the effect that the LVN
Pictures Inc. and Jose Mendoza on
one side, and the defendant
company on the other, entered into
a contract of transportation (p. 29,
Rec. on Appeal). One interpretation
of said finding is that the LVN
Pictures Inc. through previous
agreement with Mendoza acted as
the latter's agent. When he
negotiated with the LVN Pictures
Inc. to rent the film "Himala ng
Birhen" and show it during the
Naga town fiesta, he most probably
authorized and enjoined the Picture
Company to ship the film for him
on the PAL on September 17th.
Another interpretation is that even
if the LVN Pictures Inc. as consignor
of its own initiative, and acting
independently of Mendoza for the
time being, made Mendoza as
consignee, a stranger to the
contract if that is possible,
nevertheless when he, Mendoza
appeared at the Phil Air Port armed
with the copy of the Air Way Bill
(Exh. 1) demanding the delivery of
the shipment to him, he thereby
made himself a party to the
contract of transportation. The very
citation made by appellant in his
memorandum supports this view.
Speaking of the possibility of a
conflict between the order of the
shipper on the one hand and the
order of the consignee on the
other, as when the shipper orders
the shipping company to return or
retain the goods shipped while the
consignee demands their delivery,
Malagarriga in his book Codigo de
Comercio Comentado, Vol. 1, p.
400, citing a decision of the
Argentina Court of Appeals on
commercial matters, cited by
Tolentino in Vol. II of his book
entitled "Commentaries and
Jurisprudence on the Commercial
Laws of the Philippines" p. 209,
says that the right of the shipper to
countermand the shipment
terminates when the consignee or
legitimate holder of the bill of
lading appears with such big of
lading before the carrier and makes
himself a party to the contract.
Prior to that time he is a stranger
to the contract.

Sea-Land appealed to the Intermediate Appellate

Court. 9 That Court however affirmed the decision
of the Trial Court xxx in all its parts ... . 10 SeaLand thereupon filed the present petition for review
which, as already stated, poses the question of
whether, upon the facts above set forth, it can be
held liable for the loss of the shipment in any
amount beyond the limit of US$600.00 per package
stipulated in the bill of lading.
To begin with, there is no question of the right, in
principle, of a consignee in a bill of lading to
recover from the carrier or shipper for loss of, or
damage to, goods being transported under said bill
,although that document may have been as in
practice it oftentimes is drawn up only by
the consignor and the carrier without the
intervention of the consignee. In Mendoza vs.
Philippine Air Lines, Inc. 11 the Court delved at
some length into the reasons behind this when,
upon a claim made by the consignee of a motion
picture film shipped by air that he was never a
party to the contract of transportation and was a
complete stranger thereto, it said:
But appellant now contends that he
is not suing on a breach of contract
but on a tort as provided for in Art.
1902 of the Civil Code. We are a
little perplexed as to this new
theory of the appellant. First, he
insists that the articles of the Code
of Commerce should be applied:
that he invokes the provisions of
aid Code governing the obligations
of a common carrier to make
prompt delivery of goods given to it
under a contract of transportation.
Later, as already said, he says that
he was never a party to the
contract of transportation and was
a complete stranger to it, and that
he is now suing on a tort or a
violation of his rights as a stranger
(culpa aquiliana) If he does not
invoke the contract of carriage
entered into with the defendant
company, then he would hardly
have any leg to stand on. His right
to prompt delivery of the can of
film at the Phil. Air Port stems and
is derived from the contract of
carriage under which contract, the
PAL undertook to carry the can of
film safely and to deliver it to him
promptly. Take away or ignore that
contract and the obligation to carry
and to deliver and right to prompt
delivery disappear. Common
carriers are not obligated by law to
carry and to deliver merchandise,
and persons are not vested with
the right to prompt delivery, unless
such common carriers previously
assume the obligation. Said rights
and obligations are created by a

Still another view of this phase of

the case is that contemplated in
Art. 1257, paragraph 2, of the old
Civil Code (now Art, 1311, second
paragraph) which reads thus:

32

Should the contract

contain any
stipulation in favor
of a third person,
he may demand its
fulfillment provided
he has given notice
of his acceptance
to the person
bound before the
stipulation has
been revoked.

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
Clause 22, first paragraph, of the long form bill of
lading customarily issued by Sea-Land to its
shipping clients 14 is a virtual copy of the first
paragraph of the foregoing provision. It says:

Here, the contract of carriage

between the LVN Pictures Inc. and
the defendant carrier contains the
stipulations of delivery to Mendoza
as consignee. His demand for the
delivery of the can of film to him at
the Phil Air Port may be regarded
as a notice of his acceptance of the
stipulation of the delivery in his
favor contained in the contract of
carriage and delivery. In this case
he also made himself a party to the
contract, or at least has come to
court to enforce it. His cause of
action must necessarily be founded
on its breach.

22. VALUATION. In the event of any

loss, damage or delay to or in
connection with goods exceeding in
actual value $500 per package,
lawful money of the United States,
or in case of goods not shipped in
packages, per customary freight
unit, the value of the goods shall
be deemed to be $500 per package
or per customary freight unit, as
the case may be, and the carrier's
liability, if any, shall be determined
on the basis of a value of $500 per
package or customary freight unit,
unless the nature and a higher
value shall be declared by the
shipper in writing before shipment
and inserted in this Bill of Lading.

Since the liability of a common carrier for loss of or

damage to goods transported by it under a
contract of carriage is governed by the laws of the
country of destination 12 and the goods in
question were shipped from the United States to
the Philippines, the liability of petitioner Sea-Land
to the respondent consignee is governed primarily
by the Civil Code, and as ordained by the said
Code, suppletorily, in all matters not determined
thereby, by the Code of Commerce and special
laws. 13 One of these suppletory special laws is
the Carriage of Goods by Sea Act, U.S. Public Act
No. 521 which was made applicable to all contracts
for the carriage of goods by sea to and from
Philippine ports in foreign trade by Commonwealth
Act No. 65, approved on October 22, 1936. Sec.
4(5) of said Act in part reads:

And in its second paragraph, the bill states:

If a value higher than $500 shag
have been declared in writing by
the shipper upon delivery to the
carrier and inserted in this bill of
lading and extra freight paid, if
required and in such case if the
actual value of the goods per
package or per customary freight
unit shall exceed such declared
value, the value shall nevertheless
be deemed to be declared value
and the carrier's liability, if any,
shall not exceed the declared value
and any partial loss or damage
shall be adjusted pro rata on the
basis of such declared value.

(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 the bill of
lading. This declaration, if
embodied in the bill of lading, shall
be prima facie evidence, but shall
not be conclusive on the carrier.

Since, as already pointed out, Article 1766 of the

Civil Code expressly subjects the rights and
obligations of common carriers to the provisions of
the Code of Commerce and of special laws in
matters not regulated by said (Civil) Code, the
Court fails to fathom the reason or justification for
the Appellate Court's pronouncement in its
appealed Decision that the Carriage of Goods by
Sea Act " ... has no application whatsoever in this
case. 15 Not only is there nothing in the Civil Code
which absolutely prohibits agreements between
shipper and carrier limiting the latter's liability for
loss of or damage to cargo shipped under contracts
of carriage; it is also quite clear that said Code in
fact has agreements of such character in

By agreement between the carrier,

master, or agent of the carrier, and

33

contemplation in providing, in its Articles 1749 and

1750, that:

the shipper or consignor, or his status as a stranger

in whose favor some stipulation is made in said
contract, and who becomes a party thereto when
he demands fulfillment of that stipulation, in this
case the delivery of the goods or cargo shipped. In
neither capacity can he assert personally, in bar to
any provision of the bill of lading, the alleged
circumstance that fair and free agreement to such
provision was vitiated by its being in such fine print
as to be hardly readable. Parenthetically, it may be
observed that in one comparatively recent
case 16 where this Court found that a similar
package limitation clause was "(printed in the
smallest type on the back of the bill of lading, it
nonetheless ruled that the consignee was bound
thereby on the strength of authority holding that
such provisions on liability limitation are as much a
part of a bill of lading as though physically in it and
as though placed therein by agreement of the
parties.

ART. 1749 A stipulation that the

common carrier's liability is limited
to the value of the goods appearing
in the bill of lading, unless the
shipper or owner declares a greater
value, is binding.
ART. 1750. A contract fixing the
sum that may be recovered by the
owner or shipper for the loss,
destruction, or deterioration of the
goods is valid, if it is reasonable
and just under the circumstances,
and has been fairly and freely
agreed upon.
Nothing contained in section 4(5) of the Carriage of
Goods by Sea Act already quoted is repugnant to or
inconsistent with any of the just-cited provisions of
the Civil Code. Said section merely gives more
flesh and greater specificity to the rather general
terms of Article 1749 (without doing any violence
to the plain intent thereof) and of Article 1750, to
give effect to just agreements limiting carriers'
liability for loss or damage which are freely and
fairly entered into.

There can, therefore, be no doubt or equivocation

about the validity and enforceability of freelyagreed-upon stipulations in a contract of carriage
or bill of lading limiting the liability of the carrier to
an agreed valuation unless the shipper declares a
higher value and inserts it into said contract or bill.
This pro position, moreover, rests upon an almost
uniform weight of authority. 17
The issue of alleged deviation is also settled by
Clause 13 of the bill of lading which expressly
authorizes trans-shipment of the goods at any
point in the voyage in these terms:

It seems clear that even if said section 4(5) of the

Carriage of Goods by Sea Act did not exist, the
validity and binding effect of the liability limitation
clause in the bill of lading here are nevertheless
fully sustainable on the basis alone of the cited
Civil Code provisions. That said stipulation is just
and reasonable is arguable from the fact that it
echoes Art. 1750 itself in providing a limit to
liability only if a greater value is not declared for
the shipment in the bill of lading. To hold otherwise
would amount to questioning the justice and
fairness of that law itself, and this the private
respondent does not pretend to do. But over and
above that consideration, the lust and reasonable
character of such stipulation is implicit in it giving
the shipper or owner the option of avoiding acrrual
of liability limitation by the simple and surely far
from onerous expedient of declaring the nature and
value of the shipment in the bill of lading. And
since the shipper here has not been heard to
complaint of having been "rushed," imposed upon
or deceived in any significant way into agreeing to
ship the cargo under a bill of lading carrying such a
stipulation in fact, it does not appear that said
party has been heard from at all insofar as this
dispute is concerned there is simply no ground
for assuming that its agreement thereto was not as
the law would require, freely and fairly sought and
given.

13. THROUGH CARGO AND

TRANSSHIPMENT. The carrier or
master, in the exercise of its or his
discretion and although
transshipment or forwarding of the
goods may not have been
contemplated or provided for
herein, may at port of discharge or
any other place whatsoever
transship or forward the goods or
any part thereof by any means at
the risk and expense of the goods
and at any time, whether before or
after loading on the ship named
herein and by any route, whether
within or outside the scope of the
voyage or beyond the port of
discharge or destination of the
goods and without notice to the
shipper or consignee. The carrier or
master may delay such
transshipping or forwarding for any
reason, including but not limited to
awaiting a vessel or other means of
transportation whether by the
carrier or others.

The private respondent had no direct part or

intervention in the execution of the contract of
carriage between the shipper and the carrier as set
forth in the bill of lading in question. As pointed out
in Mendoza vs. PAL, supra, the right of a party in
the same situation as respondent here, to recover
for loss of a shipment consigned to him under a bill
of lading drawn up only by and between the
shipper and the carrier, springs from either a
relation of agency that may exist between him and

Said provision obviates the necessity to offer any

other justification for offloading the shipment in
question in Manila for transshipment to Cebu City,
the port of destination stipulated in the bill of
lading. Nonetheless, the Court takes note of SeaLand's explanation that it only directly serves the
Port of Manila from abroad in the usual course of
voyage of its carriers, hence its maintenance of

34

arrangements with a local forwarder. Aboitiz and

Company, for delivery of its imported cargo to the
agreed final point of destination within the
Philippines, such arrangements not being
prohibited, but in fact recognized, by law. 18

current conversion rate of the dollar to the peso,

bear for its own account all of the increase in said
rate since the time of the offer of settlement. The
decision of the Regional Trial Court awarding the
private respondent P186,048.00 as the peso value
of the lost shipment is clearly based on a
conversion rate of P8.00 to US$1.00, said
respondent having claimed a dollar value of
$23,256.00 for said shipment. 24 All circumstances
considered, it is just and fair that Sea-Land's dollar
obligation be convertible at the same rate.

Furthermore, this Court has also ruled 19 that the

Carriage of Goods by Sea Act is applicable up to
the final port of destination and that the fact that
transshipment was made on an interisland vessel
did not remove the contract of carriage of goods
from the operation of said Act.

WHEREFORE, the Decision of the Intermediate

Appellate Court complained of is reversed and set
aside. The stipulation in the questioned bill of
lading limiting Sea-Land's liability for loss of or
damage to the shipment covered by said bill to
US$500.00 per package is held valid and binding
on private respondent. There being no question of
the fact that said shipment consisted of eight (8)
cartons or packages, for the loss of which Sea-Land
is therefore liable in the aggregate amount of
US$4,000.00, it is the judgment of the Court that
said petitioner discharge that obligation by paying
private respondent the sum of P32,000.00, the
equivalent in Philippine currency of US$4,000.00 at
the conversion rate of P8.00 to $1.00. Costs
against private respondent.

Private respondent also contends that the

aforecited Clauses 22 and 13 of the bill of lading
relied upon by petitioner Sea Land form no part of
the short-form bill of lading attached to his
complaint before the Trial Court and appear only in
the long form of that document which, he claims.
SeaLand offered (as its Exhibit 2) as an unused
blank form with no entries or signatures therein.
He, however, admitted in the Trial Court that
several times in the past shipments had been
delivered to him through Sea-Land, 20 from which
the assumption may fairly follow that by the time
of the consignment now in question, he was
already reasonably apprised of the usual terms
covering contracts of carriage with said petitioner.
At any rate, as observed earlier, it has already
been held that the provisions of the Carriage of
Goods by Sea Act on package limitation [sec 4(5) of
the Act hereinabove referred to] are as much a part
of a bill of lading as though actually placed therein
by agreement of the parties. 21
Private respondent, by making claim for loss on the
basis of the bill of lading, to all intents and
purposes accepted said bill. Having done so, he
... becomes bound by all
stipulations contained therein
whether on the front or the back
thereof. Respondent cannot elude
its provisions simply because they
prejudice him and take advantage
of those that are beneficial.
Secondly, the fact that respondent
shipped his goods on board the
ship of petitioner and paid the
corresponding freight thereon
shows that he impliedly accepted
the bill of lading which was issued
in connection with the shipment in
question, and so it may be said
that the same is finding upon him
as if it had been actually signed by
him or by any other person in his
behalf. ... 22.
There is one final consideration. The private
respondent admits 23 that as early as on April 22,
1981, Sea-Land had offered to settle his claim for
US$4,000.00, the limit of said carrier's liability for
loss of the shipment under the bill of lading. This
Court having reached the conclusion that said sum
is all that is justly due said respondent, it does not
appear just or equitable that Sea-Land, which
offered that amount in good faith as early as six
years ago, should, by being made to pay at the

35