EN BANCG.R. No. L-16598 October 3, 1921H. E. HEACOCK COMPANY,plaintiff-appellant,
vs.
MACONDRAY & COMPANY, INC.,defendant-appellant.Fisher & DeWitt for plaintiff-appellant.
Wolfson, Wolfson & Schwarzkopf for defendant-appellant.JOHNSON,J.:This action was commenced in the Court of First Instance of the City of Manila to recover the sum of P240 together with interest thereon. The facts are stipulated by the parties, and are, briefly, as follows:(1) On or about the 5th day of June, 1919, the plaintiff caused to be delivered on board of steamshipBolton Castle, then in the harbor of New York, four cases of merchandise one of which contained twelve (12) 8-day Edmond clocks properly boxed and marked for transportation to Manila, and paid freight on said clocks from New York to Manila in advance. The said steampship arrived in the port of Manila on or about the 10th day of September, 1919, consigned to the defendant herein as agent and representative of said vessel in said port. Neither the master of said vessel nor the defendant herein, as its agent, delivered to the plaintiff the aforesaid twelve 8-day Edmond clocks, although demand was made upon them for their delivery.(2) The invoice value of the said twelve 8-day Edmond clocks in the city of New York was P22 and the market value of the same in the City of Manila at the time when they should have been delivered to the plaintiff was P420.(3) The bill of lading issued and delivered to the plaintiff by the master of the said steamshipBolton Castlecontained, among others, the following clauses:1.It is mutually agreedthat the value of the goods receipted for above does not exceed $500 per freight ton, or, in proportion for any part of a ton, unless the value be expressly stated herein and ad valorem freight paid thereon.9.Also, that in the event of claims for short delivery of, or damage to, cargo being made, the carrier shall not be liable for more than the net invoice price plus freight and insurance less all charges saved, and any loss or damage for which the carrier may be liable shall be adjusted pro rata on the said basis.(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.

(5) No greater value than $500, U. S. currency, per freight ton was declared by the plaintiff on the aforesaid clocks, and no ad valorem freight was paid thereon.(6) On or about October 9, 1919, the defendant tendered to the plaintiff P76.36, the proportionate freight ton value of the aforesaid twelve 8-day Edmond clocks, in payment of plaintiff's claim, which tender plaintiff rejected.The lower court, in accordance with clause 9 of the bill of lading above quoted, rendered judgment in favor of the plaintiff against the defendant for the sum of P226.02, this being the invoice value of the clocks in question plus the freight and insurance thereon, with legal interest thereon from November 20, 1919, the date of the complaint, together with costs. From that judgment both parties appealed to this court.The plaintiff-appellant insists that it is entitled to recover from the defendant the market value of the clocks in question, to wit: the sum of P420. The defendant-appellant, on the other hand, contends that, in accordance with clause 1 of the bill of lading, the plaintiff is entitled to recover only the sum of P76.36, the proportionate freight ton value of the said clocks. The claim of the plaintiff is based upon the argument that the two clause in the bill of lading above quoted, limiting the liability of the carrier, are contrary to public order and, therefore, null and void. The defendant, on the other hand, contends that both of said clauses are valid, and the clause 1 should have been applied by the lower court instead of clause 9.I. The appeal of the plaintiff presents this question; May a common carrier, by stipulations inserted in the bill of lading, limit its liability for the loss of or damage to the cargo to an agreed valuation of the latter?1awph!l.netThree kinds of stipulations have often been made in a bill of lading. Thefirstis one exempting the carrier from any and all liability for loss or damage occasioned by its own negligence. Thesecondis one providing for an unqualified limitation of such liability to an agreed valuation. And thethirdis one limiting the liability of the carrier to an agreed valuation unless the shipper declares a higher value and pays a higher rate of freight. According to an almost uniform weight of authority, the first and second kinds of stipulations are invalid as being contrary to public policy, but the third is valid and enforceable.The authorities relied upon by the plaintiff-appellant (the Harter Act [Act of Congress of February 13, 1893]: Louisville Ry. Co.vs.Wynn, 88 Tenn., 320; and Galtvs.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 itsnegligence, or provide for an unqualified limitation of such liability to an agreed valuation.A reading of clauses 1 and 9 of the bill of lading here in question, however, clearly shows that the present case falls within the third stipulation, to wit: That a clause in a bill of lading limiting the liability of the carrier to a certain amount unless the shipper declares a higher value and pays a higher rate of freight, is valid and enforceable. This proposition is supported by a uniform lien of decisions of the Supreme Court of the United States rendered both prior and subsequent to the passage of the Harter Act, from the case of Hartvs.Pennsylvania R. R. Co. (decided Nov. 24, 1884; 112 U. S., 331), to the case of theUnion Pacific Ry. Co.vs.Burke (decided Feb. 28, 1921, Advance Opinions, 1920-1921, p. 318).In the case of Hartvs.Pennsylvania R. R. Co.,supra, it was held that "where a contract of carriage, signed by the shipper, is fairly made with a railroad company, agreeing on a valuation of the property carried, with the rate of freight based on the condition that the carrier assumes liability only to the extent of the agreed valuation, even in case of loss or damage by the negligence of the carrier, the contract will be upheld as proper and lawful mode of securing a due proportion between the amount for which the carrier may be responsible and the freight he receives, and protecting himself against extravagant and fanciful valuations."In the case of Union Pacific Railway Co.vs.Burke,supra, the court said: "In many cases, from the decision in 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."The syllabus of the same case reads as follows: "A carrier may not, by a valuation agreement with a shipper, limit its liability in case of the loss by negligence of an interstate shipment to less than the real value thereof, unless the shipper is given a choice of rates, based on valuation."A limitation of liability based upon an agreed value to obtain a lower rate does not conflict with any sound principle of public policy; and it is not conformable to plain principles of justice that a shipper may understate value in order to reduce the rate and then recover a larger value in case of loss. (Adams Express Co.vs.Croninger 226 U. S. 491, 492.) See also Reidvs.Farbo (130 C. C. A., 285); Jenningsvs.Smith (45 C. C. A., 249); George N. Pierce Co.vs.Wells, Fargo and Co. (227 U. S., 278); Wells, Fargo & Co.vs.Neiman-Marcus Co. (227 U. S., 469).It seems clear from the foregoing authorities that the clauses (1 and 9) of the bill of lading here in question are not contrary to public order. Article 1255 of the Civil Code provides that "the contracting parties may establish any agreements, terms and conditions they may deem advisable, provided they are not contrary to law, morals or public order." Said clauses of the bill of lading are, therefore, valid and binding upon the parties thereto.II. The question presented by the appeal of the defendant is whether clause 1 or clause 9 of the bill of lading here in question is to be adopted as the measure of defendant's liability. Clause 1 provides as follows:1.It is mutually agreedthat the value of the goods receipted for above does not exceed $500 per freight ton, or, in proportion for any part of aton, unless the value be expressly stated herein and ad valorem freight paid thereon. Clause 9 provides:9.Also, that in the even of claims for short delivery of, or damage to, cargo being made, the carrier shall not be liable for more than the net invoice price plus freight and insurance less all charges saved, and any loss or damage for which the carrier may be liable shall be adjusted pro rata on the said basis.The defendant-appellant contends that these two clauses, if construed together, mean that the shipper and the carrier stipulate and agree that the value of the goods receipted for does not exceed $500 per freight ton, but should the invoice value of the goods be less than $500 per freight ton, then the invoice value governs; that since in this case the invoice value is more than $500 per freight ton, the latter valuation should be adopted and that according to that valuation, the proportionate value of the clocks in question is only P76.36 which the defendant is ready and willing to pay to the plaintiff.It will be noted, however, that whereas clause 1 contains only animpliedundertaking to settle in case of loss on the basis of not exceeding $500 per freight ton, clause 9 contains anexpressundertaking 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 liableshallbe adjustedpro rataon the said basis," clause 9 expressly provides. It seems to us that there is an irreconcilable conflict between the two clauses with regard to the measure of defendant's liability. It is difficult to reconcile them without doing violence to the language used and reading exceptions and conditions into the undertaking contained in clause 9 that are not there. This being the case, the bill of lading in question should be interpreted against the defendant carrier, which drew said contract. "A written contract should, in case of doubt, be interpreted against the party who has drawn the contract." (6 R. C. L. 854.) It is a well-known principle of construction that ambiguity or uncertainty in an agreement must be construed most strongly against the party causing it. (6 R. C. L., 855.) These rules as applicable to contracts contained in bills of lading. "In construing a bill of lading given by the carrier for the safe transportation and delivery of goods shipped by a consignor, the contract will be construed most strongly against the carrier, and favorably to the consignor, in case of doubt in any matter of construction." (Alabama, etc. R. R. Co.vs.Thomas, 89 Ala., 294; 18 Am. St. Rep., 119.)It follows from all of the foregoing that the judgment appealed from should be affirmed, without any finding as to costs. So ordered.Araullo, street, Avancea and Villamor, JJ., concur.

FIRST DIVISIONG.R. No. L-40597 June 29, 1979AGUSTINO 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.The facts are as follows:On August 26, 1967, petitioner was a fare paying passenger of respondent Philippine Air Lines, Inc. (PAL), on board Flight No. 463-R, from Mactan Cebu, bound for Butuan City. He was scheduled to attend the trial of Civil Case No. 1005 and Spec. Procs. No. 1125 in the Court of First Instance, Branch II, thereat, set for hearing on August 28-31, 1967. As a passenger, he checked in one piece of luggage, a blue "maleta" for which he was issued Claim Check No. 2106-R (Exh. "A"). The plane left Mactan Airport, Cebu, at about 1:00 o'clock P.M., and arrived at Bancasi airport, Butuan City, at past 2:00 o'clock P.M., of the same day. Upon arrival, petitioner claimed his luggage but it could not be found. According to petitioner, it was only after reacting indignantly to the loss that the matter was attended to by the porter clerk, Maximo Gomez, which, however, the latter denies, At about 3:00 o'clock P.M., PAL Butuan, sent a message to PAL, Cebu, inquiring about the missing luggage, which message was, in turn relayed in full to the Mactan Airport teletype operator at 3:45 P.M. (Exh. "2") that same afternoon. It must have been transmitted to Manila immediately, for at 3:59 that same afternoon, PAL Manila wired PAL Cebu advising that the luggage had been over carried to Manila aboard Flight No. 156 and that it would be forwarded to Cebu on Flight No. 345 of the same day. Instructions were also given that the luggage be immediately forwarded to Butuan City on the first available flight (Exh. "3"). At 5:00 P.M. of the same afternoon, PAL Cebu sent a message to PAL Butuan that the luggage would be forwarded on Fright No. 963 the following day, August 27, 196'(. However, this message was not received by PAL Butuan as all the personnel had already left since there were no more incoming flights that afternoon.In the meantime, petitioner was worried about the missing luggage because it contained vital documents needed for trial the next day. At 10:00 o'clock that evening, petitioner wired PAL Cebu demanding the delivery of his baggage before noon the next day, otherwise, he would hold PAL liable for damages, and stating that PAL's gross negligence had caused him undue inconvenience, worry, anxiety and extreme embarrassment (Exh. "B"). This telegram was received by the Cebu PAL supervisor but the latter felt no need to wire petitioner that his luggage had already been forwarded on the assumption that by the time the message reached Butuan City, the luggage would have arrived.Early in the morning of the next day, August 27, 1967, petitioner went to the Bancasi Airport to inquire about his luggage. He did not wait, however, for the morning flight which arrived at 10:00 o'clock that morning. This flight carried the missing luggage. The porter clerk, Maximo Gomez, paged petitioner, but the latter had already left. A certain Emilio Dagorro a driver of a "colorum" car, who also used to drive for petitioner,volunteered to take the luggage to petitioner. As Maximo Gomez knew Dagorro to be the same driver used by petitioner whenever the latter was in Butuan City, Gomez took the luggage and placed it on the counter. Dagorro examined the lock, pressed it, and it opened. After calling the attention of Maximo Gomez, the "maleta" was opened, Gomez took a look at its contents, but did not touch them. Dagorro then delivered the "maleta" to petitioner, with the information that the lock was open. Upon inspection, petitioner found that a folder containing certain exhibits, transcripts and private documents in Civil Case No. 1005 and Sp. Procs. No. 1126 were missing, aside from two gift items for his parents-in-law. Petitioner refused to accept the luggage. Dagorro returned it to the porter clerk, Maximo Gomez, who sealed it and forwarded the same to PAL Cebu.Meanwhile, petitioner asked for postponement of the hearing of Civil Case No. 1005 due to loss of his documents, which was granted by the Court (Exhs. "C" and "C-1"). Petitioner returned to Cebu City on August 28, 1967. In a letter dated August 29, 1967 addressed to PAL, Cebu, petitioner called attention to his telegram (Exh. "D"), demanded that his luggage be produced intact, and that he be compensated in the sum of P250,000,00 for actual and moral damages within five days from receipt of the letter, otherwise, he would be left with no alternative but to file suit (Exh. "D").On August 31, 1967, Messrs. de Leon, Navarsi, and Agustin, all of PAL Cebu, went to petitioner's office to deliver the "maleta". In the presence of Mr. Jose Yap and Atty. Manuel Maranga the contents were listed and receipted for by petitioner (Exh. "E").On September 5, 1967, petitioner sent a tracer letter to PAL Cebu inquiring about the results of the investigation which Messrs. de Leon, Navarsi, and Agustin had promised to conduct to pinpoint responsibility for the unauthorized opening of the "maleta" (Exh. "F").The following day, September 6, 1967, PAL sent its reply hereinunder quoted verbatim:Dear Atty. Ong Yiu:This is with reference to your September 5, 1967, letter to Mr. Ricardo G. Paloma, Acting Manager, Southern Philippines.First of all, may we apologize for the delay in informing you of the result of our investigation since we visited you in your office last August 31, 1967. Since there are stations other than Cebu which are involved in your case, we have to communicate and await replies from them. We regret to inform you that to date we have not found the supposedly lost folder of papers nor have we been able to pinpoint the personnel who allegedly pilferred your baggage.You must realize that no inventory was taken of the cargo upon loading them on any plane. Consequently, we have no way of knowing the real contents of your baggage when same was loaded.We realized the inconvenience you encountered of this incident but we trust that you will give us another opportunity to be of better service to you.Very truly yours,PHILIPPINE AIR LINES, INC.(Sgd) JEREMIAS S. AGUSTINBranch SupervisorCebu(Exhibit G, Folder of Exhibits)1On September 13, 1967, petitioner filed a Complaint against PAL for damages for breach of contract of transportation with the Court of First Instance of Cebu, Branch V, docketed as Civil Case No. R-10188, which PAL traversed. After due trial, the lower Court found PAL to have acted in bad faith and with malice and declared petitioner entitled to moral damages in the sum of P80,000.00, exemplary damages of P30,000.00, attorney's fees of P5,000.00, and costs.Both parties appealed to the Court of Appeals petitioner in so far as he was awarded only the sum of P80,000.00 as moral damages; and defendant because of the unfavorable judgment rendered against it.On August 22, 1974, the Court of Appeals,* finding that PAL was guilty only of simple negligence, reversed the judgment of the trial Court granting petitioner moral and exemplary damages, but ordered PAL to pay plaintiff the sum of P100.00, the baggage liability assumed by it under the condition of carriage printed at the back of the ticket.Hence, this Petition for Review by Certiorari, filed on May 2, 1975, with petitioner making the following Assignments of Error:I. THE HONORABLE COURT OF APPEALS ERRED IN HOLDING RESPONDENT PAL GUILTY ONLY OF SIMPLE NEGLIGENCE ANDNOT BAD FAITH IN THE BREACH OF ITS CONTRACT OF TRANSPORTATION WITH PETITIONER.II. THE HONORABLE COURT OF APPEALS MISCONSTRUED THE EVIDENCE AND THE LAW WHEN IT REVERSED THE DECISION OF THE LOWER COURT AWARDING TO PETITIONER MORAL DAMAGES IN THE AMOUNT OF P80,000.00, EXEMPLARY DAMAGES OF P30,000.00, AND P5,000.00 REPRESENTING ATTORNEY'S FEES, AND ORDERED RESPONDENT PAL TO COMPENSATE PLAINTIFF THE SUM OF P100.00 ONLY, CONTRARY TO THE EXPLICIT PROVISIONS OF ARTICLES 2220, 2229, 2232 AND 2234 OF THE CIVIL CODE OF THE PHILIPPINES.On July 16, 1975, this Court gave due course to the Petition.There is no dispute that PAL incurred in delay in the delivery of petitioner's luggage. The question is the correctness of respondent Court's conclusion that there was no gross negligence on the part of PAL and that it had not acted fraudulently or in bad faith as to entitle petitioner to an award of moral and exemplary damages.From the facts of the case, we agree with respondent Court that PAL had not acted in bad faith. Bad faith means a breach of a known duty through some motive of interest or ill will.2It was the duty of PAL to look for petitioner's luggage which had been miscarried. PAL exerted due diligence in complying with such duty.As aptly stated by the appellate Court:We do not find any evidence of bad faith in this. On the contrary, We find that the defendant had exerted diligent effort to locate plaintiff's baggage. The trial court saw evidence of bad faith because PAL sent the telegraphic message to Mactan only at 3:00 o'clock that same afternoon, despite plaintiff's indignation for the non-arrival of his baggage. The message was sent within less than one hour after plaintiff's luggage could not be located. Efforts had to be exerted to locate plaintiff's maleta. Then the Bancasi airport had to attend to other incoming passengers and to the outgoing passengers. Certainly, no evidence of bad faith can be inferred from these facts. Cebu office immediately wired Manila inquiring about the missing baggage of the plaintiff. At 3:59 P.M., Manila station agent at the domestic airport wired Cebu that the baggage was over carried to Manila. And this message was received in Cebu one minute thereafter, or at 4:00 P.M. The baggage was in fact sent back to Cebu City that same afternoon. His Honor stated that the fact that the message was sent at 3:59 P.M. from Manila and completely relayed to Mactan at 4:00 P.M., or within one minute, made the message appear spurious. This is a forced reasoning. A radio message of about 50 words can be completely transmitted in even less than one minute depending upon atmospheric conditions. Even if the message was sent from Manila or other distant places, the message can be received within a minute. that is a scientific fact which cannot be questioned.3Neither was the failure of PAL Cebu to reply to petitioner's rush telegram indicative of bad faith, The telegram (Exh. B) was dispatched by petitioner at around 10:00 P.M. of August 26, 1967. The PAL supervisor at Mactan Airport was notified of it only in the morning of the following day. At that time the luggage was already to be forwarded to Butuan City. There was no bad faith, therefore, in the assumption made by said supervisor that the plane carrying the bag would arrive at Butuan earlier than a reply telegram. Had petitioner waited or caused someone to wait at the Bancasi airport for the arrival of the morning flight, he would have been able to retrieve his luggage sooner.In the absence of a wrongful act or omission or of fraud or bad faith, petitioner is not entitled to moral damages.Art. 2217. Moral damages include physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury. Though incapable of pecuniary computation, moral damages may be recovered if they are the proximate result of the defendant's wrongful act of omission.Art. 2220. Willful injury to property may be a legal ground for awarding moral damages if the court should find that, under the circumstances, such damages are justly due. The same rule applies to breaches of contract where the defendant acted fraudulently or in bad faith.Petitioner is neither entitled to exemplary damages. In contracts, as provided for in Article 2232 of the Civil Code, exemplary damages can be granted if the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner, which has not been proven in this case.Petitioner further contends that respondent Court committed grave error when it limited PAL's carriage liability to the amount of P100.00 as stipulated at the back of the ticket. In this connection, respondent Court opined:As a general proposition, the plaintiff's maleta having been pilfered while in the custody of the defendant, it is presumed that the defendant had been negligent. The liability, however, of PAL for the loss, in accordance with the stipulation written on the back of the ticket, Exhibit 12, is limited to P100.00 per baggage, plaintiff not having declared a greater value, and not having called the attention of the defendant on its true value and paid the tariff therefor. The validity of this stipulation is not questioned by the plaintiff. They are printed in reasonably and fairly big letters, and are easily readable. Moreover, plaintiff had been a frequent passenger of PAL from Cebu to Butuan City and back, and he, being a lawyer and businessman, must be fully aware of these conditions.4We 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 highervaluation in excess of P100.00, but not in excess, however, of a total valuation of P1,000.00 and additional charges are paid pursuant to Carrier's tariffs.There is no dispute that petitioner did not declare any higher value for his luggage, much less did he pay any additional transportation charge.But petitioner argues that there is nothing in the evidence to show that he had actually entered into a contract with PAL limiting the latter's liability for loss or delay of the baggage of its passengers, and that Article 1750* of the Civil Code has not been complied with.While it may be true that petitioner had not signed the plane ticket (Exh. "12"), he is nevertheless bound by the provisions thereof. "Such provisions have been held to be a part of the contract of carriage, and valid and binding upon the passenger regardless of the latter's lack of knowledge or assent to the regulation".5It 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.6And as held in Randolph v. American Airlines, 103 Ohio App. 172, 144 N.E. 2d 878; Rosenchein vs. Trans World Airlines, Inc., 349 S.W. 2d 483, "a contract limiting liability upon an agreed valuation does not offend against the policy of the law forbidding one from contracting against his own negligence.Considering, therefore, that petitioner had failed to declare a higher value for his baggage, he cannot be permitted a recovery in excess of P100.00.Besides, passengers are advised not to place valuable items inside their baggage but "to avail of our V-cargo service " (Exh. "1"). I t is likewise to be noted that there is nothing in the evidence to show the actual value of the goods allegedly lost by petitioner.There is another matter involved, raised as an error by PAL the fact that on October 24, 1974 or two months after the promulgation of the Decision of the appellate Court, petitioner's widow filed a Motion for Substitution claiming that petitioner died on January 6, 1974 and that she only came to know of the adverse Decision on October 23, 1974 when petitioner's law partner informed her that he received copy of the Decision on August 28, 1974. Attached to her Motion was an Affidavit of petitioner's law partner reciting facts constitutive of excusable negligence. The appellate Court noting that all pleadings had been signed by petitioner himself allowed the widow "to take such steps as she or counsel may deem necessary." She then filed a Motion for Reconsideration over the opposition of PAL which alleged that the Court of Appeals Decision, promulgated on August 22, 1974, had already become final and executory since no appeal had been interposed therefrom within the reglementary period.Under the circumstances, considering the demise of petitioner himself, who acted as his own counsel, it is best that technicality yields to the interests of substantial justice. Besides, in the 'last analysis, no serious prejudice has been caused respondent PAL.In fine, we hold that the conclusions drawn by respondent Court from the evidence on record are not erroneous.WHEREFORE, for lack of merit, the instant Petition is hereby denied, and the judgment sought to be reviewed hereby affirmedin toto.No costs.SO ORDERED.Teehankee, (Chairman), Makasiar, Fernandez, Guerrero and De Castro, JJ., concur.#Footnotes1 pp. 47-48, Rollo.* Decision penned by Justice Jose Leuterio, with Justice Roseller Lim and Francisco Tantuico, Jr., concurring.2 Air France vs. Carrascoso, 18 SCRA 166 (1966); Lopez vs. Pan American World Airways, 16 SCRA 431 (1966).3 pp. 12-13, Decision. on pp. 53-54, Rollo.4 pp. 8-9, Decision on pp. 27-28, Rollo.* A contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction, or deterioration of the goods is valid, if it is reasonable and just under the circumstances, and has been fairly and freely agreed upon.5 Tannebaum v. National Airline, Inc. 13 Misc. 2d 450, 176 N.Y.S. 2d 400; Lichten vs. Eastern Airlines, 87 Fed. Supp. 691; Migoski v. Eastern Air Lines, Inc., Fla. 63 So. 2d 634.6 Tolentino, Civil Code, Vol. IV, 1962 ed., p, 462, citing Mr. Justice J.B.L. Reyes, Lawyer's Journal, Jan. 31, 195 1, p. 49.

Ong Yui vs. CA Case Digest(91 SCRA 223)

Facts:On august 26, 1967, Ong Yiu was a fare paying passenger of respondent PAL from Mactan, Cebu to Butuan City wherein he was scheduled to attend a trial. As a passenger, he checked in one piece of luggae, blue maleta for which he was issued a claim ticket. Upon arrival at Butuan City, petitioner claimed his luggage but it could not be found. PAL Butuan sent a message to PAL Cebu which in turn sent a message to PAL Manila that same afternoon. PAL Manila advised PAL Cebu that the luggage has been overcarried to Manila and that it would be forwarded to PAL Cebu that same day. PAL Cebu then advised PAL Butuan that the luggage will be forwarded the following day, on scheduled morning flight. This message was not received by PAL Butuan as all the personnel had already gone for the day. Meanwhile, Ong Yiu was worried about the missing luggage because it contained vital documents needed for the trial the next day so he wired PAL Cebu demanding delivery of his luggage before noon that next day or he would hold PAL liable for damages based on gross negligence. Early morning, petitioner went to the Butuan Airport to inquire about theluggage but did not wait for the arrival of the morning flight at 10:00am. which carried his luggage. A certain Dagorro, a driver of a colorum car, who also used to drive the petitioner volunteered to take the luggage to the petitioner. He revelaed that the documents were lost. Ong Yiu demanded from PAL Cebu actual and compensatory damages as an incident of breach of contract of carriage.

Issue:Whether or not PAL is guilty of only simple negligence and not gross negligence?

Whether the doctrine of limited liability doctrine applies in the instant case?

Held:PAL had not acted in bad faith. It exercised due diligence in looking for petitioners luggage which had been miscarried. Had petitioner waited or caused someone to wait at the airport for the arrival of the morning flight which carried his luggage, he would have been able to retrieve his luggage sooner. In the absence of a wrongful act or omission or fraud, the petitioner is not entitled to moral damages. Neither is he entitled to exemplary damages absent any proof that the defendant acted in a wanton, fraudulent, reckless manner.

The limited liability applies in this case. On the presumed negligence of PAL, its liability for the loss however, is limited on the stipulation written on the back of the plane

Ticket which is P100 per baggage. The petitioner not having declared a greater value and not having called the attention of PAL on its true value and paid the tariff therefore. The stipulation is printed in reasonably and fairly big letters and is easily readable. Moreso, petitioner had been a frequent passenger of PAL from Cebu to Butuan City and back and he being a lawyer and a businessman, must be fully aware of these conditions.

FIRST DIVISIONG.R. No. 75118 August 31, 1987SEA-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.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.1Based on volume measurements Sea-land charged the shipper the total amount of US$209.282for 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.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.3Sometime 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 trans-shipment to Cebu, it was stolen by pilferers and has never been recovered.4On March 10, 1981, Paulino Cue, the consignee, made formal claim upon Sea-Land for the value of the lost shipment allegedly amounting to P179,643.48.5Sea-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.6Cue rejected the offer and thereafter brought suit for damages against Sea-Land in the then Court of First Instance of Cebu, Branch X.7Said 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 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.8Sea-Land appealed to the Intermediate Appellate Court.9That Court however affirmed the decision of the Trial Court xxx in all its parts ... .10Sea-Land 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 aconsigneein 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 theconsignor and the carrierwithout the intervention of theconsignee.InMendoza vs. Philippine Air Lines, Inc.11the Court delved at some length into the reasons behind this when, upon a claim made by theconsigneeof a motion picture film shipped by air thathe 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 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 thegoods 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.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: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.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.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 destination12and 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.13One 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:(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.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 lessthan the figure above named. In no event shall the carrier be liable for more than the amount of damage actually sustained.xxx xxx xxxClause 22, first paragraph, of the long form bill of lading customarily issued by Sea-Land to its shipping clients14is a virtual copy of the first paragraph of the foregoing provision. It says: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.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.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.15Not 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 contemplation in providing, in its Articles 1749 and 1750, that: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.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.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 inMendoza 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 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 case16where 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.There can, therefore, be no doubt or equivocation about the validity and enforceability of freely-agreed-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.17The 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: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 providedfor 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.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 Sea-Land'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 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.18Furthermore, this Court has also ruled19that 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.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,20from 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.21Private 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 admits23that 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 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.24All circumstances considered, it is just and fair that Sea-Land's dollar obligation be convertible at the same rate.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.SO ORDERED.Teehankee, C.J., Cruz, Paras and Gancayco, JJ., concur.Footnotes1 Exhibits 1, 1-B: TSN Dec. 14, 1982, pp. 19-20.2 Petition, p. 2; Rollo, p. 11.3 Exhibits 6, 6-A: TSN Jan. 26, 1983, pp. 18-204 Exhibits E 3-A, 4, 8 and 9; TSNId.5 Exhibit F.6 Exhibits 2, 2-A.7 Civil Case No. 20810.8 Rollo, p. 21.9 AC-G.R. CV No. 06150.10 Rollo, p. 12, 21-32.11 90 Phil 836, 845-846; see also American Express Co. vs. Natividad, 46 Phil. 207 and Phoenix Assurance Co., Ltd. vs. United States Lines, 22 SCRA 675.12 Art. 1753, Civil Code.13 Art. 1766, Civil Code, Samar Mining Co., Inc. vs. Nordeutscher Lloyd, 132 SCRA 529; Eastern Shipping Lines, Inc. vs. The Nisshin Fire & Marine Insurance Co., et al., G. R. Nos. 69044 and 71478, May 29,1987.14 Exhibit 2.15 Rollo, pp. 26-27.16 Phoenix Assurance Company vs. Macondray & Co., Inc., 64 SCRA 15, May 15,1973.17 Freixas and Co. vs. Pacific Mail Steamship Co., 42 Phil. 198; H.E. Heacock Co. vs. Macondray & Co., 43 Phil. 205; American President Lines vs. Klepper infra; Phoenix Assurance Co. vs. Macondray & Co., supra.18 Art. 373, Code of Commerce.19 American Insurance Company vs. Compaia Maritima, 21 SCRA 998.20 Reply to Comment, p. 11, Rollo, p. 87, citing TSN, Sept. 1, 1982.21 Phoenix Assurance Company vs. Macondray & Companysupra, citing Shackman vs. Cunard White Star, D.C.N.Y. 1940; see also Eastern Shipping Lines, Inc. vs. IAC,supra, which cites the same American case.22 American President Lines vs. Klepper supra.23 Appellee's brief, p. 6; Rollo, p. 53.24 Appellee's Brief, p. 5; Rollo, p. 53.

Sea-Land Service, Inc. v. Intermediate Appellate Court (153 SCRA 552 )Facts:Sea-Land, a foreign shipping and forwarding company licensed to do business in the Philippines, received from Sea-borne TradingCompany in California, a shipment consigned to Sen Hiap Hing, thebusiness nameused by Cue. The shipper not having declared the value ofthe shipment, no value was indicated in thebill of lading.The shipmentwas discharged in Manila, and while awaiting transshipment to Cebu, thecargowas stolen and never recovered.

The trial court sentenced Sea-Land to pay Cue P186,048 representing the Philippinecurrency valueof the lostcargo, P55, 814 for unrealized profit and P25,000 for attorneys fees. CA affirmed the trial courts decision.

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

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

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

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

The stipulation in thebill of ladinglimiting the liability of Sea-Land for loss or damages tothe shipmentcovered by said rule to US$500 per package unless the shipper declares the value ofthe shipmentand pays additional charges is valid and binding on Cue.

SECOND DIVISIONG.R. No. 88092 April 25, 1990CITADEL LINES, INC.,petitioner,
vs.
COURT OF APPEALS*and MANILA WINE MERCHANTS, INC.,respondents.Del Rosario & Del Rosario Law Offices for petitioner.
Limqueco and Macaraeg Law Office for private respondent.

REGALADO,J.:Through this petition, we are asked to review the decision of the Court of Appeals dated December 20, 1988, in CA-G.R. No. CV-10070,1which affirmed the August 30, 1985 decision of the Regional Trial Court of Manila, Branch 27, in Civil Case No. 126415, entitled Manila Wine Merchants, Inc. vs. Citadel Lines,Inc. and E. Razon, Inc., with a modification by deleting the award of attorney's fees and costs of suit.The following recital of the factual background of this case is culled from the findings in the decision of the courta quoand adopted by respondent court based on the evidence of record.Petitioner Citadel Lines, Inc. (hereafter referred to as the CARRIER) is the general agent of the vessel "Cardigan Bay/Strait Enterprise," while respondent Manila Wine Merchants, Inc. (hereafter, the CONSIGNEE) is the importer of the subject shipment of Dunhill cigarettes from England.On or about March 17, 1979, the vessel "Cardigan Bay/Strait Enterprise" loaded on board at Southampton, England, for carriage to Manila, 180 Filbrite cartons of mixed British manufactured cigarettes called "Dunhill International Filter" and "Dunhill International Menthol," as evidenced by Bill of Lading No. 706213742and Bill of Lading No. 706086803of the Ben Line Containers Ltd. The shipment arrived at the Port of Manila Pier 13, on April 18, 1979 in container van No. BENU 204850-9. The said container was received by E. Razon, Inc. (later known as Metro Port Service, Inc. and referred to herein as the ARRASTRE) under Cargo Receipt No. 71923 dated April 18, 1979.4On April 30, 1979, the container van, which contained two shipments was stripped. One shipment was delivered and the other shipment consisting of the imported British manufactured cigarettes was palletized. Due to lack of space at the Special Cargo Coral, the aforesaid cigarettes were placed in two containers with two pallets in container No. BENU 204850-9, the original container, and four pallets in container No. BENU 201009-9, with both containers duly padlocked and sealed by the representative of the CARRIER.In the morning of May 1, 1979, the CARRIER'S headchecker discovered that container van No. BENU 201009-9 had a different padlock and the seal was tampered with. The matter was reported to Jose G. Sibucao, Pier Superintendent, Pier 13, and upon verification, it was found that 90 cases of imported British manufactured cigarettes were missing. This was confirmed in the report of said Superintendent Sibucao to Ricardo Cosme, Assistant Operations Manager, dated May 1, 19795and the Official Report/Notice of Claim of Citadel Lines, Inc. to E. Razon, Inc. dated May 8, 1979.6Per investigation conducted by the ARRASTRE, it was revealed that the cargo in question was not formally turned over toit by the CARRIER but was kept inside container van No. BENU 201009-9 which was padlocked and sealed by the representatives of the CARRIER without any participation of the ARRASTRE.When the CONSIGNEE learned that 90 cases were missing, it filed a formal claim dated May 21, 1979,7with the CARRIER, demanding the payment of P315,000.00 representing the market value of the missing cargoes. The CARRIER, in its reply letter dated May 23, 1979,8admitted the loss but alleged that the same occurred at Pier 13, an area absolutely under the control of the ARRASTRE. In view thereof, the CONSIGNEE filed a formal claim, dated June 4, 1979,9with the ARRASTRE, demanding payment of the value of the goods but said claim was denied.After trial, the lower court rendered a decision on August 30, 1985, exonerating the ARRASTRE of any liability on the ground that the subject container van was not formally turned over to its custody, and adjudging the CARRIER liable for the principal amount of P312,480.00 representing the market value of the lost shipment, and the sum of P30,000.00 as and for attorney's fees and the costs of suit.As earlier stated, the court of Appeals affirmed the decision of the courta quobut deleted the award of attorney's fees and costs of suit.The two main issues for resolution are:1. Whether the loss occurred while the cargo in question was in the custody of E. Razon, Inc. or of Citadel Lines, Inc; and2. Whether the stipulation limiting the liability of the carrier contained in the bill of lading is binding on the consignee.The first issue is factual in nature. The Court of Appeals declared in no uncertain terms that, on the basis of the evidence presented, the subject cargo which was placed in a container van, padlocked and sealed by the representative of the CARRIER was still in its possession and control when the loss occurred, there having been no formal turnover of the cargo to the ARRASTRE. Besides, there is the categorical admission made by two witnesses, namely, Atty. Lope M. Velasco and Ruben Ignacio, Claims Manager and Head Checker, respectively, of the CARRIER,10that for lack of space the containers were not turned over to and as the responsibility of E. Razon Inc. The CARRIER is now estopped from claiming otherwise.Common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them, according to all the circumstances of each case.11If the goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extra ordinary diligence as required in Article 1733 of the Civil Code.12The duty of the consignee is to prove merely that the goods were lost. Thereafter, the burden is shifted to the carrier to prove that it has exercised the extraordinary diligence required by law. And, its extraordinary responsibility lasts from the time the goods are unconditionally placed in the possession of, and received by the carrier for transportation until the same are delivered, actually or constructively, by the carrier to the consignee or to the person who has the right to receive them.13Considering, therefore, that the subject shipment was lost while it was still in the custody of herein petitioner CARRIER, and considering further that it failed to prove that the losswas occasioned by an excepted cause, the inescapable conclusion is that the CARRIER was negligent and should be held liable therefor.The cases cited by petitioner in support of its allegations to the contrary do not find proper application in the case at bar simply because those cases involve a situation wherein the shipment was turned over to the custody and possession of the arrastre operator.We, however, find the award of damages in the amount of P312,800.00 for the value of the goods lost, based on the alleged market value thereof, to be erroneous. It is clearly and expressly provided under Clause 6 of the aforementioned bills of lading issued by the CARRIER that its liability is limited to $2.00 per kilo. Basic is the rule, long since enshrined as a statutory provision, that a stipulation limiting the liability of the carrier to the value of the goods appearing in the bill of lading, unless the shipper or owner declares a greater value, is binding.14Further, 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.15The CONSIGNEE itself admits in its memorandum that the value of the goods shipped does not appear in the bills of lading.16Hence, the stipulation on the carrier's limited liability applies. There is no question that the stipulation is just and reasonable under the circumstances and have been fairly and freely agreed upon. InSea-land Service, Inc.vs.Intermediate Appellate Court, et al.17we there explained what is a just and reasonable, and a fair and free, stipulation, in this wise:. . . That said stipulation is just and reasonable 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 just and reasonable character of such stipulation is implicit in it giving the shipper or owner the option of avoiding accrual of liability limitation by the simple and surely far from onerous expedient of declaring the nature and value of the shipment in the bill of lading. And since the shipper here has not been heard to complain 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 well.The bill of lading shows that 120 cartons weigh 2,978 kilos or 24.82 kilos per carton. Since 90 cartons were lost and the weight of said cartons is 2,233.80 kilos, at $2.00 per kilo the CARRIER's liability amounts to only US$4,467.60.WHEREFORE, the judgment of respondent court is hereby MODIFIED and petitioner Citadel Lines, Inc. is ordered to pay private respondent Manila Wine Merchants, Inc. the sum of US$4,465.60. or its equivalent in Philippine currency at the exchange rate obtaining at the time of payment thereof. In all other respects, said judgment of respondent Court is AFFIRMED.SO ORDERED.Melencio-Herrera, Paras, Padilla and Sarmiento, JJ., concur.

Footnotes*Impleaded as a respondent and added to complete the title of the case stated in the petition.1Justice Josue N. Bellosillo,ponente, and Justices Felipe B. Kalalo and Regina G. Ordoez-Benitez concurring.2Exh. A; Exh. 7-Citadel.3Exh. B; Exh. 8-Citadel.4Exh. 1-Citadel5Exh. 10-D-Razon.6Exh. 4-Citadel.7Exh. C.8Exh. D.9Exh. E.10Rollo, 45.11Art. 1733, Civil Code.12Art. 1735,Id.13Art. 1736,Id.14Art. 1749,Id.15Art. 1750,Id.16Rollo, 120.17153 SCRA 552 (1987).

SECOND DIVISION[G.R. No. 122494.October 8, 1998]EVERETT STEAMSHIP CORPORATION,petitioner, vs.COURT OF APPEALS and HERNANDEZ TRADING CO. INC.,respondents.D E C I S I O NMARTINEZ,J.:Petitioner Everett Steamship Corporation, through this petition for review, seeks the reversal of the decision[1]of the Court of Appeals, dated June 14, 1995, in CA-G.R. No. 428093, which affirmed the decision of the Regional Trial Court of Kalookan City, Branch 126, in Civil Case No. C-15532, finding petitioner liable to private respondent Hernandez Trading Co., Inc. for the value of the lost cargo.Private respondent imported three crates of bus spare parts marked as MARCOC/No. 12,MARCO C/No. 13 andMARCO C/No. 14, from its supplier, Maruman Trading Company, Ltd. (Maruman Trading), a foreign corporation based in Inazawa, Aichi, Japan.The crates were shipped from Nagoya, Japan to Manila on board ADELFAEVERETTE, a vesselowned by petitioners principal, Everett Orient Lines.The said crates were covered byBill of Lading No. NGO53MN.Upon arrival at the port of Manila, it was discovered that the crate marked MARCO C/No. 14 was missing.This was confirmed and admitted by petitioner in its letter of January 13, 1992 addressed to private respondent, which thereafter made a formal claim upon petitioner for the value of the lost cargo amounting to One Million Five Hundred Fifty Two Thousand Five Hundred (Y1,552,500.00) Yen, the amount shown in an Invoice No. MTM-941, dated November 14, 1991.However, petitioner offered to pay only One Hundred Thousand (Y100,000.00) Yen, the maximum amount stipulated under Clause 18 of the covering bill of lading which limits the liability of petitioner.Private respondent rejected the offer and thereafter instituted a suit for collection docketed as Civil Case No. C-15532, against petitioner before the Regional Trial Court of Caloocan City, Branch 126.At the pre-trial conference, both parties manifested that they have no testimonial evidence to offer and agreed instead to file their respective memoranda.On July 16, 1993, the trial court rendered judgment[2]in favor of private respondent, ordering petitioner to pay:(a) Y1,552,500.00; (b) Y20,000.00 or its peso equivalent representing the actual value of the lost cargo and the material and packaging cost; (c) 10% of the total amount as an award for and as contingent attorneys fees; and (d) to pay the cost of the suit.The trial court ruled:Considering defendants categorical admission of loss and its failure to overcome the presumption of negligence and fault, the Court conclusively finds defendant liable to the plaintiff.The next point of inquiry the Court wants to resolve is the extent of the liability of the defendant.As stated earlier, plaintiff contends that defendant should be held liable for the whole value for the loss of the goods in the amount of Y1,552,500.00 because the terms appearing at the backof the bill of lading was so written in fine prints and that the same was not signed by plaintiff or shipper thus, they are not bound by the clause stated in paragraph 18 of the bill of lading.On the other hand, defendant merely admitted that it lost the shipment but shall be liable only up to the amount of Y100,000.00.The Court subscribes to the provisions of Article 1750 of the New Civil Code -Art. 1750. A contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction or deterioration of the goods is valid, if it is reasonable and just under the circumstances, and has been fairly and freely agreed upon.It is required, however, that the contract must be reasonable and just under the circumstances and has been fairly and freely agreed upon.The requirements provided in Art. 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 at bar, the Court is of the view that the requirements of said article have not been met.The fact that those conditions are printed at the back of the bill of lading in letters so small that they are hard to read would not warrant the presumption that the plaintiff or its supplier was aware of these conditions such that he had fairly and freely agreed to these conditions.It can not be said that the plaintiff had actually entered into a contract with the defendant, embodying the conditions as printed at the back of the bill of lading that was issued by the defendant to plaintiff.On appeal, the Court of Appeals deleted the award of attorneys fees but affirmed the trial courts findings with the additional observation that private respondent can not be bound by the terms and conditions of the bill of lading because it was notprivy to the contract of carriage.It said:As to the amount of liability, no evidence appears on record to show that the appellee (Hernandez Trading Co.) consented to the terms of the Bill of Lading.The shipper named in the Bill of Lading is Maruman Trading Co., Ltd. whom the appellant (Everett Steamship Corp.) contracted with for the transportation of the lost goods.Even assumingarguendothat the shipper Maruman Trading Co., Ltd. accepted the terms of the bill of lading when it delivered the cargo to the appellant, still it does not necessarily follow that appellee Hernandez Trading Company as consignee is bound thereby considering that the latter was never privy to the shipping contract.x x xx x xx x xNever having entered into a contract with the appellant, appellee should therefore not be bound by any of the terms and conditions in the bill of lading.Hence, it follows that the appellee may recover the full value of the shipment lost, the basis of which is not the breach of contract as appellee was never aprivy to the any contract with the appellant, but is based on Article 1735 of the New Civil Code, there being no evidence to prove satisfactorily that the appellant has overcome the presumption of negligence provided for in the law.Petitioner now comes to us arguing that the Court of Appeals erred (1)in ruling that the consent of the consignee to the terms and conditions of the bill of lading is necessary to make such stipulations binding upon it; (2) in holding that the carriers limited package liability as stipulated in the bill of lading does not apply in the instant case; and (3) in allowing private respondent to fully recover the full alleged value of its lost cargo.We shall first resolve the validity ofthe limited liability clause in the bill of lading.A stipulation in the bill of lading limiting the common carriers liability for loss or destruction of a cargo to a certain sum, unless the shipper or owner declares a greater value, is sanctioned by law, particularly Articles 1749 and 1750 of the Civil Code which provide:ART. 1749.A stipulation that the common carriers liability is limited to the value of the goods appearing in the bill of lading, unless the shipper or owner declares a greater value, is binding.ART. 1750.A contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction, or deterioration of the goods is valid, if it is reasonable and just under the circumstances, and has been freely and fairly agreed upon.Such limited-liability clause has also been consistently upheld by this Courtin a number of cases.[3]Thus, inSea Land Service, Inc. vs Intermediate Appellate Court[4], we ruled: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 justness and fairness of the law itself, and this the private respondent does not pretend to do.But over and above that consideration, the just and reasonable character of such stipulation is implicit in it giving the shipper or owner the option of avoiding accrual of liability limitation by the simple and surely far from onerous expedient of declaring the nature and value of the shipment in the bill of lading..Pursuant to the afore-quoted provisions of law, it is required that the stipulation limiting the common carriers liability for loss must be reasonable and just under the circumstances, and has been freely and fairly agreed upon.The bill of lading subject of the present controversy specifically provides, among others:18.All claims for which the carrier may be liable shall be adjusted and settled on the basis of the shippers net invoice cost plus freight and insurance premiums, if paid, and in no event shall the carrier be liable for any loss of possible profits or any consequential loss.The carrier shall not be liable for any loss of or any damage to or in any connection with, goods in an amount exceeding One Hundred Thousand Yen in Japanese Currency (Y100,000.00) or its equivalent in any other currency per package or customary freight unit (whichever is least)unless the value of the goods higher than this amount is declared in writing by the shipper before receipt of the goods by the carrier and inserted in the Bill of Lading and extra freight is paid as required.(Emphasis supplied)The above stipulations are, to our mind, reasonable and just.In the bill of lading, the carrier made it clear that its liability would only be up to One Hundred Thousand (Y100,000.00) Yen.However, the shipper, Maruman Trading,had the option to declare a higher valuation if the value of its cargo was higher than the limited liability of the carrier.Considering that the shipper did not declare a higher valuation, it had itself to blame for not complying with the stipulations.The trial courts ratiocination that private respondent could not have fairly and freely agreed to the limited liability clause in the bill of lading because the said conditions were printed in small letters does not make the bill of lading invalid.We ruled inPAL, Inc. vs. Court of Appeals[5]that the jurisprudence on the matter reveals the consistent holding of the court that contracts of adhesion are not invalidperseand that it has on numerous occasions upheld the binding effect thereof.Also, inPhilippine American General Insurance Co., Inc. vs. Sweet Lines , Inc.[6]this Court , speaking through the learned Justice Florenz D. Regalado, held:x x xOng Yiu vs. Court of Appeals, et.al., instructs us thatcontracts of adhesionwherein one party imposes a ready-made form of contract on the other x xx 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.In the present case, not even an allegation of ignorance of a party excuses non-compliance with the contractual stipulations since the responsibility for ensuring full comprehension of the provisions of a contract of carriage devolves not on the carrier but on the owner, shipper, or consignee as the case may be.(Emphasis supplied)It was further explained inOng Yiu vs Court of Appeals[7]that stipulations in contracts of adhesion are valid and binding.While it may be true that petitioner had not signed the plane ticket x x, 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 latters 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. xxx , 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. (Emphasis supplied)Greater vigilance, however, is required of the courts when dealing with contracts of adhesion in that the said contracts must be carefully scrutinized in order to shield theunwary (or weaker party) from deceptive schemes contained in ready-made covenants,[8]such as the bill of lading in question.The stringent requirement which the courts are enjoined to observe is in recognition of Article 24 of the Civil Code which mandates that (i)n all contractual, property or other relations,when one of the parties is at a disadvantage on account of his moral dependence, ignorance, indigence, mental weakness, tender age or other handicap, the courts must be vigilant for his protection.The shipper, Maruman Trading, we assume, has been extensively engaged in the trading business.It can not be said to be ignorant of the business transactions it entered into involving the shipment of its goods to its customers.The shipper could not have known, or should know the stipulations in the bill of lading and there it should have declared a higher valuation of the goods shipped.Moreover, Maruman Trading has not been heard to complain that it has been deceived or rushed into agreeing to ship the cargo in petitioners vessel.In fact, it was not even impleaded in this case.The next issue to be resolved is whether or not private respondent, as consignee, who is not a signatory to the bill of lading is bound by the stipulations thereof.Again, inSea-Land Service, Inc. vs. Intermediate Appellate Court(supra),weheld that even if the consignee was not a signatory to the contract of carriage between the shipper and the carrier, the consignee can still be bound by the contract.Speaking through Mr. Chief Justice Narvasa, weruled:To begin with, there is no question of the right, in principle, of aconsigneein 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 theconsignor and the carrierwithout the intervention of the consignee. xxx.x x xtheright 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 the shipper or consignor, or his status as 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 (Phoenix Assurance Company vs. Macondray & Co., Inc., 64 SCRA 15) where this Court found thata 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.There can, therefore, be no doubt or equivocation about the validity and enforceability of freely-agreed-upon stipulations in a contract of carriage or bill of lading limiting the liability of the carrier to an agreed valuationunless theshipper declares a higher value and inserts it into said contract or bill.This proposition, moreover, rests upon an almost uniform weight of authority. (Underscoring supplied)When private respondentformally claimed reimbursement for the missing goods from petitioner and subsequently filed a case against the latter based on the very same bill of lading, it(private respondent) accepted the provisions of the contract and thereby made itself a party thereto, or at least has come to court to enforce it.[9]Thus, private respondent cannot now reject or disregard the carriers limited liability stipulation in the bill of lading.In other words, private respondentis bound by the whole stipulations in the bill of lading and must respect the same.Private respondent, however, insists that the carrier should be liable for the full value of the lost cargo in the amount of Y1,552,500.00, considering that the shipper, Maruman Trading, had "fully declared the shipment x x x, the contents of each crate, the dimensions, weight andvalueof the contents,"[10]as shown in the commercial Invoice No. MTM-941.This claim was denied by petitioner, contending that it did not know of the contents, quantity and value of "the shipment which consisted of three pre-packed crates described in Bill of Lading No. NGO-53MN merely as 3 CASES SPARE PARTS.[11]The bill of lading in question confirms petitioners contention.To defeat the carriers limited liability, the aforecited Clause 18 of the bill of lading requires that the shipper should havedeclared in writing a higher valuationof its goods before receipt thereof by the carrier andinsert the said declaration in the bill of lading, with the extra freight paid.These requirements in the bill of lading were never complied with by the shipper, hence, the liability of the carrier under the limited liability clause stands.The commercial Invoice No. MTM-941 does not in itself sufficiently and convincingly show that petitioner has knowledge of the value of the cargo as contended by private respondent.No other evidence was proffered by private respondent to support is contention.Thus, we are convinced that petitioner should be liable for thefull valueof the lost cargo.In fine, the liability of petitioner for the loss of the cargo is limited to One Hundred Thousand (Y100,000.00) Yen, pursuant to Clause 18 of the bill of lading.WHEREFORE, the decision of the Court of Appeals dated June 14, 1995 in C.A.-G.R. CV No. 42803is hereby REVERSED and SET ASIDE.SO ORDERED.Regalado,(Acting Chief Justice), Melo, Puno,andMendoza, JJ.,concur.

[1]Penned by Justice Pacita Canizares-Nye and concurred in by Justices Conchita Carpio-Morales and Antonio P. Solano;Rollo, pp. 33-40.[2]Penned by Judge Oscar M. Payawal,Rollo, pp. 43-50 .[3]St. Paul Fire and Marine Insurance Co.vsMacondray & Co., 70 SCRA 122 [1976]; Sea Land Services, Inc.vsIntermediate Appellate Court, 153 SCRA 552 [1987]; Pan American World Airways, Inc.vsIntermediate Appellate Court, 164 SCRA 268 [1988]; Phil. Airlines, Inc.vsCourt of Appeals, 255 SCRA 63 [1996].[4]153 SCRA 552 [1987][5]255SCRA 48, 58 [1996].[6]212 SCRA 194, 212-213 [1992].[7]91 SCRA 223 [1979]; Philippine Airlines, Inc.vsCourt of Appeals, 255 SCRA 63 [1996].[8]Ayala Corporationvs. Ray Burton Development Corporation, G.R. No. 126699, August 7, 1998.See also Qua Chee Ganvs. Law Union and Rock Insurance Co., Ltd., 98 Phil. 95 [1955].[9]See Mendozavs. Philippine Air Lines, Inc. 90 Phil. 836, 845-846.[10]Rollo, p. 116.[11]Rollo, p. 13.

Alitalia v. Intermediate Appellate Court (192 SCRA 9 )Facts:Dr. Felipa Pablo, a professor from UP was invited to attend a meeting by the United Nations in Ispra, Italy. She was to read a paper regarding foreign substances in food and the agriculture environment which she had specialized knowledge of. She booked a flight to Italy with Alitalia airlines, petitioner herein. She had arrived in Milan the day before the meeting however her luggage did not arrive with her. The airline informed her that her luggage wasdelayedbecause it was placed in one of the succeedingflightsto Italy. She never got her luggage.

When she got back to Manila she demanded that Alitalia compensate her forthe damagesthat she suffered. Petitioner herein offered freeairline ticketsin order to compensate for the alleged damages, however she rejected this offer and instead filed a case. Subsequently it was found out that the luggages of Dr. Pablo were not placed in the succeedingflights. She received her luggage 11 months after and after she had already instituted a case against Alitalia.

The lower court rendered a decision in favor of Dr. Pablo and o