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ACTIONS AND DAMAGES IN CASE OF BREACH

A. CAUSES OF ACTION AND NATURE /EXTENT OF LIAB.

Passengers and shippers who suffered damages because of the breach of the contractual obl.of the carrier may sue the latter for DAMAGES. ]

SOURCE OF OBLIGAITON: Culpa contractual; Such source of obl.is SEPARATE and DISTINCT from quasi-delict under Art. 2176.

DISTINCTIONS

PT. OF DISTINCTION

CULPA CONTRACTUAL

CULPA AQUILIANA

Source Contract Quasi-delict

Liab of employee No liab. there being no privity of contract

Solidarily liable w/ employer

Availability of defense

Due dil.in the selection and supervision of the employee NOT a defense

Ibid;a defense

In what capacity liable

Liable as contracting party

Liable as an employer

CONCURRENT CAUSES OF ACTION. The same act that breaches the contract may also be tort. Hence, a negligent act that breaches contract may give rise to a liab.based on contract + quasi-delict under Art. 2176., BCC.

In fact, w/ r.t employee of the carrier, civil liav.may be based on quasi-delict as well as criminal liab.under Art. 100 of the RPC.

a. Hence, CAUSE OF ACTION of a passenger/shipper against the common carrier can be culpa contractual or culpa aquiliana while the basis of liab. on the part of the driver is culpa delictual or culpa aquiliana.

b. Direct and primary liab.of drivers based on quasi-delict and delict equally applies to the capt., officers and crew of the vessel. The shipowner or the operator, as employer, may be held liable PRIMARILY under Art. 2180 of the NCC OR SUBSDIARILY liable under RPC.

CONCURRENT W/ 3RD

PERSONS. If negligence f 3rd

persons concurs w/ the breach (e.g., where

passenger was injured bec. the carrier collided w/ another vehicle), the liab. of the 3

rd persons who was

driving another vehicle and/or his employer may be based on quasi-delict.

The driver alone may be held CRIMINALLY liable and civil iab. May be imposed on him based on delict. In the latter case, the employer is subsidiary liable.

a. However, in case of injury to a passenger due to the negligence of the driver of the vehicle on which he was riding and the driver of another vehicle, the drivers and the owners of 2 vehicles are JOINTLY and SEVERALLY liable for damages. It does not make any difference that the liab. of one springs from contract while the other quasi-delict.

-if owner and driver of the other vehicle are NOT impleaded, carrier may implead them by filing a third party complaint.

SOLIDARY LIABILITY

- in case the negligence of the carrier’s driver and a 3

rd person concurs, liab,of the parties – carrier and

his driver, 3rd

p. – is joint and several

a.ALT CAUSES OF ACTION. It was permissible for the plaintiff to allege in the complaint alternative causes of action and join as amny parties as may be liable on such causes of action so long as the plaintiff does NOT recover twice for the same injury. Thus, carrier may be sued on the alternative causes of action of breach and contract and quasi-delict.

ALT.COMPENSATION SCHEME. In order to provide public w/ an easier way of recovering damages for the injuries sustained due to the op.of common carriers, SPECIAL LAWS provide for MANDATORY INSURANCE COVERAGE FOR PASSENGERS AND CARGOS.

a. SEC. 14 of Domestic Shipping Devt Act of 2004 requires mandatory insurance for passengers to meet the financial responsibility of domestic ship operator for breach of contract of carriage.

SEC. 15 – MARINA has the power to require every shop operator to obtain such other compulsory insurance coverage necessary to adequately cover claims for damages.

b. W. r/.t motor vehicles, a Compulsory Motor Liab. Insurance is mandated by the Insurance Code of the Phils.

B. DOMESTIC TRANSPO

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NOTICE OF CLAIM AND PRESCRIPTIVE PERIOD.

In an action for damages for breach of contract, it is essential that claimant est. the ff:

(1) The existence of a perfected contract; (2) Breach thereof by the other contracting

party (3) Damages w/c he/she sustained due to the

breach (4) Notice of claim (the same must be complied

w/ and any action that may be filed thereafter must be files w/in the prescriptive period provided by law.

A. CLAIM IN OVERLAND TRANSPO AND COASTWISE SHIPPING. A condition precedent for an action against the carrier in overland transpo is the filing of

a claim w/ the carrier within the period prescribed under Art. 366 of the Code of Commerce.

After the period mentioned have elapsed, or the transpo charges have been paid, NO CLAIM shall be admitted against the carrier w/ regard to the condition in w/c goods transported were delivered.

a. Under above provision, an ACTION FOR DAMAGES is barred if the goods arrived in damaged condition and NO claim is filed by the shipper w/in the ff. period:

(1) The claim for damage MUST be filed immediately if the damage is apparent;

(2) The claim for damage must be made w/in 24 hrs from receipt of the merchandise if the damage is NOT apparent, i.e., the damage CANNOT be ascertained merely from the outside packaging of the cargo.

NOTICE OF CLAIM MANDATORY. Non-filing of the claim bars recovery. It’s more accurate to state that the filing of a claim w/ the carrier w/in the time limitation therefor under Art. 366 actually

constitutes a condition precedent to the ACCRUAL of right of action against carrier for damages.

- The shipper or the consignee must allege and prove the fulfilment of the condition precedent and if he omits such allegation and proof, NO right of action against the carrier can accrue in his favor.

a. The rule that IMPOSES PRESCRIPTIVE PERIOD is also consistent w/ the procedural rule that “before an action can pproperly be commenced all the essential elements of the cause of action must be complete

b. The SC explained mandatory character of the period for filing a notice of claim in UCPB GENERAL INSURANCE CO., INC v ABOITIZ SHIPPING CORP.:

“The requirement to give notice of loss or damage to the goods is not an empty formalism. The fundamental reason or purpose of such a stipulation is not to relieve the carrier from just liability, but reasonably to inform it that the shipment has been damaged and that it is charged with liability therefor, and to give it an opportunity to examine the nature and extent of the injury. This protects the carrier by affording it an opportunity to make an investigation of a claim while the matter is still fresh and easily investigated so as to safeguard itself from false and fraudulent claims.”

c. COMMENCEMENT OF PERIOD. T he period does NOT begin to run until the consignee has received the possession of the merchandise that he may exercise over it the ordinary control pertinent to ownership.

d. APPLICABLE TO COASTWISE SHIPPING. The reqt was also applied to maritime transpo WITHIN the Phils. or Coastwise shipping. Ex. If goods were shipped from Manila Cebu and the goods were already damaged when they arrived in Cebu, a claim must be filed w/in the period prescribed under Art. 366 of the CC.

e. N/A TO MISDELIVERY. Art. 366 is limited only to cases of claims for damage to goods ACTUALLY turned over by the carrier and received by the consignee, whether those damages be apparent from an examination of the packages in w/c goods are delivered OR of such character that the nature and extent of the damage is NOT apparent until the packages are opened and the contents examined.

OBJECTIVE OF THE REQT OF SUBMISSION OF CLAIMS: to compel the consignee of goods entrusted to a carrier to make prompt demand for settlement

ART. 366 – Within 24 hrs following the receipt of the merchandise, the claim against the carrier for damage or average be found therein upon the opening the packages, may be made provided that the indications of the damage or average w/c gives rise to the claim CANNOT be ascertained from the outside part of such packages, in which case the claim shall be admitted ONLY at the time of receipt.

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of alleged damages suffered by the goods while in transport, so that carrier will be enabled to VERIFY all such claims at the time of delivery or within 24 hrs.

f. EFFECT OF STIPULATION. The period described may be s.t MODIFICATION by agreement of the parties. The parties may stipulate in the b/l a period that is different from the period provided by Art. 366.

Stipulations in the b/l or other contracts of shipment w/c require notice of claim for loss of or damage to goods shipped in order to impose liability on the carrier operate to prevent the enforcement of the contract when NOT complied w/, i.e., NOTICE is a CONDITION PRECEDENT and the carrier NOT liable f notice is NOT given in accordance w/ stipulation.

Parties to a contract may FIX by agreement a SHORTER time for the bringing of the suit on a claim for the loss of or damage to the shipment than that provided by the statute of limitations.

Such limitation is NOT contrary to public policy for it does not in any way defeat the complete vestiture of the right to recover, but merely requires the assertion of that right by action at an earlier period than would be necessary.

PRESCRIPTION IN OVERLAND TRANSPO AND COASTWISE SHIPPING. There being NO special rules w/ r.t the contract of carriage involving overland transpo and coastwise shipping of goods, the GR under the NCC on extinctive prescription applies.

(a) Under the NCC, the extinctive period is 6 years if there is NO written contract and 10 yrs if there is a written contract

- Consequently, an action for damage for breach of contract of carriage prescribes w/in 6 yrs if no b/l or any written contract has been issued.

CASES:

UCPB v ABOITIZ SHIPPING, EAGLE EXPRESS LINES, DAMCO INTERMODAL

FACTS:

On June 18, 1991, three (3) units of waste water treatment plant with accessories were purchased by San Miguel Corporation (SMC for brevity) from Super Max Engineering Enterprises, Co., Ltd. of Taipei, Taiwan.

The goods came from Charleston, U.S.A. and arrived at the port of Manila on board MV "SCANDUTCH STAR". The same were then transported to Cebu on board MV "ABOITIZ SUPERCON II". After its arrival at the port of Cebu and clearance from the Bureau of Customs, the goods were delivered to and received by SMC at its plant site on August 2, 1991. It was then discovered that one electrical motor of DBS Drive Unit Model DE-30-7 was damaged.

Pursuant to an insurance agreement, plaintiff-appellee paid SMC the amount of P1,703,381.40 representing the value of the damaged unit. In turn, SMC executed a Subrogation Form dated March 31, 1992 in favor of plaintiff-appellee.

COMPLAINT. Consequently, plaintiff-appellee filed a Complaint on July 21, 1992 as subrogee of SMC seeking to recover from defendants the amount it had paid SMC.

On September 20, 1994, plaintiff-appellee moved to admit its Amended Complaint whereby it impleaded East Asiatic Co. Ltd. (EAST for brevity) as among the defendants for being the "general agent" of DAMCO. In its Order dated September 23, 1994, the lower court admitted the said amended complaint.

RTC: noted the dismissal of the complaint against defendant EAST and trial ensued to remaining defendants.

Judgment is hereby rendered declaring DAMCO Intermodal Systems, Inc., Eagle Express Lines, Inc. and defendant Aboitiz Shipping solidarily liable to plaintiff-subrogee for the damaged shipment and orders them to pay plaintiff jointly and severally the sum of P1,703,381.40.

CA: Reversed; because UCPB failed to file a notice of claim w/in 24 hrs from SMC’s receipt for the damaged merchandise. UCPB asserts that the claim requirement under Art. 366 of the Code of Commerce does not apply to this case because the damage to the merchandise had already been known to the carrier. Interestingly, UCPB makes this revelation: "x x x damage to the cargo was found upon discharge from the foreign carrier onto the International Container Terminal Services, Inc. (ICTSI) in the presence of the carrier’s representative who signed the Request for Bad Order Survey and turn-over of Bad Order Cargoes. On transhipment, the cargo was already damaged when loaded on board the inter-island carrier.

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CONTENTION: UCPB claims that under the Carriage of Goods by Sea Act (COGSA), notice of loss need not be given if the condition of the cargo has been the subject of joint inspection such as, in this case, the inspection in the presence of the Eagle Express representative at the time the cargo was opened at the ICTSI.

Eagle Express, in its Memorandum9 dated February

7, 2007, asserts that it cannot be held liable for the damage to the merchandise as it acted merely as a freight forwarder’s agent in the transaction. It allegedly facilitated the transshipment of the cargo from Manila to Cebu but represented the interest of the cargo owner, and not the carrier’s. The only reason why the name of the Eagle Express representative appeared on the Permit to Deliver Imported Goods was that the form did not have a space for the freight forwarder’s agent, but only for the agent of the shipping line. Moreover, UCPB had previously judicially admitted that upon verification from the Bureau of Customs, it was East Asiatic Co., Ltd. (East Asiatic), regarding whom the original complaint was dismissed on the ground of prescription, which was the real agent of DAMCO Intermodal Services, Inc. (DAMCO), the ship owner.

Aboitiz Shipping Corporation (Aboitiz), on the other hand, points out, in its Memorandum

10 dated March

29, 2007, that it obviously cannot be held liable for the damage to the cargo which, by UCPB’s admission, was incurred not during transshipment to Cebu on board one of Aboitiz’s vessels, but was already existent at the time of unloading in Manila. Aboitiz also argues that Art. 366 of the Code of Commerce is applicable and serves as a condition precedent to the accrual of UCPB’s cause of action against it.

The Memorandum11

dated June 3, 2008, filed by Pimentel Customs Brokerage Co. (Pimentel Customs), is also a reiteration of the applicability of Art. 366 of the Code of Commerce.

ISSUE: whether a claim should have been made by SMC, or UCPB as SMC’s subrogee, within the 24-hour period prescribed by Art. 366 of the Code of Commerce

HELD:

Respondents raised the defense that UCPB did not file a claim w/it and that complaint states no cause of action.

UCPB obviously made a gross misrepresentation to the Court when it claimed that the issue regarding the applicability of the Code of Commerce, particularly the 24-hour formal claim rule, was not raised as an issue before the trial court.

ALREADY BEEN FOUND DAMAGED. Interestingly enough, UCPB itself has revealed that when the shipment was discharged and opened at the ICTSI in Manila in the presence of an Eagle Express representative, the cargo had already been found damaged. In fact, a request for bad order survey was then made and a turnover survey of bad order cargoes was issued, pursuant to the procedure in the discharge of bad order cargo. The shipment was then repacked and transshipped from Manila to Cebu on board MV Aboitiz Supercon II. When the cargo was finally received by SMC at its Mandaue City warehouse, it was found in bad order, thereby confirming the damage already uncovered in Manila.

DAMAGE PRESENT BEFORE ABOITIZ’S SHIPMENT. In charging Aboitiz with liability for the damaged cargo, the trial court condoned UCPB’s wrongful suit against Aboitiz to whom the damage could not have been attributable since there was no evidence presented that the cargo was further damaged during its transshipment to Cebu. Even by the exercise of extraordinary diligence, Aboitiz could not have undone the damage to the cargo that had already been there when the same was shipped on board its vessel.

NOT AN EMPTY FORMALISM. The requirement to give notice of loss or damage to the goods is not an empty formalism. The fundamental reason or purpose of such a stipulation is not to relieve the carrier from just liability, but Areasonably to inform it that the shipment has been damaged and that it is charged with liability therefor, and to give it an opportunity to examine the nature and extent of the injury. This protects the carrier by affording it an opportunity to make an investigation of a claim while the matter is still fresh and easily investigated so as to safeguard itself from false and fraudulent claim.

CONDITION PRECEDENT. We have construed the 24-hour claim requirement as a condition precedent to the accrual of a right of action against a carrier for loss of, or damage to, the goods. The shipper or consignee must allege and prove the fulfillment of the condition. Otherwise, no right of action against the carrier can accrue in favor of the former.

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MORE THAN 3 MONTHS LAPSE. The shipment in this case was received by SMC on August 2, 1991. However, as found by the Court of Appeals, the claims were dated October 30, 1991, more than three (3) months from receipt of the shipment and, at that, even after the extent of the loss had already been determined by SMC’s surveyor. The claim was, therefore, clearly filed beyond the 24-hour time frame prescribed by Art. 366 of the Code of Commerce.

But what of the damage already discovered in the presence of Eagle Express’s representative at the time the shipment was discharged in Manila? The Request for Bad Order Survey and Turn Over Survey of Bad Order Cargoes, respectively dated June 17, 1999 and June 28, 1991, evince the fact that the damage to the cargo was already made known to Eagle Express and, possibly, SMC, as of those dates.

Sec. 3(6) of the COGSA provides a similar claim mechanism as the Code of Commerce but prescribes a period of three (3) days within which notice of claim must be given if the loss or damage is not apparent. Last par. Of which provides: “The notice in writing need not be given if the state of the goods has at the time of their receipt been the subject of joint survey or inspection.”

UCPB seizes upon the last paragraph which dispenses with the written notice if the state of the goods has been the subject of a joint survey which, in this case, was the opening of the shipment in the presence of an Eagle Express representative. It should be noted at this point that the applicability of the above-quoted provision of the COGSA was not raised as an issue by UCPB before the trial court and was only cited by UCPB in its Memorandum in this case.

UCPB, however, is ambivalent as to which party Eagle Express represented in the transaction. By its own manifestation, East Asiatic, and not Eagle Express, acted as the agent through which summons.

NOTE: It would be unjust to hold that Eagle Express’s knowledge of the damage to the cargo is such that it served to preclude or dispense with the 24-hour notice to the carrier required by Art. 366 of the Code of Commerce. Neither did the inspection of the cargo in which Eagle Express’s representative had participated lead to the waiver of the written notice under the Sec. 3(6) of the COGSA. Eagle Express, after all, had acted as the agent of the

freight consolidator, not that of the carrier to whom the notice should have been made.

Pimentel Customs, it is sufficient to acknowledge that it had no participation in the physical handling, loading and delivery of the damaged cargo and should, therefore, be absolved of liability.

RULING: PETITION DENIED.

PHIL. CHARTER INSURANCE v CHEMOIL LIGHTERAGE

FACTS:

Petitioner Philippine Charter Insurance Corporation is a domestic corporation engaged in the business of non-life insurance. Respondent Chemoil Lighterage Corporation is also a domestic corporation engaged in the transport of goods.

Samkyung Chemical Company, Ltd., based in Ulsan, South Korea, shipped 62.06 metric tons of the liquid chemical DIOCTYL PHTHALATE (DOP) on board MT "TACHIBANA" which was valued at US$90,201.57 under Bill of Lading No. ULS/MNL-1

3 and another

436.70 metric tons of DOP valued at US$634,724.89 under Bill of Lading No. ULS/MNL-2

4 to the

Philippines. The consignee was Plastic Group Phils., Inc. (PGP) in Manila.

PGP insured the cargo with herein petitioner Philippine Charter Insurance Corporation against all risks. The insurance was under Marine Policies No. MRN-30721

5 dated 06 February 1991

for P31,757,969.19 and No. MRN-30722

6 for P4,514,881.00. Marine Endorsement No.

27867 dated 11 May 1991 was attached and formed

part of MRN-30721, amending the latter’s insured value to P24,667,422.03, and reduced the premium accordingly.

The ocean tanker MT "TACHIBANA" unloaded the cargo to Tanker Barge LB-1011 of respondent Chemoil Lighterage Corporation, which shall transport the same to Del Pan Bridge in Pasig River. Tanker Barge LB-1011 would unload the cargo to tanker trucks, also owned by the respondent, and haul it by land to PGP’s storage tanks in Calamba, Laguna.

DISCOLORATION. Upon inspection by PGP, the samples taken from the shipment showed discoloration from yellowish to amber,

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demonstrating that it was damaged, as DOP is colorless and water clear.

PGP then sent a letter to the petitioner dated 18 February 1991

8 where it formally made an insurance

claim for the loss it sustained due to the contamination. The petitioner requested an independent insurance adjuster, the GIT Insurance Adjusters, Inc. (GIT), to conduct a Quantity and Condition Survey of the shipment. It was found: Furthermore, it was noted that the rubber gaskets of the manhole covers of the ballast tanks re-acted to the chemical causing shrinkage thus, loosening the covers and cargo ingress to the rusty ballast tanks

The petitioner paid PGP the amount of P5,000,000.00

11 as full and final payment for the

loss. PGP issued a Subrogation Receipt to the petitioner.

COMPLAINT. An action for damages was instituted by the petitioner-insurer against respondent-carrier before the RTC, Branch 16, City of Manila. The petitioner prayed for actual damages in the amount of P5,000,000.00, attorney’s fees in the amount of no less than P1,000,000.00, and costs of suit.

RTC: In favor of plaintiff

CA: Reversed and set aside; contended that PGP failed to file a notice, claim, or protest w/in the period required by Art. 366.

A telephone call which was supposedly made by a certain Alfred Chan, an employee of PGP, to one of the Vice Presidents of the respondent, informing the latter of the discoloration, is not the notice required by Article 366 of the Code of Commerce.

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ISSUES:

(1) Whether or not the notice of claim was filed within the required period. If the answer is in the affirmative,

(2) Whether or not the damage to the cargo was due to the fault or negligence of the respondent.

HELD:

Article 366 of the Code of Commerce has profound application in the case at bar.

(1) As to the first issue, the petitioner contends that the notice of contamination was given by Alfredo Chan, an employee of PGP, to Ms. Encarnacion Abastillas, Vice President for Administration and Operations of the respondent, at the time of the delivery of the cargo, and therefore, within the required period.

25 This was done by telephone.

The respondent, however, claims that the supposed notice given by PGP over the telephone was denied by Ms. Abastillas. Between the testimonies of Alfredo Chan and Encarnacion Abastillas, the latter’s testimony is purportedly more credible because it would be quite unbelievable and contrary to business practice for Alfredo Chan to merely make a verbal notice of claim that involves millions of pesos.

On the matter concerning the giving of the notice of claim as required by Article 366 of the Code of Commerce, both courts held that, indeed, a telephone call was made by Alfredo Chan to Encarnacion Abastillas, informing the latter of the contamination. However, nothing in the trial court’s decision stated that the notice of claim was relayed or filed with the respondent-carrier immediately or within a period of twenty-four hours from the time the goods were received. The Court of Appeals made the same finding. Having examined the entire records of the case, we cannot find a shred of evidence that will precisely and ultimately point to the conclusion that the notice of claim was timely relayed or filed.

The requirement that a notice of claim should be filed within the period stated by Article 366 of the Code of Commerce is not an empty or worthless proviso:

The object sought to be attained by the requirement of the submission of claims in pursuance of this article is to compel the consignee of goods entrusted to a carrier to make prompt demand for settlement of alleged damages suffered by the goods while in transport, so that the carrier will be enabled to verify all such claims at the time of delivery or within twenty-four hours thereafter, and if necessary fix responsibility and secure evidence as to the nature and extent of the alleged damages to the goods while the matter is still fresh in the minds of the parties.

In this case, there is no question that the transportation charges have been paid, as admitted by the petitioner, and the corresponding official

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receipt32

duly issued. But the petitioner is of the view that the payment for services does not invalidate its claim. It contends that under the second paragraph of Article 366 of the Code of Commerce, it is clear that if notice or protest has been made prior to payment of services, claim against the bad order condition of the cargo is allowed.

NO EVIDENCE THAT NOTICE FILED W/IN REQD PERIOD. We do not believe so. As discussed at length above, there is no evidence to confirm that the notice of claim was filed within the period provided for under Article 366 of the Code of Commerce. Petitioner’s contention proceeds from a false presupposition that the notice of claim was timely filed.

It is NOT necessary to resolve 2nd

issue since 1st issue has been resolved in the negative.

RULING: CA DECISION AFFIRMED.

ABOITIZ SHIPPING v INSURANCE CO. OF NORTH AMERICA

FACTS:

[NOTE: THE RIGHT of subrogation attaches upon payment by the insurer of the insurance claims by the assured. As subrogee, the insurer steps into the shoes of the assured and may exercise only those rights that the assured may have against the wrongdoer who caused the damage.]

On June 20, 1993, MSAS Cargo International Limited and/or Associated and/or Subsidiary Companies (MSAS) procured a marine insurance policy from respondent ICNA UK Limited of London. The insurance was for a transshipment of certain wooden work tools and workbenches purchased for the consignee Science Teaching Improvement Project (STIP), Ecotech Center, Sudlon Lahug, Cebu City, Philippines.

3 ICNA issued an "all-risk" open

marine policy.

The cargo, packed inside one container van, was shipped "freight prepaid" from Hamburg, Germany on board M/S Katsuragi. A clean bill of lading

6 was

issued by Hapag-Lloyd which stated the consignee to be STIP, Ecotech Center, Sudlon Lahug, Cebu City.

The container van was then off-loaded at Singapore and transshipped on board M/S Vigour Singapore.

On July 18, 1993, the ship arrived and docked at the Manila International Container Port where the container van was again off-loaded. On July 26, 1993, the cargo was received by petitioner Aboitiz Shipping Corporation (Aboitiz) through its duly authorized booking representative, Aboitiz Transport System. The b/l contained notation: “grounded outside warehouse.”

The container van was stripped and transferred to another crate/container van without any notation on the condition of the cargo on the Stuffing/Stripping Report.

8 On August 1, 1993, the container van was

loaded on board petitioner's vessel, MV Super Concarrier I. The vessel left Manila en route to Cebu City on August 2, 1993.

CRATES SLIGHTLY BROKEN. The shipment arrived in Cebu City and discharged onto a receiving apron of the Cebu International Port. It was then brought to the Cebu Bonded Warehousing Corporation pending clearance from the Customs authorities. In the Stripping Report

9 dated August 5, 1993, petitioner's

checker noted that the crates were slightly broken or cracked at the bottom.

On August 11, 1993, the cargo was withdrawn by the representative of the consignee, Science Teaching Improvement Project (STIP) and delivered to Don Bosco Technical High School, Punta Princesa, Cebu City. It was received by Mr. Bernhard Willig.

TELEPHONE CALL. On August 13, 1993, Mayo B. Perez, then Claims Head of petitioner, received a telephone call from Willig informing him that the cargo sustained water damage. Perez, upon receiving the call, immediately went to the bonded warehouse and checked the condition of the container and other cargoes stuffed in the same container. He found that the container van and other cargoes stuffed there were completely dry and showed no sign of wetness.

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But he confirmed that the tools which were stored inside the crate were already corroded. He further explained that the "grounded outside warehouse" notation in the bill of lading referred only to the container van bearing the cargo.

NOTICE OF DAMAGE. In a letter dated August 15, 1993, Willig informed Aboitiz of the damage noticed upon opening of the cargo. The letter stated that the crate was broken at its bottom part such that the contents were exposed. The work tools and

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workbenches were found to have been completely soaked in water with most of the packing cartons already disintegrating. The crate was properly sealed off from the inside with tarpaper sheets. On the outside, galvanized metal bands were nailed onto all the edges. The letter concluded that apparently, the damage was caused by water entering through the broken parts of the crate.

CLAIM. On September 21, 1993, the consignee filed a formal claim

14 with Aboitiz in the amount

ofP276,540.00 for the damaged condition of the following goods: ten (10) wooden workbenches, three (3) carbide-tipped saw blades, one (1) set of ball-bearing guides, one (1) set of overarm router bits, twenty (20) rolls of sandpaper for stroke sander.

“GROUNDED OUTSIDE WAREHOUSE.” CAC (Claims Adjustment Corp.) reported to ICNA that based on official weather report from the PAG-ASA, it would appear that heavy rains on July 28 and 29, 1993 caused water damage to the shipment. CAC noted that the shipment was placed outside the warehouse of Pier No. 4, North Harbor, Manila when it was delivered on July 26, 1993. The shipment was placed outside the warehouse as can be gleaned from the bill of lading issued by Aboitiz which contained the notation "grounded outside warehouse."

It was only on July 31, 1993 when the shipment was stuffed inside another container van for shipment to Cebu.

Aboitiz refused to settle the claim. On October 4, 1993, ICNA paid the amount of P280,176.92 to consignee. A subrogation receipt was duly signed by Willig. ICNA formally advised Aboitiz of the claim and subrogation receipt executed in its favor. Despite follow-ups, however, no reply was received from Aboitiz

RTC: Plaintiff NOT entitled to the relief claimed for being baseless and w/o merit. No evidence has been adduced which would show that ICNA UK is the same as or the predecessor-in-interest of plaintiff Insurance Company of North America ICNA with office address at Cigna-Monarch Bldg., dela Rosa cor. Herrera Sts., Legaspi Village, Makati, Metro Manila or that ICNA UK assigned the Marine Policy to ICNA.

laintiff, further, claims that it has been subrogated to the rights and interest of Science Teaching Improvement Project as shown by the Subrogation Form (Exhibit "K") allegedly signed by a representative of Science Teaching Improvement Project. Such representative, however, was not presented on the witness stand. Hence, the Subrogation Form is self-serving and has no probative value

ICNA failed to prduce evid. That it was a foreign corp duly licensed to do business in the Phils. Thus, it lacked capacity to do sue before our courts.

CA: Reversed and set aside RTC decision. Aboitiz to pay plaintiff Insurer; ground invoked for the dismissal of the complaint as legally untenable. Even assuming arguendo that the plaintiff-insurer in this case is an unlicensed foreign corporation, such circumstance will not bar it from claiming reimbursement from the defendant carrier by virtue of subrogation under the contract of insurance and as recognized by Philippine courts.

ISSUES: (a) Is respondent ICNA the real party-in-interest that possesses the right of subrogation to claim reimbursement from petitioner Aboitiz? (b) Was there a timely filing of the notice of claim as required under Article 366 of the Code of Commerce? (c) If so, can petitioner be held liable on the claim for damages?

HELD:

A foreign corporation not licensed to do business in the Philippines is not absolutely incapacitated from filing a suit in local courts. Only when that foreign corporation is "transacting" or "doing business" in the country will a license be necessary before it can institute suits.

It may, however, bring suits on isolated business transactions, which is not prohibited under Philippine law

Thus, this Court has held that a foreign insurance company may sue in Philippine courts upon the marine insurance policies issued by it abroad to cover international-bound cargoes shipped by a Philippine carrier, even if it has no license to do business in this country. It is the act of engaging in business without the prescribed license, and not the lack of license per se, which bars a foreign corporation from access to our courts. (it was the

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ICNA UK Limited which issued the subject marine policy, the present suit was filed by the said company's authorized agent in Manila. It was the domestic corporation that brought the suit and not the foreign company).

THERE WAS PROPER INDORSEMENT. The terms of the Open Policy authorize the filing of any claim on the insured goods, to be brought against ICNA UK, the company who issued the insurance, or against any of its listed agents worldwide

MSAS accepted said provision when it signed and accepted the policy. The acceptance operated as an acceptance of the authority of the agents. Hence, a formal indorsement of the policy to the agent in the Philippines was unnecessary for the latter to exercise the rights of the insurer.

The policy benefits any subsequent assignee, or holder, including the consignee, who may file claims on behalf of the assured. This is in keeping with Section 57 of the Insurance Code which states:

A policy may be so framed that it will inure to the benefit of whosoever, during the continuance of the risk, may become the owner of the interest insured. (Emphasis added).

SUBROGATION – accrues simply upon payment of the insurance claim by the insurer.

Thus, ICNA's entitlement to subrogation equipped it with a cause of action against petitioner in case of a contractual breach or negligence.

The giving of notice of loss or injury is a condition precedent to the action for loss or injury or the right to enforce the carrier's liability. Circumstances peculiar to this case lead Us to conclude that the notice requirement was complied with.

Art. 366 applies.

IN THE CASE AT BAR: The shipment was delivered on August 11, 1993. Although the letter informing the carrier of the damage was dated August 15, 1993, that letter, together with the notice of claim, was received by petitioner only on September 21, 1993. But petitioner admits that even before it received the written notice of claim, Mr. Mayo B. Perez, Claims Head of the company, was informed by telephone sometime in August 13, 1993. Mr. Perez then immediately went to the warehouse and to the

delivery site to inspect the goods in behalf of petitioner.

COMPARISON w/ PCIC CASE; PRO HAC VICE. As adverted to earlier, there are peculiar circumstances in the instant case that constrain Us to rule differently from the PCIC case, albeit this ruling is being made pro hac vice, not to be made a precedent for other cases.

Bernhard Willig, the representative of consignee who received the shipment, relayed the information that the delivered goods were discovered to have sustained water damage to no less than the Claims Head of petitioner, Mayo B. Perez. Immediately, Perez was able to investigate the claims himself and he confirmed that the goods were, indeed, already corroded.

Provisions specifying a time to give notice of damage to common carriers are ordinarily to be given a reasonable and practical, rather than a strict construction. e give due consideration to the fact that the final destination of the damaged cargo was a school institution where authorities are bound by rules and regulations governing their actions. Understandably, when the goods were delivered, the necessary clearance had to be made before the package was opened. Upon opening and discovery of the damaged condition of the goods, a report to this effect had to pass through the proper channels before it could be finalized and endorsed by the institution to the claims department of the shipping company.

CALL MADE W/IN REASONABLE PERIOD; SUBSTANTIAL COMPLIANCE. The call to petitioner was made two days from delivery, a reasonable period considering that the goods could not have corroded instantly overnight such that it could only have sustained the damage during transit. Moreover, petitioner was able to immediately inspect the damage while the matter was still fresh. In so doing, the main objective of the prescribed time period was fulfilled. Thus, there was substantial compliance with the notice requirement in this case.

To recapitulate, We have found that respondent, as subrogee of the consignee, is the real party in interest to institute the claim for damages against petitioner; and pro hac vice, that a valid notice of claim was made by respondent. LIABILITY: Extraordinary diligence NOT observed. Goods were kept outside the warehouse as evidenced by its

10

notation and that evidence showed that rain fell over Manila during that period.

RULING: PETITION DENIED; PETITIONER LIABLE FOR DAMAGES.

C. INT’L TRANSPO (COGSA, WARSAW CONVENTION)

The provisions of COGSA apply in International Carriage (foreign country to the Phils). Sec. 3 [6]:

(6) Unless notice or loss or damage and the general nature of such loss or damage by given in writing to the carrier or his agent at the port of discharge or at the time of the removal of the goods into the custody of the person entitled to delivery thereof under the contract of carriage, such removal shall be prima facie evidence of the delivery by the carrier of the goods as described in the bill of lading. If the loss or damage is not apparent, the notice must be given within three days of the delivery.

Said notice of loss or damage may be endorsed upon the receipt for the goods given by the person taking delivery thereof.

The notice in writing need not be given if the state of the goods has at the time of their receipt been the subject of joint survey or inspection.

In any event the carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is brought within one year after delivery of the goods or the date when the goods should have been delivered: Provided, that, if a notice of loss or damage, either apparent or concealed, is not given as provided for in this section, that fact shall not affect or prejudice the right of the shipper to bring suit within one year after the delivery of the goods or the date when the goods should have been delivered.

In the case of any actual or apprehended loss or damage, the carrier and the receiver shall give all reasonable facilities to each other for inspecting and tallying the goods

1. PERIOD TO FILE CLAIM

a. If the damage is apparent, the claim shd be filed immediately upon the discharge of the goods

b. The claim must be made w/in 3 days from delivery of the damage is NOT apparent.

PERIOD NOT MANDATORY. Failure to file notice of claim w/in the given period will NOT bar recovery. The carrier is NOT discharged even if notice of loss is not given bec. Sec.3 provides: “such fact will NOT affect or prejudice the right of the shipper to bring suit.”

In other words: regardless of whether the notice of loss or damage has been given, the shipper can still bring a action to recover WITHIN 1 YR AFTER DELIVERY OF THE GOODS.

2. PRESCRIPTION IN INT’L CARRIAGE OF GOODS. The action for damages MUST be filed WITHIN 1 YR FROM DISCHARGE OF GOODS.

PURPOSE: Said limitation is designed to meet the exigencies of maritime hazards.

a. Effect of Demand. The period is NOT suspended by an EXTRAJUDICIAL DEMAND, Art. 1155, NCC cannot be applied because ematters affecting transpo of goods by sea shd be decided in as SHORT A TIME AS POSSIBLE.

b. Conversion or Misdelivery. The period does NOT apply to conversion or misdelivery. The 1 yr period provided for refers to LOSS OF CARGO.

If misdelivered, applicable prescriptive period is that found in the Civil Code, i.e., 10 yrs for breach of warranty of a written contract or 4 years for quasi-delict.

c. Delay. Similarly , damage arising from delay or late delivery is NOT the damage or loss contemplated under COGSA. The goods are NOT actually lost or damaged – 10 yr prescriptive eriod.

d. Collision cases. The rule applies in collision cases. HOWEVER, 1 YR PERIOD starts NOT from date of the collision but when the goods should have been delivered, had the cargoes been saved.

e. Insurance. Bound by 1 yr. This is understandable because the insurer, in the exercise of right of subrogation, s pursing the cause of action belonging to the shipper/insured.

- Hence, any defense avail.against the shipper is avail. against the insurer. However, it does NOT apply to the claim against the insurer for the insrurance proceeds.

- The claim for insurance proceeds prescribes 10 yrs.

WARSAW CONVENTION:

11

CHAPTER III LIABILITY OF THE CARRIER

Article 17. The carrier is liable for damage sustained in the event of the death or wounding of a passenger or any other bodily injury suffered by a passenger, if the accident which caused the damage so sustained took place on board the aircraft or in the course of any of the operations of embarking or disembarking.

Article 18

1. The carrier is liable for damage sustained in the event of the destruction or loss of, or of damage to, any registered luggage or any goods, if the occurrence which caused the damage so sustained took place during the carriage by air.

2. The carriage by air within the meaning of the preceding paragraph comprises the period during which the luggage or goods are in charge of the carrier, whether in an aerodrome or on board an aircraft, or, in the case of a landing outside an aerodrome, in any place whatsoever.

3. The period of the carriage by air does not extend to any carriage by land, by sea or by river performed outside an aerodrome. If, however, such a carriage takes place in the performance of a contract for carriage by air, for the purpose of loading, delivery or transshipment, any damage is presumed, subject to proof to the contrary, to have been the result of an event which took place during the carriage by air.

Article 19 The carrier is liable for damage occasioned by delay in the carriage by air of passengers, luggage or goods.

Article 22

1. In the carriage of passengers the liability of the carrier for each passenger is limited to the sum of 125,000 francs. Where, in accordance with the law of the Court seised of the case, damages may be awarded in the form of periodical payments, the equivalent capital value of the said payments shall not exceed 125,000 francs. Nevertheless, by special contract, the carrier and the passenger may agree to a higher limit of liability.

2. In the carriage of registered luggage and of goods, the liability of the carrier is limited to a sum of 250 francs per kilogram, unless the consignor has made, at the time when the package was handed over to the carrier, a special declaration of the value at delivery and has paid a supplementary sum if the case so requires. In that case the carrier will be liable to pay a sum not exceeding the declared sum, unless

he proves that that sum is greater than the actual value to the consignor at delivery.

3. As regards objects of which the passenger takes charge himself the liability of the carrier is limited to 5,000 francs per passenger. 4. The sums mentioned above shall be deemed to refer to the French franc consisting of 65 ½ milligrams gold of millesimal fineness 900. These sums may be converted into any national currency in round figures.

MITSUI O.S.K LINES LTD. v CA, LAVINE LOUNGEWEAR MFG. CORP

FACTS:

Petitioner Mitsui O.S.K. Lines Ltd. is a foreign corporation represented in the Philippines by its agent, Magsaysay Agencies. It entered into a contract of carriage through Meister Transport, Inc., an international freight forwarder, with private respondent Lavine Loungewear Manufacturing Corporation to transport goods of the latter from Manila to Le Havre, France.

DELAY. Petitioner undertook to deliver the goods to France 28 days from initial loading. On July 24, 1991, petitioner's vessel loaded private respondent's container van for carriage at the said port of origin.

However, in Kaoshiung, Taiwan the goods were not transshipped immediately, with the result that the shipment arrived in Le Havre only on November 14, 1991. The consignee allegedly paid only half the value of the said goods on the ground that they did not arrive in France until the "off season" in that country. The remaining half was allegedly charged to the account of private respondent which in turn demanded payment from petitioner through its agent.

COMPLAINT. As petitioner denied private respondent's claim, the latter filed a case in the Regional Trial Court on April 14, 1992. In the original complaint, private respondent impleaded as defendants Meister Transport, Inc. and Magsaysay Agencies, Inc., the latter as agent of petitioner Mitsui O.S.K. Lines Ltd. On May 20, 1993, it amended its complaint by impleading petitioner as defendant in lieu of its agent. The parties to the case thus became private respondent as plaintiff, on one side, and Meister Transport Inc. and petitioner Mitsui O.S.K. Lines Ltd. as represented by Magsaysay Agencies, Inc., as defendants on the other.

12

RTC: denied petitioner’s motion and MR.

CA: Sustained

ISSUE: Whether private respondent's action is for "loss or damage" to goods shipped, within the meaning of §3(6) of the Carriage of Goods by Sea Act (COGSA).

HELD:

As defined in the Civil Code and as applied to Section 3(6), paragraph 4 of the Carriage of Goods by Sea Act, "loss" contemplates merely a situation where no delivery at all was made by the shipper of the goods because the same had perished, gone out of commerce, or disappeared in such a way that their existence is unknown or they cannot be recovered

Deterioration of goods due to delay in their transportation constitutes "loss" or "damage" within the meaning of §3(6), so that as suit was not brought within one year the action was barred:

The RATIONALE behind limiting the said definitions to such parameters is not hard to find or fathom. As this Court held in Ang:

Said one-year period of limitation is designed to meet the exigencies of maritime hazards. In a case where the goods shipped were neither lost nor damaged in transit but were, on the contrary, delivered in port to someone who claimed to be entitled thereto, the situation is different, and the special need for the short period of limitation in cases of loss or damage caused by maritime perils does not obtain.

IN THE CASE AT BAR: there is neither deterioration nor disappearance nor destruction of goods caused by the carrier's breach of contract. Whatever reduction there may have been in the value of the goods is not due to their deterioration or disappearance because they had been damaged in transit.

Precisely, the question before the trial court is not the particular sense of "damages" as it refers to the physical loss or damage of a shipper's goods as specifically covered by §3(6) of COGSA but petitioner's potential liability for the damages it has caused in the general sense and, as such, the matter is governed by the Civil Code, the Code of Commerce and COGSA, for the breach of its contract of carriage with private respondent.

We conclude by holding that as the suit below is not for "loss or damage" to goods contemplated in §3(6), the question of prescription of action is governed not by the COGSA but by Art. 1144 of the Civil Code which provides for a prescriptive period of ten years

RULING: CA DECISION AFFIRMED.

FIL-MERCHANTS INSURANCE CO. v PRESIDING JUDGE ALEJANDRO

FACTS:

On August 3, 1977, plaintiff Choa Tiek Seng filed a complaint, docketed as Civil Case No. 109911, against the petitioner before the then CFI Manila for recovery of a sum of money under the marine insurance policy on cargo.

Mr. Choa alleged that the goods he insured with the petitioner sustained loss and damage in the amount of P35,987.26. The vessel SS Frotario which was owned and operated by private respondent Frota Oceanica Brasiliera, (Frota) discharged the goods at the port of Manila on December 13, 1976. The said goods were delivered to the arrastre operator E. Razon, Inc., on December 17, 1976 and on the same date were received by the consignee-plaintiff.

On January 9, 1978, the petitioner filed a third-party complaint against the carrier, private respondent Frota and the arrastre contractor, E. Razon, Inc. for indemnity, subrogation, or reimbursement in the event that it is held liable to the plaintiff.

Meanwhile, on August 10, 1977, Joseph Benzon Chua filed a similar complaint against the petitioner which was docketed as Civil Case No. 110061, for recovery under the marine insurance policy for cargo alleging that the goods insured with the petitioner sustained loss and damage in the sum of P55,996.49.

DELIVERY. The goods were delivered to the plaintiff-consignee on or about January 25-28, 1977.

In both cases, the private respondents filed their respective answers and subsequently filed a motion for preliminary hearing on their affirmative defense of prescription. The private respondents alleged in their separate answers that the petitioner is already barred from filing a claim because under the Carriage of Goods by Sea Act, the suit against the carrier must be filed within one year after delivery of

13

the goods or the date when the goods should have been delivered.

CONTENTION BY PETITIONER: provision relied upon by the respondents applies only to the shipper and not to the insurer of the goods.

RTC: upheld respondent Frota and dismissed the petitioner's third-party complaint. Likewise, on August 31, 1982, the respondent judge in Civil Case No. 110061 dismissed the petitioner's third-party complaint against respondent Australia-West on the ground that the same was filed beyond the prescriptive period provide in Section 3 (6) of the Carriage of Goods by Sea Act of 1936. These both cases, the petitioner appealed to us on a pure question of law, raising the issue of whether or not the prescriptive period of one year under the said Act also applies to an insurer such as herein petitioner.

ISSUE: whether or not the one-year period within which to file a suit against the carrier and theship, in case of damage or loss as provided for in the Carriage of Goods by Sea Act applies to the insurer of the goods.

HELD:

The petitioner maintains that the one-year prescriptive period cannot cover an insurer which has not settled the claim of its insured because it cannot be considered as the person referred to in the applicable provision of the said Act that has the duty or right to give notice of loss or damage to the carrier or to sue such carrier within the period of one year and that where an insurer does not settle the claim of its insured it cannot be considered as subrogated to the rights of said insured that would then authorize it to sue the carrier within the time-bar of one year.

The lower courts did not err.

In the first place, said section provides that the notice of loss or damage for which a claim for indemnity may be made should be given in writing to the carrier at the port of discharge before or at the time of the removal of the goods, and if the loss or damage is not apparent said notice should be given 'within three days on delivery.'

From the language of this section, it seems clear that the notice of loss or damage is required to be filed not necessarily by the shipper but also by the

consignee or any legal holder of the bill of lading. In fact, said section requires that the notice be given at the port of discharge and the most logical party to file the notice is either the consignee or the endorsee of the bill of lading. In the second place, a study of the historical background of this particular provision will show that although the word shipper is used in the proviso referred to by the petitioner, the intention of the law was not to exclude the consignee or endorsee of the bill of lading from bringing the action but merely to limit the filing of the same within one year after the delivery of the goods at the port of discharge.

Clearly, the coverage of the Act includes the insurer of the goods. Otherwise, what the Act intends to prohibit after the lapse of the one-year prescriptive period can be done indirectly by the shipper or owner of the goods by simply filing a claim against the insurer even after the lapse of one year. This would be the result if we follow the petitioner's argument that the insurer can, at any time, proceed against the carrier and the ship since it is not bound by the time-bar provision. In this situation, the one-year limitation will be practically useless. This could not have been the intention of the law which has also for its purpose the protection of the carrier and the ship from fraudulent claims by having "matters affecting transportation of goods by sea be decided in as short a time as possible" and by avoiding incidents which would "unnecessarily extend the period and permit delays in the settlement of questions affecting the transportation."

We likewise agree with the respondents that the third-party complaint of the petitioner cannot be considered to have been filed upon the filing of the main action because although it can be said that a third-party complaint is but ancilliary to the main action (Eastern Assurance and Surety Corporation v. Cui 105 SCRA 622), it cannot abridge, enlarge, nor modify the substantive rights of any litigant. It creates no substantive rights.

ACTION HAS PRESCRIBED. In the case at bar, the petitioner's action has prescribed under the provisions of the Carriage of Goods by Sea Act. Hence, whether it files a third-party complaint or chooses to maintain an independent action against herein respondents is of no moment. Had the plaintiffs in the civil cases below filed an action against the petitioner after the one-year prescriptive period, then the latter could have successfully denied liability on the ground that by their own doing, the plaintiffs had prevented the petitioner

14

from being subrogated to their respective rights against the herein respondents by filing a suit after the one-year prescriptive period.

HOWEVER, the situation, however, does not obtain in the present case. The plaintiffs in the civil cases below gave extra-judicial notice to their respective carriers and filed suit against the petitioner well within one year from their receipt of the goods. The petitioner had plenty of time within which to act. In Civil Case No. 109911, the petitioner had more than four months to file a third-party complaint while in Civil Case No. 110061, it had more than five months to do so. In both instances, however, the petitioner failed to file the appropriate action.

RULING: DISMISSED

MAYER STEEL PIPE CORP AND HK GOVT SUPPLIES DEPT. v CA, SOUTH SEA SURETY, CHARTER INSURANCE CORP.

FACTS:

In 1983, petitioner Hongkong Government Supplies Department (Hongkong) contracted petitioner Mayer Steel Pipe Corporation (Mayer) to manufacture and supply various steel pipes and fittings. From August to October, 1983, Mayer shipped the pipes and fittings to Hongkong as evidenced by Invoice.

Prior to the shipping, petitioner Mayer insured the pipes and fittings against all risks with private respondents South Sea Surety and Insurance Co., Inc. (South Sea) and Charter Insurance Corp. (Charter).The pipes and fittings covered by Invoice Nos. MSPC-1014, 1015 and 1025 with a total amount of US$212,772.09 were insured with respondent South Sea, while those covered by Invoice Nos. 1020, 1017 and 1022 with a total amount of US$149,470.00 were insured with respondent Charter.

DAMAGE. Industrial Inspection certified all the pipes and fittings to be in good order condition before they were loaded in the vessel. Nonetheless, when the goods reached Hongkong, it was discovered that a substantial portion thereof was damaged.

CLAIM. Petitioners filed a claim against private respondents for indemnity under the insurance contract. Respondent Charter paid petitioner Hongkong the amount of HK$64,904.75. Petitioners

demanded payment of the balance of HK$299,345.30 representing the cost of repair of the damaged pipes. Private respondents refused to pay because the insurance surveyor's report allegedly showed that the damage is a factory defect.

Petitioners filed an action against private respondents to recover the sum of HK$299,345.30. For their defense, private respondents averred that they have no obligation to pay the amount claimed by petitioners because the damage to the goods is due to factory defects which are not covered by the insurance policies.

RTC: ruled in favor of petitioners; It found that the damage to the goods is not due to manufacturing defects. It also noted that the insurance contracts executed by petitioner Mayer and private respondents are "all risks" policies which insure against all causes of conceivable loss or damage. The only exceptions are those excluded in the policy, or those sustained due to fraud or intentional misconduct on the part of the insured.

CA: Affirmed.

ISSUE: W/N CA erred in holding petitioner’s cause of action had already prescribed on the mistaken app of COGSA

HELD:

Petition is impressed w/ merit. CA erred in applying Sec. 3(6) of COGSA.

Section 3(6) of the Carriage of Goods by Sea Act states that the carrier and the ship shall be discharged from all liability for loss or damage to the goods if no suit is filed within one year after delivery of the goods or the date when they should have been delivered.

NOTE: Under this provision, only the carrier's liability is extinguished if no suit is brought within one year. But the liability of the insurer is not extinguished because the insurer's liability is based not on the contract of carriage but on the contract of insurance.

The Filipino Merchants case is different from the case at bar. In Filipino Merchants, it was the insurer which filed a claim against the carrier for reimbursement of the amount it paid to the shipper. In the case at bar, it was the shipper which

15

filed a claim against the insurer. The basis of the shipper's claim is the "all risks" insurance policies issued by private respondents to petitioner Mayer.

The ruling in Filipino Merchants should apply only to suits against the carrier filed either by the shipper, the consignee or the insurer. When the court said in Filipino Merchants that Section 3(6) of the Carriage of Goods by Sea Act applies to the insurer, it meant that the insurer, like the shipper, may no longer file a claim against the carrier beyond the one-year period provided in the law. But it does not mean that the shipper may no longer file a claim against the insurer because the basis of the insurer's liability is the insurance contract. An insurance contract is a contract whereby one party, for a consideration known as the premium, agrees to indemnify another for loss or damage which he may suffer from a specified peril.

“ALL RISKS” covers all kinds of loss other than those due to willful and fraudulent act of the insured.

-Such obligation prescribes in ten years, in accordance with Article 1144 of the New Civil Code.

RULING: PETITION GRANTED.

BELGIAN OVERSEAS CHARTERING v PHIL FIRST INSURANCE (see notes)

LHUILLIER v BRITISH AIRWAYS

FACTS:

On April 28, 2005, petitioner Edna Diago Lhuillier filed a Complaint for damages against respondent British Airways before the Regional Trial Court (RTC) of Makati City. She alleged that on February 28, 2005, she took respondent’s flight 548 from London, UK to Rome, Italy.

Once on board, she allegedly requested Julian Halliday (Halliday), one of the respondent’s flight attendants, to assist her in placing her hand-carried luggage in the overhead bin. However, Halliday allegedly refused to help and assist her, and even sarcastically remarked that "If I were to help all 300 passengers in this flight, I would have a broken back!”

Petitioner further alleged that when the plane was about to land in Rome, Italy, another flight attendant, Nickolas Kerrigan (Kerrigan), singled her

out from among all the passengers in the business class section to lecture on plane safety. Allegedly, Kerrigan made her appear to the other passengers to be ignorant, uneducated, stupid, and in need of lecturing on the safety rules and regulations of the plane. Affronted, petitioner assured Kerrigan that she knew the plane’s safety regulations being a frequent traveler. Thereupon, Kerrigan allegedly thrust his face a mere few centimeters away from that of the petitioner and menacingly told her that "We don’t like your attitude."

Upon arrival in Rome, petitioner complained to respondent’s ground manager and demanded an apology. However, the latter declared that the flight stewards were "only doing their job."

COMPLAINT. Thus, petitioner filed the complaint for damages, praying that respondent be ordered to pay P5 million as moral damages, P2 million as nominal damages, P1 million as exemplary damages, P300,000.00 as attorney’s fees,P200,000.00 as litigation expenses, and cost of the suit.

On May 16, 2005, summons, together with a copy of the complaint, was served on the respondent through Violeta Echevarria, General Manager of Euro-Philippine Airline Services, Inc.

CONTENTION: lack of jurisdiction. Respondent filed a motion to dismiss on grounds of lack of jurisdiction over the case and over the person of the respondent. Respondent alleged that only the courts of London, United Kingdom or Rome, Italy, have jurisdiction over the complaint for damages pursuant to the Warsaw Convention,

5 Article 28(1)

of which provides:

An action for damages must be brought at the option of the plaintiff, either before the court of domicile of the carrier or his principal place of business, or where he has a place of business through which the contract has been made, or before the court of the place of destination. Thus, since a) respondent is domiciled in London; b) respondent’s principal place of business is in London; c) petitioner bought her ticket in Italy (through Jeepney Travel S.A.S, in Rome);

6 and d) Rome, Italy is

petitioner’s place of destination, then it follows that the complaint should only be filed in the proper courts of London, United Kingdom or Rome, Italy.

16

RTC: File an answer to the Motion to Dismiss. Instead of filing a motion to dismiss, petitioner filed on June 27, 2005, an Urgent Ex-Parte Motion to Admit Formal Amendment to the Complaint and Issuance of Alias Summons.

8 Petitioner alleged that

upon verification with the Securities and Exchange Commission, she found out that the resident agent of respondent in the Philippines is Alonzo Q. Ancheta. Subsequently, on September 9, 2005, petitioner filed a Motion to Resolve Pending Incident and Opposition to Motion to Dismiss.

Granted Motion to Dismiss. However, our Courts have to apply the principles of international law, and are bound by treaty stipulations entered into by the Philippines which form part of the law of the land. One of this is the Warsaw Convention. Being a signatory thereto, the Philippines adheres to its stipulations and is bound by its provisions including the place where actions involving damages to plaintiff is to be instituted, as provided for under Article 28(1) thereof. Said treaty stipulations must be complied with in good faith following the time honored principle of pacta sunt servanda.

ISSUE: Whether Philippine courts have jurisdiction over a tortious conduct committed against a filipino citizen and resident by airline personnel of a foreign carrier travelling beyond the territorial limit of any foreign country; and thus is outside the ambit of the Warsaw convention

HELD:

Petition w/o merit.

CONTENTION: Her cause of action arose NOT from the contract of carriage but from the tortuous conduct by airline respondent in violation of the Civil Code on Human Relations.

The Warsaw Convention has the force and effect of law in this country.

The Republic of the Philippines is a party to the Convention for the Unification of Certain Rules Relating to International Transportation by Air, otherwise known as the Warsaw Convention. It took effect on February 13, 1933. The Convention was concurred in by the Senate, through its Resolution No. 19, on May 16, 1950. The Philippine instrument of accession was signed by President Elpidio Quirino on October 13, 1950, and was deposited with the Polish government on

November 9, 1950. The Convention became applicable to the Philippines on February 9, 1951.

On September 23, 1955, President Ramon Magsaysay issued Proclamation No. 201, declaring our formal adherence thereto, "to the end that the same and every article and clause thereof may be observed and fulfilled in good faith by the Republic of the Philippines and the citizens thereof.”

The Convention is thus a treaty commitment voluntarily assumed by the Philippine government and, as such, has the force and effect of law in this country.

APPLICATION. The Warsaw Convention applies because the air travel, where the alleged tortious conduct occurred, was between the United Kingdom and Italy, which are both signatories to the Warsaw Convention.

Article 1 of the Warsaw Convention provides:

1. This Convention applies to all international carriage of persons, luggage or goods performed by aircraft for reward. It applies equally to gratuitous carriage by aircraft performed by an air transport undertaking.

2. For the purposes of this Convention the expression "international carriage" means any carriage in which, according to the contract made by the parties, the place of departure and the place of destination, whether or not there be a break in the carriage or a transhipment, are situated either within the territories of two High Contracting Parties, or within the territory of a single High Contracting Party, if there is an agreed stopping place within a territory subject to the sovereignty, suzerainty, mandate or authority of another Power, even though that Power is not a party to this Convention. A carriage without such an agreed stopping place between territories subject to the sovereignty, suzerainty, mandate or authority of the same High Contracting Party is not deemed to be international for the purposes of this Convention. (Emphasis supplied)

HIGH CONTRACTING PARTIES: Thus, when the place of departure and the place of destination in a contract of carriage are situated within the territories of two High Contracting Parties, said carriage is deemed an "international carriage". The High Contracting Parties referred to herein were

17

the signatories to the Warsaw Convention and those which subsequently adhered to it.

TRANPORT W/IN “INT’L CARRIAGE.” In the case at bench, petitioner’s place of departure was London, United Kingdom while her place of destination was Rome, Italy.

15 Both the United Kingdom

16 and

Italy17

signed and ratified the Warsaw Convention. As such, the transport of the petitioner is deemed to be an "international carriage" within the contemplation of the Warsaw Convention.

Under Article 28(1) of the Warsaw Convention, the plaintiff may bring the action for damages before –

1. the court where the carrier is domiciled;

2. the court where the carrier has its principal place of business;

3. the court where the carrier has an establishment by which the contract has been made; or

4. the court of the place of destination.

In this case, it is not disputed that respondent is a British corporation domiciled in London, United Kingdom with London as its principal place of business. Hence, under the first and second jurisdictional rules, the petitioner may bring her case before the courts of London in the United Kingdom. In the passenger ticket and baggage check presented by both the petitioner and respondent, it appears that the ticket was issued in Rome, Italy. Consequently, under the third jurisdictional rule, the petitioner has the option to bring her case before the courts of Rome in Italy. Finally, both the petitioner and respondent aver that the place of destination is Rome, Italy, which is properly designated given the routing presented in the said passenger ticket and baggage check. Accordingly, petitioner may bring her action before the courts of Rome, Italy. We thus find that the RTC of Makati correctly ruled that it does not have jurisdiction over the case filed by the petitioner.

NOTE: We further held that Article 28(1) of the Warsaw Convention is jurisdictional in character.

JURISDICTION AND NOT VENUE PROVISION. Article 28(1) as a jurisdiction and not a venue provision. First, the wording of Article 32, which indicates the places where the action for damages "must" be brought, underscores the mandatory nature of

Article 28(1). Second, this characterization is consistent with one of the objectives of the Convention, which is to "regulate in a uniform manner the conditions of international transportation by air." Third, the Convention does not contain any provision prescribing rules of jurisdiction other than Article 28(1), which means that the phrase "rules as to jurisdiction" used in Article 32 must refer only to Article 28(1). In fact, the last sentence of Article 32 specifically deals with the exclusive enumeration in Article 28(1) as "jurisdictions," which, as such, cannot be left to the will of the parties regardless of the time when the damage occurred.

In other words, where the matter is governed by the Warsaw Convention, jurisdiction takes on a dual concept. Jurisdiction in the international sense must be established in accordance with Article 28(1) of the Warsaw Convention, following which the jurisdiction of a particular court must be established pursuant to the applicable domestic law. Only after the question of which court has jurisdiction is determined will the issue of venue be taken up. This second question shall be governed by the law of the court to which the case is submitted

Santos III v. Northwest Orient Airlines23

is analogous to the instant case. In the said case, we held that the allegation of willful misconduct resulting in a tort is insufficient to exclude the case from the realm of the Warsaw Convention. In fact, our ruling that a cause of action based on tort did not bring the case outside the sphere of the Warsaw Convention was our ratio decidendi in disposing of the specific issue presented by Augusto Santos III. Clearly, the contention of the herein petitioner that the said ruling is an obiter dictum is without basis.

It is thus settled that allegations of tortious conduct committed against an airline passenger during the course of the international carriage do not bring the case outside the ambit of the Warsaw Convention.

NO SUBMISSION TO THE JURISDCTION OF TRIAL COURT. Special Appearance to Question a Court’s Jurisdiction Is NOT Voluntary Appearance.

Sec. 20. Voluntary appearance. – The defendant’s voluntary appearance in the action shall be equivalent to service of summons. The inclusion in a motion to dismiss of other grounds aside from lack of jurisdiction over the person of the defendant shall not be deemed a voluntary appearance.

18

Thus, a defendant who files a motion to dismiss, assailing the jurisdiction of the court over his person, together with other grounds raised therein, is not deemed to have appeared voluntarily before the court.

RULING: PETITION DENIED

CHINA AIRLINES v DANIEL CHIOK

FACTS:

On September 18, 1981, Daniel Chiok purchased from China Airlines, Ltd. (CAL for brevity) airline passenger ticket number 297:4402:004:278:5 for air transportation covering Manila-Taipei-Hongkong-Manila. Said ticket was exclusively endorseable to Philippine Airlines, Ltd. (PAL for brevity).

Chiok took his trip from Manila to Taipei using [the] CAL ticket. Before he left for said trip, the trips covered by the ticket were pre-scheduled and confirmed by the former. When he arrived in Taipei, he went to the CAL office and confirmed his Hongkong to Manila trip on board PAL Flight No. PR 311. The CAL office attached a yellow sticker appropriately indicating that his flight status was OK.

When Chiok reached Hongkong, he went to the PAL office and sought to reconfirm his flight back to Manila. The PAL office confirmed his return trip on board Flight No. PR 311 and attached its own sticker. On November 24, 1981, Chiok proceeded to Hongkong International Airport for his return trip to Manila. However, upon reaching the PAL counter, Chiok saw a poster stating that PAL Flight No. PR 311 was cancelled because of a typhoon in Manila. He was then informed that all the confirmed ticket holders of PAL Flight No. PR 311 were automatically booked for its next flight, which was to leave the next day. He then informed PAL personnel that, being the founding director of the Philippine Polysterene Paper Corporation, he ha[d] to reach Manila on November 25, 1981 because of a business option which he ha[d] to execute on said date.

On November 25, 1981, Chiok went to the airport. Cathay Pacific stewardess Lok Chan (hereafter referred to as Lok) ha[d] taken and received Chioks plane ticket and his luggage. Lok called the attention of Carmen Chan (hereafter referred to as Carmen), PALs terminal supervisor, and informed the latter that Chiok’s name was not

in the computer list of passengers. Subsequently, Carmen informed Chiok that his name did not appear in PALs computer list of passengers and therefore could not be permitted to board PAL Flight No. PR 307.

Meanwhile, Chiok requested Carmen to put into writing the alleged reason why he was not allowed to take his flight. The latter then wrote the following, to wit: PAL STAFF CARMEN CHAN CHKD WITH R/C KENNY AT 1005H NO SUCH NAME IN COMPUTER FOR 311/24 NOV AND 307/25 NOV. The latter sought to recover his luggage but found only 2 which were placed at the end of the passengers line. Realizing that his new Samsonite luggage was missing, which contained cosmetics worth HK$14,128.80, he complained to Carmen.

Thereafter, Chiok proceeded to PALs Hongkong office and confronted PALs reservation officer, Carie Chao (hereafter referred to as Chao), who previously confirmed his flight back to Manila. Chao told Chiok that his name was on the list and pointed to the latter his computer number listed on the PAL confirmation sticker attached to his plane ticket, which number was R/MN62.

Thereafter, Carmen directed PAL personnel to transfer counters. In the ensuing commotion, Chiok lost his clutch bag containing the following, to wit: (a) $2,000.00; (b) HK$2,000.00; (c) Taipei $8,000.00; (d) P2,000.00; etc. Subsequently, he was placed on stand-by and at around 7:30 p.m., PAL personnel informed him that he could now check-in.

COMPLAINT. Chiok filed a complaint against PAL and CAL in the RTC-NCR alleging that defendant PAL refused to accommodate him in Flight No. 307, for which reason he lost the business option aforementioned.

RTC: Defendant-airlines jointly and severally liable.

CA: Affirmed.

ISSUE: whether CAL is liable for damages

HELD:

y the very nature of their contract, defendant-appellant CAL is clearly liable under the contract of carriage with [respondent] and remains to be so, regardless of those instances when actual carriage was to be performed by another carrier. The

19

issuance of a confirmed CAL ticket in favor of [respondent] covering his entire trip abroad concretely attests to this. This also serves as proof that defendant-appellant CAL, in effect guaranteed that the carrier, such as defendant-appellant PAL would honor his ticket, assure him of a space therein and transport him on a particular segment of his trip.

Notwithstanding the errant quotation, we have found after careful deliberation that the assailed Decision is supported in substance by KLM v. CA. The misquotation by the CA cannot serve as basis for the reversal of its ruling.

LIAB. OF TICKET-ISSUING AIRLINE. It is significant to note that the contract of air transportation was between petitioner and respondent, with the former endorsing to PAL the Hong Kong-to-Manila segment of the journey. Such contract of carriage has always been treated in this jurisdiction as a single operation. This jurisprudential rule is supported by the Warsaw Convention,

[22] to which the Philippines

is a party, and by the existing practices of the International Air Transport Association (IATA).

Article 1, Section 3 of the Warsaw Convention states:

Transportation to be performed by several successive air carriers shall be deemed, for the purposes of this Convention, to be one undivided transportation, if it has been regarded by the parties as a single operation, whether it has been agreed upon under the form of a single contract or of a series of contracts, and it shall not lose its international character merely because one contract or a series of contracts is to be performed entirely within a territory subject to the sovereignty, suzerainty, mandate, or authority of the same High Contracting Party.

Article 15 of IATA-Recommended Practice similarly provides:

Carriage to be performed by several successive carriers under one ticket, or under a ticket and any conjunction ticket issued therewith, is regarded as a single operation.

In American Airlines v. Court of Appeals,[24]

we have noted that under a general pool partnership agreement, the ticket-issuing airline is the principal in a contract of carriage, while the endorsee-airline is the agent.

Likewise, as the principal in the contract of carriage, the petitioner in British Airways v. Court of Appeals

[26]was held liable, even when the breach of

contract had occurred, not on its own flight, but on that of another airline

IN THE CASE AT BAR: following the jurisprudence cited above, PAL acted as the carrying agent of CAL. In the same way that we ruled against British Airways and Lufthansa in the aforementioned cases, we also rule that CAL cannot evade liability to respondent, even though it may have been only a ticket issuer for the Hong Kong-Manila sector.

The records amply establish that he secured repeated confirmations of his PR 311 flight on November 24, 1981. Hence, he had every reason to expect that he would be put on the replacement flight as a confirmed passenger. Instead, he was harangued and prevented from boarding the original and the replacement flights.Thus, PAL breached its duty to transport him. After he had been directed to pay the terminal fee, his pieces of luggage were removed from the weighing-in counter despite his protestations.

PAL’S NEGLIGENCE. It is relevant to point out that the employees of PAL were utterly insensitive to his need to be in Manila on November 25, 1981, and to the likelihood that his business affairs in the city would be jeopardized because of a mistake on their part. It was that mistake that had caused the omission of his name from the passenger list despite his confirmed flight ticket. By merely looking at his ticket and validation sticker, it is evident that the glitch was the airlines fault. However, no serious attempt was made by PAL to secure the all-important transportation of respondent to Manila on the following day. To make matters worse, PAL allowed a group of non-revenue passengers, who had no confirmed tickets or reservations, to board Flight PR 307.

[33]

LACK OF DILIGENCE. The acts of PALs employees, particularly Chan, clearly fell short of the extraordinary standard of care that the law requires of common carriers.

[38] As narrated in Chans oral

deposition,[39]

the manner in which the airline discharged its responsibility to respondent and its other passengers manifested a lack of the requisite diligence and due regard for their welfare

RULING: PETITION DENIED.

20

FEDERAL EXPRESS CORP. v AMERICAN HOME INSURANCE, PHILAM INSURANCE CO.

FACTS:

SMITHKLINE Beecham (SMITHKLINE for brevity) of Nebraska, USA delivered to Burlington Air Express (BURLINGTON), an agent of [Petitioner] Federal Express Corporation, a shipment of 109 cartons of veterinary biologicals for delivery to consignee SMITHKLINE and French Overseas Company in Makati City, Metro Manila. The shipment was covered by Burlington Airway Bill No. 11263825 with the words, REFRIGERATE WHEN NOT IN TRANSIT and PERISHABLE stamp marked on its face.

That same day, Burlington insured the cargoes in the amount of $39,339.00 with American Home Assurance Company (AHAC).

The following day, Burlington turned over the custody of said cargoes to Federal Express which transported the same to Manila. The first shipment, consisting of 92 cartons arrived in Manila on January 29, 1994 in Flight No. 0071-28NRT and was immediately stored at [Cargohaus Inc.s] warehouse. While the second, consisting of 17 cartons, came in two (2) days later, or on January 31, 1994, in Flight No. 0071-30NRT which was likewise immediately stored at Cargohaus warehouse. Prior to the arrival of the cargoes, Federal Express informed GETC Cargo International Corporation, the customs broker hired by the consignee to facilitate the release of its cargoes from the Bureau of Customs, of the impending arrival of its clients cargoes.

DARIO C. DIONEDA (DIONEDA), twelve (12) days after the cargoes arrived in Manila, a non-licensed customs broker who was assigned by GETC to facilitate the release of the subject cargoes, found out, while he was about to cause the release of the said cargoes, that the same [were] stored only in a room with two (2) air conditioners running, to cool the place instead of a refrigerator.

Thereafter, DIONEDA, upon instructions from GETC, did not proceed with the withdrawal of the vaccines and instead, samples of the same were taken and brought to the Bureau of Animal Industry of the Department of Agriculture in the Philippines by SMITHKLINE for examination wherein it was discovered that the ELISA reading of vaccinates sera are below the positive reference serum.

ABANDONMENT. As result of the veterinary biologics test, SMITHKLINE abandoned the shipment and, declaring total loss for the unusable shipment.

COMPLAINT. It filed a claim with AHAC through its representative in the Philippines, the Philam Insurance Co., Inc. (PHILAM) which recompensed SMITHKLINE for the whole insured amount of THIRTY NINE THOUSAND THREE HUNDRED THIRTY NINE DOLLARS ($39,339.00). Thereafter, [respondents] filed an action for damages against the [petitioner] imputing negligence on either or both of them in the handling of the cargo.

RTC: petitioner jointly and severally liable.

CA: United States Department of Agriculture (Animal and Plant Health Inspection Service) was found by the CA to be inadmissible in evidence BUT goods had indeed been delivered to the carrier in good condition so a prima facie presumption that damage occurred thru the fault of carrier.

ISSUE:Is petitioner Federal Express liable for damage to or loss of the insured goods?

HELD:

Petition has merit.

Petitioner contends that respondents have no personality to sue -- thus, no cause of action against it -- because the payment made to Smithkline was erroneous.

Pertinent to this issue is the Certificate of Insurance

[10] (Certificate) that both opposing parties

cite in support of their respective positions. They differ only in their interpretation of what their rights are under its terms. The determination of those rights involves a question of law, not a question of fact.

Proper Payee

The Certificate specifies that loss of or damage to the insured cargo is payable to order upon surrender of this Certificate. Such wording conveys the right of collecting on any such damage or loss, as fully as if the property were covered by a special policy in the name of the holder itself. At the back of the Certificate appears the signature of the representative of Burlington. This document has thus been duly indorsed in blank and is deemed a bearer instrument.

21

Since the Certificate was in the possession of Smithkline, the latter had the right of collecting or of being indemnified for loss of or damage to the insured shipment, as fully as if the property were covered by a special policy in the name of the holder. Hence, being the holder of the Certificate and having an insurable interest in the goods, Smithkline was the proper payee of the insurance proceeds.

Subrogation

Upon receipt of the insurance proceeds, the consignee (Smithkline) executed a subrogation Receipt

[12] in favor of respondents. The latter were

thus authorized to file claims and begin suit against any such carrier, vessel, person, corporation or government. Undeniably, the consignee had a legal right to receive the goods in the same condition it was delivered for transport to petitioner. If that right was violated, the consignee would have a cause of action against the person responsible therefor.

Upon payment to the consignee of an indemnity for the loss of or damage to the insured goods, the insurers entitlement to subrogation pro tanto -- being of the highest equity -- equips it with a cause of action in case of a contractual breach or negligence.

Prescription of Claim

petitioner has tirelessly pointed out that respondents claim and right of action are already barred. The latter, and even the consignee, never filed with the carrier any written notice or complaint regarding its claim for damage of or loss to the subject cargo within the period required by the Warsaw Convention and/or in the airway bill. Indeed, this fact has never been denied by respondents and is plainly evident from the records.

The requirement of giving notice of loss of or injury to the goods is not an empty formalism. The fundamental reasons for such a stipulation are (1) to inform the carrier that the cargo has been damaged, and that it is being charged with liability therefor; and (2) to give it an opportunity to examine the nature and extent of the injury. This protects the carrier by affording it an opportunity to make an investigation of a claim while the matter is fresh and easily investigated so as to safeguard itself from false and fraudulent claims.

When an airway bill -- or any contract of carriage for that matter -- has a stipulation that requires a notice of claim for loss of or damage to goods shipped and the stipulation is not complied with, its

enforcement can be prevented and the liability cannot be imposed on the carrier. Failure to comply with such a stipulation bars recovery for the loss or damage suffered.

IN THE CASE AT BAR: there is neither an allegation nor a showing of respondents compliance with this requirement within the prescribed period. While respondents may have had a cause of action then, they cannot now enforce it for their failure to comply with the aforesaid condition precedent. (STIPULATION: within (14) days from the date the goods are placed at the disposal of the person entitled to delivery, or in the case of total loss (including non-delivery) unless presented within (120) days from the date of issue of the [Airway Bill].

NOT W/O RECOURSE. We note that respondents are not without recourse. Cargohaus, Inc. -- petitioners co-defendant in respondents Complaint below -- has been adjudged by the trial court as liable for, inter alia, actual damages in the amount of the peso equivalent of US $39,339.

RULING: PETITION IS GRANTED, AND THE ASSAILED DECISION REVERSED INSOFAR AS IT PERTAINS TO PETITIONER FEDERAL EXPRESS CORPORATION

PAL v PRESIDING JUDGE SAVILLO, SIMPLICIO GRINO

FACTS:

Private respondent was invited to participate in the 1993 ASEAN Seniors Annual Golf Tournament held in Jakarta, Indonesia. He and several companions decided to purchase their respective passenger tickets from PAL with the following points of passage: MANILA-SINGAPORE-JAKARTA-SINGAPORE-MANILA.

Private respondent and his companions were made to understand by PAL that its plane would take them from Manila to Singapore, while Singapore Airlines would take them from Singapore to Jakarta.

Private respondent and his companions took the PAL flight to Singapore and arrived at about 6:00 o’clock in the evening. Upon their arrival, they proceeded to the Singapore Airlines office to check-in for their flight to Jakarta scheduled at 8:00 o’clock in the same evening. Singapore Airlines rejected the tickets of private respondent and his group because they were not endorsed by PAL. It was explained to private respondent and his group that if Singapore

22

Airlines honored the tickets without PAL’s endorsement, PAL would not pay Singapore Airlines for their passage. Private respondent tried to contact PAL’s office at the airport, only to find out that it was closed.

Stranded at the airport in Singapore and left with no recourse, private respondent was in panic and at a loss where to go; and was subjected to humiliation, embarrassment, mental anguish, serious anxiety, fear and distress.

Eventually, private respondent and his companions were forced to purchase tickets from Garuda Airlines and board its last flight bound for Jakarta. When they arrived in Jakarta at about 12:00 o’clock midnight, the party who was supposed to fetch them from the airport had already left and they had to arrange for their transportation to the hotel at a very late hour. After the series of nerve-wracking experiences, private respondent became ill and was unable to participate in the tournament.

COMPLAINT. Upon his return to the Philippines, private respondent brought the matter to the attention of PAL. He sent a demand letter to PAL on 20 December 1993 and another to Singapore Airlines on 21 March 1994., Private respondent filed a Complaint for Damages before the RTC, seeking compensation for moral damages in the amount of P1,000,000.00 and atty’s fees.

CONTENTION. Instead of filing an answer, PAL filed a Motion to Dismiss. PAL argued that the Warsaw Convention,

10 particularly Article 29

thereof,11

governed this case, as it provides that any claim for damages in connection with the international transportation of persons is subject to the prescription period of two years. Since the Complaint was filed on 15 August 1997, more than three years after PAL received the demand letter on 25 January 1994, it was already barred by prescription.

RTC: Motion to Dismiss denied It maintained that the provisions of the Civil Code and other pertinent laws of the Philippines, not the Warsaw Convention, were applicable to the present case.

CA: Affirmed.

ISSUE: W/N CA erred in not applying WARSAW despite the fact that Grinos cause of action arose from breach of contract of carriage.

HELD:

Petition w/o merit.

The Warsaw Convention applies to "all international transportation of persons, baggage or goods performed by any aircraft for hire." It seeks to accommodate or balance the interests of passengers seeking recovery for personal injuries and the interests of air carriers seeking to limit potential liability. It employs a scheme of strict liability favoring passengers and imposing damage caps to benefit air carriers.

16 The cardinal purpose of the

Warsaw Convention is to provide uniformity of rules governing claims arising from international air travel; thus, it precludes a passenger from maintaining an action for personal injury damages under local law when his or her claim does not satisfy the conditions of liability under the Consti.

Article 19 of the Warsaw Convention provides for liability on the part of a carrier for "damages occasioned by delay in the transportation by air of passengers, baggage or goods." Article 24 excludes other remedies by further providing that "(1) in the cases covered by articles 18 and 19, any action for damages, however founded, can only be brought subject to the conditions and limits set out in this convention." Therefore, a claim covered by the Warsaw Convention can no longer be recovered under local law, if the statute of limitations of two years has already lapsed.

Nevertheless, this Court notes that jurisprudence in the Philippines and the United States also recognizes that the Warsaw Convention does not "exclusively regulate" the relationship between passenger and carrier on an international flight. This Court finds that the present case is substantially similar to cases in which the damages sought were considered to be outside the coverage of the Warsaw Convention.

NOTE: In United Airlines v. Uy,18

this Court distinguished between the (1) damage to the passenger’s baggage and (2) humiliation he suffered at the hands of the airline’s employees. The first cause of action was covered by the Warsaw Convention which prescribes in two years, while the second was covered by the provisions of the Civil Code on torts, which prescribes in four years.

IN THE CASE AT BAR: private respondent’s Complaint alleged that both PAL and Singapore Airlines were guilty of gross negligence, which resulted in his being subjected to "humiliation, embarrassment, mental anguish, serious anxiety, fear and distress.

SIMILARITY: In Lathigra v. British Airways, it was held that the airlines’ negligent act of reconfirming the passenger’s reservation days before departure

23

and failing to inform the latter that the flight had already been discontinued is not among the acts covered by the Warsaw Convention, since the alleged negligence did not occur during the performance of the contract of carriage but, rather, days before the scheduled flight.

CANNOT BE DISMISSED. Singapore Airlines barred private respondent from boarding the Singapore Airlines flight because PAL allegedly failed to endorse the tickets of private respondent and his companions, despite PAL’s assurances to respondent that Singapore Airlines had already confirmed their passage. While this fact still needs to be heard and established by adequate proof before the RTC, an action based on these allegations will not fall under the Warsaw Convention, since the purported negligence on the part of PAL did not occur during the performance of the contract of carriage but days before the scheduled flight. Thus, the present action cannot be dismissed based on the statute of limitations provided under Article 29 of the Warsaw Convention.

ACTION HAS NOT YET PRESCRIBED. Private respondent’s Complaint was filed with the RTC on 15 August 1997, which was less than four years since PAL received his extrajudicial demand on 25 January 1994. Thus, private respondent’s claims have not yet prescribed and PAL’s Motion to Dismiss must be denied.

RULING: PETITION DENIED.

LUFTHANSA GERMAN AIRLINES v CA, TIRSO ANTIPORDA, SR.

FACTS:

Tirso V. Antiporda, Sr. was an associate director of the Central Bank of the Philippines and a registered consultant of the Asian Development Bank, the World Bank and the UNDP. He was, contracted by Sycip, Gorres, Velayo & Co. (SGV) to be the institutional financial specialist for the agricultural credit institution project of the Investment and Development Bank of Malawi in Africa.

According to the letter of August 30, 1984 addressed to Antiporda from J.F. Singson of SGV, he would render his services to the Malawi bank as an independent contractor for which he would be paid US$9,167 for a 50-day period commencing sometime in September 1984. For the engagement, Antiporda would be provided one round-trip economy ticket from Manila to Blantyre and back

with a maximum travel time of four days per round-trip and, in addition, a travel allowance of $50 per day, a travel insurance coverage of P100,000 and major hospitalization with AFIA and an accident insurance coverage of P150,000.

1 On September 17,

1984, Lufthansa, through SGV, issued ticket No. 3477712678 for Antiporda's confirmed flights to Malawi, Africa.

Thus, on September 25, 1984, Antiporda took the Lufthansa flight to Singapore from where he proceeded to Bombay on board the same airline. He arrived in Bombay as scheduled and waited at the transit area of the airport for his connecting flight to Nairobi which was, per schedule given him by Lufthansa, to leave Bombay in the morning of September 26, 1984.

Finding no representative of Lufthansa waiting for him at the gate, Antiporda asked the duty officer of Air India how he could get in touch with Lufthansa. He was told to call up Lufthansa which informed him that somebody would attend to him shortly. Ten minutes later, Gerard Matias, Lufthansa's traffic officer, arrived, asked for Antiporda's ticket and told him to just sit down and wait.

Matias returned with one Leslie Benent, duty officer of Lufthansa, who informed Antiporda that his seat in Air Kenya Flight 203 to Nairobi had been given to a very important person of Bombay who was attending a religious function in Nairobi. Antiporda protested, stressing that he had an important professional engagement in Blantyre, Malawi in the afternoon of September 26, 1984. He requested that the situation be remedied but Air Kenya Flight 203 left for Nairobi without him on board. Stranded in Bombay, Antiporda was booked for Nairobi via Addis Ababa only on September 27, 1984. He finally arrived in Blantyre at 9:00 o'clock in the evening of September 28, 1984, more than a couple of days late for his appointment with people from the institution he was to work with in Malawi.

DAMAGES. Consequently, on January 8, 1985, Antiporda's counsel wrote the general manager of Lufthansa in Manila demanding P1,000,000 in damages for the airline's "malicious, wanton, disregard of the contract of carriage."

2 In reply,

Lufthansa general manager Hagen Keilich assured Antiporda that the matter would be investigated.

COMPLAINT. Antiporda filed a complaint w/ RTC QC

RTC: Lufthansa breached the contract to transport Antiporda from Manila to Blantyre on a trip for 5 legs.

24

CONTENTION: Denies obl.to transport plaintiff to his pt of destination at Blantyre, Malawi, Africa. Defendant claims that it was obligated to transport the plaintiff only up to Bombay.

From the ticket, therefore, it is indubitably clear that it was the duty and responsibility of the defendant Lufthansa to transport the plaintiff from Manila to Blantyre, on a trip of five legs.

The posture taken by the defendant that it was Air Kenya's, not Lufthansa's, liability to transport plaintiff from Bombay to Malawi, is inacceptable. The plaintiff dealt exclusively with the defendant Lufthansa which issued to him the ticket for his entire trip and which in effect guaranteed to the plaintiff that he would have sure space in Air Kenya's flight to Nairobi. Plaintiff, under that assurance of the defendant, naturally, had the right to expect that his ticket would be honored by Air Kenya, to which, in the legal sense, Lufthansa had endorsed and in effect guaranteed the performance of its principal engagement to carry out plaintiff's scheduled itinerary previously and mutually agreed upon by the parties.

Defendant itself admitted that the flight from Manila, Singapore, Bombay, Nairobi, Lilongwe, Blantyre, Malawi, were all confirmed with the stamped letters "OK" thereon. In short, after issuing a confirmed ticket from Manila to Malawi and receiv(ing) payment from the plaintiff for such one whole trip, how can the defendant now deny its contractual obligation by alleging that its responsibility ceased at the Bombay Airport?

In justifying its award of moral and exemplary damages, the lower court emphasized that the breach of contract was "aggravated by the discourteous and highly arbitrary conduct of Gerard Matias, an official of petitioner Lufthansa in Bombay.

Bumped off from his connecting flight to Nairobi and stranded in the Bombay Airport for 32 hours, when plaintiff insisted on taking his scheduled flight to Nairobi, Gerard Matias got angry and threw the ticket and passport on plaintiff's lap and was ordered to go to the basement with his heavy luggages for no reason at all.

Lufthansa elevated the case to the Court of Appeals arguing that it cannot be held liable for the acts committed by Air Kenya on the basis of the following:

(a) it merely acted as a ticket-issuing agent in behalf of Air

Kenya; consequently the contract of carriage entered into

is between respondent Antiporda and Air Kenya, to the exclusion of petitioner Lufthansa;

(b) under sections (1) and (2) Article 30 of the Warsaw Convention, an airline carrier is liable only to untoward occurrences on its own line;

CA: Affirmed

The Court of Appeals concluded that Lufthansa cannot, thus, invoke Sections (1) and (2), Article 30 of the Warsaw Convention to evade liability.

ISSUE: Was there a breach of obligation by the defendant?

HELD:

Lufthansa maintains that its liability to any passenger is limited to occurrences in its own line, and, thus, in the case at bench, its liability to Antiporda is limited to the extent that it had transported him from Manila to Singapore and from Singapore to Bombay; that therefrom, responsibility for the performance of the contract of carriage is assumed by the succeeding carriers tasked to transport him for the remaining leg of his trip because at that stage, its contract of carriage with Antiporda ceases, with Lufthansa acting, no longer as the principal in the contract of carriage, but merely as a ticket-issuing agent for the other carriers.

Lufthansa invoked Section 2, Article 30 of the Warsaw Convention

9 which expressly stipulates that

in cases where the transportation of passengers or goods is performed by various successive carriers, the passenger can take action only against the carrier which performed the transportation, during which the accidentor delay occurred.

The basis for such claim is well-founded. As ruled by the trial court, with the Court of Appeals concurring favorably, Antiporda was issued a confirmed Lufthansa ticket all throughout the five-leg trip. The fourth paragraph of the "Conditions of Contract" stipulated in the ticket indubitably showed that the contract of carriage was considered as one of continuous air transportation from Manila to Blantyre, Malawi, thus:

4. . . . carriage to be performed hereunder by several successive carriers is regarded as a single operation.

In light of the stipulations expressly specified in the ticket defining the true nature of its contract of carriage with Antiporda, Lufthansa cannot claim that its liability thereon ceased at Bombay Airport and thence, shifted to the various carriers that assumed the actual task of transporting said private respondent.

LUFTHANSA THE PRINCIPAL. We, therefore, reject Lufthansa's theory that from the time another carrier was engaged to transport Antiporda on another segment of his trip, it merely acted as a

25

ticket-issuing agent in behalf of said carrier. In the very nature of their contract, Lufthansa is clearly the principal in the contract of carriage with Antiporda and remains to be so, regardless of those instances when actual carriage was to be performed by various carriers.

PROOF. The issuance of a confirmed Lufthansa ticket in favor of Antiporda covering his entire five-leg trip abroad successive carriers concretely attests to this. This also serves as proof that Lufthansa, in effect guaranteed that the successive carriers, such as Air Kenya would honor his ticket; assure him of a space therein and transport him on a particular segment of his trip.

RE APP. OF SEC. 2, ART. 30, WARSAW. Lufthansa prays this court to take heed of jurisprudence in the United States where the term "delay" was interpreted to include "bumping-off" or failure to carry a passenger with a confirmed reservation. These decisions in the United States are not controlling in this jurisdiction. We are not prepared, absent reasons of compelling nature, to entertain an extended meaning of the term "delay," which in KLM was given its ordinary signification. "Construction and interpretation come only after it has been demonstrated that application is impossible or inadequate without them. The ordinary language of a statute must be given its ordinary meaning and limited to a reasonable interpretation."

13

In its ordinary sense, "delay" means to prolong the time of or before; to stop, detain or hinder for a time, or cause someone or something to be behind in schedule or usual rate of movement in progress.

14 "Bumping-off," which is the refusal to

transport passengers with confirmed reservation to their planned and contracted destinations, totally forecloses said passengers' right to be transported, whereas delay merely postpones for a time being the enforcement of such right.

Consequently, Section 2, Article 30 of the Warsaw Convention which does not contemplate the instance of "bumping-off" but merely of simple delay, cannot provide a handy excuse for Lufthansa as to exculpate it from any liability to Antiporda. The payment of damages is, thus, deemed warranted by this Court.

CONFLICT ON REASONS BY WITNESSES OF LUFTHANSA RE: “BUMPING-OFF:”

If there was really no seat available because of over-booking, why did Lufthansa confirm the ticket of the plaintiff-appellee? It has to be pointed out that the confirmed ticket is up to Blantyre, Malawi, not only to Bombay.

Since the ticket was marked O.K., meaning confirmed, therefore plaintiff-appellee must have a definite seat with Kenya Airways but it was lost or given to another person. It is not true therefore, that plaintiff-appellee's name was not in the list of Kenya Airways. Besides, why should Lufthansa allow a passenger to depart from the Philippines with a confirmed ticket, without instructing its Bombay office to reserve a seat with Kenya Airways for its connecting flight? In spite of the confirmation, Nelda Aquino testified that plaintiff-appellee was stranded in Bombay because he did not get a seat with Kenya Airways, and his name did not appear in the list of passengers.

Clearly, bad faith attended the performance of the contract of carriage, for even while Antiporda was in Bombay, representatives of Lufthansa already tried to evade liability first, by claiming that the contract of carriage between Lufthansa and Antiporda ceased at Bombay airport, in disregard of the fact that Antiporda was holding a Lufthansa ticket for the entire five-leg trip; second, despite Berndt Loewe's knowledge that Antiporda's seat was allowed to be given to another passenger, the same suppressed the information and feigned ignorance of the matter, presenting altogether another reason why Antiporda was not listed in the manifest, i.e. that Air Kenya Boeing 707 was overbooked, notwithstanding clear proof that Lufthansa in Manila confirmed his reservation for said flight.

RULING: PETITION DENIED; CA DECISION AFFIRMED