1. ALFREDO MANAY, JR.

vs CEBU AIR, INC,

FACTS:
On June 13, 2008, Carlos S. Jose purchased 20 Cebu Pacific round-trip tickets from Manila to Palawan
at Cebu Pacific's branch office in Robinsons Galleria for himself and his relatives and friends. He alleged
that he specified to ticketing agent his preferred date and time of departure from Manila to Palawan and
the ticketing agent recapped to him the first page of the ticket and no longer read the other pages of the
flight information. Since the first page contained the details he specified to the agent, he no longer read
the other pages of the flight information. Jose and his 19 companions boarded the Cebu Pacific flight to
Palawan and had an enjoyable stay. However, during the processing of their boarding passes for their
flight back to Manila, they were informed by Cebu Pacific personnel that nine (9) of them could not be
admitted because their tickets were for the 1005 (or 10:05 a.m.) flight earlier that day.

Jose informed the ground personnel that he personally purchased the tickets and specifically instructed
the ticketing agent that all 20 of them should be on the 4:15 p.m. flight to Manila. However, upon
checking the tickets, they learned that only the first two (2) pages had the schedule Jose specified. They
were left with no other option but to rebook their tickets. Jose subsequently went to Cebu Pacific's
ticketing office in Robinsons Galleria to complain about the allegedly erroneous booking and the rude
treatment that his group encountered from the ground personnel in Palawan. He alleged that instead of
being assured by the airline that someone would address the issues he raised, he was merely "given a
run around." Jose and his companions were frustrated and annoyed by Cebu Pacific's handling of the
incident so they sent the airline demand letters asking for a reimbursement of P42,955.00, representing
the additional amounts spent to purchase the nine (9) tickets, the accommodation, and meals of the four
(4) that were left behind. Eventually, Jose and his companions were filed a Complaint for Damages
against Cebu Pacific.

ISSUE:
Whether or not Cebu Pacific should be held liable for damages.

RULING:
NO. The airline must exercise extraordinary diligence in the fulfillment of the terms and conditions of the
contract of carriage. The passenger, however, has the correlative obligation to exercise ordinary
diligence in the conduct of his or her affairs.

A contract of carriage is defined as "one whereby a certain person or association of persons obligate
themselves to transport persons, things, or news from one place to another for a fixed price. "In Cathay
Pacific Airways v. Reyes: “W] hen an airline issues a ticket to a passenger confirmed on a particular
flight, on a certain date, a contract of carriage arises, and the passenger has every right to expect that he
would fly on that flight and on that date. If he does not, then the carrier opens itself to a suit for breach of
contract of carriage.”

Once a plane ticket is issued, the common carrier binds itself to deliver the passenger safely on the date
and time stated in the ticket. The contractual obligation of the common carrier to the passenger is
governed principally by what is written on the contract of carriage.

In this case, both parties stipulated that the flight schedule stated on the nine (9) disputed tickets was the
10:05 a.m. flight of July 22, 2008. According to the contract of carriage, respondent's obligation as a
common carrier was to transport nine (9) of the petitioners safely on the 10:05 a.m. flight of July 22,
2008.

The common carrier's obligation to exercise extraordinary diligence in the issuance of the contract of
carriage is fulfilled by requiring a full review of the flight schedules to be given to a prospective
passenger before payment. Based on the information stated on the contract of carriage, all three (3)
pages were recapped to petitioner Jose.
The only evidence petitioners have in order to prove their true intent of having the entire group on the
4:15 p.m. flight is petitioner Jose's self-serving testimony that the airline failed to recap the last page of
the tickets to him.

2. FEDERAL EXPRESS CORPORATION vs ANTONINO

FACTS
Eliza was the owner of Unit 22-A (the Unit) in Allegro Condominium, located at 62 West 62nd St., New
York, United States. However, when the monthly charges for the unit were due, Luwalhati and Eliza were
in the Philippines. With this, on December 15, 2003, they decided to send several Citibank checks to
Veronica Z. Sison (Sison), who was based in New York. Citibank checks allegedly for the payment of
monthly charges and for the payment of real estate taxes through FedEx. Sison allegedly did not receive
the package, resulting in the non-payment of Luwalhati and Eliza's obligations and the foreclosure of the
Unit.

According to Sison she contacted FedEx to inquire about the non-delivery and was informed that the
package was delivered to her neighbor but there was no signed receipt.

On March 14, 2004, Luwalhati and Eliza, through their counsel, sent a demand letter to FedEx for
payment of damages due to the non-delivery of the package, but FedEx refused to heed their demand.
Hence, they filed their Complaint for damages.

FedEx claimed that Luwalhati and Eliza "ha[d] no cause of action against it because [they] failed to
comply with a condition precedent, that of filing a written notice of claim within the 45 calendar days from
the acceptance of the shipment." It added that it was absolved of liability as Luwalhati and Eliza shipped
prohibited items and misdeclared these items as "documents." It pointed to conditions under its Air
Waybill prohibiting the "transportation of money (including but not limited to coins or negotiable
instruments equivalent to cash such as endorsed stocks and bonds)."

The trial court ruled for Luwalhati and Eliza, awarding them moral and exemplary damages, and
attorney's fees and held that common carriers are presumed to be at fault whenever goods are lost.
Upon appeal, the Court of Appeals affirmed the ruling of the Regional Trial Court. According to it, by
accepting the package despite its supposed defect, FedEx was deemed to have acquiesced to the
transaction. Thus, it must deliver the package in good condition and could not subsequently deny liability
for loss.

ISSUE
Whether petitioner Federal Express Corporation may be held liable for damages on account of its failure
to deliver the checks shipped by respondents Luwalhati R. Antonino and Eliza Bettina Ricasa Antonino
to the consignee Veronica Sison.

RULING
NO. The Civil Code mandates common carriers to observe extraordinary diligence in caring for the
goods they are transporting:

Article 1733. Common carriers, from the nature of their business and for reasons of public policy, are
bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the
passengers transported by them, according to all the circumstances of each case.

"Extraordinary diligence is that extreme measure of care and caution which persons of unusual
prudence and circumspection use for securing and preserving their own property or rights."45
Consistent with the mandate of extraordinary diligence, the Civil Code stipulates that in case of loss
or damage to goods, common carriers are presumed to be negligent or at fault,46 except in the
following instances:
 (1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the containers;
(5) Order or act or competent public authority.

In all other cases, common carriers must prove that they exercised extraordinary diligence in the
performance of their duties, if they are to be absolved of liability.

The responsibility of common carriers to exercise extraordinary diligence lasts from the time the goods
are unconditionally placed in their possession until they are delivered "to the consignee, or to the person
who has a right to receive them." Thus, part of the extraordinary responsibility of common carriers is the
duty to ensure that shipments are received by none but "the person who has a right to receive them."
Common carriers must ascertain the identity of the recipient. Failing to deliver shipment to the
designated recipient amounts to a failure to deliver. The shipment shall then be considered lost, and
liability for this loss ensues.

Petitioner is unable to prove that it exercised extraordinary diligence in ensuring delivery of the package
to its designated consignee. It claims to have made a delivery but it even admits that it was not to the
designated consignee. It asserts instead that it was authorized to release the package without the
signature of the designated recipient and that the neighbor of the consignee, one identified only as
"LGAA 385507," received it. This failed to impress.

The assertion that receipt was made by "LGAA 385507" amounts to little, if any, value in proving
petitioner's successful discharge of its duty. "LGAA 385507" is nothing but an alphanumeric code that
outside of petitioner's personnel and internal systems signifies nothing. This code does not represent a
definite, readily identifiable person, contrary to how commonly accepted identifiers, such as numbers
attached to official, public, or professional identifications like social security numbers and professional
license numbers, function. Reliance on this code is tantamount to reliance on nothing more than
petitioner's bare, self-serving allegations. Certainly, this cannot satisfy the requisite of extraordinary
diligence consummated through delivery to none but "the person who has a right to receive"52 the
package.

Given the circumstances in this case, the more reasonable conclusion is that the package was not
delivered. The package shipped by respondents should then be considered lost, thereby engendering
the liability of a common carrier for this loss.

Petitioner cannot but be liable for this loss. It failed to ensure that the package was delivered to the
named consignee. It admitted to delivering to a mere neighbor. Even as it claimed this, it failed to identify
that neighbor.

3. KEIHIN-EVERETT FORWARDING CO., INC. vs MARINE MALAYAN INSURANCE CO.,

FACTS
In 2005, Honda Trading Phils. Ecozone Corporation (Honda Trading) ordered 80 bundles of Aluminum
Alloy Ingots from PT Molten Aluminum Producer Indonesia (PT Molten). PT Molten loaded the goods in
two container vans which were, in turn, received in Jakarta, Indonesia by Nippon Express Co., Ltd. for
shipment to Manila.

Aside from insuring the entire shipment with Tokio Marine & Nichido Fire Insurance Co., Inc. (TMNFIC),
Honda Trading also engaged the services of petitioner Keihin-Everett to clear and withdraw the cargo
from the pier and to transport and deliver the same to its warehouse at the Laguna Technopark in Biñan,
Laguna.Meanwhile, petitioner Keihin-Everett had an Accreditation Agreement with respondent unfreight
Forwarders whereby the latter undertook to render common carrier services for the former and to
transport inland goods within the Philippines.
Upon arrival in Manila, the shipment was caused to be released from the pier by petitioner Keihin-Everett
and turned over to respondent Sunfreight Forwarders for delivery to Honda Trading. Enroute to the
latter's warehouse, the truck carrying the containers was hijacked and the one container van was
reportedly taken away. As a consequence, Honda Trading suffered the lost 40 bundles of Aluminum
Alloy Ingots.

Claiming to have paid Honda Trading's insurance claim for the loss it suffered, respondent Tokio Marine
commenced the instant filing of its complaint for damages against petitioner Keihin-Everett.

Respondent Tokio Marine maintained that it had been subrogated to all the rights and causes of action
pertaining to Honda Trading.

Keihin-Everett denied liability for the lost shipment on the ground that the loss thereof occurred while the
same was in the possession of respondent Sunfreight Forwarders who in turn, denied liability on the
ground that it was not privy to the contract between Keihin-Everett and Honda Trading.

The trial court held Ruling of the RTC petitioner Keihin-Everett and respondent Sunfreight Forwarders
jointly and severally liable to pay respondent Tokio Marine's claim. Upon appeal, the CA modified the
ruling of the RTC insofar as the solidary liability of Keihin-Everett and Sunfreight Forwarders is
concerned.

The CA went to rule that solidarity is never presumed. There is solidary liability when the obligation so
states, or when the law or the nature of the obligation requires the same. Thus, because of the lack of
privity between Honda Trading and Sunfreight Forwarders, the latter cannot simply be held jointly and
severally liable with Keihin-Everett for Tokio Marine's claim as subrogee.

ISSUES
Whether petitioner Keihin-Everett liable to respondent Tokio Marine.

RULING
YES. Notwithstanding that the cargoes were in the possession of Sunfreight Forwarders when they were
hijacked, Keihin-Everett is not absolved from its liability as a common carrier. Keihin-Everett seems to
have overlooked that it was the one whose services were engaged by Honda Trading to clear and
withdraw the cargoes from the pier and to transport and deliver the same to its warehouse. In turn,
Keihin-Everett accredited Sunfreight Forwarders to render common carrier service for it by transporting
inland goods. As correctly held by the CA, there was no privity of contract between Honda Trading (to
whose rights Tokio Marine was subrogated) and Sunfreight Forwarders. Hence, Keihin-Everett, as the
common carrier, remained responsible to Honda Trading for the lost cargoes.

In this light, Keihin-Everett, as a common carrier, is mandated to observe, under Article 1733 of the Civil
Code, extraordinary diligence in the vigilance over the goods it transports according to all the
circumstances of each case. In the event that the goods are lost, destroyed or deteriorated, it is resumed
to have been at fault or to have acted negligently, unless it proves that it observed extraordinary
diligence. To be sure, under Article 1736 of the Civil Code, a common carrier's extraordinary
responsibility over the shipper's goods lasts from the time these goods are unconditionally placed in the
possession of, and received by, the carrier for transportation, until they are delivered, actually or
constructively, by the carrier to the consignee, or to the person who has a right to receive them. Hence,
at the time Keihin-Everett turned over the custody of the cargoes to Sunfreight Forwarders for inland
transportation, it is still required to observe extraordinary diligence in the vigilance of the goods. Failure
to successfully establish this carries with it the presumption of fault or negligence, thus, rendering Keihin-
Everett liable to Honda Trading for breach of contract.

It bears to stress that the hijacking of the goods is not considered a fortuitous event or a force majeure.
Nevertheless, a common carrier may absolve itself of liability for a resulting loss caused by robbery or
hijacked if it is proven that the robbery or hijacking was attended by grave or irresistible threat, violence
or force In this case, Keihin-Everett failed to prove the existence of the aforementioned instances.

It is undisputed that the cargoes were lost when they were in the custody of Sunfreight Forwarders.
Hence, under Article 1735[36] of the Civil Code, the presumption of fault on the part of Sunfreight
Forwarders (as common carrier) arose. Since Sunfreight Forwarders failed to prove that it observed
extraordinary diligence in the performance of its obligation to Keihin-Everett, it is liable to the latter for
breach of contract. Consequently, Keihin-Everett is entitled to be reimbursed by Sunfreight Forwarders
due to the latter's own breach occasioned by the loss and damage to the cargoes under its care and
custody. As with the cited Torres-Madrid Brokerage case, Sunfreight

Forwarders, too, has the option to absorb the loss or to proceed after its missing driver, the suspect
in the hijacking incident.

4. ANNIE TAN vs GREAT HARVEST ENTERPRISES, INC.

FACTS
On February 3, 1994, Great Harvest hired Tan to transport 430 bags of soya beans from Tacoma
Integrated Port Services, Inc. (Tacoma) in Port Area, Manila to Selecta Feeds in Camarin, Novaliches,
Quezon City. That same day, the bags of soya beans were loaded into Tan's hauling truck. Her
employee, Rannie Sultan Cabugatan (Cabugatan), then delivered the goods to Selecta Feeds. At
Selecta Feeds, however, the shipment was rejected. Upon learning of the rejection, Great Harvest
instructed Cabugatan to deliver and unload the soya beans at its warehouse in Malabon. Yet, the truck
and its shipment never reached Great Harvest's warehouse.

Great Harvest asked Tan about the missing delivery. Tan admitted that she could not locate both her
truck and Great Harvest's goods. She reported her missing truck to the Western Police District Anti-
Carnapping Unit and the National Bureau of Investigation. The NBI informed Tan that her missing truck
had been found in Cavite. However, the truck had been cannibalized and had no cargo in it.

Great Harvest filed a Complaint for sum of money against Tan for the continued refusal to pay the
missing shipment. Tan denied that she entered into a hauling contract with Great Harvest, insisting that
she merely accommodated it. Tan also pointed out that since Great Harvest instructed her driver to
change the point of delivery without her consent, it should bear the loss brought about by its deviation
from the original unloading point.

The trial court granted Great Harvest's Complaint for sum of money. It found that Tan entered into a
verbal contract of hauling with Great Harvest, and held her responsible for her driver's failure to deliver
the soya beans to Great Harvest. Tan filed an Appeal, but the Court of Appeals dismissed it. The Court
of Appeals also held that the cargo loss was due to Tan's failure to exercise the extraordinary level of
diligence required of her as a common carrier, as she did not provide security for the cargo or take out
insurance on it.

ISSUE
Whether petitioner Annie Tan should be held liable for the value of the stolen soya beans.

RULING
YES. Article 1732 of the Civil Code defines common carriers as "persons, corporations, firms or
associations engaged in the business of carrying or transporting passengers or goods or both, by land,
water or air, for compensation, offering their services to the public." The Civil Code outlines the degree of
diligence required of common carriers in Articles 1733, 1755, and 1756:
ARTICLE 1733. Common carriers, from the nature of their business and for reasons of public policy, are
bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the
passengers transported by them, according to all the circumstances of each case.
....
ARTICLE 1755. A common carrier is bound to carry the passengers safely as far as human care and
foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all the
circumstances.

ARTICLE 1756. In case of death of or injuries to passengers, common carriers are presumed to have
been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence
as prescribed in articles 1733 and 1755.

Law and economics provide the policy justification of our existing jurisprudence. The extraordinary
diligence required by the law of common carriers is primarily due to the nature of their business, with the
public policy behind it geared toward achieving allocative efficiency between the parties to the
transaction.
Allocative efficiency is an economic term that describes an optimal market where customers are willing
to pay for the goods produced. Thus, both consumers and producers benefit and stability is achieved.

The notion of common carriers is synonymous with public service under Commonwealth Act No. 146 or
the Public Service Act. Due to the public nature of their business, common carriers are compelled to
exercise extraordinary diligence since they will be burdened with the externalities or the cost of the
consequences of their contract of carriage if they fail to take the precautions expected of them.

Common carriers are mandated to internalize or shoulder the costs under the contracts of carriage. This
is so because a contract of carriage is structured in such a way that passengers or shippers surrender
total control over their persons or goods to common carriers, fully trusting that the latter will safely and
timely deliver them to their destination. In light of this inherently inequitable dynamics— and the potential
harm that might befall passengers or shippers if common carriers exercise less than extraordinary
iligence— the law is constrained to intervene and impose sanctions on common carriers for the parties to
achieve allocative efficiency.

Here, petitioner is a common carrier obligated to exercise extraordinary diligence over the goods
entrusted to her. Her responsibility began from the time she received the soya beans from respondent's
broker and would only cease after she has delivered them to the consignee or any person with the right
to receive them.

Furthermore, Article 1734 of the Civil Code holds a common carrier fully responsible for the goods
entrusted to him or her, unless there is enough evidence to show that the loss, destruction, or
deterioration of the goods falls under any of the enumerated exceptions:

ARTICLE 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods,
unless the same is due to any of the following causes only:

(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;

Nothing in the records shows that any of these exceptions caused the loss of the soya beans. Petitioner
failed to deliver the soya beans to respondent because her driver absconded with them. She cannot shift
the blame for the loss to respondent's supposed diversion of the soya beans from the loading point to
respondent's warehouse, as the evidence has conclusively shown that she had agreed beforehand to
deliver the cargo to respondent's warehouse if the consignee refused to accept it.
Finally, petitioner's reliance on De Guzman v. Court of Appeals is misplaced. There, the common carrier
was absolved of liability because the goods were stolen by robbers who used "grave or irresistible threat,
violence or force" to hijack the goods. De Guzman viewed the armed hijack as a fortuitous event:

Under Article 1745 (6) above, a common carrier is held responsible — and will not be allowed to divest
or to diminish such responsibility — even for acts of strangers like thieves or robbers, except where such
thieves or robbers in fact acted "with grave or irresistible threat, violence or force." We believe and so
hold that the limits of the duty of extraordinary diligence in the vigilance over the goods carried are
reached where the goods are lost as a result of a robbery which is attended by "grave or irresistible
threat, violence or force."

In contrast to De Guzman, the loss of the soya beans here was not attended by grave or irresistible
threat, violence, or force. Instead, it was brought about by petitioner's failure to exercise extraordinary
diligence when she neglected vetting her driver or providing security for the cargo and failing to take out
insurance on the shipment's value.

5. DESIGNER BASKETS, INC., v. AIR SEA TRANSPORT, INC. AND ASIA CARGO
CONTAINER LINES, INC., G.R. No. 184513, March 09, 2016

FACTS:

DBI is a domestic corporation engaged in the production of housewares and handicraft items for export.
Sometime in October 1995, Ambiente, a foreign-based company, ordered from DBI 223 cartons of
assorted wooden items (the “Shipment”). The Shipment was worth US$12,590.87 and payable through
telegraphic transfer. Ambiente designated ACCLI as the forwarding agent that will ship out its order from
the Philippines to the United States (US). ACCLI is a domestic corporation acting as agent of ASTI, a US
based corporation engaged in carrier transport business, in the Philippines.

On January 7, 1996, DBI delivered the shipment to ACCLI for sea transport from Manila and delivery to
Ambiente at 8306 Wilshire Blvd., Suite 1239, Beverly Hills, California. To acknowledge receipt and to
serve as the contract of sea carriage, ACCLI issued to DBI triplicate copies of the Bill of Lading. DBI
retained possession of the originals of the bills of lading pending the payment of the goods by Ambiente.
ASTI released the Shipment to Ambiente on the strength of an Indemnity Agreement executed in its
favor.

DBI then made several demands to Ambiente for the payment of the shipment, but to no avail. Thus, on
October 7, 1996, DBI filed the Original Complaint against Ambiente, ACCLI and ASTI for the payment of
the value of the Shipment, damages and legal fees.

ASTI, ACCLI and its directors and incorporators filed a motion to dismiss. They argued that: (a) they are
not the real parties-in-interest in the action because the cargo was delivered and accepted by Ambiente.
The case, therefore, was a simple case of non- payment of the buyer; (b) relative to the incorporators-
stockholders of ACCLI, piercing the corporate veil is misplaced; (c) contrary to the allegation of DBI, the
bill of lading covering the shipment does not contain a proviso exposing ASTI to liability in case the
shipment is released without the surrender of the bill of lading; and (d) the Original Complaint did not
attach a certificate of non-forum shopping.

DBI opposed the said motion, asserting that ASTI and ACCLI failed to exercise the required
extraordinary diligence when they allowed the cargoes to be withdrawn by the consignee without the
surrender of the original bill of lading. ASTI, ACCLI, and ACCLI’s incorporators-stockholders countered
that it is DBI who failed to exercise extraordinary diligence in protecting its own interest. They averred
that whether or not the buyer-consignee pays the seller is already outside of their concern. Before the
case was resolved by the lower court, DBI impleaded Ambiente as additional party defendant. The RTC
found ASTI, ACCLI and its incorporators solidarily liable with Ambiente. The incorporators were,
however, absolved from liability. The CA affirmed that Ambiente is liable but absolved ASTI and ACCLI.
According to the CA, there is nothing in the applicable laws that require the surrender of bills of lading
before the goods may be released to the buyer/consignee. The CA stressed that DBI failed to present
evidence to prove its assertion that the
surrender of the bill of lading upon delivery of the goods is a common mercantile practice. As for ASTI,
the CA explained that its only obligation as a common carrier was to deliver the shipment in good
condition. It did not include looking beyond the details of the transaction between the seller and the
consignee, or more particularly, ascertaining the payment of the goods by the buyer Ambiente.

ISSUE:
Whether ASTI/ACCLI may be held liable for releasing the Shipment without first demanding for the
surrender of the Bill of Lading.

RULING:
NO. A common carrier may release the goods to the consignee even without the surrender of the bill of
lading. Under Article 350 of the Code of Commerce, “the shipper as well as the carrier of the
merchandise or goods may mutually demand that a bill of lading be made.” A bill of lading, when issued
by the carrier to the shipper, is the legal evidence of the contract of carriage between the former and the
latter. It defines the rights and liabilities of the parties in reference to the contract of carriage. The
stipulations in the bill of lading are valid and binding unless they are contrary to law, morals, customs,
public order or public policy.

Here, ACCLI, as agent of ASTI, issued Bill of Lading No. AC/MLLA601317 to DBI. This bill of lading
governs the rights, obligations and liabilities of DBI and ASTI. DBI claims that Bill of Lading No.
AC/MLLA601317 contains a provision stating that ASTI and ACCLI are “to release and deliver the
cargo/shipment to the consignee, x x x, only after the original copy or copies of the said Bill of Lading is
or are surrendered to them; otherwise they become liable to [DBI] for the value of the shipment. Quite
tellingly, however, DBI does not point or refer to any specific clause or provision on the bill of lading
supporting this claim. The language of the bill of lading shows no such requirement. There is no
obligation, therefore, on the part of ASTI and ACCLI to release the goods only upon the surrender of the
original bill of lading.

Further, a carrier is allowed by law to release the goods to the consignee even without the latter’s
surrender of the bill of lading. The third paragraph of Article 353 of the Code of Commerce is
enlightening:

Article 353. The legal evidence of the contract between the shipper and the carrier shall be the bills of
lading, by the contents of which the disputes which may arise regarding their execution and performance
shall be decided, no exceptions being admissible other than those of falsity and material error in the
drafting. After the contract has been complied with, the bill of lading which the carrier has issued shall be
returned to him, and by virtue of the exchange of this title with the thing transported, the respective
obligations and actions shall be considered cancelled, unless in the same act the claim which the parties
may wish to reserve be reduced to writing, with the exception of that provided for in Article 366.

In case the consignee, upon receiving the goods, cannot return the bill of lading subscribed by the
carrier, because of its loss or any other cause, he must give the latter a receipt for the goods delivered,
this receipt producing the same effects as the return of the bill of lading. The general rule is that upon
receipt of the goods, the consignee surrenders the bill of lading to the carrier and their respective
obligations are considered canceled. The law, however, provides two exceptions where the goods may
be released without the surrender of the bill of lading because the consignee can no longer return it.
These exceptions are when the bill of lading gets lost or for other cause. In either case, the consignee
must issue a receipt to the carrier upon the release of the goods. Such receipt shall produce the same
effect as the surrender of the bill of lading. The nonsurrender of the original bill of lading does not violate
the carrier’s duty of extraordinary diligence over the goods. The surrender of the original bill of lading is
not a condition precedent for a common carrier to be discharged of its contractual obligation.
6. TSUNEISHI HEAVY INDUSTRIES (CEBU), INC. V. MIS MARITIME CORPORATION
G.R. NO. 193572, APRIL 04, 2018

FACTS:
Respondent (or “MIS”) contracted Tsuneishi to dry dock and repair its vessel M/T MIS-1. The vessel dry
docked in Tsuneishi's shipyard. Tsuneishi rendered the required services. However, about a month later
and while the vessel was still dry docked, Tsuneishi conducted an engine test on M/T MIS-1. The
vessel's engine emitted smoke. The parties eventually discovered that this was caused by a burnt crank
journal. The crankpin also showed hairline cracks due to defective lubrication or deterioration. Tsuneishi
insists that the damage was not its fault while MIS insists on the contrary. Nevertheless, as an act of
good will, Tsuneishi paid for the vessel's new engine crankshaft, crankpin, and main bearings.

Tsuneishi billed MIS for payment of its repair and dry docking services. MIS refused to pay this amount.
Instead, it demanded that Tsuneishi pay the income that the vessel lost in the six months that it was not
operational and dry docked at Tsuneishi's shipyard. It also asked that its claim be set off against the
amount billed by Tsuneishi. MIS further insisted that after the set off, Tsuneishi still had the obligation to
pay it the amount of US$152,891.10. Tsuneishi rejected MIS' demands. It delivered the vessel to MIS.

MIS signed an Agreement for Final Price. However, despite repeated demands, MIS refused to pay
Tsuneishi the amount billed under their contract. Tsuneishi claims that MIS also caused M/T White
Cattleya, a vessel owned by Cattleya Shipping, to stop its payment for the services Tsuneishi rendered
for the repair and dry docking of the vessel.

Tsuneishi filed a complaint with prayer for preliminary attachment against MIS before the RTC. This
complaint stated that it is invoking the admiralty jurisdiction of the RTC to enforce a maritime lien under
Section 21 of the Ship Mortgage Decree of 1978 (Ship Mortgage Decree). In particular, Tsuneishi argued
that Section 21 of the Ship Mortgage Decree provides for a maritime lien in favor of any person who
furnishes repair or provides use of a dry dock for a vessel.

ISSUE:
Whether a maritime lien under Section 21 of the Ship Mortgage Decree may be enforced through a writ
of preliminary attachment under Rule 57 of the Rules of Court.

RULING:
NO. A lien is a "legal claim or charge on property, either real or personal, as a collateral or security for
the payment of some debt or obligation." It attaches to a property by operation of law and once attached,
it follows the property until it is discharged. What it does is to give the party in whose favor the lien exists
the right to have a debt satisfied out of a particular thing. It is a legal claim or charge on the property
which functions as a collateral or security for the payment of the obligation.

Section 21 of the Ship Mortgage Decree establishes a lien. It states:

Sec. 21. Maritime Lien for Necessaries; Persons entitled to such Lien. – Any person furnishing repairs,
supplies, towage, use of dry dock or marine railway, or other necessaries to any vessel, whether foreign
or domestic, upon the order of the owner of such vessel, or of a person authorized by the owner, shall
have a maritime lien on the vessel, which may be enforced by suit in rem and it shall be necessary to
allege or prove that credit was given to the vessel.

In practical terms, this means that the holder of the lien has the right to bring an action to seek the sale
of the vessel and the application of the proceeds of this sale to the outstanding obligation. Through this
lien, a person who furnishes repair, supplies, towage, use of dry dock or marine railway, or other
necessaries to any vessel, in accordance with the requirements under Section 21, is able to obtain
security for the payment of the obligation to him.
A party who has a lien in his or her favor has a remedy in law to hold the property liable for the payment
of the obligation. A lienholder has the remedy of filing an action in court for the enforcement of the lien. In
such action, a lienholder must establish that the obligation and the corresponding lien exist before he or
she can demand that the property subject to the lien be sold for the payment of the obligation. Thus, a
lien functions as a form of security for an obligation.

Liens, as in the case of a maritime lien, arise in accordance with the provision of particular laws providing
for their creation, such as the Ship Mortgage Decree which clearly states that certain persons who
provide services or materials can possess a lien over a vessel. The Rules of Court also provide for a
provisional remedy which effectively operates as a lien. This is found in Rule 57 which governs the
procedure for the issuance of a writ of preliminary attachment.

Tsuneishi is correct that the Ship Mortgage Decree does not provide for the specific procedure through
which a maritime lien can be enforced. Its error is in insisting that a maritime lien can only be
operationalized by granting a writ of preliminary attachment under Rule 57 of the Rules of Court.
Tsuneishi argues that the existence of a maritime lien should be considered as another ground for the
issuance of a writ of preliminary attachment under the Rules of Court.

Tsuneishi's argument is rooted on a faulty understanding of a lien and a writ of preliminary attachment.
As we said, a maritime lien exists in accordance with the provision of the Ship Mortgage Decree. It is
enforced by filing a proceeding in court. When a maritime lien exists, this means that the party in whose
favor the lien was established may ask the court to enforce it by ordering the sale of the subject
property and using the proceeds to settle the obligation.

On the other hand, a writ of preliminary attachment is issued precisely to create a lien. When a party
moves for its issuance, the party is effectively asking the court to attach a property and hold it liable for
any judgment that the court may render in his or her favor. This is similar to what a lien does. It functions
as a security for the payment of an obligation. In Quasha Asperilla Ancheta Valmonte Peña & Marcos v.
Juan, the Court held: “An attachment proceeding is for the purpose of creating a lien on the property to
serve as security for the payment of the creditors' claim. Hence, where a lien already exists, as in this
case a maritime lien, the same is already equivalent to an attachment.”

When a lien already exists, this is already equivalent to an attachment. This is where Tsuneishi's
argument fails. Clearly, because it claims a maritime lien in accordance with the Ship Mortgage Decree,
all Tsuneishi had to do is to file a proper action in court for its enforcement. The issuance of a writ of
preliminary attachment on the pretext that it is the only means to enforce a maritime lien is superfluous.
The reason that the Ship Mortgage Decree does not provide for a detailed procedure for the
enforcement of a maritime lien is because it is not necessary. Section 21 already provides for the simple
procedure—file an action in rem before the court.

7. PIONEER INSURANCE and SURETY CORPORATION vs APL CO., PTE. LTD.

FACTS:
Chillies Export House Limited, turned over to respondent APL Co. Pte. Ltd. (APL) 250 bags of chili
pepper for transport from the port of Chennai, India, to Manila. The shipment, with a total declared value
of $12,272.50, was loaded on board M/V Wan Hai 262. In turn, BSFIL Technologies, Inc. (BSFIL), as
consignee, insured the cargo with petitioner Pioneer Insurance and Surety Corporation.

The shipment arrived at the port of Manila and was temporarily stored at North Harbor, Manila. Later, the
bags of chili were withdrawn and delivered to BSFIL. Upon receipt thereof, it discovered that 76 bags
were wet and heavily infested with molds. The shipment was declared unfit for human consumption and
was eventually declared as a total loss.

As a result, BSFIL made a formal claim against APL and Pioneer Insurance. Pioneer Insurance paid
BSFIL ₱195,505.65 after evaluating the claim. Having been subrogated to all the rights and cause of
action of BSFIL, Pioneer Insurance sought payment from APL, but the latter refused. This prompted
Pioneer Insurance to file a complaint for sum of money against APL on February 1, 2013.

ISSUE:
Whether or not the one-year prescriptive period under the Carriage of Goods by Sea Act (COGSA)
applies.

RULING:
YES. The one-year prescriptive period under COGSA applies in this case. The cardinal rule in the
interpretation of contracts is embodied in the first paragraph of Article 1370 of the Civil Code: “if the
terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal
meaning of its stipulations shall control.” The stipulations in the Bill of Lading between the parties are
clear and unequivocal.

It was categorically stated in the Bill of Lading that the carrier shall in any event be discharged from all
liability whatsoever in respect of the goods, unless suit is brought in the proper forum within nine (9)
months after delivery of the goods or the date when they should have been delivered. The same,
however, is qualified in that when the said nine-month period is contrary to any law compulsory
applicable, the period prescribed by the said law shall apply.

The present case involves lost or damaged cargo, wherein the one-year prescriptive period under the
COGSA applies. A reading of the Bill of Lading between the parties reveals that the nine-month
prescriptive period is not applicable in all actions or claims. As an exception, the nine-month period is
inapplicable when there is a different period provided by a law for a particular claim or action. Thus, it is
readily apparent that the exception under the Bill of Lading became operative because there was a
compulsory law applicable which provides for a different prescriptive period. Hence, strictly applying the
terms of the Bill of Lading, the one-year prescriptive period under the COGSA should govern because
the present case involves loss of goods or cargo.

8. SULPICIO LINES, INC. vs. NAPOLEON SESANTE

FACTS:
On September 18, 1998, at around 12:55 p.m., the M/V Princess of the Orient, a passenger vessel
owned and operated by the petitioner, sank near Fortune Island in Batangas. Of the 388 recorded
passengers, 150 were lost. Napoleon Sesante, then a member of the Philippine National Police (PNP)
and a lawyer, was one of the passengers who survived the sinking. He sued the petitioner for breach of
contract and damages alleging that Sulpicio Lines committed bad faith in allowing the vessel to sail
despite the storm signal. In its defense, the petitioner insisted on the seaworthiness of the M/V Princess
of the Orient due to its having been cleared to sail from the Port of Manila by the proper authorities; that
the sinking had been due to force majeure.

RTC rendered its judgment against defendant Sulpicio Lines ordering it to pay Temperate damages in
the amount of P400,000.00 and Moral damages in the amount of P1,000,000.00. CA promulgated its
assailed decision. It lowered the temperate damages to P120,000.00, which approximated the cost of
Sesante's lost personal belongings; and held that despite the seaworthiness of the vessel, the petitioner
remained civilly liable because its officers and crew had been negligent in performing their duties. During
the pendency of the case, herein petitioner died and was substituted by his heirs.

ISSUES:
Is the petitioner liable for damages under Article 1759 of the Civil Code?

RULING:
YES. The petitioner is liable for breach of contract of carriage. Article 1759 of the Civil Code does not
establish a presumption of negligence because it explicitly makes the common carrier liable in the event
of death or injury to passengers due to the negligence or fault of the common carrier's employees.
Clearly, the trial court is not required to make an express finding of the common carrier's fault or
negligence. The presumption of negligence applies so long as there is evidence showing that: (a) a
contract exists between the passenger and the common carrier; and (b) the injury or death took place
during the existence of such contract. In such event, the burden shifts to the common carrier to prove its
observance of extraordinary diligence, and that an unforeseen event or force majeure had caused the
injury. However, for a common carrier to be absolved from liability in case of force majeure, it is not
enough that the accident was caused by a fortuitous event. The common carrier must still prove that it
did not contribute to the occurrence of the incident due to its own or its employees' negligence.

The petitioner has attributed the sinking of the vessel to the storm notwithstanding its position on the
seaworthiness of M/V Princess of the Orient. Yet, the findings of the Board of Marine Inquiry (BMI)
directly contradicted the petitioner's attribution. The BMI found that the "erroneous maneuvers" during
the ill-fated voyage by the captain of the petitioner's vessel had caused the sinking. After the vessel had
cleared Limbones Point while navigating towards the direction of Fortune Island, the captain already
noticed the listing of the vessel by three degrees to the portside of the vessel, but, according to the BMI,
he did not exercise prudence as required by the situation in which his vessel was suffering the battering
on the starboard side by big waves of seven to eight meters high and strong southwesterly winds of 25
knots. The BMI pointed out that he should have considerably reduced the speed of the vessel based on
his experience about the vessel - a close-type ship of seven decks, and of a wide and high
superstructure - being vulnerable if exposed to strong winds and high waves. He ought to have also
known that maintaining a high speed under such circumstances would have shifted the solid and liquid
cargo of the vessel to port, worsening the tilted position of the vessel. It was only after a few minutes
thereafter that he finally ordered the speed to go down to 14 knots, and to put ballast water to the
starboard heeling tank to arrest the continuous listing at portside. By then, his moves became an
exercise in futility because, according to the BMI, the vessel was already listing to her portside between
15 to 20 degrees, which was almost the maximum angle of the vessel's loll. It then became inevitable for
the vessel to lose her stability.

As borne out by the aforementioned findings of the BMI, the immediate and proximate cause of the
sinking of the vessel had been the gross negligence of its captain in maneuvering the vessel.

9. ALFREDO S. RAMOS v. CHINA SOUTHERN AIRLINES CO. LTD.,

FACTS:
On 7 August 2003, petitioners purchased five China Southern Airlines roundtrip plane tickets from Active
Travel Agency. It is provided in their itineraries that petitioners will be leaving Manila on 8 August 2003
and will be leaving Xiamen on 12 August 2003. On their way back to the Manila, petitioners were
prevented from taking their designated flight despite the fact that earlier that day an agent from Active
Tours informed them that their bookings for China Southern Airlines 1920H are confirmed. The refusal
came after petitioners already checked in all their baggages and were given the corresponding claim
stubs and after they had paid the terminal fees. According to the airlines' agent with whom they spoke at
the airport, petitioners were merely chance passengers but they may be allowed to join the flight if they
are willing to pay an additional 500 Renminbi (RMB) per person. When petitioners refused to defray the
additional cost, their baggages were offloaded from the plane and China Southern Airlines 1920H flight
then left Xiamen International Airport without them. Because they have business commitments waiting
for them in Manila, petitioners were constrained to rent a car that took them to Chuan Chio Station where
they boarded the train to Hongkong. Upon reaching Hong Kong, petitioners purchased new plane tickets
from Philippine Airlines (PAL) that flew them back to Manila.

Petitioners initiated an action for damages before the RTC of Manila against China Southern Airlines and
Active Travel for damages. RTC rendered a Decision in favor of the petitioners awarding them actual,
moral and exemplary damages as well as attorney’s fees. On appeal, the CA delete award of moral and
exemplary damages. According to the appellate court, petitioners failed to prove that China Southern
Airlines' breach of contractual obligation was attended with bad faith.
ISSUE:
Whether or not the petitioner is entitled to actual, moral and exemplary damages.

RULING:
YES. The petitioner is entitled to actual, moral and exemplary damages. When an airline issues a ticket
to a passenger confirmed on a particular flight, on a certain date, a contract of carriage arises, and the
passenger has every right to expect that he would fly on that flight and on that date. If that does not
happen, then the carrier opens itself to a suit for breach of contract of carriage. In an action based on a
breach of contract of carriage, the aggrieved party does not have to prove that the common carrier was
at fault or was negligent. All he has to prove is the existence of the contract and the fact of its non-
performance by the carrier, through the latter's failure to carry the passenger to its destination.

There is no doubt that petitioners are entitled to actual or compensatory damages. Both the RTC and the
CA uniformly held that there was a breach of contract committed by China Southern Airlines when it
failed to deliver petitioners to their intended destination, a factual finding that we do not intend to depart
from in the absence of showing that it is unsupported by evidence. As the aggrieved parties, petitioners
had satisfactorily proven the existence of the contract and the fact of its nonperformance by China
Southern Airlines; the concurrence of these elements called for the imposition of actual or compensatory
damages.
With respect to moral damages, the same is awarded in cases of breaches of contract where the
defendant acted fraudulently or in bad faith. The Court finds that the airline company acted in bad
faith in insolently bumping petitioners off the flight after they have completed all the pre-departure
routine. Bad faith is evident when the ground personnel of the airline company unjustly and
unreasonably refused to board petitioners to the plane which compelled them to rent a car and take the
train to the nearest airport where they bought new sets of plane tickets from another airline that could fly
them home. Petitioners have every reason to expect that they would be transported to their intended
destination after they had checked in their luggage and had gone through all the security checks.
Instead, China Southern Airlines offered to allow them to join the flight if they are willing to pay additional
cost; this amount is on top of the purchase price of the plane tickets. The requirement to pay an
additional fare was insult upon injury.

China Southern Airlines is also liable for exemplary damages as it acted in a wantonly oppressive
manner as succinctly discussed above against the petitioners. Exemplary damages which are awarded
by way of example or correction for the public good, may be recovered in contractual obligations, as in
this case, if defendant acted in wanton, fraudulent, reckless, oppressive or malevolent manner.

10. CATHAY PACIFIC AIRWAYS, LTD. V. SPOUSES ARNULFO

FACTS:
The case originated from a Complaint for damages filed by respondents Arnulfo and Evelyn Fuentebella
against petitioner Cathay Pacific Airways Ltd. Respondents prayed damages for the alleged besmirched
reputation and honor, as well as the public embarrassment they had suffered as a result of a series of
involuntary downgrades of their trip from Manila to Sydney via Hong Kong.

The RTC ruled in favor of respondents and awarded moral damages, exemplary damages, and
attorney’s fees. CA affirmed the decision of RTC. In 1993, the Speaker of the House authorized
Congressmen Arnulfo Fuentebella (respondent Fuentebella), Alberto Lopez (Cong. Lopez) and
Leonardo Fugoso (Cong. Fugoso) to travel on official business to Sydney, Australia, to confer with their
counterparts in the Australian Parliament. On 22 October 1993, respondents bought Business Class
tickets for Manila to Sydney via Hong Kong and back. They changed their minds, however, and decided
to upgrade to First Class. From this point, the parties presented divergent versions of facts. The
overarching disagreement was on whether respondents should have been given First Class seat
accommodations for all the segments of their itinerary.
Petitioner admits that First Class tickets were issued to respondents, but clarifies that the tickets
were open-dated (waitlisted). There was no showing whether the First Class tickets issued to Lopez and
Fugoso were open-dated or otherwise, but it appears that they were able to fly First Class on all the
segments of the trip, while respondents were not.

On 25 October 1993, respondents queued in front of the First Class counter in the airport. They were
issued boarding passes for Business Class seats on board CX 902 bound for Hong Kong from Manila
and Economy Class seats on board CX 101 bound for Sydney from Hong Kong. They only discovered
that they had not been given First Class seats when they were denied entry into the First Class
lounge. Respondent Fuentebella went back to the check-in counter to demand that they be given First
Class seats or at the very least, access to the First Class Lounge. He recalled that he was treated by the
ground staff in a discourteous, arrogant and rude manner. He was allegedly told that the plane would
leave with or without them. Both the trial court and the CA gave credence to the testimony of respondent
Fuentebella.

ISSUE:
Whether or not the respondents are liable for the damages prayed for.

RULING:
YES. The respondents are entitled to moral damages, exemplary damages and attorney’s fees. In
Air France v. Gillego, the Court ruled that in an action based on a breach of contract of carriage, the
aggrieved party does not have to prove that the common carrier was at fault or was negligent; all that he
has to prove is the existence of the contract and the fact of its nonperformance by the carrier. In this
case, both the trial and appellate courts found that respondents were entitled to First Class
accommodations under the contract of carriage, and that petitioner failed to perform its obligation.

According to the senior reservation supervisor of the petitioner, Nenita Montillana (Montillana), a
reservation is deemed confirmed when there is a seat available on the plane. When asked how a
passenger was informed of the confirmation, Montillana replied that computer records were consulted
upon inquiry. By its issuance of First Class tickets on the same day of the flight in place of
Business Class tickets that indicated the preferred and confirmed flight, petitioner led
respondents to believe that their request for an upgrade had been approved.

Petitioner tries to downplay the factual finding that no explanation was given to respondents with regard
to the types of ticket that were issued to them. It ventured that respondents were seasoned travelers and
therefore familiar with the concept of open-dated tickets. Petitioner attempts to draw a parallel with
Sarreal, Jr. v. JAL, in which it was ruled that the airline could not be faulted for the negligence of the
passenger, because the latter was aware of the restrictions carried by his ticket and the usual procedure
for travel. In that case, though, records showed that the plaintiff was a well-travelled person who
averaged two trips to Europe and two trips to Bangkok every month for 34 years. In the present case, no
evidence was presented to show that respondents were indeed familiar with the concept of open-dated
ticket. In fact, the tickets do not even contain the term "open-dated."

Moral and exemplary damages are not ordinarily awarded in breach of contract cases. This Court has
held that damages may be awarded only when the breach is wanton and deliberately injurious, or the
one responsible had acted fraudulently or with malice or bad faith. Bad faith is a question of fact that
must be proven by clear and convincing evidence. Both the trial and the appellate courts found that
petitioner had acted in bad faith.

However, the award of P5 million as moral damages is excessive, considering that the highest amount
ever awarded by this Court for moral damages in cases involving airlines is P500,000. As we said in Air
France v. Gillego, "the mere fact that respondent was a Congressman should not result in an
automatic increase in the moral and exemplary damages." We find that upon the facts established,
the amount of P500,000 as moral damages are reasonable to obviate the moral suffering that
respondents have undergone. With regard to exemplary damages, jurisprudence shows that P50,000 is
sufficient to deter similar acts of bad faith attributable to airline representatives.