UCPB GENERAL INSURANCE CO., INC., Petitioner, vs. ABOITIZ SHIPPING CORP.

EAGLE EXPRESS LINES, DAMCO INTERMODAL SERVICES, INC., and PIMENTEL CUSTOMS BROKERAGE CO., Respondents. 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. 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. Upon plaintiff-appellees motion, defendant DAMCO was declared in default by the lower court in its Order dated January 6, 1995. In the meantime, on January 25, 1995, defendant EAST filed a Motion for Preliminary Hearing on its affirmative defenses seeking the dismissal of the complaint against it on the ground of prescription, which motion was however denied by the court a quo in its Order dated September 1, 1995. Such denial was elevated by defendant EAST to this Court through a Petition for Certiorari on October 30, 1995 in CA G.R. SP No. 38840. Eventually, this Court issued its Decision dated February 14, 1996 setting aside the lower courts assailed order of denial and further ordering the dismissal of the complaint against defendant EAST. Plaintiffappellee moved for reconsideration thereof but the same was denied by this Court in its Resolution dated November 8, 1996. As per Entry of Judgment, this Courts decision ordering the dismissal of the complaint against defendant EAST became final and executory on December 5, 1996. Accordingly, the court a quo noted the dismissal of the complaint against defendant EAST in its Order dated December 5, 1997. Thus, trial ensued with respect to the remaining defendants. The appellate court, as previously mentioned, reversed the decision of the trial court and ruled that UCPBs right of action against respondents did not accrue because UCPB failed to

file a formal notice of claim within 24 hours from (SMCs) receipt of the damaged merchandise as required under Art. 366 of the Code of Commerce. According to the Court of Appeals, the filing of a claim within the time limitation in Art. 366 is a condition precedent to the accrual of a right of action against the carrier for the damages caused to the merchandise. 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. UCPB further claims that the issue of the applicability of Art. 366 of the Code of Commerce was never raised before the trial court and should, therefore, not have been considered by the Court of Appeals. Aboitiz Shipping Corporation (Aboitiz), on the other hand, points out, in its Memorandum10 dated March 29, 2007, that it obviously cannot be held liable for the damage to the cargo which, by UCPBs admission, was incurred not during transshipment to Cebu on board one of Aboitizs 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 UCPBs cause of action against it. ISSUE: Whether any of the remaining parties may still be held liable by UCPB. Is the filing of a notice of claim a condition precedent to the accrual of a right of action against the carrier for the damages caused to the merchandise? HELD: The consignee failed to file a formal notice of claim within 24 hours from receipt of the damaged merchandise as required under Article 366 of the Code of Commerce. 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. The 24-hour claim requirement has been construed 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. PHILIPPINE CHARTER INSURANCE CORPORATION VS. CHEMOIL LIGHTERAGE HITE GOLD CORPORATION G.R. No. 136888. June 29, 2005 Facts: 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. On 24 January 1991, Samkyung

Chemical Company, Ltd., based in 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 and another 436.70 metric tons of DOP valued at US$634,724.89 to the Philippines. The consignee was Plastic Group Phils., Inc. in Manila. PGP insured the cargo with Philippine Charter Insurance Corporation against all risks. The insurance was under Marine Policies No. MRN-30721[5] dated 06 February 1991. Marine Endorsement No. 2786[7] dated 11 May 1991 was attached and formed part of MRN-30721, amending the latters insured value to P24,667,422.03, and reduced the premium accordingly. The ocean tanker MT TACHIBANA unloaded the cargo to the tanker barge, which shall transport the same to Del Pan Bridge in Pasig River and haul it by land to PGPs storage tanks in Calamba, Laguna. Upon inspection by PGP, the samples taken from the shipment showed discoloration demonstrating that it was damaged. PGP then sent a letter where it formally made an insurance claim for the loss it sustained. Petitioner requested the GIT Insurance Adjusters, Inc. (GIT), to conduct a Quantity and Condition Survey of the shipment which issued a report stating that DOP samples taken were discolored. Inspection of cargo tanks showed manhole covers of ballast tanks ceilings loosely secured and 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. Petitioner paid PGP the full and final payment for the loss and issued a Subrogation Receipt. Meanwhile, PGP paid the respondent the as full payment for the latters services. On 15 July 1991, an action for damages was instituted by the petitioner-insurer against respondent-carrier before the RTC, Br.16, City of Manila. Respondent filed an answer which admitted that it undertook to transport the shipment, but alleged that before the DOP was loaded into its barge, the representative of PGP, Adjustment Standard Corporation, inspected it and found the same clean, dry, and fit for loading, thus accepted the cargo without any protest or notice. As carrier, no fault and negligence can be attributed against respondent as it exercised extraordinary diligence in handling the cargo. After due hearing, the trial court rendered a Decision in favor of plaintiff. On appeal, the Court of Appeals promulgated its Decision reversing the trial court. A petition for review on certiorar[ was filed by the petitioner with this Court. Issues: 1. Whether or not the Notice of Claim was filed within the required period. 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, which provides that; Within twenty-four hours following the receipt of the merchandise a claim may be made against the carrier on account of damage or average found upon opening the packages, provided that the indications of the damage or average giving rise to the claim cannot be ascertained from the exterior of said packages, in which case said claim shall only be admitted at the time of the receipt of the packages. After the periods mentioned have elapsed, or after the transportation charges have been paid, no claim whatsoever shall be admitted against the carrier with regard to the condition in which the goods transported were delivered. As to the first issue, the petitioner contends that the notice of contamination was given by PGP employee, to Ms. Abastillas, at the time of the delivery of the cargo, and therefore, within the required period. The respondent, however, claims that the supposed notice given by PGP over the telephone was denied by Ms. Abastillas. The Court of Appeals declared:that

a telephone call made to defendant-company could constitute substantial compliance with the requirement of notice. However, it must be pointed out that compliance with the period for filing notice is an essential part of the requirement, i.e.. immediately if the damage is apparent, or otherwise within twenty-four hours from receipt of the goods, the clear import being that prompt examination of the goods must be made to ascertain damage if this is not immediately apparent. We have examined the evidence, and We are unable to find any proof of compliance with the required period, which is fatal to the accrual of the right of action against the carrier.[27] Nothing in the trial courts 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. The filing of a claim with the carrier within the time limitation therefore actually constitutes 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. If it fails to do so, no right of action against the carrier can accrue in favor of the former. The aforementioned requirement is a reasonable condition precedent; it does not constitute a limitation of action.[31] 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. Petitioners contention proceeds from a false presupposition that the notice of claim was timely filed. Considering that we have resolved the first issue in the negative, it is therefore unnecessary to make a resolution on the second issue.

Aboitiz Shipping Corp. V. Insurance Co. Of North America (2008) FACTS: June 20, 1993: MSAS Cargo International Limited and/or Associated and/or Subsidiary Companies (MSAS) procured an "all-risk" marine insurance policy from ICNA UK Limited of London for wooden work tools and workbenches purchased by consignee Science Teaching Improvement Project (STIP), Ecotech Center, Sudlon Lahug, Cebu City. July 26, 1993: the cargo was received by Aboitiz Shipping Corporation (Aboitiz) through its duly authorized booking representative, Aboitiz Transport System August 1, 1993: container van was loaded on board MV Super Concarrier I

The vessel left Manila en route to Cebu City August 3, 1993: shipment arrived in Cebu City August 5, 1993: Stripping Report, checker noted that the crates were slightly broken or cracked at the bottom August 11, 1993: 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 August 13, 1993: Mayo B. Perez, Head of Aboiti received a call from the receiver Mr. Bernhard Willig that the cargo sustained water damage so he checked the other cargo but they were dry In a letter dated August 15, 1993, Willig informed Aboitiz that the damage was caused by water entering through the broken bottom parts of the crate Consignee filed a claim against ICNA CAC reported to ICNA that the shipment was placed outside the warehouse when it was delivered on July 26, 1993 and it was only on July 31, 1993 when the shipment was stuffed inside another container van for shipment to Cebu. Weather report shows that the heavy rains on July 28 and 29, 1993 caused the damages. Aboitiz refused to settle the claim ICNA paid the amount of P280,176.92 to consignee and a subrogation receipt was duly signed by Willig. ICNA then advised Aboitiz of the receipt signed in its favor but received no reply so it filed for collection at the RTC. RTC: against ICNA - subrogation Form is self-serving and has no probative value since Wellig was not presented to the witness stand CA: reversed RTC ruling - right of subrogation accrues simply upon payment by the insurance company of the insurance claim even assuming that it is an unlicensed foreign corporation ISSUE: WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN RULING THAT THE EXTENT AND KIND OF DAMAGE SUSTAINED BY THE SUBJECT CARGO WAS CAUSED BY THE FAULT OR NEGLIGENCE OF ABOITIZ HELD: 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 carriers liability. Circumstances peculiar to this case lead Us to conclude that the notice requirement was complied with. As held in the case of Philippine American General Insurance Co., Inc. v. Sweet Lines, Inc.,[33] this notice requirement protects the carrier by affording it an opportunity to make an investigation of the claim while the matter is still fresh and easily investigated. It is meant to safeguard the carrier from false and fraudulent claims.

Under the Code of Commerce, the notice of claim must be made within twenty four (24) hours from receipt of the cargo if the damage is not apparent from the outside of the package. For damages that are visible from the outside of the package, the claim must be made immediately. The law provides: Article 366. Within twenty four hours following the receipt of the merchandise, the claim against the carrier for damages or average which may be found therein upon opening the packages, may be made, provided that the indications of the damage or average which give 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. After the periods mentioned have elapsed, or the transportation charges have been paid, no claim shall be admitted against the carrier with regard to the condition in which the goods transported were delivered. (Emphasis supplied) The periods above, as well as the manner of giving notice may be modified in the terms of the bill of lading, which is the contract between the parties. Notably, neither of the parties in this case presented the terms for giving notices of claim under the bill of lading issued by petitioner for the goods. 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.[34] The rule as stated in Article 1735 of the Civil Code is that in cases where the goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence required by law.[38] 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 rights.[39] This standard is intended to grant favor to the shipper who is at the mercy of the common carrier once the goods have been entrusted to the latter for shipment.[40] Here, the shipment delivered to the consignee sustained water damage. We agree with the findings of the CA that petitioner failed to overturn this presumption: x x x upon delivery of the cargo to the consignee Don Bosco Technical High School by a representative from Trabajo Arrastre, and the crates opened, it was discovered that the workbenches and work tools suffered damage due to wettage although by then they were already physically dry. Appellee carrier having failed to discharge the burden of proving that it exercised extraordinary diligence in the vigilance over such goods it contracted for carriage, the presumption of fault or negligence on its part from the time the goods were unconditionally placed in its possession (July 26, 1993) up to the time the same were delivered to the consignee (August 11, 1993), therefore stands. The presumption that the carrier was at fault or that it acted negligently was not overcome by any countervailing evidence. x x x[41] (Emphasis added)

The shipment arrived in the port of Manila and was received by petitioner for carriage on July 26, 1993. On the same day, it was stripped from the container van. Five days later, on July 31, 1993, it was re-stuffed inside another container van. On August 1, 1993, it was loaded onto another vessel bound for Cebu. During the period between July 26 to 31, 1993, the shipment was outside a container van and kept in storage by petitioner. The bill of lading issued by petitioner on July 31, 1993 contains the notation grounded outside warehouse, suggesting that from July 26 to 31, the goods were kept outside the warehouse. And since evidence showed that rain fell over Manila during the same period, We can conclude that this was when the shipment sustained water damage. To prove the exercise of extraordinary diligence, petitioner must do more than merely show the possibility that some other party could be responsible for the damage. It must prove that it used all reasonable means to ascertain the nature and characteristic of the goods tendered for transport and that it exercised due care in handling them.[42] Extraordinary diligence must include safeguarding the shipment from damage coming from natural elements such as rainfall. Petitioner is thus liable for the water damage sustained by the goods due to its failure to satisfactorily prove that it exercised the extraordinary diligence required of common carriers. WHEREFORE, the petition is DENIED and the appealed Decision AFFIRMED. MITSUI O.S.K. LINES LTD., represented by MAGSAYSAY AGENCIES, INC., petitioner, vs. COURT OF APPEALS and LAVINE LOUNGEWEAR MFG. CORP., respondents. MENDOZA, J.: This is a petition for review on certiorari of the January 25, 1995 decision of the Court of 1 Appeals and its resolution of March 22, 1995 denying petitioner's motion for reconsideration. The appellate court upheld orders of Branch 68 (Pasig) of the Regional Trial Court, National Capital Judicial Region, denying petitioner's motion to dismiss in the original action filed against petitioner by private respondent. The facts are not in dispute.
2

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. 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. Petitioner filed a motion to dismiss alleging that the claim against it had prescribed under the Carriage of Goods by Sea Act. The Regional Trial Court, as aforesaid, denied petitioner's motion as well as its subsequent motion for reconsideration. On petition for certiorari, the Court of Appeals sustained the trial court's orders. Hence this petition containing one assignment of error: THE RESPONDENT COURT OF APPEALS COMMITTED A SERIOUS ERROR OF LAW IN RULING THAT PRIVATE RESPONDENT'S AMENDED COMPLAINT IS (sic) NOT PRESCRIBED PURSUANT TO SECTION 3(6) OF THE CARRIAGE OF GOODS BY SEA ACT. The issue raised by the instant petition is 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). Section 3 provides: (6) Unless notice of loss or damage and the general nature of such loss or damage be 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

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. 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

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. In Ang v. American Steamship Agencies, Inc., the question was whether an action for the value of goods which had been delivered to a party other than the consignee is for "loss or damage" within the meaning of 3(6) of the COGSA. It was held that there was no loss because the goods had simply been misdelivered. "Loss" refers to the deterioration or 3 disappearance of goods. 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 4 way that their existence is unknown or they cannot be recovered. Conformably with this concept of what constitutes "loss" or "damage," this Court held in 5 another case that the 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: Whatever damage or injury is suffered by the goods while in transit would result in loss or damage to either the shipper or the consignee. As long as it is claimed, therefore, as it is done here, that the losses or damages suffered by the shipper or consignee were due to the arrival of the goods in damaged or deteriorated condition, the action is still basically one for damage to the goods, and must be filed within the period of one year from delivery or receipt, under the above-quoted 6 provision of the Carriage of Goods by Sea Act. But the Court allowed that There would be some merit in appellant's insistence that the damages suffered by him as a result of the delay in the shipment of his cargo are not covered by the prescriptive provision of the Carriage of Goods by Sea Act above referred to, if such damages were due, not to the deterioration and decay of the goods while in transit, but to other causes independent of the condition of the cargo upon arrival, like a drop in their market 7 value. . . .

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 8 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. Petitioner contends: Although we agree that there are places in the section (Article III) in which the phrase need have no broader meaning than loss or physical damage to the goods, we disagree with the conclusion that it must so be limited wherever it is used. We take it that the phrase has a uniform meaning, not merely in Section 3, but throughout the Act; and there are a number of places in which the restricted interpretation suggested would be inappropriate. For example Section 4(2) [Article IV(2) (sic) exempts exempts (sic) the carrier, the ship (sic), from liability "loss or damage" 9 (sic) resulting from certain courses beyond their control. Indeed, what is in issue in this petition is not the liability of petitioner for its handling of goods as provided by 3(6) of the COGSA, but its liability under its contract of carriage with private respondent as covered by laws of more general application. 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. WHEREFORE, the decision of the Court of Appeals is AFFIRMED. SO ORDERED.

Filipino Merchants Insurance Company, Inc. vs Judge Jose Alejandro FACTS: In 1976, Choa Tiek Seng contracted Frota Oceanica Brasiliera for the latter to deliver goods. Choa Tiek Seng insured the goods with Filipino Merchants Insurnace Company. The goods left the port of Manila on December 13, 1976 and reached its point of destination on December 17, 1976. The goods were however damaged. Respondents paid part of the petitioners demand but declined the rest claiming that the insurance surveyors report allegedly showed that the damage was a factory defect and hence not covered by the insurance policies. The lower court ruled in favor of the petitioner finding the damage not caused by manufacturing defects. It also noted that the insurance contract insured against all risks or all causes of conceivable loss or damage save those caused by fraud or intentional misconduct. At the court of appeals the CA found the all risks provision covered the damage endured but set aside the decision because the complaint had been bared by prescription. Sec 3(6) of the COGSA specifically bared it because it had been more than 1 year since the damage had been done before the demand was made. Held: The cause of action had not yet prescribed. Ratio: Sec 3(6) of the COGSA covers only the liability of the carrier which is extinguished if no suit is brought within a period of one year. However, the liability of the insurer is not extinguished because the COGSA governs the relationship between carrier and shipper, and consignee and insurer. It defines a contract of carriage. The relationship at bar is properly governed by the Insurance code. Thus the CAs finding of prescription as per the COGSA is overturned.

Choa Tiek Seng then filed an insurance claim. Filipino Merchants refused to pay so in August 1977, it was sued by Choa Tiek Seng. In January 1978, Filipino Merchants filed a third party complaint against the carrier Frota Oceanica Brasiliera as it alleged that it is the carrier who is liable to pay damages to Choa Tiek Seng. Judge Jose Alejandro of the trial court ruled against Filipino Merchants. The Court of Appeals affirmed the ruling of the judge. The lower courts ruled that Filipino Merchants 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 the goods or the date when the goods should have been delivered or one year from December 17, 1976. The insurance company is already barred for it filed its third party complaint only in January 1978. ISSUE: Whether or not Filipino Merchants is precluded by the said time-bar rule. HELD: Yes. The pertinent provision of the Carriage of Goods by Sea Act does not only apply to the shipper but also applies to the insurer. The coverage of the Carriage of Goods by Sea 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 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. Mayer Steel Pipe Corp. vs. Court of Apeals G.R. No. 124050. June 19, 1997 Facts: Hongkong Government Supplies Department henceforth, Hong Kong contracted petitioner Mayer Steel Pipe Corp to manufacture and supply various steel pipes and fittings from August to October 1983, Mayer shipped the said items to Hong Kong. Prior to shipment the items were insured against all risks with respondent South Sea Surety and Insurance Co. and Charter Insurance Corp for $212,772.09 with South Sea and $149,470 with Charter. Petitioners jointly appointed Industrial Inspection Inc as 3rd party inspector to exa mine the items to see if they were in accordance with the contract. They certified it as such prior to shipment. However, when they reached Hong Kong it was revealed that a substantial portion was damaged. Petitioners now claim for damages against the respondents for indemnity under the insurance contract.

BELGIAN OVERSEAS CHARTERING AND SHIPPING N.V. V. PHILIPPINE FIRST INSURANCE CO. FACTS: CMC Trading A.G. shipped on board the M/V Anangel Sky at Hamburg, Germany 242 coils of various Prime Cold Rolled Steel sheets for transportation to Manila consigned to the Philippine Steel Trading Corporation. - On July 28, 1990, M/V Anangel Sky arrived at the port of Manila and, within the subsequent days, discharged the subject cargo. Four (4) coils were found to be in bad order. - Finding the four (4) coils in their damaged state to be unfit for the intended purpose, the consignee Philippine Steel Trading Corporation declared the same as total loss. - Philippine First Insurance paid the claim of Philippine Steel and was thus subrogated. - Philippine First then instituted a complaint for recovery of the amount paid to the consignee as insured. - Belgian claims that the damage and/or loss was due to pre-shipment damage, to the inherent nature, vice or defect of the goods, or to perils, danger and accidents of the sea, or to insufficiency of packing thereof, or to the act or omission of the shipper of the goods or their representatives. Belgian further argued that their liability, if there be any, should not exceed the limitations of liability provided for in the bill of lading and other pertinent laws. Finally, Belgian averred that, in any event, they exercised due diligence and foresight required by law to prevent any damage/loss to said shipment. - The RTC dismissed the complaint.

- The CA reversed and ruled that Belgian were liable for the loss or the damage of the goods shipped, because they had failed to overcome the presumption of negligence imposed on common carriers. As to the extent of Belgians liability, the CA held that the package limitation under COGSA was not applicable, because the words "L/C No. 90/02447" indicated that a higher valuation of the cargo had been declared by the shipper. ISSUES: - Whether the notice of loss was timely filed. (Belgian claims that pursuant to Section 3, paragraph 6 of COGSA, respondent should have filed its Notice of Loss within three days from delivery. They assert that the cargo was discharged on July 31, 1990, but that respondent filed its Notice of Claim only on September 18, 1990.)

- YES. In this case, there was no stipulation in the Bill of Lading limiting the carrier's liability. Neither did the shipper declare a higher valuation of the goods to be shipped. This fact notwithstanding, the insertion of the words "L/C No. 90/02447 cannot be the basis for Belgians liability. - First, a notation in the Bill of Lading which indicated the amount of the Letter of Credit obtained by the shipper for the importation of steel sheets did not effect a declaration of the value of the goods as required by the bill. That notation was made only for the convenience of the shipper and the bank processing the Letter of Credit. - Second, a bill of lading is separate from the Other Letter of Credit arrangements. Thus, Belgians liability should be computed based on US$500 per package and not on the per metric ton price declared in the Letter of Credit. EDNA DIAGO LHUILLIER v . BRITISH AIRWAYSG.R. No. 171092, March 15, 2010, SECOND DIVISION (Del Castillo, J.) 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. Edna Diago Lhuillier took British Airway flight 548 from London to Rome. Once on board,she requested Julian Halliday, one of its flight attendants, to assist her in placing her hand-carried luggage in the overhead bin. 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!". Edna further alleged that when the plane was about to land in Rome, another flight attendant, Nickolas Kerrigan (Kerrigan), singled her out from among all the passengers in the business class section to lecture on plane safety. Upon arrival in Rome, petitioner complained to British Airwayss ground manager and demanded an apology. However, the latter declared that the flight stewards were "only doing their job." Edna then filed a complaint against British Airways before the Regional Trial Court (RTC) of Makati City. Summons, together with a copy of the complaint, was served on British Airways through Violeta Echevarria, General Manager of Euro-Philippine Airline Services, Inc. British Airways filed a Motion to Dismiss on grounds of lack of jurisdiction over the case and over the person of the respondent. It alleged that only the courts of London, United Kingdom or Rome, Italy, have jurisdiction over the complaint for damages pursuant to the Warsaw Convention, Article 28(1). The RTC of Makati City granted the Motion to Dismiss. Edna filed a Motion for Reconsiderationbut the motion was denied. Hence, this petition. ISSUES: Whether Philippine Courts have jurisdiction over a tortious conduct committed against aFilipino citizen and resident by airline personnel of a foreign carrier travelling beyond the territoriallimit of any foreign country

Whether the package limitation of liability under COGSA is applicable. (Belgian contends that assuming that they are liable their liability should be limited to US$500 per package as provided in the Bill of Lading and by Section 4(5)of COGS HELD: - NO. Mere proof of delivery of the goods in good order to a common carrier and of their arrival in bad order at their destination constitutes a prima facie case of fault or negligence against the carrier. - In this case, Belgian failed to rebut the prima facie presumption of negligence. First, as stated in the Bill of Lading, Belgian received the subject shipment in good order and condition in Germany. Second, prior to the unloading of the cargo, an Inspection Report prepared and signed by representatives of both parties showed the steel bands broken, the metal envelopes rust-stained and heavily buckled, and the contents thereof exposed and rusty. Third, Bad Order Tally Sheet issued by Jardine Davies Transport Services stated that the four coils were in bad order and condition. Normally, a request for a bad order survey is made in case there is an apparent or a presumed loss or damage.Fourth, the Certificate of Analysis stated that, based on the sample submitted and tested, the steel sheets found in bad order were wet with fresh water. Fifth, Belgian -- in a letteraddressed to the Philippine Steel --admitted that they were aware of the condition of the four coils found in bad order and condition. - YES. First, the provision of COGSA provides that the notice of claim need not be given if the state of the goods, at the time of their receipt, has been the subject of a joint inspection or survey. Here, prior to unloading the cargo, an Inspection Report as to the condition of the goods was prepared and signed by representatives of both parties. Second, as stated in the same provision, a failure to file a notice of claim within three days will not bar recovery if it is nonetheless filed within one year. This one-year prescriptive period also applies to the shipper, the consignee, the insurer of the goods or any legal holder of the bill of lading. - A claim is not barred by prescription as long as the one-year period has not lapsed. In the present case, the cargo was discharged on July 31, 1990, while the Complaint51 was filed by respondent on July 25, 1991, within the one-year prescriptive period.

HELD: Petition DENIED.It is settled that the Warsaw Convention has the force and effect of law in this country. xxx 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. 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. 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 the signatories to the Warsaw Convention and those which subsequently adhered to it. In the case at bench, petitioners place of departure was London, United Kingdom while her place of destination was Rome, Italy. Both the United Kingdom and Italy 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. Since the Warsaw Convention applies in the instant case, then the jurisdiction over the subject matter of the action is governed by the provisions 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; or4. 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. The Court finds that the RTC of Makati correctly ruled that it does not have jurisdiction over the case filed by the petitioner. The Court further held that Article 28(1) of the Warsaw Convention is jurisdictional in character:

A number of reasons tends to support the characterization of 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.x x x x 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. Tortious conduct as ground for the Lhuillers complaint is within the purview of the Warsaw Convention. 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. British Airways, in seeking remedies from the trial court through special appearance of counsel, is not deemed to have voluntarily submitted itself to the jurisdiction of the trial court. xxx In refuting the contention of petitioner, respondent cited La Naval Drug Corporation v.Court of Appeals where the Court held that even if a party "challenges the jurisdiction of the court over his person, as by reason of absence or defective service of summons, and he also invokes other grounds for the dismissal of the action under Rule 16, he is not deemed to be in estoppel or to have waived his objection to the jurisdiction over his person." China Airlines vs. Chiok G.R. No. 152122. July 30, 2003 Facts: Daniel Chiok purchased from China Airlines a passenger ticket for air transportation covering Manila-Taipei-Hong Kong-Manila. The said ticket was exclusively endorsable to PAL. Before Chiok his trip, the trips covered by the ticket were pre-scheduled and confirmed by the former. When petitioner arrived in Taipei, he went to CAL to confirm his Hong KongManila trip on board PAL. The CAL office attached a yellow sticker indicating the status was OK. When Chiok reached Hong Kong, he then went to PAL office to confirm his flight back to Manila. The PAL also confirmed the status of his ticket and attached a ticket indicating a status OK. Chiok proceeded to Hong Kong airport for his trip to Manila. However, upon reaching the PAL counter, he was told that the flight to Manila was cancelled due to typhoon. He was informed that all confirmed flight ticket holders of PAL were automatically booked for the next flight the following day.

The next day, Chiok was not able to board the plane because his name did not appear on the computer as passenger for the said flight to Manila. Issue: Whether or not CAL is liable for damages? Held: The contract of air transportation between the petitioner and respondent, with the former endorsing PAL the segment of Chioks journey. Such contract of carriage has been treated in this jurisprudence as a single operation pursuant to Warsaw Convention, to which the Philippines is a party. In the instant case, PAL as the carrying agent of CAL, the latter cannot evade liability to respondent, Chiok, even though it may have been only a ticket issuer for Hong Kong- Manila sector.

PHILAM filed an action for damages against the FEDEX imputing negligence on either or both of them in the handling of the cargo. Trial ensued and ultimately concluded with the FEDEX being held solidarily liable for the loss. Aggrieved, petitioner appealed to the CA. The appellate court ruled in favor of PHILAM and held that the shipping Receipts were a prima facie proof that the goods had indeed been delivered to the carrier in good condition. ISSUE: Is FEDEX liable for damage to or loss of the insured goods HELD: petition granted. Assailed decision reversed insofar as it pertains to FEDEX Prescription of Claim From the initial proceedings in the trial court up to the present, petitioner has tirelessly pointed out that respondents claim and right of action are already barred. Indeed, this fact has never been denied by respondents and is plainly evident from the records. Airway Bill No. 11263825, issued by Burlington as agent of petitioner, states:

FEDEX vs. AHAC and PHILAM INSURANCE COMPANY, INC G.R. No. 150094 August 18, 2004 FACTS: shipper SMITHKLINE USA delivered to carrier 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. 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 with American Home Assurance Company (AHAC). The following day, Burlington turned over the custody of said cargoes to FEDEX which transported the same to Manila. The shipments arrived in Manila and was immediately stored at *Cargohaus Inc.s+ warehouse. Prior to the arrival of the cargoes, FEDEX 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.

6. No action shall be maintained in the case of damage to or partial loss of the shipment unless a written notice, sufficiently describing the goods concerned, the approximate date of the damage or loss, and the details of the claim, is presented by shipper or consignee to an office of Burlington 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]. xxx Relevantly, petitioners airway bill states: 12./12.1 The person entitled to delivery must make a complaint to the carrier in writing in the case: 12.1.1 of visible damage to the goods, immediately after discovery of the damage and at the latest within fourteen (14) days from receipt of the goods; xxx Article 26 of the Warsaw Convention, on the other hand, provides: Xxx (2) In case of damage, the person entitled to delivery must complain to the carrier forthwith after the discovery of the damage, and, at the latest, within 3 days from the date of receipt in the case of baggage and 7 days from the date of receipt in the case of goods. xx (3) Every complaint must be made in writing upon the document of transportation or by separate notice in writing dispatched within the times aforesaid. (4) Failing complaint within the times aforesaid, no action shall lie against the carrier, save in the case of fraud on his part. xxx Condition Precedent

12 days after the cargoes arrived in Manila, DIONEDA, a non-licensed customs broker who was assigned by GETC, found out, while he was about to cause the release of the said cargoes, that the same [were] stored only in a room with 2 air conditioners running, to cool the place instead of a refrigerator. 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. As a consequence of the foregoing result of the veterinary biologics test, SMITHKLINE abandoned the shipment and, declaring total loss for the unusable shipment, 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. Thereafter,

In this jurisdiction, the filing of a claim with the carrier within the time limitation therefor actually constitutes 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. If it fails to do so, no right of action against the carrier can accrue in favor of the former. The aforementioned requirement is a reasonable condition precedent; it does not constitute a limitation of action.

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. NOTES: as to proper payee: The Certificate specifies that loss of or damage to the insured cargo is payable to order x x x 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. 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 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. Philippine Airlines v. Savillo Facts: Savillo was a judge of the RTC of Iloilo He was invited to participate in the 1993 ASEAN Seniors Annual Golf Tournament in Jakarta Indonesia. So, in order to take part in such event, he purchased a ticket from PAL with the following itinerary: Manila-Singapore-Jakarta-Singapore-Manila.

PAL would take them from Manila to Signapore, while Singapore Airlines would take them from Singapore to Jakarta. When they arrived in Singapore, Singapore Airlines rejected the tickets of Savillo because they were not endorsed by PAL. It was explained that if Singapore Airlines honoured the tickets without PALS endorsement, PAL would not pay Singapore Airlines for their passage. Savillo demanded compensation from both PAL and Singapore Airlines, but his efforts were futile. He then sued PAL after 3 years, demanding moral damages. PAL , in its MTD, claimed that the cause of action has already prescribed invoking the Warsaw Convention (providing for a 2 year prescriptive period). Both RTC and CA ruled against PAL.

Issues: What is the applicable law, the Civil Code or the Warsaw Convention? Has the action prescribed? Held: The Civil Code is applicable. Therefore the action has not yet prescribed for the prescription period is 4 years. If cause of action claims moral damages, not covered by Warsaw Convention. 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 statue of limitations of two years has elapsed. 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. In U.S. v. Uy, this Court distinguished between the (1) damage to the passengers baggage and (2) humiliation he suffered at the hands of the airlines 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 Mahaney v. Air France (US case), the court therein ruled that if the plaintiff were to claim damages based solely on the delay she experienced- for instance, the costs of renting a van, which she had to arrange on her own as a consequence of the delay the complaint would be barred by the twoyear statute of limitations. However, where the plaintiff alleged that the airlines subjected her to unjust discrimination or undue or unreasonable preference or disadvantage, an act punishable under the US law, then the plaintiff may claim purely nominal compensatory damages for humiliation and hurt feelings, which are not provided for by the Warsaw Convention.

In the Petition at bar, Savillos 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 therefore this case is not covered by the Warsaw Convention. When the negligence happened before the performance of the contract of carriage, not covered by the Warsaw Convention. Also, this case is comparable to Lathigra v. British Airways. In that case, it was held that the airlines negligent act of reconfirming the passengers reservation days before departure 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. In the case at hand, Singapore Airlines barred Savillo from boarding the Singapore Airlines flight because PAL allegedly failed to endorse the tickets of private respondent and his companions, despite PALs assurances to Savillo that Singapore Airlines had already confirmed their passage. While this fact still needs to 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 party 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 Statue of Limitations provided under Article 29 of the Warsaw Convention. Cathay Pacific Airways vs. CA (1993) Nature: Petition for review on certiorari of the decision of the Court of Appeals which affirmed with modification that of the trial court by increasing the award of damages in favor of private respondent Tomas L. Alcantara. Facts: On 19 October 1975, respondent Tomas L. Alcantara was a first class passenger of petitioner Cathay Pacific Airways from Manila to Hongkong and onward from Hongkong to Jakarta. The purpose of his trip was to attend the following day, October 20, 1975, a conference with the Director General of Trade of Indonesia. He checked in his luggage which contained not only his clothing and articles for personal use but also papers and documents he needed for the conference. Upon his arrival in Jakarta, respondent discovered that his luggage was missing. Private respondent was told that his luggage was left behind in Hongkong. For this, respondent Alcantara was offered $20.00 as "inconvenience money" to buy his immediate personal needs until the luggage could be delivered to him. The respondent, as a result of the incident had to seek postponement of his pre-arranged conference. When his luggage finally reached Jakarta more than twenty four hours later, it was not delivered to him at his hotel but was required by petitioner to be picked up by an official of the Philippine Embassy. Respondent filed a case for damages in the CFI of Lanao del Norte which ruled in his favour.

Both parties appealed to the Court of Appeals. Court of Appeals rendered its decision affirming the decision of the CFI but by modifying its awards by increasing the damages. Issue: Whether or not the Court of Appeals erred in not applying the Warsaw Convention to limit the liability of the respondent airline. Ruling: No. xxx although the Warsaw Convention has the force and effect of law in this country, being a treaty commitment assumed by the Philippine government, said convention does not operate as an exclusive enumeration of the instances for declaring a carrier liable for breach of contract of carriage or as an absolute limit of the extent of that liability. The Warsaw Convention declares the carrier liable for damages in the enumerated cases and under certain limitations. However, it must not be construed to preclude the operation of the Civil Code and other pertinent laws. It does not regulate, much less exempt, the carrier from liability for damages for violating the rights of its passengers under the contract of carriage, especially if wilfull misconduct on the part of the carrier's employees is found or established, which is clearly the case before Us. For, the Warsaw Convention itself provides in Art. 25 that "(1) The carrier shall not be entitled to avail himself of the provisions of this convention which exclude or limit his liability, if the damage is caused by his wilfull misconduct or by such default on his part as, in accordance with the law of the court to which the case is submitted, is considered to be equivalent to wilfull misconduct." (2) Similarly the carrier shall not be entitled to avail himself of the said provisions, if the damage is caused under the same circumstances by any agent of the carrier acting within the scope of his employment." When petitioner airline misplaced respondent's luggage and failed to deliver it to its passenger at the appointed place and time, some special species of injury must have been caused to him. For sure, the latter underwent profound distress and anxiety, and the fear of losing the opportunity to fulfill the purpose of his trip. In fact, for want of appropriate clothings for the occasion brought about by the delay of the arrival of his luggage, to his embarrassment and consternation respondent Alcantara had to seek postponement of his pre-arranged conference with the Director General of Trade of the host country. In one case, his Court observed that a traveller would naturally suffer mental anguish, anxiety and shock when he finds that his luggage did not travel with him and he finds himself in a foreign land without any article of clothing other than what he has on. Thus, respondent is entitled to moral and exemplary damages. We however find the award by the Court of Appeals of P80,000.00 for moral damages excessive, hence, We reduce the amount to P30,000.00. The exemplary damages of P20,000.00 being reasonable is maintained, as well as the attorney's fees of P25,000.00 considering that petitioner's act or omission has compelled Alcantara to litigate with third persons or to incur expenses to protect his interest.