Cy Transpo

[G.R. No. 16598. October 3, 1921.]

H. E. HEACOCK COMPANY, plaintiff-appellant, vs. MACONDRAY & COMPANY, INC., defendant-appellant.

1. COMMON CARRIER; BILL OF LADING; STIPULATIONS REGARDING LIABILITY OF CARRIER FOR LOSS OF OR DAMAGE TO CARGO; VALIDITY OF SUCH STIPULATIONS. — Three kinds of stipulation have often been made in a bill of lading. The first is one exempting the carrier from any and all liability for loss or damage occasioned by its own negligence. The second is one providing for an unqualified limitation of such liability to an agreed valuation. And the third is one limiting the liability of the carrier to an agreed valuation unless the shipper declare a higher value and pays a higher rate of freight. According to an almost uniform weight of authority, the first and second kinds of stipulations are invalid as being contrary to public policy, but the third is valid and enforceable.

2. ID.; ID. — A stipulation in a bill of lading which either exempts the carrier from liability for loss or damage occasioned by its negligences or provides for an unqualified limitation of such liability to an agreed valuation, is invalid as being contrary to public policy.

3. ID.; ID.; ID. — But a stipulation in such bill of lading which limits the liability of the carrier to a specified amount unless the shipper declares a higher value and pays a higher rate of freight, is valid and enforceable. Thus, if a common carrier gives to a shipper the choice of two rates, the lower of them conditioned upon his agreeing to a stipulated valuation of his property in case of loss, even by the carrier's negligence, if the shipper makes the choice understandingly and freely, and names his valuation, he cannot thereafter recover more than the value which he thus places upon his property.

4. CONTRACT; CONSTRUCTION OF, IN CASE OF DOUBT. — A written contract, in case of doubt, should be interpreted against the party who has drawn the contract. It is a well-known principle of construction that ambiguity or uncertainty in an agreement must be construed most strongly against the party causing it. There rules are applicable to contracts contained in bills of lading. In construing a bill of lading given by the carrier for the safe transportation and delivery of goods shipped by a consignor, the contract will be construed most strongly against the carrier, and favorably to the consignor, in case of doubt in and matter of construction.

This action was commenced in the Court of First Instance of the City of Manila to recover the sum of P420 together with interest thereon.

(1) On or about the 5th day of June, 1919, the plaintiff caused to be delivered on board the steamship Bolton Castle, then in the harbor of New York, four cases of merchandise one of which contained twelve (12) 8-day Edmond clocks, properly boxed and marked for transportation to Manila, and paid freight on said clocks from New York to Manila in advance. The said steamship arrived in the port of Manila on or about the 10th day of September, 1919, consigned to the defendant herein as agent and representative of said vessel in said port. Neither the master of said vessel nor the defendant herein, as its agent, delivered to the plaintiff the aforesaid twelve 8-day Edmond clocks, although demand was made upon them for their delivery.

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

(3) The bill of lading issued and delivered to the plaintiff by the master of the said steamship Bolton Castle contained, among others, the following clauses:

"1. It is mutually agreed that the value of the goods receipted for above does not exceed $500 per freight ton, or, in proportion for any part of a ton, unless the value be expressly stated herein and ad valorem freight paid thereon."

"9. Also, that in the event of claims for short delivery of, or damage to, cargo being made, the carrier shall not be liable for more than the net invoice price plus freight and insurance less all charges saved, and any loss or damage for which the carrier may be liable shall be adjusted pro rata on the said basis."

(4) The case containing the aforesaid twelve 8-day Edmond clocks measured 3 cubic feet, and the freight ton value thereof was $1,480, U. S. currency.

(5) No greater value than $500, U. S. currency, per freight ton was declared by the plaintiff on the aforesaid clocks, and no ad valorem freight was paid thereon.

(6) On or about October 9, 1919, the defendant tendered to the plaintiff P76.36, the proportionate freight ton value of the aforesaid twelve 8-day Edmond clocks, in payment of plaintiff's claim, which tender plaintiff rejected.

The lower court, in accordance with clause 9 or the bill of lading above quoted, rendered judgment in favor of the plaintiff against the defendant for the sum of P226.02, this being the invoice value of the clocks in question plus the freight and insurance thereon, with legal interest thereon from November 20, 1919, the date of the complaint, together with costs. From that judgment both parties appealed to this court.

The plaintiff-appellant insists that it is entitled to recover from the defendant the market value of the clocks in question to wit: the sum of P420. The defendant-appellant, on he other hand, contends that, in accordance with clause 1 a the bill of lading, the plaintiff is entitled to recover only the sum of P76.36, the proportionate freight ton value of the said clocks. The claim of the plaintiff is based upon the argument that the two clauses in the bill of lading above quoted, limiting the liability of the carrier, are contrary to public order and, therefore, null and void. The defendant, on the other hand, contends that both of said clauses are valid, and that clause 1 should have been applied by the lower court instead of clause 9.

I. The appeal of the plaintiff presents this question: May a common carrier, by stipulations inserted in the bill of lading, limit its liability for the loss of or damage to the cargo to an agreed valuation of the latter?

Three kinds of stipulations have often been made in a bill of lading. The first is one exempting the carrier from any and all liability for loss or damage occasioned by its own negligence. The second is one providing for an unqualified limitation of such liability to an agreed valuation. And the third is one limiting the liability of the carrier to an agreed valuation unless the shipper declares a higher vale and pays a higher rate of freight. According to an almost uniform weight of authority, the first and second kinds of stipulations are invalid as being contrary to public policy, but the third is valid and enforceable.

The authorities relied upon by the plaintiff-appellant (the Harter Act [Act of Congress of February 13, 1893]; Louisville Ry. Co. vs. Wynn, 88 Tenn., 320; and Galt vs. Adams Express Co., 4 McAr., 124; 48 Am. Rep., 742) support the

proposition that the first and second stipulations in a bill of lading are invalid which either exempt the carrier from liability for loss or damage occasioned by its negligences or provide for an unqualified limitation of such liability to an agreed valuation.

A reading of clauses 1 and 9 of the bill of lading here in question, however, clearly shows that the present case falls within the third stipulation, to wit: That a clause in a bill of lading limiting the liability of the carrier to a certain amount unless the shipper declares a higher value and pays a higher rate of freight, is valid and enforceable. This proposition is supported by a uniform lien of decisions of the Supreme Court of the United States rendered both prior and subsequent to the passage of the Harter Act, from the case of Hart vs. Pennsylvania R. R. Co. (decided Nov. 24, 1884; 112 U. S., 331), to the case of the Union Pacific Ry. Co. vs. Burke (decided Feb. 28, 1921, Advance Opinions, 1920-1921, p. 318).

In the case of Hart vs. Pennsylvania R. R. Co., supra, it was held that "where a contract of carriage, signed by the shipper, is fairly made with a railroad company, agreeing on a valuation of the property carried, with the rate of freight based on the condition that the carrier assumes liability only to the extent of the agreed valuation, even in case of loss or damage by the negligence of the carrier, the contract will be upheld as proper and lawful mode of recurring a due proportion between the amount for which the carrier may be responsible and the freight he receives, and protecting himself against extravagant and fanciful valuations."

In the case of Union Pacific Railway Co. vs. Burke, supra, the court said: "In many cases, from the decision in Hart vs. Pennsylvania R. R. Co. (112 U. S., 331; 28 L. ed., 717; 5 Sup. Ct. Rep., 151, decided in 1884), to Boston & M. R. Co. vs. Piper (246 U. S., 439; 62 L. ed., 820; 38 Sup. Ct. Rep., 354; Ann. Cas. 1918 E, 469, decided in 1918), it has been declared to be the settled Federal law that if a common carrier gives to a shipper the choice of two rates, the lower of them conditioned upon his agreeing to a stipulated valuation of his property in case of loss, even by the carrier's negligence, if the shipper makes such a choice, understandingly and freely, and names his valuation, he cannot thereafter recover more than the value which he thus places upon his property As a matter of legal distinction, estoppel is made the basis of this ruling, — that, having accepted the benefit of the lower rate, in common honesty the shipper may not repudiate the conditions on which it was obtained, — but the rule and the effect of it are clearly established."

The syllabus of the same case reads as follows: "A carrier may not, by a valuation agreement with a shipper, limit its liability in case of the loss by negligence of an interstate shipment to less than the real value thereof, unless the shipper is given a choice of rates, based on valuation."

"A limitation of liability based upon an agreed value to obtain a lower rate does not conflict with any sound principle of public policy; and it is not conformable to plain principle of justice that a shipper may understate value in order to reduce the rate and then recover a larger value in case of loss." (Adams Express Co. vs. Croninger, 226 U. S, 491, 492.) See also Reid vs. Fargo (130 C. C. A., 285); Jennings vs. Smith (45 C. C. A., 249); George N. Pierce Co. vs. Wells, Fargo & Co. (236 U. S., 278); Wells, Fargo & Co. vs. Neiman-Marcus Co. (227 U. S., 469).

It seems clear from the foregoing authorities that the clauses (1 and 9) of the bill of lading here in question are not contrary to public order. Article 1255 of the Civil Code provides that "the contracting parties may establish any agreements, terms and conditions they may deem advisable, provided they are not contrary to law, morals or public order." Said clauses of the bill of lading are, therefore, valid and binding upon the parties thereto.

II. The question presented by the appeal of the defendant is whether clause 1 or clause 9 of the bill of lading here in question is to be adopted as the measure of defendant's liability. Clause 1 provides as follows:

"1. It is mutually agreed that the value of the goods receipted for above does not exceed $500 per freight ton, or, in proportion for any part of a ton, unless the value be expressly stated herein and ad valorem freight paid thereon." Clause 9 provides:

"9. Also, that in the event of claims for short delivery of, or damage to, cargo being made, the carrier shall not be liable for more than the net invoice price plus freight and insurance less all charges saved, and any loss or damage for which the carrier may be liable shall be adjusted pro rata on the said basis."

The defendant-appellant contends that these two clauses, if construed together, mean that the shipper and the carrier stipulate and agree that the value of the goods receipted for does not exceed $500 per freight ton, but should the invoice value of the goods be less than $500 per freight ton, then the invoice value governs; that since in this case the invoice value is more than $500 per freight ton, the latter valuation should be adopted and that according to that valuation, the proportionate value of the clocks in question is only P76.36, which the defendant is ready and willing to pay to the plaintiff.

It will be noted, however, that whereas clause 1 contains only an implied undertaking to settle in case of 1085 on the basis of not exceeding $500 per freight ton, clause 9 contains an express undertaking to settle on the basis of the net invoice price plus freight and insurance less all charges saved. "Any loss or damage for which the carrier may be liable shall be adjusted pro rata on the said basis," clause 9 expressly provides. It seems to us that there is an irreconcilable conflict between the two clauses with regard to the measure of defendant's liability. It is difficult to reconcile them without doing violence to the language used and reading exceptions and conditions into the undertaking contained in clause 9 that are not there. This being the case, the bill of lading in question should be interpreted against the defendant carrier, which drew said contract. "A written contract should, in case of doubt, be interpreted against the party who has drawn the contract." (6 R. C. L., 854.) It is a well-known principle of construction that ambiguity or uncertainty in an agreement must be construed most strongly against the party causing it. (6 R. C. L., 855.) These rules are applicable to contracts contained in bills of lading. "In construing a bill of lading given by the carrier for the safe transportation and delivery of goods shipped by a consignor, the contract will be construed most strongly against the carrier, and favorably to the consignor, in case of doubt in any matter of construction." (Alabama, etc. R. R. Co. vs. Thomas, 89 Ala., 294; 18 Am. St. Rep., 119.)

It follows from all of the foregoing that the judgment appealed from should be affirmed, without any finding as to costs. So ordered.

Araullo, Street, Avanceña, and Villamor, JJ., concur.

[G.R. No. 146018. June 25, 2003.]

EDGAR COKALIONG SHIPPING LINES, INC., petitioner, vs. UCPB GENERAL INSURANCE COMPANY, INC., respondent.

SYNOPSISNestor Angelia and Zosima Mercado separately delivered cargo to petitioner for transportation to Surigao del Sur on board the M/V Tandag for which petitioner issued Bills of Lading Nos. 58 and 59, respectively. As stated in the Bill of Lading, the value of Angelia's cargo was P6,500.00, while Mercado's cargo was valued in the amount of P14,000.00. Feliciana Legaspi, as owner of both cargoes, insured them against all risks with respondent in the total amount of P150,000.00. Unfortunately, the engine room of the vessel caught fire after it passed the Mandaue-Mactan Bridge resulting in the loss of the vessel and its cargo. Hence, Feliciana Legaspi filed an insurance claim from the respondent for the value of both cargoes. Respondent approved Feliciana's claim and remitted to her the total amount of P148,000 for both cargoes, after which Feliciana executed a Subrogation Receipts/Deeds in favor of respondent. Respondent as subrogee of Feliciana Legaspi, filed a complaint before the Regional Trial Court of Makati City against petitioner for the collection of the amount which it paid to Feliciana Legaspi for the loss of the cargo. Among others, respondent alleged that the loss of the cargo was due to the negligence of the petitioner. On its part, petitioner contended, among others, that the cause of loss of the aforesaid cargo was due to force majeure and that they exercised due diligence prior to, during and immediately after the fire on its vessel. Petitioner further claimed that its liability should not exceed the value of the cargo as declared in the Bill of Lading. The trial court dismissed the complaint. On appeal, the Court of Appeals reversed the decision of the trial court and ruled in favor of respondent. Hence, petitioner brought the case to the Supreme Court.

The Court found the petitioner responsible for the loss of the subject goods. According to the Court, where loss of cargo results from the failure of the officers of a vessel to inspect their ship frequently so as to discover the existence of cracked parts, that loss cannot be attributed to force majeure, but to the negligence of those officers. Here, the Court found that the petitioner did not present sufficient evidence showing what measures or acts it had undertaken to ensure the seaworthiness of the vessel or that it had exercised extraordinary diligence. However, the Court ruled that petitioner should not be held liable for more than what was declared by the shippers/consignees as the value of the goods in the Bills of Lading. It held that the liability of a common carrier for the loss of goods, by stipulation in the bill of lading, be limited to the value declared by the shipper. On the other hand, the liability of the insurer is determined by the actual value covered by the insurance policy and the insurance premiums paid herefore, and not necessarily by the value declared in the bill of lading. For assuming a higher risk, the insurance company was paid the correct higher premium by Feliciana Legaspi; while petitioner was paid a fee lower than what it was entitled to for transporting the goods that had been deliberately undervalued by the shippers in the bill of lading. According to the Court, as between the two of them, the insurer should bear the loss in excess of the value declared in the bill of lading.

SYLLABUS

1. CIVIL LAW; COMMON CARRIERS; FORCE MAJEURE; FIRE ORIGINATING FROM A CRACK IN THE FUEL OIL TANK, NOT A CASE OF. — The uncontroverted findings of the Philippine Coast Guard show that the M/V Tandag sank due to a fire, which resulted from a crack in the auxiliary engine fuel oil service tank. Fuel spurted out of the crack and dripped to the heating exhaust

manifold, causing the ship to burst into flames. The crack was located on the side of the fuel oil tank, which had a mere two-inch-gap-from the engine room walling, thus precluding constant inspection and care by the crew. Having originated from an unchecked crack in the fuel oil service tank, the fire could not have been caused by force majeure. Broadly speaking, force majeure generally applies to a natural accident, such as that caused by a lightning, an earthquake, a tempest or a public enemy. Hence, fire is not considered a natural disaster or calamity. Where loss of cargo results from the failure of the officers of a vessel to inspect their ship frequently so as to discover the existence of cracked parts, that loss cannot be attributed to force majeure, but to the negligence of those officials.

2. ID.; ID.; PRESUMED TO HAVE BEEN NEGLIGENT IF IT FAILS TO PROVE THAT IT EXERCISED EXTRAORDINARY VIGILANCE OVER THE GOODS IT TRANSPORTED; CASE AT BAR. — The law provides that a common carrier is presumed to have been negligent if it fails to prove that it exercised extraordinary vigilance over the goods it transported. Ensuring the seaworthiness of the vessel is the first step in exercising the required vigilance. Petitioner did not present sufficient evidence showing what measures or acts it had undertaken to ensure the seaworthiness of the vessel. It failed to show when the last inspection and care of the auxiliary engine fuel oil service tank was made, what the normal practice was for its maintenance, or some other evidence to establish that it had exercised extraordinary diligence. It merely stated that constant inspection and care were not possible, and that the last time the vessel was dry-docked was in November 1990. Necessarily, in accordance with Article 1735 of the Civil Code, we hold petitioner responsible for the loss of the goods covered by Bills of Lading Nos. 58 and 59.

3. ID.; ID.; STIPULATION LIMITING LIABILITY; VALID IF NOT CONTRARY TO PUBLIC POLICY; CASE AT BAR. — A stipulation that limits liability is valid as long as it is not against public policy. In the present case, the stipulation limiting petitioner's liability is not contrary to public policy. In fact, its just and reasonable character is evident. The shippers/consignees may recover the full value of the goods by the simple expedient of declaring the true value of the shipment in the Bill of Lading. Other than the payment of a higher freight, there was nothing to stop them from placing the actual value of the goods therein. In fact, they committed fraud against the common carrier by deliberately undervaluing the goods in their Bill of Lading, thus depriving the carrier of its proper and just transport fare.

4. ID.; ID.; ID.; INSURER SHOULD BEAR THE LOSS IN EXCESS OF THE VALUE DECLARED IN THE BILL OF LADING. — It is well to point out that, for assuming a higher risk (the alleged actual value of the goods) the insurance company was paid the correct higher premium by Feliciana Legaspi; while .petitioner was paid a fee lower than what it was entitled to for transporting the goods that had been deliberately undervalued by the shippers in the Bill of Lading. Between the two of them, the insurer should bear the loss in excess of the value declared in the Bills of Lading. This is the just and equitable solution.

5. ID.; ID.; NOT LIABLE FOR MORE THAN THE VALUE OF THE GOODS DECLARED IN THE BILL OF LADING. — In Aboitiz Shipping Corporation v. Court of Appeals, the description of the nature and the value of the goods shipped were declared and reflected in the bill of lading, like in the present case. The Court therein considered this declaration as the basis of the carrier's liability and ordered payment based on such amount. Following this ruling, petitioner should not be held liable for more than what was declared by the shippers/consignees as the value of the goods in the bills of lading. ITDHcA

6. ID.; ID.; ID.; LIABILITY THEREOF FOR THE LOSS OF GOODS NOT EXTINGUISHED WHERE PAYMENT WAS MADE

TO A PERSON NOT ENTITLED THERETO. — We find no cogent reason to disturb the CA's finding that Feliciana Legaspi was the owner of the goods covered by Bills of Lading Nos. 58 and 59. Undoubtedly, the goods were merely consigned to Nestor Angelia and Zosimo Mercado, respectively; thus, Feliciana Legaspi or her subrogee (respondent) was entitled to the goods or, in case of loss, to compensation therefor. There is no evidence showing that petitioner paid her for the loss of those goods. It does not even claim to have paid her. On the other hand, Legaspi Marketing filed with petitioner a claim for the lost goods under Bill of Lading No. 59, for which the latter subsequently paid P14,000. But nothing in the records convincingly shows that the former was the owner of the goods. Respondent was, however, able to prove that it was Feliciana Legaspi who owned those goods, and who was thus entitled to payment for their loss. Hence, the claim for the goods under Bill of Lading No. 59 cannot be deemed to have been extinguished, because payment was made to a person who was not entitled thereto.

PANGANIBAN, J p:

The liability of a common carrier for the loss of goods may, by stipulation in the bill of lading, be limited to the value declared by the shipper. On the other hand, the liability of the insurer is determined by the actual value covered by the insurance policy and the insurance premiums paid therefor, and not necessarily by the value declared in the bill of lading. CIAHDT

The Case

Before the Court is a Petition for Review 1 under Rule 45 of the Rules of Court, seeking to set aside the August 31, 2000 Decision 2 and the November 17, 2000 Resolution 3 of the Court of Appeals 4 (CA) in CA-GR SP No. 62751. The dispositive part of the Decision reads:

"IN THE LIGHT OF THE FOREGOING, the appeal is GRANTED. The Decision appealed from is REVERSED. [Petitioner] is hereby condemned to pay to [respondent] the total amount of P148,500.00, with interest thereon, at the rate of 6% per annum, from date of this Decision of the Court. [Respondent's] claim for attorney's fees [is] DISMISSED. [Petitioner's] counterclaims are DISMISSED." 5

The assailed Resolution denied petitioner's Motion for Reconsideration.

On the other hand, the disposition of the Regional Trial Court's 6 Decision, 7 which was later reversed by the CA, states:

"WHEREFORE, premises considered, the case is hereby DISMISSED for lack of merit.

"No cost." 8

The Facts

The facts of the case are summarized by the appellate court in this wise:

"Sometime on December 11, 1991, Nestor Angelia delivered to the Edgar Cokaliong Shipping Lines, Inc. (now Cokaliong Shipping Lines), [petitioner] for brevity, cargo consisting of one (1) carton of Christmas decor and two (2) sacks of plastic toys, to be transported on board the M/V Tandag on its Voyage No. T-

189 scheduled to depart from Cebu City, on December 12, 1991, for Tandag, Surigao del Sur. [Petitioner] issued Bill of Lading No. 58, freight prepaid, covering the cargo. Nestor Angelia was both the shipper and consignee of the cargo valued, on the face thereof, in the amount of P6,500.00. Zosimo Mercado likewise delivered cargo to [petitioner], consisting of two (2) cartons of plastic toys and Christmas decor, one (1) roll of floor mat and one (1) bundle of various or assorted goods for transportation thereof from Cebu City to Tandag, Surigao del Sur, on board the said vessel, and said voyage. [Petitioner] issued Bill of Lading No. 59 covering the cargo which, on the face thereof, was valued in the amount of P14,000.00. Under the Bill of Lading, Zosimo Mercado was both the shipper and consignee of the cargo.

"On December 12, 1991, Feliciana Legaspi insured the cargo, covered by Bill of Lading No. 59, with the UCPB General Insurance Co., Inc., [respondent] for brevity, for the amount of P100,000.00 'against all risks' under Open Policy No. 002/91/254 for which she was issued, by [respondent], Marine Risk Note No. 18409 on said date. She also insured the cargo covered by Bill of Lading No. 58, with [respondent], for the amount of P50,000.00, under Open Policy No. 002/91/254 on the basis of which [respondent] issued Marine Risk Note No. 18410 on said date.

"When the vessel left port, it had thirty-four (34) passengers and assorted cargo on board, including the goods of Legaspi. After the vessel had passed by the Mandaue Mactan Bridge, fire ensued in the engine room, and, despite earnest efforts of the officers and crew of the vessel, the fire engulfed and destroyed the entire vessel resulting in the loss of the vessel and the cargoes therein. The Captain filed the required Marine Protest.

"Shortly thereafter, Feliciana Legaspi filed a claim, with [respondent], for the value of the cargo insured under Marine Risk Note No. 18409 and covered by Bill of Lading No. 59. She submitted, in support of her claim, a Receipt, dated December 11, 1991, purportedly signed by Zosimo Mercado, and Order Slips purportedly signed by him for the goods he received from Feliciana Legaspi valued in the amount of P110,056.00. [Respondent] approved the claim of Feliciana Legaspi and drew and issued UCPB Check No. 612939, dated March 9, 1992, in the net amount of P99,000.00, in settlement of her claim after which she executed a Subrogation Receipt/Deed, for said amount, in favor of [respondent]. She also filed a claim for the value of the cargo covered by Bill of Lading No. 58. She submitted to [respondent] a Receipt, dated December 11, 1991 and Order Slips, purportedly signed by Nestor Angelia for the goods he received from Feliciana Legaspi valued at P60,338.00. [Respondent] approved her claim and remitted to Feliciana Legaspi the

net amount of P49,500.00, after which she signed a Subrogation Receipt/Deed, dated March 9, 1992, in favor of [respondent].

"On July 14, 1992, [respondent], as subrogee of Feliciana Legaspi, filed a complaint anchored on torts against [petitioner], with the Regional Trial Court of Makati City, for the collection of the total principal amount of P148,500.00, which it paid to Feliciana Legaspi for the loss of the cargo, praying that judgment be rendered in its favor and against the [petitioner] as follows:

'WHEREFORE, it is respectfully prayed of this Honorable Court that after due hearing, judgment be rendered ordering [petitioner] to pay [respondent] the following.

1. Actual damages in the amount of P148,500.00 plus interest thereon at the legal rate from the time of filing of this complaint until fully paid;

2. Attorney's fees in the amount of P10,000.00; and

3. Cost of suit.

'[Respondent] further prays for such other reliefs and remedies as this Honorable Court may deem just and equitable under the premises.'

"[Respondent] alleged, inter alia, in its complaint, that the cargo subject of its complaint was delivered to, and received by, [petitioner] for transportation to Tandag, Surigao del Sur under 'Bill of Ladings,' Annexes 'A' and 'B' of the complaint; that the loss of the cargo was due to the negligence of the [petitioner]; and that Feliciana Legaspi had executed Subrogation Receipts/Deeds in favor of [respondent] after paying to her the value of the cargo on account of the Marine Risk Notes it issued in her favor covering the cargo.

"In its Answer to the complaint, [petitioner] alleged that: (a) [petitioner] was cleared by the Board of Marine Inquiry of any negligence in the burning of the vessel; (b) the complaint stated no cause of action against [petitioner]; and (c) the shippers/consignee had already been paid the value of the goods as stated in the Bill of Lading and, hence, [petitioner] cannot be held liable for the loss of the cargo beyond the value thereof declared in the Bill of Lading.

"After [respondent] rested its case, [petitioner] prayed for and was allowed, by the Court a quo, to take the depositions of Chester Cokaliong, the Vice-President and Chief Operating Officer of [petitioner], and a resident of Cebu City, and of Noel Tanyu, an officer of the Equitable Banking Corporation, in Cebu City, and a resident of Cebu City, to be given before the Presiding Judge of Branch 106 of the Regional Trial Court of Cebu City. Chester Cokaliong and Noel Tanyu did testify, by way of deposition, before the Court and declared inter alia, that: [petitioner] is a family corporation like the Chester Marketing, Inc.; Nestor Angelia had been doing business with [petitioner] and Chester Marketing, Inc., for years, and incurred an account with Chester Marketing, Inc. for his purchases from said corporation; [petitioner] did issue Bills of Lading Nos. 58 and 59 for the cargo described therein with Zosimo Mercado and Nestor Angelia as shippers/consignees, respectively; the engine room of the M/V Tandag caught fire after it passed the Mandaue/Mactan Bridge resulting in the total loss of the vessel and its cargo; an investigation was conducted by the Board of Marine Inquiry of the Philippine Coast Guard

which rendered a Report, dated February 13, 1992 absolving [petitioner] of any responsibility on account of the fire, which Report of the Board was approved by the District Commander of the Philippine Coast Guard; a few days after the sinking of the vessel, a representative of the Legaspi Marketing filed claims for the values of the goods under Bills of Lading Nos. 58 and 59 in behalf of the shippers/consignees, Nestor Angelia and Zosimo Mercado; [petitioner] was able to ascertain, from the shippers/consignees and the representative of the Legaspi Marketing that the cargo covered by Bill of Lading No. 59 was owned by Legaspi Marketing and consigned to Zosimo Mercado while that covered by Bill of Lading No. 58 was purchased by Nestor Angelia from the Legaspi Marketing; that [petitioner] approved the claim of Legaspi Marketing for the value of the cargo under Bill of Lading No. 59 and remitted to Legaspi Marketing the said amount under Equitable Banking Corporation Check No. 20230486 dated August 12, 1992, in the amount of P14,000.00 for which the representative of the Legaspi Marketing signed Voucher No. 4379, dated August 12, 1992, for the said amount of P14,000.00 in full payment of claims underBill of Lading No. 59; that [petitioner) approved the claim of Nestor Angelia in the amount of P6,500.00 but that since the latter owed Chester Marketing, Inc., for some purchases, [petitioner] merely set off the amount due to Nestor Angelia under Bill of Lading No. 58 against his account with Chester Marketing, Inc.; [petitioner] lost/[misplaced] the original of the check after it was received by Legaspi Marketing, hence, the production of the microfilm copy by Noel Tanyu of the Equitable Banking Corporation; [petitioner] never knew, before settling with Legaspi Marketing and Nestor Angelia that the cargo under both Bills of Lading were insured with [respondent], or that Feliciana Legaspi filed claims for the value of the cargo with [respondent] and that the latter approved the claims of Feliciana Legaspi and paid the total amount of P148,500.00 to her; [petitioner] came to know, for the first time, of the payments by [respondent] of the claims of Feliciana Legaspi when it was served with the summons and complaint, on October 8, 1992; after settling his claim, Nestor Angelia . . . executed the Release and Quitclaim, dated July 2, 1993, and Affidavit, dated July 2, 1993 in favor of [respondent]; hence, [petitioner] was absolved of any liability for the loss of the cargo covered by Bills of Lading, Nos. 58 and 59; and even if it was, its liability should not exceed the value of the cargo as stated in the Bills of Lading.

"[Petitioner) did not anymore present any other witnesses on its evidence-in-chief. . . ." 9 (Citations omitted)

Ruling of the Court of Appeals

The CA held that petitioner had failed "to prove that the fire which consumed the vessel and its cargo was caused by something other than its negligence in the upkeep, maintenance and operation of the vessel." 10

Petitioner had paid P14,000 to Legaspi Marketing for the cargo covered by Bill of Lading No. 59. The CA, however, held that the payment did not extinguish petitioner's obligation to respondent, because there was no evidence that Feliciana Legaspi (the insured) was the owner/proprietor of Legaspi Marketing. The CA also pointed out the impropriety of treating the claim under Bill of Lading No. 58 — covering cargo valued therein at P6,500 — as a setoff against Nestor Angelia's account with Chester Enterprises, Inc.

Finally, it ruled that respondent "is not bound by the valuation of the cargo under the Bills of Lading, . . . nor is the value of the cargo under said Bills of Lading conclusive on the [respondent]. This is so because, in the first place, the goods were insured with the [respondent] for the total amount of P150,000.00, which amount may be considered as the face value of the goods." 11

Hence this Petition. 12

Issues

Petitioner raises for our consideration the following alleged errors of the CA:

"I

"The Honorable Court of Appeals erred, granting arguendo that petitioner is liable, in holding that petitioner's liability should be based on the 'actual insured value' of the goods and not from actual valuation declared by the shipper/consignee in the bill of lading.

"II

"The Court of Appeals erred in not affirming the findings of the Philippine Coast Guard, as sustained by the trial court a quo, holding that the cause of loss of the aforesaid cargoes under Bill of Lading Nos. 58 and 59 was due to force majeure and due diligence was [exercised] by petitioner prior to, during and immediately after the fire on [petitioner's] vessel.

"III

"The Court of Appeals erred in not holding that respondent UCPB General Insurance has no cause of action against the petitioner." 13

In sum, the issues are: (1) Is petitioner liable for the loss of the goods? (2) If it is liable, what is the extent of its liability?

This Court's Ruling

The Petition is partly meritorious.

First Issue:

Liability for Loss

Petitioner argues that the cause of the loss of the goods, subject of this case, was force majeure. It adds that its exercise of due diligence was adequately proven by the findings of the Philippine Coast Guard.

We are not convinced. The uncontroverted findings of the Philippine Coast Guard show that the M/V Tandag sank due to a fire, which resulted from a crack in the auxiliary engine fuel oil service tank. Fuel spurted out of the crack and dripped to the heating exhaust manifold, causing the ship to burst into flames. The crack was located on the side of the fuel oil tank, which had a mere two-inch gap from the engine room walling, thus precluding constant inspection and care by the crew.

Having originated from an unchecked crack in the fuel oil service tank, the fire could not have been caused by force majeure. Broadly speaking, force majeure generally applies to a natural accident, such as that caused by a lightning, an earthquake, a tempest or a public enemy. 14 Hence, fire is not considered a natural disaster or calamity. InEastern Shipping Lines, Inc. v. Intermediate Appellate Court, 15 we explained:

". . . . This must be so as it arises almost invariably from some act of man or by human

means. It does not fall within the category of an act of God unless caused by lighting or by other natural disaster or calamity. It may even be caused by the actual fault or privity of the carrier.

"Article 1680 of the Civil Code, which considers fire as an extraordinary fortuitous event refers to leases or rural lands where a reduction of the rent is allowed when more than one-half of the fruits have been lost due to such event, considering that the law adopts a protective policy towards agriculture.

"As the peril of fire is not comprehended within the exceptions in Article 1734, supra, Article 1735 of the Civil Code provides that in all cases other than those mentioned in Article 1734, the common carrier shall be presumed to have been at fault or to have acted negligently, unless it proves that it has observed the extraordinary diligence required by law."

Where loss of cargo results from the failure of the officers of a vessel to inspect their ship frequently so as to discover the existence of cracked parts, that loss cannot be attributed to force majeure, but to the negligence of those officials. 16

The law provides that a common carrier is presumed to have been negligent if it fails to prove that it exercised extraordinary vigilance over the goods it transported. Ensuring the seaworthiness of the vessel is the first step in exercising the required vigilance. Petitioner did not present sufficient evidence showing what measures or acts it had undertaken to ensure the seaworthiness of the vessel. It failed to show when the last inspection and care of the auxiliary engine fuel oil service tank was made, what the normal practice was for its maintenance, or some other evidence to establish that it had exercised extraordinary diligence. It merely stated that constant inspection and care were not possible, and that the last time the vessel was dry-docked was in November 1990. Necessarily, in accordance with Article 1735 17 of the Civil Code, we hold petitioner responsible for the loss of the goods covered by Bills of Lading Nos. 58 and 59.

Second Issue:

Extent of Liability

Respondent contends that petitioner's liability should be based on the actual insured value of the goods, subject of this case. On the other hand, petitioner claims that its liability should be limited to the value declared by the shipper/consignee in the Bill of Lading.

The records 18 show that the Bills of Lading covering the lost goods contain the stipulation that in case of claim for loss or for damage to the shipped merchandise or property, "[t]he liability of the common carrier . . . shall not exceed the value of the goods as appearing in the bill of lading." 19 The attempt by respondent to make light of this stipulation is unconvincing. As it had the consignees' copies of the Bills of Lading, 20 it could have easily produced those copies, instead of relying on mere allegations and suppositions. However, it presented mere photocopies thereof to disprove petitioner's evidence showing the existence of the above stipulation.

A stipulation that limits liability is valid 21 as long as it is not against public policy. In Everett Steamship Corporation v. Court of Appeals, 22 the Court stated:

"A stipulation in the bill of lading limiting the common carrier's liability for loss or destruction of a cargo to a certain sum, unless the shipper or owner declares a greater

value, is sanctioned by law, particularly Articles 1749 and 1750 of the Civil Code which provides:

'Art. 1749. A stipulation that the common carrier's liability is limited to the value of the goods appearing in the bill of lading, unless the shipper or owner declares a greater value, is binding.'

'Art. 1750. A contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction, or deterioration of the goods is valid, if it is reasonable and just under the circumstances, and has been freely and fairly agreed upon.'

"Such limited-liability clause has also been consistently upheld by this Court in a number of cases. Thus, in Sea-Land Service, Inc. vs. Intermediate Appellate Court, we ruled:

'It seems clear that even if said Section 4 (5) of the Carriage of Goods by Sea Act did not exist, the validity and binding effect of the liability limitation clause in the bill of lading here are nevertheless fully sustainable on the basis alone of the cited Civil Code Provisions. That said stipulation is just and reasonable is arguable from the fact that it echoes Art. 1750 itself in providing a limit to liability only if a greater value is not declared for the shipment in the bill of lading. To hold otherwise would amount to questioning the justness and fairness of the law itself, and this the private respondent does not pretend to do. But over and above that consideration, the just and reasonable character of such stipulation is implicit in it giving the shipper or owner the option of avoiding accrual of liability limitation by the simple and surely far from onerous expedient of declaring the nature and value of the shipment in the bill of lading.'

"Pursuant to the afore-quoted provisions of law, it is required that the stipulation limiting the common carrier's liability for loss must be 'reasonable and just under the circumstances, and has been freely and fairly agreed upon.

"The bill of lading subject of the present controversy specifically provides, among others:

'18. All claims for which the carrier may be liable shall be adjusted and settled on the basis of the shipper's net invoice cost plus freight and insurance premiums, if paid, and in no event shall the carrier be liable for any loss of possible profits or any consequential loss.

'The carrier shall not be liable for any loss of or any damage to or in any connection with, goods in an amount exceeding One Hundred Thousand Yen in Japanese Currency (¥100,000.00) or its equivalent in any other currency per package or customary freight unit (whichever is least) unless the value of the goods higher than this amount is declared in writing by the shipper before receipt of the goods by the carrier and inserted in the Bill of Lading and extra freight is paid as required.'

"The above stipulations are, to our mind, reasonable and just. In the bill of lading, the carrier made it clear that its liability would only be up to One Hundred Thousand (¥100,000.00) Yen. However, the shipper, Maruman Trading, had the option to declare a higher valuation if the value of its cargo was higher than the limited liability of the carrier. Considering that the shipper did not declare a higher valuation, it had itself to blame for not complying with the stipulations." (Italics supplied)

In the present case, the stipulation limiting petitioner's liability is not contrary to public policy. In fact, its just and reasonable character is evident. The shippers/consignees may recover the full value of the goods by the simple expedient of declaring the true value of the shipment in the Bill of Lading. Other than the payment of a higher freight, there was nothing to stop them from placing the actual value of the goods therein. In fact, they committed fraud against the common carrier by deliberately undervaluing the goods in their Bill of Lading, thus depriving the carrier of its proper and just transport fare.

Concededly, the purpose of the limiting stipulation in the Bill of Lading is to protect the common carrier. Such stipulation obliges the shipper/consignee to notify the common carrier of the amount that the latter may be liable for in case of loss of the goods. The common carrier can then take appropriate measures — getting insurance, if needed, to cover or protect itself. This precaution on the part of the carrier is reasonable and prudent. Hence, a shipper/consignee that undervalues the real worth of the goods it seeks to transport does not only violate a valid contractual stipulation, but commits a fraudulent act when it seeks to make the common carrier liable for more than the amount it declared in the bill of lading.

Indeed, Zosimo Mercado and Nestor Angelia misled petitioner by undervaluing the goods in their respective Bills of Lading. Hence, petitioner was exposed to a risk that was deliberately hidden from it, and from which it could not protect itself.

It is well to point out that, for assuming a higher risk (the alleged actual value of the goods) the insurance company was paid the correct higher premium by Feliciana Legaspi; while petitioner was paid a fee lower than what it was entitled to for transporting the goods that had been deliberately undervalued by the shippers in the Bill of Lading. Between the two of them, the insurer should bear the loss in excess of the value declared in the Bills of Lading. This is the just and equitable solution.

In Aboitiz Shipping Corporation v. Court of Appeals, 23 the description of the nature and the value of the goods shipped were declared and reflected in the bill of lading, like in the present case. The Court therein considered this declaration as the basis of the carrier's liability and ordered payment based on such amount. Following this ruling, petitioner should not be held liable for more than what was declared by the shippers/consignees as the value of the goods in the bills of lading.

We find no cogent reason to disturb the CA's finding that Feliciana Legaspi was the owner of the goods covered by Bills of Lading Nos. 58 and 59. Undoubtedly, the goods were merely consigned to Nestor Angelia and Zosimo Mercado, respectively; thus, Feliciana Legaspi or her subrogee (respondent) was entitled to the goods or, in case of loss, to compensation therefor. There is no evidence showing that petitioner paid her for the loss of those goods. It does not even claim to have paid her.

On the other hand, Legaspi Marketing filed with petitioner a claim for the lost goods under Bill of Lading No. 59, for which the latter subsequently paid P14,000. But nothing in the records convincingly shows that the former was the owner of the goods. Respondent was, however, able to prove that it was Feliciana Legaspi who owned those goods, and who was thus entitled to payment for their loss. Hence, the claim for the goods under Bill of Lading No. 59 cannot be deemed to have been extinguished, because payment was made to a person who was not entitled thereto.

With regard to the claim for the goods that were covered by Bill of Lading No. 58 and valued at P6,500, the parties have not convinced us to disturb the findings of the CA that compensation could not

validly take place. Thus, we uphold the appellate court's ruling on this point.

WHEREFORE, the Petition is hereby PARTIALLY GRANTED. The assailed Decision is MODIFIED in the sense that petitioner is ORDERED to pay respondent the sums of P14,000 and P6,500, which represent the value of the goods stated in Bills of Lading Nos. 59 and 58, respectively. No costs.

SO ORDERED.

||| (Edgar Cokaliong Shipping Lines v. UCPB General Insurance Company, G.R. No. 146018, June 25, 2003)

[G.R. No. L-17825. June 26, 1922.]

In the matter of the Involuntary insolvency of U. DE POLI. FELISA ROMAN, claimant-appellee, vs. ASIA BANKING CORPORATION, claimant-appellant.

SYLLABUS

1. WAREHOUSE RECEIPT; VENDOR'S LIEN. — A vendor's lien upon goods stored in a public warehouse cannot prevail against the rights of a purchaser, mortgagee, or pledgee, for value and in good faith to whom the negotiable warehouse receipts for such goods has been indorsed.

2. ID.; INTERPRETATION. — A warehouse receipt like any other document must be interpreted according to its evident intent.

3. ID.; ID. — A warehouse receipt recited that certain merchandise was deposited in the warehouse "por orden" of the depositor instead of "a la orden." It was not marked "non-negotiable" or "not negotiable" as required by statute for non-negotiable warehouse receipts. Held: That the use of "por orden" was merely a clerical or grammatical error and that the receipt was negotiable.

OSTRAND, J p:

This is an appeal from an order entered by the Court of First Instance of Manila in civil cause No. 19240, the insolvency of Umberto de Poli, and declaring the lien claimed by the appellee Felisa Roman upon a lot of leaf tobacco, consisting of 576 bales, and found in the possession of said, insolvent, superior to that claimed by the appellant, the Asia Banking Corporation.

The order appealed from is based upon the following stipulation of facts:

"It is hereby stipulated and agreed by and between Felisa Roman and Asia Banking Corporation, and on their behalf by their undersigned attorneys, that their respective rights, in relation to the 576 bultos of tobacco mentioned in the order of this court dated April 25, 1921, be, and hereby are, submitted to the court for decision upon the following:

"I. Felisa Roman claims the 576 bultos of tobacco under and by virtue of the instrument, a copy of which is hereto attached and made a part hereof and marked Exhibit A.

"II. That on November 25, 1920, said Felisa Roman notified the said Asia Banking Corporation of her contention, a copy of which notification is hereto attached and made a part hereof and marked Exhibit B.

"III. That on November 29, 1920, said Asia Banking Corporation replied as per copy hereto attached and marked Exhibit C.

"IV. That at the time the above entitled insolvency proceedings were filed the 576 bultos of tobacco were in possession of U. de Poli and now are in possession of the assignee.

"V. That on November 18, 1920, U. de Poli, for value received, issued a quedan, covering aforesaid 576 bultos of tobacco, to the Asia Banking Corporation as per copy of quedan attached and marked Exhibit D.

"VI. That aforesaid 576 bultos of tobacco are part and parcel of the 2,777 bultos purchased by U. de Poli from Felisa Roman.

"VII. The parties further stipulate and agree that any further evidence that either of the parties desire to submit shall be taken into consideration together with this stipulation.

"Manila, P. I., April 28, 1921.

(Sgd.) "ANTONIO V. HERRERO

"Attorney for Felisa Roman

(Sgd.) "WOLFSON, WOLFSON & SCHWARZKOPF

"Attorneys for Asia Banking Corp."

Exhibit A referred to in the foregoing stipulation reads:

"1. Que la primera parte es duena de unos dos mil quinientos a tres mil quintales de tabaco de distintas clases, producidos en los municipios de San Isidro, Kabiaw y Gapan adquiridos por compra condinero perteneciente a sus bienes parafernales, de los cuales es ella administradora.

"2. Que ha convenido la venta de dichos dos mis quinientos a tres mil quintales de tabaco mencionada con la Segunda Parte, cuya compraventa se regira por las condiciones siguientes:

"(a) La Primera Parte remitira a la Segunda debidamente enfardado el tabaco de que ella es propietaria en bultos no menores de cincuenta kilos, siendo de cuenta de dicha Primera Parte todos los gastos que origine dicha mercancia hasta la estacion de ferrocarril de Tutuban, en cuyo lugar se hara cargo la Segunda y desde cuyo instante seran de cuenta de esta los riesgos de la mercancia.

"(b) El precio en que la Primera Parte vende a la Segunda el tabaco mencionado es el de veintiseis pesos (P26), moneda filipina, por quintal, pagaderos en la forma que despues se establece.

"(c) La Segunda Parte sera la consignataria del tabaco en esta Ciudad de Manila quien se hara cargo de el cuando reciba la factura de embarque y la guia de Rentas Internas, trasladandolo a su bodega quedando en la misma en calidad de deposito hasta la fecha en que dicha Segunda Parte pague el precio del

mismo, siendo de cuenta de dicha Segunda Parte el pago de almacenaje y seguro.

"(d) Llegada la ultima expedicion del tabaco, se procedera a pesar el mismo con intervencion de la Primera Parte o de un agente de ella, y conocido el numero total de quintales remitidos, se hara liquidacion del precio a cuenta del cual se pagaran quince mil pesos (P15,000), y el resto se dividira en cuatro pagares vencederos cada uno de ellos treinta dias despues del anterior pago; esto es, el primer pagare vencera a los treinta dias de la fecha en que se hayan pagado los quince mil pesos, el segundo a igual tiempo del anterior pago, y asi sucesivamente; conviniendose que el capital debido como precio del tabaco devengara un interes del diez por ciento anual.

"Los plazos concedidos al comprador para el pago del precio quedan sujetos a la condicion resolutoria de que si antes del vincimiento de cualquier plazo, el comprador vendiese parte del tabaco en proporcion al importe de cualquiera de los pagares que restasen por vencer, or caso de que vendiese, pues se conviene para este caso que desde el momento en que la Segunda Parte venda el tabaco, el deposito del mismo, como garantia del pago del precio, queda cancelad y simultaneamente es exigible el importe de la parte por pagar.

"Leido este documento por los otorgantes y encontrandolo conforme con lo por ellos convenido, lo firman la Primera Parte en el lugar de su residencia, San Isidro de Nueva Ecija, y la Segunda en esta Ciudad de Manila, en las fechas que respectivamente al pie de este documento aparecen.

(Fdos) "FELISA ROMAN VDA. DE MORENO

"U. DE POLI

"Firmado en presencia de:

(Fdos.) "ANTONIO V. HERRERO

"T. BARRETTO

("Acknowledged before Notary")

Exhibit D is a warehouse receipt issued by the warehouse of U. de Poli for 576 bales of tobacco. The first paragraph of the receipt reads as follows:

"Quedan depositados en estos almacenes por orden del Sr. U. de Poli la cantidad de quinientos setenta y seis fardos de tabacco en rama segun marcas detalladas a margen, y con arreglo a las condiciones siguientes:"

In the left margin of the face of the receit, U. de Poli certifies that he is the sole owner of the merchandise therein described. The receipt is endorsed in blank "Umberto de Poli;" it is not marked "non-negotiable" or "not negotiable."

Exhibits B and C referred to in the stipulation are not material to the issues and do not appear in the printed record.

Though Exhibit A in its paragraph (c) states that the tobacco should remain in the warehouse of U. de Poli as a

deposit until the price was paid, it appears clearly from the language of the exhibit as a whole that it evidences a contract of sale and the recitals in an order of the Court of First Instance, dated January 18, 1921, which form part of the printed record, show that De Poli received from Felisa Roman, under this contract, 2,777 bales of tobacco of the total value of P78,815.69, of which he paid P15,000 in cash and executed four notes of P15,953.92 each for the balance. The sale having been thus consummated, the only lien upon the tobacco which Felisa Roman can claim is a vendor's lien.

The order appealed from is based upon the theory that the tobacco was transferred to the Asia Banking Corporation as security for a loan and that as the transfer neither fulfilled the requirements of the Civil Code for a pledge nor constituted a chattel mortgage under Act No. 1508, the vendor's lien of Felisa Roman should be accorded preference over it.

It is quite evident that the court below failed to take into consideration the provisions of section 49 of Act No. 2137 which reads:

"Where a negotiable receipt has been issued for goods, no seller's lien or right of stoppage in transitu shall defeat the rights of any purchaser for value in good faith to who such receipt has been negotiated, whether such negotiation be prior or subsequent to the notification to the warehouseman who issues such receipt of the seller's claim to a lien or right of stoppage in transitu. Nor shall the warehouseman be obliged to deliver or justified in delivering the goods to an unpaid seller unless the receipt is first surrendered for cancellation."

The term "purchaser' as used in the section quoted, includes mortgagee and pledgee. (See section 58 (a) of the same Act.)

In view of the foregoing provisions, there can be no doubt whatever that if the warehouse receipt in question is negotiable, the vendor's lien of Felisa Roman cannot prevail against the rights of the Asia Banking Corporation as the indorsee of the receipt. The only question of importance to be determined in this case is, therefore, whether the receipt before us is negotiable.

The matter is not entirely free from doubt. The receipt is not perfect: It recites that the merchandise is deposited in the warehouse "por orden" instead of "a la orden" or "sujeto a la orden" of the depositor and it contains no other direct statement showing whether the goods received are to be delivered to the bearer, to a specified person, or to a specified person or his order.

We think, however, that it must be considered a negotiable receipt. A warehouse receipt, like any other document, must be interpreted according to its evident intent (Civil Code, arts. 1281 et seq.) and it is quite obvious that the deposit evidenced by the receipt in this case was intended to be made subject to the order of the depositor and therefore negotiable. That the words "por orden" are used instead of "a la orden" is very evidently merely a clerical or grammatical error. If any intelligent meaning is to be attached to the phrase. "Quedan depositados en estos almacenes por orden del Sr. U. de Poli" it must be held to mean "Quedan depositados en estos almacenes a la orden del Sr. U. de Poli." The phrase must be construed to mean that U. de Poli was the person authorized to endorse and deliver the receipt; any other interpretation would mean that no one had such power and the clause, as well as the entire receipt, would be rendered nugatory.

Moreover, the endorsement in blank of the receipt in controversy together with its delivery by U. de Poli to the appellant bank took place on the very date of the issuance of the warehouse receipt, thereby immediately demonstrating the intention of U. de Poli and of the appellant bank, by the employment of the phrase "por orden del Sr. U. de Poli" to make the receipt negotiable and subject to the very transfer which he then and there made by such endorsement in blank and delivery of the receipt to the bank.

As hereinbefore stated, the receipt was not marked "non-negotiable." Under modern statutes the negotiability of warehouse receipts has been enlarged, the statutes having the effect of making such receipts negotiable unless marked "non-negotiable." (27 R. C. L., 967 and cases cited.)

Section 7 of our own Warehouse Receipts Act (No. 2137) which is a copy of the Uniform Warehouse Receipts Act, says:

"A non-negotiable receipt shall have plainly placed upon its face by the warehouseman issuing it 'non-negotiable,' or 'not negotiable.' In case of the warehouseman's failure so to do, a holder of the receipt who purchased it for value supposing it to be negotiable may, at his option, treat such receipt as imposing upon the warehouseman the same liabilities he would have incurred had the receipt been negotiable.

"This section shall not apply, however, to letters, memoranda, or written acknowledgments of an informal character."

This section appears to give any warehouse receipt not marked "non-negotiable" or "not negotiable" practically the same effect as a receipt which, by its terms, is negotiable provided the holder of such unmarked receipt acquired it for value supposing it to be negotiable, circumstances which admittedly exist in the present case.

We therefore hold that the warehouse receipt in controversy was negotiable and that the rights of the endorsee thereof, the appellant, are superior to the vendor's lien of the appellee and should be given preference over the latter.

The order appealed from is therefore reversed without costs. So ordered.

Araullo, C.J., Malcolm, Avanceña, Villamor, Johns, and Romualdez, JJ., concur.

||| (Roman v. Asia Banking Corp., G.R. No. L-17825, June 26, 1922)

[G.R. No. 95536. March 23, 1992.]

ANICETO G. SALUDO, JR., MARIA SALVACION SALUDO, LEOPOLDO G. SALUDO and SATURNINO G. SALUDO, petitioners, vs. HON. COURT OF APPEALS, TRANS WORLD AIRLINES, INC., and PHILIPPINE AIRLINES, INC., respondents.

Ledesma, Saludo & Associates for petitioners.

Quisumbing, Torres & Evangelista for Trans World Airlines, Inc.

Siguion Reyna, Montecillo & Ongsiako for Phil. Airlines, Inc.

SYLLABUS

1. REMEDIAL LAW; EVIDENCE; AS A GENERAL RULE; FACTUAL FINDINGS OF THE COURT OF APPEALS ARE FINAL AND CONCLUSIVE AND CANNOT BE REVIEWED BY THE SUPREME COURT; EXCEPTIONS. — At the outset and in view of the spirited exchanges of the parties on this aspect, it is to be stressed that only questions of law may be raised in a petition filed in this Court to review on certiorari the decision of the Court of Appeals. This being so, the factual findings of the Court of Appeals are final and conclusive and cannot be reviewed by the Supreme Court. The rule, however, admits of established exceptions, to wit: (a) where there is grave abuse of discretion; (b) when the finding is grounded entirely on speculations, surmises or conjectures; (c) when the inference made is manifestly mistaken, absurd or impossible; (d) when the judgment of the Court of Appeals was based on a misapprehension of facts; (e) when the factual findings are conflicting; (f) when the Court of Appeals, in making its findings, went beyond the issues of the case and the same are contrary to the admissions of both appellant and appellee; (g) when the Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties and which, if properly considered, would justify a different conclusion; and (h) where the findings of fact of the Court of Appeals are contrary to those of the trial court, or are mere conclusions without citation of specific evidence, or where the facts set forth by the petitioner are not disputed by the respondent, or where the findings of fact of the Court of Appeals are premised on the absence of evidence and are contradicted by the evidence on record.

2. ID.; ID.; QUESTION OF LAW; DISTINGUISHED FROM QUESTION OF FACT. — To distinguish, a question of law is one which involves a doubt or controversy on what the law is on a certain state of facts; and, a question of fact, contrarily, is one in which there is a doubt or difference as to the truth or falsehood of the alleged facts. One test, it has been held, is whether the appellate court can determine the issue raised without reviewing or evaluating the evidence, in which case it is a question of law, otherwise it will be a question of fact.

3. ID.; ID.; RULES ON ADMISSIBILITY; INTERPRETATION OF DOCUMENT; WRITTEN WORDS CONTROL PRINTED; WORDS NOT APPLICABLE IN CASE AT BAR. — Petitioners' invocation of the interpretative rule in the Rules of Court that written words control printed words in documents, to bolster their assertion that the typewritten provisions regarding the routing and flight schedule prevail over the printed conditions, is tenuous. Said rule may be considered only when there is inconsistency between the written and printed words of the contract. As previously stated, we find no ambiguity in the contract subject of this case that would call for the application of said rule. In any event, the contract has provided for such a situation by explicitly stating that the above condition remains effective "notwithstanding that the same (fixed time for completion of carriage, specified aircraft, or any particular route or schedule) may be stated on the face hereof." While petitioners hinge private respondents' culpability on the fact that the carrier "certifies goods described below were received for carriage," they may have overlooked that the statement on the face of the airway bill properly and completely reads — "Carrier certifies goods described below were received for carriage subject to the Conditions on the reverse hereof the goods then being in apparent good order and condition except as noted hereon." Private respondents further aptly observe that the carrier's certification regarding receipt of the goods for carriage "was of a Waybill, including Condition No. 5 — and thus if plaintiffs-appellants had recognized the former, then with more reason they were aware of the latter." In the same vein, it would also be incorrect to accede to the suggestion of petitioners that the typewritten specifications of the flight, routes and dates of departures

and arrivals on the face of the airway bill constitute a special contract which modifies the printed conditions at the back thereof. We reiterate that typewritten provisions of the contract are to be read and understood subject to and in view of the printed conditions, fully reconciling and giving effect to the manifest intention of the parties to the agreement.

4. COMMERCIAL LAW; COMMERCIAL CONTRACT FOR TRANSPORTATION; BILL OF LADING; DEFINED. — A bill of lading is a written acknowledgment of the receipt of the goods and an agreement to transport and deliver them at a specified place to a person named or on his order. Such instrument may be called a shipping receipt, forwarder's receipt and receipt for transportation. The designation, however, is immaterial. It has been held that freight tickets for bus companies as well as receipts for cargo transported by all forms of transportation, whether by sea or land, fall within the definition. Under the Tariff and Customs Code, a bill of lading includes airway bills of lading (4 Alcantara, Commercial Laws of the Philippines, 118 [1987]).

5. ID.; ID.; ID.; TWO-FOLD CHARACTER THEREOF. — The two-fold character of a bill of lading is all too familiar: it is a receipt as to the quantity and description of the goods shipped and a contract to transport the goods to the consignee or other person therein designated, on the terms specified in such instrument.

6. ID.; ID.; ID.; PRIMA FACIE EVIDENCE OF DELIVERY OF THE GOODS TO THE CARRIER. — Logically, since a bill of lading acknowledges receipt of goods to be transported, delivery of the goods to the carrier normally precedes the issuance of the bill; or, to some extent, delivery of the goods and issuance of the bill are regarded in commercial practice as simultaneous acts. However, except as may be prohibited by law, there is nothing to prevent an inverse order of events, that is, the execution of the bill of lading even prior to actual possession and control by the carrier of the cargo to be transported. There is no law which requires that the delivery of the goods for carriage and the issuance of the covering bill of lading must coincide in point of time or, for that matter, that the former should precede the latter. Ordinarily, a receipt is not essential to a complete delivery of goods to the carrier for transportation but, when issued, is competent and prima facie, but not conclusive, evidence of delivery to the carrier. A bill of lading, when properly executed and delivered to a shipper, is evidence that the carrier has received the goods described therein for shipment. Except as modified by statute, it is a general rule as to the parties to a contract of carriage of goods in connection with which a bill of lading is issued reciting that goods have been received for transportation, that the recital being in essence a receipt alone, is not conclusive, but may be explained, varied or contradicted by parol or other evidence.

7. ID.; ID.; ID.; BETWEEN THE SHIPPER AND THE CARRIER; WHEN NO GOODS HAVE BEEN DELIVERED FOR SHIPMENT; NO RECITAL IN THE BILL CAN ESTOP THE CARRIER FROM SHOWING THE TRUE FACTS. — While we agree with petitioners' statement that "an airway hill estops the carrier from denying receipt of goods of the quantity and quality described in the bill," a further reading and a more faithful quotation of the authority cited would reveal that "(a) bill of lading may contain constituent elements of estoppel and thus become something more than a contract between the shipper and the carrier. . . . (However), as between the shipper and the carrier, when no goods have been delivered for shipment no recitals in the bill can estop the carrier from showing the true facts . . .. Between the consignor of goods and a receiving carrier, recitals in a bill of lading as to the goods shipped raise only a rebuttable presumption that such goods were delivered for shipment. As between the consignor and a receiving carrier, the fact must outweigh the recital."

8. ID.; ID.; ID.; ACCEPTANCE THEREOF WITHOUT DISSENT; PRESUMPTION. — There is a holding in most jurisdictions that the acceptance of a bill of lading without dissent raises a presumption that all terms therein were brought to the knowledge of the shipper and agreed to by him, and in the absence of fraud or mistake, he is estopped from thereafter denying that he assented to such terms. This rule applies with particular force where a shipper accepts a bill of lading with full knowledge of its contents, and acceptance, under such circumstances makes it a binding contract. In order that any presumption of assent to a stipulation in a bill of lading limiting the liability of a carrier may arise, it must appear that the clause containing this exemption from liability plainly formed a part of the contract contained in the bill of lading. A stipulation printed on the back of a receipt or bill of lading or on papers attached to such receipt will be quite as effective as if printed on its face, if it is shown that the consignor knew of its terms. Thus, where a shipper accepts a receipt which states that its conditions are to be found on the back, such receipt comes within the general rule, and the shipper is held to have accepted and to be bound by the conditions there to be found.

9. ID.; COMMON CARRIER; EXTRAORDINARY RESPONSIBILITY THEREOF OVER THE GOODS BEGINS FROM THE TIME THE GOODS ARE DELIVERED THERETO. — Explicit is the rule under Article 1736 of the Civil Code that the extraordinary responsibility of the common carrier begins from the time the goods are delivered to the carrier. This responsibility remains in full force and effect even when they are temporarily unloaded or stored in transit, unless the shipper or owner exercises the right of stoppage in transitu, and terminates only after the lapse of a reasonable time for the acceptance of the goods by the consignee or such other person entitled to receive them. And, there is delivery to the carrier when the goods are ready for and have been placed in the exclusive possession, custody and control of the carrier for the purpose of their immediate transportation and the carrier has accepted them. Where such a delivery has thus been accepted by the carrier, the liability of the common carrier commences eo instanti.

10. ID.; ID.; ID.; FACT OF DELIVERY MUST BE UNEQUIVOCABLY ESTABLISHED. — While we agree with petitioners that the extraordinary diligence statutorily required to be observed by the carrier instantaneously commences upon delivery of the goods thereto, for such duty to commence there must in fact have been delivery of the cargo subject of the contract of carriage. Only when such fact of delivery has been unequivocally established can the liability for loss, destruction or deterioration of goods in the custody of the carrier, absent the excepting causes under Article 1734, attach and the presumption of fault of the carrier under Article 1735 be invoked.

11. ID.; ID.; NOT LIABLE FOR EVENTS PRIOR TO THE DELIVERY OF THE GOODS THERETO. — The facts in the case at bar belie the averment that there was delivery of the cargo to the carrier on October 26, 1976. Rather, as earlier explained, the body intended to be shipped as agreed upon was, really placed in the possession and control of PAL on October 28, 1976 and it was from that date that private respondents became responsible for the agreed cargo under their undertakings in PAL Airway Bill No. 079-01180454. Consequently, for the switching of caskets prior thereto which was not caused by them., and subsequent events caused thereby, private respondents cannot be held liable.

12. ID.; ID.; PROHIBITED FROM OPENING A CASKET FOR FURTHER VERIFICATION. — Petitioners, proceeding on the premise that there was delivery of the cargo to private respondents on October 26, 1976 and that the latter's extraordinary responsibility had by then become operative, insist on foisting the blame on private respondents for the switching of the two caskets which occurred on

October 27, 1976. It is argued that since there is no clear evidence establishing the fault of Continental Mortuary Air Services (CMAS) for the mix-up, private respondents are presumably negligent pursuant to Article 1735 of the Civil Code and, for failure to rebut such presumption, they must necessarily be held liable; or, assuming that CMAS was at fault, the same does not absolve private respondents of liability because whoever brought the cargo to the airport, or loaded it on the plane did so as agent of private respondents. This contention is without merit. As pithily explained by the Court of Appeals: . . . "Consequently, when the cargo was received from C.M.A.S. at the Chicago airport terminal for shipment, which was supposed to contain the remains of Crispina Saludo, Air Care International and/or TWA, had no way of determining its actual contents, since the casket was hermetically sealed by the Philippine Vice-Consul in Chicago and in an air pouch of C.M.A.S., to the effect that Air Care International and/or TWA had to rely on the information furnished by the shipper regarding the cargo's content. Neither could Air Care International and/or TWA open the casket for further verification, since they were not only without authority to do so, but even prohibited. "Thus, under said circumstances, no fault and/or negligence can be attributed to PAL (even if Air Care International should be considered as an agent of PAL) and/or TWA, the entire fault or negligence being exclusively with C.M.A.S." It can correctly and logically be concluded, therefore that the switching occurred or, more accurately, was discovered on October 27, 1976; and based on the above findings of the Court of Appeals, it happened while the cargo was still with CMAS, well before the same was placed in the custody of private respondents.

13. ID.; ID.; FAILURE TO VERIFY AND IDENTIFY THE CONTENTS OF THE CARGO; DOES NOT CONSTITUTE NEGLIGENCE; CASE AT BAR. — Petitioners consider TWA's statement that it had to rely on the information furnished by the shipper" a lame, excuse and that its failure to prove that its personnel verified and identified the contents of the casket before loading the same constituted negligence on the part of TWA. We uphold the favorable consideration by the Court of Appeals of the following findings of the trial court: "It was not (to) TWA, but to C.M.A.S. that the Pomierski & Son Funeral Home delivered the casket containing the remains of Crispina Saludo. TWA would have no knowledge therefore that the remains of Crispina Saludo were not the ones inside the casket that was being presented to it for shipment. TWA would have to rely on the representations of C.M.A.S. The casket was hermetically sealed and also sealed by the Philippine Vice Consul in Chicago. TWA or any airline for that matter would not have opened such sealed casket just for the purpose of ascertaining whose body was inside and to make sure that the remains inside were those of the particular person indicated to be by C.M.A.S. TWA had to accept whatever information was being furnished by the shipper or by the one presenting the casket for shipment. And so as a matter of fact, TWA carried to San Francisco and transferred to defendant PAL a shipment covered by or under PAL Airway Bill No. 079-ORD-01180454, the airway bill for the shipment of the casketed remains of Crispina Saludo. Only, it turned out later, while the casket was already with PAL, that what was inside the casket was not the body of Crispina Saludo so much so that it had to be withdrawn by C.M.A.S from PAL. The body of Crispina Saludo had been shipped to Mexico. The casket containing the remains of Crispina Saludo was transshipped from Mexico and arrived in San Francisco the following day on board American Airlines. It was immediately loaded by PAL on its flight for Manila. The foregoing points at C.M.A.S., not defendant TWA much less defendant PAL, as the ONE responsible for the switching or mix-up of the two bodies at the Chicago Airport terminal, and started a chain reaction of the misshipment of the body of Crispina Saludo and a one-day delay in the delivery thereof to its destination. Verily, no amount of inspection by respondent airline companies could have guarded against the switching that had already taken place. Or, granting that they could have opened the casket to

inspect its contents, private respondents had no means of ascertaining whether the body therein contained was indeed that of Crispina Saludo except, possibly, if the body was that of a male person and such fact was visually apparent upon opening the casket. However, to repeat, private respondents had no authority to unseal and open the same nor did they have any reason or justification to resort thereto.

14. ID.; ID.; RIGHT TO REQUIRE GOOD FAITH ON THE PART OF THE PERSONS DELIVERING THE GOODS TO BE CARRIED AND ENTER INTO CONTRACT WITH CARRIER; SCOPE. — It is the right of the carrier to require good faith on the part of those persons who deliver goods to be carried, ar enter into contracts with it, and inasmuch as the freight may depend on the value of the article to be carried, the carrier ordinarily has the right to inquire as to its value. Ordinarily, too, it is the duty of the carrier to make inquiry as to the general nature of the articles shipped and of their value before it consents to carry them; and its failure to do so cannot defeat the shipper's right to recovery of the full value of the package if lost, in the absence of showing of fraud or deceit on the part of the shipper. In the absence of more definite information, the carrier has the right to accept shipper's marks as to the contents of the package offered for transportation and is not bound to inquire particularly about them in order to take advantage of a false classification and where a shipper expressly represents the contents of a package to be of a designated character, it is not the duty of the carrier to ask for a repetition of the statement nor disbelieve it and open the box and see for itself. However, where a common carrier has reasonable ground to suspect that the offered goods are of a dangerous or illegal character, the carrier has the right to know the character of such goods and to insist on an inspection, if reasonable and practical under the circumstances, as a condition of receiving and transporting such goods.

15. ID.; ID.; ENTITLED TO FAIR REPRESENTATION OF THE NATURE AND VALUE OF THE GOODS TO BE CARRIED; CASE AT BAR. — It can safely be said then that a common carrier is entitled to fair representation of the nature and value of the goods to be carried, with the concomitant right to rely thereon, and further noting at this juncture that a carrier has no obligation to inquire into the correctness or sufficiency of such information. The consequent duty to conduct an inspection thereof arises in the event that there should be reason to doubt the veracity of such representations. Therefore, to be subjected to unusual search, other than the routinary inspection procedure customarily undertaken, there must exist proof that would justify cause for apprehension that the baggage is dangerous as to warrant exhaustive inspection, or even refusal to accept carriage of the same; and it is the failure of the carrier to act accordingly in the face of such proof that constitutes the basis of the common carrier's liability. In the case at bar, private respondents had no reason whatsoever to doubt the truth of the shipper's representations. The airway bill expressly providing that "carrier certifies goods received below were received for carriage," and that the cargo contained "casketed human remains of Crispina Saludo," was issued on the basis of such representations. The reliance thereon by private respondents was reasonable and, for so doing, they cannot be said to have acted negligently. Likewise, no evidence was adduced to suggest even an iota of suspicion that the cargo presented for transportation was anything other than what it was declared to be, as would require more than routine inspection or call for the carrier to insist that the same be opened for scrutiny of its contents per declaration.

16. ID.; ID.; FORWARDER OF THE GOODS THERETO, NOT AN AGENT THEREOF BUT THAT OF THE SHIPPER. — Private respondents cannot be held accountable on the basis of petitioners' preposterous proposition that whoever brought the cargo to the airport or loaded it on the airplane did so as agent of private respondents, so that even if CMAS whose services were engaged for the transit arrangements for the remains was indeed at fault, the

liability therefor would supposedly still be attributable to private respondents. While we agree that the actual participation of CMAS has been sufficiently and correctly established, to hold that it acted as agent for private respondents would be both an inaccurate appraisal and an unwarranted categorization of the legal position it held in the entire transaction. It bears repeating that CMAS was hired to handle all the necessary shipping arrangements for the transportation of the human remains of Crispina Saludo to Manila. Hence, it was to CMAS that the Pomierski & Son Funeral Home, as shipper, brought the remains of petitioners' mother for shipment, with Maria Saludo as consignee. Thereafter, CMAS booked the shipment with PAL through the carrier's agent, Air Care International. With its aforestated functions, CMAS may accordingly be classified as a forwarder which, by accepted commercial practice, is regarded as an agent of the shipper and not of the carrier. As such, it merely contracts for the transportation of goods by carriers, and has no interest in the freight but receives compensation from the shipper as his agent.

17. ID.; ID.; NOT LIABLE FOR DELAY IN THE ABSENCE OF SPECIAL CONTRACT. — The oft-repeated rule regarding a carrier's liability for delay is that in the absence of a special contract, a carrier is not an insurer against delay in transportation of goods. When a common carrier undertakes to convey goods, the law implies a contract that they shall be delivered at destination within a reasonable time, in the absence of any agreement as to the time of delivery. But where a carrier has made an express contract to transport and deliver property within a specified time, it is bound to fulfill its contract and is liable for any delay, no matter from what cause it may have arisen. This result logically follows from the well-settled rule that where the law creates a duty or charge, and the party is disabled from performing it without any default in himself, and has no remedy over, then the law will excuse him, but where the party by his own contract creates a duty or charge upon himself, he is bound to make it good notwithstanding any accident or delay by inevitable necessity because he might have provided against it by contract. Whether or not there has been such an undertaking on the part of the carrier is to be determined from the circumstances surrounding the case and by application of the ordinary rules for the interpretation of contracts.

18. ID.; ID.; ID.; SPECIFICATION OF THE FLIGHT AND DATES OF DEPARTURE; NOT A SPECIAL CONTRACT THAT COULD PREVAIL OVER THE PRINTED STIPULATION. — Also, the theory of petitioners that the specification of the flights and dates of departures and arrivals constitute a special contract that could prevail over the printed stipulations at the back of the airway bill is vacuous. To countenance such a postulate would unduly burden the common carrier for that would have the effect of unilaterally transforming every single bill of lading or trip ticket into a special contract by the simple expedient of filling it up with the particulars of the flight, trip or voyage, and thereby imposing upon the carrier duties and/or obligations which it may not have been ready or willing to assume had it been timely advised thereof. Neither does the fact that the challenged condition No. 5 was printed at the back of the airway bill militate against its binding effect on petitioners as parties to the contract, for there were sufficient indications on the face of said bill that would alert them to the presence of such additional condition to put them on their guard. Ordinary prudence on the part of any person entering or contemplating to enter into a contract would prompt even a cursory examination of any such conditions, terms and/or stipulations.

19. ID.; ID.; CHANGES IN ROUTE; FLIGHTS AND SCHEDULE; WHEN JUSTIFIED. — Just because we have said that Condition No. 5 of the airway bill is binding upon the parties to and fully operative in this transaction, it does not mean, and let this serve as fair warning

to respondent carriers, that they can at all times whimsically seek refuge from liability in the exculpatory sanctuary of said Condition No. 5 or arbitrarily vary routes, flights and schedules to the prejudice of their customers. This condition only serves to insulate the carrier from liability in those instances when changes in routes, flights and schedules are clearly justified by the peculiar circumstances of a particular case, or by general transportation practices, customs and usages, or by contingencies or emergencies in aviation such as weather turbulence, mechanical failure, requirements of national security and the like. And even as it is conceded that specific routing and other navigational arrangements for a trip, flight or voyage, or variations therein, generally lie within the discretion of the carrier in the absence of specific routing instructions or directions by the shipper, it is plainly incumbent upon the carrier to exercise its rights with due deference to the rights, interests and convenience of its customers.

20. ID.; ID.; LIABLE FOR DAMAGES IN CASE OF UNREASONABLE DELAY AS IMMEDIATE AND PROXIMATE RESULT FROM NEGLECT OF DUTY. — A common carrier undertaking to transport property has the implicit duty to carry and deliver it within a reasonable time, absent any particular stipulation regarding time of delivery, and to guard against delay. In case of any unreasonable delay, the carrier shall be liable for damages immediately and proximately resulting from such neglect of duty.

21. ID.; ID.; MUST STRICTLY REQUIRE ITS PERSONNEL TO BE MORE ACCOMMODATING TOWARDS CUSTOMER, PASSENGER AND THE GENERAL PUBLIC; REASONS THEREFOR. — Airline companies are hereby sternly admonished that it is their duty not only to cursorily instruct but to strictly require their personnel to be more accommodating towards customers, passengers and the general public. After all, common carriers such as airline companies are in the business of rendering public service, which is the primary reason for their enfranchisement and recognition in our law. Because the passengers in a contract of carriage do not contract merely for transportation, they have a right to be treated with kindness, respect, courtesy and consideration. A contract to transport passengers is quite different in kind and degree from any other contractual relation, and generates a relation attended with public duty. The operation of a common carrier is a business affected with public interest and must be directed to serve the comfort and convenience of passengers. Passengers are human beings with human feelings and emotions; they should not be treated as mere numbers or statistics for revenue.

22. ID.; CONTRACTS; CONSTRUCTION AND INTERPRETATION THEREOF; RULE. — The hornbook rule on interpretation of contracts consecrates the primacy of the intention of the parties, the same having the force of law between them. When the terms of the agreement are clear and explicit, that they do not justify an attempt to read into any alleged intention of the parties, the terms are to be understood literally just as they appear on the face of the contract. The various stipulations of a contract shall be interpreted together and such a construction is to be adopted as will give effect to all provisions thereof. A contract cannot be construed by parts, but its clauses should be interpreted in relation to one another. The whole contract must be interpreted or read together in order to arrive at its true meaning. Certain stipulations cannot be segregated and then made to control; neither do particular words or phrases necessarily determine the character of a contract. The legal effect of the contract is not to be determined alone by any particular provision disconnected from all others, but in the ruling intention of the parties as gathered from all the language they have used and from their contemporaneous and subsequent acts.

23. ID.; ID.; CONTRACT OF ADHESION; AS A GENERAL RULE, MUST BE STRICTLY CONSTRUED AGAINST THE PARTY WHO DRAFTED THE SAME; EXCEPTION. —

Grantingarguendo that Condition No. 5 partakes of the nature of a contract of adhesion and as such must be construed strictly against the party who drafted the same or gave rise to any ambiguity therein, it should be borne in mind that a contract of adhesion may be struck down as void and unenforceable, for being subversive of public policy, only when the weaker party is imposed upon in dealing with the dominant bargaining party and is reduced to the alternative of taking it or leaving it, completely deprived of the opportunity to bargain on equal footing. However, Ong Yiu vs. Court of Appeals, et al., instructs us that contracts of adhesion are not entirely prohibited. The one who adheres to the contract is in reality free to reject it entirely; if he adheres, he gives his consent. Accordingly, petitioners, far from being the weaker party in this situation, duly signified their presumed assent to all terms of the contract through their acceptance of the airway bill and are consequently bound thereby. It cannot be gainsaid that petitioners were not without several choices as to carriers in Chicago with its numerous airways and airlines servicing the same.

24. ID.; DAMAGES; MORAL DAMAGES; MAY BE AWARDED FOR WILLFUL OR FRAUDULENT BREACH OF CONTRACT AND SUCH BREACH IS ATTENDED BY MALICE OR BAD FAITH. — The uniform decisional tenet in our jurisdiction holds that moral damages may be awarded for willful or fraudulent breach of contract or when such breach is attended by malice or bad faith. However, in the absence of strong and positive evidence of fraud, malice or bad faith, said damages cannot be awarded. Neither can there be an award of exemplary damages nor of attorney's fees as an item of damages in the absence of proof that defendant acted with malice, fraud or bad faith.

25. ID.; ID.; NOMINAL DAMAGES; INTENDED FOR THE VINDICATION OR RECOGNITION OF A RIGHT VIOLATED OR INVADED. — The censurable conduct of TWA's employees cannot, however, be said to have approximated the dimensions of fraud, malice or bad faith. It can be said to be more of a lethargic reaction produced and engrained in some people by the mechanically routine nature of their work and a racial or societal culture which stultifies what would have been their accustomed human response to a human need under a former and different ambience. Nonetheless, the facts show that petitioners' right to be treated with due courtesy in accordance with the degree of diligence required by law to be exercised by every common carrier was violated by TWA and this entitles them, at least, to nominal damages from TWA alone. Articles 2221 and 2222 of the Civil Code make it clear that nominal damages are not intended for indemnification of loss suffered but for the vindication or recognition of a right violated or invaded. They are recoverable where some injury has been done but the amount of which the evidence fails to show, the assessment of damages being left to the discretion of the court according to the circumstances of the case. In the exercise of our discretion, we find an award of P40,000.00 as nominal damages in favor of petitioners to be a reasonable amount under the circumstances of the case.

D E C I S I O N

REGALADO, J p:

Assailed in this petition for review on certiorari is the decision in CA-G.R. CV No. 20951 of respondent Court of Appeals 1 which affirmed the decision of the trial court 2dismissing for lack of evidence herein petitioners' complaint in Civil Case No. R-2101 of the then Court of First Instance of Southern Leyte, Branch I. LLpr

The facts, as recounted by the court a quo and adopted by respondent court after "considering the evidence on record," are as follows:

"After the death of plaintiffs' mother, Crispina Galdo Saludo, in Chicago, Illinois, (on) October 23, 1976 (Exh. A), Pomierski and Son Funeral Home of Chicago, made the necessary preparations and arrangements for the shipment of the remains from Chicago to the Philippines. The funeral home had the remains embalmed (Exh. D) and secured a permit for the disposition of dead human body on October 25, 1976 (Exh. C). Philippine Vice Consul in Chicago, Illinois, Bienvenido M. Llaneta, at 3:00 p.m. on October 26, 1976 at the Pomierski & Son Funeral Home, sealed the shipping case containing a hermetically sealed casket that is airtight and waterproof wherein was contained the remains of Crispina Saludo Galdo (sic) (Exh. B). On the same date, October 26, 1976, Pomierski brought the remains to C.M.A.S. (Continental Mortuary Air Services) at the airport (Chicago) which made the necessary arrangements such as flights, transfers, etc.; C.M.A.S. is a national service used by undertakers throughout the nation (U.S.A.), they furnish the air pouch which the casket is enclosed in, and they see that the remains are taken to the proper air freight terminal (Exh. 6-TWA). C.M.A.S. booked the shipment with PAL thru the carrier's agent Air Care International, with Pomierski F.H. as the shipper and Mario (Maria) Saludo as the consignee. PAL Airway Bill No. 079-01180454 Ordinary was issued wherein the requested routing was from Chicago to San Francisco on board TWA Flight 131 of October 27, 1976, and from San Francisco to Manila on board PAL Flight No. 107 of the same date, and from Manila to Cebu on board PAL Flight 149 of October 29, 1976 (See Exh. E, also Exh. 1-PAL).

"In the meantime, plaintiffs Maria Salvacion Saludo and Saturnino Saludo, thru a travel agent, were booked with United Airlines from Chicago to California, and with PAL from California to Manila. She then went to the funeral director of Pomierski Funeral Home who had her mother's remains and she told the director that they were booked with United Airlines. But the director told her that the remains were booked with TWA flight to California. This upset her, and she and her brother had to change reservations from UA to the TWA flight after she confirmed by phone that her mother's remains would be on that TWA flight. They went to the airport and watched from the look-out area. She saw no body being brought. So, she went to the TWA counter again, and she was told there was no body on that flight. Reluctantly, they took the TWA flight upon assurance of her cousin, Ani Bantug, that he would look into the matter and inform her about it on the plane or have it radioed to her. But no confirmation from her cousin reached her that her mother was on the West Coast.

"Upon arrival at San Francisco at about 5:00 p.m., she went to the TWA counter there to inquire about her mother's remains. She was told they did not know anything about it.

"She then called Pomierski that her mother's remains were not at the West Coast terminal, and Pomierski immediately called C.M.A.S., which in a matter of 10 minutes informed him that the remains were on a place to Mexico City, that there were two bodies at the terminal, and somehow they were switched; he relayed this information to Miss Saludo in California; later C.M.A.S. called and told him they were sending the remains back to California via Texas (see Exh. 6-TWA).

"It turned out that TWA had carried a shipment under PAL Airway Bill No. 079-ORD-01180454 on TWA Flight 603 of October 27, 1976, a flight earlier than TWA Flight 131 of the same date. TWA delivered or transferred the said shipment said to contain human remains to PAL at 1400 H or 2:00 p.m. of the same date. October 27, 1976 (See Exh. 1-TWA). 'Due to a switch(ing) in Chicago', this shipment was withdrawn from PAL by CMAS at 1805H (or 6:05 p.m.) of the same date, October 27 (Exh. 3-PAL, see Exh. 3-a-PAL).

"What transpired at the Chicago (A)irport is explained in a memo or incident report by Pomierski (Exh. 6-TWA) to Pomierski's lawyers who in turn referred to said memo and enclosed it in their (Pomierski's lawyers) answer dated July 18, 1981 to herein plaintiff's counsel (See Exh. 5-TWA). In that memo or incident report (Exh. 6-TWA), it is stated that the remains (of Crispina Saludo) were taken to CMAS at the airport; that there were two bodies at the (Chicago Airport) terminal, and somehow they were switched, that the remains (of Crispina Saludo) were on a plane to Mexico City; that CMAS is a national service used by undertakers throughout the nation (U.S.A.), makes all the necessary arrangements, such as flights, transfers, etc., and see(s) to it that the remains are taken to the proper air freight terminal.

"The following day October 28, 1976, the shipment or remains of Crispina Saludo arrived (in) San Francisco from Mexico on board American Airlines. This shipment was transferred to or received by PAL at 1945H or 7:45 p.m. (Exh. 2-PAL, Exh. 2-a-PAL). This casket bearing the remains of Crispina Saludo, which was mistakenly sent to Mexico and was opened (there), was resealed by Crispin F. Padagas for shipment to the Philippines (See Exh. B-1). The shipment was immediately loaded on PAL flight for Manila that same evening and arrived (in) Manila on October 30, 1976, a day after its expected arrival on October 29, 1976." 3

In a letter dated December 15, 1976, 4 petitioners' counsel informed private respondent Trans World Airlines (TWA) of the misshipment and eventual delay in the delivery of the cargo containing the remains of the late Crispina Saludo, and of the discourtesy of its employees to

petitioners Maria Salvacion Saludo and Saturnino Saludo. In a separate letter on June 10, 1977 addressed to co-respondent Philippine Airlines (PAL), 5 petitioners stated that they were holding PAL liable for said delay in delivery and would commence judicial action should no favorable explanation be given. LLjur

Both private respondents denied liability. Thus, a damage suit 6 was filed by petitioners before the then Court of First Instance, Branch III, Leyte, praying for the award of actual damages of P50,000.00, moral damages of P1,000,000.00, exemplary damages, attorney's fees and costs of suit.

As earlier stated, the court below absolved the two respondent airline companies of liability. The Court of Appeals affirmed the decision of the lower court in toto, and in a subsequent resolution, 7 denied herein petitioners' motion for reconsideration for lack of merit.

In predictable disagreement and dissatisfaction with the conclusions reached by respondent appellate court, petitioners now urge this Court to review the appealed decision and to resolve whether or not (1) the delay in the delivery of the casketed remains of petitioners' mother was due to the fault of respondent airline companies, (2) the one-day delay in the delivery of the same constitutes contractual breach as would entitle petitioners to damages, (3) damages are recoverable by petitioners for the humiliating, arrogant and indifferent acts of the employees of TWA and PAL, and (4) private respondents should be held liable for actual. moral and exemplary damages, aside from attorney's fees and litigation expenses. 8

At the outset and in view of the spirited exchanges of the parties on this aspect, it is to be stressed that only questions of law may be raised in a petition filed in this Court to review on certiorari the decision of the Court of Appeals. 9 This being so, the factual findings of the Court of Appeals are final and conclusive and cannot be reviewed by the Supreme Court. The rule, however, admits of established exceptions, to wit: (a) where there is grave abuse of discretion; (b) when the finding is grounded entirely on speculations, surmises or conjectures; (c) when the inference made is manifestly mistaken, absurd or impossible; (d) when the judgment of the Court of Appeals was based on a misapprehension of facts; (e) when the factual findings are conflicting; (f) when the Court of Appeals, in making its findings, went beyond the issues of the case and the same are contrary to the admissions of both appellant and appellee; 10 (g) when the Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties and which, if properly considered, would justify a different conclusion; 11 and (h) where the findings of fact of the Court of Appeals are contrary to those of the trial court, or are mere conclusions without citation of specific evidence, or where the facts set forth by the petitioner are not disputed by the respondent, or where the findings of fact of the Court of Appeals are premised on the absence of evidence and are contradicted by the evidence on record. 12

To distinguish, a question of law is one which involves a doubt or controversy on what the law is on a certain state of facts; and, a question of fact, contrarily, is one in which there is a doubt or difference as to the truth or falsehood of the alleged facts. 13 One test, it has been held, is whether the appellate court can determine the issue raised without reviewing or evaluating the evidence, in which case it is a question of law, otherwise it will be a question of fact. 14 Respondent airline companies object to the present recourse of petitioners on the ground that this petition raises only factual questions. 15 Petitioners maintain otherwise or, alternatively, they are of the position that, assuming that the petition raises factual questions, the same are within the recognized exceptions to the general rule as would render the petition cognizable and worthy of review by the Court. 16

Since it is precisely the soundness of the inferences or conclusions that may be drawn from the factual issues which are here being assayed, we find that the issues raised in the instant petition indeed warrant a second look if this litigation is to come to a reasonable denouement. A discussion seriatim of said issues will further reveal that the sequence of the events involved is in effect disputed. Likewise to be settled is whether or not the conclusions of the Court of Appeals subject of this review indeed find evidentiary and legal support. cdrep

I. Petitioners fault respondent court for "not finding that private respondents failed to exercise extraordinary diligence required by law which resulted in the switching and/or misdelivery of the remains of Crispina Saludo to Mexico causing gross delay in its shipment to the Philippines, and consequently, damages to petitioners." 17

Petitioners allege that private 'respondents received the casketed remains of petitioners' mother on October 26, 1976, as evidenced by the issuance of PAL Air Way-bill No. 079-01180454 18 by Air Care International as carrier's agent; and from said date, private respondents were charged with the responsibility to exercise extraordinary diligence so much so that for the alleged switching of the caskets on October 27, 1976, or one day after private respondents received the cargo, the latter must necessarily be liable.

To support their assertion, petitioners rely on the jurisprudential dictum, both under American and Philippine law, that "(t)he issuance of a bill of lading carries the presumption that the goods were delivered to the carrier issuing the bill, for immediate shipment, and it is nowhere questioned that a bill of lading is prima facie evidence of the receipt of the goods by the carrier. . . . In the absence of convincing testimony establishing mistake, recitals in the bill of lading showing that the carrier received the goods for shipment on a specified date control (13 C.J.S. 235)." 19

A bill of lading is a written acknowledgment of the receipt of the goods and an agreement to transport and deliver them at a specified place to a person named or on his order. Such instrument may be called a shipping receipt, forwarder's receipt and receipt for transportation. 20 The designation, however, is immaterial. It has been held that freight tickets for bus companies as well as receipts for cargo transported by all forms of transportation, whether by sea or land, fall within the definition. Under the Tariff and Customs Code, a bill of lading includes airway bills of lading. 21 The two-fold character of a bill of lading is all too familiar: it is a receipt as to the quantity and description of the goods shipped and a contract to transport the goods to the consignee or other person therein designated, on the terms specified in such instrument. 22

Logically, since a bill of lading acknowledges receipt of goods to be transported, delivery of the goods to the carrier normally precedes the issuance of the bill; or, to some extent, delivery of the goods and issuance of the bill are regarded in commercial practice as simultaneous acts. 23 However, except as may be prohibited by law, there is nothing to prevent an inverse order of events, that is, the execution of the bill, of lading even prior to actual possession and control by the carrier of the cargo to be transported. There is no law which requires that the delivery of the goods for carriage and the issuance of the covering bill of lading must coincide in point of time or, for that matter, that the former should precede the latter.

Ordinarily, a receipt is not essential to a complete delivery of goods to the carrier for transportation but, when issued, is competent and prima facie, but not conclusive, evidence of delivery to the carrier. A bill of lading, when properly executed and delivered to a shipper, is evidence that the carrier has received the goods described therein for shipment. Except as modified by statute, it is a general rule as to the parties to a contract of carriage of goods in connection with which a bill of lading is issued reciting that goods have been received for transportation, that the recital being in essence a receipt

alone, is not conclusive, but may be explained, varied or contradicted by parol or other evidence. 24

While we agree with petitioners' statement that "an airway hill estops the carrier from denying receipt of goods of the quantity and quality described in the bill," a further reading and a more faithful quotation of the authority cited would reveal that "(a) bill of lading may contain constituent elements of estoppel and thus become something more than a contract between the shipper and the carrier. . . . (However), as between the shipper and the carrier, when no goods have been delivered for shipment no recitals in the bill can estop the carrier from showing the true facts . . . Between the consignor of goods and a receiving carrier, recitals in a bill of lading as to the goods shipped raise only a rebuttable presumption that such goods were delivered for shipment. As between the consignor and a receiving carrier, the fact must outweigh the recital." 25 (Emphasis supplied.)

For this reason, we must perforce allow explanation by private respondents why, despite the issuance of the airway bill and the date thereof, they deny having received the remains of Crispina Saludo on October 26, 1976 as alleged by petitioners.

The findings of the trial court, as favorably adopted by the Court of Appeals and which we have earlier quoted, provide us with the explanation that sufficiently overcomes the presumption relied on by petitioners in insisting that the remains of their mother were delivered to and received by private respondents on October 26, 1976. Thus —

". . . Philippine Vice Consul in Chicago, Illinois, Bienvenido M. Llaneta, at 3:00 p.m. on October 26, 1976 at the Pomierski & Son Funeral Home, sealed the shipping case containing a hermetically sealed casket that is airtight and waterproof wherein was contained the remains of Crispina Saludo Galdo (sic) (Exh. B). On the same date October 26, 1976, Pomierski brought the remains to C.M.A.S. (Continental Mortuary Air Services) at the airport (Chicago) which made the necessary arrangements such as flights, transfers, etc; C.M.A.S. is a national service used by undertakers throughout the nation (U.S.A.), they furnish the air pouch which the casket is enclosed in, and they see that the remains are taken to the proper air freight terminal (Exh. G-TWA). C.M.A.S. booked the shipment with PAL thru the carrier's agent Air Care International, with Pomierski F.H. as the shipper and Mario (Maria) Saludo as the consignee. PAL Airway Bill No. 079- 01180454 Ordinary was issued wherein the requested routing was from Chicago to San Francisco on board TWA Flight 131 of October 27, 1976, and from San Francisco to Manila on board PAL Flight No. 107 of the same date, and from Manila to Cebu on board PAL Flight 149 of October 29, 1976 (See Exh. E, also Exh. 1-PAL)." 26 (Emphasis supplied.)

Moreover, we are persuaded to believe private respondent PAL's account as to what transpired on October 26, 1976:

". . . pursuant thereto, on 26 October 1976, CMAS acting upon the instruction of Pomierski, F.H., the shipper requested booking of the casketed remains of Mrs. Cristina (sic) Saludo on board PAL's San Francisco-Manila Flight No. PR 107 on October 27, 1976.

"2. To signify acceptance and confirmation of said booking, PAL issued to said Pomierski

F.H., PAL Airway Bill No. 079-01180454 dated October 27, 1976 (sic, '10/26/76'). PAL confirmed the booking and transporting of the shipment on board of its Flight PR 107 on October 27, 1976 on the basis of the representation of the shipper and/or CMAS that. the said cargo would arrive in San Francisco from Chicago on board United Airlines Flight US 121 on 27 October 1976." 27

In other words,, on October 26, 1976 the cargo containing the casketed remains of Crispina Saludo was booked for PAL Flight Number PR-107 leaving San Francisco for Manila on October 27, 1976. PAL Airway Bill No. 079-01180454 was issued, not as evidence of receipt of delivery of the Cargo on October 26, 1976, but merely as a confirmation of the booking thus made for the San Francisco-Manila flight scheduled on October 27, 1976. Actually, it was not until October 28, 1976 that PAL received physical delivery of the body at San Francisco, as duly evidenced by the Interline Freight Transfer Manifest of the American Airline Freight System and signed for by Virgilio Rosales at 1945H, or 7:45 P.M. on said date. 28

Explicit is the rule under Article 1736 of the Civil Code that the extraordinary responsibility of the common carrier begins from the time the goods are delivered to the carrier. This responsibility remains in full force and effect even when they are temporarily unloaded or stored in transit, unless the shipper or owner exercises the right of stoppage in transitu, 29 and terminates only after the lapse of a reasonable time for the acceptance of the goods by the consignee or such other person entitled to receive them. 30 And, there is delivery to the carrier when the goods are ready for and have been placed in the exclusive possession, custody and control of the carrier for the purpose of their immediate transportation and the carrier has accepted them. 31 Where such a delivery has thus been accepted by the carrier, the liability of the common carrier commenceseo instanti. 32

Hence, while we agree with petitioners that the extraordinary diligence statutorily required to be observed by the carrier instantaneously commences upon delivery of the goods thereto, for such duty to commence there must in fact have been delivery of the cargo subject of the contract of carriage. Only when such fact of delivery has been unequivocally established can the liability for loss, destruction or deterioration of goods in the custody of the carrier, absent the excepting causes under Article 1734, attach and the presumption of fault of the carrier under Article 1735 be invoked.

As already demonstrated, the facts, in the case at bar belie the averment that there was delivery of the cargo to the carrier on October 26, 1976. Rather, as earlier explained, the body intended to be shipped as agreed upon was, really placed in the possession and control of PAL on October 28, 1976 and it was from that date that private respondents became responsible for the agreed cargo under their undertakings in PAL Airway Bill No. 079-01180454. Consequently, for the switching of caskets prior thereto which was not caused by them., and subsequent events caused thereby, private respondents cannot be held liable. prLL

Petitioners, proceeding on the premise that there was delivery of the cargo to private respondents on October 26, 1976 and that the latter's extraordinary responsibility had by then become operative, insist on foisting the blame on private respondents for the switching of the two caskets which occurred on October 27, 1976. It is argued that since there is no clear evidence establishing the fault of Continental Mortuary Air Services (CMAS) for the mix-up, private respondents are presumably negligent pursuant to Article 1735 of the Civil Code and, for failure to rebut such presumption, they must necessarily be

held liable; or, assuming that CMAS was at fault, the same does not absolve private respondents of liability because whoever brought the cargo to the airport, or loaded it on the plane did so as agent of private respondents.

This contention is without merit. As pithily explained by the Court of Appeals:

"The airway bill expressly provides that 'Carrier certifies goods described below were received for carriage', and said cargo was 'casketed human remains of Crispina Saludo', with 'Maria Saludo as Consignee: Pomierski F.H. as Shipper;: Air Care International as carrier's agent.' On the face of the said airway bill, the specific flight numbers, specific routes of shipment and dates of departure and arrival were typewritten, to wit: Chicago TWA Flight 131/27 to San Francisco and from San Francisco by PAL 107 on October 27, 1976 to Philippines and to Cebu via PAL Flight 149 on October 29, 1976. The airway bill also contains the following typewritten words, as follows: 'all documents have been examined (sic). Human remains of Crispina Saludo. Please return back (sic) first available flight to SFO.

"But, as it turned out and was discovered later the casketed human remains which was issued PAL Airway Bill #079-1180454 was not the remains of Crispina Saludo, the casket containing her remains having been shipped to Mexico City.

"However, it should be noted that, Pomierski F.H., the shipper of Mrs. Saludo's remains, hired Continental Mortuary Services (hereafter referred to as C.M.A.S. ), which is engaged in the business of transporting and forwarding human remains. Thus, C.M.A.S. made all the necessary arrangements — such as flights, transfers, etc. — for shipment of the remains of Crispina Saludo.

'The remains were taken on October 26th, 1976, to C.M.A.S. at the airport. These people made all the necessary arrangements, such as flights, transfers, etc. This is a national service used by undertakers throughout the nation. They furnished the air pouch which the casket is enclosed in, and they see that the remains are taken to the proper air freight terminal. I was very surprised when Miss Saludo called me to say that the remains were not at the west coast terminal. I immediately called C.M.A.S. They called me back in a matter of ten minutes to inform me that the remains were on a plane to Mexico City. The man said that there were two bodies at the terminal, and somehow they were switched. . . (Exh. 6-'TWA', which is the memo or incident report enclosed in the stationery of Walter Pomierski & Sons Ltd.)'

"Consequently, when the cargo was received from C.M.A.S. at the Chicago airport terminal

for shipment, which was supposed to contain the remains of Crispina Saludo, Air Care International and/or TWA, had no way of determining its actual contents, since the casket was hermetically sealed by the Philippine Vice-Consul in Chicago and in an air pouch of C.M.A.S., to the effect that Air Care International and/or TWA had to rely on the information furnished by the shipper regarding the cargo's content. Neither could Air Care International and/or TWA open the casket for further verification, since they were not only without authority to do so, but even prohibited.

"Thus, under said circumstances, no fault and/or negligence can be attributed to PAL (even if Air Care International should be considered as an agent of PAL) and/or TWA, the entire fault or negligence being exclusively with C.M.A.S." 33 (Emphasis supplied.)

It can correctly and logically be concluded, therefore that the switching occurred or, more accurately, was discovered on October 27, 1976; and based on the above findings of the Court of Appeals, it happened while the cargo was still with CMAS, well before the same was placed in the custody of private respondents.

Thus, while the Air Cargo Transfer Manifest of TWA of October 27, 1976 34 was signed by Garry Marcial of PAL at 1400H, or 2:00 P.M., on the same date, thereby indicating acknowledgment by PAL of the transfer to them by TWA of what was in truth the erroneous cargo, said misshipped cargo was in fact withdrawn by CMAS from PAL as shown by the notation on another copy of said manifest 35 stating "Received by CMAS — Due to switch in Chicago 10/27-1805H," the authenticity of which was never challenged. This shows that said misshipped cargo was in fact withdrawn by CMAS from PAL and the correct shipment containing the body of Crispina Saludo was received by PAL only on October 28, 1976, at 1945H, or 7:45 P.M., per American Airlines Interline Freight Transfer Manifest No. AA204312. 36

Witness the deposition of TWA's ramp serviceman, Michael Giosso, on this matter:

"ATTY. JUAN COLLAS, JR.:

 On that date, do (sic) you have occasion to handle or deal with the transfer of cargo from TWA Flight No. 603 to PAL San Francisco?

MICHAEL GIOSSO:

 Yes, I did.

ATTY. JUAN COLLAS, JR.:

 What was your participation with the transfer of the cargo?

MICHAEL GIOSSO:

 I manifested the freight on a transfer manifest and physically moved it to PAL and concluded the transfer by signing it off.

ATTY. JUAN COLLAS, JR.:

 You brought it there yourself?

MICHAEL GIOSSO:

 Yes sir.

ATTY. JUAN COLLAS, JR.:

 Do you have anything to show that PAL received the cargo from TWA on October 27, 1976?

MICHAEL GIOSSO:

 Yes, I do.(Witness presenting a document)

ATTY. JUAN COLLAS, JR.:

 For purposes of clarity, Exhibit I is designated as Exhibit I-TWA.

xxx xxx xxx

ATTY. JUAN COLLAS, JR.:

 This Exhibit I-TWA, could you tell what it is, what it shows?

MICHAEL GIOSSO:

 It shows transfer of manifest on 10-27-76 to PAL at 1400 and verified with two signatures as it completed the transfer.

ATTY. JUAN COLLAS, JR.:

 Very good. Who was the PAL employee who received the cargo?

MICHAEL GIOSSO:

 The name is Garry Marcial." 37

The deposition of Alberto A. Lim. PAL's cargo supervisor at San Francisco, as deponent-witness for PAL, makes this further clarification:

"ATTY. CESAR P. MANALAYSAY:

 You mentioned Airway Bill, Mr. Lim. I am showing to you a PAL Airway Bill Number 01180454 which for purposes of evidence, I would like to request that the same be marked as evidence Exhibit I for PAL.

xxx xxx xxx

 In what circumstances did you encounter Exhibit I-PAL?

ALBERTO A. LIM:

 If I recall correctly, I was queried by Manila, our Manila office with regard to a certain complaint that a consignee filed that this shipment did not arrive on the day that the consignee expects the shipment to arrive.

ATTY. CESAR P. MANALAYSAY:

 Okay. Now, upon receipt of that query from your Manila office, did you conduct any investigation to pinpoint the possible causes of mishandling?

ALBERTO A. LIM:

 Yes.

xxx xxx xxx

ATTY. CESAR P. MANALAYSAY:

 What is the result of your investigation?

ALBERTO A. LIM:

 In the course of my investigation, I found that we received the body on October 28, 1976, from American Airlines.

ATTY. CESAR P. MANALAYSAY:

 What body are you referring to?

xxx xxx xxx

ALBERTO A. LIM:

 The remains of Mrs. Cristina (sic) Saludo.

ATTY. CESAR P. MANALAYSAY:

 Is that the same body mentioned in this Airway Bill?

ALBERTO A. LIM:

 Yes.

ATTY. CESAR P MANALAYSAY:

 What time did you receive said body on October 28, 1976?

ALBERTO A. LIM:

 If I recall correctly, approximately 7:45 of October 28, 1976.

ATTY. CESAR P. MANALAYSAY:

 Do you have any proof with you to back the statement?

ALBERTO A. LIM:

 Yes. We have on our records a Transfer Manifest from American Airlines Number 204312 showing that we received a human remains shipment belong to Mrs. Cristina (sic) Saludo or the human remains of Mrs. Cristina (sic) Saludo.

ATTY. CESAR P. MANALAYSAY:

 At this juncture, may I request that the Transfer Manifest referred to by the witness be marked as an evidence as Exhibit II-PAL.

xxx xxx xxx

 Mr. Lim, yesterday your co-defendant TWA presented as their Exhibit I evidence tending to show that on October 27, 1976 at about 2:00 in the afternoon they delivered to you a cargo bearing human remains. Could you go over this Exhibit I and please give us your comments as to that exhibit?

ATTY. ALBERTO C. MENDOZA:

 That is a vague question. I would rather request that counsel propound specific questions rather than asking for comments on Exhibit I-TWA.

ATTY. CESAR P. MANALAYSAY:

 In that case, I will reform my question. Could you tell us whether TWA in fact delivered to you the human remains as indicated in that Transfer Manifest?

ALBERTO A. LIM:

 Yes, they did.

ATTY. CESAR P. MANALAYSAY:

 I noticed that the Transfer Manifest of TWA marked as Exhibit I-TWA bears the same numbers or the same entries as the Airway Bill marked as Exhibit I-A PAL tending to show that this is the human remains of Mrs. Cristina (sic) Saludo. Could you tell us whether this is true?

ALBERTO A. LIM:

 It is true that we received human remains shipment from TWA as indicated on this Transfer Manifest. But in the course of investigation, it was found out that the human remains transferred to us is not the remains of Mrs. Cristina (sic) Saludo which is the reason why we did not board it on our flight." 38

Petitioners consider TWA's statement that "it had to rely on the information furnished by the shipper" a lame excuse and that its failure to prove that its personnel verified and identified the contents of the casket before loading the same constituted negligence on the part of TWA. 39

We uphold the favorable consideration by the Court of Appeals of the following findings of the trial court:

"It was not (to) TWA, but to C.M.A.S. that the Pomierski & Son Funeral Home delivered the casket containing the remains of Crispina Saludo. TWA would have no knowledge therefore that the remains of Crispina Saludo were not the ones inside the casket that was being presented to it for shipment. TWA would have to rely on the representations of C.M.A.S. The casket was hermetically sealed and also sealed by the Philippine Vice Consul in Chicago. TWA or any airline for that matter would not have opened such sealed casket just for the purpose of ascertaining whose body was inside and to make sure that the remains inside were those of the particular person indicated to be by C.M.A.S. TWA had to accept whatever information was being furnished by the shipper or by the one presenting the casket for shipment. And so as a matter of fact, TWA carried to San Francisco and transferred to defendant PAL a shipment covered by or under PAL Airway Bill No. 079-ORD-01180454, the

airway bill for the shipment of the casketed remains of Crispina Saludo. Only, it turned out later, while the casket was already with PAL, that what was inside the casket was not the body of Crispina Saludo so much so that it had to be withdrawn by C.M.A.S. from PAL. The body of Crispina Saludo had been shipped to Mexico. The casket containing the remains of Crispina Saludo was transshipped from Mexico and arrived in San Francisco the following day on board American Airlines. It was immediately loaded by PAL on its flight for Manila.

"The foregoing points at C.M.A.S., not defendant TWA much less defendant PAL, as the ONE responsible for the switching or mix-up of the two bodies at the Chicago Airport terminal, and started a chain reaction of the misshipment of the body of Crispina Saludo and a one-day delay in the delivery thereof to its destination. 40

Verily, no amount of inspection by respondent airline companies could have guarded against the switching that had already taken place. Or, granting that they could have opened the casket to inspect its contents, private respondents had no means of ascertaining whether the body therein contained was indeed that of Crispina Saludo except, possibly, if the body was that of a male person and such fact was visually apparent upon opening the casket. However, to repeat, private respondents had no authority to unseal and open the same nor did they have any reason or justification to resort thereto.

It is the right of the carrier to require good faith on the part of those persons who deliver goods to be carried, or enter into contracts with it, and inasmuch as the freight may depend on the value of the article to be carried, the carrier ordinarily has the right to inquire as to its value. Ordinarily, too, it is the duty of the carrier to make inquiry as to the general nature of the articles shipped and of their value before it consents to carry them; and its failure to do so cannot defeat the shipper's right to recovery of the full value of the package if lost, in the absence of showing of fraud or deceit on the part of the shipper. In the absence of more definite information, the carrier has the right to accept shipper's marks as to the contents of the package offered for transportation and is not bound to inquire particularly about them in order to take advantage of a false classification and where a shipper expressly represents the contents of a package to be of a designated character, it is not the duty of the carrier to ask for a repetition of the statement nor disbelieve it and open the box and see for itself. 41 However, where a common carrier has reasonable ground to suspect that the offered goods are of a dangerous or illegal character, the carrier has the right to know the character of such goods and to insist on an inspection, if reasonable and practical under the circumstances, as a condition of receiving and transporting such goods. 42

It can safely be said then that a common carrier is entitled to fair representation of the nature and value of the goods to be carried, with the concomitant right to rely thereon, and further noting at this juncture that a carrier has no obligation to inquire into the correctness or sufficiency of such information. 43 The consequent duty to conduct an inspection thereof arises in the event that there should be reason to doubt the veracity of such representations. Therefore, to be subjected to unusual search, other than the routinary inspection procedure customarily undertaken, there must exist proof that would justify cause for apprehension that the baggage is dangerous as to warrant exhaustive inspection, or even refusal to accept carriage of the same; and it is the failure of the carrier to act accordingly in the face of such proof that constitutes the basis of the common carrier's liability. 44

In the case at bar, private respondents had no reason whatsoever to doubt the truth of the shipper's representations. The airway bill expressly providing that "carrier certifies goods received below were received for carriage," and that the cargo contained "casketed human remains of Crispina Saludo," was issued on the basis of such representations. The reliance thereon by private respondents was reasonable and, for so doing, they cannot be said to have acted negligently. Likewise, no evidence was adduced to suggest even an iota of suspicion that the cargo presented for transportation was anything other than what it was declared to be, as would require more than routine inspection or call for the carrier to insist that the same be opened for scrutiny of its contents per declaration.

Neither can private respondents be held accountable on the basis of petitioners' preposterous proposition that whoever brought the cargo to the airport or loaded it on the airplane did so as agent of private respondents, so that even if CMAS whose services were engaged for the transit arrangements for the remains was indeed at fault, the liability therefor would supposedly still be attributable to private respondents.

While we agree that the actual participation of CMAS has been sufficiently and correctly established, to hold that it acted as agent for private respondents would be both an inaccurate appraisal and an unwarranted categorization of the legal position it held in the entire transaction.

It bears repeating that CMAS was hired to handle all the necessary shipping arrangements for the transportation of the human remains of Crispina Saludo to Manila. Hence, it was to CMAS that the Pomierski & Son Funeral Home, as shipper, brought the remains of petitioners' mother for shipment, with Maria Saludo as consignee. Thereafter, CMAS booked the shipment with PAL through the carrier's agent, Air Care International. 45 With its aforestated functions, CMAS may accordingly be classified as a forwarder which, by accepted commercial practice, is regarded as an agent of the shipper and not of the carrier. As such, it merely contracts for the transportation of goods by carriers, and has no interest in the freight but receives compensation from the shipper as his agent. 46

At this point, it can be categorically stated that, as culled from the findings of both the trial court and appellate court, the entire chain of events which culminated in the present controversy was not due to the fault or negligence of private respondents. Rather, the facts of the case would point to CMAS as the culprit. Equally telling of the more likely possibility of CMAS' liability is petitioners' letter to and demanding an explanation from CMAS regarding the statement of private respondents laying the blame on CMAS for the incident, portions of which, reading as follows:

". . . we were informed that the unfortunate mix-up occurred due to your negligence. . .

"Likewise, the two airlines pinpoint the responsibility upon your agents. Evidence were presented to prove that allegation.

"On the face of this overwhelming evidence we could and should have filed a case against you. . ." 47

clearly allude to CMAS as the party at fault. This is tantamount to an admission by petitioners that they consider private respondents without fault, or is at the very least indicative of the fact that petitioners entertained serious doubts as to whether herein private respondents were responsible for the unfortunate turn of events.

Undeniably, petitioners' grief over the death of their mother was aggravated by the unnecessary inconvenience and anxiety that attended their efforts to bring her body home for a decent burial. This

is unfortunate and calls for sincere commiseration with petitioners. But, much as we would like to give them consolation for their undeserved distress, we are barred by the inequity of allowing recovery of the damages prayed for by them at the expense of private respondents whose fault or negligence in the very acts imputed to them has not been convincingly and legally demonstrated.

Neither are we prepared to delve into, much less definitively rule on, the possible liability of CMAS as the evaluation and adjudication of the same is not what is presently at issue here and is best deferred to another time and addressed to another forum.

II. Petitioners further fault the Court of Appeals for ruling that there was no contractual breach on the part of private respondents as would entitle petitioners to damages.

Petitioners hold that respondent TWA, by agreeing to transport the remains of petitioners' mother on its Flight 131 from Chicago to San Francisco on October 27, 1976, made itself a party to the contract of carriage and, therefore, was bound by the terms of the issued airway bill. When TWA undertook to ship the remains on its Flight 603, ten hours earlier than scheduled, it supposedly violated the express agreement embodied in the airway bill. It was allegedly this breach of obligation which compounded, if not directly caused, the switching of the caskets.

In addition, petitioners maintain that since there is no evidence as to who placed the body on board Flight 603, or that CMAS actually put the cargo on that flight, or that the two caskets at the Chicago airport were to be transported by the same airline, or that they came from the same funeral home, or that both caskets were received by CMAS, then the employees or agents of TWA presumably caused the mix-up by loading the wrong casket on the plane. For said error, they contend, TWA must necessarily be presumed negligent and this presumption of negligence stands undisturbed unless rebutting evidence is presented to show that the switching or misdelivery was due to circumstances that would exempt the carrier from liability.

Private respondent TWA professes otherwise. Having duly delivered or transferred the cargo to its co-respondent PAL on October 27, 1976 at 2:00 P.M., as supported by the TWA Transfer Manifest, TWA faithfully complied with its obligation under the airway bill. Said faithful compliance was not affected by the fact that the remains were shipped on an earlier flight as there was no fixed time for completion of carriage stipulated on. Moreover, the carrier did not undertake to carry the cargo aboard any specified aircraft, in view of the condition on the back of the airway bill which provides:

"CONDITIONS OF CONTRACT

xxx xxx xxx

"It is agreed that no time is fixed for the completion of carriage hereunder and that Carrier may without notice substitute alternate carriers or aircraft. Carrier assumes no obligation to carry the goods by any specified aircraft or over any particular route or routes or to make connection at any point according to any particular schedule, and Carrier is hereby authorized to select, or deviate from the route or routes of shipment, notwithstanding that the same may be stated on the face hereof. The shipper guarantees payment of all charges and advances." 48

Hence, when respondent TWA shipped the body on an earlier flight and on a different aircraft, it was acting well within its rights. We find this argument tenable.

The contention that there was contractual breach on the part of private respondents is founded on the postulation that there was ambiguity in the terms of the airway bill, hence petitioners' insistence on the application of the rules on interpretation of contracts and documents. We find no such ambiguity. The terms are clear enough as to preclude the necessity to probe beyond the apparent intendment of the contractual provisions.

The hornbook rule on interpretation of contracts consecrates the primacy of the intention of the parties, the same having the force of law between them. When the terms of the agreement are clear and explicit, that they do not justify an attempt to read into any alleged intention of the parties, the terms are to be understood literally just as they appear on the face of the contract. 49 The various stipulations of a contract shall be interpreted together 50 and such a construction is to be adopted as will give effect to all provisions thereof. 51 A contract cannot be construed by parts, but its clauses should be interpreted in relation to one another. The whole contract must be interpreted or read together in order to arrive at its true meaning. Certain stipulations cannot be segregated and then made to control; neither do particular words or phrases necessarily determine the character of a contract. The legal effect of the contract is not to be determined alone by any particular provision disconnected from all others, but in the ruling intention of the parties as gathered from all the language they have used and from their contemporaneous and subsequent acts. 52

Turning to the terms of the contract at hand, as presented by PAL Air Waybill No. 079-01180454, respondent court approvingly quoted the trial court's disquisition on the aforequoted condition appearing on the reverse side of the airway bill and its disposition of this particular assigned error:

"The foregoing stipulation fully answers plaintiffs' objections to the one-day delay and the shipping of the remains in TWA Flight 603 instead of TWA Flight 131. Under the stipulation, parties agreed that no time was fixed to complete the contract of carriage and that the carrier may, without notice, substitute alternate carriers or aircraft. The carrier did not assume the obligation to carry the shipment on any specified aircraft.

xxx xxx xxx

"Furthermore, contrary to the claim of plaintiffs-appellants, the conditions of the Air Waybill are big enough to be read and noticed. Also, the mere fact that the cargo in question was shipped in TWA Flight 603, a flight earlier on the same day than TWA Flight 131, did not in any way cause or add to the one-day delay complained of and/or the switching or mix-up of the bodies." 53

Indubitably, that private respondent can use substitute aircraft even without notice and without the assumption of any obligation whatsoever to carry the goods on any specified aircraft is clearly sanctioned by the contract of carriage as specifically provided for under the conditions thereof.

Petitioners' invocation of the interpretative rule in the Rules of Court that written words control printed words in documents, 54 to bolster their assertion that the typewritten provisions regarding the routing and flight schedule prevail over the printed conditions, is tenuous. Said rule may be considered only when there is inconsistency between the written and printed words of the contract.

As previously stated, we find no ambiguity in,the contract subject of this case that would call for the application of said rule. In any event, the contract has provided for such a situation by explicitly stating that the above condition remains effective "notwithstanding that the same (fixed time for completion of carriage, specified aircraft, or any particular route or schedule) may be stated on the face hereof." While petitioners hinge private respondents' culpability on the fact that the carrier "certifies goods described below were received for carriage," they may have overlooked that the statement on the face of the airway bill properly and completely reads —

"Carrier certifies goods described below were received for carriage subject to the Conditions on the reverse hereof the goods then being in apparent good order and condition except as noted hereon." 55 (Emphasis supplied.)

Private respondents further aptly observe that the carrier's certification regarding receipt of the goods for carriage "was of a Waybill, including Condition No. 5 — and thus if plaintiffs-appellants had recognized the former, then with more reason they were aware of the latter." 56

In the same vein, it would also be incorrect to accede to the suggestion of petitioners that the typewritten specifications of the flight, routes and dates of departures and arrivals on the face of the airway bill constitute a special contract which modifies the printed conditions at the back thereof. We reiterate that typewritten provisions of the contract are to be read and understood subject to and in view of the printed conditions, fully reconciling and giving effect to the manifest intention of the parties to the agreement. LexLib

The oft-repeated rule regarding a carrier's liability for delay is that in the absence of a special contract, a carrier is not an insurer against delay in transportation of goods. When a common carrier undertakes to convey goods, the law implies a contract that they shall be delivered at destination within a reasonable time, in the absence of any agreement as to the time of delivery. 57 But where a carrier has made an express contract to transport and deliver property within a specified time, it is bound to fulfill its contract and is liable for any delay, no matter from what cause it may have arisen. 58 This result logically follows from the well-settled rule that where the law creates a duty or charge, and the party is disabled from performing it without any default in himself, and has no remedy over, then the law will excuse him, but where the party by his own contract creates a duty or charge upon himself, he is bound to make it good notwithstanding any accident or delay by inevitable necessity because he might have provided against it by contract. Whether or not there has been such an undertaking on the part of the carrier is to be determined from the circumstances surrounding the case and by application of the ordinary rules for the interpretation of contracts. 59

Echoing the findings of the trial court, the respondent court correctly declared that —

"In a similar case of delayed delivery of air cargo under a very similar stipulation contained in the airway bill which reads: 'The carrier does not obligate itself to carry the goods by any specified aircraft or on a specified time. Said carrier being hereby authorized to deviate from the route of the shipment without any liability therefore', our Supreme Court ruled that common carriers are not obligated by law to carry and to deliver merchandise, and persons are not vested with the right to prompt delivery, unless such common carriers previously assume the obligation. Said rights and obligations are

created by a specific contract entered into by the parties (Mendoza vs. PAL, 90 Phil. 836).

"There is no showing by plaintiffs that such a special or specific contract had been entered into between them and the defendant airline companies.

"And this special contract for prompt delivery should call the attention of the carrier to the circumstances surrounding the case and the approximate amount of damages to be suffered in case of delay (See Mendoza vs. PAL, supra). There was no such contract entered into in the instant case." 60

Also, the theory of petitioners that the specification of the flights and dates of departures and arrivals constitute a special contract that could prevail over the printed stipulations at the back of the airway bill is vacuous. To countenance such a postulate would unduly burden the common carrier for that would have the effect of unilaterally transforming every single bill of lading or trip ticket into a special contract by the simple expedient of filling it up with the particulars of the flight, trip or voyage, and thereby imposing upon the carrier duties and/or obligations which it may not have been ready or willing to assume had it been timely advised thereof.

Neither does the fact that the challenged condition No. 5 was printed at the back of the airway bill militate against its binding effect on petitioners as parties to the contract, for there were sufficient indications on the face of said bill that would alert them to the presence of such additional condition to put them on their guard. Ordinary prudence on the part of any person entering or contemplating to enter into a contract would prompt even a cursory examination of any such conditions, terms and/or stipulations.

There is a holding in most jurisdictions that the acceptance of a bill of lading without dissent raises a presumption that all terms therein were brought to the knowledge of the shipper and agreed to by him, and in the absence of fraud or mistake, he is estopped from thereafter denying that he assented to such terms. This rule applies with particular force where a shipper accepts a bill of lading with full knowledge of its contents, and acceptance, under such circumstances makes it a binding contract. In order that any presumption of assent to a stipulation in a bill of lading limiting the liability of a carrier may arise, it must appear that the clause containing this exemption from liability plainly formed a part of the contract contained in the bill of lading. A stipulation printed on the back of a receipt or bill of lading or on papers attached to such receipt will be quite as effective as if printed on its face, if it is shown that the consignor knew of its terms. Thus, where a shipper accepts a receipt which states that its conditions are to be found on the back, such receipt comes within the general rule, and the shipper is held to have accepted and to be bound by the conditions there to be found. 61

Granting arguendo that Condition No. 5 partakes of the nature of a contract of adhesion and as such must be construed strictly against the party who drafted the same or gave rise to any ambiguity therein, it should be borne in mind that a contract of adhesion may be struck down as void and unenforceable, for being subversive of public policy, only when the weaker party is imposed upon in dealing with the dominant bargaining party and is reduced to the alternative of taking it or leaving it, completely deprived of the opportunity to bargain on equal footing. 62 However, Ong Yiu vs. Court of Appeals, et al. 63 instructs us that contracts of adhesion are not entirely prohibited. The one who adheres to the contract is in reality free to reject it entirely; if he adheres, he gives his consent. Accordingly, petitioners, far from being the weaker party in this situation, duly

signified their presumed assent to all terms of the contract through their acceptance of the airway bill and are consequently bound thereby. It cannot be gainsaid that petitioners were not without several choices as to carriers in Chicago with its numerous airways and airlines servicing the same. LLpr

We wish to allay petitioners' apprehension that Condition No. 5 of the airway bill is productive of mischief as it would validate delay in delivery, sanction violations of contractual obligations with impunity or put a premium on breaches of contract.

Just because we have said that Condition No. 5 of the airway bill is binding upon the parties to and fully operative in this transaction, it does not mean, and let this serve as fair warning to respondent carriers, that they can at all times whimsically seek refuge from liability in the exculpatory sanctuary of said Condition No. 5 or arbitrarily vary routes, flights and schedules to the prejudice of their customers. This condition only serves to insulate the carrier from liability in those instances when changes in routes, flights and schedules are clearly justified by the peculiar circumstances of a particular case, or by general transportation practices, customs and usages, or by contingencies or emergencies in aviation such as weather turbulence, mechanical failure, requirements of national security and the like. And even as it is conceded that specific routing and other navigational arrangements for a trip, flight or voyage, or variations therein, generally lie within the discretion of the carrier in the absence of specific routing instructions or directions by the shipper, it is plainly incumbent upon the carrier to exercise its rights with due deference to the rights, interests and convenience of its customers.

A common carrier undertaking to transport property has the implicit duty to carry and deliver it within a reasonable time, absent any particular stipulation regarding time of delivery, and to guard against delay. In case of any unreasonable delay, the carrier shall be liable for damages immediately and proximately resulting from such neglect of duty. 64 As found by the trial court, the delay in the delivery of the remains of Crispina Saludo, undeniable and regrettable as it was, cannot be attributed to the fault, negligence or malice of private respondents, 65 a conclusion concurred in by respondent court and which we are not inclined to disturb.

We are further convinced that when TWA opted to ship the remains of Crispina Saludo on an earlier flight, it did so in the exercise of sound discretion and with reasonable prudence, as shown by the explanation of its counsel in his letter of February 19, 1977 in response to petitioners' demand letter:

"Investigation of TWA's handling of this matter reveals that although the shipment was scheduled on TWA Flight 131 of October 27, 1976, it was actually boarded on TWA Flight 603 of the same day, approximately 10 hours earlier, in order to assure that the shipment would be received in San Francisco in sufficient time for transfer to PAL. This transfer was effected in San Francisco at 2:00 P.M. on October 27, 1976. 66

Precisely, private respondent TWA knew of the urgency of the shipment by reason of this notation on the lower portion of the airway bill: "All documents have been certified. Human remains of Cristina (sic) Saludo. Please return bag first available flight to SFO." Accordingly, TWA took it upon itself to carry the remains of Crispina Saludo on an earlier flight, which we emphasize it could do under the terms of the airway bill, to make sure that there would be enough time for loading said remains on the transfer flight on board PAL.

III. Petitioners challenge the validity of respondent court's finding that private respondents are not liable for tort on account of the humiliating, arrogant and indifferent acts of their officers and personnel. They posit that since their mother's remains were transported ten hours earlier than originally scheduled, there was no reason for private respondents' personnel to disclaim knowledge of the arrival or whereabouts of the same other than their sheer arrogance, indifference and extreme insensitivity to the feelings of petitioners. Moreover, being passengers and not merely consignors of goods, petitioners had the right to be treated with courtesy, respect, kindness and due consideration.

In riposte, TWA claims that its employees have always dealt politely with all clients, customers and the public in general. PAL, on the other hand, declares that in the performance of its obligation to the riding public, other customers and clients, it has always acted with justice, honesty, courtesy and good faith.

Respondent appellate court found merit in and reproduced the trial court's refutation of this assigned error:

"About the only evidence of plaintiffs that may have reference to the manner with which the personnel of defendants treated the two plaintiffs at the San Francisco Airport are the following pertinent portions of Maria Saludo's testimony:

'Q When you arrived there, what did you do, if any?

A I immediately went to the TWA counter and I inquired about whether my mother was there or if they knew anything about it.

Q What was the answer?

A They said they do not know. So, we waited.

Q About what time was that when you reached San Francisco from Chicago?

A I think 5 o'clock. Somewhere around that in the afternoon.

Q You made inquiry it was immediately thereafter?

A Right after we got off the plane.

Q Up to what time did you stay in the airport to wait until the TWA people could tell you the whereabouts?

A Sorry, Sir, but the TWA did not tell us anything We stayed there until about 9 o'clock. They have not heard anything about it. They did not say anything.

Q Do you want to convey to the Court that from 5 up to 9 o'clock in the evening you yourself went back to the TWA and they could not tell you where the remains of your mother were?

A Yes sir.

Q And after nine o'clock, what did you do?

A I told my brother my Mom was supposed to be on the Philippine Airlines flight. 'Why don't we check with PAL instead to see if she was there?' We tried to

comfort each other. I told him anyway that was a shortest flight from Chicago to California. We will be with our mother on this longer flight. So, we checked with the PAL.

Q What did you find?

A We learned, Yes, my Mom would be on the flight.

Q Who was that brother?

A Saturnino Saludo.

Q And did you find what was your flight from San Francisco to the Philippines?

A I do not know the number. It was the evening flight of the Philippine Airline(s) from San Francisco to Manila.

Q You took that flight with your mother?

A We were scheduled to, Sir.

Q Now, you could not locate the remains of your mother in San Francisco could you tell us what did you feel?

A After we were told that my mother was not there?

Q After you learned that your mother could not fly with you from Chicago to California?

A Well, I was very upset. Of course, I wanted the confirmation that my mother was in the West Coast. The flight was about 5 hours from Chicago to California. We waited anxiously all that time on the plane. I wanted to be assured about my mother's remains. But there was nothing and we could not get any assurance from anyone about it.

Q Your feeling when you reached San Francisco and you could not find out from the TWA the whereabouts of the remains, what did you feel?

A Something nobody would be able to describe unless he experiences it himself. It is a kind of panic. I think it's a feeling you are about to go crazy. It is something do not want to live through again.' (Inting, t.s.n., Aug. 9, 1983, pp. 14-18).

"The foregoing does not show any humiliating or arrogant manner with which the personnel of both defendants treated the two plaintiffs. Even their alleged indifference is not clearly established. The initial answer of the TWA personnel at the counter that they did not know anything about the remains, and later, their answer that they have not heard anything about the remains, and the inability of the TWA counter personnel to inform the two plaintiffs of

the whereabouts of the remains, cannot be said to be total or complete indifference to the said plaintiffs. At any rate, it is any rude or discourteous conduct, malfeasance or neglect, the use of abusive or insulting language calculated to humiliate and shame passenger or bad faith by or on the part of the employees of the carrier that gives the passenger an action for damages against the carrier (Zulueta vs. Pan American World Airways, 43 SCRA 397; Air France vs. Carrascoso, et al., 18 SCRA 155; Lopez, et al. vs. Pan American World Airways, 16 SCRA 431; Northwest Airlines, Inc. vs. Cuenca, 14 SCRA 1063), and none of the above is obtaining in the instant case." 67

We stand by respondent court's findings on this point, but only to the extent where it holds that the manner in which private respondent TWA's employees dealt with petitioners was not grossly humiliating, arrogant or indifferent as would assume the proportions of malice or bad faith and lay the basis for an award of the damages claimed. It must however, be pointed out that the lamentable actuations of respondent TWA's employees leave much to be desired, particularly so in the face of petitioners' grief over the death of their mother, exacerbated by the tension and anxiety wrought by the impasse and confusion over the failure to ascertain over an appreciable period of time what happened to her remains. llcd

Airline companies are hereby sternly admonished that it is their duty not only to cursorily instruct but to strictly require their personnel to be more accommodating towards customers, passengers and the general public. After all, common carriers such as airline companies are in the business of rendering public service, which is the primary reason for their enfranchisement and recognition in our law. Because the passengers in a contract of carriage do not contract merely for transportation, they have a right to be treated with kindness, respect, courtesy and consideration. 68 A contract to transport passengers is quite different in kind and degree from any other contractual relation, and generates a relation attended with public duty. The operation of a common carrier is a business affected with public interest and must be directed to serve the comfort and convenience of passengers. 69 Passengers are human beings with human feelings and emotions; they should not be treated as mere numbers or statistics for revenue.

The records reveal that petitioners, particularly Maria and Saturnino Saludo, agonized for nearly five hours, over the possibility of losing their mother's mortal remains, unattended to and without any assurance from the employees of TWA that they were doing anything about the situation. This is not to say that petitioners were to be regaled with extra special attention. They were, however, entitled to the understanding and humane consideration called for by and commensurate with the extraordinary diligence required of common carriers, and not the cold insensitivity to their predicament. It is hard to believe that the airline's counter personnel were totally helpless about the situation. Common sense could and should have dictated that they exert a little extra effort in making a more extensive inquiry, by themselves or through their superiors, rather than just shrug off the problem with a callous and uncaring remark that they had no knowledge about it. With all the modern communications equipment readily available to them, which could have easily facilitated said inquiry and which are used as a matter of course by airline companies in their daily operations, their apathetic stance while not legally reprehensible is morally deplorable.

Losing a loved one, especially one's parent, is a painful experience. Our culture accords the tenderest human feelings toward and in reverence to the dead. That the remains of the deceased were subsequently delivered, albeit belatedly, and eventually laid in her

final resting place is of little consolation. The imperviousness displayed by the airline's personnel, even for just that fraction of time, was especially condemnable particularly in the hour of bereavement of the family of Crispina Saludo, intensified by anguish due to the uncertainty of the whereabouts of their mother's remains. Hence, it is quite apparent that private respondents' personnel were remiss in the observance of that genuine human concern and professional attentiveness required and expected of them.

The foregoing observations, however, do not appear to be applicable or imputable to respondent PAL or its employees. No attribution of discourtesy or indifference has been made against PAL by petitioners and, in fact, petitioner Maria Saludo testified that it was to PAL that they repaired after failing to receive proper attention from TWA. It was from PAL that they received confirmation that their mother's remains would be on the same flight to Manila with them.

We find the following substantiation on this particular episode from the deposition of Alberto A. Lim, PAL's cargo supervisor earlier adverted to, regarding their investigation of and the action taken on learning of petitioner's problem:

"ATTY. ALBERTO C. MENDOZA:

 Yes.

 Mr. Lim, what exactly was your procedure adopted in your so called investigation?

ALBERTO A. LIM:

 I called the lead agent on duty at that time and requested for a copy of airway bill, transfer manifest and other documents concerning the shipment.

ATTY. ALBERTO C. MENDOZA:

 Then, what?

ALBERTO A. LIM:

 They proceeded to analyze exactly where PAL failed, if any, in forwarding the human remains of Mrs. Cristina (sic) Saludo. And found out that there was not (sic) delay in shipping the remains of Mrs. Saludo to Manila. Since we received the body from American Airlines on 28 October at 7:45 and we expedited the shipment so that it could have been loaded on our flight leaving at 9:00 in the evening or just barely one hour and 15 minutes prior to the departure of the aircraft. That is so (sic) being the case, I reported to Manila these circumstances." 70

IV. Finally, petitioners insist, as a consequence of the delay in the shipment of their mother's remains allegedly caused by willful contractual breach, on their entitlement to actual, moral and exemplary damages as well as attorney's fees, litigation expenses, and legal interest.

The uniform decisional tenet in our jurisdiction holds that moral damages may be awarded for willful or fraudulent breach of contract 71 or when such breach is attended by malice or bad faith. 72 However, in the absence of strong and positive evidence of fraud, malice or bad faith, said damages cannot be awarded. 73 Neither can, there be an award of exemplary

damages 74 nor of attorney's fees 75 as an item of damages in the absence of proof that defendant acted with malice, fraud or bad faith.

The censurable conduct of TWA's employees cannot, however, be said to have approximated the dimensions of fraud, malice or bad faith. It can be said to be more of a lethargic reaction produced and engrained in some people by the mechanically routine nature of their work and a racial or societal culture which stultifies what would have been their accustomed human response to a human need under a former and different ambience.

Nonetheless, the facts show that petitioners' right to be treated with due courtesy in accordance with the degree of diligence required by law to be exercised by every common carrier was violated by TWA and this entitles them, at least, to nominal damages from TWA alone. Articles 2221 and 2222 of the Civil Code make it clear that nominal damages are not intended for indemnification of loss suffered but for the vindication or recognition of a right violated or invaded. They are recoverable where some injury has been done but the amount of which the evidence fails to show, the assessment of damages being left to the discretion of the court according to the circumstances of the case.76 In the exercise of our discretion, we find an award of P40,000.00 as nominal damages in favor of petitioners to be a reasonable amount under the circumstances of this case.

WHEREFORE, with the modification that an award or P40,000.00 as and by way of nominal damages is hereby granted in favor of petitioners to be paid by respondent Trans World Airlines, the appealed decision is AFFIRMED in all other respects.

SO ORDERED.

Melencio-Herrera, Paras, Padilla and Nocon, JJ., concur.

||| (Saludo, Jr. v. Court of Appeals, G.R. No. 95536, March 23, 1992)

[G.R. No. 16483. December 7, 1921.]

PHILIPPINE TRUST COMPANY, as assignee of Salvador Hermanos, insolvent, plaintiff-appellant, vs. PHILIPPINE NATIONAL BANK, defendant-appellee.

Ross & Lawrence and Ewald E. Selph for appellant.

Roman J. Lacson for appellee.

SYLLABUS

1. INSOLVENT CANNOT MAKE PREFERENCE. — Where a person files a petition in the Court of First Instance to be adjudged insolvent under Act No. 1956 of the Philippine Legislature, pending the final adjudication, the filing of the petition ipso facto takes away from, and deprives the petitioner of the right to, do or commit any act of preference as to creditors.

2. TITLE OF ASSIGNEE RELATES BACK. — Where an insolvency petition is filed in the proper court, and, in the ordinary course of business, the petitioner is adjudged insolvent and an assignee is duly elected, the title of the assignee to the property of the insolvent relates back and becomes vested as of the date the insolvency petition was filed.

3. TITLE CARRIES POSSESSION. — Where in January, 1919, a firm borrowed money from a bank and executed its promissory notes and delivered to the bank

negotiable quedans as collateral to secure their payment, the indorsement and delivery of the quedans and the pledging of the collateral ipso facto carries with it the title to the property described in the quedans, together with the constructive possession of it, and legally the owner and holder of the quedans becomes the owner of the property described in the quedans, and is entitled to its possession.

4. OWNER OF NEGOTIABLE QUEDANS IS OWNER OF PROPERTY. — Where quedans were endorsed and delivered in January, 1919, to secure a preexisting debt, and the insolvency petition was filed on April 21, 1919, the holder of such quedans is the owner of the property therein described, as against the assignee or any creditor of the insolvent.

5. STATEMENTS AND REPRESENTATIONS DO NOT CONVEY TITLE. — Where on February 10, 1919, a firm received certain quedans under a promise to return them on or before February 27th, to which was attached a certificate of the firm dated February 8, 1919, that certain described property was in its bodegas which it promised would not be removed without first consulting its creditor, construed together, such instruments do not constitute a negotiable quedan, and are nothing more than a representation and a promise and do not convey title to the property.

6. ASSIGNEE ENTITLED TO POSSESSION. — Where it appears that on February 8, 1919, on behalf of one of its creditors, a firm made a representation, and on February 10th, made a certificate at to certain property, and filed its insolvency petition on April 21, 1919, and the property was left and remained in possession of the insolvent firm, and was not delivered to the creditor until May 3, 1919, the assignee of the insolvent firm, as against such creditor, is entitled to the possession of the property or its value.

7 DECLARED VALUE MAY BECOME MARKET VALUE. — Where there is no evidence of the actual market value of the property, but the parties themselves placed a declared value on the property at the time of delivery, in the absence of other testimony, the declared value will be considered and treated as the market value.

D E C I S I O N

JOHNS, J p:

The plaintiff and defendant are corporations organized under the laws of the Philippine Islands and domiciled in the city of Manila.

Salvador Hermanos was a copartnership and during the month of January, 1919, executed to the defendant eight promissory notes aggregating P156,000, payable on demand, and each secured by a quedan, or warehouse receipt, issued by the firm of Nieva, Ruiz & Company. Each note recites that it is payable on demand after date, for value received, and that the firm has deposited "with the said bank as collateral security for the payment of this note, or any note given in extension or renewal thereof, as well as for the payment of any other liability or liabilities of the undersigned to the said bank, due or to become due, whether now existing or hereafter arising, the following property owned by the undersigned." The note then specifies the number of the quedan and the amount of copra in piculs, and states that the quedan was issued by Nieva, Ruiz & Company. The note for P8,000, dated January 18, 1919, was secured by warehouse receipt No. 30; for P20,000, dated January

22, 1919, was secured by receipt No. 35; for P20,000, dated January 24, 1919, was secured by receipt No. 38; for P20,000, dated January 27, 1919, was secured by receipt No. 41; for P14,000, dated January 28, 1919, was secured by receipt No. 42; for P18,000, dated January 21, 1919, was secured by receipt No. 33; for P18,000, dated January 23, 1919, was secured by receipt No. 36; and for P18,000, dated January 25, 1919, was secured by receipt No. 39, making a total of 16,051.10 piculs of copra, covered by the warehouse receipts of the firm of Nieva, Ruiz & Company issued to the firm of Salvador Hermanos, and by that firm pledged as collateral to the defendant to secure the payment of the eight above-described notes. Each of them further recites that "on the nonperformance of this promise, or upon the non-payment of any of the liabilities above-mentioned, or upon the failure of the undersigned forthwith, with or without notice, to furnish satisfactory additional securities in case of decline, as aforesaid, then and in either such case, this note and all liabilities of the undersigned, or any of them, shall forthwith become due and payable, without demand or notice, and full power and authority are hereby given to said bank to sell, assign transfer and deliver the whole of the said securities, or any part thereof, or any substitutes therefor or any additions thereto, or any other securities or property given unto or left in the possession of or hereafter given unto or left in the possession of the said bank by the undersigned for safe keeping or otherwise, at any brokers' board or at public or private sale, at the option of said bank or of its president or secretary, without either demand, advertise mentor notice of any kind, which are hereby expressly waived. At any such sale, the said bank may itself purchase the whole or any part of the property sold, free from any right of redemption on the part of the undersigned, which is hereby waived and released." Stamped in red ink across the face of each quedan are the words "Negotiable Warrant," and each of them was in the usual form of warehouse receipts.

On February 10, 1919, the firm of Salvador Hermanos withdrew from the defendant bank, by and with its consent, warehouse receipts Nos. 33, 36, and 39 above described, which the bank was holding as collateral security for each of the three 18,000-peso notes amounting to P54,000. The total amount of copra evidenced by the receipts withdrawn was 6,024.55 piculs, the declared value of which, shown on the face of such receipts, was P90,368.25. At the time of the withdrawal, the firm executed the following writing:

"We received from the Philippine National Bank the warehouse receipts issued by Messrs. Nieva, Ruiz & Company, the contents of which are as follow:

No. Date   Sacks   Piculs   Declared              value

33January 21/19

  2,325   2,040.55   P30,608.25

36January 23/19

  2,175   1,992.00   29,880.00

39January 25/19

  2,335   1,992.00   29,880.00

      _____   ______   ________Total     6,835   6,024.55   90,368.25

"We promise to return to this bank the warehouse receipts above cited on or before the 27th instant. These warehouse receipts are guaranteed by the attached certificate of existence of the effects of the 8th of February, 1919, issued by us.

"Manila, P. I., February 10, 1919.

"SALVADOR HERMANOS.

 "Per (Sgd.) G. SALVADOR."

to which was attached this writing:

"MANILA, P. I., February 8, 1919.

"We hereby certify that there exist the following articles in our bodegas as follows:

"Soler Bodega.

100 tons kapok @ 200.00 P20,000.00100 piculs hemp @ 60.00 6,000.0020,000 sacks (empty) @ 0.30 6,000.001 lot gum copal 1,900.001 lot gum elemi 1,700.00500,000 rattan @ 12.00 6,000.00Aceites y grasas 800.009,000 sacks common salt @ 2.00 18,000.00  ________  60,400.00

"Wise & Co. — Gagalañgin Bodega.

905 cas. Gs. in case @ 12.75 P11,538.75  77 cas. Gs. in drums    54 gals. 64.80 4,989.60    ________      16,528.35    _________    P76,928.35    ========

and promise that none of the above articles would be removed without consulting first with the Philippine National Bank.

"SALVADOR HERMANOS.

"Per (Sgd.) G. SALVADOR."

Neither writing was in any manner authenticated by a notary or by a competent public official. The writing of February 10 is in form a receipt from the firm of Salvador Hermanos to the Philippine National Bank of the quedans, or warehouse receipts, for the copra therein described. The one of February 8 is, in legal effect, the certificate of Salvador Hermanos "that there exist the following articles in our bodegas as follows:" (Here follows the described property. ) That is to say, that the firm certifies that the property described is in the warehouse of the firm.

Act No. 1956 of the Philippine Legislature provides for the suspension of payments, the relief of insolvent debtors, the protection of creditors, and the punishment of fraudulent debtors. The Act provides:

"SECTION 1. This Act shall be known and may be cited as The Insolvency Law, and in accordance with its provisions every insolvent debtor may be permitted to suspend payments or be discharged from his debts and liabilities."

Section 2 provides that debtor who possesses sufficient property to cover the debts, be it an individual, firm or corporation, and who is unable to meet them at maturity, "may petition that he be declared in the state of suspension of payments by the court, or the judge thereof in vacation."

Section 3 enacts that upon the filing of the petition, the court shall make an order calling a meeting of creditors specifying the time and place; that notice thereof shall be published in a newspaper, and that "said order shall further contain an absolute injunction forbidding the petitioning debtor from disposing in any manner of his property, except in so far as concerns the ordinary operations of commerce or of industry in which the petitioner is engaged, and, furthermore, from making any payments outside of the necessary or legitimate expenses of his business or industry, so long as the proceedings relative to the suspension of payments are pending, and said proceedings for the purposes of this Act shall be considered to have been instituted from the date of the filing of the petition."

Section 14, chapter 3, provides that any person owing debts exceeding P1,000 may apply to be discharged from his debts and liabilities by petition to the Court of First Instance in which he has resided for six months preceding the filing of the petition.

Section 18 enacts that upon receiving and filing of the petition, schedule, and inventory, the court, or the judge, shall make an order declaring the petitioner insolvent, and "shall further forbid the payment to the debtor of any debts due to him and the delivery to the debtor, or to any person for him, of any property belonging to him, and the transfer of any property by him, and shall further appoint a time and place for a meeting of the creditors to choose an assignee of the estate."

On April 21, 1919, Salvador Hermanos filed a petition of insolvency in the Court of First Instance of the city of Manila. Article 5 of the petition recites:

"That the following property and merchandise are being pledged in favor of the Philippine National Bank, as shown by a written document, on account of its credit which amounts to P175,563.19, which are described as follows:

81,904 kilos kapok @ 0.20 ko 16,380.80521,600 pieces rattan split 11.00 m 5,737.6093.94 piculs almaciga value  2,300.0080 drums Union gasoline @ 53 gls. each    @ 1.485 gal 6,415.20100 cases gasoline 14.00 cs   1,400.008 drums gasoline @ 54 gals. ea. 1.485 gl 641.5210,000 piculs copra p. picul 14.50 145,000.0035 bales cardboard value 1,451.52      ___________    P179,326.64"

The testimony is undisputed and conclusive that about May 3, 1919, Gregorio Salvador, a member of the firm of Salvador Hermanos, delivered certain goods, wares, and merchandise to and in the warehouse of Nieva, Ruiz & Company, and requested that firm to issue its receipt therefor to and in favor of the Philippine National Bank, and that, pursuant

to such request, that firm did issue eight quedans to the bank as follows:

No. 161 for 32 bales of hemp;

No. 162 for 953 bundles of rattan;

No. 165 for 72 bundles of empty sacks;

No. 167 for 136 sacks of gum;

No. 168 for 1,461 bales of kapok;

No. 175 for 288 packages of Talcum Powder;

No. 176 for 35 packages of cardboard; and

No. 185 for 134 bundles of empty sacks.

On and between May 6, 1919 and August 7, 1919, acting under the terms and provisions of its respective notes, the defendant bank sold all of the personal property for which it held warehouse receipts, or which had been surrendered to it by the Hermanos firm, save and except the property described in the three warehouse receipts, which were released and surrendered to that firm on February 10, 1919.

Based upon its insolvency petition, and in the ordinary course of business, the firm of Salvador Hermanos was adjudged insolvent, and on July 19, 1919, the Philippine Trust Company was elected assignee of said firm and duly qualified. September 13, 1919, as such assignee, it made a demand upon the bank for the surrender and delivery of the property described in all of the above receipts, and, upon the bank's refusal, commenced this action to recover its value alleged to be P242,579.61, claiming that on April 21, 1919, the firm of Salvador Hermanos was the sole and exclusive owner of the property, and that, as to the copra, about June 28, 1919, and after the filing of the insolvency petition, the bank unlawfully seized and converted the copra to its own use, the value of which was P192,260. For a second cause of action, the plaintiff alleges that, as such assignee, it was the owner of the remaining personal property, and that, after the insolvency petition was filed, the defendant unlawfully seized and converted such property to its own use, and that it was of the value of P50,319.61.

For answer, the bank makes a general denial, as to each cause of action, of all of the material allegations of the complaint This presents the question as to who is the owner and entitled to possession of the property. There is but little, if any, dispute as to the facts.

It is conceded that in January, 1919, the firm of Salvador Hermanos executed to the Philippine National Bank the eight promissory notes above described, and that each note was secured by the quedan, or warehouse receipt, of Nieva, Ruiz & Company, issued to the firm of Salvador Hermanos for so many piculs of copra. that the notes are of the same form, the only difference being the date and the amount of the note, and the number of the quedan, or warehouse receipt, and the amount of copra in piculs. Each warehouse receipt was duly numbered, dated and signed by Nieva, Ruiz & Company, and recites "received from Salvador Hermanos the following packages of copra as specified below, which are stored in warehouse No. 2, situated at_____________, subject to the terms and conditions stated on the face and back hereof, to be delivered unto Salvador Hermanos, or order," giving the number of the warehouse where located, and the number of sacks, gross weight and the declared value; across the face of each receipt is stamped in red ink the words "Negotiable Warrant." Among the conditions printed on the back of the receipt is paragraph 4, as follows:

"4. This Company will deliver the packages noted hereon, on surrender to the Company of this warrant endorsed by the party who shall be for the time registered in the books of the Company as the owner of the packages described hereon; and the production by the Company of this warrant shall at all times be conclusive proof that the Packages hereon noted have been properly delivered by the Company and shall exempt the Company from all responsibility in connection with the said packages or goods."

Also the following:

"Delivery is hereby authorized unto________________," opposite which some of the receipts were signed by the firm of Salvador Hermanos, and others were not signed by any one.

The fact remains that at the time the eight promissory notes were executed, a given quedan, or warehouse receipt, was described and incorporated in the note as to its number, when and by whom issued, and the property it represented, and each receipt was then delivered by the firm to the defendant bank, all of which was during the month of January, 1919. The bank never had the manual possession or the physical control of any of this property until after the insolvency petition was filed, and it is for such reason that the plaintiff claims that it was the property of the firm, and that the defendant should account to the assignee.

Each quedan, or warehouse receipt, was specifically described in a given note, and was made a part of it, and the note recites that, for any breach of its terms or conditions, the bank has full power and authority "to sell, assign, transfer and deliver the whole of the said security, or any part thereof, etc.," and that "at any such sale, the said bank may itself purchase the whole or any part of the property sold, free from any right of redemption on the part of the undersigned, which is hereby waived and released."

In addition, the quedan itself was delivered to and held by the bank, and the warehouseman recognized the bank as the owner of the property. Legally speaking, the owner of the quedans, or warehouse receipts, was the owner of the property described in them, and the quedans were given as collateral to secure promissory notes, which, for value received, were executed to the bank.

The execution of the notes, the physical possession of the negotiable quedan, or warehouse receipt, and the recognition of ownership by the warehouseman, legally carries with it both the title to, and the possession of, the property. In such a case, title is not founded on a public instrument which should be authenticated by a notary or by a competent public official. Legally speaking, the execution of the promissory notes and the pledging of the quedans, or warehouse receipts, as collateral, and the describing of them in the notes, and the manual delivery of the quedan, or warehouse receipt itself, carries with it not only the title, but the legal possession of the property. In other words, as to the property described in the quedans, or warehouse receipts, which were pledged, as collateral, in January, 1919, to secure the eight respective promissory notes, both the title and

the possession of that property were delivered to and vested in the defendant bank in January, 1919. Three of those quedans, or warehouse receipts, were returned to the firm by the bank on February 10, 1919, but the bank still owned and held the notes, which were secured but those warehouse receipts, and no part of the debt itself was paid by or through the surrender of the receipts. For such reasons as to the first cause of action, the plaintiff cannot recover, and, as to it, the judgment of the lower court should be affirmed.

The second cause of action presents another and different question.

February 10, 1919, for some unexplained reason, the bank surrendered and returned to Salvador Hermanos the three quedans, or warehouse receipts, Nos. 33, 36, and 39, which the firm had pledged to it as collateral on January 21, 23, and 25, 1919, to secure the payment of the three notes of P18,000 each, executed on those respective dates. In its receipt for them, the firm promised to return the quedans to the bank "on or before the 27th instant;" meaning January 27, 1919, and it was therein stated that such warehouse receipts "are guaranteed by the attached certificate of existence of the effects of the 8th of February, 1919, issued by us." The legal effect of this receipt is a promise on the part of the firm to return the three quedans on or before January 27, 1919, and a statement that such receipts are guaranteed by the attached certificate of the existence in the warehouse of the property described in the certificate. The statement of February 8, recites "we hereby certify that there exist the following articles in our bodegas." Then follows a description of the property. This is nothing but a statement or representation to the effect that the firm has the property in its warehouse Nothing more. After describing the property, the certificate then says: "And promise that none of the above articles would be removed without consulting first with the Philippine National Bank." There is no statement or representation of any kind showing when or from whom the property was received, or how it was held, or who was the owner, or when or to whom it would be delivered When analyzed, this writing is nothing more than a certificate of the firm that the described property was then in its warehouse, and a promise that none of the "articles would be removed without consulting first with the Philippine National Bank." Such a writing would not transfer the title of the property to the bank, or give it possession, either actual or constructive. It will be noted that both the receipt of February 10 and the certificate and promise of February 8, are signed by the firm of Salvador Hermanos, and that the certificate says that the property was then in the firm's warehouse, and that neither instrument was in any manner authenticated by a notary or a competent public official, as provided by article 1216 of the Civil Code, and that the property was in the warehouse of the firm.

Article 1863 of the Civil Code provides:

"In addition to the requisites mentioned in article 1857, it shall be necessary, in order to constitute the contract of pledge, that the pledge be placed in the possession of the creditor or of a third person appointed by common consent."

But here, it appears from the certificate that the property was then in the possession of the firm, who made the certificate, and that it was in the possession of that firm when its insolvency petition was filed on April 21, 1919. It further appears that on May 3, 1919, Gregorio Salvador, a member of the firm, appeared at the offices of Nieva, Ruiz & Company, and requested that firm to issue its warehouse receipts to the

Philippine National Bank for certain goods, which on that date he placed in the warehouse of that company, and, in accord with his request, Nieva, Ruiz & Company did issue to and in favor of the Philippine National Bank the following quedans, or warehouse receipts:

No. 161 for 32 bales of hemp, in warehouse No. 2, of the declared value of P880;

No. 162 for 953 bundles of rattan, in warehouse No. 2, of the declared value of P3,700.40;

No. 165 for empty sacks, in warehouse No. 2, of the declared value of P450;

No. 167 for 136 sacks of almaciga, in warehouse No. 1, of the declared value of P2,300;

No. 168 for 1,461 bales of kapok, in warehouse No. 1, of the declared value of P14,571.48;

No. 175 for 288 packages of talcum powder, in warehouse No. 5, of the declared value of P15,582.26;

No. 176 for 35 packages of cartulina, in warehouse No. 5, of the declared value of P2,588.48; and

No. 185 for 134 bundles of empty sacks, in warehouse No. 2, of the declared value of P670, making a total declared value of the property evidenced by such receipts of P40,742.62.

In the second cause of action, the complaint alleges that the defendant took and converted 88 drums of gasoline and 100 cases of gasoline; none of which is included in the above receipts. Otherwise the property described in quedans Nos. 161 to 185, inclusive, correspond and are identical with the property described in the second cause of action.

The bank founds its right to claim the property described in the quedans Nos. 161 to 185, inclusive, upon the firm's certificate of February 8, 1919, above quoted. By comparison, it will be found that the property described in such quedans, or warehouse receipts, does not correspond with the property described in the firm's certificate of February 8. In the certificate of February 8, there are aceites y grasas, or oil and grease, valued at P800, and 9,000 sacks of common salt valued at P18,000 in thebodegas of the firm, and 905 cases of gasoline valued at P11,538.75 and 77 cases of gasoline in drums, 64 gallons, valued at P4,989.60, in the warehouse of Wise & Company, that are not described in the quedans Nos. 161 to 185, inclusive It also appears that Talcum Powder in receipt No. 175 of the value of P17,140, and cartulina in receipt No. 176 of the value of P2,847 are not included in the property described in the certificate of February 8, making a total value of the property described in those two receipts, and which is not included in the certificate of February 8, of P19,987.

There is not any evidence of the actual market value of the property, but it does appear that at the time quedans Nos. 161 to 185, inclusive, were issued, the bank itself placed a declared value upon that property of P40,742.62. Those quedans do not include the gasoline which the bank admits it sold on May 24, 1919, for P4,989.60, and the gasoline which it sold on May 28, 1919, for the sum of P2,641.80, or P7,631.40 which it received for gasoline. It is true that it appears from the sales report that the bank sold the property described in quedans Nos. 161 to 185, inclusive, for much less money than the valuation which it placed upon the property, but, in legal effect, when the quedans were issued, the conversion of that property took place at the time they were issued to and accepted by the bank, and it should be charged with the value of the property at the time of its conversion, and in the absence of any testimony as to the market value, it should be charged with the amount which it actually received from the sale of the gasoline.

It will be noted that the promissory notes executed by the firm to the bank recite:

"Full power and authority are hereby given to said bank to sell, assign, transfer and deliver the whole of the said securities, or any part thereof, or any substitutes therefor or any additions thereto, or any other securities or property given unto or left in the possession of or hereafter given unto or left in the possession of the said Bank by the undersigned."

Hence, the power and authority of the bank to sell, assign, or transfer is confined to property which was given unto or left in its possession.

As we have pointed out none of the property described in the certificate of February 8 was ever given unto or left in the possession of the bank.

The insolvency petition was filed April 21, 1919, and the plaintiff was duly elected and qualified, as assignee, on July 19, 1919, and, as such, it represents both the creditors and the firm. Although it was not appointed until July, 1919, yet when it did qualify its right and title to all the property of the firm related back and became vested as of April 21, 1919, when the insolvency petition was filed, and from that time it alone had the power and authority to act for and represent the firm. Under the terms and provisions of Act No. 1956 of the Philippine Legislature, after it was filed, the power of the firm or any member of it to deliver possession of the property to secure a preexisting debt was suspended pending final adjudication. That is to say, if the debt was not legally secured before the insolvency petition was filed, no member of the firm had any legal right to secure it after the petition was filed, and any attempt to do so would be null and void.

As to the first cause of action, we hold that in January, 1919, the bank became and remained the owner of the five quedans Nos. 30, 35, 38, 41, and 42; that they were in form negotiable, and that, as such owner, it was legally entitled to the possession and control of the property therein described at the time the insolvency petition was filed and had a right to sell it and apply the proceeds of the sale to its promissory notes, including the three notes of P18,000 each, which were formerly secured by the three quedans Nos. 33, 36, and 39, which the bank surrendered to the firm. That is to say, the bank had a legal right to apply the Proceeds from the property described in the five remaining quedans to the payment of its eight promissory notes.

As to the second cause of action, the judgment of the lower court is reversed, and one will be entered here in favor of the Philippine Trust Company, the plaintiff, and against the Philippine National Bank, the defendant, for P40,742.62, the declared value of the property described in quedans Nos. 161 to 185, inclusive, and for the further sum of P7,631.40, the value of the gasoline sold in May, 1919, or a total of P48,374.02, with interest thereon from September 22, 1919, at the rate of 6 per cent per annum, and for the costs and disbursements in this and the lower court. So ordered.

Araullo, C.J., Johnson, Street, Malcolm, Avanceña, Villamor and Romualdez, JJ., concur.

||| (Phil. Trust Co. v. PNB, G.R. No. 16483, December 07, 1921)