Parmanand Shewaram vs. Philippine Air Lines, Inc.

A common carrier cannot limit its liability for loss of goods where the loss was caused by its own negligence, and a contractual limitation on liability is valid only if it is reasonable and just under the circumstances and has been fairly and freely agreed upon. The conditions of carriage printed at the back of a ticket stub in small type, which the passenger never signed, do not constitute a fair and free agreement binding the passenger to a P100.00 limitation of liability.

The plaintiff-appellee, Parmanand Shewaram, was a paying passenger on defendant-appellant Philippine Air Lines, Inc. (PAL), a common carrier engaged in air transportation in the Philippines. The defendant offered its services to the public to carry passengers and cargoes between different points in the Philippines. The applicable law governing the liability of common carriers for loss of goods is found in Articles 1733, 1734, and 1735 of the New Civil Code, which impose upon common carriers the obligation to observe extraordinary diligence in the vigilance over the goods they transport. Article 1750 of the same Code permits contractual limitation of a carrier's pecuniary liability, but only if the contract is reasonable and just and has been fairly and freely agreed upon.

On November 23, 1959, Parmanand Shewaram was a paying passenger with ticket No. 4-30976 on Philippine Air Lines flight No. 976/910 from Zamboanga City bound for Manila. He checked in three pieces of baggage — a suitcase and two other pieces. The suitcase was mistagged by PAL's personnel in Zamboanga City as I.G.N. (for Iligan) with claim check No. B-3883, instead of MNL (for Manila). When Shewaram arrived in Manila, his suitcase did not arrive with his flight because it had been sent to Iligan.

Shewaram made a claim with PAL's personnel at the Manila airport. Another suitcase similar to his own — the only baggage left for that flight — was given to him for delivery, but he refused to take it on the ground that it was not his, alleging that all his clothes were white and that his National transistor radio 7 and Rollflex camera were not found inside, and moreover, it contained a pistol which he did not have nor place inside his suitcase. After inquiries by PAL's personnel, it was found that the suitcase had reached Iligan, and the station agent of PAL in Iligan caused it to be sent to Manila for delivery to Shewaram. The suitcase arrived at the Manila airport on November 24, 1959. It was also discovered that the suitcase offered to Shewaram belonged to a certain Del Rosario, who was bound for Iligan on the same flight.

When Shewaram's suitcase arrived in Manila on November 24, 1959, he was informed by Mr. Tomas Blanco, Jr., the acting station agent of the Manila airport, of its arrival — but minus the transistor radio and the Rollflex camera. Shewaram made demand for these two items or for their value, but the demand was not complied with. The trial court found that the suitcase was tampered with, as PAL's personnel could open it on November 24, 1959, even though Shewaram had it under key when he delivered it to PAL's personnel in Zamboanga City. The trial court also found that there was space in the suitcase where the two items could have been placed, and that when Shewaram was notified by phone of the arrival of the suitcase, he asked that a check of the things inside be made, and PAL admitted that the two items could not be found. There was no evidence on record sufficient to show that Shewaram's suitcase was never opened during the time it was in PAL's possession and prior to its recovery by him. The transistor radio cost P197.00 and the camera cost P176.00, for a total value of P373.00.

• Binding Effect of Tariff Regulations: The appellant argued that the appellee was bound by the provisions of the tariff regulations filed with the Civil Aeronautics Board and the conditions of carriage printed at the back of the plane ticket stub, which provided that the liability for loss or damage to checked baggage is limited to P100.00 unless the passenger declares a higher valuation and pays an additional charge.
• Limitation of Liability: The appellant maintained that because the appellee failed to declare a higher value for his luggage and pay the freight on the basis of that declared value, he could not demand payment in excess of P100.00.

N/A — The decision does not recount the appellee's arguments on appeal in a manner that can be separately summarized; the appellee's position is reflected in the lower courts' findings and the Court's reasoning.

• Validity of the Liability Limitation: Whether the appellee was bound by the conditions of carriage printed at the back of the plane ticket stub, which limited the appellant's liability to P100.00.
• Extent of Liability: Whether the case should have been dismissed or the appellant's liability limited to P100.00.

• Validity of the Liability Limitation: No. The appellee was not bound by the conditions of carriage printed at the back of the ticket stub because the requirements of Article 1750 of the New Civil Code — that the contract be reasonable and just and fairly and freely agreed upon — were not met. The conditions were printed in letters so small that they were hard to read, and the appellant admitted that passengers do not sign the ticket.
• Extent of Liability: No. The appellant's liability was not limited to P100.00. The loss was caused by the appellant's own negligence, and a common carrier cannot limit its liability for loss caused by its own negligence. The appellant was liable for the full value of the lost items, P373.00.

• Validity of the Liability Limitation: Article 1750 of the New Civil Code provides that a contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction, or deterioration of the goods is valid if it is reasonable and just under the circumstances and has been fairly and freely agreed upon. The Court held that these requirements were not met in this case. It could not be said that the appellee had actually entered into a contract with the appellant embodying the conditions printed at the back of the ticket stub. The fact that those conditions were printed in letters so small that they were hard to read would not warrant the presumption that the appellee was aware of those conditions such that he had "fairly and freely agreed" to them. The trial court categorically stated that the defendant admits that passengers do not sign the ticket, much less did the plaintiff sign his ticket when he made the flight on November 23, 1959. Therefore, the appellee was not bound by the conditions of carriage found at the back of the ticket stub.
• Extent of Liability: The liability of the appellant was governed by Articles 1734 and 1735 of the New Civil Code. Under Article 1734, common carriers are responsible for the loss, destruction, or deterioration of goods unless the same is due to any of the enumerated causes only: (1) flood, storm, earthquake, or other natural disaster or calamity; (2) act of the public enemy in war; (3) act or omission of the shipper or owner of the goods; (4) the character of the goods or defects in the packing or containers; (5) order or act of competent public authority. Under Article 1735, in all cases other than those mentioned, common carriers are presumed to have been at fault or to have acted negligently unless they prove that they observed extraordinary diligence as required in Article 1733. The trial court clearly found that the transistor radio and camera were lost as a result of the appellant's negligence as a common carrier, so the appellant's liability was clear — it must pay the appellee the value of those two articles. Citing Ysmael and Co. vs. Barreto, 51 Phil. 90, the Court laid down the rule that the carrier cannot limit its liability for injury to or loss of goods shipped where such injury or loss was caused by its own negligence. The Court also quoted Corpus Juris, volume 10, p. 154, which states that no contractual limitation is reasonable which is subversive of public policy, and that a carrier cannot limit its liability for injury to or loss of goods shipped where such injury or loss is caused by its own negligence, whether by itself or by its servants.

• Limitation of Carrier's Liability — Under Article 1750 of the New Civil Code, a contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction, or deterioration of goods is valid only if it is reasonable and just under the circumstances and has been fairly and freely agreed upon. The Court applied this doctrine by holding that the conditions printed at the back of a ticket stub in small type, which the passenger never signed, did not constitute a fair and free agreement.
• Carrier Cannot Limit Liability for Its Own Negligence — A common carrier cannot limit its liability for injury to or loss of goods shipped where such injury or loss was caused by its own negligence. This rule rests on considerations of public policy: the natural effect of a limitation of liability against negligence is to induce want of care on the part of the carrier in the performance of its duty, and the shipper and common carrier are not on equal terms. The Court applied this rule to hold the appellant liable for the full value of the lost items.
• Presumption of Negligence of Common Carriers — Under Article 1735 of the New Civil Code, in all cases other than those enumerated in Article 1734, if goods are lost, destroyed, or deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as required in Article 1733. The Court applied this presumption because the loss was not due to any of the enumerated causes.

• "The fact that those conditions are printed at the back of the ticket stub in letters so small that they are hard to read would not warrant the presumption that the appellee was aware of those conditions such that he had 'fairly and freely agreed' to those conditions." — This passage states the Court's reasoning for why the liability limitation was not binding on the passenger, forming the basis for the holding that the requirements of Article 1750 were not met.
• "The trial court has categorically stated in its decision that the 'Defendant admits that passengers do not sign the ticket, much less did plaintiff herein sign his ticket when he made the flight on November 23, 1959.' We hold, therefore, that the appellee is not, and can not be, bound by the conditions of carriage found at the back of the ticket stub issued to him when he made the flight on appellant's plane on November 23, 1959." — This passage establishes the ratio decidendi: without a signed agreement, the passenger cannot be bound by the printed conditions of carriage.
• "In the case of Ysmael and Co. vs. Barreto, 51 Phil. 90, cited by the trial court in support of its decision, this Court had laid down the rule that the carrier can not limit its liability for injury to or loss of goods shipped where such injury or loss was caused by its own negligence." — This passage cites the controlling precedent for the rule that a carrier cannot limit liability for its own negligence.

• Ysmael and Co. vs. Barreto, 51 Phil. 90 — Controlling precedent cited by the trial court and relied upon by the Supreme Court for the rule that a carrier cannot limit its liability for injury to or loss of goods shipped where such injury or loss was caused by its own negligence. The Court quoted extensively from Corpus Juris as cited in this case.

• Article 1750, New Civil Code — Provides that a contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction, or deterioration of the goods is valid if it is reasonable and just under the circumstances and has been fairly and freely agreed upon. The Court held that the requirements of this article were not met in this case.
• Article 1732, New Civil Code — Defines common carriers. The Court noted that there was no question that the appellant was a common carrier.
• Article 1733, New Civil Code — Requires common carriers to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them. The Court cited this as the standard of care applicable to the appellant.
• Article 1734, New Civil Code — Enumerates the exclusive causes that exempt common carriers from responsibility for loss, destruction, or deterioration of goods. The Court applied this provision to determine the appellant's liability.
• Article 1735, New Civil Code — Creates the presumption that common carriers are at fault or negligent in cases of loss, destruction, or deterioration of goods, unless they prove they observed extraordinary diligence. The Court applied this presumption against the appellant.
• Article 1736, New Civil Code — Cited in the footnotes as one of the provisions governing the appellant's liability.
• Article 1745, New Civil Code — Cited in the footnotes as one of the provisions governing the appellant's liability.
• Article 1754, New Civil Code — Cited in the footnotes as one of the provisions governing the appellant's liability.

Concepcion, C.J., Reyes, J.B.L., Barrera, Dizon, Regala, Makalintal, Bengzon, J.P., and Sanchez, JJ., concurred.

N/A — No dissenting opinions are noted in the decision.