TRANSPORTATION LAW

REVIEWER

From the Lectures of Atty. Melissa Romana Suarez

Ateneo De Davao University - College of Law

With Bar Questions and Suggested Answers

Compiled by:
JUSTIN RYAN D. MORILLA
A.Y. 2015-2016

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 appellant that it must transport the contract workers on or before the
TRANSPORTATION LAWS end of March, 1981 and the other batch in June, 1981.

Art. 1766. Civil Code
In all matters not regulated by this Code, the rights and obligations of
common carriers shall be governed by the Code of Commerce and
by special laws.
Hierarchy of Transportation Laws in the Philippines
Even if a PTA is merely an advice from the sponsors that an airline is
authorized to issue a ticket and thus no ticket was yet issued, the fact
remains that the passage had already been paid for by the principal of
the appellee, and the appellant had accepted such payment. The
existence of this payment was never objected to nor questioned by the
appellant in the lower court. Thus, the cause or consideration which is
the fare paid for the passengers exists in this case.

1. Primary Law - Civil Code The third essential requisite of a contract is an object certain. In this
2. The following aresuppletoryin character: contract "to carry", such an object is the transport of the passengers
a. Code of Commerce from the place of departure to the place of destination as stated in the
b. Special Laws telex.
1) Carriage of Goods by Sea Act Accordingly, there could be no more pretensions as to the existence of
(COGSA) an oral contract of carriage imposing reciprocal obligations on both
2) Salvage Law parties.
3) Warsaw Convention
4) Tariff and Customs Code In the case of appellee, it has fully complied with the obligation,
namely, the payment of the fare and its willingness for its contract
Definition of Transportation workers to leave for their place of destination.

 A movement of things or persons from one place to another; On the other hand, the facts clearly show that appellant was remiss in
a carrying across its obligation to transport the contract workers on their flight despite
confirmation and bookings made by appellee's travelling agent.
What is included in the word transportation?
xxxxxxxxx
It includes:
Besides, appellant knew very well that time was of the essence as the
1. Waiting time, prepaid ticket advice had specified the period of compliance therewith,
2. Loading and unloading, and with emphasis that it could only be used if the passengers fly on
3. Stopping in transit, and BA. Under the circumstances, the appellant should have refused
4. All other accessorial services in connection with the loaded acceptance of the PTA from appellee's principal or to at least inform
movement appellee that it could not accommodate the contract workers.

When does a contract of transportation arise? COMMON CARRIERS

IN GENERAL
G.R. No. 92288 February 9, 1993
BRITISH AIRWAYS, INC., petitioner, Definition of a Common Carrier [Art. 1732]
vs.
THE HON. COURT OF APPEALS, Twelfth Division, and FIRST Common carriers are persons, corporations, firms or associations
INTERNATIONAL TRADING AND GENERAL engaged in the business of carrying or transporting passengers or
SERVICES, respondents. goods or both, by land, water, or air, for compensation , offering their
NOCON, J.: services to the public.

Private respondent had a valid cause of action for damages against Elements of a Common Carrier
petitioner. A cause of action is an act or omission of one party in
violation of the legal right or rights of the other. 9 Petitioner's repeated 1. Must be a person, corporation, firm or association
failures to transport private respondent's workers in its flight despite 2. Engaged in a business
confirmed booking of said workers clearly constitutes breach of 3. Transports persons or goods or both by land, water or air
contract and bad faith on its part. In resolving petitioner's theory that 4. Offers services to the public
private respondent has no cause of action in the instant case, the 5. Accepts compensation for services
appellate court correctly held that:
True Test of a Common Carrier
In dealing with the contract of common carriage of passengers for
purpose of accuracy, there are two (2) aspects of the same, The carriage of goods and passengers, provided it has space for all
namely: (a) the contract "to carry (at some future time)," which who opt to avail themselves of its transportation for a fee [National
contract is consensual and is necessarily perfected by mere Steel v. CA, 283 SCRA 45]
consent (See Article 1356, Civil Code of the Philippines), and (b)
the contract "of carriage" or "of common carriage" itself which
JURISPRUDENCE ON THE DEFINITION OF A COMMON CARRIER
should be considered as a real contract for not until the carrier is
actually used can the carrier be said to have already assumed the
obligation of a carrier. (Paras, Civil Code Annotated, Vol. V, p. One is still considered a Common Carrier [for the provisions of the Civil
429, Eleventh Ed.) Code to apply] even if:[De Guzman v. CA [168 SCRA 612]

In the instant case, the contract "to carry" is the one involved which is 1. The carrying across of pax and/or goods is only an ancillary
consensual and is perfected by the mere consent of the parties. activity or sideline

There is no dispute as to the appellee's consent to the said contract "to 2. The transportation service is merely on an occasional,
carry" its contract workers from Manila to Jeddah. The appellant's episodic, or unscheduled basis
consent thereto, on the other hand, was manifested by its acceptance
of the PTA or prepaid ticket advice that ROLACO Engineering has 3. The transportation is offered only to a narrow segment of
prepaid the airfares of the appellee's contract workers advising the the general population

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 4. He has not secured a Certificate of Public Convenience
[CPC]
G.R. No. L-47822 December 22, 1988
PEDRO DE GUZMAN, petitioner,
vs.
COURT OF APPEALS and ERNESTO CENDANA, respondents.
FELICIANO, J.:
Article 1732 makes no distinction between one
whose principal business activity is the carrying of persons or
goods or both, and one who does such carrying only as
an ancillary activity (in local Idiom as "a sideline"). Article 1732
also carefully avoids making any distinction between a person or
enterprise offering transportation service on a regular or
scheduled basis and one offering such service on an occasional,
episodic or unscheduled basis. Neither does Article 1732 distinguish
between a carrier offering its services to the "general public," i.e.,
the general community or population, and one who offers
services or solicits business only from a narrow segment of the
general population.
XXX
It appears to the Court that private respondent is properly
characterized as a common carrier even though he merely "back-
hauled" goods for other merchants from Manila to Pangasinan,
although such back-hauling was done on a periodic or occasional
rather than regular or scheduled manner, and even though private
respondent'sprincipal occupation was not the carriage of goods for
others. There is no dispute that private respondent charged his
customers a fee for hauling their goods; that fee frequently fell below
commercial freight rates is not relevant here.
The Court of Appeals referred to the fact that private respondent held
no certificate of public convenience, and concluded he was not a
common carrier. This is palpable error. A certificate of public
convenience is not a requisite for the incurring of liability under
the Civil Code provisions governing common carriers. That
liability arises the moment a person or firm acts as a common
carrier, without regard to whether or not such carrier has also
complied with the requirements of the applicable regulatory
statute and implementing regulations and has been granted a
certificate of public convenience or other franchise. To exempt
private respondent from the liabilities of a common carrier
because he has not secured the necessary certificate of public
convenience, would be offensive to sound public policy; that
would be to reward private respondent precisely for failing to
comply with applicable statutory requirements. The business of a
common carrier impinges directly and intimately upon the safety and
well being and property of those members of the general community
who happen to deal with such carrier. The law imposes duties and
liabilities upon common carriers for the safety and protection of those
who utilize their services and the law cannot allow a common carrier to
render such duties and liabilities merely facultative by simply failing to
obtain the necessary permits and authorizations.
FPIC v. CA [300 SCRA 661] – The mode of transportation is not a
motor vehicle
G.R. No. 125948 December 29, 1998
FIRST PHILIPPINE INDUSTRIAL CORPORATION, petitioner,
vs.
COURT OF APPEALS, HONORABLE PATERNO V. TAC-AN,
BATANGAS CITY and ADORACION C. ARELLANO, in her official
capacity as City Treasurer of Batangas, respondents.
MARTINEZ, J.:
[T]here is no doubt that petitioner is a common carrier. It is engaged in
the business of transporting or carrying goods, i.e. petroleum products,
for hire as a public employment. It undertakes to carry for all persons
indifferently, that is, to all persons who choose to employ its services,
and transports the goods by land and for compensation. The fact that
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petitioner has a limited clientele does not exclude it from the definition
of a common carrier.
Also, respondent's argument that the term "common carrier" as used in
Section 133 (j) of the Local Government Code refers only to common
carriers transporting goods and passengers through moving vehicles
or vessels either by land, sea or water, is erroneous.
As correctly pointed out by petitioner, the definition of "common
carriers" in the Civil Code makes no distinction as to the means of
transporting, as long as it is by land, water or air. It does not provide
that the transportation of the passengers or goods should be by motor
vehicle. In fact, in the United States, oil pipe line operators are
considered common carriers.
Asia Lighterage v. CA [Aug 19, 2003] – It has no fixed and publicly
known route, maintains no terminals, and issues no tickets
G.R. No. 147246 August 19, 2003
ASIA LIGHTERAGE AND SHIPPING, INC., petitioner,
vs.
COURT OF APPEALS and PRUDENTIAL GUARANTEE AND
ASSURANCE, INC., respondents.
PUNO, J.:
Petitioner contends that it is not a common carrier but a private carrier.
Allegedly, it has no fixed and publicly known route, maintains no
terminals, and issues no tickets. It points out that it is not obliged to
carry indiscriminately for any person. It is not bound to carry goods
unless it consents. In short, it does not hold out its services to the
general public.
XXX
In the case at bar, the principal business of the petitioner is that of
lighterage and drayage22 and it offers its barges to the public for
carrying or transporting goods by water for compensation. Petitioner is
clearly a common carrier. In De Guzman, supra, we considered private
respondent Ernesto Cendaña to be a common carrier even if his
principal occupation was not the carriage of goods for others, but that
of buying used bottles and scrap metal in Pangasinan and selling
these items in Manila.
We therefore hold that petitioner is a common carrier whether its
carrying of goods is done on an irregular rather than scheduled
manner, and with an only limited clientele. A common carrier need not
have fixed and publicly known routes. Neither does it have to maintain
terminals or issue tickets.
To be sure, petitioner fits the test of a common carrier as laid down
in Bascos vs. Court of Appeals.24 The test to determine a common
carrier is "whether the given undertaking is a part of the business
engaged in by the carrier which he has held out to the general public
as his occupation rather than the quantity or extent of the business
transacted."25 In the case at bar, the petitioner admitted that it is
engaged in the business of shipping and lighterage offering its barges
to the public, despite its limited clientele for carrying or transporting
goods by water for compensation.
Calvo v. UCPB [19 Mar 2002] – It is not in the business of public
transportation
G.R. No. 148496 March 19, 2002
VIRGINES CALVO doing business under the name and style
TRANSORIENT CONTAINER TERMINAL SERVICES,
INC., petitioner,
vs.
UCPB GENERAL INSURANCE CO., INC. (formerly Allied
Guarantee Ins. Co., Inc.) respondent.
MENDOZA, J.:
Petitioner contends that contrary to the findings of the trial court and
the Court of Appeals, she is not a common carrier but a private carrier
because, as a customs broker and warehouseman, she does not
indiscriminately hold her services out to the public but only offers the
same to select parties with whom she may contract in the conduct of
her business. XXX
There is greater reason for holding petitioner to be a common carrier
because the transportation of goods is an integral part of her business.
To uphold petitioner's contention would be to deprive those with whom
she contracts the protection which the law affords them
notwithstanding the fact that the obligation to carry goods for her
customers, as already noted, is part and parcel of petitioner's business.
Schmitz v. TVI [ April 22, 2005] – The vehicle or mode of transport
is not owned by him
G.R. No. 150255. April 22, 2005
SCHMITZ TRANSPORT & BROKERAGE
CORPORATION, Petitioners,
vs.
TRANSPORT VENTURE, INC., INDUSTRIAL INSURANCE
COMPANY, LTD., and BLACK SEA SHIPPING AND DODWELL now
INCHCAPE SHIPPING SERVICES, Respondents.
CARPIO-MORALES, J.:
Contrary to petitioner‘s insistence, this Court, as did the appellate
court, finds that petitioner is a common carrier. For it undertook to
transport the cargoes from the shipside of "M/V Alexander Saveliev" to
the consignee‘s warehouse at Cainta, Rizal. As the appellate court put
it, "as long as a person or corporation holds [itself] to the public for the
purpose of transporting goods as [a] business, [it] is already
considered a common carrier regardless if [it] owns the vehicle to be
used or has to hire one."XXX
Article 1732 does not distinguish between one whose principal
business activity is the carrying of goods and one who does such
carrying only as an ancillary activity. The contention, therefore, of
petitioner that it is not a common carrier but a customs broker whose
principal function is to prepare the correct customs declaration and
proper shipping documents as required by law is bereft of merit. It
suffices that petitioner undertakes to deliver the goods for pecuniary
consideration.
Bascos v. CA - The contract entered into was not a ―contract of
carriage‖ but one of ―lease‖
G.R. No. 101089. April 7, 1993.
ESTRELLITA M. BASCOS, petitioners,
vs.
COURT OF APPEALS and RODOLFO A. CIPRIANO, respondents.
CAMPOS, JR., J p:
In disputing the conclusion of the trial and appellate courts that
petitioner was a common carrier, she alleged in this petition that the
contract between her and Rodolfo A. Cipriano, representing
CIPTRADE, was lease of the truck. She cited as evidence certain
affidavits which referred to the contract as "lease". These affidavits
were made by Jesus Bascos 8 and by petitioner herself. 9 She further
averred that Jesus Bascos confirmed in his testimony his statement
that the contract was a lease contract. 10 She also stated that: she
was not catering to the general public. Thus, in her answer to the
amended complaint, she said that she does business under the same
style of A.M. Bascos Trucking, offering her trucks for lease to those
who have cargo to move, not to the general public but to a few
customers only in view of the fact that it is only a small business.
We agree with the respondent Court in its finding that petitioner is a
common carrier.
Article 1732 of the Civil Code defines a common carrier as "(a) person,
corporation or firm, or association engaged in the business of carrying
or transporting passengers or goods or both, by land, water or air, for
compensation, offering their services to the public." The test to
determine a common carrier is "whether the given undertaking is a part
of the business engaged in by the carrier which he has held out to the
general public as his occupation rather than the quantity or extent of
the business transacted." In this case, petitioner herself has made the
admission that she was in the trucking business, offering her trucks to
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those with cargo to move. Judicial admissions are conclusive and no
evidence is required to prove the same.
G.R. No. 157917 August 29, 2012
SPOUSES TEODORO1 and NANETTE PERENA, Petitioners,
vs.
SPOUSES TERESITA PHILIPPINE NICOLAS and L. ZARATE,
NATIONAL RAILWAYS, and the COURT OF
APPEALS Respondents.
DECISION
BERSAMIN, J.:
Although in this jurisdiction the operator of a school bus service has
been usually regarded as a private carrier,primarily because he only
caters to some specific or privileged individuals, and his operation is
neither open to the indefinite public nor for public use, the exact nature
of the operation of a school bus service has not been finally settled.
This is the occasion to lay the matter to rest. XXX
The operator of a. school bus service is a common carrier in the eyes
of the law. He is bound to observe extraordinary diligence in the
conduct of his business. He is presumed to be negligent when death
occurs to a passenger. His liability may include indemnity for loss of
earning capacity even if the deceased passenger may only be an
unemployed high school student at the time of the accident.
WHAT ARE NOT CONSIDERED AS COMMON CARRIER
 Exclusive hauler
G.R. No. 141910 August 6, 2002
FGU INSURANCE CORPORATION, petitioner,
vs.
G.P. SARMIENTO TRUCKING CORPORATION and LAMBERT M.
EROLES, respondents.
VITUG, J.:
Court finds the conclusion of the trial court and the Court of Appeals to
be amply justified. GPS, being an exclusive contractor and hauler of
Concepcion Industries, Inc., rendering or offering its services to no
other individual or entity, cannot be considered a common carrier.
Common carriers are persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or
goods or both, by land, water, or air, for hire or compensation, offering
their services to the public,8 whether to the public in general or to a
limited clientele in particular, but never on an exclusive basis.9 The
true test of a common carrier is the carriage of passengers or goods,
providing space for those who opt to avail themselves of its
transportation service for a fee.10 Given accepted standards, GPS
scarcely falls within the term "common carrier."
 Travel Agency
G.R. No. 138334 August 25, 2003
ESTELA L. CRISOSTOMO, Petitioner,
vs.
The Court of Appeals and CARAVAN TRAVEL & TOURS
INTERNATIONAL, INC., Respondents.
YNARES-SANTIAGO, J.:
Respondent is not an entity engaged in the business of transporting
either passengers or goods and is therefore, neither a private nor a
common carrier. Respondent did not undertake to transport petitioner
from one place to another since its covenant with its customers is
simply to make travel arrangements in their behalf. Respondent‘s
services as a travel agency include procuring tickets and facilitating
travel permits or visas as well as booking customers for tours.
While petitioner concededly bought her plane ticket through the efforts
of respondent company, this does not mean that the latter ipso facto is
a common carrier. At most, respondent acted merely as an agent of
the airline, with whom petitioner ultimately contracted for her carriage
to Europe. Respondent‘s obligation to petitioner in this regard was
simply to see to it that petitioner was properly booked with the airline
for the appointed date and time. Her transport to the place of
destination, meanwhile, pertained directly to the airline.
The object of petitioner‘s contractual relation with respondent is the
latter‘s service of arranging and facilitating petitioner‘s booking,
ticketing and accommodation in the package tour. In contrast, the
object of a contract of carriage is the transportation of passengers or
goods. It is in this sense that the contract between the parties in this
case was an ordinary one for services and not one of carriage.
Petitioner‘s submission is premised on a wrong assumption.
Are freight forwarders common carriers?
The term "freight forwarder" refers to a firm holding itself out to the
general public (other than as a pipeline, rail, motor, or water carrier) to
provide transportation of property for compensation and, in the
ordinary course of its business,
1. To assemble and consolidate, or to provide for assembling
and consolidating, shipments, and to perform or provide for
break-bulk and distribution operations of the shipments;
2. To assume responsibility for the transportation of goods from
the place of receipt to the place of destination; and
3. To use for any part of the transportation a carrier subject to
the federal law pertaining to common carriers.
G.R. No. 184300 July 11, 2012
MALAYAN INSURANCE CO., INC., Petitioner,
vs.
PHILIPPINES FIRST INSURANCE CO., INC. and REPUTABLE
FORWARDER SERVICES, INC., Respondents.
REYES, J.:
Reputable is a private carrier.
More importantly, the finding of the RTC and CA that Reputable is a
special or private carrier is warranted by the evidence on record,
primarily, the unrebutted testimony of Reputable‘s Vice President and
General Manager, Mr. William AngLianSuan, who expressly stated in
open court that Reputable serves only one customer, Wyeth.
Under Article 1732 of the Civil Code, common carriers are persons,
corporations, firms, or associations engaged in the business of
carrying or transporting passenger or goods, or both by land, water or
air for compensation, offering their services to the public. On the other
hand, a private carrier is one wherein the carriage is generally
undertaken by special agreement and it does not hold itself out to carry
goods for the general public. A common carrier becomes a private
carrier when it undertakes to carry a special cargo or chartered to a
special person only.For all intents and purposes, therefore, Reputable
operated as a private/special carrier with regard to its contract of
carriage with Wyeth.
G.R. No. 166250 July 26, 2010
UNSWORTH TRANSPORT INTERNATIONAL (PHILS.),
INC., Petitioner,
vs.
COURT OF APPEALS and PIONEER INSURANCE AND SURETY
CORPORATION, Respondents.
NACHURA, J.:
Admittedly, petitioner is a freight forwarder. XXX
A freight forwarder‘s liability is limited to damages arising from its own
negligence, including negligence in choosing the carrier; however,
where the forwarder contracts to deliver goods to their destination
instead of merely arranging for their transportation, it becomes liable
as a common carrier for loss or damage to goods. A freight forwarder
assumes the responsibility of a carrier, which actually executes the
transport, even though the forwarder does not carry the merchandise
itself.
It is undisputed that UTI issued a bill of lading in favor of Unilab.
Pursuant thereto, petitioner undertook to transport, ship, and deliver
the 27 drums of raw materials for pharmaceutical manufacturing to the
consignee.
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Are arrastre operators common carriers?
An arrester operator is an entity who transports the goods from the
vessel to the customs warehouse.
It is hired by the government. It has only one customer – government.
Therefore, there is one missing element to make it a common carrier. It
does not offer its services to the public.
HOWEVER
G.R. No. 84680 February 5, 1996
SUMMA INSURANCE CORPORATION, petitioner,
vs.
COURT OF APPEALS and METRO PORT SERVICE,
INC., respondents.
PANGANIBAN, J.:
In the performance of its obligations, an arrastre operator should
observe the same degree of diligence as that required of a
common carrier and a warehouseman as enunciated under Article
1733 of the Civil Code and Section 3(8) of the Warehouse Receipts
Law, respectively. Being the custodian of the goods discharged
from a vessel, an arrastre operator's duty is to take good care of
the goods and to turn them over to the party entitled to their
possession.
G.R. No. 165647 March 26, 2009
PHILIPPINES FIRST INSURANCE CO., INC., Petitioner,
vs.
WALLEM PHILS. SHIPPING, INC., UNKNOWN OWNER AND/OR
UNKNOWN CHARTERER OF THE VESSEL M/S "OFFSHORE
MASTER" AND "SHANGHAI FAREAST SHIP BUSINESS
COMPANY," Respondents.
TINGA, J.:
The functions of an arrastre operator involve the handling of cargo
deposited on the wharf or between the establishment of the consignee
or shipper and the ship's tackle.Being the custodian of the goods
discharged from a vessel, an arrastre operator's duty is to take good
care of the goods and to turn them over to the party entitled to their
possession.
Handling cargo is mainly the arrastre operator's principal work so its
drivers/operators or employees should observe the standards and
measures necessary to prevent losses and damage to shipments
under its custody.
In Fireman‘s Fund Insurance Co. v. Metro Port Service, Inc. the Court
explained the relationship and responsibility of an arrastre operator to
a consignee of a cargo, to quote:
The legal relationship between the consignee and the arrastre operator
is akin to that of a depositor and warehouseman. The relationship
between the consignee and the common carrier is similar to that of the
consignee and the arrastre operator. Since it is the duty of the
ARRASTRE to take good care of the goods that are in its custody and
to deliver them in good condition to the consignee, such responsibility
also devolves upon the CARRIER. Both the ARRASTRE and the
CARRIER are therefore charged with and obligated to deliver the
goods in good condition to the consignee.(Emphasis supplied)
(Citations omitted)
The liability of the arrastre operator was reiterated in Eastern Shipping
Lines, Inc. v. Court of Appeals with the clarification that the arrastre
operator and the carrier are not always and necessarily solidarily liable
as the facts of a case may vary the rule. But the precise question is
which entity had custody of the shipment during its unloading from the
vessel?
Thus, in this case the appellate court is correct insofar as it ruled that
an arrastre operator and a carrier may not be held solidarily liable at all
times. But the precise question is which entity had custody of the
shipment during its unloading from the vessel? XXX
The records are replete with evidence which show that the damage to The registered owner has the right to be indemnified by the actual
the bags happened before and after their discharge and it was caused or real owner of the amount that he is required to pay[BA Finance
by the stevedores of the arrastre operator who were then under the v. CA, 215 SCRA 715]
supervision of Wallem.
STATE REGULATION OF COMMON CARRIERS
NATURE AND BASIS OF LIABILITY
Art. 1765.
Art. 1733
The Public Service Commission may, on its own motion or on petition
Common Carriers, from the nature of their business and for reasons of of any interested party, after due hearing, cancel the certificate of
public policy are bound to observe EXTRAORDINARY DILIGENCE in public convenience granted to any common carrier that repeatedly fails
the vigilance over the goods and for the safety of passengers to comply with his or its duty to observe extraordinary diligence as
transported by them, according to ALL the circumstances of each prescribed in this Section.
case
Note: Public Service Commission is now a defunct office.
Meaning of Extraordinary Diligence
Governing Bodies:
Extraordinary diligence is that extreme measure of care and caution
which persons of unusual prudence and circumspection use for 1. Land - Land Transportation Franchising and Regulatory
securing and preserving their own property or rights. RP [DOH] v. Board [LTFRB]
Lorenzo Shipping [Feb 7, 2005] 2. Water - Maritime Industry Authority [MARINA]
3. Air - Civil Aeronautics Board [CAB]
Distinctions
G.R. No. 47065 June 26, 1940
COMMON CARRIER PRIVATE CARRIER PANGASINAN TRANSPORTATION CO., INC., petitioner,
vs.
Involved in the business of More of a single undertaking THE PUBLIC SERVICE COMMISSION, respondent.
transporting pax and goods as a LAUREL, J.:
general occupation
A certificate of public convenience constitutes neither a franchise nor
Bound to carry all pax who Can choose persons with contract, confers no property right, and is mere license or privilege.
choose to employ it whom it may contract
EN BANC
Degree of diligence required is Diligence required is the [G.R. No. L-8194. July 11, 1956.]
extraordinary diligence of a GFOF EMERENCIANA M. VDA. DE MEDINA, ET AL., Plaintiffs-Appellees,
vs. GUILLERMO CRESENCIA, ET AL., Defendants. GUILLERMO
Negligence is presumed if pax Person who alleges CRESENCIA, Appellant.
or goods does not reach final negligencemust prove that it
destination exists because negligence is REYES, J.B.L., J.
not presumed
We have already held in the case of Montoya vs. Ignacio, 94 Phil., 182
To free itself from liability, it has The party alleging negligence (December 29, 1953), which the court below cited, that the law (section
the burden of proving that it has the burden of proving 20 [g], C. A. No. 146 as amended) requires the approval of the Public
exercised XO diligence negligence on the part of the Service Commission in order that a franchise, or any privilege
common carrier pertaining thereto, may be sold or leased without infringing the
certificate issued to the grantee; and that if property covered by the
Performs public service and Does not generally perform franchise is transferred or leased without this requisite approval, the
is subject to state regulation public service and is not subject transfer is not binding against the public or the Service Commission; in
to such regulations as common contemplation of law, the grantee of record continues to be responsible
carriers under the franchise in relation to the Commission and to the public.
There we gave the reason for this rule to be as follows:

LIABILITY OF REGISTERED OWNER
The registered owner shall be liable for consequences flowing from the
operations of the carrier, even though the vehicle has already been
transferred to another[Benedicto v. CA, 187 SCRA 547]
This doctrine rests upon the principle that in dealing with
vehicles registered under the Public Service Law, the public
has the right to assume that the registered owner is the
actual or lawful owner thereof. It would be very difficult and
often impossible as a practical matter, for members of the
general public to enforce the rights of action that they may
have for injuries inflicted by the vehicles being negligently
operated if they should be required to prove who the actual
owner is. The registered owner is not allowed to deny
liability by proving the identity of the alleged transferee. XXX
To permit the ostensible or registered owner to prove who
the actual owner is, would be to set at naught the purpose or
public policy which infuses that doctrine.
―Since a franchise is personal in nature any transfer or lease thereof
should be notified to the Public Service Commission so that the latter
may take proper safeguards to protect the interest of the public. In fact,
the law requires that, before the approval is granted, there should be a
public hearing, with notice to all interested parties, in order that the
Commission may determine if there are good and reasonable grounds
justifying the transfer or lease of the property covered by the franchise,
or if the sale or lease is detrimental to public interest.‖
G.R. No. 119528 March 26, 1997
PHILIPPINE AIRLINES, INC., petitioner,
vs.
CIVIL AERONAUTICS BOARD and GRAND INTERNATIONAL
AIRWAYS, INC., respondents.
TORRES, JR., J.:
Civil Aeronautics Board has the authority to issue a Certificate of
Public Convenience and Necessity, or Temporary Operating Permit to
a domestic air transport operator, who, though not possessing a
legislative franchise, meets all the other requirements prescribed by
the law. Such requirements were enumerated in Section 21 of R.A.
776.

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There is nothing in the law nor in the Constitution, which indicates that
a legislative franchise is an indispensable requirement for an entity to
operate as a domestic air transport operator. Although Section 11 of
Article XII recognizes Congress' control over any franchise, certificate
or authority to operate a public utility, it does not mean Congress has
exclusive authority to issue the same. Franchises issued by Congress
are not required before each and every public utility may operate. 19 In
many instances, Congress has seen it fit to delegate this function to
government agencies, specialized particularly in their respective areas
of public service.
Can a common carrier become a private carrier?
G.R. No. 131621 September 28, 1999
LOADSTAR SHIPPING CO., INC., petitioner,
vs.
COURT OF APPEALS and THE MANILA INSURANCE CO.,
INC., respondents.
DAVIDE, JR., C.J.:
In support of its position, LOADSTAR relied on the 1968 case of Home
Insurance Co. v. American Steamship Agencies, Inc., 11 where this
Court held that a common carrier transporting special cargo or
chartering the vessel to a special person becomes a private carrier that
is not subject to the provisions of the Civil Code. Any stipulation in the
charter party absolving the owner from liability for loss due to the
negligence of its agent is void only if the strict policy governing
common carriers is upheld. Such policy has no force where the public
at is not involved, as in the case of a ship totally chartered for the use
of a single party. LOADSTAR also cited Valenzuela
Hardwood and Industrial Supply, Inc. v. Court of
Appeals 12 and National Steel Corp. v. Court of Appeals, 13 both of
which upheld the Home Insurance doctrine.
These cases invoked by LOADSTAR are not applicable in the case at
bar for the simple reason that the factual settings are different. The
records do not disclose that the M/V "Cherokee," on the date in
question, undertook to carry a special cargo or was chartered to a
special person only. There was no charter party. The bills of lading
failed to show any special arrangement, but only a general provision to
the effect that the M/V"Cherokee" was a "general cargo
carrier." 14 Further, the bare fact that the vessel was carrying a
particular type of cargo for one shipper, which appears to be purely
coincidental, is not reason enough to convert the vessel from a
common to a private carrier, especially where, as in this case, it was
shown that the vessel was also carrying passengers.
COMMON CARRIER OF GOODS
Parties
1. CARRIER
2. SHIPPER OR CONSIGNOR – one who delivers the goods
to the carrier for transportation
3. CONSIGNEE – one to whom the goods are delivered; he is
not a party to the contract of carriage, as a general rule.
Law Applicable
Art. 1753
The law of the country to which the goods are to be transported
shall govern the liability of the common carrier for their loss,
destruction or deterioration
Test to determine if one is a Common Carrier of Goods
FPIC v. CA [300 SCRA 661]
1. He must be engaged in the business of carrying goods for
others as a public employment,
2. He must undertake to carry goods of the kind to which his
business is confined and is conducted,
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3. He must undertake to carry the goods by the method by
which his business is conducted and over his
established roads, and
4. The transportation must be for hire
Nature and Basis of Liability
Art. 1733
Common Carriers, xxx, are bound to observe EXTRAORDINARY
DILIGENCE in the vigilance over the goods according to ALL the
circumstances of each case.
Such XO diligence in the vigilance of the goods is further expressed in:
1. Art. 1734
2. Art. 1735, and
3. Art. 1745 [5], [6] and [7]
Extraordinary Diligence in the Vigilance over the Goods:
Extraordinary diligence requires rendering service with the greatest
skill and foresight to avoid damage and destruction to the goods
entrusted for carriage and delivery. [Lea Mer Industries v. Malayan
Insurance, 20 Sep 2005]
Carriage of Goods; Exercise Extraordinary Diligence
(2005)
Star Shipping Lines accepted 100 cartons of sardines fromMaster to
be delivered to 555 Company in Manila. Only 88cartons were
delivered, however, these were in badcondition. 555 Company claimed
from Star Shipping Linesthe value of the missing goods, as well as the
damagedgoods. Star Shipping Lines refused because the formerfailed
to present a bill of lading. Resolve with reasons theclaim of 555
Company. (4%)
SUGGESTED ANSWER:
The claim of 555 Company is meritorious, even if it fails topresent a bill
of lading. Although a bill of lading is the bestevidence of the contract of
carriage for cargo, neverthelesssuch contract can exist even without a
bill of lading. Likeany other contract, a contract of carriage is a meeting
ofminds that gives rise to an obligation on the part of thecarrier to
transport the goods. Jurisprudence has held that
the moment the carrier receives the cargo for transport,then its duty to
exercise extraordinary diligence arises. (Cia.Maritima v. Insurance Co.
of North America,G.R. No. L-18965, October 30, 1964; Negre v.
Cabahug Shipping &Co., G.R. No. L-19609, April 29, 1966)
ALTERNATIVE ANSWER:
Star Shipping Lines can refuse to honor 555 Company'sclaim for the
missing and damaged goods. The Bill ofLading is the document of title
that legally establishes theownership of 555 Company over said
goods. 555 needs topresent the Bill of Lading to legally claim said
goods.(National Union Fire Insurance of Pittsburg v. Stolt-Nielaen,
G.R. No.87958, April 26, 1990)
Liability of a Common Carrier of Goods
Art. 1734.
Common carriers are responsible for the loss, destruction, or
deterioration of the goods, unless the same is due to any of the
following causes only:
1. Flood, storm, earthquake, lightning, or other natural disaster or
calamity;
2. Act of the public enemy in war, whether international or civil;
3. Act of omission of the shipper or owner of the goods;
4. The character of the goods or defects in the packing or in the
container;
5. Order or act of competent public authority.
Art. 1735.
In all cases other than those mentioned in Nos. 1, 2, 3, 4, and 5 of Art.
1734, if the goods are lost, destroyed or deteriorated, common carriers
are presumed to have been at fault or to have acted negligently,
unless they prove that they observed extraordinary diligence as
required in Art. 1733.
GENERAL RULE: Common carriers are responsible for the loss,
destruction, or deterioration of goods [Art. 1734]
Effects when the Goods are Lost, Destroyed or Deteriorated [Art.
1735]
 The shipper/consignee has a cause of action for breach of
contract against the carrier
 The common carrier is PRESUMED to have been at fault
or to have acted negligently
o There is no automatic liability or responsibility.
What does the shipper or consignee have to show in order to
have a prima facie case against the carrier?
1. Proof of actual delivery of goods in good order to carrier, and
2. Failure of carrier to deliver the goods in the same condition
as when they were received [Ynchausti v. Dexter, 41 P
289]
What does it mean if the shipment is not containerized?
G.R. No. 80256 October 2, 1992
BANKERS & MANUFACTURERS ASSURANCE CORP., petitioner,
vs.
COURT OS APPEALS, F. E. ZUELLIG & CO., INC. and E. RAZON,
INC., respondents.
MELO, J.:
It must be underscored that the shipment involved in the case at bar
was "containerized". The goods under this arrangement are stuffed,
packed, and loaded by the shipper at a place of his choice,
usually his own warehouse, in the absence of the carrier. The
container is sealed by the shipper and thereafter picked up by the
carrier. Consequently, the recital of the bill of lading for goods thus
transported ordinarily would declare "Said to Contain", "Shipper's Load
and Count", "Full Container Load", and the amount or quantity of
goods in the container in a particular package is only prima
facie evidence of the amount or quantity which may be overthrown by
parol evidence.
A shipment under this arrangement is not inspected or inventoried
by the carrier whose duty is only to transport and deliver the
containers in the same condition as when the carrier received and
accepted the containers for transport.
What should be done to hold the CC if goods are damaged under
this arrangement?
Verily, if any of the vans found in bad condition, or if any inspection of
the goods was to be done in order to determine the condition thereof,
the same should have been done at the pier side, the pier warehouse,
or at any time and place while the vans were under the care and
custody of the carrier or of the arrastre operator.
How can the carrier rebut the automatic presumption of
negligence against it?
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The common carrier must prove that it exercised XO diligence in the
vigilance over the goods according to all the circumstances of each
case [Art. 1735, 1733]
Instances where Presumption of Negligence does NOT Arise [Art.
1734]
 Natural disaster
 Act of public enemy
 Act of shipper
 Character of the goods
 Order of competent authority
Effects when any of the 5 Exceptions Present:
1. There is no presumption that the common carrier acted
negligently
2. The common carrier need not prove that it exercised
extraordinary diligence in the vigilance over the goods,
3. BUT, the common carrier is not automatically exempt from
liability;
4. To escape liability, the common carrier has to prove that it
complied with the requirements under Art. 1739, 1740,
1741, 1742, and 1743
How a Common Carrier of Goods Can Escape Liability
1st Exception: NATURAL DISASTER - flood, storm, earthquake,
lightning, or other natural disaster or calamity [Art. 1734.1]
Requisites - The common carrier must show that:
1. The natural disaster must have been the proximate and
only cause of the loss [Art. 1739],
2. It exercised DUE diligence (not extraordinary diligence) to
prevent or minimize the loss BEFORE, DURING or
AFTER the occurrence [Art. 1739],
3. It did not incur in delay in transporting the goods [Art.
1740]
Is fire a natural calamity?
G.R. No. L-69044 May 29, 1987
EASTERN SHIPPING LINES, INC., petitioner,
vs.
INTERMEDIATE APPELLATE COURT and DEVELOPMENT
INSURANCE & SURETY CORPORATION,respondents.
MELENCIO-HERRERA, J.:
Petitioner Carrier claims that the loss of the vessel by fire exempts it
from liability under the phrase "natural disaster or calamity." However,
we are of the opinion that fire may not be considered a natural disaster
or calamity. 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 lightning or by other
natural disaster or calamity. It may even be caused by the actual fault
or privity of the carrier.
G.R. No. 146018 June 25, 2003
EDGAR COKALIONG SHIPPING LINES, INC., Petitioner,
vs.
UCPB GENERAL INSURANCE COMPANY, INC., Respondent.
PANGANIBAN, J.:
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.
Are heavy rains considered natural disasters?
G.R. No. 94151 April 30, 1991
EASTERN SHIPPING LINES, INC., petitioner,
vs.
THE COURT OF APPEALS and THE FIRST NATIONWIDE
ASSURANCE CORPORATION, respondents.
GANCAYCO, J.:
Plainly, the heavy seas and rains referred to in the master's report
were not casofortuito, but normal occurrences that an ocean-going
vessel, particularly in the month of September which, in our area, is a
month of rains and heavy seas would encounter as a matter of
routine. They are not unforeseen nor unforeseeable. These are
conditions that ocean-going vessels would encounter and provide for,
in the ordinary course of a voyage. That rain water (not sea water)
found its way into the holds of the Jupri Venture is a clear indication
that care and foresight did not attend the closing of the ship's hatches
so that rain water would not find its way into the cargo holds of the
ship.
G.R. No. 150255. April 22, 2005
SCHMITZ TRANSPORT & BROKERAGE
CORPORATION, Petitioners,
vs.
TRANSPORT VENTURE, INC., INDUSTRIAL INSURANCE
COMPANY, LTD., and BLACK SEA SHIPPING AND DODWELL now
INCHCAPE SHIPPING SERVICES, Respondents.
CARPIO-MORALES, J.:
As for petitioner, for it to be relieved of liability, it should, following
Article 1739 of the Civil Code, prove that it exercised due diligence to
prevent or minimize the loss, before, during and after the occurrence of
the storm in order that it may be exempted from liability for the loss of
the goods.
While petitioner sent checkers and a supervisor on board the vessel to
counter-check the operations of TVI, itfailed to take all available and
reasonable precautions to avoid the loss. After noting that TVI failed to
arrange for the prompt towage of the barge despite the deteriorating
sea conditions, it should have summoned the same or another tugboat
to extend help, but it did not.
This Court holds then that petitioner and TVI are solidarily liablefor the
loss of the cargoes.
2nd Exception: The ACT OF PUBLIC ENEMY in war, whether
international or civil [Art. 1734.2]
Requisites - The common carrier must show that:
1. The act of the public enemy must have been the proximate
and only cause of the loss [Art. 1739],
2. It exercised DUE diligence to prevent or minimize the
loss BEFORE, DURING or AFTER the occurrence [Art.
1739]
3rd Exception: ACT or OMISSION of the SHIPPER or OWNER of
the goods [Art. 1734.3]
Requisites:
 The CC has to prove that the act of the shipper is the
proximate and only cause of the loss
 The CC CANNOT escape liability [but damages shall be
equitably reduced]:
o If the proximate cause of the loss is the
negligence of the CC
o The shipper merely contributed to the loss,
destruction, or deterioration [Art. 1741]
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G.R. No. L-31379 August 29, 1988
COMPAÑIA MARITIMA, petitioner,
vs.
COURT OF APPEALS and VICENTE CONCEPCION, respondents.
FERNAN, C.J.:
While petitioner has proven that private respondent Concepcion did
furnish it with an inaccurate weight of the payloader, petitioner is
nonetheless liable, for the damage caused to the machinery could
have been avoided by the exercise of reasonable skill and attention on
its part in overseeing the unloading of such a heavy equipment. And
circumstances clearly show that the fall of the payloader could have
been avoided by petitioner's crew. Evidence on record sufficiently
show that the crew of petitioner had been negligent in the performance
of its obligation by reason of their having failed to take the necessary
precaution under the circumstances which usage has established
among careful persons, more particularly its Chief Officer, Mr. Felix
Pisang, who is tasked with the over-all supervision of loading and
unloading heavy cargoes and upon whom rests the burden of deciding
as to what particular winch the unloading of the payloader should be
undertaken. 18 While it was his duty to determine the weight of heavy
cargoes before accepting them. Mr. Felix Pisang took the bill of lading
on its face value and presumed the same to be correct by merely
"seeing" it. 19 Acknowledging that there was a "jumbo" in the MV Cebu
which has the capacity of lifting 20 to 25 ton cargoes, Mr. Felix Pisang
chose not to use it, because according to him, since the ordinary boom
has a capacity of 5 tons while the payloader was only 2.5 tons, he did
not bother to use the "jumbo" anymore.
In that sense, therefore, private respondent's act of furnishing
petitioner with an inaccurate weight of the payloader upon being asked
by petitioner's collector, cannot be used by said petitioner as an
excuse to avoid liability for the damage caused, as the same could
have been avoided had petitioner utilized the "jumbo" lifting apparatus
which has a capacity of lifting 20 to 25 tons of heavy cargoes. It is a
fact known to the Chief Officer of MV Cebu that the payloader was
loaded aboard the MV Cebu at the Manila North Harbor on August 28,
1964 by means of a terminal crane. 21 Even if petitioner chose not to
take the necessary precaution to avoid damage by checking the
correct weight of the payloader, extraordinary care and diligence
compel the use of the "jumbo" lifting apparatus as the most prudent
course for petitioner.
While the act of private respondent in furnishing petitioner with an
inaccurate weight of the payloader cannot successfully be used as an
excuse by petitioner to avoid liability to the damage thus caused, said
act constitutes a contributory circumstance to the damage caused on
the payloader, which mitigates the liability for damages of petitioner in
accordance with Article 1741 of the Civil Code.
4th Exception: The CHARACTER of the GOODS or DEFECTS in
the PACKING or in the CONTAINER [Art. 1734.4]
Requisite:
 The common carrier must prove that it exercised DUE
diligence to FORESTALL or LESSEN the loss [Art. 1742]
G.R. No. L-16629 January 31, 1962
SOUTHERN LINES, INC., petitioner,
vs.
COURT OF APPEALS and CITY OF ILOILO, respondents.
DE LEON, J.:
Petitioner claims exemption from liability by contending that the
shortage in the shipment of rice was due to such factors as the
shrinkage, leakage or spillage of the rice on account of the bad
condition of the sacks at the time it received the same and the
negligence of the agents of respondent City of Iloilo in receiving the
shipment. The contention is untenable, for, if the fact of improper
packing is known to the carrier or his servants, or apparent upon
ordinary observation, but it accepts the goods notwithstanding such
condition, it is not relieved of liability for loss or injury resulting
thereform. (9 Am Jur. 869.) Furthermore, according to the Court of
Appeals, "appellant (petitioner) itself frankly admitted that the strings
that tied the bags of rice were broken; some bags were with holes and
plenty of rice were spilled inside the hull of the boat, and that the
personnel of the boat collected no less than 26 sacks of rice which
they had distributed among themselves." This finding, which is binding
upon this Court, shows that the shortage resulted from the negligence
of petitioner.
G.R. No. 148496 March 19, 2002
VIRGINES CALVO doing business under the name and style
TRANSORIENT CONTAINER TERMINAL SERVICES,
INC., petitioner,
vs.
UCPB GENERAL INSURANCE CO., INC. (formerly Allied
Guarantee Ins. Co., Inc.) respondent.
MENDOZA, J.:
Nor is there basis to exempt petitioner from liability under Art. 1734(4),
which provides --
Common carriers are responsible for the loss, destruction, or
deterioration of the goods, unless the same is due to any of the
following causes only:
....
(4) The character of the goods or defects in the packing or in the
containers.
....
For this provision to apply, the rule is that if the improper packing or, in
this case, the defect/s in the container, is/are known to the carrier or
his employees or apparent upon ordinary observation, but he
nevertheless accepts the same without protest or exception
notwithstanding such condition, he is not relieved of liability for damage
resulting therefrom.14 In this case, petitioner accepted the cargo
without exception despite the apparent defects in some of the
container vans. Hence, for failure of petitioner to prove that she
exercised extraordinary diligence in the carriage of goods in this case
or that she is exempt from liability, the presumption of negligence as
provided under Art. 1735 holds.
G.R. No. 161833. July 8, 2005
PHILIPPINE CHARTER INSURANCE CORPORATION, Petitioners,
vs.
UNKNOWN OWNER OF THE VESSEL M/V "NATIONAL HONOR,"
NATIONAL SHIPPING CORPORATION OF THE PHILIPPINES and
INTERNATIONAL CONTAINER SERVICES, INC., Respondents.
CALLEJO, SR., J.:
In the present case, the trial court declared that based on the record,
the loss of the shipment was caused by the negligence of the petitioner
as the shipper:
The same may be said with respect to defendant ICTSI. The breakage
and collapse of Crate No. 1 and the total destruction of its contents
were not imputable to any fault or negligence on the part of said
defendant in handling the unloading of the cargoes from the carrying
vessel, but was due solely to the inherent defect and weakness of the
materials used in the fabrication of said crate.
The crate should have three solid and strong wooden batten placed
side by side underneath or on the flooring of the crate to support the
weight of its contents. However, in the case of the crate in dispute,
although there were three wooden battens placed side by side on its
flooring, the middle wooden batten, which carried substantial volume of
the weight of the crate‘s contents, had a knot hole or "bukong-bukong,"
which considerably affected, reduced and weakened its strength.
Because of the enormous weight of the machineries inside this crate,
the middle wooden batten gave way and collapsed. As the combined
strength of the other two wooden battens were not sufficient to hold
and carry the load, they too simultaneously with the middle wooden
battens gave way and collapsed (TSN, Sept. 26, 1996, pp. 20-24).
Crate No. 1 was provided by the shipper of the machineries in Seoul,
Korea. There is nothing in the record which would indicate that
defendant ICTSI had any role in the choice of the materials used in
fabricating this crate. Said defendant, therefore, cannot be held as
blame worthy for the loss of the machineries contained in Crate No. 1.
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The case at bar falls under one of the exceptions mentioned in Article
1734 of the Civil Code, particularly number (4) thereof, i.e., the
character of the goods or defects in the packing or in the containers.
The trial court found that the breakage of the crate was not due to the
fault or negligence of ICTSI, but to the inherent defect and weakness
of the materials used in the fabrication of the said crate.
5th Exception: If through the ORDER Of PUBLIC AUTHORITY the
goods are seized or destroyed [Art. 1743]
Requisites:
1. The person making the order must have the power or
authority to issue such order, and
2. The order is lawful or has been issued under legal
process or authority[Ganzon v. CA, 161 SCRA 646]
Carriage; Fortuitous Event (1995)
M. Dizon Trucking entered into a hauling contract withFairgoods Co
whereby the former bound itself to haul thelatter‗s 2000 sacks of Soya
bean meal from Manila Port Area to Calamba, Laguna. To carry out
faithfully itsobligation Dizon subcontracted with Enrico Reyes
thedelivery of 400 sacks of the Soya bean meal. Aside fromthe driver,
three male employees of Reyes rode on thetruck with the cargo. While
the truck was on its way toLaguna two strangers suddenly stopped the
truck andhijacked the cargo. Investigation by the police disclosedthat
one of the hijackers was armed with a bladed weaponwhile the other
was unarmed. For failure to deliver the 400sacks, Fairgoods sued
Dizon for damages. Dizon in turnset up a 3rd party complaint against
Reyes which the latterregistered on the ground that the loss was due
to forcemajeure. Did the hijacking constitute force majeure toexculpate
Reyes from any liability to Dizon? Discuss fully.
SUGGESTED ANSWER:
No. The hijacking in this case cannot be considered forcemajeure.
Only one of the two hijackers was armed with abladed weapon. As
against the 4 male employees of Reyes,2 hijackers, with only one of
them being armed with abladed weapon, cannot be considered force
majeure. Thehijackers did not act with grave or irresistible threat,
violence or force.
Duration of Liability
Article 1736. The extraordinary responsibility of the common carrier
lasts from the time the goods are unconditionally placed in the
possession of, and received by the carrier for transportation until
the same are delivered, actually or constructively, by the carrier
to the consignee, or to the person who has a right to receive
them, without prejudice to the provisions of article 1738.
Article 1737. The common carrier's duty to observe extraordinary
diligence over the goods remains in full force and effect even when
they are temporarily unloaded or stored in transit, unless the
shipper or owner has made use of the right of stoppage in
transitu.
Article 1738. The extraordinary liability of the common carrier
continues to be operative even during the time the goods are stored
in a warehouse of the carrier at the place of destination, until the
consignee has been advised of the arrival of the goods and has
had reasonable opportunity thereafter to remove them or
otherwise dispose of them.
G.R. No. L-18965 October 30, 1964
COMPAÑIA MARITIMA, petitioner,
vs.
INSURANCE COMPANY OF NORTH
BAUTISTA ANGELO, J.:
Was there a contract of carriage between the carrier and the
shipper even if the loss occurred when the hemp was loaded on a
barge owned by the carrier which was loaded free of charge and
was not actually loaded on the S.S. Bowline Knot which would
carry the hemp to Manila and no bill of lading was issued
therefore?
The fact that the carrier sent its lighters free of charge to take the hemp
from Macleod's wharf at Sasa preparatory to its loading onto the ship
Bowline Knot does not in any way impair the contract of carriage
already entered into between the carrier and the shipper, for that
preparatory step is but part and parcel of said contract of carriage. The
lighters were merely employed as the first step of the voyage, but once
that step was taken and the hemp delivered to the carrier's employees,
the rights and obligations of the parties attached thereby subjecting
them to the principles and usages of the maritime law. In other words,
here we have a complete contract of carriage the consummation of
which has already begun: the shipper delivering the cargo to the
carrier, and the latter taking possession thereof by placing it on a
lighter manned by its authorized employees, under which Macleod
became entitled to the privilege secured to him by law for its safe
transportation and delivery, and the carrier to the full payment of its
freight upon completion of the voyage. XXX
The test as to whether the relation of shipper and carrier had been
established is, Had the control and possession of the cotton been
completely surrendered by the shipper to the railroad company?
Whenever the control and possession of goods passes to the carrier
and nothing remains to be done by the shipper, then it can be said with
certainty that the relation of shipper and carrier has been
established. (W.F. Bogart & Co., et al. v. Wade, et al., 200 S.W. 148).
XXX
The claim that there can be no contract of affreightment because the
hemp was not actually loaded on the ship that was to take it from
Davao City to Manila is of no moment, for, as already stated, the
delivery of the hemp to the carrier's lighter is in line with the contract. In
fact, the receipt signed by the patron of the lighter that carried the
hemp stated that he was receiving the cargo "in behalf of S.S. Bowline
Knot in good order and condition." On the other hand, the authorities
are to the effect that a bill of lading is not indispensable for the creation
of a contract of carriage.
G.R. No. L-9840 April 22, 1957
LU DO & LU YM CORPORATION, petitioner-defendant,
vs.
I. V. BINAMIRA, respondent-plaintiff.
BAUTISTA ANGELO, J.:
Is the carrier responsible for the loss considering that the same
occurred after the shipment was discharged from the ship and
placed in the possession and custody of the customs authorities?
as a rule, a common carrier is responsible for the loss, destruction or
deterioration of the goods it assumes to carry from one place to
another unless the same is due to any to any of the causes mentioned
in Article 1734 on the new Civil Code, and that, if the goods are lost,
destroyed or deteriorated, for causes other that those mentioned, the
common carrier is presumed to have been at fault or to have acted
negligently, unless it proves that it has observed extraordinary
diligence in their care (Article 1735, Idem.), and that this extraordinary
liability lasts from the time the goods are placed in the possession of
the carrier until they are delivered to the consignee, or "to the person
who has the right to receive them" (Article 1736, Idem.), but these
provisions only apply when the loss, destruction or deterioration takes
place while the goods are in the possession of the carrier, and not after
it has lost control of them. The reason is obvious. While the goods are
in its possession, it is but fair that it exercise extraordinary diligence in
protecting them from damage, and if loss occurs, the law presumes
that it was due to its fault or negligence. This is necessary to protect
the interest the interest of the owner who is at its mercy. The situation
changes after the goods are delivered to the consignee.
While we agree with the Court of Appeals that while delivery of the
cargo to the consignee, or to the person who has a right to receive
them", contemplated in Article 1736, because in such case the goods
are still in the hands of the Government and the owner cannot exercise
dominion over them, we believe however that the parties may agree to
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limit the liability of the carrier considering that the goods have still to
through the inspection of the customs authorities before they are
actually turned over to the consignee. This is a situation where we may
say that the carrier losses control of the goods because of a custom
regulation and it is unfair that it be made responsible for what may
happen during the interregnum. And this is precisely what was done by
the parties herein. In the bill of lading that was issued covering the
shipment in question, both the carrier and the consignee have
stipulated to limit the responsibility of the carrier for the loss or damage
that may because to the goods before they are actually delivered XXX
It therefore appears clear that the carrier does not assume liability for
any loss or damage to the goods once they have been "taken into the
custody of customs or other authorities", or when they have been
delivered at ship's tackle. These stipulations are clear. They have been
adopted precisely to mitigate the responsibility of the carrier
considering the present law on the matter, and we find nothing therein
that is contrary to morals or public policy that may justify their
nullification. We are therefore persuaded to conclude that the carrier is
not responsible for the loss in question, it appearing that the same
happened after the shipment had been delivered to the customs
authorities.
G.R. No. L-36481-2 October 23, 1982
AMPARO C. SERVANDO, CLARA UY BICO, plaintiffs-appellees,
vs.
PHILIPPINE STEAM NAVIGATION CO., defendant-appellant.
ESCOLIN, J.:
The court a quo held that the delivery of the shipment in question to
the warehouse of the Bureau of Customs is not the delivery
contemplated by Article 1736; and since the burning of the warehouse
occurred before actual or constructive delivery of the goods to the
appellees, the loss is chargeable against the appellant.
It should be pointed out, however, that in the bills of lading issued for
the cargoes in question, the parties agreed to limit the responsibility of
the carrier for the loss or damage that may be caused to the shipment
by inserting therein the following stipulation:
Clause 14. Carrier shall not be responsible for loss or damage to
shipments billed 'owner's risk' unless such loss or damage is due to
negligence of carrier. Nor shall carrier be responsible for loss or
damage caused by force majeure, dangers or accidents of the sea or
other waters; war; public enemies; . . . fire . ...
We sustain the validity of the above stipulation; there is nothing therein
that is contrary to law, morals or public policy.
G.R. No. 125524 August 25, 1999
BENITO MACAM doing business under the name and style BEN-
MAC ENTERPRISES, petitioner,
vs.
COURT OF APPEALS, CHINA OCEAN SHIPPING CO., and/or
WALLEM PHILIPPINES SHIPPING, INC.,respondents.
BELLOSILLO, J.:
Petitioner submits that the fact that the shipment was not delivered to
the consignee as stated in the bill of lading or to a party designated or
named by the consignee constitutes a misdelivery thereof. XXX
We emphasize that the extraordinary responsibility of the common
carriers lasts until actual or constructive delivery of the cargoes to the
consignee or to the person who has a right to receive them.
PAKISTAN BANK was indicated in the bills of lading as consignee
whereas GPC was the notify party. However, in the export invoices
GPC was clearly named as buyer/importer. Petitioner also referred to
GPC as such in his demand letter to respondent WALLEM and in his
complaint before the trial court. This premise draws us to conclude that
the delivery of the cargoes to GPC as buyer/importer which,
conformably with Art. 1736 had, other than the consignee, the right to
receive them14 was proper.
Validity of Stipulations
As to DILIGENCE Required
RULE: The common carrier and the shipper or owner of the goods
may enter into a stipulation whereby the diligence required would be
LESS than XO diligence [Art. 1744]
Requisites for Stipulation to be Valid - It must be:
1. In writing,
2. Signed by the shipper or owner,
3. Supported by valuable consideration other than the
service rendered by the common carrier, and
4. Reasonable, just and not contrary to public policy
Stipulations Considered Unjust, Unreasonable and `
Contrary to Public Policy [Art. 1745]
1. That the goods are transported at the risk of the
shipper or owner,
2. That the CC will not be liable for any loss,
destruction, or deterioration of the goods,
3. That the CC need not observe any diligence in
the custody of the goods,
4. That the CC shall exercise a degree of diligence
less than that of a GFOF, or of a man of ordinary
prudence in the vigilance over the goods,
5. That the CC shall not be responsible for the
acts or omission of its EE’s,
6. That the CC‘s liability for acts committed by
thieves, or of robbers who do not act with
grave or irresistible threat, violence or force, is
dispensed with or diminished;
7. That the CC is not responsible for the loss,
destruction or deterioration of goods on
account or the defective condition of the the
car, vehicle, ship, airplane or other equipment
used in the contract of carriage
As to Amount of Liability
RULE:The common carrier and the shipper/owner of the goods may
enter into a stipulation LIMITING the LIABILITY of the common
carrier in case of loss, destruction, or deterioration of the goods
[Art. 1744]
Requisites for Limiting Liability [Art. 1749 & 1750]:
1. There is a stipulation limiting the liability of the carrier to
the value of the goods appearing in the bill of lading,
G.R. No. L-16598 October 3, 1921
H. E. HEACOCK COMPANY, plaintiff-appellant,
vs.
MACONDRAY & COMPANY, INC., defendant-appellant.
JOHNSON, J.:
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 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.
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
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in a bill of lading are invalid which either exempt the carrier from
liability for loss or damage occasioned by its negligence, 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.
2. The stipulation is just and reasonable under the
circumstances,
3. The contract has been fairly and freely agreed upon, and
4. The shipper or owner does NOT:
a. declare a greater value, NOR
b. pay a higher rate of freight
G.R. No. 146018 June 25, 2003
EDGAR COKALIONG SHIPPING LINES, INC., Petitioner,
vs.
UCPB GENERAL INSURANCE COMPANY, INC., Respondent.
PANGANIBAN, J.:
The records 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 x xx shall not exceed the value of the goods as appearing in the
bill of lading."
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.
What if there is no stipulation limiting liability?
 Domestic Voyage – Full value of the goods
 Foreign Trade - $US 500 per package (COGSA)
G.R. No. L-69044 May 29, 1987
EASTERN SHIPPING LINES, INC., petitioner,
vs.
INTERMEDIATE APPELLATE COURT and DEVELOPMENT
INSURANCE & SURETY CORPORATION,respondents.
MELENCIO-HERRERA, J.:
On the US $500 Per Package Limitation:
Petitioner Carrier avers that its liability if any, should not exceed US
$500 per package as provided in section 4(5) of the COGSA
It is to be noted that the Civil Code does not of itself limit the liability of
the common carrier to a fixed amount per package although the Code
expressly permits a stipulation limiting such liability. Thus, the COGSA
which is suppletory to the provisions of the Civil Code, steps in and
supplements the Code by establishing a statutory provision limiting the
carrier's liability in the absence of a declaration of a higher value of the
goods by the shipper in the bill of lading. The provisions of the
Carriage of Goods by.Sea Act on limited liability are as much a part of
a bill of lading as though physically in it and as much a part thereof as
though placed therein by agreement of the parties.
In G.R. No. 69044, there is no stipulation in the respective Bills of
Lading (Exhibits "C-2" and "I-3") 1 7 limiting the carrier's liability for the
loss or destruction of the goods. Nor is there a declaration of a higher
value of the goods. Hence, Petitioner Carrier's liability should not
exceed US $500 per package, or its peso equivalent, at the time of
payment of the value of the goods lost, but in no case "more than the
amount of damage actually sustained."
The actual total loss for the 5,000 pieces of calorized lance pipes was
P256,039 (Exhibit "C"), which was exactly the amount of the insurance
coverage by Development Insurance (Exhibit "A"), and the amount
affirmed to be paid by respondent Court. The goods were shipped in
28 packages (Exhibit "C-2") Multiplying 28 packages by $500 would
result in a product of $14,000 which, at the current exchange rate of
P20.44 to US $1, would be P286,160, or "more than the amount of
damage actually sustained." Consequently, the aforestated amount of
P256,039 should be upheld.
With respect to the seven (7) cases of spare parts (Exhibit "I-3"), their
actual value was P92,361.75 (Exhibit "I"), which is likewise the insured
value of the cargo (Exhibit "H") and amount was affirmed to be paid by
respondent Court. however, multiplying seven (7) cases by $500 per
package at the present prevailing rate of P20.44 to US $1 (US $3,500
x P20.44) would yield P71,540 only, which is the amount that should
be paid by Petitioner Carrier for those spare parts, and not P92,361.75.
In G.R. No. 71478, in so far as the two (2) cases of surveying
instruments are concerned, the amount awarded to DOWA which was
already reduced to $1,000 by the Appellate Court following the
statutory $500 liability per package, is in order.
In respect of the shipment of 128 cartons of garment fabrics in two (2)
containers and insured with NISSHIN, the Appellate Court also limited
Petitioner Carrier's liability to $500 per package and affirmed the award
of $46,583 to NISSHIN. it multiplied 128 cartons (considered as
COGSA packages) by $500 to arrive at the figure of $64,000, and
explained that "since this amount is more than the insured value of the
goods, that is $46,583, the Trial Court was correct in awarding said
amount only for the 128 cartons, which amount is less than the
maximum limitation of the carrier's liability."
When Stipulation Limiting Liability CANNOT be availed of by CC
in case of Loss, Destruction or Deterioration of the Goods[Art.
1747]:
1. If the CC, without just cause, DELAYS the transportation
of the goods, or
2. If the CC, without just cause, CHANGES the stipulated or
usual route
Agreement Limiting Liability v.v. Presumption of Negligence
Art. 1752
Even when there is an agreement limiting the liability of a common
carrier in the vigilance over the goods, the common carrier is
disputably presumed to have been negligent in case of their loss,
destruction or deterioration.
Passenger Baggage
What Laws Shall Apply:
1. CHECK-IN BAGGAGE[not in the personal custody of pax or
his EE] - Civil Code provisions on common carrier of goods
[Art. 1733-1753]
2. HAND CARRIED BAGGAGE[in the personal custody of pax
or his EE] - Civil Code provisions concerning responsibility of
hotel keepers [Art. 1998 and 2000-2003]
Common Cariers shall be Responsible for the Hand-carried Items
when [Art. 1998]:
1. Notice was given to them or their EE‘s by the pax of the
hand-carried items, and
2. The pax took precautions which the carrier advised
relative to the care and vigilance of their effects
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LAST UPDATED: 12/16/15
G.R. No. 108897 October 2, 1997
SARKIES TOURS PHILIPPINES, INC., petitioner,
vs.
HONORABLE COURT OF APPEALS (TENTH DIVISION), DR.
ELINO G. FORTADES, MARISOL A. FORTADES and FATIMA
MINERVA A. FORTADES, respondents.
ROMERO, J.:
The cause of the loss in the case at bar was petitioner's negligence in
not ensuring that the doors of the baggage compartment of its bus
were securely fastened. As a result of this lack of care, almost all of the
luggage was lost, to the prejudice of the paying passengers. As the
Court of Appeals correctly observed:
. . . . Where the common carrier accepted its passenger's baggage for
transportation and even had it placed in the vehicle by its own
employee, its failure to collect the freight charge is the common
carrier's own lookout. It is responsible for the consequent loss of the
baggage. In the instant case, defendant appellant's employee even
helped Fatima Minerva Fortades and her brother load the
luggages/baggages in the bus' baggage compartment, without asking
that they be weighed, declared, receipted or paid for (TSN, August 4,
1986, pp. 29, 34, 54, 57, 70; December 23, 1987, p. 35). Neither was
this required of the other passengers (TSN, August 4, 1986, p. 104;
February 5, 1988; p. 13).
Carriage; Liability; Lost Baggage or Acts of Passengers (1997)
Antonio, a paying passenger, boarded a busbound for Batangas City.
He chose a seat at the front row,near the bus driver, and told the bus
driver that he hadvaluable items in his hand carried bag which he then
placed beside the driver‗s seat. Not having slept for 24hours, he
requested the driver to keep an eye on the bagshould he doze off
during the trip. While Antonio wasasleep, another passenger took the
bag away and alightedat Calamba, Laguna. Could the common carrier
be heldliable by Antonio for the loss?
SUGGESTED ANSWER:
Yes. Ordinarily, the common carrier is not liable for acts ofother
passengers. But the common carrier cannot relieveitself from liability if
the common carrier‗s employeescould have prevented the act or
omission by exercising duediligence. In this case, the passenger asked
the driver tokeep an eye on the bag which was placed beside
thedriver‗s seat. If the driver exercised due diligence, he couldhave
prevented the loss of the bag.
Common Carrier; Duty to Examine Baggages; Railway
and Airline (1992)
Marino was a passenger on a train. Another passenger,Juancho, had
taken a gallon of gasoline placed in a plasticbag into the same coach
where Marino was riding. Thegasoline ignited and exploded causing
injury to Marino whofiled a civil suit for damages against the railway
companyclaiming that Juancho should have been subjected
toinspection by its conductor. The railway companydisclaimed liability
resulting from the explosion contendingthat it was unaware of the
contents of the plastic bag andinvoking the right of Juancho to privacy.
a) Should therailway company be held liable for damages? b) If it were
an airline company involved, would your answer be thesame? Explain
briefly.
SUGGESTED ANSWER:
a) No. The railway company is not liable for damages. Inoverland
transportation, the common carrier is not boundnor empowered to
make an examination on the contents ofpackages or bags, particularly
those handcarried bypassengers.
b) If it were an airline company, the common carrier shouldbe made
liable. In case of air carriers, it is not lawful tocarry flammable materials
in passenger aircrafts, and airlinecompanies may open and investigate
suspicious packagesand cargoes (RA 6235)

COMMON CARRIER OF
PASSENGERS
Nature and Basis of Responsibility
Article 1732. Common carriers are persons, corporations, firms or
associations engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air, for compensation,
offering their services to the public.
Article 1733. Common carriers, from the nature of their business and
for reasons of public policy, are bound to observe extraordinary
diligence in the vigilance over the goods and for the safety of the
passengers transported by them, according to all the circumstances of
each case.
Diligence Required from Common Carrier of Pax
Art. 1755
A common carrier is bound to carry pax safely as far as human care
and foresight can provide, using the utmost diligence of very
cautious persons, with due regard for all the circumstances.
Diligence Required/ Presumption
Art. 1756
In case of death of or injuries to passengers, common carriers are
presumed to have been at fault or to have acted negligently, unless
they prove that they observed XO diligence as prescribed in Art.
1733 and 1755.
G.R. No. L-22985 January 24, 1968
BATANGAS TRANSPORTATION COMPANY, petitioner,
vs.
GREGORIO CAGUIMBAL, PANCRACIO CAGUIMBAL, MARIA
MARANAN DE CAGUIMBAL, BIÑAN TRANSPORTATION
COMPANY and MARCIANO ILAGAN, respondents.
CONCEPCION, C.J.:
In an action based on a contract of carriage, the court need not make
an express finding of fault or negligence on the part of the carrier in
order to hold it responsible to pay the damages sought for by the
passenger. By the contract of carriage, the carrier assumes the
express obligation to transport the passenger to his destination safely
and to observe extraordinary diligence with a due regard for all the
circumstances, and any injury that might be suffered by the passenger
is right away attributable to the fault or negligence of the carrier (Article
1756, new Civil Code). This is an exception to the general rule that
negligence must be proved, and it is therefore incumbent upon the
carrier to prove that it has exercised extraordinary diligence as
prescribed in Articles 1733 and 1755 of the new Civil Code.
Breach of Contract
When is a common carrier presumed to have been at fault or to
have acted negligently and therefore? When does the pax have a
prima facie cause of action for breach of contract against the
carrier?
When there is DEATH or INJURY to pax [Art. 1756]
Other Causes of Breach:
G.R. No. 142305 December 10, 2003
SINGAPORE AIRLINES LIMITED, petitioner,
vs.
ANDION FERNANDEZ, respondent.
CALLEJO, SR., J.:
Page 14
LAST UPDATED: 12/16/15
When an airline issues a ticket to a passenger, confirmed for a
particular flight on a certain date, a contract of carriage arises. The
passenger then has every righ
t to expect that he be transported on that flight and on that date. If he
does not, then the carrier opens itself to a suit for a breach of contract
of carriage. XXX
In the case at bar, it is undisputed that the respondent carried a
confirmed ticket for the two-legged trip from Frankfurt to Manila: 1)
Frankfurt-Singapore; and 2) Singapore-Manila. In her contract of
carriage with the petitioner, the respondent certainly expected that she
would fly to Manila on Flight No. SQ 72 on January 28, 1991. Since the
petitioner did not transport the respondent as covenanted by it on said
terms, the petitioner clearly breached its contract of carriage with the
respondent. The respondent had every right to sue the petitioner for
this breach.
G.R. No. 155550 January 31, 2008
NORTHWEST AIRLINES, INC., petitioner,
vs.
STEVEN P. CHIONG, respondent.
NACHURA, J.:
Northwest contends that Chiong, as a "no-show" passenger on April 1,
1989, already defaulted in his obligation to abide by the terms and
conditions of the contract of carriage; and thus, Northwest could not
have been in breach of its reciprocal obligation to transport Chiong.
XXX
The foregoing documentary and testimonial evidence, taken together,
amply establish the fact that Chiong was present at MIA on April 1,
1989, passed through the PCG counter without delay, proceeded to
the Northwest check-in counter, but when he presented his confirmed
ticket thereat, he was not issued a boarding pass, and ultimately
barred from boarding Northwest Flight No. 24 on that day.
G.R. No. L-21438 September 28, 1966
AIR FRANCE, petitioner,
vs.
RAFAEL CARRASCOSO and the HONORABLE COURT OF
APPEALS, respondents.
SANCHEZ, J.:
First, That there was a contract to furnish plaintiff a first class passage
covering, amongst others, the Bangkok-Teheran leg; Second, That
said contract was breached when petitioner failed to furnish first class
transportation at Bangkok; and Third, that there was bad faith when
petitioner's employee compelled Carrascoso to leave his first class
accommodation berth "after he was already, seated" and to take a seat
in the tourist class, by reason of which he suffered inconvenience,
embarrassments and humiliations, thereby causing him mental
anguish, serious anxiety, wounded feelings and social humiliation,
resulting in moral damages. It is true that there is no specific mention
of the term bad faith in the complaint. But, the inference of bad faith is
there, it may be drawn from the facts and circumstances set forth
therein.
G.R. No. L-22415 March 30, 1966
FERNANDO LOPEZ, ET AL., plaintiffs-appellants,
vs.
PAN AMERICAN WORLD AIRWAYS, defendant-appellant.
BENGZON, J.P., J.:
Expecting that some cancellations of bookings would be made before
the flight time, Jose decided to withhold from Senator Lopez and party,
or their agent, the information that their reservations had been
cancelled.
Armando Davila having previously confirmed Senator Lopez and
party's first class reservations to PAN-AM's ticket sellers at its Manila
Hotel office, the latter sold and issued in their favor the corresponding
first class tickets on the 21st and 23rd of May, 1960.
From the foregoing evidence of defendant it is in effect admitted that
defendant — through its agents — first cancelled plaintiffs,
reservations by mistake and thereafter deliberately and
intentionally withheld from plaintiffs or their travel agent the fact of said
cancellation, letting them go on believing that their first class
reservations stood valid and confirmed. In so misleading plaintiffs into
purchasing first class tickets in the conviction that they had confirmed
reservations for the same, when in fact they had none, defendant
wilfully and knowingly placed itself into the position of having to breach
its a foresaid contracts with plaintiffs should there be no last-minute
cancellation by other passengers before flight time, as it turned out in
this case. Such actuation of defendant may indeed have been
prompted by nothing more than the promotion of its self-interest in
holding on to Senator Lopez and party as passengers in its flight and
foreclosing on their chances to seek the services of other airlines that
may have been able to afford them first class accommodations. All the
time, in legal contemplation such conduct already amounts to action in
bad faith. For bad faith means a breach of a known duty through some
motive ofinterest or ill-will (Spiegel vs. Beacon Participations, 8 NE 2d
895, 907).
PAL VS CA
September 22, 2008
Private respondents and petitioner entered into a contract of air
carriage when the former purchased two plane tickets from the latter.
Under this contract, petitioner obliged itself (1) to transport Deanna and
Nikolai, as unaccompanied minors, on 2 May 1980 from Manila to San
Francisco through one of its planes, Flight 106; and (2) upon the arrival
of Deanna and Nikolai in San Francisco Airport on 3 May 1980, to
transport them on that same day from San Francisco to Los Angeles
via a connecting flight on United Airways 996. As it was, petitioner
failed to transport Deanna and Nikolai from San Francisco to Los
Angeles on the day of their arrival at San Francisco. The staff of United
Airways 996 refused to take aboard Deanna and Nikolai for their
connecting flight to Los Angeles because petitioner‘s personnel in San
Francisco could not produce the indemnity bond accomplished and
submitted by private respondents. Thus, Deanna and Nikolai were
stranded in San Francisco and were forced to stay there overnight. It
was only on the following day that Deanna and Nikolai were able to
leave San Francisco and arrive at Los Angeles via another airline,
Western Airlines. Clearly then, petitioner breached its contract of
carriage with private respondents.
G.R. No. 150843 March 14, 2003
CATHAY PACIFIC AIRWAYS, LTD., petitioner,
vs.
SPOUSES DANIEL VAZQUEZ and MARIA LUISA MADRIGAL
VAZQUEZ, respondents.
DAVIDE, JR., C.J.:
Is an involuntary upgrading of an airline passenger’s
accommodation from one class to a more superior class at no
extra cost a breach of contract of carriage that would entitle the
passenger to an award of damages?
Normally, one would appreciate and accept an upgrading, for it would
mean a better accommodation. But, whatever their reason was and
however odd it might be, the Vazquezes had every right to decline the
upgrade and insist on the Business Class accommodation they had
booked for and which was designated in their boarding passes. They
clearly waived their priority or preference when they asked that other
passengers be given the upgrade. It should not have been imposed on
them over their vehement objection. By insisting on the upgrade,
Cathay breached its contract of carriage with the Vazquezes.
Common Carrier; Breach of Contract; Damages (2003)
Vivian Martin was booked by PAL, which acted as aticketing agent of
Far East Airlines, for a round trip flighton the latter‗s aircraft, from
Manila-Hongkong-Manila.The ticket was cut by an employee of PAL.
The ticketshowed that Vivian was scheduled to leave Manila at 5:30
p.m. on 05 January 2002 aboard Far East‗s Flight F007.Vivian arrived
at the Ninoy Aquino International Airportan hour before the time
scheduled in her ticket, but wastold that Far East‗s Flight F007 had left
at 12:10 p.m. It turned out that the ticket was inadvertently cut
andwrongly worded. PAL employees manning the airport‗sground
services nevertheless scheduled her to fly twohours later aboard their
plane. She agreed and arrived inHongkong safely. The aircraft used by
Far East Airlinesdeveloped engine trouble, and did not make it to
Page 15
LAST UPDATED: 12/16/15
Hongkong but returned to Manila. Vivian sued bothairlines, PAL and
Far East, for damages because of herhaving unable to take the Far
East flight. Could either orboth airlines be held liable to Vivian? Why?
(6%)
SUGGESTED ANSWER:
(per dondee) No, there was breach of contract and thatshe was
accommodated well with the assistance of PALemployees to take the
flight without undue delay.
Presumption of Negligence
Article 1756. In case of death of or injuries to passengers, common
carriers are presumed to have been at fault or to have acted
negligently, unless they prove that they observed extraordinary
diligence as prescribed in articles 1733 and 1755.
G.R. No. L-12219 March 15, 1918
AMADO PICART, plaintiff-appellant,
vs.
FRANK SMITH, JR., defendant-appellee.
STREET, J.:
The test by which to determine the existence of negligence in a
particular case may be stated as follows: Did the defendant in doing
the alleged negligent act use that person would have used in the same
situation? If not, then he is guilty of negligence. The law here in effect
adopts the standard supposed to be supplied by the imaginary conduct
of the discreet paterfamilias of the Roman law. The existence of
negligence in a given case is not determined by reference to the
personal judgment of the actor in the situation before him. The law
considers what would be reckless, blameworthy, or negligent in the
man of ordinary intelligence and prudence and determines liability by
that.
How can the presumption of negligence be rebutted?
If the common carriers proves that it observed the diligence
prescribed in Art. 1733 and 1756 [Art. 1756]
Grounds to Escape Liability
How a common carrier of pax can escape liability – if it proves that:
1. It observed XO diligence by carrying the pax safely as far
as human foresight can provide, using the diligence of a
very cautious person, with due regard for all the
circumstances [Art. 1756]
2. The breach was caused by a fortuitous event [Art. 1174]
Carriage; Breach of Contract; Presumption of
Negligence (1990)
Peter so hailed a taxicab owned and operated by JimmyCheng and
driven by Hermie Cortez. Peter asked Cortezto take him to his office in
Malate. On the way to Malate,the taxicab collided with a passenger
jeepney, as a result ofwhich Peter was injured, i.e., he fractured his left
leg. Petersued Jimmy for damages, based upon a contract ofcarriage,
and Peter won. Jimmy wanted to challenge thedecision before the SC
on the ground that the trial courterred in not making an express finding
as to whether ornot Jimmy was responsible for the collision and,
hence,civilly liable to Peter. He went to see you for advice. Whatwill
you tell him? Explain.
SUGGESTED ANSWER:
I will counsel Jimmy to desist from challenging thedecision. The action
of Peter being based on culpacontractual, the carrier‗s negligence is
presumed upon thebreach of contract. The burden of proof instead
would lieon Jimmy to establish that despite an exercise of utmost
diligence the collision could not have been avoided.
Carriage; Breach of Contract; Presumption of Negligence (1997)
In a court case involving claims for damages arising fromdeath and
injury of bus passengers, counsel for the busoperator files a demurrer
to evidence arguing that thecomplaint should be dismissed because
the plaintiffs didnot submit any evidence that the operator or its
employeeswere negligent. If you were the judge, would you dismiss
the complaint?
SUGGESTED ANSWER:
No. In the carriage of passengers, the failure of thecommon carrier to
bring the passengers safely to theirdestination immediately raises the
presumption that suchfailure is attributable to the carrier‗s fault or
negligence. Inthe case at bar, the fact of death and injury of the bus
passengers raises the presumption of fault or negligenceon the part of
the carrier. The carrier must rebut suchpresumption. Otherwise, the
conclusion can be properlymade that the carrier failed to exercise
extraordinarydiligence as required by law.
Requisites for a fortuitous event to exempt a common carrier
from liability:
1. The cause of the incident, or the failure of the carrier to
comply with his obligations, must be independent of human
will;
2. The incident must have been impossible to foresee, or if it
can be foreseen, it must have been impossible to avoid;
3. The incident must be such as to render it impossible for
the carrier to fulfill his obligation in a normal manner;
and
4. The carrier must be free from any participation in the
aggravation of the injury resulting to the pax
G.R. No. L-19495 February 2, 1924
HONORIO LASAM, ET AL., plaintiffs-appellants,
vs.
FRANK SMITH, JR., defendant-appellant.
OSTRAND, J.:
In discussing and analyzing
term casofortuito the EnciclopediaJuridica Española says: "In a legal
sense and, consequently, also in relation to contracts, a casofortuito
presents the following essential characteristics: (1) The cause of the
unforeseen and unexpected occurrence, or of the failure of the debtor
to comply with his obligation, must be independent of the human will.
(2) It must be impossible to foresee the event which constitutes
the casofortuito, or if it can be foreseen, it must be impossible to avoid.
(3) The occurrence must be such as to render it impossible for the
debtor to fulfill his obligation in a normal manner. And (4) the obligor
(debtor) must be free from any participation in the aggravation of the
injury resulting to the creditor." (5 EnciclopediaJuridica Española, 309.)
As will be seen, these authorities agree that some extraordinary
circumstance independent of the will of the obligor, or of his
employees, is an essential element of a casofortuito. Turning to the
present case, it is at once apparent that this element is lacking. It is not
suggested that the accident in question was due to an act of God or to
adverse road conditions which could not have been foreseen. As far as
the records shows, the accident was caused either by defects in the
automobile or else through the negligence of its driver. That is not
a casofortuito.
G.R. No. L-10605 June 30, 1958
PRECILLANO NECESITO, ETC., plaintiff-appellant,
vs.
NATIVIDAD PARAS, ET AL., defendants-appellees.
REYES, J. B. L., J.:
The proximate cause of the accident was the reduced strength of the
steering knuckle of the vehicle caused by defects in casting it. While
appellants hint that the broken knuckle exhibited in court was not the
real fitting attached to the truck at the time of the accident, the records
they registered no objection on that ground at the trial below. The issue
is thus reduced to the question whether or not the carrier is liable for
the manufacturing defect of the steering knuckle XXX
LAST UPDATED: 12/16/15
XXX In the American law, where the carrier is held to the same degree
of diligence as under the new Civil Code, the rule on the liability of
carriers for defects of equipment is thus expressed: "The
preponderance of authority is in favor of the doctrine that a passenger
is entitled to recover damages from a carrier for an injury resulting from
a defect in an appliance purchased from a manufacturer, whenever it
appears that the defect would have been discovered by the carrier if it
had exercised the degree of care which under the circumstances was
incumbent upon it, with regard to inspection and application of the
necessary tests. For the purposes of this doctrine, the manufacturer is
considered as being in law the agent or servant of the carrier, as far as
regards the work of constructing the appliance. According to this
theory, the good repute of the manufacturer will not relieve the carrier
from liability"
The rationale of the carrier's liability is the fact that the passenger has
neither choice nor control over the carrier in the selection and use of
the equipment and appliances in use by the carrier. Having no privity
whatever with the manufacturer or vendor of the defective equipment,
the passenger has no remedy against him, while the carrier usually
has. It is but logical, therefore, that the carrier, while not in insurer of
the safety of his passengers, should nevertheless be held to answer
for the flaws of his equipment if such flaws were at all discoverable.
In the case now before us, the record is to the effect that the only test
applied to the steering knuckle in question was a purely visual
inspection every thirty days, to see if any cracks developed. It nowhere
appears that either the manufacturer or the carrier at any time tested
the steering knuckle to ascertain whether its strength was up to
standard, or that it had no hidden flaws would impair that strength. And
yet the carrier must have been aware of the critical importance of the
knuckle's resistance; that its failure or breakage would result in loss of
balance and steering control of the bus, with disastrous effects upon
the passengers. No argument is required to establish that a visual
inspection could not directly determine whether the resistance of this
critically important part was not impaired. Nor has it been shown that
the weakening of the knuckle was impossible to detect by any known
test; on the contrary, there is testimony that it could be detected. We
the
are satisfied that the periodical visual inspection of the steering knuckle
as practiced by the carrier's agents did not measure up to the required
legal standard of "utmost diligence of very cautious persons" — "as far
as human care and foresight can provide", and therefore that the
knuckle's failure can not be considered a fortuitous event that exempts
the carrier from responsibility (Lasam vs. Smith, 45 Phil. 657; Son vs.
Cebu Autobus Co., 94 Phil., 892.)
It may be impracticable, as appellee argues, to require of carriers to
test the strength of each and every part of its vehicles before each trip;
but we are of the opinion that a due regard for the carrier's obligations
toward the traveling public demands adequate periodical tests to
determine the condition and strength of those vehicle portions the
failure of which may endanger the safe of the passengers.
G.R. No. 119756 March 18, 1999
FORTUNE EXPRESS, INC., petitioner,
vs.
COURT OF APPEALS, PAULIE U.CAORONG, and minor
childrenYASSER KING CAORONG, ROSE HEINNI and PRINCE
ALEXANDER, all surnamed CAORONG, and represented by their
mother PAULIE U. CAORONG, respondents.
MENDOZA, J.:
The petitioner contends that the seizure of its bus by the armed
assailants was a fortuitous event for which it could not be held liable.
XXX
Petitioner invokes the ruling in Pilapil v. Court of Appeals, 9 and De
Guzman v. Court of Appeals, 10 in support of its contention that the
seizure of its bus by the assailants constitutes force majeure. In Pilapil
v. Court of Appeals, 11 it was held that a common carrier is not liable
for failing to install window grills on its buses to protect the passengers
from injuries cause by rocks hurled at the bus by lawless elements. On
the other hand, in De Guzman v. Court of Appeals, 12 it was ruled that
a common carriers is not responsible for goods lost as a result of a
robbery which is attended by grave or irresistable threat, violence, or
force.
Page 16

It is clear that the cases of Pilapil and De Guzman do not apply to the
prensent case. Art. 1755 of the Civil Code provides that "a common
carrier is bound to carry the passengers as far as human care and
foresight can provide, using the utmost diligence of very cautious
persons, with due regard for all the circumstances." Thus, we held in
Pilapil and De Guzman that the respondents therein were not negligent
in failing to take special precautions against threats to the safety of
passengers which could not be foreseen, such as tortious or criminal
acts of third persons. In the present case, this factor of unforeseeability
(the second requisite for an event to be considered force majeure) is
lacking. As already stated, despite the report of PC agent Generalao
that the Maranaos were planning to burn some of petitioner's buses
and the assurance of petitioner's operation manager (Diosdado Bravo)
that the necessary precautions would be taken, nothing was really
done by petitioner to protect the safety of passengers.
G.R. No. 113003 October 17, 1997
ALBERTA YOBIDO and CRESENCIO YOBIDO, petitioners,
vs.
COURT OF APPEALS, LENY TUMBOY, ARDEE TUMBOY and
JASMIN TUMBOY, respondents.
ROMERO, J.:
Petitioners' contention that they should be exempt from liability
because the tire blowout was no more than a fortuitous event that
could not have been foreseen, must fail. A fortuitous event is
possessed of the following characteristics: (a) the cause of the
unforeseen and unexpected occurrence, or the failure of the debtor to
comply with his obligations, must be independent of human will; (b) it
must be impossible to foresee the event which constitutes
the casofortuito, or if it can be foreseen, it must be impossible to avoid;
(c) the occurrence must be such as to render it impossible for the
debtor to fulfill his obligation in a normal manner; and (d) the obliger
must be free from any participation in the aggravation of the injury
resulting to the creditor. 13 As Article 1174 provides, no person shall
be responsible for a fortuitous event which could not be foreseen, or
which, though foreseen, was inevitable. In other words, there must be
an entire exclusion of human agency from the cause of injury or loss.
Under the circumstances of this case, the explosion of the new tire
may not be considered a fortuitous event. There are human factors
involved in the situation. The fact that the tire was new did not imply
that it was entirely free from manufacturing defects or that it was
properly mounted on the vehicle. Neither may the fact that the tire
bought and used in the vehicle is of a brand name noted for quality,
resulting in the conclusion that it could not explode within five days'
use. Be that as it may, it is settled that an accident caused either by
defects in the automobile or through the negligence of its driver is not
a casofortuito that would exempt the carrier from liability for damages.
Moreover, a common carrier may not be absolved from liability in case
of force majeure or fortuitous event alone. The common carrier must
still prove that it was not negligent in causing the death or injury
resulting from an accident. XXX
It is interesting to note that petitioners proved through the bus
conductor, Salce, that the bus was running at "60-50" kilometers per
hour only or within the prescribed lawful speed limit. However, they
failed to rebut the testimony of LenyTumboy that the bus was running
so fast that she cautioned the driver to slow down. These contradictory
facts must, therefore, be resolved in favor of liability in view of the
presumption of negligence of the carrier in the law. Coupled with this is
the established condition of the road — rough, winding and wet due to
the rain. It was incumbent upon the defense to establish that it took
precautionary measures considering partially dangerous condition of
the road. As stated above, proof that the tire was new and of good
quality is not sufficient proof that it was not negligent. Petitioners
should have shown that it undertook extraordinary diligence in the care
of its carrier, such as conducting daily routinary check-ups of the
vehicle's parts.
G.R. No. 52159 December 22, 1989
JOSE PILAPIL, petitioner,
vs.
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LAST UPDATED: 12/16/15
HON. COURT OF APPEALS and ALATCO TRANSPORTATION
COMPANY, INC., respondents.
PADILLA, J.:
Petitioner has charged respondent carrier of negligence on the ground
that the injury complained of could have been prevented by the
common carrier if something like mesh-work grills had covered the
windows of its bus.
We do not agree.
Although the suggested precaution could have prevented the injury
complained of, the rule of ordinary care and prudence is not so
exacting as to require one charged with its exercise to take doubtful or
unreasonable precautions to guard against unlawful acts of strangers.
The carrier is not charged with the duty of providing or maintaining
vehicles as to absolutely prevent any and all injuries to passengers.
Where the carrier uses cars of the most approved type, in general use
by others engaged in the same occupation, and exercises a high
degree of care in maintaining them in suitable condition, the carrier
cannot be charged with negligence in this respect.
G.R. No. L-47822 December 22, 1988
PEDRO DE GUZMAN, petitioner,
vs.
COURT OF APPEALS and ERNESTO CENDANA, respondents.
FELICIANO, J.:
Petitioner insists that private respondent had not observed
extraordinary diligence in the care of petitioner's goods. Petitioner
argues that in the circumstances of this case, private respondent
should have hired a security guard presumably to ride with the truck
carrying the 600 cartons of Liberty filled milk. We do not believe,
however, that in the instant case, the standard of extraordinary
diligence required private respondent to retain a security guard to ride
with the truck and to engage brigands in a firelight at the risk of his own
life and the lives of the driver and his helper.
In the instant case, armed men held up the second truck owned by
private respondent which carried petitioner's cargo. The record shows
that an information for robbery in band was filed in the Court of First
Instance of Tarlac. XXX The decision of the trial court shows that the
accused acted with grave, if not irresistible, threat, violence or
force. 3 Three (3) of the five (5) hold-uppers were armed with firearms.
The robbers not only took away the truck and its cargo but also
kidnapped the driver and his helper, detaining them for several days
and later releasing them in another province (in Zambales). The
hijacked truck was subsequently found by the police in Quezon City.
The Court of First Instance convicted all the accused of robbery,
though not of robbery in band. 4
In these circumstances, we hold that the occurrence of the loss must
reasonably be regarded as quite beyond the control of the common
carrier and properly regarded as a fortuitous event. It is necessary to
recall that even common carriers are not made absolute insurers
against all risks of travel and of transport of goods, and are not held
liable for acts or events which cannot be foreseen or are inevitable,
provided that they shall have complied with the rigorous standard of
extraordinary diligence.
Duration of Responsibility (Applicable cases)
Note: There are no specific provisions for the duration of responsibility
for common carriers of passengers.
Bataclan v. Medina [102 SCRA 181] – common carrier is still liable
even after the occurrence took place
G.R. No. L-10126 October 22, 1957
SALUD VILLANUEVA VDA. DE BATACLAN and the minors
NORMA, LUZVIMINDA, ELENITA, OSCAR and ALFREDO
BATACLAN, represented by their Natural guardian, SALUD
VILLANUEVA VDA. DE BATACLAN, plaintiffs-appellants,
vs.
MARIANO MEDINA, defendant-appellant.
MONTEMAYOR, J.:
It may be that ordinarily, when a passenger bus overturns, and pins
down a passenger, merely causing him physical injuries, if through
some event, unexpected and extraordinary, the overturned bus is set
on fire, say, by lightning, or if some highwaymen after looting the
vehicle sets it on fire, and the passenger is burned to death, one might
still contend that the proximate cause of his death was the fire and not
the overturning of the vehicle. But in the present case under the
circumstances obtaining in the same, we do not hesitate to hold that
the proximate cause was the overturning of the bus, this for the reason
that when the vehicle turned not only on its side but completely on its
back, the leaking of the gasoline from the tank was not unnatural or
unexpected; that the coming of the men with a lighted torch was in
response to the call for help, made not only by the passengers, but
most probably, by the driver and the conductor themselves, and that
because it was dark (about 2:30 in the morning), the rescuers had to
carry a light with them, and coming as they did from a rural area where
lanterns and flashlights were not available; and what was more natural
than that said rescuers should innocently approach the vehicle to
extend the aid and effect the rescue requested from them. In other
words, the coming of the men with a torch was to be expected and was
a natural sequence of the overturning of the bus, the trapping of some
of its passengers and the call for outside help. What is more, the
burning of the bus can also in part be attributed to the negligence of
the carrier, through is driver and its conductor. According to the
witness, the driver and the conductor were on the road walking back
and forth. They, or at least, the driver should and must have known
that in the position in which the overturned bus was, gasoline could
and must have leaked from the gasoline tank and soaked the area in
and around the bus, this aside from the fact that gasoline when spilled,
specially over a large area, can be smelt and directed even from a
distance, and yet neither the driver nor the conductor would appear to
have cautioned or taken steps to warn the rescuers not to bring the
lighted torch too near the bus.
La Mallorca v. CA [7 SCRA 739] – contractual relation continues until
pax has had a reasonable time and opportunity to leave the
premises or reach a safe distance from the vehicle
G.R. No. L-20761 July 27, 1966
LA MALLORCA, petitioner,
vs.
HONORABLE COURT OF APPEALS, MARIANO BELTRAN, ET
AL., respondents.
BARRERA, J.:
It has been recognized as a rule that the relation of carrier and
passenger does not cease at the moment the passenger alights from
the carrier's vehicle at a place selected by the carrier at the point of
destination, but continues until the passenger has had a reasonable
time or a reasonable opportunity to leave the carrier's premises. And,
what is a reasonable time or a reasonable delay within this rule is to be
determined from all the circumstances. Thus, a person who, after
alighting from a train, walks along the station platform is considered
still a passenger.2 So also, where a passenger has alighted at his
destination and is proceeding by the usual way to leave the company's
premises, but before actually doing so is halted by the report that his
brother, a fellow passenger, has been shot, and he in good faith and
without intent of engaging in the difficulty, returns to relieve his brother,
he is deemed reasonably and necessarily delayed and thus continues
to be a passenger entitled as such to the protection of the railroad and
company and its agents.
In the present case, the father returned to the bus to get one of his
baggages which was not unloaded when they alighted from the bus.
Raquel, the child that she was, must have followed the father.
However, although the father was still on the running board of the bus
awaiting for the conductor to hand him the bag or bayong, the bus
started to run, so that even he (the father) had to jump down from the
moving vehicle. It was at this instance that the child, who must be near
the bus, was run over and killed. In the circumstances, it cannot be
claimed that the carrier's agent had exercised the "utmost diligence" of
a "very cautions person" required by Article 1755 of the Civil Code to
be observed by a common carrier in the discharge of its obligation to
transport safely its passengers. In the first place, the driver, although
Page 18
LAST UPDATED: 12/16/15
stopping the bus, nevertheless did not put off the engine. Secondly, he
started to run the bus even before the bus conductor gave him the
signal to go and while the latter was still unloading part of the
baggages of the passengers Mariano Beltran and family. The presence
of said passengers near the bus was not unreasonable and they are,
therefore, to be considered still as passengers of the carrier, entitled to
the protection under their contract of carriage.
PAL v. Zapatos [226 SCRA 423] – until the pax reaches his
destination, stoppage in between does not terminate the contract
of carriage
G.R. No. L-82619 September 15, 1993
PHILIPPINE AIRLINES, INC., petitioner,
vs.
COURT OF APPEALS and PEDRO ZAPATOS, respondents.
BELLOSILLO, J.:
Undisputably, PAL's diversion of its flight due to inclement weather was
a fortuitous event. Nonetheless, such occurrence did not terminate
PAL's contract with its passengers. Being in the business of air
carriage and the sole one to operate in the country, PAL is deemed
equipped to deal with situations as in the case at bar. What we said in
one case once again must be stressed, i.e., the relation of carrier and
passenger continues until the latter has been landed at the port of
destination and has left the carrier's premises. 22 Hence, PAL
necessarily would still have to exercise extraordinary diligence in
safeguarding the comfort, convenience and safety of its stranded
passengers until they have reached their final destination. On this
score, PAL grossly failed considering the then ongoing battle between
government forces and Muslim rebels in Cotabato City and the fact
that the private respondent was a stranger to the place. As the
appellate court correctly ruled —
While the failure of plaintiff in the first instance to reach his destination
at Ozamis City in accordance with the contract of carriage was due to
the closure of the airport on account of rain and inclement weather
which was radioed to defendant 15 minutes before landing, it has not
been disputed by defendant airline that Ozamis City has no all-weather
airport and has to cancel its flight to Ozamis City or by-pass it in the
event of inclement weather. Knowing this fact, it becomes the duty of
defendant to provide all means of comfort and convenience to its
passengers when they would have to be left in a strange place in case
of such by-passing. The steps taken by defendant airline company
towards this end has not been put in evidence, especially for those 7
others who were not accommodated in the return trip to Cebu, only 6
of the 21 having been so accommodated. It appears that plaintiff had
to leave on the next flight 2 days later. If the cause of non-fulfillment of
the contract is due to a fortuitous event, it has to be the sole and only
cause (Art. 1755 CC., Art. 1733 C.C.) Since part of the failure to
comply with the obligation of common carrier to deliver its passengers
safely to their destination lay in the defendant's failure to provide
comfort and convenience to its stranded passengers using extra-
ordinary diligence, the cause of non-fulfillment is not solely and
exclusively due to fortuitous event, but due to something which
defendant airline could have prevented, defendant becomes liable to
plaintiff.
Validity of Stipulations
As to Diligence Required
Art. 1757
The responsibility of a common carrier for the safety of passengers as
required in Art. 1733 and 1755 CANNOT be DISPENSED with or
LESSENED:
 by stipulation,
 by the posting of notices,
 by statements on tickets, or otherwise.
As to Amount of Liability

Art. 1758
When a pax is carried gratuitously, a stipulation limiting the CC’s
liability for negligence is valid, but not for willful acts or gross
negligence.
Common Carrier; Defenses; Limitation of Liability (2001)
Suppose A was riding on an airplane of a common carrier when the
accident happened and A suffered serious injuries. In an action by A
against the common carrier, the latter claimed that 1) there was a
stipulation in the ticket issued to A absolutely exempting the carrier
from liability from the passenger‗s death or injuries ad notices were
posted by the common carrier dispensing with the extraordinary
diligence of the carrier, and 2) A was given a discount on his plane fare
thereby reducing the liability of the common carrier with respect to A in
particular.
a) Are those valid defenses? (1%)
b) What are the defenses available to any common carrier to limit or
exempt it from liability? (4%)
SUGGESTED ANSWER:
a) No. These are not valid defenses because they are contrary to law
as they are in violation of the extraordinary diligence required of
common carriers. (Article 1757, 1758 New Civil Code)
b) The defenses available to any common carrier to limitor exempt it
from liability are:
1)observance of extraordinary diligence,
2)or the proximate cause of the incident is afortuitous event or force
majeure,
3)act or omission of the shipper or owner ofthe goods,
4)the character of the goods or defects in thepacking or in the
containers, and
5)order or act of competent public authority,without the common carrier
being guilty of evensimple negligence (Article 1734, NCC).
The reduction of fare does not justify any limitation of the CC’s
liability.
Amount of liability of carrier for death/injury to pax:
General Rule: The liability of the CC for death or injuries to pax cannot
be limited by stipulation or otherwise
Exception: The CC‘s liability may be limited when:
 Pax is carried gratuitously,
 There is a stipulation limiting the CC‘s liability, and
 The incident was not caused by willful acts or gross
negligence of the CC
Carriage; Prohibited & Valid Stipulations (2002)
Discuss whether or not the following stipulations in acontract of
carriage of a common carrier are valid:
1)a stipulation limiting the sum that may be recovered bythe shipper or
owner to 90% of the value of the goods in case ofloss due to theft.
2) a stipulation that in the event of loss, destruction ordeterioration of
goods on account of the defective condition ofthe vehicle used in the
contract of carriage, the carrier‗s liability islimited to the value of the
goods appearing in the bill of ladingunless the shipper or owner
declares a higher value (5%)
1) The stipulation is considered unreasonable,unjust and contrary to
public policy under Article 1745 ofthe Civil Code.
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LAST UPDATED: 12/16/15
2) The stipulation limiting the carrier‗s liability tothe value of the goods
appearing in the bill of ladingunless the shipper or owner declares a
higher value, isexpressly recognized in Article 1749 of the Civil Code.
Responsibility for Acts of Employees
Art. 1759
Common carriers are liable for the death of or injuries to passengers
through the negligence or willful acts of their employees, EVEN
THOUGH such employees may have acted:
1. beyond the scope of their authority, or
2. in violation of the orders of the CC
This liability of the common carriers does NOT cease upon proof that
they exercised all the diligence of a GFOF in the selection and
supervision of their employees
Common Carrier; Defenses (2002)
Why is the defense of due diligence in the selection andsupervision of
an employee not available to a commoncarrier? (2%)
SUGGESTED ANSWER:
The defense of due diligence in the selection andsupervision of an
employee is not available to a commoncarrier because the degree of
diligence required of acommon carrier is not the diligence of a good
father of afamily but extraordinary diligence, i.e., diligence of
thegreatest skill and utmost foresight.
Principle of Contributory Negligence:
It is the principle that negligence, however slight, on the part of the
person injured, which is one of the causes proximately contributing to
his injury, equitably reduces the liability of the common carrier
What is contributory negligence?
Conduct on the part of the injured party, contributing as a legal cause
to the harm he has suffered, which falls below the standard to which he
is required to conform for his own protection [Estacio v. Bernardo, 27
Feb 2006]
When can a person be held to have contributed to his injuries?
When it is shown that he performed an act that brought about his
injuries in disregard of warning or signs of an impending danger to
health and body [Estacio v. Bernardo, 27 Feb 2006]
Duty of Pax:
The pax must observe the diligence of a GFOF to avoid injury to
himself[Art. 1761]
Effect of Contributory Negligence on the part of pax:
The carrier shall still be held liable for the death or injury to pax, BUT
the amount of damages shall be equitably reduced [Art. 1762]
G.R. No. L-12191 October 14, 1918
JOSE CANGCO, plaintiff-appellant,
vs.
MANILA RAILROAD CO., defendant-appellee.
FISHER, J.:
The railroad company's defense involves the assumption that even
granting that the negligent conduct of its servants in placing an
obstruction upon the platform was a breach of its contractual obligation
to maintain safe means of approaching and leaving its trains, the direct
and proximate cause of the injury suffered by plaintiff was his own
contributory negligence in failing to wait until the train had come to a
complete stop before alighting. Under the doctrine of comparative
negligence announced in the Rakes case (supra), if the accident was
caused by plaintiff's own negligence, no liability is imposed upon
defendant's negligence and plaintiff's negligence merely contributed to
his injury, the damages should be apportioned. It is, therefore,
important to ascertain if defendant was in fact guilty of negligence.
It may be admitted that had plaintiff waited until the train had come to a
full stop before alighting, the particular injury suffered by him could not
have occurred. Defendant contends, and cites many authorities in
support of the contention, that it is negligence per se for a passenger
to alight from a moving train. We are not disposed to subscribe to this
doctrine in its absolute form. We are of the opinion that this proposition
is too badly stated and is at variance with the experience of every-day
life. In this particular instance, that the train was barely moving when
plaintiff alighted is shown conclusively by the fact that it came to stop
within six meters from the place where he stepped from it. Thousands
of person alight from trains under these conditions every day of the
year, and sustain no injury where the company has kept its platform
free from dangerous obstructions. There is no reason to believe that
plaintiff would have suffered any injury whatever in alighting as he did
had it not been for defendant's negligent failure to perform its duty to
provide a safe alighting place.
XXX
As the case now before us presents itself, the only fact from which a
conclusion can be drawn to the effect that plaintiff was guilty of
contributory negligence is that he stepped off the car without being
able to discern clearly the condition of the platform and while the train
was yet slowly moving. In considering the situation thus presented, it
should not be overlooked that the plaintiff was, as we find, ignorant of
the fact that the obstruction which was caused by the sacks of melons
piled on the platform existed; and as the defendant was bound by
reason of its duty as a public carrier to afford to its passengers facilities
for safe egress from its trains, the plaintiff had a right to assume, in the
absence of some circumstance to warn him to the contrary, that the
platform was clear. The place, as we have already stated, was dark, or
dimly lighted, and this also is proof of a failure upon the part of the
defendant in the performance of a duty owing by it to the plaintiff; for if
it were by any possibility concede that it had right to pile these sacks in
the path of alighting passengers, the placing of them adequately so
that their presence would be revealed.
As pertinent to the question of contributory negligence on the part of
the plaintiff in this case the following circumstances are to be noted:
The company's platform was constructed upon a level higher than that
of the roadbed and the surrounding ground. The distance from the
steps of the car to the spot where the alighting passenger would place
his feet on the platform was thus reduced, thereby decreasing the risk
incident to stepping off. The nature of the platform, constructed as it
was of cement material, also assured to the passenger a stable and
even surface on which to alight. Furthermore, the plaintiff was
possessed of the vigor and agility of young manhood, and it was by no
means so risky for him to get off while the train was yet moving as the
same act would have been in an aged or feeble person. In determining
the question of contributory negligence in performing such act — that
is to say, whether the passenger acted prudently or recklessly — the
age, sex, and physical condition of the passenger are circumstances
necessarily affecting the safety of the passenger, and should be
considered. Women, it has been observed, as a general rule are less
capable than men of alighting with safety under such conditions, as the
nature of their wearing apparel obstructs the free movement of the
limbs. Again, it may be noted that the place was perfectly familiar to
the plaintiff as it was his daily custom to get on and of the train at this
station. There could, therefore, be no uncertainty in his mind with
regard either to the length of the step which he was required to take or
the character of the platform where he was alighting. Our conclusion is
that the conduct of the plaintiff in undertaking to alight while the train
was yet slightly under way was not characterized by imprudence and
that therefore he was not guilty of contributory negligence.
G.R. No. L-30309 November 25, 1983
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LAST UPDATED: 12/16/15
CLEMENTE BRIÑAS, petitioner,
vs.
THE PEOPLE OF THE PHILIPPINES and HONORABLE COURT OF
APPEALS, respondents.
GUTIERREZ, JR., J.:
It is a matter of common knowledge and experience about common
carriers like trains and buses that before reaching a station or flagstop
they slow down and the conductor announces the name of the place. It
is also a matter of common experience that as the train or bus
slackens its speed, some passengers usually stand and proceed to the
nearest exit, ready to disembark as the train or bus comes to a full
stop. This is especially true of a train because passengers feel that if
the train resumes its run before they are able to disembark, there is no
way to stop it as a bus may be stopped.
It was negligence on the conductor's part to announce the next flag
stop when said stop was still a full three minutes ahead. As the
respondent Court of Appeals correctly observed, "the appellant's
announcement was premature and erroneous.
That the announcement was premature and erroneous is shown by the
fact that immediately after the train slowed down, it unexpectedly
accelerated to full speed. Petitioner-appellant failed to show any
reason why the train suddenly resumed its regular speed. The
announcement was made while the train was still in Barrio Lagalag.
The proximate cause of the death of the victims was the premature
and erroneous announcement of petitioner' appelantBriñas. This
announcement prompted the victims to stand and proceed to the
nearest exit. Without said announcement, the victims would have been
safely seated in their respective seats when the train jerked as it
picked up speed. The connection between the premature and
erroneous announcement of petitioner-appellant and the deaths of the
victims is direct and natural, unbroken by any intervening efficient
causes.
Petitioner-appellant also argues that it was negligence per se for
Martina Bool to go to the door of the coach while the train was still in
motion and that it was this negligence that was the proximate cause of
their deaths.
We have carefully examined the records and we agree with the
respondent court that the negligence of petitioner-appellant in
prematurely and erroneously announcing the next flag stop was the
proximate cause of the deaths of Martina Bool and EmelitaGesmundo.
Any negligence of the victims was at most contributory and does not
exculpate the accused from criminal liability.
G.R. No. 95582 October 7, 1991
DANGWA TRANSPORTATION CO., INC. and THEODORE
LARDIZABAL y MALECDAN, petitioners,
vs.
COURT OF APPEALS, INOCENCIA CUDIAMAT, EMILIA
CUDIAMAT BANDOY, FERNANDO CUDLAMAT, MARRIETA
CUDIAMAT, NORMA CUDIAMAT, DANTE CUDIAMAT, SAMUEL
CUDIAMAT and LIGAYA CUDIAMAT, all Heirs of the late
PedritoCudiamat represented by
InocenciaCudiamat, respondents.
REGALADO, J.:p
It is the duty of common carriers of passengers, including common
carriers by railroad train, streetcar, or motorbus, to stop their
conveyances a reasonable length of time in order to afford passengers
an opportunity to board and enter, and they are liable for injuries
suffered by boarding passengers resulting from the sudden starting up
or jerking of their conveyances while they are doing so.
Further, even assuming that the bus was moving, the act of the victim
in boarding the same cannot be considered negligent under the
circumstances. As clearly explained in the testimony of the aforestated
witness for petitioners, Virginia Abalos, th bus had "just started" and
"was still in slow motion" at the point where the victim had boarded and
was on its platform.
It is not negligence per se, or as a matter of law, for one attempt to
board a train or streetcar which is moving slowly. 14 An ordinarily
prudent person would have made the attempt board the moving
conveyance under the same or similar circumstances. The fact that GOODS PASSENGERS
passengers board and alight from slowly moving vehicle is a matter of
common experience both the driver and conductor in this case could Extraordinary diligence XO diligence for the safety of
not have been unaware of such an ordinary practice. pax

The victim herein, by stepping and standing on the platform of the bus, Bound to carry pax safely as far
is already considered a passenger and is entitled all the rights and as human foresight can provide,
protection pertaining to such a contractual relation. Hence, it has been using the utmost diligence of
held that the duty which the carrier passengers owes to its patrons very cautious persons, with due
extends to persons boarding cars as well as to those alighting regard for all the circumstances
therefrom.
Presumption of negligence
Responsibility for Acts of Strangers arises:

When a CC can be held liable for death or injury to pax for willful acts In case of loss, destruction or In case of death or injuries to
or negligence of strangers: deterioration of the goods passengers

 If the common carrier's employees through the exercise of Non-arrival of goods at Non fulfillment of contract
the diligence of a GFOF could have prevented or destination; delay
stopped the act or omission
Presumption of negligence does Presumption of negligence will
G.R. No. L-19161 April 29, 1966 not arise automatically in the always arise in case of carriage
MANILA RAILROAD COMPANY, petitioner, five (5) instances mentioned of pax
vs.
MACARIA BALLESTEROS, TIMOTEO CAMAYO, JOSE REYES and
JULIAN MAIMBAN, JR., respondents. Stipulation that provides that the Responsibility of a common
MAKALINTAL, J.: common carrier need not carrier to transport passenger
Another defense put up by petitioner is that since Abello was not its observe any diligence in the with extraordinary and utmost
employee it should not be held responsible for his acts. This defense custody of the goods shall be diligence cannot be dispensed
was correctly overruled by the trial court, considering the provisions of considered unreasonable, with by stipulation, by the
Article 1763 of the Civil Code and section 48 (b) of the Motor Vehicle unjust and contrary to public posting of notices, by
Law, which respectively provide as follows: policy statements on tickets or
otherwise
Art. 1763. A common carrier is responsible for injuries suffered by a
passenger on account of the wilfull acts or negligence of other Degree of diligence can be The responsibility of a common
passengers or of strangers, if the common carrier's employees through lessened provided it be in carrier to exercise extraordinary
the exercise of the diligence of a good father of a family could have writing, signed by the shipper or and utmost diligence in the
prevented or stopped the act or omission. owner, supported by a valuable transportation of passengers
consideration other than the cannot be lessened by
Sec. 48(b). No professional chauffeur shall permit any unlicensed service rendered by the stipulation, the posting of
person to drive the motor vehicle under his control, or permit a person, common carrier and notices, by statements on
sitting beside him or in any other part of the car, to interfere with him in reasonable, just and not tickets, or otherwise
the operation of the motor vehicle, by allowing said person to take hold contrary to public policy
of the steering wheel, or in any other manner take part in the
manipulation or control of the car. Liability in case of breach can As a general rule, liability in
be lessened is allowed case of breach cannot be
XXX the acts of the bus personnel, particularly "in allowing Mr. Abello lessened, especially for willful
to drive despite two occasions when the bus stopped and the regular An agreement limiting the acts or gross negligence.
driver could have taken over, constitute reckless imprudence and common carrier‘s liability for
wanton injurious conduct on the part of the MRR employees." delay on account of strikes or Exception: A stipulation limiting
riots is valid the common carrier‘s liability for
Common Carrier; Defenses; Fortuitous Events (1994) simple negligence is valid but
A stipulation that the common only when a passenger is
Marites, a paying bus passenger, was hit above her left eyeby a stone carrier‘s liability is limited to the carried gratuitously.
hurled at the bus by an unidentified bystanderas the bus was speeding value of the goods appearing in
through the National Highway.The bus owner‗s personnel lost no time the bill of lading, unless the
in bringingMarites to the provincial hospital where she was shipper or owner declares a
confinedand treated. Marites wants to sue the bus company for greater value is binding.
damages and seeks your advice whether she can legallyhold the bus
company liable. What will you advise her? A contract fixing the sum that
may be recovered by the owner
SUGGESTED ANSWER: or shipper for the loss,
destruction, or deterioration of
Marites can not legally hold the bus company liable. Thereis no the goods is valid if it is
showing that any such incident previously happenedso as to impose reasonable and just under the
an obligation on part of the personnel ofthe bus company to warn the circumstances, and has been
passengers and to take thenecessary precaution. Such hurling of a fairly and freely agreed upon.
stone constitutesfortuitous event in this case. The bus company is not
aninsurer. (Pilapil v CA 180 s 346)

Distinctions between Common Carriers of Goods and Common

Carriers of Passengers
MARITIME COMMERCE
COMMON CARRIERS OF COMMON CARRIERS OF

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Maritime Law - the system of laws which particularly relates to the FaustoRubiso in the ownership of the pilot boat Valentina, inasmuch
affairs and business of the sea, to ships, their crews and navigation, as, though the latter's acquisition of the vessel at public auction, on
and to marine conveyance of persons and property. January 23, 1915, was subsequent to its purchase by the defendant
Rivera, nevertheless said sale at public auction was antecedently
Primary Law - Civil Code Provisions on Common Carriers recorded in the office of the Collector of Customs, on January 27, and
entered in the commercial registry — an unnecessary proceeding —
Suppletory Laws: on March 4th; while the private and voluntary purchase made by
Rivera on a prior date was not recorded in the office of the Collector of
1. Code of Commerce [Book III] Customs until many days afterwards, that is, not until March 17, 1915.
2. CA 65 - COGSA [Carriage of Goods by Sea Act]
3. PD 474 Persons Who Take Part in Marine Commerce[Art. 586-651]
4. RA 1937 – Tariff and Customs Code
5. Act 2616 – Salvage Law 1. Ship Owner – the owner of the vessel
6. PD 1521 - Ship Mortgage Decree of 1978 2. Ship Agent – the person:
a. entrusted with provisioning of the vessel, or
Governing Body in Marine Transportation - MARINA [Maritime b. who represents the vessel in the port where she
Industry Authority] happens to be
3. Captain or Master – the one who governs the vessel
General Functions of the MARINA: 4. Sailing Mate – the second chief of the vessel
5. Second Mate – the one who takes command of the vessel
1. Issue Certificates of Public Convenience for the operation of in case of disability or disqualification of captain or sailing
domestic and overseas water carriers mate
2. Register and issue certificates, licenses, or documents 6. Crew or Sailors – the persons who man the vessel and
necessary or incident thereto those who perform other duties

Vessels Captain or Master of a Vessel

How ownership of MERCHANT VESSELS may be acquired [Art. Distinctions:

573]:
1. Captain - one who governs vessels:
1. By any means recognized by law [Art. 712 Civil Code]: a. that navigate the high seas, or
a. By law [sale or dacion en pago] b. of large dimensions and importance [although
b. By donation engaged in coastwise trade]
c. By testate or intestate succession 2. Master - one who commands smaller ships engaged
d. In consequence of certain contracts exclusively in the coastwise trade
e. By tradition
Note: For purposes of Maritime Commerce, ―captain‖ and ―master‖
2. By prescription: have the same meaning, both being the chiefs and commanders of
a. 3 years – if possession thereof was in good faith vessels
with just title duly recorded, or
b. 10 years – in the absence of above requisites Qualifications under Art 609 of the Code of Commerce

What kind of property is a vessel? 1. Filipino

2. Legal capacity to bind himself
1. PERSONAL or MOVABLE 3. Proof that they have skill, capacity, and qualification required
2. BUT – the to command and direct a vessel as established by:
a. ownership thereof must be evidenced by a a. marine laws, ordinances or regulations
certificate of ownership, and b. those of navigation
b. transfer thereof must be registered in the 4. Not disqualified according to the same for the discharge of
proper registry [to bind 3rd persons] (Art. 585) the duties of that position

Requisites for Legal Acquisition of a Merchant Vessel [Art. 573]: G.R. No. 114167 July 12, 1995
COASTWISE LIGHTERAGE CORPORATION, petitioner,
1. The mode of transfer must appear in a written instrument vs.
2. It must be recorded in the registry or vessels to bind 3rd COURT OF APPEALS and the PHILIPPINE GENERAL INSURANCE
persons: COMPANY, respondents.

a. Under EO 125 – transaction must be registered FRANCISCO, R., J.:

with MARINA
b. But, this is also being conducted by the PPA
G.R. No. L-11407 October 30, 1917
FAUSTO RUBISO and BONIFACIO GELITO, plaintiff-appellee,
vs.
FLORENTINO E. RIVERA, defendant-appellant.
TORRES, J.:
The requisite of registration in the registry, of the purchase of a vessel,
is necessary and indispensable in order that the purchaser's rights may
be maintained against a claim filed by a third person. Such registration
is required both by the Code of Commerce and by Act No. 1900. XXX
In view of said legal provisions, it is undeniable that the defendant
Florentino E. Rivera's rights cannot prevail over those acquired by
Jesus R. Constantino, the patron of the vessel "Coastwise 9" admitted
that he was not licensed. The Code of Commerce, which subsidiarily
governs common carriers (which are primarily governed by the
provisions of the Civil Code) provides:
Art. 609. — Captains, masters, or patrons of vessels must be Filipinos,
have legal capacity to contract in accordance with this code, and prove
the skill capacity and qualifications necessary to command and direct
the vessel, as established by marine and navigation laws, ordinances
or regulations, and must not be disqualified according to the same for
the discharge of the duties of the position. . . .
Clearly, petitioner Coastwise Lighterage's embarking on a voyage with
an unlicensed patron violates this rule. It cannot safely claim to have
exercised extraordinary diligence, by placing a person whose
navigational skills are questionable, at the helm of the vessel which

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eventually met the fateful accident. It may also logically, follow that a vessel,mayhap, because the latter had assured him that they were
person without license to navigate, lacks not just the skill to do so, but navigating normally before the grounding of the vessel.Moreover, the
also the utmost familiarity with the usual and safe routes taken by pilot had admitted that on account of his experience he was very
seasoned and legally authorized ones. Had the patron been licensed, familiar with the configuration of the river as well as the course
he could be presumed to have both the skill and the knowledge that headings, and that he does not even refer to river charts when
would have prevented the vessel's hitting the sunken derelict ship that navigating the Orinoco River.
lay on their way to Pier 18.
Based on these declarations, it comes as no surprise to us that the
As a common carrier, petitioner is liable for breach of the contract of master chose not to regain control of the ship. Admitting his limited
carriage, having failed to overcome the presumption of negligence with knowledge of the Orinoco River, Captain Colon relied on the
the loss and destruction of goods it transported, by proof of its exercise knowledge and experience of pilot Vasquez to guide the vessel safely.
of extraordinary diligence.
XXX
General Functions of a Captain
The Orinoco River being a compulsory pilotage channel necessitated
1. General agent of the ship owner the engaging of a pilot who was presumed to be knowledgeable of
2. Technical director of the vessel every shoal, bank, deep and shallow ends of the river. In his
3. Representative of the government in the country under deposition, pilot EzzarSolarzano Vasquez testified that he is an official
whose flag he navigates pilot in the Harbour at Port Ordaz, Venezuela, and that he had been a
pilot for twelve (12) years. He also had experience in navigating the
waters of the Orinoco River.
G.R. No. 115286 August 11, 1994
INTER-ORIENT MARITIME ENTERPRISES, INC., SEA HORSE
The law does provide that the master can countermand or overrule the
SHIP, INC. and TRENDA WORLD SHIPPING (MANILA),
order or command of the harbor pilot on board. The master of the
INC., petitioners,
Philippine Roxas deemed it best not to order him (the pilot) to stop the
vs.
vessel,mayhap, because the latter had assured him that they were
NATIONAL LABOR RELATIONS COMMISSION and RIZALINO D.
navigating normally before the grounding of the vessel.Moreover, the
TAYONG, respondents.
pilot had admitted that on account of his experience he was very
FELICIANO, J.:
familiar with the configuration of the river as well as the course
It is well settled in this jurisdiction that confidential and managerial
headings, and that he does not even refer to river charts when
employees cannot be arbitrarily dismissed at any time, and without
navigating the Orinoco River.
cause as reasonably established in an appropriate
investigation. 15 Such employees, too, are entitled to security of
Based on these declarations, it comes as no surprise to us that the
tenure, fair standards of employment and the protection of labor laws.
master chose not to regain control of the ship. Admitting his limited
knowledge of the Orinoco River, Captain Colon relied on the
The captain of a vessel is a confidential and managerial employee
knowledge and experience of pilot Vasquez to guide the vessel safely.
within the meaning of the above doctrine. A master or captain, for
purposes of maritime commerce, is one who has command of a
vessel. A captain commonly performs three (3) distinct roles: (1) he is Obligations of the Captain if Repair and Maintenance of Vessel is
a general agent of the shipowner; (2) he is also commander and required during the voyage [583]
technical director of the vessel; and (3) he is a representative of the
country under whose flag he navigates.16 Of these roles, by far the 1. He shall apply to:
most important is the role performed by the captain as commander of a. If in RP territory – the judge or the courts or
the vessel; for such role (which, to our mind, is analogous to that of b. If outside RP territory :
"Chief Executive Officer" [CEO] of a present-day corporate enterprise) i. Filipino Consul
has to do with the operation and preservation of the vessel during its ii. Judge or Court of the Local Authority, if
voyage and the protection of the passengers (if any) and crew and no consul is available
cargo. In his role as general agent of the shipowner, the captain has
authority to sign bills of lading, carry goods aboard and deal with the 2. He must present to:
freight earned, agree upon rates and decide whether to take cargo. a. Certificate or registry of the vessel
The ship captain, as agent of the shipowner, has legal authority to b. Instruments proving the obligation contracted
enter into contracts with respect to the vessel and the trading of the
vessel, subject to applicable limitations established by statute, contract PROHIBITED ACTS (613, 614, 615, 617, 621)
or instructions and regulations of the shipowner. 17 To the captain is
committed the governance, care and management of the Books to be Carried by the Captain on Board the Vessel Art.
vessel. 18 Clearly, the captain is vested with both management and 612[3]
fiduciary functions.
1. LOGBOOK - where he shall enter everyday everything
significant about the voyage
G.R. No. 119602 October 6, 2000
2. ACCOUNTING BOOK - where he shall enter all the
WILDVALLEY SHIPPING CO., LTD. petitioner,
amounts collected and paid for the account of the vessel
vs.
3. FREIGHT BOOK– where he shall record the entry and exit
COURT OF APPEALS and PHILIPPINE PRESIDENT LINES
of goods
INC., respondents.
BUENA, J.:
The Orinoco River being a compulsory pilotage channel necessitated
the engaging of a pilot who was presumed to be knowledgeable of
every shoal, bank, deep and shallow ends of the river. In his
deposition, pilot EzzarSolarzano Vasquez testified that he is an official
pilot in the Harbour at Port Ordaz, Venezuela,and that he had been a
pilot for twelve (12) years. He also had experience in navigating the
waters of the Orinoco River.

The law does provide that the master can countermand or overrule the
order or command of the harbor pilot on board. The master of the G.R. No. L-65442 April 5, 1985
Philippine Roxas deemed it best not to order him (the pilot) to stop the

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 HAVERTON SHIPPING LTD. and OFSI SERVICES,
INC., petitioners,
vs.
THE NATIONAL LABOR RELATIONS COMMISSION, THE HON.
CRESENCIO M. SIDDAYAO, in his capacity as Officer-in-Charge of
the NATIONAL SEAMEN BOARD and ALFREDO
BENITEZ, respondents.
MELENCIO-HERRERA, J.:
In declaring that copy of the Official Entry in the Ship's Log Book was
not legally binding for being hearsay, public respondents overlooked
the fact that under our laws the ship's captain is obligated to keep a
"log book" where, among others, he records the decisions he has
adopted. 7 Even according to the law of the vessel's registry, that book
is also "required by law" as disclosed by the entry itself. 8 There is no
controversy as to the genuineness of the said entry. The vessel's log
book is an official record and entries made by a person in the
performance of a duty required by law areprima facie evidence of the
facts stated therein.
G.R. No. 180719 August 22, 2008
CENTENNIAL TRANSMARINE, INC., CENTENNIAL MARITIME
SERVICES CORPORATION AND/OR B+H EQUIMAR SINGAPORE,
PTE. LTD., petitioners,
vs.
RUBEN G. DELA CRUZ, respondent.
YNARES-SANTIAGO, J.:
In Wallem Maritime Services, Inc. v. National Labor Relations
Commission, citing Haverton Shipping Ltd. v. National Labor Relations
Commission, the Court ruled that a copy of an official entry in the
logbook is legally binding and serves as an exception to the hearsay
rule. In the said case, however, there was no controversy as to the
genuineness of the said entry and the authenticity of the copy
presented in evidence.
In the instant case, respondent has consistently assailed the
genuineness of the purported entry and the authenticity of such copy.
He alleged that before his repatriation, there was no entry in the ship‘s
official logbook regarding any incident that might have caused his
relief; that Captain Kowalewski‘s signature in such purported entry was
forged. In support of his allegations, respondent submitted three official
documents bearing the signature of Capt. SczepanKowalewski which
is different from the one appearing in Annex E. Thus, it was incumbent
upon petitioners to prove the authenticity of Annex E, which they failed
to do. Likewise, the purported report of Capt. Kowalewski dated
September 1, 2000 (Annex D), and the statements of Safety Officer
KhaldunNacemFaridi and Chief Officer Josip Milin (Annexes G and H)
also cannot be given weight for lack of authentication.
Although technical rules of evidence do not strictly apply to labor
proceedings, however, in the instant case, authentication of the above-
mentioned documents is necessary because their genuineness is
being assailed, and since petitioners offered no corroborating
evidence. These documents and their contents have to be duly
identified and authenticated lest an injustice would result from a blind
adoption of such contents.Thus, the unauthenticated documents relied
upon by petitioners are mere self-serving statements of their own
officers and were correctly disregarded by the Court of Appeals.
What is the probative value of the entries in the logbook? It is an
official record of entries made by a person in the performance of a duty
required by law and are prima facie evidence of the facts stated therein
Duration of Responsibility of Captain for Cargo on Board his
Vessel [Art. 619]
1. FROM – the time it is turned over to him at the dock or afloat
alongside the vessel at the port of loading
2. UNTIL – he delivers it on the shore or on the discharging
wharf at the port of unloading
3. UNLESS –otherwise expressly agreed upon
NOTE: Compare to Art. 1736 Civil Code
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Article 1736. The extraordinary responsibility of the common carrier
lasts from the time the goods are unconditionally placed in the
possession of, and received by the carrier for transportation until the
same are delivered, actually or constructively, by the carrier to the
consignee, or to the person who has a right to receive them, without
prejudice to the provisions of article 1738.
Common Carrier; Duration of Liability (1996)
A bus of GL Transit on its way to Davao stopped toenable a passenger
to alight. At that moment, Santiago,who had been waiting for a ride,
boarded the bus.However, the bus driver failed to notice Santiago who
wasstill standing on the bus platform, and stepped on theaccelerator.
Because of the sudden motion, Santiagoslipped and fell down suffering
serious injuries. MaySantiago hold GL Transit liable for breach of
contract ofcarriage? Explain.
SUGGESTED ANSWER:
Santiago may hold GL Transit liable for breach of contractof carriage. It
was the duty of the driver, when he stoppedthe bus, to do no act that
would have the effect ofincreasing the peril to a passenger such as
Santiago whilehe was attempting to board the same. When a bus is
not inmotion there is no necessity for a person who wants to ride the
same to signal his intentionto board. A public utility bus, once it stops,
is in effectmaking a continuous offer to bus riders. It is the duty of
common carriers of passengers to stop their conveyancesfor a
reasonable length of time in order to affordpassengers an opportunity
to board and enter, and they areliable for injuries suffered by boarding
passengers resultingfrom the sudden starting up or jerking of their
conveyanceswhile they are doing so. Santiago, by stepping and
standingon the platform of the bus, is already considered apassenger
and is entitled to all the rights and protectionpertaining to a contract of
carriage.(Dangwa Trans Co v CA 95582 Oct 7,91 202s574)
Definition of Maritime Protest [BAR]
 It is a written statement under oath
 Made by the captain or master of the vessel
 After the occurrence of an accident or disaster
 In which the vessel or cargo is lost or injured
 With respect to circumstances attending such occurrence
Purpose of a Maritime Protest - It is usually intended to show:
1. That the loss or damage resulted from:
a. a peril of the sea, or
b. some other cause for which neither the master or
owner was responsible
2. It concludes with the protestation against any liability of the
owner for such loss or damage
Doctrine of Limited Liability[Art. 586-590]
When Ship owner or Ship Agent shall be Civilly Liable [Art. 586]
1. Art. 586:
a. For the acts of the CAPTAIN, and
b. For the obligations contracted by the CAPTAIN
to repair, equip, and provision the vessel [provided
the creditor proves that the amount claimed was
invested for the benefit of the vessel]
2. Art. 587 - For the indemnities in favor of 3rd persons
which arise from the conduct of the CAPTAIN in the care of
the goods which the vessel carried
 G.R. No. 154305 December 9, 2004
MACONDRAY & CO., INC., petitioner,
vs.
PROVIDENT INSURANCE CORPORATION, respondent.
PANGANIBAN, J.:
Article 586 of the Code of Commerce states that a ship agent is "the
person entrusted with provisioning or representing the vessel in the
port in which it may be found."
Hence, whether acting as agent of the owner of the vessel or as agent
of the charterer, petitioner will be considered as the ship agent and
may be held liable as such, as long as the latter is the one that
provisions or represents the vessel.
The trial court found that petitioner "was appointed as local agent of
the vessel, which duty includes arrangement for the entrance and
clearance of the vessel." Further, the CA found and the evidence
shows that petitioner represented the vessel. The latter prepared the
Notice of Readiness, the Statement of Facts, the Completion Notice,
the Sailing Notice and Custom's Clearance. Petitioner's employees
were present at Sangi, Toledo City, one day before the arrival of the
vessel, where they stayed until it departed. They were also present
during the actual discharging of the cargo. Moreover, Mr. de la Cruz,
the representative of petitioner, also prepared for the needs of the
vessel, like money, provision, water and fuel.
These acts all point to the conclusion that it was the entity that
represented the vessel in the Port of Manila and was the ship
agent within the meaning and context of Article 586 of the Code of
Commerce.
As ship agent, it may be held civilly liable in certain instances. The
Code of Commerce provides:
"Article 586. The shipowner and the ship agent shall be civilly liable for
the acts of the captain and for the obligations contracted by the latter to
repair, equip, and provision the vessel, provided the creditor proves
that the amount claimed was invested for the benefit of the same."
"Article 587. The ship agent shall also be civilly liable for the
indemnities in favor of third persons which may arise from the conduct
of the captain in the care of the goods which he loaded on the vessel;
but he may exempt himself therefrom by abandoning the vessel with all
her equipments and the freight it may have earned during the voyage."
Petitioner does not dispute the liabilities of the ship agent for the
loss/shortage of 476.140 metric tons of standard-grade Muriate of
Potash valued at P1,657,700.95. Hence, we find no reason to delve
further into the matter or to disturb the finding of the CA holding
petitioner, as ship agent, liable to respondent for the losses sustained
by the subject shipment.
G.R. No. L-47447-47449 October 29, 1941
TEODORO R. YANGCO, ETC., petitioner,
vs.
MANUEL LASERNA, ET AL., respondents.
MORAN, J.:
May the shipowner or agent, notwithstanding the total loss of the
vessel as a result of the negligence of its captain, be properly
held liable in damages for the consequent death of its
passengers? We are of the opinion and so hold that this question is
controlled by the provisions of article 587 of the Code of Commerce.
Said article reads:
The agent shall also be civilly liable for the indemnities in favor of third
persons which arise from the conduct of the captain in the care of the
goods which the vessel carried; but he may exempt himself therefrom
by abandoning the vessel with all her equipments and the freight he
may have earned during the voyage.
The provisions accords a shipowner or agent the right of
abandonment; and by necessary implication, his liability is confined to
that which he is entitled as of right to abandon — "the vessel with all
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her equipments and the freight it may have earned during the voyage."
It is true that the article appears to deal only with the limited liability of
shipowners or agents for damages arising from the misconduct of the
captain in the care of the goods which the vessel carries, but this is a
mere deficiency of language and in no way indicates the true extent of
such liability. The consensus of authorities is to the effect that
notwithstanding the language of the aforequoted provision, the benefit
of limited liability therein provided for, applies in all cases wherein the
shipowner or agent may properly be held liable for the negligent or
illicit acts of the captain.
XXX
In the light of all the foregoing, we therefore hold that if the shipowner
or agent may in any way be held civilly liable at all for injury to or death
of passengers arising from the negligence of the captain in cases of
collisions or shipwrecks, his liability is merely co-extensive with his
interest in the vessel such that a total loss thereof results in its
extinction. In arriving at this conclusion, we have not been unmindful of
the fact that the ill-fated steamshipNegros, as a vessel engaged in
interisland trade, is a common carrier (De Villata v. Stanely, 32 Phil.,
541), and that the relationship between the petitioner and the
passengers who died in the mishap rests on a contract of carriage. But
assuming that petitioner is liable for a breach of contract of carriage,
the exclusively "real and hypothecary nature" of maritime law operates
to limit such liability to the value of the vessel, or to the insurance
thereon, if any. In the instant case it does not appear that the vessel
was insured.
Whether the abandonment of the vessel sought by the petitioner in the
instant case was in accordance with law of not, is immaterial. The
vessel having totally perished, any act of abandonment would be an
idle ceremony.
Limited Liability Rule (1994)
Toni, a copra dealer, loaded 1000 sacks of copra on boardthe vessel
MV Tonichi (a common carrier engaged incoastwise trade owned by
Ichi) for shipment from PuertoGalera to Manila. The cargo did not
reach Manila becausethe vessel capsized and sank with all its cargo.
When Toni sued Ichi for damages based on breach ofcontract, the
latter invoked the ―limited liability rule.‖ 1)
What do you understand of the ―rule‖ invoked by Ichi? 2)
Are there exceptions to the ―limited liability rule‖?
SUGGESTED ANSWER:
1) By ―limited liability rule‖ is meant that the liability of ashipowner for
damages in case of loss is limited to thevalue of the vessel involved.
His other properties cannotbe reached by the parties entitled to
damages.
2) Yes. When the ship owner of the vessel involved isguilty of
negligence, the ―limited liability rule‖ does notapply. In such case, the
ship owner is liable to the fullextent of the damages sustained by the
aggrieved parties(Mecenas v CA 180 s 83)
Limited Liability Rule (1997)
Explain the doctrine in Maritime accidents – The Doctrine
of Limited Liability
SUGGESTED ANSWER:
Under the ―doctrine of limited liability‖ the exclusivelyreal and
hypothecary nature of maritime law operates tolimit the liability of the
shipowner to the value of thevessel, earned freightage and proceeds of
the insurance.However, such doctrine does not apply if the
shipownerand the captain are guilty of negligence.
Limited Liability Rule (1999)
Thinking that the impending typhoon was still 24 hoursaway, MV
Pioneer left port to sail for Leyte. That was amiscalculation of the
typhoon signals by both the ship owner and the captain as the typhoon
came earlier andovertook the vessel. The vessel sank and a number
ofpassengers disappeared with it.Relatives of the missing passengers
claimed damagesagainst the shipowner. The shipowner set up the
defensethat under the doctrine of limited liability, his liability wasco-
extensive with his interest in the vessel. As the vesselwas totally lost,
his liability had also been extinguished.. How will you advice the
claimants? Discuss thedoctrine of limited liability in maritime law. (3%).
Assuming that the vessel was insured, may theclaimants go after the
insurance proceeds? (3%)
SUGGESTED ANSWER:
Under the doctrine of limited liability in maritime law,the liability of the
shipowner arising from the operation of a shipis confined to the vessel,
equipment, and freight, or insurance, ifany, so that if the shipowner
abandoned the ship, equipment, andfreight, his liability is extinguished.
However, the doctrine oflimited liability does not apply when the
shipowner or captain isguilty of negligence.
Yes. In case of a lost vessel, the claimants may go afterthe proceeds
of the insurance covering the vessel.
Limited Liability Rule (2000)
MV Mariposa, one of five passenger ships owned byMarina Navigation
Co, sank off the coast of Mindoro whileen route to Iloilo City. More than
200 passengers perishedin the disaster. Evidence showed that the
ship captainignored typhoon bulletins issued by Pag-asa during the24-
hour period immediately prior to the vessel‗s departurefrom Manila.
The bulletins warned all types of sea crafts to
avoid the typhoon‗s expected path near Mindoro. To makematters
worse, he took more load than was allowed for theship‗s rated
capacity. Sued for damages by the victim‗ssurviving relatives, Marina
Nav Co contended 1) that itsliability, if any, had been extinguished with
the sinking ofMV Mariposa; and 2) that assuming it had not been
soextinguished, such liability should be limited to the loss ofthe cargo.
Are these contentions meritorious in the contextof applicable
provisions of the Code of Commerce? (3%)
SUGGESTED ANSWER:
Yes. The contentions of Marina Nav Co are meritorious.The captain of
MV Mariposa is guilty of negligence inignoring the typhoon bulletins
issued by PAGASA and inoverloading the vessel. But only the captain
of the vesselMV Mariposa is guilty of negligence. The ship owner is
not. Therefore, the ship owner can invoke the doctrine oflimited liability.
Limited Liability Rule; Doctrine of Inscrutable Fault (1991)
In a collision between M/T Manila, a tanker, and M/VDon Claro, an
inter-island vessel, Don Claro sank andmany of its passengers
drowned and died. All its cargoeswere lost. The collision occurred at
nighttime but the seawas calm, the weather fair and visibility was good.
Prior tothe collision and while still 4 nautical miles apart, Don Claro
already sighted Manila on its radarscreen. Manila had no radar
equipment. As for speed,Don Claro was twice as fast as Manila.
At the time of the collision, Manila failed to follow Rule19 of the
International Rules of the Road which requires 2vessels meeting head
on to change their course by eachvessel steering to starboard (right)
so that each vessel maypass on the port side (left) of the other. Manila
signaledthat it would turn to the port side and steered accordingly,thus
resulting in the collision. Don Claro‗s captain wasoff-duty and was
having a drink at the ship‗s bar at thetime of the collision.
a) Who would you hold liable for thecollision?
b) If Don Claro was at fault, may the heirs of thepassengers who died
and the owners of the cargoesrecover damages from the owner of said
vessel?
SUGGESTED ANSWER:
I can hold the 2 vessels liable. In the problem given,whether on the
basis of the factual settings or under thedoctrine of inscrutable fault,
both vessels can be said tohave been guilty of negligence. The liability
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of the 2carriers for the death or injury of passengers and for theloss of
or damage to the goods arising from the collision issolidary. Neither
carrier may invoke the doctrine of lastclear chance which can only be
relevant, if at all, betweenthe two vessels but not on the claims made
by passengersor shippers (Litonjua Shipping v National Seamen Board
GR 5191010Aug1989)
SUGGESTED ANSWER:
Yes, but subject to the doctrine of limited liability. Thedoctrine is to the
effect that the liability of the shipownerswould only be to the extent of
any remaining value of thevessel, proceeds of insurance, if any, and
earned freightage.Given the factual settings, the shipowner himself
was notguilty of negligence and, therefore, the doctrine can wellapply
(Amparo de los Santos v CA 186 s 69)
Limited Liability Rule; General Average Loss (2000)
X Shipping Company spent almost a fortune in refittingand repairing its
luxury passenger vessel, the MV Marina,which plied the inter-island
routes of the company fromLa Union in the north to Davao City in the
south. TheMV Marina met an untimely fate during its post-
repairvoyage. It sank off the coast of Zambales while en route toLa
Union from Manila. The investigation showed that thecaptain alone
was negligent. There were no casualties inthat disaster. Faced with a
claim for the payment of therefitting and repair, X Shipping company
assertedexemption from liability on the basis of the hypothecary or
limited liability rule under Article 587 of the Code ofCommerce. Is X
Shipping Company‗s assertion valid?Explain (3%).
SUGGESTED ANSWER:
No. The assertion of X Shipping Company is not valid.The total
destruction of the vessel does not affect theliability of the ship owner
for repairs on the vesselcompleted before its loss.
Limited Liability Rule; General Average Loss (2000)
MV SuperFast, a passenger-cargo vessel owned by SFShipping
Company plying the inter-island routes, was on itsway to Zamboanga
City from the Manila port when itaccidentally, and without fault or
negligence of anyone onthe ship, hit a huge floating object. The
accident causeddamage to the vessel and loss of an accompanying
cratedcargo of passenger PR. In order to lighten the vessel andsave it
from sinking and in order to avoid risk of damage toor loss of the rest
of the shipped items (none of which waslocated on the deck), some
had to be jettisoned. SFShipping had the vessel repaired at its port of
destination.SF Shipping thereafter filed a complaint demanding all the
other cargo owners to share in the total repair costs incurred by the
company and in the value of the lost andjettisoned cargoes. In answer
to the complaint, theshippers‗ sole contention was that, under the Code
ofCommerce, each damaged party should bear its or his own
damage and those that did not suffer any loss or damagewere not
obligated to make any contribution in favor ofthose who did. Is the
shippers‗ contention valid? Explain(2%)
SUGGESTED ANSWER:
No. The shippers‗ contention is not valid. The owners ofthe cargo
jettisoned, to save the vessel from sinking and tosave the rest of the
cargoes, are entitled to contribution.The jettisoning of said cargoes
constitute general averageloss which entitles the owners thereof to
contribution fromthe owner of the vessel and also from the owners of
thecargoes saved.
SF Shipping is not entitled to contribution/ reimbursementfor the costs
of repairs on the vessel from the shippers.
Powers and Duties of a Ship Agent:
1. Represent the ownership of the vessel and may, in his own
name and in such capacity, take judicial and extrajudicial
steps in matters relating to commerce (595.2)
2. Occupy the duties of the captain, if he has the qualification of
a captain (596.1)
 3. Select and come into agreement with the captain and
contract in the name of owners who shall be bound in all that
refers to repairs, details of equipment, armament, provisions,
fuel, freight, and in general that pertains to the requirement
of navigation (597)
4. Indemnify the captain for all the expenses he may have
incurred from his own funds or from those of other persons
for the benefit of the vessel (602)
NOTE: Ship owner, agent and captain can be one and the same
persons (595, 596, 606)
How Ship Agent may Exempt Himself from Liability:
By ABANDONING:
1. the vessel, and
2. ALL:
a. her equipment, and
b. the freightage it may have earned during the
voyage
Why is the Ship owner given the right of abandonment?
As correctly stated by the appellate court, "(t)his rule is found
necessary to offset against the innumerable hazards and perils of
a sea voyage and to encourage shipbuilding and marine
commerce. (Delos Santos v CA)
What distinguishes Maritime Law from Civil Law or Mercantile
Law? The REAL and HYPOTHECARY nature of Maritime Law
A shipping transportation contract is ―REAL & HYPOTHECARY‖ in
nature under Art. 587 which accords a ship owner or agent the right of
abandonment; and by necessary implication, his liability is confined to
that which he is entitled as of right to abandon - "the vessel with all her
equipments and the freight it may have earned during the voyage."
[Yangco v. Laserna, Oct 29, 1941]
ABANDONMENT
It is equivalent to an offer of the value of the vessel, her equipment and
freight earned in return for an exemption from liability.
When ABANDONMENT is made in the instances provided by law,
it cannot be refused.
Note:When the right to abandonment exists, the
shipper/consignee/pax cannot invoke Art. 1733 and 1755 of the Civil
Code.
Article 1733. Common carriers, from the nature of their business and
for reasons of public policy, are bound to observe extraordinary
diligence in the vigilance over the goods and for the safety of the
passengers transported by them, according to all the circumstances of
each case.
Article 1755. A common carrier is bound to carry the passengers
safely as far as human care and foresight can provide, using the
utmost diligence of very cautious persons, with a due regard for all the
circumstances.
While the primary law governing maritime commerce is the Civil Code,
in all matters not regulated by said Code, the Code of Commerce and
other special laws shall govern.
Since the Civil Code contains no provision regulating the liability of
shipowers in the event of total loss or destruction of the vessel, it is the
provisions of the Code of Commerce, particularly Art. 587 that
governs.[Chua Yek Hong v. IAC, 14 Dec 1988]
When ABANDONMENT can be made:
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1. For civil liability to third persons arising from the conduct
of the captain in the vigilance over the goods which the
vessel carried [Art. 587]
2. For the proportionate contribution of co-owners or the
vessel to a common fund for the results of the acts of the
captain [Art. 590]
3. For civil liability incurred by the ship owner in case of
collision [Art.837]
When the ship owner or ship agent may be held liable for MORE
than the value of the vessel:
1. When the vessel is PROPERLY INSURED – the insurance
will take care of the liability the value of w/c could be more
than the value of the vessel
2. When the liability for REPAIRS of the vessel was incurred
BEFORE the loss of such vessel
3. When the liability is one that arises from the provisions of
the LABOR CODE
When Abandonment CANNOT be Made
1. When the ship owner or ship agent is at FAULT – he is
deemed at fault when the incident arose because of lack of
proper equipment of the vessel and technical training of
officers and crew
2. When the voyage is NOT maritime, but only in a river bay,
of gulf
3. When the vessel is NOT acting as a common carrier but a
private carrier
G.R. No. L-51165 June 21, 1990
HEIRS OF AMPARO DE LOS SANTOS, HEIRS OF ERNANIE
DELOS SANTOS, HEIRS OF AMABELLA DELOS SANTOS, HEIRS
OF LENNY DELOS SANTOS, HEIRS OF MELANY DELOS SANTOS,
HEIRS OF TERESA PAMATIAN, HEIRS OF DIEGO SALEM, AND
RUBEN REYES, petitioners,
vs.
HONORABLE COURT OF APPEALS AND COMPANIA
MARITIMA, respondents.
MEDIALDEA. J.:
Under Article 587, a shipowner or agent has the right of abandonment;
and by necessary implication, his liability is confined to that which he is
entitled as of right to abandon-"the vessel with all her equipments and
the freight it may have earned during the voyage" (Yangco v. Laserna,
et al., 73 Phil. 330, 332). Notwithstanding the passage of the New Civil
Code, Article 587 of the Code of Commerce is still good law. The
reason lies in the peculiar nature of maritime law which is 94
exclusively real and hypothecary that operates to limit such liability to
the value of the vessel, or to the insurance thereon, if any (Yangco v.
Laserna, Ibid). As correctly stated by the appellate court, "(t)his rule is
found necessary to offset against the innumerable hazards and perils
of a sea voyage and to encourage shipbuilding and marine commerce.
(Decision, Rollo, p. 29). Contrary to the petitioners' supposition, the
limited liability doctrine applies not only to the goods but also in all
cases like death or injury to passengers wherein the shipowner or
agent may properly be held liable for the negligent or illicit acts of the
captain (Yangco v. Laserna, Ibid). It must be stressed at this point
that Article 587 speaks only of situations where the fault or
negligence is committed solely by the captain. In cases where the
shipowner is likewise to be blamed, Article 587 does not apply
(see Manila Steamship Co., Inc. v. Abdulhanan, et al., 100 Phil. 32,
38). Such a situation will be covered by the provisions of the New
Civil Code on Common Carriers. Owing to the nature of their
business and for reasons of public policy, common carriers are tasked
to observe extraordinary diligence in the vigilance over the goods and
for the safety of its passengers (Article 1733, New Civil Code). Further,
they are bound to carry the passengers safely as far as human care
and foresight can provide, using the utmost diligence of very cautious
persons, with a due regard for all the circumstances (Article 1755, New
Civil Code). Whenever death or injury to a passenger occurs, common
carriers are presumed to have been at fault or to have acted
negligently unless they prove that they observed extraordinary
diligence as prescribed by Articles 1733 and 1755 (Article 1756, New
Civil Code).
Guided by the above legal provisions, We painstakingly reviewed the
records of the case and found imprints of Maritima's negligence which
compel Us to reverse the conclusion of the appellate court.
Maritima claims that it did not have any information about typhoon
'Welming' until after the boat was already at sea. Modem technology
belie such contention. The Weather Bureau is now equipped with
modern apparatus which enables it to detect any incoming
atmospheric disturbances. In his summary report on tropical cyclone
'Welming' which occurred within the Philippine Area of Responsibility,
Dr. Roman L. Kintanar, Weather Bureau Director, stated that during
the periods of November 15, 1967, the Bureau issued a total of
seventeen (17) warnings or advisories of typhoon 'Welming' to
shipping companies. XXX
While We agree with the appellate court that the captain was negligent
for overloading the ship, We, however, rule that Maritima shares
equally in his negligence. We find that while M/V Mindoro was already
cleared by the Bureau of Customs and the Coast Guard for departure
at 2:00 p.m. the ship's departure was, however, delayed for four hours.
Maritima could not account for the delay because it neither checked
from the captain the reasons behind the delay nor sent its
representative to inquire into the cause of such delay. It was due to this
interim that the appellate court noted that "(i)ndeed there is a great
probability that unmanifested cargo (such as dump truck, 3 toyota cars,
steel bars, and 6,000 beer cases) and passengers (about 241 more
than the authorized 193 passengers) were loaded during the four (4)
hour interval" (Decision, p. 13, Rollo, p. 26). Perchance, a closer
supervision could have prevented the overloading of the ship. Maritima
could have directed the ship's captain to immediately depart in view of
the fact that as of 11:07 in the morning of November 2, 1967, the
typhoon had already attained surface winds of about 240 kilometers
per hour. As the appellate court stated, '(v)erily, if it were not for have
reached (its) destination and this delay, the vessel could thereby have
avoided the effects of the storm" (Decision, Rollo p. 26). This
conclusion was buttressed by evidence that another ship, M/V
Mangaren, an interisland vessel, sailed for New Washington, Aklan on
November 2, 1967, ahead of M/V Mindoro and took the same route as
the latter but it arrived safely (Exh. BB-2, Index of Exhibits, pp. 143-144
and Exh. 4-A, Ibid, p. 254).
G.R. No. 116940 June 11, 1997
THE PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY,
INC., petitioner,
vs.
COURT OF APPEALS and FELMAN SHIPPING
LINES, respondents.
BELLOSILLO, J.:
On the second issue, Art. 587 of the Code of Commerce is not
applicable to the case at bar. 8 Simply put, the ship agent is liable for
the negligent acts of the captain in the care of goods loaded on the
vessel. This liability however can be limited through abandonment of
the vessel, its equipment and freightage as provided in Art. 587.
Nonetheless, there are exceptional circumstances wherein the ship
agent could still be held answerable despite the abandonment, as
where the loss or injury was due to the fault of the shipowner and the
captain. 9 The international rule is to the effect that the right of
abandonment of vessels, as a legal limitation of a shipowner's liability,
does not apply to cases where the injury or average was occasioned
by the shipowner's own fault. 10 It must be stressed at this point that
Art. 587 speaks only of situations where the fault or negligence is
committed solely by the captain. Where the shipowner is likewise to be
blamed, Art. 587 will not apply, and such situation will be covered by
the provisions of the Civil Code on common carrier.
It was already established at the outset that the sinking of "MV Asilda"
was due to its unseaworthiness even at the time of its departure from
the port of Zamboanga. It was top-heavy as an excessive amount of
cargo was loaded on deck. Closer supervision on the part of the
shipowner could have prevented this fatal miscalculation. As such,
FELMAN was equally negligent. It cannot therefore escape liability
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through the expedient of filing a notice of abandonment of the vessel
by virtue of Art. 587 of the Code of Commerce.
NOTE:For the earlier rulings on the case against Aboitiz, read:

Aboitiz Shipping vs General Accident (1993)
In the 1993 GAFLAC case, Aboitiz argued that the real and
hypothecary doctrine warranted the immediate stay of execution of
judgment to prevent the impairment of the other creditors‘ shares.
Invoking the rule on the law of the case, private respondent therein
countered that the 1990 GAFLAC case had already settled the extent
of Aboitiz‘s liability.
Following the doctrine of limited liability, however, the Court declared in
the 1993 GAFLAC case that claims against Aboitiz arising from the
sinking of M/V P. Aboitiz should be limited only to the extent of the
value of the vessel. Thus, the Court held that the execution of
judgments in cases already resolved with finality must be stayed
pending the resolution of all the other similar claims arising from the
sinking of M/V P. Aboitiz. Considering that the claims against Aboitiz
had reached more than 100, the Court found it necessary to collate all
these claims before their payment from the insurance proceeds of the
vessel and its pending freightage. As a result, the Court exhorted the
trial courts before whom similar cases remained pending to proceed
with trial and adjudicate these claims so that the pro-rated share of
each claim could be determined after all the cases shall have been
decided.
In the 1993 GAFLAC case, the Court applied the limited liability rule in
favor of Aboitiz based on the trial court‘s finding therein that Aboitiz
was not negligent.
 Monarch Insurance vs CA (2000)
In Monarch Insurance, the Court deemed it fit to settle once and for all
this factual issue by declaring that the sinking of M/V P. Aboitiz was
caused by the concurrence of the unseaworthiness of the vessel and
the negligence of both Aboitiz and the vessel‘s crew and master and
not because of force majeure. Notwithstanding this finding, the Court
did not reverse but reiterated instead the pronouncement
in GAFLAC to the effect that the claimants be treated as "creditors in
an insolvent corporation whose assets are not enough to satisfy the
totality of claims against it." The Court explained that the peculiar
circumstances warranted that procedural rules of evidence be set
aside to prevent frustrating the just claims of shippers/insurers. Thus,
the Court in Monarch Insurance ordered Aboitiz to institute the
necessary limitation and distribution action before the proper RTC and
to deposit with the said court the insurance proceeds of and the
freightage earned by the ill-fated ship.
 Aboitiz Shipping vs New India (2006)
However, on 02 May 2006, the Court rendered a decision in Aboitiz
Shipping Corporation v. New India Assurance Company, Ltd.44 (New
India), reiterating the well-settled principle that the exception to the
limited liability doctrine applies when the damage is due to the fault of
the shipowner or to the concurrent negligence of the shipowner and
the captain. Where the shipowner fails to overcome the presumption of
negligence, the doctrine of limited liability cannot be applied. In New
India, the Court clarified that the earlier pronouncement in Monarch
Insurance was not an abandonment of the doctrine of limited liability
and that the circumstances therein still made the doctrine applicable.
In New India, the Court declared that Aboitiz failed to discharge its
burden of showing that it exercised extraordinary diligence in the
transport of the goods it had on board in order to invoke the limited
liability doctrine. Thus, the Court rejected Aboitiz‘s argument that the
award of damages to respondent therein should be limited to its pro
rata share in the insurance proceeds from the sinking of M/V P.
Aboitiz.
 G.R. No. 137801 October 17, 2008
ABOITIZ SHIPPING CORPORATION, petitioners, For the transportation of its cargo from the Port of Manilato the Port of
vs. Kobe, Japan, Osawa & Co., chartered―bareboat‖ M/V Ilog of
EQUITABLE INSURANCE CORPORATION, respondents. Karagatan Corporation. M/V Ilogmet a sea accident resulting in the
TINGA, J.: loss of the cargo and thedeath of some of the seamen manning the
The circumstances in the 1993 GAFLAC case, however, are not vessel. Whoshould bear the loss of the cargo and the death of the
obtaining in the instant petitions. seamen? Why? (4%)

A perusal of the decisions of the courts below in all three petitions SUGGESTED ANSWER:
reveals that there is a categorical finding of negligence on the part of (per Dondee) Osawa and Co. shall bear the loss becauseunder a
Aboitiz. For instance, in G.R. No. 121833, the RTC therein expressly demise or bareboat charter, the charterer (Osawa& Co.) mans the
stated that the captain of M/V P. Aboitiz was negligent in failing to take vessel with his own people and becomes,in effect, the owner for the
a course of action that would prevent the vessel from sailing into the voyage or service stipulated,subject to liability for damages caused by
typhoon. In G.R. No. 130752, the RTC concluded that Aboitiz failed to negligence.
show that it had exercised the required extraordinary diligence in
steering the vessel before, during and after the storm. In G.R. No. Effect of Charter Party Agreement
137801, the RTC categorically stated that the sinking of M/V P.
Aboitiz was attributable to the negligence or fault of Aboitiz. In all 1. Common Carrier
instances, the Court of Appeals affirmed the factual findings of the trial
courts. a. Voyage or Time Charter – retains its status as a
common carrier
XXX
b. Bareboat or Demise Charter – it becomes a
The instant petitions provide another occasion for the Court to reiterate private carrier for the particular charter
the well-settled doctrine of the real and hypothecary nature of maritime
law. As a general rule, a ship owner‘s liability is merely co-extensive 2. Private Carrier – retains its status as a private carrier
with his interest in the vessel, except where actual fault is attributable
to the shipowner. Thus, as an exception to the limited liability doctrine, What is meant by ―owner pro hac vice‖ of the vessel?
a shipowner or ship agent may be held liable for damages when the
sinking of the vessel is attributable to the actual fault or negligence of He is a demise or bareboat charterer to whom the owner of the vessel
the shipowner or its failure to ensure the seaworthiness of the vessel. has completely and exclusively relinquished possession, command
The instant petitions cannot be spared from the application of the and navigation of the vessel
exception to the doctrine of limited liability in view of the unanimous
findings of the courts below that both Aboitiz and the crew failed to Formal Requirements of a Charter Party [Art. 652]
ensure the seaworthiness of the M/V P. Aboitiz.
1. Must be drawn in duplicates,
Can a CHARTERER make an abandonment? 2. Signed by the contracting parties [or by two witnesses at the
request of party who does not know or is not able to sign]
NO. He cannot be regarded as being in the place of the owner or agent
in matters relating to the responsibility pertaining to ownership and Substantial Requirements of a Charter Party [Art. 652]
possession of the vessel [Yeung Sheung Exchange v. Urrutia, 12
PHIL 747] 1. Conditions freely stipulated
2. Kind, name and tonnage of vessel
Special Contracts of Maritime Commerce 3. Flag and port of registry
4. Name, surname and domicile of captain, ship agent, and
1. CHARTER PARTY charterer
2. BILL of LADING 5. Port of loading or unloading
6. Capacity, weight or measure the parties respectively bind
CHARTER PARTY[Art. 652-692] themselves to load and transport, or whether it is total cargo
7. Freightage to be paid
A contract by which an entire ship, or some principal part thereof, is let 8. Primage to be paid by captain
by the owner to another person for a specified time or use, 9. Days agreed for loading or unloading
inconsideration of the payment of a fee. 10. Lay days and extra days to be allowed and the rate of
demurrage
Kinds of Charter Parties:
Charter Party (1991)
1. CONTRACT OF AFFREIGHTMENT– owner retains control
of the vessel; involves merely the use of shipping space on The Saad Dev Co enters into a voyage charter with XYZover the
a vessel, leased by the owner in part or as a whole, to carry latter‗s vessel, the MV LadyLove. Before the Saadcould load it, XYZ
goods for others, and may either be a: sold Lady Love to Oslob Maritime Cowhich decided to load it for its
own account.
a. TIME CHARTER– a contract to use the vessel for
a particular period of time a) May XYZShipping Co validly ask for the rescission of the
charterparty? If so, can Saad recover damages? To what extent?
b. VOYAGE CHARTER– a contract for the hire of a
vessel for one or a series of voyage b)If Oslob did not load it for its own account, is it bound bythe charter
party?
2. BAREBOAT OR DEMISE– involves the transfer of full
possession and control of the vessel for the period covered c) Explain the meaning of ―owner prohac vice of the vessel.‖ In what
by the contract; the entire command of the vessel, kind of charter party doesthis obtain?
possession and control over its navigation, including the
master and crew are turned over to the charterer SUGGESTED ANSWER:

Maritime Commerce; Bareboat (2003)

Page 29
LAST UPDATED: 12/16/15
a) XYZ may ask for the rescission of the charter party if,as in this case, under which vessel navigates for damages suffered
it sold the vessel before the charterer hasbegun to load the vessel and
the purchaser loads it for hisown account. Saad may recover damages Non placement of vessel at He will be indemnified by owner
to the extent ofits losses (Art 689 Code of Commerce) disposal of charterer within for damages suffered
period and manner agreed upon
b) If Oslob did not load Lady Love for its own account, itwould be
bound by the charter party, but XYZ wouldhave to indemnify Oslob if it
was not informed of theCharter Party at the time of sale. (Art 689 Code
ofCommerce) Vessel returns to port of If he unloads the vessel, owner
departure on account of risk shall have the right to freight in
c) The term ―Owner Pro Hac Vice of the Vessel,‖ isgenerally from pirates, enemies or full for voyage out
understood to be the charterer of the vessel inthe case of bareboat or inclement weather
demise charter (Litonjua Shipping Co vNational Seamen‟s Board GR
51910 10Aug1989)
Vessel makes port in order to He must dispose of the goods
Charter Party (2004)
make repairs
Under a charter party, XXO Trading Company shippedsugar to Coca-
Cola Company through SS Negros ShippingCorp., insured by Capitol
Insurance Company. The cargoarrived but with shortages. Coca-Cola Rescission by Owner
demanded fromCapitol Insurance Co. P500.000 in settlement for XXO
Trading. The MM Regional Trial Court, where the civil suitwas filed, Failure of charterer to place Charter is rescinded but
"absolved the insurance company, declaring thatunder the Code of cargo alongside vessel at the charterer must pay the vessel
Commerce, the shipping agent is civillyliable for damages in favor of termination of extra lay days owner:
third persons due to theconduct of the carrier's captain, and the
stipulation in thecharter party exempting the owner from liability is not a. ½ of the freight stipulated,
against public policy. Coca-Cola appealed. Will its appealprosper? and
Reason briefly. (5%)
b. demurrage for the lay days
SUGGESTED ANSWER: and extra lay days

No. The appeal of Coca-Cola will not prosper. UnderArticle 587 of the Sale of vessel before the Charter is rescinded - If the
Code of Commerce, the shipping agentis civilly liable for damages in charterer has begun to load the buyer of has loaded the vessel
favor of third persons due tothe conduct of the carrier's captain, and vessel for his own account BUT
the shipping agentcan exempt himself therefrom only by abandoning seller/owner must indemnify
thevessel with all his equipment and the freight he may haveearned charterer for damages suffered
during the voyage. On the other hand, assumingthere is bareboat
charter, the stipulation in the charterparty exempting the owner from Charter is NOT rescinded - If
liability is not againstpublic policy because the public at large is not buyer has NOT loaded the
involved(Home Insurance Co. v. American Steamship Agencies, Inc., vessel for his own account BUT
23 SCRA25(1968). the seller shall indemnify the
buyer if he did not inform the
Definition of Terms: buyer of the charter at the time
of making the sale
1. PRIMAGE – a small allowance or compensation payable:

a. to the master or owner of the vessel for the use of Distinctions

his cables and ropes to discharge the goods, and
b. to the mariners for lading and unlading in any port ORDINARY LEASE CHARTER PARTY
CONTRACT
2. DEMURRAGE – an amount stipulated in the charter party to
be paid by the charterer or shipper to the shipowner for any If the lease is for a definite If the charter is for a definite
DELAY in the sailing of his ship period, the lessee cannot give period, the charterer may
terminate the lease by just rescind the charter party by
3. LAYDAYS – number of days between loading and departure paying a portion of the amount paying half of the freightage
agreed upon
Who can Rescind a Charter Party

1. Charterer [Art. 688]
2. Ship owner [Art. 689]
Rescission by Charterer
Abandonment of charter before
loading
If the leased property is sold to
one who knows of the existence
of the lease contract, the new
owner of the property must
respect the lease
He must pay ½ of freight agreed
upon
If the vessel is sold to another,
the new owner cannot be
compelled to respect the CP for
as long as the new owner can
load the vessel with his own
cargo

[G.R. No. 139629. June 21, 2004]

Capacity of vessel not found to
be in conformity with that stated
in certificate of tonnage
Error in the statement of the flag
He will be indemnified by owner
for damages suffered
He will be indemnified by owner
SANTIAGO LIGHTERAGE CORPORATION, petitioner, vs. COURT
OF APPEALS, C-SQUARE CONSOLIDATED MINES and MANUEL
A. PELAEZ, respondents.
CARPIO, J.:

Page 30
LAST UPDATED: 12/16/15
Interpretation of the Charter Party Agreement
Petitioner asserts that delivery of the MV Christine Gay to Pelaez and
Pelaezs subsequent takeover of the vessel is already a full
performance of petitioners obligations. Petitioner berthed MV Christine
Gay in the port of Manila as early as 26 August 1989 and Pelaez had
the opportunity to inspect her from that date until 1 September 1989,
when Pelaez took over the vessel.Thus, petitioner is not liable for
defects in MV Christine Gay after the delivery and turn over. XXX
The mere physical transfer of MV Christine Gay from petitioner to
Pelaez does not constitute full performance of its obligation under their
bareboat charter agreement. Neither is it considered a delivery. Under
the agreement, physical transfer of a seaworthy vesselis necessary to
satisfy delivery.Paragraph 3 of the bareboat charter agreement
expressly requires petitioner to make the VESSEL seaworthy at the
time of delivery. Since petitioner did not deliver a seaworthy vessel,
petitioner failed to perform his obligation to Pelaez under the
agreement.
Seaworthiness is a relative term. Petitioner claims that MV Christine
Gay later undertook voyages within the Philippines.However, such
subsequent voyages in the Philippines do not prove the vessels
seaworthiness to withstand a voyage to South Korea. We quote from
authorities in Maritime Law:
To be seaworthy, a vessel must have that degree of fitness which an
ordinary, careful and prudent owner would require his vessel to have at
the commencement of her voyage, having regard to all the probable
circumstances of it. Thus the degree of seaworthiness varies in relation
to the contemplated voyage. Crossing the Atlantic calls for stronger
equipment than sailing across the Visayan Sea. It is essential to
consider that once the necessary degree of seaworthiness has been
ascertained, this obligation is an absolute one, i.e. the undertaking is
that the vessel actually is seaworthy. It is no excuse that the shipowner
took every possible precaution to make her so, if in fact he failed.
In examining what is meant by seaworthiness we must bear in mind
the dual nature of the carriers obligations under a contract of
affreightment. To satisfy these duties the vessel must (a) be efficient
as an instrument of transport and (b) as a storehouse for her
cargo. The latter part of the obligation is sometimes referred to as
cargoworthiness.
A ship is efficient as an instrument of transport if its hull, tackle and
machinery are in a state of good repair, if she is sufficiently provided
with fuel and ballast, and is manned by an efficient crew.
And a vessel is cargoworthy if it is sufficiently strong and equipped to
carry the particular kind of cargo which she has contracted to carry,
and her cargo must be so loaded that it is safe for her to proceed on
her voyage. A mere right given to the charterer to inspect the vessel
before loading and to satisfy himself that she was fit for the contracted
cargo does not free the shipowner from his obligation to provide a
cargoworthy ship. (Emphasis added)
Bill of Lading[Art. 350-375, 709-718]
Definition [Black’s Law Dictionary]
 An instrument in writing
 Signed by a carrier or his agent
 Describing the freight so as to identify it
 Stating the name of the consignor, the terms of the contract
of carriage, and
 Agreeing or directing that the freight be delivered to the
order or assigns of a specified person at a specified place
Page 31
LAST UPDATED: 12/16/15
G.R. NO. 172822 : December18, 2009]
MOF COMPANY, INC., Petitioner, v. SHIN YANG BROKERAGE
CORPORATION Respondent.
DECISION
DEL CASTILLO, J.:
The bill of lading is oftentimes drawn up by the shipper/consignor and
the carrier without the intervention of the consignee. However, the
latter can be bound by the stipulations of the bill of lading when a)
there is a relation of agency between the shipper or consignor and the
consignee or b) when the consignee demands fulfillment of the
stipulation of the bill of lading which was drawn up in its favor.
In Keng Hua Paper Products Co., Inc. v. Court of Appeals, we held that
once the bill of lading is received by the consignee who does not object
to any terms or stipulations contained therein, it constitutes as an
acceptance of the contract and of all of its terms and conditions, of
which the acceptor has actual or constructive notice.???ñr?bl?š
3-Fold Character of a BL
1. A RECEIPT which:
2.
a. specifies the quantity, condition and character of
the goods received, and
b. recites the date and place of shipment and the
fees paid by the shipper
3. It is evidence of a CONTRACT by which the 3 parties
[shipper, carrier, consignee] undertake specific
responsibilities and assume stipulated obligations; also fixes
the route, destination, freight charges, and stipulates the
rights and obligations assumed by the parties [Art. 353]
4. It is a DOCUMENT OF TITLE
G.R. No. 181300 September 18, 2009
MALAYAN INSURANCE CO., INC., Petitioner,
vs.
JARDINE DAVIES TRANSPORT SERVICES, INC. and ASIAN
TERMINALS, INC., Respondents.
DECISION
CARPIO MORALES, J.:
The presumption that the bill of lading, which petitioner relies upon to
support its claim for restitution, constitutes prima facie evidence of the
goods therein described was correctly deemed by the appellate court
to have been rebutted in light of abundant evidence casting doubts on
its veracity.
That MV Hoegh undertook, under the bill of lading, to transport
6,599.23 MT of yellow crude sulphur on a "said to weigh" basis is not
disputed. Under such clause, the shipper is solely responsible for the
loading of the cargo while the carrier is oblivious of the contents of the
shipment. Nobody really knows the actual weight of the cargo
inasmuch as what is written on the bill of lading, as well as on the
manifest, is based solely on the shipper‘s declaration.
The bill of lading carried an added clause – the shipment‘s weight,
measure, quantity, quality, condition, contents and value unknown."
Evidently, the weight of the cargo could not be gauged from the bill of
lading.
XXX
In the absence of clear, convincing and competent evidence to prove
that the cargo indeed weighed, albeit the Bill of Lading qualified it by
the phrase "said to weigh," 6,599.23 MT at the port of origin when it
was loaded onto the MV Hoegh, the fact of loss or shortage in the
cargo upon its arrival in Manila cannot be definitively established. The
legal basis for attributing liability to either of the respondents is thus
sorely wanting.
Effect of Issuance by Carrier of an UNSIGNED Bill of Lading when
ACCEPTED by Shipper or Consignee:
Acceptance with full knowledge of its contents gives rise to the
presumption that the same was a perfected and binding contract
[Keng Hua vs CA 286 SCRA 257]
Is a Bill of Lading indispensable to a contract of carriage? NO, for
as long as there is a meeting of the minds of the parties, a contract of
carriage exists. But under Art. 350, the shipper or carrier may mutually
demand that a bill of lading be made.
What must be done to the Bill of Lading upon fulfillment of the
contract of transportation?
It must be RETURNED to the carrier who may have issued it, and by
virtue of the exchange of the BL for the object transported, the
respective obligations and actions shall be considered as cancelled
What if the shipper cannot return the bill of lading to the shipper
due to loss or any other cause? Shipper must give the carrier a
receipt for the goods delivered
What is the presumption if the carrier does not hold the bill of
lading after the fulfillment of the contract of transportation?
The carrier DID NOT DELIVER the goods to the consignee. Therefore
it will be liable for the merchandise stated in the bill of lading. Burden of
proof is on the carrier to establish actual delivery of the merchandise
called for in the bill of lading.
G.R. No. 125524 August 25, 1999
BENITO MACAM doing business under the name and style BEN-
MAC ENTERPRISES, petitioner,
vs.
COURT OF APPEALS, CHINA OCEAN SHIPPING CO., and/or
WALLEM PHILIPPINES SHIPPING, INC.,respondents.
BELLOSILLO, J.:
In petitioner‘s several years of business relationship with GPC and
respondents, there was not a single instance when the bill of lading
was first presented before the release of the cargoes. He admitted the
existence of the telex of 3 July 1989 containing his request to deliver
the shipment to the consignee without presentation of the bill of lading
Transshipment -The act of taking cargo from one ship and loading it
on another
It is immaterial whether the same person or entity owns the other
vessel
Trans-Shipment; Bill of Lading; binding contract (1993)
JRT Inc entered into a contract with C Co of Japan toexport anahaw
fans valued at $23,000. As payment thereof,a letter of credit was
issued to JRT by the buyer. The letterof credit required the issuance of
an on-board bill of ladingand prohibited the transshipment. The
President of JRTthen contracted a shipping agent to ship the anahaw
fansthrough O Containers Lines, specifying the requirementsof the
letter of credit. However, the bill of lading issued bythe shipping lines
bore the notation ―received for shipment‖ and contained anentry
indicating transshipment in Hongkong. The Presidentof JRT personally
received and signed the bill of lading anddespite the entries, he
delivered the corresponding check inpayment of the freight. The
shipment was delivered at theport of discharge but the buyer refused
to accept theanahaw fans because there was no on-board bill of
lading,and there was transshipment since the goods weretransferred in
Hongkong from MV Pacific, the feedervessel, to MV Oriental, a mother
vessel. JRT argued thatthe same cannot be considered transshipment
because bothvessels belong to the same shipping company. 1) Was
theretransshipment? Explain 2) JRT further argued thatassuming that
there was transshipment, it cannot bedeemed to have agreed thereto
even if it signed the bill oflading containing such entry because it was
made known tothe shipping lines from the start that transshipment
wasprohibited under the letter of credit and that, therefore, ithad no
intention to allow transshipment of the subjectcargo. Is the argument
tenable? Reason.
Page 32
LAST UPDATED: 12/16/15
SUGGESTED ANSWER:
1) Yes. Transshipment is the act of taking cargo out of oneship and
loading it in another. It is immaterial whether ornot the same person,
firm, or entity owns the two vessels.(Magellan v CA 201 s 102)
2) No. JRT is bound by the terms of the bill of ladingwhen it accepted
the bill of lading with full knowledge ofits contents which included
transshipment in Hongkong.Acceptance under such circumstances
makes the bill oflading a binding contract. (Magellan v Ca 201 s 102)
Can a carrier refuse to accept goods? In general, no because it is
obliged to offer services to whoever wants to avail of its services but
may refuse if the goods are unfit for transportation.
When can carrier examine the goods? When there is a reason of
well-founded suspicion of falsity
PROCEDURE:
1. It must be made in the presence of witnesses
2. Shipper or consignee must be in attendance or before a
notary public
3. It must open the goods in front of the shipper
4. If after examination, the declaration is found to be true, the
expenses for examination and repackage shall be borne by
the carrier otherwise, it shall be paid by the shipper.
Effect when Transshipment is without Legal Excuse:
1. It is a violation of the contract of carriage
2. Carrier shall be liable to the shipper if cargo is lost even by a
cause otherwise excepted
Can the consignee be changed? Yes (Long voyage and the
consignee refuses to pay)
Conditions:
1. Carrier has to be informed
2. Carrier must comply with the change of the
consignee if the place of delivery shall not be
altered
3. Original bill of lading must be returned to the
carrier who will issue another one containing the
novation of contract and expenses in the change
of consignee shall be paid by the shipper
Period for Bringing a Claim Against the Carrier [Art. 366]
1. IMMEDIATELY UPON RECEIPT of the package – if
damage is APPARENT from exterior of package [for such
purpose, a VERBAL CLAIM made immediately is
SUFFICIENT compliance with the law]
2. WITHIN 24 HOURS following RECEIPT of package – if the
damage CANNOT BE KNOWN from exterior of package
All Claims are EXTINGUISHED – if consignee RECEIVES
themerchandise, and PAYS the freight charges WITHOUT PROTEST
What is the PURPOSE of the above Rules?
To compel the consignee of goods entrusted to a carrier to make
prompt demand for settlement of alleged damages suffered by the
goods while in transport, so that the carrier will be enabled to verify all
claims, fix responsibility and secure evidence as to the goods while the
matter is still fresh in the minds of the parties [Roldan v. Lim Ponzo
37 PHIL 285]
When shall the above period commence to run?
When the goods are ACTUALLY turned over by the carrier and
RECEIVED by the consignee
G.R. No. L-7311. September 30, 1955
NEW ZEALAND INSURANCE CO., LTD., Plaintiff-Appellant, v.
ADRIANO CHOA JOY, ETC.,Defendant-Appellee.
BAUTISTA ANGELO, J.:
Article 366 of the Code of Commerce, which was applied by the court,
provides:
"Within twenty-four hours following the receipt of the merchandise, the
claim against the carrier for damage or average which may be found
therein upon opening the packages, may be made, provided that the
indications of the damage or average which gives rise to the claim
cannot be ascertained from the outside part of such packages, in
which case the claim shall be admitted only at time of receipt.
"After the periods mentioned have elapsed, or the transportation
charges have been paid, no claim shall be admitted against the carrier
with regard to the condition in which the goods transported were
delivered."
XXX
In order that the condition provided in Article 366 of the Code of
Commerce may be demanded there should be a consignment of
goods, through a common carrier, by a consignor in one place to a
consignee in another place, and the delivery of the merchandise by the
carrier to the consignee at the place of destination. In the instant case,
the consignor is the branch office of Lee Teh& Co., Inc. at Catarman,
Samar, which placed the cargo on board the ship Jupiter, and the
consignee, its main office at Manila. The cargo never reached Manila,
its destination, nor was it ever delivered to the consignee, the office of
the shipper in Manila, because the ship ran aground upon entering
Laoang Bay, Samar of the same day of the shipment. Such being the
case, Article 366 does not have application because the cargo was
never received by the consignee. Moreover, under the bill of lading
issued by the carrier (Exhibit C), it was the latter‘s undertaking to bring
the cargo to its designation — Manila, — and deliver it to its consignee,
which undertaking was never complied with. The carrier, therefore,
breached its contract, and, as such, it forfeited its right to invoked in its
favor the condition required by Article 366.
Did the prescriptive periods under the Civil Code repeal Art. 366
of Code of Commerce?
NO. The limitations of actions mentioned in the Civil Code are without
prejudice to those specified in the Code of Commerce [Art. 1148 New
Civil Code]
Prescriptive Period to File a Case in Court :
 If there is a bill of lading – 10 years [Art. 1144 – based on a
written contract]
 If there is NO bill of lading – 6 years [Art. 1145 – based on
a an oral or quasi-contract]
 If it involves overseas trading – 1 year [COGSA]
G.R. No. 147724 June 8, 2004
LORENZO SHIPPING CORP., petitioner,
vs.
CHUBB and SONS, Inc., GEARBULK, Ltd. and PHILIPPINE
TRANSMARINE CARRIERS, INC., respondents.
PUNO, J.:
Whether or not Sumitomo, Chubb‘s predecessor-in-interest, validly
made a claim for damages against Lorenzo Shipping within the period
prescribed by the Code of Commerce;
On the issue of prescription of respondent Chubb and Sons‘ claim for
damages, we rule that it has not yet prescribed at the time it was
made. XXX
Page 33
LAST UPDATED: 12/16/15
The twenty-four-hour period prescribed by Art. 366 of the Code of
Commerce within which claims must be presented does not begin to
run until the consignee has received such possession of the
merchandise that he may exercise over it the ordinary control pertinent
to ownership. In other words, there must be delivery of the cargo by
the carrier to the consignee at the place of destination. In the case at
bar, consignee Sumitomo has not received possession of the cargo,
and has not physically inspected the same at the time the shipment
was discharged from M/V Lorcon IV in Davao City. Petitioner Lorenzo
Shipping failed to establish that an authorized agent of the consignee
Sumitomo received the cargo at Sasa Wharf in Davao City.
Respondent Transmarine Carriers as agent of respondent Gearbulk,
Ltd., which carried the goods from Davao City to the United States,
and the principal, respondent Gearbulk, Ltd. itself, are not the
authorized agents as contemplated by law. What is clear from the
evidence is that the consignee received and took possession of the
entire shipment only when the latter reached the United States‘ shore.
Only then was delivery made and completed. And only then did the 24-
hour prescriptive period start to run.
G.R. No. 136888 June 29, 2005
PHILIPPINE CHARTER INSURANCE CORPORATION, petitioner,
vs.
CHEMOIL LIGHTERAGE CORPORATION, respondent.
CHICO-NAZARIO, J.:
Both courts held that, indeed, a telephone call was made by Alfredo
Chan to EncarnacionAbastillas, informing the latter of the
contamination. However, nothing in the trial court‘s decision stated that
the notice of claim was relayed or filed with the respondent-carrier
immediately or within a period of twenty-four hours from the time the
goods were received. The Court of Appeals made the same finding.
Having examined the entire records of the case, we cannot find a
shred of evidence that will precisely and ultimately point to the
conclusion that the notice of claim was timely relayed or filed.
The allegation of the petitioner that not only the Vice President of the
respondent was informed, but also its drivers, as testified by Alfredo
Chan, during the time that the delivery was actually being made,
cannot be given great weight as no driver was presented to the witness
stand to prove this. XXX
The requirement that a notice of claim should be filed within the period
stated by Article 366 of the Code of Commerce is not an empty or
worthless proviso. In a case, we held:
The object sought to be attained by the requirement of the submission
of claims in pursuance of this article is to compel the consignee of
goods entrusted to a carrier to make prompt demand for settlement of
alleged damages suffered by the goods while in transport, so that the
carrier will be enabled to verify all such claims at the time of delivery or
within twenty-four hours thereafter, and if necessary fix responsibility
and secure evidence as to the nature and extent of the alleged
damages to the goods while the matter is still fresh in the minds of the
parties.
G.R. No. 168402 August 6, 2008
ABOITIZ SHIPPING CORPORATION, petitioner,
vs.
INSURANCE COMPANY OF NORTH AMERICA, respondent.
REYES, R.T., J.:
The giving of notice of loss or injury is a condition precedent to the
action for loss or injury or the right to enforce the carrier's liability.
Circumstances peculiar to this case lead Us to conclude that the notice
requirement was complied with. XXX
The shipment was delivered on August 11, 1993. Although the letter
informing the carrier of the damage was dated August 15, 1993, that
letter, together with the notice of claim, was received by petitioner only
on September 21, 1993. But petitioner admits that even before it
received the written notice of claim, Mr. Mayo B. Perez, Claims Head
of the company, was informed by telephone sometime in August 13,
1993. Mr. Perez then immediately went to the warehouse and to the
delivery site to inspect the goods in behalf of petitioner.
 7. quarantine,
In the case of Philippine Charter Insurance Corporation (PCIC) v. 8. lazaretto, and
ChemoilLighterage Corporation, the notice was allegedly made by the 9. other so called port expenses, costs of barges, and
consignee through telephone. The claim for damages was denied. This unloading, until the goods are placed on the wharf, and
Court ruled that such a notice did not comply with the notice 10. Other usual expenses of navigation
requirement under the law. There was no evidence presented that the
notice was timely given. Neither was there evidence presented that the Who Shall Defray or Reimburse the Ordinary or Petty Expenses
notice was relayed to the responsible authority of the carrier. [Art. 807]

As adverted to earlier, there are peculiar circumstances in the instant
case that constrain Us to rule differently from the PCIC case, albeit this
ruling is being made pro hac vice, not to be made a precedent for other
cases. XXX
Bernhard Willig, the representative of consignee who received the
shipment, relayed the information that the delivered goods were
discovered to have sustained water damage to no less than the Claims
Head of petitioner, Mayo B. Perez. Immediately, Perez was able to
investigate the claims himself and he confirmed that the goods were,
indeed, already corroded.
Provisions specifying a time to give notice of damage to common
carriers are ordinarily to be given a reasonable and practical, rather
than a strict construction. We give due consideration to the fact that the
final destination of the damaged cargo was a school institution where
authorities are bound by rules and regulations governing their actions.
Understandably, when the goods were delivered, the necessary
clearance had to be made before the package was opened. Upon
opening and discovery of the damaged condition of the goods, a report
to this effect had to pass through the proper channels before it could
be finalized and endorsed by the institution to the claims department of
the shipping company.
The call to petitioner was made two days from delivery, a reasonable
period considering that the goods could not have corroded instantly
overnight such that it could only have sustained the damage during
transit. Moreover, petitioner was able to immediately inspect the
damage while the matter was still fresh. In so doing, the main objective
of the prescribed time period was fulfilled. Thus, there was substantial
compliance with the notice requirement in this case.
Risks, Damages and Accidents of Maritime Commerce
Averages[Art. 806-816, 665-677, 732]
What are considered as Averages [Art. 806]
1. All extraordinary or accidental expenses which may be
incurred during the voyage for the preservation of the
vessel, cargo, or both
2. All damages or deterioration:
a. which the vessel may suffer:
b. from the time she puts to sea at the port of
departure
c. until she casts anchor at the port of destination
d. suffered by the goods:
e. from the time they are loaded in the port
ofshipment
f. until they are unloaded in the port of their
consignment
What are Considered Ordinary or Petty Expenses [Art. 807]
The petty and ordinary expenses incident to navigation such as those
of:
1. pilotage of coast and ports,
2. lighterage,
3. towage,
4. anchorage,
5. inspection,
6. health,
General Rule: the Ship owner
Exception:unless there is an express agreement to the contrary
Kinds of Averages [Art. 808]
1. Simple or Particular
2. General
Particular Average
Definition [Art. 809]
All the expenses and damage caused to the vessel or to her cargo
which have NOT inured to the common benefit and profit of ALL the
persons interested in the vessel and her cargo
Who bears the loss?
The OWNER of the things which gave rise to the expenses or
suffered the damage
General Average
Definition [Art. 811]
All the damages and expenses which are DELIBERATELY CAUSED
in order to save the vessel, her cargo, or both at the same time
from a REAL KNOWN risk
Who bears the loss? All the persons having an interest in the vessel
and cargo therein at the time of the occurrence of the average shall
contribute
Requisites of a General Average
1. There must be a common danger, a danger in which ship,
cargo and crew all participate
2. For the common safety or for the purpose of avoiding an
imminent peril, part of the vessel or cargo or both is
sacrificed deliberately
3. This attempt to avoid the imminent peril must be
successful in a sense that the vessel and some of the cargo
are saved
4. The expenses were incurred or damages were afflicted
after taking the proper legal steps and authority
G.R. No. L-6393 January 31, 1955
A. MAGSAYSAY INC., plaintiff-appellee,
vs.
ANASTACIO AGAN, defendant-appellant.
REYES, A. J.:
With respect to the first requisite, the evidence does not disclose that
the expenses sought to be recovered from defendant were incurred to
save vessel and cargo from a common danger. The vessel ran
aground in fine weather inside the port at the mouth of a river, a place
described as "very shallow". It would thus appear that vessel and
cargo were at the time in no imminent danger or a danger which might
"rationally be sought to be certain and imminent." It is, of course,
conceivable that, if left indefinitely at the mercy of the elements, they
would run the risk of being destroyed. But as stated at the above
quotation, "this last requirement excludes measures undertaken
against a distant peril." It is the deliverance from an immediate,
impending peril, by a common sacrifice, that constitutes the essence of

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general average. (The Columbian Insurance Company of
Alexandria vs. Ashby &Stribling et al., 13 Peters 331; 10 L. Ed., 186).
In the present case there is no proof that the vessel had to be put
afloat to save it from imminent danger. What does appear from the
testimony of plaintiff's manager is that the vessel had to be salvaged in
order to enable it "to proceed to its port of destination." But as was said
in the case just cited it is the safety of the property, and not of the
voyage, which constitutes the true foundation of the general average.
As to the second requisite, we need only repeat that the expenses in
question were not incurred for the common safety of vessel and cargo,
since they, or at least the cargo, were not in imminent peril. The cargo
could, without need of expensive salvage operation, have been
unloaded by the owners if they had been required to do so.
With respect to the third requisite, the salvage operation, it is true, was
a success. But as the sacrifice was for the benefit of the vessel — to
enable it to proceed to destination — and not for the purpose of saving
the cargo, the cargo owners are not in law bound to contribute to the
expenses.
The final requisite has not been proved, for it does not appear that the
expenses here in question were incurred after following the procedure
laid down in article 813 et seq.
In conclusion we found that plaintiff not made out a case for general
average, with the result that its claim for contribution against the
defendant cannot be granted.
G.R. No. L-13695 October 18, 1921
STANDARD OIL COMPANY OF NEW YORK, plaintiff-appellee,
vs.
MANUEL LOPEZ CASTELO, defendant-appellant.
STREET, J.:
The first question for discussion is whether the loss of this petroleum
was a general average loss or a particular less to be borne solely by
the owner of the cargo. Upon this point it will be observed that the
cargo was carried upon deck; and it is a general rule, both under the
Spanish Commercial Code and under the doctrines prevailing in the
courts of admiralty of England America, as well as in other countries,
that ordinarily the loss of cargo carried on deck shall not be considered
a general average loss. This is clearly expressed in Rule I of the York-
Antwerp Rules, as follows: "No jettison of deck cargo shall be made
good as general average." The reason for this rule is found in the fact
that deck cargo is in an extra-hazardous position and, if on a sailing
vessel, its presence is likely to obstruct the free action of the crew in
managing the ship. Moreover, especially in the case of small vessels, it
renders the boat top-heavy and thus may have to be cast overboard
sooner than would be necessary if it were in the hold; and naturally it is
always the first cargo to go over in case of emergency. Indeed, in
subsection 1 of article 815 of the Code of Commerce, it is expressly
declared that deck cargo shall be cast overboard before cargo stowed
in the hold.
But this rule, denying deck cargo the right to contribution by way of
general average in case of jettison, was first mad in the days of sailing
vessels; and with the advent of the steamship as the principal
conveyer of cargo by sea, it has been felt that the reason for the rule
has become less weighty, especially with reference to coastwise trade;
and it is now generally held that jettisoned goods carried on deck,
according to the custom of trade, by steam vessels navigating
coastwise and inland waters, are entitled to contribution as a general
average loss (24 R. C. L., 1419).
XXX
From what has been said it is evident that the loss of this petroleum is
a general and not a special average, with the result that the plaintiff is
entitled to recover in some way and from somebody an amount
bearing such proportion to its total loss as the value of both the ship
and the saved cargo bears to the value of the ship and entire cargo
before the jettison was effected.
Average; Particular Average vs. General Average (2003)
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M/V Ilog de Manila with a cargo of 500 tons of iron ore left the Port of
Zamboanga City bound for Manila. For one reason or another, M/V Ilog
de Manila hit a submerged obstacle causing it to sink along with its
cargo. A salvor, Salvador, Inc., was contracted to refloat the vessel for
P1 Million. What kind of average was the refloating fee of P1 million,
and for whose account should it be? Why? (4%)
SUGGESTED ANSWER:
Particular Average. The owner of the vessel shall shoulder the
average. Generally speaking, simple or particular averages include all
expenses and damages caused to the vessel or cargo which have not
inured to the common benefit (Art. 809, and are, therefore, to be borne
only by the owner of the property which gave rise to the same (Art.
810) while general or gross averages include "all the damages and
expenses which are deliberately caused in order to save the vessel, its
cargo, or both at the same time, from a real and known risk" (Art. 811).
Being for the common benefit, gross averages are to be borne by the
owners of the articles saved (Art. 812). In the present case there is no
proof that the vessel had to be put afloat to save it from an imminent
danger.
Jason Clause [Rule D, York-Antwerp Rules]
Rights to contribution in general average:
 shall not be affected, though the event which gave rise to the
sacrifice or expenditure may have been due to the fault of
one of the parties to the adventure; but
 this shall not prejudice any remedies which may be open
against that party for such clause
Distinctions
GENERAL PARTICULAR
Deliberately caused in order to May be due to causes other
save the vessel or cargo or both than a deliberate act
Inures to the benefit of those Does not inure to the common
interested in the vessel or her benefit of all persons interested
cargo in the vessel and her cargo
Shall be shared and contributed Shall be borne by the owner of
to by all persons benefited the things damaged
Art. 677. Effect of a Declaration of War or Blockade on a Charter
Party:
 The charter party shall remain in force – if the captain should
not have any instruction from the charterer
 Captain must proceed to the nearest safe and neutral port
 At said port- captain must request and await orders from the
shippers
 Expenses and salaries accruing during detention in said port
shall be paid as general average
 If, by order of the shipper, the cargo should be discharged at
the port of arrival, the freight for the voyage out shall be paid
in full
G.R. No. L-11515 July 29, 1918
INTERNATIONAL HARVESTER COMPANY IN RUSSIA, plaintiff-
appellee,
vs.
HAMBURG-AMERICAN LINE, defendant-appellant.
STREET, J.:
Upon the first question it is clear that the cargo in question is not liable Second Ground: Well-founded fear of seizure, privateers or
to a general average. It is not claimed that this agricultural machinery pirates; When Not Considered Lawful [Art. 820]
was contraband of war; and being neutral goods, it was not liable to
forfeiture in the event of capture by the enemies of the ship's flag. It If the risk of the enemies, privateers, or pirates should not have been:
follows that when the master of the Suevia decided to take refuge in
the port of Manila, he acted exclusively with a view to the protection of 1. well known,
his vessel. There was nocommon danger to the ship and cargo; and 2. manifest, and
therefore it was not a case for a general average. The point here in 3. based on positive andprovable acts
dispute has already been determined by this court unfavorably to the
contention of the appellant. (Compagnie de Commerce et de Third Ground: By reason of any accident of the sea disabling the
Navigation D'Extreme Orient vs. Hamburg Amerika vessel to navigate; When Not Considered Lawful [Art. 820]
PacketfachtActienGesselschaft, 36 Phil., 590.) The following provision
contained in the York-Antwerp Rules, as we interpret it, is conclusive  If the defect of the vessel should have arisen from the fact
against the appellant's contention: that she was not repaired, rigged, equipped, and
prepared in a manner suitable for voyage, or from some
When a ship shall have entered a port of refuge . . . in consequence of erroneous orders of the captain
accident, sacrifice, or other extraordinary circumstance which renders  Whenever malice, negligence, lack of foresight, or want
that necessary for the common safety, the expense of entering such of skill on the part of the captain exists in actually
port shall be admitted as general average. (York-Antwerp Rules, causing the damage
section 10.)
Collisions[Art. 827-838]
G.R. No. L-10986 March 31, 1917
COMPAGNIE DE COMMERCE ET DE NAVIGATION D'EXTREME Definitions:
ORIENT, plaintiff-appellant,
vs. 1. In a strict sense:
THE HAMBURG AMERIKA PACKETFACHT ACTIEN
GESELLSCHAFT, defendant-appellant. a. Collision – the impact of 2 vessels, both or
CARSON, J.: which are moving
b. Allision - the striking of a moving vessel
The claim of the shipowner for general average cannot be sustained against one that is stationary
under the provisions of the York-Antwerp Rules of 1890, by reference
to which, it was expressly stipulated in the charter party, all such 2. In a broad sense – collision includes allision, and perhaps
questions should be settled, Rules X and XI, which treat of "Expenses another species of encounters between vessels, or a vessel
at Port of Refuge, etc.," and "Wages and Maintenance of Crew in Port and other floating, though non-navigable object
of Refuge, etc.," provide for general average "When a ship shall have
entered a port or place of refuge, or shall have returned to her port or Liability in Case of Collision;
place of loading, in consequence of accident, sacrifice, or other
extraordinary circumstances which render that necessary for the Who is at Fault: One vessel
common safety . . .;" and an examination of the entire body of these
rules discloses that general average is never allowed thereunder
Said vessel shall be liable for:
unless the loss or damage sought to be made good as general
average has been incurred for the "common safety." It is very clear that
in fleeing from the port of Saigon and taking refuge in Manila Bay the 1. damage caused to the innocent vessel, and
master of the Sambia was not acting for the common safety of the 2. damages suffered by the owners of the cargo of:
vessel and her cargo. The French cargo was absolutely secure from a. the innocent vessel, and
danger of seizure or confiscation so long as it remained in the port of b. its own vessel
Saigon, and there can be no question that the flight of the Sambia was
a measure of precaution adopted solely and exclusively for the Who is at Fault: Both vessels[Art. 827]&It cannot be determined
preservation of the vessel from danger of seizure or capture. which vessel[Art. 831]

Arrival Under Stress[Art. 819-821] 1. Each vessel must bear its own loss, and
2. Both shipowners shall be solidarily liable to the shippers for
damages suffered
 The arrival of the vessel at the nearest and most
convenient port
Who is at Fault: A 3rd vessel [Art. 831]
 Because the vessel CANNOT continue the trip to the port
of destination
Said vessel shall be liable for:
 On account of:

o Lack of provisions, 1. damage caused to 2 the innocent vessels, and

o Well founded fear of seizure, privateers or pirates, 2. damages suffered by the owners of the cargo of:
or
o By reason of any accident of the sea disabling the a. the 2 innocent vessels, and
vessel to navigate b. its own vessel

First Ground: Lack of provisions; When Not Considered Lawful Who is at Fault: None [Fortuitous event] [Art. 830]
[Art. 820]
None – each one must bear his own loss
 If the lack of provisions should arise from the failure to take
the necessary provisions for the voyage according to Error in Extremis
the usage and customs, or
 Where a navigator,
 If they should have been rendered useless or lost through  suddenly realizing that a collision is imminent
bad stowage or negligence in their care  by no fault of his own,
 in confusion and excitement of the moment,

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  does something which contributes to the collision, or
 omits to do something by which the collision may be
avoided,
 Such act or omission is ordinarily considered to be in
extremis, and
 The ordinary rules of strict accountability do NOT apply
When does the rule of ―error in extremis‖ apply?
It must appear that there was an imminent danger and it is the actual
risk of danger and not apprehension merely that determines the
question whether the error is one in extremis
Doctrine of Inscrutable Fault:
 The court can see that a fault has been committed,
 But is unable from the conflict of testimony, or otherwise,
to locate it [the fault]
 Hence, when it is impossible to determine to what direct and
specific acts the collision is attributable, it is a case of
damage arising from a cause that is inscrutable
Doctrine of Inscrutable Fault (1997)
Explain the doctrine in Maritime accidents – Doctrine ofInscrutable
Fault
SUGGESTED ANSWER:
Under the ―doctrine of inscrutable fault,‖ where fault isestablished but
it cannot be determined which of the twovessels were at fault, both
shall be deemed to have been atfault.
Doctrine of Inscrutable Fault (1998)
A severe typhoon was raging when the vessel SS Masdaamcollided
with MV Princes. It is conceded that the typhoonwas the major cause
of the collision, although there was avery strong possibility that it could
have been avoided ifthe captain of SS Masdaam was not drunk and
the captainof the MV Princes was not asleep at the time of collisions.
Who should bear the damages to the vessels and theircargoes? (5%)
SUGGESTED ANSWER:
The shipowners of SS Masdaam and MV Princess shalleach bear their
respective loss of vessels. For the lossesand damages suffered by
their cargoes both shipownersare solidarily liable.
What kind of AVERAGE is damage caused by a collision due to a
storm or force majeure?
The injury shall be considered as a particular average of the vessel
run into [Art. 832]
Can the ship owner raise the defense that he exercised the
diligence of GFOF in the selection and supervision of the
captain?
 Culpa Contractual – NO
 Culpa Aquiliana – YES excepti in cases of collision when
both parties or vessel are at fault
 Culpa Criminal - NO
The case of Manila Steamship Company, Inc. vs. InsaAbdulhaman
and Lim HongTo 17 is a case of collision of the ML "Consuelo V" and
MS "Bowline Knot" as a result of which the ML "Consuelo V" capsized
and was lost where nine (9) passengers died or were missing and all
its cargoes were lost. In the action for damages arising from the
collision, applying Article 837 of the Code of Commerce, this Court
held that in such case where the collision was imputable to both of
them, each vessel shall suffer her own damages and both shall be
solidarily liable for the damages occasioned to their cargoes.18 Thus,
We held:
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In fact, it is a general principle, well established maritime law and
custom, that shipowners and ship agents are civilly liable for the acts of
the captain (Code of Commerce, Article 586) and for the indemnities
due the third persons (Article 587); so that injured parties may
immediately look for reimbursement to the owner of the ship, it being
universally recognized that the ship master or captain is primarily the
representative of the owner (Standard Oil Co. vs. Lopez Castelo, 42
Phil. 256, 260). This direct liability, moderated and limited by the
owner's right of abandonment of the vessel and earned freight (Article
587) has been declared to exist not only in case of breached contracts,
but also in cases of tortious negligence (Yu Biao Sontua vs. Osorio, 43
Phil. 511; 515):
xxxxxxxxx
It is easy to see that to admit the defense of due diligence of a bonus
paterfamilias (in the selection and vigilance of the officers and crew) as
exempting the shipowner from any liability for their faults, would render
nugatory the solidary liability established by Article 827 of the Code of
Commerce for the greater protection of injured parties. Shipowners
would be able to escape liability in practically every case, considering
that the qualifications and licensing of ship masters and officers are
determined by the State, and that vigilance is practically impossible to
exercise over officers and crew of vessels at sea. To compel the
parties prejudiced to look to the crew for indemnity and redress would
be an illusory remedy for almost always its members. are, from
captains down, mere wage earners.
We, therefore, find no reversible error in the refusal of the Court of
Appeals to consider the defense of the Manila Steamship Co., that it is
exempt from liability for the collision with the M L "Consuelo V " due to
the absence of negligence on its part in the selection and supervision
of the officers and crew of the M/S "Bowline Knot.
However, insofar as respondent Lim Hong To, owner of M L "Consuelo
V" who admittedly employed an unlicensed master and engineer and
who in his application for permission to operate expressly assumed full
risk and responsibility thereby (Exh. 2) this Court held that the liability
of Lim Hong To cannot be limited to the value of his motor launch by
abandonment of the vessel as invoked in Article 587 of the Code of
Commerce, We said:
The international rule is to the effect that the right of abandonment of
vessels, as a legal limitation of a shipowner's liability, does not apply to
cases where the injury or the average is due to shipowner's own fault.
Farina (Derecho Commercial Maritima Vol. 1, pp. 122-123), on the
authority of judicial precedents from various nations, sets the rule to be
as follows:
CARRIAGE OF GOODS BY SEA
ACT[COGSA]
Contracts Covered by the COGSA
 ALL contracts:
o for the carriage of GOODS by SEA
o to and from Philippine Ports in FOREIGN Trade
G.R. No. L-24515 November 18, 1967
THE AMERICAN INSURANCE COMPANY, plaintiff-appellant,
vs.
COMPAÑIA MARITIMA, ET AL., defendants.
MAKALINTAL, J.:
The transshipment of the cargo from Manila to Cebu was not a
separate transaction from that originally entered into by Macondray, as
general agent for the "M/S TOREADOR". It was part of Macondray's
obligation under the contract of carriage and the fact that the
transshipment was made via an inter-island vessel did not operate to
remove the transaction from the operation of the Carriage of Goods by
Sea Act. (See Go Chang & Co., Inc. vs. Aboitiz & Co., Inc., 98 Phil.
197).

What is the effect of the COGSA on our Maritime Laws?
It shall not:
1. repeal any existing provision of the Code of Commerce
which is now in force, or
2. limit its application
Procedure to be undertaken by Shipper or Consignee in Case of
Loss or Damage of Cargo [Sec. 3(6)]
A NOTICE of LOSS or DAMAGE and the general nature of such loss
or damage IN WRITING, must be given to the CARRIER or his agent:
1. at the PORT of DISCHARGE, or
2. at the TIME of REMOVAL of the goods into the custody of
the person entitled to delivery thereof [such removal shall be
prima facie evidence of delivery by the carrier of the goods
as described in the bill of lading], or
3. if the loss or damage is NOT apparent – the notice must be
given within 3 days of delivery
G.R. No. 119571 March 11, 1998
MITSUI O.S.K. LINES LTD., represented by MAGSAYSAY
AGENCIES, INC., petitioner,
vs.
COURT OF APPEALS and LAVINE LOUNGEWEAR MFG.
CORP., respondents.
MENDOZA, J.:
The issue raised by the instant petition is whether private respondent's
action is for "loss or damage" to goods shipped, within the meaning of
§3(6) of the Carriage of Goods by Sea Act (COGSA). XXX
In the case at bar, there is neither deterioration nor disappearance nor
destruction of goods caused by the carrier's breach of contract.
Whatever reduction there may have been in the value of the goods is
not due to their deterioration or disappearance because they had been
damaged in transit. XXX
Precisely, the question before the trial court is not the particular sense
of "damages" as it refers to the physical loss or damage of a shipper's
goods as specifically covered by §3(6) of COGSA but petitioner's
potential liability for the damages it has caused in the general sense
and, as such, the matter is governed by the Civil Code, the Code of
Commerce and COGSA, for the breach of its contract of carriage with
private respondent.
We conclude by holding that as the suit below is not for "loss or
damage" to goods contemplated in §3(6), the question of prescription
of action is governed not by the COGSA but by Art. 1144 of the Civil
Code which provides for a prescriptive period of ten years.
Prescriptive Period of Actions Under COGSA [Sec. 3[6](4)]
Any action against the carrier must be brought within one [1] year
after:
1. the delivery of the goods, or
2. the date when the goods should have been delivered
What is the effect of failure to give the required NOTICE of LOSS
to the carrier within the period prescribed?
This shall not affect or prejudice the right of the shipper to bring the suit
within the one [1] year period [EE Elser vs CA, Nov 29, 1954]
What is the effect of failure to BRING THE ACTION within one [1]
year period?
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The carrier and the ship shall be DISCHARGED from all liability from
such loss or damage
G.R. No. L-5554 May 27, 1953
BENITO CHUA KUY, petitioner,
vs.
EVERRETT STEAMSHIP CORPORATION, respondent.
BAUTISTA ANGELO, J.:
There is no dispute in the evidence that the cargo in question was
brought to the City of Manila, Philippines, from Portland, Oregon,
U.S.A., on board a foreign ship; that the cargo was unloaded at the
port of Manila and delivered to petitioner on February 26, 1947; that
the alleged shortage in the cargo was discovered by petitioner on the
same date; and that this action was given to respondent, as local agent
of the owner of the ship, also on the same date; and that this action
was commenced only on May 7, 1948, or after the lapse one year, two
months and nine days from the delivery of the goods to petitioner.
Considering that, under the provision above-quoted, an action for
recovery of loss or damage in connection with certain within one year
after delivery of said cargo, it would seem evident that the action of
petitioner has already prescribed.
G.R. No. 77638 July 12, 1990
MARITIME AGENCIES & SERVICES, INC., petitioner,
vs.
COURT OF APPEALS, and UNION INSURANCE SOCIETY OF
CANTON, LTD., respondents.
CRUZ, J.:
But we do agree that the period for filing the claim is one year, in
accordance with the Carriage of Goods by Sea Act. XXX
The one-year period in the cases at bar should commence on October
20, 1979, when the last item was delivered to the
consignee. 18 Union's complaint was filed against Hongkong on
September 19, 1980, but tardily against Macondray on April 20, 1981.
The consequence is that the action is considered prescribed as far as
Macondray is concerned but not against its principal, which is what
matters anyway.
What law shall prevail, with respect to prescriptive periods? Civil
Code or COGSA?
The New Civil Code did NOT impliedly repeal the period of prescription
under the COGSA. As a SPECIAL LAW the COGSA prevails over the
general provisions of the Civil Code on prescription of actions
[Maritime Agencies v. CA 187 SCRA 346]
COGSA: Prescription of Claims/Actions (2004)
AA entered into a contract with BB thruCC to transport ladies' wear
from Manila to France withtranshipment at Taiwan. Somehow the
goods were notloaded at Taiwan on time. Hence, when the goods
arrivedin France, they arrived "off-season" and AA was paid onlyfor
one-half the value by the buyer. AA claimed damagesfrom the shipping
company and its agent. The defense ofthe respondents was
prescription. Considering that theladies' wear suffered "loss of value,"
as claimed by AA,should the prescriptive period be one year under the
Carriage of Goods by Sea Act, or ten years under the CivilCode?
Explain briefly. (5%)
SUGGESTED ANSWER:
The applicable prescriptive period is ten years under theCivil Code.
The one-year prescriptive period under theCarriage of Goods by Sea
Act applies in cases of loss ordamages to the cargo. The term "loss"
as interpreted bythe Supreme Court in Mitsui O.S.K. Lines Ltd. v. Court
of Appeals,287 SCRA 366 (1998), contemplates a situation where
nodelivery at all was made by the carrier of the goods because
the same had perished or gone out of commercedeteriorated or
decayed while in transit. In the presentcase, the shipment of ladies'
wear was actually delivered.The "loss of value" is not the total loss
contemplated bythe Carriage of Goods by Sea Act.
COGSA; Prescription of Claims (1992)
A local consignee sought to enforce judicially a claimagainst the carrier
for loss of a shipment of drums oflubricating oil from Japan under the
Carriage of Goods bySea Act (COGSA) after the carrier had rejected
its demand.The carrier pleaded in its Answer the affirmative defense
ofprescription under the provisions of said Act inasmuch as
the suit was brought by the consignee after one (1) yearfrom the
delivery of the goods. In turn, the consigneecontended that the period
of prescription was suspendedby the written extrajudicial demand it
had made against thecarrier within the one-year period, pursuant to
Article 1155of the Civil Code providing that the prescription of actions
is interrupted when there is a written extrajudicial demandby the
creditors.
a) Has the action in fact prescribed? Why?
b) If the consignee‗s action were predicated on misdelivery
or conversion of the goods, would your answer be the
same? Explain briefly.
SUGGESTED ANSWER:
a) The action taken by the local consignee has, in fact,prescribed. The
period of one year under the Carriage ofGoods by Sea Act (COGSA) is
not interrupted by a writtenextrajudicial demand. The provisions of Art
1155 of theNCC merely apply to prescriptive periods provided for
insaid Code and not to special laws such as COGSA exceptwhen
otherwise provided. (Dole v Maritime Co 148 s 118).
b) If the consignee‗s action were predicated onmisdelivery or
conversion of goods, the provisions of theCOGSA would be
inapplicable. In these cases, the NCCprescriptive periods, including Art
1155 of the NCC willapply (Ang v Compania Maritama 133 s 600)
COGSA; Prescription of Claims (2000)
RC imported computer motherboards from the UnitedStates and had
them shipped to Manila aboard an oceangoingcargo ship owned by BC
Shipping Company. Whenthe cargo arrived at Manila seaport and
delivered to RC,the crate appeared intact; but upon inspection of the
contents, RC discovered that the items inside had all beenbadly
damaged. He did not file any notice of damage oranything with
anyone, least of all with BC ShippingCompany. What he did was to
proceed directly to youroffice to consult you about whether he should
have given anotice of damage and how long a time he had to initiate a
suit under the provisions of the Carriage of Goods by SeaAct (CA 65).
What would your advice be? (2%)
SUGGESTED ANSWER:
My advice would be that RC should give notice of thedamage
sustained by the cargo within 3 days and that hehas to file the suit to
recover the damage sustained by thecargo within one year from the
date of the delivery of thecargo to him.
COGSA; Prescriptive Period (1995)
What is the prescriptive period for actions involving lostor damaged
cargo under the Carriage of Goods by SeaAct?
SUGGESTED ANSWER:
ONE YEAR after the delivery of the goods or the datewhen the goods
should have been delivered (Sec 3(6),COGSA)
What is the effect of EXTRAJUDICIAL DEMAND made to the
carrier?
G.R. No. L-61352 February 27, 1987
DOLE PHILIPPINES, INC., plaintiff-appellant,
vs.
MARITIME COMPANY OF THE PHILIPPINES, defendant-appellee.
NARVASA, J.:
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These arguments might merit weightier consideration were it not for
the fact that the question has already received a definitive answer,
adverse to the position taken by Dole, in The Yek Tong Lin Fire &
Marine Insurance Co., Ltd. vs. American President Lines,
Inc. 15 There, in a parallel factual situation, where suit to recover for
damage to cargo shipped by vessel from Tokyo to Manila was filed
more than two years after the consignee's receipt of the cargo, this
Court rejected the contention that an extrajudicial demand toiled the
prescriptive period provided for in the Carriage of Goods by Sea Act,
viz:
In the second assignment of error plaintiff-appellant argues that it was
error for the court a quo not to have considered the action of plaintiff-
appellant suspended by the extrajudicial demand which took place,
according to defendant's own motion to dismiss on August 22, 1952.
We notice that while plaintiff avoids stating any date when the goods
arrived in Manila, it relies upon the allegation made in the motion to
dismiss that a protest was filed on August 22, 1952 — which goes to
show that plaintiff-appellant's counsel has not been laying the facts
squarely before the court for the consideration of the merits of the
case. We have already decided that in a case governed by the
Carriage of Goods by Sea Act, the general provisions of the Code of
Civil Procedure on prescription should not be made to apply. (Chua
Kuy vs. Everett Steamship Corp., G.R. No. L-5554, May 27, 1953.)
Similarly, we now hold that in such a case the general provisions of the
new Civil Code (Art. 1155) cannot be made to apply, as such
application would have the effect of extending the one-year period of
prescription fixed in the law. It is desirable that matters affecting
transportation of goods by sea be decided in as short a time as
possible; the application of the provisions of Article 1155 of the new
Civil Code would unnecessarily extend the period and permit delays in
the settlement of questions affecting transportation, contrary to the
clear intent and purpose of the law. * * *
Instances Where the One [1] Year Prescriptive Period under the
COGSA is INTERRUPTED:
1. In case an action has been already filed in court
[F.H.Stevens v. Nordeutscher Lloyd [6 SCRA 180]
2. When there is an express agreement to the effect
[Universal Shipping v. IAC [188 SCRA 170]
G.R. No. L-25266 January 15, 1975
AETNA INSURANCE COMPANY, plaintiff-appellant,
vs.
BARBER STEAMSHIP LINES, INC., and/or LUZON STEVEDORING
CORPORATION and/or LUZON BROKERAGE
CORPORATION, defendants-appellees.
AQUINO, J.:
The trial court correctly held that the one-year statutory and contractual
prescriptive period had already expired when appellant company filed
on April 7, 1965 its action against Barber Line Far East Service. The
one year period commenced on February 25, 1964 when the damaged
cargo was delivered to the consignee. (See Chua Kuy vs. Everrett
Steamship Corporation, 93 Phil. 207; Yek Tong Fire & Marine
Insurance Co., Ltd. vs. American President Lines, Inc., 103 Phil. 1125).
XXX
Appellant company invokes the rule that where the original complaint
states a cause of action but does it imperfectly, and afterwards an
amended complaint is filed, correcting the defect, the plea of
prescription will relate to the time of the filing of the original complaint
(Pangasinan Transportation Co. vs. Phil. Farming Co., Ltd., 81 Phil.
273). It contends that inasmuch as the original complaint was filed
within the one year period, the action had not prescribed.
That ruling would apply to defendants Luzon Stevedoring Corporation
and Luzon Brokerage Corporation. But it would not apply to Barber
Line Far East Service which was impleaded for the first time in the
amended complaint.
It should be recalled that the original complaint was dismissed as to
Barber Steamship Lines, Inc. in the lower court's order of April 19,
1965. New summons had to be issued to Barber Line Far East Service
which had replaced Barber Steamship Lines, Inc. as a defendant.
The filing of the original complaint interrupted the prescriptive period as
to Barber Steamship Lines, Inc. but not as to Barber Line Far East
Service, an entity supposedly distinct from the former. Appellant's
contention that there was merely a correction in the name of a party-
defendant is untenable. *
From what point should the 1 year prescriptive period be
counted? It depends:
1. If delivery was made – from the date of delivery [includes
delivery to arrastre operator]
2. If NO delivery – from the date when the goods should have
been delivered
[G.R. No. L-6420. July 18, 1955.]
INSURANCE COMPANY OF NORTH AMERICA, Plaintiff-Appellant,
v. PHILIPPINE PORTS TERMINALS, INC., Defendant-Appellee.
JUGO, J.:
The defendant-appellee, Philippine Ports Terminals, Inc., is neither a
charterer nor a ship. Consequently the "Carriage of Goods by Sea Act"
does not apply to it. However, the ordinary period of four years fixed by
the Code of Civil Procedure will apply. The action in this case has been
brought within that time.
G.R. No. L-22491 January 27, 1967
DOMINGO ANG, plaintiff-appellant,
vs.
AMERICAN STEAMSHIP AGENCIES, INC., defendant-appellee.
BENGZON, J.P., J.:
As defined in the Civil Code and as applied to Section 3 (6) paragraph
4 of the Carriage of Goods by Sea Act, "loss" contemplates merely a
situation where no delivery at all was made by the shipper of the goods
because the same had perished, gone out of commerce, or
disappeared that their existence is unknown or they cannot be
recovered. It does not include a situation where there was indeed
delivery — but delivery to the wrong person, or a misdelivery, as
alleged in the complaint in this case. XXX
From the allegations of the complaint, therefore, the goods cannot be
deemed "lost". They were delivered to Herminio G. Teves, so that
there can only be either delivery, if Teves really was entitled to receive
them, or misdelivery, if he was not so entitled. It is not for Us now to
resolve whether or not delivery of the goods to Teves was proper, that
is, whether or not there was rightful delivery or misdelivery.
The point that matters here is that the situation is either delivery or
misdelivery, but not nondelivery. Thus, the goods were either rightly
delivered or misdelivered, but they were not lost. There being no loss
or damage to the goods, the aforequoted provision of the Carriage of
Good by Sea Act stating that "In any event, the carrier and the ship
shall be discharged from all liability in respect of loss or damage unless
suit is brought within one year after delivery of the goods or the date
when the goods should have been delivered," does not apply. The
reason is not difficult to see. Said one-year period of limitation is
designed to meet the exigencies of maritime hazards. In a case where
the goods shipped were neither last nor damaged in transit but were,
on the contrary, delivered in port to someone who claimed to be
entitled thereto, the situation is different, and the special need for the
short period of limitation in cases of loss or damage caused by
maritime perils does not obtain.
It follows that for suits predicated not upon loss or damage but on
alleged misdelivery (or conversion) of the goods, the applicable rule on
prescription is that found in the Civil Code, namely, either ten years for
breach of a written contract or four years for quasi-delict. (Arts.
1144[1], 1146, Civil Code) In either case, plaintiff's cause of action has
not vet prescribed, since his right of action would have accrued at the
earliest on May 9, 1961 when the ship arrived in Manila and he filed
suit on October 30, 1963.
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Effects of Prescriptive Period under the COGSA on the Liability of
the Insurer
1. ONLY the carrier‘s liability is extinguished if no suit is
brought within one [1] year from delivery of goods
2. BUT the liability of the insurer is NOT extinguished
3. Insurers are governed by the Insurance Code and not the
COGSA [Mayer Steel v. CA 274 SCRA 432]
4. BUT the insurer CANNOT file an action against the carrier
beyond the one [1] year prescriptive period [Filipino
Merchants v. CA 179 SCRA 638]
Limit of the Liability of the Carrier for Loss or Damage to Goods
Transported Sec. 4[5](1):
1. $500 per package – UNLESS the nature and value of such
goods have been declared by the shipper before shipment
and inserted in the bill of lading
2. This declaration, if embodied in the bill of lading, shall be
prima facie evidence, BUT shall not be conclusive on the
carrier.
3. Shipper and carrier may agree on another maximum amount
but should not be less than $500
4. Carrier can NOT be liable for:
a. MORE than the amount of damage ACTUALLY
sustained
b. Loss or damage to goods if the value thereof has
been knowingly and fraudulently MISSTATED by
the shipper in the bill of lading
G.R. No. L-69044 May 29, 1987
EASTERN SHIPPING LINES, INC., petitioner,
vs.
INTERMEDIATE APPELLATE COURT and DEVELOPMENT
INSURANCE & SURETY CORPORATION,respondents.
MELENCIO-HERRERA, J.:
On the US $500 Per Package Limitation:
It is to be noted that the Civil Code does not of itself limit the liability of
the common carrier to a fixed amount per package although the Code
expressly permits a stipulation limiting such liability. Thus, the COGSA
which is suppletory to the provisions of the Civil Code, steps in and
supplements the Code by establishing a statutory provision limiting the
carrier's liability in the absence of a declaration of a higher value of the
goods by the shipper in the bill of lading. The provisions of the
Carriage of Goods by.Sea Act on limited liability are as much a part of
a bill of lading as though physically in it and as much a part thereof as
though placed therein by agreement of the parties.
ARRASTRE
General Definition of Arrastre
A broad tern which refers to a contract for the unloading of goods from
a vessel
Arrastre in Mercantile Law
The term ‗arrastre‘ has a technical meaning as it applies only to
overseas trade
When cargo from abroad arrives on board a vessel, the consignee
cannot unload and deliver the cargo by himself.
This is done by the arrastre operator, who will then deliver the cargo to
the customs warehouse
Parties in Arrastre Contract
 1. Republic of the Philippines
2. The party awarded the privilege of operating the arrastre
service
INITIALS
 FOB [Free On Board] or FAS [Free Alongside Ship]
A price quotation with FOB presumes that the seller shall comply with
his obligation to deliver the cargo to the vessel.
Thereupon, it is the BUYER who shall pay the freightage and thus the
carrier is deemed agent of the buyer so that delivery to the vessel is
delivery to the buyer.
Ownership of the cargo will pass to the buyer upon delivery by the
seller to the vessel.
 CIF [Cost, Insurance and Freight]
A price quotation on CIF presumes that the seller shall cost of crating
and packaging, insurance and the freightage.
The carrier is deemed to be the agent of the seller, so that throughout
the entire trip ownership is retained by the SELLER and only passes to
the buyer upon reaching the point of destination and the cargo is
discharged in favor of the buyer.
AIR TRANSPORTATION
Regulatory Body in Air Transportation: Civil Aeronautics Board
[CAB]
Requisite to Engage in Air Commerce: A Certificate of Public
Convenience and Necessity is a permit issued by the CAB authorizing
a person to engage in air commerce and/or air transportation, foreign
and/or domestic [RA 776 Sec. 11]
NOTE: Compare & Contrast Warsaw and Montreal Convention
RESOLUTION No. 95 RESOLUTION CONCURRING IN THE
ACCESSION TO THE 1999 MONTREAL CONVENTION FOR THE
UNIFICATION OF CERTAIN RULES FOR INTERNATIONAL
CARRIAGE BY AIR
XXX
Resolved, That the Philippine Senate concur, as it hereby concurs, in
the Philippine accession to the Convention for the Unification of
Certain Rules for International Carriage by Air signed on 28 May 1999
in Montreal, with the reservation that the Convention shall not apply to
(a) international carriage by air performed and operated drrectly by the
Philippines for noncommercial purposes in respect of its functions and
duties as a sovereign State; and (b) the carrige of persons, cargo, and
baggage for its military authoritIes on aircraft registered in or leased by
the Philippines, the whole capacity of which has been reserved by or
on behalf of such authorities.
XXX
This Resolution was adopted by the Senate on August 10, 2015.
WARSAW CONVENTION
In General:
1. Full Title – Warsaw Convention for the Unification of Certain
Rules Relating to International Carriage by Air
2. Date and Place Signed – Warsaw Poland, October 12,
1929
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3. Formal Adherence – Sep 23, 1955 by Proclamation 201
issued by President Ramon Magsaysay
Applicability [Art. 1.1]
The Warsaw Convention shall apply to:
 All INTERNATIONAL transportation of persons, baggage or
goods
 Performed by aircraft FOR HIRE
Meaning of International Transportation [Art. 1.2]
Any transportation, in which according to the CONTRACT made by the
parties, the place of departure and the place of destination, w/n there
be a break in the transportationare situated either within the:
 territories of 2 High Contracting Parties, or
 territory of a single High Contracting Party, IF there is an
agreed stopping place within a territory subject to the
sovereignty, mandate or authority of another power, even
though that power is not a party to this convention
What is a High Contracting Party?
A signatory to the Warsaw Convention and one who subsequently
adheres to it
Montreal Convention 1999
Convention for the Unification of Certain Rules for International
Carriage by Air, opened for Signature at Montreal on 28 May 1999
(ICAO Doc No 4698)
Article 1 — Scope of Application
1. This Convention applies to all international carriage of persons,
baggage or cargo performed by aircraft for reward. It applies equally to
gratuitous carriage by aircraft performed by an air transport
undertaking.
2. For the purposes of this Convention, the expression international
carriage means any carriage in which, according to the agreement
between the parties, the place of departure and the place of
destination, whether or not there be a break in the carriage or a
transhipment, are situated either within the territories of two States
Parties, or within the territory of a single State Party if there is an
agreed stopping place within the territory of another State, even if that
State is not a State Party. Carriage between two points within the
territory of a single State Party without an agreed stopping place within
the territory of another State is not international carriage for the
purposes of this Convention.
NOTE: All boxes similarly shaded were taken from Montreal Convention
G.R. No. 122308 July 8, 1997
PURITA S. MAPA, CARMINA S. MAPA and CORNELIO P.
MAPA, petitioners,
vs.
COURT OF APPEALS and TRANS-WORLD AIRLINES
INC., respondents.
DAVIDE, JR., J.:
Carrier:TWA
Place of purchase of ticket: Bangkok
Sectors: LAX-NYC-BOS-STL-CHI
The pitch issue to be resolved under the petitioner's first assigned error
is whether the contracts of transportation between Purita and
CarminaMapa, on the one hand, and TWA, on the other, were
contracts of "international transportation" under the Warsaw
Convention.
There are then two categories of international transportation, viz., (1)
that where the place of departure and the place of destination are
situated within the territories of two High Contracting Parties regardless
of whether or not there be a break in the transportation or a
transshipment; and (2) that where the place of departure and the place
of destination are within the territory of a single High Contracting Party
if there is an agreed stopping place within a territory subject to the
sovereignty, mandate, or authority of another power, even though the
power is not a party of the Convention. XXX
The contracts of transportation in this case are evidenced by the two
TWA tickets, No. 015:9475:153:304 and No. 015:9475:153:305, both
purchased and issued in Bangkok, Thailand. On the basis alone of the
provisions therein, it is obvious that the place of departure and the
place of destination are all in the territory of the United States, or of a
single High Contracting Party. The contracts, therefore, cannot come
within the purview of the first category of international transportation.
Neither can it be under the second category since there was NO
agreed stopping place within a territory subject to the sovereignty,
mandate, or authority of another power.
Effect when Transportation is Performed by Several Successive
Air Carriers [Art. 1.3)]
1. It shall be deemed, for the purposes of the WC, to be one
undivided transportation, PROVIDED It has been
regarded by the parties as a single operation, whether it
has been agreed upon under the form of a single contract or
of a series of contracts, and
2. It shall not lose its international character merely
because one contract or a series of contracts is to be
performed entirely within a territory subject to the
sovereignty, suzerainty, mandate, or authority of the same
High Contracting Party
1.3. Carriage to be performed by several successive carriers is
deemed, for the purposes of this Convention, to be one undivided
carriage if it has been regarded by the parties as a single operation,
whether it had been agreed upon under the form of a single contract or
of a series of contracts, and it does not lose its international character
merely because one contract or a series of contracts is to be
performed entirely within the territory of the same State.
G.R. No. 116044-45 arch 9, 2000
AMERICAN AIRLINES petitioner,
vs.
COURT OF APPEALS, HON. BERNARDO LL. SALAS and
DEMOCRITO MENDOZA, respondents.
GONZAGA-REYES, J.:
Carriers: Successive
Place of purchase of ticket: SQ in Manila
Sectors: MNL-SIN-ATH-LAR-ROM-TUR-ZRH-GEN-CPH-JFK
Ticket: Conjunction
The question is whether the contract of transportation between the
petitioner and the private respondent would be considered as a single
operation and part of the contract of transportation entered into by the
latter with Singapore Airlines in Manila.
The contract of carriage between the private respondent and
Singapore Airlines although performed by different carriers under a
series of airline tickets, including that issued by the petitioner,
constitutes a single operation. Members of the IATA are under a
general pool partnership agreement wherein they act as agent of each
other in the issuance of tickets to contracted passengers to boost ticket
sales worldwide and at the same time provide passengers easy access
to airlines which are otherwise inaccessible in some parts of the world.
Booking and reservation among airline members are allowed even by
telephone and it has become an accepted practice among them. A
member airline which enters into a contract of carriage consisting of a
series of trips to be performed by different carriers is authorized to
receive the fare for the whole trip and through the required process of
interline settlement of accounts by way of the IATA clearing house an
airline is duly compensated for the segment of the trip serviced. Thus,
when the petitioner accepted the unused portion of the conjunction
tickets, entered it in the IATA clearing house and undertook to
transport the private respondent over the route covered by the unused
portion of the conjunction tickets, i.e., Geneva to New York, the
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petitioner tacitly recognized its commitment under the IATA pool
arrangement to act as agent of the principal contracting airline,
Singapore Airlines, as to the segment of the trip the petitioner agreed
to undertake. As such, the petitioner thereby assumed the obligation to
take the place of the carrier originally designated in the original
conjunction ticket. The petitioner's argument that it is not a designated
carrier in the original conjunction tickets and that it issued its own ticket
is not decisive of its liability. The new ticket was simply a replacement
for the unused portion of the conjunction ticket, both tickets being for
the same amount of US$2,760 and having the same points of
departure and destination. By constituting itself as an agent of the
principal carrier the petitioner's undertaking should be taken as part of
a single operation under the contract of carriage executed by the
private respondent and Singapore Airlines in Manila.
The quoted provision of the Warsaw Convention Art. 1(3) clearly states
that a contract of air transportation is taken as a single operation
whether it is founded on a single contract or a series of contracts. The
number of tickets issued does not detract from the oneness of the
contract of carriage as long as the parties regard the contract as a
single operation. The evident purpose underlying this Article is to
promote international air travel by facilitating the procurement of a
series of contracts for air transportation through a single principal and
obligating different airlines to be bound by one contract of
transportation. Petitioner's acquiescence to take the place of the
original designated carrier binds it under the contract of carriage
entered into by the private respondent and Singapore Airlines in
Manila.
Liability of Carrier [Art. 17]
Art. 17 provides for the liability of the carrier for damage suffered by a
passenger, sustained in the event of:
1. the death, or
2. the wounding of a passenger, or
3. any other bodily injury
Conditions for Liability [Art. 17]
The accident, which caused the damage so sustained, took place:
1. on board the aircraft, or
2. in the course of any of the operations of embarking or
disembarking
Liability of Carrier [Art. 18]
Art. 18 provides for the liability of the carrier for damage sustained in
the event of the
1. destruction or
2. loss of, or
3. of damage to any checked baggage or goods
The occurrence, which caused the damage, so sustained took place
during the transportation by air.
What comprises Transportation by Air in reference to Art. 18[1]?
It shall comprise the period during which the baggage or goods are in
charge of the carrier whether:
1. in an airport, or
2. on board an aircraft, or,
3. in the case of a landing outside an airport, in any place
whatsoever
Does the period of the transportation by air shall extend to any
transportation by land, by sea, or by river performed outside an
airport?
As a General Rule, NO. If, however, such transportation takes place in
the performance of a contract for transportation by air, for the purpose
of loading, delivery or transshipment, any damage is PRESUMED,
subject to proof to the contrary, to have been the result of an event,
which took place during the transportation by air
Liability of Carrier for Delay [Art. 19]
The carrier shall be liable for damages occasioned by delay in the
transportation by air of passengers, baggage, or goods.
G.R. No. 77011 July 24, 1990
ALITALIA AIRWAYS, petitioner,
vs.
COURT OF APPEALS, and SPS. JOSE O. JULIANO and VICTORIA
JULIANO, respondents.
SARMIENTO, J.:
Thus we re-affirm the ruling laid down by the Court in a long line of
cases that when an airline issues a ticket to a passenger confirmed on
a particular flight, on a certain date, a contract of carriage arises, and
the passenger has every right to expect that he would fly on that flight
and on that date. If he does not, then the carrier opens itself to a suit
for breach of contract of carriage.
Accordingly, the respondent court erred in holding that the Julianos are
not entitled to a refund because the purchase of the Thai Airways
tickets was unnecessary. XXX
When a passenger contracts for a specific flight he has a purpose in
making that choice which must be respected. This choice, once
exercised, must not be impaired by a breach on the part of the airline
without the latter incurring any liability. Besides, why should the
Julianos be compelled to wait for another Alitalia tight to risk a similar
rebuff and suffer the consequent further delay? XXX
It was already too much of a coincidence that, at Fumicino Airport, the
Julianos would find another Filipino, in the person of Ms. Estanislao, in
the same predicament that they were in. 27 We will no longer go to the
extent of indulging in the conjecture that Ms. Estanislao and the
Julianos were singled out to be discriminated against because of their
color. What is plain to see is that the airline had deliberately
overbooked and in doing so took the risk of having to deprive some
passengers of their seats in case all of them would show up for check-
in.
That Alitalia had no intention to accommodate all who had 'confirmed
their flight reservations could be seen in the absence of any measure
to contract all possible passengers for each flight who might be within
the airport premises. 28 As a result, some passengers would really be
left behind in the long and disorderly queue at the check-in counter.
Common carriers, like commercial airlines, are in the business of
rendering service, which is the primary reason for their recognition in
our law. They can not be allowed to disregard our laws as if they are
doing the passengers any favor by accommodating them.
Because the passengers in a contract of carriage do not contract
merely for transportation, they have a right to be treated by the carrier's
employees with kindness, respect, courtesy, and
consideration. 29 Hence the justification why passengers must be
spared from the indignity and inconvenience of being refused a
confirmed seat on the last minute.
As held in Trans World Airlines v. Court of Appeals, 30 such inattention
to and lack of care [by the petitioner airline] for the interest of its
passengers who are entitled to its utmost consideration, particularly as
to their convenience, amount to bad faith which entitles the passenger
to the award of moral damages. Ergo, we affirm the respondent court's
award of moral damages at P200.000.00. This award should be
sufficient to indemnify the Julianos for the delay, inconvenience,
humiliation, and embarrassment they suffered.
Likewise the award of exemplary damages is well-grounded. With
dismay, we note, that the imposition of substantial amounts of
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damages notwithstanding, international carriers have not been
dissuaded from repeating similar derogatory acts.
Limitations to Liability of Air Carriers [Art. 22]
 In transportation of PASSENGERS – 125,000 francs [or
equivalent], but carrier and pax may agree to a higher limit of
liability;
 In transportation of CHECKED BAGGAGE or GOODS –
125 francs [or equivalent] per kilo, unless the consignor
declares a higher value and pays a supplementary sum
 As regards OBJECTS of which pax takes charge HIMSELF
[hand carried luggage] – 5,000 francs [or equivalent] per
pax
Carriage; Valuation of Damaged Cargo (1993)
A shipped thirteen pieces of luggage through LG Airlinesfrom Teheran
to Manila as evidenced by LG Air Waybillwhich disclosed that the
actual gross weight of the luggagewas 180 kg. Z did not declare an
inventory of the contentsor the value of the 13 pieces of luggage. After
the saidpieces of luggage arrived in Manila, the consignee was able
to claim from the cargo broker only 12 pieces, with a totalweight of 174
kg. X advised the airline of the loss of one ofthe 13 pieces of luggage
and of the contents thereof.Efforts of the airline to trace the missing
luggage werefruitless. Since the airline failed to comply with the
demandof X to produce the missing luggage, X filed an action for
breach of contract with damages against LG Airlines. In itsanswer, LG
Airlines alleged that the Warsaw Conventionwhich limits the liability of
the carrier, if any, with respectto cargo to a sum of $20 per kilo or
$9.07 per pound,unless a higher value is declared in advance and
additionalcharges are paid by the passenger and the conditions of the
contract as set forth in the air waybill, expressly subject thecontract of
the carriage of cargo to the WarsawConvention. May the allegation of
LG Airlines besustained? Explain.
SUGGESTED ANSWER:
Yes. Unless the contents of a cargo are declared or thecontents of a
lost luggage are proved by the satisfactoryevidence other than the self-
serving declaration of oneparty, the contract should be enforced as it is
the onlyreasonable basis to arrive at a just award. The passenger
orshipper is bound by the terms of the passenger ticket or
the waybill. (Panama v Rapadas 209 s 67)
Common Carrier; Defenses; Limitation of Liability (1998)
X took a plane from Manila bound for Davao via Cebuwhere there was
a change of planes. X arrived in Davaosafely but to his dismay, his two
suitcases were left behindin Cebu. The airline company assured X that
the suitcaseswould come in the next flight but they never did. X
claimed P2,000 for the loss of both suitcases, but theairline was willing
to pay only P500 because the airlineticket stipulated that unless a
higher value was declared,any claim for loss cannot exceed P250 for
each piece ofluggage. X reasoned out that he did not sign the
stipulationand in fact had not even read it. X did not declare a greater
value despitethe fact that the clerk had called his attention to
thestipulation in the ticket. Decide the case (5%)
SUGGESTED ANSWER:
Even if he did not sign the ticket, X is bound by thestipulation that any
claim for loss cannot exceed P250 foreach luggage. He did not declare
a higher value. X isentitled to P500 for the two luggages lost.
G.R. No. 70462 August 11, 1988
PAN AMERICAN WORLD AIRWAYS, INC., petitioner,
vs.
INTERMEDIATE APPELLATE COURT, RENE V. PANGAN,
SOTANG BASTOS PRODUCTIONS and ARCHER
PRODUCTIONS, respondents.
CORTES, J.:
On the basis of the foregoing stipulations printed at the back of the
ticket, petitioner contends that its liability for the lost baggage of private
respondent Pangan is limited to $600.00 ($20.00 x 30 kilos) as the
latter did not declare a higher value for his baggage and pay the
corresponding additional charges.
To support this contention, petitioner cites the case of Ong Yiu v. Court
of Appeals [G.R. No. L-40597, June 29, 1979, 91 SCRA 223], where
the Court sustained the validity of a printed stipulation at the back of an
airline ticket limiting the liability of the carrier for lost baggage to a
specified amount and ruled that the carrier's liability was limited to said
amount since the passenger did not declare a higher value, much less
pay additional charges.
We find the ruling in Ong Yiu squarely applicable to the instant case.
XXX
In view thereof petitioner's liability for the lost baggage is limited to
$20.00 per kilo or $600.00, as stipulated at the back of the ticket.
G.R. No. 92501 March 6, 1992
PHILIPPINE AIR LINES, petitioner,
vs.
HON. COURT OF APPEALS and ISIDRO CO, respondents.
GRIÑO-AQUINO, J.:
Petitioner contends that under the Warsaw Convention, its liability, if
any, cannot exceed US $20.00 based on weight as private respondent
Co did not declare the contents of his baggage nor pay traditional
charges before the flight (p. 3, tsn, July 18, 1985).
We find no merit in that contention. XXX
Since the passenger's destination in this case was the Philippines,
Philippine law governs the liability of the carrier for the loss of the
passenger's luggage.
In this case, the petitioner failed to overcome, not only the
presumption, but more importantly, the private respondent's evidence,
proving that the carrier's negligence was the proximate cause of the
loss of his baggage. Furthermore, petitioner acted in bad faith in faking
a retrieval receipt to bail itself out of having to pay Co's claim.
The Court of Appeals therefore did not err in disregarding the limits of
liability under the Warsaw Convention.
G.R. No. 104685 March 14, 1996
SABENA BELGIAN WORLD AIRLINES, petitioner,
vs.
HON. COURT OF APPEALS and MA. PAULA SAN
AGUSTIN, respondents.
VITUG, J.:p
It remained undisputed that private respondent's luggage was lost
while it was in the custody of petitioner. It was supposed to arrive on
the same flight that private respondent took in returning to Manila on
02 September 1987. When she discovered that the luggage was
missing, she promptly accomplished and filed a Property Irregularity
Report. She followed up her claim on 14 September 1987, and filed, on
the following day, a formal letter-complaint with petitioner. She felt
relieved when, on 23 October 1987, she was advised that her luggage
had finally been found, with its contents intact when examined, and
that she could expect it to arrive on 27 October 1987. She then waited
anxiously only to be told later that her luggage had been lost for the
second time. Thus, the appellate court, given all the facts before it,
sustained the trial court in finding petitioner ultimately guilty of "gross
negligence" in the handling of private respondent's luggage. The "loss
of said baggage not only once but twice, said the appellate court,
"underscores the wanton negligence and lack of care" on the part of
the carrier.
The above findings, which certainly cannot be said to be without basis,
foreclose whatever rights petitioner might have had to the possible
limitation of liabilities enjoyed by international air carriers under the
Warsaw Convention (Convention for the Unification of Certain Rules
Relating to International Carriage by Air, as amended by the Hague
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Protocol of 1955, the Montreal Agreement of 1966, the Guatemala
Protocol of 1971 and the Montreal Protocols of 1975). XXX
The Court thus sees no error in the preponderant application to the
instant case by the appellate court, as well as by the trial court, of the
usual rules on the extent of recoverable damages beyond the Warsaw
limitations. Under domestic law and jurisprudence (the Philippines
being the country of destination), the attendance of gross negligence
(given the equivalent of fraud or bad faith) holds the common carrier
liable for all damages which can be reasonably attributed, although
unforeseen, to the non-performance of the obligation, 9 including moral
and exemplary damages.
G.R. No. 121824 January 29, 1998
BRITISH AIRWAYS, petitioner,
vs.
COURT OF APPEALS, GOP MAHTANI, and PHILIPPINE
AIRLINES, respondents.
ROMERO, J.:
It is the position of BA that there should have been no separate award
for the luggage and the contents thereof since Mahtani failed to
declare a separate higher valuation for the luggage, 18 and therefore,
its liability is limited, at most, only to the amount stated in the ticket.
XXX
Considering the facts of the case, we cannot assent to such specious
argument. XXX
In addition, we have held that benefits of limited liability are subject to
waiver such as when the air carrier failed to raise timely objections
during the trial when questions and answers regarding the actual
claims and damages sustained by the passenger were asked.
Given the foregoing postulates, the inescapable conclusion is that BA
had waived the defense of limited liability when it allowed Mahtani to
testify as to the actual damages he incurred due to the misplacement
of his luggage, without any objection. XXX
To compound matters for BA, its counsel failed, not only to interpose a
timely objection, but even conducted his own cross-examination as
well.
When an Air Carrier NOT is entitled to the WC provisions which
EXCLUDE or LIMIT Liability?
When the loss or damage is caused by the WILLFUL MISCONDUCT
of the carrier or its agent… x xx[Art. 25]
What is the effect of receipt by the person entitled to delivery of
luggage or goods without complaint?
It is prima facie evidence that the goods have been delivered in good
condition and in accordance with the document of transportation [Art.
26]
What is the duty of the shipper or consignee when the goods are
DAMAGED or when there is DELAY in their delivery?
He must make a complaint to the carrier:
1. In case of DAMAGE – the complaint must be made forthwith
after the discovery of the damage, and, at the latest, within:
a. 3 days from the date of receipt in the case of
luggage, and
b. 7 days from date of receipt in the case of goods
2. In case of DELAY - the complaint must be made at the latest
within 14 days from the date on which the luggage or
goods have been placed at his disposal [Art. 26]
Form of the Complaint:
1. In writing upon the document of carriage, or
 2. by separate notice in writing dispatched within the times
aforesaid [Art. 26]
Effect of Failure to File Complaint within Periods Provided:
General Rule – no action shall lie against the carrier
Exception – save in the case of fraud on his [carrier‘s] part [Art. 26]
G.R. No. 150094 August 18, 2004
FEDERAL EXPRESS CORPORATION, petitioner,
vs.
AMERICAN HOME ASSURANCE COMPANY and PHILAM
INSURANCE COMPANY, INC., respondents.
DECISION
PANGANIBAN, J.:
In this jurisdiction, the filing of a claim with the carrier within the time
limitation therefor actually constitutes a condition precedent to the
accrual of a right of action against a carrier for loss of or damage to the
goods. The shipper or consignee must allege and prove the fulfillment
of the condition. If it fails to do so, no right of action against the carrier
can accrue in favor of the former. The aforementioned requirement is a
reasonable condition precedent; it does not constitute a limitation of
action.
The requirement of giving notice of loss of or injury to the goods is not
an empty formalism. The fundamental reasons for such a stipulation
are (1) to inform the carrier that the cargo has been damaged, and that
it is being charged with liability therefor; and (2) to give it an
opportunity to examine the nature and extent of the injury. "This
protects the carrier by affording it an opportunity to make an
investigation of a claim while the matter is fresh and easily investigated
so as to safeguard itself from false and fraudulent claims."
When an airway bill -- or any contract of carriage for that matter -- has
a stipulation that requires a notice of claim for loss of or damage to
goods shipped and the stipulation is not complied with, its enforcement
can be prevented and the liability cannot be imposed on the carrier. To
stress, notice is a condition precedent, and the carrier is not liable if
notice is not given in accordance with the stipulation. Failure to comply
with such a stipulation bars recovery for the loss or damage suffered.
Being a condition precedent, the notice must precede a suit for
enforcement. In the present case, there is neither an allegation nor a
showing of respondents' compliance with this requirement within the
prescribed period. While respondents may have had a cause of action
then, they cannot now enforce it for their failure to comply with the
aforesaid condition precedent.
G.R. Nos. 100374-75 November 27, 1992
RUFINO Y. LUNA, RODOLFO J. ALONSO and PORFIRIO
RODRIGUEZ, petitioners,
vs.
HON. COURT OF APPEALS, HON. CRISTINA M. ESTRADA in her
capacity as Presiding Judge, RTC-Pasig, Br. 69, Metro Manila,
HON. TERESITA D. CAPULONG in her capacity as Presiding
Judge, RTC-Valenzuela, Br. 172, Metro Manila, and NORTHWEST
AIRLINES, INC., respondents.
BELLOSILLO, J.:
Previously, We ruled that the Warsaw Convention was a treaty
commitment voluntarily assumed by the Philippine government;
consequently, it has the force and effect of law in this country. 15 But,
in the same token, We are also aware of jurisprudence that the
Warsaw Convention does not operate as an exclusive enumeration of
the instances for declaring an airline liable for breach of contract of
carriage or as an absolute limit of the extent of that liability. 16 The
Convention merely declares the carrier liable for damages in the
enumerated cases, if the conditions therein specified are
present. 17 For sure, it does not regulate the liability, much less
exempt, the carrier for violating the rights of others which must simply
be respected in accordance with their contracts of carriage. The
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application of the Convention must not therefore be construed to
preclude the operation of the Civil Code and other pertinent laws. In
fact, in Alitalia v. IAC,We awarded Dr. Felipa Pablo nominal damages,
the provisions of the Convention notwithstanding.
Hence, petitioners' alleged failure to file a claim with the common
carrier as mandated by the provisions of the Warsaw Convention
should not be a ground for the summary dismissal of their complaints
since private respondent may still be held liable for breach of other
relevant laws which may provide a different period or procedure for
filing a claim. Considering that petitioners indeed filed a claim which
private respondent admitted having received on 21 June, 1989, their
demand may have very well been filed within the period prescribed by
those applicable laws. Consequently, respondent trial courts, as well
as respondent appellate court, were in error when they limited
themselves to the provisions of the Warsaw Convention and
disregarding completely the provisions of the Civil Code.
We are unable to agree however with petitioners that Art. 25 of the
Convention operations to exclude the other provisions of the
Convention if damage is caused by the common carrier's willful
misconduct. As correctly pointed out by private respondent, Art. 25
refers only to the monetary ceiling on damages found in Art. 22 should
damage be caused by the carrier's willful misconduct. Hence, only the
provisions of Art. 22 limiting the carrier's liability and imposing a
monetary ceiling in case of willful misconduct on its part that the carrier
cannot invoke. 19 This issue however has become academic in the
light of our ruling that the trial courts erred in dismissing petitioners'
respective complaints.
We are not prepared to subscribed to petitioners' argument that the
failure of private respondent to deliver their luggage at the designated
time and place amounted ipso facto to willful misconduct. For willful
misconduct to exist, there must be a showing that the acts complained
of were impelled by an intention to violate the law, or were in persistent
disregard of one's rights. It must be evidenced by a flagrantly or
shamefully wrong or improper conduct.
Jurisdiction Art. 28[1]
An action for damages must be brought, at the option of the plaintiff, in
the territory of one of the High Contracting Parties, either before the
court of the domicile of the carrier or of his principal place of business,
or where he has a place of business through which the contract has
been made, or before the court at the place of destination.
Article 33 — Jurisdiction
1. An action for damages must be brought, at the option of the plaintiff,
in the territory of one of the States Parties, either before the court of
the domicile of the carrier or of its principal place of business, or where
it has a place of business through which the contract has been made
or before the court at the place of destination.
2. In respect of damage resulting from the death or injury of a
passenger, an action may be brought before one of the courts
mentioned in paragraph 1 of this Article, or in the territory of a State
Party in which at the time of the accident the passenger has his or her
principal and permanent residence and to or from which the carrier
operates services for the carriage of passengers by air, either on its
own aircraft, or on another carrier‘s aircraft pursuant to a commercial
agreement, and in which that carrier conducts its business of carriage
of passengers by air from premises leased or owned by the carrier
itself or by another carrier with which it has a commercial agreement.
3. For the purposes of paragraph 2,
a) ―commercial agreement‖ means an agreement, other than an
agency agreement, made between carriers and relating to the
provision of their joint services for carriage of passengers by air;
b) ―principal and permanent residence‖ means the one Þ xed and
permanent abode of the passenger at the time of the accident. The
nationality of the passenger shall not be the determining factor in this
regard.
4. Questions of procedure shall be governed by the law of the court
seised of the case
Where a Complaint for Damages Against an Air Carrier May be
Instituted [Art. 28]:
1. The court of the domicile of the carrier;
2. The court of its principal place of business;
3. The court where it has a place of business through which the
contract had been made;
4. The court of the place of destination.
G.R. No. 116044-45 March 9, 2000
AMERICAN AIRLINES petitioner,
vs.
COURT OF APPEALS, HON. BERNARDO LL. SALAS and
DEMOCRITO MENDOZA, respondents.
GONZAGA-REYES, J.:
The third option of the plaintiff under Art 28 (1) of the Warsaw
Convention e.g., to sue in the place of business of the carrier wherein
the contract was made, is therefore, Manila, and Philippine courts are
clothed with jurisdiction over this case. We note that while this case
was filed in Cebu and not in Manila the issue of venue is no longer an
issue as the petitioner is deemed to have waived it when it presented
evidence before the trial court.
G.R. No. 101538 June 23, 1992
AUGUSTO BENEDICTO SANTOS III, represented by his father and
legal guardian, Augusto Benedicto Santos, petitioner,
vs.
NORTHWEST ORIENT AIRLINES and COURT OF
APPEALS, respondents.
CRUZ, J.:
The petitioner claims that the lower court erred in not ruling that
under Article 28(1) of the Warsaw Convention, this case was
properly filed in the Philippines, because Manila was the
destination of the plaintiff. XXX
The place of destination, within the meaning of the Warsaw
Convention, is determined by the terms of the contract of carriage or,
specifically in this case, the ticket between the passenger and the
carrier. Examination of the petitioner's ticket shows that his ultimate
destination is San Francisco. Although the date of the return flight was
left open, the contract of carriage between the parties indicates that
NOA was bound to transport the petitioner to San Francisco from
Manila. Manila should therefore be considered merely an agreed
stopping place and not the destination.
The petitioner claims that the lower court erred in not ruling that
under Art. 28(1) of the Warsaw Convention, this case was
properly filed in the Philippines because the defendant has its
domicile in the Philippines. XXX
The private respondent notes, however, that in Compagnie Nationale
Air France vs. Giliberto, 19 it was held:
The plaintiffs' first contention is that Air France is domiciled in the
United States. They say that the domicile of a corporation includes any
country where the airline carries on its business on "a regular and
substantial basis," and that the United States qualifies under such
definition. The meaning of domicile cannot, however, be so extended.
The domicile of a corporation is customarily regarded as the place
where it is incorporated, and the courts have given the meaning to the
term as it is used in article 28(1) of the Convention. (See Smith v.
Canadian Pacific Airways, Ltd. (2d Cir. 1971), 452 F2d 798, 802; Nudo
v. Societe Anonyme Belge d' Exploitation de la Navigation Aerienne
Sabena Belgian World Airlines (E.D. pa. 1962). 207 F. Supp, 191;
Karfunkel v. Compagnie Nationale Air France (S.D.N.Y. 1977), 427 F.
Suppl. 971, 974). Moreover, the structure of article 28(1), viewed as a
whole, is also incompatible with the plaintiffs' claim. The article, in
stating that places of business are among the bases of the jurisdiction,
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sets out two places where an action for damages may be brought; the
country where the carrier's principal place of business is located, and
the country in which it has a place of business through which the
particular contract in question was made, that is, where the ticket was
bought, Adopting the plaintiffs' theory would at a minimum blur these
carefully drawn distinctions by creating a third intermediate category. It
would obviously introduce uncertainty into litigation under the article
because of the necessity of having to determine, and without
standards or criteria, whether the amount of business done by a carrier
in a particular country was "regular" and "substantial." The plaintiff's
request to adopt this basis of jurisdiction is in effect a request to create
a new jurisdictional standard for the Convention.
XXX
We agree with these rulings.
Notably, the domicile of the carrier is only one of the places where the
complaint is allowed to be filed under Article 28(1). By specifying the
three other places, to wit, the principal place of business of the carrier,
its place of business where the contract was made, and the place of
destination, the article clearly meant that these three other places were
not comprehended in the term "domicile."
G.R. No. 171092 March 15, 2010
EDNA DIAGO LHUILLIER, Petitioner,
vs.
BRITISH AIRWAYS, Respondent.
DEL CASTILLO, J.:
In this case, it is not disputed that respondent is a British corporation
domiciled in London, United Kingdom with London as its principal
place of business. Hence, under the first and second jurisdictional
rules, the petitioner may bring her case before the courts of London in
the United Kingdom. In the passenger ticket and baggage check
presented by both the petitioner and respondent, it appears that the
ticket was issued in Rome, Italy. Consequently, under the third
jurisdictional rule, the petitioner has the option to bring her case before
the courts of Rome in Italy. Finally, both the petitioner and respondent
aver that the place of destination is Rome, Italy, which is properly
designated given the routing presented in the said passenger ticket
and baggage check. Accordingly, petitioner may bring her action
before the courts of Rome, Italy. We thus find that the RTC of Makati
correctly ruled that it does not have jurisdiction over the case filed by
the petitioner.
Prescriptive Period in Filing a Case for Damages against Carrier
[Art. 29]:
Within two [2] years, reckoned from:
 the date of arrival at the destination, or
 the date on which the aircraft ought to have arrived, or
 the date on which the transportation stopped
Effect of Failure to File Action against the Carrier within 2 years:
The right to damages shall be extinguished
In United Airlines v. Uy,18 this Court distinguished between the (1)
damage to the passenger‘s baggage and (2) humiliation he suffered at
the hands of the airline‘s employees. The first cause of action was
covered by the Warsaw Convention which prescribes in two years,
while the second was covered by the provisions of the Civil Code on
torts, which prescribes in four years.
G.R. No. 127768 November 19, 1999
UNITED AIRLINES, petitioner,
vs.
WILLIE J. UY, respondent.
BELLOSILLO, J.:
As for respondent's second cause of action, indeed the travaux
preparatories of the Warsaw Convention reveal that the delegates
thereto intended the two (2)-year limitation incorporated in Art. 29 as
an absolute bar to suit and not to be made subject to the various tolling
provisions of the laws of the forum. This therefore forecloses the
application of our own rules on interruption of prescriptive periods.
Article 29, par. (2), was intended only to let local laws determine
whether an action had been commenced within the two (2)-year
period, and within our jurisdiction an action shall be deemed
commenced upon the filing of a complaint. Since it is indisputable that
respondent filed the present action beyond the two (2)-year time frame
his second cause of action must be barred. Nonetheless, it cannot be
doubted that respondent exerted efforts to immediately convey his loss
to petitioner, even employed the services of two (2) lawyers to follow
up his claims, and that the filing of the action itself was delayed
because of petitioner's evasion.
In this regard, Philippine Airlines, Inc. v. Court of Appeals 19 is
instructive. In this case of PAL, private respondent filed an action for
damages against petitioner airline for the breakage of the front glass of
the microwave oven which she shipped under PAL Air Waybill No. 0-
79-1013008-3. Petitioner averred that, the action having been filed
seven (7) months after her arrival at her port of destination, she failed
to comply with par. 12, subpar. (a) (1), of the Air Waybill which
expressly provided that the person entitled to delivery must make a
complaint to the carrier in writing in case of visible damage to the
goods, immediately after discovery of the damage and at the latest
within 14 days from receipt of the goods. Despite non-compliance
therewith the Court held that by private respondent's immediate
submission of a formal claim to petitioner, which however was not
immediately entertained as it was referred from one employee to
another, she was deemed to have substantially complied with the
requirement. The Court noted that with private respondent's own
zealous efforts in pursuing her claim it was clearly not her fault that the
letter of demand for damages could only be filed, after months of
exasperating follow-up of the claim, on 13 August 1990, and that if
there was any failure at all to file the formal claim within the
prescriptive period contemplated in the Air Waybill, this was largely
because of the carrier's own doing, the consequences of which could
not in all fairness be attributed to private respondent.
In the same vein must we rule upon the circumstances brought before
us. Verily, respondent filed his complaint more than two (2) years later,
beyond the period of limitation prescribed by the Warsaw Convention
for filing a claim for damages. However, it is obvious that respondent
was forestalled from immediately filing an action because petitioner
airline gave him the runaround, answering his letters but not giving in
to his demands. True, respondent should have already filed an action
at the first instance when his claims were denied by petitioner but the
same could only be due to his desire to make an out-of-court
settlement for which he cannot be faulted. Hence, despite the express
mandate of Art. 29 of the Warsaw Convention that an action for
damages should be filed within two (2) years from the arrival at the
place of destination, such rule shall not be applied in the instant case
because of the delaying tactics employed by petitioner airline itself.
Thus, private respondent's second cause of action cannot be
considered as time-barred under Art. 29 of the Warsaw Convention.
G.R. No. 149547 July 4, 2008
PHILIPPINE AIRLINES, INC., petitioner,
vs.
HON. ADRIANO SAVILLO, Presiding Judge of RTC Branch 30 ,
Iloilo City, and SIMPLICIO GRIÑO,respondents.
CHICO-NAZARIO, J.:
In the Petition at bar, private respondent‘s Complaint alleged that both
PAL and Singapore Airlines were guilty of gross negligence, which
resulted in his being subjected to "humiliation, embarrassment, mental
anguish, serious anxiety, fear and distress." The emotional harm
suffered by the private respondent as a result of having been
unreasonably and unjustly prevented from boarding the plane should
be distinguished from the actual damages which resulted from the
same incident. Under the Civil Code provisions on tort,22 such
emotional harm gives rise to compensation where gross negligence or
malice is proven.
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The instant case is comparable to the case of Lathigra v. British
Airways.23
In Lathigra, it was held that the airlines‘ negligent act of reconfirming
the passenger‘s reservation days before departure and failing to inform
the latter that the flight had already been discontinued is not among the
acts covered by the Warsaw Convention, since the alleged negligence
did not occur during the performance of the contract of carriage but,
rather, days before the scheduled flight.
In the case at hand, Singapore Airlines barred private respondent from
boarding the Singapore Airlines flight because PAL allegedly failed to
endorse the tickets of private respondent and his companions, despite
PAL‘s assurances to respondent that Singapore Airlines had already
confirmed their passage. While this fact still needs to be heard and
established by adequate proof before the RTC, an action based on
these allegations will not fall under the Warsaw Convention, since the
purported negligence on the part of PAL did not occur during the
performance of the contract of carriage but days before the scheduled
flight. Thus, the present action cannot be dismissed based on the
statute of limitations provided under Article 29 of the Warsaw
Convention.
Had the present case merely consisted of claims incidental to the
airlines‘ delay in transporting their passengers, the private
respondent‘s Complaint would have been time-barred under Article 29
of the Warsaw Convention. However, the present case involves a
special species of injury resulting from the failure of PAL and/or
Singapore Airlines to transport private respondent from Singapore to
Jakarta – the profound distress, fear, anxiety and humiliation that
private respondent experienced when, despite PAL‘s earlier assurance
that Singapore Airlines confirmed his passage, he was prevented from
boarding the plane and he faced the daunting possibility that he would
be stranded in Singapore Airport because the PAL office was already
closed.
These claims are covered by the Civil Code provisions on tort, and not
within the purview of the Warsaw Convention. Hence, the applicable
prescription period is that provided under Article 1146 of the Civil
Code:
Art. 1146. The following actions must be instituted within four years:
(1) Upon an injury to the rights of the plaintiff;
(2) Upon a quasi-delict.
Private respondent‘s Complaint was filed with the RTC on 15 August
1997, which was less than four years since PAL received his
extrajudicial demand on 25 January 1994. Thus, private respondent‘s
claims have not yet prescribed and PAL‘s Motion to Dismiss must be
denied.
Rule when Transportation Performed by Successive Carriers
under Art. 1.3
Each carrier who accepts pax, baggage or goods shall be:
 subject to the rules set out in the WC, and
 deemed to be one of the contracting parties to the contract
of transportation insofar as the contract deals with the part of
transportation which is performed under his supervision [Art.
30]
Against whom can Pax take Action:
General Rule – only against the carrier who performed the
transportation during which the accident or delay occurred,
Exception – against the first carrier when, by express agreement, it
has assumed liability for the whole journey
G.R. No. L-31150 July 22, 1975
KONINKLIJKE LUCHTVAART MAATSHAPPIJ N.V., otherwise
known as KLM ROYAL DUTCH AIRLINES,petitioner,
vs.
THE HONORABLE COURT OF APPEALS, CONSUELO T.
MENDOZA and RUFINO T. MENDOZA, respondents.
 CASTRO, J.:
The argument that the KLM should not be held accountable for the
tortious conduct of Aer Lingus because of the provision printed on the
respondents' tickets expressly limiting the KLM's liability for damages
only to occurrences on its own lines is unacceptable. As noted by the
Court of Appeals that condition was printed in letters so small that one
would have to use a magnifying glass to read the words. Under the
circumstances, it would be unfair and inequitable to charge the
respondents with automatic knowledge or notice of the said condition
so as to preclude any doubt that it was fairly and freely agreed upon by
the respondents when they accepted the passage tickets issued to
them by the KLM. As the airline which issued those tickets with the
knowledge that the respondents would be flown on the various legs of
their journey by different air carriers, the KLM was chargeable with the
duty and responsibility of specifically informing the respondents of
conditions prescribed in their tickets or, in the very least, to ascertain
that the respondents read them before they accepted their passage
tickets. A thorough search of the record, however, inexplicably fails to
show that any effort was exerted by the KLM officials or employees to
discharge in a proper manner this responsibility to the respondents.
Consequently, we hold that the respondents cannot be bound by the
provision in question by which KLM unilaterally assumed the role of a
mere ticket-issuing agent for other airlines and limited its liability only to
untoward occurrences on its own lines.
Moreover, as maintained by the respondents and the Court of Appeals,
the passage tickets of the respondents provide that the carriage to be
performed thereunder by several successive carriers "is to be regarded
as a single operation," which is diametrically incompatible with the
theory of the KLM that the respondents entered into a series of
independent contracts with the carriers which took them on the various
segments of their trip. This position of KLM we reject. The respondents
dealt exclusively with the KLM which issued them tickets for their entire
trip and which in effect guaranteed to them that they would have sure
space in Aer Lingus flight 861. The respondents, under that assurance
of the internationally prestigious KLM, naturally had the right to expect
that their tickets would be honored by Aer Lingus to which, in the legal
sense, the KLM had indorsed and in effect guaranteed the
performance of its principal engagement to carry out the respondents'
scheduled itinerary previously and mutually agreed upon between the
parties.
The breach of that guarantee was aggravated by the discourteous and
highly arbitrary conduct of an official of the Aer Lingus which the KLM
had engaged to transport the respondents on the Barcelona-Lourdes
segment of their itinerary. It is but just and in full accord with the policy
expressly embodied in our civil law which enjoins courts to be more
vigilant for the protection of a contracting party who occupies an
inferior position with respect to the other contracting party, that the
KLM should be held responsible for the abuse, injury and
embarrassment suffered by the respondents at the hands of a
supercilious boor of the Aer Lingus.
G.R. No. 83612 November 24, 1994
LUFTHANSA GERMAN AIRLINES, petitioner,
vs.
COURT OF APPEALS and TIRSO V. ANTIPORDA,
SR., respondents.
ROMERO, J.:
Lufthansa maintains that its liability to any passenger is limited to
occurrences in its own line, and, thus, in the case at bench, its liability
to Antiporda is limited to the extent that it had transported him from
Manila to Singapore and from Singapore to Bombay; that therefrom,
responsibility for the performance of the contract of carriage is
assumed by the succeeding carriers tasked to transport him for the
remaining leg of his trip because at that stage, its contract of carriage
with Antiporda ceases, with Lufthansa acting, no longer as the principal
in the contract of carriage, but merely as a ticket-issuing agent for the
other carriers.XXX
We, therefore, reject Lufthansa's theory that from the time another
carrier was engaged to transport Antiporda on another segment of his
trip, it merely acted as a ticket-issuing agent in behalf of said carrier. In
the very nature of their contract, Lufthansa is clearly the principal in the
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contract of carriage with Antiporda and remains to be so, regardless of
those instances when actual carriage was to be performed by various
carriers. The issuance of a confirmed Lufthansa ticket in favor of
Antiporda covering his entire five-leg trip abroad successive carriers
concretely attests to this. This also serves as proof that Lufthansa, in
effect guaranteed that the successive carriers, such as Air Kenya
would honor his ticket; assure him of a space therein and transport him
on a particular segment of his trip.
G.R. No. 152122 July 30, 2003
CHINA AIRLINES, petitioner,
vs.
DANIEL CHIOK, respondent.
PANGANIBAN, J.:
It is significant to note that the contract of air transportation was
between petitioner and respondent, with the former endorsing to PAL
the Hong Kong-to-Manila segment of the journey. Such contract of
carriage has always been treated in this jurisdiction as a single
operation. This jurisprudential rule is supported by the Warsaw
Convention,22 to which the Philippines is a party, and by the existing
practices of the International Air Transport Association (IATA). XXX
In American Airlines v. Court of Appeals,24 we have noted that under a
general pool partnership agreement, the ticket-issuing airline is the
principal in a contract of carriage, while the endorsee-airline is the
agent. XXX
In the instant case, following the jurisprudence cited above, PAL acted
as the carrying agent of CAL. In the same way that we ruled against
British Airways and Lufthansa in the aforementioned cases, we also
rule that CAL cannot evade liability to respondent, even though it may
have been only a ticket issuer for the Hong Kong-Manila sector.
Rule with Respect to Baggage or Goods
 The pax or consignor shall have a right to action against the
FIRST carrier
 The pax or consignee who is entitled to delivery shall have a
right of action against the LAST carrier
 Each may take action against the carrier WHO
PERFORMED the transportation during which the
destruction, loss, damage or delay took place
 The carriers shall be JOINTLY liable to the pax or to the
consignor or consignee
Is the Warsaw Convention Binding in the Philippines?
General Rule: YES, it has the force and effect of a law, being a treaty
commitment assumed by the Philippine Government
However – it does NOT operate as:
a) an EXCLUSIVE enumeration of the instances for
declaring a carrier liable for breach of contract of
carriage, or
b) an ABSOLUTE limit of the extent of that liability
The WC must NOT be construed as to PRECLUDE the operation of
the Civil Code and other pertinent laws
It does not regulate, much less exempt the carrier from liability for
damages for violating the rights of the passengers under the contract
of carriage, ESPECIALLY if willful misconduct on the part of then
carrier‘s employees is found or established.
FREEDOMS OF THE AIR
First Freedom of the Air - the right or privilege, in respect of
scheduled international air services, granted by one State to another
State or States to fly across its territory without landing (also known as
a First Freedom Right).
Second Freedom of the Air - the right or privilege, in respect of 2. Damages cannot be presumed – to be recoverable, they
scheduled international air services, granted by one State to another must be pleaded and proven in court; in no instance may
State or States to land in its territory for non-traffic purposes (also a judge award more than those so pleaded and proven
known as a Second Freedom Right). 3. Speculative damages cannot be awarded
4. The award thereof must be based on the evidence
Third Freedom of The Air - the right or privilege, in respect of presented, not on the personal knowledge of the court;
scheduled international air services, granted by one State to another and certainly not on flimsy, remote, speculative and non-
State to put down, in the territory of the first State, traffic coming from substantial proof
the home State of the carrier (also known as a Third Freedom Right).
In Breach of Contract of Carriage – If the Common Carrier is in:
Fourth Freedom of The Air - the right or privilege, in respect of
scheduled international air services, granted by one State to another 1. GOOD Faith – it shall be responsible for:
State to take on, in the territory of the first State, traffic destined for the
home State of the carrier (also known as a Fourth Freedom Right). a. The NATURAL and PROBABLE consequences of
the breach of the obligations; AND
Fifth Freedom of The Air - the right or privilege, in respect of
scheduled international air services, granted by one State to another b. Damages which the parties FORESAW or COULD
State to put down and to take on, in the territory of the first State, traffic HAVE FORESEEN
coming from or destined to a third State (also known as a Fifth
Freedom Right). 2. BAD Faith – it shall be responsible for ALL damages which
may be REASONABLE ATTRIBUTED to the non-
ICAO characterizes all "freedoms" beyond the Fifth as "so-called" performance of the obligation (relation of cause and effect is
because only the first five "freedoms" have been officially recognized enough) [Art. 2201]
as such by international treaty.
In Crimes and Quasi-Delicts:
Sixth Freedom of The Air - the right or privilege, in respect of
scheduled international air services, of transporting, via the home State 1. The common carrier shall be liable for ALL damages which
of the carrier, traffic moving between two other States (also known as are the natural and probable consequences of the act or
a Sixth Freedom Right). The so-called Sixth Freedom of the Air, unlike omission complained of
the first five freedoms, is not incorporated as such into any widely
recognized air service agreements such as the "Five Freedoms 2. It is not necessary that such damages have been foreseen
Agreement". or could have reasonably been foreseen by the common
carrier [Art. 2202]
Seventh Freedom of The Air - the right or privilege, in respect of
scheduled international air services, granted by one State to another Moral Damages
State, of transporting traffic between the territory of the granting State
and any third State with no requirement to include on such operation Moral Damages include:
any point in the territory of the recipient State, i.e the service need not
connect to or be an extension of any service to/from the home State of
1. physical suffering,
the carrier.
2. mental anguish,
3. fright,
Eighth Freedom of The Air - the right or privilege, in respect of
4. serious anxiety,
scheduled international air services, of transporting cabotage traffic
5. besmirched reputation,
between two points in the territory of the granting State on a service
6. wounded feelings,
which originates or terminates in the home country of the foreign
7. moral shock,
carrier or (in connection with the so-called Seventh Freedom of the Air)
8. social humiliation, and
outside the territory of the granting State (also known as a Eighth
9. similar injury
Freedom Right or "consecutive cabotage").
In Breach of Contract of Carriage:
Ninth Freedom of The Air - the right or privilege of transporting
cabotage traffic of the granting State on a service performed entirely
within the territory of the granting State (also known as a Ninth 1. General Rule – Moral Damages are NOT recoverable in
Freedom Right or "stand alone"cabotage). damage actions predicated on a breach of contract of
carriage
Source: Manual on the Regulation of International Air Transport (Doc
9626, Part 4) 2. Exceptions – moral damages may be awarded when:

a. The mishaps results in the DEATH of the pax

DAMAGES b. It is proven that the carrier is guilty of FRAUD or
BAD FAITH, even if death does not result [Art.
2220]
Kinds of Damages [Art. 2197 Civil Code]
Bad Faith
1. Actual or compensatory
2. Moral Breach of a known duty through some motive of interest or ill will
3. Nominal
4. Temperate or Moderate When Moral Damages may be Recovered [ART. 2219]
5. Liquidated
6. Exemplary 1. In criminal offenses resulting in physical injuries
2. Quasi-delicts causing physical injuries
Actual Damages; Features: 3. xxx

1. They pertain to such injuries or losses that are actually G.R. No. 124110 April 20, 2001
sustained and susceptible of measurement

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 UNITED AIRLINES, INC., Petitioner Exemplary or corrective damages are imposed, by way of example or
vs. correction for the public good, in addition to the moral, temperate,
COURT OF APPEALS, ANICETO FONTANILLA, in his personal liquidated or compensatory damages [Art. 2229]
capacity and in behalf of his minor sonMYCHAL ANDREW
FONTANILLA, Respondents. Note:
KAPUNAN, J.:
As to the award of moral and exemplary damages, we find error in the 1. Exemplary Damages can ONLY be granted in ADDITION to:
award of such by the Court of Appeals. For the plaintiff to be entitled to a. moral damages
an award of moral damages arising from a breach of contract of b. temperate damages
carriage, the carrier must have acted with fraud or bad faith. The c. liquidated damages, or
appellate court predicated its award on our pronouncement in the case d. actual or compensatory damages
of Zalanea vs. Court of Appeals, supra, where we stated:
2. If exemplary damages are granted, nominal damages
Existing jurisprudence explicitly states that overbooking amounts to CANNOT be awarded
bad faith, entitling passengers concerned to an award of moral
damages. In Alitalia Airways vs. Court of Appeals, where passengers
with confirmed booking were refused carriage on the last minute, this When Exemplary Damages may be Recovered:
Court held that when an airline issues a ticket to a passenger
confirmed on a particular flight, on a certain date, a contract of carriage 1. In Criminal Offenses – if the crime was committed with one
arises, and the passenger has every right to except that he would fly or more aggravating circumstances [Art. 2230]
on that flight and on that date. If he does not, then the carrier opens
itself to a suit for breach of contract of carriage. Where an airline had 2. In Quasi-delicts – if the common carrier acted with gross
deliberately overbooked, it took the risk of having to deprive some negligence [Art. 2231]
passengers of their seats in case all of them would show up for check
in. For the indignity and inconvenience of being refused a confirmed 3. In Contracts & Quasi-contracts – if the common carrier
seat on the last minute, said passenger is entitled to moral damages. acted in a wanton, fraudulent, reckless, oppressive, or
(Emphasis supplied). malevolent manner [Art. 2232]

Nominal Damages G.R. No. 116617 November 16, 1998

METRO MANILA TRANSIT CORPORATION (MMTC), PEDRO A.
Nominal Damages are Adjudicated: MUSA, CONRADO TOLENTINO, FELICIANA CELEBRADO and
THE GOVERNMENT SERVICE INSURANCE SYSTEM, petitioners,
1. in order that a right of the pax, shipper, or consignee, which vs.
has been violated or invaded by the common carrier, may be COURT OF APPEALS, SPS. RODOLFO V. ROSALES and LILY R.
vindicated or recognized, and ROSALES, respondents.

2. not for the purpose of indemnifying the pax, shipper or Indemnity for Death. Art. 2206 provides for the payment of indemnity
consignee for any loss suffered by him [Art. 2221] for death caused by a crime or quasi-delict. Initially fixed in said article
of the Civil Code at P3,000.00, the amount of the indemnity has
Note: through the years been gradually increased based on the value of the
peso. At present, it is fixed at P50,000.00. 26 To conform to this new
1. Nominal Damages stand alone ruling, the Court of Appeals correctly increased the indemnity it had
originally ordered the spouses Rosales to be paid from P30,000.00 to
a. There can NO longer be an award for nominal P50,000.00 in its resolution, dated September 12, 1996. XXX
damages IF there already has been an award for
actual, moral, temperate, liquidated and exemplary Actual Damages. Art. 2199 provides that "except as provided by law or
damages by stipulation, one is entitled to an adequate compensation only for
such pecuniary loss suffered by him as he has duly proved." The
b. An award of nominal damages precludes the spouses Rosales are claiming actual damages in the amount of
award of actual, moral, temperate, liquidated and P239,245.40. However, during the trial, they submitted receipts
exemplary damages showing that expenses for the funeral, wake, and interment of Liza
Rosalie amounted only to P60,226.65 XXX The spouses Rosales claim
2. When the act of the common carrier did not amount to fraud, moral damages in the amount of P5,000,000.00. In People v.
malice or bad faith, moral damages cannot be awarded. Teehankee, Jr., 32 this Court awarded P1 million as moral damages to
However, if there was an invasion of the plaintiff‘s right, the heirs of a seventeen-year-old girl who was murdered. This amount
nominal damages may be awarded. seems reasonable to us as moral damages for the loss of a minor
child, whether he or she was a victim of a crime or a quasi-delict.
Temperate or Moderate Damages Hence, we hold that the MMTC and Musa are solidarily liable to the
spouses Rosales in the amount of P1,000,000.00 as moral damages
 which are more than nominal but less than compensatory for the death of Liza Rosalie.
damages,
 may be recovered when the court finds that some pecuniary Moral Damages. Under Art. 2206, the "spouse, legitimate and
loss has been suffered illegitimate descendants and ascendants of the deceased may demand
 but its amount can not, from the nature of the case, be moral damages for mental anguish by reason of the death of the
provided with certainty [Art. 2224] deceased." XXX In the instant case, the spouses Rosales presented
evidence of the intense moral suffering they had gone through as a
Liquidated Damages result of the loss of Liza Rosalie who was their youngest child.

Liquidated damages are those agreed upon by the parties to a

Exemplary Damages. Art. 2231 provides that exemplary damages may
contract, to be paid in case of breach thereof [Art. 2226]
be recovered in cases involving quasi-delicts if "the defendant acted
with gross negligence." This circumstance obtains in the instant case.
Exemplary Damages
The records indicate that at the time of the mishap, there was a
pending criminal case against Musa for reckless imprudence resulting

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in slight physical injuries with another branch of the Regional Trial
Court, Quezon City. 33 The evidence also shows that he failed to stop
his vehicle at once even after eye witnesses shouted at him. The
spouses Rosales claim exemplary damages in the amount of
P5,000,000.00. Under the circumstances, we deem it reasonable to
award the spouses Rosales exemplary damages in the amount of five
hundred thousand pesos (P500,000.00).
G.R. No. 119706 March 14, 1996
PHILIPPINE AIRLINES, INC., petitioner,
vs.
COURT OF APPEALS and GILDA C. MEJIA, respondents.
REGALADO, J.:p
In the case at bar, it will be noted that private respondent signified an
intention to declare the value of the microwave oven prior to shipment,
but was explicitly advised against doing so by PAL's personnel in San
Francisco, U.S.A. XXX
It cannot be denied that the attention of PAL through its personnel in
San Francisco was sufficiently called to the fact that private
respondent's cargo was highly susceptible to breakage as would
necessitate the declaration of its actual value. Petitioner had all the
opportunity to check the condition and manner of packing prior to
acceptance for shipment, 22 as well as during the preparation of the air
waybill by PAL's Acceptance Personnel based on information supplied
by the shipper, 23 and to reject the cargo if the contents or the packing
did not meet the company's required specifications. Certainly, PAL
could not have been otherwise prevailed upon to merely accept the
cargo. XXX
There is no absolute obligation on the part of a carrier to accept a
cargo. Where a common carrier accepts a cargo for shipment for
valuable consideration, it takes the risk of delivering it in good condition
as when it was loaded. And if the fact of improper packing is known to
the carrier or its personnel, or apparent upon observation but it accepts
the goods notwithstanding such condition, it is not relieved of liability
for loss or injury resulting therefrom.
The acceptance in due course by PAL of private respondent's cargo as
packed and its advice against the need for declaration of its actual
value operated as an assurance to private respondent that in fact there
was no need for such a declaration. Petitioner can hardly be faulted for
relying on the representations of PAL's own personnel.
In other words, private respondent Mejia could and would have
complied with the conditions stated in the air waybill, i.e., declaration of
a higher value and payment of supplemental transportation charges,
entitling her to recovery of damages beyond the stipulated limit of US
$20 per kilogram of cargo in the event of loss or damage, had she not
been effectively prevented from doing so upon the advice of PAL's
personnel for reasons best known to themselves. XXX
Considering the abovementioned incidents and private respondent
Mejia's own zealous efforts in following up the claim, 34 it was clearly
not her fault that the letter of demand for damages could only be filed,
after months of exasperating follow-up of the claim, on August 13,
1990. 35 If there was any failure at all to file the formal claim within the
prescriptive period contemplated in the air waybill, this was largely
because of PAL's own doing, the consequences of which cannot, in all
fairness, be attributed to private respondent.
Even if the claim for damages was conditioned on the timely filing of a
formal claim, under Article 1186 of the Civil Code that condition was
deemed fulfilled, considering that the collective action of PAL's
personnel in tossing around the claim and leaving it unresolved for an
indefinite period of time was tantamount to "voluntarily preventing its
fulfillment." On grounds of equity, the filing of the baggage freight
claim, which sufficiently informed PAL of the damage sustained by
private respondent's cargo, constituted substantial compliance with the
requirement in the contract for the filing of a formal claim.
All told, therefore, respondent appellate court did not err in ruling that
the provision on limited liability is not applicable in this case. We,
however, note in passing that while the facts and circumstances of this
case do not call for the direct application of the provisions of the
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Warsaw Convention, it should be stressed that, indeed, recognition of
the Warsaw Convention does not preclude the operation of the Civil
Code and other pertinent laws in the determination of the extent of
liability of the common carrier.
XXX
Petitioner ascribes ultimate error in the award of moral and exemplary
damages and attorney's fees in favor of private respondent in that
other than the statement of the trial court that petitioner acted in bad
faith in denying private respondent's claim, which was affirmed by the
Court of Appeals, there is no evidence on record that the same is true.
XXX
Furthermore, there was glaringly no attempt whatsoever on the part of
petitioner to explain the cause of the damage to the oven. The
unexplained cause of damage to private respondent's cargo
constitutes gross carelessness or negligence which by itself justifies
the present award of damages. 45 The equally unexplained and
inordinate delay in acting on the claim upon referral thereof to the
claims officer, Atty. Paco, and the noncommittal responses to private
respondent's entreaties for settlement of her claim for damages belies
petitioner's pretension that there was no bad faith on its part. This
unprofessional indifference of PAL's personnel despite full and actual
knowledge of the damage to private respondent's cargo, just to be
exculpated from liability on pure technicality and bureaucratic
subterfuge, smacks of willful misconduct and insensitivity to a
passenger's plight tantamount to bad faith 46 and renders
unquestionable petitioner's liability for damages. In sum, there is no
reason to disturb the findings of the trial court in this case, especially
with its full affirmance by respondent Court of Appeals.
G.R. No. 150843 March 14, 2003
CATHAY PACIFIC AIRWAYS, LTD., petitioner,
vs.
SPOUSES DANIEL VAZQUEZ and MARIA LUISA MADRIGAL
VAZQUEZ, respondents.
DAVIDE, JR., C.J.:
In this case, we have ruled that the breach of contract of carriage,
which consisted in the involuntary upgrading of the Vazquezes‘ seat
accommodation, was not attended by fraud or bad faith. The Court of
Appeals‘ award of moral damages has, therefore, no leg to stand on.
The deletion of the award for exemplary damages by the Court of
Appeals is correct. It is a requisite in the grant of exemplary damages
that the act of the offender must be accompanied by bad faith or done
in wanton, fraudulent or malevolent manner.15 Such requisite is
absent in this case. Moreover, to be entitled thereto the claimant must
first establish his right to moral, temperate, or compensatory
damages.16 Since the Vazquezes are not entitled to any of these
damages, the award for exemplary damages has no legal basis. And
where the awards for moral and exemplary damages are eliminated,
so must the award for attorney‘s fees.
The most that can be adjudged in favor of the Vazquezes for Cathay‘s
breach of contract is an award for nominal damages under Article 2221
of the Civil Code
G.R. No. 99301 March 13, 1997
VICTOR KIERULF, LUCILA H. KIERULF and PORFIRIO
LEGASPI, petitioners,
vs.
THE COURT OF APPEALS and PANTRANCO NORTH EXPRESS,
INCORPORATED, respondents.
PANGANIBAN, J.:
Second Issue: Moral Damages
The spouses aver that the disfigurement of Lucila's physical
appearance cannot but affect their marital right to "consortium" which
would have remained normal were it not for the accident. Thus, the
moral damages awarded in favor of Lucila should be increased to
P1,000,000.00, not only for Lucila but also for her husband Victor who
also suffered "psychologically." XXX
Victor's claim for deprivation of his right to consortium, although argued
before Respondent Court, is not supported by the evidence on record.
His wife might have been badly disfigured, but he had not testified that,
in consequence thereof, his right to marital consortium was affected.
Clearly, Victor (and for that matter, Lucila) had failed to make out a
case for loss of consortium, unlike the Rodriguez spouse. Again, we
emphasize that this claim is factual in origin and must find basis not
only in the evidence presented but also in the findings of the
Respondent Court. For lack of factual basis, such claim cannot be
ruled upon by this Court at this time.
Fourth Issue: Exemplary Damages
The claim of Lucila has been favorably considered in view of the
finding of gross negligence by Respondent Court on the part of
Pantranco. This is made clear by Respondent Court in granting Lucila's
claim of exemplary damages:
(P)ublic utility operators like the defendant, have made a mockery of
our laws, rules and regulations governing operations of motor vehicles
and have ignored either deliberately or through negligent disregard of
their duties to exercise extraordinary degree of diligence for the safety
of the travelling public and their passengers. . . . .
To give teeth to this warning, the exemplary damages awarded to
Petitioner Lucila is increased to P200,000.00. The fact of gross
negligence duly proven, we believe that Legaspi, being also a victim of
gross negligence, should also receive exemplary damages. Under the
facts proven, the Court awards him P25,000 as exemplary damages.
G.R. No. 159636 November 25, 2004
VICTORY LINER, INC., petitioner,
vs.
ROSALITO GAMMAD, APRIL ROSSAN P. GAMMAD, ROI ROZANO
P. GAMMAD and DIANA FRANCES P. GAMMAD, respondents.
YNARES-SANTIAGO, J.:
Article 1764 in relation to Article 2206 of the Civil Code, holds the
common carrier in breach of its contract of carriage that results in the
death of a passenger liable to pay the following: (1) indemnity for
death, (2) indemnity for loss of earning capacity, and (3) moral
damages.
In the present case, respondent heirs of the deceased are entitled to
indemnity for the death of Marie Grace which under current
jurisprudence is fixed at P50,000.00.
The award of compensatory damages for the loss of the deceased‘s
earning capacity should be deleted for lack of basis. XXX
However, the fact of loss having been established, temperate damages
in the amount of P500,000.00 should be awarded to respondents.
Under Article 2224 of the Civil Code, temperate or moderate damages,
which are more than nominal but less than compensatory damages,
may be recovered when the court finds that some pecuniary loss has
been suffered but its amount can not, from the nature of the case, be
proved with certainty.
Anent the award of moral damages, the same cannot be lumped with
exemplary damages because they are based on different jural
foundations. These damages are different in nature and require
separate determination. In culpa contractual or breach of contract,
moral damages may be recovered when the defendant acted in bad
faith or was guilty of gross negligence (amounting to bad faith) or in
wanton disregard of contractual obligations and, as in this case, when
the act of breach of contract itself constitutes the tort that results in
physical injuries. By special rule in Article 1764 in relation to Article
2206 of the Civil Code, moral damages may also be awarded in case
the death of a passenger results from a breach of carriage. On the
other hand, exemplary damages, which are awarded by way of
example or correction for the public good may be recovered in
contractual obligations if the defendant acted in wanton, fraudulent,
reckless, oppressive, or malevolent manner.
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Respondents in the instant case should be awarded moral damages to
compensate for the grief caused by the death of the deceased
resulting from the petitioner‘s breach of contract of carriage.
Furthermore, the petitioner failed to prove that it exercised the
extraordinary diligence required for common carriers, it is presumed to
have acted recklessly. Thus, the award of exemplary damages is
proper. Under the circumstances, we find it reasonable to award
respondents the amount of P100,000.00 as moral damages and
P100,000.00 as exemplary damages. These amounts are not
excessive.
G.R. No. 157009 March 17, 2010
SULPICIO LINES, INC., Petitioner,
vs.
DOMINGO E. CURSO, LUCIA E. CURSO, MELECIO E. CURSO,
SEGUNDO E. CURSO, VIRGILIO E. CURSO, DIOSDADA E.
CURSO, and CECILIA E. CURSO, Respondents.
BERSAMIN, J.:
The petitioner has correctly relied on the holding in Receiver for North
Negros Sugar Company, Inc. v. Ybañez, to the effect that in case of
death caused by quasi-delict, the brother of the deceased was not
entitled to the award of moral damages based on Article 2206 of the
Civil Code. XXX
To be entitled to moral damages, the respondents must have a right
based upon law. It is true that under Article 1003 of the Civil Code they
succeeded to the entire estate of the late Dr. Curso in the absence of
the latter‘s descendants, ascendants, illegitimate children, and
surviving spouse. However, they were not included among the persons
entitled to recover moral damages, as enumerated in Article 2219 of
the Civil Code XXX
Article 2219 circumscribes the instances in which moral damages may
be awarded. The provision does not include succession in the
collateral line as a source of the right to recover moral damages. The
usage of the phrase analogous cases in the provision means simply
that the situation must be held similar to those expressly enumerated
in the law in question following the ejusdem generis rule. Hence,
Article 1003 of the Civil Code is not concerned with recovery of moral
damages.
In fine, moral damages may be recovered in an action upon breach of
contract of carriage only when: (a) where death of a passenger results,
or (b) it is proved that the carrier was guilty of fraud and bad faith, even
if death does not result. Article 2206 of the Civil Code entitles the
descendants, ascendants, illegitimate children, and surviving spouse of
the deceased passenger to demand moral damages for mental
anguish by reason of the death of the deceased.
PUBLIC SERVICE ACT
CA 146, AS AMENDED
Purposes:
1. To secure adequate service for the public, for the least
possible cost
2. To protect and conserve investments which have already
been made for the purpose
SECTION 13 PUBLIC SERVICE
(b) The term "public service" includes every person that now or
hereafter may own, operate, manage, or control in the Philippines, for
hire or compensation, with general or limited clientele, whether
permanent, occasional or accidental, and done for general business
purposes, any common carrier, railroad, street railway, traction railway,
sub-way motor vehicle, either for freight or passenger, or both with or
without fixed route and whether may be its classification, freight or
carrier service of any class, express service, steamboat or steamship
line, pontines, ferries, and water craft, engaged in the transportation of
passengers or freight or both, shipyard, marine railways, marine repair
shop, [warehouse] wharf or dock, ice plant, ice-refrigeration plant,
canal, irrigation system, gas, electric light, heat and power water
supply and power, petroleum, sewerage system, wire or wireless
communications system, wire or wireless broadcasting stations and
other similar public services: Provided, however, That a person
engaged in agriculture, not otherwise a public service, who owns a
motor vehicle and uses it personally and/or enters into a special
contract whereby said motor vehicle is offered for hire or compensation
to a third party or third parties engaged in agriculture, not itself or
themselves a public service, for operation by the latter for a limited
time and for a specific purpose directly connected with the cultivation
of his or their farm, the transportation, processing, and marketing of
agricultural products of such third party or third parties shall not be
considered as operating a public service for the purposes of this Act.
What do you mean by public? This means individuals in general
without restriction or selection to the extent that the capacity of the
utility may admit of such service or use
Public Utility - business or service which is engaged in regulating,
supplying the public with some commodity or service of public
consequence, such as transportation
Principal determinative characteristic of a public utility – service or
readiness to serve an indefinite public which has the right to demand
and receive its services or commodities
G.R. No. 115381 December 23, 1994
KILUSANG MAYO UNO LABOR CENTER, petitioner,
vs.
HON. JESUS B. GARCIA, JR., the LAND TRANSPORTATION
FRANCHISING AND REGULATORY BOARD, and the PROVINCIAL
BUS OPERATORS ASSOCIATION OF THE
PHILIPPINES, respondents.
KAPUNAN, J.:
Public utilities are privately owned and operated businesses whose
service are essential to the general public. They are enterprises which
specially cater to the needs of the public and conduce to their comfort
and convenience. As such, public utility services are impressed with
public interest and concern. The same is true with respect to the
business of common carrier which holds such a peculiar relation to the
public interest that there is superinduced upon it the right of public
regulation when private properties are affected with public interest,
hence, they cease to be juris privati only. When, therefore, one
devotes his property to a use in which the public has an interest, he, in
effect grants to the public an interest in that use, and must submit to
the control by the public for the common good, to the extent of the
interest he has thus created.
 The fact that the service is limited to a particular district or
town does not prevent the business from being a public
utility
 The number of people actually served does not determine
whether a person or company is a public utility
 Such person or company which holds himself out to serve all
who which to avail themselves of the service may be apublic
utility even though only one or two people actually receive
the service
Regulation of Public Utilities
Basis: Police Power; The legislature may interfere with the
management of public utilities whenever public interest demands
What is the extent of police power?
1. Regulation of rates and charges
2. Prevent discrimination upon the part of the public utility
against those who employ it
3. To make orders governing the conduct of the public utility
Entities that are exempt from the provisions of Public Service Act
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Section 14. The following are exempted from the provisions of the
preceding section:
(a) Warehouses;
(b) Vehicles drawn by animals and bancas moved by oar or sail, and
tugboats and lighters;
(c) Airships within the Philippines except as regards the fixing of their
maximum rates on freight and passengers;
(d) Radio companies except with respect to the fixing of rates;
(e) Public services owned or operated by any instrumentality of the
National Government or by any government-owned or controlled
corporation, except with respect to the fixing of rates. (As amended by
Com. Act 454, RA No. 2031, and RA No. 2677 )
Requisite for operation of public utility
Section 15. With the exception of those enumerated in the preceding
section, no public service shall operate in the Philippines without
possessing a valid and subsisting certificate from the Public Service
Commission known as "certificate of public convenience," or
"certificate of public convenience and necessity," as the case may be,
to the effect that the operation of said service and the authorization to
do business will promote the public interests in a proper and suitable
manner.
The Commission may prescribe as a condition for the issuance of the
certificate provided in the preceding paragraph that the service can be
acquired by the Republic of the Philippines or any instrumentality
thereof upon payment of the cost price of its useful equipment, less
reasonable depreciation; and likewise, that the certificate shall be valid
only for a definite period of time; and that the violation of any of these
conditions shall produce the immediate cancellation of the certificate
without the necessity of any express action on the part of the
Commission.
In estimating the depreciation, the effect of the use of the equipment,
its actual condition, the age of the model, or other circumstances
affecting its value in the market shall be taken into consideration.
The foregoing is likewise applicable to any extension or amendment of
certificates actually in force and to those which may hereafter be
issued, to permit to modify itineraries and time schedules of public
services, and to authorizations to renew and increase equipment and
properties.
Entities exempt from obtaining a CPC:
1. Public Service owned or operated by Government or
GOCCs
2. Grantees of legislative franchise when expressly exempted
from obtaining a CPC
3. Those expressly exempted from the jurisdiction of the
regulating bodies
Distinction
CPC CPCN
Issued when it is found that the Issued upon approval of any
operation of the proposed public franchise or privilege granted by
service will promote the public any political subdivision or the RP
interest in a proper and suitable when in the judgment of the
manner, for which a municipal or regulatory body, such franchise or
legislative franchise is not privilege will properly conserve
necessary the public interest

Requisites for the Grant of a CPC or CPCN
1. Applicant – must be:
a. citizen of the RP, or
b. corporation or association organized under the laws of
the RP at least 60% of its capital is owned by such
citizens;
2. Applicant must be financially capable of undertaking the proposed
service and meeting the responsibilities incident to its operation;
3. Applicant must prove that the operation of the public service
proposed and the authorization to do business will promote the public
interest in a proper and suitable manner
What is the primordial consideration in granting franchises or
CPC’s? PUBLIC INTEREST
Rules in Issuing CPC
Prior Operator Rule
Before permitting a new operator to invade the territory of another
already established with a CPC, the prior operator must first be given
the opportunity to extend its service in order to meet the public
needs in the matter of transportation
Prior Applicant Rule
Where there are various applicants for a public utility over the same
territory, ALL CONDITIONS BEING EQUAL, priority in filing of the
application for a CPC becomes an important factor in granting or
refusal of the CPC
Protection of Investment Rule
One of the purposes of the Public Service Law is to protect and
conserve investments which have already been made for that purpose
by public service operators
When ―Prior Operator‖ Rule NOT Applicable:
1. Where public interest would better be served by the new
operator [Guico v. Estate of Buan, Aug 30, 1957]
2. Where the prior operator has failed to make an offer to meet
the increase in traffic [Manila Yellow Taxicab v. Castelo,
May 30, 1960]
3. Where the CPC granted to the new operator is a maiden
CPC, which does not overlap with the entire route of the old
operator but only a short portion thereof as a convergence
point [Mandbusco v. Francisco, 32 SCRA 405]
Prior Operator Rule (2003)
Bayan Bus Lines had been operating satisfactorily a busservice over
the route Manila to Tarlac and vice versa viathe McArthur Highway.
With the upgrading of the newNorth Expressway, Bayan Bus Lines
service became seemingly inadequate despite its efforts of improving
thesame. Pasok Transportation, Inc., now applies for theissuance to it
by the Land Transportation Franchising andRegulatory Board of a
certificate of public convenience forthe same Manila-Tarlac-Manila
route. Could Bayan BusLines, Inc., invoke the ―prior operator‖ rules
against PasokTransportation, Inc.? Why? (6%)
SUGGESTED ANSWER:
(per Dondee) No, Bayan Bus Lines, Inc., cannot invokethe ―prior
operator‖ rules against Pasok Transportation,Inc. because such
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―Prior or Old Operator Rule‖ under thePublic Service Act only applies
as a policy of the law of thePublic Service Commission to issue a
certificate of publicconvenience to a second operator when prior
operator isrendering sufficient, adequate and satisfactory service, and
who in all things and respects is complying with the ruleand regulation
of the Commission. In the facts of the caseat bar, Bayan Bus Lines
service became seeminglyinadequate despite its efforts of improving
the same.Hence, in the interest of providing efficient publictransport
services, the use of the 'prior operator' and the'priority of filing' rules
shall is untenable n this case.
When ―Protection of Investment‖ Rule NOT Applicable:
If the application of the rule would be conducive to monopoly of
service, and contrary to the principle that promotes healthy competition
[Villa Rey v. Pangasinan, 5 SCRA 234]
Grounds for Suspension or Revocation of CPC:
1. Sec. 16(m) – The facts and circumstances on the strength
on which CPC was issued have been misrepresented or
materially changed
The Commission shall have power, upon proper notice and hearing in
accordance with the rules and provisions of this Act, subject to the
limitations and exceptions mentioned and saving provisions to the
contrary :
(m) To amend, modify or revoke at any time certificate issued under
the provisions of this Act, whenever the facts and circumstances on the
strength of which said certificate was issued have been
misrepresented or materially changed.
2. Sec. 16(n) – The holder thereof has violated or willfully and
contumaciously refused to comply with any order, rule, or
regulation of the regulatory bodies or any provision of the
Public Service Act
(n) To suspend or revoke any certificate issued under the provisions of
this Act whenever the holder thereof has violated or willfully and
contumaciously refused to comply with any order rule or regulation of
the Commission or any provision of this Act: Provided, That the
Commission, for good cause, may prior to the hearing suspend for a
period not to exceed thirty days any certificate or the exercise of any
right or authority issued or granted under this Act by order of the
Commission, whenever such step shall in the judgment of the
Commission be necessary to avoid serious and irreparable damage or
inconvenience to the public or to private interests.
3. Art. 1765, Civil Code – The common carrier repeatedly fails
to comply with his duty to observe extraordinary diligence as
prescribed by law
Due Process in Revocation or Cancellation of CPC:
1. Notice and Hearing
2. Formal Charge – not necessary for as long as the holder of
CPC is given his day in court [CIR v. Buan, Jul 31, 1958]
Sec. 16[c] – Regulations of Rates – PSC has the Power:
To fix and determine individual or joint rates, tolls, charges,
classifications, or schedules thereof, as well as commutation, mileage,
kilometrage, and other special rates which shall be imposed observed
and followed thereafter by any public service.
(c) To fix and determine individual or joint rates, tolls, charges,
classifications, or schedules thereof, as well as commutation, mileage,
kilometrage, and other special rates which shall be imposed observed
and followed thereafter by any public service: Provided, That the
Commission may, in its discretion, approve rates proposed by public
services provisionally and without necessity of any hearing; but it shall
call a hearing thereon within thirty days, thereafter, upon publication
and notice to the concerns operating in the territory affected: Provided,
further, That in case the public service equipment of an operator is
used principally or secondarily for the promotion of a private business,
the net profits of said private business shall be considered in relation
with the public service of such operator for the purpose of fixing the
rates.
Note:
1. The power to regulate rates does not give the State the right
to prescribe rates which are so low as to deprive the public
utility of a reasonable return on investment. [RP v. Meralco,
Nov 15, 2002]
What requirements must be met before a certificate ofpublic
convenience may be granted under the PublicService Act?
SUGGESTED ANSWER:
The following are the requirements for the granting of acertificate of
public convenience, to wit:
a) The applicantmust be a citizen of the Philippines, or a corporation,
co-partnership or association organizedunder the laws of the
Philippines and at least 60% ofthe stock of paid-up capital of which
must belong tocitizens of the Philippines. (Sec 16a, CA 146, as
amended)

2. The only standard which the legislature is required to
prescribe for the guidance of the administrative authority is
that the rate be reasonable and just. [RP v. Meralco, Nov
15, 2002]
3. The power to fix the rates of public utilities is a power that
has been delegated to the regulatory administrative
agencies. As such it cannot be further delegated by the said
administrative agencies. [KMU v. Garcia, Dec 23, 1994]
4. Discrimination in the charging of rates is NOT allowed [US v.
Quinajon, Jul 30, 1915]
b) The applicant must prove public necessity.
c) The applicant must prove that the operation ofthe public service
proposed and the authorization to dobusiness will promote the public
interest in a proper andsuitable manner. (Sec 16a CA 146 as
amended)
d) The applicant must be financially capable ofundertaking the
proposed service and meeting theresponsibilities incident to its
operation.
Revocation of Certificate (1993)

1) Robert is a holder of a certificate of public convenienceto operate a

Certificate of public Convenience (1998)
taxicab service in Manila and suburbs. Oneevening, one of his taxicab
units was boarded by threerobbers as they escaped after staging a
The Batong Bakal Corporation filed with the Board ofEnergy an
hold-up. Because ofsaid incident, the LTFRB revoked the certificate of
application for a Certificate of PublicConvenience for the purpose of
publicconvenience of Robert on the ground that said operatorfailed to
supplying electric powerand lights to the factory and its employees
render safe, proper and adequate service asrequired under Sec 19a of
living within thecompound. The application was opposed by the
the Public Service Act.
BulacanElectric Corporation contending that the Batong
BakalCorporation has not secured a franchise to operate andmaintain
a) Wasthe revocation of the certificate of public convenience of
an electric plant. Is the opposition‗s contentioncorrect? (5%)
Robert justified? Explain.
SUGGESTED ANSWER:
b) When can the Commission(Board) exercise its power to suspend or
revoke certificateof public convenience?
No. A certificate of public convenience may be granted toBatong Bakal
Corporation, though not possessing a legislative franchise, if it meets
SUGGESTED ANSWER:
all the other requirements.There is nothing in the law nor the
Constitution, whichindicates that a legislative franchise is necessary or
1a) No. A single hold-up incident which does not linkRobert‗s taxicab
requiredfor an entity to operate as supplier of electric power and
cannot be construed that he rendered aservice that is unsafe,
light to its factory and its employees living within thecompound.
inadequate and improper (Manzanalv Ausejo 164 s 36)
Certificate of Public Convenience; inseparability of
1b) Under Sec 19a of the Public Service Act, theCommission (Board)
certificate and vessel (1992)
can suspend or revoke a certificate ofpublic convenience when the
operator fails to provide aservice that is safe, proper or adequate, and
Antonio was granted a Certificate of Public Convenience(CPC) in 1986
refuses torender any service which can be reasonably demanded and
to operate a ferry between Mindoro andBatangas using the motor
furnished.
vessel ―MV Lotus.‖ He stoppedoperations in 1988 due to
unserviceability of the vessel. In1989, Basilio was granted a CPC for
Revocation of Certificate (1993)
the same route. After afew months, he discovered that Carlos was
operating onhis route under Antonio‗s CPC. Because Basilio filed a
Pepay, a holder of a certificate of public convenience,failed to register
complaint for illegal operations with the Maritime IndustryAuthority,
to the complete number of units requiredby her certificate. However,
Antonio and Carlos jointly filed an applicationfor sale and transfer of
she tried to justify such failureby the accidents that allegedly befell her,
Antonio‗s CPC and substitution ofthe vessel ―MV Lotus‖ with another
claiming that shewas so shocked and burdened by the successive
owned by CarlosShould Antonio‗s and Carlos‗ joint application be
accidentsand misfortunes that she did not know what she wasdoing,
approved? Giver your reasons.
she was confused and thrown off tangentmomentarily, although she
always had the money andfinancial ability to buy new trucks and repair
SUGGESTED ANSWER:
the destroyedone. Are the reasons given by Pepay sufficient grounds
toexcuse her from completing units? Explain.
The joint application of Antonio and Carlos for the saleand transfer of
Antonio‗s CPC and substitution of thevessel MV Lotus with another
SUGGESTED ANSWER:
vessel owned by thetransferee should not be approved. The certificate
ofpublic convenience and MV Lotus are inseparable.
No. The reasons given by Pepay are not sufficient groundsto excuse
Theunserviceability of the vessel covered by the certificate hadlikewise
her from completing her units. The same couldbe undertaken by her
rendered ineffective the certificate itself, and theholder thereof may not
children or by other authorizedrepresentatives (Sec 16n Pub Serv Act;
legally transfer the same toanother. (Cohon v CA 188 s 719).
Halili v Herras 10 s769)
Certificate of Public Convenience; Requirements (1995)

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Domestic Shipping Rates Acts Which are UNLAWFUL Without Approval of the Commission
[Sec. 20]
1. EO 213 [Nov 28, 1994] – instituted the deregulation of
domestic shipping rates  Sec. 20[a] – To increase its rates
 Sec. 20[b] – To operate new units [Ammen Transportation
2. MC issued by MARINA on Dec 16, 1999 – further v. Francisco, Nov 29, 1957]
implemented deregulation  Sec. 20[g] – Sell, mortgage or lease its CPC, property,
franchise or rights [Cogeo-Cubao v. CA 207 SCRA 346]
3. Sec. 8 of RA 9295 passed on May 2004 – mandates
deregulation Requirement to Entitle a Common Carrier to Increase his Unit

FOB [Free On Board] or FAS [Free Alongside Ship] 1. He must show that there is a PUBLIC NEED for it, in other
words, he must prove that:
A price quotation with FOB presumes that the seller shall comply with 2. He had regularly undertaken all his authorized trips
his obligation to deliver the cargo to the vessel. 3. His vehicles were sufficiently loaded with pax
4. Many travelers could not be conveniently accommodated
Thereupon, it is the BUYER who shall pay the freightage and thus the
carrier is deemed agent of the buyer so that delivery to the vessel is Effect of Sale or Lease of CPC Without Prior Approval of
delivery to the buyer. Regulatory Body:

Ownership of the cargo will pass to the buyer upon delivery by the
seller to the vessel.
CIF [Cost, Insurance and Freight]
A price quotation on CIF presumes that the seller shall cost of crating
and packaging, insurance and the freightage.
1. The sale or lease is valid and binding between the parties
2. BUT it is not effective against the regulatory body concerned
3. The approval is only necessary to protect the public interest
4. The registered owner is liable for damages sustained by a
3rd person [regardless of who the actual owner is]
Registered Owner; Conclusive Presumption (1990)

The carrier is deemed to be the agent of the seller, so that throughout
the entire trip ownership is retained by the SELLER and only passes to
the buyer upon reaching the point of destination and the cargo is
discharged in favor of the buyer.
General Definition of Arrastre
A broad tern which refers to a contract for the unloading of goods from
a vessel
Arrastre in Mercantile Law
The term ‗arrastre‘ has a technical meaning as it applies only to
overseas trade
When cargo from abroad arrives on board a vessel, the consignee
cannot unload and deliver the cargo by himself.
Johnny owns a Sarao jeepney. He asked his neighbor Van ifhe could
operate the said jeepney under Van‗s certificate ofpublic convenience.
Van agreed and, accordingly, Johnnyregistered his jeepney under Van
name. On June 10, 1990,one of the passenger jeepneys operated by
Van bumpedTomas. Tomas was injured and in due time, he filed a
complaint for damages against Van and his driver for theinjuries he
suffered. The court rendered judgment in favorof Tomas and ordered
Van and his driver, jointly andseverally, to pay Tomas actual and moral
damages,attorney‗s fees, and costs.The Sheriff levied on the jeepney
belonging to Johnny butregistered in the name of Van. Johnny filed a
3rd partyclaim with the Sheriff alleging ownership of the jeepneylevied
upon and stating that the jeepney was registered in
the name of Van merely to enable Johnny to make use ofVan‗s
certificate of public convenience. May the Sheriffproceed with the
public auction of Johnny‗s jeepney.Discuss with reasons.
SUGGESTED ANSWER:

Yes, the Sheriff may proceed with the auction sale ofJohnny‗s jeepney.
This is done by the arrastre operator, who will then deliver the cargo to
In contemplation of law as regards thepublic and third persons, the
the customs warehouse
vehicle is considered theproperty of the registered operator (Santos v
Sibug 104 S 520)
Parties in Arrastre Contract
Prescriptive Period [Sec. 28.]
1. Republic of the Philippines
2. The party awarded the privilege of operating the arrastre
service 1. 60 days – for violations of orders, decisions and regulations
of the regulatory bodies
2. 180 days – for violations of the provisions of the Public
Sec. 16[n] – Suspension of CPC:
Service Act
May be done PRIOR to a hearing BUT cannot exceed 30 days
Kabit System - An arrangement whereby:
Ground – to avoid serious and irreparable damage or inconvenience
 a person who has been granted a CPC
to the public or private interests
 allows another person who owns motor vehicles
Operators of Public Services  to operate under such franchise
 for a fee
Unlawful Service (Sec. 19[a])
Kabit System – Legal or Not?
It shall be unlawful for any public service to:
1. It is not penalized outright as a criminal offense
2. But it is invariably recognized as contrary to public policy and
 provide or maintain any service that is unsafe, improper, or
therefore VOID and INEXISTENT under Art.1409 of the Civil
inadequate, or
Code
 withhold or refuse any service which can reasonably be 3. It is one of the root causes of the prevalence of graft and
demanded and furnished corruption in the government transportation offices

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 4. It is an abuse of the CPC which is a special privilege granted
by the government
G.R. No. L-26815 May 26, 19810
ADOLFO L. SANTOS, petitioner,
vs.
ABRAHAM SIBUG and COURT OF APPEALS, respondents.
MELENCIO-HERRERA, J.:
In this case, SANTOS had fictitiously sold the jeepney to VIDAD, who
had become the registered owner and operator of record at the time of
the accident. lt is true that VIDAD had executed a re-sale to SANTOS,
but the document was not registered. Although SANTOS, as
the kabit was the true owner as against VIDAD, the latter, as the
registered owner/operator and grantee of the franchise, is directly and
primarily responsible and liable for the damages caused to SIBUG, the
injured party, as a consequence of the negligent or careless operation
of the vehicle. 6 This ruling is based on the principle that the operator
of record is considered the operator of the vehicle in contemplation of
law as regards the public and third persons 7 even if the vehicle
involved in the accident had been sold to another where such sale had
not been approved by the then Public Service Commission. 8 For the
same basic reason, as the vehicle here in question was registered in
VIDAD'S name, the levy on execution against said vehicle should be
enforced so that the judgment in the BRANCH XVII CASE may be
satisfied, notwithstanding the fact that the secret ownership of the
vehicle belonged to another. SANTOS, as the kabit should not be
allowed to defeat the levy on his vehicle and to avoid his
responsibilities as a kabit owner for he had led the public to believe
that the vehicle belonged to VIDAD. This is one way of curbing the
pernicious kabit system that facilitates the commission of fraud against
the travelling public.
As indicated in the Erezo case, supra, SANTOS' remedy. as the real
owner of the vehicle, is to go against VIDAD, the actual operator who
was responsible for the accident, for the recovery of whatever
damages SANTOS may suffer by reason of the execution. In fact, if
SANTOS, as the kabit had been impleaded as a party defendant in the
BRANCH XVII CASE, he should be held jointly and severally liable
with VIDAD and the driver for damages suffered by SIBUG, 9 as well
as for exemplary damages.
G.R. No. L-64693 April 27, 1984
LITA ENTERPRISES, INC., petitioner,
vs.
SECOND CIVIL CASES DIVISION, INTERMEDIATE APPELLATE
COURT, NICASIO M. OCAMPO and FRANCISCA P.
GARCIA, respondents.
ESCOLIN, J.:
Unquestionably, the parties herein operated under an arrangement,
comonly known as the "kabit system", whereby a person who has been
granted a certificate of convenience allows another person who owns
motors vehicles to operate under such franchise for a fee. A certificate
of public convenience is a special privilege conferred by the
government . Abuse of this privilege by the grantees thereof cannot be
countenanced. The "kabit system" has been Identified as one of the
root causes of the prevalence of graft and corruption in the government
transportation offices. In the words of Chief Justice Makalintal, 1 "this is
a pernicious system that cannot be too severely condemned. It
constitutes an imposition upon the goo faith of the government.
Although not outrightly penalized as a criminal offense, the "kabit
system" is invariably recognized as being contrary to public policy and,
therefore, void and inexistent under Article 1409 of the Civil Code, It is
a fundamental principle that the court will not aid either party to enforce
an illegal contract, but will leave them both where it finds them. Upon
this premise, it was flagrant error on the part of both the trial and
appellate courts to have accorded the parties relief from their
predicament. Article 1412 of the Civil Code denies them such aid. It
provides:
ART. 1412. if the act in which the unlawful or forbidden cause consists
does not constitute a criminal offense, the following rules shall be
observed;
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(1) when the fault, is on the part of both contracting parties, neither
may recover what he has given by virtue of the contract, or demand
the performance of the other's undertaking.
The defect of inexistence of a contract is permanent and incurable, and
cannot be cured by ratification or by prescription. As this Court said
in Eugenio v. Perdido, 2 "the mere lapse of time cannot give efficacy to
contracts that are null void."
The principle of in pari delicto is well known not only in this jurisdiction
but also in the United States where common law prevails. Under
American jurisdiction, the doctrine is stated thus: "The proposition is
universal that no action arises, in equity or at law, from an illegal
contract; no suit can be maintained for its specific performance, or to
recover the property agreed to be sold or delivered, or damages for its
property agreed to be sold or delivered, or damages for its violation.
The rule has sometimes been laid down as though it was equally
universal, that where the parties are in pari delicto, no affirmative relief
of any kind will be given to one against the other." 3 Although certain
exceptions to the rule are provided by law, We see no cogent reason
why the full force of the rule should not be applied in the instant case.
Kabit System (2005)
Discuss the ―kabit system‖ in land transportation and itslegal
consequences. (2%)\
SUGGESTED ANSWER:
The kabit system is an arrangement where a persongranted a
certificate of public convenience allows otherpersons to operate their
motor vehicles under his license,for a fee or percentage of their
earnings (Lim v. Court of Appealsand Gonzalez, G.R, No. 125817,
January 16, 2002, citing BaliwagTrannit v. Court of Appeals, G.R. No.
57493, January 7, 1987) Thelaw enjoining the kabit system aims to
identify the personresponsible for an accident in order to protect the
ridingpublic. The policy has no force when the public at large is
neither deceived nor involved.
The law does not penalize the parties to a kabit agreement.But the
kabit system is contrary to public policy and therefore void and
inexistent.(Art. 1409[1], Civil Code)
Kabit System; Agent of the Registered Owner (2005)
Procopio purchased an Isuzu passenger jeepney fromEnteng, a holder
of a certificate of public convenience forthe operation of public utility
vehicle plying theCalamba-Los Baños route. While Procopio
continuedoffering the jeepney for public transport services, he did
not have the registration of the vehicle transferred in hisname. Neither
did he secure for himself a certificate ofpublic convenience for its
operation. Thus, per the recordsof the Land Transportation Franchising
and RegulatoryBoard, Enteng remained its registered owner and
operator.One day, while the jeepney was traveling southbound,
itcollided with a ten-wheeler truck owned by Emmanuel.
The driver of the truck admitted responsibility for theaccident,
explaining that the truck lost its brakes.Procopio sued Emmanuel for
damages, but the lattermoved to dismiss the case on the ground that
Procopio isnot the real party in interest since he is not the registered
owner of the jeepney. Resolve the motion with reasons.(3%)
SUGGESTED ANSWER:
The motion to dismiss should be denied because Procopio,as the real
owner of the jeepney, is the real party in interest.Procopio falls under
the Kabit system. However, the legalrestriction as regards the Kabit
system does not apply inthis case because the public at large is not
deceived norinvolved. (Lim v. Court of Appeals, G.R. No. 125817,
January16, 2002, citing Baliwag Transit v. Court of Appeals, G.R. No.
57493, January 7, 1987)In any event, Procoprio is deemed to be "the
agent" of theregistered owner. (First Malayan Leasing v. Court of
Appeals,G.R. No. 91378, June 9,1992; and "F" Transit Co., Inc.
v.NLRC, G.R. Nos, 88195-96, January 27, 1994)
Boundary System transfer to public ownership utilities and other private enterprises to be
operated by the Government.
An arrangement between:

1. the owner of a motor vehicle who holds a CPC, and Art. XII. Sec. 19.
2. the driver who uses the motor vehicle for a fixed number of
hours and pays to the owner a fixed amount and shoulders The State shall regulate or prohibit monopolies when the public interest
the gasoline used so requires.

The share of the driver in lieu of a fixed compensation is the excess of No combinations in restraint of trade or unfair competition shall be
the total amount of fares earned or collected over and above the allowed.
amount paid to the owner

It is a contract of employment between:

1. the owner of the public utility, and

2. the driver

Boundary System (2005)

Baldo is a driver of Yellow Cab Company under theboundary system.

While cruising along the SouthExpressway, Baldo‗s cab figured in a
collision, killing his passenger, Pietro. The heirs of Pietrosued Yellow
Cab Company for damages, but the latterrefused to pay the heirs,
insisting that it is not liablebecause Baldo is not its employee. Resolve
with reasons.(2%)

SUGGESTED ANSWER:

Yellow Cab Company shall be liable with Baldo, on asolidary basis, for
the death of passenger Pietro. Baldo isan employee of Yellow Cab
under the boundary system.As such, the death of passenger Pietro is
breach ofcontract of carriage, making both the common carrierYellow
Cab and its employee, Baldo, solidarily liable.(Hernandez v. Dolor,
G.R, No. 160286, July 30, 2004)

Constitutional Provisions

Art. XII Sec. 11 – Filipinization

No franchise, certificate, or any form of authorization for the operation

of a public utility shall be granted except to citizens of the RP or to
corporations or association organized under the laws of the RP at least
60% of whose capital is owned by such citizens, nor shall such
franchise, certificate, or authorization be exclusive in character or for a
longer period than 50 years.

Neither shall any such franchise or right be granted except under the
condition that it shall be subject to amendment, alteration, or repeal by
the Congress when the common good so requires.

The State shall encourage equity participation in public utilities by the

general public.

The participation of foreign investors in the governing body of any

public utility enterprise shall be limited to their proportionate share in its
capital, and all the executive and managing officers of such corporation
or association must be citizens of the Philippines.

Art. XII. Sec. 17.

In times of national emergency, when the public interest so requires,

the State may, during the emergency and under reasonable terms
prescribed by it, temporarily take over or direct the operation of any
privately owned public utility or business affected with public interest.

Art. XII. Sec 18 – Nationalization

The State may, in the interest of national welfare or defense, establish

and operate vital industries and, upon payment of just compensation,

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