Transpo Notes

A. WHAT IS A COMMON CARRIER?
- 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. (Art. 1732,
Civil Code).
- One that holds itself out as ready to engage in the transportation of
goods for hire as a public employment and not as a casual occupation.
(De Guzman vs. Court of Appeals, No. L-47822, December 22, 1988)
B. CHARACTERISTICS OF A COMMON CARRIER
Art. 1732 of the Civil Code avoids any distinction between one
whose principal business is the carrying of persons or goods or
both, and one who does such carrying only as an ancillary activity
(sideline).
It also avoids a 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.
Article 1732 does not distinguish between a carrier offering its

services to the general public, that is the general community or
population, and one who offers services or solicits business only
from a narrow segment of the general population.
A person or entity is a common carrier even if he did not secure a

Certificate of Public Convenience
The Civil Code makes no distinction as to the means of transporting,

as long as it is by land, water or air.
The Civil Code does not provide that the transportation should be
by motor vehicle.
A person or entity may be a common carrier even if he has no fixed

publicly known route, maintains no terminals, and issues no tickets.
Undertakes to carry for all people indifferently and thus is liable for
refusal without sufficient reason (Lastimoso vs. Doliente, 3 SCRA ,
[1961]);
Cannot lawfully decline to accept a particular class of goods for

carriage to the prejudice of the traffic in these goods;
No monopoly is favored (Batangas Trans. vs. Orlanes, 52 Phil. 455);
Provides public convenience.
C. TESTS WHETHER A PARTY IS A COMMON CARRIER OF GOODS:

It must be engaged in the business of carrying goods for others as a
public employment and must hold itself out as ready to engage in the
transportation of goods generally as a business and not as a casual
occupation;
It must undertake to carry goods of the kind to which its business is
confined;
It must undertake to carry by the method by which his business is
conducted and over its established roads; and
The transportation must be for hire. (First Philippine Industrial Corp.
v. CA, 300 SCRA 661, [1998)
TRANSPORTATION LAW: Lawrence Jeffrey Delfin, Flerida Emma Manglicmot, Mark Joseph Mupas,
Melanie Pascua, Gilbert Ricaforte, Renato Segubiense Jr., Katleen Grace Serrano, Mary Jane Timbang
Test whether a party is a common carrier

FIRST PHILIPPINE INDUSTRIAL CORP. VS. COURT OF APPEALS
(101 SCRA 661, 1998)
Facts: Petitioner is a grantee of a pipeline concession under R.A. No. 387,
as amended, a contract, install and operate oil pipelines. The original
pipeline concession was granted in 1967 and renewed by the Energy
Regulatory Board in 1992.
Sometime in January 1995, petitioner applied for a mayors permit
with the Office of the Mayor of Batangas City. However, before the
mayors permit could be issued, the respondent City Treasurer required
petitioner to pay a local tax based on its gross receipts for the fiscal year
1993 pursuant to the Local Government Code. The respondent City
Treasure assessed a business tax on the petitioner amounting to
P956,076.04 payable in four installments based on the gross receipts for
products pumped at GPS-1 for the fiscal year 1993 which amounted to
P181,681,151.00. in order not to hamper its operations, petitioner paid
the tax under protest in the amount of P239, 019.01 for the first quarter of
1993.
On June 15, 1994, petitioner filed with the RTC of Batangas City a
complaint for tax refund with prayer for writ of preliminary injunction
against respondents City of Batangas and Adoracion Arellano in her
capacity as City Treasurer. In its complaint, petitioner alleged, inter alia,
that: (1) the imposition and collection of the business tax on its gross
receipts violates Sec. 133 of the Local Government Code; (2)
the
authority of cities to impose and collect a tax on the gross receipts of
contractors and independent contractors under Sec. 141(e) and 151
does not include the authority to collect such taxes on transportation
contractors for, as defined under Sec. 131(h), the term contractors
excludes transportation contactors; and (3) the City Treasurer illegally and
erroneously imposed and collected the said tax, thus meriting the
immediate refund of the tax paid.
Traversing the complaint, the respondents argued that petitioner
cannot be exempt from taxes under Sec. 133 (J) of the Local Government
Code as said exemption applied only to transportation contractors and
persons engaged in the transportation by hire and common carriers by air
land and water. Respondents assert that pipelines are not included in the
term common carrier which refers solely to ordinary carriers as trucks,
trains, ships and the like. Respondents further posit that the term
common carrier under the said Code pertains to the mode or manner by
which a product is delivered to its destination.
Issue: Whether or not the petitioner is a common carrier so that in the
affirmative, he is not liable to pay the carriers tax under the Local
Government Code of 1991?
Held: Petitioner is a common carrier.
A common carrier may be defined, broadly, as one who holds
himself out to the public as engaged in the business of transporting
persons or property from place to place, for compensation, offering his
services to the public generally.
Article 1732 of the Civil Code defines a common carrier as any
person, corporation, firm or association engaged in the business of
air, for compensation, offering their services to the public.
The test for determining whether a party is a common carrier of
goods is:
1. He must be engaged in the carrying of goods for others as a public

employment, and must hold himself out as ready to engage in the
transportation of goods or persons generally as a business and not as a
casual occupation.
2. He must undertake to carry goods of the kind to which his business is
confined;
3. He must undertake to carry by the method by which his business is
conducted and over his established roads; and
4. The transportation must be for hire.
D. Cases:
1. DE GUZMAN VS. COURT OF APPEALS (168 SCRA 612)
Facts: Cendena was a junk dealer and was engaged in buying used
bottles and scrap materials in Pangasinan and brought these to Manila for
resale. He used two 6-wheeler trucks. On the return trip to Pangasinan, he
would load his vehicles with cargo which various merchants wanted
delivered to Pangasinan. For that service, he charged freight lower than
regular rates. General Milk Co. contacted with him for the hauling of 750
cartons of milk. On the way to Pangasinan, one of the trucks was hijacked
by armed men who took with them the truck and its cargo and kidnapped
the driver and his helper. Only 150 cartons of milk were delivered. The
Milk Co. sued to claim the value of the lost merchandise based on an
alleged contract of carriage. Cendena denied that he was a common
carrier and contended that he could not be liable for the loss it was due to
force majeure. The trial court ruled that he was a common carrier. The CA
reversed.
Issue: Whether or not Cendena is a common carrier?
Held: Yes, Cendena is properly characterized as a common carrier even
though he merely backhauled goods for other merchants, and even if it
was done on a periodic basis rather than on a regular basis, and even if
his principal occupation was not the carriage of goods.
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. It also avoids making a
distinction between a person or enterprise offering transportation services
on a regular or scheduled basis and one offering service on an occasional,
episodic or unscheduled basis. Neither does it make a distinction between
a carrier offering its services to the general public and one who offers
services or solicits business only from a narrow segment of population.
2. PLANTERS PRODUCTS VS. CA (226 SCRA)
Facts: Planters Product Inc. purchased from Mitsubishi international
corporation metric tons of Urea fertilizer, which the latter shipped aboard
the cargo vessel M/V Sun Plum owned by private respondent Kyosei Kisen
Kabushiki Kaisha. Prior to its voyage, a time charter-party on the vessel
respondent entered into between Mitsubishi as shipper/charterer and
KKKK as ship owner, in Tokyo, Japan.
Before loading the fertilizer aboard the vessel, (4) of her holds were
presumably inspected by the charterers representative and found fit to
take a load of urea in bulk. After the Urea fertilizer was loaded in bulk by
stevedores hired by and under the supervision of the shipper, the steel
hatches were closed with heavy iron lids. Upon arrival of vessel at port,
the petitioner unloaded the cargo pursuant to the terms and conditions of
the charter-party. The hatches remained open throughout the duration of
the discharge.
Upon arrival at petitioners warehouse a survey conducted over the
cargo revealed a shortage and the most of the fertilizer was contaminated
with dirt. As such, Planters filed an action for damages. The defendant
argued that the public policy governing common carriers do not apply to
them because they have become private carriers by reason of the
provisions of the charter-party.
Issue: Whether or not the charter-party contract between the ship owner
and the charterer transforms a common carrier into a private carrier?
Held: A charter party may either her be time charter wherein the vessel is
leased to the charterer, wherein the ship is leased to the charterer for a
fixed period of time or voyage charter, wherein the ship is leased for a
single voyage. In both cases, the charter party provides for the hire of the
vessel only, either for a determinate time or for a single or consecutive
voyage.
It is therefore imperative that such common carrier shall remain as
such, notwithstanding the charter of the whole or part of the vessel by
one or more persons, provided the charter is limited to the ship only, as in
the case of a time-charter or voyage-charter. It is only when the charter
includes both ship and its crew as in bareboat or demise that it becomes a
private carrier. Undoubtedly, a shipowner in a time or voyage charter
retains in possession and control of the ship, although her holds may be
the property of the charterer.
3. CALVO V. UCPB GENERAL INSURANCE (G.R. NO. 148496 MARCH
19, 2002)
Facts: Petitioner Virgines Calvo, owner of Transorient Container Terminal
Services, Inc. (TCTSI), and a custom broker, entered into a contract with
San Miguel Corporation (SMC) for the transfer of 114 reels of semichemical fluting paper and 124 reels of kraft liner board from the port area
to the Tabacalera Compound, Ermita, Manila. The cargo was insured by
respondent UCPB General Insurance Co., Inc.
On July 14, 1990, contained in 30 metal vans, arrived in Manila on
board M/V Hayakawa Maru. After 24 hours, they were unloaded from
vessel to the custody of the arrastre operator, Manila Port Services, Inc.
From July 23 to 25, 1990, petitioner, pursuant to her contract with SMC,
withdrew the cargo from the arrastre operator and delivered it to SMCs
warehouse in Manila. On July 25, the goods were inspected by Marine
Cargo Surveyors, reported that 15 reels of the semi-chemical fluting paper
were wet/stained/torn and 3 reels of kraft liner board were also torn.
The damages cost P93,112.00.
SMC collected the said amount from respondent UCPB under its
insurance contract. Respondent on the other hand, as a subrogee of SMC,
brought a suit against petitioner in RTC, Makati City. On December 20,
1995, the RTC rendered judgment finding petitioner liable for the damage
to the shipment. The decision was affirmed by the CA.
Issue: Whether or not Calvo is a common carrier?
Held: In this case the contention of the petitioner, that he is not a
common carrier but a private carrier, has no merit.
Article 1732 makes no distinction between one whose principal
does such carrying only as ancillary activity. 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. We think that Article 1733 deliberately refrained from

making such distinction. (De Guzman v. CA, 68 SCRA 612)
Te concept of common carrier under Article 1732 coincide with
the notion of public service, under the Public Service Act which partially
supplements the law on common carrier. Under Section 13, paragraph (b)
of the Public Service Act, it includes:
x x x 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, subway motor vehicle, either for freight or
passenger, or both, with or without fixed route and whatever 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
repair shop, 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
systems, wire or wireless broadcasting stations and other similar public
services. x x x
4. FABRE VS. CA (259 SCRA 426 G.R. NO. 111127, JULY 26, 1996)
Facts: Petitioners Engracio Fabre, Jr. and his wife were owners of a Mazda
minibus. They used the bus principally in connection with a bus service for
school children which they operated in Manila. It was driven by Porfirio
Cabil.
On November 2, 1984 private respondent Word for the World
Christian Fellowship Inc. (WWCF) arranged with the petitioners for the
transportation of 33 members of its Young Adults Ministry from Manila to
La Union and back in consideration of which private respondent paid
petitioners the amount of P3,000.00.
The usual route to Caba, La Union was through Carmen,
Pangasinan. However, the bridge at Carmen was under repair, so that
petitioner Cabil, who was unfamiliar with the area (it being his first trip to
La Union), was forced to take a detour through the town of Ba-ay in
Lingayen, Pangasinan. At 11:30 that night, petitioner Cabil came upon a
sharp curve on the highway. The road was slippery because it was raining,
causing the bus, which was running at the speed of 50 kilometers per
hour, to skid to the left road shoulder. The bus hit the left traffic steel
brace and sign along the road and rammed the fence of one Jesus Escano,
then turned over and landed on its left side, coming to a full stop only
after a series of impacts. The bus came to rest off the road. A coconut tree
which it had hit fell on it and smashed its front portion. Because of the
mishap, several passengers were injured particularly Amyline Antonio.
Criminal complaint was filed against the driver and the spouses
were also made jointly liable. Spouses Fabre on the other hand contended
that they are not liable since they are not a common carrier. The RTC of
Makati ruled in favor of the plaintiff and the defendants were ordered to
pay jointly and severally to the plaintiffs. The Court of Appeals affirmed
the decision of the trial court.
Issue: Whether the spouses Fabre are common carriers?
Held: Petition was denied. Spouses Fabre are common carriers.
The Supreme Court held that this case actually involves a contract
of carriage. Petitioners, the Fabres, did not have to be engaged in the
business of public transportation for the provisions of the Civil Code on
common carriers to apply to them. As this Court has held: 10 Art. 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.
The above article makes no distinction between one whose principal
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. We think
that Article 1732 deliberately refrained from making such distinctions.
5. TATAD VS. GARCIA (241 SCRA 334, GR. NO. 114222. APRIL 6,
1995)
Facts: DOTC planned to construct a light railway transit line along Edsa.
EDSA LRT Corporation, Ltd., a foreign corporation was awarded the
contract to build, lease and transfer the said light railway.
The said award was questioned by the petitioners on the basis that
a foreign corporation cannot own the EDSA LRT III, a public utility as it
violates the Constitution.
Issue: Whether or not an owner and lessor of the facilities used by a
public utility constitute a public utility?
Held: EDSA LRT Corporation, Ltd. Is admittedly a foreign corporation duly
incorporated and existing under the laws of Hong Kong. However, there is
no dispute that once the EDSA LRT III is constructed, the private
respondent, as lessor, will turn it over to DOTC as lessee, for the latter to
operate the system and pay rentals for the said use.
What private respondent owns are the rail tracks, rolling stocks, rail
stations, terminals and the power plant, not a public utility. While a
franchise is needed to operate these facilities to serve the public, they do
not themselves constitute a public utility. What constitutes a public utility
in not their ownership but their use to serve the public.
The Constitution, in no uncertain terms, requires a franchise for the
operation of a public utility. However, it does not require a franchise
before one can own the facilities needed to operate a public utility so long
as it does not operate them to serve the public. In law, there is a clear
distinction between the operation of a public utility and the ownership of
the facilities and the equipment used to serve the public.
6. FISHER VS. YANGCO STEAMSHIP (31 PHIL 1)
Facts: The complained alleges that plaintiff is a stockholder in Yangco
Steamship
Company, the owner of the large steam vessels, duly licensed to
engage in the coastwise trade of the Philippine Island; that on or about
June 10, 1912, the directors of the company, adopted a resolution which
was thereafter ratified and affirmed by the stockholders of the company
expressly declaring and providing that the classes of merchandise to be
carried by the company in its business as common carrier do not include
dynamite, powder or other explosives, and expressly prohibiting the
officers, agents an d servants of the company from offering to carry,
accepting for carriage or carrying said dynamite, powder or other
explosives.
Issue: Whether the refusal of the owner and officer of a steam vessel, to
accept for carriage dynamite, powder or other explosives for carriage can
be held to be a lawful act?
Held: The traffic in dynamite gun powder and other explosive is vitally
essential to the material and general welfare of the inhabitants of this
islands and it these products are to continue in general use throughout
the Philippines they must be transported from water to port to port in
various island which make up the Archipelago.
It follows that a refusal by a particular vessel engage as a common
carrier of merchandise in coastwise trade in the Philippine Island to accept
such explosives for carriage constitutes a violation.
The prohibition against discrimination penalized under the statute,
unless it can be shown that there is so Real and substantial danger of
disaster necessarily involved in the courage of any or all of this article of
merchandise as to render such refusal a due or unnecessary or a
reasonable exercise or prudence and discreation on the part of the ship
owner.
7. LOADSTAR SHIPPING VS. CA (315 SCRA 339, 1999)
Facts: On November 19, 1984, loadstar received on board its M/V
Cherokee bales of lawanit hardwood, tilewood and Apitong Bolidenized
for shipment. The goods, amounting to P6,067, 178. Were insured for the
same amount with the Manila Insurance Company against various risks
including Total Loss by Total Loss of the Vessel. On November 20, 1984,
on its way to Manila from the port of Nasipit, Agusan Del Norte, the vessel,
along with its cargo, sank off Limasawa Island. As a result of the total loss
of its shipment, the consignee made a claim with loadstar which, however,
ignored the same. As the insurer, MIC paid to the insured in full settlement
of its claim, and the latter executed a subrogation receipt therefor. MIC
thereafter filed a complaint against loadstar alleging that the sinking of
the vessel was due to fault and negligence of loadstar and its employees.
In its answer, Loadstar denied any liability for the loss of the
shippers goods and claimed that the sinking of its vessel was due to force
majeure. The court a quo rendered judgment in favor of MIC., prompting
loadstar to elevate the matter to the Court of Appeals, which however,
agreed with the trial court and affirmed its decision in toto. On appeal,
loadstar maintained that the vessel was a private carrier because it was
not issued a Certificate of Public Convenience, it did not have a regular
trip or schedule nor a fixed route, and there was only one shipper, one
consignee for a special crago.
Issue: Whether or not M/V Cherokee was a private carrier so as to exempt
it from the provisions covering Common Carrier?
Held: Loadstar is a common carrier.
The Court held that LOADSTAR is a common carrier. It is not
necessary that the carrier be issued a certificate of public convenience,
and this public character is not altered by the fact that the carriage of the
goods in question was periodic, occasional, episodic or unscheduled.
Further, the bare fact that the vessel was carrying a particular type of
cargo for one shipper, which appears to be purely co-incidental; it is no
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.
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.
8. FIRST PHILIPPINES INDUSTRIAL CORP. VS. CA (300 SCRA 661)
Facts: Petitioner is a grantee of a pipeline concession under R.A. No. 387,
as amended, a contract, install and operate oil pipelines. The original
pipeline concession was granted in 1967 and renewed by the Energy
Regulatory Board in 1992.
Sometime in January 1995, petitioner applied for a mayors permit
with the Office of the Mayor of Batangas City. However, before the
mayors permit could be issued, the respondent City Treasurer required
petitioner to pay a local tax based on its gross receipts for the fiscal year
1993 pursuant to the Local Government Code. The respondent City
Treasure assessed a business tax on the petitioner amounting to
P956,076.04 payable in four installments based on the gross receipts for
products pumped at GPS-1 for the fiscal year 1993 which amounted to
P181,681,151.00. In order not to hamper its operations, petitioner paid
the tax but under protest in the amount of P239, 019.01 for the first
quarter of 1993.
On June 15, 1994, petitioner filed with the RTC of Batangas City a
complaint for tax refund with prayer for writ of preliminary injunction
against respondents City of Batangas and Adoracion Arellano in her
capacity as City Treasurer.
Traversing the complaint, the respondents argued that petitioner
cannot be exempt from taxes under Sec. 133(J) of the Local Government
Code as said exemption applied only to transportation contractors and
persons engaged in the transportation by hire and common carriers by air
land and water. Respondents assert that pipelines are not included in the
term common carrier which refers solely to ordinary carriers as trucks,
trains, ships and the like. Respondents further posit that the term
common carrier under the said Code pertains to the mode or manner by
which a product is delivered to its destination.
Issue: Whether the petitioner, an oil pipeline operator is a common
carrier, and therefore exempted from paying local taxes?
Held: Yes. Petitioner is a common carrier.
Article 1732 of the Civil Code defines a common carrier as any
person, corporation, firm or association engaged in the business of
air, for compensation, offering their services to the public.
A common carrier may be defined, broadly, as one who holds
himself out to the public as engaged in the business of transporting
persons or property from place to place, for compensation, offering his
services to the public generally.
The test for determining whether a party is a common carrier of
goods is: 1. He must be engaged in the carrying of goods for others as a
public employment, and must hold himself out as ready to engage in the
transportation of goods or persons generally as a business and not as a
casual occupation; 2.He must undertake to carry goods of the kind to
which his business is confined; 3. He must undertake to carry by the
method by which his business is conducted and over his established
roads; and 4. The transportation must be for hire.
Based on the above definition and requirements, there is no doubt

that the petitioner is a common carrier.
9. HOME INSURANCE VS. AMEARICAN STEAMSHIP (23 SCRA 24)
Facts: The Consorcio Pesquero del Peru of South America shipped jute
bags of Peruvian fishmeal through SS Crowborough, consigned to San
Miguel Brewery, Inc. The cargo, which was insured by Home Insurance
Company, arrived at the port of Manila and was discharged to the lighters
of the Luzon Stevedoring Corporation. When the same was delivered to
the consignee, there were shortages amounting to P 12, 033.85,
prompting the latter to pay against Luzon Stevedoring Co.
Because the others denied liability, Home Insurance paid San
Miguel the insurance value loss. This cost was brought by the former to
recover indemnity from Luzon Stevedoring and the ship owner. Luzon
Stevedoring raised the defense that it deliver with due diligence in the
same from the carrier. Mexican Steamship Agencies denied liability on the
ground that the charter party referred to in the bills of lading, the charter,
not the ship owner, was responsible for any loss or damage of the cargo.
Furthermore, it claimed to have exercised due diligence in stowing the
goods and as a mere forwarding agent, it was not responsible for losses or
damages to the cargo.
Issue: Whether or not the stipulation in the charter party to owners nonliability was valid as to absolve the American Steamship from liability loss?
Held: The Civil Code provision on common carriers should not be applied
where the carrier is not acting as such but as a private carrier. The
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 public policy
governing common carriers is applied. Such policy has no force where the
public at large is not involved, as in the case of a ship totally chartered for
the use of a single party.
10. SAN PABLO VS. PANTRANCO (153 SCRA 199)
Facts: The Pantranco South Express, Inc., hereinafter referred to as
PANTRANCO is a domestic corporation engaged in the land transportation
business with PUB service for passengers and freight and various
certificates for public conveniences (CPC) to operate passenger buses
from Metro Manila to Bicol Region and Eastern Samar. On March 27,1980
PANTRANCO through its counsel wrote to Maritime Industry Authority
(MARINA) requesting authority to lease/purchase a vessel named MN
"Black Double" "to be used for its project to operate a ferryboat service
from Matnog, Sorsogon and Allen, Samar that will provide service to
company buses and freight trucks that have to cross San Bernardo Strait.
In a reply of April 29,1981 PANTRANCO was informed by MARINA that it
cannot give due course to the request.
PANTRANCO nevertheless acquired the vessel MN "Black Double" on
May 27, 1981 for P3 Million pesos. It wrote the Chairman of the Board of
Transportation (BOT) through its counsel, that it proposes to operate a
ferry service to carry its passenger buses and freight trucks between Allen
and Matnog in connection with its trips to Tacloban City. PANTRANCO
claims that it can operate a ferry service in connection with its franchise
for bus operation in the highway from Pasay City to Tacloban City "for the
purpose of continuing the highway, which is interrupted by a small body of
water, the said proposed ferry operation is merely a necessary and
incidental service to its main service and obligation of transporting its
passengers from Pasay City to Tacloban City. Such being the case there is
no need to obtain a separate certificate for public convenience to operate
a ferry service between Allen and Matnog to cater exclusively to its
passenger buses and freight trucks.
Without awaiting action on its request PANTRANCO started to

operate said ferry service. Acting Chairman Jose C. Campos, Jr. of BOT
ordered PANTRANCO not to operate its vessel until the application for
hearing on Oct. 1, 1981. In another order BOT enjoined PANTRANCO from
operating the MN "Black Double" otherwise it will be cited to show cause
why its CPC should not be suspended or the pending application denied.
Epitacio San Pablo (now represented by his heirs) and Cardinal
Shipping Corporation who are franchise holders of the ferry service in this
area interposed their opposition. They claim they adequately service the
PANTRANCO by ferrying its buses, trucks and passengers. BOT then asked
the legal opinion from the Minister of Justice whether or not a bus
company with an existing CPC between Pasay City and Tacloban City may
still be required to secure another certificate in order to operate a ferry
service between two terminals of a small body of water. On October 20,
1981 then Minister of Justice Ricardo Puno rendered an opinion to the
effect that there is no need for bus operators to secure a separate CPC to
operate a ferryboat service.
Thus on October 23, 1981 the BOT rendered its decision holding
that the ferryboat service is part of its CPC to operate from Pasay to
Samar/Leyte by amending PANTRANCO's CPC so as to reflect the same.
Cardinal Shipping Corporation and the heirs of San Pablo filed
separate motions for reconsideration of said decision and San Pablo filed a
supplemental motion for reconsideration that were denied by the BOT on
July 21, 1981. Hence, San Pablo filed the herein petition for review on
certiorari with prayer for preliminary injunction seeking the revocation of
said decision, and pending consideration of the petition the issuance of a
restraining order or preliminary injunction against the operation by
PANTRANCO of said ferry service
Issue: Whether or not the ferry boat is a common carrier?
Held: Considering the environmental circumstances of the case, the
conveyance of passengers, trucks and cargo from Matnog to Allen is
certainly not a ferryboat service but a coastwise or interisland shipping
service. Under no circumstance can the sea between Matnog and Allen be
considered a continuation of the highway. While a ferryboat service has
been considered as a continuation of the highway when crossing rivers or
even lakes, which are small body of waters separating the land, however,
when as in this case the two terminals, Matnog and Allen are separated by
an open sea it can not be considered as a continuation of the highway.
The contention of private respondent PANTRANCO that its ferry
service operation is as a private carrier, not as a common carrier for its
exclusive use in the ferrying of its passenger buses and cargo trucks is
absurd. PANTRANCO does not deny that it charges its passengers
separately from the charges for the bus trips and issues separate tickets
whenever they board the MN "Black Double" that crosses Matnog to Allen.
Nevertheless, considering that the authority granted to PANTRANCO is to
operate a private ferry, it can still assert that it cannot be held to account
as a common carrier towards its passengers and cargo. Such an
anomalous situation that will jeopardize the safety and interests of its
passengers and the cargo owners cannot be allowed.
Thus the Court holds that the water transport service between
Matnog and Allen is not a ferryboat service but a coastwise or interisland
shipping service. Before private respondent may be issued a franchise or
CPC for the operation of the said service as a common carrier, it must
comply with the usual requirements of filing an application, payment of
the fees, publication, adducing evidence at a hearing and affording the
oppositors the opportunity to be heard, among others, as provided by law.
10
E. DISTINCTIONS BETWEEN COMMON CARRIER AND PRIVATE

CARRIER
Common Carrier
As to passengers
Holds himself out for all
indiscriminately.
Private Carrier
people Contracts
with
particular
individuals or groups only.
As to required diligence
Requires extraordinary diligence.
Requires only ordinary diligence.
As to state regulation
Subject to regulation.
Not subject to regulation.
As to stipulation on limiting liability

Parties may not agree on limiting the Parties may agree on limiting the
carriers liability except when provided carriers liability, provided not
by law.
contrary to law, morals or good
customs.
Presumption as to fault and negligence
Presumption of fault or negligence No
fault
or
negligence
is
applies.
presumed.
As to laws applicable on damages
Law on common carriers.
Law on obligations and contracts.
F. GOVERNING/ APPLICABLE LAW
A. Transportation by Sea
1.
Coastwise
Civil Code (Arts.1732-1766) primary law
Code of Commerce suppletory law
Note: Carriage of Goods by Sea Act inapplicable even if the
parties expressly provide for it.
2.
3.
Carriage from Foreign Ports To Philippine Ports

Civil Code primary law
Code of Commerce all matters not regulated by the
Civil Code.
Carriage of Goods by Sea Act (COGSA) suppletory to
the Civil Code.
Carriage from Philippine Ports To Foreign

Ports-laws of the country to which the goods are to be transported.
B. Land Transportation
a.
Common Carriers
Civil Code (Arts.1732-1766) primary law
Code of Commerce suppletory law

b.
Private Carriers
Object merchandise
Code of Commerce primary law
Civil Code suppletory law
C. Air Transportation
Domestic Transportation
1.
Civil Code
Code of Commerce
International
2.
Transportation
Warsaw
Convention
11
While the Warsaw Convention has the force of law in the

Philippines, it does not have an exclusive enumeration of a
carriers liability for contractual breach or absolute limit of
liability. It does not preclude the operation of the Civil Code and
other laws.
The liability of the carrier for the loss, destruction or
deterioration of goods transported to the Philippines from a
foreign country, is primarily governed by the Civil Code not by
the Warsaw Convention which applies only to simple loss of
baggage.
There Is International Transportation When:

1. The place of departure and the place of destination are within
the territories of two high contracting parties, regardless of
whether or not there was a break in the transportation or
transshipment.
2. The place of departure and the place of destination are within
the territory of a single 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 to the convention. (Mapa v. CA, 275 SCRA [1997])
High Contracting Parties
Signatories to the Warsaw Convention and those which subsequently
adhered to it.
In National Development Co. vs. CA (164 SCRA 593). The law of the
country to which the goods are to be transported governs the liability of
the common carrier in case of loss, destruction or deterioration (Art. 1753,
NCC) XXX The liability of the carrier is governed primarily by the Civil
Code and in all matters not regulated by the said Code, the rights and
obligations of common carriers shall be governed by the code of
Commence and by special laws (Art. 1766 NCC). Hence, the COGSA /a
special law is merely supppletory to the provisions of the Civil Code. The
place of destinations whose law shall be deemed to be the governing
law in so far as the liability of common carrier is concerned refers to the
place of ultimate destination not an agreed stopping place. This is
particularly true in so far as the warsaw convention used the term to
determine the country where the suit against the international carrier
should be filled. (Santos III vs. NorthWest Orient Airlines, 210 SCRA 256
Cases:
SAMAR MINING CO., INC. VS. NORDEUTSCHER LLOYD (132 SCRA
529)
Facts: Samar Mining imported 1 crate optima welded wire (amounting to
around USD 424 or PhP 1,700) from Germany, which was shipped on a
vessel owned by Nordeutscher Lloyd (M/S Schwabenstein). The shipment
was unloaded in Manila into a barge for transshipment to Davao and
temporarily stored in a bonded warehouse owned by AMCYL. The goods
never reached Davao and were never delivered to or received by the
consignee, Samar Mining Co.
CFI ruled in favor of Samar Mining holding Nordeutscher Lloyd
liable. However, defendants may recoup whatever they may pay Samar
Mining by enforcing the judgment against third party defendant AMCYL.
Issue: Whether Nordeustscher Lloyd is liable for the loss of the goods as
common carrier?
Held: No. At the time of the loss of the goods, the character of
possession of Nordeutscher Lloyd shifted from common carrier to agent of
Samar Mining Co.
12
The Bill of Lading is serves both as a receipt of goods and is likewise

the contract to transport and deliver the same as stipulated. It is a
contract and is therefore the law between the parties. The Bill of Lading in
question stipulated that Nordeutscher Lloyd only undertook to transport
the goods in its vessel only up to the port of discharge from ship, which is
Manila. The Bill of Lading further stipulated that the goods were to be
transshipped by the carrier from Manila to the port of destination Davao.
By unloading the shipment in Manila and delivering the goods to the
warehouse of AMCYL, the appellant was acting within the contractual
stipulations contained in the Bill of Lading.
Article 1736 of the Civil Code relives the carrier of responsibility
over the shipment as soon as the carrier makes actual or constructive
delivery of the goods to the consignee or to the person who has a right to
receive them.
Under the Civil Code provisions governing Agency, an agent can
only be held liable in cases where his acts are attended by fraud,
negligence, deceit or if there is a conflict of interest between him and the
principal. Under the same law an agent is likewise liable if he appoints a
substitute when he was not given the power to appoint one or otherwise
appoints one that is notoriously incompetent or insolvent. These facts
were not proven in the record.
EASTERN SHIPPING LINES INC.
COURT (150 SCRA 463)
VS.
INTERMEDIATE APPELLATE
Facts: Sometime in or prior to June 1977, the M/S Asiatica, a vessel

operated by petitioner Eastern Shipping Lines Inc., loaded at Kobe, Japan
for transportation to Manila loaded 5,000 pieces of calorized pipes valued
at P256,039.00 which was consigned to Philippine Blooming Mills Co, Inc.
and 7 cases of spare parts valued at P92, 361.75 consigned to Central
Textile Mills. Both sets of goods were inured against marine risk for their
stated value with respondent Development Insurance and Surety Corp.
In the same vessel, 2 containers of garment fabrics were also
loaded which was consigned to Mariveles Apparel Corp worth $46,583.
The said cargoes were consigned to Nisshin Fire and Marine Insurance.
Another cargo loaded to the vessel was the surveying instruments
consigned to Aman Enterprises and General Merchandise and insured
against respondent Dowa Fire & Marine Insurance for $1,385.00.
On the way to Manila, M/S Asiatica caught fire and sank. This
resulted to the loss of the ship and its cargoes. The respective Insurers
paid the corresponding marine insurance values and were thus
subrogated to the rights of the insured.
The insurers filed a suit against the petitioner carrier for recovery of
the amounts paid to the insured. However, petitioner contends that it is
not liable on the ground that the loss was due to an extraordinary
fortuitous event.
Issue: Whether the Civil Code provisions on Common Carriers or the
Carriage of the Goods by Sea Act will govern the case at bar?
Held: The law of the country to which the goods are to be transported
governs the liability of common carrier in case of their loss, destruction or
deterioration. The liability of petitioner is governed primarily by the Civil
Code however, in all matters not regulated by the Civil Code, the Code of
Commerce and Special Laws will govern with respect to the rights and
obligations of the carrier. Therefore COGSA is suppletory to the provisions
of the Civil Code.
G. GOVERNMENT REGULATION
13
Case/s
KMU LABOR CENTER VS. GARCIA (239 SCRA 386)
Facts: On June 26,1990, Secretary of DOTC, Oscar M. Orbos issued
memorandum circular No. 90-395 to then LTFRB, Chairman Remedios A.S.
Fernando allowing provincial buses operators to charge passengers within
a range of 15% above and 15% below, the LTFRB official rate for a period
of one (1) year. On December 5, 1990 private respondent PBOAP filed an
application for fare rate increase to P0.085 and again it was reduced to
P0.065 per kilometer rate. The application was opposed by the Philippine
Consumer Foundation Inc. that the proposed rate were exorbitant and
unreasonable and that the application contained no allegation on the rate
o return on December 14, 1990. Public respondent LTFRB granted the fare
rate increase on March 16, 1994. Petitioner KMU filed a petition before the
LTFRB opposing the upward adjustment of bus fares, it was dismissed for
lack of merit, hence this petition.
Issue: Whether or not the Provincial Bus Operators has the power to
reduce and increase fare rated based on the circular order issued by the
LTFRB?
Held: Supreme Court held that the authority given by the LTFRB to the
provincial bus operators to set a fare range over and above the authorized
existing fare is illegal and invalid as it is tantamount to an undue
delegation of legislative authority, Potestas delegata non delegari
protest what has been delegated further delegation of such power would
indeed constitute a negation of the duty in violation of the trust reposed in
the delegate inandated to discharged it directly. Furthermore rate fixing or
making is a delicate and sensitive government function that requires
dexterity of judgment and sound discretion with the settle goal at arriving
at a just and reasonable rate acceptable to both public utility and the
public.
1. REGISTERED OWNER RULE
GELISAN VS. ALDAY (154 SCRA 388)
Facts: Bienvenido Gelisan and Roberto Espiritu entered into a contract
where the former hired the truck of Gelisan for the purpose of transporting
goods at the price of P18.00. It is also agreed that Espiritu shall bear and
pay all losses and damages attending the carriage of the goods to be
hauled by him. Benito Alday, a trucking operator, had a contract to haul
the fertilizers of the Atlas Fertilizer Corporation from Pier 4, North Harbor,
to its Warehouse in Mandaluyong. Alday met Espiritu at the gate of Pier 4
and the latter offered the use of his truck with the driver and helper at 9
centavos per bag of fertilizer. The offer was accepted by plaintiff Alday
and he instructed his checker Celso Henson to let Roberto Espiritu haul
the fertilizer. Espiritu made two hauls of 200 bags of fertilizer per trip. The
fertilizer was delivered to the driver and helper of Espiritu with the
necessary way bill receipts, Exhibits A and B. Espiritu, however, did not
deliver the fertilizer to the Atlas Fertilizer bodega at Mandaluyong.
Subsequently, plaintiff Alday saw the truck in question on Sto.
Cristo St. and he notified the Manila Police Department, and it was
impounded by the police. It was claimed by Bienvenido Gelisan. As a
result of the impounding of the truck according to Gelisan and that for the
release of the truck he paid the premium of P300 to the surety company.
Benito Alday was compelled to pay the value of the 400 bags of
fertilizer, in the amount of P5,397.33, to Atlas Fertilizer Corporation so
that, on 12 February 1962, he (Alday) filed a complaint against Roberto
Espiritu and Bienvenido Gelisan with the CFI Manila
14
Bienvenido Gelisan, upon the other hand, claimed that he had no

contractual relations with the plaintiff Benito Alday.
Issue: Whether Gelisan being a registered owner is responsible for
damages?
Held: The Court has invariably held in several decisions that the
registered owner of a public service vehicle is responsible for damages
that may arise from consequences incident to its operation or that may be
caused to any of the passengers therein. The claim of the petitioner that
he is not able in view of the lease contract executed by and between him
and Roberto Espiritu which exempts him from liability to third persons,
cannot be sustained because it appears that the lease contract, adverted
to, had not been approved by the Public Service Commission. It is settled
in our jurisprudence that if the property covered by a franchise is
transferred or leased to another without obtaining the requisite approval,
the transfer is not binding upon the public and third persons.
Bienvenido Gelisan, the registered owner, is not however without
recourse. He has a right to be indemnified by Roberto Espiritu for the
amount that he may be required to pay as damages for the injury caused
to Benito Alday, since the lease contract in question, although not
effective against the public for not having been approved by the Public
Service Commission, is valid and binding between the contracting parties.
BENEDICTO VS.CA (187 SCRA 547)
Facts: Private respondent Greenhills Wood Industries Company, Inc. a
lumber manufacturing firm in Dagupan City, operates a sawmill in
Maddela, Quirino.
In May 1980, private respondent bound himself to sell and deliver
to Bluestar Mahogony, Inc. 100,000 board feet of sawn lumber with the
understanding that the initial delivery would be made on 15 May 1980. To
effect its first delivery, private respondents resident manager in Maddela,
Dominador Cruz, contracted Virgilio Licuden, the driver of a cargo truck to
transport its sawn lumber to the consignee Blue Star in Valenzuela,
Bulacan. This cargo truck was registered in the name of petitioner Ma. Luis
Benedicto, the proprietor of Macoven Trucking, business enterprise
engaged in hauling freight, with the main office in B.F. Homes, Paraaque.
On 15 May 1980, Cruz in the presence and with the consent of
driver Licuden, supervised the loading of 7,690 board feet of sawn lumber
with invoice value of P16, 918.00 aboard the cargo truck. The cargo never
reached Blue Star.
Issue: Whether the registered owner is liable even though the vehicle
have been transferred to another person?
Held: Supreme Court held that the prevailing rule on common carrier
makes the registered owner liable for consequences flowing from the
operations of the common carrier, even though the specific vehicle
involve may already have been transferred to another person. This
doctrine rest upon the principle that in dealing with the 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.
The prevailing doctrine on common carriers makes the registered
owner liable for consequences flowing from the operations of the carrier,
even though the specific vehicle involved may already have been
transferred to another person. 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
15
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. Thus, contrary to petitioners claim, private
respondent is not required to go beyond the vehicles certificate of
registration to ascertain the owner of the carrier.
Clearly, to permit a common carrier to escape its responsibility for the
passengers or goods transported by its proving a prior sale of the vehicle
or means of transportation to an alleged vendee would be to attenuate
drastically the carriers duty of extraordinary diligence.
2. KABIT SYSTEM
Case/s:
SANTOS VS. SIBUG (104 SCRA 520)
Facts: Petitioner Adolfo Santos was the owner of a passenger jeep, but he
had no certificate of public conveyance for the operation of the vehicle as
a public passenger jeep. Santos then transferred his jeep to the name of
Vidad so that it could be operated under the latters certificate of public
convenience. In other words, Santos became what is known as kabit
operator. Vidad executed a re-transfer document presumably to be
registered it and when it was decided that the passenger jeep of Santos
was to be withdrawn from kabit arrangement.
On the accident date, Abraham Sibug was bumped by the said
passenger jeep.
Issue: Whether the Vidad is liable being the registered owner of the
jeepney?
Held: As the jeep in question was registered in the name of Vidad, the
government or any person affected by the representation that said vehicle
is registered under the name of the particular person had the right to rely
on his declaration of his ownership and registration. And the registered
owner or any other person for that matter cannot be permitted to
repudiate said declaration with the objective of proving that the said
registered vehicle is owned by another person and not by the registered
owner.
Santos, as the kabit, should not be allowed to defeat the levy in his
vehicle and to avoid his responsibility as a kabit owner for he had led the
public to believe that the vehicle belongs to Vidad. This is one way of
curbing the pernicious kabit system that facilitates the commissions of
fraud against the traveling public.
LITA ENTERPRISES VS. IAC (129 SCRA 464)
Facts:
Spouses Nicasio Ocampo and Francisca Garcia (private
respondents) purchased in installment from the Delta Motor Sales
Corporation five (5) Toyota Corona Standard cars to be used as taxi. Since
they had no franchise to operate taxicabs, they contracted with petitioner
Lita Enterprise, Inc., through its representative Manuel Concordia, for the
use of the latters certificate of public convenience for a consideration of
P1, 000.00 and a monthly rental of P200.00/taxicab unit.
For the
agreement to take effect, the cars were registered in the name of Lita
Enterprises, Inc. The possession, however, remains with spouses Ocampo
and Garcia who operated and maintained the same under Acme Taxi,
petitioners trade name.
16
A year later, one of the taxicabs, driven by their employee,

Emeterio Martin, collided with a motorcycle. Unfortunately the driver of
the motorcycle, Florante Galvez died from the injuries it sustained.
Criminal case was filed against Emeterio Martin, while a civil case
was filed by the heir of the victim against Lita Enterprises. In the decision
of the lower court Lita Enterprises was held liable for damages for the
amount of P25, 000.00 and P7, 000.00 for attorneys fees.
A writ of execution for the decision followed, 2 of the cars of the
respondents spouses were levied and were sold to a public auction.
On March 1973, respondent Ocampo decided to register his
taxicabs in his own name. The manager of petitioner refused to give him
the registration papers. Thus, making spouses file a complaint against
petitioner. In the decision, Lita Enterprise was ordered to return the three
certificate of registration not levied in the prior case.
Petitioner now prays that private respondent be held liable to pay
the amount they have given to the heir of Galvez.
Issue: Whether or not petitioner can recover from private respondent,
knowing they are in an arrangement known as kabit system.
Held: Kabit system is defined as, when a person who has been granted
a certificate of convenience allows another person who owns a motor
vehicle to operate under such franchise for a fee. This system is not
penalized as a criminal offense but is recognized as one that is against
public policy; therefore it is void and inexistent.
It is fundamental that the court will not aid either of the 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 trial and
appellate courts to have accorded the parties relief from their
predicament. Specifically Article 1412 states that:
If the act in which the unlawful or forbidden cause consists does
not constitute a criminal offense, the following rules shall be observed:
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 others undertaking.
The principle of in pari delicto is evident in this case. 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 sold or delivered, or damages for its
property agreed to be sold or delivered, or damages for its violation. The
parties in this case are in pari delicto, therefore no affirmative relief can
be granted to them.
TEJA MARKETING V. IAC (148 SCRA 347)
Facts: Pedro Nale bought from Teja Marketing a motorcycle with complete
accessories and a sidecar. A chattel mortgage was constituted as a
security for the payment of the balance of the purchase price. The
records of the Land Transportation Commission show that the motorcycle
sold to the defendant was first mortgaged to the Teja Marketing by Angel
Jaucian though the Teja Marketing and Angel Jaucian are one and the
same, because it was made to appear that way only as the defendant had
no franchise of his own and he attached the unit to the plaintiff's MCH
Line. The agreement also of the parties here was for the plaintiff to
undertake the yearly registration of the motorcycle with the Land
Transportation Commission. The plaintiff, however failed to register the
motorcycle on that year on the ground that the defendant failed to comply
17
with some requirements such as the payment of the insurance premiums

and the bringing of the motorcycle to the LTC for stenciling, the plaintiff
said that the defendant was hiding the motorcycle from him. Lastly, the
plaintiff also explained that though the ownership of the motorcycle was
already transferred to the defendant, the vehicle was still mortgaged with
the consent of the defendant to the Rural Bank of Camaligan for the
reason that all motorcycle purchased from the plaintiff on credit was
rediscounted with the bank.
Teja Marketing made demands for the payment of the motorcycle
but just the same Nale failed to comply, thus forcing Teja Marketing to
consult a lawyer and file an action for damage before the City Court of
Naga in the amount of P546.21 for attorney's fees and P100.00 for
expenses of litigation. Teja Marketing also claimed that as of 20 February
1978, the total account of Nale was already P2, 731, 05 as shown in a
statement of account; includes not only the balance of P1, 700.00 but an
additional 12% interest per annum on the said balance from 26 January
1976 to 27 February 1978; a 2% service charge; and P546.21 representing
attorney's fees. On his part, Nale did not dispute the sale and the
outstanding balance of P1,700.00 still payable to Teja Marketing; but
contends that because of this failure of Teja Marketing to comply with his
obligation to register the motorcycle, Nale suffered damages when he
failed to claim any insurance indemnity which would amount to no less
than P15,000.00 for the more than 2 times that the motorcycle figured in
accidents aside from the loss of the daily income of P15.00 as boundary
fee beginning October 1976 when the motorcycle was impounded by the
LTC for not being registered. The City Court rendered judgment in favor of
Teja Marketing, dismissing the counterclaim, and ordered Nale to pay Teja
Marketing On appeal to the Court of First Instance of Camarines Sur, the
decision was affirmed in toto. Nale filed a petition for review with the
Intermediate Appellate Court. On 18 July 1983, the appellate court set
aside the decision under review on the basis of doctrine of "pari delicto,"
and accordingly, dismissed the complaint of Teja Marketing, as well as the
counterclaim of Nale; without pronouncements as to costs. Hence, the
petition for review was filed by Teja Marketing and/or Angel Jaucian.
Issue: Whether the defendant can recover damages against the plaintiff?
Held: Unquestionably, the parties herein operated under an arrangement,
commonly known as the "kabit system" whereby a person who has been
granted a certificate of public convenience allows another person who
owns motor 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. Although not out rightly penalized as a criminal offense, the kabit
system is invariably recognized as being contrary to public policy and,
therefore, void and in existent 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 both where it finds then. Upon this premise
it would be error to accord the parties relief from their predicament.
3. BOUNDARY SYSTEM
Case/s:
MAGBOO V. BERNARDO 7 SCRA 952
Facts: Urbano and Emilia Magboo are the parents of Cesar Magboo, a
child of 8 years old, who lived with them and was under their custody until
his death on 24 October 1956 when he was killed in a motor vehicle
18
accident, the fatal vehicle being a passenger jeepney owned by Delfin

Bernardo. At the time of the accident, said passenger jeepney was driven
by Conrado Roque. The contract between Roque and Bernardo was that
Roque was to pay to Bernardo the sum of P8.00, which he paid to
Bernardo, for privilege of driving the jeepney, it being their agreement
that whatever earnings Roque could make out of the use of the jeepney in
transporting passengers from one point to another in the City of Manila
would belong entirely to Roque. As a consequence of the accident and as
a result of the death of Cesar Magboo in said accident, Roque was
prosecuted for homicide thru reckless imprudence before the CFI Manila.
Roque was sentenced to 6 months of arresto mayor, with the accessory
penalties of the law; to indemnify the heirs of the deceased in, with
subsidiary imprisonment in case of insolvency, and to pay the costs.
Pursuant to said judgment Roque served his sentence but he was not able
to pay the indemnity because he was insolvent. An action was filed by the
spouses Magboo against Bernardo is for enforcement of his subsidiary
liability. The trial court ordered Bernardo to pay the. Bernardo appealed to
the Court of Appeals, which certified the case to the Supreme Court on the
ground that only questions of law are involved.
Issue: Whether or not an employer-employee relationship between the
jeepney operator and the driver?
Held: An employer-employee relationship exists between a jeepney owner
and a driver under a boundary system arrangement. The features which
characterize the boundary system - namely the fact that the driver does
not receive a fixed wage but gets only the excess of the amount of fares
collected by him over the amount he pays to the jeep-owner, and the
gasoline consumed by the jeep is for the amount of the driver - are not
sufficient to withdraw the relationship between them from that of
employee and employer. Consequently, the jeepney owner is subsidiary
liable as employer in accordance with Art.103, Revised Penal Code.
II. CONTRACTUAL EFFECTS
A. CAUSE OF ACTION
1. FABRE VS. CA 259 SCRA 426 (G.R. NO. 111127, JULY 26, 1996)
Facts: Petitioner and his wife were owners of a minibus. They used the
bus principally in connection with a bus service for school children which
they operated in Manila and was driven by Porfirio Cabil. His job was to
take school children to and from the school. Sometime during November
private respondent WWCF arranged with petitioners for the transportation
of 33 members of its ministry form Manila to La Union and back in
consideration of which private respondent shall pay petitioners the
stipulated amount. On the day of the trip, several members of the ministry
came in late, hence, the departure was delayed. On the may to La Union,
the minibus caught an accident causing damages and injury to several
passengers particularly Amyline Antonio. Apparently, the driver was
unable to see a sharp curve ahead of time for him to be able to avoid the
mishap. A criminal complaint was them filed against the driver, while
defendant spouses were also made jointly liable.
Issue: Whether or not defendant spouses failed to exercise diligence of a
good father of the family?
Held: Court ruled that defendant spouses were negligent in the exercise
of their duties as owners of the minibus for it was clearly established by
evidence that said vehicle was not properly check if it was fit for the long
trip. Moreover, defendants were also negligent in the selection and
supervision of their employee, particularly, the driver, who was only used
to driving short distances.
2. AIR FRANCE VS CARRASCOSO (18 SCRA 155)
19
Facts: Plaintiff, a civil engineer, was a member of a group of 48 Filipino

pilgrims that left Manila for Lourdes on March 30, 1958.
On March 28, 1958, the defendant, Air France, through its
authorized agent, Philippine Air Lines, Inc., issued to plaintiff a "first class"
round trip airplane ticket from Manila to Rome. From Manila to Bangkok,
plaintiff traveled in "first class", but at Bangkok, the Manager of the
defendant airline forced plaintiff to vacate the "first class" seat that he
was occupying because, in the words of the witness Ernesto G. Cuento,
there was a "white man", who, the Manager alleged, had a "better right"
to the seat. When asked to vacate his "first class" seat, the plaintiff, as
was to be expected, refused, and told defendant's Manager that his seat
would be taken over his dead body; a commotion ensued, and, according
to said Ernesto G. Cuento, "many of the Filipino passengers got nervous in
the tourist class; when they found out that Mr. Carrascoso was having a
hot discussion with the white man [manager], they came all across to Mr.
Carrascoso and pacified Mr. Carrascoso to give his seat to the white man"
and plaintiff reluctantly gave his "first class" seat in the plane after being
threatened that he will be thrown out of the plane if he does not oblige.
The captain of the plane, when asked to intervene, refused to do so.
Issue: Whether or not there was bad faith on the part of Air France,
petitioner, entitling Rafael Carrascoso, respondent for moral and
exemplary damages as against the petitioner?
Held: The court held in favor of the respondent, Carrascoso.
The responsibility of an employer for the tortious act of its
employees need not be essayed. It is well settled in law. For the willful
malevolent act of petitioner's manager, petitioner, his employer, must
answer.
A contract to transport passengers is quite different in kind and
degree from any other contractual relation. And this, because of the
relation which an air-carrier sustains with the public. Its business is mainly
with the traveling public. It invites people to avail of the comforts and
advantages it offers. The contract of air carriage, therefore, generates a
relation attended with a public duty. Neglect or malfeasance of the
carrier's employees, naturally, could give ground for an action for
damages.
Passengers do not contract merely for transportation. They have a
right to be treated by the carrier's employees with kindness, respect,
courtesy and due consideration. They are entitled to be protected against
personal misconduct, injurious language, indignities and abuses from such
employees. So it is that any rule or discourteous conduct on the part of
employees towards a passenger gives the latter an action for damages
against the carrier.
The court held that the judgment of the Court of Appeals does not
suffer from reversible error. CA decision affirmed.
3. TIU VS. ARRIESGADO G.R. NO. 138060, SEPTEMBER 1, 2004
Facts: At about 10:00 p.m. of March 15, 1987, the cargo truck marked
"Condor Hollow Blocks and General Merchandise" bearing plate number
GBP-675 was loaded with firewood in Bogo, Cebu and left for Cebu City.
Upon reaching Sitio Aggies, Poblacion, Compostela, Cebu, just as the truck
passed over a bridge, one of its rear tires exploded. The driver, Sergio
Pedrano, then parked along the right side of the national highway and
removed the damaged tire to have it vulcanized at a nearby shop, about
700 meters away. Pedrano left his helper, Jose Mitante, Jr. to keep watch
over the stalled vehicle, and instructed the latter to place a spare tire six
20
fathoms away behind the stalled truck to serve as a warning for oncoming
vehicles. The trucks tail lights were also left on. It was about 12:00 a.m.,
March 16, 1987.
At about 4:45 a.m., D Rough Riders passenger bus with plate
number PBP-724 driven by Virgilio Te Laspias was cruising along the
national highway of Sitio Aggies, Poblacion, Compostela, Cebu. The
passenger bus was also bound for Cebu City, and had come from Maya,
Daanbantayan, Cebu. Among its passengers were the Spouses Pedro A.
Arriesgado and Felisa Pepito Arriesgado, who were seated at the right side
of the bus, about three (3) or four (4) places from the front seat.
As the bus was approaching the bridge, Laspias saw the stalled truck,
which was then about 25 meters away. He applied the breaks and tried to
swerve to the left to avoid hitting the truck. But it was too late; the bus
rammed into the trucks left rear. The impact damaged the right side of the
bus and left several passengers injured. Pedro Arriesgado lost
consciousness and suffered a fracture in his right colles. His wife, Felisa,
was brought to the Danao City Hospital. She was later transferred to the
Southern Island Medical Center where she died shortly thereafter.
Respondent Pedro A. Arriesgado then filed a complaint for breach of
contract of carriage, damages and attorneys fees before the Regional Trial
Court of Cebu City, Branch 20, against the petitioners, D Rough Riders bus
operator William Tiu and his driver, Virgilio Te Laspias on May 27, 1987.
The respondent alleged that the passenger bus in question was cruising at
a fast and high speed along the national road, and that petitioner Laspias
did not take precautionary measures to avoid the accident.
The petitioners, for their part, filed a Third-Party Complaint against the
following: respondent Philippine Phoenix Surety and Insurance, Inc. (PPSII),
petitioner Tius insurer; respondent Benjamin Condor, the registered
owner of the cargo truck; and respondent Sergio Pedrano, the driver of the
truck. They alleged that petitioner Laspias was negotiating the uphill
climb along the national highway of Sitio Aggies, Poblacion, Compostela,
in a moderate and normal speed. It was further alleged that the truck was
parked in a slanted manner, its rear portion almost in the middle of the
highway, and that no early warning device was displayed. Petitioner
Laspias promptly applied the brakes and swerved to the left to avoid
hitting the truck head-on, but despite his efforts to avoid damage to
property and physical injuries on the passengers, the right side portion of
the bus hit the cargo trucks left rear.
HELD: The rules which common carriers should observe as to the safety
of their passengers are set forth in the Civil Code, Articles 1733, 1755and
1756. It is undisputed that the respondent and his wife were not safely
transported to the destination agreed upon. In actions for breach of
contract, only the existence of such contract, and the fact that the obligor,
in this case the common carrier, failed to transport his passenger safely to
his destination are the matters that need to be proved. This is because
under the said contract of carriage, the petitioners assumed the express
obligation to transport the respondent and his wife to their destination
safely and to observe extraordinary diligence with due regard for all
circumstances. Any injury suffered by the passengers in the course
thereof is immediately attributable to the negligence of the carrier. Upon
the happening of the accident, the presumption of negligence at once
arises, and it becomes the duty of a common carrier to prove that he
observed extraordinary diligence in the care of his passengers. It must be
stressed that in requiring the highest possible degree of diligence from
common carriers and in creating a presumption of negligence against
them, the law compels them to curb the recklessness of their drivers.
While evidence may be submitted to overcome such presumption of
negligence, it must be shown that the carrier observed the required
extraordinary diligence, which means that the carrier must show the
21
utmost diligence of very cautious persons as far as human care and

foresight can provide, or that the accident was caused by fortuitous event.
As correctly found by the trial court, petitioner Tiu failed to conclusively
rebut such presumption. The negligence of petitioner Laspias as driver of
the passenger bus is, thus, binding against petitioner Tiu, as the owner of
the passenger bus engaged as a common carrier.
B. EXTRAORDINARY DILIGENCE
REQUIREMENT OF EXTRAORDINARY DILIGENCE
Common Carriers, from the nature of their business and for reasons of
public policy, are bound to observe extraordinary diligence on the
vigilance over goods and for the safety of the passengers transported by
them according to all the circumstances of each case. (Art. 1733, Civil
Code)
Coverage
1.
2.
Vigilance over goods (Arts. 1734-1754)

Safety of passengers (Arts. 1755-1763)
Passenger - A person who has entered into a contract of carriage,

express or implied, with the carrier. They are entitled to extraordinary
diligence from the common carrier.
Persons Not Considered As Passengers
1.
One who has not yet boarded any part of a vehicle regardless
of whether or not he has purchased a ticket;
2.
One who remains on a carrier for an unreasonable length of
time after he has been afforded every safe opportunity to alight;
3.
One who has boarded by fraud, stealth, or deceit;
4.
One who attempts to board a moving vehicle, although he
has a ticket, unless the attempt be with the knowledge and consent
of the carrier;
5.
One who boarded a wrong vehicle, has been properly
informed of such fact, and on alighting, is injured by the carrier; or
6.
One who rides any part of the vehicle which is unsuitable or
dangerous or which he knows is not designed or intended for
passengers.
RULES ON PRESUMPTION OF NEGLIGENCE:
A. In the Carriage of Goods:
In case of loss, destruction and deterioration of goods, common
carriers are presumed to be at fault or have acted negligently,
unless they prove that they exercise extraordinary diligence.
In the transport of goods, mere proof of delivery of goods in good
order to a carrier and the subsequent arrival of the same goods at
the place of destination in bad order makes for a prima facie case
against the carrier.
B. In the Carriage of Passengers:
In case of death or injury to passengers, common carriers are
presumed to be at fault or have acted negligently, unless they
prove that they exercise extraordinary diligence. .(Art. 1755,NCC)
The court need not make an express finding of fault or negligence of
common carriers. The law imposes upon common carriers strict
liability, as long as it is shown that there exists a relationship
between the passenger and the common carrier and that injury or
death took place during the existence of the contract.
The common carrier is not an absolute insurer against all possible
risks of transportation or travel. (Pilapil vs. CA et al, 180 SCRA 546)
Doctrine of Proximate Cause is NOT applicable to contract of carriage
The injured passenger or owner of goods need not prove causation
to establish his case. The presumption arises upon the happening of
22
the accident. (Calalas v. CA, 383 SCRA, [2002])

DEFENSES OF COMMON CARRIERS
General Rule: Common carriers are responsible for the loss, destruction
or deterioration of the goods.
Exceptions: The same is due to any of the following causes only:
a. Flood, storm, earthquake, lightning or other natural disaster or
calamity;
b. Act of public enemy in war, whether international or civil;
c. Act or omission of the shipper or the owner of the goods;
d. The character of the goods or defects in the packing or in the
containers;
e. Order or act of competent authority. (Art.1734, Civil Code)
The above enumeration is exclusive. If not one of those

enumerated is present, the carrier is liable. (Belgian Chartering and
Shipping, N.V. v. Phil. First Insurance Co.,Inc., 383 SCRA, 2002)
The exceptions in Art 1734 must be proven whether the
presumption of negligence applies. Common carriers are bound to
observe extraordinary diligence in the vigilance over the goods
transported by them. They are presumed to have been at fault or to
have acted negligently if the goods are lost, destroyed or
deteriorated. To overcome the presumption of negligence in case of
loss, destruction or deterioration of the goods, the common carrier
must prove that it exercised extraordinary diligence. There are,
however, exceptions to this rule. Article 1734 of the Civil Code
enumerates the instance when the presumption of negligence does
not attach. (Delsan v. Trans. American Home Insurance, August 15,
2006)
a. Caso Fortuito / Force Majeure

Requisites:
a. Must be the proximate and only cause of the loss;
b. Event independent of human will;
c. Occurrence makes it impossible for debtor to fulfill the obligation in
a normal manner;
d. Obligor must be free of participation in, or aggravation of, the injury
to the debtor; and
e. Impossible to foresee or impossible to avoid.
o
Fire is not considered a natural disaster or calamity as it arises

almost invariably from some act of man or by human means
unless caused by lightning or by natural disaster or calamity. It
may even be caused by the actual fault or privity of the common
carrier. (Eastern Shipping Lines Inc. vs. IAC, 150 SCRA 469,
[1987])
Mechanical defects are not force majeure if the same was

discoverable by regular and adequate inspections. (Aquino T. &
Hernando, Notes and Cases on the Law on Transportation and
Public Utilities, , R.P. 2004 ed. p.120-122)
B. Act of God
Requisites:
1. The common carrier must have exercised extraordinary diligence
before, during and after the time of the accident;
2. The event must be unforeseen or even if it can be foreseen, it
cannot be avoided;
3. There must have been no undue delay on the part of the common
carrier;
4. The proximate cause must not be committed by the common
carrier.
23
Fortuitous event must be established to be the proximate

cause of the loss. (Asia Lighterage and Shipping, Inc. v. CA, et al.,
409 SCRA, [2003])
Exemption to Liability From Natural Disasters or Calamities:

1. The natural disaster must have been the proximate cause of the
loss.
2. It must have been the cause of the loss.
3. The common carrier must have exercised due diligence to prevent
or minimize the damage or loss before, during and after the natural
disaster.
4. The common carrier has not negligently incurred delay in
transporting the goods.
C. Acts of Public Enemy In War
Requisites:
1. The act of the public enemy must have been the proximate and
only cause of the loss; and
2. The common carrier must have exercised due diligence to prevent
or minimize the loss before, during or after the act causing the loss,
deterioration or destruction of the goods (Art. 1739, Civil Code)
D. Act or Omission of the Shipper or Owner of Goods
1. The act or omission of the shipper/owner must have been the sole
and proximate cause of the loss. This is an absolute defense.
2. Contributory Negligence: partial defense. (Art. 1741, Civil Code )
Doctrine of Contributory Negligence
Failure of a person who has been exposed to injury by the fault or

negligence of another, to use such degree of care for his safety and
protection as ordinarily prudent men would use under the
circumstances. (Rakes v. Atlantic, Gulf and Pacific Co., 7 Phil. 359
[1907])
The common carrier shall be liable even if the shipper or

merely contributed to the loss, destruction or deterioration
goods, the proximate cause thereof being the negligence
common carrier, the latter shall be liable in damages,
however, shall be equitably reduced. (Art. 1741, Civil Code)
owner
of the
of the
which,
E. Character of the Goods or Defects in the Packing or in the

Container
That the loss, destruction or deterioration was caused by the
character of the goods or the faulty packing or containers.
Even if the damage should be caused by the inherent
defect/character of the goods, the common carrier must exercise
due diligence to forestall or lessen the loss. (Art. 1742, Civil Code)
o
The rule is that if the improper packing is known to the carrier or

his employee or is apparent upon ordinary observation, but he
nevertheless accepts the same without protest or exception
notwithstanding such condition, he is not relieved of liability for
the resulting damage. (A.F. Sanchez Brokerage Inc. vs. C.A., 447
SCRA 427, [2004])
E. Order or Act of Public Authority
The common carrier is not ipso facto relieved

from liability due to the loss, destruction or deterioration of goods
caused by public authority.
Requisites:
The common carrier must prove that the public authority has the
power to issue the order for the seizure or destruction of the goods.
The common carrier must exercise extraordinary diligence to
24
prevent or minimize the loss, destruction or deterioration of he

goods at the time of the accident.
o
Said public authority must have the power to issue the order
(Article 1743, Civil Code). Consequently, where the officer acts
without legal process, the common carrier will be held liable.
(Ganzon v. CA 161, SCRA 646 [1988])
Cases:
REPUBLIC VS. LORENZO SHIPPING LINES (7 FEBRUARY 2005)
Facts: The Republic of the Philippines signed an agreement through the
Department of Health and the Cooperative for American Relief
Everywhere, Inc. (CARE) wherein it would acquire from the US government
donations of Non-Fat Dried Milk and other food products. In turn, the
Philippines will transport and distribute the donated to the intended
beneficiaries of the country. As a result, it entered into a contract of
carriage of goods with the herein respondent. The latter shipped 4,868
bags of non-fat dried milk from Sept-Dec 1988. The consignee named in
the bills was Abdurahman Jama, petitioners branch supervisor in
Zamboanga City. Upon reaching the port of Zamboanga, respondents
agent, Efren Ruste Shipping Agency unloaded the said milks. Before each
delivery, Rogelio Rizada and Ismael Zamora both delivery checkers of
Efren Ruste requested Abdurahman to surrender the originals of the Bill of
Lading. However, the petitioner alleged that they did not receive anything
and they filed a claim against the herein respondent. The petitioner
contended that the respondents failed to exercise extraordinary diligence.
Issue: Whether the respondents failed to exercise extraordinary diligence
required by law?
Held The surrender of the Bill of Lading is not a condition precedent for a
common carrier to be discharged of its contractual obligation. If the
surrender is not possible, acknowledgment of the delivery by signing the
receipt suffices. The herein respondent did not even bother to prevent the
resignation of abdurhaman Jama to be utilized as a witness.
CENTRAL SHIPPING CO. VS. INSURANCE CO. (SEPTEMBER 20, 200,
121 SCRA 769)
Facts: On July 25, 1990 at Puerto Princesa, Palawan, the petitioner
received on board its vessel, the M/V Central Bohol, 376 pieces of Round
Logs and undertook to transport said shipment to Manila for delivery to
Alaska Lumber Co., Inc. The cargo is insured for P3, 000, 000.00 against
total lost under respondents MarineCargo Policy.
After loading the logs, the vessel starts its voyage. After few hours
of the trip, the ship tilts 10 degrees to its side, due to the shifting of the
logs in the hold. It continues to tilt causing the captain and the crew to
abandon ship. The ship sank.
Respondent alleged that the loss is due to the negligence and fault
of the captain. While petitioner contends that the happening is due to
monsoons which is unforeseen or casa fortuito.
Issue: Whether or not petitioner is liable for the loss of cargo?
Held: From the nature of their business and for reasons of public policy,
common carriers are bound to observe extraordinary diligence over the
goods they transport, according to all the circumstances of each case. In
the event of loss, destruction or deterioration of the insured goods,
common carriers are responsible; that is, unless they can prove that such
loss, destruction or deterioration was brought about -- among others -- by
25
"flood, storm, earthquake, lightning or other natural disaster or calamity."

In all other cases not specified under Article 1734 of the Civil Code,
common carriers are presumed to have been at fault or to have acted
negligently, unless they prove that they observed extraordinary diligence.
The contention of the petitioner that the loss is due to casa fortuito
exempting them from liability is untenable. Petitioner failed to show that
such natural disaster or calamity was the proximate and only cause of the
loss. Human agency must be entirely excluded from the cause of injury or
loss. In other words, the damaging effects blamed on the event or
phenomenon must not have been caused, contributed to, or worsened by
the presence of human participation. The defense of fortuitous event or
natural disaster cannot be successfully made when the injury could have
been avoided by human precaution.
The monsoon is not the proximate cause of the sinking but is due to
the improper stowage of logs. The logs were not secured by cable wires,
causing the logs to shift and later on the sinking the ship. This shows that
they did not exercise extraordinary diligence, making them liable for such
loss.
SWEET LINES INC, VS. CA (121 SCRA 769)
Facts: Herein private respondents purchased first-class tickets from
petitioner at the latters office in Cebu City. They were to board M/V Sweet
Grace bound for Catbalogan, Western Samar. Instead of departing at the
scheduled hour of about midnight on July 8, 1972, the vessel set sail at
3:00 am of July 9, 1972 only to be towed back to Cebu due to engine
trouble, arriving there on the same day at about 4:00 pm. The vessel lifted
anchor again on July 10, 1972 at around 8:00 am. Instead of docking at
Catbalogan (the first port of call), the vessel proceeded direct to Tacloban.
Private respondents had no recourse but to disembark and board a ferry
boat to Catbalogan. Hence, the suit for breach of contract of carriage.
Issue: Whether or not the mechanical defect constitutes a fortuitous
event which would exempt the carrier from liability.
Held: No. As found by the trial court and the Court of Appeals, there was
no fortuitous event or force majeure which prevented the vessel from
fulfilling its undertaking of taking the private respondents to Catbalogan.
In the first place, mechanical defects in the carrier are not considered a
caso fortuito that exempts the carrier from responsibility. In the second
place, even granting arguendo that the engine failure was a fortuitous
event, it accounted on for the delay of departure. When the vessel finally
left the port, there was no longer any force majeure that justified bypassing a port of call.
EASTERN SHIPPING LINES VS. CA 234 SCRA 7
Facts: On December 4, 1981, two fiber drums of riboflavin were shipped
from Yokohama, Japan for delivery vessel "SS EASTERN COMET" owned by
defendant Eastern Shipping Lines under a bill of lading. The shipment was
insured under plaintiff's Marine Insurance Policy. Upon arrival of the
shipment in Manila on December 12, 1981, it was discharged unto the
custody of defendant Metro Port Service, Inc. The latter excepted to one
drum, said to be in bad order, which damage was unknown to plaintiff.
On January 7, 1982 defendant Allied Brokerage Corporation
received the shipment from defendant Metro Port Service, Inc., one drum
opened and without seal. On January 8 and 14, 1982, defendant Allied
Brokerage Corporation made deliveries of the shipment to the consignee's
warehouse. The latter excepted to one drum which contained spillages,
while the rest of the contents was adulterated/fake.
26
Plaintiff contended that due to the losses/damage sustained by said

drum, the consignee suffered losses totaling P19, 032.95, due to the fault
and negligence of defendants. Claims were presented against defendants
who failed and refused to pay the same. As a consequence of the losses
sustained, plaintiff was compelled to pay the consignee P19, 032.95 under
the aforestated marine insurance policy, so that it became subrogated to
all the rights of action of said consignee against defendants.
Issue: Whether or not a claim for damage sustained on a shipment of
goods can be a solidary or joint and several, liability of the common
carrier, the arrastre operator and the customs broker?
Held: The common carrier's duty to observe the requisite diligence in the
shipment of goods lasts from the time the articles are surrendered to or
unconditionally placed in the possession of, and received by, the carrier
for transportation until delivered to, or until the lapse of a reasonable time
for their acceptance by, the person entitled to receive them (Arts. 17361738, Civil Code). When the goods shipped either are lost or arrive in
damaged condition, a presumption arises against the carrier of its failure
to observe that diligence, and there need not be an express finding of
negligence to hold it liable (Art. 1735, Civil Code). There are, of course,
exceptional cases when such presumption of fault is not observed but
these cases, enumerated in Article 1734 of the Civil Code, are exclusive,
not one of which can be applied to this case.
As to The question of charging both the carrier and the arrastre
operator with the obligation of properly delivering the goods to the
consignee, the legal relationship between the consignee and the arrastre
operator is akin to that of a depositor and warehouseman while 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 the obligation to deliver the goods in good condition to the
consignee. A factual finding of both the Supreme Court and the appellate
court was that there was sufficient evidence that the shipment sustained
damage while in the successive possession of appellants. Accordingly, the
liability imposed on Eastern Shipping Lines, Inc., the sole petitioner in this
case, is inevitable regardless of whether there are others solidarily liable
with it.
LA MALLORCA VS. CA (G.R. NO. L-20761, 27 JULY 1966, 17 SCRA
739)
Facts: Plaintiffs, husband and wife, together with their three minor
daughters (Milagros, 13 years old, Raquel, about 4 years old and Fe, 2
years old) boarded the Pambusco at San Fernando Pampanga, bound for
Anao, Mexico, Pampanga. Such bus is owned and operated by the
defendant.
They were carrying with them four pieces of baggage containing
their personal belonging. The conductor of the b us issued three tickets
covering the full fares of the plaintiff and their eldest child Milagros. No
fare was charged on Raquel and Fe, since both were below the height
which fare is charged in accordance with plaintiffs rules and regulations.
After about an hours trip, the bus reached Anao where it stopped to
allow the passengers bound therefore, among whom were the plaintiffs
and their children to get off. Mariano Beltran, carrying some of their
baggage was the first to get down the bus, followed by his wife and
children. Mariano led his companion to a shaded spot on the left
pedestrian side of the road about four or five meters away from the
vehicle. Afterwards, he returned to the bus in controversy to get his
27
paying, which he had left behind, but in so doing, his daughter followed
him unnoticed by his father. While said Mariano Beltran was on he running
board of the bus waiting for the conductor to hand him his bayong which
he left under one its seats near the door, the bus, whose motor was not
shut off while unloading suddenly started moving forward, evidently to
resume its trip, notwithstanding the fact that the conductor was still
attending to the baggage left behind by Mariano Beltran. Incidentally,
when the bus was again placed in a complete stop, it had traveled about
10 meters from point where plaintiffs had gotten off.
Sensing the bus was again in motion; Mariano immediately jumped
form the running board without getting his bayong from conductor. He
landed on the side of the road almost board in front of the shaded place
where he left his wife and his children. At that time, he saw people
beginning to gather around the body of a child lying prostrate on the
ground, her skull crushed, and without life. The child was none other than
his daughter Raquel, who was run over by the bus in which she rode
earlier together her parent.
For the death of the said child, plaintiffs comment the suit against
the defendant to recover from the latter damages.
Issue: Whether or not the child was no longer the passenger of the bus
involved in the incident, and therefore, the contract of carriage was
already terminated?
Held: There can be no controversy that as far as the father is concerned,
when he returned to the bus for his bayong which was not unloaded, the
relation of passenger and carrier between him and the petitioner
remained subsisting. The relation of carrier and passenger does not
necessarily cease where the latter, after alighting from the car aids the
carriers servant or employee in removing his baggage from the car.
It is a rule that the relation of carrier and passenger does not cease
the moment the passenger alights from the carriers 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 carriers premises.
The father returned to the bus to get one of his baggages which
was not unloaded when they alighted from the bus. Raquel must have
followed her 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 had jumped down from
the moving vehicle. It was that 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 carriers agent had exercised the utmost diligence of a
very cautious 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. The driver, although stopping the bus,
nevertheless did not put off the engine. He started to run the bus even
before the conductor gave him the signal to go and while the latter was
still unloading part of the baggage of the passengers Beltran and family.
The presence of the 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.
ABOITIZ SHIPPING CORP. VS. CA (179 SCRA 95)
Facts: On May 11, 1975, Anacleto Viana boarded M/|V Antonio from
Occidental Mindoro bound for Manila. Upon arrival on May 12, 1975, the
passengers therein disembarked through a gangplank connecting the
vessel to the pier. Viana, instead of disembarking through the gangplank,
disembarked through the third deck, which was at the same level with the
28
pier. An hour after the passengers disembarked, Pioneer stevedoring

started to operate in unloading the cargo from the ship. Viana then went
back, remembering some of his cargoes left at the vessel. At that time,
while he was pointing at the crew of the vessel to where his cargoes were
loaded, the crane hit him, pinning him between the crane and the side of
the vessel. He was brought to the hospital where he died 3 days after
(May 15). The parents of Anacleto filed a complaint against Aboitiz for
breach of contract of carriage.
The trial court ruled in favor of the plaintiffs. Then both Aboitiz and
Pioneer filed a motion for reconsideration, upon which the trial court
issued an order absolving Pioneer from liability but not Aboitiz. On appeal,
CA affirmed the trial court ruling. Hence, this petition.
Issue: Whether or not Viana is still considered a passenger at the time of
the incident?
Held: Yes. The La Mallorca case is applicable in the case at bar.
The rule is that the relation of carrier and passenger continues until
the passenger has been landed at the port of destination and has left the
vessel owners dock or premises. Once created, the relationship will not
ordinarily terminate until the passenger has, after reaching his
destination, safely alighted from the carriers conveyance or had a
reasonable opportunity to leave the carriers premises. All persons who
remain on the premises a reasonable time after leaving the conveyance
are to be deemed passengers, and what is a reasonable time or a
reasonable delay within this rule is to be determined from all the
circumstances, and includes a reasonable time to see after his baggage
and prepare for his departure. The carrier-passenger relationship is not
terminated merely by the fact that the person transported has been
carried to his destination if, for example, such person remains in the
carriers premises to claim his baggage.
The reasonableness of the time should be made to depend on the
attending circumstances of the case, such as the kind of common carrier,
the nature of its business, the customs of the place, and so forth, and
therefore precludes a consideration of the time element per se without
taking into account such other factors.
Where a passenger dies or is injured, the common carrier is
presumed to have been at fault or to have acted negligently. This gives
rise to an action for breach of contract where all that is required of plaintiff
is to prove the existence of the contract of carriage and its nonperformance by the carrier, that is, the failure of the carrier to carry the
passenger safely to his destination, which, in the instant case, necessarily
includes its failure to safeguard its passenger with extraordinary diligence
while such relation subsists.
BRINAS VS. PEOPLE (125 SCRA 687)
Facts: In the afternoon of January 6, 1957, Juanito Gesmundo bought a
train ticket at the railroad station in Tagkawayan, Quezon for his 55-year
old mother Martina Bool and his 3-year old daughter Emelita Gesmundo.
The two were bound for Lusacan in Tiaong, Quezon.
They boarded the train of Manila Railroad Company at about 2pm.
Upon approaching Barrio Lagalag at 8pm, the train slowed down and the
conductor, accused-appellant, Clemente Brinas, shouted Lusacan,
Lusacan!
The old woman walked towards the train exit carrying the child with
one hand and holding her baggage with the other. When they were near
the door, the train suddenly picked up speed. The old woman and the
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child stumbled from the train causing them to fall down the tracks and
were hit by an oncoming train, causing their instant death.
A criminal information was filed against Victor Milan, the driver,
Hermogenes Buencamino, the assistant conductor and Clemente Brinas
for Double Homicide thru Reckless Imprudence. But the lower court
acquitted Milan and Buencamino. On appeal to the CA, respondent CA
affirmed the decision.
Issue: Whether or not the CA erred in ruling the accused-appellant was
negligent?
Held: There was no error in the factual findings of the respondent court
and in the conclusion drawn from the findings.
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.
The appellant was negligent because his announcement was premature
and erroneous, for it took a full 3 minutes more before the next barrio of
Lusacan was reached. The premature announcement prompted the two
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 and picked up speed. The
proximate cause of the death of the victims was the premature and
erroneous announcement of petitioner-appellant.
GACAL VS. PAL (183 SCRA 189, G.R. NO. 55300 MARCH 16, 1990)
Facts: Plaintiffs Franklin Gacal, his wife and three others were passengers
of PAL plane at Davao Airport for a flight to Manila, not knowing that the
flight, were Commander Zapata with other members of Moro National
Liberation Front. They were armed with grenades and pistols. After take
off, the members of MNLF announced a hijacking and directed the pilot to
fly directly to Libya, later to Sabah. They were, however, forced to land in
Zamboanga airport for refueling, because the plane did not have enough
fuel to make direct flight to Sabah. When the plane began to taxi at the
runaway of Zamboanga airport, it was met by two armored cars of the
military.
An armored car subsequently bumped the stairs leading inside the
plane. That commenced the battle between the military and the hijackers,
which led ultimately to the liberation of the planes surviving crew and
passengers with the final score of ten passengers and three hijackers
dead.
Issue: Whether or not hijacking is a case fortuito or force majeure, which
would exempt an aircraft from liability for, damages to its passengers and
personal belongings that were lost during the incident?
Held: In order to constitute a caso fortuito that would exempt from
liability under Art 1174 of the civil code, it is necessary that the following
elements must occur: (a) the cause of the breach of obligation must be
independent of human will; (b) the event must be unforeseeable or
unavoidable; (c) the event must be such as to render it impossible for the
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debtor to fulfill his obligation in a normal manner; (d) the debtor must be
free from any participation in or aggravation of the injury to the creditor.
Applying the above guidelines, the failure to transport the
petitioners safely from Davao to Manila was due to the skyjacking incident
staged buy the MNLF without connection to the private respondent,
hence, independent of will of PAL or its passengers.
The events rendered it impossible for PAL to perform its obligation
in a normal manner and it cannot be faulted for negligence on the duty
performed by the military. The existence of force majeure has been
established thus exempting PAL from payment of damages.
PILAPIL VS. CA 180 SCRA 546
Facts: On September 16, 1971, Jose Pilapil boarded defendants bus
bearing No. 409 at San Nicolas, Iriga City at about 6:00PM. Upon reaching
the vicinity of the cemetery of the Municipality of Baao, Camarines Sur, on
the way to Naga City City, an unidentified man ( a bystander) hurled a
stone at the left side of the bus, which apparently hit petitioner above his
left eye. He was then immediately brought by private respondents
personnel to the provincial hospital in Naga City.
Issue: Whether or not the nature of the business of a transportation
company requires the assumption of certain risks and the stroking of the
bus by a bystander resulting in injury to petitioner-passenger is one such
risk from which the common carrier may not exempt itself from liability?
Held: The Supreme Court held that while the law requires the highest
degree of diligence from common carriers in the safe transport of their
passengers and creates a presumption of negligence against them, it does
not however, make the carrier an insurer of absolute safety of its
passengers. A tort, committed by a stranger which causes an injury to a
passenger does not accord the latter a cause of action against the carrier.
The negligence for which a common carrier is responsible is the negligent
omission by the carriers employees to prevent the tort from being
committed when the same could have been foreseen and prevented by
them. Further, it is to be noted that when the violation of the contract is
due to the willful acts of strangers, as in the instant case, the degree of
care essential to be exercised by the common carrier for the protection of
its passenger is only that of a good father of the family.
COMPANIA MARITIMA VS COURT OF APPEALS AND VICENTE
CONCEPCION (162 SCRA 685)
Facts: Vicente Concepcion is doing business under the name of
Consolidated Construction. Being a Manila based contractor, Concepcion
had to ship his construction equipment to Cagayan de Oro. On August 28,
1964, Concepcion shipped 1 unit pay loader, 4 units of 6x6 Roe trucks,
and 2 pieces of water tanks. The aforementioned equipment was loaded
aboard the MV Cebu, which left Manila on August 30, 1964 and arrived at
Cagayan de Oro on September 1, 1964. The Reo trucks and water tanks
were safely unloaded however the pay loader suffered damage while
being unloaded. The damaged pay loader was taken to the petitioners
compound in Cagayan de Oro.
Consolidated Construction thru Vicente Concepcion wrote Compania
Maritima to demand a replacement of the broken pay loader and also
asked for damages. Unable to get a response, Concepcion sent another
demand letter. Petitioner meanwhile, sent the damaged payloader to
Manila, it was weighed at San Miguel Corporation, where it was found that
the payloader actually weighed 7.5 tons and not 2.5 tons as declared in its
bill of lading. Due to this, petitioner denied the claim for damages of
Consolidated Construction. Consolidated then filed an action for damages
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against petitioner with the Court of First Instance of Manila. The Court of
First Instance dismissed the complaint stating that the proximate cause of
the fall of the payloader which caused its damage was the act or omission
of Vicente Concepcion for misrepresenting the weight of the payloader as
2.5 tons instead of its true weight of 7.5 tons. On appeal, the Court of
Appeals, reversed the decision of the Court of First Instance and ordered
the plaintiff to pay Concepcion damages. Hence this petition.
Issue: Whether or not the act of respondent Concepcion of misdeclaring
the true weight of the payloader the proximate and only cause of the
damage of the payloader?
Held: No, Compania Maritima is liable for the damage to the payloader.
The General rule under Articles 1735 and 1752 of the Civil Code is that
common carriers are presumed to be at fault or to have acted negligently
in case the goods transported by them are lost, destroyed, or had
deteriorated. To overcome the presumption of liability for the loss
destruction or deterioration common carriers must prove that they have
exercised extraordinary diligence as required by Article 1733 of the Civil
Code.
Extraordinary Diligence in the vigilance over the goods tendered for
shipment requires the common carrier to know and follow the required
precaution fro avoiding damage or destruction of the goods entrusted to it
for safe carriage and delivery. It requires common carriers to render
service with the greatest skill and foresight and to use all reasonable
means to ascertain the nature and characteristics of goods tendered for
shipment and to exercise due care in the handling and stowage including
such methods as their nature requires.
The Supreme Court further held that the weight in a bill of lading
are prima facie evidence of the amount received and the fact that the
weighing was done by another will not relieve the common carrier where it
accepted such weight and entered it in on the bill of lading. The common
carrier can protect themselves against mistakes in the bill of lading as to
weight by exercising extraordinary diligence before issuing such.
SERVANDO VS. PHILIPPINE STEAM NAVIGATION CO.(117 SCRA 832)
Facts: Bico and Servando loaded on board the FS-176 the following
cargoes: 1.528 cavans of rice and 44 cartons of colored paper, toys and
general merchandise. Upon the arrival of the vessel, the cargoes were
discharged, complete and in good order to the warehouse of the Bureau of
Customs. At 2:00 pm of the same day, a fire of unknown reasons razed
the warehouse. Before the fire, Bico was able to take delivery of 907
cavans of rice. The petitioners are now claiming for the value of the
destroyed goods from the common carrier.
The Trial Court ordered the respondent to pay the plaintiffs the
amount of their lost goods on the basis that the delivery of the shipment
to the warehouse is not the delivery contemplated by Article 1736 of the
New Civil Code, since the loss occurred before actual or constructive
delivery. The petitioners argued that the stipulation in the bills of lading
does not bind them because they did not sign the same. The stipulation
states that the carrier shall not be responsible for loss unless such loss
was due to the carriers negligence. Neither shall it be liable for loss due
to fortuitous events such as dangers of the sea and war.
Issue: Whether or not the carrier should be held liable for the destruction
of the goods
Held: No. There is nothing on record to show that the carrier incurred in
delay in the performance of its obligation. Since the carrier even notified
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the plaintiffs of the arrival of their shipments and had demanded that they
be withdrawn.
The carrier also cannot be charged with negligence since the
storage of the goods was in the Customs warehouse and was undoubtedly
made with their knowledge and consent. Since the warehouse belonged
and maintained by the Government, it would be unfair to impute
negligence to the appellant since it has no control over the same.
DSR SENATOR LINES VS. FEDERAL PHOENIX 7 OCTOBER 2003
Facts: Berde plants, Inc. delivered 632 units of artificial trees to C.F. Sharp
and Company, Inc., the General Sip Agent of DSR- Senator Lines, a foreign
shipping corporation, for transportation and delivery to the consignee, AlMohr International Group, in Riyadh, Saudi Arabia. Sharp issued an
international bill of landing for the cargo, with a stipulation that the port of
discharge for the cargo was at the Khor Fakkan port and the port of
delivery was Riyadh, Saudi Arabia.
On June 7, 1993, the vessel left Manila for Saudi Arabia with the
cargo on board. When the vessel arrived in Khor Fakkan Port, the cargo
was reloaded on board DSR-Senator Lines feeder vessel, however while in
transit, the vessel and all its cargo caught fire.
Consequently, Federal Phoenix Assurance paid Berde Plants
corresponding to the amount of the insurance for the cargo. In turn, Berde
Plants executed in its favor a Subrogation Receipt.
Federal Phoenix demanding payment on the basis of the
subrogation receipt. C.f. Sharp denied any liability that such liability was
extinguished when the vessel carrying the cargo was gutted by fire. Thus,
Federal Phoenix filed a complaint for damages against DSR-Senator Lines
and C.F, Sharp.
Issue: Whether or not there was a breach of contract of carriage.
Held: Fire is not one of those enumerated under Article 1734 of the Civil
Code to wit,
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 civil;
3. Act or omission of the shipper or the owner of the goods;
4. The character of the goods or defects in the packing or in the
containers;
5. Order or act of competent public authority.
6. Common carriers are obliged to observe extraordinary diligence in
the vigilance over the goods transported by them. Accordingly, they
are presumed to have been at fault or to have acted negligently of
the goods are lost, destroyed or deteriorated. In those cases where
the presumption is applied, the common carrier must prove that it
exercised extraordinary diligence in order to overcome the
presumption.
SARREAL VS. JAPAN AIRLINES (117 SCRA 832)
Facts: On September 14, 1979, the petitioner purchased in Bangkok from
private respondent Japan Air Lines (JAL) ticket no. 131-4442-517-368,
having various foreign destinations from Bangkok and back to Bangkok.
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On or about June 23, 1980, he was in Los Angeles, USA with his
business representative Atty. Pol Tiglao, and Luis Espada, the boxing
manager of World Flyweight Boxing Champion Hilario Zapata. They were
negotiating a possible match between the latter and the winner of the "
Netrnoi Vorasing - Brigildo Caada" main event fight which was scheduled
on July 4, 1980 in Manila. This agreement was to be confirmed by the
petitioner through overseas call in Manila on or before July 2, 1980.
The petitioner then flew from Los Angeles to Tokyo arriving thereat
on June 26, 1980.
At the Narita Airport Office, the petitioner inquired if there was a JAL
flight from Bangkok to Manila on July 2, 1980. He explained to a lady
employee of JAL that he had a very important business in Manila on July 2,
1980. He also told her that if he could not take a flight from Bangkok to
Manila on that date, he would not be going to Bangkok anymore.
The JAL lady employee looked into her scheduled book put a stamp
on the petitioner's ticket and told him not to worry because she has
endorsed his JAL ticket to Thai International leaving Bangkok on July 2,
1980 for Manila.
Relying on the assurance of the lady employee, the petitioner then
proceeded to Bangkok.
However, in the morning of July 2, 1980, when the petitioner was
about to board the said Thai International, he was not allowed to board
the said plane through it had available seats because he was told that his
ticket was not endorsable.
Since the petitioner failed to reach Manila by July 2, 1980, Espada
cancelled his transaction with the petitioner and decided to have the
champion fight in Japan instead.
This led the petitioner to file an action for damages with the
Regional Trail Court (RTC ), Pasay City against private respondent JAL
premised on the breach of contract of carriage.
Issue: Whether or not the assurance of an airline employee, not
evidenced by any hard proof, is sufficient as an assurance of a passenger
securing his seat?
Held: The petitioner is said to be a well-traveled person who average two
long trips to Europe and two trips to Bangkok every month since 1945. He
claims to have used practically all the airlines but mostly Philippine
Airlines whenever he travels abroad in connection with his occupation as
international boxing matchmaker and manager of world-champion boxers.
Certainly, a man of such stature was aware of the restrictions
carried by his ticket and the usual procedure that goes with traveling. The
petitioner ought to know that it was still necessary to verify first from Thai
International if they would honor the endorsement of his JAL ticket or
confirm with the airline if he had a seat in the July 2 flight.
The court finds no justification for the relief prayed for by the
petitioner. He has failed to show that the findings of the respondent court
are not based on substantial evidence or that it conclusions are contrary
to law and applicable jurisprudence.
VASQUEZ VS. COURT OF APPEALS (138 SCRA 553)
Facts: MV Pioneer Cebu left the port of Manila and bounded for Cebu. Its
officers were aware of the upcoming typhoon Klaring that is already
building up somewhere in Mindanao. There being no typhoon signals on
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their route, they proceeded with their voyage. When they reached the
island of Romblon, the captain decided not to seek shelter since the
weather was still good. They continued their journey until the vessel
reached the island of Tanguingui, while passing through the island the
weather suddenly changed and heavy rains fell. Fearing that they might
hit Chocolate island due to zero visibility, the captain ordered to reverse
course the vessel so that they could weather out the typhoon by facing
the strong winds and waves. Unfortunately, the vessel struck a reef near
Malapascua Island, it sustained a leak and eventually sunk.
The parents of the passengers who were lost due to that incident
filed an action against Filipinas Pioneer Lines for damages. The defendant
pleaded force majeure but the Trial Court ruled in favor of the plaintiff. On
appeal to the Court of Appeals, it reversed the decision of the lower
stating that the incident was a force majeure and absolved the defendants
from liability.
Issue: Whether of not Filipinas Pioneer Lines is liable for damages and
presumed to be at fault for the death of its passenger?
Held: The Supreme Court held the Filipinas Pioneer Lines failed to observe
that extraordinary diligence required of them by law for the safety of the
passengers transported by them with due regard for all necessary
circumstance and unnecessarily exposed the vessel to tragic mishap.
Despite knowledge of the fact that there was a typhoon, they still
proceeded with their voyage relying only on the forecast that the typhoon
would weaken upon crossing the island of Samar. The defense of caso
fortuito is untenable. To constitute caso fortuito to exempt a person from
liability it necessary that the event must be independent from human will,
the occurrence must render it impossible for the debtor to fulfill his
obligation in a normal manner, the obligor must be free from any
participation or aggravation to the injury of the creditor. Filipina Pioneer
Lines failed to overcome that presumption o fault or negligence that arises
in cases of death or injuries to passengers.
GATCHALIAN V DELIM AND CA 203 SCRA 126
Facts: Gatchalian boarded the respondents Thames minibus at San
Eugenio, Aringay, La Union bound of the same province. On the way, a
snapping sound was suddenly heard at one part of the bus and shortly
thereafter, the vehicle bumped a cement flower pot on the side of the
road, went off the road and fell into a ditch. Several passengers including
the petitioner was injured. They were taken into an hospital for treatment.
While there, private respondents wife Adela Delim visited and paid for the
expenses, hospitalization and transportation fees. However, before she
left, she had the injured passengers including the petitioner sign an
already prepared Joint Affidavit constituting a waiver of any future
complaint. However, notwithstanding this document, petitioner filed an
action Ex Contractu to recover compensatory and Actual Damages. Private
respondent denied liability on the ground that it was an accident and the
Joint which constitutes as a waiver. The trial court dismissed the complaint
based on the waiver and the CA affirmed.
Issue: Whether or not the private respondent has successfully proved
that he exercised extraordinary diligence.
Held: The court held that they failed to prove extraordinary diligence.
After a snapping sound was suddenly heard at one part of the bus, the
driver didnt even bother to stop and look f anything had gone wrong with
the bus. With regard to the waiver, it must to be valid and effective,
couched in clear and unequivocal terms which leave no doubt as to the
intention of the person to give up a right or benefit which legally pertains
to him. In this case, such waiver is not clear and unequivocal. When
petitioner signed the waiver, she was reeling from the effects of the
35
accident and while reading the paper, she experienced dizziness but upon
seeing other passengers sign the document, she too signed which
bothering to read to its entirety. There appears substantial doubt whether
the petitioner fully understood the joint affidavit.
JUNTILLA VS FONTANAR (136 SCRA 624)
Facts: Herein plaintiff was a passenger of the public utility jeepney on
course from Danao City to Cebu City. The jeepney was driven by driven by
defendant Berfol Camoro and registered under the franchise of Clemente
Fontanar. When the jeepney reached Mandaue City, the right rear tire
exploded causing the vehicle to turn turtle. In the process, the plaintiff
who was sitting at the front seat was thrown out of the vehicle. Plaintiff
suffered a lacerated wound on his right palm aside from the injuries he
suffered on his left arm, right thigh, and on his back.
Plaintiff filed a case for breach of contract with damages before the
City Court of Cebu City. Defendants, in their answer, alleged that the tire
blow out was beyond their control, taking into account that the tire that
exploded was newly bought and was only slightly used at the time it blew
up.
Issue: Whether or not the tire blow-out is a fortuitous event?
Held: No. In the case at bar, the cause of the unforeseen and unexpected
occurrence was not independent of the human will. The accident was
caused either through the negligence of the driver or because of
mechanical defects in the tire. Common carriers should teach drivers not
to overload their vehicles, not to exceed safe and legal speed limits, and
to know the correct measures to take when a tire blows up thus insuring
the safety of passengers at all tines.
NECESSITO VS. PARAS (104 PHIL 75)
Facts: On January\y 28, 1954, Severina Garces and her one year old son,
Precillano Necesito boarded passenger auto truck bus of the Philippine
Rabbit Bus Lines at Agno, Pangasinan.
After the bus entered a wooden bridge, the front wheels swerved to
the right. The driver lost control, and after the wrecking the bridge
wooden rails, the truck fell on its right side into a creek where water was
breast deep. The mother, Severina was drowned and the son Precillano
was injured.
Issue: Whether or nor the carrier is liable for manufacturing defect of the
steering knuckle?
Held: It is clear that the carrier is not an insurer of the passengers safety.
His liability rest upon negligence, that his failure to exercise utmost
degree of diligence that the law requires.
The passenger has neither choice nor control over the carrier in the
selection and use of the equipment and the 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
carrier usually has. It is but logical, therefore, that the carrier, while not an
insurer of the safety of his passengers, should nevertheless be held to
answer for flaws of his equipment if such cause were at all discoverable.
C. DEFENSE/S
Cases :
36
EASTERN SHIPPING LINES INC.

COURT (150 SCRA 463)
VS.
INTERMEDIATE APPELLATE
Facts: Sometime in or prior to June 1977, the M/S Asiatica, a vessel

operated by petitioner Eastern Shipping Lines Inc., loaded at Kobe, Japan
for transportation to Manila loaded 5,000 pieces of calorized pipes valued
at P256,039.00 which was consigned to Philippine Blooming Mills Co, Inc.
and 7 cases of spare parts valued at P92, 361.75 consigned to Central
Textile Mills. Both sets of goods were inured against marine risk for their
stated value with respondent Development Insurance and Surety Corp.
In the same vessel, 2 containers of garment fabrics were also
loaded which was consigned to Mariveles Apparel Corp worth $46,583.
The said cargoes were consigned to Nisshin Fire and Marine Insurance.
Another cargo loaded to the vessel was the surveying instruments
consigned to Aman Enterprises and General Merchandise and insured
against respondent Dowa Fire & Marine Insurance for $1,385.00.
On the way to Manila, M/S Asiatica caught fire and sank. This
resulted to the loss of the ship and its cargoes. The respective Insurers
paid the corresponding marine insurance values and were thus
subrogated to the rights of the insured.
The insurers filed a suit against the petitioner carrier for recovery of
the amounts paid to the insured. However, petitioner contends that it is
not liable on the ground that the loss was due to an extraordinary
fortuitous event.
Issues:
1. Whether the Civil Code provisions on Common Carriers or the Carriage
of the Goods by Sea Act will govern the case at bar?
2. Whether or not the common carrier has the burden of proof to show its
compliance with the diligence required by law, which is extraordinary
diligence?
Held:
1. The law of the country to which the goods are to be transported
governs the liability of the common carrier in case of their loss,
destruction or deterioration.
The liability of petitioner is governed
primarily by the Civil Code however, in all matters not regulated by the
Civil Code, the Code of Commerce and Special Laws will govern with
respect to the rights and obligations of the carrier. Therefore COGSA is
suppletory to the provisions of the Civil Code.
2. YES. The Common Carrier has the burden to prove that it exercised
extraordinary diligence required by law. The Court is of the opinion that
fire may not be considered a natural disaster or calamity. This must be so
as it almost arises 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. However, petitioner
failed to discharge the burden of proving that it had exercised the
extraordinary diligence required by law and therefore cannot escape
liability for the loss of the cargo.
GANZON VS. CA (161 SCRA 646)
Facts: Gelacio Tumambing contracted the services of Mauro B. Ganzon to
haul 305 tons of scrap iron from Mariveles, Bataan, to the port of Manila
on board the lighter LCT "Batman." Pursuant to this agreement, Mauro B.
Ganzon sent his lighter "Batman" to Mariveles where it docked in 3 feet of
water. Then, Gelacio Tumambing delivered the scrap iron to Filomeno Niza,
captain of the lighter, for loading which was actually begun on the same
date by the crew of the lighter under the captain's supervision. When
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about half of the scrap iron was already loaded, Mayor Jose Advincula of
Mariveles, Bataan, arrived and demanded P5,000.00 from Gelacio
Tumambing. The latter resisted the shakedown and after a heated
argument between them, Mayor Jose Advincula drew his gun and fired at
Gelacio Tumambing. The gunshot was not fatal but Tumambing had to be
taken to a hospital in Balanga, Bataan, for treatment. After sometime, the
loading of the scrap iron was resumed. But on 4 December 1956, Acting
Mayor Basilio Rub, accompanied by 3 policemen, ordered captain
Filomeno Niza and his crew to dump the scrap iron where the lighter was
docked. The rest was brought to the compound of NASSCO. Later on
Acting Mayor Rub issued a receipt stating that the Municipality of
Mariveles had taken custody of the scrap iron.
Tumambing instituted with CFI Manila an action against Ganzon for
damages based on culpa contractual. The trial court rendered a decision
absolving Ganzon from liability. On appeal, however, the appellate court
reversed and set aside the decision appealed. Hence, the petition for
review on certiorari.
Held: Now the petitioner is changing his theory to caso fortuito. Such a
change of theory on appeal we cannot, however, allow. In any case, the
intervention of the municipal officials was not In any case, of a character
that would render impossible the fulfillment by the carrier of its obligation.
The petitioner was not duty bound to obey the illegal order to dump into
the sea the scrap iron. Moreover, there is absence of sufficient proof that
the issuance of the same order was attended with such force or
intimidation as to completely overpower the will of the petitioner's
employees. The mere difficulty in the fullfilment of the obligation is not
considered force majeure. We agree with the private respondent that the
scraps could have been properly unloaded at the shore or at the NASSCO
compound, so that after the dispute with the local officials concerned was
settled, the scraps could then be delivered in accordance with the
contract
of
carriage.
D. DURATION OF RESPONSIBILITY OR LIABILITY OF COMMON
CARRIERS
A. IN CASE OF GOODS
START: From the time that the goods are delivered to the common
carrier. (Article 1736, Civil Code. Cia Maritima vs. Insurance Co. of
America)
TERMINATION: When the goods are delivered, actively or constructively,
by the carrier to the consignee/person who has the right to receive them,
or the consignee/person who has the right to receive them has been
informed of the arrival of the goods and the consignee had reasonable
time to remove such. (Article 1736 and 1738, Civil Code)
The liability remains in full force and effect even when they are
temporarily unloaded or stored in transit unless the shipper or owner
made use of the right of stoppage in transitu. (Article 1737, Civil
Code)
WHEN RIGHT OF STOPPAGE IN TRANSITU IS EXERCISED:
It is the right of the unpaid seller who has parted with his goods to
stop its delivery while in transit when the buyer of the goods is or turns
insolvent. (Article 1530, Civil Code)
The common carrier who holds the goods becomes the
warehouseman or ordinary bailee and the contract is terminated when
such right is exercised.
Requisites:
1. Unpaid seller (Article 1525, Civil Code);
2. Goods must be in transit (Article 1531, Civil Code);
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3. The seller must either actually take possession of the goods sold or
give notice of his claim to the carrier or other person in possession
(Article 1532 [1], Civil Code);
4. The seller must surrender the negotiable document of title, if any,
issued by the carrier or bailee (Article 1532[2], Civil Code);
5. The seller must bear the expenses of delivery of the goods after the
exercise of the right (Article 1532[2], Civil Code); and
6. The buyer is in a state of insolvency or becomes insolvent.
B. IN CASE OF PASSENGERS
START: The carrier is bound to exercise utmost diligence with respect to
passengers the moment the person who purchases the ticket (or a token)
from the carrier presents himself at the proper place and in a proper
manner to be transported. Such person must have bona fide intention to
use the facilities of the carrier, possess sufficient fare with which to pay
for his passage, and present himself to the carrier for the transportation in
the manner provided. (Vda. De Nueca v. Manila Railroad Company, CA,
G.R. No. 31731, January 30, 1968)
It is the duty of carriers of passengers to stop their conveyances for
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 (Dangwa Transportation Co., Inc. vs. CA, 202 SCRA [1991])
TERMINATION: Until the passenger has, after reaching his destination,
safely alighted from the carriers conveyance or had a reasonable
opportunity to leave the carriers premises. (La Mallorca v. CA, 17 SCRA
739 [1966])
A person by stepping and standing on the platform of a bus, is
already considered a passenger and is entitled to all rights and protection
pertaining to such conventional relation (I.d.).
E. RULES ON PASSENGERS BAGGAGE
1. Baggage in the custody of the passengers or their employee:
That baggage, while in transit will be considered as necessary deposits.
The common carrier shall be responsible for the baggage as
depositaries, provided that notice was given to them or its employees
and the passengers took the necessary precautions which the carrier has
advised them relative to the care and vigilance of their baggage.
2. Baggage not in personal custody, but in that of a Carrier
Carrier who has in its custody the baggage of a passenger to be carried
like any other goods is required to observe extraordinary diligence. In
case of loss or damage, the carrier is presumed negligent. As to the
other baggage, the rules in Article 1998 and 2000 to 2003 of the Civil
Code concerning the responsibility of hotel-keepers shall be applicable.
(Art.1733-1735, Civil Code)
Case/s
QUISUMBING VS. CA
Facts: Norberto Quisumbing, Sr. and Gunther Leoffler were among the
of ... (PAL's) Fokker 'Friendship' PIC-536 plane in its flight of November 6,
1968 which left Mactan City at about 7:30 in the evening with Manila for
its destination.
After the plane had taken off, Florencio O. Villarin, a Senior NBI
Agent who was also a passenger of the said plane, noticed a certain
'Zaldy,' a suspect in the killing of Judge Valdez, seated at the front seat
near the door leading to the cockpit of the plane. A check by Villarin with
the passenger's ticket in the possession of flight Stewardess Annie
Bontigao, who was seated at the last seat right row, revealed that 'Zaldy'
39
had used the name 'Cardente,' one of his aliases known to Villarin. Villarin
also came to know from the stewardess that 'Zaldy' had three companions
on board the plane."
Villarin then scribbled a note addressed to the pilot of the plane
requesting the latter to contact NBI duty agents in Manila for the said
agents to ask the Director of the NBI to send about six NBI agents to meet
the plane because the suspect in the killing of Judge Valdez was on board
(Exh. 'G'). The said note was handed by Villarin to the stewardess who in
turn gave the same to the pilot.
After receiving the note, which was about 15 minutes after take off,
the pilot of the plane, Capt. Luis Bonnevie, Jr., came out of the cockpit and
sat beside Villarin at the rear portion of the plane and explained that he
could not send the message because it would be heard by all ground
aircraft stations. Villarin, however, told the pilot of the danger of
commission of violent acts on board the plane by the notorious 'Zaldy' and
his three companions.
While the pilot and Villarin were talking, 'Zaldy' and one of his
companions walked to the rear and stood behind them. Capt. Bonnevie
then stood up and went back to the cockpit. 'Zaldy' and his companions
returned to their seats, but after a few minutes they moved back to the
rear throwing ugly looks at Villarin who, sensing danger, stood up and
went back to his original seat across the aisle on the second to the last
seat near the window. 'Zaldy and his companion likewise went back to
their respective seats in front.
Soon thereafter an exchange of gunshots ensued between Villarin
and 'Zaldy' and the latter's companions. 'Zaldy' announced to the
passengers and the pilots in the cockpit that it was a hold-up and ordered
the pilot not to send any SOS. The hold-uppers divested passengers of
their belongings.
Issue: Whether or not Pal is liable for damages against the passengers for
loss caused by the robbers on board?
Held: It is illusive to assume that had these precautions been taken, the
hijacking or the robbery would not have succeeded. The mandatory use of
the most sophisticated electronic detection devices and magnetometers,
the imposition of severe penalties, the development of screening
procedures, the compilation of hijacker behavioral profiles, the assignment
of sky marshals, and the weight of outraged world opinion may have
minimized hijackings but all these have proved ineffective against truly
determined hijackers. World experience shows that if a group of armed
hijackers want to take over a plane in flight, they can elude the latest
combined government and airline industry measures. And as our own
experience in Zamboanga City illustrates, the use of force to overcome
hijackers, results in the death and injury of innocent passengers and crew
members. We are not in the least bit suggesting that the Philippine
Airlines should not do everything humanly possible to protect passengers
from hijackers' acts. We merely state that where the defendant has
faithfully complied with the requirements of government agencies and
adhered to the established procedures and precautions of the airline
industry at any particular time, its failure to take certain steps that a
passenger in hindsight believes should have been taken is not the
negligence or misconduct which mingles with force majeure as an active
and cooperative cause.
BRITISH AIRWAYS VS. CA (285 SCRA 450)
Facts: On April 16, 1989, Mahtani is on his way to Bombay, India from
Manila. His trip was Manila-Hong Kong via PAL and then Hong Kong-India
via British Airways. Prior to his departure, he checked in two pieces of
40
luggage containing his clothing and other personal effects, confident that
the same would be transferred to his BA flight.
Unfortunately, when he arrived in India, he discovered that his
luggage was missing.
The RTC awarded Mahtani damages which was affirmed by CA.
Issue: Whether or not in a contract of air carriage a declaration by the
passenger is needed to recover a greater amount?
Held: American jurisprudence provides that an air carrier is not liable for
the loss of baggage in an amount in excess of the limits specified in the
tariff which was filed with the proper authorities, such tariff being binding
on the passenger regardless of the passengers lack of knowledge thereof
or assent thereto. This doctrine is recognized in this jurisdiction.
The inescapable conclusion that BA had waived the defense of
limited liability when it allowed Mahtani to testify as to the actual
damages he incurred due to misplacement of his luggage, without any
objection.
It is a well-settled doctrine that where the proponent offers
evidence deemed by counsel of the adverse party to be inadmissible for
any reason, the latter has the right to object. However, such right is a
mere privilege which can be waived. Necessarily, the objection must be
made at the earliest opportunity, in case of silence when there is
opportunity to speak may operate as a waiver of objections.
F.LIABILITY OF SUCCESSIVE AIR CARRIERS
KLM ROYAL DUTCH AIRLINES VS CA (65 SCRA 237)
Facts: Spouses Mendoza approached Mr. Reyes, the branch manager of
Philippine Travel Bureau, for consultation about a world tour which they
were intending to make with their daughter and niece. Three segments of
the trip, the longest, was via KLM. Respondents decided that one of the
routes they will take was a Barcelona-Lourdes route with knowledge that
only one airline, Aer Lingus, served it. Reyes made the necessary
reservations. To this, KLM secured seat reservations for the Mendozas and
their companions from the carriers which would ferry them throughout
their trip, which the exception of Aer Lingus. When the Mendozas left the
Philippines, they were issued KLM tickets for the entire trip. However, their
coupon for Aer Lingus was marked on request.
When they were in Germany, they went to the KLM office and
obtained a confirmation from Aer Lingus. At the airport in Barcelona, the
Mendozas and their companions checked in for their flight to Lourdes.
However, although their daughter and niece were allowed to take the
flight, the spouses Mendozas were off loaded on orders of the Aer Lingus
manager, who brusquely shoved them aside and shouted at them. So the
spouses Mendozas took a train ride to Lourdes instead.
Thus, they filed a complaint for damages against KLM for breach of
contract of carriage. The trial court decided in favor of the Mendozas. On
appeal, the CA affirmed the decision. Hence, KLM brings this petition to
the Supreme Court. KLM cites Art 30 of the Warsaw Convention, which
states: the passenger or his representatives can take action only against
the carrier who performed the transportation during which the accident or
delay occurred. Also, KLM avers that the front cover of each ticket reads:
that liability of the carrier for damages shall be limited to occurrences on
its own line.
Issue: Whether or not KLM is liable for breach of contract of carriage?
41
Held: The applicability of Art. 30 of the Warsaw Convention cannot be

sustained. The article presupposes the occurrence of delay or accident.
What is manifest here is that the Aer Lingus refused to transport the
spouses Mendozas to their planned and contracted destination.
As the airline which issued the tickets, KLM was chargeable with the
duty and responsibility of specifically informing the spouses of the
conditions prescribed in their tickets or to ascertain that the spouses read
them before they accepted their passage tickets.
The Supreme Court held that KLM cannot be merely assumed as a
ticket-issuing agent for other airlines and limit its liability to untoward
occurrences on its own line.
The court found, that the passage tickets provide that the carriage
to be performed therein by several successive carriers is to be regarded
as a single operation.
FRANCISCO ORTIGAS, JR. VS. LUFTHANSA GERMAN AIRLINES
(G.R. NO. L-28773 JUNE 30, 1975)
Facts: Direct appeals of both parties plaintiff, Francisco Ortigas, and
defendant Luthansa German Airlines, from the decision of the Court of
First Instance of Manila Branch Y, condemning the defendant to pay
plaintiff the amount of P100,000 as moral damages, P30,000 as
exemplary or corrective damages, with interest of both sums at the legal
rate from the commencement of this suit until fully paid, P20,000 as
attorneys fees and the costs for the former failure to comply with its
obligation to give first accommodation to (the latter) a (Filipino) passenger
holding a first class ticket, aggravated by the giving of the space instead
to a Belgian and the improper conduct of its agents in dealing with him
during the occasion of such discriminatory violence of its contract of
carriage.
Issue: Whether Lufthansa is liable for damages?
Held: The court said that when it comes to contracts of common carriage,
inattention and lack of care on the part of the carrier resulting in the
failure of the passenger to be accommodated in class contracted for
amounts to bad faith and fraud which entitles the passenger to the award
of moral damages in accordance with the 2220 of the Civil Code. But in
the instant case, the breach appears to the graver nature, since the
preference given to the Belgian passenger over plaintiff was done willfully
and in wanton disregard of plaintiffs rights and his dignity as a human
being and as a Filipino, who may not be discriminated against with
impunity, as found by the court below what worsened the situation of
Ortigas was that Lufthansa succeeded in keeping him as its passenger by
assuring him that he would be given first class accommodation at Cairo,
the next station, the proper arrangements therefore having been made
already, when in truth such was not the case. Although molested and
embarrassed to the point that he had to take nitroglycerine pills to ward
off a possible heart attack, Ortigas hardly had any choice, since his
luggage was already in the plane. To his disappointment, when the plane
reached Cairo, he was told by Lufthansa office there that no word at all
had been received from Rome and they had no space for him in first class.
Worse, similar false representations were made to him at Dharham and
Calcutta. It was only at Bangkok where for the first time. Ortigas was at
last informed that he could have a first class seat in the leg of the flight,
from Bangkok to Hong Kong. This Ortigas rejected, if only to make patent
his displeasure and indignation at being so inconsiderately treated in the
earlier part of his journey. In the light of all foregoing, there can be no
doubt as to the right of Ortigas to damages, both moral and exemplary.
Precedents we have consistently adhere to so dictate.
42
CHINA AIRLINES VS. CHIOK (23 JULY 2003)

Facts: Daniel Chiok purchased from China Airlines a passenger ticket for
air transportation covering Manila-Taipei-Hong Kong-Manila. The said ticket
was exclusively endorsable to PAL.
Before Chiok his trip, the trips covered by the ticket were prescheduled and confirmed by the former. When petitioner arrived in Taipei,
he went to CAL to confirm his Hong Kong- Manila trip on board PAL. The
CAL office attached a yellow sticker indicating the status was OK.
When Chiok reached Hong Kong, he then went to PAL office to
confirm his flight back to Manila. The PAL also confirmed the status of his
ticket and attached a ticket indicating a status OK. Chiok proceeded to
Hong Kong airport for his trip to Manila. However, upon reaching the PAL
counter, he was told that the flight to Manila was cancelled due to
typhoon. He was informed that all confirmed flight ticket holders of PAL
were automatically booked for the next flight the following day.
The next day, Chiok was not able to board the plane because his
name did not appear on the computer as passenger for the said flight to
Manila.
Issue: Whether or not CAL is liable for damages?
Held: The contract of air transportation between the petitioner and
respondent, with the former endorsing PAL the segment of Chioks journey.
Such contract of carriage has been treated in this jurisprudence as a
single operation pursuant to Warsaw Convention, to which the Philippines
is a party.
In the instant case, PAL as the carrying agent of CAL, the latter
cannot evade liability to respondent, Chiok, even though it may have been
only a ticket issuer for Hong Kong- Manila sector.
III.
CODE
OF
COMMERCE
PROVISIONS
ON
OVERLAND
TRANSPORTATION (*Unless otherwise indicated, reference is to Code of
Commerce)
ARTS. 349 379, CODE OF COMMERCE
BILL OF LADING
The written acknowledgment of the receipt of goods, and the
agreement to transport them to a specific place to a person named or to
his order. It is not indispensable for the creation of a contract of carriage.
(Compania Maritima v. Insurance Co. of North America 12 SCRA 213
[1964])
Two-fold Character of a Bill of Lading:
1.
It is receipt of the goods to be transported; and
2.
It constitutes a contract of carriage of the goods.
Functions:
1.
Best evidence of the existence of the contract of
carriage of cargo (Art. 353 Code of Commerce);
2.
Commercial document whereby, if negotiable,
ownership may be transferred by negotiation; and
3.
Receipt of cargo.
Limitations as to the Carriers Liability:
A stipulation in the Bill of Lading limiting the liability of the carrier to an
agreed valuation unless the shipper declares a higher value and pays a
higher rate of freight is valid.
43
However, the carrier cannot limit its liability for injury to, or loss of,
goods shipped where such injury or loss was caused by its own
negligence.
o
The surrender of the original bill of lading is not a condition

precedent for a common carrier to be discharged of its contractual
obligation. If surrender of the original bill of lading is not possible,
acknowledgment of the delivery by signing the delivery receipt
suffices. (RP v. Lorenzo Shipping, February 7, 2005)
Kinds of Bill of Lading:

1. On Board - issued when the goods have been actually placed aboard
the ship with very reasonable expectation that the shipment is as good
as on its way.
2. Received - one in which it is stated that the goods have been received
for shipment with or without specifying the vessel by which the goods
are to be shipped.
3. Negotiable - one in which it is stated that the goods referred to
therein will be delivered to the bearer or to the order of any person
named therein.
4. Non-Negotiable - One in which it is stated that the goods referred to
therein will be delivered to a specified person.
5. Clean One which does not indicate any defect in the goods.
6. Foul One which contains a notation thereon indicating that the goods
covered by it are in bad condition.
7. Spent One which covers goods that already have been delivered by
the carrier without a surrender of a signed copy of the bill.
8. Through One issued by the carrier who is obliged to use the facilities
of other carriers as well as his own facilities for the purpose of
transporting the goods from the city of the seller to the city of the
buyer, which bill of lading is honored by the second and other
interested carriers who do not issue their own bills.
9. Custody One wherein the goods are already received by the carrier
but the vessel indicated therein has not yet arrived in the port.
10.Port One which is issued by the carrier to whom the goods have
been delivered, and the vessel indicated in the bill of lading by which
the goods are to be shipped is already in the port where the goods are
held for shipment.
On-Board Bill of Lading v. Received for Shipment Bill of
Lading:
An On Board Bill of Lading is one in which it is stated that the
goods have been received on board the vessel which is to carry the goods.
An on board bill of lading is issued when the goods have been actually
placed aboard the ship with every reasonable expectation that the
shipment is as good as on its way. It is, therefore, understandable that a
party to a maritime contract would require an on board bill of lading
because of its apparent certainty of shipping as well as the seaworthiness
of the vessel which is to carry the goods. (Magellan Mfg.,etc. v. Court of
Appeals, 201 SCRA 116-117[1991])
A Received for Shipment Bill of Lading is one which it is stated
that the goods have been received for shipment without specifying the
vessel by which the goods are to be shipped. Received for shipment bills
of lading are issued wherever conditions are not normal and there is
insufficiency of shipping space. (Magellan Mfg., etc. v. Court of
Appeals,201 SCRA 116)
OBLIGATIONS OF THE CARRIER
A. Duty to Accept the Goods
General Rule: A common carrier cannot ordinarily refuse to carry a
particular class of goods.
Exception: For some sufficient reason the discrimination against the
traffic in such goods is reasonable and necessary. (Fisher vs. Yangco
44
Steamship Co. 31 Phil 1 [1915]).

Instances when the carrier may validly refuse to accept the
goods:
1. Goods sought to be transported are dangerous objects, or
substances including dynamite and other explosives;
2. Goods are unfit for transportation;
3. Acceptance would result in overloading;
4. Contrabands or illegal goods;
5. Goods are injurious to health;
6. Goods will be exposed to untoward danger like flood, capture by
enemies and the like;
7. Goods like livestock will be exposed to disease;
8. Strike;
9. Failure to tender goods on time.
In case of carriage by railway, the carrier is exempted from liability
if carriage is insisted upon by the shipper, provided its objections
are stated in the bill of lading.
o However, when a common carrier accepts cargo for shipment for
valuable consideration, it takes the risk of delivering it in good
condition as when it was loaded. (PAL vs. CA, 226 SCRA 423 )
B. Duty to deliver the goods
Not only to transport the goods safely but to deliver the same to the
person indicated in the bill of lading. The goods should be delivered to
the consignee or any other person to whom the bill of lading was
validly transferred or negotiated.
o
TIME OF DELIVERY
Stipulated in
Contract/Bill of Lading
Carrier is bound to fulfill the
contract and is liable for
any delay; no matter from
what cause it may have
arisen.
No stipulation
1.
2.
Within a reasonable time.

Carrier is bound to forward them in
the 1st shipment of the same or similar
goods which he may make to the point
of delivery. (Art. 358 Code of
Commerce)
Effects of delay:
1. Merely suspends and generally does not terminate the contract of
carriage.
2. Carrier remains duty bound to exercise extraordinary diligence.
3. Natural disaster shall not free the carrier from responsibility
(Art.1740, Civil Code)
4. If delay is without just cause, the contract limiting the common
carriers liability cannot be availed of in case of loss or deterioration
of the goods (Art.1747, Civil Code)
C. Duty to exercise extraordinary diligence
o Inquiry may be made as to the nature of passengers baggage, but
beyond this constitutional boundaries are already in danger of
being transgressed. (Nocum vs. Laguna Tayabas Bus Co., 30 SCRA
68)[this doctrine is not applicable to aircrafts because of Section 8
of Anti-Hijacking Law (RA 6235)]
RIGHT OF CONSIGNEE TO ABANDON GOODS
Instances:
1. Partial non-delivery, where the goods are useless without the others
(Art. 363, Code of Commerce);
2. Goods are rendered useless for sale or consumption for the purposes
for which they are properly destined (Art. 365, Code of Commerce);
and
3. In case of delay through the fault of the carrier (Art. 371, Code of
Commerce).
45
NOTICE OF DAMAGE
Requisites for Applicability:
1. Domestic/inter-island/coastwise transportation
2. Land/water/air transportation
3. Carriage of goods
4. Goods shipped are damaged (Art. 366, Code of Commerce)
Rules:
a. Patent damage: shipper must file a claim against the carrier
immediately upon delivery (it may be oral or written)
b. Latent damage: shipper should file a claim against the carrier within 24
hours from delivery.
o These rules do not apply to misdelivery of goods. (Roldan vs. Lim
Ponzo)
o The filing of notice of claim is a condition precedent for recovery.
Purpose of Notice: To inform the carrier that the shipment has been
damaged, and it is charged with liability therefore, and to give it an
opportunity to make an investigation and fix responsibility while the
matter is fresh.
Prescriptive Period
Not provided by Article 366. Thus, in such absence, Civil Code rules on
prescription apply.
If despite the notice of claim, the carrier refuses to pay, action must be
filed in court.
1. If no bill of lading was issued: within 6 years
2. If bill of lading was issued: within 10 years.
COMBINED CARRIER AGREEMENT
General Rule: In case of a contract of transportation of several legs, each
carrier is responsible for its particular leg in the contract. (Art. 373, Code
of Commerce)
Exception: A combined carrier agreement where a carrier makes itself
liable assuming the obligations and acquiring as well the rights and
causes of action of those which preceded it.
ARTICLE 366 (COC)
SECTION 3(6) (COGSA)

Applicability
1. Domestic/inter1.
International/overseas/f
island/coastwise
oreign (from foreign country to
transportation.
Philippines).
2. Land, water, air
subject to the rule on
transportation.
Paramount Clause
3. Carriage of goods.
2. Water/maritime
4. Maritime transportation.
transportation
3. Carriage of goods
Notice of damage
1. Filing of notice of claim for the 1. Filing of a notice of claim for the
damages is a condition
damages is not a condition
precedent
precedent
2. 24-hour period for claiming
2. 3-day period for claiming latent
latent damage.
damage.
Prescriptive period
None provided; Civil Code
One year from the date of delivery
applies.
(delivered but damaged goods), or
date when the vessel left port or
from the date of delivery to the
arrastre (non-delivery or loss).
MANNER OF RECOVERY FROM DAMAGES OF GOODS
Inter-Island if goods arrived in damaged condition:
1. If damage is apparent, the shipper must file a claim immediately; or
46
2. If damages are not apparent, he should file a claim within twenty-four

hours from delivery.
The filing of claim under either (a) or (b) is a condition precedent for
recovery.
If the claim is filed, but the carrier refuses to pay, enforce carriers
liability in court by filing a case:
1. Within six (6) years, if no bill of lading has been issued; or
2. Within ten (1) years, if a bill of lading has been issued.
Written demand within twenty-four (24) hours is necessary only when the
package does not show exterior signs of damage but when there are
exterior signs of damage, a verbal claim made immediately is sufficient
compliance with law. (Mapaso Goldfields v. Compania Maritima [CA], 2 OG
307)
Payment of the transportation charge precludes the presentation of
any claim against the carrier.
Overseas where goods arrived in a damaged condition from a foreign

port to a Philippine port of entry:
a.
Upon discharge of goods, if the damage is apparent, claim should
be filed immediately; or
b.
If the damage is not apparent, claim should be filed within three
days from delivery.
The filing of notice of claim is not a condition precedent for

recovery. However, an action must be filed within one year from
discharge. If there is no delivery action should be filed from the day
of the goods supposed delivery.
Where there was delivery to the wrong person, the prescriptive
period is ten years because there is a violation of contract, and the
Carriage of Goods by Sea Act (COGSA) does not apply to cases of
misdelivery.
Doctrine of Connecting Carriers

The original carrier that entered into the contract of carriage shall be
liable for damages caused by its connection carrier. (Art. 373 Code of
Commerce)
IV. ADMIRALTY AND MARITIME COMMERCE
ARTS. 573 - 869, CODE OF COMMERCE
Characteristics of Maritime Transaction:
1. REAL - similar to transactions over real property with respect to
effectively against third persons which is done through registration as
shown by the limitation of the liability of the agents to the actual value
of the vessel and the freight money; and the right to retain the cargo
and embargo and detention of the vessel; and
2. HYPOTHECARY - the liability of the owner is limited to the value of
the vessel itself (Doctrine of Limited Liability).
o
The real and hypothecary nature of maritime law simply means that
the liability of the carrier in connection with losses related to
maritime contracts is confined to the vessel, which stands as the
guaranty for their settlement. (Aboitiz Shipping Corp. vs. General
Accident Fire and Life Assurance Corp. 217 SCRA 359)
PREFERENCE OF CREDITS
Mortgage of a vessel properly registered becomes preferred
mortgage lien which shall have priority over all claims against the vessel
in an extrajudicial foreclosure for:
1. Credit in favor of the public treasury;
2. Judicial costs of the proceedings;
47
3.
4.
5.
6.
7.
8.
Pilotage and tonnage charges and other sea and port charges;
Salaries of depositaries keepers of the vessel;
Captain and crews wages;
General average;
Salvage, including contract salvage;
Maritime liens arising prior in time to the recording of the preferred
mortgage;
9. Damages arising out of tort; and
10.Preferred mortgage registered prior in time.
MERCHANT VESSEL
Vessel engaged in maritime commerce, whether foreign or otherwise.
Constitutes property which may be acquired and transferred by any of
the means recognized by law. They shall continue to be considered as
personal property. (Arts. 573, 585 Code of Commerce)
o
Susceptible to maritime liens such as for the repair, equipping and

provisioning of the vessel in the preparation of a voyage, as well as
mortgage liabilities, in satisfaction of which a vessel may be validly
arrested and sold. (Ship Mortgage Decree of 1978)
DOCTRINE OF LIMITED LIABILITY (HYPOTHECARY RULE)

General Rule: The liability of shipowner and ship agent is limited to the
amount of interest in said vessel such that where vessel is entirely lost,
the obligation is extinguished. (Luzon Stevedoring v. Escano, 156 SCRA
169[1987]). The interest extends to:
1. The vessel itself;
2. Equipments;
3. Freightage; and
4. Insurance proceeds. (Chua v. IAC, 166 SCRA 183[1988])
Exceptions: When not applicable;
1. The voyage is not maritime, but only in river, bay or gulf.
2. In case of expense for equipping, repairing or provisioning of the
vessel.
3. In case the vessel is not common but a special carrier.
4. In case the vessel would totally sink or get lost by reason of the ship
owner or ship agents fault.
5. When the injury to or death of a passenger is due either to the fault of
the ship owner and the captain.
6. When the vessel is insured (to the extent of the insurance proceeds);
or
7. In workmens compensation claims. (Yangco v. Laserna 73 Phil. 330)
When shipowner was equally negligent, it cannot escape liability

by virtue of the limited liability rule (Central Shipping Co. vs.
Insurance Co. of N. America, G.R. No. 150751. September 20,
2004)
The limited liability doctrine applies not only to the goods but
also in all cases like death or injury to passengers. (Heirs of Amparo
Delos Santos vs. CA, 186 SCRA 649)
If the vessel is not entirely lost, the hypothecary nature will not apply,
unless the shipowner or the ship agent abandons the vessel.
When Applicable:
1. Civil liability for indemnities in favor of third persons which arise
from the conduct of the captain in the care of the goods which the
vessel carried. (Art. 587, Code of Commerce)
2. Civil liability arising from collisions. (Art. 837, Code of
Commerce)
48
3.
Unpaid wages of the captain and the crew if the vessel and its
cargo are totally lost by reason of capture or shipwreck. (Art. 643,
Code of Commerce)
Rules on Principle of Limited Liability of the Shipowner and Ship

Agent
o Where the shipowner or ship agent validly exercised his right of
abandonment of the vessel with all her equipment and the freightage
earned during the voyage, the abandonment amounts to an offer to
the injured party of the value of the vessel, of her equipment, and the
freight money earned during the voyage. (Phil. Shipping Co. v. GarciaVergara 96 Phil 201)
o
In consequence of the limited liability rule, the shipowners property,

other than his vessel and freightage earned during the voyage, cannot
be made to answer for his liability arising from the collision with other
vessels. (Phil. Shipping Co. v. Garcia-Vergara, G.R. No. L-1600, June 1,
1906)
This is not to say, however, that the limited liability rule is without
exceptions, namely: (1) where the injury or death to a passenger is
due either to the fault of the shipowner, or to the concurring
negligence of the shipowner and the captain. (Phil. Am. Gen.
Insurance Co., Inc. v. CA, 273 SCRA 649,271 [1997]); (2) where the
vessel is insured; and (3) in workmens compensation claims.
(Monarch Insurance Co., Inc. v. CA, 333 SCRA 71 [2000])
Contrary to the theory that the limited liability rule has been rendered
obsolete by the advances in modern technology, which considerably
lessen the risks involved in maritime trade, this Court continues to
apply the said rule in appropriate cases. (Monarch Insurance Co., Inc.
v. CA, 333 SCRA 71 [2000])
ABANDONMENT
Abandonment of the vessel is necessary to limit the liability of the
shipowner. The only instance were abandonment is dispensed with is
when the vessel is entirely lost (Luzon Stevedoring vs. CA 156 SCRA
169[1987]).
o
Satisfaction of Claims Under the Limited Liability

1.
All claims should be collated before they can be satisfied from what
remains of the insurance proceeds and freightage at the time of the
loss;
2.
No claimant should be given preference over the others.
Execution of judgment in earlier completed cases, even those already
final and executory, must be stayed pending completion of all cases
caused by the subject sinking. (Aboitiz Shipping v. Gen. Accident Fire
and Life Insurance, 217 SCRA 359 [1993])
Abandonment; Who May Exercise
1. Shipowner
2. Ship agent
However, in cases of co-ownership of a vessel, its part owner may

exempt himself from liability by the abandonment. (Art. 590, Code of
Commerce)
A charterer cannot make an abandonment as the charterer cannot
be regarded as being in the place of the owner or agents in matters
relating to the responsibility pertaining to ownership and possession of
the vessel. (Yueng Sheng Exchange v. Urrutia, 12 Phil. 747[1909])
Instances when the Shipowner or Agent May Exercise the Right to

Abandon Vessel:
1. For civil liability to 3rd persons arising from the conduct of the captain
49
in the vigilance over the goods which the vessel carried.

2. For the proportionate contribution of co-owners of the vessel to a
common fund for the acts of the captain.

3. For civil liability incurred by the shipowner in case of collision.
4. In case of leakage of at least of the contents of a cargo containing
liquids; and
5. In case of constructive loss of the vessel.
Requisites for Abandonment in Maritime Commerce
1.
Actual relinquishment of claim of ownership;
2.
Constructive total loss (loss, injury or expenses suffered should be
more then of the value of the thing abandoned);
3.
Abandonment must be neither partial nor conditional;
4.
Abandonment done within reasonable time after receipt of reliable
information of constructive total loss;
5.
Explicit notice to the insurer, whether orally or in writing, specifying
the cause of abandonment;
6.
If notice done orally, a written notice must be given within 7 days
from such oral notice.
Persons Participating In Maritime Commerce
1. Shipowners and ship agents
2. Captains and masters of the vessel
3. Officers and crew of the vessel
4. Supercargoes
5. Engineer
SHIPOWNERS AND SHIP AGENTS
Shipowner (proprietario) - Person who has possession, control and
management of the vessel and the consequent right to direct her
navigation and receive freight earned and paid, while his possession
continues.
Ship Agent (Naviero) - Person entrusted with provisioning and
representing the vessel in the port in which it may be found; also includes
the shipowner. (Chua Hek Yong vs. IAC, 166 SCRA 183)
Not a mere agent under civil law; he is solidarily liable with the ship
owner.
Powers and functions of a Ship Agent:

1. Capacity to trade;
2. Discharge duties of the captain, subject to Art.609;
3. Contract in the name of the owners with respect to repairs, details of
equipment, armament, provisions of food and fuel, and freight of the
vessel, and all that relate to the requirements of navigation;
4. Order a new voyage, make a new charter or insure the vessel after
obtaining authorization from the shipowner or if granted in certificate
of appointment.
Civil Liabilities of the Shipowner And Ship Agent
1. All contracts of the captain, whether authorized or not, to repair, equip
and provision the vessel; (Art. 586, Code of Commerce)
2. Loss and damage to the goods loaded on the vessel without prejudice
to their right to free themselves from liability by abandoning the vessel
to the creditors. (Art. 587, Code of Commerce)
3. Indemnities in favor of third persons arising from the conduct of the
captain in the care of the goods loaded in the vessel;
4. Damages suffered by a third person for tort committed by the captain;
and
5. Damages in case of collision due to fault or negligence or want of skill
of the captain.
Duty of Ship Agent to Discharge the Captain and Members of the
50
Crew
If the seamen contract is not for a definite period or voyage, he
may discharge them at his discretion. (Art. 603, Code of
Commerce)
If for a definite period, he may not discharge them until after the
fulfillment of their contracts, except on the following grounds:
- Insubordination in serious matters;
- Robbery;
- Theft;
- Habitual drunkenness;
- Damage caused to the vessel or to its cargo through malice or
manifest or proven negligence. (Art. 605, Code of Commerce)
CAPTAINS AND MASTERS
They are the chiefs or commanders of ships.
The terms have the same meaning, but are particularly used in
accordance with the size of the vessel governed and the scope of
transportation, i.e., large and overseas, and small and coastwise,
respectively.
Nature of Position of Captains and Masters (3-Fold character):
1. General agent of the shipowner;
2. Technical director of the vessel;
3. Representative of the government of the country under whose flag he
navigates.
Qualifications of Captain and Masters:
1. Filipino citizen;
2. Legal capacity to contract;
3. Must have passed the required physical and mental examinations
required for licensing him as such. (Art. 609, Code of Commerce)
Inherent powers of Captains:
1. Appoint crew in the absence of ship agent;
2. Command the crew and direct the vessel to its port of destination;
3. Impose correctional punishment on those who, while on board vessel,
fail to comply with his orders or are wanting in discipline;
4. Make contracts for the charter of vessel in the absence of ship agent.
5. Supply, equip, and provision the vessel; and
6. Order repair of vessel to enable it to continue its voyage. (Art. 610,
Code of Commerce)
Duties of Captains:
1. Bring on board the proper certificate and documents and a copy of the
Code of Commerce;
2. Keep a Log Book, Accounting Book and Freight Book;
3. Examine the ship before the voyage;
4. Stay on board during the loading and unloading of the cargo;
5. Be on deck while leaving or entering the port;
6. Protest arrivals under stress and in case of shipwreck;
7. Follow instructions of and render an accounting to the ship agent;
8. Leave the vessel last in case of wreck;
9. Hold in custody properties left by deceased passengers and crew
members;
10.Comply with the requirements of customs, health, etc. at the port of
arrival;
11.Observe rules to avoid collision;
12. Demand a pilot while entering or leaving a port. (Art. 612, Code of
Commerce)
No liability for the following:
1. Damages caused to the vessel or to the cargo by force majeure;
2. Obligations contracted for the repair, equipment, and provisioning of
the vessel unless he has expressly bound himself personally or has
51
signed a bill of exchange or promissory note in his name. (Art. 620,

Code of Commerce)
Solidary Liabilities of the Ship Agent/Shipowner for Acts Done by
the Captain towards Passengers and Cargoes
1. Damages to vessel and to cargo due to lack of skill and negligence;
2. Thefts and robberies of the crew;
3. Losses and fines for violation of laws;
4. Damages due to mutinies;
5. Damages due to misuse of power;
6. For deviations;
7. For arrivals under stress;
8. Damages due to non-observance of marine regulations. (Art. 618, CoC)
OFFICERS AND CREW
1. Sailing Mate/First Mate
2. Second Mate
3. Engineers
4. Crew
No liability under the following circumstances:
1. If, before beginning voyage, captain attempts to change it, or a naval
war with the power to which the vessel was destined occurs;
2. If a disease breaks out and be officially declared an epidemic in the
port of destination;
3. If the vessel should change owner or captain. (Art. 647, Code of
Commerce)
Sailing Mate/First Mate: Second chief of the vessel who takes the
place of the captain in case of absence, sickness, or death and shall
assume all of his duties, powers and responsibilities. (Art. 627, Code of
Commerce)
Second Mate: Takes command of the vessel in case of the inability or
disqualification of the captain and the sailing mate, assuming in such case
their powers and responsibilities. (Third in command)
Engineers: Officers of the vessel but have no authority except in matters
referring to the motor apparatus. When two or more are hired, one of
them shall be the chief engineer.
Crew: The aggregate of seamen who man a ship, or the ships company.
Hired by the ship agent, where he is present and in his absence, the
captain hires them, preferring Filipinos, and in their absence, he may
take in foreigners, but not exceeding 1/5 of the crew. (Art. 634, Code of
Commerce)
Just Causes for the Discharge of Seaman While Contract Subsists
1. Perpetration of a crime;
2. Repeated insubordination, want of discipline;
3. Repeated incapacity and negligence;
4. Habitual drunkenness;
5. Physical incapacity;
6. Desertion. (Art. 637, Code of Commerce)
Rules in Case of Death of a Seaman
The seamans heirs are entitled to payment as follows:
1. If Death Is Natural:
a. compensation up to time of death if engaged on wage;
b. if by voyage - half of amount if death occurs on voyage out; and
full, if on voyage in;
c. if by shares - none, if before departure; full, if after departure;
2. If Death is Due to Defense of Vessel - full payment;
3. If Captured in Defense of Vessel - full payment;
52
4.
If Captured Due to Carelessness - wages up to the date of the

capture. (Art. 645, Code of Commerce)
COMPLEMENT OF THE VESSEL

All persons on board, from the captain to the cabin boy, necessary for
the management, maneuvers, and service, thus including the crew, the
sailing mates, engineers, stokers and other employees on board not
having specific designations.
Does not include the passengers or the persons whom the vessel is
transporting.
SUPERCARGOES
Persons who discharge administrative duties assigned to them by ship
agent or shippers, keeping an account and record of transaction as
required in the accounting book of the captain. (Art. 649, Code of
Commerce)
PILOT
A person duly qualified, and licensed, to conduct a vessel into or out of
ports, or in certain waters.
The term generally connotes a person taken on board at a

particular place for the purpose of conducting a ship through a river,
road or channel, or from a port.
Master pro hac vice (for the time being) in the command and
navigation of the ship.
Liability of Pilot
General Rule: On compulsory pilotage grounds, the Harbor Pilot is
responsible for damage to a vessel or to life or property due to his
negligence.
Exceptions:
1. Accident caused by force majeure or natural calamity provided the
pilot exercised prudence and extra diligence to prevent or minimize
damages.
2. Countermand or overrule by the master of the vessel in which case the
registered owner of the vessel is liable. (Sec.11, Art.III Philippine Ports
Authority Administrative Order 03-85)
DESERTION
An act by which a seaman deserts and abandons a ship or vessel
before the expiration of his term of duty without leave and without
intention to return. (Singa Ship Management Phils. v. NLRC 276 SCRA
201[1997])
CAUSES OF REVOCATION OF VOYAGE
1. War or interdiction of commerce;
2. Blockade;
3. Prohibition to receive cargo at destination;
4. Embargo;
5. Inability of the vessel to navigate. (Art. 640, Code of Commerce)
Terms:
1. Interdiction of Commerce A governmental prohibition of
commercial intercourse intended to bring about an entire cessation for
the time being of all trade whatever.
2. Blockade A sort of circumvallation of a place by which all foreign
connection and correspondence is, as far as human power can effect it,
to be cut off.
3. Embargo A proclamation or order of a state, usually issued in time of
war or threatened hostilities, prohibiting the departure of ships or
goods from some or all the ports of such state until further order.
Vessels
LOPEZ VS. DURUELO 52 PHIL 229
53
Facts: On February 10, 1927, plaintiff Augusto Lopez was desirous of

embarking upon the interisland steamer San Jacinto in order to go to
Cebu, the plaintiff embarked at the landing in the motorboat Jison which
was engaged in conveying passengers and luggage back and forth from
the landing to the boats at anchor.
As the motorboat approached San Jacinto in a perfectly quiet sea, it
came too near to the stern of the ship, and as the propeller of the ship had
not yet ceased to turn, the blades of the propeller strucked the motorboat
and sank it at once. As it sank, the plaintiff was thrown into the water
against the propeller, and the revolving blades inflicted various injuries
upon him. The plaintiff was hospitalized. He filed a complaint seeking to
recover damages from the defendant. The defendant however alleged
that the complaint does not have a right of action, a demurrer was
submitted directed to the fact that the complaint does not allege that the
protest had been presented by the plaintiff, within twenty-four hours after
the occurrence to the competent authority at the port where the accident
occurred as provided for Article 835 of the Code of Commerce.
Issue: Whether the motorboat Jison is a vessel provided for by Article 835
of the Code of Commerce?
Held: The word vessel as used in the third section of tile IV, Book III of the
Code of Commerce, dealing with collisions, does not include all ships, craft
or floating structures of any kind without limitation. The said section does
not apply to minor craft engaged in a river and bay traffic.Therefore, a
passenger on boat like the Jison, is not required to make protest as a
condition precedent to his right of action for the injury suffered by him in
the collision described in the complaint.Article 835 of the Code of
Commerce does not apply.
1. Nature and characteristic of Maritime transactions, Arts. 585,
587
RUBISO VS. RIVERA (27PHIL72) G.R. No. L- 11407 October 30, 1917
Facts: The counsel of plaintiff brought a suit alleging that his clients were
the owners of the pilot boat named Valentine, which has been in bad
condition and on the date of the complaint, was stranded in the place
called Tingly, of the municipality of Battings. The defendant Rivera took
charge or took possession of the said boat without the knowledge or
consent of the plaintiff and refused to deliver it to them, under the claim
that he was the owner thereof. The refusal on the part of the defendant
has caused the plaintiff damages because they were unable to derive
profit from the voyages for which the said pilot boat was customarily used.
The defendant, on the other hand, alleged that they purchased the subject
pilot boat. The plaintiff alleged that the sale on behalf of the defendant
Rivera was prior to that made at public auction to Rubio, but the
registration of this latter sale was prior to the sale made to the defendant.
Issue: Whether or not, the plaintiff still has the better right over the
subject vessel?
Held: Under the Code of Commerce, Art 573 provides:
Merchant vessels constitute property that may be acquired and
transferred by any of the means recognized by law. The acquisition of a
vessel must be included in a written instrument, which shall not produce
any effect with regard to third persons if not recorded in the commercial
registry.
The requisite of registration in the registry of the purchase of a
vessel is necessary and indispensable in order that the purchasers rights
may be maintained against a claim filed by third person. It is undeniable
54
that Riveras right cannot prevail over those acquired by Rubiso in the
ownership of the pilot boat, thought the latters acquisition of the vessel
at public auction was subsequent to its purchase by the defendant,
Rivera.
LUZON STEVEDORING CORPORATION VS. COURT OF APPEALS
(156 SCRA 169)
Facts: A maritime collision occurred between the tanker CAVITE owned by
LSCO and MV Fernando Escano (a passenger ship) owned by Escano, as a
result the passenger ship sunk. An action in admiralty was filed by Escano
against Luzon. The trial court held that LSCO Cavite was solely to blame
for the collision and held that Luzons claim that its liability should be
limited under Article 837 of the Code of Commerce has not been
established. The Court of Appeals affirmed the trial court. The SC also
affirmed the CA. Upon two motions for reconsideration, the Supreme
Court gave course to the petition.
Issue: Whether or not in order to claim limited liability under Article 837
of the Code of Commerce, it is necessary that the owner abandon the
vessel
Held: Yes, abandonment is necessary to claim the limited liability wherein
it shall be limited to the value of the vessel with all the appurtenances and
freightage earned in the voyage. However, if the injury was due to the
ship owners fault, the ship owner may not avail of his right to avail of
limited liability by abandoning the vessel.
The real nature of the liability of the ship owner or agent is
embodied in the Code of Commerce. Articles 587, 590 and 837 are
intended to limit the liability of the ship owner, provided that the owner or
agent abandons the vessel. Although Article 837 does not specifically
provide that in case of collision there should be abandonment, to enjoy
such limited liability, said article is a mere amplification of the provisions
of Articles 587 and 590 which makes it a mere superfluity.
The exception to this rule in Article 837 is when the vessel is totally
lost in which case there is no vessel to abandon, thus abandonment is not
required. Because of such loss, the liability of the owner or agent is
extinguished. However, they are still personally liable for claims under
the Workmens Compensation Act and for repairs on the vessel prior to its
loss.
In case of illegal or tortious acts of the captain, the liability of the
owner and agent is subsidiary. In such cases, the owner or agent may
avail of Article 837 by abandoning the vessel. But if the injury is caused
by the owners fault as where he engages the services of an
inexperienced captain or engineer, he cannot avail of the provisions of
Article 837 by abandoning the vessel. He is personally liable for such
damages.
In this case, the Court held that the petitioner is a t fault and since
he did not abandon the vessel, he cannot invoke the benefit of Article 837
to limit his liability to the value of the vessel, all appurtenances and
freightage earned during the voyage.
YANGCO VS. LASERNA (73 PHIL 330)
Facts: On the afternoon of May 26, 1927, the steamer SS Negros left the
port of Romblon on its return trip to Manila. Typhoon signal no. 2 was then
up and in fact, the passengers duly advised the captain before sailing. The
boat was overloaded. After 2 hours of sailing, the boat encountered strong
winds and rough seas between the islands of Banton and Simara. While in
the act of maneuvering, the vessel was caught sidewise by a big wave
55
which caused it to capsize and sink. Many of the passengers died on the
mishap. Civil actions were instituted in the CFI of Capiz, the petitioner
sought to abandon the vessel to the plaintiffs in three cases.
Issue: Whether the shipowner or agent is liable for damages for the
consequent death of its passengers notwithstanding the total loss of the
vessel?
Held: The petitioner is absolved from all complaints.
Under Article 587 the ship agent shall also be civilly liable for
indemnities in favor of third persons which arise from the conduct of the
captain in the vigilance over the goods which the vessels carried; BUT he
may exempt himself therefrom by abandoning the vessel with all her
equipment and the freight he may have earned during the voyage.
Whether the abandonment of the vessel sought by the petitioner in
the case was in accordance with the law or not, is immaterial. The vessel
having totally perished, any act of abandonment would be idle ceremony.
NO VESSEL, NO LIABILITY.
MANILA STEAMSHIP CO. INC. VS. INSA ABDULHAMAN (100 PHIL
32)
Facts: Insa Abdulhaman together with his wife and five children boarded
M/L Consuelo V in Zamboanga City. The said ship was bound for Siokon
under the command of Faustino Macrohon. On that same night, M/S
Bowline Knot was navigating from Marijoboc towards Zamboanga.
Around 9:30 to 10:00 in the evening of May 4, 1948, while some of
the passengers of the M/L Consuelo V were then sleeping and some lying
down awake, a shocking collision suddenly occurred. The ship that
collided was later on identified as the M/V Bowline Knot. M/L Consuelo V
capsized that resulted to the death of 9 passengers and the loss of the
cargoes on board.
The Court held the owners of both vessels solidarily liable to
plaintiff for damages caused to the latter under Article 827 of the Code of
Commerce but exempted defendant Lim Hong To from liability due to the
sinking and total loss of his vessel. While Manila steamship, owner of the
Bowline Knot was ordered to pay all of plaintiffs damages.
Petitioner Manila Steamship Co. pleads that it is exempt from any
liability under Article 1903 of the Civil Code because it had exercised the
diligence of a good father of a family in the selection of its employees,
particularly the officer in command of the M/S Bowline Knot.
Issue: Whether or not petitioner Manila Steamship Co. is exempt from any
liability under Art. 1903 of the Civil Code?
Held: NO. Petitioner is not exempted from liabilities. While it is true that
plaintiffs action against petitioner is based on a tort or quasi delict, the
tort in question is not a civil tort under the Civil Code but a maritime tort
resulting in a collision at sea, governed by Articles 826-939 of the Code of
Commerce. Under Art. 827 of the Code of Commerce, in case of collision
between two vessels imputable to both of them, each vessel shall suffer
her own damage and both shall be solidarily liable for the damages
occasioned to their cargoes. The shipowner is directly and primarily
responsible in tort resulting in a collision at sea, and it may not escape
liability on the ground that exercised due diligence in the selection and
supervision of the vessels officers and crew.
VASQUEZ VS. CA (138 SCRA 553)
56
FACTS: The litigation involves a claim for damages for the loss at sea of
petitioners respective children after the shipwreck of MV Pioneer Cebu
due to typhoon Klaring in May of 1966. When the inter-island vessel MV
Pioneer Cebu left the Port of Manila in the early morning of May 15, 1966
bound for Cebu, it had on board the spouses Alfonso Vasquez and Filipinas
Bagaipo and a four-year old boy, Mario Vasquez, among her passengers.
The MV Pioneer Cebu encountered typhoon Klaring and struck a reef on
the southern part of Malapascua Island, located somewhere north of island
of Cebu and subsequently sunk. The aforementioned passengers were
unheard from since then.
Due to the loss of their children, petitioners sued for damages
before the Court Instance of Manila. Respondent defended on the plea of
force majeure, and extinction of its liability by the actual loss of the
vessel. After proper proceedings, the trial court awarded damages. On
appeal, respondent Court reversed judgment and absolved private
respondent from any liability. Hence, this Petition for Review on Certiorari.
Issue: Whether the shipowners liability is extinguished despite of the loss
of the ship?
Held: With respect for the private respondents submission that the total
loss of the vessel extinguished its liability pursuant to Article 587 of the
Code of Commerce as construed in Yangco vs. Laserna, 73 Phil. 330
(1941), suffice it to state that even in the cited case, it was held that the
liability of the shipowner is limited to the value of the vessel or to the
insurance thereon, Despite the total loss of the vessel therefore, its
insurance answers for the damages that the shipowners agent may be
held liable for by reason of the death of its passengers. Judgment of the
CFI reinstated.
ABUEG VS. SAN DIEGO (77 PHIL 32)

Facts: The M/S San Diego II and the M/S Bartolome, while engaged in
fishing operations around Mindoro Island on Oct. 1, 1941 were caught by a
typhoon as a consequence of which they were sunk and totally lost.
Amado Nuez, Victoriano Salvacion and Francisco Oching while acting in
their capacities perished in the shipwreck.
Counsel for the appellant cite article 587 of the Code of Commerce
which provides that if the vessel together with all her tackle and freight
money earned during the voyage are abandoned, the agent's liability to
third persons for tortious acts of the captain in the care of the goods which
the ship carried is extinguished; article 837 of the same code which
provides that in cases of collision, the ship owners' liability is limited to the
value of the vessel with all her equipment and freight earned during the
voyage (Philippine Shipping company vs. Garcia, 6 Phil., 281), and article
643 of the same Code which provides that if the vessel and freight are
totally lost, the agent's liability for wages of the crew is extinguished.
From these premises counsel draw the conclusion that appellant's liability,
as owner of the two motor ships lost or sunk as a result of the typhoon
that lashed the island of Mindoro on October 1, 1941, was extinguished.
Issue: Whether the liability of the shipowner is extinguished by the total
loss of the ship?
Held: The provisions of the Code of Commerce invoked by appellant have
no room in the application of the Workmen's Compensation Act which
seeks to improve, and aims at the amelioration of, the condition of
laborers and employees. It is not the liability for the damage or loss of the
cargo or injury to, or death of, a passenger by or through the misconduct
of the captain or master of the ship; nor the liability for the loss of the ship
57
as result of collision; nor the responsibility for wages of the crew, but a
liability created by a statute to compensate employees and laborers in
cases of injury received by or inflicted upon them, while engaged in the
performance of their work or employment, or the heirs and dependents
and laborers and employees in the event of death caused by their
employment. Such compensation has nothing to do with the provisions of
the Code of Commerce regarding maritime commerce. It is an item in the
cost of production which must be included in the budget of any wellmanaged industry.
It has been repeatedly stated that the Workmen's Compensation
Act was enacted to abrogate the common law and our Civil Code upon
culpable acts and omissions, and that the employer need not be guilty of
neglect or fault, in order that responsibility may attach to him and that
shipowner was liable to pay compensation provided for in the Workmen's
Compensation Act, notwithstanding the fact that the motorboat was
totally lost.
Doctrine of Limited Liability, Art. 587
ABOITIZ SHIPPING VS. GENERAL ACCIDENT FIRE AND LIFE (GR NO.
100446 JANUARY 21, 1993)
Facts: Petitioner is a corporation engaged in the business of maritime
trade as a carrier. As such, it owned and operated the M/V P/ ABOITIZ, a
common carrier that sank on voyage from Hong Kong to Manila. Private
respondent GAFLAC is a foreign insurance company pursuing its remedy
as a subrogee of several cargo consignees whose respective cargo sank
with the said vessel and for which it has priory paid. The sinking of vessel
gave rise to filling of suit to recover the lost cargo either by shippers, their
successors-in-interest, or the cargo insurers like GAFLAC as subrogees.
The sinking was initially investigated by the Board of Marine Inquiry, which
found that such sinking was due to fortuitous event.
Issue: Whether or not the doctrine of limited liability is applicable to the
case?
Held: The real an hypothecary nature of maritime law simple means that
the liability of the carrier in connection with losses related to maritime
contracts is confined to the vessel, which is hypothecated for such
obligations or which stands as the guaranty for their settlement. It has its
origin by reason of the conditions and risks attending maritime trade in its
earliest years when such trade was replete with innumerable and
unknown hazards since vessels had to go through largely uncharted
waters to ply their trade. Thus, the liability of the vessel owner and agent
arising form the operation of such vessel were confined to the vessel
itself, its equipment, freight and insurance, if any, which limitation served
to induce capitalist into effectively wagering their resources against
consideration of the large attainable in the trade.
AMERICAN HOME ASSURANCE VS. CA (208 SCRA 343)
Facts: On or about June 19, 1998, Cheng Hwa Pulp Corp. shipped 5,000
bales of bleached kraft pulp from Haulien, Taiwan on board SS Kaunlaran
(owned by National Marine Corporation). The shipment was consigned to
Mayleen Paper, Inc. which insured the same with American Home
Assurance Co. On June 22, 1998, the shipment arrived in manila and was
discharged onto the custody of the Marina Port Services, Inc. However,
upon delivery to Mayleen Paper Inc., it was found that 122 bales had
either been damaged or lost with the value of P61, 263.41.
Mayleen Paper Inc, duly demanded indemnification from NMC but
was not heeded. Mayleen then sought recovery from American Home
Assurance, the insurer, which was adjusted to P31, 506.75. As subrogee,
58
American Home then filed a suit against NMC for the recovery of the said
amount. NMC filed a motion to dismiss on the ground that there was no
cause of action based on Art 848 of the Code of Commerce which provides
that claims for averages shall not be admitted if they do not exceed 5%
of the interest which the claimant may have in the vessel or in the cargo if
it be gross average and 1% of the goods damaged if particular average,
deducting in both cases the expenses of appraisal, unless there is an
agreement to the contrary. NMC contended that based on the allegations
of the complaint, the loss sustained in the case was P35, 506.75 which is
only .18% of P17.420.000.00, the total value of the cargo.
The trial court dismissed the case for lack of cause of action.
American Home then filed a petition for certiorari with the Court of
Appeals which later dismissed as constituting plain errors of law. Hence,
this petition.
Issue: Whether or not the law on averages applies when there is
negligence?
Held: NO. Common carriers cannot limit their liability for injury or loss of
goods where such injury or loss was caused by its own negligence.
Otherwise stated, the law on averages under the Code of Commerce
cannot be applied in determining liability where there is negligence. It is
reasonable to conclude that the issue of negligence must first be
addressed before the proper provisions of the Code of Commerce on the
extent of liability may be applied.
Instead of presenting proof of
diligence as requires by law, NMC
hypothetically admitting the truth of the
the effect that the loss or damage to
negligence or fault of NMC.
the exercise of extraordinary

filed its motion to dismiss,
facts alleged in the complaint to
the 122 bales was due to the
PHILIPPINE HOME ASSURANCE VS. CA (257 SCRA 468)

Facts: Eastern Shipping Lines, Inc. (ESLI) loaded on board SS Eastern
Explorer in Kobe, Japan, a shipment for carriage to Manila and Cebu freight
prepaid and in good order and condition. While the vessel is off Okinawa,
Japan, a small flame was detected on the acetylene cylinder located in the
main deck level. As the crew was trying to extinguish the fire, the
acetylene cylinder suddenly exploded sending a flash of flame throughout
the accommodation area, thus causing death and severe injuries to the
crew and instantly setting fire to the whole superstructure of the vessel.
The incident forces the master and the crew to abandon the ship.
Thereafter, SS Eastern Explorer was found to be constructive total loss
and its voyage was declared abandoned. Several hours later, a tugboat
under the control of Fukuda Salvage Co. arrived near the vessel and
commenced to tow the vessel for the port of Naha, Japan.
After the fire was extinguished, the cargoes which were saved were
loaded to another vessel for delivery for their original of port of
destination. ESLI charged the consignees several amounts corresponding
to additional freight and salvage charges. The charges were all paid by
Philippine Home Assurance Corporation (PHAC) under protest for and in
behalf of the consignees. PHAC, as subrogee of the consignees, thereafter
filed a complaint before the Regional Trial Court of Manila, Branch 39,
against ESLI to recover the sum paid under protest on the ground that the
same were actually damages directly brought about by the fault,
negligence, illegal act and/or breach of contract of ESLI.
In its answer, ESLI contended that it exercised the diligence
required by law in the handling, custody and carriage of the shipment;
that the fire was caused by unforeseen event; that the additional freight
charges are due and demandable pursuant to the Bill of Lading, and that
59
salvage charges are properly collectible under Act. No. 2616, known as the
Salvage Law.
The trial court dismissed the PHACs complaint and ruled in favor of
ESLI. The court said that the Supreme Court has ruled in Erlanger and
Galinger vs. Swedish East Asiatic Co., Ltd., 34 Phil. 178, that three
elements are (1) a marine peril (2) service voluntary rendered when not
required as an existing duty or from a special contract and (3) success in
whole or in part, or that the service rendered contributed to such success.
The court said that the above elements are all present in the instant case.
Salvage charges may thus be assessed on the cargoes saved from the
vessel. As provided for in Section 13 of the Salvage Law, The expenses of
salvage, as well as the reward for salvage or assistance shall be a charge
on the things salvaged or their value. In Manila Railroad Co. vs.
Macondray Co., 37 Phil. 583. It was also held that When a ship and its
cargo are saved together, the salvage allowance should be charged
against the ship and the cargo in the proportion of their respective values,
the same as in the case of general average Thus, the compensation to
be paid by the owner of the cargo is in proportion to the value of the
vessel and the value of the cargo saved.
On appeal to the Court of Appeals, respondent court affirmed the
trial courts findings and conclusion; hence, the present petition for review
before this Court on the following error, among others:
Issue: Whether or not the respondent Court erroneously adopted with
approval the Trial Courts conclusion that the expenses or averages
incurred in saving the cargo constitute general average?
Held: On the issue whether or not respondent court committed an error in
concluding that the expenses incurred in saving the cargo are considered
general average, we rule in the affirmative. As a rule, general or gross
averages include all damages and expenses which are deliberately caused
in order to save vessels, its cargo or both at the same time, from a real
and known risk. While the instant case may technically fall within the
purview of the said provision, the formalities prescribed under Article 813
and 814 of the Code of Commerce in order to incur the expenses and
cause the damage corresponding to gross average were not complied
with. Consequently, respondent ESLIs claim for contribution from the
consignees of the cargo at the time of the occurrence of the average turns
to naught.
The Court reversed and set aside the judgment of the respondent
court and ordered respondent Eastern Shipping Lines. Inc. to return to
petitioner Philippine Home Assurance Corporation the amount it paid
under protest in behalf of the consignees.
SALVAGE LAW (ACT NO. 2616)
Provides a compulsory reward to those who save cargo by requiring the
owner of the property to give a reward equivalent to the maximum of 50%
of the value of the property saved.
SALVAGE (Two Concepts)
1. Service one person renders to the owner of a ship or goods, by his own
labor, preserving the goods or the ship which the owner or those
entrusted with the care of them have either abandoned in distress at
sea, or are unable to protect or secure.
2. Compensation allowed to persons by whose voluntary assistance a ship
at sea or her cargo or both have been saved in whole or in part from
impending sea peril, or such property recovered from actual peril or
loss, as in cases of shipwreck, derelict or recapture.
Requisites:
60
1. Valid object of salvage; valid object of salvage; that the vessel is
shipwrecked beyond the control of the crew or shall have been

abandoned;
2. Object must have been exposed to marine peril (not perils of the ship);
3. Services rendered voluntarily (neither an existing duty nor out of a preexisting contract);
4. Services are successful, total or partial.
Subjects of Salvage:
1. Ship itself;
2. Jetsam goods which are cast into the sea, and there sink and remain
under water;
3. Floatsam or Flotsam goods which float upon the sea when cast
overboard;
4. Ligan or Lagan goods cast into the sea tied to a buoy, so that they
may be found again by the owners (Diaz, Notes on Transportation Law,
p.173).
Persons Who Have No Right to a Reward for Salvage:
1.
Crew of the vessel saved;
2.
Person who commenced Salvage in spite of opposition of the
Captain or his representative;
3.
In accordance with Sec. 3 of the Salvage Law, a person who fails to
deliver a salvaged vessel or cargo to the Collector of Customs.
DERELICT
A ship or her cargo which is abandoned and deserted at sea by those
who are in charge of it, without any hope of recovering it, or without any
intention of returning to it.
Rules on Salvage Reward
1. The reward is fixed by the RTC judge in the absence of agreement or
where the latter is excessive. (Sec. 9, Act No. 2616)
2. The reward should constitute a sufficient compensation for the outlay
and effort of the salvors and should be liberal enough to offer an
inducement to others to render services in similar emergencies in the
future.
3. If sold (no claim being made within 3 months from publication), the
proceeds, after deducting expenses and the salvage claim, shall go to
the owner; if the latter does not claim it within 3 years, 50% of the said
proceeds shall go to the salvors, who shall divide it equitably, and the
other half to the government. (Secs. 11-12, Act. No 2616)
4. If a vessel is the salvor, the reward shall be distributed as follows:
a. 50% to the shipowner;
b. 25% to the captain; and
c. 25% to the officers and crew in proportion to their salaries. (Sec.
13, Act No. 2616)
5. Expenses incurred in the salvage must be shown to be necessary and
reasonable in amount before they will be allowed to the salvors.
CONTRACT OF TOWAGE
A contract whereby one vessel, usually motorized, pulls another, whether
loaded or not with merchandise, from one place to another, for a
compensation. It is a contract for services rather than a contract of
carriage.
BARRIOS VS. GO THONG & CO. (7 SCRA 535)
Facts: Honorio Barrios was the captain and master of the MV Henry I
operated by William Lines, Inc. which plied the route from Cebu to Davao
City. On its voyage on May 1, 1958 the MV Henry I intercepted an SOS
signal from the MV Don Alfredo owned and operated by Go Thong & Co.
Responding to the SOS, Henry I approached the Don Alfredo and found out
that the Don Alfredo was suffering from engine failure. After agreeing to
61
assist the disabled ship, the crew of Henry I attached tow lines and
proceeded to tow the Don Alfredo heading towards the port of Dumaguete
City. The following morning, they encountered a sister ship of Don Alfredo,
the MV Lux. Upon the request of the captain of the Don Alfredo, the crew
of the Henry I released the towlines and continued on their voyage.
After the incident, Barrios as captain of MV Henry I claimed
entitlement to compensation under the salvage law which was opposed by
Go Thong and Co. who claimed that what occurred was only mere towage.
The trial court dismissed the claim.
Issue: Whether the rescue of the MV Don Alfredo should be classified as a
salvage, thus entitling Barrios et al. to reward?
Held: No. Not all the requisites were present for the rescue to be
considered as salvage under the law.
The claim of Barrios is anchored on the provisions of the Salvage
Law that stipulates that a ship that is lost or abandoned at sea is
considered as a derelict and the proper subject of salvage. A ship in a
desperate condition with passengers and persons on board but who are
unable to do anything for their own safety may be considered a quasiderelict.
Further, the Salvage Law provides that those assisting in saving a
vessel in its cargo from shipwreck shall be entitled to a reward. There are
three elements that are necessary for a salvage claim:
1. the existence of a marine peril
2. service is voluntarily rendered when not required as an existing
duty or a special contract; and
3. success in whole or in part, or that the service rendered contributed
to such success.
It is therefore imperative to establish whether the MV Don Alfredo
was exposed to any form of marine peril when it was assisted by the MV
Henry I. The Supreme Court however noted that the nature of its
disability and the circumstances surrounding it could be construed as a
marine peril as contemplated in the Salvage Law. When the engine failure
occurred the seas were calm and the weather was clear. In fact the ship
did not drift too far from the location where its engines failed. Further, the
captain and crew of the MV Don Alfredo did not find it necessary to
jettison the vessels cargo as a safety measure. Therefore the MV Don
Alfredo cannot even be considered as a quasi derelict.
Although the service of the defendant did not constitute as salvage,
it can be considered as a quasi contract of towage. However in a contract
of towage, only the owner of the towing vessel is entitled to remuneration.
It is noteworthy that the owner of MV Henry I, William Lines, Inc., already
waived its claim for compensation.
SPECIAL CONTRACTS OF MARITIME COMMERCE
1. Charter party
2. Bill of lading
3. Contract of transportation of passengers on sea voyages
4. Loan on bottomry
5. Loan on respondentia
6. Marine insurance
A. CHARTER PARTY
A contract by virtue of which the owner or agent binds himself to
transport merchandise or persons for a fixed price.
A contract by which an entire ship, or some principal part thereof is
let/leased by the owner to another person for a specified time or use.
62
(Planters Products, Inc. vs. CA, 226 SCRA 476)

Parties to a charter party:
1.
Ship owner or ship agent; and
2.
Charterer
Form of Charter Party
1.
Must be in duplicate
2.
Signed by the contracting parties, and when either does not
know how or is unable to do so, by two witnesses at his request. (Art.
652, Code of Commerce)
Contents of Charter Party Agreement
Besides the condition freely stipulated, it shall include the following:
1.
Kind, name and tonnage of the vessel;
2.
Her flag and port of registry;
3.
Name, surname and domicile of the captain;
4.
Name, surname and domicile of the ship agent, and if the
latter should make the carter party;
5.
Name, surname and domicile of the charterer, and if he
states that he is acting by commission, that of the person for whose
account he makes the contract;
6.
Port of loading and unloading;
7.
Capacity, the number or tons or weight, or measure which
they respectively bind themselves to load and transport, or whether it
is the total cargo;
8.
Freightage to be paid;
9.
Amount of primage to be paid by the captain;
10.
Days agreed upon for loading and unloading;
11.
Lay Days and extra lay days to be allowed and the rate of
demurrage.
Classes of Charter Party:
1.
Bareboat Or Demise
The charterer provides crew, food and fuel. The charterer is liable as if
he were the owner, except when the cause arises from the
unworthiness of the vessel. The shipowner leases to the charterer the
whole vessel, transferring to the latter the entire command, possession
and consequent control over the vessels navigation, including the
master and the crew, who thereby become the charters servants. It
transforms a common carrier into a private carrier.
2. Contract of Affreightment A contract whereby the owner of the
vessel leases part or all of its space to haul goods for others.
Kinds of Contract of Affreightment:
a.
Time Charter vessel is chartered for a fixed period
of time or duration of voyage.
b.
Voyage or trip charter the vessel is leased for one
or series of voyages usually for purposes of transporting goods for
charterer.
Requisites of a Valid Charter Party
1.
Consent of the contracting parties
2.
Existing vessel which should be placed at the disposition of the
shipper
3.
Freight
4.
Compliance with Art. 652 of the Code of Commerce
Clauses Which May Be Included In a Charter Party
1. Jason Clause
A stipulation in a charter party that in case of a maritime accident
for which the shipowner is not responsible by law, contract or
otherwise, the cargo shippers, consignees or owners shall contribute
63
with the shipowner in general average.

2. Clause Paramount or Paramount Clause
A clause in a charter party providing that the COGSA shall apply,
even though the transportation is domestic, subject to the extent that
any term of the bill of lading is repugnant to the COGSA or applicable
law, then to the extent thereof the provision of the bill of lading is void.
Rights and Obligations in a Charter Party
A.
1.
2.
3.
4.
5.
6.
7.
B.
1.
2.
3.
4.
5.
Of the Owner or Ship Agent:

If the vessel is chartered wholly, not to accept cargo from
others;
To observe represented capacity;
To unload cargo clandestinely placed;
To substitute another vessel if load is less than 3/5 of
capacity;
To leave the port if the charterer does not bring the cargo
within the lay days and extra lay days allowed;
To place in a vessel in a condition navigate; and
To bring cargo to nearest neutral port in case of war or
blockade. (Art.669-678, Code of Commerce)
Of the Charterer:
To pay the agreed charter price;
To pay freightage on unboarded cargo;
To pay losses to others for loading uncontracted cargo or
illicit cargo;
To wait if the vessel needs repair;
To pay expenses for deviation. (Art. 679-687, Code of
Commerce)
Rescission of a Charter Party

A.
At Charterers Request:
1. By abandoning the charter and paying half of the freightage;
2. Error in tonnage or flag;
3. Failure to place the vessel at the charterers disposal;
4. Return of the vessel due to pirates, enemies or bad weather;
5. Arrival at a port for repairs.
B.
At Shipowners Request:
1. If the extra lay days terminate without the cargo being placed
alongside the vessel;
2. Sale by the owner of the vessel before loading the charterer.
C.
1.
2.
3.
4.
5.
Fortuitous causes:
War;
Blockade;
Prohibition to receive cargo;
Embargo; and
Inability of the vessel to navigate.
PRIMAGE: Bonus to be paid to the captain after the successful voyage.

DEMURRAGE: The sum fixed in the charter party as a remuneration to
the owner of the ship for the detention of his vessel beyond the number of
days allowed by the charter party for loading or unloading or for sailing.
DEADFREIGHT: The amount paid by or recoverable from a charterer of a
ship for the portion of the ships capacity the latter contracted for but
failed to occupy.
LAY DAYS: Days allowed to charter parties for loading and unloading the
cargo.
EXTRA LAY DAYS: Days which follow after the lay days have elapsed.
64
BILL OF LADING
Written acknowledgment of receipt of goods and agreement to
transport them to a specific place to a person named or to his order.
(Compania Maritima v. Insurance Comp. of North America, 12 SCRA
213)
The consignee and the shipper who accepts a bill of lading even
without signing are bound by the terms and conditions thereof.
(Keng Hua Paper Products v. CA 286 SCRA 257[1998])
Acceptance of the consignee is implied if he claims reimbursement
for missing goods and files a case based on the bill of lading.
(Belgian Overseas Chartering v. Phil. First Insurance, 383 SCRA 23
[2002])
USUAL FORMS OF CONSUMMATING CONTRACTS

1. C.O.D collect on delivery
If the goods are marked C.O.D., the carrier acts for the seller in
collecting the purchase price. The buyer must pay for the goods
before he can obtain possession. C.O.D. terms do not prevent title
from passing to the buyer on delivery to the carrier where they are
solely intended as security for the purchase price.
2. C.I.F. cost, insurance and freight
They signify that the price fixed covers not only the cost of the
goods, but the expense of the freight and insurance to be paid by
the seller up to the point of destination. Title passes to the buyer at
the moment of delivery to the point especially named.
3. F.O.B. - free on board
At the place of destination
Seller must pay the freight since the contract states free on board
till destination.
4. F.A.S. - free alongside ship
The property passes as soon as the goods are delivered aboard the
carrier or alongside the vessel, and that the buyer as the owner of
the goods is to bear all expenses after they are so delivered. (De
Leon, Comments and Cases on Sales, 2002 Edition, page 234)
TRANSSHIPMENT OF GOODS
The act of taking cargo out of one ship and loading it in another, or the
transfer of goods from the vessel stipulated in the contract of
affreightment to another vessel before the place of destination named in
the contract has been reached, or the transfer for further transportation
from one ship or conveyance to another.
LOAN ON BOTTOMRY
Loan made by shipowner or ship agent guaranteed by the vessel itself
and repayable upon arrival of vessel at destination.
LOAN ON RESPONDENTIA
Loan taken on security of cargo laden on a vessel and repayable upon
safe arrival of cargo at destination.
Common Elements of Loans on Bottomry and Respondentia:
1.
The captain may not borrow on bottomry or
respondentia except on his own interest or portion thereof, otherwise,
the contract is void;
2.
These contracts must at least be in writing, otherwise,
they cannot be the basis of judicial action. In order to affect third
persons and entitle it to preferential credit treatment, the contract
should be inscribed in the certificate of registry and seconded in the
registry of vessels;
3.
Should the goods upon which the money is taken not
be the risk, the contract shall be considered a simple loan;
4.
More recent loans are preferred than prior loans;
5.
The usury laws are inapplicable to these contracts;
65
6.
7.
Exposure of security to marine peril;

Obligation of the debtor conditioned only upon safe
arrival of the security at the point of destination.
Who may Contract

1. Bottomry: the owner; if owner is absent captain.
2. Respondentia: only the owner of he cargo.
Bottomry or Respondentia
1. Not subject to Usury Law.
2. Liability of the borrower is
contingent on the safe arrival
of the vessel or cargo at
destination.
3. The last lender is a preferred
creditor.
Ordinary Loan (Mutuum)

1. Subject to Usury Law
2. Not subject to any contingency
(absolute liability).
3. The first lender is a preferred
creditor.
When Loan On Bottomry Or Respondentia Regarded As Simple

Loan
1.
Lender loaned an amount larger than the value of the object due to
fraudulent means employed by the borrower. (Art. 726, Code of
Commerce)
2.
Full amount of the loan is not used for the cargo or given on the
goods if all of them could not have been loaded, the balance will be
considered a simple loan. (Art.727, Code of Commerce)
3.
If the effects on which the money is taken is not subjected to any
risk. (Art.729, Code of Commerce)
The parties to a loan, whether ordinary or maritime, may agree on any

rate of interest (CB Circular 905); provided the same is not contrary to
law, morals, good customs, public order or public policy (Art. 1306,
Civil Code)
Obligation on Bottomry Loan is Extinguished when:

1.
The loss of the vessel is based on the risk agreed upon; and
2.
Risk occurred during the voyage.
HYPOTHECARY NATURE OF BOTTOMRY AND RESPONDENTIA
General Rule: The obligation of the borrower to pay the loan is
extinguished if the goods given as security are absolutely lost by reason of
an accident of the sea, during the voyage designated, and if it is proven
that the goods were on board.
Exceptions:
1. Loss due to inherent defect;
2. Loss due to the barratry on the part of the captain;
3. Loss due to the fault or malice of the borrower;
4. The vessel was engaged in contraband;
5. The cargo loaded on the vessel be different in from that agreed upon.
RISKS, DAMAGES AND ACCIDENTS IN MARITIME COMMERCE
1. Averages
2. Arrival Under Stress
3. Collision
4. Shipwreck
A.
AVERAGE
An extraordinary or accidental expense incurred during the voyage
order to preserve the cargo, vessel or both, and all damages
deterioration suffered by the vessel from departure to the port
destination, and to the cargo from the port of loading to the port
consignment. (Art. 806, Code of Commerce)
in
or
of
of
66
CLASSES OF AVERAGES:
1. Gross or General Average
2. Particular or Simple Average
Where both vessel and cargo are saved, it is general average;

where only the vessel or only the cargo is saved, it is particular
average.
o
Expenses incurred to refloat a vessel, which accidentally ran

aground, in order to continue its voyage, do not constitute
general average. Not only is there absence of a marine peril,
common safety factor, and deliberateness. It is the safety of the
property, and not the voyage, which constitutes the true
foundation of general average. (A. Magsaysay, Inc. vs. Agan,
967 Phil 504 [1955])
Gross or General Average

Includes all damages and expenses, which are deliberately caused in
order to save the vessel and/or its cargo from real and known risk
resulting in a common benefit. These expenses and damages shall be
borne ratably among all those having interest in the vessel and cargo
at the time of the occurrence of the average. (Art. 806, 808, 811 Code
of Commerce)
Requisites of Gross or General Average:
1.
Common danger;
2.
Deliberate sacrifice;
3.
Success; and
4.
Proper formalities and legal steps.
Particular or Simple Average
Damages and expenses that do not inure to the common benefit or are
not the result of a deliberate sacrifice. These expenses and damages
are borne by those who suffer them. (See Art. 806, 807-810 Code of
Commerce)
The owner of the goods who gave rise to the expense or suffered
the damage shall bear this average.
Goods Not Covered By General Average Even If Sacrificed
1.
Goods carried on deck. (Art. 855, Code of Commerce)
2. Goods not recorded in the books or records of the vessel. (Art.
855[2], Code of Commerce)
3. Fuel for the vessel if there is more than sufficient fuel for the
voyage.
Jettison - the act of throwing cargo overboard in order to lighten the
vessel.
Order of goods to be cast overboard:
1. Those which are on the deck, preferring the heaviest one with the
least utility and value;
2. Those which are below the upper deck, beginning with the one with
greatest weight and smallest value.
(Art. 815, Code of
Commerce)
Jettisoned goods are not res nullius nor deemed abandoned within
the meaning of civil law so as to be the object of occupation by
salvage.
In order that the jettisoned goods may be included in the gross or
general average, the existence of the cargo on board should be
proven by means of the bill of lading. (Art. 816, Code of Commerce)
Under the York-Antwerp Rules, deck cargo is permitted in Coastwise
Shipping but prohibited in Overseas Shipping.
1. If deck cargo is located with the consent of the shipper on
67
overseas trade, it must always contribute to general average,

but should the same be jettisoned, it would not be entitled to
reimbursement because there is a violation of the York-Antwerp
Rules.
2. If the deck cargo is located with the consent of the shipper on
coastwise shipping, it must always contribute to general average
and if jettisoned would be entitled to reimbursement.
Domestic
Deck cargo is allowed
With shippers consent
General average
Without shippers consent
Captain is liable
International
Deck cargo is not allowed
Particular average
Captain is liable
B.
ARRIVAL UNDER STRESS

The arrival of a vessel at the nearest and most convenient port instead
of the port of destination, if during the voyage the vessel cannot
continue the trip to the port of destination, due to:
1. Lack of provisioning;
2. Well-founded fear of seizure, of privateers or pirates; or
3. An accident of the sea disabling the vessel to navigate. (Art. 819,
Code of Commerce)
In such arrival the captain must file a protest which is merely a

disclaimer.
When NOT Lawful

1. Lack of provisions due to negligence to carry according to usage and
customs;
2. Risk of enemy not well known or manifest;
3. Defect of vessel due to improper repair; and
4. Malice, negligence, lack of foresight or skill of captain.
Who Bears Expenses
General Rule: The shipowner bears all the expenses for arrival under
stress.
Exception: When arrival under stress is unlawful, the ship owner also
answers for damages to the owners of the cargo and the passengers.
1.
The shipowner or ship agent is liable in case of unlawful arrival
under stress. But they shall not be liable for the damages caused by
reason of a lawful arrival.
2.
The captain shall be liable for damages caused by his delay if after
the cause of the arrival under stress has ceased he should not continue
the voyage.
It is the duty of the captain to continue the voyage without delay after
the cause of the arrival under stress has ceased failing in such duty
renders him liable. However, in case the cause has been risk of
enemies, there must first be an assembly before departure. (Art. 825,
Code of Commerce)
C.
COLLISION
The impact of two moving vessels.
Zones of Time in the Collision of Vessels:
a. 1st zone all time up to the moment when risk of collision begins;
b. 2nd zone time between moment when risk of collision begins and
the moment it becomes a practical certainty; and
c. 3rd zone time when collision has become a practicable certainty
to the point of actual impact.
68
Allision - Impact between a moving vessel and a stationary one.

Rules on Collision of Vessels
1. The collision may be due to the fault, negligence or lack of skill of
the captain, sailing mate, or any other member of the complement
of the vessel. The owner of the vessel at fault may be liable for
losses or damages. (Art. 826, Code of Commerce)
2. The collision may be due to the fault of both vessels. Each vessel
shall suffer its own losses, but as regards the owner of cargoes both
vessels shall be jointly and severally liable. (Art.827, Code of
Commerce)
3. If it cannot be determined which vessel is at fault, each vessel shall
also suffer its own losses and both shall be solidarily liable for
losses or damages on the cargoes. (Art. 828, Code of Commerce)
4. The vessels may collide with each other through fortuitous event or
force majeure. In this case, each shall bear its own damage.
5. Two vessels may collide with each other without their fault by
reason of a third vessel. The third vessel will be liable for losses and
damages. (Art. 831, Code of Commerce)
6. A vessel which is properly anchored and moored may collide with
those nearby, by reason of storm or other cause of force majeure.
The vessel run into shall suffer its own damage and expense. (Art.
Nautical Rules to Determine Negligence
1. When two vessels are about to enter a port, the farther one must
allow the nearer to enter first; if they collide, the fault is presumed
to be imputable to the one who arrived later, unless it can be
proved that there was no fault on its part.
2. When two vessels meet, the smaller should give the right of way to
the larger one.
3. A vessel leaving port should leave the way clear for another which
may be entering the same port.
4. The vessel which leaves later is presumed to have collided against
one which has left earlier.
5. There is a presumption against the vessel which sets sail in the
night.
6. There is a presumption against the vessel with spread sails which
collides with another which is at anchor and cannot move, even
when the crew of the latter has received word to lift anchor, when
there was no sufficient time to do so or there was fear of a greater
damage or other legitimate reason.
7. There is a presumption against an improperly moored vessel.
8. There is a presumption against a vessel which has no buoys to
indicate the location of its anchors to prevent damage to vessels
which may approach it.
9. Vessels must have proper look-outs or persons trained as such
and who have no other duty aside therefrom. (Smith Bell v. CA
197 SCRA 201)
Nautical Rules as to Sailing Vessel and Steamship
1.
Where a steamship and a sailing vessel are approaching each
other from opposite directions, or on intersecting lines, the
steamship from the moment the sailing vessel is seen, shall watch
with the highest diligence her course and movements so as to be
able to adopt such timely means of precaution as will necessarily
prevent the two boats from coming in contact.
2.
The sailing vessel is required to keep her course unless the
circumstances require otherwise.
Error in Extremis
Sudden movement made by a faultless vessel during the third zone of
collision with another vessel which is at fault during the 2nd zone.
Even if such sudden movement is wrong, no responsibility will fall on
69
said faultless vessel. (Urrutia and Co. v. Baco River Plantation Co., 26
Phil. 632)
Rules on Liability in Collision and Allision
Consequential Damages Covered:
1. Damages caused to vessel
2. Damages caused to the passenger
3. Damages caused to the cargo
Rule:
1. One vessel at fault
Vessel at fault is liable for damage caused to the vessel,
passenger, and cargoes of both vessels. (Art. 826, CoC)
2. Both Vessels At Fault
Each vessel must bear its own loss, but as to the other damages,
the passenger and cargoes, they shall be both solidarily liable.
(Art. 827, CoC)
3. Vessel at fault not known
Each vessel must bear its own loss, but both shall be solidarily
liable for losses and damages on the cargoes. (Art. 828, CoC)
Doctrine of Inscrutable Fault
In case of collision where it cannot be determined which between
the two vessels was at fault, both vessels bear their respective
damage, but both should be solidarily liable for damage to the
cargo of both vessels.
4. Third vessel at fault
The third vessel will be liable for all the losses and damages.
(Art. 831, Code of Commerce)
5. Fortuitous event/force majeure
No liability. Each party shall bear its own loss. However, due
diligence must be exercised by the carrier to lessen the
damages before, during, and after the impact (Art. 830, Code
of Commerce).
The doctrine of res ipsa loquitur applies in case a moving vessel
strikes a stationary object, such as a bridge post, dock, or
navigational aid. (Far Eastern Shipping v. CA, 297 SCRA 301; Luzon
Stevedoring vs. CA, 156 SCRA 169)
Doctrine of Last Clear Chance and Rule on Contributory

Negligence cannot be applied in collision cases where both vessels
are at fault because under Art. 827 of the Code of Commerce, both
vessels shall suffer its own loss, and at the same time shall be
solidarily liable for the damages to the passenger and cargoes of both
vessels.
In case of collision, there must be a maritime protest to recover

collision damage; in such a case, the marine protest is a condition
sine qua non and not merely a disclaimer unlike in the arrival under
stress or shipwreck.
MARITIME PROTEST
It is a written statement made under oath by the captain of a vessel
after the occurrence of an accident or disaster in which the vessel or cargo
is lost or damaged, with respect to the circumstances attending such
occurrence, for the purpose of recovering losses and damages.
Excuses for not filing protest: 1) where the interested person is not on
board the vessel; and 2) on collision time, need not be protested. (Art.
Maritime Protest is applicable in the following cases:

1. Collision (Art. 835, Code of Commerce);
2. Arrival under stress (Art. 612(8), Code of Commerce);
70
3. Shipwrecks (Arts. 612(15), 843, Code of Commerce);

4. Where the vessel has gone through a hurricane or when the captain
believes that the cargo has suffered damages or averages (Art. 624,
Code of Commerce).
Pre-Requisites for Recovery:
1.
Maritime protest should be made within 24 hours before the
competent authority at the point of collision or at the first port of
arrival, if in the Philippines; and to the Philippine consul, if the collision
took place abroad. (Art. 835 Code of Commerce)
2.
The lack of protest does not prejudice such action to recover in
respect to damages caused to persons or cargo whose owners were
not on board the vessel or who were not in a condition to make their
wishes known. (Art. 836 CoC)
D.
SHIPWRECK
It is the loss of the vessel at sea as a consequence of its grounding,
or running against an object in sea or on the coast. It occurs when the
vessel sustains injuries due to a marine peril rendering her incapable of
navigation.
If the wreck was due to malice, negligence or lack of skill of the

captain, or because the vessel put to sea was insufficiently repaired
and equipped; the owner of the vessel may demand indemnity from
said captain. (Art. 841, Code of Commerce)
The rules on collision or allision, as may be pertinent, can equally apply to

shipwrecks
LITONJUA SHIPPING VS. NATIONAL SEAMEN BOARD (176 SCRA

189)
Facts: Petitioner Litonjua is the duly appointed local crewing Managing
Office of the Fairwind Shipping Corporation ('Fairwind). The M/V Dufton
Bay is an ocean-going vessel of foreign registry owned by the R.D. Mullion
Ship Broking Agency Ltd. ("Mullion"). On 11 September 1976, while the
Dufton Bay was in the port of Cebu and while under charter by Fairwind,
the vessel's master contracted the services of, among others, private
respondent Gregorio Candongo to serve as Third Engineer for a period of
twelve (12) months with a monthly wage of US$500.00. This agreement
was executed before the Cebu Area Manning Unit of the NSB. Thereafter,
private respondent boarded the vessel. On 28 December 1976, before
expiration of his contract, private respondent was required to disembark
at Port Kelang, Malaysia, and was returned to the Philippines on 5 January
1977. The cause of the discharge was described in his Seaman's Book as
'by owner's arrange".
Shortly after returning to the Philippines, private respondent filed a
complaint before public respondent NSB, which complaint was docketed
as NSB-1331-77, for violation of contract, against Mullion as the shipping
company and petitioner Litonjua as agent of the shipowner and of the
charterer of the vessel.
Issues: Whether or no the admiralty law as embodied in the Philippine
Code of Commerce fastens liability for payment of the crew's wages upon
the ship owner, and not the charterer.
Held: The first basis is the charter party which existed between Mullion,
the shipowner, and Fairwind, the charterer. In modern maritime law and
usage, there are three (3) distinguishable types of charter parties: (a) the
"bareboat" or "demise" charter; (b) the "time" charter; and (c) the
"voyage" or "trip" charter. A bareboat or demise charter is a demise of a
vessel, much as a lease of an unfurnished house is a demise of real
71
property. The shipowner turns over possession of his vessel to the

charterer, who then undertakes to provide a crew and victuals and
supplies and fuel for her during the term of the charter. The shipowner is
not normally required by the terms of a demise charter to provide a crew,
and so the charterer gets the "bare boat", i.e., without a crew.
Sometimes, of course, the demise charter might provide that the
shipowner is to furnish a master and crew to man the vessel under the
charterer's direction, such that the master and crew provided by the
shipowner become the agents and servants or employees of the charterer,
and the charterer (and not the owner) through the agency of the master,
has possession and control of the vessel during the charter period. A time
charter, upon the other hand, like a demise charter, is a contract for the
use of a vessel for a specified period of time or for the duration of one or
more specified voyages. In this case, however, the owner of a timechartered vessel (unlike the owner of a vessel under a demise or bareboat charter), retains possession and control through the master and crew
who remain his employees. What the time charterer acquires is the right
to utilize the carrying capacity and facilities of the vessel and to designate
her destinations during the term of the charter. A voyage charter, or trip
charter, is simply a contract of affreightment, that is, a contract for the
carriage of goods, from one or more ports of loading to one or more ports
of unloading, on one or on a series of voyages. In a voyage charter,
master and crew remain in the employ of the owner of the vessel.
It is well settled that in a demise or bare boat charter, the charterer is
treated as owner pro hac vice of the vessel, the charterer assuming in
large measure the customary rights and liabilities of the shipowner in
relation to third persons who have dealt with him or with the vessel. In
such case, the Master of the vessel is the agent of the charterer and not of
the shipowner. The charterer or owner pro hac vice, and not the general
owner of the vessel, is held liable for the expenses of the voyage including
the wages
VALENZUELA HARDWOOD VS. CA (30 JUNE 1997,274 SCRA 643)
Facts: On January 16, 1984, plaintiff entered into an agreement with
Seven Brothers Shipping corporation whereby the latter undertook to load
on board its vessel M/V Seven Ambassadors 940 Lauan round logs for
shipment from Isabela to Manila. On January 20, plaintiff insured the cargo
with South Sea Surety and Insurance for two million pesos. However on
January 25, 1984, the M/V Seven Ambassador sank, resulting in the loss of
petitioners logs. Pursuant to the loss, petitioner filed a claim with South
Sea Surety and Insurance for the insured amount of the logs, but the latter
refused, denying liability under the policy. Petitioner likewise filed a formal
claim against Seven Brothers Shipping Corporation for the value of the
lost logs, but the latter likewise denied their claim.
The trial court found for the plaintiff, holding South Sea and Seven
Brothers liable for the loss. On appeal, the Court of Appeals affirmed in
part the decision of the trial court. The Court of Appeals affirmed the
liability of South Sea Surety and Assurance but exonerated Seven
Brothers, stating that the latter is a private carrier therefore the provisions
on common carriers is not applicable to their contract. Hence the present
appeal.
Issue: Whether or not respondent Court of Appeals committed a
reversible error in upholding the validity of the stipulation in the charter
party executed between petitioner and Seven Brothers exempting the
latter from liability of loss arising from the negligence of its captain.
Held: The decision of the Court of appeals is correct. The contract
between petitioner and Seven Brothers is one of Private Carriage hence
the provisions on common carriage do not apply. In a contract of private
carriage parties are free to stipulate that the responsibility for the cargo
72
rests solely in the charterer, such stipulations are valid because they are
freely entered into by the parties and the same is not contrary to law,
morals, good custom, public order or public policy.
SWEET LINES VS. CA (121 SCRA 769)
Facts: Herein private respondents purchased first-class tickets from
petitioner at the latters office in Cebu City. They were to board M/V Sweet
Grace bound for Catbalogan, Western Samar. Instead of departing at the
scheduled hour of about midnight on July 8, 1972, the vessel set sail at
3:00 am of July 9, 1972 only to be towed back to Cebu due to engine
trouble, arriving there on the same day at about 4:00 pm. The vessel lifted
anchor again on July 10, 1972 at around 8:00 am. Instead of docking at
Catbalogan (the first port of call), the vessel proceeded direct to Tacloban.
Private respondents had no recourse but to disembark and board a ferry
boat to Catbalogan. Hence, the suit for breach of contract of carriage.
Issue: Whether or not the mechanical defect constitutes a fortuitous
event which would exempt the carrier from liability?
Held: No. As found by the trial court and the Court of Appeals, there was
no fortuitous event or force majeure which prevented the vessel from
fulfilling its undertaking of taking the private respondents to Catbalogan.
In the first place, mechanical defects in the carrier are not considered a
caso fortuito that exempts the carrier from responsibility. In the second
place, even granting arguendo that the engine failure was a fortuitous
event, it accounted on for the delay of departure. When the vessel finally
left the port, there was no longer any force majeure that justified bypassing a port of call.
TRANS-ASIA SHIPPING VS. CA (254 SCRA 260)
Facts: Plaintiff (herein private respondent Atty. Renato Arroyo) bought a
ticket from herein petitioner for the voyage of M/V Asia Thailand Vessel to
Cagayan de Oro from Cebu City. Arroyo boarded the vessel in the evening
of November 12, 1991 at around 5:30. At that instance, plaintiff noticed
that some repair works were being undertaken on the evening of the
vessel. The vessel departed at around 11:00 in the evening with only one
engine running.
After an hour of slow voyage, vessel stopped near Kawit Island and
dropped its anchor threat. After an hour of stillness, some passenger
demanded that they should be allowed to return to Cebu City for they
were no longer willing to continue their voyage to Cagayan de Oro City.
The captain acceded to their request and thus the vessel headed back to
Cebu City. At Cebu City, the plaintiff together with the other passengers
who requested to be brought back to Cebu City was allowed to disembark.
Thereafter, the vessel proceeded to Cagayan de Oro City. Plaintiff, the
next day boarded the M/V Asia Japan for its voyage to Cagayan de Oro
City, likewise a vessel of the defendant.
On account of this failure of defendant to transport him to the place
pf destination on November 12, 1991, plaintiff filed before the trial court a
complaint for damages against the defendant.
Issue: Whether or not the failure of a common carrier to maintain in
seaworthy condition its vessel involved in a contract of carriage a breach
of its duty?
Held: Undoubtedly, there was, between the petitioner and private
respondent a contract of carriage. Under Article 1733 of the Civil Code,
the petitioner was bound to observed extraordinary diligence in ensuring
the safety of the private respondent. That meant that the petitioner was
pursuant to the Article 1755 off the said Code, bound to carry the private
73
respondent safely as far as human care and foresight could provide, using
the utmost diligence of very cautious persons, with due regard for all the
circumstances. In this case, the Supreme Court is in full accord with the
Court of Appeals that the petitioner failed or discharged this obligation.
Before commencing the contact of voyage, the petitioner undertook
some repairs on the cylinder head of one of the vessels engines. But even
before it could finish these repairs it allowed the vessel to leave the port
of origin on only one functioning engine, instead of two. Moreover, even
the lone functioning engine was not in perfect condition at sometime after
it had run its course, in conked out. Which cause the vessel to stop and
remain adrift at sea, thus in order to prevent the ship from capsizing, it
had to drop anchor. Plainly, the vessel was unseaworthy even before the
voyage begun. For the vessel to be seaworthy, it must be adequately
equipped for the voyage and manned with the sufficient number of
competent officers and crew. The Failure of the common carrier to
maintain in seaworthy condition its vessel involved in a contract of
carriage is a clear breach of its duty prescribed in Article 1755 of the Civil
Code.
Carriage of Goods by Sea Act (Commonwealth Act. No. 65; Public
Act No. 521, 74th US Congress)
Domestic Trade: Civil Code and Code of Commerce applies.
Foreign Trade: COGSA applies.
The Civil Code and the Code of Commerce is suppletory to COGSA in

the carriage of goods from foreign ports to the Philippines.
The law of the country to which the goods are to be transported shall
govern the liability of the common carrier for loss, destruction or
deterioration of the goods. (Art 1753, NCC)
The Civil Code is the primary law on goods that are being shipped from
a foreign port to the Philippines. However, COGSA remains to be a
suppletory law for international shipping.
For COGSA TO BE
1.
2.
3.
Philippine port).
APPLICABLE, the transportation must be:

Water/maritime transportation;
for the carriage of goods; and
overseas/international/foreign (from foreign port to
It can be applied in domestic sea transportation if agreed upon by the

parties. (Clause Paramount or Paramount Clause)
Amount of Carriers Liability

Under the Sec. 4(5), the liability limit is set at $500 per package or
customary freight unit unless the nature and value of such goods is
declared by the shipper. This is deemed incorporated in the bill of
lading even if not mentioned in it. (Eastern Shipping vs. IAC, 150 SCRA
463)
NOTE: Art.1749 of the Civil Code applies to Inter-Island Trade.
Notice of Damage
a. Patent Damage: shipper should file a claim with the carrier
immediately upon delivery
b. Latent Damage: shipper should file a claim with the carrier within
three days from delivery.
The filing of a notice of claim is not a condition precedent.
PRESCRIPTIVE PERIOD
74
1.
Coastwise or within the Philippines

When to file a claim with carrier condition precedent if goods
arrived in damaged condition, claim must be filed by the shipper within
the following period otherwise recovery is barred:
a. Immediately if damage is apparent; or
b. Within 24 hours from delivery if damage is not apparent.
When to file a case in court prescriptive period:
a. Within 6 years, if no bill of lading has been issued; or
b. Within 10 years, if bill of lading has been issued.
2.
International carriage from foreign port to the

Philippines (Carriage of Goods by Sea Act)
When to file a claim with carrier not condition precedent.
a. Upon discharge of goods, if the damage is apparent, claim should
be filed immediately; or
b. If damage is not apparent, claim should be filed within 3 days from
delivery.
When To File A Case In Court

Within a period of 1 year from discharge.
Under the COGSA, suits for loss or damage to the cargo should be
brought within one year after:
1. Delivery of the goods; or
2. The date when goods should have been delivered.
The one-year prescriptive period is suspended by:

1. The express agreement of the parties;
2. The filing of an action in court until it is dismissed.
The one-year period shall run from delivery of the last package and is
not suspended by extrajudicial demand. Reasons:
1. Matters affecting transportation of goods by sea should be decided
at the shortest time possible.
2. The Civil Code does not apply to a special law like COGSA.
The insurer exercising its right of subrogation is bound by the one-year

prescriptive period. However, it does not apply to the claim against
the insurer for the insurance proceeds because the claim against the
insurer is based on contract, it expires in 10 years.
The period does not apply to
conversions or misdeliveries. It
contemplates a situation where no delivery at all was made because
the goods had perished, gave out of commerce, or disappeared in such
a way that their existence is unknown or cannot be recovered. It starts
from delivery to the arrastre operator, not consignee. A stipulation
reducing the one year period is null and void but a written agreement
to suspend it is valid.
The rule applies in cases of collision, but it starts not from the date of
collision, but when the goods should have been delivered had the
cargoes been saved.
Section 3(6) of the COGSA provides:

Unless notice of loss or damage and the general nature of such loss or
damage be given in writing to the carrier of his agent at the port of
discharge or at the time of the removal of the goods into the custody of
the person entitled to delivery by the carrier of the goods as described in
the bill of lading. If the loss or damage is not apparent, the notice must be
given within three days of delivery.
Said notice of loss or damage may be endorsed on the receipt of the
goods given by the person taking delivery thereof. The notice in writing
need not be given if the state of the goods has at the time of their
75
receipt, been the subject of joint survey or inspection.

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;
provided, that, if a notice of loss or damage, either apparent or
concealed, is not given as provided for in this section, that fact shall
not affect or prejudice the right of the shipper to bring suit within one
year after the delivery of the goods or that date when the goods should
have been delivered.
In the case of any actual or apprehended loss or damage, the carrier
and the receiver shall give all reasonable facilities to each other for
inspecting and tallying the goods. (Belgian Overseas Chartering and
Shipping N.V. v. Philippine First Insurance Co., Inc. 383 SCRA 23
[2002])
As stated in the same provision, a failure to file a notice of claim
within three days will not bar recovery if it is nonetheless filed within
one year. (Vitug, Pandect of Commercial Law and Jurisprudence, 3 rd
ed., 1997, p. 333)
This one year prescriptive period also applies to the shipper, the
consignee, the insurer of the goods or any legal holder of the bill of
lading. (Filipino Merchants Insurance Co., Inc. v. Alejandro, 145 SCRA
42)
In Loadstar Shipping Co., Inc. v. CA (315 SCRA 339), the SC ruled that
a claim is not barred by prescription as long as the one year period
has not lapsed. (Belgian Overseas Chartering and Shipping N.V. v.
Philippine First Insurance Co., Inc. 383 SCRA 23 [2002])
TACKLE TO TACKLE RULE

The shipper shall be responsible for the goods the moment it passes
through one side of the ship for the purpose of loading until it passes
through the other side for discharging. There are two tackles involved in
the operation; one for loading, the other for unloading.
ANG VS. AMERICAN STEAMSHIP AGENCIES (19 SCRA 631)
Facts: Yau Yue Commercial Bank of Hongkong agreed to sell 140
packages of galvanized steel durzinc sheets to Herminio Teves for
$32,458.26. Said agreement was subject to the following terms: the
purchase price should be covered by a bank draft which should be paid by
Teves in exchange for the delivery to him of the bill of lading to be
deposited with honking and Shanghai Bank of Manila; that Teves would
present said bill of lading to carriers agent, American Steamship Agencies
which would then issue the permit to deliver imported articles to be
presented to the Bureau of customs to obtain the release of the articles.
Yau Yue shipped the articles aboard S.S. Tensai Maru owned by
Nissho Shipping Co., of which the American Shipping is the agent in the
Philippines.
When the Articles arrived in manila, Honkong Shanghais Bank
notified Teves of the arrival of the goods and requested for the payment of
the demand draft. Teves, however, failed to pay the demand draft. So, the
bank returned the bill of lading and the demand draft to Yau Yue which
endorsed the bill of lading to Domingo Ang.
Despite his non-payment, Teves was able to obtain a bank
guarantee in favor of the American Steamship Agencies, the carriers
agent. Thus, Teves succeeded in securing a permit to deliver imported
articles from the carriers agent, which he presented to the Bureau of
Customs, that released the said articles to him.
76
Subsequently, Domingo Ang claimed the articles from American

Steamship, by presenting the indorsed bill of lading, but he was informed
that it had delivered the articles to Teves. Ang filed a complaint in the
Court of First Instance of Manila against American shipping agencies, for
having wrongfully delivered the goods.
The American Steamship filed for a motion to dismiss, citing the
carriage of Goods by Sea Act, section 3 paragraph 4, which states: in any
event, the carrier and the ship shall be discharged from all liability in
respect to loss or damage unless suit is brought within one year, after
delivery of goods or the date when the goods should have been delivered.
Thus, the lower court dismissed the action, on the ground of
prescription.
Issue: Whether or not the Carriage of Goods by Sea Act Section 3,
Paragraph 4, applies to the case at bar?
Held: The provision of the law speaks of loss or damage. But there was
no damage caused to the goods which were delivered intact to Herminio
Teves.
As defined by the Civil Code and as applied to section 3, paragraph
4, of the Carriage of Goods by sea Act, loss contemplates 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.
The applicable rule on prescription is that found in the Civil Code,
either: ten years for breach of contract or four years for quasi-delict. In
either case, the plaintiffs cause of action has not yet prescribed. Thus, the
case is remanded to the court a quo for further proceedings.
MERCHANTS INSURANCE COMPANY VS. ALEJANDRO
(145 SCRA 42)
Facts: Plaintiff Choa Tiek Seng filed a complaint against the petitioner
before the then Court of First Instance of Manila for recovery of a sum of
money under the marine insurance policy on cargo. Mr. Choa alleged that
the goods he insured with the petitioner sustained loss and damage in the
amount of P35, 987.26. The said goods were delivered to the arrastre
operator E. Razon, Inc., on December 17, 1976 and on the same date were
received by the consignee-plaintiff.
Petitioner disclaims liability and imputes against plaintiff the
commission of fraud. A similar complaint was filed by Joseph Benzon Chua
against the petitioner for recovery under the marine insurance policy for
cargo alleging that the goods insured with the petitioner sustained loss
and damage in the sum of P55,996.49. The goods were delivered to the
plaintiff-consignee on or about January 25-28, 1977.
Petitioner filed third-party complaints against private respondents
for indemnity, subrogation, or reimbursement in the event that it is held
liable to the plaintiff.
The private respondents, carriers Frota Oceanica Brasiliera and
Australia-West Pacific Line
alleged in their separate answers that the
petitioner is already barred from filing a claim because under the Carriage
of Goods by Sea Act, the suit against the carrier must be filed within one
year after delivery of the goods or the date when the goods should have
been delivered
77
Petitioner contended that provision relied upon by the respondents

applies only to the shipper and not to the insurer of the goods.
Respondent judge dismissed both third-party complaints.
Issue: Whether or not the one-year period within which to file a suit
against the carrier and the ship, in case of damage or loss as provided for
in the Carriage of Goods by Sea Act applies to the insurer of the goods.
Held: The coverage of the Act includes the insurer of the goods.
Otherwise, what the Act intends to prohibit after the lapse of the one-year
prescriptive period can be done indirectly by the shipper or owner of the
goods by simply filing a claim against the insurer even after the lapse of
one year. This would be the result if we follow the petitioner's argument
that the insurer can, at any time, proceed against the carrier and the ship
since it is not bound by the time-bar provision. In this situation, the oneyear limitation will be practically useless. This could not have been the
intention of the law which has also for its purpose the protection of the
carrier and the ship from fraudulent claims by having "matters affecting
transportation of goods by sea be decided in as short a time as possible"
and by avoiding incidents which would "unnecessarily extend the period
and permit delays in the settlement of questions affecting the
transportation."
In the case at bar, the petitioner's action has prescribed under the
provisions of the Carriage of Goods by Sea Act. Hence, whether it files a
third-party complaint or chooses to maintain an independent action
against herein respondents is of no moment.
MAYER STEEL PIPE CORP. VS. CA (19 KIME 1997)
Facts: Hongkong Government Supplies Department henceforth, Hong
Kong contracted petitioner Mayer Steel Pipe Corp to manufacture and
supply various steel pipes and fittings from August to October 1983,
Mayer shipped the said items to Hong Kong. Prior to shipment the items
were insured against all risks with respondent South Sea Surety and
Insurance Co. and Charter Insurance Corp for $212,772.09 with South Sea
and $149,470 with Charter.
Petitioners jointly appointed Industrial Inspection Inc as 3 rd party
inspector to examine the items to see if they were in accordance with the
contract. They certified it as such prior to shipment. However, when they
reached Hong Kong it was revealed that a substantial portion was
damaged. Petitioners now claim for damages against the respondents for
indemnity under the insurance contract.
Respondents paid part of the petitioners demand but declined the
rest claiming that the insurance surveyors report allegedly showed that
the damage was a factory defect and hence not covered by the insurance
policies. The lower court ruled in favor of the petitioner finding the
damage not caused by manufacturing defects. It also noted that the
insurance contract insured against all risks or all causes of conceivable
loss or damage save those caused by fraud or intentional misconduct. At
the court of appeals the CA found the all risks provision covered the
damage endured but set aside the decision because the complaint had
been bared by prescription. Sec 3(6) of the COGSA specifically bared it
because it had been more than 1 year since the damage had been done
before the demand was made.
Held: The cause of action had not yet prescribed.
Ratio: Sec 3(6) of the COGSA covers only the liability of the carrier
which is extinguished if no suit is brought within a period of one year.
However, the liability of the insurer is not extinguished because the
78
COGSA governs the relationship between carrier and shipper, and

consignee and insurer. It defines a contract of carriage. The relationship at
bar is properly governed by the Insurance code. Thus the CAs finding of
prescription as per the COGSA is overturned.
SHEWARAM VS, PAL (17 SCRA 606, (1966)
Facts: A PAL ticket, on the reverse side, stated in fine print that if the
value of baggage is not stated, and the baggage is lost, the maximum
liability of PAL is P100.00 if value in excess of P100.00 is stated, PAL will
charge extra because PAL is being held liable for an amount exceeding
P100.00. Shewaram, a Hindu from Davao, boarded a PAL plane for Manila.
Among his baggage was a camera with P800.00 and it was lost. PAL
offered to pay P100.00. Shewaram wanted full payment of P800.00.
Issue: Whether the limited liability rule shall apply in the case at bar?
Held: The limited liability rule shall not apply. Since this is a stipulation on
qualified liability, which operates to reduce the liability of the carrier, the
carrier and the shipper must agree thereupon. Otherwise, the carrier will
be liable for full. PAL is fully liable (for full) because Shewaran did not
agree to the stipulation on the ticket, as manifested by the fact that
Shewaram did not sign the ticket. Ticket should have been signed.
ONG YUI VS. CA (91 SCRA 223)
Facts: On august 26, 1967, Ong Yiu was a fare paying passenger of
respondent PAL from Mactan, Cebu to Butuan City wherein he was
scheduled to attend a trial. As a passenger, he checked in one piece of
luggae, blue maleta for which he was issued a claim ticket. Upon arrival at
Butuan City, petitioner claimed his luggage but it could not be found. PAL
Butuan sent a message to PAL Cebu which in turn sent a message to PAL
Manila that same afternoon. PAL Manila advised PAL Cebu that the
luggage has been overcarried to Manila and that it would be forwarded to
PAL Cebu that same day. PAL Cebu then advised PAL Butuan that the
luggage will be forwarded the following day, on scheduled morning flight.
This message was not received by PAL Butuan as all the personnel had
already gone for the day. Meanwhile, Ong Yiu was worried about the
missing luggage because it contained vital documents needed for the trial
the next day so he wired PAL Cebu demanding delivery of his luggage
before noon that next day or he would hold PAL liable for damages based
on gross negligence. Early morning, petitioner went to the Butuan Airport
to inquire about the luggage but did not wait for the arrival of the morning
flight at 10:00am. which carried his luggage. A certain Dagorro, a driver of
a colorum car, who also used to drive the petitioner volunteered to take
the luggage to the petitioner. He revelaed that the documents were lost.
Ong Yiu demanded from PAL Cebu actual and compensatory damages as
an incident of breach of contract of carriage.
Issue: Whether or not PAL is guilty of only simple negligence and not
gross negligence?
Whether the doctrine of limited liability doctrine applies in the
instant case?
Held: PAL had not acted in bad faith. It exercised due diligence in looking
for petitioners luggage which had been miscarried. Had petitioner waited
or caused someone to wait at the airport for the arrival of the morning
flight which carried his luggage, he would have been able to retrieve his
luggage sooner. In the absence of a wrongful act or omission or fraud, the
petitioner is not entitled to moral damages. Neither is he entitled to
exemplary damages absent any proof that the defendant acted in a
wanton, fraudulent, reckless manner.
79
The limited liability applies in this case. On the presumed

negligence of PAL, its liability for the loss however, is limited on the
stipulation written on the back of the plane
Ticket which is P100 per baggage. The petitioner not having declared a
greater value and not having called the attention of PAL on its true value
and paid the tariff therefore. The stipulation is printed in reasonably and
fairly big letters and is easily readable. Moreso, petitioner had been a
frequent passenger of PAL from Cebu to Butuan City and back and he
being a lawyer and a businessman, must be fully aware of these
conditions.
V. PUBLIC SERVICE ACT (COMMONWEALTH ACT NO. 146)
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 or public utility, ice
plants, power and water supplies, communication and similar public
services. (Sec. 13b, CA 146)
The Public Service Commission created under the Public Service Law
has already been abolished under P.D. No. 1 and other issuances. It has
been replaced by the following government agencies: LTO; LTFRB; ATO;
BOE; NTC; NEA; ERB; NWRC; CAB; and Marina.
Three-Fold Purpose:
1. To protect the public against unreasonable charges and poor,
inefficient service;
2. To protect and secure investments in public services;
3. To prevent ruinous competition.
AUTHORITY TO OPERATE PUBLIC SERVICES
General Rule: No public service shall operate without having been issued
a certificate of public convenience or a certificate of public convenience
and necessity.
Exceptions:
1. Warehouses;
2. Animal drawn vehicles and bancas moved by oar or sail;
3. Airships, except for the fixing of maximum rates for fare and freight;
4. Radio companies, except for rates fixing;
5. Public services owned or operated by the government, except as to
rates fixing;
6. Ice plants; and
7. Public markets.
PUBLIC UTILITIES
- Privately owned and operated business whose services are essential to
the general public.
A foreigner can own a public utility. The right to operate a public

utility may exist independently and separately from the ownership
of the facilities thereof. One can own facilities without operating
them as utility, or conversely, one may operate a public utility
without owning the facilities used to serve the public.
The Constitution requires a franchise for the operation of public

utility but it does not require a franchise before one can own the
facilities needed to operate a public utility. (Tatad vs. Garcia, 243
SCRA 436)
FRANCHISE AND CERTIFICATE OF PUBLIC CONVENIENCE

The trend is not to require a legislative franchise. However, even if
there was already a delegation of authority to a specific administrative
80
agency to issue certificates of public convenience, it does not follow that a

legislative franchise is no longer necessary. It would still depend on the
enabling law creating or authorizing the administrative body, which may
still require a legislative franchise. A certificate of public convenience is
not necessary for the issuance of a legislative franchise.
Certificate of Public Convenience: An authorization issued by the
appropriate government agency for the operation of public services for
which no franchise, either municipal or legislative, is required by law, e.g.,
common carriers.
Certificate of Public Convenience And Necessity: An authorization
issued by the appropriate government agency for the operation of public
service for which a prior franchise is required by law; e.g. telephone and
other services.
A Certificate of Public Convenience or a Certificate of Public
Convenience and Necessity constitutes neither a franchise nor a contract,
confers no property right, and is a mere license or a privilege. The holder
of said certificate does not acquire a property right in the route covered
thereby. Nor does it confer upon the holder any proprietary right or
interest or franchise in the public highways. Revocation of this certificate
deprives him of no vested right. New and additional burdens, alteration of
the certificate, or even revocation or annulment thereof is reserved to the
State. (Luque vs. Villegas, 30 SCRA 408).
FRANCHISE
Is a special privilege and its terms and conditions are specifically
prescribed by Congress. Thus, the manner of granting the franchise, to
whom it may be granted, the mode of conducting the business, the
character and quality of the service to be rendered and the duty of the
grantee to the public in exercising the franchise are defined in clear and
unequivocal language by the legislature. These conditionalities are made
more stringent when the franchise involves the operation of a game
played for bets, such as jai-alai, which is conceded as a menace to
morality. Franchises are granted in accord with this universal principle.
(Del Mar v. PAGCOR 358 SCRA 775)
An authority or permit is a license or provisional authority
granted to a public utility to operate as an implementation of a legislative
enactment. In fine, an authority or permit is a detailed implementation of
a legislative franchise. (U.S. v. Almond 6 Phil. 309)
Conditions that Must Concur in the Grant of Certificate of Public
Convenience and Certificate of Public Convenience and Necessity:
Applicant must be a citizen of the Philippines or a corporation or
entity 60% of the stock or paid-up capital of which is owned by such
citizens;
Applicant must prove public necessity;
Applicant must prove that the operation of the public service
proposed and the authorization to do business will promote the
public interest on a proper and suitable manner;
Applicant must have sufficient financial capability to undertake the
proposed services and meeting the responsibilities incident to its
operation.
Primordial considerations
convenience.
are
public
interest,
necessity
and
Grounds for Revocation/Cancellation of the Certificate of Public

Convenience:
Where the holder is a mere dummy;
Where the operator ceased operation and placed his buses on
81
storage;
Where the operator abandons totally the service. clear
Under section 16 (n) of Public Service Act, the power of the Commission to
suspend or revoke any certificate may only be exercised 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 the Act.
General Rule: Prior notice and hearing.
Exception: When it is necessary to avoid serious and irreparable damage
or inconvenience to the public or private interest, in which case, a
suspension not more than 30 days may be ordered, prior to the hearing.
Powers Requiring Notice and Hearing
Issuance of Certificate of Public Convenience or Certificate of Public
Convenience and Necessity;
Fixing of rates, tolls, and charges;
Setting up of standards and classifications;
Establishment of rules to secure accuracy of all meters and all
measuring appliances;
Issuance of orders requiring establishment or maintenance of
extension of facilities;
Revocation, or modification of Certificate of Public Convenience or
Certificate of Public Convenience and Necessity;
Suspension of Certificate of Public Convenience or Certificate of Public
Convenience and Necessity, except when it is necessary to avoid
serious and irreparable damage or inconvenience to the public or
private interest, in which case, a suspension not more than 30 days
may be ordered, prior to the hearing.
Powers Exercisable Without Prior Notice and Hearing
Investigation of any matter concerning public service;
Requiring operators to furnish safe, adequate, and proper service;
Requiring public services to pay expenses of investigation;
Valuation of properties of public utilities;
Examination and test of measuring appliances;
Grant of special permits to make extra or special trips in territories
specified in the certificate;
Uniform accounting system and furnishing of annual reports;
Compelling compliance with the laws and regulations.
ACTS REQUIRING PRIOR APPROVAL
Establish and maintain individual or joint rates;
Establish and operate new units;
Issue free tickets;
Issue any stock or stock certificates representing an increase of capital;
Capitalize any franchise in excess of the amount actually paid to the
Government;
Sell, alienate, mortgage or lease property, certificates or franchise
UNLAWFUL ACTS OF PUBLIC UTILITY COMPANIES
Engagement in public service business without first securing the
proper certificate;
Providing or maintaining unsafe, improper or inadequate service as
determined by the proper authority;
Committing any act of unreasonable and unjust preferential treatment
to any particular person, corporation or entity as determined by the
proper authority;
Refusing or neglecting to carry public mail upon request.
PRIOR OPERATOR RULE
82
- The rule allowing an existing franchised operator to invoke a preferential

right as against a second operator within the authorized territory as long
as he renders adequate and economical service.
Purpose: To prevent ruinous and wasteful competition in order that the
interests of the public would be conserved and preserved.
The policy is not to issue a certificate to a second operator to cover the
same field and in competition with a first operator who is rendering
sufficient, adequate and satisfactory service. The prior operator must first
be given an opportunity to improve its service, if inadequate or deficient.
The granting of preference to an old operator applies only when said
operator has made as offer to meet the increase in traffic or demand for
service and not when another operator, even a new one, has made the
offer to serve the new line or increase the service on said line. The rule of
preference protects only those who are vigilant, in meeting the needs of
the traveling public.
PROTECTION OF INVESTMENT RULE
The Law aims to protect not only the public, but the operations as
well. It is the governments duty to protect the investment of the
operators of public utilities from unfair, unjustified and ruinous
competition.
PRIOR APPLICANT RULE
Presupposes a situation when two interested persons apply for a
certificate to operate a public utility in the same community over which no
person has as yet granted any certificate. If it turns out, after the hearing,
that the circumstances between the two applicants are more or less equal,
then the applicant who applied ahead of the other, will be granted the
certificate.
REGISTERED OWNER RULE
The registered owner of a certificate of public convenience is liable to the
public for the injuries or damages suffered by third persons caused by the
operation of said vehicle, even though the same had been transferred to a
third person.
The registered owner is not allowed to escape responsibility by proving
that a third person is the actual and real owner
Reason: It would be easy for him, by collusion with others or otherwise,
to transfer the responsibility to an indefinite person, or to one who
possesses no property with which to respond financially for the damage or
injury done. (Erezo, et al. vs. Jepte 102 Phil 103]
A registered owner is the lawful operator insofar as the public and
third persons are concerned; consequently, it is directly and primarily
responsible for the consequences of its operation. In contemplation of law,
the owner/operator of record is the employer of the driver, the actual
operator and employer being considered as merely its agent. The same
principle applies even if the registered owner of any vehicle does not use
it for public service, (Equitable Leasing Corp vs. Suyom, 388 SCRA 445
[2002]], or otherwise stated, to privately-owned vehicles.
RATE-FIXING POWER
The rate to be fixed must be just, founded upon conditions which are fair
and reasonable to both the owner and the public.
A rate is just and reasonable if it conforms to the following

requirements:
One which yields to the carrier a fair return upon the value of the
property employed in performing the service; and
83
One which is fair to the public for the service rendered.
Exceptions to Kabit system:

When neither of the parties to the pernicious kabit system is being
held liable for damages.
When the case arose from the negligence of another vehicle in
using the public road to whom no representation or
misrepresentation as regards the ownership and operation of
passenger jeepney was made
When the riding public was not bothered or inconvenienced at the
very least by the illegal arrangement. (Lim vs. CA, 373 SCRA 394)
The policy, which prohibits the Kabit System, may also be applied to
vessels and aircrafts that are covered by certificates of public convenience
and necessity.
Persons who do not have such certificates cannot
circumvent the law by using the certificate of another. (Sec. 23, Public
Service Act)
BOUNDARY SYSTEM
Features:
The driver does not receive a fixed wage but gets only the excess of
the receipt of the fares collected by him over the amount he pays to
the jeep owner.
The gasoline consumed by the jeep is for the account of the driver.
These two features are not sufficient to withdraw the relationship between
the owner and the driver from that of employer and employee. The
jeepney owner is subsidiarily liable as employer in accordance with
Art.103 of RPC (Magboo vs. Bernardo, 7 SCRA 952)
KILUSANG MAYO UNO LABOR CENTER VS GARCIA
239 SCRA 538 (1994)
Facts: The Kilusang Mayo Uno Labor Center (KMU) assails the
constitutionality and validity of a memorandum which, among others,
authorize provincial bus and jeepney operators to increase or decrease
the prescribed transportation fares without application therefore with the
LTFRB, and without hearing and approval thereof by said agency.
Issue: Whether or not the absence of notice and hearing and the
delegation of authority in the increase or decrease of transportation fares
to provincial bus and jeepney operators is illegal?
Held: Under Section 16 (c) of the Public Service Act, as amended, the
legislature delegated to the defunct Public Service Commission the power
of fixing the rates of public services. LTFRB, the existing regulatory body
today, is likewise vested with the same under Executive Order 202.
The authority given by the LTFRB to the bus operators to set fares
over and above the authorized existing fare is illegal and invalid, as it is
tantamount to undue delegation of legislative authority. Under the maxim
potestas delegate non delegari potest what has been delegated cannot
be delegated.
The policy allowing provincial bus operators to change and increase
their fares would result not only to a chaotic situation but to an anarchic
state of affairs. This would leave the riding public at the mercy of
transport operators who may increase fares, every hour, every day, every
month or every year, whenever it pleases them or whenever they deem it
necessary to do so. Furthermore, under the Section 16 (a) of Public
Service Act, there must be proper notice and hearing in the fixing of rates,
to arrive at a just and reasonable rate acceptable to both the public utility
and the public.
84
PHILIPPINE AIRLINES, INC. VS. CIBIL AERONAUTICS BOARD

(270 SCRA 538)
Facts: Grand Air applied for a Certificate of Public Convenience and
Necessity with the Civil Aeronautics Board (CAB). The Chief Hearing
Officer issued a notice of hearing directing Grand Air to serve a copy of
the application and notice to all scheduled Philippine Domestic operators.
Grand Air filed its compliance and requested for a Temporary Operating
Permit (TOP). PAL filed an opposition to the application on the ground that
the CAB had no jurisdiction to hear the application until Grand Air first
obtains a franchise to operate from Congress. The Chief Hearing Officer
denied the opposition and the CAB approved the issuance of the TOP for a
period of 3 months. The opposition for the TOP was likewise denied. The
CAB justified its assumption of jurisdiction over Grand Airs application on
the basis of Republic Act 776 which gives it the specific power to issue any
TOP or Certificate of Public Convenience and Necessity.
Issue: Whether or not the CAB can issue a Certificate of Public
Convenience and Necessity or TOP even though the prospective operator
does not have a legislative franchise?
Held: Yes, as mentioned by the CAB, it is duly authorized to do so under
Republic Act 776 and a legislative franchise is not necessary before it may
do so, since Congress has delegated the authority to authorize the
operation of domestic air transport services to the CAB, an administrative
agency. The delegation of such authority is not without limits since
Congress had set specific standard and limitations on how such authority
should be exercised.
Public convenience and necessity exists when the proposed facility
will meet a reasonable want of the public and supply a need which the
existing facilities do not adequately afford.
Thus, the Board should be allowed to continue hearing the
application, since it has jurisdiction over it provided that the applicant
meets all the requirements of the law.
TATAD VS. GARCIA (243 SCRA 436, GR. NO. 114222. APRIL 6,
1995)
Facts: DOTC planned to construct a light railway transit line along Edsa.
EDSA LRT Corporation, Ltd., a foreign corporation was awarded the
contract to build, lease and transfer the said light railway.
The said award was questioned by the petitioners on the basis that a
foreign corporation cannot own the EDSA LRT III, a public utility as it
violates the Constitution.
Issue: Whether or not an owner and lessor of the facilities used by a
public utility constitute a public utility?
Held: EDSA LRT Corporation, Ltd. Is admittedly a foreign corporation duly
incorporated and existing under the laws of Hong Kong. However, there is
no dispute that once the EDSA LRT III is constructed, the private
respondent, as lessor, will turn it over to DOTC as lessee, for the latter to
operate the system and pay rentals for the said use.
What private respondent owns are the rail tracks, rolling stocks, rail
stations, terminals and the power plant, not a public utility. While a
franchise is needed to operate these facilities to serve the public, they do
not themselves constitute a public utility. What constitutes a public utility
in not their ownership but their use to serve the public.
The Constitution, in no uncertain terms, requires a franchise for the
operation of a public utility. However, it does not require a franchise
before one can own the facilities needed to operate a public utility so long
85
as it does not operate them to serve the public. In law, there is a clear
distinction between the operation of a public utility and the ownership of
the facilities and the equipment used to serve the public.
ALBANO VS. REYES (175 SCRA 264)
Facts: On April 20, 1987, the PPA ( Philippine Ports Authority ) Board
adopted its Resolution No. 850 directing PPA management to prepare the
Invitation to Bid and all relevant documents and technical requirements
necessary for the public bidding of the development, management and
operation for the MICT ( leasing as well as to implement this project.
Respondent Secretary Reyes created a 7 man Special MICT Bidding
Committee charged with all bid proposals.
After evaluation of the seven companies that submitted bids, the
committee recommended the award of the contract to ICTSI for having
offered the best technical and financial proposal. However, before the
MICT contract could be signed, 2 cases were filed against respondents
which assailed the legality and regularity of the bidding. But on May 18,
1988, the President of the Philippines approved the proposed MICT
Contract with specific directives on the part of the PPA and the contractor
ICTSI.
Meanwhile, Rodolfo Albano, the petitioner filed a petition assailing
the award of the MICT contract to ICTSI claiming that the former is a public
utility and therefore needs a legislative franchise before it can legally
operate as a public utility, pursuant to Article 12, Sec 11 of the 1987
Constitution.
Issue: Whether or not the MICT needs a legislative franchise from
Congress to legally operate as a public utility?
Held: NO. EO No. 30 dated July16, 1986 provides for the immediate recall
of the franchise granted to the Manila International Port Terminals Inc.,
and authorize the PPA to take over, manage and operate the Manila
International Port Complex at North Harbor, Manila and undertake the
provision of cargo handling and port related services thereat, in
accordance with PD 857 and other applicable laws and regulations.
Sec. 6 of PD 857 otherwise known as the Revised Charter of the PPA
provides as one of the corporate duties of the PPA is to provide services
( whether on its own, by contract, or otherwise ) within the Port Districts
and the approaches thereof including but not limited to
As stated above, PPA has been tasked under EO No. 30, with the
management and operation of the Manila International Port Complex in
accordance with PD 857 and other applicable laws and regulations.
However, PD 857 itself authorizes the PPA to perform the service by itself,
by contracting it out, or through other means. Reading EO No. 30 and PD
857 together, the inescapable conclusion is that the lawmaker has
empowered the PPA to undertake by itself the operation and management
of the MICP or to authorize its operation and management by another by
contract or other means at its option. The latter power having been
delegated to the PPA, a franchise from Congress to authorize an entity
other than the PPA to operate and manage the MICP becomes
unnecessary.
Therefore, PPAs act of privatizing the MICT and awarding the
Contract to ICTSI are wholly within its jurisdiction under its Charter which
empowers the PPA to supervise, control, regulate, construct, maintain,
operate and provide such facilities necessary in the ports vested.
LITIMCO VS. LA MALLORCA (18 MAY 1962)
Fact: Tomas Litimco filed a petition with the Public Service Commission
praying for the authority to operate a bus service between Manila and
Malolos via Sta. Isabel using 10 buses. Several operators filed their
86
opposition however none of them submitted their evidence to support

their opposition. The petition was then submitted for decision.
However, La Mallorca, another bus operator, moved for the reopening of the case claiming that if the petition of Litimco was to be
granted it would work to its prejudice. The motion was granted but when
requested to present evidence to support its opposition, La Mallorca
moved for postponement only to file its own application to operate the
same line.
The PSC approved the application of La Mallorca from which Litimco
appealed.
Issue: Whether the award of the franchise in favor of La Mallorca was
proper?
Held: No. The Supreme Court held that since there was no doubt that
Litimco was the first to apply for the service in the territory in question
and its financial capability was proven, its application should be granted.
The Court pointed out that if an applicant is qualified financially, and is
able to undertake the service, he should be given the preference as a
matter of fairness and justice. The priority in the filing of the application
for a certificate of public convenience is, other conditions being equal, an
important factor in determining the rights of the public service companies.
It is only in cases when the incapacity or incapability of the first applicant
is established may the other applicants be considered.
HALILI VS. CRUZ (27 JUNE 1968)
Facts: Herein respondent filed, on September 19, 1961, with the Public
Service Commission an application, praying for the grant of a certificate of
public convenience to operate, under PUB denomination, ten buses
between Norzagaray (Bulacan) and Piers (Manila).
Petitioner, in his opposition alleged, substantially, that he was an
operator of a bus service on the line applied for, enumerating at the same
time the other lines he operated which were traversed by the route
mentioned in respondent's application; that his service, as well as that of
other bus operators on the route, was more than adequate to meet the
demands of the traveling public; that the grant of the application would
merely result in wasteful and ruinous competition, and that the
respondent was not financially capable of operating and maintaining the
service proposed by him.
The Public Service Commission rendered a decision on February 13,
1963, granting a certificate of public convenience to respondent Ruperto
Cruz to operate ten buses under PUB denomination of the line Norzagaray
(Bulacan) - Piers (Manila) passing through the routes for.
It is the above-mentioned decision of the Public Service Commission
that is now sought to be reviewed by this Court. Petitioner contends that:
1. "The finding of the Public Service Commission that there was a public
need for the operation by respondent of ten buses on the line Norzagaray
(Bulacan) - Piers (Manila) is not supported by the evidence;
2. "The Public Service Commission erred when it did not recognize the fact
that petitioner-appellant was rendering sufficient and adequate service on
the line in question; and
3. "The Public Service Commission erred in failing to give petitionerappellant the right of protection to investment to which petitionerappellant is entitled."
87
In support of his first two contentions petitioner argues that the 500
passengers found by the Commission as commuting daily from
Norzagaray to Manila could easily be accommodated in the buses of
existing operators; that the existing operators were authorized to operate
31 buses which made around 100 round trips a day; that since a bus could
accommodate about 50 passengers, the existing authorized services could
easily accommodate not only the 500 but even 5000 passengers a day.
Petitioner also asserted that the Commission failed to consider that 200 of
the 500 commuters worked in the Republic Cement Factory located at
Norzagaray and so there were really only 300 commuters daily traveling
on the Norzagaray - Manila line. Petitioner further claimed that the new
terminal proposed in the application was not based on actual need,
because there were no importing firms, or business establishments, or
manufacturing concerns, in Norzagaray, whose employees had to make
trips to the piers at the south harbor in Manila. On the question of public
necessity, petitioner pointed out that the evidence presented by the
respondent consisted only of the testimony of two witnesses who did not
make any formal or systematic study of the movement and frequency of
public utility buses, so that their testimonies were based only on casual
observations. On the other hand, as petitioner pointed out, the oppositors
presented five witnesses, two of whom made meticulous, systematic and
daily observations on the line applied for.
Petitioner likewise asserted that public necessity did not require the
operation of the ten buses applied for by the respondent because of the
fact that on December 20, 1961, the Public Service Commission granted
to herein petitioner, in Case No. 61-5807, authority to operate only 10
buses on the line Norzagaray - Manila, even if he had applied for 20 buses;
and that out of the many applications to operate buses from Paradise
Farms (Bulacan) to Manila, only 10 buses were authorized.
Issue: Whether or not preference over common carriers interest will
prevail over public convenience?
Held: The decision of the Public Service Commission is affirmed.
"While it is the duty of the government as far as possible to protect
public utility operators against unfair and unjustified competition, it is
nevertheless obvious that public convenience must have the first
consideration. . . ." The public convenience is properly served if
passengers who take buses at points in one part of a line are able to
proceed beyond those points without having to change buses. On this
point this Court said:
"It is the convenience of the public that must be taken into account,
other things being equal, and that convenience would be effectuated by
passengers who take buses at points in one part of a line being able to
proceed beyond those points without having to change buses and to wait
the arrival of buses of a competitive operator. We can perceive how under
such conditions one public utility could gain business at the expense of a
rival."
Certainly the Public Service Commission has power to grant a

certificate of public convenience to a new operator, and the old operator
cannot with reason complain that it had not been given opportunity to
improve its equipment and service, if it is shown that the old operator has
not placed in the service all the units of equipment that it had been
authorized to operate, and also when the old operator has violated, or has
not complied with, important conditions in its certificate. 13 In the instant
88
case, it has been shown that petitioner had not operated all the units that
it was authorized to operate.
89

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A. WHAT IS A COMMON CARRIER?

- Persons, corporations, firms or associations engaged in the business of

It also avoids a distinction between a person or enterprise offering

Article 1732 does not distinguish between a carrier offering its

A person or entity is a common carrier even if he did not secure a

The Civil Code makes no distinction as to the means of transporting,

A person or entity may be a common carrier even if he has no fixed

Cannot lawfully decline to accept a particular class of goods for

No monopoly is favored (Batangas Trans. vs. Orlanes, 52 Phil. 455);

Provides public convenience.

C. TESTS WHETHER A PARTY IS A COMMON CARRIER OF GOODS:

Test whether a party is a common carrier

1. He must be engaged in the carrying of goods for others as a public

general population. We think that Article 1733 deliberately refrained from

Common carriers are persons, corporations, firms or associations engaged

scheduled basis and one offering such service on an occasional, episodic

Based on the above definition and requirements, there is no doubt

Without awaiting action on its request PANTRANCO started to

E. DISTINCTIONS BETWEEN COMMON CARRIER AND PRIVATE

Requires only ordinary diligence.

Not subject to regulation.

As to stipulation on limiting liability

Carriage from Foreign Ports To Philippine Ports

Carriage from Philippine Ports To Foreign

Civil Code (Arts.1732-1766) primary law

Code of Commerce suppletory law

While the Warsaw Convention has the force of law in the

There Is International Transportation When:

The Bill of Lading is serves both as a receipt of goods and is likewise

Facts: Sometime in or prior to June 1977, the M/S Asiatica, a vessel

Bienvenido Gelisan, upon the other hand, claimed that he had no

A year later, one of the taxicabs, driven by their employee,

with some requirements such as the payment of the insurance premiums

accident, the fatal vehicle being a passenger jeepney owned by Delfin

Facts: Plaintiff, a civil engineer, was a member of a group of 48 Filipino

utmost diligence of very cautious persons as far as human care and

Vigilance over goods (Arts. 1734-1754)

Passenger - A person who has entered into a contract of carriage,

the accident. (Calalas v. CA, 383 SCRA, [2002])

The above enumeration is exclusive. If not one of those

a. Caso Fortuito / Force Majeure

Fire is not considered a natural disaster or calamity as it arises

Mechanical defects are not force majeure if the same was

Fortuitous event must be established to be the proximate

Exemption to Liability From Natural Disasters or Calamities:

Failure of a person who has been exposed to injury by the fault or

The common carrier shall be liable even if the shipper or

E. Character of the Goods or Defects in the Packing or in the

The rule is that if the improper packing is known to the carrier or

E. Order or Act of Public Authority

The common carrier is not ipso facto relieved

prevent or minimize the loss, destruction or deterioration of he

"flood, storm, earthquake, lightning or other natural disaster or calamity."

Plaintiff contended that due to the losses/damage sustained by said

pier. An hour after the passengers disembarked, Pioneer stevedoring

EASTERN SHIPPING LINES INC.

Facts: Sometime in or prior to June 1977, the M/S Asiatica, a vessel

Held: The applicability of Art. 30 of the Warsaw Convention cannot be

CHINA AIRLINES VS. CHIOK (23 JULY 2003)

The surrender of the original bill of lading is not a condition

Kinds of Bill of Lading:

Steamship Co. 31 Phil 1 [1915]).

Within a reasonable time.

SECTION 3(6) (COGSA)