COMMON CARRIERS IN GENERAL

I. Concept of Common Carriers; Distinction from private Carriers; Liability of Registered Owners; Kabit
System; Nature of Business and Degree of Diligence Required
a) Crisostomo vs CA
b) Pedro de Guzman vs CA
c) First Philippine Pipeline Corporation vs CA
d) Calvo vs CA
e) National Steel Corporation vs CA
f) Loadstar Shipping vs CA
g) Asia Lighterage vd CA
h) PhilAmGen vs PKS Shipping
i) Caltex vs Sulpicio Lines
j) Coastwise Lighterage Corporation vs CA
k) Planters Products vs CA
l) Schmitz Transport vs Transport Venture
m) AF Sanchez Brokerage vs CA
n) Lastimoso vs Doliente
o) Loadstar Shipping vs Pioneer Asia
p) Eastern Shipping Lines vs Nisshin Fire
q) Sabena Belgian World Airlines
r) Abelardo Lim vs CA
s) Lita Enterprises vs IAC
t) Villanueva vs Domingo
u) Equitable Leasing Corp vs Suyong

II. Vigilance over the goods Article; Presumption of Negligence; Defense Available Diligence in Selection
of Employees; Articles 1734, 35, 56, 42, 43
a) Victory Liner vs Gammad
b) Lea Mer Industries vs Malayan Ins
c) Philippine American Gen Insurance vs CA
d) Fabre vs CA
e) Sarkies Tours vs CA
f) Davao Stevedore Terminal vs Fernandez
g) Sourthern Lines vs CA
h) Eastern Shipping vs EAC
i) Fortune Express vs CA

III. Duration of Obligation; Stipulation Limiting Liability; 1736-38, 1744

a) British Airways vs CA
b) Benito Macam vs CA
c) CIA MAritima vs Insurance Company of North America
d) Dangwa Transportation Company
e) La Mallorca vs CA
f) Aboitiz Shipping vs CA
g) Amparo Servando vs Philippine Steam Navigation
h) Samar Mining vs Nordeutseher Lloyd
i) Edgar Cokaliong Shipping Lines vs UCPB
j) Sealand Service vs IAC
k) Belgian Overseas Chartering and Shipping vs Philippine Insurance Corp
l) Everett Steamship Corporation vs CA

IV. Carriage of Passengers

a) Baritua vs Mereader
b) Japan Airlines vs CA
c) Tin vs Arriesgado
d) Yobido vs CA
e) Baliwag Transit vs CA
f) Sabena Belgian World Airlines vs CA
g) Estacion vs Bernardo
h) Calalas vs CA
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 i) Singapore Airlines vs Fernandez
j) British Airways vs CA
k) Yu Eng Cho vs Pan Am
l) Morris vs CA
m) Japan Airlines vs Asuncion
n) Japan Airlines vs Simangan
o) Cathay Pacific vs Vasquez
p) Tan vs Northwest Airlines
q) Santos III vs Northwest Orient Airlines
r) PAL vs CA 257 S 33 (1996)
s) PAL vs CA 255 S 48 (1996)
t) Northwest Airlines vs CA
u) Mapa vs CA
v) American Airlines vs CA
w) United Airlines vs Uy

V. Damages
a) Davila vs PAL
b) KLM vs CA
c) United Airlines vs CA
d) Zalamea vs CA
e) Zulueta vs PanAm
f) Lopez vs PAN-AM
g) Victory Liner vs Gammad
h) Sulpicio Lines vs CA
i) People vs More
j) Tugade vs CA

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I. Concept of Common Carriers; Distinction from private Carriers; Liability of Registered Owners; Kabit
System; Nature of Business and Degree of Diligence Required
a) Crisostomo vs CA
Estela Crisostomo contracted the services of respondent Caravan Travel and Tours to facilitate her tour known
as Jewels of Europe. On June 12, 1991, Meriam Menor, respondents ticketing manager as well as petitioners
niece, delivered petitioners travel documents and plane tickets and informed her to be at the airport on June
15, 1991, 2 hrs before departure. On the stated date when the petitioner went to the airport, the flight that she
was supposed to take had departed the previous day. She complained to Menor, but the latter prevailed upon
her to take another tour known as the British Pageant. Upon petitioners return from Europe, she demanded
from the respondent the reimbursement of the amount representing the difference between the sum she paid
for the first tour and the amount she owed to respondent for the 2nd tour, but despite demands, respondent
company refused to reimburse the amount, contending that the same was non-refundable. She now files an
action for breach of contract of carriage and damages. After trial, the lower court awarded damages to the
petitioner on the basis that the respondent was negligent, but it deducted 10% from the amount for the
contributory negligence of petitioner. On appeal, the Court of Appeals found petitioner to be more negligent,
hence, it directed her to pay the balance of the price for the "British Pageant." Hence, this petition Petitioner
contends that respondent did not observe the standard of care required of common carrier when it informed
her wrongly of the flight schedule. She could not be deemed more negligent than respondent since the latter is
required by law to exercise extraordinary diligence in the fulfillment of its obligation

Is a travel agency a common carrier?

HELD: a contract of carriage or transportation is one whereby a certain person or association of persons
obligate themselves to transport persons, things, or news from one place to another for a fixed price. 9 Such
person or association of persons are regarded as carriers and are classified as private or special carriers and
common or public carriers. 10 A common carrier is defined under Article 1732 of the Civil Code as 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.

Respondent is NOT an entity engaged in the business of transporting either passengers or goods and is
therefore, neither a private nor a common carrier. The respondents services is limited to make travel
arrangements in behalf of its clients. It only includes procuring tickets and facilitating travel permits or visas as
well as booking customers for tours. While petitioner concededly bought her plane ticket through the efforts of
respondent company, this does not mean that the latter ipso facto is a common carrier. At most, respondent
acted merely as an agent of the airline, with whom petitioner ultimately contracted for her carriage to Europe.
Respondent's obligation to petitioner in this regard was simply to see to it that petitioner was properly booked
with the airline for the appointed date and time. Her transport to the place of destination, meanwhile, pertained
directly to the airline.

The object of the contractual relation in this case, is the arranging and facilitating of petitioners booking,
ticketing, and accommodation in the package tour. In contrast, the object of a contract of carriage is the
transportation of passengers and goods. Hence, the contract in the case at bar the nature of the contractual
relations does not require extraordinary diligence unlike in a contract of carriage. Since the contract is an
ordinary one, the standard of care required is only that of a good father of a family under 1173 of the civil code.
In the case at bar, the evidence on record shows that respondent company performed its duty diligently and did
not commit any contractual breach. Hence, petitioner cannot recover and must bear her own damage.

b) Pedro de Guzman vs CA
Ernesto Cendana, a junk dealer, was engaged in buying up used bottles and scrap metal in Pangasinan. Upon
gathering sufficient quantities of such scrap material, respondent would bring such material to Manila for resale.
He utilized two (2) six-wheeler trucks which he owned for hauling the material to Manila. On the return trip to
Pangasinan, respondent would load his vehicles with cargo which various merchants wanted delivered to
differing establishments in Pangasinan. For that service, respondent charged freight rates which were
commonly lower than regular commercial rates. Pedro de Guzman a merchant and authorized dealer of General
Milk Company (Philippines), Inc. in Urdaneta, Pangasinan, contracted with respondent for the hauling of 750
cartons of Liberty filled milk from a warehouse of General Milk in Makati, Rizal, to petitioner's establishment in
Urdaneta. However, the truck which carried the boxes was hijacked and the armed men took with them the
truck, its driver, helper, and the cargo. petitioner commenced action against private respondent demanding
payment of P 22,150.00, the claimed value of the lost merchandise, plus damages and attorney's fees. It argued
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 that private respondent, being a common carrier, and having failed to exercise the extraordinary diligence
required of him by the law, should be held liable for the value of the undelivered goods.

whether or not private respondent Ernesto Cendana may, under the facts earlier set forth, be properly
characterized as a common carrier?

HELD:
COMMON CARRIER, defined.
Article 1732. Common carriers are persons, corporations, firms or associations engaged in the business of
carrying or transporting passengers or goods or both, by land, water, or air for compensation, offering their
services to the public.

1732 MAKES NO DISTINCTION

between one whose principal business activity is the carrying of persons or goods or both, and one who
does such carrying only as an ancillary activity (in local Idiom as "a sideline").
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.
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.

PUBLIC SERVICE ACT We think that Article 1733 deliberaom making such distinctions. So understood, the
concept of "common carrier" under Article 1732 may be seen to coincide neatly with the notion of "public
service," under the Public Service Act (Commonwealth Act No. 1416, as amended) which at least partially
supplements the law on common carriers set forth in the Civil Code. Under Section 13, paragraph (b) of the
Public Service Act, "public service" includes:
... every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or
compensation, with general or limited clientele, whether permanent, occasional or accidental, and done for
general business purposes, any common carrier, railroad, street railway, traction railway, 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. ... (Emphasis supplied)

RESPONDENT IS A COMMON CARRIER even though he merely "back-hauled" goods for other merchants
from Manila to Pangasinan, although such back-hauling was done on a periodic or occasional rather than
regular or scheduled manner, and even though private respondent's principal occupation was not the carriage
of goods for others. There is no dispute that private respondent charged his customers a fee for hauling their
goods; that fee frequently fell below commercial freight rates is not relevant here.

CERTIFICATE OF PUBLIC CONVENIENCE IS NOT A REQUISITE for the incurring of liability under the Civil
Code provisions governing common carriers. That liability arises the moment a person or firm acts as a common
carrier, without regard to whether or not such carrier has also complied with the requirements of the applicable
regulatory statute and implementing regulations and has been granted a certificate of public convenience or
other franchise. To exempt private respondent from the liabilities of a common carrier because he has not
secured the necessary certificate of public convenience, would be offensive to sound public policy; that would
be to reward private respondent precisely for failing to comply with applicable statutory requirements.

EXTRAORDINARY DILIGENCE REQUIRED Common carriers, "by the nature of their business and for reasons
of public policy" 2 are held to a very high degree of care and diligence ("extraordinary diligence") in the carriage
of goods as well as of passengers. The specific import of extraordinary diligence in the care of goods
transported by a common carrier is, according to Article 1733, "further expressed in Articles 1734,1735 and
1745, numbers 5, 6 and 7" of the Civil Code.

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 Article 1734 establishes the general rule that common carriers are responsible for the loss, destruction or
deterioration of the goods which they carry, "unless the same is due to any of the following causes only:
1) Flood, storm, earthquake, lightning or other natural disaster or calamity;
2) Act of the public enemy in war, whether international or civil;
3) Act or omission of the shipper or owner of the goods;
4) The character-of the goods or defects in the packing or-in the containers; and
5) Order or act of competent public authority.

Causes not falling under the enumeration above, even if they constitute a species of force majeure fall within
1735 such that xxx if the goods are lost, destroyed or deteriorated, common carriers are presumed to have
been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as
required in Article 1733

THE HIJACKING OF THE CARRIER'S TRUCK DOES NOT FALL WITHIN ANY OF THE FIVE (5)
CATEGORIES OF EXEMPTING CAUSES LISTED IN ARTICLE 1734. It would follow, therefore, that the
hijacking of the carrier's vehicle must be dealt with under the provisions of Article 1735, in other words, that the
private respondent as common carrier is presumed to have been at fault or to have acted negligently. This
presumption, however, may be overthrown by proof of extraordinary diligence on the part of private respondent.

PROHIBITED STIPULATIONS UNDER 1745 Any of the following or similar stipulations shall be considered
unreasonable, unjust and contrary to public policy: xxx xxx xxx
5) that the common carrier shall not be responsible for the acts or omissions of his or its employees;
6) that the common carrier's liability for acts committed by thieves, or of robbers who donot act with grave or
irresistible threat, violence or force, is dispensed with or diminished; and
7) that the common carrier shall not responsible for the loss, destruction or deterioration of goods on account
of the defective condition of the car vehicle, ship, airplane or other equipment used in the contract of
carriage.

NOT LIABLE. the occurrence of the loss must reasonably be regarded as quite beyond the control of the
common carrier and properly regarded as a fortuitous event. It is necessary to recall that even common carriers
are not made absolute insurers against all risks of travel and of transport of goods, and are not held liable for
acts or events which cannot be foreseen or are inevitable, provided that they shall have complied with the
rigorous standard of extraordinary diligence.

c) First Philippine Pipeline Corporation vs CA

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
The test for determining whether a party is a common carrier of goods is:
1) He must be engaged in the business of carrying goods for others as a public employment, and must
hold himself out as ready to engage in the transportation of goods for person 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.

FPPC IS A COMMON CARRIER. It is engaged in the business of transporting or carrying goods, i.e., petroleum
products, for hire as a public employment. It undertakes to carry for all persons indifferently, that is, to all persons
who choose to employ its services and transports the goods by land and for compensation. The fact that
petitioner has a limited clientele does not exclude it from the definition of a common carrier. As correctly pointed
out by petitioner, the definition of "common carrier" in the Civil Code makes no distinction as to the means of
transporting, as long as it is by land, water or air. It does not provide that the transportation of the passengers
or goods should be by motor vehicle. In fact, in the United Sates, oil pipe line operators are considered common
carriers.

5
 HENCE, TAX EXEMPT. there is no doubt that petitioner is a "common carrier" and, therefore, exempt from the
business tax as provided for in Section 133 (j) of the Local Government Code, to wit: "Section 133. Common
Limitations on the Taxing Power of Local Government Units. Unless otherwise provided herein, the exercise
of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the
following: . . . (j) Taxes on the gross receipts of transportation contractors and persons engaged in the
transportation of passengers or freight by hire and common carriers by air, land or water except as provided in
this Code.

d) Calvo vs CA
Petitioner Virgines Calvo is the owner of Transorient Container Terminal Services, Inc. (TCTSI), a sole
proprietorship customs broker. At the time material to this case, petitioner entered into a contract with San
Miguel Corporation (SMC) for the transfer of 114 reels of semi-chemical fluting paper and 124 reels of kraft liner
board from the Port Area in Manila to SMCs warehouse at the Tabacalera Compound, Romualdez St., Ermita,
Manila. The cargo was insured by respondent UCPB General Insurance Co., Inc.

On July 14, 1990, the shipment in question, contained in 30 metal vans, arrived in Manila on board M/V
Hayakawa Maru and, after 24 hours, were unloaded from the vessel to the custody of the arrastre operator,
Manila Port Services, Inc. From July 23 to July 25, 1990, petitioner, pursuant to her contract with SMC, withdrew
the cargo from the arrastre operator and delivered it to SMCs warehouse in Ermita, Manila. On July 25, 1990,
the goods were inspected by Marine Cargo Surveyors, who found that 15 reels of the semi-chemical fluting
paper were wet/stained/torn and 3 reels of kraft liner board were likewise torn. The damage was placed at
P93,112.00.

Petitioner contends that she is not a common carrier but a private carrier because, as a customs broker and
warehouseman, she does not indiscriminately hold her services out to the public but only offers the same to
select parties with whom she may contract in the conduct of her business.

Is petitioner a common carrier? YES

De Guzman reiterated
There is greater reason for holding petitioner to be a common carrier because the transportation of goods is an
integral part of her business. To uphold petitioners contention would be to deprive those with whom she
contracts the protection which the law affords them notwithstanding the fact that the obligation to carry goods
for her customers, as already noted, is part and parcel of petitioners business. common carriers, from the nature
of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance
over the goods and for the safety of the passengers transported by them, according to all the circumstances of
each case.

EXTRAORDINARY DILIGENCE IN THE VIGILANCE OVER THE GOODS tendered for shipment requires the
common carrier to know and to follow the required precaution for avoiding damage to, or destruction of the
goods entrusted to it for sale, 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 characteristic of goods
tendered for shipment, and to exercise due care in the handling and stowage, including such methods as their
nature requires.

In the case at bar, petitioner denies liability for the damage to the cargo. She claims that the spoilage or wettage
took place while the goods were in the custody of either the carrying vessel M/V Hayakawa Maru, which
transported the cargo to Manila, or the arrastre operator, to whom the goods were unloaded and who allegedly
kept them in open air for nine days from July 14 to July 23, 1998 notwithstanding the fact that some of the
containers were deformed, cracked, or otherwise damaged, as noted in the Marine Survey Report.

Contrary to petitioners assertion, the Survey Report (Exh. H) of the Marine Cargo Surveyors indicates that when
the shipper transferred the cargo in question to the arrastre operator, these were covered by clean Equipment
Interchange Report (EIR) and, when petitioners employees withdrew the cargo from the arrastre operator, they
did so without exception or protest either with regard to the condition of container vans ortheir contents. We can
only conclude that the damages to the cargo occurred while it was in the possession of the defendant-appellant.
Whenever the thing is lost (or damaged) in the possession of the debtor (or obligor), it shall be presumed that

6
 the loss (or damage) was due to his fault, unless there is proof to the contrary. No proof was proffered to rebut
this legal presumption and the presumption of negligence attached to a common carrier in case of loss or
damage to the goods.

e) Loadstar Shipping vs CA (1999)

LOADSTAR received on board its M/V Cherokee bales of hardwood, crates of tiles and bundles of mouldings
insured by MIC against various risks including total loss by total loss of the vessel. The vessel is also insured
by PGAI for 4m. n 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 P6,075,000 to the insured in full
settlement of its claim, and the latter executed a subrogation receipt therefor.

MIC filed a complaint against LOADSTAR and PGAI, alleging that the sinking of the vessel was due to the fault
and negligence of LOADSTAR and its employees.

(1) Is the M/V Cherokee a private or a common carrier? COMMON CARRIER

(2) Did LOADSTAR observe due and/or ordinary diligence in these premises?

HELD:
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.

In support of its position, LOADSTAR relied on the 1968 case of Home Insurance Co. v. American Steamship
Agencies, Inc.,[11] where this Court held that a common carrier transporting special cargo or chartering the
vessel to a special person becomes a private carrier that is not subject to the provisions of the Civil Code. Any
stipulation in the charter party absolving the owner from liability for loss due to the negligence of its agent is
void only if the strict policy governing common carriers is upheld. Such policy has no force where the public at
large is not involved, as in the case of a ship totally chartered for the use of a single party. LOADSTAR also
cited Valenzuela Hardwood and Industrial Supply, Inc. v. Court of Appeals[12] and National Steel Corp. v. Court
of Appeals,[13] both of which upheld the Home Insurance doctrine.

CASES CITED DO NOT APPLY, BOL INDICATES GENERAL CARGO CARRIER. The records do not
disclose that the M/V Cherokee, on the date in question, undertook to carry a special cargo or was chartered
to a special person only. There was no charter party. The bills of lading failed to show any special arrangement,
but only a general provision to the effect that the M/V Cherokee was a general cargo carrier.[14] Further, the
bare fact that the vessel was carrying a particular type of cargo for one shipper, which appears to be purely
coincidental, is not reason enough to convert the vessel from a common to a private carrier, especially where,
as in this case, it was shown that the vessel was also carrying passengers.

1732; NO DISTINCTION; No certificate of public convenience is immaterial

A CERTIFICATE OF PUBLIC CONVENIENCE IS NOT A REQUISITE FOR THE INCURRING OF LIABILITY
under the Civil Code provisions governing common carriers.That liability arises the moment a person or firm
acts as a common carrier, without regard to whether or not such carrier has also complied with the requirements
of the applicable regulatory statute and implementing regulations and has been granted a certificate of public
convenience or other franchise. To exempt private respondent from the liabilities of a common carrier because
he has not secured the necessary certificate of public convenience, would be offensive to sound public policy;
that would be to reward private respondent precisely for failing to comply with applicable statutory
requirements. The business of a common carrier impinges directly and intimately upon the safety and well
being and property of those members of the general community who happen to deal with such carrier. The law
imposes duties and liabilities upon common carriers for the safety and protection of those who utilize their
services and the law cannot allow a common carrier to render such duties and liabilities merely facultative by
simply failing to obtain the necessary permits and authorizations.

7
 M/V CHEROKEE WAS NOT SEAWORTHY WHEN IT EMBARKED ON ITS VOYAGE on 19 November
1984. The vessel was not even sufficiently manned at the time.For a vessel to be seaworthy, it must be
adequately equipped for the voyage and manned with a sufficient number of competent officers and crew. The
failure of a 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.

The DOCTRINE OF LIMITED LIABILITY does not apply where there was negligence on the part of the vessel
owner or agent.[17] LOADSTAR was at fault or negligent in not maintaining a seaworthy vessel and in having
allowed its vessel to sail despite knowledge of an approaching typhoon. In any event, it did not sink because
of any storm that may be deemed as force majeure, inasmuch as the wind condition in the area where it sank
was determined to be moderate. Since it was remiss in the performance of its duties, LOADSTAR cannot hide
behind the limited liability doctrine to escape responsibility for the loss of the vessel and its cargo. the stipulation
in the case at bar effectively reduces the common carriers liability for the loss or destruction of the goods to a
degree less than extraordinary (Articles 1744 and 1745), that is, the carrier is not liable for any loss or damage
to shipments made at owners risk. Such stipulation is obviously null and void for being contrary to public policy.

Three kinds of stipulations have often been made in a bill of lading.

1) exempting the carrier from any and all liability for loss or damage occasioned by its own negligence.
2) providing for an unqualified limitation of such liability to an agreed valuation.
3) limiting the liability of the carrier to an agreed valuation unless the shipper declares a higher value and pays
a higher rate of freight.

According to an almost uniform weight of authority, the first and second kinds of stipulations are invalid as being
contrary to public policy, but the third is valid and enforceable. Since the stipulation in question is null and void,
it follows that when MIC paid the shipper, it was subrogated to all the rights which the latter has against the
common carrier, LOADSTAR.

1 YEAR PRESCRIPTIVE PERIOD. Inasmuch as neither the Civil Code nor the Code of Commerce states a
specific prescriptive period on the matter, the Carriage of Goods by Sea Act (COGSA) which provides for a
one-year period of limitation on claims for loss of, or damage to, cargoes sustained during transit may be applied
suppletorily to the case at bar. This one-year prescriptive period also applies to the insurer of the good. [22] In
this case, the period for filing the action for recovery has not yet elapsed. Moreover, a stipulation reducing the
one-year period is null and void;[23] it must, accordingly, be struck down.

f) Asia Lighterage vs CA
3,150 metric tons of Better Western White Wheat in bulk, was shipped by Marubeni American Corporation of
Portland, Oregon on board the vessel M/V NEO for delivery to the consignee, General Milling Corporation in
Manila, evidenced by Bill of Lading. The shipment was insured by the private respondent Prudential Guarantee
and Assurance, Inc. against loss or damage under Marine Cargo Risk Note. the carrying vessel arrived in
Manila and the cargo was transferred to the custody of the petitioner Asia Lighterage and Shipping, Inc. The
petitioner was contracted by the consignee as carrier to deliver the cargo to consignee's warehouse at Bo.
Ugong, Pasig City.

900 metric tons of the shipment was loaded on barge PSTSI III, evidenced by Lighterage Receipt for delivery
to consignee but the cargo did NOT reach the destination.

It appears that on August 17, 1990, the transport of said cargo was suspended due to a warning of an incoming
typhoon. On August 22, 1990, the petitioner proceeded to pull the barge to Engineering Island off Baseco to
seek shelter from the approaching typhoon. PSTSI III was tied down to other barges which arrived ahead of it
while weathering out the storm that night. A few days after, the barge developed a list because of a hole it
sustained after hitting an unseen protuberance underneath the water. The petitioner filed a Marine Protest on
August 28, 1990.[8] It likewise secured the services of Gaspar Salvaging Corporation which refloated the
barge.[9] The hole was then patched with clay and cement.

The barge was then towed to ISLOFF terminal before it finally headed towards the consignee's wharf on
September 5, 1990. Upon reaching the Sta. Mesa spillways, the barge again ran aground due to strong
8
 current. To avoid the complete sinking of the barge, a portion of the goods was transferred to three other barges.
However, when the towing bits of the barge broke, it sank completely, resulting in the total loss of the remaining
cargo.[11] A second Marine Protest was filed. Petitioner contends that it is not a common carrier but a private
carrier. Allegedly, it has no fixed and publicly known route, maintains no terminals, and issues no tickets. It
points out that it is not obliged to carry indiscriminately for any person. It is not bound to carry goods unless it
consents. In short, it does not hold out its services to the general public.

Is petitioner a common carrier? COMMON CARRIER

Did it exercise extraordinary diligence in the care and custody of the consignees cargo? NO

HELD:
De Guzman reiterated
In the case at bar, the principal business of the petitioner is that of lighterage and drayage[22] and it offers its
barges to the public for carrying or transporting goods by water for compensation. Petitioner is clearly a common
carrier. petitioner is a common carrier whether its carrying of goods is done on an irregular rather than scheduled
manner, and with an only limited clientele. A common carrier need not have fixed and publicly known
routes. Neither does it have to maintain terminals or issue tickets.

THE TEST TO DETERMINE A COMMON CARRIER is

1) whether the given undertaking is a part of the business engaged in by the carrier
2) which he has held out to the general public as his occupation rather than the quantity or extent of the
business transacted.[25]

In the case at bar, the petitioner admitted that it is engaged in the business of shipping and lighterage,[26] offering
its barges to the public, despite its limited clientele for carrying or transporting goods by water for
compensation.[27]

PETITIONER FAILED TO EXERCISE EXTRAORDINARY DILIGENCE in its care and custody of the
consignees goods. In the case at bar, the barge completely sank after its towing bits broke, resulting in the total
loss of its cargo. Petitioner claims that this was caused by a typhoon, hence, it should not be held liable for the
loss of the cargo. However, petitioner failed to prove that the typhoon is the proximate and only cause of the loss
of the goods, and that it has exercised due diligence before, during and after the occurrence of the typhoon to
prevent or minimize the loss.[30] The evidence show that, even before the towing bits of the barge broke, it had
already previously sustained damage when it hit a sunken object while docked at the Engineering Island. It even
suffered a hole. Clearly, this could not be solely attributed to the typhoon. The partly-submerged vessel was
refloated but its hole was patched with only clay and cement. The patch work was merely a provisional remedy,
not enough for the barge to sail safely. Thus, when petitioner persisted to proceed with the voyage, it recklessly
exposed the cargo to further damage.

TYPHOON, NOT THE PROXIMATE CAUSE. Surely, meeting a typhoon head-on falls short of due diligence
required from a common carrier. More importantly, the officers/employees themselves of petitioner admitted that
when the towing bits of the vessel broke that caused its sinking and the total loss of the cargo upon reaching the
Pasig River, it was no longer affected by the typhoon. The typhoon then is not the proximate cause of the loss
of the cargo; a human factor, i.e., negligence had intervened.

g) PhilAmGen vs PKS Shipping

Davao Union Marketing Corporation (DUMC) contracted the services of respondent PKS Shipping Company
(PKS Shipping) for the shipment to Tacloban City of seventy-five thousand (75,000) bags of cement. DUMC
insured the goods for its full value with petitioner Philippine American General Insurance Company. The goods
were loaded aboard the dumb barge Limar I belonging to PKS Shipping. On the evening of 22 December 1988,
about nine oclock, while Limar I was being towed by respondents tugboat, the barge sank bringing down with it
the entire cargo of 75,000 bags of cement. DUMC filed a formal claim with Philamgen for the full amount of the
insurance. Philamgen promptly made payment; it then sought reimbursement from PKS Shipping of the sum
paid to DUMC but the shipping company refused to pay, prompting Philamgen to file suit against PKS Shipping
with the Makati RTC. The latter dismissed the case on the fround of fortuitous event. Appellate court ruled that
evidence to establish that PKS Shipping was a common carrier at the time it undertook to transport the bags of
cement was wanting because the peculiar method of the shipping companys carrying goods for others was not
generally held out as a business but as a casual occupation. It then concluded that PKS Shipping, not being a
9
 common carrier, was not expected to observe the stringent extraordinary diligence required of common carriers
in the care of goods.

Is petitioner a common carrier? COMMON CARRIER

Did it exercise extraordinary diligence in the care and custody of the consignees cargo? NO
HELD:
COMMON CARRIER. Much of the distinction between a common or public carrier and a private or special carrier
lies in the character of the business, such that if the undertaking is an isolated transaction, not a part of the
business or occupation, and the carrier does not hold itself out to carry the goods for the general public or to a
limited clientele, although involving the carriage of goods for a fee, [3]the person or corporation providing such
service could very well be just a private carrier.A typical case is that of a charter party which includes both the
vessel and its crew, such as in a bareboat or demise, where the charterer obtains the use and service of all or
some part of a ship for a period of time or a voyage or voyages[4] and gets the control of the vessel and its
crew.[5] Contrary to the conclusion made by the appellate court, its factual findings indicate that PKS Shipping
has engaged itself in the business of carrying goods for others, although for a limited clientele, undertaking to
carry such goods for a fee. The regularity of its activities in this area indicates more than just a casual activity on
its part.[6] Neither can the concept of a common carrier change merely because individual contracts are
executed or entered into with patrons of the carrier. Such restrictive interpretation would make it easy
for a common carrier to escape liability by the simple expedient of entering into those distinct
agreements with clients.

WAVES OF EXTRAORDINARY HEIGHT; FORTUITOUS EVENT. Gathered from the testimonies and sworn
marine protests of the respective vessel masters of Limar I and MT Iron Eagle, that there was no way by which
the barges or the tugboats crew could have prevented the sinking of Limar I. The vessel was suddenly tossed
by waves of extraordinary height of six (6) to eight (8) feet and buffeted by strong winds of 1.5 knots resulting in
the entry of water into the barges hatches. The official Certificate of Inspection of the barge issued by the
Philippine Coastguard and the Coastwise Load Line Certificate would attest to the seaworthiness of Limar I and
should strengthen the factual findings of the appellate court. All given then, the appellate court did not err in its
judgment absolving PKS Shipping from liability for the loss of the DUMC cargo.

h) Caltex vs Sulpicio Lines

Motor tanker MT Vector was loaded with 8,800 barrels of petroleum products shipped by petitioner Caltex. MT
Vector is a tramping motor tanker owned and operated by Vector Shipping Corporation, engaged in the business
of transporting fuel products. During that particular voyage, the MT Vector carried on board gasoline and other
oil products owned by Caltex by virtue of a charter contract between them.

On the other hand, passenger ship MV Doa Paz left the port of Tacloban headed for Manila with a complement
of 59 crew members including the master and his officers, and passengers totaling 1,493 as indicated in the
Coast Guard Clearance. MV Doa Paz is a passenger and cargo vessel owned and operated by Sulpicio Lines
making trips twice a week.

Collision of MT Vector and MV dona Paz leading to death of almost all of the passengers aboard Dona Paz.
Hence the case, by the heirs for Damages Arising from Breach of Contract of Carriage against Sulpicio Lines,
Inc. Sulpicio, in turn, filed a third party complaint against Francisco Soriano, Vector Shipping Corporation and
Caltex (Philippines), Inc. Sulpicio alleged that Caltex chartered MT Vector with gross and evident bad faith
knowing fully well that MT Vector was improperly manned, ill-equipped, unseaworthy and a hazard to safe
navigation; as a result, it rammed against MV Doa Paz in the open sea setting MT Vectors highly flammable
cargo ablaze.

Is the charterer of a sea vessel liable for damages resulting from a collision between the chartered vessel
and a passenger ship? NO

HELD:
THE CHARTERER HAS NO LIABILITY FOR DAMAGES UNDER PHILIPPINE MARITIME LAWS. The
respective rights and duties of a shipper and the carrier depends NOT on whether the carrier is public or private,
but on whether the contract of carriage is a bill of lading or equivalent shipping documents on the one hand, or
a charter party or similar contract on the other.
10
 Caltex and Vector entered into a contract of AFFREIGHTMENT aka voyage charter. A charter party is a contract
by which an entire ship, or some principal part thereof, is let by the owner to another person for a specified time
or use; a contract of affreightment is one by which the owner of a ship or other vessel lets the whole or part of
her to a merchant or other person for the conveyance of goods, on a particular voyage, in consideration of the
payment of freight.[11]A contract of affreightment may be either
time charter, wherein the leased vessel 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 period
of time or for a single or consecutive voyage, the ship owner to supply the ships store, pay for the wages
of the master of the crew, and defray the expenses for the maintenance of the ship.[12]
demise or bareboat charter, the charterer mans the vessel with his own people and becomes, in effect, the
owner for the voyage or service stipulated, subject to liability for damages caused by negligence.

If the charter is a contract of affreightment, which leaves the general owner in possession of the ship as owner
for the voyage, the rights and the responsibilities of ownership rest on the owner. The charterer is free from
liability to third persons in respect of the ship.[13]

MT VECTOR IS A COMMON CARRIER

Charter parties fall into three main categories: (1) Demise or bareboat, (2) time charter, (3) voyage
charter. Does a charter party agreement turn the common carrier into a private one? NO

The charter party agreement did not convert the common carrier into a private carrier. The parties entered into
a voyage charter, which retains the character of the vessel as a common carrier.

In Planters Products, Inc. vs. Court of Appeals,[14] we said:

It is therefore imperative that a public carrier shall remain as such, notwithstanding the charter of the whole or
portion of a 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 THE VESSEL AND ITS
CREW, AS IN A BAREBOAT OR DEMISE THAT A COMMON CARRIER BECOMES PRIVATE, at least insofar
as the particular voyage covering the charter-party is concerned. Indubitably, a ship-owner in a time or voyage
charter retains possession and control of the ship, although her holds may, for the moment, be the property of
the charterer.

Later, we ruled in Coastwise Lighterage Corporation vs. Court of Appeals:[15]

ALTHOUGH A CHARTER PARTY MAY TRANSFORM A COMMON CARRIER INTO A PRIVATE ONE, THE
SAME HOWEVER IS X TRUE IN A CONTRACT OF AFFREIGHTMENT A common carrier is a person or
corporation whose regular business is to carry passengers or property for all persons who may choose to employ
and to remunerate him.[16] MT Vector fits the definition of a common carrier under Article 1732 of the Civil Code.

DE GUZMAN

COGSA Under the Carriage of Goods by Sea Act :

Sec. 3. (1) The carrier shall be bound before and at the beginning of the voyage to exercise due diligence to -
(a) Make the ship seaworthy;
(b) Properly man, equip, and supply the ship;

Thus, the carriers are deemed to warrant impliedly the seaworthiness of the ship. For a vessel to be seaworthy,
it must be adequately equipped for the voyage and manned with a sufficient number of competent
officers and crew. The failure of a common carrier to maintain in seaworthy condition the vessel involved in its
contract of carriage is a clear breach of its duty prescribed in Article 1755 of the Civil Code.[

The provisions owed their conception to the nature of the business of common carriers. This business is
impressed with a special public duty. The public must of necessity rely on the care and skill of common carriers
in the vigilance over the goods and safety of the passengers, especially because with the modern development
of science and invention, transportation has become more rapid, more complicated and somehow more
hazardous.[19] For these reasons, a passenger or a shipper of goods is under no obligation to conduct an
inspection of the ship and its crew, the carrier being obliged by law to impliedly warrant its seaworthiness.

Is Caltex liable for damages under the Civil Code? We rule that it is not.
11
 In Southeastern College, Inc. vs. Court of Appeals,[21] we said that NEGLIGENCE, as commonly understood, is
conduct which naturally or reasonably creates undue risk or harm to others. It may be the failure to observe that
degree of care, precaution, and vigilance, which the circumstances justly demand, or the omission to do
something which ordinarily regulate the conduct of human affairs, would do.

THE CHARTERER OF A VESSEL HAS NO OBLIGATION BEFORE TRANSPORTING ITS CARGO TO

ENSURE THAT THE VESSEL IT CHARTERED COMPLIED WITH ALL LEGAL REQUIREMENTS. The duty
rests upon the common carrier simply for being engaged in public service.[22] The Civil Code demands diligence
which is required by the nature of the obligation and that which corresponds with the circumstances of the
persons, the time and the place.Hence, considering the nature of the obligation between Caltex and MT Vector,
the liability as found by the Court of Appeals is without basis.

The relationship between the parties in this case is governed by special laws. Because of the implied warranty
of seaworthiness,[23] shippers of goods, when transacting with common carriers, are not expected to inquire into
the vessels seaworthiness, genuineness of its licenses and compliance with all maritime laws. To demand more
from shippers and hold them liable in case of failure exhibits nothing but the futility of our maritime laws insofar
as the protection of the public in general is concerned. By the same token, we cannot expect passengers to
inquire every time they board a common carrier, whether the carrier possesses the necessary papers or that all
the carriers employees are qualified. Such a practice would be an absurdity in a business where time is always
of the essence. Considering the nature of transportation business, passengers and shippers alike customarily
presume that common carriers possess all the legal requisites in its operation.

Thus, the nature of the obligation of Caltex demands ordinary diligence like any other shipper in shipping his
cargoes. A cursory reading of the records convinces us that Caltex had reasons to believe that MT Vector could
legally transport cargo that time of the year.

i) Coastwise Lighterage Corporation vs CA

Pag-asa Sales, Inc. entered into a contract to transport molasses from the province of Negros to Manila with
Coastwise, using the latter's dumb barges. The barges were towed in tandem by the tugboat MT Marica, which
is likewise owned by Coastwise.

Upon reaching Manila Bay, while approaching Pier 18, one of the barges, "Coastwise 9", struck an unknown
sunken object. The forward buoyancy compartment was damaged, and water gushed in through a hole rendering
the molasses at the cargo tanks contaminated and unfit for the use it was intended. This prompted the consignee,
Pag-asa Sales, Inc. to reject the shipment of molasses as a total loss. Thereafter, Pag-asa Sales, Inc. filed a
formal claim with the insurer of its lost cargo, herein (PhilGen) and carrier, Coastwise. The latter denied the claim
and it was PhilGen which paid the consignee, Pag-asa Sales, Inc., the amount of P700,000.00, representing the
value of the damaged cargo of molasses.

PhilGen then filed an action against Coastwise Lighterage to recover the amount of P700,000.00 which it paid
to Pag-asa Sales, Inc. for the latter's lost cargo. PhilGen now claims to be subrogated to all the contractual rights
and claims which the consignee may have against the carrier, which is presumed to have violated the contract
of carriage.

Was Coastwise Lighterage transformed into a private carrier, by virtue of the contract of
affreightment which it entered into with the consignee, Pag-asa Sales, Inc.? NO

if it were in fact transformed into a private carrier, did it exercise the ordinary diligence to which a
private carrier is in turn bound?

HELD:
DEMISE OR BAREBOAT
Charterer will generally be regarded as owner for
the voyage or service stipulated
Charterer mans the vessels with his own people
and becomes the owner pro hac vice, subject to
liability to others for damages caused by
negligence.
12
CONTRACT OF AFFREIGHTMENT
one in which the owner of the vessel leases
part or all of its space to haul goods for others
Contract for special service to be rendered by
the owner of the vessel and under such
contract the general owner retains the
possession, command, and navigation of the

To create a demise, the owner of a vessel must
completely and exclusively relinquish
possession, command, and navigation thereof to
the charterer, anything short of such a complete
transfer is a contract of affreightment (time or
voyage charter party) or not a charter party at all.
ship, the charterer or freighter merely having
use of the space in the vessel in return for his
payment of the charter hire
. . . An owner who retains possession of the
ship though the hold is the property of the
charterer, remains liable as carrier and must
answer for any breach of duty as to the care,
loading and unloading of the cargo. . . .

Although a charter party may transform a common carrier into a private one, the same however is not true in a
contract of affreightment on account of the aforementioned distinctions between the two.

CONTRACT OF AFFREIGHTMENT. Pag-asa Sales, Inc. only leased three of petitioner's vessels, in order to
carry cargo from one point to another, but the possession, command and navigation of the vessels remained
with petitioner Coastwise Lighterage. Coastwise Lighterage, by the contract of affreightment, was not converted
into a private carrier, but remained a common carrier and was still liable as such.

The law and jurisprudence on common carriers both hold that the 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.

It follows then that the presumption of negligence that attaches to common carriers, once the goods it transports
are lost, destroyed or deteriorated, applies to the petitioner. This presumption, which is overcome only by proof
of the exercise of extraordinary diligence, remained unrebutted in this case.

NO EXTRAORDINARY DILIGENCE. it appeared that far from having rendered service with the greatest skill
and utmost foresight, and being free from fault, the carrier was culpably remiss in the observance of its duties.
Jesus R. Constantino, the patron of the vessel "Coastwise 9" admitted that he was not licensed Clearly, petitioner
Coastwise Lighterage's embarking on a voyage with an unlicensed patron violates this rule. It cannot safely claim
to have exercised extraordinary diligence, by placing a person whose navigational skills are questionable, at the
helm of the vessel which eventually met the fateful accident. It may also logically, follow that a person without
license to navigate, lacks not just the skill to do so, but also the utmost familiarity with the usual and safe routes
taken by seasoned and legally authorized ones. Had the patron been licensed, he could be presumed to have
both the skill and the knowledge that would have prevented the vessel's hitting the sunken derelict ship that lay
on their way to Pier 18. As a common carrier, petitioner is liable for breach of the contract of carriage, having
failed to overcome the presumption of negligence with the loss and destruction of goods it transported, by proof
of its exercise of extraordinary diligence.

j) Planters Products vs CA
Does a charter-party 1 between a shipowner and a charterer transform a common carrier into a private one as to
negate the civil law presumption of negligence in case of loss or damage to its cargo?

PPI, purchased from (MITSUBISHI) of New York, Urea 46% fertilizer which the latter shipped in bulk aboard the
cargo vessel M/V "Sun Plum" owned by KKKK from Alaska to Philippines, as evidence by a Bill of Lading signed
by the master of the vessel and issued on the date of departure.

prior to its voyage, a time charter-party on the vessel M/V "Sun Plum" pursuant to the Uniform General
Charter 2 was entered into between Mitsubishi as shipper/charterer and KKKK as shipowner, in Tokyo,
Japan. 3Riders to the aforesaid charter-party starting from par. 16 to 40 were attached to the pre-printed
agreement.

survey report submitted by CSCI to the consignee (PPI) dated 19 July 1974 revealed a shortage in the cargo of
106.726 M/T and that a portion of the Urea fertilizer approximating 18 M/T was contaminated with dirt. The same
results were contained in a Certificate of Shortage/Damaged Cargo dated 18 July 1974 prepared by PPI which

13
 showed that the cargo delivered was indeed short of 94.839 M/T and about 23 M/T were rendered unfit for
commerce, having been polluted with sand, rust and dirt.

PI filed an action for damages with the Court of First Instance of Manila. The defendant carrier argued that the
strict public policy governing common carriers does not apply to them because they have become private carriers
by reason of the provisions of the charter-party. The court a quo however sustained the claim of the plaintiff
against the defendant carrier for the value of the goods lost or damaged

whether a common carrier becomes a private carrier by reason of a charter-party; in the negative,
whether the shipowner in the instant case was able to prove that he had exercised that degree of
diligence required of him under the law?

HELD:
A "charter-party" is defined as a contract by which an entire ship, or some principal part thereof, is let by the
owner to another person for a specified time or use; 20 a contract of affreightment by which the owner of a ship
or other vessel lets the whole or a part of her to a merchant or other person for the conveyance of goods, on a
particular voyage, in consideration of the payment of freight; 21 Charter parties are of two types:
(a) contract of affreightment which involves the use of shipping space on vessels leased by the owner in part
or as a whole, to carry goods for others; and,
time charter, wherein the vessel is leased to the charterer for a fixed period of time, or
voyage charter, wherein the ship is leased for a single voyage. 22
In both cases, the charter-party provides for the hire of vessel only, either for a determinate period
of time or for a single or consecutive voyage, the shipowner to supply the ship's stores, pay for the
wages of the master and the crew, and defray the expenses for the maintenance of the ship.

(b) charter by demise or bareboat charter, by the terms of which the whole vessel is let to the charterer with
a transfer to him of its entire command and possession and consequent control over its navigation, including
the master and the crew, who are his servants.

Upon the other hand, the term "common or public carrier" is defined in Art. 1732 of the Civil Code. 23 The
definition extends to carriers either by land, air or water which hold themselves out as ready to engage in carrying
goods or transporting passengers or both for compensation as a public employment and not as a casual
occupation. The distinction between a "common or public carrier" and a "private or special carrier" lies in the
character of the business, such that if the undertaking is a single transaction, not a part of the general business
or occupation, although involving the carriage of goods for a fee, the person or corporation offering such service
is a private carrier.

COMMON CARRIER. Respondent, in the ordinary course of business, operates as a common carrier,
transporting goods indiscriminately for all persons. When petitioner chartered the vessel M/V "Sun Plum", the
ship captain, its officers and compliment were under the employ of the shipowner and therefore continued to be
under its direct supervision and control. Hardly then can we charge the charterer, a stranger to the crew and to
the ship, with the duty of caring for his cargo when the charterer did not have any control of the means in doing
so. This is evident in the present case considering that the steering of the ship, the manning of the decks, the
determination of the course of the voyage and other technical incidents of maritime navigation were all consigned
to the officers and crew who were screened, chosen and hired by the shipowner.

It is therefore imperative that a public carrier shall remain as such, notwithstanding the charter of the whole or
portion of a 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 the vessel and its crew, as in a bareboat
or demise that a common carrier becomes private, at least insofar as the particular voyage covering the charter-
party is concerned. Indubitably, a shipowner in a time or voyage charter retains possession and control of the
ship, although her holds may, for the moment, be the property of the charterer.

CONSIGNEE MUST FIRST PROVE THE FACT OF SHIPMENT AND THE LOSS. THEREAFTER, THE
BURDEN IS ON THE CARRIER TO SHOW IT EXERCISED DUE DILIGENCE REQUIRED. In an action for
recovery of damages against a common carrier on the goods shipped, the shipper or consignee should first
prove the fact of shipment and its consequent loss or damage while the same was in the possession, actual or
constructive, of the carrier. Thereafter, the burden of proof shifts to respondent to prove that he has exercised

14
 extraordinary diligence required by law or that the loss, damage or deterioration of the cargo was due to fortuitous
event, or some other circumstances inconsistent with its liability.

PRIMA FACIE PRESUMPTION OF NEGLIGENCE, REBUTTED. The master of the carrying vessel, Captain
Lee Tae Bo, in his deposition taken on 19 April 1977 before the Philippine Consul and Legal Attache in the
Philippine Embassy in Tokyo, Japan, testified that before the fertilizer was loaded, the four (4) hatches of the
vessel were cleaned, dried and fumigated. After completing the loading of the cargo in bulk in the ship's holds,
the steel pontoon hatches were closed and sealed with iron lids, then covered with three (3) layers of serviceable
tarpaulins which were tied with steel bonds. The hatches remained close and tightly sealed while the ship was
in transit as the weight of the steel covers made it impossible for a person to open without the use of the ship's
boom.

BULK SHIPMENT OF HIGHLY SOLUBLE GOODS LIKE FERTILIZER CARRIES WITH IT THE RISK OF LOSS
OR DAMAGE. More so, with a variable weather condition prevalent during its unloading, as was the case at bar.
This is a risk the shipper or the owner of the goods has to face. Clearly, respondent carrier has sufficiently proved
the inherent character of the goods which makes it highly vulnerable to deterioration; as well as the inadequacy
of its packaging which further contributed to the loss. On the other hand, no proof was adduced by the petitioner
showing that the carrier was remise in the exercise of due diligence in order to minimize the loss or damage to
the goods it carried.

k) Schmitz Transport vs Transport Venture

TCO Pte Ltd. Singapore shipped from the port of Russia on board a vessel owned by Black Sea 545 hot rolled
steel sheets in coil. The cargoes, which were to be discharged at the port of Manila in favor of the consignee,
(Little Giant),[4] were insured against all risks with. (Industrial Insurance) under Marine Policy. Schmitz
Transport, whose services the consignee engaged to secure the requisite clearances, to receive the cargoes
from the shipside, and to deliver them to its (the consignees) warehouse at Cainta, Rizal,[7] in turn engaged the
services of TVI to send a barge and tugboat at shipside.

VIs tugboat Lailani towed the barge Erika V to shipside. the tugboat, after positioning the barge alongside the
vessel, left and returned to the port terminal.[9] At 9:00 p.m., arrastre operator Ocean Terminal Services Inc.
commenced to unload 37 of the 545 coils from the vessel unto the barge. Although the weather condition had
become inclement due to an approaching storm, the unloading unto the barge of the 37 coils was
accomplished.[10] No tugboat pulled the barge back to the pier, however. due to strong waves,[11] the crew of the
barge abandoned it and transferred to the vessel. The barge pitched and rolled with the waves and eventually
capsized, washing the 37 coils into the sea.[12] At 7:00 a.m., a tugboat finally arrived to pull the already empty
and damaged barge back to the pier.[13]

Industrial insurance as subrogee of Little Giant files an action against Schmitz Transport, TVI, and Black Sea. It
faulted the defendants for undertaking the unloading of the cargoes while typhoon signal No. 1 was raised in
Metro Manila.

Whether the loss of the cargoes was due to a fortuitous event, independent of any act of negligence on
the part of petitioner Black Sea and TVI, and
If there was negligence, whether liability for the loss may attach to Black Sea, petitioner and TVI.

HELD:
ART. 1174. Except in cases expressly specified by the law, or when it is otherwise declared by stipulation, or
when the nature of the obligation requires the assumption of risk, no person shall be responsible for those events
which could not be foreseen, or which though foreseen, were inevitable.
In order, to be considered a fortuitous event, however,
(1) the cause of the unforeseen and unexpected occurrence, or the failure of the debtor to comply with his
obligation, must be independent of human will;
(2) it must be impossible to foresee the event which constitute the caso fortuito, or if it can be foreseen it must
be impossible to avoid;
(3) the occurrence must be such as to render it impossible for the debtor to fulfill his obligation in any manner;
and
(4) the obligor must be free from any participation in the aggravation of the injury resulting to the creditor. [

15
 [T]HE PRINCIPLE EMBODIED IN THE ACT OF GOD DOCTRINE STRICTLY REQUIRES THAT THE ACT
MUST BE OCCASIONED SOLELY BY THE VIOLENCE OF NATURE. Human intervention is to be excluded
from creating or entering into the cause of the mischief. When the effect is found to be in part the result of the
participation of man, whether due to his active intervention or neglect or failure to act, the whole occurrence is
then humanized and removed from the rules applicable to the acts of God.

while typhoon signal No. 1 was hoisted over Metro Manila on October 23-31, 1991, the sea condition at the port
of Manila at 5:00 p.m. - 11:00 p.m. of October 26, 1991 was moderate, it cannot, therefore, be said that the
defendants were negligent in not unloading the cargoes upon the barge on October 26, 1991 inside the
breakwater.

PROXIMATE CAUSE That no tugboat towed back the barge to the pier after the cargoes were completely
loaded by 12:30 in the morning[39] is, however, a material fact which the appellate court failed to properly
consider and appreciate[40] the proximate cause of the loss of the cargoes. Had the barge been towed back
promptly to the pier, the deteriorating sea conditions notwithstanding, the loss could have been avoided. But the
barge was left floating in open sea until big waves set in at 5:30 a.m., causing it to sink along with the
cargoes.[41] The loss thus falls outside the act of God doctrine.

The proximate cause of the loss having been determined, who among the parties is/are responsible
therefor?
Petitioner is a common carrier. For it undertook to transport the cargoes from the shipside of M/V Alexander
Saveliev to the consignees warehouse at Cainta, Rizal. As the appellate court put it, as long as a person or
corporation holds [itself] to the public for the purpose of transporting goods as [a] business, [it] is already
considered a common carrier regardless if [it] owns the vehicle to be used or has to hire one. [42] That petitioner
is a common carrier, the testimony of its own Vice-President and General Manager Noel Aro that part of the
services it offers to its clients as a brokerage firm includes the transportation of cargoes reflects so.

UNDER A GIVEN SET OF FACTS, A CUSTOMS BROKER MAY BE REGARDED AS A COMMON

CARRIER. In Calvo v. UCPB General Insurance Co. Inc.,[46] this Court held that as the transportation of goods
is an integral part of a customs broker, the customs broker is also a common carrier. For to declare otherwise
would be to deprive those with whom [it] contracts the protection which the law affords them notwithstanding the
fact that the obligation to carry goods for [its] customers, is part and parcel of petitioners business. [47]

NEGLIGENCE COMMITTED BY AGENT DEEMED THE NEGLIGENCE OF ITS PRINCIPAL, DOES NOT
APPLY.
True, petitioner was the broker-agent of Little Giant in securing the release of the cargoes. In effecting the
transportation of the cargoes from the shipside and into Little Giants warehouse, however, petitioner was
discharging its own personal obligation under a contact of carriage. Petitioner, which did not have any barge or
tugboat, engaged the services of TVI as handler[48] to provide the barge and the tugboat. In their Service
Contract,[49] while Little Giant was named as the consignee, petitioner did not disclose that it was acting
on commission and was chartering the vessel for Little Giant. [50] Little Giant did not thus automatically
become a party to the Service Contract and was not, therefore, bound by the terms and conditions
therein. Not being a party to the service contract, Little Giant cannot directly sue TVI based thereon but it can
maintain a cause of action for negligence.[51]

In the case of TVI, while it acted as a private carrier for which it was under no duty to observe extraordinary
diligence, it was still required to observe ordinary diligence to ensure the proper and careful handling, care and
discharge of the carried goods.

TVI FAILED TO EXACT DUE DILIGENCE AN ORDINARILY PRUDENT PERSON WOULD HAVE USED IN
THE SAME SITUATION
TVIs failure to promptly provide a tugboat did not only increase the risk that might have been reasonably
anticipated during the shipside operation, but was the proximate cause of the loss. A man of ordinary prudence
would not leave a heavily loaded barge floating for a considerable number of hours, at such a precarious time,
and in the open sea, knowing that the barge does not have any power of its own and is totally defenseless from
16
 the ravages of the sea. That it was nighttime and, therefore, the members of the crew of a tugboat would be
charging overtime pay did not excuse TVI from calling for one such tugboat.

As for petitioner, for it to be relieved of liability, it should, following Article 1739[53] of the Civil Code, prove that it
exercised due diligence to prevent or minimize the loss, before, during and after the occurrence of the storm in
order that it may be exempted from liability for the loss of the goods. While petitioner sent checkers[54] and a
supervisor[55] on board the vessel to counter-check the operations of TVI, it failed to take all available and
reasonable precautions to avoid the loss. After noting that TVI failed to arrange for the prompt towage of the
barge despite the deteriorating sea conditions, it should have summoned the same or another tugboat to extend
help, but it did not.

This Court holds then that petitioner and TVI are solidarily liable[56] for the loss of the cargoes.
Should Prudent be made likewise liable? If at all, that liability could only be for tort under the provisions of Article
2176 and related provisions, in conjunction with Article 2180 of the Civil Code. x x x [O]ne might ask further, how
then must the liability of the common carrier, on one hand, and an independent contractor, on the other hand,
be described? It would be solidary. A contractual obligation can be breached by tort and when the same act or
omission causes the injury, one resulting in culpa contractual and the other in culpa aquiliana, Article 2194 of
the Civil Code can well apply. In fine, a liability for tort may arise even under a contract, where tort is that which
breaches the contract. Stated differently, when an act which constitutes a breach of contract would have itself
constituted the source of a quasi-delictual liability had no contract existed between the parties, the contract can
be said to have been breached by tort, thereby allowing the rules on tort to apply. [57]

BLACK SEA IS NOT LIABLE, its duty as a common carrier extended only from the time the goods were
surrendered or unconditionally placed in its possession and received for transportation until they were delivered
actually or constructively to consignee Little Giant.[58] Parties to a contract of carriage may, however, agree upon
a definition of delivery that extends the services rendered by the carrier. In the case at bar, Bill of Lading No. 2
covering the shipment provides that delivery be made to the port of discharge or so near thereto as she may
safely get, always afloat.[59] The delivery of the goods to the consignee was not from pier to pier but from the
shipside of M/V Alexander Saveliev and into barges, for which reason the consignee contracted the services of
petitioner. Since Black Sea had constructively delivered the cargoes to Little Giant, through petitioner, it had
discharged its duty.[60]
In fine, no liability may thus attach to Black Sea.

l) AF Sanchez Brokerage vs CA
Wyeth-Pharma GMBH shipped on board an aircraft of KLM Royal Dutch Airlines in Germany oral contraceptives
for delivery to Manila in favor of Wyeth Lab. The femenal tables were placed in cartons and the Nordiol tables
were placed in 20 cartons which were packed together in one LD3 aluminum container, while the Trinordial
tablets wre packed in 2 pallets, each of which contained 30 cartons. Wyeth-Suaco insured the shipment against
all risks with FGU Insurance which issued Marine Risk Note. Upon arrival in NAIA, it was discharged w/o
exception and delivered to the warehouse in PSI for safekeeping. In order to secure the release of the cargoes
from the PSI and the Bureau of Customs, Wyeth-Suaco engaged the services of Sanchez Brokerage which had
been its licensed broker since 1984.[8] As its customs broker, Sanchez Brokerage calculates and pays the
customs duties, taxes and storage fees for the cargo and thereafter delivers it to Wyeth-Suaco.[9 representatives
of Sanchez Brokerage, paid PSI storage fee. On the receipt, another representative of Sanchez Brokerage, M.
Sison,[11] acknowledged that he received the cargoes consisting of three pieces in good condition.[12]

Wyeth-Suaco being a regular importer, the customs examiner did not inspect the cargoes[13] which were
thereupon stripped from the aluminum containers[14] and loaded inside two transport vehicles hired by Sanchez
Brokerage.[ pon inspection, however, he, together with Ruben Alonzo of Elite Surveyors, discovered that 44
cartons containing Femenal and Nordiol tablets were in bad order.[20] He thus placed a note above his signature
on the delivery receipt stating that 44 cartons of oral contraceptives were in bad order. The remaining 160 cartons
of oral contraceptives were accepted as complete and in good order. Wyeth-Suaco later demanded, by
letter[29] of August 25, 1992, from Sanchez Brokerage the payment of P191,384.25 representing the value of its
loss arising from the damaged tablets.

On demand by FGU Insurance for payment of the amount of P181,431.49 it paid Wyeth-Suaco, Sanchez
Brokerage, by letter[31] of January 7, 1993, disclaimed liability for the damaged goods, positing that the damage

17
 was due to improper and insufficient export packaging; that when the sealed containers were opened outside
the PSI warehouse, it was discovered that some of the loose cartons were wet, [32] prompting its (Sanchez
Brokerages) representative Morales to inform the Import-Export Assistant of Wyeth-Suaco, Ramir Calicdan,
about the condition of the cargoes but that the latter advised to still deliver them to Hizon Laboratories where an
adjuster would assess the damage.[

FGU Insurance contends that petitioner, as a common carrier, failed to overcome the presumption of
negligence, it being documented that petitioner withdrew from the warehouse of PSI the subject shipment
entirely in good order and condition

Is Sanchez a common carrier? YES

HELD:
The appellate court did not err in finding petitioner, a customs broker, to be also a common carrier, as defined
under Article 1732 of the Civil Code, to wit:
Article 1732 does not distinguish between one whose principal business activity is the carrying of goods and one
who does such carrying only as an ancillary activity.[44] The contention, therefore, of petitioner that it is not a
common carrier but a customs broker whose principal function is to prepare the correct customs declaration and
proper shipping documents as required by law is bereft of merit. It suffices that petitioner undertakes to deliver
the goods for pecuniary consideration.

In this light, petitioner as a common carrier is mandated to observe, under Article 1733[45] of the Civil Code,
extraordinary diligence in the vigilance over the goods it transports according to all the circumstances of each
case. In the event that the goods are lost, destroyed or deteriorated, it is presumed to have been at fault or to
have acted negligently, unless it proves that it observed extraordinary diligence.[

The EXTRAORDINARY DILIGENCE IN THE VIGILANCE OVER THE GOODS tendered for shipment requires
the common carrier to know and to follow the required precaution for avoiding damage to, or destruction of the
goods entrusted to it for sale, 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.

In the case at bar, it was established that petitioner received the cargoes from the PSI warehouse in NAIA in
good order and condition;[49] and that upon delivery by petitioner to Hizon Laboratories Inc., some of the cargoes
were found to be in bad order, as noted in the Delivery Receipt [50] issued by petitioner, and as indicated in the
Survey Report of Elite Surveyors[51] and the Destruction Report of Hizon Laboratories, Inc.[52]

While paragraph No. 4 of Article 1734[55] of the Civil Code exempts a common carrier from liability if the loss or
damage is due to the character of the goods or defects in the packing or in the containers, the rule is that if the
improper packing is known to the carrier or his employees 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. [56]

If the claim of petitioner that some of the cartons were already damaged upon delivery to it were true, then it
should naturally have received the cargo under protest or with reservations duly noted on the receipt issued by
PSI. But it made no such protest or reservation.[57]

Since petitioner received all the cargoes in good order and condition at the time they were turned over by the
PSI warehouseman, and upon their delivery to Hizon Laboratories, Inc. a portion thereof was found to be in bad
order, it was incumbent on petitioner to prove that it exercised extraordinary diligence in the carriage of the
goods. It did not, however. Hence, its presumed negligence under Article 1735 of the Civil Code remains
unrebutted.

m) Lastimoso vs Doliente

n) Loadstar Shipping vs Pioneer Asia

18
 Loadstar is the registered owner and operator of M/V Weasel. It entered into a voyage-charter with Northern
Mindanao Transport Co. for the carriage of bags of cement from Iligan to Manila while the consignee in Manila
was Market Developers Inc. Prior to the voyage, the consignee insured the shipment of cement with respondent
Pioneer Asia Insurance Corporation. M/V Weasel left Iligan City for Manila in good weather. However, at 4:31 in
the morning of June 25, 1984, Captain Vicente C. Montera, master of M/V Weasel, ordered the vessel to be
forced aground. Consequently, the entire shipment of cement was good as gone due to exposure to sea water.
Petitioner thus failed to deliver the goods to the consignee in Manila.

Insurance company as subrogee alleged that (1) the M/V Weasel was not seaworthy at the commencement
of the voyage; (2) the weather and sea conditions then prevailing were usual and expected for that time of the
year and as such, was an ordinary peril of the voyage for which the M/V Weasel should have been normally able
to cope with; and (3) petitioner was negligent in the selection and supervision of its agents and employees then
manning the M/V Weasel.

Petitioner contends that at the time of the voyage the carriers voyage-charter with the shipper converted it into
a private carrier. Thus, the presumption of negligence against common carriers could not apply. Petitioner further
avers that the stipulation in the voyage-charter holding it free from liability is valid and binds the respondent. In
any event, petitioner insists that it had exercised extraordinary diligence and that the proximate cause of the loss
of the cargo was a fortuitous event.

Given the circumstances of this case, is petitioner a common or a private carrier? and
In either case, did petitioner exercise the required diligence i.e., the extraordinary diligence of a
common carrier or the ordinary diligence of a private carrier?

HELD:
Petitioner is a corporation engaged in the business of transporting cargo by water and for compensation,
offering its services indiscriminately to the public. Thus, without doubt, it is a common carrier. The voyage-
charter agreement between petitioner and Northern Mindanao Transport Company, Inc. did not in any way
convert the common carrier into a private carrier.

PLANTERS PRODUCTS REITERATED. It is therefore imperative that a public carrier shall remain as
such, notwithstanding the charter of the whole or portion of a 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 the vessel and its crew, as in a bareboat or demise that a common carrier becomes
private, at least insofar as the particular voyage covering the charter-party is concerned. Indubitably, a
shipowner in a time or voyage charter retains possession and control of the ship, although her holds may,
for the moment, be the property of the charterer.

petitioner remains a common carrier notwithstanding the existence of the charter agreement with the Northern
Mindanao Transport Company, Inc. since the said charter is limited to the ship only and does not involve both
the vessel and its crew. As elucidated in Planters Products, its charter is only a voyage-charter, not a bareboat
charter.

NO EXTRAORDINARY DILIGENCE. Records show that in the evening of June 24, 1984, the sea and weather
conditions in the vicinity of Negros Occidental were calm. The records reveal that petitioner took a shortcut route,
instead of the usual route, which exposed the voyage to unexpected hazard. Petitioner has only itself to blame
for its misjudgment.

o) Eastern Shipping Lines vs Nisshin Fire

1ST CASE: M/S ASIATICA, a vessel operated by Eastern Shipping loaded at Kobe, Japan for transportation to
Manila, 5,000 pieces of calorized lance pipes in 28 packages consigned to Philippine Blooming Mills Co., Inc.,
and 7 cases of spare parts consigned to Central Textile Mills, Inc. Both sets of goods were insured against
marine risk for their stated value with respondent Development Insurance and Surety Corporation.

2ND CASE: during the same period, the same vessel took on board 128 cartons of garment fabrics and
accessories, in two (2) containers, consigned to Mariveles Apparel Corporation, and two cases of surveying
instruments consigned to Aman Enterprises and General Merchandise. The 128 cartons were insured for their
stated value by respondent Nisshin Fire & Marine Insurance Co. Enroute for Kobe, Japan, to Manila, the vessel
caught fire and sank, resulting in the total loss of ship and cargo. The respective respondent Insurers paid the

19
 corresponding marine insurance values to the consignees concerned and were thus subrogated unto the rights
of the latter as the insured.

Before SC, Nisshin and DOWA as subrogees of the isnured, filed suit for recovery of the insured value of the
cargo lost imputing unseaworthiness of the ship and non-observance of extraordinary diligence by petitioner
Carrier.

w/n the petitioner is liable?

HELD:
On the Burden of Proof
Under the Civil Code, common carriers, from the nature of their business and for reasons of public policy, are
bound to observe extraordinary diligence in the vigilance over goods, according to all the circumstances of each
case. 8 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;

FIRE MAY NOT BE CONSIDERED A NATURAL DISASTER OR CALAMITY. This must be so as it arises
almost invariably from some act of man or by human means. 10 It does not fall within the category of an act of
God unless caused by lightning 11 or by other natural disaster or calamity. 12 It may even be caused by the
actual fault or privity of the carrier. 13

Article 1680 of the Civil Code, which considers fire as an extraordinary fortuitous event refers to leases of rural
lands where a reduction of the rent is allowed when more than one-half of the fruits have been lost due to such
event, considering that the law adopts a protection policy towards agriculture. 14

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

In this case, the respective Insurers. as subrogees of the cargo shippers, have proven that the transported goods
have been lost. Petitioner Carrier has also proved that the loss was caused by fire. The burden then is upon
Petitioner Carrier to proved that it has exercised the extraordinary diligence required by law. In this regard, the
Trial Court, concurred in by the Appellate Court, made the following Finding of fact:
The cargoes in question were, according to the witnesses defendant placed in hatches No, 2 and 3 cf the
vessel, Boatswain Ernesto Pastrana noticed that smoke was coming out from hatch No. 2 and hatch No.
3; that where the smoke was noticed, the fire was already big; that the fire must have started twenty-four
24) our the same was noticed; that carbon dioxide was ordered released and the crew was ordered to open
the hatch covers of No, 2 tor commencement of fire fighting by sea water: that all of these effort were not
enough to control the fire.

Pursuant to Article 1733, common carriers are bound to extraordinary diligence in the vigilance over the goods.
The evidence of the defendant did not show that extraordinary vigilance was observed by the vessel to prevent
the occurrence of fire at hatches numbers 2 and 3. Defendant's evidence did not likewise show he amount of
diligence made by the crew, on orders, in the care of the cargoes. What appears is that after the cargoes were
stored in the hatches, no regular inspection was made as to their condition during the voyage. Consequently,
the crew could not have even explain what could have caused the fire. The defendant, in the Court's mind, failed
to satisfactorily show that extraordinary vigilance and care had been made by the crew to prevent the occurrence
of the fire. The defendant, as a common carrier, is liable to the consignees for said lack of deligence required of
it under Article 1733 of the Civil Code. 15

Having failed to discharge the burden of proving that it had exercised the extraordinary diligence required by
law, Petitioner Carrier cannot escape liability for the loss of the cargo. And even if fire were to be considered
a "natural disaster" within the meaning of Article 1734 of the Civil Code, it is required under Article 1739
of the same Code that the "natural disaster" must have been the "proximate and only cause of the loss,"

20
 and that the carrier has "exercised due diligence to prevent or minimize the loss before, during or after
the occurrence of the disaster. " This Petitioner Carrier has also failed to establish satisfactorily.

Nor may Petitioner Carrier seek refuge from liability under the Carriage of Goods by Sea Act, It is provided
therein that:
Sec. 4(2). Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from
(b) Fire, unless caused by the actual fault or privity of the carrier.
xxx xxx xxx
In this case, there was "actual fault" of the carrier shown by "lack of diligence" in that "when the smoke was
noticed, the fire was already big; that the fire must have started twenty-four (24) hours before the same was
noticed; " and that "after the cargoes were stored in the hatches, no regular inspection was made as to their
condition during the voyage." The foregoing suffices to show that the circumstances under which the fire
originated and spread are such as to show that Petitioner Carrier or its servants were negligent in connection
therewith. Consequently, the complete defense afforded by the COGSA when loss results from fire is unavailing
to Petitioner Carrier.

Article 1749 of the New Civil Code also allows the limitations of liability in this wise:
Art. 1749. A stipulation that the common carrier's liability as limited to the value of the goods appearing in the bill
of lading, unless the shipper or owner declares a greater value, is binding.
It is to be noted that the Civil Code does not of itself limit the liability of the common carrier to a fixed amount per
package although the Code expressly permits a stipulation limiting such liability. Thus, the COGSA which is
suppletory to the provisions of the Civil Code, steps in and supplements the Code by establishing a statutory
provision limiting the carrier's liability in the absence of a declaration of a higher value of the goods by the shipper
in the bill of lading. The provisions of the Carriage of Goods by.Sea Act on limited liability are as much a part of
a bill of lading as though physically in it and as much a part thereof as though placed therein by agreement of
the parties. 16

p) Sabena Belgian World Airlines

plaintiff was a passenger on board Flight SN 284 of defendant airline originating from Casablanca to Brussels,
Belgium on her way back to Manila. Plaintiff checked in her luggage which contained her valuables, She stayed
overnight in Brussels and her luggage was left on board Flight SN 284. The luggage was missing. She was
advised to accomplish and submit a property Irregularity Report which she submitted and filed on the same day.
She followed up her claim on September 14, 1987 but the luggage remained to be missing.

the Brussels Office of defendant found the luggage and that they have broken the locks for identification (Exhibit
B). Plaintiff was assured by the defendant that it has notified its Manila Office that the luggage will be shipped to
Manila on October 27, 1987. But unfortunately plaintiff was informed that the luggage was lost for the second
time. At the time of the filling of the complaint, the luggage with its content has not been found. Plaintiff demanded
from the defendant the money value of the luggage and its contents amounting to $4,265.00 or its exchange
value, but defendant refused to settle the claim.

Petitioner airline company, in contending that the alleged negligence of private respondent should be considered
the primary cause for the loss of her luggage, avers that, despite her awareness that the flight ticket had been
confirmed only for Casablanca and Brussels, and that her flight from Brussels to Manila had yet to be confirmed,
she did not retrieve the luggage upon arrival in Brussels. Petitioner insists that private respondent, being a
seasoned international traveler, must have likewise been familiar with the standard provisions contained in her
flight ticket that items of value are required to be hand-carried by the passenger and that the liability of the airline
or loss, delay or damage to baggage would be limited, in any event, to only US$20.00 per kilo unless a higher
value is declared in advance and corresponding additional charges are paid thereon.

HELD:
FAULT OR NEGLIGENCE consists in the omission of that diligence which is demanded by the nature of an
obligation and corresponds with the circumstances of the person, of the time, and of the place. When the source
of an obligation is derived from a contract, the mere breach or non-fulfillment of the prestation gives rise to the
presumption of fault on the part of the obligor. This rule is not different in the case of common carriers in the
carriage of goods which, indeed, are bound to observe not just the due diligence of a good father of a family but
that of extraordinary care in the vigilance over the goods.

21
 PROXIMATE CAUSE is that which, in natural and continuous sequence, unbroken by any efficient intervening
cause, produces injury and without which the result would not have occurred. It remained undisputed that private
respondents luggage was lost while it was in the custody of petitioner. It was supposed to arrive on the same
flight that private respondent took in returning to Manila on 02 September 1987. When she discovered that the
luggage was missing, she promptly accomplished and filed a Property Irregularity Report. She followed up her
claim on 14 September 1987, and filed, on the following day, a formal letter-complaint with petitioner. She felt
relieved when, on 23 October 1987, she was advised that her luggage had finally been found, with its contents
intact when examined, and that she could expect it to arrive on 27 October 1987. She then waited anxiously only
to be told later that her luggage had been lost for the second time. Thus, the appellate court, given all the facts
before it, sustained the trial court in finding petitioner ultimately guilty of gross negligence in the handling of
private respondents luggage. The loss of said baggage not only once by twice, said the appellate court,
underscores the wanton negligence and lack of care on the part of the carrier.

The above findings, which certainly cannot be said to be without basis, foreclose whatever rights petitioner might
have had to the possible limitation of liabilities enjoyed by international air carriers under the Warsaw Convention
(Convention for the Unification of Certain Rules Relating to International Carriage by Air, as amended by the
Hague Protocol of 1955, the Montreal Agreement of 1966, the Guatemala Protocol of 1971 and the Montreal
Protocols of 1975). In Alitalia vs. Intermediate Appellate Court,[8] now Chief Justice Andres R. Narvasa, speaking
for the Court, has explained it well; he said:

The WARSAW CONVENTION however denies to the carrier availment of the provisions which exclude or limit
his liability, if the damage is caused by his wilful misconduct or by such default on his part as, in accordance with
the law of the court seized of the case, is considered to be equivalent to wilful misconduct, or if the damage is
(similarly) caused x x x by any agent of the carrier acting within the scope of his employment. The Hague Protocol
amended the Warsaw Convention by removing the provision that if the airline took all necessary steps to avoid
the damage, it could exculpate itself completely, and declaring the stated limits of liability not applicable if it is
proved that the damage resulted from an act or omission of the carrier, its servants or agents, done with intent
to cause damage or recklessly and with knowledge that damage would probably result. The same deletion was
effected by the Montreal Agreement of 1966, with the result that a passenger could recover unlimited damages
upon proof of wilful misconduct.

The Convention does not thus operate as an exclusive enumeration of the instances of an airlines liability, or as
an absolute limit of the extent of that liability. Such a proposition is not borne out by the language of the
Convention, as this Court has now, and at an earlier time, pointed out. Moreover, slight reflection readily leads
to the conclusion that it should be deemed a limit of liability only in those cases where the cause of the death or
injury to person, or destruction, loss or damage to property or delay in its transport is not attributable to or
attended by any wilful misconduct, bad faith, recklessness or otherwise improper conduct on the part of any
official or employee for which the carrier is responsible, and there is otherwise no special or extraordinary form
of resulting injury. The Contentions provisions, in short, do not regulate or exclude liability for other breaches of
contract by the carrier or misconduct of its officers and employees, or for some particular or exceptional type of
damage. Otherwise, an air carrier would be exempt from any liability for damages in the event of its absolute
refusal, in bad faith, to comply with a contract of carriage, which is absurd. Nor may it for a moment be supposed
that if a member of the aircraft complement should inflict some physical injury on a passenger, or maliciously
destroy or damage the latters property, the Convention might successfully be pleaded as the sole gauge to
determine the carriers liability to the passenger. Neither may the Convention be invoked to justify the disregard
of some extraordinary sort of damage resulting to a passenger and preclude recovery therefor beyond the limits
set by said Convention. It is in this sense that the Convention has been applied, or ignored, depending on the
peculiar facts presented by each case.

The Court thus sees no error in the preponderant application to the instant case by the appellate court, as well
as by the trial court, of the usual rules on the extent of recoverable damages beyond the Warsaw
limitations. Under domestic law and jurisprudence (the Philippines being the country of destination), the
attendance of gross negligence (given the equivalent of fraud or bad faith) holds the common carrier liable for
all damages which can be reasonably attributed, although unforeseen, to the non-performance of the
obligation,[9]including moral and exemplary damages.[10]

22
 q) Abelardo Lim vs CA
When a passenger jeepney covered by a certificate of public convenience is sold to another who continues to
operate it under the same certificate of public convenience under the so-called kabit system, and in the course
thereof the vehicle meets an accident through the fault of another vehicle, may the new owner sue for damages
against the erring vehicle?Otherwise stated, does the new owner have any legal personality to bring the action,
or is he the real party in interest in the suit, despite the fact that he is not the registered owner under the certificate
of public convenience?

Donato Gonzales purchased an Isuzu passenger jeepney from Gomercino Vallarta, holder of a certificate of
public convenience for the operation of public utility vehicles. While Gonzales continued offering the jeepney for
public transport services he did not have the registration of the vehicle transferred in his name nor did he secure
for himself a certificate of public convenience for its operation. Thus Vallarta remained on record as its registered
owner and operator.

The jeepney collided with a ten wheeler truck owned by Lim and driven by Gunnaban.
Lim denied liability by contending that he exercised due diligence in theselection and supervision of his
employees. He further asserted that as the jeepney was registered in Vallartas name, it was Vallarta and not
private respondent who was the real party in interest. [1] For his part, petitioner Gunnaban averred that the
accident was a fortuitous event which was beyond his control.[

petitioner Lim's liability for Gunnaban's negligence was premised on his want of diligence in supervising his
employees. It was admitted during trial that Gunnaban doubled as mechanic of the ill-fated truck despite the fact
that he was neither tutored nor trained to handle such task.
titioners appealed to the Court of Appeals which, on 17 July 1996, affirmed the decision of the trial court. In
upholding the decision of the court a quo the appeals court concluded that while an operator under
the kabit system could not sue without joining the registered owner of the vehicle as his principal, equity
demanded that the present case be made an exception. Hence, petition.

RULING:
The KABIT SYSTEM is an arrangement whereby a person who has been granted a certificate of public
convenience allows other persons who own motor vehicles to operate them under his license, sometimes for a
fee or percentage of the earnings.[9] Although the parties to such an agreement are not outrightly penalized by
law, the kabit system is invariably recognized as being contrary to public policy and therefore void and inexistent
under Art. 1409 of the Civil Code.

ne of the primary factors considered in the granting of a certificate of public convenience for the business of
public transportation is the financial capacity of the holder of the license, so that liabilities arising from accidents
may be duly compensated. The kabit system renders illusory such purpose and, worse, may still be availed of
by the grantee to escape civil liability caused by a negligent use of a vehicle owned by another and operated
under his license. If a registered owner is allowed to escape liability by proving who the supposed owner of the
vehicle is, it would be easy for him to transfer the subject vehicle to another who possesses no
property with whichto respond financially for the damage done. Thus, for the safety of passengers and the public
who may have been wronged and deceived through the baneful kabit system, the registered owner of the vehicle
is not allowed to prove that another person has become the owner so that he may be thereby relieved of
responsibility. Subsequent cases affirm such basic doctrine.[11]

It would seem then that the thrust of the law in enjoining the kabit system is not so much as to penalize the
parties but to identify the person upon whom responsibility may be fixed in case of an accident with the end view
of protecting the riding public. The policy therefore loses its force if the public at large is not deceived, much less
involved.
In the present case it is at once apparent that the evil sought to be prevented in enjoining the kabit system does
not exist. First, neither of the parties to the pernicious kabit system is being held liable for damages. Second, 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 the passenger jeepney was made and to whom
no such representation, or misrepresentation, was necessary. Thus it cannot be said that private respondent
Gonzales and the registered owner of the jeepney were in estoppel for leading the public to believe that the
jeepney belonged to the registered owner. Third, the riding public was not bothered nor inconvenienced at the
very least by the illegal arrangement. On the contrary, it was private respondent himself who had been wronged
23
 and was seekingcompensation for the damage done to him. Certainly, it would be the height of inequity to deny
him his right.

r) Lita Enterprises vs IAC

spouses Nicasio M. Ocampo and Francisca Garcia, purchased in installment from the Delta Motor Sales five
(5) Toyota Corona Standard cars to be used as taxicabs. Since they had no franchise to operate taxicabs, they
contracted with petitioner Lita Enterprises, Inc., through its representative, Manuel Concordia, for the use of the
latter's certificate of public convenience. To effectuate Id agreement, the aforesaid cars were registered in the
name of petitioner Lita Enterprises, Inc, Possession, however, remained with tile spouses Ocampo who operated
and maintained the same under the name Acme Taxi, petitioner's trade name.

About a year later, one of said taxicabs driven by their employee, Martin, collided with a motorcycle whose driver,
one Galvez, died from the head injuries sustained therefrom. A criminal case was eventually filed against the
driver Martin, while a civil case for damages was instituted by Vda. de Galvez, heir of the victim, against Lita
Enterprises, Inc., as registered owner of the taxicab in the latter case, Civil Case No. 72067 of the Court of First
Instance of Manila, petitioner Lita Enterprises, Inc. was adjudged liable for damages

HELD:
Unquestionably, the parties herein operated under an arrangement, comonly known as the "kabit system",
whereby a person who has been granted a certificate of convenience allows another person who owns motors
vehicles to operate under such franchise for a fee. A certificate of public convenience is a special privilege
conferred by the government . Abuse of this privilege by the grantees thereof cannot be countenanced. The
"kabit system" has been Identified as one of the root causes of the prevalence of graft and corruption in the
government transportation offices. J. Makalintal once said that this is a pernicious system that cannot be too
severely condemned. It constitutes an imposition upon the goo faith of the government.

Although not outrightly penalized as a criminal offense, the "kabit system" is invariably recognized as being
contrary to public policy and, therefore, void and inexistent under Article 1409 of the Civil Code, It is a
fundamental principle that the court will not aid either party to enforce an illegal contract, but will leave them both
where it finds them. Upon this premise, it was flagrant error on the part of both the trial and appellate courts to
have accorded the parties relief from their predicament.

The proposition is universal that no action arises, in equity or at law, from an illegal contract; no suit can be
maintained for its specific performance, or to recover the property agreed to be sold or delivered, or damages
for its property agreed to be sold or delivered, or damages for its violation. The rule has sometimes been laid
down as though it was equally universal, that where the parties are in pari delicto, no affirmative relief of any
kind will be given to one against the other." 3 Although certain exceptions to the rule are provided by law, We
see no cogent reason why the full force of the rule should not be applied in the instant case.

s) Villanueva vs Domingo
Domingo is the registered owner of a silver Mitsubishi Lancer Car with [co-respondent] Leandro Luis R. Domingo
as authorized driver. [Petitioner] Nostradamus Villanueva was then the registered owner of a green Mitsubishi
Lancer bearing Plate No. PHK 201 91.

When both cars got involved into a multiple collision incident, Villanueva claimed that he was no longer the owner
of the car at the time of the mishap because it swapped with a Pajero owned by Jaucian/Auto Palace Car
Exchange. For her part, Linda Gonzales declared that her presence at the scene of the accident was upon the
request of the actual owner of the Mitsubishi Lancer (PHK 201 91) [Albert Jaucian] for whom she had been
working as agent/seller. On the other hand, Auto Palace Car Exchange represented by Albert Jaucian claimed
that he was not the registered owner of the car. Moreover, it could not be held subsidiary liable as employer of
Ocfemia because the latter was off-duty as utility employee at the time of the incident. Neither was Ocfemia
performing a duty related to his employment.[

MAY THE REGISTERED OWNER OF A MOTOR VEHICLE BE HELD LIABLE FOR DAMAGES ARISING
FROM A VEHICULAR ACCIDENT INVOLVING HIS MOTOR VEHICLE WHILE BEING OPERATED BY THE
EMPLOYEE OF ITS BUYER WITHOUT THE LATTERS CONSENT AND KNOWLEDGE? YES

24
 he registered owner of any vehicle is directly and primarily responsible to the public and third persons while it
is being operated.[6] The rationale behind such doctrine was explained way back in 1957 in Erezo vs. Jepte[7]:

The principle upon which this doctrine is based is that in dealing with vehicles registered under the Public Service
Law, the public has the right to assume or presume that the registered owner is the actual owner thereof, for it
would be difficult for the public to enforce the actions that they may have for injuries caused to them by the
vehicles being negligently operated if the public should be required to prove who the actual owner is. How would
the public or third persons know against whom to enforce their rights in case of subsequent transfers of the
vehicles? We do not imply by his doctrine, however, that the registered owner may not recover whatever amount
he had paid by virtue of his liability to third persons from the person to whom he had actually sold, assigned or
conveyed the vehicle.

Under the same principle the registered owner of any vehicle, even if not used for a public service, should
primarily be responsible to the public or to third persons for injuries caused the latter while the vehicle is being
driven on the highways or streets. The members of the Court are in agreement that the defendant-appellant
should be held liable to plaintiff-appellee for the injuries occasioned to the latter because of the negligence of
the driver, even if the defendant-appellant was no longer the owner of the vehicle at the time of the damage
because he had previously sold it to another. What is the legal basis for his (defendant-appellants) liability?

There is a presumption that the owner of the guilty vehicle is the defendant-appellant as he is the registered
owner in the Motor Vehicles Office. Should he not be allowed to prove the truth, that he had sold it to another
and thus shift the responsibility for the injury to the real and actual owner? The defendant holds the affirmative
of this proposition; the trial court held the negative.
The Revised Motor Vehicle Law (Act No. 3992, as amended) provides that no vehicle may be used or operated
upon any public highway unless the same is property registered. It has been stated that the system of licensing
and the requirement that each machine must carry a registration number, conspicuously displayed, is one of the
precautions taken to reduce the danger of injury to pedestrians and other travelers from the careless
management of automobiles. And to furnish a means of ascertaining the identity of persons violating the laws
and ordinances, regulating the speed and operation of machines upon the highways (2 R.C.L. 1176). Not only
are vehicles to be registered and that no motor vehicles are to be used or operated without being properly
registered for the current year, but that dealers in motor vehicles shall furnish thee Motor Vehicles Office a report
showing the name and address of each purchaser of motor vehicle during the previous month and the
manufacturers serial number and motor number. (Section 5(c), Act No. 3992, as amended.)

Registration is required not to make said registration the operative act by which ownership in vehicles is
transferred, as in land registration cases, because the administrative proceeding of registration does not bear
any essential relation to the contract of sale between the parties (Chinchilla vs. Rafael and Verdaguer, 39 Phil.
888), but to permit the use and operation of the vehicle upon any public highway (section 5 [a], Act No. 3992, as
amended). The main aim of motor vehicle registration is to identify the owner so that if any accident happens, or
that any damage or injury is caused by the vehicle on the public highways, responsibility therefore can be fixed
on a definite individual, the registered owner. Instances are numerous where vehicles running on public
highways caused accidents or injuries to pedestrians or other vehicles without positive identification of the owner
or drivers, or with very scant means of identification. It is to forestall these circumstances, so inconvenient or
prejudicial to the public, that the motor vehicle registration is primarily ordained, in the interest of the
determination of persons responsible for damages or injuries caused on public highways:
One of the principal purposes of motor vehicles legislation is identification of the vehicle and of the operator,
in case of accident; and another is that the knowledge that means of detection are always available may
act as a deterrent from lax observance of the law and of the rules of conservative and safe operation.
Whatever purpose there may be in these statutes, it is subordinate at the last to the primary purpose of
rendering it certain that the violator of the law or of the rules of safety shall not escape because of lack of
means to discover him. The purpose of the statute is thwarted, and the displayed number becomes a share
and delusion, if courts would entertain such defenses as that put forward by appellee in this case. No
responsible person or corporation could be held liable for the most outrageous acts of negligence, if they
should be allowed to pace a middleman between them and the public, and escape liability by the manner
in which they recompense servants. (King vs. Brenham Automobile Co., Inc. 145 S.W. 278, 279.)

25
 With the above policy in mind, the question that defendant-appellant poses is: should not the registered owner
be allowed at the trial to prove who the actual and real owner is, and in accordance with such proof escape or
evade responsibility by and lay the same on the person actually owning the vehicle? We hold with the trial court
that the law does not allow him to do so; the law, with its aim and policy in mind, does not relieve him directly of
the responsibility that the law fixes and places upon him as an incident or consequence of registration. Were a
registered owner allowed to evade responsibility by proving who the supposed transferee or owner is, it would
be easy for him, by collusion with others or otherwise, to escape said responsibility and transfer the same to an
indefinite person, or to one who possesses no property with which to respond financially for the damage or injury
done. A victim of recklessness on the public highways is usually without means to discover or identify the person
actually causing the injury or damage. He has no means other than by a recourse to the registration in the Motor
Vehicles Office to determine who is the owner. The protection that the law aims to extend to him would become
illusory were the registered owner given the opportunity to escape liability by disproving his ownership. If the
policy of the law is to be enforced and carried out, the registered owner should not be allowed to prove the
contrary to the prejudice of the person injured, that is, to prove that a third person or another has become the
owner, so that he may thereby be relieved of the responsibility to the injured person.

The main purpose of vehicle registration is the easy identification of the owner who can be held responsible for
any accident, damage or injury caused by the vehicle. Easy identification prevents inconvenience and prejudice
to a third party injured by one who is unknown or unidentified. To allow a registered owner to escape liability by
claiming that the driver was not authorized by the new (actual) owner results in the public detriment the law
seeks to avoid.
Finally, the issue of whether or not the driver of the vehicle during the accident was authorized is not at all
relevant to determining the liability of the registered owner. This must be so if we are to comply with the
rationale and principle behind the registration requirement under the motor vehicle law

t) Equitable Leasing Corp vs Suyom

In an action based on quasi delict, the registered owner of a motor vehicle is solidarily liable for the injuries and
damages caused by the negligence of the driver, in spite of the fact that the vehicle may have already been the
subject of an unregistered Deed of Sale in favor of another person. Unless registered with the Land
Transportation Office, the sale -- while valid and binding between the parties -- does not affect third parties,
especially the victims of accidents involving the said transport equipment. Thus, in the present case, petitioner,
which is the registered owner, is liable for the acts of the driver employed by its former lessee who has become
the owner of that vehicle by virtue of an unregistered Deed of Sale.

Fuso Road Tractor driven by Raul Tutor rammed into the house cumstore of Myrna Tamayo. It caused death
and injuries to the Tamayos. Tutor was accordingly charged. However, Petitioner contends that it should not be
held liable for the damages sustained by respondents and that arose from the negligence of the driver of the
Fuso Road Tractor, which it had already sold to Ecatine at the time of the accident. Not having employed Raul
Tutor, the driver of the vehicle, it could not have controlled or supervised him.

Is petitioner liable for damages suffered by private respondents in an action based on quasi delict for
the negligent acts of a driver who [was] not the employee of the petitioner? YES

HELD: In negligence cases, the aggrieved party may sue the negligent party under (1) Article 100[19] of the
Revised Penal Code, for civil liability ex delicto; or (2) under Article 2176[20] of the Civil Code, for civil liability ex
quasi delicto. An action predicated on quasi delict may be instituted against the employer for an employees act
or omission.

The liability for the negligent conduct of the subordinate is direct and primary, but is subject to the defense of
due diligence in the selection and supervision of the employee. The enforcement of the judgment against the
employer for an action based on Article 2176 does not require the employee to be insolvent, since the liability of
the former is solidary -- the latter being statutorily considered a joint tortfeasor.[26] To sustain a claim based on
quasi delict, the following requisites must be proven:
(c) damage suffered by the plaintiff,
(d) fault or negligence of the defendant, and

26
 (e) connection of cause and effect between the fault or negligence of the defendant and the damage incurred
by the plaintiff.

These two causes of action (ex delicto or ex quasi delicto) may be availed of, subject to the caveat[28] that the
offended party cannot recover damages twice for the same act or omission or under both causes.[29] Since these
two civil liabilities are distinct and independent of each other, the failure to recover in one will not necessarily
preclude recovery in the other.[30] In the instant case, respondents -- having failed to recover anything in the
criminal case -- elected to file a separate civil action for damages, based on quasi delict under Article 2176 of
the Civil Code.[31] The evidence is clear that the deaths and the injuries suffered by respondents and their kins
were due to the fault of the driver of the Fuso tractor.

LIABLE FOR THE DEATHS AND THE INJURIES complained of, because it was the registered owner of the
tractor at the time of the accident on July 17, 1994.[38] The Court has consistently ruled that, regardless of sales
made of a motor vehicle, the 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.[39] 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.[40] The same principle applies even if the registered owner of any vehicle
does not use it for public service.[41]
Since Equitable remained the registered owner of the tractor, it could not escape primary liability for the deaths
and the injuries arising from the negligence of the driver.[42]

VI. Vigilance over the goods Article; Presumption of Negligence; Defense Available Diligence in Selection
of Employees; Articles 1734, 35, 56, 42, 43
a) Victory Liner vs Gammad
on March 14, 1996, his wife Marie Grace Pagulayan-Gammad, 3 was on board an air-conditioned Victory
Liner bus bound for Tuguegarao, Cagayan from Manila. At about 3:00 a.m., the bus while running at a
high speed fell on a ravine somewhere in Barangay Baliling, Sta. Fe, Nueva Vizcaya, which resulted in
the death of Marie Grace and physical injuries to other passengers

o (2) whether petitioner should be held liable for breach of contract of carriage; yes

PETITIONER WAS CORRECTLY FOUND LIABLE FOR BREACH OF CONTRACT OF CARRIAGE. A

common carrier is bound to carry its passengers safely as far as human care and foresight can provide,
using the utmost diligence of very cautious persons, with due regard to all the circumstances. In a
contract of carriage, it is presumed that the common carrier was at fault or was negligent when a
passenger dies or is injured. Unless the presumption is rebutted, the court need not even make an
express finding of fault or
negligence on the part of the common carrier. This statutory presumption may only be overcome by
evidence that the carrier exercised extraordinary diligence. In the instant case, there is no evidence to
rebut the statutory presumption that the proximate cause of Marie Graces death was the negligence of
petitioner. Hence, the courts below correctly ruled that petitioner was guilty of breach of contract of
carriage.

b) Lea Mer Industries vs Malayan Ins

common carriers are bound to observe extraordinary diligence in their vigilance over the goods entrusted
to them, as required by the nature of their business and for reasons of public policy. Consequently, the law
presumes that common carriers are at fault or negligent for any loss or damage to the goods that they
transport. In the present case, the evidence submitted by petitioner to overcome this presumption was
sorely insufficient.

Ilian Silica Mining entered into a contract of carriage with Lea Mer Industries, Inc., for the shipment of 900
metric tons of silica sand valued at P565,000.[5] Consigned to Vulcan Industrial and Mining Corporation, the
cargo was to be transported from Palawan to Manila. On October 25, 1991, the silica sand was placed on
board Judy VII, a barge leased by Lea Mer.[6] During the voyage, the vessel sank, resulting in the loss of
the cargo.[7]

27
 Malayan Insurance Co., Inc., as insurer, paid Vulcan the value of the lost cargo. [8] To recover the amount
paid and in the exercise of its right of subrogation, Malayan demanded reimbursement from Lea Mer, which
refused to comply.

TC dismissed the complaint due to fortuitous event. It noted that the vessel sunk due to bad weather
condition due to Typhoon Trining. The court ruled that petitioner had no advance knowledge of the incoming
typhoon, and that the vessel had been cleared by the Philippine Coast Guard to travel from Palawan to
Manila

whether petitioner is liable for the loss of the cargo,

whether the survey report of Jesus Cortez is admissible in evidence.

HELD:
Liability for loss of Cargo
The resolution of the present case hinges on whether the loss of the cargo was due to a fortuitous event.
This issue involves primarily a question of fact, notwithstanding petitioners claim that it pertains only to a
question of law.

Rule on Common Carriers

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 -- when this service is offered to the
public for compensation.[17] Petitioner is clearly a common carrier, because it offers to the public its business
of transporting goods through its vessels.[18]

Thus, the Court corrects the trial courts finding that petitioner became a private carrier when Vulcan
chartered it.[19] Charter parties are classified as contracts of demise (or bareboat) and affreightment, which
are distinguished as follows:

Under the demise or bareboat charter of the vessel,

the charterer will generally be considered as owner for the voyage or service stipulated.
The charterer mans the vessel with his own people and becomes, in effect, the owner pro hac
vice, subject to liability to others for damages caused by negligence.
To create a demise, the owner of a vessel must completely and exclusively relinquish possession,
command and navigation thereof to the charterer; anything short of such a complete transfer is a
contract of affreightment (time or voyage charter party) or not a charter party at all.[20]
The distinction is significant, because a demise or bareboat charter indicates a business undertaking
that is private in character. [21]
Consequently, the rights and obligations of the parties to a contract of private carriage are governed
principally by their stipulations, not by the law on common carriers. [22]

AFFREIGHTMENT, as shown by the fact that it was petitioners crew that manned the tugboat M/V
Ayalit and controlled the barge Judy VII.[23]Necessarily, petitioner was a common carrier, and the pertinent
law governs the present factual circumstances.

EXTRAORDINARY DILIGENCE REQUIRED

Common carriers are bound to observe extraordinary diligence in their vigilance over the goods and the
safety of the passengers they transport, as required by the nature of their business and for reasons of public
policy.[24] Extraordinary diligence requires rendering service with the greatest skill and foresight to avoid
damage and destruction to the goods entrusted for carriage and delivery.[25]

Common carriers are presumed to have been at fault or to have acted negligently for loss or damage to the
goods that they have transported.[26] This presumption can be rebutted only by proof that they observed
extraordinary diligence, or that the loss or damage was occasioned by any of the following causes: [27]
1. Flood, storm, earthquake, lightning, or other natural disaster or calamity;
2. Act of the public enemy in war, whether international or civil;
3. Act or omission of the shipper or 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.[28]

28
 Rule on Fortuitous Events
Article 1174 of the Civil Code provides that no person shall be responsible for a fortuitous event which
could not be foreseen, or which, though foreseen, was inevitable. Thus, if the loss or damage was due to
such an event, a common carrier is exempted from liability.
Jurisprudence defines the elements of a fortuitous event as follows:
1. the cause of the unforeseen and unexpected occurrence, or the failure of the debtors to comply with
their obligations, must have been independent of human will;
2. the event that constituted the caso fortuito must have been impossible to foresee or, if foreseeable,
impossible to avoid;
3. the occurrence must have been such as to render it impossible for the debtors to fulfill their obligation
in a normal manner; and (d) the obligor must have been free from any participation in the aggravation
of the resulting injury to the creditor.[29]

To excuse the common carrier fully of any liability, the fortuitous event must have been the proximate and
only cause of the loss.[30] Moreover, it should have exercised due diligence to prevent or minimize the loss
before, during and after the occurrence of the fortuitous event.

The evidence presented by petitioner in support of its defense of fortuitous event was sorely insufficient.
As required by the pertinent law, it was not enough for the common carrier to show that there was an
unforeseen or unexpected occurrence. It had to show that it was free from any fault -- a fact it miserably
failed to prove.

petitioner presented no evidence that it had attempted to minimize or prevent the loss before, during
or after the alleged fortuitous event.
, the alleged fortuitous event was not the sole and proximate cause of the loss. There is a
preponderance of evidence that the barge was not seaworthy when it sailed for Manila. n the hull of
the barge, there were holes that might have caused or aggravated the sinking.
petitioner offered no evidence to rebut the existence of the holes.
The submission of the Philippine Coast Guards Certificate of Inspection of Judy VII, dated July 31,
1991, did not conclusively prove that the barge was seaworthy.[42] The regularity of the issuance of
the Certificate is disputably presumed.[43] It could be contradicted by competent evidence, which
respondent offered. Moreover, this evidence did not necessarily take into account the actual condition
of the vessel at the time of the commencement of the voyage

c) Fabre vs CA
At 11:30 that night, petitioner Cabil came upon a sharp curve on the highway, running on a south to east
direction, which he described as siete. 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. Several
passengers were injured. Private respondent Amyline Antonio was thrown on the floor of the bus and pinned
down by a wooden seat which came off after being unscrewed. It took three persons to safely remove her
from this position. She was in great pain and could not move.

The driver, petitioner Cabil, claimed he did not see the curve until it was too late. He said he was not familiar
with the area and he could not have seen the curve despite the care he took in driving the bus, because it
was dark and there was no sign on the road. He said that he saw the curve when he was already within 15
to 30 meters of it. He allegedly slow Amyline Antonio, who was seriously injured, brought this case in the
RTC of Makati, Metro Manila. As a result of the accident, she is now suffering from paraplegia and is
permanently paralyzed from the waist downed down to 30 kilometers per hour, but it was too late.

Whether or not petitioners were liable for the injuries suffered by private respondents.

First, it is unnecessary for our purpose to determine whether to decide this case on the theory that
petitioners are liable for breach of contract of carriage or culpa contractual or on the theory of quasi delict
or culpa aquilianaas both the Regional Trial Court and the Court of Appeals held, for although the relation
of passenger and carrier is contractual both in origin and nature, nevertheless the act that breaks the
contract may be also a tort.[2] In either case, the question is whether the bus driver, petitioner Porfirio Cabil,
was negligent.
29
 The finding that Cabil drove his bus negligently, while his employer, the Fabres, who owned the bus, failed
to exercise the diligence of a good father of the family in the selection and supervision of their employee is
fully supported by the evidence on record. These factual findings of the two courts we regard as final and
conclusive, supported as they are by the evidence. Indeed, it was admitted by Cabil that on the night in
question, it was raining, and, as a consequence, the road was slippery, and it was dark. He averred these
facts to justify his failure to see that there lay a sharp curve ahead. However, it is undisputed that Cabil
drove his bus at the speed of 50 kilometers per hour and only slowed down when he noticed the curve
some 15 to 30 meters ahead.[3] By then it was too late for him to avoid falling off the road. Given the
conditions of the road and considering that the trip was Cabils first one outside of Manila, Cabil should have
driven his vehicle at a moderate speed. There is testimony[4]that the vehicles passing on that portion of the
road should only be running 20 kilometers per hour, so that at 50 kilometers per hour, Cabil was running at
a very high speed.

Considering the foregoing the fact that it was raining and the road was slippery, that it was dark, that he
drove his bus at 50 kilometers an hour when even on a good day the normal speed was only 20 kilometers
an hour, and that he was unfamiliar with the terrain, Cabil was grossly negligent and should be held liable
for the injuries suffered by private respondent Amyline Antonio.

In the case at bar, the Fabres, in allowing Cabil to drive the bus to La Union, apparently did not consider
the fact that Cabil had been driving for school children only, from their homes to the St. Scholasticas College
in Metro Manila.[7] They had hired him only after a two-week apprenticeship. They had tested him for certain
matters, such as whether he could remember the names of the children he would be taking to school, which
were irrelevant to his qualification to drive on a long distance travel, especially considering that the trip to
La Union was his first. The existence of hiring procedures and supervisory policies cannot be casually
invoked to overturn the presumption of negligence on the part of an employer

Petitioners argue that they are not liable because (1) an earlier departure (made impossible by the
congregations delayed meeting) could have averted the mishap and (2) under the contract, the WWCF was
directly responsible for the conduct of the trip. Neither of these contentions hold water. The hour of
departure had not been fixed. Even if it had been, the delay did not bear directly on the cause of the
accident. With respect to the second contention, it was held in an early case that:
[A] person who hires a public automobile and gives the driver directions as to the place to which he wishes
to be conveyed, but exercises no other control over the conduct of the driver, is not responsible for acts of
negligence of the latter or prevented from recovering for injuries suffered from a collision between the
automobile and a train, caused by the negligence either of the locomotive engineer or the automobile
driver.[9]
As already stated, 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 common carriers, the Fabres were bound to exercise extraordinary diligence for the safe transportation
of the passengers to their destination. This duty of care is not excused by proof that they exercised the
diligence of a good father of the family in the selection and supervision of their employee. As Art. 1759 of
the Code provides:
Common carriers are liable for the death of or injuries to passengers through the negligence or wilful acts
of the formers employees, although such employees may have acted beyond the scope of their authority
or in violation of the orders of the common carriers.
This liability of the common carriers does not cease upon proof that they exercised all the diligence of a
good father of a family in the selection and supervision of their employees.

The same circumstances detailed above, supporting the finding of the trial court and of the appellate court
that petitioners are liable under Arts. 2176 and 2180 for quasi delict, fully justify finding them guilty of breach
of contract of carriage under Arts. 1733, 1755 and 1759 of the Civil Code.

JOINT AND SEVERAL LIABILITY OF DRIVER AND OPERATOR. As in the case of BLTB, private
respondents in this case and her co-plaintiffs did not stake out their claim against the carrier and the driver
exclusively on one theory, much less on that of breach of contract alone. After all, it was permitted for them
to allege alternative causes of action and join as many parties as may be liable on such causes of action[23]
so long as private respondent and her co-plaintiffs do not recover twice for the same injury. What is clear
30
 from the cases is the intent of the plaintiff there to recover from both the carrier and the driver, thus justifying
the holding that the carrier and the driver were jointly and severally liable because their separate and distinct
acts concurred to produce the same injury.

d) Philippine American Gen Insurance vs CA

Facts: San Miguel Corp. insured several beer bottle cases with petitioner Phil. Am. General Insurance Co.
The cargo was loaded unto a vessel owned by Gaerlan with MCG Marine Services as agent. The vessel
left the port of Mandaue City under calm weather. The next day, the vessel sunk and the cargo belonging
to SMC was lost. SMC claimed the amount of its loss from petitioner. Petitioner paid SMC Php 5.8M
pursuant to the terms of their insurance contract. Now, petitioner as subrogee of SMC filed a collection
case against respondents. Respondents contented that they could not be held liable for the loss of SMCs
cargo because said loss occurred as a consequence of a fortuitous event, and that such fortuitous event
was the proximate and only cause of the loss.

Issue: WON respondents can be held liable for the loss of SMCs cargo? NO.
Ruling: Common carriers, from the nature of their business and for the reasons of public policy, are
mandated to observe extraordinary diligence in the vigilance of their goods and for the safety of the
passengers transported by them. As a general rule, common carries are presumed to have been at fault or
negligent if the goods transported by them are lost, destroyed or if the same deteriorated. However, this
presumption of fault or negligence does not arise in the cases enumerated under Art. 1734 CC: Common
carriers are responsible for the loss, destruction, or deterioration of the goods, UNLESS the same is due to
any of the ff. causes only:
(1) Flood, storm, earthquake, lightning or other natural disaster or calamity;
X X X

In order that a common carrier may be absolved from liability where the loss, destruction or deterioration of
the goods is due to a natural disaster or calamity was the proximate and only cause of the loss; there must
be an entire exclusion of human agency from the cause of the injury or the loss.

Even under this case, a common carrier is still required to exercise due diligence to prevent or minimize
loss before, during, and after the occurrence of the natural disaster, for it to be exempt from liability under
the law for the loss of the goods. If a common carrier fails to exercise due diligence to preserve and protect
the goods carried by it on the occasion of a natural disaster, it will be deemed to have been negligent, and
the loss will not be considered as having been due to a natural disaster under Art. 1734 (1).

In the case at bar, the vessel encountered strong winds and huge waves ranging from 6 to 10 feet in
height. It was indeed a fortuitous event. A fortuitous event has been defined as one which could not be
foreseen or which though foreseen, is inevitable. An event is considered fortuitous if the following elements
concur: (a) the cause must be independent of human will; (b) it must be impossible to foresee the event, or
if it can be foreseen, it must be impossible to avoid; (c) the occurrence must be such as to render it
impossible for the debtor to fulfill his obligation in a normal manner; and (d) the obligor must be free from
any participation in the aggravation of the injury resulting to the creditor.

The weather conditions would permit the safe travel of the vessel. The captain could not be expected to
have foreseen the unfavorable weather condition that awaited enormous waves, which caused the vessel
to sink. There was no negligence on the part of the crew of the vessel. Since the presence of strong winds
and enormous waves was shown to be the proximate and only cause of the sinking of the vessel and the
loss of the cargo belonging to SMC, private respondents cannot be held liable for the said loss.

e) Sarkies Tours vs CA
FACTS
On August 31, 1984, Fatima boarded petitioners De Luxe Bus No. 5 in Manila on her way to Legazpi City.
Her brother helped her load three pieces of luggage containing all of her optometry review books, materials
and equipment, trial lenses, trial contact lenses, passport and visa, as well as her mothers U.S. immigration
(green) card, among other things. Her belongings were kept in the baggage compartment of the bus, but
at the stopover she discovered that all but one bag remained in the open compartment. Some passengers
suggested retracing the route to try to recover the lost items, but the driver ignored them and proceeded to
Legazpi City.
Fatima immediately reported the loss to her mother who, in turn, went to Sarkies Tours office in Legazpi
City and later at its head office in Manila. The latter merely offered her P1,000.00 for each piece of luggage
31
 lost, which she turned down. After returning to Bicol, they asked assistance from the radio stations and
even from Philtranco bus drivers who plied the same route on August 31st. The effort paid off when one of
Fatimas bags was recovered. Marisol also reported the incident to the NBI in Legazpi City, and to the local
police.

On September 20, 1984, Fatima et al, formally demanded satisfaction of their complaint from Sarkies. In a
letter dated October 1, 1984, the latter apologized for the delay and said that (a) team has been sent out to
Bicol for the purpose of recovering or at least getting the full detail of the incident.

After more than nine months of waiting, Fatima et al decided to file the case to recover the value of the
remaining lost items, as well as moral and exemplary damages, attorneys fees and expenses of litigation.
They claimed that the loss was due to petitioners failure to observe extraordinary diligence in the care of
Fatimas luggage and that petitioner dealt with them in bad faith from the start. Petitioner, on the other hand,
disowned any liability for the loss on the ground that Fatima allegedly did not declare any excess baggage
upon boarding its bus. RTC ruled in favor of Fatima et al. Upon appeal to CA, affirmed but award for moral
and exemplary damages was deleted. Sarkies filed MR but was denied by CA.

ISSUE: W/N Sarkies, as a common carrier, can be held liable for the loss?

RULING: Yes.
[Sarkies claim that Fatima did not bring any luggage with her and that she did not declare such. However,
records and testimonial evidence show otherwise. ]
Under the Civil Code, (c)ommon carriers, from the nature of their business and for reasons of public policy,
are bound to observe extraordinary diligence in the vigilance over the goods x x x transported by them, and
this liability lasts from the time the goods are unconditionally placed in the possession of, and received by
the carrier for transportation until the same are delivered, actually or constructively, by the carrier for
transportation until the same are delivered, actually or constructively, by the carrier to x x x the person who
has a right to receive them, unless the loss is due to any of the excepted causes under Article 1734 thereof.

The cause of the loss in the case at bar was petitioners negligence in not ensuring that the doors of the
baggage compartment of its bus were securely fastened. As a result of this lack of care, almost all of the
luggage was lost, to the prejudice of the paying passengers.
Where the common carrier accepted its passengers baggage for transportation and even had it placed in
the vehicle by its own employee, its failure to collect the freight charge is the common carriers own lookout.
It is responsible for the consequent loss of the baggage. In the instant case, Sarkies employee even helped
Fatima and her brother load the luggage in the bus baggage compartment, without asking that they be
weighed, declared, receipted or paid for.

f) Davao Stevedore Terminal vs Fernandez

g) Southern Lines vs CA
FACTS:
The City of Iloilo requisitioned for rice from the National Rice and Corn Corporation (NARIC) in Manila.
NARIC, pursuant to the order, shipped 1,726 sacks of rice consigned to the City of Iloilo on board the SS
"General Wright" belonging to the Southern Lines. Each sack of rice weighed 75 kilos and the entire
shipment as indicated in the bill of lading had a total weight of 129,450 kilos. According to the bill of lading,
the cost of the shipment was P63, 115.50. The City of Iloilo received the shipment and paid the amount.
However, it was noted that the foot of the bill of lading that the City of Iloilo 'Received the above mentioned
merchandise apparently in same condition as when shipped having received 1685 sacks with a gross
weight of 116,131 kilos upon actual weighing. Total shortage ascertained 13,319 kilos equivalent to 41
sacks of rice. The City of Iloilo filed a complaint in the Court of First Instance of Iloilo against NARIC and
the Southern Lines, Inc. for the recovery of the amount of P6,486.35 representing the value of the shortage
of the shipment of rice.

ISSUE: -
Whether or not Southern Lines is liable for the loss or shortage of the rice shipped. YES
-Whether the City of Iloilo is precluded from filing an action for damages on account of its failure to
present a claim within 24 hours from receipt of the shipment as stated in the bill of lading.NO

RULING: Under the provisions of Article 361, the defendant-carrier in order to free itself from liability, was
only obliged to prove that the damages suffered by the goods were "by virtue of the nature or defect of the
32
 articles (shipper shall then bear the loss)." Under the provisions of Article 362, the plaintiff, in order to hold
the defendant liable, was obliged to prove that the damages to the goods by virtue of their nature, occurred
on account of its negligence or because the defendant did not take the precaution adopted by careful
persons.

Petitioner claims exemption from liability by contending that the shortage in the shipment of rice was due
to such factors as the shrinkage, leakage or spillage of the rice due to bad condition of the sacks at the time
it received was received and the negligence of the agents of respondent City of Iloilo in receiving the
shipment. The contention is untenable since if the improper packing is known to the carrier or his servants,
but it accepts the goods notwithstanding such condition, it is not relieved of liability for loss or injury resulting
therefrom. Furthermore, petitioner itself frankly admitted that the strings that tied the bags of rice were
broken; some bags were with holes and plenty of rice was spilled inside the hull of the boat, and that the
personnel of the boat collected no less than 26 sacks of rice which they had distributed among themselves."
This finding, which is binding upon this Court, shows that the shortage resulted from the negligence of
petitioner. Invoking the provisions of Article 366 of the Code of Commerce, those of the bill of lading and
jurisprudences, Petitioner further contends that respondent is precluded from filing an action for damages
on account of its failure to present a claim within 24 hours from receipt of the shipment.

The court noted that Southern Lines failed to plead this defense in its answer to City of Iloilos complaint
and, therefore, the same is deemed waived and cannot be raised for the first time. The court also cited the
finding of the CA that City of Iloilo filed the action within a reasonable time; that the action is one for the
refund of the amount paid in excess, and not for damages or the recovery of shortage; the bill of lading
does not at all limit the time for the filing of action for the refund of money paid in excess.

Petitioner herein is therefore found to pay the amount of P4,931.41 which is the difference between the
sum of P6,486.35 and P1,554.94 representing the latter's counterclaim for handling and freight.

h) Eastern Shipping vs EAC

(G.R. No. L-69044): a vessel operated by petitioner Eastern Shipping Lines, Inc., loaded at Kobe, Japan
for transportation to Manila, 5000 pieces of calorized lance pipes in 28packages consigned to Philippine
Blooming Mills Co., Inc., and 7 cases of spare parts consigned to Central Textile Mills, Inc.; both sets of
goods were insured with Development Insurance and Surety Corp.
(G.R. No. 71478): the same vessel took on board 128 cartons of garment fabrics and accessories, in 2
containers, consigned to Mariveles Apparel Corporation, and two cases of surveying instruments consigned
to Aman Enterprises and General Merchandise
The vessel caught fire and sank, resulting in the total loss of ship and cargo.
ISSUES:
1. Which law should govern the Civil Code provisions on Common carriers or the Carriage of Goods
by Sea Act?;
2. Who has the burden of proof to show negligence of the carrier?
3. What is the extent of the carriers liability?

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. As the cargoes were transported from Japan
to the Philippines, the liability of Petitioner Carrier is governed primarily by the Civil Code. However, in
all matters not regulated by said Code, the rights and obligations of common carrier shall be governed
by the Code of Commerce and by special laws. Thus, the Carriage of Goods by Sea Act, a special law,
is suppletory to the provisions of the Civil Code.
2. Article 1735 of the Civil Code provides that all cases than those mention in Article 1734, the common
carrier shall be presumed to have been at fault or to have acted negligently, unless it proves that it has
observed the extraordinary diligence required by law. The burden is upon Eastern Shipping Lines to
prove that it has exercised the extraordinary diligence required by law.
1. Note: fire not considered a natural disaster or calamity within the contemplation of Art.1734 for it
arises almost invariably from some act of man or by human means; it does not fall within the
category of an act of God unless caused by lightning or by other natural disaster or calamity
2. Having failed to discharge the burden of proving that it had exercised the extraordinary diligence
required by law, Eastern Shipping Lines cannot escape liability for the loss of the cargo.

33
 3. As it was at fault, it cannot seek the protective mantle of Sec. 4(2) of Carriage of Goods by Sea Act
which provides: Neither the carrier nor the ship shall be responsible for loss or damage arising or
resulting from x x x (b) Fire, unless caused by the actual fault or privity of the carrier.
4. There was actual fault of the carrier shown by lack of diligence in that when the smoke was noticed,
the fire was already big; that the fire must have started 24 hours before the same was noticed; and
that after the cargoes were stored in the hatches, no regular inspection was made as to their
condition during the voyage.
3. See Art. 1749.G.R. No. 69044: no stipulation in the Bills of Lading limiting the carriers liability for the
lessor destruction of the goods; no declaration of a higher value of the goods; Hence, Eastern Shipping
Lines liability should not exceed US $500 per package (as provided in 4(5) of theCOGSA), or its peso
equivalent, at the time of payment of the value of the goods lost, but in no case more than the amount
of damage actually sustained.

i) Fortune Express vs CA
On November 18, 1989 a bus owned by Fortune Express Inc. (a bus company in northern Mindanao)
figured in an accident with a jeepney in Kauswagan, Lanao del Norte, which resulted in the death of several
jeepney passengers, including 2 Maranaos.
Generalao, a volunteer field agent of the Constabulary Regional Security Unit No. X conducted an
investigation of the incident. He found out that the owner of the jeep was a Maranao and that certain
Maranaos were planning to take revenge on Fortune Express by burning some of its buses. Upon order
Sgt. Bastasa, Generalao went to see Bravo, the operations manager of Fortune Express, at its main office
in Cagayan de Oro, to inform him of the said findings. Bravo assured him that the necessary precautions
to insure the safety of lives and property would be taken.
On November 22, 1989 (at about 6:45PM), there were 3 armed Maranaos, who pretended to be
passengers, seized a bus of Fortune Express at Linamon, Lanao del Norte while on its way to Iligan City.
The leader of the Maranaos ordered the driver, Cabatuan, to stop the bus on the side of the highway, then
shot Cabatuan on the arm. The other started pouring gasoline inside the bus, and the other held the
passengers at bay with a handgun. Then they ordered the passengers to get off the bus.
However, Atty. Talib Caorong, one of the passengers, returned to the bus to retrieve something from the
overhead rack. He was allowed to do so by the 3 Maranaos. However, during that time, one of the armed
men started pouring gasoline on the head of the driver. Cabatuan, who had meantime regained
consciousness, heard Atty. Caorong pleading with the armed men to spare the driver as he was innocent
of any wrong doing and was only trying to make a living. The armed men were, however adamant as they
repeated their warning that they were going to burn the bus along with its driver. During this exchange,
Cabatuan climbed out the left window of the bus and escaped. Atty. Caorong was shot. Some of the
passengers were able to pull him out of the burning bus, but he died while undergoing operation.
Thus, the widow of Atty. Caorong filed this suit for breach of contract of carriage in the RTC of Iligan City.
She alleged that Fortune did should have taken proper precautions given that is has been informed of the
report and should have provided its buses with security guards.
Defense of Fortune Express: They were not negligent; No law requires it to provide guards on its buses
and that the safety of citizens is the duty of the government.

ISSUE #1: WON Fortune breached the contract of carriage for its failure to exercise the required
degree of diligence.
HELD:
YES. Fortune is liable for breach of contract of carriage.
Art. 1763 of the NCC proved that a common carrier is responsible for injuries suffered by a passenger on
account of the willful acts of other passengers, if the employees of the common carrier could have prevented
the act through the exercise of the diligence of a good father of a family.
Despite warning by the Phil. Constabulary and the assurance of Fortunes operations manager that the
necessary precautions would be taken, Fortune did nothing to protect the safety of its passengers. Under
the circumstances, simple precautionary measures to protect the safety of passengers such as frisking
passengers and inspecting their baggage, preferably with non-intrusive gadgets such as metal detectors,
before allowing them on board could have been employed without violating the passengers constitutional
rights. They did not exercise the diligence of a good father of a family.
Had petitioner and its employees been vigilant they would not have failed to see that the malefactors had
a large quantity of gasoline with them. Under the circumstances, simple precautionary measures to protect
the safety of passengers, such as frisking passengers and inspecting their baggages, preferably with non-
34
 intrusive gadgets such as metal detectors, before allowing them on board could have been employed
without violating the passenger's constitutional rights. As this Court amended in Gacal v. Philippine Air
Lines, Inc., 6 a common carrier can be held liable for failing to prevent a hijacking by frisking passengers
and inspecting their baggages.
From the foregoing, it is evident that petitioner's employees failed to prevent the attack on one of petitioner's
buses because they did not exercise the diligence of a good father of a family. Hence, petitioner should be
held liable for the death of Atty. Caorong.
ADDITIONAL ISSUES (just in case):

Issue #2: WON the acts of the Maranao outlaws were so grave, irresistible, violent, and forceful, as
to be regarded as caso fortuito
HELD:

NO. Seizure of the bus was not a case of force majeure.

Art. 1174 of the Civil Code defines a fortuitous even as an occurrence which could not be foreseen or which
though foreseen, is inevitable. In Yobido v. Court of Appeals, we held that to be considered as force
majeure, it is necessary that: (1) the cause of the breach of the obligation must be independent of the
human will; (2) the event must be either unforeseeable or unavoidable; (3) the occurrence must be such as
to render it impossible for the debtor to fulfill the obligation in a normal manner; and (4) the obligor must be
free of participation in, or aggravation of, the injury to the creditor. The absence of any of the requisites
mentioned above would prevent the obligor from being excused from liability.
Given that they were given a written report by the Phil. Constabulary, the seizure of the bus of the petitioner
was foreseeable and, therefore, was not a fortuitous event which would exempt petitioner from liability.
Petitioner invokes the ruling in Pilapil v. Court of Appeals and De Guzman v. Court of Appeals in support
of its contention that the seizure of its bus by the assailants constitutes force majeure. In Pilapil v. Court of
Appeals, it was held that a common carrier is not liable for failing to install window grills on its buses to
protect passengers from injuries caused by rocks hurled at the bus by lawless elements. On the other hand,
in De Guzman v. Court of Appeals, it was ruled that a common carrier is not responsible for goods lost as
a result of a robbery which is attended by grave or irresistible threat, violence, or force.
It is clear that the cases of Pilapil and De Guzman do not apply to the present case.
Art. 1755 of the Civil Code provides that a common carrier is bound to carry the passengers as far as
human care and foresight can provide, using the utmost diligence of very cautious person, with due regard
for all the circumstances. Thus, we held in Pilapil and De Guzman that the respondents therein were not
negligent in failing to take special precautions against threats to the safety of passengers which could not
be foreseen, such as tortious or criminal acts of third persons.
In the present case, this factor of unforeseeablility (the second requisite for an event to be considered force
majeure) is lacking. As already stated, despite the report of PC agent Generalao that the Maranaos were
planning to burn some of petitioners buses and the assurance of petitioners operations manager (Diosdado
Bravo) that the necessary precautions would be taken, nothing was really done by petitioner to protect the
safety of passengers.

Issue #3: WON the deceased was guilty of contributory negligence.

HELD:
NO. Deceased was not guilty of contributory negligence.
Atty. Caorong did not act recklessly. It should be pointed out that the intended targets of the violence were
petitioner and its employees, not its passengers. The armed men actually allowed Atty. Caorong to retrieve
something from the bus. What apparently angered them was his attempt to help the driver of the bus by
pleading for his life. He was playing the role of the good Samaritan. Certainly, this act cannot be considered
an act of negligence, let alone recklessness.

VII. Duration of Obligation; Stipulation Limiting Liability; 1736-38, 1744

a) British Airways vs CA
On February 15, 1981, private respondent First International Trading and General Services Co., a duly
licensed domestic recruitment and placement agency, received a telex message from its principal ROLACO
Engineering and Contracting Services in Jeddah, Saudi Arabia to recruit Filipino contract workers. The
principal paid to the Jeddah branch of petitioner British Airways, Inc. airfare tickets for 93 contract workers
with specific instruction to transport said workers to Jeddah on or before March 30, 1981.
As soon as petitioner received a prepaid ticket advice from its Jeddah branch to transport the 93 workers,
private respondent was immediately informed by petitioner that its principal had forwarded 93 prepaid

35
 tickets. Thereafter, private respondent instructed its travel agent, ADB Travel and Tours. Inc., to book the
93 workers with petitioner but the latter failed to fly said workers.
Sometime in the first week of June, 1981, First International Trading and General Services Co was again
informed by the British Airways that it had received a prepaid ticket advice from its Jeddah branch for the
transportation of 27 contract workers. Immediatety, private respondent instructed its travel agent to book
the 27 contract workers with the petitioner but the latter was only able to book and confirm 16 seats on its
June 9, 1981 flight.
Out of the 93 workers that were contracted, only very few were able to leave for Jedda, due to subsequent
flight cancellations and rebookings were made by the petitioner without any prior notice to either private
respondent or the workers. As a result of these incidents, private respondent sent a letter to petitioner
demanding compensation for the damages it had incurred by the latter's repeated failure to transport its
contract workers despite confirmed bookings and payment of the corresponding travel taxes.
Eventually, private respondent filed a complaint for damages against petitioner with the Regional Trial
Court. RTC ruled in favor of private respondent. CA affirmed RTC.

Issue:
It is the contention of petitioner that private respondent has no cause of action against it there being no
perfected contract of carriage existing between them as no ticket was ever issued to private respondent's
contract workers and, therefore, the obligation of the petitioner to transport said contract workers did not
arise. Furthermore, private respondent's failure to attach any ticket in the complaint further proved that it
was never a party to the alleged transaction.

Ruling:
Private respondent had a valid cause of action for damages against petitioner. A cause of action is an act
or omission of one party in violation of the legal right or rights of the other. 9 Petitioner's repeated failures
to transport private respondent's workers in its flight despite confirmed booking of said workers clearly
constitutes breach of contract and bad faith on its part.
In resolving petitioner's theory that private respondent has no cause of action in the instant case, the
appellate court correctly held that:

In dealing with the contract of common carriage of passengers for purpose of accuracy, there are two (2)
aspects of the same, namely: (a) the contract "to carry (at some future time)," which contract is consensual
and is necessarily perfected by mere consent (See Article 1356, Civil Code of the Philippines), and (b) the
contract "of carriage" or "of common carriage" itself which should be considered as a real contract for not
until the carrier is actually used can the carrier be said to have already assumed the obligation of a carrier.
(Paras, Civil Code Annotated, Vol. V, p. 429, Eleventh Ed.)
In the instant case, the contract "to carry" is the one involved which is consensual and is perfected by the
mere consent of the parties.
There is no dispute as to the appellee's consent to the said contract "to carry" its contract workers from
Manila to Jeddah. The appellant's consent thereto, on the other hand, was manifested by its acceptance of
the PTA or prepaid ticket advice that ROLACO Engineering has prepaid the airfares of the appellee's
contract workers advising the appellant that it must transport the contract workers on or before the end of
March, 1981 and the other batch in June, 1981.

Even if a PTA is merely an advice from the sponsors that an airline is authorized to issue a ticket and thus
no ticket was yet issued, the fact remains that the passage had already been paid for by the principal of the
appellee, and the appellant had accepted such payment. The existence of this payment was never objected
to nor questioned by the appellant in the lower court. Thus, the cause or consideration which is the fare
paid for the passengers exists in this case.
The third essential requisite of a contract is an object certain. In this contract "to carry", such an object is
the transport of the passengers from the place of departure to the place of destination as stated in the telex.
Accordingly, there could be no more pretensions as to the existence of an oral contract of carriage imposing
reciprocal obligations on both parties.
In the case of appellee, it has fully complied with the obligation, namely, the payment of the fare and its
willingness for its contract workers to leave for their place of destination.
On the other hand, the facts clearly show that appellant was remiss in its obligation to transport the contract
workers on their flight despite confirmation and bookings made by appellee's travelling agent.

b) Benito Macam vs CA
36
 Facts:
On 4 April 1989 petitioner Benito Macam, doing business under the name and style Ben-Mac Enterprises,
shipped on board the vessel Nen Jiang, owned and operated by respondent China Ocean Shipping Co.,
through local agent respondent Wallem Philippines Shipping, Inc. (hereinafter WALLEM), 3,500 boxes of
watermelons valued at US$5,950.00 NK) and 1,611 boxes of fresh mangoes with a value of US$14,273.46

The Bills of Lading contained the following pertinent provision: "One of the Bills of Lading must be
surrendered duly endorsed in exchange for the goods or delivery order."

The shipment was bound for Hongkong with PAKISTAN BANK as consignee and Great Prospect Company
of Kowloon, Hongkong (hereinafter GPC) as notify party.

On 6 April 1989, per letter of credit requirement, copies of the bills of lading and commercial invoices were
submitted to petitioner's depository bank, Consolidated Banking Corporation (hereinafter SOLIDBANK),
which paid petitioner in advance the total value of the shipment of US$20,223.46.

Upon arrival in Hongkong, the shipment was delivered by respondent WALLEM directly to GPC, not to
PAKISTAN BANK, and without the required bill of lading having been surrendered. Subsequently, GPC
failed to pay PAKISTAN BANK such that the latter, still in possession of the original bills of lading, refused
to pay petitioner through SOLIDBANK. Since SOLIDBANK already pre-paid petitioner the value of the
shipment, it demanded payment from respondent WALLEM through five (5) letters but was refused.
Petitioner was thus allegedly constrained to return the amount involved to SOLIDBANK, then demanded
payment from respondent WALLEM in writing but to no avail.

On 25 September 1991 petitioner sought collection of the value of the shipment of US$20,223.46 or its
equivalent of P546,033.42 from respondents before the Regional Trial Court of Manila, based on delivery
of the shipment to GPC without presentation of the bills of lading and bank guarantee.

Respondents contended that the shipment was delivered to GPC without presentation of the bills of lading
and bank guarantee per request of petitioner himself because the shipment consisted of perishable goods.
The telex dated 5 April 1989 conveying such request read -
AS PER SHPR'S REQUEST KINDLY ARRANGE DELIVERY OF A/M SHIPT TO RESPECTIVE CNEES
WITHOUT PRESENTATION OF OB/L and bank guarantee since for prepaid shipment of rt charges already
fully paid our end x x x x
Respondents explained that it is a standard maritime practice, when immediate delivery is of the essence,
for the shipper to request or instruct the carrier to deliver the goods to the buyer upon arrival at the port of
destination without requiring presentation of the bill of lading as that usually takes time. As proof thereof,
respondents apprised the trial court that for the duration of their two-year business relationship with
petitioner concerning similar shipments to GPC deliveries were effected without presentation of the bills of
lading.

RTC ruled in favor of petitioners

CA appreciated the evidence in a different manner. According to it, as established by previous similar
transactions between the parties, shipped cargoes were sometimes actually delivered not to the consignee
but to notify party GPC without need of the bills of lading or bank guarantee. Respondent court noted that
besides, GPC was listed as a consignee in the telex. It observed further that the demand letter of petitioner
to respondents never complained of misdelivery of goods. Lastly, respondent court found that petitioner's
claim of having reimbursed the amount involved to SOLIDBANK was unsubstantiated.

Issue:
(1) WON delivery to GPC constituted misdelivery
(2) whether respondents are liable to petitioner for releasing the goods to GPC without the bills of lading or
bank guarantee.

Held:
(1) NO. We emphasize that the extraordinary responsibility of the common carriers lasts until actual or
constructive delivery of the cargoes to the consignee or to the person who has a right to receive them.
PAKISTAN BANK was indicated in the bills of lading as consignee whereas GPC was the notify party.
However, in the export invoices GPC was clearly named as buyer/importer. Petitioner also referred to GPC
37
 as such in his demand letter to respondent WALLEM and in his complaint before the trial court. This premise
draws us to conclude that the delivery of the cargoes to GPC as buyer/importer which, conformably with
Art. 1736 had, other than the consignee, the right to receive them was proper.

(2) NO.

From the testimony of petitioner, we gather that he has been transacting with GPC as buyer/importer for
around two (2) or three (3) years already. When mangoes and watermelons are in season, his shipment to
GPC using the facilities of respondents is twice or thrice a week. The goods are released to GPC.
It has been the practice of petitioner to request the shipping lines to immediately release perishable cargoes
such as watermelons and fresh mangoes through telephone calls by himself or his "people."
In transactions covered by a letter of credit, bank guarantee is normally required by the shipping lines prior
to releasing the goods. But for buyers using telegraphic transfers, petitioner dispenses with the bank
guarantee because the goods are already fully paid. In his several years of business relationship with GPC
and respondents, there was not a single instance when the bill of lading was first presented before the
release of the cargoes.

Against petitioner's claim of "not remembering" having made a request for delivery of subject cargoes to
GPC without presentation of the bills of lading and bank guarantee as reflected in the telex of 5 April 1989
are damaging disclosures in his testimony. He declared that it was his practice to ask the shipping lines to
immediately release shipment of perishable goods through telephone calls by himself or his "people." He
no longer required presentation of a bill of lading nor of a bank guarantee as a condition to releasing the
goods in case he was already fully paid. Thus, taking into account that subject shipment consisted of
perishable goods and SOLIDBANK prepaid the full amount of the value thereof, it is not hard to believe the
claim of respondent WALLEM that petitioner indeed requested the release of the goods to GPC without
presentation of the bills of lading and bank guarantee.

The instruction in the telex of 5 April 1989 was "to deliver the shipment to respective consignees." And so
petitioner argues that, assuming there was such an instruction, the consignee referred to was PAKISTAN
BANK. We find the argument too simplistic. Respondent court analyzed the telex in its entirety and correctly
arrived at the conclusion that the consignee referred to was not PAKISTAN BANK but GPC -
There is no mistake that the originals of the two (2) subject Bills of Lading are still in the possession of the
Pakistani Bank. The appealed decision affirms this fact. Conformably, to implement the said telex
instruction, the delivery of the shipment must be to GPC, the notify party or real importer/buyer of the goods
and not the Pakistani Bank since the latter can very well present the original Bills of Lading in its possession.

Likewise, if it were the Pakistani Bank to whom the cargoes were to be strictly delivered, it will no longer be
proper to require a bank guarantee as a substitute for the Bill of Lading. To construe otherwise will render
meaningless the telex instruction. After all, the cargoes consist of perishable fresh fruits and immediate
delivery thereof to the buyer/importer is essentially a factor to reckon with. Besides, GPC is listed as one
among the several consignees in the telex (Exhibit 5-B) and the instruction in the telex was to arrange
delivery of A/M shipment (not any party) to respective consignees without presentation of OB/L and bank
guarantee.

c) CIA MAritima vs Insurance Company of North America

FACTS:
Sometime in October, 1952, Macleod and Company of the Philippines contracted by telephone the services
of the Compaia Maritima, a shipping corporation, for the shipment of 2,645 bales of hemp from the former's
Sasa private pier at Davao City to Manila and for their subsequent transhipment to Boston, Massachusetts,
U.S.A. on board the S.S. Steel Navigator. This oral contract was later on confirmed by a formal and written
booking issued by Macleod's branch office in Sasa and handcarried to Compaia Maritima's branch office
in Davao in compliance with which the latter sent to Macleod's private wharf on which the loading of the
hemp was completed on October 29, 1952.
Thereafter, the two loaded barges left Macleod's wharf and proceeded to and moored at the government's
marginal wharf in the same place to await the arrival of the S.S. Bowline Knot belonging to Compaia
Maritima on which the hemp was to be loaded.

38
 During the night of October 29, 1952, or at the early hours of October 30, one of the barges sank (LCT No.
1025), resulting in the damage or loss of 1,162 bales of hemp loaded therein. On October 30, 1952, Macleod
promptly notified the carrier's main office in Manila and its branch in Davao advising it of its liability. The
damaged hemp was brought to Odell Plantation in Madaum, Davao, for cleaning, washing, reconditioning,
and redrying.

All abaca shipments of Macleod, including the 1,162 bales loaded on the carrier's LCT No. 1025, were
insured with the Insurance Company of North America against all losses and damages. In due time,
Macleod filed a claim for the loss it suffered as above stated with said insurance company, and after the
same had been processed, the sum of P64,018.55 was paid, which was noted down in a document which
aside from being a receipt of the amount paid, was a subrogation agreement between Macleod and the
insurance company wherein the former assigned to the latter its rights over the insured and damaged cargo.
Having failed to recover from the carrier the sum of P60,421.02, which is the only amount supported by
receipts, the insurance company instituted the present action on October 28, 1953. TRIAL COURT: Ordered
the carrier Compania Maritima to pay the insurance company (P60, 421.02).
CA: Affirmed the decision of the TC. Hence; this petition for review.

ISSUE 1: Was there a contract of carriage between the carrier (Compania Maritima) and the shipper
(Macleod and Company) even if
the loss occurred when the hemp was loaded on a barge owned by the carrier which was loaded free of
charge and was not actually
loaded on the S.S. Bowline Knot which would carry the hemp to Manila and no bill of lading was issued
therefore? YES.

HELD 1:
Macleod and Company contracted by telephone the services of petitioner Compania Maritima to ship the
hemp in question from the former's private pier at Sasa, Davao City, to Manila, to be subsequently
transhipped to Boston, Massachusetts, U.S.A., which oral contract was later confirmed by a formal and
written booking issued by the shipper's branch office, Davao City, in virtue of which the carrier sent two of
its lighters to undertake the service. It also appears that the patrons of said lighters were employees of the
carrier (Compania Maritima) with due authority to undertake the transportation and to sign the documents
that may be necessary therefor so much so that the patron of LCT No. 1025 signed the receipt covering
the cargo of hemp loaded therein.

The fact that the carrier sent its lighters free of charge to take the hemp from Macleod's wharf at Sasa
preparatory to its loading onto the ship Bowline Knot does not in any way impair the contract of carriage
already entered into between the carrier and the shipper, for that preparatory step is but part and parcel of
said contract of carriage. Here, we have a complete contract of carriage the consummation of which has
already begun: the shipper delivering the cargo to the carrier, and the latter taking possession thereof by
placing it on a lighter manned by its authorized employees, under which Macleod became entitled to the
privilege secured to him by law for its safe transportation and delivery, and the carrier to the full payment
of its freight upon completion of the voyage.

The receipt of goods by the carrier has been said to lie at the foundation of the contract to carry and deliver,
and if actually no
goods are received there can be no such contract. The liability and responsibility of the carrier under a
contract for the carriage of goods commence on their actual delivery to, or receipt by, the carrier or an
authorized agent. ... and delivery to a lighter in charge of a vessel for shipment on the vessel, where it is
the custom to deliver in that way, is a good delivery and binds the vessel receiving the freight, the liability
commencing at the time of delivery to the lighter. ... and, similarly, where there is a contract to carry goods
from one port to another, and they cannot be loaded directly on the vessel and lighters are sent by the
vessel to bring the goods to it, the lighters are for the time its substitutes, so that the bill of landing is
applicable to the goods as soon as they are placed on the lighters.
The claim that there can be no contract of affreightment because the hemp was not actually loaded on the
ship that was to take it from Davao City to Manila is of no moment, for, as already stated, the delivery of
the hemp to the carrier's lighter is in line with the contract. In fact, the receipt signed by the patron of the
lighter that carried the hemp stated that he was receiving the cargo "in behalf of S.S. Bowline Knot in good
order and condition."

39
 On the other hand, the authorities are to the effect that a bill of lading is not indispensable for the creation
of a contract of carriage. The issuance of a bill of lading is not necessary to complete delivery and
acceptance. Even where it is provided by statute that liability commences with the issuance of the bill of
lading, actual delivery and acceptance are sufficient to bind the carrier.

ISSUE 2: Was the damage caused to the cargo or the sinking of the barge where it was loaded due
to a fortuitous event, storm or natural disaster that would exempt the carrier from liability? NO.
HELD:
Petitioner disclaims responsibility for the damage of the cargo in question shielding itself behind the claim
of force majeure or storm which occurred on the night of October 29, 1952. But the evidence fails to bear
this out. Rather, it shows that the mishap that caused the damage or loss was due, not to force majeure,
but to lack of adequate precautions or measures taken by the carrier to prevent the loss as may be inferred
from the following findings of the Court of Appeals:
Aside from the fact that, as admitted by appellant's own witness, the ill-fated barge had cracks on
its bottom which admitted sea water in the same manner as rain entered "thru tank man-holes",
according to the patron of LCT No. 1023 conclusively showing that the barge was not seaworthy
it should be noted that on the night of the nautical accident there was no storm, flood, or other
natural disaster or calamity. The Court of Appeals further added: "the report of R. J. del Pan & Co.,
Inc., marine surveyors, attributes the sinking of LCT No. 1025 to the 'non-water-tight conditions of
various buoyancy compartments'; and this report finds confirmation on the above-mentioned
admission of two witnesses for appellant concerning the cracks of the lighter's bottom and the
entrance of the rain water 'thru manholes'." We are not prepared to dispute this finding of the Court
of Appeals.

ISSUE 3: WON respondent Insurance Company of America may recover from the carrier Compania
Maritima. YES.
HELD 3:
There can also be no doubt that the insurance company can recover from the carrier as assignee of the
owner of the cargo for the insurance amount it paid to the latter under the insurance contract. And this is
so because since the cargo that was damaged was insured with respondent company and the latter paid
the amount represented by the loss, it is but fair that it be given the right to recover from the party
responsible for the loss. The instant case, therefore, is not one between the insured and the insurer, but
one between the shipper and the carrier, because the insurance company merely stepped into the shoes
of the shipper. And since the shipper has a direct cause of action against the carrier on account of the
damage of the cargo, no valid reason is seen why such action cannot be asserted or availed of by the
insurance company as a subrogee of the shipper. Nor can the carrier set up as a defense any defect in the
insurance policy not only because it is not a privy to it but also because it cannot avoid its liability to the
shipper under the contract of carriage which binds it to pay any loss that may be caused to the cargo
involved therein. WHEREFORE, the decision appealed from is affirmed, with costs against petitioner.

d) Dangwa Transportation Company

FACTS:
On May 13, 1985, PR filed a complaint for damages against DANGWA TRANSPO for the death of Pedrito
Cudiamat as a result of a vehicular accident. It was alleged that Lardizabal was recklessly driving a
passenger bus belonging to DANGWA TRANSPO and ran over its passenger, Pedrito Cudiamat. However,
instead of bringing Pedrito immediately to the nearest hospital, the said driver, in utter bad faith and without
regard to the welfare of the victim, first brought his other passengers and cargo to their respective
destinations before banging said victim to the Lepanto Hospital where he expired.

DANGWA TRANSPO claims that they observed and continued to observe the extraordinary diligence
required in the operation of the transportation company and the supervision of the employees, even as they
add that they are not absolute insurers of the safety of the public at large.

RTC ruled that the proximate cause of death by Cudiamat is his own negligence. CA reversed declaring
that from the testimony of appellees'own witness it is evident that the subject bus was at full stop when the
victim Pedrito Cudiamat boarded the same as it was precisely on this instance where a certain Miss Abenoja
alighted from the bus. Moreover, contrary to the assertion of the appellees, the victim did indicate his
intention to board the bus as can be seen from the testimony of the said witness when he declared that
Pedrito Cudiamat was no longer walking and made a sign to board the bus when the latter was still at a

40
 distance from him. It was at the instance when Pedrito Cudiamat was closing his umbrella at the platform
of the bus when the latter made a sudden jerk movement (as) the driver commenced to accelerate the bus.

Evidently, the incident took place due to the gross negligence of the appellee-driver in prematurely stepping
on the accelerator and in not waiting for the passenger to first secure his seat especially so when we take
into account that the platform of the bus was at the time slippery and wet because of a drizzle. The
defendants-appellees utterly failed to observe their duty and obligation as common carrier to the end that
they should observe extra-ordinary diligence in the vigilance over the goods and for the safety of the
passengers transported by them according to the circumstances of each case (Article 1733, New Civil
Code). 8

ISSUES: W/N there was a breach of contract of carriage? YES

HELD:
Testimonies from the record show that the place of the accident and the place where one of the passengers
alighted were both between Bunkhouses 53 and 54, hence the finding of the Court of Appeals that the bus
was at full stop when the victim boarded the same is correct. They further confirm the conclusion that the
victim fell from the platform of the bus when it suddenly accelerated forward and was run over by
the rear right tires of the vehicle, as shown by the physical evidence on where he was thereafter found
in relation to the bus when it stopped. Under such circumstances, it cannot be said that the deceased was
guilty of negligence.

The contention of petitioners that the driver and the conductor had no knowledge that the victim would ride
on the bus, since the latter had supposedly not manifested his intention to board the same, does not merit
consideration. When the bus is not in motion there is no necessity for a person who wants to ride the same
to signal his intention to board. A public utility bus, once it stops, is in effect making a continuous offer to
bus riders. Hence, it becomes the duty of the driver and the conductor, every time the bus stops, to
do no act that would have the effect of increasing the peril to a passenger while he was attempting
to board the same. The premature acceleration of the bus in this case was a breach of such duty. 11

It is the DUTY OF COMMON CARRIERS OF PASSENGERS, including common carriers by railroad train,
streetcar, or motorbus, to stop their conveyances a reasonable length of time in order to afford passengers
an opportunity to board and enter, and they are liable for injuries suffered by boarding passengers resulting
from the sudden starting up or jerking of their conveyances while they are doing so.

Further, even assuming that the bus was moving, the act of the victim in boarding the same cannot be
considered negligent under the circumstances. As clearly explained in the testimony of the aforestated
witness for petitioners, Virginia Abalos, th bus had "just started" and "was still in slow motion" at the point
where the victim had boarded and was on its platform.

It is not negligence per se, or as a matter of law, for one attempt to board a train or streetcar which
is moving slowly. 14 An ordinarily prudent person would have made the attempt board the moving
conveyance under the same or similar circumstances. The fact that passengers board and alight from
slowly moving vehicle is a matter of common experience both the driver and conductor in this case could
not have been unaware of such an ordinary practice.

The victim herein, by stepping and standing on the platform of the bus, is already considered a
passenger and is entitled all the rights and protection pertaining to such a contractual relation.
Hence, it has been held that the duty which the carrier passengers owes to its patrons extends to persons
boarding cars as well as to those alighting therefrom.

Common carriers, from the nature of their business and reasons of public policy, are bound to
observe extraordinary diligence for the safety of the passengers transported by the according to all the
circumstances of each case. A common carrier is bound to carry the passengers safely as far as human
care and foresight can provide, using the utmost diligence very cautious persons, with a due regard for all
the circumstances.

It has also been repeatedly held that in an action based on a contract of carriage, the court need not make
an express finding of fault or negligence on the part of the carrier in order to hold it responsible to pay the
damages sought by the passenger. By contract of carriage, the carrier assumes the express obligation to
41
 transport the passenger to his destination safely and observe extraordinary diligence with a due regard for
all the circumstances, and any injury that might be suffered by the passenger is right away attributable to
the fault or negligence of the carrier. This is an exception to the general rule that negligence must be proved,
and it is therefore incumbent upon the carrier to prove that it has exercised extraordinary diligence as
prescribed in Articles 1733 and 1755 of the Civil Code. 18

Moreover, the circumstances under which the driver and the conductor failed to bring the gravely injured
victim immediately to the hospital for medical treatment is a patent and incontrovertible proof of their
negligence. It defies understanding and can even be stigmatized as callous indifference. The evidence
shows that after the accident the bus could have forthwith turned at Bunk 56 and thence to the hospital, but
its driver instead opted to first proceed to Bunk 70 to allow a passenger to alight and to deliver a refrigerator,
despite the serious condition of the victim.

e) La Mallorca vs CA
Facts:
Mariano Beltran, aboarded the Pambuso bus No. 352 owned and operated by La Mallorca at San
Fernando, Pampanga, bound for Anao, Mexico, Pampanga. He was with his wife and children, one of
them being Raquel who was not charged any fare as she was below the height at which fare is charged in
accordance with the rules and regulations of the bus operator.
When they arrived at Anao, Mariano went back to the bus for the 4 pieces of bayong that were left
behind. He didnt realize that Raquel folllowed him and that while the driver resumed driving without the
signal of the conductor, he jumped off the bus without being able to get his luggage. He saw people
beginning to gather around the body of Raquel who was run over the bus. Thus Beltran, commenced the
present suit against La Mallorca to recover from it P16,000 to cover moral damages and actual damages
as well as attorneys fees.
RTC: La Mallorca is liable for breach of contract of carriage
CA: CA sustained La Mallorcas theory that there could not have been a breach of contract because
when the child met her death, she was no longer a passgenger of the bus involved in the incident thus the
contract of carriage had already been terminated. Nevertheless it was found to be guilty of quasi-delict
and held liable for damages for the negligence of its driver pursuant to Art. 2180 of the CC.
- increased damages to P6,000 instead of P3000

Issue: Is La Mallorca liable for quasi delict? If not, is there a breach of contract of carriage by La
Mallorca for the death of the child, who was already lead by the father to a place about 5 meters
away from the bus?
Ruling:
LA MALLORCA IS LIABLE FOR DAMAGES FOR THE DEATH OF THE CHILD RAQUEL. CONTRACT
OF CARRIAGE WAS STILL SUBSISTING. While it is true that Beltran had already alighted from the bus
at a place designated for disembarking or unloading of passengers, it was also established that the father
had to return to the vehicle (which was still at a stop) to get one of his bags or bayong that was left under
one of the seats of the bus. Thus, 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 CEASE AT 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.
What is a reasonable time or a reasonable delay within this rule is to be determined from all the
circumstances.
examples:
A person who, after alighting from a train, walks along the station platform is considered still a
passenger.
A passenger who has alighted at his destination and is proceeding by the usual way to leave the
companys premises, but before actually doing so is halted by the report that his brother, a fellow
passenger, has been shot, and he in good faith and without intent of engaging in the difficulty, returns
to relieve his brother, he is deemed reasonably and necessarily delayed and thus continues to be a
passenger entitled as such to the protection of the railroad and company and its agents.

42
 IN THIS CASE, IT CANNOT BE CLAIMED THAT THE CARRIERS AGENT HAD EXERCISED THE
UTMOST DILIGENCE OF A VERY CAUTIOUS PERSON REQUIRED BY ART. 1755 OF THE CC TO BE
OBSERVED BY A COMMON CARRIER IN THE DISCHARGE OF ITS OBLIGATION TO TRANSPORT
SAFELY ITS PASSENGERS.
- driver although stopping the bus, did not put off the engine
- he started to run the bus even before the bus conductor gave him the signal to do and while the latter
was still unloading part of the baggages of the passengers Beltran and family

EVEN ASSUMING ARGUENDO THAT THE CONTRACT OF CARRIAGE HAD ALREADY BEEN
TERMINATED, PETITIONER CAN BE HELD LIABLE FOR NEGLIGENCE OF THE DRIVER PURSUANT
TO ART. 2180.
Paragraph 7 of the complaint is clearly an allegation for quasi-delict as it claimed that the death was caused
by the negligence of the driver. The inclusion of this averment for quasi-delict, while incompatible with the
other claim under the contract of carriage, is permissible under Section 2 of Rule 8 of the New Rules of
Court, which allows a plaintiff to allege causes of action in the alternative, be they compatible with each
other or not, to the end that the real matter in controversy may be resolved and determined. the presentation
of the proof of the negligene of its employee gave rise to the presumption that La Mallorca did not exercise
the diligence of a good father of the family in the selection and supervision of its employees. This
presumption La Mallorca failed to overcome. Thus, it must be adjudged pecuniarily liable for the death of
Raquel.

INCREASE OF AWARD OF DAMAGES CANNOT BE SUSTAINED. Because Beltran did not appeal
from that portion of the judgement of the RTC.

f) Aboitiz Shipping vs CA
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 pier. An hour after the passenger 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).
Respondents Vianas filed a complaint for damages against Aboitiz for breach of contract of carriage.
Aboitiz denied responsibility contending that:
- at the time of the accident, the vessel was completely under the control of respondent Pioneer Stevedoring
Corporation (Pioneer, for short) as the exclusive stevedoring contractor of Aboitiz, which handled the
unloading of cargoes from the vessel of Aboitiz; and
- that since the crane operator was not an employee of Aboitiz, the latter cannot be held liable under the
fellow-servant rule.
Aboitiz filed a complaint against Pioneer imputing liability thereto for Anacleto Viana's death as having been
allegedly caused by the negligence of the crane operator who was an employee of Pioneer under its
exclusive control and supervision.

Pioneer raised the ff defenses:

- that Aboitiz had no cause of action against Pioneer considering that Aboitiz is being sued by the Vianas
for breach of contract of carriage to which Pioneer is not a party;
- that Pioneer had observed the diligence of a good father of a family both in the selection and supervision
of its employees as well as in the prevention of damage or injury to anyone including the victim Anacleto
Viana;
- that Anacleto Viana's gross negligence was the direct and proximate cause of his death; and
-that the filing of the third-party complaint was premature by reason of the pendency of the criminal case
for homicide through reckless imprudence filed against the crane operator.

TC: Aboitiz was ordered to pay the Vianas for damages incurred, and Pioneer was ordered to reimburse
Aboitiz for whatever amount the latter paid the Vianas.

43
 MFR: Both Aboitiz and Pioneer raised the TC's failure to declare that Anacleto Viana acted with gross
negligence despite the overwhelming evidence presented in support thereof. In addition, Aboitiz alleged,
that under the MOA the liability of Pioneer as contractor is automatic for any damages or losses whatsoever
occasioned by and arising from the operation of its arrastre and stevedoring service.
TC:
- absolved Pioneer from liability for failure of the Vianas and Aboitiz to preponderantly establish a case
of negligence against the crane operator which the court a quo ruled is never presumed, aside from
the fact that the MOA supposedly refers only to Pioneer's liability in case of loss or damage to goods
handled by it but not in the case of personal injuries, and,
- Aboitiz cannot properly invoke the fellow-servant rule simply because its liability stems from a breach
of contract of carriage.
CA: affirmed the findings of TC except as to the amount of damages awarded to the Vianas.
ISSUES:
A. WON the doctrine laid down La Mallorca vs. CA is applicable- YES
B. WON Aboitiz is liable for damages
RATIO:
Both the TC and CA found the deceased guilty of contributory negligence, but holding that it was the
negligence of Aboitiz in prematurely turning over the vessel to the arrastre operator for the unloading of
cargoes which was the direct, immediate and proximate cause of the victim's death.
I. Petitioner contends that since one (1) hour had already elapsed from the time Anacleto Viana
disembarked from the vessel and that he was given more than ample opportunity to unload his cargoes
prior to the operation of the crane, his presence on the vessel was no longer reasonable e and he
consequently ceased to be a passenger. Corollarily, it insists that the doctrine in La Mallorca is not
applicable to 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 owner's dock or premises. Once created, the relationship will not
ordinarily terminate until the passenger has, after reaching his destination, safely alighted from the carrier's
conveyance or had a reasonable opportunity to leave the carrier's 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 carrier's premises to claim his baggage.
It is apparent from the foregoing that what prompted the Court to rule as it did in said case is the fact of the
passenger's reasonable presence within the carrier's premises. That reasonableness of 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. It is thus of no moment whether in the cited
case of La Mallorca there was no appreciable interregnum for the passenger therein to leave the carrier's
premises whereas in the case at bar, an interval of one (1) hour had elapsed before the victim met the
accident. The primary factor to be considered is the existence of a reasonable cause as will justify
the presence of the victim on or near the petitioner's vessel. We believe there exists such a
justifiable cause.

It is of common knowledge that, by the very nature of petitioner's business as a shipper, the passengers of
vessels are allotted a longer period of time to disembark from the ship than other common carriers such as
a passenger bus. With respect to the bulk of cargoes and the number of passengers it can load, such
vessels are capable of accommodating a bigger volume of both as compared to the capacity of a regular
commuter bus. Consequently, a ship passenger will need at least an hour as is the usual practice, to
disembark from the vessel and claim his baggage whereas a bus passenger can easily get off the bus and
retrieve his luggage in a very short period of time. Verily, petitioner cannot categorically claim, through
the bare expedient of comparing the period of time entailed in getting the passenger's cargoes, that
the ruling in La Mallorca is inapplicable to the case at bar. On the contrary, if we are to apply the
doctrine enunciated therein to the instant petition, we cannot in reason doubt that the victim Anacleto
Viana was still a passenger at the time of the incident. When the accident occurred, the victim was in
the act of unloading his cargoes, which he had every right to do, from petitioner's vessel. As earlier stated,
a carrier is duty bound not only to bring its passengers safely to their destination but also to afford
them a reasonable time to claim their baggage.
44
 It is not definitely shown that one (1) hour prior to the incident, the victim had already disembarked from the
vessel. Petitioner failed to prove this. What is clear to us is that at the time the victim was taking his cargoes,
the vessel had already docked an hour earlier. In consonance with common shipping procedure as to the
minimum time of one (1) hour allowed for the passengers to disembark, it may be presumed that the victim
had just gotten off the vessel when he went to retrieve his baggage. Yet, even if he had already disembarked
an hour earlier, his presence in petitioner's premises was not without cause. The victim had to claim his
baggage which was possible only one (1) hour after the vessel arrived since it was admittedly standard
procedure in the case of petitioner's vessels that the unloading operations shall start only after that time.
Consequently, under the foregoing circumstances, the victim Anacleto Viana is still deemed a
passenger of said carrier at the time of his tragic death.

II. Under the law, common carriers are, from the nature of their business and for reasons of public
policy, bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the
passengers transported by them, according to all the circumstances of each case. More particularly, a
common carrier is bound to carry the passengers safely as far as human care and foresight can
provide, using the utmost diligence of very cautious persons, with a due regard for all the
circumstances. Thus, 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 of carriage
where all that is required of plaintiff is to prove the existence of the contract of carriage and its non-
performance 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.

The presumption is, therefore, established by law that in case of a passenger's death or injury the
operator of the vessel was at fault or negligent, having failed to exercise extraordinary diligence,
and it is incumbent upon it to rebut the same. This is in consonance with the avowed policy of the State
to afford full protection to the passengers of common carriers which can be carried out only by imposing a
stringent statutory obligation upon the latter. Concomitantly, this Court has likewise adopted a rigid posture
in the application of the law by exacting the highest degree of care and diligence from common carriers,
bearing utmost in mind the welfare of the passengers who often become hapless victims of indifferent and
profit-oriented carriers. We cannot in reason deny that petitioner failed to rebut the presumption against
it. Under the facts obtaining in the present case, it cannot be gainsaid that petitioner had inadequately
complied with the required degree of diligence to prevent the accident from happening.

As found by the CA, the evidence does not show that there was a cordon of drums around the perimeter of
the crane, as claimed by petitioner. It also adverted to the fact that the alleged presence of visible warning
signs in the vicinity was disputable and not indubitably established. Thus, we are not inclined to accept
petitioner's explanation that the victim and other passengers were sufficiently warned that merely venturing
into the area in question was fraught with serious peril. Definitely, even assuming the existence of the
supposed cordon of drums loosely placed around the unloading area and the guard's admonitions against
entry therein, these were at most insufficient precautions which pale into insignificance if considered vis-a-
vis the gravity of the danger to which the deceased was exposed. There is no showing that Aboitiz was
extraordinarily diligent in requiring or seeing to it that said precautionary measures were strictly
and actually enforced to subserve their purpose of preventing entry into the forbidden area. By no
stretch of liberal evaluation can such perfunctory acts approximate the "utmost diligence of very cautious
persons" to be exercised "as far as human care and foresight can provide" which is required by law of
common carriers with respect to their passengers.

While the victim was admittedly contributorily negligent, still Aboitiz failure to exercise
extraordinary diligence was the proximate and direct cause of, because it could definitely have
prevented, the former's death.
There was no negligence on the part of Pioneer Stevedoring Corporation, hence our conformity to Pioneer's
being absolved of any liability.

Pioneer is not within the ambit of the rule on extraordinary diligence required of, and the corresponding
presumption of negligence foisted on, common carriers like Aboitiz. This, of course, does not detract from
what we have said that no negligence can be imputed to Pioneer but, that on the contrary, the failure of
Aboitiz to exercise extraordinary diligence for the safety of its passenger is the rationale for our finding on
its liability.

45
 g) Amparo Servando vs Philippine Steam Navigation
On November 6, 1963, Clara Uy Bico and Amparo Servando loaded on board Philippine Steams vessel,
FS-176, for carriage from Manila to Pulupandan, Negros Occidental, the following cargoes, to wit:
Clara Uy Bico
1,528 cavans of rice valued
at P40,907.50;
Amparo Servando
44 cartons of colored paper,
toys and general merchandise valued at P1,070.50;
Upon arrival of the vessel at Pulupandan, in the morning of November 18, 1963, the cargoes were
discharged, complete and in good order, unto the warehouse of the Bureau of Customs. At about 2:00 in
the afternoon of the same day, said warehouse was razed by a fire destroying the cargoes. Before the fire,
however, Uy Bico was able to take delivery of 907 cavans of rice Appellees' claims for the value of said
goods were rejected by the appellant.
The trial court ruled in favour of Servando and Bico. It held that the delivery of the shipment in question to
the warehouse of the Bureau of Customs is not the delivery contemplated by Article 1736; and since the
burning of the warehouse occurred before actual or constructive delivery of the goods to the appellees, the
loss is chargeable against Philippine Steam.
The CA elevated the case to SC as it was a question of law.

ISSUE: Whether Philippine Steam is liable.

Article 1736 CC: common carriers have the duty to observe extraordinary diligence from the moment the
goods are unconditionally placed in their possession until the same are delivered, actually or constructively,
by the carrier to the consignee or to the person who has a right to receive them.
However, in the bills of lading, the parties agreed to limit the responsibility of the carrier for the loss or
damage in the following stipulation:
Clause 14. Carrier shall not be responsible for loss or damage to shipments billed 'owner's risk'
unless such loss or damage is due to negligence of carrier. Nor shall carrier be responsible for loss
or damage caused by force majeure, dangers or accidents of the sea or other waters; war; public
enemies; . . . fire . ...
The SC sustained the validity of the above stipulation, for there is nothing therein that is contrary to law,
morals or public policy.
Servando and Bico contend that the above stipulation does not bind them because it was printed in fine
letters on the back-of the bills of lading; and that they did not sign the same.
However, Ong Yiu vs. Court of Appeals provides that:
While it may be true that petitioner had not signed the plane ticket he is nevertheless bound by the
provisions thereof. 'Such provisions have been held to be a part of the contract of carriage,
and valid and binding upon the passenger regardless of the latter's lack of knowledge or
assent to the regulation'. It is what is known as a contract of 'adhesion', in regards which it has
been said that contracts of adhesion wherein one party imposes a ready made form of contract on
the other, as the plane ticket in the case at bar, are contracts not entirely prohibited. The one who
adheres to the contract is in reality free to reject it entirely; if he adheres, he gives his consent."
Article 1174 provides that except in cases expressly specified by the law, or when it is otherwise declared
by stipulation, or when the nature of the obligation requires the assumption of risk, no person shall be
responsible for those events which could not be foreseen, or which, though foreseen, were inevitable.
Caso fortuito' presents the following essential characteristics:
1. the cause of the unforeseen and unexpected occurrence, or of the failure of the debtor to comply with
his obligation, must be independent of the human will;
2. it must be impossible to foresee the event which constitutes the 'caso fortuito', or if it can be foreseen,
it must be impossible to avoid;
3. the occurrence must be such as to render it impossible for the debtor to fulfill his obligation in a normal
manner;
4. the obligor must be free from any participation in the aggravation of the injury resulting to the creditor."

In the case at bar...

46
 1. the burning of the customs warehouse was an extraordinary event which happened
independently of the will of the Philippine Steam.
2. It could not have foreseen such event.
3. There was no delay. Philippine Steam had not only notified appellees of the arrival of their shipment,
but had demanded that the same be withdrawn. In fact, pursuant to such demand, Uy Bico had taken
delivery of 907 cavans of rice before the burning of the warehouse.
4. There was no negligence. The storage of the goods in the Customs warehouse pending withdrawal
was undoubtedly made with knowledge and consent. Since the warehouse belonged to and was
maintained by the government, it would be unfair to impute negligence to Philippine Steam since they
have no control whatsoever over the same.
The TC relied on Yu Biao Sontua vs. Ossorio where the Court held the defendant liable for damages arising
from a fire caused by the negligence of the defendant's employees while loading cases of gasoline and
petroleon products. But unlike in the said case, there is not a shred of proof in the present case that the
cause of the fire that broke out in the Custom's warehouse was in any way attributable to the negligence of
the appellant or its employees. Under the circumstances, the appellant is plainly not responsible.

h) Samar Mining vs Nordeutseher Lloyd

FACTS: The case arose from an importation made by plaintiff-appellee SAMAR MINING COMPANY of
one (1) crate Optima welded wedge wire sieves through the M/S SCHWABENSTEIN a vessel owned by
defendant-appellant NORDEUTSCHER LLOYD (represented in the Philippines by its agent, C.F. SHARP
& CO., INC.), which shipment is covered by Bill of Lading No. 18 duly issued to consignee SAMAR.
Upon arrival of the aforesaid vessel at the port of Manila, the aforementioned importation was unloaded
and delivered in good order and condition to the bonded warehouse of AMCYL. The goods were however
never delivered to, nor received by, the consignee at the port of destination Davao.
When the letters of complaint sent to NORDEUTSCHER failed to elicit the desired response, SAMAR filed
a formal claim for P1, 691.93 against the former, but neither paid. Hence, the filing of the instant suit to
enforce payment.
TC in favor of SAMAR. However, the Court stated that defendants may recoup whatever they may pay
plaintiff by enforcing the judgment against third party defendant AMCYL which had earlier been declared in
default. Only the defendants appealed from said decision.
ISSUE: WON NORDEUTSCHER (defendant) is liable for loss or damage to the goods.

SC: The liability of the common carrier for the loss, destruction or deterioration of goods transported from
a foreign country to the Philippines is governed primarily by the New Civil Code.
Article 1736. The extraordinary responsibility of the common carrier lasts from the time the goods are
unconditionally placed in the possession of, and received by the carrier for transportation until the same
are delivered, actually or constructively, by the carrier to the consignee, or to the person who has a right to
receive them, without prejudice to the provisions of article 1738.
Article 1738. The extraordinary liability of the common carrier continues to be operative even during the
time the goods are stored in a warehouse of the carrier at the place of destination, until the consignee has
been advised of the arrival of the goods and has had reasonable opportunity thereafter to remove them or
otherwise dispose of them.
There is no doubt that Art. 1738 finds no applicability to the instant case. The said article contemplates a
situation where the goods had already reached their place of destination and are stored in the warehouse
of the carrier. The subject goods were still awaiting transshipment to their port of destination, and were
stored in the warehouse of a third party when last seen and/or heard of.
However, Article 1736 is applicable to the instant suit. Under said article, the carrier may be relieved of the
responsibility for loss or damage to the goods upon actual or constructive delivery of the same by the carrier
to the consignee, or to the person who has a right to receive them.

In sales, actual delivery has been defined as the ceding of corporeal possession by the seller, and the
actual apprehension of corporeal possession by the buyer or by some person authorized by him to receive
the goods as his representative for the purpose of custody or disposal.
By the same token, there is actual delivery in contracts for the transport of goods when possession has
been turned over to the consignee or to his duly authorized agent and a reasonable time is given him to
remove the goods. The court a quo found that there was actual delivery to the consignee through its duly
authorized agent, the carrier.

47
 It becomes necessary at this point to dissect the complex relationship that had developed between
appellant and appellee in the course of the transactions that gave birth to the present suit. Two undertakings
appeared embodied and/or provided for in the Bill of Lading in question.

The first is FOR THE TRANSPORT OF GOODS from Bremen, Germany to Manila. The second, THE
TRANSSHIPMENT OF THE SAME GOODS from Manila to Davao, with appellant acting as agent of the
consignee.
At the hiatus between these two undertakings of appellant which is the moment when the subject goods
are discharged in Manila, its personality changes from that of carrier to that of agent of the consignee. Thus,
the character of appellant's possession also changes, from possession in its own name as carrier, into
possession in the name of consignee as the latter's agent. Such being the case, there was, in effect, actual
delivery of the goods from appellant as carrier to the same appellant as agent of the consignee. Upon such
delivery, the appellant, as erstwhile carrier, ceases to be responsible for any loss or damage that may befall
the goods from that point onwards. This is the full import of Article 1736, as applied to the case before Us.
WHEREFORE, the appealed decision is hereby REVERSED. Plaintiff-appellee's complaint is hereby
DISMISSED.

i) Edgar Cokaliong Shipping Lines vs UCPB

DOCTRINE: The liability of a common carrier for the loss of goods may, by stipulation in the bill of lading,
be limited to the value declared by the shipper. On the other hand, the liability of the insurer is determined
by the actual value covered by the insurance policy and the insurance premiums paid therefor, and not
necessarily by the value declared in the bill of lading.
FACTS:
Shipper: Zosima Mercardo, Nestor Amelia
Carrier: EDGAR COKALIONG SHIPPING LINES, INC.
Vessel: M/V Tandag Insurer: UCPB General Insurance Co. Inc. (Feliciana Legaspi insured the cargoes)
Event: FIRE
The shipper delivered to the carrier items to be sent to Surigao del Sur. After the vessel left the port, and
passed Mactan Bridge, a fire engulfed and destroyed the entire vessel resulting in the loss of the vessel
and the cargoes therein. UCBP (subrogated Feliciana) paid Feliciana for the damages. Now, Edgar did not
pay UCPB. UCPB filed a complaint. RTC absolved Edgar of any liability. CA affirmed.
Argument of carrier was that the cause was from force majeure. That it exercised due diligence and was
adequately proven by the findings of the Phil Coast Guard

ISSUE:
1. W/N the carriers argument is correct

RULING:
We are not convinced. The uncontroverted findings of the Philippine Coast Guard show that the M/V
Tandag sank due to a fire, which resulted from a crack in the auxiliary engine fuel oil service tank. Fuel
spurted out of the crack and dripped to the heating exhaust manifold, causing the ship to burst into flames.
The crack was located on the side of the fuel oil tank, which had a mere two-inch gap from the engine room
walling, thus precluding constant inspection and care by the crew.
Having originated from an unchecked crack in the fuel oil service tank, the fire could not have been caused
by force majeure. Broadly speaking, force majeure generally applies to a natural accident, such as that
caused by a lightning, an earthquake, a tempest or a public enem

Where loss of cargo results from the failure of the officers of a vessel to inspect their ship frequently so as
to discover the existence of cracked parts, that loss cannot be attributed to force majeure, but to the
negligence of those officials.[16]
The law provides that a common carrier is presumed to have been negligent if it fails to prove that it
exercised extraordinary vigilance over the goods it transported.Ensuring the seaworthiness of the vessel is
the first step in exercising the required vigilance. Petitioner did not present sufficient evidence showing what
measures or acts it had undertaken to ensure the seaworthiness of the vessel. It failed to show when the
last inspection and care of the auxiliary engine fuel oil service tank was made, what the normal practice
was for its maintenance, or some other evidence to establish that it had exercised extraordinary diligence.
It merely stated that constant inspection and care were not possible, and that the last time the vessel was
dry-docked was in November 1990. Necessarily, in accordance with Article 1735[17] of the Civil Code, we
hold petitioner responsible for the loss of the goods covered by Bills of Lading Nos. 58 and 59.

48
 j) Sealand Service vs IAC
Sea-Land Service, Inc. (Sea-Land) a foreign shipping and forwarding company licensed to do business in
the Philippines, received from Seaborne Trading Company in Oakland, California a shipment consigned to
Sen Hiap Hing the business name used by Paulino Cue in the wholesale and retail trade.
The shipper not having declared the value of the shipment, no value was indicated in the bill of lading. The
shipment was loaded on board a vessel owned and operated by Sea-Land, for discharge at the Port of
Cebu. The shipment arrived in Manila and there discharged into the custody of the arrastre contractor and
the customs and port authorities. After the shipment had been transferred, along with other cargoes, it was
stolen by pilferers and has never been recovered.
Paulino Cue, the consignee, made formal claim upon Sea-Land for the value of the lost shipment allegedly
amounting to P179,643. Sea-Land offered to settle for US$4,000, or its then Phil. peso equivalent of
P30,600 asserting that said amount represented its maximum liability for the loss of the shipment under the
package limitation clause in the covering bill of lading. Paulino Cue rejected the offer. On the other hand,
Sea-Land insisted that it cannot be held liable for the loss of the shipment in any amount beyond the limit
of US$600 (Take note na sa dispositive kay US$500 ang nakabutang) per package stipulated in the bill of
lading.

ISSUE:
Whether or not Paulino Cue is bound by stipulations in the covering bill of lading limiting to a fixed amount
the liability of the carrier for loss or damage to the cargo where its value is not declared in the bill.

HELD: Yes.
The liability of a common carrier for loss of or damage to goods transported by it under a contract of carriage
is governed by the laws of the country of destination and the goods in question were shipped from the
United States to the Philippines, the liability of Sea-Land to Paulino Cue is governed primarily by the Civil
Code, and as ordained by the said Code, suppletorily, in all matters not determined thereby, by the Code
of Commerce and special laws. One of these suppletory special laws is the Carriage of Goods by Sea Act,
U.S. Public Act No. 521 which was made applicable to all contracts for the carriage of goods by sea to and
from Philippine ports in foreign trade by Commonwealth Act No. 65. Sec. 4(5) of said Act in part reads:
(5) Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in
connection with the transportation of goods in an amount exceeding $500 per package lawful money of the
United States, or in case of goods not shipped in packages, per customary freight unit, or the equivalent of
that sum in other currency, unless the nature and value of such goods have been declared by the shipper
before shipment and inserted in the bill of lading. This declaration, if embodied in the bill of lading, shall be
prima facie evidence, but shall not be conclusive on the carrier. (Emphasis supplied)

By agreement between the carrier, master, or agent of the carrier, and the shipper another maximum
amount than that mentioned in this paragraph may be fixed: Provided, that such maximum shall not be less
than the figure above named. In no event shall the carrier be liable for more than the amount of damage
actually sustained.
ART. 1749 A stipulation that the common carrier's liability is limited to the value of the goods appearing
in the bill of lading, unless the shipper or owner declares a greater value, is binding.
ART. 1750 A contract fixing the sum that may be recovered by the owner or shipper for the loss,
destruction, or deterioration of the goods is valid, if it is reasonable and just under the circumstances, and
has been fairly and freely agreed upon.

The validity and binding effect of the liability limitation clause in the bill of lading here are nevertheless fully
sustainable on the basis of the cited Civil Code provisions. That said stipulation is just and reasonable is
arguable from the fact that it echoes Art. 1750 itself in providing a limit to liability only if a greater value is
not declared for the shipment in the bill of lading.
There can, therefore, be no doubt or equivocation about the validity and enforceability of freely-agreed-
upon stipulations in a contract of carriage or bill of lading limiting the liability of the carrier to an agreed
valuation unless the shipper declares a higher value and inserts it into said contract or bill. This pro position,
moreover, rests upon an almost uniform weight of authority.
The stipulation in the questioned bill of lading limiting Sea-Land's liability for loss of or damage to the
shipment covered by said bill to US$500 per package is held valid and binding on Paulino Cue.

k) Belgian Overseas Chartering and Shipping vs Philippine Insurance Corp

FACTS:

49
 On June 13, 1990, CMC Trading A.G. shipped on board the MN Anangel Sky at Hamburg, Germany 242
coils of various Prime Cold Rolled Steel sheets for transportation to Manila consigned to the Philippine
Steel Trading Corporation. On July 28, 1990, MN Anangel Sky arrived at the port of Manila and, within the
subsequent days, discharged the subject cargo. Four (4) coils were found to be in bad order B.O. Tally
sheet No. 154974. Finding the four (4) coils in their damaged state to be unfit for the intended purpose, the
consignee Philippine Steel Trading Corporation declared the same as total loss.
Despite receipt of a formal demand, defendants-appellees refused to submit to the consignees claim.
Consequently, plaintiff-appellant paid the consignee five hundred six thousand eighty six & 50/100 pesos
(P506,086.50), and was subrogated to the latters rights and causes of action against defendants-appellees.
Subsequently, plaintiff-appellant instituted this complaint for recovery of the amount paid by them, to the
consignee as insured. Impugning the propriety of the suit against them, defendants-appellees imputed that
the damage and/or loss was due to preshipment damage, to the inherent nature, vice or defect of the goods,
or to perils, danger and accidents of the sea, or to insufficiency of packing thereof, or to the act or omission
of the shipper of the goods or their representatives. In addition thereto, defendants-appellees argued that
their liability, if there be any, should not exceed the limitations of liability provided for in the bill of lading and
other pertinent laws. Finally, defendants-appellees averred that, in any event, they exercised due diligence
and foresight required by law to prevent any damage/loss to said shipment.
RTC: dismissed the Complaint because PHIL. FIRST INSURANCE had failed to prove its claims with the
quantum of proof required by law. It likewise debunked BELGIAN OVERSEAS and JARDINE DAVIES
counterclaim, because PHIL. FIRST INSURANCEs suit was not manifestly frivolous or primarily intended
to harass them. CA: reversed RTCs ruling and ruled that BELGIAN OVERSEAS and JARDINE DAVIES
were liable for the loss or the damage of the goods shipped, because they had failed to overcome the
presumption of negligence imposed on common carriers.

The CA further held as inadequately proven BELGIAN OVERSEAS and JARDINE DAVIES claim that the
loss or the deterioration of the goods was due to pre-shipment damage. It likewise opined that the notation
metal envelopes rust stained and slightly dented placed on the Bill of Lading had not been the proximate
cause of the damage to the four (4) coils. As to the extent of BELGIAN OVERSEAS and JARDINE DAVIES
liability, the CA held that the package limitation under COGSA was not applicable, because the words L/C
No. 90/02447 indicated that a higher valuation of the cargo had been declared by the shipper. The CA,
however, affirmed the award of attorneys fees.

ISSUES:
o Whether the package limitation of liability is applicable. YES.
o Whether Belgian Overseas have overcome the presumption of negligence of a common carrier.
NO (just in case Atty. Valencia will include this)

RULING:
First Issue: Package Limitation
Assuming arguendo they are liable for PHIL. FIRST INSURANCEs claims, BELGIAN OVERSEAS and
JARDINE DAVIES contend that their liability should be limited to US$500 per package as provided in the
Bill of Lading and by Section 4(5) of COGSA On the other hand, PHIL. FIRST INSURANCE argues that
Section 4(5) of COGSA is inapplicable, because the value of the subject shipment was declared by
BELGIAN OVERSEAS and JARDINE DAVIES beforehand, as evidenced by the reference to and the
insertion of the Letter of Credit or L/C No. 90/02447 in the said Bill of Lading.

A bill of lading serves two functions. First, it is a receipt for the goods shipped. Second, it is a contract by
which three parties -- namely, the shipper, the carrier, and the consignee -- undertake specific
responsibilities and assume stipulated obligations. In a nutshell, the acceptance of the bill of lading by the
shipper and the consignee, with full knowledge of its contents, gives rise to the presumption that it
constituted a perfected and binding contract. Further, a stipulation in the bill of lading limiting to a certain
sum the common carriers liability for loss or destruction of a cargo -- unless the shipper or owner declares
a greater value -- is sanctioned by law. There are, however, two conditions to be satisfied: (1) the contract
is reasonable and just under the circumstances, and (2) it has been fairly and freely agreed upon by the
parties. The rationale for, this rule is to bind the shippers by their agreement to the value (maximum
valuation) of their goods.

It is to be noted, however, that the Civil Code does not limit the liability of the common carrier to a fixed
amount per package. In all matters not regulated by the Civil Code, the right and the obligations of common
carriers shall be governed by the Code of Commerce and special laws. Thus, the COGSA, which is
50
 suppletory to the provisions of the Civil Code, supplements the latter by establishing a statutory provision
limiting the carriers liability in the absence of a shippers declaration of a higher value in the bill of lading.
The provisions on limited liability are as much a part of the bill of lading as though physically in it and as
though placed there by agreement of the parties.

In the case before us, there was no stipulation in the Bill of Lading limiting the carriers liability. Neither did
the shipper declare a higher valuation of the goods to be shipped. This fact notwithstanding, the insertion
of the words L/C No. 90/02447 cannot be the basis for BELGIAN OVERSEAS and JARDINE DAVIES
liability. First, a notation in the Bill of Lading which indicated the amount of the Letter of Credit obtained by
the shipper for the importation of steel sheets did not effect a declaration of the value of the goods as
required by the bill. That notation was made only for the convenience of the shipper and the bank processing
the Letter of Credit.

BELGIAN OVERSEAS and JARDINE DAVIES liability should be computed based on US$500 per package
and not on the per metric ton price declared in the Letter of Credit. In Eastern Shipping Lines, Inc. v.
Intermediate Appellate Court we explained the meaning of package: When what would ordinarily be
considered packages are shipped in a container supplied by the carrier and the number of such units is
disclosed in the shipping documents, each of those units and not the container constitutes the package
referred to in the liability limitation provision of Carriage of Goods by Sea Act. Considering, therefore, the
ruling in Eastern Shipping Lines and the fact that the Bill of Lading clearly disclosed the contents of the
containers, the number of units, as well as the nature of the steel sheets, the four damaged coils should be
considered as the shipping unit subject to the US$500 limitation.

Second Issue: Proof of Negligence BELGIAN OVERSEAS and JARDINE DAVIES contend that the
presumption of fault imposed on common carriers should not be applied on the basis of the lone testimony
offered by private PHIL. FIRST INSURANCE. The contention is untenable. Well-settled is the rule that
common carriers, from the nature of their business and for reasons of public policy, are bound to observe
extraordinary diligence and vigilance with respect to the safety of the goods and the passengers they
transport. Thus, common carriers are required to render service with the greatest skill and foresight and to
use all reasonable means to ascertain the nature and characteristics of the goods tendered for shipment,
and to exercise due care in the handling and stowage, including such methods as their nature requires.
The extraordinary responsibility lasts from the time the goods are unconditionally placed in the possession
of and received for transportation by the carrier until they are delivered, actually or constructively, to the
consignee or to the person who has a right to receive them.

Owing to this high degree of diligence required of them, common carriers, as a general rule, are presumed
to have been at fault or negligent if the goods they transported deteriorated or got lost or destroyed. That
is, unless they prove that they exercised extraordinary diligence in transporting the goods. In order to avoid
responsibility for any loss or damage, therefore, they have the burden of proving that they observed such
diligence. However, the presumption of fault or negligence will not arise if the loss is due to any of the
following causes: (1) flood, storm, earthquake, lightning, or other natural disaster or calamity; (2) an act of
the public enemy in war, whether international or civil; (3) an act or omission of the shipper or owner of the
goods; (4) the character of the goods or defects in the packing or the container; or (5) an order or act of
competent public authority. This is a closed list. If the cause of destruction, loss or
deterioration is other than the enumerated circumstances, then the carrier is liable therefor.

Corollary to the foregoing, mere proof of delivery of the goods in good order to a common carrier and of
their arrival in bad order at their destination constitutes a prima facie case of fault or negligence against the
carrier. If no adequate explanation is given as to how the deterioration, the loss or the destruction of the
goods happened, the transporter shall be held responsible.

That BELGIAN OVERSEAS and JARDINE DAVIES failed to rebut the prima facie presumption of
negligence is revealed in the case at bar by a review of the records and more so by the evidence adduced
by PHIL. FIRST INSURANCE. True, the words metal envelopes rust stained and slightly dented were
noted on the Bill of Lading; however, there is no showing that BELGIAN OVERSEAS and JARDINE DAVIES
exercised due diligence to forestall or lessen the loss. Having been in the service for several years, the
master of the vessel should have known at the outset that metal envelopes in the said state would eventually
deteriorate when not properly stored while in transit. Equipped with the proper knowledge of the nature of
steel sheets in coils and of the proper way of transporting them, the master of the vessel and his crew
should have undertaken precautionary measures to avoid possible deterioration of the cargo. But none of
51
 these measures was taken. Having failed to discharge the burden of proving that they have exercised the
extraordinary diligence required by law, BELGIAN OVERSEAS and JARDINE DAVIES cannot escape
liability for the damage to the four coils.

l) Everett Steamship Corporation vs CA

BRIEF STATEMENT OF THE CASE:
Validity of the Bill of lading in a contract of carriage
FACTS:
Private respondent imported 3 crates of bus spare parts marked as MARCO C/No. 12, MARCO C/No. 13
and MARCO C/No. 14, from its supplier, Maruman Trading Company, Ltd. (Maruman Trading), a foreign
corporation based in Inazawa, Aichi, Japan. The crates were shipped from Nagoya, Japan to Manila on
board "ADELFAEVERETTE," a vessel owned by petitioner's principal, Everett Orient Lines.
Upon arrival at the port of Manila, it was discovered that the crate marked MARCO C/No. 14 was
missing. Private respondent claim upon petitioner for the value of the lost cargo amounting to One Million
Five Hundred Fifty Two Thousand Five Hundred (Y1, 552,500.00) Yen, the amount shown in an Invoice
No. MTM-941, dated November 14, 1991. However, petitioner offered to pay only One Hundred Thousand
(Y100,000.00) Yen, the maximum amount stipulated under Clause 18 of the covering bill of lading which
limits the liability of petitioner. Private respondent rejected the offer and thereafter instituted a suit for
collection.
TC RULING: in favour of the private respondents ordering petitioner to pay: (a) Y1,552,500.00; (b)
Y20,000.00 or its peso equivalent representing the actual value of the lost cargo and the material and
packaging cost; (c) 10% of the total amount as an award for and as contingent attorneys fees; and (d) to
pay the cost of the suit.
The Court subscribes to the provisions of Article 1750 of the New Civil Code -
Art. 1750. A contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction
or deterioration of the goods is valid, if it is reasonable and just under the circumstances, and has been
fairly and freely agreed upon.
It is required, however, that the contract must be reasonable and just under the circumstances and has
been fairly and freely agreed upon. The requirements provided in Art. 1750 of the New Civil Code must be
complied with before a common carrier can claim a limitation of its pecuniary liability in case of loss,
destruction or deterioration of the goods it has undertaken to transport.
In the case at bar, the Court is of the view that the requirements of said article have not been met. The fact
that those conditions are printed at the back of the bill of lading in letters so small that they are hard to read
would not warrant the presumption that the plaintiff or its supplier was aware of these conditions such that
he had fairly and freely agreed to these conditions. It can not be said that the plaintiff had actually entered
into a contract with the defendant, embodying the conditions as printed at the back of the bill of lading that
was issued by the defendant to plaintiff.
On appeal, the Court of Appeals deleted the award of attorneys fees but affirmed the trial courts findings
with the additional observation that private respondent can not be bound by the terms and conditions of the
bill of lading because it was not privy to the contract of carriage.
Hence, this Petition
ISSUES:
1. Is the petitioner liable for the actual value and not the maximum value recoverable under the bill of
lading?
2. Is private respondent, as consignee, who is not a signatory to the bill of lading bound by the stipulations
thereof?
ARGUMENTS:
1. The Petitioner is only liable for the maximum value recoverable under the bill of lading.
Clause 18 of the covering bill of lading:
18. All claims for which the carrier may be liable shall be adjusted and settled on the basis of the
shipper's net invoice cost plus freight and insurance premiums, if paid, and in no event shall the
carrier be liable for any loss of possible profits or any consequential loss. The carrier shall not be
liable for any loss of or any damage to or in any connection with, goods in an amount exceeding
One Hundred thousand Yen in Japanese Currency (Y100,000.00) or its equivalent in any other
currency per package or customary freight unit (whichever is least) unless the value of the goods
higher than this amount is declared in writing by the shipper before receipt of the goods by the
carrier and inserted in the Bill of Lading and extra freight is paid as required. (Emphasis supplied)

Pertinent provisions that is applicable as to this case:

52
 Art. 1749. A stipulation that the common carrier's liability is limited to the value of the goods
appearing in the bill of lading, unless the shipper or owner declares a greater value, is binding.
Art. 1750. A contract fixing the sum that may be recovered by the owner or shipper for the loss,
destruction, or deterioration of the goods is valid, if it is reasonable and just under the
circumstances, and has been freely and fairly agreed upon.
Pursuant to the afore-quoted provisions of law, it is required that the stipulation limiting the common carrier's
liability for loss must be "reasonable and just under the circumstances, and has been freely and fairly agreed
upon."
The above stipulations are reasonable and just. In the bill of lading, the carrier made it clear that its liability
would only be up to One Hundred Thousand (Y100,000.00) Yen. However, the shipper, Maruman Trading,
had the option to declare a higher valuation if the value of its cargo was higher than the limited liability of
the carrier. Considering that the shipper did not declare a higher valuation, it had itself to blame for not
complying with the stipulations.

2. Private Respondents are still bound by the stipulations of the bill of lading
In Sea-Land Service, Inc. vs. Intermediate Appellate Court (supra), it was held that even if the consignee
was not a signatory to the contract of carriage between the shipper and the carrier, the consignee can still
be bound by the contract.

RULING:
The decision of the Court of Appeals is hereby REVERSED and SET ASIDE.
In fine, the liability of petitioner for the loss of the cargo is limited to One Hundred Thousand (Y100,000.00)
Yen, pursuant to Clause 18 of the bill of lading..

53
 VIII. Carriage of Passengers
a) Baritua vs Mereader
b) Japan Airlines vs CA
c) Tin vs Arriesgado
d) Yobido vs CA
e) Baliwag Transit vs CA
f) Sabena Belgian World Airlines vs CA
g) Estacion vs Bernardo
h) Calalas vs CA
i) Singapore Airlines vs Fernandez
j) British Airways vs CA
k) Yu Eng Cho vs Pan Am
l) Morris vs CA
m) Japan Airlines vs Asuncion
n) Japan Airlines vs Simangan
o) Cathay Pacific vs Vasquez
p) Tan vs Northwest Airlines
q) Santos III vs Northwest Orient Airlines
This case involves the Proper interpretation of Article 28(1) of the Warsaw Convention, reading as follows:
Art. 28. (1) An action for damage must be brought at the option of the plaintiff, in the territory of one
of the High Contracting Parties, either before the court of
1. the court of the domicile of the carrier;
2. the court of its principal place of business;
3. the court where it has a place of business through which the contract had been made;
4. the court of the place of destination.

FACTS: SANTOS III is a minor and a resident of the Philippines. Northwest Orient Airlines (NOA) is a
foreign corporation with principal office in Minnesota, U.S.A. and licensed to do business and maintain a
branch office in the Philippines. 1986, the SANTOS III purchased from NOA a round-trip ticket in San
Francisco. U.S.A., for his flight from San Francisco to Manila via Tokyo and back. The scheduled departure
date from Tokyo was December 20, 1986. No date was specified for his return to San Francisco. 1 However,
when SANTOS III checked in at the NOA counter in the San Francisco airport for his scheduled departure
to Manila he was informed that he had no reservation for his flight. He therefore had to be wait-listed.

SANTOS III sued NOA for damages in the RTC Makati. On April 13, 1987, NOA moved to dismiss the
complaint on the ground of lack of jurisdiction. Citing the above-quoted article, it contended that the
complaint could be instituted only in accordance with 28(1) of the Warsaw Convention.

NOA contended that the Philippines was not its domicile nor was this its principal place of business. Neither
was the SANTOS IIIs ticket issued in this country nor was his destination Manila but San Francisco in the
United States.

2 MAJOR ISSUES, viz:

(1) the constitutionality of Article 28(1) of the Warsaw Convention; and
(2) the jurisdiction of Philippine courts over the case.

HELD:
THE ISSUE OF CONSTITUTIONALITY
A. The petitioner claims that the lower court erred in not ruling that Article 28(1) of the Warsaw
Convention violates the constitutional guarantees of due process and equal protection.

The Republic of the Philippines is a party to the Convention for the Unification of Certain Rules Relating to
International Transportation by Air, otherwise known as the Warsaw Convention. It took effect on February
13, 1933. The Convention was concurred in by the Senate, through its Resolution No. 19, on May 16, 1950.
The Philippine instrument of accession was signed by President Elpidio Quirino on October 13, 1950, and
was deposited with the Polish government on November 9, 1950. The Convention became applicable to
the Philippines on February 9, 1951. On September 23, 1955, President Ramon Magsaysay issued
Proclamation No. 201, declaring our formal adherence thereto. "to the end that the same and every article
54
 and clause thereof may be observed and fulfilled in good faith by the Republic of the Philippines and the
citizens thereof." 5 The Convention is thus a treaty commitment voluntarily assumed by the Philippine
government and, as such, has the force and effect of law in this country.

The petitioner contends that Article 28(1) cannot be applied in the present case because it is
unconstitutional. He argues that there is no substantial distinction between a person who purchases a ticket
in Manila and a person who purchases his ticket in San Francisco. The classification of the places in which
actions for damages may be brought is arbitrary and irrational and thus violates the due process and equal
protection clauses.

The treaty which is the subject matter of this petition was a joint legislative-executive act. The
presumption is that it was first carefully studied and determined to be constitutional before it was
adopted and given the force of law in this country. The petitioner's allegations are not convincing
enough to overcome this presumption. Apparently, the Convention considered the four places designated
in Article 28 the most convenient forums for the litigation of any claim that may arise between the airline
and its passenger, as distinguished from all other places. At any rate, we agree with the respondent court
that this case can be decided on other grounds without the necessity of resolving the constitutional issue.

The Warsaw drafters wished to create a system of liability rules that would cover all the hazards of air travel
. . . The Warsaw delegates knew that, in the years to come, civil aviation would change in ways that they
could not foresee. They wished to design a system of air law that would be both durable and flexible enough
to keep pace with these changes . . . The ever-changing needs of the system of civil aviation can be served
within the framework they created.
It is true that at the time the Warsaw Convention was drafted, the airline industry was still in its infancy.
However, that circumstance alone is not sufficient justification for the rejection of the treaty at this time. The
changes recited by the petitioner were, realistically, not entirely unforeseen although they were expected
in a general sense only. In fact, the Convention itself, anticipating such developments, contains the following
significant provision:
Article 41. Any High Contracting Party shall be entitled not earlier than two years after the coming
into force of this convention to call for the assembling of a new international conference in order to
consider any improvements which may be made in this convention. To this end, it will communicate
with the Government of the French Republic which will take the necessary measures to make
preparations for such conference.

The treaty may be denounced even without an expressed justification for this action. The conclusion and
renunciation of treaties is the prerogative of the political departments and may not be usurped by the
judiciary. The courts are concerned only with the interpretation and application of laws and treaties in force
and not with their wisdom or efficacy.

B. The petitioner claims that the lower court erred in ruling that the plaintiff must sue in the United
States, because this would deny him the right to access to our courts.
Obviously, the constitutional guaranty of access to courts refers only to courts with appropriate jurisdiction
as defined by law. It does not mean that a person can go to any court for redress of his grievances
regardless of the nature or value of his claim. If the petitioner is barred from filing his complaint before our
courts, it is because they are not vested with the appropriate jurisdiction under the Warsaw Convention,
which is part of the law of our land.

II
THE ISSUE OF JURISDICTION.
A. The petitioner claims that the lower court erred in not ruling that Article 28(1) of the Warsaw
Convention is a rule merely of venue and was waived by defendant when it did not move to dismiss
on the ground of improper venue.

By its own terms, the Convention applies to all international transportation of persons performed by aircraft
for hire.
International transportation is defined in paragraph (2) of Article 1 as follows:
For the purposes of this convention, the expression "international transportation" shall mean
any transportation in which, according to the contract made by the parties, the place of departure
and the place of destination, whether or not there be a break in the transportation or a
transshipment, are situated [either] within the territories of two High Contracting Parties . . .
55
 Whether the transportation is "international" is determined by the contract of the parties, which in
the case of passengers is the ticket. When the contract of carriage provides for the transportation
of the passenger between certain designated terminals "within the territories of two High
Contracting Parties," the provisions of the Convention automatically apply and exclusively govern
the rights and liabilities of the airline and its passenger.

Since the flight involved in the case at bar is international, the same being from the United States to the
Philippines and back to the United States, it is subject to the provisions of the Warsaw Convention, including
Article 28(1), which enumerates the four places where an action for damages may be brought.

A NUMBER OF REASONS TENDS TO SUPPORT THE CHARACTERIZATION OF ARTICLE 28(1) AS

A JURISDICTION AND NOT A VENUE PROVISION.
the wording of Article 32, which indicates the places where the action for damages "must" be
brought, underscores the mandatory nature of Article 28(1).
Such characterization is consistent with one of the objectives of the Convention, which is to
"regulate in a uniform manner the conditions of international transportation by air."
the Convention does not contain any provision prescribing rules of jurisdiction other than Article
28(1), which means that the phrase "rules as to jurisdiction" used in Article 32 must refer only to
Article 28(1). In fact, the last sentence of Article 32 specifically deals with the exclusive enumeration
in Article 28(1) as "jurisdictions," which, as such, cannot be left to the will of the parties regardless
of the time when the damage occurred.

B. The petitioner claims that the lower court erred in not ruling that under Article 28(1) of the Warsaw
Convention, this case was properly filed in the Philippines, because Manila was the destination of
the plaintiff.
The Petitioner contends that the facts of this case are analogous to those in Aanestad v. Air Canada. 16 In
that case, Mrs. Silverberg purchased a round-trip ticket from Montreal to Los Angeles and back to Montreal.
The date and time of departure were specified but not of the return flight. The plane crashed while on route
from Montreal to Los Angeles, killing Mrs. Silverberg. Her administratrix filed an action for damages against
Air Canada in the U.S. District Court of California. The defendant moved to dismiss for lack of jurisdiction
but the motion was denied thus:

. . . It is evident that the contract entered into between Air Canada and Mrs. Silverberg as evidenced by the
ticket booklets and the Flight Coupon No. 1, was a contract for Air Canada to carry Mrs. Silverberg to Los
Angeles on a certain flight, a certain time and a certain class, but that the time for her to return remained
completely in her power. Coupon No. 2 was only a continuing offer by Air Canada to give her a ticket to
return to Montreal between certain dates. . . .

The only conclusion that can be reached then, is that "the place of destination" as used in the Warsaw
Convention is considered by both the Canadian C.T.C. and the United States C.A.B. to describe at least
two "places of destination," viz., the "place of destination" of a particular flight either an "outward
destination" from the "point of origin" or from the "outward point of destination" to any place in Canada.

Thus the place of destination under Art. 28 and Art. 1 of the Warsaw Convention of the flight on which Mrs.
Silverberg was killed, was Los Angeles according to the ticket, which was the contract between the parties
and the suit is properly filed in this Court which has jurisdiction.
The Petitioner avers that the present case falls squarely under the above ruling because the date and time
of his return flight to San Francisco were, as in the Aanestad case, also left open. Consequently, Manila
and not San Francisco should be considered the petitioner's destination.
The private respondent for its part invokes the ruling in Butz v. British Airways, 17 where the United States
District Court (Eastern District of Pennsylvania) said:
. . . Although the authorities which addressed this precise issue are not extensive, both the cases and the
commentators are almost unanimous in concluding that the "place of destination" referred to in the Warsaw
Convention "in a trip consisting of several parts . . . is the ultimate destination that is accorded treaty
jurisdiction." . . .
But apart from that distinguishing feature, I cannot agree with the Court's analysis in Aanestad; whether the
return portion of the ticket is characterized as an option or a contract, the carrier was legally bound to
transport the passenger back to the place of origin within the prescribed time and. the passenger for her
part agreed to pay the fare and, in fact, did pay the fare. Thus there was mutuality of obligation and a
56
 binding contract of carriage, The fact that the passenger could forego her rights under the contract does
not make it any less a binding contract. Certainly, if the parties did not contemplate the return leg of the
journey, the passenger would not have paid for it and the carrier would not have issued a round trip ticket.

We agree with the latter case. The place of destination, within the meaning of the Warsaw Convention, is
determined by the terms of the contract of carriage or, specifically in this case, the ticket between the
passenger and the carrier. Examination of the petitioner's ticket shows that his ultimate destination is San
Francisco. Although the date of the return flight was left open, the contract of carriage between the parties
indicates that NOA was bound to transport the petitioner to San Francisco from Manila. Manila should
therefore be considered merely an agreed stopping place and not the destination.

The petitioner submits that the Butz case could not have overruled the Aanestad case because these
decisions are from different jurisdictions. But that is neither here nor there. In fact, neither of these cases is
controlling on this Court. If we have preferred the Butz case, it is because, exercising our own freedom of
choice, we have decided that it represents the better, and correct, interpretation of Article 28(1).
Article 1(2) also draws a distinction between a "destination" and an "agreed stopping place." It is the
"destination" and not an "agreed stopping place" that controls for purposes of ascertaining jurisdiction
under the Convention.

The contract is a single undivided operation, beginning with the place of departure and ending with the
ultimate destination. The use of the singular in this expression indicates the understanding of the parties to
the Convention that every contract of carriage has one place of departure and one place of destination. An
intermediate place where the carriage may be broken is not regarded as a "place of destination."

C. The petitioner claims that the lower court erred in not ruling that under Art. 28(1) of the Warsaw
Convention, this case was properly filed in the Philippines because the defendant has its domicile
in the Philippines.
Notably, the domicile of the carrier is only one of the places where the complaint is allowed to be filed under
Article 28(1). By specifying the three other places, to wit, the principal place of business of the carrier, its
place of business where the contract was made, and the place of destination, the article clearly meant that
these three other places were not comprehended in the term "domicile."

D. The petitioner claims that the lower court erred in not ruling that Art. 28(1) of the Warsaw
Convention does not apply to actions based on tort.
The petitioner alleges that the gravamen of the complaint is that private respondent acted arbitrarily and in
bad faith, discriminated against the petitioner, and committed a willful misconduct because it canceled his
confirmed reservation and gave his reserved seat to someone who had no better right to it. In short. the
private respondent committed a tort.
Such allegation, he submits, removes the present case from the coverage of the Warsaw Convention. He
argues that in at least two American cases, 21 it was held that Article 28(1) of the Warsaw Convention does
not apply if the action is based on tort.
This position is negated by Husserl v. Swiss Air Transport Company, 22 where the article in question was
interpreted thus:
. . . Assuming for the present that plaintiff's claim is "covered" by Article 17, Article 24 clearly excludes any
relief not provided for in the Convention as modified by the Montreal Agreement. It does not, however, limit
the kind of cause of action on which the relief may be founded; rather it provides that any action based on
the injuries specified in Article 17 "however founded," i.e., regardless of the type of action on which relief is
founded, can only be brought subject to the conditions and limitations established by the Warsaw System.
Presumably, the reason for the use of the phrase "however founded," in two-fold: to accommodate all of
the multifarious bases on which a claim might be founded in different countries, whether under code law or
common law, whether under contract or tort, etc.; and to include all bases on which a claim seeking relief
for an injury might be founded in any one country. In other words, if the injury occurs as described in Article
17, any relief available is subject to the conditions and limitations established by the Warsaw System,
regardless of the particular cause of action which forms the basis on which a plaintiff could seek
relief . . .

The private respondent correctly contends that the allegation of willful misconduct resulting in a tort is
insufficient to exclude the case from the comprehension of the Warsaw Convention. The petitioner has
apparently misconstrued the import of Article 25(l) of the Convention, which reads as follows:

57
 Art. 25 (1). The carrier shall not be entitled to avail himself of the provisions of this Convention
which exclude or limit his liability. if the damage is caused by his willful misconduct or by such
default on his part as, in accordance with the law of the court to which the case is submitted, is
considered to be equivalent to willful misconduct.

It is understood under this article that the court called upon to determine the applicability of the limitation
provision must first be vested with the appropriate jurisdiction. Article 28(1) is the provision in the
Convention which defines that jurisdiction. Article 22 23 merely fixes the monetary ceiling for the liability of
the carrier in cases covered by the Convention. If the carrier is indeed guilty of willful misconduct, it can
avail itself of the limitations set forth in this article. But this can be done only if the action has first been
commenced properly under the rules on jurisdiction set forth in Article 28(1).

r) PAL vs CA 257 S 33 (1996)

s) PAL vs CA 255 S 48 (1996)
t) Northwest Airlines vs CA
u) Mapa vs CA
v) American Airlines vs CA
w) United Airlines vs Uy

IX. Damages
a) Davila vs PAL
b) KLM vs CA
c) United Airlines vs CA
d) Zalamea vs CA
e) Zulueta vs PanAm
f) Lopez vs PAN-AM
g) Victory Liner vs Gammad
h) Sulpicio Lines vs CA
i) People vs More
j) Tugade vs CA

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