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THE LAW ON TRANSPORTATION AND PUBLIC UTILITIES SWU LAW- PHINMA

Atty. Jandel V. Ondangan Instructor

COURSE SYLLABUS

PART I - COMMON CARRIERS

 

5

Definition of Contract of Transportation

5

 

5

Unsworth Transportation International v. CA

6

Agustin Dela Torre v. CA

5

Parties

7

  • 1.1 Carriage of Passengers / Contract to Carry Passenger

7

  • 1.2 Carriage

of

Goods/ Contract to carry Goods

7

Laws and Jurisprudence:

7

Baliwag Transit Corporation v CA

7

Everett Steamship Corp. v. CA

8

British Airways v. CA

8

Perfection -

9

9

10

10

Common carrier

11

11

11

Commonwealth Act No. 146 section 13 par. b as amended

11

11

Test:

11

  • 1.3 First Philippine Industrial Corporation v. CA

11

  • 1.4 Estrellita M. Bascos v. CA

..................................................................................................................

12

  • 1.5 FGU Insurance Corporation v. G. P. Sarmiento Trucking Corporations

13

  • 1.6 Sps. Teodoro and Nanette Perena v. Sps Teresita Phil. Nicolas, et al.

14

  • 1.7 National Steel Corporation v. CA

20

  • 1.8 Sps Cruz v. Holiday

21

Characteristics

21

Broader concept

23

23

23

23

Laws and Jurisprudence:

23

23

National Steel Corporation v. CA

..............................................................................................................

23

a.

Asia Lighterage and Shipping, Inc. v. CA

23

b.

Fabre, Jr. v. CA

......................................................................................................................................

25

c.

Phil. American general insurance Company v. PKS Shipping Co

26

d.

Virgines Calvo v. UCPB General Insurance Co

28

e.

Caltex(phil) v. Sulpicio Lines

29

f.

Loadstar Shipping Co. v. Pioneer Asia Insurance

30

g.

Home Assurance Corp

31

h.

Planters v. CA

......................................................................................................................................

32

i.

A.F Sanchez Brokerage Inc. v. CA

33

Effect of

  • 2. Charter Party

..........................................................................................................................................

33

  • 3. carrier v. Private Carrier

Common

34

a.

Cebu Salvage Corporation v. Philippine Home Assurance Corp

33

b.

Valenzuela Hardwood and Industrial Supply, Inc. v. CA

34

c.

Loadmasters Customs Services, Inc. Glodel Brokerage Corporation

36

  • 4. carrier v. Other contracts

Common

......................................................................................................................

37

a.

Towage - Cargolift Shipping Inc. V. L. Actuario Marketing Co. and Skyland Brokerage

37

  • b. Stevedoring - Mindanao Terminal and Brokerage services v. Phoenix Assurance Co

.........................

38

  • c. Arrastre- Cebu Arrastre Services v. Collector of Internal Revenue

....................................................

40

  • d. Travel Agency- Crisostomo v. CA

........................................................................................................

40

  • 5. Governing Laws

....................................................................................................................................................

41

  • 5.1 Article 1766 of the New Civil Code(NCC)

............................................................................................

41

Article 1753 NCC

  • 5.2 .................................................................................................................................

41

Article

  • 5.3 1732-1766 NCC

........................................................................................................................

41

  • 5.4 National Dev. Company v. CA

...........................................................................................................

41

Mapa v. CA

  • 5.5 ........................................................................................................................................

42

  • 5.6 Alitalia v. Intermediate Appellate Court

...........................................................................................

43

  • 5.7 Philippine Charter Insurance Corpo v. Neptune Orient Lines

..........................................................

43

  • 5.10 .............................................................................................................................................

RA 4136

44

RA 9497

  • 5.11 .............................................................................................................................................

44

  • 6. Nature of business

................................................................................................................................................

44

  • 7. Registered owner rule and Kabit System

.............................................................................................................

44

  • 7.1 Registration laws

........................................................................................................................................
Compulsory registration of motor vehicles

......................................................................................

44

44

  • 7.2 Registered owner rule

................................................................................................................................

44

7.3

Kabit system

...............................................................................................................................................

47

7.4

Pari Delicto Rule

.........................................................................................................................................

49

  • 7.5 Aircrafts and vessels

...................................................................................................................................

50

  • a. PCI leasing and finance, Inc. v. UCPB General Insurance Co

................................................................

44

  • b. Equitable Leasing Corporation v. Lucita Suyon

....................................................................................

45

  • c. Aguilar v. Commercial Savings Bank

...................................................................................................

45

  • d. ...............................................................................................................................

Perez v. Gutierrez

46

Aberlardo Lim

  • e. .......................................................................................................................................

48

  • f. Marketing v. Intermediate Appellate Court

Teja

..................................................................................

49

  • g. Lita Enterprises, Inc. v. IAC

.................................................................................................................

48

  • h. Mariano C Mendoza and Lim v. SPS Gomez and Gomez

....................................................................

49

  • i. Estela Crisostomo v. CA and Caravan Travel and Tours

......................................................................

50

  • 8. Boundary System

..................................................................................................................................................

51

Laws and a. Gregorio “George” Amante and Vicente Amante vs.

Jurisprudence....................................................................................................................................

Bibiano Serwelas

.........................................

51

51

  • b. Oscar Villarama Jr v. CA

........................................................................................................................

52

  • c. Martin Lantaco et al. v. City Judge Francisco R. Llamas

......................................................................

53

d.

Isabelo Doce v. WCC and Dadao Jadao

..............................................................................................

55

  • e. Rodolfo J. Serrano v. Severino Santos Transit and/or Severino Santos

...............................................

55

____________________________________________________________________________________________

PART II OBLIGATION OF THE CARRIER

..................................................................................................................
Philam Insurance Co. v. Chartis Phil Insurance

...................................................................................

Gregorio Anuran, Maria Maligaya v. Buno et al

.................................................................................

57

57

59

Duty to accept

..........................................................................................................................................................

60

FC Fisher v. Yangco Steamship

Co. .....................................................................................................

60

Valid grounds for non- acceptance

..................................................................................................

61

  • Article 356-357-358 of the Code of Commerce(COC) Article

........................................................................

1742 of the NCC ...............................................................................................................................................

......................................................................................................................

Duty to deliver goods

61

61

61

Consequences of delay

.............................................................................................................................................

61

Article Article A. 370 A. 371 A. 372 A. 373 A. 374
Article
Article
A. 370
A. 371
A. 372
A. 373
A. 374

1740

NCC

1747

NCC

COC

COC

COC

COC

COC

61

61

61

61

61

61

61

Rights of passengers in case of delay

.......................................................................................................................

61

  • Article 698 COC

...................................................................................................................................

61

 

Trans-asia Shipping Lines, Inc. v. CA

Trans-asia Shipping Lines, Inc. v. CA

61

Marina regulation Mem. Circular no. 112

64

Place of delivery A. A. A.

Place of delivery  A.  A.  A. 360 368 369 COC COC COC

360

368

369

COC

COC

COC

64

64

64

64

To whom delivered

64

 

64

64

Duty to Exercise Extra-ordinary Diligence

................................................................................................................

65

 

1.1

Code of commerce provisions

65

1.2

Presumption of negligence

.................................................................................................................

65

1.3

Duration of Duty in Carriage of Goods

65

1.4

Commencement of Duty in Carriage of Passengers

65

Laws

and

jurisprudence:

65

a.

Article 1733 of the NCC

65

b.

Artilc 1755 of the NCC

..........................................................................................................................

65

c.

Article

1736 of the NCC

.........................................................................................................................

65

d.

Article of 1737 of the NCC

65

e.

Article of 1738 of the NCC

65

Mariano v. Calleja

65

Belgian Overseas Chartering and Shipping v. Phil. First Ins. Co.,

66

Ganzon v. CA G.R. No. L-48757 May 30, 1998

67

Saludo v. CA

68

Republic

68

Regional Container Lines v. Netherlands Insurance

70

Defenses

of Common Carriers

Defense in Carriage of Passengers

Fortuitous event

Public enemy

Order of Public Authority

Defenses of Carriage of

73

Proximate Causation

73

73

73

73

Improper Packing

73

73

73

Acts of Employees

73

73

73

Leopoldo Poblete vs. Donato Fabros

76

Collin A. Morris vs.

77

Antonia Maranan vs. Pascual Perez, et al,

80

Act of Other Passengers and 3rd persons

81

 

Jose Pilapil vs.

CA

81

Passenger’s baggages

...............................................................................................................................................

83

  • 1.5 Define baggage

83

  • 1.6 Checked-in-Baggage

...........................................................................................................................

84

  • 1.7 Hand Carried baggage

84

Philippine Airlines Inc. vs. CA

85

British Airways vs. CA

93

Philippine Airlines Inc. vs. Hon. Adriano Savillo, et.

97

Obligations of Shipper, Consignee and

Passenger

100

 
  • 1.8 Negligence of Shipper or Passenger

100

  • 1.9 Payment of Freight

100

  • 1.10 will pay the freight

Who

100

  • 1.11 Time to pay the freight

100

Carrier’s lien

  • 1.12 ....................................................................................................................................

100

  • 1.13 Payment of Demurrage

100

PART I - COMMON CARRIERS

Art 1732- Common Carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to the public. Common Carrier one that holds itself out as ready to engage in the transportation of goods for hire as a public employment and not as a casual occupation. (De Guzman v. CA, G.R. No. L-47822, 22 December 1988)

Definition of Contract of Transportation

The movement of persons or things from one place to another, by a carrier.

(Black’s Law Dictionary)

A contract of transportation is whereby a certain person or association of persons obligate themselves to transport persons, things, news from one place to another for a fixed price. It is the removal of goods or persons from one place to another.

Does not presume that the carrier is a common carrier.

Laws and Jurisprudence:

R.A 4136: land Transportation and Traffic Code

Section 3. Words and phrases defined. - As used in this Act:

  • (a) "Motor Vehicle" shall mean any vehicle propelled by any power other than muscular power using the public

highways, but excepting road rollers, trolley cars, street-sweepers, sprinklers, lawn mowers, bulldozers, graders, fork-lifts, amphibian trucks, and cranes if not used on public highways, vehicles which run only on rails or tracks, and tractors, trailers and traction engines of all kinds used exclusively for agricultural purposes. Trailers having any number of wheels, when propelled or intended to be propelled by attachment to a motor vehicle, shall be classified as separate motor vehicle with no power rating.

  • (b) "Passenger automobiles" shall mean all pneumatic-tire vehicles of types similar to those usually known under the

following terms: touring car, command car, speedster, sports car, roadster, jeep, cycle, car (except motor wheel and

similar small outfits which are classified with motorcycles), coupe, landaulet, closed car, limousine, cabriolet, and sedan.

Motor vehicles with changed or rebuilt bodies, such as jeepneys, jitneys, or station wagons, using a chassis of the usual pneumatic-tire passenger automobile type, shall also be classified as passenger automobile, if their net allowable carrying capacity, as determined by the Commissioner of Land Transportation, does not exceed nine passengers and if they are not used primarily for carrying freight or merchandise. The distinction between "passenger truck" and "passenger automobile" shall be that of common usage: Provided, That a motor vehicle registered for more than nine passengers shall be classified as "truck": And Provided, further, That a "truck with seating compartments at the back not used for hire shall be registered under special "S" classifications. In case of dispute, the Commissioner of Land Transportation shall determine the classification to which any special type of motor vehicle belongs.

  • (d) "Driver" shall mean every and any licensed operator of a motor vehicle.

  • (e) "Professional driver" shall mean every and any driver hired or paid for driving or operating a motor vehicle, whether

for private use or for hire to the public. Any person driving his own motor vehicle for hire is a professional driver.

Is a freight forwarder liable as a common carrier?

Unsworth Transportation International v. CA

The term "freight forwarder" refers to a firm holding itself out to the general public (other than as a pipeline, rail, motor, or water carrier) to provide transportation of property for compensation and, in the ordinary course of its business, (1) to assemble and consolidate, or to provide for assembling and consolidating, shipments, and to perform or provide for break-bulk and distribution operations of the shipments; (2) to assume responsibility for the transportation of goods from the place of receipt to the place of destination; and (3) to use for any part of the transportation a carrier subject to the federal law pertaining to common carriers.

A freight forwarder's liability is limited to damages arising from its own negligence, including negligence in choosing the carrier; however, where the forwarder contracts to deliver goods to their destination instead of merely arranging for their transportation, it becomes liable as a common carrier for loss or damage to goods. A freight forwarder assumes the responsibility of a carrier, which actually executes the transport, even though the forwarder does not carry the merchandise itself.

Real and Hypothecary or Limited Liability Rule - May the Charterer invoke the Limited Liability Rule against the owner?

Agustin Dela Torre v. CA

With respect to petitioners position that the Limited Liability Rule under the Code of Commerce should be applied to them, the argument is misplaced. The said rule has been explained to be that of the real and hypothecary doctrine in maritime law where the shipowner or ship agents liability is held as merely co-extensive with his interest in the vessel

such that a total loss thereof results in its extinction. In this jurisdiction, this rule is provided in three articles of the Code of Commerce. These are:

Art. 587. The ship agent shall also be civilly liable for the indemnities in favor of third persons which may arise from the conduct of the captain in the care of the goods which he loaded on the vessel; but he may exempt himself therefrom by abandoning the vessel with all her equipment and the freight it may have earned during the voyage.

--

Art. 590. The co-owners of the vessel shall be civilly liable in the proportion of their interests in the common

fund for the results of the acts of the captain referred to in Art. 587.

Each co-owner may exempt himself from this liability by the abandonment, before a notary, of the part of the vessel belonging to him.

---

Art. 837. The civil liability incurred by shipowners in the case prescribed in this section, shall be understood as

limited to the value of the vessel with all its appurtenances and freightage served during the voyage.

Article 837 specifically applies to cases involving collision which is a necessary consequence of the right to

abandon the vessel given to the shipowner or ship agent under the first provision Article 587. Similarly, Article 590 is a reiteration of Article 587, only this time the situation is that the vessel is co-owned by several persons. Obviously, the

forerunner of the Limited Liability Rule under the Code of Commerce is Article 587. Now, the latter is quite clear on which indemnities may be confined or restricted to the value of the vessel pursuant to the said Rule, and these are the indemnities in favor of third persons which may arise from the conduct of the captain in the care of the goods which he loaded on the vessel. Thus, what is contemplated is the liability to third persons who may have dealt with the shipowner, the agent or even the charterer in case of demise or bareboat charter.

The only person who could avail of this is the shipowner, Concepcion. He is the very person whom the Limited Liability Rule has been conceived to protect.

Later, in the case of Monarch Insurance Co., Inc. v. CA,[28] this Court, this time through Justice Sabino R. De Leon, Jr., again explained:

No vessel, no liability, expresses in a nutshell the limited liability rule. The shipowners or agents liability is merely coextensive with his interest in the vessel such that a total loss thereof results in its extinction. The total destruction of the vessel extinguishes maritime liens because there is no longer any res to which it can attach. This doctrine is based on the real and hypothecary nature of maritime law which has its origin in the prevailing conditions of the maritime trade and sea voyages during the medieval ages, attended by innumerable hazards and perils. To offset against these adverse conditions and to encourage shipbuilding and maritime commerce, it was deemed necessary to confine the liability of the owner or agent arising from the operation of a ship to the vessel, equipment, and freight, or insurance, if

any.[29]

In view of the foregoing, Concepcion as the real shipowner is the one who is supposed to be supported and encouraged to pursue maritime commerce. Thus, it would be absurd to apply the Limited Liability Rule against him who, in the first place, should be the one benefitting from the said rule. In distinguishing the rights between the charterer and the shipowner, the case of Yueng Sheng Exchange and Trading Co. v. Urrutia & Co.[30] is most enlightening. In that case, no less than Chief Justice Arellano wrote:

The whole ground of this assignment of errors rests on the proposition advanced by the appellant company that the charterer of a vessel, under the conditions stipulated in the charter party in question, is the owner pro hac vice of the ship and takes upon himself the responsibilities of the owner. x x x If G. Urrutia & Co., by virtue of the above-mentioned contract, became the agents of the Cebu, then they must respond for the damages claimed, because the owner and the agent are civilly responsible for the acts of the captain.

But G. Urrutia & Co. could not in any way exercise the powers or rights of an agent. They could not represent the ownership of the vessel, nor could they, in their own name and in such capacity, take judicial or extrajudicial steps in all that relates to commerce; thus if the Cebu were attached, they would have no legal capacity to proceed to secure its release; speaking generally, not even the fines could or ought to be paid by them, unless such fines were occasioned by their orders. x x x.

The contract executed by Smith, Bell & Co., as agents for the Cebu, and G. Urrutia & Co., as charterers of the vessel, did not put the latter in the place of the former, nor make them agents of the owner or owners of the vessel. With relation to those agents, they retained opposing rights derived from the charter party of the vessel, and at no time could they be regarded by the third parties, or by the authorities, or by the courts, as being in the place of the owners or the agents in matters relating to the responsibilities pertaining to the ownership and possession of the vessel. x x x.[31]

In Yueng Sheng, it was further stressed that the charterer does not completely and absolutely step into the shoes of the shipowner or even the ship agent because there remains conflicting rights between the former and the real shipowner as derived from their charter agreement. The Court again quotes Chief Justice Arellano:

Their (the charterers) possession was, therefore, the uncertain title of lease, not a possession of the owner, such as is that of the agent, who is fully subrogated to the place of the owner in regard to the dominion, possession, free administration, and navigation of the vessel.[32]

Therefore, even if the contract is for a bareboat or demise charter where possession, free administration and even navigation are temporarily surrendered to the charterer, dominion over the vessel remains with the shipowner. Ergo, the charterer or the sub-charterer, whose rights cannot rise above that of the former, can never set up the Limited Liability Rule against the very owner of the vessel. Borrowing the words of Chief Justice Artemio V. Panganiban, Indeed, where the reason for the rule ceases, the rule itself does not apply.[33]

The Court now comes to the issue of the liability of the charterer and the sub-charterer.

In the present case, the charterer and the sub-charterer through their respective contracts of agreement/charter parties, obtained the use and service of the entire LCT-Josephine. The vessel was likewise manned by the charterer and later by the sub-charterers people. With the complete and exclusive relinquishment of possession, command and

navigation of the vessel, the charterer and later the sub-charterer became the vessels owner pro hac vice. Now, and in the absence of any showing that the vessel or any part thereof was commercially offered for use to the public, the above agreements/charter parties are that of a private carriage where the rights of the contracting parties are primarily defined and governed by the stipulations in their contract.[34]

Parties

  • 1.1 Carriage of Passengers / Contract to Carry Passenger

  • 1. Passenger - one who travels in a public conveyance by virtue of contract, express or implied, with the carrier as to the payment of fare or that which is accepted as an equivalent thereof. (Nueca v. Manila Railroad Co., G.R. No. 31731-R, 30 January 1968)

  • 2. Common Carrier - one that holds itself out as ready to engage in the transportation of goods for hire as a public employment and not as a casual occupation. (De Guzman v. CA, G.R. No. L-47822, 22 December 1988)

    • 1.2 Carriage of Goods/ Contract to carry Goods

    • Shipper is the person who delivers the goods to the carrier for transportation. He is the person who pays the consideration or on whose behalf payment is made.

    • Consignee is the person to whom the goods are to be delivered. • May be the shipper himself where the goods will be delivered to one of the branch offices of the shipper, or • May be a third person who is not actually a party to the contract.

    • Carrier

Laws and Jurisprudence:

Baliwag Transit Corporation v CA

Release of claims

The passenger(George) and his Parents filed an action for damages against carrier(Baliwag) arising from breach of contract of carriage because of an accident which hospitalized the passenger. Carrier filed Motions to Dismiss on the ground that passenger, in consideration of a sum of money had executed a "Release of Claims". Parents disagrees since passenger is still living with them and they shouldered the medical bills.

Held: Release of Claims executed by him, as the injured party, discharging Fortune Insurance and Baliwag from any and all liability is valid. He was then of legal age, a graduating student of Agricultural Engineering, and had the capacity to do acts with legal effect (Article 37 in relation to Article 402, Civil Code). Thus, he could sue and be sued even without the assistance of his parents.

Significantly, the contract of carriage was actually between George, as the paying passenger, and Baliwag, as the

common carrier. As such carrier, Baliwag was bound to carry its passengers safely as far as human care and foresight could provide, and is liable for injuries to them through the negligence or wilful acts of its employees (Articles 1755 and 1759, Civil Code). Thus, George had the right to be safely brought to his destination and Baliwag had the correlative obligation to do so. Since a contract may be violated only by the parties thereto, as against each other, in an action upon that contract, the real parties in interest, either as plaintiff or as defendant, must be parties to said contract (Marimperio Compania Naviera, S.A. vs. Court of Appeals, No. L-40234, December 14, 1987, 156 SCRA 368).

A real party-in-interest -plaintiff is one who has a legal right while a real party-in-interest-defendant is one who has a correlative legal obligation whose act or omission violates the legal right of the former (Lee vs. Romillo, Jr., G.R. No. 60973, May 28, 1988). In the absence of any contract of carriage between Baliwag and George's parents, the latter are not real parties-in-interest in an action for breach of that contract.

Limited Liability

in

the

Bill

of

Lading

Consignee, when bound in the stipulation

in

Bill

of

Lading

Everett Steamship Corp. v. CA

Private respondent imported three crates of bus spare part from its supplier, Maruman Trading Company, Ltd. (Maruman Trading), a foreign corporation based in Inazawa, Aichi, Japan. The crates were shipped from Nagoya to Manila on board ADELFA EVERETTE, a vessel owned by petitioners principal, Everett Orient Lines. The said crates were covered by Bill of Lading No. NGO53MN. one of the crates was missing.

Respondent made Formal 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 docketed as Civil Case No. C-15532, against petitioner before the Regional Trial Court of Caloocan City, Branch 126.

Held: A stipulation in the bill of lading limiting the common carriers liability for loss or destruction of a cargo to a certain sum, unless the shipper or owner declares a greater value, is sanctioned by law, particularly Articles 1749 and 1750 of the Civil Code which provide:

ART. 1749. A stipulation that the common carriers liability is limited to the value of the goods appearing in the bill of lading, unless the shipper or owner declares a greater value, is binding. ART. 1750. A contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction, or deterioration of the goods is valid, if it is reasonable and just under the circumstances, and has been freely and fairly agreed upon. Such limited-liability clause has also been consistently upheld by this Court in a number of cases.

Whether or not private respondent, as consignee, who is not a signatory to the bill of lading is bound by the stipulations thereof. Again, in Sea-Land Service, Inc. vs. Intermediate Appellate Court (supra), we 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. When Hernandez formally claimed reimbursement for the missing goods from Everett and subsequently filed a case against the it based on the very same bill of lading, it accepted the provisions of the contract and thereby made itself a party thereto, or at least has come to court to enforce it.

British Airways v. CA

Facts: Mahtani who wants to go to India asked Mr. Gumar to prepare his travelplans. Mr. Gumar purchased a ticket from British Airways (BA).Since BA had no direct flights from Manila to Bombay, Mahtani had to take a flight to Hongkong via PAL, and upon arrival in Hongkong he had to take a connecting flight to Bombay on board BA. Before departure, Mahtani checked in at PAL counter his two pieces of luggage containing his clothings and personal effects, confident that upon reaching Hongkong, the same would be transferred to the BA flight bound for Bombay.

When Mahtani arrived in Bombay he discovered that his luggage was missing and that upon inquiry from the BA representatives, he was told that the same might have been diverted to London. After waiting for 1 week, BA finally advised him to file a claim by accomplishing the "Property Irregularity Report. In the Philippines, on June 11, 1990 Mahtani filed his complaint for damages and attorney's fees against BA and Mr.Gumar before the RTC.

alleging that the reason for the non-transfer of the luggage was due to the latter's late arrival in Hongkong, thus leaving hardly any time for the proper transfer of Mahtani's luggage to the BA aircraft bound for Bombay.

Held:

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 - applicable in this case (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

Even if a prepaid ticket advice (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

Besides, appellant knew very well that time was of the essence as the prepaid ticket advice had specified the period of compliance therewith, and with emphasis that it could only be used if the passengers fly on BA involvement of the BA in the contract "to carry" was well demonstrated when the it immediately advised First Int'l

Acts of BA indeed constitute malice and evident bad faith which had caused damage and besmirched the reputation and business image fo First Int'l

Perfection

Passengers

  • 1st Type: CONTRACT TO CARRY an agreement to carry the passenger at some future date.

    • (CONSENSUAL IN NATURE hence, PERFECTED BY MERE CONSENT.

  • 2nd Type: CONTRACT OF CARRIAGE OR OF COMMON CARRIAGE

    • (A REAL CONTRACT for not until the facilities of the carrier are actually used can the carrier be said to have already assumed the obligation as a carrier)

Goods

  • 1st Type: CONTRACT TO CARRY an agreement to carry and transport goods at some future date.

    • CONSENSUAL IN NATURE hence, PERFECTED BY MERE CONSENT. (ganzon)

  • 2nd Type: CONTRACT OF CARRIAGE OR OF COMMON CARRIAGE

    • By the act of delivery of the goods, that is, when the goods are unconditionally placed in the possession and control of the carrier, and upon their receipt by the carrier for transportation, the contract of carriage is perfected.

      • 1. AIRCRAFT

        • a) If contract to carry passengers, there is perfection even if no tickets have been issued to said passengers so

long as there was already a meeting of minds with respect to the subject matter and the consideration. (British Airways, Inc. vs. CA, G. R. No. 92288, 9 February 1993)

  • b) If contract of carriage, there is perfection if it can be established that the passenger had checked in at the

departure counter, passed through customs and immigration, boarded the shuttle bus and proceeded to the ramp of the aircraft and that his baggage had already been loaded in the aircraft to be flown with the passenger to his destination. (Korean Airlines Co. Ltd. Vs. CA, G.R. No. 114061, 3 August 1994, 234 SCRA 717, 723)

  • 2. BUSES, JEEPNEYS, STREET CARS

    • a) Once a public utility bus or jeepney stops, it is in effect making a continuous offer to the passengers. Hence,

it is the duty of the drivers to stop their conveyances for a reasonable length of time in order to afford passengers an

opportunity to board and enter.

  • b) Passenger is deemed to be accepting the offer if he is already attempting to board the conveyances and the

contract of carriage is perfected from that point.

  • c) Any injury suffered by the passenger resulting from the sudden starting up of the carrier is already based on

contract.

  • 3. TRAINS

    • a) There is perfection when a person with a bona fide intention to use the facilities of the carrier and

possessing sufficient fare with which to pay for his passage, has presented himself to the carrier for transportation in the place and manner provided.

  • b) Where a person has already purchased a LRT token and while waiting on the platform designated for

boarding fell thereon and hit by the train, he was deemed a passenger.

(LRTA, et.al. Vs. Marjorie Navidad, et.al., G.R. No. 145804, 06 February 2003)

Laws and Jurisprudence:

British Airways v. CA February 9, 1993, 218 SCRA 699 - XXX XXX

Perfection of Contract of carriage of goods Mauro Ganzon v. CA No. L-48757, May 30, 1988

Facts: Gelacio Tumambing contracted the services of Mauro B. Ganzon to haul 305 tons of scrap iron from Mariveles, Bataan, to the port of Manila on board the lighter LCT "Batman".

Pursuant to that agreement, Mauro B. Ganzon sent his lighter "Batman" to Mariveles where it docked in three feet of water. Gelacio Tumambing delivered the scrap iron to defendant Filomeno Niza, captain of the lighter, for loading which was actually begun on the same date by the crew of the lighter under the captain's supervision. When about half of the scrap iron was already loaded, Mayor Advincula of Mariveles, Bataan, arrived and demanded P5,000.00 from Gelacio Tumambing. The latter resisted the shakedown and after a heated argument between them, Mayor Jose Advincula drew his gun and fired at Gelacio Tumambing. The gunshot was not fatal but Tumambing had to be taken to a hospital in Balanga, Bataan, for treatment.

After sometime, the loading of the scrap iron was resumed. But on December 4, 1956, Acting Mayor Basilio Rub, accompanied by three policemen, ordered captain Filomeno Niza and his crew to dump the scrap iron where the lighter was docketed. The rest was brought to the compound of NASSCO. Later on Acting Mayor Rub issued a receipt stating that the Municipality of Mariveles had taken custody of the scrap iron.

SC: By the said act of delivery, the scraps were unconditionally placed in the possession and control of the common carrier, and upon their receipt by the carrier for transportation, the contract of carriage was deemed perfected.

Perfection of Contract of Carriage of Passengers Korean Airlines Co. ltd v. CA

Juanito C. Lapuz, an automotive electrician, was contracted for employment in Jeddah, Saudi Arabia, for a period of one year through Pan Pacific Overseas Recruiting Services, Inc. Lapuz was supposed to leave on November 8, 1980, via Korean Airlines. Initially, he was "wait-listed," which meant that he could only be accommodated if any of the confirmed passengers failed to show up at the airport before departure. When two of such passengers did not appear, Lapuz and another person by the name of Perico were given the two unclaimed seats.

According to Lapuz, he was allowed to check in with one suitcase and one shoulder bag at the check-in counter of KAL. He passed through the customs and immigration sections for routine check-up and was cleared for departure as Passenger No. 157 of KAL Flight No. KE 903. Together with the other passengers, he rode in the shuttle bus and

proceeded to the ramp of the KAL aircraft for boarding. However, when he was at the third or fourth rung of the stairs, a KAL officer pointed to him and shouted "Down! Down!" He was thus barred from taking the flight. When he later asked for another booking, his ticket was canceled by KAL. Consequently, he was unable to report for his work in Saudi Arabia within the stipulated 2-week period and so lost his employment.

KAL, on the other hand, alleged that on November 8, 1980, Pan Pacific Recruiting Services Inc. coordinated with KAL for the departure of 30 contract workers, of whom only 21 were confirmed and 9 were wait-listed passengers. The agent of Pan Pacific, Jimmie Joseph, after being informed that there was a possibility of having one or two seats becoming available, gave priority to Perico, who was one of the supervisors of the hiring company in Saudi Arabia. The other seat was won through lottery by Lapuz. However, only one seat became available and so, pursuant to the earlier agreement that Perico was to be given priority, he alone was allowed to board.

The status of Lapuz as standby passenger was changed to that of a confirmed passenger when his name was entered in the passenger manifest of KAL for its Flight No. KE 903. His clearance through immigration and customs clearly shows that he had indeed been confirmed as a passenger of KAL in that flight. KAL thus committed a breach of the contract of carriage between them when it failed to bring Lapuz to his destination.

This Court has held that a contract to transport passengers is different in kind and degree from any other contractual relation. The business of the carrier is mainly with the traveling public. It invites people to avail themselves of the comforts and advantages it offers. The contract of air carriage generates a relation attended with a public duty. Passengers have the right to be treated by the carrier's employees with kindness, respect, courtesy and due consideration. They are entitled to be protected against personal misconduct, injurious language, indignities and abuses from such employees. So it is that any discourteous conduct on the part of these employees toward a passenger gives the latter an action for damages against the carrier.

KAL argues that "the evidence of confirmation of a chance passenger status is not through the entry of the name of a chance passenger in the passenger manifest nor the clearance from the Commission on Immigration and Deportation, because they are merely means of facilitating the boarding of a chance passenger in case his status is confirmed." We are not persuaded. The evidence presented by Lapuz shows that he had indeed checked in at the departure counter, passed through customs and immigration, boarded the shuttle bus and proceeded to the ramp of KAL's aircraft. In fact, his baggage had already been loaded in KAL's aircraft, to be flown with him to Jeddah. The contract of carriage between him and KAL had already been perfected when he was summarily and insolently prevented from boarding the aircraft.

KAL's allegation that the respondent court abused its discretion in awarding moral and exemplary damages is also not tenable.

Perfection Contract to Carry Passengers

Dangwa Transportation Co., Inc. v CA

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. 15

Common carrier Public service Article 1732 of the New Civil Code

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.

Commonwealth Act No. 146 section 13 par. b as amended

• Includes every person who 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, fraction railway, subway motor vehicle, steamboat, or steamship line ferries, and water craft, shipyard, ice plant, electric light, heat and power or any other public utility. [Sec. 13(b), Act. 146]

De Guzman v. CA

De Guzman a merchant 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. 150 cartons were loaded on a truck driven by respondent himself, while 600 cartons were placed on board the other truck which was driven by Manuel Estrada, respondent's driver and employee. Only 150 boxes of Liberty filled milk were delivered to petitioner. The other 600

boxes never reached petitioner, since the truck which carried these boxes was hijacked by armed men who took with them the truck, its driver, his helper and the cargo. Respondent denied that he was a common carrier and argued that he could not be held responsible for the value of the lost goods, such loss having been due to force majeure. On appeal before the Court of Appeals, respondent urged that the trial court had erred in considering him a common carrier; in finding that he had habitually offered trucking services to the public; in not exempting him from liability on the ground of force majeure; and in ordering him to pay damages and attorney's fees. the issue is whether or not respondent may, under the facts earlier set forth, be properly characterized as a common carrier. The Civil Code defines "common carriers" in the following terms:

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.

The above article makes no distinction between one whose principal business activity is the carrying of persons or

goods or both, and one who does such carrying only as an ancillary activity (in local Idiom as "a sideline"). Article 1732 also carefully avoids making any distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services to the "general public," i.e., the general community or population, and one who offers services or solicits business only from a narrow segment of the general population. 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)

Tests:

May a pipeline concessionaire be liable as a common carrier? First Philippine Industrial Corporation v. CA

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. [15] Based on the above definitions and requirements, there is no doubt that petitioner is a common carrier. It is

engaged in the business of transporting or carrying goods, i.e. petroleum products, for hire as a public employment. It undertakes to carry for all persons indifferently, that is, to all persons who choose to employ its services, and transports

the goods by land and for compensation. The fact that petitioner has a limited clientele does not exclude it from the definition of a common carrier. In De Guzman vs. Court of Appeals [16] we ruled that:

"The above article (Art. 1732, Civil Code) makes no distinction between one whose principal business activity is the

carrying of persons or goods or both, and one who does such carrying only as an ancillary activity (in local idiom, as a 'sideline'). Article 1732 x x x avoids making any distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services to the 'general public,' i.e., the general community or population, and one who offers services or solicits business only from a narrow segment of the general population. We think that Article 1877 deliberately refrained from 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.' "(Underscoring Supplied) Also, respondent's argument that the term "common carrier" as used in Section 133 (j) of the Local Government Code refers only to common carriers transporting goods and passengers through moving vehicles or vessels either by land, sea or water, is erroneous. As correctly pointed out by petitioner, the definition of "common carriers" in the Civil Code makes no distinction as

to the means of transporting, as long as it is by land, water or air. It does not provide that the transportation of the passengers or goods should be by motor vehicle. In fact, in the United States, oil pipe line operators are considered common carriers. [17] Under the Petroleum Act of the Philippines (Republic Act 387), petitioner is considered a "common carrier." Thus,

Article 86 thereof provides that:

"Art. 86. Pipe line concessionaire as a common carrier. - A pipe line shall have the preferential right to utilize installations for the transportation of petroleum owned by him, but is obligated to utilize the remaining transportation capacity pro rata for the transportation of such other petroleum as may be offered by others for transport, and to charge without discrimination such rates as may have been approved by the Secretary of Agriculture and Natural Resources." Republic Act 387 also regards petroleum operation as a public utility. Pertinent portion of Article 7 thereof provides:

"that everything relating to the exploration for and exploitation of petroleum x x and everything relating to the manufacture, refining, storage, or transportation by special methods of petroleum, is hereby declared to be a public utility." (Underscoring Supplied) The Bureau of Internal Revenue likewise considers the petitioner a "common carrier." In BIR Ruling No. 069-83, it declared:

"x x x since [petitioner] is a pipeline concessionaire that is engaged only in transporting petroleum products, it is considered a common carrier under Republic Act No. 387 x x x. Such being the case, it is not subject to withholding tax prescribed by Revenue Regulations No. 13-78, as amended."

Estrellita M. Bascos v. CA

1. CIVIL LAW; COMMON CARRIERS; DEFINED; TEST TO DETERMINE COMMON CARRIER. Article 1732 also carefully avoids making any distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguished between a carrier offering its services to the "general public," i.e., the general community or population, and one who offers services or solicits business only from a narrow segment of the general population. We think that Article 1732 deliberately refrained from making such distinctions."

Facts:

Rodolfo Cipriano, representing CIPTRADE, entered into a hauling contract with Jibfair Shipping Agency Corporation

whereby the former bound itself to haul the latter’s 2000m/tons of soya bean meal from Manila to Calamba. CIPTRADE

subcontracted with petitioner Estrellita Bascos to transport and deliver the 400 sacks of soya beans. Petitioner failed to deliver the cargo, and as a consequence, Cipriano paid Jibfair the amount of goods lost in accordance with their contract. Cipriano demanded reimbursement from petitioner but the latter refused to pay. Cipriano filed a complaint

for breach of contract of carriage. Petitioner denied that there was no contract of carriage since CIPTRADE leased her cargo truck, and that the hijacking was a force majeure. The trial court ruled against petitioner.

Issues:

(1) Was petitioner a common carrier? (2) Was the hijacking referred to a force majeure?

Held:

(1) Article 1732 of the Civil Code defines a common carrier as "(a) person, corporation or firm, or association engaged in the business of carrying or transporting passengers or goods or both, by land, water or air, for compensation, offering their services to the public." The test to determine a common carrier is "whether the given undertaking is a part of the business engaged in by the carrier which he has held out to the general public as his occupation rather than the quantity or extent of the business transacted." In this case, petitioner herself has made the admission that she was in the trucking business, offering her trucks to those with cargo to move. Judicial admissions are conclusive and no evidence is required to prove the same. (2) Common carriers are obliged to observe extraordinary diligence in the vigilance over the goods transported by them. Accordingly, they are presumed to have been at fault or to have acted negligently if the goods are lost, destroyed or deteriorated. There are very few instances when the presumption of negligence does not attach and these instances are enumerated in Article 1734. In those cases where the presumption is applied, the common carrier must prove that it exercised extraordinary diligence in order to overcome the presumption. The presumption of negligence was raised against petitioner. It was petitioner's burden to overcome it. Thus, contrary to her assertion, private respondent need not introduce any evidence to prove her negligence. Her own failure to adduce sufficient proof of extraordinary diligence made the presumption conclusive against her.

FGU Insurance Corporation v. G. P. Sarmiento Trucking Corporations

Lessons Applicable: Loss caused by negligence of the insured (Insurance)

FACTS:

Anco Enterprises Company (ANCO), a partnership between Ang Gui and Co To, was engaged in the shipping business operating two common carriers, M/T ANCO tugboat and D/B Lucio barge that has no engine of its own, it could not maneuver by itself and had to be towed by a tugboat for it to move from one place to another.

San Miguel Corporation (SMC) shipped from Mandaue City, Cebu, on board the D/B Lucio, for towage by M/T ANCO

D/B Lucio was towed by the M/T ANCO arrived and M/T ANCO left the barge immediately. The clouds were dark and the waves were big so SMC’s District Sales Supervisor, Fernando Macabuag, requested ANCO’s representative to transfer the barge to a safer place but it refused so around the midnight, the barge sunk along with 29,210 cases of Pale Pilsen and 500 cases of Cerveza Negra totalling to P1,346,197

When SMC claimed against ANCO it stated that they agreed that it would not be liable for any losses or damages resulting to the cargoes by reason of fortuitous event and it was agreed to be insured with FGU for 20,000 cases or P858,500

ISSUE: W/N FGU should be exempted from liability to ANCO for the lost cargoes because of a fortuitous event and negligence of ANCO.

HELD: YES. Art. 1733.

Common carriers, from the nature of their business and for reasons of public policy are bound to

observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by

them, according to all the circumstances of each case.

Such extraordinary diligence in vigilance over the goods is further expressed in Articles 1734, 1735, and 1745 Nos. 5, 6,

and 7

. .

.

  • Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the same is due to any of the following causes only:

(1)

Flood, storm, earthquake, lightning, or other natural disaster or calamity;

xxx

Art. 1739. In order that the common carrier may be exempted from responsibility, the natural disaster must have

been the proximate and only cause of the loss.

However, the common carrier must exercise due diligence to

prevent or minimize loss before, during and after the occurrence of flood, storm, or other natural disaster in order

that the common carrier may be exempted from liability

for the loss, destruction, or deterioration of the goods

. .

.

  • Caso fortuito or force majeure

  • extraordinary events not foreseeable or avoidable, events that could not be foreseen, or which though foreseen, were inevitable

  • not enough that the event should not have been foreseen or anticipated, as is commonly believed but it must be one impossible to foresee or to avoid - not in this case

  • other vessels in the port of San Jose, Antique, managed to transfer to another place

  • To be exempted from responsibility, the natural disaster should have been the proximate and only cause of the loss. There must have been no contributory negligence on the part of the common carrier.

  • there was blatant negligence on the part of M/T ANCO’s crewmembers, first in leaving the engine-less barge D/B Lucio at the mercy of the storm without the assistance of the tugboat, and again in failing to heed the

request of SMC’s representatives to have the barge transferred to a safer place

  • When evidence show that the insured’s negligence or recklessness is so gross as to be sufficient to constitute a willful act, the insurer must be exonerated.

  • ANCO’s employees is of such gross character that it amounts to a wrongful act which must exonerate FGU

from liability under the insurance contract

  • both the D/B Lucio and the M/T ANCO were blatantly negligent.

Sps. Teodoro and Nanette Perena v. Sps Teresita Phil. Nicolas, et al.

The operator of a. school bus service is a common carrier in the eyes of the law. He is bound to observe extraordinary diligence in the conduct of his business. He is presumed to be negligent when death occurs to a passenger. His liability may include indemnity for loss of earning capacity even if the deceased passenger may only be an unemployed high school student at the time of the accident.

The Case

By petition for review on certiorari, Spouses Teodoro and Nanette Perefia (Perefias) appeal the adverse decision promulgated on November 13, 2002, by which the Court of Appeals (CA) affirmed with modification the decision rendered on December 3, 1999 by the Regional Trial Court (RTC), Branch 260, in Parañaque City that had decreed them jointly and severally liable with Philippine National Railways (PNR), their co-defendant, to Spouses Nicolas and Teresita Zarate (Zarates) for the death of their 15-year old son, Aaron John L. Zarate (Aaron), then a high school student of Don Bosco Technical Institute (Don Bosco).

Antecedents

The Pereñas were engaged in the business of transporting students from their respective residences in Parañaque City to Don Bosco in Pasong Tamo, Makati City, and back. In their business, the Pereñas used a KIA Ceres Van (van) with Plate No. PYA 896, which had the capacity to transport 14 students at a time, two of whom would be seated in the front beside the driver, and the others in the rear, with six students on either side. They employed Clemente Alfaro (Alfaro) as driver of the van. In June 1996, the Zarates contracted the Pereñas to transport Aaron to and from Don Bosco. On August 22, 1996, as on previous school days, the van picked Aaron up around 6:00 a.m. from the Zarates’ residence. Aaron took his place on the left side of the van near the rear door. The van, with its air-conditioning unit turned on and the stereo playing loudly, ultimately carried all the 14 student riders on their way to Don Bosco. Considering that the students were due at Don Bosco by 7:15 a.m., and that they were already running late because of the heavy vehicular traffic on the South Superhighway, Alfaro took the van to an alternate route at about 6:45 a.m. by traversing the narrow path underneath the Magallanes Interchange that was then commonly used by Makati-bound vehicles as a short cut into Makati. At the time, the narrow path was marked by piles of construction materials and parked passenger jeepneys, and the railroad crossing in the narrow path had no railroad warning signs, or watchmen, or other responsible persons manning the crossing. In fact, the bamboo barandilla was up, leaving the railroad crossing open to traversing motorists. At about the time the van was to traverse the railroad crossing, PNR Commuter No. 302 (train), operated by Jhonny Alano (Alano), was in the vicinity of the Magallanes Interchange travelling northbound. As the train neared the railroad crossing, Alfaro drove the van eastward across the railroad tracks, closely tailing a large passenger bus. His view of the oncoming train was blocked because he overtook the passenger bus on its left side. The train blew its horn to warn motorists of its approach. When the train was about 50 meters away from the passenger bus and the van, Alano applied the ordinary brakes of the train. He applied the emergency brakes only when he saw that a collision was imminent. The passenger bus successfully crossed the railroad tracks, but the van driven by Alfaro did not. The train hit the rear end of the van, and the impact threw nine of the 12 students in the rear, including Aaron, out of the van. Aaron landed in the path of the train, which dragged his body and severed his head, instantaneously killing him. Alano fled the

scene on board the train, and did not wait for the police investigator to arrive. Devastated by the early and unexpected death of Aaron, the Zarates commenced this action for damages against Alfaro, the Pereñas, PNR and Alano. The Pereñas and PNR filed their respective answers, with cross-claims against each other, but Alfaro could not be served with summons. At the pre-trial, the parties stipulated on the facts and issues, viz:

A. FACTS:

 there was blatant negligence on the part of M/T ANCO’s crewmembers, first in leaving the

(1) That spouses Zarate were the legitimate parents of Aaron John L. Zarate; (2) Spouses Zarate engaged the services of spouses Pereña for the adequate and safe transportation carriage of the former spouses' son from their residence in Parañaque to his school at the Don Bosco Technical Institute in Makati City; (3) During the effectivity of the contract of carriage and in the implementation thereof, Aaron, the minor son of spouses Zarate died in connection with a vehicular/train collision which occurred while Aaron was riding the contracted carrier Kia Ceres van of spouses Pereña, then driven and operated by the latter's employee/authorized driver Clemente Alfaro, which van collided with the train of PNR, at around 6:45 A.M. of August 22, 1996, within the vicinity of the Magallanes Interchange in Makati City, Metro Manila, Philippines; (4) At the time of the vehicular/train collision, the subject site of the vehicular/train collision was a railroad crossing used by motorists for crossing the railroad tracks; (5) During the said time of the vehicular/train collision, there were no appropriate and safety warning signs and railings at the site commonly used for railroad crossing;

 there was blatant negligence on the part of M/T ANCO’s crewmembers, first in leaving the
 there was blatant negligence on the part of M/T ANCO’s crewmembers, first in leaving the
 there was blatant negligence on the part of M/T ANCO’s crewmembers, first in leaving the
(6) At the material time, countless number of Makati bound public utility and private vehicles used. The Zarates’ claim against the Pere ñas was upon breach of the contract of carriage for the safe transport of Aaron; but that against PNR was based on quasi-delict under Article 2176, Civil Code. In their defense, the Pereñas adduced evidence to show that they had exercised the diligence of a good father of the family in the selection and supervision of Alfaro, by making sure that Alfaro had been issued a driver’s license and had not been involved in any vehicular accident prior to the collision; that their own son had taken the van daily; and that Teodoro Pereña had sometimes accompanied Alfaro in the van’s trips transporting the students to school. For its part, PNR tended to show that the proximate cause of the collision had been the reckless crossing of the van whose driver had not first stopped, looked and listened; and that the narrow path traversed by the van had not been intended to be a railroad crossing for motorists. Ruling of the RTC On December 3, 1999, the RTC rendered its decision , d isposing: WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff and against the defendants ordering them to jointly and severally pay the plaintiffs as follows: (1) (for) the death of Aaron- Php50,000.00; (2) Actual damages in the amount of Php100,000.00; (3) For the loss of earning capacity- Php2,109,071.00; (4) Moral damages in the amount of Php4,000,000.00; (5) Exemplary damages in the amount of Php1,000,000.00; (6) Attorney’s fees in the amount of Php200,000.00; and (7) Cost of suit. SO ORDERED. On June 29, 2000, the RTC denied the Pereñas’ motion for reconsideration , r eiterating that the cooperative gross negligence of the Pereñas and PNR had caused the collision that led to the death of Aaron; and that the damages awarded to the Zarates were not excessive, but based on the established circumstances. The CA’s Ruling Both the Pereñas and PNR appealed (C.A.-G.R. CV No. 68916). PNR assigned the following errors, to wit : The Court a quo erred in: " id="pdf-obj-14-2" src="pdf-obj-14-2.jpg">

(6) At the material time, countless number of Makati bound public utility and private vehicles used on a daily basis the site of the collision as an alternative route and short-cut to Makati; (7) The train driver or operator left the scene of the incident on board the commuter train involved without waiting for the police investigator; (8) The site commonly used for railroad crossing by motorists was not in fact intended by the railroad operator for railroad crossing at the time of the vehicular collision; (9) PNR received the demand letter of the spouses Zarate; (10) PNR refused to acknowledge any liability for the vehicular/train collision; (11) The eventual closure of the railroad crossing alleged by PNR was an internal arrangement between the former and its project contractor; and (12) The site of the vehicular/train collision was within the vicinity or less than 100 meters from the Magallanes station of PNR. B. ISSUES (1) Whether or not defendant-driver of the van is, in the performance of his functions, liable for negligence constituting the proximate cause of the vehicular collision, which resulted in the death of plaintiff spouses' son; (2) Whether or not the defendant spouses Pereña being the employer of defendant Alfaro are liable for any negligence which may be attributed to defendant Alfaro; (3) Whether or not defendant Philippine National Railways being the operator of the railroad system is liable for negligence in failing to provide adequate safety warning signs and railings in the area commonly used by motorists for railroad crossings, constituting the proximate cause of the vehicular collision which resulted in the death of the plaintiff spouses' son; (4) Whether or not defendant spouses Pereña are liable for breach of the contract of carriage with plaintiff-spouses in failing to provide adequate and safe transportation for the latter's son; (5) Whether or not defendants spouses are liable for actual, moral damages, exemplary damages, and attorney's fees; (6) Whether or not defendants spouses Teodorico and Nanette Pereña observed the diligence of employers and school bus operators; (7) Whether or not defendant-spouses are civilly liable for the accidental death of Aaron John Zarate; (8) Whether or not defendant PNR was grossly negligent in operating the commuter train involved in the accident, in allowing or tolerating the motoring public to cross, and its failure to install safety devices or equipment at the site of the accident for the protection of the public; (9) Whether or not defendant PNR should be made to reimburse defendant spouses for any and whatever amount the latter may be held answerable or which they may be ordered to pay in favor of plaintiffs by reason of the action;

(6) At the material time, countless number of Makati bound public utility and private vehicles used. The Zarates’ claim against the Pere ñas was upon breach of the contract of carriage for the safe transport of Aaron; but that against PNR was based on quasi-delict under Article 2176, Civil Code. In their defense, the Pereñas adduced evidence to show that they had exercised the diligence of a good father of the family in the selection and supervision of Alfaro, by making sure that Alfaro had been issued a driver’s license and had not been involved in any vehicular accident prior to the collision; that their own son had taken the van daily; and that Teodoro Pereña had sometimes accompanied Alfaro in the van’s trips transporting the students to school. For its part, PNR tended to show that the proximate cause of the collision had been the reckless crossing of the van whose driver had not first stopped, looked and listened; and that the narrow path traversed by the van had not been intended to be a railroad crossing for motorists. Ruling of the RTC On December 3, 1999, the RTC rendered its decision , d isposing: WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff and against the defendants ordering them to jointly and severally pay the plaintiffs as follows: (1) (for) the death of Aaron- Php50,000.00; (2) Actual damages in the amount of Php100,000.00; (3) For the loss of earning capacity- Php2,109,071.00; (4) Moral damages in the amount of Php4,000,000.00; (5) Exemplary damages in the amount of Php1,000,000.00; (6) Attorney’s fees in the amount of Php200,000.00; and (7) Cost of suit. SO ORDERED. On June 29, 2000, the RTC denied the Pereñas’ motion for reconsideration , r eiterating that the cooperative gross negligence of the Pereñas and PNR had caused the collision that led to the death of Aaron; and that the damages awarded to the Zarates were not excessive, but based on the established circumstances. The CA’s Ruling Both the Pereñas and PNR appealed (C.A.-G.R. CV No. 68916). PNR assigned the following errors, to wit : The Court a quo erred in: " id="pdf-obj-14-6" src="pdf-obj-14-6.jpg">
(6) At the material time, countless number of Makati bound public utility and private vehicles used. The Zarates’ claim against the Pere ñas was upon breach of the contract of carriage for the safe transport of Aaron; but that against PNR was based on quasi-delict under Article 2176, Civil Code. In their defense, the Pereñas adduced evidence to show that they had exercised the diligence of a good father of the family in the selection and supervision of Alfaro, by making sure that Alfaro had been issued a driver’s license and had not been involved in any vehicular accident prior to the collision; that their own son had taken the van daily; and that Teodoro Pereña had sometimes accompanied Alfaro in the van’s trips transporting the students to school. For its part, PNR tended to show that the proximate cause of the collision had been the reckless crossing of the van whose driver had not first stopped, looked and listened; and that the narrow path traversed by the van had not been intended to be a railroad crossing for motorists. Ruling of the RTC On December 3, 1999, the RTC rendered its decision , d isposing: WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff and against the defendants ordering them to jointly and severally pay the plaintiffs as follows: (1) (for) the death of Aaron- Php50,000.00; (2) Actual damages in the amount of Php100,000.00; (3) For the loss of earning capacity- Php2,109,071.00; (4) Moral damages in the amount of Php4,000,000.00; (5) Exemplary damages in the amount of Php1,000,000.00; (6) Attorney’s fees in the amount of Php200,000.00; and (7) Cost of suit. SO ORDERED. On June 29, 2000, the RTC denied the Pereñas’ motion for reconsideration , r eiterating that the cooperative gross negligence of the Pereñas and PNR had caused the collision that led to the death of Aaron; and that the damages awarded to the Zarates were not excessive, but based on the established circumstances. The CA’s Ruling Both the Pereñas and PNR appealed (C.A.-G.R. CV No. 68916). PNR assigned the following errors, to wit : The Court a quo erred in: " id="pdf-obj-14-8" src="pdf-obj-14-8.jpg">
(6) At the material time, countless number of Makati bound public utility and private vehicles used. The Zarates’ claim against the Pere ñas was upon breach of the contract of carriage for the safe transport of Aaron; but that against PNR was based on quasi-delict under Article 2176, Civil Code. In their defense, the Pereñas adduced evidence to show that they had exercised the diligence of a good father of the family in the selection and supervision of Alfaro, by making sure that Alfaro had been issued a driver’s license and had not been involved in any vehicular accident prior to the collision; that their own son had taken the van daily; and that Teodoro Pereña had sometimes accompanied Alfaro in the van’s trips transporting the students to school. For its part, PNR tended to show that the proximate cause of the collision had been the reckless crossing of the van whose driver had not first stopped, looked and listened; and that the narrow path traversed by the van had not been intended to be a railroad crossing for motorists. Ruling of the RTC On December 3, 1999, the RTC rendered its decision , d isposing: WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff and against the defendants ordering them to jointly and severally pay the plaintiffs as follows: (1) (for) the death of Aaron- Php50,000.00; (2) Actual damages in the amount of Php100,000.00; (3) For the loss of earning capacity- Php2,109,071.00; (4) Moral damages in the amount of Php4,000,000.00; (5) Exemplary damages in the amount of Php1,000,000.00; (6) Attorney’s fees in the amount of Php200,000.00; and (7) Cost of suit. SO ORDERED. On June 29, 2000, the RTC denied the Pereñas’ motion for reconsideration , r eiterating that the cooperative gross negligence of the Pereñas and PNR had caused the collision that led to the death of Aaron; and that the damages awarded to the Zarates were not excessive, but based on the established circumstances. The CA’s Ruling Both the Pereñas and PNR appealed (C.A.-G.R. CV No. 68916). PNR assigned the following errors, to wit : The Court a quo erred in: " id="pdf-obj-14-10" src="pdf-obj-14-10.jpg">
(6) At the material time, countless number of Makati bound public utility and private vehicles used. The Zarates’ claim against the Pere ñas was upon breach of the contract of carriage for the safe transport of Aaron; but that against PNR was based on quasi-delict under Article 2176, Civil Code. In their defense, the Pereñas adduced evidence to show that they had exercised the diligence of a good father of the family in the selection and supervision of Alfaro, by making sure that Alfaro had been issued a driver’s license and had not been involved in any vehicular accident prior to the collision; that their own son had taken the van daily; and that Teodoro Pereña had sometimes accompanied Alfaro in the van’s trips transporting the students to school. For its part, PNR tended to show that the proximate cause of the collision had been the reckless crossing of the van whose driver had not first stopped, looked and listened; and that the narrow path traversed by the van had not been intended to be a railroad crossing for motorists. Ruling of the RTC On December 3, 1999, the RTC rendered its decision , d isposing: WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff and against the defendants ordering them to jointly and severally pay the plaintiffs as follows: (1) (for) the death of Aaron- Php50,000.00; (2) Actual damages in the amount of Php100,000.00; (3) For the loss of earning capacity- Php2,109,071.00; (4) Moral damages in the amount of Php4,000,000.00; (5) Exemplary damages in the amount of Php1,000,000.00; (6) Attorney’s fees in the amount of Php200,000.00; and (7) Cost of suit. SO ORDERED. On June 29, 2000, the RTC denied the Pereñas’ motion for reconsideration , r eiterating that the cooperative gross negligence of the Pereñas and PNR had caused the collision that led to the death of Aaron; and that the damages awarded to the Zarates were not excessive, but based on the established circumstances. The CA’s Ruling Both the Pereñas and PNR appealed (C.A.-G.R. CV No. 68916). PNR assigned the following errors, to wit : The Court a quo erred in: " id="pdf-obj-14-12" src="pdf-obj-14-12.jpg">

(10) Whether or not defendant PNR should pay plaintiffs directly and fully on the amounts claimed by the latter in their Complaint by reason of its gross negligence; (11) Whether or not defendant PNR is liable to defendants spouses for actual, moral and exemplary damages and attorney's fees. 2 The Zarates’ claim against the Pereñas was upon breach of the contract of carriage for the safe transport of Aaron; but that against PNR was based on quasi-delict under Article 2176, Civil Code. In their defense, the Pereñas adduced evidence to show that they had exercised the diligence of a good father of the

family in the selection and supervision of Alfaro, by making sure that Alfaro had been issued a driver’s license and had

not been involved in any vehicular accident prior to the collision; that their own son had taken the van daily; and that

Teodoro Pereña had sometimes accompanied Alfaro in the van’s trips transporting the students to school.

For its part, PNR tended to show that the proximate cause of the collision had been the reckless crossing of the van

whose driver had not first stopped, looked and listened; and that the narrow path traversed by the van had not been intended to be a railroad crossing for motorists.

Ruling of the RTC

On December 3, 1999, the RTC rendered its decision, 3 disposing:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff and against

the defendants ordering them to jointly and severally pay the plaintiffs as follows:

(1) (for) the death of Aaron- Php50,000.00; (2) Actual damages in the amount of Php100,000.00; (3) For the loss of earning capacity- Php2,109,071.00; (4) Moral damages in the amount of Php4,000,000.00; (5) Exemplary damages in the amount of Php1,000,000.00;

(6) Attorney’s fees in the amount of Php200,000.00; and

(7) Cost of suit. SO ORDERED. On June 29, 2000, the RTC denied the Pereñas’ motion for reconsideration, 4 reiterating that the cooperative gross negligence of the Pereñas and PNR had caused the collision that led to the death of Aaron; and that the damages

awarded to the Zarates were not excessive, but based on the established circumstances.

The CA’s Ruling

Both the Pereñas and PNR appealed (C.A.-G.R. CV No. 68916).

PNR assigned the following errors, to wit: 5 The Court a quo erred in:

1. In finding the defendant-appellant Philippine National Railways jointly and severally liable together with defendant-appellants spouses Teodorico and Nanette Pereña and defendant-appellant Clemente Alfaro to pay plaintiffs-appellees for the death of Aaron Zarate and damages. 2. In giving full faith and merit to the oral testimonies of plaintiffs-appellees witnesses despite overwhelming documentary evidence on record, supporting the case of defendants-appellants Philippine National Railways. The Pereñas ascribed the following errors to the RTC, namely:

The trial court erred in finding defendants-appellants jointly and severally liable for actual, moral and exemplary damages and attorney’s fees with the other defendants. The trial court erred in dismissing the cross-claim of the appellants Pereñas against the Philippine National Railways and in not holding the latter and its train driver primarily responsible for the incident. The trial court erred in awarding excessive damages and attorney’s fees. The trial court erred in awarding damages in the form of deceased’s loss of earning capacity in the absence of sufficient basis for such an award. On November 13, 2002, the CA promulgated its decision, affirming the findings of the RTC, but limited the moral damages to 2,500,000.00; and deleted the attorney’s fees because the RTC did not state the factual and legal bases, to wit: 6

WHEREFORE, premises considered, the assailed Decision of the Regional Trial Court, Branch 260 of Parañaque City is AFFIRMED with the modification that the award of Actual Damages is reduced to 59,502.76; Moral Damages is reduced to 2,500,000.00; and the award for Attorney’s Fees is Deleted. SO ORDERED. The CA upheld the award for the loss of Aaron’s earning capacity, taking cognizance of the ruling in Cariaga v. Laguna Tayabas Bus Company and Manila Railroad Company, 7 wherein the Court gave the heirs of Cariaga a sum representing the loss of the deceased’s earning capacity despite Cariaga being only a medical student at the time of the fatal incident. Applying the formula adopted in the American Expectancy Table of Mortality:2/3 x (80 - age at the time of death) = life expectancy the CA determined the life expectancy of Aaron to be 39.3 years upon reckoning his life expectancy from age of 21 (the age when he would have graduated from college and started working for his own livelihood) instead of 15 years (his age when he died). Considering that the nature of his work and his salary at the time of Aaron’s death were unknown, it used the prevailing minimum wage of 280.00/day to compute Aaron’s gross annual salary to be 110,716.65, inclusive of the thirteenth month pay. Multiplying this annual salary by Aaron’s life expectancy of 39.3 years, his gross income would aggregate to 4,351,164.30, from which his estimated expenses in the sum of 2,189,664.30 was deducted to finally arrive at P 2,161,500.00 as net income. Due to Aaron’s computed net income turning out to be higher than the amount claimed by the Zarates, only 2,109,071.00, the amount expressly prayed for by them, was granted. On April 4, 2003, the CA denied the Pereñas’ motion for reconsideration. 8 Issues

In this appeal, the Pereñas list the following as the errors committed by the CA, to wit:

I. The lower court erred when it upheld the trial court’s decision holding the petitioners jointly and severally liable to pay damages with Philippine National Railways and dismissing their cross-claim against the latter. II. The lower court erred in affirming the trial court’s decision awarding damages for loss of earning capacity of a minor who was only a high school student at the time of his death in the absence of sufficient basis for such an award. III. The lower court erred in not reducing further the amount of damages awarded, assuming petitioners are liable at all.

The petition has no merit.

Ruling

1.

Were the Pereñas and PNR jointly

and severally liable for damages?

The Zarates brought this action for recovery of damages against both the Pereñas and the PNR, basing their claim against the Pereñas on breach of contract of carriage and against the PNR on quasi-delict.

The RTC found the Pereñas and the PNR negligent. The CA affirmed the findings. We concur with the CA.

To start with, the Pereñas’ defense was that they exercised the diligence of a good father of the family in the selection and supervision of Alfaro, the van driver, by seeing to it that Alfaro had a driver’s license and that he had not been

involved in any vehicular accident prior to the fatal collision with the train; that they even had their own son travel to and from school on a daily basis; and that Teodoro Pereña himself sometimes accompanied Alfaro in transporting the passengers to and from school. The RTC gave scant consideration to such defense by regarding such defense as inappropriate in an action for breach of contract of carriage. We find no adequate cause to differ from the conclusions of the lower courts that the Pereñas operated as a common carrier; and that their standard of care was extraordinary diligence, not the ordinary diligence of a good father of a family. Although in this jurisdiction the operator of a school bus service has been usually regarded as a private carrier, 9 primarily because he only caters to some specific or privileged individuals, and his operation is neither open to the indefinite

public nor for public use, the exact nature of the operation of a school bus service has not been finally settled. This is the occasion to lay the matter to rest. A carrier is a person or corporation who undertakes to transport or convey goods or persons from one place to another, gratuitously or for hire. The carrier is classified either as a private/special carrier or as a common/public carrier. 10 A private carrier is one who, without making the activity a vocation, or without holding himself or itself out to the public as ready to act for all who may desire his or its services, undertakes, by special agreement in a particular instance only, to transport goods or persons from one place to another either gratuitously or for hire. 11 The provisions on ordinary contracts of the Civil Code govern the contract of private carriage.The diligence required of a private carrier is only ordinary, that is, the diligence of a good father of the family. In contrast, a common carrier is a person, corporation, firm or association engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for compensation, offering such services to the public. 12 Contracts of common carriage are governed by the provisions on common carriers of the Civil Code, the Public Service Act, 13 and other special laws relating to transportation. A common carrier is required to observe extraordinary diligence, and is presumed to be at fault or to have acted negligently in case of the loss of the effects of passengers, or the death or injuries to passengers. 14 In relation to common carriers, the Court defined public use in the following terms in United States v. Tan Piaco, 15 viz:

"Public use" is the same as "use by the public". The essential feature of the public use is not confined to privileged individuals, but is open to the indefinite public. It is this indefinite or unrestricted quality

that gives it its public character. In determining whether a use is public, we must look not only to the character of the business to be done, but also to the proposed mode of doing it. If the use is merely optional with the owners, or the public benefit is merely incidental, it is not a public use, authorizing the exercise of the jurisdiction of the public utility commission. There must be, in general, a right which the law compels the owner to give to the general public. It is not enough that the general prosperity of the public is promoted. Public use is not synonymous with public interest. The true criterion by which to judge the character of the use is whether the public may enjoy it by right or only by permission. In De Guzman v. Court of Appeals, 16 the Court noted that Article 1732 of the Civil Code avoided any distinction between a person or an enterprise offering transportation on a regular or an isolated basis; and has not distinguished a carrier offering his services to the general public, that is, the general community or population, from one offering his services only to a narrow segment of the general population. Nonetheless, the concept of a common carrier embodied in Article 1732 of the Civil Code coincides neatly with the notion of public service under the Public Service Act, which supplements the law on common carriers found in the Civil Code. Public service, according to Section 13, paragraph (b) of the Public Service Act, includes:

x x x every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or compensation, with general or limited clientèle, whether permanent or occasional, and done for the 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, ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and power, water supply and power petroleum, sewerage system, wire or wireless communications systems, wire or wireless broadcasting stations and other similar public services. x x

Given the breadth of the aforequoted characterization of a common carrier, the Court has considered as common carriers pipeline operators, 18 custom brokers and warehousemen, 19 and barge operators 20 even if they had limited clientèle. As all the foregoing indicate, the true test for a common carrier is not the quantity or extent of the business actually transacted, or the number and character of the conveyances used in the activity, but whether the undertaking is a part of the activity engaged in by the carrier that he has held out to the general public as his business or occupation. If the undertaking is a single transaction, not a part of the general business or occupation engaged in, as advertised and held out to the general public, the individual or the entity rendering such service is a private, not a common, carrier. The question must be determined by the character of the business actually carried on by the carrier, not by any secret intention or mental reservation it may entertain or assert when charged with the duties and obligations that the law imposes. 21 Applying these considerations to the case before us, there is no question that the Pereñas as the operators of a school bus service were: (a) engaged in transporting passengers generally as a business, not just as a casual occupation; (b) undertaking to carry passengers over established roads by the method by which the business was conducted; and (c) transporting students for a fee. Despite catering to a limited clientèle, the Pereñas operated as a common carrier because they held themselves out as a ready transportation indiscriminately to the students of a particular school living within or near where they operated the service and for a fee. The common carrier’s standard of care and vigilance as to the safety of the passengers is defined by law. Given the nature of the business and for reasons of public policy, the common carrier is 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." 22 Article 1755 of the Civil Code specifies that the common carrier should "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." To successfully fend off liability in an action upon the death or injury to a passenger, the common carrier must prove his or its observance of that extraordinary diligence; otherwise, the legal presumption that he or it was at fault or acted negligently would stand. 23 No device, whether by stipulation, posting of

notices, statements on tickets, or otherwise, may dispense with or lessen the responsibility of the common carrier as defined under Article 1755 of the Civil Code. 24 And, secondly, the Pereñas have not presented any compelling defense or reason by which the Court might now reverse the CA’s findings on their liability. On the contrary, an examination of the records shows that the evidence fully supported the findings of the CA. As earlier stated, the Pereñas, acting as a common carrier, were already presumed to be negligent at the time of the accident because death had occurred to their passenger. 25 The presumption of negligence, being a presumption of law, laid the burden of evidence on their shoulders to establish that they had not been negligent. 26 It was the law no less that required them to prove their observance of extraordinary diligence in seeing to the safe and secure carriage of the passengers to their destination. Until they did so in a credible manner, they stood to be held legally responsible for the death of Aaron and thus to be held liable for all the natural consequences of such death. There is no question that the Pereñas did not overturn the presumption of their negligence by credible evidence. Their defense of having observed the diligence of a good father of a family in the selection and supervision of their driver was not legally sufficient. According to Article 1759 of the Civil Code, their liability as a common carrier did not cease upon proof that they exercised all the diligence of a good father of a family in the selection and supervision of their employee. This was the reason why the RTC treated this defense of the Pereñas as inappropriate in this action for breach of contract of carriage. The Pereñas were liable for the death of Aaron despite the fact that their driver might have acted beyond the scope of his authority or even in violation of the orders of the common carrier. 27 In this connection, the records showed their driver’s actual negligence. There was a showing, to begin with, that their driver traversed the railroad tracks at a point at which the PNR did not permit motorists going into the Makati area to cross the railroad tracks. Although that point had been used by motorists as a shortcut into the Makati area, that fact alone did not excuse their driver into taking that route. On the other hand, with his familiarity with that shortcut, their driver was fully aware of the risks to his passengers but he still disregarded the risks. Compounding his lack of care was that loud music was playing inside the air-conditioned van at the time of the accident. The loudness most probably reduced his ability to hear the warning horns of the oncoming train to allow him to correctly appreciate the lurking dangers on the railroad tracks. Also, he sought to overtake a passenger bus on the left side as both vehicles traversed the railroad tracks. In so doing, he lost his view of the train that was then coming from the opposite side of the passenger bus, leading him to miscalculate his chances of beating the bus in their race, and of getting clear of the train. As a result, the bus avoided a collision with the train but the van got slammed at its rear, causing the fatality. Lastly, he did not slow down or go to a full stop before traversing the railroad tracks despite knowing that his slackening of speed and going to a full stop were in observance of the right of way at railroad tracks as defined by the traffic laws and regulations. 28 He thereby violated a specific traffic regulation on right of way, by virtue of which he was immediately presumed to be negligent. 29 The omissions of care on the part of the van driver constituted negligence, 30 which, according to Layugan v. Intermediate Appellate Court, 31 is "the omission to do something which a reasonable man, guided by those considerations which ordinarily regulate the conduct of human affairs, would do, or the doing of something which a prudent and reasonable man would not do, 32 or as Judge Cooley defines it, ‘(t)he failure to observe for the protection of the interests of another person, that degree of care, precaution, and vigilance which the circumstances justly demand, whereby such other person suffers injury.’" 33 The test by which to determine the existence of negligence in a particular case has been aptly stated in the leading case of Picart v. Smith, 34 thuswise:

The test by which to determine the existence of negligence in a particular case may be stated as follows: Did the defendant in doing the alleged negligent act use that reasonable care and caution which an ordinarily prudent person would have used in the same situation? If not, then he is guilty of negligence. The law here in effect adopts the standard supposed to be supplied by the imaginary conduct of the discreet paterfamilias of the Roman law. The existence of negligence in a given case is not determined by reference to the personal judgment of the actor in the situation before him. The law considers what would be reckless, blameworthy, or negligent in the man of ordinary intelligence and prudence and determines liability by that. The question as to what would constitute the conduct of a prudent man in a given situation must of course be always determined in the light of human experience and in view of the facts involved in the particular case. Abstract speculation cannot here be of much value but this much can be profitably said:

Reasonable men govern their conduct by the circumstances which are before them or known to them. They are not, and are not supposed to be, omniscient of the future. Hence they can be expected to take care only when there is something before them to suggest or warn of danger. Could a prudent man, in the case under consideration, foresee harm as a result of the course actually pursued? If so, it was the duty of the actor to take precautions to guard against that harm. Reasonable foresight of harm, followed by the ignoring of the suggestion born of this prevision, is always necessary before negligence can be held to exist. Stated in these terms, the proper criterion for determining the existence of negligence in a given case is this: Conduct is said to be negligent when a prudent man in the position of the tortfeasor would have foreseen that an effect harmful to another was sufficiently probable to warrant his foregoing the conduct or guarding against its consequences. (Emphasis supplied) Pursuant to the Picart v. Smith test of negligence, the Pereñas’ driver was entirely negligent when he traversed the railroad tracks at a point not allowed for a motorist’s crossing despite being fully aware of the grave harm to be thereby

caused to his passengers; and when he disregarded the foresight of harm to his passengers by overtaking the bus on

the left side as to leave himself blind to the approach of the oncoming train that he knew was on the opposite side of the bus. Unrelenting, the Pereñas cite Phil. National Railways v. Intermediate Appellate Court, 35 where the Court held the PNR solely liable for the damages caused to a passenger bus and its passengers when its train hit the rear end of the bus that was then traversing the railroad crossing. But the circumstances of that case and this one share no similarities. In Philippine National Railways v. Intermediate Appellate Court, no evidence of contributory negligence was adduced against the owner of the bus. Instead, it was the owner of the bus who proved the exercise of extraordinary diligence by preponderant evidence. Also, the records are replete with the showing of negligence on the part of both the Pereñas and the PNR. Another distinction is that the passenger bus in Philippine National Railways v. Intermediate

Appellate Court was traversing the dedicated railroad crossing when it was hit by the train, but the Pereñas’ school van

traversed the railroad tracks at a point not intended for that purpose. At any rate, the lower courts correctly held both the Pereñas and the PNR "jointly and severally" liable for damages arising from the death of Aaron. They had been impleaded in the same complaint as defendants against whom the Zarates had the right to relief, whether jointly, severally, or in the alternative, in respect to or arising out of the accident, and questions of fact and of law were common as to the Zarates. 36 Although the basis of the right to relief of the Zarates (i.e., breach of contract of carriage) against the Pereñas was distinct from the basis of the Zarates’ right to relief against the PNR (i.e., quasi-delict under Article 2176, Civil Code), they nonetheless could be held jointly and severally

liable by virtue of their respective negligence combining to cause the death of Aaron. As to the PNR, the RTC rightly found the PNR also guilty of negligence despite the school van of the Pereñas traversing the railroad tracks at a point not dedicated by the PNR as a railroad crossing for pedestrians and motorists, because the PNR did not ensure the safety of others through the placing of crossbars, signal lights, warning signs, and other permanent safety barriers to prevent vehicles or pedestrians from crossing there. The RTC observed that the fact that a crossing guard had been

assigned to man that point from 7 a.m. to 5 p.m. was a good indicium that the PNR was aware of the risks to others as well as the need to control the vehicular and other traffic there. Verily, the Pereñas and the PNR were joint tortfeasors.

2.

Was the indemnity for loss of

Aaron’s earning capacity proper?

The RTC awarded indemnity for loss of Aaron’s earning capacity. Although agreeing with the RTC on the liability, the CA

modified the amount. Both lower courts took into consideration that Aaron, while only a high school student, had been enrolled in one of the reputable schools in the Philippines and that he had been a normal and able-bodied child prior to his death. The basis for the computation of Aaron’s earning capacity was not what he would have become or what he would have wanted to be if not for his untimely death, but the minimum wage in effect at the time of his death.

Moreover, the RTC’s computation of Aaron’s life expectancy rate was not reckoned from his age of 15 years at the time of his death, but on 21 years, his age when he would have graduated from college. We find the considerations taken into account by the lower courts to be reasonable and fully warranted. Yet, the Pereñas submit that the indemnity for loss of earning capacity was speculative and unfounded.1âwphi1 They cited People v. Teehankee, Jr., 37 where the Court deleted the indemnity for victim Jussi Leino’s loss of earning capacity as a pilot for being speculative due to his having graduated from high school at the International School in Manila only two years before the shooting, and was at the time of the shooting only enrolled in the first semester at the Manila Aero Club to pursue his ambition to become a professional pilot. That meant, according to the Court, that he was for all intents and purposes only a high school graduate. We reject the Pereñas’ submission.

First of all, a careful perusal of the Teehankee, Jr. case shows that the situation there of Jussi Leino was not akin to that of Aaron here. The CA and the RTC were not speculating that Aaron would be some highly-paid professional, like a pilot

(or, for that matter, an engineer, a physician, or a lawyer). Instead, the computation of Aaron’s earning capacity was

premised on him being a lowly minimum wage earner despite his being then enrolled at a prestigious high school like Don Bosco in Makati, a fact that would have likely ensured his success in his later years in life and at work.

And, secondly, the fact that Aaron was then without a history of earnings should not be taken against his parents and in favor of the defendants whose negligence not only cost Aaron his life and his right to work and earn money, but also deprived his parents of their right to his presence and his services as well. Our law itself states that the loss of the earning capacity of the deceased shall be the liability of the guilty party in favor of the heirs of the deceased, and shall in every case be assessed and awarded by the court "unless the deceased on account of permanent physical disability not caused by the defendant, had no earning capacity at the time of his death." 38 Accordingly, we emphatically hold in favor of the indemnification for Aaron’s loss of earning capacity despite him having been unemployed, because compensation of this nature is awarded not for loss of time or earnings but for loss of the deceased’s power or ability to earn money. 39 This favorable treatment of the Zarates’ claim is not unprecedented. In Cariaga v. Laguna Tayabas Bus Company and Manila Railroad Company, 40 fourth-year medical student Edgardo Carriaga’s earning capacity, although he survived the accident but his injuries rendered him permanently incapacitated, was computed to be that of the physician that he dreamed to become. The Court considered his scholastic record sufficient to justify the assumption that he could have finished the medical course and would have passed the medical board examinations in due time, and that he could have possibly earned a modest income as a medical practitioner. Also, in People v. Sanchez, 41 the Court opined that murder and rape victim Eileen Sarmienta and murder victim Allan Gomez could have easily landed good-paying jobs had they graduated in due time, and that their jobs would probably pay them high monthly salaries from 10,000.00 to 15,000.00 upon their graduation. Their earning capacities were computed at rates higher than the minimum wage at the time of their deaths due to their being already senior agriculture students of the University of the Philippines in Los

Baños, the country’s leading educational institution in agriculture.

3.

Were the amounts of damages excessive? The Pereñas plead for the reduction of the moral and exemplary damages awarded to the Zarates in the respective amounts of 2,500,000.00 and 1,000,000.00 on the ground that such amounts were excessive. The plea is unwarranted. The moral damages of 2,500,000.00 were really just and reasonable under the established circumstances of this case because they were intended by the law to assuage the Zarates’ deep mental anguish over their son’s unexpected and violent death, and their moral shock over the senseless accident. That amount would not be too much, considering that it would help the Zarates obtain the means, diversions or amusements that would alleviate their suffering for the loss of their child. At any rate, reducing the amount as excessive might prove to be an injustice, given the passage of a long time from when their mental anguish was inflicted on them on August 22, 1996. Anent the 1,000,000.00 allowed as exemplary damages, we should not reduce the amount if only to render effective the desired example for the public good. As a common carrier, the Pereñas needed to be vigorously reminded to observe their duty to exercise extraordinary diligence to prevent a similarly senseless accident from happening again. Only by an award of exemplary damages in that amount would suffice to instill in them and others similarly situated like them the ever-present need for greater and constant vigilance in the conduct of a business imbued with public interest. WHEREFORE, we DENY the petition for review on certiorari; AFFIRM the decision promulgated on November 13, 2002;

and ORDER the petitioners to pay the costs of suit. SO ORDERED.

National Steel Corporation v. CA

FACTS:

The MV Vlasons I is a vessel which renders tramping service and, as such, does not transport cargo or shipment for the general public. Its services are available only to specific persons who enter into a special contract of charter party with its owner. It is undisputed that the ship is a private carrier. And it is in the capacity that its owner, Vlasons Shipping, Inc., entered into a contract of affreightment or contract of voyage charter hire with National Steel Corporation.

Plaintiff National Steel Corporation (NSC) as Charterer and defendant Vlasons Shipping, Inc. (VSI) as Owner, entered into a Contract of Voyage Charter Hire whereby NSC hired VSI's vessel, the MV "VLASONS I" to make one (1) voyage to load steel products at Iligan City and discharge them at North Harbor, Manila.

The parties stipulated in their contract that the terms and conditions of the NONYOZAI Charter Party shall form part of their terms. The terms "F.I.O.S.T." (Freight In and Out including Stevedoring and Trading) which is used in the shipping business is a standard provision in said Charter Party means that the handling, loading and unloading of the cargoes are the responsibility of the Charterer. Under Paragraph 5 of the NANYOZAI Charter Party, it states, "Charterers to load, stow and discharge the cargo free of risk and expenses to owners.

It also stipulated that the owners shall not be liable for loss of or damage of the cargo arising or resulting from:

unseaworthiness unless caused by want of due diligence on the part of the owners to make the vessel seaworthy, and to secure that the vessel is properly manned, equipped and supplied and to make the holds and all other parts of the vessel in which cargo is carried, fit and safe for its reception, carriage and preservation xxx

In accordance with the Contract of Voyage Charter Hire, the MV "VLASONS I" loaded at plaintiffs pier at Iligan City, the NSC's shipment of 1,677 skids of tinplates and 92 packages of hot rolled sheets for carriage to Manila. The shipment was placed in the 3 hatches of the ship.

The vessel arrived with the cargo at North Harbor, Manila. The following day, when the vessel's 3 hatches containing the shipment were opened by plaintiff's agents, nearly all the skids of tinplates and hot rolled sheets were allegedly found to be wet and rusty.

The cargo was discharged and unloaded by stevedores hired by the Charterer. Unloading was completed after incurring a delay of 11 days due to the heavy rain which interrupted the unloading operations.

MASCO (surveyor hired by the NSC) made a report of its ocular inspection conducted on the cargo, both while it was still on board the vessel and later at the NDC warehouse where the cargo was taken and stored. It found wetting and rusting of the packages of hot rolled sheets and metal covers of the tinplates; that tarpaulin hatch covers were noted torn at various extents; that container/metal casings of the skids were rusting all over. MASCO ventured the opinion that "rusting of the tinplates was caused by contact with SEA WATER sustained while still on board the vessel as a consequence of the heavy weather and rough seas encountered while en route to destination”. It was also reported that MASCO's surveyors drew at random samples of bad order packing materials of the tinplates and delivered the

same to the M.I.T. Testing Laboratories for analysis which affirmed MASCO’s finding.

On the basis of the aforesaid report, NSC filed with the defendant its claim for damages suffered due to the downgrading of the damaged tinplates in the amount of P941K.

Plaintiff formally demanded payment of said claim but defendant VSI refused and failed to pay. In its complaint, it claimed that it sustained losses as a result of the act, neglect and default of the master and crew in the management of

the vessel as well as the want of due diligence on the part of the defendant to make the vessel seaworthy and to make the holds and all other parts of the vessel in which the cargo was carried, fit and safe for its reception, carriage and preservation all in violation of defendant's undertaking under their Contract of Voyage Charter Hire.

Defendant denied liability for the alleged damage claiming that the MV "VLASONS I" was seaworthy in all respects for the carriage of plaintiff's cargo and that said vessel was not a "common carrier" inasmuch as she was under voyage charter contract with the plaintiff as charterer under the charter party.

RTC ruled in favor of defendant. It held that The MV "VLASONS I" is a vessel of Philippine registry engaged in the tramping service and is available for hire only under special contracts of charter party as in this particular case. It further held that defendant cannot be held liable for it pursuant to Article 1734 of the Civil Case which exempts the carrier from

responsibility for loss or damage arising from the "character of the goods

." All the 1,769 skids of the tinplates could

. . not have been damaged by water as claimed by plaintiff but because of its own “sweating”; and that due to the fact the

vessel encountered rough seas and bad weather on which account the master filed a Marine Protest can be invoked as a defense of force majeure.

CA modified the decision of the RTC by reducing the demurrage and deleting attorneys fees and expenses.

ISSUE:

-

W/N VSI is a private/common carrier? PRIVATE

-

W/N defendant may be held liable on account of the damage of the cargo owned by plaintiff? NO

RULING:

In the instant case, it is undisputed that VSI did not offer its services to the general public. As found by the RTC, it carried passengers or goods only for those it chose under a "special contract of charter party." The MV Vlasons I "was not a common but a private carrier. Consequently, the rights and obligations of VSI and NSC, including their respective liability for damage to the cargo, are determined primarily by stipulations in their contract of private carriage or charter party.

It is clear from the parties' Contract of Voyage Charter Hire that VSI "shall not be responsible for losses except on proven willful negligence of the officers of the vessel." The NANYOZAI Charter Party, which was incorporated in the parties' contract of transportation further provided that the shipowner shall not be liable for loss of or a damage to the cargo arising or resulting from unseaworthiness, unless the same was caused by its lack of due diligence to make the vessel seaworthy or to ensure that the same was "properly manned, equipped and supplied," and to "make the holds and all other parts of the vessel in which cargo was carried, fit and safe for its reception, carriage and preservation."

Because the MV Vlasons I was a private carrier, the shipowner's obligations are governed by the foregoing provisions of

the Code of Commerce and not by the Civil Code which, as a general rule, places the prima facie presumption of negligence on a common carrier. It is a hornbook doctrine that: “In an action against a private carrier for loss of, or

injury to, cargo, the burden is on the plaintiff to prove that the carrier was negligent or unseaworthy, and the fact that

the goods were lost or damaged while in the carrier's custody does not put the burden of proof on the carrier.”

Indicators of VSI’s due diligence:

  • a) It was drylocked and inspected by the Philippine Coast Guard before it proceeded to Iligan City for its voyage to

Manila under the contract of voyage charter hire. The vessel's voyage from Iligan to Manila was the vessel's first voyage after drydocking. The Philippine Coast Guard Station in Cebu cleared it as seaworthy, fitted and equipped; it met all requirements for trading as cargo vessel.

  • b) The records sufficiently support VSI's contention that the ship used the old tarpaulin, only in addition to the new one

used primarily to make the ship's hatches watertight.

  • c) Despite encountering rough weather twice, the new tarpaulin did not give way and the ship's hatches and cargo

holds remained waterproof. Indeed, NSC failed to discharge its burden to show negligence on the part of the officers and the crew of MV Vlasons I. On the contrary, the records reveal that it was the stevedores of NSC who were negligent in unloading the cargo from

the ship. The stevedores employed only a tent-like material to cover the hatches when strong rains occasioned by a passing typhoon disrupted the unloading of the cargo. This tent-like covering, however, was clearly inadequate for keeping rain and seawater away from the hatches of the ship.

The charter party is a normal commercial contract and its stipulations are agreed upon in consideration of many factors, not the least of which is the transport price which is determined not only by the actual costs but also by the risks and burdens assumed by the shipper in regard to possible loss or damage to the cargo. In recognition of such factors, the parties even stipulated that the shipper should insure the cargo to protect itself from the risks it undertook under the charter party. That NSC failed or neglected to protect itself with such insurance should not adversely affect VSI, which had nothing to do with such failure or neglect.

Sps Cruz v. Holiday

Spouses Dante and Leonora Cruz (petitioners) lodged a Complaint on January 25, 2001 against Sun Holidays, Inc. (respondent) with the Regional Trial Court (RTC) of Pasig City for damages arising from the death of their son Ruelito C.

Cruz (Ruelito) who perished with his wife on September 11, 2000 on board the boat M/B Coco Beach III that capsized en route to Batangas from Puerto Galera, Oriental Mindoro where the couple had stayed at Coco Beach Island Resort (Resort) owned and operated by respondent.

The stay of the newly wed Ruelito and his wife at the Resort from September 9 to 11, 2000 was by virtue of a tour package-contract with respondent that included transportation to and from the Resort and the point of departure in Batangas. Miguel C. Matute (Matute), a scuba diving instructor and one of the survivors, gave his account of the incident that led to the filing of the complaint as follows:

Matute stayed at the Resort from September 8 to 11, 2000. He was originally scheduled to leave the Resort in the afternoon of September 10, 2000, but was advised to stay for another night because of strong winds and heavy rains.On September 11, 2000, as it was still windy, Matute and 25 other Resort guests including petitioners' son and his wife trekked to the other side of the Coco Beach mountain that was sheltered from the wind where they boarded M/B Coco Beach III, which was to ferry them to Batangas.Shortly after the boat sailed, it started to rain. As it moved farther away from Puerto Galera and into the open seas, the rain and wind got stronger, causing the boat to tilt from side to side and the captain to step forward to the front, leaving the wheel to one of the crew members. The waves got more unwieldy. After getting hit by two big waves which came one after the other,M/B Coco Beach III capsized putting all passengers underwater.The passengers, who had put on their life jackets, struggled to get out of the boat. Upon seeing the captain, Matute and the other passengers who reached the surface asked him what they could do to save the people who were still trapped under the boat. The captain replied "Iligtas niyo na lang ang sarili niyo" (Just save yourselves). AcCTaD Help came after about 45 minutes when two boats owned by Asia Divers in Sabang, Puerto Galera passed by the capsized M/B Coco Beach III. Boarded on those two boats were 22 persons, consisting of 18 passengers and four crew members, who were brought to Pisa Island. Eight passengers, including petitioners' son and his wife, died during the incident. At the time of Ruelito's death, he was 28 years old and employed as a contractual worker for Mitsui Engineering & Shipbuilding Arabia, Ltd. in Saudi Arabia, with a basic monthly salary of $900. Petitioners, by letter of October 26, 2000, demanded indemnification from respondent for the death of their son in the amount of at least P4,000,000. Respondent denied any responsibility for the incident which it considered to be a fortuitous event. It nevertheless offered, as an act of commiseration, the amount of P10,000 to petitioners upon their signing of a waiver. Petitioners declined, they filed the Complaint, alleging that respondent, as a common carrier, was guilty of negligence in allowing M/B Coco Beach III to sail notwithstanding storm warning bulletins issued by the Philippine Atmospheric, Geophysical and Astronomical Services Administration (PAGASA) as early as 5:00 a.m. of September 11, 2000. Carlos Bonquin, captain of M/B Coco Beach III, averred that the Resort customarily requires four conditions to be met before a boat is allowed to sail, to wit: (1) the sea is calm, (2) there is clearance from the Coast Guard, (3) there is clearance from the captain and (4) there is clearance from the Resort's assistant manager. He added that M/B Coco Beach III met all four conditions on September 11, 2000, but a subasco or squall, characterized by strong winds and big waves, suddenly occurred, causing the boat to capsize. By Decision of February 16, 2005, Branch 267 of the Pasig RTC dismissed petitioners' Complaint and respondent's Counterclaim Petitioners' Motion for Reconsideration having been denied by Order dated September 2, 2005, they appealed to the Court of Appeals.

By Decision of August 19, 2008, the appellate court denied petitioners' appeal, holding, among other things, that the trial court correctly ruled that respondent is a private carrier which is only required to observe ordinary diligence; that respondent in fact observed extraordinary diligence in transporting its guests on board M/B Coco Beach III; and that the proximate cause of the incident was a squall, a fortuitous event. Petitioners' Motion for Reconsideration having been denied by Resolution dated January 16, 2009, they filed the present Petition for Review

 

ISSUE:

1.

WON respondent is a common carrier

2.

WON respondent is guilty of negligence in allowing M/B Coco Beach III sail notwithstanding storm warning bulletins

issued by PAGASA.

HELD:

YES. Petitioners correctly rely on De Guzman v. Court of Appeals in characterizing respondent as a common carrier.

1.

The Civil Code defines "common carriers" in the following terms:

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. The above article makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity (in local idiom, as "a sideline").

Article 1732 also carefully avoids making any distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services to the "general public," i.e., the general community or population, and one who offers services or solicits business only from a narrow segment of the general population.

We think that Article 1733 deliberately refrained from 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.

Indeed, respondent is a common carrier. Its ferry services are so intertwined with its main business as to be properly considered ancillary thereto. The constancy of respondent's ferry services in its resort operations is underscored by its having its own Coco Beach boats. And the tour packages it offers, which include the ferry services, may be availed of by anyone who can afford to pay the same. These services are thus available to the public. That respondent does not charge a separate fee or fare for its ferry services is of no moment. It would be imprudent to suppose that it provides said services at a loss. The Court is aware of the practice of beach resort operators offering tour packages to factor the transportation fee in arriving at the tour package price. That guests who opt not to avail of respondent's ferry services pay the same amount is likewise inconsequential. These guests may only be deemed to have overpaid.

2. YES. A very cautious person exercising the utmost diligence would thus not brave such stormy weather and put other people's lives at risk. The extraordinary diligence required of common carriers demands that they take care of the goods or lives entrusted to their hands as if they were their own. This respondent failed to do.

Respondent cites the squall that occurred during the voyage as the fortuitous event that overturned M/B Coco Beach

III. As reflected above, however, the occurrence of squalls was expected under the weather condition of September 11, 2000. Moreover, evidence shows that M/B Coco Beach III suffered engine trouble before it capsized and sank. The incident was, therefore, not completely free from human intervention. The Court need not belabor how respondent's evidence likewise fails to demonstrate that it exercised due diligence to prevent or minimize the loss before, during and after the occurrence of the squall. As De Guzman instructs, Article 1732 of the Civil Code defining "common carriers" has deliberately refrained from making distinctions on whether the carrying of persons or goods is the carrier's principal business, whether it is offered on a regular basis, or whether it is offered to the general public. The intent of the law is thus to not consider such distinctions. Otherwise, there is no telling how many other distinctions may be concocted by unscrupulous businessmen engaged in the carrying of persons or goods in order to avoid the legal obligations and liabilities of common carriers.

The evidence shows that PAGASA issued 24-hour public weather forecasts and tropical cyclone warnings for shipping on September 10 and 11, 2000 advising of tropical depressions in Northern Luzon which would also affect the province of Mindoro. By the testimony of Dr. Frisco Nilo, supervising weather specialist of PAGASA, squalls are to be expected under such weather condition. Respondent's insistence that the incident was caused by a fortuitous event does not impress either.

The elements of a "fortuitous event" are: (a) 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; (b) the event that constituted the caso fortuito must have been impossible to foresee or, if foreseeable, impossible to avoid; (c) 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.

To fully free a common carrier from any liability, the fortuitous event must have been the proximate and only cause of the loss. And it should have exercised due diligence to prevent or minimize the loss before, during and after the occurrence of the fortuitous event. Article 1764 vis-à-vis Article 2206 of the Civil Code holds the common carrier in breach of its contract of carriage that results in the death of a passenger liable to pay the following: (1) indemnity for death, (2) indemnity for loss of earning capacity and (3) moral damages.

Broader concept Ancillary business Limited clientele Means of transportation Laws and Jurisprudence:

Article 1732 of the New Civil Code

Characteristics

National Steel Corporation v. CA

The true test of a CC is the carriage of goods or passengers, provided it has space for all who opt to avail themselves of its transportation for a fee.

Asia Lighterage and Shipping, Inc. v. CA

FACTS:

Petitioner Asia Lighterage and Shipping, Inc. was contracted as carrier by the consignee, General Milling Corporation, to deliver a cargo to the consignee's warehouse at Pasig City. The cargo, however, did not reach the consignee. The transport of said cargo was suspended due to a warning of an incoming typhoon, however, the petitioner proceeded to pull the barge to Engineering Island off Baseco to seek shelter from the approaching typhoon. A few days after, the barge develop a list because of a hole it sustained after hitting an unseen protruberance underneath the water. Upon reaching the Sta. Mesa spillways, the barge again ran aground due to strong current. To avoid the complete sinking of the barge, a portion of the goods was transferred to three other barges. The next day, the towing bits of the barge broke. It sank completely, resulting in the total loss of the remaining cargo. Private respondent, Prudential Guarantee and Assurance, Inc., as insurer, indemnified the General Milling Corp. for the lost cargo and thus, as subrogee, sought recovery from petitioner, Asia Lighterage. Both the trial court and the appellate court ruled in favor of private respondent.

 

ISSUE:

1.

Whether or not Asia Lighterage is a common carrier?

2.

Whether or not Asia Lighterage exercised extraordinary diligence in it’s care and custody of the consignee’s

cargo?

HELD:

1.

Yes,

Asia Lighterage is a common carrier. Article 1732 of the Civil Code defines common carriers 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. The definition of common carriers in Article 1732 of the Civil Code 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; that there was no distinguishment 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, that Article 1732 does not distinguish between a carrier offering its services to the general public, and one who offers services or solicits business only from a narrow segment of the general population. In the case at bar, the principal business of the petitioner is that of lighterage and drayage and it offers its barges to the

public for carrying or transporting goods by water for compensation. Petitioner is clearly 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 "whether the given undertaking is a part of the business engaged in by the carrier which he has held out to the general public as his occupation rather than the quantity or extent of the business transacted." In the case at bar, the petitioner admitted that it is engaged in the business of shipping and lighterage, offering its barges to the public, despite its limited clientele for carrying or transporting goods by water for compensation.

2.

No,

Petitioner failed to exercise extraordinary diligence in its care and custody of the consignee's goods. Common carriers are bound to observe extraordinary diligence in the vigilance over the goods transported by them. They are presumed to have been at fault or to have acted negligently if the goods are lost, destroyed or deteriorated. To overcome the presumption of negligence in the case of loss, destruction or deterioration of the goods, the common carrier must prove that it exercised extraordinary diligence. There are, however, exceptions to this rule. Article 1734 of the Civil Code enumerates the instances when the presumption of negligence does not attach:

Art. 1734.Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the same is due to any of the following causes only:

(1)Flood, storm, earthquake, lightning, or other natural disaster or calamity; (2)Act of the public enemy in war, whether international or civil; (3)Act 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.

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. 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.

Fabre, Jr. v. CA

DOCTRINE: Due diligence in selection of employees is not satisfied by finding that the applicant possessed a professional driver’s license. The employer should also examine the applicant for his qualifications, experience and record of service. Due diligence in supervision, on the other hand, requires the formulation of rules and regulations for the guidance of employees and the issuance of proper instructions as well as actual implementation and monitoring of consistent compliance with the rules.

FACTS:

  • - Petitioners Engracio Fabre, Jr. and his wife were owners of a 1982 model Mazda minibus. They used the bus principally in connection with a bus service for school children which they operated in Manila.

  • - The couple had a driver, Porfirio J. Cabil, whom they hired in 1981, after trying him out for two weeks. His job was to take school children to and from the St. Scholastica’s College in Malate, Manila.

  • - Private respondent Word for the World Christian Fellowship Inc. (WWCF) arranged with petitioners for the transportation of 33 members of its Young Adults Ministry from Manila to La Union and back in consideration of which private respondent paid petitioners the amount of P3K.

  • - The group was scheduled to leave at 5PM. However, as several members of the party were late, the bus did not leave the Tropical Hut at the corner of Ortigas Avenue and EDSA until 8PM. Petitioner Porfirio Cabil drove the minibus.

  • - The usual route to Caba, La Union was through Carmen, Pangasinan. Petitioner Cabil, who was unfamiliar with the area (it being his first trip to La Union), was forced to take a detour through the town of Ba-ay in Lingayen, Pangasinan. At 11:30PM, he came upon a sharp curve on the highway, running on a south to east direction/“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. The bus hit the left traffic steel brace and sign along the road and rammed the fence of one Jesus Escano, then turned over and landed on its left side, coming to a full stop only after a series of impacts. The bus came to rest off the road. A coconut tree which it had hit fell on it and smashed its front portion.

  • - 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 Lingayen police investigated the incident the next day and subsequently filed a criminal complaint against the driver, Porfirio Cabil. The case was later filed with the RTC Lingayen.

  • - Amyline Antonio, who was seriously injured, brought this case in the RTC Makati. As a result of the accident, she is now suffering from paraplegia and is permanently paralyzed from the waist down. During the trial she described the operations she underwent and adduced evidence regarding the cost of her treatment and therapy.

  • - RTC gave judgment for private respondents ordering petitioners Mr. & Mrs. Engracio Fabre, Jr. and Porfirio Cabil pursuant to articles 2176 and 2180 to pay the respondents jointly and severally. CA affirmed.

ISSUE: W/N common carrier Fabres were negligent, and accordingly, liable to private respondents? YES

RULING:

Pursuant to Arts. 2176 and 2180 of the Civil Code, Cabil’s negligence gave rise to the presumption that his employers, the

Fabres, were themselves negligent in the selection and supervision of their employee.

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. 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 which according to him, was the reason for 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. 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 Cabil’s first one outside of Manila, Cabil should have driven his vehicle at a moderate speed.

Due diligence in selection of employees is not satisfied by finding that the applicant possessed a professional driver’s license. The employer should also examine the applicant for his qualifications, experience and record of service. Due diligence in supervision, on the other hand, requires the formulation of rules and regulations for the guidance of employees and the issuance of proper instructions as well as actual implementation and monitoring of consistent compliance with the rules.

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. Scholastica’s College in Metro Manila. 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.

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.

  • a. Phil. American general insurance Company v. PKS Shipping Co.

DOCTRINE:

Art. 587 of the Code of Commerce is NOT applicable to the case at bar. Simply put, the ship agent is liable for the negligent acts of the captain in the care of goods loaded on the vessel. This liability however can be limited through abandonment of the vessel, its equipment and freightage as provided in Art. 587. Nonetheless, there are exceptional circumstances wherein the ship agent could still be held answerable despite the abandonment, as where the loss or injury was due to the fault of the shipowner and the captain. The international rule is to the effect that the right of

abandonment of vessels, as a legal limitation of a shipowner’s liability, does not apply to cases where the injury or

average was occasioned by the shipowner’s own fault. It must be stressed at this point that Art. 587 speaks only of situations where the fault or negligence is committed solely by the captain. Where the shipowner is likewise to be blamed, Art. 587 will not apply, and such situation will be covered by the provisions of the Civil Code on common carrier.

FACTS:

-

On July 6, 1983, Coca-Cola Bottlers Philippines, Inc., loaded on board “MV Asilda,” a vessel owned and operated by respondent Felman Shipping Lines (FELMAN), 7,500 cases of 1-liter Coca-Cola softdrink bottles to be

transported

from

Zamboanga

City

to

Cebu City for consignee Coca-Cola Bottlers Philippines, Inc., Cebu. The shipment was insured with

petitioner Philippine American General Insurance Co., Inc. (PHILAMGEN).

 

-

“MV Asilda”

left the port of Zamboanga in fine weather at eight o’clock in the evening of the same day.

At

around 8:45AM, July 7, the vessel sank in the waters of Zamboanga del Norte bringing down her entire cargo with her including the subject 7,500 cases of 1-liter Coca-Cola softdrink bottles.

-

On 15 July 1983 the consignee Coca-Cola Bottlers Philippines, Inc., Cebu plant, filed a claim with respondent FELMAN for recovery of damages it sustained as a result of the loss of its softdrink bottles that sank with “MV

Asilda.” FELMAN denied the claim thus prompting the consignee to file an insurance claim with PHILAMGEN which paid its claim of P755,250.

-

Claiming its right of subrogation PHILAMGEN sought recourse against respondent FELMAN which disclaimed any liability for the loss. Consequently, PHILAMGEN sued the shipowner for sum of money and damages.

-

In its complaint PHILAMGEN alleged that the sinking and total loss of “MV Asilda” and its cargo were due to the vessel’s unseaworthiness as she was put to sea in an unstable condition. It further alleged that the vessel was improperly manned and that its officers were grossly negligent in failing to take appropriate measures to proceed to a nearby port or beach after the vessel started to list.

-

FELMAN filed a MTD based on the affirmative defense that no right of subrogation in favor of PHILAMGEN was transmitted by the shipper, and that, in any event, FELMAN had abandoned all its rights, interests and ownership over “MV Asilda” together with her freight and appurtenances for the purpose of limiting and extinguishing its liability under Art. 587 of the Code of Commerce.

-

The trial court dismissed the complaint of PHILAMGEN. On appeal the Court of Appeals set aside the dismissal and remanded the case to the lower court for trial on the merits. FELMAN filed a petition for certiorari with the SC which was subsequently denied.

-

The trial court rendered judgment in favor of FELMAN. It ruled that “MV Asilda” was seaworthy when it left the port of Zamboanga as confirmed by certificates issued by the Philippine Coast Guard and the shipowner’s

surveyor attesting to its seaworthiness. Thus the loss of the vessel and its entire shipment could only be attributed to either a fortuitous event, in which case, no liability should attach unless there was a stipulation to the contrary, or to the negligence of the captain and his crew, in which case, Art. 587 of the Code of Commerce

should apply. Moreover, assuming “MV Asilda” was unseaworthy, still PHILAMGEN could not recover from FELMAN since the assured (Coca-Cola Bottlers Philippines, Inc.) had breached its implied warranty on the vessel’s seaworthiness. Resultantly, the payment made by PHILAMGEN to the assured was an undue, wrong and mistaken payment.

-

PHILAMGEN appealed the decision to the CA. CA rendered judgment finding “MV Asilda” unseaworthy for being top- heavy as 2,500 cases of Coca-Cola softdrink bottles were improperly stowed on deck. In other words, while the vessel possessed the necessary Coast Guard certification indicating its seaworthiness with

respect to the structure of the ship itself, it was not seaworthy with respect to the cargo. Nonetheless, said

court denied the claim of PHILAMGEN on the ground that the assured’s implied warranty of seaworthiness was

not complied with. Perfunctorily, PHILAMGEN was not properly subrogated to the rights and interests of the shipper. Furthermore, respondent court held that the filing of notice of abandonment had absolved the shipowner/agent from liability under the limited liability rule.

ISSUES:

(1) W/N “MV Asilda”

was seaworthy when it left the port of Zamboanga? YES

(2) W/N the limited liability under Art. 587 of the Code of Commerce should apply? NO (3) W/N PHILAMGEN was properly subrogated to the rights and legal actions which the shipper had against FELMAN, the shipowner? YES

RULING:

(1) “MV Asilda” was unseaworthy when it left the port of Zamboanga. In a joint statement, the captain as well as the chief mate of the vessel confirmed that the weather was fine when they left the port of Zamboanga. According to them, the vessel was carrying 7,500 cases of 1-liter Coca-Cola softdrink bottles, 300 sacks of seaweeds, 200 empty CO2

cylinders and an undetermined quantity of empty boxes for fresh eggs. They loaded the empty boxes for eggs and about 500 cases of Coca-Cola bottles on deck. The ship captain stated that around 4AM of 7 July he was awakened by the officer on duty to inform him that the vessel had hit a floating log. At that time he noticed that the weather had deteriorated with strong southeast winds inducing big waves. After thirty minutes he observed that the vessel was listing slightly to starboard and would not correct itself despite the heavy rolling and pitching. He then ordered his crew to shift the cargo from starboard to portside until the vessel was balanced. At about 7AM, the master of the vessel stopped the engine because the vessel was listing dangerously to portside. He ordered his crew to shift the cargo back to starboard. The shifting of cargo took about an hour after which he rang the engine room to resume full speed. After an hour and a half, the vessel suddenly listed to portside and before the captain could decide on his next

move, some of the cargo on deck were thrown overboard and seawater entered the engine room and cargo holds of the vessel. At that instance, the master of the vessel ordered his crew to abandon ship. Shortly thereafter, “MV Asilda” capsized and sank. He ascribed the sinking to the entry of seawater through a hole in the hull caused by the vessel’s collision with a partially submerged log.

The Elite Adjusters, Inc., submitted a report regarding the sinking of “MV Asilda” which was given credence both by the CA and the SC finding that the vessel was top-heavy which is to say that while the vessel may not have been overloaded, yet the distribution or stowage of the cargo on board was done in such a manner that the vessel was in top-heavy condition at the time of her departure and which condition rendered her unstable and unseaworthy for that particular voyage. It is also to be noted that the subject vessel was designed as a fishing vessel and it was not designed to carry a substantial amount or quantity of cargo on deck. Therefore, the report strongly asserted that had her cargo been confined to those that could have been accommodated under deck, her stability would not have been affected and the vessel would not have been in any danger of capsizing, even given the prevailing weather conditions at that time of sinking.

But from the moment that the vessel was utilized to load heavy cargo on its deck, the vessel was rendered

unseaworthy for the purpose of carrying the type of cargo because the weight of the deck cargo so decreased the vessel’s metacentric height as to cause it to become unstable. Thus, the Court held that the proximate cause of the sinking of the M/V “Asilda” was her condition of unseaworthiness arising from her having been top-heavy when she departed from the Port of Zamboanga. Her having capsized and eventually sunk was bound to happen and was therefore in the category of an inevitable occurrence.

(2) Art. 587 of the Code of Commerce is NOT applicable to the case at bar. Simply put, the ship agent is liable for the negligent acts of the captain in the care of goods loaded on the vessel. This liability however can be limited through abandonment of the vessel, its equipment and freightage as provided in Art. 587. Nonetheless, there are exceptional circumstances wherein the ship agent could still be held answerable despite the abandonment, as where the loss or injury was due to the fault of the shipowner and the captain. The international rule is to the effect that the right of

abandonment of vessels, as a legal limitation of a shipowner’s liability, does not apply to cases where the injury or

average was occasioned by the shipowner’s own fault. It must be stressed at this point that Art. 587 speaks only of situations where the fault or negligence is committed solely by the captain. Where the shipowner is likewise to be blamed, Art. 587 will not apply, and such situation will be covered by the provisions of the Civil Code on common carrier.

It was already established at the outset that the sinking of “MV Asilda” was due to its unseaworthiness even at the time of its departure from the port of Zamboanga. It was top-heavy as an excessive amount of cargo was loaded on deck. Closer supervision on the part of the shipowner could have prevented this fatal miscalculation. As such, FELMAN was equally negligent. It cannot therefore escape liability through the expedient of filing a notice of abandonment of the vessel by virtue of Art. 587 of the Code of Commerce. FELMAN, the shipowner, was likewise not able to rebut the presumption of negligence as stated in Art. 1733 of the NCC.

(3) The marine policy issued by PHILAMGEN to the Coca-Cola bottling firm in at least two (2) instances has dispensed with the usual warranty of worthiness. Paragraph 15 of the Marine Open Policy reads “(t)he liberties as per Contract of Affreightment the presence of the Negligence Clause and/or Latent Defect Clause in the Bill of Lading and/or Charter Party and/or Contract of Affreightment as between the Assured and the Company shall not prejudice the insurance. The seaworthiness of the vessel as between the Assured and the Assurers is hereby admitted.” The same clause is present in par. 8 of the Institute Cargo Clauses (F.P.A.) of the policy which states “(t)he seaworthiness of the vessel as between the Assured and Underwriters in hereby admitted x x x x" The result of the admission of seaworthiness by the assurer PHILAMGEN may mean one or two things: (a) that the warranty of the seaworthiness is to be taken as fulfilled; or, (b) that the risk of unseaworthiness is assumed by the insurance company. The insertion of such waiver clauses in cargo policies is in recognition of the realistic fact that

cargo owners cannot control the state of the vessel.

Thus

it

can

be

said that with such categorical

waiver, PHILAMGEN has accepted the risk of unseaworthiness so that if the ship should sink by unseaworthiness, as

what occurred in this case, PHILAMGEN is liable.

PHILAMGEN’s action against FELMAN is squarely sanctioned by Art. 2207 of the Civil Code. Payment by the assurer to

the assured operates as an equitable assignment to the assurer of all the remedies which the assured may have against the third party whose negligence or wrongful act caused the loss. The right of subrogation is not dependent upon, nor does it grow out of any privity of contract or upon payment by the insurance company of the insurance claim. It accrues simply upon payment by the insurance company of the insurance claim.

Virgines Calvo v. UCPB General Insurance Co.,

FACTS:

  • - Virgines Calvo is the owner of Transorient Container Terminal Services, Inc (TCTSI), a sole proprietorship customs broker. Calvo 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 SMC's 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 SMC's 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.

  • - SMC collected payment from respondent UCPB under its insurance contract for the aforementioned amount.

  • - As subrogee of SMC, UCPB brought suit against petitioner in the RTC which rendered judgment finding petitioner Calvo liable to respondent for the damage to the shipment. It held that defendant by reason of the nature of [her] business should have devised ways and means in order to prevent the damage to the cargoes which it is under obligation to take custody of and to forthwith deliver to the consignee. It held that Calvo did not present any evidence on what precaution she performed to prevent the said incident, hence the presumption is that the moment the defendant accepts the cargo she shall perform such extraordinary diligence because of the nature of the cargo.

  • - CA affirmed RTC’s decision.

  • - Petitioner contends that contrary to the findings of the trial court and the CA, 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.

ISSUE: W/N petitioner is a common carrier and is thus liable to respondent? YES

RULING:

There is greater reason for holding petitioner to be a common carrier because the transportation of goods is an integral part of her business. To uphold petitioner's contention would be to deprive those with whom she contracts the protection which the law affords them notwithstanding the fact that the obligation to carry goods for her customers, as already noted, is part and parcel of petitioner's business.

Now, as to petitioner's liability, Art. 1733 of the Civil Code provides:

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. . .

.

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 notwithstanding the fact that some of the containers were deformed, cracked or otherwise damaged.

Contrary to petitioner's assertion, the Survey Report 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 petitioner's employees withdrew the cargo from the arrastre operator, they did so without exception or protest either with regard to the condition of container vans or their contents. To put it simply, Calvo received the shipment in good order and condition and delivered the same to the consignee damaged. CA 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 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.

Anent petitioner's insistence that the cargo could not have been damaged while in her custody as she immediately delivered the containers to SMC's compound, suffice it to say that to prove the exercise of extraordinary diligence, petitioner must do more than merely show the possibility that some other party could be responsible for the damage. It must prove that it used "all reasonable means to ascertain the nature and characteristic of goods tendered for transport and that it exercised due care in the handling thereof. Petitioner failed to do this.

Nor is there basis to exempt provision to apply petitioner from liability under Art. 1734(4) because the rule is that if the improper packing or, in this case, the defect/s in the container, is/are known to the carrier or his employees or apparent upon ordinary observation, but he nevertheless accepts the same without protest or exception notwithstanding such condition, he is not relieved of liability for damage resulting therefrom. 14 In this case, petitioner accepted the cargo without exception despite the apparent defects in some of the container vans. Hence, for failure of petitioner to prove that she exercised extraordinary diligence in the carriage of goods in this case or that she is exempt from liability, the presumption of negligence as provided under Art. 1735.

Facts:

Caltex(phil) v. Sulpicio Lines

On December 20, 1987, motor tanker MV Vector, carrying petroleum products of Caltex, collided in the open sea with passenger ship MV Doña Paz, causing the death of all but 25 of the latter’s passengers. Among those who died were Sebastian Canezal and his daughter Corazon Canezal. On March 22, 1988, the board of marine inquiry found that Vector Shipping Corporation was at fault. On February 13, 1989, Teresita Cañezal and Sotera E. Cañezal, Sebastian Cañezal’s wife and mother respectively, filed with the Regional Trial Court of Manila a complaint for damages arising from breach of contract of carriage against Sulpicio Lines. Sulpicio filed a third-party complaint against Vector and Caltex. The trial court dismissed the complaint against Caltex, but the Court of Appeals included the same in the liability. Hence, Caltex filed this petition.

Issue:

Is the charterer of a sea vessel liable for damages resulting from a collision between the chartered vessel and a

passenger ship?

Held:

First: The charterer has no liability for damages under Philippine Maritime laws.

Petitioner and Vector entered into a contract of affreightment, also known as a 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. 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 ship’s store, pay for the wages of the master of the crew, and defray the expenses for the maintenance of the ship. 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.

Second: MT Vector is a common carrier

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. It is 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. 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. 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. 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.

Third: Is Caltex liable for damages under the Civil Code?

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." The relationship between the parties in this case is governed by special laws. Because of the implied warranty of

seaworthiness, shippers of goods, when transacting with common carriers, are not expected to inquire into the vessel’s

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. 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.

Loadstar Shipping Co. v. Pioneer Asia Insurance

FACTS:

  • - LOADSTAR received on board its M/V "Cherokee" the following goods for shipment: a) 705 bales of lawanit hardwood; b) 27 boxes and crates of tilewood assemblies and the others; and c) 49 bundles of mouldings R & W (d) Apitong Bolidenized.

  • - The goods, amounting to P6M were insured for the same amount with respondent MIC against various risks including "TOTAL LOSS BY TOTAL OF THE LOSS THE VESSEL." The vessel, in turn, was insured by Prudential Guarantee & Assurance, Inc. (hereafter PGAI) for P4 million.

  • - On its way to Manila from the port of Nasipit, Agusan del Norte, the vessel, along with its cargo, sank off Limasawa Island.

  • - As a result of the total loss of its shipment, the consignee made a claim with LOADSTAR which, however, ignored the same.

  • - As the insurer, MIC paid P6M 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. It also prayed that PGAI be ordered to pay the insurance proceeds from the loss the vessel directly to MIC, said amount to be deducted from MIC's claim from LOADSTAR.

  • - LOADSTAR denied any liability for the loss of the shipper's goods and claimed that sinking of its vessel was due to force majeure. PGAI, on the other hand, averred that MIC had no cause of action against it, LOADSTAR being the party insured. In any event, PGAI was later dropped as a party defendant after it paid the insurance proceeds to LOADSTAR.

  • - RTC rendered judgment in favor of MIC, prompting LOADSTAR to elevate the matter to the court of Appeals, which, however, agreed with the trial court and affirmed its decision in toto.

  • - LOADSTAR submits that the vessel was a private carrier because it was not issued a certificate of public convenience, it did not have a regular trip or schedule nor a fixed route, and there was only one shipper, one consignee for a special cargo.

ISSUE: W/N LOADSTAR is a private/common carrier?

RULING:

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

These cases invoked by LOADSTAR are not applicable in the case at bar for the simple reason that the factual settings

are different. The records do not disclose that the M/V "Cherokee," on the date in question, undertook to carry a special cargo or was chartered to a special person only. There was no charter party. The bills of lading failed to show any special arrangement, but only a general provision to the effect that the M/V"Cherokee" was a "general cargo carrier." 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.

Under the facts and circumstances obtaining in this case, LOADSTAR fits the definition of a common carrier under Article 1732 of the Civil Code. The SC upheld the doctrine enshrined in De Guzman v. Court of Appeals, where the Court juxtaposed the statutory definition of "common carriers" with the peculiar circumstances of that case. Art. 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 ancillary activity. Article 1732 also carefully avoids making any distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services to the "general public," i.e., the general community or population, and one who offers services or solicits business only from a narrow segment of the general population.

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.

As regards the issue of seaworthiness of M/V Cherokee, the Court found that the subject vessel 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."

FACTS:

Home Assurance Corp.

· NOV 12, 1984 - Cebu Salvage Corporation (as carrier) and Maria Cristina Chemicals Industries, Inc. [MCCII] (as charterer) entered into a voyage charter wherein CSC was to load 800 to 1,100 metric tons of silica quartz on board the M/T Espiritu Santo at Ayungon, Negros Occidental for transport to and discharge at Tagoloan, Misamis Oriental to consignee Ferrochrome Phils., Inc · DEC 23, 1984, CSC received and loaded 1,100 metric tons of silica quartz on board the M/T Espiritu Santo which left for Misamis the next day à M/T Espiritu Santo sank off the beach of Opol, Misamis Oriental, resulting in the total loss of the

cargo. · MCCII filed a claim for the loss of the shipment with its insurer Philippine Home Assurance Corporation à paid the claim of P211,500 and was subrogated to the rights of MCCII PHAC filed a case against CSC for reimbursement of the amount it paid MCCII à WON IN THE RTC! CSC ordered to reimburse CA affirmed à CSC appealed

·

·

ISSUE: May a carrier be held liable for the loss of cargo resulting from the sinking of a ship it does not own?

· CSC and MCCII entered into a "voyage charter," also known as a contract of affreightment wherein the ship was leased for a single voyage for the conveyance of goods, in consideration of the payment of freight. Under a voyage charter, the shipowner retains the possession, command and navigation of the ship, the charterer or freighter merely having use of the space in the vessel in return for his payment of freight. An owner who retains possession of the ship remains liable as carrier and must answer for loss or non-delivery of the goods received for transportation.

· CSC argues that the voyage of charter is NOT a contract of carriage. It insists that the agreement was merely a contract of hire wherein MCCII hired the vessel from its owner, ALS Timber Enterprises (ALS). Not being the owner of the M/T Espiritu Santo, petitioner did not have control and supervision over the vessel, its master and crew thus, it could not be held liable for the loss of the shipment · SC DISAGREES! à Based on the agreement signed by the parties and the testimony of CSC’s operations manager, it is clear that it was a contract of carriage. · There is no dispute that CSC was a common carrier. At the time of the loss of the cargo, it was engaged in the business of carrying and transporting goods by water, for compensation, and offered its services to the public. · From the nature of their business and for reasons of public policy, common carriers are bound to observe extraordinary diligence over the goods they transport according to the circumstances of each case. In the event of loss of the goods, common carriers are responsible, unless they can prove that this was brought about by the causes specified in Article 1734. In all other cases, common carriers are presumed to be at fault or to have acted negligently, unless they prove that they observed extraordinary diligence. · IN THIS CASE à CSC was the one which contracted with MCCII for the transport of the cargo. It had control over what vessel it would use. All throughout its dealings with MCCII, it represented itself as a common carrier. The fact that it did not own the vessel it decided to use to consummate the contract of carriage did not negate its character and duties as a common carrier.

· Court did said it is not reasonable to expect MCCII to ask about ownership of vesselà As a practical matter, it is very difficult and often impossible for the general public to enforce its rights of action under a contract of carriage if it should be required to know who the actual owner of the vessel is. In fact, in this case, the voyage charter itself denominated petitioner as the "owner/operator" of the vessel

CSC says if there was a contract of carriage à it was between MCCII and ALS as evidenced by the bill of lading ALS issuedà SC DISAGREES AGAIN o A bill of lading may serve as the contract of carriage between the parties BUT it cannot prevail over the express provision of the voyage charter à[I]n cases where a Bill of Lading has been issued by a carrier covering goods shipped aboard a vessel under a charter party, and the charterer is also the holder of the bill of lading, "the bill of lading operates as the receipt for the goods, and as document of title passing the property of the goods, but not as varying the contract between the charterer and the shipowner."

·

·

Coastwise asserts that MCCII should be held liable for its own loss since the voyage charter stipulated that cargo insurance was for the charterer’s account. à This deserves scant consideration. à This simply meant that the charterer would take care of having the goods insured. It could not exculpate the carrier from liability for the breach of its contract of carriage. The law, in fact, prohibits it and condemns it as unjust and contrary to public policy.

Facts:

Planters v. CA

Planters Products, Inc. purchased from Mitsubishi International Corporation 9,329.7069 metric tons of Urea 46%

fertilizer, which the latter shipped aboard the cargo vessel M/V Sun Plum on June 16, 1974. Prior to its voyage, a time-charter party was entered into between Mitsubishi as shipper, and Kyosei Kisen Kabushiki Kaisha as shipowner.

Before loading the fertilizer aboard the vessel, four of her holds were presumably inspected by the charterer’s

representative and found it fit to take the load. After loading the cargo, the steel hatches were closed with heavy iron lids, covered with 3 layers of tarpaulin then tied with steel bonds. It remained sealed throughout the entire voyage.

Upon arrival of the vessel, petitioner unloaded the cargo, which took 11 days. A private marine and cargo surveyor, Cargo Superintendents Company, Inc. (CSCI) was hired by petitioner to determine the outturn of the cargo shipped. CSCI reported shortage of 106.726 metric tons, and contamination of 18 metric tons due to dirt. PPI sent a claim letter against Soriamont Steamship Agencies, the resident agent of KKKK. The request was denied, hence, PPI filed an action

for damages before the CFI Manila. The lower court sustained the petitioner’s claim, but such decision was reversed by

the appellate court, which absolved the carrier from liability. The appellate court ruled that the vessel was a private carrier and not a common carrier by reason of the charter party.

Issues:

(1) Whether a common carrier becomes a private carrier by reason of a charter party

(2) Whether the ship owner was able to prove the exercise of the diligence required under the circumstances

Held:

(1) 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; 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, (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. Contract of affreightment may either be 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. Upon the other hand, the term "common or public carrier" is defined in Art. 1732 of the Civil Code. 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. Article 1733 of the New Civil Code mandates that common carriers, by reason of the nature of their business, should observe extraordinary diligence in the vigilance over the goods they carry. In the case of private carriers, however, the exercise of ordinary diligence in the carriage of goods will suffice. Moreover, in case of loss, destruction or deterioration of the goods, common carriers are presumed to have been at fault or to have acted negligently, and the burden of proving otherwise rests on them. On the contrary, no such presumption applies to private carriers, for whosoever alleges damage to or deterioration of the goods carried has the onus of proving that the cause was the negligence of the carrier. 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 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. (2) 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 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. To our mind, respondent carrier has sufficiently overcome, by clear and convincing proof, the prima facie presumption of negligence. 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. It was also shown during the trial that the hull of the vessel was in good condition, foreclosing the possibility of spillage of the cargo into the sea or seepage of water inside the hull of the vessel. When M/V "Sun Plum" docked at its berthing place, representatives of the consignee boarded, and in the presence of a representative of the shipowner, the foreman, the stevedores, and a cargo surveyor representing CSCI, opened the hatches and inspected the condition of the hull of the vessel. The stevedores unloaded the cargo under the watchful eyes of the shipmates who were overseeing the whole operation on rotation basis. The period during which private respondent was to observe the degree of diligence required of it as a public carrier began from the time the cargo was unconditionally placed in its charge after the vessel's holds were duly inspected and passed scrutiny by the shipper, up to and until the vessel reached its destination and its hull was re-examined by the consignee, but prior to unloading. A shipowner is liable for damage to the cargo resulting from improper stowage only

when the stowing is done by stevedores employed by him, and therefore under his control and supervision, not when the same is done by the consignee or stevedores under the employ of the latter. Common carriers are not responsible for the loss, destruction or deterioration of the goods if caused by the character of the goods or defects in the packaging or in the containers. The primary cause of these spillages is the clamped shell which does not seal very tightly. Also, the wind tends to blow away some of the materials during the unloading process. The probability of the cargo being damaged or getting mixed or contaminated with foreign particles was made greater by the fact that the fertilizer was transported in "bulk," thereby exposing it to the inimical effects of the elements and the grimy condition of the various pieces of equipment used in transporting and hauling it. If there was loss or contamination of the cargo, it was more likely to have occurred while the same was being transported from the ship to the dump trucks and finally to the consignee's warehouse. 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 remiss in the exercise of due diligence in order to minimize the loss or damage to the goods it carried.

A.F Sanchez Brokerage Inc. v. CA,

Principle: Customs broker is engaged in the business of transportation as a common carrier as it obliges itself to undertake to deliver goods to the warehouse for consideration

Facts:

AF Sanchez is engaged in a broker business wherein its main job is to calculate customs duty, fees and charges as well as storage fees for the cargoes. Part also of the services being given by AF Sanchez is the delivery of the shipment to the consignee upon the instruction of the shipper.

Wyett engaged the services of AF Sanchez where the latter delivered the shipment to Hizon Laboratories upon instruction of Wyett. Upon inspection, it was found out that at least 44 cartons containing contraceptives were in bad condition. Wyett claimed insurance from FGU. FGU exercising its right of subrogation claims damages against AF Sanchez who delivered the damaged goods. AF Sanchez contended that it is not a common carrier but a brokerage firm.

Held:

SC held that Art 1732 of the Civil Code in defining common carrier does not distinguish whether the activity is undertaken as a principal activity or merely as an ancillary activity. In this case, while it is true that AF Sanchez is principally engaged as a broker, it cannot be denied from the evidence presented that part of the services it offers to its customers is the delivery of the goods to their respective consignees.

Addendum:

Doctrine of Foul Bill of Lading reservation or protest on a shipment or goods improperly packed.

AF Sanchez claimed that the proximate cause of the damage is improper packing. Under the CC, improper packing of the goods is an exonerating circumstance. But in this case, the SC held that though the goods were improperly packed, since AF Sanchez knew of the condition and yet it accepted the shipment without protest or reservation, the defense is deemed waived.

Effect of Charter Party. Cebu Salvage Corporation v. Philippine Home Assurance Corp.

Principle: Petitioner was the one which contracted with MCCII for the transport of the cargo. It had control over what vessel it would use. All throughout its dealings with MCCII, it represented itself as a common carrier. The fact that it did not own the vessel it decided to use to did not negate its character and duties as a common carrier. The MCCII (respondent’s subrogor) could not be reasonably expected to inquire about the ownership of the vessels which petitioner carrier offered to utilize.

As a practical matter, it is very difficult and often impossible for the general public to enforce its rights of action under a contract of carriage if it should be required to know who the actual owner of the vessel is. In fact, in this case, the voyage charter itself denominated petitioner as the “owner/operator” of the vessel. While it is true that the BOL may serve as a contract of carriage between the parties, it cannot prevail over the express provision of voyage charter that MCCII and petitioner executed

Facts

Petitioner CSC & Maria Christina Chemicals Industries, Inc., (MCCII) entered into a voyage charter wherein CSC was to load 800-1,100 metric tons of silica quartz on board the M/T Espiritu Santo at Ayungon, Negros Occidental for transport to and discharge at Tagoloan, Misamis Oriental to consigned Ferrochrome Phil’s., Inc. Pursuant to the contract, on December 23, 1984, CSC received & loaded 1,100 metric tons of silica quartz on board the M/T Espiritu Santo which left Ayungon for Tagoloan the next day. However, the shipment never reached its destination because the M/T Espiritu Santo sank off the beach of Opol, Misamis Oriental, resulting in the total loss of the cargo.

MCCII filed a claim for the loss of the shipment with its insurer, PHAC. PHAC paid the claim in the amount of P211,500 and

was surrogated to MCCII’s rights. It thereafter filed a case in the RTC against CSC for reimbursement of the amount it paid

MCCII.

However, CSC claims no liability insisting that the agreement was merely a contract of hire wherein MCCII hired the vessel from its owner, ALS Timber Enterprises. Not being the owner of the M/T Espiritu Santo, petitioner did not have control over

the vessel, it’s master & crew. Thus, it could not allegedly be held liable for the loss of the shipment caused by the sinking of a ship it didn’t own.

HELD:

  • 1. Yes. The cargo was loaded on board the vessel; loss/non-delivery of the cargo was proven; and petitioner failed to prove

that it exercised extraordinary diligence to prevent such loss or that it was due to some casualty or force majeure. The voyage charter here being a contract of affreightment, the carrier was answerable for the loss of the goods received for transportation.

  • 2. CSC was the one which contracted with MCCII for the transport of the cargo. It had control over what vessel it would

use. All throughout its dealings with MCCII, it represented itself as a common carrier. The fact that it did not own the

vessel it decided to use to consummate the contract of carriage did not negate its character & duties as a common carrier. The MCCII could not be reasonably expected to inquire about the ownership of the vessels which petitioner carrier offered

to utilize. It is very difficult & often impossible for the general public to enforce its rights of action under a contract of carriage if it should be required to know who the actual owner of the vehicle is. In this case, the voyage charter itself

denominated the petitioner as the “owner/operator” of the vessel.

  • 3. The bill of lading was merely a receipt issued by ALS to evidence the fact that the goods had been received for

transportation. It was not signed by MCCII, as in fact it was simply signed by the supercargo of ALS. This is consistent with the fact that MCCII did not contract directly with ALS. While it is true that a bill of lading may serve as the contract of

carriage between the parties, it cannot prevail over the express provision of the voyage charter that MCCII and petitioner executed.

  • 4. It deserves scant consideration that the voyage charter stipulated that cargo insurance was for the charterer’s account.

This meant that the charterer would take care of having the goods insured. It could not exculpate the carrier from liability

for the breach of its contract of carriage. The law prohibits it and condemns it as unjust & contrary to public policy.

  • 5. The idea proposed by CSC is preposterous & dangerous. MCCII never dealt with ALS and yet petitioner insists that MCCII

should sue ALS for reimbursement for its loss. Certainly, to permit a common carrier to escape its responsibility for the goods it agreed to transport (by expedient of alleging non-ownership of the vessel it employed) would radically derogate from the carrier’s duty of extraordinary diligence. It would also open the door to collusion between the carrier & the supposed owner and to the possible shifting of liability from the carrier to one without any financial capability to answer for

the resulting damages.

Common carrier v. Private Carrier. Valenzuela Hardwood and Industrial Supply, Inc. v. CA

Principle: In a contract of private carriage, the parties may validly stipulate that responsibility for the cargo rests solely on the charterer, exempting the shipowner from liability for loss of or damage to the cargo caused even by the negligence of the ship captain. Pursuant to Article 1306 of the Civil Code, such stipulation is valid because it is freely entered into by the parties and the same is not contrary to law, morals, good customs, public order, or public policy. Indeed, their contract of private carriage is not even a contract of adhesion.

We stress that in a contract of private carriage, the parties may freely stipulate their duties and obligations which perforce would be binding on them. Unlike in a contract involving a common carrier, private carriage does not involve the general public. Hence, the stringent provisions of the Civil Code on common carriers protecting the general public cannot justifiably be applied to a ship transporting commercial goods as a private carrier.

The Facts Plaintiff (Valenzuela Hardwood and Industrial Supply, Inc.) entered into an agreement with the defendant Seven Brothers

(Shipping Corporation) whereby the latter undertook to load on board its vessel M/V Seven Ambassador the former’s lauan

round logs numbering 940 at the port of Maconacon, Isabela for shipment to Manila.

Plaintiff insured the logs against loss and/or damage with defendant South Sea Surety and Insurance Co., Inc. for P2,000,000.00 and the latter issued its Marine Cargo Insurance Policy No. 84/24229 for P2,000,000.00 on said date, the plaintiff gave the check in payment of the premium on the insurance.

The vessel M/V Seven Ambassador sank resulting in the loss of the plaintiff’s insured logs. On 30 January 1984, a check for P5,625.00 (Exh. “E”) to cover payment of the premium and documentary stamps due on the policy was tendered due to the insurer but was not accepted. Instead, the South Sea Surety and Insurance Co., Inc. cancelled the insurance policy it issued as of the date of the inception for non-payment of the premium due in accordance with Section 77 of the Insurance Code.

Plaintiff demanded from defendant South Sea Surety and Insurance Co., Inc. the payment of the proceeds of the policy but the latter denied liability under the policy. Plaintiff likewise filed a formal claim with defendant Seven Brothers Shipping Corporation for the value of the lost logs but the latter denied the claim. After due hearing and trial, the court a quo rendered judgment in favor of plaintiff and against defendants. Both defendants shipping corporation and the surety company appealed.

Defendant-appellant Seven Brothers Shipping Corporation impute (sic) to the court a quo the following assignment of errors, to wit:

B. The lower court erred in declaring that the non-liability clause of the Seven Brothers Shipping Corporation from logs (sic) of the cargo stipulated in the charter party is void for being contrary to public policy invoking article 1745 of the New Civil Code.

The Court of Appeals affirmed in part the RTC judgment by sustaining the liability of South Sea Surety and Insurance Company (“South Sea”), but modified it by holding that Seven Brothers Shipping Corporation (“Seven Brothers”) was not

liable for the lost cargo. 5 In modifying the RTC judgment, the respondent appellate court ratiocinated thus:

It appears that there is a stipulation in the charter party that the ship owner would be exempted from liability in case of loss. The court a quo erred in applying the provisions of the Civil Code on common carriers to establish the liability of the shipping corporation. The provisions on common carriers should not be applied where the carrier is not acting as such but as a private carrier.

Under American jurisprudence, a common carrier undertaking to carry a special cargo or chartered to a special person only, becomes a private carrier.

The Issue

“whether or not respondent Court (of Appeals) committed a reversible error in upholding the validity of the stipulation in

the charter party executed between the petitioner and the private respondent exempting the latter from liability for the

loss of petitioner’s logs arising from the negligence of its (Seven Brothers’) captain.” The Court’s Ruling

The petition is not meritorious.

Validity of Stipulation is Lis Mota- The charter party between the petitioner and private respondent stipulated that the “(o)wners shall not be responsible for loss, split, short-landing, breakages and any kind of damages to the cargo.” 10 The validity of this stipulation is the lis mota of this case.

It should be noted at the outset that there is no dispute between the parties that the proximate cause of the sinking of M/V Seven Ambassadors resulting in the loss of its cargo was the “snapping of the iron chains and the subsequent rolling of the logs to the portside due to the negligence of the captain in stowing and securing the logs on board the vessel and not due to fortuitous event.” Likewise undisputed is the status of Private Respondent Seven Brothers as a private carrier when it contracted to transport the cargo of Petitioner Valenzuela. Even the latter admits this in its petition.

In a contract of private carriage, the parties may validly stipulate that responsibility for the cargo rests solely on the charterer, exempting the shipowner from liability for loss of or damage to the cargo caused even by the negligence of the ship captain. Pursuant to Article 1306 17 of the Civil Code, such stipulation is valid because it is freely entered into by the parties and the same is not contrary to law, morals, good customs, public order, or public policy. Indeed, their contract of private carriage is not even a contract of adhesion. We stress that in a contract of private carriage, the parties may freely stipulate their duties and obligations which perforce would be binding on them. Unlike in a contract involving a common carrier, private carriage does not involve the general public. Hence, the stringent provisions of the Civil Code on common carriers protecting the general public cannot justifiably be applied to a ship transporting commercial goods as a private carrier. Consequently, the public policy embodied therein is not contravened by stipulations in a charter party that lessen or remove the protection given by law in contracts involving common carriers.

Petitioner likewise argues that the stipulation subject of this controversy is void for being contrary to Articles 1170 and 1173 of the Civil Code 27 which read:

Art. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and those who in any manner contravene the tenor thereof, are liable for damages Art. 1173. The fault or negligence of the obligor consists in the omission of that diligence which is required by the nature of the obligation and corresponds with the circumstances of the persons, of the time and of the place. When negligence shows bad faith, the provisions of articles 1171 and 2201, shall apply.

If the law does not state the diligence which is to be observed in the performance, that which is expected of a good father of a family shall be required. The Court notes that the foregoing articles are applicable only to the obligor or the one with an obligation to perform. In the instant case, Private Respondent Seven Brothers is not an obligor in respect of the cargo, for this obligation to bear the loss was shifted to petitioner by virtue of the charter party. This shifting of responsibility, as earlier observed, is not void. The provisions cited by petitioner are, therefore, inapplicable to the present case.

Loadmasters Customs Services, Inc. Glodel Brokerage Corporation Common Carrier - Customs Broker

FACTS:

R&B Insurance issued a Marine Policy in favor of Columbia to insure the shipment of 132 bundles of electric copper cathodes against All Risks. The cargoes were shipped on board the vessel "Richard Rey" from Isabela, Leyte, to Pier 10, North Harbor, Manila. They arrived on the same date. Columbia engaged the services of Glodel for the release and withdrawal of the cargoes from the pier and the subsequent delivery to its warehouses/plants. Glodel, in turn, engaged the services of Loadmasters for the use of its delivery trucks to transport the cargoes to Columbia’s warehouses/plants in Bulacan and Valenzuela City. The goods were loaded on board twelve (12) trucks owned by Loadmasters, driven by its employed drivers and accompanied by its employed truck helpers. Of the six (6) trucks route to Balagtas, Bulacan, only five (5) reached the destination. One (1) truck, loaded with 11 bundles or 232 pieces of copper cathodes, failed to deliver its cargo. Later on, the said truck, was recovered but without the copper cathodes. Because of this incident, Columbia filed with R&B Insurance a claim for insurance indemnity. After the investigation, R&B Insurance paid Columbia insurance indemnity. R&B Insurance, thereafter, filed a complaint for damages against both Loadmasters and Glodel before the (RTC), It

sought reimbursement of the amount it had paid to Columbia for the loss of the subject cargo. It claimed that it had been subrogated "to the right of the consignee to recover from the party/parties who may be held legally liable for the loss." RTC rendered a decision holding Glodel liable for damages for the loss of the subject cargo and dismissing Loadmasters’ counterclaim for damages and attorney’s fees against R&B Insurance.

Both R&B Insurance and Glodel appealed the RTC decision to the CA. CA rendered that the appellee is an agent of appellant Glodel, whatever liability the latter owes to appellant R&B Insurance Corporation as insurance indemnity must likewise be the amount it shall be paid by appellee Loadmasters. Hence, Loadmasters filed the present petition for review on certiorari.

ISSUE:

Whether or not Loadmasters and Glodel are common carriers to determine their liability for the loss of the subject cargo.

RULING:

Under Article 1732 of the Civil Code, common carriers are persons, corporations, firms, or associations engaged in the business of carrying or transporting passenger or goods, or both by land, water or air for compensation, offering their services to the public. Loadmasters is a common carrier because it is engaged in the business of transporting goods by land, through its trucking service. It is a common carrier as distinguished from a private carrier wherein the carriage is generally undertaken by special agreement and it does not hold itself out to carry goods for the general public. Glodel is also

considered a common carrier within the context of Article 1732. For as stated and well provided in the case of Schmitz Transport & Brokerage Corporation v. Transport Venture, Inc., a customs broker is also regarded as a common carrier, the transportation of goods being an integral part of its business.

Loadmasters and Glodel, being both common carriers, are mandated from the nature of their business and for reasons of public policy, to observe the extraordinary diligence in the vigilance over the goods transported by them according to all the circumstances of such case, as required by Article 1733 of the Civil Code. When the Court speaks of extraordinary diligence, it is that extreme measure of care and caution which persons of unusual prudence and circumspection observe for securing and preserving their own property or rights. With respect to the time frame of this extraordinary responsibility, the Civil Code provides that the exercise of extraordinary diligence 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.

The Court is of the view that both Loadmasters and Glodel are jointly and severally liable to R & B Insurance for the loss of

the subject cargo. Loadmasters’ claim that it was never privy to the contract entered into by Glodel with the

consignee Columbia or R&B Insurance as subrogee, is not a valid defense. For under ART. 2180. The obligation imposed by Article 2176 is demandable not only for one’s own acts or omissions, but also for those of persons for whom one is responsible. x x x x

Employers shall be liable for the damages caused by their employees and household helpers acting within the scope of their assigned tasks, even though the former are not engaged in any business or industry. It is not disputed that the subject cargo was lost while in the custody of Loadmasters whose employees (truck driver and helper) were instrumental in the hijacking or robbery of the shipment. As employer, Loadmasters should be made

answerable for the damages caused by its employees who acted within the scope of their assigned task of delivering the goods safely to the warehouse. Glodel is also liable because of its failure to exercise extraordinary diligence. It failed to ensure that Loadmasters would fully comply with the undertaking to safely transport the subject cargo to the designated destination. Glodel should, therefore, be held liable with Loadmasters. Its defense of force majeure is unavailing. For the consequence, Glodel has no one to blame but itself. The Court cannot come to its aid on equitable grounds. "Equity, which has been aptly described as ‘a justice outside legality,’ is applied only in the absence of, and never against, statutory law or judicial rules of procedure." The Court cannot be a lawyer and take the cudgels for a party who has been at fault or negligent.

Common carrier v. Other contracts.

Cargolift Shipping Inc. V. L. Actuario Marketing Co. and Skyland Brokerage Common Carrier v Contract of Towage

Facts Respondent L. Acuario Marketing Corp., (Acuario) and respondent Skyland Brokerage, Inc., (Skyland) entered into a time charter agreement whereby Acuario leased to Skyland its L. Acuario II barge for use by the latter in transporting electrical posts from Manila to Limay, Bataan. At the same time, Skyland also entered into a separate contract with petitioner Cargolift, for the latters tugboats to tow the aforesaid barge.

In accordance with the foregoing contracts, petitioners tugboat M/T Beejay left the Manila South Harbor with Acuarios barge in tow. It reached the port of Limay, Bataan, whereupon M/T Beejay disengaged and once again set sail for Manila. Petitioners other tugboat, the M/T Count, remained in Bataan to secure the barge for unloading.

Off-loading operations went underway until operations were interrupted for the next two days to give way to the observance of the lenten season. The unloading of the cargo was concluded by the time M/T Beejay had gone back to Bataan for the return trip. The M/T Beejay and the barge returned to the port of Manila.

On the same day, the barge was brought to Acuarios shipyard where it was allegedly discovered by Acuarios dry-docking officer, Guillermo Nacu, Jr., that the barge was listing due to a leak in its hull. According to Nacu, he was informed by the skipper of the tugboat that the damage was sustained in Bataan. To confirm the same, Nacu ordered an underwater survey of the barge and prepared a damage report. No representative of Skyland was present during the inspection although it was furnished with a copy of the said report.

The barge was consequently dry-docked for repairs at the Western Shipyard. Acuario spent for the repairs.

Pursuant to its contract with Skyland which provided that (a)ny damage or loss on the barge due to the fault or negligence of charterers shall be the responsibility of the (c)harterer or his representative, Acuario wrote Skyland seeking reimbursement of its repair costs, failing which, it filed a complaint for damages against Skyland before the RTC.

According to Acuario and its witnesses, the weather in Bataan shifted drastically while the barge was docked at the Limay port eight meters away from the stone wall. Due to strong winds and large waves, the barge repeatedly hit its hull on the wall, thus prompting the barge patron to alert the tugboat captain of the M/T Count to tow the barge farther out to sea. However, the tugboat failed to pull the barge to a safer distance due to engine malfunction, thereby causing the barge to sustain a hole in its hull.

On the other hand, petitioner and Skyland denied that the barge had been damaged. One of its witnesses, Salvador D. Ocampo, claimed that he was involved in all aspects of the operation and that no accident of any sort was brought to his knowledge. He alleged that the barge patron and tug master made no mention of any maritime casualty during the clearing of the vessels at the Philippine Ports Authority in Limay, Bataan. The barge was in good condition and was not damaged when it was turned over to Acuario. Held:

SC find no cogent reason to disturb the lower courts finding that the barge sustained a hole in its hull when petitioners tugboat failed to tow it to a safer distance as the weather changed in the port of Limay. This Court is bound by the factual determinations of the appellate court especially when these are supported by substantial evidence and merely affirm those of the trial court, as in this case. There is no showing here that the inferences made by the Court of Appeals were manifestly mistaken, or that the appealed judgment was based on a misapprehension of facts, or that the appellate court overlooked certain relevant, undisputed facts which, if properly considered, would justify a different conclusion. Thus, a reversal of the factual findings in this case is unwarranted.

It was not Acuario that seeks to hold petitioner liable for the damage to the barge, as the former in fact sued only Skyland pursuant to their charter agreement. It was Skyland that impleaded petitioner as third-party defendant considering that Skyland was being held accountable for the damage attributable to petitioner. In other words, petitioner was not sued under Skylands charter agreement with Acuario, but pursuant to its separate undertaking with Skyland. Strictly speaking, therefore, petitioner is not being held liable under any charter agreement with Acuario.

Consequently, it is not correct for petitioner to assert that Acuario could not recover damages from it due to lack of privity of contract between them. It is not Acuario that is seeking damages from petitioner but Skyland, with whom it undoubtedly had a juridical tie. While Acuario could hold Skyland liable under its charter agreement, Skyland in turn could enforce liability on petitioner based on the latters obligation to Skyland. In other words, petitioner is being held liable by Skyland and not by Acuario.

Thus, in the performance of its contractual obligation to Skyland, petitioner was required to observe the due diligence of a good father of the family. This much was held in the old but still relevant case of Baer Senior & Co.s Successors v. La Compania Maritima[21] where the Court explained that a tug and its owners must observe ordinary diligence in the performance of its obligation under a contract of towage. The negligence of the obligor in the performance of the obligation renders him liable for damages for the resulting loss suffered by the obligee. Fault or negligence of the obligor consists in his failure to exercise due care and prudence in the performance of the obligation as the nature of the obligation so demands.

In the case at bar, the exercise of ordinary prudence by petitioner means ensuring that its tugboat is free of mechanical problems. While adverse weather has always been a real threat to maritime commerce, the least that petitioner could have done was to ensure that the M/T Count or any of its other tugboats would be able to secure the barge at all times during the engagement. This is especially true when considered with the fact that Acuarios barge was wholly dependent upon petitioners tugboat for propulsion. The barge was not equipped with any engine and needed a tugboat for maneuvering.

Needless to say, if petitioner only subjected the M/T Count to a more rigid check-up or inspection, the engine malfunction could have been discovered or avoided. The M/T Count was exclusively controlled by petitioner and the latter had the duty to see to it that the tugboat was in good running condition. There is simply no basis for petitioners assertion that Skyland contractually assumed the risk of any engine trouble that the tugboat may encounter. Skyland merely procured petitioners towing service but in no way assumed any such risk.

That petitioners negligence was the proximate cause of the damage to the barge cannot be doubted. Had its tugboat been serviceable, the barge could have been moved away from the stone wall with facility. It is too late in the day for petitioner to insist that the proximate cause of the damage was the barge patrons negligence in not objecting to the position of the barge by the stone wall. Aside from the fact that the position of the barge is quite understandable since off-loading operations were then still underway,[24] the alleged negligence of the barge patron is a matter that is also being raised for the first time before this Court.

Thus, the damage to the barge could have been avoided had it not been for the tugboats inability to tow it away from the stone wall. Considering that a barge has no power of its own and is totally defenseless against the ravages of the sea, it was incumbent upon petitioner to see to it that it could secure the barge by providing a seaworthy tugboat. Petitioners failure to do so did not only increase the risk that might have been reasonably anticipated during the shipside operation but was the proximate cause of the damage.[25] Hence, as correctly found by the courts below, it should ultimately be held liable therefor.

Mindanao Terminal and Brokerage services v. Phoenix Assurance Co.

Common Carrier v Contract of Stevedoring Mindanao Terminal and Brokerage services v. Phoenix Assurance Co.

Del Monte Philippines contracted petitioner Mindanao Terminal and Brokerage Service, Inc, a stevedoring company, to load

and stow a shipment of 146,288 cartons of fresh green Bananas and 15,202 cartons of fresh pineapples belonging to Del Monte Produce into the cargo hold of the vessel M/v Mistrau The vessel was docked at the port of Davao and goods were to be transported to Incheon, Korea in favour of consignee Taegu Industries. Del Monte Produce insured the shipment under an open cargo policy with private respondent Phoenix Assurance Company of New York, a non-life insurance company, and private respondent McGee & Co, the underwriting manager/agent of Phoenix Upon arrival of M/V Mistrau in Incheon, it was discovered upon discharge that some of the cargo was in bad condition The damage surveyor of Korea, Byeong, surveyed that 16,069 cartons of the banana shipment and 2,185 cartons of the pineapple shipment were so damaged that they no longer had commercial value. Del Monte Produce filed a claim under the open cargo policy. McGees Marine Claims evaluated the claim and recommended that payment in the amount of $210,266.43 be made. Del Monte issued a subrogation receipt to Phoenix and McGee. Phoenix and McGee instituted an action for damages against Mindanao Terminal

RTC ruled that the only participation of Mindanao Terminal was to load the cargoes on board the vessel and signed the foremans report unless they were properly arranged and tightly secured to withstand voyage across the open seas. It was found that the cargoes were damages on account of a typhoon which M/V Mistrau had encountered during the voyage. It was held that Phoenix and McGee had no cause of action against Mindanao Terminal because the latter, whose services were contracted by Del Monte, a distinct corporation from Del Monte Produce, had no contract with the assured Del Monte Produce.

CA reversed the RTC s decision which sustained Phoenix s and McGee s argument that the damage in the cargoes was the result of the improper stowage by Mindanao Terminal. It imposed on Mindanao Terminal, as the stevedore of the cargo, the duty to exercise extraordinary diligence in loading and stowing the cargoes.

It further held that even with the absence of a contractual relationship between Mindanao Terminal and Del Monte Produce, the cause of action of Phoenix and McGee could be based on quasi-delict under Article 2176 of the Civil Code.

RULING:

The present action is based on quasi-delict, arising from the negligent and careless loading and stowing of the cargoes belonging to Del Monte Produce. Even assuming that both Phoenix and McGee have only been subrogated in the rights of Del Monte Produce, who is not a party to the contract of service between Mindanao Terminal and Del Monte, still the insurance carriers may have a cause of action in light of the Courts consistent ruling that the act that breaks the contract may be also a tort. In fine, a liability for tort may arise even under a contract, where tort is that which breaches the contract In the present case, Phoenix and McGee are not suing for damages for injuries arising from the breach of the contract of service but from the alleged negligent manner by which Mindanao Terminal handled the cargoes belonging to DelMonte Produce. Despite the absence of contractual relationship between Del Monte Produce and Mindanao Terminal, the allegation of negligence on the part of the defendant should be sufficient to establish a cause of action arising from

quasi-delict. Article 1173 of the Civil Code is very clear that if the law or contract does not state the degree of diligence which is to be observed in the performance of an obligation then that which is expected of a good father of a family or ordinary diligence shall be required.

Mindanao Terminal, a stevedoring company which was charged with the loading and stowing the cargoes of Del Monte

Produce aboard M/V Mistrau, had acted merely as a labor provider in the case at bar. There is no specific provision of law that imposes a higher degree of diligence than ordinary diligence for a stevedoring company or one who is charged only with the loading and stowing of cargoes.

It was neither alleged nor proven by Phoenix and McGee that Mindanao Terminal was bound by contractual stipulation to observe a higher degree of diligence than that required of a good father of a family. We therefore conclude that following Article 1173, Mindanao Terminal was required to observe ordinary diligence only in loading and stowing the cargoes of Del Monte Produce aboard M/V Mistrau. Mindanao Terminal, as a stevedore, was only charged with the loading and stowing of the cargoes from the pier to the ships cargo hold; it was never the custodian of the shipment of Del Monte Produce.

The loading and stowing of cargoes would not have a far reaching public ramification as that of a common carrier and a warehouseman; the public is adequately protected by our laws on contract and on quasi-delict. The public policy considerations in legally imposing upon a common carrier or a warehouseman a higher degree of diligence is not present in a stevedoring outfit which mainly provides labor in loading and stowing of cargoes for its clients. Phoenix and McGee failed to prove by preponderance of evidence that Mindanao Terminal had acted negligently. Phoenix and McGee relied heavily on the deposition of Byeong Yong Ahn and on the survey report of the damage to the cargoes. Byeong, whose testimony was refreshed by the survey report, found that the cause of the damage was improper stowage due to the manner the cargoes were arranged. As admitted by Phoenix and McGee in their Comment before us, the latter is merely a stevedoring company which was tasked by Del Monte to load and stow the shipments of fresh banana and pineapple of Del Monte Produce aboard the M/V Mistrau. How and where it should load and stow a shipment in a vessel is wholly dependent on the shipper and the officers of the vessel. we are of the opinion that damage occurred aboard the carrying vessel during sea transit, being caused by ship s heavy rolling and pitching under boisterous weather while proceeding from 1600 hrs on 7th October to 0700 hrs on 12th October, 1994 as described in the sea protest. As it is clear that Mindanao Terminal had duly exercised the required degree of diligence in loading and stowing the cargoes,

which is the ordinary diligence of a good father of a family, the grant of the petition is in order.

Cebu Arrastre Services v. CIR Common Carrier v Arrastre

Cebu Arrastre Services v. Collector of Internal Revenue

The Cebu Arrastre, an association of persons engaged in the handling of cargoes carried by coastwise vessels stopping at

the port of Cebu, thru its counsel Atty. Jose Muana petitioned the Collector of Internal Revenue for the exemption and the refund based on the grounds that they are:

  • 1. A group of laborers who had recently organized themselves into an arrastre service association merely for the purpose of centralizing the collection of handling" charges and making direct payment to the men in order to insure the compliance of the Minimum Wage Law requirement,

  • 2. they’re under the direct supervision and control of the officers of the ships.

  • 3. That the Cebu Arrastre Service is engaged solely in the loading and unloading of cargoes to and from the boats and

is not engaged in the transportation business." Acting upon the petition, the Collector referred the matter to his agent in Cebu for investigation. And on the basis of said report the Collector denied the petition, holding that inasmuch as the Cebu Arrastre was engaged in the loading and unloading of vessels in port, it may be considered a stevedore within the meaning of section 191 of the Tax Code. In this connection, it may be stated that section 191 of the Tax Code imposes a tax equivalent to 3 per cent of the gross receipts on certain businesses and business entities, among them stevedores.

SC "The question, then revolves around the facts and around the credibility of the description depicting the exact nature of the work of the laborers working under the contracts entered into by the Cebu Arrastre Co. Inc. with Cebu shipowners. We just determine therefore, which of the two conflicting versions conies nearer the reality of the situation. "We may say at the outset that the preponderance of evidence is in favor of the version of the Assistant Agent of the Bureau of Internal Revenue of Cebu. According to him the loading and unloading of cargoes to and from the ships holds is done by the laborers under the Cebu Arrastre Service Co., Inc. and the ships officers supervision is limited to the proper placing of the same inside the ships hold, the inference being that said 'proper placing (stowing) is being done by the corporation laborers. This is not contradicted by the version of the petitioner as given in its original petition wherein it says:

The men working under the Cebu Arrastre Service are same men of 'Katubusanan sa Maraumuo' who have been handling

the loading of the boats of the Aboitiz & Co. and of the Philippine Navigation Co. since 1947 up to the present.' It says also,

further on: 'The Cebu Arrastre Service is dedicated itself solely to the loading and unloading of cargoes on the boats

.' It is

. . true that the President and Counsel corrected this description in the memorandum on appeal to the effect that laborers of the corporation do not, except on rare occasions, engage in loading or unloading the boat but limit their work on loading or unloading pele-mele. the slings of the boats under contract with the Arrastre Service, but in the opinion of the Board this amendment is not nearer to the truth than the original version which was corroborated by the official who investigated the case by order of the Collector of Internal Revenue. "It is noteworthy that in the agreement entered into by the shipowners and the corporation mention is twice made of the 'arrastre service on the vessels' (but never on the piers) to be done by the laborers of the Cebu Arrastre Service Inc. Another circumstance which may help in obtaining a clear picture of the situation is that nowhere in these papers is it contended that the stevedores actually performing the stowing work belong to an organization not related to the petitioner." We quote the following definitions of stevedores, viz:

Stevedores is "one who works at, or one who is responsible for, the unloading and loading of a vessel in port. (Webster's New International Dictionary, Second Edition (unabridged), p. 2473). A stevedore is a person employed in loading and unloading a vessel. (The Owego, D. C. Wash., 292 F. 505, 507). Stevedores are class of laborers at the ports whose business it is to load and unload vessels. (The Senator, 21 F. 191). "Stevedore" is defined as "one whose occupation is to load and unload vessels in port"; in other words, a contractor or a

jobber for special business ready to be employed by anybody at his line of work (Rankin vs.Merchants and Miners Transp. Co., 73 Ga. 239, 54 Am. Rep. 874). "Stevedore" and "longshoreman", are synonymous terms when interpreted in the light of the work they perform, namely loading and unloading of vessels (Zampiere vs.Willian Spencer and Son Corporation, 185 N.Y.S. 639, 640, 194 App. Div.

576).

Under the above definitions the Cebu Arrastre admittedly engaged in the work of loading and unloading coast wise

vessels calling at the port of Cebu, should be regarded as a stevedore and therefore subject to the percentage tax under section 191 of the Tax Code. But even if we applied the narrower and more specific concept of stevedore used by the Tax Board, namely, that a stevedore is one who places cargoes in the holds of ships in such a way that the boat would maintain an even keel, and that even with the movement of the boat, especially in rough weather, the cargoes would not be displaced from their original position, still', under the finding of fact made by the Tax Board that the Cebu Arrastre is engaged in this work of towing cargo either in the hold or even on the deck, appellant would be subject to the tax. We also agree with the Tax Board that the purpose for which the petitioner-appellant was organized, and the supervision exercised by the ships' officers over its work in loading and unloading vessels including the towing of cargo, has nothing to do with the

tax liability of the petitioner-appellant.

In view of the foregoing, the decision appealed from is hereby affirmed, with costs in both instances.

Crisostomo v. CA Common Carrier v Travel Agency

FACTS:

Petitioner Estela L. Crisostomo (Crisostomo) contracted the services of respondent Caravan Travel and ToursInternational, Inc. (Caravan) to arrange and facilitate her booking, ticketing and accommodation in a tour dubbed “Jewels of Europe”. Pursuant to said contract, Meriam Menor (MENOR) who is also the niece of Crisostomo, went to the latter’s residence to deliver the travel documents and plane tickets. Crisostomo, in turn, gave Menor the full payment for the package tour. Without checking her travel documents, Crisostomo went to NAIA. However, she discovered that the flight she was supposed to take had already departed the previous day. She thus called up Menor to complain.

Subsequently, Menor prevailed upon Crisostomo to take another tour the “British Pageant” to which Crisostomo was asked to pay once again. Upon Crisostomo’s return from Europe, she demanded from Caravan the reimbursement of P61,421.70,representing the difference between the sum she paid for “Jewels of Europe” and the amount she owed Caravanfor the “British Pageant” tour. Despite several demands, Caravan refused to reimburse the amount, contendingthat the same was non-refundable. Crisostomo thus filed a case.

Crisostomo alleged that her failure to join “Jewels of Europe” was due to Caravan’s fault since it did not clearly indicate the departure date on the plane ticket. Caravan was also negligent in informing her of the wrongflight schedule through its employee Menor. Caravan insisted that Crisostomo was informed of the correct departure date, which was clearly and legibly printed on the plane ticket. The travel documents were given two days ahead of the scheduled trip. Crisostomo had only herself to blame for missing the flight, as she did not bother to read or confirm her flight schedule as printed on the ticket.

RTC: Caravan was negligent in erroneously advising Crisostomo of the wrong date. Crisostomo incurredcontributory negligence for not checking her travel documents. Caravan should reimburse Crisostomo but withdeductions due to her contributory negligence.

CA: Both parties were at fault. However, Crisostomo is more negligent because as a lawyer and well-traveled person, she should have known better than to simply rely on what was told to her. This being so, she is not entitled to any form of damages. Crisostomo appealed to SC.

HELD No, a travel agency is not an entity engaged in the business of transporting either passengers or goodsand is therefore, neither a private nor a common carrier.

By definition, a contract of carriage or transportation is one whereby a certain person or association of persons obligate themselves transport persons, things, or news from one place to another for a fixed price. Such person or association of persons are regarded as c arriers and are classified as private or special carriers and common or public carriers. 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 orgoods or both, by land, water or air, for compensation, offering their services to the public.

It is obvious from the above definition that respondent is not an entity engaged in the business of transporting either passengers or goods. Respondent did not undertake to transport petitioner from one place to another since its covenant with its customers is simply to make travel arrangements in their behalf. Respondent’s services as a travel agency include procuring tickets and facilitating travel permits or visas as well as booking customers for tours.

The object of petitioner’s contractual relation with respondent is the latter’s service of arranging and facilitating petitioner’s booking, ticketing and accommodation in the package tour. In contrast, the object of a contract of carriage is the transportation of passengers or goods. It is in this sense that the contract between the parties in this case was an ordinary one for services and not one of carriage. A travel agency is not an entity engaged in the business of transporting either passengers or goods and is therefore, neither a private nor a common carrier. It goes without saying that a travel agency is not required by law to exercise extra ordinary diligence.

Governing Laws:

  • 1.3 Article 1766 of the New Civil Code(NCC).

  • 1.4 Article 1753 NCC.

  • 1.5 Article 1732-1766 NCC.

  • 1.6 National Dev. Company v. CA 164 SCRA 593.

Art. 1766. In all matters not regulated by this Code, the rights and obligations of common carriers shall be governed by the

Code of Commerce and by special laws

Application of Art. 1753NCC

National Dev. Company v. CA

National Development Company (NDC) appointed Maritime Company of the Philippines (MCP) as its agent to manage and

operate its vessel, ‘Dona Nati’, for and in behalf of its account. In 1964, while en route to Japan from San Francisco, Dona Nati collided with a Japanese vessel, ‘SS Yasushima Maru’, causing its cargo to be damaged and lost. The private respondent,

as insurer to the consigners, paid almost Php400,000.00 for said lost and damaged cargo. Hence, the private respondent instituted an action to recover from NDC

Issue:

Which laws govern the loss and destruction of goods due to collision of vessels outside Philippine waters

Ruling:

In a previously decided case, it was held that 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 pursuant to Article 1753 of the Civil Code. It is immaterial that the collision actually occurred in foreign waters, such as Ise Bay, Japan.It appears, however, that collision falls among matters not specifically regulated by the Civil Code, hence, we apply Articles 826 to 839, Book Three of the Code of Commerce, which deal exclusively with collision of vessels.

Mapa v. CA When Is there International Transportation

When:

  • 1. The place of departure and the place of destination are within the territories of two high contracting parties, regardless

of whether or not there was a break in the transportation or transshipment.

  • 2. The place of departure and the place of destination are within the territory of a single contracting party if there is an

agreed stopping place within a territory subject to the sovereignty, mandate or authority of another power, even though

the power is not a party to the convention.

Alitalia v. Intermediate Appellate Court Warsaw Convention

Facts:

Dr. Felipa Pablo, an associate professor in the University of the Philippines and a research grantee of the Philippine Atomic Energy Agency, was invited to take part at a meeting of the Department of Research and Isotopes in Italy in view of her specialized knowledge in “foreign substances in food and the agriculture environment”. She would be the second speaker on the first day of the meeting. Dr. Pablo booked passage on petitioner Alitalia. She arrived in Milan on the day before the meeting, but was told that her luggage was delayed and was in a succeeding flight from Rome to Milan. The luggage included her materials for the presentation. The succeeding flights did not carry her luggage. Desperate, she went to Rome to try to locate the luggage herself, but to no avail. She returned to Manila without attending the meeting. She demanded reparation for the damages.

She rejected Alitalia’s offer of free airline tickets and commenced an action for damages. As it turned out, the luggage was actually forwarded to Ispra, but only a day after the scheduled appearance. It was returned to her after 11 months. The trial court ruled in favor of Dr. Pablo, and this was affirmed by the Court of Appeals.

Held:

(1) Under the Warsaw Convention, an air carrier is made liable for damages for:

  • a. The death, wounding or other bodily injury of a passenger if the accident causing it took place on board the aircraft or I

the course of its operations of embarking or disembarking;

  • b. The destruction or loss of, or damage to, any registered luggage or goods, if the occurrence causing it took place during

the carriage by air; and

  • c. Delay in the transportation by air of passengers, luggage or goods.

The 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 is considered to be equivalent to wilful misconduct. The Convention does not thus operate as an exclusive enumeration of the instances of an airline's liability, or as an absolute limit of the extent of that liability. 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.

In the case at bar, no bad faith or otherwise improper conduct may be ascribed to the employees of petitioner airline; and Dr. Pablo's luggage was eventually returned to her, belatedly, it is true, but without appreciable damage. The fact is, nevertheless, that some species of injury was caused to Dr. Pablo because petitioner ALITALIA misplaced her baggage and failed to deliver it to her at the time appointed - a breach of its contract of carriage. Certainly, the compensation for the injury suffered by Dr. Pablo cannot under the circumstances be restricted to that prescribed by the Warsaw Convention for delay in the transport of baggage.

(2) She is not, of course, entitled to be compensated for loss or damage to her luggage. She is however entitled to nominal damages which, as the law says, is adjudicated in order that a right of the plaintiff, which has been violated or invaded by the defendant, may be vindicated and recognized, and not for the purpose of indemnifying the plaintiff that for any loss suffered and this Court agrees that the respondent Court of Appeals correctly set the amount thereof at PhP 40,000.00.

The Court also agrees that respondent Court of Appeals correctly awarded attorney’s fees to Dr. Pablo and the amount of PhP 5,000.00 set by it is reasonable in the premises. The law authorizes recovery of attorney’s fees inter alia where, as here, the defendant’s act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest or where the court deems it just and equitable.

Philippine Charter Insurance Corpo v. Neptune Orient Lines Application of COGSA

Limited liability

While common carriers are liable to pay for loss or destruction of goods transported by them, if they failed to prove that they observe extraordinary diligence in the vigilance over the goods, a stipulation in the bill of lading limiting their liability for such loss or destruction to a certain sum is sanctioned by law (Art. 1749 and 1750, Civil Code), unless the shipper or owner declares a greater value. This is the rule applied in this case of NOL, a shipping company based in Hong Kong and owner of the vessel M/V Baltimar Orion.

The goods here consisted of three sets of warped yarn shipped from Hong Kong by a garments manufacturer (LTGMC) on returnable beams aboard the said vessel for transport and delivery to a local garment manufacturer in Metro Manila (FMC).

The said cargoes were loaded in a container in good condition under Bill of Lading N. HKG-0396180 9B/L) that had no declaration as to the actual value of the Goods. FMC however insured the shipment against all risks with Philippine Charter Insurance Corporation (PCIC) under Marine Cargo Policy No. RN 55581 in the amount of P228,085.

Under the said B/L it is stipulated that “neither the carrier nor the vessel shall in any event become liable for any loss

of or damage to or in connection with the transportation of Goods in an amount exceeding US$500 per package or in case of Goods not shipped in packages, per shipping unit or customary freight unless the nature and value of such Goods have been declared by the Shipper before shipment and inserted in this B/L and the shipper has paid additional charges on such

declared value”

In the course of the maritime voyage from Hong Kong to Manila, the vessel encountered winds and seas such as to cause moderate to heavy pitching and rolling deeply at times. As a result four containers on board, including the container of the subject shipment fell overboard.

Thus FMC claimed the value of the lost cargo from OASI, the local agent of NOL in Manila. But the agent ignored the claim. Hence FMC sought payment from its insurer PCIC for the insured value of the cargoes in the amount of P228,085 which claim was fully satisfied by PCIC.

Held: Yes. Since the cargoes were lost while being transported from HK to the Philippines, the rights and obligations of common carriers are governed by the provisions of the Civil Code and the Carriage of Goods by Sea Act (COGSA) of the United States (Article 1753 and 1766, Civil Code).

The pertinent provisions of the Civil Code says that stipulations limiting the common carrier’s liability to the value of the goods appearing in the bill of lading unless the shipper or owner declares a greater value, is binding (Article 1749). Also under Article 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.

Section 4 par. 5 of the COGSA which also pertinently provides that “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 not exceeding $500 per package… unless the nature and value of such goods have been declared by the shipper before the shipment and inserted in the B/L

In this case the B/L submitted by the PCIC did not show that the shipper (LTGMC) declared the actual value of the goods insured by FMC before shipment and that said value was inserted in the B/L. In fact no additional charges were paid.

Hence the stipulation in the B/L that the carrier’s liability shall not exceed US$500 per package applies (Philippine Charter

Insurance Corporation vs. Neptune Orient Lines etc., G.R. 145044, June 12, 2008)

  • 1.7 RA 4136.

  • 1.8 RA 9497.

  • 2. Nature of business.

  • 3. Registered owner rule and Kabit System.

    • 3.1 Registration laws.

      • Compulsory registration of motor vehicles RA 4136

Registered owner rule. PCI leasing and finance, Inc. v. UCPB General Insurance Co.

The non-registration of the financial lease precludes the enjoyment of the benefits of Section 12 of RA 8556

FACTS:A Mitsubishi Lancer car owned by UCPB, insured with UCPB General Insurance Co., was traversing the LaurelHighway, Barangay Balintawak, LipaCity. It was driven by Flaviano Isaac with Conrado Geronimo (Asst. Manager of saidbank), was hit and bumped by an 18-wheeler Fuso Tanker Truck, owned by defendants-appellants PCI Leasing &Finance, Inc. allegedly leased to and operated by defendant-appellant Superior Gas & Equitable Co., Inc. (SUGECO) anddriven by its employee, defendant appellant Renato Gonzaga. The impact caused heavy damage to the MitsubishiLancer car resulting in an explosion of the rear part of the car. The driver and passenger suffered physical injuries.However, the driver defendant-appellant Gonzaga continued on its way to its destination and did not bother to bringhis victims to the hospital.As the 18-wheeler truck is registered under the name of PCI Leasing, repeated demands were made byplaintiff-appellee for the payment of the aforesaid amounts. However, no payment was made. PCI Leasing and Finance,Inc., (petitioner) interposed the defense that it could not be held liable for the collision, since the driver, Gonzaga,

wasnot its employee, but that of its co-defendant SUGECO. In fact, it was SUGECO, that was the actual operator of thetruck, pursuant to a Contract of Lease signed by petitioner and SUGECO. Petitioner, however, admitted that it was theowner of the truck in question. RTC rendered judgment in favour of UCPB General Insurance and ordered PCI Leasing and Gonzaga,

to pay jointly and severally the former. CA affirmed with the lower court’s decision.

ISSUES:

Whether petitioner, as registered owner of a motor vehicle that figured in a quasi-delict may be held liable, jointly andseverally, with the driver thereof, for the damages caused to third parties.

RULING: The principle of holding the registered owner of a vehicle liable for quasi-delicts resulting from its use is well-established in jurisprudence. As explained in the case of Erezo v. Jepte, thus:

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 anyessential 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, asamended.) The main aim of motor vehicle registration is to identify the owner so that if any accident happens, orthat any damage or injury is caused by the vehicle on the public highways, responsibility therefor can be fixed on adefinite individual, the registered owner. Instances are numerous where vehicles running on public highwayscaused 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 tothe public, that the motor vehicle registration is primarily ordained, in the interest of the determination of personsresponsible for damages or injuries caused on public highways.

A sale, lease, or financial lease, for that matter, that is not registered with the Land Transportation Office, still does not bind third persons who are aggrieved in tortious incidents, for the latter need only to rely on the public registration of amotor vehicle as conclusive evidence of ownership. A lease such as the one involved in the instant case is anencumbrance in contemplation of law, which needs to be registered in order for it to bind third parties.