TRANSPORTATION AND PUBLIC SERVICE LAW

(FOR CLASSROOM DISCUSSION ONLY. NOT INTENDED FOR SALE OR DISTRIBUTION.)

University of San Jose-Recoletos School of Law

Atty. Gerald R. Yu, CPA, CRB, CIB
 PART I
Common Carriers
 PRELIMINARIES
• General Concepts
• Obligations of the Parties
• Extraordinary Diligence
• Bill of Lading and other
Formalities
• Actions and Damages in
Case of Breach
GENERAL CONCEPTS
 CONTRACT OF
TRANSPORTATION
• There is contract of transportation where a person obligates himself to transport
persons or property from one place to another for a consideration.

• The contract may therefore involve:

• Carriage of Passengers, or

• Carriage of Goods, or both.

• The person who obligates himself to transport the goods or passengers may be a:

• Common Carrier, or

• Private Carrier
 PARTIES:
CARRIAGE OF PASSENGERS
• 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)

• 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)
 PARTIES:
CARRIAGE OF 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.

• Carrier

• 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.

 PERFECTION OF CONTRACT:
CARRIAGE OF PASSENGERS, IN GENERAL
• CONTRACT TO CARRY (1st Type) - an agreement to
carry the passenger at some future date. CONSENSUAL
IN NATURE hence, PERFECTED BY MERE CONSENT.

• CONTRACT OF CARRIAGE or OF COMMON

CARRIAGE (2nd Type) - 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.
 PERFECTION OF CONTRACT:
CARRIAGE OF GOODS, IN GENERAL
• CONTRACT TO CARRY (1st Type) – an agreement to carry
and transport goods at some future date. CONSENSUAL IN
NATURE hence, PERFECTED BY MERE CONSENT.

• CONTRACT OF CARRIAGE OR OF COMMON CARRIAGE

(2nd Type) - 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.
 SPECIFIC MODES OF
PERFECTION
• AIRCRAFT :

• Contract to Carry - 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.

• Contract of Carriage - 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.
• BUSES, JEEPNEYS, and STREET CARS

• 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.

• 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.

• Any injury suffered by the passenger resulting from the

sudden starting up of the carrier is already based on contract.
• TRAINS

• 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.

• 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)
CONCEPT OF COMMON CARRIAGE
ANALOGOUS TO PUBLIC SERVICE
• The concept of common carrier under ARTICLE 1732 CCP 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.

• 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.
• 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.
TEST TO DETERMINE WHETHER A PARTY
IS A COMMON CARRIER OF GOODS:
• 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;

• He must undertake to carry goods of the kind to which his business is confined;

• He must undertake to carry by the method by which his business is conducted and over his
established roads;

• The transportation must be for hire. [First Philippine Industrial Corp. v. CA, G.R. 125948,
Dec. 29, 1998];

• Provided it has space, for all who opt to avail themselves of its transportation service for a
fee [National Steel Corp. v. CA, G.R. No. 112287, Dec. 12, 1997, quoting Mendoza v. PAL, 90
Phil. 836].
 BASIC RULES
• Still a common carrier:

• Even if it carries persons, goods, or both only as an ancillary activity;

• Even if it offers transportation services on an occasional, episodic or unscheduled basis;

• Even if it offers services or solicits business only from a narrow segment of the general
population;

• Even if he did not secure a Certificate of Public Convenience;

• Even if means is not through motor vehicle;

• Even if it has no fixed and publicly known route, maintains no terminals, and issues no
tickets.
 DE GUZMAN V. COURT OF
APPEALS (168 SCRA 612)
• Art. 1732 makes no distinction between one whose principal
business activity is carrying of persons or goods or both, and one
who does such carrying only as an ancillary, nor does it make
distinctions between one who offers the service to the ‘general
public’ or a narrow segment of the general population.

• Therefore, a party who ‘back-hauled’ goods for other merchants from

Manila to Pangasinan, even when such activity was only periodical or
occasional and was not its principal line of business would be subject
to the responsibilities and obligations of a common carrier.
 LIMITED CLIENTELE NOT A
DEFENSE
• Facts: Petitioner entered into a contract with SMC for
the transfer of paper and kraft board from the port area
to SMC’s warehouse.

• Held: She is still a common carrier although she does not

indiscriminately hold her services out to the public but
offers the same to select parties with whom she may
contract in the conduct of her business. [Virgines Calvo v.
UCPB General Insurance Co., G.R. 148496, Mar. 19, 2002]
 PHIL. AMERICAN GENERAL INSURANCE
COMPANY, ET.AL. V. PKS SHIPPING
COMPANY, G.R. NO. 149038, 09 APRIL 2003.
• Facts: Respondent shipping company transported the 75,000
bags of cement to Petitioner in its barge. The bags of cement
perished after its barge sank while being towed by a tug boat.

• Held: Respondent is a common carrier because it was

engaged in the business of carrying goods for others for a fee.
The regularity of its activities in the area indicates more than
just a casual activity on its part. Neither can the concept of a
common carrier change merely because individual contracts
are executed or entered into with the patrons of the carrier.
 NO FIXED ROUTE, NO TERMINAL,
NO TICKET ISSUED NOT A DEFENSE
• Facts: Petitioner is involved in the business of carrying
goods through its barges. It has no fixed and publicly
known route, maintains no terminals, and issues no tickets.

• Held: Petitioner is still a common carrier because its

principal business is that of lighterage and drayage and it
offers its barges to the public for carrying or transporting
by water for compensation. [Asia Lighterage and Shipping,
Inc. v. CA, G.R. 147246, Aug. 19, 2003]
MEANS OF TRANSPORTATION,
NOT MATERIAL
• Issue: Are pipeline operators common carriers as to subject
them to business taxes on common carriers?

• Held: Yes. The 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 US, oil pipe line
operators are considered common carriers. Also under the
Petroleum Act of the Philippines (RA 387). (First Philippine
Industrial Corp. v. CA, GR No. 147246, 19 August 2003).
 CHARTER PARTY
• 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.

• Contract of Affreightment - owner of a ship or other vessel lets the whole

or a part of her to a merchant or other person for the conveyance of
goods, on a particular voyage, in consideration of the payment of freight.

• Charter by Demise or Bareboat Charter - 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

• Time Charter - vessel is leased to the charterer

for a fixed period of time.

• Voyage Charter - ship is leased for a single voyage.

EFFECT WHEN COMMON CARRIER
ENTERS INTO A CHARTER PARTY

• If only by contract of affreightment, whether

voyage or time charter, it remains a common
carrier.

• If by bareboat or demise charter, a common

carrier is transformed into a private carrier.
 COMMON CARRIER V. PRIVATE
CARRIER
• Common carrier holds himself out in common, that is, to all persons who choose to employ
him, ready to cary for hire while the private carrier or special carrier agrees in some special
case with some private individual to carry for hire;

• A private carrier is not bound to carry for any reason, unless it enters a special agreement
to do so. A common carrier is bound to carry for all who offer such goods as it is
accustomed to carry and tender reasonable compensation for carrying them.

• A common carrier is subject to regulation as it is a public service. A private carrier is not.

• The common carrier is bound to exercise extraordinary diligence while a private carrier
owes only diligence of a good father of a family.

• A common carrier cannot stipulate that it is exempt from liability for the negligence of its
agents or employees. Such stipulation is void as it is against public policy. A private carrier
may validly enter into such stipulation (1980, 1981, 1984 Bar Exams)
 FGU INSURANCE V. G.P. SARMIENTO
TRUCKING, GR 141910, 06 AUGUST 2002
• Facts: GPS, as the exclusive hauler of Concepcion Industries,
undertook to deliver thirty (30) units of Condura refrigerators
from latter’s plant in Alabang to Dagupan City. While the truck
was traversing the north diversion road along McArthur
highway in Barangay Anupol, Bamban, Tarlac, it collided with an
unidentified truck, causing it to fall into a deep canal, resulting in
damage to the cargoes. Petitioner FGU as subrogee to
Concepcion Industries filed a complaint for damages and
breach of contract of carriage against GPS and its driver.
• Issue No. 1: WHETHER RESPONDENT GPS
MAY BE CONSIDERED AS A COMMON
CARRIER.

• Held: GPS, being an exclusive contractor and

hauler of Concepcion Industries, Inc., rendering
or offering its services to no other individual or
entity, cannot be considered a common carrier.
The above conclusion notwithstanding, GPS
cannot escape from liability.
• In culpa contractual, upon which the action of
petitioner rests as being the subrogee of
Concepcion Industries, Inc., the mere proof of
the existence of the contract and the failure of
its compliance justify, pr ima facie , a
corresponding right of relief.

• A breach upon the contract confers upon the

injured party a valid cause for recovering that
which may have been lost or suffered.
• The remedy serves to preserve the interests of the promisee
that may include his:

• “Expectation interest," which is his interest in having the

benefit of his bargain by being put in as good a position as he
would have been in had the contract been performed; or

• “Reliance interest," which is his interest in being reimbursed

for loss caused by reliance on the contract by being put in as
good a position as he would have been in had the contract not
been made; or

• “Restitution interest," which is his interest in having restored

to him any benefit that he has conferred on the other party.
• The effect of every infraction is to create a new duty, that is, to make
recompense to the one who has been injured by the failure of another
to observe his contractual obligation unless he can show extenuating
circumstances, like proof of his exercise of due diligence (normally that
of the diligence of a good father of a family or, exceptionally by
stipulation or by law such as in the case of common carriers, that of
extraordinary diligence) or of the attendance of fortuitous event, to
excuse him from his ensuing liability.

• In this case, the delivery of the goods in its custody to the place of
destination - gives rise to a presumption of lack of care and
corresponding liability on the part of the contractual obligor the burden
being on him to establish otherwise. GPS has failed to do so.

• Respondent driver, on the other hand, without concrete proof of his

negligence or fault, may not himself be ordered to pay petitioner.
• The driver, not being a party to the contract of carriage between
petitioner’s principal and defendant, may not be held liable under the
agreement.

• A contract can only bind the parties who have entered into it or
their successors who have assumed their personality or their juridical
position.

• Consonantly with the axiom res inter alios acta aliis neque nocet
prodest, such contract can neither favor nor prejudice a third person.

• Petitioner’s civil action against the driver can only be based on culpa
aquiliana, which, unlike culpa contractual, would require the claimant
for damages to prove negligence or fault on the part of the
defendant.
• Issue No. 2: WHETHER THE DOCTRINE OF RES IPSA
LOQUITUR IS APPLICABLE IN THE INSTANT CASE.

• Held: Res ipsa loquitur, a doctrine being invoked by

petitioner, holds a defendant liable where the thing
which caused the injury complained of is shown to be
under the latter’s management and the accident is such
that, in the ordinary course of things, cannot be
expected to happen if those who have its management
or control use proper care. It affords reasonable
evidence, in the absence of explanation by the
defendant, that the accident arose from want of care
• It is not a rule of substantive law and, as such, it does not create an
independent ground of liability. Instead, it is regarded as a mode of proof, or
a mere procedural convenience since it furnishes a substitute for, and
relieves the plaintiff of, the burden of producing specific proof of negligence.

• The maxim simply places on the defendant the burden of going forward
with the proof.

• Resort to the doctrine, however, may be allowed only when (a) the event is
of a kind which does not ordinarily occur in the absence of negligence; (b)
other responsible causes, including the conduct of the plaintiff and third
persons, are sufficiently eliminated by the evidence; and (c) the indicated
negligence is within the scope of the defendant's duty to the plaintiff.

• Thus, it is not applicable when an unexplained accident may be attributable

to one of several causes, for some of which the defendant could not be
responsible.
• Res ipsa loquitur generally finds relevance whether or not a contractual
relationship exists between the plaintiff and the defendant, for the inference of
negligence arises from the circumstances and nature of the occurrence and not
from the nature of the relation of the parties.

• Nevertheless, the requirement that responsible causes other than those due to
defendant’s conduct must first be eliminated, for the doctrine to apply, should
be understood as being confined only to cases of pure (non-contractual) tort
since obviously the presumption of negligence in culpa contractual, as previously
so pointed out, immediately attaches by a failure of the covenant or its tenor.

• In the case of the truck driver, whose liability in a civil action is predicated on
culpa acquiliana, while he admittedly can be said to have been in control and
management of the vehicle which figured in the accident, it is not equally shown,
however, that the accident could have been exclusively due to his negligence, a
matter that can allow, forthwith, res ipsa loquitur to work against him.
 GROUP ACTIVITY

• Group yourselves to 8 groups consisting of 5

members each. Submit list of group members.

• Prepare Case Digest.

• Synthesize the Cases.

COMMON CARRIAGE DISTINGUISHED
FROM OTHER CONTRACTS
• VS. TOWAGE -

• In towage, one vessel is hired to bring another vessel to another

place. Thus, a tugboat may be hired by a common carrier to
bring the vessel to a port. In this case, the operator of the
tugboat cannot be considered a common carrier.

• In maritime law, towage refers to a service rendered to a vessel

by towing for the mere purpose of expediting her voyage
without reference to any circumstances of danger. It usually
confined to vessels that have received no injury or damage.
• VS. ARRASTRE -

• The functions of an arrastre operator usually include the

following:

1. Receive, handle, care for, and deliver all merchandise

imported and exported, upon or passing over
Government-owned wharves and piers in the port;

2. Record or check all merchandise which may be

delivered to said port at shipside, and in general and;

3. Furnish light, and water services and other incidental

services in order to undertake its arrastre service.
• Hence, the functions of an arrastre operator has nothing to
do with the trade and business of navigation, nor to the use
or operation of vessels.

• Both as to the nature of the functions and the place of their

performance (upon wharves and piers shipside), the arrastre
operator’s services are clearly not maritime.

• They are in fact, no different from those of a depositary or

warehouseman.

• Even if the arrastre service depends on, assists, or furthers

maritime transportation, it may be deemed merely incidental
and does not make its service maritime
• Vs. Stevedoring -

• The diligence required of a stevedore is the diligence of a good father

of a family.

• Not a common carrier for it does not transport goods or passengers; it

is not akin to a warehouseman for it does not store goods for profit.

• 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 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.
• Vs. Travel Agency -

• Not a common carrier. The object of contractual

relation of a person who purchases a ticket through a
travel agency is only the agency’s service of arranging
and facilitating the booking, ticketing, and
accommodation in a package tour.

• In contrast, the object of the contract with a common

carrier is transportation. The contract between the
travel agency is a contract of service and not a
contract of carriage. (Crisostomo v. CA, et.al., GR No.
138334, 25 August 2003, 409 SCRA 528, 534)
 TWO TYPES OF CARGO
OPERATION
• Line Service - operation of a common carrier which publicly offers
services without discrimination to any user, has regular ports of call/
destination, fixed sailing schedules and frequencies and published
freight rates and attendant charges and usually carriers multiple
consignments (RA 9515). Liners carry general cargoes, meaning
whatever is offered is accepted for shipment.

• Tramp Service - operation of a common carrier which has no regular

and fixed routes and schedules but accepts cargo wherever and
whenever the shipper desires, is hired on a contractual basis, or
chartered by any one or few shippers under mutually agreed terms
and usually carries bulk or break bulk cargoes.
 GOVERNING LAWS
• Coastwise Shipping

• New Civil Code (Arts. 1732-1766)

• Code of Commerce

• Carriage from Foreign Ports to Phil. Ports

• New Civil Code (primary)

• Code of Commerce (suppletory)

• Carriage of Goods by Sea Act [COGSA] (suppletory)

• Carriage From Phil. Port to Foreign Ports

• The laws of the country to which the goods are to be transported.

• Overland Transportation

• Civil Code (Primary)

• Code of Commerce (Suppletorily)

• R.A. 4136 (The Land Transportation and Traffic Code)

• Air Transportation

• Civil Code (primary)

• Code of Commerce (suppletorily)

• For international carriage - Warsaw Convention [Convention for the

Unification of Certain of Rules Relating to the International Carriage by Air]
 NATURE OF BUSINESS OF
COMMON CARRIERS
• Common carriers are public utilities within the contemplation of the public
service law.

• Public utilities are privately owned and operated businesses whose services are
essential to the general public.

• They are enterprises which specially cater to the needs of the public and
conduce to their comfort and convenience.

• When, one devotes his property to a use in which the public has an interest, he,
in effect grants to the public an interest in that use, and must submit to the
control by the public for the common good, to the extent of the interest he has
thus created. (KMU v. Garcia, GR 115381, 23 December 1994)*
 REGISTRATION LAWS

• Registration of motor vehicles is now governed by

Republic Act No. 4136 otherwise known as “The
Land Transportation and Traffic Code.”

• Administered by the Land Transportation Office.

 SALIENT PROVISIONS OF R.A.
4136
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)…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.

(c) “Articulated vehicle” shall mean any motor vehicle with a trailer having no front axle and so
attached that part of the trailer rests upon motor vehicle and a substantial part of the weight of the
trailer and of its load is borne by the motor vehicle. Such a trailer shall be called as “semi-trailer.”

(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.

(f) “Owner” shall mean the actual legal owner of a motor vehicle, in whose name such vehicle is duly
registered with the Land Transportation Commission.

The “owner” of a government-owned motor vehicle is the head of the office or the chief of the Bureau
to which the said motor vehicle belongs.
(g) “Dealer” shall mean every person, association, partnership, or corporation making,
manufacturing, constructing, assembling, remodeling, rebuilding, or setting up motor vehicles; and
every such entity acting as agent for the sale of one or more makes, styles, or kinds of motor
vehicles, dealing in motor vehicles, keeping the same in stock or selling same or handling with a
view to trading same.

(h) “Garage” shall mean any building in which two or more motor vehicles, either with or without
drivers, are kept ready for hire to the public, but shall not include street stands, public service
stations, or other public places designated by proper authority as parking spaces for motor vehicles
for hire while awaiting or soliciting business.

(j) “Highways” shall mean every public thoroughfare, public boulevard, driveway, avenue, park, alley
and callejon, but shall not include roadway upon grounds owned by private persons, colleges,
universities, or other similar institutions.

(l) “Parking or parked”, for the purposes of this Act, shall mean that a motor vehicle is “parked” or
“parking” if it has been brought to a stop on the shoulder or proper edge of a highway, and
remains inactive in that place or close thereto for an appreciable period of time. A motor vehicle
which properly stops merely to discharge a passenger or to take in a waiting passenger, or to load
or unload a small quantity of freight with reasonable dispatch shall not be considered as “parked”, if
the motor vehicle again moves away without delay.
SECTION 5. Compulsory Registration of Motor Vehicles. – (a) All motor vehicles and trailer of any
type used or operated on or upon any highway of the Philippines must be registered with the
Bureau of Land Transportation  for the current year in accordance with the provisions of this Act.

xxx

Any registration of motor vehicles not renewed or before the date fixed by the Bureau of Land
Transportation shall become delinquent and invalid.

(c) Dealer’s Report. – Dealers shall submit to the Director of Land Transportation a report
concerning the sale or transfer of or any other transaction involving motor vehicles, including such
information as importation, manufacturing data, and number of stocks remaining, as the Director
may require for the effective enforcement of the provision of this Act within five (5) working days
from such sale, transfer or transaction. Such dealers shall furnish also the buyer with a duplicate
copy thereof, duly authenticated by the Director of Land Transportation.

(d) Unauthorized repair of change of engine serial number. – Unless satisfactorily explained to and
approved by the Director of Land Transportation, no repair involving the restoration of the original
or registered serial number as stamped on the engine shall be allowed. No change involving an
alteration of or tampering with the original or registered engine serial number of a motor vehicle
shall ever be allowed, and any motor vehicle with a trace of having its engine serial number altered
or tampered with shall be refused registration or re-registration.
• (e) Encumbrances of motor vehicles.  Mor tgages,
attachments, and other encumbrances of motor vehicles, in
order to be valid against third parties must be recorded in
the Bureau. Voluntar y tr ansactions or voluntar y
encumbrances shall likewise be properly recorded on the
face of all outstanding copies of the certificates of
registration of the vehicle concerned.

• Cancellation or foreclosure of such mortgages, attachments,

and other encumbrances shall likewise be recorded, and in
the absence of such cancellation, no certificate of registration
shall be issued without the corresponding notation of
mortgage, attachment and/or other encumbrances.
SECTION 7. Registration Classification. – The classification of vehicles shall be:

(1) Private

(2) For Hire

(3) Government

(4) Diplomatic

Within ninety days from the approval of this Act, appropriate subclassifications shall be determined by the Director
of Land Transportation  with the approval of the Minister of Transportation and Communications,  taking into
consideration the body configuration, weight, cubic displacement and/or number of cylinders of the motor vehicle.

(a) Private. – Motor vehicles registered under this classification shall not be used for hire under any circumstance.

(b) For Hire. – Motor vehicles registered under this classification are those covered by certificates of public
convenience, or special permits issued by the Board of Transportation,  and shall be subject to the provisions of the
Public Service Act and the rules and regulations issued thereunder, as well as the provisions of this Act.

(c) Government. – Motor vehicles owned by the government of the Philippines or any of its political subdivisions
shall be registered under this classification.

(d) Diplomatic. Motor vehicles owned by foreign governments or by their duly accredited diplomatic officers in the
Philippines and used in the discharged of their official duties.
Tourists bringing their own motor vehicles to the Philippines
may, however, without registering such motor vehicles, use the
same during but not after ninety (90) days of their sojourn:
Provided, That the motor vehicle displays the number plates for
the current year of some other country or state, and said
number plates as well as the name and address (permanent and
temporary) of the thereof are registered in the Bureau of Land
Transportation  prior to the operation of the motor vehicle.

If such tourists remain in the Philippines longer than ninety (90)

days, the motor vehicle shall not be operated unless registered
in accordance with this Act and the corresponding registration
fees paid.
SECTION 14. Issuance of Certificates of Registration. – A properly numbered
certificate of registration shall be issued for each separate motor vehicle after due
inspection and payment of corresponding registration fees.

SECTION 15. Use and Authority of Certificate of Registration. – (a) The said
certificate shall be preserved and carried in the car by the owner as evidence of the
registration of the motor vehicle described therein, and shall be presented with
subsequent applications for re-registration, transfer of ownership, or recording of
encumbrances: Provided, That in lieu of the certificate of registration a true copy or
photostat thereof may be carried in the motor vehicle.

(b) The certificate of registration issued under the provisions of this Act for any
motor vehicle shall, while the same is valid and effective and has not been
suspended or revoked, be the authority for the operation of such motor vehicle.

(c) No motor vehicle shall be operated on the public highways in a manner which
would place it under a classification requiring the payment of a larger registration
fee than that stated in the certificate of registration.
SECTION 16. Suspension of Registration Certificate. – If on inspection, as provided in paragraph (6) of
Section four hereof, any motor vehicle is found to be unsightly, unsafe, overloaded, improperly marked or
equipped, or otherwise unfit to be operated, or capable of causing excessive damage to the highways, or
not conforming to minimum standards and specifications, the Commissioner  may refuse to register the said
motor vehicle, or if already registered, may require the number plates thereof to be surrendered to him,
and upon seventy-two hours notice to the owner of the motor vehicle, suspend such registration until the
defects of the vehicle are corrected and/or the minimum standards and specifications fully complied with.

Whenever it shall appear from the records of the Commission that during any twelve-month period more
than three warnings for violations of this Act have been given to the owner of a motor vehicle, or that the
said owner has been convicted by a competent court more than once for violation of such laws, the
Commissioner may, in his discretion, suspend the certificate of registration for a period not exceeding
ninety days and, thereupon, shall require the immediate surrender of the number plates.

Whenever a motor vehicle is found to be underweighed the owner thereof shall pay the difference in the
registration fees corresponding to the shortage in weight plus a fifty per cent surcharge, and until such
payment is made, the certificate of registration of the motor vehicle concerned shall be suspended by the
Commissioner.

After two such suspension, re-registration of the vehicle concerned for one year may be denied.

The Commissioner shall notify the owner of the motor vehicle of any action taken by him under this
section.
SECTION 17. Number Plates, Preparation and Issuance of. – The Bureau of Land Transportation 
shall cause reflective number plates to be prepared and issued to owners of motor vehicles and
trailers registered and recorded in the Bureau of Land Transportation under this Act, as amended,
for a reasonable fee: Provided, That the fee shall be subject to the approval of the Minister of
Transportation and Communications  in consultation with the Minister of Finance, and, Provided,
further, That the identification, numbers and letters of any motor vehicle number plate shall be
permanently assigned to such motor vehicle during its lifetime. No motor vehicles shall be
exempted from payment of registration fees. Motor vehicles for hire and privately owned motor
vehicles shall bear plates of reflective materials so designed and painted with different colors to
distinguish one class from another.

The transfer of motor vehicle plates whether temporary or regular, validating tags and/or stickers
from one motor vehicle to another without permit from the Bureau of Land Transportation,
except security number plates on authorized vehicles, shall be punishable with a fine of not less
than Five Thousand Pesos (P5,000.00) and/or imprisonment of six months at the discretion of the
Court.

For purposes of renewal of registration of motor vehicles, the Director or his Deputies shall issue
validating tags and stickers indicating the year of registry, charging a reasonable fee: Provided, That
the fee shall be subject to the approval of the Minister of Transportation and Communications in
consultation with the Minister of Finance.
SECTION 18. Use of Number Plates. – At all times, every motor vehicle
shall display in conspicuous places, one in front and one in the rear
thereof, the said number plates.

The number plates shall be kept clean and cared for, and shall be firmly
affixed to the motor vehicle in such a manner as will make it entirely
visible and always legible.

Except in the case of dealer’s number plates which may be used

successively on various motor vehicles in stock, no person shall transfer
number plates from one motor vehicle to another.

No dealer’s number plate shall be used on any motor vehicle after said
vehicle has been sold and delivered to a purchaser, and no dealer shall
allow such dealer’s number plates to be used on any motor vehicle after
its sale and delivery to a purchaser.
SECTION 19. Duty to have License. – Except as
otherwise specifically provided in this Act, it shall be
unlawful for any person to operate any motor
vehicle without having in his possession a valid
license to drive a motor vehicle.

The license shall be carried by the driver at all times

when operating a motor vehicle, and shall be shown
and/or surrendered for cause and upon demand to
any person with authority under this Act to
confiscate the same.
SECTION 21. Operation of Motor Vehicles by Tourists. – Bona fide
tourist and similar transients who are duly licensed to operate motor
vehicles in their respective countries may be allowed to operate motor
vehicles during but not after ninety days of their sojourn in the
Philippines.

If any accident involving such tourist or transient occurs, which upon

investigation by the Commissioner  or his deputies indicates that the said
tourist or transient is incompetent to operate motor vehicles, the
Commissioner shall immediately inform the said tourist or transient in
writing that he shall no longer be permitted to operate a motor vehicle.

After ninety days, any tourist or transient desiring to operate motor

vehicles shall pay fees and obtain and carry a license as hereinafter
provided.
SPEED LIMIT AND KEEPING TO
THE RIGHT
SECTION 35. Restriction as to Speed. – (a) Any person driving a motor
vehicle on a highway shall drive the same at a careful and prudent speed,
not greater nor less than is reasonable and proper, having due regard for
the traffic, the width of the highway, and of any other condition then and
there existing; and no person shall drive any motor vehicle upon a
highway at such a speed as to endanger the life, limb and property of
any person, nor at a speed greater than will permit him to bring the
vehicle to a stop within the assured clear distance ahead.

(b) Subject to the provisions of the preceding paragraph, the rate of

speed of any motor vehicle shall not exceed the following:
MAXIMUM ALLOWABLE
SPEEDS
Location Passengers

Motor trucks and buses
Cars and Motorcycle

1. On open country roads, with

no "blinds corners" not closely 80 km. per hour 50 km. per hour
bordered by habitations

2. On "through streets" or
boulevards, clear of traffic, 40 km. per hour 30 km. per hour
with no " blind corners”,
when so designated.
3. On city and municipal
streets, with light traffic, when 30 km. per hour 30 km. per hour
not designated “through
streets”
4. Through crowded streets, approaching
intersections at "blind corners," passing 20 km. per hour 20 km. per hour
school zones, passing other vehicles
which are stationery, or for similar
dangerous circumstance
(c) The rates of speed herein-above prescribed shall not apply to the following:

(1) A physician or his driver when the former responds to emergency calls;

(2) The driver of a hospital ambulance on the way to and from the place of accident or
other emergency;

(3) Any driver bringing a wounded or sick person for emergency treatment to a hospital,
clinic, or any other similar place;

(4) The driver of a motor vehicle belonging to the Armed Forces while in use for official
purposes in times of riot, insurrection or invasion;

(5) The driver of a vehicle, when he or his passengers are in pursuit of a criminal;

(6) A law-enforcement officer who is trying to overtake a violator of traffic laws; and

(7) The driver officially operating a motor vehicle of any fire department, provided that
exemption shall not be construed to allow unless or unnecessary fast driving of drivers
afore-mentioned.
SECTION 36. Speed Limits Uniform Throughout the Philippines. – No
provincial, city or municipal authority shall enact or enforce any
ordinance or resolution specifying maximum allowable speeds other
than those provided in this Act.

SECTION 37. Driving on Right Side of Highway. – Unless a different

course of action is required in the interest of the safety and the security
of life, person or property, or because of unreasonable difficulty of
operation in compliance herewith, every person operating a motor
vehicle or an animal-drawn vehicle on a highway shall pass to the right
when meeting persons or vehicles coming toward him, and to the left
when overtaking persons or vehicles going the same direction, and when
turning to the left in going from one highway to another, every vehicle
shall be conducted to the right of the center of the intersection of the
highway.
SECTION 39. Overtaking a Vehicle. – The driver of any motor vehicle
overtaking another vehicle proceeding in the same direction shall pass at a
safe distance to the left thereof, and shall not again drive to the right side
of the highway until safely clear of such overtaken vehicle except that on a
highway, within a business or residential district, having two or more lanes
for the movement of traffic in one direction, the driver of a vehicle may
overtake and pass another vehicle on the right. Nothing in this section shall
be construed to prohibit a driver overtaking and passing, upon the right,
another vehicle which is making or about to make a left turn.

SECTION 40. Driver to Give Way to Overtaking Vehicle. – The driver of a

vehicle about to be overtaken and passed by another vehicle approaching
from the rear shall give way to the overtaking vehicle on suitable and
audible signal being given by the driver of the overtaking vehicle, and shall
not increase the speed of his vehicle until completely passed by the
overtaking vehicle.
SECTION 41. Restrictions on Overtaking and Passing. –

(a) The driver of a vehicle shall not drive to the left side of the center line of a highway in overtaking or passing another
vehicle proceeding in the same direction, unless such left side is clearly visible, and is free of oncoming traffic for a
sufficient distance ahead to permit such overtaking or passing to be made in safety.

(b) The driver of a vehicle shall not overtake or pass another vehicle proceeding in the same direction, when
approaching the crest of a grade, not upon a curve in the highway, where the driver’s view along the highway is
obstructed within a distance of five hundred feet ahead, except on a highway having two or more lanes for movement of
traffic in one direction where the driver of a vehicle may overtake or pass another vehicle: Provided, That on a highway
within a business or residential district, having two or more lanes for movement of traffic in one direction, the driver of a
vehicle may overtake or pass another vehicle on the right.

(c) The driver of a vehicle shall not overtake or pass any other vehicle proceeding in the same direction, at any railway
grade crossing, nor at any intersection of highways unless such intersection or crossing is controlled by traffic signal, or
unless permitted to do so by a watchman or a peace officer, except on a highway having two or more lanes for
movement of traffic in one direction where the driver of a vehicle may overtake or pass another vehicle on the right.
Nothing in this section shall be construed to prohibit a driver overtaking or passing upon the right another vehicle which
is making or about to make a left turn.

(d) The driver of a vehicle shall not overtake or pass, or attempt to pass, any other vehicle, proceeding in the same
direction, between any points indicated by the placing of official temporary warning or caution signs indicating that men
are working on the highway.

(e) The driver of a vehicle shall not overtake or pass, or attempt to overtake or pass, any other vehicle proceeding in the
same direction in any “no-passing or overtaking zone.”
SECTION 42. Right of Way. – (a) When two vehicles approach or enter an intersection at
approximately the same time, the driver of the vehicle on the left shall yield the right of way to
the vehicle on the right, except as otherwise hereinafter provided. The driver of any vehicle
traveling at an unlawful speed shall forfeit any right of way which he might otherwise have
hereunder.

(b) The driver of a vehicle approaching but not having entered an intersection, shall yield the right
of way to a vehicle within such intersection or turning therein to the left across the line of travel
of such first-mentioned vehicle, provided the driver of the vehicle turning left has given a plainly
visible signal of intention to turn as required in this Act.

(c) The driver of any vehicle upon a highway within a business or residential district shall yield the
right of way to a pedestrian crossing such highway within a crosswalk, except at intersections
where the movement of traffic is being regulated by a peace officer or by traffic signal. Every
pedestrian crossing a highway within a business or residential district, at any point other than a
crosswalk shall yield the right of way to vehicles upon the highway.

(d) The driver of a vehicle upon a highway shall bring to a full stop such vehicle before traversing
any “through highway” or railroad crossing: Provided, That when it is apparent that no hazard
exists, the vehicle may be slowed down to five miles per hour instead of bringing it to a full stop.
SECTION 43. Exception to the Right of Way Rule. – (a) The driver of a
vehicle entering a highway from a private road or drive shall yield the right of
way to all vehicles approaching on such highway.

(b) The driver of a vehicle upon a highway shall yield the right of way to
police or fire department vehicles and ambulances when such vehicles are
operated on official business and the drivers thereof sound audible signal of
their approach.

(c) The driver of a vehicle entering a “through highway” or a “stop

intersection” shall yield the right of way to all vehicles approaching in either
direction on such “through highway”: Provided, That nothing in this subsection
shall be construed as relieving the driver of any vehicle being operated on a
“through highway” from the duty of driving with due regard for the safety of
vehicles entering such “through highway” nor as protecting the said driver
from the consequence of an arbitrary exercise of such right of way.
SECTION 44. Signals on Starting, Stopping or Turning. –

(a) The driver of any vehicle upon a highway, before starting,

stopping or turning from a direct line, shall first see that such
movement can be made in safety, and if any pedestrian may be
affected by such movement, shall give a clearly audible signal by
sounding the horn, and whenever the operation of any other
vehicle approaching or following may be affected by such
movement, shall give a signal plainly visible to the driver of such
other vehicles of the intention to make such movement.

(b) The signal herein required shall be given by means of

extending the hand and arm beyond the left side of the vehicle,
or by an approved mechanical or electrical signal device.
SECTION 45. Turning at Intersections. – (a) The driver of a vehicle intending
to run to the right at an intersection shall approach such intersection in the
lane for traffic nearest to the right-hand side of the highway and, in turning,
shall keep as close as possible to the right-hand curb or edge of the highway.

(b) The driver of a vehicle intending to turn to the left shall approach such
intersection in the lane for traffic to the right of and nearest to the center
line of the highway, and, in turning, shall pass to the left of the center of the
intersection, except that, upon highways laned for traffic and upon one-way
highways, a left turn shall be made from the left lane of traffic in the direction
in which the vehicle is proceeding.

(c) For the purpose of this section, the center of the intersection shall mean
the meeting point of the medial lines of the highways intersecting one
another, except when it is occupied by a monument, grass plot or any
permanent structure, other than a traffic control device.
SECTION 46. Parking Prohibited in Specified Places. – No driver shall park a vehicle, or permit
it to stand, whether attended or unattended, upon a highway in any of the following places:

(a) Within an intersection.

(b) On a crosswalk.

(c) Within six meters of the intersection of curb lines.

(d) Within four meters of the driveway entrance to and fire station.

(e) Within four meters of a fire hydrant.

(f) In front of a private driveway.

(g) On the roadway side of any vehicle stopped or parked at the curb or edge of the highway.

(h) At any place where official signs have been erected prohibiting parking.

SECTION 47. Parked Vehicle. – Whenever a motor vehicle is parked unattended on any
highway, the driver thereof must turn off the ignition switch and stop the motor and notch
effectively the hand brake.
SECTION 48. Reckless Driving. – No person shall operate a motor
vehicle on any highway recklessly or without reasonable caution
considering the width, traffic, grades, crossing, curvatures, visibility and
other conditions of the highway and the conditions of the atmosphere
and weather, or so as to endanger the property or the safety or rights of
any person or so as to cause excessive or unreasonable damage to the
highway.

SECTION 49. Right of Way for Police and Other Emergency Vehicles. –
Upon the approach of any police or fire department vehicle, or of an
ambulance giving audible signal, the driver of every other vehicle shall
immediately drive the same to a position as near as possible and parallel
to the right-hand edge or curb of the highway, clear of any intersection
of highways, and shall stop and remain in such position, unless otherwise
directed by a peace officer, until such vehicle shall have passed.
SECTION 50. Tampering with Vehicles. – No unauthorized person shall sound the horn,
handle the levers or set in motion or in any way tamper with a damage or deface any motor
vehicle.

SECTION 51. Hitching to a Vehicle. – No person shall hang on to, or ride on, the outside or
the rear end of any vehicle, and no person on a bicycle, roller skate or other similar device,
shall hold fast to or hitch on to any moving vehicle, and no driver shall knowingly permit any
person to hang on to or ride, the outside or rear end of his vehicle or allow any person on a
bicycle, roller skate or other similar device to hold fast or hitch to his vehicle.

SECTION 52. Driving or Parking on Sidewalk. – No person shall drive or park a motor
vehicle upon or along any sidewalk, path or alley not intended for vehicular traffic or parking.

SECTION 53. Driving While Under the Influence of Liquor or Narcotic Drug. – No person
shall drive a motor vehicle while under the influence of liquor or narcotic drug.

SECTION 54. Obstruction of Traffic. – No person shall drive his motor vehicle in such a
manner as to obstruct or impede the passage of any vehicle, nor, while discharging or taking
on passengers or loading or unloading freight, obstruct the free passage of other vehicles on
the highway.
SECTION 55. Duty of Driver in Case of Accident. – In the event that
any accident should occur as a result of the operation of a motor vehicle
upon a highway, the driver present, shall show his driver’s license, give his
true name and address and also the true name and address of the
owner of the motor vehicle.

No driver of a motor vehicle concerned in a vehicular accident shall

leave the scene of the accident without aiding the victim, except under
any of the following circumstances:

1. If he is in imminent danger of being seriously harmed by any person or

persons by reason of the accident;

2. If he reports the accident to the nearest officer of the law; or

3. If he has to summon a physician or nurse to aid the victim.

SECTION 56. Penalty for Violation. – The following penalties shall be imposed for violations of this Act:

(a) For registering later than seven days after acquiring title to an unregistered motor vehicle or after
conversion of a registered motor vehicle requiring larger registration fee than for which it was originally
registered, or for a renewal of a delinquent registration, the penalty shall be a fine of fifty per cent of
the registration fees corresponding to the portion of the year for which the vehicle is registered for
use.

(b) For failure to sign driver’s license or to carry same while driving, one hundred pesos fine.

(c) Driving a vehicle with a delinquent or invalid driver’s license, two hundred pesos fine or
imprisonment not exceeding ten days, at the discretion of the court.

(d) Driving a motor vehicle with delinquent, suspended or invalid registration, or without registration or
without the proper license plate for the current year, three hundred pesos fine or imprisonment not
exceeding fifteen days, at the discretion of the court.

(e) Driving a motor vehicle without first securing a driver’s license, five hundred pesos fine and
imprisonment of not exceeding fifteen days.

(f) Driving a motor vehicle while under the influence of liquor or narcotic drug, a fine of not less than
one thousand pesos or imprisonment of not less than three nor more than six months, or both, at the
discretion of the court.
(g) Violation of Sections thirty-two, thirty-four (a), (b), and (b-1), thirty-five and forty-six, a fine not exceeding one
hundred pesos: Provided, however, That in the case of violation of Section thirty-four (b) the vehicle or vehicles
affected may not be allowed to operate, unless the requirement provided in this section are complied with.

(h) Violations of Sections forty-nine, fifty-one, and fifty-two, a fine of not less than twenty-five pesos nor more than
fifty pesos.

(i) For using or attempting to use a driver’s license, identification card, certificate of registration, number plate, tag
or permit in similitude of those issued under this Act, or falsely or fraudulently representing as valid and in force any
driver’s license under this Act which is delinquent or which has been suspended or revoked, a fine of not less than
one thousand nor more than three thousand pesos or imprisonment of not more than six months, or both, at the
discretion of the court.

For making, manufacturing, distributing or selling a driver’s license, identification card, certificate of registration,
number plate, tag or permit in imitation or similitude of those issued under this Act, the penalties under the
provisions of the Revised Penal Code.

If the violation is committed by a public officer or employee, the offender shall furthermore suffer perpetual
absolute disqualification.

(j) For using private passenger automobiles, private trucks, private motorcycles, and motor wheel attachments for
hire, in violation of Section seven, subsections (a), (b), and (c), of this Act, a fine of two hundred pesos and
suspension of driver’s license for a period of three months for the first conviction; a fine of three hundred pesos
and six months imprisonment of one year and permanent revocation of the driver’s license for the third conviction.
(k) For permitting, allowing, consenting to, or tolerating the use of privately-owned
motor vehicles for hire in violation of Section seven, subsections (a), (b), and (c), of
this Act, there shall be imposed upon the owner of the vehicle as fine of five hundred
pesos and the certificate of registration shall be suspended for a period of three
months for the first conviction, and an increase of one hundred pesos in the fine and
one month’s suspension of the registration for each subsequent conviction.

(l) For violation of any provisions of this Act or regulations promulgated pursuant
hereto, not hereinbefore specifically punished, a fine of not less than one hundred
nor more than five hundred pesos shall be imposed.

(m) In the event an offender cannot pay any fine imposed pursuant to the provisions
of this Act, he shall be made to undergo subsidiary imprisonment as provided for in
the Revised Penal Code.

(n) If, as the result of negligence or reckless or unreasonable fast driving, any accident
occurs resulting in death or injury of any person, the motor vehicle operator at fault
shall, upon conviction, be punished under the provisions of the Revised Penal Code.
 PRESUMPTION OF
NEGLIGENCE

Art. 2185, Civil Code – It is presumed that a person

driving a motor vehicle is negligent if at the time of
the mishap, he was violating any traffic regulation,
unless the contrary.
 CONCLUSIVE PRESUMPTION
OF A VEHICLE IS FOR HIRE

• A vehicle habitually used to carry freight not

belonging to the registered owner thereof, or
passengers not related by consanguinity or affinity
within the fourth civil degree to such owner, shall
be conclusively presumed to be "for hire."
 REGISTERED OWNER RULE
• The person who is the registered owner of a
vehicle is liable for any damage caused by the
negligent operation of the vehicle although the
same was already sold or conveyed to another
person at the time of the accident.

• This is subject to the right of recourse by the

registered owner against the transferee or buyer.
 REGISTERED OWNER RULE,
APPLICATION
• RO is not liable if the vehicle was taken from his garage
without his knowledge and consent.

• ROR applies even if the RO leased the vehicle to another

who is the actual operator.

• ROR applies in a financial lease.

• ROR applicable whenever the persons involved are

engaged in what is known as the “kabit system.”
 REGISTRATION
• PRINCIPAL PURPOSE(S):

• Identification of the vehicle and of the operator, in

case of accident;

• The knowledge that means of detection are always

available may act as a deterrent from lax
observance of the law and of the rules of
conservative and safe operation.
 KABIT SYSTEM
• An arrangement whereby a person who has been granted a certificate of
public convenience allows other persons who own motor vehicles to operate
them under his license, sometimes for a fee or percentage of the earnings.

• Although the parties to such an agreement are not outrightly penalized by

law, the KS is invariably recognized as being contrary to public policy and
therefore void and inexistent under Art. 1409 of the Civil Code. (Aberlado
Lim, et.al., v. CA, et.al., No. 125817, 16 January 2002; Baliwag Transit, Inc. v. CA,
147 SCRA 82 [1987])

• May also be applied to vessels and aircrafts that are covered by certificates of
public convenience and necessity.
 PARTIES IN KABIT SYSTEM
COVERED BY PARI DELICTO RULES
• Ex pact illicito non oritur action – No action arises
out of an illicit bargain.

• Having entered into an illegal contract, parties to

the kabit system cannot seek relief from the
courts, and each must bear the consequences of
his acts. (Lita Enterprises v. Intermediate Appellate
Court, No. 64693, 27 April 1984, 129 SCRA 79)
 TEJA MARKETING V. IAC, 148
SCRA 347, 9 MARCH 1987
• Facts: Petitioner was constrained to file an action for damages
because private respondent allegedly failed to pay the balance
of the purchase price of its motorcycle sold. The motorcycle
which was used for sidecar remained under the name of
petitioner and operated under its franchise under an
arrangement called ‘kabit system’.

• Held: Dismissal of case sustained. Both parties are in pari

delicto. The court will not aid either party to enforce an illegal
contract.
 BOUNDARY SYSTEM
• In land transportation where the boundary system may be
implemented by the common carrier, the carrier cannot
escape liability by claiming that the driver is a lessee.

• The carrier cannot exempt himself on the ground that he

is a lessor because to tolerate such position would not
only abet flagrant violations of the Public Service Law, but
also place the riding public at the mercy of reckless and
irresponsible drivers.
OBLIGATIONS OF THE PARTIES
 DUTIES OF THE COMMON
CARRIER
• To accept passengers and goods without discrimination;

• To seasonably deliver the goods or bring the passenger

to the destination;

• To deliver the goods to the proper person; and

• To exercise extraordinary diligence in the performance

of its duties.
 OBLIGATION OF SHIPPER OR
PASSENGER

• Duty to exercise due diligence.

• Duty to pay the amount of freight or passage on

time.
 DUTY TO ACCEPT
• A common carrier is duty bound to accept passengers
or cargo without any discrimination.

• The present laws forbid failures or refusals to receive

persons or property for carriage which have the effect
of giving an unreasonable or unnecessary preference or
advantage to any person, locality or particular kind of
traffic to any undue or unreasonable prejudice or
discrimination.
 FACTORS TO CONSIDER IN
ACCEPTING OR REFUSING:
• Suitability of the Vessel for the Transportation of such products;

• Reasonable possibility of danger or disaster resulting from their

transportation in the form and under the conditions in which they
are offered for carriage;

• General Nature of the Business done by the carrier;

• All the attendant circumstances which might affect the question of

the reasonable necessity for the refusal by the carrier to
undertake the transportation of this class of merchandise.
 GROUNDS FOR REFUSAL
• When goods sought to be transported are dangerous objects, or substances including
dynamites and other explosives;

• Goods are unfit for transportation;

• Acceptance would result in overloading;

• Goods are considered contrabands or illegal goods;

• Goods are injurious to health;

• Goods will be exposed to untoward danger like flood, capture by enemies and the like;

• Goods like livestock will be exposed to diseases;

• Strike; and

• Failure to tender goods on time.

 RULE ON HAZARDOUS AND
DANGEROUS SUBSTANCES
• A carrier may be granted authority to carry goods
that are by nature dangerous and hazardous. A
carrier specially designed to carry dangerous
chemicals and goods may be granted CPC for
such purpose.

• All other carriers may validly refuse to accept such

cargoes.
RULES ON GOODS THAT ARE
UNFIT FOR TRANSPORT
• GENERAL: Carriers may refuse to accept goods that are unfit for
transportation.

• Unfit:

• Improper Packaging; or

• Defect in their Containers

• However, carrier may choose to transport such goods and limit

its liability by stipulation.
 RELEVANT PROVISIONS
• ARTICLE 356 (COC). Carriers may refuse packages which appear
unfit for transportation; and if the carriage is to be made by railway,
and the shipment is insisted upon, the company shall transport
them, being exempt from all responsibility if its objections, is made
to appear in the bill of lading.

• ARTICLE 1742 (CCP).Even if the loss, destruction, or deterioration

of the goods should be caused by the character of the goods, or
the faulty nature of the packing or of the containers, the common
carrier must exercise due diligence to forestall or lessen the loss.
 DUTY TO DELIVER THE
GOODS
• General Rule:

• IN THE ABSENCE OF A SPECIAL CONTRACT, Carrier is not

an insurer against delay in transportation of goods. When a
common carrier undertakes to convey the goods, the law
implies a contract that they shall be delivered at destination
within a reasonable time.

• Exception:

• When there is agreement as to the time of delivery.

 RULES ON DELAY ON OVERLAND
TRANSPORTATION (CODE OF
COMMERCE)
Art. 358, Code of Commerce:

If there is no period fixed for the delivery of the

goods the carrier shall be bound to forward them in
the first shipment of the same or similar goods
which he may make to the point of delivery; and
should he not do so, the damages caused by the
delay should be for his account.
 DELAY WHEN PERIOD IS
FIXED
• Art. 370. If a period has been fixed for the delivery of
the goods, it must be made within such time, and, for
failure to do so, the carrier shall pay the indemnity
stipulated in the bill of lading, neither the shipper nor
the consignee being entitled to anything else. If no
indemnity has been stipulated and the delay exceeds
the time fixed in the BL, the carrier shall be liable for
the damages which the delay may have caused.
 WHEN DELAY IS DEEMED
REASONABLE
• Ordinary Goods – Expected date of arrival reflected in the bill of
lading may be considered. Thus, if the estimated date of arrival is April
3 of a given year, delay in the delivery of goods spanning a period of
more than 2 months is considered unreasonable. [Maersk Line v. CA,
May 17, 1993]

• Perishable Goods – Great diligence should be used in forwarding such

property with dispatch and haste; and where a delay of 2 or 3 days,
the property is damaged, the carrier may be held liable for the
damage. [Dissenting: Tan Chiong Sian v. Inchausti, GR 6092, Mar. 8,
1912]
 CONSEQUENCES OF DELAY
1. EXCUSABLE DELAYS:

A. Suspend, but do not generally terminate, the contract of carriage, and when the cause is
removed, the master must proceed with the voyage and make delivery.

B. Vessel continues to be liable as a common carrier, not a warehouseman.

2. INEXCUSABLE DELAY:

A. Carrier is still liable even if natural disaster cause the damage;

B. Stipulation limiting the liability of the carrier is inoperative;

C. Carrier is liable for the damages caused by the delay;

D. Consignee may exercise his right to abandon under Article 371 of the Code of Commerce.
 PROCEDURE IN ABANDONMENT BY
CONSIGNEE IN CASE OF DELAY
(TYPE 2)
• Art. 371. In case of delay through the fault of the carrier referred to in the
preceding articles, the consignee may leave the goods transported in the hands
of the former, advising him thereof in writing before their arrival at the point of
destination.

• When this abandonment takes place, the carrier shall pay the full value of the
goods as if they had been lost or mislaid.

• If the abandonment is not made, the indemnification for the losses and damages
by reason of the delay cannot exceed the current price which the goods
transported would have had on the day and at the place in which they should
have been delivered; this same rule is to be observed in all other cases in which
this indemnity may be due.
OTHER CODE OF COMMERCE
PROVISIONS
ARTICLE 372.    The value of the goods which the carrier must pay in cases if
loss or misplacement shall be determined in accordance with that declared in
the bill of lading, the shipper not being allowed to present proof that among
the goods declared therein there were articles of greater value and money.

Horses, vehicles, vessels, equipment and all other principal and accessory
means of transportation shall be especially bound in favor of the shipper,
although with respect to railroads said liability shall be subordinated to the
provisions of the laws of concession with respect to the property, and to what
this Code established as to the manner and form of effecting seizures and
attachments against said companies.
ARTICLE 373.    The carrier who makes the delivery of the merchandise to the consignee by
virtue of combined agreements or services with other carriers shall assume the obligations of
those who preceded him in the conveyance, reserving his right to proceed against the latter if
he was not the party directly responsible for the fault which gave rise to the claim of the
shipper or consignee.

The carrier who makes the delivery shall likewise acquire all the actions and rights of those
who preceded him in the conveyance.  The shipper and the consignee shall have an
immediate right of action against the carrier who executed the transportation contract, or
against the other carriers who may have received the goods transported without reservation.

However, the reservation made by the latter shall not relieve them from the responsibilities
which they may have incurred by their own acts.

ARTICLE 374.      The consignees to whom the shipment was made may not defer the
payment of the expenses and transportation charges of the goods they receive after the
lapse of twenty-four hours following their delivery; and in case of delay in this payment, the
carrier may demand the judicial sale of the goods transported in an amount necessary to
cover the cost of transportation and the expenses incurred.
FIVE TYPES OF ABANDONMENT
UNDER MERCANTILE LAW
1. WHEN DAMAGE IS SO GREAT [Art. 365, Code of Commerce]

2. WHEN GOODS ARRIVE BEYOND THE DATE AGREED ON [Art. 371,

Code of Commerce]

3. ABANDONMENT BY SHIPOWNER WHEN LIABILITY EXCEEDS VALUE

OF VESSEL [Art. 578, Code of Commerce]

4. DAMAGE TO GOODS IN LIQUID FORM [Sec. 687, Code of Commerce]

5. CONSTRUCTIVE LOSS UNDER THE INSURANCE CODE [Sec. 138,

Insurance Code of the Phil.]
 1ST TYPE: WHEN DAMAGE IS
SO GREAT
• Where the shipper ships goods and goods arrive in damaged
condition and damage is so great that shipper may not use
goods for the purpose for which they have been shipped, the
shipper may exercise right of abandonment.

• NOTICE TO THE CARRIER IS SUFFICIENT – consent of

carrier is not necessary and once perfected, the ownership
over damaged goods passes to the carrier and carrier must
pay the shipper market value of goods at point of destination.
2ND TYPE: WHEN GOODS ARRIVE
BEYOND DATE AGREED ON
• Under this set-up, shipper and carrier agreed in advance that cargo must
arrive on a certain date.

• The date has passed but the cargo has not yet arrived due to carrier’s fault.

• Shipper/consignee may exercise the right of abandonment by NOTIFYING

the carrier.

• Once carrier has been notified, ownership over the goods undelivered passes
to carrier.

• But carrier must pay shipper market value of the goods at the point of
destination.
 3RD TYPE: ABANDONMENT BY
SHIPOWNER WHEN LIABILITY EXCEEDS
VALUE OF VESSEL
• Reflects the hypothecary nature of maritime transactions.

• Instances when vessel carries goods and goods are damaged.

• Liability of the carrier over the damage goods exceeds the value
of the vessel.

• Shipowner of ship agent may exercise right of abandonment by

simply NOTIFYING TO THE SHIPPER.

• Liability of the shipowner is now limited to the value of the vessel.

 4TH TYPE: DAMAGE TO
GOODS IN LIQUID FORM
Charterers and shippers may abandon the merchandise damaged
if :

• Cargo should consist of liquids;

• The contents have leaked out;

• What remains in the container is but ¼ of its content;

• The cause was on account of inherent defect or fortuitous event.

5TH TYPE: CONSTRUCTIVE LOSS
UNDER THE INSURANCE CODE
• Shipowner’s right of abandonment for constructive loss;

• Takes place when vessel suffers damage in excess of ¾ of its

insured value;

• Notice to Insurer from the insured is sufficient;

• Thereafter, ownership over the damaged vessel passes to the

insurer; and

• Insurer must pay insured as if it were an ACTUAL LOSS.

 CHARACTERISTICS OF
ABANDONMENT
• It is unilateral right;

• It is perfected by mere notice;

• Once perfected, ownership over damaged goods

passes to carrier; and

• Carrier must pay the shipper market value of goods

at the point of destination
BAR, MERCANTILE LAW [1979]
• Problem:

• A, in Manila, shipped on board a vessel of B, chairs to be used in the

moviehouse of consignee C in Cebu. No date for delivery or
indemnity for delay was stipulated. The chairs, however, were not
claimed promptly by C and were shipped by mistake back to Manila,
where it was discovered and re-shipped to Cebu. By the time the
chairs arrived, the date of inauguration of the moviehouse passed by
and it had to be postponed. C brings an action for damages against B
claiming loss of profits during the Christmas season when he
expected the moviehouse to be opened. Decide the case with reason.
Suggested Answer:

• C may sue B for the loss of his profits provided

that ample proof thereof are presented in
court. The carrier is obligated to transport the
goods without delay. The carrier is liable if he is
guilty of delay in the shipment of cargo, causing
damages to the consignee.
MORA IN CIVIL LAW DISTINGUISHED
FROM MORA IN MERCANTILE LAW
Under Art. 1169, Civil Code requires demand by the
creditor in order that delay may exist.

Exceptions:

A. Obligation or law expressly so provides;

B. Time is of the essence; and

C. Demand would be useless.

• BUT under the Code of Commerce, demand,
as a general rule, is not necessary in commercial
contracts in order for the obligor to incur delay
[Arts. 61, 62 & 63, Code of Commerce].

• Exceptions: a) When fixed by contract, b) when

recognized or allowed by law.

• In commercial contracts, time is always of the

essence.
CODE OF COMMERCE PROVISIONS
ON MORA [ARTS. 61, 62,& 63]
Art. 61. Day of grace, courtesy or others which under any name whatsoever defer the fulfillment of
commercial obligations, shall not be recognized, except those which the parties may have previously
fixed in contract or which are based on a definite provision of law.

Art. 62. Obligations which do not have a period previously fixed by the parties or by the provisions of
this Code, shall be demandable ten days after having been contracted if they give rise only to an
ordinary action, and on the next day if they involve immediate execution.

Art. 63. The effect of default in the performance of commercial obligation shall commence:

1. In contracts with a day for performance fixed by the will of the parties or by the law, on
the day following their maturity;

2. In those which do not have such day fixed, from the day on which the creditor makes
judicial demand on the debtor or notifies him of protest of loss and damages made against him before
a judge, notary or other public official authorized to admit the same.
 SUMMARY: WHEN DEBTOR INCURS
DELAY IN COMMERCIAL CONTRACTS
• If period of performance is fixed, debtor incurs delay the day following the
day fixed, without need of demand;

• If no period fixed, ten (10) days from execution of contract and on 11th
day, debtor incurs delay without need of demand;

• Potestative period (e.g. when the debtor desires) – debtor in delay from
date of demand.

• Note: distinguished from a potestative condition, e.g. ‘if the debtor desires’.
Under the Civil Code and Code of Commerce, such condition is void.
 KINDS OF DELAY UNDER
CIVIL CODE
• Mora solvendi – Delay of an obligor to deliver or to perform an obligation:

a. Mora solvendi ex re – delay when the obligation is to give or to deliver;

b. Mora solvendi ex persona – delay when the obligation is to do or to

perform a personal service.

• Mora accipiendi – Delay of an obligee in accepting the delivery of the thing

due;

• Compensatio morae – Delay in reciprocal obligations (Art. 1169, last par.).

Neither party is in default unless the other is ready to comply with his
obligation.
UNDER CIVIL CODE: DEMAND
NECESSARY FOR DELAY
In Compania General de Tabacos vs. Araza, 7 Phil. 455, held:
‘The contract does not provide for the payment of any
interest. There is no provision in it declaring expressly that
the failure to pay when due should put the debtor in
default. There was therefore no default which would make
him liable for interest until a demand was made. There was
no evidence of any demand prior to the presentation of the
complaint. The plaintiff is therefore entitled to interest only
from the commencement of the action’.
DEEMED MERCHANTS UNDER
THE CODE OF COMMERCE
• Those who, having legal capacity to engage in
commerce, habitually devote themselves thereto [Art. 1]

• Legal presumption of habituality: ‘From the moment a

person who intends to engage in commerce announces
through circulars, newspapers, handbills, posters
exhibited to the public, or in any manner whatsoever, an
establishment which has for its object some commercial
operation’ [Art. 3]
 COMMERCIAL CONTRACTS
GOVERNED BY CODE OF COMMERCE
• Art. 50. Commercial contracts, in everything relative to their requisites,
modifications, exceptions, interpretations, and extinction and to the capacity of
their contracting parties, shall be governed in all matters not expressly
provided for in this Code or in special laws, by the general rules of civil law.

• HIERARCHIC AL APPLIC ABILITY OF LAWS TO COMMERCIAL

TRANSACTIONS:

1. Code of Commerce

2. Commercial customs (in the absence of #1); and

3. Civil Code (in the absence of 1 & 2)

 PERFECTION OF COMMERCIAL
CONTRACTS BY CORRESPONDENCE
• Art. 54. Contracts entered into by correspondence shall
be perfected from the moment an ANSWER IS MADE
ACCEPTING THE OFFER OR THE CONDITIONS by
which the latter may be modified.

• Above is in contrast to Art. 1319, NCC where

negotiated contracts by correspondence are perfected
only FROM THE TIME THE OFFEROR HAS ACTUAL
KNOWLEDGE OF ACCEPTANCE.
 PERFECTION OF COMMERCIAL
CONTRACTS BY AGENT OR BROKER
• Art. 55. Contracts in which an agent or broker intervenes shall
be perfected WHEN THE CONTRACTING PARTIES SHALL
HAVE ACCEPTED HIS OFFER.

• Compare Art. 1989, NCC: If the agent contracts in the name of

the principal, exceeding the scope of his authority, and the
principal does not ratify the contract, it shall be void if the party
with whom the agent contracted is aware of the limits of the
powers granted by the principal. In this case, however, the agent
is liable if he undertook to secure the principals ratification.
 CONSEQUENCE OF DELAY
(CIVIL CODE)
• Art. 1740, NCC: If the common carrier negligently incurs
in delay in transporting the goods, a natural disaster shall
not free such carrier from responsibility.

• Art. 1747: If the common carrier, without just cause,

delays the transportation of the goods or changes the
stipulated or usual route, the contract limiting the
common carrier’s liability cannot be availed of in case of
the loss, destruction or deterioration of the goods.
 RIGHT OF PASSENGER IN
CASE OF DELAY
• Code of Commerce: Art. 698

• In case a voyage already begun has been interrupted;

• Passengers to pay the fare in proportion to the distance covered;

• No right to recover for losses and damages if interruption is due to fortuitous event or force
majeure;

• Except when interruption was caused by the Captain exclusively.

• If interruption is due to disability of the vessel and passenger agrees to await the repair;

• He is not required to pay any increased price of passage;

• BUT HIS LIVING EXPENSES DURING THE STAY FOR HIS OWN ACCOUNT. (But see MARINA
MC 112)
 MARINA MEMORANDUM
CIRCULAR NO. 112
In case the vessel cannot continue or complete her voyage FOR ANY
CAUSE:

• Carrier is under obligation to transport the passenger to his/her

destination AT THE EXPENSE OF THE CARRIER including FREE MEALS
and LODGING before said passenger is transported to his destination.

• A passenger may opt to have his ticket refunded in full if the cause of the
unfinished voyage is due to the negligence of the carrier; or

• To an amount that will suffice to defray transportation cost at the shortest

possible route towards his destination if the cause is fortuitous event.
• If arrival is delayed, carrier shall provide for meals,
free of charge, during mealtime.

• If departure is delayed due to carrier’s negligence,

carrier is also under the obligation to provide
meals, free of charge, during meal time to
TICKETED PASSENGERS for the particular voyage.

• If departure is delayed due to fortuitous event, the

carrier is under no obligation to serve free meals
to the passengers.
 DUTY TO DELIVER GOODS AT THE
PLACE DESIGNATED AND TO PERSON
NAMED IN BL
Art. 360 (Code of Commerce):

• The shipper may change the consignment of goods, without necessarily

changing the place of delivery;

• But must, at the time of ordering the change of consignee in the BL

signed by the carrier;

• Return the BL to the carrier in lieu of another BL containing the

novated contract.

• Expenses of the change of consignee at the expense of the shipper.

BAR MERCANTILE LAW [1975]
• Bar Question:

• If a shipper, without changing the place of delivery

changes the consignment of consignee of the
goods (after said goods had been delivered to the
carrier), under what condition will the carrier be
required to comply with the new order of the
shipper?
Suggested Answer:

• Art. 360 of the Code of Commerce provides that

if the shipper should change the consignee of the
goods without changing their destination, the
carrier shall comply with the new order provided
the shipper RETURNS TO THE CARRIER the bill
of lading and a new one is issued showing the
novation of the contract. However, all expenses
for the change must be paid by the shipper.
CARRIER’S DUTY TO EXERCISE
EXTRAORDINARY DILIGENCE
• Art. 1733 (NCC). 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 the vigilance over
the goods is further expressed in Arts. 1734, 1735,
and 1745, Nos. 5, 6, and 7, while the extraordinary
diligence for the safety of the passengers is further
set forth in Arts. 1755 and 1756.

• Art. 1755. A common carrier is bound to carry

the passengers safely as far as human care and
foresight can provide, using the utmost diligence
of very cautious persons, with a due regard for all
the circumstances.
• The foregoing provisions in the Civil Code modify Arts. 363, 364 &
365 of the Code of Commerce:

• Art. 363 on the requirement of the carrier to deliver the goods

shipped in the same condition where they were found at the time
they were received; and

• Art. 364 on when damage is merely diminution in the value of the

goods, carrier’s liability shall be reduced to the payment of the
amount constituting the difference in value determined by experts.

• Art. 365 on instance when goods are rendered useless for sale and
consumption for the purposes they are destined, consignee may
not receive them and may demand only their value at the current
price of the day.
 PRESUMPTION OF
NEGLIGENCE
In case of loss of effects or cargo; or In case of death
or injury of passenger:

• Common carrier is presumed to be at fault;

• Unless, it can prove that it had observed

extraordinary diligence in the vigilance thereof.
 BATANGAS TRANSPORT CO. V.
CAGUIMBAL, ET AL., 

G.R. L-22985, JAN. 24, 1968
• In an action based on a contract of carriage, the court
need not make an express finding of fault or negligence
on the part of the carrier in order to hold it responsible
to pay the damages sought;

• It is sufficient that plaintiff shows: a) there exist a

contract between the passenger or the shipper and the
common carrier; and b) the loss, deterioration, injury or
death took place during the subsistence of the contract.
 MIRASOL V. THE ROBERT DOLLAR
COMPANY, G.R. L-29721, MAR. 27, 1929
• Facts:

• Mirasol is consignee of two cases of Encyclopedia

Britannica books that he ordered from New York,
shipped in good order and condition on board MS
President Garfield, principal defendant company. The
books arrived in bad order and condition. There was
total loss of one case and partial loss on the other, all in
all amounting to P2,080.
• Held:

• Defendant having received the two boxes in good

condition, its legal duty was to deliver them to the
plaintiff in the same condition in which it received
them.

• As the boxes were damaged while in transit, the

burden of proof then shifted, and it devolved upon
the defendant to both allege and prove that the
damage was caused by reason of some fact which
exempted it from liability.
• As to how the boxes were damaged, was a matter peculiarly and exclusively
within the knowledge of the defendant.

• To require plaintiff to prove as to when and how the damage was caused would
force him to call and rely upon the employees of the defendant’s ship. That is not
the law.

• The evidence for the defendant shows that the damage was largely caused by ‘sea
water’, from which it contends that it is exempt.

• Damage by ‘sea water’, standing alone and within itself, is not evidence that they
were damaged by force majeure or for a cause beyond defendant’s control.

• The words ‘perils of the sea’ apply to all kinds of marine casualties, such as
shipwreck, foundering, stranding, etc.

• Where the peril is the proximate cause of the loss, the shipowner is excused. But
something fortuitous and out of the ordinary must be involved in both words
‘peril’ or ‘accident’
 DURATION OF DUTY TO EXERCISE
EXTRAORDINARY DILIGENCE
[CARRIAGE OF GOODS]
Art. 1736, NCC:

The extraordinary responsibility of the common carrier

lasts from the time the goods are unconditionally placed in
the possession of, and received by the carrier for
transportation until the same are delivered, actually or
constructively, by the carrier to the consignee, or the
person who has a right to receive them, without prejudice
to the provisions of Art. 1738.
Art. 1737 (NCC):

The common carrier’s duty to observe extraordinary diligence

over the goods remains in full force and effect even when they
are temporarily unloaded or stored in transit, unless the shipper
or owner has made use of the right of stoppage in transitu.

Note: Right to stoppage in transitu is the right of the unpaid

seller who has parted with the possession of the goods, when
the buyer is or becomes insolvent, to stop them and resume
possession while they are in transit. The unpaid seller will
become entitled to the same rights to the goods, as if he had
never parted with possession. [Art. 1530, NCC]
Art. 1738 (NCC):

The extraordinary liability of the common carrier

continues to be operative even during the time
the goods are stored in a warehouse of the
carrier at the place of destination, until the
consignee has been advised of the arrival of the
goods and has had reasonable opportunity
thereafter to remove them or otherwise dispose
of them.
 ART. 1736 CONSTRUED 

[MACAM V. CA, G.R. 125524]
• Facts:

• Ben-Mac Enterprises shipped on board MV Nen Jiang, represented

by local agent Wallem Shipping, 3,500 boxes of watermelons valued
at $5,950 and 1,611 boxed of fresh mangoes valued at $14,273
with Pakistan Bank (Hongkong) as consignee and Great Prospect
Co., Hongkong as Notify Party.

• In the BL, it was stipulated that ‘One of the Bills of Lading must be
surrendered duly endorsed in exchange for the goods or delivery
order’.
• As per letter of credit requirement, copies of the BL and
commercial invoices were submitted by Ben-Mac to SolidBank.
The latter then paid Ben-Mac the total value of the shipment.

• Upon arrival in Hongkong, the shipment was delivered directly

to GPC, not to Pakistan Bank and without the required BL
having been surrendered.

• GPC failed to pay Pakistan Bank. Pakistan Bank refused to pay

Ben-Mac through Solidbank.

• Since SolidBank already pre-paid Ben-Mac the value of the

shipment, it demanded payment from Wallem but was refused.
Ben-Mac was forced to refund SolidBank.
Held:

• We emphasize that the extraordinary responsibility of the

common carriers lasts until actual or constructive delivery of the
cargoes to the consignee or TO THE PERSON WHO HAS A
RIGHT TO RECEIVE THEM.

• Pakistan Bank was indicated in the BL as consignee whereas GPC

was the notify party. However, in the export invoices GPC was
clearly named as buyer/importer. Ben-Mac also referred to GPC
as such in his demand letter to Wallem.

• This premise draws us to conclude that the delivery to GPC as

buyer/importer which, conformably with Art. 1736 had, other than
the consignee, the right to receive them was proper.
 DURATION OF DUTY TO EXERCISE
DILIGENCE [CARRIAGE OF PASSENGERS]
• For Trains: Starts from the moment the person who
purchases the ticket (or token or card) from the
carrier presents himself at the proper place and in a
proper manner to be transported with bona fide
intent to ride the coach. Same for Ships & Aircrafts.

• For jeepneys/buses: Starts from the time the person

steps on the platform.
 WHEN CONTRACT OF
CARRIAGE ENDS

• The relation of carrier does not cease at the

moment the passenger alights from the carrier’s
vehicle but continues until the passenger has had a
reasonable time or a reasonable opportunity to
leave the carrier’s premises.
 LA MALLORCA V. CA, G.R.
L-20761, JULY 27, 1966
• Facts:

• Plaintiffs, as husband and wife boarded Pambusco Bus No. 352 together
with their (3) minor daughters from San Fernando, Pampanga to Anao,
Mexico, Pampanga.

• All alighted at the designated place of unloading but Mariano, the father
had to return to the bus to get one of his bayong left under his seat.

• Unknown to him, her daughter Raquel followed him. She was ran over
by the bus when it started to run again.
• Held:

• There can be no controversy that as far as the father is concerned, when

he returned to the bus for his bayong which was not unloaded, the relation
of passenger and carrier does not necessarily cease where the latter, after
alighting from the car, aids the carrier’s conductor in removing his baggage.

• The issue to be determined here is whether as to the child, who was

already led by the father to a place about 5 meters away from the bus, the
liability of the carrier for her safety under the contract of carriage also
persisted.

• In the present case, the father returned to the bus to get one of his
baggages which was not unloaded when they alighted from the bus.

• Raquel, the child that she was, must have followed the father.
• However, although the father was still on the running board
of the bus awaiting for the conductor to hand him the bag or
bayong, the bus started to run, so even the father had to
jump down from the moving vehicle.

• It was at this instance that the child, who must be near the
bus, was run over and killed. In the circumstances, it cannot be
claimed that the carrier’s agent had exercised the utmost
diligence required under Art. 1755.

• The presence of said passengers near the bus was not

unreasonable and they are, therefore, to be considered still as
passengers of the carrier, entitled to the protection under
their contract.
 ABOITIZ SHIPPING V. CA, G.R.
84458, NOV. 6, 1989
Facts:

• Anacleto was a passenger of MV Antonia from San Jose, Mindoro to Manila.

Upon reaching Pier 4, North Harbor, he disembarked from the ship by jumping
from the 3rd deck which is at level with the pier.

• After 1 hour when all the passengers have already disembarked and the crane
started unloading the cargoes, Anacleto went back to the vessel after realizing
that he left some of his cargoes there.

• It was while he was pointing to the crew the place where his cargoes were
loaded that the crane hit him. He later died. His heir sued Aboitiz for breach of
contract of carriage.
Held:

• In consonance with common shipping procedure as to the minimum

time of 1 hr. allowed for the passengers to disembark, it may be
presumed that the victim had just gotten off the vessel when he went
to retrieve his baggage.

• Yet, even if he had already disembarked an hour earlier, his presence in

petitioner’s premises was not without cause. The victim had to claim
his baggage which was possible only one (1) hour after the vessel
arrived since it was admittedly standard procedure in the case of
petitioner’s vessels that the unloading operations shall start only after
that time.

• Consequently, the victim Anacleto is still deemed passenger at the

time of his tragic death.
DEFENSES OF COMMON CARRIERS
[ART. 1734, NCC]- GOODS
1. Flood, storm, earthquake, lightning, or other natural disaster or calamity;

2. Act of public enemy in war, whether international or civil;

3. Act or omission of the shipper or owner of the goods;

4. The character of the goods or defects in the packing or in the containers;

and

5. Order or act of competent public authority.

• Note: The enumeration is exclusive; no other defense may be raised by the

Common Carrier.
 DEFENSE NO. 1: FORTUITOUS
EVENT
REQUISITES:

• Independent of human will;

• Impossible to foresee or if it can be foreseen, impossible to avoid;

• Must be such as to render it impossible for the obligor to fulfill

the obligation in a normal manner; and

• Obligor must be free from any participation in or the aggravation

of the injury [Lasam v. Smith, No. 19495, Feb. 2, 1924]
 ARTICLE 1739, NCC:
• 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. The same
duty is incumbent upon the common carrier in case of an act of
the public enemy referred to in Article 1734, No. 2.
An act of God can not be urged for the protection of a person who has been guilty of gross negligence in not
trying to avert its results. One who has accepted responsibility for pay can not weakly fold his hands and say
that he was prevented from meeting that responsibility by an act of God, when the exercise of the ordinary
care and prudence would have averted the results flowing from that act. One who has placed the property of
another, intrusted to his care, in an unseaworthy craft, upon dangerous waters, cannot absolve himself by
crying, "an act of God," when every effect which a typhoon produced upon that property could have been
avoided by the exercise of common care and prudence. When the negligence of the carrier concurs with an
act of God producing a loss, the carrier is not exempted from liability by showing that the immediate cause of
the damage was the act of God; or, as it has been expressed, "when the loss is caused by the act of God, if the
negligence of the carrier mingles with it as an active and cooperative cause, he is still liable." The loss and
damage to perishable articles in consequence of the weather will not excuse the carrier if it could have been
prevented by due care and diligence. The carrier must not only show that it did all that was usual, but all that
was necessary to be done under the circumstances. (Wing vs. New York, etc., Ry. Co., 1 Hilt. (N.Y.), 235; Philleo
vs. Sanford, 17 Tex., 228.) To be exempt from liability for loss because of an act of God, the common carrier
must be free from any previous negligence or misconduct by which that loss or damage may have been
occasioned. For, although the immediate or proximate cause of a loss in any given instance may have been
what is termed an act of God, yet if the carrier unnecessarily exposed the property to such accident by any
culpable act or omission of his own, he is not excused. (Mc-Graw vs. Baltimore and Ohio Ry. Co., 41 Am. Rep.,
696.) In the case of Wolf vs. American Express Co,., 43 Mo., 421, Wagner, J., said:

The act of God which excuses the carrier must not only be the proximate cause of the loss, but the better
opinion is that it must be the sole cause. And where the loss is caused by the "act of God," if the negligence of
the carrier mingles with it as an active and cooperative cause, he is still responsible. (Amies vs. Stevens, 1 Stra.,
128.)
Thus, in order for fortuitous event to be a valid
defense,

• It must be the PROXIMATE AND ONLY CAUSE

OF THE LOSS;

• Carrier must be free from any participation in

causing the damage or injury;

• It must exercise due diligence to prevent or

minimize the loss BEFORE, DURING AND AFTER
the fortuitous event. [Art. 1739, NCC]
 FIRE NOT A NATURAL
DISASTER OR CALAMITY
[COKALIONG V. UCPB GEN. INSURANCE, G.R. 146018, JUNE 25, 2003]
• Facts:

M/V Tandag sank after a crack from her auxiliary engine’s fuel tank caused the
spurt of fuel towards the heating exhaust manifold ignited a fire in the engine
room.

• Held:

Fire is not considered a natural disaster or calamity. This must be so as it arises

almost invariably from some act of man or by human means.

It does not fall within the category of an act of God unless caused by lightning
or by other natural disaster or calamity.
 HIJACKING NOT AN
EXEMPTING CAUSE
• A Common Carrier can be held liable for failing to prevent a hijacking by
frisking passengers and inspecting their baggages, especially when it had
received prior notice of such threat. (Fortune Express v. CA, 305 SCRA 14)

• Under Art. 1745 (6), a common carrier is held responsible - and will not be
allowed to divest or to diminish such responsibility - even for acts of
strangers like thieves or robbers, except where such thieves or robbers in
fact acted “with grave or irresistible threat, violence or force.” We believe
and so hold that the limits of the duty of extraordinary diligence in the
vigilance over the goods carried are reached where the goods are lost as a
result of a robbery which is attended by “grave or irresistible threat,
violence or force. (De Guzman v. CA, 15 September 1993).
 FIRECRACKERS EXPLODING FROM
PASSENGER BAGGAGE: CARRIER EXCUSED
(NOCUM V. LTD, 30 SCRA 69)

• Facts:

One of the bus passengers had firecrackers inside his bag. They exploded after another
passenger smoked cigarettes causing injuries to another passenger. The injured passenger
sought to recover from the carrier.

• Held:

Carrier not liable. The carrier cannot be expected to examine and search each and every
piece of baggage of passengers, otherwise the bus may not all together be able to leave.

This is only true so long as the cause of the accident was not apparent and the carrier or
its employees are not guilty of negligence.
 MECHANICAL DEFECTS
[NECESITO V. PARAS, G.R. NO. L-10605, 30 JUNE 1958 AND G.R. NO. L-10606, 30 JUNE
1958]

• Facts:

A Phil. Rabbit Bus was traveling fast. During the trip the driver sensed that the wheels
did not respond to the movement of the steering wheel.

The bus hit a rut (pothole) and it turned turtle, killing a passenger.

The mechanic of the bus company discovered that the worn-out gear of the steering
wheel had a crack, which could not be seen by the naked eye from the outside.

The bus company proved that the defect was attributable to General Motors,
manufacturer of the bus and that the defect could not have been discovered by
expert mechanics.
 RULE ON MECHANICAL
DEFECTS
• It is clear that the carrier is not an insurer of the passengers' safety. His liability rests upon negligence, his
failure to exercise the "utmost" degree of diligence that the law requires, and by Art. 1756, in case of a
passenger's death or injury the carrier bears the burden of satisfying the court that he has duly discharged
the duty of prudence required. In the American law, where the carrier is held to the same degree of
diligence as under the new Civil Code, the rule on the liability of carriers for defects of equipment is thus
expressed: "The preponderance of authority is in favor of the doctrine that a passenger is
entitled to recover damages from a carrier for an injury resulting from a defect in an appliance
purchased from a manufacturer, whenever it appears that the defect would have been
discovered by the carrier if it had exercised the degree of care which under the circumstances
was incumbent upon it, with regard to inspection and application of the necessary tests. For
the purposes of this doctrine, the manufacturer is considered as being in law the agent or
servant of the carrier, as far as regards the work of constructing the appliance. According to
this theory, the good repute of the manufacturer will not relieve the carrier from liability" (10
Am. Jur. 205, s, 1324; see also Pennsylvania R. Co. vs. Roy, 102 U. S. 451; 20 L. Ed. 141; Southern R. Co. vs.
Hussey, 74 ALR 1172; 42 Fed. 2d 70; and Ed Note, 29 ALR 788; Ann. Cas. 1916E 929).
• The rationale of the carrier's liability is the fact that the passenger has neither choice nor
control over the carrier in the selection and use of the equipment and appliances in use by
the carrier. Having no privity whatever with the manufacturer or vendor of the defective
equipment, the passenger has no remedy against him, while the carrier usually has. It is but
logical, therefore, that the carrier, while not in insurer of the safety of his passengers, should
nevertheless be held to answer for the flaws of his equipment if such flaws were at all
discoverable.

• R E S O L U T I O N (to the MR) , September 11, 1958, REYES, J. B. L., J.:

And in Son vs. Cebu Autobus Company, 94 Phil., 892, this Court held a common carrier liable
in damages to passenger for injuries cause by an accident due to the breakage of a faulty
drag-link spring.

It can be seen that while the courts of the United States are at variance on the question of a
carrier's liability for latent mechanical defects, the rule in this jurisdiction has been consistent
in holding the carrier responsible. This Court has quoted from American and English
decisions, not because it felt bound to follow the same, but merely in approval of the
rationale of the rule as expressed therein, since the previous Philippine cases did not enlarge
on the ideas underlying the doctrine established thereby.
 YOBIDO V. CA
G.R. 113003, OCT. 17, 1997
• Held:

• The explosion of a new tire cannot by itself be considered a fortuitous

event to exempt the common carrier from liability in the absence of
showing on the part of the carrier that other human factors that could
have intervened to cause the blowout of the new tire did not in fact
occur.

• Moreover, a common carrier may not be absolved from liability in case

of force majeure or fortuitous event alone. It must still prove that it was
not negligent in causing the death or injury resulting from the accident.
 PESTANO V. SUMAUYANG
346 SCRA 870 (2000)
• Held:

• The fact that the driver was able to use a bus with a
faulty speedometer shows that the employer was
remiss in the supervision of its employees and in the
proper care of its vehicles. Under Arts. 2180 and
2176 of the Civil Code, owners and managers are
responsible for damages caused by their employees.
SPS. LANDINGAN V. PANTRANCO
33 SCRA 284
• Facts: A married couple with two children were passengers in a
bus going to Baguio. While negotiating Kennon Road, the
motor suddenly stopped and the bus backed down. The driver
expertly guided the bus to rest on the mountainside of the
road. But because of the noise, the two children became
frightened and they jumped out of the bus and were killed.

• Held: The bus when it stopped, was not in perfect running

condition. It is the carrier’s duty to see to it that the bus is
always in perfect condition.
 TRANS-ASIA V. CA
254 SCRA 260 (1996)
• Held:

• Before commencing the contracted voyage, the carrier undertook some repairs on one of the
vessel’s two engines, but even before it could finish these repairs, it allowed the vessel to leave the
port of origin on only one functioning engine, instead of two.

• Moreover, even the lone functioning engine was not in perfect condition as sometime after it had
run its course, it conked out. Plainly, the vessel was unseaworthy even before the voyage began.

• 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 common carrier to maintain in seaworthy condition its vessel is clear breach of its
duty prescribed under Art. 1755 of the Civil Code, which binds the carrier to carry the passengers
safely as far as human care and foresight could provide, using the utmost diligence of a very
cautious person, with due regard for all the circumstances.
 OTHER INVALID CAUSES
• Explosion – Damage to cargo from explosion of another cargo is
not ordinarily attributable to peril of the sea or accidents of
navigation particularly where it occurs after the vessel has ended
its voyage and is finally moored to unload;

• Worms & rats – Whenever the ship is damaged by worms

resulting in damage to cargo, the same cannot be cited as an
excuse. The same is true with respect to damage of cargo by rats
whether the cargo was directly damaged by the rats or by water
let in through holes gnawed by rats in the ship or her fixtures.
• Water Damage: Damage by sea water is not a valid excuse
where the water gains entrance through a port which had
been left open or insufficiently fastened on sailing.

• Barratry: The shipowner cannot escape liability to third

persons if the cause of damage is barratry. It is an act
committed by the master or crew of the ship for some
unlawful or fraudulent purpose, contrary to their duty to
the owner. Intentional fraud or breach of trust or willful
violation of law is necessary to constitute barratry. Barratry
includes theft by the purser of a specie shipped on board
and fraudulently running the ship ashore.
 RAYNERA V. HICENTA
306 SCRA 102 (1999)
• Held:

• Drivers of vehicles who bump the rear of another

vehicle must be presumed to be the cause of the
accident, unless contradicted by other evidence,
since the rear driver is deemed to have the last
clear chance of avoiding the accident, and
therefore deemed negligent.
 DEFENSE NO. 2: PUBLIC
ENEMY
• Presupposes the existence of an actual state of war, and refers to the
government of a foreign nation at war with country to which the carrier
belongs.

• Thieves, rioters, robbers, and insurrectionists, thought at war with social order,
are not in a legal sense classed as public enemies.

• Reason for the defense: The exception concerning the acts of public enemies is
understandable because the government itself is called upon to protect its
subjects from loss or from such hazard and private citizens have no power to
furnish the security and protection required.

• Public enemy is also an exception under COGSA.

DEFENSE NOS. 3 & 4: ACT OR OMISSION
OF OWNER & IMPROPER PACKING
• COGSA also provides for similar defense, i.e. carrier shall not
be liable for (1) wastage in bulk or weight or any other loss or
damage arising from inherent defect, quality or vice of goods,
(2) insufficiency of packing, (3) insufficiency or inadequacy of
the marks, or (4) latent defect not discoverable by due
diligence.

• However, common carriers are still required to exercise due

diligence to forestall or lessen the loss notwithstanding the
existence of improper packing.
 ARTICLE 1742
• Defect is want or absence of something necessary for
completeness or perfection; a lack of something essential to
the proper use for the purpose for which a thing is used.

• Defectiveness is not synonymous with inferiority.

• Inferior means of poor quality, mediocre or second rate.

(Phil. Charter Insurance Corp. v. Unknown Owner of the
Vessel M/V National Honor)
 A.F. SANCHEZ BROKERAGE V. CA,
21 DECEMBER 2004, 447 SCRA 427.
• The carrier must receive the goods under protest;

• The acceptance with reservation regarding such defect

which must be duly noted in the bill of lading.

• If the carrier accepted the cargo without reservation

or without protest with respect to the alleged
defective package, it can be inferred that there was no
damage to the package at the time of acceptance.
 DEFENSE NO. 5: ORDER OF
PUBLIC AUTHORITY

• Requisite: Such public authority must had power

to issue the order.

• Defense is not available if: (1) the public authority

has no authority to issue the subject order, or (2)
if the public authority exceeded his authority.
 DEFENSES IN CARRIAGE OF
PASSENGERS
• The carrier’s PRIMARY defense is exercise of
extraordinary or utmost diligence.

• It is believed that the defenses mentioned in Article

1734 like fortuitous event or acts of a public enemy
(EXCEPT NO. 4) may be invoked against the passenger
or his heirs PROVIDED that UTMOST DILIGENCE is
exercised. However, the presumption under Article 1756
applies.
 RELEVANT CIVIL CODE
PROVISIONS
Article 1759. Common carriers are liable for the death of or injuries to passengers
through the negligence or wilful acts of the former's employees, although such
employees may have acted beyond the scope of their authority or in violation of the
orders of the common carriers.

This liability of the common carriers does not cease upon proof that they exercised all
the diligence of a good father of a family in the selection and supervision of their
employees.

Article 1763. A common carrier is responsible for injuries suffered by a passenger on

account of the wilful acts or negligence of other passengers or of strangers, if the
common carrier's employees through the exercise of the diligence of a good father of
a family could have prevented or stopped the act or omission.
CARRIER LIABLE FOR ACTS OF
ITS EMPLOYEES
• Unlike in quasi-delict, a common carrier cannot escape liability by claiming the
he exercised due diligence in the selection and supervision of the employee.

• It is not a defense that the employee acted beyond the scope of his authority
because the riding public is not expected to inquire from time to time before
they board the carrier whether or not the driver or any other employee is
authorized to drive the vehicle or that said driver is acting within the scope of
his authority and observing the existing rules and regulations required of him.
(Silverio Marchan, et.al. v. Arsenio Mendoza, No. 24471, 30 August 1968, 24
SCRA 888)

• Willful acts of the employees include theft.

 YU CON V. IPIL
GR NO. L-10195, DEC. 29, 1916
Held:

• It is well and good that the shipowner be not held

criminally liable for such crimes or quasi-crimes; but he
cannot be excused from liability for the damage and
harm which, in consequence of those acts, may be
suffered by the third parties who contracted with the
captain, in his double capacity of agent and subordinate
of the shipowner himself.
• In maritime commerce, the shippers and passengers in making contracts with the
captain do so through the confidence they have in the shipowner who appointed
him; they presume that the owner made a most careful investigation before
appointing him, and above all, they themselves are unable to make such an
investigation, and even though they should do so, they could not obtain complete
security, inasmuch as the shipowner can, whenever he sees fit, appoint another
captain instead.

• The shipowner is in the same case with respect to the members of the crew, for,
though he does not appoint directly, he expressly or tacitly, he contributes to their
appointment.

• On the other hand, if the shipowner derives profits from the results of the choice
of the captain and the crew, when the choice turns out successful, it is also just
that he should suffer the consequences of an unsuccessful appointment, by
application of the rule of natural law contained in the Partidaz, viz., that he who
enjoys the benefits derived from a thing must likewise suffer the losses that ensue
therefrom.
 PAL V. CA
275 SCRA 621 (1997)
• Held:

• Even assuming arguendo that airline passengers have no vested

right to hotel accommodation allowances in case a flight is
cancelled due to force majeure, nevertheless the airline
company would be liable for damages when its employees
blatantly refused to accord the so-called amenities equally to all
its stranded passengers, and there was no compelling or
justifying reason advanced for such discriminatory and
prejudicial conduct.
 BACHELOR EXPRESS V. CA
G.R. 85691, JULY 31, 1990
• Held:

• The act of passenger stabbing another passenger in the

bus is considered as force majeure.

• However, to be absolved from liability in the case of

force majeure, the common carrier must still prove that
it was not negligent in causing the injuries resulting from
such accident. Otherwise, it would still be held liable.
 BARITUA V. MERCADER
(350 SCRA 86)
• Held:

• A common carrier, by the nature of its business and for reasons of public
policy, is bound to carry passengers safely as far as human care and
foresight can provide. It is supposed to do so by using the utmost diligence
of very cautious persons, with due regard for all the circumstances.

• In case of death or injuries to passengers, it is presumed to have been at

fault or to have acted negligently, unless it proves that it observed
extraordinary diligence as prescribed in Arts. 1733 and 1755 of the Civil
Code.
 FABRE V. CA, 259 SCRA 426 (1996)
[ON DUE DILIGENCE IN SELECTION
AND SUPERVISION OF EMPLOYEES]
• Held:

• For a bus company, 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 issuance of proper instructions as well as actual implementation
and monitoring of consistent compliance with the rules.
 CARRIER ALSO LIABLE FOR ACTS OF
STRANGERS AND OTHER PASSENGERS
• But subject to defense of EXERCISE BY THE
CARRIER OF DUE DILIGENCE TO PREVENT
OR STOP THE ACT OR OMISSION.

• Defense is not available if the carrier’s driver

allowed another person who is not an employee
or a regular driver to take over the task of driving
the vehicle.
 MARANAN V. PEREZ
20 SCRA 413
• Facts: A taxi driver tried to hold-up his passenger, who resisted and was killed.
His heirs sued based on culpa contractual against the taxi company, which
denied liability on the ground that the driver acted beyond the scope of his
authority.

• Held: It may be true that the taxi driver was acting beyond the scope of his
authority, but Art. 1759 of the Civil Code expressly provides that the owner is
liable for negligence of the employees even if such acts are beyond the scope of
his authority.

• Note: This case repealed the doctrine in De Gillaco v. Manila Railroad, 97 Phil.
884 which absolved the carrier for liability caused by its security guard who killed
one of its passengers while already off-duty.
MANILA RAILROAD V. BALLESTEROS
6 SCRA 641
• Facts: A bus of the Manila Railroad reached one of the towns along its
route. The bus driver stopped the bus and went down to answer a call
of nature. While the driver was outside the bus, one of the passengers
went into the driver’s seat and drove off the bus. It met an accident
causing injuries to other passengers.

• Held: Carrier is liable. Its driver is guilty of negligence in leaving the key
on the ignition. Had he taken the key with himself, the passenger could
not have driven off the bus. The carrier is liable for the injuries of other
passengers when the carrier’s employees could have prevented the
injuries through the exercise of the diligence of a good father of a family.
 RELEVANT PROVISIONS:
PASSENGER BAGGAGE
• Art. 1754: The provision of Articles 1733 to 1753 shall apply to the
passenger’s baggage which is not in his personal custody or in that of his
employee. As to other baggage, the rules in Articles 1998 and 2000 to
2003 concerning the responsibility of hotel-keepers shall be applicable.

• Art. 1998: The deposit of effects made by the travelers in hotels or inns
shall also be regarded as necessary. The keepers of hotels or inns shall be
responsible for them as depositaries, PROVIDED THAT NOTICE WAS
GIVEN TO THEM, or to their employees, of the effects brought by the
guests and that, on the part of the latter, they take the precautions which
said hotel-keepers or their substitutes advised relative to the care and
vigilance of their effects.
• Art. 2000: The responsibility referred to in the two
preceding articles shall include the loss of, or injury to the
personal property of the guests caused by the servants or
employees of the keepers of hotels or inns as well as
strangers; but not that which may proceed from any force
majeure. The fact that travelers are constrained to rely on
the vigilance of the keeper of the hotels or inns shall be
considered in determining the degree of care required of
him.

• Art. 2001: The act of a thief or robber, who has entered

the hotel is not deemed force majeure, unless it is done
with the use of arms or through an irresistible force.
• Art. 2002: The hotel-keeper is not liable for
compensation if the loss is due to the acts of the
guests, his family, servants or visitors, or if the loss arises
from the character of the things brought into the hotel.

• Art. 2003: The hotel-keeper cannot free himself from

responsibility by the posting notices to the effect that
he is not liable for the articles brought by the guest.
Any stipulation between the hotel-keeper and the
guest whereby the responsibility of the former as set
forth in Articles 1998 to 2001 is suppressed or
diminished shall be void.
 RULES
• CHECKED-IN BAGGAGE: Governed by the rules
discussed in Article 1754 requiring extraordinary
diligence. In other words, the rules that are applicable to
goods that are being shipped are applicable to baggage
delivered to the custody of the carrier.

• HAND CARRIED LUGGAGE: Rules under Articles

1998, 2000 to 2003 of the Civil Code apply (necessary
deposits)
 SARKIES TOURS PHIL. V. CA
280 SCRA 58
• Held:

• Where a common carrier accepts its passenger’s

baggage for transportation and even had it placed
in the vehicle by its own employee, its failure to
collect the freight charge is the common carrier’s
own lookout, and the common carrier is
responsible for the consequent loss of the baggage.
 PAL V. IAC
216 SCRA 334
• Held:

• Although the baggage of a passenger was eventually delivered to

him, that did not constitute a case of mere delay in delivery since
the baggage was not delivered at all to the passenger for the
purpose of the trip in contravention of a common carrier’s
undertaking to transport the goods from the place of embarkation
to the ultimate point of destination.

• The non-delivery of luggage during the entire length of passenger’s

stay abroad is a breach of carrier’s obligation.
 OBLIGATION OF SHIPPER &
PASSENGER
• The shipper and passenger have the corresponding obligation
to exercise due diligence in avoiding damage to the goods or
injury to himself.

• However, contributory negligence on the part of the

passenger is not a defense that will excuse the carrier from
liability. It will only mitigate such liability.

• BUT IF HIS CONTRIBUTORY NEGLIGENCE IS THE SOLE

AND PROXIMATE CAUSE, CARRIER IS ABSOLVED.
 RELEVANT CIVIL CODE
PROVISIONS
• Article 1741. If the shipper or owner merely contributed to the loss,
destruction or deterioration of the goods, the proximate cause thereof
being the negligence of the common carrier, the latter shall be liable in
damages, which however, shall be equitably reduced.

• Article 1761. The passenger must observe the diligence of a good father of
a family to avoid injury to himself.

• Article 1762. The contributory negligence of the passenger does not bar
recovery of damages for his death or injuries, if the proximate cause thereof
is the negligence of the common carrier, but the amount of damages shall
be equitably reduced.
 PROXIMATE CAUSE

• Proximate cause is that which, in the natural and

continuous sequence, unbroken by an efficient
intervening cause, produces injury and without
which the result would not have occurred. [Sabena
Belgian World Airlines v. CA, 255 SCRA 38]
 ISAAC V. AMMEN TRANSPORT,
101PHIL. 1046 (ON CONTRIBUTORY
NEGLIGENCE)
• Facts: The road on which the bus was passing was wide enough for 2 buses only.
A passenger placed his elbow outside the window railing of the bus. An
oncoming bus hit the passenger’s elbow, injuring it in such a manner that it had
to be amputated.

• Held: Carrier is not liable because the proximate cause of the injury was the
passenger’s own contributory negligence. This is a complete defense to the
common carrier, and absolves it from liability.

• Note: While contributory negligence will only serve to diminish the liability of
the carrier under Art. 1761, NCC, the same will not apply if the proximate cause
of his injury is his contributory negligence and not that of carrier’s negligence.
 CERVANTES V. CA
GR 125138, MAR. 2, 1999
• Facts: PAL issued a round trip ticket to Petitioner which expressly
provides for an expiry date of 1-year from issuance. A separate
written agreement provides that the 1-year period may be
extended provided that the petitioner sends a letter to the airline’s
counsel asking for extension. Petitioner failed to do the terms in the
agreement.

• Held: Petitioner cannot sue PAL for breach when he was not
allowed to board. Although he was booked for the flight through
PAL’s agent, the latter was not authorized to change the agreement.
 DOCTRINE ON AVOIDABLE
CONSEQUENCES

• The party suffering loss or injury must exercise the

diligence of a good father of a family to minimize
the damages resulting from the act or omission in
question. (Art. 2203, NCC).
 DOCTRINE OF LAST CLEAR
CHANCE
• A negligent defendant is held liable to a negligent plaintiff, or even to a plaintiff who has
been grossly negligent in placing himself in peril, if he, aware of the plaintiff ’s peril, or
according to some authorities, should have been aware of it in the reasonable exercise
of due care, had in fact an opportunity later than that of the plaintiff to avoid an
accident. (Bustamante, et.al. v. CA, No. 89880, 6 Feb. 1991, 193 SCRA 603)

• The principle of last clear chance applies in a suit between the owners and drivers of
colliding vehicles. (Phil. Rabbit Bus Lines, Inc. v. IAC, GR Nos. 66102-04, 30 Aug. 1990)

• It does not arise where a passenger demands responsibility from the carrier to enforce
its contractual obligations.

• It would be inequitable to exempt the negligent driver of the jeepney and its owner on
the ground that the other driver was likewise guilty of negligence.
 DOCTRINE ON ASSUMPTION
OF RISK
• That passengers must take such risks incident to the mode of travel he
takes since carriers are not insurers of the lives of their passengers.

• In air travel, adverse weather conditions or extreme climactic changers are

some of the perils involved, the consequence of which the passenger must
assume or expect. (Japan Airlines v. CA, GR No. 118664, Aug. 7, 1998).

• But there is no assumption of risk in case the passenger voluntarily

boarded a carrier that was overloaded.

• Also, there is no assumption of risk by the mere fact that the carrier
posted notices against such liability. (Art. 1757, NCC)
 YOBIDO V. CA
281 SCRA 1 (1997)
• Held:

• As a rule, when a passenger boards a common carrier, he takes the risks

incidental to the mode of travel he has taken, since after all, a carrier is not
an insurer of the safety of its passengers and is not bound absolutely and at
all e vents to carry them safely and without injury.

• However, when a passenger is injured or dies while traveling, the law under
Art. 1755 of the Civil Code presumes that the common carrier is negligent,
and therefore the burden of proof is upon such common carrier to prove
that it has exercised the extraordinary diligence required under the law to
avoid damage or injury to the passenger.
 CALALAS V. CA
G.R. 122039, MAY 31, 2000
• Facts: A student took a passenger jeepney operated by petitioner. As the
jeepney was filled to capacity of about 24 passengers, the student was given
by the conductor an extension seat. The jeepney stopped on its way to let a
passenger off and the student gave way to the outgoing passenger. Just as
she was doing so, a truck bumped the rear end portion of the jeepney. She
suffered injuries as a result.

• Held: Construing the taking of an extension seat as an implied assumption

of risk is akin to arguing that the injuries to the many victims of the
tragedies in our seas should not be compensated merely because those
passengers assumed a greater risk of drowning by boarding an overloaded
ferry.
 COMPAÑA MARITIMA V. CA &
CONCEPCION
G.R. L-31379, AUG. 29, 1988
• Facts:

• Respondent Concepcion loaded his construction equipment

aboard MV Cebu to Cagayan de Oro City.

• Upon arrival, one of his cargoes, a payloader fell on the pier

while being unloaded and damaged. He claimed for
replacement of the unit. Petitioner denied the claim contending
that Respondent furnished it with inaccurate weight of his
equipment. The excess weight caused the crane cables to snap.
• Held:

• While the act of private respondent in furnishing

petitioner with an inaccurate weight of the
payloader cannot successfully be used as an excuse
by petitioner to avoid liability, said act constitute a
contributory circumstance to the damage which
mitigates the liability of petitioner.

• We find equitable the conclusion of the CA

reducing the recoverable amount of damages by
20% or 1/5 of the value of the payloader.
CANGCO V. MANILA RAILROAD
CO., G.R. 12191, OCT. 14, 1918
• Facts:

• Cangco was clerk of Manila Railroad with a monthly wage of

P25. In going to his workplace daily, he rode on the trains
from his town of San Mateo, Rizal.

• One day while returning home and while the train was
slowing down, he alighted from his coach but one of his feet
came in contact with a sack of watermelon causing him to fell
violently on the platform. He sustained serious injuries.
• Held: The test by which to determine whether the passenger has been guilty of negligence in
attempting to alight from a moving railway train, is that of ordinary reasonable care.

• It is to be considered whether an ordinarily prudent person, of the age, sex and condition of the
passenger, would have acted as the passenger acted under the circumstances disclosed by the
evidence.

• This care has been defined to be, not the care which may or should be used by the prudent man
generally, but the care which a man of ordinary prudence would use under similar circumstance, to
avoid injury.

• Or, if we prefer to adopt the mode of exposition used by this court in Picart v. Smith (37 Phil.
809), we may say that the test is this: Was there anything in the circumstances surrounding the
plaintiff at the time he alighted from the train which would have admonished a person of average
prudence that to get off the train under the conditions then existing was dangerous?

• If so, the plaintiff should have desisted from alighting; and his failure so to desist was contributory
negligence.

• Our conclusion is that the conduct of the plaintiff in undertaking to alight while the train was yet
slightly under way was not characterized by imprudence and that therefore he was not guilty of
contributory negligence.
• Plaintiff was earning P25 a month. His expectancy of life,
according to the standard mortality tables, is approximately
33-years.

• We are of the opinion that a fair compensation for the

damage suffered by him for his permanent disability is the sum
of P2,500, and that he is also entitled to recover of defendant
the additional sum of P790.25 for medical attention, etc.

• Note: Net Earning Capacity = Life Expectancy [2/3 x 80

less the age of the plaintiff] x Gross Annual Income less
Living Expenses [computed @ 50% of Gross Annual
Income]
DEL PRADO V. MANILA ELECTRIC CO.,
G.R. 29462, MAR. 7, 1929
• Facts:

• Manila Electric operated a street in Manila for conveyance of passengers.

While still moving, plaintiff ran across the street to catch the car, his
approach being made from the left. The car was of the kind having entrance
and exit at either end, and the movement of plaintiff was so timed that he
arrived at the front entrance of the car at the moment when the car was
passing.

• Upon approaching the car, plaintiff raised his hand as an indication to the
motorman of his desire to board. In response, the latter eased up a little,
without stopping.
• Upon this the plaintiff seized, with his left hand, the front perpendicular handpost, at
the same time placing his left foot upon the platform.

• However, before the plaintiff ’s position had become secure, and even before his raised
right foot had reached the platform, the motorman applied power which caused
plaintiff ’s foot to slip. He fell to the ground and his right foot crushed by the moving
car.

• Held: Although the motorman was not bound to stop to let the plaintiff on, it was
his duty to do no act that would have the effect of increasing the plaintiff ’s peril while
he was attempting to board the car. The premature acceleration of the car was a
breach of this duty.

• As to contributory negligence of plaintiff, it should be treated as a mitigating

circumstance.

• It is obvious that the plaintiff ’s negligence in attempting to board the moving car was
not the proximate cause of the injury. The direct and proximate cause was the act of
appellant’s motorman in putting on the power prematurely.
 DUTY TO PAY FREIGHT
• Rates charged by vessels for hire is now deregulated (R.A. 9295).

• However, on overland transportation, deregulated rates are

applied only to aircon buses.

• Person to pay: The shipper, or the consignee if carrier and

shipper stipulates in the BL.

• Time to pay: NCC is silent but Art. 374 of the COC provides for
24-hr period to pay the freight.
CARRIAGE OF PASSENGERS BY
SEA
• Check MARINA MC No. 112, 15 December 1995:

• Requires ticket outlets or booking offices to be set up in

every ports of call of the vessel.

• Carrier bound to observe a “No Ticket, No Boarding Policy.”

• Carrier shall collect/inspect the passenger’s ticket within 1

hour from the vessel’s departure so as not to disrupt the
passengers who are either resting or sleeping.
 CARRIER’S LIEN
• If consignee fails to pay the freight within the period prescribed, the
carrier may exercise its lien in accordance with Art. 375 of the Code of
Commerce.

• ARTICLE 375. The goods transported shall be especially bound to

answer for the cost of transportation and for the expenses and fees
incurred for them during their conveyance and until the moment of delivery.

• This special right shall PRESCRIBE EIGHT (8) DAYS AFTER THE DELIVERY
HAS BEEN MADE, and once prescribed, the carrier shall have no other
action than that corresponding to him as an ordinary creditor.
 DEMURRAGE
• In its strict sense, it is the compensation provided for in the
contract of affreightment for the detention of the vessel beyond
the time agreed on for loading and unloading. It is essentially a claim
for damages for failure to accept delivery.

• In its broad sense, every improper detention of a vessel may be

considered demurrage.

• Notice of arrival of vessels or conveyances, or of their placement

for purposes of unloading is often a condition precedent to the
right to collect demurrage charges
EXTRAORDINARY DILIGENCE
 RATIONALE
• A common carrier is bound to carry the passengers safely as far as human
care and foresight can provide, using the utmost diligence of very cautious
persons, with due regard for all circumstances.

• This extraordinary diligence required of common carriers is calculated to

protect the passengers from the tragic mishaps that frequently occur in
connection with rapid modern transportation.

• This high standard of care is imperatively demanded by the preciousness of

human life and by the consideration that every person must in every way
be safeguarded against all injury. [Report of the Code Commission, pp.
35-36]
 HOW DUTY IS COMPLIED
• Source of common carrier’s legal liability is contract of carriage by
binding itself to carry the passengers safely as far as human care
and foresight can provide, using the utmost diligence of a very
cautious person, with due regard for all the circumstances.

• It is not enough to exercise ordinary diligence; what is required is

extraordinary diligence.

• There is, however no fixed definition on what extraordinary

diligence means. In most cases, exercise of extraordinary diligence
are given meaning by way of illustrative examples.
 DUTY EXTENDS TO THIRD
PERSONS
• Primarily, the duty is owed by the common carrier to its
passengers and cargoes.

• But, the duty also extends to:

• - the members of the crew or complement;

• - the pedestrians; and

• - even to the owners and passengers of other vehicles.

KAPALARAN BUS LINES V. CORONADO
GR 85331, AUG. 25, 1989
• Judicial notice is made on the gross negligence and the appalling disregard
of the physical safety and property of other so commonly exhibited today
by the drivers of passenger buses and similar vehicles on our highways.

• In requiring the highest possible degree of diligence from common carriers

and creating a presumption of negligence against them, the law compels
them to curb the recklessness of their drivers.

• While the immediate beneficiaries of the standard of extraordinary

diligence are, of course the passengers and owners of cargo carried by a
common carrier, they are not the only persons that the law seeks to
benefit.
• For if common carriers carefully observed the statutory
standard of extraordinary diligence in respect of their own
passengers,

• They cannot help BUT SIMULTANEOUSLY BENEFIT

PEDESTRIANS AND THE OWNERS AND PASSENGERS
OF OTHER VEHICLES who are equally entitled to the safe
and convenient use of our roads and highways.

• The law seeks to stop and prevent the slaughter and maiming
of people (whether passenger or not) and the destruction of
property (whether freight or not) on our highways by buses,
the very size and power of which seem often to inflame the
minds of their drivers.
EFFECT ON STIPULATION LOWER
THAN THE REQUIRED DEGREE
On Goods:

Art. 1744: A stipulation between the common carrier and the shipper or owner
limiting the liability of the former for the loss, destruction, or deterioration of the
goods to a degree less than extraordinary diligence shall be valid, provided it be:

1. In writing, signed by the shipper or owner;

2. Supported by a valuable consideration other than the service

rendered by the common carrier; and

3. Reasonable, just and not contrary to public policy.

On passengers in general:

Art. 1757: The responsibility of a common carrier for the safety of

passengers as required in Articles 1733 and 1755 cannot be
dispensed with or lessened by stipulation, by the posting of notices,
by statements on tickets, or otherwise.

On gratuitous passengers:

Art. 1758: When a passenger is carried gratuitously, a stipulation

LIMITING THE COMMON CARRIER’S LIABILITY for negligence is
valid, BUT NOT FOR WILLFUL ACTS OR GROSS NEGLIGENCE.

The reduction of fare does not justify any limitation of the

common carrier’s liability.
 LARA V. VALENCIA, 

GR 9907, JUNE 30, 1958
• Facts:

• The deceased Lara was inspector of the BFD at Davao City. Defendant Valencia was
engaged in the business of exporting logs from his timber concession in Cotabato. Lara
went to Valencia’s area upon instruction of his chief to classify the logs of Defendant.

• After six days of work, Lara, who was then eager to return home asked Valencia if he
could take him in his pick-up truck to which defendant agreed.

• Lara was with the five other passengers who were with Lara at the back of the pick-up.
Lara was seated on a bag.

• While the pick-up was cruising along Km 96, Lara accidentally fell from the pick-up and
died.
• Held:

• Deceased were merely accommodation passengers who paid

nothing for the service and so they can be considered invited
guests within the meaning of the law.

• The rule is established by the weight of authority that the

owner or operator of an automobile owes the duty to an
invited guest to exercise reasonable care in its operation, and
not unreasonably to expose him to danger and injury by
increasing the hazard of travel.

• Note: Lara is not controlling upon common carriers since

Valencia was a private carrier who accommodated Lara.