TRANSPO CH 1 – DEFINITION AND CONCEPT OF COMMON CARRIER policy; that would be to reward private respondent precisely for failing
spondent precisely for failing to comply
1. Article 1732, Civil Code; Broad Concept
1.1 De Guzman vs. CA
FACTS:
Ernesto Cendana, a junk dealer, was engaged in buying up used bottles and scrap
metal in Pangasinan, and bring such material to Manila for resale. He utilized two
(2) six-wheeler trucks which he owned for hauling the material to Manila. He
charged freight rates which were commonly lower than regular commercial rates
for the cargo loaded in his vehicle.
Pedro de Guzman a merchant and authorized dealer of General Milk Company
contracted with Cendana for the hauling of 750 cartons of Liberty lled milk from
a warehouse of General Milk in Makati, Rizal. 150 cartons were loaded on a truck
driven by Cendana himself, while 600 cartons were placed on board the other
truck which was driven by Manuel Estrada, Cendana’s driver and employee. The
other 600 boxes never reached de Guzman, since the truck which carried these
boxes was hijacked somewhere along the MacArthur Highway in Paniqui, Tarlac,
by armed men who took with them the truck, its driver, his helper and the cargo.
Having failed to exercise the extraordinary diligence required of him by the law,
he is held liable for the value of the undelivered goods. Cendana denied that he
was a common carrier and argued that he could not be held responsible for the
value of the lost goods, such loss having been due to force majeure.
ISSUE:
Whether or not Ernesto Cendana may, under the facts earlier set forth, be
properly characterized as a common carrier?
Whether or not high jacking with robbery can be properly regarded as a
fortuitous event that can exempt the carrier?
HELD:
The trial court rendered a Decision finding private respondent to be a common
carrier and holding him liable for the value of the undelivered goods as damages
and as attorney's fees. The Court of Appeals reversed the judgment of the trial
court and held that respondent had been engaged in transporting return loads of
freight "as a casual occupation — a sideline to his scrap iron business" and not as
a common carrier.
Liability arises the moment a person or rm acts as a common carrier, without
regard to whether or not such carrier has also complied with the requirements of
the applicable regulatory statute and implementing regulations and has been
granted a certicate of public convenience or other franchise. To exempt private
respondent from the liabilities of a common carrier because he has not secured
the necessary certicate of public convenience, would be o8ensive to sound public
with applicable statutory requirements.
Common carriers, "by the nature of their business and for reasons of public
policy" 2 are held to a very high degree of care and diligence ("extraordinary
diligence") in the carriage of goods as well as of passengers. Article 1734
establishes the general rule that common carriers are responsible for the loss,
destruction or deterioration of the goods which they carry, "unless the same is
due to any of the following causes only:
(1) Flood, storm, earthquake, lightning or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character-of the goods or defects in the packing or-in the containers; and
(5) Order or act of competent public authority.
The above list of causes of loss, destruction or deterioration which exempt the
common carrier for responsibility therefor, is a closed list. Causes falling outside
the foregoing list, even if they appear to constitute a species of force majeure fall
within the scope of Article 1735, which provides as follows:
In all cases other than those mentioned in numbers 1, 2, 3, 4 and 5 of the
preceding article, if the goods are lost, destroyed or deteriorated, common
carriers are presumed to have been at fault or to have acted negligently, unless
they prove that they observed extraordinary diligence as required in Article
1733. (Emphasis supplied)
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." In the instant case,
armed men held up the second truck owned by private respondent which carried
petitioner's cargo.
The occurrence of the loss must reasonably be regarded as quite beyond the
control of the common carrier and properly regarded as a fortuitous event. It is
necessary to recall that even common carriers are not made absolute insurers
against all risks of travel and of transport of goods, and are not held liable for acts
or events which cannot be foreseen or are inevitable, provided that they shall
have complied with the rigorous standard of extraordinary diligence.
Cendana is not liable for the value of the undelivered merchandise which was lost
because of an event entirely beyond private respondent's control. Petition for
Review on certiorari is hereby DENIED and the Decision of the Court of Appeals
dated 3 August 1977 is AFFIRMED. No pronouncement as to costs.
1.2 Cruz vs. Sun Holidays
FACTS:
Spouses Dante and Leonora Cruz (petitioners) lodged a Complaint on January 25,
2001 against Sun Holidays, Inc. (respondent) with the Regional Trial Court (RTC)
of Pasig City for damages arising from the death of their son Ruelito C. Cruz
(Ruelito) who perished with his wife on September 11, 2000 on board the boat
M/B Coco Beach III that capsized en route to Batangas from Puerto Galera,
Oriental Mindoro where the couple had stayed at Coco Beach Island Resort
(Resort) owned and operated by respondent.
The stay of the newly wed Ruelito and his wife at the Resort from September 9 to
11, 2000 was by virtue of a tour package-contract with respondent that included
transportation to and from the Resort and the point of departure in Batangas.
Miguel C. Matute (Matute), a scuba diving instructor and one of the survivors,
gave his account of the incident that led to the filing of the complaint as follows:
Matute stayed at the Resort from September 8 to 11, 2000. He was originally
scheduled to leave the Resort in the afternoon of September 10, 2000, but was
advised to stay for another night because of strong winds and heavy rains. On
September 11, 2000, as it was still windy, Matute and 25 other Resort guests
including petitioners' son and his wife trekked to the other side of the Coco Beach
mountain that was sheltered from the wind where they boarded M/B Coco Beach
III, which was to ferry them to Batangas. Shortly after the boat sailed, it started to
rain. As it moved farther away from Puerto Galera and into the open seas, the
rain and wind got stronger, causing the boat to tilt from side to side and the
captain to step forward to the front, leaving the wheel to one of the crew
members. The waves got more unwieldy. After getting hit by two big waves
which came one after the other,M/B Coco Beach III capsized putting all
passengers underwater. The passengers, who had put on their life jackets,
struggled to get out of the boat. Upon seeing the captain, Matute and the other
passengers who reached the surface asked him what they could do to save the
people who were still trapped under the boat. The captain replied "Iligtas niyo na
lang ang sarili niyo" (Just save yourselves).
Help came after about 45 minutes when two boats owned by Asia Divers in
Sabang, Puerto Galera passed by the capsized M/B Coco Beach III. Boarded on
those two boats were 22 persons, consisting of 18 passengers and four crew
members, who were brought to Pisa Island. Eight passengers, including
petitioners' son and his wife, died during the incident.
At the time of Ruelito's death, he was 28 years old and employed as a contractual
worker for Mitsui Engineering & Shipbuilding Arabia, Ltd. in Saudi Arabia, with a
basic monthly salary of $900.
Petitioners, by letter of October 26, 2000, demanded indemnification from
respondent for the death of their son in the amount of at least P4,000,000.
Respondent denied any responsibility for the incident which it considered to be a
fortuitous event. It nevertheless offered, as an act of commiseration, the amount
of P10,000 to petitioners upon their signing of a waiver. Petitioners declined,
they filed the Complaint, alleging that respondent, as a common carrier, was
guilty of negligence in allowing M/B Coco Beach III to sail notwithstanding storm
warning bulletins issued by the Philippine Atmospheric, Geophysical and
Astronomical Services Administration (PAGASA) as early as 5:00 a.m. of
September 11, 2000.
Carlos Bonquin, captain of M/B Coco Beach III, averred that the Resort
customarily requires four conditions to be met before a boat is allowed to sail, to
wit: (1) the sea is calm, (2) there is clearance from the Coast Guard, (3) there is
clearance from the captain and (4) there is clearance from the Resort's assistant
manager. He added that M/B Coco Beach III met all four conditions on September
11, 2000, but a subasco or squall, characterized by strong winds and big waves,
suddenly occurred, causing the boat to capsize.
By Decision of February 16, 2005, Branch 267 of the Pasig RTC dismissed
petitioners' Complaint and respondent's Counterclaim
Petitioners' Motion for Reconsideration having been denied by Order dated
September 2, 2005, they appealed to the Court of Appeals.
By Decision of August 19, 2008, the appellate court denied petitioners' appeal,
holding, among other things, that the trial court correctly ruled that respondent
is a private carrier which is only required to observe ordinary diligence; that
respondent in fact observed extraordinary diligence in transporting its guests on
board M/B Coco Beach III; and that the proximate cause of the incident was a
squall, a fortuitous event.
Petitioners' Motion for Reconsideration having been denied by Resolution dated
January 16, 2009, they filed the present Petition for Review
ISSUE:
1. WON respondent is a common carrier
2. WON respondent is guilty of negligence in allowing M/B Coco Beach III sail
notwithstanding storm warning bulletins issued by PAGASA.
HELD:
1. YES.
Petitioners correctly rely on De Guzman v. Court of Appeals in characterizing
respondent as a common carrier.
The Civil Code defines "common carriers" in the following terms:
Article 1732.Common carriers are persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or goods or both,
by land, water, or air for compensation, offering their services to the public.
 The above article makes no distinction between one whose principal business
activity is the carrying of persons or goods or both, and one who does such
carrying only as an ancillary activity (in local idiom, as "a sideline"). Article 1732
also carefully avoids making any distinction between a person or enterprise
offering transportation service on a regular or scheduled basis and one offering
such service on an occasional, episodic or unscheduled basis. Neither does Article
1732 distinguish between a carrier offering its services to the "general public,"
i.e., the general community or population, and one who offers services or solicits
business only from a narrow segment of the general population. We think that
Article 1733 deliberately refrained from making such distinctions.
So understood, the concept of "common carrier" under Article 1732 may be
seen to coincide neatly with the notion of "public service," under the Public
Service Act (Commonwealth Act No. 1416, as amended) which at least partially
supplements the law on common carriers set forth in the Civil Code.
Indeed, respondent is a common carrier. Its ferry services are so intertwined
with its main business as to be properly considered ancillary thereto. The
constancy of respondent's ferry services in its resort operations is underscored
by its having its own Coco Beach boats. And the tour packages it offers, which
include the ferry services, may be availed of by anyone who can afford to pay the
same. These services are thus available to the public.
That respondent does not charge a separate fee or fare for its ferry services is of
no moment. It would be imprudent to suppose that it provides said services at a
loss. The Court is aware of the practice of beach resort operators offering tour
packages to factor the transportation fee in arriving at the tour package price.
That guests who opt not to avail of respondent's ferry services pay the same
amount is likewise inconsequential. These guests may only be deemed to have
overpaid.
2. YES.
A very cautious person exercising the utmost diligence would thus not brave
such stormy weather and put other people's lives at risk. The extraordinary
diligence required of common carriers demands that they take care of the goods
or lives entrusted to their hands as if they were their own. This respondent failed
to do.
Respondent cites the squall that occurred during the voyage as the fortuitous
event that overturned M/B Coco Beach III. As reflected above, however, the
occurrence of squalls was expected under the weather condition of September
11, 2000. Moreover, evidence shows that M/B Coco Beach III suffered engine
trouble before it capsized and sank. The incident was, therefore, not completely
free from human intervention.
The Court need not belabor how respondent's evidence likewise fails to
demonstrate that it exercised due diligence to prevent or minimize the loss
before, during and after the occurrence of the squall.
As De Guzman instructs, Article 1732 of the Civil Code defining "common
carriers" has deliberately refrained from making distinctions on whether the
carrying of persons or goods is the carrier's principal business, whether it is
offered on a regular basis, or whether it is offered to the general public. The
intent of the law is thus to not consider such distinctions. Otherwise, there is no
telling how many other distinctions may be concocted by unscrupulous
businessmen engaged in the carrying of persons or goods in order to avoid the
legal obligations and liabilities of common carriers.
The evidence shows that PAGASA issued 24-hour public weather forecasts and
tropical cyclone warnings for shipping on September 10 and 11, 2000 advising of
tropical depressions in Northern Luzon which would also affect the province of
Mindoro. By the testimony of Dr. Frisco Nilo, supervising weather specialist of
PAGASA, squalls are to be expected under such weather condition.
Respondent's insistence that the incident was caused by a fortuitous event does
not impress either.
The elements of a "fortuitous event" are: (a) the cause of the unforeseen and
unexpected occurrence, or the failure of the debtors to comply with their
obligations, must have been independent of human will; (b) the event that
constituted the caso fortuito must have been impossible to foresee or, if
foreseeable, impossible to avoid; (c) the occurrence must have been such as to
render it impossible for the debtors to fulfill their obligation in a normal manner;
and (d) the obligor must have been free from any participation in the aggravation
of the resulting injury to the creditor.
THE Court of Appeals Decision of August 19, 2008 is REVERSED and SET ASIDE.
Judgment is rendered in favor of petitioners ordering respondent to pay
petitioners the following: (1) P50,000 as indemnity for the death of Ruelito Cruz;
(2) P8,316,000 as indemnity for Ruelito's loss of earning capacity; (3) P100,000
as moral damages; (4) P100,000 as exemplary damages; (5) 10% of the total
amount adjudged against respondent as attorneys fees; and (6) the costs of suit.
The total amount adjudged against respondent shall earn interest at the rate of
12% per annum computed from the finality of this decision until full payment.
1.3 First Phil. Industrial Corp vs. CA
FACTS:
Petitioner First Philippine Industrial Corporation (FIPC) is a grantee of a pipeline
concession under Republic Act No. 387, to contract, install and operate oil
pipelines. Sometime in January 1995, petitioner applied for mayor’s permit in
Batangas. However, the Treasurer required petitioner to pay a local tax based on
gross receipts amounting to P956,076.04 payable in four installments. In order
not to hamper its operations, petitioner paid the tax for the first quarter of 1993.
On January 20, 1994, petitioner filed a letter-protest to the City Treasurer,
claiming that it is exempt from local tax since it is engaged in transportation
business. The respondent City Treasurer denied the protest contending that
petitioner cannot be considered engaged in trasportation business thus it cannot
claim exemption under Section 133 (j) of the Local Government Code. Petitioner
filed a complaint before the Regional Trial Court of Batangas for tax refund.
Respondents assert that pipelines are not included in the term “common carrier”
which refers solely to ordinary carriers such as trucks, trains, ships and the like,
that the term “common Carrier” pertains to the mode or manner by which a
product is delivered to its destination. The trial court dismissed the complaint,
and such was affirmed by the Court of Appeals.
ISSUE/S:
Whether or not FIPC is a common carrier?
HELD/RULING:
Yes, FIPC is a common carrier. A "common carrier" may be defined, broadly, as
one who holds himself out to the public as engaged in the business of
transporting persons or property from place to place, for compensation, offering
his services to the public generally.Article 1732 of the Civil Code defines a
"common carrier" as "any person, corporation, firm or association engaged in the
business of carrying or transporting passengers or goods or both, by land, water,
or air, for compensation, offering their services to the public."
The test for determining whether a party is a common carrier of goods is:
(1) He must be engaged in the business of carrying goods for others as a public
employment, and must hold himself out as ready to engage in the transportation
of goods for person generally as a business and not as a casual occupation;
(2) He must undertake to carry goods of the kind to which his business is
confined;
(3) He must undertake to carry by the method by which his business is
conducted and over his established roads; and
(4) The transportation must be for hire.
Based on the above definitions and requirements, there is no doubt that
petitioner is a common carrier. It is engaged in the business of transporting or
carrying goods, i.e. petroleum products, for hire as a public employment. It
undertakes to carry for all persons indifferently, that is, to all persons who
choose to employ its services, and transports the goods by land and for
compensation. The fact that petitioner has a limited clientele does not exclude it
from the definition of a common carrier. The definition of "common carriers" in
the Civil Code makes no distinction as to the means of transporting, as long as it
is by land, water or air. It does not provide that the transportation of the
passengers or goods should be by motor vehicle.
1.4 Calvo vs. UPCB General Insurance Co.
FACTS:
Petitioner Virgines Calvo is the owner of Transorient Container Terminal
Services, Inc. (TCTSI), a sole proprietorship customs broker. Petitioner entered
into a contract with San Miguel Corporation (SMC) for the transfer of 114 reels of
semi-chemical fluting paper and 124 reels of kraft liner board from the Port Area
in Manila to SMC's warehouse in Ermita, Manila. The cargo was insured by
respondent UCPB General Insurance Co., Inc. On July 14, 1990, the shipment,
contained in 30 metal vans, arrived in Manila on board "M/V Hayakawa Maru"
and were unloaded from the vessel to the custody of the arrastre operator,
Manila Port Services, Inc. Pursuant to her contract with SMC, petitioner Calco
withdrew the cargo from the arrastre operator and delivered it to SMC's
warehouse in Ermita, Manila. After inspection, it was found that some of the
cargoes were damaged. SMC collected payment from respondent UCPB under its
insurance contract for the said amount. Respondent UCPB, as subrogee of SMC,
brought suit against petitioner in the Regional Trial Court, which rendered the
petitioner liable for damages to the cargo handled. The decision was affirmed by
the Court of Appeals on appeal. Hence this petition for review on certiorari.
ISSUE/s:
Whether the petitioner is a common carrier or a private or special
carrier who did not hold its services to the public.
HELD:
Article 1732 of the Civil Code provides that “Common carriers are persons,
corporations, firms or associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or air for
compensation, offering their services to the public. Hence, the Supreme Court
ruled that petitioner is a common carrier because the transportation of goods is
an integral part of her business. It was further held that as such, she is bound to
observe extraordinary diligence in the carriage of goods as provided in Article
1733; that to prove extraordinary diligence, petitioner must do more than
merely show the possibility that some other party could be responsible for the
damage; and that improper packing of the goods could be a basis to exempt
petitioner from liability, but petitioner accepted the cargo without exception
despite the apparent defects in some of the container vans.
1.5 Asia Lighterage and Shipping vs. CA
FACTS:
Petitioner was contracted as carrier by a corporation from Portland, Oregon to
deliver a cargo to the consignee's warehouse at Pasig City. The cargo, however,
never reached the consignee as the barge that carried the cargo sank completely,
resulting in damage to the cargo. Private respondent, as insurer, indemni_ed the
consignee for the lost cargo and thus, as subrogee, sought recovery from
petitioner. Both the trial court and the appellate court ruled in favor of private
respondent.
The Court ruled in favor of private respondent. Whether or not petitioner is a
common carrier, the Court ruled in the a1rmative. The principal business of
petitioner is that of lighterage and drayage, o8ering its barges to the public,
although for limited clientele, for carrying or transporting goods by water for
compensation. Whether or not petitioner failed to exercise extraordinary
diligence in its care and custody of the consignee's goods, the Court also ruled in
the a1rmative. The barge completely sank after its towing bits broke, resulting in
the loss of the cargo. Petitioner failed to prove that the typhoon was the
proximate and only cause of the loss and that it has exercised due diligence
before, during and after the occurrence.
ISSUE:
Whether or Not the petitioner is a common carrier.
RULING: YES.
Petitioner is a common carrier whether its carrying of goods is done on an
irregular rather than scheduled manner, and with an only limited clientele. A
common carrier need not have _xed and publicly known routes. Neither does it
have to maintain terminals or issue tickets. To be sure, petitioner _ts the test of a
common carrier as laid down in Bascos vs. Court of Appeals. The test to
determine a common carrier is "whether the given undertaking is a part of the
business engaged in by the carrier which he has held out to the general public as
his occupation rather than the quantity or extent of the business transacted." In
the case at bar, the petitioner admitted that it is engaged in the business of
shipping and lighterage, o8ering its barges to the public, despite its limited
clientele for carrying or transporting goods by water for compensation.
Article 1732 of the Civil Code de_nes common carriers as persons, corporations,
_rms or associations engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air, for compensation..o8ering
their services to the public. Petitioner contends that it is not a common carrier
but a private carrier. Allegedly, it has no _xed and publicly known route,
maintains no terminals, and issues no tickets. It points out that it is not obliged to
carry indiscriminately for any person. It is not bound to carry goods unless it
consents. In short, it does not hold out its services to the general public. In De
Guzman vs. Court of Appeals, we held that the de_nition of common carriers in
Article 1732 of the Civil Code makes no distinction between one whose principal
business activity is the carrying of persons or goods or both, and one who does
such carrying only as an ancillary activity. We also did not distinguish between a
person or enterprise o8ering transportation service on a regular or scheduled
basis and one o8ering such service on an occasional, episodic or unscheduled
basis. Further, we ruled that Article 1732 does not distinguish between a carrier
o8ering its services to the general public, and one who o8ers services or solicits
business only from a narrow segment of the general population.
Common carriers are bound to observe extraordinary diligence in the vigilance
over the goods transported by them. They are presumed to have been at fault or
to have acted negligently if the goods are lost, destroyed or deteriorated. To
overcome the presumption of negligence in the case of loss, destruction or
deterioration of the goods, deterioration of the goods, the common carrier must
prove that it exercised extraordinary diligence. There are, however, exceptions to
this rule. Article 1734 of the Civil Code enumerates the instances when the
presumption of negligence does not attach: Art. 1734. Common carriers are
responsible for the loss, destruction, or deterioration of the goods, unless the
same is due to any of the following causes only: (1) Flood, storm, earthquake,
lightning, or other natural disaster or calamity; (2) Act of the public enemy in
war, whether international or civil; (3) Act or omission of the shipper or owner of
the goods; (4) The character of the goods or defects in the packing or in the
containers; (5) Order or act of competent public authority.
In the case at bar, the barge completely sank after its towing bits broke, resulting
in the total loss of its cargo. Petitioner claims that this was caused by a typhoon,
hence, it should not be held liable for the loss of the cargo. However, petitioner
failed to prove that the typhoon is the proximate and only cause of the loss of the
goods, and that it has exercised due diligence before, during and after the
occurrence of the typhoon to prevent or minimize the loss. The evidence show
that, even before the towing bits of the barge broke, it had already previously
sustained damage when it hit a sunken object while docked at the Engineering
Island. It even su8ered a hole. Clearly, this could not be solely attributed to the
typhoon. The partly-submerged vessel was refloated but its hole was patched
with only clay and cement. The patch work was merely a provisional remedy, not
enough for the barge to sail safely. Thus, when petitioner persisted to proceed
with the voyage, it recklessly exposed the cargo to further damage.
1.6 Asian Terminals, Inc. vs. Daehan Fire and Marine Insurance Co.
Facts:
On 8July 2008 Doosan Corporation shipped 26 Boxes of printed
alluminum sheets on board vessel Heung-A Dragon owned by Dongnama
Shipping Co., Ltd., it is covered by bill lading and consigned to Access
International. Doosan insured the shipment with Daehan Fire and Marine
Insurance Co. Ltd. under all risk marine cargo insurance policy.
The vessel
arrived in Manila that was then unloaded under good condition and no survey
were conducted in the Equipment Interchange Receipt. Successively, the Access
International requested from the licensed broker, Victoria Lazo together with
Asian Terminal Inc. a joint survey of shipment but still no inspection was
made.
Victoria Lazo and Asian Terminal then released the and delivered to
Access International warehouse. However, there were only 12 boxes that is
accounted whole 14 boxes were missing amounting $34,993.28. Thus Access
International asked for the indemnifdication from Daehan Fire and marine
Insurance Co. amounting $45,728.81.
Daehan now filed a case represented by
Smith Bell against DongnamaUNiship Inc. alleging that the loss and damages was
due to the fault of the Asian Terminal Inc. and Victoria Lazo.
RTC: Dismissed the
Case on the groundsof insufficiency of evidence
CA: Reversed the Decision of
RTC. Ordering Asian Terminal Inc. and Victoria Lazo to pay Daehan Fore and
Marine Insurance Co.
 YES. The defense of the Pereñas that they exercised the diligence of a good father
Issue:
Whether or not the Petitioner Asian Terminals Inc. is liable for the loss of
the shipment notwithstanding the acknowledgement by consignee’s broker/
representative in the Equipment Interchange Receipt that the shipment was
received in good order.
 to their passenger. The presumption for negligence, being a presumption of law,
Held:
Yes. In the performance of its obligation, An Arrastre Operator should
OBSERVE THE SAME DEGREE OF DILIGENCE as that required of COMMON
CARRIERS and warehouseman. Being a custodian of goods an arrastre must take
care of goods and turn them over to party entitled into possession.
In a burden of proof to show compliance in the obligation to deliver goods to
appropriate party must devolve upon arrastre operator. Since safe keeping of
goods is its responsibility, it must prove that the losses were not due to its
negligence or to that of its employee.
Under claims and Liability, the contractor shall be solely liable for any injury or
damages that may arise on account of negligence or carelessness of
CONTRACTOR. What is essential is knowledge beforehand of the extent of risk to
be undertaken by arrastre operator, as determined by the value of property.
1.7 Sps. Pereña vs. Sps. Zarate
FACTS:
Sps. Zarate, parents of Aaron Zarate, engaged the services of Sps. Pereña for the
adequate and safe transportation carriage of the former spouses’ son from their
residence to his school. During the effectivity of the contract of carriage, Aaron
Zarate died in connection with a vehicular/train collision which occurred while
Aaron was riding the contracted carrier. At the time of the said collision, there
were no safety warning signs and railings at the site commonly used for railroad
crossing. The site of the collision was not intended by the railroad operator for
railroad crossing at the time of the collision. PNR refused to acknowledge any
liability for the collision. In Sps. Pereña’s defense, they adduces evidence to show
that they had exercised the diligence of a good father of a family in the selection
and supervision of Alfaro, the driver, by making sure that Alfaro had been issued
a driver’s license and had not been involved in any vehicular accident prior to the
collision. The RTC ruled in favor of Sps. Zarate and held the Pereñas and PNR
jointly and severally liable for the death of Aaron plus damages. The CA upheld
the award for the loss of Aaron’s earning capacity, plus damages, and the award
for Attorney’s fees was deleted. Hence, this petition.
ISSUE:
WON the Pereñas and PNR are jointly and severally liable for damages.
HELD:
of a family has no merit because they operated as common carriers and that their
standard of care was extraordinary diligence, not the ordinary diligence of a good
father of a family. The Pereñas, acting as a common carrier, were already
presumed to be negligent at the time of the accident because death had occurred
laid the burden of evidence on their shoulders to establish that they had not been
negligent. There is no question that the Pereñas did not overturn the
presumption of their negligence by credible evidence. Their defense of having
observed the diligence of a good father of a family in the selection and
supervision of their driver was not legally sufficient. PNR was also found guilty of
negligence because it did not ensure the safety of others through the placing of
crossbars, signal lights, warning signs, and other permanent safety barriers to
prevent vehicles or pedestrians from crossing there. Hence, the Pereñas and PNR
should jointly and severally be liable for the death of Aaron Zarate.
2. Characteristics; Test
2.1 Fisher vs. Yangco Steamship Co.
Facts: The board of Yangco Steamship Co. adopted a resolution which was
ratified by the stockholders declaring classes of merchandise which are not to be
carried by the vessels of the company and prohibiting the employees to carry
dynamite, powder or other explosives. The Collector of Customs suspended the
issuance of clearances for the vessels unless they carry the explosives. Fisher, a
stockholder of YSC, filed a petition for prohibition.
Issue: Whether or not the refusal of the board of YFC to accept for carriage
"dynamite, powder or other explosives" from any and all shippers who may offer
such explosives for carriage can be held to be a lawful act.
Held: No. In construing Act 98 for the alleged violation, the test is whether the
refusal of YSC to carry the explosives without qualification or conditions may
have the effect of subjecting any person or locality or the traffic is such explosives
to an unduly unreasonable or unnecessary prejudice or discrimination. Common
carriers in this jurisdiction cannot lawfully decline to accept a particular class of
goods unless it appears that for some sufficient reason the discrimination for
such is reasonable and necessary. YSC has not met those conditions.
The nature of the business of a common carrier as a public employment is such
that it is within the power of the State to impose such just regulations in the
interest of the public as the legislator may deem proper.
2.2 US vs. Quinajon
Facts: Defendants were charged for violation of Act 98, when they unloaded in
the port of Currimao 5,986 sacks of rice belonging to Ilocos Norte Provincial
Government from Manila, and charged the provincial treasurer 10 centavos for
each sack instead of 6 centavos which they have been regularly charging for the
unloading of the same kind of merchandise and under virtually the same
circumstances and conditions. They were convicted, hence they appealed to the
higher court.
Issue: Whether or not the defendants as common carriers caused prejudice to
the Ilocos Norte Government.
Held: Yes. There is no pretense that it actually cost more to handle the rice for
the province than it did for the merchants with whom the special contracts were
made. There was a clear discrimination against the province which is prohibited
by the law. It is however not believed that the law prohibits common carriers
from making special rates for the handling and transporting of merchandise,
when the same are made for the purpose of increasing their business and to
manage their important interests upon the same principles which are regarded
as sound and adopted in other trades and pursuits. Absolute equality is not
required in all cases. It is only unjust, undue and unreasonable discrimination
which the law forbids. The law of equality is in force only where the services
performed in the different cases are substantially the same and the
circumstances and conditions are similar.
2.3 Loadstar Shipping Co. vs. CA
Facts: On November 19, 1984, LOADSTAR received on board its M/V Cherokee
goods(certain types of wood) for shipment. The goods were insured with Manila
Insurance Co.(MIC) against various risks including “TOTAL LOSS BY TOTAL LOSS
OF THE VESSEL”. The vessel, in turn, was insured by Prudential Guarantee &
Assurance, Inc.(PGAI) for P4 Million.
On November 20, 1984, on its way to Manila from Nasipit, Agusan del Norte, the
vessel sank off Limasawa Island. As a result of the total loss of its shipment, the
consignee made a claim with LOADSTAR which, however ignored the same. As
the insurer, MIC paid the insured in full settlement of its claim.
On February 4, 1985, MIC filed a complaint against Loadstar and PGAI, alleging
that the sinking of the vessel was due to the fault and negligence of Loadstar and
its employees. Loadstar claimed force majeur. PGAI averred that MIC has no
cause of action against it, Loadstar being the party insured. PGAI was later
dropped as a party defendant after it paid the insurance proceeds to Loadstar.
The trial court rendered judgment for MIC, prompting Loadstar to go to the CA
which affirmed the decision.
Issue: Whether or not Loadstar is a private carrier.
Held: No. Loadstar submits that the vessel was a private carrier because it was
not issued a CPC; it did not have a regular trip or schedule nor a fixed route; and
there was only “one shipper, one consignee for a special cargo.”
The SC held that Loadstar is a common carrier. It is not necessary that the carrier
be issued a CPC, and this character is not altered by the fact that the carriage of
the goods in question was periodic, occasional, episodic or unscheduled.
In support of its position Loadstar relied on the 1968 case of Home Insurance Co.
v. American Steamship Agencies, where the Court held that a common carrier
transporting special cargo or chartering the vessel to a special person becomes a
private carrier that is not subject to the provisions of the Civil Code.
This case however is not applicable in the case at bar for the simple reason that
the actual settings are different. The records do not disclose that the M/V
Cherokee, on the date in question, undertook to carry a special cargo or was
chartered to a special person only. There was no charter party. The bills of lading
failed to show any special arrangement, but only a general provision to the effect
that the M/V Cherokee was a general cargo carrier. Further, the bare fact that the
vessel was carrying a particular type of cargo for one shipper, which appears to
be purely coincidental, is not reason enough to convert the vessel from a
common carrier to a private carrier, especially where, as in this case, it was
shown that the vessel was also carrying passengers.
Under the facts and circumstances obtaining in this case, Loadstar fits the
definition of a common carrier under Article 1732 of the NCC. The doctrine
enunciated in the case of De Guzman v. CA was also mentioned. CA decision is
hereby affirmed.
2.4 National Steel Corporation vs. CA
Facts:
NSC hired MV Vlasons I, a private vessel owned by VSI. They entered into a
contract of voyage charter hire wherein the contract states that NSC hired VSI's
vessel to make one voyage to load steel products at Iligan City and discharge
them at North Harbor, Manila. On arrival and upon opening the three hatches
containing the shipment, nearly all the skids of tinplates and hot rolled sheets
were allegedly found to be wet and rusty. NSC _led a complaint for damages but
RTC dismissed the complaint
Issues:
1. whether VSI contracted with NSC as a common carrier or as a private
carrier 

2. Whether or not the provisions of the Civil Code of the Philippines on
common carriers pursuant to which there exist[s] a presumption of
 negligence against the common carrier in case of loss or damage to the
cargo are applicable to a private carrier. 
 and well being and property of those members of the general community who
Held:
1. VSI was not a common carrier but a private carrier. It is undisputed that VSI
did not o8er its services to the general public. The extent of VSI's responsibility
and liability over NSC's cargo are determined primarily by the stipulations in the
contract of carriage or charter party and the Code of Commerce. The burden of
proof lies on the part of NSC and not the VSI.
Article 1732 of the Civil Code de_nes a common carrier as "persons, corporations,
_rms or associations engaged in the business of carrying or transporting
passengers or goods or both, by land, water or air, for compensation, o8ering
their services to the public." It has been held that the true test of a common
carrier is the carriage of passengers or goods, provided it has space, for all who
opt to avail themselves of its transportation service for a fee. A carrier which
does not qualify under the above test is deemed a private carrier. "Generally,
private carriage is undertaken by special agreement and the carrier does not hold
himself out to carry goods for the general public. . . ."
2. Because the MV Vlason I was a private carrier, the shipowner's obligations are
governed by the provisions of the Code of Commerce and not by the Civil Code
which, as a general rule places the prima facie presumption of negligence on a
common carrier.
IN A CONTRACT OF PRIVATE CARRIAGE, THE BURDEN OF PROOF IN CASE OF
ACCIDENT IS ON THE CARRIER but the court exempts VSI due to force majeure.
NSC must prove that the damage to its shipment was caused by VSI's willful
negligence or failure to exercise due diligence in making MV Vlason I seaworthy
and _t for holding, carrying and safekeeping the cargo. The burden of proof was
placed on NSC by the parties' agreement.
2.5 Certificate of Public Convenience (De Guzman vs. CA)
The Court of Appeals referred to the fact that private respondent held no
certificate of public convenience, and concluded he was not a common carrier.
This is palpable error. A certificate of public convenience is not a requisite for the
incurring of liability under the Civil Code provisions governing common carriers.
That liability arises the moment a person or firm acts as a common carrier,
without regard to whether or not such carrier has also complied with the
requirements of the applicable regulatory statute and implementing regulations
and has been granted a certificate of public convenience or other franchise. To
exempt private respondent from the liabilities of a common carrier because he
has not secured the necessary certificate of public convenience, would be
offensive to sound public policy; that would be to reward private respondent
precisely for failing to comply with applicable statutory requirements. The
business of a common carrier impinges directly and intimately upon the safety
happen to deal with such carrier. The law imposes duties and liabilities upon
common carriers for the safety and protection of those who utilize their services
and the law cannot allow a common carrier to render such duties and liabilities
merely facultative by simply failing to obtain the necessary permits and
authorizations.
2.6 Ownership of Vehicle Used as Carrier
2.6.1 Registered Owner Rule (See No. 5 below)
2.6.2 Cebu Salvage Corporation vs. Philippine Home
Assurance
CORONA, J.:
· NOV 12, 1984 - Cebu Salvage Corporation (as carrier) and Maria Cristina
Chemicals Industries, Inc. [MCCII] (as charterer) entered into a voyage
charter wherein CSC was to load 800 to 1,100 metric tons of silica quartz on
board the M/T Espiritu Santo at Ayungon, Negros Occidental for transport to and
discharge at Tagoloan, Misamis Oriental to consignee Ferrochrome Phils., Inc
· DEC 23, 1984, CSC received and loaded 1,100 metric tons of silica quartz on
board the M/T Espiritu Santo which left for Misamis the next day à M/T Espiritu
Santo sank off the beach of Opol, Misamis Oriental, resulting in the total loss of
the cargo.
· MCCII filed a claim for the loss of the shipment with its insurer Philippine
Home Assurance Corporation à paid the claim of P211,500 and was subrogated
to the rights of MCCII
· PHAC filed a case against CSC for reimbursement of the amount it paid
MCCII à WON IN THE RTC! CSC ordered to reimburse
· CA affirmed à CSC appealed
ISSUE: May a carrier be held liable for the loss of cargo resulting from the
sinking of a ship it does not own?
· CSC and MCCII entered into a "voyage charter," also known as a contract of
affreightment wherein the ship was leased for a single voyage for the conveyance
of goods, in consideration of the payment of freight. Under a voyage charter, the
shipowner retains the possession, command and navigation of the ship, the
charterer or freighter merely having use of the space in the vessel in return for
his payment of freight. An owner who retains possession of the ship remains
liable as carrier and must answer for loss or non-delivery of the goods received
for transportation.
· CSC argues that the voyage of charter is NOT a contract of carriage. It insists
that the agreement was merely a contract of hire wherein MCCII hired the vessel
from its owner, ALS Timber Enterprises (ALS). Not being the owner of the M/T
Espiritu Santo, petitioner did not have control and supervision over the vessel, its
master and crew thus, it could not be held liable for the loss of the shipment
· SC DISAGREES! à Based on the agreement signed by the parties and the
testimony of CSC’s operations manager, it is clear that it was a contract of
carriage.
· There is no dispute that CSC was a common carrier. At the time of the loss of
the cargo, it was engaged in the business of carrying and transporting goods by
water, for compensation, and offered its services to the public.
· From the nature of their business and for reasons of public policy, common
carriers are bound to observe extraordinary diligence over the goods they
transport according to the circumstances of each case. In the event of loss of the
goods, common carriers are responsible, unless they can prove that this was
brought about by the causes specified in Article 1734. In all other cases, common
carriers are presumed to be at fault or to have acted negligently, unless they
prove that they observed extraordinary diligence.
· IN THIS CASE à CSC was the one which contracted with MCCII for the
transport of the cargo. It had control over what vessel it would use. All
throughout its dealings with MCCII, it represented itself as a common
carrier. The fact that it did not own the vessel it decided to use to
consummate the contract of carriage did not negate its character and duties
as a common carrier.
· Court did said it is not reasonable to expect MCCII to ask about ownership
of vesselà As a practical matter, it is very difficult and often impossible for the
general public to enforce its rights of action under a contract of carriage if it
should be required to know who the actual owner of the vessel is. In fact, in this
case, the voyage charter itself denominated petitioner as the "owner/operator"
of the vessel
· CSC says if there was a contract of carriage à it was between MCCII and ALS
as evidenced by the bill of lading ALS issuedà SC DISAGREES AGAIN
o A bill of lading may serve as the contract of carriage between the parties BUT
it cannot prevail over the express provision of the voyage charter à[I]n cases
where a Bill of Lading has been issued by a carrier covering goods shipped
aboard a vessel under a charter party, and the charterer is also the holder of the
bill of lading, "the bill of lading operates as the receipt for the goods, and as
document of title passing the property of the goods, but not as varying the
contract between the charterer and the shipowner."
· Coastwise asserts that MCCII should be held liable for its own loss since the
voyage charter stipulated that cargo insurance was for the charterer’s
account. à This deserves scant consideration. à This simply meant that the
charterer would take care of having the goods insured. It could not exculpate the
carrier from liability for the breach of its contract of carriage. The law, in fact,
prohibits it and condemns it as unjust and contrary to public policy.
2.6.3 Nonvessel Operating Common Carrier (NVOCC)
3. Distinguished from Private Carrier
3.1 Planters Products Inc vs. CA
Facts: PPI purchased from Mitsubishi metric tons of Urea fertilizer which the
latter shipped aboard the cargo vessel owned by KKKK from US to La Union.
Prior to its voyage, a time charter-party on the vessel was entered into between
Mitsubishi as shipper/charterer and KKKK as shipowner, in Tokyo, Japan. Before
loading the fertilizer aboard the vessel, they were all presumably inspected by
the charterer's representative and found fit to take a load of urea. After the Urea
fertilizer was loaded in bulk by stevedores hired by and under the supervision of
the shipper, the steel hatches were closed with heavy iron lids, covered with
three layers of tarpaulin, then tied with steel bonds. The hatches remained closed
and tightly sealed throughout the entire voyage.
A private marine and cargo surveyor, Cargo Superintendents Company Inc.
(CSCI), was hired by PPI to determine the "outturn" of the cargo shipped. The
survey report submitted revealed a shortage in the cargo and that a portion of
the Urea fertilizer approximating was contaminated with dirt.
PPI sent a claim letter to Soriamont Steamship Agencies (SSA), the resident agent
of the carrier, KKKK, for the cost of the shortage in the and the diminution in
value of that portion contaminated with dirt. SSA explained that they did not
respond to the consignee's claim because it was not a formal claim, and that they
had nothing to do with the discharge of the shipment.
PPI filed an action for damages. The defendant carrier argued that the strict
public policy governing common carriers does not apply to them because they
have become private carriers by reason of the provisions of the charter-party.
RTC ruled in favor of plaintiff, stating that “common carriers are presumed
negligent, all that a shipper has to do in a suit to recover for loss or damage is to
show receipt by the carrier of the goods and to delivery by it of less than what it
received. After that, the burden of proving that the loss or damage was due to any
of the causes which exempt him from liability is shifted to the carrier, common or
private he may be. Even if the provisions of the charter-party are deemed valid,
and the defendants considered private carriers, it was still incumbent upon them
to prove that the shortage or contamination sustained by the cargo is attributable
to the fault or negligence on the part of the shipper or consignee in the loading,
stowing, trimming and discharge of the cargo. This they failed to do.” CA reversed
the decision, relying on the 1968 case of Home Insurance Co. v. American
Steamship Agencies, Inc., it ruled that the cargo vessel M/V "Sun Plum" owned by
private respondent KKKK was a private carrier and not a common carrier by
reason of the time charterer-party. Accordingly, the Civil Code provisions on
common carriers which set forth a presumption of negligence do not find
application in the case at bar.
Issue:
1) Whether a common carrier becomes a private carrier by reason of a charter-
party.
 bonds. The hatches remained close and tightly sealed while the ship was in
2) Whether the shipowner was able to prove that he had exercised that degree of
diligence required of him under the law.
Held:
1.) Not necessarily. It is not disputed that respondent carrier, in the ordinary
course of business, operates as a common carrier, transporting goods
indiscriminately for all persons. When petitioner chartered the vessel M/V "Sun
Plum", the ship captain, its officers and compliment were under the employ of the
shipowner and therefore continued to be under its direct supervision and
control. Hardly then can the charterer be charged, a stranger to the crew and to
the ship, with the duty of caring for his cargo when the charterer did not have
any control of the means in doing so. This is evident in the present case
considering that the steering of the ship, the manning of the decks, the
determination of the course of the voyage and other technical incidents of
maritime navigation were all consigned to the officers and crew who were
screened, chosen and hired by the shipowner. It is therefore imperative that a
public carrier shall remain as such, notwithstanding the charter of the whole or
portion of a vessel by one or more persons, provided the charter is limited to the
ship only, as in the case of a time-charter or voyage-charter. It is only when the
charter includes both the vessel and its crew, that a common carrier becomes
private, at least insofar as the particular voyage covering the charter-party is
concerned. Indubitably, a shipowner in a time or voyage charter retains
possession and control of the ship, although her holds may, for the moment, be
the property of the charterer.
Respondent carrier's heavy reliance on the case of Home Insurance Co. v.
American Steamship Agencies, is misplaced for the reason that the meat of the
controversy therein was the validity of a stipulation in the charter-party
exempting the shipowners from liability for loss due to the negligence of its
agent, and not the effects of a special charter on common carriers. At any rate, the
rule in the United States that a ship chartered by a single shipper to carry special
cargo is not a common carrier, does not find application in our jurisdiction, for
we have observed that the growing concern for safety in the transportation of
passengers and /or carriage of goods by sea requires a more exacting
interpretation of admiralty laws, more particularly, the rules governing common
carriers.
2.) Yes. In an action for recovery of damages against a common carrier on the
goods shipped, the RTC’s statement on the requirements of the law was
reiterated. SC held that respondent carrier has sufficiently overcome, by clear
and convincing proof, the prima facie presumption of negligence.
It was shown during the trial that after the loading of the cargo in bulk in the
ship’s holds, the steel pontoon hatches were closed and sealed with iron lids,
then covered with 3 layers of serviceable tarpaulins which were tied with steel
transit as the weight of the steel covers made it impossible for a person to open
without the use of the ship’s boom. Also shown, was that the hull of the vessel
was in good condition, foreclosing the possibility of spillage of the cargo into the
sea or seepage of water inside the hull of the vessel.
SC agreed that the bulk shipment of highly soluble goods like fertilizer carries
with it the risk of loss or damage. Moreso, with a variable weather condition
prevalent during its unloading, as was the case at bar. This is a risk the shipper or
the owner of the goods has to face. Clearly, respondent carrier has sufficiently
proved the inherent character of the goods which makes it highly vulnerable to
deterioration; as well as the inadequacy of its packaging which further
contributed to the loss.
3.2 San Pablo vs. Pantranco
FACTS:
Pantranco through its counsel wrote to Maritime Industry Authority (MARINA)
requesting authority to lease/purchase a vessel named M/V "Black Double" "to
be used for its project to operate a ferryboat service from Matnog, Sorsogon and
Allen, Samar that will provide service to company buses and freight trucks that
have to cross San Bernardo Strait. Pantranco nevertheless acquired the vessel
M/V "Black Double" for P3 Million pesos. It wrote the Chairman of the Board of
Transportation (BOT) through its counsel, that it proposes to operate a ferry
service to carry its passenger buses and freight trucks between Allen and Matnog
in connection with its trips to Tacloban City. Without awaiting action on its
request Pantranco started to operate said ferry service. The BOT rendered its
decision holding that the ferryboat service is part of its Certificate for Public
Convenience (CPC) to operate from Pasay to Samar/Leyte by amending
Pantranco's CPC, that the grant of authority to operate a private ferryboat service
as one of the conditions for the grant of the certificate subject to the condition
that the ferryboat shall be for the exclusive use of Pantranco buses, its
passengers and freight trucks, and should it offer itself to the public for hire other
than its own passengers, it must apply for a separate certificate of public
convenience as a public ferryboat service, separate and distinct from its land
transport systems.
ISSUE:
Whether or not the ferry boat is a common carrier?
HELD:
YES, Pantranco’s ferry service operation is a common carrier. The contention of
private respondent Pantranco that its ferry service operation is as a private
carrier, not as a common carrier for its exclusive use in the ferrying of its
passenger buses and cargo trucks is absurd. Pantranco does not deny that it
charges its passengers separately from the charges for the bus trips and issues
separate tickets whenever they board the M/V "Black Double" that crosses
Matnog to Allen. Nevertheless, considering that the authority granted to
Pantranco is to operate a private ferry, it can still assert that it cannot be held to
account as a common carrier towards its passengers and cargo. Such an
anomalous situation that will jeopardize the safety and interests of its passengers
and the cargo owners cannot be allowed. What appears clear from the record is
that at the beginning PANTRANCO planned to operate such ferryboat service
between Matnog and Allen as a common carrier so it requested authority from
MARINA to purchase the vessel M/V "Black Double" in accordance with the
procedure provided for by law for such application for a certificate of public
convenience. Thus the Court holds that the water transport service between
Matnog and Allen is not a ferryboat service but a coastwise or interisland
shipping service. Before private respondent may be issued a franchise or CPC for
the operation of the said service as a common carrier, it must comply with the
usual requirements of filing an application, payment of the fees, publication,
adducing evidence at a hearing and affording the oppositors the opportunity to
be heard, among others, as provided by law.
3.3 Limited Clientele
Although the clientele is limited, the regularity of the activities of a carrier may
indicate that the same carrier is a common carrier.
3.3.1 Phil. American Gen. Insurance Co. vs. PKS Shipping Co.
Facts:
Davao Union Marketing Corporation contracted the service of PKS Shipping
Company to transport 75,000 bags of cement insuring it in the amount of P 3,
375,00.00 to Philagen. Suddenly the barge sank and brings down the entire
shipment. Thus Davao Union Marketing Corporation then filed a case for the
claim of the entire amount of insurance. Further, Philagen sought for
reimbursement of the amount paid but PKS Shipping Company refused to pay.
RTC: Dismissed the case on the grounds that it is caused by fortuitous event in
which case the ship-owner is not liable CA: Affirmed in Toto with RTC’s decision
concluded further that PKS is not a common carrier because carrying of goods for
the other is not its principal work and it is a mere casual occupation. PKS
Shipping Company being not a common carrier must only observe ORDINARY
DILIGENCE and not EXTRAORDINARY DILIGENCE as expected of COMMON
CARRIER.
Issue:
Whether PKS Shipping Company is a private carrier or common carrier thus
observing the proper diligence.
Held:
According to Article 1723, A common carrier are persons, corporationsm
corporations, firms or associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or air for
compensation, offering their services to the public."
Complementary to the codal
definition is Section 13, paragraph (b), of the Public Service Act; it defines "public
service" to be —
". . . 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, subway motor vehicle,
either for freight or passenger, or both, with or without fixed route and whatever
may be its classification, freight or carrier service of any class, express service,
steamboat, or steamship, 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 communication systems, wire or wireless
broadcasting stations and other similar public services.
THEREFORE, The above article makes no distinction between one whose
principal business activity is the carrying of persons or goods or both, and one
who does such carrying only as an ancillary activity (in local idiom, as 'a
sideline').
In addressing the proper diligence, Article 1733 of the Civil Code
requires common carriers to observe extraordinary diligence in the vigilance
over the goods they carry. In case of loss, destruction or deterioration of goods,
common carriers are presumed to have been at fault or to have acted negligently,
and the burden of proving otherwise rests on them.
There is no way by which the barge's or the tugboat's crew could have prevented
the sinking of Limar I. The vessel was suddenly tossed by waves of extraordinary
height of six (6) to eight (8) feet and buffeted by strong winds of 1.5 knots
resulting in the entry of water into the barge's hatches. The official Certificate of
Inspection of the barge issued by the Philippine Coastguard and the Coastwise
Load Line Certificate would attest to the seaworthiness of Limar I and should
strengthen the factual findings of the appellate court.Thus FORTUITIOUS EVENT.
Petition Denied.
3.3.2 FGU Insurance Corporation vs. G.P. Sarmiento Trucking
Corp.
FACTS:
G.P. Sarmiento Trucking Corporation (GPS) undertook to deliver on 18 June 1994
thirty (30) units of Condura S.D. white refrigerators aboard one of its Isuzu truck,
driven by Lambert Eroles, from the plant site of Concepcion Industries, Inc., along
South Superhighway in Alabang, Metro Manila, to the Central Luzon Appliances
in 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. FGU Insurance Corporation (FGU), an insurer of the shipment, paid to
Concepcion Industries, Inc., the value of the covered cargoes. FGU, in turn, being
the subrogee of the rights and interests of Concepcion Industries, Inc., sought
reimbursement of the amount it had paid to the latter from GPS. Since the
trucking company failed to heed the claim, FGU filed a complaint for damages and
breach of contract of carriage against GPS and its driver Lambert Eroles. The trial
court dismissed the case on the ground that plaintiff did not present any single
evidence that would prove that defendant is a common carrier. Accordingly, the
application of the law on common carriers is not warranted and the presumption
of fault or negligence on the part of a common carrier in case of loss, damage or
deterioration of goods during transport under 1735 of the Civil Code is not
availing. The Court of Appeals rejected the appeal of petitioner and ruled in favor
of GPS. Hence, this petition.
ISSUE:
WON GPS is a common carrier.
HELD:
NO. The Court finds the conclusion of the trial court and the Court of Appeals to
be amply justified. GPS, being an exclusive contractor and hauler of Concepcion
Industries, Inc., rendering or offering its services to no other individual or entity,
cannot be considered a common carrier. Common carriers are persons,
corporations, firms or associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or air, for hire or
compensation, offering their services to the public, whether to the public in
general or to a limited clientele in particular, but never on an exclusive basis. The
true test of a common carrier is the carriage of passengers or goods, providing
space for those who opt to avail themselves of its transportation service for a fee.
Given accepted standards, GPS scarcely falls within the term "common carrier.
However, GPS cannot escape from liability. Respondent trucking corporation
recognizes the existence of a contract of carriage between it and petitioner’s
assured, and admits that the cargoes it has assumed to deliver have been lost or
damaged while in its custody. In such a situation, a default on, or failure of
compliance with, the obligation – 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. 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, prima facie, a corresponding
right of relief. The law, recognizing the obligatory force of contracts, will not
permit a party to be set free from liability for any kind of misperformance of the
contractual undertaking or a contravention of the tenor thereof.
3.4 Line Service vs. Tramp Service
Cargo operation may be classified into two types, namely line service and
tramp service.
Line Service (RA 9515)
– The 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 carries multiple consignments.
– Liners carry “general cargoes,” meaning whatever is offered is accepted
for shipment.
Tram Service (RA 9515)
- The operation of a contract 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
bull cargoes.
- Tramps “offer their capacity for the carriage of bulk cargoes as desired
by the shipper, who ordinarily engages the whole of the ship; each
voyage is thus a matter of special arrangement between the shipowner
and shipper.
- The tramp seeks and usually gets a whole cargo loaded by a single
shipper and such cargoes are most often in bulk or in standard packages
and typically consist of raw materials, fuels and unprocessed foods so
vital to the world economy.
- May also be considered common carrier depending on the circumstances
4. Contract of Carriage Distinguished from Other Transactions
4.1 Towage (Baer Senior &Co. vs. La Compañia Maritima)
- A vessel is hired to bring another vessel to another place 

- e.g. a tugboat may be hired by CC to bring the vessel to a port 
(operator of
tugboat not CC) 

- in maritime law: towing for the mere purpose of expediting her 
voyage
without reference to any circumstances of danger 

By the terms of articles 1104 the defendant was bound to exercise what is known
in the American law as ordinary diligence, taking into consideration the nature of
the obligation and the circumstances of persons, time, and place. We think the
evidence in the case shows that the defendant did exercise the diligence required
of it by law. As we understand the evidence the towing line was passed from the
steamer to the launch, around the stern of the launch once or twice, and one or
two other lines passed entirely around the bow of the launch and under the keel.
These lines were fastened to a post in the bow of the launch, which post,
according to the testimony of the defendant's witnesses, was used for fastening
ropes in cases of towing, and, according to one witness of the plaintiff, for the
purpose of fastening the launch to the wharf. At the time the loss occurred the
towing line did not break, but this post did, and was found fastened to the towing
lines when they were pulled on board the steamer. The captain of the steamer
and the first mate, both men of experience in the matter, testified that the lines
were properly adjusted and the tow properly made fast to the steamer. The only
evidence to the contrary was the evidence furnished by one witness of the
plaintiff, who testified that he was present when the towing lines were made fast
by the captain himself, of the steamer; that he then told the captain it should be
done another way. The captain denied this. This witness had no experience,
according to his own testimony, in the matter of towing; had never had occasion
to make fast a tow to a tug, and had never seen it done, with one exception; and
that when this same launch was towed from Manila to Aparri. We do not think his
evidence is sufficient to overcome the evidence of the defendant.
4.2 Stevedoring (Mindanao Terminal and Brokerage Service, Inc. vs.
Phoenix Assurance Cormpany of New York/Mcgee & Co., Inc.)
involves the loading and unloading of coastwise vessels calling at the port.
>>> Common carriers are public utilities, impressed with public interest and
concern subject to regulation by the state.
There is a distinction between an arrastre and a stevedore.[24] Arrastre, a Spanish
word which refers to hauling of cargo, comprehends the handling of cargo on the
wharf or between the establishment of the consignee or shipper and the ship's
tackle. The responsibility of the arrastre operator lasts until the delivery of the
cargo to the consignee. The service is usually performed by longshoremen. On
the other hand, stevedoring refers to the handling of the cargo in the holds of the
vessel or between the ship's tackle and the holds of the vessel. The responsibility
of the stevedore ends upon the loading and stowing of the cargo in the vessel.
It is not disputed that Mindanao Terminal was performing purely stevedoring
function while the private respondent in the Summa case was performing
arrastre function. In the present case, Mindanao Terminal, as a stevedore, was
only charged with the loading and stowing of the cargoes from the pier to the
ships cargo hold; it was never the custodian of the shipment of Del Monte
Produce. A stevedore is 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 on quasi-delict. The public
policy considerations in legally imposing upon a common carrier or a
warehouseman a higher degree of diligence is not present in a stevedoring outfit
which mainly provides labor in loading and stowing of cargoes for its clients.
4.3 Arrastre/ Terminal Operator (Asian Terminals vs. Daehan)
- Arrastre operator’s functions has nothing to do with the trade and business of
navigation nor to the use or operation of vessels 

- Services are not maritime 

- Functions of arrastre operator: 

o Receive, handle, care for, and deliver all merchandise imported and
exported, upon or passing over Government-owned wharves and piers
in the port
o Record or check all merchandise which may be delivered to said port
ant shipside
o Furnish light, and water services and other incidental service in order
to undertake its arrastre service
- Such service is in face, no different from those of a depositary or warehouseman
It is undisputed that Access International, upon arrival of the shipment, declared
the same for taxation purposes, as well as for the assessment of arrastre charges
and other fees. For the purpose, the invoice, packing list and other shipping
documents were presented to the Bureau of Customs as well as to petitioner for
the proper assessment of the arrastre charges and other fees. Such manifestation
satisfies the condition of declaration of the actual invoices of the value of the
goods before their arrival, to overcome the limitation on the liability of the
arrastre operator.[43] Then, the arrastre operator, by reason of the payment to it
of a commensurate charge based on the higher declared value of the
merchandise, could and should take extraordinary care of the special or valuable
cargo.[44] What would, indeed, be unfair and arbitrary is to hold the arrastre
operator liable for the full value of the merchandise after the consignee has paid
the arrastre charges only on a basis much lower than the true value of the
goods.[45]
What is essential is knowledge beforehand of the extent of the risk to be
undertaken by the arrastre operator, as determined by the value of the property
committed to its care. This defines its responsibility for loss of or damage to such
cargo and ascertains the compensation commensurate to such risk assumed.
Having been duly informed of the actual invoice value of the merchandise under
its custody and having received payment of arrastre charges based thereon,
petitioner cannot therefore insist on a limitation of its liability under the contract
to less than the value of each lost cargo.[46]
The stipulation requiring the consignee to inform the arrastre operator and to
give advance notice of the actual invoice value of the goods to be put in its
custody is adopted for the purpose of determining its liability, that it may obtain
compensation commensurate to the risk it assumes, not for the purpose of
determining the degree of care or diligence it must exercise as a depositary or
warehouseman.[47]
4.4 Freight Forwarding (Unsworth Transport International vs. CA)
Admittedly, petitioner is a freight forwarder. The term freight forwarder" refers
to a firm holding itself out to the general public (other than as a pipeline, rail,
motor, or water carrier) to provide transportation of property for compensation
and, in the ordinary course of its business, (1) to assemble and consolidate, or to
provide for assembling and consolidating, shipments, and to perform or provide
for break-bulk and distribution operations of the shipments; (2) to assume
responsibility for the transportation of goods from the place of receipt to the
place of destination; and (3) to use for any part of the transportation a carrier
subject to the federal law pertaining to common carriers.[23]
A freight forwarders liability is limited to damages arising from its own
negligence, including negligence in choosing the carrier; however, where the
forwarder contracts to deliver goods to their destination instead of merely
arranging for their transportation, it becomes liable as a common carrier for loss
or damage to goods. A freight forwarder assumes the responsibility of a carrier,
which actually executes the transport, even though the forwarder does not carry
the merchandise itself.[24]
It is undisputed that UTI issued a bill of lading in favor of Unilab. Pursuant
thereto, petitioner undertook to transport, ship, and deliver the 27 drums of raw
materials for pharmaceutical manufacturing to the consignee.
A bill of lading is a written acknowledgement of the receipt of goods and an
agreement to transport and to deliver them at a specified place to a person
named or on his or her order.[25] It operates both as a receipt and as a contract. It
is a receipt for the goods shipped and a contract to transport and
deliver the same as therein stipulated. As a receipt, it recites the date and place of
shipment, describes the goods as to quantity, weight, dimensions, identification
marks, condition, quality, and value. As a contract, it names the contracting
parties, which include the consignee; fixes the route, destination, and freight rate
or charges; and stipulates the rights and obligations assumed by the parties. [26]
Undoubtedly, UTI is liable as a common carrier. Common carriers, as a general
rule, are presumed to have been at fault or negligent if the goods they
transported deteriorated or got lost or destroyed. That is, unless they prove that
they exercised extraordinary diligence in transporting the goods. In order to
avoid responsibility for any loss or damage, therefore, they have the burden of
proving that they observed such diligence.[27] Mere proof of delivery of the goods
in good order to a common carrier and of their arrival in bad order at their
destination constitutes a prima facie case of fault or negligence against the
carrier. If no adequate explanation is given as to how the deterioration, loss, or
destruction of the goods happened, the transporter shall be held responsible. [28]
4.5 Travel Agency (Crisostomo vs. CA)
It is obvious from the above definition that respondent is not an entity engaged in
the business of transporting either passengers or goods and is therefore, neither
a private nor a common carrier. Respondent did not undertake to transport
petitioner from one place to another since its covenant with its customers is
simply to make travel arrangements in their behalf. Respondents services as a
travel agency include procuring tickets and facilitating travel permits or visas as
well as booking customers for tours.
While petitioner concededly bought her plane ticket through the efforts of
respondent company, this does not mean that the latter ipso facto is a common
carrier. At most, respondent acted merely as an agent of the airline, with whom
petitioner ultimately contracted for her carriage to Europe. Respondents
obligation to petitioner in this regard was simply to see to it that petitioner was
properly booked with the airline for the appointed date and time. Her transport
to the place of destination, meanwhile, pertained directly to the airline.
The object of petitioners contractual relation with respondent is the latters
service of arranging and facilitating petitioners booking, ticketing and
accommodation in the package tour. In contrast, the object of a contract of
carriage is the transportation of passengers or goods. It is in this sense that the
contract between the parties in this case was an ordinary one for services and
not one of carriage. Petitioners submission is premised on a wrong assumption.
The nature of the contractual relation between petitioner and respondent is
determinative of the degree of care required in the performance of the latters
obligation under the contract. For reasons of public policy, a common carrier in a
contract of carriage is bound by law to carry passengers as far as human care and
foresight can provide using the utmost diligence of very cautious persons and
with due regard for all the circumstances.[11] As earlier stated, however,
respondent is not a common carrier but a travel agency. It is thus not bound
under the law to observe extraordinary diligence in the performance of its
obligation, as petitioner claims.
4.6 Transportation Network Companies (TNC) vs. Transportation
Network Vehicle Service (TNVS) (LTFRB Memorandum Circular
No. 2015-015 & -018)
A Transportation Network Company (TNC) as defined under Department Order
No. 2015-011 shall mean as an "organization whether a corporation, partnership,
or sole proprietor, That provides pre-arranged transportation services for
compensation using an internet-based technology application or digital platform
technology to connect passengers with drivers using their personal vehicles°,
hence treated as a transport provider.
5. Government Regulation of Common Carrier’s Business; Public
Policies
5.1 Public Interest Doctrine (KMU Labor Center vs. Garcia)
Common carriers are public utilities; they are enterprises that specially cater to
the needs of the public and conduce to their comfort and convenience.
Moreover, the business of common carriers impinges directly and intimately
upon the safety, well-being and property of the members of the general
community who happen to deal with such carrier. The law imposes duties and
liabilities upon common carriers for the safety and protection of those who
utilize their services.
5.2 Tatad vs. Garcia, Jr.
Facts: DOTC planned to construct a light railway transit line along EDSA referred
to as EDSA Light Rail Transit III (EDSA LRT III). Then President Aquino, signed
into law the Build-Operate-Transfer (BOT) Law. After prequalifying the bidders
for the construction of the said transit, it was found that out of all the applicants,
only the EDSA LRT Consortium met the requirements. DOTC and respondent
EDSA LRT Corporation, Ltd. (a private corporation organized under the laws of
HongKong) in substitution of the EDSA LRT Consortium, entered into an
"Agreement to Build, Lease and Transfer a Light Rail Transit System for EDSA"
under the terms of the BOT Law.
DOTC sought the approval of the President but the same was denied. Thus, DOTC,
represented by Secretary Garcia, and private respondent entered into a
supplemental agreement—“Revised and Restated Agreement to Build, Lease and
Transfer a Light Rail Transit System for EDSA" so as to clarify their respective
rights and responsibilities and to submit Supplemental Agreement to the
President.
Petitioners, in their capacity as Senators and taxpayers, question the
constitutionality of the two agreements between DOTC and private respondent.
They contend that it grants EDSA LRT Corp., Ltd., a foreign corporation, the
ownership of EDSA LRT III which is a public utility. Secretary Garcia and private
respondent on the other hand, contend that the nationality requirement for
public utilities mandated by the Constitution does not apply to private
respondent.
Issue: Does the fact that EDSA LRT Corporation, Ltd., a foreign corporation, own
the facilities and equipment of the LRT III mean it also own the LRT III as a public
utility?
Held: No. What private respondent owns are the rail tracks, rolling stocks like
the coaches, rail stations, terminals and the power plant, not a public utility.
While a franchise is needed to operate these facilities to serve the public, they do
not by themselves constitute a public utility. As ruled in Iloilo Ice & Cold Storage
Co. v. Public Service Board, what constitutes a public utility is not their
ownership but their use to serve the public.
In law, there is a clear distinction between the "operation" of a public utility and
the ownership of the facilities and equipment used to serve the public. The right
to operate a public utility may exist independently and separately from the
ownership of the facilities thereof. One can own said facilities without operating
them as a public utility, or conversely, one may operate a public utility without
owning the facilities used to serve the public. The devotion of property to serve
the public may be done by the owner or by the person in control thereof who
may not necessarily be the owner thereof.
In the case at bar, private respondent
and DOTC agreed that on completion date, private respondent will immediately
deliver possession of the LRT system by way of lease for 25 years, during which
period DOTC shall operate the same as a common carrier and private respondent
shall provide technical maintenance and repair services to DOTC. Clearly, private
respondent will not run the light rail vehicles and collect fees from the riding
public. It will have no dealings with the public and the public will have no right to
demand any services from it. It is DOTC which shall operate the EDSA LRT III.
Therefore, private respondent, EDSA LRT Corp., Ltd. does not own EDSA LRT III
as a public utility.
5.3 Registered Owner Rule
The rule in this jurisdiction is that 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 rule is a matter of public interest. The registered owner is
liable to the injured party subject to his right of recourse against the transferee
or the buyer.
Rules:
a. The registered owner is not liable if the vehicle was taken from his
garage without his knowledge and consent. To hold the registered owner
would be absurd as it would be like holding liable the owner of a stolen
vehicle for an accident caused by the person who stole such vehicle.
b. However, absent the circumstance of unauthorized use or that the
subject vehicle was stolen, the registered owner cannot escape liability.
 c. The rule applies even if the vehicle was leased to another who is the
actual operator, unless the lease contract is registered with the LTO,
with the annotation that the lessee is the one operating the vehicle.
d. Applies in financial lease. Financial Lease is a “mode of extending credit
through a non-cancellable lease contract under which the lessor
purchases or acquires, at the instance of the lessee, machinery,
equipment, motor vehicles, appliances, business and office machines,
and other movable or immovable property in consideration of the
periodic payment by the lessee of a fixed amount of money sufficient to
authorize at least 70% of the purchase price or acquisition cost,
including any incidental expenses and a margin of profit over an
obligatory period of not less than two years during which the lessee has
the right to hold and use the leased property, xxx but with no obligation
or option on his part to purchase the leased property from the owner-
lessor at the end of the leased contract (in case of non-registration of the
financial lease).
5.5.1. Gelisan vs. Alday
Facts:
 constrained to look for other suppliers
BienvenidoGelisan is the owner of a freight truck which Roberto Espiritu hired
for the purpose of hauling rice, flour, sugar and fertilizer at an agreed price of
P18.00 per trip within the limits of the City of Manila, provided that the load shall
noet exceed 200 sacks.
The truck was taken by a driver Espiritu. Alday, a
trucking operator, had a contract to haul the fertilizers of Allas Fertilizer
Corporatioon.
Espiritu offered the truck in which ALday accepted. The fertilizers
then were delivered to the driver and helper of Espiritu, however the latter did
not deliver the fertilizers. Espiritu could not be found and Alday reported the loss
to Manila Police Department.
But soon, Espiritu was arrested and booked for
theft.
Alday saw the truck in question and it was impounded by the police.
Gelisan claimed the truck from the police department. Gelisan claimed that he
had no contractual relations to Alday as regards to the hauling and/or delivery
that the alleged misappropriation or non-delivery by Espiritu was entirely
beyond his control.
 for the value of the undelivered or lost sawn lumber
Commission. It is a rule that whoever is the owner shall consequently liable in
any accidents that the a car may incur.
5.5.2. Benedicto vs. IAC
FACTS:
 Greenhills Wood Industries - bound itself to sell and deliver to Blue Star
Mahogany, Inc. 100,000 board feet of sawn lumber with the
understanding that an initial delivery would be made.
 Greenhills resident manager in Maddela, Dominador Cruz, contracted
Virgilio Licuden, the driver of a cargo truck, to transport its sawn lumber
to the consignee Blue Star in Valenzuela, Bulacan; this cargo truck was
registered in the name of Ma. Luisa Benedicto, the proprietor of Macoven
Trucking, a business enterprise engaged in hauling freight the Manager
of Blue Star called up Greenhills’ president informing him that the sawn
lumber on board the subject cargo truck had not yet arrived in
Valenzuela, Bulacan; because of the delay in delivery Blue Star was
 Greenhill’s filed criminal case against driver Licuden for estafa; and a
civil case for recovery of the value of the lost sawn lumber plus damages
against Benedicto
 Benedicto denied liability as she was a complete stranger to the contract
of carriage, the subject truck having been earlier sold by her to Benjamin
Tee; but the truck had remained registered in her name because Tee
have not yet fully paid the amount of the truck; be that as it may, Tee had
been operating the said truck in Central Luzon from that and Licuden
was Tee’s employee and not hers
ISSUE:
WoN Benedicto, being the registered owner of the carrier, should be held liable

Issue:
 HELD:
Whether or not Gelisan is liable because the said truck is registered under his
name
 YES. The registered owner liable for consequences flowing from the operations of
the carrier, even though the specific vehicle involved may already have been
Held:
 transferred to another person. This doctrine rests upon the principle that in
Yes, He is liable. The registered owner of the public service vehicle is responsible dealing with vehicles registered under the Public Service Law, the public has the
for damages that may arise from the consequences of the incident to its right to assume that the registered owner is the actual or lawful owner thereof It
operation or that may be caused to any of the passengers therein. Gelisan’s claim would be very difficult and often impossible as a practical matter, for members of
that he is not liable in view of the contract of lease executed by and between him the general public to enforce the rights of action that they may have for injuries
and Espiritu exempts him from liability of Third person CANNOT BE SUSTAINED inflicted by the vehicles being negligently operated if they should be required to
because the lease contract had not been approved by the Public Service
prove who the actual owner is. Greenhills is not required to go beyond the
vehicle’s certificate of registration to ascertain the owner of the carrier.
5.5.3. Erezo vs. Jepte
Facts:
 Defendant-appellant is the registered owner of a six by six truck bearing.
On August, 9, 1949, while the same was being driven by Rodolfo Espino y
Garcia, it collided with a taxicab at the intersection of San Andres and
Dakota Streets, Manila. As the truck went off the street, it hit Ernesto
Erezo and another, and the former suffered injuries, as a result of which
he died.
 The driver was prosecuted for homicide through reckless negligence.
The accused pleaded guilty and was sentenced to suffer imprisonment
and to pay the heirs of Ernesto Erezo the sum of P3,000. As the amount
of the judgment could not be enforced against him, plaintiff brought this
action against the registered owner of the truck, the defendant-
appellant.
 The defendant does not deny at the time of the fatal accident the cargo
truck driven by Rodolfo Espino y Garcia was registered in his name. He,
however, claims that the vehicle belonged to the Port Brokerage, of
which he was the broker at the time of the accident. He explained, and
his explanation was corroborated by Policarpio Franco, the manager of
the corporation, that the trucks of the corporation were registered in his
name as a convenient arrangement so as to enable the corporation to
pay the registration fee with his backpay as a pre-war government
employee. Franco, however, admitted that the arrangement was not
known to the Motor Vehicle Office.
 The trial court held that as the defendant-appellant represented himself
to be the owner of the truck and the Motor Vehicle Office, relying on his
representation, registered the vehicles in his name, the Government and
all persons affected by the representation had the right to rely on his
declaration of ownership and registration. It, therefore, held that the
defendant-appellant is liable because he cannot be permitted to
repudiate his own declaration.
Issue:
WoN Jepte should be liable to Erezo for the injuries occasioned to the latter
because of the negligence of the driver even if he was no longer the owner of the
vehicle at the time of the damage (because he had previously sold it to another)
Held:
YES.
 The registered owner, the defendant-appellant herein, is primarily
responsible for the damage caused to the vehicle of the plaintiff-appellee,
but he (defendant-appellant) has a right to be indemnified by the real or
actual owner of the amount that he may be required to pay as damage
for the injury caused to the plaintiff-appellant
 The Revised Motor Vehicle Law provides that no vehicle may be used or
operated upon any public highway unless the same is properly
registered. Not only are vehicles to be registered and that no motor
vehicles are to be used or operated without being properly registered for
the current year, but that dealers in motor vehicles shall furnish the
Motor Vehicles Office a report showing the name and address of each
purchaser of motor vehicle during the previous month and the
manufacturer's serial number and motor number.
 Registration is required not to make said registration the operative act
by which ownership in vehicles is transferred, as in land registration
cases, because the administrative proceeding of registration does not
bear any essential relation to the contract of sale between the parties,
but to permit the use and operation of the vehicle upon any public
 The main aim of motor vehicle registration is to identify the owner so
that if any accident happens, or that any damage or injury is caused by
the vehicles on the public highways, responsibility therefore can be fixed
on a definite individual, the registered owner.
 A registered owner who has already sold or transferred a vehicle has the
recourse to a third-party complaint, in the same action brought against
him to recover for the damage or injury done, against the vendee or
transferee of the vehicle.
5.4 Kabit System
It is an arrangement whereby a person who has been granted a certificate of
public convenience allows other persons who own motor vehicles to operate
them under his license, sometimes for a fee or percentage of the earnings.
Although law does not outrightly penalize the parties to such an agreement, the
kabit system is invariably recognized as being contrary to public policy and
therefore void and inexistent under Article 1409 of the Civil Code.
In the early case of Dizon v. Octavio the Court explained that one of the primary
factors considered in the granting of a certificate of public convenience for the
business of public transportation is the financial capacity of the holder of the
license, so that liabilities arising from accidents may be duly compensated.
The kabit system renders illusory such purpose and, worse, may still be availed
of by the grantee to escape civil liability caused by a negligent use of a vehicle
owned by another and operated under his license. If a registered owner is
allowed to escape liability by proving who the supposed owner of the vehicle is, it
would be easy for him to transfer the subject vehicle to another who possesses
no property with which to respond financially for the damage done.
Thus, for the safety of passengers and the public who may have been wronged
and deceived through the baneful kabit system, the registered owner of the
vehicle is not allowed to prove that another person has become the owner so that
he may be thereby relieved of responsibility. Subsequent cases affirm such basic
doctrine.
It would seem then that the thrust of the law in enjoining the kabit system is not
so much as to penalize the parties but to identify the person upon whom
responsibility may be fixed in case of an accident with the end view of protecting
the riding public. The policy therefore loses its force if the public at large is not
deceived, much less involved.
5.4.1. Santos vs. Sibug
Facts:
Prior to April 26, 1963, Vidad was duly authorized passenger jeepney operator.
Also, prior to said date, petitioner Santos was the owner of a passenger jeep, but
he had no certificate of public convenience for the operation of the vehicle as a
public passenger jeep. Santos then transferred his jeep to the name of Vidad so
that it could be operated under the latter’s certificate of public convenience.
Thus, Santos became what is known as a kabit operator. For the protection of
Santos, Vidad executed a re-transfer document to the former, which was to be a
private document presumably to be registered if and when it was decided that
the passenger jeep of Santos was to be withdrawn from the kabit agreement.
On April 26, 1963, private respondent Sibug was bumped by a passenger jeepney
operated by vidad and driven by Severo Gragas. Thus, filed a complaint for
damages. Judgment was rendered in favor of Sibug.
On April 10, 1964, the Sheriff of Manila levied on a motor vehicle, registered in
the name of Vidad, and scheduled the public auction sale. The next day, Santos
presented a third-party claim with the Sheriff, as a result, Santos, instituted an
Action for Damages and Injunction with a prayer for Preliminary Mandatory
Injunction. On October 14, 1965, branch X affirmed Santos’ ownership of the
jeepney in question.
Sibug sought relief from respondent Appellate Court. Respondent Court held that
Santos may not be permitted to prove his ownership over a particular vehicle
being levied upon but registered in another’s name in a separate action.
Issue: Whether or not a jeepney registered in the name of Vidad, an authorized
public utility operator but is actually owned by Santos (the kabit operator),
which bumped Sibug be sold at a public auction to satisfy the court’s award.
Held: Yes, the jeepney under the “kabit system” which bumped Sibu can be sold
at public auction to satisfy the court’s award.
Sec. 20 (g) of the Public Service Act provides: “it shall be unlawful for any public
service or for the owner, lessee or operator thereof, without the approval or
authorization of the Commission previously had- (g) to sell, alienate, mortgage,
encumber or lease its property, franchise certificates, privileges, or rights, or any
part thereof.
In the case at bar, Santos had fictitiously sold the jeepney to Vidad, who had
become the registered owner and operator of record at the time of the accident.
It is true that Vidad had executed a re- sale to Santos, but the document was not
registered. Although Santos, as the kabit, was the true owner as against Vidad,
the latter, as the registered owner/ operator and grantee of the franchise, is
directly and primarily responsible and liable for damages caused to Sibug, the
injured party, as a consequence of the negligent or careless operation of the
vehicle. This ruling is based on the principle that the operator of record is
considered the operator of the vehicle in contemplation of law as regards the
public and third persons even if the vehicle involved in the accident had been
sold to another where such sale had not been approved by the then Public
Service commission.
The court ruled that the petition for review filed by Santos is dismissed.
5.4.2. Lita Enterprises, Inc. vs. IAC
Facts:
Spouses Ocampo, herein private respondent, purchased in instalment
from Delta Motor Sales Corporation 5 Toyota Corona Standard cars to be used as
taxicabs. Since they had no franchise to operate the taxicabs, the contracted with
petitioner Lita Enterprises for the use of the latter’s certificate of public
convenience in consideration of an initial payment of P1,000 and a monthly
rental of P200 per taxicab unit.
Aforesaid cars were registered in the name of
Lita Enterprises, the possession however remain with the spouses Ocampo who
operated and maintained the same unde the namen of “ACME “ Taxi.
About a year later, one of the said taxicabs driven by their employee collided with
a motorcycle whose driver died thus a civil case is filed for damages which was
instituted against Lita Enterprise as registered owner of the taxicab.
Thus when
the decision of the damages became final and executor, one of the vehicles of the
spouses was levied upon the public auction thereafter; respondent Ocampo
decided to register his taxicabs under his name but declined. Thus a case for
reconveryance of motor vehicle.
RTC: ordered Lita Enterprises to transfer the registration certificate of the three
Toyota cars not levied upon.
 the total account ofNale was already P2, 731, 05 as shown in a statement of
CA: modified decision: in the event the condition of the three Toyota cars will no
longer serve the purpose of the deed of conveyance because of their
deterioration, or because they are no longer serviceable, or because they are no
longer available, the LitaEnterprises, Inc. is ordered to pay the plaintiffs their fair
market value as of July 22, 1975
Issue:
Whether or not the private respondent is liable for the amount which the
petitioner has paid in relation to gross negligence of private respondent’s
drivers
 feebeginning October 1976 when the motorcycle was impounded by the LTC
Held:
The relationship between the respondent and the petitioner is Kabit
system whereby a person who has been granted a certificate of convenience
allows another person who owns motor vehicles to operate under such franchise
for a fee. “kabit system" is invariably recognized as being contrary to public
policy and, therefore, void and inexistent under Artic1e 1409 of the Civil Code. It
is a fundamental principle that the court will not aid either party to enforce an
illegal contract, but will leave them both where it finds them.
Thus Making them
IN PARI DELICTO. Inexistent and Void Contract.
5.4.3. Teja Marketing vs. IAC
Facts:
Pedro Nale bought from Teja Marketing a motorcycle with completeaccessories
and a sidecar. A chattel mortgage was constituted as a securityfor the payment of
the balance of the purchase price. The records of theLand Transportation
Commission show that the motorcycle sold to thedefendant was first mortgaged
to the Teja Marketing by Angel Jaucian thoughthe Teja Marketing and Angel
Jaucian are one and the same, because it wasmade to appear that way only as the
defendant had no franchise of his ownand he attached the unit to the plaintiffs
MCH Line. The agreement also ofthe parties here was for the plaintiff to
undertake the yearly registration of themotorcycle with the Land Transportation
Commission. The plaintiff, howeverfailed to register the motorcycle on that year
on the ground that the defendantfailed to comply with some requirements such
as the payment of theinsurance premiums and the bringing of the motorcycle to
the LTC forstenciling, the plaintiff said that the defendant was hiding the
motorcycle fromhim. Lastly, the plaintiff also explained that though the
ownership of themotorcycle was already transferred to the defendant, the
vehicle was stillmortgaged with the consent of the defendant to the Rural Bank of
Camaliganfor the reason that all motorcycle purchased from the plaintiff on
credit wasrediscounted with the bank. Teja Marketing made demands for the
payment of the motorcycle butjust the same Nale failed to comply, thus forcing
Teja Marketing to consult alawyer and file an action for damage before the City
Court of Naga in theamount of P546.21 for attorneys fees and P100.00 for
expenses of litigation.Teja Marketing also claimed that as of 20 February 1978,
account; includesnot only the balance of P1, 700.00 but an additional 12%
interest per annumon the said balance from 26 January 1976 to 27 February
1978; a 2% servicecharge; and P546.21 representing attorneys fees. On his part,
Nale did notdispute the sale and the outstanding balance of P1,700.00 still
payable toTeja Marketing; but contends that because of this failure of Teja
Marketing tocomply with his obligation to register the motorcycle, Nale suffered
damageswhen he failed to claim any insurance indemnity which would amount
to no less than P15,000.00 for the more than 2 times that the motorcycle figured
inaccidents aside from the loss of the daily income of P15.00 as boundary
fornot being registered. The City Court rendered judgment in favor of
TejaMarketing, dismissing the counterclaim, and ordered Nale to pay
TejaMarketing On appeal to the Court of First Instance of Camarines Sur,
thedecision was affirmed in toto. Nale filed a petition for review with
theIntermediate Appellate Court. On 18 July 1983, the appellate court set
asidethe decision under review on the basis of doctrine of "pari delicto,"
andaccordingly, dismissed the complaint of Teja Marketing, as well as
thecounterclaim of Nale; without pronouncements as to costs. Hence, thepetition
for review was filed by Teja Marketing and/or Angel Jaucian.
Issue:
Whether the defendant can recover damages against the plaintiff?
Held:
Unquestionably, the parties herein operated under an arrangement,commonly
known as the "kabit system" whereby a person who has beengranted a certificate
of public convenience allows another person who ownsmotor vehicles to operate
under such franchise for a fee. A certificate ofpublic convenience is a special
privilege conferred by the government. Abuseof this privilege by the grantees
thereof cannot be countenanced. The "kabit system" has been identified as one of
the root causes of theprevalence of graft and corruption in the government
transportation offices.Although not out rightly penalized as a criminal offense,
the kabit system isinvariably recognized as being contrary to public policy and,
therefore, voidand in existent under Article 1409 of the Civil Code. It is a
fundamentalprinciple that the court will not aid either party to enforce an illegal
contract,but will leave both where it finds then. Upon this premise it would be
error toaccord the parties relief from their predicament.
5.4.4. Lim vs. CA
Facts:
Private respondent herein purchased an Isuzu passenger jeepney from
Gomercino Vallarta, a holder of a certificate of public convenience for the
operation of a public utility vehicle. He continued to operate the public transport
business without transferring the registration of the vehicle to his name. Thus,
the original owner remained to be the registered owner and operator of the
vehicle. Unfortunately, the vehicle got involved in a road mishap which caused it
severe damage. The ten-wheeler-truck which caused the accident was owned by
petitioner Lim and was driven by co-petitioner Gunnaban. Gunnaban admitted
responsibility for the accident, so that petitioner Lim shouldered the costs of
hospitalization of those wounded, compensation for the heirs of the deceased
passenger and the restoration of the other vehicle involved. He also negotiated
for the repair of the private respondent's jeepney but the latter refused and
demanded for its replacement. Hence, private respondent filed a complaint for
damages against petitioners. Meanwhile, the jeepney was left by the roadside to
corrode and decay. The trial court decided in favor of private respondent and
awarded him his claim. On appeal, the Court of Appeals affirmed the decision of
the trial court. Hence, petitioner filed this petition.
Issue:
WoN the new owner of a passenger jeepney who continued to operate the same
under the so-called kabit system and in the course thereof met an accident has
the legal personality to bring the action for damages against the erring vehicle.
Held:
YES. According to the Court, the thrust of the law in enjoining the kabit system is
not much as to penalize the parties but to identify the person upon whom
responsibility may be fixed in case of an accident with the end view of protecting
the riding public. In the present case, it is once apparent that the evil sought to be
prevented in enjoining the kabit system does not exist. First, neither of the
parties to the pernicious kabit system is being held liable for damages. Second,
the case arose from the negligence of another vehicle in using the public road to
whom no representation, or misrepresentation, as regards the ownership and
operation of the passenger jeepney was made and to whom no such
representation, or misrepresentation, was necessary. Thus it cannot be said that
private respondent Gonzales and the registered owner of the jeepney were in
estoppel for leading the public to believe that the jeepney belonged to the
registered owner. Third, the riding public was not bothered nor inconvenienced
at the very least by the illegal arrangement. On the contrary, it was private
respondent himself who had been wronged and was seeking compensation for
the damage done to him. Certainly, it would be the height of inequity to deny him
his right. Hence, the private respondent has the right to proceed against
petitioners for the damage caused on his passenger jeepney as well as on his
business
5.5 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 he is a lessor because
to tolerate such position would not only abet flagrant violations of the Public
Service Law but also to place the riding public at the mercy of reckless and
irresponsible drivers – reckless because the measure of their earnings depends
largely upon the number of trips the make, and, hence, the speed at which they
drive; and irresponsible because most if not all of them are in no position to pay
the damages they might cause.
5.5.1. Magboo vs. Bernardo
Facts:
Urbano and Emilia Magboo are the parents of Cesar Magboo, a childof 8 years old,
who lived with them and was under their custody until hisdeath on 24 October
1956 when he was killed in a motor vehicle accident, thefatal vehicle being a
passenger jeepney owned by Delfin Bernardo. At thetime of the accident, said
passenger jeepney was driven by Conrado Roque.The contract between Roque
and Bernardo was that Roque was to pay toBernardo the sum of P8.00, which he
paid to Bernardo, for privilege of drivingthe jeepney, it being their agreement
that whatever earnings Roque couldmake out of the use of the jeepney in
transporting passengers from one pointto another in the City of Manila would
belong entirely to Roque. As aconsequence of the accident and as a result of the
death of Cesar Magboo insaid accident, Roque was prosecuted for homicide thru
reckless imprudencebefore the CFI Manila. Roque was sentenced to 6 months of
arresto mayor,with the accessory penalties of the law; to indemnify the heirs of
thedeceased in, with subsidiary imprisonment in case of insolvency, and to
paythe costs. Pursuant to said judgment Roque served his sentence but he
wasnot able to pay the indemnity because he was insolvent. An action was
filedby the spouses Magboo against Bernardo is for enforcement of his
subsidiaryliability. The trial court ordered Bernardo to pay the. Bernardo
appealed to the Court of Appeals, which certified the case to the Supreme Court
on theground that only questions of law are involved.
Issue:
Whether or not an employer-employee relationship between thejeepney
operator and the driver?
Held:
An employer-employee relationship exists between a jeepney ownerand a driver
under a boundary system arrangement. The features whichcharacterize the
boundary system - namely the fact that the driver does notreceive a fixed wage
but gets only the excess of the amount of fares collectedby him over the amount
he pays to the jeep-owner, and the gasolineconsumed by the jeep is for the
amount of the driver - are not sufficient towithdraw the relationship between
them from that of employee and employer.Consequently, the jeepney owner is
subsidiary liable as employer inaccordance with Art.103, Revised Penal Code.II
5.5.2. Sps. Hernandez vs. Sps. Dolor
Facts:
 At about 3:00 p.m., Lorenzo Menard "Boyet" Dolor, Jr. was driving an
owner-type jeepney owned by her mother, Margarita, towards Anilao,
Batangas. As he was traversing the road at Barangay Anilao East, Mabini,
Batangas, his vehicle collided with a passenger jeepney driven by
petitioner Juan Gonzales and owned by his co-petitioner Francisco
Hernandez, which was travelling towards Batangas City.
 Boyet Dolor and his passenger, Oscar Valmocina, died as a result of the
collision. Fred Panopio, Rene Castillo and Joseph Sandoval, who were
also on board the owner-type jeep, which was totally wrecked, suffered
physical injuries. The collision also damaged the passenger jeepney of
Francisco Hernandez and caused physical injuries to its passengers,
namely, Virgie Cadavida, Fiscal Artemio Reyes and Francisca Corona.
 Consequently, respondents commenced an action 4 for damages against
petitioners alleging that driver Juan Gonzales was guilty of negligence
and lack of care and that the Hernandez spouses were guilty of
negligence in the selection and supervision of their employees.
 Petitioners countered that the proximate cause of the death and injuries
sustained by the passengers of both vehicles was the recklessness of
Boyet Dolor, the driver of the owner-type jeepney, who was driving in a
zigzagging manner under the influence of alcohol. Petitioners also
alleged that Gonzales was not the driver-employee of the Hernandez
spouses as the former only leased the passenger jeepney on a daily basis.
The Hernandez spouses further claimed that even if an employer-
employee relationship is found to exist between them, they cannot be
held liable because as employers they exercised due care in the selection
and supervision of their employee.
Issue:
WoN spouses Hernandez are solidarily liable with Juan Gonzales although they
were not in the passenger jeepney driven by the latter when the accident
happened
Held:
YES.
 Article 2180 states that the obligation imposed by article 2176 is
demandable not only for one's own acts or omissions, but also for those of
persons for whom one is responsible.
 Moreover, Article 2180 should be read with Article 2194 of the same
Code, which categorically states that the responsibility of two or more
persons who are liable for quasi-delict is solidary. In other words, the
liability of joint tortfeasors is solidary. Verily, under Article 2180 of the
Civil Code, an employer may be held solidarily liable for the negligent act
of his employee.
 The next question is whether Julian Gonzales is an employee of the
Hernandez spouses. An affirmative answer will put to rest any issue on
the solidary liability of the Hernandez spouses for the acts of Julian
Gonzales. The Hernandez spouses maintained that Julian Gonzales is not
their employee since their relationship relative to the use of the jeepney
is that of a lessor and a lessee. They argue that Julian Gonzales pays them
a daily rental of P150.00 for the use of the jeepney. In essence,
petitioners are practicing the "boundary system" of jeepney operation
albeit disguised as a lease agreement between them for the use of the
jeepney.
 We hold that an employer-employee relationship exists between the
Hernandez spouses and Julian Gonzales.
 Indeed to exempt from liability the owner of a public vehicle who
operates it under the "boundary system" on the ground that he is a mere
lessor would be not only to abet flagrant violations of the Public Service
Law, but also to place the riding public at the mercy of reckless and
irresponsible drivers — reckless because the measure of their earnings
depends largely upon the number of trips they make and, hence, the
speed at which they drive; and irresponsible because most if not all of
them are in no position to pay the damages they might cause.
6. Governing Law on Common Carriers
6.1 Applicable Laws
Summary Rules (pg. 39, Aquino 2016)
a) Coastwise Shipping
1) New Civil Code (Arts. 1732-1766) – primary law
2) Code of Commerce – governs suppletorily in absence of Civil
Code provisions
b) Carriage from Foreign Ports to Philippine Ports
1) New Civil Code – primary law
2) Code of Commerce – all matters not regulated by the Civil Code
(Nat. Dev. Co. vs. CA)
3) Carriage of Goods by Sea Act –suppletorily to the Civil COde
c) Carriage from Philippine Ports to Foreign Ports
1) The laws of the country to which the goods are to be
transported. (Art. 1753, Civil Code; Nat. Dev. Co. vs. CA)
 d) Overland Transportation
1) Civil Code – primary law
2) Code of Commerce - suppletorily
e) Air Transportation
1) Civil Code
2) Code of Commerce
For International Carriage – Convention for the Unification of Certain Rules
Relating to the International Carriage by Air or “Warsaw Convention” with its
amendments (Alitalia vs. IAC)
Note: COGSA is the primary law under RA 10668 (see page 970)
6.2 Conflicts Rule (Article 1753, Civil Code)
Art. 1753. The law of the country to which the goods are to be transported shall
govern the liability of the common carrier for their loss, destruction or
deterioration.
6.3 Eastern Shipping Lines vs. IAC
Facts:
On December 4, 1981, two fiber drums of riboflavin were shipped
fromYokohama, Japan for delivery vessel "SS EASTERN COMET" owned
bydefendant Eastern Shipping Lines under a bill of lading. The shipment
wasinsured under plaintiffs Marine Insurance Policy. Upon arrival of the
shipmentin Manila on December 12, 1981, it was discharged unto the custody
ofdefendant Metro Port Service, Inc. The latter excepted to one drum, said tobe in
bad order, which damage was unknown to plaintiff. On January 7, 1982
defendant Allied Brokerage Corporation receivedthe shipment from defendant
Metro Port Service, Inc., one drum opened andwithout seal. On January 8 and 14,
1982, defendant Allied BrokerageCorporation made deliveries of the shipment to
the consignees warehouse.The latter excepted to one drum which contained
spillages, while the rest ofthe contents was adulterated/fake. Plaintiff contended
that due to the losses/damage sustained by saiddrum, the consignee suffered
losses totaling P19, 032.95, due to the fault andnegligence of defendants. Claims
were presented against defendants whofailed and refused to pay the same. As a
consequence of the lossessustained, plaintiff was compelled to pay the consignee
P19, 032.95 underthe aforestated marine insurance policy, so that it became
subrogated to allthe rights of action of said consignee against defendants.
Issue:
Whether or not a claim for damage sustained on a shipment of goods can be a
solidary or joint and several, liability of the common carrier, thearrastre operator
and the customs broker?
Held:
The common carriers duty to observe the requisite diligence in theshipment of
goods lasts from the time the articles are surrendered to orunconditionally
placed in the possession of, and received by, the carrier fortransportation until
delivered to, or until the lapse of a reasonable time fortheir acceptance by, the
person entitled to receive them (Arts. 1736-1738,Civil Code). When the goods
shipped either are lost or arrive in damagedcondition, a presumption arises
against the carrier of its failure to observe thatdiligence, and there need not be an
express finding of negligence to hold itliable (Art. 1735, Civil Code). There are, of
course, exceptional cases whensuch presumption of fault is not observed but
these cases, enumerated inArticle 1734 of the Civil Code, are exclusive, not one of
which can be appliedto this case. As to The question of charging both the carrier
and the arrastreoperator with the obligation of properly delivering the goods to
the consignee,the legal relationship between the consignee and the arrastre
operator is akinto that of a depositor and warehouseman while the relationship
between theconsignee and the common carrier is similar to that of the consignee
and thearrastre operator. Since it is the duty of the arrastre to take good care of
thegoods that are in its custody and to deliver them in good condition to
theconsignee, such responsibility also devolves upon the carrier. Both
thearrastre and the carrier are therefore charged with the obligation to deliver
thegoods in good condition to the consignee. A factual finding of both
theSupreme Court and the appellate court was that there was sufficient evidence
that the shipment sustained damage while in the successive possession
ofappellants. Accordingly, the liability imposed on Eastern Shipping Lines,
Inc.,the sole petitioner in this case, is inevitable regardless of whether there
areothers solidarily liable with it
6.4 National Development Co. vs. CA
Facts:
 In accordance with a memorandum agreement entered into between
defendants NDC and MCP (Maritime Company of the Philippines) on
September 13, 1962, defendant NDC as the first preferred mortgagee of
three ocean going vessels including one with the name 'Doña Nati'
appointed defendant MCP as its agent to manage and operate said vessel
for and in its behalf and account
 On February 28, 1964 the E. Philipp Corporation of New York loaded on
board the vessel 'Doña Nati' at San Francisco, California, a total of 1,200
bales of American raw cotton consigned to the order of Manila Banking
Corporation, Manila and the People's Bank and Trust Company acting for
and in behalf of the Pan Asiatic Commercial Company, Inc., who
represents Riverside Mills Corporation. Also loaded on the same vessel
at Tokyo, Japan, were the cargo of Kyokuto Boekui, Kaisa, Ltd., consigned
to the order of Manila Banking Corporation consisting of 200 cartons of
sodium lauryl sulfate and 10 cases of aluminum foil
 En route to Manila the vessel Doña Nati figured in a collision on April 15,
1964 at Ise Bay, Japan with a Japanese vessel 'SS Yasushima Maru' as a
result of which 550 bales of aforesaid cargo of American raw cotton
 were lost and/or destroyed, of which 535 bales as damaged were landed
and sold on the authority of the General Average Surveyor for Yen
6,045,-500 and 15 bales were not landed and deemed lost
 On April 22, 1965, the Development Insurance and Surety Corporation
filed before the then Court of First Instance of Manila an action for the
recovery of the sum of P364,915.86 plus attorney's fees of P10,000.00
against NDC and MCP
Issue:
Which laws govern loss or destruction of goods due to collision of vessels outside
Philippine waters, and the extent of liability as well as the rules of prescription
provided thereunder.
Held:
PHILIPPINE LAWS.
 In the case at bar, it has been established that the goods in question are
transported from San Francisco, California and Tokyo, Japan to the
Philippines and that they were lost or damaged due to a collision which
was found to have been caused by the negligence or fault of both
captains of the colliding vessels.
 It is evident that the laws of the Philippines will apply, and it is
immaterial that the collision actually occurred in foreign waters.
 Under Article 1733 of the Civil Code, common carriers from the nature of
their business and for reasons of public policy are bound to observe
extraordinary diligence in the vigilance over the goods and for the safety
of the passengers transported by them according to all circumstances of
each case. Accordingly, under Article 1735 of the same Code, in all cases
other than those mentioned is Article 1734 thereof, the common carrier
shall be presumed to have been at fault or to have acted negligently,
unless it proves that it has observed the extraordinary diligence
required by law.
 It appears, however, that collision falls among matters not specifically
regulated by the Civil Code, so that no reversible error can be found in
respondent court's application to the case at bar of Articles 826 to 839,
Book Three of the Code of Commerce, which deal exclusively with
collision of vessels.
 More specifically, Article 826 of the Code of Commerce provides that
where collision is imputable to the personnel of a vessel, the owner of
the vessel at fault, shall indemnify the losses and damages incurred after
an expert appraisal. But more in point to the instant case is Article 827 of
the same Code, which provides that if the collision is imputable to both
vessels, each one shall suffer its own damages and both shall be
solidarily responsible for the losses and damages suffered by their
cargoes.
 Significantly, under the provisions of the Code of Commerce, particularly
Articles 826 to 839, the shipowner or carrier, is not exempt from liability
for damages arising from collision due to the fault or negligence of the
captain. Primary liability is imposed on the shipowner or carrier in
recognition of the universally accepted doctrine that the shipmaster or
captain is merely the representative of the owner who has the actual or
constructive control over the conduct of the voyage
 Both the owner and agent of the offending vessel are liable for the
damage done where both are impleaded that in case of collision, both the
owner and the agent are civilly responsible for the acts of the captain;
that while it is true that the liability of the naviero in the sense of
charterer or agent, is not expressly provided in Article 826 of the Code of
Commerce, it is clearly deducible from the general doctrine of
jurisprudence under the Civil Code but more specially as regards
contractual obligations in Article 586 of the Code of Commerce.
Moreover, the Court held that both the owner and agent (Naviero)
should be declared jointly and severally liable, since the obligation which
is the subject of the action had its origin in a tortious act and did not
arise from contract Consequently, the agent, even though he may not be
the owner of the vessel, is liable to the shippers and owners of the cargo
transported by it, for losses and damages occasioned to such cargo,
without prejudice, however, to his rights against the owner of the ship,
to the extent of the value of the vessel, its equipment, and the freight.
7. Obligations of Common Carrier, in General
Basic Obligations of the Carrier
a. To accept passengers and goods without discrimination;
b. To seasonably deliver the goods or bring the passenger to the
destination;
c. To deliver the goods or bring the passenger to the proper place or
destination;
d. To deliver the goods to the proper person; and
e. To exercise extraordinary diligence in the performance of its duties.
7.1 Commencement
• Time of Delivery
- Where a carrier has made an express contract, the goods must be delivered
within a specified time otherwise he is liable for any delay (indemnity for
damages).
- In the absence of any agreement, goods must be delivered at its destination
within a reasonable time (depending on the attending circumstances, nature of
the goods; expected date of arrival in the BOL may be considered).
- In the absence of a special contract, a carrier is NOT an insurer against delay in
transportation of goods
ARTICLE 1736.The extraordinary responsibility of the common carrier lasts
from the time the goods are unconditionally placed in the possession of, and
received by the carrier for transportation until the same are delivered, actually or
constructively, by the carrier to the consignee, or to the person who has a right to
receive them, without prejudice to the provisions of article 1738.
ARTICLE 1737.The common carrier's duty to observe extraordinary diligence in
the vigilance over the goods remains in full force and effect even when they are
temporarily unloaded or stored in transit, unless the shipper or owner has made
use of the right of stoppage in transitu.
ARTICLE 1738.The extraordinary liability of the common carrier continues to be
operative even during the time the goods are stored in a warehouse of the carrier
at the place of destination, until the consignee has been advised of the arrival of
the goods and has had reasonable opportunity thereafter to remove them or
otherwise dispose of them.
From when: from the time the goods are unconditionally placed in the
possession of, and received by the carrier for transportation.
Not actually place on the ship, it is enough even if custody is transferred to the
office/receiving office of the carrier.
It ends: When the goods are delivered, actually or constructively, by the carrier
to the consignee, or to the person who has a right to receive them, without
prejudice to the provisions of article 1738.
7.2.1. International Maritime Dangerous Goods (IMDG) Code
7.2.2. MARINA Circular No. 1 Series of 2008 (Carriage of
Dangerous Goods in Domestic Trade)
7.2 Duty to Deliver
7.3.1. Actual vs. Constructive Delivery
 Actual Delivery: If the goods are physically given into the possession of
the buyer, the delivery is an actual delivery.
 Constructive delivery: The transfer of goods can be done even when the
transfer is effected without a change in the possession or custody of the
goods. For example, a case of the delivery by attornment or
acknowledgment will be a constructive delivery. If you pick up a parcel
on behalf of your friend and agree to hold on to it for him, it is a
constructive delivery.
 Symbolic delivery: This kind of delivery involves the delivery of a thing
in token of a transfer of some other thing. For example, the key of the
godowns with the goods in it, when handed over to the buyer will
constitute a symbolic delivery.
7.3.2. Code of Commerce provisions
ARTICLE 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
bill of lading, the carrier shall be liable for the damages which the delay may have
caused.
ARTICLE 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 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.
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.
7.3.3. Where and to Whom Delivered
7.3.3.1. Place
Place – Goods should be delivered to the consignee in the place
agreed upon by the parties.
The shipper may change the consignment of the goods provided that at the time
of ordering the change of the consignee the bill of lading signed by the carrier be
returned to him, in exchange for another wherein the novation of the contract
appears. The expenses occasioned by the change shall be for the account of the
shipper.
7.3.3.2. Consignee
Consignee – Delivery must generally be made to the owner or consignee or to
someone lawfully authorized by him to receive the goods for his account or to the
holder of the negotiable instrument.
ARTICLE 368. The carrier must deliver to the consignee, without any delay or
obstruction, the goods which he may have received, by the mere fact of being
named in the bill of lading to receive them; and if he does not do so, he shall be
liable for the damages which may be caused thereby.
ARTICLE 369. If the consignee cannot be found at the residence indicated in
the bill of lading, or if he refuses to pay the transportation charges and expenses,
or if he refuses to receive the goods, the municipal judge, where there is none of
the first instance, shall provide for their deposit at the disposal of the shipper,
this deposit producing all the effects of delivery without prejudice to third parties
with a better right.
7.3 Duty to Exercise Extraordinary Diligence
A common carrier is required to faithfully comply with his obligation to
deliver the goods and to ferry the passenger to the point of destination.
Compliance with this obligation must be with the element of integrity in the
sense that the goods should be delivered in the same condition that they were
received and to transport passengers without encountering any harm or loss.
In the exercise of this obligation< the common carrier is obligated to exercise
extraordinary diligence. Failure will result in the breach of the obligation of the
carrier through negligence.
Art. 1733. Common carriers, from the nature of their business and for reasons of
public policy, are bound to observe extraordinary diligence in the vigilance over the
goods and for the safety of the passengers transported by them, according to all the
circumstances of each case.
Such extraordinary diligence in the vigilance over the goods is further expressed in
Articles 1734, 1735, and 1745, Nos. 5, 6, and 7, while the extraordinary diligence for
the safety of the passengers is further set forth in Articles 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.
ARTICLE 363. Outside of the cases mentioned in the second paragraph of Article
361, the carrier shall be obliged to deliver the goods shipped in the same condition
in which, according to the bill of lading, they were found at the time they were
received, without any damage or impairment, and failing to do so, to pay the value
which those not delivered may have at the point and at the time at which their
delivery should have been made.
If those not delivered form part of the goods transported, the consignee may refuse
to receive the latter, when he proves that he cannot make use of them
independently of the others.
ARTICLE 364. If the effect of the damage referred to in Article 361 is merely a
diminution in the value of the goods, the obligation of the carrier shall be reduced
to the payment of the amount which, in the judgment of experts, constitutes such
difference in value.
ARTICLE 365. If, in consequence of the damage, the goods are rendered useless
for sale and consumption for the purposes for which they are properly destined, the
consignee shall not be bound to receive them, and he may have them in the hands of
the carrier, demanding of the latter their value at the current price on that day.
If among the damaged goods there should be some pieces in good condition and
without any defect, the foregoing provision shall be applicable with respect to those
damaged and the consignee shall receive those which are sound, this segregation to
be made by distinct and separate pieces and without dividing a single object, unless
the consignee proves the impossibility of conveniently making use of them in this
form.
The same rule shall be applied to merchandise in bales or packages, separating
those parcels which appear sound.
8. Perfection of Contract of Common Carriage
8.1 Aspects of Contract of Carriage
The Supreme Court has adopted in one case that there are two types of contract
of carriage of passengers:
Contract to Carry – an agreement to carry the passenger at some future date.
This contract is consensual and is therefore perfected by mere consent.
Contract of Carriage or of common carrier itself – should be considered 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 of the common carrier.
8.1.1. British Airways Inc. vs. CA
Facts:
On April 16, 1989, Mahtani is on his way to Bombay, India fromManila. His trip
was Manila-Hong Kong via PAL and then Hong Kong-Indiavia British Airways.
Prior to his departure, he checked in two pieces ofluggage containing his clothing
and other personal effects, confident that thesame would be transferred to his BA
flight. Unfortunately, when he arrived in India, he discovered that his luggagewas
missing. The RTC awarded Mahtani damages which was affirmed by CA.
Issue:
Whether or not in a contract of air carriage a declaration by thepassenger is
needed to recover a greater amount?
Held:
American jurisprudence provides that an air carrier is not liable for theloss of
baggage in an amount in excess of the limits specified in the tariffwhich was filed
with the proper authorities, such tariff being binding on thepassenger regardless
of the passenger’s lack of knowledge thereof or assentthereto. This doctrine is
recognized in this jurisdiction. The inescapable conclusion that BA had waived
the defense of limitedliability when it allowed Mahtani to testify as to the actual
damages heincurred due to misplacement of his luggage, without any objection.
It is a well-settled doctrine that where the proponent offers evidencedeemed by
counsel of the adverse party to be inadmissible for any reason,the latter has the
right to object. However, such right is a mere privilegewhich can be waived.
Necessarily, the objection must be made at the earliestopportunity, in case of
silence when there is opportunity to speak mayoperate as a waiver of objections
8.2 Carriage of Goods
There may be a consensual contract to carry goods whereby the carrier agrees to
accept and transport goods at some future date. However, by the actof 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.” (Compania Maritima vs.
Insurance Co. of NA)
8.3 Carriage of Passengers
* AIRCRAFT – perfected if it was established that the passenger had checked in
at the departure counter, passed through customs and immigration, boarded the
shuttle bus and proceeded to the ramp of the aircraft and baggage already loaded
to the aircraft.
* Public Utility Bus or Jeepneys or Street Cars – once it stops it is in effect
making a continuous offer to riders; perfected when passenger is already
attempting to board the vehicle
* TRAINS – perfected when a person:
a. purchased a ticket/ possess sufficient
fare with which to pay for his passage
b. presented himself at the proper place
and in a proper manner to be transported
c. has a bona fide intention to use
facilities of the carrier
8.3.1. Manay, Jr. vs. Cebu Air, Inc.
8.3.2. Ramon vs. China Southern Airlines Co.