EVERETT STEAMSHIP CORPORATION, PETITIONER, VS.

COURT OF APPEALS
AND HERNANDEZ TRADING CO. INC., RESPONDENTS.

Legal Principle: The consignee is bound by the terms and conditions of the bill of lading
where it was established that he accepted the same and is trying to enforce the agreement.

Facts:
1. Private respondent, Hernandez Trading imported three crates of bus spare parts from
its suppliery, Maruman Trading Company, Ltd. (Maruman Trading), a foreign
corporation based in Japan.
2. The crates were shipped from Nagoya, Japan to Manila on board "ADELFAEVERETTE,"
a vessel owned by petitioner, Everett Steamship’s principal, Everett Orient Lines.
3. Upon arrival at the port of Manila, it was discovered that one crate was missing. This was
confirmed and admitted by petitioner in its letter addressed to private respondent, which
thereafter made a formal claim upon petitioner for the value of the lost cargo amounting
to Y1,552,500.00. However, petitioner offered to pay only (Y100,000.00), the maximum
amount stipulated under Clause 18 of the covering bill of lading which limits the
liability of petitioner; it states, among others:

18. All claims for which the carrier may be liable shall be adjusted and settled on the basis
of the shipper's net invoice cost plus freight and insurance premiums, if paid, and in no
event shall the carrier be liable for any loss of possible profits or any consequential loss.
The carrier shall not be liable for any loss of or any damage to or in any connection with,
goods in an amount exceeding One Hundred thousand Yen in Japanese Currency
(Y100,000.00) or its equivalent in any other currency per package or customary freight unit
(whichever is least) unless the value of the goods higher than this amount is declared in writing
by the shipper before receipt of the goods by the carrier and inserted in the Bill of Lading and extra
freight is paid as required.

4. Plaintiff contends that defendant should be held liable for the whole value for the loss of
the goods because the terms appearing at the back of the bill of lading was so written in
fine prints and that the same was not signed by Hernandez or shipper thus, they are not
bound by clause stated in paragraph 18 of the bill of lading. On the other hand, defendant
merely admitted that it lost the shipment but shall be liable only up to the amount of
Y100,000.00.

RTC RULING:
ruled in favor of respondent contending that the requirements of Art. 1750 of NCC is not
complied with given that though the conditions are printed at the back of the bill of lading, it was
so small that they are hard to read and hence would not warrant the presumption that the plaintiff
or its supplier was aware of these conditions such that they had “fairly agreed” to these
conditions.

CA RULING:
agreed and added that respondent was not a privy to the contract as it was between Maruman
and Everett.
Issue:
(1) WON the limited liability clause in the bill of lading is valid and thus making petitioner liable
only for 100,000 YEN

(2) WON private respondent, as consignee, who is not a signatory to the bill of lading is
bound by the stipulations thereof?

Held:
1. It is valid.

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

Art. 1749. A stipulation that the common carrier's liability is limited to the value of
the goods appearing in the bill of lading, unless the shipper or owner declares a
greater value, is binding.

Art. 1750. A contract fixing the sum that may be recovered by the owner or shipper
for the loss, destruction, or deterioration of the goods is valid, if it is reasonable
and just under the circumstances, and has been freely and fairly agreed upon.

Pursuant to the afore-quoted provisions of law, it is required that the stipulation limiting
the common carrier's liability for loss must be "reasonable and just under the circumstances,
and has been freely and fairly agreed upon."

In the bill of lading, the carrier made it clear that its liability would only be up to
100,000.00 Yen. However, the shipper, Maruman Trading, had the option to declare a higher
valuation if the value of its cargo was higher than the limited liability of the carrier.
Considering that the shipper did not declare a higher valuation, it had itself to blame for
not complying with the stipulations.

2. Yes.

In Sea-Land Service, Inc. vs. IAC, the SC held that even if the consignee was not a
signatory to the contract of carriage between the shipper and the carrier, the consignee
can still be bound by the contract. Speaking through Mr. Chief Justice Narvasa, SC ruled:

To begin with, there is no question of the right, in principle, of a consignee in a

bill of lading to recover from the carrier or shipper for loss of, or damage to goods
being transported under said bill, although that document may have been-as in
practice it oftentimes is-drawn up only by the consignor and the carrier without the
intervention of the consignee. . . . . . . . the right of a party in the same situation as
respondent here, to recover for loss of a shipment consigned to him under a bill of
lading drawn up only by and between the shipper and the carrier, springs from either
 a relation of agency that may exist between him and the shipper or consignor, or
his status as stranger in whose favor some stipulation is made in said contract, and
who becomes a party thereto when he demands fulfillment of that stipulation, in
this case the delivery of the goods or cargo shipped. In neither capacity can he
assert personally, in bar to any provision of the bill of lading, the alleged
circumstance that fair and free agreement to such provision was vitiated by its being
in such fine print as to be hardly readable. Parenthetically, it may be observed that
in one comparatively recent case (Phoenix Assurance Company vs. Macondray &
Co., Inc., 64 SCRA 15) where this Court found that a similar package limitation
clause was "printed in the smallest type on the back of the bill of lading," it
nonetheless ruled that the consignee was bound thereby on the strength of authority
holding that such provisions on liability limitation are as much a part of a bill of lading
as through physically in it and as though placed therein by agreement of the parties.

When private respondent formally claimed reimbursement for the missing goods from
petitioner and subsequently filed a case against the latter based on the very same bill of
lading, the private respondent accepted the provisions of the contract and thereby made
itself a party thereto, or at least has come to court to enforce it. Thus, private respondent
cannot now reject or disregard the carrier's limited liability stipulation in the bill of lading.
In other words, private respondent is bound by the whole stipulations in the bill of lading
and must respect the same.

To defeat the carrier's limited liability, the aforecited Clause 18 of the bill of lading
requires that the shipper should have declared in writing a higher valuation of its goods
before receipt thereof by the carrier and insert the said declaration in the bill of lading,
with extra freight paid. These requirements in the bill of lading were never complied with
by the shipper, hence, the liability of the carrier under the limited liability clause stands.
The commercial Invoice No. MTM-941 does not in itself sufficiently and convincingly show
that petitioner has knowledge of the value of the cargo as contended by private respondent.
No other evidence was proffered by private respondent to support is contention. Thus, we
are convinced that petitioner should be liable for the full value of the lost cargo.

The decision of the CA is REVERSED and SET ASIDE.

MOF COMPANY, INC., PETITIONER, VS. SHIN YANG BROKERAGE CORPORATION,

RESPONDENT.

Concepts, parties and perfection

When consignee is bound by the contract

Halla – consignor
Hanjin – shipper
Shin yang – alleged consignee
MOF – hanjin’s PH agent

FACTS:

1. On October 25, 2001, Halla Trading Co., a company based in Korea, shipped to Manila
secondhand cars and other articles on board the vessel Hanjin Busan 0238W.

2. The bill of lading covering the shipment, which was prepared by the carrier Hanjin
Shipping Co., Ltd. (Hanjin), named respondent Shin Yang Brokerage Corp. (Shin Yang)
as the consignee and indicated that payment was on a "Freight Collect" basis, i.e., that the
consignee/receiver of the goods would be the one to pay for the freight and other charges
in the total amount of ₱57,646.00.

3. When shipment arrived in Manila, petitioner MOF Company, Inc. (MOF), Hanjin’s
exclusive general agent in the Philippines, repeatedly demanded the payment of ocean
freight, documentation fee and terminal handling charges from Shin Yang.
4. Shin Yang, however, failed and refused to pay contending that it did not cause the
importation of the goods, that it is only the Consolidator of the said shipment, that the
ultimate consignee did not endorse in its favor the original bill of lading and that the bill
of lading was prepared without its consent.

5. MOF file a case for sum of money before the MeTC of Pasay City alleging that despite
Hanjin’s compliance, Shin Yang unjustlt breached its obligation to pay.
6. MeTC and RTC both ruled in favor of petitioner MOF.

7. CA ruled in favor of Shin Yang, saying that except for the Bill of Lading, respondent has
not presented any other evidence to bolster its claim that petitioner has entered [into] an
agreement of affreightment with respondent, be it verbal or written. It is noted that the
Bill of Lading was prepared by Hanjin Shipping, not the petitioner.
Petitioner’s Arguments (MOF)
1. According to MOF, the bill of lading, which expressly stated Shin Yang as the
consignee, is the best evidence of the latter’s actual participation in the
transportation of the goods. Such document, validly entered, stands as the law
among the shipper, carrier and the consignee, who are all bound by the terms
stated therein.
2. As against Shin Yang’s bare denials, the bill of lading is the sufficient
preponderance of evidence required to prove MOF’s claim. MOF maintains that
Shin Yang was the one that supplied all the details in the bill of lading and
acquiesced to be named consignee of the shipment on a ‘Freight Collect’ basis.
3. MOF claims that even if Shin Yang never gave its consent, it cannot avoid its
obligation to pay, because it never objected to being named as the consignee in the
bill of lading and that it only protested when the shipment arrived in the
Philippines
Respondent’s Arguments (Shin Yang)
1. Shin Yang insists that MOF has no evidence to prove that it consented to take part
in the contract of affreightment.
 2. Shin Yang argues that MOF miserably failed to present any evidence to prove that
it was the one that made preparations for the subject shipment, or that it is an
‘actual shipping practice’ that forwarders/consolidators as consignees are the
ones that provide carriers details and information on the bills of lading.

ISSUE:
1. Whether a consignee, who is not a signatory to the bill of lading, is bound by the
stipulations thereof.
2. Whether respondent, who was not an agent of the shipper and who did not make any
demand for the fulfillment of the stipulations of the bill of lading drawn in its favor, is
liable to pay the corresponding freight and handling charges.

RULING:
WHEN CONSIGNEE IS BOUND BY THE CONTRACT
The bill of lading is oftentimes drawn up by the shipper/consignor and the carrier without the
intervention of the consignee. However, the latter can be bound by the stipulations of the bill
of lading when:
a) there is a relation of agency between the shipper or consignor and the consignee or
b) when the consignee demands fulfillment of the stipulation of the bill of lading which
was drawn up in its favor

A consignee, although not a signatory to the contract of carriage between the shipper and the
carrier, becomes a party to the contract by reason of either
a) the relationship of agency between the consignee and the shipper/ consignor;
b) the unequivocal acceptance of the bill of lading delivered to the consignee, with full
knowledge of its contents; or
c) availment of the stipulation pour autrui, i.e., when the consignee, a third person,
demands before the carrier the fulfillment of the stipulation made by the
consignor/shipper in the consignee’s favor, specifically the delivery of the goods/cargoes
shipped.

RESPONDENT SHIN YANG IS NOT LIABLE

1. In the instant case, Shin Yang consistently denied in all of its pleadings that it authorized
Halla Trading, Co. to ship the goods on its behalf; or that it got hold of the bill of lading
covering the shipment or that it demanded the release of the cargo.
2. Basic is the rule in evidence that the burden of proof lies upon him who asserts it, not
upon him who denies, since, by the nature of things, he who denies a fact cannot produce
any proof of it. Thus, MOF has the burden to controvert all these denials, it being insistent
that Shin Yang asserted itself as the consignee and the one that caused the shipment of the
goods to the Philippines.
3. MOF failed to prove its case by preponderance of evidence. Other than presenting the bill
of lading, which, at most, proves that the carrier acknowledged receipt of the subject cargo
from the shipper and that the consignee named is to shoulder the freightage, MOF has not
adduced any other credible evidence to strengthen its cause of action.
4. It did not even present any witness in support of its allegation that it was Shin Yang which
furnished all the details indicated in the bill of lading and that Shin Yang consented to
shoulder the shipment costs.
 5. There is also nothing in the records which would indicate that Shin Yang was an agent of
Halla Trading Co. or that it exercised any act that would bind it as a named consignee.

DANGWA TRANSPORTATION CO. v. CA, GR No. 95582,

October 7, 1991, Second Division, Regalado, J.
FACTS:

Lardizabal – bus driver

Dangwa – bus company
Cudiamat - victim

1. Petitioner Theodor M. Lardizabal was driving a passenger bus belonging to Dangwa

Transportation Co. (petitioner corporation) in a reckless and imprudent manner
2. It ran over a prospective passenger, Pedrito Cudiamat.

3. Instead of bring Pedrito immediately to the nearest hospital, Lardizabal, in bad faith and
without regard to the victim first brought his other passengers and cargo to their
respective destinations before bringing the victim to the hospital.

4. Dangwa alleges they had observed extraordinary diligence required in the operation of the
transpo company and the supervision of the employees, and argued they are not “the
insurers of the safety of the public at large.
 Also alleged it was victim’s own carelessness and negligence which gave rise to
the subject incident.

5. Respondents filed a complaint for damages against petitioner for the death of Pedrito
Cudiamat as a result of vehicular accident.

6. Dangwa prayed for the dismissal of the complaint and an award for damages in their
favor by way of counterclaim.

7. The trial court rendered a decision in favor of the petitioners, ordering the heirs of Pedrito
to pay Php10,000.00
 The trial court held Pedrito negligent for trying to board a moving vehicle, with
one hand holding an umbrella, and without giving the driver or conductor any
indication that he was about to board the bus.
 However, when Pedrito boarded the vehicle, the vehicle’s door was open instead
of being closed, and herein lies the defendant’s lack of diligence.

8. Upon appeal to CA, it reversed the decision, requiring instead the respondents to pay
petitioners indemnity moral damages, and actual and compensatory damages.
 The subject bus was at full stop when Pedrito boarded the same as it was precisely
on this instance where another passenger alighted from the bus.
  The victim did indicate his intention to board the bus, according to a witness who
declared that Pedrito was no longer walking and made a sign to board the bus.
 It was when Pedrito was closing his umbrella at the platform of the bus when the
bus made a sudden jerk movement as the driver commenced to accelerate the bus.
(Paita, namatay ra ka pag tiplok og payong. Ugh!)

 It was gross negligence of the driver to prematurely step on the accelerator and in
not waiting for the passenger to first secure his seat, especially so when the platform of the
bus was slippery and wet because of a drizzle.
 He was found two to three meters at the back of the bus, run over by the rear right
tires.
9. Hence, this petition.
ISSUE/S: Which, among the parties, is negligent and liable for the damages claimed?
RULING: The petitioner. We find no reason to disturb the holding of the CA.
A PUBLIC UTILITY BUS, ONCE IT STOPS, IS IN EFFECT MAKING A CONTINIOUS
OFFER TO BUS RIDERS.
 Contention that the driver and the conductor had no knowledge that the victim would
ride the bus, since the latter had supposedly not manifested his intention to board the
same, does not merit consideration.
 When the bus is not in motion, there is no necessity for a person who want to ride the same,
to signal his intention to board.
 It becomes the DUTY of the driver and the conductor every time the bus stops, TO DO
NO ACT that would have the effect of increasing the peril to a passenger while he was
attempting to board the same.
 The premature acceleration of the bus was a breach of such duty.
DUTY OF COMMON CARRIERS
 It is their duty to stop their conveyances a reasonable length of time in order to afford
passengers an opportunity to board and enter, and they are liable for injuries suffered by
the boarding passengers resulting from the sudden starting up or jerking.
IT IS NOT NEGLIGENCE per se TO ATTEMPT TO BOARD A TRAIN OR STREETCAR
WHICH IS MOVING SLOWLY
 Even assuming, the bus was moving, the act of the victim in boarding cannot be
considered negligent as the bus “just started” and “was still in slow motion” at the point
where the victim had boarded and was on its platform.
 The fact that passengers board and alight from a slowly moving vehicle is a matter of
common experience and both the driver and conductor could not have been unaware of
such an ordinary practice.
BY STEPPING AND STANDING ON THE PLATFORM OF THE BUS, ALREADY
CONSIDERED A PASSENGER
 He is entitled to all the rights and protection pertaining to such a contractual relation.
 The duty which the carrier of passengers owes to its patrons extends to persons boarding
the cars as well as to those alighting therefrom.
EXTRAORDINARY DILIGENCE REQUIRED OF COMMON CARRIERS
  From the nature of their business, and for reasons of public policy, they are bound to
observe extraordinary diligence for the safety of the passengers transported by them.
 Common carriers are bound to carry the passengers safely as far as human care and
foresight can provide using the utmost diligence of very cautious persons, with due
regard for all circumstances.
 Circumstances which the driver and conductor failed to bring the gravely injured victim
for medical treatment is incontrovertible proof of their negligence and callous
indifference. Evidence shows that the bus could have turned at Bunk 56 and thence to the
hospital but its driver opted to first proceed to Bunk 70 to allow a passenger to alight and
to deliver a refrigerator despite the serious condition of the victim.
ON ACTIONS BASED ON A CONTRACT OF CARRIAGE
 It is NOT required that the court make an express finding of fault or negligence on the part of
the carrier in order to hold it responsible.
 By the contract of carriage, the carrier assumes the express obligation to transport the
passenger to his destination safely and to observe extraordinary diligence with a due regard
for all the circumstances.
 Any injury that might be suffered is right away ATTRIBUTABLE to the fault or ngeligence
of the carrier.

 This is an EXCEPTION to the general rule that “negligence must be proved,” and it is
therefore INCUMBENT UPON THE CARRER to prove that it has exercised extraordinary
diligence (ART 1733, 1755 Civil Code)
DISPOSITIVE PORTION: Wherefore, the challenged judgment and resolution of the respondent
CA is hereby AFFIRMED.

KOREAN AIRLINES CO., LTD., VS. COURT OF

APPEALS AND JUANITO C. LAPUZ

Lapuz – victim
KAL – carrier

• 1980, Juanito C. Lapuz, an automotive electrician was contracted for employment in

Jeddah, Saudi Araba, for a period of one year through Pan Pacific Overseas Recruiting
Services, Inc.
• Lapuz was supposed to leave on November 8, 1980, via Korean Airlines.

• Initially, he was "wait-listed," which meant that he could only be accommodated if any of
the confirmed passengers failed to show up at the airport before departure.
• When two of such passengers did not appear, Lapuz and another person by the name of
Perico were given the two unclaimed seats.
 • he was allowed to check in with one suitcase and one shoulder bag at the check-in counter
of KAL.
• He passed through the customs and immigration sections for routine check-up and was
cleared for departure
• he rode in the shuttle bus and proceeded to the ramp of the KAL aircraft for boarding.
However, when he was at the third or fourth rung of the stairs, a KAL officer pointed to
him and shouted "Down! Down!" He was thus barred from taking the flight.

• he later asked for another booking, his ticket was canceled by KAL. Consequently, he
was unable to report for his work in Saudi Arabia within the stipulated 2-week period
and so lost his employment.

• KAL, on the other hand, alleged that Pan Pacific Recruiting Services Inc. coordinated with
KAL for the departure of 30 contract workers, of whom only 21 were confirmed
and 9 were wait-listed passengers. The agent of Pan Pacific, after being informed that
there was a possibility of having one or two seats becoming available, gave priority to
Perico, who was one of the supervisors of the hiring company in Saudi Arabia. The other
seat was won through lottery by Lapuz. However, only one seat became available and so,
pursuant to the earlier agreement that Perico was to be given priority, he alone was
allowed to board.
• After trial, the Regional Trial Court of Manila, KAL liable for damages.
• On appeal, this decision was modified by the Court of Appeals by reducing the amount
of damages.
◦ CA's factual findings: The status of Lapuz as standby passenger was changed to that
of a confirmed passenger when his name was entered in the passenger manifest of
KAL for its Flight No. KE 903.

◦ His clearance through immigration and customs clearly shows that he had indeed
been confirmed as a passenger of KAL in that flight. KAL thus committed a breach
of the contract of carriage between them when it failed to bring Lapuz to his
destination.

• KAL and Lapuz filed their respective motions for reconsideration, which were both
denied for lack of merit. Hence, this consolidated petitions.

ISSUE: WON there was a breach of contract of carriage notwithstanding lack of proper,
competent and sufficient evidence of the existence of such contract (that Lapuz did not have any
boarding pass to prove that he was allowed to board and to prove that his airline ticket was
confirmed) AND by concluding that the standby passenger status of Lapuz was changed to a
confirmed status when his name was entered into the passenger manifest.

( TN: KAL's argument: "the evidence of confirmation of a chance passenger status is not
through the entry of the name of a chance passenger in the passenger manifest nor the clearance
from the Commission on Immigration and Deportation, because they are merely means of
facilitating the boarding of a chance passenger in case his status is confirmed. )
RULING:
• A contract to transport passengers is different in kind and degree from any other
contractual relation. The business of the carrier is mainly with the traveling public. It
invites people to avail themselves of the comforts and advantages it offers. The contract
of air carriage generates a relation attended with a public duty. Passengers have the
right to be treated by the carrier's employees with kindness, respect, courtesy and due
consideration. They are entitled to be protected against personal misconduct, injurious
language, indignities and abuses from such employees. So it is that any discourteous
conduct on the part of these employees toward a passenger gives the latter an action for
damages against the carrier.
◦ The breach of contract was aggravated in this case when, instead of courteously
informing Lapuz of his being a "wait-listed" passenger, a KAL officer rudely shouted
"Down! Down!" while pointing at him, thus causing him embarrassment and public
humiliation.

ON KAL's ARGUMENT ON THE CONTRACT OF CARRIAGE

• The evidence presented by Lapuz shows that he had indeed checked in at the departure
counter, passed through customs and immigration, boarded the shuttle bus and proceeded
to the ramp of KAL's aircraft. In fact, his baggage had already been loaded in KAL' s
aircraft, to be flown with him to Jeddah.
•
• The contract of carriage between him and KAL had already been perfected when he
was summarily and insolently prevented from boarding the aircraft.

ON THE AWARD OF DAMAGES (in case asked in recits)

• The award of moral damages is justified. → that defendant-appellant Korean Air Lines
acted in a wanton, fraudulent, reckless, oppressive or malevolent manner when it
"bumped off" Lapuz and in addition treated him rudely and arrogantly as a "patay gutom
na contract worker fighting Korean Air Lines," which clearly shows malice and bad faith.
• The reduction however was justified because the injury suffered by Lapuz is not so serious
or extensive. A perusal of the Lapuz's contract of employment shows that the effectivity
of the contract is for only one year, renewable every year for five years. Although he
intends to renew his contract, such renewal will still be subject to his foreign employer.
He had not yet started working with his foreign employer, hence, there can be no basis as
to whether his contract will be renewed by his foreign employer or not.

WHEREFORE, the appealed judgment is AFFIRMED,

LRTA v. Navidad
Topic: Concept, Parties, and Perfection

Natividad – drunkard victim

Escartin – guard
Romano -LRT operator

FACTS
1. On 14 October 1993, about half an hour past seven o’clock in the evening, Nicanor Navidad,
then drunk, entered the EDSA LRT station after purchasing a “token” ( representing payment of
the fare).

2. While Navidad was standing on the platform near the LRT tracks, Junelito Escartin, the security
guard assigned to the area approached Navidad. A misunderstanding or an altercation between
the two apparently ensued that led to a fist fight. No evidence, however, was adduced to indicate
how the fight started or who, between the two, delivered the first blow or how Navidad later fell
on the LRT tracks.

3. At the exact moment that Navidad fell, an LRT train, operated by petitioner Rodolfo Roman,
was coming in. Navidad was struck by the moving train, and he was killed instantaneously.

4. On 08 December 1994, the widow of Nicanor, herein respondent Marjorie Navidad, along with
her children, filed a complaint for damages against Junelito Escartin, Rodolfo Roman, the LRTA,
the Metro Transit Organization, Inc. (Metro Transit), and Prudent for the death of her husband.

5. On 11 August 1998, the trial court rendered its decision in favor of the plaintiffs and against
the defendants Prudent Security and Junelito Escartin ordering the latter to pay jointly and
severally the plaintiffs.The complaint against defendants LRTA and Rodolfo Roman are
dismissed for lack of merit.

6. On 27 August 2000, the appellate court promulgated its now assailed decision exonerating
Prudent from any liability for the death of Nicanor Navidad and, instead, holding the LRTA and
Roman jointly and severally liable.

7. The appellate court ratiocinated that while the deceased might not have then as yet boarded
the train, a contract of carriage theretofore had already existed when the victim entered the place
where passengers were supposed to be after paying the fare and getting the corresponding token
therefor. In exempting Prudent from liability, the court stressed that there was nothing to link the
security agency to the death of Navidad.

8. It said that Navidad failed to show that Escartin inflicted fist blows upon the victim and the
evidence merely established the fact of death of Navidad by reason of his having been hit by the
train owned and managed by the LRTA and operated at the time by Roman. The appellate court
faulted petitioners for their failure to present expert evidence to establish the fact that the
application of emergency brakes could not have stopped the train.

ISSUE
1. Whether or not LRTA is liable for the death of Navidad.

RULING
Yes, LRTA is liable.
1. The law requires common carriers to carry passengers safely using the utmost diligence of very
cautious persons with due regard for all circumstances. Such duty of a common carrier to provide
safety to its passengers so obligates it not only during the course of the trip but for so long as the
passengers are within its premises and where they ought to be in pursuance to the contract of
carriage.

2. The statutory provisions render a common carrier liable for death of or injury to passengers (a)
through the negligence or wilful acts of its employees or b) on account of wilful acts or negligence
of other passengers or of strangers if the common carrier’s employees through the exercise of due
diligence could have prevented or stopped the act or omission.

3. In case of such death or injury, a carrier is presumed to have been at fault or been negligent,
and by simple proof of injury, the passenger is relieved of the duty to still establish the fault or
negligence of the carrier or of its employees and the burden shifts upon the carrier to prove that
the injury is due to an unforeseen event or to force majeure.

4. In the absence of satisfactory explanation by the carrier on how the accident occurred, which
petitioners, according to the appellate court, have failed to show, the presumption would be that
it has been at fault, an exception from the general rule that negligence must be proved.

5. The foundation of LRTA’s liability is the contract of carriage and its obligation to indemnify
the victim arises from the breach of that contract by reason of its failure to exercise the high
diligence required of the common carrier. In the discharge of its commitment to ensure the safety
of passengers, a carrier may choose to hire its own employees or avail itself of the services of an
outsider or an independent firm to undertake the task. In either case, the common carrier is not
relieved of its responsibilities under the contract of carriage.

Note: The case did not discuss why “such duty of a common carrier to provide safety to its
passengers so obligates it not only during the course of the trip but for so long as the passengers
are within its premises and where they ought to be in pursuance to the contract of carriage”. It
merely cited as footnote the case of Dangwa Transportation Co. v. CA.

6. RAMOS, ET AL. vs. CHINA SOUTHERN AIRLINES CO. LTD,

G.R. NO. 213418, SEPTEMBER 21, 2016

Ramoses – victim
China southern – ® airline

FACTS:
  Petitioners (Alfredo, Conchita, Benjamin, Nelson, and Robinson all surnamed Ramos)
purchased 5 China Southern Airlines roundtrip plane tickets from Active Travel Agency
for their trip to Xiamen.

 They were able to successfully board the plane which carried them to Xiamen.

 However, on their way back to Manila, they were prevented from taking their designated
flight even after they already checked in their baggages, were given claim stubs, and after
they have paid the terminal fees. This also, despite the fact that an agent from Active
Tours informed them that their bookings have been confirmed.

 According to the airlines’ agent, they were merely chance passengers but they may be
allowed to join the flight if they pay an additional amount. Petitioners refused, their
baggages were offloaded from the plane and it left without them.

 Petitioners were thus constrained to board a train to Hong Kong and therein, bought new
tickets from PAL which caused them another P87, 375.00.

 Upon arrival in Manila, petitioners went to Active Travel to inform them of the
unfortunate incident. The latter offered to refund the price of the plane tickets but
petitioners refused the offer. They instead went to respondent and demanded
reimbursement of their airfare and travel expenses. Respondent airline refused which led
petitioners to file an action for damages against the airline and Active Travel.

 China Southern Airlines denied liability by alleging that petitioners were not confirmed
passengers but were merely chance passengers. It was specifically provided in the issued
tickets that petitioners are required to re-confirm all their bookings at least 72 hours before
their scheduled departure but they failed to do so which resulted in the automatic
cancellation of their bookings.

 RTC ruled in favor of the petitioners and ordered China Southern Airlines to pay
petitioners actual, moral, and exemplary damages; and attorney’s fees.

 CA, however, deleted the award for moral and exemplary damages ruling that petitioners
failed to prove that China Southern Airlines’ breach of contractual obligation was
attended with bad faith.

ISSUE 1: WON China Southern Airlines is liable for breach of contract when it failed to deliver
petitioners to their intended destination
HELD:

 Yes. Article 1755 of the Civil Code provides:

"1755 of the New Civil Code. A common carrier is bound to carry passengers safely as far
as human care and foresight can provide, using the utmost diligence of very cautious
persons, with due regard for all the circumstances."
  When an airline issues a ticket to a passenger confirmed on a particular flight, on a certain
date, a contract of carriage arises, and the passenger has every right to expect that he
would fly on that flight and on that date. If that does not happen, then the carrier opens
itself to a suit for breach of contract of carriage. In an action based on a breach of contract of
carriage, the aggrieved party does not have to prove that the common carrier was at fault or was
negligent.

 All he has to prove is the existence of the contract and the fact of its non-performance by
the carrier, through the latter's failure to carry the passenger to its destination.

 Petitioners had an existing contract of air carriage with China Southern Airlines as
evidenced by their airline tickets - They were issued two-way tickets with itineraries
indicating the date and time of their return fight to Manila. These are binding contracts of
carriage. The contract of carriage arose regardless of respondent’s claim that petitioners
do not have confirmed reservations. Moreover, petitioners were allowed to go through
the check-in procedures when as a practice, airline companies do not accept pieces of
luggage without confirmed reservations.

 Hence, petitioners had satisfactorily proven the existence of the contract and the fact of its
non-performance by the airline. This made the airline liable for actual damages.

ISSUE 2: WON respondent airline is liable for moral and exemplary damages

HELD:

 Yes. Article 2220 of the Civil Code reads:

“Article 2220. Willful injury to property may be a legal ground for awarding moral damages
if the court should find that, under the circumstances, such damages are justly due. The
same rule applies to breaches of contract where the defendant acted fraudulently or in
bad faith.”

 Bad faith which would entitle the passenger in a contract of carriage to an award of moral
damages involves inattention to and lack of care for the interests of its passengers, particularly
as to their convenience. What the law considers as bad faith would be bad faith in securing
the contract and in the execution thereof, as well as in the enforcement of its terms, or any
other kind of deceit.

 The airline company acted in bad faith when they insolently bumped petitioners off the
flight after they have completed all the pre-departure routine and had every reason to
expect that they would be transported to their intended destination. Bad faith is evident
when respondent unjustly and refused to board petitioners which compelled them to buy
new plane tickets. Moreover, the requirement to pay an additional fare just so they could
join the flight was an insult upon injury. It is an aggravation of the breach of contract.
  China Southern Airlines is also liable for exemplary damages as it acted in a wantonly
oppressive manner. Exemplary damages which are awarded by way of example or
correction for the public good may be recovered in contractual obligations, as in this case.

7
Sps. Fernando v. Northwest Airlines, Inc., G.R. No. 212038, February 8, 2017

FACTS

Northwest – airline
Fernando - victim

1. Spouses Jesus and Elizabeth Fernando are frequent flyers of Northwest Airlines, Inc. and are
holders of Elite Platinum World Perks Card, the highest category given to frequent flyers of the
carrier. The instant case which arose from two (2) separate incidents:

2. Sometime on December 20, 2001, Jesus Fernando arrived at the LA Airport via Northwest
Airlines Flight to join his family who flew earlier to the said place for a reunion for the Christmas
holidays.

3. When Jesus Fernando presented his documents at the immigration counter, he was asked by the
Immigration Officer to have his return ticket verified and validated since the date reflected thereon is
August 2001. So he approached a Northwest personnel identified as Linda Puntawongdaycha, but
the latter merely glanced at his ticket without checking its status with the computer and
peremptorily said that the ticket has been used and could not be considered as valid. He then
explained to the personnel that he was about to use the said ticket on August 20 or 21, 2001 on his
way back to Manila from LA but he could not book any seat because of some ticket restrictions so
he, instead, purchased new business class ticket on the said date. Hence, the ticket remains unused
and perfectly valid.

4. To avoid further arguments, Jesus Fernando gave the personnel the number of his Elite Platinum
World Perks Card for the latter to access the ticket control record with the airline's computer and for
her to see that the ticket is still valid. But Linda refused to check the validity of the ticket in the computer
but, instead, looked at Jesus Fernando with contempt, then informed the Immigration Officer that
the ticket is not valid because it had been used.

5.The Immigration Officer brought Jesus Fernando to the interrogation room of the Immigration
and Naturalization Services (INS) where he was asked humiliating questions for more than two
(2) hours. When he was finally cleared by the Immigration Officer, he was granted only a twelve
(12)-day stay in the United States (US), instead of the usual six (6) months.

6. Jesus Fernando had to spend additional expenses for plane fares and other related expenses, and
missed the chance to be with his family for the whole duration of the Christmas holidays.
7. In defense, Northwest Airlines, Inc. alleged that Linda tried her best to help Jesus Fernando get
through the US Immigration. Notwithstanding that Linda was not able to find any relevant
information on Jesus Fernando's return ticket, she still went an extra mile by printing the PNR of
Jesus Fernando and handling the same personally to the Immigration Officer. It pointed out that
the Immigration Officer "noticed in the ticket that it was dated sometime August 20 or 21, 2001,
although it was already December 2001."

8. The departure from the Los Angeles Airport on January 29, 2002. The Fernandos were on their
way back to the Philippines. They have confirmed bookings on Northwest Airlines NW Flight No.
001 for Narita, Japan and NW 029 for Manila. They checked in with their luggage at the LA Airport
and were given their respective boarding passes for business class seats and claim stubs for six (6)
pieces of luggage. With boarding passes, tickets and other proper travel documents, they were allowed
entry to the departure area and joined their business associates from Japan and the Philippines who
attended the Musical Instrument Trade Show in LA on January 17, 2002 and the Sports Equipment
Trade Show in Las Vegas on January 21 to 23, 2002.

When it was announced that the plane was ready for boarding, the Fernandos joined the long line
of business class passengers along with their business associates. When the Fernandos reached the
gate area where boarding passes need to be presented, Northwest supervisor Linda Tang stopped
them and demanded for the presentation of their paper tickets (coupon type). They failed to present
the same since, according to them, Northwest issued electronic tickets (attached to the boarding
passes) which they showed to the supervisor. In the presence of the other passengers, Linda Tang
rudely pulled them out of the queue.

Elizabeth Fernando explained to Linda Tang that the matter could be sorted out by simply
verifying their electronic tickets in her computer and all she had to do was click and punch in their
Elite Platinum World Perks Card number. But Linda Tang told them that if they wanted to board
the plane, they should produce their credit cards and pay for their new tickets, otherwise
Northwest would order their luggage off-loaded from the plane.

Exasperated and pressed for time, the Fernandos rushed to the Northwest Airline Ticket counter
to clarify the matter. They were assisted by Northwest personnel Jeanne Meyer who retrieved their
control number from her computer and was able to ascertain that the Fernandos' electronic tickets
were valid and they were confirmed passengers on both NW Flight No. 001 for Narita Japan and
NW 029 for Manila on that day. To ensure that the Fernandos would no longer encounter any
problem with Linda Tang, Jeanne Meyer printed coupon tickets for them who were then advised
to rush back to the boarding gates since the plane was about to depart. But when the Fernandos
reached the boarding gate, the plane had already departed. They were able to depart, instead, the
day after.
In defense, Northwest Airlines, Inc. alleged that Linda Tang was only following Northwest standard
boarding procedures when she asked the Fernandos for their tickets even if they had boarding
passes. Thus, the conduct cannot be construed as bad faith. The dates indicated on the tickets did
not match the booking. Elizabeth Fernando was using an electronic ticket dated August 21, 2001,
while the electronic ticket of Jesus Fernando was dated January 26, 2002. According to Northwest,
even if the Fernandos had electronic tickets, the same did not discount the fact that, on the face of
the tickets, they were for travel on past dates. Also, the electronic tickets did not contain the ticket
number or any information regarding the reservation. Hence, the alleged negligence of the
Fernandos resulted in the confusion in the procedure in boarding the plane and the eventual
failure to take their flight.
In the Comment of Northwest, it insisted that assuming a mistake was committed by Linda Tang and
Linda Puntawongdaycha, such mistake alone, without malice or ill will, is not equivalent to fraud or bad
faith that would entitle the Fernandos to the payment of moral damages.
The RTC rendered judgment in favor of the plaintiffs and against defendant ordering defendant
to pay moral, actual or compensatory damages, Attorney's fees and cost of suit.
Both parties filed their respective appeals which were dismissed by the CA, and affirmed the RTC
Decision.
ISSUE:
Whether or not the CA committed reversible error in ruling that Northwest committed a breach
of contract of carriage and whether it was done in a wanton, malevolent or reckless manner
amounting to bad faith?
RULING:
CONTRACT OF CARRIAGE DEFINED
A contract of carriage is defined as one whereby a certain person or association of persons obligate
themselves to transport persons, things, or goods from one place to another for a fixed price.
Under Article 1732 of the Civil Code, this "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" is called a common carrier.31 Undoubtedly, a
contract of carriage existed between Northwest and the Fernandos. They voluntarily and freely
gave their consent to an agreement whose object was the transportation of the Fernandos from
LA to Manila, and whose cause or consideration was the fare paid by the Fernandos to Northwest.

In Alitalia Airways v. CA, et al.,33 We held that when an airline issues a ticket to a passenger
confirmed for a particular flight on a certain date, a contract of carriage arises.

The passenger then has every right to expect that he would fly on that flight and on that date. If
he does not, then the carrier. opens itself to a suit for breach of contract of carriage.34

When Northwest confirmed the reservations of the Fernandos, it bound itself to transport the
Fernandos on their flight on 29 January 2002.

THE AGGRIEVED PARTY DOES NOT HAVE TO PROVE THAT THE COMMON CARRIER
WAS AT FAULT OR NEGLIGENT
In an action based on a breach of contract of carriage, the aggrieved party does not have to prove
that the common carrier was at fault or was negligent. All that he has to prove is the existence of
the contract and the fact of its non-performance by the carrier.37 As the aggrieved party, the
Fernandos only had to prove the existence of the contract and the fact of its non-performance by
Northwest, as carrier, in order to be awarded compensatory and actual damages
Therefore, having proven the existence of a contract of carriage between Northwest and the
Fernandos, and the fact of non-performance by Northwest of its obligation as a common carrier,
it is clear that Northwest breached its contract of carriage with the Fernandos. Thus, Northwest
opened itself to claims for compensatory, actual, moral and exemplary damages, attorney's fees
and costs of suit.
Moreover, Article 1733 of the New Civil Code provides that 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. Also, Article 1755 of the same Code states that a common
carrier is bound to carry the passengers safely as far as human care and foresight can provide,
using the utmost diligence of very cautious persons, with due regard for all the circumstances.

We, thus, sustain the findings of the CA and the RTC that Northwest committed a breach of
contract "in failing to provide the spouses with the proper assistance to avoid any inconvenience"
and that the actuations of Northwest in both subject incidents "fall short of the utmost diligence
of a very cautious person expected of it". Both ruled that considering that the Fernandos are not
just ordinary passengers but, in fact, frequent flyers of Northwest, the latter should have been
more courteous and accommodating to their needs so that the delay and inconveniences they
suffered could have been avoided. Northwest was remiss in its duty to provide the proper and
adequate assistance to them.
Nonetheless, We are not in accord with the common finding of the CA and the RTC when both
ruled out bad faith on the part of Northwest. While We agree that the discrepancy between the
date of actual travel and the date appearing on the tickets of the Fernandos called for some
verification, however, the Northwest personnel failed to exercise the utmost diligence in assisting
the Fernandos. The actuations of Northwest personnel in both subject incidents are constitutive
of bad faith.
In ignoring Jesus Fernando's pleas to check the validity of the tickets in the computer, the
Northwest personnel exhibited an indifferent attitude without due regard for the inconvenience
and anxiety Jesus Fernando might have experienced.
OBLIGATION TO OF CARRIERS TO TREAT PASSENGERS WITH RESPECT
Passengers do not contract merely for transportation. They have a right to be treated by the
carrier's employees with kindness, respect, courtesy and due consideration. They are entitled to
be protected against personal misconduct, injurious language, indignities and abuses from such
employees. So it is, that any rule or discourteous conduct on the part of employees towards a
passenger gives the latter an action for damages against the carrier.42

CONTRACT OF CARRIAGE IS IMBUED WITH PUBLIC INTEREST

Time and again, We have declared that a contract of carriage, in this case, air transport, is
primarily intended to serve the traveling public and thus, imbued with public interest. The law
governing common carriers consequently imposes an exacting standard of conduct.63 A contract
to transport passengers is quite different in kind and degree from any other contractual relation
because of the relation which an air-carrier sustains with the public.
WHEREFORE, the Decision dated August 30, 2013 and the Resolution dated March 31, 2014 of
the Court of Appeals, in CA-G.R. CV No. 93496 are hereby AFFIRMED WITH
MODIFICATION. The award of moral damages and attorney's fees are hereby increased to
₱3,000,000.00 and ten percent (10%) of the damages awarded, respectively. Exemplary damages
in the amount of ₱2,000,000.00 is also awarded. Costs against Northwest Airlines.

The total amount adjudged shall earn legal interest at the rate of twelve percent (12%) per annum
computed from judicial demand or from April 30, 2002 to June 30 2013, and six percent (6%) per
annum from July 1, 2013 until their full satisfaction.
8.
PEDRO DE GUZMAN VS. CA & ERNESTO CENDANA
Topic: Common Carriage

Cendana – junk dealer, casual common carrier

Guzman – milk dealer

FACTS:
1. Respondent Cendana was a junk dealer who would bring used bottles and scrap metal
from Pangasinan to Manila. On the return trip to Pangasinan, respondent would load
his vehicles with cargo which various merchants wanted delivered to differing
establishments in Pangasinan, and charged freight rates lower than commercial rates.

2. Petitioner de Guzman, an authorized dealer of General Milk in Urdaneta, Pangasinan,

contracted with respondent for the hauling of 750 cartons of Liberty filled milk from a
warehouse of General Milk in Makati, Rizal, to petitioner’s establishment in Urdaneta.

3. 150 cartons were loaded on a truck driven by respondent himself, while 600 cartons
were placed on board the other truck which was driven by his driver and employee.

4. Only 150 boxes of Liberty filled milk were delivered to petitioner. The other 600 boxes
never reached petitioner, since the truck which carried these boxes was hijacked
somewhere along the highway by armed men who took with them the truck, its driver,
his helper and the cargo.

5. Petitioner commenced action against private respondent in the CFI of Pangasinan for
the lost merchandise.
6. RTC DECISION: In favor of de Guzman and found respondent to be a liable common
carrier.
7. CA DECISION: Reversed 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.

ISSUE 1: WON private respondent was a common carrier

RULING: YES, as Article 1732 makes no distinction between carrying of persons or
goods on a permanent or principal capacity and on a temporary or occasional
basis.

1. THE CA 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.
2. (PLEASE SEE ART.1732, Civil Code) 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 or sideline.
3. It also carefully avoids making any distinction between a regular or scheduled basis
and one on an occasional, episodic or unscheduled basis.
4. Neither does it distinguish between a carrier offering its services to the general public
and only to a narrow segment of the general population.
5. So understood, the concept of "common carrier" under Article 1732 may be seen to
coincide neatly with the notion of "public service," under Section 13 paragraph (b) of
the Public Service Act (Commonwealth Act No. 1416, as amended) which at least
partially supplements the law, wherein a carrier is defined as someone “with general
or limited clientele, whether permanent, occasional or accidental, and done for general
business purposes.”
6. It appears that private respondent is properly characterized as a common
carrier even though he merely “back-hauled goods for other merchants,
although such back-hauling was done periodically rather than regularly, and
even though private respondent’s principal occupation was not the carriage of
goods for others.
7. CA WAS WRONG when it concluded that he was not a common carrier for having no
certificate of public convenience. A certificate of public convenience is not a requisite
for incurring liability under the Civil Code provisions governing common carriers. The
liability arises the moment a person or firm acts as a common carrier. Otherwise, it
would be offensive to sound public policy, and reward respondent precisely for failing
to comply with applicable statutory requirements.

ISSUE 2: WON private respondent is liable as a common carrier

RULING: NO, the undelivered merchandise was lost because of an even entirely
beyond private respondent’s control.

1. PETITIONER INSISTS that private respondent had not observed extraordinary

diligence in the care of petitioner’s goods and that in this case, he should have hired
a security guard presumably to ride with the truck carrying the 600 cartons of Liberty
filled milk.
2. Common carriers “by the nature of their business and for reasons of public policy” are
held to a very high degree of care and diligence (extraordinary diligence) in the
carriage of goods as well as of passengers, unless the same is due to the causes
listed in Article 1734 (PLEASE SEE ARTICLE 1734).
3. Article 1734 is a closed list. Causes falling outside the list, even if they appear to
constitute a species of force majeure, fall within the scope of Article 1735 where a
carrier is presumed to have been at fault or to have acted negligently; however,
this may be overthrown by proof of extraordinary diligence.
4. Under Article 1745(6), a common carrier is responsible – and will not be allowed to
divest or to diminish such responsibility – even for acts of strangers like thieves or
robbers, EXCEPT where such thieves acted “with grave or irresistible threat, violence
or force.”
5. IN THE INSTANT CASE, armed men held up the second truck which carried
petitioner’s cargo. An information for robber in band was also filed against the
robbers and the decision shows that the accused therein acted with grave, if
not irresistible, threat, violence or force, and were even armed with firearms.
 They even kidnapped the driver and helper, detaining them for several days. They
were all convicted of robbery, though not in a band.
6. SC DID NOT BELIEVE PETITIONER THAT THE STANDARD OF
EXTRAORDINARY DILIGENCE REQUIRED RESPONDENT TO RETAIN A
SECURITY GUARD to ride with the truck and engage brigands in a firelight at the risk
of his own life and the lives of the driver and his helper.
7. SC HELD that the occurrence of the loss must reasonable be regarded as quite
beyond the control of the common carrier and properly regarded as a fortuitous event.
Common carriers are not 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 THEY SHALL HAVE
COMPLIED WITH THE RIGOROUS STANDARD OF EXTRAORDINARY
DILIGENCE.

9.
Planters Products Inc v CA 226 SCRA 476 (1993)
TOPIC: Common Carriage

Mitsubishi: Shipper/Charterer
KKKK: Shipowner

FACTS:
 Planters Products, Inc. (PPI), purchased from Mitsubishi International Corporation
(MITSUBISHI) of New York, U.S.A., 9,329.7069 metric tons ( M/T) of Urea 46%
fertilizer which the latter shipped in bulk aboard the cargo vessel M/V "Sun Plum"
owned by private respondent Kyosei Kisen Kabushiki Kaisha (KKKK) from U.S.A., to
Philippines, as evidenced by a Bill of Lading.
 Prior to its voyage, a time charter-party on the vessel M/V "Sun Plum" pursuant to
the Uniform General Charter was entered into between MITSUBISHI as
shipper/charterer and KKKK as shipowner Before loading the fertilizer aboard the
vessel, four (4) of her holds were all presumably inspected by the charterer's
representative and found fit to take a load of urea in bulk.
 After the Urea fertilizer was loaded in bulk by stevedores hired by and under the
supervision of the shipper, the steel hatches were closed with heavy iron lids, covered
with three (3) layers of tarpaulin, then tied with steel bonds. The hatches remained
closed and tightly sealed throughout the entire voyage. (IOW several steps were done
to ensure the cargo was protected)
 Upon arrival of the vessel at her port of call, PPI unloaded the cargo from the holds
into its steel-bodied dump trucks pursuant to the terms and conditions of the charter-
party. The hatches remained open throughout the duration of the discharge.
 Each time a dump truck was filled up, its load of Urea was covered with tarpaulin
before it was transported to the consignee's warehouse. The port area was windy,
certain portions of the route to the warehouse were sandy and the weather was
variable, raining occasionally while the discharge was in progress.
 After the unloading of Cargo was completed, a private marine and cargo surveyor,
Cargo Superintendents Company Inc. (CSCI), was hired by PPI to determine the
"outturn" of the cargo shipped, by taking draft readings of the vessel prior to and
after discharge.
 The survey submitted by CSCI revealed a shortage in the cargo and that a portion
of the Urea fertilizer was contaminated with dirt. The same results were contained in
a Certificate of Shortage/Damaged Cargo prepared by PPI.
 PPI sent a claim letter to Soriamont Steamship Agencies (SSA), the resident agent
of the carrier, KKKK, for P245,969.31 representing the cost of the damage.
 SSA did not respond to the letter claiming they had nothing to do with the discharge
of the shipment and the letter they received was not a formal claim.

PPI filed an action for damages with the CFI of Manila.

 The defendant carrier argued that the strict public policy governing common
carriers does not apply to them because they have become private carriers by
reason of the provisions of the charter-party.
 CFI sustained the claim of PPI for damages.
 On appeal, CA reversed the CFI’s decision.

ISSUE: W/N a common carrier becomes a private carrier by reason of a charter-party

RULING: No, provided the charter is limited to the ship only excluding the crew,
etc.

Relevant Provisions: Arts 1732, 1733, 1734 of NCC

The distinction between a "common or public carrier" and a "private or special carrier"
lies in the character of the business, such that if the undertaking is a single transaction,
not a part of the general business or occupation, although involving the carriage of goods
for a fee, the person or corporation offering such service is a private carrier.
Common carriers, by reason of the nature of their business, should observe extraordinary
diligence. For private carriers, the exercise of ordinary diligence in the carriage of goods
will suffice. Moreover, in case of loss, destruction or deterioration of the goods, common
carriers are presumed to have been at fault or to have acted negligently, and the burden
of proving otherwise rests on them. No such presumption applies to private carriers, for
whosoever alleges damage to or deterioration of the goods carried has the onus of
proving that the cause was the negligence of the carrier.

KKK, in the ordinary course of business, operates as a common carrier, transporting goods
indiscriminately for all persons.

When PPI chartered the ship Sun Plum, the captain & officers remained under the
supervision and control of KKK.

KKK remains a public carrier, notwithstanding the charter of the whole or portion of a
vessel by one or more persons, provided the charter is limited to the ship only, as in the
case of a time-charter or voyage-charter. It is only
when the charter includes both the vessel and its crew, as in a bareboat or demise
that a common carrier becomes private, at least insofar as the particular voyage
covering the charter-party is concerned.

KKK has sufficiently overcome, by clear and convincing proof, the prima facie presumption
of negligence.

In an action for damages against a common carrier, the shipper should prove the fact
of shipment and its consequent damage while the same was in the possession,
actual or constructive, of the carrier. Thereafter, the burden shifts on the common
carrier to prove that it exercised extraordinary diligence or that the loss,
damage or deterioration of the cargo was due to fortuitous event, or some other
circumstances inconsistent with its liability.

The deposition of the master of the vessel revealed that the hatches of the vessel were
cleaned, closed and sealed, then covered with 3 layers of tarpaulin. It was also shown
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. (VERY WELL
PROTECTED)

A chemical engineer testified as to the nature of the urea fertilizer and the risks
of shipping it in bulk. Urea is highly soluble in water and that there is also a possibility
of spillage due to the clamp shell and the wind. There is also a possibility of contaminated
with other matters as the urea was transported in bulk. There is also inadequacy in the
packaging which further contributed to the loss. Bulk shipment of highly soluble
cargo carries with it the risk of loss or damage.
The shipowner was able to prove that it exercised the diligence required. PPI, on the
other hand, showed no proof that KKK was remiss in the exercise of due diligence.

10
BASCOS V. CA, G.R. NO. 101089, 7 APRIL 1993
FACTS

CIPTRADE –
Jibfair –
BASCOS – transporter driver

1. Rodolfo A. Cipriano representing Cipriano Trading Enterprise (CIPTRADE for short)

entered into a hauling contract with Jibfair Shipping Agency Corp whereby the
former bound itself to haul the latter’s 2,000 m/tons of soya bean meal to the
warehouse in Calamba, Laguna. To carry out its obligation, CIPTRADE, through
Cipriano, subcontracted with Bascos to transport and to deliver 400 sacks of soya
bean meal from the Manila Port Area to Calamba, Laguna. Petitioner failed to
deliver the said cargo. As a consequence of that failure, Cipriano paid Jibfair
Shipping Agency the amount of the lost goods in accordance with their contract.

2. Cipriano demanded reimbursement from petitioner but the latter refused to pay.

3. Eventually, Cipriano filed a complaint for a sum of money and damages with writ of
preliminary attachment for breach of a contract of carriage. The trial court granted
the writ of preliminary attachment.
4. In her answer, petitioner interposed the defense that there was no contract of
carriage since CIPTRADE leased her cargo truck to load the cargo from Manila Port
Area to Laguna and that the truck carrying the cargo was hijacked and being a
force majeure, exculpated petitioner from any liability
5. After trial, the trial court rendered a decision in favor of Cipriano and against Bascos
ordering the latter to pay the former for actual damages for attorney’s fees and cost
of suit.
6. The “Urgent Motion To Dissolve/Lift preliminary Attachment” Bascos is DENIED for
being moot and academic.
7. Petitioner appealed to the Court of Appeals but respondent Court affirmed the trial
court’s judgment.
Hence this petition for review on certiorari.
ISSUES
(1) W/N petitioner a common carrier
(2) W/N the hijacking referred to a force majeure

RULING
The petition is DISMISSED and the decision of the Court of Appeals is hereby AFFIRMED.
1. Yes.

Article 1732 of the Civil Code defines a common carrier as “(a) person, corporation or firm, or
association engaged in the business of carrying or transporting passengers or goods or both, by land,
water or air, for compensation, offering their services to the public.” The test to determine a
common carrier is “whether the given undertaking is a part of the business engaged in by the carrier
which he has held out to the general public as his occupation rather than the quantity or extent of
the business transacted.”

In this case, petitioner herself has made the admission that she was in the trucking business, offering
her trucks to those with cargo to move. Judicial admissions are conclusive and no evidence is
required to prove the same.
But petitioner argues that there was only a contract of lease because they offer their services only
to a select group of people. Regarding the first contention, the holding of the Court in De Guzman
vs. Court of Appeals 14 is instructive. In referring to Article 1732 of the Civil Code, it held thus:
“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 1732 deliberately refrained from making
such distinctions.”
2. No. Likewise, We affirm the holding of the respondent court that the loss of the goods was not
due to force majeure.
Common carriers are obliged to observe extraordinary diligence in the vigilance over the goods
transported by them. Accordingly, they are presumed to have been at fault or to have acted
negligently if the goods are lost, destroyed or deteriorated. There are very few instances when the
presumption of negligence does not attach and these instances are enumerated in Article 1734. In
those cases where the presumption is applied, the common carrier must prove that it exercised
extraordinary diligence in order to overcome the presumption.
In this case, petitioner alleged that hijacking constituted force majeure which exculpated her from
liability for the loss of the cargo. In De Guzman vs. Court of Appeals, the Court held that hijacking,
not being included in the provisions of Article 1734, must be dealt with under the provisions of
Article 1735 and thus, the common carrier is presumed to have been at fault or negligent. To
exculpate the carrier from liability arising from hijacking, he must prove that the robbers or the
hijackers acted with grave or irresistible threat, violence, or force. This is in accordance with Article
1745 of the Civil Code which provides:
“Art. 1745. Any of the following or similar stipulations shall be considered unreasonable, unjust
and contrary to public policy; xx
(6) That the common carrier’s liability for acts committed by thieves, or of robbers who do not act
with grave or irresistible threat, violences or force, is dispensed with or diminished;”

Fabre, Jr. vs. Court of Appeals

FACTS:

Fabre – school minibus owners

Cabil – driver
WWCF - vitim

1. Sps Engracio Fabre, Jr. were owners of a 1982 model Mazda minibus. They used the bus principally
in connection with a bus service for school children which they operated in Manila. Also, they had a driver
named Porfirio J. Cabil whose job was to take school children to and from the St. Scholastica's College in
Malate, Manila.

2. Word for the World Christian Fellowship Inc. (WWCF) arranged with Sps. Fabre for the
transportation of 33 members of its Young Adults Ministry from Manila to La Union and back in
consideration of P3,000.00.

3. The usual route to Caba, La Union was through Carmen, Pangasinan. However, the bridge at Carmen
was under repair. So the driver, who was unfamiliar with the area (it being his first trip to La Union), was
forced to take a detour through the town of Baay in Lingayen, Pangasinan. (Please you do note nga nag
filipino time ang uban passengers ani so dugay sila kalarga, in case lang mu ask si Capanas)

4. (Nadisgrasya sila dzai) At 11:30 that night, the driver came upon a sharp curve on the highway. The road
was slippery because it was raining, causing the bus, which was running at the speed of 50 kmph, to skid
to the left road shoulder. The bus hit the left traffic steel brace and sign along the road and rammed the
fence, then turned over and landed on its left side, coming to a full stop only after a series of impacts. The
bus came to rest off the road. Several passengers were injured.

5. (Wala jud daw kabantay si driver) The driver claimed he did not see the curve until it was too late. He
said he was not familiar with the area and he could not have seen the curve despite the care he took in
driving the bus, because it was dark and there was no sign on the road.

6. The Lingayen police investigated the incident and on the basis of their finding they filed a criminal
complaint against the driver. But the owners paid an amount to the owner of the fence and it was dismissed.
7. Amyline Antonio, one of the seriously injured passengers and is now suffering from paraplegia and is
permanently paralyzed from the waist down, filed this case in the RTC of Makati. During the trial she
described the operations she underwent and adduced evidence regarding the cost of her treatment and
therapy.

8. RTC Ruling - No convincing evidence was shown that the minibus was properly checked for travel to
a long distance trip and that the driver was properly screened and tested before being admitted for
employment. Indeed, all the evidence presented have shown the negligent act of the defendants which
ultimately resulted to the accident subject of this case. Essentially, the RTC awarded a lot of damages.

9. CA Ruling – Affirmed

10. SPS Fabre argued that they are not liable because (1) an earlier departure (made impossible by the
congregation's delayed meeting) could have a averted the mishap and (2) under the contract, the
WWCF was directly responsible for the conduct of the trip.

ISSUE:

WON the SPS Fabre and the driver are liable for damages.

RULING: YES

1. (Mao rani giingon sa SC about sa late departure) The contention about the late departure does not hold
water. The hour of departure had not been fixed. Even if it had been, the delay did not bear directly on the
cause of the accident.

2. (As to the 2nd defense) And earlier case said that a person who hires a public automobile and gives the
driver directions as to the place to which he wishes to be conveyed, but exercises no other control
over the conduct of the driver, is not responsible for acts of negligence of the latter or prevented from
recovering for injuries suffered from a collision between the automobile and a train, caused by the
negligence or the automobile driver.

3. This is already a contract of carriage and the Sps do not have to be engaged in the business of public
transportation for the provisions of the Civil Code on common carriers to apply to them.

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

The above article makes no distinction between

(a) 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
(b) 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
(c) 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
4. As common carriers, the Fabres were found to exercise "extraordinary diligence" for the safe
transportation of the passengers to their destination. This duty of care is not excused by proof that they
exercise the diligence of a good father of the family in the selection and supervision of their employee.

Art. 1759. Common carriers are liable for the death of or injuries to passengers through the negligence or
willful acts of the former's employees although such employees may have acted beyond the scope of their
authority or in violation of the orders of the common carriers.

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

5. With this, the SC affirmed with modification (gi lessen niya ang damages) the decision of the CA and
ordered petitioners to pay respondent damages.

12.

FIRST PHIL. INDUSTRIAL CORP. V. CA, 300 SCRA 661 (1998)

First Phil - G
FACTS
1. Petitioner is a grantee of a pipeline concession under Republic Act No. 387.
2. Sometime in January 1995, petitioner applied for mayor’s permit in Batangas.
3. However, the Treasurer required petitioner to pay a local tax based on gross
receipts amounting to P956,076.04. In order not to hamper its operations,
petitioner paid the taxes for the first quarter of 1993 amounting to P239,019.01
under protest.
4. 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
(common carrier)
5. The respondent City Treasurer denied the protest, thus, 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 or motor vehicles.
The trial court dismissed the complaint, and such was affirmed by the Court of Appeals.
ISSUE
W/N a pipeline business is included in the term “common carrier” so as to entitle the petitioner to
the exemption
RULING
Yes. 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.

13.

LOADSTAR SHIPPING CO. VS. CA AND THE MANILA INSURANCE CO

Topic: Common Carriage

Loadstar - shipper

FACTS:
1. Loadstar Shipping received on board its M/V Cherokee vessels 705 bales of lawanit
hardwood, 27 boxes of crates of tilewood and 49 bundles of mouldings (hereinafter
called “goods”) amounting to P6,067,178 (6M)
2. These goods was insured for the same amount with Manila Insurance Co. (MIC for
brevity) against various risk including “total loss by total loss of the vessel”
3. The vessel, M/V Cherokee, was insured by Prudential Guarantee & Assurance Inc
(hereafter PGAI) for 4M.
4. On its way to Manila from the port of Nasipit, Agusan del Norte, M/V Cherokee,
along with its cargo, sank off Limasawa Island

5. As a result of the total loss of its shipment, the consignee made a claim with
Loadstar which, however, ignored the same.
6. The insurer, MIC paid 6,075,000 to the insured in full settlement of its claim and the
latter executed a subrogation receipt therefor (as against Loadstar).
7. MIC’S COMPLAINT: MIC then filed a complaint against Loadstar and PGAI alleging
that the sinking vessel was due to the fault and negligence of Loadstar and its
employees
8. It also prayed that PGAI be ordered to pay the insurance proceeds from the loss of
the vessel directly to MIC (instead of giving it to Loadstar), said amount to be
deducted from MIC’s claim from Loadstar.
9. LOADSTAR’S ANSWER: Denied any liability for loss of the shipper’s goods and
claimed that the sinking vessel was due to force majeure
10. PGAI’S AVERSION: MIC had no cause of action against it since Loadstar is the
party insured.
11. RTC’s Decision: Rendered judgment in favor of MIC.
12. CA’s Decision: Affirmed RTC’s Decision in toto
13. CA ruled that Loadstar was a common carrier and therefore it is the Code
of Commerce, not the Civil Code, which should be applied in determining the
rights and liabilities of the parties
14. LOADSTAR’S CONTENTIONS: It argues that it is a private carrier and thus cannot
be presumed to have been negligent and the burden of proving otherwise devolved
upon MIC. It also argued that the loss is due to force majeure

ISSUE:
1. Whether or not M/V Cherokee owned by LOADSTAR Shipping Inc. was a common
carrier or a private carrier.

RULING:
LOADSTAR IS A COMMON CARRIER.

LOADSTAR FITS THE DEFINITION OF A CARRIER UNDER ARTICLE 1732 OF THE

CIVIL CODE
1. Art. 1732. Common carriers are persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or goods or both, by
land, water, or air, for compensation, offering their services to the public.
2. The article does not make a 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 ancilliary activity (iow, as sideline).
3. It does not also distinguish between offering transportation service on a regular
basis and one offering such service on a periodic, occasional, episodic or unscheduled.
4. It does not also distinguish between offering its services to the “general public”
and one who offers services only from a narrow segment of the general population.

LOADSTAR DOES NOT QUALIFY AS A SPECIAL CARRIER

5. It argues 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. (Cite Home Insurance Co. V. American Steamship)
1. SC: YOU’RE WRONG! NOT APPLICABLE! The records do not disclose that MV
Cherokee on the said date undertook to carry a special cargo or was chartered
to a special person only. There was no charter party and the bills of lading
failed to show any special arrangement but only a general provision to the
effect that MV Cherokee was a “general cargo carrier”
6. The 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 common to a private carrier since the vessel was also carrying passengers.

A CERTIFICATE OF PUBLIC CONVENIENCE IS NOT NECESSARY FOR

INCURRING LIABILITY UNDER THE NCC PROVISIONS GOVERNING COMMON
CARRIERS
7. It is not necessary that the carrier be issued a certificate of public convenience,
and this public character cannot be altered by the fact that the carriage of the goods in
question was periodic, occasional, episodic or unscheduled.
8. To exempt Loadstar 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 Loadstar precisely for failing to comply with the
applicable statutory requirements.
9. The business of common carriers impinges directly and intimately upon the
safety and well-being of property of those members of the general community who
happen to deal with such carrier.

Hence, Loadstar is a common carrier and is therefore not exempt from Liability.

14.
CALVO, V. UCPB GEN. INSURANCE TERMINAL SERVICES, INC. G.R. NO. 148496,
MARCH 19, 2002
FACTS

Calvo – customs broker and owner of TCTSI

UCPB - insurance

 Petitioner 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. The cargo was insured by respondent
UCPB General Insurance Co., Inc.
 The shipment in question arrived in Manila on board "M/V Hayakawa Maru" and,
after 24 hours, were unloaded from the vessel to the custody of the arrastre
operator, Manila Port Services, Inc. Thereafter, petitioner, pursuant to her contract
with SMC, withdrew the cargo from the arrastre operator and delivered it to SMC's
warehouse.
 The goods were inspected by Marine Cargo Surveyors, who found that 15 reels of
the semi-chemical fluting paper were "wet/stained/torn" and 3 reels of kraft liner
board were likewise torn.
 SMC collected payment from respondent UCPB under its insurance contract for
the aforementioned amount.
 In turn, respondent, as subrogee of SMC, brought suit against petitioner.

 Petitioner contends that contrary to the findings of the trial court and the Court of
Appeals, she is not a common carrier but a private carrier because, as a customs
 broker and warehouseman, she does not indiscriminately hold her services out to
the public but only offers the same to select parties with whom she may contract in
the conduct of her business.
ISSUE
W/N Calvo is a common carrier liable for the damages for failure to observe extraordinary diligence
in the vigilance over the goods.
RULING
Petitioner is a common carrier
Art. 1732 does not 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.

There is greater reason for holding petitioner to be a common carrier because the transportation of
goods is an integral part of her business. To uphold petitioner's contention would be to deprive those
with whom she contracts the protection which the law affords them notwithstanding the fact that
the obligation to carry goods for her customers, as already noted, is part and parcel of petitioner's
business.
Petitioner is liable for the damages for failure to observe extraordinary diligence
To prove the exercise of extraordinary diligence, petitioner must do more than merely show the
possibility that some other party could be responsible for the damage. It must prove that it used "all
reasonable means to ascertain the nature and characteristic of goods tendered for [transport] and
that [it] exercise[d] due care in the handling [thereof]." Petitioner failed to do this.
Nor is there basis to exempt petitioner from liability under Art. 1734(4). For this provision to
apply, the rule is that if the improper packing or, in this case, the defect/s in the container, is/are
known to the carrier or his employees or apparent upon ordinary observation, but he nevertheless
accepts the same without protest or exception notwithstanding such condition, he is not relieved
of liability for damage resulting therefrom. In this case, petitioner accepted the cargo without
exception despite the apparent defects in some of the container vans

15.
ASIA LIGHTERAGE AND SHIPPING, INC. v. CA - GR

Marubeni – shipper
Gen Milling – consignee
Prudential – insurance
Asia lighterage - delivery

FACTS
1. On 1990 June 13, 3,150 tons of Better Western White Wheat valued at US$423,192.50 was
shipped by Marubeni American Corp. of Portland, Oregon to the consignee in Manila(General
Milling Corp.). The shipment was insured by RESPONDENT Prudential Guarantee and Assurance
for P14,621,771.15.
2. On 1990 July 25, the carrying vessel arrived in Manila and the cargo was transferred to
PETITIONER Asia Lighterage & Shipping, Inc.’s custody.
 3. Petitioner was contracted by consignee Gen. Milling as carrier to deliver the cargo to consignee’s
warehouse in Pasig City.
4. On 1990 Aug. 15, 900 metric tons was loaded on a barge for delivery to Gen. Milling but it did not
reach its destination.
5. It appears that the transport of said cargo was suspended due to a warning of an incoming typhoon.

6. But Petitioner proceeded to pull the barge to Engineering Island off Baseco to seek shelter from
the approaching typhoon. The barge was tied down to other barges which arrived ahead while
weathering out the storm that night.
7. The barge developed a list because of a hole it sustained after hitting an unseen protuberance
underneath the water. Petitioner then filed a Marine Protest and secured Gaspar Salvaging Corp.’s
services which refloated the barge. The hole was then patched with clay and cement.
8. Upon reaching the Sta.Mesa spillways, the barge ran aground due to strong current. To avoid
complete sinking of the barge, a portion of the goods was transferred to 3 other barges.
9. The next day, the towing bits of the barge broke. The barge sank completely, resulting in the total
loss of the remaining cargo.
10. Consignee (Gen. Milling) sent a claim letter to petitioner (Asia Lighterage) and another letter to
respondent (Prudential) for the value of the lost cargo.
11. Respondent Prudential indemnified Gen. Milling and thereafter sought recovery from petitioner Asia
Lighterage but to no avail.
12. Thus, Respondent filed a complaint. RTC ruled in favor of respondent. Petitioner appealed to the
CA insisting that it is not a common carrier but the CA affirmed the RTC’s decision. Hence, this
petition.
13. Petitioner contends it is not a common carrier but a private carrier. Allegedly, it has no fixed and
publicly known route, maintains no terminals, and issues no tickets. It is not obliged to carry
indiscriminately for any person. It is not bound to carry goods unless it consents. Thus it does not
hold out its services to the general public.

ISSUE
1. Whether the petitioner is a common carrier.
2. Assuming petitioner is a common carrier, whether it exercised extraordinary diligence in its care
and custody of the consigned cargo.

RULING
PETITIONER ASIA LIGHTERAGE IS A COMMON CARRIER
1. A 1732 NCC defines common carriers as persons, corporations, firms or associations engaged in
the business of carrying or transporting passengers or goods or both, by land, water or air, for
compensation, offering their services to the public.
2. In De Guzman vs. CA, the SC held that A1732’s definition of common carriers makes no distinction
between one whose principal business activity is the carrying of persons or both, and one who does
such carrying only as an ancillary activity.
3. There is also no 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.
4. Furthermore, A1732 does not distinguish between a carrier offering its services to the general
public, and one who offers services or solicits business only from a narrow segment of the general
population.
5. In this case, petitioner’s principal business is that of lighterage and drayage, and it offers its barges
to the public for carrying or transporting goods by water for compensation. Hence, they are clearly
common carriers.
6. The test to determine a common carrier is whether the given undertaking is 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.
 7. Petitioner therefore is a common carrier despite its carrying of goods in an irregular manner than
scheduled with a limited clientele. It need not have a fixed and publicly known routes. Neither does
it have to maintain terminals or issue tickets.

PETITIONER FAILED TO EXERCISE EXTRAORDINARY DILIGENCE IN ITS CARE AND CUSTODY OF

THE CONSIGNEE’S GOODS
6. 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 such presumption, it must prove exercised extraordinary
diligence.
7. A 1734 NCC enumerates the instances when the presumption does not attach. [Par. (1) flood,
storm, earthquake, lightning, or other natural disaster or calamity;]
8. Evidence showed that even before the towing bits of the barge broke, it had previously sustained
damage when it hit a sunken object while docked at Engineering Island
9. . It even suffered a hole which was patched with only clay and cement. Surely it was a
provisional remedy, not enough for the barge to sail safely.
10. Thus, when petitioner persisted to proceed with the voyage, it recklessly exposed the cargo to
further damage.
11. Meeting a typhoon head on falls short of extraordinary diligence. It was also found out that when
the towing bits of the barge broke, it was no longer affected by the typhoon. Thus, the typhoon is not the
proximate cause of the loss of the cargo; a human factor i.e. negligence had intervened.

16.

A.F. SANCHEZ BROKERAGE INC., vs. CA and FGU INSURANCE CORP.

G.R. No. 147079 | December 21, 2004

Wyeth pharma – consignor

Wyeth suaca – consignee
FGU – insurance
Sanchez - broker

FACTS:
1. Wyeth-Pharma shipped on board an aircraft oral contraceptives for delivery to Manila in
favor of the consignee, Wyeth-Suaco Laboratories, Inc. (“Wyeth” for brevity). Wyeth
insured the shipment against all risks with FGU Insurance. Upon arrival of the shipment
at NAIA, it was discharged "without exception" and delivered to the warehouse of the
Philippine Skylanders, Inc. (PSI) at the NAIA for safekeeping.
2. Wyeth engaged the services of petitioner Sanchez Brokerage to secure the release of the
cargoes from the PSI and the Bureau of Customs. Petitioner paid the customs duties,
taxes and storage fees, and acknowledged that the cargoes were received in good
condition.
3. Wyeth-Suaco being a regular importer, the customs examiner did not inspect the
cargoes which were thereupon stripped from the aluminum containers and loaded inside
the transport vehicles hired by petitioner.
4. Upon instructions of Wyeth, the cargoes were delivered to Hizon Laboratories for quality
control check. Two days after, a representative of Wyeth acknowledged the delivery of the
cargoes by affixing his signature on the delivery receipt. Upon inspection, however, he
discovered that 44 cartons were in bad order and “wetted” due to heavy rains at the time
 of delivery to the warehouse of Hizon Lab. That the cartons were “in bad order and wetted”
was noted on the delivery receipt. Prior to the loading of the cargoes to the broker’s trucks
at the NAIA, they were inspected and found to be in "apparent good condition, as
evidenced by a certificate issued and attached.
5. Wyeth later demanded, by letter of August 25, 1992, from Sanchez Brokerage the
payment of P191,384.25 representing the value of its loss arising from the damaged
tablets. As petitioner refused to heed the demand, Wyeth filed an insurance claim against
FGU Insurance which paid the amount of P181,431.49 in settlement of its claim.
6. Wyeth issued Subrogation Receipt in favor of FGU Insurance.
7. On demand by FGU Insurance for payment of the amount of P181,431.49 it paid Wyeth-
Suaco, Sanchez Brokerage, disclaimed liability for the damaged goods, positing that the
damage was due to improper and insufficient export packaging; that when the sealed
containers were opened outside the PSI warehouse, it was discovered that some of the
loose cartons were wet, prompting its (Sanchez Brokerage’s) representative Morales to
inform the Import-Export Assistant of Wyeth-Suaco, Ramir Calicdan, about the condition
of the cargoes but that the latter advised to still deliver them to Hizon Laboratories where
an adjuster would assess the damage.
8. FGU Insurance filed a complaint for damages before the RTC of Makati City against the
Sanchez Brokerage.
9. RTC dismissed the complaint, holding that the Survey Report prepared by the Elite
Surveyors is bereft of any evidentiary support and a mere product of pure guesswork.
10. CA reversed RTC, holding that the Sanchez Brokerage engaged not only in the business
of customs brokerage but also in the transportation and delivery of the cargo of its clients,
hence, a common carrier within the context of Article 1732 of the New Civil Code.
11. Noting that Wyeth-Suaco adduced evidence that the cargoes were delivered to petitioner
in good order and condition but were in a damaged state when delivered to Wyeth-Suaco,
the appellate court held that Sanchez Brokerage is presumed negligent and upon it rested
the burden of proving that it exercised extraordinary negligence not only in instances when
negligence is directly proven but also in those cases when the cause of the damage is not
known or unknown.
12. In the main, petitioner asserts that the appellate court committed grave and reversible
error tantamount to abuse of discretion when it found petitioner a "common carrier" within
the context of Article 1732 of the New Civil Code.
13. Respondent contends that petitioner, as a common carrier, failed to overcome the
presumption of negligence, it being documented that petitioner withdrew from the
warehouse of PSI the subject shipment entirely in good order and condition.

ISSUE:
 Is AF Sanchez a common carrier even if its primary purpose is a customs broker?

RULING:
1. Petitioner, though a customs broker, is also a common carrier, as defined under Article
1732 of the Civil Code, to wit:
a. Art. 1732. Common carriers are persons, corporations, firms or
associations engaged in the business of carrying or transporting passengers or
goods or both, by land, water, or air, for compensation, offering their services to
the public.
2. Article 1732 does not distinguish between one whose principal business activity is the
carrying of goods and one who does such carrying only as an ancillary activity. The
contention, therefore, of petitioner that it is not a common carrier but a customs broker
whose principal function is to prepare the correct customs declaration and proper shipping
 documents as required by law is bereft of merit. It suffices that petitioner undertakes to
deliver the goods for pecuniary consideration.
3. Petitioner, as a common carrier, is mandated to observe, under Article 1733 of the
Civil Code, extraordinary diligence in the vigilance over the goods it transports
according to all the circumstances of each case.
4. In the event that the goods are lost, destroyed or deteriorated, it is presumed to have been
at fault or to have acted negligently, unless it proves that it observed extraordinary
diligence.
5. The extraordinary diligence in the vigilance over the goods tendered for shipment requires
the common carrier to know and to follow the required precaution for avoiding damage to,
or destruction of the goods entrusted to it for sale, carriage and delivery. It requires
common carriers to render service with the greatest skill and foresight and "to use all
reasonable means to ascertain the nature and characteristics of goods tendered for
shipment, and to exercise due care in the handling and stowage, including such methods
as their nature requires."
6. In the case at bar, it was established that petitioner received the cargoes from the PSI
warehouse in NAIA in good order and condition; and that upon delivery by petitioner to
Hizon Laboratories Inc., some of the cargoes were found to be in bad order, as noted in
the Delivery Receipt issued by petitioner, and as indicated in the Survey Report of Elite
Surveyors and the Destruction Report of Hizon Laboratories, Inc.
7. While Article 1734 par. 4 of the Civil Code exempts a common carrier from liability if the
loss or damage is due to the character of the goods or defects in the packing or in the
containers, the rule is that if the improper packing is known to the carrier or his
employees or is apparent upon ordinary observation, but he nevertheless accepts
the same without protest or exception notwithstanding such condition, he is not
relieved of liability for the resulting damage.
8. If what petitioner claims is true – that some of the cartons were already damaged upon
delivery - then it should naturally have received the cargo under protest or with
reservations duly noted on the receipt issued by PSI. But it made no such protest or
reservation.
9. If indeed petitioner’s employees only examined the cargoes outside the PSI warehouse
and found some to be wet, they would certainly have gone back to PSI, showed to the
warehouseman the damage, and demanded then and there for Bad Order documents or
a certification confirming the damage. Or, petitioner would have presented, as witness,
the employees of the PSI from whom Morales and Domingo took delivery of the cargo to
prove that, indeed, part of the cargoes was already damaged when the container was
allegedly opened outside the warehouse.
10. Since petitioner received all the cargoes in good order and condition at the time they were
turned over by the PSI warehouseman, and upon their delivery to Hizon Laboratories, Inc.
a portion thereof was found to be in bad order, it was incumbent on petitioner to prove that
it exercised extraordinary diligence in the carriage of the goods. It did not, however. Hence,
its presumed negligence under Article 1735 of the Civil Code remains unrebutted.

16.1 Schmitz Transport and Brokerage Corp. v. Transport Venture, Inc., G.R. No. 150255, April
22, 2005
FACTS

SYTCO – consignor
Little giant – consignee
Industrial insurance – insurance
Schmitz – broker
TVI - transport

 SYTCO Pte Ltd. Singapore shipped from the port of Ilyichevsk, Russia on board M/V
“Alexander Saveliev” (a vessel of Russian registry owned by Black Sea) 545 hot rolled steel
sheets in coil weighing 7M metric tons.
 The cargoes, which were to be discharged at the port of Manila in favor of the consignee, Little
Giant Steel Pipe Corporation (Little Giant), were insured against all risks with Industrial
Insurance Company Ltd. (Industrial Insurance).
 Schmitz Transport, whose services the consignee engaged to secure the requisite
clearances, to receive the cargoes from the shipside, and to deliver them to its (the
consignee’s) warehouse at Cainta, Rizal, in turn engaged the services of Transport Venture
Inc (TVI) to send a barge and tugboat at shipside.
 Arrastre operator Ocean Terminal Services Inc. commenced to unload 37 of the 545 coils
from the vessel unto the barge.
 Due to strong waves, the crew of the barge abandoned it and transferred to the vessel. The
barge pitched and rolled with the waves and eventually capsized, washing the 37 coils into
the sea.
 Industrial Insurance later filed a complaint against Schmitz Transport, TVI, and Black Sea
through its representative Inchcape (the defendants) before the RTC of Manila, for the
recovery of the amount it paid to Little Giant. It faulted the defendants for undertaking the
unloading of the cargoes while typhoon signal No. 1 was raised in Metro Manila.
 Petitioner asserts that in chartering the barge and tugboat of TVI, it was acting for its
principal, consignee Little Giant, hence, the transportation contract was by and between Little
Giant and TVI.

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

HELD
1. NO. The loss was due to a negligent act which puts it outside the Act of God Doctrine.
When a fortuitous event occurs, Article 1174 of the Civil Code absolves any party from any
and all liability arising therefrom. When the effect is found to be in part the result of the
 participation of man, whether due to his active intervention or neglect or failure to act, the
whole occurrence is then humanized and removed from the rules applicable to the acts of
God. From a review of the records of the case, there is no indication that there was greater
risk in loading the cargoes outside the breakwater. As the defendants proffered, the weather
on October 26, 1991 remained normal. It cannot, therefore, be said that the defendants were
negligent in not unloading the cargoes upon the barge on October 26, 1991 inside the
breakwater.
That no tugboat towed back the barge to the pier after the cargoes were completely loaded
by 12:30 in the morning is, however, a material fact which the appellate court failed to
properly consider and appreciate — the proximate cause of the loss of the cargoes. Had the
barge been towed back promptly to the pier, the deteriorating sea conditions
notwithstanding, the loss could have been avoided. But the barge was left floating in open
sea until big waves set in at 5:30 a.m., causing it to sink along with the cargoes. The loss thus
falls outside the “act of God doctrine.”
2. Being a common carrier, petitioner is liable for the loss, as well as TVI as its negligence
became the proximate cause of the loss.
Petitioner is a common carrier. For it undertook to transport the cargoes from the shipside
of “M/V Alexander Saveliev” to the consignee’s warehouse at Cainta, Rizal. As long as a
person or corporation holds [itself] to the public for the purpose of transporting goods as [a]
business, [it] is already considered a common carrier regardless if [it] owns the vehicle to be
used or has to hire one.
Art. 1732. Common carriers are persons, corporations, firms or associations engaged in the
business of carrying or transporting passengers or goods or both, by land, water, or air, for
compensation, offering their services to the public.
Article 1732 does not distinguish between one whose principal business activity is the
carrying of goods and one who does such carrying only as an ancillary activity. It suffices that
petitioner undertakes to deliver the goods for pecuniary consideration.
Not being a party to the service contract, Little Giant cannot directly sue TVI based thereon
but it can maintain a cause of action for negligence.
In the case of TVI, while it acted as a private carrier for which it was under no duty to
observe extraordinary diligence, it was still required to observe ordinary diligence.
Thus, Articles 1170 and 1173 of the Civil Code provide:
ART. 1170. Those who in the performance of their obligations are guilty of fraud, negligence,
or delay, and those who in any manner contravene the tenor thereof, are liable for damages.
ART. 1173. The fault or negligence of the obligor consists in the omission of that diligence
which is required by the nature of the obligation and corresponds with the circumstances of
the persons, of the time and of the place. When negligence shows bad faith, the provisions of
articles 1171 and 2202, paragraph 2, shall apply.
TVI’s failure to promptly provide a tugboat did not only increase the risk that might have been
reasonably anticipated during the shipside operation, but was the proximate cause of the
loss.
As for petitioner, for it to be relieved of liability, it should, following Article 1739 of the Civil
Code, prove that it exercised due diligence to prevent or minimize the loss, before, during and
 after the occurrence of the storm in order that it may be exempted from liability for the loss
of the goods.
While petitioner sent checkers and a supervisor on board the vessel to counter-check the
operations of TVI, it failed to take all available and reasonable precautions to avoid the
loss. After noting that TVI failed to arrange for the prompt towage of the barge despite the
deteriorating sea conditions, it should have summoned the same or another tugboat to extend
help, but it did not.
This Court holds then that petitioner and TVI are solidarily liable for the loss of the
cargoes.
Liability of Prudent on the other hand could only be for tort under the provisions of Article
2176 and related provisions, in conjunction with Article 2180 of the Civil Code.
As for Black Sea, its duty as a common carrier extended only from the time the goods were
surrendered or unconditionally placed in its possession and received for transportation until
they were delivered actually or constructively to consignee Little Giant. In fine, no liability
may thus attach to Black Sea.
WHEREFORE, judgment is hereby rendered ordering petitioner Schmitz Transport &
Brokerage Corporation, and Transport Venture Incorporation jointly and severally liable.

17.

PCIC vs. M/V national honor

NSCP – shipper
Blue Mono - consignor

Facts:

 A shipment of 2 units lathe machine, 1 unit surface grinder and 1 unit

Milling machine contained in 2 crates was loaded on board the vessel
M/V "National Honor, by its agent, National Shipping Corporation of
the Philippines (NSCP).
 When M/V “National Honor” arrived in Manila, the arrastre operator,
International Container Terminal Services, Incorporated (ICTSI),
started discharging the cargoes.
 As the first crate was being hoisted from the vessel's hatch, the
wooden flooring suddenly snapped five feet in the air, sending all its
contents crashing down hard and causing extensive damage to the
shipment.
 Upon receipt of the damaged shipment, Blue Mono International
Company Inc. (BMICI) found that the items could no longer be used
for their intended purpose.
  BMICI filed separate claims against NSCP, ICTSI and its insurer, the
PCIC for 61,500.00 US dollars.
 PCIC paid the claim and was issued a subrogation receipt.
 PCIC then filed a case for damages against the owner of the vessel,
NSCP and ICTSI alleging that the loss was due to the fault and
negligence of the defendants.
 ICTSI filed a counterclaim and cross claim against NSCP claiming that
the damage was caused by the defective material and insufficient
packing of shipper.
 RTC: ruled in favor PCIC. The loss of the shipment contained in Crate
No. 1 was due to the internal defect and weakness of the materials
used in the fabrication of the crates. The middle wooden batten had a
hole.
 CA: affirmed in toto the decision of the RTC

Issue: Whether CA erred in not holding respondent common carrier liable

for the damages sustained by the shipment.

Ruling: The respondent carrier is not liable for the damages sustained by
the shipment in the possession of the arrastre operator.

Common carriers from the nature of their business and for reasons of public
policy, are mandated 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. The Court has defined
extraordinary diligence in the vigilance over the goods as follows:

The extraordinary diligence in the vigilance over the goods tendered for
shipment requires the common carrier to know and to follow the required
precaution for avoiding damage to, or destruction of the goods entrusted to
it for sale, carriage and delivery. It requires common carriers to render
service with the greatest skill and foresight and “to use all reasonable means
to ascertain the nature and characteristic of goods tendered for shipment,
and to exercise due care in the handling and stowage, including such
methods as their nature requires.”

The common carrier’s duty to observe the requisite diligence in the shipment
of goods lasts from the time the articles are surrendered to or
unconditionally placed in the possession of, and received by, the carrier for
transportation until delivered to, or until the lapse of a reasonable time for
their acceptance, by the person entitled to receive them. When the goods
shipped are either lost or arrive in damaged condition, a presumption arises
against the carrier of its failure to observe that diligence, and there need
not be an express finding of negligence to hold it liable. To overcome the
presumption of negligence in the case of loss, destruction or deterioration
of the goods, the common carrier must prove that it exercised extraordinary
diligence.

However, under Article 1734 of the New Civil Code, the presumption of
negligence does not apply to any of the following causes:
3. 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.

It bears stressing that the enumeration in Article 1734 of the New Civil
Code which exempts the common carrier for the loss or damage to the
cargo is a closed list. To exculpate itself from liability for the loss/damage
to the cargo under any of the causes, the common carrier is burdened to
prove any of the aforecited causes claimed by it by a preponderance of
evidence. If the carrier succeeds, the burden of evidence is shifted to the
shipper to prove that the carrier is negligent.

“Defect” is the want or absence of something necessary for completeness

or perfection; a lack or absence of something essential to completeness;
a deficiency in something essential to the proper use for the purpose for
which a thing is to be used. On the other hand, inferior means of poor
quality, mediocre, or second rate. A thing may be of inferior quality but
not necessarily defective. In other words, “defectiveness” is not
synonymous with “inferiority.”

In the present case, the trial court declared that based on the record, the
loss of the shipment was caused by the negligence of the petitioner as
the shipper:

The same may be said with respect to defendant ICTSI. The breakage
and collapse of Crate No. 1 and the total destruction of its contents were
not imputable to any fault or negligence on the part of said defendant in
handling the unloading of the cargoes from the carrying vessel, but was
due solely to the inherent defect and weakness of the materials used in
the fabrication of said crate.

The crate should have three solid and strong wooden batten placed side
by side underneath or on the flooring of the crate to support the weight
of its contents. x x x