Transpo Reviewer

TRANSPORTATION AND MARITIME LAW
Based on the outline of Prof. Rodrigo Quimbo
_______________
I. General Considerations
A. Public Utilities
1. Article XII, 1987 Constitution
Art. XII, Section 11. No franchise, certificate or any other form of

authorization for the operation of a public utility shall be granted
except to citizens of the Philippines or to corporations or associations
organized under the laws of the Philippines at least 60% of whose
capital is owned by such citizens, nor shall such franchise, certificate or
authorization be exclusive in character or for a longer period than fifty
years. Neither shall any franchise or right be granted except under the
condition that it shall be subject to amendment, alteration or repeal by
the Congress when the common good so requires. The State shall
encourage equity participation in public utilities by the general public.
The participation of foreign investors in the governing body of any
public utility enterprise shall be limited to their proportionate share in
its capital, and all the executive and managing officers of such
corporation or association must be citizens of the Philippines.
Section 17. In times of national emergency, when the public

interest so requires, the State may, during the emergency and under
reasonable terms prescribed by it, temporarily take over or direct the
operation of any privately owned public utility or business affected with
public interest.
Section 18. The State may, in the interest of national welfare or

defense, establish and operate vital industries and, upon payment of
just compensation, transfer to public ownership utilities and other
private enterprises to be operated by the Government.
Section 19. The State shall regulate or prohibit monopolies when

the public interest so requires. No combinations in restraint of trade or
unfair competition shall be allowed.
(a) What is a public utility?
A public utility is a business or service engaged in regularly supplying the

public with some commodity or service of public consequence such as electricity,
gas, water, transportation, telephone or telegraph service. Apart from statutes
which define the public utilities that are within the purview of such statutes, it
would be difficult to construct a definition of a public utility which would fit every
conceivable case. As its name indicates, however, the term public utility implies
a public use and service to the public. (Am. Jur. 2d V. 64, p.549.) (Albano vs
Reyes)
(b) What is a public service?
The Public Service Act (CA No. 146 as amended) provides that the term
public service "includes every person that now or hereafter may own, operate,
manage, or control in the Philippines, for hire or compensation, with general or
limited clientele, whether permanent, occasional or accidental, and done for
general business purposes, any common carrier, railroad, street railway, traction
railway, sub-way motor vehicle, either for freight or passenger, or both with or
without fixed route and whatever may be its classification, freight or carrier
service or any class, express service, steamboat, or steamship line, pontines,
ferries, and water craft, engaged in the transportation of passengers and freight
or both, shipyard, marine repairshop, [warehouse], wharf or dock, ice plant, ice
refrigeration plant, canal, irrigation system, gas, electric light, heat and power,
water supply and power, petroleum, sewerage system, wire or wireless
communications system, wire or wireless broadcasting stations and other similar
public services..." [Sec. 13(b)] (Albano vs Reyes)
Albano vs Reyes 175 SCRA 264
F: On 20 April 1987, the Phil. Ports Authority (PPA) adopted a resolution directing
mgmt. to prepare the Invitation to Bid and all relevant bidding documents necessary for
the public bidding of the development, mgmt., and operation of the Manila Intl.
Container Terminal (MICT) and authorized the Board Chairman Secretary Reyes to
oversee and implement the project.
Secretary Reyes created a 7-man MICT Bidding Committee to evaluate all bids
and recommend to the Board the best bid. The PPA published the Invitation to Bid with
the reservation that it had the right to reject any bid and to accept such bid it may deem
advantageous to the govt.
Seven companies submitted bids. The Committee recommended that the
contract be awarded to Intl. Container Terminal Services (ICTSI) on the ground that it
offered the best technical and financial proposal. Secretary Reyes awarded the contract
to ICTSI. Before the contract could be signed, two cases were filed questioning the
legality or regularity of the bidding. The first was a special action for prohibition with
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prelim injunction filed by Alo, a concerned taxpayer. The second was a civil case for
prohibition with prayer for TRO filed by Sharp Co. which actively participated in the
bidding.
The President approved the proposed MICT contract. The PPA and ICTFSI
perfected the contract. Rodolfo Albano, a member of the House of Representatives filed
the present case assailing the award of the contract on the ground that since the MICT is
a public utility, it needs a legislative franchise before it can legally operate as a public
utility.
Issue : WON a legislative franchise is necessary.
Held : NO. Petition dismissed.

A franchise specially granted by Congress is not necessary for the
operation of the MICT by a private entity. A contract entered into by the PPA and
such entity is substantial compliance with the law. 1. Executive Order No. 30
authorized the PPA to take over, manage and operate the MICT in accordance
with PD 857 (Revised Charter of the PPA). PD 857 expressly empowers the PPA
to provide services within Port Districts "whether on its own, by contract or
otherwise." Therefore, under EO 30 and PD 857, the PPA may contract with ICTSI
for the mgmt., operation and devt. of the MICT.
2. Even if the MICT be considered a public utility or a public service on the theory
that it is a wharf or a dock as contemplated by the Public Service Act, its
operation would not necessarily call for a legislative franchise. Legislative
franchises are not required before each and every public utility may operate.
The law has granted certain administrative agencies the power to grant licenses
for or to authorize the operation of certain public utilities.
That the Consti provides that the issuance of a franchise for the operation
of a public utility shall be subject to amendment, alteration or repeal by Congress
does not necessarily imply that only Congress has the power to grant such
authorization. There are several laws granting specified agencies in the
Executive Dept. the power to issue such authorization for certain classes of
public utilities. [ 1. LTFRB wrt Certificates of Public Convenience authorizing the
operation of public land transportation services provided by motorized vehicles;
2. ERB wrt operation of electric power utilities and services except electric coops]
Reading EO 30 and PD 857 together, the PPA has been empowered to
undertake by itself or to authorize the operation and mgmt. of the MICT by
another by contract. The latter power having been delegated to the PPA, a
legislative franchise is no longer necessary. In this case, the PPA's contracting
with ICTSI is wholly within its jurisdiction and powers.
3. The award of the contract to ICTSI is all the authorization that is necessary.
The award made by the PPA and the President enjoys the presumption of validity
and regularity of official action. There is no evidence to the contrary.
4. Albano has standing to assail the contract. While the expenditure of public
funds may not be involved under the contract, public interest is definitely
involved considering the important role of the MICP in the economic devt. of the
country and the magnitude of the amount involved. He has sufficient standing
since a public right (disclosure provision) is sought to be enforced.
5. There in no conflict among the 3 branches of govt. The Executive Dept. has
not contravened an act of Congress. There is no usurpation of powers of another
branch.
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6. The determination of the winning bid should be left to the sound judgment of
the PPA. It is in the best position to evaluate the bids. It has the technical
expertise which neither the Court nor Congress has. No abuse of discretion has
been shown.
2. CA 146, as amended, Sec 13 (b)
The term public service includes every person that now or

hereafter may operate, manage, or control in the Philippines, for hire or
compensation, with general or limited clientele, whether permanent,
occasional or accidental, and done for general business purposes, any
common carrier, railroad, street railway, traction railway, sub-way
motor vehicle, either for freight or passenger, or both with or without
fixed route and whatever may be its classification, freight or carrier
service or any class, express service, steamboat, or steamship line,
pontines, ferries, and water craft, engaged in the transportation of
passengers and freight or both, shipyard, marine repairshop,
[warehouse], wharf or dock, ice plant, ice refrigeration plant, canal,
irrigation system, gas, electric light, heat and power, water supply and
power, petroleum, sewerage system, wire or wireless communications
system, wire or wireless broadcasting stations and other similar public
services: Provided, however, that a person engaged in agriculture, not
otherwise a public service, who owns a motor vehicle and uses it
personally and/or enters into a special contract whereby said motor
vehicle is offered for hire or compensation to a third party or third
parties engaged in agriculture, not itself or themselves a public service,
for operation by the latter for a limited time and for a specific purpose
directly connected with the cultivation of his or their farm, the
transportation, processing, and marketing of agricultural products of
such third party or third parties shall not be considered as operating a
public service for the purposes of this Act.
B. Transportation
1. Definition - A contract of transportation is one whereby a certain

person or association of persons obligate themselves to transport persons,
things, news from one place to another for a fixed price. It is the removal of
goods or persons from one place to another.
2. Public Nature
(a) Public Service Act
Section 13 (a) The Commission (PSC) shall have jurisdiction,

supervision, and control over all public services and their franchises,
eqpt., and other properties, and in the exercise of its authority, it shall
have the necessary powers and the aid of the public force: Provided,
That public services owned or operated by govt. entities or GOOCs shall
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be regulated by the Commission in the same way as privately owned

public services, but certificates of public convenience or certificates of
public convenience and necessity shall not be required of such entities
or corporations: And provided, further, That it shall have no authority
to require steamboats, motorships and steamship lines, whether
privately owned or owned or operated by any govt. controlled
corporation or instrumentality to obtain certificates of public
convenience or to prescribe their definite routes or lines of service.
(b) The term public service includes every person that now or
hereafter may operate, manage, or control in the Philippines, for hire or
compensation, with general or limited clientele, whether permanent,
occasional or accidental, and done for general business purposes, any
common carrier, railroad, street railway, traction railway, sub-way
motor vehicle, either for freight or passenger, or both with or without
fixed route and whatever may be its classification, freight or carrier
service or any class, express service, steamboat, or steamship line,
pontines, ferries, and water craft, engaged in the transportation of
passengers and freight or both, shipyard, marine repairshop,
warehouse, wharf or dock, ice plant, ice refrigeration plant, canal,
irrigation system, gas, electric light, heat and power, water supply and
power, petroleum, sewerage system, wire or wireless communications
system, wire or wireless broadcasting stations and other similar public
services: Provided, however, that a person engaged in agriculture, not
otherwise a public service, who owns a motor vehicle and uses it
personally and/or enters into a special contract whereby said motor
vehicle is offered for hire or compensation to a third party or third
parties engaged in agriculture, not itself or themselves a public service,
for operation by the latter for a limited time and for a specific purpose
directly connected with the cultivation of his or their farm, the
transportation, processing, and marketing of agricultural products of
such third party or third parties shall not be considered as operating a
public service for the purposes of this Act.
(c) The word "person" includes every individual, co- partnership,

joint stock co. or corporation, whether domestic or foreign, their
lessees, trustees, or receivers, as well as any municipality, province,
city, GOOC, or agency of the govt. of the Philippines, and whatever
other person or entities that may own or possess or operate public
services.
Section 14. The ff. are exempted from the provisions of the
preceding section :
(a) Warehouses;
(b) Vehicles drawn by animals and bancas moved by oar or sail,
and tugboats and lighters;
(c) Airships within the Philippines except as regards the fixing of
their maximum rates on freight and passengers;
(d) Radio companies except with respect to the fixing of rates;
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(e) Public services owned or operated by any instrumentality of

the Natl. Govt. or by any GOOC, except with respect to the fixing of
rates.
Section 15. With the exception of those enumerated in the

preceding section, no public service shall operate in the Philippines
without possessing a valid and subsisting certificate from the PSC
known as the certificate of public convenience, or certificate of public
convenience and necessity as the case may be, to the effect that the
operation of said service and the authorization to do business will
promote the public interests in a proper and suitable manner.
The Commission may prescribe as a condition for the issuance of
the certificate provided in the preceding paragraph that the service can
be acquired by the Republic of the Philippines or any instrumentality
thereof upon payment of the cost price of its useful eqpt., less
reasonable depn.; and likewise, that the certificate shall be valid only
for a definite period of time; and that the violation of any of these
conditions shall produce the immediate cancellation of the certificate
without the necessity of any express action on the part of the
Commission.
In estimating the depn., the effect of the use of the eqpt., its
actual condition, the age of the model, or other circumstances affecting
its value in the market shall be taken into consideration.
The foregoing is likewise applicable to any extension or
amendment of certificates actually in force and to those which may
hereafter be issued, to permit to modify itineraries and time schedules
of public services, and to authorizations to renew and increase eqpt.
and properties.
Section 16. Proceedings of the Commission, upon notice and

hearing. The Commission shall have power, upon proper notice and
hearing in accordance with the rules and provisions of this Act, subject
to the limitations and exceptions mentioned and saving provisions to
the contrary.
(a) To issue certificates ... authorizing the operation of public

services within the Philippines, whenever the Commission finds that the
operation of the public service proposed and the authorization to do
business will promote the public interest in a proper and suitable
manner. Provided, that certificates will be granted only to citizens of
the Philippines or of the US or to corps., co-partnerships, associations
or joint stock companies constituted and organized under the laws of
the Philippines; Provided, that 60% of the stock or paid-up capital ...
must belong entirely to citizens of the Philippines or of the US;
Provided, further, that no such certificate shall be issued for a period of
more than 50 years.
(b) To approve, subject to constitutional limitations any franchise,

privilege granted under the provisions of Act No. 667, as amended by
Act. No. 1022, by any political subdivision of the Philippines when, in
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the judgment of the Commission, such franchise or privilege will

properly conserve the public interests xxx
(c) To fix and determine individual or joint rates, tolls, charges,

classifications, or schedules thereof, as well as commutation, mileage,
kilometrage, and other special rates which shall be imposed, observed
and followed thereafter by any public service ; Provided, further that in
case the public service equipment of an operator is used principally or
secondarily for the promotion of a private business, the net profits of
said business shall be considered in relation with the public service of
such operator for the purpose of fixing the rates.
(d) To fix just and reasonable standards, classifications,

regulations, practices, measurements, or service to be furnished,
imposed, observed, and followed thereafter by any public service.
(e) To ascertain and fix adequate and serviceable standards for

the measurement of quantity, quality, pressure, initial voltage, or other
condition pertaining to the supply of the product or service rendered by
any public service, and to prescribe reasonable regulations for the
examination and test of such product or service and for the
measurement thereof.
(f) To establish reasonable rules, regulations, instructions,

specifications, and standards, to secure the accuracy of all meters and
appliances for measurements.
(g) To compel any public service to furnish safe, adequate, and

proper service as regards the manner of furnishing the same as well as
the maintenance of the necessary material and eqpt.
(h) To require any public service to establish, construct, maintain

and operate any reasonable extension of its existing facilities, where, in
the judgment of said commission, such extension is reasonable and
practicable, and will furnish sufficient business to justify the
construction and maintenance of the same, and when the financial
condition of the said public service reasonably warrants the original
expenditure required in making and operating such extension.
(i) To direct any railroad, street, railway or traction co. to

establish and maintain at any junction or point of connection or
intersection with any other line of said road or track, or with any other
line of any other railroad, street, railway or traction co., such just and
reasonable connection as shall be necessary to promote the
convenience of shippers of property, or of passengers, and in like
manner to direct any railroad, street railway or traction co. engaged in
carrying merchandise, to construct, maintain and operate, upon
reasonable terms, a switch connection with any private sidetrack which
may be constructed by any shipper to connect with the railroad, street
railway or traction company line where, in the judgment of the
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commission, such connection is reasonable and practicable, and can be

put in with safety, and will furnish sufficient business to justify the
construction and maintenance of the same.
(j) To authorize, in its discretion, any railroad, street railway of

traction company to lay its tracks across tracks of any other railroad,
street railway or traction company, or across any public highway.
(k) To direct any railroad or street railway co. to install such
safety devices or to adopt such other reasonable measures as may in
the judgment of the commission be necessary for the protection of the
public at passing grade crossings of (1) public highways and railroads,
(2) public highways and street railways, or (3) railroads and street
railways.
(l) To fix and determine the proper and adequate rates of depn. of
the property of any public service which will be observed in proper and
adequate depn. account to be carried for the protection of
stockholders, or bondholders or creditors, in accordance with such
rules, regulations, and forms of account as the commission may
prescribe. Said rates shall be sufficient to provide the amounts
required over and above the expenses of maintenance to keep such
property in a state of efficiency corresponding to the progress of the
industry. Each public service shall conform its depreciation accounts to
the rates so determined and fixed, and shall set aside the money so
provided for out of its earnings and carry the same in a depreciation
fund. The income from such investments of money in such fund shall
likewise be carried in such fund. This fund shall not be expended
otherwise than for depreciation, improvements, extensions, new
constructions or additions to the property of such public service.
(m) To amend, modify or revoke at any time any certificate under

the provisions of this act, whenever the facts and circumstances on the
strength of which said certificate was issued have been misrepresented
or materially changed.
(n) To suspend or revoke any certificate issued under the

provisions of this act whenever the holder thereof has violated or
willfully and consumatedly refused to comply with any order, rule or
regulation of the commission or any provisions of this act: Provided,
that the commission for good cause, may prior to the hearing suspend
for a period not exceeding 30 days any certificate or the exercise of any
right or authority issued or granted under this act by order of the
commission, whenever such step shall in the judgment of the
commission be necessary to avoid serious and irreparable damage or
inconvenience to the public or to private interests.
(o) To fix, determine, and regulate, as the convenience of the

state may require, a special type for auto buses, trucks and motor
trucks, to be hereafter constructed, purchased, and operated by
operators after the approval of this act; to fix and determine a special
PAGE 8
registration fee for auto-buses, trucks and motor trucks so constructed,

purchased, and operated: Provided, that said fees shall be smaller than
those charged for auto- buses, trucks, and motor trucks of types not
made regulation under this subsection.
Section 17. Proceedings of commission without previous hearing:

(a) To investigate, upon its own initiative, or upon complaint in
writing, any matter concerning any public service as regards matters
under its jurisdiction; to require any public service to furnish safe,
adequate and proper service as the public interest may require and
warrant; to enforce compliance with any standard xxx and to prohibit
or prevent any public service from operating without first securing a
certificate of public convenience or public necessity and convenience
xxx and require existing public services to pay the fees provided for in
this act for the issuance of the proper certificate xxx under the penalty,
in the discretion of the commission, of the revocation and cancellation
of any acquired right.
(b) To require payment of actual expenses incurred in any

investigation if a violation shall be found; to assess costs not to exceed
25% with reference to such investigation
(c) To appraise and value the property of any public service; in

relation thereto, to have access to and use any books, documents or
records in the possession of any govt. dept., bureau, office, or political
subdivision
(d) To provide, on motion by or at the request of any consumer,

for the examination and test of any appliance used for the measuring of
any product or service of a public service, to enter any premises where
said appliances may be, and other premises of the public service, for
the purpose of setting up and using on said premises any apparatus
necessary therefor, and to fix fees to be paid by the consumer who may
apply for such examination, and in case of defect, to refund the fees
paid
(e) To permit any street railway or traction company to change its

existing gauge to standard steam railroad gauge
(f) To grant any public service special permits to make extra or

special trips within the territory covered by its certificate and to make
special excursions outside if the public interest or special
circumstances so require; Provided where the public service cannot
render such extra service on its own line or in its own territory, a
special permit for such extra service may be granted to any other public
service
(g) To require any public service to keep its books, records, and
accounts; to adopt a uniform system of accounting as approved by the
auditor general
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(h) To require any public service to furnish annual reports of

finances and operations, covering the 12 month period ending
December 31
(i) To require every public service to file with the commission a

written, verified statement made by the owner, president or secretary
setting forth the officers, authority, power and duties of every officer,
as to disclose the source and origin of each administrative act or rule
(j) To require any public service to comply with the laws of the
Philippines and with any local resolution or ordinance or its charter
(k) To investigate accidents directly or indirectly arising from or

connected with the maintenance or operation of the public service
(l) To require every public service to file a complete schedule of

every classification, individual or joint rate, toll, fare or charge, and in
case of public carriers, a complete statement of itineraries or routes
o Section 18 - It shall be unlawful for any individual, co- partnership,

association, corporation or joint-stock company, their lessees, trustees
or receivers xxx to engage in any public service business without
having first secured from the commission a certificate, except grantees
of legislative franchises expressly exempting such grantee from the
reqts of securing a certificate from the commission, as well as those
expressly exempted from the jurisdiction of the commission
Section 19. Unlawful acts - It shall be unlawful for any public

service :
(a) To provide or maintain any service that is unsafe, improper or

inadequate ,or withhold or refuse any service which can reasonably be
demanded and furnished, as found and determined by the commission
in a final order which shall be conclusive and shall take effect in
accordance with this act, upon appeal or otherwise.
(b) To make or give, directly or indirectly, by itself or through its

agents, attorneys or brokers, or any of them, discounts or rebates on
authorized rates, or grant credit for the payment of freight charges, or
any undue or unreasonable preference or advantage to any person or
corporation or to any locality or to any particular person or corporation
or locality or any particular description of traffic or service, or subject
any particular person or corporation or locality or any particular
description of traffic to any prejudice or disadvantage in any respect
whatsoever; to adopt, maintain, or enforce any regulation, practice or
measurement which shall be found or determined by the commission to
be unjust, unreasonable, unduly preferential, or unjustly
discriminatory, in a final order which shall be conclusive and shall take
effect in accordance with the provisions of this act, upon appeal or
otherwise.
PAGE 10
(c) To refuse or neglect, when requested by the director of posts

or his authorized representative to carry public mail on the regular
trips of any public land transportation service maintained or operated
by any such public service, upon such terms and conditions and for a
consideration in such amount as may be agreed upon between the
Director of Posts and the public service carrier or fixed by the
commission in the absence of an agreement between the Director of
Posts and the carrier. In case the Director of Posts and the public
service carrier are unable to agree on the amount of the compensation
to be paid for the carriage of the mail, the Director of Posts shall
forthwith request the commission to fix a just and reasonable
compensation for such carriage and the same shall be promptly fixed by
the commission in accordance with section 16 of this act.
Section 20. Acts requiring the approval of the Commission -

Subject to established limitations and exceptions and saving provisions
to the contrary, it shall be unlawful for any public service or for the
owner, lessee or operator thereof, without the approval and
authorization of the Commission previously had -
(a) To adopt, establish, fix, impose, maintain, collect or carry into

effect any individual or joint rates, commutation, mileage or other
special rate, toll, fare, charge, classification or itinerary. The
Commission shall approve only those that are just and reasonable and
not nay that are unjustly discriminatory or unduly preferential, only
upon reasonable notice to the public services and other parties
concerned, giving them a reasonable opportunity to be heard and the
burden of the proof to show that the proposed rates or regulations are
just an reasonable shall be upon the public service proposing the same.
(b) To establish, construct, maintain or operate new units or

extend existing facilities or make any other addition to or general
extension of the service.
(e) Hereafter to issue any stock or stock certificates representing

an increase of capital; or issue any share of stock without par value; or
issue any bonds or other evidence of indebtedness payable in more
than one year from the issuance thereof, provided that it shall be the
duty of the Commission, after hearing, to approve any such issue
maturing in more than one year from the date thereof, when satisfied
that the same is to be made in accordance with law, and the purpose of
such issue be approved by the Commission.
(g) To sell, alienate, mortgage, encumber or lease its property,

franchises, certificates, privileges or rights or any part thereof; or
merge or consolidate its property, franchises, privileges or rights, or
any part thereof, with those of any public service. The approval herein
required shall be given, after notice to the public and after hearing, if it
be shown that there are just and reasonable grounds for making the
PAGE 11
mortgage or encumbrance, for liabilities of more than one year

maturity, or the sale, alienation, lease , merger or consolidation to be
approved, and that the same are not detrimental to the public interest,
and in case of a sale, the date on which the same is to be consummated
shall be fixed in the order of approval: Provided, however, that nothing
herein contained shall be construed to prevent the transaction from
being negotiated or completed before its approval or to prevent the
sale, alienation, or lease by any public service of any of its property in
the ordinary course of its business.
(h) To sell or register in its books the transfer or sale of shares of

its capital stock, if the result of that sale in itself or in connection with
another previous sale, shall be to vest in the transferee more than 40%
of the subscribed capital of said public service. Any transfer made in
violation of this provision shall be void and of no effect and shall not be
registered in the books of the public service corporation. Nothing
herein contained shall be construed to prevent the holding of shares
lawfully acquired.
(i) To sell, alienate or in any manner transfer shares of its capital

stock to any alien if the result of that sale, alienation, or transfer in
itself or in connection with another previous sale shall be the reduction
to less than 60% of the capital stock belonging to Philippine citizens.
Such sale, alienation or transfer shall be void and of no effect and shall
be sufficient cause for ordering the cancellation of the certificate.
(b) The Certificate of Public Convenience (CPC), the

Certificate of Public Convenience and Necessity (CPCN), and the
Prior Operator Rule
Difference between CPC and CPCN : A CPCN is issued by the PSC to a public
service to which any political subdivision has granted a franchise under Act 667
after the PSC has approved the same under Section 16(b). A CPC is any
authorization to operate a public service issued by the PSC. A CPC is an
authorization issued by the Commission for the operation of public services for
which no franchise, either municipal or legislative, is required by law (e.g. auto-
trucks and motor vehicles). A CPCN is an authorization issued by the PSC for the
operation of public services for which a franchise is required by law (e.g. electric,
telephone services).
Nature of certificate : It constitutes neither a franchise nor a contract, confers no

property rights and is a mere license or privilege, and such privilege is forfeited
when the grantee fails to comply with his commitments behind which lies the
paramount interest of the public, for public necessity cannot be made to wait,
nor sacrificed for private convenience.
However, certificates represent property rights to the extent that if the
rights which any public utility is exercising pursuant to lawful orders of the PSC
has been invaded by another public utility, in appropriate cases actions may be
maintained by the complainant public utility. Owners of public utilities have the
PAGE 12
right to maintain appropriate actions against other public utilities not authorized
to operate in competition with the complainant.
Certificates are considered as property as used in Civil Procedure as they
have material value and are material assets. They are subject to attachment and
seizure by legal process, and may be acquired by purchase.
Determination of WON an issuance of a certificate is for public convenience - (1)

financial responsibility of the applicant, (2) reliability of the applicant, (3) priority
of filing the application for a certificate, and (4) priority of operation
Prior operator rule - to carry out the purpose and intent for which the PSC was
created the law contemplates that the first licensee will be protected in his
investment and will not be subjected to a ruinous competition. It is not therefore
the policy of the law for the PSC to issue a CPC to a second operator to cover the
same field and in competition with a first operator who is rendering sufficient,
adequate and satisfactory service, and who in all things and respects is
complying with the rules and regulations of the PSC. Accordingly, a CPC or CPCN
ought not to be granted where there is no complaint as to existing rates and the
co. in the field is rendering adequate services.
- regular operators are preferred over irregular operators
- prior operator is given opportunity to improve service
- prior operator given opportunity to extend lines
- basis of rule : to prevent ruinous and wasteful competition in order that the
interests of the public would be conserved and preserved; so long as the
operator complied with the terms and conditions of the license and the
reasonable demands of the public, it is the duty of the PSC to protect rather than
to destroy its investment
Raymundo vs Luneta Motor 58 Phil 889
F: Nicanor de Guzman signing as Guzco Transit purchased trucks from Luneta Motor
and executed PNs guaranteed by a chattel mortgage on several trucks. Failing to pay
the PNs, a suit for collection was filed. A writ of attachment was issued and garnishment
was served on the PSC attaching the right, title, and participation of Guzco Transit in the
CPC covering the bus transportation lines between Manila and Rizal. The CFI ordered the
selling of these certificates in a public bidding in which Luneta Motor was the highest
bidder.
Nine days after the certificates were attached, these were sold to Raymundo
(including certificate No. 25951 which was not included in the sale to Luneta Motor Co.).
The approval of the sale was sought from the PSC. The PSC approved the sale in the
public bidding and disapproved the sale to Raymundo except with respect to Certificate
No. 25951 which Raymundo could apply for its approval.
Issue : Which of the two sales should prevail? public auction by virtue of an
attachment vs voluntary sale
Held : Sale to Luneta Motor Co. in a public auction
The Public Service Law authorizes certificates of public convenience to be
secured by public service operators from the PSC. A CPC grants a right in the
nature of a limited franchise. The Code of Civil Procedure does not exclude
franchises or certificates from the word "property." The test by which to
determine WON a property can be attached and sold upon execution is whether
PAGE 13
the judgment debtor has such a beneficial interest therein that he can sell or
otherwise dispose of it for value. The Public Service Law permits the PSC to
approve the sale, alienation, mortgaging, encumbering or leasing of property,
franchises, privileges, or rights or any part thereof. If the holder of a certificate
can voluntary sell it, there is no reason why the same cannot be sold
involuntarily pursuant to court process.
CPCs have considerable material value. They are valuable assets. They are
subject to being sold for consideration as much as any other property. They are
even more valuable than ordinary properties, taking into consideration that they
are not granted to every one who applies for them but only to those who
undertake to furnish satisfactory and convenient service to the public. Though
intangible, they are of value and are considered properties which can be seized
through legal process.
Batangas Transportation Co. vs Orlanes 52 Phil 455
F: Orlanes sought to have a CPC to operate a line of auto trucks with fixed times of
departure between Taal and Bantilan, with the right to receive passengers and freight
from intermediate points. The evidence is conclusive that at the time of his application,
Orlanes was an irregular operator between Bantilan and Taal, and that BTC was a
regular operator between Batangas and Rosario. Orlanes sought to have his irregular
operation changed into a regular operation, and to set aside and nullify the prohibition
against him in his CPC that he shall not have or receive any passengers or freight at any
of the points served by the BTC which holds a prior license from the PSC. His petition is
based on the fact that to comply with the growing demands of the public, the BTC
applied for a permit to increase the no. of trip hours at and between the same places
and for an order that all irregular operators be prohibited from operating unless they
should observe an interval of 2 hours before or one hour after the regular hours of the
BTC. The PSC granted the petition of Orlanes.
Issue : WON a CPC should be issued to a second operator in a field where, and in
competition with, a first operator who is already operating a sufficient, adequate
and satisfactory service.
Held : NO. Decision of PSC is revoked.

An autobus line is a public utility, and as such, is a common carrier and an
impt. factor in the business affairs of the community.
The PSC has the power to specify and define the terms and conditions
upon which any public utility shall operate and to make reasonable rules and
regulations for its operation, and to fix the compensation that it shall receive for
its service to the public, and for good cause may suspend or even revoke a
license granted.
It is not the policy of the law for the PSC to issue a CPC to a second
operator to cover the same field and in competition with a first operator who is
rendering sufficient, adequate and satisfactory service, and who in all things and
respects is complying with the rules and regulations of the PSC.
The power of the PSC to issue a CPC is founded on the condition precedent
that after a full hearing and investigation, it shall find as a fact that the proposed
operation is for the convenience of the public.
PAGE 14
So long as the first operator keeps and performs his terms and conditions
of its license and complies with the reasonable demands of the public, it has
more or less of a vested and preferential right over another who seeks to
acquire a later license to operate over the same route.
To carry out the purpose and intent for which the PSC was created, the law
contemplates that the first license will be protected in his investment and will not
be subjected to ruinous competition.
The primary purpose of the PSC is to secure adequate, sustained service
for the public at the least possible cost and to protect and conserve investments
which have already been made for that purpose. A CPCN for the operation of an
auto truck line in occupied territory should not be granted where there is no
complaint as to existing rates and the co. in the field is rendering adequate
service. It is the duty of the PSC to protect rather than to destroy the
investment of a public utility.
The policy of regulation upon which the present public utility commission
plan is based and which tends to do away with competition among public utilities
as they are natural monopolies, is at once the reason that the regulation of an
existing system of transportation, which is properly serving a given field, or may
be required to do so, is to be preferred to competition among several
independent systems. While requiring a proper service from a single system for
a territory in consideration for protecting it as a monopoly for all the service
required and in conserving its resources, no economic waste results and service
may be furnished at a minimum cost.
Carmelo vs Monserrat 55 Phil 644
F: Monserrat twice applied to Congress for an exclusive franchise to operate a

taxicab service in Manila. The Governor General twice vetoed the bill. Monserrat then
applied to the PSC for a CPC. It was granted.
Carmelo and Oriol then applied to the PSC for a CPC to operate a taxicab service
within Manila. Monserrat opposed. The PSC denied the application.
Held : There is no valid, legal reason why Monserrat should have the exclusive
right of operating a taxicab service. In the granting and refusal of a CPC, the
question is what is for the best interest of the public. Tested by that rule, it is
hard to conceive how it would be for the best interests of the public to have one
taxicab service only, and how the public would be injured by the granting of the
certificate in question, for it must be conceded that two companies in the field
would stimulate the business, and the public would much sooner and much
easier become educated in the use of taxi.
Monserrat does not have a vested right in the business of any person that
might want the use of a taxi, for the simple reason that the use of any taxi is the
sole discretion of the customer. This is unlike the BTC case which dealt with an
autobus service with fixed schedules and routes.
PAGE 15
San Pablo vs Pantranco South Express, Inc. 153 SCRA 199
F: Pantranco operates passenger buses from Metro Manila to Bicol and Eastern
Samar. It wrote to the Maritime Industry Authority (MARINA) requesting authority to
lease/purchase MV Black Double to be used in operating a ferryboat service from
Matnog, Sorsogon and Allen, Samar that will provide service to co. buses and freight
trucks that have to cross the Bernardo Strait. MARINA denied the petition on the ground
that the Matnog- Allen run is adequately serviced by the Cardinal Shipping Corp. and
Epitacio San Pablo and that market conditions cannot support the entry of additional
tonnage.
Pantranco acquired the vessel. It then applied to BOT claiming that it can operate
a ferry service in connection with its franchise for bus operation in the highway from
Pasay City to Tacloban City for the purpose of continuing the highway, which is
interrupted by a small body of water, and that the proposed ferry operation is merely a
necessary and incidental service to its main service and obligation of transferring
passengers from Pasay City to Tacloban City. Accdg. to it, there is no need to obtain a
separate CPC to operate a ferry service to cater exclusively to its passenger buses and
ferry trucks. Pantranco began operating its ferry service. The BOT held that the
ferryboat service is part of Pantranco's CPC and amended Pantranco's CPC to provide so.
The two other ferry boat services filed motions for reconsideration.
Issue : WON the sea can be considered as a continuation of the highway. WON a
land transpo co. can be authorized to operate a ferry service or coastwise or
interisland shipping service along its authorized route as an incident to its
franchise without the need of filing a separate application for the same.
Held : The water transport service between Matnog and Allen is not a ferryboat
service but a coastwise or interisland shipping service. Before private
respondent may be issued a franchise or CPC for the operation of the said service
as a common carrier, it must comply with the usual reqts. of filing an application,
payment of the fees, publication, adducing evidence at a hearing and affording
the oppositors the opportunity to be heard.
Considering the environmental circumstances of the case, the conveyance
of passengers from Matnog to Allen is not a ferryboat service but a coastwise or
interisland shipping service. Under no circumstances can the sea between
Matnog and Allen be considered a continuation of the highway. While a ferryboat
service has been considered as a continuation of the highway when crossing
rivers or even lakes, which are small body of waters separating the land,
however, when as in this case the two terminals are separated by an open sea, it
cannot be considered a continuation of the highway. Pantranco must secure a
separate CPC for the operation of an interisland or coastwise shipping service.
Its CPC cannot be merely amended to include this water service under the guise
that it is a mere private ferry service.
Pantranco does not deny that it charges its passengers separately from
the charges for the bus trips and issues separate tickets whenever they board
the MV Black Double. It cannot pretend that it issued tickets as a private carrier
and not as a common carrier. It in fact accepts walk in passengers during the
trips. It cannot claim that it is both a private carrier and a common carrier at the
same time.
In the case of Javellana vs PSC, the Court differentiated between ferry

service and interisland or coastwide service. Ferry means service either by
PAGE 16
barges or rafts, even by motor or steam vessels, between the banks of a river or
stream to continue the highway which is interrupted by a body of water, or in
some cases, to connect two points on opposite shores of an arm of the sea such
as a bay or lake which does not involve too great a distance or too long a time to
navigate. But where the line or service involves crossing a body of water which
is wide and dangerous with big waves, then such line or service belongs properly
to interisland or coastwide trade.
3. Private nature: rights and obligations of parties inter se arising
from transactions relating to transportation
(a) absent a transportation contract
(b) arising from a transportation contract
(i) contract of transportation, defined - one whereby a

certain person or association of persons obligate themselves
to transport persons, things or news from one place to
another for a fixed price
(ii) contract of transportation, elements
Parties to the contract :
1. shipper - one who gives rise to the contract of transportation by

agreeing to deliver the things or news to be transported, or to present his own
person or those of other or others in the case of transportation of passengers
2. carrier or conductor - one who binds himself to transport persons,
things, or news as the case may be or one employed in or engaged in the
business of carrying goods for others for hire
Persons or corporations who undertake to transport or convey goods,

property, or persons from one place to another, gratuitously or for hire, and are
classified as private or special carriers and common or public carriers
C. Regulation of the Transportation Industry
* The Department of Transportation and Communications
EO 125, Sec. 4. Mandate. The DOTC shall be the primary policy,

planning, programming, coordinating, implementing, regulating, and
administrative entity of the Executive Branch of the govt. in the
promotion, devt. and regulation of dependable and coordinated
networks of transportation and communication systems, as well as in
the fast, safe, efficient, and reliable postal, transportation and
communication services.
To accomplish such mandate, the Dept. shall have the ff.
objectives:
(a) promote the devt. of dependable and coordinated networks of
transportation and communication systems;
PAGE 17
(b) guide govt. and private investments in the devt. of the

country's inter-modal transportation and communication system in a
most practical, expeditious, and orderly fashion for maximum safety,
service and cost effectiveness;
(c) impose appropriate measures so that technical, economic and
other conditions for the continuing economic viability of the
transportation and communication entities are not jeopardized and do
not encourage inefficiency and distortion of traffic patronage;
(d) develop an integrated plan for a nationwide transmission
system in accordance with national and intl. telecommunications
service reqts. including, among others, radio and television broadcast
relaying leased channel services and data transmission;
(e) guide govt. and private investments in the establishment,
operation and maintenance of an intl. switching system for incoming
and outgoing telecommunication services;
(f) encourage the devt. of a domestic telecommunications
industry in coordination with the concerned entities particularly, the
manufacture of communications/electronics equipment and components
to complement and support, as much as possible, the expansion,
development, operation and maintenance of the nationwide
telecommunication network;
(g) Provide for a safe, reliable and efficient postal system for the
country.
EO 125-A, Sec. 5. To accomplish its mandate, the Dept. shall have

the ff. powers and functions:
(a) formulate and recommend national policies and guidelines for
the preparation and implementation of integrated and comprehensive
transportation and communications systems at the national, regional
and local levels; (b) establish and administer comprehensive and
integrated programs for transportation and communications, xxx call
on any agency, corp., or organization xxx to participate and assist in
the preparation and implementation of such program;
(c) assess, review and provide direction to xxx research and devt.
programs of the govt xxx;
(d) administer and enforce all laws xxx in the field of
transportation and communication;
(e) coordinate with the DPWH in the design, location, devt,
rehabilitation, improvement, etc. of all infrastructure projects and
facilities of the Dept. xxx
(f) establish, operate and maintain a nationwide postal system
xxx;
(g) issue certificates of public convenience for the operation of
public land and rail transportation utilities and services;
(h) accredit foreign aircraft and manufactures xxx;
(i) establish and prescribe rules and regulations for identification
of routes, zones and/or areas of operation of particular operator of
public land services;
PAGE 18
(j) establish and prescribe rules xxx for the establishment,

operation and maintenance of such telecommunication facilities in
areas not adequately served by the private sector xxx;
(k) establish and prescribe rules xxx operation and maintenance
of a nationwide postal system xxx;
(l) establish and prescribe rules xxx issuance of CPCs for public
land transportation utilities, such as motor vehicles, trimobiles, and
railways;
(m) establish and prescribe rules xxx inspection and registration
of air and land transportation facilities, such as motor vehicles,
trimobiles, and aircrafts;
(n) establish and prescribe rules xxx issuance of licenses xxx;
(o) establish and prescribe rules xxx enforcement of laws
governing transportation xxx;
(p) determine, fix and/or prescribe charges and/or rates pertinent
to the operation of public air and land transportation utility facilities
and services xxx;
(q) establish and prescribe rules xxx accreditation of driving
schools;
(r) administer and operate the Civil Aviation Training Center xxx;
(s) perform such other powers and functions as it may be
prescribed by law, or as may be necessary, incidental, or proper to its
mandate, or as may be assigned from time to time by the President.
(a) Air
(i) Air Transportation Office
EO 125, as amended by EO 125-A

Sec. 10. Assistant Secretaries and Service Chiefs.
xxx
h) Office of the Assistant Secretary for Air Transportation
Sec. 11. xxx The present Airport Offices of the Bureau of Air
Transportation are hereby abolished and their functions are transferred
to the Dept. Airport Offices. xxx
Sec. 13. xxx

d) The Civil Aeronautics Board is hereby transferred from the
Dept. of Tourism to the Dept. as an attached agency xxx. The Secretary
of Transportation and Communications or his designated representative
shall be the Chairman of the Board xxx
Sec. 25, RA 776. The Civil Aeronautics Administration shall be

under the administrative supervision and control of the Dept. of
Commerce and Industry (now the DOTC) xxx
PAGE 19
(ii) Civil Aeronautics Board
RA 776, as amended
Section 5. The Civil Aeronautics Board shall be composed of the

Secretary of Commerce and Industry (now DOTC) as Chairman, the CAB
Administrator, the Commanding Officer of the Phil. Air Force, and 2
others to be appointed by the President xxx
Section 10 (A) Except as otherwise provided herein, the Board

shall have the power to regulate the economic aspect of air
transportation, and shall have the general supervision and regulation
of, and jurisdiction and control over, air carriers, as well as their
property, property rights, equipment, facilities, and franchise, in so far
as may be necessary for the purpose of carrying out the provisions of
this Act.
Section 10 (C) Powers and Duties of the CAB

1. issue, deny, amend, revise, alter, modify, cancel, suspend, or
revoke xxx any temporary operating permit or CPCN xxx
2. fix and determine reasonable individual, joint or special rates,
charges, or fares which an air carrier may demand, collect or receive for
any service in connection with air commerce xxx
3. authorize charters whether domestic or intl. and special air
services or flights xxx;
4. approve or disapprove increase of capital, sale of equipment of
an air carrier engaged in air commerce, consolidation, merger,
purchase, lease, operating contract, or acquisition and control between
domestic air carriers xxx
5. inquire into the mgmt. of the business of any air carrier xxx;
6. require annual, monthly, periodical and special reports from
any carrier xxx;
7. prescribe the forms of any and all accounts, records, and
memoranda of the movement of traffic, as well as of the receipt and
expenditures of money and the length of time such accounts, records,
and memoranda shall be preserved xxx;
8. require each officer and director of any air carrier to transmit a
report describing the shares of stock or other interest held by such air
carrier with any person engaged in any phase of aeronautics, and the
holding of the stock in, and control of, other persons engaged in any
phase of aeronautics.
Section 11. A CPCN is a permit issued by the Board authorizing a

person to engage in air commerce and/or air transportation, foreign
and/or domestic.
Any permit may be altered, amended, modified, suspended,
canceled and revoked by the Board xxx whenever the Board finds such
action to be in the public interest.
PAGE 20
There shall be attached to the exercise of the privileges xxx such

reasonable terms, conditions, or limitations as, in the judgment of the
Board, the public interest may require.
xxx
Section 12. Except as otherwise provided in the Constitution and

existing treaty or treaties, a permit authorizing a person to engage in
domestic air commerce and/or air transportation shall be issued only to
citizens of the Philippines.
(b) Land
(i) Land Transportation Office

EO 125-A
Section 9. Assistant Secretaries and Service Chiefs

xxx
e) Office of the Assistant Secretary for Land Transportation
Section 11. xxx The present Regional Offices of the Land

Transportation Commission are hereby abolished and their functions
are transferred to the respective Department Regional offices for Land
Transportation. xxx
Section 13 (a) The Land Transportation Commission is hereby

abolished and its staff functions are transferred to the service offices of
the Dept. Proper and line functions are transferred to the Dept.
Regional Offices for Land Transportation as provided in Section 11
herein. xxx The quasi-judicial powers and functions of the Commission
are transferred to the Dept. The corresponding position structure and
staffing pattern shall be approved and prescribed by the Secretary xxx.
Administrative Code of 1987, Title XV
Sec. 9. The Department shall have the following line offices :

(1) The Office of the Assistant Secretary for Land Transportation.
xxx
(ii) Land Transportation Franchising and Regulatory

Board
EO 202
Sec.1. There is hereby created in the DOTC, the Land

Transportation Franchising and Regulatory Board.
Sec.2. The Board shall be composed of a Chairman and 2 members

with the same rank, salary and privileges of an Assistant Secretary, xxx
PAGE 21
Sec.4. The Secretary of Transportation and Communications,

through his duly designated Undersecretary, shall exercise
administrative supervision and control over the LTFRB.
Sec.5. Powers and functions:

a. prescribe and regulate routes of service, xxx zones or areas of
operation of public land transportation services provided by motorized
vehicles xxx;
b. issue, amend, revise, suspend or cancel CPCs or permits
authorizing the operation of public land transportation services
provided by motorized vehicles xxx;
c. determine, prescribe, approve and periodically review and
adjust reasonable fares, rates and other related charges, relative to the
operation of public land transportation services provided by motorized
vehicles;
d. issue preliminary or permanent injunction xxx;
e. punish for contempt of the Board, both direct and indirect xxx;
f. issue subpoena and subpoena duces tecum and to summon
witnesses to appear in any proceedings of the Board, to administer
oaths and affirmations;
g. conduct investigations and hearings of complaints for violation
of the public service laws on land transportation and of the Board's
rules and regulations xxx;
h. to review motu proprio the decisions, actions of the Regional
Franchising and Regulatory Office herein created;
i. promulgate rules and regulations governing proceedings before
the Board and the Regional Franchising and Regulatory Office xxx;
j. fix, impose, and collect, and periodically review and adjust
reasonable fees and other related charges for services rendered;
k. formulate, promulgate, administer, implement and enforce
rules and regulations on land transportation public utilities, standards
of measurements and/or design, and rules and regulations requiring
operators of any public land transportation service to equip, install and
provide in their utilities and in their stations such devices, eqpt.
facilities and operating procedures and techniques as may promote
safety, protection, comfort and convenience to persons and property in
their charges as well as the safety of persons and property within their
areas of operations;
l. coordinate and cooperate with other govt. agencies and entities
xxx;
m. perform such other functions and duties as may be provided by
law, or as may be necessary, or proper or incidental to the purposes
and objectives of this Executive Order.
Sec.6. The Board xxx shall sit and render its decision en banc; xxx
concurrence and signature of at least 2 members xxx
The decision shall be appealable to the Secretary within 30 days
from receipt of the decision; Provided, that the Secretary may motu
PAGE 22
proprio review any decision or action of the Board before the same
becomes final.
Sec.7. There shall be a Regional Franchising and Regulatory Office

in each of the administrative regions of the country which shall be
headed by a Board Regional Manager having the rank, salary and
privileges of a Dept. Assistant Regional Director. The Regional
Franchising and Regulatory Offices shall hear and decide uncontested
applications/petitions for routes, within their respective administrative
regions: Provided, that applications/petitions for routes extending their
respective territorial jurisdictions shall be heard and decided by the
Board.
Administrative Code, Title XV
Sec. 15. The quasi-judicial powers and functions with respect to

land transportation shall be exercised through the Land Transportation
and Regulatory Board.
Sec. 16. The Board shall be composed of a Chairman and 2

members with the rank, salary and privileges of an Assistant Secretary,
all of whom shall be appointed by the President upon the
recommendation of the Secretary of Transportation and
Communications xxx
Sec. 17. The Board shall have an Executive Director who shall also
be appointed by the President xxx. He shall have the rank, salary and
privileges of a Dept. Service Chief. He shall assist the Board in the
performance of its powers and functions.
The Board shall be supported by the Technical Evaluation
Division, Legal Division, Management Information Division,
Administrative Division and Finance Division.
Sec. 18. The Secretary of Transportation and Communications

shall exercise administrative supervision and control over the Board.
Sec. 19. Powers and functions of the Board:

1. prescribe and regulate routes xxx;
2. issue, amend, revise, suspend, or cancel CPCs or permits, xxx;
3. determine, prescribe, approve and periodically review and
adjust reasonable fares xxx;
4. issue injunctions xxx;
5. punish for contempt of the Board xxx;
6. issue subpoena and subpoena duces tecum and to summon
witnesses xxx; 7. conduct investigations and hearings of
complaints for violation of the public service laws on land
transportation xxx;
PAGE 23
8. review motu proprio the decisions, actions of the Regional

Franchising and Regulatory Offices xxx;
9. promulgate rules and regulations governing proceedings
before the Board and the Regional Franchising and Regulatory Office
xxx;
10. fix, impose and collect, and periodically review and adjust
reasonable fees, and other related charges for services rendered;
11. formulate, promulgate, administer, implement and enforce
rules and regulations on land transportation xxx;
12. coordinate and cooperate with other govt. agencies and
entities concerned with any aspect involving public land transportation
services xxx;
13. perform such other functions and duties as may be provided
by law, or as may be necessary, or proper or incidental to the purposes
and objectives of the Dept.
Sec. 20. The Board shall xxx sit and decide en banc; concurrence
and signature of at least 2 members; decision shall be appealable to the
Secretary within 30 days from receipt of the decision; the Secretary
may motu proprio review any decision or action of the Board before it
becomes final.
Sec. 21. Regional Franchising and Regulatory Offices - hear and

decide uncontested applications/ petitions for routes xxx;
Sec. 22. decisions of the Regional Franchising and Regulatory

Offices shall be appealable to the Board within 30 days from receipt of
the decision.
(c) Water
(i) Maritime Industry Authority
EO 125, Sec. 14 as amended by EO 125-A, Sec. 3
The Maritime Industry Authority is hereby retained and shall have

the ff. functions:
a. develop and formulate plans, policies, projects xxx geared
toward the promotion and devt. of the maritime industry, the growth
and effective regulation of shipping enterprises, and for the national
security objectives of the country;
b. establish, prescribe and regulate routes, zones and/or areas of
operation of particular operators of public water services;
c. issue CPCs for the operation of domestic and overseas water
carriers;
d. register vessels as well as issue certificates, licenses or
document necessary or incident thereto;
PAGE 24
e. undertake the safety regulatory functions pertaining to vessel

construction and operation including the determination or manning
levels and issuance of certificates of competency to seamen;
f. enforce laws, prescribe and enforce rules and regulations,
including penalties for violations thereof, governing water
transportation and the Phil. merchant marine xxx;
g. undertake the issuance of licenses to qualified seamen and
harbor, bay and river pilots;
h. determine, fix, prescribe charges/rates pertinent to the
operation of public water transport utilities xxx;
i. accredit marine surveyors and maritime enterprises engaged in
shipbuilding, ship repair xxx;
j. issue and register the continuous discharge book of Filipino
seamen;
k. establish and prescribe rules and regulations, standards and
procedures for the efficient and effective discharge of the above
functions;
l. perform such other functions as may now or hereafter be
provided by law.
PAGE 25
II. Common Carriers
A. In General
1. Definitions; essential elements
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.
Aguedo F. Agbayani, COMMERCIAL LAWS OF THE PHILIPPINES, vol. 4, 1989 ed.

(hereinafter 4 Agbayani)
Transportation defined.-- a contract of transportation is one whereby a

certain person or association of persons obligate themselves to transport
persons, things, or news from one place to another for a fixed price
Classification :
1. As to object: (1) things; (2) persons; (3) news
2. As to place of travel: (1) land; (2) water; (3) air
Parties to contract of transportation:
(1) shipper or consignor.-- person to be transported; one who gives rise to

the contract of transportation by agreeing to deliver the things or news to be
transported, or to present his own person or those of other or others in the case
of transportation of passengers
(2) carrier or conductor.-- one who binds himself to transport persons,
things, or news as the case may be; one employed in or engaged in the business
of carrying goods for other for hire
(3) consignee.-- the party to whom the carrier is to deliver the things being
transported; one to whom the carrier may lawfully make delivery in accordance
with its contract of carriage (but the shipper and the consignee may be one
person)
Freight defined.-- The terms has been defined as: (1) the price or
compensation paid for the transportation of goods by a carrier, at sea, from port
to port. But the term is also used to denote (2) the hire paid for the carriage of
goods on land from place to place, or on inland streams or lakes. The name is
also applied to (3) the goods or merchandise transported at sea, on land, or
PAGE 26
inland streams or lakes. Thus the term is used in 2 senses: to designate the
price for the carriage, also called freightage, or to designate the goods carried.
Contracts through transportation agents.-- A contract of transportation is

not changed, altered or affected by the mere fact that the obligor avails of other
parties to effect the transportation agreed upon, as in the case of transportation
agents.
Carriers defined.-- Persons or corporations who undertake to transport or

convey goods, property or persons, from one place to another, gratuitously or for
hire, and are classified as private or special carriers, and common or public
carriers
Private carriers defined.-- Those who transport or undertake to transport in a

particular instance for hire or reward
Common carriers vs Private carriers:
(1) the common carrier holds (1) the private carrier agrees
himself out in common, that is, in some special case with
some
to all persons who choose to em- private individual to carry
ploy him, as ready to carry for for hire

hire; no one can be a common
carrier unless he has held himself
out to the public as a carrier in
such a manner as to render him
liable to an action if he should
refuse to carry for anyone who
wished to employ him
(2) a common carrier is bound to (2) a private carrier is not

carry all who offer such goods as bound to carry for any
reason,
it is accustomed to carry and unless it enter into a
special
tender reasonable compensation agreement to do so
for carrying them
(3) a common carrier is a public service (3) a private carrier

does not
and is therefore subject to regulation hold itself out as
engaged in
the business for the public,
and is therefore not subject
to regulation as a common
carrier
PAGE 27
Test for a common carrier:
(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 persons generally as a business, and not 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 methods by which his business is
conducted, and over his established roads.
(4) The transportation must be for hire.
The true test 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 actually
transacted, or the no. and character of the conveyances used in the employment
(the test is therefore the character of the business actually carried on by the
carrier.)
Case : an airplane owner is a common carrier where he undertakes for hire to

carry all persons who apply for passage indiscriminately as long as there is room
and no legal excuse for refusing; airlines engaged in the passenger service on
regular schedules on definite routes, who solicit patronage of the traveling
public, advertise schedules for routes, times of leaving and rates of fare, and
make the usual stipulation as to baggage are common carriers
Characteristics of common carriers:
(1) The common carrier undertakes to carry for all people indifferently; he
holds himself out as ready to engage in the transportation of goods for hire as a
public employment and not as a casual occupation, and he undertakes to carry
for all persons indifferently, within the limits of his capacity and the sphere of the
business required of him, so that he is bound to serve all who apply and is liable
for refusal, without sufficient reason, to do so
(2) The common carrier cannot lawfully decline to accept a particular class
of goods for carriage to the prejudice of the traffic in those goods
Exception : for some sufficient reason, where the discrimination in such
goods is reasonable and necessary (substantial grounds)
(3) No monopoly is favored - the Commission has the power to say what is
a reasonable compensation to the utility and to make reasonable rules and
regulations for the convenience of the traveling public and to enforce them
(4) Public convenience - for the best interests of the public
Meaning of Public use.-- It is not confined to privileged individuals, but is open

to the indefinite public; there must be a right which the law compels the owner
to give to the general public. Public use is not synonymous with public interest.
The true criterion is whether the public may enjoy it by right or only by
permission
PAGE 28
The law prohibits unreasonable discrimination by common carriers.--

The law requires common carriers to carry for all persons, either passengers or
property, for exactly the same charge for a like or contemporaneous service in
the transportation of like kind of traffic under substantially similar circumstances
or conditions. The law prohibits common carriers (CC) from subjecting any
person, etc. or locality, or any kind of traffic, to any undue or unreasonable
prejudice or discrimination whatsoever.
Exception: When the actual cost of handling and transporting is different,
then different rates may be charged
Cases : (1) merchandise of like quantity may not be considered alike - the
quantity, kind and quality may be exactly the same, and yet not be alike, so far
as the cost of transportation is concerned
(2) shipments may be alike although composed of different classes of
merchandise - difference in the charge for handling and transporting may only be
made when the difference is based upon actual cost
Determination of justifiable refusal:
This involves a consideration of the following--
(1) suitability of the vessels of the company for the transportation of such
products;
(2) reasonable possibility of danger or disaster, resulting from their
transportation in the form and under the conditions in which they are offered for
carriage;
(3) the general nature of the business done by the carrier;
(4) all the attendant circumstances which might affect the question of the
reasonable necessity for the refusal by the carrier to undertake the
transportation of this class of merchandise
Case: The mere fact that the carriage of dynamites may lead to destructive
explosions is not sufficient to justify refusal if it can be proven that in the
condition in which it is offered for carriage there is no real danger to the carrier
nor reasonable ground to fear that the vessel and those on board will be
exposed to unnecessary or unreasonable risks
US vs Tan Piaco, 40 Phil 853
F: Tan Piaco rented two automobile trucks and was using them upon the highways
of Leyte for the purpose of carrying some passengers and freight. He carried
passengers and freight under a special contract in each case and had not held himself
out to carry all passengers and freight for all persons who might offer passengers and
freight. He was convicted for violation of the Public Utility Law for operating a public
utility without permission from the Public Utility Commission.
Issue: WON defendant operated a public utility. NO.
PAGE 29
Held: There is no public use. The trucks were used under special agreements to
carry particular persons and property.
Under the Public Service Law, two things are necessary : (1) the individual,
co-partnership, etc. must be a public utility; and (2) the business in which such
individual, co-partnership, etc. is engaged must be for public use. "Public use"
means the same as "use by the public." The essential feature of public use is that
it is not confined to privileged individuals, but is open to the indefinite public. In
determining whether a use is public, we must look not only to the character of
the business to be done, but also to the proposed mode of doing it. If the use is
merely optional with the owners, or the public benefit is merely incidental, it is
not a public use, authorizing the exercise of the jurisdiction of the public utility
commission. There must be, in general, a right which the law compels the owner
to give to the general public. It is not enough that the general prosperity of the
public is promoted. Public use is not synonymous with public interest. The true
criterion by which to judge the character of the use is whether the public may
enjoy it by right or only by permission.
Home Insurance Co. vs American Steamship Agencies, 23 SCRA 24
F: A Peruvian firm shipped fishmeal through the SS Crowborough consigned to the

SMB and insured by the Home Insurance Co. The cargo arrived with shortages. SMB
demanded and Home Insurance Co. paid P14,000 in settlement of SMB's claim. Home
Insurance filed for recovery from Luzon Stevedoring and American Steamship Agencies.
Luzon Stevedoring claimed that it merely delivered what it received from the carrier in
the same condition it received it. American Steamship contended that it was not liable
because of a stipulation in the charter party that the charterer and not the shipowner
was to be liable for any loss or damage to the cargo. The CFI absolved Luzon
Stevedoring but ordered American Steamship to reimburse the P14,000 to Home
Insurance, declaring that Art. 587 of the Code of Commerce makes the ship agent civilly
liable for damages in favor of third persons due to the conduct of carrier's captain and
that the stipulation in the charter party exempting owner from liability is against public
policy under Art. 1744 of NCC.
Issue : Is the stipulation valid? YES.
Held : The provisions of our Civil Code on common carriers were taken from
Anglo-American law. Under American jurisprudence, a common carrier
undertaking to carry a special cargo or chartered to a special person only,
becomes a private carrier. As a private carrier, a stipulation exempting the
owner from liability for the negligence of its agents is not against public policy
and is deemed valid.
The Civil Code provisions on common carriers should not be applied where
the carrier is not acting as such but as a private carrier. The stipulation in the
charter party absolving the owner from liability for loss due to the negligence of
the agent would be void only if the strict public policy governing CC is applied.
Such policy has no force where the public at large is not involved, as in the case
of a ship totally chartered (as in this case) for the use of a single party. Based on
the stipulation, recovery cannot be had, for loss or damage to the cargo against
shipowners, unless the same is due to personal acts or negligence of said owner
PAGE 30
or its managers, as distinguished from agents or employees. No personal act or

negligence has been proved.
In a charter of the entire vessel, the bill of lading issued by the master to
the charterer, as shipper, is in fact and legal contemplation merely a receipt and
a document of title and not a contract, for the contract is the charter party.
De Guzman vs CA, 168 SCRA 612
F: Cendana was a junk dealer and was engaged in buying used bottles and scrap
materials in Pangasinan and brought these to Manila for resale. He used two 6-wheeler
trucks. On the return trip to Pangasinan, he would load his vehicles with cargo which
various merchants wanted delivered to Pangasinan. For that service, he charged freight
lower than regular rates. General Milk Co. contracted with him for the hauling of 750
cartons of mild. On the way to Pangasinan, one of the trucks was hijacked by armed men
who took with them the truck and its cargo and kidnapped the driver and his helper.
Only 150 cartons of milk were delivered. The Milk Co. sued to claim the value of the lost
merchandise based on an alleged contract of carriage. Cendana denied that he was a
common carrier and contended that he could not be liable for the loss since it was due to
force majeure. The TC ruled that he was a common carrier. The CA reversed.
Issue : WON Cendana is a common carrier. YES.
Held : Cendana is properly characterized as a common carrier even though he

merely backhauled goods for other merchants, and even if it was done on a
periodic basis rather than on a regular basis, and even if his principal occupation
was not the carriage of goods.
Art. 1732 makes no distinction between one whose principal business
activity is the carrying of persons or goods or both, and one who does such
carrying only as an ancillary activity. It also avoids making a distinction between
a person or enterprise offering transportation services on a regular or scheduled
basis and one offering service on an occasional, episodic or unscheduled basis.
Neither does it make a distinction 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 population.
The fact that Cendana does not hold a CPC is no excuse to exempt him
from incurring liabilities as a CC. Otherwise, it would be to reward persons who
fail to comply with applicable statutory reqts. and would be offensive to public
policy. The liability arises the moment a person or firm acts as a common
carrier, without regard to whether or not such carrier has also complied with the
requirements of the applicable regulatory statute and implementing regulations.
Issue : WON Cendana may be held liable for the loss of the milk. NO.
Held: Common carriers by the very nature of their business and for reasons of
public policy are held to a very high degree of care and diligence (extra-ordinary
diligence) in the carriage of goods as well as passengers. Article 1734 establishes
the general rule that CC are responsible for the loss, destruction, or deterioration
of the goods which they carry unless the same is due to the causes enumerated
therein. Such enumeration is a closed list. Causes falling outside the list, even if
they are force majeure, fall within the scope of Art. 1735 which provides that CC
PAGE 31
are presumed to have been at fault or to have acted negligently, unless they
prove that they observed extraordinary diligence required under Art. 1733.
However, Art. 1745 provides that a CC cannot be allowed to divest or
diminish his responsibility even for acts of strangers like thieves or robbers,
except where such thieves or robbers acted with grave or irresistible threat,
violence or force. The limits of extraordinary diligence are reached where there
is grave or irresistible threat, violence or force. In this case, the loss was quite
beyond the control of the CC. Even CC are not made absolute insurers against
all risks of travel and of transport of goods, and are not liable for acts or events
which cannot be foreseen or are inevitable, provided that they shall have
complied with the rigorous standard of extraordinary diligence.
Planters Products vs CA, G.R. 101503 (Sept. 15, 1993)
F: Planters purchased urea fertilizer from Mitsubishi, New York. The fertilizer was
shipped on MV Sun Plum, which is owned by KKKK, from Alaska to San Fernando, La
Union. A time charter party was entered into between Mitsubishi as shipper/charterer
and KKKK as shipowner. Upon arrival in the port, PPI unloaded the cargo. It took PPI 11
days to unload the cargo. PPI hired a marine and cargo surveyor to determine if there
was any shortage. A shortage and contamination of the fertilizer was discovered. PPI
sent a claim letter to SSA, the resident agent of KKKK for the amount of the loss. An
action for damages was filed. SSA contended that the provisions on CC do not apply to
them because they have become private carriers by reason of the charter-party. The TC
awarded damages. The CA reversed.
Issue : Does a charter party between a shipowner and a charterer transform a CC

into a private one as to negate the civil law presumption of negligence in case of
loss or damage to its cargo? NO.
Held : A charter-party is a contract by which an entire ship, or some principal

part thereof, is let by the owner to another person for a specified time or use.
There are 2 kinds: (1) contract of affreightment which involves the use of
shipping space or vessels leased by the owner in part or as a whole, to carry
goods for others; and (2) charter by demise or bareboat charter where the whole
vessel is let to the charterer with a transfer to him of its entire command and
possession and consequent control over its navigation, including the master and
the crew, who are his servants.
It is not disputed that the carrier operates as a CC in the ordinary course of
business. When PPI chartered the vessel, the ship captain, its officers and crew
were under the employ of the shipowner and therefore continued to be under its
direct supervision and control. Thus it continued to be a public carrier.
It is therefore imperative that a public carrier shall remain as such,
notwithstanding the charter of the whole or portion of a vessel, provided the
charter is limited to the ship only, as in the case of a time-charter or a voyage-
charter. It is only when the charter includes both the vessel and the crew, as in
a bareboat or demise that a CC becomes private, insofar as such particular
voyage is concerned.
Issue : WON the carrier is liable for damages. NO.
PAGE 32
Held : The presumption of negligence on the part of respondent carrier has been
overcome by the showing of extraordinary zeal and assiduity exercised by the
carrier in the care of the cargo. On the other hand, no proof was adduced by the
petitioner showing that the carrier was remiss in the exercise of due diligence in
order to minimize the loss or damage to the goods it carried.
Coastwise Lighterage Corp. vs. CA, GR No. 114167, July 12, 1995
F: Pag-asa Sales, Inc. entered into a contract to transport molasses from Negros to
Mla. w/ Coastwise, using the latter's dumb barges. The barges were towed in tandem by
the tugboat MT Marcia, w/c is likewise owned by Coastwise.
Upon reaching Mla. Bay, while approaching Pier 18, one of the barges, "Coastwise
9," struck an unknown sunken object. The forward buoyancy compartment was
damaged, and water gushed in through a hole 2 inches wide and 22 inches long. As a
consequence, the molasses at the cargo tanks were contaminated and rendered unfit for
the use it was intended. This prompted the consignee, Pag-asa to reject the shipment of
molasses as a total loss. Thereafter, Pag-asa filed a formal claim w/ the insurer of its
cargo, herein pvt. resp., Phil. Gen. Insurance Co. (Philgen) and against the carrier, herein
petitioner Coastwise. Coastwise denied the claim and it was Philgen w/c paid the
consignee the amount of P700,000 representing the value of the damaged cargo of
molasses.
In turn, Phil-gen filed an action agsint Coastwise bef. RTC-Mla. seeking to recover
the P700,000 it paid to Pag-asa. RTC ruled in favor of Philgen. CA affirmed the RTC
decision. Hence, this petition.
RULINGS: (1) Bareboat charter and contract of affreightment, difference;

Coastwise, by the contract of affreightment, was not converted into a private
carrier, but remained a common carrier.-- Under the demise or bareboat charter
of the vessel, the charterer will generally be regarded as the owner of the voyage
or service stipulated. The charterer mans the vessel w/ his own people and
becomes the owner pro hac vice, subject to liability to others for damages
caused by negligence. To create a demise, the owner of a vessel must
completely and exclusively relinquish possession, command and navigation
thereof to the charterer; anything short of such a complete transfer is a contract
of affreightment (time or voyage charter party) or not a charter party at all.
A contract of affreightment is one in w/c the owner of the vessel leases
part or all of its space to haul goods for others. It is a contract for special service
to be rendered by the owner of the vessel and under such contract the general
owner retains the possession, command and navigation of the ships, the
charterer or freighter merely having use of the space in the vessel in return for
his payment of the charter hire. xxx
xxx
Although a charter party may transform a common carrier into a private
one, the same, however, is not true in a contract of affreightment on account of
the aforementioned distinctions bet. the two.
Petitioner admits that the contract it entered into w/ the consignee was
one of afreightment. We agree. Pag-asa only leased 3 of petitioner's vessels, in
order to carry cargo from one point to another, but the possession, command
and navigation of the vessels remained w/ petitioner.
PAGE 33
(2) Petitioner is liable for breach of contract of carriage, having failed to

overcome the presumption of negligence w/ the loss and destruction of goods it
transported, by proof of its exercise of extraordinary diligence.-- Mere proof of
delivery of goods to a carrier and the subsequent arrival of the same goods at
the place of destination in bad order makes for a prima facie case against the
carrier. Jesus Constantino, the patron of the vessel "Coastwise 9" admitted that
he was not licensed. This violates the rule in the Code of Commerce (Art. 609)
w/c requires that patrons must "have the legal capacity to contract in accordance
w/ this code, and prove the skill, capacity and qualifications necessary to
command and direct the vessel xxx and must be qualified xxx for the discharge
of the duties of the position. xxx" Coastwise cannot safely claim to have
extraordinary diligence, by placing a person whose navigational skills are
questionable, at the helm of the vessel w/c eventually met the fateful accident.
xxx Had the patron been licensed, he could be presumed to have both the skill
and the knowledge that would have prevented the vessel's hitting the sunken
derelict ship that lay on their way to Pier 8. RAM.
2. Nature of business; power of State to regulate
Art. 1765. The [Public Service Commission] Board of

Transportation may, on its own motion or on petition of any interested
party, after due hearing, cancel the certificate of public convenience
granted to any common carrier that repeatedly fails to comply with his
or its duty to observe extraordinary diligence as prescribed in this
Section.
4 Agbayani:
Common carriers are subject to legislative regulation.-- The business of a

common carrier holds such a peculiar relation to the public interest that there is
superinduced upon it the right of public regulation. The business of a common
carrier is affected with public interest. When, therefore, one devotes his property
to a use in which the public has an interest, he, in effect, grants to the public an
interest in that use, and must submit to be controlled by the public for the
common good, to the extent of the interest he had thus created.
Limitation on power to regulate.-- Such regulations must not have the effect
of depriving an owner of his property without due process of law, nor of
confiscating, or appropriating private property without just compensation, nor of
limiting or prescribing irrevocably vested rights or privileges lawfully acquired
under a charter or franchise [just compensation, due process of law]
When judiciary may interfere with legislative regulation of common

carriers.-- The judiciary ought not to interfere with legislative regulations
unless they are so plainly and palpably unreasonable as to make their
enforcement equivalent to the taking of property for public use without such
compensation as under all circumstances is just both to the owner and to the
public.
PAGE 34
Pantranco vs PSC, 70 Phil 221
F: Pantranco has been engaged for the past 20 years in the business of transporting
passengers by means of motor vehicles in accordance with the CPCN issued to it. It filed
with the PSC an application for authorization to operate 10 addtl. new trucks. The
application was granted with two conditions : (1) that the CPCN would be valid for only
25 years and (2) that the service can be acquired by the govt. upon payment of cost
price of its useful eqpt. less reasonable depreciation. Pantranco challenged the
constitutionality of Art. 15, CA 146 as an undue delegation of legislative powers.
Issue : WON the PSC may prescribe the 2 conditions as a prerequisite to the
issuance of the CPCN.
Held : Yes. CA 146 provides a sufficient standard, which is public interest, by

which the PSC is guided in imposing such conditions.
The business of a common carrier holds such a peculiar relation to the
public interest that there is superinduced upon it the right of public regulation.
When private property is affected with a public interest, it ceases to be juris
privati only. When, therefore, one devotes his property to a use in which the
public has an interest, he, in effect, grants to the public an interest in that use,
and must submit to be controlled by the public for the common good, to the
extent of the interest he had thus created. He may withdraw his grant by
discontinuing the use, but so long as he maintains the use, he must submit to
control. Indeed this right is so far beyond question that it is settled that the
power of the state to exercise legislative control over public utilities may be
exercised through the board of commissioners. This right of the state to regulate
public utilities is founded upon the police power, and statutes for the control and
regulation of utilities are a legitimate exercise thereof, for the protection of the
public as well as the utilities themselves. Such statutes are not unconstitutional,
either as impairing the obligation of contracts, taking property without due
process, or denying the equal protection of the laws, especially inasmuch as the
question WON private property shall be devoted to a public use and the
consequent burdens assumed is ordinarily for the owner to decide; and if he
voluntarily places his property in public service he cannot complain that it
becomes subject to the regulatory powers of the state. This is more so in the
light of authorities which hold that a CPC constitutes neither a franchise nor a
contract, confers no property rights and is a mere license or privilege.
3. Nature and Basis of Liability
Art. 1733. Common carriers, from the nature of their business

and for reasons of public policy, are bound to observe extraordinary
diligence in the vigilance over the goods and for the safety of the
passengers transported by them, according to the circumstances of
each case.
Such extraordinary diligence in the vigilance over the goods is
further expressed in Articles 1734, 1735, and 1745, Nos. 5,6, and 7,
PAGE 35
while the extraordinary diligence for the safety of the passengers is

further set forth in Articles 1755 and 1756.
Art. 1734. Common carriers are responsible for the loss,

destruction, or deterioration of the goods, unless the same is due
to any of the following causes only:
(1) Flood, storm, earthquake, lightning, or other natural
disaster or calamity;
(2) Act of the public enemy in war, whether international or
civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packaging
or in the containers;
(5) Order or act of competent public authority.
Art. 1735. In all cases other than those mentioned in Nos. 1,

2, 3, 4 and 5 of the preceding article, if the goods are lost,
destroyed or deteriorated, common carriers are presumed to have
been at fault or to have acted negligently, unless they prove that
they observed extraordinary diligence as required in Art. 1733.
Art. 1745. Any of the ff. or similar stipulations shall be

considered unreasonable, unjust and contrary to public policy:
xxx
(5) That the common carrier shall not be responsible for the
acts or omissions of his or its employees;
(6) That the common carrier's liability for acts committed by
thieves, or of robbers who do not act with grave or irresistible
threat, violence or force, is dispensed with or diminished;
(7) That the common carrier is not responsible for the loss,
destruction, or deterioration of goods on account of the defective
condition of the car, vehicle, ship, airplane or other equipment
used in the contract of carriage.
Art. 1755. A common carrier is bound to carry the

passengers safely as far as human care and foresight can provide,
using the utmost diligence of very cautious persons, with a due
regard for all circumstances.
Art. 1756. In case of death of or injuries to passengers,

common carriers are presumed to have been at fault or to have
acted negligently, unless they prove that they observed
extraordinary diligence as prescribed in articles 1733 and 1755.
4 Agbayani:
Extraordinary diligence required of common carriers.-- The law requires

CC to exercise extra-ordinary diligence which means that they must render
service with the greatest skill and utmost foresight. The extra-ordinary diligence
required of carriers in the handling of the goods of the shippers and consignees
last from the time the cargoes are loaded in the vessels until they are discharged
and delivered to the consignees.
PAGE 36
Reasons for requiring extra-ordinary diligence.-- The nature of the

business of common carriers and the exigencies of public policy demand that
they observe extra-ordinary diligence; the business of CC is impressed with a
special public duty and therefore subject to control and regulation by the state.
The public must of necessity rely on the care and skill of CC in the vigilance over
the goods and safety of the passengers
Rigorous law on common carriers not applicable to special employment

as carrier.-- The laws applicable to CC are rigorous and should not be extended
to a person who has neither expressly assumed that character, nor by his
conduct and from the nature of his business justified the belief on the part of the
public that he intended to assume it.
Registered owner primarily and solidarily liable with driver, under the
"kabit system."-- Registered owner is primarily and solidarily liable for the
damage caused by the vehicle registered in his name, even if the said vehicle
had already been sold, leased or transferred to another person who was, at the
time of the accident, actually operating the vehicle. The operator of record
continues to be the operator of the vehicle in contemplation of law, as regards
the public and third persons, and as such is responsible for the consequences
incident to its operation; such owner/operator of record is held in contemplation
of law as the employer of the driver.
Kabit system.-- One whereby a person who has been granted a certificate of
public convenience allows other persons who own vehicles to operate them
under such license, for a fee or percentage of the earnings. This is contrary to
public policy, and therefore, void and inexistent; "this is a pernicious system that
cannot be too severely condemned; it constitutes an imposition upon the good
faith of the govt."
Reason for holding registered owner liable.-- The law does not relieve the
registered owner directly of the responsibility that the law fixes and places upon
him as an incident or consequence of registration -- where a registered owner
allowed to evade responsibility by proving who the supposed transferee or owner
is, it would be easy for him by collusion with others or otherwise, to escape said
responsibility and transfer the same to an indefinite person or to one who
possesses no property with which to respond financially for the damage or injury
done; in case of an accident, the registered owner should not be allowed to
disprove his ownership to the prejudice of the person injured or to be relieved
from responsibility
Cangco vs MRR, 38 Phil 768
F: Jose Cangco, an employee of MRR, was riding on its train. As it drew up to the
station, the plaintiff made his exit. As he alighted, his foot stepped on a sack of
watermelons causing him to slip and his right arm was crushed. This happened between
7 and 8 p.m. and as the railroad station was lighted dimly by a single light, objects on
the platform were difficult to see.
PAGE 37
Issue : WON MRR is liable to pay damages for the acts of its EEs.
Held : YES.
It cannot be doubted that the EEs of the railroad co. were guilty of
negligence in piling sacks on the platform; their presence constituted an effective
legal cause of the injuries sustained by Cangco.
It is impt. to note that the foundation of the legal liability of the defendant
is the contract of carriage, and that the obligation to respond for the damage
which plaintiff has suffered arises, if at all, from the breach of that contract by
reason of the failure of defendant to exercise due care in its performance. Its
liability is direct and immediate (culpa contractual), differing essentially, from
that presumptive responsibility for the negligence of its servants, which can be
rebutted by proof of the exercise of due care in the selection and supervision of
EEs (culpa aquiliana).
The liability of masters and employers for the negligent acts or omissions
of their servants or agents, when such act or omissions cause damage which
amount to the breach of a contract, is not based upon a mere presumption of the
master's negligence in their selection or control, and proof of exercise of the
utmost diligence and care in this regard does not relieve the master of his
liability for the breach of his contract. When the facts averred show a contractual
undertaking by defendant for the benefit of plaintiff, and it is alleged that
plaintiff has failed or refused to perform the contract, it is not necessary for
plaintiff to specify in his pleadings whether the breach of the contract is due to
wilful fault or to negligence on the part of the defendant, or of his servants or
agents. Proof of the contract and of its nonperformance is sufficient prima facie
to warrant recovery.
The contract of defendant to transport plaintiff carried with it, by
implication, the duty to carry him in safety and to provide safe means of entering
and leaving its trains. That duty, being contractual, was direct and immediate,
and its nonperformance could not be excused by proof that the fault was morally
imputable to defendant's servants.
Medina vs Cresencia, 99 Phil 506
F: A passenger jeepney driven by Brigido Avorque smashed into a Meralco post

resulting in the death of Vicenta Medina, one of its passengers. In a criminal case of
homicide through reckless imprudence, Avorque pleaded guilty. The right to file a
separate action for damages was reserved. Cresencia was still the registered operator
of the jeepney in the records of the Motor Vehicles Office and the PSC, while Rosario
Avorque was the owner at the time of the accident.
Issue: WON Cresencia is liable for breach of the contract of carriage. YES.
Ratio: The law requires the approval of the PSC, in order that a franchise, or any
privilege pertaining thereto, may be sold or leased without infringing the
certificate issued to the grantee; and that if property covered by the franchise is
transferred or leased without this requisite approval, the transfer is not binding
against the public or the PSC; and in contemplation of law, the grantee of record
continues to be responsible under the franchise in relation to the PSC and to the
PAGE 38
public. Since a franchise is personal in nature, any transfer or lease thereof

should be notified to the PSC so that the latter may take proper safeguards to
protect the interest of the public.
Plaintiff's action is based on the breach of the carrier's contractual
obligation to carry his passengers safely to their destination (culpa contractual).
The liability of the carrier is direct and immediate.
Isaac vs A.L. Ammen Trans. Co., 101 Phil 1046
F: Plaintiff boarded defendant's bus as a paying passenger from Albay. The bus
collided with a pick-up truck which was coming from the opposite direction trying to
swerve from a pile of gravel. As a result, his left arm was completely severed. Plaintiff
chose to hold defendant liable on its contractual obligation. Plaintiff brought this action
for damages which the lower court dismissed holding the driver of the pick-up negligent
and not that of the bus.
Issue : WON defendant observed extra-ordinary diligence or the utmost diligence

of a very cautious person in avoiding the collision. YES.
Held : The facts of the case show that the bus and the pick-up were approaching
each other head-on. The bus swerved to the right and went over a pile of stones
and gravel. Despite the efforts of the bus driver, the pick up car still hit the rear
left side of the bus. The sense of caution one should observe cannot always be
expected from one who is placed suddenly in a predicament where he is not
given enough time to take the proper course of action under ordinary
circumstances. Furthermore, plaintiff is guilty of contributory negligence since
he placed his left elbow outside the window.
Ratio: A CC is bound to carry the passengers safely as far as human care and
foresight can provide, using the utmost diligence of very cautious persons, with
due regard for all circumstances. This extra-ordinary diligence required of
common carriers is calculated to protect the passengers from the tragic mishaps
that frequently occur in connection with rapid modern transportation. This high
standard of care is imperatively demanded by the preciousness of human life and
by the consideration that every person must in every way be safeguarded
against all injury.
Principles as to liability of CC:
(1) the liability of a carrier is contractual and arises upon breach of its
obligation; there is breach if it fails to exert extra-ordinary diligence accdg. to all
the circumstances of each case
(2) a carrier is obliged to carry its passenger with the utmost diligence of a
very cautious person, having due regard for all the circumstances
(3) a carrier is presumed to have been at fault or to have acted negligently
in case of death of, or injury to, passengers, it being it duty to prove that it
exercised extra-ordinary diligence
(4) the carrier is not an insurer against all risks of travel.
Fores vs Miranda, 105 Phil 266
PAGE 39
F: Respondent, a professor of Fine Arts, was a passenger of a jeep registered in the

name of Fores but actually operated by Carmen Sackerman. While the jeep was
descending at Sta. Mesa bridge at excessive speed, the driver lost control of it causing it
to swerve and hit the bridge wall resulting to injuries to its passengers including
respondent who suffered a fracture of the upper right humerus. In an action for
damages, the CFI awarded actual damages. The CA reduced the actual damages and
added moral damages and attorney's fees.
Issue : WON the approval of the PSC is necessary for the sale of a public service
vehicle even without conveying therewith the authority to operate the same.
YES.
Held : A transfer made without the requisite approval of the PSC is not effective
and binding in so far as the responsibility of the grantee under the franchise in
relation to the public is concerned. The law was designed primarily for the
protection of the public interest.
Issue : WON moral damages may be awarded.
Held : In case of breach of contract (including one of transportation), proof of bad

faith or fraud, i.e., wanton or deliberately injurious conduct, is essential to justify
an award of moral damages. The exception to this is when a mishap results in
the death of a passenger, in which a CC is liable to pay moral damages for the
mental anguish by reason of the death of the passenger. So where the injured
passenger does not die, moral damages are not recoverable unless it is proved
that the carrier was guilty of malice or bad faith.
Under the law, the presumption is that common carriers acted negligently
but not maliciously. The distinction between fraud, bad faith or malice in the
sense of deliberate or wanton wrong doing and negligence (as mere
carelessness) is too fundamental in our law to be ignored. A carrier's bad faith is
not to be lightly inferred from a mere finding that the contract was breached
through negligence of the carrier's employees.
Phil. Rabbit Bus Lines vs IAC, 189 SCRA 159
F: Several passengers boarded the jeepney owned by spouses Mangune and driven
by Manalo at Dau, Pampanga bound for Carmen, Rosales, Pangasinan. Their contract
with Manalo was P24 for the trip. Upon reaching Tarlac, the right wheel of the jeepney
was detached, so it was running in an unbalanced position. Manalo stepped on the
brake, making a sudden U-turn and encroaching on the right of way of the other
vehicles. The Phil. Rabbit bus bumped from behind the jeepney. As a result of the
collision, 3 persons died while the others sustained injuries. Cases were filed against the
spouses Mangune, Manalo, Phil. Rabbit and De los Reyes (driver).
Issue: Who should be held liable? the Mangunes and Filriters Guaranty Assurance
Corp. (Insurance co.)
Ratio: The principle of last clear chance would call for application in a suit
between the owners and drivers of two colliding vehicles. It does not arise
where a passenger demands responsibility from the carrier to enforce its
PAGE 40
contractual obligations. For it would be inequitable to exempt the negligent

driver of the jeepney and its owners on the ground that the other driver was
likewise guilty of negligence.
On the presumption that the drivers who bump the rear of another vehicle
are guilty and the cause of the accident, unless contradicted by other evidence,
the SC held that the jeep made a sudden U-turn which was so abrupt that the
other driver de los Reyes did not anticipate the sudden U-turn.
The proximate cause of the accident was the negligence of Manalo and the
spouses Mangune. In culpa contractual, the carrier is presumed to have been at
fault or to have acted negligently, and this disputable presumption may only be
overcome by evidence that he had observed extra-ordinary diligence or that the
death or injury of the passenger was due to a fortuitous event.
The driver cannot be held jointly liable with the owners of the jeep in case
of breach of the contract of carriage. The contract of carriage is between the
carrier and the passenger, and in the event of contractual liability, the carrier is
exclusively responsible therefore to the passenger, even if such breach be due to
the negligence of the driver. To make the driver jointly liable would make the
carrier's liability personal instead of merely vicarious and consequently, the
victim is entitled to recover only the share which corresponds to the driver.
4. Classes of common carriers
Art. 1732. Common carriers are persons, corporations, firms or

associations engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air, for compensation,
offering their services to the public.

each case.
Art. 1755. A common carrier is bound to carry the passengers

safely as far as human care and foresight can provide, using the utmost
diligence of very cautious persons, with a due regard for all
circumstances.
5. Laws applicable
Art. 1766. In all matters not regulated by this Code, the rights and
obligations of common carriers shall be governed by the Code of
Commerce and by special laws.
PAGE 41
4 Agbayani:
New Civil Code primarily governs common carriers.-- The Provisions of the
Civil Code [1732-1766] primarily govern common carriers and the provisions of
the Code of Commerce [Overland Transportation and Maritime Commerce] and
special laws [Carriage of Goods by Sea Act; Salvage Act] have only subsidiary
application to common carriers.
Art. 1753, NCC. The law of the country to which the goods are to
be transported shall govern the liability of the common carrier for their
loss, destruction or deterioration.
The provisions of the NCC primarily govern contracts of carriage of goods

from foreign ports to Philippine ports
Eastern Shipping Lines vs IAC 150 SCRA 463
F: These two cases, both for the recovery of value of cargo insurance, arose from
the same incident, the sinking of the M/S ASIATICA when it caught fire, resulting in the
total loss of ship and cargo.
In the first case, the M/S ASIATICA, a vessel operated by petitioner Eastern
Shipping Lines, loaded at Kobe, Japan for transportation to Manila 5,000 pieces of
colorized lance pipes in 28 packages valued at P256,039 consigned to Phil. Blooming
Mills and 7 cases of spare parts valued at P92,361.75 consigned to Central Textile Mills.
Both sets of goods were insured against marine risk for their stated value with
respondent Devt. Insurance and Surety Corporation.
In the second case, the same vessel took on board 128 cartons of garment fabrics
and accessories, in 2 containers, consigned to Mariveles Apparel Corporation, and 2
cases of surveying instruments consigned to Aman Enterprises and General
Merchandise. The 128 cartons were insured by respondent Nisshin Fire and Marine
Insurance Co. and Dowa Fire & Marine Insurance Co.
En route for Manila, the ship caught fire and sank. The insurers paid the
corresponding marine insurance values and were subrogated to the rights of the latter
as the insured. They filed suits against the petitioner Carrier and won (affirmed by the
CA). Petitioner carrier denies liability on the ff. grounds:
(a) that the loss was due to an extraordinary fortuitous even which is an
exempting circumstance under Sec. 4(2)(b) of the Carriage of Goods by Sea Act
(COGSA);
(b) that when fire is established, the burden of proving negligence is shifted to
the cargo shipper.
Issues: (1)Which law should govern : the Civil Code or the Carriage of Goods by
Sea Act.
(2)Who has the burden of proof to show negligence of the carrier.
Ratio : (1) The law of the country to which the goods are to be transported
governs the liability of the common carrier in case of their loss, destruction or
PAGE 42
deterioration. As the cargoes in question were transported from Japan to the

Philippines, the liability of Petitioner Carrier is governed primarily by the Civil
Code. However, in all matters not regulated by said Code, the rights and
obligations of common carriers shall be governed by the Code of Commerce and
special laws. Thus, the COGSA, a special law, is suppletory to the provisions of
the Civil Code.
(2) Under the Civil Code, common carriers, from the nature of their
business and for reasons of public policy, are bound to observe extra-ordinary
diligence in the vigilance over goods, accdg. to all the circumstances of each
case. Common carriers are responsible for the loss, destruction, or deterioration
of the goods unless the same is due to any of the ff. causes only (Art. 1734,
NCC):
"(1) Flood, storm, earthquake, lightning or other natural disaster or
calamity; xxx"
The Carrier claims that the loss of the vessel by fire exempts it from
liability under the phrase "natural disaster or calamity." However, we are of the
opinion that fire may not be considered a natural disaster or calamity. This must
be so as it arises almost invariably from some act of man or by human means. It
does not fall within the category of an act of God unless caused by lightning or
by other natural disaster or calamity. It may even be caused by the actual fault
or privity of the carrier.
As the peril of fire is not comprehended within the exceptions in Article
1734, then Article 1735 provides that in all cases other than those mentioned in
Art. 1734, the CC shall be presumed to have been at fault or to have acted
negligently, unless it proves that it has observed the extra-ordinary diligence
required by law.
In this case, the respective Insurers, as subrogees of the cargo shippers,
have proven that the transported goods have been lost. Petitioner carrier has
also proven that the loss was caused by fire. The burden then is upon Petitioner
carrier to prove that it has exercised the extra-ordinary diligence required by law.
Having failed to discharge the burden of proving that it had exercised the
extra-ordinary diligence required by law, Petitioner Carrier can not escape
liability for the loss of the cargo.
And even if fire were to be considered a natural disaster within the
meaning of Art. 1734, it is required under Art. 1739 of the same Code that the
natural disaster must have been the proximate and only cause of the loss, and
that the carrier has exercised due diligence to prevent or minimize the loss
before, during or after the occurrence of the disaster. This petitioner carrier has
also failed to establish satisfactorily.
Nor may Petitioner Carrier seek refuge from liability under the COGSA. It is
provided therein that:
"Sec.4 (2). Neither the carrier nor the ship shall be responsible for loss or
damage arising or resulting from: (b) Fire, unless caused by the actual fault or
privity of the carrier."
In this case, both the TC and the CA, in effect, found, as a fact, that there
was "actual fault" of the carrier shown by lack of diligence in that when the
PAGE 43
smoke was noticed, the fire was already big; that the fire must have started 24
hrs before the same was noticed; and that after the cargoes were stored in the
hatches, no regular inspection was made as to their condition during the voyage.
The foregoing suffices to show that the circumstances under which the fire
originated and spread are such as to show that Petitioner carrier or its servants
were negligent in connection therewith. Consequently, the complete defense
afforded by the COGSA when the loss results from fire is unavailing to petitioner
carrier.
B. Common Carriers
1. Liability and presumption of negligence

each case.
(read discussion under [3] Nature and basis of liability)

destruction, or deterioration of the goods, unless the same is due to
any of the following causes only:
(1) Flood, storm, earthquake, lightning, or other natural disaster
or calamity;
(2) Act of the public enemy in war, whether international or civil;
(4) The character of the goods or defects in the packaging or in
the containers;
Art. 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4 and 5
of the preceding article, if the goods are lost, destroyed or deteriorated, common
carriers are presumed to have been at fault or to have acted negligently, unless
they prove that they observed extraordinary diligence as required in Art. 1733.
4 Agbayani:
Responsibility of common carriers.-- In general, CC are responsible for

the loss, destruction, or deterioration of the goods carried by them. This
responsibility arises from contract, as the relation between a carrier and its
patrons is of a contractual nature. A failure on the carrier to use extra-ordinary
care in carrying goods or passengers safely is a breach of contract and
constitutes culpa contractual not culpa aquiliana. While the liability of a carrier
PAGE 44
as an insurer is not recognized in this jurisdiction, a carrier is liable for damages

suffered by goods carried if such damages arise from its negligence. The carrier
is also liable even in those cases where the cause of the loss or damage is
unknown.
Due extraordinary diligence required, carriers given wide discretion in

selection and supervision of persons to handle goods.-- The law requires
CC to exercise extra-o diligence which means that they must render service with
the greatest skill and utmost foresight. The extra-o diligence required of CC in
the handling of the goods of the shipper and the consignees lasts from the time
the cargoes are loaded in the vessels until they are discharged and delivered to
the consignees. To comply with this obligation, CC should be afforded the right
of having a wide discretion in the selection and supervision of persons who will
handle the goods.
Air carrier can terminate services of pilot for serious misconduct and
drunkenness, because of its duty of extraordinary dilignece.-- The CC
can terminate the services of its drivers, pilots and EEs for serious misconduct
and drunkenness because of its duty of extra-ordinary diligence. Whenever a
passenger dies or is injured the presumption is that the CC is at fault
notwithstanding the fact that it has exercised due diligence of a good father of a
family in the selection and supervision of its EEs. Thus, extra-ordinary measures
and diligence should be exercised by it for the safety of its passengers and their
belongings. A CC can terminate an EE whose continued service is inimical to its
interests and the safety of the passengers.
Carrier has duty to keep and care for goods carried.-- It is the duty of the
CC to properly and carefully handle, carry, keep and care for the goods carried
and to exercise due care to ascertain and consider the nature of the goods
offered for shipment and to use such methods for their care during the voyage as
their nature requires. The carrier is liable for injury to, or loss of, cargo resulting
from the failure to properly care for and handle the cargo en route; and it is
required to provide adequate ventilation for the safe carriage of the cargo, and
provide reasonable and ordinary inspection and care in and about the
transportation of cargo. A vessel should not accept cargo unless it can be given
the type of storage that its character requires, for placing of conditions in a bill of
lading does not relieve the vessels of obligation to take appropriate care of the
cargo.
Duty of carrier to deliver cargo in good condition as when loaded.--

There is no absolute obligation for a CC to accept cargo. It should not be
accepted unless it can be given the type of storage that its character requires.
Where a vessel accepts a cargo for shipment for valuable consideration, it takes
the risk of delivering it in good condition as when it was loaded. And if the fact
of improper packing is known to the carrier or his servants, or apparent upon
ordinary observation, but it accepts the goods notwithstanding such condition, it
is not relieved of liability for loss or injury resulting therefrom.
In the exercise of extra-ordinary diligence required by law, the CC must
give due regard to all circumstances and take all steps necessary to insure the
safety of the passengers and the goods given the circumstances.
PAGE 45
Presumption of negligence.-- Under Art. 1735, if the goods are proved to

have been lost, destroyed or deteriorated, CC are presumed to have been at fault
or to have acted negligently, unless they prove that they have observed the
extra-o diligence required by law.
The plaintiff needs only to prove that the goods he transported have been
lost, destroyed or deteriorated
CC must then prove that he has exercised extra-ordinary diligence
required by law or that the loss, etc. was due to accident or some other
circumstances inconsistent with its liability
Mere proof of delivery of goods in order to a carrier, and of their arrival at
the place of destination in bad order makes out a prima facie case against the CC
Defenses available to CC:
1. Art. 1734
2. Art. 1735 (exercise of extra-ordinary diligence required by law)
3. Natural disaster: The CC is exempt from liability if he proves that the
loss or destruction of the merchandise was due to accident and force majeure
and not to fraud, fault or negligence on the part of the EEs and owners of the CC.
CC cannot interpose the defense that it exercised due diligence in the
selection and supervision of EEs. The liability of the CC arises from breach of the
contract of carriage and not from culpa aquiliana. It is however the duty of CC to
teach their drivers not to overload vehicles, not to exceed safe and legal speed
limits, and other safety precautions.
Carrier not insurer.-- CC are not required to exercise all the care, skill and
diligence of which the human mind can conceive nor such as will free the
transportation of passengers from all possible perils. A CC is not an insurer of
the safety of the passengers and is not absolutely and at all events to carry them
safely and without injury.
Ynchausti Steamship Co. vs Dexter 41 Phil 289
F: The Govt. of the Philippines, acting through the Insular Purchasing Agent,
employed the services of petitioner, Ynchausti Steamship Co., a common carrier for the
transportation, on board the steamship Venus, from the port of Manila to the port of
Appari, Cagayan, of consignments of merchandise, consisting of 30 cases of Wine Rose
mineral oil of two 5-gallon cans to the case. On another occasion, the Govt. also sent 96
cases of Cock brand mineral oil, ten gallons to the case. The goods were delivered by
the shipper to the carrier which accordingly received them, and to evidence the contract
of transportation, the parties duly executed and delivered what is popularly called Govt.
bill of lading, whereby it was stipulated that the carrier, Ynchausti, received the above-
mentioned supplies in apparent good condition, obliging itself to carry said supplies to
the place agreed upon.
Both shipments arrived with one case missing per shipment. Ynchausti denied
negligence. However, upon investigation, the Insular Auditor decided that the leakages
were due to Ynchausti's negligence. The Insular Auditor deducted the amount of the lost
goods from the entire amount payable to Ynchausti. Petitioner refused to accept the
warrant. Hence, this action was filed.
PAGE 46
Issue : Is Ynchausti liable for the loss? YES.
Ratio : Sec. 646 of the Administrative Code provided that when Govt. property is
transmitted from one source to another by carrier, it shall be upon proper bill of
lading or receipt, from such carrier; and it shall be the duty of the consignee or
his representative to make all notation of any evidence of loss, shortage, or
damage, on the bill of lading or receipt before accomplishing it. It is admitted by
petitioner that the consignee, at the time the goods were delivered, noted the
losses in the respective bill of ladings. Such notation made in obedience to the
code, is competent evidence to show that the shortage did exist. Inasmuch as
the fact of loss was proven, it results in the presumption that the petitioner was
to blame for the loss; and it was incumbent upon the petitioner to rebut that
presumption by proving that the loss was not due to any fault or negligence of
the petitioner.
The mere proof of delivery of goods in good order to a carrier, and of their
arrival at the place of destination in bad order, makes out a prima facie case
against the carrier, so that if no explanation is given as to how the injury
occurred, the carrier must be held responsible. It is incumbent upon the carrier
to prove that the loss was due to accident or some other circumstance
inconsistent with its liability. Indeed, if the Govt. had instituted an action in court
against petitioner to recover the value of the oil lost, it would, based on the facts,
be entitled to judgment. In the absence of proof showing that the carrier was not
at fault for the loss, the Insular Auditor was entitled to withhold the amount
admittedly due to the petitioner for the freight charges, a sum sufficient to cover
the value of the oil lost in transit.
Mirasol vs Dollar 53 Phil 124
F: Mirasol was the owner of two cases of Encyclopedia Brittanica shipped in good
order and condition on board Dollar's steamship, President Garfield, to be transported
from New York to Manila. The books arrived in bad order and damaged condition,
resulting in total loss of one case and partial loss of the other. Mirasol filed claims, but
Dollar refused to pay alleging that the damage was caused by sea water and that
Mirasol entered into a contract providing that Dollar will not be held liable for loss or
damage of merchandise resulting from "acts of God" or "perils of the sea," and that in
no case shall it be held liable beyond $250 for any article not enclosed in a package
unless a higher value is stated therein and ad valorem freight paid or assessed thereon.
The LC ruled in favor of Mirasol for payment of P 2,080.
Issue : WON Dollar may be held liable. YES.
Ratio: There was no claim or pretense that Mirasol signed the bill of lading or
that he knew of its contents. In that situation, he was not legally bound by the
clause limiting Dollar's liability. Where it appears that a bill of lading was issued
to a shipper containing a clause limiting the carrier's liability, printed in fine
letters on the back of the bill of lading, which the shipper did not sign and of
which he was not advised, the shipper is not bound by the clause limiting liability
and the stipulation is void or against public policy.
PAGE 47
Shippers who are forced to ship goods in an ocean liner have legal rights.
When the goods are delivered on board the ship in good order and condition and
the carrier delivers them to the shipper in bad order and condition, in an action
for damages, the burden of proof shifted and it devolves upon the carrier to both
allege and prove that the goods were damaged by reason of some act which
legally exempts it from liability.
Having received the boxes in good condition, its legal duty was to deliver
them in the same condition as received. Dollar, having admitted that the goods
were damaged while in transit and in its possession, the burden of proof then
shifted and it devolved upon him to allege and prove that the damage was
caused by reason of some fact which exempted it from liability. As to when and
how the goods were damaged in transit is a matter peculiarly within the
knowledge of the carrier and its employees. To require Mirasol to prove such,
would force him to rely upon the EEs of Dollar's ship, which in legal effect would
be to say that he could not recover damages at all.
Since Dollar was not even able to prove that the goods were wet with sea
water due to a fortuitous event, it must be presumed that the carrier was liable.
2. Exemption from liability
Proof of the delivery of the goods in good order to a carrier, and of their
arrival at the place of destination short or in bad order, makes a prima facie
case; it is incumbent on the carrier, in order to exonerate itself, to prove that the
loss or injury was due to some circumstances inconsistent with its liability
(a) Natural disaster

any of the ff. causes only:
or calamity;
xxx
Art. 1739. In order that the common carrier may be exempted from
responsibility, the natural disaster must have been the proximate and only cause
of the loss. However, the common carrier must exercise due diligence to prevent
or minimize loss before, during and after the occurrence of flood, storm, or other
natural disaster in order that the common carrier may be exempted from liability
for the loss, destruction, or deterioration of the goods. The same duty is
incumbent upon the common carrier in case of an act of the public enemy
referred to in Art. 1734 (2).
Art. 1740. If the CC negligently incurs in delay in transporting the

goods, a natural disaster shall not free such carrier from responsibility.
Art. 361. Merchandise shall be transported at the risk and

venture of the shipper, if the contrary has not been expressly
stipulated.
PAGE 48
As a consequence, all the losses and deteriorations which the

goods may suffer during the transportation by reason of fortuitous
event, force majeure, or the inherent nature and defect of the goods,
shall be for the account and risk of the shipper.
Proof of these accidents is incumbent upon the carrier. (Code of
Commerce.)
4 Agbayani:
Effect of New Civil Code.-- Transportation of the merchandise "at the risk and
venture of the shipper" means that the shipper will suffer losses and
deterioration arising from fortuitous event, force majeure, or inherent nature and
defects of the goods. It does not mean that the carrier is free from liability for
losses and deterioration arising from his negligence or fault, w/c is presumed.
Thus construed, par. 1 of Art. 361 is not inconsistent with Art. 1735 of the NCC.
Requisites for defense of natural disaster:
1. Art. 1739 -- natural disaster must have been the proximate and only
cause of the loss
2. The CC must exercise due diligence to prevent or minimize the loss
before, during and after the occurrence of flood, storm, or other natural disaster.
If the CC does not exercise due diligence in minimizing the loss, he may yet be
held liable notwithstanding the fact that the loss, destruction or deterioration of
the goods arose out of natural disaster.
3. Art. 1740 -- the CC must not be in delay. If the CC incurs in delay, a
natural disaster shall not free it from responsibility. Under Art. 1165 par. 3, if the
obligor incurs delay, he shall be responsible for any fortuitous event until he has
effected delivery.
However, if between the delay or refusal of the CC to transport the goods

and the loss of the goods due to an act of God there intervened the shipper's
negligence, thus causing a break in the chain of causation between the act of
God which caused their loss and the CC's fault, the act of God is the proximate
cause of the loss and the carrier's delay or refusal to transport the goods, is
merely the remote cause. In such cases, the shipper is not even entitled to set
up the claim of contributory negligence. It is then necessary that it be
established that the CC was guilty of a willful or negligent act and that between
this willful or negligent act and the act of God, no negligence on the part of the
shipper intervened.
Accident due to defects of carrier not caso fortuito.-- Accidents caused

either by defects in the carrier or through the negligence of the carrier is not
caso fortuito. The passenger or shipper has every right to presume that the
carrier is perfectly in good condition and could transport him safely and securely
to his destination
Tan Chiong San vs Ynchausti & Co., 22 Phil 152
PAGE 49
F: Ynchausti and Co. received from Ong Bien Sip in Manila 205 bundles of goods to
be conveyed by YC's steamer to Gubat in Sorsogon, and there to be transhipped to
another vessel belonging to YC and transported to Catarman, in Samar. As the lorcha
Pilar, which was to transport the goods to Catarman was not yet in Gubat when the cargo
arrived, the cargo was stored in YC's warehouse.
Several days later, the lorcha arrived and the goods were loaded. However, as
the lorcha was being towed, a storm arose, drove the lorcha to the shore and wrecked it,
scattering the goods on the beach. YC's laborers proceeded to gather up the goods. As
it was impossible to preserve the goods, they were sold at a public auction. Plaintiff filed
an action for damages for P 20,000. LC decided that plaintiff was entitled only to P
14,642.63.
Issues: (1) WON the carrier is relieved from liability due to force majeure. YES.
(2) WON the carrier is liable for the loss of the cargo and for failure to
deliver the same at the place of destination. NO.
Ratio: (1) It is a proven fact that the loss or damage to the goods shipped on the
said lorcha was due to the force majeure which caused the wreck of the said
craft. Accdg. to Art. 361 of the Code of Commerce, merchandise shall be
transported at the risk and venture of the shipper, unless the contrary be
expressly stipulated. No such stipulation appears of record, therefore, all
damages and impairment suffered by the goods in transportation, by reason of
accident, force majeure, or by virtue of the nature or defect of the articles, are
for the account and risk of the shipper. The carrier is exempt from liability if he
is able to prove, as he did prove, that the loss or destruction of the merchandise
was due to accident and force majeure and not to fraud, fault or negligence on
the part of the captain or owner of the ship -- that the loss was a result of the
stranding of Pilar because of the hurricane that overtook it.
(2) The record bears no proof that said loss caused by the destruction of
Pilar occurred through the carelessness or negligence of the defendant, its
agents or patron of the lorcha. The defendant as well as its agents and patron
had a natural interest in preserving the craft -- an interest equal to that of the
plaintiff. The record discloses that Pilar was manned by an experienced patron
and a sufficient number of crewmen plus the fact that it was fully equipped. The
crewmen took all the precautions that any diligent man should have taken whose
duty it was to save the boat and its cargo, and by the instinct of self-
preservation of their lives. Considering, therefore, the conduct of the men of the
defendant Pilar and of its agents during the disaster, the defendant has not
incurred any liability whatsoever for the loss of the goods, inasmuch as such loss
was the result of a fortuitous event or force majeure, and there was no
negligence or lack of care or diligence on the part of the defendant or its agents.
Loss of a ship and of its cargo, in a wreck due to accident or force majeure
must, as a general rule, fall upon their respective owners, except in cases where
the wrecking or stranding of the vessel occurred through malice, carelessness or
lack of skill on the part of the captain or because the vessel put to sea is
insufficiently repaired and prepared. (Art. 841, Code of Commerce)
Martini Ltd. vs Macondray & Co., 39 Phil 934
PAGE 50
F: Martini shipped on board the Easter, owned by the Australian Steamship Co.
represented in the Philippines by Macondray, 219 cases of chemicals for Kobe, Japan.
Upon arrival in Kobe, it was discovered that the shipment was damaged by rain and sea
water. Martini claims that it was the ship's duty to stow the cargo in the hold and not to
place it on the deck exposed to the elements. Macondray denied any responsibility on
the ground that the contract of affreightment clearly states that the cargo was to be
carried on deck at shipper's risk as evidenced by the words "on deck at shipper's risk"
stamped on the bill of lading.
Ordinarily, when a shipper wishes to avail of space on board a ship, he first
obtains a shipping order from the ship owner. This shipping order is authority for the
ship's officers to accept the shipper's cargo. When signed by the ship's mate, this would
constitute the mate's receipt showing that the cargo has been taken aboard. The
shipper would then present this receipt to the agent of the ship's company who would
then issue the bill of lading. However, in this case, the shipper obtained the bill of
lading without first presenting the mate's receipt (so as to expedite the negotiation of
the bill with the banks). By doing so, the shipper entered into a written guaranty, binding
himself to abide by the terms of the mate's receipt which in this case obtained a
stipulation that the cargo shall be shipped on or under the deck at the option of the ship
and at shipper's risk.
In this case, plaintiff protested the arrangement but when the defendant
informed them that the cargo could be discharged if they were dissatisfied, plaintiff did
not order its discharge. The CFI ruled for Martini.
Issues: (1) WON plaintiff consented to having the cargo carried on deck. YES.
(2) WON defendant was negligent and thus liable for the damage to the
cargo. NO.
Ratio: While Martini would have greatly preferred for the cargo to be carried
under the hatches, they nevertheless consented for it to go on deck. Codina, an
EE of Martini, if attentive to the interests of his company, must have known from
the tenor of the guaranty which he signed that defendant had reserved the right
to carry the cargo on deck. The bill of lading plainly showed that the cargo would
be so carried. The plaintiff was duly notified as to the manner by which was the
cargo was to be shipped. They only protested after the bill had been negotiated
at the bank and even when there was time to stop the shipment, they failed to
give the necessary instructions thereby manifesting acquiescence.
In every contract of affreightment, losses by dangers of the seas are
excepted from the risk which the carrier takes upon himself whether the
exception is expressed in contract or not. The exception is made by law and falls
within the general principle that no one is responsible for fortuitous events. But
then this general law is subject to the exception that when the inevitable
accident is preceded by fault of the carrier, without which it would not have
happened, then he becomes responsible for it.
The carrier is responsible for safe and proper storage of the cargo, and
there is no doubt that by the general maritime law he is bound to secure the
cargo safely under deck. If he carries the goods on deck without the consent of
the shipper and the goods are damaged or lost in consequence of being exposed,
the carrier cannot protect himself by showing that they were damaged or lost by
the dangers of the sea. When the shipper consents to his goods being carried on
deck, he takes the risk upon himself.
PAGE 51
If goods shipped are found to have been damaged, the burden of proof is
on the carrier to show that the damage was due to fortuitous events. But, even
if the damage is caused by one of the excepted causes, the carrier is still
responsible if the injury might have been avoided by the exercise of reasonable
skill and attention on their part. However, in this case, where the shipper
consented to the conditions of carriage, the burden of proof is shifted to the
shipper.
As there is no allegation or proof of negligence on the part of the carrier in
protecting the cargo from rain or sea water and as the complaint clearly
indicates that the damage was due to it being kept on deck, and such manner of
carriage having been consented to by the plaintiff, the defendant is absolved. It
is not permissible for the court, in the absence of any allegation or proof of
negligence, to attribute negligence to the ship's employees in the matter of
protecting the goods from rains and storms.
Eastern Shipping Lines vs IAC, 150 SCRA 463
Issue: Should petitioner be exempted from liability under Art. 1734 on the ground
that the loss of the vessel by fire comes under the phrase "natural disaster or
calamity?" NO.
Ratio: Fire may not be considered a natural disaster or calamity. This must be so
as it arises almost invariably from some act of man or by human means. It does
not fall within the category of an act of God unless caused by lightning or by
another natural disaster or calamity. It may even be caused by the actual fault
or privity of the carrier. Art. 1680 which considers fire as an extra-ordinary
fortuitous event does not apply since it refers only to leases of rural lands where
a reduction of rent is allowed when more than 1/2 of the fruits have been lost
due to such event.
As the peril of fire is not comprehended under Art. 1734, Art. 1735 applies
and the CC shall be presumed to have been at fault or to have acted negligently,
unless it proves extra-ordinary diligence. The burden is on the CC.
The LC and the CA found that there was lack of diligence on the part of CC
amounting to actual fault. Even if the fire were to be considered a natural
disaster under Art. 1734, it is required under Art. 1739 that the disaster must
have been the proximate and only cause of the loss, and that the CC exercised
due diligence to prevent or minimize the loss before, during or after the
occurrence of the disaster. Nor may petitioner seek refuge under COGSA since
fire is only an exempting circumstance if not caused by actual fault or privity of
the carrier.
Issue: On the $500 Per Package Limitation
Ratio: Petitioner carrier avers that its liability should not exceed $500 per
package as provided in Section 4(5) of the COGSA, which reads:
"(5) Neither the carrier nor the ship shall in any event be or become liable for any
loss or damage to or in connection with the transportation of goods in an amount
exceeding $500 per package xxx or in case of goods not shipped in packages, per
customary freight unit, or the equivalent of that sum in other currency, unless the nature
PAGE 52
and value of such goods have been declared by the shipper before shipment and
inserted in the bill of lading."
Article 1749, NCC also allows the limitations of liability in that it provides
that "a stipulation that the CC'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."
It is to be noted that the Civil Code does not of itself limit the liability of
the CC to a fixed amount per package, although the Code expressly permits a
stipulation limiting such liability. Thus, the COGSA, which is suppletory to the
Civil Code, steps in and supplements the Code by establishing a statutory
provision limiting the carrier's liability in the absence of a declaration of a higher
value of the goods by the shipper in the bill of lading. The provisions of the
COGSA on limited liability are as much a part of a bill of lading as though
physically in it and as much a part thereof as though placed therein by
agreement of the parties.
In these cases, there is no stipulation in the respective bills of lading
limiting the carrier's liability for the loss or destruction of the goods. Nor is there
a declaration of a higher value of the goods. Hence, petitioner carrier's liability
should not exceed $500 per package, or its peso equivalent, at the time of the
payment of the value of the goods lost, but in no case "more than the amount of
damage actually sustained."
The liability was computed as: 128 cartons (shipping unit) x $500 =
$64,000. The cartons and not the containers should be considered as the
shipping unit.
Dissenting : Yap, J.
There is no evidence that the containers were carrier- supplied. The
shipper must have saved on freight charges by using containers for shipment.
The containers should be considered as the shipping unit.
(b) Act of public enemy

xxx
Art. 1739. In order that the common carrier may be exempted

from responsibility, the natural disaster must have been the proximate
and only cause of the loss. However, the common carrier must exercise
due diligence to prevent or minimize loss before, during and after the
occurrence of flood, storm, or other natural disaster in order that the
common carrier may be exempted from liability for the loss,
destruction, or deterioration of the goods. The same duty is incumbent
upon the common carrier in case of an act of the public enemy referred
to in Art. 1734 (2).
PAGE 53
4 Agbayani:
Acts of public enemy.-- This defense is not absolute. Under 1739, in order for
the CC to be exempted from liability, (1) the act of the public enemy must have
been the proximate and only cause; and (2) the CC must have exercised due
diligence to prevent or minimize the loss before, during and after the act of the
public enemy causing the loss, destruction or deterioration of the goods.
(c) Act or omission of the shipper

xxx
Art. 1741. If the shipper or owner merely contributed to the loss,

destruction or deterioration of the goods, the proximate cause thereof
being the negligence of the common carrier, the latter shall be liable in
damages, which, however, shall be equitably reduced.
Act or omission of the shipper.-- The act or omission of the shipper must be
the proximate cause of the loss, destruction or deterioration of the goods. If the
shipper merely contributed to the loss,etc. and the proximate cause is still the
negligence of the CC, the CC shall still be liable for damages although the
damages shall be equitably reduced.
(d) Character of goods, etc.

(4) The character of the goods or defects in the packaging or in
the containers;
Art. 1742. Even if the loss, destruction, or deterioration of the

goods should be caused by the character of the goods, or the faulty
nature of the packing or of the containers, the common carrier must
exercise due diligence to forestall or lessen the loss.
Art. 366. Within the twenty four hours following the receipt of
the merchandise, a claim may be brought against the carrier on account
of damage or average found therein on opening the packages, provided
that the signs of the damage or average giving rise to the claim may
not be known from the exterior part of the packages, and in case that
PAGE 54
they may be so ascertained, said claim shall only be admitted at the

time of the receipt of the packages.
After the periods mentioned have elapsed, or after the
transportation charges have been paid, no claim whatsoever shall be
admitted against the carrier with regard to the condition in which the
goods transported were delivered. (Code of Commerce.)
Claims for damages must be made at the time the goods are delivered
unless the indications of the damage cannot be ascertained from the exterior of
the package, in which case such written claims must be made w/in 24 hours from
delivery
Rule: As long as the damage to the goods was due purely to the inherent
nature or defect of the goods or of the containers thereof, the CC cannot be held
responsible. However, under 1742, the CC must exercise due diligence to
forestall or lessen the loss for it to completely escape liability.
Govt. vs Ynchausti, 40 Phil 219
F: Plaintiff shipped a cargo of roofing tiles from Manila to Iloilo on a vessel owned by
Ynchausti. Defendant stamped on the bill of lading the condition that the goods have
been accepted for transportation subject to the conditions prescribed by the Insular
Collector of Customs. The tiles were delivered by defendant to the consignee of the
plaintiff at Iloilo. Upon delivery, it was found that some of the tiles had been damaged.
The LC absolved the defendant from any liability since the defendant was able to prove
that the tiles were leaded, stored and discharged by hand labor and not by any
mechanical device. Defendant proved, without dispute from the plaintiff, that there was
no negligence on its part, the tiles being discharged by handlabor and not by
mechanical device.
Issue : WON the terms and conditions of the bill of lading were binding upon the
plaintiff. YES.
Ratio: The defendant placed said stamp upon the bill of lading before the
plaintiff shipped the tiles, and that having shipped the tiles under said bill, with
the terms and conditions of carriage stamped thereon, the govt. must be
deemed to have assented to said terms and conditions. The binding effect of the
conditions stamped on the bill of lading did not proceed from the Collector of
Customs, but from the actual contract which the parties made. Each bill of
lading is a contract and the parties thereto are bound by its terms.
The defendant, to free itself from liability, was only obliged to prove that
the damages suffered by the tile were by virtue of the nature or defect of the
articles. The plaintiff, to hold the defendant liable, was obliged to prove that the
damage to the tiles, by virtue of their nature, occurred on account of the
defendant's negligence or because the latter did not take precaution usually
adopted by careful persons.
The defendant proved,and the plaintiff did not attempt to dispute that the
tiles were of a brittle and fragile nature and that they were delivered to the
PAGE 55
defendant without any packing or protective covering. The plaintiff, not having
proved negligence on the part of the defendant, is not entitled to recover
damages.
Southern Lines vs CA, 4 SCRA 256
F: The city of Iloilo requisitioned for rice from NARIC in Manila. NARIC shipped from
Manila to Iloilo 1726 sacks of rice on board the SS Gen. Wright belonging to Southern
Lines. After the city paid for the rice, it was noted that 41 sacks were missing. The city
filed a complaint against NARIC and Southern Lines to recover the amount. The LC
absolved NARIC but ordered Southern Lines to pay. The CA affirmed.
Issue: WON petitioner is liable for the loss or shortage. YES.
Ratio: Under Art. 361 of the Code of Commerce, the carrier, in order to free itself
from liability, was only obliged to prove that the damage suffered by the goods
were by virtue of defects of the articles. Under Art. 362, the plaintiff in order to
hold the carrier liable, was obliged to prove that the damage to the goods by
virtue of their nature, occurred on account of the carrier's negligence or because
the carrier did not take the precaution adopted by careful persons.
Petitioner claims exemption based on the fact that the sacks were in bad
condition and that rice was improperly packed causing a lot of spillage of the rice
while it was being loaded.
Southern Lines' contention is untenable, for if the fact of improper packing
is known to the carrier or its servants or apparent upon ordinary observation, but
it accepts the goods notwithstanding such condition, it is not relieved of liability
for loss or injury resulting therefrom. Furthermore, the petitioner itself frankly
admitted that the strings tying the bags of rice were broken, that some bags
were with holes and plenty of rice were spilled inside the hull of the vessel, and
that the boat personnel collected 26 sacks of rice, which they distributed among
themselves. This shows that the shortage resulted from the negligence of the
petitioner.
This is an action for refund of the amount paid in excess of delivery and is
not for damages. Therefore, the 24 hour rule under Art. 366 does not apply.
(e) Order of competent authority

xxx
Art. 1743. If through order of public authority the goods are

seized or destroyed, the common carrier is not responsible, provided
said public authority had power to issue the order.
PAGE 56
4 Agbayani:
Order or act of competent authority.-- Under 1743, the CC is not

responsible for the loss, etc. of the goods if the public authority had power to
issue the order. Where the officer acts without legal process, the CC will be held
liable.
Ganzon vs CA, 161 SCRA 646
F: Gelacio Tumambing contracted the services of Ganzon to haul 305 tons of scrap
iron from Mariveles, Bataan to the port of Manila on board the lighter LCT Batman. When
half of the scrap iron was already loaded, the mayor of Mariveles arrived and demanded
P 5,000 from Tumambing. An argument resulted in the shooting of Tumambing. The
loading of the scrap iron was resumed but the acting mayor arrived and ordered Captain
Niza to dump the scrap iron. The acting mayor took the rest to the compound of NASSCO
and took custody of the scrap iron. Tumambing filed an action for damages against
Ganzon based on culpa contractual. The TC and CA held Ganzon liable.
Held: Ganzon contended that the scrap iron had not been unconditionally placed
under his custody and control to make him liable. However, he admitted that he
received the scraps of iron which Tumambing delivered to him. By the said act
of delivery, the scraps were unconditionally placed in the possession and control
of the common carrier and upon their receipt by the carrier for transportation,
the contract of carriage was deemed perfected. The carrier's extraordinary
responsibility for the loss, destruction, or deterioration of the goods commenced.
Pursuant to Art. 1736, such extra-ordinary responsibility would cease only
upon the delivery, actual or constructive, by the carrier to the consignee or to the
person who has the right to receive them. The fact that part of the shipment had
not been loaded on board the lighter did not impair the said contract of
transportation as the goods remained in the custody and control of the carrier,
albeit still unloaded.
Ganzon failed to show that the loss was due to any causes under Art.
1734. We cannot sustain the theory of caso fortuito. The carrier raised the
defense that the loss was due to an order or act of competent public authority.
The carrier, however, failed to show that the acting mayor had the power to issue
the disputed order or that it was lawful or issued under legal process of authority.
The order was part of the pressure by the mayor to shakedown Tumambing for P
5,000. The order did not constitute valid authority for Ganzon to carry out.
In any case, the intervention of the municipal officials was not of a
character that would render impossible the fulfillment by the carrier of its
obligation. The petitioner was not duty bound to obey the illegal order to dump
into the sea the scrap iron. There is absence of sufficient proof that the issuance
of the order was attended with such force or intimidation as to completely
overpower the will of the carrier's EEs.
Melencio-Herrera, Dissenting: Through the order or act of competent public

authority, the performance of the contract was rendered impossible. The captain
has no control over the situation just as Tumambing had no control over the
situation.
PAGE 57
3. Duration of Extraordinary Responsibility
Art. 1736. The extraordinary responsibility of the common carrier

lasts from the time the goods are unconditionally placed in the
possession of, and received by the carrier for transportation until the
same are delivered, actually or constructively, by the carrier to the
consignee, or to the person who has a right to receive them, without
prejudice to the provisions of Art. 1738.
Art. 1737. The common carrier's duty to observe extra-ordinary

diligence in the vigilance over the goods remains in full force and effect
even when they are temporarily unloaded or stored in transit, unless
the shipper or owner has made use of the right of stoppage in transitu.
Art. 1738. The extra-ordinary liability of the common carrier

continues to be operative even during the time the goods are stored in
a warehouse of the carrier at the place of destination until the
consignee has been advised of the arrival of the goods and has
reasonable opportunity thereafter to remove them or otherwise dispose
of them.
4 Agbayani:
When carrier's responsibility begins.-- Under Art. 1738, the extra-o

responsibility of the CC begins from the time the goods are delivered to the
carrier. The delivery to the CC must place the goods to be transported
unconditionally in the possession of the CC and the CC must receive them.
Otherwise, the extra-ordinary responsibility of the CC will not commence.
When carrier's responsibility terminates.-- Under 1738, the extra-ordinary

responsibility of the CC is terminated at the time the goods are delivered to the
consignee or the person who has a right to receive them (actual or constructive
delivery).
Constructive delivery: Notice by the CC that the cargo had already
arrived, placing them at the disposal of the shipper or consignee releases CC
from extra-ordinary responsibility. From such moment the consignee or shipper
should exercise over the cargo the ordinary control pertinent to ownership
(should unload cargo from the CC)
Shipper bound to observe all diligence in obtaining delivery of goods.--

The shipper is bound to observe all diligence in obtaining delivery of the goods.
Once the goods are delivered, the extra-ordinary responsibility of the CC ceases.
Liability of shipper for delay in obtaining delivery of goods,

demurrage.-- The shipper is liable for lost earnings occasioned by the
PAGE 58
unnecessary delay in the use of the vehicles belonging to the carrier, due in turn
to the failure of the former, upon receipt of notice of the arrival of the goods at
the place of destination, to unload forthwith and take away the cargo from the
vehicles. This is a charge for demurrage (addtl. service provided by CC)
Effect of storing in transit.-- Under 1737, the temporary unloading or storage

of the goods during the time that they are being transported does not interrupt
the extra-ordinary responsibility of the CC
Exception: Where the shipper or owner exercises its right of stoppage in
transitu (the act by which the unpaid vendor of goods stops their progress and
resumes possession of them, while they are in the course of transit from him to
the purchaser, and not yet actually delivered to the latter. This is exercised
when the buyer is or becomes insolvent.)
Responsibility of carrier when right exercised.-- The extra-ordinary

responsibility of the CC ceases when the goods being transported are temporarily
unloaded or stored in transit be reason of the exercise of the right of stoppage in
transitu by the unpaid seller. The CC holds the goods in the capacity of an
ordinary bailee or warehouseman upon the theory that the exercise of the right
of stoppage in transitu terminates the contract of carriage (ordinary diligence is
required)
Effect of storage in warehouse of carrier.-- Under 1738, the extra-ordinary

responsibility of the CC does not cease notwithstanding the fact that the goods
being transported are stored in the warehouse of the CC at the place of
destination. Extra-ordinary responsibility ceases only after the consignee has
been advised of the arrival of the goods and has had reasonable opportunity to
remove them or otherwise dispose of them.
Liability as a warehouseman (ordinary diligence) arises only when the
consignee has been advised of the arrival of the goods and has had reasonable
opportunity to remove them or otherwise dispose of them
Cia Maritima vs Insurance Co. of North America, 12 SCRA 213
F: Macleod and Co. contracted the services of Cia Maritima for the shipment of bales
of hemp from Davao to Manila. The bales were loaded into CC's lighters. One of the
lighters sunk. The insurance co. paid Macleod and filed to collect from CC. CC denied
liability on the grounds that the hemp was loaded on a barge owned by the CC free of
charge, that there was no bill of lading issued thereby resulting to the nonexistence of a
contract of carriage, that the sinking was due to a fortuitous event, and that the
insurance co. has no personality to sue.
Held: There was a complete contract of carriage the consummation of which has
already begun when the shipper delivered the cargo to the carrier and the latter
took possession of the same by placing it on a lighter manned by its EEs, under
which Macleod became entitled to the privilege secured to him by law for its safe
transportation and delivery, and the carrier to the full payment of its freight upon
completion of the voyage. The barges or lighters were merely employed as the
first step of the voyage, which is part of the contract.
PAGE 59
The receipt of the goods by the carrier has been said to lie at the
foundation of the contract to carry and deliver, and if no goods are received
there can be no such contract. The liability and responsibility of the carrier under
a contract for the carriage of goods commence on their actual delivery to, or
receipt by the carrier or an authorized agent, of the goods. The test as to
whether the relation of shipper and carrier had been established is: Had the
control and possession of the goods been completely surrendered by the shipper
to the CC. Whenever the control and possession of goods passes to the carrier
and nothing remains to be done by the shipper, then it can be said with certainty
that the relation of shipper and carrier has been established.
The bill of lading is not indispensable to a contract of carriage. It is merely
documentary proof of the agreement of the parties.
There was no force majeure. The reason for the damage or the loss was
lack of adequate protections and measures taken by the carrier to prevent the
loss.
Lu Do vs Binamira, 101 Phil 120
F: Delta Co. of NY shipped six cases of films and photographic supplies consigned to
Binamira. The shipped arrived in Cebu and discharged her cargo, placing it in the
possession and custody of the arrastre operator appointed by the Bureau of Customs.
The cargo was checked both by the stevedoring co. as well as by the arrastre operator
and was found in good order. In the contract of carriage, however, it was stipulated that
the carrier is no longer liable for the cargo upon its delivery to the hands of the custom
authorities. The cargo was delivered to Binamira and some goods were missing.
Held: The general rule is that CC's responsibility to observe extra-ordinary

diligence lasts from the time the goods are placed in the possession of the carrier
until they are delivered to the consignee. BUT this rule applies only when the
loss, destruction and deterioration of the goods takes place while the goods are
in the possession of the carrier and not after it has lost control of them. While
the goods are in its possession, it is but fair that it exercise extra-ordinary
diligence in protecting them from damage and if loss occurs, the law presumes
that it was due to its fault or negligence.
While delivery to the customs authorities is not delivery to the consignee,
the parties may however, agree to limit the liability of the carrier considering
that the goods have still to go through the inspection of the customs authorities
before they are actually turned over to the consignee. This stipulation is not
contrary to morals or public policy. This is a situation where the CC loses control
of the goods because of custom regulations and it is unfair that it be made
responsible for any loss or damage during such interregnum.
APL vs Klepper, 110 Phil 243
F: Klepper shipped one lift van containing personal and household effects from
Yokohama to Manila. While the lift van was being unloaded by crane, it fell on the pier
damaging its contents. The TC found for Klepper.
PAGE 60
Held: APL does not question the finding that the damage was due its negligence
but contends that its liability cannot exceed $500 based on the bill of lading and
Sec 4(5) of the COGSA. Regardless of its negligence, the carrier's liability would
attach because being a CC, its responsibility is extra-ordinary and lasts from the
time the goods are placed in its possession until they are delivered, actually or
constructively, to the consignee or to the person who has a right to receive them.
The carrier should only pay $ 500; the shipper who accepted the bill of
lading is bound by its terms. COGSA is merely suppletory to the provisions of the
NCC which govern the contract.
4. Agreement Limiting Liability
(a) As to diligence required
Art. 1744. A stipulation between the common carrier and the

shipper or owner limiting the liability of the former for the loss or
destruction, or deterioration of the goods to a degree less than extra-
ordinary diligence shall be valid, provided it be:
(1) In writing, signed by the shipper or owner;
(2) Supported by a valuable consideration other than the service
rendered by the CC; and
(3) Reasonable, just and not contrary to public policy.
Art. 1745. Any of the following or similar stipulations shall be

considered unreasonable, unjust and contrary to public policy:
(1) That the goods are transported at the risk of the owner or
shipper;
(2) That the common carrier will not be liable for any loss,
destruction or deterioration of the goods;
(3) That the common carrier need not observe any diligence in the
custody of the goods;
(4) That the common carrier shall exercise a degree of diligence
less than that of a good father of a family, or of a man of ordinary
prudence in the vigilance over the movable transported;
(5) That the common carrier shall not be responsible for the acts
or omissions of his or its employees;
(6) That the common carrier's liability for acts committed by
thieves, or of robbers who do not act with grave or irresistible threat,
violence or force, is dispensed with or diminished;
(7) That the common carrier is not responsible for the loss,
destruction, or deterioration of goods on account of the defective
condition of the car, vehicle, ship, airplane or other equipment used in
the contract of carriage.
Art. 1751. The fact that the common carrier has no competitor
along the line or route, or a part thereof, to which the contract refers
shall be taken into consideration of the question of whether or not a
stipulation limiting the common carrier's liability is reasonable, just and
in accordance with public policy.
PAGE 61
(b) As to amount liability
Art. 1749. A stipulation that the common carrier's liability is

limited to the value of the goods appearing in the bill of lading, unless
the shipper or owner declares a greater value, is binding.
Art. 1750. A contract fixing the sum that may be recovered by the
owner or shipper for the loss, destruction, or deterioration of the goods
is valid, if it is reasonable and just under the circumstances, and has
been fairly and freely agreed upon.
Ysmael vs Barreto, 51 Phil 90
F: Plaintiff sought to recover from defendant the alleged value of 4 cases of

merchandise which it delivered to a vessel of defendant at the port of Manila to be
shipped to Surigao, but which were never delivered to consignee. Defendant relied on
clause 7 of the bill of lading where it provided that actions not brought within 60 days
from the time the cause of action accrued shall be barred, and on clause 12 which
provided that the defendant is not liable for any package in excess of P 300 unless the
value and contents of such package are correctly stated in the bill of lading at the time
of the shipment. Plaintiffs complaint was filed a little less than 6 months after the
shipment was made.
Held: The evidence shows that 164 cases were shipped valued at P 2,500 a
case. The limit of defendant's liability for each case for loss or damage from any
cause or for any reason, would put it in the power of the defendant to take the
whole cargo of 164 cases at a value of P 300/case, or less than 1/8 of its actual
value. If that rule should be sustained, no silk would ever be shipped. Such
limitation of value is unconscionable and void as against public policy.
The validity of stipulations limiting the carrier's liability is to be determined
by their reasonableness and their conformity to the sound public policy. It
cannot lawfully stipulate for exemption from liability unless such exemption is
just and reasonable and unless the contract is freely and fairly made. No
contractual limitation is reasonable which is subversive of public policy. A CC
cannot limit its liability for injury or loss where such is caused by its own
negligence, unskillfulness or carelessness of its EEs. The rule rests on public
policy. The shipper and CC are not on equal terms; the shipper is entirely at the
mercy of the CC unless protected by the law. Such contracts are wanting in the
element of voluntary assent.
The action was brought within reasonable time considering the distance
between Surigao and Manila and the fact that plaintiff had to make a full
investigation to determine liability. Stipulations limiting the time for bringing suit
must be reasonable, otherwise they can be declared void.
Heacock vs Macondray, 42 Phil 205
PAGE 62
F: Plaintiff shipped Edmonton clocks from NY to Manila on board defendant's vessel.

It was agreed in the bill of lading that the value of the goods receipted do not exceed
$500 per freight on or in proportion for any part of a ton, unless the value be expressly
stated in the bill and freight paid. It was also agreed that in the event of claims for
shortage or damage the carrier shall not be liable for more than the net invoice price
plus freight and insurance less charges, and any loss or damage for which the carrier
may be liable shall be adjusted pro rata on said basis. The clocks were not delivered
despite demands. Plaintiff claimed P420 as the MV of the clocks, while defendant
claimed P76.36 as the proportionate freight ton value.
Held: Three kinds of stipulations have often been made in a bill of lading. First,
one exempting the carrier from any and all liability for loss or damage
occasioned by its own negligence. Second, one providing for an unqualified
limitation of such liability to an agree valuation. Third, one limiting the liability
of the carrier to an agreed valuation unless the shipper declares a higher value
and pays a higher rate of freight. The first and second stipulations are invalid as
contrary to public policy. The third is valid and enforceable.
A stipulation in the bill of lading limiting the liability of the CC to a
specified amount unless the shipper declares a higher value and pays a higher
freight is valid and enforceable. If a CC gives to a shipper the choice of 2 rates,
the lower of them conditioned upon his agreeing to a stipulated valuation of his
property in case of loss, even by the carrier's negligence, if the shipper makes
the choice understandingly and freely, and names his valuation, he cannot
thereafter recover more than the value which he thus places upon his property.
Shewaram vs PAL, 17 SCRA 606
F: Plaintiff bought a plane ticket from Zamboanga to Manila. When he arrived in

Manila, his suitcase was tampered with and his camera and radio were lost. PAL
contended that plaintiff was bound by the conditions printed at the back of his ticket
which provided that the liability of PAL for any loss is limited to the value of the thing
unless the passenger declares in advance a higher valuation and pays an additional
charge, and that the value is conclusively deemed not to exceed P 100/ticket.
Held : Two requisites must be fulfilled in order that the liability of PAL be limited
according to the stipulations behind the ticket stub : (1) the contract is just and
reasonable under the circumstances; and (2) it has been fairly and freely agreed
upon. (Art. 1750)
The fact that the conditions are printed at the back of the ticket stub in
letters so small that they are hard to read would not warrant the presumption
that plaintiff was aware of those conditions such that he had "fairly and freely
agreed" to those conditions. PAL has admitted that passengers do not sign the
ticket. Also the carrier cannot limit his liability for injury or loss of goods shipped
when such injury or loss was caused by its own negligence. (Arts. 1734, 1735)
Ong Yiu vs CA, 91 SCRA 223
PAGE 63
F: Atty. Ong Yiu was a passenger on a PAL Cebu-Butuan flight to attend court
hearings in Butuan. His suitcase was accidentally sent to Manila. PAL-Manila sent the
suitcase to Butuan but the lock had been opened and a folder containing court
documents was missing. Plaintiff refused to accept the luggage. PAL-Cebu delivered the
luggage to Ong Yiu with the promise to investigate the matter. Plaintiff sued and was
awarded moral and exemplary damages. CA reversed holding that PAL was guilty of
simple negligence and denied moral and exemplary damages but ordered PAL to pay
P100, the baggage liability assumed by it under the condition of carriage printed on the
back of the ticket.
Held: PAL incurred delay in the delivery of petitioner's luggage. However, there
was no bad faith. The liability of PAL was limited to the stipulations printed on
the back of the ticket.
While the passenger had not signed the plane ticket, he is nevertheless
bound by the provision thereof; such provisions have been held to be part of the
contract of carriage and valid and binding upon the passenger regardless of the
latter's lack of knowledge or assent to the regulation. It is what is known as a
contract of adhesion wherein one party imposes a ready made form of contract
on the other; it is not entirely prohibited. The one who adheres to the contract is
in reality free to reject it entirely; if he adheres, he gives his consent. A contract
limiting liability upon an agree valuation does not offend against the policy of the
law forbidding one from contracting against his own negligence.
Considering that petitioner had failed to declare a higher value for his
baggage, he cannot be permitted a recovery in excess of P 100.00. Besides,
passengers are advised not to place valuable items inside their baggage. Also,
there is nothing in the evidence to show the actual value of the goods allegedly
lost by petitioner.
PAN AM vs IAC, 164 SCRA 268
F: This is a petition filed by Pan Am to limit its liability for lost baggage containing
promotional and advertising materials for films to be exhibited in Guam and the US,
clutch bags, barong tagalogs and personal belongings of Rene Pangan to the amount
specified in the airline ticket absent a declaration of a higher valuation and payment of
additional charges.
Pan Am contends that its liability for lost baggage is limited to $600 ($20 x 30
kilos) as the latter did not declare a higher value for his baggage. Such stipulation is
printed at the back of the ticket.
Held : Pan Am cited Ong Yiu vs CA. Such case is squarely applicable in this case.
The ruling in Shewaram vs PAL is inapplicable since it was premised on the fact
that the conditions printed at the back of the ticket were so small and hard to
read.
Liability is limited to $600 as stipulated at the back of the ticket.
The SC reversed the CA ruling awarding respondent damages for lost
profits. The rule laid down in Mendoza vs PAL provides that before damages can
be awarded for loss of profits on account of delay or failure of delivery, it must
have appeared that CC had notice at the time of delivery to him of the particular
circumstances attending the shipment, and which probably would lead to such
special loss if he defaulted. In the absence of a showing that Pan Am's attention
PAGE 64
was called to the special circumstances requiring prompt delivery of the luggage,
it cannot be held liable for the cancellation of respondent's contracts as it could
not have foreseen such an eventuality when it accepted the luggage for transit.
Pan Am vs Rapadas, 209 SCRA 67
F: Jose Rapadas was en route from Guam to Manila. While standing in line to board
the flight, he was ordered by Pan Am's handcarry control agent to check in his
Samsonite attache case. He protested on the ground that other passengers were
permitted to handcarry bulkier baggages. He tried to check-in without having to register
his attache case. He was however forced to register his baggage. He gave his attache
case to his brother who checked it in for him without declaring its contents or the value
of its contents. Upon arriving in Manila, he was given all his checked-in baggages except
the attache case. Since he felt ill, he sent his son to request for the search of the
missing luggage. He sent letters of demand to Pan Am.
Pan Am offered to settle the claim for $160, representing the CC's alleged limit of
liability for loss or damage to a passenger's personal property. Rapadas filed this action
for damages. He alleged that Pan Am discriminated or singled him out in ordering that
his luggage be checked in; that Pan Am neglected its duty in the handling and
safekeeping of his attache case from the point of embarkation in Guam to his
destination in Manila; that the value of the lost attache case and its contents is
$42,403.90. According to him, the loss resulted in his failure to pay certain obligations,
failure to remit money sent through him to relatives, inability to enjoy the fruits of his
retirement and vacation pay and inability to return to Tonga Construction Co. to comply
with then existing contracts. During the trial, he showed proof of the contents of his
attache case.
Pan Am contended that the claim was subject to the Notice of Baggage Liability
Limitations attached to the ticket. Such notice was also conspicuously posted in its
offices. It alleged that its liability is limited to $160 because Rapadas did not declare a
higher value and did not pay the corresponding additional charges.
The lower court ruled in favor of Rapadas. It however did not find Pan Am guilty
of discriminatory acts or bad faith. CA affirmed the decision.
Issue: WON a passenger is bound by the terms of a passenger ticket declaring

that the limitations of liability set forth in the Warsaw Convention as amended by
the Hague Protocol shall apply in case of loss, damage or destruction to a
registered luggage of a passenger. YES. Pan Am was ordered to pay $400 and P
10,000 as attorney's fees and costs of suit.
Held: There is no dispute that there was a notice appearing on page 2 of the
ticket stating that the Warsaw Convention governs in case of death or injury to a
passenger or of loss, damage or destruction to a passenger's luggage. Such
notice should be sufficient notice showing the applicability of the Warsaw
limitations. The passenger, upon contracting with the airline and receiving the
plane ticket, was expected to be vigilant insofar as his luggage is concerned. If
the passenger fails to adduce evidence to overcome the stipulations, he cannot
avoid the application of the liability limitations.
The Warsaw Convention, as amended, specifically provides that it is
applicable to international carriage which it defines as "any carriage in which,
according to the agreement between the parties, the place of departure and the
place of destination xxx are situated either within the territories of two High
PAGE 65
Contracting Parties or within the territory of a single High Contracting Party if

there is an agreed stopping place within the territory of another State xxx."
Nowhere in the Warsaw Convention is such detailed notice of baggage liability
limitations required. It is however a common, safe and practical custom for air
carriers to indicate beforehand the precise sums equivalent to those fixed by Art.
22(2) of the Convention.
The facts show that Rapadas actually refused to register his attache case.
In attempting to avoid registering the luggage, he manifested a disregard of
airline rules on allowable handcarried baggages. Prudence dictates that cash and
jewelry should be removed from checked-in luggage and placed in one's pockets
or handcarried. The alleged lack of enough time for him to make a declaration of
a higher value and to pay the corresponding supplementary charges cannot
justify his failure to comply with the requirement that will exclude the application
of limited liability. Had he readily complied with airline regulations from the
start, this situation would not have arisen.
While contracts of adhesion are not entirely prohibited, neither is blind
reliance on them encouraged. In the face of facts showing they should be ignored
because of their basically one- sided nature, the Court does not hesitate to rule
out blind adherence to their terms. The SC is not saying that passengers are
always bound to the stipulated amounts printed on a ticket, found in a contract
of adhesion, or printed elsewhere but referred to in handouts or forms. The
Court simply recognizes that the reasons behind stipulations on liability
limitations arise from the difficulty, if not impossibility, of establishing with a
clear preponderance of evidence the contents of a lost suitcase. Unless the
contents are declared, it will always be the word of a passenger against that of
the airline. If the loss of life or property is caused by the gross negligence or
arbitrary acts of the airline or the contents of the lost luggage are proved by
satisfactory evidence other than the self-serving declarations of one party, the
Court will not hesitate to disregard the fine print in a contract of adhesion.
Otherwise, the Court is constrained to rule that we have to enforce the contract
as it is the only reasonable basis to arrive at a just award.
(c) Factors affecting agreement
Art. 1746. An agreement limiting the common carrier's liability

may be annulled by the shipper or owner if the CC refused to carry the
goods unless the former agree to such stipulation.
Art. 1747. If the common carrier, without just cause, delays the
transportation of the goods or changes the stipulated or usual route,
the contract limiting the common carrier's liability cannot be availed of
in case of the loss, destruction, or deterioration of the goods.
Art. 1748. An agreement limiting the common carrier's liability

for delay on account of strikes or riots is valid.
Art. 1751. The fact that the common carrier has no competitor
along the line or route or a part thereof, to which the contract refers
shall be taken into consideration on the question of whether or not a
PAGE 66
stipulation limiting the common carrier's liability is reasonable, just,

and in consonance with public policy.
Art. 1752. Even when there is an agreement limiting the liability

of the common carrier in the vigilance over the goods, the common
carrier is disputably presumed to have been negligent in case of their
4 Agbayani:
Kinds of stipulation limiting liability.-- The following stipulations are often

made in a bill of lading bill of lading:
1. stipulation exempting the CC from any and all liability for loss or
damage occasioned by its own negligence - VOID
2. stipulation providing for an unqualified limitation of such liability to an
agreed stipulation - VOID
3. stipulation limiting the liability of the CC to an agreed valuation unless
the shipper declares a higher value and pays a higher rate of freight -- VALID and
ENFORCEABLE
When stipulation limiting liability valid.-- Under 1744, the shipper or owner
and the CC may stipulate to limit the liability of the CC for the loss, destruction or
deterioration of goods to a degree less than extra-ordinary diligence :
1. the stipulation must be in writing and signed by both parties;
2. the stipulation must be supported by valuable consideration other than
the service rendered by the CC;
3. the stipulation must be reasonable, just and not contrary to public
policy. This applies only when the CC is acting as such but not when it acts as a
private carrier [in Home Insurance vs American Steamship Co., the SC held that
the Civil Code provisions on CC should not be applied where the CC is not acting
as such but as a private carrier; such policy has no force where the public at
large is not involved]
The parties may stipulate that the diligence to be exercised by the CC be
less than extra-ordinary diligence, provided that the requirements under Article
1744 are complied with. However, the parties cannot reduce the diligence to
less than that of a good father of a family. Art. 1745 provides for 7 stipulations
which shall be considered unreasonable, unjust and contrary to public policy.
Construction of stipulations limiting common carrier's liability.-- An

exemption in general words not expressly relating to negligence, even though
the words are wide enough to include loss by negligence or default of CC's
servants, must be construed as limiting the liability of the CC as assurer, and not
as relieving him from the duty of exercising reasonable skill and care
Effect of lack of competitor to common carrier.-- Under 1751, the lack of
competition of the CC shall be considered in determining WON a stipulation
limiting CC's liability is reasonable, just and in consonance with public policy.
Examples of valid stipulations:
PAGE 67
1. 1748 - an agreement limiting the CC's liability for delay on account of

strikes or riots
2. 1749, Heacock vs Macondray - a stipulation that the CC's liability is
limited to the value of the goods appearing in bill of lading unless the shipper or
owner declares a greater value
3. 1750 - a contract fixing the sum that may be recovered by the owner or
shipper for the loss, destruction or deterioration of the goods, if it is reasonable
and just under the circumstances, and has been fairly and freely agreed upon
Under 1746, an agreement limiting the CC's liability may be annulled by the
shipper or owner if the CC refused to carry the goods unless the former agreed to
such stipulation. The effect of the shipper's consent obtained by means of
refusal on the part of the carrier to carry the goods is to make the agreement
limiting the CC's liability voidable at the instance of the shipper
Principles : [St. Paul Insurance vs Macondray, 70 SCRA 122]

1. A stipulation in the bill of lading limiting the CC's liability to the value of
the goods appearing in the bill, unless the shipper or owner declares a greater
value, is valid and binding.
2. The insurer who pays the insured on his claim for damage is merely
subrogated to the rights of the insured; therefore, said insurer cannot collect
from the CC more than what the insured can collect from the CC.
3. The obligation to pay the damage begins from the date it fails to deliver
the shipment in good condition to the consignee (on the basis of the rate of
exchange on that date).
Effect of delay in transportation, etc.-- Under 1747, the CC cannot avail of

the contract limiting his liability in these cases : (1) where the CC delays the
transportation of the goods; (2) where the CC changes the stipulated or usual
route [in both cases, the delay or change of route must be without just cause]
Presumption as to negligence in case of limited liability.-- Under 1752,

the presumption continues even when there is an agreement limiting the liability
of the CC in the vigilance of the goods. This presumption is disputable or
rebuttable by evidence that the CC exercised extra-ordinary diligence.
5. Applicable Law in foreign trade
Art. 1753. The law of the country to which the goods are to be
transported shall govern the liability of the common carrier for their
4 Agbayani:
The Civil Code governs the liability of the CC in case of loss, damage or
deterioration. Under 1766, in all matters not regulated by the Civil Code, the
rights and obligations of CC shall be governed by the Code of Commerce and by
special laws which are suppletory to the provisions of the Civil Code.
PAGE 68
6. Rules on Passenger Baggage
Art. 1754. The provisions of Arts.1733 to 1753 shall apply to the

passenger's baggage which is not in his personal custody or in that of
his employees. As to other baggage, the rules in Articles 1998 and
2000 to 2003 concerning the responsibility of hotel keepers shall be
applicable.
Art. 1998. The deposit of effects made by travelers in hotels and

inns shall also be regarded as necessary. The keepers of hotels and inns
shall be responsible for them as depositaries, provided that notice was
given to them, or to their employees, of the effects brought by the
guests and that, on the part of the latter, they take the precautions
which said hotel-keepers or their substitutes advised relative to the
care and vigilance of their effects.
Art. 2000. The responsibility referred to in the preceding article

shall include the loss of, or injury to the personal property of the guests
caused by the servants or employees of the keepers of hotels or inns as
well as by strangers; but not that which may proceed from any force
majeure. The fact that travelers are constrained to rely on the vigilance
of the keeper of the hotel or inn shall be considered in determining the
degree of care required of him.
Art. 2001. The act of a thief or robber, who has entered the hotel
is not deemed force majeure, unless it is done with the use of arms or
through irresistible force.
Art. 2002. The hotelkeeper is not liable for compensation if the

loss is due to the acts of the guest, his family, servants or visitors, or if
the loss arises from the character of the things brought into the hotel.
Art. 2003. The hotelkeeper cannot free himself from

responsibility by posting notices to the effect that he is not liable for
the articles brought by the guest. Any stipulation between the
hotelkeeper and the guest where the responsibility of the former as set
forth in Arts. 1998 to 2001 is suppressed or diminished shall be void.
Classes of baggage of passengers.-- The law makes a distinction between

(1) baggage in the custody of the passengers or their EEs; and (2) baggage not in
such custody but in that of the CC.
Liability for baggage in custody of passenger.-- Art. 1754 refers to Arts.

1998, 2000- 2003 concerning the responsibility of hotel keepers. Under 1998,
the baggage of passengers in their personal custody or in that of their EEs while
being transported shall be regarded as necessary deposits. The CC shall be
responsible for such baggage as depositaries, provided that (1) notice was given
to them or to their EEs, of the baggage brought by their passengers, and that (2)
PAGE 69
the passengers take the precautions which said CCs advised relative to the care
and vigilance of their baggage.
Responsibility for acts of EEs, thieves.-- Under 2000, a CC is

responsible as a depositary for the loss of or injury to the baggage in the
personal custody of passengers, caused by the CC's servants or EEs but not
those caused by force majeure.
Under 2001, the act of a thief or robber, who has entered the CC's vehicle
is not deemed force majeure, unless it is done with the use of arms or through
irresistible force.
Under 2002, the CC is not liable if the loss of the baggage in the personal
custody of the passenger is due to the acts of the passengers, his family,
servants or visitors, OR if the loss arises from the character of the baggage.
Stipulations limiting liability.-- Under 2003, a CC cannot free himself

from responsibility by posting notices to the effect that he is not liable for the
baggage brought by the passengers. Any stipulation diminishing the
responsibility required under 1998 to 2001 shall be void.
Liability for baggage not in custody of passenger.-- This refers to baggage

delivered to the custody of the CC and received by him, to be carried in the
same manner as other goods being transported by him. As the CC has custody
of such baggage and are carried like any other goods, the provisions on carriage
of goods shall apply (extra-ordinary diligence in the vigilance over the goods).
The moment the effects of a passenger are unconditionally placed in the
possession of and received by a carrier for conveyance, the law immediately
imposes on the CC extra-ordinary responsibility for the loss thereof which lasts
until the actual or constructive delivery of the effects to the passenger as the
person who has the right to receive them (presumption of negligence exists but
may be rebutted by proof of exercise of extraordinary diligence or causes under
1734).
A CC is liable for the loss of baggage although not declared and the
charges not paid, if it accepted them for transportation
C. Common Carrier of Passengers
1. Nature and extent of responsibility

each case.
further expressed in Articles 1734, 1735, and 1745, Nos. 5, 6, and 7,
PAGE 70
Art. 1755. A common carrier is bound to carry the passengers

safely as far as human care and foresight can provide, using the utmost
diligence of very cautious persons, with a due regard for all
circumstances.
4 Agbayani:
Common carriers must exercise extraordinary diligence in carrying

passengers.-- Art. 1755 shows clearly the high degree of care and extra-o
diligence required of a CC with respect to its passengers.
Carrier's duty of extraordinary diligence extends also to crew

members.-- The duty to exercise the utmost diligence on the part of CCs is for
the safety of passengers as well as for the members of the crew or the
complement operating the carrier. This must be so for any omission, lapse or
neglect thereof will certainly result to the damage, prejudice, injuries or even
death to all aboard the plane.
Cangco vs MRR, 38 Phil 768
Facts: supra. EE riding on train who stepped on watermelons.
Held: The conduct of plaintiff in undertaking to alight while the train was yet
slightly underway was not characterized by imprudence and that he was not
guilty of contributory negligence.
It is not negligence per se for a traveler to alight from a slowly moving train.
MRR failed to exercise due care in not providing for safe exit of its
passengers. It also failed to provide adequate lighting for its station.
It is impt. to note that the foundation of the legal liability of the defendant
is the contract of carriage, and that the obligation to respond for the damage
which plaintiff has suffered arises, if at all, from the breach of that contract by
reason of the failure of defendant to exercise due care in its performance. Its
liability is direct and immediate (culpa contractual), differing essentially, from
that presumptive responsibility for the negligence of its servants, which can be
rebutted by proof of the exercise of due care in the selection and supervision of
EEs (culpa aquiliana).
The liability of masters and employers for the negligent acts or omissions
of their servants or agents, when such act or omissions cause damage which
amount to the breach of a contract, is not based upon a mere presumption of the
master's negligence in their selection or control, and proof of exercise of the
utmost diligence and care in this regard does not relieve the master of his
liability for the breach of his contract. When the facts averred show a contractual
undertaking by defendant for the benefit of plaintiff, and it is alleged that plaintiff
has failed or refused to perform the contract, it is not necessary for plaintiff to
specify in his pleadings whether the breach of the contract is due to willful fault
or to negligence on the part of the defendant, or of his servants or agents. Proof
of the contract and of its nonperformance is sufficient prima facie to warrant
recovery.
PAGE 71
The contract of defendant to transport plaintiff carried with it, by

implication, the duty to carry him in safety and to provide safe means of entering
and leaving its trains. That duty, being contractual, was direct and immediate,
and its nonperformance could not be excused by proof that the fault was morally
imputable to defendant's servants.
Strong vs Iloilo-Negros Air Express, 40 OG 269
F: Plaintiff was a passenger aboard defendant's plane en route from Iloilo to Manila.
The plane's motors went dead and, notwithstanding the efforts of its pilot, it plunged
into the sea and sank. The passengers and the pilot were rescued.
Held : In aviation, inevitable accident is defined as one that is not occasioned in

any degree remotely or directly by want of such skill or care as the law holds for
what man is bound to exercise. Airplane companies are not required to exercise
all the care. Passengers necessarily should take upon the usual and ordinary
perils to airplane travel. A carrier is not an insurer against all risks.
A carrier is not liable for defects of ignition cables used on his plane, nor of
the installation thereof, which cables were purchased from a competent and
reputable manufacturer in the absence of a showing that it knew those defects or
that such kind of ignition cable is not ordinarily used on the airplane operated by
it.
The doctrine of res ipsa loquitor cannot be applied when there is no proof
that according to the general experience of mankind, the accident was such that
it does not usually occur in the ordinary course of events without the negligence
on the part of those in control.
Isaac vs A.L. Ammen Trans. Co., 101 Phil 1046
F: supra. Passenger aboard a bus who placed his left arm on the window lost his
arm when the bus collided with a pick up.
Held : If the carrier's EE is confronted with a sudden emergency, he is not held to

the same degree of care he would otherwise be required in the absence of such
emergency.
By placing his left arm on the window, the passenger is guilty of
contributory negligence, and although contributory negligence cannot relieve the
carrier but can only reduce his liability (Art. 1762), this is a circumstance which
militates against plaintiff's position. It is negligence per se for passengers to
protrude any part of his body and that no recovery can be had for an injury.
Ratio: A CC is bound to carry the passengers safely as far as human care and
foresight can provide, using the utmost diligence of very cautious persons, with
due regard for all circumstances. This extraordinary diligence required of
common carriers is calculated to protect the passengers from the tragic mishaps
PAGE 72
that frequently occur in connection with rapid modern transportation. This high
standard of care is imperatively demanded by the preciousness of human life and
by the consideration that every person must in every way be safeguarded
against all injury.
Principles as to liability of CC:
(1) The liability of a carrier is contractual and arises upon breach of its
obligation; there is breach if it fails to exert extraordinary diligence accdg. to all
the circumstances of each case
(2) A carrier is obliged to carry its passenger with the utmost diligence of
a very cautious person, having due regard for all the circumstances
(3) A carrier is presumed to have been at fault or to have acted
negligently in case of death of, or injury to, passengers, it being its duty to prove
that it exercised extraordinary diligence
(4) The carrier is not an insurer against all risks of travel
Landingin vs Pantranco, 33 SCRA 284
F: Plaintiffs are parents of 2 girls who were passengers on a Pantranco bus on an

excursion trip from Dagupan to Baguio. The bus was open on one side. The TC found
that the crossjoint of the bus broke and the bus started to roll back. Some passengers
jumped out. The bus driver maneuvered the bus safely to the mountainside. Two of the
girls who jumped were seriously injured and died.
Held : In Lasam vs Smith, the court held that accidents caused by defects in the
automobile are not caso fortuito. The rationale is that the passenger has neither
the choice nor control over the carrier in the selection and use of the equipment
and appliances in use by the carrier.
When the passenger dies or is injured, the presumption is that the CC is at
fault or acted negligently. This is only rebutted by proof on the carrier's part that
it observed extraordinary diligence required in Art. 1733 and the utmost
diligence of very cautious persons required in Art. 1755.
It does not appear that the carrier gave due regard for all the
circumstances with cross joints' inspection the day previous to the accident. The
bus was heavily laden, and it would be traversing mountainous, circuitous and
ascending road. Thus the entire bus would naturally be taxed more heavily than
it would be under the ordinary circumstances. The mere fact that the bus was
inspected only recently and found to be in order would not exempt carrier from
liability unless it is shown that the particular circumstances under which the bus
would travel were also considered.
Landicho vs BTC, 52 OG 764
F: Landicho boarded a BTC bus. Before he did so, the conductor helped him in
placing his two baskets of chicken inside the running board. After a distance, he claimed
that he noticed one cage falling and he called the conductor's attention who did not
respond. He tried to fix it himself resulting in his fall in which he suffered injuries.
Held : The facts show that the cage was not about to fall. Plaintiff was probably
dizzy or sleepy that he fell from the truck.
PAGE 73
It is true that defendant being a CC is bound to transport its passengers

from the point of origin to the place of destination, but the duty does not
encompass all the risks attendant to a passenger in transit, for then the co.
would be a good source of stipend for a family who would like to end it all by
simply boarding, paying the fare and intentionally falling off. It is enough for the
CC's EEs to see to it that the passenger places himself safely inside the vehicle,
that it is operated carefully and that its mechanism is perfectly alright to prevent
mishaps. It would be unreasonable to exact upon operators to determine
beforehand whether a passenger is likely to fall dizzy or sleepy on the way, for
that is the lookout of the passenger himself. A passenger must see to it that he
seats himself in a safe portion of the vehicle.
Necesito vs Paras, 105 Phil 75
F: A mother and son boarded a passenger autotruck of the Phil. Rabbit Bus Lines.
While entering a wooden bridge, its front wheels swerved to the right, the driver lost
control and the truck fell into a creek. The mother drowned; the son was injured.
Held : While the carrier is not an insurer of the safety of the passengers, it should
nevertheless be held answerable for the flaws of its equipment if such flaws were
discoverable. The liability of the CC rests upon negligence or his failure to
exercise the utmost degree of diligence that the law requires. The rationale of
CC's liability for manufacturing defects is the fact that the passenger has neither
choice nor control over the carrier in the selection and use of the eqpt. and
appliances in use by the carrier. Having no privity whatever with the
manufacturer or vendor of the defective eqpt, the passenger has no remedy
against him. In this case, the defect could have been detected with the exercise
of utmost diligence by the CC.
2. Duration of responsibility
4 Agbayani:
When relationship of carrier and passenger terminates.-- The relation of

CC and passenger does not cease at the moment that the passenger alights from
the CC's vehicle at a place selected by the CC at the point of destination, but
continues until the passenger had reasonable time or a reasonable opportunity to
leave the CC's premises. What is a reasonable time or a reasonable delay within
this rule is to be determined from all the circumstances
La Mallorca vs CA, 17 SCRA 739
F: Husband and wife together with minor children boarded a La Mallorca bus. They
alighted from the bus. The father returned to the bus to get their baggage. He was
followed by his daughter. While the father was still on the running board awaiting for
the conductor to give his baggage, the bus stated to run so that the father had to jump.
His daughter was run over and was killed. The bus co. contended that when she was
killed, she was no longer a passenger and the contract of carriage had terminated.
PAGE 74
Held: Whether or not the relation between carrier and passenger does not cease
at the moment the passenger alights from the carrier's premises is to be
determined from the circumstances.
In this case, there was no utmost diligence. The driver stopped the bus
but did not turn off the engine. He started to run the bus even before the
conductor gave him the signal. The presence of passengers near the bus was
not unreasonable and the duration of the responsibility still exists.
Bataclan vs Medina, 102 Phil 181
F: The bus of Medina Trans left Cavite for Pasay with 18 passengers. Around dawn,
the front tires burst and the vehicles began to zigzag until it fell into a canal and turned
turtle. Some passengers were able to get out while four were trapped including
Bataclan. Later, 10 men came to help, one of them carrying a lighted torch, fueled by
petroleum. A fire started, burning the bus and the 4 passengers. Gas had leaked when
the bus overturned.
Held: The proximate cause of the death was the overturning of the vehicle which
was followed by the negligence of the driver and the conductor who were on the
road walking back and forth. They should have known that with the position of
the bus, leakage was possible aside from the fact that gas when spilled can be
smelled from a distance. The failure of the driver and conductor to have
cautioned or taken steps to warn rescuers not to bring a lighted torch too near
the bus constitutes negligence on the part of the agents of the carrier.
Aboitiz vs CA 179 SCRA 95
F: A farmer boarded a boat owned by Aboitiz at Mindoro bound for Manila. When
the vessel arrived, Pioneer Stevedoring took over control of the cargoes loaded at the
vessel and placed its crane alongside the vessel. One hour after he disembarked, he
went back to get his cargo but the crane hit him and he died.
Held: Aboitiz is still liable for his death under the contract of carriage. The
relation of carrier and passenger continues until the passenger has been landed
at the port of destination and has left the vessel owner's dock. Once created the
relationship will not ordinarily terminate until the passenger has safely alighted
from the carrier's conveyance or had reasonable opportunity to leave the
carrier's premises. All persons who remain on the premises a reasonable time
after leaving the conveyance are to be deemed passengers and what is
reasonable time is to be determined from all circumstances and includes a
reasonable time to see after his baggage and prepare for his departure. The CC-
passenger relationship is not terminated merely by the fact that the person
transported has been carried to his destination if the person remains in the
premises to claim his baggage.
The test is the existence of a reasonable cause as will justify the presence
of the passenger near the vessel.
PAGE 75
A CC is bound to carry its passengers as far as human care and foresight

can provide, using the utmost diligence of a very cautious person with due
regard for all circumstances.
PAL vs CA, G.R. 82619, Sept. 1993
F: Pedro Zapatos was among 21 passengers on a PAL flight from Cebu to Ozamis.
The flight was Cebu-Ozamis-Cotabato. Fifteen minutes before landing in Ozamis, the
pilot received a message that the airport was closed due to heavy rains and inclement
weather and that he should proceed to Cotabato City. In Cotabato, PAL informed the
passengers of their options and that due to limited number of seats in the other flights,
the basis for priority would be the check-in sequence at Cebu. Zapatos chose to return to
Cebu but was not accommodated because he checked in as passenger no. 9. However,
his personal belongings including a camera from Japan were still on board the flight to
Manila. He tried to stop the departure but his plea fell on deaf ears. He was given a free
ticket to Iligan City which he received under protest. He was left at the airport. PAL
neither provided him with transportation from the airport to the city proper nor food and
accommodation for his stay in Cotabato City. The next day, he purchased a ticket to
Iligan City. He informed PAL that he would not use the free ticket because he was filing a
case against PAL. His personal belongings were never recovered.
PAL denied that it unjustifiably refused to accommodate Zapatos. It alleged that
there was simply no more seat for him on Flight 560 to Manila; and that there was force
majeure which was a valid justification for the pilot to bypass Ozamis City and proceed
directly to Cotabato City. PAL contended that it did not unjustifiably deny his demand for
priority over confirmed passengers which they could not satisfy in view of the limited
seats. PAL also asserted that it should not be charged with the task of looking after the
passengers' comfort and convenience because the diversion of the flight was due to a
fortuitous event, and that if made liable, an added burden is given to PAL which is over
and beyond its duties under the contract of carriage. It argued that granting there was
negligence, PAL cannot be liable in damages in the absence of fraud or bad faith.
The RTC held in favor of plaintiff. The CA affirmed.
Held: The passenger's complaint touched on PAL's indifference and inattention to

his predicament and not on PAL's refusal to comply with his demand for priority
over the other passengers. He claimed that he was exposed to the peril of
Muslim rebels and that he suffered mental anguish, mental torture, social
humiliation, besmirched reputation and wounded feeling. He referred to PAL's
apathy.
The contract of air carriage is a peculiar one. Being imbued with public
interest, the law requires common carriers 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. In Air France vs
Carrascoso, the SC held that the contract to transport passengers is quite
different from any contractual relation in that it invites people to avail of the
comforts and advantages it offers. The diversion of the flight was due to a
fortuitous event. However, such did not terminate PAL's contract with its
passengers. Being in the business of air carriage, PAL is deemed equipped to
deal with situations like the case at bar. The relation of carrier and passenger
continues until the latter has been landed at the port of destination and has left
the CC's premises. Hence, PAL necessarily would still have to exercise
extraordinary diligence in safeguarding the comfort, convenience and safety of
PAGE 76
the stranded passengers until they have reached their final destination. PAL was
therefore remiss in its duty of extending utmost care to Zapatos while being
stranded in Cotabato City.
The CA held : "While the failure of Zapatos to reach his destination xxx in
accordance with the contract of carriage was due to the closure of the airport on
account of rain and inclement weather xxx it becomes the duty of PAL to provide
all means of comfort and convenience to its passengers when they would have to
be left in a strange place in case of such by-passing. If the cause of non-
fulfillment of the contract is due to a fortuitous event, it has to be the sole and
only cause. Since part of the failure to comply with the obligation to deliver its
passengers safely to their destination lay in PAL's failure to provide comfort and
convenience to its stranded passengers using extraordinary diligence, the cause
of non-fulfillment is not solely and exclusively due to fortuitous event, but due to
something that PAL could have prevented, PAL becomes liable to the passenger."
However the SC found that although PAL was remiss in its duty of extending
utmost care to Zapatos while being stranded in Cotabato City, there was no
sufficient basis to conclude that PAL failed to inform him about his other options.
3. Presumption of negligence
Art. 1756. In case of death of or injuries to passengers, common

carriers are presumed to have been at fault or to have acted
negligently, unless they prove that they observed extraordinary
diligence as prescribed in articles 1733 and 1755.
4 Agbayani:
Presumption of negligence.-- CCs are presumed to have been at fault or to

have acted negligently in case of death or injuries to passengers. This disputable
presumption may only be overcome by superior evidence that he had observed
extraordinary diligence prescribed in 1733, 1755, 1756
Where death or injury results to the passenger because of the negligence
of the CC's Es, the CC is liable, notwithstanding the fact that he had exercised all
the diligence of a good father of a family, in the selection and supervision of his
EEs
xxx
Consequently, in an action for damages, the issue is not WON the party
seeking damages has adduced sufficient evidence to show the negligence of the
CC but WON the carrier has presented the required quantum of proof to
overcome the presumption that it has been at fault or that it acted negligently in
the performance of its duty.
In the exercise of extraordinary diligence, the CC must give due regard for
all circumstances in connection with the transport of passengers
How presumption of negligence overcome.-- To overcome such

presumption, it must be shown that the CC had observed the required
extraordinary diligence or that the accident was caused by fortuituos event. In
order to constitute caso fortuito that would exempt a person from responsibility,
it is necessary that :
PAGE 77
1. The event must be independent of human will;

2. The occurrence must render it impossible for the obligor to fulfill his
obligation in a normal manner;
3. The obligor must be free of a concurrent or contributory fault or
negligence. [Estrada vs Consolacion, 71 SCRA 523]
Carrier not precluded from proving negligence of other carrier involved

in collision.-- While the plaintiff-passenger does not need to prove the
negligence of the CC, he may not preclude the CC from proving the legal defense
of negligence of the other vehicle involved in the collision (the CC may file a
third-party complaint against the other vehicle for reimbursement)
"Last clear chance" rule not applicable to contracts of carriage.-- The

principle of last clear chance applies only in a suit between the owners and
drivers of two colliding vehicles; it does not apply where a passenger demands
responsibility from the CC to enforce its contractual obligation; it would be
iniquitous to exempt the driver and his ER on the ground that the other driver
was also negligent
Court need not make express finding of carrier's fault or negligence.--

The court need not make an express finding of fault or negligence on the part of
the CC in order to hold it responsible to pay the damages sought by the
passenger. By the contract of carriage, the CC assumes the express obligation to
observe extraordinary diligence in transporting the passenger This is an
exception to general rule that negligence must be proved.
Carriers not ordinarily liable for injuries to passengers due to fires or

explosions caused by articles brought into conveyance by other
passengers.-- CC is not ordinarily liable for injuries to passengers due to fires
or explosions caused by articles brought into conveyance by other passengers.
Fairness demands that in measuring the CC's duty towards its passengers,
allowance should be given to the reliance that should be reposed on the sense of
responsibility of all the passengers in regard to their common safety (that the
passenger will not take with him anything dangerous to his co-passengers.) For
the carrier to be liable, he must be aware, through his EEs of the nature of the
article or must have had some reason to anticipate danger therefrom
(circumstances must show that there are causes for apprehension that the
passenger's baggage is dangerous and that the CC fails to act in the fact of such
evidence) [Nocum vs Laguna Bus Co., 1969]
4. Force Majeure
Bachelor Express vs CA 188 SCRA 217
F: Bus No. 800 owned by Bachelor Express and driven by Cresencio Rivera was the
situs of a stampede which resulted in the death of passengers Beter and Rautrat. The
bus came from Davao City on its way to Cagayan de Oro passing Butuan City. While in
Tabon-Tabon, Butuan, the bus picked up a passenger. A passenger suddenly stabbed a
PC soldier which caused commotion and panic among the passengers. Two passengers
PAGE 78
jumped out (finding of the TC which was reversed by the CA) of the bus and were found
dead as a result of head injuries. The passenger- assailant ran away from the bus but
was killed by the police. The parents of the dead passengers filed a complaint for a sum
of money against the CC, the owner and the driver.
The CC denied liability and alleged that the driver was able to transport his
passengers safely to their respective places of destination except for the two passengers
who jumped off the bus without the knowledge and consent, much less, the fault of the
driver; that the CC exercised due diligence in the choice of its EEs to avoid as much as
possible accidents; that the incident was not a traffic or vehicular accident but was an
incident very much beyond the control of the CC; that the CC was not a party to the
incident as it was an act of a third party who is not in any way connected with the CC
and of which they have no control and supervision. The CC argued that the incident's
proximate cause was the act of the passenger who ran amuck and which triggered off
the commotion and panic.
The TC dismissed the complaint. The CA reversed and ordered the CC, the owner
and driver solidarily liable to the heirs of the deceased.
Held : The CC is liable for the death of the passengers.

Bachelor Express as a CC is bound to carry its passengers safely as far as
human care and foresight can provide using the utmost diligence of very
cautious person, with due regard for all the circumstances. In this case where
passengers suffered injuries which caused their death, under 1756, the CC is
presumed to have acted negligently unless it can prove that it had observed
extraordinary diligence. The CC raised the defense of caso fortuito. Art. 1174
provides that no person shall be responsible for those events which could not be
foreseen or which though foreseen were inevitable. In Lasam vs Smith, the SC
held that a caso fortuito must have the following elements: (1) The cause of the
unforeseen and unexpected occurrence must be independent of the human will;
(2) It must be impossible to foresee the event; (3) The occurrence must be so
as to render it impossible for the debtor to fulfill his obligation in a normal
manner; and (4) The obligor must be free from any participation in the
aggravation of the injury resulting to the creditor. The running amuck of the
passenger was the proximate cause of the incident and is within the context of
force majeure.
However, in order that a CC may be absolved from liability in case of force
majeure, it is not enough that the accident was caused by force majeure. The CC
must still prove that it was not negligent in causing the injuries resulting from
such accident. It must prove that there was no negligence or lack of care and
diligence on the part of the CC.
The TC and the CA had conflicting findings of fact. The SC upheld the
findings of the CA-- the driver did not immediately stop the bus at the height of
the commotion; the bus was speeding from a full stop; the victims fell from the
bus door when it was opened or gave way while the bus was still running; the
conductor panicked and blew his whistle after people had already fallen off the
bus; the bus was not properly equipped with doors in accordance with law. It is
therefore clear that the petitioners have failed to overcome the presumption of
fault and negligence found in the law governing CCs.
The CC's argument that it is not an insurer of its passengers deserves no
merit in view of the failure of the CC to prove that the deaths of the 2 passengers
were exclusively due to force majeure and not to the failure of the CC to observe
PAGE 79
extra-ordinary diligence in transporting safely the passengers to their

destinations as warranted by law.
5. Limitation of liability; validity of stipulations
Art. 1757. The responsibility of the common carrier for the safety
of passengers as required in Arts. 1733 and 1755 cannot be dispensed
with or lessened by stipulation, by the posting of notices, by
statements on tickets, or otherwise.
Art. 1758. When a passenger is carried gratuitously, a stipulation

limiting the common carrier's liability for negligence is valid, but not
for willful acts or gross negligence.
The reduction of fare does not justify any limitation of the
common carrier's liability.
Ticket given to a passenger is a written contract.-- Ticket given to

passenger is a written contract with the ff. elements: (1) the consent of the
contracting parties manifested by the fact that the passenger boards the ship
and the shipper consents or accepts him in the ship for transportation; (2) cause
or consideration which is the fare paid by the passenger as stated in the ticket;
(3) object, which is the transportation of the passenger from the place of
departure to the place of destination which are stated in the ticket.
Passenger bound notwithstanding his failure to sign ticket containing

stipulation limiting liability.-- Even if the passenger failed to sign the ticket,
he is nevertheless bound by the provisions thereof. Such provisions are part of
the contract of carriage, regardless of the passenger's lack of knowledge or
assent to the regulation. It is what is known as a contract of adhesion which is
not entirely prohibited by law. The one who adheres to the contract is in reality
free to reject it entirely; if he adheres, he gives his consent. Accordingly, where
the CC incurred delay, it is liable only for the amount printed in the ticket the
passenger not having declared a higher value for his luggage nor paid addtl.
charges.
Dispensing with or limiting liability.-- General rule: Under 1757, the

extraordinary diligence required under 1733 and 1755 for the carriage of
passengers cannot be dispensed with or lessened (1) by stipulation, (2) by the
posting of notices, (3) by statements on tickets, or (4) otherwise
What cannot be stipulated in a carriage of passengers :
(1) absolutely exempting the CC from liability from the passenger's death
or injuries;
(2) lessening the extraordinary diligence required by law to the diligence
of a good father of a family
Exception: Effect of gratuitous carriage.-- Under 1758, the CC and the

passenger may validly stipulate limiting the CC's liability for negligence where
the passenger is carried gratuitously (but the parties cannot stipulate to entirely
eliminate liability of CC)
PAGE 80
Effect of reduction of fares.-- Under 1758 (2), the reduction of fare does
not justify any limitation of the CC's liability -- the law requires gratuitous
passage.
The law is much stricter with respect to carriage of passengers as

compared with carriage of goods: a stipulation limiting the CC's liability in
writing, signed by the parties, supported by sufficient consideration, not contrary
to law will still be void where the passenger is not carried gratuitously.
Liability of owner of CC to accommodation passengers or invited

guests.-- [Lara vs Valencia, 1958] an owner of an automobile owes a guest the
duty to exercise ordinary or reasonable care to avoid injuring him; since one
riding in an automobile is no less a guest because he asked for the privilege of
doing so, the same obligation of care is imposed upon the driver and owner as in
the case of one expressly invited to ride
6. Responsibility for acts of EEs
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 carrier.
The liability of the common carrier 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.
Art. 1760. The common carrier's responsibility prescribed in the

preceding article cannot be eliminated or limited by stipulation, by the
posting of notices, by statements on the tickets, or otherwise.
4 Agbayani:
Liability for negligence or willful acts of employees.-- Under 1759, CC are

held liable for the death or injuries to passengers caused by the negligence or
the willful acts of their EEs, although such EEs may have acted beyond the scope
of their authority or in violation of the orders of the CC. The CC cannot escape
liability by interposing the defense that its EEs have acted without any authority
or against the orders of the CC
The passenger is entitled to protection from personal violence by the CC or
its agents or EEs since the contract of transportation obligates the CC to
transport a passenger safely to his destination and a CC is responsible for the
misconduct of its EEs
Cardenas vs Fernando, 54 OG no. 4, p. 1043 (1957): (1) extraordinary diligence

required of CC: calculated to protect the passengers as demanded by the
preciousness of human life and by the consideration that every person must in
every way be safeguarded against all injury; (2) liability for injury of passenger is
PAGE 81
based on a breach of contract of carriage for failure to bring the passenger safely
to his destination
Reason for making the CC liable for the misconduct of its EEs in their
own interest.-- The servant is clothed with delegated authority and charged
with the duty by the CC, to execute his undertaking to carry the passenger
safely; when the EE mistreats the passenger, he violates the contractual
obligation of the CC for which he represents the CC
Liability of CC for defects of its equipment.-- A passenger is entitled to

recover damages from a CC for an injury resulting from a defect in an appliance
purchased from a manufacturer, whenever it appears that the defect would have
been discovered by the CC if it had exercised the degree of care which under the
circumstances was incumbent upon it, with regard to inspection and application
of the necessary tests; for the purposes of this doctrine, the manufacturer is
considered as being in law the agent or servant of the CC, as far as regards the
work of constructing the appliance
Common carrier is exempt from acts of EE not done in line of duty.--

The CC is exempt from liability where the EE was never in a position in which it
became his duty to his ER to represent him in discharging any duty of the CC
towards the passenger; the EE is deemed as a stranger or co-passenger since his
act was not done in the line of duty
Defense of diligence in selection, etc., of employees.-- CC cannot escape

liability by interposing defense that he exercised due diligence in the selection
and supervision of his EEs; his liability is based on culpa contractual
When relationship of carrier and passenger terminates.-- The relation of

CC and passenger does not cease at the moment that the passenger alights from
the CC's vehicle at a place selected by the CC at the point of destination, but
continues until the passenger had reasonable time or a reasonable opportunity to
leave the CC's premises. What is a reasonable time or a reasonable delay within
this rule is to be determined from all the circumstances
Elimination or limitation of carrier's liability.-- Under 1760, the CC's

liability for the negligence or willful acts of his EEs which cause death of or injury
to passengers cannot be eliminated or limited by (1) stipulation, (2) by the
posting of notice, (3) by statements on the tickets, or (4) otherwise
Bataclan vs Medina, 104 Phil 181
F: supra. Bus turned turtle with gas leaking out. Rescuers brought torches which
resulted in fire.
Held : There was a breach of the contract of carriage and negligence on the part
of the agent of the CC, the driver. At the time of the blowout of the tires, the bus
was speeding. The proximate cause of the death was the overturning of the
vehicle which was followed by the negligence of the driver and the conductor
who were on the road walking back and forth. They should have known that with
PAGE 82
the position of the bus, leakage was possible aside from the fact that gas when
spilled can be smelled from a distance. The failure of the driver and conductor to
have cautioned or taken steps to warn rescuers not to bring a lighted torch too
near the bus constitutes negligence on the part of the agents of the carrier.
De Gillaco vs MRR, 97 Phil 884
F: Plaintiff's husband was a passenger in the train from Calamba to Manila. When
the train reached the Paco Railroad, a train guard of MRR was in the station waiting for
the same train to take him to Tutuban to report for duty. He had a long standing grudge
against Gillaco and he shot and killed him upon seeing him inside the train coach.
Held : While a passenger is entitled to protection from personal violence by the

CC or its agents or EEs, the responsibility of the CC extends only to those acts
that the CC could foresee or avoid through the exercise of the degree of care and
diligence required of it. The OCC did not impose upon CC the absolute liability
for assaults of their EEs upon the passengers.
The act of the guard was entirely unforeseeable by MRR which had no
means to ascertain or anticipate that the two would meet nor could it foresee
every personal rancor that might exist between its EEs and its passengers. The
shooting was a caso fortuito, both being unforeseeable and inevitable under the
circumstances.
When the crime took place, the guard had no duties to discharge. His
position would be that of a passenger also waiting transportation and not of an
EE assigned to discharge duties.
Maranan vs Perez, 20 SCRA 412
F: A passenger in a taxicab was stabbed and killed by the driver. The driver claimed
self defense since accdg to him, he was stabbed first by the passenger. The taxicab
operator claimed caso fortuito.
Held: The NCC unlike the OCC makes the CC absolutely liable for intentional
assaults committed by its EEs upon its passengers (Art. 1754). The CC's liability
is based on either (1) respondeat superior or (2) the CC's implied duty to
transport the passenger safely. Under respondeat superior (w/c is the minority
view), the CC is liable only when the act of the EE is within the scope of his
authority and duty. Under the second view, the CC is liable as long as the
assault occurs within the course of the performance of the EE's duty. It is no
defense that the act was done in excess of authority or in disobedience of the
CC's orders. The CC's liability is absolute in the sense that it practically secures
the passengers from assaults committed by its own EEs. Three cogent reasons
underlie this rule : (1) the special undertaking of the CC requires that it furnish
the passengers the full measure of protection afforded by the exercise of the
high degree of care prescribed in the law, from violence and insults in the hands
of strangers, other passengers, and from its own servants charged with the
passenger's safety; (2) liability is based on the CC's confiding in the servant's
hands the performance of his contract to safely transport the passenger,
PAGE 83
delegating therewith the duty of protecting the passenger with utmost care
prescribed by law; (3) as between the CC and the passenger, the CC must bear
the risk of wrongful acts or negligence of the CC's EEs against passengers since it
has the power to select and remove them.
It is the CC's obligation to select its drivers with due regard not only to
their technical competence and physical ability but also to their total personality,
including patterns of behavior, moral fiber, and social attitude.
7. Responsibility for acts of strangers and co-passengers
Art. 1763. A common carrier is responsible for injuries suffered

by a passenger on account of the willful acts or negligence of other
passengers or of strangers, if the common carrier's employees through
the exercise of the diligence of a good father of a family could have
prevented or stopped the act or omission.
4 Agbayani:
The CC is responsible for such willful acts or negligence of other passengers or of

strangers, provided that the CC's EEs could have prevented or stopped the act or
omission through the exercise of ordinary diligence. If the injury could not have
been avoided by the exercise of ordinary diligence on the part of the EEs of the
CC, the CC is not liable
Notice that the law speaks of injuries suffered by the passenger but not his
death. However, there appears to be no reason why the common carrier should
not be held liable under such circumstances. The word "injuries" should be
interpreted to include "death." (Aguedo F. Agbayani, COMMERCIAL LAW
REVIEWER, 1988 ed.)
Pilapil vs CA 180 SCRA 546
F: While on a bus, an unidentified bystander hurled a stone at the bus and hit Pilapil
above his left eye. He sustained some injuries to his eye.
Held: The law does not make the CC an insurer of the absolute safety of its
passengers. Art. 1755 qualifies the duty of the CC in exercising vigilance to only
such as human care and foresight can provide. The presumption created by law
against the CC is rebuttable by proof that the CC had exercised extraordinary
diligence in the performance of its obligations and that the injuries suffered were
caused by fortuitous events. The liability of the CC necessarily rests upon its
negligence, or its failure to exercise the degree of diligence required by law.
Under Art. 1763, the diligence required, with regards to its liability in cases when
intervening acts of strangers directly caused the injury, is the diligence only of a
good father of a family and not the extraordinary diligence generally required.
The rule is not so exacting as to require one charged with its exercise to take
doubtful or unreasonable precautions to guard against unlawful acts of strangers.
The CC would only be negligent if the tort caused by a third person could have
been foreseen and prevented by them.
PAGE 84
The injury was in no way connected to the performance of the obligation of

the bus company. It was caused by a stranger, over which the carrier had no
control or even knowledge of, and which could not have been prevented.
Bachelor Express vs CA, 180 SCRA 217
F: supra. A passenger stabbed a PC officer which caused a commotion which

resulted in the death of 2 passengers.
Held: The CC raised the defense of caso fortuito. The running amuck of the
passenger was the proximate cause of the incident and is within the context of
force majeure. However, in order that a CC may be absolved from liability in case
of force majeure, it is not enough that the accident was caused by force majeure.
The CC must still prove that it was not negligent in causing the injuries resulting
from such accident. It must prove that there was no negligence or lack of care
and diligence on the part of the CC.
The TC and the CA had conflicting findings of fact. The SC upheld the
findings of the CA-- the driver did not immediately stop the bus at the height of
the commotion; the bus was speeding from a full stop; the victims fell from the
bus door when it was opened or gave way while the bus was still running; the
conductor panicked and blew his whistle after people had already fallen off the
bus; the bus was not properly equipped with doors in accordance with law. It is
therefore clear that the petitioners have failed to overcome the presumption of
fault and negligence found in the law governing CCs.
The CC's argument that it is not an insurer of its passengers deserves no
merit in view of the failure of the CC to prove that the deaths of the 2 passengers
were exclusively due to force majeure and not to the failure of the CC to observe
extraordinary diligence in transporting safely the passengers to their destinations
as warranted by law.
8. Duty of passenger; effect of contributory negligence
Art. 1761. The passenger must observe the diligence of a good

father of a family to avoid injury to himself.
Art. 1762. The contributory negligence of the passenger does not

bar recovery of damages for his death or injuries, if the proximate
cause thereof is the negligence of the common carrier, but the amount
of damages shall be equitably reduced.
Law does not protect negligence of passenger.-- Law does not protect
negligence of passenger to the extent of doing harm or damage upon a public
utility
Diligence required of passenger.-- Diligence of a good father of a family to

avoid injury to himself.
PAGE 85
Effect of negligence of passenger.-- Where the proximate cause of the

death of or injury to the passenger is his own negligence, and not that of the CC,
the CC is exempted from liability
Effect of passenger's contributory negligence.-- Contributory negligence

on the part of the passenger does not justify the CC's exemption from liability.
Where it is not the proximate cause of the death or injury, he or his heirs are not
barred from recovery of damages, provided of course that the CC is the
proximate cause of his death or injury
Cangco vs MRR 38 Phil 768
F: supra. EE riding on train who stepped on watermelons.
Held: The conduct of plaintiff in undertaking to alight while the train was yet
slightly underway was not characterized by imprudence and that he was not
guilty of contributory negligence.
The circumstances show that it was no means so risky for him to get off while
the train was yet moving. It is not negligence per se for a traveler to alight from
a slowly moving train.
Isaac vs A. L. Ammen
F: supra. Passenger aboard a bus who placed his left arm on the window lost his
arm when the bus collided with a pick up.
Held: By placing his left arm on the window, the passenger is guilty of
contributory negligence, and although contributory negligence cannot relieve the
carrier but can only reduce his liability (Art. 1762), this is a circumstance which
militates against plaintiff's position. It is negligence per se for passengers to
protrude any part of his body and that no recovery can be had for an injury.
In this case, the bus driver had done what a prudent man could have done
to avoid the collision. The injury was due to passenger's fault.
Liability of air carrier under the Warsaw Convention (Oct. 12, 1929)
Art. 17. The carrier shall be liable for damages sustained in the event of
death or wounding of a passenger or any other bodily injury suffered by a
passenger, if the accident which caused the damage so sustained took place
on board the aircraft or in the course of any of the operations of embarking or
disembarking.
Art. 18. (1) The carrier shall be liable for damage sustained in the event
of the destruction or loss of, or of damage to, any checked baggage or any
goods, if the occurrence which caused the damage so sustained took place
during the transportation by air.
(2) The transportation by air within the meaning of the preceding
paragraph shall comprise the period during which the baggage or goods are in
PAGE 86
the charge of the carrier, whether in an airport or on board an aircraft, or, in

case of a landing outside an airport, in any place whatsoever.
(3) The period of the transportation by air shall not extend to any
transportation by land, by sea, or by river performed outside an airport. If
however, such transportation takes place in the performance of a contract for
transportation by air, for the purpose of loading, delivery, or transshipment,
any damage is presumed, subject to proof to the contrary, to have been the
result of an event which took place during the transportation by air.
Art. 19. The carrier shall be liable for damages occasioned by delay in
the transportation by air of passengers, baggage or goods
SC has held that these provisions merely declare the carrier liable for
damages in the enumerated cases, if the conditions therein specified are
present. Neither said provisions nor others in the Convention regulate or exclude
liability for other breaches of contract by the carrier.
D. Damages Recoverable from Common Carriers
1. In general
Art. 1764. Damages in cases comprised in this Section shall be

awarded with the title XVIII of this book concerning damages. Article
2206 shall also apply to the death of a passenger caused by the breach
of contract by a common carrier.
Art. 2197. Damages may be:

(1) Actual or compensatory;
(2) Moral;
(3) Nominal;
(4) Temperate or moderate;
(5) Liquidated;
(6) Exemplary or corrective.
2. Actual or compensatory
Art. 2199. Except as provided by law or by stipulation, one is

entitled to an adequate compensation only for such pecuniary loss
suffered by him as he has duly proved. Such compensation referred to
as actual or compensatory damages.
Art. 2201. In contracts and quasi-contracts, the damages for

which the obligor who acted in good faith is liable shall be those that
are natural and probable consequences of the breach of the obligation,
and which the parties have foreseen or could have reasonably foreseen
at the time the obligation was constituted.
PAGE 87
In case of fraud, bad faith, malice or wanton attitude, the obligor

shall be responsible for all damages which may be reasonably
attributed to the non-performance of the obligation.
Art. 2203. The party suffering loss or injury must exercise

diligence of a good father of a family to minimize the damages resulting
from the act or omission in question.
Art. 1764. Damages in cases comprised in this Section shall be

awarded with the title XVIII of this book concerning damages. Article
2206 shall also apply to the death of a passenger caused by the breach
of contract by a common carrier.
Art. 2206. The amount of damages for death caused by a crime or

quasi-delict shall be at least P 3,000 (now P50,000), even though there
may have been mitigating circumstances. In addition:
(1) The defendant shall be liable for the loss of the earning
capacity of the deceased, and the indemnity shall be paid to the heirs
of the latter; such indemnity shall in every case be assessed and
awarded by the court, unless the deceased on account of permanent
physical disability not caused by the defendant, had no earning
capacity at the time of his death;
(2) If the deceased was obliged to give support according to the
provisions of article 291, the recipient who is not an heir called to the
decedent's inheritance by the law of testate or intestate succession,
may demand support from the person causing the death, for a period
not exceeding five years, the exact duration to be fixed by the court;
(3) The spouses, legitimate and illegitimate descendants and
ascendants of the deceased may demand moral damages for mental
anguish by reason of the death of the deceased.
Cariaga vs LTBCo., 110 Phil 346
F: Edgardo Cariaga, a fourth year medical student of UST, was a passenger of an

LTBC bus which bumped against a train of MRR on the national highway crossing a
railroad tract at Laguna de Bay. Cariaga suffered severe injuries on the head making
him unconscious during the first 35 days after the accident, reducing his intelligence by
50% and rendering him in a helpless condition, virtually invalid, both physically and
mentally. LTBC paid all medical expenses plus allowance during convalescence. Later,
Cariaga's parents brought an action to recover damages from LTBC and MRR in the
amount of P 312,000 as actual, compensatory, moral and exemplary damages. LTBC
disclaimed liability and filed a cross-complaint against MRR for recovery of expenses
paid by it to the plaintiff placing MRR negligent for not providing a crossing bar at the
national highway railroad track. Laguna CFI dismissed the cross-complaint against MRR
and held LTBC liable for P 10,000 as compensatory damages with interest. Plaintiff and
LTBC appealed.
Held: The train driver was not negligent. He sounded the train's whistle four
times before the intersection, which were heard even by the bus passengers.
The bus did not slow down but instead the bus driver tried to pass the
PAGE 88
intersection before the train. In addition, another LTBC bus which arrived ahead
of the bus in this case, at the crossing heeded the train whistle by stopping and
allowing the train to pass. Clearly, the bus driver was negligent in totally
disregarding the warning. On the other hand, MRR cannot be held to be
contributorily negligent because LTBC was not able to discharge its burden of
proof when it alleged that MRR violated its charter by failing to ring the
locomotive bell.
The evidence shows that Ed C. had been rendered physically and mentally
invalid by the accident. He suffered head injuries specifically a fractured right
forehead necessitating the removal of all the right frontal lobe of his brain, which
reduced his intelligence by 50% so that he can no longer finish his medical
course. In addition, he has to lead a quiet and retired life because if the
tantalum plate which replaced a portion of his skull is pressed in or dented, it
would cause his death.
LTBC admitted that under Art. 2201, it is liable for damages that are the
natural and probable consequences of the breach and which the parties had
foreseen or could have reasonably foreseen at the time the obligation was
constituted. It however claims that the said provision contemplates only the
medical, hospital, and other expenses in the total sum of P 17,719.75. The SC
ruled that the income which Ed could earn if he should finish the medical course,
and pass the corresponding board exams must be deemed included because
they could have reasonably been foreseen by the parties at the time he boarded
the bus.
While his scholastic record may not be first rate, it is sufficient to justify
the assumption that he could have finished his course and would have passed
the board exams in due time. As regards the income that he could possibly earn
as a doctor, P 300 (accdg. to LTBC witness, Dr. Doria) could easily be expected
as minimum monthly income of Ed C. had he finished his studies. Compensatory
damages should be increased to P 25,000.
The claim for moral damages could not be granted because Art. 2219
enumerates the instances when moral damages may be recovered and the
present case does not fall under any of them, even par. (2) thereof because this
case is not one of quasi-delict and could not be considered as such because of a
pre-existing contractual relation between Ed C. and LTBC. Neither could LTBC be
liable under Art. 2220 because it did not act fraudulently or in bad faith.
Attorney's fees could also not be granted because this case does not fall under
Art. 2208.
The claim by the parents for actual and compensatory damages is also
without merit because the present action is based upon a breach of contract of
carriage and the parents were not a party thereto, and were not themselves
injured as a result of the collision.
Pan Am vs IAC, 164 SCRA 268
F: supra. Baggage containing promotional and advertising materials for films to be

exhibited in the US, clutch bags, barong tagalogs and personal belongings was lost. PAN
AM sought to limit its liability to the amount specified in the ticket absent a declaration
of higher valuation and the payment of addtl. charges.
PAGE 89
Held: On the basis of stipulations printed at the back of the ticket, Pan Am
contends that its liability for the lost baggage of Pangan is limited to $ 600.00
($20 x 30 kilos) as the latter did not declare a higher value for his baggage and
pay the corresponding charges.
The SC applied the ruling in Mendoza vs PAL: Before defendant could be
held to special damages, such as alleged loss of profits on account of delay or
failure of delivery, it must have appeared that he had notice at the time of
delivery to him of the particular circumstances attending the shipment, and
which probably would lead to such special loss if he defaulted. In order to
impose on the defaulting party further liability than for damages naturally and
directly, i.e. in the ordinary course of things, arising from a breach of contract,
such unusual or extraordinary damages must have been brought within the
contemplation of the parties as the probable result of the breach at the time of
or prior to contracting. In the absence of proof that Pan Am's attention was
called to the special circumstances requiring prompt delivery of Pangan's
luggages, petitioner cannot be held liable for the cancellation of Pangan's
contracts as it could not have reasonably foreseen such eventuality when it
accepted the luggage for transit. Pan Am was not privy to the contracts of
Pangan nor was its attention called to the condition therein requiring delivery of
the promotional and advertising materials on or before a certain date.
No attorney's fees could be awarded since there was no unjustified refusal
by Pan Am to satisfy the passenger's just and valid claim.
Villa Rey Transit vs CA, 31 SCRA 511
F: Policronio Quintos boarded a Villa Rey Transit bus at Lingayen, Pangasinan for
Manila and was seated on the first seat right side. When they reached the national
highway in Pampanga, the bus frontally hit the rear side of a bull cart filled with hay.
The end of the bamboo pole tied to the cart hit the windshield and landed on the face of
Quintos who was seated in front. He died of cerebral injuries. His sisters and surviving
heirs brought an action against the bus co. The TC and CA held Villa Rey liable for P
63,750.00.
Held: The determination of damages due is dependent on 2 factors : (1) on the

no. of years on the basis of which damages shall be computed (life expectancy);
and (2) rate at which the losses sustained should be fixed.
CA determined life expectancy accdg. to the American Expectancy Table of
Mortality; and since Quintos was around 30 years old at the time of his death :
2/3 x [80 - 30] = 33 1/3 years. The bus co. wanted to use the 4 year basis
adopted in Alcantara vs Surro but the court held that the case is not controlling
as it did not lay down any rule on the length of time to be used in the
computation of damages. In fact, it declared that there is no fixed basis for
determination of indemnity and much is left to the discretion of the court
considering the material damages involved and that there can be no exact or
uniform rule for measuring the value of human life and the measure of damages
cannot be arrived at by precise mathematical calculations.
Villa Rey impugns the decision on the ground that damages will have to be
paid NOW where most of those sought to be indemnified will be suffered years
later. This argument if offset by the fact that payment of the award will take
PAGE 90
place upon the finality of the decision, fixed at the rate of P 2,184 per year and
did not anymore compute the potentiality and capacity of Quintos to increase his
future income, upon conclusion of his training, when he would be promoted and
receive a higher salary.
In determining the losses sustained by the dependents and heirs of
Quintos. they consist NOT of the full amount of his earnings but of the support
they would have received from him had he not died. In fixing said amount, the
necessary living expenses should therefore be deducted from his earnings. The
amount recoverable would therefore be the NET earnings, which is the portion
which the beneficiaries would have received. To this sum must be added
P12,000 pursuant to Art. 104 and 107 of the RPC, in relation to Art. 2206, NCC
and P 1,727.95 for the amount actually spent by the sisters for his medical and
burial expenses and
P 2, 500 attorney's fees.
PAL vs CA, 185 SCRA 110
F: In 1960, Nicanor Padilla boarded the PAL flight from Iloilo to Manila. The plane
crashed on Mt. Baco, Mindoro. The plane, a PI-C133, was manufactured in 1942 and was
acquired by PAL in 1948. It had been certified airworthy by the Civil Aeronautics
Administration. As a result of her son's death, Mrs. Padilla demanded P 600,000 as
actual and compensatory damages plus exemplary damages and P 60,000 attorney's
fees.
Prior to his death, Nicanor Padilla was 29 years old, President and General
Manager of Padilla Shipping Co. at Iloilo City, and a legal assistant of the Padilla Law
Office. Upon learning of the death of her son, she suffered shock and mental anguish,
because her son who was still single was living with her. Nicanor had life insurance of P
20,000, the proceeds of which were paid to his sister. Eduardo Mate of the Allied
Overseas Trading Co. testified that the deceased was one of the incorporators of the co.
and also its VP with a monthly salary of P 455. Isaac Reyes, auditor of Padilla Shipping
Co., declared that the deceased was President and General Manager and received a
salary of P 1,500 per month.
The RTC and the CA awarded damages of P 477,000 as award for the expected
income of the deceased, P 10,000 as moral damages; P 10,000 as attorney's fees and to
pay the costs. PAL appealed the decision since accdg. to it, the court erred in computing
the awarded indemnity based on the life expectancy of the deceased rather than on the
life expectancy of the mother. Accdg. to it, the life expectancy of the deceased or of the
beneficiary, whichever is shorter, is used in computing for amount of damages.
Held: Under Arts. 1764 and Article 2206 (1), the award of damages for death is
computed on the basis of the life expectancy of the deceased and not of the
beneficiary. In this case, the lower courts determined the deceased gross annual
income to be P 23,100 less P 9,200 as living expenses, resulting in a net
income of P 13,900. The lower court allowed the deceased a life expectancy of
30 years. Multiplying his annual net income by his life expectancy of 30 years,
the product is P 417,000, which is the death indemnity due to his mother and
only forced heir.
Because of the long delay in this case, the mother already died without
being able to receive the indemnity she deserved. PAL is ordered to pay her heirs
the death indemnity with legal rate of interest of 6% per annum.
PAGE 91
3. Moral
Art. 2217. Moral damages include physical suffering, mental

anguish, fright, serious anxiety, besmirched reputation, wounded
feelings, moral shock, social humiliation, and similar injury. Though
incapable of pecuniary computation, moral damages may be recovered
if they are the proximate result of the defendant's wrongful act or
omission.
Art. 2216. No proof of pecuniary loss is necessary in order that

moral, nominal, temperate, liquidated or exemplary damages may be
adjudicated. The assessment of such damages, except liquidated ones,
is left to the discretion of the court, according to the circumstances of
each case.
Art. 2219. Moral damages may be recovered in the following

analogous cases :
(1) A criminal offense resulting in physical injuries;
(2) Quasi-delicts causing physical injuries;
xxx
(10) Acts and actions referred to in Articles 21, 26, 27, 28, 29, 30,
32, 34 and 35.
xxx
Art. 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.
Art. 2206. xxx

(3) The spouses, legitimate and illegitimate descendants and
ascendants of the deceased may demand moral damages for mental
anguish by reason of the death of the deceased.
Fores vs Miranda 105 Phil 266
F: supra. While the jeepney was descending the Sta. Mesa bridge at an excessive
rate of speed, the driver lost control, causing it to swerve and hit the bridge wall. Five of
the passengers were injured, including the respondent. The CA awarded moral damages.
Held: Art. 1764 makes it all the more evident that where the injured passenger
does not die, moral damages are not recoverable unless it is proved that the CC
was guilty of malice or bad faith. In the case at bar, there is no other evidence of
such malice to support an award of moral damages. To award moral damages
for breach of contract, without proof of bad faith or malice on the part of the CC,
PAGE 92
as required by Art. 2220, would be to violate the clear provisions of the law, and
constitute unwarranted legislation. A CC's bad faith is not to be lightly inferred
from a mere finding that the contract was breached through negligence of the
CC's EEs. The exception is a mishap resulting to the death of a passenger in
which case Art. 1764 makes the CC subject to Art. 2206 (award of moral
damages).
Air France vs Carrascoso, 18 SCRA 155
F: Plaintiff, a civil engineer, was a member of a group of 48 Filipinos that left Manila
for Lourdes on March 30, 1958. Air France, through its authorized agent, PAL, issued to
plaintiff a first class round trip ticket from Manila to Rome. From Manila to Bangkok, he
traveled first class, but at Bangkok, Air France forced him to vacate the first class seat
that he was occupying because there was a white man who had a better right to the
seat. There was a commotion when plaintiff first refused to give up his seat, but he was
pacified by his fellow Filipino passengers to give up his seat and transfer to another
class.
The lower court sentenced Air France to pay P 25,000 as moral damages, P
10,000 as exemplary damages, the difference in fare between first class and tourist
class plus P 3,000 for attorney's fees and costs of suit. The CA reduced the refund from
P 393.20 to P 383.20.
Held: Air France contended that the issuance of the first class ticket was no
guarantee that he would have a first class ride, but such would depend upon the
availability of first class seats. The SC ruled that it could not understand how a
reputable firm like Air France could have the indiscretion to give out tickets it
never meant to honor at all. It received the corresponding amount in payment of
first-class tickets and yet it allowed the passenger to be at the mercy of its EEs.
Plaintiff was indeed confirmed for first class all the way to Rome.
There was contract to furnish plaintiff a first class passage. Said contract
was breached when the CC failed to furnish the first class transportation at
Bangkok. Third, there was bad faith when petitioner's EE compelled Carrascoso
to leave his first class accommodation after he was already seated and to take a
seat in the tourist class by reason of which he suffered inconvenience,
embarrassments and humiliation, thereby causing him mental anguish, serious
anxiety, wounded feelings, and social humiliation, resulting in moral damages. It
is true that the complaint did not use the term Bad Faith. But the interference of
BF is there. The manager not only prevented Carrascoso from enjoying his right
to a first class seat; worse, he imposed his arbitrary will; he forcibly ejected him
from his seat, made him suffer the humiliation of having to go to the tourist class
compartment -- just to give way to another passenger whose right thereto has
not been established. This is certainly BF. For the willful malevolent act of CC's
manager, the CC-ER must answer. Moral damages are recoverable.
CC's contract with Carrascoso is attended with public duty. The expulsion
of Carrascoso is a violation of a public duty by the CC -- a case of quasi-delict.
Damages are proper. The manner of ejectment of Carrascoso fits into the legal
precept for awarding exemplary damages in addition to moral damages.
Lopez vs Pan Am, 16 SCRA 431
PAGE 93
F: Plaintiffs made first class reservations with defendant air carrier, in its Tokyo-SF
flight, which reservation was confirmed and first class tickets issued; but defendant's
agent by mistake canceled plaintiff's reservations and thereafter deliberately withheld
from plaintiffs the information, letting them go on believing that their first class
reservations stood valid and confirmed, expecting some cancellations of bookings would
be made before the flight time, which failed to occur. Upon arrival in Tokyo, only then
were the plaintiffs informed that there were no accommodations for them in the first
class, and they were constrained, due to pressing engagements in the US, to take the
flight as tourist passengers, which they did under protest. Plaintiffs sued the defendant
for moral and exemplary damages. The Rizal CFI awarded the plaintiffs moral and
exemplary damages and attorney's fees. Upon plaintiff's MFR, said damages were
increased in amount.
Held: In so misleading the plaintiffs into purchasing first class tickets in

conviction that they had confirmed reservations when in fact they had none,
defendant willfully and knowingly placed itself into position of having breached
its contract with plaintiffs.
Such actions of the defendant may indeed have been prompted by nothing
more than the promotion of its self-interest in holding on to plaintiffs as
passengers and foreclosing on their chances to seek the service of other airlines
that may have been able to afford to them first class accommodations. All the
same, in legal contemplation, such conduct already amounts to action in BF. For
bad faith means a breach of a known duty through some motive of interest of ill
will. It may not be humiliating to travel as tourist passengers, but it is
humiliating to be compelled to travel as such, contrary to what is rightfully to be
expected from the contractual undertaking.
Plaintiffs are entitled to moral damages. Considering their official,
political, social and financial standing, they are awarded P 200,000 as moral
damages, P 75,000 as exemplary damages all with interest, and P 50,000 as
attorney's fees considering the standing of plaintiff's counsel.
Ortigas vs Lufthansa, 64 SCRA 610
F: Plaintiff took a first class accommodation on Lufthansa Airlines in Rome for his
trip to Manila, with confirmation of the airlines office, but its EE on seeing plaintiff's
Filipino nationality in his passport, disallowed him to board the place and his seat was
given to a Belgian. Plaintiff having a heart ailment was advised by his physician to take
only a first class seat, but he was compelled to take an economy seat with a promise of
the Lufthansa EE that plaintiff will be transferred to first class in Cairo and onward to
Hongkong. Upon arrival in Cairo, the promise was not complied with. Similar false
representations were made to him at Dharnan and Calcutta. Plaintiff sued the airlines
for damages. TC awarded plaintiff moral and exemplary damages.
Held: It is the opinion of the SC that moral damages should be raised from P
100,000 to P 150,000 and exemplary damages be increased from P 30,000 to P
100,000. It is our considered view that when it comes to contracts of common
carriage, inattention and lack of care on the part of the CC resulting in the failure
of the passenger to be accommodated in the class contracted for amounts to bad
faith or fraud which entitles the passenger to an award of moral damages in
PAGE 94
accordance with Art. 2220. In this case, the breach appears to be of graver
nature, since the preference given to the Belgian passenger over plaintiff was
done willfully and in wanton disregard of plaintiff's rights and his dignity as a
human being and as a Filipino, who may not be discriminated against with
impunity. Since both Alitalia and Lufthansa are members of IATA and are agents
of each other, they are bound by the mistakes committed by a member such as
the mistake of the Alitalia EE to inform Ortigas that he could travel first class
instead of only being waitlisted. The award of higher damages is justified by the
aggravation of the situation when the Lufthansa EE at Rome falsely noted on
Ortigas' ticket that he was traveling economy from Rome to HK and which was
repeated four times. Also taken into consideration was the heart condition of
Ortigas which gave him added apprehension about traveling economy against
the advice of the doctor.
4. Exemplary
Art. 2229. Exemplary or corrective damages are imposed, by way

of example or correction for the public good, in addition to the moral,
temperate, liquidated or compensatory damages.
Art. 2232. In contracts and quasi contracts, the court may award
exemplary damages if the defendant acted in a wanton, fraudulent,
reckless, oppressive, or malevolent manner.
Art. 2233. Exemplary damages cannot be recovered as a matter

of right; the court will decide whether or not they should be
adjudicated.
Mecenas vs CA, 180 SCRA 83
F: M/V Tacloban City (TC) left Amlan, Negros Oriental bound for Manila. M/V Don
Juan (DJ) left Manila bound for Bacolod. TC had visual contact of DJ when they were
about 5 miles apart and as a precaution, it was steered to its left. DJ had radar contact
of TC when they were four miles apart and following R18 of the International Rules of
the Road when a collision is possible, it was steered to its right. At 10:30 PM, both
collided as a result of which DJ sank 15 minutes later and hundreds of its passengers
perished.
Petitioners, children of the victims, filed a case against Negros Navigation, owner
of DJ, based on quasi-delict. The RTC awarded damages of P 400,000 for the death of
plaintiffs' parents and P 15,000 for attorney's fees. The CA modified the award to P
100,000 as actual and compensatory damages.
Held: Before going into the issue, the SC ruled that the action which was based
on quasi-delict should be appropriately regarded as grounded on contract, and
indulged in the presumption of negligence on the part of the CC although its EEs
may have acted beyond the scope of their authority or even in violation of its
instructions. Its liability would include moral damages (Art. 1764) and exemplary
damages if the defendants acted recklessly or with gross negligence (Art. 2332).
There is no question that the defendants are negligent. As found by the
CFI, DJ steered to the right while TC continued its course to the left. There can
PAGE 95
be no excuse for them not to realize that with such maneuvers, they will collide.
They executed maneuvers inadequately and too late, to avoid collision. The
question is WON the defendants were recklessly or grossly negligent. The SC
ruled in the affirmative.
As for the captain, he was playing mahjong before and up to the time of
the collision. WON he was then off-duty is immaterial; there is, both realistically
speaking and in contemplation of law, no such thing as off-duty hours for the
master of a vessel at sea that is a CC upon whom the law imposes the duty of
extraordinary diligence. When the collision occurred, the captain failed to
supervise his crew in the process of abandoning the ship and he failed to avail of
measures to prevent the too rapid sinking of his vessel, thus aggravating the
casualties.
As for Negros Aviation, in permitting, or in failing to discover and correct
the regularity of the captain's mahjong sessions while DJ was at sea, it must be
deemed grossly negligent. It also sailed with an overload (1,004 passengers and
crewmembers).
As for the failure of TC to follow R18 by turning right instead of left, the SC
ruled that it is not applicable and will not relieve DJ from responsibility if the
collision could have been avoided by proper care and skill on her part or even by
a departure from the rules. DJ is still at fault when, upon seeing TC turn to its
left, it still turned to its right resulting in the collision.
The SC awarded moral damages of P 307,000 and exemplary damages of
P 307,000 and attorney's fees of P 15,000 together with actual and
compensatory damages for wrongful death of P 126,000 and P 60,000 for a total
of P 815,000. Although the petitioners only asked for P 400,000 award of
damages granted by the CFI, the SC increased it to P 800,000 following the
doctrine that the SC must consider and resolve all issues which must be decided
in order to render substantial justice to the parties, including issues not explicitly
raised by the parties affected.
In discussing the rule of exemplary damages in law, the SC looks to it as
an instrument to serve the ends of law and public policy by reshaping socially
deleterious behaviors, specifically, in the case, to compel CC to control their EEs,
to tame their reckless instincts, and to force them to take adequate care of
human beings and their property.
5. Nominal, Temperate and Liquidated
Art. 2221. Nominal damages are adjudicated in order that a right

of the plaintiff, which has been violated or invaded by the defendant,
may be vindicated or recognized, and not for the purpose of
indemnifying the plaintiff for any loss suffered by him.
Art. 2224. Temperate or moderate damages, which are more than

nominal but less than compensatory damages, may be recovered when
the court finds that some pecuniary loss has been suffered but its
amount cannot, from the nature of the case, be proved with certainty.
Art. 2226. Liquidated damages are those agreed upon by the

parties to a contract, to be paid in case of breach thereof.
PAGE 96
Art. 1757. The responsibility of a common carrier for the safety of

passengers as required in Arts. 1733 and 1755 cannot be dispensed
with or lessened by stipulation, by the posting of notices, by
statements on tickets, or otherwise.
Alitalia vs IAC, 192 SCRA 10
F: Dr. Felipa Pablo, an associate professor of UP and a research grantee of the Phil.
Atomic Energy Association was invited to take part at a meeting sponsored by the United
Nations in Ispra, Italy. She accepted the invitation and was then scheduled by the
organizers to read her paper. She was to be the 2nd speaker on the first day of the
meeting. She then booked passage with Alitalia. She arrived in Milan on the day before
the meeting in accordance with the itinerary set for her by Alitalia but her luggage was
delayed as it was in one of the succeeding flights from Rome to Milan. However, the
other flights from Rome did not have her baggage on board. Her luggage consisted of 2
suitcases-- one for her clothing and personal items and the other for her scientific
papers, slides and other research material.
Feeling desperate, she went to Rome to try to locate her bags. She inquired
about her suitcases in the international and domestic airports and filled out the forms
required by Alitalia for people in her predicament. However, her baggage could not be
found. Discouraged, she returned to Manila without attending the meeting in Ispra, Italy.
In Manila, she demanded that Alitalia make reparation for damages suffered by
her. Alitalia offered her free airline tickets which she rejected while instituting this
action. Her bags were located and forwarded to Ispra but only on the day after her
scheduled appearance. As she was no longer there to accept delivery, her bags were
not actually returned to her until after 11 months. The CFI awarded nominal damages of
P 20,000 and attorney's fees of P 5,000 plus costs of the suit. The IAC increased the
award of nominal damages to P 40,000. The increase was justified as follows--
considering the negligence committed by defendant, the amount of P20,000 under
present inflationary conditions as awarded to plaintiff as nominal damages is too little to
make up for the plaintiff's frustration and disappointment in not being able to appear at
said conference, and for the embarrassment and humiliation she suffered from the
academic community for failure to carry out an official mission for which she was singled
out by the faculty to represent her institution and the country.
Alitalia appealed on the following grounds: (1) That the Warsaw Convention
should have been applied to limit Alitalia's liability; and (2) That there is no warrant in
fact or in law for the award of nominal damages and attorney's fees.
Held: Under the Warsaw Convention, an air carrier is made liable for damages
for: (1) The death, wounding or other bodily injury of a passenger if the accident
causing it took place on board the aircraft or in the course of its operations of
embarking or disembarking; (2)
The destruction, or loss of damage to, any registered luggage or goods, if the
occurrence causing it took place during the carriage by air; and (3) Delay in the
transportation by air of passengers, luggage or goods. The Convention also
limits the liability of the carriers for each passenger to 250,000 francs and for
registered baggage and cargo to 250 francs per kg unless the passenger has
declared a higher rate and has paid additional charges. The Warsaw Convention,
however, denies to the carrier availment of the provisions which exclude or limit
his liability, if the damage is caused by his wilful misconduct or by such default
PAGE 97
on his part as is considered to be equivalent to wilful misconduct or if the

damage is similarly caused by any agent of the carrier acting within the scope of
his employment. The Convention does not thus operate as an exclusive
enumeration of the instances of an airline's liability, or as an absolute limit of the
extent of that liability. Such proposition is not borne out by the language of the
Convention. The Convention should be deemed a liability only in those cases
where the cause of the death or injury to person, or destruction, loss or damage
to property or delay in its transport is not attributable to or attended by any
wilful misconduct, bad faith, recklessness, or otherwise improper conduct. The
Convention does not regulate or exclude liability for other breaches of contract
by the carrier. Otherwise, an air carrier would be exempt from any liability for
damages in the event of its absolute refusal, in bad faith, to comply with a
contract of carriage. The Warsaw Convention has invariably been held
inapplicable, or as not restrictive of the carrier's liability, where there was
satisfactory evidence of malice or bad faith attributable to its officers and
employees.
In the case at bar, no bad faith or otherwise improper conduct may be
ascribed to the EEs of Alitalia. Dr. Pablo's luggage was eventually returned
belatedly, but without appreciable damage. The fact is, nevertheless, that some
special species of injury was caused to her because Alitalia misplaced her
baggage and failed to deliver it to her at the time appointed -- a breach of its
contract of carriage -- with the result that she was unable to read her paper that
she had painstakingly labored over. The opportunity to claim honor or distinction
for herself, for UP and for the country, was irretrievably lost to her. She also
underwent profound distress and anxiety, which gradually turned into panic and
despair, when she learned that her suitcases were missing.
The compensation for the injury suffered by Dr. Pablo cannot under the
circumstances be restricted to that prescribed by the Warsaw Convention for
delay in the transport of baggage. She is not entitled to be compensated for loss
or damage to her luggage since they were ultimately delivered to her. She is
however entitled to nominal damages, which is adjudicated in order that a right
of the plaintiff, which has been violated or invaded by the defendant, may be
vindicated and recognized, and not for the purpose of indemnifying the plaintiff
for any loss suffered.
As to the argument that she failed to include a specific claim for nominal
damages in her complaint, it suffices that her general prayer includes "such
other and further just and equitable relief in the premises." Also absent any
claim for actual or compensatory damages (she asked for moral and exemplary
damages and attorney's fees), and with proof of Dr. Pablo's right being violated,
the issue of nominal damages is raised.
The award of P 5,000 for attorney's fees is reasonable. The law authorizes
recovery of attorney's fees where the defendant's act or omission has compelled
the plaintiff to litigate with third person or to incur expenses to protect his
interest, or where the court deems it just and equitable.
Saludo vs CA 207 SCRA 498
F: After the death of plaintiff's mother Crispina Galdo, Saludo in Chicago, Pomierski
and Son Funeral Home, made the necessary preparations and arrangements for the
shipment of the body from Chicago to the Philippines. They had the body embalmed
PAGE 98
and secured a permit from the Philippine Vice Consul in Chicago. The Phil. Vice Consul
sealed the shipping case on Oct. 26,1976. On the same date, Pomierski brought the
remains to the Continental Mortuary Air Service (CMAS) which made the necessary
arrangements such as flights, transfers,etc. CMAS is a national service used by
undertakers which furnishes the air pouch in which the casket is enclosed in and they
see to it that the remains are taken to the proper air freigh terminal. CMAS booked the
shipment with PAL, through its agent Air Care International, with Pomierski as shipper
and Maria Saludo as consignee. PAL Airway Bill was issued for the route from Chicago to
SF on board TWA Flight 131 of Oct. 27, 1976, and from SF to Manila, on board PAL Flight
107 of Oct. 27, 1976, and from Manila to Cebu on board PAL Flight 149 of Oct. 29, 1976.
Maria Saludo and Saturnino Saludo, children of the deceased were booked with
United Airlines from Chicago to California and with PAL from California to Manila. When
she learned of her mother's arrangements, she changed reservations from UA to TWA.
She watched from the look-out area but she saw no body being brought on the flight.
She reluctantly took the TWA flight with her cousin's assurance to look into the matter.
Upon arrival in SF, she went to the TWA counter to inquire about her mother's remains
but she was told that they did not know anything about it. She then called Pomierski who
then called CMAS which in a matter of 10 minutes told him that the remains had been
switched with another body and had been sent to Mexico. Based on the facts, there was
a mix-up in Chicago Airport between the two bodies. Arrangements were made to send
the body to California through Texas. On October 28, 1976, the remains arrived in SF
and was received by PAL at 7:45 p.m. The shipment was immediately loaded on PAL
flight for Manila that same evening and arrived in Manila on October 30, 1976, a day
after its expected arrival on October 29, 1976.
Plaintiffs then filed a case against PAL and TWA before the CFI of Leyte, praying
for the award of actual damages of P 50,000, moral damages of P 1,000,000, exemplary
damages and attorney's fees and costs of suit. The CFI and CA absolved the two airline
companies. Plaintiffs then appealed the decision on the ff. grounds: (1) That the delay in
the delivery of the remains was due to the fault of the airlines, (2) The one day delay in
the delivery constitutes breach of contract as would entitle them to damages, (3) That
damages are recoverable by petitioners for the humiliating, arrogant, and indifferent
acts of the EEs of TWA and PAL. The airlines objected on the ground that this petition
only raises factual questions. Since it is precisely the soundness of the inferences or
conclusions that may be drawn from the factual issues which are here being assailed,
the issues raised in the petition indeed warrant a second look.
Held: (1) Petitioners allege that private respondents received the casketed
remains of petitioner's mother on Oct. 26, 1976 as evidenced by the issuance of
the PAL Airway Bill. From said date, private respondents were charged with the
responsibility to exercise extraordinary diligence so much so that for the alleged
switching of the caskets on Oct. 27, 1976, or one day after private respondents
received the cargo, the latter must necessarily be liable. Petitioners relied on the
doctrine that the issuance of the bill of lading carries the presumption that the
goods were delivered to the carrier issuing the bill, for immediate shipment, and
it is nowhere questioned that a bill of lading is prima facie evidence of the receipt
of the goods by the carrier. A bill of lading is a written acknowledgment of the
receipt of the goods and an agreement to transport and deliver them at a
specified place to a person named or on his order. A bill of lading is a receipt as
to the quantity and description of the goods shipped and a contract to transport
the goods to the consignee or other person therein designated, on the terms
specified in such instrument.
SC: An airway bill estops the carrier from denying receipt of goods.
However, as between the shipper and the carrier, when no goods have been
PAGE 99
delivered for shipment no recitals in the bill can estop the carrier from showing
the true facts. We must therefore allow the airline companies to explain, why,
despite the issuance of the airway bill and the date thereof, they deny having
received the remains of Saludo on Oct. 26, 1976.
As found by the CA, the airway bill was issued, not as evidence of receipt
of delivery but merely as confirmation for the booking made for the SF-Manila
flight scheduled on October 27, 1976. It was not until Oct. 28 that PAL received
physical delivery of the body at SF. The extraordinary responsibility of CC begins
from the time the goods are delivered to the carrier. This responsibility remains
in force even when they are temporarily unloaded or stored in transit, unless the
shipper exercises the right of stoppage in transitu, and terminates ony after the
lapse of a reasonable time for the acceptance of the goods by the consignee or
other person entitled to receive them. For such duty to commence, there must
in fact have been delivery of the cargo subject of the contract of carriage. Only
when such fact of delivery has been unequivocally esablished can the reqt. of
extraordinary responsibility arise.
As found by the CA, the body was really received by PAL on Oct. 28, 1976
and it was from such date that it became responsible for the agreed cargo under
the airway bill. Consequently, for the switching of caskets prior thereto which
was not caused by them and subsequent events caused thereby, PAL cannot be
held liable.
(2) Petitioners allege that even assuming CMAS was at fault, PAL would still be
liable because whoever brought the cargo to the airport or loaded it on the plane
did so as agent of PAL.
SC: This contention is without merit. When the cargo was received from
CMAS, Air Care Intl, PAL's agent and TWA had no way of determining its actual
contents, since the casket was hermetically sealed by the Philippine Vice-Consul.
They had to rely on the information given by CMAS. No amount of inspection by
the airlines could have guarded against the switching that had taken place. They
had no authority to unseal and open the casket. It is the right of the carrier to
require good faith on the part of those persons who deliver goods to be carried
by it. In the absence of more definite information, the carrier has the right to
accept shipper's marks as to the contents of the package offered for
transportation and is not bound to inquire particularly about them. It can safely
be said that a CC is entitled to fair representation of the nature and value of the
goods to be carried, with the concomitant right to rely thereon, and that a carrier
has no obligation to inquire into the correctness or sufficiency of such
information. The consequent duty to conduct an inspection arises in the event
that there should be reason to doubt the veracity of such representations.
In this case, private respondents had no reason to doubt the truth of the
shipper's representations. The airway bill was issued on the basis of such
representations.
Neither can they be held accountable on the basis of petitioner's theory
that whoever brought the cargo to the airport or loaded it on the plane did so as
an agent of private respondents, so that even if CMAS was indeed at fault, the
liability would be attributed to the airlines. CMAS was not an agent of private
respondents. It was hired to handle all the necessary shipping arrangements for
the transportation of the remains. CMAS may be classified as a forwarder, which
PAGE 100
is regarded as the agent of the shipper (Pomierski) and not of the crrier. It
merely contracts for the transportation of goods by carriers and has no interest
in the freight but receives compensation from the shipper as his agent.
The facts of the case would point to CMAS as the culprit. In fact, even the
petitioners wrote CMAS entertaining serious doubts as to whether they were
responsible for the mix-up. But the court cannot rule on the possible liability of
CMAS as such is not at issue in this case and there has not been convincing
evidence on the matter.
(3) Petitioners contended that TWA by agreeing to transport the remains, it made
itself a party to the contract of carriage nad was therefore bound by the airway
bill. When TWA shipped the remains ten hours earlier than scheduled, it
allegedly violated the terms of the airway bill which compounded, if not directly
caused, the switching of the caskets. The EEs of TWA presumably caused the
mix-up by loading the wrong casket on the plane. TWA must be presumed
negligent unless such is rebutted. TWA contends that it faithfully complied with
the obligations under the airway bill. Said faithful compliance was not affected
by the fact that the remains were shipped on an earlier flight as there was no
fixed time for completion of carriage stipulated on. TWA did not undertake to
carry the cargo aboard any specified aircraft, in view of the condition on the back
of the airway bill, which provides that " xxx no time is fixed for the completion of
the carriage, xxx and that Carrier may without notice substitute alternate
carriers or aircrafts xxx."
SC : TWA's contention is tenable. TWA can use substitute aircraft, even

without notice and without the assumption of any obligation whatsoever to carry
the goods on any specified aircraft. This is clearly sanctioned by the contract of
carriage. When a CC undertakes to convey goods, the law implies a contract that
they shall be delivered at destination within a reasonable time, in the absence of
any agreement as to the time of delivery. In case at bar, no special contract for
prompt delivery was entered into by the parties.
Condition No. 5 is binding on the plaintiff even if it is printed at the back of
the airway bill. This is in the nature of a contract of adhesion. However, such
condition only serves to insulate the carrier from liability in those instances when
the changes in routes, flights and schedules are clearly justified by the peculiar
circumstances of a particular cae, or by general transportation practices,
customs and usages, or by contingencies, emergencies in aviation, such as
weather turbulence, mechanical failure, reqts. of national security and the like.
In this case, the delay in the delivery of the remains cannot be attributed to the
fault, negligence or malice of private respondents. When TWA shipped the
remains on an earlier flight, it did so in the exercise of sound discretion and with
reasonable prudence -- they wanted to assure that the shipment would be
received in SF in sufficient time for transfer to PAL. TWA knew of the urgency of
the shipment due to the notation on the airway bill : "xxx Please return bag first
available flight to SFO."
(4) Petitioners alleged that private respondents are liable for tort on account of
humiliating, arrogant and indifferent acts of their officers and personnel. They
contended that there was no reason for the personnel to disclaim knowledge of
PAGE 101
the arrival or whereabouts of the body other than their sheer arrogance,
indifference and extreme insensitivity to their feelings.
SC: It affirmed the CA's findings that TWA EEs did not deal with petitioners
in a grossly humiliating, arrogant or indifferent manner as to amount to BF or
malice. It must be pointed out that the lamentable actuations of TWA's EEs leave
much to be desired, particularly so given the grief of petitioners, their tension
and anxiety wrought by the confusion and the fear about where their mother's
remains were. Airline companies are sternly admonished to strictly require their
personnel to be more accommodating to passengers and the general public.
Petitioners agonized for 5 hours unattended to and without any assurance
from the EEs of TWA. Common sense should have dictated that they exert a
little extra effort in making more extensive inquiry, by themselves or through
their superiors, rather than just shrug off the promblem with a callous and
uncaring remark that they had no knowledge about it.
The foregoing observations do not appear to be applicable to PAl and its
EEs.
(5) In the absence of strong and positive evidence of fraud, malice or bad faith,
moral damages cannot be awarded. Neither can exemplary damages nor
attorney's fees, in the absence of proof that defendants acted with malice, fraud
or BF. The censurable conduct of TWA's EEs cannot be said to have
approximated the dimensions of fraud, malice or BF. Nonetheless, the facts
show that petitioners' right to be treated with due courtesy in accordance with
the degree of diligence required by law to be exercised by every common carrier
was violated by TWA and this entitles them, at least, to nominal damages from
TWA alone. Arts. 2221 and 2222 of the Civil Code makes it clear that nominal
damages are not intended for indemnification of loss suffered but for the
vindication or recognition of a right violated or invaded. They are recoverable
where some injury has been done but the amount of which the evidence fails to
show, the assessment of damages being left to the discretion of the court accdg.
to the circumstances of the case. Nominal damages of P 40,000 to be paid by
TWA was awarded in favor of petitioners as a reasonable amount in the
circumstances.
6. Attorney's Fees and Interest
Art. 2208. In the absence of stipulation, attorney's fees and

expenses of litigation, other than judicial costs, cannot be recovered,
except:
(1) When exemplary damages are awarded;
(2) When the defendant's act or omission has compelled the
plaintiff to litigate with third persons or to incur expenses to protect
his interest;
(3) In criminal cases of malicious prosecution against the plaintiff;
(4) In case of a clearly unfounded civil action or proceeding
against the plaintiff;
(5) Where the defendant acted in gross and evident BF in refusing
to satisfy the plaintiff's plainly valid, just and demandable claim;
PAGE 102
(6) In actions for legal support;

(7) In actions for the recovery of wages or household helpers,
laboreres and skilled workers;
(8) In actions for indemnity under workmen's compensation and
employer's liability laws;
(9) In a separate civil action to recover civil liability arising from
a crime;
(10) When at least double judicial costs are awarded;
(11) In any other cases where the court deems it just and
equitable that attorney's fees and expenses of litigation should be
recovered.
In all cases, the attorney's fees and expenses of litigation must be
reasonable.
Art. 2210. Interest may, in the discretion of the court, be allowed

upon damages awarded for breach of contract.
4 Agbayani:
Damages arising from death; factors to be considered

1. number of years on the basis of which the damages shall be computed
2. the rate at which the losses sustained should be fixed. In the
determination of the losses or damages sustained by dependents and heirs of
the deceased, said damages consist not of the full amount of his earnings, but of
the support they received or would have received from him had he not died in
consequence of the negligence of defendant.
In fixing the amount of support, only net earnings are to be considered--
total earnings less expenses necessary in the creation of such earnings less
living and incidental expenses
Damages recoverable when death occurs due to commission of crime.--

(1) indemnity for the death of victim (P 50T); (2) indemnity for loss of earning
capacity of the deceased; (3) moral damages; (4) exemplary damages; (5)
attorney's fees and expenses of litigation; and (6) interest. Indemnity arising
from the fact of death is fixed whereas the others are still subject to the
determination of the court based on evidence presented; indemnity for death is
distinct and separate from the other forms of indemnity
Common carrier not liable for moral damages to passenger injured due
to negligence of driver.-- A CC's bad faith is not to be lightly inferred from a
mere finding that the contract was breached through negligence of the CC's
employees (Fores vs Miranda)
Extent of liability of air carrier for death of passenger:

(1) where there was no satisfactory explanation on the part of PAL as to how and
why the accident occurred, the presumption is that it was at fault, under Art.
1756
PAGE 103
(2) liability for lost earnings are the deceased passenger's net earnings
during his expected length of life based on accepted mortality tables
(compensatory damages)
(3) PAL is not liable for exemplary damages where it was not proven that it
acted in a wanton, fraudulent, reckless, oppressive or malevolent manner
[Davila vs PAL]
Nature of liability of air carrier to its passengers:
[Zulueta vs Pan Am]
F: Filipino passenger who went to relieve himself was berated by the captain for
coming back late to the plane and was called a monkey.
Held: A passenger is entitled to courteous treatment from the carrier and its EEs
and failure of the CC to comply with this obligation will entitle the passenger to
damages.
The relation between CC and passenger involves special and peculiar
obligations and duties, differing in kind and degree, from those of almost every
legal or contractual relation. On account of the peculiar situation of the parties,
the law implies a promise and imposes upon the CC the corresponding duty of
protection and courteous treatment. Therefore, the CC is under the absolute
duty of protecting his passengers from assault or insult by himself or his
servants.
A contract to transport passengers is quite different in kind and degree
from any other contractual relation. And this, because of the relation which an
air carrier sustains with the public. Its business is mainly with the traveling
public. It invites people to avail of the comforts and advantages it offers. The
contract of air carriage, therefore, generates a relation attended with a public
duty. Neglect or malfeasance of the CC's employees naturally could give ground
for an action for damages.
Passengers do not contract merely for transportation. They have a right to
be treated by the CC's EEs 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 rude or discourteous conduct on the part of EEs towards a passenger gives
the latter an action for damages against the CC.
Damages caused by CC on third persons.-- Negligence refers to the failure

to observe for the protection of the interests of another person that degree of
care, precaution, and vigilance which the circumstances justify demand, whereby
such other person suffers injury
Common carrier is liable only for damages that are natural and
probable consequence of breach of contract.-- Where the CC is guilty of a
breach of contract, but acted in GF, it is liable only for the natural and probable
consequences of the breach and which the parties had foreseen or could have
reasonably foreseen at the time the obligation was constituted (includes medical,
hospital expenses)
PAGE 104
Actual damages.-- (1) lost income.-- includes income to be earned by the

injured passenger or deceased passenger had he finished his course (could have
been foreseen)
(2) sum being carried by the deceased passenger which was lost
(3) funeral expenses
(4) attorney's fees
(5) loss of merchandise carried by the deceased
(6) loss of baggage and personal belongings
Exception to rule that CC is not liable for moral damages in breach of

contract:
(1) where the mishap results in death of the passenger
(2) where it is proved that the CC was guilty of fraud or BF, even if death
does not result Ex. where because of the BF of the CC, the passenger
suffered social humiliation, wounded feelings, serious anxiety and mental
anguish
Under 2206, the heirs of the deceased passenger may demand moral
damages in an amount commensurate with the mental anguish suffered by them
xxx
In a case where the passenger suffers physical injuries because of the CC's
injuries, he cannot recover moral damages for such breach of contract since it
does not fall under any of the cases where moral damages are recoverable under
Art. 2219
xxx
In determining the amount of moral damages, the TC may consider the
nature and extent of the injuries and the suffering occasioned by them and the
duration thereof. The appellate court should not interfere unless such is palpably
and scandalously excessive so as to indicate that it was the result of passion,
prejudice or corruption on the part of the TC
BF justifying moral damages must be in the securing, execution and

enforcement of contract of carriage. BF cannot be imputed but must be alleged
and proved; mere carelessness of the CC's driver does not per se constitute or
justify an inference of malice or BF on the part of the CC
xxx
CC is subsidiarily liable for moral damages in actions ex delicto or where
the action is based upon its liability arising from a crime
xxx
CC is not ordinarily liable for exemplary or corrective damages based upon
the wrongful act of its EE or driver where it did not have anything to do with the
wrongful act or had not previously authorized or subsequently ratified such act
(Art. 2332) This cannot be presumed but must be proven by evidence; exemplary
damages cannot be recovered as a matter of right
Nominal and exemplary damages awarded for willful breach of contract

committed through agent or EE
xxx
Where the CC has incurred in delay in the delivery of the luggage of the
offended party, but it had not acted in BF nor been guilty of gross negligence, the
offended party is not entitled to moral nor exemplary damages but only to the
PAGE 105
limited amount printed in the plane ticket where the offended party had not
declared a higher value nor paid addtl. transpo charges
Liability of air carriers for moral and exemplary damages.-- [Ortigas vs

Lufthansa] (1) Under the pool arrangement among different airlines of the IATA
agreement of which Alitalia and Lufthansa are signatories, both airlines are
constituted as agents of each other in the issuing of tickets and other matters
pertaining to their relations with those who would need their services.
(2) When it comes to contracts of common carriage, inattention and lack of
care on the part of the CC resulting in the failure of the passenger to be
accommodated in the class contracted for amounts to BF or fraud which entitles
the passenger to the award of moral damages. Where the passenger's seat was
given to a white passenger, there is willful breach giving rise to an action for
moral damages.
(3) Exemplary damages were awarded. Defendant as an airline should be
made to pay an amount that can really serve as a deterrent against a seeming
pattern of indifference and unconcern, and discrimination for racial reasons,
discernible in the treatment of air passengers.
[PAL vs CA, 106 SCRA 391] The duty to exercise the utmost diligence on the part
of the CC is for the safety of passengers as well as for the members of the crew
or the complement operating the carrier. Any omission, lapse or neglect thereof
will certainly result to the damage, prejudice, injuries and even death to all
aboard the plane, passengers, and crew members alike.
xxx
[KLM vs CA] A provision in passage ticket that carriage by successive air carriers
is to be regarded as a single operation makes the ticket-issuing carrier liable for
tortious conduct of other carriers
xxx
Exemplary damages may be awarded where the vehicle involved in the
accident operated under the kabit system, which is a pernicious system in
violation of law and which is in fraud of the traveling public which has a right to
expect that the holder of the certificate of convenience be the one to actually
operate his transport line.
xxx
CC is liable for nominal damages for its failure to bring passengers to their
destination which is in violatin of their right as passengers.
xxx
The CC is liable for the negligence of his driver in case of breach of
contract and cannot avail of the defense that he exercised due diligence in the
employment of his driver. The action for breach of contract imposes on the CC a
presumption of liability upon mere proof of injury to the passenger.
xxx
An action for damages against CC for breach of contract is primary and
independent and does not depend upon the previous conviction of the driver or
EE. Indemnification in a criminal prosecution is distinct from that awarded as
damages in a civil action.
PAGE 106
Other Principles :
The offended party has the option between an action for enforcement of
civil liability based on culpa criminal and an action for recovery of damages
based on culpa aquiliana. Responsibility for negligence under the Civil Code is
entirely separate from negligence under the Penal Code.
An independent civil action based on quasi-delict against the ER-operator

of a negligent driver cannot be suspended by the filing of a criminal action
against the driver.
Death of driver is not a hindrance to a separate quasi-delict action against

the CC-employer
There is no error in awarding civil damages against a driver in a criminal

case even when a separate civil action was filed against the ER. Culpa
contractual and an act or omission punishable by law are two distinct sources of
obligation.
III. CODE OF COMMERCE PROVISIONS ON OVERLAND TRANSPORTATION

COMMERCIAL CONTRACTS FOR TRANSPORTATION OVERLAND
A. Scope of Overland Transportation
B. Nature of Contract
Art. 349. A contract of transportation by land or waterways of

any kind shall be considered commercial:
1. When it involves merchandise or any object of commerce.

2. When, no matter what its object may be, the carrier is a
merchant or is customarily [habitually] engaged in transportation for
the public.
Requisites for a contract of transportation by land or water to be

commercial :
(1) transportation of merchandise is always commercial
(2) transportation of person or news is commercial only when the CC is a
merchant or is habitually engaged in transportation for the public
* principal requirement : the CC is a merchant or is habitually engaged in
transportation for the public; the object carried is of little importance
PAGE 107
A contract of air transportation may be regarded as commercial since it is

analogous to land and water transportation. The reason for its non-inclusion in
the Code of Commerce was that at the time of its promulgation, air
transportation on a commercial basis was not yet known.
C. Effect of Civil Code
Art. 1766. In all matters not regulated by this Code, the rights
and obligations of common carriers shall be governed by the Code of
Commerce and by special laws. (New Civil Code.)
Art. 2270. The following laws and regulations are hereby

repealed:
(2) The provisions of the Code of Commerce governing sales,
partnership, agency, loan, deposit and guaranty;
(4) All laws, Acts, parts of Acts, rules of court, executive orders,
and administrative regulations which are inconsistent with this Code.
(Ibid.)
There is now no distinction between a transportation contract of a CC

under the Civil Code and a transportation contract under the Code of Commerce
The New Civil Code does not expressly repeal the provisions of the Code of
Commerce on overland transportation; it makes such provisions suppletory to
the provisions of the Civil Code on CCs.
D. Contract of Carriage
1. Bill of Lading
(a) Definition, Subject Matter
Art. 352. The bills of lading or tickets in cases of transportation

of passengers may be diverse, one for persons and another for
baggage; but all of them shall bear the name of the carrier, the date of
shipment, the point of departure and arrival, the cost, and with regard
to the baggage, the number and weight of the packages, with such
other statements which may be necessary for their easy identification.
A bill of lading may defined as a written acknowledgment of the receipt of

goods and an agreement to transport and to deliver them at a specified place to
a person named or on his order. It comprehends all methods of transportation.
Nature : (1) each bill is a contract in itself and the parties are bound by its terms
(2) a bill of lading is also a receipt
(3) it is also a symbol of the goods covered by it
PAGE 108
A bill of lading is also a document of title. A document of title is any

document used in the ordinary course of business in the sale or transfer of
goods, as proof of the possession or control of goods, or authorizing or purporting
to authorize the possessor of the document to transfer or receive, either by
indorsement or by delivery, goods represented by such document.
(b) Form, Contents
Art. 350. The shipper as well as the carrier of merchandise and

goods may mutually demand of each other the issuance of a bill of
lading in which there shall be stated:
1. The name, surname, and domicile of the shipper.
2. The name, surname, and domicile of the carrier.
3. The name, surname, and domicile of the person to whom or to
whose order the goods are addressed, or whether they are to be
delivered to the bearer of the said bill.
4. A description of the goods, stating their generic character,
their weight, and the external marks or signs of the packages
containing the same.
5. The cost of the transportation.
6. The date of which the shipment is made.
7. The place of the delivery to the carrier.
8. The place and time at which the delivery is to be made to
the consignee.
9. The damages to be paid by the carrier in case of delay, if
any agreement is made on this point.
Art. 351. In transportation made by railroads or other enterprises

which are subject to schedules or the time fixed by regulations, it shall
be sufficient that the bills of lading or the declarations of shipment
furnished by the shipper refer, with respect to the rate, terms, and
special conditions of the transportation, to the schedules and
regulations, the application of which he requests; and should no
schedule be determined, the carrier must apply the rate of the
merchandise paying the lowest, with the conditions inherent therein,
always including such statement or reference to them in the bill of
lading which he delivers to the shipper.
Many of the items required in a bill of lading may be omitted with much
advantage to commerce, which aims to have the greatest number of transactions
in the last possible time especially in cases where there are tariffs or regulations
issued by the carrier company. In this case, the circumstances relative to price,
term and conditions of carriage may be omitted and simple reference be made to
the tariff and regulations under which the transportation is to be made. (Art. 351)
The form of the bill of lading is not material : if it contains an

acknowledgment by the carrier of the receipt of goods for transportation, it is in
legal effect, a bill of lading
PAGE 109
A ticket issued by a carrier to a passenger is not only a receipt for the fare
paid but is the contract between the passenger and the carrier, of the
passenger's right to ride in the CC's vehicle
Classes of bills of lading :

1. negotiable B/L - where it is stated that the goods will be delivered to the
bearer, or to the order of any person named in such document
2. non-negotiable B/L - where the goods are to be delivered to a specified
person
3. clean B/L - does not indicate any defect in the goods
4. foul B/L - indicates that the goods covered by it are in bad condition
5. spent B/L - covers goods that have already been delivered by the CC
without a surrender of a signed copy of the B/L; the subsequent delivery of the
spent B/L cannot give to the buyer of it any actual control of the goods, or
anything which can fairly be called delivery
6. through B/L - issued by the CC who is obliged to use the facilities of
other carriers as well as his own facilities for the purpose of transporting the
goods from the city of the seller to the city of the buyer, which B/L is honored by
the subsequent interested carriers who do not issue their own ladings
7. on board B/L - states that the goods have been received on board the
vessels which is to carry the goods
8. received for shipment B/L - states that the goods have been received for
shipment with or w/o specifying the vessel by which the goods are to be shipped;
issued when conditions are not normal and there is an insufficiency of shipping
space
9. custody B/L - issued by the CC to whom the goods have been delivered
for shipment but the steamer indicated in the B/L which is to carry the goods has
not yet reached the port where the goods are held for shipment
10. port B/L - issued by the CC to whom the goods have been delivered
and the steamer indicated in the B/L by which the goods are to be shipped is
already in the port where the goods are held for shipment
Negotiation of Bills by delivery/ by indorsement
Effect of fraud, accident on validity of negotiation : not impaired where the

person to whom the bill was negotiated paid value thereof in GF without notice of
the breach of duty or loss, theft, fraud, accident, mistake, duress or conversion
Who may negotiate? owner; any person to whom possession or custody of

the bill has been entrusted by the owner
Rights acquired:
1. such title to the goods as the person negotiating the bill had or had
ability to convey to a buyer in good faith for value
2. direct obligation of the CC issuing the bill to hold possession of the
goods for him according to the terms of the B/L as fully as if such CC contracted
directly with him
Transfer of non-negotiable B/L
PAGE 110
Rights acquired:
1. as against the transferor, title to the goods subject to the terms of any
agreement with the transferor
2. right to notify the CC who issued the bill and thereby acquire the direct
obligations of such CC to hold possession of the goods for him accdg to the terms
of the document; prior to notification of the CC, the title of the transferee may be
defeated by levy upon the goods or a subsequent purchaser from the transferor
of a subsequent sale of the goods by a transferor
(c) Function
Art. 353. The legal basis of the contract between the shipper and
the carrier shall be the bills of lading, by the contents of which all
disputes which may arise with regard to their execution and fulfillment
shall be decided, no exceptions being admissible other than forgery or
material errors in the drafting thereof.
After the contract has been complied with, the bill of lading shall
be returned to the carrier who may have issued it, and by virtue of the
exchange of this title for the article transported, the respective
obligations and actions shall be considered canceled, unless the same
act the claims which the contracting parties desire to reserve are
reduced to writing, exception being made of the provisions of Article
366.
In case the consignee, upon receiving the goods, cannot return

the bill of lading subscribed by the carrier, due to its loss or for any
other cause, he shall give said carrier a receipt for the goods delivered,
this receipt producing the same effect as the return of the bill of lading.
B/L constitutes the legal evidence of the contract of transportation --> all
disputes between the parties regarding the execution and performance of the
contract shall be decided by the contents of the B/L issued by the CC --> the law
admits no exceptions other than falsity and material error in the drafting of the
B/L
As a contract expressing the terms and conditions upon which the

property is to be transported, it is to be regarded as merging all prior and
contemporaneous agreements of the parties, and in the absence of fraud,
concealment or mistake, its terms or legal import, when free from ambiguity
cannot be explained nor added to by parol (Parol Evidence Rule)
2. Refusal to Transport
Art. 356. Carriers may refuse to accept packages which appear

unfit for transportation; and if said transportation is to be made by
railway, and the shipment is insisted on, the company shall carry them,
PAGE 111
being exempt from all liability if its objections are so stated in the bill
of lading.
CC cannot ordinarily refuse to carry a particular class of goods to the prejudice of

the traffic in those goods
exception : when the goods or packages are unfit for transportation
--> if transpo is insisted upon, railroads cannot refuse to carry them, but they
shall be exempt from all responsibility if their objections are made to appear in
the B/L
3. Doubtful declaration of contents
Art. 357. If by reason of well-founded suspicions of falsity in the

declaration of the contents of a package, the carrier should decide to
examine it, he shall do so before witnesses, in the presence of the
shipper or of the consignee.
Should the shipper or consignee cited not appear, the exami-
nations shall be made before a notary, who shall draft a certificate of
the result of the examination, for such purposes as may be proper.
If the declaration of the shipper should be correct, the expenses
caused by the examination and those of carefully repacking the
packages shall be defrayed by the carrier, and in a contrary case by the
shipper.
If the CC has a well-founded suspicion of falsity in the declaration as to the

contents of a package, he may examine it --> he must follow the procedure
under 357
4. No bill of lading
Art. 354. In the absence of a bill of lading the respective claims of

the parties shall be decided by the legal proofs that each one may
submit in support of his claims, in accordance with the general
provisions established in this Code for commercial contracts.
Art. 351. In transportation made by railroads or other enterprises

which are subject to schedules or the time fixed by regulations, it shall
be sufficient that the bills of lading or the declarations of shipment
furnished by the shipper refer, with respect to the rate, terms, and
special conditions of the transportation, to the schedules and
regulations, the application of which he requests; and should no
schedule be determined, the carrier must apply the rate of the
merchandise paying the lowest, with the conditions inherent therein,
always including such statement or reference to them in the bill of
lading which he delivers to the shipper.
PAGE 112
Bill not essential to contract : While under 350, the shipper and the CC may
mutually demand that a B/L is made, it is not obligatory. The fact that a B/L is
not issued does not preclude the existence of a contract of transpo. Provided
there is a meeting of the minds and from such meeting arise rights and
obligations, there should be no limitations as to form.
The B/L is not essential to the contract, although it may become obligatory
by reason of the regulations of companies or as a condition imposed in the
contract by agreement of the parties themselves
Where no B/L is issued, the disputes between the parties shall be decided
accdg. to the rules laid down in Art. 354
E. Responsibility of the Carrier
1. When it commences
Art. 355. The liability of the carrier shall begin from the moment
he receives the merchandise, in person or through a person entrusted
therewith in the place indicated for their reception.
The responsibility of the CC commences from the moment he receives the

merchandise --> the delivery must be made to him personally or through his
duly authorized agent, and at the place indicated for receiving the merchandise
2. Route
Art. 359. If there should be an agreement between the shipper

and the carrier with regard to the road over which the transportation is
to be made, the carrier may not change the route, unless obliged to do
so by force majeure; and should he do so without such cause, he shall
be liable for any damage which may be suffered by the goods
transported for any other cause whatsoever, besides paying the
amount which may have been stipulated for such a case.
When on account of said force majeure the carrier is obliged to
take another route, causing an increase in the transportation charges,
he shall be reimbursed for said increase after formal proof thereof.
Where there is an agreed route, the CC shall be liable for losses due not only to
the change of route but also to other causes, together with the indemnity agreed
upon --> the CC may not avail of the contract limiting his liability in case of
unjustified change of route
Where there is no agreed route, the carrier must select one which may be
the shortest, least expensive and practically passable
3. Care of Goods
PAGE 113
Article 361. The merchandise shall be transported at the risk and

venture of the shipper, if the contrary was not expressly stipulated.
Therefore, all damages and impairment suffered by the goods
during the transportation, by reason of accident, force majeure, or by
virtue of the nature or defect of the articles, shall be for the account
and risk of the shipper.
The proof of these accidents is incumbent on the carrier.
When goods are delivered on board a ship in good order and condition, and the
shipper-owner delivers them to the shipper in bad order and condition, it then
devolves upon the shipowner to both allege and prove that the goods were
damaged by reason of some fact which legally exempts him from liability
The shipper will suffer losses and deteriorations arising from fortuitous
event, force majeure, or inherent nature and defects of the goods (at the risk and
venture of the shipper)
It does not mean that the CC is free from liability for losses and
deterioration arising from his negligence or fault, which is presumed
Relate this with Art. 1734 and 1735 of the Civil Code
Art. 362. The carrier, however, shall be liable for the losses and
damages arising from the causes mentioned in the foregoing article if it
is proved that they occurred on account of his negligence or because
he did not take the precautions usually adopted by careful persons,
unless the shipper committed fraud in the bill of lading, making him
believe that the goods were of a class or quality different from what
they really were.
If, notwithstanding the precaution referred to in this article, the

goods transported run the risk of being lost on account of the nature or
by reason of an unavoidable accident, there being no time for the
owners to dispose of the same, the carrier shall proceed to their sale,
placing them for this purpose at the disposal of the judicial authority or
of the officials determined by special provisions.
Burden of proof : the CC has the burden of proving that the injury was
occasioned by one of the excepted causes
The shipper then has the burden to prove that although the injury may
have been occasioned by one of the excepted causes, yet still the CC is
responsible if the injury might have been avoided by the exercise of reasonable
skill and attention on his part
Art. 362 is in consonance with Art. 1735, NCC --> except that under 1732,
proof of extra-o diligence is required and not just ordinary diligence as implied
under 362
Where goods run risk of loss due to their nature, Art. 362 provides for the
remedy of sale by the CC of the goods, placing them for the purpose at the
PAGE 114
disposal of the judicial authority or of the officials designated by special

provisions

any of the ff. causes only:
or calamity;
(4) The character of the goods or defects in the packing or in the
containers;
(5) Order or act of competent public authority. (New Civil Code.)
Art. 1735. In all cases other than those mentioned in Nos. 1,2,3,4,
and 5 of the preceding article, if the goods are lost, destroyed or
deteriorated, CCs are presumed to have been at fault or to have acted
negligently, unless they prove that they observed extraordinary
diligence as required in Art. 1733. (Ibid.)
4. Delivery
(a) Condition of Goods
Art. 363. With the exception of the cases prescribed in the

second paragraph of Article 361, the carrier shall be obliged to deliver
the goods transported in the same condition in which, according to the
bill of lading, they were at the time of their receipt, without any
damage or impairment, and should he not do so, he shall be obliged to
pay the value of the goods not delivered at the point where they should
have been and at the time the delivery should have taken place.
If part of the goods transported should be delivered the
consignee may refuse to receive them, when he proves that he cannot
make use thereof without the others.
Duty to deliver goods : duty to deliver the goods in the same condition in
which accdg. to the B/L they were found at the time they were received, without
damage or impairment --> otherwise, the CC is liable for damages
Partial delivery: The consignee may refuse to receive the goods delivered, if
he can prove that he cannot make use of them independently of those not
delivered --> true solution depends upon the economic use which the goods
transported have (consignee cannot be arbitrary and must justify his
determination)
PAGE 115
Estoppel of shipper by laches : neglect or delay of shipper to demand

immediately, or within a reasonable time, the return of the merchandise shipped
or its value in case of non-delivery constitutes estoppel by laches
Places the CC at a disadvantageous position to show that it had fulfilled
what it had undertaken; makes it difficult for the CC to prove delivery
Art. 364. If the effect of the damage referred to in Article 361

should be only a reduction in the value of the goods, the obligation of
the carrier shall be reduced to the payment of the amount of said
reduction in value, after appraisal by experts.
Where all the goods are delivered but damage is to such an extent that
their value is diminished, the obligation of the CC shall be reduced to the
payment of the amount which, in the judgment of experts, constitute such
difference in value --> subject of course to other damages under the NCC
Art. 365. If, on account of the damage, the goods are rendered
useless for sale or consumption for the use for which they are properly
destined the consignee shall not be bound to receive them, and may
leave them in the hands of the carrier, demanding payment of their
value at the current market price that day.
If among the goods damages there should be some in good
condition and without any defect whatsoever, the foregoing provision
shall be applicable with regard to the damaged ones, and the consignee
shall receive those which are sound, this separation being made by
distinct and separate articles, no object being divided for the purpose,
unless the consignee proves the impossibility of conveniently making
use thereof in this form.
The same provision shall be applied to merchandise in bales or
packages, with distinction of the packages which appear sound.
Where damage renders the goods useless for sale and consumption for the
purposes for which they are properly destined:
1. if the damage affects all goods, the consignee may abandon all the
goods to the CC who shall pay the corresponding damages
2. if the damage affects only some of the goods, the consignee may
abandon only the damaged goods --> but if the consignee can prove that it is
impossible to conveniently use the undamaged goods in that form, without the
damaged goods, the law authorizes the consignee to abandon all the goods
Art. 366. Within the twenty-four hours following the receipt of

the merchandise a claim may be made against the carrier on account of
damage or average found upon opening the packages, provided that
the indications of the damage or average giving rise to the claim cannot
be ascertained from the exterior of said packages, in which case said
claim shall only be admitted at the time of the receipt of the packages.
PAGE 116

goods transported were delivered.
In case of damaged goods, the damage may either be (1) ascertainable only by
opening of the packages, or (2) ascertainable from the outside part of the
package
In Case 1, the claim against the CC for damages must be made within 24
hours following the receipt of the merchandise
In Case 2, the claim must be made at the time of receipt
The claim must be made before the payment of transportation charges
** otherwise, no action for damages may be maintained against the CC
When period begins to run : period begins to run when the consignee
received possession of the goods such that he may exercise over it the ordinary
control pertinent to ownership
There must be delivery of the merchandise by the CC to the consignee at
the place of destination --> Art. 366 applies only to cases of claims for damage
to goods actually turned over by the CC and received by the consignee
The conditions under Art. 366 are not limitation of action but are
conditions precedent to a cause of action --> if the shipper or consignee fails to
allege and prove the conditions under 366, he shall have no right of action
against the CC
The CC may require in the B/L that the goods be examined at the time of
delivery thereof --> the CC may likewise waive such right
Art. 366 is modified by a B/L prescribing a longer period for filing of written
claim with the CC or its agent
The unilateral action of a CC in stamping a condition in the notice of
arrival, requiring examination of bad order cargo by the ship's agent before
removal from port authorities as condition precedent to an action for recovery
cannot modify or add conditions to the B/L --> unreasonable and unfair in that it
allows CC to avoid responsibility for the loss of or damage to their cargo when in
packages or covered
The purpose of short period for claiming damages : to afford the CC a

reasonable opportunity and facilities to check the validity of the claims while the
acts are still fresh in the minds of the person who took part in the transaction
and the documents are still available.
The consignee may file a provisional claim : it is not necessary that such
claim should state a detailed list of the loss or damage; they only have to contain
descriptions of the shipments in question sufficient to have allowed the CC to
make reasonable verifications of such claim --> the determination of the specific
amount of damages claimed should be done carefully and without haste and
PAGE 117
these can be done only in a formal claim which will be filed after the provisional
claim
This stipulation is in the nature of a limitation upon the owner's right to

recovery --> the burden of proof is on the CC to show that the limitation was
reasonable and in proper form or within the time stated (see Southern Lines vs
CA)
A a stipulation in the B/L providing for a shorter period than the statutory
period within which to bring action for breach is valid --> does not in any way
defeat the right to recover but merely requires that said right be asserted by
action at an earlier period (filing of claims is different from filing of suits)
Art. 367. If there should occur doubts and disputes between the
consignee and the carrier with regard to the condition of goods
transported at the time of their delivery to the former, the said goods
shall be examined by experts appointed by the parties, and in case of
disagreement, a third one appointed by the judicial authority, the result
of the examination being reduced to writing; and if the persons
interested should not agree to the report of the experts and could not
settle their disputes, said judicial authority shall order the deposit of
the merchandise in a safe warehouse, and the parties interested shall
make use of their rights in the proper manner.
If doubts and disputes should arise between the consignee and the CC with
respect to the condition of the goods transported at the time of the delivery, Art.
367 shall govern --> expert opinion on the matter is not conclusive on the parties
(b) To Whom Delivery Made
Art. 368. The carrier must deliver to the consignee without any
delay or obstruction the merchandise received by him, by the mere fact
of being designated in the bill of lading to receive it; and should he not
do so he shall be liable for the damages which may arise therefrom.
The delivery must be made to the consignee
Where the B/L is issued to the order of the shipper, the CC is under a duty not to
deliver the merchandise except upon presentation of the B/L duly indorsed by
the shipper, and where the CC delivered the goods to another person who did not
present the B/L, such CC is liable for misdelivery --> duty to transport the goods
safely and to deliver them to the person indicated in the B/L
Misdelivery: Delivery to a person different from that indicated in the B/L -->
different from non-delivery
In case of conflicting orders of the shipper and the consignee (where one
orders the return and the other orders the delivery of the goods), there is no
PAGE 118
other recourse than to determine at what moment the right of the shipper to
countermand the shipment terminates --> this moment can be no other than the
time when the consignee or legitimate holder of the B/L appears with such B/L
before the CC and makes himself a party to the contract (prior to that time, he is
a stranger to the contract)
(c) Judicial Deposit
Art. 369. Should the consignee be not found at the domicile

indicated in the bill of lading, or should refuse to pay the transportation
charges and expenses, or to receive the goods, the deposit of said
goods shall be ordered by the municipal judge, where there is no judge
of first instance, to be placed at the disposal of the shipper or sender,
without prejudice to a person having a better right, this deposit having
all the effects of a delivery.
Judicial deposit as a remedy:

1. where the consignee cannot be found at the residence indicated
2. where the consignee refused to pay the transportation charges
3. where the consignee refuses to receive the goods
Judicial deposit shall produce all the effects of delivery subject to third
persons with better rights
Duty to look for consignee : if consignee is not present, he is entitled to
reasonable notice from the CC of their arrival and a fair opportunity to take care
of and remove them
: if the consignee is unknown to the CC, the latter must use proper and
reasonable diligence to find him, and if the consignee still cannot be found, the
goods may be stored in a proper place and the CC will have performed his whole
duty and shall be discharged from liability as a CC
Failure to look for consignee and to give him reasonable notice shall make
the CC liable for damages resulting from the delay in the receipt of the goods by
the consignee --> apply 1738 on the liability of the CC even when the goods are
deposited in its warehouse until after the consignee has been given reasonable
notice and opportunity to remove the goods
Art. 1752. Even when there is an agreement limiting the liability

of the CC in the vigilance over the goods, the CC is disputably presumed
to have been negligent in case of their loss, destruction or
deterioration. (New Civil Code.)
(d) When to be made
Article 370. If a period has been fixed for the delivery of the
goods, it must be made within the same, otherwise the carrier shall pay
the indemnity agreed upon in the bill of lading, neither the shipper nor
consignee being entitled to anything else.
PAGE 119
Should no indemnity have been agreed upon and the delay

exceeds the time fixed in the bill of lading, the carrier shall be liable for
the damages which may have been caused by the
delay.
Art. 358. Should no period within which goods are to be delivered

be previously fixed, the carrier shall be under the obligation to forward
them in the first shipment of the same or similar merchandise which he
may make to the point of delivery; and should he not do so, the
damages occasioned by the delay shall be suffered by him.
Where period fixed for delivery : the CC must deliver the goods within the time
fixed --> for failure to do so, the CC shall pay indemnity stipulated in the B/L,
neither the shipper nor the consignee being entitled to anything else -->
however, under the CC, damages shall be paid if the carrier refuses to pay the
stipulated indemnity or is guilty of fraud in the fulfillment of his obligation (Art.
1126,NCC)
If no indemnity has been stipulated and the delay exceeds the time fixed
in the B/L, the CC shall be liable for the damages that the delay may have
caused, e.g. the difference between the MV of the goods at the time when they
should have been delivered, and the price at the time when they were delivered
to which may be added reasonable expenses caused by delay
A CC in GF may be held liable only for damages that were foreseen or

might have been foreseen at the time the contract of transpo was entered into
--> before a CC could be held liable for special damages, such as loss of profits
on account of the delay or failure of deliver, he must have notice at the time of
the delivery of the particular circumstances attending the shipment and which
would probably lead to such special loss if he defaulted (Mendoza vs PAL)
If the CC incurs in delay in transporting the goods, a natural disaster shall
not free such carrier from responsibility; where the CC without cause delays the
transportation of the goods, the contract limiting the CC's liability cannot be
availed of in case of the loss, destruction or deterioration of the goods
Where property in the hands of a CC is not delivered within a reasonable
time after it has reached its destination, the CC in the absence of any legal
exemption and after demand has been made and delivery refused, is liable for a
conversion of the property --> the consignee may waive title to the property and
sue for conversion and is entitled to the value of the goods at the time they
should have been delivered to him --> subsequent tender of the goods by the
CC is not available as a defense
If there has been demand and the CC tenders the goods, the consignee
cannot refuse to receive the goods and sue for conversion; his sole remedy is an
action for damages on account of the delay --> there can only be conversion if
there has been demand and the CC refuses delivery
The time for delivery when no period fixed : the CC shall be bound to
forward them in the first shipment of the same or similar goods which he makes
to the point where he must deliver them --> should he not do so, the damages
caused by the delay shall be for his account
PAGE 120
Art. 358 is not violated when though the goods were not shipped on the
train agreed upon, they were shipped on another train which arrived earlier than
the one agreed upon
(e) Two or more carriers
Art. 373. A carrier who delivers merchandise to a consignee by

virtue of agreements or combined services with other carriers shall
assume the obligations of the carriers who preceded him, reserving his
right to proceed against the latter if he should not be directly
responsible for the fault which gives rise to the claim of the shipper or
of the consignee.
The carrier making the delivery shall also assume all the actions
and rights of those who may have preceded him in the transportation.
The shipper and the consignee shall have an immediate right of

action against the carrier who executed the transportation contract, or
against the other carriers who received the goods transported without
reservation.
The reservations made by the latter shall not however exempt

them from the liabilities they may have incurred by reason of their own
act.
Successive carriers shall assume the obligations of previous carriers but have a
right of action against previous carriers is the latter are directly responsible for
the fault giving rise to the claim of the shipper
(f) Obligation to keep registry
Art. 378. Transportation agents shall be obliged to keep a special

registry, with the formalities required by Article 36, in which there shall
be entered, in progressive order of number and dates, all the goods the
transportation of which is undertaken, stating the circumstances
required by Articles 350 et seq. for the respective bills of lading.
(g) Compliance with administrative regulations
Art. 377. The carrier shall be liable for all the consequences
arising from noncompliance on his part with the formalities prescribed
by the laws and regulations of the public administration during the
entire course of the trip and upon arrival at the point of destination,
except when his omission arises from his having been induced into
error by false statements of the shipper in the declaration of the
merchandise.
PAGE 121
If the carrier has acted in accordance with a formal order received

from the shipper or consignee of the merchandise both shall incur
liability.
The CC is exempted from responsibility where his failure to comply arises from
having been led into error by the falsehood on the part of the shipper in the
declaration of the merchandise
The shipper or consignee may become liable for noncompliance with govt.
rules and regulations, when the CC has acted by virtue of a formal order of the
shipper or consignee --> but the CC continues to be liable
F. Rights and Obligations of Shipper and/or Consignee
1. Right to Damages
(a) Condition imposed on right
Art. 366. Within the twenty-four hours following the receipt of

the merchandise a claim may be made against the carrier on account of
damage or average found upon opening the packages, provided that
the indications of the damage or average giving rise to the claim cannot
be ascertained from the exterior of said packages, in which case said
claim shall only be admitted at the time of the receipt of the packages.
goods transported were delivered.
Art. 357. If by reason of well-founded suspicions of falsity in the

declaration of the contents of a package, the carrier should decide to
examine it, he shall do so before witnesses, in the presence of the
shipper or of the consignee.
Should the shipper or consignee cited not appear, the exami-
nations shall be made before a notary, who shall draft a certificate of
the result of the examination, for such purposes as may be proper.
If the declaration of the shipper should be correct, the expenses
caused by the examination and those of carefully repacking the
packages shall be defrayed by the carrier, and in a contrary case by the
shipper.
PAGE 122
366.
Effect of return of the B/L or giving of the receipt: The respective

obligations and actions of the parties against each other shall be considered
canceled, except where in the same act of return or giving of a receipt the claims
of the parties be reduced to writing subject to the provisions of Art. 366
(b) Amount of damages for loss
Art. 372. The value of the goods which the carrier must pay in
case of their being lost or mislaid shall be fixed in accordance with
what is stated in the bill of lading, no proofs being allowed on the part
of the shipper that there were among the goods declared therein
articles of greater value, and money.
Horses, vehicles, vessels, equipments, and all the other principal

and accessory means of transportation, shall be especially obligated in
favor of the shipper, although with respect to railroads said obligation
shall be subordinated to the provisions of the laws of concession with
regard to property and to those of this Code with regard to the manner
and form of making attachments and seizures against the said
companies.
The value of the goods stated in the B/L is conclusive between the parties and
the shipper is not allowed to prove a higher value
It is only when the CC's fault is so gross as to amount to actual fraud, that
the actual amount of the losses and damages suffered may be proved by the
shipper against the carrier
Par. 2 especially binds the horses, vehicles, vessels and eqpt. and all other
principal and accessory means of the CC in favor of the shipper --> this lien is a
security for the payment of the value of the goods which the CC must pay in case
of loss or misplacement
Art. 1744, NCC. A stipulation between the CC and the shipper or
owner limiting the liability of the former for the loss, destruction or
deterioration of the goods to a degree less than extra-o diligence shall
be valid, provided it be:
PAGE 123
(1) in writing, signed by the shipper or owner;

(2) supported by a valuable consideration other than the service
rendered by the CC; and
(3) reasonable, just, and not contrary to public policy. (New Civil
Code.)
(c) Amount of damages for delay
Art. 371. In cases of delay on account of the fault of the carrier,

referred to in the foregoing articles, the consignee may leave the goods
transported in the hands of the carrier, informing him thereof in writing
before the arrival of the same at the point of destination.
When this abandonment occurs, the carrier shall satisfy the total
value of the goods, as if they had been lost or mislaid.
Should the abandonment not occur the indemnity for loss and
damages on account of the delays cannot exceed the current price of
the goods transported on the day and at the place where the delivery
was to have been made. The same provision shall be observed in all
cases where this indemnity is due.
Damages for delay (par. 3) : Provided there is no express agreement as to

indemnity in the B/L and there is no fraud on the part of the CC, and the goods
have a known current price at the place and on the day they should have been
delivered, the damages shall not exceed such value --> subject to Civil Code
provisions on damages in case of delay
2. Right to abandon
Art. 371. In cases of delay on account of the fault of the carrier,

referred to in the foregoing articles, the consignee may leave the goods
transported in the hands of the carrier, informing him thereof in writing
before the arrival of the same at the point of destination.
When this abandonment occurs, the carrier shall satisfy the total
value of the goods, as if they had been lost or mislaid.
Should the abandonment not occur the indemnity for loss and
damages on account of the delays cannot exceed the current price of
the goods transported on the day and at the place where the delivery
was to have been made. The same provision shall be observed in all
cases where this indemnity is due.
Right of abandonment: Exceptional but limited right

The right must be exercised during the intervening period between the
moment when the fault of the CC produces a delay, which is the generative
cause of the action, until the moment just before the arrival of the goods at the
place of delivery, by communicating such abandonment to the CC in writing
Where these conditions do not concur, the refusal to accept cannot be
effective
PAGE 124
Damages for abandonment : Art. 371 (2) --> subject to Civil Code
Art. 360. The shipper may, without changing the place where the
delivery is to be made, change the consignment of the goods delivered
to the carrier, and the latter shall comply with his orders, provided that
at the time of making the change of the consignee the bill of lading
subscribed by the carrier, if one were issued, be returned to him,
exchanging it for another containing the novation of the contract.
The expenses arising from the change of consignment shall be
defrayed by the shipper.
Art. 365. If, on account of the damage, the goods are rendered
useless for sale or consumption for the use for which they are properly
destined the consignee shall not be bound to receive them, and may
leave them in the hands of the carrier, demanding payment of their
value at the current market price that day.
If among the goods damages there should be some in good
condition and without any defect whatsoever, the foregoing provision
shall be applicable with regard to the damaged ones, and the consignee
shall receive those which are sound, this separation being made by
distinct and separate articles, no object being divided for the purpose,
unless the consignee proves the impossibility of conveniently making
use thereof in this form.
The same provision shall be applied to merchandise in bales or
packages, with distinction of the packages which appear sound.
Art. 363. With the exception of the cases prescribed in the

second paragraph of Article 361, the carrier shall be obliged to deliver
the goods transported in the same condition in which, according to the
bill of lading, they were at the time of their receipt, without any
damage or impairment, and should he not do so, he shall be obliged to
pay the value of the goods not delivered at the point where they should
have been and at the time the delivery should have taken place.
If part of the goods transported should be delivered the
consignee may refuse to receive them, when he proves that he cannot
make use thereof without the others.
Cases where consignee may abandon goods :

1. Art. 363, in case of partial non-delivery where the consignee proves that
he cannot make use of the goods capable of delivery independently of those not
delivered
2. Art. 365, where the goods are rendered useless for sale and
consumption for the purposes for which they are properly destined
3. Art. 371, where there is delay through the fault of the carrier
2. Right to change consignment
PAGE 125
Art. 360. The shipper may, without changing the place where the
delivery is to be made, change the consignment of the goods delivered
to the carrier, and the latter shall comply with his orders, provided that
at the time of making the change of the consignee the bill of lading
subscribed by the carrier, if one were issued, be returned to him,
exchanging it for another containing the novation of the contract.
The expenses arising from the change of consignment shall be
defrayed by the shipper.
3. Obligation to pay transportation charges
Art. 374. The consignees to whom the remittance may have been
made may not defer the payment of the expenses and transportation
charges on the goods that they received after twenty-four hours have
elapsed from the time of the delivery; and in case of delay in making
this payment, the carrier may demand the judicial sale of the goods he
transported to a sufficient amount to cover the transportation charges
and the expenses incurred.
Railroad corporations have the power to detain freight, goods or luggage,

to answer for the freight, storage and other transportation charges
In case of failure of the shipper, owner or consignee to pay for such
charges, the CC has the power to sell such freight, goods, or luggage at public
auction following the procedure under the law
Art. 375. The goods transported shall be specifically bound to

answer for the transportation charges and for the expenses and fees
caused by the same during their transportation, and until the time of
their delivery.
This special right shall be limited to eight days after the delivery
has been made, and after said prescription the carrier shall have no
further right of action than that corresponding to an ordinary creditor.
Art. 376. The preference of the carrier to the payment of what is

due him for the transportation and expenses of the goods delivered to
the consignee shall not be affected by the bankruptcy of the latter,
provided the action is brought within the eight days mentioned in the
foregoing article.
Art. 2241. With reference to specific movable property of the

debtor, the ff. claims or liens shall be preferred :
xxx
(9) Credits for transportation, upon the goods carried, for the
price of the contract and incidental expenses, until their delivery and
for thirty days thereafter. (New Civil Code.)
PAGE 126
Two sanctions for the enforcement by the CC of the payment of expenses and
transpo charges :
1. Art. 374 - judicial sale of the goods transported
2. Art. 375 - creating a lien in favor of the CC on the goods transported -->
8 day period has been increased to 30 days by the NCC
The purpose of the lien and time limit: Reciprocal to that established in
favor of the shipper under
Art. 372(par. 2); time limit rests on the necessity which the consignee must have
for alienation of the goods, by which the CC is given a period relatively urgent
pertaining to the said goods transported --> after the time has prescribed, his
preference prescribes and his only remedy is by ordinary action
The mere fact that the goods remain in the possession of the CC because
they have not been removed by the consignee, and the right of the CC to
demand the sale of the goods to satisfy the cost of transportation and other
expenses, do not deprive the CC of its right to demand in a proper action the
amounts owing to it by reason of the contract of transpo
The bankruptcy of the consignee shall not cut off the preference of the CC,
provided that the claim is made w/in 30 days from date of delivery (NCC)
5. Obligation to return bill of lading
366.
Under par. 2, Art. 353, after the contract of transpo has been complied with, the
B/L shall be returned to the issuing CC in exchange for the goods transported
which are delivered to the shipper or consignee
PAGE 127
Where the consignee upon receiving the goods cannot return the B/L to
the CC by reason of its loss or any other cause, par. 3, Art. 353 provides that he
must give the CC a receipt of the goods delivered
Effect of return of the B/L or giving of the receipt: The respective

obligations and actions of the parties against each other shall be considered
canceled, except where in the same act of return or giving of a receipt the claims
of the parties be reduced to writing subject to the provisions of Art. 366
G. Applicability of Provisions
Art. 379. The provisions contained in Article 349 et seq. shall also
be understood as relating to persons who, although they do not
personally effect the transportation of commercial goods, contract to
do so through others, either as contracts for a special and fixed
transaction or as freight and transportation agents.
In either case they shall be subrogated to the place of the carriers
with regard to the obligations and liability of the latter, as well as with
regard to their right.
IV. ADMIRALTY AND MARITIME COMMERCE
A. Concept of Admiralty; Jurisdiction over Admiralty Cases
BP 129, Sec. 19. Regional Trial Courts shall exercise exclusive

original jurisdiction:
xxx
(3) In all actions in admiralty and maritime jurisdiction where the
demand or claim exceeds one hundred thousand pesos (P100,000) xxx.
BP 129, Sec. 33. Metropolitan Trial Courts, Municipal Trial Courts

and Municipal Circuit Trial Courts shall exercise:
(1) Exclusive original jurisdiction over civil actions and probate
proceedings, testate and intestate, including the grant of provisional
remedies in proper cases, where the value of the personal property,
estate or amount of the demand does not exceed one hundred
thousand pesos (P100,000), or in Metro Manila where such personal
property, estate, or amount of the demand does not exceed Two
hundred thousand pesos (P200,000), exclusive of interest, damages of
whatever kind, attorney's fees, litigation expenses, and costs, the
amount of which must be specifically alleged: Provided, That interest,
damages of whatever kind, attorney's fees, litigation expenses, and
costs shall be included in the determination of the filing fees:
Provided, further, That where there are several claims or causes of
action between the same or different parties, embodied in the same
complaint, the amount of the demand shall be the totality of the claims
PAGE 128
in all the causes of action, irrespective of whether the causes of action

arose out of the same or different actions.
International Harvester vs Aragon 84 Phil 363
F: The S/S Belle of the Sea took on board in LA, goods for shipment to Manila and
covered by B/L No. 105. The S/S Belle of the Sea arrived in Manila and discharged her
cargo at the govt. piers under the supervision and custody of the defendant Manila
Terminal Inc. Of the entire shipment, one carton of assorted samples with a stipulated
value of P200 was not delivered to plaintiff Yaras and Co. The latter filed a complaint
with the Municipal Court of Manila against International Harvester, as agent of the S/S
Belle of the Sea and Manila Terminal Inc. The complaint charged that the merchandise
was lost through the negligence of either of the defendants. Before trial could proceed,
the International Harvester Inc. (IH) filed a motion to dismiss on the ground that the
court had no jurisdiction. The motion was denied. Prohibition proceedings were
instituted before the CFI of Manila to stop the judge from proceeding with the action.
The petition was granted and the respondents now appeal.
Held : It is clear from the complaint that IH is being held liable only on the
assumption that the goods had been lost in transit or before being discharged at
the pier. The liability of IH is predicated on the contract of carriage by sea
between IH and Yaras & Co. as evidenced by the B/L, independently of the
liability of the Manila Terminal Co. as operator of an arrastre service.
Admiralty has jurisdiction over all maritime contracts, in whatever form,
wherever they were executed or are to be performed, but not over non-maritime
contracts. Whether or not a contract is maritime depends not on the place where
the contract is made and is to be executed, making the locality the test, but on
the subject matter of the contract, making the true criterion a maritime service
or a maritime transaction. Specifically, admiralty has jurisdiction of a proceeding
in rem or in personam for the breach of a contract of affreightment, whether
evidenced by a B/L or a charter party. And typical of a controversy over
contracts of affreightment is a suit of one party against the other for loss or
damage to the cargo. This is the very case before us, because the respondent
Yaras & Co. seeks to recover from the petitioner IH the value of certain lost
cargo.
The contention of Yaras that the admiralty jurisdiction is not involved
because the contract in question was made upon land and to be terminated upon
land, merely reflects the English rule which had long been rejected in the US. It
is now well-settled in the latter country that the jurisdiction of admiralty in
matters of contract depends upon the subject matter, i.e., the nature and
character of the contract and that the English rule which conceded jurisdiction
only to contracts made upon and to be performed upon navigable waters, is
inadmissible, the true criterion being that the contract has reference to maritime
service or maritime transaction. Under the law, the CFI has jurisdiction over
admiralty cases.
B. Vessels
1. Meaning
PAGE 129
Lopez vs Duruelo 52 Phil 229
F: Augusto Lopez, of Silay, Occidental Negros, wanted to embark on the interisland

steamer San Jacinto bound for Iloilo. The steamer was anchored some half a mile from
the shore or port of Silay. In order to board the steamer, Lopes boarded the motor boat
Jison at the landing which was then engaged in conveying passengers and luggage to
and from the steamer. Whether due to negligence or incompetence of Duruelo, the
engineer of Jison aged 16, as alleged, the boat approached too near to the stern of the
steamer wherein it was struck by the still turning propeller of the steamer. The boat
sunk and Lopez was thrown into the water against the propeller wherein he suffered a
bruise in the breast, two serious fractures of the bones of the left leg and a compound
fracture of the left femur. As a result, Lopez was hospitalized from February 28 to
October 19, 1927 or eight months. Lopez filed a complaint and sought damages
amounting to P120,000 alleging that he suffered injuries due to the negligence and
inexperience having only been in its third day of apprenticeship on the day of the
accident. It was also alleged that Jison was overloaded when it carried 14 passengers
instead of its capacity for eight or nine. The defendants assigned in it demurrer that the
plaintiff did not show a right of action since the complaint did not allege that a protest
had been presented by the plaintiff within 24 hours after the occurrence, to the
competent authority of the port where the accident occurred as provided under the Code
of Commerce. CFI dismissed the complaint, hence the appeal.
Held : Assuming that article 835 of the Code of Commerce states a condition
precedent to the maintenance of an action in a case requiring protest, such as
protest is nevertheless not necessary in the case at bar. The article is found in
the section dealing with collisions and the context shows the collisions intended
are collisions of sea-going vessels. Said article cannot be applied to small boats
engaged in river and bay traffic. The vessels intended in the Third Book of the
Code of Commerce which deals with maritime commerce and in which Art. 865 is
found was evidently intended to define the law relative to merchant vessels and
marine shipping, and the vessels intended in that Book are such as are run by
masters having special training with the elaborate apparatus of crew and
equipment indicated in the Code. The word "vessel" used in the section was not
intended to include all ships, craft, or floating structures of every kind without
limitation, and the provision of that section should not be held to include minor
craft engaged only in river or bay traffic. Vessels of minor nature, such as river
boats and those carrying passengers from ship to shore are governed as to their
liability in passengers, by the Civil Code.
The word ship and vessel, in their grammatical sense are applied to
designate every kind of craft, large or small, merchant or war, a signification
which does not differ essentially from its juridical meaning according to which
vessels for the purpose of the Code of Commerce, are considered not only those
engaged in navigation whether coastwise or high seas, but also floating docks,
pontoons,dredges, scows, and other floating apparatus for the service of the
industry or maritime commerce.
Yet notwithstanding these principles from which it would seem that any
floating apparatus which serves directly for the transportation of things or
persons or which indirectly is related to this industry, ought to be subjected to
the principles of the Code with reference to ownership, transfer, rights,
registrations, etc. they are not applicable to small craft which are only subject to
PAGE 130
administrative regulations in the matter of port service and in the fishing

industry.
But even if The Code Of Commerce was applicable, a protest still need not
be made since under Art. 836, want of protest cannot prejudice a person not in a
condition to make known his wishes. A person who has suffered injuries like that
of the plaintiff cannot be supposed to be in a condition to make a protest.
2. Nature and acquisition of vessels
Art. 573. Merchant vessels constitute property which may be

acquired and transferred by any of the means recognized by law. The
acquisition of a vessel must be included in a written instrument, which
shall not produce any effect with regard to third persons if not
recorded in the registry of vessels. The ownership of a vessel shall
also be acquired by the possession thereof in good faith for three
years, with a good title duly recorded.
In the absence of any of these requisites, uninterrupted
possession for ten years shall be necessary in order to acquire
ownership.
A captain cannot acquire by prescription the ship of which he is in
command.
Vessels: Those engaged in navigation , whether coastwise or on the high seas,

including floating docks, pontoons, dredges, scows and any other floating
apparatus destined for the services of the industry or maritime commerce
Vessels engaged in the business of carrying or transporting passengers or

goods for compensation, offering their services to the public are common carriers
--> governed primarily by the Civil Code provisions on common carriers and
subsidiarily by the Code of Commerce and special laws
The Code of Commerce regulates merchant ships or those engaged in the
transportation of passengers and freight from one port to another or from place
to another
The Code of Commerce does not refer to pleasure ships, yachts, pontoons,
health service and harbor police vessels, floating storehouses, warships or patrol
vessels, coast guard vessels, fishing vessels, towboats and other craft destined
to other uses, such as coast and geodetic survey, scientific research and
exploration, crafts engaged in the loading and the discharge of vessels, or
transhipments from one vessel to another
Vessels of a minor nature not engaged in maritime commerce, such as,
river boats and those carrying passengers from ship to shore, must be governed
as to their liability to passengers, by the provisions of the Civil Code
Modes of acquisition: (1) purchase and sale, (2) prescription, (3)

construction, (4) capture, (5) donation, (6) succession, and (7) other means, such
as barter
Possession in GF will ripen into ownership in 3 years; if the possession is
otherwise, it will ripen into ownership in 10 years
PAGE 131
There can be no prescription in favor of the captain because the nature of

the possession of the captain is such that he is only an agent of the owner, a
depositary of the vessel
The acquisition of a vessel must appear in a written instrument and such

instrument must be registered in order that the transfer may affect third persons
Art. 574. Builders of vessels may employ the material and follow
with regard to their construction and rigging the systems most suitable
to their interest. Ship owners and seamen shall be subject to the
provisions of the laws and regulations of the public administration on
navigation, customs, health, safety of vessels, and other similar
matters.
The business of constructing and repairing vessels or parts thereof shall not be
considered a public utility and no CPC shall be required thereof
Art. 585. For all purposes of law not modified or restricted by the
provisions of this Code, vessels shall continue to be considered as
personal property.
Vessels are considered personal or movable property; but they partake to a

certain extent, of the nature and conditions of real property, on account of their
value and importance in the world of commerce
Art. 712. Ownership is acquired by occupation and by intellectual

creation.
Ownership and other real rights over property are acquired and
transmitted by law, by donation, by testate and intestate succession,
and in consequence of certain contracts, by tradition.
They may also be acquired by means of prescription. (New Civil
Code.)
3. Registration; certificates issued; distinctions
Tariff and Customs Code, Sec. 802
(1) vessels - every sort of boat, craft or other artificial contrivance

used, or capable of being used, as a means of transportation on water
(2) duly registered - person, natural or juridical, registered with
the proper govt. agencies, as Bureau of Commerce, SEC, NACIDA, BOI,
Export Incentives Board or Oil Commission, as now or may hereafter be
required by law.
PD 761 as amended by PD 1064, 1521
PAGE 132
Sec. 806. Upon registration of a vessel of domestic ownership,

and of more than 15 tons gross, a certificate of Philippine registry shall
be issued for it. If the vessel is of domestic ownership and of 15 tons
gross or less, the taking of the certificate of Philippine registry shall be
optional with the owner.
Domestic ownership means ownership vested in the citizens of
the Philippines or corporations or association organized under the laws
of the Philippines at least 60% of the C/S or capital of which is wholly
owned by citizens of the Philippines, and in the case of corporations or
associations which will engage in coastwise trade the president and
managing directors thereof shall be such citizens xxx
xxx an enterprise duly registered with the Board of Investments
WON entirely owned by foreign nationals, may register its own vessels
xxx if such vessels are to be used exclusively to transport its own raw
materials and finished products in Philippine waters as an incident to
its manufacturing, processing or business activity registered with the
BOI and certified to by said Board as an essential element in the
operation of the registered project.
Rule III, Marina Rules and Regulations:
Subjects of Registration:
1) All vessels used in Phil. waters, not being transients of foreign
registry, shall be registered with the MARINA. To this end, it shall be
the duty of the master, owner and agent of every such vessel to make
application to the proper MARINA district office for registration thereof
within 15 days after the vessel becomes subject to such registration.
2) A vessel of 3 tons gross or less shall not be registered unless
the owner shall so desire, nor shall documents licenses of any kind be
required for such vessel, but the proper fee shall be charged for
measurement when measurement is necessary, except when the same
is engaged in towing or carrying of articles and passengers for hire.
3) All undocumented vessels shall be numbered in such form as
may be prescribed by the Administrator.
Vessels exempt from Registration :

AFP vessels, vessels owned and/or operated by the AFP or by
foreign govt. for military purposes, and bancas, sail boats and other
water craft which are not motorized of less than 3 gross tons shall not
be subject to the requirements of these rules and regulations relative
to registration and navigation, except in so far as may be prescribed by
regulations of MARINA.
PAGE 133
The Phil. Coast Guard is vested with exclusive authority over the registration and
documentation of Phil. vessels, as well as the issuance of all certificates,
licenses, or other documents necessary or incident to such registration
The registration shall be effected at its home port or at the nearest Coast
Guard district or station when the home port does not have such
Certificates of Philippine register: upon registration of a vessel of domestic

ownership and of more than 15 tons gross, a certificate of Phil. register shall be
issued for it
The purpose of certificates of register of vessels : to declare the
nationality of a vessel engaged in trade with foreign nations and to enable her to
assert that nationality wherever found
Privileges of certificate: It confers upon the vessel the right to engage,

consistently with law, in the Philippines coastwise trade and entitles it to the
protection of the authorities and the flag of the Philippines in all ports and on the
high seas, and at the same time secures to it the same privileges and subjects it
to the same disabilities as, under the laws of the Philippines, pertain to foreign
built vessels transferred abroad to citizens of the Philippines
Certificates of ownership : upon registration of a vessel of more than 5 tons
gross, a certificate of ownership shall be issued for it
4. Significance of registration of transactions affecting vessels
Presumption of ownership from registration : the presumption is that the person

in whose name a vessel is registered has legal title thereto --> but such is not
conclusive proof against the real owners
It is essential that a record of documents affecting the title of a vessel be
entered in the Philippine Coast Guard
Arroyo vs Yu 54 Phil 511
F: The appeal of Yu relates to the preferences to the ten lorchas as between herself
and the PNB. Among the facts found by the trial judge is that they were owned by Lim
Ponzo Navigation Co. They were mortgaged to Po Pauco to guarantee a loan of P20,000.
This was duly registered with the register of deeds. Po Pauco later mortgaged them in
favor of PNB and registered with the register of deeds but was recorded in the Office of
Collector of Customs much later. Meanwhile, Yu secured a judgment against Lim Ponzo
Navigation Co. The notice of seizure was recorded by the collector of customs of Iloilo
on which date the records of the office disclosed the vessels as free from encumbrances.
HELD : Sec. 1171 of AC has modified the provisions of the Chattel Mortgage Law,
particularly Sec. 4 thereof. It is now not necessary for a chattel mortgage of a
vessel to be noted in the register of deeds. But it is essential that a record of
documents affecting the title of a vessel be entered in the office of the collector
of customs at a port of entry. This is designed to protect persons who deal with
a vessel on the strength of the record title. Mortgages on vessels., although not
PAGE 134
recorded, are good as between the parties. But as against creditors of the
mortgagor, an unrecorded mortgage is valid.
However, we find an explanation of the delay of registration with the

collector of customs-because of doubts entertained by the latter relative to the
applicability of Act No. 3324 to a mortgage executed in 1918 in favor of a
Chinese subject. This uncontradicted fact must be taken as curing the bank's
defective title. That the collector did not perform his duty was no fault of PNB.
Judgment affirmed in part in the sense that as between Yu and PNB, the
latter has a superior right to its claim for P20,000, and set aside in part in the
sense that the record is remanded for further proceedings.
Rubiso vs Rivera 37 Phil 72
F: Defendant Rivera acquired by purchase the pilot boat Valentina on a date prior to
that of the purchase and adjudication at public auction by plaintiff Rubiso. But the sale
at public auction to Rubiso was recorded in the office of the collector of customs on Jan.
27, 1915 and in the commercial registry on March 4, 1915, while the sale to Rivera was
entered in the customs registry only on March 17, 1915. Lower court decided for
plaintiff. Defendant appealed.
HELD : The requisite of registration in the registry of the purchase of a vessel is

necessary and indispensable in order that the purchaser's rights may be
maintained against a claim filed by a third person. Such registration is required
both Art. 573 of the Code of Commerce in connection with Sec 2 of Act No. 1900
which Act amended said article. The amendments solely consisted in charging
the Insular Collector of Customs, as at present, with the fulfillment of the duties
of the commercial register concerning the registering of vessels, so that the
registration of a bill of sale of a vessel shall be made in the Insular Collector of
Customs, who, since May 18, 1909, has been performing the duties of the
commercial registry in place of this latter official. In view of said legal provisions,
it is undeniable that defendant's rights cannot prevail over those acquired by
plaintiff in the ownership of said boat, in as much as defendant's registration
came after plaintiff's registration.
C. Persons Participating in Maritime Commerce
1. Shipowners and shipagents
Art. 586. The owner of a vessel and ship agent shall be civilly
liable for the acts of the captain and for the obligations contracted by
the latter to repair, equip, and provision the vessel, provided the
creditors proves that the amount claimed was invested therein.
By agent is understood the person entrusted with the
provisioning of a vessel, or who represents her in the port in which she
happens to be.
PAGE 135
Art. 587. The ship agent shall also be civilly liable for the
indemnities in favor of third persons which arise from the conduct of
the captain in the care of the goods which the vessel carried; but he
may exempt himself therefrom by abandoning the vessel with all her
equipments and the freightage he may have earned during the voyage.
Art. 588. Neither the owner of the vessel nor the agent shall be
liable for the obligations contracted by the captain if the latter exceeds
his powers and privileges inherent in his position or those which may
have been conferred upon him by the former.
However, if the amounts claimed were made use of for the benefit
of the vessel, the owner or agent shall be liable.
Liability of shipowner and shipagent :

(1) under Art. 857, for the acts of the captain
(2) for contracts entered into by the captain to repair, equip and provision
the vessel, provided that the amount claimed was invested for the benefit of the
vessel
(3) for the indemnities in favor of third persons which may arise from the
conduct of the captain in the care of the goods transported, as well as for the
safety of passengers transported
(4) for damages to third persons for tort or quasi-delict committed by the
captain, except collision with another vessel
(5) under Art. 826, for damages in case of collision due to the fault,
negligence, or want of skill of the captain, sailing mate, or any other member of
the complement
The agent is liable to the shippers and owners of the cargo transported by
it, for losses and damages occasioned to such cargo without prejudice to his
rights against the owner of the ship, to the extent of the value of the vessel, its
equipment and the freight
Under 588, the shipowner and the shipagent are not liable for the obligations
contracted by the captain if he exceeds his authority, unless the amounts
claimed were invested for the benefit of the vessel --> however under Art. 1759,
NCC, the ship owner is liable for the death of or injuries to the passengers which
are caused by the negligence or wilful acts of his EEs although such EEs may
have acted beyond the scope of their authority or in violation of the orders of the
shipowner
Art. 589. If two or more persons should be part owners of a

merchant vessel, an association shall be presumed as established by
the part owners.
This association shall be governed by the resolutions of a majority
of the members.
A majority shall be the relative majority of the voting members.
PAGE 136
If there should be only two part owners, in case of disagreement

the vote of the member having the largest interest shall be decisive. If
the interests are equal, it shall be decided by lot.
The representation of the smallest part in the ownership shall
have one vote; and proportionately the other part owners as many
votes as they have parts equal to the smallest one.
A vessel cannot be detained, attached or levied upon execution in

her entirety for the private debts of a part owner, but the proceedings
shall be limited to the interest the debtor may have in the vessel,
without interfering with her navigation.
Art. 590. The co-owners of a vessel shall be civilly liable, in the

proportion of their contribution to the common fund, for the results of
the acts of the captain, referred to in Article 587.
Each part owner may exempt himself from this liability by the
abandonment before a notary of the part of the vessel belonging to
him.
Art. 591. All the part owners shall be liable, in proportion to their
respective ownership, for the expenses which are incurred by virtue of
a resolution of the majority.
They shall likewise be liable in the same proportion for the
expenses of maintenance, equipment, and provisioning of the vessel,
necessary for navigation.
Art. 592. The resolutions of the majority with regard to the

repair, equipment, and provisioning of the vessel in the port of
departure shall bind the minority, unless they renounce their
participation therein, which must be acquired by the other part owners
after a judicial appraisement of the value of the portion or portions
assigned.
The resolutions of the majority relating to the dissolution of the
association and sale of the vessel shall also be binding on the minority.
The sale of the vessel shall be made at a public auction, subject to
the provisions of the law of civil procedure unless the part owners
unanimously agree otherwise, subject always to the right of pre-
emption and redemption mentioned in Article 575.
Art. 593. The owners of a vessel shall have preference in her

charter over other persons, offering equal conditions and price. If two
or more of the former should claim said right the one having greater
interest shall be preferred, and should they have an equal interest it
shall be decided by lot.
PAGE 137
Art. 594. The part owners shall elect the manager who is to
represent them in the capacity of agent.
The appointment of director or agent shall be revocable at the
will of the partners.
Art. 595. The agent, be he at the same time an owner of a vessel

or a manager for an owner or for an association of co- owners, must be
qualified to trade and must be recorded in the merchant's registry of
the province.
The agent shall represent the ownership of the vessel, and may in
his own name and in such capacity take judicial and extrajudicial steps
in all that relates to commerce.
Art. 596. The agent may discharge the duties of captain of the
vessel, subject, in every case, to the provisions contained in Article 609.
If two or more co-owners request the position of captain, the
disagreement shall be decided by a vote of the members; and if the
vote should result in a tie, the position shall be given to the part owner
having the larger interest in the vessel.
If the interest of the petitioners should be the same, and there
should be a tie, the matter shall be decided by lot.
Art. 597. The agent shall select and enter into an agreement with
the captain, and shall contract in the name of the owners, who shall be
bound in all that refers to repairs, details of equipment, armament,
provisions, fuel, and freight of the vessel, and, in general, in all that
relates to the requirements of navigation.
Art. 598. The agent cannot order a new voyage, nor make
contracts for a new charter, nor insure the vessel, without the authority
of her owner or by virtue of a resolution of the majority of the co-
owners, unless these powers were granted him in the certificate of his
appointment.
If he should insure the vessel without authority therefor he shall
be subsidiarily liable for the solvency of the underwriter.
Art. 599. The managing agent of an association, shall give his co-
owners an account of the results of each voyage of the vessel, without
prejudice to always having the books and correspondence relating to
the vessel and to its voyages at their disposal.
Art. 600. After the account of the managing agent has been
approved by a relative majority, the co-owners shall satisfy the
expenses in proportion to their interest, without prejudice to the civil
PAGE 138
or criminal actions which the minority may deem fit to institute

afterwards.
In order to enforce the payment, the managing agents shall be
entitled to an executory action, which shall be instituted by virtue of a
resolution of the majority, and without further proceedings than the
acknowledgment of the signatures of the persons who voted for the
resolution.
* Note : an executory action is no longer recognized in this jurisdiction
Art. 601. Should there be any profits, the co-owners may demand
of the managing agent the amount due them, by means of an executory
action without further requisite than the acknowledgment of the
signatures in the instrument approving the account.
Art. 602. The agent shall indemnify the captain for all the
expenses he may have made from his own funds or from those of other
persons, for the benefit of the vessel.
Art. 603. Before a vessel goes out to sea the agent may at his
discretion, discharge the captain and members of the crew whose
contract did not state a definite period nor a definite voyage, paying
them the salaries earned according to their contracts, and without any
indemnity whatsoever, unless there is an expressed and specific
agreement in respect thereto.
Art. 604. If the captain or any other member of the crew should be
discharged during the voyage, they shall receive their salary until their return to
the place where the contract was made, unless there are good reasons for the
discharge, all in accordance with Art. 636 et seq. of this Code.
Art. 605. If the contracts of the captain and members of the crew
with the agent should be for a definite period or voyage, they cannot be
discharged until the fulfillment of their contracts, except for reasons of
insubordination in serious matters, robbery, theft, habitual
drunkenness, and damage caused to the vessel or to its cargo by malice
or manifest or proven negligence.
Art. 606. If the captain should be a part owner in the vessel, he

may not be discharged unless the agent returns to him the amount of
his interest therein, which, in the absence of an agreement between the
parties, shall be appraised by experts appointed in the manner
established in the law of civil procedure.
PAGE 139
Art. 607. If the captain who is a part owners should have

obtained the command of the vessel by virtue of a special agreement
contained in the articles of copartnership, he cannot be deprived
thereof except for the reasons mentioned in Article 605.
Art. 608. In case of the voluntary sale of the vessel, all contracts
between the agent and captain shall terminate, reserving to the latter
his right to the indemnity which may be proper, according to the
agreements made with the agent.
The vessel sold shall remain subject to the security of the
payment of said indemnity if, after the action against the vendor has
been instituted, the latter should be insolvent.
Art. 618. The captain shall be civilly liable to the ship agent and
the latter to the third persons who may have made contracts with the
former -
1. For all the damages suffered by the vessel and its cargo by
reason of want of skill or negligence on his part. If a misdemeanor or
crime has been committed he shall be liable in accordance with the
Penal Code.
2. For all the thefts and robberies committed by the crew,
reserving his right of action against the guilty parties.
3. For the losses, fines, and confiscations imposed on account of
violation of the laws and regulations of customs, police, health, and
navigation.
4. For the losses and damages caused by mutinies on board the
vessel, or by reason of faults committed by the crew in the service and
defense of the same, if he does not prove that he made full use of his
authority to prevent or avoid them.
5. For those arising by reason of a misuse of powers and
nonfulfillment of the duties which pertain to him in accordance with
Articles 610 and 612.
6. For those arising by reason of his going out of his course or
taking a course which, in the opinion of the officers of the vessel, at a
meeting attended by the shippers or supercargoes who may be on
board, he should not have taken without sufficient cause.
No exception whatsoever shall exempt him from his obligation.
7. For those arising by reason of his voluntarily entering a port
other than his destination, with the exception of the cases or without
the formalities referred to in Article 612. 8. For those arising by
reason of the nonobservance of the provisions contained in the
regulations for lights and maneuvers for the purpose of preventing
collisions.
Art. 618 provides for the direct responsibility of the shipowner and shipagent to
third persons; the captain shall be civilly liable to the ship agent and the latter is
PAGE 140
the one liable to third persons This article applies to breaches of contract and
tortious negligence of the captain
But where the vessel is totally chartered for use of a single party, the
shipowner and that party may validly stipulate that the latter shall be exempt
from liability for the negligence of the captain and crew
Reason for imposition of liability on owner for damages suffered by

third persons occasioned by the acts of the captain: To place the primary
liability upon the person who has actual control over the conduct of the voyage
and who has the most capital embarked in the venture, namely, the owner of the
ship, leaving him to obtain recourse, from other individuals who have been
drawn into the venture as shippers
The shippers and passengers in making contracts with the captain do so
through the confidence they have in the shipowner who appointed him --> they
presume that the owner made a most careful investigation before appointing him
Distinction between liability for lawful and unlawful acts :

The lawful acts and obligations of the captain beneficial to the vessel may
be enforced as against the agent/owner for the reason that such obligations arise
from the contract of agency ( provided that the captain does not exceed his
authority)
As to any liability incurred by the captain through his unlawful acts, the
ship agent is simply subsidiarily liable
Liabilities of captain: the responsibility of the captain extends to every

fraudulent or negligent act of any person in the complement, in the execution of
his employment --> he does not respond for personal injuries of the crew arising
from personal quarrels but he is liable for damages to persons or property
occasioned by a maneuvering of the vessel, for failure to follow international
rules and regulations, for failure to take the precautions to prevent every
damage possible to the vessel which has suffered an average
Standard Oil vs Castelo 42 Phil 256
F: Castelo, owner of the interisland steamer Batangueno, contracted with

Chumbuque stipulating that for a term of one year, the latter shall use it in conveying
cargo; that the crew should be supplied by the owner; and that the charterer should
have no control over the captain and crew than to specify the voyages. Plaintiff
delivered petroleum which was placed on deck. While the steamer was on her way, a
typhoon came, compelling the captain to jettison the petroleum. When the storm
abated, the ship made port and 13 cases of petroleum were recovered, but the
remainder was wholly lost. Plaintiff brought action to recover the petroleum value
against the shipowner. CFI rendered judgment for plaintiff.
Held : Ordinarily, the loss of cargo carried on deck shall not be considered as
general average loss, as expressed in the York- Antwerp Rules. This rule, first
made during the days of sailing vessels has changed and it is now generally held
that jettisoned goods carried on deck, according to the customs of trade, by
steam vessels navigating coastwise and inland waters, are entitled to
PAGE 141
contribution as general average loss. The reason for this, in coastwise trade, is
that boats are small and voyages are short, with the result that the coasting
vessel can use more circumspection about the condition of the weather at
departure time. It is evident therefore, that the loss of the petroleum is a
general average with the result that plaintiff is entitled to recover an amount
bearing such proportion to its total loss as the value of both ship and cargo bears
to the value of ship and entire cargo before jettison was effected.
It is universally recognized that the captain is the representative of the
owner and both under Art. 586 of the Code of Commerce, are civilly liable for the
acts of the master. When jettison of cargo occurs, it is the duty of the captain to
effect the adjustment, liquidating and distribution of the general average; his
failure gave rise to liability for which the owner of the ship must answer.
The owner of the ship ordinarily has vastly more capital embarked upon a
voyage than has any shipper of cargo. Moreover, the shipowner, in captain's
person, has complete and exclusive control of the crew and ship navigation. It is
therefore proper that any person whose property may have been cast should
have a right of action directly against the shipowner for breach of duty which the
law imposed on the captain with respect to such cargo. The evident intention of
the Com. Code is to place primary liability upon the person who has actual
control over the conduct of the voyage and who has most capital in the venture,
namely, the shipowner, leaving him to obtain recourse, as it is very easy to do,
from other individuals who have been drawn into the venture as shippers.
Defendant is therefore liable.
Araullo, and Avancena, dissenting :

Action for recovery, if any, should be brought not against the defendant
owner but against the captain thereof.
(a) Responsibilities and liabilities
Yu Con vs Ipil 41 Phil 770
F: Yu delivered to Ipil and Solamo P 450 for delivery from Catmon to Cebu aboard a
banca named Maria of which Lauron was the owner and Ipil and Solamo, the master and
supercargo, respectively. The money together with various merchandise belonging to
plaintiff was to be carried from the port of Cebu to Catmon in Cebu. The money was
placed by Yu in his trunk and was transferred to that of Ipil. That night, the window of
the stateroom in which the trunk containing the money was kept was broken through by
persons not identified and through which the said trunk was stolen. It was found at the
trial that Ipil and Solamo were negligent in guarding the money because they were
sound asleep at the time of the theft and they assigned no one to stand guard during
the night. Their defense was that Yu chartered and had control and responsibility of the
banca and that the theft was due to Yu's negligence. The CFI held Ipil and Solamo
negligent and held Lauron liable as ER and shipowner under Articles 586, 587 and 618 of
the Code of Commerce.
Held : Ipil and Solamo, as carriers and depositories of the money were liable
under the Civil Code, the theft not being a fortuitous event or of force majeure
and they being manifestly negligent and at fault.
PAGE 142
As to the liability of Lauron, the SC proceeded by first defining the banca

"Maria" as within the meaning of the term "vessel." Thus, according to the
foregoing definitions (by the Mercantile Code, by Reus in Commentaries on the
Code of Commerce, and by Blanco) we hold that the banca "Maria" chartered by
Yu Con from Lauron, was a "vessel" under Mercantile Law and the Code of
Commerce. Ipil, the master of the banca, was also held to be the captain
(masters are to small vessels as captains are to big ones). Under Arts. 587 and
618, the shipowner shall be civilly liable to third persons when the captain of the
vessel causes the damage or loss to goods entrusted to him by said third persons
under a contract to carry said goods. Thus, it is well and god that the shipowner
be not held criminally liable for such crimes or quasi crimes but he cannot be
excused from liability for the damage and harm which in consequence of those
acts may be suffered by the third parties who contracted with the captain in his
double capacity of agent and subordinate of the shipowner himself. In maritime
commerce, the shippers and passengers in making contracts with the captain do
so through the confidence they have in the shipowner who appointed him.
The owner of a minor craft who has equipped and victualed it for the
purpose of using it in the transportation of merchandise from one port to another
is under the law a shipowner and the master of the craft is to be considered as
its captain in the legal acceptation of this word, and the former must be held
civilly liable for indemnities in favor of third parties to which the conduct of the
master/captain may give rise in the custody of the effects laden on the craft, and
for all losses which, through his fault or negligence, may occur to the
merchandise or effects delivered to him for their transportation as well as for the
damages suffered by those who contracted with him, in consequence of
misdemeanors and crimes committed by him or by the members of the crew of
the craft.
Manila Steamship vs Abdulhaman 100 Phil 32
F: At around 7 p.m., M/L Consuelo V, owned by Lim Hong To, laden with cargoes and
passengers left Zamboanga City bound for Siokon under the command of Faustino
Macrohon. Among her passengers were plaintiff Insa Abdulhaman, his wife, and their 5
kids. On the same night, the M/S Bowline Knot owned by the Manila Steamship Co. were
navigating from Maribojoc towards Zamboanga City. The weather then was considered
fair.
At around 10 PM, without any warning to the resting passengers, both vessels
collided. M/L Consuelo V capsized, resulting in the death of Abdulhaman's five children.
The above facts found by the Board of Marine Inquiry, was used by the CFI to hold the
owners of both vessels solidarily liable to Abdulhaman for P 20,784 as damages. The
CA, however, exempted Lim from liability by reason of the sinking and total loss of his
vessel. Hence, this petition by the Manila Steamship Co. questioning the exemption of
Lim while also alleging its exemption having had exercised due diligence in the selection
of its EEs.
Held : (1) While it is true that plaintiff's action against petitioner is based on a
tort or quasi-delict, the tort in question is not a civil tort under the Civil Code but
is a maritime tort resulting in a collision at sea, governed by Arts. 826-939 of the
Code of Commerce, while the owners of both colliding vessels are solidarily liable
for damages caused. This direct responsibility is recognized in Art. 618 of the
PAGE 143
Code of Commerce, under which the captain shall be civilly liable to the ship
agent, and the latter is the one liable to third persons.
In fact it is a general principle well established in the maritime law and
custom, that shipowners and shipagents are civilly liable for the acts of the
captain (Art. 586) and for the indemnities due to the third persons (Art. 587).
This direct liability moderated and limited by the owner's right of abandonment
of the vessel and earned freight (Art. 587) has been declared to exist not only in
the case of breached contracts but also in cases of tortious negligence.
It is easy to see that to admit the defense of the diligence of a bonus pater
familias in the selection and vigilance of the officers and crew as exempting the
shipowner from any liability for their faults, would render nugatory the solidary
liability in Art. 827 for the greater protection of injured parties.
(2) It is to be noted that Macrohon was not duly licensed as a shipmaster
and Lim knew of this fact when it hired the former, thus deliberately increasing
the risk to which the unknowing passengers would be subjected. The liability of
Lim, cannot, therefore be identical to that of a shipowner who bears in mind the
safety of the passengers by employing duly licensed officers. To hold, as the CA
had done, that Lim may limit his liability to the value of his vessels, is to erase all
differences between compliance with law and the deliberate disregard thereof.
The international rule is to the effect that the right of abandonment of
vessels, as a legal limitation of a shipowner's liability, does not apply to cases
where the injury of the average is due to shipowner's own fault.
(b) The doctrine of limited liability
* Doctrine of limited liability is provided for in Arts. 587, 590 and 837
Art. 587. The ship agent shall also be civilly liable for the
indemnities in favor of third persons which arise from the conduct of
the captain in the care of the goods which the vessel carried; but he
may exempt himself therefrom by abandoning the vessel with all her
equipments and the freightage he may have earned during the voyage.
A shipagent is liable notwithstanding the insolvency of the principal/owner
BUT the ship agent may exempt himself from liability by abandoning the vessel
with all her equipment and the freight it may have earned during the voyage -->
the effect of abandonment is to extinguish the liability of the shipagent
The ship agent's liability is confined to that which he is entitled as a matter
of right to abandon : the vessel with all her eqpt. and the freight it may have
earned during the voyage and to the insurance thereof
Limited liability is not applicable when no abandonment of vessel is made
Effect of abandonment: An abandonment amounts to an offer of the value of

the vessel, of her equipment, and freight money earned --> results in the
cessation of the responsibility of the owner/agent
Abandonment cannot be refused by creditors
PAGE 144
This applies to all cases where the owner/agent may be held liable for the
negligent or illicit acts of the captain
Effect of loss or destruction of vessel: The shipagent's liability is merely co-

extensive with his interest in the vessel such that the total loss thereof results in
its extinction --> the total destruction of the vessel extinguishes a maritime lien
as there is no longer any res to which it can attach.
Thre (3) cases where the loss of the vessel extinguishes the
liability of the shipowner:
(1) under 587, liability arising from the conduct of the captain in the
vigilance of the goods and for the safety of the passengers and for any liability
arising from the negligent or illicit acts of the captain for which the shipowner or
ship agent may be held liable
(2) under 643, liability for the wages of the captain and the crew and for
advances made by the shipagent if the vessel is lost by shipwreck or capture
(3) under 837, liability for collision
Exceptions:
(1) Doctrine does not apply where shipowner is at fault : the doctrine is premised
on the condition that the death or injury to the passenger occurred by reason of
the fault or negligence of the captain only
(2) Doctrine does not apply in cases of Workmen's Compensation --> such
compensation has nothing to do with maritime commerce; it is an item in the
cost of production which must be included in the budget of any well-managed
industry
(3) Total destruction of the vessel does not affect the liability of the owner for
repairs on the vessel completed before its loss --> owners of a vessel are liable
for necessary repairs; its liability for repairs remains unaffected by the loss of the
thing
Reason for limited liability: This doctrine had its origin when maritime trade
and sea voyage was attended by innumerable hazards and perils --> to offset
against these adverse conditions and to encourage shipbuilding and maritime
commerce, it was deemed necessary to confine the liability of the owner or agent
arising from the operation of a ship to the vessel, eqpt. and freight or insurance,
if any
Limited liability is evidence of the real and hypothecary nature of

maritime law:
(1) limitation of liability to the actual value of the vessel and freight; (2) right to
retain the cargo and the embargo and detention of the vessel in cases where the
ordinary civil law would not allow more than a personal action against the debtor
or personal liable --> the maritime creditor may attach the vessel itself to secure
his claim without waiting for a settlement of his rights by a final judgment, even
to the prejudice of a third person
Manila Steamship vs Abdulhaman 100 Phil 32
PAGE 145
Issue : How is the doctrine of limited liability applied in this case with M/V
Consuelo?
Held : The direct liability may be moderated or limited by the shipowner's right
to abandon the vessel and earned freight. However, this right of abandonment
of vessels, as a legal limitation of a shipowner's liability does not apply to cases
where the injury or the average is due to shipowner's fault. Thus, the owner of
Consuelo is solidarily liable with Manila Steamship, the former having caused the
vessel to sail without licensed officers, for injuries caused by the collision over
and beyond the value of the said vessel.
In the application for permission to operate, despite lack of trained crew,
Lim Hong To even declared expressly, "that in case of any accident, damage, or
loss, I shall assume full risks and responsibility for all consequences, thereof."
Hence, Lim cannot escape liability because of the sinking of the vessel.
Operating with an unlicensed shipmaster constitutes such negligence as would
prevent the shipowner from claiming the benefit of limited liability under Art.
587.
Yangco vs Laserna 73 Phil 330
F: Petitioner Yangco's vessel SS Negros left Romblon for Manila. The captain was
duly advised and his attention was called by the passengers that typhoon Signal No. 2
was up. But the boat proceeded to sail after some loading. The boat was overloaded
with cargo and passengers (180 instead of only 123). After two weeks of sailing, the sea
became too dangerous. The captain ordered that they return to Romblon and while
turning, a big wave caught them on the side causing it to capsize. Among the
passengers who perished were the relatives of respondents Laserna.
In the separate civil action for damages for the death of the passengers, the CFI
held Yangco liable for a total of P3,180. After the rendition of the judgment, Yangco
sought to abandon the vessel to plaintiffs/respondents with all its equipments.
Abandonment was denied. The CA affirmed the judgment.
Held : Art. 587 accords a shipowner or agent the right of abandonment; and by
necessary implication, his liability is confined to that which he is entitled as of
right to abandon -- the vessel with all her equipments and the freight it may have
earned during the voyage. In other words, such liability is limited to the value of
the vessel and other things appertaining thereto such that a total loss thereof
results in its extinction. Although the article appears to deal only with the limited
liability of shipowners or agents for damages arising from the misconduct of the
captain in the care of the goods which the vessel carries, this is a mere
deficiency of language and in no way indicates the true extent of such liability, to
wit, the benefit of limited liability applies in all cases (as regards both goods and
passengers of the vessel) wherein the shipowner or agent may properly be held
for the negligent or illicit acts of the captain.
The reason for the limited liability is the real and hypothecary nature of
maritime law as distinguished from civil law and mercantile law in general. As
evidence of this real nature, we have (1) the limitation of the liability of the
agents to the actual value of the vessel and the freight money and (2) the right
of the maritime creditor to retain the cargo, and the embargo and detention of
the vessel in cases where the ordinary civil law would not allow more than a
PAGE 146
personal action against the debtor or person liable. Thus, even assuming that
Yangco is liable for breach of contract because his relationship to the passengers
rests on a contract of carriage, the exclusively real and hypothecary nature of
maritime law still operates to limit his liability to the value of the vessel or to the
insurance thereon, if any. In this case, the vessel was not insured. Whether the
abandonment of the vessel sought by the petitioner in instant case was in
accordance with law or not, is immaterial. The vessel having totally perished,
any act of abandonment would be an idle ceremony. Petitioner is absolved from
all complaints.
Abueg vs San Diego 77 Phil 730
F: Bartolome San Diego was the owner of 2 motorships, San Diego II and Bartolome
S. Dionisia Abueg is the widow of Amado Nunez, who was a machinist on board the M/S
San Diego II. Marciana de Salvacion is the widow of Victoriano Salvacion, who was a
machinist on board the M/S Bartolome S. Rosario Oching is the widow of Francisco
Oching, who was the captain of the M/S Bartolome S. The 2 ships, while engaged in
fishing operations around Mindoro Island on October 1941, were caught by a typhoon as
a consequence of which they were sunk and totally lost. Nunez, Salvacion and Oching
while acting in their capacities perished in the shipwreck. The vessels were not covered
by any insurance. The widows were awarded compensation under the Workmen's
Compensation Act by the CFI.
Held : The real and hypothecary nature of the liability of the shipowner or agent
embodied in the provisions of the Maritime Law, had its origin in the prevailing
conditions of the maritime trade and sea voyages during the medieval ages,
attended by innumerable hazards and perils. To offset against these adverse
conditions and to encourage shipbuilding and maritime commerce, it was
deemed necessary to confine the liability of the owner or agent arising from the
operation of a ship to the vessel, equipment, and freight, or insurance, if any, so
that if the shipowner or agent abandoned the ship, equipment, and freight, his
liability was extinguished.
The provisions of the Code of Commerce regarding maritime commerce
have no room in the application of the Workmen's Compensation Act which seeks
to improve, and aims at the amelioration of, the condition of laborers and EEs.
Said Act creates a liability to compensate EEs and laborers in cases of injury
received by or inflicted upon them, while engaged in the performance of their
work or employment, or the heirs and dependents of such laborers and EEs in
the event of death caused by their employment.
The officers of motor ships engaged in fishing are industrial EEs and are
entitled to the benefits of the Workmen's Compensation Act. If an accident is
compensable under the WCA, it must be compensated even when the workman's
right is not recognized by or is in conflict with other provisions of the Civil Code
or Code of Commerce. The reason is that the WCA was enacted in abrogation of
existing laws.
Heirs of Amparo de los Santos vs CA 186 SCRA 649
PAGE 147
F: M/V Mindoro owned by Compania Maritima sailed from Manila bound for New
Washington, Aklan. Said vessel met typhoon Welming on the Sibuyan Sea, causing the
death of many of its passengers, although about 136 survived. Mauricio de los Santos
declared that he, his wife and 4 children were aboard the boat together with their
household utensils valued at P 1,000, with the intention of living in Aklan permanently.
His wife and his children were among the casualties. The Board of Marine Inquiry found
that the captain and some officers of the crew were negligent in operating the vessel
and imposed upon them a suspension and/or revocation of their license certificates.
This decision could not be executed against the captain who perished with the vessel.
The shipowner alleged that no negligence was ever established and in fact they took all
the necessary precautions in operating the vessel. Furthermore, the loss of lives as a
result of the drowning of some passengers, including the relatives of the plaintiffs, was
due to force majeure because of the strong typhoon Welming. It also presented the
findings of the Board of Marine Inquiry recommending that the captain be exonerated
and that the ship was in seaworthy condition. The CFI dismissed the complaint in view
of lack of sufficient evidence. The CA ruled that while concurring negligence on the part
of the captain is imputable to Maritima, Maritima could not be held liable in damages
based on the principle of limited liability of the shipowner or shipagent under Art. 587 of
the Code of Commerce.
Held : There is no dispute as to the finding of the captain's negligence. The

present controversy centers on the questions of Maritima's negligence and of the
application of Art. 587 of the Code of Commerce. Under this provision, a
shipowner or agent has the right of abandonment; and by necessary implication,
his liability is confined to that which he is entitled as of right to abandon -- the
vessel with all her equipments and the freight it may have earned during the
voyage. This rule is found necessary to offset against the innumerable hazards
and perils of a sea voyage and to encourage shipbuilding and marine commerce.
The limited liability doctrine applies not only to the goods but also in all cases
like death or injury to passengers wherein the shipowner of agent may properly
be held liable for the negligent or illicit acts of the captain. Art. 587 speaks only
of situations where the fault or negligence is committed solely by the captain.
In cases where the shipowner is likewise to be blamed, Art. 587 does not apply.
Such a situation will be covered by the Civil Code provisions on CCs. Owing to
the nature of their business and for reasons of public policy, they are required to
observe EO diligence.
Maritima's claim that it had no information of typhoon Welming until after
the boat was at sea is untenable in light of modern technology which enables it
to detect any incoming atmospheric disturbances. In fact, the Weather Bureau
issued a total of 17 warnings or advisories of typhoon Welming. In allowing the
ship to depart late from Manila despite the typhoon advisories, Maritima
displayed lack of foresight and minimum concern for the safety of its passengers
taking into account the surrounding circumstances of the case.
While the captain was negligent for overloading the ship, Maritima shares
equally in his negligence. M/V Mindoro was cleared for departure at 2 PM by the
Bureau of Customs and the Coast Guard but its departure was delayed for 4
hours. Maritima could not account for the delay because it neither checked from
the captain the reasons behind the delay. It was due to this interim that there is
great probability that unmanifested cargo and passengers were loaded.
PAGE 148
Maritima presented evidence of the seaworthy condition of the ship prior

to its departure, including the installation of life saving equipment and other
navigational instruments. But it could not present evidence that it specifically
installed a radar which could have allowed the vessel to navigate safely for
shelter during the storm. An important device such as the radar could have
enabled the ship to pass through the river and to safety.
Maritima's lack of EO diligence coupled with the negligence of the captain
were the proximate causes of the sinking of M/V Mindoro. Maritima is liable for
the deaths and injury of the victims. It was ordered to pay death indemnities to
the heirs of the victims, moral damages, actual damages and attorney's fees.
(c) Specific rights and prerogatives
Art. 575. Part owners of vessels shall enjoy the right of pre-
emption and redemption in the sales made to strangers; but they can
only exercise it within the nine days following the record of the sale in
the registry and by delivering the price at once.
Art. 593. The owners of a vessel shall have preference in her

charter over other persons, offering equal conditions and price. If two
or more of the former should claim said right the one having greater interest
shall be preferred, and should they have an equal interest it shall be decided by
lot.
Art. 594. The part owners shall elect the manager who is to
represent them in the capacity of agent.
The appointment of director or agent shall be revocable at the

will of the partners.
Art. 596. The agent may discharge the duties of captain of the
vessel, subject, in every case, to the provisions contained in Article 609.
If two or more co-owners request the position of captain, the

disagreement shall be decided by a vote of the members; and if the
vote should result in a tie, the position shall be given to the part owner
having the larger interest in the vessel.
If the interest of the petitioners should be the same, and there

should be a tie, the matter shall be decided by lot.
Art. 609. Captains, masters or patrons of vessels must be

Filipinos, have legal capacity to contract in accordance with this
Code, and prove the skill, capacity, and qualifications necessary to
PAGE 149
command and direct the vessel, as established by marine or

navigation laws, ordinances, or regulations, and must not be
disqualfied according to the same for the discharge of the duties
of the position.
If the owner of a vessel desires to be the captain thereof,
without having the legal qualifications therefor, he shall limit
himself to the financial administration of the vessel, and shall
intrust the navigation to a person possessing the qualifications
required by said ordinances nd regulations.
Art. 601. Should there be any profits, the co- owners may demand
of the managing agent the amount due them, by means of an executory
action without further requisite than the acknowledgment of the
signatures in the instrument approving the account.
2. Captains and Masters
(a) Qualifications and licensing
RA 5173
Sec. 3. The Philippine Coast Guard shall perform the following

functions : (e) to issue licenses and certificates to officers, pilots, major
and minor patrons and seamen, as well as suspend and revoke such
licenses and certificates.
Art. 609. Captains and masters of vessels must be Filipinos having

legal capacity to bind themselves in accordance with this Code, and must
prove that they have the skill, capacity, and qualifications required to
command and direct the vessel, as established by marine laws,
ordinances, or regulations, or by those of navigation, and that they are
not disqualified according to the same for the discharge of the duties of
that position.
If the owner of a vessel desires to be the captain thereof and does
not have the legal qualifications therefore, he shall limit himself to the
financial administration of the vessel, and shall entrust her navigation to
the person possessing the qualifications required by said ordinances and
regulations.
notes:
- Captain - one who governs vessels that navigate the high seas or ships of large
dimensions and importance, although they may be engaged in coastwise trade
- Master - one who commands smaller ships engaged exclusively in coastwise
trade
- captain and master have the same meaning for maritime commerce
- patron - bancas
PAGE 150
- Roles of the captain :

(1) general agent of the shipowner
(2) technical director of the vessels
(3) represents the government of the country under whose flag he navigates
(b) Inherent Powers
Art. 610. The following powers are inherent in the position of

captain or master of a vessel:
1. To appoint or make contracts with the crew in the absence of
the ship agent and propose said crew, should said agent be present; but
the agent may not employ any member against the captain's express
refusal.
2. To command the crew and direct the vessel to the port to its
destination, in accordance with the instructions he may have received
from the ship agent.
3. To impose, in accordance with the contracts and the laws and
regulations of the merchants marine, on board the vessel, correctional
punishment upon those who do not comply with his orders or who
conduct themselves against discipline, holding a preliminary
investigation on the crimes committed on board the vessel on the high
seas, which he shall turn over to the authorities, who are to take
cognizance thereof, at the first port touched.
4. To make contracts for the charter of the vessel in the absence
of the ship agent or of the consignee, acting in accordance with the
instructions received and protecting the interests of the owner with
utmost care.
5. To adopt all the measures which may be necessary to keep the
vessel well supplied and equipped, purchasing all that may be necessary
for the purpose, provided there is no time to request instructions of the
agent.
6. To provide in similar urgent cases and on a voyage, for the
repairs to the hull and engines of the vessel and to her rigging and
equipment which are absolutely necessary in order for her to be able to
continue and conclude her voyage; but if she should arrive at a point
where there is a consignee of the vessel, he shall act in concurrence with
the latter.
notes: The first three powers cannot be renounced as they relate to public order
and are vested in the captain as a delegation of public authority
Art. 611. In order to comply with the obligations mentioned in the

foregoing article, and when he has no funds and does not expect to
receive any from the agent, the captain shall procure the same in the
successive order stated below:
PAGE 151
1. By requesting said funds of the consignees of the vessel or the

correspondents of the ship agent.
2. By applying to the consignees of the cargo or to the persons
interested therein.
3. By drawing on the ship agent.
4. By borrowing the amount required by means of a bottomry loan.
5. By selling a sufficient amount of the cargo to cover the amount
absolutely necessary to repair the vessel and to equip her to pursue the
voyage.
In the two last cases he must apply to the judicial authority of the
port, if in the Philippines and to the Filipino consul, if in a foreign
country; and where there should be none, to the local authority,
proceeding in accordance with the prescriptions of Article 583, and with
the provisions of the law of civil procedure.
Art. 583. If while on a voyage the captain should find it

necessary to contract one or more of the obligations mentioned in
subdivisions 8 and 9 of articl 580, he shall apply to the judge or
court if he is in the Philippine territory, and otherwise to the
consul of the Republic of the Philippines, should there be one, and
in his absence, to the judge or court or proper local authority,
presenting the certificate of the registration sheet treated of in
Article 612 and the instruments proving the obligation contracted.
The judge or court, the consul, or the local authority, as the
case may be, in view of the result of the proceedings institutied,
shall make a temporary memorandum of their result in the
certificate, in order that it may be recorded in the registry when
the vessel returns to the port of its registry, or so that it can be
admitted as a legal and preferred obligation in case of sale before
its return, by reason of the sale of the vessel on account of a
declaration of unseaworthiness.
The omission of this formality shall make the captain
personally liable for the credits prejudiced on his account.
(the ff. is not required by the outline)

Art. 612. The following duties are inherent in the office of captain:
1. To have on board before starting on a voyage a detailed
inventory of the hull, engines, rigging, tackle, stores, and other
equipments of the vessel; the navigation certificate; the roll of the
persons who make up the crew of the vessel, and the contracts entered
into with the crew; the list of passengers; the health certificate; the
certificate of the registry proving the ownership of the vessel; and all
the obligations which encumber the same up to that date; the charters
or authenticated copies thereof; the invoices or manifest of the cargo,
and the instrument of the expert visit or inspection, should it have been
made at the port of departure.
2. To have a copy of this Code on board.
3. To have three folioed and stamped books, placing at the
beginning of each one a note of the number of folios it contains, signed
by the marine official, and in his absence by the competent authority.
PAGE 152
In the first book, which shall be called "log book," he shall enter
every day the condition of the atmosphere, the prevailing winds, the
course sailed, the rigging carried, the horsepower of the engines, the
distance covered, the maneuvers executed, and other incidents of
navigation. He shall also enter the damage suffered by the vessel in her
hull engines, rigging, and tackle, no matter what is its cause, as well as
the imperfections and averages of the cargo, and the effects and
consequence of the jettison, should there be any; and in cases of grave
resolutions which require the advice or a meeting of the officers of the
vessel, or even of the passengers and crew, he shall record the decision
adopted. For the informations indicated he shall make use of the
binnacle book, and of the steam or engine book kept by the engineer.
In the second book, called the "accounting book", he shall enter all
the amounts collected and paid for the account of the vessel, entering
specifically article by article, the sources of the collection, and the
amounts invested in provisions, repairs, acquisition of rigging or goods,
fuel, outfits, wages, and all other expenses. He shall furthermore enter
therein a list of all the members of the crew, stating their domiciles,
their wages and salaries, and the amounts they may have received on
accounts, either directly or by delivery to their families.
In the third book, called "freight book," he shall record the entry
and exit of all the goods, stating their marks and packages, names of the
shippers and of the consignees, ports of loading and unloading, and the
freight earned. In the same book he shall record the names and places
of sailing of the passengers and the number of packages of which their
baggage consists, and the price of the passage.
4. To make, before receiving the freight, with the officers of the
crew, and the two experts, if required by the shippers and passengers,
an examination of the vessel, in order to ascertain whether she is
watertight, and whether the rigging and engines are in good condition;
and if she has the equipment required for good navigation, preserving a
certificate of the memorandum of this inspection, signed by all the
persons who may have taken part therein, under their liability.
The experts shall be appointed one by the captain of the vessel
and the other one by the persons who request the examination, and in
case of disagreement a third shall be appointed by the marine authority
of the port.
5. To remain constantly on board the vessel with the crew during
the time the freight is taken on board and carefully watch the stowage
thereof; not to consent to any merchandise or goods of a dangerous
character to be taken on, such as inflammable or explosive substances,
without the precautions which are recommended for their packing,
management and isolation; not to permit that any freight be carried on
deck which by reason of its disposition, volume, or weight makes the
work of the sailors difficult, and which might endanger the safety of the
vessel; and if, on account of the nature of the merchandise, the special
character of the shipment, and principally the favorable season it takes
place, he allows merchandise to be carried on deck, he must hear the
opinion of the officers of the vessel, and have the consent of the
shippers and of the agent.
PAGE 153
6. To demand a pilot at the expense of the vessel whenever

required by navigation, and principally when a port, canal, or river, or a
roadstead or anchoring place is to be entered with which neither he, the
officers nor the crew are acquainted.
7. To be on deck at the time of sighting land and to take command
on entering and leaving ports, canals, roadsteads, and rivers, unless
there is a pilot on board discharging his duties. He shall not spend the
night away from the vessel except for serious causes or by reason of
official business.
8. To present himself, when making a port in distress, to the

maritime authority if in the Philippines and to the Filipino consul if in a
foreign country, before twenty-four hours have elapsed, and make a
statement of the name, registry, and port of departure of the vessel, of
its cargo, and reason of arrival, which declaration shall be vised by the
authority of by the consul if after examining the same it is found to be
acceptable, giving the captain the proper certificate in order to show his
arrival under stress and the reasons therefore. In the absence of marine
officials or of the consul, the declaration must be made before the local
authority.
9. To take the steps necessary before the competent authority in
order to enter in the certificate of the vessel in the registry of the
vessels, the obligations which he may contract in accordance with Article
583.
10. To put in a safe place and keep all the papers and belongings
of any members of the crew who might die on the vessel, drawing up a
detailed inventory, in the presence of passengers as witnesses, and, in
their absence, of members of the crew.
11. To conduct himself according to the rules and precepts
contained in the instructions of the agent, being liable for all that he
may do in violation thereof.
12. To give an account to the agent from the port where the vessel
arrives, of the reason therefore, taking advantage of the semaphore,
telegraph, mail, etc., according to the cases; notify him the freight he
may have received, stating the name and domicile of the shippers,
freight earned, and amounts borrowed on bottomry bond, advise him of
his departure, and give him any information and date which may be of
interest.
13. To observe the rules on the situation of lights and evolutions
to prevent collisions.
14. To remain on board in case of danger to the vessel, until all
hope to save her is lost, and before abandoning her to hear the officers
of the crew, abiding by the decision of the majority; and if he should
have to take a boat he shall take with him, before anything else, the
books and papers, and then the articles of most value, being obliged to
prove in case of the loss of the books and papers that he did all he could
to save them.
15. In case of wreck he shall make the proper protest in due form
at the first port reached, before the competent authority or Filipino
PAGE 154
consul, within twenty-four hours, stating therein all the incidents of the
wreck, in accordance with case 8 of this article.
16. To comply with the obligations imposed by the laws and rules
of navigation, customs, health, and others.
Notes: Although the duties in Art. 612 are inherent in the captain, the civil liability
arising from the non-fulfillment thereof is not limited to the captain, since while
the captain is liable to the shipagent, the shipagent is liable to third persons (Art.
618).
(not included in the outline)

Art. 622. If when on a voyage the captain should receive news of
the appearance of privateers or men of war against his flag, he shall be
obliged to make the nearest neutral port, inform his agents or shippers,
and await an occasion to sail under convoy or until the danger is over or
to receive final orders from the ship agent or shippers.

Art. 624. A captain whose vessel has gone through a hurricane or
who believes that the cargo has suffered damages or averages, shall
make a protest thereon before the competent authority at the first port
he touches within the twenty-four hours following his arrival, and shall
ratify it within the same period when he arrives at the place of his desti-
nation, immediately proceeding with the proof of the facts, it not being
permitted to open the hatches until after this has been done.
The captain shall proceed in the same manner if, the vessel having
been wrecked, he is saved alone or with part of his crew, in which case
he shall appear before the nearest authority, and make a sworn
statement of the facts.
The authority or the consul abroad shall verify the said facts,
receiving sworn statements of the members of the crew and passengers
who may have been saved, and taking such other steps as may help in
arriving at the facts, he shall make a statement of the result of the
proceedings in the log book and in that of the sailing mate, and shall
deliver the original records of the proceedings to the captain, stamped
and folioed, with a memorandum of the folios, which he must rubricate,
for their presentation to the judge or court of the port of destination.
The statement of the captain shall be believed if it is in accordance

with those of the crew and passengers; if they disagreed, the latter shall
be accepted, unless there is proof to the contrary.
PAGE 155
Art. 625. Upon arrival at the port of destination, the captain shall,
under his personal liability, turn over the cargo, without any defalcation,
to the consignees, and, in a proper case, the vessel, rigging, and freights
to the agent, after having obtained the necessary permission from the
health and customs officers and fulfilled the other formalities required
by the regulations of the administration.
[If, by reason of the absence of the consignee or on account of the
nonappearance of a legal holder of the invoices, the captain does not
know to whom he is to make the legal delivery of the cargo, he shall
place it at the disposal of the proper judge or court or authority, in order
that he may decide with regard to its deposit, preservation, and
custody.]
Notes: Under 619, the delivery of the cargo at the port of discharge terminates
the captain's responsibility as to the cargo
INTER-ORIENT MARINE ENTERPRISES V. NLRC [235 S 634 (1994)]
F: 1. Captain Rizalino Tayong was employed by petitioner shipwoners as master of a

vessel for one year. His instructions were to replenish bunker and diesel fuel and to sail to
South Africa , and there to load 120,000 metric tons of coal.
2. While in HK, a storm hit, and precautionary measures were taken since the vessel was
14 years old and the turbo-charger was leaking. The Captain requisitioned for supplies of
oxygen and acetylene necessary for the repairs. The vessel sailed from HK to Singapore.
3. While in Singapore, the supplies were not available, hence after consultation with the
Chied Engineer, the Captain decided to delay departure and wait for the supplies.
4. After the supplies were delivered, the vessel sailed for South Africa, where upon arrival,
the Captain was instructed to turn over his post to a new captain. He was then repatriated
to the Philippines.
5. Captain Tayong filed with the POEA a complaint for illegal dismissal, which was
dismissed.
6. On appeal, the NLRC reversed and ordered the shipowner to pay his salary for the
unexpired contract plus one month leave benefit, and attorney's fees. Hence, this appeal.
ISSUE: W/N CAPTAIN TAYONG WAS ILLEGALLY DISMISSED?
HELD: Yes.
1. It is well settled that confidential and managerial employees cannot be

arbitrarily dismissed at any time, and without case as reasonably established in an
appropriate investigation.
2. The captain of a vessel is a confidential and managerial employee within the

meaning of the above doctrine. A master or captain, for purposes of maritime
PAGE 156
commerce, is one who has command of a vessel. A captain commonly performs

three (3) distinct roles: (1) he is a general agent of the shipowner; (2) he is also
commander and technical director of the vessel; and (3) he is a representative of
the country under whose flag he navigates. Of these roles, by far the most
important is the role performed by the captain as commander of the vessel, for
such role (which to our mind, is analogous to that of "Chief Executive Officer"
[CEO] of a present-day corporate enterprise) has to do with the operation and
protection of the vessel during its voyag and the protection of the passengers (if
any) and crew and cargo. In his role as general agent of the shipowner, the
captain has authority to sign bills of lading, carry goods aboard and and deal with
the freight earned, agree upon rates and decide whether to take cargo. The ship
captain, as agent of the shipowner, has legal authority to enter into contracts with
respect to the vessel and the trading of the vessel, subkect to applicable
limitations established by statute, contract or instructions and regulations of the
shipowner. To the captain is committed the governance, care and management of
the vessel. Clearly, the captain is veste with both management and fiduciary
functions.
3. More importantly, a ship's captain must be accorded a reasonable measure of

discretionary authority to decide what the safety of the ship and its crew and
cargo specifically requires on a stipulated ocean voyage. The captain is held
responsible, and properly so, for such safety.
4. Compagnie de Commerce v. Hamburg is instructive in this connection. In that

case, the captain of a German vessel at the port of Saigon decided to head for the
port of Manila instead of the ports of Dunkirk and Hamburg because of WWI has
been declared and in his judgment, the vessel could not reach its destination. The
charterer sued for damages arising from the breach of the charter party, and
unauthorized sale of the Cargo. The SC held that the master of the vessel had
reasonable grounds to apprehend that the vessel was in danger of seizure of
captur by the French authorities in Saigon and was justified by necessity to elect
the court which he took - to flee Saigon for the port of Manila - with the result that
the shipowner was relieved from liability for the deviation from the stipulated
route and from liability for the damage to the cargo.
(c) Prohibited acts and transactions
Art. 613. A captain who navigates for freight in common or on

shares may not make any separate transaction for his own account, and
should he do so the profits shall belong to the other persons interested,
and the losses shall be borne by him alone.
Art. 615. Without the consent of the ship agent, the captain may
not have himself substituted by another person; and should he do so,
besides being liable for all the acts of the substitute and bound to pay
the indemnities mentioned in the foregoing article, the substitute as well
as the captain may be discharged by the ship agent.
PAGE 157
Notes: The duties of a captain are essentially personal due to the confidence
given to him arising from the fact that he possesses the required technical ability
and that he is a man worthy of trust of the shipowner
Art. 617. The captain may not contract loans on respondentia

secured by the cargo, and should he do so the contract shall be void.
Neither may he borrow money on bottomry for his own
transactions, except on the portion of the vessel he owns, provided no
money has been previously borrowed on the whole vessel, and provided
there does not exist any other kind of lien or obligation chargeable
against the vessel. When he is permitted to do so, he must necessarily
state what interest he has in the vessel.
In case of violation of this article the principal, interest, and costs
shall be charged to the private account of the captain, and the ship
agent may furthermore discharge him.
Art. 621. A captain who borrows money on the hull, engine,

rigging, or tackle of the vessel, or who pledges or sells merchandise or
provisions outside of the cases and without the formalities prescribed in
this Code, shall be liable for the principal, interest, and costs, and shall
indemnify for the damages he may cause.
He who commits fraud in his accounts shall reimburse the amount
defrauded, and shall be subject to the provisions of the Penal Code.
Art. 583. If the ship being on a voyage the captain should find it
necessary to contract one or more of the obligations mentioned in Nos. 8
and 9 of Article 580, he shall apply to the judge or court if he is in
Philippine territory, and otherwise to the Filipino consul, should there be
one, and in his absence to the judge or court or to the proper local
authority, presenting the certificate of the registry of the vessel treated
of in Article 612, and the instruments proving the obligation contracted.
The judge or court, the consul or the local authority as the case
may be in view of the result of the proceedings instituted, shall make a
temporary memorandum in the certificate of their result, in order that it
may be recorded in the registry when the vessel returns to the port of
her registry, or so that it can be admitted as a legal and preferred
obligation in case of sale before the return, by reason of the sale of the
vessel by virtue of a declaration of unseaworthiness.
The lack of this formality shall make the captain personally liable
to the creditors who may be prejudiced through his fault.
Notes: Obligations covered by this article : (1) price which has not been paid to
the last vendor; (2) for materials and labor in the construction of the vessel; (3) for
the repair, equipment and provisioning with the victuals and fuel; (4) loan on
bottomry before departure of the vessel; (5) insurance premiums under Art. 580
pars. 8 and 9.
PAGE 158
3. Other Officers and Crew
notes:
Art. 626 - 631 : sailing mate or second in command
Art. 632 - 633 : second mate or third in command
Complement of a vessel or crew - all the persons on board, from the captain to the
cabin boy, necessary for the management, maneuvers, and service; includes the
sailing mates, engineers, stokers, and other employees.
(a) Contracts and formalities
Art. 634. The captain may make up his crew with the number he
may consider advisable, and in the absence of Filipino sailors he may
ship foreigners residing in the country, the number thereof not to
exceed one-fifth of the total crew. If in foreign ports the captain should
not find a sufficient number of Filipino sailors, he may make up the crew
with foreigners, with the consent of the consul or marine authorities.
The agreements which the captain may make with the members of
the crew and others who go to make up the complement of the vessels,
to which reference is made in Article 612 (obligations inherent in the
office of captain) must be reduced to writing in the account book without
the intervention of a notary public or clerk of court, signed by the
parties thereto, and vised by the marine authority if they are executed in
Filipino territory, or by the consuls or consular agents of the Philippines
if executed abroad, stating therein all the obligations which each one
contracts and all the rights they acquire, said authorities taking care
that these obligations and rights are recorded in a concise and clear
manner, which will not give rise to doubts or claims.
The captain shall take care to read to them the articles of this Code
which concern them, stating in the said document that they were read.
If the book includes the requisites prescribed in Article 612, and
there should not appear any signs of alterations in its entries, it shall be
admitted as evidence in questions which may arise between the captain
and the crew with regard to the agreements contained therein and the
amounts paid on account of the same.
Every member of the crew may demand of the captain a copy,
signed by the latter, of the agreement and of the liquidation of his
wages, as they appear in the book.
Notes: The contract with a seaman has the nature of a lease of service, in virtue
of which one person binds himself to perform or to do the services or works for
which he has signed himself in the vessel in consideration of the compensation
stipulated
(b) Duties and liabilities
PAGE 159
Art. 635. A sailor who has been contracted to serve on a vessel

cannot rescind his contract nor fail to comply therewith except by reason
of a legitimate impediment which may have occurred.
Neither can he pass from the service of one vessel to another
without obtaining the written consent of the vessel on which he may be.
If, without obtaining said permission, the sailor who has signed for
one vessel should sign for another one, the second contract shall be
void, and the captain may choose between forcing him to fulfill the
service to which he first bound himself or look for a person to substitute
him at his expense.
Said sailor shall furthermore lose the wages earned on his first
contract to the benefit of the vessel for which he may have signed.
A captain who, knowing that a sailor is in the service of another
vessel, should have made a new agreement with him, without having
requested the permission referred to in the foregoing paragraphs, shall
be personally liable to the captain of the vessel to which the sailor first
belonged for that part of the indemnity, referred to in the third
paragraph of this article, which the sailor may not be able to pay.
(c) Rights
Art. 636. Should there be no fixed period for which a sailor has
been contracted, he cannot be discharged until the end of the return
voyage to the port where he enlisted.
Art. 637. Neither may the captain discharge a sailor during the
time of his contract except for just cause, the following being considered
as such:
1. The perpetration of a crime which disturbs order on the vessel.
2. Repeated insubordination, want of discipline, or non- fulfillment
of the service.
3. Incapacity and repeated negligence in the fulfillment of the
service which he should render.
4. Habitual drunkenness.
5. Any occurrence which incapacitates the sailor to perform the
work entrusted to him, with the exception of that provided in Article
644.
Art. 644. A seaman who falls sick shall not lose his right to
wages during the voyage, unless the sickness is the result of his
own fault. At any rate, the costs of the attendance and cure shall
be defrayed from the common funds, in the form of a loan.
If the sickness should comee from an injury received in the

service or defense of the vessel, the seaman shall be attended
and cured at the expense of the common funds deducting, before
PAGE 160
anything else, from the proceeds of the freightage the cost of the
attendance and cure.
6. Desertion.
The captain may, however, before setting out on a voyage and without
giving any reason whatsoever, refuse to permit a sailor whom he may have
engaged to go on board, and may leave him on land, in which case his wages
have to be paid as if he had rendered services.
The indemnity shall be paid from the funds of the vessel if the captain
should have acted for reasons of prudence and in the interest of the safety and
good service of the vessel. Should this not be the case, it shall be paid by the
captain personally.
After the voyage has begun, and during the same and until the conclusion
thereof, the captain may not abandon any member of his crew on land or on the
sea, unless, as the accused of a crime, his imprisonment and delivery to the
competent authority in the first port touched should be proper, which shall be obli-
gatory to the captain.
Art. 638. If, after the crew has been engaged, the voyage is
revoked by the will of the ship agent or of the charterers, before or after
the vessel has put to sea, or if the vessel is for the same reason given a
different destination from that fixed in the agreement with the crew, the
latter shall be indemnified on account of the rescission of the contract,
according to the following cases:
1. If the revocation of the voyage should be decided before
departure of the vessel from the port, each sailor engaged shall be given
one month's salary, besides what may be due him, in accordance with his
contract, for the services rendered to the vessel up to the date of the
revocation.
2. If the agreement should have been for a fixed amount for the
whole voyage, what may be due for said month and days shall be
determined in proportion to the approximate duration of the voyage, in
the judgment of the experts, in the manner established by the law of
civil procedure; and if the proposed voyage should be of such short
duration that it is calculated at approximately one month, the indemnity
shall be fixed at fifteen days, discounting in all cases the sums advanced.
3. If the revocation should take place after the vessel has put to
sea, the sailors engaged for a fixed amount for the voyage shall receive
the entire salary which may have been offered them if the voyage had
terminated; and those engaged by the month shall receive the amount
corresponding to the time they might have been on board and to the
time they may require to arrive at the port of destination, the captain
being obliged, furthermore, to pay said sailors in both cases the passage
to the said port or to the port of sailing of the vessel, as may be
convenient for them.
PAGE 161
4. If the ship agent or the charterers of the vessel should give it a

destination different from that fixed in the agreement, and the members
of the crew should not agree thereto, they shall be given by way of
indemnity half the amount fixed in the first case, in addition to what may
be due them for the part of the monthly wages corresponding to the
days which may have elapsed from the date of their agreements.
If they accept the change, and the voyage, on account of greater
distance or of other reasons, should give rise to an increase of wages,
the latter shall be adjusted privately, or through friendly adjusters in
case of disagreement. Even if the voyage should be shortened to a
nearer point, this shall not give rise to a reduction in the wages agreed
upon.
Should the revocation or change of the voyage originate from the
shippers or charterers, the ship agent shall have a right to demand of
them the indemnity which may be justly due.
Art. 639. Should the revocation of the voyage arise from a just
cause independent of the will of the ship agent and the charterers, and
the vessel should not have left the port, the members of the crew shall
no other right than to collect the wages earned up to the day the
revocation was made.
Art. 640. The following shall be just causes for the revocation of
the voyage:
1. A declaration of war or interdiction of commerce with the power
to whose territory the vessel was bound.
2. The blockade of the port of its destination or the breaking out
of an epidemic after the agreement.
3. The prohibition to receive in said port the goods which make up
the cargo of the vessel.
4. The detention or embargo of the same by order of the
government, or for any other reason independent of the will of the
agent.
5. The inability of the vessel to navigate.
Art. 641. If, after a voyage has been begun, and any of the first
three causes mentioned in the foregoing article should occur, the sailors
shall be paid at the port which the captain may deem advisable to make
for the benefit of the vessel and cargo, according to the time they may
have served thereon; but if the vessel is to continue its voyage, the
captain and the crew may mutually demand the enforcement of the
contract.
In case of the occurrence of the fourth cause, the crew shall
continue to be paid half wages, if the agreement is by month; but if the
detention should exceed three months, the contract shall be rescinded
and the crew shall be paid what they should have earned according to
the contact, as if the voyage had been made. And if the agreement
PAGE 162
should be for a fixed sum for the voyage, the contract must be complied
with in the terms agreed upon.
In the fifth case, the crew shall have no other right than to collect
the wages earned; but if the disability of the vessel should have been
caused by the negligence or lack of skill of the captain, engineer, or
sailing mate, they shall indemnify the crew for the damages suffered,
always without prejudice to the criminal liability which may be proper.
Art. 642. If the crew has been engaged on shares it shall not be
entitled, by reason of the revocation, delay, or greater extension of the
voyage, to anything but the proportionate part of the indemnity which
may be paid to the common funds by the persons responsible for said
occurrences.
Art. 643. If the vessel and her cargo should be totally lost by
reason of capture or shipwreck, all rights shall be extinguished, both as
regards the right of the crew to demand any wages and as regards the
right of the ship agent to recover the advances made.
If a portion of the vessel or of the cargo, or of both, should be
saved, the crew engaged on wages, including the captain, shall retain
their rights on the salvage, as far as possible, on the remainder of the
vessel as well as on the value of the freightage or the cargo saved; but
sailors who are engaged on shares shall have no right on the salvage of
the hull, but only on the portion of the freightage saved. (If they should
have worked to recover the remainder of the shipwrecked vessel, they
shall be given from the amount of the salvage an award in proportion to
the efforts made and to the risks encountered in order to accomplish the
salvage.)
Art. 644. A sailor who falls sick shall not lose his right to wages
during the voyage, unless his sickness is the result of his own fault. At
any rate, the costs of medical attendance and treatment shall be
defrayed from the common funds, in the form of a loan.
If the sickness should be caused by an injury received in the
service or defense of the vessel, the sailor shall be attended and treated
at the expense of the common funds, deducting, before anything else,
from the proceeds of the freightage, the cost of the attendance and
treatment.
Art. 645. If a sailor should die during the voyage, his heirs shall be
given the wages earned and not received, according to his contract and
the cause of his death, namely ---
If he died a natural death and was engaged on wages, that which
may have been earned up to the date of his death shall be paid.
PAGE 163
If the contract was for a fixed sum for the whole voyage, half the
amount earned shall be paid if the sailor died on the voyage out, and the
whole amount if he died on the return voyage.
And if the contract was on shares and the death occurred after the
voyage was begun, the heirs shall be paid the entire portion due the
sailor; but if the latter died before the departure of the vessel from the
port, the heirs shall not be entitled to claim anything.
If death occurred in the defense of the vessel, the sailor shall be
considered as living, and his heirs shall be paid, at the end of the
voyage, the full amount of wages or the entire part of the profits which
may be due him as others of his class.
The sailor shall likewise be considered as present if he was
captured while defending the vessel, in order to enjoy the benefits as
the rest; but should he have been captured on account of carelessness or
other accident not related to the service, he shall only receive the wages
due up to the day of his capture.
Art. 646. The vessel with her engines, rigging, equipment, and
freightage shall be liable for the wages earned by the crew engaged per
month or for the trip, the liquidation and payment to take place between
one voyage and the other. // After a new voyage has been undertaken,
credits of such kind pertaining to the preceding voyage shall lose the
preference.
Art. 647. The officers and the crew of the vessel shall be exempted
from all obligations contracted, if they deem if proper, in the following
cases;
1. If, before the beginning of the voyage, the captain attempts to
change it, or there occurs a naval war with the power to which the vessel
was destined.
2. If a disease should break out and be officially declared epidemic
in the port of destination.
3. If the vessel should change owner or captain.
4. Supercargoes
Art. 649. Supercargoes shall discharge on board the vessel the

administrative duties which the agent or shippers may have assigned
them; they shall keep an account and record of their transactions in a
book which shall have the same conditions and requisites as required for
the accounting book of the captain, and shall respect the latter in his
duties as chief of the vessel.
The powers and liabilities of the captain shall cease, when there is
a supercargo, with regard to that part of the administration legitimately
conferred upon the latter, but shall continue in force for all acts which
are inseparable from his authority and office.
PAGE 164
Supercargo: An agent of the owner of the goods shipped as cargo on a vessel,

who has charge of the cargo on board, sells the same to the best advantage in the
foreign markets, buys cargo to be brought back on the return voyage of the ship,
and comes home with it
Art. 650. All the provisions contained in the second section of Title
III, Book II, with regard to qualifications, manner of making contracts,
and liabilities of factors shall be applicable to supercargoes.
Now governed by the provisions on agency
Art. 651. Supercargoes cannot, without special authorization or

agreement, make any transaction for their own account during the
voyage, with the exception of the ventures which, in accordance with the
custom of the port of destination, they are permitted to do.
Neither shall they be permitted to invest in the return trip more
than the profits from the ventures, unless there is a special
authorization therefor from the principals.
D. Accidents and Damages in Maritime Commerce
RISKS, DAMAGES, AND ACCIDENTS OF MARITIME COMMERCE
1. Averages
(a) Nature and Kinds
Art. 806. For the purposes of this Code the following shall be
considered averages:
1. All extraordinary or accidental expenses which may be
incurred during the voyage for the preservation of the vessel or cargo,
or both.
2. All damages or deterioration which the vessel may suffer from
the time it puts to sea at the port of departure until it casts anchor at
the port of destination, and those suffered by the merchandise from the
time they are loaded in the port of shipment until they are unloaded in
the port of their consignment.
Art. 807. The petty and ordinary expenses incident to navigation,

such as those of pilotage of coasts and ports, lighterage and towage,
anchorage, inspection, health, quarantine lazaretto, and other so-called
port expenses, costs of barges, and unloading, until the merchandise is
placed on the wharf, and other usual expenses of navigation shall be
considered ordinary expenses to be defrayed by the shipowner, unless
there is an express agreement to the contrary.
PAGE 165
Art. 808. Averages shall be:

1. Simple or particular.
2. General or gross.
Averages consist of 2 items :

1. Expenses : to constitute an average, an expense must be:
a. extraordinary or accidental
b. incurred during the voyage
c. incurred in order to preserve the vessel, cargo or both
2. Damages or deterioration : to constitute an average, it must be:
a. have been suffered from the time the vessel puts to sea from
the port of departure until it casts anchor in the port of

destination
b. have been suffered by the merchandise from the time they are
loaded in the port of shipment until they are unloaded in the port
of consignment
(1) Simple or Particular
(a) Defined
Art. 809. As a general rule, simple or particular averages include

all the expenses and damages caused to the vessel or to her cargo
which have not inured to the common benefit and profit of all the
persons interested in the vessel and her cargo, especially the following:
1. The losses suffered by the cargo from the time of its
embarkation until it is unloaded, either on account of the inherent
defect of the goods or by reason of a marine accident or force majeure,
and the expenses incurred to avoid and repair the same.
2. The losses and expenses suffered by the vessel in its hull,
rigging, arms, and equipments, for the same causes and reasons, from
the time it puts to sea from the port of departure until it anchors in the
port of destination.
3. The losses suffered by the merchandise loaded on deck, except
in coastwise navigation, if the marine ordinances allow it.
4. The wages and victuals of the crew when the vessel is detained
or embargoed by a legitimate order or force majeure, if the charter has
been contracted for a fixed sum for the voyage.
5. The necessary expenses on arrival at port, in order to make
repairs or secure provisions.
6. The lowest value of the goods sold by the captain in arrivals
under stress for the payment of provisions and to save the crew, to
meet any other need of the vessel against which the proper amount
shall be charged.
PAGE 166
7. The victuals and wages of the crew while the vessel is in

quarantine.
8. The loss inflicted upon the vessel or cargo by reason of an
impact or collision with another, if it is accidental and unavoidable. If
the accident should occur through the fault or negligence of the
captain, the latter shall be liable for all the damage caused.
9. Any loss suffered by the cargo through the faults, negligence,
or barratry of the captain or of the crew, without prejudice to the right
of the owner to recover the corresponding indemnity from the captain,
the vessel, and the freight.
Distinguishing feature : an expense incurred or damage suffered which has not

inured to the common benefit and profit of all persons interested in the vessel
and its cargo
(b) Effects
Art. 810. The owner of the goods which gave rise to the expense
or suffered the damage shall bear the simple or particular averages.
(2) Gross or General
(a) Defined
Art. 811. As a general rule, general or gross averages shall

include all the damages and expenses which are deliberately caused in
order to save the vessel, its cargo, or both at the same time, from a real
and known risk, and particularly the following:
1. The goods or cash invested in the redemption of the vessel or
of the cargo captured by enemies, privateers, or pirates, and the
provisions, wages, and expenses of the vessel detained during the time
the settlement or redemption is being made.
2. The goods jettisoned to lighten the vessel, whether they
belong to the cargo, to the vessel, or to the crew, and the damage
suffered through said act by the goods which are kept on board.
3. The cables and masts which are cut or rendered useless, the
anchors and the chains which are abandoned, in order to save the
cargo, the vessel, or both.
4. The expenses of removing or transferring a portion of the
cargo in order to lighten the vessel and place it in condition to enter a
port or roadstead, and the damage resulting therefrom to the goods
removed or transferred.
5. The damage suffered by the goods of the cargo by the opening
made in the vessel in order to drain it and prevent its sinking.
6. The expenses caused in order to float a vessel intentionally
stranded for the purpose of saving it.
7. The damage caused to the vessel which had to be opened,
scuttled or broken in order to save the cargo.
PAGE 167
8. The expenses for the treatment and subsistence of the

members of the crew who may have been wounded or crippled in
defending or saving the vessel.
9. The wages of any member of the crew held as hostage by
enemies, privateers, or pirates, and the necessary expenses which he
may incur in his imprisonment, until he is returned to the vessel or to
his domicile, should he prefer it.
10. The wages and victuals of the crew of a vessel chartered by
the month, during the time that it is embargoed or detained by force
majeure or by order of the Government, or in order to repair the
damage caused for the common benefit.
11. The depreciation resulting in the value of the goods sold at
arrivals under stress in order to repair the vessel by reason of gross
average.
12. The expenses of the liquidation of the average.
Art. 817. If in the lightening a vessel on account of a storm, in

order to facilitate its entry into a port or roadstead, part of her cargo
should be transferred to lighters or barges and be lost, the owner of
said part shall be entitled to indemnity, as if the loss had originated
from a gross average, the amount thereof being distributed between
the vessel and cargo from which it came.
If, on the contrary, the merchandise transferred should be saved
and the vessel should be lost, no liability may be demanded of the
salvage.
Art. 818. If, as a necessary measure to extinguish a fire in port,

roadstead, creek, or bay, it should be decided to sink any vessel, this
loss shall be considered gross average, to which the vessels saved shall
contribute.
Distinguishing feature: Expense or damage suffered deliberately in order to save

the vessel, its cargo or both from a real and known risk --> it is the deliverance
from an immediate peril, by a common sacrifice, that constitutes the essence of
general average
Requisites for general average:
1. there must be a common danger --> the ship and cargo are subject to
the same danger and that the danger arises from accidents of the sea,
dispositions of the authorities or faults of men, provided that the circumstances
producing the peril should be ascertained and imminent
2. for the common safety, part of the vessel or the cargo or both is
sacrificed deliberately
3. from the expenses or damages caused follows the successful saving of
the vessel and cargo
PAGE 168
4. the expenses or damages should have been incurred or inflicted after

taking legal steps and authority
(b) Essential Requisites
Art. 813. In order to incur the expenses and cause the damages
corresponding to gross average, there must be a resolution of the
captain, adopted after deliberation with the sailing mate and other
officers of the vessel, and after hearing the persons interested in the
cargo who may be present.
If the latter should object, and the captain and officers or a
majority of them, or the captain, if opposed to the majority, should
consider certain measures necessary, they may be executed under his
responsibility, without prejudice to the right of the shippers to proceed
against the captain before the competent judge or court, if they can
prove that he acted with malice, lack of skill, or negligence.
If the persons interested in the cargo, being on board the vessel,
have not been heard, they shall not contribute to the gross average,
their share being chargeable against the captain, unless the urgency of
the case should be such that the time necessary for previous
deliberation was wanting.
Art. 814. The resolution adopted to cause the damages which

constitute general average must necessarily be entered in the log book,
stating the motives and reasons on which it is based, the votes against
it and the reason for the dissent, should there be any, and the
irresistible and urgent causes which impelled the captain if he acted of
his own accord.
In the first case the minutes shall be signed by all the persons
present who could do so before taking action, if possible; and if not, at
the first opportunity. In the second case, it shall be signed by the
captain and by the officers of the vessel.
In the minutes, and after the resolution, shall be stated in detail
all the goods jettisoned, and mention shall be made of the injuries
caused to those kept on board. The captain shall be obliged to deliver
one copy of these minutes to the maritime judicial authority of the first
port he may make, within twenty- four hours after his arrival, and to
ratify it immediately under oath.
Formalities for incurring gross average :

1. there must be an assembly of the sailing mate and other officers with the
captain including those with interests in the cargo
2. there must be a resolution of the captain
3. the resolution shall be entered in the log book, with the reasons and
motives and the votes for and against the resolution
4. the minutes shall be signed by the parties
5. within 24 hours upon arrival at the first port the captain makes, he shall
deliver one copy of these minutes to the maritime judicial authority thereat
PAGE 169
Art. 860. If, notwithstanding the jettison of the merchandise,

breakage of masts, ropes, and equipment, the vessel should be lost
running same risk, no contribution whatsoever by reason of gross
average shall be proper.
The owners of the goods saved shall not be liable for the
indemnification of those jettisoned, lost or damaged.
The goods that were not sacrificed shall not be liable for the indemnification of
those sacrificed - One of the requisites of general average is lacking, that is,
success in saving the vessel and remaining cargo
Magsaysay Inc. vs Agan 96 Phil. 504
F: Plaintiff's vessel SS Antonio left for Manila for Basco, Batanes with general cargo
owned by the different shippers including that of the defendant. Upon reaching Aparri, it
accidentally ran aground. Plaintiff had it refloated by Luzteveco for compensation. After
refueling, the vessel proceeded to Basco where the cargoes were delivered. On the
theory that the expenses incurred in floating the vessel constituted a general average to
which both the ship and cargo should contribute, plaintiff asked from the shippers a
deposit or bond to answer for contribution to the average. All shippers acceded except
the defendant. In action to recover said contribution, the Manila CFI decided for the
plaintiff. Defendant appealed contending that the floating of a vessel, unintentionally
stranded inside a port and at the mouth of a river during a fine weather, does not
constitute general average expenses.
Held: In classifying averages into simple or particular and general or gross and
defining each class, the Code of Commerce at the same time enumerate certain
specific cases as coming specially under one or the other class. While the
expenses incurred in putting the vessel afloat may well come under No. 2 of Art.
809 - referring to expenses suffered by the vessel due to an accident of the sea
or force majeure- said expenses do not fit into any of the specific cases of
general average enumerated in ART. 811. No. 6 of Art. 811 mentions expenses
caused to afloat a vessel, but it specifically refers to a vessel intentionally
stranded for the purpose of saving it, and would have no application where the
stranding was unintentional.
The following are the requisites for a general average: 1) there must be
common danger, 2) for the common safety part of the vessel or cargo or both is
sacrificed deliberately, 3) from the expenses or damages caused follows the
successful saving of the vessel and cargo, and 4) the expenses or damages
should have been incurred or inflicted after taking the proper legal steps and
authority.
It is the deliverance from an immediate peril, by reason of a common
sacrifice, that constitutes the essence of a general average. Where there is no
proof that the stranded vessel had to be put afloat to save it from imminent
danger, and what does appear is that the vessel had to be salvaged in order to
enable it to proceed to its port of destination, the expenses incurred in floating
the vessel do not constitute general average. It is the safety of the property, and
not of the voyage which constitutes the true foundation of general average.
PAGE 170
The expenses incurred for the common safety of the vessel and cargo in
this case did not arise from the imminent peril of both. The cargo could have
been unloaded by the owners had they been required to do so. The refloating
was a success, but as the sacrifice was for the vessel's benefit -- to enable it to
proceed to its destination -- and not for the purpose of saving the cargo, the
cargo owners are not in law bound to contribute to expenses. The final requisite
has not been proved for it does not appear that the expenses in question were
incurred after following the procedure laid down in Art. 913.
Decision reversed.
International Harvester vs Hamburg American Line 42 Phil 845
F: In the spring of 1917, defendant undertook to carry agricultural machineries,

belonging to the plaintiff, from Hamburg to Vladivostok, Russia. Freight charges were
prepaid to ultimate destination and defendant reserved the right to forward the
machineries at its own expense by some other means in case of its inability to effect
discharge at the port of destination. When the voyage was almost completed at the
China Sea, war broke out between Germany and Russia, and the ship put in to the port
of Manila, where it was interned. Captain of the vessel refused to surrender the
machineries to the owner's agent unless the latter would agree to subject said cargo to
liability upon general average to satisfy the cost and expenses of the vessel incident to
its stay in Manila. Plaintiff did not assent and brought an action for recovery of the
machineries plus damages. The plaintiff later obtained said cargo by a writ of replevin
and forwarded it to Vladivostok by another streamer. Defendant denied liability
asserting its lien on the cargo for general average. Trial court awarded the plaintiff
damages. Defendant appealed.
Held: It is clear that the cargo in question is not liable to a general average. It is
not claimed that said cargo was contraband of war and being neutral goods, they
were not liable to forfeiture in the event of capture by the enemies of the ship's
flag. It follows that when the master of the vessel decided to take refuge in
Manila, he acted exclusively with a view to the vessel's protection. There was no
common danger to the ship and cargo; and, therefore, it was not a case for a
general average.
The outbreak of the war between Germany and Russia absolved the
defendant from conveying the cargo to Russia, and no damage could be
recovered by the plaintiff from the defendant for the latter's failure to convey the
cargo to the port of destination on that ship. But by the terms of the contract of
affreightment, the defendant was bound to forward the cargo to Vladivostok at
its expense, not necessarily by a streamer of defendant. It does not by any
means follow that it is not liable for the expenses incurred by the plaintiff in
completing the unfinished portion of the voyage in another ship. Defendant is,
therefore, liable for the cost of forwarding the cargo by another line, the full
freight having been received by the ship at the commencement of the voyage.
Judgment affirmed.
Compagnie de Commerce vs Hamburg 36 Phil 590
PAGE 171
F: In July 1914, defendant's vessel undertook to carry a cargo of rice meal in the
French port of Saigon for delivery to Dunkirk under a contract of affreightment with a
French shipper. While the loading of the cargo was made, rumors of the outbreak of war
between French and Germany spread. The master of the German vessel, after
completion of the loading of the cargo and after being refused by the French Governor
at Saigon for a pass of safe-conduct, fled with his vessel and her cargo and took refuge
in Manila. Considering the nature of the cargo and its impossibility of being delivered to
its destination within reasonable time, the master of the vessel consulted the shipper's
instruction as to the disposition of the cargo, but the shipper's agent refused to assume
responsibility. Defendant's agent in Manila, upon the court's authority secured by the
master of the vessel, sold said rice meal and deposited the proceeds thereof with the
court minus the expenses incident to the sale. Plaintiff filed an action for recovery of the
proceeds of the sale and the resulting damages. Defendant also claimed, in a cross-
complaint, contribution from plaintiff for general average for the expenses incurred by
the vessel's stay in Manila. Trial court decided for the plaintiff including damages for the
defendant's breach of the charter party. Both parties appealed.
Held: The danger from which the master of the vessel fled was a real and not
merely an imaginary one. Seizure at the hands of the enemy, though not
inevitable, was a possible outcome of a failure to leave the port of Saigon; and it
cannot be said that under the conditions existing at the time when the master
elected to flee from that port, there were no grounds for a reasonable
apprehension of danger from seizure by French authorities, and therefore no
necessity for flight. The deviation of the vessel therefore, from the route
prescribed in her charter party, and the subsequent abandonment by the master
of the voyage contemplated in the contract of affreightment, must be held to
have been justified by the necessity under which the master was placed to elect
that course which would remove and preserve the vessel from danger of seizure
by the public enemy of the flag which the vessel sailed; and that neither the
vessel nor her owners are liable for the resultant damages suffered by the owner
of the cargo.
The claim for general average by the shipowner, however, cannot be
sustained under the provisions of the York-Antwerp Rules. An examination of the
entire body of these rules discloses that general average is never allowed
thereunder unless the loss or damage sought to be made good as general
average has been incurred for the `common safety'. It is very clear that in
fleeing from the port of Saigon and taking refuge in Manila, the master of the
vessel was not acting for the common safety of the vessel and her cargo. The
French cargo was absolutely secure from danger of seizure or confiscation so
long as it remained in the port of Saigon, and there can be no question that the
flight of the vessel was a measure of precaution adopted solely and exclusively
for the preservation of the vessel from danger of seizure or capture. Delivery of
the net proceeds of the sale to plaintiff should be affirmed, but recovery of
damages by plaintiff should be reversed. Defendant cannot claim for general
average.
Judgment modified.
(c) Effects
PAGE 172
Art. 812. In order to satisfy the amount of the gross or general

averages, all the persons having an interest in the vessel and cargo
therein at the time of the occurrence of the average shall contribute.
(d) Jettison
Art. 815. The captain shall direct the jettison, and shall order the
goods cast overboard in the following order:
1. Those which are on deck, beginning with those which
embarrass the maneuver or damage the vessel, preferring, if possible,
the heaviest ones with the least utility and value.
2. Those which are below the upper deck, always beginning with
those of the greatest weight and smallest value, to the amount and
number absolutely indispensable.
Art. 816. In order that the goods jettisoned may be included in

the gross average and the owners thereof be entitled to indemnity, it
shall be necessary in so far as the cargo is concerned that their
existence on board be proven by means of the bill of lading; and with
regard to those belonging to the vessel, by means of the inventory
prepared before the departure, in accordance with the first paragraph
of Article 612.
(e) Jason Clause
Jason Clause, Rule D, York-Antwerp Rules
Rights to contribution in general average shall not be affected, though the

event which gave rise to the sacrifice or expenditure may have been due to the
fault of one of the parties to the adventure; but this shall not prejudice any
remedies which may be open against that party for such fault.
(b) Proof and Liquidation of Averages
(1) Modes
Art. 846. Those interested in the proof and liquidation of

averages may mutually agree and bind themselves at any time with
regard to the liability, liquidation and payment thereof.
In the absence of agreements, the following rules shall be
observed:
1. The proof of the average shall take place in the port where the
repairs are made, should any be necessary, or in the port of unloading.
2. The liquidation shall be made in the port of unloading, if it is a
Philippine port.
PAGE 173
3. If the average occurred outside of the jurisdictional waters of

the Philippines, or the cargo has been sold in a foreign port by reason
of an arrival under stress, the liquidation shall be made in the port of
arrival.
4. If the average has occurred near the port of destination, so
that said port can be made, the proceedings mentioned in rules 1 and 2
shall be held there.
Art. 847. In the case where the liquidation of the averages is

made privately by virtue of agreement, as well as when a judicial
authority intervenes at the request of any of the parties interested who
do not agree thereto, all of them shall be cited and heard, should they
not have renounced this right.
Should they not be present or should they have no legal
representative, the liquidation shall be made by the consul in a foreign
port, and where there is none, by the competent judge or court,
according to the laws of the country and for the account of the proper
party.
When the representative is a person well known in the place
where the liquidation is made, his intervention shall be admitted and
shall produce legal effects, even though he be authorized only by a
letter of the ship agent, the shipper, or the insurer.
Art. 848. Claims for averages shall not be admitted if they do not
exceed 5 per cent of the interest which the claimant may have in the
vessel or in the cargo if it be gross average, and 1 per cent of the goods
damaged if particular average, deducting in both cases the expenses of
appraisal, unless there is an agreement to the contrary.
(2) Appraisal of general average
Art. 850. If by reason of one or more accidents of the sea,

particular and gross averages of the vessel, of the cargo, or of both,
should take place on the same voyage, the expenses and damages
corresponding to each average shall be determined separately in the
port where the repairs are made, or where the merchandise is
discharged, sold, or utilized.
For this purpose the captains shall be obliged to demand of the
expert appraisers and of the contractors making the repairs, as well as
of those appraising and taking part in the unloading, repair, sale, or
utilization of the merchandise, that in their appraisements or estimates
and accounts they set down separately and accurately the expenses
and damages pertaining to each average, and in those of each average
those corresponding to the vessel and to the cargo, also stating
separately whether or not there are damages proceeding from inherent
defect of the thing and not from accident of the sea; and in case there
PAGE 174
should be expenses common to the different averages and to the vessel

and its cargo, the amount corresponding to each must be estimated
and stated distinctly.
Art. 851. At the instance of the captain, the adjustment,

liquidation, and distribution of gross averages shall be held privately,
with the consent of all the parties in interest.
For this purpose, within forty-eight hours, following the arrival of
the vessel at the port, the captain shall convene all the persons
interested in order that they may decide as to whether the adjustment
or liquidation of the gross average is to be made by experts and
liquidators appointed by themselves, in which case did shall be so done
if the interested parties agree.
If an agreement is not possible, the captain shall apply to the
competent judge or court, who shall be the one in the port where these
proceedings are to be held in accordance with the provisions of this
Code, or to the consul of the Philippines should there be one, and
should there be none, to the local authority when they are to be held in
a foreign port.
Art. 852. If the captain does not comply with the provisions of the
preceding article, the ship agent or the shippers shall demand the
liquidation, without prejudice to the action they may bring to demand
indemnity from him.
Under Art. 851, the captain is required to initiate the proceedings for the
adjustment, liquidation and distribution of any gross average; it is his duty to
take the proper steps to protect any shipper whose goods may have been
jettisoned for the general safety ==> if the captain does not comply with his
duty under 851, the shipowner or shipper has the right to maintain an action
against the captain for indemnification for the loss --> this does not involve the
suppression of the right of action of the shipper against the shipowner
Art. 853. After the experts have been appointed by the persons
interested, or by the court, and after the acceptance, they shall proceed
to the examination of the vessel and of the repairs required and to the
appraisal of their cost, separating these losses and damages from those
arising from the inherent defect of the things.
The experts shall also declare whether the repairs may be made
immediately, or whether it is necessary to unload the vessel in order to
examine and repair it.
With regard to the merchandise, if the average should be visible
at a mere glance, the examination thereof must be made before they
are delivered. Should it not be visible at the time of unloading, said
examination may be made after the delivery, provided that it is done
PAGE 175
within forty-eight hours from the unloading, and without prejudice to

the other proofs which the experts may deem proper.
Art. 854. The valuation of the objects which are to contribute to

the gross average, and that of those which constitute the average, shall
be subject to the following rules:
1. The merchandise saved which is to contribute to the payment
of the gross average shall be valued at the current price at the port of
unloading, deducting the freightage, customs duties, and expenses of
unloading, as may appear from a material inspection of the same,
without taking the bills of lading into consideration, unless there is an
agreement to the contrary.
2. If the liquidation is to be made in the port of departure, the
value of the merchandise loaded shall be determined by the purchase
price, including the expenses until they are placed on board, the
insurance premium excluded.
3. If the merchandise should be damaged, it shall be appraised at
its true value.
4. If the voyage having been interrupted, the merchandise should
have been sold in a foreign port, and the average cannot be estimated,
the value of the merchandise in the port of arrival, or the net proceeds
obtained at the sale thereof, shall be taken as the contributing capital.
5. Merchandise lost, which constitutes the gross average, shall
be appraised at the value which merchandise of its kind may have in
the port of unloading, provided that its kind and quality appear in the
bill of lading; and should they not appear, the value shall be that stated
in the invoices of the purchase issued in the port of shipment, adding
thereto the expenses and freightage subsequently arising.
6. The masts cut down, the sails, cables, and other equipment of
the vessel rendered useless for the purpose of saving it, shall be
appraised at the current value, deducting one-third by reason of the
difference between new and old.
This deduction shall not be made with respect to anchors and
chains.
7. The vessel shall be appraised at its true value in the condition
in which it is found.
8. The freightage shall represent 50 per cent by way of
contributing capital.
Art. 855. The merchandise loaded on the upper deck of the vessel
shall contribute to the gross average should it be saved; but there shall
be no right to indemnify if it should be lost by reason of having been
jettisoned for common safety, except when the marine ordinances allow
its shipment in this manner in coastwise navigation.
The same shall take place with that which is on board and is not
included in the bills of lading or inventories, according to the cases.
PAGE 176
In any case the shipowner and the captain shall be liable to the
shippers for the damages from the jettison, if the storage on the upper
deck was made without the consent of the latter.
The goods may be stowed on deck (1) with the consent of the shipper or (2)
without his consent --> if stowed on deck with his consent, he takes the risk
upon himself of the perils arising from the dangers of the sea and any damage
will be borne by the owner [particular average]
--> if stowed on deck without his consent, the captain does so at his own
risk; the captain cannot protect himself by showing that they are damaged or
lost by dangers of the sea
The carriage of gasoline on deck by coastwise or interisland vessels is

allowed by marine regulations --> the loss of petroleum for common safety and
benefit will constitute a general average.
Art. 857. After the appraisement of the goods saved and of those
lost which constitute the gross average, has been concluded by the
experts, the repairs, if any, made on the vessel, and, in this case, the
accounts of the same approved by the persons interested or by the
judge or court, the entire record shall be turned over to the liquidator
appointed, in order that he may proceed with the distribution of the
average.
(3) Liquidation of general average
Art. 858. In order to effect the liquidation, the liquidator shall

examine the protest of the captain, comparing it, if necessary, with the
log book, and all the contracts which may have been made among the
persons interested in the average, the appraisements, expert
examinations, and accounts of repairs made. If, as a result of this
examination, he should find any defect in the procedure which might
injure the rights of the persons interested or affect the liability of the
captain, he shall call attention thereto in order that it may be
corrected, if possible, and otherwise he shall include it in the exordial
of the liquidation.
Immediately thereafter he shall proceed with the distribution of
the amount of the average, for which purpose he shall fix:
1. The contributing capital, which he shall determine by the value
of the cargo, in accordance with the rules established in Article 854.
2. That of the vessel in its actual condition, according to a
statement of experts.
3. The 50 per cent of the amount of the freightage, deducting the
remaining 50 per cent for wages and maintenance of the crew.
After the amount of the gross average has been determined in
accordance with the provisions of this Code, it shall be distributed pro
rata among the goods which are to cover the same.
PAGE 177
Art. 865. The distribution of the gross average shall not be final
until it has been agreed to, or in the absence thereof, until it has been
approved by the judge or court, after an examination of the liquidation
and a hearing of the persons interested who may be present or of their
representatives.
Art. 866. After the liquidation has been approved, it shall be the
duty of the captain to collect the amount of the contribution, and he
shall be liable to the owners of the goods averaged for the damages
they may suffer through his delay or negligence.
Art. 867. If the persons contributing should not pay the amount
of the contribution at the end of the third day after having been
required to do so, the goods saved shall be proceeded against, at the
request of the captain, until payment has been made from their
proceeds.
Art. 868. If the person interested in receiving the goods saved

should not give security sufficient to answer for the amount
corresponding to the gross average, the captain may defer the delivery
thereof until payment has been made.
Art. 869. The experts whom the court or the persons interested
may appoint, as the case may be, shall proceed with the examination
and appraisement of the averages in the manner prescribed in Articles
853 and 854, Rules 2 to 7, in so far as they are applicable.
(4) Liquidation of particular average
Art. 869. The experts whom the court or the persons interested
may appoint, as the case may be, shall proceed with the examination
and appraisement of the averages in the manner prescribed in Articles
853 and 854, Rules 2 to 7, in so far as they are applicable.
2. Arrivals Under Stress
(a) Causes
Art. 819. If during the voyage the captain should believe that the
vessel cannot continue the trip to the port of destination on account of
the lack of provisions, well-founded fear of seizure, privateers, or
pirates, or by reason of any accident of the sea disabling it to navigate,
he shall assemble the officers and shall summon the persons interested
in the cargo who may be present, and who may attend the meeting
PAGE 178
without the right to vote; and if, after examining the circumstances of
the case, the reason should be considered well-founded, the arrival at
the nearest and most convenient port shall be agreed upon, drafting
and entering the proper minutes, which shall be signed by all, in the log
book.
The captain shall have the deciding vote, and the persons
interested in the cargo may make the objections and protests they may
deem proper, which shall be entered in the minutes in order that they
may make use thereof in the manner they may consider advisable.
Art. 820. An arrival shall not be considered lawful in the following

cases:
1. If the lack of provisions should arise from the failure to take
the necessary provisions for the voyage according to usage and
custom, or if they should have been rendered useless or lost through
bad stowage or negligence in their care.
2. If the risk of enemies, privateers, or pirates should not have
been well known, manifest, and based on positive and provable facts.
3. If the defector the vessel should have arisen from the fact that
it was not repaired, rigged, equipped, and prepared in a manner
suitable for the voyage, or from some erroneous order of the captain.
4. Whenever malice, negligence, want of foresight, or lack of skill
on the part of the captain exists in the act causing the damage.
Arrival under stress: Arrival of a vessel at the nearest and most convenient
port, if during the voyage the vessel cannot continue the trip to the port of
destination due to : (1) lack of provisions, (2) well-founded fear of seizure,
privateers, or pirates, (3) by reason of any accident of the sea disabling it to
navigate
(b) Formalities
Art. 819. If during the voyage the captain should believe that the
vessel cannot continue the trip to the port of destination on account of
the lack of provisions, well-founded fear of seizure, privateers, or
pirates, or by reason of any accident of the sea disabling it to navigate,
he shall assemble the officers and shall summon the persons interested
in the cargo who may be present, and who may attend the meeting
without the right to vote; and if, after examining the circumstances of
the case, the reason should be considered well-founded, the arrival at
the nearest and most convenient port shall be agreed upon, drafting
and entering the proper minutes, which shall be signed by all, in the log
book.
The captain shall have the deciding vote, and the persons
interested in the cargo may make the objections and protests they may
PAGE 179
deem proper, which shall be entered in the minutes in order that they
may make use thereof in the manner they may consider advisable.
Formalities : 1. assembly of the officers including all interested parties

2. drafting and entering in the log book the proper minutes, which shall be
signed by all
3. entry in the log book of the objections and protests of the persons
interested in the cargo
Art. 822. If in order to make repairs to the vessel or because

there is danger that the cargo may suffer damage, it should be
necessary to unload, the captain must request authorization from the
competent judge or court for the removal, and carry it out with the
knowledge of the person interested in the cargo, or his representative,
should there be any.
In a foreign port, it shall be the duty of the Filipino consul, where
there is one, to give the authorization.
In the first case, the expenses shall be for the account of the ship
agent or owner, and in the second, they shall be chargeable against the
owners of the merchandise for whose benefit the act was performed.
If the unloading should take place for both reasons, the expenses
shall be divided proportionately between the value of the vessel and
that of the cargo.
(c) Expenses
Art. 821. The expenses of an arrival under stress shall always be

for the account of the shipowner or agent, but they shall not be liable
for the damages which may be caused the shippers by reason of the
arrival, provided the latter is legitimate.
Otherwise, the ship agent and the captain shall be jointly liable.
Art. 822. If in order to make repairs to the vessel or because

there is danger that the cargo may suffer damage, it should be
necessary to unload, the captain must request authorization from the
competent judge or court for the removal, and carry it out with the
knowledge of the person interested in the cargo, or his representative,
In a foreign port, it shall be the duty of the Filipino consul, where
there is one, to give the authorization.
In the first case, the expenses shall be for the account of the ship
agent or owner, and in the second, they shall be chargeable against the
owners of the merchandise for whose benefit the act was performed.
If the unloading should take place for both reasons, the expenses
shall be divided proportionately between the value of the vessel and
that of the cargo.
PAGE 180
Requisites for the captain to unload the cargo arriving under stress:
1. the unloading must be necessary to make repairs or there must be danger
that the cargo may suffer damage
2. the captain must be authorized by either a competent court or the Phil. consul,
depending on the port of arrival
(d) Responsibility of Captain
Art. 823. The custody and preservation of the cargo which has
been unloaded shall be entrusted to the captain, who shall be
responsible for the same, except in cases of force majeure.
Art. 824. If the entire cargo or part thereof should appear to be

damaged, or there should be imminent danger of its being damaged,
the captain may request of the competent judge or court, or of the
consul in a proper case, the sale of all or of part of the former, and the
person taking cognizance of the matter shall authorize it, after an
examination and declaration of experts, advertisements, and other
formalities required by the case, and an entry in the book, in
accordance with the provisions of Article 624.
The captain shall, in a proper case, justify the legality of his
conduct, under the penalty of answering to the shipper for the price the
merchandise would have brought if it had arrived in good condition at
the port of destination.
Art. 825. The captain shall be responsible for the damages

caused by his delay, if after the cause of the arrival under stress has
ceased, he should not continue the voyage.
If the cause of the arrival should have been the fear of enemies,
privateers, or pirates, a deliberation and resolution in a meeting of the
officers of the vessel and persons interested in the cargo who may be
present, in accordance with the provisions contained in Article 819,
shall precede the departure.
The captain has the duty to continue the voyage without delay after the cause of
the arrival under stress has ceased--> otherwise, he shall be liable for damages
caused by the delay
3. Collisions
Collision: impact of two vessels both of which are moving

Allision: striking of a moving vessel against one that is stationary
Cases of collision :
PAGE 181
1. due to the fault, negligence or lack of skill of the captain, sailing mate or the
complement of the vessel --> under 826, the shipowner shall be liable for the
losses and damages
2. due to the fault of both vessels --> under 827, each vessel shall suffer its own
losses, but as regards the owners of the cargoes, both vessels shall be jointly and
severally liable
3. where it cannot be determined which of the 2 vessels is at fault --> under
828, each vessel shall suffer its own losses, and both shall also be solidarily
responsible for the losses and damages caused to their cargoes
4. collision due to fortuitous event or force majeure --> under 830, each vessel
shall bear its own damages
5. where two vessels collide with each other without their fault but by reason of
the fault of a third vessel --> under 831, the owner of the third vessel causing
the collision shall be liable for the losses and damages 6. a vessel which is
properly anchored and moored may collide with those nearby by reason of a
storm or other cause of force majeure --> under 832, the vessel run into shall
suffer its own damages and expenses
Nautical Rules to determine negligence :
1. When 2 vessels are about to enter a port, the farther one must allow the
nearer to enter first; if they collide, the fault is presumed to be imputable to the
one who arrived later, unless it can be proved that there was no fault on its part.
2. When 2 vessels meet, the smaller should give the right of way to the
larger one.
3. A vessel leaving port should leave the way clear for another which may
be entering the same port.
4. The vessel which leaves later is presumed to have collided against one
who has left earlier.
5. There is also a presumption against the vessel which sets sail at night.
6. The presumption also works against the vessel with spread sails which
collides with another which is at anchor, and cannot move, even when the crew
of the latter has received word to lift anchor, when there was not sufficient time
to do so or there was fear of a greater damage or other legitimate reason.
7. The vessel which is not properly moored or does not observe the proper
distances, has the presumption against itself.
8. The vessel which is moored at a place not used for the purpose, or
which is improperly moored or does not have sufficient cables, or which has been
left without watch, has also against itself the presumption.
9. The same rule applies to those vessels which do not have buoys to
indicate the location of its anchors to prevent damage to these vessels which
may approach it.
PAGE 182
Zones in time of collisions (3 time zones):
1. all the time up to the moment when the risk of collision may have said
to have begun
--> within this zone, no rule is applicable because none is necessary. Each
vessel is free to direct its course as it deems best with reference to the
movements of the other vessel.
2. the time between the moment when the risk of collission begins and the
moment when it has become a practical necessity.
3. the time between the moment when collission has become a practical
certainty and the moment of actual contact
Effect of fault of privileged vessel during third zone :
If a vessel having a right of way suddenly changes its course during the
third zone, in an effort to avoid an imminent collision due to the fault of another
vessel, such act may be said to be done in extremis, and even if wrong, cannot
create responsibility on the part of said vessel with the right of way. Thus, it has
been held that fault on the part of the sailing vessel at the moment preceding a
collission, that is, during the third division of time, does not absolve the
steamship which has suffered herself and a sailing vessel to get into such
dangerous proximity as to cause inevitable harm and confusion, and a collision
results as a consequence. The steamer having a far greater fault in allowing such
proximity to be brought about is chargeable with all the damages resulting from
the collission; and the act of the sailing vessel having been done in extremis and
even wrong, is not responsible for the result.
(a) Classes and Effects
(1) Fortuitous
Art. 830. If a vessel should collide with another through

fortuitous event or force majeure, each vessel and its cargo shall bear
its own damages.
Art. 832. If, by reasons of a storm or other cause of force

majeure, a vessel which is properly anchored and moored should collide
with those nearby, causing them damages, the injury occasioned shall
be considered as particular average of the vessel run into.
Each to his own damage --> particular damage
(2) Culpable
PAGE 183
Art. 826. If a vessel should collide with another, through the

fault, negligence, or lack of skill of the captain, sailing mate, or any
other member of the complement, the owner of the vessel at fault shall
indemnify the losses and damages suffered, after an expert appraisal.
Where the obligation arises from tortious act and not from contract, both the
owner and the shipagent should be declared liable
Art. 827. If the collision is imputable to both vessels, each one

shall suffer its own damages, and both shall be solidarily responsible
for the losses and damages occasioned to their cargoes.
Defense of due diligence of a good father of a family in the selection and

vigilance of the officers and crew cannot be used to render nugatory the solidary
liability under 827
Under the express provisions of 827, the shipowners cannot successfully

maintain an action against the other for the loss or injury to his vessel
Art.831. If a vessel should be forced by a third vessel to collide

with another, the owner of the third vessel shall indemnify the losses
and damages caused, the captain thereof being civilly liable to said
owner.
(3) Inscrutable Fault
Art. 828. The provisions of the preceding article are applicable to

the case in which it cannot be determined which of the two vessels has
caused the collision.
Relation of Art. 827 to Art. 828

Art. 828 must be considered an extension of Art. 827
The rule of liability under Art. 827 is applicable not only to the case where
both vessels may be shown to be actually blameworthy but also to the case
where it is obvious that only one was at fault but the proof does not show which
Under Arts. 827 and 828, in case of collision between two vessels at sea,
both are solidarily liable for the loss of cargo carried by either to the full extent of
the value thereof, not only in the cse where both vessels may be shown to be
actually blameworthy but also in the case where it is shown that only one ws at
fault but the proof does not show it --> it makes no difference that the
negligence imputable to the two vessels may have differed somewhat in
character and degree and that the negligence of the sunken ship was somewhat
more marked than that of the ther
PAGE 184
The doctrine of last clear chance cannot be raised --> under the express
provisions of Art. 827, under which the evidence disclosing that both vessels are
blameworthy, the owners of neither can successfully maintain an action against
the other for the loss or injury to his vessel
(b) Presumption of loss by collision
Art.833. A vessel which, upon being run into, sinks immediately,

as well as that which, having been obliged to make a port to repair the
damages caused by the collision, is lost during the voyage or is obliged
to be stranded in order to be saved, shall be presumed as lost by
reason of collision.
(c) Liabilities
(1) Shipowner or agent
Art. 837. The civil liability incurred by the shipowners in the

cases prescribed in this section, shall be understood as limited to the
value of the vessel with all its appurtenances and freightage earned
during the voyage.
Art. 838. When the value of the vessel and her appurtenances
should not be sufficient to cover all the liabilities, the indemnity due by
reason of the death or injury of persons shall have preference.
Limited liability : limited to the value of the vessel and the freight earned during
the voyage [provided for in Arts. 587, 590 and 837]
Damages may be recovered to the extent of what may be salvaged or of
the freightage received or of the value of the insurance recoverable
(2) Captain, pilot, others
Art. 829. In the cases above mentioned the civil action of the
owner against the person causing the injury as well as the criminal
liabilities, which may be proper, are reserved.
Art. 834. If the vessels colliding with each other should have
pilots on board discharging their duties at the time of the collision,
their presence shall not exempt the captains from the liabilities they
incur, but the latter shall have the right to be indemnified by the pilots,
without prejudice to the criminal liability which the latter may incur.
PAGE 185
(3) conditions; protests
Art. 835. The action for the recovery of losses and damages
arising from collisions cannot be admitted if a protest or declaration is
not presented within twenty-four hours before the competent authority
of the point where the collision took place, or that of the first port of
arrival of the vessel, if in Philippine territory and to the consul of the
Philippines, if it occurred in a foreign country.
Art. 836. With respect to damages caused to persons or to the

cargo, the absence of a protest may not prejudice the persons
interested who were not on board or were not in a condition to make
known their wishes.
Art. 835 establishes a condition precedent before any action for the recovery of
damages arising from collisions may be admitted --> presentation of a protest or
declaration within 24 hours before the proper authorities [competent authority at
the point where the collision took place or of the first port of arrival of the vessel
or to the consul of the Philippines if it occurred in a foreign country]
The requirement of protest is not necessary with respect to small boats engaged
in river and bay traffic and boats manned by a group of fishermen
Reason for requiring protest: Neccesity of preventing fictitious collisions and

improper indemnities
Summary of cases where protest is required:

1. under 612, when the vessel makes an arrival under stress
2. under 612, 624 and 843, where the vessel is shipwrecked
3. under 624, where the vessel has gone through a hurricane or when the
captain believes that the cargo has suffered damages or averages
4. under 835, in case of maritime collisions
Art. 839. If the collision should take place between Philippine

vessels in foreign waters, of if having taken place in the open seas, and
the vessels should make a foreign port, the Filipino consul in said port
shall hold a summary investigation of the accident, forwarding the
proceedings to the Secretary of the Department of Foreign Affairs for
continuation and conclusion.
4. Shipwrecks
Art. 840. The losses and deteriorations suffered by a vessel and

her cargo by reason of shipwreck or stranding shall be individually for
the account of the owners, the part which may be saved belonging to
them in the same proportion.
PAGE 186
Art. 841. If the wreck or standing should be caused by the

malice,e negligence, or lack of skill of the captain, or because the
vessel put to sea insufficiently repaired and equipped, the ship agent or
the shippers may demand indemnity of the captain for the damages
caused to the vessel or to the cargo by the accident, in accordance with
the provisions contained in Articles 610, 612, 614, and 621.
Shipwreck: Loss of a vessel at sea, either by being swallowed up by the waves,

by running against another vessel or thing at sea, or on coast --> renders the
ship incapable of navigation
Under 841, in case the wreck or stranding is due to the (1) malice,
negligence, or lack of skill of the captain, or (2) because the vessel put to sea
was insufficiently repaired and equipped, the captain shall be liable
Art. 842. The goods saved from the wreck shall be specially
bound for the payment of the expenses of the respective salvage, and
the amount thereof must be paid by the owners of the former before
they are delivered to them, and with preference over any other
obligation if the merchandise should be sold.
Where a ship and its cargo are saved together, the salvage allowance should be
charged against the ship and cargo in proportion of their respective values, the
same as in general averages and neither is liable for the salvage due from the
other
Where a personal action is brought by the salvor against the owner of the
ship, the liability of the latter is limited to such part of the salvage compensation
due for the entire service as is proportionate to the value of the ship
Art. 843. If several vessels sail under convoy, and any of them
should be wrecked, the cargos saved shall be distributed among the
rest in proportion to the amount which each one is able to take.
If any captain should refuse, without sufficient cause, to receive
what may correspond to him, the captain of the wrecked vessels shall
enter a protest against him, before two sea officials, of the losses and
damages resulting therefrom, ratifying the protest within twenty-four
hours after arrival at the first port, and including it in the proceedings
he must institute in accordance with the provisions contained in Article
612.
If it is not possible to transfer to the other vessels the entire
cargo of the vessel wrecked, the goods of the highest value and
smallest volume shall be saved first, the designation thereof to be
made by the captain with the concurrence of the officers of his vessel.
Salvage Law (Act No. 2616)
PAGE 187
Section 1. When in case of shipwreck, the vessel or its cargo shall

be beyond the control of the crew, or shall have been abandoned by
them, and picked up and conveyed to a safe place by other persons, the
latter shall be entitled to a reward for the salvage.
Those who, not being included in the above paragraph, assist in
saving a vessel or its cargo from shipwreck, shall be entitled to a like
reward.
Salvage.-- The compensation allowed to persons by whose voluntary assistance

a ship at sea or her cargo or both have been saved in whole or in part from
impending sea peril, or such property recovered from actual peril or loss, as in
cases of shipwrecks, derelict or recapture -- a service which one person,
renders to the owner of a ship or goods by his own labor, preserving the goods or
ship which the owner or those entrusted with the care of them either abandoned
in distress at sea or are unable to protect and secure ---> a permit is required to
engage in salvage business
Shipwreck-- means a ship which has received injuries rendering her incapable
by navigation; loss of a vessel at sea, either by being swallowed up by the
waves, running against a thing at sea, or on the coast
Derelict.-- A ship or her cargo which is abandoned and deserted at sea by

those who are in charge of it, without any hope of recovering it, or without any
intention of returning it --> if those in charge of the property left it with the
intention of finally leaving it, it is a derelict and the change of their intention and
an attempt to return to it will not change its nature
ex. a schooner which has capsized in the high seas, deserted by her
captain with no intention to return, is a derelict
a vessel, though not abandoned, may be the subject of salvage, if at the
time the services were rendered, there was a probable, threatening danger to
the vessel or its cargo --> if the vessel towed is aided in escaping present or
prospective danger, the service is one of salvage an the towage is merely
incidental
Rights of finder of derelict: The finder who takes possession with the
intention of saving her, gains a right of possession which he can maintain against
the true owners. The owner does not renounce his right of property. This is not
presumed to be intentional, nor does the finder acquire any such right. But the
owner thus abandons temporarily, his right of possession, which is transferred to
the finder who becomes bound to preserve the property with GF and bring it to a
place of safety for the owner's use; in return, he acquires a right to be paid for
his service a reasonable and proper compensation out of the property itself. He
is not bound to part with the possession until he is paid or the property is taken
into the possession of the law preparatory to the amount of salvage being legally
asserted
Elements of a valid salvage:
1. a marine peril
PAGE 188
2. service voluntarily rendered when not required as an existing duty or

from special contract
3. success, in whole or in part, or that the services rendered contributed to
such success
Distinction between salvage and towage is of importance to the crew of

the salvaging ship : if the contract for towage is in fact towage, then the crew
does not have any interest or rights with the renumeration pursuant to the
contract; BUT if the owners of the respective vessels are of a salvage nature, the
crew of the salvaging ship is entitled to salvage, and can look to the salvaged
vessel for its share
Captain towing vessel cannot invoke equity in quasi-contract of towage -->
there is an express provision of law (Art. 2142, NCC) applicable to the
relationship of quasi-contract of towage, where the crew is not entitled to
compensation separate from that of the vessel
Section 2. If the captain of the vessel, or the person acting in his

stead, is present, no one shall take from the sea, or from the shores, or
coast merchandise or effects proceeding from a shipwreck or proceed
to the salvage of the vessel, without the consent of such captain or
person acting in his stead.
Section 3. He who shall save or pick up a vessel or merchandise at

sea, in the absence of the captain of the vessel, owner or a
representative of either of them, they being unknown, shall convey and
deliver such vessel or merchandise, as soon as possible, to the Collector
of Customs, if the port has a collector, and otherwise to the provincial
treasurer or municipal mayor.
Section 4. After the salvage is accomplished, the owner or his

representative shall have the right to the delivery of the vessel or the
things saved, provided that he pays or gives a bond to secure the
expenses and the proper reward.
Salvor has an interest in the property; this is called a lien, but it is not a debt due
by the owner to the salvor for services rendered but upon the principle that the
service creates a property in the thing saved --> he is, to all intents and
purposes, a joint owner and if, the property is lost he must bear his share like
other joint owners.
Payment of compensation where vessel and cargo salvage : where a ship and its
cargo are saved together, the salvage allowance should be charged against the
ship and cargo in the proportion of their respective values, as in the case of
general average
Section 5. The Collector of Customs, provincial treasurer, or

municipal mayor, to whom a salvage is reported, shall order:
a. That the things saved be safeguarded and inventoried.
PAGE 189
b. The sale at public auction of the things saved which may be in

danger of immediate loss or those whose conservation is evidently
prejudicial to the interests of the owner, when no objection is made to
such sale.
c. The advertisement within the 30 days subsequent to the
salvage, in one of the local newspapers or in the nearest newspaper
published, of all the details of the disaster, with a statement of the
mark and number of the effects requesting all interested persons to
make their claims.
Section 6. If, while the vessel or thing saved are at the disposition
of the authorities, the owner or his representative shall claim them,
such authorities shall order their delivery to such owner or his
representative, provided that there is no controversy over their value,
and a bond is given by the owner or his representative to secure the
payment of the expenses and the proper reward. Otherwise, the
delivery shall not be made until the matter is decided by the CFI (RTC)
of the province.
Section 7. No claim being presented in the three months

subsequent to the publication of the advertisements prescribed in
subsection (c) of Section 5, the things saved shall be sold at public
auction, and their proceeds, after deducting the expenses and the
proper reward shall be deposited in the insular treasury. If three years
shall pass without anyone claiming it, one-half of the deposit shall be
adjudged to him who saved the things, and the other half to the insular
government.
Section 8. The following shall have no right to a reward for

salvage or assistance:
a. The crew of the vessel shipwrecked or which was in danger of
shipwreck;
b. He who shall have commenced the salvage in spite of
opposition of the captain or his representative; and
c. He who shall have failed to comply with the provisions of
Section 3.
Section 9. If, during the danger, an agreement is entered into

concerning the amount of the reward for salvage or assistance, its
validity may be impugned because it is excessive, and it may be
required to be reduced to an amount proportionate to the
circumstances.
Kinds of salvage service:

(1) voluntary - wherein the compensation is dependent upon success
(2) rendered under a contract for a pier diem or per horam wage,
payable at all events
Where the compensation is dependent upon success, it may be very much larger
than mere quantum meruit --> as a reward for perilous services
PAGE 190
Such contracts for salvage will not be set aside unless corruptly entered
into, or made under fraudulent representations, a clear mistake or suppression of
important facts, under compulsion or contrary to equity and good conscience
Section 10. In a case coming under the last preceding section, as

well as in the absence of an agreement, the reward for salvage or
assistance shall be fixed by the RTC of the province where the things
salvaged are found, taking into account principally the expenditures
made to recover, or save the vessel or the cargo or both, the zeal
demonstrated, the time employed, the services rendered, the excessive
expenses occasioned, the number of persons who aided, the danger to
which they and their vessels were exposed as well as that which
menaced the things recovered or salvaged, and the value of such things
after deducting the expenses.
Reasons for allowing salvage compensation to salving vessel:

(1) to reward promptness, energy, efficiency, and heroic endeavor in saving life
and property in peril;
(2) to compensate the use and service of the vessel as an indispensable
instrument for the salvage;
(3) recognizes the danger and risk to which the crew and the vessel were
exposed to in saving the ship and property and life.
The amount should be liberal enough to cover the expenses and to give an extra
sum as a reward for the services rendered; should be liberal enough to offer an
inducement to others to render like services in similar emergencies in the future;
BUT should not be so high as to cause vessels in need of assistance to hesitate
because of ruinous cost
"Public policy encourages the hardy and adventurous mariner to engage

in these laborious and sometimes dangerous enterprises, and with a view
to withdraw from him every temptation to embezzlement and dishonesty,
the law allows him, in case he is successful, a liberal compensation."
Section 11. From the proceeds of the sale of the things saved shall
be deducted, first, the expenses of their custody, conversation,
advertisement, and auction, as well as whatever taxes or duties they
should pay for their entrance; then there shall be deducted the expenses
of salvage; and from the net amount remaining shall be taken the
reward for the salvage or assistance which shall not exceed 50% of such
amount remaining.
Section 12. If in the salvage or in the rendering of assistance

different persons shall have intervened the reward shall be divided
between them in proportion to the services which each one may have
rendered, and in case of doubt, in equal parts.
Those who, in order to save persons, shall have been exposed to
the same dangers shall also have a right to participation in the reward.
PAGE 191
No other person has the right to interfere with the salvage of a vessel or cargo if
the salvor is able to effect the salvage with fidelity and vigor --> if their means are
inadequate, they are bound to accept additional assistance if offered
Taking passengers from a sinking ship, without rendering any service in rescuing
the vessel, is not a salvage service, being a duty of humanity and not for reward
--> the Salvage Act, giving salvors of human life a fair share or remuneration
offered to salvors of the vessel, refers to a situation where both lives and property
were simultaneously imperiled and both are rescued at the same time
Section 13. If a vessel or its cargo shall have been assisted or

saved, entirely or partially, by another vessel, the reward for salvage or
for assistance shall be divided between the owner, the captain, and the
remainder of the crew of the latter vessel, so as to give the owner a half,
the captain a fourth, and all the remainder of the crew the other fourth
of the reward, in proportion to their respective salaries, in the absence
of an agreement to the contrary. The expenses of salvage, as well as the
reward for salvage or assistance, shall be a charge on the thing salvaged
or their value.
The owner of the salving vessel has always been considered as entitled to salvage
reward for the use of his vessel in rendering salvage services, though he was not
present when the salvage service was rendered --> remuneration is awarded on
account of the danger to which the service exposes their property and the risk
which they run of loss in suffering their vessels engaged in such perilous
undertaking.
Section 14. This Act shall take effect on its passage. Enacted
2/4/16.
MRR vs Macondray 37 Phil 850
F: On April 6, 1915 the steamer Seward owned by Macondray & Co. left Saigon for the
Philippine Islands, encountering a moderately high sea. Laden with a cargo of rice, the
weight of which, taken with the condition of the sea, caused the vessel to spring a leak,
and her master felt compelled to return to Saigon. At this juncture, the steamship
Hondagua owned by plaintiff, was sighted, whereupon the Seward flew the international
distress signal asking for assistance. The Hondagua changed her course and approached
the Seward. Seward had indicated that it had sprung a leak and wished to be taken in tow.
In response to signals from the Hondagua, the Seward sent her boat to the Hondagua for
a heaving line, by means of which a hawser was passed from the Hondagua to the Seward
and the former, with the latter in tow, then proceeded at half speed towards Saigon.
Shortly afterwards, the Seward signaled that the leak was gaining rapidly. The Hondagua
went full speed ahead, until their arrival at Cape St. James, at the mouth of the Saigon
River. The towing occupied some 4 or 5 hours and covered a distance of 20 to 30 miles.
The court found that the value of the Seward upon her arrival at Cape St. James did
not exceed P 20,000 and that the value of the cargo was approximately P 54,000. The
defendant company had no interest in the cargo, other than that of the carrier, and the
cargo was owned by shippers whose names do not appear of record.
PAGE 192
Plaintiff filed an action in the CFI of Manila, seeking to recover from defendant P
75,000, the alleged value of the salvage service. The CFI ordered the defendant to pay P
4,000 to the plaintiff. Both appealed.
Issues : Is the plaintiff entitled to recover renumeration for saving the cargo as
well as for saving the ship? What is the reasonable compensation which should be
allowed?
Held : There is no question as to the liability of defendant for the service rendered
by plaintiff. Nor is there any dispute over the fact that the service rendered was a
salvage service and renumerable as such. Where a ship and its cargo are saved
together, as a result of services carried on with a view to saving both, the salvage
allowance should be apportioned between the ship and cargo in the proportion of
their respective values, the same as in a case of general average; and neither is
liable for the salvage due from the other. If one who have salved both ship and
cargo brings before the court in his salvage action only the ship, or only the cargo,
he will get judgment only for such amount of reward as the court finds to be due
in respect of the value of that property which is before the court. Not only is the
salvage charge a separate and divisible burden as between ship and cargo, but
also as between portions of the cargo belonging to different owners. There is no
common liability for the amounts due from the ship or other portions of the cargo
when the ship and cargo, or either, are brought into the custody of the court as a
result of a proceeding in rem. The rule of liability must be the same where a
personal action is instituted against the owners of the one or the other. The
personal liability of each must be limited to the portion of the salvage charge
which should be borne by his own property.
If it had been alleged and proved that the ship was unseaworthy when she
put to sea or that the necessity for the salvage service was due to the negligence
of the master, or of the ship's owner, the latter might have been liable, at least
between himself and the shipper, for the entire cost of the service. But when the
claim is put upon the basis of salvage, the fixing of the compensation goes beyond
the limits of a quantum meruit for the work and labor done and involves the
assessment of a bounty. The amount to be allowed is in part determined upon
considerations of equity and public policy; and it is not proper to make the ship or
the ship's owner liable for the whole amount. But where the owner of the cargo
has not been made a party to the action, no recovery can be had in this action in
regard to the service rendered to the cargo.
In fixing the compensation, the ff. circumstances are taken into
consideration: (1) the labor expended by the salvors in rendering the salvage
service; (2) the promptitude, skill and energy displayed in rendering the service
and saving the property; (3) the value of the property employed by the salvors,
and the danger to which such property was exposed; (4) the risk incurred by the
salvors in rescuing the property from the impending peril; (5) the value of the
property salved; and (6) the degree of danger from which the property was
rescued.
In applying these criteria to this case, the ff. circumstances are pertinent :
the Hondagua was delayed in her voyage about nine hours. This delay caused her
to enter Iloilo, the port of destination, in the early hours of the morning instead of
the late afternoon of the previous day; but the unloading of her cargo was not
thereby retarded. Under the charter party contract under which she was
operating, the Hondagua was earning about P 300/day, which was considered
PAGE 193
reasonable compensation for her use, including the services of officers and crew.
The service rendered did not involve any further expenditure of labor on the part
of the salvors, no unusual display of skill and energy and the condition of the sea
was not such as to involve any special risk either to Hondagua or her crew. Finally,
the danger from which the Seward was rescued was real since the ship was
confronted by a serious peril. In determining the amount of the award, the aim
should be to hold out to seafaring men a fair inducement to the performance of
salvage service without fixing a scale of compensation so high as to cause vessels
in need of such services to hesitate and decline to receive them because of the
ruinous cost. That the salvor is entitled, as of bounty, to something more than
mere renumeration for his own work and the risk incurred by him is conceded; but
the interests of commerce should also be considered. Towage is not considered a
salvage service of high order of merit and where the risk is inconsiderable and
other conditions favorable, the compensation to be allowed should be modest in
its amount.
In this case, the sum of P 1,000 is adequate for the service rendered.
Barrios vs Go Thong 7 SCRA 535
F: Plaintiff Barrios was the captain of MV Henry I, a vessel of William Lines, Inc. At
about 8:00 p.m. of May 1, 1958, plaintiff as captain received an SOS or distress signal by
blinkers from the MV Alfredo, owned by the defendant Carlos Go Thong & Co. Answering
the SOS call, the plaintiff as captain of MV Henry, which was then sailing from Dumaguete
City, altered the course of said vessel, and headed towards the MV Don Alfredo, which
plaintiff found to be in trouble, due to engine failure and the loss of her propeller, for
which reason, it was drifting slowly southward from Negros Island towards Borneo in the
open China Sea, at the mercy of a moderate easterly wind. At about 8:25 p.m. on the
same day, May 1, 1958, the MV Henry, under the command of the plaintiff, succeeded in
getting near the MV Don Alfredo -- in fact as near as about 7 meters from the latter ship --
and with the consent and knowledge of the captain and/or master of the MV Don Alfredo,
the plaintiff caused the latter vessel to be tied to, or well-secured and connected with two
lines from the MV Henry; and the latter had the MV Don Alfredo in tow and proceeded
towards the direction of Dumaguete City, as evidenced by a written certificate to this
effect executed by the Master, the Chief Engineer, the Chief Officers, and the Second
Engineer of the MV Don Alfredo, who were then on board the latter ship at the time of the
occurrence. When both vessels were approaching the vicinity of Negros Oriental, the MV
Lux, a sister ship of MV Don Alfredo, was sighted heading towards the two vessels. At the
request and instance of the captain of MV Don Alfredo, the plaintiff caused the tow lines to
be released, thereby also releasing the MV Don Alfredo.
Issue: WON the service rendered by plaintiff constituted salvage or towage, and if
so, WON plaintiff may recover from defendant compensation for such service.
Held :(1) According to Sec. 1 of the Salvage Law, those who assist in saving a
vessel or its cargo from shipwreck, shall be entitled to a reward (salvage).
"Salvage" has been defined as the compensation allowed to persons by whose
assistance a ship or her cargo has been saved, in whole or in part, form impending
peril on the sea, or in recovering such property from actual loss, as in case of
shipwreck, derelict or recapture. There was no marine peril in this case. Although
defendant's vessel was in a helpless condition due to engine failure, it did not drift
too far from the place where it was. As found by the LC, the weather was fair,
PAGE 194
clear and good. The waves were small and too slight, so much so, that there were
only ripples on the sea, which was quite smooth. During the towing of the vessel
on the same night, there was moonlight. Although said vessel was drifting
towards the open sea, there was no danger of its foundering or being stranded, as
it was far from any island or rocks. In case of danger of stranding, its anchor
could be released, to prevent such occurrence. There was no danger that
defendant's vessel would sink, in view of the smoothness of the sea and the
fairness of the weather. That there was absence of danger is shown by the fact
that said vessel or its crew did not even find it necessary to lower its launch and
two motor boats, in order to evacuate its passengers no were the cargo in danger
of perishing. All that the vessel's crew members could no do was to move the
vessel on its own power. That did not make the vessel a quasi-derelict,
considering that even before the plaintiff-appellant extended the help to the
distressed ship, a sister vessel was known to be on its way to succor it.
(2) But plaintiff's service can be considered as a quasi- contract of towage.
In consenting to plaintiff's offer to tow the vessel, the defendant through its
captain, thereby impliedly entered into a juridical relation of towage with the
owner of the MV Henry. If the contract thus created is one for towage, then only
the owner of the towing vessel , to the exclusion of the crew of the said vessel,
may be entitled to renumeration. And as the vessel-owner, William Lines, had
expressly waived its claim for compensation for the towage service rendered to
defendant, it is clear that plaintiff, whose right if at all depends upon and not
separate from the interest, is not entitled to payment for such towage services.
Neither may the plaintiff captain invoke equity in support of his claim for
compensation against defendant. There being an express provision of law (Art.
2142, NCC) applicable to the relationship created in this case, that is, that of a
quasi-contract of towage where the crew is not entitled to compensation separate
from that of the vessel, there is no occasion to resort to equitable considerations.
E. SPECIAL CONTRACTS OF MARITIME COMMERCE
1. Charter Parties
a. Definition; as common carrier
A charter party is a contract by virtue of which the owner or agent of a

vessel binds himself to transport merchandise or persons for a fixed price. It is a
contract by which the owner or agent of the vessel leases for a certain price the
whole or a portion of the vessel for the transportation of goods or persons from
one port to another.
Towage is not a charter party; instead it is a contract for the hire of
services by virtue of which a vessel is engaged to tow another vessel from one
port to another for a consideration
Planters Products vs CA G.R. 101503 (Sept. 15, 1993)
PAGE 195
F: Planters purchased urea fertilizer from Mitsubishi,New York. The fertilizer was
shipped on MV Sun Plum, which is owned by KKKK, from Alaska to San Fernando, La
Union. A time charter party was entered into between Mitsubishi as shipper/charterer
and KKKK as shipowner. Upon arrival in the port, PPI unloaded the cargo. It took PPI 11
days to unload the cargo. PPI hired a marine and cargo surveyor to determine if there
was any shortage. A shortage and contamination of the fertilizer was discovered. PPI
sent a claim letter to SSA, the resident agent of KKKK for the amount of the loss. An
action for damages was filed. SSA contended that the provisions on CC do not apply to
them because they have become private carriers by reason of the charter-party. The TC
awarded damages. The CA reversed.
Issue : Does a charter party between a shipowner and a charterer transform a CC

into a private one as to negate the civil law presumption of negligence in case of
loss or damage to its cargo? NO.
Held : A charter-party is a contract by which an entire ship, or some principal

part thereof, is let by the owner to another person for a specified time or use.
There are 2 kinds : (1) contract of affreightment which involves the use of
shipping space or vessels leased by the owner in part or as a whole, to carry
goods for others; and (2) charter by demise or bareboat charter where the whole
vessel is let to the charterer with a transfer to him of its entire command and
possession and consequent control over its navigation, including the master and
the crew, who are his servants.
It is not disputed that the carrier operates as a CC in the ordinary course of
business. When PPI chartered the vessel, the ship captain, its officers and crew
were under the employ of the shipowner and therefore continued to be under its
direct supervision and control. Thus it continued to be a public carrier.
It is therefore imperative that a public carrier shall remain as such,
notwithstanding the charter of the whole or portion of a vessel, provided the
charter is limited to the ship only, as in the case of a time-charter or a voyage-
charter. It is only when the charter includes both the vessel and the crew, as in
a bareboat or demise that a CC becomes private, insofar as such particular
voyage is concerned.
Issue : WON the carrier is liable for damages. NO.
Held : The presumption of negligence on the part of respondent carrier has been
overcome by the showing of extraordinary zeal and assiduity exercised by the
carrier in the care of the cargo. On the other hand, no proof was adduced by the
petitioner showing that the carrier was remiss in the exercise of due diligence in
order to minimize the loss or damage to the goods it carried.
b. Kinds
Classes of charter party:
(1) as to extent of vessel hired

(a) total
PAGE 196
(b) partial - the charterer does not as a rule acquire the right to fix
the date when the vessel should depart, unless such right is expressly granted in
the contract
(2) as to time
(a) until a fixed day or for a determined number of days or month
(b) for a voyage
(3) as to freightage
(a) for a fixed amount for the whole cargo
(b) for a fixed rate per ton
(c) for so much per month
Maritime Agencies vs CA 187 SCRA 346
F: Transcontinental Fertilizer Co. of London chartered from Hongkong Island

Shipping Co. the motor vessel Hongkong Island for the shipment of bagged urea from
Odessa, USSR to the Philippines. The parties signed a Uniform General Charter dated
August 1979. The consignee was Atlas Fertilizer Co. while the insurer was the Union
Insurance Society of Canton. Maritime Agencies was appointed as the charterer's agent
and Macondray as the owner's agent. The vessel arrived in Manila to unload part of its
cargo and then proceeded to Cebu to discharge the rest of the cargo. The consignee
filed a formal claim for shortlanded bags. The consignee also filed a claim against Viva
Customs Brokerage for the unrecovered spillage. These claims having been rejected, the
consignee went to Union, which paid the total indemnity of P 113,123.86 pursuant to the
insurance contract. As subrogee of the consignee, Union filed a claim for reimbursement
against Hongkong Island Co., Maritime Agencies and/or Viva Customs Brokerage. Viva
was dropped from the complaint while Macondray Co. was impleaded.
The RTC found Hongkong Island liable for the shortlanded bags while Maritime
Agencies was held liable for the spillage during discharge. The RTC ordered Hongkong
Island and its local agent Macondray to pay P 87,000+ and Maritime Agencies to pay P
36,000+ to Union Insurance. CA exempted Hongkong Island and Macondray exempt
from liability. Thus this petition. Maritime pleads non-liability on the ground that it was
only the charterer's agent and should not answer for whatever responsibility might have
attached to the principal. Union asked that Maritime should be made solidarily liable
since its principal had not been impleaded.
Held : There are 3 general categories of charters:

1. Demise or bareboat charter - involves the transfer of full possession and
control of the vessel for the period covered by the contract, the charterer
obtaining the right to use the vessel and carry whatever cargo it chooses, while
manning and supplying the ship as well
2. Time Charter - contract to use a vessel for a particular period of time,
the charterer obtaining the right to direct the movements of the vessel during
the chartering period, although the owner retains possession and control
3. Voyage Charter - contract for the hire of a vessel for one or a series of
voyages usually for the purpose of transporting goods for the charterer; the
voyage charter is a contract of affreightment and is considered a private carriage
- being a private carriage, the parties may freely contract respecting
liability for damages to the goods and other matters; responsibility for the cargo
loss falls on the one who agreed to perform the duty involved in accordance with
the terms of the voyage charter
PAGE 197
This case involves a voyage charter.In the present case, the charterer was
responsible for loading, stowage and discharging at the ports visited, while the
owner was responsible for the care of the cargo. Par. 2 of the Uniform General
Charter provided that the owner shall be responsible for loss or damage or delay
in the delivery of goods caused by improper or negligent stowage of the goods or
by personal want of due diligence in making the vessel seaworthy and properly
manned. However, the owner shall not be liable for any other cause, even from
the neglect of the captain or the crew or any other person employed by the
owner on board, or for any unseaworthiness of the vessel on loading or
commencement of the voyage.
In cases at bar, the TC found that there were shortlanded bags, which
could only mean that they were damaged or lost on board the vessel before
unloading of the shipment. The entire cargo was covered by a clean B/L. As the
bags were in good order when received by the vessel, the presumption is that
they were damaged or lost during the voyage as a result of their negligent
improper storage. The shipowner should be held liable.
The filing of the claim must be within one year, in accordance with the
COGSA. Otherwise, the carrier and the ship shall be discharged from liability.
The one year period should commence from Oct. 20, 1979, the date when the
last item was delivered to the consignee. Union filed the complaint against
Hongkong within the one year period but tardily against Macondray. The action
has prescribed with respect Macondray but not against the principal, Hongkong
Island.
As regards the goods damaged or lost during unloading, the charterer is
liable thereof, having assumed this activity under the charter party free of
expense to the vessel. The difficulty is that Transcontinental has not been
impleaded and so is beyond the court's jurisdiction. The liability imposed on it
cannot be borne by Maritime which is a mere agent and is not answerable for the
injury caused by its principal (unless the principal is undisclosed).
In this case, the charterer did not represent itself as a carrier and indeed
assumed responsibility only for the unloading of the cargo. Maritime acted in
representation of the charterer and not of the vessel. As a mere charterer's
agent, it cannot be held solidarily liable with Transcontinental for the
losses/damages to the cargo outside the custody of the vessel. Transcontinental
was disclosed as the charterer's principal and Maritime only acted within the
scope of its authority.
The TC's findings were upheld except for some modifications. The liability
of Macondray can no longer be enforced because of prescription. Maritima
cannot be held liable for the principal's acts.
c. Forms and Effects
Art. 652. A charter party must be drawn in duplicate and signed

by the contracting parties, and when either does not know how or is
not able to do so, by two witnesses at his request.
The charter party shall include, besides the condition stipulated,
the following circumstances:
1. The kind, name, and tonnage of the vessel.
2. Her flag and port or registry.
PAGE 198
3. The name, surname, and domicile of the captain.

4. The name, surname, and domicile of the agent, if the latter
should make the charter party.
5. The name, surname, and domicile of the charterer, and if he
states that he is acting by commission, that of the person for whose
account he makes the contract.
6. The port of loading and unloading.
7. The capacity, number of tons or weight, or measure which
they respectively bind themselves to load and transport, or whether it
is the total cargo.
8. The freightage to be paid, stating whether it is to be a
fixed amount for the voyage or so much per month, or for the space to
be occupied, or for the weight or measure of the goods of which the
cargo consists, or in any other manner whatsoever agreed upon.
9. The amount of primage to be paid the captain.
10. The days agreed upon for loading and unloading.
11. The lay days and extra lay days to be allowed and the
rate of demurrage.
Art. 653. If the freight should be received without the charter

party having been signed, the contract shall be understood as executed
in accordance with what appears in the bill of lading, which shall be the
only instrument with regard to the freight to determine the rights and
obligations of the ship agent, of the captain, and of the charterer.
If the cargo is received without a charter party, the B/L shall be considered the
contract of the parties
Q: If there is no charter party and B/L, would there be a valid contract?

A: Taking Art. 653 literally, the answer is no. However, if we take into account
the fact that delivery of the cargo does not constitute the making of a contract
but rather the partial performance thereof, the mere fact of delivery and receipt
of such cargo, the GF and mutual consent with which they have been made,
should be a better substitute for the charter party than is the B/L which is
nothing more than the proof of such delivery.
Primage.-- Formerly, a small allowance or compensation payable to the master

and marines of a ship; to the former for the use of his cables and ropes to
discharge the goods of the merchant; to the latter for lading and unlading in any
port of haven
Primage, at present, it is no longer a gratuity to the master, unless
especially stipulated; but it belongs to owners or freighters and is nothing but an
increase of the freight rate.
Demurrage.-- Sum which is fixed by the contract of carriage, or which is

allowed, as remuneration to the owner of a ship for the detention of his vessel
beyond the number of days allowed by the charter party for loading and
PAGE 199
unloading or for sailing; it is an extended freight or reward to the vessel in

compensation for the earnings she is improperly caused to lose
Lay days.-- Days allowed to charter parties for loading and unloading the cargo
Art. 654. The charter parties executed with the intervention of a

broker, who certifies to the authenticity of the signatures of the
contracting parties made in his presence, shall be full evidence in court;
and, if they should be conflicting, that which agrees with the one which
the broker must keep in his registry, if kept in accordance with law,
shall govern.
The contracts shall also be admitted as evidence, even though a
broker has not taken part therein, if the contracting parties
acknowledge the signatures of the same as their own.
Should no broker have taken part in the charter party and the
signatures be not acknowledged, doubts shall be decided by what is
provided for in the bill of lading, and, in the absence thereof, by the
proofs submitted by the parties.
Art. 655. Charter parties executed by the captain in the absence

of the ship agent shall be valid and effective, even though in executing
them he should have acted in violation of the orders and instructions of
the agent or shipowner; but the latter shall have a right of action
against the captain to recover damages.
Art. 656. If in the charter party the time in which the loading and
unloading are to take place is not stated, the usages of the port where
these acts take place shall be observed. After the stipulated or
customary period has passed, and should there not be in the freight
contract an express provision fixing the indemnification for the delay,
the captain shall be entitled to demand demurrage for the lay days and
extra lay days which may have elapsed in loading and unloading.
Art. 657. If during the voyage the vessel should be rendered

unseaworthy the captain shall be obliged to charter at his expense
another one in good condition, to carry the cargo to its destination, for
which purpose he shall be obliged to look for a vessel not only at the
port of arrival but also in the neighboring ports within a distance of 150
kilometers.
If the captain, through indolence or malice, should not furnish a
vessel to take the cargo to its destination, the shippers, after
requesting the captain to charter a vessel within an unextendible
period, may charter one and apply to the judicial authority for the
summary approval of the charter party which they may have made.
PAGE 200
The same authority shall judicially compel the captain to carry out
for his account and under his responsibility the charter made by the
shippers.
If the captain, notwithstanding his diligence, should not find a
vessel to charter, he shall deposit the cargo at the disposal of the
shippers, to whom he shall communicate the facts on the first
opportunity, the freight being adjusted in such cases by the distance
covered by the vessel, with no right to any indemnification whatsoever.
Articles 659 to 664 : Some of the goods being transported may : (1) be sold by
the captain to pay for necessary repairs; (2) be jettisoned for the common safety;
(3) be lost by reason of shipwreck or stranding; (4) be seized by pirates or
enemies; (5) suffer deteriorations or dimunitions; or (6) increase by natural cause
in weight or size
** Goods that shall not pay freightage:

(1) Art. 660 - goods jettisoned for the common safety but the amount of
freightage that should have been paid shall be considered as a general average
and shall be computed in proportion to the distance covered when they were
jettisoned
(2) Art. 661 - merchandise lost by reason of shipwreck or stranding; if freight had
been paid in advance, it shall be returned
(3) Art. 661 - goods seized by pirates or enemies; freight paid in advance shall be
returned
** Goods required to pay freightage:
(1) Art. 659 - goods sold by the captain to pay for the necessary repairs to the
hull, machinery or equipment or for unavoidable and urgent needs --> but the
freight may not be required to be paid in full
(2) Art. 663 - goods which suffer deterioration or dimunition on account of (a)
inherent defects or bad quality of packing, or of (b) fortuitous event
(3) Art. 644 - goods that increase in size or weight by natural cause
d. Rights and Obligations of Shipowners
Art. 669. The shipowner of the captain shall observe in charter

parties the capacity of the vessel or that expressly designated in its
registry, a difference greater than 2 per cent between that registered
and her true capacity not being permissible.
If the shipowner or the captain should contract to carry a greater
amount of cargo than the vessel can carry, in view of her tonnage, they
shall indemnify the shippers whose contracts they do not fulfill for the
losses they may have caused them by reason of their default, according
to the cases, viz:
If the vessel has been chartered by one shipper only, and there
should appear to be an error or fraud in her capacity, and the charterer
should not wish to rescind the contract, when he has a right to do so,
the freightage shall be reduced in proportion to the cargo the vessel
cannot receive, the person from whom the vessel is chartered being
PAGE 201
furthermore obliged to indemnify the charterer for the losses he may

have caused him.
If, on the contrary, there should be several charter parties, and
by reason of the want of space all the cargo contracted for cannot be
received, and none of the charterers desires to rescind the contract,
preference shall be given to the person who has already loaded and
arranged the cargo in the vessel, and the rest shall take the place
corresponding to them in the order of the dates of their contracts.
Should there be no priority, the charterers may load, if they wish,
in proportion to the weight or space they may have engaged, and the
person from whom the vessel was chartered shall be obliged to
indemnify them for losses and damages.
Art. 670. If the person from whom the vessel is chartered, after
receiving a part of the cargo, should not find sufficient to make up at
least three fifths of the amount the vessel can hold, at the price he may
have fixed, he may substitute for that transportation another vessel
inspected and declared suitable for the same voyage, the expenses of
transfer, and the increase in the price of the charter, should there be
any, being for his account. Should he not be able to make this change,
the voyage shall be undertaken at the time agreed upon; and should no
time have been fixed, within fifteen days from the time the loading
began, should nothing to the contrary have been stipulated.
If the owner of the part of the cargo already loaded should
procure some more at the same price and under similar or propor-
tionate conditions to those accepted for the freight received, the
person from whom the vessel is chartered or the captain may not
refuse to accept the rest of the cargo; and should he do so, the
charterer shall have a right to demand that the vessel put to sea with
the cargo she may have on board.
Art. 671. After three-fifths of the vessel is loaded, the person

from whom she is chartered may not, without the consent of the
charterers or shippers, substitute the vessel designated in the charter
party with another one, under the penalty of making himself thereby
liable for all the losses and damages occurring during the voyage to the
cargo of those who did not consent to the change.
Art. 672. If the vessel has been chartered in whole, the captain
may not, without the consent of the person chartering her, accept
cargo from any other person; and should he do so, said charterer may
oblige him to unload it and to indemnify him for the losses suffered
thereby.
Art. 673. The person from whom the vessel is chartered shall be
liable for all the losses caused the charterer by reason of the voluntary
delay of the captain in putting to sea, according to the rules prescribed,
PAGE 202
provided he has been requested to put to sea at the proper time

through a notary or judicially.
Art. 674. If the charterer should carry to the vessel more cargo
than that contracted for, the excess may be admitted in accordance
with the price stipulated in the contract if it can be well stowed without
incurring the other shippers, but if in order to stow said cargo it should
be necessary to stow it in such manner as to throw the vessel out of
trim the captain must refuse it or unload it at the expense of its owner.
The captain may likewise, before leaving the port, unload the
merchandise clandestinely placed on board, or transport it, it he can do
so and keep the vessel in trim, demanding by way of freightage the
highest price which may have been stipulated for said voyage.
Art. 675. If the vessel has been chartered to receive the cargo in
another port, the captain shall appear before the consignee designated
in the charter party, and should the latter not deliver the cargo to him,
he shall inform the charterer and await his instructions, the lay days
agreed upon, or those allowed by custom in the port, beginning to run
in the meantime, unless there is an express agreement to the contrary.
Should the captain not receive an answer within the time
necessary therefore, he shall make efforts to find cargo; and should he
not find any after the lay days and extra lay days have elapsed, he shall
make a protest and return to the port where the charter was made.
The charterer shall pay the freightage in full, discounting that
which may have been earned on the merchandise which may have been
carried on the voyage out or on the return trip, if carried for the
account of third persons.
The same shall be done if a vessel, having been chartered for the
round trip, should not be given any cargo for her return.
Art. 676. The captain shall lose the freightage and shall
indemnify the charterers if the latter should prove, even against the
certificate of inspection, if one has been made at the port of departure,
that the vessel was not in a condition to navigate at the time of
receiving the cargo.
Art. 677. The charter party shall subsist if the captain should not
have any instructions from the charterer, and a declaration of war or a
blockade should take place during the voyage.
In such case the captain must proceed to the nearest safe and
neutral port, requesting and awaiting orders from the shipper; and the
expenses and salaries accruing during the detention shall be paid as
general average.
If, by orders of the shipper, the cargo should be discharged at the
port of arrival, the freightage for the voyage out shall be paid in full.
PAGE 203
Art. 678. If the time necessary, in the opinion of the judge or

court, to receive orders from the shippers should have elapsed without
the captain having received any instructions, the cargo shall be
deposited, and it shall be liable for the payment of the freightage and
expenses incurred by reason of the delay, which shall be paid from the
proceeds of the part first sold.
Obligations of shipowner:
1. Art. 669 - to observe in the charter parties, the capacity of the vessel, and to
indemnify the shippers whose contracts are not fulfilled for the losses they may
have suffered by the failure of the shipowner to observe the capacity of the
vessel
2. Art. 670 - to undertake a voyage at the time agreed upon or within 15 days
from loading if no time is stipulated, even if the shipowner should not find cargo
sufficient to make up at least 3/5 of the amount which the vessel may hold,
where he fails to exercise his right to change vessel
3. Art. 670 - where the shipowner should not find cargo sufficient to make up at
least 3/5 of the amount which the vessel may hold, to accept other cargo
procured by the owner of the freight already loaded under the same price and
conditions
4. Art. 671- not to change the vessel after 3/5 of the vessel has been loaded,
without the consent of the charterers or shippers
5. Art. 672 - if the vessel has been chartered in whole, not to accept cargo from
any other person without the consent of the charterer
6. Art. 673 - to answer for losses arising from delay in putting to sea
7. Art. 676 - to have the vessel in a condition to navigate at the time of
receiving the cargo
8. Art. 677 - in case of declaration of war or blockade during the voyage, where
the captain has not received any instructions from the charterer, for the captain
to proceed to the nearest safe and neutral port, requesting and awaiting orders
from the shippers
Rights of Shipowner:
1. Art. 670 - where the cargo is not sufficient to make up at least 3/5 of the
amount which the vessel may hold, he may substitute anohter vessel inspected
and declared suitable for the voyage --> expenses of transfer and increase in
price of the charter shall be paid by him
2. Art. 674 - to collect the freight in accordance with the price stipulated for
cargo in excess of that agreed upon is such excess can be properly stowed 3. Art.
674 - to refuse and unload at the expense of the owner excess cargo that cannot
be properly stowed
4. Art. 674 - to unload merchandise clandestinely placed on board, or to
transport them if he can do so, demanding the highest freightage
5. Art. 675- to find freight to take place of freight not received, if the vessel has
been chartered to receive cargo in another port, after he receives no cargo from
the consignee and after he receives no answer from the charterer
PAGE 204
6. Art. 675 - to receive freight in full, discounting that which may have been
earned on the merchandise carried as substitute
7. Art. 677 - to have the charter party subsist notwithstanding the declaration of
war or a blockade during the voyage, and to receive in such cases, the freightage
in full where the shipper orders that the cargo should be discharged at the port
of arrival
e. Obligations of charterers
Art. 679. The charterer of an entire vessel may subcharter the

whole or part thereof for the amounts he may consider most
convenient, the captain not being allowed to refuse to receive on board
the cargo delivered by the second charterers, provided the conditions
of the first charter are not changed, and that the price agreed upon is
paid in full, even though the full cargo is not loaded, with the limitation
established in the next article.
Art. 680. A charterer who does not complete the full cargo he
bound himself to ship shall pay the freightage of the amount he fails to
load, if the captain does not take other freight to complete the load of
the vessel, in which case he shall pay the first charterer the difference
Art. 681. If the charterer should ship goods different from those
indicated at the time of executing the charter party, without the
knowledge of the person from whom the vessel was chartered or of the
captain, and should thereby give rise to losses, by reason of
confiscation, embargo, detention, or other causes, to the person from
whom the vessel was chartered or to the shippers, the person giving
rise thereto shall be liable with the value of his shipment and
furthermore with his property, for the full indemnity to all those injured
through his fault.
Art. 682. If the merchandise should have been shipped for the
purpose of illicit commerce, and was taken on board with the
knowledge of the person from whom the vessel was chartered or of the
captain, the latter, jointly with the owner of the merchandise, shall be
liable for all the losses which may be caused to other shippers, and
even though it may have been agreed, they cannot demand any
indemnity whatsoever from the charterer for the damage caused the
vessel.
Art. 683. In case of making a port to repair the hull, machinery,

or equipment of the vessel, the shippers must wait until the vessel is
repaired, being permitted to unload her at their own expense should
PAGE 205
they deem it advisable. If, for the benefit of cargo which runs the
risk of deterioration, the shippers or the court, or the consul, or the
competent authority in a foreign land should order the merchandise to
be unloaded, the expenses of unloading and reloading shall be for the
account of the former.
Art. 684. If the charterer, without the occurrence of any

of the cases of force majeure mentioned in the foregoing article, should
wish to unload his merchandise before arriving at the port of
destination, he shall pay the full freightage, the expenses of the arrival
made at his request, and the losses and damages caused the other
shippers, should there be any.
Art. 685. In charters for transportation of general freight any of

the shippers may unload the merchandise before the beginning of the
voyage, paying one half the freightage, the expense of stowing and
restoring the cargo, and any other damage which may be caused the
other shippers.
Art. 686. After the vessel has been unloaded and the cargo
placed at the disposal of the consignee, the latter must immediately
pay the captain the freightage due and the other expenses for which
the cargo may be liable.
The primage must be paid in the same proportion and at the same
time as the freightage, all the changes and modifications to which the
latter should be subject also governing the former.
Art. 687. The charterers and shippers may not abandon

merchandise damaged on account of its own inherent defect or of
fortuitous event for the payment of the freightage and other expenses.
The abandonment shall be proper, however, if the cargo should
consist of liquids which may have leaked out, there remaining in the
containers not more than one-fourth of their contents.
Obligations of the charterer:

1. Art. 680 - to pay the freight in full even if the charterer does not complete the
full cargo he bound himself to ship
2. Art. 681- to answer with the value of his shipment and other property for the
losses suffered by the shipowner, captain or other shippers arising from
confiscation, embargo, detention, or other causes, where the charterer loads
goods different from those stated at the time of the execution of the charter
party
3. Art. 682 - to be jointly liable with the captain for losses which may be caused
to the other shippers where the charterer ships goods for illicit commerce with
the knowledge of the shipowner or captain
PAGE 206
4. Art. 682 - in case of making a port to repair the hull, machinery or equipment
of the vessel, to wait until the vessel is repaired or to pay for the expenses of
unloading should the charterer choose to unload
5. Art. 684 - where the charterer unloads goods before arriving at port of
destination without any force majeure occurring, to pay (1) expenses of arrival,
(2) full freight and (3) for the damages and losses caused to other shippers, if
any
6. Art. 685 - where the charterer unloads before the beginning of the voyage, (1)
to pay 1/2 of the freight, (2) to pay for the expenses of stowing and restowing
the cargo, (3) to pay any other damage which he may have caused other
shippers
7. Art. 686 - to pay for freight, other expenses and the primage after the vessel
has been unloaded and the cargo placed at the disposal of the consignee
8. Art. 687 - not to abandon merchandise damaged on account of inherent
defect or fortuitous event, for the payment of the freight and other expenses
f. Rescission
Art. 688. A charter party may be annulled at the request of the

charterer:
1. If before loading the vessel he should abandon the charter,
paying half the freightage agreed upon.
2. If the capacity of the vessel should not agree with that stated
in the certificate of tonnage, or if there be an error in the statement of
the flag under which she sails.
3. If the vessel should not be placed at the disposal of the
charterer within the period and in the manner agreed upon.
4. If, after the vessel has put to sea, she should return to the port
of departure, on account of risk from pirates, enemies, or bad weather,
and the shippers should agree to unload her.
In the second and third cases the person from whom the vessel
was chartered shall indemnify the charterer for the losses he may
suffer.
In the fourth case the person from whom the vessel was chartered
shall have a right to the freightage in full for the voyage out.
If the charter should have been made by the month, the
charterers shall pay the full freightage for one month, if the voyage is
for a port in the same waters; and two months, if for a port in different
waters.
(From one port to another of the Peninsula (Philippines) and
adjacent islands, the freightage for one month only shall be paid.)
5. If a vessel should make a port during the voyage in order to
make urgent repairs and the charterers should prefer to dispose of the
merchandise.
When the delay does not exceed thirty days, the shippers shall
pay the full freightage for the voyage out.
Should the delay exceed thirty days, they shall pay the freight in
proportion to the distance covered by the vessel.
PAGE 207
Art. 689. At the request of the person from whom the vessel is
chartered the charter party may be rescinded:
1. If the charterer at the termination of the extra lay days does
not place the cargo alongside the vessel.
In such case the charterer must pay half of the freightage
stipulated besides the demurrage due for the lay days and extra lay
days.
2. If the person from whom the vessel was chartered should sell
it before the charterer has begun to load it and the purchaser should
load it for his own account.
In such case the vendor shall indemnify the charterer for the
losses he may suffer.
If the new owner of the vessel should not load it for his own
account the charter party shall be respected, and the vendor shall
indemnify the purchaser if the former did not inform him of the charter
pending at the time of making the sale.
Art. 690. The charter party shall be rescinded and all action
arising therefrom shall be extinguished if, before the vessel puts to sea
from the port of departure, any of the following cases should occur:
1. A declaration of war or interdiction of commerce with the
power to whose ports the vessel was to make its voyage.
2. A condition of blockage of the port of destination of said
vessel, or the breaking out of an epidemic after the contract was
executed.
3. The prohibition to receive at the said port the merchandise
constituting the cargo of the vessel.
4. An indefinite detention, by reason of an embargo of the vessel
by order of the government, or for any other reason independent of the
will of the ship agent.
5. The inability of the vessel to navigate, without fault of the
captain or ship agent.
The unloading shall be made for the account of the charterer.
Art. 691. If the vessel cannot put to sea on account of the closing
of the port of departure, or any other temporary cause, the charter
shall remain in force without right of either of the contracting parties to
claim damages.
The subsistence and wages of the crew shall be considered as
general average.
During the interruption the charterer may, at the proper timer
and for his own account, unload and load the merchandise, paying
demurrage if the reloading should continue after the cause for the
detention has ceased.
PAGE 208
Art. 692. A charter party shall be partially rescinded, unless there

is an agreement to the contrary, and the captain shall only be entitled
to the freightage for the voyage out, if, by reason of a declaration of
war, closing of ports, or interdiction of commercial relations during the
voyage, the vessel should make the port designated for such a case in
the instructions of the charterer.
2. Loans on Bottomry and Respondentia
a. Loan on Bottomry, defined
A contract in the nature of a mortgage, by which the owner of the ship

borrows money for the use, equipment and repair of the vessel and for a definite
term, and pledges the ship (or the keel or bottom of the ship) as a security for its
repayment, with maritime or extraordinary interest on account of the maritime
risks to be borne by the lender, it being stipulated that if the ship be lost in the
course of the specific voyage or during the limited time, by any of the perils
enumerated in the contract, the lender shall also lose his money.
b. Loan on Respondentia, defined
One made on the goods laden on board the ship, and which are to be sold
or exchanged in the course of the voyage, the borrower's personal responsibility
being deemed the principal security for the performance of the contract, which is
therefore called respondentia. The lender must be paid his principal and
interest, thought the ship perishes, provided that the goods are saved.
c. Character of Loan
Art. 719. A loan in which, under any condition whatever, the

repayment of the sum loaned and of the premium stipulated depends
upon the safe arrival in port of the goods on which it is made, or of the
price they may receive in case of accident, shall be considered a loan on
bottomry or respondentia.
Real, unilateral, aleatory contract:

1. delivery of the amount loaned is necessary for the perfection of the
contract
2. although there are reciprocal benefits, the contract produces obligations
only for one party, the borrower who must return the amount borrowed plus
premium
3. lender really runs known risks
Distinguished from ordinary loans:
Ordinary loan loan on bottomry and

respondentia
PAGE 209
1. first lender has preference last lender has preference over

over subsequent lenders previous ones
2. must be paid absolutely loan is required to be paid only

upon
at all events, WON thing safe arrival of the thing given as
given as security is lost or security at port of destination
destroyed
3. subject to Usury Law no limit as to rate of interest in

view of diff. classes and various
risks in a maritime voyage
Marine insurance vs Bottomry and Respondentia Loans:
The borrower is in effect indemnified for his loss, at least, to the extent of the
loan --> in case of loss of the thing given as security, the borrower is under no
obligation to pay the loan
Marine insurance bottomry/respondentia loans

1. indemnity is paid after the indemnity is paid in advance by
way of loan
loss has occurred
2. when marine peril occurs, when marine peril causes the loss
of the
the obligation of the insurer vessel or cargo, the obligation of
the
becomes absolute borrower to pay is extinguished
3. consensual contract real contract --perfected from the

* governed by Insurance Act moment of delivery of the thing
loaned
When loss does not extinguish loan: (Art. 731)

1. where the loss is caused by inherent defect of the thing
2. where the loss is caused by fault or malice of borrower
3. where loss is caused by barratry on the part of the captain
4. where loss is caused by damage to the vessel as a consequence of its
engaging in contraband
5. where loss arose from having loaded the merchandise on a vessel different
from that designated in the contract, except if change is due to force majeure
d. Forms and Requisites
Art. 720. Loans on bottomry or respondentia may be executed:

1. By means of a public instrument.
PAGE 210
2. By means of a policy signed by the contracting parties and the

broker taking part therein.
3. By means of a private instrument.
Under whichever of these forms the contract is executed, it shall
be entered in the certificate of the registry of the vessel and shall be
recorded in the registry of vessels, without which requisites the credits
of this kind shall not have, with regard to other credits, the preference
which, according to their nature, they should have, although the
obligation shall be valid between the contracting parties.
The contracts made during a voyage shall be governed by the
provisions of Articles 583 and 611, and shall be effective with regard to
third persons from the date of their execution, if they should be
recorded in the registry of vessels of the port of registry of the vessel
before the lapse of eight days following its arrival. If said eight days
should elapse without the record having been made in the registry of
vessels, the contracts made during the voyage of a vessel shall produce
no effect with regard to third persons, except from the day and date of
their inscription.
In order that the policy of the contracts executed in accordance
with No.2 may have binding force, they must conform to the registry of
the broker who took part therein. With respect to those executed in
accordance with No. 3 the acknowledgment of the signature shall be
required.
Contracts which are not reduced in writing shall not give rise to
judicial action.
Effect of registration:
1. the loan shall have, with regard to other credits, the preference which,
according to its nature, it should have (Art. 580 - 8th in the order of preference)
2. effective against third persons from the time of execution/registration
Art. 721. In a contract on bottomry or respondentia the following

must be stated:
1. The kind, name, and registry of the vessel.
2. The name, surname, and domicile of the captain.
3. The names, surnames, and domiciles of the person giving and
the person receiving the loan.
4. The amount of the loan and the premium stipulated.
5. The time for repayment.
6. The goods pledged to secure repayment.
7. The voyage during which the risk is run.
Art. 722. The contracts may be made to order, in which case they
shall be transferable by indorsement, and the indorsee shall acquire all
the rights and shall incur all the risks corresponding to the indorser.
PAGE 211
e. On What Constituted
Art. 724. The loans may be constituted jointly or separately:

1. On the hull of the vessel.
2. On the rigging.
3. On the equipment, provisions, and fuel.
4. On the engine, if the vessel is a steamer.
5. On the merchandise loaded.
If the loan is constituted on the hull of the vessel, the rigging,
equipment and other goods, provisions, fuel, steam engines, and the
freightage earned during the voyage on which the loan is made, shall
also be considered as included in the liability for the loan.
If the loan is made on the cargo, all that which constitutes the
same shall be subject to the repayment; and if on a particular object of
the vessel or of the cargo, only the object concretely and specifically
mentioned shall be liable.
Art. 725. No loans on bottomry may be made on the salaries of

the crew or on the profits expected.
f. Amount
Art. 723. Loans may be made in goods and in merchandise, fixing

their value in order to determine the principal of the loan.
Art. 726. If the lender should prove that he loaned an amount

larger than the value of the object liable for the bottomry loan, on
account of fraudulent measures employed by the borrower, the loan
shall be valid only for the amount at which said object is appraised by
experts.
The surplus principal shall be returned with legal interest for the
entire time required for repayment.
Art. 727. If the full amount of the loan contracted in order to load
the vessel should not be used for the cargo, the balance shall be
returned before clearing.
The same procedure shall be observed with regard to the goods
taken as loan, if they were not loaded.
The excess shall be valid only as an ordinary loan
g. By whom
Art. 728. The loan which the captain takes at the point of
residence of the owners of the vessel shall only affect that part thereof
which belongs to the captain, if the other owners or their agents should
PAGE 212
not have given their express authorization therefor or should not have
taken part in the transaction.
If one or more of the owners should be requested to furnish the
amount necessary to repair or provision the vessel, and they should not
do so within twenty-four hours, the interest which the parties in default
may have in the vessel shall be liable for the loan in the proper
proportion.
Outside of the residence of the owners, the captain may contract
loans in accordance with the provisions of Articles 583 and 611.
Art. 617. The captain may not contract loans on respondentia

secured by the cargo, and should he do so the contract shall be void.
Neither may he borrow money on bottomry for his own
transactions, except on the portion of the vessel he owns, provided no
money has been previously borrowed on the whole vessel, and provided
there does not exist any other kind of lien or obligation chargeable
against the vessel. When he is permitted to do so, he must necessarily
state what interest he has in the vessel.
In case of violation of this article the principal, interest, and costs
shall be charged to the private account of the captain, and the ship
agent may furthermore discharge him.
Art. 611. In order to comply with the obligations mentioned in

the foregoing article, and when he has no funds and does not expect to
receive any from the agent, the captain shall procure the same in the
successive order stated below:
1. By requesting said funds of the consignees of the vessel or the
correspondents of the ship agent.
2. By applying to the consignees of the cargo or to the persons
interested therein. 3. By drawing on the ship agent.
4. By borrowing the amount required by means of a bottomry
loan.
5. By selling a sufficient amount of the cargo to cover the amount
absolutely necessary to repair the vessel and to equip her to pursue the
voyage.
In the two last cases he must apply to the judicial authority of the
port, if in the Philippines and to the Filipino consul, if in a foreign
country; and where there should be none, to the local authority,
proceeding in accordance with the prescriptions of Article 583, and with
the provisions of the law of civil procedure.
Art. 583. If the ship being on a voyage the captain should find it
necessary to contract one or more of the obligations mentioned in Nos.
8 and 9 of Article 580, he shall apply to the judge or court if he is in
Philippine territory, and otherwise to the Filipino consul, should there
be one, and in his absence to the judge or court or to the proper local
authority, presenting the certificate of the registry of the vessel treated
PAGE 213
of in Article 612, and the instruments proving the obligation contract-

ed.
The judge or court, the consul or the local authority as the case
may be in view of the result of the proceedings instituted, shall make a
temporary memorandum in the certificate of their result, in order that
it may be recorded in the registry when the vessel returns to the port
of her registry, or so that it can be admitted as a legal and preferred
obligation in case of sale before the return, by reason of the sale of the
vessel by virtue of a declaration of unseaworthiness.
The lack of this formality shall make the captain personally liable
to the creditors who may be prejudiced through his fault.
h. Effects of Contract
Art. 719. A loan in which, under any condition whatever, the

repayment of the sum loaned and of the premium stipulated depends
upon the safe arrival in port of the goods on which it is made, or of the
price they may receive in case of accident, shall be considered a loan on
bottomry or respondentia.
Art. 729. Should the goods on which money is taken not be

subjected to risk, the contract shall be considered a simple loan, with
the obligation on the part of the borrower to return the principal and
interest at the legal rate, if that agreed upon should not be lower.
Art. 726. If the lender should prove that he loaned an amount

larger than the value of the object liable for the bottomry loan, on
account of fraudulent measures employed by the borrower, the loan
shall be valid only for the amount at which said object is appraised by
experts.
The surplus principal shall be returned with legal interest for the
entire time required for repayment.
Art. 727. If the full amount of the loan contracted in order to load
the vessel should not be used for the cargo, the balance shall be
returned before clearing.
The same procedure shall be observed with regard to the goods
taken as loan, if they were not loaded.
Art. 730. Loans made during the voyage shall have preference
over those made before the clearing of the vessel, and they shall be
graduated in the inverse order of their dates.
The loans for the last voyage shall have preference over prior
ones.
PAGE 214
Should several loans have been made at the same port of arrival
under stress and for the same purpose, all of them shall be paid pro
rata.
F. BILL OF LADING
B/L operates both as a receipt and as a contract; it is a receipt for the goods
shipped and a contract to transport and deliver the same as stipulated
A stipulation that a CC's liability is limited to the value of the goods

appearing in the B/L, unless the owner declares a greater value, is valid and
binding
Bill of Lading vs Charter party

1. Charter party - entire or complete contract
B/L - private receipt which the captain gives to accredit that such goods belong
to such persons
2. Charter party - consensual party, which can be dissolved by means of
indemnity for losses and damages
B/L - real contract; exists only after delivery of the goods to be transported is
made
1. Contents
Art. 706. The captain and the shipper shall have the obligation of
drawing up the bill of lading, in which shall be stated:
1. The name, registry, and tonnage of the vessel.
2. The name of the captain and his domicile.
3. The port of loading and that of unloading.
4. The name of the shipper.
5. The name of the consignee, if the bill of lading is issued in the
name of a specified person.
6. The quantity, quality, number of packages, and marks of the
merchandise.
7. The freightage and the primage stipulated.
The bill of lading may be issued to bearer, to order, or in the
name of a specified person, and must be signed within twenty- four
hours after the cargo has been received on board, the shipper being
entitled to demand the unloading at the expense of the captain should
the latter not sign it, and, in any case, the losses and damages suffered
thereby.
Art.707. Four true copies of the original bill of lading shall be

made, and all of them shall be signed by the captain and by the
shipper. Of these copies the shipper shall keep one and send another
to the consignee; the captain shall take two, one for himself and the
other for the ship agent.
PAGE 215
There may also be drawn as many copies of the bill of lading as

may be considered necessary by the parties; but, when they are issued
to order or to bearer, there shall be stated in all the copies, be they the
first four or the subsequent ones, the destination of each one, stating
whether it is for the ship agent, for the captain, for the shipper, or for
the consignee. If the copy sent to the latter should have a duplicate,
this circumstance and the fact that it is not valid except in default of
the first one must be stated therein.
Art. 713. If before the delivery of the cargo a new bill of lading
should be demanded of the captain, on the allegation that the failure to
present the previous ones is on account of their loss or for any other
just cause, he shall be obliged to issue it, provided that security for the
value of the cargo is given to his satisfaction; but without changing the
consignment and stating therein the circumstances prescribed in the
last paragraph of Article 707, when dealing with the bills of lading
referred to therein, under penalty, should he not do so, of being liable
for said cargo if improperly delivered through his fault.
Art. 714. If before the vessel puts to sea the captain should die or
should cease to hold his position through any cause, the shipper shall
have the right to demand of the new captain the ratification of the first
bills of lading, and the latter must do so, provided that all the copies
previously issued be presented or returned to him, and it should appear
from an examination of the cargo that they are correct.
The expenses arising from the examination of the cargo shall be
for the account of the ship agent, without prejudice to his right of
action against the first captain, if he ceased to be such through his own
fault. Should said examination not be made, it shall be understood that
the new captain accepts the cargo as it appears from the bills of lading.
2. Probative Value
Art. 709. A bill of lading drawn up in accordance with the

provisions of this title shall be proof as between those interested in the
cargo and between the latter and the insurers, evidence to the contrary
being reserved by the latter.
Art. 710. If the bills of lading do not agree, and no change or

erasure appears in any of them, those in the possession of the shipper
or consignee signed by the captain shall be proof against the latter or
ship agent in favor of the consignee or the shipper; and those
possessed by the captain or ship agent signed by the shipper shall be
proof against the shipper or consignee in favor of the captain or ship
agent.
PAGE 216
B/L - proof of the agreement between the parties

Issuance of B/L is merely prima facie evidence of the receipt of the
merchandise by the carrier or his agent; not conclusive evidence
Defective and irregular B/L may be cured by other complementary
documents
G. PASSENGERS ON SEA VOYAGE
1. Nature of Contract
Art. 695. The right to passage, if issued to a specified person,

may not be transferred without the consent of the captain or of the
consignee.
2. Obligations of Passengers
Art. 693. If the passage price has not been agreed upon, the
judge or court shall summarily fix it, after a statement of experts.
Art. 699. If the contract is rescinded, before or after the

commencement of the voyage, the captain shall have a right to claim
payment for what he may have furnished the passengers.
Art. 704. In order to collect the fare and expenses of sustenance,

the captain may retain the goods belonging to the passenger, and in
case of their sale, he shall be given preference over other creditors,
acting in the same way as in the collection of freightage.
Art. 694. Should the passenger not arrive on board at the time
fixed, or should he leave the vessel without permission from the
captain, when the latter is ready to leave the port, the captain may
continue the voyage and demand the full passage price.
Art. 700. In all that pertains to the preservation of order and

discipline on board the vessel, the passengers shall be subject to the
orders of the captain, without any distinction whatsoever.
3. Rights of Passengers
Art. 697. If before beginning the voyage it should be suspended

through the sole fault of the captain or ship agent, the passengers shall
be entitled to have their passage refunded and to recover for losses
and damages; but if the suspension was due to an accidental cause, or
to force majeure, or to any other cause beyond the control of the
PAGE 217
captain or ship agent, the passengers shall only be entitled to the

return of the passage money.
Art. 698. In case a voyage already begun should be interrupted,

the passengers shall be obliged to pay only the fare in proportion to the
distance covered, and without right to recover for losses and damages
if the interruption is due to a fortuitous event or to force majeure, but
with a right to indemnify if the interruption should have been caused by
the captain exclusively. If the interruption should be by reason of the
disability of the vessel, and the passenger should agree to await the
repairs, he may not be required to pay any increased price of passage,
but his living expenses during the delay shall be for his own account.
In case of delay in the departure of the vessel, the passengers
have a right to remain on board and to be furnished food for the
account of the vessel, unless the delay is due to an accidental cause or
to force majeure. If the delay should exceed 99ten days, the
passengers requesting the same shall be entitled to the return of the
fare; and if it is due exclusively to the captain or ship agent they may
furthermore demand indemnity for losses and damages.
A vessel exclusively destined to the transportation of passengers
must take them directly to the port or ports of destination, no matter
what the number of passengers may be, making all the stops indicated
in its itinerary.
In the Philippines, there is no law which requires shipowners to publish a

schedule of the arrivals and departures of their vessels in the different ports of
call, and which holds them liable in damages to passengers for any deviation
from said schedule
Sweet Lines vs CA 121 SCRA 769
F: Private respondents purchased first-class tickets from petitioner in Cebu City.

They were to board petitioner's vessel M/V Sweet Grace, bound for Catbalogan, Western
Samar. Instead of departing at the scheduled hour of about midnight, the vessel sailed
at around 3 A.M. only to be towed back to Cebu due to engine trouble, arriving back at
Cebu at about 4 PM. After repairs, the vessel was only able to leave around 8 A.M. of the
next day.
Instead of docking at Catbalogan, which was the first port of call, the vessel
proceeded directly to Tacloban. Private respondents had no recourse but to disembark
and board a ferryboat to Catbalogan. Hence this suit for damages for breach of contract
of carriage. The TC and CA decided in favor of plaintiffs.
Issue: WON defendant is liable.

Held: The governing provisions are found in the Code of Commerce. Art. 614
provides that a captain who agreed to make a voyage and who fails to fulfill his
undertaking, without being prevented by fortuitous event or force majeure, shall
indemnify all the losses which his failure may cause, without prejudice to
PAGE 218
criminal penalties which may prosper. Art. 698 also provides for the captain's
liability.
The crucial factor then is the existence of a fortuitous event or force
majeure. Without it, the right to damages and indemnity exists against a captain
who fails to fulfill his undertaking or where the interruption has been caused by
the captain exclusively.
As found by both courts below, there was no fortuitous event or force
majeure which prevented the vessel from fulfilling its undertaking of taking
private respondents to Catbalogan. Mechanical defects in the CC are not
considered caso fortuito that exempts the CC from responsibility. Even granting
that the engine failure was a fortuitous event, it accounted only for the delay in
the departure. When the vessel left Cebu, there was no longer any force
majeure that justified the by-passing a port of call. The vessel was completely
repaired when it left Cebu for Samar and Leyte. In fact, after docking at
Tacloban City, the vessel left for Manila to complete its voyage.
Petitioner cannot rely on the conditions in small bold print at the back of
the ticket reading: "The passenger's acceptance of this ticket shall be considered
as an acceptance of the ff. conditions:
3. In case the vessel cannot continue or complete the trip for any cause
whatsoever, the carrier reserves the right to bring the passenger to his/her
destination at the expense of the carrier or to cancel the tickets and refund the
passenger the value of his/her ticket.
11. The sailing schedule of the vessel xxx is subject to change without
previous notice."
Even assuming that those conditions are applicable to case at bar,

petitioner did not comply with the same. It did not cancel the ticket nor did it
refund the value of the tickets to private respondents. Besides, it was not the
vessels' sailing schedule that was involved. The complaint is directed not at the
delayed departure the next day but at the by-passing of Catbalogan, their
destination. Had petitioner notified them previously and offered to bring them to
their destination at its expense or refunded the value of the tickets purchased,
perhaps this controversy would not have arisen.
Furthermore, the conditions relied upon by petitioner cannot prevail over
Arts. 614 and 698 of the Code of Commerce.
The voyage to Catbalogan was interrupted by the captain upon instruction
of management. The interruption was not due to fortuitous event or force
majeure nor to disability of the vessel. Having been caused by the captain upon
instructions of management, the passengers' right to indemnity is evident. The
owner of a vessel and the ship agent shall be civilly liable for the acts of the
captain under Art. 586 of the Code of Commerce.
The passengers are also entitled to moral damages on account of the BF

on the part of the carrier. They did not give notice of the change of schedule.
Knowing fully well that it would take 15 hours to repair the vessel, they informed
the passengers that it would take only a few hours. They did not offer to refund
the tickets of the passengers nor provide them transportation from Bacolod City
to Catbalogan.
PAGE 219
4. Responsibilities of Captain
Art. 701. The convenience or the interest of the passengers shall

not obligate nor empower the captain to stand in-shore or enter places
which may take the vessel out of her course, nor to remain in the ports
he must or is under the necessity of touching for a period longer than
that required by the needs of navigation.
Art. 702. In the absence of an agreement to the contrary, the

subsistence of the passengers during the voyage shall be deemed
included in the price of the passage; but should it be for their account,
the captain shall be under the obligation, in case of necessity, to supply
the food necessary for their sustenance at a reasonable price.
Art. 705. In case of the death of a passenger during the voyage

the captain shall be authorized, with respect to the body, to take the
steps required by the circumstances, and shall carefully take care of the
papers and goods of said passenger which may be on board, complying
with the provisions of case No. 10 of Article 612 with regard to
members of the crew.
Art. 612. The following duties are inherent in the office of

captain:
1. To have on board before starting on a voyage a detailed
inventory of the hull, engines, rigging, tackle, stores, and other
equipments of the vessel; the navigation certificate; the roll of the
persons who make up the crew of the vessel, and the contracts entered
into with the crew; the list of passengers; the health certificate; the
certificate of the registry proving the ownership of the vessel; and all
the obligations which encumber the same up to that date; the charters
or authenticated copies thereof; the invoices or manifest of the cargo,
and the instrument of the expert visit or inspection, should it have been
made at the port of departure.
2. To have a copy of this Code on board.
3. To have three folioed and stamped books, placing at the
beginning of each one a note of the number of folios it contains, signed
by the marine official, and in his absence by the competent authority.
In the first book, which shall be called "log book," he shall enter
every day the condition of the atmosphere, the prevailing winds, the
course sailed, the rigging carried, the horsepower of the engines, the
distance covered, the maneuvers executed, and other incidents of
navigation. He shall also enter the damage suffered by the vessel in
her hull engines, rigging, and tackle, no matter what is its cause, as
well as the imperfections and averages of the cargo, and the effects
and consequence of the jettison, should there be any; and in cases of
grave resolutions which require the advice or a meeting of the officers
of the vessel, or even of the passengers and crew, he shall record the
PAGE 220
decision adopted. For the informations indicated he shall make use of

the binnacle book, and of the steam or engine book kept by the
engineer.
In the second book, called the "accounting book", he shall enter
all the amounts collected and paid for the account of the vessel,
entering specifically article by article, the sources of the collection, and
the amounts invested in provisions, repairs, acquisition of rigging or
goods, fuel, outfits, wages, and all other expenses. He shall
furthermore enter therein a list of all the members of the crew, stating
their domiciles, their wages and salaries, and the amounts they may
have received on accounts, either directly or by delivery to their
families.
In the third book, called "freight book," he shall record the entry
and exit of all the goods, stating their marks and packages, names of
the shippers and of the consignees, ports of loading and unloading, and
the freight earned. In the same book he shall record the names and
places of sailing of the passengers and the number of packages of
which their baggage consists, and the price of the passage.
4. To make, before receiving the freight, with the officers of the
crew, and the two experts, if required by the shippers and passengers,
an examination of the vessel, in order to ascertain whether she is
watertight, and whether the rigging and engines are in good condition;
and if she has the equipment required for good navigation, preserving
a certificate of the memorandum of this inspection, signed by all the
persons who may have taken part therein, under their liability.
The experts shall be appointed one by the captain of the vessel
and the other one by the persons who request the examination, and in
case of disagreement a third shall be appointed by the marine authority
of the port.
5. To remain constantly on board the vessel with the crew during
the time the freight is taken on board and carefully watch the stowage
thereof; not to consent to any merchandise or goods of a dangerous
character to be taken on, such as inflammable or explosive substances,
without the precautions which are recommended for their packing,
management and isolation; not to permit that any freight be carried on
deck which by reason of its disposition, volume, or weight makes the
work of the sailors difficult, and which might endanger the safety of the
vessel; and if, on account of the nature of the merchandise, the special
character of the shipment, and principally the favorable season it takes
place, he allows merchandise to be carried on deck, he must hear the
opinion of the officers of the vessel, and have the consent of the
shippers and of the agent.
6. To demand a pilot at the expense of the vessel whenever
required by navigation, and principally when a port, canal, or river, or a
roadstead or anchoring place is to be entered with which neither he,
the officers nor the crew are acquainted.
7. To be on deck at the time of sighting land and to take
command on entering and leaving ports, canals, roadsteads, and rivers,
unless there is a pilot on board discharging his duties. He shall not
spend the night away from the vessel except for serious causes or by
PAGE 221
reason of official business. 8. To present himself, when making a port

in distress, to the maritime authority if in the Philippines and to the
Filipino consul if in a foreign country, before twenty-four hours have
elapsed, and make a statement of the name, registry, and port of
departure of the vessel, of its cargo, and reason of arrival, which
declaration shall be vised by the authority of by the consul if after
examining the same it is found to be acceptable, giving the captain the
proper certificate in order to show his arrival under stress and the
reasons therefor. In the absence of marine officials or of the consul,
the declaration must be made before the local authority.
9. To take the steps necessary before the competent authority in
order to enter in the certificate of the vessel in the registry of the
vessels, the obligations which he may contract in accordance with
Article 583.
10. To put in a safe place and keep all the papers and belongings
of any members of the crew who might die on the vessel, drawing up a
detailed inventory, in the presence of passengers as witnesses, and, in
their absence, of members of the crew.
11. To conduct himself according to the rules and precepts
contained in the instructions of the agent, being liable for all that he
may do in violation thereof.
12. To give an account to the agent from the port where the
vessel arrives, of the reason therefor, taking advantage of the
semaphore, telegraph, mail, etc., according to the cases; notify him the
freight he may have received, stating the name and domicile of the
shippers, freight earned, and amounts borrowed on bottomry bond,
advise him of his departure, and give him any information and date
which may be of interest.
13. To observe the rules on the situation of lights and evolutions
to prevent collisions.
14. To remain on board in case of danger to the vessel, until all
hope to save her is lost, and before abandoning her to hear the officers
of the crew, abiding by the decision of the majority; and if he should
have to take a boat he shall take with him, before anything else, the
books and papers, and then the articles of most value, being obliged to
prove in case of the loss of the books and papers that he did all he
could to save them.
15. In case of wreck he shall make the proper protest in due form
at the first port reached, before the competent authority or Filipino
consul, within twenty-four hours, stating therein all the incidents of the
wreck, in accordance with case 8 of this article.
16. To comply with the obligations imposed by the laws and rules
of navigation, customs, health, and others.
Art. 703. A passenger shall be considered a shipper of the goods
he carries on board, and the captain shall not be responsible for what
the former may keep under his immediate and special custody, unless
the damage arises from an act of the captain or of the crew.
PAGE 222
Art. 1754. The provisions of Arts. 1733 to 1753 shall apply to the
passenger's baggage which is not in his personal custody or in that of
his employee. As to the other baggage, the rules in Articles 1998 and
2000 to 2003 concerning the responsibility of hotel-keepers shall be
applicable. (New Civil Code.)
J. Carriage of Goods by Sea Act (Commonwealth Act. No. 65, Public Act No. 521,
74the US Congress)
Sec. 1. That the provisions of Public Act No. 521 of the 74th Congress
of the United States, approved on April 16, 1936, be accepted, as it is
hereby accepted to be made applicable to all contracts for the carriage
of goods by sea to and from Philippine ports in foreign trade: Provided,
that nothing in this Act shall be construed as repealing any existing
provision of the Code of Commerce which is not in force, or as limiting
its application.
Notes: In relation to Civil Code :

Art. 1753 - governed by law of place of destination, if shipped to a foreign
country, governed by law of foreign country
Art. 1766 - goods from foreign country shipped to the Philippines, governed by
the Civil Code
COGSA - applicable to all transportation of goods by sea in foreign trade to and

from Philippine ports
- does not apply to purely domestic transport
- Laws applicable to a contract for the carriage of goods by sea:
1. Distinguish - common carrier (Civil Code)

- private carrier
2. Where is the vessel going?
a. Common carrier coming to the Phils. = what law applies?
1st: Civil Code
2nd: COGSA (it's more specific than Code of Commerce)
- in foreign trade
3rd: Code of Commerce
b. Private carrier coming to the Phils. in foreign trade

1st: COGSA (because it's more specific)
2nd: Code of Commerce
3rd: Civil Code (provisions not on common carriers e.g. torts, contracts)
c. From the Phils. to a foreign country: apply laws of such foreign country (Art.
1753)
- with respect to vessels destined for foreign ports, the COGSA doesn't apply
unless parties make it applicable.
PAGE 223
Q: In what situations does COGSA primarily apply?

A: Where the parties expressly stipulate that COGSA shall govern their
respective rights and obligations.
Q: Can the COGSA apply in domestic shipping?

A: Generally, NO.
EXCEPTION: when parties agree to make it apply.
Q: What application does COGSA have in carriage of passengers?

A: None. Applies only to carriage of goods.
Sec. 2. This Act shall take effect upon its approval. (Approved
October 22, 1936).
TITLE I
Sec. 1. When used in this Act-

(a) The term "carrier" includes the owner or the charterer
who enters into a contract of carriage with a shipper.
(b) The term "contract of carriage" applies only to contracts
of carriage covered by a bill of lading or any similar document of title,
insofar as such document relates to the carriage of goods by sea,
including any bill of lading or any similar document as aforesaid issued
under or pursuant to a charter party from the moment at which such
bill of lading or similar document of title regulates the relations
between a carrier and a holder of the same.
(c) The term "goods" includes goods, wares, merchandise, and
articles of ever kind whatsoever, except live animals and cargo which
by the contract of carriage is stated as being carried on deck and is so
carried.
(d) The term "ship" means any vessel used for the carriage
of goods by sea.
(e) The term "carriage of goods" covers the period from the time
when the goods are loaded to the time when they are discharged from
the ship
RISKS
Sec. 2. Subject to the provisions of Section 6, under every

contract of carriage of goods by sea, the carrier in relation to the
loading, handling, stowage, carriage, custody, care, and discharge of
such goods shall be subject to the responsibilities and liabilities and
entitled to the rights and immunities hereinafter set forth.
PAGE 224
RESPONSIBILITIES AND LIABILITIES
Sec. 3. (1) The carrier shall be bound before and at the beginning
of the voyage to exercise due diligence to-
(a) Make the ship seaworthy;

(b) Properly man, equip, and supply the ship;
(c) Make the holds, refrigerating and cooling
chambers, and all other parts of the ship in which goods are
carried, fit and safe for their reception, carriage, and
preservation
(2) The carrier shall properly and carefully load, handle, stow,
carry, keep, care for, and discharge the goods carried.
(3) After receiving the goods into his charge the carrier, or the
master or agent of the carrier, shall, on demand of the shipper, issue to
the shipper a bill of lading showing among other things-
(a) The loading marks necessary for identification of the

goods as the same are furnished in writing by the shipper
before the loading of such goods starts, provided such
marks are stamped or otherwise shown clearly upon the
goods if uncovered, in such a manner as should ordinarily
remain legible until the end of the voyage.
(b) Either the number of packages or pieces, or the quantity
or weight, as the case may be, as furnished in writing by the
shipper.
(c) The apparent order and conditions of the goods: Provided,
that no carrier, master, or agent of the carrier, shall be bound to
state or show in the bill of lading any marks, number, quantity, or
weight which he has reasonable ground for suspecting not
accurately to represent the goods actually received or which he
has had no reasonable means of checking.
(4) Such a bill of lading shall be prima facie evidence of the receipt
by the carrier of the goods as therein described in accordance with
paragraphs (3) (a), and (c), of this section: (The rest of the provision is
not applicable to the Philippines).
(5) The shipper shall be deemed to have guaranteed to the carrier

the accuracy at the time of shipment of the marks, number, quantity,
and weight, as furnished by him; and the shipper shall indemnify the
carrier against all loss, damages, and expenses arising or resulting from
inaccuracies in such particulars. The right of the carrier to such
indemnity shall in no way limit his responsibility and liability under the
contract of carriage to any person other than the shipper.
(6) Unless notice of loss or damage and the general nature of such
loss or damage be given in writing to the carrier or his agent at the port
PAGE 225
of discharge or at the time of the removal of the goods into the custody
of the person entitled to delivery thereof under the contract of carriage,
such removal shall be prima facie evidence of the delivery by the carrier
of the goods as described in the bill of lading. If the loss or damage is
not apparent, the notice must be given within three days of the
delivery.
Said notice of loss or damage may be endorsed upon the receipt

for the goods given by the person taking delivery thereof.
The notice in writing need not be given if the state of the goods
has at the time of their receipt been the subject of joint survey or
inspection.
In any event the carrier and the ship shall be discharged from all
liability in respect of loss or damage unless suit is brought within one
year after delivery of the goods or the date when the goods should have
been delivered: Provided, that, if a notice of loss or damage, either
apparent or concealed, is not given as provided for in this section, that
fact shall not affect or prejudice the right of the shipper to bring suit
within one year after the deliver of the goods or the date when the
goods should have been delivered.
In the case of any actual or apprehended loss or damage, the

carrier and the receiver shall give all reasonable facilities to each other
for inspecting and tallying the goods
(7) After the goods are loaded the bill of lading to be issued by the
carrier, master, or agent of the carrier to the shipper shall if the shipper
so demands, be a "shipped" bill of lading: Provided, that if the shipper
shall have previously taken up any document of title to such goods, he
shall surrender the same as against the issue of the "shipped" bill of
lading, but at the option of the carrier such document of title may be
noted at the port of shipment by the carrier, master, or agent with the
name or names of the ship or ships upon which the goods have been
shipped and the date or dates of shipment, and when so noted the same
shall for the purpose of this section be deemed to constitute a "shipped"
bill of lading.
(8) Any clause, covenant, or agreement in a contract of carriage

relieving the carrier of the ship from liability for loss or damage to or in
connection with the goods, arising from negligence, fault, or failure in
the duties and obligations provided in this section, or lessening such
liability otherwise than as provided in this Act, shall be null and void and
of no effect. A benefit of insurance in favor of the carrier, or similar
clause, shall be deemed to be a clause relieving the carrier from liability.
Notes: Prescriptive period under Section 3(6). - the carrier and the agent shall be
discharged form liability in respect of loss or damage unless suit is brought within
1 year from:
PAGE 226
(1) in case of damaged goods: from the time delivery of the goods was
made
(2) in case of non-delivery (i.e., lost goods): from the date the goods should
have been delivered
Cases of misdelivery or conversion not covered.

1 year-prescriptive period in Sec. 3 (6) applies only where there is loss or
damage.
Loss contemplates only where no delivery at all was made by the carrier of the
goods because the same had perished, gone out of commerce, or disappeared in
such a way that their existence is unknown or they cannot be recovered
Hence, in case of misdelivery (delivery to wrong person) or conversion of the

goods, the rules on prescription found in the Civil Code shall apply (10 years for
contracts; 4 years for tortious obligations)
Shipper, consignee or legal holder of B/L may invoke the prescriptive period and
have the right to file suit within one year after delivery of the goods or failure to
deliver.
Mere proposal for arbitration or fact that there have been initial negotiations does
not suspend the running of the period for prescription
NOTE: Prof. Quimbo does not agree with this SC ruling. If there is a misdelivery
or conversion, there is a case of loss from the point of view of the consignee or
shipper.
Q: Is the prescriptive period under the COGSA interrupted from the time of the
making of extra-judicial demand or filing of judicial action as provided in Art. 1155,
NCC?
A: No. 1 year period is a special prescriptive period, uniform worldwide
Rationale behind the 3-day notice and relatively short prescriptive period:
- to provide carrier an opportunity to look for the lost goods
- to discover who was at fault
- in case of transshipment, to determine, when and where damage occurred
Shipper, consignee or legal holder of bill may invoke prescriptive period although
the proviso in Sec. 3 (6) gives the impression that it is the shipper alone who can
invoke the same.
But prescriptive period does not apply to the action by an insurer as subrogee of
the consignee.
Stipulation in bill limiting carrier's liability contrary to sec. 3(8) is void; e.g.
provision in the bill excepting th owner form liability for loss or damage of cargo
unless written notice is thereof was given to the carrier within 30 days; such a
provision is contrary to a provision of the COGSA since Sec. 3 provides that even if
PAGE 227
a notice of loss or damage is not given as required, that fact shall not prejudice
the right of the shipper to bring suit within 1 year after delivery of the goods.
Notice requirements:
COGSA: Sec. 3(6)
If loss or damage is apparent - protest as soon as receipt of goods
If not apparent -> within 3 days of delivery
Code of Commerce: Art. 366

apparent - protest at time of receipt
non-apparent - within 24 hours after receipt
WARSAW: Art. 26
in case of damage:
of baggage - within 3 days from receipt
of goods - within 7 days
in case of delay: within 14 days from receipt
failure to comply with the 3-days notice requirement under COGSA does not affect
the right of the shipper to bring action provided he brings the same within 1 year
To be distinguished from the notice requirement in the WARSAW convention

and Code of Commerce, where the notice requirement is a condition precedent for
the right of action against the shipowner to accrue.
RIGHTS AND IMMUNITIES
Sec. 4. (1) Neither the carrier not the ship shall be liable for loss
or damage arising or resulting from unseaworthiness unless caused by
want of due diligence on the part of the carrier to make the ship
seaworthy and to secure that the ship is properly manned, equipped,
and supplied, and to make the holds, refrigerating and cooling
chambers, and all other parts of the ship in which goods are carried fit
and safe for their reception, carriage, and preservation, in accordance
with the provisions of paragraph (1) of Section (3). Whenever loss or
damage has resulted from unseaworthiness, the burden of proving the
exercise of due diligence shall be on the carrier or other person claiming
exemption under this section.
(2) Neither the carrier not the ship shall be responsible for loss or
damage arising or resulting from-
(a) Act, neglect, or default of the master, mariner, pilot, or

the servants of the carrier in the navigation or in the
management of the ship;
(b) Fire, unless caused by the actual fault or privity of the
carrier;
(c) Perils, dangers, and accidents of the sea or other
navigable water;
PAGE 228
(d) Act of God;

(e) Act of war;
(f) Act of public enemies;
(g) Arrest or restraint of princes, rulers, or people, or
seizure under legal process;
(h) Quarantine restrictions;
(i) Act or omission of the shipper or owner of the goods,
his agent or representative;;
(j) Strikes or lockouts or stoppage or restraint of labor from
whatever cause, whether partial or general: Provided, that
nothing herein contained shall be construed to relive a
carrier from responsibility for the carrier's own acts:
(k) Riots and civil commotions;
(l) Saving or attempting to save life or property at sea;
(m) Wastage in bulk or weight or any other loss or damage
arising from inherent defect, quality, or vice of the goods;
(n) Insufficiency of packing;
(o) Insufficiency or inadequacy of marks;
(p) Latent defects not discoverable by due diligence; and
(q) Any other cause arising without the actual fault and
privity of the carrier and without the fault or neglect of the
agents or servants of the carrier, but the burden of proof
shall be on the person claiming the benefit of this exception
to show that neither the actual fault or privity of the carrier
not the fault or neglect of the agents or servants of the
carrier contributed to the loss or damage.
(3) The shipper shall not be responsible for loss or damage

sustained by the carrier or the ship arising or resulting from any cause
without the act, or neglect of the shipper, his agents, or his
(4) An deviation in saving or attempting to save life or property at

sea, or any reasonable deviation shall not be deemed to be an
infringement or breach of this Act or of the contract of carriage, and
carrier shall not be liable for any loss or damage resulting therefrom:
Provided, however, that if the deviation is for the purpose of loading or
unloading cargo or passengers it shall, prima facie, be regarded as
unreasonable.
(5) Neither the carrier nor the ship shall in any event be or
become liable for any loss or damage to or in connection with the
transportation of goods in an amount exceeding $500 per package of
lawful money of the United States, or in case of goods not shipped in
packages, per customary freight unit, or the equivalent of that sum in
other currency, unless the nature and value of such goods have been
declared by the shipper before shipment and inserted in the bill of
lading. This declaration, if embodied in the bill of lading, shall be prima
facie evidence, but shall not be conclusive on the carrier.
PAGE 229
By agreement between the carrier, master or agent of the carrier,

and the shipper another maximum amount than that mentioned in this
paragraph may be fixed: Provided, that such maximum shall not be less
than the figure above named. In no event shall the carrier be liable for
more than the amount of damage actually sustained.
Neither the carrier nor the ship shall be responsible in any event
for loss or damage to or in connection with the transportation of the
goods if the nature or value thereof has been knowingly and
fraudulently mis-stated by the shipper in the bill of lading.
(6) Goods of an inflammable, explosive, or dangerous nature to

the shipment whereof, the carrier, master or agent of the carrier, has
not consented with knowledge of their nature and character, may at any
time before discharge be landed at any place or destroyed or rendered
innocuous by the carrier without compensation, and the shipper of such
goods shall be liable for all damages and expenses directly or indirectly
arising out of or resulting from such shipment. If any such goods
shipped with such knowledge and consent shall become a danger to the
ship or cargo, they may in like manner be landed at any place, or de-
stroyed or rendered innocuous by the carrier without liability on the part
of the carrier except to general average if any.
Notes: Amount recoverable in case of loss: $500/package, even if not stipulated
The plaintiff cannot dispute said limitation on the ground that it was not freely and
fairly agreed upon or that it is against public policy, since the LAW ITSELF
PROVIDES FOR SAID LIMITATION; THE SAME IS DEEMED READ INTO THEIR
CONTRACT
Package - means individual packaging of the goods

- does not cover 1 container van
Parties may agree to amount of liability less than $500 under Sec. 4(5). By
providing that $500 is the maximum liability, the law does not disallow an
agreement for liability at a lesser amount. Moreover, Art. 1749 of the NCC
expressly allows th limitation of the carrier's liability. (Eastern v. Great American)
SURRENDER OF RIGHTS AND IMMUNITIES AND INCREASE OF

RESPONSIBILITIES AND LIABILITIES
Sec. 5. A carrier shall be at liberty to surrender in whole or in part

all or any of his rights and immunities or to increase any of his
responsibilities and liabilities under this Act, provided such surrender or
increase shall be embodied in the bill of lading issued to the shipper.
PAGE 230
The provisions of this Act shall not be applicable to charter parties;

but if bills of lading are issued in the case of a ship under a charter
party, they shall comply with the terms of this Act. Nothing in this Act
shall be held to prevent the insertion in a bill of lading of any lawful
provisions regarding general average.
SPECIAL CONDITIONS
Sec. 6. Notwithstanding the provisions of the preceding section, a

carrier, master or agent of the carrier, and a shipper shall, in regard to
any particular goods be at liberty to enter into any agreement in any
terms as to the responsibility and liability of the carrier for such goods,
and as to the rights and immunities of the carrier in respect to such
goods, or his obligation as to seaworthiness, (so far as the stipulation
regarding seaworthiness is not contrary to public policy), or the care or
diligence of his servants or agents in regard to the loading, handling,
stowage, carriage, custody, care and discharge of the goods carried by
sea; provided, that in this case no bill of lading has been or shall be
issued and that the terms agreed shall be embodied in a receipt which
shall be a non-negotiable document and shall be marked as such.
Any agreement so entered into shall have full legal effect:
Provided, that this section shall not apply to ordinary commercial
shipments made in the ordinary course of trade but only to other
shipments where the character or condition of the property to be carried
or the circumstances, terms and conditions under which the carriage is
to be performed are such as reasonable to justify a special agreement.
Sec. 7. Nothing contained in this Act shall prevent a carrier or a

shipper from entering into any agreement, stipulation, condition,
reservation, or exemption as to the responsibility and liability of the
carrier or the ship for the loss or damage to or in connection with the
custody and care and handling of goods prior to the loading on and
subsequent to the discharge from the ship on which the goods are
carried by sea.
Sec. 8. The provisions of this Act shall not affect the rights and
obligations of the carrier under the provisions of the Shipping Act, 1916,
or under the provisions of Section 4281 to 4292, inclusive, of the Revised
Statutes of the United States, or of any amendments thereto, or under
the provisions of any other enactment for the time being in force
relating to the limitation of the liability of the owners of seagoing
vessels.
TITLE II
PAGE 231
Sec. 9. Nothing contained in this Act shall be construed as

permitting a common carrier by water to discriminate between
competing shippers similarly placed in time and circumstances, either
(a) with respect to their right to demand and receive bills of lading
subject to the provisions of this Act; or
(b) when issuing such bills of lading either in the surrender of any
of the carrier's rights and immunities or in the increase of any of the
carrier's responsibilities and liabilities pursuant to Section 5, Title I, of
this Act;
(c) in any other way prohibited by the Shipping Act, 1916, as
amended.
Sec. 10. (Not applicable to the Philippines.)
Sec. 11. When under the custom of any trade the weight of any
bulk cargo inserted in the bill of lading is a weight ascertained or
accepted by a third party other than the carrier or the shipper and the
fact that the weight as ascertained or accepted is stated in the bill of
lading, then notwithstanding anything in this Act, the bill of lading shall
not be deemed to be prima facie evidence against the carrier of the
receipt of goods of the weight so inserted in the bill of lading, and the
accuracy thereof at the time of shipment shall not be deemed to have
been guaranteed by the shipper.
Sec. 12. (Not applicable to the Philippines.)
Sec. 13. This act shall apply to all contracts for carriage of goods
by sea to or from ports of the United States in foreign trade. As used in
this Act the term "United States" includes its districts, territories, and
possessions: Provided, however, that the Philippine Legislature may by
law exclude its application to transportation to or from ports of the
Philippine Islands. The term "foreign trade" means the transportation
of goods between the ports of the United States and ports of foreign
countries. Nothing in this Act shall be held to apply to contracts for
carriage of goods by sea between any port of the United States or its
possession: Provided, however, that any bill of lading or similar
document of the title which is evidence of a contract for the carriage of
goods by sea between such ports, containing an express statement that
it shall be subject to the provisions of this Act, shall be subjected hereto
as fully as if subject hereto by the express provisions of this Act:
Provided, further, that every bill of lading or similar document of title
which is evidence of a contract for the carriage of goods by sea from
ports of the United States in foreign trade, shall contain a statement
that it shall have effect subject to the provisions of this Act.
PAGE 232
Notes: American Insurance vs Cia Maritima : contract of carriage from NY with

final destination in Cebu. COGSA is applicable despite the fact that from Manila to
Cebu, the goods were transshipped on an interisland vessel. Transshipment was
not a separate transaction from that originally entered into by the parties but was
part of the carrier's contractual obligation.
Sec. 14. Upon the certification of the Secretary of Commerce that

the foreign commerce of the United States in its competition with that of
foreign nations is prejudiced by the provisions, or any of them, of the
Title I of this Act, or by the laws of any foreign country or countries
relating to the carriage of goods by sea, the President of the United
States may, from time to time by proclamation, suspend any or all
provisions of Title I of this Act for such periods of time or indefinitely as
may be designated in the proclamation., The President may at any time
rescind such suspension of Title I hereof, and any time rescind such
suspension of Title I hereof, and any provisions thereof which may have
been thereafter made for carriage of goods by sea. Any proclamation of
suspension or rescission of any such suspension shall take effect on the
date named therein, which date shall be not less than ten days from the
issue of the proclamation.
Any contract for the carriage of goods by sea, subject to the
provisions of this Act, effective during any period when Title I hereof, or
any part thereof, is suspended, shall be subject to all provisions of law
now or hereafter applicable to that part of Title I which may have thus
been suspended.
Sec. 15, COGSA. This Act shall take effect ninety days after the date of
its approval; but nothing in this Act shall apply during a period not to
exceed one year following its approval to any contract for the carriage of
goods by sea, made before the date on which this Act is approved nor to
any bill of lading or similar document of title issued, whether before or
after such date of approval in pursuance of any such contract as
aforesaid.
Sec. 16, COGSA. This Act may be cited as the "Carriage of Goods by Sea
Act."
Approved, April 16, 1936.
PAGE 233
V. International Air Transport
A. The Warsaw Convention, 51 O.G. 5084 (October 1955);
Presidential Proclamation No. 201, 51 O.G. 4933 (October 1955)
MAKING PUBLIC THE ADHERENCE OF THE R.P. TO THE CONVENTION FOR

THE UNIFICATION OF CERTAIN RULES RELATING TO INTL.
TRANSPORTATION BY AIR AND THE ADDITIONAL PROTOCOL THERETO,
1929
WHEREAS, a Convention for the Unification of Certain Rules

Relating to International Transportation by Air & an Additional Protocol
thereto relating to Article 2 of the Convention were signed at Warsaw by
the plenipotentiaries of 32 countries;
WHEREAS, Article 38 of the aforesaid Convention provides that a

Government on behalf of which this Convention has not been signed,
shall be allowed to adhere thereto at any time after the Convention has
come into force, by means of a notification addressed to the Government
of the Republic of Poland;
WHEREAS, the Senate of the Congress of the Philippines, by its

Resolution No. 19 adopted on May 16, 1950, concurred in the adherence
by the Republic of the Philippines Government to the said Convention &
the said Protocol in accordance with the Philippine Constitution, subject
to the reservation, as provided in the Additional Protocol, that the 1st
paragraph of Art. 2 of the Convention shall not apply to international
transportation that may be performed by the Republic of the Philippines;
WHEREAS, the Republic of the Philippines Government has formally

adhered to the said Convention its Additional Protocol, & the
Government of the Republic of Poland was notified of said adherence on
November 9, 1950, when the instrument of adherence was registered in
accordance with Article 38 (2) of said Convention; and,
WHEREAS, the adherence of the Republic of the Philippines

Government, pursuant to Art. 38(3) of said Convention, took effect as
from the 90th day after November 9, 1950.
NOW, THEREFORE, be it known that I, Ramon Magsaysay, Republic

of the Philippines President, in pursuance of the aforesaid concurrence
of the Senate of the Congress of the Philippines, and subject to the
reservation as provided in the Additional Protocol that the First
paragraph of Art.2 of the Convention shall not apply to international
transportation that may be performed by the Republic of the Philippines,
do hereby proclaim and make public the said Convention and said
PAGE 234
Protocol, a copy of which is hereto attached, to the end that the same
and every article and clause thereof may be observed & fulfilled with
good faith by the Republic of the Philippines and the citizens thereof.
Notes: If common carrier, Civil Code first applies, then Warsaw Convention.
Situations where Warsaw is applicable is in private carriers.
The only criterion for the Warsaw Convention to be applicable is: it is applicable to
ALL international transportation of persons, baggage, or goods performed by
aircraft for hire.
International transport: where there's transport by AIR & there is a point of contact
in 2 high contracting parties (countries which have acceded to the Convention).
E.g. transportation by PAL from Manila to San Francisco

Federal Express - transporation of goods
B. Constitutionality
SANTOS V. NORTHWEST AIRLINES [210 S 256 (1992)]
F: 1. A Filipino minor was informed by Northwest that he had no reservations for his
flights, and had to be waitlisted, despite a previous confirmation. He sued for damages.
Northwest moved to dismiss on the ground of lack of jurisdiction based on Art.28 (1) of
the Warsaw Convention, where the complaint could be instituted in the territory of one of
the contracting parties before the court of the
(1) domicile of the carrier;
(2) principal place of business;
(3) where it has a place of business through which the contract had been made; and
(4) place of destination.
FIRST ISSUE: W/NOT THE WARSAW CONVENTION IS UNCONSTITUTIONAL?
HELD: No. Art. 28 (1) of Warsaw Con. is constitutional. Although the case can be
decided on other grounds without resolving the constitutional question, the
Warsaw Convention is a treaty commitment voluntarily assumed by the Philippine
Government and as such, has the force and effect of law. The presumption is that
this joint legislative-executive act was first carefully studied and determined to be
constitutional before it was adopted. Petitioner's allegation have not overcome
this presumption. Moreover, the treaty since 1950 has not been rejected by the
Philippine Government.
SECOND ISSUE: W/NOT THE WC SHOULD BE RENDERED IRRELEVANT BY THE

DOCTRINE OF REBUS SIC STANTIBUS?
HELD: No. The circumstance that the airline industry was still in infancy when the
Convention was made, alone, is not sufficient justification for the rejection of the
PAGE 235
treaty at this time. The changes recited by petitioner were not entirely unforeseen
although they were expected in a general sense only. (Check Art.41).
THIRD ISSUE: W/NOT THE REQUISITS OF THE WC IS MERELY A MATTER OF VENUE

OR JURISDICTION?
HELD: Jurisdiction
(1) The wording of Art. 32, which indicates the places where the action for
damages "must" be brought, underscores the mandatory nature of Art. 28 (1).
(2) This characterization is consistent with one of the objectives of the convention,
which is to regulate in a uniform manner the conditions of international
transportation by air.
FOURT ISSUE: W/NOT PHILIPPIN COURTS HAVE JURISDICTION OVER THIS CASE?
HELD: No. Art. 28 (1) provides that an action for damage must be brought at the
option of the plaintiff: (a) before the court of the domicile of the carrier;
(b) the court of its principal place of business;
(c) the court where it has a place of business thru w/c the contract had been
made;
(d) the court of the place of destination.
In this case, the ff. were not followed, and hence the Philippines, not being
one of the courts mentioned in Art.28 (1), does not have jurisdiction over the case.
(1) court of domicile is Minnesota, U.S.A;
(2) principal place of business of carrier is also U.S.A;
(3) place of business where contract was made was in San Francisco;
(4) place of destination is also San Francisco, Santos having purchased a round
trip-ticket from SFO-TYO-MNL, then back to TYO- SFO. The "ultimate destination"
being San Francisco.
The court called upon to determine the applicability of the limitation

provision must first be vested with the appropriate jurisdiction. If the carrier is
indeed is indeed not guilty of WILLFUL MISCONDUCT, it can avail itself of the
limitations set forth in this article. But it can be done only if the action has first
been commenced properly under the rules set forth in Art.28 (1).
Notes: The enumeration of the causes of action in the WC is not an exclusive list.
You can have a cause of action even if it is not:
(a) death or wounding of passenger;
(b) damage or loss or destruction of checked baggage;
(c) delay in transportation of passengers, luggage and goods.
The case of Northwest is actually overbooking. Delay still a cause of action under
WC.
Note however, that the limitations of liability in the Convention favors the carrier.
C. When Applicable
PAGE 236
Art. 1. (1) This convention shall apply to all international

transportation of persons, baggage, or goods performed by aircraft for
hire. It shall apply equally to gratuitous transportation by aircraft
performed by an air transportation enterprise.
(2) For the purpose of this convention the expression
"international transportation" shall mean any transportation in which,
according to the contract made by the parties, the place of departure
and the place of destination, whether or not there be a break in the
transportation or a transshipment, are situated either within the
territories of two High Contracting Parties, or within the territory of a
single High Contracting Party, if there is an agreed stopping place within
a territory subject to the sovereignty, suzerainty, mandate, or authority
of another power, even though that power is not a party to this
convention. Transportation without such an agreed stopping place
between territories subject to the sovereignty, suzerainty, mandate, or
authority of the same High Contracting Party shall not be deemed to be
international for the purposes of this Convention.
(3) Transportation to be performed by several successive air
carriers shall be deemed, for the purposes of this Convention, to be one
undivided transportation, if it has been rendered by the parties as a
single operation, whether it has been agreed upon under the form of a
single contract or of a series of contracts is to be performed entirely w/in
a territory subject to the sovereignty, suzerainty, mandate, or authority
of the same High Contracting Party.
Art. 2. (1) This convention shall apply to transportation performed

by the state or by legal entities constituted under public law provided it
falls within the conditions laid down in Art .1.
(2) This convention shall not apply to transportation performed
under the terms of any international postal convention.
D. Liabilities Under the Convention
Art. 17. The carrier shall be liable for damage sustained in the
event of the death or wounding of a passenger or any other bodily injury
suffered by a passenger, if the accident which caused the damage so
sustained took place on board the aircraft or in the course of any of the
operations of embarking or disembarking.
Art. 18. (1) The carrier shall be liable for damage sustained in the
event of the destruction or loss of, or of damage to, any checked
baggage, or any goods, if the occurrence which caused the damage so
sustained took place during the transportation by air.
(2) The transportation by air within the meaning of the proceeding
paragraph shall comprise the period during which the baggage or the
PAGE 237
goods are in charge of the carrier, whether in an airport or on board an

aircraft, or in the case of a landing outside an airport, in any place
whatsoever.
(3) The period of the transportation by air shall not extend to any
transportation by land, by sea, or by river performed outside of an
airport. If however, such transportation takes place in the performance
of a contract for transportation by air, for the purpose of loading,
delivery, or transshipment,any damage is presumed, subject to proof to
the contrary, to have been the result of an event which took place during
the transportation by air.
Art. 19. The carrier shall be liable for damage occasioned by delay
in the transportation by air of passengers,baggage, or goods.
NORTHRWEST V. CUENCA [14 S 1063 (1965)]
F: Nicolas Cuenca, an official delegate of Philippines to a conference in Tokyo, was

transferred from first class to tourist class despite his first class ticket. The Northwest
agent also treated him rudely in front of other passengers. Northwest argues that
according to the Warsaw Convention, Arts. 17, 18, 19, an air carrier is liable only in the
event of (a) death of a passenger or injury suffered by him; (b) of destruction or loss of,
or damage to any checked baggage/goods; & (c) delay in the transportation by air of
passengers, baggage or goods.
ISSUE: W/NOT CUENCA HAS A CAUSE OF ACTION THOUGH NOT AMONG THOSE
MENTIONED IN THE WC?
HELD: Yes. The said articles merely declare the carrier liable for damages in the
enumerated cases, if the conditions therein specified are present. Neither the
provisions of said articles nor others regulate or exclude liability for other
breaches of contract by the carrier. Under petitioner's theory, an air carrier would
be exempt from any liability for damages in the event of its absolute refusal, in
bad faith, to comply with a contract of carriage, which is absurd.
ALITALIA V. IAC [192 SCRA 10 (1990)]
F: Dr. Felipa Pablo, an Associate UP Professor and research grantee of the Philippine
Atomic Energy Agency was scheduled to speak in a UN meeting in Ispra, Italy. She
arrived in Milan a day before the meeting, but her luggage (where her speech was) was
delayed, and arrived a day after the meeting. She returned to Manila before the
meeting.
ISSUE: W/NOT THE WC SHOULD APPLY TO LIMIT ALITATLIA'S LIABILITY?
HELD: No. The WC does not operate as an absolute limit of the extent of an
airline's liability. It does not regulate or exclude liability for other breaches of
contract by the carrier.
PAGE 238
Under the WC, an air carrier is made liable for damages for delay in the
transportation by air of passengers, luggage or goods. The WC also limits the
liability of the carrier to 250 francs per kilo of the total weight of the package. The
WC denies to the carrier availment of the provisions which exclude or limit his
liability, if the damage is caused by his willful misconduct or by such default on
his part as, in accordance with the law of the court seized of the case, is
considered as willful misconduct, or if the damage is caused by any agent of the
carrier acting w/in the scope of his employment.
2. The WC does not regulate or exclude liability for other breaches of contract by
the carrier or misconduct of its officers and employees or for some particular or
exceptional damage. The WC has been held inapplicable where there was proof of
malice or bad faith attributable to its officers and employees. Here, however, there
was no bad faith on the part of the employees.
Nominal damages however, was awarded because of the presence of some special
species of injury caused to Dr. Pablo.
E. Limitations on Liability
RE: PASSENGERS
Art.22. (1) In the transportation of passengers the liability of the

carrier for each passenger shall be limited to the sum of 125,000 francs.
(Now $100,000) Where, in accordance w/ the law of the court to w/c the
case is submitted, damages may be awarded in the form of periodical
payments, the equivalent capital value of the said payments shall not be
exceed 125,000 francs. Nevertheless, by special contract, the carrier and
the passenger may agree to a higher limit of liability.
RE: BAGGAGE/GOODS
(2) In the transportation of checked baggage and of goods, the

liability of the carrier shall be limited to a sum of 250 francs per
kilogram (Now $20 per kilo), unless the consignor has made, at the time
when the package was handed over to the carrier, a special declaration
of the value of the delivery and has paid a supplementary sum if the
case so requires. In that case, the carrier will be liable to pay a sum not
exceeding the declared sun, unless he proves that the sum is grater that
the actual value to the consignor at delivery.
(3) As regards objects of w/c the passenger takes charge himself,

the liability of the carrier shall be limited to 5,000 francs per passenger.
(4) The sums mentioned above shall be deemed to refer to the

French franc consisting of 65 1/2 milligrams of gold at the standard of
fineness of nine hundred thousandths. These sums may be converted
into any national currency in round figures.
PAGE 239
Art. 23. Any provision tending to relieve the carrier of liability or

to fix a lower limit that which is laid down in this convention shall be null
and void, but the nullity of any such provision shall not involve the
nullity of the whole contract, which shall remain subject to the
provisions of this convention.
Art. 24. (1) In the cases covered by Arts.18 & 19 any action for
damages, HOWEVER FOUNDED, can only be brought subject to the
conditions and limit set out in this convention.
(2) In the case covered by Art.17, the provisions of the preceding
paragraph shall also apply,w/o prejudice to the question as to who are
the persons who have the right to bring suit and what are their
respective rights.
NOTES: Even if you base your claim on quasi-delict, you can still sue under
Warsaw, invoking Art.24 (1).
PAN AM v. IAC (164 SCRA)
F: Pangan's luggages didn't arrive w/ his flight. As a consequence the film exhibitions
he set up & promoted for, was cancelled. CFI ordered PanAm to pay for P83,000 for actual
damages. PanAm contended that such award was beyond the limitation of liability set
forth in the Warsaw Con., the provisions of such being found at the back of the ticket.
ISSUE: WON Pangan is bound by such Warsaw provisions & hence is entitled only
to $600 ($20 standard X 30 kilos) ---- YES.
Such provisions have been held to be a part of the contract of carriage, & is
valid & binding upon the passenger regardless of the latter's lack of knowledge or
assent to the regulation.
A contract limiting liability upon an agreed valuation does not offend
against the policy of the law forbidding one from contracting against his own
negligence. Inasmuch as Pangan failed to declare any higher value for his luggage
& to pay add'l charges, PanAm's liability is limited to $600, as stipulated at the
back of the ticket.
FELICIANO v. PAN AM (CA CASE)
F: Feliciano, & her Co. asked P182,000 for the value of the contents of her lost
luggage (including loss of possible opportunities). PanAm contends its liability if limited by
the Warsaw Con. to not more than $20 per kilo. TC held that there was no issue of fact
except as to amount& awarded $600 ($20 X 30 kgs).
Was TC correct? --- YES.

Indeed, SC has granted damages on the ground of fraud or bad faith due to
the personal misconduct of airline employees. This case, however, the contract of
carriage of PET's baggage is based on the conditions in the airline. Such contract
is governed by Art.22(2). Since there is no evidence that PET had declared a
PAGE 240
higher value for her lost luggage for w/c the corresponding value, the Warsaw
Con. should apply.
F. When limitations unavailable
Art. 3. (1) For the transpo. of passengers the carrier must deliver a
passenger ticket w/c shall contain the ff. particulars:
(a) The place & date of issue;

(b) The place of departure & of destination;
(c) The agreed stopping places, provided that the carrier
may reserve the right to alter the stopping places in case of
necessity, and that if he exercises that right, the alteration
shall not have the effect of depriving the transportation of
its intl. character;
(d) The name & address of the carrier/s;
(e) A statement that the transpo. is subject to the rules
relating to liability established by this convention.
(2) The absence, irregularity, or loss of the passenger ticket shall

not affect the existence or the validity of the contract of transportation,
w/c shall none the less be subject to the rules of this convention.
Nevertheless, if the carrier accepts a passenger w/o a passenger ticket
having been delivered he shall not be entitled to avail himself of those
provisions of this Convention w/c exclude or limit his liability.
Art.25. (1) The carrier shall not be entitled to avail himself of the
provisions of this convention w/c exclude or limit his liability, if the
damage is caused by his wilful misconduct or by such default on his part
as, in accordance w/ the law of the court to w/c the case is submitted, is
considered to be equivalent to wilful misconduct.
(2) Similarly the carrier shall not be entitled to avail himself of the
said provisions, is the damage is caused under the same circumstances
by any agent of the carrier acting w/in the scope of his employment.
NOTES: Q: In what cases can carrier NOT invoke limitations?

A: 1. wilfull misconduct (Art.25)
2. default amounting to wilful misconduct accdg. to court where action is
brought;
3. accepting passengers w/o passenger ticket (Art.3-2);
4. accepting goods w/o air waybill/baggage w/o baggage check.
Q: Can carrier rely on WC if it was guilty of wilfull misconduct?
A: YES. It just can't avail of the limitation on liability. Thus it can still invoke
the provisions on NOTICE or PRESCRIPTION/LACK OF CAUSE OF ACTION.
e.g. If damage wasn't one of the enumerations in the WC, & case was filed
beyond the 2 year requirement. The carrier can invoke prescription. But if suit is
brought w/in 2 years, carrier may be liable for a higher amount than the limitation.
PAGE 241
The only time when WC isn't applicable is when it's not intl. air transport.
There is nothing in Art.25 w/c says that the WC doesn't apply entirely.
ALITALIA v.IAC (supra)
The Convention does not regulate or exclude liability for other breaches
of contract by the carrier or misconduct of its officers and employees or for some
particular or exceptional damage. The Con. has been held inapplicable where
there was proof of malice or bad faith attributable to its officers & employees.
HERE, HOWEVER, no bad faith of EES. Nominal damages however, was awarded
because of the presence of some special species of injury caused to Dr. Pablo.
TWA v. CA (165 SCRA)
F: Vinluan, ACCRA lawyer, was downgraded from 1st class to economy & was issued
refund
application, in his MNL-Europe-NYK- SFO-MNL flight. (His NYK-SFO flight particularly) He
also noticed that white Caucasian passengers who checked in later than him were given
preference in 1st class seats, w/c became available due to "no show" passengers. He sued
in CFI for breach of contract & bad faith.
ISSUE: WON Warsaw Con. limit on liability can be availed of --- NO.
There was obvious discrimination & humiliation to w/c Vinluan was
subjected. Such inattention & lack of care for interest of its passengers amount to
bad faith w/c entitles passenger to moral damages.
NOTES: His entire trip, even though he availed of the services of other airlines, is
equal to one transport.
E.g. MNL-SFO via PAL } one continuing
SFO-NYK via United } ticket
Hence, if injury appears in SFO-NYK, Warsaw can be applied.
F. Conditions of Liability
Art.26. (1) Receipt by the person entitled to the delivery of

baggage of goods w/o complaint shall be prima facie evidence that the
same have been delivered in good condition & in accordance w/ the
document of transpo.
(2)In case of damage, the person entitled to delivery must
complain to the carrier forthwith after the discovery of the damage, and
at the latest, within 3 days from the date of receipt in the case of
BAGGAGE and 7 days from the date of receipt in the case of GOODS. In
case of DELAY the complaint must be made at the latest w/in 14 days
from the date on w/c the baggage or goods have been placed at his
disposal.
PAGE 242
(3) Every complaint must be made in writing upon the document of

transportation or by separate notice in writing dispatched w/in the times
aforesaid.
(4) Failing complaint w/in the times aforesaid, no action shall lie
against the carrier, save in the case of fraud on his part.
NOTE: No notice requirement in case or a person's death or injury.
Art. 27. In the case of death of the person liable, an action for
damages lies in accordance w/ th terms of this convention against those
legally representing his estate.
Art. 28. (1) An action for damage must be brought at the option of
the plaintiff, in the territory of one of the High Contracting Parties,
either before the court of the domicile of the carrier or of his principal
place of business , or where he has a place of business through w/c the
contract has been made, or before the court at the place of destination.
(2) Questions of procedure shall be governed by the law of the court
to w/c the case is submitted.
SANTOS v. NORTHWEST (supra)
Art. 28(1) provides that an action for damage must be brought at

the option of the plaintiff:
(a) before the court of the domicile of the carrier;

(b) the court of its principal place of business;
(c) the court where it has a place of business thru w/c the
contract had been made;
(d) the court of the place of destination.
xxx
In this case, the ff. were not followed, and hence the Phils., not being one of
the courts mentioned in Art.28 (1), does not have jurisdiction over the case.
(1) court of domicile is U.S., Minnesota;
(2) principal place of business of carrier is also US;
(3) place of business where contract was made was in San Francisco;
(4) place of destination is also San Francisco, Santos having purchased a round
trip-ticket from SFO-TYO-MNL, then back to TYO- SFO. The "ultimate destination"
being San Francisco.
Art. 32. Any clause contained in the contract an all special

agreements entered into before the damage occurred by which the
parties purport to infringe the rules laid down by this convention,
whether by deciding the law to be applied or by altering the rules as to
jurisdiction, shall be null and void. Nevertheless, for the transportation
of goods, arbitration clauses shall be allowed, subject to this convention,
PAGE 243
if the arbitration is to take place within one of the jurisdictions referred

to in the first paragraph of Article 28.
PAGE 244

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TRANSPORTATION AND MARITIME LAW

Based on the outline of Prof. Rodrigo Quimbo

1. Article XII, 1987 Constitution

Art. XII, Section 11. No franchise, certificate or any other form of

Section 17. In times of national emergency, when the public

Section 18. The State may, in the interest of national welfare or

Section 19. The State shall regulate or prohibit monopolies when

(a) What is a public utility?

A public utility is a business or service engaged in regularly supplying the

(b) What is a public service?

Albano vs Reyes 175 SCRA 264

Issue : WON a legislative franchise is necessary.

Held : NO. Petition dismissed.

2. CA 146, as amended, Sec 13 (b)

The term public service includes every person that now or

1. Definition - A contract of transportation is one whereby a certain

(a) Public Service Act

Section 13 (a) The Commission (PSC) shall have jurisdiction,

be regulated by the Commission in the same way as privately owned

(c) The word "person" includes every individual, co- partnership,

(e) Public services owned or operated by any instrumentality of

Section 15. With the exception of those enumerated in the

Section 16. Proceedings of the Commission, upon notice and

(a) To issue certificates ... authorizing the operation of public

(b) To approve, subject to constitutional limitations any franchise,

the judgment of the Commission, such franchise or privilege will

(c) To fix and determine individual or joint rates, tolls, charges,

(d) To fix just and reasonable standards, classifications,

(e) To ascertain and fix adequate and serviceable standards for

(f) To establish reasonable rules, regulations, instructions,

(g) To compel any public service to furnish safe, adequate, and

(h) To require any public service to establish, construct, maintain

(i) To direct any railroad, street, railway or traction co. to

commission, such connection is reasonable and practicable, and can be

(j) To authorize, in its discretion, any railroad, street railway of

(m) To amend, modify or revoke at any time any certificate under

(n) To suspend or revoke any certificate issued under the

(o) To fix, determine, and regulate, as the convenience of the

registration fee for auto-buses, trucks and motor trucks so constructed,

Section 17. Proceedings of commission without previous hearing:

(b) To require payment of actual expenses incurred in any

(c) To appraise and value the property of any public service; in

(d) To provide, on motion by or at the request of any consumer,

(e) To permit any street railway or traction company to change its

(f) To grant any public service special permits to make extra or

(h) To require any public service to furnish annual reports of

(i) To require every public service to file with the commission a

(k) To investigate accidents directly or indirectly arising from or

(l) To require every public service to file a complete schedule of

o Section 18 - It shall be unlawful for any individual, co- partnership,

Section 19. Unlawful acts - It shall be unlawful for any public

(a) To provide or maintain any service that is unsafe, improper or

(b) To make or give, directly or indirectly, by itself or through its

(c) To refuse or neglect, when requested by the director of posts

Section 20. Acts requiring the approval of the Commission -

(a) To adopt, establish, fix, impose, maintain, collect or carry into

(b) To establish, construct, maintain or operate new units or

(e) Hereafter to issue any stock or stock certificates representing

(g) To sell, alienate, mortgage, encumber or lease its property,

mortgage or encumbrance, for liabilities of more than one year

(h) To sell or register in its books the transfer or sale of shares of

(i) To sell, alienate or in any manner transfer shares of its capital

(b) The Certificate of Public Convenience (CPC), the