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Codal Definition Art. 1732, New Civil Code (NCC) - 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. Complementary to the codal definition is Sec. 13, par. (b) of the Public Service Act (CA. 146, as amended), it defines public service to bex x x every person that now or hereafter may own, operate manage or control in the Philippines, for hire or compensation, with general or limited clientele, whether permanent, occasional or accidental and done for general business purposes, and done for common carrier, railroad, street railway, subway motor vehicle, either for freight or passenger, or steamship line, ferries and transportation, engaged in the transportation of passengers or freight or both, shipyard, marine repair shop, wharf or dock, ice plant, ice refrigeration plant, canal, irrigation system, gas, electric light, heat and power, water supply and power petroleum, sewerage system, wire or wireless communication systems, wire or wireless broadcasting stations and other similar public services. The concept of common carrier under Art. 1732 may be seen to coincide neatly with the notion of public service, under the Commonwealth Act No. 146, as amended, which at least partially supplements the law on common carriers provided for in the New Civil Code (Philippine American General Insurance Company vs. PKS Shipping Co., G.R. No. 149038, 401 SCRA 222).
Meaning of a Common Carrier

1. Questions in the bar examinations requiring the determination of whether or not a carrier is common or private have consistently followed the fact pattern in De Guzman vs. CA, 168 SCRA 612, a case decided on December 22, 1968. Here, the respondent is a junk dealer, engaged in the business of buying and selling bottles and scrap metal in Pangasinan. Upon gathering sufficient quantities of junk, he would bring the materials to Manila for resale using two six-wheeler trucks. On the return trip, he would load his vehicles with cargo of certain merchants to Pangasinan and would charge freight rates lower than the normal commercial rates. In one of those return trips, petitioner, De Guzman, contracted the respondent to deliver from Makati to Urdaneta, Pangasinan two truckloads of milk. Only one truck reached its destination. The other truck was hijacked somewhere in Paniqui, Tarlac. Petitioner now wants to hold respondent liable as a common carrier. The latter contends that it cannot be liable as a common carrier because the transporting of goods on the return trip is not his usual occupation but a mere casual activity and a mere sideline to his junk dealership and that it had no certificate of public convenience normally granted by law to common carriers. Is respondent a common carrier? Respondent is a common carrier. Art. 1732 makes no distinction between one whose principal business is the carrying of persons or goods or both, and one who does the same only as an ancillary activity or a sideline. The law does not likewise require that to be a common carrier, a person or

enterprise should conduct its business in a regular or scheduled basis. A carrier may be common even if its activities are merely episodic, occasional or even if unscheduled. Neither does Art. 1732 distinguish between a carrier offering its services to the general public, the general community or population and one who offers services or solicits business only from a narrow segment of the general population. Also, a certificate of public convenience is not a requisite for an enterprise to be a common carrier (De Guzman vs. CA, 168 SCRA 612, December 22, 1968). A common carrier may be considered as such despite its having a limited clientele (Phil. American General Insurance Co., vs. PKS Shipping Co., G.R. No. 149038, 401 SCRA 222). The defense that a carrier cannot be considered common because it has no publicly known route and terminals, with a limited clientele and issues no tickets is unavailing. The principal business of petitioner is that of lighterage and drayage and that it offers its barges for the transporting of goods by water for compensation even if done on an irregular rather than scheduled manner and with only limited clientele. A common carrier need not have fixed and publicly known routes. Neither does it have to maintain terminals or issue tickets. (Asia Lighterage and Shipping co., vs. CA, G.R. No.147246, 409 SCRA 340). 2. A corporation which is a grantee of pipeline concession to install, operate pipelines and through such pipes, is engaged in the business of transporting and carrying petroleum products for persons who want to employ its services for compensation is a common carrier even if it has a limited clientele. The term common carrier does not only include entities using trains, trucks, ships and the like. The definition of the term common carrier under Art. 1732 makes no distinction as to the means of transporting, as long as it is by land, water, or air. (First Philippine Industrial Corporation vs. CA, G.R. No. 125948, 300 SCRA 661). 3. A customs broker whose principal function is to prepare the correct customs declaration and proper shipping documents as required by law is a common carrier. It suffices that it undertakes to deliver the goods for pecuniary consideration (A.F. Sanchez Brokerage Inc. vs. CA and FGU Insurance Corp., G.R. 147079, 447 SCRA 427). There is greater reason for holding a person who is a customs broker to be a common carrier because the transportation of goods is an integral part of its business (Calvo vs. UCPB General Insurance Co., Inc., 379 SCRA 510). 4. A travel agency engaged in the business of arranging, facilitating, booking, ticketing and accommodations of travelers is neither a private nor a common carrier. It does not undertake to transport people from one place to another, its covenant with its customers being to make travel arrangements for its customers which services include procuring tickets and facilitating travel permits or visas as well as booking customers for tours. Although ones ticket was bought through the efforts of the travel agency, this does not make the latter a common carrier. At most the travel agency is merely an agent of the airline with whom the customer ultimately contracted for carriage. The contract between the travel agency and the traveler is an ordinary contract of services and not one of carriage (Crisostomo vs. CA, G.R. No.138334, 409 SCRA 528).

Test of a Common Carrier Generally, the true test of a common carrier is the carriage of passengers or goods, providing services to those who opt to avail themselves of its transportation services for a fee . If the carrier renders and offers its services exclusively for a particular person or entity and to no other, the carrier is not a common carrier (FGU Insurance Corp. vs. G.P. Sarmiento Trucking Corp., 386 SCRA 312). In other words, we have to consider whether or not the given undertaking is part of the business engaged in by the carrier which he has held out to the general public as his occupation rather than the quantity or extent of the business transacted (Asia Lighterage and Shipping, Inc., vs. CA, G.R. No. 147246, 409 SCRA 340). Specifically, the tests whether a party is a common carrier of goods are: (a) 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 as a casual occupation; (b)He must undertake to carry goods of the kind to which his business is confined; (c) He must undertake to carry by the method by which his business is conducted and over his established roads; and, (d)The transportation must be for hire (First Philippine Industrial Corporation vs. CA, 300 SCRA 661). Effects of Being a Common Carrier 1. The degree of diligence required for common carriers is extraordinary diligence in the vigilance over goods and for the safety of its passengers (Art. 1733, NCC). Extraordinary diligence is that extreme measure of care and caution which persons of unusual prudence and circumspection use for securing and preserving their own property or rights (Republic of the Philippines vs. Lorenzo Shipping Corporation, G.R. 153563, 450 SCRA 550). This rule does not apply to a private carrier. In the absence of a stipulation or a legal provision, the private carrier is deemed to observe only an ordinary diligence or the diligence of a good father of a family (Art. 1173, NCC). 2. In case of loss, damage or deterioration of the goods or in case of injury or death to passengers, the carrier is presumed to have been at fault or to have acted negligently (Arts. 1735 and 1756, NCC). A private carrier is not burdened by this presumption. However, the presumption of fault or negligence, may be overturned by competent evidence showing that the common carrier has observed extraordinary diligence over the goods (Republic of the Philippines vs. Lorenzo Shipping Corporation, G.R. 153563, 450 SCRA 550). 3. The duty of extraordinary diligence of a common carrier, as a rule, is not subject to a reduction to another degree of diligence. Exception: If the agreement to observe a degree of diligence less than extraordinary diligence is: (a) in writing, signed by the shipper or owner of the goods; (b) supported

by a valuable consideration other than the service rendered; and, (c) the stipulation is reasonable, just and not contrary to public policy. No reduction of diligence is allowed with respect to passengers under Art 1757 of the NCC. Under this provision, the responsibility of the carrier for the safety of passengers cannot be lessened by stipulation, by posting of notices, or by statements in tickets. The exception is when the passenger is carried gratuitously. Here a stipulation limiting the common carriers liability for negligence is valid, but not for willful acts or gross negligence (Art. 1758, NCC). This stipulation is not allowed when the passenger is carried at a reduced fare. Reduction in fare does not justify any limitation of the common carriers liability. 4. In common carriers, a stipulation exempting the common carrier from liability because of the carriers negligence or because of the negligence of its employees is void as being contrary to public policy. However In case of private carriers, there could be a valid stipulation exempting the carrier from its negligence or from the negligence of its agents. 5. A common carrier is subject to regulation as a public service entity. A private carrier is not regulated as such. NOTE: Based on past bar examinations, when the carrier is a land or air transportation it is easy to determine when a common carrier becomes private. Take Victory Liner, a common carrier, as an example. One of its buses is hired for an excursion. If there is complete control as to its trip, when to go and where to go, it is like a private carrier. Hence the rules governing common carriers will not apply. The diligence will not be extraordinary and no presumption of negligence will apply. A stipulation exempting the carrier from its negligence or the negligence of its employees will be held valid. When does a ship which is a common carrier become a private carrier? The old cases do not give us a definite criterion. The doctrine laid down in Home Insurance Co. vs. American Steamship Agencies, Inc., 23 SCRA 24, does not however, give us a clear standard when a common carrier becomes a private carrier. It simply says that when a common carrier undertakes to carry a special cargo for a special person it becomes a private carrier. Subsequent cases however, have made this question easier to resolve. Later cases have held that the mere chartering of a ship or maritime vessel does not make it automatically a private carrier because one has to still make a distinction between two kinds of charter parties. This distinction was made in Planters Products, Inc. vs. CA, 226 SCRA 476. It was held that a charter party agreement is of two types: 1. contract of affreightment which involves the use of shipping space; and, 2. bareboat or demise charter where the whole ship is chartered and the charterer has control of the ship and the crew who are considered his servants. When the charter is bareboat, the charterer is deemed to be the owner of the vessel in the meantime. On the other hand, there are two kinds of contract of affreightment: time charter and voyage charter. Here the control of the ship is still with the ship owner and the master and the crews are his employees. In a contract of affreightment the carrier is still a common carrier. CRITERION: CONTROL OF VESSEL AND CREW. Duties of Common Carriers

1. A common carrier is bound to carry passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances. (Art. 1755, NCC). Such duty of a common carrier to provide safety to its passengers obligates it not only during the course of the trip but for so long as the passengers are within its premises and where they ought to be in pursuance to the contract of carriage (Light Rail Transit Authority vs. Navidad, G.R. No. 145804, 397 SCRA 75). If a passenger reaches his destination but he had to stay in the premises of the carrier to claim his luggage and while waiting, he was hit by a crane of the carrier, the latter is liable because the deceased is still deemed to be a passenger (Aboitiz Shipping vs. CA, 179 SCRA 75). When a passenger steps on the platform of a bus, he is already deemed a passenger. The acceleration by the bus driver just as the deceased stepped on the platform causing him to fall and die is clearly the carriers liability. It is the duty of the carrier to stop their conveyances for a reasonable length of time to afford a passenger an opportunity to board and alight. When a public utility bus stops, it is in effect making an offer for the public to ride. Hence, when that bus is not in motion, there is no need for a prospective passenger to signal his intention to board (Dangwa Transportation Co. vs. CA, 202 SCRA 575). When the victim entered the LRT station after having purchased a token and he fell from the platform while waiting for the train and was struck by a train which was coming at the exact time he fell, the victim should be treated as passenger. His standing on the platform while waiting for the train was where he was supposed to be (LRTA vs. Navidad, G.R. No. 145804, 397 SCRA 75). Passengers who remain within the premises of the carrier to retrieve their baggage and stay therein for a reasonable time for the purpose are treated as passengers. Injuries or death occasioned by the carrier at that point in time, are liabilities of the carrier under the contract of carriage (La Mallorca vs. CA, 17 SCRA 739). In a similar vein, a passenger who had disembarked from a vessel and returned after an hour to retrieve a baggage which he left unintentionally and died when hit by the crane used by a stevedoring company is still a passenger because he was there for a purpose and considering that it was the practice of the carrier to offload goods and cargo an hour after arrival (Aboitiz Shipping Corp. vs. CA, 179 SCRA 95). 2. 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. It 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. It continues to be operative even during the time the goods are stored in a warehouse of the carrier at the place of destination until the consignee has been advised of the arrival of the goods and has had reasonable opportunity thereafter to remove them or otherwise dispose of them (Arts. 1736-1738, NCC). The extraordinary diligence in the vigilance over the goods tendered for shipment requires the common carrier to know and to follow the required

precaution for avoiding the damage to, or destruction of, the goods entrusted to it for safe carriage and delivery. It requires common carriers to render service with the greatest skill and foresight and to use all reasonable means to ascertain the nature and characteristic of goods tendered for shipment, and to exercise due care in the handling and stowage, including such methods as their nature requires (Sulpicio Lines, Inc. vs. First LepantoTaisho Insurance Corporation, G.R. 140349, June 29, 2005). For example, if the carrier is equipped with the proper knowledge of the nature of steel sheets in coils and of the proper way of transporting them, the master of the vessel and his crew should have undertaken precautionary measures to avoid possible deterioration of the cargo (Belgian Overseas Chartering and Shipping N.V. vs. Philippine First Insurance Co., Inc., 383 SCRA 23). Source of Liability of Common Carriers 1. The obvious source of the liability of common carriers to the shipper or its passengers is contractual. Any suit against the carrier will normally be based on a breach of contract. When the suit is based on this source of liability, the plaintiff need not prove the negligence of the carrier. This negligence is presumed (Arts. 1735 and 1756, NCC). May the carrier defend by invoking that it has observed diligence n the selection and supervision of its employees? No. This defense will not absolve the carrier from liability when the suit is based on a breach of contract (Art. 1759, par. 2, NCC). 2. May the carrier be sued based on a tort or a quasi-delict? Yes, the act that breaks the contract may also be a tort, although the relationship of passenger and carrier is contractual both in origin and nature (Air France vs. Carrascoso, 18 SCRA 155). The principle in Air France is more easily understood in a common carrier situation. Assume that a bus filled with passengers fell into an embankment because of the negligence of the bus driver, an employee of the carrier. X, a passenger was severely injured as a result of the accident. There is no doubt that X can sue the bus company for breach of contract of carriage because of the existing contractual relationship between X and the bus company. May X also sue the bus company based on a quasi-delict? Yes. Under Art. 2180 of the NCC, employers are liable for the negligent acts of its employees. When X sues the bus company, it is not suing it based on the contract of carriage, i.e., on its failure to bring X safely to his destination. Instead, it is suing the carrier on its negligence in the selection and supervision of its driver. Note: If the cause of action of X against the carrier is based on the contract of carriage, the carrier cannot invoke the defense of diligence in the selection and supervision of its driver to relieve it from liability. This defense is not available in a contractual suit (Art. 1759, NCC). This defense is however, available to the carrier if it is sued under a quasi-delict (Art. 2180, NCC). On the other hand, the driver, not being a party to the contract of carriage, may not be held liable under the agreement the civil action against him can only be based on culpa aquiliana, which, unlike culpa contractual, would require the claimant for damages to prove negligence or fault on his part (FGU Insurance Corporation vs. G.P. Sarmiento Trucking Corporation, 386 SCRA 31).

Liability of a Common Carrier for Damages 1. Neglect or malfeasance of the carriers employees naturally give ground for an action for damages (Morris vs. CA, 352 SCRA 428). 2. To justify an award of actual damages, there should be proof of the actual amount of loss incurred in connection with the death, wake or burial of the victim (Victory Liner, Inc. vs. Heirs of Andres Malecdan, 394 SCRA 520). 3. Factors in determining reasonableness of damages awarded under Art. 1764, NCC, in conjunction with Art. 2206, NCC, are: (a) life expectancy (considering the health of the victim and the mortality table which is deemed conclusive) and loss of earning capacity; (b) pecuniary loss, loss of support and service; and, (c) moral and mental sufferings (Smith Bell Dodwell Shipping Agency Corporation vs. Borja, 383 SCRA 341). 4. Moral damages are awarded for the purpose of compensation. It is not awarded to impose a penalty on the wrongdoer (ABS-CBN Broadcasting Corp. vs. CA, 301 SCRA 572). It is not also meant to enrich the plaintiff at the expense of the defendant (Coca Cola Bottlers Corp. vs. Roque, 308 SCRA 215). We do not follow the American concept of punitive damages which is to punish the wrongdoer. In our legal system, damages are awarded to replace what the plaintiff has lost or to pay him what he will not receive because of the defendant's wrongful act. The only form of damages we have which is closest to the American concept of punitive damages is exemplary damages which is awarded as a corrective measure or as an example to the public not to do or perform a similar act. As a rule, the award of damages refers to the compensation for an injury sustained, to make the plaintiff whole again. 5. Moral damages under Article 2217 of the NCC are awarded when the plaintiff experiences physical suffering, mental anguish, serious anxiety, fright, besmirched reputation, moral shock, wounded feelings, social humiliation and similar injury. Although it is incapable of pecuniary estimation, you must however, prove the FACT of injury. Moral damages are not recoverable simply because you suffer from the above. It is necessary that the sufferings must arise from any of the sources mentioned in Art. 2219 of the NCC. It is significant to note that a breach of contract is not one of those cases where the award of moral damages is allowed. 6. As a rule, there is no recovery of moral damages in a breach of contract because it is not one of those causes mentioned in Art. 2219. Moral damages are recoverable for breach of contract only when the defendant acted FRAUDULENTLY or in BAD FAITH (Art. 2220, NCC; United Airlines, Inc. vs. CA, 357 SCRA 99) or when the breach of the contract of carriage results in the death of the passenger (Art. 1746, NCC in relation to Art. 2206, NCC; Expertravel & Tours, Inc. vs. CA, 309 SCRA 141). 7. Bad faith of a carrier means a breach of known duty through some motive of interest or ill will. While the carrier was motivated by selfenrichment or fraternal interest, and not personal ill will, it is malice nevertheless. Inattentiveness and rudeness of an airlines personnel to a passengers plight may amount to bad faith (Singapore Airline Limited vs. Fernandez, 417 SCRA 474). But where the request of a passenger for a change in schedule was confirmed but the Manila office by mistake informed

the office in another country that there was no such request, the passenger cannot recover moral damages, but only actual damages because bad faith is not clear (China Airlines vs. CA, 211 SCRA 897). On the other hand, a passenger on the waiting list who was cleared for departure but was insolently barred from boarding the plane is entitled to moral and exemplary damages. There is bad faith here (Korean Airlines vs. CA, 234 SCRA 717). 8. Where the bus driver was drunk and the bus was speeding despite a drizzle and it was dark, the gross negligence of the driver amounts to bad faith. This makes the operator liable for moral damages (Baliwag Transit vs. CA, 256 SCRA 746; Fabre vs. Ca, 259 SCRA 426). 9. A shipping company is liable for moral and exemplary damages to a passenger sustaining a loss, for acting in a wanton and reckless manner and in bad faith, if it allows one of its ships to sail with only one engine and knowing that the other engine is not working (Trans-Asia Shipping vs. CA, 254 SCRA 260). Res Ipsa Loquitor (in relation to carriers) 1. The requisites for the applicability of the doctrine of res ipsa loquitur are: (a) the occurrence of an injury; (b) the thing which cause the injury was under the control and management of the defendant (c) the occurrence was such that in the ordinary course of the things, would not happened if those who had control or management used proper care; and d) the absence of the explanation by the defendant. Of the foregoing requisites, the most instrumental is the control and management of the thing which caused the injury (Professional Services, Inc. vs. Agana 513 SCRA 478, January 31, 2007) 2. Res ipsa loquitur is not a rule of substantive law, hence, does not per se create or constitute an independent or separate ground of liability, being mere evidentiary rule. (Professional Services, Inc. vs. Agana 513 SCRA 478, January 31, 2007) While res ipsa loquitur generally finds relevance whether or not a contractual relationship exists between the plaintiff and the defendant, for the inference of negligence arises from the circumstances and nature of the occurrence and not from the nature of the relation of the parties. The requirement that responsible causes other than those due to defendants conduct must first be eliminated, for the doctrine to apply, should be understood as being confined only to cases of pure tort (non-contractual) since obviously the presumption of negligence in culpa contractual immediately attaches by a failure of the covenant or its tenor ( FGU Insurance Corporation vs. G.P. Sarmiento Trucking Corporation, 386 SCRA 312). Defenses of a Common Carrier A. Fortuitous Events - For a fortuitous event to be a defense, it is necessary that the fortuitous event is the only and proximate cause of the loss. It must also be shown that the carrier has exercised due diligence to prevent or minimize the loss before, during and after the occurrence of the event (Art. 1739, NCC; Central Shipping Company, Inc. vs. Insurance Company of North America, G.R. No. 150751, 438 SCRA 511). If the

fortuitous event was coupled with the defendants negligence, fault, bad faith or delay, a fortuitous event would not be considered as a defense. Thus, if a ship sank not only because of a typhoon but also because of the negligence of the captain and the crew and it was also established that the majority of the crew were unlicensed, the fortuitous event is not the only and proximate cause of the loss. The fortuitous therefore, would not be exempting. Even if the weather encountered by the ship is to be deemed a natural disaster under Art. 1739 of the NCC, it must be shown that human agency must be entirely excluded from the cause of injury or loss. In other words, the damaging effects blamed on the event or phenomenon must not have been caused, contributed to, or worsened by the presence of human participation. The defense of fortuitous event or natural disaster cannot be successfully made when the injury could have been avoided by human precaution (Central Shipping Company, Inc. vs. Insurance Company of North America, G.R. No. 150751, 438 SCRA 511). Force majeure generally applies to a natural accident, such as that caused by a lightning, an earthquake, a tempest or a public enemy. Hence, fire is not considered a natural disaster or calamity. 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 Art. 1734, NCC, Art. 1735 of the NCC, provides that in all cases other than those mentioned in Art. 1734, the common carrier shall be presumed to have been at fault or to have acted negligently, unless it proves that it has observed the extraordinary diligence required by law (Edgar Cokaliong Shipping Lines, Inc. Vs. UCPB General Insurance Company, Inc., G.R. No. 146018 404 SCRA 706). Whenever an employees negligence causes damage or injury to another, there instantly arises a presumption juris tantum that the employer failed to exercise diligentissimi patris families in the selection (culpa in eligiendo) or supervision (culpa in vigilando) of its employees. To avoid liability for a quasi-delict committed by his employee, an employer must overcome the presumption by presenting convincing proof that he exercised the care and diligence of a good father of the family in the selection and supervision of his employee. Bare allegations, unsubstantiated by evidence, are not equivalent tp proof. (Real vs. Belo 513 SCRA 111 January 26, 2007) If the common carrier negligently incurs in delay in transporting the goods, a natural disaster shall not free such carrier from responsibility (Art. 1740, NCC). For hijacking or acts committed by thieves and robbers to be a defense, the act must be accompanied by grave or irresistible threat, violence or force (Art.1745, par. 6, NCC; De Guzman vs. CA, 168 SCRA 612; Bascos vs. CA, 221 SCRA 318). Where armed robbery was committed by other passengers, the carrier may be absolved from liability if the incident could not have been prevented (Quisumbing vs. CA, 189 SCRA 605). On the other hand, where the common carrier did not exercise precautionary measures despite knowledge that its buses would be attacked by armed men, it is liable for the death of its passenger killed by said armed men (Fortune Express vs. CA, 305 SCRA 14).

A ship owner is liable for the damage to the coils of wire transported and which became rusty when rain water seeped into the hatch. Rains are not fortuitous events (Eastern Shipping Lines vs. CA, 196 SCRA 570). Mechanical defects and tire blow-outs are not considered as fortuitous events or force majeure (Yobido vs. CA, 281 SCRA 1). B. Act of the Public Enemy - The same duty as required for fortuitous events is required for this defense to be availed of. This means that the act of the public enemy must be the proximate and only cause of the loss. The common carrier must also exercise due diligence to prevent or minimize the loss (Art. 1739, NCC). C. Act or Omission of the Shipper or Owner of the Goods - This defense presupposes that the proximate cause of the loss is the negligence of the shipper or owner of the goods. If his negligence is only contributory to the loss, the negligence of the carrier being the proximate cause thereof, the carrier shall still be liable for damages, although its liability shall be equitably reduced (Art. 1741, NCC). D. Character of the Goods/Defect in Packing - For this defense to be fully invoked, the carrier must establish that it had exercised due diligence to forestall or lessen the loss even if the loss is caused by the character of the goods or by the faulty nature of the packing or of the containers (Art. 1742, NCC). However, if the improper packing or the defects in the container are known to the carrier or his employees or apparent upon ordinary observation, but he nevertheless accepts the same without protest or exception notwithstanding such condition, he is not relieved of liability for damage resulting therefrom (Calvo vs. UCPB General Insurance Co., Inc., 379 SCRA 510). This defense refers to cases when goods are lost or damaged while in transit as a result of the natural decay of perishable goods or the fermentation or evaporation of substances, the necessary and natural wear of goods in transport, defects in packages in which they are shipped, or the natural propensities of animals (Belgian Overseas Chartering and Shipping N.V. vs. Philippine First Insurance Co., Inc., 383 SCRA 23). E. Order or Act of Competent Public Authority - This defense will be effective if the public authority had the power to issue the order for the seizure or destruction of the goods (Art. 1743, NCC). If it had no power to issue the order, the defense would be force majeure akin to hijacking or robbery where there was irresistible force, violence or threats. F. The Carrier is Acting as a Private Carrier - Where the carrier is acting as a private carrier, the responsibilities and liabilities of a common carrier will not apply. For example: A stipulation that the carrier shall not be responsible for the acts or omissions of its employees is a void stipulation when the carrier involved is a common carrier. Where the carrier is private, this stipulation is valid. G. Proof That the Carrier Observed Extraordinary Diligence (See Articles 1735 and 1756, NCC)


H. There is a Valid Stipulation Limiting the Carriers Liability to an Agreed Valuation - The validity of this kind of stipulation is dependent on the concurrence of two requisites, namely: (a) that the agreement allows the owner of the goods to declare a greater value for the goods transported (Art. 1749, NCC); and, (b) the stipulation must be reasonable and just under the circumstances and must be fairly and freely agreed upon (Art. 1750, NCC). When these requisites are present, the validity of the stipulation cannot be attacked on the ground that it is a contract of adhesion. It has been held that a contract of adhesion is not void in itself. It is as binding as an ordinary contract. Parties who enter into it are free to reject the stipulation entirely (Ermitanio vs. CA, 306 SCRA 218). A stipulation limiting the liability of a carrier to P500.00 for every baggage or package is not valid because it does not give the shipper the option to declare a higher value for the goods shipped. In limiting the carriers liability to P500.00 for every baggage or package regardless of its value is not a valid stipulation. Even if the shipper is given the option to declare a greater value for the goods, if the stipulation is printed at the back of a ticket stub are in letters so small that they are hard to read, this would not warrant the presumption that the passenger was aware of those conditions. In such a case, he did not fairly and freely agree to the stipulations. Hence, he cannot be bound by the conditions fixed at the back of the ticket (Shewaram vs. Philippine Airlines, 17 SCRA 606). Even if the stipulation is, by its terms valid, if the carrier refuses to carry the goods unless the shipper agrees to such stipulations, the agreement limiting the carriers liability may be annulled by the shipper (Art. 1746, NCC). If the common carrier, without just cause, delays the transportation of the goods, or when the carrier changes the usual routes, the contract limiting the common carriers liability cannot be availed of in case of loss, destruction, or deterioration of the goods (Art. 1747, NCC). An agreement limiting the common carriers liability for delay on account of strikes or riots is valid (Art. 1748, NCC). A stipulation limiting the carriers liability in the vigilance over the goods does not affect the rule that the common carrier is disputably presumed to have been negligent in case of their loss, destruction, or deterioration (Art. 1752, NCC). The shippers/consignees may recover the full value of the goods by the simple expedient of declaring the true value of the shipment in the bill of lading. Other than the payment of a higher freight, there was nothing to stop them from placing the actual value of the goods therein. Fraud is committed against the common carrier by deliberately undervaluing the goods in the bill of lading, thus depriving the carrier of its proper and just transport fare. The purpose of the limiting stipulation in the bill of lading is to protect the common carrier. The common carrier can then take appropriate measures, getting insurance, if needed, to cover or protect itself. Hence, a shipper/consignee that undervalues the real worth of the goods it seeks to transport does not only violate a valid contractual stipulation, but commits a


fraudulent act when it seeks to make the common carrier liable for more than the amount it declared in the bill of lading. The carrier should not be held liable for more that what was declared by the shippers/consignees as the value of the goods in the bills of lading (Edgar Cokaliong Shipping Lines, Inc., vs. UCPB General Insurance Company, Inc., G.R. No. 146018, 404 SCRA 706). Liability for Baggages 1. Baggages of passengers may either be those in the custody of the carrier or those baggages in the custody of the passenger. 2. Where the baggage is under the custody of the carrier or its employees the provisions of Arts. 1733 to 1753 of the NCC shall apply. This means that the liability shall be governed by the provisions on common carriers. 3. Where the baggage is under the custody of the passenger, the rules governing the responsibility of hotel-keepers shall apply. These rules are those found in Arts. 1998, 2000-2003, NCC. These rules are those governing necessary deposits. The carrier shall be like a hotel-keeper with respect to those under the custody of the passenger. The common carrier shall be responsible for the baggage as a depositary as long as the carrier was given notice of the presence of the baggage brought by the passenger and also provided that the passenger had observed the precautions which the carrier advised the passenger to undertake as to the care and vigilance over the baggage. Liability of the carrier will not attach if such requirements of notice and/or precautions are not met. Liability of Common Carrier as to Passengers 1. In case of death or injuries to passengers, the presumption is that the common carrier is liable (Art. 1756, NCC). In an action for breach of contract of carriage, the aggrieved party does not have to prove that the common carrier was at fault or was negligent. All that is necessary to prove is the existence of the contract and the fact of its non-performance by the carrier (Singapore Airline Limited vs. Fernandez, 417 SCRA 474). 2. The contributory negligence of the passenger does not take away the carriers responsibility although its liability is mitigated by the passengers contributory negligence (Art. 1762, NCC). 3. The fact that the employee of the carrier acted beyond his authority or acted in violation of the instructions of the common carrier, the latters responsibility does not cease. It is still liable for the death of or injuries of passengers (Art. 1759, NCC). 4. If the injury is suffered by the passenger because of the negligence or willful act of a fellow passenger, the carrier will be liable only if through the exercise of the diligence of a good father of a family, the common carriers employees could have prevented or stopped the same. Otherwise, it is not liable (Art. 1763, NCC). Registered Owner Rule and Kabit System


1. The registered owner of any vehicle, even if not used for public service, would directly and primarily be responsible to the public or to third persons for injuries caused the latter while the vehicle was being driven on the highways or street (St. Marys Academy vs. Carpitanos, 376 SCRA 473). 2. The prevailing doctrine on common carrier makes the registered owner liable for the consequences following from the operation of the carrier, even though the specific vehicle involved may already have been transferred to another person (Benedicto vs. IAC, 187 SCRA 547). The owner operator of record is the employer of the driver, the actual operator and employer being considered as merely its agent (Equitable Leasing Corporation vs. Suyom, 388 SCRA 445). 3. The principle upon which this doctrine is based is that in dealing with vehicles which are registered, the public has the right to assume or presume that the registered owner is the actual owner thereof, for it would be difficult for the public to enforce the actions that they may have for injuries caused to them by the vehicles being negligently operated, if the public should be required to prove who the actual owner is. It is not implied however, by this doctrine, that the registered owner may not recover whatever amount he had paid by virtue of his liability to third persons from the person to whom he had actually sold, assigned, or conveyed the vehicle. One of the principal purposes of motor vehicles legislation is identification of the vehicle and of the operator, in case of accident and another is that the knowledge that means of detection are always available, which may act as a deterrent from lax observance of the law and of the rules of conservative and safe operation (Villanueva vs. Domingo, G.R. No. 144274, 438 SCRA 485). 4. The registered owner rule is applicable whenever the persons involved are engaged in what is known as the kabit sysyem. The kabit system is an arrangement whereby a person who has been granted a certificate of public convenience allows another person who owns a motor vehicle to operate under such franchise for a fee. Although not outrightly penalized as a criminal offense, the kabit system is recognized as being contrary to public policy and therefore, is void and inexistent (Lita Enterprises vs. IAC, 129 SCRA). It is a fundamental principle that the courts will not aid either party to enforce an illegal contract but will leave them both where it finds them. Where the parties are in pari delicto, no affirmative relief of any kind will be given to one against the other (Teja Marketing vs. IAC, 148 SCRA 347). Boundary System The boundary system is a scheme by an owner/operator engaged in transporting passengers as a common carrier to primarily govern the compensation of the driver, that is, the latters daily earnings are remitted to the owner/operator less the excess of the boundary which represents the drivers compensation. Jeepney owner/operator driver relationship under the boundary system is that of employer-employee and not lessor-lessee (Villamaria, Jr. vs. CA, , April 19, 2006). Doctrine of Last Clear Chance


1. The doctrine of last clear chance states that where both parties are negligent but the negligent act of one is appreciably later than that of the other, or where it is impossible to determine whose fault or negligence caused the loss, the one who had the last clear opportunity to avoid the loss but failed to do so, is chargeable with the loss. This doctrine is not applicable in a case of culpa contractual (Consolidated Bank and Trust Corporation vs. CA, 410 SCRA 562). 2. The doctrine of last clear chance applies 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 contractual obligations, for it would be inequitable to exempt the negligent driver and its owner on the ground that the other driver was likewise guilty of negligence. The common law notion of last clear chance permitted courts to grant recovery to a plaintiff who has also been negligent provided that the defendant had the last clear chance to avoid the casualty and failed to do so (William Tiu, doing business under the name and style of D Rough Riders, and Virgilio Te Las Pias vs. Arriegado, G.R. 138060, September 1, 2004). II. MARITIME COMMERCE Doctrine of Limited Liability/Hypothecary Nature of Maritime Transactions Under the limited liability rule (hypothecary nature of maritime transactions), the liability of the ship owner or ship agent is co-extensive with the value of the ship, including its equipment and freightage, so that if the vessel is lost, the liability of the ship owner or ship agent is likewise lost. If the vessel is insured, then the liability may be satisfied out of the insurance proceeds. The doctrine of limited liability has its origins from medieval times. Maritime travel then was attended by hazards and perils because most of the oceans of the world were uncharted. Maritime commerce was not considered a wise investment. To encourage maritime activity, it was deemed necessary to confine the liability of the ship owner to the value of the ship to avoid the scenario of an investor being financially ruined as a result of the loss of the cargo on board. Thus was born the rule, no ship, no liability (Monarch Insurance vs. CA, 333 SCRA 71; Chua Yek Hong vs. IAC, G.R. No. 74811, 166 SCRA 138). If the ship does not sink, the doctrine of limited liability will not apply. However, the ship owner or ship agent may produce the effect of sinking the vessel by abandoning the vessel to its claimants. The abandonment includes the equipment of the ship and its freightage. The doctrine of limited liability will then apply (Luzon Stevedoring vs. CA, 156 SCRA 169). The abandonment may be made where the fault or negligence is committed solely by the captain of the ship. Where the ship owner or ship agent is likewise to be blamed, the abandonment cannot be made (Philamgen vs. CA, 273 SCRA 262). The limited liability rule however, does not apply to certain cases. Here, the ship owner/ship agent is still liable despite the total loss of the vessel.


(a) when the loss is due to the fault or negligence of the ship owner/ship agent or their concurring negligence with the ship captain; (Example is when the vessel is unseaworthy.) (b)when the liability proceeds from the Workmens Compensation Act or the Labor Code; (c) expenses for the repairs of the vessel before its complete loss; (d)when the vessel is insured (proceeds of the insurance shall be the source of payment because the proceeds shall take the place of the vessel); (e) when the voyage is not maritime as in rivers; and, (f) when the ship is on a voyage as a private carrier and not as a common carrier. To limit the liability of the shipowner to the amount of insurance proceeds, the shipowner has the burden of proving that the unseaworthiness of its vessel was not due to its fault or negligence. The findings of the Board of Marine Inquiry (BMI) are not deemed always binding on the courts. Besides, exoneration of the vessels officers and crew by the BMI merely concerns their respective administrative liabilities. It does not operate to absolve the common carrier from its civil liabilities arising from its failure to exercise extraordinary diligence, the determination of which properly belongs to the courts (Aboitiz Shipping Corporation vs. New India Assurance Company, 488 SCRA 563, May 2, 2006). Persons Involved in Maritime Commerce 1. Ship Owner - He is the person who has control, possession, management and ownership of the maritime vessel. 2. Ship Agent Also called a naviero, he is the person who is entrusted with provisioning and representing the vessel in the port in which it may be found. While he is not the ship owner, he is solidarily liable with the owner for such losses or damages for which the ship owner is liable for (NDC vs. CA, 164 SCRA 593). Like the ship owner, he is liable for debts incurred by the captain for the repair and the provisioning of the vessel. The ship agent when sued cannot defend by claiming that he is a mere agent of a disclosed principal because he is not an agent as defined under the Civil Code of the Philippines. Even if the ship owner is known to be his principal, the ship agent is chargeable for all the liabilities of the ship owner in relation to the vessel. The ship agent who pays for the liability of the ship owner is however, entitled to reimbursement from the ship owner. The ship agent may also exercise all the rights of the ship owner and is subject to all the liabilities of the latter in connection with the operation of the vessel because in the absence of the ship owner, it is as if he is the owner (Switzerland General Insurance vs. Ramirez, 96 SCRA 297; NDC vs. CA, 164 SCRA 593; Art. 587, Code of Commerce). Thus, the ship agent may make an abandonment of the ship to limit the liability of the ship owner to the value of the vessel, its appurtenances and freightage. If the ship owner is absent, he is liable for the effects of collision. He may also be held liable for the tax liabilities of the ship owner. May the ship agent assert prescription as against the ship owner if he wants to acquire the vessel? No. The ship agent holds the vessel in trust and


he cannot invoke prescription in his favor to acquire ownership over the vessel. 3. Captain or Master of the Ship - He is responsible not only for sailing the vessel and commanding and directing the crew. He also represents the government of the country under whose flag he navigates. He has some powers inherent to his position as captain. Thus: (a) he can appoint the crew in the absence of the ship agent or ship owner; (b) he can enter into contracts for the charter of the vessel in the absence of the ship agent; (c) during the voyage, he can enter into contracts to supply, equip, and provision the vessel; (d) he can order the repair of the vessel to enable it to continue its voyage; and, (e) he can impose correctional penalties on those who, while on board the vessel, fail to comply with his orders or are wanting in discipline. 4. Supercargo - He is the agent of the owner of the goods that are being shipped who accompanies the cargo on board the ship. He sells the cargo in a foreign port of destination and buys other cargo to be loaded on the ship on the return trip. When there is a supercargo on board, the powers and responsibilities of the ship captain cease with respect to matters conferred upon the supercargo by the cargo owner but still continues to have powers and responsibilities pertaining to his office or authority. Contracts in Maritime Commerce 1. Charter Party - A charter party is a maritime contract by virtue of which the owner or agent of a vessel binds himself to transport merchandise of persons for a fixed price and where the ship or some part thereof is leased by the owner to another person for a specified period, voyage or purpose. There are certain classes of charter parties. They are: (a) Bareboat or Demise - Here the charterer receives the ship from the ship owner or ship agent in a bare condition with no provisions, supplies or crew. The charterer therefore provides for all of these and is considered the owner of the vessel pro hac vice during the existence of the contract. He is therefore liable as a ship owner during this period and is liable for all the consequences of the voyage as if he were the owner. He would not however, be liable if the loss, destruction or damage to the goods or the injuries or deaths of passengers was due to the unseaworthy condition of the vessel. In this case, it is the ship owner who is liable. Where the charter is bareboat or demise, the vessel which is ordinarily a common carrier, becomes a private carrier (Planters Products, Inc. vs. CA, 226 SCRA 476; Caltex Phil., vs. Sulpicio Lines, 315 SCRA 709) (b) Contract of Affreightment - This contract involves the use of shipping space to carry goods for a particular time (time charter) or for a particular, single voyage (voyage charter). In both cases, the charterer pays for a space in the vessel, either for a determinate period of time or for a single or consecutive voyage, the ship owner to supply the ships store, pay for the wages of the master of the crew and defray the expenses for the maintenance ship. The charterer does not in either of these cases become the owner of the vessel pro hac vice. The rights and the responsibilities of ownership rest on the owner. The charterer is free from liability to third persons in respect of the ship (San Miguel vs. Heirs of Sabiniano Inguito, G.R.


No. 141716, 384 SCRA 87). The vessel in this type of charter party remains as a common carrier (Puromines vs. CA, 220 SCRA 281). Before loading the vessel, the charterer may cancel the charter contract unilaterally as long as he pays of the freightage agreed upon. The consent of the ship owner is not necessary. Mere notice is enough (Art. 688, Code of Commerce). This cannot be done in an ordinary lease under the Civil Code. The charterer may also rescind for good causes like when the vessel is not up to the capacity agreed upon or when the vessel is not placed at the disposal of the charterer within the period agreed upon. The ship owner may also rescind the contract if the charterer fails to load or use the vessel. Here the charterer must still pay of the freightage. If the vessel is sold and has a new owner, and the latter loads the ship with his own cargo, the new owner may rescind the charter even if he knows of the contract. (Art. 689, Code of Commerce). Under the Civil code, the new owner who knows of the contract cannot rescind and must respect the same. The occurrence of any of the following is a ground for rescission at the instance of any party: (a) war; (b) blockade; (c) prohibition to receive cargo by competent authority; (d) embargo of the vessel by the government; and, (e) inability of the vessel to navigate due to no fault of the ship owner, ship agent or ship captain. Primage is a term associated with charter party agreements. It refers to the additional compensation given to the captain and the crew when the ship is under charter. Under modern practice it is but an increase in freight charges which is paid to the ship owner who assumes the obligation of giving the corresponding compensation to the captain and the crew if such is stipulated. Demurrage is the amount given to the ship owner as additional compensation for detaining beyond the period agreed upon in the charter party. 2. Loans on Bottomry/Respondentia - These are loans the repayment of which depend upon the safe arrival in port of the ship and of the goods upon which the loans are made. The loan is bottomry if the security of the loan is the ship (bottom or keel). The loan is respondentia if the security are the goods laden on board. These loans are not consensual contracts and thus, are not perfected by mere consent. They require actual delivery of the money borrowed for their perfection. There are distinctions between a simple loan (mutuum) and loans on bottomry and respondentia. These distinctions are: (a) A simple loan does not involve a marine risk; bottomry and respondentia involve marine risks. Without these marine risks the loan is merely an ordinary loan. (b) A simple loan is not extinguished by the loss of the security and must still be paid; the loss of the security extinguishes the obligation to pay in bottomry or respondentia. This extinguishment


of the obligation reflects the hypothecary nature of loans on bottomry and respondentia. (c) The interest rates in simple loan is much lower than the interest rates bottomry and respondentia. (d) In simple loan, the first lender is preferred; in bottomry and respondentia, the last lender is preferred n payment. This is because it was the last lender that made it possible for the vessel to sail and arrive safely. Loans on bottomry or respondentia cannot be made on the salaries of the crew or on the profits expected (Art. 725, Code of Commerce). A loan on bottomry may be entered into only by the ship owner or ship agent. The ship captain cannot, as a rule, enter into such a contract. Exceptions: (a) in the absence of the ship owner or ship agent; or, (b) the ship captain is also an owner of the ship. A loan on respondentia can be entered only by the owner of the cargo. The ship owner, ship agent or captain cannot, unless of course, they also own the cargo. The general rule is that the loss of the ship or the goods on which the loan was made extinguishes the obligation to pay the loan. The loan will not however, be extinguished in the following instances: (a) loss was caused by the inherent defect of the thing or goods; (b) loss was caused by the fault or malice of the borrower; (c) loss was caused by the barratry on the part of the captain; Note: Barratry refers to a willful misconduct of the captain to the prejudice of the owner of the vessel. (d) Loss was a consequence of the vessel being engaged in transporting contraband; and, (e) If the loss arose from having loaded the merchandise on a vessel different from that designated in the contract unless the change was due to a fortuitous event (Art. 731, Code of Commerce). 3. Averages - There are two kinds of averages: (a) General or gross average; and, (b) Particular or simple average. Simple or particular average includes all expenses and damages caused to the vessel or her cargo which have not inured to the common benefit of all the persons interested in the vessel and cargo. General or gross average includes all the damages and expenses which are deliberately caused in order to save the vessel, its cargo or both from a real and known risk. They are expenses and damages incurred for the benefit of all. The following are the requisites of general average: (a) The existence of a common danger; (b) The deliberate sacrifice of the vessel and/or cargo or parts of the vessel or cargo; (c) The taking of the legal steps before the deliberate sacrifice; and,


(d) Success in saving what was intended to be saved. Before incurring a general average or making a deliberate sacrifice of a part of the ship or of the cargo, the captain should call a meeting among the sailing mate, the officers of the vessel and all persons interested in the cargo. This meeting should lead to a resolution making a deliberate sacrifice. The resolution shall be entered into a log book stating the reasons for the decision. The deliberations included the resolution must be stated in the minutes of the meeting. Upon arrival in the first port, the captain shall deliver a copy of the minutes to the maritime judicial authority of the first port within 24 hours from arrival of the ship. There, he must ratify the minutes under oath. All the persons benefited by the deliberate sacrifice must share in the expenses in proportion to their interests. This is the rule in the liquidation of general averages. Thus, assuming that while on a voyage a ship run into an unexpected storm. If in order to save the ship, the cargo owned by Mr. X had to be jettisoned, all the other cargo owners, the owner of the ship as well as Mr. X shall proportionately share in the loss. The loss is considered a general average. On the other hand, if during the voyage, the hull of the ship was damaged when it hit a submerged rock, the expenses for the repair of the ship shall constitute only particular average. Losses suffered by the cargo because of the inherent defect in the packing shall be borne by the cargo owner. This is because the loss was not incurred for the common benefit. This is a particular average. The wages and victuals (food) of the crew during the voyage are of course for the account of the ship owner and constitute particular average. This is true even if the vessel is under quarantine. But wages of the crew held hostage by enemies, privateers or pirates until they are returned to the vessel or to his domicile constitute general average. Also considered as general average are the expenses for the treatment of the crew who may have been wounded or crippled in defending or saving the vessel. Goods or cash invested to redeem a vessel and its cargo captured by privateers constitute general average. The cables and masts cut or rendered useless or parts of the ship disabled to lighten the vessel are also general average. Also deemed general average are the expenses for the liquidation of the general average. 4. Bill of Lading - A bill of lading (also known as forwarders receipt, shipping receipt, or receipt for transportation) is a written acknowledgment of receipt of goods accompanied with the written stipulation that such goods shall be transported by the carrier, on behalf of the shipper, to a consignee at a designated place. Thus, a bill of lading indicates three parties in a contract of transportation: (a) the shipper; (b) the carrier; (c) the consignee. A bill of lading is two-fold in nature: (a) a contract where the carrier is bound to deliver the goods to an agreed destination and the shipper is to pay; and, (b) a receipt where it acknowledges that certain described goods have been received by the carrier for shipment (Iron Bulk Shipping Philippines, Co., Ltd. vs. Remington Industrial Sales Corporation. 417 SCRA 229).


The bill of lading defines the right and liabilities of the parties in reference to the contract of carriage. It is in the nature of contract of adhesion. This type of contract has been declared as an ordinary contract the reason being that the party who adheres to the contract is free to reject it entirely (Provident Insurance Corp. vs. Court of Appeal, 419 SCRA 480). NOTE: The issuance of a bill of lading is not indispensable to the existence of a contract of carriage of goods. The liability of the carrier begins when the goods are actually delivered to it for transportation and are accepted by the carrier. Actual delivery and acceptance are the acts that bind the carrier. Thus, even in the absence of a bill of lading, a cause of action arises against the carrier for the loss, destruction or deterioration of the goods (Compania Maritima vs. Insurance of North America, L-18965, October 30, 1964). The surrender of the original bill of lading is not a condition precedent for a common carrier to be discharged of its contractual obligation. If surrender of the original bill of lading is not possible, acknowledgment of the delivery by signing the delivery receipt suffices (Republic of the Philippines vs. Lorenzo Shipping Corporation, G.R. 153563, February 7, 2005). The statement in the bill of lading, that the shipment was in apparent good condition, is sufficient to sustain a finding of absence of defects in the merchandise, but such statement will create a prima facie presumption only as to the external condition and not to that not open to inspection (Philippine Charter Insurance Corporation vs. Unknown Owner of the Vessel M/V National Honor, G.R. 161833, July 8, 2005). The following are the common forms of bills of lading: (a) Negotiable bill of lading one where the goods covered by the bill are deliverable to bearer or to the order of a specified person. (b) Non-negotiable bill of lading one where the goods covered by it are deliverable to a specified person. (c) Through bill of lading - one where the carrier which issues it is obliged to use the facilities of other carriers aside form its own. (d) Clean bill of lading one which does not indicate that there are defects in the goods to be transported. (e) Foul bill of lading one which indicates the defects in the goods to be transported. (f) On board bill of lading This bill of lading particularly states the vessel that will carry the goods and that the goods have been received by the carrier and are now on board for transportation. (g) Received shipment bill of lading - This bill, although stating that the goods have been received for shipment, does not specify the vessel on which they are to be transported. Filing of Claims Against Vessels 1. For Inter-island Shipping If the goods arrived in damaged condition, the claim must be filed by the shipper within the following periods:


(a) If the damage is apparent, then the claim must be immediately made or filed; (b) If the damage is not apparent, then file the claim within 24 hours (Art. 366, Code of Commerce). Note: The filing of a claim within the periods mentioned constitute a condition precedent to judicial action. An action filed without filing the required claim may be vulnerable to a motion to dismiss based on failure to comply with a condition precedent. This failure would also affect the plaintiffs cause of action. Where the claim has been properly filed, judicial action may be filed within ten (10) years from the accrual of the cause of action, i.e. the denial of the claim if there is a bill of lading in accordance with Art. 1144 of the NCC. If there is no bill of lading or no other written contract between the parties, hence, merely oral, action may be commenced within six (6) years pursuant to Art. 1145 of the NCC. 2. International Shipping (Carriage of Goods by Sea Act) The law of the country to which the goods are to be transported govern the liability of the common carrier in case of loss, destruction, or deterioration (Eastern Shipping Lines, Inc. vs. IAC, 150 SCRA 464; NDC vs. CA, 164 SCRA 593). The Carriage of Goods by Sea Act (COGSA) , which is suppletory to the provisions of the Civil Code, supplements the latter by establishing a statutory provision limiting the carriers liability in the absence of a shippers declaration of a higher value in the bill of lading - the provisions on limited liability are as much a part of the bill of lading as though physically in it and as though placed there by agreement of the parties (Belgian Overseas Chartering and Shipping N.V. vs. Philippine First Insurance Co., Inc., 383 SCRA 23). If the goods arrived in damaged condition, the claim must be filed by the shipper within the following periods: (a) If the damage is apparent file the claim immediately; (b) If the damage is not apparent, file the claim within three (3) days. Under Sec. 3(6) of the COGSA, the claim must be in writing. However, this requirement has no actual legal significance because the filing of the claim is not a condition precedent to file an action unlike the required filing of the claim in inter-island shipping. Under the same provision, the fact that the notice of loss was not made within the period stated, does not prejudice the right of the shipper to bring suit. The action should be filed within one (1) year from the delivery of the goods or from the date when the goods should have been delivered. This is the prescriptive period for the action. Where the action is not filed within said period, the carrier shall be discharged from liability (Sec. 3(6), COGSA). The one (1) year period does not apply to conversions or misdeliveries. They are not contemplated within the meaning of loss of goods mentioned in the COGSA (CIA Maritima vs. Insurance Co. of North America, 19 SCRA 123; Ang vs. CIA Maritima, 133 SCRA 600). Here, use the New Civil Code provisions on prescription: Ten (10) years if there is a written contract or bill of lading or six (6) years if the contract is oral. For losses or damage to the


goods or non-delivery which is also a loss, apply the one (1) year period under the COGSA. If suit is brought against the carrier for delay in delivery, this is not a loss or damage to the goods contemplated by Sec. 3 of the COGSA. You have to use instead, the New Civil Code provisions on prescription. A stipulation reducing the one (1) year period is null and void although an agreement suspending the period is valid. There must be an agreement between the parties to suspend the running of the prescriptive period. Hence, a mere letter of demand by the shipper or any other extra-judicial demand, does not toll the running of the period (Dole Philippines vs. Maritime Co., 148 SCRA 118) . The law admits an exception to the prescriptive period: if the one-year period is suspended by express agreement of the parties. In such a case, the agreement becomes the law of the parties (Phil. American Gen. Insurance vs. Mutuc, 61 SCRA 22, 23). If the suit is filed by the insurer under its subrogatory right, the one (1) year period applies (Fil. Merchants vs. Alejandro, 145 SCRA 42). However, where the shipper or consignee files the suit against the insurer for payment under the insurance policy, the one (1) year period does not apply but the ten (10) year prescriptive period under the Civil Code because the suit is not against the carrier arising from the contract of carriage (Mayer Steel Pipe Corp. vs. CA, 274 SCRA 432). If cargo is shipped from New York to the Cebu pursuant to the bill of lading, but the ships final port is Manila, losses to the goods while being transshipped from Manila to Cebu aboard an inter-island vessel is still covered by the COGSA (American Insurance Co. of North America vs. CIA Maritima, 21 SCRA 998). The liability of the carrier is US$500 per package in the absence of a shippers declaration of a higher value in the bill of lading (Sec. 4(5), COGSA). When what would ordinarily be considered packages are shipped in a container supplied by the carrier and the number of such units is disclosed in the shipping documents, each of those units and not the container constitutes the package referred to in the liability limitation provision of COGSA (Belgian Overseas Chartering and Shipping N.V. vs. Philippine First Insurance Co., Inc., 383 SCRA 23). Risks and Accidents in Maritime Commerce 1. Arrival under stress This occurs when a ship discontinues its voyage towards its destination and instead sails towards and arrives at the nearest and most convenient port because of any of the following causes: (a) lack of provisions; (b)well-founded fear of seizure by privateers or pirates; or, (c) any accident of the sea that disables the ship. If the arrival is lawful, the expenses for arrival shall be for the account of the ship owner or ship agent but either shall not be liable for damages resulting from said arrival. If the arrival under stress is unlawful, the ship owner and the captain shall be jointly liable for damages to the shippers or


cargo owners for damage which they may sustain (Art. 821, Code of Commerce). The arrival under stress shall be considered unlawful under any of the following cases: (a) If the lack of provisions is due to the negligence of the captain; (b) If the risk of pirates or enemies was not manifest and well-founded; (c) If the disabling of the vessel was due to lack of repairs; or, (d) If there is malice, want of skill, or lack of foresight on the part of the captain. 2. Collision - This is the impact of two moving vessels. If one is moving and the other is stationary, the impact is called allision. In case of collision of vessels in transporting goods to the Philippines, the Code of Commerce shall apply, since collision is a matter not regulated by the Civil Code and the Code of Commerce being suppletory to the Civil Code (National Development Company vs. CA, 164 SCRA 593). There are three zones of collision: (a) First zone This is the time up to the moment when the risk of collision begins. This zone starts the moment the vessels find each other traveling in the same area. (b) Second zone The time from the moment the risk of collision begins up to the point when the collision becomes a certainty. It is in this zone where the negligence of the vessel is determined and is material. (c) Third zone - This is the time from the moment the collision becomes certain up to the actual impact. In this zone, if a vessel having the right of way makes a wrong maneuver or a wrong move to avoid a collision made certain by the negligent acts of the other vessel during the second zone, the wrong move of the innocent vessel is called an error in extremis and even if wrong does not make the innocent vessel liable. There are certain important rules to remember in relation to collision of vessels that have often been subjects of the bar. Most important among these are: (a) If the collision is imputable to the negligence of one vessel, the vessel at fault shall be liable for all the losses and damages suffered by the other vessel and by the owners of the cargoes of both vessels (Art. 826, Code of Commerce). (b) If the collision is imputable to both vessels, each shall bear its own damage, and both shall be solidarily liable to the damage to their cargoes (Art. 827, Code of Commerce). (c) If it cannot be determined which of the vessels is at fault, then both shall be considered at fault and each shall bear its own damage, but shall be solidarily liable for the damage to their cargoes. Where the fault cannot be determined and both are considered at fault, this is called the doctrine of inscrutable fault (Art. 828, Code of Commerce).


(d) If the collision is due to fortuitous event, no one shall be liable. Hence, each vessel and each cargo owner shall bear his own damage (Art. 830, Code of Commerce). (e) If a vessel should be forced by a third vessel to collide with another vessel, the owner of the third vessel shall indemnify the losses and damages caused, and the captain shall be liable to the owner (Art. 831, Code of Commerce). (f) If by reason of a storm or force majeure, a vessel which is properly anchored and moored shall collide with another, causing it damage, the injury occasioned shall be considered as particular average of the vessel run into. The vessel hitting the latter will not be liable as long it has been properly moored and anchored (Art. 832, Code of Commerce). (g) The rules on collision do not apply to small boats in rivers and in bay traffic (Lopez vs. Duruelo, 52 Phil. 229). NOTE: There are some civil law concepts which should not be applied to maritime collisions, thus: (a) The defense of diligence of a good father of a family is not available in maritime torts because this will render useless the provision that in case both vessels are at fault, both shall bear its own damage and shall be solidarily liable for their cargoes. (b)The doctrine of last clear chance cannot be invoked in maritime collisions. (c) The doctrine of contributory negligence cannot be invoked in maritime collisions. 3. Shipwreck - This refers to the condition where the ship is so severely damaged and disabled that it can no longer navigate. Losses and deterioration suffered by a vessel and her cargo by reason of shipwreck shall be for the account of the owners (Art. 840, Code of Commerce). If it is the shipwreck is due to the captains fault, he shall be liable to the ship owner and the shippers. Maritime Protest Protest in maritime commerce is required in any of the following cases: (a) Arrival under stress; (b) Shipwreck or stranding of the vessel; (c) When the vessel has gone through a hurricane; and, (d) In case of maritime collisions. Without a protest, the action for recovery of losses and damages arising from any of the above cannot be admitted. The protest is a condition precedent to the filing of the action. A maritime protest is a written statement by the master of the vessel, attested by a proper judicial officer or a notary, to the effect that damage suffered by the ship on her voyage was caused by a storm or other perils of the sea, without any negligence or misconduct on his own part. This is presented within twenty-four (24) hours before the competent authority of the port where the event took place or in the first port of arrival. If it


occurred in a foreign country, the protest shall be made with the Philippine consul. The reason for requiring the protest is to prevent feigning of the event. The Warsaw Convention On Air Transportation 1. The Warsaw Convention was enforced in the Philippines effective February 9, 1951 although earlier concurred in by the Philippine Senate as early as May 16, 1950. The convention sought to regulate in a uniform manner the conditions of international transportation by air in respect to the documents used for transportation and of the liability of the carrier. 2. The Warsaw Convention applies to all international transportation of persons, baggage, or goods by air and for compensation. There is international transportation if the place of departure and destination are within the territories of two contracting parties or even if the place of departure and destination are within the territory of a single contracting party as long as there is an agreed stopping place within the territory of another country, whether or not said country is a contracting party to the convention (Art. 1, Warsaw Convention). 3. Under the Warsaw Convention, the carrier must deliver to the passenger a ticket. However, the absence, irregularity, or loss of the passengers ticket shall not affect the existence or the validity of the contract of transportation, which shall nonetheless be subject to the rules of the convention. If the carrier accepts a passenger without a passenger ticket having the carrier shall not be entitled to avail itself of the provisions of the convention which exclude or limit its liability. 4. The same convention likewise provides that for the transportation of baggage, other than small personal objects of which the passenger takes charge of himself, the carrier must deliver a baggage check. The absence, irregularity, or loss of the baggage check shall not affect the validity of the contract of transportation. Nevertheless, if the carrier accepts baggage without a baggage check the carrier shall not be entitled to avail itself of those provisions of the convention excluding or limiting its liability. 5. Every carrier when transporting goods has the right to require the shipper/consignor to submit to it an airway bill and every shipper/consignor has the right to require the carrier to accept the airway bill. The absence, irregularity or loss of the airway bill, shall not affect the existence or the validity of the contract of transportation. 6. The carrier shall be liable for the death or injuries of a passenger if the event took place in the aircraft or in the course of any of the operations of embarking or disembarking. It shall be liable for the loss of, destruction or damage to the checked in baggage if the occurrence which caused the damage took place during the transportation by air. The transportation by air covers the period during which the baggage are in the charge of the carrier whether in the airport or on board the aircraft or in any place where the carrier is in charge of said baggage or goods. 7. The carrier shall also be liable for damage occasioned by delay in the transportation by air of passengers, baggage or goods.


8. The carrier shall not be liable if it proves that the carrier and its agents have taken all the necessary measures to avoid the damage or that it was impossible for it to take such measures. However, in the case of the transportation of goods and baggage, Sec. 20 of the Warsaw Convention provides, that in the transportation of goods and baggage, the carrier shall not be liable if it proves that the damage was caused by an error n piloting, in the handling of the aircraft, or n navigation and that, in all other respects, the carrier and its agents have taken all necessary measures to avoid the damage. Note: The Warsaw Convention does not preclude the stringent rules under the Civil Code of the Philippines. 9. In the transportation of passengers, the liability of the carrier for each passenger shall be limited to the sum of 125,000 francs or the equivalent value in the courts of the country where the case is submitted. By special contract, the carrier and the passenger may agree to a higher limit of liability. In the transportation of goods or baggage and of goods the liability of the carrier shall be 250 francs per kilogram, unless the consignor has made, at the time when the package was handed to the carrier, a special declaration of the value and has paid a supplementary sum. In that case the carrier shall be liable for an amount not exceeding the declared value. As regards objects of which the passenger takes charge himself, the liability shall be limited to 5,000 francs per passenger. The sums mentioned refers to the French franc which may be converted into any national currency in round figures (Art. 22, Warsaw Convention). 10. The Warsaw Convention should be deemed a limit of liability only in those cases where the cause of the death or injury to person, or destruction to or attended by any willful misconduct, bad faith, recklessness, or otherwise improper conduct on the part of any official or employee for which the carrier is responsible, and there is otherwise no special or extraordinary form of resulting injury (Northwest Airlines, Inc. vs. CA, 284 SCRA 408). 11. Under Art. 23 of the Warsaw Convention, any stipulation fixing a lower limit of liability shall be null and void, but the nullity of such provision shall not involve the nullity of the whole contract. 12. In a contract of air carriage, a declaration by the passenger of a higher value is needed to recover a greater amount. An air carrier is not liable for the loss of baggage in an amount in excess of the limits specified in the tariff which was filed with the proper authorities, such tariff being binding on the passenger regardless of the passengers lack of knowledge thereof or assent thereto (British Airways vs. CA, 285 SCRA 450). 13. Receipt of the person entitled to the delivery of the baggage or goods without complaint shall be prima facie evidence that the same has been delivered in good condition. In case of damage, a complaint must be made with the carrier within three (3) days from date of receipt in case of baggage and seven (7) days from the date of receipt in the case of goods. In case of delay, the complaint must be made within fourteen (14) days at the latest. Every complaint must be made in writing upon the document or by a separate notice in writing. Failure to make such complaint within the period mentioned shall bar any action against the carrier, except in case of fraud on its part.


In this jurisdiction, the filing of a claim with the air carrier within the time limitation mentioned in the contract actually constitutes a condition precedent to the accrual of a right of action against a carrier for loss of or damage to the goods. The shipper or consignee must allege and prove the fulfillment of the condition. If it fails to do so, no right of action against the carrier can accrue in favor of the former. The requirement of giving notice of loss of or injury to the goods is not an empty formalism. The fundamental reasons for such a stipulation are: (1) to inform the carrier that the cargo has been damaged, and that it is being charged with liability therefore; and, (2) to give it an opportunity to examine the nature and extent of the injury. This protects the carrier by affording it an opportunity to make an investigation of a claim while the matters is fresh and easily investigated so as to safeguard itself from false an fraudulent claims. When an airway bill or any contract of carriage for that matter has a stipulation that requires a notice of claim for loss of or damage to goods shipped and the stipulation is not complied with, its enforcement can be prevented and the liability cannot be imposed on the carrier (Federal Express Corporation vs. American Home Assurance Company and Philam Insurance Company, Inc., G.R. No. 150094, August 18, 2004). 14. The action for damages must be brought either before the court of the domicile of the carrier or of its principal place of business or before the court at the place of destination, at the option of the plaintiff. These venues must be in the territory of a contracting party to the Warsaw Convention. The procedural rules of the country where the action is brought shall govern (Art. 28, Warsaw Convention). 15. The prescriptive period for the action is two (2) years reckoned from the date of arrival at the destination, or from the date on which the aircraft ought to have arrived, or from the date on which the transportation stopped. The method of calculating the period of prescription shall be determined by the law of the court to which the case is submitted (Art. 29, Warsaw Convention). Note: In Luna vs. CA, 216 SCRA 107, November 27, 1992, the Supreme Court held that the alleged failure to file a claim with the common carrier as mandated by the Warsaw Convention should not be a ground for the summary dismissal of the complaint where the carrier may be held liable for the breach of other pertinent laws. It is error to limit the case to the provisions of the Warsaw Convention and to completely disregard the provisions of the Civil Code. Even if it has the force and effect of law because it is a treaty commitment, it does operate as an exclusive enumeration of the rights of the parties and the obligations of the carrier. Citing Alitalia vs. IAC, 192 SCRA 9, the Court likewise ruled that the application of the Warsaw Convention must not be construed to preclude the operation of the Civil Code and other pertinent laws 16. In the case of transportation to be performed by successive carriers, each carrier shall be deemed to be a contracting party to the contract of transportation insofar as the contract deals with the part of the transportation performed under its supervision. In such a case, the passenger can take action only against the carrier which performed the


transportation during which the accident occurred, save in the case where by express agreement, the first carrier has assumed liability for the whole journey (Art. 30, Warsaw Convention). However, even if the transportation is to be performed by successive air carriers, it shall be deemed to be one undivided transportation if so regarded by the parties as a single operation even if written under a single contract or a series of contracts (Art. 1(3), Warsaw Convention). 17. Under a general pool partnership agreement, the ticket-issuing airline is the principal in a contract of carriage while the endorsee-airline is the agent. The obligation of the ticket-issuing airline remained and did not cease, regardless of the fact that another airline had undertaken to carry the passengers to one of their destinations (China Airlines vs. Chiok, 407 SCRA 432). 18. In a contract of carriage, an airlines obligation is limited to transporting the passenger and the latters luggage safely to the agreed destination. An airline does not breach its contract with the passenger if he is held in custody by immigration officials during a stop-over. The obligation of an airline to inspect the necessary travel documents of a passenger does not extend to checking the veracity of every entry in the travel documents. The power to admit an alien into a country is a sovereign act which cannot be interfered with by an airline (Japan Airlines vs. Asuncion, G.R. No. 161730, January 28, 2005). Public Service Act 1. Under the Public Service Act, unless otherwise exempt by law, no public service shall operate without having been issued a certificate of public convenience or a certificate of public convenience and necessity (Sec. 15, CA. 146, as amended) 2. A certificate of convenience is not the same as a certificate of convenience and necessity. In the former no legislative franchise is required. A certificate of convenience and necessity requires a franchise. Whether or not a legislative franchise is required depends upon the law. If there is no statute requiring a franchise, the same shall not be required. For example, P.D. No. 576-A requires a franchise for the operation of radio and television stations. 3. A certificate of public convenience is not required to operate the following: (a) warehouses; (b) animal drawn vehicles, bancas powered by oars or sails, tugboats and lighters; (c) airships except as to fixing of rates; (d) radio companies except as to fixing of rates; (e) public utilities operated by the government or its political subdivisions (Surigao Electric vs. Mun. of Surigao, 24 SCRA 898); (f) ice plants; and, (g) public markets (Chamber of Filipino Retailers vs. Villegas, 44 SCRA 405). 4. The following must be met before a person is granted a certificate of public convenience (and necessity): (a) The applicant must be a Filipino citizen of a corporation or entity 60% of the stock belongs to Filipino citizens;


(b)The applicant must have sufficient financial capability to undertake the service; (c) The service to be operated should be one that would promote public interest, necessity and convenience. 5. A certificate of public convenience, in relation to the state, is a mere license or a privilege and is neither a franchise nor a contract. It confers no vested or property right or interest on the part of the holder. It can be withdrawn by the state, it being a mere privilege. In its purely private aspect, it may be deemed property because it as value and may be subject to levy (Vda. De Lat vs. PSC, G.R. 34978, February 26, 1988). 6. The original Public Service Commission under the Public Service Act has been replaced by several agencies: (a) The Land Transportation Franchising Regulatory Board (LTFRB) regulates land transportation while the registration of motor vehicles is done by the Land Transportation Office (LTO); (b) The Civil Aeronautics Board (CAB) regulates land transportation. The Air Transportation Office (ATO) registers aircraft and maintains airports; (c) The Energy Regulatory Board (ERB) regulates electric or power companies; (d) The National Telecommunications Commission (NTC) regulates communication utilities and services, radio communication systems, wire or wireless telephone and telegraph systems, radio and television broadcasting systems and similar public facilities; (e) The National Water Resources Council (NWRC) regulates water resources and utilities; and, (f) The Maritime Industry Authority (MARINA) regulates water transportation. 7. Public utilities are regulated pursuant to the police power of the state. When private property is used for a public interest, it ceases to be strictly private and thus becomes subject to regulation in order to promote the common good (Republic vs. Manila Electric Company, G.R. No. 141314, November 15, 2002). 8. The first licensee is usually protected in his investment and will not be exposed to a ruinous type of competition. Hence, a certificate of public convenience will not be issued to a second operator if the first operator is rendering sufficient, adequate and satisfactory service and is complying with all laws, rules, and regulations. This is called the prior operator rule. 9. The issuance of a certificate of public convenience (and necessity) requires a hearing. When granted, it may be revoked if the holder violates or contumaciously refuses to comply with any applicable rules or regulations, or the holder is found out to be a mere dummy or when the holder ceases operations or abandons the franchise. 10. Before a regulatory board fixes standards and qualifications, standards for measuring quantity, establishes rules to secure accuracy of all meters and all measuring appliances and allow extension of facilities, and in the fixing of rates, a notice and hearing is required. However, the investigation of public utility companies, valuation of its properties, examination and test of its measuring devices and appliances, investigation of accidents, the grant of special permits for special trips and the enforcement of rules and regulations do not require a notice and hearing. 11. An administrative agency may be empowered by law to provisionally approve a rate increase n public utilities when demanded by


urgent public needs even without a hearing. Provisional rates are by their nature temporary and subject to adjustment after a final hearing (Padua vs. Ranada, G.R. No. 141949, October 14, 2002).