Transportation Laws Finals

I.

Public Service Act

a. Public Utility v. Public Service

A distinction must be made between the terms public service and public utility as they do
not have the same legal meaning, although are related:
2.1

The definition of public service in the Public Service Act, as last amended by

Republic Act No. 2677, includes every person who owns, operates, manages or controls, for

hire or compensation, and done for general business purposes, any common carrier
railroad, street railway, traction railway, subway motor vehicle, either for freight or
passenger, or both with or without fixed route and whatever may be its classification,

freight or carrier service of any class, express service, steamboat, or steamship line, pontines,
ferries, and water craft engaged in the transportation of passengers or freight or both,
shipyard, marine railway, 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, broadcasting stations
and other similar public services.
2.2

A public utility, on the other hand, is a business or service engaged in regularly

supplying in the public with some commodity or service of public consequence such as
electricity, gas, water, transportation, telephone or telegraph service.
2.3

Simply stated, a public utility provides a service or facility needed for present day

2.4

Another dissimilarity is that a public utility requires a franchise, aside from a

living which cannot be denied to anyone who is willing to pay for it.1

certificate of public necessity and convenience, for its operation, while a public service
which is not a public utility requires only a certificate of public convenience.
2.5

However, laws may provide that an activity is not a public utility. An example is

Section 29 of the Electric Power Reform Act of 2001 (EPIRA) 2 which states any law to the
contrary notwithstanding, supply of electricity to the contestable market shall not be
considered a public utility operation. This means that independent power producers/power
generators are not considered public utilities that may be subject to regulatory policy.

1
2

JG Summit Holdings, Inc. vs. Court of Appeals, 412 SCRA 10

RA 9136
1

Transportation Laws Finals

b. Certificate of Public Convenience v. Certificate of Public Convenience v.
Necessity vs. Legislative Franchise
1.

A certificate of public convenience is any authorization to operate public service

issued by the Public Service Commission for which no franchise, either municipal or
legislative, is required by law.
1.1

The certificate of public convenience and necessity requires a franchise issued by the

1.2

Legislative franchise distinguished from a certificate of public convenience -A

legislative department.

franchise is distinguished from a certificate of public convenience in that the former is a

grant or privilege from the sovereign power, while the latter is a form of regulations
through an administrative agency.3
1.3

A legislative franchise is necessary before a public utility can be allowed to secure a

certificate of public convenience if there is a statute requiring it, otherwise, it would not be
required.
2.

A certificate of public convenience is a mere license or a privilege and being neither

a franchise nor a contract, it confers no vested or property right or interest on the holder.
However, in its purely private aspect, it has value and may be considered property that can
be levied upon.
3.

The grant of

certificate of public convenience or a certificate of public

convenience and necessity requires the concurrence of the following: (a) the applicant must
be a citizen of the Philippines, or a corporation, partnership, or joint stock company

constituted and organized under the laws of the Philippines, at least sixty percent (60%) of
its stock or paid-up capital belongs entirely to Filipino citizens (b) the applicant must be
financially capable of undertaking the proposed service and meeting the responsibilities

incident to its operation, and (c) the applicant must prove that the operation of the business
will promote the public interest in a proper and suitable manner.
c. Rules observed in the grant of certificates of public convenience/certificates
of public convenience and necessity
i.
1.

Prior operator rule

The Prior Operator Rule contemplates that the first licensee will be protected in his

investment and will not be subjected to ruinous competition.

Associated Communications & Wireless Service-UBN v. NTC, 397 SCRA 574

2

Transportation Laws Finals

1.1

It is not therefore, the policy of the law for the Public Service Commission to issue a

certificate of public convenience to a second operator when a prior operator is rendering

sufficient, adequate and satisfactory service, and who in all things and respects is complying
with the rules and regulations of the Commission.
1.2

The rule will not apply if the public interest is served better by a new operator

where: (a) the old operator failed to make an offer to meet the increase in traffic (b) where
the Certificate of Public Convenience is granted to a new operator is a maiden Certificate of
Public Convenience (c) where the application of the rule is conducive to a monopoly
ii.

Old operator rule

Another form of the rule is the Old Operator Rule which mandates that before permitting a
new operator to invade the territory of another already established with a certificate of

public convenience, thereby entering into competition with it, the prior operator must be
given an opportunity to extend its service in order to meet the public.4
1.4

Note that this rule only applies when the old operator offers to meet the increase in

the demand the moment it arises and not after another operator had offered to render the
additional service as was done in the present case.The rule protects those who are vigilant
in meeting the needs of the travelling public.5
iii.

Prior applicant rule

The Prior Applicant Rule presupposes a situation where two or more interested persons
apply for a Certificate of Public Convenience in the same locality over which no person has
of yet been granted a Certificate of Public Convenience, the applications being equal, the
one who first applied will be preferred.6
iv.

Third operator rule

In relation to this rule, there is the Third Operator Rule which provides that where two
operators are more than serving the public, there is no reason to permit a third operator to
engage in competition with them. Thus, the fact that it is only one trip and of little
consequence, is not sufficient reason to grant the application.

However, if later on

circumstances would change requiring the operation of new units or extending existing

Javier vs. Orlanes, 53 Phil 468

Angat-Manila Transportation Company vs. Victoria vda. De Tengco, 95 Phil 58
6
Batangas Transportation Company vs. Orlanes, 52 Phil 455
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Transportation Laws Finals

facilities, the third operator rule would be subject to the prior applicant rule and also as to
who may best subserve the public interests.7
2.2

The rule where there are various applicants for a public utility over the same

territory, is that priority of application, while an element to be considered, does not

necessarily control the granting of a certificate of public convenience. The question to be
considered in such cases is which applicant can render the best service, considering the
conditions and qualifications of the applicant to furnish the same.

But where other

conditions are equal, priority in the filing of the application for a certificate of public
convenience becomes an important factor in the granting or refusal of a certificate.8
3.

Protection of Investment Rule is likewise considered as one of the primary purposes

of the law is to protect and conserve investments which have already been made for that
purpose by public service operators.9
v.

Grounds for revocation of certificate

The grounds for a revocation of a certificate are: (a) The holder violates or contumaciously

refuses to comply with any order, rule or regulations of the commission (b) The holder is a
mere dummy (c) The holder ceases operations or abandons the service.
II.

Bill of Lading
i.

Definition

A bill of lading may be 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.
ii. Nature
The nature of a Bill of Lading is as follows: (a) is a contract in itself and the parties are
bound by its terms (b) it is a receipt (c) it is a symbol of the goods covered by it.

The bill of lading is the law between the parties and is legal evidence of the contract. As
such it is an actionable document.10
1.3

As a receipt means that the issuance of a 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
7

Yangco vs. Esteban, 58 Phil 346

Cruz vs. Marcelo, L-15301, March 30, 1962
9
Batangas Transportation Company vs. Orlanes, 52 Phil 455
10
Philippine American General Insurance Co., Inc. v. Sweet Lines Inc., 212 SCRA 194, 203 [August 5, 1992]
8

Transportation Laws Finals

by the carrier. Since it is a prima facie evidence of receipt, the carrier may be allowed to
present proof that he received the cargo on a date different from the date of the bill of
lading.11
2.

Since it also is a symbol of the goods, it is considered a document of title to the goods.

2.1

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 the

possessor of the document to transfer or receive, either by endorsement or delivery, goods

represented by such document
iii. Parties
The parties to a bill of lading are: (a) shipper/consignor a person to be transported or
owner of the goods to be transported; one who gives rise to the contract of transportation
(b)

carrier one who binds himself to transport persons, things or news as the case may

be; one engaged in the business of carrying goods for others for hire (c)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
.Note: the shipper and consignee may be 1 person.
iv. Concept of Conversion
Concept of Conversion: Where property in the hands of a carrier is not delivered within a
reasonable time after it has reached its destination, the carrier in the absence of any legal
exemption and after demand has been made and delivery refused, is liable for a conversion
of the property.
2.1

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 carrier is not available as a defense.
2.2

If there has been demand and the carrier 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
carrier refuses delivery.12

11
12

Saludo Jr. v. Court of Appeals, 207 SCRA 498, 508 [March 23, 1992]
Yu Chaco Sons & Co vs. Admiral Line, 46 Phil 418
5

Transportation Laws Finals

v. Conflicting orders of shipper and consignee
In case of conflicting orders of the shipper and the consignee, there is no 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 bill appears with such bill before the carrier and makes himself a party to the
contract as prior to that time, he is a stranger to the contract.
vi. Misdelivery
A misdelivery occurs when delivery to a person different from that indicated in the bill is
made.
vii. Time for making claim for damages
Summary of steps in filing claims for damages: (a) if damages can be ascertained on the
face of the cargo protest immediately upon receipt (b)if it cannot be ascertained after
delivery and receipt file a claim within 24 hours after receipt.
viii.Rights of the shipper or consignee
i.
2.

Abandonment

A right to abandon exists in cases of delay on account of the fault of the carrier as

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 the destination.13
2.1

It also exists when: (a) there is of partial non-delivery where the consignee proves

that he cannot make use of the goods capable of delivery independently of those not
delivered (b) where the goods are rendered useless for sale and consumption for the
purposes for which they are properly destined.
2.2

When this abandonment occurs, the carrier shall satisfy the total value of the goods,

as if they had been lost or mislaid

2.3

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 n all
cases where there this indemnity is due

13

Article 371, Code of Commerce

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Transportation Laws Finals

III.

Admiralty and Maritime Commerce

a. Real and hypothecary nature of maritime law

Real and hypothecary nature means that the liability of the agent or shipowner in relation
to maritime contracts is limited to the res or the vessel.
i.

Limited liability rule

To offset against the adverse conditions and to encourage shipbuilding and maritime
commerce, it was deemed necessary to confine the liability of the owner or the agent arising

from the operation of the vessel to the vessel, its equipment, and freight or insurance, if any,
so that if the shipowner or agent abandoned the ship, equipment, and freight, his liability
was extinguished.14 This is known as the limited liability rule.
1.3

As a rule, subject to limited exceptions, if the vessel is lost, the ship owner or ship

agent will have no liability. If the vessel is not lost, the ship owner or the ship agent may
abandon the vessel to the creditors in satisfaction of their claim.
1.4

The only person who could avail of the limited liability rule is the ship owner. He is

the very person whom the rule has conceived to protect and the charterer cannot invoke
this as a defense.15
1.4

The limited liability rule finds basis in Articles 837, 587 and 590 which limits the

liability of the ship owner or ship agent to the vessel, its freight and insurance. Note though
that Article 837 is but a necessary consequence of the right to abandon the vessel given to a
ship owner under Article 587.
ii.

Exceptions of limited liability rule

The exceptions to the doctrine of limited liability: (a) where the ship owner is at fault or is
due to the concurring negligence of the ship owner and captain as 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 16 (b) in cases of Workmens Compensation as 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 nay well-managed industry17 (c) when
the vessel is insured (d) Total destruction of the vessel does not affect the liability of the

owner for repairs on the vessel completed before its loss as owners of a vessel are liable for
necessary repairs and it shall remain unaffected by the loss of the thing.
14

Abueg vs. San Diego, 44 OG 80

Dela Torre v. Court of Appeals, 653 SCRA 714 [July 13, 2011]
16
Manila Steamship v. Abdulhaman, 100 Phil 32 [1956]
17
Abueg v. San Diego, 77 Phil 730 [1946]
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b. Shipowner v. Ship agent
2.

Distinguishing the ship owner from the ship agent. A ship agent is defined as the

person entrusted with provisioning or representing the vessel in the port where it is
found.18
2.1

Fundamentally, the term ship agent must be understood to refer to the person

2.2

This interpretation is notwithstanding the apparent conflict with the statutory

undertaking the voyage, who, in one case may be the owner or a charterer.19

definition of a ship agent and under Article 587 of the Code of Commerce where it is
utilized in manner that encompasses the term owner.
2.3

This distinction must be made when the one doing the work of a ship agent is the

ship owner himself.

1.

A ship owner is the natural or juridical person who owns the vessel, while the ship

2.

In the matter of their liability for the acts of the captain, it must be noted that the

agent is the ship owners representative in all the places where his vessel makes port.

ship owner, in the person of the captain, has complete and exclusive control of the crew
and the navigation of the ship, as well as the disposition of the cargo at the end of the
voyage.
2.1

Consequently, any person would have a right of action directly against the ship

owner for breach of a duty which the law has imposed upon the captain.
2.2

Note also that the ship owner is liable for the death of or injuries to passengers

which are caused by the negligence or willful acts of his employees, although such
employees may have acted beyond the scope of their authority or in violation of orders.20
3.

In enforcing the liability, the ship agent is the one primarily 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
3.1

The captain shall be civilly liable to the ship agent and the latter is directly liable to

3.2

This direct liability is moderated and limited by the right of abandonment.

rd

3 persons for damages that may be incurred.21

18

nd

Article 586, 2 Par., Code of Commerce

Standard Oil Co. vs. Lopez Castelo, 42 Phil 256
20
Article 1759, Civil Code
21
Article 618, Code of Commerce
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Transportation Laws Finals

c. Maritime protest
5.

A maritime protest will be required when the: (a) vessel goes thorough a hurricane

(b) the cargo has suffered damages or averages or (c) vessel is wrecked and he is saved
alone or with a part of his crew.22
5.1

The basis requisites are: (a) make the protest before the competent authority at the

first port he touches (b) protest must be made within 24 hours following arrival (c) the
captain must ratify it within the same period when the vessel arrives at its destination, and
(d) he must immediately proceed with proof of facts.
5.2

These are required because the causes constitute an exemption in favor of the party

responsible for the loss. Hence, there is a duty to prove the existence of the circumstances to
be able to successfully protest liability.
Note: 4.

A maritime protest is necessary as the action for recovery of losses and

damages arising from a collision 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 Republic of the Philippines, if it occurred in a foreign country.23
d. Supercargo
1.

A supercargo is a person designated by the owner of goods to accompany the goods

1.1

He is an agent of the owner of the goods shipped as cargo on a vessel. He has charge

on the vessel where the goods are loaded.

of the cargo on board, sells them to the best advantage in the market, and buys cargo to be
brought back on the return voyage and comes home with it.24
1.2

He is not an employee of the carrier nor a part of the crew. He is in effect a

2.

Supercargoes shall discharge on board the vessel the administrative duties which the

passenger.

agent or shippers may have assigned them.

2.1

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.
22

Article 624, Code of Commerce

Article 835, Code of Commerce
24
Blacks Law Dictionary
23

Transportation Laws Finals

2.2

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.25
2.3

They may not, without special authorization or agreement: (a) make any transaction

for their account, with the exception of ventures which, in accordance with the custom at
the port of destination or (b) invest in the return trip more than the profits from the
ventures.26
4.

The presence of a supercargo modifies or varies the legal relation of the shipper and

the carrier and the degree of attention of the carrier to the cargo.
4.1

Consequently, it may be a defense of the ship owner or captain in case of loss,

4.2

The carrier still has the duty to exercise extra-ordinary diligence as mandated by the

damage or deterioration

Civil Code over the goods and the supercargo. Note that the supercargo is also a passenger.
The mandate to exercise such degree of diligence is express.
IV.

Risks, Damages and Accidents in Maritime Commerce

a. Averages
i.

Simple or Particular

Simple or Particular which is 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.
The effect is that no reimbursement is allowed.
ii.

General or Gross

General/Gross which is an expense or damages 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. The effect is
that the person who incurred the damage/expense can ask reimbursement from those who
benefited, which of course, may include the ship owner.
The requisites of a General Average are: (a) there must be a common danger, meaning that
the ship and cargo are subject to the same danger and that 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 (b) for the common safety, part of
the vessel or the cargo or both is sacrificed deliberately (c) from the expenses or damages
25
26

Article 649, Code of Commerce

Article 651, Code of Commerce
10

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caused follows the successful saving of the vessel and cargo (d) the expenses or damages

should have been incurred or inflicted after taking legal steps and authority.27 In summary:
The general average must: (a) deliberately incurred (b)

intended to save vessel and cargo

(c) real and known risk to which the shipper and the carrier must be exposed to (d) success
in saving the vessel and the remaining cargo. Note that if notwithstanding the jettison of
merchandise, breakage of masts, ropes, and equipment, the vessel shall be lost running the
same risk, no contribution whatsoever by jettison of gross average shall be proper. The

owners of the goods saved shall not be liable for indemnification of those jettisoned, lost or
damaged.
Note: Jason Clause
The Jason Clause or Rule D, York-Antwerp Rules, which is an international system of
rules, providing among others, for liquidation and payment of averages, provides that the
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. However, this shall not prejudice any remedies which may be open against
that party for such fault.
iii.

General v. Simple

The distinctions between general or gross averages and simple or particular averages are as
follows: (a) In general or gross averages, both the ship and cargo are subject to the same
danger which is real and known, whereas in simple or particular averages, there is no such

common danger to both the vessel and the cargo; (b) In the former, part of the vessel or of
the cargo or both is sacrificed deliberately, whereas in the latter, the expenses and damage
caused to the vessel or to her cargo are neither deliberately made nor subject to any legal
step or authority; (c) In the former, from the expenses or damage caused follows the
successful saving of the vessel and her cargo, whereas in the latter, the expenses or damages
suffered have not inured to such common benefit; (d) In the former, all the persons having
an interest in the vessel and cargo saved shall contribute to indemnify the expenses or
damages caused, whereas in the latter, the owner of the things which gave rise to the
expenses or suffered the damages shall bear the same.28

As when: Expenses incurred

towards refloating the vessel after it was intentionally run aground to save it and the cargo

is a general average. Compare with expenses incurred in refloating the vessel after it
accidentally ran aground in order to be able to proceed to its destination, which is a
particular average in the absence of imminent danger to the ship and cargo.
27
28

A. Magsaysay, Inc. v. Agan, G.R. No. L-6393 [January 31, 1955]

Articles 809-815, Code of Commerce, Magsaysay vs. Agan, GR No. 6393, January 31, 1955
11

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iv.

Jettison. Order of Jettison

The order of jettison of the captains shall be in the following order: (a) those which are on
deck, beginning with those which embarrass the maneuver or damage the vessel, preferring,
if possible, the heaviest ones with least utility and value, then (b) those which are below
upper deck, always beginning with those of greatest weight and smallest value, to the
amount and number absolutely indispensable.29
6.

If, after the vessel has been saved from the risk which gave rise to the jettison, it

should be lost through another accident taking place during the voyage, the goods saved
and existing from the first risk shall continue to be liable to contribution by reason of the

gross average according to their value in the condition in which they may be found,
deducting the expenses incurred in saving them.30
V.

Arrivals under Stress

a. Significance

1.

An Arrival Under Stress is the 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: (a) lack of provisions, except if the failure to take the necessary provisions was due to the
carriers fault like when it was not able to stow them properly or that there was a failure to

adequately determine what was required (b) well-founded fear of seizure of privateers or
pirates, except when the risk of privateers or pirates is well-known (c) by reason of any
accident of the sea disabling it to navigate except defect in vessel was due to captains fault

in failing to properly repair, rig, equip or prepare the vessel or some erroneous order of the
captain or when malice, negligence, want of foresight, or lack of skill on the part of the
captain exists in the act causing the damage.31
2.

The significance of determining whether the arrival is under stress or not is because

the same is a deviation. Hence, if it will not constitute an arrival under stress it is an
improper deviation and liability will ensue for the damages caused to the cargoes by such
arrival under stress.
2.1

The rule is that the expenses of an arrival under stress shall always be for the

account of the ship owner of agent, but they shall not be liable for the damages which may

29

Article 815, Code of Commerce

Article 861, Code of Commerce
31
Article 819-820, Code of Commerce
30

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be caused the shippers by reason of the arrival provided the latter is legitimate. Otherwise,
the ship agent and captain shall be jointly liable.32
2.2

If in order to make repairs to the vessel or because there is a danger that the cargo

may suffer damages, it should be necessary to unload, the captain may request
authorization from a competent judge or court for the removal, and carry it out with the
knowledge of the person interested in the cargo, or his representative if there be any. In a

foreign court, it shall be the duty of the Philippine consul where there is one to give
authorization. In the first case, the expenses will be for the account of the ship agent or

owner, and in the second case, they shall be chargeable to the owners of the cargo for
whose benefit the act was performed. If the unloading be done for both reasons, the
expenses shall be divided proportionately between the value of the vessel and that of the
cargo.33
2.3

The custody of the cargo that is unloaded shall be entrusted to the captain who shall

2.4

If the entire cargo or part thereof should appear to be damaged, or there is an

be responsible for the same, except in cases of force majeure.34

imminent danger of its being damaged, the captain may request of a competent judge, court
or consul, the sale of all or part of the goods.35
VI.

Collisions
a. Collision v. Allision

1.

A Collision refers to the impact of two vessels both of which are moving.

1.1

Allision refers to the striking of a moving vessel against one that is stationary.

1.2

Note though that a shipowner or ship agent can be held liable even if his vessel did

not hit or collide with another as Article 831 makes the owner of a third vessel liable if it
forced a vessel to hit another.
b. 3 zones of collisions
1.3

There are three zones in collision: (a) the first zone refers to all the time up to the

moment when the risk of collision may be said to have begun-no rule applies as each vessel
is free to navigate without reference to the movement of another vessel (b) the second zone

refers to the time between the moment when risk of collision begins and the moment it
32

Article 821, Code of Commerce

Article 822, Code of Commerce
34
Article 823, Code of Commerce
35
Article 824, Code of Commerce
33

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becomes a practical certainty, and (c) the third zone covers the time of actual contact. If
during the third zone, the sailing vessel changed course to port in order to avoid, if possible,

the collision, the act may be said to be done in extremis, and even if wrong, the sailing
vessel is not responsible for the result.36

c. Causes of collisions and legal effects

Cause

Effect

Due to the fault, negligence or lack of The shipowner shall be liable for the
skill of the captain or the complement losses and damages
of the vessel37

Due to the fault of both vessels38

Each vessel shall suffer its own losses,

but as regards the owners of the cargoes,
both vessels shall be jointly and severally
liable

Where it cannot be determined which Each vessel shall suffer its own losses,
of the 2 vessels is at fault39

and

both

shall

also

be

solidarily

responsible for the losses and damages

caused to their cargoes

Collision due to a fortuitous event or Each vessel shall bear its own damages
force majeure40

A vessel which is properly anchored The vessel run into shall suffer its own
and moored may collide with those damages and expenses

nearby by reason of a storm or other as they are considered as a particular

cause of force majeure41

average of the vessel run into

36

A, Urrutia & Co v. Baco River Plantation Co., No. 7675 [March 25, 1913]
Article 826, Code of Commerce
38
Article 827, Code of Commerce
39
Article 828, Code of Commerce
40
Article 830, Code of Commerce
41
Article 832, Code of Commerce
37

14

Transportation Laws Finals

Where 2 vessels collide with each other The owner of the 3rd vessel causing the
without their fault but by reason of the collision shall be liable for the losses and
fault of a 3rd vessel42

damages, the captain thereof being

civilly liable to the owner

1.6

In addition, when a vessel that is run into sinks immediately, as well as that which,

having been obliged to make port to repair the damages caused by a collision, is lost during
the voyage or is obliged to be stranded in order to be saved, it shall be presumed as lost be
reason of collision.43
1.7

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 they shall have a right to be indemnified by the pilots, without
prejudice to the criminal liability which the latter may incur.44
d. Rules to determine negligence
2.1

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 his part
2.2

When 2 vessels meet, the smaller should give the right of way to the larger one

2.3

A vessel leaving port should leave the way clear for another which may be entering

the same port

2.4

The vessel which leaves later is presumed to have collided against one which has left

2.5

There is also a presumption against the vessel which sets sail at night

2.6

The presumption also works against the vessel with spread sails which collides with

earlier

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

42

Article 831, Code of Commerce

Article 833, Code of Commerce
44
Article 834, Code of Commerce
43

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2.7

The vessel which is not properly moored or does not observe the proper distances,

has the presumption against itself.

2.8

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
2.9

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
e. Classes and effects of collisions
3.

Classes and Effects of Collisions: (a) Fortuitous when the vessels collide with each

other though fortuitous event or force majeure . Each vessel and each cargo shall bear its
own damages or a vessel which is properly anchored and moored may collide with those

nearby by reason of a storm or other cause of force majeure vessel run into suffers its own
damages (b)Culpable when the collision is due to the fault, negligence or lack of skill of the
captain or the complement of the vessel owner of the vessel at fault shall be liable for the

losses and damages or due to fault of both vessels each vessel suffers its own losses
regardless of degree of fault, hence rules on contributory negligence does not apply, with
regard to the owners of the cargo, both vessels shall be jointly and severally liable even if

their cause of actions may be different or 2 vessels may collide with each other without
their fault but by reason of the fault of a 3rd vessel owner of the 3rd vessel will be liable (c)
Inscrutable

where it cannot be determined which of the 2 vessels is at fault each vessel

suffers its own losses and damages; both will be solidarily liable for losses and damages
caused to their cargoes. Hence the effect is that you treat it as a culpable collision.
3.1

The doctrines of contributory negligence and last clear chance are not applicable.

Article 827 of the Code of Commerce holds that if both vessels were negligently operated, it

does not matter if the other has the last clear chance of avoiding injury because each must
suffer its own damage.45This applies although the negligence on the part of the mate of the
incoming vessel preceded the negligence on the part of the mate of the outgoing vessel by
an appreciable interval of time, the first vessel cannot on that account be absolved from
liability.46

45
46

C.B. Williams v. Teodoro Yangco, No. 8325 [March 10, 1914]

The Government of the Philippine Islands v. Philippine Steamship Co. Inc., No. 18957 [January 16, 1925]
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VII.

Shipwreck
a. Shipwreck

1.

A Shipwreck is a 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 the coast which renders the ship
incapable of navigation or when the boat sinks or is abandoned or capsizes.
1.1

Note that there is no need for it to be wrecked.

b. Derelict

2.

A Derelict is a ship or cargo which is abandoned or 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.
Additional: 3. A shipwreck or a derelict can give rise to salvage or 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 peril, or such property is recovered from
actual peril or loss, in cases of shipwrecks, derelict or recapture.
3.1

Where a ship and its cargo are saved together, the salvage allowance should be

charged against the ship and cargo in proportion to 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.
c. Salvage: elements
3.2

The elements of a valid salvage: (a) a marine peril- it being essential that the

property saved was in danger of being lost and such danger be real though not necessarily
immediate (b)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

d. Salvage reward
5.

The salvage reward is divided as among the shipowner, captain and crew who

effected the salvage as follows: The owner shall be entitled to 50% of the salvage reward,
while the captain and the crew shall get 25% each, respectively. The 25% reward of the

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crew shall be apportioned among them on the basis of their salaries in the absence of an
agreement.47

e. Salvage v. Towage
7.

Do not confuse with a Towage Contract , which is one whereby one vessel pulls

another from one place to another for compensation. It is a contract for services, not a
contract of carriage.
7.1

The 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 remuneration pursuant to the contract. But if it is of a salvage
nature, the crew of the salvaging ship is entitled to salvage, and can look to the salvaged
vessel for its share.
7.2

If all the elements are present, the salvor takes possession and may retain possession

until he is paid. In towage, there is no possessory lien, there is only an action for the sum of
money.
VIII.

Special Contracts

a. Charter party

A Charter Party is a contract whereby the owner of a vessel lets a part thereof and/or his
complement and crew to a person named as a charterer which contract can be for a specific
time, known as a time charter or for a specific voyage, known as a voyage charter.
i.

Contract of affreightment

Contract of affreightment involves the use of shipping space or vessels leased by the
owner in part or as a whole, to carry goods for others. Here the vessel is still a common
carrier.
ii. Charter by demise or bareboat charter
Charter by demise or bareboat charter 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. The vessel in this case
becomes a private carrier.
iii. Transshipment
47

Break in the transportation

Section 13, Act No. 2616

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iv. 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/unloading/sailing.
b. Bottomry and respondentia
1.

Loans on Bottomry or Respondentia are contracts of loan whereby the ship owner

borrows money from a lender at an unusually high rate of interest whereby the ability of

the lender to recover depends on the safe return of the vessel. If the vessel is lost, the
contract is extinguished.
1.1

A loan on bottomry is 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 for a definite term,
and pledges 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
1.2

A loan on respondentia is one made on the goods on board the ship, and which are

to be sold or exchanged in the course of the voyage, the borrowers personal responsibility
being deemed the principal security for the performance of the contract. The lender must be
paid his principal and interest, though the ship perishes, provided that the goods are saved.
IX.

Carriage of Goods by Sea Act

a. Paramount clause

Notwithstanding that the Civil Code applies to common carriers and COGSA applies only to
foreign trade, when parties to a contract of private carriage stipulate to apply the Civil Code
or COGSA, they do not apply ex propio vigore or of their own force but rather as mere
terms of a contract. This means that in case of dispute, they are simple contractual terms
which call out for judicial interpretation. This is a paramount clause.
b. Degree of diligence: Duration
The degree of diligence required is due diligence before and at the beginning of the voyage
to: (a) make the ship seaworthy (b) properly man, equip and supply the ship, and (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.48
48

Section 3. (1) COGSA

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3.1

Whenever loss or damage arises from unseaworthiness, the burden of proving the

exercise of due diligence is on the carrier and neither shall the carrier or ship be liable
unless it is caused by want of due diligence on its part to make the ship seaworthy.
c. Categories of immunities
4.

The immunities can be grouped into three categories: (a) overwhelming outside

forces, i.e. acts of war, acts of public enemies, arrest of princess, quarantines, strikes,

lockouts, riots and civil commotions, (b) overwhelming natural forces, i.e. perils of the sea
or acts of God, and (c) faults of the shipper, i.e. act or omission of the shipper or his agents,
wastage in bulk or weight, losses due to inherent vice, insufficiency of packing,
insufficiency of marking and latent defects.49
d. Notice as to damage of goods
8.

Notice as to damage on the goods should be given upon receipt of the goods, unless

such damage is not apparent or externally visible in which case notice should be given
within three (3) days from receipt of the goods.
8.1

No notice is required when the state of the goods has at the time of receipt been the

8.2

When there is a failure to comply with a bill of lading provision that a notice of

subject of a joint survey inspection.

claim must be given by the consignee to the carrier within 30 days from receipt of the

cargo but the action is nevertheless filed within one (1) year from delivery, the action was
held to be properly brought as the clause was deemed to be null and void for being contrary
to COGSA.50

e. Prescriptive period
9.

The carrier and the ship shall be discharged from liability in respect to loss or

damage unless suit is brought within one (1) year after delivery of the goods or date when
the goods should have been delivered.

Note thought that failure to give notice does not

bar the filing of the suit for loss or damage to the goods. 51 Failure to file notice of loss does
not bar an action against the carrier if the action was filed within one year.52
9.1

Loss is defined as a situation where no delivery at all was made because the same

had perished, gone out of commerce or disappeared in such a way that their existence is
49

Section 4 (2) COGSA

EE Elser Inc. vs. Court of Appeals, L-6517, November 29, 1954
51
Section 3(6) Par. 4, CA 65
52
Sea Land Service, Inc. v. Intermediate Appellate Court, 153 SCRA 552
50

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Transportation Laws Finals

unknown or they cannot be recovered. It however includes damages by reason of
unreasonable delay in the transportation so that if the goods are lost or damaged by reason
of the delay, the carrier is liable.53
9.2

Loss does not include a situation where there is delivery but is made to the wrong

person. Hence,the prescriptive period will not apply to cases of misdelivery of the goods or
delivery to wrong person. What will apply is either the Civil Code provision prescribing ten
(10) years for breach of a written contract or four (4) years for quasi-delict.54
9.3

An action under the Carriage of Goods by Sea Act must be filed within one year from

9.4

The period is counted from the date of the delivery of the goods. If no delivery was

the date the last item was delivered to the consignee.55

made, from the date when the goods should have been delivered. To illustrate the latter, if
the carrier arrived on November 2, 1962 and left on November 4, 1962 without delivering
the cargo, it was on the latter date that the carrier had the opportunity to deliver the goods.

The period then commenced to run on November 5, 1962 and expired on November 4,
1963.56
9.5

The period will not interrupted by a written extrajudicial demand or claim by the

consignee to the carrier as it has been held that the provisions of Article 1155 cannot be
made to apply as its application would have the effect of extending the period of

prescription and would permit delays in the settlement of questions affecting transportation
contrary to the clear intent of the law.57 The provision in the Civil Code that a written
demand tolls the prescriptive period does not apply to the COGSA cases, since matters
affecting the transportation of goods by sea must be decided as soon as possible.58
9.6

Where an insurer who was sued by the consignee of imported goods filed a third

party complaint against the carrying vessel more than a year after the delivery of the goods,

the third party complaint is barred by the one-year prescriptive period under COGSA, as
otherwise the prescriptive period can be avoided by the consignee by filing a claim against
the insurer.59
9.7

The one-year prescriptive period under COGSA is inapplicable to the action filed by

the importer of pipes and fitting which arrived in a damaged condition against the
53

Tan Liao vs. American President Lines Ltd., L-7280, January 20, 1956
Ang vs. American Steamship Agencies, Inc., 19 SCRA 123
55
Maritime Agencies & Services, Inc. v. Court of Appeals, 187 SCRA 346
56
Rizal Surety & Insurance Company vs. Macondray & Company, Inc., 22 SCRA 902
57
The Yek Tong Fire & Marine Insurance Co. vs. American President Lines, 103 Phil 1125, 1992 Bar
58
Dole Philippines, Inc. v. Maritime Company of the Philippines 148 SCRA 118
59
Filipino Merchant Insurance Co., Inc. v. Alejandro, 145 SCRA 42
54

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Transportation Laws Finals

insurance company which insured the pipes and fittings, because the action is based on a
contract of insurance.60
9.8

The prescriptive period for an action against a broker is ten years and not one year

under the Carriage of Goods by Sea Act, since the broker is not a carrier, charterer or holder
of the bill of lading.61
9.9

The period will be interrupted when: (a) Action has been filed in court; or (b)

Express agreement that extrajudicial claim or demand for damages will suspend the
running of the prescriptive period as the parties may agree to extend the one-year period to
file a case under COGSA.62
9.10

Note that when the action has been filed in court, there is jurisprudence applying

Section 49 of Act 190 which provides that If, in an action commenced, in due time, a
judgment for the plaintiff be reversed, or if the plaintiff fails otherwise than upon the merits,
and at the time limited for the commencement of such action, has, at the date of such
reversal or failure, expired, the plaintiff, or, if he dies, the cause of action survives, his

representatives may commence a new action within one year after such date, and this
provision shall apply to any claim asserted in any pleading by a defendant.63
X.

Warsaw Convention
a. Application

3.

It applies to international air carriage or transportation.

3.1

Under the Convention there are two categories: (a) That where the place of

departure and place of destination are situated within the territories of two High
Contracting Parties regardless of whether or not there be a break in transportation or

transhipment, and (b) That where the place of departure and the place of destination are
within the territory of a single High Contracting Party if there is an agreed stopping place

within the territory subject to the sovereignty, mandate or authority of another power, even
though the power is not party to the Convention.64
3.2

To illustrate: Plaintiffs purchased from TWA two tickets in Bangkok, Thailand for

LA-NY-Boston-St. Louis-Chicago. The domicile and place of business of TWA is Kansas City,
Missouri, USA. Plaintiffs left Manila via PAL to LA. From LA, they boarded TWA to NY. Upon
arrival in Boston, the plaintiffs were missing four of their luggages. An eventual suit was
60

Mayer Steel Pipe Corporation v. Court of Appeals, 274 SCRA 432

Reyna Brokerage Inc. v. Philippine Home Assurance Corporation, 202 SCRA 564
62
Universal Shipping Lines, Inc. v. Intermediate Appellate Court, 188 SCRA 170
63
F.H. Stevens & Co, Inc. vs. Norddeuscher Lloyd, 6 SCRA 180
64
Mapa vs. Court of Appeals, 275 SCRA 286
61

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Transportation Laws Finals

filed in Manila against TWA, who moved to dismiss saying that jurisdiction is not vested in
the Manila court, which subsequently dismissed the action applying the rule on venue as
per the Warsaw Convention. Upon appeal, the dismissal was reversed as the Convention
was held inapplicable as the contract of transportation was not an international one as LA,
the place of departure and Chicago, the place of destination are within the territory of the
USA, neither does it fall in the second type as there was no agreed stopping point in another
territory.
b. Bringing of action
3.3

An action for a violation of a contract of international transportation by air must be

brought, at the option of the plaintiff, in the territory of one of the High Contracting Parties,
either before the court of domicile of the carrier or of his principal place of business or
where he has a place of business through which the contract has been made, or before the
court at the place of destination.65
3.4

To illustrate: Northwest is a foreign corporation with principal office in Minnesota,

USA and licensed to do business in the Philippines. A Filipino resident purchased a ticket in
San Francisco for his flight from San Francisco to Manila via Tokyo and back. Due to the

cancellation of his confirmed reservation for the Tokyo to Manila leg, he was waitlisted. He
brings suit against Northwest in the Manila. The court upon motion dismissed the action as
it should have been brought in either the USA, the carriers domicile, in Minnesota, USA, its

principal place of business, San Francisco, the place of business through which the contract
was made or the place destination.
c. Airway bill
1.

An air waybill is a document serving as the prima facie evidence of the contract of

2.

It has three (3) parts intended for the carrier, the consignor and the consignee of the

transportation and as the receipt of the goods carried by air carriers.

goods.
d. Liability of International Carrier
1.

The carrier shall be liable for damages sustained in the event of death or bodily

injury suffered by a passenger on board the aircraft or in the course of embarkation or

disembarkation thereof, and of damage or loss of any checked baggage or any goods during
the transportation by air.

65

Section 28 (1) Warsaw Convention, Santos III vs. Northwest Orient Airlines, 210 SCRA 256
23

Transportation Laws Finals

2.

The following are the limited liability of the carrier under the convention:(a) For

each passenger 125,000 French francs; (b) For checked baggage and of goods 250
French francs per kilogram; (c) For objects that the passenger takes charge himself 5,000
French francs per passenger.
2.1

The above limitations may be increased by agreement, but any provision tending to

2.2

Provided, that the limitations shall not apply if the damage is caused by the willful

relieve the carrier of its liability or to fix a lower limit shall be null and void.
misconduct of the carrier or his agents.
2.3

Illustrations of

wilful misconduct that would hold an airline liable for

compensatory, moral, and exemplary damages and attorneys fees: (a) Flight attendant

rudely placed a passenger with first class ticket in the economy section of the airplane.66 (b)
Flight attendant ousted an asian passenger from the plane and substituted a caucasian
passenger on his seat. 67 (c) Airline personnel subjected a passenger to rude and barbaric

treatment, calling him a monkey. 68 (d) Spouses and child, all with confirmed and
reconfirmed reservations, were placed on wait-list, with only one making it on the
scheduled flight and the two others were compelled to buy again tickets from a different

airline.69 (e) Loss of baggage due to carriers negligence and tainted with bad faith by faking

a retrieval receipt to bail itself out of having to pay the passenger. 70 (f) Where the
passengers are upgraded from business class to first class without their consent and would
not be allowed to board unless they give in to the upgrade.71
3.

Illustrations:

3.1

X checked in two luggages containing advertising materials at the American Airs

ticket counter before boarding the aircraft with destination to Guam. Upon arrival, the two

luggages did not arrive with his flight. Xs business presentation to his prospective clients
was cancelled as a result. American Airways insisted that its liability to the lost luggages is
limited only to $600 ($20 x 30 kilos) as printed at the back of the airline ticket. X
contended that American Airways is guilty of wilful misconduct in losing his luggages and

so the limitation on the airlines liability does not apply. Decide the controversy with
reasons. The contention of American Airways limiting its liability in case of lost luggages to
66

Northwest Airlines, Inc. v. Cuenca, 14 SCRA 1063

Air France v. Carrascoso, 18 SCRA 155
68
Zulueta v. Pan-Am, 43 SCRA 397
69
Zalamea v. Court of Appeals, 228 SCRA 23
70
PAL v. Court of Appeals, 207 SCRA 100
71
Cathay Pacific Airways, Ltd v. Vasquez, 399 SCRA 207
67

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Transportation Laws Finals

$20 per kilo is in harmony with the Warsaw Convention. The failure of the airline to
deliver the luggages at the designated time and place does not amount ipso fact to wilful
misconduct. There must be a showing that the acts complained of were impelled by an

intention to violate the law or in persistent disregard of ones right. It must be evidenced by
a flagrantly or shamefully wrong or improper conduct. Therefore, X is only entitled to
$600 ($20 x 30 kilos). (PanAm World Airways, Inc. vs. IAC, 164 SCRA 268)
3.2

X is a resident of the Philippines. USA Airways is a foreign corporation with

principal office in Seattle, U.S.A. and licensed to engage in business in the Philippines with

branch office in Manila. While X was vacationing in the U.S.A., he bought a roundtrip ticket
in the New York-based ticket outlet of USA Airways (New York[via Tokyo]-Manila-New
York). His airline ticket showed that his return flight (Manila-New York) was left open.

Upon his arrival in Tokyo, X was told that there was no reservation for his Tokyo-Manila
flight. X pleaded that his flight had been confirmed and reconfirmed by the New York
Office. X was waitlisted and was only able to take the flight the following day. X then sued
USA Airways in the Manila RTC. Will the action for damages prosper? Explain briefly. No,
the action will not prosper for lack of jurisdiction of the Manila RTC.

Being an

international flight involving two (2) High Contracting Parties (USA and Philippines) of the

Warsaw Convention, its provision on jurisdiction of actions for damages shall apply. Such
being the case, the damage suit can only be filed in the proper court of any of the following:
(1) domicile of the carrier; (2) principal office of the carrier; (3) place of business through

which the contract has been made; or (4) place of destination.It is clear that the domicile
and principal office of USA Airways are in Seattle, U.S.A., while the place of business where

the contract was made and the place of destination (round-trip) are in New York, U.S.A.
Therefore, the damage suit filed in the Manila RTC should be dismissed for lack of
jurisdiction.72

72

Santos III v. Northwest Orient Airlines, 210 SCRA 256

25