COMMON CARRIERS

What is a Common Carrier?

First Philippine Industrial Corp. vs. CA
FACTS:
First Philippine Industrial Corporation is a grantee of a
pipeline concession under Republic Act No. 387.
Sometime in January 1995, petitioner applied for
mayors permit in Batangas. However, the Treasurer
required petitioner to pay a local tax based on gross
receipts amounting to P956,076.04. In order not to
hamper its operations, petitioner paid the taxes for the
first quarter of 1993 amounting to P239,019.01 under
protest.
On January 20, 1994, petitioner filed a letter-protest to
the City Treasurer, claiming that it is exempt from local
tax since it is a pipeline operator with a government
concession engaged in the business of transporting
petroleum products from the Batangas refineries, via
pipeline, to Sucat and JTF Pandacana Terminals.
The respondent City Treasurer denied the protest, thus,
petitioner filed a complaint before the Regional Trial
Court of Batangas for tax refund. In its complaint,
petitioner alleged that the authority of cities to impose
and collect a tax on the gross receipts of contractors
and independent contractors under Sec. 141 (e) and
151 does not include the authority to collect such taxes
on transportation contractors for, as defined under Sec.
131 (h), the term "contractors" excludes transportation
contractors
Respondents assert that pipelines cannot be exempt
from taxes under Section 133 (j) of the Local
Government Code as said exemption applies only to
"transportation contractors and persons engaged in the
transportation by hire and common carriers by air, land
and water." Respondents assert that pipelines are not
included in the term "common carrier" which refers
solely to ordinary carriers such as trucks, trains, ships
and the like.
ISSUE:
Whether or not a pipeline business is included in the
term common carrier so as to entitle the petitioner to
the tax exemption. Yes.
RULING:
A common carrier may be defined, broadly, as one
who holds himself out to the public as engaged in the
business of transporting persons or property from place
to place for compensation, offering his services to the
public generally.

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Article 1732 of the Civil Code defines a "common

carrier" as "any person, corporation, firm or association
engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air, for
compensation, offering their services to the public."
The test for determining whether a party is a common
carrier of goods is:
(1) He must be engaged in the business of carrying
goods for others as a public employment, and must hold
himself out as ready to engage in the transportation of
goods for person generally as a business and not as a
casual occupation;
(2) He must undertake to carry goods of the kind to
which his business is confined;
(3) He must undertake to carry by the method by which
his business is conducted and over his established
roads; and
(4) The transportation must be for hire.

Based on the above definitions and requirements, there

is no doubt that petitioner is a common carrier. It is
engaged in the business of transporting or carrying
goods, i.e. petroleum products, for hire as a public
employment. It undertakes to carry for all persons
indifferently, that is, to all persons who choose to
employ its services, and transports the goods by land
and for compensation. The fact that petitioner has a
limited clientele does not exclude it from the definition
of a common carrier.
In De Guzman vs. Court of Appeals the Supreme Court
ruled that:
The above article (Art. 1732, Civil Code) makes no
distinction between one whose principal business
activity is the carrying of persons or goods or both, and
one who does such carrying only as an ancillary activity
(in local idiom, as a "sideline"). Article 1732 . . . avoids
making any distinction between a person or enterprise
offering transportation service on a regular or scheduled
basis and one offering such service on an occasional,
episodic or unscheduled basis. Neither does Article 1732
distinguish between a carrier offering its services to the
"general public," i.e., the general community or
population, and one who offers services or solicits
business only from a narrow segment of the general
population. We think that Article 1877 deliberately
refrained from making such distinctions.
Also, respondent's argument that the term "common
carrier" as used in Section 133 (j) of the Local
Government Code refers only to common carriers
transporting goods and passengers through moving

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vehicles or vessels either by land, sea or water, is

erroneous.
As correctly pointed out by petitioner, the definition of
"common carriers" in the Civil Code makes no distinction
as to the means of transporting, as long as it is by land,
water or air. It does not provide that the transportation
of the passengers or goods should be by motor vehicle.

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COMMON CARRIERS

PEDRO DE GUZMAN vs. CA and ERNESTO

CENDANA
FACTS:
Cendana is a junk dealer from Pangasinan who
brings such material to Manila for resale. On the return
trip to Pangasinan, respondent would load his vehicles
with cargo which various merchants deliver to
Pangasinan. For that service Cendana charged freight
rates commonly lower than the regular rates.
In 1970, de Guzman a dealer of General Milk
contracted Cendana to deliver 750 cartons of Liberty
milk to Pangasinan. The controversy arose when 600
cartons never reached Pangasinan as the truck which
carried these boxes was hijacked.
De Guzman sued Cendana seeking to recover
the value of the goods. It is the contention of de Guzman
that as a common carrier Cendana failed to exercise
extra-ordinary diligence in dealing with the goods. As a
defense, Cendana alleged that he is not a common
carrier for the reason that this is not his principal line of
business, he only do this occasionally, and that he has
no certificate of convenience.
ISSUES:
1.
Whether or not Cendana is a common carrier.
2.
Whether or not a Certificate of Convenience is a
prerequisite before one can become a common carrier.
3.
Whether or not Cendana should be held liable.
RULING:
1.

Yes.

any 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 xxx
2.

No.

A certificate of public convenience is not a requisite for

the incurring of liability under the Civil Code provisions
governing common carriers. That liability arises the
moment a person or a firm acts as common carrier,
without regard whether or not such carrier has also
complied with the requirements of applicable regulatory
statute and implementing regulations and has been
granted a certificate of public convenience or other
franchise.
The law imposes duties and liabilities upon
common carriers for the safety and protection of those
who utilize their services and the law cannot allow a
common carrier to render such duties and liabilities
merely facultative by simply failing to obtain the
necessary permits and authorizations.
3.

No.

The Supreme Court held that Cendana should not be

held liable under the circumstances. The hijacking of the
carriers truck does not fall within any of the five (5)
categories enumerated in Article 1734 and that list is
exclusive. Therefore, there is a presumption as provided
under Article 1735, in other words, the private
respondent as common carrier is presumed to have
been at fault or have acted negligently. This
presumption, however, may be overthrown by proof of
extraordinary diligence on the part of Cendana.

Cendana is a common carrier. Article 1732 defines

common carriers as persons, corporations, firms or
associations engaged in the business of carrying or
transporting passengers or goods or both, by land,
water, or air for compensation, offering their services to
the public. The article makes no distinction between one
whose principal business activity is the carrying of
persons or goods or both, and who does such carrying
only as an ancillary activity or as sideline. Article 1732
carefully avoids making distinctions between a person
and/or enterprise offering transportation service on an
occasional, episodic or unscheduled basis. Neither does
Article 1732 distinguish between a carrier offering its
services to the general public, i.e. the general
community or population, one who offers services or
solicit business only from a narrow segment of the
general population.

Article 1745 (6) provides that a common carrier

is held responsible and will not be allowed to divest or
to diminish such responsibility even for acts of
strangers like thieves or robbers, except where such
thieves or robbers in fact acted with grave or irresistible
threat, violence or force. The Court believes and so
hold that should there be grave and irresistible threat,
violence or force the limits of extraordinary diligence
would be reached. In this case ARMED robbers held up
the truck of Cendana and in fact these men were
apprehended and were tried before the CFI and were
convicted for robbery.

Common carrier may coincide neatly with the

notion of public service under the Public Service Act
which at least supplements the law on common carriers
set forth in the Civil Code. Public service includes, xxx

Therefore, Cendana is not liable for the value of

the undelivered merchandise which was lost because of
an event entirely beyond his control.

In these circumstances, the SC hold that the

occurrence of the loss must reasonably be regarded as
quite beyond the control of the common carrier and
properly regarded as a fortuitous event.

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ESTRELLITA M. BASCOS, petitioners, vs.

COURT OF APPEALS and RODOLFO A.
CIPRIANO, respondents.

RTC rendered a decision in favor of Cipriano and

ordered Bascos to pay damages to the former. CA
affirmed the said decision.

FACTS: Rodolfo A. Cipriano representing Cipriano

Trading Enterprise (CIPTRADE for short) entered
into a hauling contract with Jibfair Shipping
Agency Corporation whereby the former bound
itself to haul the latter's 2,000 m/tons of soya
bean meal from Magallanes Drive, Del Pan, Manila
to the warehouse of Purefoods Corporation in
Calamba, Laguna.

ISSUES: (1) was petitioner a common carrier?;

and (2) was the hijacking referred to a force
majeure?

To carry out its obligation, CIPTRADE, through

Rodolfo Cipriano, subcontracted with Estrellita
Bascos to transport and to deliver 400 sacks of
soya bean meal worth P156,404.00 from the
Manila Port Area to Calamba, Laguna at the rate
of P50.00 per metric ton. Petitioner failed to
deliver the said cargo. As a consequence of that
failure, Cipriano paid Jibfair Shipping Agency the
amount of the lost goods in accordance with the
contract which held the former ...liable and
answerable for any loss in bags due to theft,
hijacking and non-delivery or damages to the
cargo during transport at market value..."
Cipriano
demanded
reimbursement
from
petitioner but the latter refused to pay. Eventually,
Cipriano filed a complaint for a sum of money and
damages with writ of preliminary attachment for
breach of a contract of carriage.
Petitioner contends that there was no contract of
carriage but a contract of lease since CIPTRADE
leased her cargo truck to load the cargo from
Manila Port Area to Laguna and that they offer
their services only to a select group of people and
do not cater to the general public; that CIPTRADE
was liable to petitioner in the amount of
P11,000.00 for loading the cargo; that the truck
carrying the cargo was hijacked along Canonigo
St., Paco, Manila on the night of October 21, 1988;
that the hijacking was immediately reported to
CIPTRADE and that petitioner and the police
exerted all efforts to locate the hijacked
properties; that after preliminary investigation, an
information for robbery and carnapping were filed
against Jose Opriano, et al.; and that hijacking,
being a force majeure, exculpated petitioner from
any liability to CIPTRADE.

(1) YES. Article 1732 of the Civil Code defines a

common carrier as "(a) person, corporation or
firm, or association engaged in the business of
carrying or transporting passengers or goods or
both, by land, water or air, for compensation,
offering their services to the public." The test to
determine a common carrier is "whether the given
undertaking is a part of the business engaged in
by the carrier which he has held out to the general
public as his occupation rather than the quantity
or extent of the business transacted."
In this case, petitioner herself has made the
admission that she was in the trucking business
under the name A.M. Bascos Trucking offering her
trucks to those with cargo to move. Both courts
appreciated the following pieces of evidence as
indicators that petitioner was a common carrier:
the fact that the truck driver of petitioner, Maximo
Sanglay, received the cargo consisting of 400 bags
of soya bean meal as evidenced by a cargo receipt
signed by Maximo Sanglay; the fact that the truck
helper, Juanito Morden, was also an employee of
petitioner; and the fact that control of the cargo
was placed in petitioner's care.
Article 1732 makes no distinction between one
whose principal business activity is the carrying of
persons or goods or both, and one who does such
carrying only as an ancillary activity (in local
idiom, as a "sideline"). Neither does Article 1732
distinguish between a carrier offering its services
to the "general public," i.e., the general
community or population, and one who offers
services or solicits business only from a narrow
segment of the general population.
(2) NO. Common carriers are obliged to observe
extraordinary diligence in the vigilance over the
goods transported by them. Accordingly, they are
presumed to have been at fault or to have acted
negligently if the goods are lost, destroyed or
deteriorated. Such presumption does not attach in
instances enumerated in Article 1734. In those
cases where the presumption is applied, the

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common carrier must prove that it exercised

extraordinary diligence in order to overcome the
presumption.
In De Guzman vs. CA, SC held that hijacking, not
being included in Article 1734, must be dealt with
under Article 1735 and thus, the common carrier
is presumed to have been at fault or negligent. To
exculpate the carrier from liability arising from
hijacking, he must prove that the robbers or the
hijackers acted with grave or irresistible threat,
violence, or force which is in accordance with
Article 1745 of the Civil Code.
Affidavits of petitioner, Jesus Bascos, and Juanito
Morden's "Salaysay" were presented before the
court. However, petitioner's affidavit about the
hijacking was based on what had been told her by
Juanito Morden and thus, was not a first-hand
account. Secondly, the affidavit of Jesus Bascos
did not dwell on how the hijacking took place.
Thirdly, while the affidavit of Juanito Morden, the
truck helper in the hijacked truck, was presented
as evidence in court, he himself was a witness as
could be gleaned from the contents of the petition.
These affidavits were not enough to overcome the
presumption. The subsequent filing of the
information for carnapping and robbery against
the accused named in said affidavits did not
necessarily mean that the contents of the
affidavits were true because they were yet to be
determined in the trial of the criminal cases.
The presumption of negligence was raised against
petitioner. It was petitioner's burden to overcome
it. Thus, contrary to her assertion, private
respondent need not introduce any evidence to
prove her negligence. Her own failure to adduce
sufficient proof of extraordinary diligence made
the presumption conclusive against her.

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COMMON CARRIERS

VIRGINES CALVO doing business under the name

and style TRANSORIENT CONTAINER TERMINAL
SERVICES, INC. v. UCPB GENERAL INSURANCE
CO., INC.
March 19, 2002
FACTS:
Petitioner Virgines Calvo is the owner of Transorient
Container Terminal Services, Inc. (TCTSI), a sole
proprietorship customs broker.
Calvo entered into a contract with San Miguel
Corporation (SMC) for the transfer of 114 reels of semichemical fluting paper and 124 reels of kraft liner board
from the Port Area in Manila to SMCs warehouse at the
Tabacalera Compound, Ermita, Manila.
The cargo was insured by respondent UCPB General
Insurance Co., Inc.
The shipment in question, contained in 30 metal vans,
arrived in Manila on board M/V Hayakawa Maru and
were unloaded from the vessel to the custody of the
arrastre operator, Manila Port Services, Inc.
Calvo, pursuant to her contract with SMC, withdrew the
cargo from the arrastre operator and delivered it to
SMCs warehouse in Ermita, Manila.
Upon delivery, the goods were inspected by Marine
Cargo Surveyors, who found that 15 reels of the semichemical fluting paper were wet/stained/torn and 3
reels of kraft liner board were likewise torn. The damage
was placed at P93,112.00.
SMC collected payment from respondent UCPB under its
insurance contract for the aforementioned amount. In
turn, UCPB as subrogee of SMC, brought suit against
Calvo before RTC. It rendered judgment finding Calvo
liable to UCPB for the damage to the shipment.
RTC [as affirmed by CA] opined that damages sustained
by shipment are attributable to improper handling whilst
in the custody of the broker. It ruled that Calvo is a
customs broker, warehouseman and at the same time a
common carrier who is supposed to exercise the
extraordinary diligence required by law. Having failed to
exercise such diligence, she must be held liable.

Petitioner contends that contrary to the findings of RTC

and CA, she is not a common carrier but a private carrier
because, as a customs broker and warehouseman, she
does not indiscriminately hold her services out to the
public but only offers the same to select parties with
whom she may contract in the conduct of her business.

ISSUE:
WON Calvo is a common carrier
RULING:
Yes. Calvo is a common carrier.
The Civil Code defines common carriers in the following
terms:
Article
1732.
Common
carriers
are
persons,
corporations, firms or associations engaged in the
business of carrying or transporting passengers or
goods or both, by land, water, or air for compensation,
offering their services to the public.
The above article makes no distinction between one
whose principal business activity is the carrying of
persons or goods or both, and one who does such
carrying only as an ancillary activity. . . Article 1732 also
carefully avoids making any distinction between a
person or enterprise offering transportation service on
a regular or scheduled basis and one offering such
service on an occasional, episodic or unscheduled basis.
Neither does Article 1732 distinguish between a carrier
offering its services to the general public, i.e., the
general community or population, and one who offers
services
or
solicits
business
only
from
a
narrow segment of the general population. We think
that Article 1732 deliberately refrained from making
such distinctions.
The concept of common carrier under Article 1732 also
coincides with the notion of public service, under the
Public Service Act (Commonwealth Act No. 1416, as
amended) which at least partially supplements the law
on common carriers set forth in the Civil Code.
Under Section 13, paragraph (b) of the Public Service
Act, public service includes:
x 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,
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 serviceand other similar public services. x x x
There is greater reason for holding petitioner Calvo to
be a common carrier because the transportation of
goods is an integral part of her business. To uphold
Calvos contention would be to deprive those with whom
she contracts the protection which the law affords
them notwithstanding the fact that the obligation to

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COMMON CARRIERS

carry goods for her customers, as already noted, is part

and parcel of petitioners business.
ON CALVOS LIABILITY AS COMMON CARRIER
Now, being classified as common carrier, Calvos liability
in Art. 1733 of the Civil Code provides:
Common carriers, from the nature of their business and
for reasons of public policy, are bound to observe
extraordinary diligence in the vigilance over the goods
and for the safety of the passengers transported by
them, according to all the circumstances of each
case. . . .
Meaning of Extraordinary Diligence:
As defined in Compania Maritima v. Court of Appeals,
The extraordinary diligence in the vigilance over the
goods tendered for shipment requires the common
carrier to know and to follow the required precaution for
avoiding damage to, or destruction of the goods
entrusted to it for sale, carriage and delivery. It requires
common carriers to render service with the greatest skill
and foresight and to use all reasonable means to
ascertain the nature and characteristic of goods
tendered for shipment, and to exercise due care in the
handling and stowage, including such methods as their
nature requires.
Calvo in this case did not exercise extraordinary
diligence. Despite her insistence that the cargo could not
have been damaged while in her custody, to prove the
exercise of extraordinary diligence, petitioner must do
more than merely show the possibility that some other
party could be responsible for the damage. It must
prove that it used all reasonable means to ascertain the
nature and characteristic of goods tendered for
[transport] and that it exercised due care in the
handling thereof. Petitioner failed to do this.
Contrary to Calvos assertion, when petitioners
employees withdrew the cargo from the arrastre
operator, they did so without exception or protest either
with regard to the condition of container vans
or their contents. Surely, if the container vans were
deformed, cracked, distorted or dented, Calvo would
have reported it immediately to the consignee but she
did not.
We can only conclude that the damages to the cargo
occurred while it was in the possession of the defendantappellant. Whenever the thing is lost (or damaged) in
the possession of the debtor (or obligor), it shall be
presumed that the loss (or damage) was due to his fault,
unless there is proof to the contrary.

On Calvos contention that she is still exempted from

liability even assuming arguendo that she is a common
carrier:
Petitioner contends that she must be exempted from
liability under Art. 1734(4), which provides:
Common carriers are responsible for the loss,
destruction, or deterioration of the goods, UNLESS the
same is due to any of the following causes only:
....
(4) The character of the goods or defects in the packing
or in the containers. xxx
But Calvo is STILL NOT EXEMPTED FROM LIABILITY. For
this provision to apply, the rule is that if the improper
packing or, in this case, the defect/s in the container,
is/are known to the carrier or his employees or apparent
upon ordinary observation, but he nevertheless accepts
the same without protest or exception notwithstanding
such condition, he is not relieved of liability for damage
resulting therefrom.
In this case, petitioner accepted the cargo without
exception despite the apparent defects in some of the
container vans.
Hence, for failure of petitioner to prove that she
exercised extraordinary diligence in the carriage of
goods in this case or that she is exempt from liability,
the presumption of negligence as provided under Art.
1735 holds.

COMMON CARRIERS

PLANTERS v. CA
Planters Products Inc (PPI) versus Court of Appeals
(CA), Soriamont Steamship Agencies (SSA) and Kyosei
Kisen Kabushiki Kaisha (KKKK)
FACTS:
Planters Products Inc (PPI) purchased from Mitsubishi 9,
329.7069 metric tons (MT) of urea 46% fertilizer to be
shipped in bulk by cargo vessel M/V Sun Plum owned by
KKKK from Alaska, USA to La Union, Philippines. Prior to
its voyage, a time charter party on MV Sun Plum was
executed between Mitsubishi as shipper/charterer and
KKKK as shipowner. The ship was inspected and found
fit to take a load of urea in bulk. The urea was loaded in
bulk under the supervision of Mitsubishi and the cargo
vessel went on voyage. Upon its arrival in La Union, PPI
unloaded the cargo to dump trucks and transported
them to a warehouse 50 meters away from the wharf.
11 days after, the unloading finished. PPI found out that
there was shortage of about 94-106 MT of urea and
about 18-23 MT were contaminated with dirt thus unfit
for commerce.
PPI then sent a claim letter to SSA, KKKKs resident
agent amounting to P245,969.31 representing the cost
of the shortage and contaminated urea. SSA denied the
claim because they had nothing to do with the
discharge of shipment. PPI thus filed an action for
damages with CFI Manila. KKKK defended that the strict
public policy governing common carriers does not apply
to them because they become private carriers by reason
of the charter-party. CFI ruled in favor of PPI. Upon
appeal in CA, the appellate court absolved KKKK from
liability and ruled that it was a private carrier thus there
was no presumption of negligence. Hence, this appeal
via petition for review.
ISSUES:
(1) WON a common carrier becomes a private carrier by
reason of a charter party. NO
(2) WON KKKK is liable for damages. NO
RULING:
(1) Article 1732 of NCC defines common carriers
as persons, corporations, firms or associations engaged
in the business of carrying or transporting passengers
or goods or both, by land, water, or air, for
compensation offering their services to the public.
The distinction between a "common or public carrier"
and a "private or special carrier" lies in the character of
the business, such that if the undertaking is a single
transaction, not a part of the general business or
occupation, although involving the carriage of goods for

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a fee, the person or corporation offering such service is

a private carrier.
It is undisputed that KKKK is a common carrier,
transporting goods indiscriminately to all persons in its
ordinary course of business. What happens in a charter
party is that an entire ship or some principal part thereof
is let by the owner to another person for a specified time
or use. There are 2 types, (a) contract of affreightment
which involves the use of shipping space on vessels
leased by the owner in part or as a whole, to carry goods
for others and, (b) charter by demise or bareboat
charter, by the terms of which 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. Contract of affreightment may either
be time charter, wherein the vessel is leased to the
charterer for a fixed period of time, or voyage charter,
wherein the ship is leased for a single voyage.
In this case, the charter party executed on MV Sun Plum
is a time charter party wherein KKKK lets the use of the
ship to PPI but the ship captain and the crew remained
to be under the direct supervision and control of KKKK.
Thus, a public carrier shall remain as such,
notwithstanding the charter of the whole or
portion of a vessel by one or more persons,
provided the charter is limited to the ship only, as
in the case of a time-charter or voyage charter. It
is only when the charter includes both the vessel
and its crew, as in a bareboat or demise that a
common carrier becomes private, at least insofar
as the particular voyage covering the charter
party is concerned. Indubitably, a shipowner in a
time or voyage charter retains possession and
control of the ship, although her holds may, for the
moment, be the property of the charterer.
(2) Article 1733 of NCC mandates that common carriers,
by reason of the nature of their business, should
observe extraordinary diligence in the vigilance over the
goods they carry. In the case of private carriers,
however, the exercise of ordinary diligence in the
carriage of goods will suffice. Moreover, in the case of
loss, destruction or deterioration of the goods, common
carriers are presumed to have been at fault or to have
acted negligently, and the burden of proving otherwise
rests on them. On the contrary, no such presumption
applies to private carriers, for whosoever alleges
damage to or deterioration of the goods carried has the
onus of proving that the cause was the negligence of the
carrier.
While it may be true that KKKK remains to be a common
carrier despite the time charter party, it is still not liable
for damages because it has successfully overcome the
presumption of negligence. The carrier proved that it
has exercised extraordinary zeal and diligence in the
care of the cargo. The vessel was in good condition and

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all the seals intact making it impossible for any

contamination during the voyage. Also, shipment of
highly soluble fertilizer such as urea in bulk carries with
it the risk of loss or damage. The weather was variable
during the unloading and the packaging of urea was
insufficient which all contributed to the loss. PPI has not
adduced evidence of negligence on the part of KKKK
thus it cannot claim for damages for the loss it suffered.

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PHILAMGEN v. PKS SHIPPING COMPANY

FACTS:

Davao Union Marketing Corporation (DUMC) contracted

the services of PKS Shipping Company (PKS Shipping)
for the shipment of 75,000 bags of cement worth Php3,
375, 000.00 to Tacloban City. DUMC insured the goods
for its full value with Philippine American General
Insurance Company (Philamgen).

The goods were loaded aboard dumb barge

Limar I which belonged to PKS Shipping. On the evening
of December 22, 1988, while Limar I was being towed
by MT Iron Eagle (PKS tugboat), the barge sank a couple
of miles off the coast of Dumagas Point, in Zamboanga
del Sur, bringing down with it the entire cargo of
cement.
DUMC filed a formal claim with Philamgen for
the full amount of the insurance. Philamgen promptly
made payment. However, PKS Shipping refused to
reimburse Philamgen which prompted the latter to file
suit against the former before the Makati RTC.
PKS Shipping contends it is not a common
carrier and therefore not liable for the loss of the cement
due to a fortuitous event (Typhoon APIANG).
ISSUES:
1. Whether PKS Shipping is a common carrier or private
carrier.
2. In either case, WON it has observed the proper
diligence (ordinary-private, extraordinary-common)
required in the circumstances to be exempt from
liability.
RULING:
1. PKS Shipping is a Common Carrier (CC). Article
1732 of the Civil Code: CCs 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
Section 13, paragraph (b), of the Public Service Act:
public service is x 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, any
CC, x x x
In applying Article 1732, in conjunction with
Sec.13 (b) of the Public Service Act, the Court ruled in
the leading case of De Guzman vs. CA that there is no
distinction between:
-

one whose principal business activity is the

carrying of persons or goods or both, and one

who does such carrying only as an ancillary

activity (sideline);
a person or enterprise offering transportation
service on a regular or scheduled basis and
one offering such service on an occasional,
episodic or unscheduled basis; and
a carrier offering its services to the general
public and one who offers services or solicits
business only from the narrow segment of
the general population.

Much of the distinction between a CC and a

private carrier lies in the character of the business. If it
undertakes an isolated transaction (not part of the
business), and the carrier does not hold itself out to
carry goods for the general public or to a limited
clientele, although involving the carriage of goods for a
fee, the carrier could very well be a private one.
PKS Shipping has engaged itself in the business
of carrying goods for others, although for a limited
clientele, undertaking to carry such goods for a fee. The
regularity of its activities in this area indicates more
than just casual activity on its part. Even if individual
contracts are entered into, the concept of a CC would
not change, otherwise, it will be easy for one to evade
liability by simply entering into those distinct
agreements with clients.
2. YES, PKS observed extraordinary diligence,
hence, not liable for the loss. Article 1733 of the Civil
Code requires CC to observe extraordinary diligence in
the vigilance over the goods they carry. In case of loss,
destruction or deterioration of goods, CC are presumed
to have been at fault or to have acted negligently, and
the burden of proving otherwise rests on them.
However, CC are exempt from liability for the loss,
destruction, etc. due to Flood, storm, earthquake,
lightning, or natural disaster or calamity; act of the
public enemy in war, whether intl or civil; act or
omission of the shipper or owner of the goods; the
character of the goods or defects in the packing or in
the containers; and order or act of competent public
authority.
The Court upheld the finding of the CA that
based on the testimonies and sworn marine protests of
the respective vessel masters of Limar I and MT Iron
Eagle that there was no way by which the crew of both
the barge and tugboat could have prevented the sinking
of Limar I. The vessel was suddenly tossed by 6-8 foot
tall waves (extraordinary height) buffeted by strong
winds which resulted to the entry of water into the
barges hatches. The official certificate of inspection
done by the Philippine Coastguard and the Coastwise
Load Line certificate would attest to the seaworthiness
of Limar I.

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ASIA LIGHTERAGE vs. CA (August 19, 2003)

FACTS:
In 1990, Marubeni American Corporation of Portland
Oregon shipped 3,150 metric tons of Better Western
White Wheat valued at over USD400, 000 on board a
marine vessel. The shipment was bound for General
Milling Corporation in Manila and was insured by
Prudential Guarantee and Assurance, Inc. against loss
or damage for Php14, 621,771.75.
Upon arrival of the vessel in Manila, the cargo was
transferred to the custody of Asia Lighterage and
Shipping, Inc., whose services were engaged by General
Milling Corporation to deliver said cargo to the latters
warehouse in Pasig City.
En route to Pasig, the barge on which the cargo was
loaded received several warnings of an incoming
typhoon and thus it sought shelter in an ship
engineering facility where it sustained damaged caused
by an unseen protuberance and partially sank.
Subsequently, the hole on the barge was patched with
clay and cement. It was refloated and continued on its
voyage to Pasig City. During transit, the barge ran
aground due to strong currents. To avoid complete
sinking of the barge, portions of the cargo were loaded
to three other barges.
The next day, the barge sank completely together with
its cargo. Prudential Guarantee and Assurance, paid
General Milling Corp., the amount insured and
thereafter, as subrogee, it pursued Asia Lighterage for
the same amount. Asia Lighterage contends that it is
not a common carrier for the following reasons:
a) It has no fixed and publicly known route;
b) It maintains no terminals;
c) It issues no tickets;
d) It is obliged to carry indiscriminately for any
person; and
e) It does not hold out its services to the general
public
ISSUES:
Whether or not Asia Lighterage and Shipping, Inc., is a
common carrier. YES.
Whether or not Asia Lighterage and Shipping, Inc.,
exercised extra-ordinary diligence. NO
RULING:
Yes, Asia Lighterage and Shipping, Inc., was adjudged
by the Supreme Court as a common carrier. Article 1732
provides for the definition of common carrier.
It may be noted that the above-provision does not make
distinction between one whose principal business is

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carrying of persons or goods or both, and one carrying

only as an ancillary activity (in support of an industry).
Furthermore, it does not distinguish between a carrier
offering its services to the general public and one who
offers services only to a narrow segment of the general
public; as in the instant case.
In the case of Bascos vs. Court of Appeals, the SC laid
down the test to determine a common carrier and that
iswhether the given undertaking is a part of the
business engaged in by the carrier which he has held
out to the general public as his occupation rather than
the quantity or extent of the business transacted.
In the instant case, Asia Lighterage admitted that it is
in the business of shipping and lighterage and it offers
such services to a limited group of clients.
As regards to the second issue, Asia Lighterage failed to
exercise extra-ordinary diligence as expected from
common carriers. Common carriers are presumed to
have been at fault or to have acted negligently if the
goods are lost or destroyed. Article 1734 of the Civil
Code, however, provides for exceptions wherein the
presumption of negligence does not attach. To hurdle
this presumption, the carrier must prove that it
exercised extraordinary diligence which Asia Lighterage
miserably failed to do.
The facts of the case and testimonial evidence of the
crew reveal that the proximate cause of the sinking was
not the storm itself but several occurrences. The first
was that the barge already partially submerged and the
damaged portion thereof was sealed merely by clay and
cement- this is only a temporary fix; insufficient to
assure the safety of the barge in voyage. Thus, the
crews persistence to carry-on with the voyage despite
the damage sustained by the vessel and several
warnings of incoming typhoons is contrary to the
exercise of extraordinary diligence. Asia Lighterage,
therefore, cannot escape liability by invoking force
majeure.

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COMMON CARRIERS

LOADMASTERS CUSTOMS SERVICES, INC., vs.

GLODEL BROKERAGE CORPORATION and R&B
INSURANCE CORPORATION,
G.R. No. 179446, January 10, 2011
FACTS:
The case is a petition for review on certiorari
under Rule 45 of the Revised Rules of Court assailing
the August 24, 2007 Decision of the Court of Appeals
(CA) in CA-G.R. CV No. 82822.
On August 28, 2001, R&B Insurance issued
Marine Policy No. MN-00105/2001 in favor of Columbia
to insure the shipment of 132 bundles of electric copper
cathodes against All Risks. On August 28, 2001, the
cargoes were shipped on board the vessel "Richard Rey"
from Isabela, Leyte, to Pier 10, North Harbor, Manila.
They arrived on the same date.
Columbia engaged the services of Glodel for the
release and withdrawal of the cargoes from the pier and
the subsequent delivery to its warehouses/plants.
Glodel, in turn, engaged the services of Loadmasters for
the use of its delivery trucks to transport the cargoes to
Columbias
warehouses/plants
in
Bulacan
and
Valenzuela City.
The goods were loaded on board twelve (12)
trucks owned by Loadmasters, driven by its employed
drivers and accompanied by its employed truck helpers.
Of the six (6) trucks route to Balagtas, Bulacan, only
five (5) reached the destination. One (1) truck, loaded
with 11 bundles or 232 pieces of copper cathodes, failed
to deliver its cargo.
Later on, the said truck, was recovered but
without the copper cathodes. Because of this incident,
Columbia filed with R&B Insurance a claim for insurance
indemnity in the amount ofP1,903,335.39. After the
investigation, R&B Insurance paid Columbia the amount
ofP1,896,789.62 as insurance indemnity.
R&B Insurance, thereafter, filed a complaint for
damages against both Loadmasters and Glodel before
the Regional Trial Court, Branch 14, Manila (RTC), It
sought reimbursement of the amount it had paid to
Columbia for the loss of the subject cargo. It claimed
that it had been subrogated "to the right of the
consignee to recover from the party/parties who may be
held legally liable for the loss."
On November 19, 2003, the RTC rendered a
decision holding Glodel liable for damages for the loss
of the subject cargo and dismissing Loadmasters
counterclaim for damages and attorneys fees against
R&B Insurance.

Both R&B Insurance and Glodel appealed the

RTC decision to the CA.
On August 24, 2007, the CA rendered that the
appellee is an agent of appellant Glodel, whatever
liability the latter owes to appellant R&B Insurance
Corporation as insurance indemnity must likewise be
the amount it shall be paid by appellee Loadmasters.
Hence, Loadmasters filed the present petition for review
on certiorari.
ISSUE:
Whether or not Loadmasters and Glodel are common
carriers to determine their liability for the loss of the
subject cargo.
RULING:
The petition is PARTIALLY GRANTED. Judgment is
rendered declaring petitioner Loadmasters Customs
Services, Inc. and respondent Glodel Brokerage
Corporation jointly and severally liable to respondent
Under Article 1732 of the Civil Code, common carriers
are persons, corporations, firms, or associations
engaged in the business of carrying or transporting
passenger or goods, or both by land, water or air for
compensation, offering their services to the public.
Loadmasters is a common carrier because it is engaged
in the business of transporting goods by land, through
its trucking service. It is a common carrier as
distinguished from a private carrier wherein the carriage
is generally undertaken by special agreement and it
does not hold itself out to carry goods for the general
public. Glodel is also considered a common carrier
within the context of Article 1732. For as stated and
well provided in the case of Schmitz Transport &
Brokerage Corporation v. Transport Venture, Inc., a
customs broker is also regarded as a common carrier,
the transportation of goods being an integral part of its
business.
Loadmasters and Glodel, being both common carriers,
are mandated from the nature of their business and for
reasons of public policy, to observe the extraordinary
diligence in the vigilance over the goods transported by
them according to all the circumstances of such case, as
required by Article 1733 of the Civil Code. When the
Court speaks of extraordinary diligence, it is that
extreme measure of care and caution which persons of
unusual prudence and circumspection observe for
securing and preserving their own property or rights.
With respect to the time frame of this extraordinary
responsibility, the Civil Code provides that the exercise
of extraordinary diligence 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

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COMMON CARRIERS

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to the consignee, or to the person who has a right to

receive them.
The Court is of the view that both Loadmasters and
Glodel are jointly and severally liable to R & B Insurance
for the loss of the subject cargo. Loadmasters claim
that it was never privy to the contract entered into by
Glodel with the consignee Columbia or R&B Insurance
as subrogee, is not a valid defense.
For under ART. 2180. The obligation imposed by Article
2176 is demandable not only for ones own acts or
omissions, but also for those of persons for whom one
is responsible.
xxxx
Employers shall be liable for the damages caused by
their employees and household helpers acting within the
scope of their assigned tasks, even though the former
are not engaged in any business or industry.
It is not disputed that the subject cargo was lost while
in the custody of Loadmasters whose employees (truck
driver and helper) were instrumental in the hijacking or
robbery of the shipment. As employer, Loadmasters
should be made answerable for the damages caused by
its employees who acted within the scope of their
assigned task of delivering the goods safely to the
warehouse.
Glodel is also liable because of its failure to exercise
extraordinary diligence. It failed to ensure that
Loadmasters would fully comply with the undertaking to
safely transport the subject cargo to the designated
destination. Glodel should, therefore, be held liable with
Loadmasters. Its defense of force majeure is unavailing.
For the consequence, Glodel has no one to blame but
itself. The Court cannot come to its aid on equitable
grounds. "Equity, which has been aptly described as a
justice outside legality, is applied only in the absence
of, and never against, statutory law or judicial rules of
procedure." The Court cannot be a lawyer and take the
cudgels for a party who has been at fault or negligent.

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COMMON CARRIERS

PERENA v. ZARATE

ISSUE:

Private school bus (carpool) is a common carrier in the

eyes of the law. They Must observe extraordinary
diligence.

WON the PERENAS fall under the definition of a

COMMON CARRIER which would require the XO
DILIGENCE of a GOOD FATHER.

FACTS:

RULING:

The PERENAS were engaged in the business of

transporting students from their respective residences
in Paraaque City to Don Bosco in Pasong Tamo, Makati
City, and back. (private school trasnport .. murag car
pool)

YES. Despite catering to a limited clientle, the Pereas

operated as a common carrier because they held
themselves
out
as
a
ready
transportation
indiscriminately to the students of a particular school
living within or near where they operated the service
and for a fee.

They hired ALFARO as driver of the van. The ZARATES

contracted the PERENAS to transport the latters son to
and from school.
While on their way to school on Aug 12, 1996, ALFARO
decided to make a shortcut using the railroad crossing
of the Philippine National Railway due to heavy traffic
and their were running late.
ALFARO saw that the barandilla (the pole used to block
vehicles crossing the railway) was up which means it
was okay to cross. He also tried to overtake a bus that
is why he did not see the incoming train. He also did not
hear the honks of the train kay kusog daw ang music sa
van.
The bus was able to cross unscathed but the vans rear
end was hit. During the collision, Aaron, was thrown off
the van. His body hit the railroad tracks and his head
was severed.
ZARATES sued PNR (PH NATL RAILROAD), PERENAS
and ALFARO (at large) and filed a complaint for breach
of contract of common carriage.
DEFENSE OF PERENAS:
1. Being private carriers, they were not negligent in
selecting Alfaro as their driver as they made sure that:

ALFARO has a drivers license

he was not involved in any

accident prior to his being hired

1. A carrier is a person or corporation who undertakes

to transport or convey goods or persons from one place
to another, gratuitously or for hire. It can be
private/special or public/common.
2. A private carrier is one who, without making the
activity a vocation, or without holding himself or itself
out to the public as ready to act for all who may desire
his or its services, undertakes, by special agreement in
a particular instance only, to transport goods or persons
from one place to another either gratuitously or for hire.

in Civil Code

governed by ordinary contracts

diligence required = ordinary

diligence of a good father
3. In contrast, a common carrier is a person,
corporation, firm or association engaged in the business
of carrying or transporting passengers or goods or both,
by land, water, or air, for compensation, offering such
services to the public.

governed by provisions
common carriers in CIVIL CODE

on

diligence
=
extraordinary
diligence, and is presumed to be at fault or
to have acted negligently in case of the loss
of the effects of passengers, or the death
or injuries to passengers.

1. Alfaro was reckless for crossing, who did not first

stop, look and listen for the incoming train.

4. TRUE TEST to know if COMMON CARRIER = not the

quantity or extent of the business actually transacted,
or the number and character of the conveyances used
in the activity, but whether the undertaking is a part
of the activity engaged in by the carrier that he
has held out to the general public as his business
or occupation.

2. That the narrow path traversed by the van had not

been intended to be a railroad crossing for motorists.

5. If not advertised, tapos single transaction lang =

private

2. In short, they observed the diligence of a good father

in selecting their employee.
DEFENSE of PNR:

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COMMON CARRIERS

If advertised/held out to the public = public

6. Applying these considerations to the case before us,
there is no question that the Pereas as the operators
of a school bus service were:
a.
engaged
in
transporting
passengers generally as a business, not
just as a casual occupation;
b.
undertaking
to
carry
passengers over established roads by the
method by which the business was
conducted; and
fee.

c.

transporting students for a

7. Despite catering to a limited clientle, the Peras

operated as a common carrier because they held
themselves
out
as
a
ready
transportation
indiscriminately to the students of a particular school
living within or near where they operated the service
and for a fee.
Nota bene:
Proof of negligence:
a.
PNR did not permit motorists
going into the Makati area to cross the railroad
tracks, but ALFARO did. Though it was used by
some motorists as a shortcut, it did not excuse
ALFARO.
b.
he pursued.

He knows that it was risky yet

c.
Loudness of music in the van
reduced his ability to hear the warning horns
made by the train.
d.
His act of overtaking caused
him not to see the incoming train from the
opposite side of the bus and lead to his
miscalculations of getting clear from the train.
e.
Lastly, he did not slow down nor go to a
full stop before traversing the railroad tracks despite
knowing that his slackening of speed and going to a full
stop were in obs.

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COMMON CARRIERS

Degree of Care Required of A Common Carrier

CANGCO v. MANILA RAILROAD
FACTS:
On January 20, 1915 at around 7-8pm, Jose Cangco was
riding the train of Manila Railroad Company where he
was an employed as a clerk. As the train drew near to
his destination, he arose from his seat. When Cangco
was about to alight from the train, Cangco accidentally
stepped on a sack of watermelons which he failed to
notice because it was already dim when it happened. As
a result, he slipped and fell violently on the platform.
His right arm was badly crushed and lacerated which
was eventually amputated. The operation was
unsatisfactory so he had second operation at another
hospital and was again amputated higher up near the
shoulder expending a total of P790.25
On August 1915, Cangco sued Manila Railroad Company
(recovery of damages) on the ground of negligence of
its employees placing the sacks of melons upon the
platform. The sacks were placed so as to jeopardize the
safety of passengers.
The MRRs defense was that granting that its employees
were negligent in placing an obstruction upon the
platform, the direct and proximate cause of the injury
suffered by plaintiff was his own contributing
negligence. CFI: favored Manila Railroad Co.
Cangco had failed to use due caution in alighting from
the coach and was therefore precluded from recovering
damages.
ISSUE:
WON MRR should be held liable.
RULING:
YES, CFI is reversed, and MRR is ordered to pay Cangco
the sum of P3,290.25. SC said that the PRIMARY
RESPONSIBILITY of MRR should be examined separately
from the CONTRIBUTORY NEGLIGENCE of Cangco.
On the one hand, there is the contract of carriage on the
part of MRR to bring Cangco safely to his destination.
There is the presumption of responsibility on the part of
MRR to make sure that in order to bring Cangco and
other passengers safely to their destination, MRR should
have exercised the proper discretion in selecting and
directing its employees and workers. MRR is deemed
negligent if is proven that they failed in their discretion
in selecting and directing its employees.
It cannot be doubted that the employees of the railroad
company were guilty of negligence. It necessarily
follows that the defendant company is liable for the

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damage thereby occasioned unless recovery is barred

by the plaintiff's own contributory negligence.
As ruled by the Court, Article 1903 of the Civil Code is
not applicable to obligations arising ex contractu, but
only to extra-contractual obligations or to use the
technical form of expression, that article relates only
to culpa aquiliana and not to culpa contractual
Article 1903 of the Civil Code is not applicable to acts of
negligence which constitute the breach of a contract
two things are apparent:
(1) That when an injury is caused by the
negligence of a servant or employee
there instantly arises a presumption of
law that there was negligence on the
part of the master or employer either in
selection of the servant or employee, or
in supervision over him after the
selection, or both; and
(2) that that presumption is juris
tantum and not juris et de jure, and
consequently, may be rebutted. It
follows necessarily that if the employer
shows to the satisfaction of the court
that in selection and supervision he has
exercised the care and diligence of a
good father of a family, the presumption
is overcome and he is relieved from
liability.
On the other hand, In determining the question of
contributory negligence in performing such act that is
to say, whether the passenger acted prudently or
recklessly the age, sex, and physical condition of the
passenger are circumstances necessarily affecting the
safety of the passenger, and should be considered.
The place was perfectly familiar to the plaintiff as it was
his daily custom to get on and off the train at the station.
There could, therefore, be no uncertainty in his mind
with regard either to the length of the step which he was
required to take or the character of the platform where
he was alighting. The Supreme Courts conclusion was
that the conduct of the plaintiff in undertaking to alight
while the train was yet slightly under way was not
characterized by imprudence and that therefore he was
not guilty of contributory negligence.

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COMMON CARRIERS

PHILIPPINE AIRLINES, INC., v. COURT OF

APPEALS and PEDRO ZAPATOS
FACTS:
On August 2, 1976, Pedro Zapatos was among the 21
passengers of PAL Flight 477 that took off from Cebu
bound for Ozamiz City. The routing of this flight was
Cebu-Ozamiz-Cotabato. While on flight and just about
15 minutes before landing at Ozamiz City, the pilot
received a radio message that the airport was closed
due to heavy rains and inclement weather and that he
should proceed to Cotabato City instead.
Upon arrival at Cotabato City, the PAL Station Agent
informed the passengers of the following options:
1)
to return to Cebu on flight 560 of the same day
and thence to Ozamiz City on 4 August 1975, or
2)
take the next flight to Cebu the following day,
or
3)
remain at Cotabato and take the next available
flight to Ozamiz City on 5 August 1975.
Zapatos chose to return to Cebu but was not
accommodated because only 6 seats were available and
he checked-in as passenger No. 9 on Flight 477. He
insisted on being given priority over the confirmed
passengers in the accommodation, but the Station
Agent refused Zapatos demand.
Private respondent tried to stop the departure of Flight
560 as his personal belongings were still on board. His
plea fell on deaf ears. PAL then issued to him a free
ticket to Iligan city, which the latter received under
protest. Private respondent was left at the airport and
could not even hitch a ride in the car loaded with PAL
personnel. PAL neither provided private respondent
with transportation from the airport to the city proper
nor food and accommodation for his stay in Cotabato
City. Subsequently, Zapatos went to Iligan City; his
personal belongings were no longer recovered.
Zapatos filed a complaint for damages for breach of
contract of carriage against Philippine Airlines, Inc.
(PAL), before the Regional Trial Court, of Misamis
Occidental, at Ozamiz City.
PAL filed its answer denying that it unjustifiably refused
to accommodate private respondent. It alleged that
there was simply no more seat for private respondent
on Flight 560 since there were only six (6) seats
available and the priority of accommodation on Flight
560 was based on the check-in sequence in Cebu; that
the first six (6) priority passengers on Flight 477 chose
to take Flight 560.

Regional Trial Court ruled in favor of Zapatos and

awarded damages in his favor.
PAL argues that the award for damages is unfounded,
asserting that it should not be charged with the task of
looking after the passengers' comfort and convenience
because the diversion of the flight was due to a
fortuitous event, and that if made liable, an added
burden is given to PAL which is over and beyond its
duties under the contract of carriage. It submits that
granting arguendo that negligence exists, PAL cannot be
liable in damages in the absence of fraud or bad faith.
ISSUE:
WON PAL is liable for damages for its breach of contract
of carriage
RULING:
YES. The position taken by PAL in this case clearly
illustrates its failure to grasp the exacting standard
required by law. Undisputably, PAL's diversion of its
flight due to inclement weather was a fortuitous event.
Nonetheless, such occurrence did not terminate PAL's
contract with its passengers. Being in the business of air
carriage and the sole one to operate in the country, PAL
is deemed equipped to deal with situations as in the case
at bar. What we said in one case once again must be
stressed, i.e., the relation of carrier and passenger
continues until the latter has been landed at the port of
destination and has left the carrier's premises. Hence,
PAL necessarily would still have to exercise
extraordinary diligence in safeguarding the comfort,
convenience and safety of its stranded passengers until
they have reached their final destination. On this score,
PAL grossly failed considering the then ongoing battle
between government forces and Muslim rebels in
Cotabato City and the fact that the private respondent
was a stranger to the place.
The contract of air carriage is a peculiar one. Being
imbued with public interest, the law requires common
carriers to carry the passengers safely as far as human
care and foresight can provide, using the utmost
diligence of very cautious persons, with due regard for
all the circumstances. In Air France v. Carrascoso, we
held that
A contract to transport passengers is quite different in
kind and degree from any other contractual relation.
And this, because of the relation which an air carrier
sustains with the public. Its business is mainly with the
travelling public. It invites people to avail of the
comforts and advantages it offers. The contract of air
carriage, therefore, generates a relation attended with
a public duty.

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COMMON CARRIERS

REPUBLIC VS LORENZO SHIPPING CORP.

FACTS:
The government entered into a contract of carriage of
goods with the National Trucking and Forwarding
Corporation (NTFC). The NTFC shipped 4,868 bags of
non-fat dried milk through the Lorenzo Shipping
Corporation (LSC). The consignee named in the bills of
lading issued by the LSC was Abdurahman Jama, the
NTFCs branch supervisor in Zamboanga City.
Upon reaching the port of Zamboanga City, LSCs agent,
Efren Ruste Shipping Agency, unloaded the bags and
delivered the goods to the NTFCs warehouse. Before
each delivery, both delivery checkers of the agency
requested Jama to surrender the original bills of lading
but Jama merely presented the certified true copies
thereof. Hence, they made Jama sign the delivery
receipts and at times he wasnt around, he instructed
his subordinates to sign the delivery receipts for him.

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and in his absence, his designated subordinates, to sign

the cargo delivery receipts. This practice which is their
standard operating procedure finds support in Article
353 of the Code of Commerce.
Under said article, it is enough that the delivery receipt
is signed if the surrender of the original bill of lading is
not possible. Since it was what was done by LSC, then
it could be said that they have sufficiently and
substantially complied with the requirements.
Hence, LSC is not guilty for breach of contract of
carriage.

The NTFC alleged that they did not receive the subject
goods. Thus, it filed a formal claim for non-delivery of
the goods shipped thru respondent. It also conducted
an investigation but before it was over, Jama resigned
as the branch supervisor of NTFC.
The government then filed an action for breach of
contract of carriage against LSC.
ISSUE:
W/N LSC is guilty for breach of contract of carriage
RULING:
NO. Article 1733 of the CC demands that a common
carrier observe extra-ordinary diligence over the goods
transported by it. 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. This
exacting standard imposed on common carriers in a
contract of carriage of goods is intended to tilt the scales
in favor of the shipper who is at the mercy of the
common carrier once the goods have been lodged for
shipment. Hence, in case of loss of goods in transit, the
common carrier is presumed under the law to have been
at fault or negligent. 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.
In this case, the SC found that the LSC adequately
proved that it exercised extraordinary diligence.
Although the original bills of lading remained with the
NTFC, LSCs agents demanded from Jama the certified
true copies of the bills of lading. They even made Jama

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COMMON CARRIERS

Aboitiz Shipping Corp. v Insurance Company of

North America (ICNA), August 6, 2008
FACTS:
MSAS procured an all risk marine insurance
policy from ICNA for transshipment of certain wooden
work tools and workbenches purchased for consignee
Science Teaching Improvement Project (STIP). The
cargo, packed inside a container van, was shipped
freight prepaid from Germany on board M/S
Katsuragi. A clean bill of lading was issued by HapagLloyd which stated the consignee to be STIP, Cebu City.
The container van was off-loaded at Singapore and
transshipped on board M/S Vigour Singapore. When the
ship arrived and docked at Manila, the container van
was again off-loaded. The cargo was received by Aboitiz,
which issued a bill of lading containing the
notation grounded outside warehouse.
The container van was stripped and transferred to
another crate/container van without any notation on the
condition of the cargo on the Stuffing/Stripping Report.
The container van was loaded on board Aboitizs vessel
en route to Cebu.
The shipment arrived in Cebu City and discharged. It
was brought to the Cebu Bonded Warehousing
Corporation pending clearance from the Customs. In the
Stripping Report, Aboitizs checker noted that the crates
were slightly broken or cracked at the bottom.
The cargo was withdrawn by STIP and delivered to Don
Bosco High School, and received by Mr. Willig. Two days
later, Willig, through a telephone call, informed Perez,
the Claims Head of Aboitiz, that the cargo sustained
water damage.
Perez inspected the contrainer and found that the
container van and other cargoes were completely dry.
Perez found that except for the bottom of the crate
which was slightly broken, the crate itself appeared to
be completely dry and had no water marks. But he
confirmed that the tools which were stored inside the
crate were already corroded. He further explained that
the "grounded outside warehouse" notation in the bill of
lading referred only to the container van bearing the
cargo.
STIP filed insurance claims with ICNA. The inspection
showed the goods sustained water damage, molds, and
corrosion which were discovered upon delivery to
consignee. STIP filed a formal claim with Aboitiz. A
supplemental report showed that PAGASA reported
heavy rains that caused water damage to the shipment,
which were placed outside the warehouse of the Pier in
Manila as can be gleaned from the bill of lading which
contained the notation grounded outside warehouse.

It was only 4 days after that the shipment was stuffed

inside another container van for shipment to Cebu.
ICNA paid the amount, and formally advised Aboitiz of
the claim, which the latter did not settle. The RTC
rendered judgment against ICNA ruling that it failed to
prove personality to sue because it was ICNA UK who
issued the policy not ICNA Phils. ICNA failed to produce
evidence that it was a foreign corporation duly licensed
to do business in the Philippines. Thus, it lacked the
capacity to sue before Philippine Courts. On appeal, the
CA reversed the RTC ruling holding that the right of
subrogation accrues simply upon payment by the
insurance company of the insurance claim. As subrogee,
ICNA is entitled to reimbursement from Aboitiz, even
assuming that it is an unlicensed foreign corporation.
The CA ruled that the presumption that the carrier was
at fault or that it acted negligently was not overcome by
any countervailing evidence. Hence, Aboitiz brought the
present petition.
ISSUE:
Whether or not Aboitiz Shipping Corporation exercised
extraordinary diligence?
*To determine if they are liable for damages
RULING:
No. They did not exercise extraordinary diligence.
The rule as stated in Article 1735 of the Civil Code is
that in cases where the goods are lost, destroyed or
deteriorated, common carriers are presumed to have
been at fault or to have acted negligently, unless they
prove that they observed extraordinary diligence
required by law.
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 rights.This standard is intended to grant
favor to the shipper who is at the mercy of the common
carrier once the goods have been entrusted to the latter
for shipment.
Here, the shipment delivered to the consignee sustained
water damage.
The shipment arrived in the port of Manila and was
received by petitioner for carriage on July 26, 1993. On
the same day, it was stripped from the container van.
Five days later, on July 31, 1993, it was re-stuffed inside
another container van. On August 1, 1993, it was loaded
onto another vessel bound for Cebu. During the period
between July 26 to 31, 1993, the shipment was outside
a container van and kept in storage by petitioner.

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The bill of lading issued by petitioner on July 31, 1993

contains the notation grounded outside warehouse,
suggesting that from July 26 to 31, the goods were kept
outside the warehouse. And since evidence showed that
rain fell over Manila during the same period, We can
conclude that this was when the shipment sustained
water damage.
To prove the exercise of extraordinary diligence,
petitioner must do more than merely show the
possibility that some other party could be responsible
for the damage. It must prove that it used all reasonable
means to ascertain the nature and characteristic of the
goods tendered for transport and that it exercised due
care in handling them. Extraordinary diligence must
include safeguarding the shipment from damage coming
from natural elements such as rainfall.
Aside from denying that the grounded outside
warehouse notation referred not to the crate for
shipment but only to the carrier van, petitioner failed to
mention where exactly the goods were stored during the
period in question. It failed to show that the crate was
properly stored indoors during the time when it
exercised custody before shipment to Cebu.
Petitioner is thus liable for the water damage sustained
by the goods due to its failure to satisfactorily prove that
it exercised the extraordinary diligence required of
common carriers.

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Transportation Law
Case Digests
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SY 2015-2016

COMMON CARRIERS

PHILIPPINES FIRST v. WALLEM

FACTS:
On October 2, 1995 Anhui Chemicals Import & Export
Corporation loaded on board M/S Offshore Master a
shipment consisting of 10,000 bags of sodium sulphate
complete and in good order for transportation to and
delivery at the port of Manila for consignee, L.G.
Atkimson Import-Export. The Bill of Lading reflects the
gross weight of the total cargo at 500,200 kilograms.
The Owner and/or Charterer of M/V Offshore Master is
unknown while the shipper of the shipment is Shanghai
Fareast Ship Business Company. Both are foreign firms
doing business in the Philippines, thru its local ship
agent, respondent Wallem Philippines Shipping, Inc.
(Wallem).
On October 16, 1995 the shipment arrived at the port
of Manila on board the vessel M/S Offshore Master from
which it was subsequently discharged. It was disclosed
during the discharge of the shipment from the carrier
that 2,426 poly bags (bags) were in bad order and
condition, having sustained various degrees of spillages
and losses. This is evidenced by the turn survey and bad
order survey of the arrastre operator Asian Terminals
Inc.
Asia starfreight undertook the delivery of the shipment
from the peir to the consignees in quezon city. The final
inspection was conducted jointly by the consignees
representative and the cargo surveyor. During the
unloading, it was found and noted that the bags had
been discharged in damaged and bad order condition.
Upon inspection, it was discovered that 63,065.00
kilograms of the shipment had sustained unrecovered
spillages, while 58,235.00 kilograms had been exposed
and contaminated, resulting in losses due to
depreciation and downgrading.
Consignee later on filed a formal complaint against
wallem for the value of the damaged shipments but to
no avail since it was insured with Philippines first
insurance against all risk in the amount of
P2,470,213.50. Consequently, Philippines first paid the
consignee the sum of P397,879.69 and the latter signed
a subrogation receipt.
Philippines first in its exercise of his right of subrogation
sent demand letter to wallem but it was unheeded.
Thus, Philippines first filed with the RTC an action for
damages including the payment of principal amount.
RTC held that Wallem shipping and the arrastre operator
solidarily liable since both the arrastre operator and the
carrier are charged with and obligated to deliver the
goods in good order condition to the consignee citing
the case of Eastern Shipping Lines, Inc. v. Court of
Appeals.

CA reversed RTCs decision; there is no solidary liability

between the carrier and the arrastre operator because
it was clearly established by the court a quo that the
damage and losses of the shipment were attributed to
the mishandling by the arrastre operator in the
discharge of the shipment. The appellate court ruled
that the instant case falls under an exception recognized
in Eastern Shipping Lines.
ISSUES:
1.) Whether or not the Court of Appeals erred in not
holding that as a common carrier, the carriers
duties extend to the obligation to safely
discharge the cargo from the vessel
2.) Whether or not the carrier should be held liable
for the cost of the damaged shipment
RULING:
As to the first issue, Common carriers, from the
nature of their business and for reasons of public policy,
are bound to observe extraordinary diligence in the
vigilance over the goods transported by them. Subject
to certain exceptions enumerated under Article 1734 of
the Civil Code, common carriers are responsible for the
loss, destruction, or deterioration of the goods. 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.
For marine vessels, Article 619 of the Code of
Commerce provides that the ship captain is liable for the
cargo from the time it is turned over to him at the dock
or afloat alongside the vessel at the port of loading, until
he delivers it on the shore or on the discharging wharf
at the port of unloading, unless agreed otherwise.
Lastly, Section 2 of the COGSA provides that
under every contract of carriage of goods by sea, the
carrier in relation to the loading, handling, stowage,
carriage, custody, care, and discharge of such goods,
shall be subject to the responsibilities and liabilities and
entitled to the rights and immunities set forth in the Act.
Section 3 (2) thereof then states that among the
carriers responsibilities are to properly and carefully
load, handle, stow, carry, keep, care for, and discharge
the goods carried.
The above doctrines are in fact expressly
incorporated in the bill of lading between the shipper
Shanghai Fareast Business Co., and the consignee, to
wit:
4.
PERIOD
OF
RESPONSIBILITY.
The
responsibility of the carrier shall commence from the
time when the goods are loaded on board the vessel and
shall cease when they are discharged from the vessel.

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COMMON CARRIERS

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The Carrier shall not be liable of loss of or

damage to the goods before loading and after
discharging from the vessel, howsoever such loss or
damage arises.
Handling cargo is mainly the arrastre operator's
principal work so its drivers/operators or employees
should observe the standards and measures necessary
to prevent losses and damage to shipments under its
custody. Thus, in this case the appellate court is correct
insofar as it ruled that an arrastre operator and a carrier
may not be held solidarily liable at all times.
As to the second issue, according to the
testimony of Mr. Talens, it is the master of the vessel
who supervises the unloading of the goods and reports
them to the head checker who is a contractor or checker
of wallem shipping.
The records are replete with evidence which show that
the damage to the bags happened before and after their
discharge and it was caused by the stevedores of the
arrastre operator who were then under the supervision
of Wallem.
It is settled in maritime law jurisprudence that
cargoes while being unloaded generally remain under
the custody of the carrier. In the instant case, the
damage or losses were incurred during the discharge of
the shipment while under the supervision of the carrier.
Consequently, the carrier is liable for the damage or
losses caused to the shipment. As the cost of the actual
damage to the subject shipment has long been settled,
the trial courts finding of actual damages in the amount
of P397,879.69 has to be sustained.

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Transportation Law
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COMMON CARRIERS

APPLICABLE
LAWS
COMMON CARRIERS

IN

CASES

INVOLVING

PAL v. CA, 207 SCRA 100

FACTS:
Isidro Co arrived at Manila International Airport aboard
Philippine Air Lines from California, USA. After
embarking, he proceeded to the baggage retrieval area
to claim his nine pieces of checked-in-luggage with
corresponding claim checks in his possession. However,
he failed to find one luggage. The said item is a
Samsonite suitcase measuring worth about $200.00 and
contained personal items.
Consequently, Co filed a complaint. The RTC and CA
found PAL liable and awarded Co damages. Upon
reaching the SC, PAL contended that under the Warsaw
Convention, its liability, if any, cannot exceed $20.00
based on weigh as Co did not declare the contents of his
baggage nor pay additional charges before flight.

Since the passengers destination in this case

was the Philippines. Philippine law governs the liability
of the carrier for the loss of the passengers luggage. In
this case, PAL failed to overcome, not only the
presumption, but more importantly, Cos evidence,
proving that the carriers negligence was the proximate
cause of the loss of his baggage. Furthermore, the
award of damages is bolstered by the fact that PAL acted
in bad faith in faking a retrieval receipt to bail itself out
of having to Pay Cos claim.

ISSUE:
Whether or not the Warsaw Convention applies.
RULING:
No, the Warsaw Convention does not apply.
The liability of the common carrier for the loss,
destruction or deterioration of goods transported from a
foreign country to the Philippines is governed primarily
by the New Civil Code. In all matters not regulated by
said Code, the rights and obligations of common carriers
shall be governed by the Code of Commerce and by
Special Laws.
The following applicable provisions of the New
Civil Code applicable are Articles 1733, 1735 and 1753
which provide:
Article 1733. Common carriers, from the nature
of their business and for reasons of public policy, are
bound to observe extraordinary diligence in the
vigilance over the goods and for the safety of the
passengers transported by them, according to all the
circumstances of each case.
Article 1735. In all cases other than those
mentioned in Nos. 1, 2, 3, 4, and 5 of the preceding
article, if the goods are lost, destroyed or deteriorated,
common carriers are presumed to have been at fault or
to have acted negligently, unless they prove that they
observed extraordinary diligence as required in article
1733.
Article 1753. The law of the country to which the
goods are to be transported shall govern the liability of
the common carrier for their loss, destruction or
deterioration.

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COMMON CARRIER OF GOODS

DEGREE OF DILIGENCE REQUIRED

AMANDO MIRASOL v. THE ROBERT DOLLAR CO.
G.R. NO. L-29721 (March 27, 1929)
FACTS:
Amando Mirasol is the owner and consignee of
two cases of books, shipped in good order and condition
at New York, USA, on board The Robert Dollar Co.
steamship President Garfield. The said books were to be
transported and delivered to Mirasol in the City of
Manila, all freight charges paid.
On September 1, 1927, the cases arrived in
Manila in bad order and damaged condition resulting in
the total loss of one case, and a partial loss of the other.
Mirasol filed a claim for damages in the amount of
P1,630 with regard to one case and P700 with regard to
the second case which suffered a partial loss but The
Robert Dollar Co. refused and neglected to pay on the
ground that the damages to the books was caused by
sea water.
Mirasol alleged that he never entered into any
contract with the shipping company limiting the latter's
liability as a common carrier and never intended to ratify
or confirm any agreement to limit the latter's liability,
and when he wrote the letter of September 3, 1927, he
had not then ascertained the contents of the damaged
case, and could not determine their value but when the
damaged case was found on September 9, 1927, he
filed a claim for the real damage of the books in the
amount of $375.
On its part, The Robert Dollar Co. cited the
following contentions which it suggests will exonerate
the company's liability regarding the damaged books:
1) the steamship President Garfield was
seaworthy and properly manned, equipped and supplied
for the voyage and that the damage to Mirasol's
merchandise was not caused through the negligence of
the vessel or any of its crew.
2) In the bill of lading, it was agreed in writing
that The Robert Dollar Co. should not be held liable for
any loss or damage resulting from Acts of God or perils
of the sea or other waters.
3) In the said bill of lading, it was agreed that
The Robert Dollar Co. in no case shall be held liable for
said merchandise or property beyond the sum of $250.
4) The damage by sea water is a shipper's risk
and thus, The Robert Dollar Co. is not liable.
Thereafter, the lower court rendered judgment
in favor of Mirasol and awarded in his favor the amount
of P2,080 and from which both parties appealed.
ISSUE:

Transportation Law
Case Digests
2-Manresa
SY 2015-2016

YES

Whether or not The Robert Dollar Co. is liable -

RULING:
Under Article 1733 of the New Civil Code, "Common carriers, from the nature of their business and
for reasons of public policy, are bound to observe
extraordinary diligence in the vigilance over the goods
and for the safety of the passengers transported by
them, according to all the circumstances of each case"
The defendant having received the two boxes in
good condition, its legal duty was to deliver them to the
plaintiff in the same condition in which it received them.
From the time of their delivery to the defendant in New
York until they are delivered to the plaintiff in Manila,
the boxes were under the control and supervision of the
defendant and beyond the control of the plaintiff. The
defendant having admitted that the boxes were
damaged while in transit and in its possession, the
burden of proof then shifted, and it devolved upon the
defendant to both allege and prove that the damage was
caused by reason of some fact which exempted it from
liability. As to how the boxes were damaged, when or
where, was a matter peculiarly and exclusively within
the knowledge of the defendant and in the very nature
of things could not be in the knowledge of the plaintiff.
To require the plaintiff to prove as to when and how the
damage was caused would force him to call and rely
upon the employees of the defendant's ship, which in
legal effect would be to say that he could not recover
any damage for any reason. That is not the law.
Shippers who are forced to ship goods on an
ocean liner or any other ship have some legal rights,
and when goods are delivered on board ship in good
order and condition, and the ship owner delivers them
to the shipper in bad order and condition, it then
devolves upon the ship owner to both allege and prove
that the goods were damaged by the reason of some
fact which legally exempts him from liability; otherwise,
the shipper would be left without any redress, no matter
what may have caused the damage.
The lower court in its opinion says:
The defendant has not even attempted to prove
that the two cases were wet with sea water by fictitious
event, force majeure or nature and defect of the things
themselves. Consequently, it must be presumed that it
was by causes entirely distinct and in no manner
imputable to the plaintiff, and of which the steamer
President Garfield or any of its crew could not have been
entirely unaware.
And the evidence for the defendant shows that
the damage was largely caused by "sea water," from
which it contends that it is exempt under the provisions
of its bill of lading and the provisions of the Article 361
of the Code of Commerce, which is as follows:

COMMON CARRIER OF GOODS

Transportation Law
Case Digests
2-Manresa
SY 2015-2016

Merchandise shall be transported at the risk and

venture of the shipper, if the contrary was not expressly
stipulated.
Therefore, all damages and impairment suffered
by the goods during the transportation, by reason of
accident, force majeure, or by virtue of the nature or
defect of the articles, shall be for the account and risk
of the shipper.
The proof of these accidents is incumbent on the
carrier.
Thus, the Robert Dollar Co. cannot escape
liability by enforcing the alleged agreements in the bill
of lading as this is considered by the Court as against
public policy. Likewise, the company cannot invoke
article 361 of the Code of Commerce because it failed to
prove that the damages suffered by the books during
transportation was by reason of accident or force
majeure. Thus it is presumed that The Robert Dollar Co.
is negligent and be held liable for damages because it
failed to prove that it observed extraordinary diligence
in the transport and delivery of the books owned by
Amando Mirasol.

COMMON CARRIER OF GOODS

Transportation Law
Case Digests
2-Manresa
SY 2015-2016

FIREMANS FUND INSURANCE CO v. METRO PORT

SERVICES

employ must exercise due diligence in the performance

of their work.

FACTS:

The testimonies are appreciated and the court held that

Maerks is at fault in not providing twist locks on the
chassis and Metro is also at fault for Librandos
negligence in not checking that the cargo is securely
loaded on the chassis.

Vulcan Industrial and Mining Corporation imported from

the United States several machineries and equipment
which were loaded on board the SIS Albert Maersk at
the port of Philadelphia, U.S.A., and transhipped for
Manila through the vessel S/S Maersk Tempo.
The shipment arrived at the port of Manila on June 3,
1979 and was turned over complete and in good order
condition to the arrastre operator E. Razon Inc. (now
Metro Port Service Inc. and referred to as the
ARRASTRE).
A tractor operator, named Danilo Librando and
employed by the ARRASTRE, was ordered to transfer the
shipment to the Equipment Yard at Pier 3. While
Librando was maneuvering the tractor (owned and
provided by Maersk Line) to the left, the cargo fell from
the chassis and hit one of the container vans of
American President Lines. It was discovered that there
were no twist lock at the rear end of the chassis where
the cargo was loaded.
An Insurance was claimed by Vulcan Industrial, in turn,
the petitioner insurance company demanded recovery
from Maerks Line. The trial court ruled that Maerks and
Metro Port be held solidarily liable. On appeal by Metro
Port, the Court of Appeals reversed, ruling that it is only
Maerks that is liable.
ISSUE:
WON Maerks and Metro Port exercised the proper
degree of diligence.
WON Maerks and Metro Port be held liable solidarity.
RULING:
Maersk and Metro port did not exercise the proper
diligence.
In general, the nature of the work of an arrastre
operator covers the handling of cargoes at piers and
wharves. The ARRASTRE is required to provide cargo
handling equipment which includes among others
trailers, chassis for containers. In some cases, however,
the shipping line has its own cargo handling equipment.
In this case, Maerks provide for the chassis and tractors
and merely requested the arrastre (Metro) to dispatch a
tractor operator. ARRASTRE which had the sole
discretion and prerogative to hire and assign Librando
to operate the tractor. It was also the ARRASTRE's sole
decision to detail and deploy Librando for the particular
task from among its pool of tractor operators or drivers.
Since the ARRASTRE offered its drivers for the operation
of tractors in the handling of cargo and equipment, then
the ARRASTRE should see to it that the drivers under its

Both the arrastre and the carrier are charged with

and obligated to deliver the goods in good
condition to the consignee.
The legal relationship between the consignee and the
arrastre operator is akin to that of a depositor and
warehouseman (Lua Kian v. Manila Railroad Co., 19
SCRA 5 [1967]). The relationship between the
consignee and the common carrier is similar to that of
the consignee and the arrastre operator (Northern
Motors, Inc. v. Prince Line, et al., 107 Phil. 253 [1960]).
Since it is the duty of the ARRASTRE to take good care
of the goods that are in its custody and to deliver them
in good condition to the consignee, such responsibility
also devolves upon the CARRIER. Both the ARRASTRE
and the CARRIER are therefore charged with and
obligated to deliver the goods in good condition to the
consignee.

COMMON CARRIER OF GOODS

Transportation Law
Case Digests
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SY 2015-2016

117 SCRA 832

1.) While it may be true that petitioner had not signed

the plane ticket, he is nevertheless bound by the
provisions thereof. It is a contract of adhesion. The
one who adheres to the contract of adhesion is in reality
free to reject it entirely, if he adheres, he gives his
consent.

Appellees Clara Uy Bico and Amparo Servando

loaded on board appellants vessel, FS-176, for carriage
from Manila to Pulupandan, Negros Occidental. Clara Uy
Bico loaded 1,528 cavans of rice valued at P40,907.50
while Amparo Servando loaded 44 cartons of colored
paper, toys and general merchandise valued at
P1,070.50.

2.) Where fortuitous event or force majeure is the

immediate and proximate cause of the loss, the obligor
is exempt from liability for non-performance. Article
1174-- Except in cases expressly specified by the law,
or when it is otherwise declared by stipulation, or when
the nature of the obligation requires the assumption of
risk, no person shall be responsible for those events
which could not be foreseen, or which, though foreseen,
were inevitable.

WHEN EXTRAORDINARY DILIGENCE MUST BE

EXERCISED: DURATION

Servando v. Phil Steam

FACTS:

Upon arrival of the vessel at Pulupandan, in the

morning of November 18, 1963, the cargoes were
discharged, complete and in good order, unto the
warehouse of the Bureau of Customs.
At about 2:00 in the afternoon of the same day,
said warehouse was razed by a fire of unknown origin,
destroying appellees' cargoes.
Appellees' claims for the value of said goods
were rejected by the appellant on the ground that in the
bills of lading issued for the cargoes in question, the
parties agreed to limit the responsibility of the carrier
for the loss or damage that may be caused to the
shipment by inserting therein the following stipulation:
Clause 14. Carrier shall not be responsible for
loss or damage to shipments billed 'owner's risk'
unless such loss or damage is due to negligence
of carrier. Nor shall carrier be responsible for
loss or damage caused by force majeure,
dangers or accidents of the sea or other waters;
war; public enemies; . . . fire ...
Appellees would contend that the above
stipulation does not bind them because it was printed in
fine letters on the back-of the bills of lading; and that
they did not sign the same.
ISSUE:
WON the said stipulation binds the appellees
RULING:
Yes. There is nothing therein that is contrary to law,
morals or public policy.
The Court in this case, gave 4 reasons to justify its
ruling:

3.) Appellant carrier did not incur delay in the

performance of its obligation. It appears that appellant
had not only notified appellees of the arrival of their
shipment, but had demanded that the same be
withdrawn. In fact, pursuant to such demand, appellee
Uy Bico had taken delivery of 907 cavans of rice before
the burning of the warehouse.
4.) Since the warehouse belonged to and was
maintained by the government, it would be unfair to
impute negligence to the appellant, the latter having no
control whatsoever over the same.

COMMON CARRIER OF GOODS

GENERAL RULE ON LIABILITY

THE PHILIPPINE AMERICAN GENERAL
INSURANCE COMPANY, INC. vs. CA and FELMAN
SHIPPING LINES
(G.R. No. 116940, June 11, 1997)
Facts:
On 6 July 1983 Coca-Cola Bottlers Philippines, Inc.,
loaded on board MV Asilda, a vessel owned and operated
by respondent Felman Shipping Lines (FELMAN for
brevity), 7,500 cases of 1-liter Coca-Cola softdrink
bottles to be transported from Zamboanga City to Cebu
City for consignee Coca-Cola Bottlers Philippines, Inc.,
Cebu. The shipment was insured with petitioner
Philippine American General Insurance Co., Inc.
(PHILAMGEN for brevity).
On 7 July 1983, the vessel sank in the waters of
Zamboanga del Norte.
On 15 July 1983 the consignee Coca-Cola Bottlers
Philippines, Inc., Cebu plant, filed a claim with
respondent FELMAN for recovery of damages. FELMAN
denied the claim thus prompting the consignee to file an
insurance claim with PHILAMGEN which paid its claim of
P755,250.00.
Claiming its right of subrogation, PHILAMGEN sought
recourse against FELMAN which disclaimed any liability
for the loss. Consequently, on 29 November 1983
PHILAMGEN sued the shipowner for sum of money and
damages alleging that the sinking was due to the
vessels unseaworthiness.
The trial court rendered judgment in favor of FELMAN.
It ruled that MV Asilda was seaworthy, in which case, no
liability should attach unless there was a stipulation to
the contrary. Upon appeal, the CA rendered judgment
finding MV Asilda unseaworthy for being top- heavy as
2,500 cases of Coca-Cola softdrink bottles were
improperly stowed on deck.
Issues:
(a) Whether MV Asilda was seaworthy when it left the
port of Zamboanga;
(b) Whether the limited liability under Art. 587 of the
Code of Commerce should apply; and
(c) Whether PHILAMGEN was properly subrogated to the
rights and legal actions which the shipper had against
FELMAN, the shipowner.
Ruling:
1. MV Asilda was unseaworthy when it left the port of
Zamboanga. The SC subscribed to the findings of the
Elite Adjusters, Inc. regarding the sinking of MV Asilda
that the proximate cause of the sinking of MV Asilda was

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its being top-heavy. Evidence shows that approximately

2,500 cases of softdrink bottles were stowed on deck.
In this case it was established that MV Asilda was not
designed to carry substantial amount of cargo on deck.
The inordinate loading of cargo deck resulted in the
decrease of the vessels metacentric height thus making
it unstable. The strong winds and waves encountered by
the vessel are but the ordinary vicissitudes of a sea
voyage and as such merely contributed to its already
unstable and unseaworthy condition.
2. On the second issue, Art. 587 of the Code of
Commerce is not applicable to the case at bar. Simply
put, the ship agent is liable for the negligent acts of the
captain in the care of goods loaded on the vessel. This
liability however can be limited through abandonment
of the vessel, its equipment and freightage as provided
in Art. 587. Nonetheless, there are exceptional
circumstances wherein the ship agent could still be held
answerable despite the abandonment, as where the loss
or injury was due to the fault of the shipowner and the
captain.
It was already established at the outset that the sinking
of MV Asilda was due to its unseaworthiness. Closer
supervision on the part of the shipowner could have
prevented this fatal miscalculation. As such, FELMAN
was equally negligent. It cannot therefore escape
liability through the expedient of filing a notice of
abandonment of the vessel by virtue of Art. 587 of the
Code of Commerce.
Under Art 1733 of the Civil Code, (c)ommon
carriers, from the nature of their business and for
reasons of public policy, are bound to observe
extraordinary diligence in the vigilance over the
goods and for the safety of the passengers
transported by them, according to all the
circumstances of each case x x x x" In the event
of loss of goods, common carriers are presumed
to
have
acted
negligently.
FELMAN,
the
shipowner,
was not able
to rebut this
presumption.
3. In relation to the question of subrogation, CA found
MV Asilda unseaworthy with reference to the cargo and
therefore ruled that there was breach of warranty of
seaworthiness that rendered the assured not entitled to
the payment of is claim under the policy. Hence, when
PHILAMGEN paid the claim of the bottling firm there was
in effect a voluntary payment and no right of
subrogation accrued in its favor. In other words, when
PHILAMGEN paid it did so at its own risk.
Therefore, the payment made by PHILAMGEN to CocaCola Bottlers Philippines, Inc., gave the former the right
to bring an action as subrogee against FELMAN. Having
failed to rebut the presumption of fault, the liability of
FELMAN for the loss of the 7,500 cases of 1-liter CocaCola softdrink bottles is inevitable.

COMMON CARRIER OF GOODS

SARKIES TOURS PHILIPPINES vs. CA and FATIMA

A. FORTADES

FACTS:
On August 31, 1984, Fatima boarded De Luxe Bus No.
5 in Manila on her way to Legazpi City. She had three
pieces of luggage containing all of her optometry review
books, materials and equipment, trial lenses, trial
contact lenses, passport and visa, as well as her mother
Marisols U.S. immigration (green) card, among other
important documents and personal belongings. During
a stopover at Daet, it was discovered that all but one
bag remained in the open compartment as the other
bags, including Fatimas things, were missing and could
have dropped along the way.
Fatima immediately reported the loss to her mother who
went to petitioners offices in Legazpi City and Manila
where she was merely offered her P1,000.00 for each
piece of luggage lost. In an effort to recover the bags,
the petitioners asked assistance from the radio stations
and even from Philtranco bus drivers who plied the same
route on August 31st. This paid off when one of Fatimas
bags was recovered.
On September 20, 1984, respondents, through counsel,
made a formal demand from the petitioner. In a letter
dated October 1, 1984, the latter apologized for the
delay and said that a team has been sent out to Bicol
for the purpose of recovering or at least getting the full
detail of the incident. After more than nine
months, respondents decided to file a case for breach of
contract of carriage. They claimed that the loss was due
to petitioners failure to observe extraordinary diligence
in the care of Fatimas luggage and that petitioner dealt
with them in bad faith. Petitioner, on the other hand,
disowned any liability for the loss on the ground that
Fatima allegedly did not declare any excess baggage
upon boarding its bus.
RTC: The trial court ruled in favor of the petitioners and
ordered the payment of the value of the lost belongings,
transportation expenses and damages among other.
CA: The CA affirmed the ruling of the RTC but deleted
the award of moral and exemplary damages.
ISSUE:
W/N Sarkies Tours is liable for breach of contract
of carriage due to the loss of Fatimas belongings
RULING:
YES.
Petitioner claims that Fatima did not bring any piece of
luggage with her, and even if she did, none was declared
at the start of the trip. However, in a letter dated
October 1, 1984, petitioner tacitly admitted its liability

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by apologizing to respondents and assuring them that

efforts were being made to recover the lost items.
Petitioners would not have gone through a lot of trouble
of trying to recover the bags and its contents if they
pursued a false loss. Fatima was not the only one who
lost her luggage. Other passengers suffered a similar
fate.
Under Article 1733 of the Civil Code, common carriers,
from the nature of their business and for reasons of
public policy, are bound to observe extraordinary
diligence in the vigilance over the goods and for the
safety of passengers transported by them.
Article 1736 further provides that this liability 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 for transportation until the
same are delivered, actually or constructively, by the
carrier to the person who has a right to receive them.
The exception to this is unless the loss is due to any of
the excepted causes under Article 1734. The cause of
the loss in the case at bar was petitioners negligence in
not ensuring that the doors of the baggage
compartment of its bus were securely fastened. As a
result of this lack of care, almost all of the luggage was
lost, to the prejudice of the paying passengers.

COMMON CARRIER OF GOODS

SCHMITZ TRANSPORT & BROKERAGE

CORPORATION,
vs.
TRANSPORT VENTURE, INC., INDUSTRIAL
INSURANCE COMPANY, LTD., and BLACK SEA
SHIPPING AND DODWELL now INCHCAPE
SHIPPING SERVICES

Facts:
MV Alexander Saveliey, a vessel owned by Black Sea
contains a shipment of 545 hot rolled steels from Russia
which was discharged at the Port of Manila in favour of
the Consignee, Little Giant Corporation. These were
insured against all risks with Industrial Insurance
Company. Upon arrival in the port of Manila, it was
assigned outside the breakwater of Manila South
Harbor.
Schmitz Transport is the customs broker whose
services were engaged by Little Giant to secure the
clearances, receive the cargoes from the shipside and
deliver it to Little Giants warehouse. Since Schmitz does
not own a barge and a tugboat to unload the coils at
shipside, it in turn engaged the services of Transport
Venture (TVI).
The weather condition had become inclement due to an
approaching storm and 37 coils unloaded from the
vessel to the barge were already accomplished around
12:30 am. However, no tugboat pulled the barge back
to the pier. The barge was abandoned by the crew at
5:30 am due to the strong waves. It eventually capsized
washing away the 37 coils and was never recovered.
Little Giant filed a formal claim against Industrial
Insurance which paid it the amount of P5,246,113.11.
It then executed a subrogation receipt in favor of
Industrial Insurance. Industrial Insurance later filed a
complaint against Schmitz Transport, TVI, and Black
Sea for the recovery of the amount it paid to Little Giant.
It faulted the defendants for undertaking the unloading
of the cargoes while typhoon signal No. 1 was raised in
Metro Manila.
Defendants defenses:
Schmitz Transport asserts that it was acting as an agent
of Little Giant, hence the transportation contract was
between Little Giant and TVI and that both of them were
not common carriers. Black Sea argued that the cargoes
were received by Little Giant through Schmitz in good
order, hence it cannot be faulted. TVI maintained that it
acted as a passive party as it merely received the
cargoes and transferred the same to the barge upon
instruction of Schmitz Transport.

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The RTC and CA found all them to be liable jointly and

severally.

Issues:
1. Whether the cargoes were lost due to a
fortuitous event and no negligence on the part
of the 3 of them?
2. If there was negligence, to whom should liability
attach?

Held:
1. No, it was not lost due to a fortuitous event
under Article 1174.
The loss thus is outside the act of God Doctrine. In this
case, the proximate cause of the loss of the cargoes was
that no tugboat towed back the barge to the pier after
it was completely loaded. Had the barge been towed
back promptly to the pier, the deteriorating sea
conditions notwithstanding, the loss could have been
avoided. But the barge was left floating in open sea until
big waves set in causing it to shrink along with the
cargoes.
When the effect is found to be in part the result of the
participation of man, whether due to his active
intervention or neglect or failure to act, the whole
occurrence is then humanized and removed from the
rules applicable to the acts of God.
2. Schmitz Transport and TVI are liable.
Schmitz Transport is a Common Carrier. A customs
broker may be regarded as a common carrier. As long
as a person or corporation holds itself to the public for
the purpose of transporting goods as a business, it is
already considered a common carrier regardless if it
owns the vehicle to be used or has to hire one. It
undertook to transport the cargoes from the shipside to
Little Giants warehouse. This is proven by the testimony
of its own VP and General Manager that part of the
services it offers to its clients as a brokerage firm
includes the transportation of cargoes reflects so.
It suffices that petitioner undertakes to deliver the
goods for pecuniary consideration. Article 1732 does not
distinguish between one whose principal business
activity is the carrying of goods and one who does such
carrying only as an ancillary activity. To declare
otherwise "would be to deprive those with whom it
contracts the protection which the law affords them
notwithstanding the fact that the obligation to carry
goods for its customers, is part and parcel of petitioners
business.

COMMON CARRIER OF GOODS

For it to be relieved of Liability, it should prove that it

exercised due diligence to prevent or minimize the loss,
before, during and after the occurrence of the storm in
order that it may be exempted from liability for the loss
of the goods. After noting that TVI failed to arrange for
the prompt towage of the, it should have summoned the
same or another tugboat to extend help, but it did not.

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consignee was not from "pier to pier" but from the

shipside of the vessel and into barges, for which reason
the Little Giant contracted the services of petitioner.
Since Black Sea had constructively delivered the
cargoes to Little Giant, through petitioner, it had
discharged its duty.

Schmitz argument on being just an agent of Little

Giant:
Yes, Schmitz is a broker agent but in effecting the
transportation of the cargoes until delivered to the Little
Giant, it was discharging its own personal obligation
under a contract of carriage. It did not disclose that it
was acting on commission and was chartering the vessel
for Little Giant in their Service Contract with TVI. Not
being a party to the service contract, Little Giant
cannot directly sue TVI based thereon but it can
maintain a cause of action for negligence.

In the case of TVI:

It acted as a private carrier for which it was under no
duty to observe extraordinary diligence, it was still
required to observe ordinary diligence to ensure the
proper and careful handling, care and discharge of the
carried goods.

A man of ordinary prudence would not leave a heavily

loaded barge floating for a considerable number of
hours, at such a precarious time, and in the open sea,
knowing that the barge does not have any power of its
own and is totally defenseless from the ravages of the
sea. That it was nighttime and, therefore, the members
of the crew of a tugboat would be charging overtime pay
did not excuse TVI from calling for one such tugboat.

As for Black Sea:

No liability may attach to Black Sea. Its duty as a
common carrier extended only from the time the goods
were surrendered or unconditionally placed in its
possession and received for transportation until they
were delivered actually or constructively to Little Giant.
Parties to a contract of carriage may, however, agree
upon a definition of delivery that extends the services
rendered by the carrier.

In the case at bar, Bill of Lading No. 2 covering the

shipment provides that delivery be made "to the port of
discharge or so near thereto as she may safely get,
always afloat." The delivery of the goods to the