Transportation and Public Utilities Law associations organized under the laws of the Philippines,

at least sixty per centum of whose capital is owned by

I. INTRODUCTION such citizens; nor shall such franchise, certificate, or
authorization be exclusive in character or for a longer
A. Concept of PUBLIC SERVICE period than fifty years. Neither shall any such franchise or
right be granted except under the condition that it shall
B. Transportation and Public Utility be subject to amendment, alteration, or repeal by the
Congress when the common good so requires. The State
1. PUBLIC SERVICE: A public utility is engaged in shall encourage equity participation in public utilities by
public service providing basic commodities and the general public. The participation of foreign investors
services indispensable to the interest of the general in the governing body of any public utility enterprise shall
public. be limited to their proportionate share in its capital, and
2. REGULATION versus FREE ENTERPRISE: all the executive and managing officers of such
corporation or association must be citizens of the
C. Regulatory Agencies Philippines.

D. The contract of transportation a. Luzon Stevedoring Corporation v. Anti-Dummy Board,

G. R. No. L-26094, August 18, 1972
1. Coverage
a. Transportation of persons b. Historical Antecedents of the Constitutional Provision
b. Transportation of things
(a) Article XIV, 8, 1935: No franchise, certificate,
2. Means of Transportation or any other form of authorization for the
a. By land operation of a public utility shall be granted
b. By sea except to citizens of the Philippines or to
c. By air corporations or other entities organized under
the laws of the Philippines sixty per centum of
3. Types of transportation the capital of which is owned by citizens of the
a. Domestic carriage Philippines, nor shall such franchise, certificate,
b. International carriage or authorization be exclusive in character or for
a longer period than fifty years. No franchise or
E. Use of transport right shall be granted to any individual, firm, or
corporation, except under the condition that it
1. Basic commercial concepts in the use of shall be subject to amendment, alteration, or
transport services repeal by the Congress when the public interest
2. Parties to the contract of transport so requires.
a. Passenger
b. Shipper (b) Article XIV, 5, 1973: No franchise, certificate,
c. Carrier or any other form of authorization for the
d. Receiver or consignee operation of a public utility shall be granted
except to citizens of the Philippines at least sixty
II. Transportation and public utilities per centum of the capital of which is owned by
such citizens, nor shall such franchise,
A. The Regulatory Agencies certificate, or authorization be exclusive in
(a) Land Transportation, Franchising and Regulatory character or for a longer period then fifty years.
Board (LTFRB) EO 202, s. 1987 Neither shall any such franchise or right be
(b) Land Transportation Office (LTO) RA 4136 granted except under the condition that it shall
(c) Light Rail Transit Authority (LRTA) EO 603. as be subject to amendment, alteration, or repeal
amended s. 1980 by the National Assembly when the public
(d) Toll Regulatory Board (TRB) PD1112 as interest so requires. The State shall encourage
amended equity participation in public utilities by the
(e) Civil Aeronautics Board (CAB) RA 776 general public. The participation of foreign
(f) Civil Aviation Authority of the Philippines (CAAP) investors in the governing body of any public
RA 9497 utility enterprise shall be limited to their
(g) Maritime Industry Authority (MARINA) PD 474, proportionate share in the capital thereof.
EO 125/125-A, s.
a. 1987, RA 9295 2. Definition of public utilities
(h) Philippine Ports Authority (PPA) PD 857
(i) Philippine Coast Guard (PCG) RA 9993 PUBLIC UTILITY: Business or service engaged in
(j) National Telecommunications Commission (NTC) regularly supplying the public with some commodity
EO 546, s. 1979 or service or of public consequence such as
(k) National Water Resources Board (NWRB) EO electricity, gas, water, transportation, telephone or
860, s. 2010 telegraph service. The term implies public use and
(l) Local Water Utilities Administration (LWUA) EO 421, service.
s. 2005 Luzon Brokerage v. Public Service Commission, 57
(m) Energy Regulatory Commission (ERC) RA 9136 Phil. 536, G. R. No. 37661, November 16, 1932
North Negros Sugar Co v. Serafin Hidalgo, 63 Phil
III. PUBLIC LAW ASPECT OF TRANSPORTATION 664, G. R. No. 42334, October 31, 1936
STATE REGULATION
3. Definition of public services 13 (b) Public
A. Public utility concept of transportation Service Act (Com. Act No 146)
Luzon Stevedoring Company v. Public Service
1. Constitutional basis for regulating public utilities
Commission, G. R. No. L-5458, September 16, 1953,
1987 Constitution, Article XII, 11: No franchise,
93 Phil 735
certificate, or any other form of authorization for the
operation of a public utility shall be granted except to
B. Grant of franchises
citizens of the Philippines or to corporations or

1. Legislative franchises: 1987 Constitution, Article XII,
11
Pangasinan Transportation Co., Inc. v. Public Service
Commission, G. R. No. 47065, June 26, 1940. 70 Phil
221
Radio Communications of the Philippines v. National
Telecommunications Commission, G. R. No. L-68729,
May 29, 1987
2. Franchises granted through delegated authority;
powers and functions of regulatory agencies
a. Land transport LTFRB
19, Chapter 5, Title XV, Executive Order No. 292
(Administrative Code of 1987)
b. Air transport
11, R.A. No. 776 (CAAP): Certificate of Public
Convenience and Necessity is a permit issued by the
Board authorizing a person to engage in air commerce
and/or transportation, foreign and/or domestic. No person
shall engage in air commerce unless there is in force a
permit issued by the Board.
No general sales agent, cargo sales agent or airfreight
forwarder shall engage in any of the activities mentioned in
Section 3 paragraphs (jj), (kk) and (ll) respectively, unless
there is in force a permit or any other form of authorization
issued by the Board.
Any permit may be altered, amended, modified, suspended,
canceled or revoked by the Board in whole or in part, upon
complaints or petition or upon the Board's initiative as
hereinafter provided, whenever the Board finds such action to
be in the public interest.
There shall be attached to the exercise of the privileges
granted by the permit, or amendment thereto, such
reasonable terms, conditions, or limitations as, in the
judgment of the Board, the public interest may require.
No permit shall confer any proprietary, property, or exclusive
right in the use of any air space, civil airway, landing area of
government air navigation facility.
The permit shall, among others specify the terminal and
intermediate points, if any, between which the air carrier is
authorized to operate the service to be rendered, the time of
arrival and departure at each point, and the frequency of
flights. Provided, that no change in routes, rates, schedules or
frequency nor supplemental or additional flights to those
covered by an air commerce permit or franchise shall be
affected without prior approval of the Civil Aeronautics Board.
In so far as the operation is to take place within the
Philippines, the permit shall designate the terminal and
intermediate points only insofar as the Board shall deem
practicable, and otherwise shall designate only the general
route or routes to be followed.
No carrier shall abandon any route, or part thereof for which a
permit has been issued, unless upon findings by the Civil
Aeronautics Board that such an abandonment is uneconomical
and is in the public interest.
c. Sea transport
12, P.D. No. 474 (MARINA): Specific Powers and
Functions of the Administrator. In addition to his general
powers and functions, the Administrator shall;
a. Issue Certificate of Philippine Registry for all vessels being
used in Philippine waters, including fishing vessels covered by
Presidential Decree No. 43 except transient civilian vessels of
foreign registry, vessels owned and/or operated by the Armed
Forces of the Philippines or by foreign governments for
military purposes, and bancas, sailboats and other watercraft
which are not motorized, of less than three gross tons;
b. Provide a system of assisting various officers, professionals,
technicians, skilled workers and seamen to be gainfully
employed in shipping enterprises, priority being given to
domestic needs;
c. In collaboration and coordination with the Department of
Labor, to look into, and promote improvements in the working
conditions and terms of employment of the officers and crew
of vessels of Philippine registry, and of such officers and crew
members who are Philippine citizens and employed by foreign
flag vessels, as well as of personnel of other shipping
enterprises, and to assist in the settlement of disputes
between the shipowners and ship operators and such officers
and crew members and between the owner or manager of
other shipping enterprises and their personnel;
d. To require any public water transport utility or Philippine
flag vessels to provide shipping services to any coastal areas
in the country where such services are necessary for the
development of the area, to meet emergency sealift
requirements, or when public interest so requires;
e. Investigate by itself or with the assistance of other
appropriate government agencies or officials, or experts from
the private sector, any matter within its jurisdiction, except
marine casualties or accidents which shall be undertaken by
the Philippine Coast Guard;
f. Impose, fix, collect and receive in accordance with the
schedules approved by the Board, from any shipping
enterprise or other persons concerned, such fees and other
charges for the payment of its services;
g. Inspect, at least annually, the facilities of port and cargo
operators and recommend measures for adherence to
prescribed standards of safety, quality and operations;
h. Approve the sale, lease or transfer of management of
vessels owned by Philippine Nationals to foreign owned or
controlled enterprises;
i. Prescribe and enforce rules and regulations for the
prevention of marine pollution in bays, harbors and other
navigable waters of the Philippines, in coordination with the
government authorities concerned;
j. Establish and maintain, in coordination with the appropriate
government offices and agencies, a system of regularly and
promptly producing, collating, analyzing and disseminating
traffic flows, port operations, marine insurance services and
other information on maritime matters;
k. Recommend such measures as may be necessary for the
regulation of the importation into and exportation from the
Philippines of vessels, their equipment and spare parts;
l. Implement the rules and regulations issued by the Board of
Transportation; lawphi1.net
m. Compile and codify all maritime laws, orders, rules and
regulations, decisions in leasing cases of courts and the
Authority's procedures and other requirements relative to
shipping and other shipping enterprises, make them available
to the public, and, whenever practicable to publish such
materials;
n. Delegate his powers in writing to either of the Deputy
Administrators or any other ranking officials of the Authority;
Provided, That he informs the Board of such delegation
promptly; and
o. Perform such other duties as the Board may assign, and
such acts as may be necessary and proper to implement this
Decree.
3, E.O. No. 125-A, April 13, 1987, amending 14 of
Executive Order No. 125, January 30, 1987: Sec. 12.
 Maritime Industry Authority. The Maritime Industry
Authority is hereby retained and shall have the following
functions:
(a) Develop and formulate plans, policies, programs, projects,
standards, specifications and guidelines geared toward the
promotion and development of the maritime industry, the
growth and effective regulation of shipping enterprises, and
for the national security objectives of the country;
(b) Establish, prescribe and regulate routes, zones and/or
areas of operation of particular operators of public water
services;
(c) Issue Certificates of Public Convenience for the operation
of domestic and overseas water carriers;
(d) Register vessels as well as issue certificates, licenses or
documents necessary or incident thereto;
(e) Undertake the safety regulatory functions pertaining to
vessel construction and operation including the determination
of manning levels and issuance of certificates of competency
to seamen;
(f) Enforce laws, prescribe and enforce rules and regulations,
including penalties for violations thereof, governing water
transportation and the Philippine merchant marine, and
deputize the Philippine Coast Guard and other law
enforcement agencies to effectively discharge these
functions;
(g) Undertake the issuance of licenses to qualified seamen
and harbor, bay and river pilots;
(h) Determine, fix and/or prescribe charges and/or rates
pertinent to the operation of public water transport utilities,
facilities and services except in cases where charges or rates
are established by international bodies or associations of
which the Philippines is a participating member or by bodies
or associations recognized by the Philippine Government as
the proper arbiter of such charges or rates.
(i) Accredit marine surveyors and maritime enterprises
engaged in shipbuilding, ship repair, shipbreaking, domestic
and overseas shipping ship management and agency;
(j) Issue and register the continuous discharge book of Filipino
seamen;
(k) Establish and prescribe rules and regulations, standards
and procedures for the efficient and effective discharge of the
above functions;
(l) Perform such other functions as may now or hereafter be
provided by law.
10, R.A. No. 9295: Jurisdiction; Power; and Duties of
MARINA. - The MARINA shall have the power and
authority to:
(1) Register vessels;
(2) Issue certificates of public convenience or any extensions
or amendments thereto, authorizing the operation of all kinds.
Classes and types of vessels in domestic shipping: Provided,
That no such certificate shall be valid for a period of more
than twenty-five (25) years;
(3) Modify, suspend or revoke at any time upon notice and
hearing, any certificate, license or accreditation it may have
issued to any domestic ship operator;
(4) Establish and prescribe routes, zones or areas of
operations of domestic ship operators;
(5) Require any domestic ship operator to provide shipping
services to any coastal area, island or region in the country
where such services are necessary for the development of the
area, to meet emergency sealift requirements, or when public
interest so requires;
(6) Set safety standards for vessels in accordance with
applicable conventions and regulations;
(7) Require all domestic ship operators to comply with
operational and safety standards for vessels set by applicable
conventions and regulations, maintain its vessels in safe and
serviceable conditions, meet the standards of safety of life at
sea and safe manning requirements, and furnish safe,
adequate, efficient, reliable and proper service at all times;
(8) Inspect all vessels to ensure and enforce compliance with
safety standards and other regulations;
(9) Ensure that all domestic ship operators shall have the
financial capacity to provide and sustain safe, reliable,
efficient and economic passenger or cargo service, or both;
(10) Determine the impact which any new service shall have
to the locality it will serve;
(11) Adopt and enforce such rules and regulations which will
ensure compliance by every domestic ship operator with
required safety standards and other rules and regulations on
vessel safety;
(12) Adopt such rules and regulations which ensure the
reasonable stability of passengers and freight rates and, if
necessary, to intervene in order to protect public interest;
(13) Hear and adjudicate any complaint made in writing
involving any violation of this law or the rules and regulations
of the Authority;
(14) Impose such fines and penalties on, including the
revocations of licenses of any domestic ship operator who
shall fail to maintain its vessels in safe and serviceable
condition, or who shall violate or fail to comply with safety
regulations;
(15) Investigate any complaint made in writing against any
domestic ship operator, or any shipper, or any group of
shippers regarding any matter involving violations of the
provisions of this Act;
(16) Upon notice and hearing, impose such fines, suspend or
revoke certificates of public convenience or other license
issued, or otherwise penalize any ship operator, shipper or
group of shippers found violating the provisions of this Act;
and
(17) Issue such rules and regulations necessary to implement
the provisions of this Act: Provided, That such rules and
regulations cannot change or in any way amend or be
contrary to the intent and purposes of this Act.
1. Regulation of rates Section 16 (c). Public
Service Act
a. Approval of rates charged
Kilusang Mayo Uno Labor Center v. Jesus B.
Garcia, Jr., et al., G. R. No. 115381, December
23, 1994
"to determine, prescribe, approve and
periodically review and adjust, reasonable
fares, rates and other related charges,
relative to the operation of public land
transportation services provided by
motorized vehicles."
Such delegation of legislative power to an
administrative agency is permitted in order
to adapt to the increasing complexity of
modern life. As subjects for governmental
regulation multiply, so does the difficulty of
administering the laws. Hence,
specialization even in legislation has
become necessary. Given the task of
determining sensitive and delicate matters
as route-fixing and rate-making for the
transport sector, the responsible regulatory
 body is entrusted with the power of
subordinate legislation. With this authority,
an administrative body and in this case, the
LTFRB, may implement broad policies laid
down in a statute by "filling in" the details
which the Legislature may neither have time
or competence to provide. However,
nowhere under the aforesaid provisions of
law are the regulatory bodies, the PSC and
LTFRB alike, authorized to delegate that
power to a common carrier, a transport
operator, or other public service.
Moreover, rate making or RATE FIXING is
not an easy task. It is a delicate and
sensitive government function that
requires dexterity of judgment and
sound discretion with the settled goal
of arriving at a just and reasonable
rate acceptable to both the public
utility and the public. Several factors, in
fact, have to be taken into consideration
before a balance could be achieved. A rate
should not be confiscatory as would place
an operator in a situation where he will
continue to operate at a loss. Hence, the
rate should enable public utilities to
generate revenues sufficient to cover
operational costs and provide reasonable
return on the investments. On the other
hand, a rate which is too high becomes
discriminatory. It is contrary to public
interest. A rate, therefore, must be
reasonable and fair and must
be affordable to the end user who will utilize
the services.
Given the complexity of the nature of the
function of rate-fixing and its far-reaching
effects on millions of commuters,
government must not relinquish this
important function in favor of those
who would benefit and profit from the
industry. Neither should the requisite
notice and hearing be done away with.
The people, represented by reputable
oppositors, deserve to be given full
opportunity to be heard in their
opposition to any fare increase.
b. RETURN ON RATE BASE: In determining the just
and reasonable rates to be charged by a public
utility, three major factors are considered by
the regulating agency: a) rate of return; b) rate
base and c) the return itself or the computed
revenue to be earned by the public utility
based on the rate of return and rate base.
[22]
The RATE OF RETURN is a judgment percentage
which, if multiplied with the rate base, provides a fair
return on the public utility for the use of its property
for service to the public.[23] The rate of return of a
public utility is not prescribed by statute but
by administrative and judicial
pronouncements. This Court has consistently
adopted a 12% rate of return for public
utilities.[24] The RATE BASE, on the other hand, is
an evaluation of the property devoted by the utility
to the public service or the value of invested capital
or property which the utility is entitled to a return.[25]
Republic of the Philippines v. Enrique Medina, et
al., G. R. No. L-32068, October 4, 1971
In authorizing an increase of rates, the
Public Service Commission proceeded on
the basis that the MERALCO as public utility
should receive a reasonable return on its
investment, equivalent to 12% on the rate
base, the present market or replacement
value of the properties devoted to the
service less depreciation, plus operating
capital equivalent to 2 months operating
income. In so doing, the Public Service
Commission only followed the constant
doctrine of the case heretofore adjudicated
by this Court.
MERALCO returns do not exceed 12% of
its service assets. While a public utility
like MERALCO may in effect be deemed
to be a monopoly, its favored position
as such is more than counterbalanced
by the regulatory limitation on the rate
of return on its capital and its
unavoidable obligation to maintain and
expand its services as demand therefor
increases. Of course, its rates must
always be just to the public, but
protection of the latter does not
necessarily mean that only reduced
rates, regardless of economic
conditions,
Oppositors vigorously criticize the
method utilized in the appealed
decision in determing the rate base
and fair returns for MERALCO. We are
not unaware of the fact that various theories
or formulae have been proposed to appraise
the assets and determine what are fair rates
for public utilities. Of them three appear
to have gained favor at various times:
(1) the historical cost or prudent
investment formula; (2) that of present
cost or market value; and (3) the cost
to reproduce theory (43 Am. Jur., page
646). The decided weight of authority,
however, is to the effect that property
valuation is not to be solved by
formula, but depends upon particular
circumstances and relevant facts
affecting each utility as to what
constitutes a just rate base and what
would be the fair return, just to both
the utility and the public.
Atty. Bautista argues that Meralco has
trended or re-priced its properties three
times since 1963 resulting in over valuation
of its utility plant in service. He contends
that the dollar components of Meralco's
property in service prior to 1963 were
already trended in 1963, then trended again
in 1968 and then their dollar cost was
multiplied by 6 (P6 to $1).This argument
stems from a misapprehension of the
purpose of the trending method which,
as has been stated hereinbefore, is to
give recognition to changing economic
conditions and variations in the
purchasing power of the currency
between the time of investment and
the time of the rate base computation.
c. Rule with respect to water transport
Sections 8 and 11, RA 9295
8. Deregulation of the Domestic
Shipping Industry. - In order to encourage
investments in the domestic shipping
industry by existing domestic ship operators
and attract new investment from new
operators and investors, domestic ship
operators are hereby authorized to
establish their own domestic shipping
rates: Provided, That effective competition
is fostered and public interest is served.
The MARINA shall monitor all shipping
operations and exercise regulatory
 intervention where it is established after
due process that public interest needs to be
protected and safeguarded.
11. Rates. - Every domestic ship operator
shall have the right to fix its own passenger
or cargo rates, or both.
d. Rule with respect to air transport
Section 10, RA 776
To fix and determine reasonable individual,
joint or special rates, charges or fares,
which an air carrier may demand, collect or
receive for any service in connection with
air commerce. The Board may adopt any
original, amended, or new individual, joint or
special rates, charges or fares proposed by
an air carrier if the proposed individual,
joint, or special rates, charges for fares are
not unduly preferential or unduly
discriminatory or unreasonable. The burden
of proof to show that the proposed
individual, joint or special rates, charges or
fares are just and reasonable shall be upon
the air carrier proposing the same.
In fixing rates, charges, fares under the
provisions of this Act, the Board shall take
into consideration, among other factors:
(a) The effect of such rates upon the
movement of traffic;
(b) The need in the public interest of
adequate and efficient transportation of
persons and property by air carriers at the
lowest cost consistent with the furnishing of
such service.
(c) Such standards respecting the character
and quality of service to be rendered by air
carriers as may be prescribed by or
pursuant to law;
(d) The inherent advantages of
transportation by aircraft; and
(e) The need of each air carrier for revenues
sufficient to enable such air carrier, under
honest, economical, and efficient
management, to provide adequate and
efficient air carrier service.
EXCEPTION: Right to set rates by legislative
franchise grantees subject to the rules of the
Civil Aeronautics Board
CHAPTER IV CPCN: 11. Nature, Terms,
and Conditions. The permit shall, among
others specify the terminal and intermediate
points, if any, between which the air carrier
is authorized to operate the service to be
rendered, the time of arrival and departure
at each point, and the frequency of flights.
Provided, that no change in routes, rates,
schedules or frequency nor supplemental or
additional flights to those COVERED BY AN
AIR COMMERCE PERMIT OR FRANCHISE
shall be affected without prior approval of
the Civil Aeronautics Board. In so far as the
operation is to take place within the
Philippines, the permit shall designate the
terminal and intermediate points only
insofar as the Board shall deem practicable,
and otherwise shall designate only the
general route or routes to be followed.
No carrier shall abandon any route, or part
thereof for which a permit has been issued,
unless upon findings by the Civil Aeronautics
Board that such an abandonment
isuneconomical and is in the public interest.
Paragraph 2.2, Executive Order No. 219, January
3, 1995 (Establishing the Domestic and
International Civil Aviation Liberalization Policy)
Domestic Air Transportation
Tariffs and Fares. To the extent allowed
by law passage freight and other charges
shall be liberalized. However, passage rates
shall likewise be deregulated for routes/links
operated by more than one (1) common
carrier. For routes serviced by a single
operator, passage rates shall continue to be
regulated. However, all freight rates,
charges and passage rates shall be
monitored by the CAB.
Also study the charters of to see the nature and
extent of legislative franchises:
1. Filipinas Orient
2. Air Manila
3. Silangan Airways
4. Cebu Air
5. All Asia Airlines
6. Air Philippines
7. Grand International Airways
8. Davao Agritech
9. Air Mabuhay
10. Laoag International Airlines
11. Provincial Airways
12. Asian Spirit
13. Philippine Airlines (PD 1590)
2. Regulation of authorized routes
13(b), PSA: The term "public service" includes every
person that now or hereafter may own, operate, manage,
or control in the Philippines, for hire or compensation,
with general or limited clientele, whether permanent,
occasional or accidental, and done for general business
purposes, any common carrier, railroad, street railway,
traction railway, sub-way motor vehicle, either for freight
or passenger, or both with or without fixed route and
whether may be its classification, freight or carrier
service of any class, express service, steamboat or
steamship line, pontines, ferries, and water craft,
engaged in the transportation of passengers or freight or
both, shipyard, marine railways, marine repair shop,
[warehouse] wharf or dock, ice plant, ice-refrigeration
plant, canal, irrigation system, gas, electric light, heat
and power water supply and power, petroleum, sewerage
system, wire or wireless communications system, wire or
wireless broadcasting stations and other similar public
services x x x.
LTFRB: 19(1), Chapter 5, Title XV, EO 292: Prescribe and
regulate routes, economically viable capacities, and
zones or areas of operation of public land transportation
services provided by motorized vehicles in accordance
with the public land transportation development plans
and programs approved by the Department of
Transportation and Communications;
MARINA: 3, EO 125-A: Establish, prescribe and regulate
routes, zones and/or areas of operation of particular
operators of public water services.
CAB: 11, RA 776: In so far as the operation is to take
place within the Philippines, the permit shall designate
the terminal and intermediate points only insofar as the
Board shall deem practicable, and otherwise shall
designate only the general route or routes to be followed.
No carrier shall abandon any route, or part thereof for
which a permit has been issued, unless upon findings by
the Civil Aeronautics Board that such an abandonment is
uneconomical and is in the public interest.
 ADDITIONAL: Under 10(C)(3) To authorize any
type of charters whether domestic or international and
special air services or flight under such terms and
conditions as in its judgment public interest requires.
Notwithstanding the existence of bilateral air agreement,
the CAB is authorized to grant any foreign airline increase
in frequencies and/or capacities on international routes
when in its judgment the national interest requires it,
provided that the utilization of the increase frequencies
and capacities is not more than thirty days. All grants of
frequencies and/or capacities shall be subject to the
approval of the President.
a. General power of regulation
Laguna Tayabas Bus Company v. Felix T.
Regodon, G. R. No. L-9586, December 27,
1956, 100 Phil 570
Giving the applicant the benefit of
doubt and assuming that during the
rush hours on the line in question, the
volume of traffic justifies additional
service, we approve the
Commission's decision granting
Regodon's application for
additional service, but with the
modification that the Commission
adjust his time schedule so as to
cover as nearly as possible only the
rush hours between 6:00 and 8:00
a.m. and 5:00 and 6:00 p.m., of
course, with one single unit. The
reason for this modification is that any
invasion of the lean hours in
transportation by allowing additional
service thereto would only result in
unfair and cut-throat competition, with
all the attendant evils and
disadvantages, such as, financial loss to
all operators, changing without
authority time schedules so as to get
more passengers, or racing of buses on
the highway in order to pick up
passengers.
BATANGAS CASE: Before such a
business can be operated, it must apply
for, and obtain, a license or permit from
the PSC, and comply with certain
defined terms and conditions, and when
license is once, granted, the operator
must conform to, and comply with all,
reasonable rules and regulations of the
PSC. The object and purpose of such a
commission, among other things, is to
look out for, and protect, the interests
of the public and to provide it with safe
and suitable means of travel over the
highways. To all intents and purposes,
the operation of an autobus line is very
similar to that of a railroad, and a
license for its operation should be
granted or refused on like terms and
conditions.
GENERAL POWER OF REGULATION:
b. Presumption of adequacy of service; protection of
investments rule; protection of prior operator
Batangas Transportation Company v.
Cayetano Orlanes, G. R. No. 28865,
December 19, 1928, 52 Phil 455
PRESUMPTION OF ADEQUACY OF
SERVICE:
KMU CASE: By its terms, public
convenience or necessity generally
means something fitting or suited
to the public need. As one of the
basic requirements for the grant of
a CPC, public convenience and
necessity exists when the proposed
facility or service meets a
reasonable want of the public and
supply a need which the
existing facilities do not
adequately supply. The
existence or non-existence of
public convenience and necessity
is therefore a question of fact that
must be established by evidence,
real and/or testimonial; empirical
data; statistics and such other
means necessary, in a public
hearing conducted for that
purpose. The object and purpose of
such procedure, among other
things, is to look out for, and
protect, the interests of both the
public and the existing transport
operators.
BATANGAS CASE: The evidence is
conclusive that the Batangas
Transportation Company operated its
line five years before Orlanes ever
turned a wheel, yet the legal effect of
the decision of the Public Service
Commission is to give an irregular
operator, who was the last in the field,
a preferential right over a regular
operator, who was the first in the field.
That is not the law, and there is no legal
principle upon which it can be
sustained. It does not appear that the
public has ever made any complaint the
Batangas Transportation Company, yet
on its own volition and to meet the
increase of its business, it has applied
to the Public Service Commission for
authority to increase the number of
daily trips to nineteen, thus showing a
spirit that ought to be commended.
PROTECTION OF INVESTMENTS
RULE: So long as the first licensee
keeps and performs the terms and
conditions of its license and complies
with the reasonable rules and
regulations of the Commission and
meets the reasonable demands of the
public, it should have more or less of a
vested and preferential right over a
person who seeks to acquire another
and a later license over the same route.
Otherwise, the first license would not
have protection on his investment, and
would be subject to ruinous competition
and thus defeat the very purpose and
intent for which the Public Service
Commission was created.
PROTECTION OF PRIOR OPERATOR:
that where an operator is rendering
good, sufficient and adequate service to
the public, that the convenience does
not require and the public interests will
not be promoted in a proper and
suitable manner by giving another
operator a certificate of public
convenience to operate a competing
line over the same route.
c. Change in the rules on presumption of adequacy of
service and protection of investments of prior
operators
Par. 1, EO 185, June 28, 1994 Opening
the Domestic Water Transport Industry
 to New Operators and Investors: The
entry of new operators into the domestic
water transport industry shall be liberalized
to enhance the level of competition and
bring about reasonable rates and improve
quality of services.
Opening-up of All Routes
Encouraging Entry Into Developmental
Routes
Deregulating Entry of Newly-Acquired
Vessel Into Routes Already Served By
Franchised Operators
Vessel Rerouting Or Amendment Of
Authorized Route And Change In Sailing
Schedules And Frequency
Par. 1, EO 219, January 3, 1995
Establishing the Domestic and
International Civil Aviation
Liberalization Policy: International Air
Transportation
1.1 Carrier Designation. At least two (2)
international carriers shall be designated official
carrier(s) for the Philippines. However, if the
designated carrier(s) do not service the total
frequency entitlement of the Philippines under
existing Air Services Agreements or other
arrangements, then additional carrier(s) may be
designated to operate such unused frequencies;
1.2 Traffic Rights and Routes. The exchange of
traffic rights and routes with other countries shall be
based on (a) the National Interest which shall include
value for the Philippines in terms of promoting
international trade, foreign investments and tourism,
among others; and on (b) the reciprocity between the
Philippines and other countries. Reciprocity shall be
interpreted to mean the exchange of rights,
freedoms, and opportunities of equal or equivalent
value. The Civil Aeronautics Board (CAB) shall
determine national interest taking into
consideration the larger interest of the country,
especially the users of air services.
1.3 Frequency and Capacity. All grants of
frequencies or capacity to, any increase of existing
frequencies or capacities of and/or the grant of new
routes or traffic points to any foreign carrier (even if
on a provisional basis) shall be the sole prerogative
of the CAB subject to the confirmation of the Office of
the President. The following rules shall determine
the frequency and capacity for the carriers
concerned:
a. Frequency and capacity of third and fourth
freedom carriers will be determined based on
reciprocity and value of the Philippines.
b. Fifth freedom traffic shall be secondary and
supplemental to third and fourth freedom traffic
except that the CAB may grant fifth freedom rights in
order to promote the development of routes and
destinations.
c. The CAB may authorize special flights when, for
any reason whatsoever, the designated carrier(s) fail
to accommodate a route/link traffic demand.
1.4 Tariff and Fares. The CAB shall regulate the
fares, rates and charges of foreign designated
carriers in accordance with existing laws. Reciprocity
and value for the Philippines shall be considered in
granting discounted or promotional fares and rates.
To the extent possible, air transportation tickets of
Filipino citizens residing in the Philippines shall be
purchased, issued and paid in the Philippines.
1.5 Charters and Non-Scheduled Services. The CAB
may authorize chartered flights and non-scheduled
services provided the traffic of the scheduled
services shall not be significantly diverted.
1.6 Developmental and Cooperative Air Services.
The CAB may grant authority to operate air services
principally for the development of routes,
destinations and gateways but not to exceed one (1)
year.
Further, authority shall be granted in the operation of
air services connecting non-premier city airports of
other countries to new international gateways of the
country as provided for under economic cooperation
agreements with the Philippines.
1.7 Composition of Negotiating and Consultation
Panels. The following rules shall define the
composition of the Air Negotiating Panel and the
Consultation panel:
a. The Department of Foreign Affairs (DFA) shall be
the lead agency responsible for the initial
negotiations leading to the conclusion of the Air
Services Agreements or similar arrangements. The
Philippine Negotiating Panel shall be composed of
representatives from the DFA (as Chairman),
representatives of the Civil Aeronautics Board (CAB),
the Philippine designated carrier(s) and such other
person(s) as may be authorized by the President of
the Philippines.
b. In similar succeeding negotiation of these Air
Services Agreements or similar arrangements
(consultation talks), the Department of
Transportation and Communications (DOTC), through
the CAB shall be the lead agency involved in
coordinating all necessary preparations. The
Philippine Consultation Panel shall be composed of
representatives from the CAB (as Chairman), the
Department of Tourism (DOT), the Philippine
designated carrier(s) and other person(s) as may be
authorized by the Secretary of Transportation and
Communications.
3. Regulation of equipment used, imposition of reasonable
standards
16(d), PSA: To fix just and reasonable
standards, classifications, regulations,
practices, measurement, or service to be
furnished, imposed, observed, and followed
thereafter by any public service.
Ramon L. Corpus v. Public Service
Commission, G. R. No. L-325, October 31,
1947, 79 Phil 444
The commission RESERVED upon itself
the right to alter or modify the
conditions enumerated in the decision
or to impose additional conditions in
order to adjust applicants' operation to
changing conditions and the eventual
resumption of operation under normal
conditions, considering that the service
applied for is authorized during a state
of emergency.
Considering the age of the cars, the
time limit granted by the commission
cannot be unreasonable. The cars have
been in use years before the war. Their
long years of service and the fact that
during the Japanese occupation there
 were no adequate means for proper
repairs are reasons enough to believe
that the cars cannot be of useful
service for more than one year, taking
into consideration the heavy pounding
they will received in the continuous
daily public service in rough roads.
Considering the rough handling which
public service cars receive from their
drivers, the great majority of whom
show complete unconcern about traffic
conditions, and are constantly violating
traffic rules, without any regard for
public safety, a thing upon which the
commission is urged to take preventive
measures, in view of the extent of the
evil.
The commission acted wisely in
reserving to itself the right to modify
the conditions of the certificate
granted. It is expected that the
commission will exercise such keen and
proper supervision as to immediately
stop the operation of the service as
soon as the vehicles used in same
would endanger public safety.
LTFRB: 19, Chap. 5, Title XV, EO 292 (11)
Formulate, promulgate, administer,
implement and enforce rules and
regulations on land transportation public
utilities, standards of measurements or
design and rules and regulations requiring
operators of any public land transportation
service to equip, install and provide in their
utilities and in their stations such devices,
equipment, facilities and operating
procedures and techniques as may promote
safety, protection, comfort and convenience
to persons and property in their charges as
well as the safety of persons and property
within their areas of operation.
MARINA: 9 and 10, RA 9295
9. Safety Standards. - All vessels
operate by domestic ship operators
shall at all times be in seaworthy
condition properly equipped with
adequate life-saving, communication,
safety and other equipment operated
and maintained in accordance with the
standards set by MARINA, and manned
by duly licensed and competent vessel
crew.
The MARINA shall have the power to
inspect vessels and all equipment on
board to ensure compliance with safety
standards.
10. Jurisdiction, Power and Duties
(5) Require any domestic ship operator
to provide shipping services to any
coastal area, island or region in the
country where such services are
necessary for the development of the
area, to meet emergency sealift
requirements, or when public interest
so requires;
(6) Set safety standards for vessels in
accordance with applicable conventions
and regulations;
(7) Require all domestic ship operators
to comply with operational and safety
standards for vessels set by applicable
conventions and regulations, maintain
its vessels in safe and serviceable
conditions, meet the standards of
safety of life at sea and safe manning
requirements, and furnish safe,
adequate, efficient, reliable and proper
service at all times;
(8) Inspect all vessels to ensure and
enforce compliance with safety
standards and other regulations;
(11) Adopt and enforce such rules and
regulations which will ensure
compliance by every domestic ship
operator with required safety standards
and other rules and regulations on
vessel safety;
CAB: 10(C), RA 776
4. Regulation of period within which a franchise may be
enjoyed
LTFRB: 19, Chapter 5, Title XV, EO 292
(2) Issue, amend, revise, suspend or cancel
Certificates of Public Convenience or
permits authorizing the operation of public
land transportation services provided by
motorized vehicles, and prescribe the
appropriate terms and conditions therefor;
MARINA: 10, RA 9295
(2) Issue certificates of public convenience or
any extensions or amendments thereto,
authorizing the operation of all kinds. Classes
and types of vessels in domestic shipping:
Provided, That no such certificate shall be valid
for a period of more than twenty-five (25) years;
(3) Modify, suspend or revoke at any time upon
notice and hearing, any certificate, license or
accreditation it may have issued to any domestic
ship operator;
CAB: 11, RA 776
5. Governments right of requisition
1987 Constitution, Article XII NATIONAL
ECONOMY AND PATRIMONY
17. In times of national emergency,
when the public interest so requires,
the State may, during the emergency
and under reasonable terms prescribed
by it, temporarily take over or direct
the operation of any privately-owned
public utility or business affected with
public interest.
18. The State may, in the interest of
national welfare or defense, establish
and operate vital industries and, upon
payment of just compensation, transfer
to public ownership utilities and other
private enterprises to be operated by
the Government.
9, R.A. No. 7471 Overseas Shipping
Development Act: Requisition of Vessels.
The President of the Philippines may, in
times of war and other national
emergency, requisition absolutely or
temporarily, for any naval or military
purpose, any and all vessels of the
Philippine registry. The Government shall
pay the owner or operator of the vessel,
based on normal conditions at the time of
requisition;
(a) The fair market value, if the vessel is
taken absolutely, or
(b) The fair charter value, if the vessel is
taken temporarily.
In case of disagreement, such fair value
shall be determined by an arbitration
committee composed of:

(a) One (1) member to be appointed by the
MARINA;
(b) One (1) member to be appointed by the
owner or operator of the vessel; and
(c) One (1) member to be appointed by the
two (2) members so appointed.
The decision of the arbitration committee
shall be final and binding on both parties.
24, Republic Act No. 9295 Temporary
Take-Over of Operations. - In times of
national emergency, when the public
interest so requires, the State may during
emergencies and under reasonable terms
prescribed by it, temporary take over or
direct the operations or any vessel engaged
in domestic trade and commerce, or
prescribe its rates or routes of operation.
Immediately upon the cessation of the
emergency, the State shall immediately
reinstate to the domestic ship operation of
its vessel under the same terms and
conditions prior to the occurrence of the
emergency.
LEGISLATIVE FRANCHISE OF AIRLINE
GRANTEES right of government to take
over and operate equipment of grantee
paying for its use or damages
P.D. No. 1590 PAL: 7. In case of
war, insurrection, domestic trouble,
public calamity, or national emergency,
the Philippine Government upon order
of the President shall have the right to
take over and operate the equipment of
the grantee, paying just compensation
for such use or damages.
R.A. No. 9181 PROVINCIAL
AIRWAYS CORPORATION: 10. Right
of Government. - A special right is
hereby reserved to the President of the
Philippines, in times of war, rebellion,
public peril, calamity, emergency,
disaster or disturbance of peace and
order, to temporarily suspend the
operation of any facility or equipment in
the interest of public safety, security
and public welfare, or to authorize the
temporary use and operation thereof by
any agency of the government, upon
due compensation to the grantee, for
the use of said facilities or equipment
during the period when they shall be so
operated.
6. Revocation of license
Maria Concepcion Paez Vda. De Cruz v.
Tobias P. Marcelo, G. R. Nos. L-15301 and L-
15302, March 30, 1962
There is indeed a sound rule that old
operators must be protected in their
investments as long as they are willing
and able to serve the public need in the
proper and adequate manner. But this
rule is not absolute, for this Court has
time and again held that the grant of a
certificate or preference to a new
operator is in order where the old
operators were given a chance to
improve or complete their service but
have failed to do so.
In the instant case, the petitioner has
not only failed to improve nor complete
the service, but has abandoned it. It is
very clear that the herein petitioner,
while acting as the administratrix of the
late Pedro B. Cruz, and the latter while
still living, had abandoned the
operation of their 15-ton ice plant in
such a manner that the ice plant was
converted into a pig pen. Such
abandonment is sufficient cause for the
cancellation of a certificate of public
convenience, for public necessity
cannot be made to wait nor sacrifice for
private convenience.
Furthermore, an abandonment is a
violation of the law, as public
service may not be abandoned to
the prejudice of the interest of the
public. In the present case, it is not
only the herein petitioner who,
acting in her capacity as the
administratrix of the late Pedro B.
Cruz, abandoned the service, but
also her predecessor. For that reason
she should not be allowed to avail of
any right of preference under the old
operator rule. And a certificate of public
convenience is denied to a successor,
where the predecessor has violated the
law
But all other conditions being equal
as in these cases priority in the
filing of application for a certificate of
public convenience becomes an
important factor in the granting thereof.
The issuance of certificate of public
convenience and necessity as between
two applicants who are both qualified
rests on the sound discretion of the
Public Service Commission.
21(2), PSA: Section 21. Every public
service violating or failing to comply with
the terms and conditions of any certificate
or any orders, decisions or regulations of the
Commission shall be subject to a fine of not
exceeding two hundred pesos per day for
every day during which such default or
violation continues; and the Commission is
hereby authorized and empowered to
impose such fine, after due notice and
hearing.
The fines so imposed shall be paid to the
Government of the Philippines through the
Commission, and failure to pay the fine in
any case within the same specified in the
order or decision of the Commission shall be
deemed good and sufficient reason for the
suspension of the certificate of said public
service until payment shall be made.
Payment may also be enforced by
appropriate action brought in a court of
competent jurisdiction. The remedy
provided in this section shall not be a bar to,
or affect any other remedy provided in this
Act but shall be cumulative and additional to
such remedy or remedies.
19, Chapter 5, Title XV, EO 292
10, RA 9295
22, RA 776: Modification, suspension
or revocation. - The Board, upon petition
or complaint or upon its own initiative, may,
by order entered after notice and
opportunity for hearing, alter, amend,
modify or suspend any permit, in whole or in
part, if public convenience and necessity so
require, or may revoke any permit in whole
or in part, for intentional failure to comply
 with any provision of this Act or any order,
rule or regulation issued thereunder, or any
term condition or limitation of such permit:
Provided, That the Board, for good cause,
may by order without notice and hearings
suspend, for a period not to exceed thirty
days, any permit or the exercise or any
privilege or authority issued or granted
under this Act whenever such step shall, in
the judgment of the Board, be necessary to
avoid serious or irreparable damage or
inconvenience to the public. Any interested
person may file with the Board a protest or
memorandum in support of or opposition to
the alteration, amendment, modification,
suspension, or revocation of any permit.
7. Protection of operators from foreign competition
PRINCIPLE OF CABOTAGE: Trade or
navigation in coastal waters, or, the
exclusive right of a country to operate the
air traffic within its territory. Cabotage is
used in the context of "cabotage rights", the
right of a company from one country to
trade in another country. In aviation terms,
it is the right to operate within the domestic
borders of another country. Most countries
do not permit aviation cabotage, for reasons
of economic protectionism, national
security or public safety.
Luzon Stevedoring Corporation v. Anti-
Dummy Board, G. R. No. L-26094, August
18, 1972
The policy or purpose of the
amendatory law, Republic Act No. 134,
in inserting Clause 3 in 2-A of
Commonwealth Act No. 108, as
amended by Commonwealth Act No.
421, was to plug all loopholes that
may be utilized by designing
foreigners to circumvent the
nationalization laws of the country,
regardless of whether such laws
provide for complete or only partial
nationalization of the right,
franchise, privilege, property or
business covered thereby.
Aside from employing dummies, the
stockholders who own 40% of the
capital stock of a public utility, may
effectively control its operation by
employing aliens to implement
their plan to subvert our territorial
integrity and our economic
stability.
Shipping lines, whether for passengers
alone, for cargo only, or for both
passengers and cargo, are the vital
arteries of commerce, perhaps more
vital to our security and independence
than the nationalization of the retail
trade. Alien control of inter-island
navigation mean economic control and
political domination of our country by
alien hands.
It should be stressed that the interest of
Filipino stockholders may be nullified by
the employment of hostile aliens who
actually man and operate the ships. In
times of peace, such vessels may be
utilized for smuggling not only of
prohibited or dutiable goods but also on
hostile human cargo as well as for gun-
running. In times of war, the peril to
the State is greater because the officer
and employees manning the ships or
directing their open rations may be
enemy aliens. And even if they are
nationals of a neutral country, they may
operate the ship in violation of the laws
of war to embarrass our government
and alienate the sympathy or support of
other nations and thus weaken our
position vis-a-vis the enemy.
Sections 902 and 905, Part I, Title II,
Book II, Tariff and Customs Code
902. Vessels Eligible for Coastwise
Trade. The right to engage in the
Philippine coastwise trade is limited to
vessels carrying a certificate of
Philippine registry.
905. Transportation of Passengers
and Articles Between Philippine
Ports. Passengers shall not be
received at one Philippine port for any
other such port by a vessel not licensed
for the coastwise trade, except upon
special permission previously granted
by the Collector; and subject to the
same qualification, articles embarked at
a domestic port shall not be transported
to any other port in the Philippines,
either directly or by way of a foreign
port, or for any part of the voyage, in
any other vessel than one licensed for
the coastwise trade
Sections 1001 and 1009, Part I, Title III,
Book II, TARIFF AND CUSTOMS CODE
1001. Ports Open to Vessels
Engaged in Foreign Trade Duty of
Vessel to Make Entry. Vessels
engaged in the foreign trade shall touch
at ports of entry only, except as
otherwise specially allowed; and
every such vessel arriving within a
customs collection district of the
Philippines from a foreign port shall
make entry at the port of entry for such
district and shall be subject to the
authority of the Collector of the port
while within his jurisdiction.
The master of any war vessel employed
by any foreign government shall not be
required to report and enter on arrival
in the Philippines, unless engaged in
the transportation of articles in the way
of trade.
1009. Clearance of Foreign Vessels
To and From Coastwise Ports.
Passengers or articles arriving from
abroad upon a foreign vessel may be
carried by the same vessel through any
port of entry to the port of destination
in the Philippines; and passengers
departing from the Philippines or
articles intended for export may be
carried in a foreign vessel through a
Philippine port.
Upon such reasonable condition as he
may impose, the Commissioner may
clear foreign vessels for any port and
authorize the conveyance therein of
either articles or passengers brought
from abroad upon such vessels; and he
may likewise, upon such conditions as
he may impose, allow a foreign vessel
to take cargo and passengers at any
port and convey the same upon such
vessel to a foreign port.
 6, RA 9295:. Foreign Vessels Engaged
in Trade and Commerce in the
Philippines Territorial Waters. - No
foreign vessel shall be allowed to transport
passengers or cargo between ports or place
within the Philippine territorial waters,
except upon the grant Special Permit by the
MARINA when no domestic vessels is
available or suitable to provide the needed
shipping service and public interest
warrants the same.
D. Quasi-judicial functions of regulatory agencies
Sections 16 and 17, Public Service Act
Section 16. Proceedings of the Commission, upon notice and
hearing. - The Commission shall have power, upon proper
notice and hearing in accordance with the rules and provisions
of this Act, subject to the limitations and exceptions
mentioned and saving provisions to the contrary :
(a) To issue certificates which shall be known as
certificates of public convenience, authorizing the
operation of public service within the Philippines
whenever the Commission finds that the operation of
the public service proposed and the authorization to
do business will promote the public interest in a
proper and suitable manner. Provided, That
thereafter, certificates of public convenience and
certificates of public convenience and necessity will
be granted only to citizens of the Philippines or of the
United States or to corporations, co-partnerships,
associations or joint-stock companies constituted and
organized under the laws of the Philippines; Provided,
That sixty per centum of the stock or paid-up capital
of any such corporations, co-partnership, association
or joint-stock company must belong entirely to
citizens of the Philippines or of the United States:
Provided, further, That no such certificates shall be
issued for a period of more than fifty years.
(b) To approve, subject to constitutional limitations
any franchise or privilege granted under the
provisions of Act No. Six Hundred and Sixty-seven, as
amended by Act No. One Thousand and twenty-two,
by any political subdivision of the Philippines when,
in the judgment of the Commission, such franchise or
privilege will properly conserve the public interests,
and the Commission shall in so approving impose
such conditions as to construction, equipment,
maintenance, service, or operation as the public
interests and convenience may reasonably require,
and to issue certificates of public convenience and
necessity when such is required or provided by any
law or franchise.
(c) To fix and determine individual or joint rates, tolls,
charges, classifications, or schedules thereof, as well
as commutation, mileage, kilometrage, and other
special rates which shall be imposed observed and
followed thereafter by any public service: Provided,
That the Commission may, in its discretion, approve
rates proposed by public services provisionally and
without necessity of any hearing; but it shall call a
hearing thereon within thirty days, thereafter, upon
publication and notice to the concerns operating in
the territory affected: Provided, further, That in case
the public service equipment of an operator is used
principally or secondarily for the promotion of a
private business, the net profits of said private
business shall be considered in relation with the
public service of such operator for the purpose of
fixing the rates.
(d) To fix just and reasonable standards,
classifications, regulations, practices, measurement,
or service to be furnished, imposed, observed, and
followed thereafter by any public service.
(e) To ascertain and fix adequate and serviceable
standards for the measurement of quantity, quality,
pressure, initial voltage, or other condition pertaining
to the supply of the product or service rendered by
any public service, and to prescribe reasonable
regulations for the examination and test of such
product or service and for the measurement thereof.
(f) To establish reasonable rules, regulations,
instructions, specifications, and standards, to secure
the accuracy of all meters and appliances for
measurements.
(g) To compel any public service to furnish safe,
adequate, and proper service as regards the manner
of furnishing the same as well as the maintenance of
the necessary material and equipment.
(h) To require any public service to establish,
construct, maintain, and operate any reasonable
extension of its existing facilities, where in the
judgment of said Commission, such extension is
reasonable and practicable and will furnish sufficient
business to justify the construction and maintenance
of the same and when the financial condition of the
said public service reasonably warrants the original
expenditure required in making and operating such
extension.
(i) To direct any railroad, street railway or traction
company to establish and maintain at any junction or
point of connection or intersection with any other line
of said road or track, or with any other line of any
other railroad, street railway or traction to promote,
such just and reasonable connection as shall be
necessary to promote the convenience of shippers of
property, or of passengers, and in like manner direct
any railroad, street railway, or traction company
engaged in carrying merchandise, to construct,
maintain and operate, upon reasonable terms, a
switch connection with any private sidetrack which
may be constructed by any shipper to connect with
the railroad, street railway or traction company line
where, in the judgment of the Commission, such
connection is reasonable and practicable and can be
out in with safety and will furnish sufficient business
to justify the construction and maintenance of the
same.
(j) To authorize, in its discretion, any railroad, street
railway or traction company to lay its tracks across
the tracks of any other railroad, street railway or
traction company or across any public highway.
(k) To direct any railroad or street railway company to
install such safety devices or about such other
reasonable measures as may in the judgment of the
Commission be necessary for the protection of the
public are passing grade crossing of (1) public
highways and railroads, (2) public highways and
streets railway, or (3) railways and street railways.
(l) To fix and determine proper and adequate rates of
depreciation of the property of any public service
which will be observed in a proper and adequate
depreciation account to be carried for the protection
of stockholders, bondholders or creditors in
accordance with such rules, regulations, and form of
account as the Commission may prescribe. Said rates
shall be sufficient to provide the amounts required
over and above the expense of maintenance to keep
such property in a state of efficiency corresponding
to the progress of the industry. Each public service
shall conform its depreciation accounts to the rates
so determined and fixed, and shall set aside the
moneys so provided for out of its earnings and carry
the same in a depreciation fund. The income from
investments of money in such fund shall likewise be
carried in such fund. This fund shall not be expended
otherwise than for depreciation, improvements, new
construction, extensions or conditions to the properly
of such public service.
(m) To amend, modify or revoke at any time
certificate issued under the provisions of this Act,
 whenever the facts and circumstances on the
strength of which said certificate was issued have
been misrepresented or materially changed.
(n) To suspend or revoke any certificate issued under
the provisions of this Act whenever the holder
thereof has violated or willfully and contumaciously
refused to comply with any order rule or regulation of
the Commission or any provision of this Act:
Provided, That the Commission, for good cause, may
prior to the hearing suspend for a period not to
exceed thirty days any certificate or the exercise of
any right or authority issued or granted under this
Act by order of the Commission, whenever such step
shall in the judgment of the Commission be
necessary to avoid serious and irreparable damage
or inconvenience to the public or to private interests.
(o) To fix, determine, and regulate, as the
convenience of the state may require, a special type
for auto-busses, trucks, and motor trucks to be
hereafter constructed, purchased, and operated by
operators after the approval of this Act; to fix and
determine a special registration fee for auto-buses,
trucks, and motor trucks so constructed, purchased
and operated: Provided, That said fees shall be
smaller than more those charged for auto-busses,
trucks, and motor trucks of types not made
regulation under the subsection.
Section 17. Proceedings of Commission without previous
hearing. - The Commission shall have power without previous
hearing, subject to established limitations and exception and
saving provisions to the contrary:
(a) To investigate, upon its own initiative, or upon
complaint in writing, any matter concerning any
public service as regards matters under its
jurisdiction; to require any public service to furnish
safe, adequate, and proper service as the public
interest may require and warrant; to enforce
compliance with any standard, rule, regulation, order
or other requirement of this Act or of the
Commission, and to prohibit or prevent any public
service as herein defined from operating without
having first secured a certificate of public
convenience or public necessity and convenience, as
the case may be and require existing public services
to pay the fees provided for in this Act for the
issuance of the proper certificate of public
convenience or certificate of public necessity and
convenience, as the case may be, under the penalty,
in the discretion by the Commission, of the
revocation and cancellation of any acquired rights.
(b) To require any public service to pay the actual
expenses incurred by the Commission in any
investigation if it shall be found in the same that any
rate, tool, charge, schedule, regulation, practice, act
or service thereof is in violation of any provision of
this Act or any certificate, order, rule, regulation or
requirement issued or established by the
Commission. The Commission may also assess
against any public service costs not to exceed
twenty-five pesos with reference to such
investigation.
(c) From time to time appraise and value the
property of any public service, whenever in the
judgment of the Commission it shall be necessary so
to do, for the purpose of carrying out any of the
provisions of this Act, and in making such valuation
the Commission may have access to and use any
books, documents, or records in the possession of
any department, bureau, office, or board of the
government of the Philippines or any political
subdivision thereof.
(d) To provide, on motion by or at the request of any
consumer or user of a public service, for the
examination and test of any appliance used for the
measuring of any product or service of a public
service, and for that purpose, by its agents, experts,
or examiners to enter upon any premises where said
appliances may be, and other premises of the public
service, for the purpose of setting up and using on
said premises any apparatus necessary therefor. and
to fix the fees to be paid by any consumer or user
who may apply to the Commission for such
examination or test to be made, and if the appliance
be found defective or incorrect to the disadvantage
of the consumer or user to require the fees paid to be
refunded to the consumer or user by the public
service concerned.
(e) To permit any street railway or traction company
to change its existing gauge to standard steam
railroad gauge, upon such terms and conditions as
the Commission shall prescribe.
(f) To grant to any public service special permits to
make extra or special trips within the territory
covered by its certificates of public convenience, and
to make special excursion trips outside of its own
territory if the public interest or special
circumstances required it: Provided, however, that in
case a public service cannot render such extra
service on its own line or in its own territory, a
special permit for such extra service may be granted
to any other public service.
(g) To require any public service to keep its books,
records, and accounts so as to afford an intelligent
understanding of the conduct of its business and to
that end to require every such public service of the
same class to adopt a uniform system of accounting.
Such system conform to any system approved and
confirmed by the Auditor General.
(h) To require any public service to furnish annual
reports of finances and operations. Such reports shall
set forth in detail the capital stock issued, the
amounts of said capital stock paid up and the form of
payment thereof; the dividends paid, the surplus, if
any and the number of stockholders, the
consolidated and pending obligations and the
interest paid thereon; the cost and value of the
property of the operator; concessions or franchises
and equipment; the number of employees and
salaries paid to each class; the accidents to
passengers, employees, and other person, and the
causes thereof; the annual expenditures on
improvements; the manner of their investment and
nature of such improvements; the receipts and
profits in each of the branches of the business and of
whatever source; the operating and other expenses;
the balance of profits and losses; and a complete
statement of the annual financial operations of the
operator, including an annual balance sheet. Such
reports shall also contain any information which the
Commission may require concerning freight and
passenger rates, or agreements, compromises or
contracts affecting the same. Said reports shall cover
a period of twelve months, ending on December
thirty-first of each year, and shall be sworn to by the
officer or functionary of the public service authorized
therefor. The Commission shall also have power to
require from time to time special reports containing
such information as above provided for or on other
matters as the Commission may deem necessary or
advisable.
(i) To require every public service to file with the
Commission a statement in writing, verified by the
oaths of the owner or the president and the secretary
thereof, if a corporation, setting forth the name, title
of office or portion, and post-office address, and the
authority, power and duties of every officer, member
of the board of directors, trustees executive
committee, superintendent, chief or head of
construction and operation thereof, in such form as
to disclose the source and origin of each
administrative act, rule, decision, order or other
action of the operator of such public service; and,
within ten days after any change is made in the title
of, or authority, powers or duties appertaining to any
 such office or position, or the person holding the
same, filed with the Commission a like statement,
verified in like manner, setting forth such change.
(j) To require any public service to comply with the
laws of the Philippines and with any provincial
resolution or municipal ordinance relating thereto
and to conform to the duties imposed upon it thereby
or by the provisions of its own character, whether
obtained under any general or special law of the
Philippines.
(k) To investigate any or all accidents that may occur
on the property of any public service or directly or
indirectly arising from or connected with its
maintenance or operation in the Philippines; to
require any public service to give the Commission
immediate and effective notice of all any such
accidents, and to make such order or
recommendation with respect thereto as the public
interest may warrant or require.
(l) To require every public service s herein defined to
file within complete schedules of every classification
employed and of every individual or joint rate, toll
fare or charge made, charged or exacted by it for any
product supplied or service rendered within the
Philippines and, in the case of public carriers, to file
with it a statement showing the itineraries or routes
served as specified in such requirement.
1. LTFRB Sections 19 and 20, Chapter 5, Title XV, EO 292
Section 19. Powers and Functions of the Land Transportation
Franchising and Regulatory Board. - The Board shall:
(1) Prescribe and regulate routes, economically
viable capacities, and zones or areas of operation of
public land transportation services provided by
motorized vehicles in accordance with the public land
transportation development plans and programs
approved by the Department of Transportation and
Communications;
(2) Issue, amend, revise, suspend or cancel
Certificates of Public Convenience or permits
authorizing the operation of public land
transportation services provided by motorized
vehicles, and prescribe the appropriate terms and
conditions therefor;
(3) Determine, prescribe, approve and periodically
review and adjust reasonable fares, rates and other
related charges, relative to the operation of public
land transportation services provided by motorized
vehicles;
(4) Issue preliminary or permanent injunctions,
whether prohibitory or mandatory, in all cases in
which it has jurisdiction and in which cases the
pertinent provisions of the Rules of Court shall apply;
(5) Punish for contempt of the Board, both direct and
indirect, in accordance with the pertinent provisions
of, and the penalties prescribed by, the Rules of
Court;
(6) Issue subpoena and subpoena duces tecum and
to summon witnesses to appear in any proceedings
of the Board, to administer oaths and affirmations,
and, in appropriate cases, to order the search and
seizure of all vehicles and documents, upon probable
cause and as may be necessary for the proper
disposition of the cases before it;
(7) Conduct investigations and hearings of
complaints for violation of the public service laws on
land transportation and of the Board's rules and
regulations, orders, decisions or rulings and to
impose fines or penalties for such violations;
(8) Review motu propio the decisions/actions of the
Regional Franchising and Regulatory Offices;
(9) Promulgate rules and regulations governing
proceedings before the Board and the Regional
Franchising and Regulatory Office. However, except
with respect to paragraphs 4, 5, 6, and 7 hereof, the
rules of procedure and evidence prevailing in the
courts of law should not be controlling but rather the
spirit and intention of said rules. The Board and the
Regional Franchising and Regulatory Offices shall use
every and all reasonable means to ascertain facts in
each case speedily and objectively and without
regard to technicalities of law and procedures, all in
the interest of due process;
(10) Fix, impose and collect, and periodically review
and adjust, reasonable fees and other related
charges for services rendered;
(11) Formulate, promulgate, administer, implement
and enforce rules and regulations on land
transportation public utilities, standards of
measurements or design, and rules and regulations
requiring operators of any public land transportation
service to equip, install and provide in their utilities
and in their stations such devices, equipment,
facilities and operating procedures and techniques as
may promote safety, protection, comfort and
convenience to persons and property in their charges
as well as the safety of persons and property within
their areas of operation;
(12) Coordinate and cooperate with other
government agencies and entities concerned with
any aspect involving public land transportation
services with the end in view of effecting continuing
improvement of such services; and
(13) Perform such other functions and duties as may
be provided by law, or as may be necessary, or
proper or incidental to the purposes and objectives of
the Department;
Section 20. Decisions of the Board; Appeals therefrom or
Review Thereof . - The Board, in the exercise of its powers and
functions, shall sit and render its decision en banc. Every such
decision, order, or resolution of the Board must bear the
concurrence and signature of at least two (2) members
thereof.
The decision, order or resolution of the Board shall be
appealable to the Secretary within thirty (30) days from
receipt of the decision. However, the Secretary may motu
propio review and decision or action of the Board before the
same becomes final.
2. MARINA
Section 12, Presidential Decree 474, Charter of the
MARINA
Section 12. EO 125-A
Section 10, RA 9295
3. CAB Sections 10, 13, and 14, RA 776
Section 10. Powers and duties of the Board. -
A. Except as otherwise provided herein, the Board shall have
the power to regulate the economic aspect of air
transportation, and shall have the general supervision and
regulation of, and jurisdiction and control over, air carriers as
well as their property, property rights, equipment, facilities,
and franchise, in so far as may be necessary for the purpose
of carrying out the provisions of this Act.
B. The Board may perform such acts, conduct such
investigations, issue and amend such orders, and make and
amend such general or special rules, regulations, and
procedures as it shall deem necessary to carry out the
provisions of this Act.
C. The Board shall have the following specific powers and
duties:
1. In accordance with the provisions of Chapter IV of this Act,
to issue, deny, amend, revise, alter, modify, cancel, suspend
or revoke, in whole or in part, upon petition or complaint, or
upon its own initiative, any temporary operating permit or
Certificate of Public Convenience and Necessity: Provided,
however, That in the case of foreign air carriers, the permit
shall be issued with the approval of the President of the
Republic of the Philippines.
2. To fix and determine reasonable individual, joint or special
rates, charges or fares which an air carrier may demand,
collect or receive for any service in connection with air
commerce. The Board may adopt any original amended, or
new individual, joint or special rates, charges or fares
proposed by an air carrier if the proposed individual, joint, or
special rates, charges or fares are not unduly preferential or
unduly discriminatory or unreasonable. The burden of proof to
show that the proposed individual, joint or special rates,
charges or fares are just and reasonable shall be upon the air
carrier proposing the same.
In fixing rates, charges, or fares under the provisions of this
Act, the Board shall take into consideration, among other
factors:
a. The effect of such rates upon the movement of traffic;
b. The need in the public interest of adequate and efficient
transportation of persons and property by air carriers at the
lowest cost consistent with the furnishing of such service;
c. Such standards respecting the character and quality of
service to be rendered by air carriers as may be prescribed by
or pursuant to law;
d. The inherent advantages of transportation by aircraft; and
e. The need of each air carrier for revenue sufficient to enable
such air carrier, under honest, economical, and efficient
management, to provide adequate and efficient air carrier
service.
3. To authorize charters whether domestic or international and
special air services or flight heretofore exercised by the
Department of Commerce and Industry under Commonwealth
Act Numbered Ninety-seven under such terms and conditions
as in its judgment the public interest requires.
4. To approve or disapprove increase of capital, sale of
equipment of an air carrier engaged in air commerce,
consolidation, merger, purchase, lease, operating contract or
acquisition and control between domestic air carriers; or
between domestic air carriers and foreign air carriers;
between domestic air carriers and any person engaged in any
phase of aeronautics.
5. To inquire into the management of the business of any air
carrier and, to the extent reasonably necessary for such
inquiry, to obtain from such carrier, and from any person
controlling, or controlled by, or under common control with,
such air carrier, full and complete reports and other
information. Such reports shall be under oath whenever the
Board so requires.
6. To require annual, monthly, periodical, and special reports
from any air carrier; to prescribe the manner and form in
which such reports shall be made; and to require from any air
carrier specific answers to all questions upon which the Board
may deem information to be necessary. Such reports shall be
under oath whenever the Board so Requires. The Board may
also require any air carrier tofilewith it any contract,
agreement, understanding or arrangement, or a true copy
thereof, between such air carrier and any other carrier or
person, in relation to any traffic affected by the provisions of
this Act.
7. To prescribed the forms of any and all accounts, records,
and memoranda of the movement of traffic, as well as of the
receipt and expenditures of money, and the length of time
such accounts, records and memoranda shall be preserved:
Provided, That any air carrier may keep additional accounts,
records or memoranda if they do not impair the integrity of
the accounts, records, or memoranda prescribed or approved
by the Board and do not constitute an undue financial burden
on such air carrier.
8. To require each officer and director of any air carrier to
transmit a report describing the shares of stock or other
interest held by such air carrier with any persons engaged in
any phase of aeronautics, and the holding of the stock in, and
control of, other persons engaged in any phase of aeronautics.
D. The Board may investigate, upon complaint or upon its own
initiative, whether any individual or air carrier, domestic or
foreign, is violating any provision of this Act, or the rules and
regulations issued thereunder, and shall take such action,
consistent with the provisions of this Act, as may be
necessary to prevent further violation of such provision, or
rules and regulations so issued.
E. The Board may issue subpoena or subpoena duces tecum,
require the attendance and testimony of witnesses in any
matter or inquiry pending before the Board or its duly
authorized representative, and require the production of
books, papers, tariffs, contracts, agreements and all other
documents submitted for purposes of this section to be under
oath and verified by the person in custody thereof as to the
truth and correctness of data appearing in such books,
papers, tariffs, contracts, agreements and all other
documents.
F. The Board may review, revise, reverse, modify, or affirm on
appeal any administrative decision or order of the
Administrator on matters pertaining to:
1. Grounding of airmen and aircrafts; or
2. Revocation of any certificate or the denial by the
Administrator of issuance of any certificate; or
3. Imposition of civil penalty or fine in connection with the
violation of any provision of this Act or rules and regulations
issued thereunder.
G. The Board shall have the power, either on its own initiative
or upon review on appeal from an order or decision of the
Administrator, to determine whether to impose, remit,
mitigate, increase, or compromise, such fines and civil
penalties, as the case may be.
H. (1) The Civil Aeronautics Board shall be advised of, and
shall consult with the Department of Foreign Affairs
concerning the negotiation of any air agreement with foreign
governments for the promotion, establishment, or
development of foreign air transportation.
(2) In exercising and performing its powers and duties under
the provisions of this Act, the Civil Aeronautics Board shall
take into consideration the obligation assumed by the
Republic of the Philippines in any treaty, convention or
agreement with foreign countries on matters affecting civil
aviation.
SECTION 13. Conduct of Proceedings. - The Board shall
conduct its proceedings in such manner as will be conducive
to the proper dispatch of business and to the ends of justice.
All hearings and investigations before the Civil Aeronautics
Board shall be governed by the rules of procedure adopted by
the Board and in the conduct thereof the Board shall not be
bound by the technical rules of evidence.
SECTION 14. Delegation of authority to conduct hearings. The
Board may designate in writing any of its members or any of
its officer to conduct hearings and investigations on any
matter pending before the Board and for that purpose the
person so designated shall have authority to administer oaths,
issue subpoena and subpoena duces tecum, require the
attendance and testimony of witnesses, examine witnesses,
make ocular inspection of or enter into any airline
establishment, building, place or premise in the performance
of its official business.
I. PRIVATE LAW ASPECT OF TRANSPORTATION
Contractual relations of the parties to the contract of
transportation
A. Applicable law
1. Philippine law will apply in the following cases:
a. Domestic carriage
b. Contractual stipulation applies Philippine law
c. There is no contractual stipulation but the
passenger or goods are bound for the Philippines
2. Applicable Philippine law:
a. Civil Code
b. Code of Commerce
c. Carriage of Goods by Sea Act
B. Philippine Law Code of Commerce (1888)
1. Carriage of passengers by water
a. Rights of the carrier
I. DEMAND PAYMENT OF PASSAGE
ARTICLE 694: Should the passenger not arrive on board
at the time fixed, or should leave the vessel without
permission from the captain when the latter is ready to
leave the port, the captain may continue the voyage and
demand the full passage price.
II. GRANT PASSAGE ONLY TO THE SPECIFIED
PERSON
ARTICLE 695: The right to passage, if issued to a
specified person, may not be transferred without the
consent of the captain or of the consignee.
b. Rights of the passenger
I. DEMAND A REFUND OF PASSAGE FOR
SUSPENSION OR INTERRUPTION OF VOYAGE
Articles 697 and 698
ARTICLE 697: If before the voyage is begun it is
suspended through the exclusive fault of the captain or
ship agent, the passengers shall have the right to a
refund of their fares and to recover losses and damages;
but if the suspension is due to fortuitous events, or to
force majeure, or to any other cause independent of the
captain or ship agent, the passengers shall only be
entitled to the return of the fare.
ARTICLE 698: In case a voyage already begun should be
interrupted, the passengers shall be obliged to pay the
fare in proportion to the distance covered, without right
to recover for losses and damages if the interruption is
due to fortuitous event or to force majeure, but with a
right to indemnity if the interruption should have been
caused by the captain exclusively. If the interruption
should be caused by the disability of the vessel, and a
passenger should agree to await the repairs, he may not
be required to pay any increased price of passage, but his
living expenses during the stay shall be for his own
account.
In case of delay in the departure of the vessel, the passengers
have the right to remain on board and to be furnished
with food for the account of the vessel unless the delay is
due to fortuitous events or to force majeure. If the delay
should exceed ten days, passengers requesting the same
shall be entitled to the return of the fare; and if it is due
exclusively to the fault of the captain or ship agent, they
may also demand indemnity for losses and damages.
A vessel exclusively devoted to the transportation of
passengers must take them directly to the port or ports of
destination, no matter what the number of passengers
may be, making all the stops indicated in its itinerary.
Trans-Asia Shipping Lines v. Court of
Appeals, G. R. No. 118126, March 4, 1996
c. Obligations of the carrier
i. Transport passengers to their ports of
destination Article 698, last paragraph,
Article 701
ARTICLE 701: The convenience or the interest of the
passengers shall not obligate or empowers the captain to
stand in shore or enter places which may take the vessel
out of her course, or to remain in the ports he must or in
under necessity of touching for a period longer than that
required by the needs of navigation.
II. PROVIDE SUBSISTENCE DURING THE VOYAGE
ARTICLE 702: In the absence of an agreement to the
contrary, it shall be understood that the subsistence of the
passengers during the voyage is included in the price of the
passage; but should it be for the account of the latter, the
captain shall be under obligation, in case of necessity, to
furnish the supply of food necessary for their sustenance at a
reasonable price.
d. Obligations of the passenger
II. OBSERVE MEASURES TO MAINTAIN ORDER AND
DISCIPLINE ON BOARD
ARTICLE 700: In all matters pertaining to the preservation of
order and discipline on board the vessel passengers shall be
subject to the orders of the captain, without any distinction
whatsoever.
2. Contract for the carriage of goods
a. Carriage on bill of lading terms
b. Carriage on charter party terms
3. Carriage on bill of lading terms
a. Definition of a bill of lading
i. Receipt of the goods
ii. Evidence of the agreement to transport and
deliver the goods
iii. Document of title in case of transferable bills of
lading
b. Contents of a bill of lading Articles 350 and 352
ARTICLE 350: The shipper as well as the carrier of
merchandise or goods may mutually demand that a bill of
lading be made, stating:
1. The name, surname and residence of the shipper.
2. The name, surname and residence of the carrier.
3. The name, surname and residence of the person to whom
or to whose order the goods are to be sent or whether they
are to be delivered to the bearer of said bill.
4. The description of the goods, with a statement of their kind,
of their weight, and of the external marks or signs of the
packages in which they are contained.
5. The cost of transportation.
6. The date on which shipment is made.
7. The place of delivery to the carrier.
8. The place and the time at which delivery to the consignee
shall be made.
9. The indemnity to be paid by the carrier in case of delay, if
there should be any agreement on this matter.
ARTICLE 352: The bills of lading, or tickets in cases of
transportation of passengers, may be diverse, some for
persons and others for baggage; but all of them shall bear the
name of the carrier, the date of shipment, the points of
departure and arrival, the cost, and, with respect to the
baggage, the number and weight of the packages, with such
other manifestations which may be considered necessary for
their easy identification.
c. Carriers obligations
i. Deliver the goods within the time
stipulated or if no time has been stipulated
then within a reasonable time Articles
358, 370
ARTICLE 358: If there is no period fixed for the delivery of
the goods the carrier shall be bound to forward them in the
first shipment of the same or similar goods which he may
make point where he must deliver them; and should he not do
so, the damages caused by the delay should be for his
account
ARTICLE 370: If a period has been fixed for the delivery of
the goods, it must be made within such time, and, for failure
to do so, the carrier shall pay the indemnity stipulated in the
bill of lading, neither the shipper nor the consignee being
entitled to anything else.
If no indemnity has been stipulated and the delay exceeds the
time fixed in the bill of lading, the carrier shall be liable for the
damages which the delay may have caused.
ii. Deliver the goods in the same condition as when
these were shipped Article 363
ARTICLE 363: Outside of the cases mentioned in the second
paragraph of Article 361, the carrier shall be obliged to deliver
the goods shipped in the same condition in which, according
to the bill of lading, they were found at the time they were
received, without any damage or impairment, and failing to do
so, to pay the value which those not delivered may have at
the point and at the time at which their delivery should have
been made.
If those not delivered form part of the goods transported, the
consignee may refuse to receive the latter, when he proves
that he cannot make use of them independently of the others.
iii. Deliver the same goods it received Article 368
ARTICLE 368: The carrier must deliver to the consignee,
without any delay or obstruction, the goods which he may
have received, by the mere fact of being named in the bill of
lading to receive them; and if he does not do so, he shall be
liable for the damages which may be caused thereby.
d. Carriers rights
i. Refuse packages unfit for transportation Article
365
ARTICLE 365: The carrier must deliver to the consignee,
without any delay or obstruction, the goods which he may
have received, by the mere fact of being named in the bill of
lading to receive them; and if he does not do so, he shall be
liable for the damages which may be caused thereby.
ii. Inspect the goods prior to acceptance
Article 357
ARTICLE 357: If by reason of well-founded suspicion of falsity
in the declaration as to the contents of a package the carrier
should decide to examine it, he shall proceed with his
investigation in the presence of witnesses, with the shipper or
consignee in attendance.
If the shipper or consignee who has to be cited does not
attend, the examination shall be made before a notary, who
shall prepare a memorandum of the result of the
investigation, for such purposes as may be proper.
If the declaration of the shipper should be true, the expense
occasioned by the examination and that of carefully repacking
the packages shall be for the account of the carrier and in a
contrary case for the account of the shipper.
iii. Exercise its lien over the goods in case of
non-payment of freight Articles 374, 375,
and 376
ARTICLE 374: The consignees to whom the shipment was
made may not defer the payment of the expenses and
transportation charges of the goods they receive after the
lapse of twenty-four hours following their delivery; and in case
of delay in this payment, the carrier may demand the judicial
sale of the goods transported in an amount necessary to
cover the cost of transportation and the expenses incurred.
ARTICLE 375: The goods transported shall be especially
bound to answer for the cost of transportation and for the
expenses and fees incurred for them during their conveyance
and until the moment of their delivery.
This special right shall prescribe eight days after the delivery
has been made, and once prescribed, the carrier shall have no
other action than that corresponding to him as an ordinary
creditor.
ARTICLE 376: The preference of the carrier to the payment
of what is owed him for the transportation and expenses of
the goods delivered to the consignee shall not be cut off by
the bankruptcy of the latter, provided it is claimed within the
eight days mentioned in the preceding article.
[G.R. No. 118126. March 4, 1996]
TRANS-ASIA SHIPPING LINES, INC., petitioner,
vs. COURT OF APPEALS and ATTY. RENATO T.
ARROYO, respondents.
Defendant-appellee at that instant failed to exercise the
diligence which all common carriers should exercise in
transporting or carrying passengers. The law does not merely
require extraordinary diligence in the performance of the
obligation. The law mandates that common carrier[s] should
exercise utmost diligence in the transport of passengers.
Article 1755 of the New Civil Code provides:
ART. 1755. A common carrier is bound to carry the passengers
safely as far as human care and foresight can provide, using
the utmost diligence of very cautious persons, with a due
regard for all the circumstances.
Utmost diligence of a VERY CAUTIOUS person dictates
that defendant-appellee should have pursued the voyage only
when its vessel was already fit to sail. Defendant-appellee
should have made certain that the vessel [could] complete
the voyage before starting [to] sail. Anything less than this,
the vessel [could not] sail x x x with so many passengers on
board it.
However, defendant-appellant [sic] in complete
disregard of the safety of the passengers, chose to proceed
with its voyage even if only one engine was running as the
second engine was still being repaired during the voyage.
Defendant-appellee disregarded the not very remote
possibility that because of the disability of the vessel, other
problems might occur which would endanger the lives of the
passengers sailing with a disabled vessel.
As expected, x x x engine trouble occurred. Fortunate[ly]
for defendant-appellee, such trouble only necessitated the
stoppage of the vessel and did not cause the vessel to
capsize. No wonder why some passengers requested to be
brought back to Cebu City. Common carriers which are
mandated to exercise utmost diligence should not be taking
these risks.
On this premise, plaintiff-appellant should not be faulted
why he chose to disembark from the vessel with the other
passengers when it returned back to Cebu City. Defendant-
appellee may call him a very panicky passenger or a
nervous person, but this will not relieve defendant-appellee
from the liability it incurred for its failure to exercise utmost
diligence.[13]
As to the second assigned error, we find that plaintiff-
appellant is entitled to the award of moral and
exemplary damages for the breach committed by
defendant-appellee.
As discussed, defendant-appellee in sailing to Cagayan
de Oro City with only one engine and with full knowledge of
the true condition of the vessel, acted in bad faith with malice,
in complete disregard for the safety of the passengers and
only for its own personal advancement/interest.
The Civil Code provides: Art 2201. In case of fraud, bad
faith, malice or wanton attitude, the obligor shall be
responsible for all damages which may be reasonably
attributed to the non-performance of the obligation.
Plaintiff-appellant is entitled to moral damages for the
mental anguish, fright and serious anxiety he suffered during
the voyage when the vessels engine broke down and when
he disembarked from the vessel during the wee hours of the
morning at Cebu City when it returned.[14]
Moral damages are recoverable in a damage suit
predicated upon a breach of contract of carriage where it is
proved that the carrier was guilty of fraud or bad faith even if
death does not result.[15]
Fraud and bad faith by defendant-appellee having been
established, the award of moral damages is in order. [16]
To serve as a deterrent to the commission of similar acts
in the future, exemplary damages should be imposed upon
defendant-appellee.[17] Exemplary damages are designed by
our civil law to permit the courts to reshape behavior that is
socially deleterious in its consequence by creating x x x
negative incentives or deterrents against such behavior. [18]
Moral damages having been awarded, exemplary
damages maybe properly awarded. When entitlement to
moral damages has been established, the award of exemplary
damages is proper.[19]
The petitioner then instituted this petition and submitted
the question of law earlier adverted to.
Undoubtedly, there was, between the petitioner and the
private respondent, a contract of common carriage. The laws
of primary application then are the provisions on common
carriers under Section 4, Chapter 3, Title VIII, Book IV of the
Civil Code, while for all other matters not regulated thereby,
the Code of Commerce and special laws.[20]
Under Article 1733 of the Civil Code, the petitioner was
bound to observe extraordinary diligence in ensuring the
safety of the private respondent. That meant that the
petitioner was, pursuant to Article 1755 of the said Code,
bound to carry the private respondent safely as far as human
care and foresight could provide, using the utmost diligence of
very cautious persons, with due regard for all the
circumstances. In this case, we are in full accord with the
Court of Appeals that the petitioner failed to discharge this
obligation.
Before commencing the contracted voyage, the
petitioner undertook some repairs on the cylinder head of one
of the vessels engines. But even before it could finish these
repairs, it allowed the vessel to leave the port of origin on only
one functioning engine, instead of two. Moreover, even the
lone functioning engine was not in perfect condition as
sometime after it had run its course, it conked out. This
caused the vessel to stop and remain adrift at sea, thus in
order to prevent the ship from capsizing, it had to drop
anchor. Plainly, the vessel was unseaworthy even before the
voyage began. For a vessel to be seaworthy, it must be
adequately equipped for the voyage and manned with a
sufficient number of competent officers and crew. [21] The
failure of a common carrier to maintain in seaworthy condition
its vessel involved in a contract of carriage is a clear breach of
is duty prescribed in Article 1755 of the Civil Code.
As to its liability for damages to the private
respondent, Article 1764 of the Civil Code expressly
provides: ART. 1764. Damages in cases comprised in this
Section shall be awarded in accordance with Title XVIII of this
Book, concerning Damages. Article 2206 shall also apply to
the death of a passenger caused by the breach of contract by
common carrier.
The damages comprised in Title XVIII of the Civil Code are
actual or compensatory, moral, nominal, temperate or
moderate, liquidated, and exemplary.
In his complaint, the private respondent claims actual or
compensatory, moral, and exemplary damages.
Actual or compensatory damages represent the
adequate compensation for pecuniary loss suffered and for
profits the obligee failed to obtain.[22]
In contracts or quasi-contracts, the obligor is liable for all
the damages which may be reasonably attributed to the non-
performance of the obligation if he is guilty of fraud, bad faith,
malice, or wanton attitude. [23]
MORAL DAMAGES include moral suffering, mental
anguish, fright, serious anxiety, besmirched reputation,
wounded feelings, moral shock, social humiliation, or similar
injury. They may be recovered in the cases enumerated in
Article 2219 of the Civil Code, likewise, if they are the
proximate result of, as in this case, the petitioners breach of
the contract of carriage.[24] Anent a breach of a contract of
common carriage, moral damages may be awarded if the
common carrier, like the petitioner, acted fraudulently or in
bad faith.[25]
EXEMPLARY DAMAGES are imposed by way of
example or correction for the public good, in addition to
moral, temperate, liquidated or compensatory damages. [26] In
contracts and quasi-contracts, exemplary damages may be
awarded if the defendant acted in a wanton fraudulent,
reckless, oppressive or malevolent manner. [27] It cannot,
however, be considered as a matter of right; the court having
to decide whether or not they should be adjudicated. [28] Before
the court may consider an award for exemplary damages, the
plaintiff must first show that he is entitled to moral, temperate
or compensatory damages; but it is not necessary that he
prove the monetary value thereof. [29]
 The Court of Appeals did not grant the private
respondent actual or compensatory damages, reasoning that
no delay was incurred since there was no demand, as required
by Article 1169 of the Civil Code. This article, however,
finds no application in this case because, as found by the
respondent Court, there was in fact no delay in the
commencement of the contracted voyage. If any delay was
incurred, it was after the commencement of such voyage,
more specifically, when the voyage was subsequently
interrupted when the vessel had to stop
near Kawit Island after the only functioning engine conked
out.
As to the rights and duties of the parties strictly arising
out of such delay, the Civil Code is silent. However, as
correctly pointed out by the petitioner, Article 698 of the
Code of Commerce specifically provides for such a
situation. It reads: In case a voyage already begun should
be interrupted, the passengers shall be obliged to pay the fare
in proportion to the distance covered, without right to recover
for losses and damages if the interruption is due to fortuitous
event or force majeure, but with a right to indemnity if the
interruption should have been caused by the captain
exclusively. If the interruption should be caused by the
disability of the vessel and a passenger should agree to await
the repairs, he may not be required to pay any increased price
of passage, but his living expenses during the stay shall be for
his own account.
This article applies suppletorily pursuant to Article 1766 of the
Civil Code.
Of course, this does not suffice for a resolution of the
case at bench for, as earlier stated, the cause of the delay
or interruption was the petitioners failure to observe
extraordinary diligence. Article 698 must then be read
together with Articles 2199, 2200, 2201, and 2208 in
relation to Article 21 of the Civil Code. So read, it means
that the petitioner is liable for any pecuniary loss or loss of
profits which the private respondent may have suffered by
reason thereof. For the private respondent, such would be the
loss of income if unable to report to his office on the day he
was supposed to arrive were it not for the delay. This,
however, assumes that he stayed on the vessel and was with
it when it thereafter resumed its voyage; but he did not. As he
and some passengers resolved not to complete the voyage,
the vessel had to return to its port of origin and allow them to
disembark. The private respondent then took the petitioners
other vessel the following day, using the ticket he had
purchased for the previous days voyage.
Any further delay then in the private respondents arrival
at the port of destination was caused by his decision to
disembark. Had he remained on the first vessel, he would
have reached his destination at noon of 13 November 1991,
thus been able to report to his office in the afternoon. He,
therefore, would have lost only the salary for half of a day. But
actual or compensatory damages must be proved, [30] which
the private respondent failed to do. There is no convincing
evidence that he did not receive his salary for 13 November
1991 nor that his absence was not excused.
We likewise fully agree with the Court of Appeals that the
petitioner is liable for moral and exemplary damages. In
allowing its unseaworthy M/V Asia Thailand to leave the port
of origin and undertake the contracted voyage, with full
awareness that it was exposed to perils of the sea, it
deliberately disregarded its solemn duty to exercise
extraordinary diligence and obviously acted with bad faith and
in a wanton and reckless manner. On this score, however, the
petitioner asserts that the safety of the vessel and passengers
was never at stake because the sea was calm in the vicinity
where it stopped as faithfully recorded in the vessels log book
(Exhibit 4). Hence, the petitioner concludes, the private
respondent was merely over-reacting to the situation
obtaining then.[31]
We hold that the petitioners defense cannot exculpate it
nor mitigate its liability. On the contrary, such a claim
demonstrates beyond cavil the petitioners lack of genuine
concern for the safety of its passengers. It was, perhaps, only
providential that the sea happened to be calm. Even so, the
petitioner should not expect its passengers to act in the
manner it desired. The passengers were not stoics; becoming
alarmed, anxious, or frightened at the stoppage of a vessel at
sea in an unfamiliar zone at nighttime is not the sole
prerogative of the faint-hearted. More so in the light of the
many tragedies at sea resulting in the loss of lives of hopeless
passengers and damage to property simply because common
carriers failed in their duty to exercise extraordinary diligence
in the performance of their obligations.
We cannot, however, give our affirmance to the award of
attorneys fees. Under Article 2208 of the Civil Code, these are
recoverable only in the concept of actual damages,[32] not as
moral damages[33] nor judicial costs.[34] Hence, to merit such
an award, it is settled that the amount thereof must be
proven.[35] Moreover, such must be specifically prayed for - as
was not done in this case - and may not be deemed
incorporated within a general prayer for such other relief and
remedy as this court may deem just and equitable. [36] Finally,
it must be noted that aside from the following, the body of the
respondent Courts decision was devoid of any statement
regarding attorneys fees:
Plaintiff-appellant was forced to litigate in order that he can
claim moral and exemplary damages for the suffering he
encurred [sic]. He is entitled to attorneys fees pursuant to
Article 2208 of the Civil Code. It states: avert
Article 2208. In the absence of stipulation, attorney s fees
and expenses of litigation, other than judicial costs cannot be
recovered except:
1. When exemplary damages are awarded;
2. When the defendants act or omission has
compelled the plaintiff to litigate with third
persons or to incur expenses to protect his
interest.
This Court holds that the above does not satisfy the
benchmark of factual, legal and equitable justification
needed as basis for an award of attorneys fees. [37] In sum, for
lack of factual and legal basis, the award of attorneys fees
must be deleted.
WHEREFORE, the instant petition is DENIED and the
challenged decision of the Court of Appeals in CA-G.R. CV No.
39901 is AFFIRMED subject to the modification as to the
award for attorneys fees which is hereby SET ASIDE.
e. Carriers liability
i. Risk of the shipper and liability of the
carrier
ARTICLE 361. The merchandise shall be transported at
the risk and venture of the shipper, if the contrary has not
been expressly stipulated. As a consequence, all the losses
and deteriorations which the goods may suffer during the
transportation by reason of fortuitous event, force
majeure, or the inherent nature and defect of the
goods, shall be for the account and risk of the shipper.
ARTICLE 362. Nevertheless, the carrier shall be liable for
the losses and damages resulting from the causes mentioned
in the preceding article if it is proved, as against him, that
they arose through his negligence or by reason of his having
failed to take the precautions which usage has established
among careful persons, unless the shipper has committed
fraud in the bill of lading, representing the goods to be of a
kind or quality different from what they really were.
If, notwithstanding the precautions referred to in this
article, the goods transported run the risk of being lost, on
account of their nature or by reason of unavoidable accident,
there being no time for their owners to dispose of them, the
carrier may proceed to sell them, placing them for this
purpose at the disposal of the judicial authority or of the
officials designated by special provisions.
Tan Chiong Sian v. Inchausti and Co., G. R. No.
6092, March 8, 1912:
Mauro Ganzon v. Court of Appeals, et al., G. R. no.
L-48757, May 30, 1988:
ii. Pay for the value of goods that are not
delivered
ARTICLE 363. Outside of the cases mentioned in the
second paragraph of Article 361, the carrier shall be obliged
to deliver the goods shipped in the same condition in which,
according to the bill of lading, they were found at the time
they were received, without any damage or impairment, and
failing to do so, to pay the value which those not delivered
may have at the point and at the time at which their delivery
should have been made.
If those not delivered form part of the goods
transported, the consignee may refuse to receive the latter,
when he proves that he cannot make use of them
independently of the others.
iii. Pay for the difference in value of the goods
if there has been a deterioration or
diminution in value due to the carriers
fault
ARTICLE 364. If the effect of the damage referred to in
Article 361 is merely a diminution in the value of the goods,
the obligation of the carrier shall be reduced to the payment
of the amount which, in the judgment of experts, constitutes
such difference in value.
iv. Pay for any damage to the goods rendered
useless for sale and consumption
ARTICLE 365. If, in consequence of the damage, the
goods are rendered useless for sale and consumption for the
purposes for which they are properly destined, the consignee
shall not be bound to receive them, and he may have them in
the hands of the carrier, demanding of the latter their value at
the current price on that day.
If among the damaged goods there should be some
pieces in good condition and without any defect, the foregoing
provision shall be applicable with respect to those damaged
and the consignee shall receive those which are sound, this
segregation to be made by distinct and separate pieces and
without dividing a single object, unless the consignee proves
the impossibility of conveniently making use of them in this
form.
The same rule shall be applied to merchandise in
bales or packages, separating those parcels which appear
sound.
v. Pay for damages in case of delay in
delivery and consignee has abandoned the
goods to the carrier
ARTICLE 371. In case of delay through the fault of
the carrier, referred to in the preceding articles, the consignee
may leave the goods transported in the hands of the former,
advising him thereof in writing before their arrival at the point
of destination. When this abandonment takes place, the
carrier shall pay the full value of the goods as if they had been
lost or mislaid.
If the abandonment is not made, the indemnification
for losses and damages by reason of the delay cannot exceed
the current price which the goods transported would have had
on the day and at the place in which they should have been
delivered; this same rule is to be observed in all other cases in
which this indemnity may be due.
f. Filing of claims by the consignee
i. For apparent loss, claim must be filed at the
time of receipt
ARTICLE 366. Within the twenty-four hours following the
receipt of the merchandise, the claim against the carrier for
damage or average be found therein upon opening the
packages, may be made, provided that the indications of the
damage or average which gives rise to the claim cannot be
ascertained from the outside part of such packages, in which
case the claim shall be admitted only at the time of receipt.
After the periods mentioned have elapsed, or the
transportation charges have been paid, no claim shall be
admitted against the carrier with regard to the condition in
which the goods transported were delivered.
ii. For non-apparent loss, claim must be filed
within 24 hours
ARTICLE 366. Within the twenty-four hours following the
receipt of the merchandise, the claim against the carrier for
damage or average be found therein upon opening the
packages, may be made, provided that the indications of the
damage or average which gives rise to the claim cannot be
ascertained from the outside part of such packages, in which
case the claim shall be admitted only at the time of
receipt.
Philippine American General Insurance, et al., v.
Sweet Lines, Inc., et al., G. R. No. 87434, August 5,
1992:
New Zealand Insurance Co., Ltd v. Adriano Choa
Joy, G. R. No. L-7311, September 30, 1995:
g. Filing of claims in case of multiple carriers
ARTICLE 373. The carrier who makes the delivery of the
merchandise to the consignee by virtue of combined
agreements or services with other carriers shall assume the
obligations of those who preceded him in the conveyance,
reserving his right to proceed against the latter if he was not
the party directly responsible for the fault which gave rise to
the claim of the shipper or consignee.
The carrier who makes the delivery shall likewise
acquire all the actions and rights of those who preceded him
in the conveyance. The shipper and the consignee shall have
an immediate right of action against the carrier who executed
the transportation contract, or against the other carriers who
may have received the goods transported without reservation.
However, the reservation made by the latter shall not
relieve them from the responsibilities which they may have
incurred by their own acts.
h. Liability of agents of carriers
ARTICLE 379. The provisions contained in Articles 349
and following shall be understood as equally applicable to
those who, although they do not personally effect the
transportation of the merchandise, contract to do so through
others, either as contractors for a particular and definite
operation, or as agents for transportations and conveyances.
In either case they shall be subrogated in the place of the
carriers themselves, with respect to the obligations and
responsibility of the latter, as well as with regard to their
rights.
4. Carriage on charter party terms
a. Definition of a CHARTER PARTY
I. CONTRACT OF CARRIAGE
II. CONTRACT OF AFFREIGHTMENT
Planters Products, Inc. v. Court of Appeals,
Soriamont Steamship Agencies, et al., G. R. No.
101503, September 1993
b. Contents of a charter party
ARTICLE 652. A charter party must be drawn in
duplicate and signed by the contracting parties, and when
either does not know how or is not able to do so, by two
witnesses at his request.
The charter party shall contain, besides the conditions
freely stipulated, the following circumstances:
1. The kind, name, and tonnage of the vessel.
2. Its flag and port of registry.
3. The name, surname, and domicile of the captain.
4. The name, surname, and domicile of the ship agent, if
the latter should make the charter party.
5. The name, surname, and domicile of the charterer; and
if he states that he is acting by commission, that of the person
for whose account he makes the contract.
6. The port of loading and unloading.
7. The capacity, number of tons or the weight or
measurement which they respectively bind themselves to load
and to transport, or whether the charter party is total.
8. The freightage to be paid, stating whether it is to be a
fixed amount for the voyage or so much per month, or for the
space to be occupied, or for the weight or measure of the
goods of which the cargo consists, or in any other manner
whatsoever agreed upon.
9. The amount of primage to be paid to the captain.
10. The days agreed upon for loading and unloading.
11. The lay days and extra lay days to be allowed and the
demurrage to be paid for each of them.
c. Relationship between the charter party and the
bill of lading
ARTICLE 653. If the cargo should be received without
the charter party having been signed, the contract shall be
understood as executed in accordance with what appears in
the bill of lading, the sole evidence of title with regard to the
cargo for determining the rights and obligations of the ship
agent, of the captain, and of the charterer.
Market Developers, Inc. v. Intermediate Apellate
Court. Et al., G. R. No. 74978, September 8, 1989
d. Kinds of charter parties
i. Time charters
ARTICLE 658(1). The freightage shall accrue according
to the conditions stipulated in the contract, and should they
not be expressed, or should they be ambiguous, the following
rules shall be observed:
1. If the vessel has been chartered by months or by
days, the freightage shall begin to run from the day the
loading of the vessel is begun.
ARTICLE 658(2). In charters made for a fixed period, the
freightage shall begin to run from that very day.
ii. Voyage charters
ARTICLE 658(3). If the freightage is charged according
to weight, the payment shall be made according to gross
weight, including the containers, such as barrels or any other
objects in which the cargo is contained.
e. Demurrage charges
ARTICLE 656. If in the charter party the time in which
the loading and unloading are to take place is not stated, the
usages of the port where these acts take place shall be
observed. After the stipulated or the customary period has
passed, and there is no express proviso in the charter party
fixing the indemnity for the delay, the captain shall be entitled
to demand demurrage for the lay days and extra lay days
which may have elapsed in loading and unloading.
OFarrel y Cia v. Manila Electric Company, G. R. No.
31222, October 29, 1929
f. Liability of cargo to pay for freight
ARTICLE 665. The cargo shall be specially liable for the
payment of the freightage, expenses and duties arising
therefrom, which must be reimbursed by the shippers, as well
as for the part of the general average which may correspond
to it; but it shall not be legal for the captain to delay
unloading on account of suspicion that this obligation may not
be complied with. Should there be reasons for distrust, the
judge or court, at the instance of the captain, may order the
deposit of the merchandise until he has been paid in full.
Overseas Factors, Inc., et al v. South Sea Shipping
Co., Ltd., et al., G. R. no. L-12138, February 27,
1962
g. Period when lien on freight subsists
ARTICLE 667. The goods loaded shall be liable in the
first place for the freight and expenses thereof during twenty
days, to be counted from the date of their delivery or deposit.
During this period, the sale of the same may be requested,
even though there be other creditors and the bankruptcy of
the shipper or consignee should occur.
This right may not be made use of, however, on the
goods which, after being delivered, were turned over to a third
person without malice on the part of the latter and for a
valuable consideration.
Julius Ouano v. Court of Appeals, G. R. no. 95900,
July 23, 1992
h. Liability for dead freight
ARTICLE 680. A charterer who does not complete the
full cargo he bound himself to ship shall pay the freightage of
the amount he fails to ship, if the captain does not take other
freight to complete the load of the vessel, in which case the
first charterer shall pay the difference, should there be any.
National Food Authority et al., v. Court of Appeals,
et al., G. R. No. 96543, August 4, 1999
5. Loans on bottomry and respondentia
6. Averages
7. Salvage
8. Carriage on charter party terms
i. Definition of a CHARTER PARTY
III. CONTRACT OF CARRIAGE
IV. CONTRACT OF AFFREIGHTMENT
Planters Products, Inc. v. Court of Appeals,
Soriamont Steamship Agencies, et al., G. R. No.
101503, September 1993
j. Contents of a charter party
ARTICLE 652. A charter party must be drawn in
duplicate and signed by the contracting parties, and when
either does not know how or is not able to do so, by two
witnesses at his request.
The charter party shall contain, besides the conditions
freely stipulated, the following circumstances:
1. The kind, name, and tonnage of the vessel.
2. Its flag and port of registry.
3. The name, surname, and domicile of the captain.
4. The name, surname, and domicile of the ship agent, if
the latter should make the charter party.
5. The name, surname, and domicile of the charterer; and
if he states that he is acting by commission, that of the person
for whose account he makes the contract.
6. The port of loading and unloading.
7. The capacity, number of tons or the weight or
measurement which they respectively bind themselves to load
and to transport, or whether the charter party is total.
8. The freightage to be paid, stating whether it is to be a
fixed amount for the voyage or so much per month, or for the
space to be occupied, or for the weight or measure of the
goods of which the cargo consists, or in any other manner
whatsoever agreed upon.
9. The amount of primage to be paid to the captain.
10. The days agreed upon for loading and unloading.
11. The lay days and extra lay days to be allowed and the
demurrage to be paid for each of them.
k. Relationship between the charter party and the
bill of lading
ARTICLE 653. If the cargo should be received without
the charter party having been signed, the contract shall be
understood as executed in accordance with what appears in
the bill of lading, the sole evidence of title with regard to the
cargo for determining the rights and obligations of the ship
agent, of the captain, and of the charterer.
Market Developers, Inc. v. Intermediate Apellate
Court. Et al., G. R. No. 74978, September 8, 1989
l. Kinds of charter parties
iii. Time charters
ARTICLE 658(1). The freightage shall accrue according
to the conditions stipulated in the contract, and should they
not be expressed, or should they be ambiguous, the following
rules shall be observed:
1. If the vessel has been chartered by months or by
days, the freightage shall begin to run from the day the
loading of the vessel is begun.
ARTICLE 658(2). In charters made for a fixed period, the
freightage shall begin to run from that very day.
iv. Voyage charters
ARTICLE 658(3). If the freightage is charged according
to weight, the payment shall be made according to gross
weight, including the containers, such as barrels or any other
objects in which the cargo is contained.
m. Demurrage charges
ARTICLE 656. If in the charter party the time in which
the loading and unloading are to take place is not stated, the
usages of the port where these acts take place shall be
observed. After the stipulated or the customary period has
passed, and there is no express proviso in the charter party
fixing the indemnity for the delay, the captain shall be entitled
to demand demurrage for the lay days and extra lay days
which may have elapsed in loading and unloading.
OFarrel y Cia v. Manila Electric Company, G. R. No.
31222, October 29, 1929
n. Liability of cargo to pay for freight
ARTICLE 665. The cargo shall be specially liable for the
payment of the freightage, expenses and duties arising
therefrom, which must be reimbursed by the shippers, as well
as for the part of the general average which may correspond
to it; but it shall not be legal for the captain to delay
unloading on account of suspicion that this obligation may not
be complied with. Should there be reasons for distrust, the
judge or court, at the instance of the captain, may order the
deposit of the merchandise until he has been paid in full.
Overseas Factors, Inc., et al v. South Sea Shipping
Co., Ltd., et al., G. R. no. L-12138, February 27,
1962
o. Period when lien on freight subsists
ARTICLE 667. The goods loaded shall be liable in the
first place for the freight and expenses thereof during twenty
days, to be counted from the date of their delivery or deposit.
During this period, the sale of the same may be requested,
even though there be other creditors and the bankruptcy of
the shipper or consignee should occur.
This right may not be made use of, however, on the
goods which, after being delivered, were turned over to a third
person without malice on the part of the latter and for a
valuable consideration.
Julius Ouano v. Court of Appeals, G. R. no. 95900,
July 23, 1992
p. Liability for dead freight
ARTICLE 680. A charterer who does not complete the
full cargo he bound himself to ship shall pay the freightage of
the amount he fails to ship, if the captain does not take other
freight to complete the load of the vessel, in which case the
first charterer shall pay the difference, should there be any.
National Food Authority et al., v. Court of Appeals,
et al., G. R. No. 96543, August 4, 1999
9. Loans on bottomry and respondentia
10. Averages
11. Salvage
C. Philippine law Civil Code
1. Definition of common carriers
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.
Pedro de Guzman v. Court of Appeals, G. R. No. L-
47822, December 22, 1988
1. Common carriers defined; Article 1732 NCC
The Civil Code defines common carriers in the following
terms (Article 1732): Common carriers persons, corporations,
firms or associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or
air for compensation, offering their services to the public.
2. Article 1732 NCC makes no distinctions
Article 1732 of the 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 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. Article
1733 deliberately refrained from making such distinctions.
3. Concept of common carrier coincides neatly with
the notion of public service
The concept of common carrier under Article 1732 may be
seen to coincide neatly with the notion of public service,
under the Public Service Act (Commonwealth Act 1416, as
amended) which at least partially supplements the law on
common carriers set forth in the Civil Code.
4. Public Service; Section 13, paragraph (b) of the
Public Service Act
Under Section 13, paragraph (b) of the Public Service Act,
public service includes every person that now or hereafter
may own, operate, manage, or control in the Philippines, for
hire or compensation, with general or limited clientele,
whether permanent, occasional or accidental, and done for
general business purposes, any common carrier, railroad,
street railway, traction railway, subway motor vehicle, either
for freight or passenger, or both, with or without fixed route
and whatever may be its classification, freight or carrier
service of any class, express service, steamboat, or steamship
line, pontines, ferries and water craft, engaged in the
transportation of passengers or freight or both, shipyard,
marine repair shop, wharf or dock, ice plant, ice-refrigeration
plant, canal, irrigation system, gas, electric light, heat and
power, water supply and power petroleum, sewerage system,
wire or wireless communications systems, wire or wireless
broadcasting stations and other similar public services.
5. Cendaa a common carrier
Cendaa is properly characterized as a common carrier even
though he merely back-hauled goods for other merchants
from Manila to Pangasinan, although such backhauling was
done on a periodic or occasional rather than regular or
scheduled manner, and even though Cendaas principal
occupation was not the carriage of goods for others. There is
no dispute that Cendaa charged his customers a fee for
hauling their goods; that fee frequently fell below commercial
freight rates is not relevant.
6. Certificate of public convenience not requisite for
incurring of liability as common carrier
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
firm acts as a common carrier, without regard to whether or
not such carrier has also complied with the requirements of
the applicable regulatory statute and implementing
regulations and has been granted a certificate of public
convenience or other franchise. Herein, to exempt Cendaa
from the liabilities of a common carrier because he has not
secured the necessary certificate of public convenience,
would be offensive to sound public policy; that would be to
reward private respondent precisely for failing to comply with
applicable statutory requirements.
7. Business of common carrier imbued with public
interest
The business of a common carrier impinges directly and
intimately upon the safety and well-being and property of
those members of the general community who happen to deal
with such carrier. 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.
8. Extraordinary diligence required of common carriers
Common carriers, by the nature of their business and for
reasons of public policy, are held to a very high degree of
care and diligence (extraordinary diligence) in the carriage
of goods as well as of passengers. The specific import of
extraordinary diligence in the care of goods transported by a
common carrier is, according to Article 1733, further
expressed in Articles 1734, 1735 and 1745, numbers 5, 6 and
7 of the Civil Code.9. Article 1734 NCC Article 1734
establishes the general rule that common carriers are
responsible for the loss, destruction or deterioration of the
goods which they carry, unless the same is due to any of the
following causes only: (1) Flood, storm, earthquake, lightning,
or other natural disaster or calamity; (2) Act of the public
enemy in war, whether international or civil; (3) Act or
omission of the shipper or owner of the goods; (4) The
character of the goods or defects in the packing or in the
containers; and (5) Order or act of competent public
authority.
10. Enumeration in Article 1734 NCC exclusive; Article
1735 NCC
It is important to point out that the above list of causes of
loss, destruction or deterioration which exempt the common
carrier for responsibility herefor, is a closed list. Causes falling
outside the foregoing list, even if they appear to constitute a
species of force majeure, fall within the scope of Article 1735,
which provides that In all cases other than those mentioned
in numbers 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.
11. Cendaa presumed at fault; Cendaa, however, not
required to retain security guard to ride with truck
Applying Articles 1734 and 1735, the hijacking of the carriers
truck does not fall within any of the 5 categories of exempting
causes listed in Article 1734. It would follow that the hijacking
of the carriers vehicle must be dealt with under the
provisions of Article 1735, in other words, that Cendaa as
common carrier is presumed to have been at fault or to have
acted negligently. This presumption, however, may be
overthrown by proof of extraordinary diligence on the part of
Cendaa. The standard of extraordinary diligence required
Cendaa to retain a security guard to ride with the truck and
to engage brigands in a fire fight at the risk of his own life and
the lives of the driver and his helper.
12. Hold uppers of second truck armed
Herein, armed men held up the second truck owned by
Cendaa which carried de Guzmans cargo. The record shows
that an information for robbery in band was filed in the CFI of
Tarlac, Branch 2, in Criminal Case 198 entitled People of the
Philippines v. Felipe Boncorno, Napoleon Presno, Armando
Mesina, Oscar Oria and one John Doe. There, the accused
were charged with willfully and unlawfully taking and carrying
away with them the second truck, driven by Manuel Estrada
and loaded with the 600 cartons of
Liberty filled milk destined for delivery at de Guzmans store
in Urdaneta, Pangasinan. The decision of the trial court shows
that the accused acted with grave, if not irresistible, threat,
violence or force. 3 of the 5 holduppers
were armed with firearms. The robbers not only took away the
truck and its cargo but also kidnapped the driver and his
helper, detaining them for several days and later releasing
them in another province (in Zambales). The hijacked truck
was subsequently found by the police in Quezon City. The CFI
convicted all the accused of robbery, though not of robbery in
band.
12. Specific requirements of the duty of extraordinary
diligence in the vigilance over the goods carried in the
specific context of hijacking or armed robbery; Armed
robbery herein is fortuitous event
The duty of extraordinary diligence in the vigilance over goods
is, under Article 1733, given additional specification not only
by Articles 1734 and 1735 but also by Article 1745,
numbers 4, 5 and 6, Article 1745 provides in relevant part:
Any of the following or similar stipulations shall be
considered unreasonable, unjust and contrary to public policy:
xxx (5) that the common carrier shall not be responsible for
the acts or omissions of his or its employees; (6) that the
common carriers liability for acts committed by thieves, or of
robbers who do not act with grave or irresistible threat,
violence or force, is dispensed with or diminished; and (7) that
the common carrier shall not responsible for the loss,
destruction or deterioration of goods on account of the
defective condition of the car, vehicle, ship, airplane or other
equipment used in the contract of carriage. Under Article
1745 (6), 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 limits of the duty of extraordinary diligence in the
vigilance over the goods carried are reached where the goods
are lost as a result of a robbery which is attended by grave or
irresistible threat, violence or force. In these circumstances,
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.
14. Common carriers not absolute insurers against all
risks of travel and of transport of goods
Even common carriers are not made absolute insurers against
all risks of travel and of transport of goods, and are not held
liable for acts or events which cannot be foreseen or are
inevitable, provided that they shall have complied with the
rigorous standard of extraordinary diligence.
Spouses Dante Cruz and Leonora Cruz, vs. Sun
Holidays, Inc., G. R. No. 186312. June 29, 2010
Petitioners correctly rely on De Guzman v. Court of
Appeals[17] in characterizing respondent as 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 1733 deliberately refrained
from making such distinctions.
So understood, the concept of common carrier
under Article 1732 may be seen to coincide neatly 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 [citation omitted]:
Indeed, respondent is a common carrier. Its ferry
services are so intertwined with its main business as to
be properly considered ancillary thereto. The constancy
of respondents ferry services in its resort operations is
underscored by its having its own Coco Beach boats. And the
tour packages it offers, which include the ferry
services, may be availed of by anyone who can afford
to pay the same. These services are thus available to
the public.
That respondent does not charge a separate fee or
fare for its ferry services is of no moment. It would be
imprudent to suppose that it provides said services at a
loss. The Court is aware of the practice of beach resort
operators offering tour packages to factor the
transportation fee in arriving at the tour package
price. That guests who opt not to avail of respondents ferry
services pay the same amount is likewise
inconsequential. These guests may only be deemed to have
overpaid.
When a passenger dies or is injured in the discharge
of a contract of carriage, it is presumed that the common
carrier is at fault or negligent. In fact, there is even no need
for the court to make an express finding of fault or negligence
on the part of the common carrier. This statutory presumption
may only be overcome by evidence that the carrier exercised
extraordinary diligence.[21] Respondent nevertheless harps on
its strict compliance with the earlier mentioned conditions of
voyage before it allowed M/B Coco Beach III to sail on
September 11, 2000. Respondents position does not
impress.
The evidence shows that PAGASA issued 24-hour
public weather forecasts and tropical cyclone warnings for
shipping on September 10 and 11, 2000 advising of tropical
depressions in Northern Luzon which would also affect
the province of Mindoro.[22] By the testimony of Dr. Frisco Nilo,
supervising weather specialist of PAGASA, squalls are to be
expected under such weather condition.[23]
A very cautious person exercising the utmost
diligence would thus not brave such stormy weather
and put other peoples lives at risk. The extraordinary
diligence required of common carriers demands that
they take care of the goods or lives entrusted to their
hands as if they were their own. This respondent
failed to do.
Respondents insistence that the incident was caused by
a fortuitous event does not impress either.
The ELEMENTS OF A "FORTUITOUS EVENT" are: (a)
the cause of the unforeseen and unexpected occurrence, or
the failure of the debtors to comply with their obligations,
must have been independent of human will; (b) the event that
constituted the caso fortuito must have been impossible to
foresee or, if foreseeable, impossible to avoid; (c) the
occurrence must have been such as to render it impossible for
the debtors to fulfill their obligation in a normal manner; and
(d) the obligor must have been free from any participation in
the aggravation of the resulting injury to the creditor. [24]
To fully free a common carrier from any liability, the
fortuitous event must have been the proximate and only
cause of the loss. And it should have exercised due diligence
to prevent or minimize the loss before, during and after the
occurrence of the fortuitous event.[25]
--------------------
2. Contract of carriage in general
a. CARRIAGE OF PASSENGERS
Art. 1733. Common carriers, from the nature of their
business and for reasons of public policy, are bound to
observe extraordinary diligence in the vigilance over the
goods and for the safety of the passengers transported by
them, according to all the circumstances of each case.
Such extraordinary diligence in the vigilance over the
goods is further expressed in Articles 1734, 1735, and 1745,
Nos. 5, 6, and 7, while the extraordinary diligence for the
safety of the passengers is further set forth in Articles 1755
and 1756.
Art. 1755. A common carrier is bound to carry the
passengers safely as far as human care and foresight can
provide, using the utmost diligence of very cautious persons,
with a due regard for all the circumstances.
Art. 1756. In case of death of or injuries to passengers,
common carriers are presumed to have been at fault or to
have acted negligently, unless they prove that they observed
extraordinary diligence as prescribed in Articles 1733 and
1755.
Art. 1757. The responsibility of a common carrier for the
safety of passengers as required in Articles 1733 and 1755
cannot be dispensed with or lessened by stipulation, by the
posting of notices, by statements on tickets, or otherwise.
Art. 1758. When a passenger is carried gratuitously, a
stipulation limiting the common carrier's liability for
negligence is valid, but not for willful acts or gross negligence.
The reduction of fare does not justify any limitation of the
common carrier's liability.
Art. 1759. Common carriers are liable for the death of or
injuries to passengers through the negligence or willful acts of
the former's employees, although such employees may have
acted beyond the scope of their authority or in violation of the
orders of the common carriers.
This liability of the common carriers does not cease upon
proof that they exercised all the diligence of a good father of a
family in the selection and supervision of their employees.
Art. 1760. The common carrier's responsibility
prescribed in the preceding article cannot be eliminated or
limited by stipulation, by the posting of notices, by statements
on the tickets or otherwise.
Art. 1761. The passenger must observe the diligence of
a good father of a family to avoid injury to himself.
Art. 1762. The contributory negligence of the passenger
does not bar recovery of damages for his death or injuries, if
the proximate cause thereof is the negligence of the common
carrier, but the amount of damages shall be equitably
reduced.
Art. 1763. A common carrier is responsible for injuries
suffered by a passenger on account of the willful acts or
negligence of other passengers or of strangers, if the common
carrier's employees through the exercise of the diligence of a
good father of a family could have prevented or stopped the
act or omission.
b. CARRIAGE OF PASSENGERS LUGGAGE
Art. 1754. The provisions of Articles 1733 to 1753 shall
apply to the passenger's baggage which is not in his personal
custody or in that of his employee. As to other baggage, the
rules in Articles 1998 and 2000 to 2003 concerning the
responsibility of hotel-keepers shall be applicable.
a. CARRIAGE OF GOODS
Art. 1734. Common carriers are responsible for the
loss, destruction, or deterioration of the goods, unless the
same is due to any of the following causes only:
(1) Flood, storm, earthquake, lightning, or other
natural disaster or calamity;
(2) Act of the public enemy in war, whether
international or civil;
(3) Act of omission of the shipper or owner of the
goods;
(4) The character of the goods or defects in the
packing or in the containers;
(5) Order or act of competent public authority.
Art. 1735. In all cases other than those mentioned
in Nos. 1, 2, 3, 4, and 5 of the preceding article, if the
goods are lost, destroyed or deteriorated, common
carriers are presumed to have been at fault or to have
acted negligently, unless they prove that they observed
extraordinary diligence as required in Article 1733.
Art. 1736. The extraordinary responsibility of the
common carrier lasts from the time the goods are
unconditionally placed in the possession of, and received
by the carrier for transportation until the same are
delivered, actually or constructively, by the carrier to the
consignee, or to the person who has a right to receive
them, without prejudice to the provisions of Article 1738.
Art. 1737. The common carrier's duty to observe
extraordinary diligence over the goods remains in full
force and effect even when they are temporarily
unloaded or stored in transit, unless the shipper or owner
has made use of the right of stoppage in transitu.
Art. 1738. The extraordinary liability of the common
carrier continues to be operative even during the time the
goods are stored in a warehouse of the carrier at the
place of destination, until the consignee has been advised
of the arrival of the goods and has had reasonable
opportunity thereafter to remove them or otherwise
dispose of them.
Art. 1739. In order that the common carrier may be
exempted from responsibility, the natural disaster must
have been the proximate and only cause of the loss.
However, the common carrier must exercise due
diligence to prevent or minimize loss before, during and
after the occurrence of flood, storm or other natural
disaster in order that the common carrier may be
exempted from liability for the loss, destruction, or
deterioration of the goods. The same duty is incumbent
upon the common carrier in case of an act of the public
enemy referred to in Article 1734, No. 2.
Art. 1740. If the common carrier negligently incurs
in delay in transporting the goods, a natural disaster shall
not free such carrier from responsibility.
Art. 1741. If the shipper or owner merely
contributed to the loss, destruction or deterioration of the
goods, the proximate cause thereof being the negligence
of the common carrier, the latter shall be liable in
damages, which however, shall be equitably reduced.
Art. 1742. Even if the loss, destruction, or
deterioration of the goods should be caused by the
character of the goods, or the faulty nature of the packing
or of the containers, the common carrier must exercise
due diligence to forestall or lessen the loss.
Art. 1743. If through the order of public authority
the goods are seized or destroyed, the common carrier is
not responsible, provided said public authority had power
to issue the order.
Art. 1744. A stipulation between the common
carrier and the shipper or owner limiting the liability of
the former for the loss, destruction, or deterioration of the
goods to a degree less than extraordinary diligence shall
be valid, provided it be:
(1) In writing, signed by the shipper or owner;
(2) Supported by a valuable consideration other than
the service rendered by the common carrier; and
(3) Reasonable, just and not contrary to public policy.
Art. 1745. Any of the following or similar
stipulations shall be considered unreasonable, unjust and
contrary to public policy:
(1) That the goods are transported at the risk of the
owner or shipper;
(2) That the common carrier will not be liable for any
loss, destruction, or deterioration of the goods;
(3) That the common carrier need not observe any
diligence in the custody of the goods;
(4) That the common carrier shall exercise a degree
of diligence less than that of a good father of a family, or
of a man of ordinary prudence in the vigilance over the
movables transported;
(5) That the common carrier shall not be responsible
for the acts or omission of his or its employees;
(6) That the common carrier's liability for acts
committed by thieves, or of robbers who do not act with
grave or irresistible threat, violence or force, is dispensed
with or diminished;
(7) That the common carrier is not responsible for the
loss, destruction, or deterioration of goods on account of
the defective condition of the car, vehicle, ship, airplane
or other equipment used in the contract of carriage.
Art. 1746. An agreement limiting the common
carrier's liability may be annulled by the shipper or owner
if the common carrier refused to carry the goods unless
the former agreed to such stipulation.
Art. 1747. If the common carrier, without just cause,
delays the transportation of the goods or changes the
stipulated or usual route, the contract limiting the
common carrier's liability cannot be availed of in case of
the loss, destruction, or deterioration of the goods.
Art. 1748. An agreement limiting the common
carrier's liability for delay on account of strikes or riots is
valid.
Art. 1749. A stipulation that the common carrier's
liability is limited to the value of the goods appearing in
the bill of lading, unless the shipper or owner declares a
greater value, is binding.
Art. 1750. A contract fixing the sum that may be
recovered by the owner or shipper for the loss,
destruction, or deterioration of the goods is valid, if it is
reasonable and just under the circumstances, and has
been fairly and freely agreed upon.
Art. 1751. The fact that the common carrier has no
competitor along the line or route, or a part thereof, to
which the contract refers shall be taken into consideration
on the question of whether or not a stipulation limiting
the common carrier's liability is reasonable, just and in
consonance with public policy.
Art. 1752. Even when there is an agreement limiting
the liability of the common carrier in the vigilance over
the goods, the common carrier is disputably presumed to
have been negligent in case of their loss, destruction or
deterioration.
Art. 1753. The law of the country to which the
goods are to be transported shall govern the liability of
the common carrier for their loss, destruction or
deterioration.
3. Contract for the carriage of passengers
A. DUTY OF THE CARRIER TO OBSERVE UTMOST
DILIGENCE Articles 1755, 1757 and 1758
Olegario Brito Sy v. Malate Taxicab and Garage, G.
R. No. L-8937, November 29, 1957, 102 Phil 482
We find no merit in the first assignment of error that the third-
party complaint is a pre-judicial question. As enunciated by
this Court in Berbari v. Concepcion, 40 Phil. 837, "PRE-
JUDICIAL QUESTION is understood in law to be that
which precedes the criminal action, or that which
requires a decision before final judgment is rendered
in the principal action with which said question is
closely connected. Not all previous questions are pre-
judicial, although all pre-judicial questions are
necessarily previous." In the present case, the THIRD-
PARTY COMPLAINT IS NOT A PRE-JUDICIAL QUESTION,
as the issue in the main action is not entirely dependent upon
those in the third-party complaint; on the contrary, it is the
third-party complaint that is dependent upon the main case at
least in the amount of damages which defendant-appellant
seeks to be reimbursed in its third-party complaint.
Furthermore, the complaint is based on a contractual
obligation of transportation of passenger which defendant-
appellant failed to carry out, and the action is entirely
different and independent from that in the third-party
complaint which is based on alleged tortious act committed
by the third-party defendant Sgt. Dequito. The main case,
therefore, is entirely severable and may be litigated
independently. Moreover, whatever the outcome of the third-
party complaint might be would not in any way affect or alter
the contractual liability of the appellant to plaintiff. If the
collision was due to the negligence of the third-party
defendant, as alleged, then defendant-appellant may file a
separate civil action for damages based on tort ex-delicto or
upon quasi-delict, as the case may be.
Coming to the second assignment of error that the lower court
erred in not making an express finding as to whether
defendant- appellant was responsible for the collision, we find
the same to be unjustified. The pertinent provisions of the
new Civil Code under the heading Common Carriers, are the
following:
ART. 1733. Common carriers, from the nature of their business
and for reasons of public policy, are bound to observe
extraordinary diligence in the vigilance over the goods and for
the safety of the passengers transported by them, according
to all the circumstances of each case.
Such extraordinary diligence in the vigilance over the goods is
further expressed in articles 1734, 1735, and 1745, Nos. 5, 6,
and 7, while the extraordinary diligence for the safety of the
passengers is further set forth in articles 1755 and 1756.
Evidently, under these provisions of law, the court need not
make an express finding of fault or negligence on the
part of the defendant-appellant in order to hold it
responsible to pay the damages sought for by the
plaintiff, for the action initiated therefor is based on a
contract of carriage and not on tort . When plaintiff rode
on defendant-appellants taxicab, the latter assumed the
express obligation to transport him to his destination safely,
and to observe extraordinary diligence with a due regard for
all the circumstances, and any injury that might be suffered
by the passenger is right away attributable to the fault or
negligence of the carrier (Article 1756, supra). This is an
exception to the general rule that negligence must be proved,
and it was therefore incumbent upon the carrier to prove that
it has exercised extraordinary diligence as prescribed in
Articles 1733 and 1755 of the new Civil Code. It is noteworthy,
however, that at the hearing in the lower court defendant-
appellant failed to appear and has not presented any
evidence at all to overcome and overwhelm the presumption
of negligence imposed upon it by law; hence, there was no
need for the lower court to make an express finding thereon in
view of the provisions of the aforequoted Article 1756 of the
new Civil Code.
--------------------
Gregorio Anuran, et al. v. Pepito Buno, et al., G. R.
Nos. L-21353 and L-21354, May 20, 1966
Upon further and more extended consideration of the matter,
we have become convinced that error of law was committed
in releasing the jeepney from liability. It must be remembered
that the obligation of the carrier to transport its passengers
safely is such that the New Civil Code requires "utmost
diligence" from the carriers (Art. 1755) who are "presumed to
have been at fault or to have acted negligently, unless they
prove that they have observed extraordinary diligence" (Art.
1756). In this instance, this legal presumption of negligence is
confirmed by the Court of Appeals' finding that the driver of
the jeepney in question was at fault in parking the vehicle
improperly. It must follow that the driver and the
owners of the jeepney must answer for injuries to its
passengers.
The principle about the "LAST CLEAR CHANCE" would call
for application in a suit between the owners and
drivers of the two colliding vehicles . It does NOT arise
where a passenger demands responsibility from the
carrier to enforce its contractual obligations. For it
would be inequitable to exempt the negligent driver of
the jeepney and its owners on the ground that the
other driver was likewise guilty of negligence.
Now as to damages. The driver and the owners of the truck
have not appealed from the Court of Appeals' assessment.
The plaintiffs (petitioners) have not asked here for a greater
amount of indemnity. They merely pray for a declaration that
Pepito Buo, Pedro Gahol and Luisa Alcantara (the driver and
the owners of the jeepney, respectively) be declared jointly
and severally liable with the other defendants.
--------------------
Philippine Rabbit Bus Lines, Inc. v. Intermediate
Apellate Court, G. R. No. 66102-04 August 30, 1990
DOCTRINE: The principle about "THE LAST CLEAR" chance,
would call for application in a suit between the owners and
drivers of the two colliding vehicles. It does not arise where
a passenger demands responsibility from the carrier to
enforce its contractual obligations. For it would be
inequitable to exempt the negligent driver of the jeepney and
its owners on the ground that the other driver was likewise
guilty of negligence. (Anuran, et al. v. Buo et al).
The SUBSTANTIAL FACTOR TEST is that if the actor's
conduct is a substantial factor in bringing about harm to
another, the fact that the actor neither foresaw nor should
have foreseen the extent of the harm or the manner in which
it occurred does not prevent him from being liable.
In CULPA CONTRACTUAL, the moment a passenger dies or
is injured, the carrier is presumed to have been at fault or to
have acted negligently, and this disputable presumption may
only be overcome by evidence that he had observed extra-
ordinary diligence as prescribed in Articles 1733, 1755 and
1756 NCC or that the death or injury of the passenger was
due to a fortuitous event (Lasam v. Smith, Jr).
In an action for damages against the carrier for his failure to
safely carry his passenger to his destination, an accident
caused either by defects in the automobile or through the
negligence of its driver, is NOT A CASO FORTUITO which
would avoid the carriers liability for damages (Son v. Cebu
Autobus Company).
ISSUE: Who is liable for the death and physical injuries
suffered by the passengers of the jeepney?
HELD: IAC misappreciated facts and evidence and the
misapplication of the laws; this warrants a reversal of its
questioned decision and resolution.
RE presumption that drivers who bump the rear of another
vehicle guilty and the cause of the accident, unless
contradicted by other evidence:
. . . the jeepney had already executed a complete turnabout
and at the time of impact was already facing the western side
of the road. Thus the jeepney assumed a new frontal position
vis a vis, the bus, and the bus assumed a new role of
defensive driving. The spirit behind the presumption of guilt
on one who bumps the rear end of another vehicle is for the
driver following a vehicle to be at all times prepared of a
pending accident should the driver in front suddenly come to
a full stop, or change its course either through change of mind
of the front driver, mechanical trouble, or to avoid an
accident. The rear vehicle is given the responsibility of
avoiding a collision with the front vehicle for it is the
rear vehicle who has full control of the situation as it is
in a position to observe the vehicle in front of it.
But the undisputed fact is that the U-turn made by the
jeepney was abrupt. The jeepney, traveling on the eastern
shoulder, making a straight, skid mark of approximately 35
m, 15 meters from the eastern shoulder to the point of
impact. Hence, delos Reyes could not have anticipated
the sudden U-turn executed by Manalo. The
PRESUMPTION was rebutted by this piece of evidence.
RE SUBSTANTIAL FACTOR TEST, it was the opinion of the
respondent court that:
The defendant bus running at a fast speed when the
accident occurred and did not even make the slightest
effort to avoid the accident. The bus driver's conduct is
thus a substantial factor in bringing about harm to the
passengers of the jeepney, not only because he was driving
fast and did not even attempt to avoid the mishap but also
because it was the bus which was the physical force which
brought about the injury and death to the passengers of the
jeepney.
 The bus departed from Laoag at 4am and the accident
took place at approximately around 12:30 pm after
travelling roughly for 8 hours and 30 minutes. Actual
travelling time of 6 hours and 30 minutes. The average
speed of the bus would be 80 to 90 kph, as this is the
place where buses would make up for lost time in
traversing busy city streets.
SC is not convinced. The bus was travelling at a fast speed (80
-90 kph), is yet within the speed limit allowed in
highways. Delos Reyes cannot be faulted for not having
avoided the collision. The jeepney left a skid mark of about 45
meters, measured from the time its right rear wheel was
detached up to the point of collision. Delos Reyes must have
noticed the perilous condition of the jeepney from the time its
right rear wheel was detached or some 90 meters away,
considering that the road was straight and points 200 meters
north and south of the point of collision, visible and
unobstructed. Delos Reyes admitted that he was running
more or less 50 kilometers per hour at the time of the
accident. Using this speed, delos Reyes covered the distance
of 45 meters in 3.24 seconds. If We adopt the speed of 80
kilometers per hour, delos Reyes would have covered that
distance in only 2.025 seconds. Verily, he had little time to
react to the situation. To require delos Reyes to avoid the
collision is to ask too much from him. Aside from the time
element involved, there were no options available to him.
Plaintiffs tried to impress this Court that defendant de los
Reyes, could have taken either of two options: (1) to swerve
to its right (western shoulder) or (2) to swerve to its left
(eastern lane), and thus steer clear of the Mangune jeepney.
This Court does not so believe, considering the existing
exigencies of space and time.
Phil. Rabbit's evidence is convincing and unrebutted that
the Western shoulder of the road was narrow and had tall
grasses which would indicate that it was not passable. The
Rabbit bus came to a full stop only five meters from the point
of impact show that driver de los Reyes veered his Rabbit bus
to the right attempt to avoid hitting the Mangune's jeepney.
The claim loses force if one were to CONSIDER THE TIME
ELEMENT involved, for moments before that, the jeepney was
crossing that very eastern lane at a sharp angle. Under such a
situation then, for driver delos Reyes to swerve to the eastern
lane, he would run the greater risk of running smack in the
Mangune jeepney either head on or broadside.
SC find that the PROXIMATE CAUSE of the accident was the
negligence of Manalo and spouses Mangune. They all
failed to exercise the precautions that are needed precisely
pro hac vice.
NEGLIGENCE OF MANALO: was proven during the trial by the
unrebutted testimonies of Pascua, Police Investigator, Police
Corporal. Manalo's conviction for the crime of Multiple
Homicide and Multiple Serious Injuries with Damage to
Property thru Reckless Imprudence, and the application of the
doctrine of res ipsa loquitur.
NEGLIGENCE OF SPOUSES MANGUNE: was likewise proven
during the trial. To escape liability, they showed thru their
witness (Navarro, an alleged mechanic), that he periodically
checks and maintains the jeepney, the last was Dec. 23,
which included the tightening of the bolts. Defendant did not
even attempt to explain, much less establish, it to be one
caused by a caso fortuito.
The trial court was therefore right in finding that
Manalo and spouses Mangune and Carreon were
negligent.
But ruling that spouses Mangune and Carreon are jointly and
severally liable with Manalo is erroneous. Firstly, the contract
of carriage is between the carrier and the passenger, and in
the event of contractual liability, the carrier is exclusively
responsible therefore to the passenger, even if such breach
be due to the negligence of his driver (see Viluan). In
other words, the carrier can neither shift his liability on the
contract to his driver nor share it with him, for his driver's
negligence is his.
Secondly, if We make the driver jointly and severally liable
with the carrier, that would make the carrier's liability
personal instead of merely vicarious and consequently,
entitled to recover only the share which corresponds to the
driver, contradictory to the explicit provision of Article
2181.
Under Article 1764 in relation to Article 2206, the amount of
damages for the death of a passenger P3K. Was increased to
P30K (see Heirs of Amparo delos Santos, et al. v. CA).
--------------------
i. Worthiness of conveyance used
Prescillano Necesito, et al. v. Natividad Paras, et
al., G. R. No. L-10605, June 30, 1958
DOCTRINE: In the American law, the rule on the liability of
carriers for DEFECTS OF EQUIPMENT is: "The preponderance
of authority is in favor of the doctrine that a passenger is
entitled to recover damages from a carrier for an injury
resulting from a defect in an appliance purchased from a
manufacturer, whenever it appears that the defect would
have been discovered by the carrier if it had exercised the
degree of care which under the circumstances was incumbent
upon it, with regard to inspection and application of the
necessary tests. For the purposes of this doctrine, the
manufacturer is considered as being in law the agent
or servant of the carrier, as far as regards the work of
constructing the appliance. According to this theory, the
good repute of the manufacturer will not relieve the
carrier from liability".
The rationale of the carrier's liability is the fact that the
passenger has neither choice nor control over the carrier in
the selection and use of the equipment and appliances in use
by the carrier. Having no privity whatever with the
manufacturer or vendor of the defective equipment, the
passenger has no remedy against him, while the carrier
usually has. It is but logical, therefore, that the carrier, while
not in insurer of the safety of his passengers, should
nevertheless be held to answer for the flaws of his equipment
if such flaws were at all discoverable.
ISSUE: Is the carrier liable for the manufacturing defect of the
steering knuckle?
HELD: SC agrees with the trial court that it is not likely that
the bus was driven over the deeply rutted road leading
to the bridge at a speed of 50 miles per hour, as
testified for the plaintiffs. SC is forced to assume THAT THE
PROXIMATE CAUSE OF THE ACCIDENT WAS THE REDUCED
STRENGTH OF THE STEERING KNUCKLE OF THE VEHICLE
CAUSED BY DEFECTS IN CASTING IT. (Art. 1755, new Civil
Code).
The carrier is not an insurer of the passengers' safety.
His liability rests upon negligence, his failure to exercise the
"utmost" degree of diligence that the law requires, and by Art.
1756, in case of a passenger's death or injury the carrier
bears the burden of satisfying the court that he has duly
discharged the duty of prudence required.
The passenger does not know whether the carrier has himself
manufactured the means of carriage, or contracted with
someone else for its manufacture. The liability of the
manufacturer must depend on the terms of the contract
between him and the carrier, of which the passenger has no
knowledge, and over which he can have no control, while the
carrier can introduce what stipulations and take what
securities he may think proper.
For injury resulting to the carrier himself by the
manufacturer's want of care, the carrier has a remedy
against the manufacturer; but the passenger has no
remedy against the manufacturer for damage arising
from a mere breach of contract with the carrier
UNLESS, therefore, the presumed intention of the parties be
that the passenger should, in the event of his being injured by
the breach of the manufacturer's contract, of which he has no
knowledge, be without remedy, the only way in which effect
can be given to a different intention is by supposing that the
carrier is to be responsible to the passenger, and to look for
his indemnity to the person whom he selected and whose
breach of contract has caused the mischief. (29 ALR 789)
In the case now before us, the record is to the effect that
the only test applied to the steering knuckle in
question was a purely VISUAL INSPECTION every thirty
days, to see if any cracks developed. Nowhere appears that
either the manufacturer or the carrier at any time tested the
steering knuckle to ascertain whether its strength was
up to standard, or that it had no hidden flaws would
impair that strength.
AND YET the carrier must have been aware of the critical
importance of the knuckle's resistance; that its failure or
breakage would result in loss of balance and steering control
of the bus, with disastrous effects upon the passengers. NO
ARGUMENT IS REQUIRED to establish that a visual inspection
could not directly determine whether the resistance of this
critically important part was not impaired. Nor has it been
shown that the weakening of the knuckle was impossible to
detect by any known test; on the contrary, there is
testimony that it could be detected. THE PERIODICAL VISUAL
INSPECTION OF THE STEERING KNUCKLE AS PRACTICED BY
THE CARRIER'S AGENTS DID NOT MEASURE UP TO THE
REQUIRED LEGAL STANDARD OF "UTMOST DILIGENCE OF
VERY CAUTIOUS PERSONS" "as far as human care and
foresight can provide", and therefore that the knuckle's
failure cannot be considered a fortuitous event that
exempts the carrier from responsibility (Lasam vs.
Smith)
SC is of the opinion that a due regard for the carrier's
obligations toward the traveling public demands adequate
periodical tests to determine the condition and strength of
those vehicle portions the failure of which may endanger the
safe of the passengers.
RE DAMAGES: Article 2220, moral damages are recoverable
only where the defendant acted fraudulently or in bad
faith, and THERE IS NONE IN THE CASE BEFORE US. As to
EXEMPLARY DAMAGES, the carrier has not acted in a "wanton,
fraudulent, reckless, oppressive or malevolent manner" to
warrant their award.
--------------------
B. PRESUMPTION OF FAULT ON THE PART OF THE
CARRIER Article 1756
Paz Fores v. Ireneo Miranda, G. R. no. L-12163,
March 4, 1959, 105 Phil 267
DOCTRINE: A transfer contemplated by the law, if made
without the requisite approval of the Public Service
Commission, is not effective and binding in so far as the
responsibility of the grantee under the franchise in relation to
the public is concerned.
The provisions of the statute are clear and prohibit the sale,
alienation, lease, or encumbrance of the property, franchise,
certificate, privileges or rights, or any part thereof of the
owner or operator of the public service Commission. The law
was designed primarily for the protection of the public
interest; and until the approval of the public Service
Commission is obtained the vehicle is, in contemplation of
law, still under the service of the owner or operator standing
in the records of the Commission which the public has a right
to rely upon.
ISSUE: Is the approval of the Public Service Commission
necessary for the sale of a public service vehicle even
without conveying therewith the authority to operate the
same? YES.
HELD: Section 20 of the Public Service Act (CA. 146) provides:
Sec. 20. It shall be unlawful for any public service or
for the owner, lessee or operator thereof, without the
previous approval and authority of the
Commission previously had -
(g) To sell, alienate, mortgage, encumber or lease its
property, franchises, certificates, privileges, or rights, or
any part thereof; or merge or consolidate its property,
franchises, privileges or rights, or any part thereof, with
those of any other public service. The approval herein
required shall be given, after notice to the public and
after hearing the persons interested at a public hearing,
if it be shown that there are just and reasonable grounds
for making the mortgage or encumbrance, for liabilities
of more than one year maturity, or the sale, alienation,
lease, merger, or consolidation to be approved and that
the same are not detrimental to the public interest, and
in case of a sale, the date on which the same is to be
consummated shall be fixed in the order of approval:
Provided, however, That nothing herein contained shall
be construed to prevent the transaction from being
negotiated or completed before its approval or to
prevent the sale, alienation, or lease by any public
service of any of its property in the ordinary course of its
business.
The proviso that nothing therein shall be construed "to
prevent the transaction from being negotiated or complete
before its approval", means only that the sale without the
required approval is still valid and binding between the parties
(Montoya vs. Ignacio, supra).
Public Service Commission has not only general supervision
and regulation of, but also full jurisdiction and control
over all public utilities including the property, equipment
and facilities used, and the property rights and franchise
enjoyed by every individual and company engaged in the
performance of a public service in the sense this phrase is
used in the Public Service Act or Act No. 3108). Motor vehicles
used in the performance of a service, as the transportation of
freight from one point to another have been considered
public service property. (Indalecio de Torres vs. Vicente Ona).
In the case of Bachrach Motor co. vs. Zamboanga
Transportation Co, that there may be a nunc pro tunc
authorization < a court ruling "nunc pro tunc" applies
retroactively to correct an earlier ruling.> which has the effect
of having the approval retroact to the date of the transfer; but
such outcome cannot prejudice rights intervening in the
meantime. It appears that no such approval was given
by the Commission before the accident occurred.
The P10K actual damages awarded by the CFI-Manila were
reduced by the CA to only P2K, on the ground that records
failed to disclose a sufficient basis for the trial court's
appraisal, since the only evidence presented on this point
consisted of respondent's bare statement that his
expenses and loss of income amounted to P20K. It is well to
note further that respondent was a painter by profession and
a professor of Fine Arts, the amount of P2K awarded cannot be
said to be excessive (see Arts. 2224 and 2225). The
attorney's fees of P3K. Petitioner fails to note that attorney's
fees are included in the concept of actual damages and may
be awarded whenever the court deems it is just and equitable
(Art. 2208). No reason to alter these awards.
Anent the moral damages ordered to be paid to the
respondent, the same must be discarded. SC have repeatedly
ruled that moral damages are not recoverable in
damage actions predicted on a breach of the contract
of transportation, in view of Articles 2219 and 2220.
It immediately becomes apparent that:
(a) In case of breach of contract (including one of
transportation) proof of bad faith or fraud (dolus), i.e., wanton
or deliberately injurious conduct, is essential to justify an
award of moral damages; and
(b) That a breach of contract cannot be considered included
in the descriptive term "analogous cases" used in Art. 2219;
not only because Art. 2220 specifically provides for the
damages that are caused by contractual breach, but because
the definition of quasi-delict in Art. 2176 of the Code expressly
excludes the cases where there is a "preexisting contractual
relation between the parties."
The EXCEPTION TO THE BASIC RULE OF DAMAGES now under
consideration is a mishap resulting in the death of a
passenger, in which case Article 1764 makes the common
carrier expressly subject to the rule of Art. 2206, that entitles
the deceased passenger to "demand moral damages for
mental anguish by reason of the death of the deceased"
(Necesito vs. Paras).
But the exceptional rule of Art. 1764 makes it all the more
evident that where the injured passenger DOES NOT
DIE, moral damages are not recoverable unless it is proved
that the carrier was guilty of malice or bad faith. SC thinks it is
clear that the mere carelessness of the carrier's driver does
not per se constitute of justify an inference of malice or bad
faith on the part of the carrier; and in the case at bar there is
no other evidence of such malice to support the award of
moral damages by the CA.
To award moral damages for breach of contract, therefore,
without proof of bad faith or malice on the part of the
defendant, as required by Art. 220, would be to violate the
clear provisions of the law, and constitute unwarranted
judicial legislation.
The action for breach of contract imposes on the
defendant carrier a presumption of liability upon mere proof
of injury to the passenger; that latter is relieved from the
duty to established the fault of the carrier, or of his
employees, and the burden is placed on the carrier TO PROVE
THAT IT WAS DUE TO AN UNFORSEEN EVENT OR TO FORCE
MAJEURE (Cangco vs. Manila Railroad Co). Moreover, the
carrier, unlike in suits for quasi-delict, may not escape
liability by proving that it has exercised due diligence
in the selection and supervision of its employees (Art.
1759).
The DIFFERENCE in conditions, defenses and proof, as well
as the codal concept of quasi-delict as essentially extra
contractual negligence, compel us to differentiate between
action ex contractu, and actions quasi ex delicto, and prevent
us from viewing the action for breach of contract as
simultaneously embodying an action on tort.
Neither can this action be taken as one to enforce on
employee's liability under Art. 103, RPC, since the
responsibility is not alleged to be subsidiary, nor is there on
record any averment or proof that the driver of appellant was
insolvent.
It is also suggested that a carrier's violation of its
engagement to safety transport the passenger involves a
breach of the passenger's confidence, and therefore should
be regarded as a breach of contract in bad faith, justifying
recovery of moral damages under Art. 2220. THIS THEORY IS
UNTENABLE, for under it the carrier would always be deemed
in bad faith, in every case its obligation to the passenger is
infringed, and it would be never accountable for simple
negligence; while under the law (Art. 1756). the
presumption is that common carriers acted negligently (and
NOT MALICIOUSLY), and Art. 1762 speaks of negligence of the
common carrier.
ART. 1756. In case of death of or injuries to passengers,
common carriers are presumed to have been at fault or
to have acted negligently, unless they prove that they
observed extraordinary diligence as prescribed in article
1733 and 1755.
ART. 1762. The contributory negligence of the
passenger does not bar recovery of damages for his
death or injuries, if the proximate cause thereof is the
negligence of the common carrier, but the amount of
damages shall be equitably reduced.
The DISTINCTION between fraud, bad faith or malice in the
sense of deliberate or wanton wrong doing and
negligence (as mere carelessness) is too fundamental in
our law to be ignored (Arts. 1170-1172); their consequences
being clearly differentiated by the Code.
ART. 2201. In contracts and quasi-contracts, the damages for
which the obligor who acted in good faith is liable shall be
those that are the natural and probable consequences of the
breach of the obligation, and which the parties have foreseen
or could have reasonably foreseen at the time the obligation
was constituted.
In case of fraud, bad faith, malice or wanton attitude,
the obligor shall be responsible for all damages which may be
reasonably attributed to the non-performance of the
obligation.
It is TO BE PRESUMED, in the absence of statutory provision to
the contrary, that this difference was in the mind of the
lawmakers when in Art. 2220 they limited recovery of moral
damages to breaches of contract in bad faith. It is true
that negligence may be occasionally so gross as to amount
to malice; BUT that fact must be shown in evidence, and a
carrier's bad faith is not to be lightly inferred from a mere
finding that the contract was breached through negligence of
the carrier's employees.
The decision of the CA is modified by eliminating the award of
P5K by way of moral damages. In all other respects, the
judgment is AFFIRMED.
Philippine Rabbit Bus Lines, Inc., v. Intermediate
Appellante Court, G. R. No. 66102-04-August 30,
1990
i. Defense available to the carrier is the
exercise of extraordinary diligence Article
1756
ii. Liability of carrier for willful or negligent
acts of its employees Articles 1759 and 1760
Jose Cangco v. Manila Railroad Co., G. R. No.
12191, October 14, 1918, 38 Phil 768
DOCTRINE: 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.
In no case has the court ever decided that the negligence of
the defendant's servants has been held to constitute a
defense to an action for damages for breach of contract.
The contract of defendant to transport plaintiff carried with it,
by implication, the duty to carry him in safety and to provide
safe means of entering and leaving its trains (Article 1258).
That duty, being contractual, was direct and immediate, and
its non-performance could not be excused by proof that the
fault was morally imputable to defendant's servants.
The TEST by which to determine whether the passenger has
been guilty of negligence in attempting to alight from a
moving railway train, is that of ordinary or reasonable
care. It is to be considered whether an ordinarily prudent
person, of the age, sex and condition of the passenger, would
have acted as the passenger acted under the circumstances
disclosed by the evidence. This care has been defined to be,
not the care which may or should be used by the prudent man
generally, but the care which a man of ordinary prudence
would use under similar circumstances, to avoid injury.
(Thompson, Commentaries on Negligence)
In determining the question of contributory negligence the
age, sex, and physical condition of the passenger are
circumstances necessarily affecting the safety of the
passenger, and should be considered.
--------------------
Ignacio del Prado v. Manila Electric Co., G. R. No.
29462, March 7, 1929, 52 Phil 900
The MOTORMAN stated at the trial that he did not see
the plaintiff attempting to board the car; that he did
not accelerate the speed of the car as claimed by the
plaintiff's witnesses; and that he in fact knew nothing of
the incident until after the plaintiff had been hurt
and some one called to him to stop.
We are not convinced of the complete candor of this
statement, for we are unable to see how a motorman
operating this car could have failed to see a person
boarding the car under the circumstances revealed in this
case. It must be remembered that the front handpost
which, as all witness agree, was grasped by the
plaintiff in attempting to board the car, was
immediately on the left side of the motorman.
1. No obligation on the part of a street railway
company to stop cars at points other than appointed
for stoppage
There is no obligation on the part of a street railway company
to stop its cars to let on intending passengers at other points
than those appointed for stoppage. It would be impossible to
operate a system of street cars if a company engaged in this
business were required to stop any and everywhere to take on
people who are too indolent, or who imagine themselves to be
in too great a hurry, to go to the proper places for boarding
the cars.
2. Duty of the motorman of the car
Although the motorman of the car was not bound to stop to
let the passenger on, it was his duty to do no act that
would have the effect of increasing the passengers
peril while he was attempting to board the car. The
premature acceleration of the car was a breach of this
duty.
3. Nature of relation between a carrier of passengers
for hire and its patrons; Duty of the carrier
The relation between a carrier of passengers for hire and its
patrons is of a contractual nature; and a failure on the part of
the carrier to use due care in carrying its passengers safely is
a breach of duty (culpa contractual) under articles 1101,
1103, and 1104 of the Civil Code. Furthermore, the duty that
the carrier of passengers owes to its patrons extends to
persons boarding the cars as well as to those alighting
therefrom.
4. Cangco vs. Manila Railroad; Culpa Contractual
The case of Cangco vs. Manila Railroad Co. (38 Phil., 768),
supplies an instance of the violation of the duty with respect
to a passenger who was getting off of a train. In that case, the
plaintiff stepped off of a moving train, while it was slowing
down in a station, and at a time when it was too dark for him
to see clearly where he was putting his feet. The employees of
the company had carelessly left watermelons on the platform
at the place where the plaintiff alighted, with the result that
his feet slipped and he fell under the car, where his right arm
was badly injured. This court held that the railroad company
was liable for breach of positive duty (culpa contractual), and
the plaintiff was awarded damages in the amount of P2,500
for the loss of his arm. In the opinion in that case the
distinction is clearly drawn between a liability for negligence
arising from breach of contractual duty and that arising under
articles 1902 and 1903 of the Civil Code (culpa aquiliana).
5. Relevance of distinction between Culpa Contractual
and Culpa Aquiliana as to defenses available
The distinction between the two sorts of negligence is
important in this jurisdiction, for the reason that where liability
arises from a mere tort (culpa aquiliana), not involving a
breach of positive obligation, an employer, or master, may
exculpate himself, under the last paragraph of article 1903 of
the Civil Code, by proving that he had exercised due diligence
to prevent the damage; whereas this defense is not available
if the liability of the master arises from a breach of contractual
duty (culpa contractual).
6. Training of motorman irrelevant in breach of
obligation under Article 1101 of the Civil Code
Herein, the company pleaded as a special defense that it had
used all the diligence of a good father of a family to prevent
the damage suffered by del Prado; and to establish this
contention the company introduced testimony showing that
due care had been used in training and instructing the
motorman in charge of this car in his art. This proof is
irrelevant in view of the fact that the liability involved was
derived from a breach of obligation under article 1101 of the
Civil Code and related provisions.
7. Relevance of distinction between negligence arising
under Article 1902 and 1101 as to mitigation of liability
Another practical difference between liability for negligence
arising under article 1902 of the Civil Code and liability arising
from negligence in the performance of a positive duty, under
article 1101 and
related provisions of the Civil Code, is that, in dealing with the
latter form of negligence, the court is given a discretion to
mitigate liability according to the circumstances of the case
(art 1103). No such general discretion is given by the Code in
dealing with liability arising under article 1902; though
possibly the same end is reached by courts in dealing with the
latter form of liability because of the latitude of the
considerations pertinent to cases arising under this article.
8. Contributory negligence a mitigating circumstance
under Article 1103 Civil Code
As to the contributory negligence of del Prado, as in Rakes vs.
Atlantic, Gulf and Pacific Co. (7 Phil., 359), it is treated as a
mitigating circumstance under article 1103 of the Civil Code.
Herein, the negligence of del Prado was contributory to the
accident and must be considered as a mitigating
circumstance.
9. Proximate cause of the accident
Del Prados negligence in attempting to board the moving car
was not the proximate cause of the injury. The direct and
proximate cause of the injury was the act of Meralcos
motorman in putting on the power prematurely. A person
boarding a moving car must be taken to assume the risk of
injury from boarding the car under the conditions open to his
view, but he cannot fairly be held to assume the risk that the
motorman, having the situation in view, will increase his peril
by accelerating the speed of the car before he is planted
safely on the platform. Again, the situation is one where the
negligent act of the companys servant succeeded the
negligent act of the passenger, and the negligence of the
company must be considered the
proximate cause of the injury.
10. Rule analogous to the doctrine of the last clear
chance
The rule applicable seems to be analogous to, if not identical
with that which is sometimes referred to as the doctrine of
the last clear chance. In accordance with this doctrine, the
contributory negligence of the party injured will not defeat the
action if it be shown that the defendant might, by the exercise
of reasonable care and prudence, have avoided the
consequences of the negligence of the injured party.
11. Award of damage
With respect to the effect of this injury upon del Prados
earning power, although he lost his foot, he is able to use an
artificial member without great inconvenience and his earning
capacity has probably not been reduced by more than 30%. In
view of the precedents found in the Courts decisions with
respect to the damages that ought to be awarded for the loss
of a limb, and more particularly Rakes vs. Atlantic, Gulf and
Pacific Co. (7 Phil., 359); Cangco vs. Manila Railroad Co. (38
Phil., 768); and Borromeo vs. Manila Electric Railroad and
Light Co. (44 Phil., 165), and in view of all the circumstances
connected with the case, the Court is of the opinion that del
Prado will be adequately compensated by an award of P2,500.
Antonia Maranan v. Pascual Perez, et al., G. R. No.
22272, June 6, 1967
1. Gilaco case not controlling; Killing made outside
scope and course of duty of guilty employee
In Gillaco vs. Manila Railroad Co., 97 Phil. 884, it was held
that the carrier is under no absolute liability for assaults of its
employees upon the passengers. The attendant facts and
controlling law of that case and the present one are very
different however. In the Gillaco case, the passenger was
killed outside the scope and the course of duty of the guilty
employee. Herein, the killing was perpetrated by the driver of
the very cab transporting the passenger, in whose hands the
carrier had entrusted the duty of executing the contract of
carriage. In other words, unlike the Gillaco case, the killing of
the passenger here took place in the course of duty of the
guilty employee and when the employee was acting within the
scope of his duties.
2. Gilaco case not controlling; Case decided under
provisions of the Civil Code of 1889
Moreover, the Gillaco case was decided under the provisions
of the Civil Code of 1889 which, unlike the present Civil Code,
did not impose upon common carriers absolute liability for the
safety of passengers against willful assaults or negligent acts
committed by their employees. The death of the passenger in
the Gillaco case was truly a fortuitous event which exempted
the carrier from liability. It is true that Art. 1105 of the old Civil
Code on fortuitous events has been substantially reproduced
in Article 1174 of the Civil Code of the Philippines but both
articles clearly remove from their exempting effect the case
where the law expressly provides for liability in spite of the
occurrence of force majeure. And herein significantly lies the
statutory difference between the old and present Civil Codes,
in the backdrop of the factual situation of the present case,
which further accounts for a different result in the Gillaco
case.
3. New Civil Code expressly makes common carrier
liable for intentional assaults committed by its
employees upon its passengers
Unlike the old Civil Code, the new Civil Code of the Philippines
expressly makes the common carrier liable for intentional
assaults committed by its employees upon its
passengers, by the wording of Article 1759 which
categorically states that Common carriers are liable for
the death of or injuries to passengers although the
negligence or willful acts of the formers employees,
although such employees may have acted beyond the
scope of their authority or in violation of the orders of
the common carriers.
4. Source of provisions on Common Carriers; Basis of
carriers liability for assaults
The Civil Code provisions on the subject of Common Carriers
are new and were taken from Anglo-American Law. There, the
basis of the carriers liability for assaults on passengers
committed by its drivers rests either on (1) the doctrine of
respondent superior or (2) the principle that it is the carriers
implied duty to transport the passenger safely.
4. Doctrine of respondent superior
Under the DOCTRINE OF RESPONDENT SUPERIOR, which
is the minority view, the carrier is liable only when the
act of the employee is within the scope of his authority
and duty. It is not sufficient that the act be within the
course of employment only. Principle of Carriers implied
duty to transport the passenger safely Under the principle
that it is the carriers implied duty to transport the passenger
safely, upheld by the majority and also by the later cases, it is
enough that the assault happens within the course of the
employees duty. It is no defense for the carrier that the act
was done in excess of authority or in disobedience of the
carriers orders. The carriers liability here is absolute in the
sense that it practically secures the passengers from assaults
committed by its own employees.
7. Article 1759 NCC follows the rule based on the view
that it is carriers implied duty to transport the
passenger safely; Reasons
As can be gleaned from Article 1759, the Civil Code of the
Philippines evidently follows the rule based on the view that it
is carriers implied duty to transport the passenger safely. At
least three very cogent reasons underlie this rule: (1) the
special undertaking of the carrier requires that it
furnish its passenger that full measure of protection
afforded by the exercise of the high degree of care
prescribed by the law, inter alia from violence and
insults at the hands of strangers and other
passengers, but above all, from the acts of the
carriers own servants charged with the passengers
safety; (2) said liability of the carrier for the servants
violation of duty to passengers, is the result of the
formers confiding in the servants hands the
performance of his contract to safely transport the
passenger, delegating therewith the duty of protecting
the passenger with the utmost care prescribed by law;
and (3) as between the carrier and the passenger, the
former must bear the risk of wrongful acts or
negligence of the carriers employees against
passengers, since it, and not the passengers, has
power to select and remove them.
8. Carriers strict obligation to select its drivers
It is the carriers strict obligation to select its drivers and
similar employees with due regard not only to their technical
competence and physical ability, but also, no less important,
to their total personality, including their patterns of behavior,
moral fibers, and social attitude.
9. Action predicated on breach of contract of carriage
where the cab driver was not a party thereto
The dismissal of the claim against the driver was correct.
Maranans action was predicated on breach of contract of
carriage and the cab driver was not a party thereto. His civil
liability is covered in the criminal case wherein he was
convicted by final judgment.
10. Award of compensatory damages
In connection with the award of damages, the lower court
granted only P3,000, which is the minimum compensatory
damages amount recoverable under Article 1764 in
connection with Article 2206 of the Civil Code when a breach
of contract results in the passengers death. As has been the
policy followed by the Court, this minimal award should be
increased to P6,000.
11. No award of actual damages
As to other alleged actual damages, the lower courts finding
that Maranans evidence thereon was not convincing and
should not be disturbed.
12. Award of moral damages
Articles 2206 and 1764 award moral damages in addition to
compensatory damages, to the parents of the passenger
killed to compensate for the mental anguish they suffered. A
claim therefor having been properly made, it becomes the
courts duty to award moral damages. Maranan demands
P5,000 as moral damages; however, in the circumstances, the
Court considers P3,000 moral damages, in addition to the
P6,000 compensatory damages as sufficient.
--------------------
i. Effect of willful acts or negligence of other
passengers or strangers Article 1763
Jose Pilapil v. Court of Appeals, et al., G. R. no.
52159, December 22, 1989
1. Diligence required of a common carrier, and
presumption of negligence; Articles 1733 and 1755
NCC
Under Article 1733 of the Civil Code, common carriers are
required to observe extraordinary diligence for the safety of
the passenger transported by them, according to all the
circumstances of each case. The requirement of extraordinary
diligence imposed upon common carriers is restated in Article
1755: A common carrier is bound to carry the passengers
safely as far as human care and foresight can provide, using
the utmost diligence of very cautious persons, with due regard
for all the circumstances. Further, in case of death of or
injuries to passengers, the law presumes said common
carriers to be at fault or to have acted negligently.
2. Article 1755 NCC
Article 1755 of the Civil Code qualifies the duty of
extraordinary care, vigilance and precaution in the carriage of
passengers by common carriers to only such as human care
and foresight can provide. What constitutes compliance with
said duty is adjudged with due regard to all the
circumstances.
3. Article 1756 NCC
Article 1756 of the Civil Code, in creating a presumption of
fault or negligence on the part of the common carrier when its
passenger is injured, merely relieves the latter, for the time
being, from introducing evidence to fasten the negligence on
the former, because the presumption stands in the place of
evidence. Being a mere presumption, however, the same is
rebuttable by proof that the common carrier had exercised
extraordinary diligence as required by law in the performance
of its contractual obligation, or that the injury suffered by the
passenger was solely due to a fortuitous event.
4. Intention of the Code
Inferring from the law, the intention of the Code Commission
and Congress was to curb the recklessness of drivers and
operators of common carriers in the conduct of their business.
5. Common carrier not an insurer of all risks to
passenger and goods
In consideration of the right granted to it by the public to
engage in the business of transporting passengers and goods,
a common carrier does not give its consent to become an
insurer of any and all risks to passengers and goods. It merely
undertakes to perform certain duties to the public as the law
imposes, and holds itself liable for any breach thereof. While
the law requires the highest degree of diligence from common
carriers in the safe transport of their passengers and creates a
presumption of negligence against them, it does not,
however, make the carrier an insurer of the absolute safety of
its passengers. Neither the law nor the nature of the business
of a transportation company makes it an insurer of the
passengers safety, but that its liability for personal injuries
sustained by its passenger rests upon its negligence, its
failure to exercise the degree of diligence that the law
requires
6. Presumption of fault or negligence merely a
disputable presumption
The presumption of fault or negligence against the carrier is
only a disputable presumption. It gives in where contrary facts
are established proving either that the carrier had exercised
the degree of diligence required by law or the injury suffered
by the passenger was due to a fortuitous event. Herein, where
the injury sustained by Pilapil was in no way due to any defect
in the means of transport or in the method of transporting or
to the negligent or willful acts of Alatcos employees, and
therefore involving no issue of negligence in its duty to
provide safe and suitable cars as well as competent
employees, with the injury arising wholly from causes created
by strangers over which the carrier had no control or even
knowledge or could not have prevented, the presumption is
rebutted and the carrier is not and ought not to be held liable.
7. Standard of extraordinary diligence does not
determine liability when acts of strangers directly
caused the injury
While as a general rule, common carriers are bound to
exercise extraordinary diligence in the safe transport
of their passengers, it would seem that this is not the
standard by which its liability is to be determined
when intervening acts of strangers directly cause the
injury, while the contract of carriage exists.
8. Article 1763 NCC
Article 1763 provides that a common carrier is responsible
for injuries suffered by a passenger on account of the willful
acts or negligence of other passengers or of strangers, if the
common carriers employees through the exercise of the
diligence of a good father of a family could have prevented or
stopped the act or omission.
9. Article 1763 explained
A tort committed by a stranger which causes injury to
a passenger does not accord the latter a cause of
action against the carrier. The negligence for which a
common carrier is held responsible is the negligent omission
by the carriers employees to prevent the tort from being
committed when the same could have been foreseen and
prevented by them. Further, under the same provision, it is to
be noted that when the violation of the contract is due to the
willful acts of strangers the degree of care essential to
be exercised by the common carrier for the protection
of its passenger is only that of a good father of a
family.
10. Rule of ordinary care and prudence is not exacting
to require exercise of doubtful or unreasonable
precautions
Although the suggested precaution, i.e. mesh-work grills
covering windows of the bus, could have prevented the injury
complained of, the rule of ordinary care and prudence is not
so exacting as to require one charged with its exercise to take
doubtful or unreasonable precautions to guard against
unlawful acts of strangers. The carrier is not charged with
the duty of providing or maintaining vehicles as to
absolutely prevent any and all injuries to passengers.
Where the carrier uses cars of the most approved type,
in general use by others engaged in the same
occupation, and exercises a high degree of care in
maintaining them in suitable condition, the carrier
cannot be charged with negligence in this respect.
11. Congress role
Herein, Pilapil contends that it is to the greater interest of the
State if carriers were made liable for such stone-throwing
incidents rather than have the bus riding public lose
confidence in the transportation system. Sad to say, the court
is not in a position to so hold. Such a policy would be better
left to the consideration of Congress which is empowered to
enact laws to protect the public from the increasing risks and
dangers of lawlessness in society.
--------------------
Salud Villanueva vda. De Bataclan v. Mariano
Medina, G. R. No. L-10126; October 22, 1957, 102
Phil 181
Our new Civil Code amply provides for the responsibility of
common carrier to its passengers and their goods.
We agree with the trial court that the case involves a breach
of contract of transportation for hire, the Medina
Transportation having undertaken to carry Bataclan safely to
his destination, Pasay City. We also agree with the trial court
that there was negligence on the part of the defendant,
through his agent, the driver Saylon. There is evidence to
show that at the time of the blow out, the bus was speeding,
as testified to by one of the passengers, and as shown by the
fact that according to the testimony of the witnesses,
including that of the defense, from the point where one of the
front tires burst up to the canal where the bus overturned
after zig-zaging, there was a distance of about 150 meters.
The chauffeur, after the blow-out, must have applied the
brakes in order to stop the bus, but because of the velocity at
which the bus must have been running, its momentum carried
it over a distance of 150 meters before it fell into the canal
and turned turtle.
There is no question that under the circumstances, the
defendant carrier is liable. The only question is to what
degree. The trial court was of the opinion that the proximate
cause of the death of Bataclan was not the overturning of the
bus, but rather, the fire that burned the bus, including himself
and his co-passengers who were unable to leave it; that at the
time the fire started, Bataclan, though he must have suffered
physical injuries, perhaps serious, was still alive, and so
damages were awarded, not for his death, but for the physical
injuries suffered by him. We disagree. A satisfactory definition
of proximate cause is found in Volume 38, pages 695-696 of
American jurisprudence, cited by plaintiffs-appellants in their
brief. It is as follows:
. . . 'that cause, which, in natural and continuous sequence,
unbroken by any efficient intervening cause, produces the
injury, and without which the result would not have occurred.'
And more comprehensively, 'the proximate legal cause is that
acting first and producing the injury, either immediately or by
setting other events in motion, all constituting a natural and
continuous chain of events, each having a close causal
connection with its immediate predecessor, the final event in
the chain immediately effecting the injury as a natural and
probable result of the cause which first acted, under such
circumstances that the person responsible for the first event
should, as an ordinary prudent and intelligent person, have
reasonable ground to expect at the moment of his act or
default that an injury to some person might probably result
therefrom.
It may be that ordinarily, when a passenger bus overturns,
and pins down a passenger, merely causing him physical
injuries, if through some event, unexpected and
extraordinary, the overturned bus is set on fire, say, by
lightning, or if some highwaymen after looting the vehicle sets
it on fire, and the passenger is burned to death, one might still
contend that the proximate cause of his death was the fire
and not the overturning of the vehicle. But in the present case
under the circumstances obtaining in the same, we do not
hesitate to hold that the proximate cause was the overturning
of the bus, this for the reason that when the vehicle turned
not only on its side but completely on its back, the leaking of
the gasoline from the tank was not unnatural or unexpected;
that the coming of the men with a lighted torch was in
response to the call for help, made not only by the
passengers, but most probably, by the driver and the
conductor themselves, and that because it was dark (about
2:30 in the morning), the rescuers had to carry a light with
them, and coming as they did from a rural area where
lanterns and flashlights were not available; and what was
more natural than that said rescuers should innocently
approach the vehicle to extend the aid and effect the rescue
requested from them. In other words, the coming of the men
with a torch was to be expected and was a natural sequence
of the overturning of the bus, the trapping of some of its
passengers and the call for outside help. What is more, the
burning of the bus can also in part be attributed to the
negligence of the carrier, through is driver and its conductor.
According to the witness, the driver and the conductor were
on the road walking back and forth. They, or at least, the
driver should and must have known that in the position in
which the overturned bus was, gasoline could and must have
leaked from the gasoline tank and soaked the area in and
around the bus, this aside from the fact that gasoline when
spilled, specially over a large area, can be smelt and directed
even from a distance, and yet neither the driver nor the
conductor would appear to have cautioned or taken steps to
warn the rescuers not to bring the lighted torch too near the
bus. Said negligence on the part of the agents of the carrier
come under the codal provisions above-reproduced,
particularly, Articles 1733, 1759 and 1763.
As regard the damages to which plaintiffs are entitled,
considering the earning capacity of the deceased, as well as
the other elements entering into a damage award, we are
satisfied that the amount of SIX THOUSAND (P6,000) PESOS
would constitute satisfactory compensation, this to include
compensatory, moral, and other damages. We also believe
that plaintiffs are entitled to attorney's fees, and assessing
the legal services rendered by plaintiffs' attorneys not only in
the trial court, but also in the course of the appeal, and not
losing sight of the able briefs prepared by them, the
attorney's fees may well be fixed at EIGHT HUNDRED (P800)
PESOS for the loss of merchandise carried by the deceased in
the bus, is adequate and will not be disturbed.
There is one phase of this case which disturbs if it does not
shock us. According to the evidence, one of the passengers
who, because of the injuries suffered by her, was hospitalized,
and while in the hospital, she was visited by the defendant
Mariano Medina, and in the course of his visit, she overheard
him speaking to one of his bus inspectors, telling said
inspector to have the tires of the bus changed immediately
because they were already old, and that as a matter of fact,
he had been telling the driver to change the said tires, but
that the driver did not follow his instructions. If this be true, it
goes to prove that the driver had not been diligent and had
not taken the necessary precautions to insure the safety of his
passengers. Had he changed the tires, specially those in front,
with new ones, as he had been instructed to do, probably,
despite his speeding, as we have already stated, the blow out
would not have occurred. All in all, there is reason to believe
that the driver operated and drove his vehicle negligently,
resulting in the death of four of his passengers, physical
injuries to others, and the complete loss and destruction of
their goods, and yet the criminal case against him, on motion
of the fiscal and with his consent, was provisionally dismissed,
because according to the fiscal, the witnesses on whose
testimony he was banking to support the complaint, either
failed or appear or were reluctant to testify. But the record of
the case before us shows the several witnesses, passengers,
in that bus, willingly and unhesitatingly testified in court to
the effect of the said driver was negligent. In the public
interest the prosecution of said erring driver should be
pursued, this, not only as a matter of justice, but for the
promotion of the safety of passengers on public utility buses.
Let a copy of this decision be furnished the Department of
Justice and the Provincial Fiscal of Cavite.
--------------------
c. Rule in case of gratuitous carriage Article 1758
d. Duty of passenger
i. Duty to observe due diligence Article 1763
ii. Contributory negligence of the passenger
Article 1762
Cesar L. Isaac, v. A. L. Ammen Transportation Co.,
G. R. No. L-9671, August 23, 1957
DOCTRINE: Principles governing the liability of a
common carrier: (1) the liability of a carrier is contractual
and arises upon breach of its obligation. There is breach if it
fails to exert extraordinary diligence according to all
circumstances of each case; (2) a carrier is obliged to carry its
passenger with the utmost diligence of a very cautious
person, having due regard for all the circumstances; (3) a
carrier is presumed to be at fault or to have acted negligently
in case of death of, or injury to, passengers, it being its duty
to prove that it exercised extraordinary diligence; and (4) THE
CARRIER IS NOT AN INSURER AGAINST ALL RISKS OF TRAVEL.
ISSUE: Has defendant observed extraordinary diligence or
the utmost diligence of every cautious person, having due
regard for all circumstances, in avoiding the collision which
resulted in the injury caused to the plaintiff?
HELD: Code Commission said:
This extraordinary diligence required of common carriers is
calculated to protect the passengers from the tragic mishaps
that frequently occur in connection with rapid modern
transportation. This high standard of care is imperatively
demanded by the precariousness of human life and by the
consideration that every person must in every way be
safeguarded against all injury.
It appears that the Bus, immediately prior to the collision,
was running at a moderate speed because it had just stopped
at the school zone in Polangui, Albay. The pick-up car was at
full speed and was running outside of its proper lane. The
driver of the bus, upon seeing the manner in which the pick-
up was then running, swerved the bus to the very extreme
right of the road until its front and rear wheels have gone over
the pile of stones or gravel situated on the rampart of the
road. Said driver could not move the bus farther right and run
over a greater portion of the pile, the peak of which was about
3 ft high, without endangering the safety of his passengers.
And notwithstanding all these efforts, the rear left side of the
bus was hit by the pick-up car.
According to appellant, the act of the driver of the bus in
squeezing his way through between the oncoming pick-up and
the pile of gravel under the circumstances was considered
negligent.
This matter is one of credibility and evaluation of the
evidence. The trial court has already spoken on this matter; a
matter of appreciation of the situation on the part of
the driver.
While the position taken by appellant appeals more to the
sense of caution that one should observe in a given situation
to avoid an accident or mishap, such however cannot always
be expected from one who is placed suddenly in a
predicament where he is not given enough time to take the
course of action as he should under ordinary circumstances.
Authorities abound where failure to observe the same degree
of care that as ordinary prudent man would exercise under
ordinary circumstances when confronted with a sadden
emergency was held to be warranted and a justification to
exempt the carrier from liability. CONSIDERING ALL THE
CIRCUMSTANCES, we are persuaded to conclude that the
driver of the bus has done what a prudent man could have
done to avoid the collision and in our opinion this relieves
appellee from legibility under our law.
A circumstances which militates against the stand of
appellant is that he seated himself on the left side resting
his left arm on the window sill but with his left elbow
outside the window. It is for this reason that the collision
resulted in the severance of said left arm from the body of
appellant thus doing him a great damage. It is therefore
apparent that appellant is guilty of contributory
negligence. Had he not placed his left arm on the window sill
with a portion thereof protruding outside, perhaps THE
INJURY WOULD HAVE BEEN AVOIDED AS IS THE CASE WITH
THE OTHER PASSENGER. It is to be noted that appellant was
the only victim of the collision.
It is negligence per se for a passenger on a railroad
voluntarily or inadvertently to protrude his arm, hand, elbow,
or any other part of his body through the window of a moving
car beyond the outer edge of the window or outer surface of
the car, so as to come in contact with objects or obstacles
near the track, and that no recovery can be had for an injury
which but for such negligence would not have been sustained.
Plaintiff, (passenger) while riding on an interurban car, to flick
the ashes from his cigar, thrust his hand over the guard rail a
sufficient distance beyond the side line of the car to bring it in
contact with the trunk of a tree standing beside the track; the
force of the blow breaking his wrist. Held, that he was guilty of
contributory negligence as a matter of law. (Malakia vs. Rhode
Island Co.,)
--------------------
e. Contract for the carriage of passengers
luggage Article 1754, Civil Code
In the case of carriage by water, Article 703 Code of
Commerce in relation to Article 1754, Civil code
 ARTICLE 703. A passenger shall be considered a shipper
insofar as the goods he carries on board are concerned, and
the captain shall not be responsible for what the former may
keep under his immediate and special custody, unless the
damage arises from an act of the captain or of the crew.
i. Luggage in the custody of the carrier (checked in
luggage) Rules applicable to the carriage of
goods are applied
ii. Luggage in the custody of the passenger (hand-
carried luggage) Article 1998
Art. 1998. The deposit of effects made by the travellers
in hotels or inns shall also be regarded as necessary. The
keepers of hotels or inns shall be responsible for them as
depositaries, provided that notice was given to them, or to
their employees, of the effects brought by the guests and
that, on the part of the latter, they take the precautions which
said hotel-keepers or their substitutes advised relative to the
care and vigilance of their effects. (1783)
f. Damages Article 1754
Paz Fores v. Ireneo Miranda, G. R. No. L-12163,
March 4, 1959, 105 Phil 267
Philippine Rabbit Bus Lines, Inc., et al. v. Patrocinio
Esguerra, et al., G. R. No. 31420, October 23, 1982,
203 Phil 107
In this petition, PHILIPPINE RABBIT BUS LINES, INC . and
Nicasio de los Reyes contend that the award of P
5,000.00 moral damages is contrary to law and violates
the prevailing jurisprudence; that the award of P
2,000.00 attorney's fees is bereft of legal and factual
basis; that moral damages are not allowable against
the carrier, if ex-contracto, except when the mishap
results in death and where it is proved that the carrier
was guilty of fraud or bad faith even if death did not
result; that as passenger Esguerra did not die and no fraud
or bad faith had been imputed, much less proved, against the
carrier, they cannot be adjudged to pay moral damages.
Further, petitioners claim that there is no evidence adduced
by passenger Esguerra showing actual proof of expenses for
attorney's fees.
The contention of petitioners with respect to the award of
moral damages is meritorious. This Court has repeatedly held
that MORAL DAMAGES are not recoverable in actions
for damages predicated on a breach of the contract of
transportation in view of the provisions of Articles
2219 and 2220 of the New Civil Code. The EXCEPTIONS
are (1) where the mishap results in the death of a
passenger, AND (2) where it is proved that the carrier
was guilty of fraud or bad faith, even if death does not
result.
The Court of Appeals found that the two vehicles sideswiped
each other at the middle of the road. In other words, both
vehicles were in their respective lanes and that they did not
invade the lane of the other. It cannot be said therefore that
there was fraud or bad faith on the part of the carrier's driver.
This being the case, no moral damages are recoverable.
--------------------
Sulpicio Lines, Inc. v. Court of Appeals, G. R. No.
113578, July 14, 1995
1. Duty of common carrier
A common carrier is obliged to transport its passengers to
their destinations with the utmost diligence of a very cautious
person (Laguna Tayabas Bus Co. v. Tiongson, 16 SCRA 940
[1966]). Herein, the trial court found that Sulpicio Lines failed
to exercise the extraordinary diligence required of a common
carrier, which resulted in the sinking of the M/V Dona Marilyn.
2. Facts; Storm signal warnings involving Typhoon
Unsang
Typhoon Unsang entered the Philippine Area of Responsibility
on 21 October 1988. The rain in Metro Manila started after
lunch of 23 October 1988, and at about 5:00 p.m. Public
Storm signal 1 was hoisted over Metro Manila, signal 2 in
Leyte and signal 3 in Samar. By 10:00 a.m. of 23 October
1988, Public Storm signal 1 was already hoisted over the
province of Leyte, which is the destination of M/V Dona
Marilyn. This was raised to signal 2 at 4:00 p.m. and signal 3
at 10:00 p.m. on the same date. The following day, 24
October 1988, at 4:00 a.m. and 10:00 a.m., Storm signal 3
remained hoisted in Leyte. At 4 p.m. on 24 October 1988,
Storm signal 3 remained hoisted in Leyte but was reduced to
Storm signal 2.
3. Facts; Meaning of storm signal warnings
Signal 1 has maximum winds at 60 kph within 36 hours; signal
2 has maximum winds of from 60 kph to 100 kph within a
period of 24 hours; and signal 3 has maximum winds of 100
kph and above within a period of 12 hours.
4. Facts; Frequency of issuance of storm signal
warnings
Warnings of the storm signal are issued by PAG-ASA thru
DZZA, Office of Civil Defense, Philippine Navy, Coast Guard,
Radio Stations, and other offices, every 6 hours as soon as a
cyclone enters the Philippine Area of responsibility.
5. Facts; Position of the vessel vis--vis typhoon on 24
October 1988
At 10:30 a.m. on 24 October 1988, the vessel was estimated
to be between Mindoro and Masbate, and the center of the
typhoon then was around 130 degrees longitude with
maximum winds of 65 kph, with a radius of rough to
phenomenal sea at that time of 450 kms. North and 350 kms.
elsewhere; 350 kms. North center and all throughout the rest.
6. Facts; Crew of M/V Dona Marilyn took calculated
risk, and later assumed greater risk
The crew of the vessel M/V Dona Marilyn took a calculated risk
when it proceeded despite the typhoon brewing somewhere in
the general direction to which the vessel was going. The crew
assumed a greater risk when, instead of dropping anchor in or
at the periphery of the Port of Calapan, or returning to the
port of Manila which is nearer, proceeded on its voyage on the
assumption that it will be able to beat and race with the
typhoon and reach its destination before it (Unsang) passes.
7. Findings of trial court entitled to great weight, not
disturbed except for cogent reasons
Generally, the findings of fact of the trial court are entitled to
great weight and not disturbed except for cogent reasons
(Gatmaitan v. Court of Appeals, 200 SCRA 37(1991]). One of
the accepted reasons is when the findings of fact are not
supported by the evidence (Sandoval Shipyard, Inc. v. Clave,
94 SCRA 472 [1979]).
8. Actual or compensatory damages must be proved to
allow recovery
ACTUAL OR COMPENSATORY DAMAGES, to be recovered,
must be proved; otherwise, if the proof is flimsy, no damages
will be awarded (Dichoso v. Court of Appeals, 192 SCRA 169
(1990). Herein, the trial court merely mentioned the fact of
the loss and the value of the contents of the pieces of
baggage without stating the evidence on which it based its
findings. There is no showing that the value of the contents of
the lost pieces of baggage was based on the bill of lading or
was previously declared by Tito D. Tabuquilde before he
boarded the ship. Hence, there can be no basis to award
actual damages in the amount of P27,850.00.
9. Deaths caused by crime as quasi delict entitled to
actual and compensatory damages without need of
proof; Article 2206 NCC
Under Article 2206 of the Civil Code of the Philippines, only
deaths caused by a crime as quasi delict are entitled to actual
and compensatory damages without the need of proof of the
said damages. Said Article provides that the amount of
damages for death caused by a crime or quasi delict shall be
at least Three Thousand Pesos, even though there may have
been mitigating circumstances. Herein, the trial court
awarded an indemnity of P30,000.00 for the death of the
daughter of Tabuquilde. The award of damages under Article
2206 has been increased to P50,000.00 (People v. Flores, 237
SCRA 653 [1994]).
10. Death caused by breach of contract of
transportation entitled to actual and compensatory
damages; Article 1764
Deducing alone from Article 2206 of the Civil Code, one can
conclude that damages arising from culpa contractual are not
compensable without proof of special damages sustained by
the heirs of the victim. The Civil Code, however, in Article
1764 thereof, expressly makes Article 2206 applicable
to the death of a passenger caused by the breach of
contract by a common carrier. Accordingly, a common
carrier is liable for actual or compensatory damages under
Article 2206 in relation to Article 1764 of the Civil Code for
deaths of its passengers caused by the breach of the contract
of transportation.
11. Moral damages; when recoverable in culpa
contractual
With respect to the award of moral damages, the general rule
is that said damages are not recoverable in culpa contractual
except when the presence of bad faith was proven. However,
in breach of contract of carriage, moral damages may be
recovered when it results in the death of a passenger.
12. Exemplary damages
With respect to the award of exemplary damages, Article 2232
of the Civil Code of the Philippines gives the Court the
discretion to grant said damages in breach of contract when
the defendant acted in a wanton, fraudulent and reckless
manner (Air France v. Carrascoso, 18 SCRA 155 [1966]).
13. Institution of exemplary damages for safe and
reliable carriage of people and goods by sea; Mecenas
vs. CA
In the case of Mecenas v. Court of Appeals, 180 SCRA 83
(1989), the Court ruled that the Court will take judicial notice
of the dreadful regularity with which grievous maritime
disasters occur in our waters with massive loss of life. The
bulk of our population is too poor to afford domestic air
transportation. So it is that notwithstanding the frequent
sinking of passenger vessels in our waters, crowds of people
continue to travel by sea. This Court is prepared to use the
instruments given to it by the law for securing the ends of law
and public policy. One of those instruments is the institution of
exemplary damages; one of those ends, of special importance
in an archipelagic state like the Philippines, is the safe and
reliable carriage of people and goods by sea.
--------------------
Air France v. Rafael Carrascoso, et al., G. R. No. L-
21438, September 28, 1966
DOCTRINE: It is true that there is no specific mention of the
term bad faith in the complaint. But, the inference of bad
faith is there, it may be drawn from the facts and
circumstances set forth therein.
Passengers do not contract merely for transportation. They
have a right to be treated by the carrier's employees
with kindness, respect, courtesy and due
consideration. They are entitled to be protected against
personal misconduct, injurious language, indignities and
abuses from such employees. So it is, that any rule or
discourteous conduct on the part of employees towards a
passenger gives the latter an action for damages against the
carrier.
ISSUE: Was CA correct to award moral damages? YES.
HELD: CA cannot understand how a reputable firm like
defendant airplane company could have the indiscretion to
give out tickets it never meant to honor at all. It received the
corresponding amount in payment of first-class tickets and yet
it allowed the passenger to be at the mercy of its employees.
It is more in keeping with the ordinary course of business that
the company should know whether or not the tickets it issues
are to be honored or not. The trial court similarly disposed of
petitioner's contention.
If only to achieve stability in the relations between passenger
and air carrier, adherence to the ticket so issued is desirable.
Such is the case here. The lower courts refused to believe the
oral evidence intended to defeat the covenants in the ticket.
The foregoing are the considerations which point to the
conclusion that there are facts upon which the Court of
Appeals predicated the finding that respondent Carrascoso
had a first class ticket and was entitled to a first class seat.
Nor does SC subscribes to petitioner's accusation that
respondent Carrascoso "surreptitiously took a first class seat
to provoke an issue".
RE MORAL DAMAGE:
That during the first two legs of the trip from Hongkong to
Saigon and from Saigon to Bangkok, defendant furnished to
the plaintiff First Class accommodation but only after
protestations, arguments and/or insistence were made by the
plaintiff with defendant's employees.
Defendant failed to provide First Class passage, but instead
furnished plaintiff only Tourist Class accommodations. The
plaintiff has been compelled by defendant's employees to
leave the First Class accommodation after he was already
seated. Consequently, the plaintiff, desiring no repetition of
the inconvenience and embarrassments brought by
defendant's breach of contract was forced to take a Pan
American plane on his return trip from Madrid to Manila.
As a result of defendant's failure to furnish First Class
accommodations, plaintiff suffered inconveniences,
embarrassments, and humiliations, causing plaintiff
mental anguish, serious anxiety, wounded feelings, social
humiliation, and the like injury, resulting in moral damages
in the amount of P30K.
The foregoing substantially aver: First, there was a contract to
furnish plaintiff a first class passage; Second, That said
contract was breached when petitioner failed to
furnish first class transportation at Bangkok; and Third,
that there was bad faith when petitioner's employee
compelled Carrascoso to leave his first class
accommodation berth "after he was already, seated." and
to take a seat in the tourist class, by reason of which he
suffered inconvenience, embarrassments and humiliations,
thereby causing him mental anguish, serious anxiety,
wounded feelings and social humiliation, resulting in
moral damages.
The contract was averred to establish the relation between
the parties. But the stress of the action is put on
wrongful expulsion.
Deficiency in the complaint, if any, was cured by the
evidence. An amendment thereof to conform to the
evidence is not even required.
RE QUESTION OF BAD FAITH: The plaintiff was forced out of
his seat in the first class compartment of the plane belonging
to the defendant Air France while at Bangkok, and was
transferred to the tourist class not only without his consent
but against his will, has been sufficiently established by
plaintiff in his testimony before the court, corroborated by the
corresponding entry made by the purser of the plane in
his notebook.
No one on behalf of defendant ever contradicted or denied
this evidence for the plaintiff. It could have been easy for
defendant to present its manager at Bangkok to testify at the
trial of the case, or yet to secure his disposition; but
defendant did neither.
Instead of explaining to the white man the improvidence
committed by defendant's employees, the manager adopted
the more drastic step of ousting the plaintiff who was then
safely ensconsced in his rightful seat.
If there was a justified reason for the action of the defendant's
Manager in Bangkok, the defendant could have easily proven
it by having taken the testimony of the said Manager by
deposition, but defendant did not do so; the presumption
is that evidence willfully suppressed would be adverse
if produced; the Court is constrained to find that the
Manager of the defendant airline in Bangkok not merely asked
but threatened the plaintiff to throw him out of the plane.
The manager not only prevented Carrascoso from enjoying his
right to a first class seat; worse, he imposed his arbitrary will;
he forcibly ejected him from his seat, made him suffer the
humiliation of having to go to the tourist class compartment -
just to give way to another passenger whose right thereto has
not been established. Certainly, THIS IS BAD FAITH. For,
"bad faith" contemplates a "state of mind affirmatively
operating with furtive design or with some motive of self-
interest or will or for ulterior purpose."
There is the express finding of bad faith in the judgment of
the CFI.
defendant violated its contract of transportation with
plaintiff in bad faith, with the aggravating
circumstances that defendant's Manager in Bangkok
went to the extent of threatening the plaintiff in the
presence of many passengers to have him thrown out of
the airplane to give the "first class" seat that he was
occupying to a white man.
RE RESPONSIBILITY OF AN EMPLOYER FOR THE TORTIOUS ACT
OF ITS EMPLOYEES: For the willful malevolent act of
petitioner's manager, petitioner must answer. Article 21 of the
Civil Code:
ART. 21. Any person who willfully causes loss or injury to
another in a manner that is contrary to morals, good
customs or public policy shall compensate the latter
for the damage.
That upon the provisions of Article 2219 (10), Civil Code,
moral damages are recoverable.
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. Neglect or
malfeasance of the carrier's employees, naturally, could give
ground for an action for damages.
Petitioner's contract with Carrascoso is one attended
with public duty. The stress of Carrascoso's action as we
have said, is placed upon his wrongful expulsion. This is a
violation of public duty by the petitioner air carrier - A CASE
OF QUASI-DELICT. DAMAGES ARE PROPER.
If it were really true that no such entry was made, the
deposition of the purser could have cleared up the matter.
SC, therefore, holds that the transcribed testimony of
Carrascoso is admissible in evidence.<see original for
discussion on res gestae>
RE EXEMPLARY DAMAGES: The Civil Code gives the court
ample power to grant exemplary damages - in contracts
and quasi- contracts. The ONLY CONDITION is that defendant
should have "acted in a wanton, fraudulent, reckless,
oppressive, or malevolent manner." The manner of
ejectment of respondent Carrascoso from his first class seat
fits into this legal precept. And this, in addition to moral
damages.
RE ATTORNEY'S FEES: The grant of exemplary damages
justifies a similar judgment for attorneys' fees.
RE EXCESSIVE AMOUNTS DECREED: P25K as moral damages;
P10K, by way of exemplary damages, and P3K as attorneys'
fees. The task of fixing these amounts is primarily with the
trial court. The CA did not interfere with the same. Facts and
circumstances point to the reasonableness thereof.
--------------------
Fernando Lopez, et al., v. Pan American World
Airways, G. R. no. L-22415, March 30, 1966
DOCTRINE: For bad faith means a breach of a known duty
through some motive of interest or ill-will. Self-enrichment or
fraternal interest, and not personal ill-will, may well have been
the motive; but it is malice nevertheless.
Francisco Ortigas, Jr. v. Lufthansa German Airlines,
G. R. No. L-28773, June 30, 1975
DOCTRINE: SC has uniformly upheld the right of a passenger
to damages in all cases wherein, after having contracted and
paid for first class accommodations duly confirmed and
validated, he is transferred over his objection to economy,
class, which he has to take in order to be able to arrive at his
destination on his scheduled time.
Air France, petitioner, vs. Bonifacio H. Gillego, G. R.
No. 165266, December 15, 2010
4. Contract for the carriage of goods
i. Carriers duty to observe extraordinary diligence in the
vigilance over the goods Article 1733
a. Worthiness of the conveyance
Precillano Necesito, et al. v. Natividad Paras, et al.,
G. R. No. L-10605, June 30, 1958
 Chan Keep, et al. v. Leon Chan Gioco, et al., G. R.
No. 4378, August
b. Presumption of fault in case of loss of the goods
Articles 1734 and 1735
G.R. No. L-69044 May 29, 1987
EASTERN SHIPPING LINES, INC., petitioner, vs.
INTERMEDIATE APPELLATE COURT and
DEVELOPMENT INSURANCE & SURETY
CORPORATION, respondents.
ISSUES: (1) which law should govern the Civil Code
provisions on Common carriers or the Carriage of Goods by
Sea Act? and (2) who has the BURDEN OF PROOF to show
negligence of the carrier?
RULING OF THE COURT: At the outset, we reject Petitioner
Carrier's claim that it is not the operator of the M/S Asiatica
but merely a charterer thereof. We note that in G.R. No.
69044, Petitioner Carrier stated in its Petition: There are
about 22 cases of the "ASIATICA" pending in various courts
where various plaintiffs are represented by various counsel
representing various consignees or insurance companies. The
common defendant in these cases is petitioner herein, being
the operator of said vessel.
On the Law Applicable
The LAW OF THE COUNTRY to which the goods are to
be transported governs the liability of the common
carrier in case of their loss, destruction or
deterioration. As the cargoes in question were transported
from Japan to the Philippines, the liability of Petitioner
Carrier is governed PRIMARILY by the Civil Code.
However, in all matters NOT regulated by said Code, the
rights and obligations of common carrier shall be governed by
the CODE OF COMMERCE and by SPECIAL LAWS. 6 Thus,
the CARRIAGE OF GOODS BY SEA ACT, a special law, is
suppletory to the provisions of the Civil Code. 7
On the Burden of Proof
Under the Civil Code, COMMON CARRIERS are responsible
for the loss, destruction, or deterioration of the goods unless
the same is due to any (1) Flood, storm, earthquake,
lightning or other natural disaster or calamity.
Petitioner Carrier claims that the loss of the vessel by fire
exempts it from liability under the phrase "natural disaster or
calamity." However, FIRE may NOT be considered a
natural disaster or calamity. This must be so as it arises
almost invariably from some act of man or by human means.
It does not fall within the category of an act of God
unless caused by lightning or by other natural disaster
or calamity. It may even be caused by the actual fault
or privity of the carrier.
ARTICLE 1680 OF THE CIVIL CODE, which considers fire
as an extraordinary fortuitous event refers to leases of
rural lands where a reduction of the rent is allowed when
more than one-half of the fruits have been lost due to such
event, considering that the law adopts a protection policy
towards agriculture.
As the peril of the fire is not comprehended within the
exception in ARTICLE 1734, ARTICLE 1735 of the Civil Code
provides that all cases than those mention in Article
1734, the common carrier shall be PRESUMED to have
been at fault or to have acted negligently , unless it proves
that it has observed the extraordinary deligence required by
law.
In this case, the respective Insurers (as subrogees) have
proven that the transported goods have been lost. Petitioner
Carrier has also proved that the loss was caused by fire. The
BURDEN then is upon Petitioner Carrier to prove that it
has exercised the extraordinary diligence required by
law. In this regard, the Trial Court, concurred in by the
Appellate Court, made the following Finding of fact:
The cargoes in question were placed in hatches No, 2 and 3 of
the vessel, Boatswain Ernesto Pastrana noticed that
smoke was coming out from hatch No. 2 and hatch No.
3; that where the smoke was noticed, the fire was already big;
that the fire must have started twenty-four 24-Hour the same
was noticed; that carbon dioxide was ordered released
and the crew was ordered to open the hatch covers of
No, 2 For commencement of fire fighting by sea water: that
all of these effort were not enough to control the fire.
Pursuant to ARTICLE 1733, common carriers are bound to
extraordinary diligence in the vigilance over the goods. The
evidence of the defendant did not show that
extraordinary vigilance was observed by the vessel to
prevent the occurrence of fire at hatches numbers 2
and 3. Defendant's evidence did not likewise show he amount
of diligence made by the crew, on orders, in the care of the
cargoes. What appears is that AFTER THE CARGOES WERE
STORED IN THE HATCHES, NO REGULAR INSPECTION
WAS MADE AS TO THEIR CONDITION DURING THE
VOYAGE. Consequently, the crew could not have even explain
what could have caused the fire. The defendant, in the Court's
mind, failed to satisfactorily show that extraordinary
vigilance and care had been made by the crew to
prevent the occurrence of the fire. The defendant, as a
common carrier, is liable to the consignees for said lack of
diligence required of it under Article 1733 of the Civil Code.
Even if fire were to be considered a "natural disaster" within
the meaning of Article 1734 of the Civil Code, it is required
under ARTICLE 1739 of the same Code that the "natural
disaster" must have been the "proximate and only cause
of the loss," and that the CARRIER has "exercised due
diligence to prevent or minimize the loss before,
during or after the occurrence of the disaster ." This
Petitioner Carrier has also failed to establish satisfactorily.
The Petitioner Carrier may not seek refuge from liability under
the CARRIAGE OF GOODS BY SEA ACT, It is provided
therein that: Sec. 4(2). Neither the carrier nor the ship shall
be responsible for loss or damage arising or resulting from (b)
Fire, unless caused by the actual fault or privity of the carrier.
In this case, the Trial Court and the Appellate Court both
found, that there was "actual fault" of the carrier shown
by "lack of diligence." The circumstances under which the
fire originated and spread are such as to show that Petitioner
Carrier or its servants were negligent. Consequently, the
complete defense afforded by the COGSA when loss results
from fire is unavailing to Petitioner Carrier.
On the US $500 Per Package Limitation:
Petitioner Carrier avers that its liability if any, should not
exceed US $500 per package as provided in section 4(5) of
the COGSA, which reads: (5) Neither the carrier nor the ship
shall in any event be or become liable for any loss or damage
to or in connection with the transportation of goods in an
amount exceeding $500 per package lawful money of the
United States, or in case of goods not shipped in packages,
per customary freight unit, or the equivalent of that sum in
other currency, unless the nature and value of such goods
have been declared by the shipper before shipment and
inserted in bill of lading. This declaration if embodied in the
bill of lading shall be prima facie evidence, but all be
conclusive on the carrier.
By agreement between the carrier, master or agent of the
carrier, and the shipper another maximum amount than that
mentioned in this paragraph may be fixed: Provided, That
such maximum shall not be less than the figure above named.
In no event shall the carrier be Liable for more than the
amount of damage actually sustained.
ARTICLE 1749 of the New Civil Code also allows the
limitations of liability in this wise: A stipulation that the
common carrier's liability as limited to the value of the goods
appearing in the bill of lading, unless the shipper or owner
declares a greater value, is binding.
It is to be noted that the Civil Code does not of itself limit the
liability of the common carrier to a fixed amount per package
although the Code expressly permits a stipulation limiting
such liability. Thus, the COGSA which is suppletory to the
provisions of the Civil Code, steps in and supplements the
Code by establishing a statutory provision limiting the
carrier's liability in the absence of a declaration of a
higher value of the goods by the shipper in the bill of
lading. The provisions of the Carriage of Goods by Sea Act on
limited liability are as much a part of a bill of lading as though
physically in it and as much a part thereof as though placed
therein by agreement of the parties.
In G.R. No. 69044, there is no stipulation in the respective Bills
of Lading (Exhibits "C-2" and "I-3") 1 7 limiting the carrier's
liability for the loss or destruction of the goods. Nor is there a
declaration of a higher value of the goods. Hence, Petitioner
Carrier's liability should not exceed US $500 per package, or
its peso equivalent, at the time of payment of the value of the
goods lost, but in no case "more than the amount of damage
actually sustained."
The actual total loss for the 5,000 pieces of calorized lance
pipes was P256,039 (Exhibit "C"), which was exactly the
amount of the insurance coverage by Development Insurance
(Exhibit "A"), and the amount affirmed to be paid by
respondent Court. The goods were shipped in 28 packages
(Exhibit "C-2") Multiplying 28 packages by $500 would result
in a product of $14,000 which, at the current exchange rate of
P20.44 to US $1, would be P286,160, or "more than the
amount of damage actually sustained." Consequently, the
aforestated amount of P256,039 should be upheld.
With respect to the seven (7) cases of spare parts (Exhibit "I-
3"), their actual value was P92,361.75 (Exhibit "I"), which is
likewise the insured value of the cargo (Exhibit "H") and
amount was affirmed to be paid by respondent Court.
however, multiplying seven (7) cases by $500 per package at
the present prevailing rate of P20.44 to US $1 (US $3,500 x
P20.44) would yield P71,540 only, which is the amount that
should be paid by Petitioner Carrier for those spare parts, and
not P92,361.75.
In G.R. No. 71478, in so far as the two (2) cases of surveying
instruments are concerned, the amount awarded to DOWA
which was already reduced to $1,000 by the Appellate Court
following the statutory $500 liability per package, is in order.
In respect of the shipment of 128 cartons of garment fabrics
in two (2) containers and insured with NISSHIN, the Appellate
Court also limited Petitioner Carrier's liability to $500 per
package and affirmed the award of $46,583 to NISSHIN. it
multiplied 128 cartons (considered as COGSA packages) by
$500 to arrive at the figure of $64,000, and explained that
"since this amount is more than the insured value of the
goods, that is $46,583, the Trial Court was correct in awarding
said amount only for the 128 cartons, which amount is less
than the maximum limitation of the carrier's liability."
We find no reversible error. The 128 cartons and not the two
(2) containers should be considered as the shipping unit.
In this case, the Bill of Lading (Exhibit "A") disclosed the
following data:
2 Containers
(128) Cartons)
Men's Garments Fabrics and Accessories Freight Prepaid
Say: Two (2) Containers Only.
Therefore, that the Bill of Lading clearly disclosed the contents
of the containers, the number of cartons or units, as well as
the nature of the goods, and applying the ruling in the Mitsui
and Eurygenes cases it is clear that the 128 cartons, not
the two (2) containers should be considered as the
shipping unit subject to the $500 limitation of liability.
True, the evidence does not disclose whether the containers
involved herein were carrier-furnished or not. Usually,
however, containers are provided by the carrier. In this case,
the probability is that they were so furnished for Petitioner
Carrier was at liberty to pack and carry the goods in
containers if they were not so packed. Thus, at the dorsal side
of the Bill of Lading (Exhibit "A") appears the following
stipulation in fine print:
11. (Use of Container) Where the goods receipt of which is
acknowledged on the face of this Bill of Lading are not already
packed into container(s) at the time of receipt, the Carrier
shall be at liberty to pack and carry them in any type of
container(s).
The foregoing would explain the use of the estimate "Say: Two
(2) Containers Only" in the Bill of Lading, meaning that the
goods could probably fit in two (2) containers only. It cannot
mean that the shipper had furnished the containers for if so,
"Two (2) Containers" appearing as the first entry would have
sufficed. and if there is any ambiguity in the Bill of Lading, it is
a cardinal principle in the construction of contracts that the
interpretation of obscure words or stipulations in a contract
shall not favor the party who caused the obscurity. 20 This
applies with even greater force in a contract of adhesion
where a contract is already prepared and the other party
merely adheres to it, like the Bill of Lading in this case, which
is draw. up by the carrier. 21
ourts being vested with discretion in fixing the amount of
attorney's fees, it is believed that the amount of P5,000.00
would be more reasonable in G.R. No. 69044. The award of
P5,000.00 in G.R. No. 71478 is affirmed.
WHEREFORE, 1) in G.R. No. 69044, the judgment is modified
in that petitioner Eastern Shipping Lines shall pay the
Development Insurance and Surety Corporation the amount of
P256,039 for the twenty-eight (28) packages of calorized
lance pipes, and P71,540 for the seven (7) cases of spare
parts, with interest at the legal rate from the date of the filing
of the complaint on June 13, 1978, plus P5,000 as attorney's
fees, and the costs.
2) In G.R.No.71478,the judgment is hereby affirmed.
G.R. No. 143133 June 5, 2002
 BELGIAN OVERSEAS CHARTERING AND SHIPPING N.V.
and JARDINE DAVIES TRANSPORT SERVICES, INC.,
petitioners,
vs.
PHILIPPINE FIRST INSURANCE CO., INC., respondents.
PANGANIBAN, J.:
Proof of the delivery of goods in good order to a
common carrier and of their arrival in bad order at
their destination constitutes prima facie fault or
negligence on the part of the carrier. If no adequate
explanation is given as to how the loss, the destruction
or the deterioration of the goods happened, the carrier
shall be held liable therefor.
Issues
1. Whether petitioners have overcome the presumption of
negligence of a common carrier
2. Whether the notice of loss was timely filed
3. Whether the package limitation of liability is applicable
SC: The Petition is partly meritorious.
First Issue: Proof of Negligence
Well-settled is the rule that common carriers, from the nature
of their business and for reasons of public policy, are bound to
observe extraordinary diligence and vigilance with respect to
the safety of the goods and the passengers they
transport.13 Thus, common carriers are required to render
service with the greatest skill and foresight and "to use all
reason[a]ble means to ascertain the nature and
characteristics of the goods tendered for shipment, and to
exercise due care in the handling and stowage, including such
methods as their nature requires." 14 The extraordinary
responsibility lasts from the time the goods are
unconditionally placed in the possession of and received for
transportation by the carrier until they are delivered, actually
or constructively, to the consignee or to the person who has a
right to receive them.15
Owing to this high degree of diligence required of them,
common carriers, as a GENERAL RULE, are presumed to
have been at fault or negligent if the goods they
transported deteriorated or got lost
destroyed.18 That is, unless they prove that they exercised
extraordinary diligence in transporting the goods. 19 In order to
avoid responsibility for any loss or damage, therefore, they
have the burden of proving that they observed such
diligence.20
However, THE PRESUMPTION OF FAULT OR NEGLIGENCE
WILL NOT ARISE21 if the loss is due to any of the
following causes: (1) flood, storm, earthquake, lightning, or
other natural disaster or calamity; (2) an act of the public
enemy in war, whether international or civil; (3) an act or
omission of the shipper or owner of the goods; (4) the
character of the goods or defects in the packing or the
container; or (5) an order or act of competent public
authority.22 This is a closed list. If the cause of destruction,
loss or deterioration is other than the enumerated
circumstances, then the carrier is liable therefor. 23
Corollary to the foregoing, mere proof of delivery of the
goods in good order to a common carrier and of their
arrival in bad order at their destination constitutes a
prima facie case of fault or negligence against the
carrier. If no adequate explanation is given as to how the
deterioration, the loss or the destruction of the goods
happened, the transporter shall be held responsible. 24
That petitioners failed to rebut the prima facie presumption of
negligence is revealed in the case at bar by a review of the
records and more so by the evidence adduced by
respondent.25
First, as stated in the BILL OF LADING, petitioners received
the subject shipment in good order and condition in Hamburg,
Germany.26
Second, prior to the unloading of the cargo, an INSPECTION
REPORT27 prepared and signed by representatives of both
parties showed the steel bands broken, the metal envelopes
rust-stained and heavily buckled, and the contents thereof
exposed and rusty.
Third, BAD ORDER TALLY SHEET NO. 15497928 issued by
Jardine Davies Transport Services, Inc., stated that the four
coils were in bad order and condition. Normally, a
request for a bad order survey is made in case there is an
apparent or a presumed loss or damage.29
Fourth, the CERTIFICATE OF ANALYSIS30 stated that, based
on the sample submitted and tested, the steel sheets found in
bad order were wet with fresh water.
Fifth, petitioners -- in a LETTER31 addressed to the Philippine
Steel Coating Corporation and dated October 12, 1990 --
admitted that they were aware of the condition of the four
coils found in bad order and condition.
These facts were confirmed by Ruperto Esmerio, head checker
of BM Santos Checkers Agency.
All these conclusively prove the fact of shipment in good order
and condition and the consequent damage to the four coils
while in the possession of petitioner, 33 who notably failed to
explain why.34
Further, petitioners failed to prove that they observed the
extraordinary diligence and precaution which the law requires
a common carrier to know and to follow to avoid damage to or
destruction of the goods entrusted to it for safe carriage and
delivery.35
True, the words "metal envelopes rust stained and
slightly dented" were noted on the Bill of Lading;
or
however, there is no showing that petitioners
exercised due diligence to forestall or lessen the
loss.36 Having been in the service for several years, the
master of the vessel should have known at the outset that
metal envelopes in the said state would eventually deteriorate
when not properly stored while in transit.37 Equipped with the
proper knowledge of the nature of steel sheets in coils
and of the proper way of transporting them, the master
of the vessel and his crew should have undertaken
precautionary measures to avoid possible deterioration of the
cargo. But none of these measures was taken. 38
In their attempt to escape liability, petitioners further contend
that they are exempted from liability under Article 1734(4)
of the Civil Code. They cite the notation "metal envelopes rust
stained and slightly dented" printed on the Bill of Lading as
evidence that the character of the goods or defect in the
packing or the containers was the proximate cause of the
damage. We are not convinced.
From the evidence on record, it cannot be reasonably
concluded that the damage to the four coils was due to the
condition noted on the Bill of Lading.40 The aforecited
exception refers to cases when goods are lost or
damaged while in transit as a result of the natural
decay of perishable goods or the fermentation or
evaporation of substances liable therefor, the
necessary and natural wear of goods in transport,
defects in packages in which they are shipped, or the
natural propensities of animals.41 None of these is present
in the instant case.
Further, even if the fact of improper packing was known
to the carrier or its crew or was apparent upon
ordinary observation, it is not relieved of liability for
loss or injury resulting therefrom, once it accepts the
goods notwithstanding such condition. 42 Thus, petitioners
have not successfully proven the application of any of the
aforecited exceptions in the present case.43
Second Issue: Notice of Loss
Petitioners claim that pursuant to Section 3, paragraph 6 of
the Carriage of Goods by Sea Act 44 (COGSA), respondent
should have filed its Notice of Loss within three days from
delivery. They assert that the cargo was discharged on July 31,
1990, but that respondent filed its Notice of Claim only on
September 18, 1990.45
First, the above-cited provision of COGSA provides that the
notice of claim need not be given if the state of the goods, at
the time of their receipt, has been the subject of a joint
inspection or survey. As stated earlier, prior to unloading the
cargo, an Inspection Report46 as to the condition of the goods
was prepared and signed by representatives of both parties. 47
Second, as stated in the same provision, a failure to file a
notice of claim within three days will not bar recovery
if it is nonetheless filed within one year. 48 This ONE-
YEAR PRESCRIPTIVE PERIOD ALSO applies to the
shipper, the consignee, the insurer of the goods or any
legal holder of the bill of lading.49
In the present case, the cargo was discharged on July 31,
1990, while the Complaint51 was filed by respondent on July
25, 1991, within the one-year prescriptive period.
Third Issue: Package Limitation
Assuming arguendo they are liable for respondent's claims,
petitioners contend that their liability should be limited to
US$500 per package as provided in the Bill of Lading and by
Section 4(5)52 of COGSA.53
On the other hand, respondent argues that Section 4(5) of
COGSA is inapplicable, because the value of the subject
shipment was declared by petitioners beforehand, as
evidenced by the reference to and the insertion of the Letter
of Credit or "L/C No. 90/02447" in the said Bill of Lading.54
Further, a stipulation in the bill of lading limiting to a
certain sum the common carrier's liability for loss or
destruction of a cargo -- unless the shipper or owner
declares a greater value58 -- is sanctioned by
law.59 There are, however, two conditions to be
satisfied: (1) the contract is reasonable and just under
the circumstances, and (2) it has been fairly and freely
agreed upon by the parties. 60 The rationale for this rule is
to bind the shippers by their agreement to the value
(maximum valuation) of their goods.61
It is to be noted, however, that the Civil Code does not limit
the liability of the common carrier to a fixed amount per
package.62 In all matters not regulated by the Civil Code, the
right and the obligations of common carriers shall be
governed by the Code of Commerce and special laws. 63 Thus,
the COGSA, which is suppletory to the provisions of the Civil
Code, supplements the latter by establishing a statutory
provision limiting the carrier's liability in the absence of a
shipper's declaration of a higher value in the bill of
lading.64 The provisions on limited liability are as much a part
of the bill of lading as though physically in it and as though
placed there by agreement of the parties.65
In the case before us, there was no stipulation in the Bill
of Lading66 limiting the carrier's liability. Neither did the
shipper declare a higher valuation of the goods to be shipped.
This fact notwithstanding, the insertion of the words "L/C
No. 90/02447 cannot be the basis for petitioners'
liability.
First, a notation in the Bill of Lading which indicated the
amount of the Letter of Credit obtained by the shipper
for the importation of steel sheets did not effect a
declaration of the value of the goods as required by
the bill.67 That notation was made only for the
convenience of the shipper and the bank processing
the Letter of Credit.68
Second, a bill of lading was separate from the Other
Letter of Credit arrangements.
In the light of the foregoing, petitioners' liability should be
computed based on US$500 per package and not on the per
metric ton price declared in the Letter of Credit. 71 In Eastern
Shipping Lines, Inc. v. Intermediate Appellate Court,72 we
explained the meaning of packages:
"When what would ordinarily be considered packages are
shipped in a container supplied by the carrier and the number
of such units is disclosed in the shipping documents, each of
those units and not the container constitutes the 'package'
referred to in the liability limitation provision of Carriage of
Goods by Sea Act."
Considering, therefore, the ruling in Eastern Shipping
Lines and the fact that the Bill of Lading clearly disclosed the
contents of the containers, the number of units, as well as the
nature of the steel sheets, the four damaged coils should be
considered as the shipping unit subject to the US$500
limitation.
WHEREFORE, the Petition is partly granted and the assailed
Decision MODIFIED. Petitioners' liability is reduced to
US$2,000 plus interest at the legal rate of six percent from
the time of the filing of the Complaint on July 25, 1991 until
the finality of this Decision, and 12 percent thereafter until
fully paid. No pronouncement as to costs.
Regional Container Lines (RCL) of Singapore and EDSA
Shipping Agency, petitioners,
vs.
The Netherlands Insurance Co. (Philippines), Inc. G. R.
no. 168151. September 4, 2009
(degree of proof required)
ISSUE: Whether the CA correctly held RCL and EDSA
Shipping liable as common carriers under the theory of
presumption of negligence.
THE COURTS RULING
The present case is governed by the following provisions of
the Civil Code:
ART. 1733. Common carriers, from the nature of their business
and for reasons of public policy, are bound to observe
extraordinary diligence in the vigilance over the goods
and for the safety of the passengers transported by them
according to all the circumstances of each case.
Such extraordinary diligence in the vigilance over the goods is
further expressed in articles 1734, 1735, and 1745, Nos. 5, 6,
and 7, while the extraordinary diligence for the safety of the
passengers is further set forth in articles1755 and 1756.
ART. 1734. Common carriers are responsible for the
loss, destruction, or deterioration of the goods, unless the
same is due to any of the following causes only:
1) Flood, storm, earthquake, lightning, or other
natural disaster or calamity;
2) Act of the public enemy in war, whether
international or civil;
3) Act of omission of the shipper or owner of the
goods;
4) The character of the goods or defects in the
packing or in the containers;
5) Order or act of competent public authority.
ART. 1735. In all cases other that 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 by article 1733.
ART. 1736. The extraordinary responsibility of
the common carrier lasts from the time the goods are
unconditionally placed in the possession of, and
received by the carrier for transportation until the
sane are delivered, actually or constructively, by the
carrier to the consignee, or to the person who has a
right to receive them, without prejudice to the provisions of
articles 1738.
ART. 1738. The extraordinary liability of the common
carrier continues to be operative even during the time the
goods are stored in a warehouse of the carrier at the place of
destination, until the consignee has been advised of the
arrival of the goods and has had reasonable opportunity
thereafter to remove them or otherwise dispose of them.
ART. 1742. Even if the loss, destruction, or deterioration
of the goods should be caused by the character of the goods,
or the faulty nature of the packing or of the containers,
the common carrier must exercise due diligence to
forestall or lessen the loss.
In Central Shipping Company, Inc. v. Insurance Company
of North America,[6] we reiterated the RULES FOR THE
LIABILITY OF A COMMON CARRIER FOR LOST OR
DAMAGED CARGO as follows:
(1) Common carriers are bound to observe extraordinary
diligence over the goods they transport, according to all
the circumstances of each case;
(2) In the event of loss, destruction, or deterioration of the
insured goods, common carriers are responsible, unless
they can prove that such loss, destruction, or
deterioration was brought about by, among others,
flood, storm, earthquake, lightning, or other natural
disaster or calamity; and
(3) In all other cases not specified under Article 1734 of the
Civil Code, common carriers are presumed to have been
at fault or to have acted negligently, unless they
observed extraordinary diligence.[7]
RCL and EDSA Shipping disclaim any responsibility for the
loss or damage to the goods in question.
They contend that the cause of the damage to the cargo
was the fluctuation of the temperature in the reefer
van, which fluctuation occurred after the cargo had
already been discharged from the vessel; no fluctuation,
they point out, arose when the cargo was still on
board M/V Piya Bhum.
As the cause of the damage to the cargo occurred after
the same was already discharged from the vessel and
was under the custody of the arrastre operator (ICTSI),
RCL and EDSA Shipping posit that the presumption of
negligence provided in Article 1735 of the Civil Code
should not apply.
We do not find the arguments of RCL and EDSA
Shipping meritorious.
A common carrier is presumed to have been negligent if it
fails to prove that it exercised extraordinary vigilance over the
goods it transported.[8] When the goods shipped are either
lost or arrived in damaged condition, a presumption arises
against the carrier of its failure to observe that diligence, and
there need not be an express finding of negligence to hold it
liable.[9]
To OVERCOME THE PRESUMPTION OF NEGLIGENCE, the
common carrier must establish by adequate proof that
it exercised extraordinary diligence over the goods. It
must do more than merely show that some other party
could be responsible for the damage.[10]
In the present case, RCL and EDSA Shipping failed to
prove that they did exercise that degree of diligence required
by law over the goods they transported. Indeed, there is
sufficient evidence showing that the fluctuation of the
temperature in the refrigerated container van, as recorded in
the temperature chart, occurred after the cargo had been
discharged from the vessel and was already under the
custody of the arrastre operator, ICTSI. HOWEVER, this
evidence, does NOT disprove that the condenser fan
which caused the fluctuation of the temperature in the
refrigerated container was NOT damaged while the
cargo was being unloaded from the ship. It is settled
in maritime law jurisprudence that CARGOES WHILE
BEING UNLOADED GENERALLY REMAIN UNDER THE
CUSTODY OF THE CARRIER;[11] RCL and EDSA Shipping
failed to dispute this.
RCL and EDSA Shipping could have offered evidence before
the trial court to show that the damage to the condenser fan
did not occur:
(1) while the cargo was in transit;
(2) while they were in the act of discharging it from the vessel;
or
(3) while they were delivering it actually or constructively to
the consignee.
They could have presented proof to show that they exercised
extraordinary care and diligence in the handling of the goods,
but they opted to file a demurrer to evidence. As the order
granting their demurrer was reversed on appeal, the CA
correctly ruled that they are deemed to have waived
their right to present evidence, [12] and the presumption
of negligence must stand.
It is for this reason as well that we find RCL and EDSA
Shippings claim that the loss or damage to the cargo was
caused by a defect in the packing or in the containers. To
exculpate itself from liability for the loss/damage to the cargo
under any of the causes, the common carrier is burdened to
prove any of the causes in Article 1734 of the Civil Code
claimed by it by a preponderance of evidence. If the carrier
succeeds, the burden of evidence is shifted to the shipper to
prove that the carrier is negligent. [13] RCL and EDSA Shipping,
however, failed to satisfy this standard of evidence and in fact
offered no evidence at all on this point; a reversal of a
dismissal based on a demurrer to evidence bars the defendant
from presenting evidence supporting its allegations.
WHEREFORE, we DENY the petition for review
on certiorari filed by the Regional Container Lines of Singapore
and EDSA Shipping Agency. The decision of the Court of
Appeals dated May 26, 2004 in CA-G.R. CV No. 76690
is AFFIRMED IN TOTO. Costs against the petitioners.
c. Period of liability of carrier Articles 1736, 1737 and
1738
G.R. No. L-9840 April 22, 1957
LU DO & LU YM CORPORATION, petitioner-defendant,
vs.
I. V. BINAMIRA, respondent-plaintiff.
The question now to be considered is: Is the carrier
responsible for the loss considering that the same
occurred after the shipment was discharged from the
ship and placed in the possession and custody of the
customs authorities?
We believe this contention is well taken. It is true that, as a
rule, a COMMON CARRIER is responsible for the loss,
destruction or deterioration of the goods it assumes to carry
from one place to another unless the same is due to any to
any of the causes mentioned in Article 1734 on the new Civil
Code, and that, if the goods are lost, destroyed or
deteriorated, for causes other that those mentioned, the
common carrier is presumed to have been at fault or to have
acted negligently, unless it proves that it has observed
extraordinary diligence in their care (Article 1735, Idem.), and
that this extraordinary liability lasts from the time the
goods are placed in the possession of the carrier until
they are delivered to the consignee, or "to the person
who has the right to receive them" (Article
1736, Idem.), but these provisions only apply when the
loss, destruction or deterioration takes place while the
goods are in the possession of the carrier, and not
after it has lost control of them. The reason is obvious.
While the goods are in its possession, it is but fair that it
exercise extraordinary diligence in protecting them from
damage, and if loss occurs, the law presumes that it was due
to its fault or negligence. This is necessary to protect the
interest the interest of the owner who is at its mercy. The
situation changes after the goods are delivered to the
consignee.
While we agree with the Court of Appeals that while delivery
of the cargo to the consignee, or to the person who has a right
to receive them", contemplated in Article 1736, because in
such case the goods are still in the hands of the Government
and the owner cannot exercise dominion over them, we
believe however that the parties may agree to limit the
liability of the carrier considering that the goods have
still to through the inspection of the customs
authorities before they are actually turned over to the
consignee. This is a situation where we may say that the
carrier losses control of the goods because of a custom
regulation and it is unfair that it be made responsible for what
may happen during the interregnum. And this is precisely
what was done by the parties herein. In the bill of lading
that was issued covering the shipment in question,
both the carrier and the consignee have stipulated to
limit the responsibility of the carrier for the loss or
damage that may because to the goods before they are
actually delivered by insert in therein the following
provisions:
1. . . . The Carrier shall not be liable in any capacity
whatsoever for any delay, nondelivery or misdelivery, or loss
of or damage to the goods occurring while the goods are not
in the actual custody of the Carrier. . . . (Emphasis ours.)
2. . . . The responsibility of the Carrier in any capacity shall
altogether cease and the goods shall be considered to be
delivered and at their own risk and expense in every
respect when taken into the custody of customs or other
authorities. The Carrier shall not be required to give any
notification of disposition of the goods. . . . (Emphasis ours.)
3. Any provisions herein to the contrary notwithstanding,
goods may be . . . by Carrier at ship's tackle . . . and delivery
beyond ship's tackle shall been tirely at the option of the
Carrier and solely at the expense of the shipper or consignee.
It therefore appears clear that the carrier does not assume
liability for any loss or damage to the goods once they
have been "taken into the custody of customs or other
authorities", or when they have been delivered at
ship's tackle. These stipulations are clear. They have been
adopted precisely to mitigate the responsibility of the carrier
considering the present law on the matter, and we find
nothing therein that is contrary to morals or public policy that
may justify their nullification. We are therefore persuaded to
conclude that the carrier is not responsible for the loss in
question, it appearing that the same happened after the
shipment had been delivered to the customs authorities.
Wherefore, the decision appealed from is reversed, without
pronouncement as to costs.
G.R. No. L-36481-2 October 23, 1982
AMPARO C. SERVANDO, CLARA UY BICO, plaintiffs-
appellees,
vs.
PHILIPPINE STEAM NAVIGATION CO., defendant-appellant.
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 . ...
We sustain the validity of the above stipulation; there is
nothing therein that is contrary to law, morals or public policy.
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. This
argument overlooks the pronouncement of this Court in Ong
Yiu vs. Court of Appeals, The one who adheres to the
contract is in reality free to reject it entirely; if he
adheres, he gives his consent."
Besides, the agreement contained in the above quoted Clause
14 is a mere iteration of the basic principle of law written in
Article 1 1 7 4 of the Civil Code: 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.
Thus, where fortuitous event or force majeure is the
immediate and proximate cause of the loss, the obligor is
exempt from liability for non-performance. The Partidas, 4 the
antecedent of Article 1174 of the Civil Code, defines 'caso
fortuito' as 'an event that takes place by accident and could
not have been foreseen. Examples of this are destruction of
houses, unexpected fire, shipwreck, violence of robbers.'
In its dissertation of the phrase 'caso fortuito' the Enciclopedia
Juridicada Espanola 5 says: "In a legal sense and,
consequently, also in relation to contracts, a 'caso fortuito'
presents the following essential characteristics: (1) the cause
of the unforeseen and unexpected occurrence, or of the
failure of the debtor to comply with his obligation, must be
independent of the human will; (2) it must be impossible to
foresee the event which constitutes the 'caso fortuito', or if it
can be foreseen, it must be impossible to avoid; (3) the
occurrence must be such as to render it impossible for the
debtor to fulfill his obligation in a normal manner; and (4) the
obligor must be free from any participation in the aggravation
of the injury resulting to the creditor." In the case at bar, the
burning of the customs warehouse was an extraordinary event
which happened independently of the will of the appellant.
The latter could not have foreseen the event.
There is nothing in the record to show that appellant carrier,
incurred in 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.
Nor can the appellant or its employees be charged with
negligence. The storage of the goods in the Customs
warehouse pending withdrawal thereof by the appellees was
undoubtedly made with their knowledge and consent. 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.
The lower court in its decision relied on the ruling laid down
in Yu Biao Sontua vs. Ossorio 6, where this Court held the
defendant liable for damages arising from a fire caused by the
negligence of the defendant's employees while loading cases
of gasoline and petroleon products. But unlike in the said
case, there is not a shred of proof in the present case that the
cause of the fire that broke out in the Custom's warehouse
was in any way attributable to the negligence of the appellant
or its employees. Under the circumstances, the appellant is
plainly not responsible.
Aniceto G. Saludo, Jr., et al. v. Court of Appeals, et
al. G. R. No. 95536, March 23, 1992
d. Defenses available to the carrier
i. Exercise of extraordinary diligence Article 1735
ii. Loss arose from any of the exempting circumstances
Article 1734
Lu Do and Lu Ym Corp. v. l., V. Binamira, G. R. No. L-
9840, April 22, 1957, 101 Phil 120
Pedro de Guzman v. Court of Appeals, G. R. No. L-
47822. December 22, 1988
e. Exempting circumstances
i. Flood, storm, earthquake, lightning or other natural
disaster or calamity Articles 1734(1), 1739 and 1740
Philippine American General Insurance Company v.
Court of Appeals, et al., G. R. no. 101426, May 17,
1993
Philippine American General Insurance Company v.
MCG Marine Services, Inc. et al., G. R. No. 135645.
March 8, 2002
ISSUE: Whether the loss of the cargo was due to the
occurrence of a natural disaster, and if so, whether such
natural disaster was the sole and proximate cause of the loss
The presumption of fault or negligence on the part of a
common carrier does not arise in the cases enumerated under
Article 1734 of the Civil Code.
In order that a common carrier may be absolved from liability
where the loss, destruction or deterioration of the goods is
due to a natural disaster or calamity, it must further be shown
that the such natural disaster or calamity was the proximate
and only cause of the loss;9 there must be "an entire
exclusion of human agency from the cause of the injury of the
loss."10
The parties do not dispute that on the day the M/V Peatheray
Patrick-G sunk, said vessel encountered strong winds and
huge waves ranging from six to ten feet in height. The vessel
listed at the port side and eventually sunk at Cawit Point,
Cortes, Surigao del Sur.
The presence of a crack in the ill-fated vessel through
which water seeped in was confirmed by the
Greutzman Divers who were commissioned by the
private respondents to conduct an underwater survey
and inspection of the vessel to determine the cause
and circumstances of its sinking. In its report,
Greutzman Divers stated that "along the port side
platings, a small hole and two separate cracks were
found at about midship."14
The findings of the Board of Marine Inquiry indicate that
the attendance of strong winds and huge waves while the M/V
Peatheray Patrick-G was sailing through Cortes, Surigao del
Norte on March 3, 1987 was indeed fortuitous. A fortuitous
event has been defined as one which could not be foreseen,
or which though foreseen, is inevitable. 15An event is
considered fortuitous if the following elements concur:
In the case at bar, it was adequately shown that before the
M/V Peatheray Patrick-G left the port of Mandaue City, the
Captain confirmed with the Coast Guard that the weather
condition would permit the safe travel of the vessel to Bislig,
Surigao del Sur. Thus, he could not be expected to have
foreseen the unfavorable weather condition that awaited the
vessel in Cortes, Surigao del Sur. It was the presence of the
strong winds and enormous waves which caused the vessel to
list, keel over, and consequently lose the cargo contained
therein. The appellate court likewise found that there was no
negligence on the part of the crew of the M/V Peatheray
Patrick-G, citing the following portion of the decision of the
Board of Marine Inquiry:
Evidence clearly shows that the vessel was propelled with
three (3) diesel engines of 250 BHP each or a total of 750 BHP.
It had three (3) propellers which were operating satisfactorily
from the time the vessel left the port of Mandawe up to the
time when the hull on the double bottom tank was heavily
floaded (sic) by uncontrollable entry of sea water resulting in
the stoppage of engines. The vessel was also equipped with
operating generator pumps for emergency cases. This
equipment was also operating satisfactorily up to the time
when the engine room was heavily floaded (sic) with sea
water. Further, the vessel had undergone emergency
drydocking and repair before the accident occurred (sic) on
November 9, 1986 at Trigon Shipyard, San Fernando, Cebu as
shown by the billing for the Drydocking and Repair and
certificate of Inspection No. 2588-86 issued by the Philippine
coast Guard on December 5, 1986 which expired on
November 8, 1987.
LCT Peatheray Patrick-G was skippered by Mr. Manuel P.
Ramilo, competent and experienced licensed Major Patron
who had been in command of the vessel for more than three
(3) years from July 1984 up to the time of sinking March 3,
1987. His Chief Mate Mr. Mariano Alalin also a licensed Major
Patron had been the Chief Mate of " LCT Peatheray Patrick-G"
for one year and three months at the time of the accident.
Further Chief Mate Alalin had commanded a tanker vessel
named M/T Mercedes of MGM Corporation for almost two (2)
years from 1983-1985 (Alalin TSN-4-13-88 pp. 32-33).
That the vessel was granted SOLAS clearance by the
Philippine Coast Guard on March 1, 1987 to depart from
Mandawe City for Bislig, Surigao del Sur as evidenced by a
certification issued to D.C. Gaerlan Oil Products by Coast
Guard Station Cebu dated December 23, 1987.1wphi1.nt
Based on the foregoing circumstances, "LCT Peatheray
Patrick-G" should be considered seaworthy vessel at the time
she undertook that fateful voyage on March 2, 1987.
To be seaworthy, a vessel must not only be staunch and fit in
the hull for the voyage to be undertaken but also must be
properly equipped and for that purpose there is a duty upon
the owner to provide a competent master and a crew
adequate in number and competent for their duty and equals
in disposition and seamanship to the ordinary in that calling.
(Ralph 299 F-52, 1924 AMC 942). American President 2td v.
Ren Fen Fed 629. AMC 1723 LCA 9 CAL 1924). 17
Overloading was also eliminated as a possible cause of the
sinking of the vessel, as the evidence showed that its
freeboard clearance was substantially greater than the
authorized freeboard clearance.18
Although the Board of Marine Inquiry ruled only on the
administrative liability of the captain and crew of the M/V
Peatheray Patrick-G, it had to conduct a thorough
investigation of the circumstances surrounding the sinking of
the vessel and the loss of its cargo in order to determine their
responsibility, if any. The results of its investigation as
embodied in its decision on the administrative case clearly
indicate that the loss of the cargo was due solely to the
attendance of strong winds and huge waves which caused the
vessel accumulate water, tilt to the port side and to
eventually keel over. There was thus no error on the part of
the Court of Appeals in relying on the factual findings of
the Board of Marine Inquiry, for such factual findings,
being supported by substantial evidence are
persuasive, considering that said administrative body
is an expert in matters concerning marine casualties.19
Since the presence of strong winds and enormous waves at
Cortes, Surigao del Sur on March 3, 1987 was shown to be the
proximate and only cause of the sinking of the M/V Peatheray
Patrick-G and the loss of the cargo belonging to San Miguel
Corporation, private respondents cannot be held liable for the
said loss.
--------------------
ii. Act of the public enemy in war whether international
or civil Article 1734 (2)
iii. Act or omission of the shipper or owner of the goods
Articles 1734 (3), 1741
Compania Maritima v. Court of Appeals, G. R. No. L-
31379, August 29, 1988
ISSUE: Whether or not the act of Concepcion in
furnishing petitioner Compaia Maritima with an
inaccurate weight of 2.5 tons instead of the
payloader's actual weight of 7.5 tons was the
proximate and only cause of the damage on the Oliver
Payloader OC-12 when it fell while being unloaded by
petitioner's crew, as would absolutely exempt petitioner from
liability for damages under paragraph 3 of Article 1734 of the
Civil Code
Petitioner claims absolute exemption under this provision
upon the reasoning that private respondent's act of furnishing
it with an inaccurate weight of the payloader constitutes
misrepresentation within the meaning of "act or omission of
the shipper or owner of the goods" under the above- quoted
article. It likewise faults the respondent Court of Appeals for
reversing the decision of the trial court notwithstanding that
said appellate court also found that by representing the
weight of the payloader to be only 2.5 tons, private
respondent had led petitioner's officer to believe that the
same was within the 5 tons capacity of the heel block of Hatch
No. 2. Petitioner would thus insist that the proximate and only
cause of the damage to the payloader was private
respondent's alleged misrepresentation of the weight of the
machinery in question; hence, any resultant damage to it
must be borne by private respondent Vicente E. Concepcion.
The general rule under Articles 1735 and 1752 of the Civil
Code is that common carriers are presumed to have been at
fault or to have acted negligently in case the goods
transported by them are lost, destroyed or had deteriorated.
To overcome the presumption of liability for the loss,
destruction or deterioration of the goods under Article 1735,
the common carriers must prove that they observed
extraordinary diligence as required in Article 1733 of the Civil
Code. The responsibility of observing extraordinary diligence
in the vigilance over the goods is further expressed in Article
1734 of the same Code, the article invoked by petitioner to
avoid liability for damages.
Corollary is the rule that mere proof of delivery of the goods in
good order to a common carrier, and of their arrival at the
place of destination in bad order, makes out prima facie case
against the common carrier, so that if no explanation is given
as to how the loss, deterioration or destruction of the goods
occurred, the common carrier must be held
responsible. 10 Otherwise stated, it is incumbent upon the
common carrier to prove that the loss, deterioration or
destruction was due to accident or some other circumstances
inconsistent with its liability.
In the instant case, We are not persuaded by the proferred
explanation of petitioner alleged to be the proximate cause of
the fall of the payloader while it was being unloaded at the
Cagayan de Oro City pier. Petitioner seems to have overlooked
the extraordinary diligence required of common carriers in the
vigilance over the goods transported by them by virtue of the
nature of their business, which is impressed with a special
public duty.
Thus, Article 1733 of the Civil Code provides:
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 safe carriage
and delivery. It requires common carriers to render service
with the greatest skill and foresight and "to use all reasonable
means to ascertain the nature and characteristic of goods
tendered for shipment, and to exercise due care in the
handling and stowage including such methods as their nature
requires." 11 Under Article 1736 of the Civil Code, the
responsibility to observe extraordinary diligence commences
and 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 the right to receive them without prejudice to
the provisions of Article 1738.
Where, as in the instant case, petitioner, upon the testimonies
of its own crew, failed to take the necessary and adequate
precautions for avoiding damage to, or destruction of, the
payloader entrusted to it for safe carriage and delivery to
Cagayan de Oro City, it cannot be reasonably concluded that
the damage caused to the payloader was due to the alleged
misrepresentation of private respondent Concepcion as to the
correct and accurate weight of the payloader. As found by the
 respondent Court of Appeals, the fact is that petitioner used a
5-ton capacity lifting apparatus to lift and unload a visibly
heavy cargo like a payloader. Private respondent has, likewise,
sufficiently established the laxity and carelessness of
petitioner's crew in their methods of ascertaining the weight
of heavy cargoes offered for shipment before loading and
unloading them, as is customary among careful persons.
It must be noted that the weight submitted by private
respondent Concepcion appearing at the left-hand portion of
Exhibit 8 12 as an addendum to the original enumeration of
equipment to be shipped was entered into the bill of lading by
petitioner, thru Pacifico Fernandez, a company collector,
without seeing the equipment to be shipped. 13 Mr. Mariano
Gupana, assistant traffic manager of petitioner, confirmed in
his testimony that the company never checked the
information entered in the bill of lading. 14 Worse, the weight
of the payloader as entered in the bill of lading was assumed
to be correct by Mr. Felix Pisang, Chief Officer of MV Cebu. 15
The weights stated in a bill of lading are prima facie
evidence of the amount received and the fact that the
weighing was done by another will not relieve the
common carrier where it accepted such weight and
entered it on the bill of lading. 16 Besides, common
carriers can protect themselves against mistakes in
the bill of lading as to weight by exercising diligence
before issuing the same. 17
While petitioner has proven that private respondent
Concepcion did furnish it with an inaccurate weight of the
payloader, petitioner is nonetheless liable, for the damage
caused to the machinery could have been avoided by the
exercise of reasonable skill and attention on its part in
overseeing the unloading of such a heavy equipment. And
circumstances clearly show that the fall of the payloader
could have been avoided by petitioner's crew.
--------------------
i. Character of the goods or defect in the packing or the
containers Articles 1734 (4), 1742
ii. Order or act of competent authority Articles 1734
(5), 1743
iii. Other exempting circumstances
Pedro de Guzman v. Court of Appeals, G. R. No. L-
47822, December 22, 1988
f. Limitation of liability
i. As to diligence required
a. General rule Articles 1744 and 1746
Home Insurance Company v. American Steamship
Agencies, Inc., G. R. No. L-25599, April 4, 1968
Is the stipulation in the charter party of the owner's
non-liability valid so as to absolve the American
Steamship Agencies from liability for loss?
The bills of lading, 1 covering the shipment of Peruvian
fish meal provide at the back thereof that the bills of
lading shall be governed by and subject to the terms
and conditions of the charter party, if any, otherwise,
the bills of lading prevail over all the agreements .2 On
the of the bills are stamped "Freight prepaid as per
charter party. Subject to all terms, conditions and
exceptions of charter party dated London, Dec. 13,
1962."
A perusal of the charter party3 referred to shows that while
the possession and control of the ship were not entirely
transferred to the charterer, 4 the vessel was chartered to its
full and complete capacity (Exh. 3). Furthermore, the, charter
had the option to go north or south or vice-versa,5 loading,
stowing and discharging at its risk and expense. 6 Accordingly,
the charter party contract is one of affreightment over
the whole vessel rather than a demise. As such, the
liability of the shipowner for acts or negligence of its
captain and crew, would remain in the absence of
stipulation.
Section 2, PARAGRAPH 2 of the charter party, provides that
the owner is liable for loss or damage to the goods caused by
personal want of due diligence on its part or its manager to
make the vessel in all respects seaworthy and to secure that
she be properly manned, equipped and supplied or by the
personal act or default of the owner or its manager. Said
paragraph, however, exempts the owner of the vessel
from any loss or damage or delay arising from any
other source, even from the neglect or fault of the
captain or crew or some other person employed by the
owner on board, for whose acts the owner would
ordinarily be liable except for said paragraph.
Regarding the stipulation, the Court of First Instance
declared the contract as contrary to Article 587 of the
Code of Commerce making the ship agent civilly liable for
indemnities suffered by third persons arising from acts or
omissions of the captain in the care of the goods and Article
1744 of the Civil Code under which a stipulation between the
common carrier and the shipper or owner limiting the liability
of the former for loss or destruction of the goods to a degree
less than extraordinary diligence is valid provided it be
reasonable, just and not contrary to public policy. The
release from liability in this case was held
unreasonable and contrary to the public policy on
common carriers.
The provisions of our Civil Code on common carriers were
taken from Anglo-American law.7 Under American
jurisprudence, a common carrier undertaking to carry a
special cargo or chartered to a special person only,
becomes a private carrier. 8 As a private carrier, a
stipulation exempting the owner from liability for the
negligence of its agent is not against public
policy,9 and is deemed valid.
Such doctrine We find reasonable. The Civil Code
provisions on common carriers should NOT be applied
where the carrier is not acting as such but as a private
carrier. The stipulation in the charter party absolving
the owner from liability for loss due to the negligence
of its agent would be void ONLY if the strict public
policy governing common carriers is applied. Such
policy has no force where the public at large is not
involved, as in the case of a ship totally chartered for
the use of a single party.
And furthermore, in a CHARTER OF THE ENTIRE VESSEL,
the bill of lading issued by the master to the charterer, as
shipper, is in fact and legal contemplation merely a receipt
and a document of title not a contract, for the contract is the
charter party.10 The consignee may not claim ignorance of
said charter party because the bills of lading expressly
referred to the same. Accordingly, the consignees under the
bills of lading must likewise abide by the terms of the charter
party. And as stated, recovery cannot be had thereunder, for
loss or damage to the cargo, against the shipowners, unless
the same is due to personal acts or negligence of said owner
or its manager, as distinguished from its other agents or
employees. In this case, no such personal act or negligence
has been proved.
 WHEREFORE, the judgment appealed from is hereby reversed
and appellant is absolved from liability to plaintiff. No costs.
So ordered.
a. Void stipulation Article 1745
b. Effect of delay in general Article 1747
c. Effect of delay in case of strikes Article 1748
ii. As to amount of liability
a. Articles 1749 and 1750 of the Civil Code for land
transport and air transport and Article 372, Code
of Commerce, for land transport
Augusto B. Ong Yiu v. Court of Appeals and
Philippine Air Lines, No. L-40597, June 29, 1979
G.R. No. L-40597 June 29, 1979
DOCTRINE: "Such provisions have been held to be a part of
the contract of carriage, and valid and binding upon the
passenger regardless of the latter's lack of knowledge or
assent to the regulation". It is what is known as a contract of
"ADHESION", in regards which it has been said that contracts
of adhesion wherein one party imposes a ready-made form of
contract on the other, as the plane ticket in the case at bar,
are contracts not entirely prohibited. The one who adheres to
the contract is in reality free to reject it entirely; if he adheres,
he gives his consent.
A contract limiting liability upon an agreed valuation does not
offend against the policy of the law forbidding one from
contracting against his own negligence.
ISSUE: Did CA err in holding PAL guilty only of simple
negligence and not breach of its contract of transportation?
NO.
HELD: SC agrees with CA that PAL had not acted in bad
faith. Bad faith means a breach of a known duty through
some motive of interest or ill will. It was the duty of PAL to
look for petitioner's luggage which had been miscarried. PAL
exerted due diligence in complying with such duty.
In the absence of a wrongful act or omission or of fraud or bad
faith, petitioner is not entitled to moral damages.
Art. 2217. Moral damages include physical suffering,
mental anguish, fright, serious anxiety, besmirched
reputation, wounded feelings, moral shock, social humiliation,
and similar injury. Though incapable of pecuniary
computation, moral damages may be recovered if they are
the proximate result of the defendant's wrongful act of
omission.
Art. 2220. Willful injury to property may be a legal
ground for awarding moral damages if the court should find
that, under the circumstances, such damages are justly due.
The same rule applies to breaches of contract where the
defendant acted fraudulently or in bad faith.
Petitioner is neither entitled to exemplary damages (Article
2232) which can be granted if the defendant acted in a
wanton, fraudulent, reckless, oppressive, or malevolent
manner, which has not been proven in this case.
RE PAL's carriage liability:
The liability of PAL for the loss accordance with the stipulation
written on the back of the ticket is limited to P100 per
baggage, plaintiff not having declared a greater value, and
not having called the attention of the defendant on its true
value and paid the tariff. This stipulation is not questioned by
the plaintiff, and are printed in reasonably and fairly big
letters, and are easily readable. Being a lawyer and
businessman, plaintiff must be fully aware of these conditions.
8. BAGGAGE LIABILITY ... The total liability of the Carrier
for lost or damaged baggage of the passenger is LIMITED TO
P100.00 for each ticket unless a passenger declares a higher
valuation in excess of P100.00, but not in excess, however, of
a total valuation of P1,000.00 and additional charges are paid
pursuant to Carrier's tariffs.
While petitioner had not signed the plane ticket, he is
nevertheless bound by the provisions thereof.
There is nothing in the evidence to show the actual value of
the goods allegedly lost by petitioner.
WHEREFORE, for lack of merit, the instant Petition is hereby
denied, and the judgment sought to be reviewed hereby
affirmed in toto.
b. Articles 1749 and 1750 of the Civil Code, in relation to the
Carriage of Goods by Sea Act, and Articles 587, 590 (in all
other cases of loss) and 837 (in cases of collision), Code
of Commerce, for sea transport
RULES
ARTICLES 1749, 1750, cf. COGSA
ARTICLE 1749. A stipulation that the common carrier's
liability is limited to the value of the goods appearing in the
bill of lading, unless the shipper or owner declares a greater
value, is binding.
ARTICLE 1750. A contract fixing the sum that may be
recovered. by the owner or shipper for the loss, destruction, or
deterioration of the goods is valid, if it is reasonable and just
under the circumstances, and has been fairly and freely
agreed upon.
IN ALL OTHER CASES OF LOSS:
ARTICLE 587. The ship agent shall also be civilly liable
for the indemnities in favor of third persons which may arise
from the conduct of the captain in the care of the goods which
he loaded on the vessel; but he may exempt himself
therefrom by abandoning the vessel with all her equipment
and the freight it may have earned during the voyage.
ARTICLE 590. The co-owners of a vessel shall be civilly
liable in the proportion of their interests in the common fund,
for the results of the acts of the captain, referred to in Article
587. Each co-owner may exempt himself from this liability by
the abandonment, before a notary, of the part of the vessel
belonging to him.
IN CASES OF COLLISION:
ARTICLE 837. The civil liability incurred by the
shipowners in the case prescribed in this section, shall be
understood as limited to the value of the vessel with all its
appurtenances and freightage earned during the voyage
CODE OF COMMERCE FOR SEA TRANSPORT
CASES
Eastern and Australian Steamship Co., Ltd v. Great
American Insurance Co., G. R. No. L-37604, October
23, 1981
It should be noted that both the Carriage of Goods by
Sea Act and Clause 17 of the Bill of Lading allow the
payment beyond the respective melee, limit imposed
therein, provided that the value of the goods have
been declared in the Bin of Lading.
The second paragraph of Section 4 (5) of the
Carriage of Goods by Sea Act prescribing the melee,
 amount shall not be less than $500.00 refers to a
situation where there is an agreement other than set
forth in the Bill of Lading providing for a melee,
higher than $500.00 per package. In the case at bar,
it is apparent that there had been no agreement
between the parties, and hence, Clause 17 of the Bin
of Lading shall prevail.
Article 1749 of the NCC expressly allow the limitation
of the carrier's liability: Art. 1749 A stipulation that
the common carrier's liability is limited to the value
of the goods appearing in the bill of lading, unless
the shipper or owner declares a greater value, is
binding.
Eastern Shipping Lines v. Intermediate Appellate
Court, G. R. No. 69044, May 29, 1987
The law of the country to which the goods are to be
transported governs the liability of the common
carrier in case of their loss, destruction or
deterioration. As the cargoes in question were
transported from Japan to the Philippines, the liability
of Petitioner Carrier is governed primarily by the
CIVIL CODE. However, in all matters NOT regulated
by said Code, the rights and obligations of common
carrier shall be governed by the CODE OF
COMMERCE and by SPECIAL LAWS. Thus, the
Carriage of Goods by Sea Act, a special law, is
suppletory to the provisions of the Civil Code.
When what would ordinarily be considered packages
are shipped in a container supplied by the carrier and
the number of such units is disclosed in the shipping
documents, each of those units and not the container
constitutes the "PACKAGE" referred to in liability
limitation provision of Carriage of Goods by Sea Act.
Carriage of Goods by Sea Act, 4(5).
Even if language and purposes of Carriage of Goods
by Sea Act left doubt as to whether carrier-furnished
containers whose contents are disclosed should be
treated as packages, the interest in securing
international uniformity would suggest that they
should not be so treated.
Sea-Land Service, Inc. v. Intermediate Appellate
Court et al., G. R. No. 75118. August 31, 1987
Even if said section 4(5) of the Carriage of Goods by
Sea Act did not exist, the validity and binding effect
of the liability limitation clause in the bill of lading
here are nevertheless fully sustainable on the basis
alone of the cited Civil Code provisions. That said
stipulation is just and reasonable is arguable from
the fact that it echoes Art. 1750 itself in providing a
limit to liability only if a greater value is not declared
for the shipment in the bill of lading.
The Carriage of Goods by Sea Act is applicable
up to the final port of destination and that the
fact that transshipment was made on an
interisland vessel did not remove the contract
of carriage of goods from the operation of said
Act.
Teodoro Yangco, et al. v. Manuel Lasema, et al., G.
R. No. 47447-47449, October 29, 1941
That which distinguishes the maritime from the civil
law and even from the mercantile law in general is
the real and hypothecary nature of the former,
and the many securities of a real nature that
maritime customs, the laws, the codes, and the
later jurisprudence, have provided for the protection
of the various and conflicting interests which are
ventured and risked in maritime expeditions, such as
the interests of the vessel and of the agent, those of
the owners of the cargo and consignees, those who
salvage the ship, those who make loans upon the
cargo, those of the sailors and members of the crew
as to their wages, and those of a constructor as to
repairs made to the vessel.
As evidence of this REAL NATURE of the maritime
law we have (1) the limitation of the liability of the
agents to the actual value of the vessel and the
freight money, and (2) the right to retain the cargo
and the embargo and detention of the vessel even in
cases where the ordinary civil law would not allow
more than a personal action against the debtor or
person liable. It will be observed that these rights are
correlative, and naturally so, because if the agent
can exempt himself from liability by abandoning the
vessel and freight money, thus avoiding the
possibility of risking his whole fortune in the
business, it is also just that his maritime creditor may
for any reason attach the vessel itself to secure his
claim without waiting for a settlement of his rights by
a final judgment, even to the prejudice of a third
person.
If the ship owner or agent may in any way be
held civilly liable at all for injury to or death of
passengers arising from the negligence of the
captain in cases of collisions or shipwrecks, his
liability is merely co-extensive with his interest
in the vessel such that a total loss thereof
results in its extinction. In arriving at this
conclusion, we have not been unmindful of the fact
that the ill-fated steamship Negros, as a vessel
engaged in interisland trade, is a common carrier
and that the as a vessel engaged in interisland trade,
is a common carrier, and that the relationship
between the petitioner and the passengers who died
in the mishap rests on a contract of carriage. But
assuming that petitioner is liable for a breach of
contract of carriage, the exclusively "real and
hypothecary nature" of maritime law operates to
limit such liability to the value of the vessel, or to the
insurance thereon, if any. In the instant case it does
not appear that the vessel was insured.
Chua Yek Hong v. Intermediate Appellate Court, G.
R. No. L-74811, September 30, 1988
While the primary law governing the instant case is
the Civil Code, in all matters not regulated by said
Code, the Code of Commerce and other special laws
shall govern. Since the Civil Code contains no
provisions regulating liability of shipowners or agents
in the event of total loss or destruction of the vessel,
it is the provisions of the Code of Commerce,
particularly Article 587, that governs.
Aboitiz Shipping Corporation v. Court of Appeals
and General Accident Fire and Life Assurance
Corporation Ltd., G. R. No. 89757, August 6, 1990
The PACKAGE/CONTAINER contemplated by the law
to limit the liability of the carrier should be sensibly
related to the unit in which the shipper packed the
goods and described them, not a large metal object,
functionally a part of the ship, in which the carrier
used them to be contained. Such "container" must be
given the same meaning and classification as a
"package" and "customary freight unit."
iii. Rules of construction regarding stipulations
limiting carriers liability Article 1751
ARTICLE 1751. The fact that the common carrier has no
competitor along the line or route, or a part thereof, to which
the contract refers shall be taken into consideration on the
question of whether or not a stipulation limiting the common
carrier's liability is reasonable, just and in consonance with
public policy.
iv. Rules of construction on limitation of liability
regarding carriers presumption of fault Article
1752
 ARTICLE 1752. Even when there is an agreement
limiting the liability of the common carrier in the vigilance
over the goods, the common carrier is disputably presumed to
have been negligent in case of their loss, destruction or
deterioration.
c. Applicable law Article 1753
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
American President Lines v. Richard Kleper, G. R.
No. 15671, November 29, 1960, 110 Phil 243
Where the bill of lading provides that a shipper or
consignee who accepts the bill becomes bound by all
the stipulations contained therein, the said shipper or
consignee cannot elude its provisions simply because
they prejudice him and take advantage of those that
are beneficial to him. In the case at bar, the fact that
the shipper and consignee paid the corresponding
freight on his goods, shows that he impliedly
accepted the bill of lading which was issued in
connection with his shipment. Hence, the same is
binding upon him as if it had been actually signed by
him or by any person in his behalf.
Article 1753 of the Civil Code provides that the law of
the country to which the goods are to be transported
shall govern the liability of the common carrier in
case of loss, destruction or deterioration. This means
the law of the Philippines, or the Civil Code. Under
Article 1766, "In all matters not regulated by this
Code, the rights and obligations of common carriers
shall be governed by the Code of Commerce and by
special laws," and in the Civil Code there are
provisions that govern said rights and obligations
(Articles 1736, 1737 and 1738). Therefore, although
Section 4 (5) of the Carriage of Goods by Sea Act
states that the carrier shall not be liable in an
amount exceeding $500.00 per package unless the
value of the goods had been declared by the shipper
and inserted in the bill of lading, said section is
merely suppletory to the provisions of the Civil Code.
Eastern Shipping Lines v. Intermediate Appellate
Court, G. R. No. 69044, May 29, 1987
The law of the country to which the goods are to be
transported governs the liability of the common
carrier in case of their loss, destruction or
deterioration. As the cargoes in question were
transported from Japan to the Philippines, the liability
of Petitioner Carrier is governed primarily by the
CIVIL CODE. However, in all matters NOT regulated
by said Code, the rights and obligations of common
carrier shall be governed by the CODE OF
COMMERCE and by SPECIAL LAWS. Thus, the
Carriage of Goods by Sea Act, a special law, is
suppletory to the provisions of the Civil Code.
D. CARRIAGE OF GOODS BY SEA ACT
1. Application of the law Section 1
1. That the provisions of Public Act No. 521 of the 7th
Congress of the United States, approved on April 16, 1936, be
accepted, as it is hereby accepted to be made applicable to all
contracts for the carriage of goods by sea to and from
Philippine ports in foreign trade: Provided, that nothing in this
Act shall be construed as repealing any existing provision of
the Code of Commerce which is now in force, or as limiting its
application.
Eastern Shipping Lines, Inc. v. Intermediate
Appellate Court, G. No. 69044, May 29, 1987
Under the CARRIAGE OF GOODS BY SEA ACT, It is
provided therein that: 4(2). Neither the carrier
nor the ship shall be responsible for loss or
damage arising or resulting from (b) Fire,
unless caused by the actual fault or privity of
the carrier. In this case, the Trial Court and the
Appellate Court both found, that there was "actual
fault" of the carrier shown by "lack of diligence" in
that "when the smoke was noticed, the fire was
already big; that the fire must have started twenty-
four (24) hours before the same was noticed; " and
that "after the cargoes were stored in the hatches, no
regular inspection was made as to their condition
during the voyage." The foregoing suffices to show
that the circumstances under which the fire
originated and spread are such as to show that
Petitioner Carrier or its servants were negligent.
Consequently, the complete defense afforded by the
COGSA when loss results from fire is unavailing to
Petitioner Carrier.
2. Duties of the carrier
a. Provide a seaworthy ship Section 3 (1)
3(1). The carrier shall be bound before and at the beginning
of the voyage to exercise due diligence to
(a) Make the ship seaworthy;
(b) Properly man, equip, and supply the ship;
(c) Make the holds, refrigerating and cooling chambers, and
all other parts of the ship in which goods are carried, fit and
safe for their reception, carriage, and preservation.
Caltex (Phil) v. Sulpicio Lines, Inc., et al., G. R. No.
131166, September 30, 1999
The CHARTER PARTY AGREEMENT did not convert
the common carrier into a private carrier. The parties
entered into a voyage charter, which retains the
character of the vessel as a common carrier.
Therefore, it is imperative that a public carrier shall
remain as such, notwithstanding the charter of the
whole portion of a vessel of one or more persons,
provided the charter is limited to the ship only, as in
the case of a time-charter or the 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 ship-owner 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.
Thus, the carriers are deemed to warrant impliedly
the seaworthiness of the ship. For a vessel to be
seaworthy, it must be adequately equipped for the
voyage and manned with a sufficient number of
competent officers and crew. The failure of a
common carrier to maintain in seaworthy condition
the vessel involved in its contract of carriage is a
clear breach of its duty prescribed in Article 1755 of
the Civil Code.
The CHARTERER OF A VESSEL has no obligation
before transporting its cargo to ensure that the
vessel it chartered complied with all legal
requirements. The duty rests upon the common
carrier simply for being engaged in "public service."
The Civil Code demands diligence which is required
by the nature of the obligation and that which
corresponds with the circumstances of the persons,
the time and the place. Hence, considering the
nature of the obligation between Caltex and MT
Vector, liability as found by the Court of Appeals is
without basis.
The relationship between the parties in this case is
governed by special laws. Because of the implied
warranty of seaworthiness, 23 shippers of goods,
when transacting with common carriers, are not
expected to inquire into the vessel's seaworthiness,
 genuineness of its licenses and compliance with all
maritime laws. To demand more from shippers and
hold them liable in case of failure exhibits nothing
but the futility of our maritime laws insofar as the
protection of the public in general is concerned.
Thus, the nature of the obligation of Caltex demands
ordinary diligence like any other shipper in shipping
his cargoes. Clearly, as a mere VOYAGE CHARTERER,
Caltex had the right to presume that the ship was
seaworthy as even the Philippine Coast Guard itself
was convinced of its seaworthiness.
b. Properly care for the cargo Section 3
c. Issue a bill of lading Section 3(3), (7)
3(3). After receiving the goods into his carrier, or the master
or agent of the carrier, shall, on demand of the shipper, issue
to the shipper a bill of lading showing among other things
(a) The loading marks necessary for identification of the
goods as the same are furnished in writing by the shipper
before the loading of such goods starts, provided such marks
are stamped or otherwise shown clearly upon the goods if
uncovered, in such a manner as should ordinarily remain
legible until the end of the voyage.
(b) Either the number of packages or pieces, or the quantity
or weight, as the case may be, as furnished in writing by the
shipper.
(c) The apparent order and conditions of the goods: Provided,
that no carrier, master, or agent of the carrier, shall be bound
to state or show in the bill of lading any marks, number,
quantity, or weight which he has reasonable ground for
suspecting not accurately to represent the good actually
received or which he has had no reasonable means of
checking.
3(7). (7) After the goods are loaded the bill of lading to be
issued by the carrier, master, or agent of the carrier to the
shipper shall if the shipper so demands, be a "shipped" bill of
lading: Provided, that if the shipper shall have previously
taken up any document of title to such goods, he shall
surrender the same as against the issue of the "shipped" bill
of lading, but at the option of the carrier such document of
title may be noted at the port of shipment by the carrier,
master, or agent with the name or names of the ship or ships
upon which the goods have been shipped and the date or
dates of shipment, and when so noted the same shall for the
purpose of this section be deemed to constitute a "shipped"
bill of lading.
d. Indicate the apparent order and condition of the
goods Section 3(3)(c), (4)
3(3). After receiving the goods into his carrier, or the master
or agent of the carrier, shall, on demand of the shipper, issue
to the shipper a bill of lading showing among other things
(c) The apparent order and conditions of the goods: Provided,
that no carrier, master, or agent of the carrier, shall be bound
to state or show in the bill of lading any marks, number,
quantity, or weight which he has reasonable ground for
suspecting not accurately to represent the good actually
received or which he has had no reasonable means of
checking.
3(4). Such a bill of lading shall be prima facie evidence of
the receipt by the carrier of the goods as therein described in
accordance with paragraphs (3) (a), (b), and (c), of this
section: (The rest of the provision is not applicable to the
Philippines).
3. Duties of the shipper
a. Provide leading marks of the goods Section 3 (3)
(a)
3(3). After receiving the goods into his carrier, or the master
or agent of the carrier, shall, on demand of the shipper, issue
to the shipper a bill of lading showing among other things
(a) The loading marks necessary for identification of the
goods as the same are furnished in writing by the shipper
before the loading of such goods starts, provided such marks
are stamped or otherwise shown clearly upon the goods if
uncovered, in such a manner as should ordinarily remain
legible until the end of the voyage.
b. Provide the number, quantity or weight of the goods
Section 3(3)(b)
3(3). After receiving the goods into his carrier, or the master
or agent of the carrier, shall, on demand of the shipper, issue
to the shipper a bill of lading showing among other things
(b) Either the number of packages or pieces, or the quantity
or weight, as the case may be, as furnished in writing by the
shipper.
c. Guarantee the accuracy of the information given
Section 3(5)
3(5). The shipper shall be deemed to have guaranteed to
the carrier the accuracy at the time of shipment of the marks,
number, quantity, and weight, as furnished by him; and the
shipper shall indemnify the carrier against all loss, damages,
and expenses arising or resulting from inaccuracies in such
particulars. The right of the carrier to such indemnity shall in
no way limit his responsibility and liability under the contract
of carriage to any person other than the shipper.
d. Duty not to load dangerous cargo Section 4(6)
4(6). Goods of an inflammable, explosive, or dangerous
nature to the shipment whereof, the carrier, master or agent
of the carrier, has not consented with knowledge of their
nature and character, may at any time before discharge be
landed at any place or destroyed or rendered innocuous by
the carrier without compensation, and the shipper of such
goods shall be liable for all damages and expenses directly or
indirectly arising out of or resulting from such shipment. If any
such goods shipped with such knowledge and consent shall
become a danger to the ship or cargo, they may in like
manner be landed at any place, or destroyed or rendered
innocuous by the carrier without liability on the part of the
carrier except to general average if any.
4. Filing of claims Section 3(6)
3(6). Unless notice or loss or damage and the general
nature of such loss or damage by given in writing to the
carrier or his agent at the port of discharge or at the time of
the removal of the goods into the custody of the person
entitled to delivery thereof under the contract of carriage,
such removal shall be prima facie evidence of the delivery by
the carrier of the goods as described in the bill of lading. If the
loss or damage is not apparent, the notice must be given
within three days of the delivery.
Said notice of loss or damage may be endorsed upon the
receipt for the goods given by the person taking delivery
thereof.
The notice in writing need not be given if the state of the
goods has at the time of their receipt been the subject of joint
survey or inspection.
In any event the carrier and the ship shall be discharged
from all liability in respect of loss or damage unless suit is
brought within one year after delivery of the goods or the date
when the goods should have been delivered: Provided, that, if
a notice of loss or damage, either apparent or concealed, is
not given as provided for in this section, that fact shall not
affect or prejudice the right of the shipper to bring suit within
one year after the delivery of the goods or the date when the
goods should have been delivered.
In the case of any actual or apprehended loss or damage,
the carrier and the receiver shall give all reasonable facilities
to each other for inspecting and tallying the goods.

a. Apparent loss upon delivery of the goods
b. Non-apparent loss within three days from delivery
c. Filing of action to recover loss or damage to cargo
Benito Chua Kuy v. Everrett Steamship Corporation,
G. R. No. L-5554, May 27, 1953, Phil 207 (on
application of one year period)
While apparently the proviso contained in the portion
of section 3(6) of the act we have quoted gives the
impression that the right to file suit within one year
after delivery of the goods applies to the shipper
alone, however, reading the proviso in conjunction
with the rest of section 3(6), it at once becomes
apparent that the conclusion drawn by petitioner is
unwarranted. In the first place, said section provides
that the notice of loss or damage for which a claim
for indemnity maybe made should be given in writing
to the carrier at the port of discharge before or at the
time of the removal of the goods, and if the loss or
damage is not apparent said notice should be given
"within three days of the delivery." From the
language of this section, it seems clear that the
notice of loss or damage is required to be filed not
necessarily by the shipper but also by the consignee
or any legal holder of the bill of lading. In fact, said
section requires that the notice be given at the port
of discharge and the most logical party to file the
notice is either the consignee or the endorsee of the
bill of lading. In the second place, a study of the
historical background of this particular provision will
show that although the word shipper is used in the
proviso referred to by petitioner, the intention of the
law was not to exclude the consignee or endorsee of
the bill of lading from bringing the action but merely
to limit the filing of the same within one year after
the delivery of the goods at the port of discharge.
Insurance Company of North America v. Philippine
Ports Terminals, Inc., G. R. No. L-6420, July 18,
1955, 97 Phil 288 (on parties covered by COGSA)
Philippine Ports Terminals, Inc., is not a carrier. 1 (a)
and (d) of COGSA defines the terms "carrier" and
"ship" as follows: The term "carrier" includes the
owner or the charterer who enters into a contract of
carriage with a shipper. While the term "ship" means
any vessel used for the carriage of goods by sea.
Philippine Ports Terminals, Inc., is neither a
charterer nor a ship. Consequently the
"Carriage of Goods by Sea Act" does not apply
to it. However, the ordinary period of four years
fixed by the Code of Civil Procedure will apply. The
action in this case has been brought within that time.
Domingo Ang v. American Steamship Agencies, Inc.,
G. R. No. L-22491, January 27, 1957 On misdelivery
of cargo
Civil Code and as applied to Section 3 (6) paragraph
4 of the Carriage of Goods by Sea Act, "loss"
contemplates merely a situation where no
delivery at all was made by the shipper of the
goods because the same had perished, gone
out of commerce, or disappeared that their
existence is unknown or they cannot be
recovered. It does not include a situation
where there was indeed delivery but
delivery to the wrong person, or a misdelivery,
as alleged in the complaint in this case.
The point that matters here is that the situation is
either delivery or misdelivery, but not nondelivery.
Thus, the goods were either rightly delivered or
misdelivered, but they were not lost. There being no
loss or damage to the goods, the aforequoted
provision of the Carriage of Good by Sea Act stating
that "In any event, the carrier and the ship shall be
discharged from all liability in respect of loss or
damage unless suit is brought within one year after
delivery of the goods or the date when the goods
should have been delivered," does not apply. Said
one-year period of limitation is designed to meet the
exigencies of maritime hazards. In a case where the
goods shipped were neither last nor damaged in
transit but were, on the contrary, delivered in port to
someone who claimed to be entitled thereto, the
situation is different, and the special need for the
short period of limitation in cases of loss or damage
caused by maritime perils does not obtain.
Filipino Merchants Insurance Company, Inc. v. Jose
Alejandro, et al., G. R. No. L-54140, October 14,
1986 On the application of the period of limitation
on insurers of cargo
ISSUE: Whether or not the one-year period within
which to file a suit against the carrier and the ship, in
case of damage or loss as provided for in the
Carriage of Goods by Sea Act applies to the insurer of
the goods.
The coverage of the Act includes the insurer of
the goods. Otherwise, what the Act intends to
prohibit after the lapse of the one-year prescriptive
period can be done indirectly by the shipper or owner
of the goods by simply filing a claim against the
insurer even after the lapse of one year. This would
be the result if we follow the petitioner's argument
that the insurer can, at any time, proceed against the
carrier and the ship since it is not bound by the time-
bar provision. In this situation, the one-year limitation
will be practically useless. This could not have been
the intention of the law which has also for its purpose
the protection of the carrier and the ship from
fraudulent claims by having "matters affecting
transportation of goods by sea be decided in as short
a time as possible" and by avoiding incidents which
would "unnecessarily extend the period and permit
delays in the settlement of questions affecting the
transportation.
Mayer Steel Pipe Corporation, et al., v. Court of
Appeals, et al., G. R. No. 119571, March 11, 1998
(on the application of the period of limitation on
insurers of cargo)
Section 3(6) of the Carriage of Goods by Sea Act
states that the carrier and the ship shall be
discharged from all liability for loss or damage to the
goods if no suit is filed within one year after delivery
of the goods or the date when they should have been
delivered. Under this provision, only the
carrier's liability is extinguished if no suit is
brought within one year. But the liability of the
insurer is not extinguished because the
insurer's liability is based not on the contract
of carriage but on the contract of insurance. A
close reading of the law reveals that the Carriage of
Goods by Sea Act governs the relationship between
the carrier on the one hand and the shipper, the
consignee and/or the insurer on the other
hand. It defines the obligations of the carrier under
the contract of carriage. It does not, however, affect
the relationship between the shipper and the insurer.
The latter case is governed by the Insurance Code.
Our ruling in Filipino Merchants Insurance Co., Inc. v.
Alejandro 8 and the other cases 9 cited therein does
not support respondent court's view that the
insurer's liability prescribes after one year if no
action for indemnity is filed against the carrier or the
insurer. In that case, the shipper filed a complaint
against the insurer for recovery of a sum of money as
indemnity for the loss and damage sustained by the
insured goods. The insurer, in turn, filed a third-party
complaint against the carrier for reimbursement of
the amount it paid to the shipper. The insurer filed
the third-party complaint on January 9, 1978, more
 than one year after delivery of the goods on
December 17, 1977. The court held that the insurer
was already barred from filing a claim against the
carrier because under the Carriage of Goods by Sea
Act, the suit against the carrier must be filed within
one year after delivery of the goods or the date when
the goods should have been delivered. The court said
that "the coverage of the Act includes the insurer of
the goods.
Mitsui O. S. K. Lines Ltd. V. Court of Appeals, G. R.
No. 119571, March 11, 1998 On the application of
the period of limitation with respect to recovery of
loss other than that arising from loss of or damage
to cargo
As defined in the Civil Code and as applied to Section
3(6), paragraph 4 of the Carriage of Goods by Sea
Act, loss contemplates merely a situation where no
delivery at all was made by the shipper of the goods
because the same had perished, gone out of
commerce, or disappeared in such a way that their
existence is unknown or they cannot be recovered.
In the case at bar, there is neither deterioration nor
disappearance nor destruction of goods caused by
the carriers breach of contract. Whatever reduction
there may have been in the value of the goods is not
due to their deterioration or disappearance because
they had been damaged in transit.
Insurance Company of America v. Asian Terminals,
Inc., G. R. No. 180784, February 15, 2012 (on the
application of the prescriptive period)
The carrier and the ship may put up the defense of
prescription if the action for damages is not brought
within one year after the delivery of the goods or the
date when the goods should have been delivered. It
has been held that not only the shipper, but also the
consignee or legal holder of the bill may invoke the
prescriptive period. However, the COGSA does not
mention that an arrastre operator may invoke
the prescriptive period of one year; hence, it
does not cover the arrastre operator.
5. Limitation of liability Section 4 (5)
4(5). Any deviation in saving or attempting to save life or
property at sea, or any reasonable deviation shall not be
deemed to be an infringement or breach or this Act or of the
contract of carriage, and carrier shall not be liable for any loss
or damage resulting therefrom: Provided, however, that if the
deviation is for the purpose of loading or unloading cargo or
passengers it shall, prima facie, be regarded as unreasonable.
Aboitiz Shipping Corporation v. Court of Appeals, G.
R. No. 89757, August 6, 1990 On limits of liability
where value has been declared and on the
interpretation of container
American President Lines v. Richard Kleper, G. R.
No. 15671, November 29, 1960, 110 Phil 243
Article 1753 of the Civil Code provides that the law of
the country to which the goods are to be transported
shall govern the liability of the common carrier in
case of loss, destruction or deterioration. This means
the law of the Philippines, or the Civil Code. Under
Article 1766, "In all matters not regulated by this
Code, the rights and obligations of common carriers
shall be governed by the Code of Commerce and by
special laws," and in the Civil Code there are
provisions that govern said rights and obligations
(Articles 1736, 1737 and 1738). Therefore, although
Section 4 (5) of the Carriage of Goods by Sea Act
states that the carrier shall not be liable in an
amount exceeding $500.00 per package unless the
value of the goods had been declared by the shipper
and inserted in the bill of lading, said section is
merely suppletory to the provisions of the Civil Code.
Phoenix Assurance Company v. Macondray and Co.,
Inc., G. R. No. L-25048, May 13, 1975 (on extent of
recovery of insurance company)
A stipulation in a contract of carriage that the carrier
will not be liable beyond a specified amount unless
the shipper declares the goods to have a greater
value is generally deemed to be valid and will
operate to limit the carrier's liability, even if the loss
or damage results from the carrier's negligence.
Pursuant to such provision, where the shipper is
silent as to the value of his goods, the carrier's
liability for loss or damage thereto is limited to the
amount specified in the contract of carriage and
where the shipper states the value of his goods, the
carrier's liability for loss or damage thereto is limited
to that amount. Under a stipulation such as this, it is
the duty of the shipper to disclose, rather than the
carrier's to demand the true value of the goods and
silence on the part of the shipper will be sufficient to
limit recovery in case of loss to the amount stated in
the contract of carriage.
Eastern and Australian Steamship Company, Ltd. v.
Great American Insurance Company, G. R. No. L-
37604, October 23, 1981 On the interpretation of
the maximum liability under the COGSA
There is no inconsistency between Section 4 (5) of
the Carriage of Goods by Sea Act and Clause 17 of
the Bill of Lading. The first part of the provision of
Section 4 (5) of the Carriage of Goods by Sea Act
limits the melee, amount that may be recovered by
the shipper in the absence of an agreement as to the
nature and value of goods shipped. Said provision
does not prescribe the minimum and hence, it could
be any amount which is below $500.00. Clause 17 of
the questioned Bill of Lading also provides the melee,
for which the carrier is liable. It prescribes that the
carrier may only be held liable for an amount not
more than L100 Sterling which is below the melee,
limit required in the Carriage of Goods by Sea Act.
It should be noted that both the Carriage of Goods by
Sea Act and Clause 17 of the Bill of Lading allow the
payment beyond the respective melee, limit imposed
therein, provided that the value of the goods have
been declared in the Bin of Lading.
The second paragraph of Section 4 (5) of the
Carriage of Goods by Sea Act prescribing the melee,
amount shall not be less than $500.00 refers to a
situation where there is an agreement other than set
forth in the Bill of Lading providing for a melee,
higher than $500.00 per package. In the case at bar,
it is apparent that there had been no agreement
between the parties, and hence, Clause 17 of the Bin
of Lading shall prevail.
D. INTERNATIONAL CARRIAGE
1. Law of the contract varying domestic regimes
usually guided by applicable international
conventions
a. Carriage by sea
Cargo Hague Rules as amended by the Visby
Protocol and the SDR Protocol
Cargo Hamburg Rules
Passengers and their luggage Athens Convention
b. Carriage by air Warsaw Convention as amended
a. Extent of Airlines liability to passengers
 Alitalia v. Intermediate Appellate Court and Felipa
Pablo, G. R. No. 71929, December 4, 1990
The Warsaw Convention, however denies to the
carrier availment "of the provisions which
exclude or limit his liability, if the damage is
caused by his willful misconduct or by such
default on his part as, in accordance with the
law of the court seized of the case, is
considered to be equivalent to willful
misconduct," or "if the damage is (similarly)
caused . . by any agent of the carrier acting
within the scope of his employment." The Hague
Protocol amended the Warsaw Convention by
removing the provision that if the airline took all
necessary steps to avoid the damage, it could
exculpate itself completely, 23 and declaring the
stated limits of liability not applicable "if it is proved
that the damage resulted from an act or omission of
the carrier, its servants or agents, done with intent to
cause damage or recklessly and with knowledge that
damage would probably result."
The Convention's provisions do not "regulate or
exclude liability for other breaches of contract by the
carrier" 26 or misconduct of its officers and
employees, or for some particular or exceptional type
of damage. Otherwise, "an air carrier would be
exempt from any liability for damages in the event of
its absolute refusal, in bad faith, to comply with a
contract of carriage, which is absurd."
The Warsaw Convention has invariably been
held inapplicable, or as not restrictive of the
carrier's liability, where there was satisfactory
evidence of malice or bad faith attributable to
its officers and employees.
As to the purely technical argument that the award
to her of such nominal damages is precluded by her
omission to include a specific claim therefor in her
complaint, it suffices to draw attention to her general
prayer, following her plea for moral and exemplary
damages and attorney's fees, "for such other and
further just and equitable relief in the premises,"
which certainly is broad enough to comprehend an
application as well for nominal damages. Besides,
petitioner should have realized that the explicit
assertion, and proof, that Dr. Pablo's right had been
violated or invaded by it absent any claim for
actual or compensatory damages, the prayer thereof
having been voluntarily deleted by Dr. Pablo upon the
return to her of her baggage necessarily raised the
issue of nominal damages.
Carrier's liability was applied because of a simple
loss of baggage without any improper conduct on the
part of the officials or employees of the airline, or
other special injury sustained by the passengers. The
petitioner therein did not declare a higher value for
his luggage, much less did he pay an additional
transportation charge.
b. Limitation of liability
Pan American World Airways v. Intermediate
Appellate Court, G. R. No. L-70462, August 11,
1988
Under Art.1107 of the Civil Code, a debtor in good
faith like the defendant herein, may be held liable
only for damages that were foreseen or might have
been foreseen at the time the contract of
transportation was entered into. The trial court
correctly found that the defendant company could
not have foreseen the damages that would be
suffered by Mendoza upon failure to deliver the can
of film on the 17th of September, 1948 for the reason
that the plans of Mendoza to exhibit that film during
the town fiesta and his preparations, specially the
announcement of said exhibition by posters and
advertisement in the newspaper, were not called to
the defendant's attention.
But before defendant could be held to special
damages, such as the present alleged loss of profits
on account of delay or failure of delivery, it must
have appeared that he had notice at the time of
delivery to him of the particular circumstances
attending the shipment, and which probably would
lead to such special loss if he defaulted. Or, as the
rule has been stated in another form, in order
to purpose on the defaulting party further
liability than for damages naturally and
directly, i.e., in the ordinary course of things,
arising from a breach of contract, such unusual
or extraordinary damages must have been
brought within the contemplation of the
parties as the probable result of breach at the
time of or prior to contracting. Generally,
notice then of any special circumstances which
will show that the damages to be anticipated
from a breach would be enhanced has been
held sufficient for this effect.
Thus, applying the foregoing ruling to the facts of the
instant case, in the absence of a showing that
petitioner's attention was called to the special
circumstances requiring prompt delivery of private
respondent Pangan's luggages, petitioner cannot be
held liable for the cancellation of private
respondents' contracts as it could not have foreseen
such an eventuality when it accepted the luggage for
transit.
c. Applicability of the Warsaw Convention
Philippine Air Lines v. Court of Appeals G. R. No.
92501, March 6, 1992
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.
Since the passenger's destination in this case was
the Philippines, Philippine law governs the liability of
the carrier for the loss of the passenger's luggage. In
this case, the petitioner failed to overcome, not only
the presumption, but more importantly, the private
respondent's evidence, proving that the carrier's
negligence was the proximate cause of the loss
of his baggage. Furthermore, petitioner acted in
bad faith in faking a retrieval receipt to bail itself out
of having to pay Co's claim.
d. Award of Damages
Lufthansa German Airlines v. Intermediate
Appellate Court. G. R. No. 71238, March 19, 1992
The loss of one luggage belonging to the private
respondents while the same was in the custody of
the petitioner is not disputed. The contract of air
carriage generates a relation attended with a public
duty. Neglect or malfeasance of the carrier's
employees could given ground for an action for
damages. Common carriers are liable for the missing
goods for failure to comply with its duty. The
Convention does not thus operate as an exclusive
enumeration of the instances of an airline's liability,
or as an absolute limit of the extent of that liability.
Such a proposition is not borne out by the language
of the Convention, as this Court has now, and at an
earlier time, pointed out. Moreover, slight reflection
readily leads to the conclusion that it should be
deemed a limit of liability only in those cases where
the cause of the death or injury to person, or
destruction, loss or damage to property or delay in
 its transport is not attributable to or attended by any
willfully misconduct, bad faith, recklessness, or
otherwise improper conduct on the part of any
official or employee for which the carrier is
responsible, and there is otherwise no special or
extraordinary form of resulting injury. The
Convention's provisions, in short, do not "regulate or
exclude liability for other breaches of contract by the
carrier" or misconduct of its officers and employees,
or for some particular or exceptional type of damage.
WAIVER: The respondent court found that petitioner
waived the applicability of the Warsaw Convention to
the case at bar when it offered private respondent a
higher amount than that which is provided in the said
law and failed to raise timely objections during the
trial when questions and answers were brought out
regarding the actual claims and damages sustained
by Alcantara which were even subjected to lengthy
cross examination by Lufthansa's counsel.
e. Proper forum
Augusto Benedicto Santos III v. Northwest Orient
Airlines, G. R. No. 101538, June 23, 1992
By its own terms, the Convention applies to all
international transportation of persons performed by
aircraft for hire. International transportation is
defined in paragraph (2) of Article 1 as follows:
(2) For the purposes of this convention, the
expression "INTERNATIONAL TRANSPORTATION"
shall mean any transportation in which, according to
the contract made by the parties, the place of
departure and the place of destination, whether or
not there be a break in the transportation or a
transshipment, are situated [either] within the
territories of two High Contracting Parties.
Whether the transportation is "INTERNATIONAL" is
determined by the contract of the parties, which in
the case of passengers is the ticket. When the
contract of carriage provides for the transportation of
the passenger between certain designated terminals
"within the territories of two High Contracting
Parties," the provisions of the Convention
automatically apply and exclusively govern the rights
and liabilities of the airline and its passenger.
Where the matter is governed by the Warsaw
Convention, JURISDICTION TAKES ON A DUAL
CONCEPT. Jurisdiction in the international sense must
be established in accordance with Article 28(1) of
the Warsaw Convention, following which the
jurisdiction of a particular court must be established
pursuant to the applicable domestic law. ONLY AFTER
the question of which court has jurisdiction is
determined will the issue of venue be taken up. This
second question shall be governed by the law of the
court to which the case is submitted.
The PLACE OF DESTINATION, within the meaning
of the Warsaw Convention, is determined by the
terms of the contract of carriage or, specifically in
this case, the ticket between the passenger and the
carrier. Examination of the petitioner's ticket shows
that his ultimate destination is San Francisco.
Although the date of the return flight was left open,
the contract of carriage between the parties
indicates that NOA was bound to transport the
petitioner to San Francisco from Manila. Manila
should therefore be considered merely an agreed
stopping place and not the destination.
Article 1(2) also draws a distinction between a
"destination" and an "agreed stopping place." It is
the "destination" and not an "agreed stopping
place" that controls for purposes of
ascertaining jurisdiction under the Convention.
The contract is a single undivided
operation, beginning with the place of departure
and ending with the ultimate destination. The use
of the singular in this expression indicates the
understanding of the parties to the Convention that
every contract of carriage has one place of departure
and one place of destination. An intermediate place
where the carriage may be broken is not regarded as
a "place of destination."
DOMICILE: Notably, the domicile of the carrier is
only one of the places where the complaint is allowed
to be filed under Article 28(1). By specifying the
three other places, to wit, the principal place of
business of the carrier, its place of business where
the contract was made, and the place of destination,
the article clearly meant that these three other
places were not comprehended in the term "domicile.
f. Non-delivery of luggage
Philippine Airlines v. Intermediate Appellate Court,
G. R. No. 70481, December 11, 1992
DELAY", as used in a contract exempting a
telegraph company from all liability for any delay,
error, or remissness in sending a message, implies
that the message was or would be sent at some
time, but not sent or delivered promptly, and the
company is not exempt from liability for a total
failure to send and deliver a message.
Petitioner argues that pursuant to those provisions,
an air "carrier is liable only" in the event of death of a
passenger or injury suffered by him, or of destruction
or loss of, or damage to any checked baggage or
any goods, or of delay in the transportation by air of
passengers, baggage or goods. This pretense is not
borne out by the language of said Articles. The same
merely declare the carrier liable for damages in the
enumerated cases, if conditions therein specified are
present. Neither said provisions nor others in the
aforementioned Convention regulate or exclude
liability for other breaches of contract by the carrier.
g. Period of limitation
United Airlines v. Willie J. Dy. G. R. No. 127768,
November 19, 1999 Montreal Convention
The Warsaw Convention can be applied, or ignored,
depending on the peculiar facts presented by each
case. It does not regulate, much less exempt, the
carrier from liability for damages for violating the
rights of its passengers under the contract of
carriage, especially if willful misconduct on the part
of the carrier's employees is found or established.
Hence, despite the express mandate of Art. 29 of the
Warsaw Convention that an action for damages
should be filed within two (2) years from the arrival
at the place of destination, such rule shall not be
applied in the instant case because of the delaying
tactics employed by petitioner airline itself. Thus,
private respondent's second cause of action cannot
be considered as time-barred under Art. 29 of the
Warsaw Convention.
2. Law of the country of destination Article 1753,
Civil Code