I.

Civil Code later discovered that four coiles were unfit for their intended purpose, and
later declared lost by consignee Phil Steel.
Common Carriers
12. PERENA VS. ZARATE
G.R. NO. 157917 Phil First Insurance Corp paid the consignees P506,086.50 and was
August 29, 2012 subrogated, later filing a complaint for recovery. Belgian Overseas denied
Bersamin, J. liability, claiming that damage was "due to pre-shipment damage, to the
FACTS: inherent nature, vice or defect of the goods, or to perils, danger and
Perenas were engaged in the business of transporting students to Don accidents of the sea, or to insufficiency of packing thereof, or to the act or
Bosco. The Zarates engaged Perenas services to transport their son, Aaron, omission of the shipper of the goods or their representatives." They
to school. likewise claimed that should they be held liable, that said liability be
limited to the amount provided in the bill of lading and other pertinent laws.
While on the way to school, the van’s air-conditioned unit was turned on
and the stereo playing loudly. The driver took a detour because they were
running late due to the traffic in SLEX. The detour was through a narrow
path underneath the Magallanes Interchange used as short cut into The RTC dismissed the complaint, but the CA reversed their decision,
Makati. When the van was to traverse the PNR railroad crossing, the van
ruling that petitioner was liable because it failed to overcome the
was tailing a large passenger bus so the driver’s view of the oncoming train
was blocked. The train hit the van at the rear end and the impact threw 9 presumption of negligence.
students including Aaron out of the van. Aaron landed in the path of the
train which dragged his body and severed his head, instantaneously killing
him.
Issue
The Zarates filed for damages against Alfaro, Perenas, PNR, and the train
driver. The cause of action against Perena was for contract of carriage while Whether or not the presumption of negligence was overcome
for PNR, quasi delict. Perena posited the defense of diligence of a good
father in the selection and supervision of their driver
ISSUE/S: Were Perenas and PNR jointly and severally liable for damages?
Is the petitioner a common carrier? Ruling

RULING: Petitioners failed to rebut the presumption of negligence of common

YES. A school bus operator is a common carrier. carriers, as well as explain the damage sustained by the goods, after
Perena’s defense of diligence of a good father in the selection and admitting to have received them in good condition and that the damage took
supervision of their driver is unavailable for breach of contract of carriage. place while the goods were under their control.
Perenas operated as a common carrier; and their standard of care was
extraordinary diligence, not only diligence of a good father.
A carrier is a person or corporation who undertakes to transport or convey Mere proof of delivery of the goods in good order to a common carrier and
goods from one place to another, gratuitously or for hire. They may be of their arrival in bad order at their destination constitutes a prima facie
private or common case of fault or negligence against the carrier. If no adequate explanation is
Private carrier is one who, without holding himself or itself out to the given as to how the deterioration, the loss or the destruction of the goods
public as ready to act for all who may desire his or its services, undertakes, happened, the transporter shall be held responsible.
by special agreement in a particular instance only, to transport goods or
persons from one place to another either gratutitously or for hire. The
diligence required of a private carrier is only ordinary
Common Carrier is a person, corporation, firm or association engaged in Having been in the service for several years, the master of the vessel should
the business of carrying or transporting passengers or goods or both, by have known at the outset that metal envelopes would eventually deteriorate
land, water, or air, for compensation, offering such services to the when not properly stored while in transit. Equipped with the proper
public. Diligence required is to observe extraordinary diligence, and is knowledge of the nature of steel sheets in coils and of the proper way of
presumed to be at fault or to have acted negligently in case of the loss of transporting them, the master of the vessel and his crew should have
effects of passengers, or death or injuries to passengers undertaken precautionary measures to avoid possible deterioration of the
The true test for a common carrier is not the quantity or extent of business cargo. But none of these measures was taken.
actually transacted, or the number of conveyances, BUT WHETHER the
undertaking is a part of the activity that he has held out to the general public
as his business or occupation.
Breach of Contract of carriage-vigilance over goods
The Perenas held themselves out as a ready transportation indiscriminately
to the students of a particular school living within or near where they
38. REGIONAL CONTAINER LINES (RCL) OF SINGAPORE and
operated the service and for a fee. Perena, being a common carrier, was
EDSA SHIPPING AGENCY, Petitioners, vs.THE NETHERLANDS
already presumed to be negligent at the time of the accident because death
INSURANCE CO. (PHILIPPINES), INC., Respondent. G.R. No.
occurred to their passenger. The omissions of care on the part of the driver
168151 September 4, 2009
constituted negligence.

Carriage of Goods
25. Belgian Overseas and Chartering N.V. and Jardine Davies
Transport Services Inc. v. Philippine First Insurance Co. Inc. G.R. No.
143133. June 5, 2002
CMC Trading A.G. shipped 242 coils of various Prime Cold Rolled Steel
sheets from Hamburg, Germany to Manila, consigned to the Philippine
Steel Trading Corporation on June 13, 1990, and arrived July 28. The MN
Anangel Sky's cargo was discharged within the subsequent days. But it was
FACTS:
On October 20, 1995, 405 cartons of Epoxy Molding Compound were
consigned to be shipped from Singapore to Manila for Temic Telefunken
Microelectronics Philippines (Temic). U-Freight Singapore PTE Ltd.3 (U-
Freight Singapore), a forwarding agent based in Singapore, contracted the
services of Pacific Eagle Lines PTE. Ltd. (Pacific Eagle) to transport the
subject cargo. The cargo was packed, stored, and sealed by Pacific Eagle in
its Refrigerated Container No. 6105660 with Seal No. 13223. As the cargo
was highly perishable, the inside of the container had to be kept at a
temperature of 0º Celsius. Pacific Eagle then loaded the refrigerated
container on board the M/V PiyaBhum, a vessel owned by RCL, with
which Pacific Eagle had a slot charter agreement. RCL duly issued its own
Bill of Lading in favor of Pacific Eagle.
To insure the cargo against loss and damage, Netherlands Insurance issued
a Marine Open Policy in favor of Temic.
On October 25, 1995, the M/V PiyaBhum docked in Manila. After
unloading the refrigerated container, it was plugged to the power terminal
of the pier to keep its temperature constant. Fidel Rocha (Rocha), Vice-
President for Operations of Marines Adjustment Corporation, accompanied
by two surveyors, conducted a protective survey of the cargo. They found
that based on the temperature chart, the temperature reading was constant
from October 18, 1995 to October 25, 1995 at 0º Celsius. However, at
midnight of October 25, 1995 – when the cargo had already been unloaded
from the ship – the temperature fluctuated with a reading of 33º Celsius.
Rocha believed the fluctuation was caused by the burnt condenser fan
motor of the refrigerated container.
On November 9, 1995, Temic received the shipment. It found the cargo
completely damaged. Temic filed a claim for cargo loss against Netherlands
Insurance, with supporting claims documents.
RCL and EDSA Shipping, in their motion, insisted that Netherlands
Insurance had (1) failed to prove any valid subrogation, and (2) failed to
establish that any negligence on their part or that the loss was sustained
while the cargo was in their custody.
PETITIONER’S CONTENTION:
In the present case, 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 PiyaBhum. 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 (International Container
Terminal Services, Inc. or ICTSI), RCL and EDSA Shipping posit that the
presumption of negligence provided in Article 1735 of the Civil Code
should not apply. What applies in this case is Article 1734, particularly
paragraphs 3 and 4 thereof, which exempts the carrier from liability for loss
or damage to the cargo when it is caused either by an act or omission of the
shipper or by the character of the goods or defects in the packing or in the
containers.
ISSUE:
WHETHER OR NOT RCL and EDSA Shipping shall be held liable for the
damage.
HELD:
YES. 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.
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.91avvphi1
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.
This evidence, however, 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.1avvp
Limitation of Liability
51. SEA-LAND SERVICE, INC. vs. INTERMEDIATE
APPELLATE COURT and PAULINO CUE, doing business
under the name and style of "SEN HIAP HING
G.R. No. 75118
Nature of Action
PETITION to review the decision of the Court of Appeals
Parties
Petitioners: SEA-LAND SERVICE, INC.
Respondents: INTERMEDIATE APPELLATE COURT
and PAULINO CUE, doing business under the name and style of
"SEN HIAP HING,"
Facts
Sea-Land, a foreign shipping and forwarding company licensed to
do business in the Philippines, received from Seaborne Trading
Company in Oakland, California a shipment consigned to Sen Hiap
Hing the business name used by Paulino Cue in the wholesale and
retail trade which he operated out of an establishment located on
Borromeo and Plaridel Streets, Cebu City.
The shipper not having declared the value of the shipment, no
value was indicated in the bill of lading. The bill described the
shipment only as "8 CTNS on 2 SKIDS-FILES. Based on volume
measurements Sea-land charged the shipper the total amount of
US$209.28 for freight age and other charges. The shipment was
loaded on board the MS Patriot, a vessel owned and operated by
Sea-Land, for discharge at the Port Of Cebu.
The shipment arrived in Manila on February 12, 1981, and there
discharged in Container No. 310996 into the custody of the arrastre
contractor and the customs and port authorities. Sometime between
February 13 and 16, 1981, after the shipment had been transferred,
along with other cargoes to Container No. 40158 near Warehouse 3
at Pier 3 in South Harbor, Manila, awaiting trans-shipment to
Cebu, it was stolen by pilferers and has never been recovered.
On March 10, 1981, Paulino Cue, the consignee, made formal
claim upon Sea-Land for the value of the lost shipment allegedly
amounting to P179,643.48. Sea-Land offered to settle for
US$4,000.00, or its then Philippine peso equivalent of P30,600.00.
asserting that said amount represented its maximum liability for the
loss of the shipment under the package limitation clause in the
covering bill of lading. Cue rejected the offer and thereafter
brought suit for damages.
Contention of Petitioner
Defense of Respondent
Decision of RTC and CA
Court, after trial, rendered judgment in favor of Cue, sentencing
Sea-Land to pay him P186,048.00 representing the Philippine
currency value of the lost cargo, P55,814.00 for unrealized profit
with one (1%) percent monthly interest from the filing of the
complaint until fully paid, P25,000.00 for attorney's fees and
P2,000.00 as litigation expenses. Sea-Land appealed to the
Intermediate Appellate Court. That Court however affirmed the
decision of the Trial Court
Issue
whether or not the consignee of seaborne freight is bound by
stipulations in the covering bill of lading limiting to a fixed amount
the liability of the carrier for loss or damage to the cargo where its
value is not declared in the bill.
Decision
Since the liability of a common carrier for loss of or damage to
goods transported by it under a contract of carriage is governed by
the laws of the country of destination and the goods in question
were shipped from the United States to the Philippines, the liability
of petitioner Sea-Land to the respondent consignee is governed
primarily by the Civil Code, and as ordained by the said Code,
suppletorily, in all matters not determined thereby, by the Code of
Commerce and special laws. One of these suppletory special laws
is the Carriage of Goods by Sea Act, U.S. Public Act No. 521
which was made applicable to all contracts for the carriage of
goods by sea to and from Philippine ports in foreign trade by
Commonwealth Act No. 65, approved on October 22, 1936.
A stipulation that the common carrier's liability is limited to the
value of goods appearing in the bill of lading, unless the shipper or
owner declares a greater value in binding. Art 1759-c.c. 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.—Nothing contained in section 4(5) of the
Carriage of Goods by Sea Act already quoted is repugnant to or
inconsistent with any of the just-cited provisions of the Civil Code.
Said section merely gives more flesh and greater specificity to the
rather general terms of Article 1749 (without doing any violence to
the plain intent thereof) and of Article 1750, to give effect to just
agreements limiting carriers' liability for loss or damages which are
freely and fairly entered into.
Private respondent, by making claim for loss on the basis of the bill
of lading, to all intents and purposes accepted said bill. Having
done so, he—"x x x becomes bound by all stipulations contained
therein whether on the front or the back thereof. Respondent cannot
elude its provisions simply because they prejudice him and take
advantage of those that are beneficial. Secondly, the fact that
respondent shipped his goods on board the ship of petitioner and
paid the corresponding freight thereon shows that he impliedly
accepted the bill of lading which was issued in connection with the
shipment in question, and so it may be said that the same is binding
upon him as if it had been actually signed by him or by any other
person in his behalf.
CARRIAGE OF PASSENGERS
64. Baliwag Transit vs Court of Appeals
January 31, 1989
GR 80447
Nature of Action
Complaint for damages arising from breach of contract of
carriage
Parties
Petitioner: Employer Baliwag Transit and Driver
Leonardo Cruz
Respondents: Sps Sotero Cailipan and Zenaida Lopez
and son George of legal age
Facts
Sps. Sotero and Zenaida together with their son George filed a
complaint for damages against Baliwag Bus. On December 17,
1984, George, while riding on said bus suffered multiple serious
physical injuries when he was thrown off allegedly due to the
careless and negligent driving of Leonardo Cruz along Barangay
Patubig. On April 26, 1985 an Answer was filed by Baliwag
Transit alleging that the cause of the injuries sustained by George
was solely attributable to his voluntarily standing up and heading
for the door as if in a daze, opened and jumped off said bus while
in motion, in spite of the protestations of the driver and without the
knowledge of the conductor. Baliwag also filed a third party
complaint against Fortune Insurance on its third party liability
insurance where the latter claimed limited liability.

Contention of Petitioner
On November 14 and 18, 1985 respectively, Fortune Insurance and
Baliwag filed Motions to Dismiss on the ground that George had
executed a “Release of Claims” dated May 16, 1985 and was
finally incorporated in their subsequent motion.
Defense of Respondent
By way of opposition, the Father, Sotero Cailipan testified that at
the time of the incident, George was a student and totally
dependent on them for their support, that the expenses were
shouldered by them and they had not signed the “Release of
Claims”.
Decision of RTC and CA
RTC dismissed the complaint ruling that the contract of carriage
between Baliwag and George who was of legal age had the
exclusive right to execute the Release of Claims despite the fact
that he is still a student and dependent on his parents for support.
Thus Baliwag and Fortune were discharged.
CA however set aside said Order and held that the “Release of
Claims” cannot operate because it does not have the conformity of
all parties (George’s parents) who have a substantial interest and
cannot be prejudiced by such.
Issue
W/N the “Release of Claims” agreement has the effect of
extinguishing the liability of Baliwag and Fortune. (Y)
Decision
We hold that since the suit is one for breach of contract of carriage,
the Release of Claims executed by him, as the injured party,
discharging Fortune Insurance and Baliwag from any and all
liability is valid. He was then of legal age, a graduating student of
Agricultural Engineering, and had the capacity to do acts with legal
effect (Article 37 in relation to Article 402, Civil Code). Thus, he
could sue and be sued even without the assistance of his parents.
Significantly, the contract of carriage was actually between
George, as the paying passenger, and Baliwag, as the common
carrier.... Since a contract may be violated only by the parties
thereto, as against each other, in an action upon that contract, the
real parties in interest, either as plaintiff or as defendant, must be
parties to said contract (Marimperio Compania Naviera, S.A. vs.
Court of Appeals, No. L-40234, December 14, 1987, 156 SCRA
368). A real party-in-interest -plaintiff is one who has a legal right
while a real party-in-interest-defendant is one who has a correlative
legal obligation whose act or omission violates the legal right of
the former (Lee vs. Romillo, Jr., G.R. No. 60973, May 28, 1988).
In the absence of any contract of carriage between Baliwag and
George's parents, the latter are not real parties-in-interest in an
action for breach of that contract.
The Release of Claims had the effect of a compromise agreement
since it was entered into for the purpose of making a full and final
compromise adjustment and settlement of the cause of action
involved. A compromise is a contract whereby the parties, by
making reciprocal concessions, avoid a litigation or put an end to
one already commenced (Article 2028, Civil Code). The Release of
Claims executed by the injured party himself wrote finish to this
litigation.
Liability of carrier for willful or negligent acts of its
employees
77. DelPrado vs Manila Electric Co.
Facts:
The plaintiff, Del Prado, ran across the street to catch the car
that was driven by the motorman of the defendant Meralco. He raised his
hand as an indication to the motorman of his desire to board the car, in
response to which the motorman eased up a little, without stopping. Upon
this the plaintiff seized, with his hand, the front perpendicular handspot, at
the same time placing his left foot upon the platform. However, before the
plaintiff's position had become secure, and even before his raised right foot
had reached the flatform, the motorman applied the power, with the result
that the car gave a slight lurch forward. This sudden impulse to the car
caused the plaintiff's foot to slip, and his hand was jerked loose from the
handpost, He therefore fell to the ground, and his right foot was caught and
crushed by the moving car. The plaintiff filed an action for breach of
contract of carriage.
Issue: Whether Meralco is liable for breach of contract of carriage.
Ruling:
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). 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.
Where liability arises from a mere tort (culpa aquiliana), not involving a
breach of positive obligation, an employer, or master, may exculpate
himself 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). In the case
before us 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 the
plaintiff; 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. But this proof is irrelevant in view
of the fact that the liability involved was derived from a breach of
obligation.
As to the contributory negligence, it is obvious that the
plaintiff's 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 appellant's 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.
Involuntary Upgrading
90. CATHAY VS VASQUEZ
FACTS:
The Vasquezes and their two companions were given
their Business Class boarding passes. When boarding time was
announced, at the departure gate, Ms. Chiu announced, upon seeing
a seat change for respondents, an upgrade in seats from the
Business Class to First Class.
Dr. Vasquez refused the upgrade because, them as hosts,
would seat in First Class while their companions/guests stays in the
Business Class. Notified that refusal of the privilege to change seat
would mean that respondents will not be allowed for flight, Dr.
Vasquez talked with his companions and eventually gave-in.
ISSUE:
The only problem is the legal effect of the upgrading of
the seat accommodation of the Vazquezes. Did it constitute a
breach of contract?
HELD:
The Vazquezes never denied that they were members of Cathays
Marco Polo Club. They knew that as members of the Club, they
had priority for upgrading of their seat accommodation at no
extra cost when an opportunity arises. But, just like other
privileges, such priority could be waived. The Vazquezes should
have been consulted first whether they wanted to avail
themselves of the privilege or would consent to a change of seat
accommodation before their seat assignments were given to
other passengers. Normally, one would appreciate and accept an
upgrading, for it would mean a better accommodation. But,
whatever their reason was and however odd it might be, the
Vazquezes had every right to decline the upgrade and insist on
the Business Class accommodation they had booked for and
which was designated in their boarding passes. They clearly
waived their priority or preference when they asked that other
passengers be given the upgrade. It should not have been imposed
on them over their vehement objection. By insisting on the
upgrade, Cathay breached its contract of carriage with the
Vazquezes.
II. Maritime Commerce
Limited Liability Rule
103. Philippine Shipping Co. vs. Vergara
(GR 1600, 1 June 1906
Facts:
The Philippine Shipping Company, the owner of the
steamship Nuestra Sra. de Lourdes, claims an indemnification of
44,000 pesos for the loss of the said ship as a result of a collision.
Ynchausti & Co. also claimed 24,705.64 pesos as an
indemnification for the loss of the cargo of hemp and coprax
carried by the said ship on her last trip. The defendant, Francisco
Garcia Vergara, was the owner of the steamship Navarra, which
collided with the Lourdes.
From the judgment of the trial court the Philippine
Shipping Company and the defendant Vergara appealed, but the
latter has failed to prosecute his appeal by a bill of exceptions or
otherwise. The only appellant who has prosecuted this appeal now
reduces its claim to 18,000 pesos, the value of the colliding vessel.
The court below found as a matter of fact that the
steamship Lourdes was sailing in accordance with law, but that the
Navarra was not, and was therefore responsible for the collision.
(Bill of exceptions, p. 7.) The court also found as a fact that "both
ships with their respective cargoes were entirely lost." Construing
article 837 of the Code of Commerce, the court below held "that
the defendant was not responsible to the plaintiff for the value of
the steamship Lourdes, with the costs against the latter." (Bill of
exceptions, p. 8.)
Contention of Petitioner:
Philippine Shipping Company, contends that the
defendant should pay to it 18,000 pesos, the value of the Navarra at
the time of its loss
It was immaterial whether the Navarra had been entirely
lost, provided her value at the time she was lost could be
ascertained, since the extent of the liability of the owner of the
colliding vessel for the damages resulting from the collision is to
be determined in accordance with such value.
ISSUE:
WON Phil. Shipping Company should pay 18,000 pesos(the whole
value of Steamship Navarra) NO!
RULING:
Article 837 of the Code of Commerce provides: "The
civil liability contracted by the shipowners in the cases prescribed
in this section shall be understood as limited to the value of the
vessel with all her equipment and all the freight money earned
during the voyage."
"This section is a necessary consequence of the right to abandon
the vessel given to the shipowner in article 587 of the code, and it
is one of the many superfluities contained in the code." (Lorenzo
Benito, "Lecciones," 352.)
"ART. 587. The agent shall also be civilly liable for the
indemnities in favor of third persons which arise from the conduct
of the captain in the care of the goods which the vessel carried, but
he may exempt himself therefrom by abandoning the vessel with
all her equipments and the freight he may have earned during the
trip.
"ART. 590. The part owners of a vessel shall be civilly liable, in
the proportion of their contribution to the common fund, for the
results of the acts of the captain referred to in article 587. Each part
owner may exempt himself from this liability by the abandonment,
before a notary, of the part of the vessel belonging to him."

Averages/Salvage
116. Barrios vs. Carlos Go Thong & Co.
Parties: Petitioners – Honorio M. Barrios
Respondent - Carlos Go Thong & Co.
Nature of the Action:
Facts:
Petitioner Honorio Barrios was the captain and master of the MV Henry I
operated by William Lines, Inc. which plied the route from Cebu to Davao
City. On its voyage on May 1, 1958 the MV Henry I intercepted an SOS
signal from the MV Don Alfredo owned and operated by Go Thong & Co.
Responding to the SOS, Henry I approached the Don Alfredo as close as 7
meters and found out that the Don Alfredo was suffering from engine
failure. After the captain/master of MV Don Alfredo agreed to be assisted,
the crew of Henry I attached tow lines and proceeded to tow the Don
Alfredo heading towards the port of Dumaguete City. The following
morning, they encountered a sister ship of Don Alfredo, the MV Lux. Upon
the request of the captain of the Don Alfredo, the crew of the Henry I
released the towlines and continued on their voyage.
Petitioner’s Contention: That what they had undertaken was a salvage of a
vessel and its cargo from an impending sea peril, hence entitling them to
salvage of 100,000 pesos.
Respondent’s Argument: That there was no salvage, but what merely
happened was only a mere towage from which petitioner cannot claim any
compensation or remuneration independently of the shipping company that
owned the vessel commanded by him.
The trial court dismissed the claim.
Issue: Whether the rescue of the MV Don Alfredo should be classified as a
salvage, thus entitling Barrios et al. to reward?
Held:
No. Not all the requisites were present for the rescue to be considered as
salvage under the law.
The claim of Barrios is anchored on the provisions of the Salvage Law that
stipulates that a ship that is lost or abandoned at sea is considered as a
derelict and the proper subject of salvage. A ship in a desperate condition
with passengers and persons on board but who are unable to do anything for
their own safety may be considered a quasi-derelict.
Further, the Salvage Law provides that those assisting in saving a vessel in
its cargo from shipwreck shall be entitled to a reward. There are three
elements that are necessary for a salvage claim:
1. the existence of a marine peril
2. service is voluntarily rendered when not required as
an existing duty or a special contract; and
3. success in whole or in part, or that the service
rendered contributed to such success.
It is therefore imperative to establish whether the MV Don Alfredo was
exposed to any form of marine peril when it was assisted by the MV Henry
I. The Court however noted that there was no marine peril to which the MV
Don Alfredo was subjected to on the night of May 1, 1958 . When the
engine failure occurred the seas were calm and the weather was clear. In
fact the ship did not drift too far from the location where its engines failed.
Further, the captain and crew of the MV Don Alfredo did not find it
necessary to jettison the vessel’s cargo as a safety measure. Therefore the
MV Don Alfredo cannot even be considered as a quasi derelict.
Although the service of the defendant did not constitute as salvage, it can be
considered as a quasi contract of towage. However in a contract of towage,
only the owner of the towing vessel is entitled to remuneration. It is
noteworthy that the owner of MV Henry I, William Lines, Inc., already
waived its claim for compensation.
COGSA
Mitsui OSK Lines Ltd represented by Magsaysay
Agencies Inc. v. Court of Appeals and Lavine
Loungewear Mfg Corp GR no. 119572 March 11,
1998
Facts
Foreign corporation Mitsui O.S.K. Lines Ltd., represented in the
Philippines by its agent, Magsaysay Agencies contracted Meister
Transport, Inc., to transport goods to Lavine Loungewear
Manufacturing Corporation from Manila to Le Havre,
France. Mitppsui undertook to deliver the goods to France 28 days
from initial loading. On July 24, 1991, Mitsui loaded Meister's
container van for carriage at the said port of origin.
However, in Kaoshiung, Taiwan the goods were not transshipped
immediately, resulting in the arrival of the goods in Le Havre only
on November 14, 1991. The consignee allegedly paid only half the
value of the said goods on the ground that they did not arrive in
France until the off season in that country. The remaining half was
allegedly charged to the account of Lavine, who in turn demanded
payment from Mitsui through Magsaysay.
Their claim having been denied, Lavine filed a case with the RTC
on April 14, 1992. Originally impleaded as defendants were
Meister Transport, Inc. and Magsaysay Agencies, Inc., but was
later amended by impleading petitioner as defendant in lieu of its
agent. Petitioner filed a motion to dismiss alleging that the claim
against it had prescribed under the Carriage of Goods by Sea Act.
The RTC denied petitioners motion, and the CA affirmed the said
ruling.
Issue
Whether or not the action is for loss or damage to goods shipped,
within the meaning of 3(6) of the COGSA
Ruling
The CA decision is affirmed.
Loss as contemplated in the COGSA, aside from the meaning
contemplated in the Civil Code, includes a situation where the
goods never reach the consignee. Further the one year prescription
under the COGSA will not be applicable, buy rather the ten year
prescription under Art. 1144 of the Civil Code
As explained in Ang v. American Steamships Agencies, "said one-
year period of limitation is designed to meet the exigencies of
maritime hazards. In a case where the goods shipped were neither
lost 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.
Warsaw Convention
142. Lufthansa German Airlines v. IAC GR 71238
March 19, 1992
Nature of Action
Petition for review on certiorari decision of the then Intermediate Appellate
Court
Parties
Petitioner: Lufthansa German Airlines
Respondent: Intermediate Appellate Court snd Spouses Henry H. Alcantara
snd Teresita Alcantara
Facts
Respondent Alcantara shipped thirteen (13) pieces of luggage through
petitioner Lufthansa from Teheran to Manila as evidenced by Lufthansa Air
Waybill No. 220-9776-2733. The Air Waybill discloses that the actual
gross weight of the thirteen (13) pieces of luggage is 180 kilograms.
Respondent did not declare an inventory of the contents or the value of the
luggages when he delivered them to Lufthansa which were boarded in one
of Lufthansa's flights which arrived in Manila. After the luggages arrived in
Manila, the consignee, respondent Teresita Alcantara, was able to claim
from the cargo broker Philippine Skylanders, Inc. but only twelve (12) out
of the thirteen (13) pieces of luggage with a total weight of 174 kilograms.
Respondents advised Lufthansa of the loss of one of the luggages and of the
contents thereof, since efforts to trace the missing luggage yielded negative
results, Lufthansa informed Henry Alcantara accordingly and advised him
to file a claim invoice. Respondents demanded for the production of the
missing luggage but were not complied with by the petitioner.
Contention of Petitioner
Petitioner contends that the Republic of the Philippines is a party to the
"Convention for the Unification of Certain Rules Relating to International
Transportation by Air," otherwise known as the Warsaw Convention.
It insists that the testimonial and documentary evidence of respondent
spouses failed to indicate the actual value of the alleged contents of the
missing luggage and have not presented actual proof as to the contents, total
weight and value of the missing luggage as well as the actual damage they
suffered.
Defense of Respondent
Respondents maintain that the petitioner, as found by the trial and appellate
courts, waived the benefits of the Warsaw Convention when it offered a
settlement in the amount of $200.00 which is much higher than what the
Convention prescribes and never raised timely objections during the trial to
the introduction of evidence regarding the actual claims and damages
sustained by respondent Alcantara.
Decision of RTC and CA
The trial court rendered its decision in favor of the plaintiff which was
affirmed upon appeal with the modification that the amount of P20,000.00
awarded as attorney's fees shall be deleted, the costs to be borne by the
respective parties.
Issue
Whether or not the private respondents are entitled to an award of damages
beyond the liability set forth in the Warsaw Convention and in the Airway
bill of Lading.
Decision
YES, this Court held that the Warsaw Convention does not exclude liability
for other breaches of contract by the carrier. Thus:
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.
Furthermore, SC affirmed the findings of the respondent court 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.
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 (Zulueta v. Pan American World Airways, Inc., 43
SCRA 37 [1972]). Common carriers are liable for the missing goods for
failure to comply with its duty (American Insurance Co., Inc. v. Macondray
& Co., Inc., 39 SCRA 494 [171]).
In the case at bar, the trial court found that:
(a) petitioners airline has not successfully refuted the
presumption established by Article 1735 of the Civil Code
that the loss of the luggage in question was due to the
negligence or fault of its employees;
(b) the contents of the missing luggage of private respondents
could not be replaced and were assessed at P200,000.00
by the latter;

(c) respondent Henry Alcantara spent about $15,000.00 in
trying to locate said luggage in Frankfurt, Germany,
London, United Kingdom and Hongkong;
(d) there being no evidence to the contrary, the foregoing
assessments made by private respondents were fair and
reasonable; and (e) private respondents were unable to
present ample evidence to prove fraud and bad faith and
are therefore not entitled to moral damages under Article
2220 of the Civil Code.
Bumped off passenger; misplaced and lost baggage
155. Pan American World Airways, Inc. v. Rapadas
GR. No. 60673 May 19, 1992
FACTS:
Respondent held a passenger and baggage claim ticket for
petitioner’s flight from Guam to Manila. He was then ordered by
Pan American’s control agent to check in his attache case. Fearing
that he would miss his flight, respondent checked in his attache
case without declaring the contents or the value thereof.
Upon arrival to Manila respondent claimed his
belongings except his attache case. As such Rapadas filed a claim
with Petitioner’s Manila Baggage Service which was declared lost.
Petitioner offered to settle at $160 which represented the airline’s
limit of liability for loss or damage to personal property under the
contract of carriage. Rapadas refused the settlement and filed an
action for damages. Hence this petition.
ISSUE:
Whether or not passenger is bound by the terms of the passenger
ticket declaring the limitation of liability set forth in the Warsaw
Convention.
RULING:
The Court ruled in the affirmative. The Warsaw Convention
governs the availment of the liability limitations where the baggage
check is combined with or incorporated with the passenger ticket
the provision of Art 3, par. 1C.
The provision in the plane ticket is sufficient to govern
the limitations of liabilities of the airline for the loss of luggage.
The passenger, upon contracting with the airline and receiving the
plane ticket, was expected to be vigilant insofar as his luggage is
concerned. If the passenger fails to adduce evidence to overcome
the stipulations, he cannot avoid the application of the liability
limitations.
Public Service Act
168. REPUBLIC OF THE PHILIPPINES, petitioner, vs.
HON. ENRIQUE MEDINA, HON. GREGORIO
PANGANIBAN, HON. JOSUE L. CADIAO, HON.
FILOMENO KINTANAR, HON. PAZ VETO PLANAS,
as Associate Commissioners of the Public Service
Commission and MANILA ELECTRIC COMPANY,
respondents. G.R. No. L-32068 October 4, 1971
FACTS
On 7 May 1970, Manila Electric Company (hereinafter termed
MERALCO) filed an application with the Public Service Commission
seeking approval of revised rate schedules, with increased charges,
claiming that the floating exchange rate and economic conditions resulting
therefrom increased its operating and maintenance expenses by more than
40%, and likewise increased the peso cost of servicing its foreign debts,
causing it to incur an operational deficit and net loss of over one million
pesos a month. The proposed new rates, applicant contended, would give it
a reasonable return of below 12% of the present value of its properties
devoted to the public service, and implicated no additional burden to small
consumers (of 100 KWH or less per month) constituting around 52% of
petitioner's customers.
PETITIONER’S CONTENTION
Republic and other oppositors filed an opposition to respondent
MERALCO's main application for increase in rate charges on the ground
that the floating rate of exchange notwithstanding, the applicant's sound
financial condition is still capable of maintaining efficient service and
meeting due payments on its obligations, with a reasonable rate of return on
its investment; that the applicant's cash reserves accumulated and realized
from its huge net annual profits over the past years is capable of sustaining
itself without resorting to borrowings, despite the alleged increase in
operating expenses; that the proper basis of rate fixing is the fair value of its
property useful and being used in the service of the public, without regard
to encumbrance or indebtedness; that the increase in rate sought is
excessive and unreasonable and will bring about greater hardship to the
people, as well as directly cause increase in the cost of production which
will have to be unduly borne by the consuming public; and that the rate of
increase prayed for cannot be supported by the evidence to be presented in
justification thereof, apart from other grounds that may become apparent in
the course of the proceedings.
RESPONDENT/COMMISION’S RULING
Respondent Commission, promulgated a decision finding the proposed
rates reasonable and justified with minor adjustments
ISSUE
The validity of the order of 20 May 1970 authorizing the provisional rates
HELD:
NO. It is contended by petitioner Gonzalez, however, that the provisional
rate proceedings were void for want of jurisdiction, because the notice of
hearing was first published in two newspapers of general circulation
beginning 9 May 1970, and continued for 10 consecutive days until 19 May
1970; that the hearings on the provisional rates actually started 14 May, and
said rates were approved on 20 May 1970.
We do not find this contention meritorious, considering that when the
hearings were begun the notice had already been published six days in
succession, and moreover, Section 16(c) of the Public Service Acgt
(Commonwealth Act No. 146), in its first proviso, expressly prescribes —
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 30 days thereafter, upon publication and
notice to the concerns operating in the territory affected.
If the Commission is empowered to approve provisional rates even without
a hearing, a fortiori it may act on such rates upon a six-day notice to
persons concerned. In fact, when the provisional rates were approved on 20
May, the full 10 days notice had been published. To be sure petitioner
Gonzalez argues that the proviso quoted applies only to initial, not revised,
rates. The Public Service Act however, makes no distinction; it speaks of
rates proposed by public services; and whether initial or revised, these rates
are necessarily proposed merely, until the Commission approves them. The
Public Service Commission practice, moreover, is to hear and approve
revised rates without published notices or hearing. The reason is easily
discerned: The provisional rates are by their nature temporary and
subject to adjustment in conformity with the definitive rates approved,
and in the case at bar, the Public Service Commission order of 20 May
1970 expressly so provided.
181. Halili vs. Cruz, G.R. No. L-21061, June 27, 1968
Topic: Public Service Act
1. Nature of Action: Application for certificate of public
convenience to operate
2. Parties:
Petitioner: Ruperto Cruz (Applicant - Operator
of a bus service)
Respondent: Fortunato F. Halili (Existing
Operator of a bus service)
3. Facts:
Ruperto Cruz filed with the Public Service Commission an
application, praying for the grant of a certificate of public
convenience to operate, under PUB denomination, ten buses
between Norzagaray (Bulacan) and Piers (Manila), via
Novaliches Road, A. Bonifacio Road, Blumentritt Street, Rizal
Avenue, MacArthur Bridge, Aduana and 13th Streets; and on the
return trip, via Boston Street, MacArthur Bridge, Rizal Avenue,
Blumentritt Street, A. Bonifacio Road, and Novaliches Road.
The application was opposed by De Dios Transportation Co.,
Inc., Raymundo Transportation Co., Inc., PDP Transit Inc.,
Villa Rey Transit, Inc., and by herein petitioner-appellant
Fortunato F. Halili who were existing operators of
transportation serviceson the ground (1)that their service was
more than adequate to meet the demands of the traveling
public; that the(2) grant of the application would merely result
in wasteful and ruinous competition, and that the (3)respondent
was not financially capable of operating and maintaining the
service proposed by him.
After several hearings in which the parties presented their
evidence, oral and documentary, the Public Service Commission
rendered a decision, on February 13, 1963, granting a
certificate of public convenience to respondent Ruperto Cruz to
operate ten buses under PUB denomination on the line Norzagaray
(Bulacan) — Piers (Manila) passing through the routes applied for.
Hence, this instant petition.
4. Issue:
a. Whether the there was a public need for the operation by
respondent of ten buses on the line of Norzagaray (Bulacan) - Piers
(Manila).
b. Whether the petitioner-appellant was rendering sufficient and
adequate service on the line in question.
c. Whether the Public Service Commission erred in failing to give
petitioner-appellant the right of protection to investment to which
petitioner-appellant is entitled.
5. Held:
a. There is a public need for the operation by respondent-
appellee of ten buses on the line of Norzagaray (Bulacan) - Piers
(Manila). The applicant is applying for a not one from that of
the oppositors whom most of them go up to Divisoria and the rest
up to Folgueras. Also, there is evidence on record that there are
numerous students, professionals, merchants, and employees in
both government and private concerns, that commute daily
between Norzagaray and Manila and the intermediate points along
the line; that along the same line have emerged numerous centers
of population, residential subdivisions and housing projects,
industrial projects and hollow blocks manufacturing
establishments; that commuters experienced difficulties in
getting accommodated on buses traveling between Norzagaray
and Manila; and that the commuters from Manila to Norzagaray
also had to resort to broken trips for lack of direct trips.
Hence, public necessity for the application of the respondent’s
line of operation is supported.
b. The claim of petitioner, that he was rendering adequate
services on the line in question as would preclude the necessity of
another operator, is untenable. In the first place, as shown in the
record, petitioner does not have a direct line from Norzagaray
to the Piers — the line that is applied for by respondent. In the
second place, there is evidence to the effect that oppositor Halili
was authorized 48 trips between Norzagaray and Folgueras,
but it was making two trips only. This circumstance indicated
that there was shortage of transportation units or facilities, and
that the line was not adequately serviced by the petitioner.
c. As a general principle, public utility operators must be
protected from ruinous competition, such that before permitting
a new operator to serve in a territory already served by
another operator, the latter should first be given opportunity to
improve his equipment and service. This principle, however, is
subject to justifiable exceptions. The primary consideration in
the grant of a certificate of public convenience must always be
public convenience. Thus, the Court said that while it is the duty
of the government as far as possible to protect public utility
operators against unfair and unjustified competition, it is
nevertheless obvious that public convenience must have the first
consideration. The public convenience is properly served if
passengers who take buses at points in one part of a line are
able to proceed beyond those points without having to change
buses.
Considering all points, the court held that public convenience
would be properly served if commuters from Norzagaray going to
the Piers in Manila could go to their destination without the need of
changing buses. Certainly, the Public Service Commission has
power to grant a certificate of public convenience to a new
operator, and the old operator cannot with reason complain that it
had not been given opportunity to improve its equipment and
service, if it is shown that the old operator has not placed in the
service all the units of equipment that it had been authorized to
operate, and also when the old operator has violated, or has not
complied with, important conditions in its certificate. Hence,
Cruz’s application was approved.