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San Beda College of Law: 54 M A C L
San Beda College of Law: 54 M A C L
54
MEMORY AID IN COMMERCIAL LAW
TRANSPORTATION LAWS
Parties
1. Common carrier 1. Common carrier
2. Shipper 2. Passenger
3. Consignee
Cause of liability
Delay in delivery, loss, destruction, or deterioration of Death or injury to the passengers
the goods
Duration of liability
From the time the goods are unconditionally placed in The duty of a common carrier to provide safety to its
the possession of, and received by the carrier for passengers so obligates it not only during the course
transportation until the same are delivered actually orof the trip, but for so long as the passengers are
constructively by the carrier to the consignee or to the
within its premises and where they ought to be in
person who has the right to receive them. (Art. 1736) pursuance to the contract of carriage. (LRTA v.
It remains in full force and effect even when they Navidad, [2003])
All persons who remain on the premises within a
are temporarily unloaded or stored in transit unless the
shipper or owner has made use of the right of reasonable time after leaving the conveyance are to
stoppage in transitu. (Art. 1737) be deemed passengers, and what is a reasonable time
It continues to be operative even during the time or a reasonable delay within this rule is to be
the goods are stored in a warehouse of the carrier at determined from all the circumstances, and includes a
the place of destination until the consignee has bee reasonable time to see after his baggage and prepare
advised of the arrival of the goods and has had for his departure. (La Mallorca v. CA, 17 SCRA 739 ;
reasonable opportunity thereafter to remove them or Abiotiz Shipping Corporation v. CA, 179 SCRA 95)
otherwise dispose of them. (Art. 1738) It is the duty of common carriers of passengers to
Delivery of goods to the custom authorities is not stop their conveyances a reasonable length of time in
delivery to the consignee. (Lu Do v. Binamira, 101 Philorder to afford passengers an opportunity to enter,
120) and they are liable for injuries suffered from the
sudden starting up or jerking of their conveyances
while doing so. The duty which the carrier of
passengers owes to its patrons extends to persons
boarding the cars as well as to those alighting
therefrom (Dangwa Trans Co., Inc. vs. CA 202 SCRA
574).
Presumption of negligence
Defenses
Void stipulations
1. That the goods are transported at the risk of the
owner or shipper; Dispensing with or lessening the extraordinary
2. That carrier will not be liable for any loss, responsibility of a common carrier for the safety of
destruction or deterioration of the goods; passengers imposed by law by stipulation, by posting
3. That the carrier need not observe any diligence of notices, by statements on tickets or otherwise. (Art.
in the custody of the goods; 1757)
4. That the carrier shall exercise a degree of
diligence less than that of a good father of a family
over the movable transported;
5. That the carrier shall not be responsible for the
acts or omissions of his or its employees;
6. That the carrier’s liability for acts committed by
thieves or robbers who do not act with grave or
irresistible threat, violence or force is dispensed with
or diminished;
7. That the carrier is not responsible for the loss,
destruction or deterioration of the goods on account
of the defective condition of the car, vehicle, ship or
BAREBOAT OR CONTRACT OF
DEMISE CHARTER AFFREIGHTMENT
(TIME OR VOYAGE
CHARTER)
Charterer becomes Owner remains liable as
A stipulation in a charter A clause in a charter 3. Failure to 2. Sale by the and
party that in case of a party providing that the place the owner of the 5. Inability of
maritime accident for COGSA shall apply, even vessel at the vessel before the vessel to
which the shipowner is though the charterer’s loading by the navigate.
not responsible by law, transportation is disposal; charterer;
contract or otherwise, domestic, subject to the 4. Return of
the cargo shippers, extent that any term of the vessel due
consignees or owners the bill of lading is to pirates,
shall contribute with the repugnant to the COGSA enemies or bad
shipowner in general or applicable law, then weather;
average. (Pandect of to the extent thereof the 5. Arrival at a
Commercial Law and provision of the bill of port for
Jurisprudence, Justice lading is void. (Pandect repairs.
Jose Vitug, 1997 ed.) of Commercial Law and
Jurisprudence, Justice Terms:
Jose Vitug, 1997 ed.) 1. Primage - bonus to be paid to the captain after
the successful voyage.
2. Demurrage – the sum fixed in the charter party
as a remuneration to the owner of the ship for
the detention of his vessel beyond the number
of days allowed by the charter party for loading
or unloading or for sailing.
Rights and Obligations of Parties 3. Deadfreight – the amount paid by or
recoverable from a charterer of a ship for the
SHIPOWNER OR CHARTERER portion of the ship’s capacity the latter
SHIP AGENT contracted for but failed to occupy.
1. If the vessel is 1. To pay the agreed 4. Lay Days - days allowed to charter parties for
chartered wholly, not to charter price; loading and unloading the cargo.
accept cargo from 2. To pay freightage 5. Extra Lay Days – days which follow after the
others; on unboarded cargo; lay days have elapsed.
2. To observe 3. To pay losses to
represented capacity; others for loading USUAL FORMS OF CONSUMMATING
3. To unload cargo uncontracted cargo and CONTRACTS
clandestinely placed illicit cargo; 1. C.I.F. – cost, insurance and freight;
4. To substitute 4. To wait if the 2. F.O.B. - free on board;
another vessel if load is vessel needs repair; 3. F.A.S. - free alongside ship; and
less than 3/5 of 5. To pay expenses 4. C. & F. - cost and freight.
capacity; for deviation. (Arts.
5. To leave the port if 679-687) TRANSSHIPMENT OF GOODS
the charterer does not The act of taking cargo out of one ship and
bring the cargo within loading it in another, or the transfer of goods from
the lay days and extra the vessel stipulated in the contract of affreightment
lay days allowed; to another vessel before the place of destination
6. To place in a vessel named in the contract has been reached, or the
in a condition to transfer for further transportation from one ship or
navigate; conveyance to another.
7. to bring cargo to It is not dependent on the ownership of the
nearest neutral port in transporting ships or in the change of carriers, but
case of war or blockade. rather on the fact of actual physical transfer of
(Arts. 669-678) cargo from one vessel to another.
If done without legal excuse, however competent
and safe the vessel into which the transfer is made,
is a violation of contract and infringement of right of
Rescission of a Charter Party
shipper and subjects carrier to liability if freight is
At At Fortuitous
lost event by cause otherwise excepted. (Magellan
charterer’s shipowner’s causes
Manufacturing vs. CA, 201 SCRA 102)
request request (Art. 690)
(Art 688) (Art. 689)
LOAN ON BOTTOMRY AND RESPONDENTIA
A real, unilateral, aleatory contract, by virtue of
1. By 1. If the extra 1. War or which one person lends to another a certain amount
abandoning lay days interdiction of of money or goods on things exposed to maritime
the charter and terminate commerce; risks, which amount, with its earnings, is to be
paying half of without the 2. Blockade; returned if the things are safely transported, and
the freightage; cargo being 3. Prohibition which is lost if the latter are lost.
2. Error in placed to receive
tonnage or alongside the cargo;
flag; vessel; 4. Embargo;
LOAN ON LOAN ON
BOTTOMRY RESPONDENTIA
Definition Note: Under existing laws, the parties to a loan,
Loan made by Loan taken on security whether ordinary or maritime, may agree on any
shipowner or ship of the cargo laden on a rate of interest. (CB Circular 905)
agent guaranteed by vessel, and repayable
vessel itself and upon safe arrival of
repayable upon arrival cargo at destination. MARINE INSURANCE LOAN ON
of vessel at (Art. 719) BOTTOMRY OR
destination. (Art. 719) RESPONDENTIA
Indemnity is paid after the Indemnity is paid in
loss has occurred advance by way of
Who may contract
a loan
Shipowner or ship Only the owner of the
In case of loss of the vessel In case of loss of
agent. Outside of the cargo.
due to a risk insured the vessel due to a
residence of the
against, the obligation of marine peril, the
owners - the captain.
the insurer becomes obligation of the
Common elements: absolute borrower to pay is
1. Exposure of security to marine peril; extinguished
2. Obligation of the debtor conditioned only Consensual contract Real contract
upon safe arrival of the security at the point
of destination. Hypothecary Nature of Bottomry/
Forms: Respondentia
1. Public instrument GENERAL RULE: The obligation of the borrower to
2. Policy signed by the contracting parties and pay the loan is extinguished if the goods given as
the broker taking part therein security are absolutely lost by reason of an accident
3. Private instrument (Art. 720) of the sea, during the voyage designated, and if it is
Contents: proven that the goods were on board.
1. Kind, name and registry of the vessel; EXCEPTIONS:
2. Name, surname and domicile of the captain; 1. Loss due to inherent defect;
3. Names, surnames and domiciles of the 2. Loss due to the barratry on the part of the
borrower and the lender; captain;
4. Amount of the loan and the premium 3. Loss due to the fault or malice of the borrower;
stipulated; 4. The vessel was engaged in contraband; and
5. Time for repayment; 5. The cargo loaded on the vessel be different in
6. Goods pledged to secure repayment; from that agreed upon.
7. Voyage during which the risk is run (Art.721)
Concurrence of Marine Insurance and Loan on
Bottomry/Respondentia
1. The insurable interest of the owner of a
BOTTOMRY/ ORDINARY LOAN
ship hypothecated by bottomry is only the
RESPONDENTIA (MUTUUM)
excess of the value over the amount
Not subject to Usury Subject to Usury Law secured by bottomry. (Sec. 101,
Law Insurance Code)
2. The value of what may be saved in case
Liability of the Not subject to any of shipwreck shall be divided between the
borrower is contingent contingency (absolute lender and the insurer in proportion to the
on the safe arrival of liability) interest of each one. (Art. 735)
the vessel or cargo at
destination Note: If a vessel is hypothecated by bottomry only
the excess is insurable, since a loan on bottomry
The last lender is a The first lender is a partakes of the nature likewise of an insurance
preferred creditor preferred creditor coverage to the extent of the loan accommodation.
The same rule would apply to the hypothecation of
the cargo by respondentia. (Pandect of Commercial
WHEN LOAN ON BOTTOMRY OR Law and Jurisprudence, Justice Jose Vitug, 1997
RESPONDENTIA REGARDED AS SIMPLE LOAN ed.)
1. Lender loaned an amount larger than the
value of the object due to fraudulent ACCIDENTS IN MARITIME COMMERCE
means employed by the borrower. 1. Averages
(ART.726) 2. Arrival Under Stress
2. Full amount of the loan is not used for the 3. Collision
cargo or given on the goods if all of them 4. Shipwreck
could not have been loaded, the balance
will be considered a simple loan. AVERAGE
(ART.727) An extraordinary or accidental expense incurred
3. If the effects on which the money is taken during the voyage in order to preserve the cargo,
is not subjected to any risk. (ART.729) vessel or both, and all damages or deterioration
suffered by the vessel from departure to the port of Procedure for recovery
destination, and to the cargo from the port of 1. Assembly and
loading to the port of consignment. (Art. 806) deliberation
The person whose property has been saved must 2. Resolution of the
contribute to reimburse the damage caused or captain
expense incurred if the situation constitutes general 3. Entry of the
average. resolution in the
Classes: logbook
1. Particular or Simple Average 4. Detailed minutes
2. Gross or General Average 5. Delivery of the
Where both vessel and cargo are saved, it is minutes to the maritime
general average; where only the vessel or only the judicial authority of the
cargo is saved, it is particular average. first port, within 24
Expenses incurred to refloat a vessel, which hours from arrival,
accidentally ran aground, in order to continue its 6. Ratification by
voyage, do not constitute general average. Not only captain under oath.
is there absence of a marine peril, common safety (Arts. 813-814)
factor, and deliberateness. It is the safety of the
property, and not the voyage, which constitutes the GOODS NOT COVERED BY GENERAL AVERAGE
true foundation of general average. (A. Magsaysay, EVEN IF SACRIFICED
Inc. vs. Agan, G.R.No. L-6393, Jan. 31, 1955) 1. Goods carried on deck. (ART.855)
2. Goods not recorded in the books or
records of the vessel. (ART.855 (2))
PARTICULAR OR GROSS OR GENERAL 3. Fuel for the vessel if there is more than
SIMPLE sufficient fuel for the voyage. (Rule IX,
Definition York-Antwerp Rule)
Damages or expenses Damages or expenses
caused to the vessel or deliberately caused in Jettison
cargo that did not inure order to save the Act of throwing cargo overboard in order to
to the common benefit, vessel, its cargo or both lighten the vessel.
and borne by respective from real and known Order of goods to be cast overboard:
owners. (Art. 809) risk. (Art. 811) 1. Those which are on the deck, preferring
Requisites the heaviest one with the least utility and
1. common danger; value;
2. deliberate 2. Those which are below the upper deck,
sacrifice; beginning with the one with greatest
3. success; weight and smallest value. (Art. 815)
4. proper formalities
and legal steps. Jettisoned goods are not res nullius nor deemed
Liability “abandoned” within the meaning of civil law so as to
The owner of the goods All the persons having be the object of occupation by salvage. (Pandect of
which gave rise to the an interest in the vessel Commercial Law and Jurisprudence, Justice Jose
expense or suffered the and the cargo therein Vitug, 1997 ed.)
damage shall bear this at the time of the In order that the jettisoned goods may be
average. (Art. 810) occurrence of the included in the gross or general average, the
average shall contribute existence of the cargo on board should be proven
to satisfy this average. by means of the bill of lading. (Art. 816)
(Art. 812)
The insurers York-Antwerp (Y-A) Rules on Determining
(Art.859) and lenders Liability for Averages With Regard To Deck
on bottomry and Cargo
respondentia shall 1. Deck cargo is allowed only in
likewise contribute. domestic/coastwise/inter-island shipping, and is
(Art.732). prohibited in international/overseas/foreign
Number of interests involved shipping.
Only one interest Several interests 2. If deck cargo is loaded with the consent of the
involved involved shipper on overseas trade, it must always contribute
Share in the damage or expense to general average, but should the same be
jettisoned, it would not be entitled to
100% share In proportion to the
reimbursement because there is violation of the Y-A
value of the owner’s
Rules.
property saved
3. If deck cargo is loaded with the consent of the
Right to recover
shipper on coastwise shipping, it must always
No reimbursement There may be
contribute to general average and if jettisoned
reimbursement
would be entitled to reimbursement.
Kinds (not exclusive)
Reason: In domestic shipping, voyages are
Art. 809 Art. 811
usually short and the seas are generally not
rough. In overseas shipping, the vessel is Impact of two vessels both of which are moving.
exposed for many days to perils of the sea.
Allision
Impact between a moving vessel and a stationary
DOMESTIC INTERNATIONAL
one.
Deck cargo is allowed Deck cargo is not
allowed Nautical Rules to Determine Negligence
With shipper’s consent 1. When two vessels are about to enter a port,
General average Particular average the farther one must allow the nearer to enter
Without shipper’s consent first; if they collide, the fault is presumed to be
Captain is liable Captain is liable imputable to the one who arrived later, unless
it can be proved that there was no fault on its
ARRIVAL UNDER STRESS (ARRIBADA) part.
The arrival of a vessel at the nearest and most 2. When two vessels meet, the smaller should
convenient port instead of the port of destination, if give the right of way to the larger one.
during the voyage the vessel cannot continue the 3. A vessel leaving port should leave the way
trip to the port of destination. clear for another which may be entering the
same port.
When lawful When Who bears 4. The vessel which leaves later is presumed to
unlawful expenses: have collided against one which has left earlier.
5. There is a presumption against the vessel
The inability to 1. Lack of The shipowner which sets sail in the night.
continue provisions due or ship agent is 6. There is a presumption against the vessel with
voyage is due to negligence to liable in case of spread sails which collides with another which
to lack of carry according unlawful arrival is at anchor and cannot move, even when the
provisions, to usage and under stress. crew of the latter has received word to lift
well-founded customs; But they shall anchor, when there was not sufficient time to
fear of seizure, 2. Risk of not be liable do so or there was fear of a greater damage or
privateers, enemy not well for the other legitimate reason.
pirates, or known or damages 7. There is a presumption against an improperly
accidents of manifest caused by moored vessel.
the sea 3. Defect of reason of a 8. There is a presumption against a vessel which
disabling it to vessel due to lawful arrival. has no buoys to indicate the location of its
navigate. (Art. improper (Art. 821) anchors to prevent damage to vessels which
819) repair; and may approach it.
4. Malice, 9. Vessels must have “proper look-outs” or
negligence, lack persons trained as such and who have no
of foresight or other duty aside therefrom. (Smith Bell v. CA)
skill of captain.
(Art. 820) Nautical Rules as to Sailing Vessel and
Steamship
It is the duty of the captain to continue the 1. Where a steamship and a sailing vessel are
voyage without delay after the cause of the arrival approaching each other from opposite
under stress has ceased failing in such duty renders directions, or on intersecting lines, the
him liable. However, in case the cause has been risk steamship from the moment the sailing vessel
of enemies, there must first be an assembly before is seen, shall watch with the highest diligence
departure. (Art. 825) her course and movements so as to be able to
Steps: adopt such timely means of precaution as will
1. Captain should determine during the necessarily prevent the two boats from coming
voyage if there is well founded fear of in contact.
seizure, privateers and other valid 2. The sailing vessel is required to keep her
grounds; course unless the circumstances require
2. Captain shall assemble the officers and otherwise.
summon the persons interested in the
cargo who may attend the meeting but Zones of Time in the Collision of Vessels
without a right to vote; 1. First zone – all time up to the moment when risk
3. The officers shall determine and agree if of collision begins.
there is well-founded reason after No rule is as yet applicable for none is necessary.
examining the circumstances. The 2. Second zone – time between moment when risk
captain shall have the deciding vote; of collision begins and moment it becomes a
4. The agreement shall be drafted and the practical certainty.
proper minutes shall be signed and It is in this period where conduct of the vessels is
entered in the log book; primordial. It is in this zone that vessels must
5. Objections and protests shall likewise be strictly observe nautical rules, unless a departure
entered in the minutes. therefrom becomes necessary to avoid imminent
danger.
COLLISION 3. Third zone – time when collision is certain and
time of impact. Excuses for not filing protest: 1) where the
An error in this zone would no longer be legally interested person is not on board the vessel; and 2)
consequential. on collision time, need not be protested. (Art. 836)
Error in Extremis - sudden movement made by a Cases applicable:
faultless vessel during the third zone of collision 1. Collision (Art. 835);
with another vessel which is at fault during the 2nd 2. Arrival under stress (Art. 612(8));
zone. Even if such sudden movement is wrong, no 3. Shipwrecks (Arts. 612(15), 843);
responsibility will fall on said faultless vessel. 4. Where the vessel has gone through a
(Urrutia and Co. v. Baco River Plantation Co., 26 hurricane or when the captain believes
PHIL 632) that the cargo has suffered damages or
averages (Art. 624).
Cases Covered By Collision and Allision Who makes: Captain
1. One vessel at fault When made: within 24 hours from the time the
Vessel at fault is liable for damage caused to collision took place.
innocent vessel as well as damages suffered by the Before whom made: competent authority at the
owners of cargo of both vessels. (Art. 826) point of collision or at the first port of arrival, if in
2. Both vessels at fault the Philippines and to the Philippine consul, if the
Each vessel must bear its own loss, but the collision took place abroad. (Art. 835)
shippers of both vessels may go against the
shipowners who will be solidarily liable. (Art. 827) SHIPWRECK
3. Vessel at fault not known It is the loss of the vessel at sea as a
Each vessel must bear its own loss, but the consequence of its grounding, or running against an
shippers of both vessels may go against the object in sea or on the coast. It occurs when the
shipowners who will be solidarily liable. (Art. 828) vessel sustains injuries due to a marine peril
Doctrine of Inscrutable Fault – In case of rendering her incapable of navigation.
collision where it cannot be determined which If the wreck was due to malice, negligence or
between the two vessels was at fault, both lack of skill of the captain, the owner of the vessel
vessels bear their respective damage, but both may demand indemnity from said captain. (Art. 841)
should be solidarily liable for damage to the The rules on collision or allision, as may be
cargo of both vessels. pertinent, can equally apply to shipwrecks.
4. Third vessel at fault
The third vessel will be liable for losses and SPECIAL CONCEPTS
damages. (Art. 831) ARRASTRE SERVICE
5. Fortuitous event/force majeure A contract for the unloading of goods from a
No liability. Each bears its own loss. (Art. 830) vessel.
Applicability: Overseas trade only. (Commercial
The doctrine of res ipsa loquitur applies in case a Law Review, C. Villanueva, 2004 ed.)
moving vessel strikes a stationary object, such as a Significance: When a person brings in cargo
bridge post, dock, or navigational aid. (Far Eastern from abroad, he cannot unload and deliver the
Shipping v. CA, Luzon Stevedoring vs. CA) cargo by himself. The unloading must be done by
the arrastre operator, which will then deliver the
Even if the cause of action against the common cargo to the importer. (Commercial Law Review, C.
carrier is based on quasi-delict, the defense of due Villanueva, 2004 ed.)
diligence in the selection and supervision of Nature of business: It is a public utility,
employees is unavailing in case of a maritime tort discharging functions which are heavily invested
resulting in collision. It is not a civil tort governed by with public interest.
the Civil Code but a maritime one governed by Arts. Liability:
826-839 of the Code of Commerce. (Manila 1. Similar to a warehouseman (Lua Kian v. Manila
Steamship vs. Insa Abdulhaman) Railroad)
2. Similar to a common carrier (Northern Motors
Doctrine of Last Clear Chance and Rule on v. Prince Line)
Contributory Negligence cannot be applied in 3. Solidary liability with the common carrier
collision cases because of Art.827 of the Code of
Commerce. (Notes and Cases on the Law on Note: In order that the arrastre operator may be
Transportation and Public Utilities, Aquino, T. & held liable, the consignee must prove that the
Hernando, R.P. 2004 ed.) damage was due to the negligence and while the
goods are in the custody of the arrastre operator.
MARITIME PROTEST (Hartford Fire Insurance v. E. Razon, Inc.)
Condition precedent or prerequisite to recovery
of damages arising from collisions and other STEVEDORING SERVICE
maritime accidents. The carriage of goods from the warehouse or
It is a written statement made under oath by the pier to the holds of the vessel. (Chief of Staff vs.
captain of a vessel after the occurrence of an CIR)
accident or disaster in which the vessel or cargo is As understood in the port business, the term
lost or damaged, with respect to the circumstances consists of the handling of cargo from the hold of
attending such occurrence, for the purpose of the ship to the dock, in case of pier-side unloading;
recovering losses and damages. or to a barge, in case of unloading at sea. (Anglo-Fil
Trading Corp. vs. Lazaro) a. Delivery of the goods (delivered but
The loading on the ship of outgoing cargo is also damaged goods); or
part of stevedoring work. (Ibid.) b. The date when the goods should have
been delivered (non-delivery). (Sec. 3[6])
CONTAINERIZATION/ “SAID-TO-CONTAIN”/
“SHIPPER’S LOAD AND COUNT” SYSTEM “Loss or Damage” as applied to the COGSA
System whereby the shipper loads his cargoes in contemplates a situation where no delivery at all
a specially designed container, seals the container was made by the shipper of the goods because the
and delivers it to the carrier for transportation. The same had perished, gone out of commerce, or
carrier does not participate in the counting of the disappeared in such a way that their existence is
merchandise for loading into the container, the unknown or they cannot be recovered. Thus, it is
actual loading, and the sealing of the container. (US inapplicable in case of misdelivery or conversion.
Lines v. Comm. Of Customs, ICTSI v. Prudential (Ang vs. American Steamship Agencies Inc.) and
Guarantee) damage arising from delay or late delivery (Mitsui
The matter of quantity, description and O.S.K. Lines Ltd. vs. CA). In such instance the, Civil
conditions of the cargo inside the container is the Code rules on prescription shall apply.
sole responsibility of the shipper, unless there is
stipulation to the contrary. (US Lines vs. Comm. Of The one-year prescriptive period is suspended
Customs, Reyma Brokerage v. Phil. Home by:
Assurance) 1. The express agreement of the parties
(Universal Shipping Lines, Inc. vs. IAC,
Note: In order to attribute to the carrier any 188 SCRA 170)
damage to the shipment that may be found, 2. The filing of an action in court until it is
inspection of the goods should be done at pier-side . dismissed. (Stevens & Co. vs.
(Bankers vs. CA) Nordeutscher Lloyd, 6 SCRA 180)
III. CARRIAGE OF GOODS BY SEA ACT/COGSA The one-year period shall run from delivery of
(C.A. No. 65) the last package and is not suspended by
extrajudicial demand. (Dole Phils.,Inc. vs. Maritime
APPLICABILITY Co.,148 SCRA 118)
The transportation must be:
1. Water/maritime transportation; The one-year period shall run from delivery to
2. for the carriage of goods; and the arrastre operator and not to the consignee.
3. overseas/international/foreign (from (Union Carbide Phils, Inc. vs. Manila Railroad
foreign port to Philippine port). Co.,SCRA 359)
It can be applied in domestic sea transportation if
agreed upon by the parties. (Clause paramount or The insurer exercising its right of subrogation is
paramount clause) bound by the one-year prescriptive period.
However, it does not apply to the claim against the
IMPORTANT FEATURES: insurer for the insurance proceeds. (Fil. Merchants
1. Amount of carrier’s liability Ins. Co. vs. Alejandro; Mayer Steel Pipe Corp. vs.
2. Notice of damage CA)
3. Prescriptive period
IV. WARSAW CONVENTION OF 1929 (WC)
AMOUNT OF CARRIER’S LIABILITY
Under the Sec. 4(5), the liability limit is set at PURPOSE: To protect the emerging air
$500 per package or customary freight unit unless transportation industry and to secure the uniformity
the nature and value of such goods is declared by of recovery by the passengers.
the shipper. This is deemed incorporated in the bill APPLICABILITY
of lading even if not mentioned in it. (Eastern The transportation must be:
Shipping vs. IAC, 150 SCRA 463) 1. International transportation;
Note that Art. 1749, NCC applies to 2. Air transportation; and
domestic/inter-island/coastwise trade. 3. Carriage of passengers, baggage or
goods.
NOTICE OF DAMAGE (SEC. 3(6)) The WC shall also apply to fortuitous
Rules: transportation by aircraft performed by an air
a. Patent damage: shipper should file a claim with transportation enterprise.
the carrier immediately upon delivery
b. Latent damage: shipper should file a claim with International transportation - any transportation
the carrier within three days from delivery. in which the place of departure and the place of
destination are situated either:
Note: The filing of a notice of claim is not a 1. Within the territories of two High
condition precedent. Contracting Parties regardless of whether or
not there be a break in the transportation or
PRESCRIPTIVE PERIOD transshipment, or
Action for loss or damage to the cargo should be 2. Within the territory of a single High
brought within one year after: Contracting Party, if there is an agreed
stopping place within a territory subject to the
sovereignty, mandate or authority of another LIMIT OF LIABILITY (Art. 22, as amended by
power, even though that power is not a party Guatemala Protocol, 1971; Alitalia vs. IAC)
to the Convention. (“round trip”, Am. Jur.) 1. Passengers
GENERAL RULE: $100,000 per passenger
Transportation to be performed by several EXCEPTION: Agreement to a higher limit
successive air carriers shall be deemed to be one
undivided transportation, if it has been regarded by
the parties as a single operation, whether it has
been agreed upon under the form of a single 2. Checked-in baggage
contract or of a series of contracts, and it shall not GENERAL RULE: $20 per kilogram
lose its international character merely because one EXCEPTION: In case of special declaration of
contract or a series of contracts is to be performed value and payment of a supplementary sum by
entirely within a territory subject to the sovereignty, consignor, carrier is liable to not more than the
suzerainty, mandate, or authority of the same High declared sum unless it proves the sum is greater
Contracting Party. (Art. 1 Sec.3) than actual value.
3. Hand-carried baggage
WHEN INAPPLICABLE $1000/passenger
1. When public policy is contradicted; 4. Goods to be shipped
2. If the requirements under the Convention GENERAL RULE: $20 per kilogram
are not complied with. EXCEPTION: In case of special declaration of
value and payment of a supplementary sum by
IMPORTANT CONCEPTS: consignor, carrier is liable to not more than the
1. Transportation documents declared sum unless it proves the sum is greater
a. Passenger ticket than actual value.
b. Baggage check
c. Air way bill An agreement relieving the carrier from liability
2. Liability of the carrier for damages or fixing a lower limit is null and void. (Art. 23)
a. Death or injury to passengers Carrier is not entitled to the foregoing limit if the
b. Loss or damage to baggage or goods damage is caused by willful misconduct or default
c. Delay on its part. (Art. 25)
3. Successive carrier agreement
4. Jurisdiction Thus, the WC does not operate as an exclusive
5. Combined transportation agreement enumeration of the instances of an absolute limit of
the extent of liability. It does not preclude the
PASSENGER BAGGAGE AIR WAYBILL application of the Civil Code and other pertinent
TICKET CHECK local laws. It does not regulate or exclude liability
Passenger Checked-in Goods to be for other breaches of contract by the carrier, or
baggage shipped misconduct of its employees, or for some particular
or exceptional type of damage. (Alitalia vs. CA)
LIABILITY OF CARRIER FOR DAMAGES
1. Death or injury of a passenger if the accident In PanAm v. IAC, the WC was applied as regards
causing it took place on board the aircraft or in the the limitation on the carrier’s liability, there being a
course of its operations of embarking or simple loss of baggage without any improper
disembarking; (Art. 17) conduct on the part of the officials or employees of
2. Destruction, loss or damage to any baggage or the airline or other special injury sustained by the
goods, if it took place during the “transportation by passenger.
air”; (Art. 18) and
Transportation by air – The period during which In KLM Royal v. Tuller, the WC has invariably
the baggage or goods are in the charge of the been held inapplicable, or as not restrictive of the
carrier, whether in an airport or on board an carrier’s liability, where there was satisfactory
aircraft, or, in case of a landing outside an airport, evidence of malice or bad faith attributable to its
in any place whatsoever. officers and employees. (Alitalia vs. IAC)
It includes any transportation by land or water
outside an airport if such takes place in the
performance of a contract for transportation by air,
for the purpose of loading, delivery, or ACTION FOR DAMAGES
transshipment. 1. Notice of claim
3. Delay in the transportation of passengers, A written complaint must me made within:
baggage or goods. (Art. 19) a. 3 days from receipt of baggage
b. 7 days from receipt of goods
Note: The Hague Protocol amended the WC by c. In case of delay, 14 days from receipt of
removing the provision that if the airline took all baggage/goods
necessary steps to avoid the damage, it could The complaint is a condition precedent. Without
exculpate itself completely (Art. 20(1)). (Alitalia vs. the complaint, the action is barred except in case of
IAC, 192 SCRA 9) fraud on the part of the carrier. (Art. 26)
2. Prescriptive period V. SALVAGE LAW (Act No. 2616)
Action must be filed within 2 years from:
a. date of arrival at the destination SALVAGE
b. date of expected arrival Two concepts:
c. date on which the transportation stopped. 1. Services one person renders to the owner of a
(Art. 29) ship or goods, by his own labor, preserving the
goods or the ship which the owner or those
In United Airlines vs. Uy the two-year prescriptive entrusted with the care of them have either
period was not applied where the airline employed abandoned in distress at sea, or are unable to
delaying tactics. protect or secure.
2. Compensation allowed to persons by whose
RULE IN CASE OF VARIOUS SUCCESSIVE voluntary assistance a ship at sea or her cargo or
CARRIERS both have been saved in whole or in part from
1. Carriage of passengers impending sea peril, or such property recovered
GENERAL RULE: Action is filed only against the from actual peril or loss, as in cases of shipwreck,
carrier in which the accident or delay occurred. derelict or recapture.
EXCEPTION: Agreement or contract whereby the Requisites:
first carrier assumed liability for the whole journey. 1. Valid object of salvage;
2. Carriage of baggage or goods 2. Object must have been exposed to marine
a. Passenger or consignor can file an action peril (not perils of the ship);
against the first carrier and the carrier in 3. Services rendered voluntarily (neither an
which the damage occurred existing duty nor out of a pre-existing
b. Passenger or consignee can file an action contract);
against the last carrier and the carrier in 4. Services are successful, total or partial.
which the damage occurred. Subjects of Salvage:
These carriers are jointly and severally 1. Ship itself;
liable. (Art. 30) 2. Jetsam – goods which are cast into the sea, and
there sink and remain under water;
A contract of international carriage by air, 3. Floatsam or Flotsam – goods which float upon
although performed by different carriers under a the sea when cast overboard;
series of airline tickets constitutes a single 4. Ligan or Lagan – goods cast into the sea tied to a
operation. Members of the International Air buoy, so that they may be found again by the
Transportation Association (IATA) are under a owners (p.173, Judge Diaz).
general pool partnership agreement wherein they Persons who have no right to a reward for
act as agent of each other in the issuance of tickets salvage:
to contracted passengers to boost ticket sales 1. Crew of the vessel saved;
worldwide and at the same time provide passengers 2. Person who commenced Salvage in spite of
easy access to airlines which are otherwise opposition of the Captain or his representative;
inaccessible in some parts of the world. (American 3. In accordance with Sec. 3 of the Salvage Law,
Airlines vs. CA) a person who fails to deliver a salvaged vessel or
cargo to the Collector of Customs.
Under a general pool partnership agreement, the
ticket-issuing airline is the principal in a contract of Derelict – a ship or her cargo which is
carriage while the endorsee-airline is the agent. abandoned and deserted at sea by those who are in
The obligation of the former remained and did not charge of it, without any hope of recovering it, or
cease even when the breach occurred not on its without any intention of returning to it.
own flight but on that of another airline which had
undertaken to carry the passengers to one of their The intention of those in charge must be
destinations. (China Airlines vs. Chiok) ascertained. If those in charge left with the
intention of returning, or of procuring assistance,
JURISDICTION the property is not derelict, but if they quitted the
At the option of the plaintiff, the action for property with the intention of finally leaving it, it is
damages may be filed in the: derelict and a change of their intention and an
a. Court of domicile of the carrier; attempt to return will not change its nature
b. Court of its principal place of business; (Erlanger & Galinger vs. Swedish East Asiatic Co.
c. Court where it has a place of business Ltd.).
through which the contract has been
made; or If it is clear that the intention to return is slight,
d. Court of the place of destination. (Art. the salvage which was done thereafter is considered
28(1)) valid. (Notes and Cases on the Law on
NOTE: It is the passenger’s “ultimate destination” Transportation and Public Utilities, Aquino, T. &
not “an agreed stopping place” that determines the Hernando, R.P. 2004 ed. p. 616)
country where suit is to be filed.
The forum of action provided in Art. 28(1) is a CONTRACT OF TOWAGE
matter of jurisdiction rather than of venue. (Santos A contract whereby one vessel, usually
III vs. Northwest; 2A C.J.S.) motorized, pulls another, whether loaded or not
with merchandise, from one place to another, for a
compensation. It is a contract for services rather without having been issued a certificate of public
than a contract of carriage. convenience or a certificate of public convenience
and necessity.
EXCEPTIONS:
SALVAGE TOWAGE 1. Warehouses;
2. Animal drawn vehicles and bancas moved
Governed by special Governed by Civil Code
by oar or sail;
law (Act No. 2616) on contract of lease
3. Airships, except for the fixing of maximum
rates for fare and freight;
Requires success, Success is not required 4. Radio companies, except for rates fixing;
otherwise no payment 5. Public services owned or operated by the
government, except as to rates fixing;
Must be done with the Only the consent of the 6. Ice plants; and
consent of the tugboat owner is 7. Public markets.
captain/crewmen needed
Vessel must be Vessel need not be PUBLIC SERVICE
involved in an accident involved in an accident A person who owns, operates, manages or
controls in the Philippines for hire or compensation,
Fees distributed Fees belong to the with general or limited clientele, whether
among crewmen tugboat owner permanent, occasional or accidental, and done for
general business purposes, any common carrier or
public utility, ice plants, power and water supplies,
RULES ON SALVAGE REWARD
communication and similar public services. (Sec.
1. The reward is fixed by the RTC judge in the
13b, CA 146)
absence of agreement or where the latter is
A casual or incidental service devoid of public
excessive. (Sec. 9)
character and interest is not brought within the
2. The reward should constitute a sufficient
category. The question depends on such factors as
compensation for the outlay and effort of the
the extent of services, whether such person or
salvors and should be liberal enough to offer
company has held himself or itself out as ready to
an inducement to others to render services in
serve the public or a portion of the public generally.
similar emergencies in the future.
(Luzon Stevedoring vs. PSC)
3. If sold (no claim being made within 3 months
from publication), the proceeds, after
NOTE: The Public Service Commission created
deducting expenses and the salvage claim,
under the Public Service Law has already been
shall go to the owner; if the latter does not
abolished under P.D. No. 1 and other issuances. It
claim it within 3 years, 50% of the said
has been replaced by the following government
proceeds shall go to the salvors, who shall
agencies: LTO; LTFRB; ATO; BOE; NTC; NEA; ERB;
divide it equitably, and the other half to the
NWRC; CAB; and MIA.
government. (Secs. 11-12)
4. If a vessel is the salvor, the reward shall be
distributed as follows:
CERTIFICATE OF CERTIFICATE OF
a. 50% to the shipowner;
PUBLIC PUBLIC
b. 25% to the captain; and
CONVENIENCE CONVENIENCE AND
(CPC) NECESSITY (CPCN)
c. 25% to the officers and crew in
proportion to their salaries. (Sec. 13)
An authorization An authorization
Taking passengers from a sinking ship, without issued by the issued by the
rendering any service in rescuing the vessel, is not a appropriate appropriate
salvage service, being a duty of humanity and not government agency for government agency for
for reward. the operation of public the operation of public
services for which no service for which a
VI. PUBLIC SERVICE ACT franchise, either prior franchise is
(C.A. No. 146) municipal or required by law; e.g.
legislative, is required telephone and other
PURPOSES: by law, e.g., common services.
1. To secure adequate, sustained service for carriers.
the public at the least possible cost;
2. To protect the public against
unreasonable charges and poor,
A CPC or a CPCN constitutes neither a franchise
inefficient service;
nor a contract, confers no property right, and is a
3. To protect and secure investments in
mere license or a privilege. The holder of said
public services;
certificate does not acquire a property right in the
4. To prevent ruinous competition.
route covered thereby. Nor does it confer upon the
holder any proprietary right or interest or franchise
AUTHORITY TO OPERATE PUBLIC SERVICES
in the public highways. Revocation of this certificate
GENERAL RULE: No public service shall operate
deprives him of no vested right. New and additional UNLAWFUL ACTS OF PUBLIC UTILITY
burdens, alteration of the certificate, or even COMPANIES
revocation or annulment thereof is reserved to the 1. Engagement in public service business without
State. (Luque vs. Villegas, 30 SCRA 408) first securing the proper certificate;
2. Providing or maintaining unsafe, improper or
It is a “property” and has a considerable value inadequate service as determined by the
and can be the subject of sale or attachment. proper authority;
(Cogeo-Cubao Operators and Drivers Assn. vs. CA, 3. Committing any act of unreasonable and unjust
207 SCRA 343, Raymundo vs. Luneta Motor Co.) preferential treatment to any particular person,
corporation or entity as determined by the
REQUREMENTS FOR GRANTING CPC OR CPCN proper authority;
1. Applicant must be a citizen of the Philippines or 4. Refusing or neglecting to carry public mail
a corporation or entity 60% of the capital of upon request. (Secs. 18 and 19)
which is owned by such citizens;
2. Applicant must prove public necessity; ACTS REQUIRING PRIOR APPROVAL
3. Applicant must prove that the operation of the 1. Establish and maintain individual or joint rates;
public service proposed and the authorization 2. Establish and operate new units;
to do business will promote the public interest 3. Issue free tickets;
on a proper and suitable manner; 4. Issue any stock or stock certificates
4. Applicant must have sufficient financial representing an increase of capital;
capability to undertake the proposed services 5. Capitalize any franchise in excess of the
and meeting the responsibilities incident to its amount actually paid to the Government;
operation. 6. Sell, alienate, mortgage or lease property,
certificates or franchise.
POWERS POWERS Under Sec. 20(g) of C.A. No. 146, the sale, etc.
REQUIRING PRIOR EXERCISABLE may be negotiated and completed before the
NOTICE AND WITHOUT PRIOR approval by the proper authority. Its approval is not
HEARING NOTICE AND a condition precedent to the validity of the contract.
HEARING The approval is necessary only to protect public
interest.
1. Issuance of CPC 1. Investigation any
or CPCN; matter concerning PRIOR OPERATOR/OLD OPERATOR RULE
2. Fixing of rates, public service; The rule allowing an existing franchised operator
tolls, and charges; 2. Requiring to invoke a preferential right within the authorized
3. Setting up of operators to furnish territory as long as he renders satisfactory and
standards and safe, adequate, and economical service.
classifications; proper service; The policy is not to issue a certificate to a second
4. Establishment of 3. Requiring public operator to cover the same field and in competition
rules to secure services to pay with a first operator who is rendering sufficient,
accuracy of all meters expenses of adequate and satisfactory service. The prior
and all measuring investigation; operator must first be given an opportunity to
appliances; 4. Valuation of improve its service, if inadequate or deficient.
5. Issuance of properties of public Purpose: To prevent ruinous and wasteful
orders requiring utilities; competition in order that the interests of the public
establishment or 5. Examination and would be conserved and preserved.
maintenance of test of measuring
extension of facilities; appliances; It subordinates the prior applicant rule which
6. Revocation, or 6. Grant of special gives the first applicant priority only if things and
modification of CPC or permits to make extra circumstances are equal.
CPCN; or special trips in
7. Suspension of CPC territories specified in Where the operator either fails or neglects to
or CPCN, except when the certificate; make the improvement or effect the increase in
it is necessary to 7. Uniform services, especially when given the opportunity, new
avoid serious and accounting system and operators should be given the chance to give the
irreparable damage or furnishing of annual services needed by the public.
inconvenience to the reports;
public or private 8. Compelling PRIOR APPLICANT RULE
interest, in which compliance with the Presupposes a situation when two interested
case, a suspension laws and regulations. persons apply for a certificate to operate a public
not more than 30 utility in the same community over which no person
days may be ordered, has as yet granted any certificate. If it turns out,
prior to the hearing. after the hearing, that the circumstances between
(Soriano v. Medina, the two applicants are more or less equal, then the
164 SCRA 36) applicant who applied ahead of the other, will be
granted the certificate.
RATE-FIXING POWER 2. The registered owner is primarily liable for all
The rate to be fixed must be just, founded upon the consequences flowing from the operations
conditions which are fair and reasonable to both the of the carrier.
owner and the public. The public has the right to assume that the
A rate is just and reasonable if it conforms to the registered owner is the actual or lawful owner
following requirements: thereof. It would be very difficult and often
1. One which yields to the carrier a fair impossible, as a practical matter, for the public
return upon the value of the property to enforce their rights of action that they may
employed in performing the service; and have for injuries inflicted by the vehicle if they
2. One which is fair to the public for the should be required to prove who the actual
service rendered. owner is. (Benedicto vs. IAC, 187 SCRA 547)
3. The thrust of the law in enjoining the kabit
REGISTERED OWNER RULE system is to identify the person upon whom
The registered owner of a certificate of public responsibility may be fixed with the end in view
convenience is liable to the public for the injuries or of protecting the riding public (Lim vs. CA 373
damages suffered by third persons caused by the SCRA 394).
operation of said vehicle, even though the same had 4. The registered owner cannot recover from the
been transferred to a third person. actual owner and the latter cannot obtain
The registered owner is not allowed to escape transfer of the vehicle to himself, both being in
responsibility by proving that a third person is the pari delicto. (Teja Marketing vs. IAC)
actual and real owner Reason: It would be easy for 5. For the better protection of the public, both the
him, by collusion with others or otherwise, to registered owner and the actual owner are
transfer the responsibility to an indefinite person, or jointly and severally liable with the driver.
to one who possesses no property with which to (Zamboanga Transportation Co. vs. CA)
respond financially for the damage or injury done.
(Erezo, et al. vs. Jepte 102 Phil 103).
KABIT SYSTEM
A system whereby a person who has been
granted a certificate of public convenience allows
other persons who own motor vehicles to operate
under such license, for a fee or percentage of such
earnings. It is void and inexistent under Art. 1409,
Civil Code.
Effects:
1. The transfer, sale, lease or assignment of the
privilege granted is valid between the
contracting parties but not upon the public or
third persons. (Gelisan vs. Alday, 154 SCRA
388)