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Private respondent Tumambing contracted the services of petitioner Ganzon to haul 305 tons of scrap iron
from Bataan to the port of Manila on board the lighter LCT “Batman.” Petitioner sent his lighter with its
Captain Filomeno to dock at Mariveles, where respondent Tumambing delivered the scrap irons for loading
which also begun on the same day. Mayor Advincula arrived at the port and demanded P 5,000 shakedown
from respondent. The two ended up in a heated argument where respondent had to be taken to a hospital
to be treated of a gunshot wound. After sometime, the loading of the scrap iron was resumed. But now,
the Acting Mayor together with 3 policemen ordered Captain Filomeno to dump the scrap iron where the
lighter was docked and the rest to be brought to NASSCO compound. Later, the Acting Mayor issued a
receipt stating that the Municipality had taken custody of the scrap iron. Respondent instituted an action
for damages against petitioner. Respondent Court found in favor for Tumambing.
ISSUE: W/N Ganzon should be held liable under the contract of carriage

HELD: YES. Petition is DENIED.

 Ganzon thru his employees, actually received the scraps is freely admitted.
 Pursuant to Art. 1736, such extraordinary responsibility would cease only upon the delivery, actual or
constructive, by the carrier to the consignee, or to the person who has a right to receive them.
 The fact that part of the shipment had not been loaded on board the lighter did not impair the said
contract of transportation as the goods remained in the custody and control of the carrier, albeit still
failed to show that the loss of the scraps was due to any of the following causes enumerated in Article
1734 of the Civil Code.

Hence, the petitioner is presumed to have been at fault or to have acted negligently.
 Ganzon was not duty bound to obey the illegal order to dump into the sea the scrap iron.
 Moreover, there is absence of sufficient proof that the issuance of the same order was attended with
such force or intimidation as to completely overpower the will of the petitioner's employees. The mere
difficulty in the fullfilment of the obligation is not considered force majeure.
COURT OF APPEALS and all Heirs of the late Pedrito Cudiamat, G.R. No. 95582

 May 13, 1985: Theodore M. Lardizabal was driving a passenger bus belonging to Dangwa
Transportation Co. Inc. (Dangwa)
 The bus was at full stop bet. Bunkhouses 53 and 54 when Pedro alighted
 Pedro Cudiamat fell from the platform of the bus when it suddenly accelerated forward
 Theodore first brought his other passengers and cargo to their respective destinations before
bringing Pedro to Lepanto Hospital where he expired
 Private respondents filed a complaint for damages against Dangwa for the death of Pedro Cudiamat
ISSUE: W/N Dangwa should be held liable for the negligence of its driver Theodore

HELD: YES. CA affirmed.

 A public utility once it stops, is in effect making a continuous offer to bus riders (EVEN when moving as
long as it is still slow in motion)
 Duty of the driver: do NOT make acts that would have the effect of increasing peril to a passenger
while he is attempting to board the same
 Stepping and standing on the platform of the bus is already considered a passenger and is entitled all
the rights and protection pertaining to such a contractual relation
 Duty extends to boarding and alighting
 GR: By contract of carriage, the carrier assumes the express obligation to transport the passenger to
his destination safely and observe extraordinary diligence with a due regard for all the circumstances,
and any injury that might be suffered by the passenger is right away attributable to the fault or
negligence of the carrier


- At 3 p.m. on Dec. 22, 1958, Fermin Nueca brought 7 sacks of palay to Manila Railroad Co. (MRC) at
its station in Barrio del Rosario, Camarines Sur, to be shipped to the municipality of Libmanan of the
same province.

- He paid P 0.70 as freight charge and was issued Way Bill No. 56515.

- The cargo was loaded on the freight wagon of Train 537. Passengers boarded the train and
shunting operations started to hook a wagon thereto.

- Before the train reached the turnoff switch, its passenger coach fell on its side some 40 m from the
station. The wagon pinned Nueca, killing him instantly.

- Nueca’s widow and children bring this claim for damages, alleging that the Nueca was a passenger
and his death was caused by MRC’s negligence.


- W/N Nueca was a passenger?


- No, Nueca was not a passenger thus, MRC did not owe him extraordinary diligence.

A passenger is one who travels in a public conveyance by virtue of a contract, express or implied, with the
carrier as to the payment of the fare, or that which is accepted as an equivalent.

- The relation of passenger and carrier commences when one puts himself in the care of the carrier,
or directly under its control, with the bona fide intention of becoming a passenger, and is accepted
as such by the carrier – as where he makes a contract for trasportation and presents himself at the
proper place and in a proper manner to be transported.

- Even disregarding the matter of tickets, and assuming Nueca intended to be a passenger, he was
never accepted as such by MRC as he did not present himself at the proper place and in a proper
manner to be transported.
G.R. no. 111127, July 26, 1996
Mendoza, J.

Petitioner Fabre and his wife were the owners of 1982 model Mazda minibus. They were using the said
vehicle as a school bus service for children in Manila. They hired Cabil as their driver. On November 2,
1982, private respondent Word for the World Christian Fellowship (WWCF) arranged with petitioners for
the transportation of members of young adult ministry from Manila to La Union and back. While travelling,
they met an accident. The bus hit a fence and a coconut tree that caused passengers to be injured
including respondent Antonio.

The WWCF and Antonio then filed a criminal complaint against the driver, the trial court decided in favor of
respondents. All evidence presented showed the negligence of the defendants ultimately resulted to the
accident. The Court of Appeals affirmed the decision of the Trial Court. Hence this petition.
Issue: Whether the spouses Fabre are common carriers?

Held: Petition was denied. Spouses Fabre are common carriers.

The Supreme Court held that this case actually involves a contract of carriage. Petitioners, the Fabres, did
not have to be engaged in the business of public transportation for the provisions of the Civil Code on
common carriers to apply to them. As this Court has held: 10 Art. 1732, Common carriers are persons,
corporations, firms or associations engaged in the business of carrying or transporting passengers or
goods or both, by land, water, or air for compensation, offering their services to the public.

The above article makes no distinction between one whose principal business activity is the carrying of
persons or goods or both, and one who does such carrying only as an ancillary activity (in local idiom, as
"a sideline"). Article 1732 also carefully avoids making any distinction between a person or enterprise
offering transportation service on a regular or scheduled basis and one offering such service on an
occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering
its services to the "general public," i.e., the general community or population, and one who offers services
or solicits business only from a narrow segment of the general population. We think that Article 1732
deliberately refrained from making such distinctions.

Whether or not the petitioners are liable for the injuries suffered by the respondents based on culpa
contractual and/or culpa aquiliana.

The Court ruled that damages should be awarded based on the theory that petitioners are liable for breach
of contract of carriage or culpa contractual or on the theory of quasi delict or culpa aquiliana holding that
the relation of passenger and carrier is “contractual both in origin and nature,” nevertheless “the act that
breaks the contract may be also a tort. In both sources of obligation, the existence of negligence of
petitioners must be determined. In this case, Cabil drove his bus negligently, while his employer, the
Fabres, who owned the bus, failed to exercise the diligence of a good father of the family in the selection
and supervision of their employee is fully supported by the evidence on record. Pursuant to Arts. 2176 and
2180 of the Civil Code his negligence gave rise to the presumption that his employers, the Fabres, were
themselves negligent in the selection and supervision of their employee. Thus, the finding of the Court that
petitioners are liable under Arts. 2176 and 2180 for quasi delict fully justify that they are guilty of breach
of contract of carriage under Arts. 1733, 1755 and 1759 of the Civil Code.
Phil Am Gen Insurance Co, Et Al. V. PKS Shipping Co (2003)
G.R. No. 149038 April 9, 2003
Lessons Applicable: Charter Party (Transportation)

 Davao Union Marketing Corporation (DUMC) contracted the services of PKS Shipping Company (PKS
Shipping) for the shipment to Tacloban City of 75,000 bags of cement worth P3,375,000.
 DUMC insured the goods for its full value with Philippine American General Insurance Company
 The goods were loaded aboard the dumb barge Limar I belonging to PKS Shipping.
 December 22, 1988 9 pm: While Limar I was being towed by PKS’ tugboat MT Iron Eagle, the barge
sank a couple of miles off the coast of Dumagasa Point, in Zamboanga del Sur, bringing down with it
the entire cargo of 75,000 bags of cement.
 DUMC filed a formal claim with Philamgen for the full amount of the insurance. Philamgen promptly
made payment; it then sought reimbursement from PKS Shipping of the sum paid to DUMC but the
shipping company refused to pay so Philamgen to file suit against PKS Shipping
 RTC: dismissed the complaint - fortuitous event
 CA:Affirmed - not a common carrier but a casual occupation
ISSUE: W/N PKS Shipping is NOT liable since it was NOT a common carrier

HELD: NO. Petition is DENIED

Article 1732. Common carriers are persons, corporations, firms or associations engaged in the business of
carrying or transporting passengers or goods or both, by land, water, or air for compensation, offering
their services to the public
 Complementary is Section 13, paragraph (b), of the Public Service Act

public service" to be –
"x x x every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire
or compensation, with general or limited clientele, whether permanent, occasional or accidental, and done
for general business purposes, any common carrier, railroad, street railway, subway motor vehicle, either
for freight or passenger, or both, with or without fixed route and whatever may be its classification, freight
or carrier service of any class, express service, steamboat, or steamship, or steamship line, pontines,
ferries and water craft, engaged in the transportation of passengers or freight or both, shipyard, marine
repair shop, wharf or dock, ice plant, ice refrigeration plant, canal, irrigation system, gas, electric light,
heat and power, water supply and power petroleum, sewerage system, wire or wireless communication
systems, wire or wireless broadcasting stations and other similar public services
 So understood, the concept of `common carrier’ under Article 1732 may be seen to coincide neatly
with the notion of `public service,’ under the Public Service Act
 distinction between:
 common or public carrier
 private or special carrier - character of the business, such that if the undertaking is an isolated
transaction , not a part of the business or occupation, and the carrier does not hold itself out to carry
the goods for the general public or to a limited clientele, although involving the carriage of goods for a
 EX: charter party which includes both the vessel and its crew, such as in a bareboat or demise, where
the charterer obtains the use and service of all or some part of a ship for a period of time or a voyage
or voyages and gets the control of the vessel and its crew.
 The regularity of its activities in this area indicates more than just a casual activity on its part
 The appellate court ruled, gathered from the testimonies and sworn marine protests of the respective
vessel masters ofLimar I and MT Iron Eagle, that there was no way by which the barge’s or the
tugboat’s crew could have prevented the sinking of Limar I. The vessel was suddenly tossed by waves
of extraordinary height of 6 to 8 feet and buffeted by strong winds of 1.5 knots resulting in the entry of
water into the barge’s hatches. The official Certificate of Inspection of the barge issued by the
Philippine Coastguard and the Coastwise Load Line Certificate would attest to the seaworthiness
of Limar I and should strengthen the factual findings of the appellate court.
 Findings of fact of the Court of Appeals generally conclude this Court; none of the recognized
exceptions from the rule - (1) when the factual findings of the Court of Appeals and the trial court are
contradictory; (2) when the conclusion is a finding grounded entirely on speculation, surmises, or
conjectures; (3) when the inference made by the Court of Appeals from its findings of fact is manifestly
mistaken, absurd, or impossible; (4) when there is a grave abuse of discretion in the appreciation of
facts; (5) when the appellate court, in making its findings, went beyond the issues of the case and such
findings are contrary to the admissions of both appellant and appellee; (6) when the judgment of the
Court of Appeals is premised on a misapprehension of facts; (7) when the Court of Appeals failed to
notice certain relevant facts which, if properly considered, would justify a different conclusion; (8)
when the findings of fact are themselves conflicting; (9) when the findings of fact are conclusions
without citation of the specific evidence on which they are based; and (10) when the findings of fact of
the Court of Appeals are premised on the absence of evidence but such findings are contradicted by
the evidence on record – would appear to be clearly extant in this instance.
[Digest] Cebu Salvage Corporation vs Philippine Home Assurance (2007)

NOV 12, 1984 - Cebu Salvage Corporation (as carrier) and Maria Cristina Chemicals Industries, Inc.
[MCCII] (as charterer) entered into a voyage charter wherein CSC was to load 800 to 1,100 metric tons of
silica quartz on board the M/T Espiritu Santo at Ayungon, Negros Occidental for transport to and discharge
at Tagoloan, Misamis Oriental to consignee Ferrochrome Phils., Inc

DEC 23, 1984, CSC received and loaded 1,100 metric tons of silica quartz on board the M/T Espiritu
Santo which left for Misamis the next day M/T Espiritu Santo sank off the beach of Opol, Misamis
Oriental, resulting in the total loss of the cargo.

MCCII filed a claim for the loss of the shipment with its insurer Philippine Home Assurance
Corporation paid the claim of P211,500 and was subrogated to the rights of MCCII

PHAC filed a case against CSC for reimbursement of the amount it paid MCCII WON IN THE RTC!
CSC ordered to reimburse

CA affirmed CSC appealed

ISSUE: May a carrier be held liable for the loss of cargo resulting from the sinking of a ship it
does not own?

CSC and MCCII entered into a "voyage charter," also known as a contract of affreightment wherein the
ship was leased for a single voyage for the conveyance of goods, in consideration of the payment of
freight. Under a voyage charter, the shipowner retains the possession, command and navigation of the
ship, the charterer or freighter merely having use of the space in the vessel in return for his payment of
freight. An owner who retains possession of the ship remains liable as carrier and must answer for loss or
non-delivery of the goods received for transportation.

CSC argues that the voyage of charter is NOT a contract of carriage. It insists that the agreement was
merely a contract of hire wherein MCCII hired the vessel from its owner, ALS Timber Enterprises
(ALS). Not being the owner of the M/T Espiritu Santo, petitioner did not have control and supervision over
the vessel, its master and crew thus, it could not be held liable for the loss of the shipment

SC DISAGREES! Based on the agreement signed by the parties and the testimony of CSC’s
operations manager, it is clear that it was a contract of carriage.

There is no dispute that CSC was a common carrier. At the time of the loss of the cargo, it was
engaged in the business of carrying and transporting goods by water, for compensation, and offered its
services to the public.

From the nature of their business and for reasons of public policy, common carriers are bound to
observe extraordinary diligence over the goods they transport according to the circumstances of each
case. In the event of loss of the goods, common carriers are responsible, unless they can prove that this
was brought about by the causes specified in Article 1734. In all other cases, common carriers are
presumed to be at fault or to have acted negligently, unless they prove that they observed extraordinary

IN THIS CASE CSC was the one which contracted with MCCII for the transport of the cargo. It had
control over what vessel it would use. All throughout its dealings with MCCII, it represented itself as a
common carrier. The fact that it did not own the vessel it decided to use to consummate the
contract of carriage did not negate its character and duties as a common carrier.

Court did said it is not reasonable to expect MCCII to ask about ownership of vessel As a practical
matter, it is very difficult and often impossible for the general public to enforce its rights of action under a
contract of carriage if it should be required to know who the actual owner of the vessel is. In fact, in this
case, the voyage charter itself denominated petitioner as the "owner/operator" of the vessel

CSC says if there was a contract of carriage it was between MCCII and ALS as evidenced by the bill
of lading ALS issued SC DISAGREES AGAIN

o A bill of lading may serve as the contract of carriage between the parties BUT it cannot prevail over the
express provision of the voyage charter [I]n cases where a Bill of Lading has been issued by a carrier
covering goods shipped aboard a vessel under a charter party, and the charterer is also the holder of the
bill of lading, "the bill of lading operates as the receipt for the goods, and as document of title passing the
property of the goods, but not as varying the contract between the charterer and the shipowner."

Coastwise asserts that MCCII should be held liable for its own loss since the voyage charter stipulated
that cargo insurance was for the charterer’s account. This deserves scant consideration. This simply
meant that the charterer would take care of having the goods insured. It could not exculpate the carrier
from liability for the breach of its contract of carriage. The law, in fact, prohibits it and condemns it as
unjust and contrary to public policy.
[G.R. No. 112287. December 12, 1997]


National Steel Corporation (NSC) as Charterer and defendant Vlasons Shipping, Inc. (VSI) as Owner,
entered into a Contract of Voyage Charter Hire (Affreightment) whereby NSC hired VSI’s vessel, the MV
‘VLASONS I’ to make one (1) voyage to load steel products at Iligan City and discharge them at North
Harbor, Manila. VSI carried passengers or goods only for those it chose under a “special contract of charter

The vessel arrived with the cargo in Manila, but when the vessel’s three (3) hatches containing the
shipment were opened, nearly all the skids of tin plates and hot rolled sheets were allegedly found to be
wet and rusty.

NSC filed its complaint against defendant before the CFI wherein it claimed that it sustained losses as a
result of the “act, neglect and default of the master and crew in the management of the vessel as well as
the want of due diligence on the part of the defendant to make the vessel seaworthy … -- all in violation of
defendant’s undertaking under their Contract of Voyage Charter Hire.”

In its answer, defendant denied liability for the alleged damage claiming that the MV ‘VLASONS I’ was
seaworthy in all respects for the carriage of plaintiff’s cargo; that said vessel was not a ‘common carrier’
inasmuch as she was under voyage charter contract with the plaintiff as charterer under the charter party.

The trial court ruled in favor of VSI; it was affirmed by the CA on appeal.


Whether or not Vlazons is a private carrier.



At the outset, it is essential to establish whether VSI contracted with NSC as a common carrier or as a
private carrier. The resolution of this preliminary question determines the law, standard of diligence and
burden of proof applicable to the present case.

Article 1732 of the Civil Code defines a common carrier as “persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for
compensation, offering their services to the public.” It has been held that the true test of a common carrier
is the carriage of passengers or goods, provided it has space, for all who opt to avail themselves of its
transportation service for a fee. A carrier which does not qualify under the above test is deemed a private
carrier. “Generally, private carriage is undertaken by special agreement and the carrier does not hold
himself out to carry goods for the general public. The most typical, although not the only form of private
carriage, is the charter party, a maritime contract by which the charterer, a party other than the
shipowner, obtains the use and service of all or some part of a ship for a period of time or a voyage or

In the instant case, it is undisputed that VSI did not offer its services to the general public. As found by the
Regional Trial Court, it carried passengers or goods only for those it chose under a “special contract of
charter party.” As correctly concluded by the Court of Appeals, the MV Vlasons I “was not a common but a
private carrier.” Consequently, the rights and obligations of VSI and NSC, including their respective liability
for damage to the cargo, are determined primarily by stipulations in their contract of private carriage or
charter party. Recently, in Valenzuela Hardwood and Industrial Supply, Inc., vs. Court of Appeals and
Seven Brothers Shipping Corporation, the Court ruled:

“ x x x [I]n a contract of private carriage, the parties may freely stipulate their duties and obligations which
perforce would be binding on them. Unlike in a contract involving a common carrier, private carriage does
not involve the general public. Hence, the stringent provisions of the Civil Code on common carriers
protecting the general public cannot justifiably be applied to a ship transporting commercial goods as a
private carrier. Consequently, the public policy embodied therein is not contravened by stipulations in a
charter party that lessen or remove the protection given by law in contracts involving common carriers.”
G.R. No. 146426. June 27, 2006

Respondent L. Acuario Marketing Corp., ("Acuario") and respondent Skyland Brokerage, Inc., ("Skyland")
entered into a time charter agreement whereby Acuario leased to Skyland its L. Acuario II barge for use by
the latter in transporting electrical posts from Manila to Limay, Bataan. At the same time, Skyland also
entered into a separate contract with petitioner Cargolift, for the latter’s tugboats to tow the aforesaid

After the whole operation was concluded, the barge was brought to Acuario’s shipyard where it was
allegedly discovered by that the barge was listing due to a leak in its hull. It was informed by the skipper
of the tugboat that the damage was sustained in Bataan. It was learned later the due to strong winds and
large waves, the barge repeatedly hit its hull on the wall, thus prompting the barge patron to alert the
tugboat captain of the M/T Count to tow the barge farther out to sea. However, the tugboat failed to pull
the barge to a safer distance due to engine malfunction, thereby causing the barge to sustain a hole in its

Acuario spent the total sum of P97,021.20 for the repairs, and, pursuant to the contract, sought
reimbursement from Skyland, failing which, it filed a suit before the RTC which was granted. On appeal, it
was affirmed by the CA. Skyland, in turn, filed a third-party complaint against petitioner alleging that it was
responsible for the damage sustained by the barge.

Whether or not petitioner should be held liable.

Thus, in the performance of its contractual obligation to Skyland, petitioner was required to observe the
due diligence of a good father of the family. This much was held in the old but still relevant case of Baer
Senior & Co.’s Successors v. La Compania Maritima where the Court explained that a tug and its owners
must observe ordinary diligence in the performance of its obligation under a contract of towage. The
negligence of the obligor in the performance of the obligation renders him liable for damages for the
resulting loss suffered by the obligee. Fault or negligence of the obligor consists in his failure to exercise
due care and prudence in the performance of the obligation as the nature of the obligation so demands.

In the case at bar, the exercise of ordinary prudence by petitioner means ensuring that its tugboat is free
of mechanical problems. While adverse weather has always been a real threat to maritime commerce, the
least that petitioner could have done was to ensure that the M/T Count or any of its other tugboats would
be able to secure the barge at all times during the engagement. This is especially true when considered
with the fact that Acuario’s barge was wholly dependent upon petitioner’s tugboat for propulsion. The
barge was not equipped with any engine and needed a tugboat for maneuvering.

Needless to say, if petitioner only subjected the M/T Count to a more rigid check-up or inspection, the
engine malfunction could have been discovered or avoided. The M/T Count was exclusively controlled by
petitioner and the latter had the duty to see to it that the tugboat was in good running condition. There is
simply no basis for petitioner’s assertion that Skyland contractually assumed the risk of any engine trouble
that the tugboat may encounter. Skyland merely procured petitioner’s towing service but in no way
assumed any such risk.
& CO., INC.,
G.R. No. 162467. May 8, 2009.
Del Monte Phils.contracted Mindanao Terminal, a stevedoring company, to load and stow ashipment of
fresh green
bananas and pineapples into the vessel M/V Mistrau docked at the port of Davao City andbound for
Incheon, South
Korea. The goods were insured with Phoenix Assurance. Upon discharge of thecargo in Korea, several
cartons of the
fresh green bananas and pineapples were damaged and no longer had anycommercial value. Del Monte
filed an
insurance claim and was paid by Phoenix Assurance. The lattersued Mindanao Terminal for damages
before the RTC of
Davao City. The RTC dismissed the complaintfor lack of cause of action against Mindanao Terminal
because its services
were contracted by Del Monteand not by the insurer; in addition to that, Mindanao had acted merely as a
provider. The CA reversed the ruling and held Mindanao Terminal to be liable for damages.
Whether or not Phoenix and McGee have a cause of action and whether Mindanao Terminal is liable for
not having
exercise extraordinary diligence in the transport and storage of the cargo.
No. It was neither alleged nor proven by Phoenix and McGee that Mindanao Terminal was bound by
stipulation to observe a higher degree of diligence than that required of a good father of a family. Hence,
the Supreme
Court concluded that following Article 1173, Mindanao Terminal was required to observe ordinary diligence
only in
loading and stowing the cargoes of Del Monte Produce aboard M/V Mistrau. There is a distinction between
an arrastre and a stevedore. Arrastre, a Spanish word which refers to hauling of cargo, comprehends the
handling of
cargo on the wharf or between the establishment of the consignee or shipper and the ship’s tackle. The
of the arrastre operator lasts until the delivery of the cargo to the consignee. The service is usually
performed by
longshoremen. On the other hand, stevedoring refers to the handling of the cargo from the pier to the
ship’s cargo
hold. The responsibility of the stevedore ends upon the loading and stowing of the cargo in the vessel. It is
disputed that Mindanao Terminal was performing purely stevedoring function while the private respondent
in thesummarized case was performing arrastre function.
Crisostomo v. Court of Appeals, G.R. No. 138334; August 25, 2003
Topic: Common Carrier

In May 1991, petitioner Estela L. Crisostomo contracted the services of respondent Caravan Travel and
Tours International, Inc. to arrange and facilitate her booking, ticketing and accommodation in a tour
dubbed “Jewels of Europe”. The package tour included the countries of England, Holland, Germany,
Austria, Liechstenstein, Switzerland and France at a total cost of P74,322.70. Pursuant to said contract,
Menor, respondent Company’s ticketing manager, went to her aunt’s residence on June 12, 1991 –
Wednesday – to deliver petitioner’s travel documents and plane tickets. Menor then told her to be at the
Ninoy Aquino International Airport (NAIA) on Saturday, two hours before her flight on board British

Without checking her travel documents, petitioner went to NAIA on Saturday, June 15, 1991, to take the
flight for the first leg of her journey from Manila to Hong Kong. To petitioner’s dismay, she discovered that
the flight she was supposed to take had already departed the previous day. She learned that her plane
ticket was for the flight scheduled on June 14, 1991. She thus called up Menor to complain. Subsequently,
Menor prevailed upon petitioner to take another tour the “British Pageant” which included England,
Scotland and Wales in its itinerary. For this tour package, petitioner was asked anew to pay US$785.00 or

She gave respondent US$300 or P7,980.00 as partial payment and commenced the trip in July 1991. Upon
petitioner’s return from Europe, she demanded from respondent the reimbursement of P61,421.70,
representing the difference between the sum she paid for “Jewels of Europe” and the amount she owed
respondent for the “British Pageant” tour. Despite several demands, respondent company refused to
reimburse the amount, contending that the same was non-refundable. Petitioner was thus constrained to
file a complaint against respondent for breach of contract of carriage and damages at Regional Trial Court
of Makati City.

The trial court held that respondent was negligent in erroneously advising petitioner of her departure date
through its employee, Menor, who was not presented as witness to rebut petitioner’s testimony. However,
petitioner should have verified the exact date and time of departure by looking at her ticket and should
have simply not relied on Menor’s verbal representation. The trial court thus declared that petitioner was
guilty of contributory negligence and accordingly, deducted 10% from the amount being claimed as
refund. Respondent appealed to the Court of Appeals, which likewise found both parties to be at fault.
However, the appellate court held that petitioner is more negligent than respondent because as a lawyer
and well-traveled person, she should have known better than to simply rely on what was told to her. This
being so, she is not entitled to any form of damages. Petitioner also forfeited her right to the “Jewels of
Europe” tour and must therefore pay respondent the balance of the price for the “British Pageant” tour.

Is the contract a Contract of Carriage?

No. By definition, a contract of carriage or transportation is one whereby a certain person or association of
persons obligate themselves to transport persons, things, or news from one place to another for a fixed
price.9 Such person or association of persons are regarded as carriers and are classified as private or
special carriers and common or public carriers. A common carrier is defined under Article 1732 of the Civil
Code as persons, corporations, firms or associations engaged in the business of carrying or transporting
passengers or goods or both, by land, water or air, for compensation, offering their services to the public.
It is obvious from the above definition that respondent is not an entity engaged in the business of
transporting either passengers or goods and is therefore, neither a private nor a common carrier.
Respondent did not undertake to transport petitioner from one place to another since its covenant with its
customers is simply to make travel arrangements in their behalf. Respondent’s services as a travel agency
include procuring tickets and facilitating travel permits or visas as well as booking customers for tours.

While petitioner concededly bought her plane ticket through the efforts of respondent company, this does
not mean that the latter ipso facto is a common carrier. At most, respondent acted merely as an agent of
the airline, with whom petitioner ultimately contracted for her carriage to Europe. Respondent’s obligation
to petitioner in this regard was simply to see to it that petitioner was properly booked with the airline for
the appointed date and time. Her transport to the place of destination, meanwhile, pertained directly to
the airline.
The object of petitioner’s contractual relation with respondent is the latter’s service of arranging and
facilitating petitioner’s booking, ticketing and accommodation in the package tour. In contrast, the object
of a contract of carriage is the transportation of passengers or goods. It is in this sense that the contract
between the parties in this case was an ordinary one for services and not one of carriage. Petitioner’s
submission is premised on a wrong assumption
Eastern Shipping Lines, Inc. v. IAC and Development Insurance & Surety Corp.

G.R. No. L-69044 May 29, 1987

Eastern Shipping Lines, Inc. v. The Nisshin Fire and Marine Insurance Co., andDowa Fire &
Marine Insurance Co., Ltd.

G.R. No. 71478 May 29, 1987

Melencio-Herrera, J.


(G.R. No. L-69044): a vessel operated by petitioner Eastern Shipping Lines, Inc., loaded atKobe, Japan for
transportation to Manila, 5000 pieces of calorized lance pipes in 28packages consigned to Philippine
Blooming Mills Co., Inc., and 7 cases of spare partsconsigned to Central Textile Mills, Inc.; both sets of
goods were insured with DevelopmentInsurance and Surety Corp.

(G.R. No. 71478): the same vessel took on board 128 cartons of garment fabrics andaccessories, in 2
containers, consigned to Mariveles Apparel Corporation, and two cases of surveying instruments consigned
to Aman Enterprises and General Merchandise

the vessel caught fire and sank, resulting in the total loss of ship and cargo


1. which law should govern — the Civil Code provisions on Common carriers or theCarriage of Goods by
Sea Act?; 2. who has the burden of proof to show negligence of thecarrier? 3. what is the extent of the
carrier’s liability?


1. The law of the country to which the goods are to be transported governs theliability of the common
carrier in case of their loss, destruction or deterioration. As thecargoes were transported from Japan to the
Philippines, the liability of Petitioner Carrier isgoverned primarily by the Civil Code. However, in all matters
not regulated by said Code,the rights and obligations of common carrier shall be governed by the Code of
Commerceand by special laws. Thus, the Carriage of Goods by Sea Act, a special law, is suppletory tothe
provisions of the Civil Code.

2. Article 1735 of the Civil Code provides that all cases than those mention in Article 1734,the common
carrier shall be presumed to have been at fault or to have acted negligently,unless it proves that it has
observed the extraordinary diligence required by law. Theburden is upon Eastern Shipping Lines to prove
that it has exercised the extraordinarydiligence required by law.
Note: fire –not considered a natural disaster or calamity within the contemplation of Art.1734 for it arises
almost invariably from some act of man or by human means; it does notfall within the category of an act
of God unless caused by lightning or by other naturaldisaster or calamity

having failed to discharge the burden of proving that it had exercised the extraordinarydiligence required
by law, Eastern Shipping Lines cannot escape liability for the loss of thecargo

As it was at fault, it cannot seek the protective mantle of Sec. 4(2) of Carriage of Goods bySea Act which
provides: “Neither the carrier nor the ship shall be responsible for loss ordamage arising or resulting from x
x x (b) Fire, unless caused by the actual fault or privity of the carrier.”

there was actual fault of the carrier shown by lack of diligence in that when the smoke wasnoticed, the fire
was already big; that the fire must have started 24 hours before the samewas noticed; and that after the
cargoes were stored in the hatches, no regular inspectionwas made as to their condition during the

3. See Art. 1749.G.R. No. 69044: no stipulation in the Bills of Lading limiting the carrier’s liability for the
lossor destruction of the goods; no declaration of a higher value of the goods; Hence, Eastern

Shipping Lines’ liability should not exceed US $500 per package (as provided in 4(5) of theCOGSA), or its
peso equivalent, at the time of payment of the value of the goods lost, but inno case more than the
amount of damage actually sustained
Kabit System
[G.R. No. 64693. April 27, 1984.]
M. OCAMPO and FRANCISCA P. GARCIA, respondents.
Escolin.J. p:
Spouses Ocampo, herein private respondent, purchased in instalment from Delta Motor Sales Corporation
5 Toyota
Corona Standard cars to be used as taxicabs. Since they had no franchise to operate the taxicabs, the
contracted with
petitioner Lita Enterprises for the use of the latter’s certificate of public convenience in consideration of an
payment of P1,000 and a monthly rental of P200 per taxicab unit.
Aforesaid cars were registered in the name of Lita Enterprises, the possession however remain with the
Ocampo who operated and maintained the same unde the namen of “ACME “ Taxi.
About a year later, one of the said taxicabs driven by their employee collided with a motorcycle whose
driver died thus
a civil case is filed for damages which was instituted against Lita Enterprise as registered owner of the
Thus when the decision of the damages became final and executor, one of the vehicles of the spouses was
levied upon
the public auction thereafter; respondent Ocampo decided to register his taxicabs under his name but
declined. Thus a
case for reconveryance of motor vehicle.
RTC: ordered Lita Enterprises to transfer the registration certificate of the three Toyota cars not levied
CA: modified decision: in the event the condition of the three Toyota cars will no longer serve the purpose
of the deed
of conveyance because of their deterioration, or because they are no longer serviceable, or because they
are no
longer available, the LitaEnterprises, Inc. is ordered to pay the plaintiffs their fair market value as of July
22, 1975
Whether or not the private respondent is liable for the amount which the petitioner has paid in relation to
negligence of private respondent’s drivers
The relationship between the respondent and the petitioner is Kabit system whereby a person who has
been granted
a certificate of convenience allows another person who owns motor vehicles to operate under such
franchise for a fee.
“kabit system" is invariably recognized as being contrary to public policy and, therefore, void and inexistent
Artic1e 1409 of the Civil Code. It is a fundamental principle that the court will not aid either party to
enforce an illegal
contract, but will leave them both where it finds them.
Thus Making them IN PARI DELICTO. Inexistent and Void Contract.
Lita Enterprises, Inc. v. Second Civil Cases Division, IAC, Nicasio Ocampo andFrancisca Garcia

G.R. No. L-64693 April 27, 1984

Escolin, J.


Ocampo and Garcia – purchased in installment from the Delta Motor Sales Corporation 5 Toyota Corona
Standard cars to be used as taxicabs; they had no franchise to operatetaxicabs, so they contracted with
Lita Enterprises for the use of the latter’s certificate of public convenience in consideration of an initial
payment of 1,000.00 and a monthly rentalof 200.00 per taxicab unit; the aforesaid cars were then
registered in the name of LitaEnterprises

one of the taxicabs driven by Ocampo and Garcia’s employee, Emeterio Martin, collidedwith a motorcycle
whose driver, Florante Galvez, died from the head injuries sustainedtherefrom

a criminal case was filed against the driver Martin, while a civil case for damages wasinstituted by heir of
the victim against Lita Enterprises


WON Lita Enterprises is liable to the heir of the victim who died as a result of thegross negligence of
Ocampo and Garcia’s driver while driving one private respondents’taxicabs



kabit system

– system whereby a person who has been granted a certificate of convenience allows another person who
owns motors vehicles to operate under suchfranchise for a fee; contrary to public policy and, therefore,
void and inexistent underArticle 1409 of the Civil Code; as a result, the court will not aid either party to
enforce anillegal contract, but will leave them both where it finds them (pari delicto rule)

Art. 1412: “If the act in which the unlawful or forbidden cause consists does not constitutea criminal
offense, the following rules shall be observed; (1) when the fault, is on the partof both contracting parties,
neither may recover what he has given by virtue of thecontract, or demand the performance of the other’s
the defect of inexistence of a contract is permanent and incurable, and cannot be cured byratification or by
- versus -
G.R. No. 162267
(July 4, 2008)

A Mitsubishi Lancer car owned by UCPB, insured with UCPB General Insurance Co., was traversing
the Laurel Highway, Barangay Balintawak, LipaCity. It was driven by Flaviano Isaac with Conrado Geronimo (Asst.
Manager of said bank), was hit and bumped by an 18-wheeler Fuso Tanker Truck, owned by defendants-appellants
PCI Leasing & Finance, Inc. allegedly leased to and operated by defendant-appellant Superior Gas & Equitable Co.,
Inc. (SUGECO) and driven by its employee, defendant appellant Renato Gonzaga. The impact caused heavy damage
to the Mitsubishi Lancer car resulting in an explosion of the rear part of the car. The driver and passenger suffered
physical injuries. However, the driver defendant-appellant Gonzaga continued on its way to its destination and did not
bother to bring his victims to the hospital.
As the 18-wheeler truck is registered under the name of PCI Leasing, repeated demands were made by
plaintiff-appellee for the payment of the aforesaid amounts. However, no payment was made. PCI Leasing and
Finance, Inc., (petitioner) interposed the defense that it could not be held liable for the collision, since the
driver, Gonzaga, was not its employee, but that of its co-defendant SUGECO. In fact, it was SUGECO, that was the
actual operator of the truck, pursuant to a Contract of Lease signed by petitioner and SUGECO. Petitioner, however,
admitted that it was the owner of the truck in question. RTC rendered judgment in favour of UCPB General Insurance
and ordered PCI Leasing and Gonzaga, to pay jointly and severally the former. CA affirmed with the lower court’s

1) Whether petitioner, as registered owner of a motor vehicle that figured in a quasi-delict may be held liable, jointly
and severally, with the driver thereof, for the damages caused to third parties.
2) Whether petitioner, as a financing company, is absolved from liability by the enactment of Republic Act (R.A.) No.
8556, or the Financing Company Act of 1998.

1) YES. The principle of holding the registered owner of a vehicle liable for quasi-delicts resulting from its use is well-
established in jurisprudence. As explained in the case of Erezo v. Jepte, thus:
Registration is required not to make said registration the operative act by which ownership in vehicles
is transferred, as in land registration cases, because the administrative proceeding of registration does
not bear any essential relation to the contract of sale between the parties (Chinchilla vs. Rafael
and Verdaguer, 39 Phil. 888), but to permit the use and operation of the vehicle upon any public
highway (section 5 [a], Act No. 3992, as amended.) The main aim of motor vehicle registration is to
identify the owner so that if any accident happens, or that any damage or injury is caused by
the vehicle on the public highways, responsibility therefor can be fixed on a definite individual, the
registered owner. Instances are numerous where vehicles running on public highways caused
accidents or injuries to pedestrians or other vehicles without positive identification of the owner or
drivers, or with very scant means of identification. It is to forestall these circumstances, so
inconvenient or prejudicial to the public, that the motor vehicle registration is primarily ordained, in the
interest of the determination of persons responsible for damages or injuries caused on public
2) NO. The new law, R.A. No. 8556, notwithstanding developments in foreign jurisdictions, do not supersede or
repeal the law on compulsory motor vehicle registration. No part of the law expressly repeals Section 5(a) and (e) of
R.A. No. 4136, as amended, otherwise known as the Land Transportation and Traffic Code. Thus, the rule remains
the same: a sale, lease, or financial lease, for that matter, that is not registered with the Land Transportation
Office, still does not bind third persons who are aggrieved in tortious incidents, for the latter need only to rely on the
public registration of a motor vehicle as conclusive evidence of ownership. A lease such as the one involved in the
instant case is an encumbrance in contemplation of law, which needs to be registered in order for it to bind third
parties. Under this policy, the evil sought to be avoided is the exacerbation of the suffering of victims of tragic
vehicular accidents in not being able to identify a guilty party. A contrary ruling will not serve the ends of justice. The
failure to register a lease, sale, transfer or encumbrance, should not benefit the parties responsible, to the prejudice of
innocent victims