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Transcribed and Prepared by: Hanniyah Sevilla 4 Manresa ’08-‘09 1

Transportation Law who wants to avail of the services of transporting

Review persons or things.
Based on the lectures of:
Atty. Melissa Romana Q: To be a common carrier, must one be engaged in
Suarez Starring: Shyler, the cab beetle. 
 the transport of goods/passengers primarily?

A: No. Still considered common carrier ---

1.) De Guzman vs. CA - even if the carriage of
Art. 1766. In all matters not regulated by this Code, goods or pax is only an ancillary or sideline, that
the rights and obligations of common carriers shall be person can still be considered a cc. Even if the
governed by the Code of Commerce and by special transportation is merely occasional, sporadic or
laws. not on a regular basis. Even though the
transporation is offered only to a narrow segment
The primary law in transportation law is the civil code, of the general population. And lastly, even if he
particularly the provisions on common carriers. The has not secured a certificate of public
suppletory laws are the Code of Commerce, and convenience.
special laws like the COGSA (Carriage of Goods by
Sea Act), Salvage Law, Warsaw Convention, Tariff t Fx: Facts: Ernesto Cendaña, a junk dealer, was
e engaged in buying up used bottles and scrap metal in
and Customs Code. n
e Pangasinan. Upon gathering sufficient quantities of
What is transportation? such scrap material, Cendaña would bring such
It is a movement of things or persons from one place e
material to Manila for resale. He utilized 2 six-wheeler
to another; a carrying across. D
trucks which he owned for hauling the material to
a Manila. On the return trip to Pangasinan, Cendaña
What does transportation include? a would load his vehicles with cargo which various
o merchants wanted delivered to differing
1. Waiting time - just because a person is in the
airport waiting for the flight to board, does not mean C establishments in Pangasinan. For that service,
that transportation has not started. l Cendaña charged
freight rates which were commonly lower than regular
2. Loading and unloading with respect to g commercial rates. Sometime in November 1970,
transportation of goods Pedro de Guzman, a merchant and authorized dealer
f of General Milk Company (Philippines), Inc. in
3. Stopping in transit - when one takes a long flight, L
Urdaneta, Pangasinan, contracted with Cendaña for
transit stops are also included even if passenger is a the hauling of 750 cartons of Liberty filled milk from a
required to disembark and take all his belongings with warehouse of General Milk in Makati, Rizal, to de
him. Guzman‘s establishment in Urdaneta on or before 4
December 1970. Accordingly, on 1 December 1970,
4. All other accessorial services in connection with the Cendaña loaded in Makati the merchandise on to his
loaded movement -- so it could be anything, like when trucks: 150 cartons were loaded on a truck driven by
you are in HK, you are allowed to check-in the City, Cendaña himself; while 600 cartons were placed on
the movement of your luggage from the city check in board the other truck which was driven by Manuel
to the airport is already included in the term Estrada, Cendaña ‘s driver and employee. Only 150
transportation. boxes of Liberty filled milk were delivered to de
Guzman. The other 600 boxes never reached de
DEFINITION OF COMMON CARRIER (CC) Guzman, since the truck which carried these boxes
was hijacked somewhere along the MacArthur
Art. 1732. Common carriers are persons, Highway in Paniqui, Tarlac, by armed men who took
corporations, firms or associations engaged in the with them the truck, its driver, his helper and the
business of carrying or transporting passengers or cargo.
goods or both, by land, water, or air, for
compensation, offering their services to the public. Held: Article 1732 of the Civil Code makes no
distinction between one whose principal business
Elements: activity is the carrying of persons or goods or both,
1. must be a person, association, corporation, or firms and one who does such carrying only as an ancillary
2. Engaged in a business activity (in local idiom, as ―a sideline‖). Article 1732
3. Transports persons or goods or both by land, water also carefully avoids making any distinction between
or air a person or enterprise offering transportation service
4. Offers service to the public on a regular or scheduled basis and one offering such
5. Accepts compensation for services service on an occasional, episodic or unscheduled
basis. Neither does Article 1732 distinguish between a
If one element is missing, then it is not a common carrier offering its services to the ―general public,‖
carrier. i.e., the general community or population, and one
who offers services or solicits business only from a
National Steel vs. CA 283 SCRA 45 (True test of narrow segment of the general population. Article
Common carrier) 1733 deliberately refrained from making such
The carriage of goods and passengers provided it has
space for all who opt to avail themselves of its Cendaña is properly characterized as a common
transportation for a fee. carrier even though he merely ―back-hauled‖ goods
for other merchants from Manila to Pangasinan,
This means that if you are a carrier, you cannot although such backhauling was done on a periodic or
discriminate. You have to provide space for everyone occasional rather than regular or scheduled manner,
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and even though Cendaña‘s principal occupation was Held: No. Petitioner contends that respondent did not
not the carriage of goods for others. There is no observe the standard of care required of a common
dispute that Cendaña charged his customers a fee for carrier when it informed her wrongly of the flight
hauling their goods; that fee frequently fell below schedule. She could not be deemed more negligent
commercial freight rates is not relevant. than respondent since the latter is required by law to
exercise extraordinary diligence in the fulfillment of its
A certificate of public convenience is not a requisite obligation. If she were negligent at all, the same is
for the incurring of liability under the Civil Code merely contributory and not the proximate cause of
provisions governing common carriers. That liability the damage she suffered. Her loss could only be
arises the moment a person or firm acts as a common attributed to respondent as it was the direct
carrier, without regard to whether or not such carrier consequence of its employee‘s gross negligence.
has also complied with the requirements of the
applicable regulatory statute and implementing Petitioner‘s contention has no merit.
regulations and has been granted a certificate of
public convenience or other franchise. By definition, a contract of carriage or transportation is
one whereby a certain person or association of
2. FPIC vs. CA - still a common carrier even if the persons obligate themselves to transport persons,
mode of transportation is not a motor vehicle (in things, or news from one place to another for a fixed
this case, pipeline) for as long as all the price. Such person or association of persons are
requisites/elements of a cc are present. Here, it is regarded as carriers and are classified as private or
not the pipeline that moves, it is the oil. special carriers and common or public carriers. A
common carrier is defined under Article 1732 of the
3. Asia Lighterage vs. CA (2003) -- even if it has no Civil Code as persons, corporations, firms or
fixed and publicly known route, maintains no associations engaged in the business of carrying or
terminals and issues no tickets transporting passengers or goods or both, by land,
water or air, for compensation, offering their services
4. Calvo vc. UCPB - even if it is not in the business to the public.
of public transportation; here, Calvo was a
customs broker. It is obvious from the above definition that respondent
is not an entity engaged in the business of
5. Schmitz vs. TVI - even if the mode of transport is transporting either passengers or goods and is
not owned by him therefore, neither a private nor a common carrier.
Respondent did not undertake to transport petitioner
6. Bascos vs. CA - even if the contract is not a from one place to another since its covenant with its
contract of carriage. Here, what was entered into customers is simply to make travel arrangements in
was a contract of lease of the truck. The goods were their behalf. Respondent‘s services as a travel agency
lost and the defense was that what was entered into include procuring tickets and facilitating travel permits
was a lease contract. According to the SC, the name or visas as well as booking customers for tours.
of the contract does not matter, for as long as the
requisites are present, then that person is considered While petitioner concededly bought her plane ticket
a common carrier. through the efforts of respondent company, this does
not mean that the latter ipso facto is a common
WHO ARE NOT CONSIDERED COMMON carrier. At most, respondent acted merely as an agent
CARRIER? of the airline, with whom petitioner ultimately
contracted for her carriage to Europe. Respondent‘s
FGU vs. Sarmiento (2002) - Truck owned by obligation to petitioner in this regard was simply to
Sarmiento carrying refrigerators belonging to shipper, see to it that petitioner was properly booked with the
Concepcion Industries. Here, SC said that Sarmiento airline for the appointed date and time. Her transport
was not a common carrier because it was the to the place of destination, meanwhile, pertained
exclusive hauler of Concepcion Industries. directly to the airline.

GPS, being an exclusive contractor and hauler of The object of petitioner‘s contractual relation with
Concepcion Industries, Inc., rendering or offering its respondent is the latter‘s service of arranging and
services to no other individual or entity, cannot be facilitating petitioner‘s booking, ticketing and
considered a common carrier. Common carriers are accommodation in the package tour. In contrast, the
persons, corporations, firms or associations engaged object of a contract of carriage is the transportation of
in the business of carrying or transporting passengers passengers or goods. It is in this sense that the
or goods or both, by land, water, or air, for hire or contract between the parties in this case was an
compensation, offering their services to the public,[8] ordinary one for services and not one of carriage.
whether to the public in general or to a limited Petitioner‘s submission is premised on a wrong
clientele in particular, but never on an exclusive basis. assumption.
The true test of a common carrier is the carriage of
passengers or goods, providing space for those who DILIGENCE REQUIRED:
opt to avail themselves of its transportation service for
a fee.Given accepted standards, GPS scarcely falls Art. 1733. Common carriers, from the nature of their
within the term ―common carrier.‖ BUT GPS is still business and for reasons of public policy, are bound
liable based on the contract. However, there is no to observe extraordinary diligence in the vigilance
presumption of negligence in case of loss. over the goods and for the safety of the passengers
transported by them, according to all the
2. Crisostomo vs. CA (2003) Is a travel agency a circumstances of each case.
common carrier?
Such extraordinary diligence in the vigilance over the
goods is further expressed in Articles 1734, 1735, and
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1745, Nos. 5, 6, and 7, while the extraordinary not required to exercise XOD. So there is no
diligence for the safety of the passengers is further set discrimination between crew and passengers.
forth in Articles 1755 and 1756.
The duty to exercise the utmost diligence on the part
Notes: of common carriers is for the safety of passengers as
1. What is Extra Ordinary Diligence (XOD)? That well as for the members of the crew or the
extreme measure of care and caution which persons complement operating the carrier, the airplane in the
of which unusual prudence and circumspection use present case. And this must be so for any omission,
for securing and preserving their own properties or lapse or neglect thereof will certainly result to the
rights. (National Trucking and Forwarding Corp. vs. damage, prejudice, nay injuries and even death to all
Lorenzo Shipping (2005)) aboard the plane, passengers and crew members
Facts: DOH and CARE signed an agreement where
CARE would acquire from the US donations to be 3. Benedicto vs. IAC - The prevailing doctrine on
transported to the Philippines. To deliver the goods common carriers makes the registered owner liable
within the Phil, DOH entered into a contract with for consequences flowing from the operations of the
NTFC. NTFC shipped the goods through Lorenzo carrier, even though the specific vehicle involved may
Shipping. The consignee was A, NTFC‘s branch already have been transferred to another person. This
manager. LS delivered the goods but when it doctrine rests upon the principle that in dealing with
requested A to return the bills of ladings, A merely vehicles registered under the Public Service Law, the
returned certified true copies thereof. Every after public has the right to assume that the registered
delivery, A and his subordinates signed a delivery owner is the actual or lawful owner thereof It would be
receipt. Despite delivery however, it was alleged that very difficult and often impossible as a practical
the goods were never received. matter, for members of the general public to enforce
the rights of action that they may have for injuries
LS invoked that it exercised XOD, and thus was not inflicted by the vehicles being negligently operated if
liable for the loss. they should be required to prove who the actual owner
is. The registered owner is not allowed to deny liability
Held: Is LS presumed to be at fault for the loss of the by proving the identity of the alleged transferee. Thus,
goods? contrary to petitioner's claim, private respondent is not
No - Article 173 of the Civil Code demands that a required to go beyond the vehicle's certificate of
common carrier observe extraordinary diligence over registration to ascertain the owner of the carrier.
the goods transported by it. Extraordinary diligence is
that extreme measure of care and caution which 4. BA Finance vs. CA - the registered owner, the
persons of unusual prudence and circumspection use defendant-appellant herein, is primarily responsible for
for securing and preserving their own property or the damage caused to the vehicle of the plaintiff-
rights. This exacting standard imposed on common appellee, but he (defendant-appellant) has a right to
carriers in a contract of carriage of goods is intended be indemnified by the real or actual owner of the
to tilt the scales in favor of the shipper who is at the amount that he may be required to pay as damage for
mercy of the common carrier once the goods have the injury caused to the plaintiff-appellant. (File a 3rd
been lodged for shipment. Hence, in case of loss of party complaint)
goods in transit, the common carrier is presumed
under the law to have been at fault or negligent. Reason: Were a registered owner allowed to evade
However, the presumption of fault or negligence, may responsibility by proving who the supposed transferee
be overturned by competent evidence showing that or owner is, it would be easy for him, by collusion with
the common carrier has observed extraordinary others or otherwise, to escape said responsibility and
diligence over the goods. transfer the same to an indefinite person, or to one
In the instant case, we agree with the court a quo that who possesses no property with which to respond
the respondent adequately proved that it exercised financially for the damage or injury done. A victim of
extraordinary diligence. Although the original bills of recklessness on the public highways is usually
lading remained with petitioner, respondent‘s agents without means to discover or Identify the person
demanded from Abdurahman the certified true copies actually causing the injury or damage. He has no
of the bills of lading. They also asked the latter and in means other then by a recourse to the registration in
his absence, his designated subordinates, to sign the the Motor Vehicles Office to determine who is the
cargo delivery receipts. owner. The protection that the law aims to extend to
This practice, which respondent‘s agents testified to him would become illusory were the registered owner
be their standard operating procedure, finds support given the opportunity to escape liability by disproving
in Article 353 of the Code of Commerce. Conformably his ownership. If the policy of the law is to be enforced
with the aforecited provision, the surrender of the and carried out, the registered owner should not be
original bill of lading is not a condition precedent for a allowed to prove the contrary to the prejudice of the
common carrier to be discharged of its contractual person injured, that is, to prove that a third person or
obligation. If surrender of the original bill of lading is another has become the owner, so that he may
not possible, acknowledgment of the delivery by thereby be relieved of the responsibility to the injured
signing the delivery receipt suffices. person.

2. In PAL vs. CA 106 S 391 - SC said that the duty of STATE REGULATION OF COMMON
to exercise the duty of utmost diligence on the part of CARRIER
the CC is for the safety of passengers, as well as
members of the crew. Art. 1765. The Public Service Commission may, on its
own motion or on petition of any interested party, after
If you are part of the crew, and you are injured, you due hearing, cancel the certificate of public
can sue the the CC and the CC cannot invoke that it is convenience granted to any common carrier that
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repeatedly fails to comply with his or its duty to regulate the issuance of a license to operate domestic
observe extraordinary diligence as prescribed in this air transport services
Distinctions between CC and Private
Notes: Carrier
1. So the public service commission has been
replaced by the following bodies: 1. Definition Cf: Art. 1766 Involves a single
LTO - private vehicles 2. As to Bound to carry May choose
LTFRB- common carrier whom it may all pax who person with whom
Civil Aeronautics Board - public airplanes contract choose to it may contract
ATO- private planes (according to Lyndon) employ it
MARINA - common carriers for sea 3. Degree of Observe XOD GFOF
2. Note: The cancellation of certificate of public required
convenience cannot be done without hearing; 4. As to Negligence is Person who
although these bodies have the power to initiate presumption presumed if pax alleges negligence
hearing motu propio. Take note of the ground for of or goods do not must prove the
cancellation as provided under Art. 1765. negligence reach final same
3. Pantranco vs. Public Service Commission 70 P 5. As to how
221 - A certificate of public convenience constitutes to escape
neither a franchise nor a contract. It confers no liability
property rights and is a mere license or privilege and 6. As to A CC performs Does not perform
therefore can be subject to regulation founded on the state public service public service; also
police power of the State. regulation and is subject to subject to State
State regulation regulation but not
4. Medina vs. Cresencia- The sale of CPC without too strict.
approval of the governing bodies is not binding
against the public. So there has to be approval first. It CC OF GOODS (CCOG)
is binding between the parties only. In contemplation
of the law, the grantee of record continues to be Art. 1753. The law of the country to which the goods
responsible under the CPC in relation to the governing are to be transported shall govern the liability of the
body or the public. common carrier for their loss, destruction or
5. PAL vs. CAB 270 S 538 - PAL alleged that CAB
abused its discretion when it granted to Grand Air a NOTES:
Temporary Operating Permit. Accdg. to PAL, Grand 1. If foreign voyage or flight from foreign country
Air has not been granted a legislative franchise to inbound to Phil - governed by Phil laws. If outbound,
operate. carrier lands in US and there is complaint, can pax
sue CCOG here? Yes, apply conflicts of laws. (Saudia
The issue in this petition is whether or not Congress, t
Airlines case)
in enacting Republic Act 776, has delegated the e
authority to authorize the operation of domestic air e TEST TO DETERMINE IF ONE IS CCOG
transport services to the respondent Board, such that
Congressional mandate for the approval of such d a. He must be engaged in the business of carrying
authority is no longer necessary. goods for others as a public employment, and must
a hold himself out as ready to engage in the
Civil Aeronautics Board has the authority to issue a a
transportation of goods for person generally as a
Certificate of Public Convenience and Necessity, or o business and not as a casual occupation;
Temporary Operating Permit to a domestic air C
transport operator, who, though not possessing a l b. He must undertake to carry goods of the kind to
legislative franchise, meets all the other requirements l
which his business is confined;
prescribed by the law. Such requirements were g
enumerated in Section 21 of R.A. 776. c. He must undertake to carry by the method by which
f his business is conducted and over his established
There is nothing in the law nor in the Constitution, roads; and
which indicates that a legislative franchise is an a
indispensable requirement for an entity to operate as d. The transportation must be for hire. (FPIC VS. CA)
a domestic air transport operator. Although Section 11
of Article XII recognizes Congress' control over any Art. 1733. Common carriers, from the nature of their
franchise, certificate or authority to operate a public business and for reasons of public policy, are bound
utility, it does not mean Congress has exclusive to observe extraordinary diligence in the vigilance
authority to issue the same. Franchises issued by over the goods X X X
Congress are not required before each and every
public utility may operate. In many instances, Such extraordinary diligence in the vigilance over the
Congress has seen it fit to delegate this function to goods is further expressed in Articles 1734, 1735, and
government agencies, specialized particularly in their 1745, Nos. 5, 6, and 7, while the extraordinary
respective areas of public service. diligence for the safety of the passengers is further set
forth in Articles 1755 and 1756.
A reading of Section 10 of the same reveals the clear
intent of Congress to delegate the authority to Notes:
What is XOD in the vigilance of goods?
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Extraordinary diligence requires rendering service with that the loss was due to accident or some other
the greatest skill and foresight to avoid damage and circumstance inconsistent with its liability.
destruction to the goods entrusted for carriage and
delivery. (Leamer vs. Malayan, 2005) 7. What does it mean if the shipment is
'containarized'? (Bankers and Manufacturers vs.
Art. 1734. Common carriers are responsible for the CA)
loss, destruction, or deterioration of the goods, unless
the same is due to any of the following causes only: It must be underscored that the shipment involved in A
the case at bar was "containerized". The goods under e
(1) Flood, storm, earthquake, lightning, or other n
this arrangement are stuffed, packed, and loaded by e
natural disaster or calamity; the shipper at a place of his choice, usually his own o

warehouse, in the absence of the carrier. The d

(2) Act of the public enemy in war, whether container is sealed by the shipper and thereafter
international or civil; D
picked up by the carrier. Consequently, the recital of a
the bill of lading for goods thus transported ordinarily v
Notes: would declare "Said to Contain", "Shipper's Load and o
1. Gen Rule is the first sentence; the exceptions are Count", "Full Container Load", and the amount or C
the 5 cases enumerated. quantity of goods in the container in a particular o
package is only prima facie evidence of the amount or l
2. Does it mean that if goods are lost, damaged or quantity which may be overthrown by parol evidence. g
destroyed, is the CCOG automatically responsible?
A shipment under this arrangement is not inspected o
NO. There is no automatic liability or responsibility for or inventoried by the carrier whose duty is only to
loss/deterioration/damage of goods. What arises is transport and deliver the containers in the same a
AUTOMATIC PRESUMPTION of negligence. condition as when the carrier received and accepted w

the containers for transport.

3. How to rebut presumption/escape liability?
What is the requirement to hold the CCOG liable if
The CCOG must prove that it exercised XOD. (Note: goods are damaged under this arrangement?
Do not say "by exercising XOD" because that is
different from proving CCOG exercised XOD.) In order to hold the carrier liable for whatever loss,
damage or deterioration that happened on the goods
Art. 1735. In all cases other than those mentioned in inside the container, it has to be opened in front of the
Nos. 1, 2, 3, 4, and 5 of the preceding article, if the carrier and inspected. If the consignee receives the
goods are lost, destroyed or deteriorated, common container, does not check it, brings it to ihs warehouse
carriers are presumed to have been at fault or to have and complains days later, then that is no longer
acted negligently, unless they prove that they allowed. The inspection should be done in front of the
observed extraordinary diligence as required in Article carrier.
If the inspection is done upon arrival, there is a
4. If any of the 5 instances arises, the presumption of presumption that the goods were received in good
negligence WILL NOT ARISE. The effect is that there order. The carrier then will have to prove that the
is no automatic presumption of negligence. What is goods were received otherwise.
the effect? The effect is that the CCOG no longer
needs to prove that it exercised XOD. 8. What is an arrastre operator?

5. Q: Is the CCOG automatically exempt from liability Is an arrastre operator legally liable for the loss of a
in cases of the 5 instances mentioned in Art. 1734? shipment in its custody? If so, what is the extent of its
liability? (Summa Insurance vs. CA)
A: NO. The CCOG must still have to prove that it
complied with the requirements of Art. 1739, 1740, H: In the performance of its obligations, an arrastre
1741, 1742. operator should observe the same degree of diligence
as that required of a common carrier and a
6. YNCHAUSTI VS. DEXTER - What does the warehouseman as enunciated under Article 1733 of
shipper/consignee have to show in order to have a the Civil Code and Section 3(8) of the Warehouse
prima facie case against the carrier? Receipts Law, respectively. Being the custodian of the
goods discharged from a vessel, an arrastre
1. Actual receipt of goods by the carrier; operator's duty is to take good care of the goods and
2. Failure to deliver the goods in the same conditions to turn them over to the party entitled to their
as it was received. possession.

If these two are shown, the burden of proof is shifted Flood, storm, earthquake, lightning, or
and it is incumbent upon the carrier, in order to other natural disaster or calamity -- in
exonerate itself, to both allege and prove that the relation to 1739 and 1740:
injury was due to some circumstances.
Art. 1739. In order that the common carrier may be
The mere proof of delivery of goods in good order to a exempted from responsibility, the natural disaster
carrier, and of their arrival at the place of destination must have been the proximate and only cause of the
in bad order, makes out a prima facie case against loss. However, the common carrier must exercise due
the carrier, so that if no explanation is given as to how diligence to prevent or minimize loss before, during
the injury occurred, the carrier must be held and after the occurrence of flood, storm or other
responsible. It is incumbent upon the carrier to prove natural disaster in order that the common carrier may
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be exempted from liability for the loss, destruction, or 4. DSR Senator vs. Phoenix (2003) - same ruling as
deterioration of the goods. The same duty is Eastern Shipping that fire is not a natural calamity.
incumbent upon the common carrier in case of an act
of the public enemy referred to in Article 1734, No. 2. 5. Illustration of Art. 1740: Philamgen vs. CA 222
SCRA 414 - Here, the goods arrived in port but
Art. 1740. If the common carrier negligently incurs in because of the heavy rains, they were not discharged
delay in transporting the goods, a natural disaster and so the goods were destroyed. The issue is did the
shall not free such carrier from responsibility. CCOG negligently incur in delay?

Notes: No, the cause of the delay was not the fault of the
carrier. The delay was caused by the decision of the
1. CCOG need not prove it exercised XOD; however, board (construction of catwalks, etc), customs of the
CCOG must prove that: (Philamgen vs. MCG Marine) place and heavy, intermittent rains.

a. the natural calamity or disaster must have been the Other cases:
proximate and only cause of the loss; and
b. the CCOG exercised due diligence to prevent or 7. Schmitz Transport vs. Transventure: the natural
minimize the loss and calamity was not the only and proximate cause of the
c. CCOG did not incur delay in transporting the goods. loss.

2. Is fire a natural calamity? (This was not clearly Act of the public enemy in war, whether
answered by Atty. Suarez; In response to the international or civil;
suggested answer that fire is considered natural
calamity if caused by lightning, the answer given by Requirements:
Ma'am S was: When you say natural, it has to be
natural. Obviously if it was caused by something that a. the natural act of public enemy must have been the
has some kind of human intervention, it cannot fall proximate and only cause of the loss; and
under natural disaster.) b. the CCOG exercised due diligence to prevent or
minimize the loss
Act of omission of the shipper or owner of
As a general rule, fire is not a natural disaster. the goods in relation to:

Petitioner Carrier claims that the loss of the vessel by Art. 1741. If the shipper or owner merely contributed
fire exempts it from liability under the phrase "natural to the loss, destruction or deterioration of the goods,
disaster or calamity. " However, we are of the opinion the proximate cause thereof being the negligence of
that fire may not be considered a natural disaster or the common carrier, the latter shall be liable in
calamity. This must be so as it arises almost damages, which however, shall be equitably reduced.
invariably from some act of man or by human means.
It does not fall within the category of an act of God Notes:
unless caused by lightning or by other natural 1. In order to totally escape liability, the CCOG must
disaster or calamity. It may even be caused by the prove that the act/negligence of the shipper is the only
actual fault or privity of the carrier. and proximate cause of the loss. Otherwise, Art. 1741
applies. If the CCOG is not able to prove that the only
Of course the exception is unless it was naturally and proximate cause of the loss is the act of the
caused, such as lightning, or if there was an shipper then, there will be an equitable reduction of
earthquake and suddenly the cement rubbed against the liability.
each other.
2. COMPANIA MARITIMA VS. CA: Here, the shipper
This was reiterated in Cokaliong vs. UCPB (2003) stated the weight of the payloader was 2.5 tons when
it was 7.5 tons in reality. CCOG used a lifting
Having originated from an unchecked crack in the fuel apparatus with a 5 ton capacity, so the payloader fell
oil service tank, the fire could not have been caused and was damaged.
by force majeure. Broadly speaking, force majeure
generally applies to a natural accident, such as that H: We are not persuaded by the proferred explanation
caused by a lightning, an earthquake, a tempest or a of petitioner alleged to be the proximate cause of the
public enemy. Hence, fire is not considered a natural fall of the payloader while it was being unloaded at t
the Cagayan de Oro City pier. Petitioner seems to e
disaster or calamity. n
have overlooked the extraordinary diligence required e
3. What about heavy rains, are they considered of common carriers in the vigilance over the goods
natural disasters? NO. Vessels are built to withstand transported by them by virtue of the nature of their e
heavy rains and seas. business, which is impressed with a special public
duty. a
Eastern Shipping vs. CA: The heavy seas and rains a
And circumstances clearly show that the fall of the o
referred to in the master's report were not caso
fortuito, but normal occurrences that an ocean-going payloader could have been avoided by petitioner's C
vessel, particularly in the month of September which, crew. Evidence on record sufficiently show that the l
in our area, is a month of rains and heavy seas would crew of petitioner had been negligent in the e
performance of its obligation by reason of their having g
encounter as a matter of routine. They are not e
unforeseen nor unforeseeable. These are conditions failed to take the necessary precaution under the
that ocean-going vessels would encounter and circumstances which usage has established among f

provide for, in the ordinary course of a voyage. careful persons, more particularly its Chief Officer, Mr. L
Felix Pisang, who is tasked with the over-all a
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supervision of loading and unloading heavy cargoes the goods are already defective, etc. And if the goods
and upon whom rests the burden of deciding as to arrived in the same condition as it was received, then
what particular winch the unloading of the payloader that can be used as an exception. If that happens, all
should be undertaken. While it was his duty to the carrier has to prove is Art. 1742 -- due diligence to
determine the weight of heavy cargoes before forestall or lessen the loss.
accepting them. Mr. Felix Pisang took the bill of lading
on its face value and presumed the same to be Otherwise, the acceptance of CCOG without
correct by merely "seeing" it. exception, the CC cannot hide under this exception.

In that sense, therefore, private respondent's act of b. CALVO VS. UCPB: Calvo is a customs broker. The
furnishing petitioner with an inaccurate weight of the vessel arrived in Manila. The cargo was loaded on the
payloader upon being asked by petitioner's collector, truck of Calvo. Calvo as broker also volunteered to
cannot be used by said petitioner as an excuse to deliver the goods to the warehouse of the shipper.
avoid liability for the damage caused, as the same When the goods arrived, they were spoiled. Calvo
could have been avoided had petitioner utilized the denied liability for the goods and alleged that the
"jumbo" lifting apparatus which has a capacity of spoilage took place while the goods were in the vessel
lifting 20 to 25 tons of heavy cargoes. or while with the arrastre operator.

Act of omission of the shipper or owner of According to the SC, when did the consignee discover
the goods; the spoilage of the goods? When they were in the
possession of Calvo.
The character of the goods or defects in
the packing or in the containers; For this provision to apply, the rule is that if the
improper packing or, in this case, the defect/s in the
ARTICLE 1742. Even if the loss, destruction, or container, is/are known to the carrier or his
deterioration of the goods should be caused by the employees or apparent upon ordinary observation,
character of the goods, or the faulty nature of the but he nevertheless accepts the same without protest
packing or of the containers, the common carrier must or exception notwithstanding such condition, he is not
exercise due diligence to forestall or lessen the loss. relieved of liability for damage resulting therefrom. In
this case, petitioner accepted the cargo without
Notes: exception despite the apparent defects in some of the
1. If there is a defect in the packaging or character of container vans. Hence, for failure of petitioner to
the goods, for example in a case, grain was loaded prove that she exercised extraordinary diligence in the
and they were already halfway to rotting, i.e. there carriage of goods in this case or that she is exempt
were already molds, then the requisite for CCOG to from liability, the presumption of negligence as
escape liability is that it must prove that it exercised provided under Art. 1735 holds.
due diligence to forsetall or lessen the loss. That is
under Art. 1742. c. Iron bulk Shipping vs. Remington

2. But a perusal of the cases will show that the SC is Order or act of competent public
saying that CCOG should do something more than authority.
just Art. 1742:
ARTICLE 1743. If through the order of public authority
a. Southern Lines vs. CA: Petitioner claims the goods are seized or destroyed, the common
exemption from liability by contending that the carrier is not responsible, provided said public
shortage in the shipment of rice was due to such authority had power to issue the order
factors as the shrinkage, leakage or spillage of the
rice on account of the bad condition of the sacks at Note:
the time it received the same and the negligence of 1. First requisite: Person issuing order must have
the agents of respondent City of Iloilo in receiving the power to issue such.
2. Second requisite: The order must be lawful or
Held: The contention is untenable, for, if the fact of must have been issued under legal process or
improper packing is known to the carrier or his authority
servants, or apparent upon ordinary observation, but
it accepts the goods notwithstanding such condition, it (Ganzon vs. CA - A,owner of the the CCOG was
is not relieved of liability for loss or injury resulting unloading the iron. Mayor B demanded P5,000 and
thereform. when A refused, B shot A. After several days, the
unloading resumed and Acting Mayor C ordered X
Furthermore, according to the Court of Appeals, and the crew of the vessel to dump the iron. The issue
"appellant (petitioner) itself frankly admitted that the is, can the CCOG be held liable for the loss of the
strings that tied the bags of rice were broken; some cargo?
bags were with holes and plenty of rice were spilled
inside the hull of the boat, and that the personnel of Held: YES. We cannot sustain the theory of caso
the boat collected no less than 26 sacks of rice which fortuito. In the courts below, the petitioner's defense
they had distributed among themselves." This finding, was that the loss of the scraps was due to an "order
which is binding upon this Court, shows that the or act of competent public authority," and this
shortage resulted from the negligence of petitioner. contention was correctly passed upon by the Court of
Appeals which ruled that:
Therefore, if goods are delivered to the CCOG and
the defect in the goods/packaging is apparent, then ... In the second place, before the appellee Ganzon
the CC may accept the goods with reservation or could be absolved from responsibility on the ground
exception. It must be indicated in the bill of lading that that he was ordered by competent public authority to
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unload the scrap iron, it must be shown that Acting The authorities are to the effect that a bill of lading is
Mayor Basilio Rub had the power to issue the not indispensable for the creation of a contract of
disputed order, or that it was lawful, or that it was carriage. As regards the form of the contract of
issued under legal process of authority. The appellee carriage it can be said that provided that there is a
failed to establish this. Indeed, no authority or power meeting of the minds and from such meeting arise
of the acting mayor to issue such an order was given rights and obligations, there should be no limitations
in evidence. as to form.‘ The bill of lading is juridically a
documentary proof of the stipulations and conditions
The petitioner was not duty bound to obey the illegal agreed upon by both parties.
order to dump into the sea the scrap iron. Moreover,
there is absence of sufficient proof that the issuance The liability of the carrier as common carrier begins
of the same order was attended with such force or with the actual delivery of the goods for
intimidation as to completely overpower the will of the transportation, and not merely with the formal
petitioner's employees. The mere difficulty in the execution of a receipt or bill of lading; the issuance of
fullfilment of the obligation is not considered force a bill of lading is not necessary to complete delivery
majeure. and acceptance. Even where it is provided by statute
that liability commences with the issuance of the bill of
DURATION OF LIABILITY (from what point lading, actual delivery and acceptance are sufficient
to what point is a carrier liable?) to bind the carrier.

ARTICLE 1736. The extraordinary responsibility of the The test as to whether the relation of shipper and
common carrier lasts from the time the goods are carrier had been established is, had the control and
unconditionally placed in the possession of, and possession of the cotton been completely
received by the carrier for transportation until the surrendered by the shipper to the shipper? Whenever
same are delivered, actually or constructively, by the the control and possession of goods passes to the
carrier to the consignee, or to the person who has a carrier and nothing remains to be done by the
right to receive them, without prejudice to the shipper, then it can be said with certainty that the
provisions of article 1738. relation of shipper and carrier has been established.

ARTICLE 1737. The common carrier's duty to 2. In relation to Art. 1738, what if the goods are in the
observe extraordinary diligence in the vigilance over customs warehouse and they get destroyed,
the goods remains in full force and effect even when deteriorated or damaged because the processing of
they are temporarily unloaded or stored in transit, papers take too long to process? Can the carrier be
unless the shipper or owner has made use of the right held liable?
of stoppage in transitu.
ARTICLE 1738. The extraordinary liability of the
common carrier continues to be operative even during H: It is true that, as a rule, a common carrier is
the time the goods are stored in a warehouse of the responsible for the loss, destruction or deterioration of
carrier at the place of destination, until the consignee the goods it assumes to carry from one place to
has been advised of the arrival of the goods and has another unless the same is due to any to any of the
had reasonable opportunity thereafter to remove them causes mentioned in Article 1734 on the new Civil
or otherwise dispose of them. Code, and that, if the goods are lost, destroyed or
deteriorated, for causes other that those mentioned,
Notes: the common carrier is presumed to have been at fault
or to have acted negligently, unless it proves that it
From when: from the time the goods are has observed extraordinary diligence in their care ,
unconditionally placed in the possession of, and and that this extraordinary liability lasts from the time
received by the carrier for transportation. the goods are placed in the possession of the carrier
until they are delivered to the consignee, or "to the
Not actually place on the ship, it is enough even if person who has the right to receive them" , but these
custody is transferred to the office/receiving office of provisions only apply when the loss, destruction or
the carrier. deterioration takes place while the goods are in the
possession of the carrier, and not after it has lost
It ends: When the goods are delivered, actually or control of them.
constructively, by the carrier to the consignee, or to
the person who has a right to receive them, without The reason is obvious. While the goods are in its
prejudice to the provisions of article 1738. possession, it is but fair that it exercise extraordinary
diligence in protecting them from damage, and if loss
1. Compania Maritima vs. Icna - Since the vessel of occurs, the law presumes that it was due to its fault or
CM was too large for the Sasa Warf, CM sent a lighter negligence. This is necessary to protect the interest
to pick up the hemp. Before the hemp could be loaded the interest of the owner who is at its mercy. The
to the vessel, the lighter sank. CM alleged that it could situation changes after the goods are delivered to the
not be liable for the loss as the goods were not yet consignee.
loaded on the vessel. Besides, there was no bill of
lading yet issued to the shipper. While we agree with the Court of Appeals that while
delivery of the cargo to the consignee, or to the
H: The claim that there can be no contract of person who has a right to receive them",
affreightment because the hemp was not actually t contemplated in Article 1736, because in such case
loaded on the ship that was to take it from Davao City n the goods are still in the hands of the Government
e and the owner cannot exercise dominion over them,
to Manila is of no moment, for the delivery of the o
hemp to the carrier‘s lighter is in line with the contract. we believe however that the parties may agree to limit
e the liability of the carrier considering that the goods
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have still to through the inspection of the customs Held: No. When the carrier under the terms of the bill
authorities before they are actually turned over to the of lading had delivered the goods at the port of
consignee. This is a situation where we may say that destination, at that point he merely becomes the agent
the carrier losses control of the goods because of a of consignee and ceases to be liable as carrier for
custom regulation and it is unfair that it be made loss or damages of the goods transported.
responsible for what may happen during the Thereafter, loss of goods in its hand for causes
interregnum. And this is precisely what was done by beyond its control without negligence being proved,
the parties herein. cannot sustain a claim for damage against the carrier.

So what can be done in cases such as this wherein There is no doubt that Art. 1738 finds no applicability
we have no exact provision under the law to govern to the instant case. The said article contemplates a
the same? In such case, the agreement of the parties A situation where the goods had already reached their
prevail. e place of destination and are stored in the warehouse
n of the carrier. The subject goods were still awaiting
3. SERVANDO VS. PHIL STEAM NAVIGATION CO o transshipment to their port of destination, and were

d stored in the warehouse of a third party when last

Here, the goods were delivered in good order in the seen and/or heard of. However, Article 1736 is
warehouse of the customs authority. At about 2:00 in D applicable to the instant suit. Under said article, the
the afternoon of the same day, said warehouse was v carrier may be relieved of the responsibility for loss or
razed by a fire of unknown origin, destroying o damage to the goods upon actual or constructive
appellees' cargoes. Before the fire, however, appellee C
delivery of the same by the carrier to the consignee,
Uy Bico was able to take delivery of 907 cavans of o or to the person who has a right to receive them. In
rice. Is the carrier liable? l sales, actual delivery has been defined as the ceding
g of corporeal possession by the seller, and the actual
e apprehension of corporeal possession by the buyer or
H: No. Article 1736 of the Civil Code imposes upon
o by some person authorized by him to receive the
common carriers the duty to observe extraordinary
diligence from the moment the goods are goods as his representative for the purpose of
unconditionally placed in their possession "until the a
custody or disposal. By the same token, there is
same are delivered, actually or constructively, by the w actual delivery in contracts for the transport of goods

carrier to the consignee or to the person who has a when possession has been turned over to the
right to receive them, without prejudice to the consignee or to his duly authorized agent and a
provisions of Article 1738. " reasonable time is given him to remove the goods. The
court a quo found that there was actual delivery to the
The court a quo held that the delivery of the shipment consignee through its duly authorized agent,
in question to the warehouse of the Bureau of the carrier.
Customs is not the delivery contemplated by Article
1736; and since the burning of the warehouse It becomes necessary at this point to dissect the
occurred before actual or constructive delivery of the complex relationship that had developed between
goods to the appellees, the loss is chargeable against appellant and appellee in the course of the
the appellant. transactions that gave birth to the present suit. Two
undertakings appeared embodied and/or provided for
It should be pointed out, however, that in the bills of in the Bill of Lading 19 in question. The first is FOR
lading issued for the cargoes in question, the parties THE TRANSPORT OF GOODS from Bremen,
agreed to limit the responsibility of the carrier for the Germany to Manila. The second, THE
loss or damage that may be caused to the shipment TRANSSHIPMENT OF THE SAME GOODS from
by inserting therein the following stipulation: Manila to Davao, with appellant acting as agent of the
consignee. At the hiatus between these two
Clause 14. Carrier shall not be responsible for loss or undertakings of appellant which is the moment when
damage to shipments billed 'owner's risk' unless such the subject goods are discharged in Manila, its
loss or damage is due to negligence of carrier. Nor personality changes from that of carrier to that of
shall carrier be responsible for loss or damage agent of the consignee. Thus, the character of
caused by force majeure, dangers or accidents of the appellant's possession also changes, from
sea or other waters; war; public enemies; . . . fire . ... possession in its own name as carrier, into
possession in the name of consignee as the latter's
In the case at bar, the burning of the customs agent. Such being the case, there was, in effect,
warehouse was an extraordinary event which actual delivery of the goods from appellant as carrier
happened independently of the will of the appellant. to the same appellant as agent of the consignee.
The latter could not have foreseen the event. Upon such delivery, the appellant, as erstwhile
carrier, ceases to be responsible for any loss or
So in this case, the burning of the customs warehouse damage that may befall the goods from that point
was considered as a fortuitous event in so far as the onwards. This is the full import of Article 1736, as
carrier is concerned. applied to the case before Us.

4. SAMAR MINING VS. NORDEUTCHER LLOYD But even as agent of the consignee, the appellant
cannot be made answerable for the value of the
The bill of lading provided that it was effective only for missing goods, It is true that the transshipment of the
the transport of the goods for Germany to Manila. goods, which was the object of the agency, was not
From Manila, the goods were to be further transported fully performed. However, appellant had commenced
to Davao. The carrier had unloaded and delivered the said performance, the completion of which was
good in the bonded warehouse in Manila. They never aborted by circumstances beyond its control. An
reached Davao. Is Nordeutcher Lloyd liable? agent who carries out the orders and instructions of
the principal without being guilty of negligence, deceit
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or fraud, cannot be held responsible for the failure of (3) Supported by a valuable consideration other
the principal to accomplish the object of the agency. than the service rendered by the common carrier; and
(4) Reasonable, just and not contrary to public
5. Macam vs. CA policy.

Facts: Petitioner Macam exported watermelons and Can the parties stipulate that there shall be no
mangoes to Hong Kong, Great Prospect Company is diligence to be excercised by the CCOG?
the consignee. The bill of lading stated that one of the
bill must be presented by the Pakistan Bank as NO. Under Art. 1745, these are void stipulations
consignee and GPC as the notify party. Upon arrival because they are against public policy.
in Hong Kong, the shipment was delivered by the
carrier directly to GPC and not to Pakistan Bank and ARTICLE 1745. Any of the following or similar
without surrendering the bill of lading. Was there a stipulations shall be considered unreasonable, unjust
proper delivery? and contrary to public policy:
(1) That the goods are transported at the risk of
Held: YES. Delivery to GPC is delivery to the the owner or shipper;
consignee. The extraordinary responsibility of (2) That the common carrier will not be liable for
common carriers last until actual or constructive any loss, destruction, or deterioration of the goods;
delivery of the cargo to the consignee or his agent. (3) That the common carrier need not observe
any diligence in the custody of the goods;
Pakistan was indicted as consignee and GPC was the (4) That the common carrier shall exercise a
notify party. However, in the export invoice, GPC was degree of diligence less than that of a good father of a
clearly named as buyer or importer. Petitioner family, or of a man of ordinary prudence in the
referred to GPC as such in his demand letter to vigilance over the movables transported;
respondent and his complaint before the court. This (5) That the common carrier shall not be
premise brings into conclusion that the deliveries of responsible for the acts or omission of his or its
the cargo to GPC as buyer or importer is in conformity employees;
with Art. 1736 of the Civil Code. Therefore, there was (6) That the common carrier's liability for acts
a valid delivery. committed by thieves, or of robbers who do not act
with grave or irresistible threat, violence or force, is
So here, even if there was no delivery to the dispensed with or diminished;
consignee but there were instructions from the shipper (7) That the common carrier is not responsible for
then the goods are deemed delivered and the CCOG the loss, destruction, or deterioration of goods on
can no longer be held liable for the loss of the goods. account of the defective condition of the car, vehicle,
ship, airplane or other equipment used in the contract
6. SCHMITZ TRANSPORT VS. TVI: The cargo was of carriage.
on board MV Alexander that was parked outside the
breakwater. The goods were loaded on a barge that Notes:
was supposed to be pulled by the tugboat. According
to Schmitz, Black Sea, the owner of MV Alexander, 1. De Guzman vs. CA: Cendana is not liable for the
should be liable because the goods have not yet been loss of the goods because of the hijacking incident
delivered to the consignee. because it fell under Art. 1745(6) . According to the
H: No, because Shcmitz is an agent of the consignee.
And Black Sea already delivered the goods once the H: Applying the above-quoted Articles 1734 and 1735,
same were transferred from the vessel MV Alexander we note firstly that the specific cause alleged in the
to the barge that was supposed to bring the goods to instant case the hijacking of the carrier's truck does
the warehouse of Little Giant, the consignee. Thus not fall within any of the five (5) categories of
Black sea no longer had custody over the goods. exempting causes listed in Article 1734. It would
There was already actual delivery to the person who follow, therefore, that the hijacking of the carrier's
had the right to receive them, Schmitz -- as an agent vehicle must be dealt with under the provisions of
of the consignee. Article 1735, in other words, that the private
respondent as common carrier is presumed to have
VALIDITY OF STIPULATIONS been at fault or to have acted negligently. This
presumption, however, may be overthrown by proof of
Can the CCOG and the shipper agree that the CCOG extraordinary diligence on the part of private
will not be required to exercise XOD? respondent.

YES. As to the diligence required, Petitioner insists that private respondent had not
observed extraordinary diligence in the care of
General rule: the CCOG and the shipper may enter petitioner's goods. Petitioner argues that in the
into an agreement/stipulation which lessens the circumstances of this case, private respondent should
diligence required, but there are requisites: have hired a security guard presumably to ride with
the truck carrying the 600 cartons of Liberty filled milk.
ARTICLE 1744. A stipulation between the common We do not believe, however, that in the instant case,
carrier and the shipper or owner limiting the liability of the standard of extraordinary diligence required
the former for the loss, destruction, or deterioration of private respondent to retain a security guard to ride
the goods to a degree less than extraordinary with the truck and to engage brigands in a firelight at
diligence shall be valid, provided it be: A
the risk of his own life and the lives of the driver and
t his helper.
(1) In writing, n
(2) signed by the shipper or owner; o Under Article 1745 (6) above, a common carrier is
held responsible and will not be allowed to divest or

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to diminish such responsibility even for acts of The 500-peso limitation is only applicable when the
strangers like thieves or robbers, except where such shipper has not declared a higher value and paid a
thieves or robbers in fact acted "with grave or higher freight.
irresistible threat, violence or force." We believe and
so hold that the limits of the duty of extraordinary A stipulation which exempts the carrier from any or all
diligence in the vigilance over the goods carried are liability from loss or damage occasioned by its own
reached where the goods are lost as a result of a negligence is not valid.
robbery which is attended by "grave or irresistible
threat, violence or force." A stipulation which provides for an unqualified
limitations, like 10 pesos per kilo (only) and thus limits
Three (3) of the five (5) hold-uppers were armed with liability to an agreed valuation is not valid. (Meaning,
firearms. The robbers not only took away the truck wala yung stipulation that if the shipper pays a higher
and its cargo but also kidnapped the driver and his freight, etc.)
helper, detaining them for several days and later
releasing them in another province (in Zambales). In (Heacock vs. Macondray) where the SC enumerated
these circumstances, we hold that the occurrence of the three kinds of stipulation:
the loss must reasonably be regarded as quite
beyond the control of the common carrier and 1. No liability -- the carrier will not be liable at all for
properly regarded as a fortuitous event. It is the negligent acts of its crew and employees -- void
necessary to recall that even common carriers are not
made absolute insurers against all risks of travel and 2. Limited Liability -- regardless of the value of the
of transport of goods, and are not held liable for acts cargo, the maximum liability of the carrier will by only
or events which cannot be foreseen or are inevitable, to a certain amount, i.e. 500 per kilo -- void.
provided that they shall have complied with the
rigorous standard of extraordinary diligence. 3. Qualified liability- this is the only stipulation in a bill
of lading/ticket which can validly limit liability; here, the
ARTICLE 1746. An agreement limiting the common carrier fixes a maximul liability in the event the shipper
carrier's liability may be annulled by the shipper or doe snot delcare any value, or a value upto a certain
owner if the common carrier refused to carry the amount. Should shipper declare a higher value and
goods unless the former agreed to such stipulation. willing to pay higher freightage, the carrier shall
accordingly be liable for greater damage.
ARTICLE 1747. If the common carrier, without just
cause, delays the transportation of the goods or Other cases cited in ppt: Eastern vs. IAC (150 SCRA
changes the stipulated or usual route, the contract 463), Sea-Land Services vs. IAC (153 SCRA),
limiting the common carrier's liability cannot be availed Cokaliong Shipping vs. UCPB (2003)
of in case of the loss, destruction, or deterioration of
the goods. Art. 1747. If the common carrier, without just cause,
delays the transportation of the goods or changes the
ARTICLE 1748. An agreement limiting the common stipulated or usual route, the contract limiting the
carrier's liability for delay on account of strikes or riots common carrier's liability cannot be availed of in case
is valid. of the loss, destruction, or deterioration of the goods.

Stipulation lessening the amount of Even if there is any limitation limiting the liability of the
liability carrier, this cannot be availed of by the carrier if it
without just cause, delays the transportation of the
Valid: Provided follow the requisites under 1749 and goods, or etc.
What if there is a stipulation limiting the liability and
ARTICLE 1749. A stipulation that the common the flight is from Davao to Manila. But because there
carrier's liability is limited to the value of the goods was a typhoon in Manila, it was unable to land there
appearing in the bill of lading, unless the shipper or so it landed in Cebu. Can the carrier avail of the
owner declares a greater value, is binding. stipulation?

ARTICLE 1750. A contract fixing the sum that may be Yes, because there was a just cause for the change of
recovered by the owner or shipper for the loss, flight. 1747 only applies if there is no reason.
destruction, or deterioration of the goods is valid, if it
is reasonable and just under the circumstances, and Art. 1748. An agreement limiting the common carrier's
has been fairly and freely agreed upon. liability for delay on account of strikes or riots is valid.

Normally, when are these stipulations present? Art. 1749. A stipulation that the common carrier's
1. In contracts of carriage by sea -- in the bill of lading; liability is limited to the value of the goods appearing
(500 pesos per kilo) in the bill of lading, unless the shipper or owner
2. In contracts of carriage by air -- in the ticket. declares a greater value, is binding.
(normally $20 per kilo)
Art. 1750. A contract fixing the sum that may be
For the stipulation to be valid, it must not be just a recovered. by the owner or shipper for the loss,
stipulation. It must contain a statement which says destruction, or deterioration of the goods is valid, if it
that if the shipper agrees or has declared a higher is reasonable and just under the circumstances, and
valuation and has paid for a higher price thereof, then has been fairly and freely agreed upon.
the 500 peso limitation is not applicable.
Art. 1751. The fact that the common carrier has no
competitor along the line or route, or a part thereof, to
which the contract refers shall be taken into
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consideration on the question of whether or not a

stipulation limiting the common carrier's liability is CARRIAGE OF PASSENGERS
reasonable, just and in consonance with public policy.
Art. 1755. A common carrier is bound to carry the
Art. 1752. Even when there is an agreement limiting passengers safely as far as human care and foresight
the liability of the common carrier in the vigilance over can provide, using the utmost diligence of very
the goods, the common carrier is disputably presumed cautious persons, with a due regard for all the
to have been negligent in case of their loss, circumstances.
destruction or deterioration.
Art. 1756. In case of death of or injuries to
That presumption of negligence will still arise despite passengers, common carriers are presumed to have
the fact that there is an agreement. The carrier still been at fault or to have acted negligently, unless they
has to prove that it exercised EXOD to escape liability. prove that they observed extraordinary diligence as
If the carrier does not want to prove it, it will just prescribed in Articles 1733 and 1755.
accept the liability, then the carrier will be liable for the
amount stipulated in the agreement. Of course, unless Automatic presumption of negligence, rebutted by
any of the circumstances like natural disaster, etc. are proving that carrier excercised extraordinary diligence
present. for the safety of passengers according to the
circumstances of each case.
Baggage of passengers
Under the provisions of carriage of goods, in carriage
With respect to baggage of passengers, we recognize of passengers, there are no exceptions as to the
checked-in baggage and hand-carried baggages. presumption of negligence. They will be automatically
Passenger is responsible for his hand-carry presumed to be negligent under 1756, there are no
baggages. exceptions. So that is the first distinction between
COG and COP, but the presumption can be rebutted.
Art. 1754. The provisions of Articles 1733 to 1753
shall apply to the passenger's baggage which is not in Take note that proving extraordinary diligence is not
his personal custody or in that of his employee. As to the only way of escaping liability. We all know that
other baggage, the rules in Articles 1998 and 2000 to under the general provisions of the Civil Code, a
2003 concerning the responsibility of hotel-keepers fortuitous event will always exempt the obligor from
shall be applicable. liability, if the fortuitous event is the cause of the
death, injury of the passenger. Just memorize the
With respect to check in baggages, the applicable requisites of fortuitous events.
provisions are the provisions we took up. However, if
the luggage is hand-carried, different provisions of the Issue: If A is a passenger of a taxi and taxi figured in
CC will apply. (1998, 2000- 2003) an accident. A sues the taxi for breach of contract of
carriage, does A have to prove that the taxi driver is at
What is the summary for hand-carried items? fault for A to collect damages from the operator of the
1. Art. 1998: The carrier shall be responsible for
hand-carried baggages as depositaries, provided that Answer: In an action based on a contract of carriage,
notice was given to them, or to their employees, of the the court need not make an express finding of fault or
effects brought by the passengers and that, on the negligence on the part of the carrier in order to hold it
part of the latter, they take the precautions which said responsible to pay damages to the passenger.
carriers or their substitutes advised relative to the care Because of the automatic presumption of negligence,
and vigilance of their effects. the burden of proof is on the carrier. If the carrier
rebuts the presumption, then it is absolved. If it does
2. Art. 2000. The responsibility referred to in the not rebut that presumption, there is no need for the
preceding article shall include the loss of, or injury to passenger or his heirs to prove negligence.
the personal property of the passenger caused by the
servants or employees of the carrier as well as What kind of fortuitous event will exempt a carrier
strangers; but not that which may proceed from any from liability? Is a tire blow out a fortuitous event?
force majeure.
It depends. Remember that even the SC did not
The fact that passengers are constrained to rely on categorically state that a tire blow out is not a
the vigilance of the carrier shall be considered in fortuitous event. You always have to look at the
determining the degree of care required of him. requisites.

3. Art. 2001. The act of a thief or robber, who has In the cases (Yobido vs. CA, Necesito vs. Paras),
entered the carrier is not deemed force majeure, they were all cases of tire blow outs and the SC
unless it is done with the use of arms or through an always found a way to remove the tire blow out
irresistible force. (n) situtation from coverage of fortuitous events.

Art. 2002. The carrier is not liable for compensation if In Necesito vs. Paras (1958), the SC said that
the loss is due to the acts of the passenger, his family, "defective parts of vehicles cannot be considered a
servants or visitors, or if the loss arises from the fortuitous event because the manufacturer of the
character of the things brought. (n) defective parts is considered in law the agent of the
carrier, and the good repute of the manufacturer will
Art. 2003. The common carrier cannot free himself not relieve the carrier from liability."
from responsibility by posting notices to the effect that
he is not liable for the articles brought by the In Yobido, the court discovered that the driver was
passengers. driving too fast, so there was negligence and
Transcribed and Prepared by: Hanniyah Sevilla 4 Manresa ’08-‘09 13

participation on the part of the carrier in bringing the have cautioned or taken steps to warn the rescuers
accident. not to bring the lighted torch too near the bus. Said
negligence on the part of the agents of the carrier
What about hi-jacking? Is it a fortuitous event? come under the codal provisions above- reproduced,
particularly, Articles 1733, 1759 and 1763.
As a general rule, hi-jacking of an airline cannot be a
fortuitous event because this is not unforseen, this is 2. La Mallorca vs. CA (the child of a Pax was run
expected. That is why security checks are conducted. over by the bus when she followed her father who was
But in GACAL vs. PAL - this was considered a getting their baggages. The bus was already moving
fortuitous event because the inspection was done by steadily after it had dropped off the Pax even though
the military, and not PAL. This case is a special case. the baggages were still on board the truck.)

But what if the hi-jack happened on a bus or a truck? Held: here can be no controversy that as far as the
In De Guzman, the SC said that it was a fortuitous father is concerned, when he returned to the bus for
event. Can you really expect that your bus will be his bayong which was not unloaded, the relation of
hijacked while you're traveling along the highway? No, passenger and carrier between him and the petitioner
otherwise nobody will travel. remained subsisting. For, the relation of carrier and
passenger does not necessarily cease where the
PILAPIL VS. CA: It was held that a CC is not liable for latter, after alighting from the car, aids the carrier's
failure to install window grills on its buses to protect its servant or employee in removing his baggage from
passengers from injuries hurled at the bus by lawless the car. The issue to be determined here is whether
elements. as to the child, who was already led by the father to a
place about 5 meters away from the bus, the liability
FORTUNE EXPRESS VS. CA: The SC said that FE of the carrier for her safety under the contract of
was liable because there was an early warning carriage also persisted.
already. So the element of unforseeability was
missing. It has been recognized as a rule that the (contractual)
relation of carrier and passenger does not cease at
DURATION OF LIABILITY the moment the passenger alights from the carrier's
vehicle at a place selected by the carrier at the point
No provision for CC of pax for the duration of liability; of destination, but continues until the passenger has
only cases had a reasonable time or a reasonable opportunity to
leave the carrier's premises. And, what is a
1. Bataclan vs. Medina (overturned bus which leaked reasonable time or a reasonable delay within this rule
gasoline and was set on fire when villagers who is to be determined from all the circumstances. So no
wanted to help brought torches) specific time or specific distance.

Held: CC is still liable even if the bus was no longer in A 3. PAL vs. Zapatos: Even if the pax are in transit, this
transit. In the present case and under the t
will not terminate the contractual relations.
circumstances obtaining in the same, we do not n
hesitate to hold that the proximate cause of the death o Held: Undisputably, PAL's diversion of its flight due to
of Bataclan was the overturning of the bus, this for the d inclement weather was a fortuitous event.
reason that when the vehicle turned not only on its e
Nonetheless, such occurrence did not terminate
side but completely on its back, the leaking of the D PAL's contract with its passengers. Being in the
gasoline from the tank was not unnatural or v business of air carriage and the sole one to operate in
unexpected; that the coming of the men with a lighted a
the country, PAL is deemed equipped to deal with
torch was in response to the call for help, made not situations as in the case at bar. What we said in one
only by the passengers, but most probably, by the o case once again must be stressed, i.e., the relation of
driver and the conductor themselves, and that l
l carrier and passenger continues until the latter has
because it was very dark (about 2:30 in the morning), e
been landed at the port of destination and has left the
the rescuers had to carry a light with them; and e carrier's premises. Hence, PAL necessarily would
coming as they did from a rural area where lanterns o still have to exercise extraordinary diligence in
and flashlights were not available, they had to use a f
safeguarding the comfort, convenience and safety of
torch, the most handy and available; and what was L
its stranded passengers until they have reached their
more natural than that said rescuers should w final destination.
innocently approach the overturned vehicle to extend
the aid and effect the rescue requested from them. In DOCTRINE OF LAST CLEAR CHANCE:
other words, the coming of the men with the torch was
to be expected and was a natural sequence of the This doctrine calls for application in suits between
overturning of the bus, the trapping of some of its owners of two colliding vehicles. It does not apply
passengers and the call for outside help. What is where a pax demands responsibility from a carrier to
more, the burning of the bus can also in part be enforce its contractual obligations.
attributed to the negligence of the carrier, through its
driver and its conductor. According to the witnesses,
The principle of last clear chance is inapplicable in the
the driver and the conductor were on the road walking
instant case, as it only applies in a suit between the
back and forth. They, or at least, the driver should and
owners and drivers of two colliding vehicles. It does
must have known that in the position in which the
not arise where a passenger demands responsibility
overturned bus was, gasoline could and must have
from the carrier to enforce its contractual obligations,
leaked from the gasoline tank and soaked the area in
for it would be inequitable to exempt the negligent
and around the bus, this aside from the fact that
driver and its owner on the ground that the other
gasoline when spilled, specially over a large area, can
driver was likewise guilty of negligence. The common
be smelt and detected even from a distance, and yet
law notion of last clear chance permitted courts to
neither the driver nor the conductor would appear to
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grant recovery to a plaintiff who has also been good father of a family in the selection and
negligent provided that the defendant had the last supervision of their employees.
clear chance to avoid the casualty and failed to do so.
Accordingly, it is difficult to see what role, if any, the Notes:
common law of last clear chance doctrine has to play 1. There is no express provision in CC of Goods
in a jurisdiction where the common law concept of exactly like Art. 1759. BUT, the absence of express
contributory negligence as an absolute bar to stipulation does not mean that CC of Goods not liable
recovery by the plaintiff, has itself been rejected, as it for acts of ees. Under Art. 1775, par. 5, the CC cannot
has been in Article 2179 of the Civil Code. (Tiu vs. stipulate that it shall not be responsible for the acts of
Arriesgado) its ees. So this means that CC of goods still liable;

VALIDITY OF STIPULATIONS 2. If driver is drunk and figures in an accident, CC

cannot say that it is not liable because driver violated
Two kinds: company rules of no drinking while driving.

1. As to the diligence required 3. Defense of Diligence of Good father of family is

2. As to the amount of liability available if the cause of action is culpa acquiliana (Art.
2176, 2180 of NCC), But if the cause of action is for
AS TO THE DILIGENCE REQUIRED breach of contract of carriage, this defense of GFOF
cannot be invoked.
Art. 1757. The responsibility of a common carrier for
the safety of passengers as required in Articles 1733 CONTRIBUTORY NEGLIGENCE
and 1755 cannot be dispensed with or lessened by
stipulation, by the posting of notices, by statements on Art. 1761. The passenger must observe the diligence
tickets, or otherwise. of a good father of a family to avoid injury to himself.

Remember: Art. 1762. The contributory negligence of the

Diligence required: XOD passenger does not bar recovery of damages for his
What kind of XOD: Utmost diligence of a very cautious death or injuries, if the proximate cause thereof is the
person negligence of the common carrier, but the amount of
damages shall be equitably reduced.
(1) CC of Goods are allowed to lessened the
degree of diligence, but NOT do away Notes:
with the same completely. 1. Definition of Contributory Negligence: It is the
(2) CC of Pax CANNOT dispense with nor principle that negligence, no matter how slight, on the
lessen the degree of diligence. part of the person injured which is one of the causes
proximately contributing to his negligence equitably
AS TO AMOUNT OF LIABILITY reduces the liability of the CC.

Art. 1758. When a passenger is carried gratuitously, a 2. Estacion vs. Bernardo (2006): (Pax of Jeepney
stipulation limiting the common carrier's liability for was seated in extension seat initially but gave his seat
negligence is valid, but not for wilful acts or gross up to an old lady. A then hung/stood outside the
negligence. jeepney. When jeepney stopped at the curve, an isuzu
truck with a faulty break hit the jeepney causing injury
The reduction of fare does not justify any limitation of to A's leg which had to be amputated.)
the common carrier's liability.
Held: There was contributory negligence on the part
General Rule: Cannot be limited of A, and both truck and jeepney were found to be
But under 1758, there are circumstances where this negligent. Sharing of liability: 20-40-40. 20 to be
liability is limited: borne by A.
1. Pax carried gratuitously
2. Existence of stipulation limiting liability Contributory negligence is conduct on the part of
3. Accident/Breach not caused by willful acts or gross the injured party, contributing as a legal cause to the
negligence. harm he has suffered, which falls below the standard
to which he is required to conform for his own
Remember: Minimum amount that heirs of pax can protection.
collect from CC is P 50,000 because this is indemnity
for death. CC is automatically liable for this minimum When is one considered to have contributed to his
amount; if it wants to lessen this amount, CC must injuries: It has been held that “to hold a person as
follow Art. 1758. having contributed to his injuries, it must be shown
that he performed an act that brought about his
LIABILITY FOR ACTS OF EES injuries in disregard of warning or signs of an
impending danger to health and body. Respondent
Art. 1759. Common carriers are liable for the death of Noe’s act of hanging on the Fiera is definitely
or injuries to passengers through the negligence or dangerous to his life and limb.
wilful acts of the former's employees, although such
employees may have acted beyond the scope of their 3. CANGCO VS. MRR ( Jose Cangco, herein plaintiff,
authority or in violation of the orders of the common was an employee of the defendant in this case, manila
carriers. Railroad Company. Upon the occasion in question,
plaintiff was returning home by rail from his daily
This liability of the common carriers does not cease labors. As the train drew up to the station, plaintiff
upon proof that they exercised all the diligence of a arose from his seat. As the train slowed down,
plaintiff stepped off, but one or both of his feet came in
Transcribed and Prepared by: Hanniyah Sevilla 4 Manresa ’08-‘09 15

contact with a sack of watermelons. As a result, his minutes ahead. As the respondent Court of Appeals
feet slipped from under him and he fell violently on the correctly observed, "the appellant's announcement
platform.) was premature and erroneous and was the proximate
cause of the death of the victims. Any negligence of
Held: The act of the plaintiff in stepping off the train the victims was at most contributory and does not
while it as yet slowly moving was not characterized by exculpate the accused from criminal liability.
imprudence so as to hold him guilty of contributory
negligence. 6. Dangwa vs. CA - (There was no contributory
negligence on the part of the victim in this case)
In arriving to such conclusion, the court used the best
of negligence enunciated in the case of Picart vs. Held: The foregoing testimonies show that the place
Smith (37 PHIL 809) which was stated as follow: Was of the accident and the place where one of the
there anything in the circumstances surrounding the passengers alighted were both between Bunkhouses
plaintiff at the time he alighted from the train which 53 and 54, hence the finding of the Court of Appeals
would have admitted a person of average prudence that the bus was at full stop when the victim boarded
that to get off the train under the conditions then the same is correct. They further confirm the
existing was dangerous? If so, the plaintiff should conclusion that the victim fell from the platform of the
have deserted from alighting; and his failure so to bus when it suddenly accelerated forward and was
desist was contributory negligence. run over by the rear right tires of the vehicle, as
shown by the physical evidence on where he was
In the case at bar, the plaintiff was ignorant of the fact thereafter found in relation to the bus when it stopped.
that the obstruction which was caused by the sacks of Under such circumstances, it cannot be said that the
melds piled on the platform existed. Moreover, the deceased was guilty of negligence. LLphil
place was dark or dimly lighted. Thus, he was a The contention of petitioners that the driver and the
failure on the part of the defendant to afford to its conductor had no knowledge that the victim would
passengers facilities for safe egress from its trains. ride on the bus, since the latter had supposedly not
It is not negligence per se for a traveler to alight from manifested his intention to board the same, does not
a slowly moving train. merit consideration. When the bus is not in motion
there is no necessity for a person who wants to ride
4. Del Prado vs. MRR the same to signal his intention to board. A public
utility bus, once it stops, is in effect making a
Held: Defendant should still be held liable for the continuous offer to bus riders. Hence, it becomes the
damages sustained by the plaintiff. The contributory duty of the driver and the conductor, every time the
negligence upon the latter was not the proximate bus stops, to do no act that would have the effect of
cause of the injury. The proximate cause was the act increasing the peril to a passenger while he was
of the motorman in putting off on the power attempting to board the same. The premature
prematurely. A person moving boarding a moving car acceleration of the bus in this case was a breach of
must be taken to assure the risk of injury from such duty.
boarding the car, but he cannot fairly be held to
assume the risk that the motorman will increase his It is the duty of common carriers of passengers,
peril by accelerating the speed of the car before he is including common carriers by railroad train, streetcar,
planted on the platform. The motorman‘s negligence or motorbus, to stop their conveyances a reasonable
succeeded the negligence of herein plaintiff. Under length of time in order to afford passengers an
the doctrine of ―last clear chance‖, the contributory opportunity to board and enter, and they are liable for
negligence of the party injured will not defeat the injuries suffered by boarding passengers resulting
action if it be shown that the carrier might be the from the sudden starting up or jerking of their
exercise of reasonable care and prudence have conveyances while they are doing so.
avoided the consequences of the negligence of the
injured party. Further, even assuming that the bus was moving, the
act of the victim in boarding the same cannot be
5. Brinas vs. People (old woman and her considered negligent under the circumstances. As
granddaughter bound for Losacan. Conductor clearly explained in the testimony of the aforestated
announced their stop so the lola stood up and carried witness for petitioners, Virginia Abalos, the bus had
her "apo" and went to exit. When train door opened, "just started" and "was still in slow motion" at the point
before they could go down, the train picked up speed where the victim had boarded and was on its platform.
and they both fell and died)
It is not negligence per se, or as a matter of law, for
Held: It is a matter of common knowledge and one to attempt to board a train or streetcar which is
experience about common carriers like trains and moving slowly. An ordinarily prudent person would
buses that before reaching a station or flagstop they have made the attempt to board the moving
slow down and the conductor announces the name of conveyance under the same or similar circumstances.
the place. It is also a matter of common experience The fact that passengers board and alight from a
that as the train or bus slackens its speed, some slowly moving vehicle is a matter of common
passengers usually stand and proceed to the nearest experience and both the driver and conductor in this
exit, ready to disembark as the train or bus comes to case could not have been unaware of such an
a full stop. This is especially true of a train because ordinary practice. The victim herein, by stepping and
passengers feel that if the train resumes its run before standing on the platform of the bus, is already
they are able to disembark, there is no way to stop it considered a passenger and is entitled to all the rights
as a bus may be stopped. and protection pertaining to such a contractual
relation. Hence, it has been held that the duty which
It was negligence on the conductor's part to announce the carrier of passengers owes to its patrons extends
the next flag stop when said stop was still a full three to persons boarding the cars as well as to those
alighting therefrom.
Transcribed and Prepared by: Hanniyah Sevilla 4 Manresa ’08-‘09 16

3. Fortune Express vs. CA- Fortune express cannot

7. Isaac vs. Al Ammen invoke this provision.

Facts: Plaintiff boarded defendant‘s bus as paying As already stated, despite the report of PC agent
passenger from Albay. The bus collided with a pick- Generalao that the Maranaos were planning to burn
up truck which was coming from opposite direction some of petitioner‘s buses and the assurance of
trying to swerve from a pile of gravel. As a result, his petitioner‘s operations manager (Diosdado Bravo)
left arm was completely severed. Plaintiff chose to that the necessary precautions would be taken,
hold defendant liable on its contractual obligation. nothing was really done by petitioner to protect the
Plaintiff brought an action for damages which the safety of passengers.
lower court dismissed holding the driver of the pick-up
car negligent and not that of the bus. Issue: Are there other causes for breach of contract of
carriage aside from Art. 1755 and 1756?
Issue: Whether or not the common carrier is liable.
Answer: Yes.
Held: The bus was running at a moderate speed.
The driver of the bus upon the speeding pick-up truck 1. If a passenger is bumped off his flight and he
swerved the bus to the very extreme right of the road. has a confirmed booking, that is a breach because
Said driver would not move the bus further without the carrier in the ticket ensured that it will deliver the
endangering the safety of his passengers. pax to its destination on the time and date stipulated.
Notwithstanding all these efforts, the rear left side was
hit. This finding of the lower court was sustained. 2. Air France vs. Carrascoso – Rebooked to a
Also, of the carrier‘s employee is confronted with a lower class without pax consent. Pax seated in first
sudden emergency, he is not held to the same degree class from Mla to Bangkok. Upon arrival in Bangkok,
of care he would otherwise, he required in the he was downgraded to economy to give way to a
absence of such emergency. "white man". There is a breach because his ticket
says first class, and by booking the pax to economy
By placing his left arm on the window, he is guilty of class without his consent, what happens is that there
contributory negligence cannot relieve the carrier but is no more consent in the contract.
can only reduce its liability, this is a circumference
which further mistakes against plaintiff‘s position. It is 3. Singson vs. Cathay Pacific - On 24 May 1988
a prevailing rule that it is negligence per se for CARLOS SINGSON and his cousin Crescentino
passengers on a railroad to protrude any part of his Tiongson bought from Cathay Pacific Airways, Ltd.
body and that no recovery can be had for an inquiry.‖ (CATHAY), at its Metro Manila ticket outlet two (2)
open-dated, identically routed, round trip plane tickets
Responsibility for acts of strangers for the purpose of spending their vacation in the
United States. Each ticket consisted of six (6) flight
Art. 1763. A common carrier is responsible for coupons corresponding to this itinerary: flight coupon
injuries suffered by a passenger on account of the no. 1 - Manila to Hongkong; flight coupon no. 2 -
wilful acts or negligence of other passengers or of Hongkong to San Francisco; flight coupon no. 3 - San
strangers, if the common carrier's employees Francisco to Los Angeles; flight coupon no. 4 - Los
through the exercise of the diligence of a good Angeles back to San Francisco; flight coupon no. 5 -
father of a family could have prevented or stopped San Francisco to Hongkong; and, finally, flight coupon
the act or omission. no. 6 - Hongkong to Manila. The procedure was that
at the start of each leg of the trip a flight coupon
Notes: corresponding to the particular sector of the travel
1. This is one instance wherein the carrier need not would be removed from the ticket booklet so that at
prove that it exercised XOD to escape liability. If the the end of the trip no more coupon would be left in the
injury/death of pax was caused by the act of a ticket booklet.
stranger (somebody who is not an ee of the carrier)
the carrier need only prove that its ees exercised On 6 June 1988 CARLOS SINGSON and Crescentino
diligence of GFOF to prevent or stop the act or Tiongson left Manila on board CATHAY‘s Flight No.
omission. 902. They arrived safely in Los Angeles and after
staying there for about three (3) weeks they decided
Why? It is not the responsibility of the CC of Pax to to return to the Philippines. On 30 June 1988 they
ensure that no injury from outside forces will be arranged for their return flight at CATHAY‘s Los
caused to the pax, i.e. when a bomb is thrown from Angeles Office and chose 1 July 1988, a Friday, for
the roadside. their departure. While Tiongson easily got a booking
for the flight, SINGSON was not as lucky. It was
2. MRR vs. Ballesteros - Here, the driver of the bus discovered that his ticket booklet did not have flight
allowed a stranger to take the wheel of the bus. After coupon no. 5 corresponding to the San Francisco-
awhile, the driver struggled with him as the stranger Hongkong leg of the trip. Instead, what was in his
did not want to give the wheel back. The bus met an ticket was flight coupon no. 3 - San Francisco to Los
accident. Can this provision be invoked? Angeles - which was supposed to have been used
and removed from the ticket booklet. It was not until 6
What kind of diligence does the CC of Pax have to July 1988 that CATHAY was finally able to arrange for
prove here? XOD because by actually allowing a his return flight to Manila.
stranger to drive the bus even if that person caused
the accident, but still the driver did not exercise the H: CATHAY undoubtedly committed a breach of
diligence of GFOF to prevent or stop the act or contract when it refused to confirm petitioner's
omission. (yan talaga sa lecture) flight reservation back to the Philippines on
account of his missing flight coupon. Its
contention that there was no contract of carriage that
Transcribed and Prepared by: Hanniyah Sevilla 4 Manresa ’08-‘09 17

was breached because petitioner‘s ticket was open- planes, Flight 106; and (2) upon the arrival of Deanna
dated is untenable. To begin with, the round trip and Nikolai in San Francisco Airport on 3 May 1980,
ticket issued by the carrier to the passenger was in to transport them on that same day from San
itself a complete written contract by and between the Francisco to Los Angeles via a connecting flight on
carrier and the passenger. It had all the elements of a United Airways 996. As it was, petitioner failed to
complete written contract, to wit: (a) the consent of transport Deanna and Nikolai from San Francisco to
the contracting parties manifested by the fact that the Los Angeles on the day of their arrival at San
passenger agreed to be transported by the carrier to Francisco. The staff of United Airways 996 refused to
and from Los Angeles via San Francisco and take aboard Deanna and Nikolai for their connecting
Hongkong back to the Philippines, and the carrier‘s flight to Los Angeles because petitioner's personnel in
acceptance to bring him to his destination and then San Francisco could not produce the indemnity bond
back home; (b) cause or consideration, which was accomplished and submitted by private respondents.It
the fare paid by the passenger as stated in his ticket; was established in the instant case that since Deanna
and, (c) object, which was the transportation of the and Nikolai would travel as unaccompanied minors,
passenger from the place of departure to the place of petitioner required private respondents to accomplish,
destination and back, which are also stated in his sign and submit to it an indemnity bond. Private
ticket. respondents complied with this requirement.
Petitioner gave a copy of the indemnity bond to one of
Interestingly, it appears that CATHAY was its personnel on Flight 106, since it was required for
responsible for the loss of the ticket. One of two (2) the San Francisco-Los Angeles connecting flight of
things may be surmised from the circumstances of Deanna and Nikolai. Petitioner's personnel lost the
this case: first, US Air (CATHAY‘s agent) had indemnity bond during the stop-over of Flight 106 in
mistakenly detached the San Francisco-Hongkong Honolulu, Hawaii. Thus, Deanna and Nikolai were not
flight coupon thinking that it was the San Francisco- allowed to take their connecting flight.
Los Angeles portion; or, second, petitioner‘s booklet
of tickets did not from issuance include a San Evidently, petitioner was fully aware that Deanna and
Francisco-Hongkong flight coupon. In either case, the Nikolai would travel as unaccompanied minors and,
loss of the coupon was attributable to the negligence therefore, should be specially taken care of
of CATHAY‘s agents and was the proximate cause of considering their tender age and delicate situation.
the non-confirmation of petitioner's return flight on 1 Petitioner also knew well that the indemnity bond was
July 1988. required for Deanna and Nikolai to make a connecting
flight from San Francisco to Los Angeles, and that it
With regard to the second issue, we are of the firm was its duty to produce the indemnity bond to the staff
view that the appellate court seriously erred in of United Airways 996 so that Deanna and Nikolai
disallowing moral and exemplary damages. Although could board the connecting flight. Yet, despite
the rule is that moral damages predicated upon a knowledge of the foregoing, it did not exercise utmost
breach of contract of carriage may only be care in handling the indemnity bond resulting in its
recoverable in instances where the mishap results in loss in Honolulu, Hawaii. This was the proximate
the death of a passenger, or where the carrier is guilty cause why Deanna and Nikolai were not allowed to
of fraud or bad faith, there are situations where the take the connecting flight and were thus stranded
negligence of the carrier is so gross and reckless as overnight in San Francisco. Further, petitioner
to virtually amount to bad faith, in which case, the discovered that the indemnity bond was lost only
passenger likewise becomes entitled to recover moral when Flight 106 had already landed in San Francisco
damages, such as in the instant case. Airport and when the staff of United Airways 996
demanded the indemnity bond. This only manifests
4. PAL vs. CA (Sept. 22, 2008) - Here, two that petitioner did not check or verify if the indemnity
unaccompanied minors were not able to board the bond was in its custody before leaving Honolulu,
plane because PAL was not able to produce the Hawaii for San Francisco.
indemnity bond executed by the minors' parents since
they were travelling unaccompanied. The foregoing circumstances reflect petitioner's utter
lack of care for and inattention to the welfare of
Here, there was definitely a breach of contract even if Deanna and Nikolai as unaccompanied minor
the flight that the minors were supposed to take is in passengers. They also indicate petitioner's failure to
another airline. It was because of PAL's negligence exercise even slight care and diligence in handling the
that they were not able board the other airline. indemnity bond. Clearly, the negligence of petitioner
was so gross and reckless that it amounted to bad
H: When an airline issues a ticket to a passenger, faith.
confirmed for a particular flight on a certain date, a
contract of carriage arises. The passenger has every It is worth emphasizing that petitioner, as a common
right to expect that he be transported on that flight carrier, is bound by law to exercise extraordinary
and on that date, and it becomes the airline's diligence and utmost care in ensuring for the safety
obligation to carry him and his luggage safely to the and welfare of its passengers with due regard for all
agreed destination without delay. If the passenger is the circumstances.[19] The negligent acts of petitioner
not so transported or if in the process of transporting, signified more than inadvertence or inattention and
he dies or is injured, the carrier may be held liable for thus constituted a radical departure from the
a breach of contract of carriage. extraordinary standard of care required of common
Private respondents and petitioner entered into a
contract of air carriage when the former purchased Petitioner's claim that it cannot be entirely blamed for
two plane tickets from the latter. Under this contract, the loss of the indemnity bond because it gave the
petitioner obliged itself (1) to transport Deanna and indemnity bond to the immigration office of Honolulu,
Nikolai, as unaccompanied minors, on 2 May 1980 Hawaii, as a matter of procedure during the stop-over,
from Manila to San Francisco through one of its and the said immigration office failed to return the
Transcribed and Prepared by: Hanniyah Sevilla 4 Manresa ’08-‘09 18

indemnity bond to petitioner's personnel before Flight and which was designated in their boarding passes.
106 left Honolulu, Hawaii, deserves scant They clearly waived their priority or preference when
consideration. It was petitioner's obligation to ensure they asked that other passengers be given the
that it had the indemnity bond in its custody before upgrade. It should not have been imposed on them
leaving Honolulu, Hawaii for San Francisco. Petitioner over their vehement objection. By insisting on the
should have asked for the indemnity bond from the upgrade, Cathay breached its contract of carriage
immigration office during the stop-over instead of with the Vazquezes.
partly blaming the said office later on for the loss of
the indemnity bond. Petitioner's insensitivity on this So it is not only death or injury which causes breach
matter indicates that it fell short of the extraordinary of contract of carriage of pax. Anything that is in
care that the law requires of common carriers. violation of a contract will constitute a breach.

As we have earlier found, petitioner breached its DISTINCTIONS BETWEEN CCOG AND
contract of carriage with private respondents, and it CCOP
acted recklessly and malevolently in transporting Diligence extraordinary Utmost
Deanna and Nikolai as unaccompanied minors and in required diligence diligence of very
handling their indemnity bond. We have also cautious
ascertained that private respondents are entitled to person.
moral damages because they have sufficiently When Loss, death or injury
established petitioner's gross negligence which presumption of destruction or and non-
amounted to bad faith. This being the case, the award negligence deterioration fulfillment of the
of exemplary damages is warranted. arises and non-arrival contract
of the goods at
5. Cathay Pacific vs. Vasquez- Is an involuntary destination and
upgrading of an airline passenger‘s accommodation negligent delay
from one class to a more superior class at no extra When in the five (5) NONE, the
cost a breach of contract of carriage that would entitle presumption of instances presumption of
the passenger to an award of damages? negligence mentioned; negligence will
does not arise natural calamity, ALWAYS arise
H: We resolve the first issue in the affirmative. automatically etc. in case the
carriage of PAX
A contract is a meeting of minds between two persons W/N degree of For both, it cannot be dispensed.
whereby one agrees to give something or render diligence can
some service to another for a consideration. There is be dispensed
no contract unless the following requisites concur: (1) with
consent of the contracting parties; (2) an object W/N degree of yes, under the NO
certain which is the subject of the contract; and (3) the diligence can requisites
cause of the obligation which is established.[4] be lessened previously
Undoubtedly, a contract of carriage existed between discussed
Cathay and the Vazquezes. They voluntarily and W/N liability in yes, under Art. As a general
freely gave their consent to an agreement whose case of breach 1748, 1749 and rule, NO, unless
object was the transportation of the Vazquezes from can be 1750; carried
Manila to Hong Kong and back to Manila, with seats lessened? gratuitously;
in the Business Class Section of the aircraft, and stipulation but
whose cause or consideration was the fare paid by only for simple
the Vazquezes to Cathay. negligence.

The only problem is the legal effect of the upgrading VIP: When we talk about transportation laws
of the seat accommodation of the Vazquezes. Did it we should not only focus on breach of
constitute a breach of contract? contract of carriage. We should also include
that there are other causes of action which
Breach of contract is defined as the ―failure without may arise.
legal reason to comply with the terms of a contract.‖ It
is also defined as the ―[f]ailure, without legal excuse, to Example: A car owned by E and driven by F was
perform any promise which forms the whole or part of speeding along JP Laurel hit a Taxi driven by D which
the contract.‖ in turn hit C. B the passenger of the taxi was also
injured. The taxi is owned by A.
The Vazquezes never denied that they were
members of Cathay‘s Marco Polo Club. They knew Question: How many causes of action are available to
that as members of the Club, they had priority for B and to C? What are the defenses available to E, D
upgrading of their seat accommodation at no extra and F?1
cost when an opportunity arises. But, just like other
privileges, such priority could be waived. The MARITIME COMMERCE
Vazquezes should have been consulted first whether
they wanted to avail themselves of the privilege or Applicable laws: Code of Commerce;
would consent to a change of seat accommodation COGSA; Salvage Law
before their seat assignments were given to other
passengers. Normally, one would appreciate and Governing body: Marina (Maritime Industry
accept an upgrading, for it would mean a better Authority)
accommodation. But, whatever their reason was and
however odd it might be, the Vazquezes had every
right to decline the upgrade and insist on the 1
I did not include the Q and A already. Please see your UP
Business Class accommodation they had booked for Bar.
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Functions of Marina: CF PD 474 1. Must appear in a written instrument;

2. Recorded in the proper registry -- under EO 125,
1. Issue certificate of public conveniece for the transaction must be registered with the Marina
operation of domestic and overseas water carriers; but now this is being conducted by the PPA.

2. Register and issue certificate, licenses, or 3. Robiso vs. Rivera: It is undeniable that the
documents necessary or incident thereto. defendant Rivera acquired by purchase the pilot boat
Valentina on a date prior to that of the purchase and
Q: What is the requirement for a carrier to operate adjudication made at public auction, by and on behalf
domestic sea voyages? of the plaintiff Rubiso; but it is no less true that the
sale of the vessel by Sy Qui to Florentino E. Rivera,
A: Certificate of Public Convenience (CPC) on January 4, 1915, was entered in the customs
registry only on March 17, 1915, while its sale at
Kinds of VESSELS (under PD 474) public auction to Fausto Rubiso on the 23d of January
of the same year, 1915, was recorded in the office of
"Vessels" or "Watercraft" Any barge, lighter, bulk the Collector of Customs on the 27th of the same
carrier, passenger ship freighter, tanker, container month, and in the commercial registry on the 4th of
ship, fishing boats or other artificial contrivance March, following; that is, the sale on behalf of the
utilizing any source of motive power, designed, used defendant Rivera was prior to that made at public
or capable of being used as a means of water auction to Rubiso, but the registration of this latter
transportation operating either as common contract sale was prior by many days to the sale made to the
carrier, including fishing vessels covered under defendant.
Presidential Decree No. 43, except
(1) those owned and/or operated by the The requisite of registration in the registry, of the
Armed Forces of the Philippines and by purchase of a vessel, is necessary and indispensable
foreign governments for military purposes, in order that the purchaser's rights may be maintained
and against a claim filed by a third person.
(2) bancas, sailboats and other waterborne
contrivance of less than three gross tons In view of said legal provisions, it is undeniable that
capacity and not motorized. the defendant Florentino E. Rivera's rights cannot
prevail over those acquired by Fausto Rubiso in the
HOW OWNERSHIP OF A VESSEL MAY BE ownership of the pilot boat Valentina, inasmuch as,
ACQUIRED though the latter's acquisition of the vessel at public
auction, on January 23, 1915, was subsequent to its
ARTICLE 573. Merchant vessels constitute property purchase by the defendant Rivera, nevertheless said
which may be acquired and transferred by any of the sale at public auction was antecedently recorded in
means recognized by law2. the office of the Collector of Customs, on January 27,
and entered in the commercial registry-an
The acquisition of a vessel must be included in a unnecessary proceeding--on March 4th; while the
written instrument, which shall not produce any effect private and voluntary purchase made by Rivera on a
with regard to third persons if not recorded in the prior date was not recorded in the office of the
mercantile registry. Collector of Customs until many days afterwards, that
is, not until March 17, 1915.
The ownership of a vessel shall also be acquired by
the possession thereof in good faith for three years, Repair and Maintenance of Vessel during
with a good title duly recorded. the Voyage (Art. 583)

In the absence of any of these requisites, ARTICLE 583. If the ship being on a voyage the
uninterrupted possession for ten years shall be captain should find it necessary to contract one or
necessary in order to acquire ownership. more of the obligations mentioned in Nos. 8 and 9 of
Article 580, he shall apply to the judge or court if he is
A captain can not acquire by prescription the ship of in Philippine territory, and otherwise to the Filipino
which he is in command. Consul should there be one, and, in his absence to
Notes: the judge or court or to the proper local authority,
presenting the certificate of the registry of the vessel
1. Q: Kind of property is a vessel? treated of in Article 612, and the instruments proving
A: Movable, but ownership must be evidenced by the obligation contracted.
certificate of ownership and transfers must be
registered in the proper registry to bind 3rd persons. The judge or court, the consul or the local authority as
the case may be, in view of the result of the
2. Requisites for Legal Acquisition of a Merchant proceedings instituted, shall make a temporary
Vessel: memorandum in the certificate of their result, in order
that it may be recorded in the registry when the vessel
returns to the port of her registry, or so that it can be
admitted as a legal and preferred obligation in case of
In relation to Art. 712 of the Civil Code: sale before the return, by reason of the sale of the
a. Donation;
vessel by virtue of a declaration of unseaworthiness.
b. law
c. Testate or intestate succession;
d. As a consequence of certain contracts The lack of this formality shall make the captain
e. By tradition personally liable to the creditors who may be
f. By prescription (3 years if possession in good prejudiced through his fault.
faith, with just title duly recorded, otherwise, 10
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1. Article 580 Nos. 8 and 93 = contract obligations for is not an agent of Trade and Transport, petitioner can
the repair and equipment of the vessel and obtain still be the ship agent of the vessel M/V Trade Carrier.
loans and bottomry.
Article 586 of the Code of Commerce states that a
2. Why are these formalities required for the captain? ship agent is ―the person entrusted with provisioning
Because omission to follow these requirements will or representing the vessel in the port in which it may
make the captain personally liable. He cannot ask for be found.‖
a refund from the carrier.
Hence, whether acting as agent of the owner of
Persons who take part in marine the vessel or as agent of the charterer, petitioner
commerce will be considered as the ship agent and may be
held liable as such, as long as the latter is the one
I. SHIP OWNER that provisions or represents the vessel.
II. SHIP AGENT - By agent is understood the person
intrusted with the provisioning of a vessel, or who The trial court found that petitioner ―was appointed as
represents her in the port in which she happens to be. local agent of the vessel, which duty includes
arrangement for the entrance and clearance of the
ARTICLE 586. The owner of a vessel and the agent vessel.‖ Further, the CA found and the evidence
shall be civilly liable for the acts of the captain and for shows that petitioner represented the vessel. The
the obligations contracted by the latter to repair, latter prepared the Notice of Readiness, the
equip, and provision the vessel, provided the creditor Statement of Facts, the Completion Notice, the
proves that the amount claimed was invested therein. Sailing Notice and Custom‘s Clearance. Petitioner‘s
employees were present at Sangi, Toledo City, one
Notes: day before the arrival of the vessel, where they stayed
1. Macondray vs. Provident (2004) - Canpotex, until it departed. They were also present during the
shipper, shipped and loaded on board the vessel M/V actual discharging of the cargo. Moreover, Mr. de la
‗Trade Carrier‘, 5000 metric tons of Standard Grade Cruz, the representative of petitioner, also prepared
Muriate of Potash in bulk for transportation to and for the needs of the vessel, like money, provision,
delivery at the port of Sangi, Toledo City, Cebu, in water and fuel.
Consignee. Upon arrival, it was discovered that the These acts all point to the conclusion that it was the
shipment sustained losses. entity that represented the vessel in the Port of Manila
and was the ship agent within the meaning and
MACONDRAY filed ANSWER, denying liability over context of Article 586 of the Code of Commerce.
the losses, having NO absolute relation with
defendant TRADE AND TRANSPORT, the alleged III. CAPTAIN- one who governs vessels and
operator of the vessel who transported the subject navigates the high seas or of large dimension and
shipment; that accordingly, MACONDRAY is the local importance.
representative of the SHIPPER; the charterer of M/V
TRADE CARRIER and not party to this case; that it vs. Master- commands small ships and engages
has no control over the acts of the captain and crew of exclusively in coastwide trade.
the Carrier and cannot be held responsible for any
damage arising from the fault or negligence of said But For purposes of maritime commerce, captain,
captain and crew. master, patron, they all mean the same.

The CA affirmed the trial court‘s finding that petitioner Qualifications of Captain
was not the agent of Trade and Transport. The
appellate court ruled, however, that petitioner could ARTICLE 609. Captains and masters of vessels must
still be held liable for the shortages of the shipment, be Filipino having legal capacity to bind themselves in
because the latter was the ship agent of Canpotex accordance with this Code, and must prove that they
Shipping Services Ltd. -- the shipper and charterer of have the skill, capacity, and qualifications required to
the vessel M/V Trade Carrier. command and direct the vessel, as established by
marine laws, ordinances, or regulations, or by those of
navigation, and that they are not disqualified
H: In the present case, we find no compelling reason according to the same for the discharge of the duties
to overturn the Court of Appeals in its categorical of that position.
finding that petitioner was the ship agent. Such
factual finding was not in conflict with the trial court‘s If the owner of a vessel desires to be the captain
ruling, which had merely stated that petitioner was not thereof and does not have the legal qualifications
the agent of Trade and Transport. Indeed, although it therefor, he shall limit himself to the financial
administration of the vessel, and shall intrust her
navigation to a person possessing the
Art. 580 (8) The part of the price which has not been qualifications required by said ordinances and
paid the last vendor, the credits pending for the payment
of material and work in the construction of the vessel,
when it has not navigated, and those arising from the
repair and equipment of the vessel and its provisioning Notes:
with victuals and fuel during its last voyage. x x x
(9) The amounts borrowed on bottomry bonds before the 1. Coastwise Lighterage vs. CA - Here, the patron of
departure of the vessel, proven by means of the contracts
executed according to law and recorded in the commercial
the lighter admitted that he was not licensed.
registry; the amounts borrowed during the voyage with the
authority mentioned in the foregoing subdivision, filling the H: Clearly, petitioner Coastwise Lighterage's
same requisites, and the insurance premium, proven by embarking on a voyage with an unlicensed patron
the policy of the contract or certificate taken from the violates Art. 609. It cannot safely claim to have
books of the broker.
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exercised extraordinary diligence, by placing a person master or captain, for purposes of maritime
whose navigational skills are questionable, at the commerce, is one who has command of a vessel. A
helm of the vessel which eventually met the fateful captain commonly performs three (3) distinct roles: (1)
accident. It may also logically, follow that a person he is a general agent of the shipowner; (2) he is also
without license to navigate, lacks not just the skill to commander and technical director of the vessel; and
do so, but also the utmost familiarity with the usual (3) he is a representative of the country under whose
and safe routes taken by seasoned and legally flag he navigates. Of these roles, by far the most
authorized ones. Had the patron been licensed, he important is the role performed by the captain as
could be presumed to have both the skill and the commander of the vessel; for such role (which, to our
knowledge that would have prevented the vessel's mind, is analogous to that of "Chief Executive Officer"
hitting the sunken derelict ship that lay on their way to [CEO] of a present-day corporate enterprise) has to
Pier 18. do with the operation and preservation of the vessel
during its voyage and the protection of the
As a common carrier, petitioner is liable for breach of passengers (if any) and crew and cargo. In his role as
the contract of carriage, having failed to overcome the general agent of the shipowner, the captain has
presumption of negligence with the loss and authority to sign bills of lading, carry goods aboard
destruction of goods it transported, by proof of its and deal with the freight earned, agree upon rates
exercise of extraordinary diligence. and decide whether to take cargo. The ship captain,
as agent of the shipowner, has legal authority to enter
General Functions of a Captain: into contracts with respect to the vessel and the
trading of the vessel, subject to applicable limitations
ARTICLE 610. The following powers are inherent established by statute, contract or instructions and
in the position of captain or master of a vessel: regulations of the shipowner. 17 To the captain is
1. To appoint or make contracts with the committed the governance, care and management of
crew in the absence of the agent and propose said the vessel. Clearly, the captain is vested with both
crew, should said agent be present; but the agent management and fiduciary functions.
shall not be permitted to employ any member
against the captain's express refusal. More importantly, a ship's captain must be accorded a
2. To command the crew and direct the reasonable measure of discretionary authority to
vessel to the port of its destination, in accordance decide what the safety of the ship and of its crew and
with the instructions he may have received from cargo specifically requires on a stipulated ocean
the agent. voyage. The captain is held responsible, and properly
3. To impose, in accordance with the so, for such safety. He is right there on the vessel, in
agreements and the laws and regulations of the command of it and (it must be presumed)
merchants marine, on board the vessel, knowledgeable as to the specific requirements of
correctional punishment upon those who do not seaworthiness and the particular risks and perils of
comply with his orders or who conduct the voyage he is to embark upon. The applicable
themselves against discipline, holding a principle is that the captain has control of all
preliminary investigation on the crimes committed departments of service in the vessel, and reasonable
on board the vessel on the high seas, which shall discretion as to its navigation. It is the right and duty
be turned over to the authorities, who are to take of the captain, in the exercise of sound discretion and
cognizance thereof, at the first port touched. in good faith, to do all things with respect to the vessel
4. To make contracts for the charter of the and its equipment and conduct of the voyage which
vessel in the absence of the agent or of her are reasonably necessary for the protection and
consignee, acting in accordance with the preservation of the interests under his charge,
instructions received and protecting the interests whether those be of the shipowners, charterers, cargo
of the owner most carefully. owners or of underwriters. It is a basic principle of
5. To adopt all the measures which may be admiralty law that in navigating a merchantman, the
necessary to keep the vessel well supplied and master must be left free to exercise his own best
equipped, purchasing for the purpose all that may judgment. The requirements of safe navigation
be necessary, provided there is no time to compel us to reject any suggestion that the judgment
request instructions of the agent. and discretion of the captain of a vessel may be
6. To make, in similar urgent cases and on a confined within a straitjacket, even in this age of
voyage, the repairs to the hull and engines of the electronic communications.
vessel and to her rigging and equipment which are
absolutely necessary in order for her to be able to 2. Far Eastern Shipping vs. CA- There was a
continue and conclude her voyage; but if she Russian vessel that arrived in Manila, owned by Far
should arrive at a point where there is a consignee Eastern Shipping. It was assigned berth no. 4. There
of the vessel, he shall act in concurrence with the is such a thing as compulsory pilotage -- there is a
latter. pilot assigned to pilot the vessel outside the break
water until it reaches its birth. In this case, A was
Notes: assigned to the vessel. The captain of the vessel was
1. Inter-orient Maritime vs. NLRC- Here, the captain beside A. Under the rules of compulsory pilotage,
refused to leave the port, contrary to the ship agent's once a pilot takes over the helm, the captain will have
instructions, until the supplies he requested necessary to stand aside and surrender all his authority to the
for the welding-repair of the turbo-charger and the pilot who is more familiar with the docking maneuvers.
economizer were delivered. Subsequently, the captain Now, A hit the pier. PPA filed a complaint against Far
was dismissed. Issue: Was the captain remiss of his Eastern Shipping. Issue: Can the captain of the vessel
duties? be considered negligent in this case? Because the
only way that Far Eastern shipping can be held liable
H: NO. The captain has the authority to decide. The is for the courts to declare the captain negligent.
captain of a vessel is a confidential and managerial
employee within the meaning of the above doctrine. A HELD: YES.
Transcribed and Prepared by: Hanniyah Sevilla 4 Manresa ’08-‘09 22

justified in relying upon the pilot, but not blindly. Under

A pilot, in maritime law, is a person duly qualified, and the circumstances of this case, if a situation arose
licensed, to conduct a vessel into or out of ports, or in where the master, exercising that reasonable
certain waters. In a broad sense, the term "pilot" vigilance which the master of a ship should exercise,
includes both (1) those whose duty it is to guide observed, or should have observed, that the pilot was
vessels into or out of ports, or in particular waters and so navigating the vessel that she was going, or was
(2) those entrusted with the navigation of vessels on likely to go, into danger, and there was in the exercise
the high seas. However, the term "pilot" is more of reasonable care and vigilance an opportunity for
generally understood as a person taken on board at a the master to intervene so as to save the ship from
particular place for the purpose of conducting a ship danger, the master should have acted accordingly.
through a river, road or channel, or from a port. The master of a vessel must exercise a degree of
vigilance commensurate with the circumstances.
Under English and American authorities, generally
speaking, the pilot supersedes the master for the time In general, a pilot is personally liable for damages
being in the command and navigation of the ship, and caused by his own negligence or default to the
his orders must be obeyed in all matters connected owners of the vessel, and to third parties for damages
with her navigation. He becomes the master pro hac sustained in a collision. Such negligence of the pilot
vice and should give all directions as to speed, in the performance of duty constitutes a maritime tort.
course, stopping and reversing, anchoring, towing At common law, a shipowner is not liable for injuries
and the like. And when a licensed pilot is employed in inflicted exclusively by the negligence of a pilot
a place where pilotage is compulsory, it is his duty to accepted by a vessel compulsorily.The exemption
insist on having effective control of the vessel, or to from liability for such negligence shall apply if the pilot
decline to act as pilot. Under certain systems of is actually in charge and solely in fault. Since, a pilot
foreign law, the pilot does not take entire charge of is responsible only for his own personal negligence,
the vessel, but is deemed merely the adviser of the he cannot be held accountable for damages
master, who retains command and control of the proximately caused by the default of others, or, if
navigation even on localities where pilotage is there be anything which concurred with the fault of the
compulsory. pilot in producing the accident, the vessel master and
owners are liable.
While it is indubitable that in exercising his functions a
pilot-is in sole command of the ship[69] and 3. WILDVALLEY SHIPPING VS. CA - Almost same
supersedes the master for the time being in the facts, except in this case the vessel was Filipino
command and navigation of a ship and that he owned and it arrived in Velenzuela. There was a
becomes master pro hac vice of a vessel piloted by compulsory pilotage. When the pilot boarded the
him,[70] there is overwhelming authority to the effect vessel, the captain left the bridge. When it entered the
that the master does not surrender his vessel to the Venezuelan channel, the vessel experienced some
pilot and the pilot is not the master. The master is still vibration and the pilot assured the captain that the
in command of the vessel notwithstanding the vibrations were normal - the result of the shallowness
presence of a pilot. There are occasions when the of the channel. But the vessel ran aground thereafter.
master may and should interfere and even displace
the pilot, as when the pilot is obviously incompetent or Held: The captain in this case was not negligent.
intoxicated and the circumstances may require the
master to displace a compulsory pilot because of We find that the grounding of the vessel is attributable
incompetency or physical incapacity. If, however, the to the pilot. When the vibrations were first felt the
master does not observe that a compulsory pilot is watch officer asked him what was going on, and pilot
incompetent or physically incapacitated, the master is Vasquez replied that "(they) were in the middle of the
justified in relying on the pilot, but not blindly. channel and that the vibration was as (sic) a result of
the shallowness of the channel.
The master is not wholly absolved from his duties
while a pilot is on board his vessel, and may advise The law does provide that the master can
with or offer suggestions to him. He is still in countermand or overrule the order or command of the
command of the vessel, except so far as her harbor pilot on board. The master of the Philippine
navigation is concerned, and must cause the ordinary Roxas deemed it best not to order him (the pilot) to
work of the vessel to be properly carried on and the stop the vessel. The master of the Philippine Roxas
usual precaution taken. Thus, in particular, he is deemed it best not to order him (the pilot) to stop the
bound to see that there is sufficient watch on deck, vessel, mayhap, because the latter had assured him
and that the men are attentive to their duties, also that that they were navigating normally before the
engines are stopped, towlines cast off, and the grounding of the vessel. Based on these declarations,
anchors clear and ready to go at the pilot's order. it comes as no surprise to us that the master chose
not to regain control of the ship. Admitting his limited
A perusal of Capt. Kabankov's testimony makes it knowledge of the Orinoco River, Captain Colon relied
apparent that he was remiss in the discharge of his on the knowledge and experience of pilot Vasquez to
duties as master of the ship, leaving the entire guide the vessel safely.
docking procedure up to the pilot, instead of
maintaining watchful vigilance over this risky So the SC gave conflicting decisions, but if you look at
maneuver. it, the SC ruled in these ways only for one reason --
ruling in favor of Filipinos. (Very good, Lyndon!:D)
In sum, where a compulsory pilot is in charge of a
ship, the master being required to permit him to Books to be carried by the captain
navigate it, if the master observes that the pilot is
incompetent or physically incapable, then it is the duty ARTICLE 612. The following obligations are inherent
of the master to refuse to permit the pilot to act. But if in the office of captain: x x x
no such reasons are present, then the master is
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3. To have three folioed and stamped books, in such purported entry was forged. In support of his
placing at the beginning of each one a note of the allegations, respondent submitted three official
number of folios it contains, signed by the maritime documents bearing the signature of Capt. Sczepan
official, and in his absence by the competent authority. Kowalewski which is different from the one appearing
in Annex E. Thus, it was incumbent upon petitioners
In the first book, which shall be called "log book," he to prove the authenticity of Annex E, which they failed
shall enter every day the condition of the atmosphere, to do. Likewise, the purported report of Capt.
the prevailing winds, the course sailed, the rigging Kowalewski dated September 1, 2000 and the
carried, the horsepower of the engines, the distance statements of Safety Officer Khaldun Nacem Faridi
covered, the maneuvers executed, and other incidents and Chief Officer Josip Milin also cannot be given
of navigation. He shall also enter the damage suffered weight for lack of authentication.
by the vessel in her hull, engines, rigging, and tackle,
no matter what is its cause, as well as the Although technical rules of evidence do not strictly
imperfections and averages of the cargo, and the apply to labor proceedings, however, in the instant
effects and consequence of the jettison, should there case, authentication of the above-mentioned
be any; and in cases of grave resolutions which documents is necessary because their genuineness is
require the advice or a meeting of the officers of the being assailed, and since petitioners offered no
vessel, or even of the passengers and crew, he shall corroborating evidence. These documents and their
record the decision adopted. For the informations contents have to be duly identified and authenticated
indicated he shall make use of the binnacle book, and lest an injustice would result from a blind adoption of
of the steam or engine book kept by the engineer. such contents. Thus, the unauthenticated documents
relied upon by petitioners are mere self-serving
In the second book, called the "accounting book," he statements of their own officers and were correctly
shall enter all the amounts collected and paid for the disregarded by the Court of Appeals.
account of the vessel, entering specifically article by
article, the sources of the collection, and the amounts DURATION OF LIABILITY of Captain
invested in provisions, repairs, acquisition of rigging or
goods, fuel, outfits, wages, and all other expenses. He Do not forget the duration of liability under the Civil
shall furthermore enter therein a list of all the Code, Art. 1736.
members of the crew, stating their domiciles, their With respect to the captain:
wages and salaries, and the amounts they may have
received on account, either directly or by delivery to ARTICLE 619. The captain shall be liable for the
their families. cargo from the time it is turned over to him at the
dock, or afloat alongside the ship, at the port of
In the third book, called "freight book," he shall loading until he delivers it on the shores or on the
record the entry and exit of all the goods, stating their discharging wharf, of the port of unloading unless
marks and packages, names of the shippers and of the contrary has been expressly agreed upon.
the consignees, ports of loading and unloading, and
the freight earned. In the same book he shall record Notes:
the names and places of sailing of the passengers
and the number of packages of which their baggage 1. If the goods are delivered to Aboitiz in the
consists, and the price of the passage. warehouse, does the liability of Aboitiz start? Yes,
because the goods are transferred already to Aboitize.
Notes: Does the liability of the captain start? NO. Only once
1. Of the three books, the log book is the most the goods are at the dock and until the goods are
important; delivered to the shore. So the captain has a shorter
period of responsibility as compared to the carrier. Of
2. Haverton Shipping vs. NLRC - What is the course, unless is a stipulation to the contrary.
probative value of the entries in the logbook? Can you
use the log book as evidence? YES. It is an official MARITIME PROTEST
record of entries made by a person in the
performance of his duty required by law and are prima Definition: This has to be done by the captain if the
facie evidence of the facts entered therein. vessel/cargo is lost or injured. It is a written statement
under oath, made by the captain or master of the
But in: vessel after the occurrence of an accident or disaster
in which the vessel or cargo is lost or injured with
3. Centennial vs. Dela Cruz: In Wallem Maritime respect to circumstances attending such ocurrence.
Services, Inc. v. National Labor Relations
Commission, citing Haverton Shipping Ltd. v. National Purpose: It is usually intended to show that the loss
Labor Relations Commission, the Court ruled that a or damge resulted from a peril of the sea or some
copy of an official entry in the logbook is legally other cause for shich neither the master or owner was
binding and serves as an exception to the hearsay responsible. It concludes with the protestation against
rule. In the said case, however, there was no any liablity of the owner for such loss or damage.
controversy as to the genuineness of the said entry
and the authenticity of the copy presented in ARTICLE 624. A captain whose vessel has gone
evidence. through a hurricane or who believes that the cargo
has suffered damages or averages, shall make a
In the instant case, respondent has consistently protest thereon before the competent authority at
assailed the genuineness of the purported entry and the first port he touches within the twenty-four
the authenticity of such copy. He alleged that before hours following his arrival, and shall ratify it within
his repatriation, there was no entry in the ship's official the same period when he arrives at the place of
logbook regarding any incident that might have his destination, immediately proceeding with the
caused his relief; that Captain Kowalewski's signature
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proof of the facts, it not being permitted to open Chief Mate is a managerial employee because the
the hatches until this has been done. said officer performed the functions of an executive
officer next in command to the captain; that in the
The captain shall proceed in the same manner if, performance of such functions, he is vested with
the vessel having been wrecked, he is saved alone powers or prerogatives to lay down and execute
or with part of his crew, in which case he shall management policies.
appear before the nearest authority, and make a
sworn statement of the facts. The exercise of discretion and judgment in directing a
ship's course is as much managerial in nature as
The authority or the consul abroad shall verify the decisions arrived at in the confines of the more
said facts, receiving a sworn statement of the conventional board room or executive office.
members of the crew and passengers who may Important functions pertaining to the navigation of the
have been saved, and taking the other steps which vessel like assessing risks and evaluating the vessel's
may assist in arriving at the facts, drafting a situation are managerial in nature. Thus, respondent,
certificate of the result of the proceedings in the as Chief Officer, is a managerial employee; hence,
log book and in that of the sailing mate, and shall petitioners need to show by substantial evidence the
deliver the original records of the proceedings to basis for their claim that respondent has breached
the captain, stamped and folioed, with a their trust and confidence.
memorandum of the folios, which he must
rubricate, for their presentation to the judge or Petitioners' basis for dismissing respondent was the
court of the port of destination. alleged entry by Captain Kowalewski in the ship's
The statement of the captain shall be believed if it logbook regarding respondent's inexperience and
is in accordance with those of the crew and inefficiency. A ship's log/logbook is the official record
passengers; if they disagree, the latter shall be of a ship's voyage which its captain is obligated by
accepted, unless there is proof to the contrary law to keep wherein he records the decisions he has
adopted, a summary of the performance of the vessel,
Procedure: and other daily events. A logbook is a respectable
1. Protest must be made with a competent record that can be relied upon when the entries
authority at first port he touches; therein are presented in evidence. (Connect with
2. within 24 hours following his arrival page 16)
3. Captain must ratify it within 24 hours when he
arrives at the place of destination where he SECOND MATE (which is actually the 3rd mate
must proceed immediately with the proof of since the sailing mate is the 2nd mate)
the facts
4. He must not open the hatches until all of the In case of disability, disqualification of the captain and
above are done. the sailing mate, he takes over. Relevant provisions:
Art 632-633, Code of Commerce
CREW OR SAILORS - Under the Code of
SAILING MATE - He is the 2nd chief of the Commerce, they are enlisted by the captain in
vessel; takes place of the captain and assumes all such number he may deem proper. But I think at
his duties and powers in case of absence, present the captain has no business with the crew
sickness or death. as they are hired by the carrier. Relevant
provisions: Art. 634-637
ARTICLE 627. The sailing mate, as the second
chief of the vessel and unless the agent orders DISCHARGE:
otherwise, shall take the place of the captain in
cases of absence, sickness, or death, and shall
then assume all his powers, obligations, and Who can discharge? The shipowner or the captain
responsibilities. can discharge the crew (Art. 637)

Notes: What is the effect if the captain or the crew is

1. Centennial vs. Dela Cruz, supra. (2008) - discharged during the voyage? Example, voyage
Petitioners allege loss of trust and confidence due to from Manila to San Francisco and en route to SF
incompetence as the ground for respondent's they are discharged:
dismissal. Loss of trust and confidence is premised
on the fact that the employee holds a position whose ARTICLE 604. If the captain or any other member
functions may only be performed by someone who of the crew should be discharged during the
has the confidence of management. Such employee voyage, they shall receive their salary until the
may be managerial or rank-and-file, but the nature of return to the place where the contract was made,
his position determines the requirements for a valid unless there are good reasons for the discharge,
dismissal. all in accordance with Articles 636 et seq. of this
Article 627 of the Code of Commerce defines the
Chief Mate, also called Chief Officer or Sailing Mate, Gen Rule: They shall continue to receive their
as "the second chief of the vessel, and unless the salaries until their return to the port where the contract
agent orders otherwise, shall take the place of the was made. They have to be paid the full round trip.
captain in cases of absence, sickness, or death, and
shall then assume all his powers, duties, and Except: If there is a just cause or just motive.
responsibilities." A Chief Officer, therefore, is second
in command, next only to the captain of the vessel. Rule in case of discharge if the contract is for a
definite period or voyage:
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ARTICLE 605. If the contracts of the captain and ARTICLE 644. A sailor who falls sick shall not
members of the crew with the agent should be for lose his right to wages during the voyage, unless
a definite period or voyage, they can not be the sickness is the result of his own fault. At any
discharged until the fulfillment of their contracts, rate, the costs of the attendance and cure shall be
except for reasons of insubordination in serious defrayed from the common funds, in the form of a
matters, robbery, theft, habitual drunkenness, and loan.
damage caused to the vessel or to its cargo by If the sickness should be caused by an injury
malice or manifest or proven negligence. received in the service or defense of the vessel
the sailor shall be attended and cured from the
Notes: common funds, there being deducted before
1. Madrigal vs. Ogilvie - The services of Jesus G. anything else from the proceeds of the freight, the
Ogilvie, Salvador Ortile, Antonio C. Militar and Miguel cost of the attendance and cure.
M. Fermin were engaged by Manuel Mascuñana,
master or captain employed by the petitioner Madrigal WHAT IS A SUPERCARGO? A
Shipping Company, Inc., to man and fetch the vessel person specially employed by the owner of a cargo to
"S.S. Bridge" from Sasebu, Japan. Pursuant thereto take charge of and sell to the best advantage
the respondents were flown to Sasebu, Japan, and merchandise which has been shipped, and to
they manned the vessel out of the port of Sasebu. On purchase returning cargoes and to receive freight, as
16 March 1948, when the vessel reached Hongkong, he may be authorized.
the respondents were dismissed and replaced by a
crew of Chinese nationality. The respondents were ARTICLE 649. Supercargoes shall discharge on
flown back to Manila and paid their respective salaries board the vessel the administrative duties which
up to the date of their dismissal.(So they were only the agent or shippers may have assigned them;
paid from Japan to Hongkong) they shall keep an account and record of their
transactions in a book which shall have the same
H:The services of the respondents were engaged by conditions and requisites as required for the
the petitioner to man its vessel for a determinate time accounting book of the captain, and shall respect
or voyage, with an express stipulation that "this the latter in his duties as chief of the vessel.
contract expires on the arrival of this boat at the port
of Manila." Not having been discharged for any of the The powers and liabilities of the captain shall
causes enumerated in the Art. 605, the respondents cease, when there is a supercargo, with regard to
are entitled to the amounts they respectively seek to that part of the administration legitimately
collect from the petitioner. conferred upon the latter, but shall continue in
force for all acts which are inseparable from his
2. Wallem vs. Minister of Labor: Wallem hired X and authority and office.
Y as seamen for 10 months. For instigating the
International Transport Federation (ITF) Chapter to ARTICLE 650. All the provisions contained in the
demand higher wages they were dismissed. Was the second section of Title III, Book II, with regard to
dismissal proper? qualifications, manner of making contracts, and
liabilities of factors shall be applicable to
No, the seamen cannot be dismissed without legal supercargoes.
cause because the contract was for a definite period
of 10 months. What X and Y did was not a legal cause ARTICLE 651. Supercargoes can not, without
under Art. 605 but an exercise of the rights of all special authorization or agreement, make any
workmen to seek better rights and higher benefits x x transaction for their own account during the
x voyage, with the exception of the ventures which,
in accordance with the custom of the port of
Grounds if captain discharges crew:(of course, the destination, they are permitted to do.
captain cannot discharge himself!) Neither shall they be permitted to invest in the
return trip more than the profits from the ventures,
ARTICLE 636. Should a fixed period for which a unless there is a special authorization thereto
sailor has signed not be stated, he can not be from the principals.
discharged until the end of the return voyage to
the port where he enrolled. ABANDONMENT/DOCTRINE OF LIMITED
ARTICLE 637. Neither can the captain discharge a
sailor during the time of his contract except for As already discussed, the CCOG can limit its liability
sufficient cause, the following being considered by stipulation. (Art. 1749-1750) For CCOP, liability can
as such: only be limited when Pax is carried for free and there
1. The perpetration of a crime which disturbs is a stipulation. Under Maritime Commerce, there is a
order on the vessel. way for a CC to limits its liability even without a
2. Repeated offenses of insubordination, against stipulation because it is the law itself which proves for
discipline, or against the fulfillment of the service. this liability.
3. Repeated incapacity or negligence in the
fulfillment of the service to be rendered. Recall: ARTICLE 586 and 583 (SO/SA civilly liable for
4. Habitual drunkenness. acts of captain and obligations contracted)
5. Any occurrence which incapacitates the sailor
to carry out the work under his charge, with the ARTICLE 587. The agent shall also be civilly liable
exception of the provisions contained in Article for the indemnities in favor of third persons which
644. arise from the conduct of the captain in the care of the
6. Desertion. goods which the vessel carried; but he may exempt
himself therefrom by abandoning the vessel with
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all her equipments and the freight he may have 1. When the vessel is properly insured - the insurance
earned during the voyage. will take care of the liability, the value of which may be
more than the value of the vessel, freight, etc.
Other provisions providing for abandonment:
2. When the liability for repairs of the vessel was
ARTICLE 590. The owners of a vessel shall be civilly incureed before the loss of such vessel (favorite BQ)
liable in the proportion of their contribution to the
common fund, for the results of the acts of the 3. When the liability is one which arises from the
captain, referred to in Article 587. Each part owner provisions of the labor code.
may exempt himself from this liability by the
abandonment before a notary of the part of the vessel When abandonment CANNOT BE MADE
belonging to him.
1. When the voyage is not maritime, but only in a
And in cases of collision if the same is caused by the river, bay, or gulf
captain alone, under
2. When the vessel is not acting as a common carrier
Art. 837: The civil liability contracted by the but a private carrier.
shipowners in the cases prescribed in this section,
shall be understood as limited to the value of the 3. When the SO/SA is at fault, i.e. when there is lack
of proper equipment, lack of technical training of the
vessel with all her appurtenances and all the freight
crew, unlicensed crew members, captain. So any kind
earned during the voyage.
of negligence, no matter how minute will remove the
right of abandonment.
1. What is abandonment? It is equivalent to an offer
a. Heirs of Amparo delos Santos vs. CA: The
of the value of the vessel, her equipment and freigth
vessel left late because the carrier decided to load
earne in return for an exemption from liability.
more unmanifested passengers and cargo. Because
the vessel left late, it encountered a typhoon and the
So if the vessel sank and the sinking of the vessel
vessel sank. According to the Board of Marine Inquiry
was caused entirely by the negligence of the captain,
(BMI) the sinking was caused by the fault of the
the SO or SA can be held liable. But if SO or SA
captain and its officers in operating the vessel. The
abandons the vessel, then the liability will only be
SO/SA claimed the right to abandon, but the SC said
limited to the value of the vessel, the freightage and
that the doctrine of limited liability cannot be invoked
the equipment.
in this case because there was fault or negligence on
the part of the carrier because it overloaded the
2. The real and hypothecary nature of maritime law,
vessel even if it was cleared to leave. And everytime it
therefore, distinguishes it from Civil law and
is discovered that a vessel is overloaded with
commercial law because of this doctrine. A shipping
cargo/pax, goodbye abandonment.
transportation contract is "real and hypothecary" in
nature under Art. 587 which accord/issue a
shipowner/agent the right of abandonment and by It must be stressed at this point that Article 587
necessary implication, his liability is confined to that to speaks only of situations where the fault or
which he is entitled as of right to abandon, meaning negligence is committed solely by the captain. In
the vessel and all her equipment and the freight she cases where the shipowner is likewise to be blamed,
may have earned during the voyage. Article 587 does not apply. Such a situation will be
covered by the provisions of the New Civil Code on
Read: Yangco vs. Laserna for history of right of Common Carriers. Owing to the nature of their
abandonment. business and for reasons of public policy, common
carriers are tasked to observe extraordinary diligence
3. Reasons why SO/SA are given the right to in the vigilance over the goods and for the safety of its
abandonment (Heirs of Amparo vs. delos Santos) passengers (Article 1733, New Civil Code). Further,
they are bound to carry the passengers safely as far
a. To offset against the innumerable hazards and as human care and foresight can provide, using the
perils of the sea; utmost diligence of very cautious persons, with a due
b. To encourage ship building and marine commerce regard for all the circumstances (Article 1755, New
Civil Code). Whenever death or injury to a passenger
4. Note that when abandonment is made in the occurs, common carriers are presumed to have been
instances provided by law, it cannot be refused. at fault or to have acted negligently unless they prove
that they observed extraordinary diligence as
5. Can a charterer make an abandonment? NO, prescribed by Articles 1733 and 1755
because he cannot be considered in place of the
owner or the shipagent in matters regarding to the b. PHILAMGEN VS. CA- According to the SC, despite
reponsibility pertaining to ownership and possession the fact that the vessel was sea worthy, it was not
of the vessel. Even if the charter is a bareboat or cargo worthy. The cases and cases of coca-cola
demise charter. bottles were loaded on deck and the vessel was top
heavy making it easy to tilt in case of strong winds.
ABANDONMENT (meaning even if the right Q: What if the sinking of the vessel is caused by
to abandonment exists, the SO/SA will still fortuitous event, is the right of abandonment present?
pay for more than the value of the vessel) A: No, the SO or SA will be exempt from liability.

Other important cases:

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1. Aboitiz Shipping v. General Accident (1993)- The exhorted the trial courts before whom similar cases
sinking of this vessel caused a lot of cases to be filed remained pending to proceed with trial and adjudicate
against aboitiz. In this case, the SC applied the these claims so that the pro-rated share of each claim
findings of the BMI where it was found that the sinking could be determined after all the cases shall have
of the vessel was caused by a fortuitous event. The been decided.
SC even exonerated the captain and crew so nothing
could be collected from Aboitiz In Monarch Insurance, the Court deemed it fit to settle
once and for all this factual issue by declaring that the
2. Monarch Insurance vs. CA (2000)- It was sinking of M/V P. Aboitiz was caused by the
discovered that Aboitiz was negligent. So the sinking concurrence of the unseaworthiness of the vessel and
of the ship was not caused by fortuitous event and it the negligence of both Aboitiz and the vessel's crew
was not also caused by the captain of the ship. So and master and not because of force majeure.
therefore the right of abandonment does not exist as Notwithstanding this finding, the Court did not reverse
there was fault or negligence on the part of the CC. but reiterated instead the pronouncement in GAFLAC
to the effect that the claimants be treated as "creditors
BUT in this case, there was so many claimants, about in an insolvent corporation whose assets are not
110 claimants, the claim amounting to about 43 Million enough to satisfy the totality of claims against it."
and the insurance proceeds were only 14 million. The
SC said that the claimants cannot get their 43 million However, on 02 May 2006, the Court rendered a
claims. They have to share pro-rata the proceeds of decision in Aboitiz Shipping Corporation v. New India
the insurance. There is no preference of credit. Assurance Company, Ltd. (New India), reiterating the
well-settled principle that the exception to the limited
In the instant case, there is, therefore, a need to liability doctrine applies when the damage is due to
collate all claims preparatory to their satisfaction from the fault of the shipowner or to the concurrent
the insurance proceeds on the vessel M/V P. Aboitiz negligence of the shipowner and the captain. Where
and its pending freightage at the time of its loss. No the shipowner fails to overcome the presumption of
claimant can be given precedence over the others by negligence, the doctrine of limited liability cannot be
the simple expedience of having completed its action applied. In New India, the Court clarified that the
earlier than the rest. Thus, execution of judgment in earlier pronouncement in Monarch Insurance was not
earlier completed cases, even these already final and an abandonment of the doctrine of limited liability and
executory must be stayed pending completion of all that the circumstances therein still made the doctrine
cases occasioned by the subject sinking. Then and applicable.
only then can all such claims be simultaneously
settled, either completely or pro-rata should the In New India, the Court declared that Aboitiz failed to
insurance proceeds and freightage be not enough to discharge its burden of showing that it exercised
satisfy all claims. extraordinary diligence in the transport of the goods it
had on board in order to invoke the limited liability
3. Aboitiz Shipping vs. New India (2006) - The SC doctrine. Thus, the Court rejected Aboitiz's argument
changed its mind again. that the award of damages to respondent therein
should be limited to its pro rata share in the insurance
Our ruling in Monarch may appear inconsistent with proceeds from the sinking of M/V P. Aboitiz.
the exception of the limited liability doctrine, as
explicitly stated in the earlier part of the Monarch The instant petitions provide another occasion for the
decision. An exception to the limited liability doctrine Court to reiterate the well-settled doctrine of the real
is when the damage is due to the fault of the and hypothecary nature of maritime law. As a general
shipowner or to the concurrent negligence of the rule, a ship owner's liability is merely co-extensive
shipowner and the captain. In which case, the with his interest in the vessel, except where actual
shipowner shall be liable to the full-extent of the fault is attributable to the shipowner. Thus, as an
damage. We thus find it necessary to clarify now the exception to the limited liability doctrine, a shipowner
applicability here of the decision in Monarch. Where or ship agent may be held liable for damages when
the shipowner fails to overcome the presumption of the sinking of the vessel is attributable to the actual
negligence, the doctrine of limited liability cannot be fault or negligence of the shipowner or its failure to
applied. Therefore, we agree with the appellate court ensure the seaworthiness of the vessel. The instant
in sustaining the trial court's ruling that petitioner is petitions cannot be spared from the application of the
liable for the total value of the lost cargo. exception to the doctrine of limited liability in view of
the unanimous findings of the courts below that both
4. Aboitiz Shipping vs. Equitable (2008) which Aboitiz and the crew failed to ensure the
seaworthiness of the M/V P. Aboitiz.
affirmed the New India ruling. Here, the SC traced
the history starting from GAFLAC to New India. So no
pro-rata sharing of the insurance proceeds. SPECIAL CONTRACTS IN MARITIME
COMMERCE: (Charter party, bill of lading,
loans on bottomry and respondentia)
The Court declared in the 1993 GAFLAC case that
claims against Aboitiz arising from the sinking of M/V
1. CHARTER PARTY - a contract wherein the entire
P. Aboitiz should be limited only to the extent of the
ship or some principal part thereof is let by the owner
value of the vessel. Thus, the Court held that the
to another person for a specified time or use, in
execution of judgments in cases already resolved with
consideration of the payment of a fee.
finality must be stayed pending the resolution of all
the other similar claims arising from the sinking of M/V
Two kinds of C/P: a. Contract of Affreightment -
P. Aboitiz. Considering that the claims against Aboitiz
here the owner retains control of the vessel, he
had reached more than 100, the Court found it
provides the crew, what is being leased is only the
necessary to collate all these claims before their
space of the vessel. A contract of affreightment can
payment from the insurance proceeds of the vessel
be a time charter or a voyage charter. b.
and its pending freightage. As a result, the Court
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Bareboat/Demise Charter wherein the owner of the 3. If the vessel should not be placed at the disposal of
vessel gives up the control and full possession of the the charterer within the period and in the manner
vessel to the charterer who becomes the owner pro agreed upon. (non placement at disposal of the
hac vice. charterer)

If Voyage or time charter = common carrier retains its 4. If, after the vessel has put to sea, she should return
nature as a common carrier; but if it is bareboat to the port of departure, on account of risk of
charter, the common carrier becomes a private carrier pirates, enemies, or bad weather, and the
for that particular charter only. freighters should agree to unload her. (charterer
must pay owner for the voyage out, meaning one way)
Formal/Substantial requirements:
In the second and third cases the person from whom
ARTICLE 652. A charter party must be drawn in the vessel was chartered shall indemnify the charterer
duplicate and signed by the contracting parties, and for the losses he may suffer. In the fourth case the
when either does not know how or can not do so, by person from whom the vessel was chartered shall
two witnesses at their request. have a right to the freightage in full for the voyage out.
The charter party shall include, besides the conditions If the charter should have been made by the months,
unrestrictedly stipulated, the following statements: the charterers shall pay the full freightage for one
1.The kind, name, and tonnage of the vessel. month, if the voyage were to a port in the same
2.Her flag and port of registry. waters, and two months, if the voyage were to a port
3.The name, surname, and domicile of the captain. in different waters. From one port to another of the
4.The name, surname, and domicile of the agent, if Peninsula and adjacent islands, the freightage for one
the latter should make the charter party. month only shall be paid.
5. The name, surname, and domicile of the
charterer, and if he states that he is acting by 5. If a vessel should make a port during the voyage in
commission, that of the person for whose account he order to make urgent repairs and the freighters
makes the contract. should prefer to dispose of the merchandise.(pay for
6. The port of loading and unloading. voyage out)
7. The capacity, number of tons or weight, or
measure which they respectively bind themselves to When the delay does not exceed thirty days, the
load and transport, or whether it is the total cargo. freighters shall pay the full freight for the voyage out.
8. The freightage to be paid, stating whether it is Should the delay exceed thirty days, they shall only
to be a fixed amount for the voyage or so much pay the freight in proportion to the distance covered
per month, or for the space to be occupied, or for by the vessel.
the weight or measure of the goods of which the
cargo consists, or in any other manner ARTICLE 689. At the request of the person from
whatsoever agreed upon. whom the vessel is chartered the charter party may
be rescinded:
(PRIMAGE- a small allowance or compensation
payable to the master or owner of the vessel for the 1. If the charterer at the termination of the extra lay
use of its cables to load and unload the goods and to days does not place the cargo alongside the vessel.
the mariners for lading and unlading in port. So what In such case the charterer must pay half the freight
you pay those who load; stipulated besides the demurrage for the lay days and
DEMURRAGE - an amount stipulated in the charter extra lay days elapsed.
party to be paid by the charter/shipper to the ship
owner for any delay. ) 2. If the person from whom the vessel was chartered
should sell her before the charterer has begun to load
9. The amount of primage to be paid to the captain. her and the purchaser should load her for his own
account. In such case the vendor shall indemnify the
10. The days agreed upon for loading and charterer for the losses he may suffer.
unloading. (laydays- no. of days between unloading
and departure) If the new owner of the vessel should not load her for
11. The lay days and extra lay days to be allowed his own account the charter party shall be respected
and the rate of demurrage. (in such case, the charter party is not rescinded) and
the vendor shall indemnify the purchaser if the
WHO CAN RESCIND A CHARTER PARTY: former did not inform him of the charter pending at
Either party the time of making the sale. Otherwise, if he informed
him, then no need to indemnify.
ARTICLE 688. A charter party may be annulled at
the request of the charterer: Charter Party Ordinary Lease
1. If before loading the vessel he should abandon the Period If for definite period, If the lease is for a
charter, paying half of the freightage agreed upon. the charterer may definite period, the
(abandonment of charter before loading; pay 1/2 rescind the charter lessee cannot
of the freight) party by paying half terminate the contract
of the freightage
2. If the capacity of the vessel should not agree Effect New owner cannot If the leased property
with that stated in the certificate of the tonnage, or of sale be compelled to is sold to one who
if there is an error in the statement of the flag to 3rd respect the charter knows of the
under which she sails. (Charterer will be indemnified person party. existence of the lease
by the owner) contract, the new
owner must respect
the lease
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In examining what is meant by seaworthiness we

Case: must bear in mind the dual nature of the carrier‘s
obligations under a contract of affreightment. To
Santiago Lighterage vs. CA: Seaworthiness cannot satisfy these duties the vessel must (a) be efficient as
be agreed to between the parties (parang jurisdiction an instrument of transport and (b) as a storehouse for
of the court) because it is a fact which has to be her cargo. The latter part of the obligation is
proven. sometimes referred to as cargoworthiness.

Fx: In this case two charter parties were entered into. A ship is efficient as an instrument of transport if its
The owner of the vessel was Santiago. He chartered hull, tackle and machinery are in a state of good
the vessel to B (bareboat charter). B chartered the repair, if she is sufficiently provided with fuel and
vessel to C (voyage charter). The vessel was ballast, and is manned by an efficient crew.
supposed to carry an ore to South Korea. On the way
to pick up the ore from Manila to Zambales, the And a vessel is cargoworthy if it is sufficiently strong
vessel had to undergo repairs. In short it never and equipped to carry the particular kind of cargo
reached Korea. which she has contracted to carry, and her cargo
must be so loaded that it is safe for her to proceed on
The pertinent provisions of the contract between her voyage. A mere right given to the charterer to
Santiago and B reads: "3. Delivery – The VESSEL inspect the vessel before loading and to satisfy
shall be delivered and taken over by the himself that she was fit for the contracted cargo does
CHARTERERS at the port of the City of Manila, in not free the shipowner from his obligation to provide a
such ready berth as the CHARTERERS may direct. cargoworthy ship.

The OWNER shall before and at the time of delivery BILLS OF LADING (CF: ART. 356, 357, 709,
exercise due diligence to make the VESSEL 718)
seaworthy and in every respect ready in hull,
machinery and equipment for service hereunder. The An intstrument in writing signed by the carrier or his
VESSEL shall be properly documented at time of agent, describing the freight so as to identify it, staing
delivery. the name of the consigor, the terms of the contract of
carriage and agreeing or directing that the freight be
The delivery to the CHARTERERS of the VESSEL delivered to the order or assigns of a specified person
and the taking over of the VESSEL by the at a specified place.
CHARTERERS shall constitute a full performance by
the OWNER of all the OWNER‘S obligations Two fold nature: Serves as a receipt as well as
hereunder, and thereafter the CHARTERERS shall evidence of a contract. BUT it is not important for a
not be entitled to make or assert any claim against the contract of carriage to exist between the shipper/pax
OWNER on account of the representations or and the common carrier. It is merely an evidence.
warranties expressed or implied with respect to the
VESSEL but the OWNER shall be responsible for What is the effect of the issuance by a
repairs or renewals occasioned by latent defects in carrier of an unsigned bill of lading when
the VESSEL, her machinery or appurtenances accepted by the shipper or the consignee?
existing at the time of delivery under this Agreement,
provided such defects have manifested before turn- A: Keng Hua Paper Products Co, Inc. vs. CA: A "bill
over." of lading delivered and accepted constitutes the
contract of carriage even though not signed,"
What is the liability of Santiago as the owner? because the "(a)cceptance of a paper containing the
terms of a proposed contract generally constitutes an
Held: The mere physical transfer of MV Christine Gay acceptance of the contract and of all of its terms and
from petitioner to Pelaez does not constitute full conditions of which the acceptor has actual or
performance of its obligation under their bareboat constructive notice." In a nutshell, the acceptance of
charter agreement. Neither is it considered a a bill of lading by the shipper and the consignee, with
delivery. Under the agreement, physical transfer of a full knowledge of its contents, gives rise to the
seaworthy vessel is necessary to satisfy delivery. presumption that the same was a perfected and
Seaworthiness is a relative term. The degree of binding contract.
seaworthiness varies in relation to the contemplated
voyage. What must be done to the bill of lading
upon fulfillment of the contract?
To be seaworthy, a vessel ―must have that degree of
fitness which an ordinary, careful and prudent owner ARTICLE 353. The legal basis of the contract
would require his vessel to have at the between the shipper and the carrier shall be the bills
commencement of her voyage, having regard to all of lading, by the contents of which all disputes which
the probable circumstances of it.‖ Thus the degree of may arise with regard to their execution and fulfillment
seaworthiness varies in relation to the contemplated shall be decided without admission of other
voyage. Crossing the Atlantic calls for stronger exceptions than forgery or material errors in the
equipment than sailing across the Visayan Sea. It is drafting thereof.
essential to consider that once the necessary degree
of seaworthiness has been ascertained, this After the contract has been complied with the bill of
obligation is an absolute one, i.e. the undertaking is lading issued by the carrier shall be returned to him,
that the vessel actually is seaworthy. It is no excuse and by virtue of the exchange of this certificate for the
that the shipowner took every possible precaution to article transported, the respective obligations and
make her so, if in fact he failed. actions shall be considered as canceled, unless in the
same act the claims which the contracting parties
Transcribed and Prepared by: Hanniyah Sevilla 4 Manresa ’08-‘09 30

desired to reserve are reduced to writing, exception apparent, file a claim, which may be verbal,
being made of the provisions of Article 366. immediately upon receipt)

If in case of loss or for any other reason whatsoever, After the periods mentioned have elapsed, or after
the consignee can not return upon receiving the the transportation charges have been paid, no
merchandise the bill of lading subscribed by the claim whatsoever shall be admitted against the
carrier, he shall give said carrier a receipt for the carrier with regard to the condition in which the
goods delivered, this receipt producing the same goods transported were delivered.
effects as the return of the bill of lading.
When does the 24 hour period begin to run? When
AFter the contract has been complied with, the bill of the goods are actually received.
lading shall be returend to the carrier who may have
issued it and it (the surrender) is proof that the goods Case: New Zealand vs. Chua Joy - Held: In order that
have been delivered. the condition provided in Article 366 of the Code of
Commerce may be demanded there should be a
And after the deliverey or return of the bill of lading, consignment of goods, through a common carrier, by
the respective obligations and actions between the a consignor in one place to a consignee in another
parties shall be considered as cancelled. place. And said article provides that the claim for
damages must be made ―within twenty-four hours
In case the consignee cannot return upon receive following the receipt of the merchandise‖ by the
the merchandise the bill of lading, he must give the consignee from the carrier. In other words, there must
said carrier a receipt for the goods delivered, this be delivery of the merchandise by the carrier to the
receipt producing the same effects as the return of the consignee at the place of destination.
bill of lading. (Art. 353)
The cargo never reached Manila, its destination, nor
What is the presumption if the carrier does not was it ever delivered to the consignee, the office of
hold the bill of lading after the fulfillment of the the shipper in Manila, because the ship ran aground
contract of transportation? upon entering Laoang bay, Samar on the same day of
the shipment. Such being the case, it follows that the
The presumption is that the carrier did not deliver the cargo was never received by the consignee.
Did the Civil Code repeal the prescriptive
Who may change the consignee? period to file a claim under the Code of
ARTICLE 360. The shipper may, without changing
the place where the delivery is to be made, change No, the limitations of actions mentioned in the Civil
the consignment of the goods delivered to the carrier, Code are without prejudice to those specified in teh
and the latter shall comply with his orders, provided Code of Commerce.
that at the time of making the change of the consignee
the bill of lading subscribed by the carrier be returned Period to file for recovery of undelivered/lost
to him, if one were issued, exchanging it for another cargo in the courts:(note that under the Code of
containing the novation of the contract. commerce, it does not cover loss/non delivery of
The expenses arising from the change of consignment
shall be defrayed by the shipper. If there is a bill of lading, 10 years, otherwise, 6 years.
If it involves overseas trading, 1 year from date when
TRANSSHIPMENT - It is the act of taking it was supposed to be received.
cargo from one ship and loading it into
another. Transshipment cannot be made if the LOANS ON BOTTOMRY AND
shipper does not consent because it is RESPONDENTIA
dangerous.. it will expose the goods to
breakage, etc. So the effect if there was ARTICLE 719. A loan on bottomry or respondentia
transshipment without consent is that there is shall be considered that which the repayment of the
a breach in the contract of carriage. And the sum loaned and the premium stipulated, under any
carrier is liable to the shipper in case of loss, condition whatsoever, depends on the safe arrival in
even for an otherwise excepted cause. port of the goods on which it is made, or of their value
in case of accident.
1. If the collateral is the vessel = bottomry; if
Under Art. 366, this does not cover loss because it collateral is goods = respondentia.
says upon receipt of the goods or merchandise.
Ex. Loan for 5 Million, en route to San Francisco, the
ARTICLE 366. Within the twenty-four hours following vessel sinks. The loan is extinguished because the
the receipt of the merchandise a claim may be collateral is lost.
brought against the carrier on account of damage or
average found therein on opening the packages, 2. Characteristics of a loan on Bottomry: It is a loan
provided that the indications of the damage or the security of which is the vessel itself and
average giving rise to the claim can not be conditioned on the safe arrival at the port of
ascertained from the exterior of said packages, in destination. Also the vessel must be exposed to
which case said claim would only be admitted on the maritime peril. (So it must be destroyed during its
receipt of the packages. (So if the damage is voyage)
Transcribed and Prepared by: Hanniyah Sevilla 4 Manresa ’08-‘09 31

3. Who may contract such loan? On bottomry: The ARTICLE 807. The petty and ordinary expenses of
owner of the vessel or the captain (see previous navigation, such as pilotage of coasts and ports,
discussion, Art. 580); on respondentia: owner of the lighterage and towage, anchorage dues, inspection,
cargo. health, quarantine, lazaretto, and other so-called port
expenses, costs of barges, and unloading, until the
Ordinary Loan Loan on merchandise is placed on the wharf, and any other
Bottomry/respondentia expenses common to navigation shall be considered
May or may not have Must always have collateral ordinary expenses to be defrayed by the shipowner,
collateral unless there is a special agreement to the contrary.
Collateral may be Collateral must be a vessel or
real or personal a cargo subject to maritime ARTICLE 808. Averages shall be:
property risk 1.Simple or particular.
Absolutely repayable Payment depends on the safe 2.General or gross.
arrival by the collateral at the
port of the loan PARTICULAR AVERAGE: Simple or particular
Need not be in Must be in writing averages shall be, as a general rule, all the expenses
writing and damages caused to the vessel or to her cargo
To be binding on 3rd Must be registered in the which have not redounded to the benefit and common
persons, need not registry of vessels profit of all the persons interested in the vessel and
be registered her cargo x x x (Art. 809)
Loss of collateral, if Loss of collateral extinguishes
any does not the loan. Who bears the loss in P/A? The owner of the goods
extinguish the loan which gave rise to the expense or suffered the
damage shall bear the simple or particular average
Effect of loss of collateral: (Art. 810)
Gen Rule: Extinguishes the loan provided
requirements of Art. 731 are complied with. Examples of P/A:

ARTICLE 731. The actions which may be brought by 1. The damages suffered by the cargo from the time
the lender shall be extinguished by the absolute loss of its embarkation until it is unloaded, either on
of the goods on which the loan was made, if said loss account of the nature of the goods or by reason of an
arose from an accident of the sea at the time and accident at sea or force majeure, and the expenses
during the voyage designated in the contract, and incurred to avoid and repair the same.
should it be proven that the cargo was on board;
2. The damages suffered by the vessel in her hull,
EXCEPTIONS: rigging, arms, and equipment, for the same causes
but this shall not take place if the loss were caused by and reasons, from the time she puts to sea from the
the inherent defect of the thing; port of departure until she anchored in the port of
or through the fault or malice of the borrower, or destination.
through barratry on the part of the captain, or
if it were caused by damages suffered by the vessel 3. The damages suffered by the merchandise loaded
as a consequence of being engaged in contraband, or on deck, except in coastwise navigation, if the marine
if it arose through loading the merchandise on a ordinances allow it.
vessel other than that designated in the contract,
unless this change should have been made by reason 4. The wages and victuals of the crew when the vessel
of force majeure. should be detained or embargoed by a legitimate
order or force majeure, if the charter should have
The proof of the loss is incumbent upon the person been for a fixed sum for the voyage.
who received the loan, as well as the proof of the
existence in the vessel of the goods declared to the 5. The necessary expenses on arrival at a port, in
lender as the object thereof. order to make repairs or secure provisions.

RISKS, DAMAGES AND ACCIDENTS OF 6. The lowest value of the goods sold by the captain in
MARITIME COMMERCE arrivals under stress for the payment of provisions and
in order to save the crew, or to cover any other
ARTICLE 806. For the purposes of this Code the requirement of the vessel against which the proper
following shall be considered averages: amount shall be charged.

1. All extraordinary or accidental expenses which may 7. The victuals and wages of the crew during the time
be incurred during the navigation for the preservation the vessel is in quarantine.
of the vessel or cargo, or both.
8. The damage suffered by the vessel or cargo by
2. All damages or deterioration the vessel may suffer reason of an impact or collision with another, if it were
from the time she puts to sea from the port of accidental and unavoidable. If the accident should
departure until she casts anchor in the port of occur through the fault or negligence of the captain,
destination, and those suffered by the merchandise the latter shall be liable for all the damage caused.
from the time it is loaded in the port of shipment until it
is unloaded in the port of consignment. 9. Any damage suffered by the cargo through the
faults, negligence, or barratry of the captain or of the
What are NOT averages? Petty expenses under crew, without prejudice to the right of the owner to
Art. 807 recover the corresponding indemnity from the captain,
the vessel, and the freight.
Transcribed and Prepared by: Hanniyah Sevilla 4 Manresa ’08-‘09 32

GENERAL AVERAGE: all the damages and 2. For the common safety or for the purposes of
expenses which are deliberately caused in order to avoiding imminent peril, part of the cargo or
save the vessel, her cargo, or both at the same time, vessel on board is sacrificed deliberately (part of
from a real and known risk (Art. 811) the crew, pwede? hehe)

Who bears the loss? ARTICLE 812. In order to 3. There must be attempt to avoid the imminent
satisfy the amount of the gross or general averages, peril must be successful in a sense that the vessel
all the persons having an interest in the vessel and and some of the cargo are saved;
cargo therein at the time of the occurrence of the
average shall contribute. 4. Damages or expenses were incurred after
taking the proper legal steps.
Example of General Ave:
1. The goods or cash invested in the redemption of 1. Magsaysay vs. Agan
the vessel or cargo captured by enemies, privateers,
or pirates, and the provisions, wages, and expenses Facts: The S S ―San Antonio‖, a vessel owned and
of the vessel detained during the time the operated by A. Magsaysay Inc., left Manila on 6
arrangement or redemption is taking place. October 1949, bound for Basco, Batanes, via Aparri,
Cagayan, with general cargo belonging to different
2. The goods jettisoned to lighten the vessel, whether shippers, among them Anastacio Agan. The vessel
they belong to the vessel, to the cargo, or to the crew, reached Aparri on the 10th of that month, and after a
and the damage suffered through said act by the day‘s stopover in that port, weighed anchor to
goods kept. proceed to Basco. But while still in port, it ran aground
at the mouth of the Cagayan river, and, attempts to
3. The cables and masts which are cut or rendered refloat it under its own power having failed,
useless, the anchors and the chains which are Magsaysay had it refloated by the Luzon Stevedoring
abandoned in order to save the cargo, the vessel, or Co. at an agreed compensation. The stranding of
both. Magsaysay‘s vessel was due to the sudden shifting of
the sandbars at the mouth of the river which the port
4. The expenses of removing or transferring a portion pilot did not anticipate. Once afloat, the vessel
of the cargo in order to lighten the vessel and place returned to Manila to refuel and then proceeded to
her in condition to enter a port or roadstead, and the Basco, the port of destination. There the cargoes
damage resulting therefrom to the goods removed or were delivered to their respective owners or
transferred. consignees, who, with the exception of Agan, made a
deposit or signed a bond to answer for their
5. The damage suffered by the goods of the cargo contribution to the average.
through the opening made in the vessel in order to
drain her and prevent her sinking. On the theory that the expenses incurred in floating
the vessel constitute general average to which both
6. The expenses caused through floating a vessel ship and cargo should contribute, Magsaysay brought
intentionally stranded for the purpose of saving her. the action in the CFI of Manila to make Agan pay his
contribution, which, as determined by the average
7. The damage caused to the vessel which it is adjuster, amounts to P841.40. Agan, in his answer,
necessary to break open, scuttle, or smash in order to denies liability for this amount, alleging, among other
save the cargo. things, that the stranding of the vessel was due to the
fault, negligence and lack of skill of its master, that the
8. The expenses of curing and maintaining the expenses incurred in putting it afloat did not constitute
members of the crew who may have been wounded or general average, and that the liquidation of the
crippled in defending or saving the vessel. average was not made in accordance with law. After
trial, the lower court found for Magsaysay and
9. The wages of any member of the crew detained as rendered judgment against Agan for the amount of
hostage by enemies, privateers, or pirates, and the the claim, with legal interests. From this judgment,
necessary expenses which he may incur in his Agan has appealed directly to the Supreme Court.
imprisonment, until he is returned to the vessel or to
his domicile, should he prefer it. The Supreme Court reversed the decision appealed
from, and dismissed Magsaysay‘s complaint.
10. The wages and victuals of the crew of a vessel
chartered by the month during the time it should be Held: Herein, while the expenses incurred in putting
embargoed or detained by force majeure or by order Magsaysay‘s vessel afloat may well come under
of the Government, or in order to repair the damage number 2 of article 809 — which refers to expenses
caused for the common good. suffered by the vessel ―by reason of an accident of
the sea or force majeure‖ — and should therefore be
11. The loss suffered in the value of the goods sold at classified as particular average, the said expenses do
arrivals under stress in order to repair the vessel not fit into any of the specific cases of general
because of gross average. average enumerated in article 811. Number 6 of
Article 811 does mention ―expenses caused in order
12.The expenses of the liquidation of the average. to float a vessel,‖ but it specifically refers to ―a vessel
intentionally stranded for the purpose of saving it‖ and
REQUISITES FOR GENERAL AVERAGE: would have no application where, as in the present
case, the stranding was not intentional.
1. There must be a COMMON DANGER, a danger
in which the ship, cargo and crew all participate; With respect to Requisites of General average:
Transcribed and Prepared by: Hanniyah Sevilla 4 Manresa ’08-‘09 33

1. With respect to the first requisite, the evidence

does not disclose that the expenses sought to be
recovered from defendant were incurred to save
vessel and cargo from a common danger. The vessel
ran aground in fine weather inside the port at the
mouth of a river, a place described as ―very shallow‖.
It would thus appear that vessel and cargo were at
the time in no imminent danger or a danger which
might ―rationally be sought to be certain and

2. As to the second requisite, the expenses in

question were not incurred for the common safety of
vessel and cargo, since they, or at least the cargo,
were not in imminent peril. The cargo could, without
need of expensive salvage operation, have been
unloaded by the owners if they had been required to
do so.

3. With respect to the third requisite, the salvage

operation was a success; however, as the sacrifice
was for the benefit of the vessel — to enable it to
proceed to destination — and not for the purpose of
saving the cargo, the cargo owners are not in law
bound to contribute to the expenses.
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cases on Art. 366 On the matter concerning the giving of the notice of
claim as required by Article 366 of the Code of
1. Lorenzo Shipping vs. Chubb (2004): Steel pipes Commerce, the finding of fact of the Court of Appeals
were loaded on MV A for shipment from Manila to does not actually contradict the finding of fact of the
Dvo. L/S issued a clean bill of lading for the account trial court. Both courts held that, indeed, a telephone
of the consignee X, a corporation in San Francisco. call was made by Alfredo Chan to Encarnacion
So the voyage is Mla-Dvo-SF, USA. MV A arrived in Abastillas, informing the latter of the contamination.
Sasa warf in Dec. 2, 1987. Trans Marine Carrier However, nothing in the trial court's decision stated
received the shipment in Davao. When TMC received that the notice of claim was relayed or filed with the
the shipment in Dvo, it discovered that sea water was respondent-carrier immediately or within a period of
in the vessel and the steel pipes were submerged in twenty-four hours from the time the goods were
water. So X hired a surveyor and it was found that the received. The Court of Appeals made the same
cargo was no longer suitable and that the cargo hold finding. Having examined the entire records of the
of MV A was flooded w/ sea water. The rusty condition case, we cannot find a shred of evidence that will
of the cargo was noted on the mate's receipts and the precisely and ultimately point to the conclusion that
checker of M/V A signed his conforme thereon. After the notice of claim was timely relayed or filed.
the survey, respondent Gearbulk loaded the shipment
on board its vessel M/V San Mateo Victory, for The allegation of the petitioner that not only the Vice
carriage to the United States. It issued Bills of Lading President of the respondent was informed, but also its
covering 364 bundles of steel pipes to be discharged drivers, as testified by Alfredo Chan, during the time
at Oakland, U.S.A. All bills of lading were marked that the delivery was actually being made, cannot be
"ALL UNITS HEAVILY RUSTED." given great weight as no driver was presented to the
witness stand to prove this.
While the cargo was in transit from Davao City to the
U.S.A., consignee Sumitomo sent a letter of intent The object sought to be attained by the requirement of
dated December 7, 1987, to petitioner Lorenzo the submission of claims in pursuance of this article is
Shipping, which the latter received on December 9, to compel the consignee of goods entrusted to a
1987. Sumitomo informed petitioner Lorenzo carrier to make prompt demand for settlement of
Shipping that it will be filing a claim based on the alleged damages suffered by the goods while in
damaged cargo once such damage had been transport, so that the carrier will be enabled to verify
ascertained. all such claims at the time of delivery or within twenty-
four hours thereafter, and if necessary fix
On January 17, 1988, M/V San Mateo Victory arrived responsibility and secure evidence as to the nature
at Oakland, California, U.S.A. Due to its heavily rusted and extent of the alleged damages to the goods while
condition, the consignee X rejected the damaged steel the matter is still fresh in the minds of the parties.
pipes and declared them unfit for the purpose they
were intended. The filing of a claim with the carrier within the time
limitation therefore actually constitutes a condition
On December 2, 1988, respondent Chubb and Sons, precedent to the accrual of a right of action against a
Inc. filed a complaint for collection of a sum of money, carrier for loss of, or damage to, the goods. The
against respondents Lorenzo Shipping. shipper or consignee must allege and prove the
fulfillment of the condition. If it fails to do so, no right
Issue: Was there a valid notice of claim made by X? of action against the carrier can accrue in favor of the
former. The aforementioned requirement is a
Held: YES. The twenty-four-hour period prescribed by reasonable condition precedent; it does not constitute
Art. 366 of the Code of Commerce within which claims a limitation of action.
must be presented does not begin to run until the
consignee has received such possession of the The second paragraph of Article 366 of the Code of
merchandise that he may exercise over it the ordinary Commerce is also edifying. It is not only when the
control pertinent to ownership. In other words, there period to make a claim has elapsed that no claim
must be delivery of the cargo by the carrier to the whatsoever shall be admitted, as no claim may
consignee at the place of destination. In the case at similarly be admitted after the transportation
bar, consignee Sumitomo has not received charges have been paid. In this case, there is no
possession of the cargo, and has not physically question that the transportation charges have
inspected the same at the time the shipment was been paid, as admitted by the petitioner, and the
discharged from M/V Lorcon IV in Davao City. corresponding official receipt
Petitioner Lorenzo Shipping failed to establish that an
authorized agent of the consignee Sumitomo received Aboitiz Ruling: Under the Code of Commerce, the
the cargo at Sasa Wharf in Davao City. Respondent notice of claim must be made within twenty four (24)
Transmarine Carriers as agent of respondent hours from receipt of the cargo if the damage is not
Gearbulk, Ltd., which carried the goods from Davao apparent from the outside of the package. For
City to the United States, and the principal, damages that are visible from the outside of the
respondent Gearbulk, Ltd. itself, are not the package, the claim must be made immediately.
authorized agents as contemplated by law. What is
clear from the evidence is that the consignee received The periods , as well as the manner of giving notice
and took possession of the entire shipment only when may be modified in the terms of the bill of lading,
the latter reached the United States' shore. Only then which is the contract between the parties. Notably,
was delivery made and completed. And only then did neither of the parties in this case presented the terms
the 24-hour prescriptive period start to run. for giving notices of claim under the bill of lading
issued by petitioner for the goods.
2. Phil. Charter vs. Chemoil (June 2005) and
compare this with Aboitiz vs. ICNA (2008) The shipment was delivered on August 11, 1993.
Although the letter informing the carrier of the damage
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was dated August 15, 1993, that letter, together with From what has been said it is evident that the loss of
the notice of claim, was received by petitioner only on this petroleum is a general and not a special average,
September 21, 1993. But petitioner admits that even with the result that the plaintiff is entitled to recover in
before it received the written notice of claim, Mr. Mayo some way and from somebody an amount bearing
B. Perez, Claims Head of the company, was informed such proportion to its total loss as the value of both
by telephone sometime in August 13, 1993. Mr. Perez the ship and the saved cargo bears to the value of the
then immediately went to the warehouse and to the ship and entire cargo before the jettison was effected.
delivery site to inspect the goods in behalf of
petitioner. What is Jason Clause: Part of the York-Antwerp
Rules (Rule D):
In the case of Philippine Charter Insurance Right to contribution in general average shall not be
Corporation (PCIC) v. Chemoil Lighterage affected, though the even which gave rise to the
Corporation, the notice was allegedly made by the sacrifice or expenditure may have been due to the
consignee through telephone. The claim for damages fault of one of the parties to the adventure, BUT this
was denied. This Court ruled that such a notice did shall not prejudice any remedies which may be open
not comply with the notice requirement under the law. against that party for such cause.
There was no evidence presented that the notice was
timely given. Neither was there evidence presented Bar Q: What is the liability of the goods/cargo for
that the notice was relayed to the responsible general average?
authority of the carrier. ARTICLE 665. The cargo shall be specially liable for
the payment of the freight expenses, and duties
The call to petitioner was made two days from arising therefrom, which must be reimbursed by the
delivery, a reasonable period considering that the shippers, as well as for the part of the general
goods could not have corroded instantly overnight average which may be due, but it shall not be legal for
such that it could only have sustained the damage the captain to delay unloading on account of delay in
during transit. Moreover, petitioner was able to complying with this obligation.
immediately inspect the damage while the matter was
still fresh. In so doing, the main objective of the Should there be reasons for distrust, the judge or
prescribed time period was fulfilled. Thus, there was court, at the instance of the captain, may order the
substantial compliance with the notice requirement in deposit of the merchandise until he has been paid in
this case. full.

Cases on Averages: Gen Average vs. Particular Ave

General Ave - Deliberately caused; inures to the
1. Standard Oil vs. Castelo - A and B entered into a benefit of those interested in the vessel or cargo;
time charter voyage agreement. While the vessel was contribution to general average shall be contributed to
on its voyage, a typhoon came and the captain was by all the persons benefited and distributed to all
forced to jettison some barrels of petroleum on deck. those who suffered the loss;
A brought an action to recover the petroleum from B.
Particular Ave- may be due to other causes other
Is this an average? than a deliberate act; does not inure to the benefit of
those interested in vessel/cargo; owner bears the loss
Ordinarily the loss of cargo carried on deck shall not
be considered a general average loss. This is clearly EFFECTS OF DECLARATION OF WAR/BLOCKADE
expressed in Rule I of the York-Antwerp Rules, as IF THERE IS CHARTER PARTY
follows: "No jettison of deck cargo shall be made good
as general average." The reason for this rule is found ARTICLE 677. The charter party shall be enforced if
in the fact that deck cargo is in an extra-hazardous the captain should not have any instructions from the
position and, if on a sailing vessel, its presence is charterer, and a declaration of war or a blockade
likely to obstruct the free action of the crew in should take place during the voyage.
managing the ship. Moreover, especially in the case
of small vessels, it renders the boat top-heavy and In such case the captain shall be obliged to make the
thus may have to be cast overboard sooner than nearest safe and neutral port, and request and await
would be necessary if it were in the hold; and naturally orders from the freighter; and the expenses incurred
it is always the first cargo to go over in case of and salaries earned during the detention shall be
emergency. Indeed, in subsection 1 of article 815 of paid as general average.
the Code of Commerce, it is expressly declared that
deck cargo shall be cast overboard before cargo If, by orders of the freighter, the cargo should be
stowed in the hold. discharged at the port of arrival, the freight for the
voyage out shall be paid in full.
But this rule, denying deck cargo the right to
contribution by way of general average in case of CASES:
jettison, was first mad in the days of sailing vessels; 1. International Harvester vs. Hamburg American
and with the advent of the steamship as the principal Line: Vessel was German; Goods/Cargo were
conveyer of cargo by sea, it has been felt that the French. There was a declaration of war between
reason for the rule has become less weighty, Germany and France. Vessel was in Saigon when the
especially with reference to coastwise trade; and it is war was announce, vessel left and landed in Manila
now generally held that jettisoned goods carried on (neutral port). Owner of vessel tried to claim from
deck, according to the custom of trade, by steam French general averages.
vessels navigating coastwise and inland waters, are
entitled to contribution as a general average loss. Held: There can be no recovery. There was no
general average in the case because requisite no. 1
was missing. There was no common danger
Transcribed and Prepared by: Hanniyah Sevilla 4 Manresa ’08-‘09 36

shared/participated in by cargo and crew. There was 1/3 of 1.2 = 400,000

no danger to the French cargo. 2/3 of 1.2 = 800,000

2. Campagnie de Commerce vs. Hamburge

American Line: While vessel was in voyage, war brok ARRIVAL UNDER STRESS
out between Germany and Russia. The vessel was
carrying american cargo. Because of the war, the ship Arrival of the vessel at the nearest and most
landed in Manila. Again, there is no general average. convenient port because the vessel cannot continue
Cargo was American, only German vessel was at risk, the trip to the port of destination on the following
not the amercian cargo. grounds:
1. lack of provisions;
LIABILITY OF LENDERS ON BOTTOMRY OR 2. well founded fear of seizure, privateers
AVE. IN TEH THINGS ON WHICH THE LOAN WAS 3. by reason of any accident of the sea
MADE: disabling the vessel to navigate. (Art. 819)

ARTICLE 732.Lenders on bottomry or respondentia LACK OF PROVISION -note that the arrival under
shall suffer in proportion to their respective interest, stress is NOT lawful If the lack of provisions should
the general average which may take place in the arise from the failure to take the necessary provisions
goods on which the loan was made. for the voyage, according to usage and custom, or if
they should have been rendered useless or lost
In particular averages, in the absence of an express through bad stowage or negligence in their care.
agreement between the contracting parties, the lender
on bottomry or respondentia shall also contribute in WELL FOUNDED FEAR X X X - not lawful If the risk
proportion to his respective interest, should it not of enemies, privateers, or pirates should not have
belong to the kind of risks excepted in the foregoing been well known, manifest, and based on positive and
article. justifiable facts.

So: ACCIDENT OF SEA X X X - not lawful if the vessel

1. General Average: suffer in proportion to their was unseaworthy or if it is the result of some
interest erroneous order of the captain.
2. Particular Average: Contribute in proportion to their
respective interest Whenever malice, negligence, want of foresight, or
Provided that they do not fall under the exceptions lack of skill on the part of the captain is the reason for
under Art. 731. the act causing the damage, the arrival under stress is
NOT lawful.
ARTICLE 731. The actions which may be brought by
the lender shall be extinguished by the absolute loss Effect if arrival under stress is lawful: losses are
of the goods on which the loan was made, if said loss considered as particular average and damages need
arose from an accident of the sea at the time and not be paid to the shipper. (Art. 821)
during the voyage designated in the contract, and
should it be proven that the cargo was on board; but If not lawful: Damages must be paid to the shipper.
this shall not take place if the loss were caused by the (Jointly liable S/A, S/O and captain)
inherent defect of the thing or through the fault or
malice of the borrower, or through barratry on the part COLLISIONS
of the captain, or if it were caused by damages
suffered by the vessel as a consequence of being It is the impact of two moving vessels. Includes
engaged in contraband, or if it arose through loading allision in a broad sense. (ALLISION - striking of a
the merchandise on a vessel other than that moving vessel against one which is not moving.)
designated in the contract, unless this change should
have been made by reason of force majeure. Gen Rule: Guilty vessel must pay

Application: What if:

A- Borrower
B- Lender 1. ONE VESSEL AT FAULT: Said vessel is liable for
Loan on Respondentia = P1M the damage caused to the innocent vessel and for
Security - Cargo of A worth 1.5M damages suffered by the owners of the cargo of the
innocent vessel and the owners of the cargoes of its
Facts: Vessel met a typhoon, to lighten the load, own vessel. Take note that the owners of the cargo of
other cargoes were thrown overboard; A's cargo and the innocent vessel can still sue the innocent vessel
the vessel were saved. It was determined that A's for breach of contract.
contribution to the average was P300,000.
Determine the Interest of the parties in P1.5M DETERMINED WHICH ONE IS AT FAULT: Each
worth of cargo/ Extent of share in the P300,000 vessel must bear its own loss; both ship owners are
contribution solidarily liable to the shippers for the damages
occasioned to the cargo (Art. 827, 828)
A: 1/3 (amount not loaned or P500,00 ) = 100,000
B: 2/3 (amount of loan or P1M) = 200,000 3. 3RD VESSEL IS AT FAULT - Third vessel liable for
everything (Art. 831)
2. Suppose A's cargo was damaged to the extent
of P1.2 M and the same was a particular average? 4. COLLISION CAUSED BY FORTUITOUS EVENT -
everybody must bear his/her own loss. (Art. 840)
Transcribed and Prepared by: Hanniyah Sevilla 4 Manresa ’08-‘09 37

ARTICLE 833. A vessel shall be presumed as lost

Case: thru a collision which, upon being run into, sinks
1. Manila Steamship vs. Abdulhaman: Can immediately, and also any vessel which is obliged to
shipowner raise the defense of GFOF in case of make a port to repair the damages caused by the
collision? collision should be lost during the voyage, or should
be obliged to be stranded in order to be saved.
This defense is untenable. While it is true that iatdc2005
plaintiff's action against petitioner is based on a tort or ARTICLE 834. If the vessels colliding should have
quasi-delict, the tort in question is not a civil tort under pilots on board discharging their duties at the time of
the Civil Code but a maritime tort resulting in a the collision, their presence shall not exempt the
collision at sea, governed by Articles 826-939 of the captains from the liabilities they incur; but the latter
Code of Commerce. Under Article 827 of the Code of shall have the right to be indemnified by the pilots
Commerce, in case of collision between two vessels without prejudice to the criminal liability which the
imputable to both of them, each vessel shall suffer her latter may incur.
own damage and both shall be solidarily liable for the ARTICLE 835. The action for the recovery of losses
damages occasioned to their cargoes. The and damages arising from collisions can not be
characteristic language of the law in making the admitted if a protest or declaration is not presented
"vessels" solidarily liable for the damages due to the within twenty-four hours to the competent authority of
maritime collision emphasizes the direct nature of the the point where the collision took place, or that of the
responsibilities on account of the collision incurred by first port of arrival of the vessel, if in Spain, * and to
the shipowner under maritime law, as distinguished the consul of Spain * if it should have occurred in a
from the civil law and mercantile law in general. This foreign country.
direct responsibility is recognized in Article 618 of the ARTICLE 836. In so far as the damages caused to
Code of Commerce under which the captain shall be persons or to the cargo are concerned, the absence of
civilly liable to the ship agent, and the latter is the one a protest can not prejudice the persons interested
liable to third persons. who were not on board or were not in a condition to
make known their wishes.
Other issue: Can the doctrine of limited liability be ARTICLE 837. The civil liability contracted by the
invoked? No, because there was fault on the part of shipowners in the cases prescribed in this section,
both the vessels. shall be understood as limited to the value of the
vessel with all her appurtenances and all the freight
We agree, however, with petitioner-appellant, that the earned during the voyage.
Court of Appeals was in error in declaring the ARTICLE 838. When the value of the vessel and her
respondent Lim Hong To, owner of the M/L "Consuelo appurtenances should not be sufficient to cover all the
V", exempt from liability to the original plaintiff, liabilities, the indemnity due by reason of the death or
Abdulhaman, in view of the total loss of his own injury of persons shall have preference.
vessel, that sank as a result of the collision. It is to be
noted that both the master and the engineer of the Error in Extremis - Where a navigator, suddenly
motor launch "Consuelo V" were not duly licensed. realizing that a collision is imminent by no fault of his
own, in confusion and excitement of the moment does
ARTICLE 826. If a vessel should collide with another something which contributes to the collision or omits
through the fault, negligence, or lack of skill of the to do something by which the collision might be
captain, sailing mate, or any other member of the avoided, such act or omission is ordinarily considered
complement, the owner of the vessel at fault shall to be in extremis and the ordinary rules of strict
indemnify the losses and damages suffered, after an accountability will not apply.
expert appraisal. aisadc
ARTICLE 827. If both vessels may be blamed for the When will the rule of error in extremis apply?
collision, each one shall be liable for his own
damages, and both shall be jointly responsible for the It must appear that there was an imminent danger
losses and damages suffered by their cargoes. since the error of judgment is excusable only if it was
ARTICLE 828. The provisions of the foregoing article committed during such peril.
are applicable to the case in which it can not be
decided which of the two vessels was the cause of the It is the actual risk of danger and not apprehension
collision. merely that determines the question whether the error
ARTICLE 829. In the cases above mentioned the is one extremis.
civil action of the owner against the person liable for
the damage is reserved, as well as the criminal Example:
liabilities which may be proper. A stepped on the gas instead of stepping on the brake
ARTICLE 830. If a vessel should collide with another and there is a collision, then that is an error in
by reason of an accident or through force majeure, extremis. What applies depends on the facts, but not
each vessel and her cargo shall be liable for their own the rules of collision.
ARTICLE 831. If a vessel should be forced to collide DOCTRINE OF INSCRUTABLE FAULT
with another one by a third vessel, the owner of the
third vessel shall indemnify for the losses and Means that the court can see that a fault has been
damages caused, the captain thereof being civilly committed, but is unable, from the conflict of
liable to said owner. testimony or otherwise to locate it. Hence, when it is
ARTICLE 832. If, by reason of a storm or other cause impossible to determine to what direct and specific
of force majeure, a vessel which is properly anchored acts the collision is attributable, it is a case of damage
and moored should collide with those in her arising for a cause that is inscrutable. (Perez,
immediate vicinity, causing them damage, the injury Transpo Reviewer)
occasioned shall be looked upon as particular
average to the vessel run into. 2005letcd
Transcribed and Prepared by: Hanniyah Sevilla 4 Manresa ’08-‘09 38


A. if culpa contractual - NO Only refers to goods; does not refer to passenger
b. If culpa acquiliana - Yes, except in cases of liners.
collision when both parties/vessel are at fault (Art. This is a US law.
827) This applies only to foreign trade; does not apply in
c. If culpa criminal - No. domestic trade.

SHIPWRECK- the demolition or shattering of a vessel cases:

caused by her driving ashore or on rocks and shoals 1. American Insurance vs. Compania Maritima-
in teh midseas or by the violence of winds and waves voyage was from NY to Mla to Cebu; the bill of lading
in tempest. states the freight was prepaid all the way to Cebu.
From NY to Mla, the vessel was MV X. From Mla to
Who bears the damage? Gen rule: borne individually Cebu, MV Y, so there was transshipment.
by the respective owners, exceptions:
Something happened to the cargo between Manila
a. captain shall be liable for the damage of the and Cebu. Does the COGSA apply?
shipwreck in case of malice, negligence, or lack of
skill, or Held: YES, the fact that the transshipment was made
b. because the vessel was put to sea was by an inter-island vessel did not operate to remove the
insufficienlty repaired and equipped (Art. 841, Code of transaction from the operation of the COGSA. Such
Commerce) transshipment was not a separate transaction from
the one originally entered into. The contract of
OBSOLETE ARTICLES IN THE CODE OF carriage was from New York to Cebu; it was one
COMMERCE undivided contract for which the corresponding freight
608, 613, 635, 642, 645, 649, 650, 651 has been pre-paid.


WHAT IS SALVAGE - Salvage is a service which one
person renders to the owner of a ship or goods by his It shall not repeal any existing provision of the code of
own labor, preserving the goods or ship the owner or commerce which are now in force nor does it limit the
those entrusted with the care of them eithr abandoned application of the code of commerce.
in distress or at sea or are unable to protect and
secure. FILING OF CLAIM (Sec. 3.6)

Performed by the salvagor. (6) Unless notice or loss or damage and the
general nature of such loss or damage by given in
The Salvage law provides for a compulsory reward to writing to the carrier or his agent at the port of
those who brave the perils of the sea to save the discharge or at the time of the removal of the goods
cargo or the vessel. into the custody of the person entitled to delivery
thereof under the contract of carriage, such removal
If the salvage is successful, the owner of the shall be prima facie evidence of the delivery by the
vessel/cargo has to give a 50% (of the value of the carrier of the goods as described in the bill of lading.
property saved) reward to the salvagor. This is the
maximum. If the loss or damage is not apparent, the notice
must be given within three days of the delivery.
1. There must be a valid object to salvage; Said notice of loss or damage may be endorsed upon
2. The subject to be salvaged must have been the receipt for the goods given by the person taking
exposed to a marine peril delivery thereof.
3. The salvage service must be rendered voluntarily
and must not arise from a pre-existing duty or from The notice in writing need not be given if the state
special contract (so it must be rendered by a 3rd of the goods has at the time of their receipt been
party, not the ees) the subject of joint survey or inspection.
4. The efforts must be successful.
In any event the carrier and the ship shall be
Salvage vs. Towage discharged from all liability in respect of loss or
damage unless suit is brought within one year
Towage is when a tugboat pulls a barge. There is after delivery of the goods or the date when the
salvage when a vessel, by towing, is aided to escape goods should have been delivered: Provided, that,
present or prospective danger. So even if the vessel if a notice of loss or damage, either apparent or
being salvaged is not a wreck, and it is towed to concealed, is not given as provided for in this section,
escape danger, then that is still considered salvage. that fact shall not affect or prejudice the right of the
shipper to bring suit within one year after the delivery
Towage is made to take the vessel from one place to of the goods or the date when the goods should have
another. been delivered.

For salvage, the captain and crew are entitled to a In the case of any actual or apprehended loss or
share in the reward. In towage, the captain and crew damage, the carrier and the receiver shall give all
are not entitled to a share in the towage service reasonable facilities to each other for inspecting and
payment. tallying the goods.
Transcribed and Prepared by: Hanniyah Sevilla 4 Manresa ’08-‘09 39

UNIVERSAL SHIPPING VS. IAC - What if it is stated
1. The prescpriptive period for filing an action in court in the bill of lading that the prescriptive period is 2
is 1 year after the delivery of the goods if the goods years? Or that an extra judicial demand shall interrupt
are destroyed or damaged or 1 year after the date the prescriptive period? Valid agreements.
when the goods should have been delivered if they
are lost. AETNA VS. LUZON STEVEDORING - cargo was
delivered Feb. 25, 1964. An action was filed against X
2. What is the effect if you do not file a notice of loss? ShipLines on Feb. 22, 1965. The complaint was
In E.E. Elser vs. CA, the SC held that it shall NOT dismissed on the ground that X shiplines was not the
prejudice the right of the shipper to bring the suit real party in interest but it was XY Services.
within the one year period.
Has the action against XY Services prescribe? YES,
So even if 3.6 requires a notice of claim to be filed for the judicial demand to interrup the prescriptive
with the carrier, according to the SC, under the period, it must be filed against the correct parties.
COGSA, it is not jurisdictional.
From what point should the one year period be
Unlike the Code of Commerce which does not have a counted?
prescriptive period for filing a complaint in court, follow
the Civil Code provision (10 years or 6 years) INSURANCE VS. PHILIPPINE PORTS AUTHORITY
(BAR Q, 2x) - Consignee A sued arrastre operator X
3. What is the effect if you do not file a case in court for failure to deliver goods from abroad which X
within the one year period? The carrier and the ship received from the carrier for delivery to the Consignee
shall be discharged from liability. A. The action was brought within 4 years, but after the
lapse of 1 year. The case was dismissed on the
4. Chua Kay vs. Everett Steamship: The cargo was ground of prescription.
received on Feb 26, 1947; the case was filed on May
7, 1948 - obviously, the case has prescribed. Has the action prescribe? No, because the one year
period will only apply to foreign trade of goods by sea.
5. Maritime Agencies vs. CA - Oct. 20,1979 the last The arrastre operator is no longer foreign transport of
item was shipped and delivered to the consignee. An goods by sea. The prescriptive period in this case is 4
action was filed against the carriery by the consignee years because there is no written contract.
on December 19, 1980. In april 20, 1981, an action
was filed against the ship agent. ANG VS. AMERICAN STEAMSHIP - X, consignee
and Y, shipper. Carrier is AMS. Y agreed to sell to X
Against the carrier, it has not prescribed because it steel sheets. X was supposed to pay to Y a bank draft
was filed within the one year period (huh?check the upon arrival of the goods at port. If the Y receives the
facts na lang) but against the ship agent, the same bank draft, then the bill of lading would be delivered to
has prescribed because it was outside the one year AMS. And AMs has to issue a permit to deliver to be
period already. presented to the customs warehouse.

WHAT LAW PREVAILS WITH RESPECT TO THE But X did not issue the bank draft. So Y decided to
PRESCRIPTIVE PERIOD? change the consignee to Ang. But X obtained a bank
guarantee in favor of AMS. AMS in turn issued a
The SC said that the Civil Code did not impliedly permit to deliver to X and therefore X was able to
repeal the prescriptive period of the Cogsa. Because retrieve the goods. So when Ang got there, the goods
the COGSA is a special law, the one year period shall were no longer there.
prevail for foreign trade of goods by sea.
Ang filed a complaint against AMS for wrongful
DOLE VS. MARITIME (BAR Q) - Cargo was delivery. AMS filed a motion to dismiss on the ground
discharged to the custody of the consignee on Dec. of prescription because more than one year has
18, 1971. Dole filed a notice of claim with the carrier prescribed since the goods were delivered to X.
on May 5, 1972, 5 months after. The complaint in
court was on June 11, 1973, 1 1/2 year from Has the action prescribed? No, delivery should be
discharge. Has the action prescribed ? made to the correct consignee. Where the imported
goods are delivered to the wrong person, the 1
YES. 1) an extra judicial demand does not interrupt year limitation under the COGSA which refers to
the running of the prescriptive period (of one year). 2) loss or damage does not apply. The applicable rule
even if it does interrupt, the case was still filed 1 year on prescription is found in the Civil Code.
and 1 month from filing of claim.
Is the one year period in Cogsa applicable to
Doctrine: Only the filing in court will interrupt the misdelivery or conversion? NO.
running of the period.
What do you mean by LOSS? Mitsui vs. CA - A
STEVENS VS. NORDEUTCHER - an action against undertook to deliver goods loaded by B to France.
the carrier was filed within the 1 year prescriptive The goods were bathing suits, etc. The commitment of
period. But the case was dismissed on a technicality. A, the carrier, was to deliver the goods within 28 days
So the action was re-filed. The re-filing was done from loading. Long story short, A was unable to ship
more than one year from receipt of the goods. the goods within the stipulated date.

Has the action prescribed? No, because the judicial So the consignee in France paid half the value of the
demand (filing of case in court) already interrupted the goods on the ground that they arrived off season.
running of the prescriptive period. (bathing suits arrived on December! winter!)
Transcribed and Prepared by: Hanniyah Sevilla 4 Manresa ’08-‘09 40

in packages, per customary freight unit, or the

The remaining half of the value of the goods were equivalent of that sum in other currency, unless the
charged by the shipper to A. A denied liability. B filed nature and value of such goods have been declared
a case in the RTC on April 14, 1992. A filed a motion by the shipper before shipment and inserted in the bill
to dismiss alleging that the claim against it has of lading. This declaration, if embodied in the bill of
prescribed under the COGSA. lading, shall be prima facie evidence, but shall not be
conclusive on the carrier.
Has the action prescribed? No, even if the case was
filed more than one year after delivery. The loss was By agreement between the carrier, master or agent of
not a physical loss, but loss of income. Loss of income the carrier, and the shipper another maximum amount
is not the loss contemplated under COGSA. The than that mentioned in this paragraph may be fixed:
goods here were not deteriorated or damaged, either. Provided, that such maximum shall not be less than
the figure above named. In no event shall the carrier
―Loss‖ refers to the deterioration or disappearance of be liable for more than the amount of damage actually
goods. sustained.
As defined in the Civil Code and as applied to Section
3(6), paragraph 4 of the Carriage of Goods by Sea Neither the carrier nor the ship shall be responsible in
Act, ―loss‖ contemplates merely a situation where no any event for loss damage to or in connection with the
delivery at all was made by the shipper of the goods transportation of the goods if the nature or value
because the same had perished, gone out of thereof has been knowingly and fraudulently
commerce, or disappeared in such a way that their misstated by the shipper in the bill of lading.
existence is unknown or they cannot be recovered.
Eastern Shipping vs. IAC - There was no provision
Conformably with this concept of what constitutes on limitation of liability.. can Eastern Shipping limit its
―loss‖ or ―damage,‖ this Court held in another case liability to $500? YES, the provisions of COGSA on
that the deterioration of goods due to delay in their limited liability are as much a part of the bill of lading
transportation constitutes ―loss‖ or ―damage‖ within as though placed in it by agreement of the parties.
the meaning of §3(6), so that as suit was not brought
within one year the action was barred

Said one-year period of limitation is designed to meet

the exigencies of maritime hazards. In a case where
the goods shipped were neither lost nor damaged in
transit but were, on the contrary, delivered in port to
someone who claimed to be entitled thereto, the
situation is different, and the special need for the short
period of limitation in cases of loss or damage caused
by maritime perils does not obtain.

In the case at bar, there is neither deterioration nor

disappearance nor destruction of goods caused by the
carrier‘s breach of contract. Whatever reduction there
may have been in the value of the goods is not due to
their deterioration or disappearance because they had
been damaged in transit.

So apply Civil Code provisions on prescription.

Effect of prescriptive period on liability of insurer-

What if the goods were insured and the insurance
company paid the consignee if the goods were lost, or
damaged or destroyed? So there is subrogation.

Note that it says in 3.6 that only the carrier's liability is

extinguished if no suit is brought within 1 year from
delivery of the goods. But the liability of the insurer is
not extinguished because insurers are governed by
insurance code (not less than 1 year if there is
stipulation, or 10 years)

BUT the insurance company cannot bring an action

against the carrier beyond the one year prescriptive

Sec. 4.5 of COGSA -- note that under the COGSA,

there is no need to provide for a stipulation limiting

(5) Neither the carrier nor the ship shall in any event
be or become liable for any loss or damage to or in
connection with the transportation of goods in an
amount exceeding $500 per package of lawful money
of the United States, or in case of goods not shipped