DEFINITION

De Guzman v. CA

Facts:
Ernesto Cendana was a junk dealer. He buys scrap materials and brings those that he gathered to Manila
for resale using 2 six-wheeler trucks. On the return trip to Pangasinan, respondent would load his vehicle
with cargo which various merchants wanted delivered, charging fee lower than the commercial rates.
Sometime in November 1970, petitioner Pedro de Guzman contracted with respondent for the delivery of
750 cartons of Liberty Milk. On December 1, 1970, respondent loaded the cargo. Only 150 boxes were
delivered to petitioner because the truck carrying the boxes was hijacked along the way. Petitioner
commenced an action claiming the value of the lost merchandise. Petitioner argues that respondent,
being a common carrier, is bound to exercise extraordinary diligence, which it failed to do. Private
respondent denied that he was a common carrier, and so he could not be held liable for force majeure.
The trial court ruled against the respondent, but such was reversed by the Court of Appeals.

Issues:
(1) Whether or not private respondent is a common carrier
(2) Whether private respondent is liable for the loss of the goods

Held:
(1) Article 1732 makes no distinction between one whose principal business activity is the carrying of
persons or goods or both, and one who does such carrying only as an ancillary activity. Article 1732 also
carefully avoids making any distinction between a person or enterprise offering transportation service on
a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled
basis. Neither does Article 1732 distinguish between a carrier offering its services to the "general public,"
i.e., the general community or population, and one who offers services or solicits business only from a
narrow segment of the general population. It appears to the Court that private respondent is properly
characterized as a common carrier even though he merely "back-hauled" goods for other merchants from
Manila to Pangasinan, although such backhauling was done on a periodic or occasional rather than
regular or scheduled manner, and even though private respondent's principal occupation was not the
carriage of goods for others. There is no dispute that private respondent charged his customers a fee for
hauling their goods; that fee frequently fell below commercial freight rates is not relevant here. A
certificate of public convenience is not a requisite for the incurring of liability under the Civil Code
provisions governing common carriers.

(2) Article 1734 establishes the general rule that common carriers are responsible for the loss, destruction
or deterioration of the goods which they carry, "unless the same is due to any of the following causes only:

a. Flood, storm, earthquake, lightning, or other natural disaster or calamity;

b. Act of the public enemy in war, whether international or civil;
c. Act or omission of the shipper or owner of the goods;
d. The character of the goods or defects in the packing or in the containers; and
e. Order or act of competent public authority."

The hijacking of the carrier's truck - does not fall within any of the five (5) categories of exempting causes
listed in Article 1734. Private respondent as common carrier is presumed to have been at fault or to have
acted negligently. This presumption, however, may be overthrown by proof of extraordinary diligence on
the part of private respondent. We believe and so hold that the limits of the duty of extraordinary
diligence in the vigilance over the goods carried are reached where the goods are lost as a result of a
robbery which is attended by "grave or irresistible threat, violence or force." we hold that the occurrence
of the loss must reasonably be regarded as quite beyond the control of the common carrier and properly
regarded as a fortuitous event. It is necessary to recall that even common carriers are not made absolute
insurers against all risks of travel and of transport of goods, and are not held liable for acts or events which
cannot be foreseen or are inevitable, provided that they shall have complied with the rigorous standard of
extraordinary diligence.
CHARACTERISTICS

FISHER V YANGCO STEAMSHIP COMPANY (March 31, 1915)

FACTS:
Yangco Steamship Company is an owner of a large number of steam vessels and is duly licensed to engage in
the coastwise trade in the Philippines. The company adopted a resolution "expressly declaring and providing
that the classes of merchandise to be carried by the company in its business as common carrier do not include
dynamite, powder or other explosives, and expressly prohibiting the officers, agents an d servants of the
company from offering to carry, accepting for carriage or carrying said dynamite, powder or other explosives.”
Thereafter, the respondent Acting Collector of Customs demanded and required of the company the acceptance
and carriage of such explosives otherwise he will refuse and suspend the issuance of the necessary clearance
documents of the vessels of the company unless and until the company consents to accept such explosives for
carriage. That notwithstanding, the company decline and refuse to cease the carriage of such explosives.
ISSUE:
WON the refusal Yangco to accept for carriage dynamite, powder or other explosives for carriage can be held to
be a lawful act
HELD:
NO. The legislators having enacted Act No. 98, a regulation "prohibiting common carriers from giving
unnecessary or unreasonable preferences or advantages to any particular kind of traffic or subjecting any
particular kind of traffic to any undue or unreasonable prejudice or discrimination whatsoever", it is clear that
common carriers in this jurisdiction cannot lawfully decline to accept a particular class of goods for carriage, to
the prejudice of the traffic in those goods, unless it appears that for some sufficient reason the discrimination
against the traffic in such goods is reasonable and necessary. Mere whim or prejudice will not suffice. The
grounds for the discrimination must be substantial ones, such as will justify the courts in holding the
discrimination to have been reasonable and necessary under all circumstances of the case. In the present case,
the refusal of Yangco was solely on the ground of the dangers incident to the explosive quality of this class of
merchandise, would not subject thereof to an an unnecessary, undue or unreasonable prejudice and
discrimination without proof that for some special reason the particular vessel is not fitted to carry articles of
that nature.
CHARACTERISTICS

THE UNITED STATES vs. PASCUAL QUINAJON and EUGENIO QUITORIANO

G.R. No. L-8686
July 30, 1915

FACTS:
The defandant have been engaged for more than four years prior to this date in the transportation of passengers and
merchandise in the port of Currimao by means of virayes. That on June, July, and September in year 1912, by means of
their virayes and employees, did unload 5,986 sacks of rice belonging to the provincial government of Ilocos Norte from
Manila. The sacks were unloaded from the steamers in which they had been shipped and were carried to the storage
warehouses in which they were deposited. They demand and collect from the provincial treasurer for the unloading of
each one of the said sacks of rice 10 centavos. Sometime in 1912, the prosecuting attorney of the Province of Ilocos Norte
presented a complaint stating that the Provincial Governor of Ilocos Norte suffered damages in the sum of 359.16. That
acts committed in violation of the said Act No. 98 of the Civil Commission. A preliminary examination was had and
Quinajon and Quitoriano were held for trial in the Court of First Instance of the Province of Ilocos Norte. The defendants
were found guilty of the crime charged. Defendants admit that they are common carriers thus were ordered to pay a fine
of $100 (P200) and costs, and to return to the provincial government of the Province of Ilocos Norte the sum of P359.16.
Defendants filed an appeal.

ISSUE:
Whether or not defendants violated Act No. 98

RULING:
Yes. Defendants are guilty of violation of Act No. 98. Act 98 is “An Act to regulate commerce in the Philippine Islands.”
Its purpose, so far as it is possible, is to compel common carriers to render to all persons exactly the same or analogous
service for exactly the same price, to the end that there may be no unjust advantage or unreasonable discrimination. It
applies to persons or corporations engaged as common carriers of passengers or property. The law does not require that
the same charge shall be made for carrying of passengers or property unless all the conditions are alike. It is not believed
that the charging of a different rate for carrying of passengers or property when the actual cost of handling and
transporting the same is different. The law did not intend to require common carrier to carry the same kind of merchandise
even at the same price under different and unlike conditions and where the actual cost is different. In this case, there are
no proofs that the conditions were different. There is no proof that services rendered by the defendants for different parties
were unlike. Absolute equality is not required in all cases. It is only unjust discrimination which the law forbids.
CHARACTERISTICS

Loadstar Shipping Co., Inc., v Court of Appeals and The Manila Insurance Co., Inc.,
G.R. No. 131621 September 28,1999

Facts:
On November 19 1984 Loadstar received on board its MV Cherokee the goods amounting to P 6 067, 178.
Such goods were insured for with MIC against various risks including total loss by total loss of the vessel.
The vessel, in turn was insured by Prudential Guarantee & Assurance Inc., for P4 million. On November
20, 1984, on its way to Manila from Agusan del Norte, the vessel, along its cargo sank off Limasawa
Island. As a result for the loss of the shipment, the consignee made a claim with loadstar but the latter
ignored it so as the insurer, MIC paid full settlement of the claim and was latter subrogated to the rights
of the consignee.
MIC filed a complaint against Loadstar and PGAI alleging that the sinking of the vessel was due to the
fault and negligence of Loadstar and its employees. It also prayed that PGAI be ordered to pay the
insurance proceeds directly to MIC. Loadstar denied any liability and averred that the sinking of the
vessel was due to a force majeure. The trial court rendered judgement ordering Loadstar, when the latter
elevated the case to the Court of Appeals, the decision was affirmed in toto.

Issue:
Whether or not Loadstar is a common carrier.

Held:
Loadstar is a common carrier. Loadstar fits the definition of a common carrier under Article 1732 of the
Civil Code and was further explained in the case of De Guzman V. Court of Appeals. Common carriers are
persons, corporation, firms or associations engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air for compensation, offering their services to the public
(Article 1732). In De Guzman v. CA it was stated that one can be a common carrier despite lack of
certificate of public convenience. The court held that Loadstar cannot be considered a private carrier on
the sole ground that there was single shipper. It cannot also submit that it is a private carrier because it
was not issued certificate of public convenience, that it did not have a regular trip or schedule or a fixed
route. Since it was properly categorized as a common carrier, it is required to exercise extraordinary
diligence in the handling of goods. It was found that the vessel was not seaworthy when it embarked on
its voyage. The failure of a common carrier to maintain in seaworthy condition its vessel involved in a
contract of carriage is a clear breach of its duty as prescribed by the law. Loadstar cannot invoke the
existence of force majeure when there is negligence on the part of the vessel owner, it cannot hide behind
the limited liability rule. The petition is denied; the challenged decision of the Court of Appeals is
affirmed.
CHARACTERISTICS

First Philippine Industrial Corp. V CA

G.R. No. 125948

Facts:
First Philippine Industrial Corporation (FPIC) is a grantee of a pipeline concession under RA 387, as amended,
to contract, install and operate oil pipelines. The original pipeline concession was granted in 1967 and renewed
by the Energy Regulatory Board in 1992. Sometime in January 1995, FPIC applied for a mayor’s permit with
the Office of the Mayor of Batangas City. However, before the mayor's permit could be issued, the City
Treasurer required FPIC to pay a local tax based on its gross receipt for the fiscal year 1993 pursuant to the
Local Government Code. The City Treasurer assessed a business tax on the petitioner amounting to
P956,076.04 payable in four installments based on the gross receipts for products pumped at GPS-1 for the
fiscal year 1993 which amounted to P181,681,151.00. In order not to hamper its operations, FPIC paid the tax
under protest in the amount of P239,019.01 for the first quarter. On March 8, 1994, the City Treasurer denied
the protest contending that petitioner cannot be considered engaged in the transportation business, thus it cannot
claim exemption under Section 133 (j) of the Local Government Code.

On June 15,1994, FPIC filed with the RTC Batangas City a complaint for tax refund with prayer for writ of
preliminary injunction against the City of Batangas and Adoracion Arellano in her capacity as city treasurer
(Civil Case 4293). On October 3,1994, the trial court rendered a decision dismissing the complaint.

PFIC assailed the aforesaid decision before the Supreme Court via a petition for review. On February 27, 1995,
the Supreme Court referred the case to the Court of Appeals for consideration and adjudication. On November
29, 1995, the CA rendered a decision affirming the trial court's dismissal of petitioner’s complaint. FPIC’s
motion for reconsideration was denied on July 18, 1996. Hence, the petition for review on certiorari.

At first, the petition was denied due course in a Resolution dated November 11, 1996. FPIC moved for a
reconsideration which was granted by the Supreme Court in a Resolution of January 22, 1997. Thus the petition
was reinstated. Finally, the Supreme Court granted the petition, and thus reversed and set aside the decision of
the Court of Appeals.

Issue:
Whether or not FPIC is a common carrier

Held:
Article 1732 of the Civil Code defines a "common carrier" as "any person, corporation, firm or association
engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for
compensation, offering their services to the public."

The test for determining whether a party is a common carrier of goods is:

(1) He must be engaged in the business of carrying goods for others as a public employment, and must hold
himself out as ready to engage in the transportation of goods for person generally as a business and not as a
casual occupation;

(2) He must undertake to carry goods of the kind to which his business is confined;

(3) He must undertake to carry by the method by which his business is conducted and over his established
roads; and

(4) The transportation must be for hire.

Based on the above definitions and requirements, there is no doubt that petitioner is a common carrier. It is
engaged in the business of transporting or carrying goods, i.e. petroleum products, for hire as a public
employment. It undertakes to carry for all persons indifferently, that is, to all persons who choose to employ its
services, and transports the goods by land and for compensation. The fact that petitioner has a limited clientele
does not exclude it from the definition of a common carrier.
CHARACTERISTICS

PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY vs.PKS SHIPPING COMPANY

G.R. No. 149038
April 9, 2003

Facts
Davao Union Marketing Corporation (DUMC) contracted the services of respondent PKS Shipping Company
for the shipment to Tacloban City of 75,000 bags of cement worth P3,375,000.00. DUMC insured the goods for
its full value with petitioner Philippine American General Insurance Company (Philamgen). The goods were
loaded aboard the dumb barge belonging to PKS. On the evening of 22 December 1988 while dumb barge was
being towed by respondent’s tugboat the barge sank a couple of miles off the coast of Dumagasa Point, in
Zamboanga del Sur, bringing down with it the entire cargo of 75,000 bags of cement. The CA ruled that
evidence to establish that PKS Shipping was a common carrier at the time it undertook to transport the bags of
cement was wanting because the peculiar method of the shipping company’s carrying goods for others was not
generally held out as a business but as a casual occupation.

Issue
Is the CA correct in rulling that PKS is not a common carrier?

Held
No. Contrary to the conclusion made by the appellate court, its factual findings indicate that PKS Shipping has
engaged itself in the business of carrying goods for others, although for a limited clientele, undertaking to carry
such goods for a fee. The regularity of its activities in this area indicates more than just a casual activity on its
part. Neither can the concept of a common carrier change merely because individual contracts are executed or
entered into with patrons of the carrier. Such restrictive interpretation would make it easy for a common carrier
to escape liability by the simple expedient of entering into those distinct agreements with clients.

Much of the distinction between a "common or public carrier" and a "private or special carrier" lies in the
character of the business, such that if the undertaking is an isolated transaction, not a part of the business or
occupation, and the carrier does not hold itself out to carry the goods for the general public or to a limited
clientele, although involving the carriage of goods for a fee, the person or corporation providing such service
could very well be just a private carrier. A typical case is that of a charter party which includes both the vessel
and its crew, such as in a bareboat or demise, where the charterer obtains the use and service of all or some part
of a ship for a period of time or a voyage or voyages and gets the control of the vessel and its crew.

(However, PKS was absolved from liability because the loss was due to a fortuitous event.)
CHARACTERISTICS

Asia Lighterage and Shipping, Inc vs CA

FACTS:

Asia Lighterage and Shipping, Inc was contracted as carrier to deliver 3,150 metric tons of Better Western
White Wheat in bulk, (US$423,192.35) to the consignee‘s (General Milling Corporation) warehouse at Bo.
Ugong, Pasig City insured by Prudential Guarantee and Assurance, Inc. against loss/damage for
P14,621,771.75.

It appears that on August 17, 1990, the transport of said cargo was suspended due to a warning of an incoming
typhoon. PSTSI III was tied down to other barges which arrived ahead of it while weathering out the storm that
night. A few days after, the barge developed a list because of a hole it sustained after hitting an unseen
protuberance underneath the water. It filed a Marine Protest on August 28, 1990 and also secured the services of
Gaspar Salvaging Corporation to refloat the barge.

The barge was then towed to ISLOFF terminal before it finally headed towards the consignee’s wharf on
September 5, 1990. Upon reaching the Sta. Mesa spillways, the barge again ran aground due to strong current.

7 days later, a bidding was conducted to dispose of the damaged wheat retrieved & loaded on the 3 other barges.
The total proceeds from the sale of the salvaged cargo was P201,379.75.

ISSUES:

1. Whether petitioner is a common carrier.

2. Assuming petitioner is a common carrier, whether it exercised extraordinary care and diligence in its care and
custody of the consignee’s cargo.

HELD:

1. Petitioner is a common carrier.

Article 1732 of the Civil Code defines common carriers as persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for
compensation, offering their services to the public.

In De Guzman vs. CA it was held that the definition of common carriers in Article 1732 of the Civil Code
makes no distinction between one whose principal business activity is the carrying of persons or goods or both,
and one who does such carrying only as an ancillary activity. There is also no distinction between a person or
enterprise offering transportation service on a regular/scheduled basis and one offering such service on an
occasional, episodic or unscheduled basis.]

The test to determine a common carrier is “whether the given undertaking is a part of the business engaged in
by the carrier which he has held out to the general public as his occupation rather than the quantity or extent of
the business transacted.” In the case at bar, the petitioner admitted that it is engaged in the business of shipping,
lighterage and drayage, offering its barges to the public, despite its limited clientele for carrying/transporting
goods by water for compensation.
2. The findings of the lower courts should be upheld. Petitioner failed to exercise extraordinary diligence in its
care and custody of the consignee’s goods.

Common carriers are bound to observe extraordinary diligence in the vigilance over the goods transported by
them. They are presumed to have been at fault or to have acted negligently if the goods are lost, destroyed or
deteriorated. To overcome the presumption of negligence in the case of loss, destruction or deterioration of the
goods, the common carrier must prove that it exercised extraordinary diligence.There are, however, exceptions

Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the
same is due to any of the following causes only:

(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;

In the case at bar, the barge completely sank after its towing bits broke, resulting in the total loss of its cargo.
Petitioner claims that this was caused by a typhoon, hence, it should not be held liable for the loss of the cargo.
However, petitioner failed to prove that the typhoon is the proximate and only cause of the loss of the goods,
and that it has exercised due diligence before, during and after the occurrence of the typhoon to
prevent/minimize the loss. The evidence show that, even before the towing bits of the barge broke, it had
already previously sustained damage when it hit a sunken object while docked at the Engineering Island. It even
suffered a hole. Clearly, this could not be solely attributed to the typhoon. Thus, when petitioner persisted to
proceed with the voyage, it recklessly exposed the cargo to further damage.

Moreover, petitioner still headed to the consignee’s wharf despite knowledge of an incoming typhoon. During
the time that the barge was heading towards the consignee’s wharf on September 5, 1990, typhoon “Loleng” has
already entered the Philippine area of responsibility.
DISTINGUISHED FROM PRIVATE CARRIER

Home Insurance Company vs American Steamship Agencies, Inc. and Luzon Stevedoring
Corporation
GR No. L-25599 April 4, 1968
Ponente: Bengzon, J.P., J.

Facts:
"Consorcio Pesquero del Peru of South America" shipped freight pre-paid at Chimbate, Peru, 21,740 jute
bags of Peruvian fish meal through SS Crowborough, covered by clean bills of lading. The cargo,
consigned to San Miguel Brewery, Inc., now San Miguel Corporation, and insured by Home Insurance
Company arrived in Manila and was discharged into the lighters of Luzon Stevedoring Company. When
the cargo was delivered to consignee San Miguel Brewery Inc., there were shortages causing the latter to
lay claims against Luzon Stevedoring Corporation, Home Insurance Company and the American
Steamship Agencies, owner and operator of SS Crowborough.

Because the others denied liability, Home Insurance Company paid the consignee the insurance value of
the loss, as full settlement of the claim. Having been refused reimbursement by both the Luzon
Stevedoring Corporation and American Steamship Agencies, Home Insurance Company, as subrogee to
the consignee, filed against them before the Court of First Instance of Manila a complaint for recovery of
the amount paid with legal interest, plus attorney's fees.

In answer, Luzon Stevedoring Corporation alleged that it delivered with due diligence the goods in the
same quantity and quality that it had received the same from the carrier. The Court of First Instance, after
trial, absolved Luzon Stevedoring Corporation, having found the latter to have merely delivered what it
received from the carrier in the same condition and quality, and ordered American Steamship Agencies to
pay Home Insurance Company the amount demanded with legal interest plus attorney’s fees.

Issue:
Is the stipulation in the charter party of the owner's non-liability valid so as to absolve the American
Steamship Agencies from liability for loss?

Held:
Yes. The bills of lading, covering the shipment of Peruvian fish meal provide at the back thereof that the
bills of lading shall be governed by and subject to the terms and conditions of the charter party, if any,
otherwise, the bills of lading prevail over all the agreements. On the bills are stamped “Freight prepaid as
per charter party. Subject to all terms, conditions and exceptions of charter party dated London, Dec. 13,
1962.”

Section 2, paragraph 2 of the charter party, provides that the owner is liable for loss or damage to the
goods caused by personal want of due diligence on its part or its manager to make the vessel in all
respects seaworthy and to secure that she be properly manned, equipped and supplied or by the personal
act or default of the owner or its manager. Said paragraph, however, exempts the owner of the vessel
from any loss or damage or delay arising from any other source, even from the neglect or fault of the
captain or crew or some other person employed by the owner on board, for whose acts the owner would
ordinarily be liable except for said paragraph.

The provisions of our Civil Code on common carriers were taken from Anglo-American law. Under
American jurisprudence, a common carrier undertaking to carry a special cargo or chartered to a special
person only, becomes a private carrier. As a private carrier, a stipulation exempting the owner from
liability for the negligence of its agent is not against public policy, and is deemed valid.
The Civil Code provisions on common carriers should not be applied where the carrier is not acting as
such but as a private carrier. The stipulation in the charter party absolving the owner from liability for
loss due to the negligence of its agent would be void only if the strict public policy governing common
carriers is applied. Such policy has no force where the public at large is not involved, as in the case of a
ship totally chartered for the use of a single party.
DISTINGUISHED FROM PRIVATE CARRIER

EPITACIO SAN PABLO vs. PANTRANCO SOUTH EXPRESS, INC.

G.R. No. L-61461 / August 21, 1987

FACTS:

PANTRANCO acquired M/V "Black Double" to operate as a private ferryboat service in the San Bernardino
Strait to cater exclusively its passenger buses and freight trucks in connection with its trips to Tacloban City.
Pantranco claims that it can operate a ferry service in connection with its franchise for bus operation in the
highway from Pasay City to Tacloban City "for the purpose of continuing the highway, which is interrupted by
a small body of water, the said proposed ferry operation is merely a necessary and incidental service to its main
service and obligation of transporting its passengers from Pasay City to Tacloban City. Such being the case,
there is no need to obtain a separate certificate for public convenience (CPC) to operate a ferry service. Board of
Transportation (BOT) – granted Pantranco the authority to operate as private ferry boat service provided that it
shall be for the exclusive use of its buses, its passengers and freight trucks. Should it offer itself to the public for
hire other than its own passengers, it must apply for a separate certificate of public convenience as a public ferry
boat service, separate and distinct from its land transport systems.

Epitacio San Pablo (represented by his heirs) and Cardinal Shipping Corporation – were franchise holders of the
ferry service in San Bernardino Strait servicing the PANTRANCO by ferrying its buses, trucks and passengers.
Petitioners filed a petition to stop the operation of Pantranco’s ferry service claiming that PANTRANCO is not
a private carrier when it operates its ferry service.

ISSUE:

WON Pantranco is a private carrier when it provides for its water transport service - YES

HELD:

PANTRANCO does not deny that it charges its passengers separately from the charges for the bus trips and
issues separate tickets whenever they board the MV "Black Double", PANTRANCO cannot pretend that in
issuing tickets to its passengers it did so as a private carrier and not as a common carrier. The Court does not see
any reason why inspite of its franchise to operate a private ferry boat service it cannot accept walk-in passengers
just for the purpose of crossing the strait. Moreover, PANTRANCO claims that it is a private carrier insofar as
the ferryboat service is concerned but it also states that it does not abdicate from its obligation as a common
carrier to observe extraordinary diligence and vigilance in the transportation of its passengers and goods.
Considering that the authority granted to PANTRANCO is to operate a private ferry, it can still assert that it
cannot be held to account as a common carrier towards its passengers and cargo. Such situation that will
jeopardize the safety and interests of its passengers and the cargo owners cannot be allowed.

Pantranco’s water transport service through San Bernardino Strait is not a ferry boat service but a coastwise or
interisland shipping service. While a ferry boat service has been considered as a continuation of the highway
when crossing rivers or even lakes, which are small body of waters - separating the land, in this case two ports
are separated by an open sea, hence, it cannot be considered as a continuation of the highway. Before Pantranco
can operate such service as a common carrier, it must first secure appropriate Certificate of Public Convenience.
DISTINGUISHED FROM PRIVATE CARRIER

PLANTERS PRODUCTS, INC. vs. CA

G.R. No. 101503 September 15, 1993
BELLOSILLO, J.

FACTS: Planters Products, Inc. (PPI), purchased from Mitsubishi International Corporation (MITSUBISHI) of
Urea 46% fertilizer which the latter shipped in bulk aboard the cargo vessel M/V "Sun Plum" owned by Kyosei
Kisen Kabushiki Kaisha (KKKK).A time charter-party on the vessel M/V "Sun Plum" was entered into between
Mitsubishi as shipper/charterer and KKKK as shipowner. Before loading the fertilizer aboard the vessel, four
(4) of her holds were all presumably inspected by the charterer's representative and found fit to take a load of
urea in bulk.

After the Urea fertilizer was loaded in bulk by stevedores hired by and under the supervision of the shipper, the
steel hatches were closed with heavy iron lids, covered with three (3) layers of tarpaulin, then tied with steel
bonds. The hatches remained closed and tightly sealed throughout the entire voyage.

A private marine and cargo surveyor, was hired by PPI to determine the "outturn" of the cargo shipped.The
survey report submitted to the consignee (PPI) revealed a shortage in the cargo and that a portion of the Urea
fertilizer was contaminated with dirt. Consequently, PPI sent a claim letter to Soriamont Steamship Agencies
(SSA), the resident agent of the carrier, KKKK, for the cost of the alleged shortage in the goods shipped and the
diminution in value of that portion said to have been contaminated with dirt.

SSA were not able to respond to the consignee's claim. PPI filed an action for damages. The defendant carrier
argued that the strict public policy governing common carriers does not apply to them because they have
become private carriers by reason of the provisions of the charter-party.

ISSUE: Is a common carrier becomes a private carrier by reason of a charter-party?

HELD: No. The distinction between a "common or public carrier" and a "private or special carrier" lies in the
character of the business, such that if the undertaking is a single transaction, not a part of the general business or
occupation, although involving the carriage of goods for a fee, the person or corporation offering such service is
a private carrier.

The respondent carrier, in the ordinary course of business, operates as a common carrier, transporting goods
indiscriminately for all persons. When petitioner chartered the vessel M/V "Sun Plum", the ship captain, its
officers and compliment were under the employ of the shipowner and therefore continued to be under its direct
supervision and control.

It is therefore imperative that a public carrier shall remain as such, notwithstanding the charter of the whole or
portion of a vessel by one or more persons, provided the charter is limited to the ship only, as in the case of a
time-charter or voyage-charter. It is only when the charter includes both the vessel and its crew, as in a bareboat
or demise that a common carrier becomes private, at least insofar as the particular voyage covering the charter-
party is concerned. Indubitably, a shipowner in a time or voyage charter retains possession and control of the
ship, although her holds may, for the moment, be the property of the charterer.
GOVERNMENT REGULATION

KMU Labor Center v. Garcia, Jr.

G.R. No. 115381, 23 December 1994

FACTS:
On June 26, 1990 DOTC Secretary Orbos, issued MC No. 90-395 to then LTFRB Chairman Fernando allowing
provincial bus operators to charge passengers rates within a range of 15% above and 15% below the LTFRB
official rate for a period of one (1) year. Sometime in March, 1994, private respondent PBOAP, availing itself
of the deregulation policy of the DOTC allowing provincial bus operators to collect plus 20% and minus 25% of
the prescribed fare without first having filed a petition for the purpose and without the benefit of a public
hearing, announced a fare increase of twenty (20%) percent of the existing fares. Said increased fares were to be
made effective on March 16, 1994.
On March 16, 1994, petitioner KMU filed a petition before the LTFRB opposing the upward adjustment of bus
fares.

ISSUES:
1. Whether or not petitioner has locus standi?
2. Whether or not the authority given by LTFRB to provincial bus operators to set a fare range without
having to file a petition for the purpose, is unconstitutional, invalid and illegal?
3. Whether or not the establishment of a presumption of public need in favor of an applicant for a proposed
transport service without having to prove public necessity, is illegal?

HELD:
1. Yes, petitioners have locus standi. Petitioner, whose members had suffered and continue to suffer grave and
irreparable injury and damage from the implementation of the questioned memoranda, circulars and/or orders, has
shown that it has a clear legal right that was violated and continues to be violated with the enforcement of the
challenged memoranda, circulars and/or orders. KMU members, who avail of the use of buses, trains and
jeepneys everyday, are directly affected by the burdensome cost of arbitrary increase in passenger fares. They are
part of the millions of commuters who comprise the riding public. Certainly, their rights must be protected, not
neglected nor ignored.
2. Yes, the authority given by the LTFRB to the provincial bus operators to set a fare range over and above
the authorized existing fare, is illegal and invalid as it is tantamount to an undue delegation of legislative
authority. Potestas delegata non delegari potest. What has been delegated cannot be delegated. This
doctrine is based on the ethical principle that such a delegated power constitutes not only a right but a
duty to be performed by the delegate through the instrumentality of his own judgment and not through
the intervening mind of another. A further delegation of such power would indeed constitute a negation
of the duty in violation of the trust reposed in the delegate mandated to discharge it directly. The policy
of allowing the provincial bus operators to change and increase their fares at will would result not only
to a chaotic situation but to an anarchic state of affairs. This would leave the riding public at the mercy
of transport operators who may increase fares every hour, every day, every month or every year,
whenever it pleases them or whenever they deem it "necessary" to do so.
3. Yes, the presumption of public need is illegal. A certificate of public convenience (CPC) is an
authorization granted by the LTFRB for the operation of land transportation services for public use as
required by law. Pursuant to Section 16(a) of the Public Service Act, as amended, the following
requirements must be met before a CPC may be granted, to wit: (i) the applicant must be a citizen of the
Philippines, or a corporation or co-partnership, association or joint-stock company constituted and
organized under the laws of the Philippines, at least 60 per centum of its stock or paid-up capital must
belong entirely to citizens of the Philippines; (i) the applicant must be financially capable of undertaking
the proposed service and meeting the responsibilities incident to its operation; and (ii) the applicant must
prove that the operation of the public service proposed and the authorization to do business will promote
the public interest in a proper and suitable manner. It is understood that there must be proper notice and
hearing before the PSC can exercise its power to issue a CPC. While adopting in toto the foregoing
requisites for the issuance of a CPC, LTFRB Memorandum Circular No. 92-009, Part IV, provides for
yet incongruous and contradictory policy guideline on the issuance of a CPC. The guidelines states: The
issuance of a Certificate of Public Convenience is determined by public need. The presumption of public
need for a service shall be deemed in favor of the applicant, while the burden of proving that there is no
need for the proposed service shall be the oppositor's. The above-quoted provision is entirely
incompatible and inconsistent with Section 16(c) (iii) of the Public Service Act which requires that
before a CPC will be issued, the applicant must prove by proper notice and hearing that the operation of
the public service proposed will promote public interest in a proper and suitable manner. On the
contrary, the policy guideline states that the presumption of public need for a public service shall be
deemed in favor of the applicant. In case of conflict between a statute and an administrative order, the
former must prevail. Verily, the power of a regulatory body to issue a CPC is founded on the condition
that after full-dress hearing and investigation, it shall find, as a fact, that the proposed operation is for
the convenience of the public. Basic convenience is the primary consideration for which a CPC is
issued, and that fact alone must be consistently borne in mind. Also, existing operators in subject routes
must be given an opportunity to offer proof and oppose the application. Therefore, an applicant must, at
all times, be required to prove his capacity and capability to furnish the service which he has undertaken
to render. And all this will be possible only if a public hearing were conducted for that purpose.
GOVERNMENT REGULATION

Francisco Tatad, John Osmena and Rodolfo Biazon, vs. Jesus Garcia, and EDSA LRT CORPORATION,
LTD
GR NO. 114222 April 6, 1995
Quiason, J.,

FACTS:

Petitioners Francisco Tatad, John Osmena and Rodolfo Biazon are members of the Philippine Senate and are
suing in their capacities as Senators and as taxpayers. Respondent Jesus Garcia was then Secretary of the
DOTC, while private respondent EDSA LRT CORPORATION, Ltd. is a private corporation organized under
the laws of Hongkong. DOTC planned to construct a light railway transit line along EDSA, which shall traverse
the cities of Pasay, Quezon, Mandaluyong and Makati. Then DOTC Secretary Oscar Orbos, acting upon a
proposal to construct the EDSA LRT III on a Build-Operate-Transfer (BOT) basis, had invited Elijahu Levin
from the Eli Levin Enterprises, Inc to send a technical team to discuss the project with the DOTC.

Subsequently, RA No. 6957 referred to as the Build-Operate-Transfer (BOT) was signed by then President
Corazon Aquino which Act provides for two schemes for the financing, construction and operation of
government projects through private initiative and investment: BOT or Build-Transfer (BT). In accordance with
the provisions of RA 6957 and to set the EDSA LRT III project underway, the Prequalification Bids and
Awards Committee and the Technical Committee were formed.

Of the 5 applicants, only the EDSA LRT Consortium “met the requirements of garnering at least 21 points per
criteria, except for Legal aspects, and obtaining an over-all passing mark of at least 82 points.” The Legal
aspects referred to provided that the BOT/BT contractor-applicant meet the requirements specified in the
Constitution and other pertinent laws. Sec. Orbos was appointed Executive Secretary to the President of the
Philippines and was replaced by Nicomedes Prado. The latter recommended the award of the EDSA LRT III
project to the sole complying bidder, the EDSA LRT Consortium, and requested for authority to negotiate with
the said firm for the contract pursuant to the BOT Law. Authority was granted to proceed with the negotiations.

DOTC and EDSA LRT Corporation, Ltd., in substitution of the EDSA LRT Consortium, entered into an “An
Agreement to Build, Lease and Transfer a Light Rail Transit System for EDSA” under the terms of the BOT
Law. Secretary Prado, thereafter, requested presidential approval of the contract. The request cannot, however,
be granted for failure to comply with the requirements of the BOT Law. In view whereof, Sec. Drilon, the
DOTC and private respondent re-negotiated the agreement. Thereafter, the parties entered into a “Revised and
Restated Agreement to Build, Lease and Transfer and Light Rail Transit System for EDSA. DOTC, represented
by Sec. Jesus Garcia, Sec. Prado and private respondent also entered into a Supplemental Agreement to the
April Revised Agreement so as to clarify their respective rights and responsibilities. The two agreements were
approved by President Fidel Ramos. According to the agreements, the EDSA LRT III will use light rail vehicles
from the Czech and Slovak Federal Republics.

Petitioners argued that the agreement, as amended by the Supplemental Agreement, in so far as it grants EDSA
LRT COPORTATION, LTD., a foreign corporation, the ownership of EDSA LRT III, a public utility, violates
the constitution, and hence, is unconstitutional. They contend that the EDSA LRT III is a public utility, and the
ownership and operation thereof is limited by the Constitution to Filipino citizens and domestic corporations,
not foreign corporations like private respondent.

ISSUE:
Can respondent EDSA LRT Corporation, Ltd., a foreign corporation own EDSA LRT III; a public utility?
HELD:
YES. What private respondent owns are the rail tracks, rolling stocks like the coaches, rail stations, terminals
and the power plant, not a public utility. While a franchise is needed to operate these facilities to serve the
public, they do not by themselves constitute a public utility. What constitutes a public utility is not their
ownership but their use to serve the public.

The right to operate a public utility may exist independently and separately from the ownership of the facilities
thereof. One can own said facilities without operating them as a public utility, or conversely, one may operate a
public utility without owning the facilities used to serve the public. The devotion of property to serve the public
may be done by the owner or by the person in control thereof who may not necessarily be the owner thereof.
While private respondent is the owner of the facilities necessary to operate the EDSA LRT III, it admits that it
is not enfranchised to operate a public utility as per requirement of Section 11 of Article XII of the Constitution.
In view of this incapacity, private respondent and DOTC agreed that on completion date, private respondent
will immediately deliver possession of the LRT system by of lease for 25 years, during which period DOTC
shall operate the same as a common carrier and private respondent shall provide technical maintenance and
repair services to DOTC.

Since DOTC shall operate the EDSA LRT III, it shall assume all the obligations and liabilities of a common
carrier. For this purpose, DOTC shall indemnify and hold harmless private respondent from any losses,
damages, injuries or death which may be claimed in the operation or implementation of the system, except
losses, damages, injury or death due to defects in the EDSA LRT III on account of the defective condition of
equipment or facilities or the defective maintenance of such equipment facilities.
GOVERNING LAW

Samar Mining Co. v. Nordeutscher Lloyd

Facts:

The plaintiff secured the services of Nordeutscher Lloyd to import of one (1) crate Optima welded wedge wire
sieves through the latter’s ship, M/S Schawbenstein. The said shipment is covered by Bill of Lading No. 18
issued by Nordeutscher to the plaintiff.

The said Bill of Lading provided that the defendant carrier would receive the crate in behalf of the plaintiff at
the “port of loading” in Germany, prepaid up to the port of destination or “port of discharge of goods” in Davao
– with the carrier, however, only undertaking to transport the goods in its vessel M/S Schwabenstein only up to
the “port of discharge from ship” situated in Manila, which, therafter, such goods would be transshipped by the
carrier to the port of destination or “port of discharge of goods”

Ultimately, the goods was picked up from Germany and the vessel arrived at the Port of Manila where it was
unloaded to the warehouse of AMCYL. Unfortunately, the goods never reached the Samar Mining Co. Thus,
Samar demanded payment from the defendant of the amount of the goods. However, Nordeutscher contested
that it is not liable since it fulfilled the terms and conditions stipulated in the Bill of Lading No. 18.

Issue:

Is Nordeutscher exonerated from civil liability by virtue of the Bill of Lading No. 18?

Held:

Yes. According to the Court, a Bill of Lading not only serves as a receipt of the goods, but it also serves as the
contract between the parties in transporting and delivering the said goods. In this case, while the plaintiff
and the defendant agreed that the goods would be delivered to the plaintiff in Davao, Sec. 1 and Sec. 3 of the
Bill of Lading provided that the carrier shall not be liable in any capacity whatsoever for any delay, loss, or
damage….after the goods leave ship’s tackle to be discharged, transshipped, or forwarded. Thus, where the
vessel succeeded in discharging the goods in the warehouse of AMCYL in Manila to be transshipped to Davao,
the defendant fulfilled its obligation regardless if the said goods do indeed reach the consignee in Davao.
GOVERNING LAWS

Eastern Shipping Lines vs. IAC

G.R. No. L-69044, May 29, 1987
Melencio-Herrera, J.

FACTS:

M/S ASIATICA, a vessel operated by petitioner Carrier loaded at Kobe, Japan for transportation to
Manila, packages consigned to different companies and were insured against marine risk for their stated value
with respondents Insurers. Enroute to Manila, the vessel caught fire and sank, resulting in the total loss of ship
and cargo. The respective respondents Insurers paid the corresponding marine insurance values to the
consignees concerned and were thus subrogated unto the rights of the latter as the insured. Respondents filed
suit against petitioner Carrier for the recovery of the amounts it had paid to the insured. Petitioner Carrier
denied liability on the principal grounds that the fire which caused the sinking of the ship is an exempting
circumstance under Section 4(2) (b) of the Carriage of Goods by Sea Act (COGSA); and that when the loss of
fire is established, the burden of proving negligence of the vessel is shifted to the cargo shipper.

ISSUE:

Which law should govern — the Civil Code provisions on Common carriers or the Carriage of Goods by
Sea Act?

HELD:

The Civil Code provisions on Common Carriers should be the governing law. Article 1753 of the Civil
Code provides that the law of the country to which the goods are to be transported governs the liability of the
common carrier in case of their loss, destruction or deterioration. In the instant case, as the cargoes in question
were transported from Japan to the Philippines, the liability of Petitioner Carrier is governed primarily by the
Civil Code. However, in all matters not regulated by said Code, the rights and obligations of common carrier
shall be governed by the Code of Commerce and by special laws (Article 1766, Civil Code). Thus, the Carriage
of Goods by Sea Act, a special law, is suppletory to the provisions of the Civil Code.
REGISTERED OWNER RULE

BEINVENIDO GELISAN vs BENITO ALDAY

GR No L-30212 September 30, 1987
Padilla, J.:

FACTS
Bienvenido Gelisan is the owner of a freight truck bearing plate No. TH-2377. Gelisan and Roberto Espiritu
entered into a contract under which Espiritu hired the same freight truck of Gelisan for the purpose of hauling
rice, sugar, flour and that Espiritu shall bear and pay all losses and damages attending the carriage of the goods.
Benito Alday, a trucking operator, had a contract to haul the fertilizers of the Atlas Fertilizer Corporation from
North Harbor to its Warehouse in Mandaluyong. Alday met Espiritu and the latter offered the use of his truck
with the driver and helper. The offer was accepted by Alday. The fertilizer was delivered to the driver and
helper of Espiritu. However, Espiritu did not deliver the fertilizer to Atlas Fertilizer. When Espiritu could not be
found, Alday reported the loss to the Manila Police Department. After the truck was impounded by the police, it
was claimed by Gelisan; but as he could not produce at the time the registration papers, the police would not
release the truck to him. Alday was compelled to pay the value of the fertilizer to Atlas Fertilizer Corporation.
Hence, Alday filed a complaint against Espiritu and Gelisan with the CFI for the recovery of damages suffered
by him thru their criminal acts. Gelisan disowned responsibility as he had no contractual relations with Alday.
The CFI ruled that Espiritu alone was liable to Alday. On appeal, the CA found Gelisan to be likewise liable for
being the registered owner of the truck.

ISSUE
May the registered owner of truck be held liable?

HELD
YES. The registered owner of a public service vehicle is responsible for the damages that may arise from the
consequences incident to its operation or that may be caused to any of the passengers therein. Gelisan’s claim
that he is not liable in view of the lease contract between him and Espiritu (which exempts him from liability to
third persons) cannot be sustained because the contract had not been approved by the Public Service
Commission. It is settled that if the property covered by a franchise is transferred or leased to another without
obtaining the requisite approval, the transfer is not binding upon the public and third persons. Gelisan is not
however without recourse. He has a right to be indemnified by Espiritu for the amount that he may be required
to pay as damages for the injury caused to Alday, since the lease contract in question, although not effective
against the public for not having been approved by the Public Service Commission, is valid and binding
between the contracting parties. Thus, the registered owner/operator of a public service vehicle is jointly and
severally liable with the driver for damages incurred by passengers or third persons as a consequence of injuries
sustained in the operation of said vehicles.
REGISTERESD OWNER

BENEDICTO vs. IAC

Facts:
Private respondent Greenhills Wood Industries Company, Inc., a lumber manufacturing firm, operates a sawmill
in Quirino.

Sometime in May 1980, private respondent bound itself to sell and deliver to Blue Star Mahogany, Inc. (“Blue
Star”), a company in Bulacan 100,000 board feet of sawn lumber with the understanding that an initial delivery
would be made on May 15, 1980. To effect its first delivery, private respondent‟s resident manager Dominador
Cruz, contracted Virgilio Licuden, the driver of a cargo truck to transport its sawn lumber to the consignee Blue
Star in Valenzuela, Bulacan. The cargo truck was registered in the name of petitioner Ma. Luisa Benedicto, the
proprietor of Macoren Trucking, a business enterprise engaged in hauling freight.

On May 15, 1980, cruz in the presence and with the consent of driver Licuden, supervised the loading of sawn
lumber with invoice aboard the cargo truck. Thereafter, the Manager of Blue Star called up Greenhills‟
president, informing him that the sawn lumber on board the subject cargo truck had not yet arrived in Bulacan.
The latter then informed Greenhills‟ resident manager. Still, Blue Star had not received the sawn lumber and
were constrained to look for other suppliers.

Thus, private respondent Greenhills filed criminal case against driver Luciden for estafa and also against
petitioner Benedicto for recovery of the value of the lost sawn lumber plus damages before the RTC of Dagupan
City. The trial court ruled against Benedicto and Luciden. On appeal, the IAC affirmed the decision of the trial
court in toto.

Issue:
Whether or not petitioner Benedicto, being the registered owner of the carrier, should be held liable for the
value of the undelivered or lost sawn lumber.

Held:
Yes, Benedicto is liable for the undelivered or lost sawn lumber as registered owner. There is no dispute that
petitioner Benedicto has been holding herself out to the public as engaged in the business of hauling or
transporting goods for hire or compensation. Petitioner Benedicto is, in brief, a common carrier.

The prevailing doctrine on common carrier makes the registered owner liable for consequences flowing from
the operations of the carrier, even though the specific vehicle involved may already have been transferred to
another person. This doctrine rests upon the principle that in dealing with vehicles registered under the Public
Service Law, the public has the right to assume that the registered owner is the actual or lawful owner thereof. It
would be very difficult and often impossible as a practical matter, for members of the general public to enforce
the rights of action that they may have for injuries inflicted by the vehicles being negligently operated if they
should be required to prove who the actual owner is. The registered owner is not allowed to deny liability by
proving the identity of the alleged transferee.

In the case at bar, private respondent is not required to go beyond the vehicle‟s certificate of registration to
ascertain the owner of the carrier. In this regard, the letter presented by petitioner allegedly written by Benjamin
Tee admitting that Licuden was his driver, had no evidentiary value not only because Benjamin Tee was not
presented in court to testify on this matter but because of the afore mentioned doctrine. To permit the ostensible
or registered owner to prove who the actual owner is, would be to set at naught the purpose or public policy
which infuses that doctrine.

The Court ruled that the Petition fro Review is Denied.

REGISTERED OWNER RULE

Philtranco Service Enterprises v. CA

G.R. No. 120553
June 17, 1997

Facts:
Ramon Acuesta was riding in his easy rider while a bus owned by Philtranco and driven by defendant
Rogasiones Manilhig was being pushed by some persons in order to start its engine. Some of the persons who
were pushing the bus were on its back, while the others were on the sides. As the bus was pushed, its engine
started thereby the bus continued on its running motion and it occurred at the time when Ramon Acuesta who
was still riding on his bicycle was directly in front of the said bus. As the engine of the Philtranco bus started
abruptly and suddenly, its running motion was also enhanced by the said functioning engine, thereby the subject
bus bumped on the victim Acuesta who, as a result thereof fell and, thereafter, was run over by the said bus.

Issue:
Whether or not Philtranco as the employer of the accused is also liable for acts committed by the latter

Held:
Yes. The instant Civil Case is an action for damages based on quasi-delict under Article 2176 and 2180
of the Civil Code against petitioner Manilhig and his employer, petitioner Philtranco, respectively. These
articles pertinently provide:

ART. 2176. Whoever by act or omission causes damage to another, there being fault or
negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-
existing contractual relation between the parties, is called a quasi-delict and is governed by the
provisions of this Chapter.

ART. 2180. The obligation imposed by Article 2176 is demandable not only for one's own acts
or omissions, but also for those of persons for whom one is responsible.
The owners and managers of an establishment or enterprise are likewise responsible for damages
caused by their employees in the service of the branches in which the latter are employed or on
the occasion of their functions.
Employers shall be liable for the damages caused by their employees and household helpers
acting within the scope of their assigned tasks even though the former are not engaged in any
business or industry.
The responsibility treated of in this article shall cease when the persons herein mentioned prove
that they observed all the diligence of a good father of a family to prevent damage.

The Court had consistently held that the liability of the registered owner of a public service vehicle, like
petitioner Philtranco, for damages arising from the tortious acts of the driver is primary, direct, and joint and
several or solidary with the driver. As to solidarity, Article 2194 expressly provides:

ART. 2194. The responsibility of two or more persons who are liable for a quasi-delict is
solidary.

Since the employer's liability is primary, direct and solidary, its only recourse if the judgment for
damages is satisfied by it is to recover what it has paid from its employee who committed the fault or
negligence which gave rise to the action based on quasi-delict. Article 2181 of the Civil Code provides:

ART. 2181. Whoever pays for the damage caused by his dependents or employees may recover
from the latter what he has paid or delivered in satisfaction of the claim.
KABIT SYSTEM

ADOLFO L. SANTOS, petitioner,

vs.
ABRAHAM SIBUG and COURT OF APPEALS, respondents.
G.R. No. L-26815 May 26, 19810
MELENCIO-HERRERA, J.

FACTS:
 Vicente Vidad was a duly authorized passenger jeepney operator.
 Petitioner Adolfo Santos was the owner of a passenger jeep without a certificate of public convenience.
 Santos then transferred his jeep to the name of Vidad so that it could be operated under the latter’s certificate
of public convenience in an agreement called the “kabit system.
 Vidad executed a re-transfer document presumably to be registered when they decide that the jeepney be
withdrawn from the arrangement.
 On April 26, 1963, private respondent Abraham Sibug was bumped by the jeepney driven by Severo Gragas.
Sibug filed a complaint against Vidad and Gragas with Branch XVII of the Court of First Instance in Manila.
 Judgment was rendered sentencing the defendants to pay P506.20 as actual damages, P3,000 as moral
damages, and P500 as attorney’s fees and costs. On April 10, 1964, the sheriff levied on the motor vehicle
and scheduled an auction sale.
 On April 11, petitioner submitted a third-party complaint, alleging that he was the real owner of the jeepney.
 Sibug submitted a bond to the sheriff to save the latter from liability if he were to proceed with the sale and
the third-party complaint would be ultimately upheld. On April 22, petitioner instituted with CFI Branch X
an action for Damages and Injunction, with Preliminary Mandatory Injunction against Sibug, Vidad and the
sheriff. The complaint was amended to include the bonding company. On May 11, Branch X issued a
restraining order enjoining the sheriff from conducting the auction sale.
 On October 14, 1965, Branch X upheld petitioner’s ownership. Sibug appealed from the decision of Branch
X. The Court of Appeals nullified the appealed decision.

ISSUE
Whether the Vidad is liable being the registered owner of the jeepney?

HELD:
 As the jeep in question was registered in the name of Vidad, the government or any person affected by the
representation that said vehicle is registered under the name of the particular person had the right to rely on
his declaration of his ownership and registration. And the registered owner or any other person for that
matter cannot be permitted to repudiate said declaration with the objective of proving that the said registered
vehicle is owned by another person and not by the registered owner.
 Santos, as the kabit, should not be allowed to defeat the levy in his vehicle and to avoid his responsibility as
a kabit owner for he had led the public to believe that the vehicle belongs to Vidad. This is one way of
curbing the pernicious kabit system that facilitates the commissions of fraud against the traveling public.
 Although SANTOS, as the kabit, was the true owner as against VIDAD, the latter, as the registered
owner/operator and grantee of the franchise, is directly and primarily responsible and liable for the damages
caused to SIBUG, the injured party, as a consequence of the negligent or careless operation of the vehicle.
This ruling is based on the principle that the operator of record is considered the operator of the vehicle in
contemplation of law as regards the public and third persons even if the vehicle involved in the accident had
been sold to another where such sale had not been approved by the then Public Service Commission.
KABIT SYSTEM

LITA ENTERPRISES, INC., petitioner,

vs.
SECOND CIVIL CASES DIVISION, INTERMEDIATE APPELLATE COURT, NICASIO M.
OCAMPO and FRANCISCA P. GARCIA, respondents.
G.R. No. L-64693 April 27, 1984

FACTS:
Spouses Nicasio M. Ocampo and Francisca Garcia (private respondents), purchased in installment from the
Delta Motor Sales Corporation five (5) Toyota Corona Standard cars to be used as taxicabs. Since they had no
franchise to operate taxicabs, they contracted with petitioner Lita Enterprises, Inc., through its representative,
Manuel Concordia, for the use of the latter's certificate of public convenience in consideration of an initial
payment of P1,000.00 and a monthly rental of P200.00 per taxicab unit. To effectuate Id agreement, the
aforesaid cars were registered in the name of petitioner Lita Enterprises, Inc, Possession, however, remained
with tile spouses Ocampo who operated and maintained the same under the name Acme Taxi, petitioner's trade
name.
About a year later, one of said taxicabs driven by their employee, Emeterio Martin, collided with a motorcycle
whose driver, one Florante Galvez, died from the head injuries sustained therefrom. A criminal case was
eventually filed against the driver Emeterio Martin, while a civil case for damages was instituted by Rosita
Sebastian Vda. de Galvez, heir of the victim, against Lita Enterprises, Inc., as registered owner of the taxicab..

ISSUE:
Whether or not either party has cause of action to each other having under arrangement of KABIT SYSTEM?

HELD:
No. Unquestionably, the parties herein operated under an arrangement, comonly known as the "kabit system",
whereby a person who has been granted a certificate of convenience allows another person who owns motors
vehicles to operate under such franchise for a fee. A certificate of public convenience is a special privilege
conferred by the government . Abuse of this privilege by the grantees thereof cannot be countenanced. The
"kabit system" has been Identified as one of the root causes of the prevalence of graft and corruption in the
government transportation offices. In the words of Chief Justice Makalintal, 1 "this is a pernicious system that
cannot be too severely condemned. It constitutes an imposition upon the goo faith of the government.
Although not outrightly penalized as a criminal offense, the "kabit system" is invariably recognized as being
contrary to public policy and, therefore, void and inexistent under Article 1409 of the Civil Code, It is a
fundamental principle that the court will not aid either party to enforce an illegal contract, but will leave them
both where it finds them. Upon this premise, it was flagrant error on the part of both the trial and appellate
courts to have accorded the parties relief from their predicament. Article 1412 of the Civil Code denies them
such aid. It provides:

ART. 1412. if the act in which the unlawful or forbidden cause consists does not constitute a criminal
offense, the following rules shall be observed;
(1) when the fault, is on the part of both contracting parties, neither may recover what he has given by
virtue of the contract, or demand the performance of the other's undertaking.

The defect of inexistence of a contract is permanent and incurable, and cannot be cured by ratification or
by prescription.
REGISTERED OWNER RULE

Equitable Leasing Corporation vs. Lucita Suyom, Marissa Enano, Myrna Tamayo, and Felix Oledan
G.R. No. 143360 September 5, 2002
Panganiban, J.

FACTS:
On July 17, 1994, a Fruso Road Tractor driven by Raul Tutor rammed into the house and store of Myrna Tamay
o in Tondo, Manila. A portion of the house was destroyed and Reniel Tamayo, son of Myrna Tamayo, and Felm
arie Oledan, daughter of Felix Oledan, were pinned to death. Felix Oledan, Marissa Enano, and the two sons of
Lucita Suyom were injured. Tutor was charged with and later convicted of reckless imprudence resulting in mul
tiple homicide and multiple physical injuries. Equitable Leasing Corporation, being the registered owner of the t
ractor based on the certificate with the Land Transportation Office, was also ordered to pay actual and moral da
mages by the Regional Trial Court in a separate civil action filed by the herein respondents due to failure to clai
m damages in the criminal action. The Court of Appeals sustained the ruling of the RTC; hence, this appeal. Pet
itioner contends that it should not be held liable for the damages sustained by respondents that arose fro
m the negligence of the driver of the Fuso Road Tractor, which it had already sold to Ecatine at the t
ime of the accident. Not having employed Raul Tutor, the driver of the vehicle, it could not have contr
olled or supervised him.

ISSUE:
Whether or not petitioner should be liable as the registered owner of the vehicle

HELD:
YES. The main aim of motor vehicle registration is to identify the owner so that if any accident happens,
or that any damage or injury is caused by the vehicle on the public highways, responsibility therefor c
an be fixed on a definite individual, the registered owner.

The petitioner is liable for the deaths and the injuries complained of, because it was the registered own
er of the tractor at the time of the accident on July 17, 1994. The Court has consistently ruled that, re
gardless of sales made of a motor vehicle, the registered owner is the lawful operator insofar as the p
ublic and third persons are concerned; consequently, it is directly and primarily responsible for the cons
equences of its operation. In contemplation of law, the owner/operator of record is the employer of the
driver, the actual operator and employer being considered as merely its agent. The same principle applie
s even if the registered owner of any vehicle does not use it for public service.

The failure of Equitable and/or Ecatine to register the sale with the LTO should not prejudice respondent
s, who have the legal right to rely on the legal principle that the registered vehicle owner is liable for
the damages caused by the negligence of the driver. Petitioner cannot hide behind its allegation that T
utor was the employee of Ecatine. This will effectively prevent respondents from recovering their losses
on the basis of the inaction or fault of petitioner in failing to register the sale. The non-registration is
the fault of petitioner, which should thus face the legal consequences thereof.
KABIT SYSTEM
TEJA MARKETING vs. IAC
G.R. No. L-65510 March 9, 1987
PARAS, J.

FACTS:
Pedro Nale bought from Teja Marketing a motorcycle with complete accessories and a sidecar. The defendant
gave a downpayment and a chattel mortgage was constituted as a security for the payment of the balance of the
purchase price. The defendant failed to comply with his promise.

The records of the LTC show that the motorcycle sold to the defendant was first mortgaged to the Teja
Marketing by Angel Jaucian though the Teja Marketing and Angel Jaucian are one and the same, because it was
made to appear that way only as the defendant had no franchise of his own and he attached the unit to the
plaintiff's MCH Line. The agreement also of the parties here was for the plaintiff to undertake the yearly
registration of the motorcycle with the Land Transportation Commission.

The plaintiff, however failed to register the motorcycle on that year on the ground that the defendant failed to
comply with some requirements such as the payment of the insurance premiums and the bringing of the
motorcycle to the LTC for stenciling, the plaintiff saying that the defendant was hiding the motorcycle from
him.

Because of this failure of the plaintiff to comply with his obligation to register the motorcycle the defendant
suffered damages when he failed to claim any insurance indemnity for the more than two times that the
motorcycle figured in accidents aside from the loss of the daily income of P15.00 as boundary fee beginning
when the motorcycle was impounded by the LTC for not being registered.

ISSUE:
Is Teja Marketing and Pedro Nale can bring action against the other?

HELD:
No, both parties are “in pari delicto”. The parties herein operated under an arrangement, commonly known as
the "kabit system" whereby a person who has been granted a certificate of public convenience allows another
person who owns motor vehicles to operate under such franchise for a fee. A certificate of public convenience is
a special privilege conferred by the government. Abuse of this privilege by the grantees thereof cannot be
countenanced. The "kabit system" has been Identified as one of the root causes of the prevalence of graft and
corruption in the government transportation offices.

Although not outrightly penalized as a criminal offense, the kabit system is invariably recognized as being
contrary to public policy and, therefore, void and in existent under Article 1409 of the Civil Code. It is a
fundamental principle that the court will not aid either party to enforce an illegal contract, but will leave both
where it finds then. Upon this premise it would be error to accord the parties relief from their predicament.
Article 1412 of the Civil Code denies them such aid. It provides:

Art. 1412. If the act in which the unlawful or forbidden cause consists does not constitute a
criminal offense, the following rules shall be observed:

1. When the fault is on the part of both contracting parties, neither may recover that he has given
by virtue of the contract, or demand, the performance of the other's undertaking.

The defect of in existence of a contract is permanent and cannot be cured by ratification or by prescription. The
mere lapse of time cannot give efficacy to contracts that are null and void.
BOUNDARY SYSTEM

MAGBOO V BERNARDO (April 30, 1963)

FACTS:
Roque and Bernardo (owner of a jeepney) entered into a contract wherein Roque was to pay to defendant the
sum of P8.00 for the privilege of driving the jeepney, it being their agreement that whatever earnings would
belong entirely to Roque. While driving, an accident occurred resulting to the death of one of its passengers,
Cesar Magboo, the son of plaintiffs. As a consequence thereof, Roque was prosecuted for homicide thru
reckless imprudence to which he pleaded guilty and was sentenced to imprisonment. Pursuant to said judgment
Conrado Roque served his sentence but he was not able to pay the indemnity because he was insolvent.
ISSUE:
WON subsidiary liability may be enforced against Bernardo
HELD:
YES. The agreement between Roque and Bernardo is a "boundary system" — the fact that the driver does not
receive a fixed wage but gets only the excess of the receipt of fares collected by him over the amount he pays to
the jeep-owner and that the gasoline consumed by the jeep is for the account of the driver — are not sufficient
to withdraw the relationship between them from that of employer and employee. The owner and operator of a
passenger jeepney who leased it to another, but without the approval of the Public Service Commission as
required by law, the owner continued to be the operator of the vehicle in legal contemplation and as such was
responsible for the consequences incident to its operation. As in the existence of an employer-employee
relationship between the owner of the vehicle and the driver, to exempt from liability the owner of a public
vehicle who operates it under the "boundary system" on the ground that he is a mere lessor would be to abet
flagrant violations of the Public Service law.
EXTRAORDINARY DILIGENCE

EASTERN SHIPPING LINES, INC., petitioner,

vs.
THE COURT OF APPEALS and THE FIRST NATIONWIDE ASSURANCE
CORPORATION, respondents.

FACTS

Eastern Shipping Lines, Inc. owned vessel “Japri Venture” scheduled to deliver from Kobe, Japan coils of
uncoated stress relieved wire strand for prestressed concrete to Stresstek Post- Tensioning Phils., Inc. in Manila.
The cargo was insured by herein respondent First Nationwide Assurance Corporation (FNAC). However, while
enroute, Japri Venture encountered rough seas and stormy weather for three (3) days before said vessel arrived
in Manila and discharged the cargo to the custody of E. Razon, Inc .After careful inspection, it was found that
some of the coils were rusty and the “wetting” of the cargo was caused by fresh water which entered the hatch
when the vessel encountered heavy weather going to Manila. FNAC thereafter indemnified the consignee for
the damage and loss to the insured cargo and sought to recover from Eastern Shipping the salvage value of the
cargo. The appellate court ruled that the heavy seas and rains referred in the report were not “caso fortuito,” but
normal occurrences that an ocean-going vessel would encounter as a matter of routine. They are not unforeseen
nor unforeseeable. It rendered its decision against Eastern Shipping and E. Razon, ordering them both to pay
FNAC the total amount of what the latter had indemnified the consignee.

ISSUE
WON the petitioner observed extraordinary diligence over the goods.

HELD

The petitioner has failed to present evidence that it has observed extraordinary diligence over the cargo. In order
to escape liability for damage or destruction to the goods that it had admittedly carried, the carrier must present
evidence that it has observed the extraordinary diligence required. No such evidence exists of record. Thus, the
carrier cannot escape liability. Under Article 1733 of the Civil Code, common carriers are bound to observe
extra-ordinary vigilance over goods according to all circumstance of each case. Moreover, Article 1735 of the
same Code states that if the goods are lost, destroyed or deteriorated, common carries are presumed to have
been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as
required by law. The carrier has failed to establish any caso fortuito, thus giving the presumption by law of fault
or negligence on the part of the carrier.
The Court agrees with and is bound by the foregoing findings of fact made by the appellate court. The evidence
is clear to the effect that the damage to the cargo was suffered while aboard petitioner's vessel.
EXTRAORDINARY DILIGENCE

Philippine Charter Insurance Corporation vs Unknown Owner of the Vessel M/V National Honor,
National Shipping Corporation of the Philippines and International Container Services, Inc.
GR No. 161833 July 8, 2005
Ponente: Callejo, Sr., J.

Facts:
J. Trading Co. Ltd. of Seoul, Korea, loaded a shipment of four units of parts and accessories in the port of
Pusan, Korea, on board the vessel M/V National Honor, represented in the Philippines by its agent,
National Shipping Corporation of the Philippines (NSCP). The shipment, insured with the Philippine
Charter Insurance Corporation (PCIC) thru its general agent, Family Insurance and Investment
Corporation, was for delivery to Manila, Philippines.

The M/V National Honor arrived at the Manila International Container Terminal (MICT). The
International Container Terminal Services, Incorporated (ICTSI) was furnished with a copy of the crate
cargo list and bill of lading, and it knew the contents of the crate. The following day, the vessel started
discharging its cargoes using its winch crane. The crane was operated by Olegario Balsa, a winchman
from the ICTSI, the exclusive arrastre operator of MICT.

Denasto Dauz, Jr., the checker-inspector of the NSCP, along with the crew and the surveyor of the ICTSI,
conducted an inspection of the cargo. They inspected the hatches, checked the cargo and found it in
apparent good condition. Claudio Cansino, the stevedore of the ICTSI, placed two sling cables on each end
of Crate No. 1. No sling cable was fastened on the mid-portion of the crate. In Dauz’s experience, this was
a normal procedure. As the crate was being hoisted from the vessel’s hatch, the mid-portion of the
wooden flooring suddenly snapped in the air, about five feet high from the vessel’s twin deck, sending all
its contents crashing down hard, resulting in extensive damage to the shipment.

When the other companies denied liability, PCIC paid the claim made by the shipment’s ultimate
consignee Blue Mono International Company, Incorporated (BMICI). As subrogee, PCIC filed a Complaint
for Damages against the Unknown owner of the vessel M/V National Honor, NSCP and ICTSI, alleging that
the loss was due to their fault and negligence. Both the RTC of Manila and CA dismissed the complaint.

Issue:
WON the presumption of negligence is applicable in the instant case.

Held:
No.
Common carriers, from the nature of their business and for reasons of public policy, are mandated to
observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers
transported by them, according to all the circumstances of each case.

The extraordinary diligence in the vigilance over the goods tendered for shipment requires the common
carrier to know and to follow the required precaution for avoiding damage to, or destruction of the goods
entrusted to it for sale, carriage and delivery. It requires common carriers to render service with the
greatest skill and foresight and to use all reasonable means to ascertain the nature and characteristic of
goods tendered for shipment, and to exercise due care in the handling and stowage, including such methods
as their nature requires.

The common carriers duty to observe the requisite diligence in the shipment of goods lasts from the time
the articles are surrendered to or unconditionally placed in the possession of, and received by, the carrier
for transportation until delivered to, or until the lapse of a reasonable time for their acceptance, by the
person entitled to receive them. When the goods shipped are either lost or arrive in damaged condition, a
presumption arises against the carrier of its failure to observe that diligence, and there need not be an
express finding of negligence to hold it liable. To overcome the presumption of negligence in the case of
loss, destruction or deterioration of the goods, the common carrier must prove that it exercised
extraordinary diligence.

However, Article 1734 of the New Civil Code provides causes in which the presumption of negligence
does not apply.

The case at bar falls under one of the exceptions mentioned in Article 1734 of the Civil Code, particularly
number (4) thereof, i.e., the character of the goods or defects in the packing or in the containers. The trial
court found that the breakage of the crate was not due to the fault or negligence of ICTSI, but to the
inherent defect and weakness of the materials used in the fabrication of the said crate.

It appears that the wooden batten used as support for the flooring was not made of good materials, which
caused the middle portion thereof to give way when it was lifted. The shipper also failed to indicate signs
to notify the stevedores that extra care should be employed in handling the shipment.
EXTRAORDINARY DILIGENCE

ANICETO G. SALUDO, JR., MARIA SALVACION SALUDO, LEOPOLDO G. SALUDO and

SATURNINO G. SALUDO, petitioners,
vs.
HON. COURT OF APPEALS, TRANS WORLD AIRLINES, INC., and PHILIPPINE AIRLINES,
INC., respondents.

G.R. No. 95536 March 23, 1992

Facts:

Crispina Saludo is the mother of Ancieto Saludo who died on Chicago USA. Petitioner wanted to bring the
remains of his mother back to the Philippines so they engaged the services of Pomierski and Son Funeral
Homes. Pomierski then engaged the services of Continental Mortuary Air Services to make the necessary
arrangements with the airport and the airlines. Continental then booked with Philippine Airlines It was then
arranged that the remains of Crispina will be sent from Chicago to San Franciso using Trans World Airline and
from San Fransisco to Manila using PAL. An Airway Bill was issued. However , instead of arriving at San
Francisco, the body of Crispina was inadvertently switched and was sent to Mexico instead. Upon the notice of
mistake, Continental immediately arranged the body of Crispina to be sent back from Mexico to California, and
from California to Manila. The body arrived 1 day late from the expected arrival.

Issues:

Whether or not the airlines are liable for the switching of the bodies and for the late arrival of the corpse in
Manila?

Ruling:

SC said : Explicit is the rule under Article 1736 of the Civil Code that the extraordinary responsibility of the
common carrier begins from the time the goods are delivered to the carrier. This responsibility remains in full
force and effect even when they are temporarily unloaded or stored in transit, unless the shipper or owner
exercises the right of stoppage in transitu, and terminates only after the lapse of a reasonable time for the
acceptance, of the goods by the consignee or such other person entitled to receive them. And, there is delivery
to the carrier when the goods are ready for and have been placed in the exclusive possession, custody and
control of the carrier for the purpose of their immediate transportation and the carrier has accepted them. Where
such a delivery has thus been accepted by the carrier, the liability of the common carrier commences eo instant
(AT THAT INSTANT). Hence, while we agree with petitioners that the extraordinary diligence statutorily
required to be observed by the carrier instantaneously commences upon delivery of the goods thereto, for such
duty to commence there must in fact have been delivery of the cargo subject of the contract of carriage. Only
when such fact of delivery has been unequivocally established can the liability for loss, destruction or
deterioration of goods in the custody of the carrier, absent the excepting causes under Article 1734, attach and
the presumption of fault of the carrier under Article 1735 be invoked. As already demonstrated, the facts in
the case at bar belie the averment that there was delivery of the cargo to the carrier on October 26, 1976.
Rather, as earlier explained, the body intended to be shipped as agreed upon was really placed in the
possession and control of PAL on October 28, 1976 and it was from that date that private respondents
became responsible for the agreed cargo under their undertakings in PAL Airway Bill No. 079-01180454.
Consequently, for the switching of caskets prior thereto which was not caused by them, and subsequent
events caused thereby, private respondents cannot be held liable.
EXTRAORDINARY DILIGENCE

LORENZO SHIPPING CORP., petitioner, vs.

BJ MARTHEL INTERNATIONAL, INC., respondent.
G.R. No. 145483 November 19, 2004

Facts:
Petitioner Lorenzo Shipping Corporation is a domestic corporation engaged in coastwise shipping which owns
the cargo vessel M/V Dadiangas Express. Respondent BJ Marthel International, Inc. is a business entity
engaged in trading, marketing, and selling of various industrial commodities. It is also an importer and
distributor of different brands of engines and spare parts. From 1987 up to the institution of this case,
respondent supplied petitioner with spare parts for the latter's marine engines. Petitioner thereafter issued to
respondent Purchase Order No. 13839 dated 02 November 1989, for the procurement of one set of cylinder
liner, valued at P477,000, to be used for M/V Dadiangas Express. Instead of paying the 25% down payment for
the first cylinder liner, petitioner issued in favor of respondent ten postdated checks to be drawn against the
former's account with Allied Banking Corporation. The checks were supposed to represent the full payment of
the aforementioned cylinder liner. Subsequently, petitioner issued Purchase Order No. 14011 dated 15 January
1990, for yet another unit of cylinder liner. This purchase order stated the term of payment to be "25% upon
delivery, balance payable in 5 bi-monthly equal installment[s]." Like the purchase order of 02 November 1989,
the second purchase order did not state the date of the cylinder liner's delivery. On 26 January 1990, respondent
deposited petitioner's check that was postdated 18 January 1990, however, the same was dishonored by the
drawee bank due to insufficiency of funds. The remaining nine postdated checks were eventually returned by
respondent to petitioner. Despite repeated demands by the respondent, petitioner failed to pay alleging that time
was of the essence in the delivery of the cylinders and that there was a delay since the respondent committed
said items “within two months after receipt of fir order”.
The trial court held respondent bound to the quotation it submitted to petitioner particularly with respect to the
terms of payment and delivery of the cylinder liners. It also declared that respondent had agreed to the
cancellation of the contract of sale when it returned the postdated checks issued by petitioner. The CA reversed
and set aside the Decision of the court a quo. The appellate court brushed aside petitioner's claim that time was
of the essence in the contract of sale between the parties herein considering the fact that a significant period of
time had lapsed between respondent's offer and the issuance by petitioner of its purchase orders.

Issue
Was there late delivery of the subjects of the contract of sale to justify petitioner to disregard the terms of the
contract considering that time was of the essence thereof?

Held:
No, there was no late delivery because in the subject contracts, time was not of the essence. The delivery of the
cylinder liners on 20 April 1990 was made within a reasonable period of time considering that respondent had
to place the order for the cylinder liners with its principal in Japan and that the latter was, at that time, beset by
heavy volume of work. Petitioner was the one who caused the preparation of Purchase Orders No. 13839 and
No. 14011 yet it utterly failed to adduce any justification as to why said documents contained terms which are at
variance with those stated in the quotation provided by respondent. The only plausible reason for such failure on
the part of petitioner is that the parties had, in fact, renegotiated the proposed terms of the contract of sale.
Moreover, as the obscurity in the terms of the contract between respondent and petitioner was caused by the
latter when it omitted the date of delivery of the cylinder liners in the purchase orders and varied the term with
respect to the due date of the down payment, said obscurity must be resolved against it.
When the time of delivery is not fixed or is stated in general and indefinite terms, time is not of the essence of
the contract. In such cases, the delivery must be made within a reasonable time. The law implies, however, that
if no time is fixed, delivery shall be made within a reasonable time, in the absence of anything to show that an
immediate delivery intended.
Petitioner also alleges that the cylinder liners were to be used for dry dock repair and maintenance of its M/V
Dadiangas Express between the later part of December 1989 to early January 1990, the record is bereft of any
indication that respondent was aware of such fact. The failure of petitioner to notify respondent of said date is
fatal to its claim that time was of the essence in the subject contracts of sale.
In the instant case, the appellee should have provided for an allowance of time and made the purchase order
earlier if indeed the said cylinder liner was necessary for the repair of the vessel scheduled on the first week of
January, 1990. In fact, the appellee should have cancelled the first purchase order when the cylinder liner was
not delivered on the date it now says was necessary. Instead it issued another purchase order for the second set
of cylinder liner. This fact negates appellee's claim that time was indeed of the essence in the consummation of
the contract of sale between the parties.
EXTRAORDINARY DILIGENCE

Sealoader Shipping Corporation v. Grand Cement Manufacturing Corporation

G.R. No. 167363 & G.R. No. 177466, December 15, 2010
Leonardo-De Castro, J.

FACTS:
Sealoader executed a Time Charter Party Aggrement with Joyce Launch for the chartering of MT Viper in order
to tow its unpropelled barges for a minimum of 15 days. Sealoder also entered into a contract with Grand
Cement for the loading of cement clinkers and the delivery thereof to Manila.
Eventually, Sealoder’s barge arrived at the wharf of Grand Cement tugged by MT Viper. It was not
immediately loaded as the employees of Grand Cement were loading another vessel. The barge was still docked
at the wharf of Grand Cement when typhoon Bising struck in the area of Cebu. As it became stronger, MT
Viper tried to tow the barge away but it was unsuccessful. The towing line connecting the vessels snapped since
the mooring lines were not cast off. As such, the barge rammed the wharf which caused a significant damage.
Grand Cement filed a complaint for damages when Sealoader ignored its demands for compensation of the
damage caused. They allege that Sealoader was negligent when it ignored its employee’s advice to move the
vessels after it had received weather updates. Sealoader filed a motion to dismiss on the ground that Joyce
Launch is the one liable since it was the owner of MT Viper, and whose employees were manning the vessel.
Sealoader filed a cross-claim against Joyce Launch. Joyce maintains that the damages were due to force
majeure and faulted Grand Cement’s employees for abandoning the wharf leaving them helpless and for not
warning them early on.
The RTC rendered judgment in favor of Grand Cement holding the two companies liable since there was
complete disregard of the storm signal, the captain of the vessel was not present and the vessel was not
equipped with a radio or any navigational facility, which is mandatory. Joyce launch did not appeal. On appeal,
the CA affirmed the decision but on MR, it partly reversed its decision finding Grand Cement to be guilty of
contributory negligence since it was found that it was still loading the other vessel at the last minute just before
the storm hit, which was the reason why Sealoder’s vessel did not move. The damages were reduced to 50%.

ISSUE:
Who should be liable for damage sustained by the wharf of Grand Cement?

HELD:
Sealoader was guilty of negligence, hence it is liable. First because it was not equipped with a radio or a
navigational facility and it failed to monitor the prevailing weather conditions. Second, it cannot pass the
responsibility of casting off the mooring lines because the people at the wharf could not just cast off the
mooring lines without any instructions from the crew of the vessel. It should have taken the initiative to cast off
the mooring lines early on.
Moreover, there was no contributory negligence on the part of Grand Cement Manufacturing Corporation. It
had timely informed the barge of the impending typhoon and directed the vessels to move to a safer place.
Sealoader had the responsibility to inform itself of the prevailing weather conditions in the areas where its
vessel was to sail. It cannot merely rely on other vessels for weather updates and warnings on approaching
storms. To do so would be to gamble with the safety of its own vessel, putting the lives of its crew under the
mercy of the sea, as well as running the risk of causing damage to property of third parties for which it would
necessarily be liable. The evidence proffered by Sealoader to prove the negligence of Grand Cement was
marred by contradictions and are, thus, weak at best. Thus, the contributory negligence of Grand Cement was
not established in this case.
Hence, the award of damages in favor of the petitioner by the lower courts is reversed.
PRESUMPTION OF NEGLIGENCE

Delsan Transport v. AHAC

Facts:

Delsan received on board its vessel, MT Larusan, a shipment consisting of 1,986.627 Automotive Diesel Oil at
the Bataan Refinery Corporation in favor of Caltex to be delivered to its bulk depot in Bacolod City. After
arriving in Bacolod city, unloading operations of the oil commenced. However, the discharging eventually had
to be stopped on account of the discovery that the port bow, mooring of the vessel was intentionally cut causing
the vessel to drift westward severing the rubber house connected to the tanker, eventually spilling the diesel oil
onto the sea. Subsequently, further spillage was not prevented since the shore tender did not shut the storage
tank gate valve neglecting the red light signal. Lastly, due to the non-availability of a pump boat, the vessel
could not send somebody ashore to inform the people at the depot about what happened.

As a result of the spillage and backflow of diesel oil, Caltex demanded payment from Delsan, whom refused to
pay. Thus, its insurer AHAC paid Caltex and was subrogated the rights of the latter, to which they instituted a
civil action against Delsan.

Delsan contested they are not liable under Article 1734 of the Civil Code, which provides that common carriers
are not responsible for the loss, destruction or deterioration of the goods for causes such as the act or omission
of the shipper or owner of the goods – alleging that the loss was partly due to the contributory negligence of
Caltex – an exception to the rule that the presumption of negligence on the part of common carriers shall only
be overcome by extraordinary diligence on the part of the carrier.

Issue:

Is Delsan liable for not exercising extraordinary diligence?

Held:

Yes. The Court held that common carriers are bound to observe extraordinary diligence and are presumed to be
at fault or to have acted negligently if the goods are lost, destroyed, or deteriorated. Extraordinary diligence
must overcome the presumption of negligence to exculpate from civil liability, with exceptions referred to by
Art. 1734. In this case, the Court held that there was no contributory negligence on the part of Caltex to merit
the exception. More importantly, Delsan did not exercise extraordinary diligence by the warning of a red light,
being unable to warn the shore tender that the port mooring line was cut off and being unable to do so merely
because there was no available banca.
PRESUMPTION OF NEGLIGENCE

Maersk Line vs. CA

G.R. No. 94761, May 17, 1993
Bidin, J.

FACTS:

Private respondent ordered empty gelatin capsules for the manufacture of his pharmaceutical products.
He was advised by the shipper through the Memorandum that the capsules were already shipped on board MV
"Anders Maerskline" for shipment to the Philippines via Oakland, California with the date of arrival on April 3,
1977. For reasons unknown, said cargo of capsules were mishipped and diverted to Richmond, Virginia, USA
and then transported back Oakland, California. The goods finally arrived in the Philippines on June 10, 1977 or
after two (2) months from the date specified in the memorandum. As a consequence, private respondent as
consignee refused to take delivery of the goods on account of its failure to arrive on time. Private respondent
alleging gross negligence and undue delay in the delivery of the goods, filed an action for rescission of contract
with damages against petitioner.

ISSUE:

Is petitioner liable for the delay even if there is no contract to that effect?

HELD:

Yes. While it is true that common carriers are not obligated by law to carry and to deliver merchandise,
and persons are not vested with the right to prompt delivery, unless such common carriers previously assume
the obligation to deliver at a given date or time, delivery of shipment or cargo should at least be made within a
reasonable time. When a common carrier undertakes to convey goods, the law implies a contract that they shall
be delivered at destination within a reasonable time, in the absence, of any agreement as to the time of delivery.
In the case at bar, while there was no special contract entered into by the parties indicating the date of arrival of
the subject shipment, petitioner nevertheless, was very well aware of the specific date when the goods were
expected to arrive as indicated in the bill of lading itself. Thus, the Court held that a delay in the delivery of the
goods spanning a period of two (2) months and seven (7) days was beyond the realm of reasonableness. The
subject shipment was delivered to, and left in, the possession and custody of petitioner-carrier for transport to
Manila via Oakland, California. But through petitioner's negligence was mishipped to Richmond, Virginia.
Petitioner's insistence that it cannot be held liable for the delay was not sustained.
PRESUMPTION OF NEGLIGENCE

FGU Insurance Company vs CA

Facts:

Anco Enterprises Company (ANCO), a partnership between Ang Gui and Co To, was engaged in the shipping
business. It owned the D/B Lucio barge which had no engine of its own and the M/T ANCO tugboat which
towed the former in order to maneuver it from one place to another. On 23 September 1979, San Miguel
Corporation (SMC) shipped from Mandaue City, Cebu, on board the D/B Lucio, for towage by M/T ANCO for
a number of cases of its product. The barge and tugboat arrived
at San Jose, Antique, in the afternoon of 30 September 1979, however, At about ten to eleven o’clock in the
evening of 01 October 1979, the crew of D/B Lucio abandoned the vessel because the barge’s rope attached to
the wharf was cut off by the big waves. At around midnight, the barge run aground and was broken and the
cargoes of beer in the barge were swept away. As a result, ANCO failed to deliver to SMC’s consignee Twenty
-Nine Thousand Two Hundred Ten (29,210) cases of Pale Pilsen and Five Hundred Fifty (550) cases of Cerveza
Negra. Prior to such event, ANCO evidently asserted that there was an agreement between them and SMC to
insure the cargoes with FGU Insurance Corporation in order to recover indemnity in case of loss.

Issue:

Whether or not FGU can be held liable under the insurance policy to reimburse ANCO for the loss of the
cargoes despite the findings of the respondent court that such loss was occasioned by the blatant negligence of
the latter’s employees.

Held:

In the case at bar, both the trial court and the appellate court had concluded from the evidence that the crew
members of both the D/B Lucio and the M/T ANCO were blatantly negligent. To wit: There was blatant
negligence on the part of the employees of defendants-appellants when the patron (operator) of the tug boat
immediately left the barge at the San Jose, Antique wharf despite the looming bad weather. Negligence was
likewise exhibited by the defendants-appellants’ representative who did not heed Macabuag’s request that the
barge be moved to a more secure place. The prudent thing to do, as was done by the other sea vessels at San
Jose, Antique during the time in question, was to transfer the vessel to a safer wharf.
PRESUMPTION OF NEGLIGENCE

DSR-SENATOR LINES AND C.F. SHARP AND COMPANY, INC vs FEDERAL PHOENIX
ASSURANCE CO., INC.
GR No. 135377 October 7, 2003
Sandoval-Gutierrez, J.:

FACTS
Berde Plants Inc delivered 632 units of artificial trees to CF Sharp and Co (CF Sharp), the General Ship Agent
of DSR-Senator Lines (DSR), for transportation and delivery to Al-Mohr International Group in Riyadh, Saudi
Arabia. Federal Phoenix Assurance Co (Federal) insured the cargo against all risks. While in transit, the vessel
and all its cargo caught fire. DSR informed Berde Plants that the vessel was gutted by fire and sank. Federal
paid Berde Plants the amount corresponding to the insurance for the cargo. In turn, Berde executed in its favor a
“Subrogation Receipt.” On the basis of such receipt, Federal demanded payment for the damages from CF
Sharp. However, CF Sharp denied any liability on the ground that the liability was extinguished when the vessel
carrying the cargo was gutted by fire. Federal filed with the RTC a complaint for damages against DSR and CF
Sharp. RTC rendered a decision in favor of Federal. On appeal, the CA affirmed the RTC decision holding that
the carrier was presumed to have acted negligently for the fire and that the carrier is liable.

ISSUE
Is the vessel presumed to have acted negligently?

HELD
YES. Article 1734 provides that common carriers are responsible for the loss, destruction, or deterioration of
the goods unless the same is due to any of the following causes only: (1) flood, storm, earthquake, lighting, or
other natural disaster or calamity; (2) act of the public enemy in war, whether international or civil; (3) act or
omission of the shipper or owner of the goods; (4) the character of the goods or defects in the packing or in the
containers; and (5) order or act of competent public authority. Fire is not one of those enumerated under the
provision which exempts a carrier from liability.

A common carrier’s duty to observe the requisite diligence in the shipment lasts from the time the articles are
surrendered to or unconditionally placed in the possession of, and received by, the carrier for transportation
until delivered to or until the lapse of a reasonable time for their acceptance by the person entitled to receive
them. They are presumed to have been at fault or to have acted negligently of the goods are lost, destroyed or
deteriorated. There are very few instances when the presumption of negligence does not attach and these
instances are enumerated in Art 1734. In those cases where the presumption is applied, the common carrier
must prove that it exercised extraordinary diligence in order to overcome the presumption.

Federal raised the presumption of negligence against petitioners. However, they failed to overcome it by
sufficient proof of extraordinary diligence.
PRESUMPTION OF NEGLIGENCE

Philamgen vs CA

Facts:
On 6 July 1983, Coca-Cola Bottlers Philippines, Inc., loaded on board MV Asilda, a vessel owned and operated
by respondent Felman Shipping Lines (FELMAN), 7,500 cases of 1-liter Coca-Cola softdrink bottles to be
transported from Zamboanga City to Cebu City for consignee Coca-Cola Bottlers Philippines, Inc., Cebu. The
shipment was insured with petitioner Philippine American General Insurance Co., Inc. (PHILAMGEN)

MV Asilda left the port of Zamboanga in fine weather at eight oclock in the evening of the same day. At around
eight forty-five the following morning, 7 July 1983, the vessel sank in the waters of Zamboanga del Norte
bringing down her entire cargo with her including the 7,500 cases of 1-liter Coca-Cola softdrink bottles.

On 15 July 1983 the consignee filed a claim with respondent FELMAN for recovery of damages for the loss.
Respondent denied the claim thus prompting the consignee to file an insurance claim with PHILAMGEN which
paid its claim of P755,250.00.

Claiming its right of subrogation PHILAMGEN sought recourse against respondent FELMAN which
disclaimed any liability for the loss. Consequently, on 29 November 1983 PHILAMGEN sued the shipowner
for sum of money and damages.

On 17 February 1986 the trial court dismissed the complaint of PHILAMGEN. On appeal the Court of Appeals
set aside the dismissal and remanded the case to the lower court for trial on the merits.

On 28 February 1992 the trial court rendered judgment in favor of FELMAN. It ruled that MV Asilda was
seaworthy when it left the port of Zamboanga as confirmed by certificates issued by the Philippine Coast Guard
and the shipowners surveyor attesting to its seaworthiness.

On 29 August 1994 respondent appellate court rendered judgment finding MV Asilda unseaworthy. While the
vessel possessed the necessary Coast Guard certification indicating its seaworthiness with respect to the
structure of the ship itself, it was not seaworthy with respect to the cargo.

ISSUE:
1. Whether MV Asilda was seaworthy when it left the port of Zamboanga;
2. Whether or not there was a fortuitous event by the big waves
3. Whether or not the Limited liability Rule can apply

HELD:
1. Unseaworthy. The vessel was carrying 7,500 cases of 1-liter Coca-Cola softdrink bottles, 300 sacks of
seaweeds, 200 empty CO2 cylinders and an undetermined quantity of empty boxes for fresh eggs. They loaded
the empty boxes for eggs and about 500 cases of Coca-Cola bottles on deck. The vessel was top-heavy which is
to say that while the vessel may not have been overloaded, yet the distribution or stowage of the cargo on board
was done in such a manner that the vessel was in top-heavy condition at the time of her departure and which
condition rendered her unstable and unseaworthy for that particular voyage.

Further, the vessel was designed as a fishing vessel, and it was not designed to carry a substantial amount or
quantity of cargo on deck. Therefore, we believe strongly that had her cargo been confined to those that could
have been accommodated under deck, her stability would not have been affected and the vessel would not have
been in any danger of capsizing, even given the prevailing weather conditions at that time of sinking.

2. No. The proximate cause of the sinking of MV Asilda was its being top-heavy. Contrary to the ship captains
allegations, evidence shows that approximately 2,500 cases of softdrink bottles were stowed on deck. Several
days after MV Asilda sank, an estimated 2,500 empty Coca-Cola plastic cases were recovered near the vicinity
of the sinking. Considering that the ships hatches were properly secured, the empty Coca-Cola cases recovered
could have come only from the vessels deck cargo. It is settled that carrying a deck cargo raises the presumption
of unseaworthiness unless it can be shown that the deck cargo will not interfere with the proper management of
the ship. However, in this case it was established that MV Asilda was not designed to carry substantial amount
of cargo on deck. The inordinate loading of cargo deck resulted in the decrease of the vessels metacentric height
thus making it unstable.

3. No. Art. 587 of the Code of Commerce is not applicable to the case at bar. Simply put, the ship agent is liable
for the negligent acts of the captain in the care of goods loaded on the vessel. This liability however can be
limited through abandonment of the vessel, its equipment and freightage as provided in Art. 587. Nonetheless,
there are exceptional circumstances wherein the ship agent could still be held answerable despite the
abandonment, as where the loss or injury was due to the fault of the shipowner and the captain. The
international rule is to the effect that the right of abandonment of vessels, as a legal limitation of a shipowners
liability, does not apply to cases where the injury or average was occasioned by the shipowners own fault. It
must be stressed at this point that Art. 587 speaks only of situations where the fault or negligence is committed
solely by the captain.
PRESUMPTION OF NEGLIGENCE

Belgian Overseas Chartering v. Philippine First Insurance

G.R. No. 143133
June 5, 2002

Proof of the delivery of goods in good order to a common carrier and of their arrival in bad order at their
destination constitutes prima facie fault or negligence on the part of the carrier. If no adequate explanation is
given as to how the loss, the destruction or the deterioration of the goods happened, the carrier shall be held
liable therefor.

Facts:
CMC Trading A.G. shipped on board the MN Anangel Sky at Hamburg, Germany 242 coils of various
Prime Cold Rolled Steel sheets for transportation to Manila consigned to the Philippine Steel Trading
Corporation. Thereafter, MN Anangel Sky arrived at the port of Manila and, within the subsequent days,
discharged the subject cargo. Four coils were then found to be in bad order. Finding the four coils in their
damaged state to be unfit for the intended purpose, the consignee Philippine Steel Trading Corporation declared
the same as total loss.

Issue:
Whether petitioners have overcome the presumption of negligence of a common carrier

Held:
No. Owing to the high degree of diligence required of them, common carriers, as a general rule, are
presumed to have been at fault or negligent if the goods they transported deteriorated or got lost or destroyed.
That is, unless they prove that they exercised extraordinary diligence in transporting the goods. In order to avoid
responsibility for any loss or damage, therefore, they have the burden of proving that they observed such
diligence.

However, the presumption of fault or negligence will not arise if the loss is due to any of the following
causes: (1) flood, storm, earthquake, lightning, or other natural disaster or calamity; (2) an act of the public
enemy in war, whether international or civil; (3) an act or omission of the shipper or owner of the goods; (4) the
character of the goods or defects in the packing or the container; or (5) an order or act of competent public
authority. This is a closed list. If the cause of destruction, loss or deterioration is other than the enumerated
circumstances, then the carrier is liable therefor.

Corollary to the foregoing, mere proof of delivery of the goods in good order to a common carrier and of
their arrival in bad order at their destination constitutes a prima facie case of fault or negligence against the
carrier. If no adequate explanation is given as to how the deterioration, the loss or the destruction of the goods
happened, the transporter shall be held responsible.

That petitioners failed to rebut the prima facie presumption of negligence is revealed in the case at bar by a
review of the records and more so by the evidence adduced by respondent.
First, as stated in the Bill of Lading, petitioners received the subject shipment in good order and condition
in Hamburg, Germany.
Second, prior to the unloading of the cargo, an Inspection Report prepared and signed by representatives of
both parties showed the steel bands broken, the metal envelopes rust-stained and heavily buckled, and the
contents thereof exposed and rusty.
Third, Bad Order Tally Sheet No. 154979 issued by Jardine Davies Transport Services, Inc., stated that the
four coils were in bad order and condition. Normally, a request for a bad order survey is made in case there is an
apparent or a presumed loss or damage.
 Fourth, the Certificate of Analysis stated that, based on the sample submitted and tested, the steel sheets
found in bad order were wet with fresh water.
Fifth, petitioners -- in a letter addressed to the Philippine Steel Coating Corporation and dated October 12,
1990 -- admitted that they were aware of the condition of the four coils found in bad order and condition.

All these conclusively prove the fact of shipment in good order and condition and the consequent damage
to the four coils while in the possession of petitioner, who notably failed to explain why.

Further, petitioners failed to prove that they observed the extraordinary diligence and precaution which the
law requires a common carrier to know and to follow, to avoid damage to or destruction of the goods entrusted
to it for safe carriage and delivery.

True, the words metal envelopes rust stained and slightly dented were noted on the Bill of Lading;
however, there is no showing that petitioners exercised due diligence to forestall or lessen the loss. Having been
in the service for several years, the master of the vessel should have known at the outset that metal envelopes in
the said state would eventually deteriorate when not properly stored while in transit. Equipped with the proper
knowledge of the nature of steel sheets in coils and of the proper way of transporting them, the master of the
vessel and his crew should have undertaken precautionary measures to avoid possible deterioration of the
cargo. But none of these measures was taken. Having failed to discharge the burden of proving that they have
exercised the extraordinary diligence required by law, petitioners cannot escape liability for the damage to the
four coils.
PRESUMPTION OF NEGLIGENCE

Edgar Cokaliong Shipping Lines, Inc. Vs. UCPB General Insurance Company, Inc.
G.R. No. 146018 June 25, 2003
Panganiban, J.

FACTS:
Sometime on December 11, 1991, Nestor Angelia delivered to the petitioner cargo consisting of one carton of C
hristmas decor and two sacks of plastic toys to be transported to Cebu City from Tandag, Surigao del Sur he nex
t day. Petitioner issued Bill of Lading No. 58 and the cargo was valued at P6,500.00 on its face. Zosimo Mercad
o likewise delivered cargo to petitioner consisting of two cartons of plastic toys and Christmas decor, one roll of
floor mat and one bundle of various assorted goods for transportation. Petitioner issued Bill of Lading No. 59 a
nd the cargo was valued at P14,000.00 on the face thereof. Both the cargo were insured by Felicia Legaspi, the
owner thereof, with UCPB General Insurance Company, Inc. at P50,000 and P100,000.00, respectively. During
the voyage, fire ensued in the engine room, and, despite earnest efforts of the officers and crew of the vessel, the
fire engulfed and destroyed the entire vessel resulting to the loss of the vessel and the cargoes therein. Legaspi f
iled a claim with respondent for the cargoes covered by Bills of Lading Nos. 58 and 59 claiming that their amou
nt were P60,338.00 and P110,056.00, respectively. Legaspi submitted receipts and order slips to prove the amou
nt and respondent approved her claim. Respondent, as subrogee, filed a complaint anchored on torts against peti
tioner which the RTC approved and the CA reversed; hence, this petition. Petitioner argues that the cause of the
loss of the goods, subject of this case, was force majeure. It adds that its exercise of due diligence was adequatel
y proven by the findings of the Philippine Coast Guard.

ISSUE:
Whether or not petitioner was negligent or not

HELD
YES. Peril of fire is not comprehended within the exceptions in Article 1734*, Article 1735 of the Civi
l Code provides that in all cases other than those mentioned in Article 1734, the common carrier shall
be presumed to have been at fault or to have acted negligently, unless it that it has observed the ext
raordinary diligence required by law. Where loss of cargo results from the failure of the officers of a v
essel to inspect their ship frequently so as to discover the existence of cracked parts, that loss cannot
be attributed to force majeure, but to the negligence of those officials. The law provides that a commo
n carrier is presumed to have been negligent if it fails to prove that it exercised extraordinary vigilanc
e over the goods it transported. Ensuring the seaworthiness of the vessel is the first step in exercising
the required vigilance. Petitioner did not present sufficient evidence showing what measures or acts it h
ad undertaken to ensure the seaworthiness of the vessel. It failed to show when the last inspection and
care of the auxiliary engine fuel oil service tank was made, what the normal practice was for its maint
enance, or some other evidence to establish that it had exercised extraordinary diligence. It merely stated that co
nstant inspection and care were not possible, and that the last time the vessel was dry-docked was in November
1990. Necessarily, in accordance with Article 1735 of the Civil Code, the petitioner is responsible for the loss of
the goods covered by the Bills of Lading Nos. 58 and 59.

*Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the same
is due to any of the following causes only: (1) Flood, storm, earthquake, lightning, or other natural disast
er or calamity; (2) Act of the public enemy in war, whether international or civil; (3) Act or omission of
the shipper or owner of the goods; (4) The character of the goods or defects in the packing or in the c
ontainers; (5) Order or act of competent public authority.
PRESUMPTION OF NEGLIGENCE

SARKIES TOURS PHILIPPINES, INC., petitioner,

vs.
HONORABLE COURT OF APPEALS (TENTH DIVISION), DR. ELINO G. FORTADES, MARISOL
A. FORTADES and FATIMA MINERVA A. FORTADES, respondents.
G.R. No. 108897 October 2, 1997
ROMERO, J.:

FACTS:
 On August 31, 1984, Fatima Fortades and her siblings boarded Sarkie's tour bus from Manila to
Legazpi.
 Her belongings consisting of 3 bags were kept at the baggage compartment of the bus the in her luggage
contains optometry materials, her mother’s US green card, as well as other important documents and
personal belongings.
 During the stopover in Daet, it was discovered that only one remained. The others might have dropped
along the way.
 Other passengers suggested having the route traced, but the driver ignored it.
 Fatima immediately told the incident to her mother, who went to petitioner’s office in Legazpi and later
in Manila.
 Petitioner offered P1,000 for each bag, but she turned it down.
 Disappointed, she sought help from Philtranco bus drivers and radio stations. One of the bags was
recovered. She was told by petitioner that a team is looking for the lost luggage.
 After nine months of fruitless waiting, respondents filed a case to recover the lost items, as well as moral
and exemplary damages, attorney’s fees and expenses of litigation. The trial court ruled in favor of
respondents, which decision was affirmed with modification by the Court of Appeals, deleting moral
and exemplary damages.

ISSUE:
Whether or not Sarkie's Tour Bus are liable for the things lost because of its negligence

HELD:
 The cause of the loss in the case at bar was petitioner's negligence in not ensuring that the doors of the
baggage compartment of its bus were securely fastened. As a result of this lack of care, almost all of the
luggage was lost, to the prejudice of the paying passengers
 As a common carrier, it was bound to observe extraordinary diligence in the vigilance over the goods
transported by them, which diligence starts from the time the goods are unconditionally placed in its
possession and ends only when the same are delivered to the person who has a right to receive them. In
this case, the clear negligence of Sarkies was in the fact that it did not ensure that baggage compartment
was not properly locked, leading to the loss of several luggage.
PRESUMPTION OF NEGLIGENCE

VALENZUELA HARDWOOD AND INDUSTRIAL SUPPLY INC., petitioner,

vs.
COURT OF APPEALS AND SEVEN BROTHERS SHIPPING CORPORATION, respondents.

G.R. No. 102316 June 30, 1997

FACTS:

Plaintiff (Valenzuela Hardwood and Industrial Supply, Inc.) entered into an agreement with the defendant
Seven Brothers (Shipping Corporation) whereby the latter undertook to load on board its vessel M/V Seven
Ambassador the former's lauan round logs numbering 940 at the port of Maconacon, Isabela for shipment to
Manila.

The said vessel M/V Seven Ambassador sank resulting in the loss of the plaintiff's insured logs.

Plaintiff filed a formal claim with defendant Seven Brothers Shipping Corporation for the value of the lost logs
but the latter denied the claim.

ISSUE:

Whether or not the stipulation in the charter party executed between the petitioner and the private respondent
exempting the latter from liability for the loss of petitioner's logs arising from the negligence of its (Seven
Brothers') captain is valid.

HELD:

YES…

The charter party between the petitioner and private respondent stipulated that the "(o)wners shall not be
responsible for loss, split, short-landing, breakages and any kind of damages to the cargo." The validity of this
stipulation is the lis mota of this case.

It should be noted at the outset that there is no dispute between the parties that the proximate cause of the
sinking of M/V Seven Ambassadors resulting in the loss of its cargo was the "snapping of the iron chains and the
subsequent rolling of the logs to the portside due to the negligence of the captain in stowing and securing the
logs on board the vessel and not due to fortuitous event." Likewise undisputed is the status of Private
Respondent Seven Brothers as a private carrier when it contracted to transport the cargo of Petitioner
Valenzuela. Even the latter admits this in its petition.

It is undisputed that private respondent had acted as a private carrier in transporting petitioner's lauan logs.
Thus, Article 1745 and other Civil Code provisions on common carriers which were cited by petitioner may not
be applied unless expressly stipulated by the parties in their charter party.

In a contract of private carriage, the parties may validly stipulate that responsibility for the cargo rests solely on
the charterer, exempting the shipowner from liability for loss of or damage to the cargo caused even by the
negligence of the ship captain. Pursuant to Article 1306 of the Civil Code, such stipulation is valid because it is
freely entered into by the parties and the same is not contrary to law, morals, good customs, public order, or
public policy. Indeed, their contract of private carriage is not even a contract of adhesion. We stress that in a
contract of private carriage, the parties may freely stipulate their duties and obligations which perforce would be
binding on them. Unlike in a contract involving a common carrier, private carriage does not involve the general
public. Hence, the stringent provisions of the Civil Code on common carriers protecting the general public
cannot justifiably be applied to a ship transporting commercial goods as a private carrier. Consequently, the
public policy embodied therein is not contravened by stipulations in a charter party that lessen or remove the
protection given by law in contracts involving common carriers.