You are on page 1of 38

National Development Corporation v.

Court of Appeals

G.R. No. L-49407, 19 August 1988, 164 SCRA 593

FACTS:

NDC as the first preferred mortgagee of three ocean going vessels including one with the name ‘Dona Nati’ appointed MCP as its agent
to manage and operate said vessel for and in its behalf and account. Thus, the E. Philipp Corporation of New York loaded on board the
vessel “Dona Nati” at San Francisco, California, a total of 1,200 bales of American raw cotton consigned to the order of Manila Banking
Corporation, Manila and the People’s Bank and Trust Company acting for and in behalf of the Pan Asiatic Commercial Company, Inc.,
who represents Riverside Mills Corporation. Also loaded on the same vessel at Tokyo, Japan, were the cargo of Kyokuto Boekui, Kaisa,
Ltd., consigned to the order of Manila Banking Corporation consisting of 200 cartons of sodium lauryl sulfate and 10 cases of aluminum
foil.

En route to Manila the vessel Dofia Nati figured in a collision at Ise Bay, Japan with a Japanese vessel ‘SS Yasushima Maru’ as a result
of which 550 bales of aforesaid cargo of American raw cotton were lost and/or destroyed. The damaged and lost cargoes were paid by
the insurer to the Riverside Mills Corporation as holder of the negotiable bills of lading duly endorsed.

Also considered totally lost were the aforesaid shipment of Kyokuto, Boekui Kaisa Ltd., consigned to the order of Manila Banking
Corporation, Manila, acting for Guilcon, Manila. The total loss was paid by the insurer to Guilcon as holder of the duly endorsed bill of
lading. Hence, plaintiff filed this complaint to recover said amount from the NDC and MCP as owner and ship agent respectively, of the
said ‘Dofia Nati’ vessel.

ISSUE:

Which laws govern loss or destruction of goods due to collision of vessels outside Philippine waters?

HELD:

This issue has already been laid to rest by this Court in Eastern Shipping Lines Inc. v. IAC where it was held under similar circumstance
“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” (Article 1753, Civil Code). Thus, the rule was specifically laid down that for cargoes transported from Japan
to the Philippines, the liability of the carrier is governed primarily by the Civil Code and 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 laws (Article 1766, Civil Code). Hence, the Carriage
of Goods by Sea Act, a special law, is merely suppletory to the provision of the Civil Code.

It is immaterial that the collision actually occurred in foreign waters, such as Ise Bay, Japan. It appears, however, that collision falls among
matters not specifically regulated by the Civil Code, so that no reversible error can be found in respondent courses application to the case
at bar of Articles 826 to 839, Book Three of the Code of Commerce, which deal exclusively with collision of vessels.

*Case digest by Geraldine M. Cabucos, LLB-IV, Andres Bonifacio Law School, SY 2018-2019
Tatad v. Garcia, Jr. (G.R. No. 114222)

Date: November 23, 2016Author: jaicdn

0 Comments

Facts:

DOTC planned to construct a light railway transit line along EDSA (EDSA LRT III) to provide a mass transit system and alleviate the congestion and
growing transportation problem in the metropolis. RA 6957 was enacted allowing for the financing, construction and operation of government
projects through private initiative and investment. Accordingly, prequalification and bidding was made and EDSA LRT Corporation (organized under
HK laws) was recommended to be awarded with the contract. The President approved the awarding of the contract. Petitioners are senators
praying for the prohibition of respondents from further implementing and enforcing the contract.

Issue:

Whether or not the EDSA LRT III, a public utility, can be owned by a foreign corporation.

Ruling: YES.

The Constitution, in no uncertain terms, requires a franchise for the operation of a public utility. However, it does not require a franchise before
one can own the facilities needed to operate a public utility so long as it does not operate them to serve the public.

In law, there is a clear distinction between the “operation” of a public utility and the ownership of the facilities and equipment used to serve the
public. Ownership is defined as a relation in law by virtue of which a thing pertaining to one person is completely subjected to his will in everything
not prohibited by law or the concurrence with the rights of another. The exercise of the rights encompassed in ownership is limited by law so that a
property cannot be operated and used to serve the public as a public utility unless the operator has a franchise. The operation of a rail system as a
public utility includes the transportation of passengers from one point to another point, their loading and unloading at designated places and the
movement of the trains at pre-scheduled times.

In sum, private respondent will not run the light rail vehicles and collect fees from the riding public. It will have no dealings with the public and the
public will have no right to demand any services from it. Even the mere formation of a public utility corporation does not ipso facto characterize the
corporation as one operating a public utility. The moment for determining the requisite Filipino nationality is when the entity applies for a
franchise, certificate or any other form of authorization for that purpose.
Radio Communications v NTC G.R. No. L-68729 May 29, 1987
J. Gutierrez Jr.

Facts:

RCPI operated a radio communications system since 1957 under legislative franchise granted by Republic Act No. 2036 (1957). The
petitioner established a radio telegraph service in Sorsogon, Sorsogon (1968). in San Jose, Mindoro (1971), and Catarman, Samar
(1983).

Kayumanggi Radio, on the other hand, was given the rights by the NTC to operate radio networks in the same areas.

RCPI filed a complaint in the NTC and sought to prohibit Kayumanggi Radio to operate in the same areas. The NTC ruled against the
RTC’s favor and commanded RCPI to desist in the operation of radio telegraphs in the three areas.

RTC filed a MFR in 1984. This was denied.

In the SC, Petitioner alleged that the Public Service Law had sections that was still in effect even if the Public Service Commission was
abolished and the NTC was established.

These were S13- the Commission shall have jurisdiction, supervision, and control over all public services and their franchises

S 14- Radio companies are exempt from the commission’s authority except with respect to the fixing of rates

And S 15-no public service shall operate in the Philippines without possessing a valid and subsisting certificate from the Public Service
Commission, known as "certificate of public convenience,"

Issue: Whether or not petitioner RCPI, a grantee of a legislative franchise to operate a radio company, is required to secure a certificate
of public convenience and necessity before it can validly operate its radio stations including radio telephone services in the
aforementioned areas

Held: Yes. Petition dismissed.

Ratio:

Presidential Decree No. 1- the Public Service Commission was abolished and its functions were transferred to three specialized
regulatory boards, as follows: the Board of Transportation, the Board of Communications and the Board of Power and Waterworks. The
functions so transferred were still subject to the limitations provided in sections 14 and 15 of the Public Service Law, as amended.

The succeeding Executive Order No. 546- the Board of Communications and the Telecommunications Control Bureau were abolished
and their functions were transferred to the National Telecommunications Commission

Section 15- b. Establish, prescribe and regulate areas of operation of particular operators of public service communications; and
determine and prescribe charges or rates pertinent to the operation of such public utility facilities and services except in cases where
charges or rates are established by international bodies or associations of which the Philippines is a participating member or by bodies
recognized by the Philippine Government as the proper arbiter of such charges or rates;

c. Grant permits for the use of radio frequencies for wireless telephone and telegraph systems and radio communication systems
including amateur radio stations and radio and television broadcasting systems;

The exemption enjoyed by radio companies from the jurisdiction of the Public Service Commission and the Board of Communications
no longer exists because of the changes effected by the Reorganization Law and implementing executive orders.

The petitioner's claim that its franchise cannot be affected by Executive Order No. 546 on the ground that it has long been in operation
since 1957 cannot be sustained.

Today, a franchise, being merely a privilege emanating from the sovereign power of the state and owing its existence to a grant, is
subject to regulation by the state itself by virtue of its police power through its administrative agencies. Pangasinan transportation Co.-
statutes enacted for the regulation of public utilities, being a proper exercise by the State of its police power, are applicable not only to
those public utilities coming into existence after its passage, but likewise to those already established and in operation .

Executive Order No. 546, being an implementing measure of P.D. No. I insofar as it amends the Public Service Law (CA No. 146, as
amended) is applicable to the petitioner who must be bound by its provisions.
The position of the petitioner that by the mere grant of its franchise under RA No. 2036 it can operate a radio communications system
anywhere within the Philippines is erroneous.

Sec. 4(a). This franchise shall not take effect nor shall any powers thereunder be exercised by the grantee until the Secretary of Public
works and Communications shall have allotted to the grantee the frequencies and wave lengths to be used, and issued to the grantee
a license for such case.

Thus, in the words of R.A. No. 2036 itself, approval of the then Secretary of Public Works and Communications was a precondition
before the petitioner could put up radio stations in areas where it desires to operate.

The records of the case do not show any grant of authority from the then Secretary of Public Works and Communications before the
petitioner installed the questioned radio telephone services in San Jose, Mindoro in 1971. The same is true as regards the radio
telephone services opened in Sorsogon, Sorsogon and Catarman, Samar in 1983. No certificate of public convenience and necessity
appears to have been secured by the petitioner from the public respondent when such certificate,was required by the applicable public
utility regulations.

The Constitution mandates that a franchise cannot be exclusive in nature nor can a franchise be granted except that it must be subject
to amendment, alteration, or even repeal by the legislature when the common good so requires.
Lita Enterprises vs. IAC Case Digest
Lita Enterprises vs. Intermediate Appellate Court
(129 SCRA 464)

Facts: Spouses Nicasio 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 taxi. Since they had no franchise to operate taxicabs, they contracted
with petitioner Lita Enterprise, Inc., through its representative Manuel Concordia, for the use of the latter’s certificate of public convenience
for a consideration of P1, 000.00 and a monthly rental of P200.00/taxicab unit. For the agreement to take effect, the cars were registered
in the name of Lita Enterprises, Inc. The possession, however, remains with spouses Ocampo and Garcia who operated and maintained
the same under Acme Taxi, petitioner’s trade name.

A year later, one of the taxicabs, driven by their employee, Emeterio Martin, collided with a motorcycle. Unfortunately the driver of the
motorcycle, Florante Galvez died from the injuries it sustained.

Criminal case was filed against Emeterio Martin, while a civil case was filed by the heir of the victim against Lita Enterprises. In the
decision of the lower court Lita Enterprises was held liable for damages for the amount of P25, 000.00 and P7, 000.00 for attorney’s fees.

A writ of execution for the decision followed, 2 of the cars of the respondent’s spouses were levied and were sold to a public auction.

On March 1973, respondent Ocampo decided to register his taxicabs in his own name. The manager of petitioner refused to give him the
registration papers. Thus, making spouses file a complaint against petitioner. In the decision, Lita Enterprise was ordered to return the
three certificate of registration not levied in the prior case.

Petitioner now prays that private respondent be held liable to pay the amount they have given to the heir of Galvez.

Issue: Whether or not petitioner can recover from private respondent, knowing they are in an arrangement known as “kabit system”.

Held: “Kabit system” is defined as, when a person who has been granted a certificate of convenience allows another person who owns
a motor vehicle to operate under such franchise for a fee. This system is not penalized as a criminal offense but is recognized as one
that is against public policy; therefore it is void and inexistent.

It is fundamental that the court will not aid either of the 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 trial and appellate courts to have accorded the parties relief from their
predicament. Specifically Article 1412 states that:

“If the act in which the unlawful or forbidden cause consists does not constitute a criminal offense, the following rules shall be observed:
“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 principle of in pari delicto is evident in this case. “the proposition is universal that no action arises, in equity or at law, from an illegal
contract; no suit can be maintained for its specific performance, or to recover the property agreed to sold or delivered, or damages for its
property agreed to be sold or delivered, or damages for its violation.” The parties in this case are in pari delicto, therefore no affirmative
relief can be granted to them.
CASE DIGEST (Transportation Law): Baliwag vs. Court of Appeals
Baliwag Transit vs. CA

(GR 116110, 15 May 1996)

FACTS:

On 31 July 1980, Leticia Garcia, and her 5-year old son, Allan Garcia, boarded Baliwag Transit Bus 2036 bound for Cabanatuan City
driven by Jaime Santiago. They took the seat behind the driver.

At about 7:30 p.m., in Malimba, Gapan, Nueva Ecija, the bus passengers saw a cargo truck, owned by A & J Trading, parked at the
shoulder of the national highway. Its left rear portion jutted to the outer lane, as the shoulder of the road was too narrow to
accommodate the whole truck. A kerosene lamp appeared at the edge of the road obviously to serve as a warning device. The truck
driver, and his helper were then replacing a flat tire.

Bus driver Santiago was driving at an inordinately fast speed and failed to notice the truck and the kerosene lamp at the edge of the
road. Santiago’s passengers urged him to slow down but he paid them no heed. Santiago even carried animated conversations with his
co-employees while driving. When the danger of collision became imminent, the bus passengers shouted “Babangga tayo!”. Santiago
stepped on the brake, but it was too late. His bus rammed into the stalled cargo truck killing him instantly and the truck’s helper, and
injury to several others among them herein respondents.

Thus, a suit was filed against Baliwag Transit, Inc., A & J Trading and Julio Recontique for damages in the RTC of Bulacan. After trial, it
found Baliwag Transit, Inc. liable for having failed to deliver Garcia and her son to their point of destination safely in violation of Garcia’s
and Baliwag Transit’s contractual relation; and likewise found A & J and its truck driver liable for failure to provide its cargo truck with an
early warning device in violation of the Motor Vehicle Law. All were ordered to pay solidarily the Garcia spouses.

On appeal, the CA modified the trial court’s Decision by absolving A & J Trading from liability.

ISSUE:

Whether or not Baliwag should be held solely liable for the injuries.

HELD:

Yes.

As a common carrier, Baliwag breached its contract of carriage when it failed to deliver its passengers, Leticia and Allan Garcia to their
destination safe and sound. A common carrier is bound to carry its passengers safely as far as human care and foresight can provide,
using the utmost diligence of a very cautious person, with due regard for all the circumstances. In a contract of carriage, it is presumed
that the common carrier was at fault or was negligent when a passenger dies or is injured. Unless the presumption is rebutted, the court
need not even make an express finding of fault or negligence on the part of the common carrier. This statutory presumption may only
be overcome by evidence that the carrier exercised extraordinary diligence as prescribed in Articles 1733 and 1755 of the Civil Code.

Article 1759 of the Civil Code provides that “Common carriers are liable for the death of or injuries to passengers through the
negligence or willfull acts of the former’s employees, although such employees may have acted beyond the scope of their authority or in
violation of the orders of the common carriers. This liability of the common carriers do not cease upon proof that they exercised all the
diligence of a good father of a family in the selection or supervision of their employees.”

Section 34 (g) of the Land Transportation and Traffic Code provides “Lights and reflector when parked or disabled. — Appropriate
parking lights or flares visible one hundred meters away shall be displayed at the corner of the vehicle whenever such vehicle is parked
on highways or in places that are not well-lighted or, is placed in such manner as to endanger passing traffic. Furthermore, every motor
vehicle shall be provided at all times with built-in reflectors or other similar warning devices either pasted, painted or attached at its front
and back which shall likewise be visible at night at least one hundred meters away. No vehicle not provided with any of the
requirements mentioned in this subsection shall be registered. ”

x x x However, the evidence shows that Recontique and Ecala placed a kerosene lamp or torch at the edge of the road, near the rear
portion of the truck to serve as an early warning device. This substantially complies with Section 34 (g) of the Land Transportation and
Traffic Code. The law clearly allows the use not only of an early warning device of the triangular reflectorized plates variety but also
parking lights or flares visible 100 meters away. Indeed, Col. dela Cruz himself admitted that a kerosene lamp is an acceptable
substitute for the reflectorized plates. No negligence, therefore, may be imputed to A & J Trading and its driver, Recontique.

The Supreme Court affirmed the Decision of the Court of Appeals (CA-GR CV-31246) with the modification reducing the actual
damages for hospitalization and medical fees to P5,017.74; without costs.
Teja Marketing v. IAC Case Digest
Teja Marketing v. Intermediate Appellate Court

(148 SCRA 347)

Facts: Pedro Nale bought from Teja Marketing a motorcycle with complete accessories and a sidecar. A chattel mortgage was constituted
as a security for the payment of the balance of the purchase price. The records of the Land Transportation Commission 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 said that the defendant was hiding the motorcycle from him. Lastly, the plaintiff also
explained that though the ownership of the motorcycle was already transferred to the defendant, the vehicle was still mortgaged with the
consent of the defendant to the Rural Bank of Camaligan for the reason that all motorcycle purchased from the plaintiff on credit was
rediscounted with the bank.

Teja Marketing made demands for the payment of the motorcycle but just the same Nale failed to comply, thus forcing Teja Marketing to
consult a lawyer and file an action for damage before the City Court of Naga in the amount of P546.21 for attorney's fees and P100.00
for expenses of litigation. Teja Marketing also claimed that as of 20 February 1978, the total account of Nale was already P2, 731, 05 as
shown in a statement of account; includes not only the balance of P1, 700.00 but an additional 12% interest per annum on the said
balance from 26 January 1976 to 27 February 1978; a 2% service charge; and P546.21 representing attorney's fees. On his part, Nale
did not dispute the sale and the outstanding balance of P1,700.00 still payable to Teja Marketing; but contends that because of this failure
of Teja Marketing to comply with his obligation to register the motorcycle, Nale suffered damages when he failed to claim any insurance
indemnity which would amount to no less than P15,000.00 for the more than 2 times that the motorcycle figured in accidents aside from
the loss of the daily income of P15.00 as boundary fee beginning October 1976 when the motorcycle was impounded by the LTC for not
being registered. The City Court rendered judgment in favor of Teja Marketing, dismissing the counterclaim, and ordered Nale to pay Teja
Marketing On appeal to the Court of First Instance of Camarines Sur, the decision was affirmed in toto. Nale filed a petition for review
with the Intermediate Appellate Court. On 18 July 1983, the appellate court set aside the decision under review on the basis of doctrine
of "pari delicto," and accordingly, dismissed the complaint of Teja Marketing, as well as the counterclaim of Nale; without pronouncements
as to costs. Hence, the petition for review was filed by Teja Marketing and/or Angel Jaucian.

Issue: Whether the defendant can recover damages against the plaintiff?

Held: Unquestionably, 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 out rightly 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.
G.R. No. 157917 : August 29, 2012

SPOUSES TEODORO and NANETTE PERENA, Petitioners, v. SPOUSES NICOLAS and TERESITA L. ZARATE,
PHILIPPINE NATIONAL RAILWAYS, and the COURT OF APPEALS, Respondents.

BERSAMIN, J.:

FACTS:

Spouses Teodoro and Nanette Peres (Peres) were engaged in the business of transporting students from their respective residences in
Paraque City to Don Bosco in Pasong Tamo, Makati City, and back. They employed Clemente Alfaro (Alfaro) as driver of the van.
Spouses Nicolas and Teresita Zarate (Zarates) contracted the Peres to transport their son Aaron to and from Don Bosco.

Considering that the students were due at Don Bosco by 7:15 a.m., and that they were already running late because of the heavy
vehicular traffic on the South Superhighway, Alfaro took the van to an alternate route at about 6:45 a.m. by traversing the narrow path
underneath the Magallanes Interchange. The railroad crossing in the narrow path had no railroad warning signs, or watchmen, or other
responsible persons manning the crossing. In fact, the bamboo barandilla was up, leaving the railroad crossing open to traversing
motorists.

At about the time the van was to traverse the railroad crossing, PNR Commuter No. 302 (train), was in the vicinity of the Magallanes
Interchange travelling northbound. As the train neared the railroad crossing, Alfaro drove the van eastward across the railroad tracks,
closely tailing a large passenger bus. His view of the oncoming train was blocked because he overtook the passenger bus on its left side.
The train blew its horn to warn motorists of its approach. The passenger bus successfully crossed the railroad tracks, but the van driven
by Alfaro did not. The impact threw nine of the 12 students in the rear, including Aaron, out of the van. Aaron landed in the path of the
train, which dragged his body and severed his head, instantaneously killing him.

Thus, the Zarates sued the Peres for breach of contract of carriage and the PNR for quasi-delict. The RTC ruled in favor of the Zarates.
On appeal, the CA affirmed the findings of the RTC.

ISSUE: Whether or not the Peres are liable for breach of contract of carriage?

HELD: The petition has no merit.

CIVIL LAW: common carrier; extraordinary diligence

A common carrier is a 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 such services to the public. Contracts of common carriage are governed by the
provisions on common carriers of the Civil Code, the Public Service Act, and other special laws relating to transportation. A common
carrier is required to observe extraordinary diligence, and is presumed to be at fault or to have acted negligently in case of the loss of the
effects of passengers, or the death or injuries to passengers. The true test for a common carrier is not the quantity or extent of the
business actually transacted, or the number and character of the conveyances used in the activity, but whether the undertaking is a part
of the activity engaged in by the carrier that he has held out to the general public as his business or occupation.

Applying these considerations to the case before us, there is no question that the Peres as the operators of a school bus service were: (a)
engaged in transporting passengers generally as a business, not just as a casual occupation; (b) undertaking to carry passengers over
established roads by the method by which the business was conducted; and (c) transporting students for a fee. Despite catering to a
limited clientele, the Peres operated as a common carrier because they held themselves out as a ready transportation indiscriminately to
the students of a particular school living within or near where they operated the service and for a fee.

Article 1755 of the Civil Code specifies that the common carrier should "carry the passengers safely as far as human care and foresight
can provide, using the utmost diligence of very cautious persons, with a due regard for all the circumstances." To successfully fend off
liability in an action upon the death or injury to a passenger, the common carrier must prove his or its observance of that extraordinary
diligence; otherwise, the legal presumption that he or it was at fault or acted negligently would stand.

According to Article 1759 of the Civil Code, their liability as a common carrier did not cease upon proof that they exercised all the
diligence of a good father of a family in the selection and supervision of their employee. The Peres were liable for the death of Aaron
despite the fact that their driver might have acted beyond the scope of his authority or even in violation of the orders of the common
carrier. DENIED.
Spouses Cruz vs. Sun Holidays, Inc.
GR No. 186312
29 June 2010

FACTS
Spouses Cruz files a complaint for damages against Sun Holidays arising from the death of their son who perished with his wife on board the boat M/B
Coco Beach III that capsized en route Batangas from Puerto Galera where the couple had stayed at Coco Beach Island Resort owned and operated by
respondent. Their stay was by virtue of a tour package-contract with respondent that included transportation to and from the Resort and the point of
departure in Batangas. Eight of the passengers, including petitioners’ son and his wife, died during the accident. Sun denied any responsibility for the
incident which it considered to be a fortuitous event. Petitioners allege that as a common carrier, Sun was negligent in allowing the boat to sail despite
the storm warning bulletins issued by PAGASA. Respondent denied being a common carrier, alleging that its boats are not available to the public but
are only used as ferry resort carrier. It also claimed to have exercised the utmost diligence in ensuring the safety of its passengers, and that contrary to
petitioners’ allegation, there was no storm as the Coast Guard in fact cleared the voyage. M/B Coco Beach III was not filled to capacity and had
sufficient life jackets for its passengers.

RTC dismissed the complaint. CA denied the appeal holding that Sun is a private carrier which is only required to observe ordinary diligence and that
the proximate cause of the incident was a fortuitous event.

ISSUE
Whether M/B Coco Beach III breached a contract of carriage

HELD
Respondent is a common carrier. Its ferry services are so intertwined with its business as to be properly considered ancillary thereto. The constancy
of respondent’s ferry services in its resort operations is underscored by its having its own Coco Beach boats. And the tour packages it offers, which
include the ferry services, may be availed of by anyone who can afford to pay the same. These services are thus available to the public.

In the De Guzman case, Article 1732 of the Civil Code defining “common carriers” has deliberately refrained from making distinctions on whether
the carrying of persons or goods is the carrier’s principal business, whether it is offered on a regular basis, or whether it is offered to the general
public.

Under the Civil Code, common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary
diligence for the safety of the passengers transported by them, according to all the circumstances of each case. They are bound to carry the passengers
safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances.

When a passenger dies or is injured in the discharge of a contract of carriage, it is presumed that the common carrier is at fault or negligent. In fact,
there is even no need for the court to make an express finding of fault or negligence on the part of the common carrier. This statutory presumption
may only be overcome by evidence that the carrier exercised extraordinary diligence.
Loadmasters Customs Services Inc. vs. Glodel Brokerage Corporation Digested
LOADMASTERS CUSTOMS SERVICES, INC., vs. GLODEL BROKERAGE CORPORATION and R&B INSURANCE
CORPORATION, / G.R. No. 179446 / January 10, 2011

FACTS:

The case is a petition for review on certiorari under Rule 45 of the Revised Rules of Court assailing the August 24, 2007
Decision of the Court of Appeals (CA) in CA-G.R. CV No. 82822.

On August 28, 2001, R&B Insurance issued Marine Policy No. MN-00105/2001 in favor of Columbia to insure the shipment of
132 bundles of electric copper cathodes against All Risks. On August 28, 2001, the cargoes were shipped on board the vessel "Richard
Rey" from Isabela, Leyte, to Pier 10, North Harbor, Manila. They arrived on the same date.
Columbia engaged the services of Glodel for the release and withdrawal of the cargoes from the pier and the subsequent
delivery to its warehouses/plants. Glodel, in turn, engaged the services of Loadmasters for the use of its delivery trucks to transport the
cargoes to Columbia’s warehouses/plants in Bulacan and Valenzuela City.
The goods were loaded on board twelve (12) trucks owned by Loadmasters, driven by its employed drivers and accompanied
by its employed truck helpers. Of the six (6) trucks route to Balagtas, Bulacan, only five (5) reached the destination. One (1) truck,
loaded with 11 bundles or 232 pieces of copper cathodes, failed to deliver its cargo.
Later on, the said truck, was recovered but without the copper cathodes. Because of this incident, Columbia filed with R&B
Insurance a claim for insurance indemnity in the amount ofP1,903,335.39. After the investigation, R&B Insurance paid Columbia the
amount ofP1,896,789.62 as insurance indemnity.

R&B Insurance, thereafter, filed a complaint for damages against both Loadmasters and Glodel before the Regional Trial Court,
Branch 14, Manila (RTC), It sought reimbursement of the amount it had paid to Columbia for the loss of the subject cargo. It claimed
that it had been subrogated "to the right of the consignee to recover from the party/parties who may be held legally liable for the loss."

On November 19, 2003, the RTC rendered a decision holding Glodel liable for damages for the loss of the subject cargo and
dismissing Loadmasters’ counterclaim for damages and attorney’s fees against R&B Insurance.

Both R&B Insurance and Glodel appealed the RTC decision to the CA.
On August 24, 2007, the CA rendered that the appellee is an agent of appellant Glodel, whatever liability the latter owes to
appellant R&B Insurance Corporation as insurance indemnity must likewise be the amount it shall be paid by appellee Loadmasters.
Hence, Loadmasters filed the present petition for review on certiorari.

ISSUE:

Whether or not Loadmasters and Glodel are common carriers to determine their liability for the loss of the subject cargo.

RULING:

The petition is PARTIALLY GRANTED. Judgment is rendered declaring petitioner Loadmasters Customs Services, Inc. and
respondent Glodel Brokerage Corporation jointly and severally liable to respondent

Under Article 1732 of the Civil Code, common carriers are persons, corporations, firms, or associations engaged in the business of
carrying or transporting passenger or goods, or both by land, water or air for compensation, offering their services to the public.
Loadmasters is a common carrier because it is engaged in the business of transporting goods by land, through its trucking service. It is
a common carrier as distinguished from a private carrier wherein the carriage is generally undertaken by special agreement and it does
not hold itself out to carry goods for the general public. Glodel is also considered a common carrier within the context of Article
1732. For as stated and well provided in the case of Schmitz Transport & Brokerage Corporation v. Transport Venture, Inc., a customs
broker is also regarded as a common carrier, the transportation of goods being an integral part of its business.

Loadmasters and Glodel, being both common carriers, are mandated from the nature of their business and for reasons of public policy,
to observe the extraordinary diligence in the vigilance over the goods transported by them according to all the circumstances of such
case, as required by Article 1733 of the Civil Code. When the Court speaks of extraordinary diligence, it is that extreme measure of
care and caution which persons of unusual prudence and circumspection observe for securing and preserving their own property or
rights. With respect to the time frame of this extraordinary responsibility, the Civil Code provides that the exercise of extraordinary
diligence lasts from the time the goods are unconditionally placed in the possession of, and received by, the carrier for transportation
until the same are delivered, actually or constructively, by the carrier to the consignee, or to the person who has a right to receive them.
The Court is of the view that both Loadmasters and Glodel are jointly and severally liable to R & B Insurance for the loss of the subject
cargo. Loadmasters’ claim that it was never privy to the contract entered into by Glodel with the consignee Columbia or R&B Insurance
as subrogee, is not a valid defense.

For under 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.

xxxx

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.

It is not disputed that the subject cargo was lost while in the custody of Loadmasters whose employees (truck driver and helper) were
instrumental in the hijacking or robbery of the shipment. As employer, Loadmasters should be made answerable for the damages
caused by its employees who acted within the scope of their assigned task of delivering the goods safely to the warehouse.

Glodel is also liable because of its failure to exercise extraordinary diligence. It failed to ensure that Loadmasters would fully comply
with the undertaking to safely transport the subject cargo to the designated destination. Glodel should, therefore, be held liable with
Loadmasters. Its defense of force majeure is unavailing.

For the consequence, Glodel has no one to blame but itself. The Court cannot come to its aid on equitable grounds. "Equity, which has
been aptly described as ‘a justice outside legality,’ is applied only in the absence of, and never against, statutory law or judicial rules of
procedure." The Court cannot be a lawyer and take the cudgels for a party who has been at fault or negligent.
SCHMITZ TRANSPORT & BROKERAGE CORPORATION v. TRANSPORT VENTURE, INC., INDUSTRIAL INSURANCE
COMPANY, LTD., et al.

456 SCRA 557 (2005)

A common carrier shall exercise extraordinary diligence to prevent and/or minize the loss or destruction of goods.

SYTCO Pte Ltd. Singapore shipped from the port of Ilyichevsk, Russia on board M/V ―Alexander Saveliev‖ (a vessel of Russian registry
and owned by respondent Black Sea) 545 hot rolled steel sheets. The vessel arrived at the port of Manila and the Philippine Ports Authority
(PPA) assigned it a place of berth at the outside breakwater at the Manila South Harbor. Petitioner Schmitz Transport, engaged to secure
the requisite clearances, to receive the cargoes from the shipside, and to deliver them to Little Giant Steelpipe Corporation‘s warehouse
at Cainta, Rizal. It likewise engaged the services of respondent Transport Venture Inc. (TVI) to send a barge and tugboat at shipside.

The tugboat, after positioning the barge alongside the vessel, left and returned to the port terminal. Later on,
arrastre operator commenced to unload 37 of the 545 coils from the vessel unto the barge. By noon the next day, during which the weather
condition had become inclement due to an approaching storm, the unloading unto the barge of the 37 coils was accomplished. However,
there was no tugboat that pulled the barge back to the pier. Eventually, because of the strong waves, the crew of the barge abandoned it
and transferred to the vessel. The barge capsized, washing the 37 coils into the sea. Earnest efforts on the part of both the consignee Little
Giant and Industrial Insurance to recover the lost cargoes proved futile.

Industrial Insurance later filed a complaint against Schmitz Transport, TVI and Black Sea through its representative Inchcape
(the defendants) before the RTC of Manila, for the recovery of the amount it paid to Little Giant plus adjustment fees, attorney‘s fees, and
litigation expenses. Industrial Insurance won and the Schmitz et al.’s motion for reconsideration is denied.

In effect, Schmitz now filed charges against TVI et al. It asserts that in chartering the barge and tugboat of TVI, it was acting for its
principal, consignee Little Giant, hence, the transportation contract was by and between Little Giant and TVI. The Court rendered a
decision holding Schmitz and TVI liable.

ISSUES:

Whether or not the liability for the loss may attach to Black Sea, Schmitz and TVI

HELD:

TVI‘s failure to promptly provide a tugboat did not only increase the risk that might have been reasonably anticipated during the shipside
operation, but was the proximate cause of the loss. A man of ordinary prudence would not leave a heavily loaded barge floating for a
considerable number of hours, at such a precarious time, and in the open sea, knowing that the barge does not have any power of its own
and is totally defenseless from the ravages of the sea. That it was nighttime and, therefore, the members of the crew of a tugboat would
be charging overtime pay did not excuse TVI from calling for one such tugboat.

As for Schmitz, for it to be relieved of liability, it should, following Article 1739 of the Civil Code, prove that it exercised due diligence to
prevent or minimize the loss, before, during and after the occurrence of the storm in order that it may be exempted from liability for the
loss of the goods.

While Schmitz sent checkers and a supervisor on board the vessel to counter-check the operations of TVI, it failed to take all available and
reasonable precautions to avoid the loss. After noting that TVI failed to arrange for the prompt towage of the barge despite the
deteriorating sea conditions, it should have summoned the same or another tugboat to extend help, but it did not.

The Court holds then that Schmitz and TVI are solidarily liable for the loss of the cargoes. As for Black Sea, its duty as a common carrier
extended only from the time the goods were surrendered or unconditionally placed in its possession and received for transportation until
they were delivered actually or constructively to consignee Little Giant

Parties to a contract of carriage may, however, agree upon a definition of delivery that extends the services rendered by the carrier. In the
case at bar, Bill of LadingNo. 2 covering the shipment provides that delivery be made ―to the port of discharge or so near thereto as she
may safely get, always afloat.‖ The delivery of the goods to the consignee was not from ―pier to pier‖ but from the shipside of ―M/V
Alexander Saveliev‖ and into barges, for which reason the consignee contracted the services of petitioner. Since Black Sea had
constructively delivered the cargoes to Little Giant, through Schmitz, it had discharged its duty.

In fine, no liability may thus attach to Black Sea.


Calvo v. UCPB General Insurance Case Digest
Calvo v. UCPB General Insurance

G.R. No. 148496 March 19, 2002

Facts: Petitioner Virgines Calvo, owner of Transorient Container Terminal Services, Inc. (TCTSI), and a custom broker, entered into a
contract with San Miguel Corporation (SMC) for the transfer of 114 reels of semi-chemical fluting paper and 124 reels of kraft liner board
from the port area to the Tabacalera Compound, Ermita, Manila. The cargo was insured by respondent UCPB General Insurance Co.,
Inc.

On July 14, 1990, contained in 30 metal vans, arrived in Manila on board “M/V Hayakawa Maru”. After 24 hours, they were unloaded from
vessel to the custody of the arrastre operator, Manila Port Services, Inc. From July 23 to 25, 1990, petitioner, pursuant to her contract
with SMC, withdrew the cargo from the arrastre operator and delivered it to SMC’s warehouse in Manila. On July 25, the goods were
inspected by Marine Cargo Surveyors, reported that 15 reels of the semi-chemical fluting paper were “wet/stained/torn” and 3 reels of
kraft liner board were also torn. The damages cost P93,112.00.

SMC collected the said amount from respondent UCPB under its insurance contract. Respondent on the other hand, as a subrogee of
SMC, brought a suit against petitioner in RTC, Makati City. On December 20, 1995, the RTC rendered judgment finding petitioner liable
for the damage to the shipment. The decision was affirmed by the CA.

Issue: Whether or not Calvo is a common carrier?

Held: In this case the contention of the petitioner, that he is not a common carrier but a private carrier, has no merit.

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 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. We think that Article
1733 deliberately refrained from making such distinction. (De Guzman v. CA, 68 SCRA 612)

Te concept of “common carrier” under Article 1732 coincide with the notion of “public service”, under the Public Service Act which partially
supplements the law on common carrier. Under Section 13, paragraph (b) of the Public Service Act, it includes:

“ x x x every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or compensation, with general
or limited clientele, whether permanent, occasional or accidental, and done for general business purposes, any common carrier, railroad,
street railway, traction railway, subway motor vehicle, either for freight or passenger, or both, with or without fixed route and whatever
may be its classification, freight or carrier service of any class, express service, steamboat, or steamship line, pontines, ferries and water
craft, engaged in the transportation of passengers or freight or both, shipyard, marine repair shop, wharf or dock, ice plant, ice-refrigeration
plant, canal, irrigation system, gas, electric light, heat and power, water supply and power petroleum, sewerage system, wire or wireless
communications systems, wire or wireless broadcasting stations and other similar public services. x x x”
Torres Madrid Brokerage Inc. vs Feb Mitsui and BMT

Facts:

Sony engaged the services of Torres Madrid Brokerage (TMBI) to facilitate, process, withdraw, and deliver the shipment of various electronic goods
from Thailand at the port to its warehouse in Biñan, Laguna.

TMBI subcontracted the services of Benjamin Manalastas’ company, BMT Trucking services (BMT) to transport the shipment as they do not own
any delivery trucks. TMBI notified Sony and had no objections of the arrangement.

4 BMT trucks picked up the shipment from the port on Oct. 7, 2000 but due to the truck ban they could not undertake delivery immediately and
bec the ff. Day was Sunday. BMT scheduled delivery on Oct. 9 2000. October 9 early morning however, only 3 trucks arrived at Sony’s Biñan
warehouse. The 4th truck was seen abandoned along Diversion Road in Filinvest, Alabang, Muntinlupa City at 12noon wherein both the driver Rufo
Lapesura and the shipments were missing.

Victor Torres, TMBI’s general manager, filed with NBI against Lapesura for’hijacking’

TMBI notified Sony of the loss and sent BMT a letter demanding payment for the lost shipment. BMT refused so insisting the goods were
‘hijacked,’.

SONY filed an insurance claim with the Mitsui, the insurer of goods. Mitsui paid Sony P7,293,386.23. After being subrogated to Sony’s rights, Mitsui
sent TMBI a demand letter for payment of the lost goods. TMBI refused to pay. Mitsui then filed a complaint against TMBI. TMBI impleaded BMT as
a 3rd party defendant, alleging BMT’s driver responsible and claimed BMT’s negligence as the proximate cause. TMBI prayed that in te event it is
held liable to Mitsui, it should be reimbursed by BMT.

RTC found BMT and TMBI jointly and solidarily liable. That they have been doing business since early 80’s and the same incident happened on
Sony’s cargo in 1997 but neither sony nor its insurer filed a complaint.

BMT AND TMBI appealed.

TMBI denied that it was a common carrier required to exercise extraordinary diligence and that ‘hijack’ is a fortuitous event.

BMT claimed that it exercised extraordinary diligence and ye loss result from a forfuitous event.

Issue:

1. WON TMBI is a common carrier engaged in the business of transporting goods for the general public for a fee
2. WON TMBI and BMT are solidarily liable to MITSUI
3. WON BMT is directly liable to Sony or Mitsui
4. WON BMT is liable to TMBI for breach of their contract of carriage

Ruling:

1.A brokerage may be considered a common carrier if it also undertakes to deliver the goods for its customers. Common carriers are persons,
corporations, firms or associations engaged in the business of transporting passengers or goods or both, by land, water, or air, for compensation,
offering their services to the public. They are bound to observe extraordinary diligence for reasons of public policy in the vigilance over the goods
and in rhe safety of their passengers. The law does not disringuish between one whose principal business activity is the carrying of goods and one
who undertakes this task only as an ancillary activity.TMBI’s delivery of the goods is an integral, albeit ancillary, part of its brokerage services. As
long as an entity holds itself to the public for the transport of goods as a business, it os considered a common carrier regardless of whether it owns
a vehicle or has actually to hire one.

Consequently, as in the case of theft or robbery of goods,, a common carrier is presumed to have been at fault or to have acted negligently, unless
it can prove that it observed extraordinary diligence. And that a robbery attended by grave or irresistble threat, violence or force is a fortuitous
event that absolves the common carrier from liability.

In the present case, despite the subcontract, TMBI remained responsible for the cargo. Under Article 1763, a common carrier’s extraordinary
responsibility lasts from the time these goods are unconditionally placed in the possession of, and received by the carrier for transportation, until
they are delivered, actually or constructively, by the carrier to the consignee.TMBI simply argued that it was not a common carrier bound to
observe extraordinary diligence. Its failure to successfully establish this premise carries with it the presumption of fault thus rendering it liably to
Sony or Mitsui for breach of contract

2.NO. TMBI’s liability to Mitsui does not stem from a quasi delict but from its breach of contract. Th e tie that binds TMBI with Mitsui is contractual,
albeit one that oassed on to Mitsui as a result of TMBI’s contract of carriage with Sony to which Mitsui had been subrogated as an insurer. The legal
reality that results from this contractual tie precludes the application of quasi- delict

3.No. There is no direct contractual relationship existed between Sony/Mitsui. Mitsui did not even sue BMT, much less prove any negligence on its
part. There is no basis to directly hold BMT Liable to Mitsui for quasi-delict

4.YES. By subcontracting the delivery, TMBI entered into its ownc contract of carriage with a fellow common carrier. The cargo was lost after is
transfer to BMT’s custody based on its contract with TMBI. Following Article 1735, BMT Is presumed to be at fault.Since BMT failed to provethat it
observed extraordinary diligence, it is liable to TMBI for breach of their contract of carriage

TMBI is liable to Sony/Mitsui for breaching the contract of carriage. In turn, TMBI is entitled to reimbursement from BMT due to the latter’s won
breach of its contract of carriage with TMBI
First Philippine Industrial Corp. vs CA Case Digest
First Philippine Industrial Corp. vs. Court of Appeals

300 SCRA 661, 1998

Facts: Petitioner is a grantee of a pipeline concession under R.A. No. 387, as amended, a 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, petitioner 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 respondent City Treasurer required petitioner to pay a local tax based on its gross receipts for the
fiscal year 1993 pursuant to the Local Government Code. The respondent City Treasure 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, petitioner paid the tax under protest in the amount of
P239, 019.01 for the first quarter of 1993.

On June 15, 1994, petitioner filed with the RTC of Batangas City a complaint for tax refund with prayer for writ of preliminary injunction
against respondents City of Batangas and Adoracion Arellano in her capacity as City Treasurer. In its complaint, petitioner alleged, inter
alia, that: (1) the imposition and collection of the business tax on its gross receipts violates Sec. 133 of the Local Government Code; (2)
the authority of cities to impose and collect a tax on the gross receipts of “contractors and independent contractors” under Sec. 141(e)
and 151 does not include the authority to collect such taxes on transportation contractors for, as defined under Sec. 131(h), the term
“contractors” excludes transportation contactors; and (3) the City Treasurer illegally and erroneously imposed and collected the said tax,
thus meriting the immediate refund of the tax paid.

Traversing the complaint, the respondents argued that petitioner cannot be exempt from taxes under Sec. 133 (J) of the Local Government
Code as said exemption applied only to “transportation contractors and persons engaged in the transportation by hire and common
carriers by air land and water.” Respondents assert that pipelines are not included in the term “common carrier” which refers solely to
ordinary carriers as trucks, trains, ships and the like. Respondents further posit that the term “common carrier” under the said Code
pertains to the mode or manner by which a product is delivered to its destination.

Issue: Whether or not the petitioner is a common carrier so that in the affirmative, he is not liable to pay the carriers tax under the Local
Government Code of 1991?

Held: Petitioner is a common carrier.

A “common carrier” may be defined, broadly, as one who holds himself out to the public as engaged in the business of transporting
persons or property from place to place, for compensation, offering his services to the public generally.

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 carrying of goods for others as a public employment, and must hold himself out as ready to engage in the
transportation of goods or persons 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.


CASE DIGEST (Transportation Law): Vlasons vs. Court of Appeals

VLASONS SHIPPING, INC vs. CA and NATIONAL STEEL CORPORATION

[G.R. No. 112350. December 12, 1997]

NATIONAL STEEL CORPORATION vs. CA and VLASONS SHIPPING, INC.

[G.R. No. 112287. December 12, 1997]

FACTS:

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

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

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

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

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

ISSUE:

Whether or not Vlazons is a private carrier.

HELD:

Yes.

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

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

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

“ x x x [I]n a contract of private carriage, the parties may freely stipulate their duties and obligations which perforce would be binding on
them. Unlike in a contract involving a common carrier, private carriage does not involve the general public. Hence, the stringent
provisions of the Civil Code on common carriers protecting the general public cannot justifiably be applied to a ship transporting
commercial goods as a private carrier. Consequently, the public policy embodied therein is not contravened by stipulations in a charter
party that lessen or remove the protection given by law in contracts involving common carriers.”
De Guzman v. CA

Facts:

Respondent 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.
Planters Products vs. CA Case Digest
Planters Products vs. Court of Appeals

G.R. No. 101503 September 15, 1993

Facts: Planters Product Inc. purchased from Mitsubishi international corporation metric tons of Urea fertilizer, which the latter shipped
aboard the cargo vessel M/V Sun Plum owned by private respondent Kyosei Kisen Kabushiki Kaisha. Prior to its voyage, a time charter-
party on the vessel respondent entered into between Mitsubishi as shipper/charterer and KKKK as ship owner, in Tokyo, Japan.

Before loading the fertilizer aboard the vessel, (4) of her holds were 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. Upon arrival of vessel at port, the petitioner unloaded the cargo pursuant to the terms
and conditions of the charter-party. The hatches remained open throughout the duration of the discharge.

Upon arrival at petitioner’s warehouse a survey conducted over the cargo revealed a shortage and the most of the fertilizer was
contaminated with dirt. As such, Planters filed an action for damages. The defendant argued that the public policy governing common
carriers do not apply to them because they have become private carriers by reason of the provisions of the charter-party.

Issue: Whether or not the charter-party contract between the ship owner and the charterer transforms a common carrier into a private
carrier?

Held: A charter party may either her be time charter wherein the vessel is leased to the charterer, wherein the ship is leased to the
charterer for a fixed period of time or voyage charter, wherein the ship is leased for a single voyage. In both cases, the charter party
provides for the hire of the vessel only, either for a determinate time or for a single or consecutive voyage.

It is therefor imperative that such common carrier shall remain as such, notwithstanding the charter of the whole or part of the 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 ship and its crew as in bareboat or demise that it becomes a private carrier. Undoubtedly, a shipowner in a time
or voyage charter retains in possession and control of the ship, although her holds may be the property of the charterer.
Coastwise Lighterage Corporation v. CA

Facts:

Pag-asa Sales Inc. entered into a contract to transport molasses from the province of Negros to Manila with Coastwise Lighterage
Corporation (Coastwise for brevity), using the latter's dumb barges. The barges were towed in tandem by the tugboat MT Marica, which
is likewise owned by Coastwise. Upon reaching Manila Bay, one of the barges, "Coastwise 9", struck an unknown sunken object. The
forward buoyancy compartment was damaged, and water gushed in through a hole "two inches wide and twenty-two inches long". As a
consequence, the molasses at the cargo tanks were contaminated. Pag-asa filed a claim against Philippine General Insurance Company,
the insurer of its cargo. Philgen paid P700,000 for the value of the molasses lost.

Philgen then filed an action against Coastwise to recover the money it paid, claiming to be subrogated to the claims which the consignee
may have against the carrier. Both the trial court and the Court of Appeals ruled against Coastwise.

Issues:

(1) Whether Coastwise was transformed into a private carrier by virtue of the contract it entered into with Pag-asa, and whether it exercised
the required degree of diligence

(2) Whether Philgen was subrogated into the rights of the consignee against the carrier

Held:

(1) Pag-asa Sales, Inc. only leased three of petitioner's vessels, in order to carry cargo from one point to another, but the possession,
command mid navigation of the vessels remained with petitioner Coastwise Lighterage. Coastwise Lighterage, by the contract of
affreightment, was not converted into a private carrier, but remained a common carrier and was still liable as such. The law and
jurisprudence on common carriers both hold that the mere proof of delivery of goods in good order to a carrier and the subsequent arrival
of the same goods at the place of destination in bad order makes for a prima facie case against the carrier. It follows then that the
presumption of negligence that attaches to common carriers, once the goods it is sports are lost, destroyed or deteriorated, applies to the
petitioner. This presumption, which is overcome only by proof of the exercise of extraordinary diligence, remained unrebutted in this
case. Jesus R. Constantino, the patron of the vessel "Coastwise 9" admitted that he was not licensed. Coastwise Lighterage cannot safely
claim to have exercised extraordinary diligence, by placing a person whose navigational skills are questionable, at the helm of the vessel
which eventually met the fateful accident. It may also logically, follow that a person without license to navigate, lacks not just the skill to
do so, but also the utmost familiarity with the usual and safe routes taken by seasoned and legally authorized ones. Had the patron been
licensed he could be presumed to have both the skill and the knowledge that would have prevented the vessel's hitting the sunken derelict
ship that lay on their way to Pier 18. As a common carrier, petitioner is liable for breach of the contract of carriage, having failed to
overcome the presumption of negligence with the loss and destruction of goods it transported, by proof of its exercise of extraordinary
diligence.

(2) Article 2207 of the Civil Code is founded on the well-settled principle of subrogation. If the insured property is destroyed or damaged
through the fault or negligence of a party other than the assured, then the insurer, upon payment to the assured will be subrogated to the
rights of the assured to recover from the wrongdoer to the extent that the insurer has been obligated to pay. Payment by the insurer to the
assured operated as an equitable assignment to the former of all remedies which the latter may have against the third party whose
negligence or wrongful act caused the loss. The right of subrogation is not dependent upon, nor does it grow out of, any private of contract
or upon written assignment of, claim. It accrues simply upon payment of the insurance claim by the insurer.
PUROMINES, INC., petitioner, vs. COURT OF APPEAL and PHILIPP BROTHERS OCEANIC, INC., respondents. G.R. No. 91228.
March 22, 1993

Facts: Puromines, Inc. and Makati Agro Trading, Inc. entered into a contract with private respondents Philipp Brothers
Oceanic, Inc. for the sale of prilled Urea in bulk. The Sales Contract provided, among others an arbitration clause which states,
thus:

"9. Arbitration - Any disputes arising under this contract shall be settled by arbitration in London in accordance with the
Arbitration Act 1950 and any statutory amendment or modification thereof. XXXX"

The shipment covered by 3 bills of lading was loaded on MV Liliana Dimitrova with Philipp Brothers as charterer of said vessel.
When the shipment covered by Bill of Lading 1 and 3 were discharged in Manila, it was found to be in bad order and condition,
caked, hardened and lumpy, discoloured and contaminated with rust and dirt.

Puromines filed a complaint with the Trial Court for breach of contract of carriage against Maritime, as ship-agent and Philipp
Brothers, as charterer. Philipp filed a motion to dismiss on the ground that Petitioner should comply with the arbitration clause
in the sales contract. Puromines opposed contending that the sales contract does not include contract of carriage, therefore, the
latter is not covered by the agreement on arbitration.

Issue: Whether or not the arbitration clause in the sales contract covers claims for violations of contract of carriage.

Held: Yes. The sales contract is comprehensive enough to include claims for damages arising from carriage and delivery of
the goods. Puromines derives its right to the cargo from the bill of lading which is the contract of affreightment together with the
sales contract. Consequently, it is bound by the provisions and terms of the said bill of lading and of the arbitration clause
incorporated in the sales contract.

Responsibility to third persons for goods shipped on board a vessel follows the vessel's possession and employment.
Assuming the cause of action is based on contract of carriage, it must be first determined what kind of charter party had with the
ship owner to determine liability. If it is a contract of affreightment, the charterer is not liable as possession is still with owner. If
it is a charter of demise or bareboat, then the charterer is liable as it is considered the owner and therefore would be liable for
damage or loss.

In any case, whether the liability of respondent should be based on the same contract or that of the bill of lading, the
parties are nevertheless obligated to respect the arbitration provisions on the sales contract and/or the bill of lading. Petitioner
being a signatory and party to the sales contract cannot escape from his obligation under the arbitration clause as stated therein.

Arbitration has been held valid and constitutional. The rule now is that unless the agreement is such as absolutely to
close the doors of the courts against the parties, which agreement would be void, the courts will look with favor upon such
amicable arrangements and will only interfere with great reluctance to anticipate or nullify the action of the arbitrator.

WHEREFORE, petition is hereby DISMISSED and decision of the court a quo is AFFIRMED.
Transportation Case Digest: Phil Am Gen Insurance Co, Et Al. V. PKS Shipping Co (2003)

G.R. No. 149038 April 9, 2003

Lessons Applicable: Charter Party (Transportation)

FACTS:

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

HELD: NO. Petition is DENIED

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

 Complementary is Section 13, paragraph (b), of the Public Service Act

public service" to be –

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

259 SCRA 426

G.R. No. 111127

July 26, 1996

Facts: Petitioners Engracio Fabre, Jr. and his wife were owners of a Mazda minibus. They used the bus principally in connection with a
bus service for school children which they operated in Manila. It was driven by Porfirio Cabil.

On November 2, 1984 private respondent Word for the World Christian Fellowship Inc. (WWCF) arranged with the petitioners for the
transportation of 33 members of its Young Adults Ministry from Manila to La Union and back in consideration of which private respondent
paid petitioners the amount of P3,000.00.

The usual route to Caba, La Union was through Carmen, Pangasinan. However, the bridge at Carmen was under repair, so that petitioner
Cabil, who was unfamiliar with the area (it being his first trip to La Union), was forced to take a detour through the town of Ba-ay in
Lingayen, Pangasinan. At 11:30 that night, petitioner Cabil came upon a sharp curve on the highway. The road was slippery because it
was raining, causing the bus, which was running at the speed of 50 kilometers per hour, to skid to the left road shoulder. The bus hit the
left traffic steel brace and sign along the road and rammed the fence of one Jesus Escano, then turned over and landed on its left side,
coming to a full stop only after a series of impacts. The bus came to rest off the road. A coconut tree which it had hit fell on it and smashed
its front portion. Because of the mishap, several passengers were injured particularly Amyline Antonio.

Criminal complaint was filed against the driver and the spouses were also made jointly liable. Spouses Fabre on the other hand contended
that they are not liable since they are not a common carrier. The RTC of Makati ruled in favor of the plaintiff and the defendants were
ordered to pay jointly and severally to the plaintiffs. The Court of Appeals affirmed the decision of the trial court.

Issue: Whether the spouses Fabre are common carriers?

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

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

The above article makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and
one who does such carrying only as an ancillary activity (in local idiom, as "a sideline"). Article 1732 also carefully avoids making any
distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such service
on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services to the
"general public," i.e., the general community or population, and one who offers services or solicits business only from a narrow segment
of the general population. We think that Article 1732 deliberately refrained from making such distinctions.
FGU INSURANCE CORPORATION v. G.P. SARMIENTO TRUCKING CORPORATION, GR No. 141910, 2002-08-06

Facts:

G.P. Sarmiento Trucking Corporation (GPS) undertook to deliver on 18 June 1994 thirty (30) units of Condura S.D. white refrigerators
aboard one of its Isuzu truck, driven by Lambert Eroles, from the plant site of Concepcion Industries, Inc., along South Superhighway in

Alabang, Metro Manila, to the Central Luzon Appliances in Dagupan City. While the truck was traversing the north diversion road along
McArthur highway in Barangay Anupol, Bamban, Tarlac, it collided with an unidentified truck, causing it to fall into a deep canal,
resulting in... damage to the cargoes.

FGU Insurance Corporation (FGU), an insurer of the shipment, paid to Concepcion Industries, Inc., the value of the covered cargoes in
the sum of P204,450.00. FGU, in turn, being the subrogee of the rights and interests of Concepcion Industries, Inc., sought
reimbursement of... the amount it had paid to the latter from GPS. Since the trucking company failed to heed the claim, FGU filed a
complaint for damages and breach of contract of carriage against GPS and its driver Lambert Eroles with the Regional Trial Court

The trial court, in its order of 30 April 1996,[1] granted the motion to dismis

"Accordingly, the application of the law on common carriers is not warranted and the presumption of fault or negligence on the part of a
common carrier in case of loss, damage or deterioration of goods during transport under 1735 of the Civil Code is not availing.

"Thus, the laws governing the contract between the owner of the cargo to whom the plaintiff was subrogated and the owner of the
vehicle which transports the cargo are the laws on obligation and contract of the Civil Code as well as the law on quasi delicts.

"Under the law on obligation and contract, negligence or fault is not presumed. The law on quasi delict provides for some presumption
of negligence but only upon the attendance of some circumstances. Thus, Article 2185 provides:

'Art. 2185. Unless there is proof to the contrary, it is presumed that a person driving a motor vehicle has been negligent if at the time of
the mishap, he was violating any traffic regulation.'

"Evidence for the plaintiff shows no proof that defendant was violating any traffic regulation. Hence, the presumption of negligence is
not obtaining.

"Considering that plaintiff failed to adduce evidence that defendant is a common carrier and defendant's driver was the one negligent,
defendant cannot be made liable for the damages of the subject cargoes."

The Court of Appeals rejected the appeal of petitioner and ruled in favor of GPS. The appellate court, in its decision of 10 June 1999,
[4] discoursed, among other things, that -

"x x x in order for the presumption of negligence provided for under the law governing common carrier (Article 1735, Civil Code) to
arise, the appellant must first prove that the appellee is a common carrier. Should the appellant fail to prove that the appellee is a
common... carrier, the presumption would not arise; consequently, the appellant would have to prove that the carrier was negligent.

Issues:

WHETHER RESPONDENT GPS MAY BE CONSIDERED AS A COMMON CARRIER AS DEFINED UNDER THE LAW AND
EXISTING JURISPRUDENCE.

II

WHETHER RESPONDENT GPS, EITHER AS A COMMON CARRIER OR A PRIVATE CARRIER, MAY BE PRESUMED TO HAVE
BEEN NEGLIGENT WHEN THE GOODS IT UNDERTOOK TO TRANSPORT SAFELY WERE SUBSEQUENTLY DAMAGED WHILE
IN ITS PROTECTIVE CUSTODY AND POSSESSION.

III

WHETHER THE DOCTRINE OF RES IPSA LOQUITUR IS APPLICABLE IN THE INSTANT CASE.

Ruling:

the Court finds the conclusion of the trial court and the Court of Appeals to be amply justified. GPS, being an exclusive contractor and
hauler of Concepcion Industries, Inc., rendering or offering its services to no other individual or entity, cannot be... considered a
common carrier. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air, for hire or compensation, offering their services to the public,[8] whether to the
public in general or to a limited clientele in particular, but never on an exclusive basis.[9] The true test of a common carrier is the
carriage of passengers or goods, providing space for those who opt to avail themselves of... its transportation service for a fee.[10]
Given accepted standards, GPS scarcely falls within the term "common carrier."

The above conclusion nothwithstanding, GPS cannot escape from liability.

In culpa contractual, upon which the action of petitioner rests as being the subrogee of Concepcion Industries, Inc., the mere proof of
the existence of the contract and the failure of its compliance justify, prima facie, a corresponding right of relief.[11] The law,
recognizing the obligatory force of contracts,[12] will not permit a party to be set free from liability for any kind of misperformance of the
contractual undertaking or a contravention of the tenor thereof.[13] A breach upon the contract confers upon the injured party a valid
cause for recovering that which may have been lost or suffered. The remedy serves to preserve the interests of the promisee that may
include his "expectation interest," which is his interest in... having the benefit of his bargain by being put in as good a position as he
would have been in had the contract been performed, or his "reliance interest," which is his interest in being reimbursed for loss caused
by reliance on the contract by being put in as good a position as... he would have been in had the contract not been made; or his
"restitution interest," which is his interest in having restored to him any benefit that he has conferred on the other party.[14] Indeed,
agreements can accomplish little, either for their makers... or for society, unless they are made the basis for action.[15] The effect of
every infraction is to create a new duty, that is, to make recompense to the one who has been injured by the failure of another to
observe his contractual obligation[16] unless he can show extenuating circumstances, like proof of his exercise of due diligence
(normally that of the diligence of a good father of a family or, exceptionally by stipulation or by law such as in the case of common
carriers, that of extraordinary... diligence) or of the attendance of fortuitous event, to excuse him from his ensuing liability.

Respondent trucking corporation recognizes the existence of a contract of carriage between it and petitioner's assured, and admits that
the cargoes it has assumed to deliver have been lost or damaged while in its custody. In such a situation, a default on, or failure of...
compliance with, the obligation in this case, the delivery of the goods in its custody to the place of destination - gives rise to a
presumption of lack of care and corresponding liability on the part of the contractual obligor the burden being on him to establish
otherwise. GPS... has failed to do so.

Respondent driver, on the other hand, without concrete proof of his negligence or fault, may not himself be ordered to pay petitioner.
The driver, not being a party to the contract of carriage between petitioner's principal and defendant, may not be held liable under the...
agreement. A contract can only bind the parties who have entered into it or their successors who have assumed their personality or
their juridical position.[17] Consonantly with the axiom res inter alios acta aliis neque nocet prodest,... such contract can neither favor
nor prejudice a third person. Petitioner's civil action against the driver can only be based on culpa aquiliana, which, unlike culpa
contractual, would require the claimant for damages to prove negligence or fault on the part of the... defendant.[18]

A word in passing. Res ipsa loquitur, a doctrine being invoked by petitioner, holds a defendant liable where the thing which caused the
injury complained of is shown to be under the latter's management and the accident is such that, in the ordinary course of things,...
cannot be expected to happen if those who have its management or control use proper care. It affords reasonable evidence, in the
absence of explanation by the defendant, that the accident arose from want of care.[19] It is not a rule of substantive law and,... as
such, it does not create an independent ground of liability. Instead, it is regarded as a mode of proof, or a mere procedural convenience
since it furnishes a substitute for, and relieves the plaintiff of, the burden of producing specific proof of negligence. The maxim simply...
places on the defendant the burden of going forward with the proof.[20] Resort to the doctrine, however, may be allowed only when (a)
the event is of a kind which does not ordinarily occur in the absence of negligence; (b) other responsible causes,... including the
conduct of the plaintiff and third persons, are sufficiently eliminated by the evidence; and (c) the indicated negligence is within the scope
of the defendant's duty to the plaintiff.[21] Thus, it is not applicable when an unexplained accident... may be attributable to one of
several causes, for some of which the defendant could not be responsible.[22]

Res ipsa loquitur generally finds relevance whether or not a contractual relationship exists between the plaintiff and the defendant, for
the inference of negligence arises from the circumstances and nature of the occurrence and not from the nature of the relation of... the
parties.[23] Nevertheless, the requirement that responsible causes other than those due to defendant's conduct must first be eliminated,
for the doctrine to apply, should be understood as being confined only to cases of pure (non-contractual) tort since... obviously the
presumption of negligence in culpa contractual, as previously so pointed out, immediately attaches by a failure of the covenant or its
tenor. In the case of the truck driver, whose liability in a civil action is predicated on culpa acquiliana,... while he admittedly can be said
to have been in control and management of the vehicle which figured in the accident, it is not equally shown, however, that the accident
could have been exclusively due to his negligence, a matter that can allow, forthwith, res ipsa... loquitur to work against him.

If a demurrer to evidence is granted but on appeal the order of dismissal is reversed, the movant shall be deemed to have waived the
right to present evidence.[24] Thus, respondent corporation may no longer offer proof to establish that it has exercised... due care in
transporting the cargoes of the assured so as to still warrant a remand of the case to the trial court.

WHEREFORE, the order, dated 30 April 1996, of the Regional Trial Court, Branch 66, of Makati City, and the decision, dated 10 June
1999, of the Court of Appeals, are AFFIRMED only insofar as respondent Lambert M. Eroles is concerned, but said assailed order... of
the trial court and decision of the appellate court are REVERSED as regards G.P. Sarmiento Trucking Corporation which, instead, is
hereby ordered to pay FGU Insurance Corporation the value of the damaged and lost cargoes in the amount of P204,450.00. No costs.
ESTELA L. CRISOSTOMO v. CA, GR No. 138334, 2003-08-25

Facts:

petitioner Estela L. Crisostomo contracted the services of respondent Caravan Travel and Tours International, Inc. to arrange and
facilitate her booking, ticketing and accommodation in a tour dubbed "Jewels of Europe".

petitioner went to NAIA... to take the flight for the first leg of her journey from Manila to Hongkong. To petitioner's dismay, she
discovered that the flight she was supposed to take had already departed the... previous day.

Menor prevailed upon petitioner to take another tour - the "British Pageant"... petitioner was asked anew to pay

Upon petitioner's return from Europe, she demanded from respondent the reimbursement of P61,421.70, representing the difference
between the sum she paid for "Jewels of Europe" and the amount she owed respondent for the "British Pageant" tour. Despite several
demands, respondent... company refused to reimburse the amount, contending that the same was non-refundable.

Issues:

Petitioner contends that respondent did not observe the standard of care required of a common carrier when it informed her wrongly of
the flight schedule.

Ruling:

Petitioner's contention has no merit.

respondent is not an entity engaged in the business of transporting either passengers or goods and is therefore, neither a private nor a
common carrier. Respondent did not undertake to transport petitioner from one place to another... since its covenant with its customers
is simply to make travel arrangements in their behalf. Respondent's services as a travel agency include procuring tickets and facilitating
travel permits or visas as well as booking customers for tours.

While petitioner concededly bought her plane ticket through the efforts of respondent company, this does not mean that the latter ipso
facto is a common carrier. At most, respondent acted merely as an agent of the airline, with whom petitioner ultimately contracted for...
her carriage to Europe. Respondent's obligation to petitioner in this regard was simply to see to it that petitioner was properly booked
with the airline for the appointed date and time. Her transport to the place of destination, meanwhile, pertained directly to the... airline.
MINDANAO TERMINAL AND BROKERAGESERVICE, INC.- versus -PHOENIX ASSURANCE COMPANY OF NEW YORK/MCGEE &
CO., INC- Case Digest:

FACTS: The stevedoring company Mindanao Terminal and Brokerage

Service, Inc is contracted by Del Monte Philippines, Inc., to load and stow a shipment of

of fresh green Philippine bananas and fresh pineapples belonging to Del

Monte Fresh Produce International, Inc. into the cargo hold of the vessel M/V Mistrau. The

vessel was docked at the port of Davao City and the goods were to be transported by it to

the port of Inchon, Korea in favor of consignee Taegu Industries, Inc. The vessel set sail

from the port of Davao City and arrived at the port of Inchon, Korea. It was then discovered

upon discharge that some of the cargo was in bad condition. The Marine Cargo Damage

Surveyor of Incok Loss and Average Adjuster of Korea, through its representative Byeong

Yong Ahn (Byeong),surveyed the extent of the damage of the shipment. In a survey report, it

was stated that16,069 cartons of the banana shipment and2,185 cartons of the pineapple

shipment were so damaged that they no longer had commercial value. Phoenix and McGee instituted an action for damages against
Mindanao Terminal After

trial, the RTC held that the only participation of Mindanao Terminal was to loathe cargoes on

board theM/V Mistrauunderthe direction and supervision of the ship’s officers, who would not

have accepted the cargoes on board the vessel and signed theforeman’s report unless they

were properly arranged and tightly secured to withstand voyage across the open seas.

Accordingly, Mindanao Terminal cannot be held liable for whatever happened to the cargoes

after it had loaded and stowed them. Moreover, citing the survey report, it was found by the

RTC that the cargoes were damaged on account of a typhoon whichM/V Mistrauhad

encountered during the voyage. It was further held that Phoenix and McGee had no cause of

action against Mindanao Terminal because the latter,whose services were contracted by Del

Monte, a distinct corporation from Del Monte Produce, had no contract with the assured Del

Monte Produce. The RTC dismissed the complaint and awarded the counterclaim of

Mindanao Terminal in the amount of P83,945.80 as actual damages and P100,000.00 as

attorney’s fees.

ISSUE: Whether Mindanao Terminal is liable for not having exercised extraordinary diligence in the transport

and storage of the cargo.

RULING: No, in the present case, Mindanao Terminal, as a stevedore, was only charged with

the loading an d s t o w i n g o f t h e c a rg o e s from the pier to the ship’s cargo hold; it

was n e v e r t h e c u s t o d i a n o f t h e s h i p m e n t o f D e l Monte Produce. A stevedore is

not a common carrier for it does not transport goods or passengers; it is not akin to a

warehouseman for it does not store goods for profit. **Phoenix and McGee appealed to the

Court of Appeals. The appellate court reversed and set aside the decision The same court

ordered Mindanao Terminal to pay Phoenix and McGee “the total amount of $210,265.45

plus legal interest from the filing of the complaint until fully paid and attorney’s fees of 20%
of the claim." It sustained Phoenix’s and McGee’s argument that the damage in the cargoes

was the result of improper stowage by Mindanao Terminal.** Mindanao Ter minal filed a

motion for reconsideration, which the Court of Appeals denied in its 26 February 2004

resolution. Hence, the present petition for review.


CASE DIGEST (Transportation Law): Valenzuela Hardwood vs. CA
(GR 102316, 30 June 1997)
FACTS:
Valenzuela Hardwood and Industrial Supply, Inc. (VHIS) entered into an agreement with the Seven Brothers 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. VHIS insured the logs against loss and/or damage with South Sea Surety and Insurance Co.

The said vessel sank resulting in the loss of VHIS’ insured logs. VHIS demanded from South Sea Surety the payment of the proceeds
of the policy but the latter denied liability under the policy for non-payment of premium. VHIS likewise filed a formal claim with Seven
Brothers for the value of the lost logs but the latter denied the claim.

The RTC ruled in favor of the petitioner.Both Seven Brothers and South Sea Surety appealed. The Court of Appeals affirmed the
judgment except as to the liability of Seven Brothers.South Sea Surety and VHIS filed separate petitions for review before the Supreme
Court. In a Resolution dated 2 June 1995, the Supreme Court denied the petition of South Sea Surety. The present decision concerns
itself to the petition for review filed by VHIS.

ISSUE:
Is a stipulation in a charter party that the “(o)wners shall not be responsible for loss, split, short-landing, breakages and any kind of
damages to the cargo” valid?

HELD:
Yes. Xxx [I]t 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.

xxx

The general public enters into a contract of transportation with common carriers without a hand or a voice in the preparation thereof.
The riding public merely adheres to the contract; even if the public wants to, it cannot submit its own stipulations for the approval of the
common carrier. Thus, the law on common carriers extends its protective mantle against one-sided stipulations inserted in tickets,
invoices or other documents over which the riding public has no understanding or, worse, no choice. Compared to the general public, a
charterer in a contract of private carriage is not similarly situated. It can -- and in fact it usually does -- enter into a free and voluntary
agreement. In practice, the parties in a contract of private carriage can stipulate the carrier’s obligations and liabilities over the shipment
which, in turn, determine the price or consideration of the charter. Thus, a charterer, in exchange for convenience and economy, may
opt to set aside the protection of the law on common carriers. When the charterer decides to exercise this option, he takes a normal
business risk.
EDGAR COKALIONG SHIPPING LINES v. UCPB GENERAL INSURANCE COMPANY, GR No. 146018, 2003-06-25

Facts:

Nestor Angelia delivered to the Edgar Cokaliong Shipping Lines... cargo consisting of one (1) carton of Christmas décor and two (2)
sacks of plastic toys, to be... transported on board the M/V Tandag... scheduled to depart from Cebu City... for Tandag, Surigao del
Sur. [Petitioner] issued Bill of Lading No. 58, freight prepaid, covering the cargo.

Zosimo Mercado likewise delivered cargo to [petitioner], consisting of two (2) cartons of plastic toys and Christmas decor, one (1) roll of
floor mat and... one (1) bundle of various or assorted goods for transportation thereof from Cebu City to Tandag, Surigao del Sur, on
board the said vessel, and said voyage. [Petitioner] issued Bill of Lading No. 59 covering the cargo

Feliciana Legaspi insured the cargo, covered by Bill of Lading No. 59, with the UCPB General Insurance

`against all risks'

She also insured the cargo covered by Bill of Lading No. 58, with [respondent]... 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 in the loss of the vessel and
the cargoes therein. The Captain filed the required Marine Protest.

Feliciana Legaspi filed a claim, with [respondent], for the value of the cargo insured... and covered by Bill of Lading No. 59. She
submitted, in support of her claim, a Receipt,... dated December 11, 1991, purportedly signed by Zosimo Mercado, and Order Slips
purportedly signed by him for the goods he received from Feliciana Legaspi

[Respondent] approved the claim of Feliciana Legaspi

She also filed a claim for the value of the cargo covered... by Bill of Lading No. 58. She submitted to [respondent] a Receipt...
purportedly signed by Nestor Angelia for the goods he received from Feliciana Legaspi

[Respondent] approved her claim

[respondent], as subrogee of Feliciana Legaspi, filed a complaint anchored on torts against [petitioner], with the Regional Trial Court of
Makati City, for the collection of the total principal amount... which it paid to Feliciana Legaspi for the... loss of the cargo

[petitioner] alleged that: (a) [petitioner] was cleared by the Board of Marine Inquiry of any negligence in the burning of the vessel... and
(c) the shippers/consignee had already... been paid the value of the goods as stated in the Bill of Lading and, hence, [petitioner] cannot
be held liable for the loss of the cargo beyond the value thereof declared in the Bill of Lading.

Issues:

Is petitioner liable for the loss of the goods?

Ruling:

The liability of a common carrier for the loss of goods may, by stipulation in the bill of lading, be limited to the value declared by the
shipper. On the other hand, the liability of the insurer is determined by the actual value covered by the... insurance policy and the
insurance premiums paid therefor, and not necessarily by the value declared in the bill of lading.

The Petition is partly meritorious.

The uncontroverted findings of the Philippine Coast Guard show that the M/V Tandag sank due to a fire, which resulted from a crack in
the auxiliary engine fuel oil service tank.

Having originated from an unchecked crack in the fuel oil service tank, the fire could not have been caused by force majeure.

Where loss of cargo results from the failure of the officers of a vessel 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 common carrier is presumed to have been negligent if it fails to prove that it exercised extraordinary vigilance
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 had 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 maintenance, or some other evidence to establish that it had exercised extraordinary diligence. It merely stated that
constant inspection and care were not possible... we hold petitioner responsible for the loss of the goods covered by Bills of Lading
Nos. 58 and 59.
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.
Loadstar Shipping Co. v. CA

Facts:

On November 19, 1984, Loadstar received on board its vessel M/V Cherokee the following goods for shipment:

1. 705 bales of lawanit hardwood

2. 27 boxes and crates of tilewood assemblies and others

3. 49 bundles of mouldings R & W (3) Apitong Bolidenized

The goods, amounting to P6,067,178, were insured by Manila Insurance Co. The vessel is insured by Prudential Guarantee and Assurance,
Inc. On November 20, 1984, on its way to Manila from Agusan, the vessel sank off Limasawa Island. MIC paid the consignee P6,075,000
for the value of the goods lost, and filed a complaint against Loadstar and PGAI, claiming subrogation into the rights of the consignee.
When PGAI paid Loadstar, it was dropped from the complaint. The trial court ruled against Loadstar, and this was affirmed by the Court
of Appeals.

Loadstar submits that the vessel was a private carrier because it was not issued a certificate of public convenience, it did not have a regular
trip or schedule nor a fixed route, and there was only "one shipper, one consignee for a special cargo." In refutation, MIC argues that the
issue as to the classification of the M/V "Cherokee" was not timely raised below; hence, it is barred by estoppel. While it is true that the
vessel had on board only the cargo of wood products for delivery to one consignee, it was also carrying passengers as part of its regular
business. Moreover, the bills of lading in this case made no mention of any charter party but only a statement that the vessel was a "general
cargo carrier." Neither was there any "special arrangement" between LOADSTAR and the shipper regarding the shipment of the cargo.
The singular fact that the vessel was carrying a particular type of cargo for one shipper is not sufficient to convert the vessel into a private
carrier.

LOADSTAR argues that as a private carrier, it cannot be presumed to have been negligent, and the burden of proving otherwise devolved
upon MIC. It also maintains that the vessel was seaworthy, and that the loss was due to force majeure. LOADSTAR goes on to argue that,
being a private carrier, any agreement limiting its liability, such as what transpired in this case, is valid. Since the cargo was being shipped
at "owner’s risk," LOADSTAR was not liable for any loss or damage to the same. Finally, LOADSTAR avers that MIC’s claim had already
prescribed, the case having been instituted beyond the period stated in the bills of lading for instituting the same — suits based upon
claims arising from shortage, damage, or non-delivery of shipment shall be instituted within sixty days from the accrual of the right of
action. MIC, on the other hand, claims that LOADSTAR was liable, notwithstanding that the loss of the cargo was due to force majeure,
because the same concurred with LOADSTAR’s fault or negligence. Secondly, LOADSTAR did not raise the issue of prescription in the
court below; hence, the same must be deemed waived. Thirdly, the "limited liability" theory is not applicable in the case at bar because
LOADSTAR was at fault or negligent, and because it failed to maintain a seaworthy vessel. Authorizing the voyage notwithstanding its
knowledge of a typhoon is tantamount to negligence.

Issues:

(1) Whether Loadstar was a common carrier or a private carrier

(2) Whether Loadstar exercised the degree of diligence required under the circumstances

(3) Whether the stipulation that the goods are at “the owner’s risk” is valid

(4) Whether the action has prescribed

Held:

(1) We hold that LOADSTAR is a common carrier. It is not necessary that the carrier be issued a certificate of public convenience, and this
public character is not altered by the fact that the carriage of the goods in question was periodic, occasional, episodic or unscheduled.
There was no charter party. The bills of lading failed to show any special arrangement, but only a general provision to the effect that the
M/V "Cherokee" was a "general cargo carrier." Further, the bare fact that the vessel was carrying a particular type of cargo for one shipper,
which appears to be purely coincidental, is not reason enough to convert the vessel from a common to a private carrier, especially where,
as in this case, it was shown that the vessel was also carrying passengers.

(2) The doctrine of limited liability does not apply where there was negligence on the part of the vessel owner or agent. LOADSTAR was
at fault or negligent in not maintaining a seaworthy vessel and in having allowed its vessel to sail despite knowledge of an approaching
typhoon. In any event, it did not sink because of any storm that may be deemed as force majeure, inasmuch as the wind condition in the
area where it sank was determined to be moderate. Since it was remiss in the performance of its duties, LOADSTAR cannot hide behind
the "limited liability" doctrine to escape responsibility for the loss of the vessel and its cargo.
(3) Three kinds of stipulations have often been made in a bill of lading. The first is one exempting the carrier from any and all liability for
loss or damage occasioned by its own negligence. The second is one providing for an unqualified limitation of such liability to an agreed
valuation. And the third is one limiting the liability of the carrier to an agreed valuation unless the shipper declares a higher value and
pays a higher rate of freight. According to an almost uniform weight of authority, the first and second kinds of stipulations are invalid as
being contrary to public policy, but the third is valid and enforceable. Since the stipulation in question is null and void, it follows that
when MIC paid the shipper, it was subrogated to all the rights which the latter has against the common carrier, LOADSTAR.

(4) MIC’s cause of action had not yet prescribed at the time it was concerned. Inasmuch as neither the Civil Code nor the Code of
Commerce states a specific prescriptive period on the matter, the Carriage of Goods by Sea Act (COGSA) — which provides for a one-year
period of limitation on claims for loss of, or damage to, cargoes sustained during transit — may be applied suppletorily to the case at bar.
This one-year prescriptive period also applies to the insurer of the goods. In this case, the period for filing the action for recovery has not
yet elapsed. Moreover, a stipulation reducing the one-year period is null and void; it must, accordingly, be struck down.
CASE DIGEST (Transportation Law): Sabena vs. Court of Appeals
Sabena Belgian World Airlines vs. CA

(GR 104685, 14 March 1996)

FACTS:

Private respondent MA. PAULA SAN AGUSTIN was a passenger on board Flight SN 284 of defendant airline originating from
Casablanca to Brussels, Belgium on her way back to Manila. She checked in her luggage which contained her valuables all amounting
to $4,265.00, for which she was issued Tag No. 71423. She stayed overnight in Brussels and her luggage was left on board Flight SN
284. Upon Arrival in Manila, she learned that her luggage was missing and was advised to accomplish and submit a property
Irregularity Report which she submitted and filed on the same day.

Upon follow up, it remained missing; thus, she filed her formal complaint with the office of Ferge Massed, petitioner’s Local Manager,
demanding immediate attention.

Two weeks later she was notified that her luggage was found. But unfortunately plaintiff was informed that the luggage was lost for the
second time. She demanded payment but the airline refused to settle the claim.

The trial court ruled in favor of Ma. Paula San Agustin. The appellate court affirmed in toto the trial court’s judgment.

Petitioner airline company, in contending that the alleged negligence of private respondent should be considered the primary cause for
the loss of her luggage, avers that, despite her awareness that the flight ticket had been confirmed only for Casablanca and Brussels,
and that her flight from Brussels to Manila had yet to be confirmed, she did not retrieve the luggage upon arrival in Brussels. Petitioner
insists that private respondent, being a seasoned international traveler, must have likewise been familiar with the standard provisions
contained in her flight ticket that items of value are required to be hand-carried by the passenger and that the liability of the airline or
loss, delay or damage to baggage would be limited, in any event, to only US$20.00 per kilo unless a higher value is declared in
advance and corresponding additional charges are paid thereon. At the Casablanca International Airport, private respondent, in
checking in her luggage, evidently did not declare its contents or value. Petitioner cites Section 5(c), Article IX, of the General
Conditions of Carriage, signed at Warsaw, Poland, on 02 October 1929, as amended by the Hague Protocol of 1955, generally
observed by International carriers, stating, among other things, that:

“Passengers shall not include in his checked baggage, and the carrier may refuse to carry as checked baggage, fragile or perishable
articles, money, jewelry, precious metals, negotiable papers, securities or other valuables.”

ISSUE:

Whether or not the airline is negligent? Whether respondent’s negligence is the sole and proximate of the loss?

HELD:

Yes.

Fault or negligence consists in the omission of that diligence which is demanded by the nature of an obligation and corresponds with
the circumstances of the person, of the time, and of the place. When the source of an obligation is derived from a contract, the mere
breach or non-fulfillment of the prestation gives rise to the presumption of fault on the part of the obligor. This rule is not different in the
case of common carriers in the carriage of goods which, indeed, are bound to observe not just the due diligence of a good father of a
family but that of “extraordinary” care in the vigilance over the goods. The appellate court has aptly observed:

“x x x Art. 1733 of the [Civil] Code provides that from the very nature of their business and by reasons of public policy, common carriers
are bound to observe extraordinary diligence in the vigilance over the goods transported by them. This extraordinary responsibility,
according to Art. 1736, lasts from the time the goods are unconditionally placed in the possession of and received by the carrier until
they are delivered actually or constructively to the consignee or person who has the right to receive them. Art. 1737 states that the
common carrier’s duty to observe extraordinary diligence in the vigilance over the goods transported by them ‘remains in full force and
effect even when they are temporarily unloaded or stored in transit.’ And Art. 1735 establishes the presumption that if the goods are
lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that
they had observed extraordinary diligence as required in Article 1733.

The above rules remain basically unchanged even when the contract is breached by tort although noncontradictory principles on quasi-
delict may then be assimilated as also forming part of the governing law. Petitioner is not thus entirely off track when it has likewise
raised in its defense the tort doctrine of proximate cause. Unfortunately for petitioner, however, the doctrine cannot, in this particular
instance, support its case. Proximate cause is that which, in natural and continuous sequence, unbroken by any efficient intervening
cause, produces injury and without which the result would not have occurred.
The above findings, which certainly cannot be said to be without basis, foreclose whatever rights petitioner might have had to the
possible limitation of liabilities enjoyed by international air carriers under the Warsaw Convention .

The Warsaw Convention however denies to the carrier availment ‘of the provisions which exclude or limit his liability, if the damage is
caused by his wilful misconduct or by such default on his part as, in accordance with the law of the court seized of the case, is
considered to be equivalent to wilful misconduct,’ or ‘if the damage is (similarly) caused x x x by any agent of the carrier acting within
the scope of his employment.’

The Convention does not thus operate as an exclusive enumeration of the instances of an airline’s liability, or as an absolute limit of the
extent of that liability.

( Loss of baggage twice shows gross negligence)