2-L (2013-2014) TENORIO

TORRES
YOROBE
ABILO
AFAN
AGUILA
ARICHETA
ASUNCION PART I
BRILLANTES I. CONTRACT OF TRANSPORTATION
CAPCO A. Definition
CASTILLO Crisostomo v. CA
DEL MUNDO B. Tests and Characteristics
DUGEÑA De Guzman v. CA
ENCARNACION
Calvo v. UCPB General Insurance Co
ESGUERRA
Loadstar Shipping Corp v. CA
FALLER
FLORANDA First Phil Industrial v. CA
GUETA Asia Lighterage and Shipping Inc v. CA
LEAÑO FGU Insurance v. G.P. Sarmiento Trucking Corp
LUALHATI-MARQUEZ Bascos v. CA
LUZADIO Fabre v. CA
MACALINO C. Distinguished from Private Carrier, Towage, Arrastre and
MAGALIT Stevedoring
MANALANG Home Insurance Co v. American Steamship
MANRIQUE Planters Products v. CA
MAQUILING National Steel Corp v. CA
MARIANO Valenzuela Hardwood v. CA
MEDINA D. Governing Laws
NERI Samar Mining Co v. Nordeutscher Lloyd
PASCUA
Eastern Shipping Lines v. IAC
QUINTOS
National Dev Co v. CA
SANTOS, A.
SANTOS, N. E.  Government  Regulation  of  Common  Carrier’s  Business
SUBIJANO 1. Nature of Business
TA-A Fisher v. Yangco Steamship
TAN KMU Labor Center vs Garcia

Page 1 of 151
 2. Registered Owner Rule BLTB v. IAC
Gelisan v. Alday ii. Duration of Duty
Benedicto v. IAC a. Carriage of Goods
Philtranco v. CA Saludo v. CA
3. Kabit System Macam v. CA
Santos v. Sibug Samar Mining v. Nordeutscher Lloyd
Lita Enterprises v. CA Lu do v. Binamira
Teja Marketing v. IAC Republic v. Lorenzo Shipping Cort
Abelardo Lim v. CA b. Carriage of Passengers
4. Boundary System LRTA v. Navidad
Magboo v. Bernardo Dangwa Transportation Co v. CA
II. OBLIGATIONS OF THE PARTIES La Mallorca v. CA
A. Obligation of Carrier Aboitiz Shipping v. CA
1. Duty to Accept 4. Defenses of Common Carriers
Fisher v. Yangco i. Fortuitous Event
2. Duty to Deliver a. Requisites
i. Time of Delivery Schmitz Transport v. Transport Ventures
Maersk v. CA Yobido v. CA
ii. Consequences of Delay b. Fire
a. Abandonment Eastern Shipping v. IAC
Magellan Manufacturing v. CA c. Hijacking
b. Right of Passengers In Case of Delay Gacal v. PAL
Trans-Asia Shipping Line v. CA d. Mechanical Defects
3. Duty to Exercise Extraordinary Diligence Necesito v. Paras
i. Presumption of Negligence ii. Order of Public Authority
a. Carriage of Goods Ganzon v. CA
Belgian Overseas Chartering v. Phil First iii. Defenses in Carriage of Passenger
Insurance Co a. Employees
Tabacalera Insurance Co v. North Front Maranan v. Perez
Shipping Inc Gillaco v. Manila Railroad
FGU Insurance v. G.P Sarmiento b. Other Passengers and Third Persons
b. Carriage of Passengers Bachelor Express v. CA
Abeto v. PAL Pilapil v. CA
Fortune Express v. CA
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 iv.  Passenger’s  Baggages 2. Traffic Rules
Quisumbing Sr v. CA Mallari v. CA
Pan-Am v. Rapadas Pestano v. Sumayang
British Airways v. CA 3. Duty to Inspect
Tan v. Northwest Nocum v. Laguna Tayabas Bus Co
Sarkies Tour v. CA D. Extraordinary Diligence in Carriage by Air
B. Obligations of the Shipper, Consignee and Passenger Korean Airlines v. CA
1. Negligence of Shipper or Passenger PAL v. CA
i. Last Clear Chance Zalamea v. CA
Phil Rabbit v. IAC IV. BILL OF LADING AND OTHER FORMALITIES
Bustamante v. CA A. Concepts
ii. Assumption of Risk 1. Definition
JAL v. CA Macondray v. Acting Commissioner of Customs
Calalas v. CA 2. Kinds
PNR v. CA Magellan v. CA
Isaac v. Al Ammen Transportation Co B. Bill of Lading as Contract
III. EXTRAORDINARY DILIGENCE 1. Prohibited and Limiting Stipulations
A. Effect of Stipulation Ysmael v. Barretto
1. Gratuitous Passengers Shewaram v. PAL
Lara v. Valencia Ong Yiu v. CA
B. Extraordinary Diligence in Carriage by Sea Aboitiz v. CA
1. Seaworthiness Sea Land Services v. IAC
Delsan Transport v. CA Citadel Lines v. CA
Caltex v. Sulpicio Lines Everett v. CA
2. Overloading British Airways v. CA
Negros Navigation v. CA H.E. Heacock v. Macondray
3. Proper Storage Sweet Lines v. Teves
Belgian Overseas Chartering v. Phil First Insurance i. International Air Transportation
4. Negligence of Captain and Crew Alitalia v. IAC
Mecenas v. CA Pan Am v. IAC
C. Extraordinary Diligence in Carriage by Land China Airlines v. Chiok
1. Condition of Vehicle Santos III v. Northwest
Bayasen v. CA United Airlines v. UY
C. Bill of Lading as Receipt
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 Saludo v. Ca III. PERSONS WHO TAKE PART IN MARITIME COMMERCE
V. ACTIONS AND DAMAGES IN CASE OF BREACH A. Ship Owners and Ship Agents; Captains and Masters of
A. Concurrent Causes of Action Vessels; Officers and Crew, Supercargoes
Fabre v. CA Chua Yek Hong v. IAC
Air France v. Carrascoso Phil Am General Insurance v. ca
Tiu v. Arriesgado Sweet Lines v. CA
B. Notice of Claim and Prescriptive Period B. Arrastre Operator
1. Overland Transportation of Goods and Coastwise Fireman’s  Fund  Insurance  v.  Metro  Port  Services
Shipping ICTSI v. Prudential
Phil Am General Insurance v. Sweet Lines C. Pilots
2. COGSA Far Eastern v. CA
Dole Phil v. Maritime Co of the Phil IV. CHARTER PARTIES (ARTICLES 652-718)
Maritime Agencies v. CA A. Different Kinds of Charter Parties
C. Recoverable Damages Litonjua v. NSB
1. Kinds of Damages B. Effect of Charter on Character of Carrier
i. Actual/Compensatory Damages Planters Products v. CA
Zulueta v. Pan AM Caltex v. Sulpico Lines
Gatchalian v. Delim V. COLLISIONS
Marchan v. Mendoza Williams v. Yatco
De Caliston v. CA Smith and Bell v. CA
ii. Moral Damages National Dev Co v. CA
Transworld Airlines v. CA Mecenas v. CA
iii. Exemplary Damages Aboitiz Shipping v. General Accident Fire and Life Insurance Corp
Prudenciado vs. Alliance Transport Phil Am General Insurance v. CA
MARITIME LAW VI. SALVAGE
Erlanger v. Swedish East Asiatic
I. GENERAL CONCEPTS
Barrios v. Go Thong
A. Real and Hypothecary Nature
VII. CARRIAGE OF GOODS BY SEA ACT (COGSA)
Yangco v. Laserna
Elser v. CA
B. Limited Liability Rule
Ang v. Compania Maritima
Chua Yek Hong v. IAC
Dole Phjl v. Maritime Co
Heirs of Amparo de los Santos v. CA
Sea Land v. IAC
II. VESSELS
Maritime Agency v. CA
Phil Refining Corp v. Jarque
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Mayer Steel Pipe v. CA
PUBLIC UTILITIES
I. PUBLIC SERVICE REGULATIONS
Luzon Stevedoring v Public Service Com
San Pablo v. Pantranco
Manzanal v. Ausejo
Cogeo-Cubao  Operator’s  and  Driver’s  Association  v.  CA
KMU Labor Center v. Garcia
Tatad v. Garcia
PAL v. CAB
PART I
I. CONTRACT OF TRANSPORTATION
A. Definition
CASE TITLE: Estela L. Crisostomo vs. Court of Appeals
PONENTE: Ynares-Santiago, J.
FACTS:
Crisostomo contracted the services of Caravan Travel and Tours Intl. to arrange and
facilitate her booking and accommodation in a tour dubbed "Jewels of Europe",
where she was given a discount by reason that the company's ticketing manager,
MeriamMenor, was her niece. Thereafter, Menor went to her aunt's house to
deliver the latter's travel documents and plane tickets, instructing her to be at the
airport on Saturday, June 15, 1992, two days after the delivery of the tickets.
Without checking her tickets, Crisostomo went to the airport on Saturday, only to
find out that the flight she was supposed to take had already departed the previous
day, which was the departure date of her ticket. Upon complaining to Menor, the
latter convinced Crisostomo to take another tour - the "British Pageant"- which
reuired the payment of an additional S300. Upon her return from her European
tour, Crisostomo demanded from respondent the reimbursement of the difference
between the sum for the "Jewels of Europe" tour and the amount she owed
respondent for the "British Pageant" tour (P61,421.70), to which the respondent
company claimed as non-refundable. Consequently, she filed a complaint for breach
of contract of carriage and damages against the respondent.
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Petitioner's Contention: Crisostomo alleged that her failure to join the original tour
was due to Menor'sfaiure to indicate the departure date on the ticket; that
respondent was negigent in informing her of the flight schedule; and that the British
Pageant tour was merely a substitute to the Jewels of Europe tour, entitling her to
rimbursement. It contends that as a common carrier, it should have exercised
extraordinary diligence in informing her of the flight's details.
Respondent's Contention: the failure of Crisostomo to join the first tour was
because of her own doing, because she did not bother to read or confirm her flight
schedule as printed on the ticket. It was correct in its contention that it exercised
the proper standard of care when it provided her with the opportunity to confirm
the schedule before the date of the flight. Lastly, it maintained that the British
Pageant tour was not a substitute for the tour which Crisostomo missed, not
entitling the latter to be reimbursed.
ISSUE:
Whether or not respondent Caravan did not observe the standard of care required
of a common carrier when it informed the petitioner wrongly of the flight schedule?
RULING:
TRIAL COURT:
Caravan travels was negligent in erroneously advising petitioner of Crisostomo's
departure date.
CA:
Reversed RTC : held that Crisostomo was more negligent, being a well-traveled
person and a lawyer, she should have known better than to simply rely on what her
niece told her.
SC:
Petition is DENIED for lack of merit.
No. A common carrier is defined under Article 1732 of the Civil Code as persons,
corporations, firms or associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water or air, for compensation,
affecting their services to the public. It is obvious from the above definition that
respondent is not an entity engaged in the business of transporting either
passengers or goods and is therefore, neither a private nor a common carrier.
Respondent did not undertake to transport petitioner from one place to another
since its covenant with its customers is simply to make travel arrangements in their
behalf.  Respondent’s  services  as  a  travel  agency  include  procuring  tickets  and  
facilitating travel permits or visas as well as booking customers for tours. It is in this
sense that the contract between the parties in this case was an ordinary one for
services and not one of carriage.
Hence, the standard of care required of respondent is that of a good father of a
family under Article 1173 of the Civil Code. This connotes reasonable care
consistent with that which an ordinarily prudent person would have observed when
confronted with a similar situation.It is clear that respondent performed its
prestation under the contract as well as everything else that was essential to book
petitioner for the tour. Had petitioner exercised due diligence in the conduct of her
affairs, there would have been no reason for her to miss the flight. Needless to say,
after the travel papers were delivered to petitioners, it became incumbent upon
her to take ordinary care of her concerns. This undoubtedly would require that she
at least read the documents in order to assure herself of the important details
regarding the trip.
B. Tests and Characteristics
CASE TITLE: DE GUZMAN vs. CA
KEYWORD: Definition of Common Carriers
PONENTE: Feliciano, J.
DOCTRINE:
Art. 1732 of the Civil Code makes no distinctions between a person or enterprise
offering transportation service on a regular or scheduled basis and such service on
an occasional, episodic or unscheduled basis.
FACTS:
1)  Respondent  Ernesto  Cendaňa,  a  junk  dealer,  was  engaged  in  buying  up  used   1) Private respondent may be properly characterized as a common carrier in
bottles and scrap metal in Pangasinan which it brought to Manila for resale using
his 2 six-wheeler trucks.
2) On his return trip, he would load his vehicles with cargo which various merchants
wanted delivered to Pangasinan, charging freight rates lower than the regular
commercial rates.
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3) Petitioner Pedro De Guzman contracted with respondent for the hauling of 750
cartons of Liberty filled milk from  General  Milk  Company’s  warehouse  in  Makati  and  
Rizal, to Urdaneta.
4) 150 cartons were loaded on a truck driven by respondent himself, while 100
cartons  were  loaded  on  the  other  truck  driven  by  Manuel  Estrada,  respondent’s  
driver and employee.
5) Only 150 boxes were delivered to petitioner as the truck carrying the other 600
boxes was hijacked along McArthur highway by armed men, who took the truck, its
driver, his helper, and the cargo.
PETITIONER’S  CONTENTION:
1) Petitioner alleged that respondent failed to exercise the ordinary diligence
required of him by law as a common carrier which resulted to the loss, hence he
should be liable for the payment of P22,150, the claimed value of the lost
merchandise
RESPONDENT’S  CONTENTION:
1) Private respondent denied that he was a common carrier and argued that he
could not be held responsible since the loss was due to force majeure
RULING:
TRIAL COURT –GRANTED the petition
-It found private respondent to be a common carrier and held him liable for the
value of the undelivered goods
APPELLATE COURT –DENIED the petition
-The CA reversed the judgment and held that respondent had been engaged in
transporting  return  loads  of  freight  “as  a  casual  occupation—a sideline to his scrap
iron  business”  and  not  as  a  common carrier, hence cannot be held liable
SUPREME COURT –DENIED  petition  for  review  on  certiorari  and  affirmed  CA’s  
decision  as  to  respondent’s  liability  for  payment  of  the  lost  merchandise
accordance  with  Art.  1732’s  definition  of  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 compensation,
offering  their  services  to  the  public.”
2) The above Article makes no distinction between one whose principal business
activity is the carrying of persons/ goods or both, and one who does such carrying
only as an ancillary activity (sideline).
3) Respondent cannot be held liable for the value of the lost goods because under
Art. 1745(6), a common carrier is held responsible-- and will not be allowed to
divest or to diminish such responsibility—even for acts of strangers like thieves or
robbers, EXCEPT where such  thieves  or  robbers  in  fact  acted  “with  grave  or   Appeals, she is not a common carrier but a private carrier because, as a customs
irresistible  threat,  violence/  force.”
4) In these circumstances, 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 to which respondent should not be held liable.
CASE TITLE: IRGINES CALVO doing business under the name and style TRANSORIENT
CONTAINER TERMINAL SERVICES, INC., petitioner, vs. UCPB GENERAL INSURANCE
CO., INC. (formerly Allied Guarantee Ins. Co., Inc.) respondent.
KEYWORD: “common  carrier”  =“public  service”
PONENTE: MENDOZA, J
DOCTRINE:
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 . . . 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   Ordered petitioner to pay respondent, as subrogee, the amount
population, and one who offers services or solicits business only from a
narrow segment of the general population. Article 1732 deliberately refrained from
making such distinctions.
FACTS:
A contract was entered into between Calvo and San Miguel Corporation (SMC) for
the transfer of certain cargoes from the port area in Manila to the warehouse of SMC. The
cargo was insured by UCPB General Insurance Co., Inc. When the shipment arrived and unloaded
from the vessel, Calvo withdrew the cargo from the arrastre operator and delivered the same to
SMC·s warehouse. When it was inspected, it was found out that some of the goods
were torn. UCPB, being the insurer, paid for the amount of the damages and as
subrogee thereafter, filed a suit against Calvo.Petitioner, on the other hand,
contends that it is a private carrier not required to observe such extraordinary
diligence in thevigilance over the goods. As customs broker, she does not indiscriminately hold her
services out to the public but only to selected parties.
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PETITIONER’S  CONTENTION:  
Petitioner contends that contrary to the findings of the trial court and the Court of
broker and warehouseman, she does not indiscriminately hold her services out to
the public but only offers the same to select parties with whom she may contract in
the conduct of her business.
RESPONDENT’S  CONTENTION:
Defendant, being a customs brother, warehouseman and at the same time a
common carrier is supposed [to] exercise [the] extraordinary diligence required by
law, hence the extraordinary responsibility 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 the right to receive the same.
ISSUE:
Whether or not Calvo is a common carrier liable for the damages for failure to observe extraordinary
diligence in the vigilance over the goods
RULING:
1. TRIAL COURT
of P93,112.00 with legal interest, representing the value of
damaged  cargo  handled  by  petitioner,  25%  thereof  as  attorney’s  
fees, and the cost of the suit.
2. APPELLATE COURT
Affirmed the decision of the trial court.
3. SUPREME COURT
Affirmed the decision of the Court of Appeals.
The contention has no merit. In De Guzman v. Court of Appeals, the Court
dismissed a similar contention and held the party to be a common carrier, thus -
The Civil Code defines "common carriers" in the following terms:
“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."
 The law makes no distinction between a carrier offering common carrier due to the lack of a certificate of public convenience. LOADSTAR
its services to the general community or solicits business only also maintains that the vessel was seaworthy and was duly inspected by the
from an arrow segment of the general population. Note that the maritime safety engineers of the Philippine Coast Guard, who certified that the ship
transportation of goods holds an integral part of Calvo’s business, was fit to undertake a voyage.
it cannot indeed be doubted that it is a common carrier.
RESPONDENT’S  CONTENTION:
So  understood,  the  concept  of  “common  carrier”  under  Article   MIC claims that LOADSTAR was liable, notwithstanding that the loss of the cargo
1732  may  be  seen  to  coincide  neatly  with  the  notion  of  “public   was  due  to  force  majeure,  because  the  same  concurred  with  LOADSTAR’s  fault  or  
service,”  under  the  Public  Service  Act  (Commonwealth  Act  No.   negligence.  Also,  the  “limited  liability”  theory  is  not  applicable  in  the  case  at  bar  
1416, as amended) which at least partially supplements the law because LOADSTAR was at fault or negligent, and because it failed to maintain a
on common carriers set forth in the Civil Code. seaworthy vessel. Authorizing the voyage notwithstanding its knowledge of a
typhoon is tantamount to negligence.
CASE TITLE: LOADSTAR SHIPPING CO., INC. vs. COURT OF APPEALS and THE MANILA
INSURANCE CO., INC. KEYWORD: M/V Cherokee RULING: The SC held that LOADSTAR is a common carrier. It is not necessary that
PONENTE:Davide, Jr. 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,
DOCTRINE: occasional, episodic or unscheduled and that the doctrine of limited liability does
A certificate of public convenience is not a requisite for the incurring of liability not apply where there was negligence on the part of the vessel owner or agent.
under the Civil Code provisions governing common carriers. That liability arises the LOADSTAR was at fault or negligent in not maintaining a seaworthy vessel and in
moment a person or firm acts as a common carrier, without regard to whether or having allowed its vessel to sail despite knowledge of an approaching typhoon.
not such carrier has also complied with the requirements of the applicable
regulatory statute and implementing regulations and has been granted a certificate CASE TITLE: FIRST PHILIPPINE INDUSTRIAL CORPORATION VS COURT OF APPEALS
of public convenience or other franchise. KEYWORD: Pipe line operator
PONENTE: Martinez, J.
SHORT FACTS:
On  19  November  1984,  LOADSTAR  received  on  board  its  M/V  “Cherokee”  the   DOCTRINE:
following goods for shipment: a) 705 bales of lawanit hardwood; b) 27 boxes and The fact that petitioner has a limited clientele does not exclude it from the
crates of tilewood assemblies and others; and c) 49 bundles of mouldings R & W (3) definition of a common carrier.
ApitongBolidenized. The goods, amounting to P6,067,178, were insured for the
same amount with Manila Insurance Company against various risks including FACTS:
“TOTAL  LOSS  BY  TOTAL  LOSS  OF  THE  VESSEL.”  On  20  November  1984,  on  its  way  to   Petitioner  applied  for  a  mayor’s  permit  with  the  Office of the Mayor of Batangas
Manila from the port of Nasipit, Agusandel Norte, the vessel, along with its cargo, City.  However,  before  the  mayor’s  permit  could  be  issued,  the  respondent  City  
sank off Limasawa Island. As a result of the total loss of its shipment, the consignee Treasurer required the petitioner to pay a local tax pursuant to the Local
made a claim with LOADSTAR which, however, ignored the same. As the insurer, Government Code. In order not to hamper its operations, petitioner paid the tax
MIC paid P6,075,000 to the insured in full settlement of its claim, and the latter under protest in the amount of P 239, 019.01 for the first quarter of 1993.
executed a subrogation receipt therefor.
PETITIONER’S  CONTENTION: The Company (FPIC) as a pipeline operator with a
PETITIONER’S  CONTENTION: government concession granted under the Petroleum Act is exempt from paying tax
LOADSTAR  denied  any  liability  for  the  loss  of  the  shipper’s  goods  and  claimed  that   on gross receipts under Section 133 of the Local Government Code of 1991.
the sinking of its vessel was due to force majeure and that it is not considered a Moreover, Transportation contractors are not included in the enumeration of

Page 8 of 151
contractors under Section 131, Paragraph 9h) of the Local Government Code.
Therefore,  the  authority  to  impose  tax  ‘on  contractors and other independent
contractors’  under  Section  143,  Paragraph  9e)  of  the  Local  Government  Code  does   common carrier.
not include the power to levy on transportation contractors.
RESPONDENT’S  CONTENTION: Petitioner cannot be considered engaged in
transportation business, thus it cannot claim exemption under Section 133 (j) of the
Local  Government  Code.  Pipelines  are  not  included  in  the  term  “common  carrier”   PONENTE: PUNO, J.
which refers solely to ordinary carriers such as trucks, trains, ships and the like. The
term  “common  carrier”  under the said code pertains to the mode or manner by
which a product is delivered to its destination.
RULING: Petition is GRANTED.
1. TRIAL COURT: The trial court dismissed the complaint ruling that
plaintiff is either a contractor or other independent contractor. The
exemption granted under Sec. 133 (j) encompasses only commuters
with taxes. Plaintiff is not a common carrier, but a special carrier
extending  its  services  and  facilities  to  a  single  specific  or  “special   Marubeni American Corporation on board the vessel M/V NEO CYMBIDIUM V-26
customer”  under  a  “special  contract”.
2. APPELATE COURT: The  CA  affirmed  the  Trial  Court’s  dismissal  of   insured by Prudential Guarantee and Assurance, Inc. against loss or damage. When
petitioner’s  complaint.
3. SUPREME COURT: Petition is GRANTED. Article 1732 of the Civil Code
defines a "common carrier" as "any person, corporation, firm or
association engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air, for compensation,
offering their services to the public."
The test for determining whether a party is a common carrier of goods is:
1. He must be engaged in the business of carrying goods for others as a public
employment, and must hold himself out as ready to engage in the transportation of
goods for person generally as a business and not as a casual occupation;
2. He must undertake to carry goods of the kind to which his business is
confined;
3. He must undertake to carry by the method by which his business is
conducted and over his established roads; and
4. The transportation must be for hire.
Based on the above definitions and requirements, there is no doubt that petitioner
is a common carrier. It is engaged in the business of transporting or carrying
goods, i.e. petroleum products, for hire as a public employment. It undertakes to
carry for all persons indifferently, that is, to all persons who choose to employ its
services, and transports the goods by land and for compensation. The fact that
petitioner has a limited clientele does not exclude it from the definition of a
CASE TITLE: ASIA LIGHTERAGE AND SHIPPING INC. V. CA AND PRUDENTIAL
GUARANTEE AND ASSURANCE, INC.
KEYWORD/S: No fixed or known routes; no terminals; issues no tickets; typhoon
DOCTRINE:
Petitioner is a common carrier whether its carrying of goods is done on an irregular
rather than scheduled manner, and with an only limited clientele. A common carrier
need not have fixed and publicly known routes. Neither does it have to maintain
terminals or issue tickets.
FACTS:
In 1990, 3,150 metric tons of Better Western White Wheat in bulk was shipped by
for delivery to the consignee, General Milling Corporation in Manila. Such was
the vessel arrived in Manila, the cargo was transferred to the custody of the
petitioner, which was contracted by the consignee as carrier to deliver the cargo to
its warehouse in Pasig. Thereafter, 900 metric tons of the shipment was loaded on
barge for delivery to consignee but the transport of cargo was suspended due to a
warning of an incoming typhoon. Later, the petitioner proceeded to pull the barge
to Engineering Island off Baseco to seek shelter from the typhoon. A few days after,
the barge developed a list because of a hole it sustained after hitting an unseen
protuberance underneath the water and thereafter, it sank, resulting to the total
loss of the remaining cargoes not recovered.
PETITIONER’S  CONTENTION:
Asia Lighterage contends that it is not a common carrier but a private carrier.
Allegedly, it has no fixed and publicly known route, maintains no terminals, and
issues no tickets. It points out that it is not obliged to carry indiscriminately for any
person. It is not bound to carry goods unless it consents. In short, it does not hold
out its services to the general public.
RESPONDENT’S  CONTENTION:
Petitioner is a common carrier, thus, it is liable to private respondent for the
former’s  failure  to  exercise  extra  ordinary  diligence.  

Page 9 of 151
ISSUE:
Whether or not petitioner is a common carrier- YES.
RULING: PETITION IS DENIED.
TC: It ruled in favor of Prudential, ordering petitioner to pay the former the
amount  of  indemnity,  attorney’s  fees  and  cost  of  the  suit.
CA: It  affirmed  the  trial  court’s  decision  with  modification in the sense that the
salvage value of P201,379.75 shall be deducted from the amount of
P4,104,654.22.
SC: The Supreme Court ruled for Prudential. It declared 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.
It also did not distinguish 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. Further, we
ruled that Article 1732 does not distinguish between a carrier offering its
services to the general public, and one who offers services or solicits
business only from a narrow segment of the general population. In the
case at bar, the principal business of the petitioner is that of lighterage and
drayage and it offers its barges to the public for carrying or transporting
goods by water for compensation. Petitioner is clearly a common carrier.
CASE TITLE: FGU Insurance Corporation vs. G.P. Sarmiento Trucking Corporation
and Lambert Eroles
PONENTE:Vitug, J.
DOCTRINES:
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, whether to the
public in general or to a limited clientele in particular, but never on an exclusive
basis.
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.
Given  accepted  standards,  GPS  scarcely  falls  within  the  term  “common  carrier"
Page 10 of 151
FACTS:
G.P. Sarmiento Trucking Corporation (GPS) undertook to deliver (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.
ISSUE: WON GPS is common carrier
PETITIONER’S  CONTENTION:
FGU Insurance Corporation (FGU), an insurer of the shipment, paid to Concepcion
Industries, Inc., and sought reimbursement 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.
RESPONDENT’S  CONTENTION:
Respondents asserted that GPS was the exclusive hauler only of Concepcion
Industries, Inc., since 1988, and it was not so engaged in business as a common
carrier. Respondents further claimed that the cause of damage was purely
accidental
RULING:
CA decision REVERSED. 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. (Define Common Carrier and cite True Test
of a Common Carrier).
GPS cannot escape from liability. GPS is liable culpa contractual. The mere proof of
existence of contract of carriage and the failure to comply therewith, justify, prima
facie, corresponding right of relief. As the driver of the insured was not shown to be
at fault, he cannot be ordered to pay FGU because the driver is not the party to the
contract of carriage.
CASE TITLE: Bascos v. Court of Appeals
KEYWORD: hauling contract
PONENTE:Campos, JR., J.
DOCTRINE:
Common carriers are obliged to observe extraordinary diligence in the vigilance
over the goods transported by them
FACTS:
Rodolfo Cipriano, representing CIPTRADE, entered into a hauling contract with
Jibfair Shipping Agency Corporation whereby the former bound itself to haul the
latter’s  2000m/tons  of  soya  bean  meal  from  Manila  to  Calamba.  CIPTRADE   those with cargo to move. Judicial admissions are conclusive and no evidence is
subcontracted with petitioner EstrellitaBascos to transport and deliver the 400
sacks of soya beans. Petitioner failed to deliver the cargo, and as a consequence,
Cipriano paid Jibfair the amount of goods lost in accordance with their contract.
PETITIONER’S  CONTENTION:
Petitioner denied that there was no contract of carriage since CIPTRADE leased her
cargo truck, and that the hijacking was a force majeure. The trial court ruled against
petitioner.
RESPONDENT’S  CONTENTION:
Cipriano demanded reimbursement from petitioner but the latter refused to pay.
Cipriano filed a complaint for breach of contract of carriage.
ISSUE:Whether or not petitioner is a common carrier.
RULING:
TRIAL COURT:
The trial court ruled against petitioner and granted the writ of preliminary
attachment for breach of contract of carriage.
CA:
The Court of Appeals affirmed the decision of the trail court, holding that petitioner
was a common carrier, found that she admitted in her answer that she did business
under the name A.M. Bascos Trucking and that said admission dispensed with the
presentation by private respondent, Rodolfo Cipriano, of proofs that petitioner was
a common carrier.
SC:
Yes. Petitioner is a common carrier. SC ruled if favor of respondent.
(1) Article 1732 of the Civil Code defines a common carrier as "(a) person,
corporation or firm, or association engaged in the business of carrying or
Page 11 of 151
transporting passengers or goods or both, by land, water or air, for compensation,
offering their services to the public." 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 this case, petitioner herself has
made the admission that she was in the trucking business, offering her trucks to
required to prove the same.
(2) Common carriers are obliged to observe extraordinary diligence in the
vigilance over the goods transported by them. Accordingly, they are presumed to
have been at fault or to have acted negligently if the goods are lost, destroyed or
deteriorated. There are very few instances when the presumption of negligence
does not attach and these instances are enumerated in Article 1734. In those cases
where the presumption is applied, the common carrier must prove that it exercised
extraordinary diligence in order to overcome the presumption. The presumption of
negligence was raised against petitioner. It was petitioner's burden to overcome it.
Thus, contrary to her assertion, private respondent need not introduce any
evidence to prove her negligence. Her own failure to adduce sufficient proof of
extraordinary diligence made the presumption conclusive against her.
CASE: FABRE V. COURT OF APPEALS
KEYWORD: Minibus, 50kph,
PONENTE: MENDOZA, J.
DOCTRINE: Art. 1732 of the Civil Code makes no distinctions between a person or
enterprise offering transportation service on a regular or scheduled basis and such
service on an occasional, episodic or unscheduled basis.
FACTS:
Petitioners Engracio Fabre, Jr. and his wife were owners of a 1982 model
Mazda minibus principally used in connection with a bus service for school children
which they operated in Manila. In 1981, they hired Porfirio J. Cabil as a driver whose
job  is  to  take  school  children  to  and  from  St.  Scholastica’s  College  in  Malate,  Manila.  
On November 2, 1984, private respondent World Christian Fellowship, Inc. arranged
with the petitioners for the transportation of 33 members of its Young Adults
Ministry from Manila to Caba, La Union and back in consideration of which private
respondent paid petitioners the amount of P3,000.00. The group is scheduled to
leave at 5PM but the bus did not leave Tropical Hut at Ortigas corner EDSA until
8PM because of the late members. Cabil was forced to take a detour through Ba-ay,
Lingayen, Pangasinan because the bridge in the usual route (Carmen, Pangasinan)
was under repair. At 11:30pm, 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 50kph to skid to the left road shoulder, hitting the traffic brace and sign
along the road and the fence of one Jesus Escano, then turned over and landed on
its left side. Several passengers were injured, including respondent Amyline Antonio
was thrown on the floor of the bus and pinned down by a wooden seat which came
off after being unscrewed.
PETITIONER’S  CONTENTION:   the carrying of persons or goods or both, and one who does such carrying only as an
The  petitioner’s  argue  that  they  are  not  liable  because  under  the  contract,   ancillary activity.
World Christian Fellowship was directly responsible for the conduct of the trip.
RESPONDENT’S  CONTENTION:
The petitioners should be held liable for negligence.
ISSUE:
Whether or not petitioners were liable for the injuries suffered by the private
respondents. Whether or not the petitioners are common carriers.
RULING:
RTC:
LIABLE. The petitioners are liable and ordered to jointly and severally pay private
respondents World Christian Fellowship, Inc. and Amyline Antonio. No convincing
evidence was shown that the minibus was properly checked for travel to a long
distance trip and that the driver was properly screened and tested before being
admitted for employment. Indeed, all the evidence presented have shown the
negligent act of the defendants which ultimately resulted to the accident subject of
this case
CA:
AFFIRMED . The Court of Appeals affirmed the decision of the RTC with respect to
Amyline Antonio but dismissed it with respect to the other plaintiffs on the ground
that they failed to prove their respective claims. Court of Appeals sustained the trial
court’s  finding  that  petitioner  Cabil  failed  to  exercise  due  care  and  precaution  in  the  
operation of his vehicle considering the time and the place of the accident. The
Court of Appeals held that the Fabres were themselves presumptively negligent.
SC:
AFFIRMED the decision of the CA with modification as to the awards of damages.
The case 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:
Page 12 of 151
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.
Article 1732 makes no distinction between one whose principal business activity is
The fact that it was raining and the road was slippery, that it was dark, that he
drove his bus at 50 kilometers an hour when even on a good day the normal speed
was only 20 kilometers an hour, and that he was unfamiliar with the terrain, Cabil
was grossly negligent and should be held liable for the injuries suffered by private
respondent Amyline Antonio.
Arts. 2176 and 2180 of the Civil Code his negligence gave rise to the presumption
that his employers, the Fabres, were themselves negligent in the selection and
supervision of their employee.
C. Distinguished from Private Carrier, Towage, Arrastre and
Stevedoring
CASE TITLE: Home Insurance Co. vs. American Steamship Agencies, Inc.
KEYWORD: Shortage on Peruvian fish meal
PONENTE:Bengzon, J.P., J.
DOCTRINE: As a private carrier, a stipulation exempting the owner of the vessel
from liability for the negligence of its agent is not against public policy, and is
deemed valid.
FACTS:
The case involves a charter party contract which is one of affreightment over the
whole vessel;and section 2, paragraph 2 of said charter provides that the owner is
liable for loss or damage to the goods caused by the personal act or default of the
owner or its manager, but however exempts the owner of the vessel from any loss
or damage or delay arising from any other source even from the neglect or fault of
the captain or crew. Here, 21,740 jute bags of Peruvian fish meal through SS
Crowborough were covered by clean bills of lading, consigned to San Miguel
Brewery, insured by plaintiff-appellee Home Insurance Company, and were
discharged into the lighters of defendant Luzon Stevedoring Company upon its
arrival in Manila. When the cargo was delivered to consignee San Miguel Brewery,
Inc. there were shortages amounting to P12,033.85; and consequently plaintiff-
appellee Home Insurance Company, as subrogee to consignee San Miguel, filed a
complaint against defendant Luzon Stevedoring Corporation and defendant-
appellant American Steamship Agencies.
Defendant Luzon Stevedoring Corporation alleged that it delivered with
due diligence the goods in the same quantity and quality that it had received the
same from the carrier.
Defendant-appellant American Steamship denied liability by alleging that
under the provisions of the Charter party referred to in the bills of lading, the
charterer, not the shipowner, was responsible for any loss or damage of the cargo.
The Court of First Instance absolved defendant Luzon Stevedoring
Corporation, having found the latter to have merely delivered what it received from
the carrier in the same condition and quality. However, it ordered defendant-
appellant American Steamship Agencies to pay plaintiff since the stipulation in the
charter party contract exempting the owner of the vessel from liability is against
public policy; and that in case of loss, destruction or deterioration of goods,
common carriers are presumed at fault or negligent. Subsequently, defendant-
appellant American Steamship appealed directly to the SC.
ISSUE:
Whether or not the stipulation in the charter party of the owner's non-liability is
valid so as to absolve the defendant-appellant American Steamship Agencies from
liability for loss.
RULING:
Yes, the stipulation is valid. A common carrier undertaking to carry a special cargo
or chartered to a special person only, becomes a private carrier; and the Civil Code
provisions on common carriers should not be applied where the carrier is a private
carrier. And as stated in the charter party, recovery cannot be had, for loss or
damage to the cargo, against the shipowners, unless the same is due to personal
acts or negligence of said owner or its manager, as distinguished from its other
Page 13 of 151
agents or employees. In this case, no such personal act or negligence has been
proved.
Petition denied. The judgment appealed from is reversed and defendant-appellant
American Steamship Agencies is absolved from liability to plaintiff-appellee Home
Insurance Company.
CASE TITLE: PLANTERS PRODUCTS INC. VS. COURT OF APPEALS
KEYWORD: FERTILIZER
PONENTE: BELLOSILLO, J.
DOCTRINE:
Rule on Presumption of negligence and;
It is only when the charter includes both the vessel and its crew, as in a bareboat or
demise that a common carrier becomes private, at least insofar as the particular
voyage covering the charter-party is concerned. Indubitably, a shipowner in a time
or voyage charter retains possession and control of the ship, although her holds
may, for the moment, be the property of the charterer.
FACTS:
Planters Products, Inc., purchased from Mitsubishi International Corporation of
New York, U.S.A., Urea 46% fertilizer which the latter shipped in bulk on aboard the
cargo  vessel  M/V  “Sun  Plum”  owned by private respondent Kyosei Kisen Kabushiki
Kaisha from Kenai, Alaska to Poro Point, San Fernando, La Union, Philippines. A time
charter-party  on  the  vessel  M/V  “Sun  Plum”  was  entered  into  between  Mitsubishi  
as shipper/charterer and KKKK as shipowner, in Tokyo, Japan. After the Urea
fertilizer was loaded in bulk by stevedores hired by and under the supervision of the
shipper, the steel hatches were closed with heavy iron lids, covered with three (3)
layers of tarpaulin, then tied with steel bonds. Upon arrival of the vessel at her port
of  call,  the  steel  pontoon  hatches  were  opened  with  the  use  of  the  vessel’s  boom.  
Petitioner unloaded the cargo from the holds into its steel-bodied dump trucks
which were parked alongside the berth, using metal scoops attached to the ship,
pursuant to the terms and conditions of the charter-party. The hatches remained
open throughout the duration of the discharge. Each time a dump truck was filled
up, its load of Urea was covered with tarpaulin before it was transported to the
consignee’s  warehouse  located  some  fifty  (50)  meters  from  the  wharf.  The  port  
area was windy, certain portions of the route to the warehouse were sandy and the
weather was variable, raining occasionally while the discharge was in progress.
Cargo Superintendents Company Inc. (CSCI), hired by petitioner, determined the
outrun of the cargo shipped. It turned out that there was a shortage and some
fertilizers were rendered unfit for commerce, having been polluted with sand, rust,
and dirt. Petitioner sent a claim letter to Soriamont Steamship Agencies (SSA), the
resident agent of the carrier, KKKK, for P245,969.31 representing the cost of the
alleged shortage in the goods shipped and the diminution in value of that portion
said to have been contaminated with dirt.
ISSUE:
Whether a common carrier becomes a private carrier by reason of a charter party;
in the negative, whether the shipowner in the instant case was able to prove that
he had exercised that degree of diligence required of him under the law.
PETITIONER'S CONTENTION:
Petitioner argues that since the possession and control of the vessel remain with
the shipowner, absent any stipulation to the contrary, such shipowner should be
made liable for the negligence of the captain and crew. In fine, PPI faults the
appellate court in not applying the presumption of negligence against respondent
carrier, and instead shifting the onus probandi on the shipper to show want of due
diligence on the part of the carrier, when he was not even at hand to witness what
transpired during the entire voyage
RESPONDENT'S CONTENTION:
The defendant carrier argued that the strict public policy governing common
carriers does not apply to them because they have become private carriers by
reason of the provisions of the charter-party
RULING
TRIAL COURT:
Prescinding from the provision of the law that a common carrier is presumed
negligent in case of loss or damage of the goods it contracts to transport, all that a
shipper has to do in a suit to recover for loss or damage is to show receipt by the
carrier of the goods and delivery by it of less than what it received. After that, the
burden of proving that the loss or damage was due to any of the causes which
exempt him from liability is shifted to the carrier, common or private. The
defendants considered private carriers, it was still incumbent upon them to prove
that the shortage or contamination sustained by the cargo is attributable to the
fault or negligence on the part of the shipper or consignee in the loading, stowing,
trimming and discharge of the cargo. This they failed to do. By this omission,
coupled with their failure to destroy the presumption of negligence against them,
the defendants are liable".
Page 14 of 151
CA:
Court of Appeals reversed the lower court and absolved the carrier from liability for
the  value  of  the  cargo  that  was  lost  or  damaged.  The  cargo  vessel  M/V  “Sun  Plum”  
owned by private respondent KKKK was a private carrier and not a common carrier
by reason of the time charter-party. The Civil Code provisions on common carriers
which set forth a presumption of negligence do not find application in the case at
bar.
SC:
A  “charter-party”  is  defined  as  a  contract  by  which  an  entire  ship,  or  some  principal  
part thereof, is let by the owner to another person for a specified time or use; a
contract of affreightment by which the owner of a ship or other vessel lets the
whole or a part of her to a merchant or other person for the conveyance of goods,
on a particular voyage, in consideration of the payment of freight; Charter parties
are of two types: (a) contract of affreightment which involves the use of shipping
space on vessels leased by the owner in part or as a whole, to carry goods for
others; and, (b) charter by demise or bareboat charter, by the terms of which the
whole vessel is let to the charterer with a transfer to him of its entire command and
possession and consequent control over its navigation, including the master and the
crew, who are his servants. Contract of affreightment may either be time charter,
wherein the vessel 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 period of
time or for a single or  consecutive  voyage,  the  shipowner  to  supply  the  ship’s  
stores, pay for the wages of the master and the crew, and defray the expenses for
the maintenance of the ship.
The  distinction  between  a  “common  or  public  carrier”  and  a  “private  or  special  
carrier”  lies  in  the  character  of  the  business,  such  that  if  the  undertaking  is  a  single  
transaction, not a part of the general business or occupation, although involving ing
the carriage of goods for a fee, the person or corporation offering such service is a
private carrier.
Article 1733 of the New Civil Code mandates that common carriers, by reason of the
nature of their business, should observe extraordinary diligence in the vigilance
over the goods they carry. In the case of private carriers, however, the exercise of
ordinary diligence in the carriage of goods will suffice. Moreover, in case of loss,
destruction or deterioration of the goods, common carriers are presumed to have
been at fault or to have acted negligently, and the burden of proving otherwise
rests on them. On the contrary, no such presumption applies to private carriers, for
whosoever alleges damage to or deterioration of the goods carried has the onus of
proving that the cause was the negligence of the carrier. (CONCEPT)
It is not disputed that respondent carrier, in the ordinary course of business,
operates as a common carrier, transporting goods indiscriminately for all persons.
When  petitioner  chartered  the  vessel  M/V  “Sun  Plum”,  the  ship  captain,  its  officers   and service of all or some part of a ship for a period of time or a voyage or
and compliment were under the employ of the shipowner and therefore continued
to be under its direct supervision and control. Hardly then can we charge the
charterer, a stranger to the crew and to the ship, with the duty of caring for his
cargo when the charterer did not have any control of the means in doing so. This is
evident in the present case considering that the steering of the ship, the manning of
the decks, the determination of the course of the voyage and other technical
incidents of maritime navigation were all consigned to the officers and crew who
were screened, chosen and hired by the shipowner.
Respondent carrier has sufficiently overcome, by clear and convincing proof, the
prima facie presumption of negligence. The master of the carrying vessel, Captain
Lee Tae Bo, testified that before the fertilizer was loaded, the four (4) hatches of
the vessel were cleaned, dried and fumigated. After completing the loading of the
cargo  in  bulk  in  the  ship’s  holds,  the  steel  pontoon  hatches  were  closed  and  sealed  
with iron lids, then covered with three (3) layers of serviceable tarpaulins which
were tied with steel bonds. The hatches remained close and tightly sealed while the
ship was in transit as the weight of the steel covers made it impossible for a person
to open without the use of  the  ship’s  boom.  It  was  also  shown  during  the  trial  that   were allegedly found to be wet and rusty. The cargo was discharged and unloaded
the hull of the vessel was in good condition, foreclosing the possibility of spillage of
the cargo into the sea or seepage of water inside the hull of the vessel. When M/V
“Sun  Plum”  docked  at  its berthing place, representatives of the consignee boarded,
and in the presence of a representative of the shipowner, the foreman, the
stevedores, and a cargo surveyor representing CSCI, opened the hatches and
inspected the condition of the hull of the vessel. The stevedores unloaded the cargo
under the watchful eyes of the shipmates who were overseeing the whole
operation on rotation basis.
TITLE: NATIONAL STEEL CORPORATION VS CA
KEYWORD: Common Carrier; Private Carrier; Burden of Proof
PONENTE:PANGANIBAN, J.
DOCTRINE:
The true test of a common carrier is the carriage of passengers or goods, provided it
Page 15 of 151
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
voyages.”
FACTS:
The MV Vlasons I is a vessel which renders tramping service and does not transport
cargo or shipment for the general public. Its services are available only to specific
persons who enter into a special contract of charter party with its owner.
Vlasons Shipping, Inc., owner of MV Vlasons I, entered into a contract of
affreightment or contract of voyage charter hire with National Steel Corporation.
On  August  6,  7  and  8,  1974,  the  MV  ‘VLASONS  I’  loaded  at  the  pier  at  Iligan  City,  the  
NSC’s  shipment  of  1,677  skids  of  tinplatesand 92 packages of hot rolled sheets for
carriage to Manila. The shipment was placed in the three (3) hatches of the ship.
The vessel arrived with the cargo at Pier 12, North Harbor, Manila, on August 12,
1974. The following  day,  when  the  vessel’s  three  hatches  containing  the  shipment  
were  opened  by  NSC’s  agents, nearly all the skids of tinplates and hot rolled sheets
by stevedores hired by the Charterer.
NSC filed with VSI its claim for damages suffered. On October 3, 1974, plaintiff
formally demanded payment of said claim but defendant VSI refused and failed to
pay. Plaintiff filed its complaint against defendant on April 21, 1976 in the CFI, Rizal.
PETITIONER’S  (NSC)  CONTENTION:  
It sustained losses as a result of
1. the act, neglect and default of the master and crew in the
management of the vessel as well as
2. the want of due diligence on the part of the defendant
a. to make the vessel seaworthy and
b. to make the holds and all other parts of the vessel in which the
cargo was carried, fit and safe for its reception, carriage and
preservation—
 all  in  violation  of  defendant’s  undertaking  under  their  Contract  of  Voyage   Affirmed with modification reducing the demurrage from P88,000.00 to P44,000.00
Charter Hire. and  deleting  the  award  of  attorney’s fees and expenses of litigation.

PRIVATE  RESPONDENT’S  (VSI)  CONTENTION: SC: (only related to the topic)

1. MV  ‘VLASONS  I’  was  seaworthy  in  all  respects  for  the  carriage  of  plaintiff’s   Issue: WON MV Vlason I is a private carrier?
cargo;
2. Said  vessel  was  not  a  ‘common  carrier’  inasmuch  as  she  was  under  voyage   Held: YES. In the instant case, it is undisputed that VSI did not offer its services to
charter contract with NSC as charterer under the charter party; the general public. As found by the RTC, it carried passengers or goods only for
3. In  the  course  of  the  voyage  from  Iligan  City  to  Manila,  the  MV  ‘VLASONS  I’   those  it  chose  under  a  “special  contract  of  charter  party.”As  correctly  concluded  by  
encountered very rough seas, strong winds and adverse weather the CA, the MV Vlasons I “was  not  a  common  but  a  private  carrier.”Consequently,  
condition, causing strong winds and big waves to continuously pound the rights and obligations of VSI and NSC, including their respective liability for
against the vessel and seawater to overflow on its deck and hatch covers, damage to the cargo, are determined primarily by stipulations in their contract of
which may be considered as force majeure; private carriage or charter party.
4. Under the Contract of Voyage Charter Hire, defendant shall not be
responsible for losses/damages except on proven willful negligence of the Extent  of  VSI’  s  Responsibility  and  Liability  Over  NSC’  s  Cargo
officers of the vessel, It  is  clear  from  the  parties’  Contract  of  Voyage  Charter  Hire  that  VSI  “shall  not  be  
a. the  officers  of  said  MV  ‘VLASONS  I’  exercised  due  diligence  and   responsible for losses except on proven willful negligence of the officers of the
proper seamanship and were not willfully negligent vessel.”

RULING: Burden of Proof

TRIAL COURT: Ineluctably,  the  burden  of  proof  was  placed  on  NSC  by  the  parties’  agreement.
In favor of VSI, NSC was ordered to pay the unpaid freight due and demurrage for
the delay in payment. (italized related to the topic in Transpo) CASE TITLE: Valenzuela Hardwood vs CA
1. The  MV  ‘VLASONS  I’  is  a  vessel  of  Philippine  registry  engaged  in  the   KEYWORD/s: charter party stipulation, 7brothers
tramping service and is available for hire only under special contracts of PONENTE: PANGANIBAN
charter party as in this particular case. DOCTRINE: In case of a private carrier, a stipulation exempting the owner from
2. The  evidence  shows  that  the  MV  ‘VLASONS  I’  was  seaworthy  and  properly   liability even for the negligence of its agent is valid.
manned, equipped and supplied when it undertook the voyage. It had all
the required certificates of seaworthiness. FACTS:
3. The cargo/shipment was securely stowed in three (3) hatches of the ship. On Jan 16, 1984 Valenzuela hardwood entered into a contract w Seven Brothers
The hatch openings were covered by hatchboards which were in turn whereby the latter undertook an agreement to load on board it's vessel M/V Seven
covered by two or double tarpaulins. The hatch covers were water tight Ambassador said Lauan round logs(940) of Valenzuela at port of Isabela to Manila.
and, under the hatchboards were steel beams to give support. On Jan. 25, 1984 M/V 7 Ambassador sank resulting in the loss of the insured logs,
4. The claim of the plaintiff that defendant violated the contract of carriage is the cause of the loss was the snapping of the iron chains & subsequent rolling of
not supported by evidence. As to the damage to the tinplates, there is the logs due to the fault of its captain in stowing and securing the logs. There was a
unrebutted  testimony  of  witness  Vicente  Angliongto  that  tinplates  ‘sweat’   stipulation in the said contract that "owners shall not be responsible for loss, split,
by themselves when packed even without being in contract (sic) with short handling, breakages, and any kind of damages to the cargo".
water from outside especially when the weather is bad or raining.
PETITIONER’S  CONTENTION:
CA:

Page 16 of 151
Valenzuela contends that the said stipulation in the charter party executed between
Valenzuela and 7 brothers exempting the latter from liability for loss of the former's
logs arising from negligence of its captain is not valid, thus, 7 brothers should be
held liable for the loss.
RESPONDENT’S  CONTENTION:   the rights and obligations of common carriers shall be governed by the Code of
Seven brothers argued that said stipulation in the contract exempting them from
liability in case of loss is valid.
RULING:
TRIAL COURT:
Trial court ruled in favor of Valenzuela on the ground that the cause of loss was due
to the negligence of the captain in stowing and and securing the logs on board. That
the said stipulation in the charter party is void for being contrary to public policy.
CA:
CA affirmed in part the decision of RTC by sustaining the liability of Seven Brothers
but modified by holding that Seven Brothers was not liable for the lost cargo on the
ground that the said stipulation is valid.
SC:
SC ruled in favor of Seven Brothers that Seven Brothers as a private carrier when it
contracted to transport the cargo of Valenzuela. In a contract of private carrier, the
parties may validly stipulate that responsibility for the cargo rests solely on the
charterer, exempting the shipowner from liability for loss or damage to the cargo
caused even by the negligence of the ship captain such stipulation is valid because
it's is freely entered into by the parties and the same is not contrary to law, morals,
good customs, public order or public policy. As compared to common carriers,
private carriers are free to stipulate certain conditions in their contracts while the
general public enters into a contract of transportation with common carriers
without a hand or voice in preparation thereof.
D. Governing Laws
CASE TITLE: SAMAR MINING COMPANY, INC. vs. NORDEUTSCHER LLOYD and CF.
SHARP & COMPANY, INC
KEYWORD: Article 1736, New Civil Code.
Page 17 of 151
PONENTE: Cuevas, J.
DOCTRINE:The liability of the common carrier for the loss, destruction or
deterioration of goods transported from a foreign country to the Philippines is
governed primarily by the New Civil Code. In all matters not regulated by said Code,
Commerce and by special laws.
FACTS:
SAMAR MINING COMPANY, INC. (SMCI) imported one (1) crate Optima welded
wedge wire sieves from Germany, through a vessel owned by common carrier,
NORDEUTSCHER LLOYD, represented in the Philippines by its agent, CF. SHARP &
CO., INC. which shipment is covered by Bill of Lading No. 18 duly issued to
consignee, SMCI.
Upon arrival of the vessel at the port of Manila, the goods were unloaded and
delivered by the carrier to the bonded warehouse of AMCYL where the goods were
stored before its transshipment to Davao, which was the agreed point of
destination. However, the goods were never transhipped to Davao hence, were not
received by the consignee.
Consequently, SMCI filed an extrajudicial claim for the value of the goods against
the carrier, but was not paid. Hence, SMCI filed the instant suit to enforce such
payment.
The trial court rendered a decision in favor of SMCI, ordering defendants to pay the
value of the goods.
Hence, this petition.
ISSUE: WON the petitioners are liable for the loss of the shipment.
RULING: NO.
The liability of the common carrier for the loss, destruction or deterioration of
goods transported from a foreign country to the Philippines is governed primarily
by the New Civil Code. In all matters not regulated by said Code, the rights and
obligations of common carriers shall be governed by the Code of Commerce and by
special laws.
Here, Article 1736 of the New Civil Code provisions on common carriers was applied
by the Supreme Court.
Under said article, the carrier may be RELIEVED of the responsibility for loss or
damage to the goods UPON ACTUAL or constructive delivery of the same by the
carrier to the consignee, or to the person who has a right to receive them.
There is ACTUAL delivery in contracts for the transport of goods when possession
has been turned over to the consignee or to his DULY AUTHORIZED AGENT and a
reasonable time is given him to remove the goods.
DOCTRINE:
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.
FACTS:
M/S ASIATICA, a vessel operated by Eastern Shipping Lines loaded at Kobe, Japan
for transportation to Manila, 5,000 pieces of calorized lance pipes consigned to
Philippine Blooming Mills Co., Inc., and 7 cases of spare parts consigned to Central
Textile Mills, Inc., both sets of goods were insured against marine risk with
Development Insurance and Surety Corporation.

In finding that the appellant was not responsible for the loss of the goods since
there was actual delivery to the consignee through his duly authorized agent, who
turned out to be carrier-appellant herein, the Court ruled in this wise:
Under the bill of lading, the appellant-carrier assumed 2 undertakings:
The first is FOR THE TRANSPORT OF GOODS from Bremen, Germany to Manila. The
second, THE TRANSSHIPMENT OF THE SAME GOODS from Manila to Davao,
with appellant acting as agent of the consignee.
The same vessel took on board 128 cartons of garment fabrics and accessories
consigned to Mariveles Apparel Corporation and insured by Nisshin Fire & Marine
Insurance Co., and surveying instruments consigned to Aman Enterprises and
General Merchandise and insured by Dowa Fire & Marine Insurance. Enroute for
Kobe, Japan, to Manila, the vessel caught fire and sank, resulting in the total loss of
ship and cargo. The respective Insurers paid the corresponding marine insurance
values to the consignees concerned and were thus subrogated unto the rights of
the latter as the insured.

At the hiatus between these two undertakings of appellant, which is the moment PETITIONER’S  CONTENTION:
st
when the subject goods are discharged in Manila, its personality changes from that 1 issue: It is not the operator of the M/S Asiatica but merely a charterer
of carrier TO THAT OF AGENT of the consignee. thereof
nd
2 issue: loss was due to an extraordinary fortuitous event, hence, it is not
Thus,  the  character  of  appellant’s  possession  also  changes,  FROM  possession  in  its   liable under the law.
own name AS CARRIER, into possession in the name of consignee AS THE LATTER'S
AGENT. RESPONDENT’S  CONTENTION:
st
1 issue: Subrogation
nd
Such being the case, there was, in effect, actual delivery of the goods from 2 issue: It is not an extraordinary fortuitous event
appellant AS CARRIER to the same appellant AS AGENT of the consignee.
RULING
Upon such delivery, the appellant, as erstwhile carrier, CEASES to be responsible for Trial court:
any loss or damage that may befall the goods from that point onwards. In favor of Insurance companies

This is the full import of Article 1736 as applied in this case. CA:
Affirmed  the  trial  court’s  decision
CASE TITLE: Eastern Shipping Lines v IAC
KEYWORD/S: Governing Laws; Subrogation; Liability of Common Carriers SC:
PONENTE:Melencio-Herrera Affirmed  the  CA’s  decision  with  modifications  as  to  the  monetary  award

Page 18 of 151
 The law of the country to which the goods are to be transported governs that "after the cargoes were stored in the hatches, no regular inspection
the liability of the common carrier in case of their loss, destruction or was made as to their condition  during  the  voyage.”
deterioration.
As the cargoes in question were transported from Japan to the Philippines, TITLE: National Development Company vs. Court of Appeals
the liability of Petitioner Carrier is governed primarily by the Civil Code. KEYWORD/s:  Common  carriers;  Carriage  of  Goods  by  Sea  Act…  Extraordinary    
However, in all matters not regulated by said Code, the rights and Diligence;
obligations of common carrier shall be governed by the Code of Commerce “goods  in  question  are  transported  from  San  Francisco,  California  and  Tokyo,  Japan  
and by special laws. to the  Philippines  and  that  they  were  lost  or  damaged  due  to  a  collision”
Thus, the Carriage of Goods by Sea Act, a special law, is suppletory to the PONENTE:PARAS, J.
provisions of the Civil Code.
(This case is placed under the heading  “Governing  Laws”  in  the  syllabus,  but  if  you   DOCTRINE:
want,  here’s  the  collateral  issue  discussed  by  the  Supreme  Court  which  I  think  is   1. Common carriers; Carriage of Goods by Sea Act; Rule that for cargoes
also covered by the hw) transported from Japan to the Philippines, the liability of the carrier in case of loss,
destruction or deterioration of goods is governed primarily by the Civil Code, but on
ISSUE all other matters, the Code of Commerce and special laws shall apply; The Carriage
Burden of proof of Goods by Sea Act is suppletory to the Civil Code.

HELD 2. Extraordinary Diligence; Common carriers, are bound to observe extraordinary

Common carriers are responsible for the loss, destruction, or deterioration diligence in the vigilance over the goods and for the safety of passengers
of the goods unless the same is due to any of the following causes only: transported by them according to all circumstances of each case.
o Flood, storm, earthquake, lightning or other natural disaster or
calamity; xxx ***Nature of the case: These are appeals by certiorari from the decision of the
Loss is due to fire Court of Appeals in CA G.R. No. L-46513-R  entitled  “Development  Insurance  and  
Fire may NOT be considered a natural disaster or calamity. surety Corporation (DISC) plaintiff-appellee vs. Maritime Company of the
This must be so as it arises almost invariably from some act of man or by Philippines (MCP) and National Development Company (NDC) defendant-
human means. appellants,”  affirming  in  toto  the  decision  in  Civil  Case  No.  60641  of  the  then  CFI  of  
Manila, Sixth Judicial District ordering the defendants MDC and MCP, to pay jointly
It does not fall within the category of an act of God unless caused by
and severally, to the plaintiff Development Insurance and Surety Corp P 364,915.86
lightning or by other natural disaster or calamity.
The burden then is upon Petitioner Carrier to prove that it has exercised
FACTS:
the extraordinary diligence required by law
In accordance with a memorandum entered into between defendants NDC and
And even if fire were to be considered a "natural disaster" within the
MCP on September 13, 1962, defendant NDC as the first preferred mortgagee of
meaning of Article 1734 of the Civil Code, it is required under Article 1739
three ocean-going  vessels  including  one  the  name  “Doña  Nati”  appointed  
of the same Code that the "natural disaster" must have been the
defendant MCP as its agent to manage and operate said vessels in its behalf. The E.
"proximate and only cause of the loss," and that the carrier has
Phillipp  Corporation  of  the  New  York  loaded  on  board  the  vessel  “Doña  Nati”  at  San  
"exercised due diligence to prevent or minimize the loss before, during or
Francisco, California, a total of 1,200 bales of American raw cotton consigned to
after the occurrence of the disaster.
Manila Banking Corporation, Manila  and  the  People’s  Bank  and  Trust  Company  
There was "actual fault" of the carrier shown by "lack of diligence" in that
acting for and in behalf of the Pan Asiatic Commercial Company, Inc., who
"when the smoke was noticed, the fire was already big; that the fire must
represents Riverside Mills Corporation. The vessel figured in a collision at Ise Bay,
have started twenty-four (24) hours before the same was noticed; " and
Japan with a Japanese vessel as a result of which 550 bales of aforesaid cargo were

Page 19 of 151
lost and/or destroyed. The damage and lost cargo was worth P344,977.86 which
amount, the plaintiff Development Insurance and Surety Corporation as insurer,
paid to the Riverside Mills Corporation as holder of the negotiable bills of lading
duly endorsed. The insurer filed before the CFI of Manila an action for the recovery
of said amount from NDC and MCP.
PETITIONER’S  (NDC  and  MCP)  CONTENTION:  
The main thrust of NDC's argument is to the effect that the Carriage of
Goods by Sea Act should apply to the case at bar and not the Civil Code or the Code
of Commerce.
1. Under Section 4 (2) of said Act, the carrier is not responsible for the loss or
damage resulting from the "act, neglect or default of the master, mariner,
pilot or the servants of the carrier in the navigation or in the management
of the ship."
2. NDC insists that based on the findings of the trial court which were
adopted by the Court of Appeals, both pilots of the colliding vessels were
at fault and negligent, NDC would have been relieved of liability under the
Carriage of Goods by Sea Act.
3. Instead, Article 287 of the Code of Commerce was applied and both NDC
and MCP were ordered to reimburse the insurance company for the
amount the latter paid to the consignee as earlier stated.
PRIVATE  RESPONDENT’S  (DISC)  CONTENTION:
Plaintiff (herein respondent DISC) had paid as insurer the total amount of
P364,915.86 to the consignees or their successors-in-interest, for the said lost or
damaged cargoes.
Hence, plaintiff filed this complaint to recover said amount from the
defendants-NDC and MCP as owner and ship agent respectively, of the said
'DofiaNati' vessel.
RULING:
TRIAL COURT:
Trial court rendered a decision ordering the defendants MCP and NDC to pay jointly
and solidarity to DISC the sum of P364,915.86 plus the legal rate of interest to be
computed from the filing of the complaint on April 22, 1965, until fully paid and
attorney's fees of P10,000.00. Likewise, in said decision, the trial court granted
MCP's crossclaim against NDC.
COURT OF APPEALS:
Page 20 of 151
On November 17,1978, the Court of Appeals promulgated its decision affirming in
toto the decision of the trial court.
SUPREME COURT (only related to the topic)
Issue: Which laws govern loss or destruction of goods due to collision of vessels
outside Philippine waters, and the extent of liability as well as the rules of
prescription provided thereunder.
Held: The subject petitions are DENIED for lack of merit and the assailed decision of
the respondent Appellate Court is AFFIRMED. Philippine Laws will apply.
Ratio: 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 special laws (Article 1766, Civil Code). Hence, the
Carriage of Goods by Sea Act, a special law, is merely suppletory to the provisions of
the Civil Code.
In the case at bar, it has been established that the goods in question are
transported from San Francisco, California and Tokyo, Japan to the Philippines and
that they were lost or damaged due to a collision which was found to have been
caused by the negligence or fault of both captains of the colliding vessels. Under the
above ruling, it is evident that the laws of the Philippines will apply, and it is
immaterial that the collision actually occurred in foreign waters, such as Ise Bay,
Japan.
Under Article 1733 of the Civil Code, common carriers from the nature of
their business and for reasons of public policy are bound to observe extraordinary
diligence in the vigilance over the goods and for the safety of the passengers
transported by them according to all circumstances of each case. Accordingly,
under Article 1735 of the same Code, in all cases other than those mentioned in
Article 1734 thereof, the common carrier shall be presumed to have been at fault or
to have acted negligently, unless it proves that it has observed the extraordinary
diligence required by law.
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.

E.  Government  Regulation  of  Common  Carrier’s  Business
1. Nature of Business
CASE TITLE: Fisher vs. Yangco Steamship Company
KEYWORD: dynamite, explosives
PONENTE: Justice Carson
DOCTRINE:
CONTROL AND REGULATION OF CARRIERS,— The nature of the business of a
common carrier as a public employment is such that it is clearly within the power of
the state to impose such just and reasonable regulations thereon in the interest of
the public as the legislator may deem proper. Of course such regulations must not
have the effect of depriving an owner of his property without due course of law,
nor of confiscating or appropriating private property without just compensation,
nor of limiting or prescribing irrevocably vested rights or privileges lawfully acquired
under a charter or franchise. But aside from such constitutional limitations, the
determination of the nature and extent of the regulations, which should be
prescribed, rests in the hands of the legislator.
SHORT FACTS:
ORIGINAL ACTION in the Supreme Court. Prohibition.
The parties to the case are –
- FC Fisher (stockholder of YangcoStreamship Company)
- Yangco Steamship Company
- J.S. Stanley (Acting Collector of Customs of the Philippines)
On or about June 10, 1912 the directors of Yangco Steamship Company adopted a
resolution (ratified and affirmed by the shareholders of the company) that declares
and provides that goods that are to be carried by their vessels shall not include
dynamite, powder or other explosives. J.S Stanley however demanded and required
the company to accept and carry such explosives for carriage. Notwithstanding the
demands of Fisher, the manager, agents and servants of the company decline and
refuse to cease the carriage of such explosives.
Page 21 of 151
PETITIONER’S  CONTENTIONS:
1. That the Acting Collector of Customs erroneously construes the provisions of Act
No. 98 in holding that they require the company to accept such explosives for
carriage notwithstanding the above mentioned resolution of the directors and
stockholders of the company, and
2. That if the Act does in fact require the company to carry such explosives it is to
that extent unconstitutional and void
3. That a common carrier in the Philippine Islands -may decline to accept for
carriage any shipment of' merchandise of a class which it expressly or impliedly
declines to accept from all shippers alike, because, as he contends "the duty of a
common carrier to carry for all who offer arises from the public profession he has
made, and is limited by it.
RESPONDENT’S  CONTENTIONS:
1. That should the company decline to accept such explosives for carriage, the
respondent Attorney- General of the Philippine Islands and the respondent
prosecuting attorney of the city of Manila intend to institute proceedings under the
penal provisions of Act No. 98 of the Philippine Commission against the company,
its managers, agents and servants, to enforce the requirements of the Acting
Collector of Customs as to the acceptance of such explosives for carriage
2. That Sec. 3 of Act No. 98 impose an imperative duty on all common carriers to
accept for carriage, and to carry all and any kind of freight which may be offered for
carriage without regard to the facilities which they may have at their disposal.
ISSUE:
Whether or not the refusal of the owners and officers of a steam vessel to accept
for carriage "dynamite, powder or other explosives" [from any and all shippers who
may offer such explosives for carriage] can be held to be a lawful act without regard
to any question as to the conditions under which such explosives are offered for
carriage, or as to the suitableness of the vessel for the transportation of such
explosives, or as to the possibility that the refusal to accept such articles of
commerce in a particular case may have the effect of subjecting any person or
locality or the traffic in such explosives to an undue, unreasonable or unnecessary
prejudice or discrimination.
RULING:
NO. The nature of the business of a common carrier as a public employment is such
that it is clearly within the power of the state to impose such just and reasonable
regulations thereon in the interest of the public, as the legislator may deem proper.
Of course such regulations must not have the effect of depriving an owner of his
property without due course of law, nor of confiscating or appropriating private
property without just compensation, nor of limiting or prescribing irrevocably
vested rights or privileges lawfully acquired under a charter or franchise. But aside
from such constitutional limitations, the determination of the nature and extent of
the regulations, which should be prescribed, rests in the hands of the legislator.
The said provision which provides that no common carrier shall under the pretense
whatsoever, fail or refuse to receive for carriage any person or property is not to be
construed in its literal sense and without regard to the context, so as to impose an
imperative duty to all common carriers to accept and carry all and any kind of
freight which may be offered for carriage without regard to their facilities. The
statute more so does not require of a common carrier, as a condition to the
continuing  in  said  business,  that  he  must  carry  anything  and  everything”,  and   -providing implementing guidelines on the DOTC Department Order
thereby  “renders useless the facilities he may have for the carriage of certain types
of freight.
The prayer for petition cannot be granted. It cannot be doubted that the refusal of
the said company, owner of a large number of vessels engaged in trade to receive
for carriage such explosives in any of their vessels would subject the traffic of such
goods to manifest prejudice and discrimination. Such prejudice and discrimination
being unnecessary and unreasonable given the fact that it has not been alleged that
“dynamite,  gunpowder,  and  other  explosives”  cannot  be  transported  with   an indicative or reference rate as the basis for the
reasonable safety on board a vessel engaged in the business of common carriers.
Further,  it  has  not  been  alleged  that  the  company’s  vessels  are  unsound  for  such   e. LTFRB Order (March 24, 1994)
purposes. The mere fact that violent and destruct can be obtained by the use of
dynamite would not be sufficient in itself to justify the refusal of the vessel, duly
licensed as common carrier of merchandise to accept if for carriage. If it cannot be
proven that the condition, which it is to be transported, offers real danger to the
carriage or that there be reasonable fear that the vessel will be exposed to
unnecessary risks then such refusal is a violation of the prohibition against
discrimination prohibited by the Act.
CASE TITLE:Kilusang Mayo Uno (KMU) Labor Center vs. Hon. Jesus Garcia, Jr.
KEYWORD: Fare Range Scheme (15% ; +20% -25%)
PONENTE:Kapunan, J.
DOCTRINE: Rate fixing (a delicate and sensitive government function that requires
dexterity of judgment and sound discretion with the settled goal of arriving at a just
and reasonable rate acceptable to both the public utility and the public) must not
be relinquished in favor of those who would benefit and profit from the industry.
Page 22 of 151
FACTS:
1. The DOTC and the LTFRB issued the following memoranda, circulars and/or
orders:
a. DOTC Memorandum Order 90-395 (June 26, 1990)
- implementation of a fare range scheme for provincial bus services in
the country;
(+15% -15% of the LTFRB official rate for a period of 1yr)
b. DOTC Department Order No.92-587 (March 30, 1992)
-defining the policy framework on the regulation of transport services;
c. DOTC Memorandum (October 8, 1992)
-laying down rules and procedures to implement Department Order
No. 92-587;
d. LTFRB Memorandum Circular No. 92-009 (February 17, 1993)
No. 92-587
-Challenged Portions:
i. The presumption of public need for a service shall be deemed in
favor of the applicant, while burden of proving that there is no
need for the proposed service shall be the oppositor'(s).
ii. The existing authorized fare range system of plus or minus 15 per
cent for provincial buses and jeepneys shall be widened to 20%
and -25% limit in 1994 with the authorized fare to be replaced by
expanded fare range ;
-dismissing KMU's petition opposing the upward adjustment of bus
fare
2. Sometime in March, 1994, Provincial Bus Operators Association of the
Philippines, Inc. (PBOAP) PBOAP, availing itself of the deregulation policy of
the DOTC allowing provincial bus operators to collect plus 20% and minus
25% of the prescribed fare without first having filed a petition for the
purpose and without the benefit of a public hearing, announced a fare
increase of twenty (20%) percent of the existing fares.
3. On the date the said increased fares were to be made effective KMU,
opposing the upward adjustment of bus fares, filed a petition seeking to
nullify all 5 memoranda, circulars and/or orders (mentioned in #1).
PETITIONER’S  CONTENTION:
Petitioner KMU anchors its claim on two (2) grounds.
First: the authority given by respondent LTFRB to provincial bus operators to set a
fare range of plus or minus fifteen (15%) percent, later increased to plus twenty
(20%) and minus twenty-five (-25%) percent, over and above the existing
authorized fare without having to file a petition for the purpose, is unconstitutional,
invalid and illegal.
Second: the establishment of a presumption of public need in favor of an applicant
for a proposed transport service without having to prove public necessity, is illegal
for being violative of the Public Service Act and the Rules of Court.
RESPONDNENT’S  CONTENTION:
PBOAP
-asserts that the petitioner has no legal standing to sue or has no real interest in the
case at bench and in obtaining the reliefs prayed for.
DOTC Secretary Jesus B. Garcia, Jr. and the LTFRB
-asserts that the petitioner does not have the standing to maintain the instant suit.
-they further claim that it is within DOTC and LTFRB's authority to set a fare range
scheme and establish a presumption of public need in applications for certificates of
public convenience.
RULING:
LTFRB:
Petition of KMU is dismissed for lack of merit hence, the instant petition for
certiorari with an urgent prayer for the issuance of a TRO (Straight to SC. No RTC or
CA involved)
SC:
1. On Fare Range Scheme
The policy of allowing the provincial bus operators to change and increase their
fares at will would result not only to a chaotic situation but to an anarchic state
of affairs as this would leave the riding public at the mercy of transport
operators who may increase fares whenever it pleases them or whenever they
deem it "necessary" to do so.
2. On the Presumption of Public Need
Advocacy of liberalized franchising and regulatory process is tantamount to an
abdication by the government of its inherent right to exercise police power,
that is, the right of government to regulate public utilities for protection of the
public and the utilities themselves.
Page 23 of 151
3. The Ruling:
The instant petition is GRANTED& DOTC Dept. Order#92-587, LTFRB Memo
Circ#92-009, and March 24, 1994LTFRB order are declared contrary to law and
invalid insofar as they affect provisions therein:
(a) Delegating to provincial bus and jeepney operators the authority to increase
or decrease the duly prescribed transportation fares; and
(b) Creating a presumption of public need for a service in favor of the applicant
for a certificate of public convenience and placing the burden of proving
that there is no need for the proposed service to the oppositor.
2. Registered Owner Rule
CASE TITLE: BienvenidoGelisan vs Benito Alday
KEYWORD/S: freight truck, contract of lease
PONENTE: Justice Padilla
DOCTRINE:
If the properties covered by a franchise is transferred or leased to another without
the required approval of the Public Service Commission (PSC), the transfer is not
binding upon the public and third persons.
FACTS:
Gelisan entered into an unregistered contract of lease with Espiritu, allowing the
latter to use his freight truck for the purpose of hauling goods at an agreed price of
Php18.00 per trip. Espiritu, subsequently entered into a contract with Benito Alday
to deliver 400 sacks of fertilizers to the warehouse of Atlas Fertilizer Corporation
(Atlas) in Mandaluyong. Espiritu, however, failed to deliver the fertilizers and was
subsequently arrested for theft while the truck was impounded. Alday then sought
for the recovery of damages because he was made to pay the value of the
undelivered fertilizers to Atlas.
PETITIONER’S  CONTENTION:
The petitioner argued that by virtue of the lease contract between him and Espiritu,
he is exempt from liability to Alday because he has no contractual relations with the
latter regarding the delivery  of  the  400  sacks  of  fertilizers  and  Espiritu’s  actions  are  
beyond his control. He also contends that the contract between him and Espiritu
specifically stated that all liability arising from the use of the freight truck shall be
borne by Espiritu. He further contends that the previous approval of the Public
Service Commission regarding the transfer or lease of vehicle applies only when
there is no positive identification of the driver or owner or there is scant means of
identification, but not in instances where the identity of the person responsible was
determined. He also reiterated that if he should be held liable, his liability is only
subsidiary.
RESPONDENT’S  CONTENTION:  
The petitioners should pay for the damages suffered by the respondent due to the
criminal act committed by Espiritu. (The court did not elaborate on the
respondent’s  contention.  It  focused  on  the  ruling  of  the  SC)     carrier, even though the specific vehicle involved may already have been
ISSUE:
Whether or not Gelisan, the registered owner of the vehicle, should be held
solidarily liable with Espiritu, the lessee, despite the fact that freight truck was
leased to the latter at the time the incident occurred.
RULING: The petition was denied.
Trial Court:
The CFI of Manila ruled that Espiritu alone was liable to Alday, since Gelisan was not
privy to the contract between Espiritu and Alday.
CA:
The CA found Gelisansolidarily liable with Espiritu for being the registered owner of
the vehicle, and the lease contract executed by and between Gelisan and Espiritu is
not binding upon Alday for not having previously approved by the Public Service
Commission.
SC:
The  SC  affirmed  the  CA’s  ruling.  The  court  ruled  that  the  registered  owner  of  a   Luisa Benedicto, the proprietor of Macoven Trucking, a business enterprise engaged
vehicle which is responsible for damages that may arise from consequences
incident to its operation or that may be caused to any of the passengers therein and
shall be held jointly and severally liable with the person who caused the damage. It
further stated that the fact that the properties covered by a franchise is transferred
or leased to another shall not exempt the registered owner from liability unless the
said transfer or lease was previously approved by the PSC. The reason for this rule
is that a franchise is personal in nature and any transfer or lease should be notified
to the PSC so that the latter may take proper safeguard to protect the interest of
the public.
The registered owner, however, is not left without recourse. Gelisan has the right to
be indemnified by Espiritu for the amount he may be required to pay Alday because
although the lease contract at issue is not binding upon Alday, is valid and binding
between the contracting parties.
Page 24 of 151
CASE TITLE: MA. LUISA BENEDICTO vs.IAC
KEYWORD: Lumbar manufacturer
PONENTER: FELICIANO, J.
DOCTRINE:
The registered owner is liable for consequences flowing from the operations of the
transferred to another person. This doctrine rests upon the principle that in dealing
with vehicles registered under the Public Service Law, the public has the right to
assume that the registered owner is the actual or lawful owner thereof It would be
very difficult and often impossible as a practical matter, for members of the general
public to enforce the rights of action that they may have for injuries inflicted by the
vehicles being negligently operated if they should be required to prove who the
actual owner is.
FACTS:
Sometime in May 1980, private respondent Greenhills, a lumber manufacturing firm
with business address at Dagupan City, operates sawmill in Maddela, Quirino,
bound itself to sell and deliver to Blue Star Mahogany, Inc., ("Blue Star") a company
with business operations in Valenzuela, Bulacan 100,000 board feet of sawn lumber
with the understanding that an initial delivery would be made on 15 May 1980. To
effect its first delivery, private respondent's resident manager in Maddela,
Dominador Cruz, contracted VirgilioLicuden, the driver of a cargo truck bearing
Plate No. 225 GA TH to transport its sawn lumber to the consignee Blue Star in
Valenzuela, Bulacan. This cargo truck was registered in the name of petitioner Ma.
in hauling freight, with main office in B.F. Homes, Parañaque.
On 15 May 1980, Cruz in the presence and with the consent of driver Licuden,
supervised the loading of 7,690 board feet of sawn aboard the cargo truck.
On 16 May 1980, the Manager of Blue Star called up by long distance telephone
Greenhills' president, Henry Lee Chuy, informing him that the sawn lumber on
board the subject cargo truck had not yet arrived in Valenzuela, Bulacan. In a letter,
Blue Star's administrative and personnel manager, Manuel R. Bautista, formally
informed Greenhills' president and general manager that Blue Star still had not
received the sawn lumber which was supposed to arrive on 15 May 1980 and
because of this delay, "they were constrained to look for other suppliers."
Private respondent Greenhill's filed Criminal Case against driver Licuden for estafa.
Greenhills also filed against petitioner Benedicto Civil for recovery of the value of
the lost sawn lumber plus damages before the RTC of Dagupan City.
PETITIONER’S  CONTENTION:
Petitioner Benedicto denied liability alleging that she was a complete stranger to
the contract of carriage, the subject truck having been earlier sold by her to
Benjamin Tee, on 28 February 1980 as evidenced by a deed of sale. She claimed
that the truck had remained registered in her name notwithstanding its earlier sale
to Tee because the latter had paid her only P50,000.00 out of the total agreed price
of P68,000.00 However, she averred that Tee had been operating the said truck in
Central Luzon from that date (28 February 1980) onwards, and that, therefore,
Licuden was Tee's employee and not hers.
RESPONDENT’S  CONTENTION:
Since petitioner was the registered owner of the subject vehicle, Licuden the driver
of the truck, was her employee, and that accordingly petitioner should be
responsible for the negligence of said driver and bear the loss of the sawn lumber
plus damages. Petitioner moved for reconsideration, without success.
ISSUE:
Whether the Petitioner, being the registered owner of the carrier, should be held
liable for the value of the undelivered or lost sawn lumber
RULING:
1. TRIAL COURT:
Ruled against Benedicto based on the finding that petitioner Benedicto was still the
registered owner of the subject truck, and holding that Licuden was her employee.
2. CA:
Affirmed the Decision In toto
3. SC:
Affirmed the Decision of both Trial court and IAC. There is no dispute that petitioner
Benedicto has been holding herself out to the public as engaged in the business of
hauling or transporting goods for hire or compensation. Petitioner Benedicto is, in
brief, a common carrier.
Private respondent Greenhills Woods is not required to go beyond the vehicle's
certificate of registration to ascertain the owner of the carrier. In this regard, the
Page 25 of 151
letter presented by petitioner allegedly written by Benjamin Tee admitting that
Licuden was his driver, had no evidentiary value not only because Benjamin Tee was
not presented in court to testify on this matter but also because of the
aforementioned doctrine. To permit the ostensible or registered owner to prove
who the actual owner is, would be to set at naught the purpose or public policy
which infuses that doctrine.
This presumption may be overcome only by proof of extraordinary diligence on the
part of the carrier. Clearly, to permit a common carrier to escape its responsibility
for the passengers or goods transported by it by proving a prior sale of the vehicle
or means of transportation to an alleged vendee would be to attenuate drastically
the carrier's duty of extraordinary diligence. It would also open wide the door to
collusion between the carrier and the supposed vendee and to shifting liability from
the carrier to one without financial capability to respond for the resulting damages.
In other words, the thrust of the public policy here involved is as sharp and real in
the case of carriage of goods as it is in the transporting of human beings. Thus, to
sustain petitioner Benedicto's contention, that is, to require the shipper to go
behind a certificate of registration of a public utility vehicle, would be utterly
subversive of the purpose of the law and doctrine.
CASE TITLE:Philtranco Service Enterprises, Inc. vs. CA
KEYWORD: Bicycle
PONENTE:Davide, Jr., J.
DOCTRINE:
The liability of the registered owner of a public service vehicle for damages arising
from the tortious acts of the driver is primary, direct, and joint and several or
solidary with the driver.
FACTS:
At 6:00 in the morning of March 24, 1990, Ramon Acuesta was riding his bicycle
along Gomez Street of Calbayog City when he was bumped by a bus of Philtranco
Service Enterprises, Inc. driven by RogasionesManilhig. The said bus was being
pushed by some persons for its engine to start and when its engine started, the bus
continued running and bumped Acuesta. The bus, however, did not stop running.
P/Sgt. Yabao, who was jogging, saw the victim being run over by Philtranco bus and
tried to stop Manilhig but the latter refused. It was only until Yabao jumped into the
bus and introduced himself as a policeman that Manilhig stopped the bus.
PETITIONER’S  CONTENTION:
Philtranco contended that it should not be held liable because they exercised
diligence of a good father of a family in the selection and supervision of its
employees and that Manilhig had an excellent records as a driver and had
undergone months of rigid training before he was hired.
RESPONDENT’S  CONTENTION:
Philtranco should be held solidarily liable with Manilhig pursuant to Article 2194 of
the Civil Code.
ISSUE: Whether or not Philtranco is liable.
RULING:
RTC:
LIABLE -- Philtranco and Manilhig are liable and ordered to jointly and severally pay
the private respondents (Heirs of Ramon Acuesta).
CA:
AFFIRMED the decision -- The CA held that Manilhig was at fault and not Acuesta, or
at least did not contribute to, his unfortunate accident. It awarded damages to
private respondents and found that Philtranco was solidarily liable with Manilhig.
SC:
PARTLY GRANTED only in so far as the damages. The damages were reduced. It held
Philtrancosolidarily liable with Manilhig.
The  Supreme  Court  stated  that,  “We  have  consistently  held  that  the  
liability of the registered owner of a public service vehicle, like petitioner Philtranco,
for damages arising from the tortuous acts of the driver is primary, direct, and joint
and several or solidary with the driver. As to solidarity, Article 2194 expressly
provides:
ART. 2194. The responsibility of two or more persons who are liable for a
quasi-delict is solidary.
Since the employer's liability is primary, direct and solidary, its only recourse if the
judgment for damages is satisfied by it is to recover what it has paid from its
employee who committed the fault or negligence which gave rise to the action
based on quasi-delict. Article 2181 of the Civil Code provides:
ART. 2181. Whoever pays for the damage caused by his dependents or
employees may recover from the latter what he has paid or delivered in
satisfaction  of  the  claim.”
Page 26 of 151
3. Kabit System
CASE TITLE: Santos vs Sibug
KEYWORD: Third Party Claim
PONENTE: Justice Melencio-Herrera
DOCTRINE:
The true owner of a vehicle registered under the name of another cannot claim
ownership once the same has been subject to levy because although the general
rule  is  that  a  stranger’s  property  cannot  be  subject  to  levy,  the  person  under  whose  
name the vehicle is registered is, in a legal sense, not a stranger.
FACTS:
A jeepney was registered under the name of Vicente Vidad because Adolfo Santos,
it’s  true  owner,  does  not  have  the  necessary  certificate  of  public  convenience  and  
the former has. On April 26, 1963, Abraham Sibug was bumped by a passenger
jeepney operated by Severe Gargas and registered under the name of Vicente
Vidad, causing Sibug to file for damages with the CFI of Manila Branch XVII. The
decision of Branch XVII, caused Santos to file a third party claim with the CFI of
Manila Branch X.
PETITIONER’S  CONTENTION:
The petitioner filed a third party claim, claiming actual ownership of the property in
question and alleged that the vehicle was registered only under the name of Vidad
to  make  use  of  the  latter’s  Certificate  of  Public  Convenience.
RESPONDENT’S  CONTENTION:
Respondent was silent, aside from claiming damages for the accident caused by
Gargas and Vidad.
ISSUE:
Whether or not the third party claimant has the right to vindicate his claim to the
vehicle levied upon in a separate action.
RULING:
TRIAL COURT:
 Branch XVII - Branch XVII of the CFI of Manila held Vidad and Gargas
liable for damages, causing the Sheriff of Manila to levy the vehicle.
Branch X - Branch X, upon a third party claim by Santos, issued a
restraining order enjoining the Sheriff from conducting a public auction to
sell the levied vehicle and ordering the return of the vehicle to the plaintiff.
COURT OF APPEALS:
The CA enjoined the enforcement of the decision of Branch X and nullified the same
holding that the decision was an interference with the power and authority of
Branch XVII, a court having co-equal and coordinate jurisdiction. It was also decided
that since the vehicle was registered under the name of Vidad, the government or
any person affected by the representation that the vehicle is registered under his
name had the right to rely on his declaration of ownership and registration
pursuant to Section 68(a) Rule 123 and Article 1431 of the New Civil Code.
SUPREME COURT:
The Supreme Court upheld the decision of the Court of Appeals in nullifying the
decision  of  Branch  X  because  although  ordinarily  a  stranger’s  property  is  not   ISSUE:
ordinarily subject to levy, the vehicle in question cannot be legally claimed as a
“stranger’s  property.”  The  fact  of  the  matter  is,  the  vehicle  was registered under
the name of Vidad, the judgment debtor, who cannot be claimed to be a stranger.
Whatever legal technicalities may be invoked, the court found that the judgement
of the CA to be in consonance with justice.
CASE TITLE: LITA ENTERPRISES vs Court of Appeals
KEYWORD:Kabit System
PONENTE: ESCOLIN, J.
DOCTRINE:
Although  not  outrightly  penalized,  the  “kabit  system”  is  invariably  recognized  as   certificate of convenience allows another person who owns motor vehicles to
being contrary to public policy and, therefore, void and inexistent under Article
1409 of the Civil Code.
FACTS:
Private respondents, NicasioOcampo and Francisca Garcia, contracted petitioner
Lita  Enterprises,  Inc.  for  the  use  of  the  latter’s  Certificate  of  Public  Convenience   an illegal contract, but will leave them both where it finds them.
(CPC) involving 5 units of taxicabs since they had no franchise to operate them. To
effectuate the agreement, the taxicabs were registered in the name of Lita
Enterprises while the possession of the taxicabs remained with spouses Ocampo.
One of the aforementioned taxicabs was involved in an accident in 1967 which
resulted in the filing of a civil case for damages against Lita Enterprises, as
Page 27 of 151
registered owner. Thereafter, in 1973, Ocampo decided to register his taxicabs in
his name. He requested Lita Enterprises to turn over the registration papers to him,
but the latter allegedly refused.
PETITIONER’S  CONTENTION:
Spouses Ocampo filed a complaint against Lita Enterprises, Inc., Rosita Sebastian
Vda. De Galvez, Visayan Surety &Insurance Co. And Sheriff of Manila of
reconveyance of motor vehicles with damages.
RESPONDENT’S  CONTENTION:
Lita Enterprises moved for reconsideration. Private respondents should be declared
liable to petitioner for whatever amount the latter has paid or was declared liable
(in Civil Case No. 72067) of the Court of First Instance of Manila to Rosita Sebastian
Vda. de Galvez, as heir of the victim Florante Galvez, who died as a result of the
gross negligence of private respondents' driver while driving one private
respondents' taxicabs.
Whether private respondents may be held liable for the amount Lita Enterprises
paid  to  the  victim  of  the  former’s  driver  while  driving  one  of  their  taxicabs.
RULING:
1.RTC: GRANTED. The CFI of Manila ordered Lita Enterprises to transfer the
registration certificate of the 3 Toyota cars not levied upon by executing a deed of
conveyance in favour of Spouses Ocampo.
2. COURT OF APPEALS: CFI DECISION MODIFIED.
3. SUPREME COURT: DENIED. The parties operated under an arrangement,
commonly  known  as  the  “kabit  system”,  whereby  a  person  who  has  been  granted  a  
operate  under  such  franchise  for  a  fee.  The  “kabit  system”  has  been  identified  as  
one of the root causes of the prevalence of graft and corruption. Although not
outrightly  penalized,  the  “kabit  system”  is  invariably recognized as being contraey
to public policy and, therefore, void and inexistent under Article 1409 of the Civil
Code. It is a fundamental principle that the court will not aid either party to enforce
CASE TITLE: TEJA MARKETING AND/OR ANGEL JAUCIAN vs.IAC& PEDRO N. NALE
KEYWORD: KABITSYSTEM & EX PACTO DELICTO NON ORITUR ACTIO
PONENTE: JUSTICE PARAS
DOCTRINE:
Kabit System, although not expressly penalized as a criminal offense, is contrary to
public policy and is void and in existent under Article 1409; the parties being both at
fault cannot maintain any action against each other.
FACTS:
On May 9, 1975, the defendant bought from the plaintiff a motorcycle with
complete accessories and a sidecar in the total consideration of P8,000.00, but only
managing to pay P 1,700.00 as downpayment. Despite repeated demands,
defendant failed to comply with his promise and so upon his own request, the
period of paying the balance was extended to one year in monthly installments until
January 1976, which in turn never materialized causing plaintiff to file an action for
‘sum  of  money  with  damages.’  It  appears  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, being made only to showthat
since defendant had no franchise of his own and had attached the unit to the
plaintiff's MCH Line.
PETITIONER’S  CONTENTION:   the private respondent Jaucian, pursuant to what is commonly known as the "kabit
The agreement between them was for the plaintiff to undertake the yearly
registration of the motorcycle with the Land Transportation Commission, pursuant
to which, defendant gave the plaintiff P90.00 (P8.00 for the mortgage fee and
P82.00 for the registration fee of the motorcycle), but plaintiff, however failed to
register the motorcycle on that year on the ground that defendant failed to comply
with some requirements such as the payment of insurance premiums and bringing
of the motorcycle to LTC for stenciling, the plaintiff saying that the defendant was
hiding the motorcycle from him. Lastly, plaintiff 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.
RESPONDENT’S  CONTENTION:   granted a certificate of public convenience allows another person who
The defendant disputed the claim of the plaintiff that he was hiding from the
plaintiff the motorcycle resulting in its not being registered, the truth being that the
motorcycle was being used for transporting passengers and it kept on travelling
from one place to another. The motor vehicle sold to him was mortgaged by the
plaintiff with the Rural Bank of Camaligan without his consent and knowledge and
the defendant was not even given a copy of the mortgage deed; and consequently
Page 28 of 151
puts the blame on the plaintiff for not registering the motorcycle with the LTC and
for not giving him the registration papers despite the demands made.
ISSUE:
Whether  or  not  plaintiff  is  entitled  to  the  sum  claimed,  attorney’s  fees  and  costs
RULING:
CITY COURT OF NEGA CITY: GRANTED
The Court ordered defendant to pay plaintiff P1,700.00 as the unpaid balance of
the purchase price with legal rate of interest from the date of the filing of the
complaint until the same is fully paid; to pay plaintiff the sum of P546.21 as
attorney's fees; to pay plaintiff the sum of P200.00 as expenses of litigation; and to
pay the costs.
COURT OF FIRST INSTANCE OF CAMARINES SUR:
Decision was affirmed in toto.
INTERMEDIATE APPELLATE COURT: DISMIISSED
The purchase of the motorcycle for operation as a trimobile under the franchise of
system", without the prior approval of the Board of Transportation (formerly the
Public Service Commission) was an illegal transaction involving the fictitious
registration of the motor vehicle in the name of the private respondent so that he
may traffic with the privileges of his franchise, or certificate of public convenience,
to operate a tricycle service, the parties being in paridelicto, neither of them may
bring an action against the other to enforce their illegal contract [Art. 1412 (a), Civil
Code].
SUPREME COURT (SECOND DIVISION): DISMISSED (Affirming decision of IAC)
Issue: Whether or not the principle of in pari delicto is applicable in the
instant case.
Yes. Unquestionably, the parties herein operated under an arrangement,
commonly known as the "kabit system"whereby a person who has been
owns motor vehicles to operate under such franchise for a fee. A certificate
of public convenience is a special privilege conferred by the government;
consequently, abuse of this privilege by the grantees thereof cannot be
countenanced.
Although not outrightly penalized as a criminal offense, the kabit system is
recognized as being contrary to public policy and, therefore, void and in
existent under Article 1409 of the Civil Code and this defect in existence of
 a contract is permanent and cannot be cured by ratification or by
prescription.
Being in parti delicto, the court will not aid either parties to enforce an
illegal contract, but will leave both where it finds then, as provided under
Article 1412:
Art. 1412. If the act in which the unlawful or forbidden cause
consists does not constitute a criminal offense, the following rules
shall be observed:
1. When the fault is on the part of both contracting parties,
neither may recover that he has given by virtue of the contract, or
demand, the performance of the other's undertaking.
CASE TITLE: LIM v COURT OF APPEALS
KEYWORDS:Kabit System, Actual damages, actual loss, indemnification
PONENTE:Bellosillo J
FACTS:
Private respondent herein purchased an Isuzu passenger jeepney from Gomercino
Vallarta, a holder of acertificate of public convenience for the operation of a public
utility vehicle. He continued to operate thepublic transport business without
transferring the registration of the vehicle to his name. Thus, theoriginal owner
remained to be the registered owner and operator of the vehicle. Unfortunately,
thevehicle got involved in a road mishap which caused it severe damage. The ten-
wheeler-truck whichcaused the accident was owned by petitioner Lim and was
driven by co-petitioner Gunnaban. Gunnabanadmitted responsibility for the
accident, so that petitioner Lim shouldered the costs of hospitalization of those
wounded, compensation for the heirs of the deceased passenger and the
restoration of the othervehicle involved. He also negotiated for the repair of
the private respondent's jeepney but the latterrefused and demanded for its
replacement. Hence, private respondent filed a complaint for damagesagainst
petitioners. Meanwhile, the jeepney was left by the roadside to corrode and decay.
The trialcourt decided in favor of private respondent and awarded him his claim. On
appeal, the Court of Appeals affirmed the decision of the trial court. Hence,
petitioner filed this petition.
ISSUE:
whether or not the new owner of a passenger jeepney who continued to operate
the same under theso-called kabit system and in the course thereof met an
accident has the legal personality to bring theaction for damages against the erring
vehicle.
Page 29 of 151
RULING:
The Supreme Court affirmed the subject decision with modification as to the
computation of interest.According to the Court, the thrust of the law in enjoining
the kabit system is not much as to penalize theparties but to identify the
person upon whom responsibility may be fixed in case of an accident with theend
view of protecting the riding public. In the present case, it is once apparent that the
evil sought tobe prevented in enjoining the kabit system does not exist. Hence, the
private respondent has the rightto proceed against petitioners for the
damage caused on his passenger jeepney as well as on his business.
4. Boundary System
CASE TITLE: URBANO MAGBOO and EMILIA C. MAGBOO, plaintiffs-appellees, vs.
DELFIN BERNARDO, defendant-appellant.
KEYWORD: Boundary system
PONENTE: MAKALINTAL, J.
DOCTRINE:
An employer-employee relationship exists between a jeepney owner and a driver
under a boundary system arrangement.
FACTS: The spouses Magboo are the parents of Cesar Magboo, a child of 8 years
old, was killed in a motor vehicle accident, the fatal vehicle being the passenger
jeepney owned by Bernardo but it was driven by ConradoRoques. The contract
between Roque and Bernardo was that Roque was to pay the latter P8.00 for the
privilege of driving the jeepney and whatever earnings he could make out of the use
of the jeepney would belong entirely to Roque. As a consequence of the accident,
Roque was prosecuted for homicide thru reckless imprudence and was sentenced
to six months of arresto mayor and to indemnify the heirs in the sum of P3,000.
Roque was not able to pay the indemnity because he was insolvent.
PETITIONER’S  CONTENTION:  
The spouses Magboo contend that Bernardo, as an employer of Roque, is
subsidiarily liable for the payment of the indemnity.
RESPONDENT’S  CONTENTION:
Bernardo contends that the relationship is essentially that of lessor and lessee.
ISSUE:
WON there exists an employer-employee relationship.

RULING:
YES. An employer-employee relationship exists between a jeepney owner and a
driver under a boundary system arrangement. The features which characterize the
boundary system - namely the fact that the driver does not receive a fixed wage but
gets only the excess of the amount of fares collected by him over the amount he
pays to the jeep-owner, and the gasoline consumed by the jeep is for the amount of
the driver - are not sufficient to withdraw the relationship between them from that
of employee and employer. Consequently, the jeepney owner is subsidiary liable as
employer in accordance with Art.103, Revised Penal Code. Indeed to exempt from
liability the owner of a public vehicle who operates it under the "boundary system"
on the ground that he is a mere lessor would be not only to abet flagrant violations
of the Public Service Law but also to place the riding public at the mercy of reckless
and irresponsible drivers — reckless because the measure of their earnings depends
largely upon the number of trips they make and, hence, the speed at which they
drive; and irresponsible because most if not all of them are in no position to pay the
damages they might cause.
II. OBLIGATIONS OF THE PARTIES
A. Obligation of Carrier
1. Duty to Accept
CASE TITLE: Fisher v. Yangco Steamship Co.
KEYWORD: Dynamite
PONENTE: Carson, J.
DOCTRINE: Common carriers in this jurisdiction cannot lawfully decline to accept a
particular class of goods for carriage to the prejudice of the traffic in these goods
unless it appears that for some sufficient reason the discrimination against the
Page 30 of 151
traffic in such goods is reasonable and necessary. Grounds of the discrimination
must be substantial ones.
FACTS: Plaintiff is a stockholder in the Yangco Steamship Company, owner of a large
number of steam vessels, duly licensed to engage in the coastwise trade of the
Philippine Islands. That on or about June 10, 1912, the directors of the company
adopted a resolution which was thereafter ratified and affirmed by the
shareholders  of  the  company,  “expressly  declaring  and  providing that the classes of
merchandise to be carried by the company in its business as a common carrier do
not  include  dynamite,  powder,  or  other  explosives.”
ISSUE: Whether the refusal of the owners of a steam vessel duly licensed to engage
in the coastwise trade of the Philippine Islands and engaged in that trade as a
common  carrier,  to  accept  for  carriage  “dynamite,  powder,  or  other  explosives”  
from any and all shippers who may offer such explosives for carriage or as to the
suitableness of the vessel for the transportation of such explosives, or as to the
possibility that the refusal to accept such articles of commerce in a particular case
may have the effect of subjecting any person or locality or the traffic in such
explosives to an undue, unreasonable, or unnecessary prejudice or discrimination.
PETITIONER’S  CONTENTION: A common carrier in the Philippine Islands may
decline to accept for carriage any shipment of merchandise of a class which it
expressly or impliedly declines to accept from all shippers alike,  as  he  contends  “the  
duty of a common carrier to carry for all who offer arises from the public profession
he  has  made,  and  is  limited  by  it.”
RESPONDENT’S  CONTENTION: Basically demanded and required the company the
acceptance and carriage of explosives --- SC was the one who explained the reason
why.
RULING: The traffic in dynamite, gunpowder, and other explosives is vitally essential
to the material and general welfare of the people of these Islands. The refusal by a
particular vessel, engaged as a common carrier of merchandise in the coastwise
trade of the Philippine Islands, to accept any or all of the explosives for carriage
would constitute a violation of the prohibitions against discriminations penalized
under the statute, unless it can be shown by affirmative evidence that there is so
real and substantial a danger of disaster necessarily involved in the carriage of any
or all of these articles or merchandise as to render such refusal a due or a necessary
or a reasonable exercise of prudence and discretion on the part of the shipowner.
#PASCUA
2. Duty to Deliver
i. Time of Delivery
CASE TITLE: MAERSK LINE 
vs.
COURT OF APPEALS AND EFREN V. CASTILLO, doing
business under the name and style of Ethegal Laboratories
KEYWORD: Duties of Common Carriers
PONENTE:Bidin, J.
DOCTRINE:Saludo, Jr. v. Court of Appeals (207 SCRA 498 [1992]) this Court held: The
oft-repeated rule regarding a carrier's liability for delay is that in the absence of a
special contract, a carrier is not an insurer against delay in transportation of goods.
When a common carrier undertakes to convey goods, the law implies a contract
that they shall be delivered at destination within a reasonable time, in the absence,
of any agreement as to the time of delivery. But where a carrier has made an
express contract to transport and deliver properly within a specified time, it is
bound to fulfill its contract and is liable for any delay, no matter from what cause it
may have arisen.
FACTS: Petitioner Maersk Line is engaged in the transportation of goods by sea,
doing business in the Philippines through its general agent Compania General de
Tabacos de Filipinas. Private respondent Efren Castillo, on the other hand, is the
proprietor of Ethegal Laboratories, a firm engaged in the manutacture of
pharmaceutical products. On November 12, 1976, private respondent ordered from
Eli Lilly. Inc. of Puerto Rico through its (Eli Lilly, Inc.'s) agent in the Philippines,
Elanco Products, 600,000 empty gelatin capsules for the manufacture of his
pharmaceutical products. The capsules were placed in six (6) drums of 100,000
capsules each valued at US $1,668.71.
Through a Memorandum of Shipment (Exh. "B"; AC GR CV No.10340, Folder of
Exhibits, pp. 5-6), the shipper Eli Lilly, Inc. of Puerto Rico advised private respondent
as consignee that the 600,000 empty gelatin capsules in six (6) drums of 100,000
capsules each, were already shipped on board MV "Anders Maerskline" under
Voyage No. 7703 for shipment to the Philippines via Oakland, California. In said
Memorandum, shipper Eli Lilly, Inc. specified the date of arrival to be April 3, 1977.
For reasons unknown, said cargo of capsules were mishipped and diverted to
Richmond, Virginia, USA and then transported back Oakland, California. The goods
finally arrived in the Philippines on June 10, 1977 or after two (2) months from the
date specified in the memorandum. As a consequence, private respondent as
consignee refused to take delivery of the goods on account of its failure to arrive on
time.
ISSUE: Whether or not Maersk Line is liable for damages resulting from delay in the
delivery of the shipment in the absence in the bill of lading of a stipulation on the
period of delivery.
PETITIONER’S  CONTENTION: Denying that it committed breach of contract,
petitioner alleged in its that answer that the subject shipment was transported in
Page 31 of 151
accordance with the provisions of the covering bill of lading and that its liability
under the law on transportation of good attaches only in case of loss, destruction or
deterioration of the goods as provided for in Article
1734 of Civil Code (Rollo, p. 16).
Defendant Eli Lilly, Inc., on the other hand, filed its answer with compulsory and
cross-claim. In its cross-claim, it alleged that the delay in the arrival of the the
subject merchandise was due solely to the gross negligence of petitioner Maersk
Line.
RESPONDENT’S  CONTENTION: Private respondent alleging gross negligence and
undue delay in the delivery of the goods, filed an action before the court a quo for
rescission of contract with damages against petitioner.
RULING:
TRIAL COURT: After trial held between respondent and petitioner, the court a quo
rendered judgment dated January 8, 1982 in favor of respondent Castillo, the
dispositive portion of which reads:
IN VIEW OF THE FOREGOING, this Court believe (sic) and so hold (sic) that there was
a breach in the performance of their obligation by the defendant Maersk Line
consisting of their negligence to ship the 6 drums of empty Gelatin Capsules which
under their own memorandum shipment would arrive in the Philippines on April 3,
1977 which under Art. 1170 of the New Civil Code, they stood liable for damages.
APPELLATE COURT: On appeal, respondent court rendered its decision dated
August 1, 1990 affirming with modifications the lower court's decision.
SUPREME COURT: We have carefully reviewed the decisions of respondent court
and the trial court and both of them show that, in finding petitioner liable for
damages for the delay in the delivery of goods, reliance was made on the rule that
contracts of adhesion are void. Added to this, the lower court stated that the
exemption against liability for delay is against public policy and is thus, void.
Besides, private respondent's action is anchored on Article 1170 of the New Civil
Code and not under the law on Admiralty (AC-GR CV No. 10340, Rollo, p. 14).
In the case before us, we find that a delay in the delivery of the goods spanning a
period of two (2) months and seven (7) days falls was beyond the realm of
reasonableness. Described as gelatin capsules for use in pharmaceutical products,
subject shipment was delivered to, and left in, the possession and custody of
petitioner-carrier for transport to Manila via Oakland, California. But through
petitioner's negligence was mishipped to Richmond, Virginia. Petitioner's insistence
that it cannot be held liable for the delay finds no merit. #QUINTOS
ii. Consequences of Delay
a. Abandonment

CASE TITLE: MAGELLAN MANUFACTURING MARKETING CORPORATION vs. COURT
OF APPEALS, ORIENT OVERSEAS CONTAINER LINES and F.E. ZUELLIG, INC
Keyword: anahaw
PONENTE: J. Regalado
DOCTRINE:Unreasonable delay in the delivery of transported goods is sufficient
ground for the abandonment of goods as provided in the code of commerce is also
applicable to marine transportation.
FACTS:Magellan Manufacturers Marketing Corp. (MMMC) entered into a contract
with Choju Co. of Yokohama, Japan to export 136,000 anahaw fans for and in
consideration of $23,220.00. Through its president, James Cu, MMMC then
contracted F.E. Zuellig, a shipping agent to ship the anahaw fans through Orient
Overseas Container Lines, Inc., (OOCL) specifying that he needed an on-board bill of
lading and that transhipment is not allowed under the letter of credit. appellant
MMMC paid F.E. Zuellig the freight charges and secured a copy of the bill of lading
which was presented to Allied Bank However, when appellant's president James Cu,
went back to the bank later, he was informed that the payment was refused by the
buyer allegedly because there was no on-board bill of lading, and there was a
transhipment of goods. As a result of the refusal of the buyer to accept, upon
appellant's request, the anahaw fans were shipped back to Manila by appellees, for
which the latter demanded from appellant payment of P246,043.43. Appellant
abandoned the whole cargo and asked appellees for damages.
ISSUE:WON MMMMC should be liable for P52k when it exercised its option of
Abandonment.
PETITIONERS CONTENTION:
Private respondents be ordered to pay whatever petitioner was not able to earn
from Choju  Co.,  Ltd.,  amounting  to  P1  74,150.00  and  other  damages  like  attorney’s   not only because of the unreasonable delay in its delivery but because of the option
fees since private respondents are to blame for the refusal of Choju Co., Ltd. to
accept the Anahaw fans
RESPONDENTS CONTENTION:
It alleged that the bill of lading clearly shows that there will be a transhipment and
that petitioner was well aware that MV (Pacific) Despatcher was only up to
Hongkong where the subject cargo will be transferred to another vessel for Japan.
Private respondents also filed a counterclaim praying that petitioner be ordered to
Page 32 of 151
pay freight charges from Japan to Manila and the demurrages in Japan and Manila
amounting to P298,150.93
TRIAL COURT:
MMMMC cannot seek damages as it agreed to a transshipment of the goods and is
liable for demurrages amounting to P298k incurred in Japan and Manila.
COURT OF APPEALS:
MMMMC cannot seek damages as it agreed to a transshipment of the goods and is
liable for demurrages amounting to P52k incurred in Japan. While the goods arrived
in Manila in October 1980, appellant was notified of said arrival only in March 1981.
No explanation was given for the delay in notifying appellant.
SUPREME COURT:
No. Private respondents belatedly informed petitioner of the arrival of its goods in
Manila and that if it wished to take delivery of the cargo it would have to pay P52k.
Private respondents unequivocally offered petitioner the option of paying the
shipping and demurrage charges in order to take delivery of the goods or of
abandoning the same so that private respondents could sell them at public auction
and thereafter apply the proceeds in payment of the shipping and other charges.
There is no dispute that private respondents expressly and on their own volition
granted petitioner an option with respect to the satisfaction of freightage and
demurrage charges. Having given such option, especially since it was accepted by
petitioner, private respondents are estopped from reneging thereon. Petitioner, on
its part, was well within its right to exercise said option. Private respondents, in
giving the option, and petitioner, in exercising that option, are concluded by their
respective actions. To allow either of them to unilaterally back out on the offer and
on the exercise of the option would be to countenance abuse of rights as an order
of the day, doing violence to the long entrenched principle of mutuality of
contracts.By analogy, this can also apply to maritime transportation. Further, with
much more reason can petitioner in the instant case properly abandon the goods,
which was categorically granted to and exercised by it as a means of settling its
liability for the cost and expenses of reshipment. And, said choice having been duly
communicated, the same is binding upon the parties on legal and equitable
considerations of estoppel. #SANTOS

b. Right of Passengers In Case of Delay
CASE TITLE: Trans-Asia Shipping Lines vs. CA
KEYWORD: Delayed Attorney
PONENTE: Justice Davide Jr.
DOCTRINE: ART. 1755. A common carrier is bound to 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.
FACTS: Plaintiff, Atty. Renato Arroyo, a public attorney, bought a ticket from
defendant, a corporation engaged in inter-island shipping, for the voyage of
M/V Asia Thailand vessel to Cagayan de Oro City from Cebu City on
November 12, 1991.
At around 5:30 in the evening of November 12, 1991, plaintiff boarded the
M/V Asia Thailand vessel. At that instance, plaintiff noticed that some repair
works were being undertaken on the engine of the vessel. The vessel
departed at around 11:00 in the evening with only one (1) engine running.
After an hour of slow voyage, the vessel stopped near Kawit Island and
dropped its anchor thereat. After half an hour of stillness, some passengers
demanded that they should be allowed to return to Cebu City for they were
no longer willing to continue their voyage to Cagayan de Oro City. The
captain acceded to their request and thus the vessel headed back to Cebu
City.
At Cebu City, plaintiff together with the other passengers who requested to
be brought back to Cebu City, were allowed to disembark. Thereafter, the
vessel proceeded to Cagayan de Oro City. Plaintiff, the next day, boarded
the M/V Asia Japan for its voyage to Cagayan de Oro City, likewise a vessel
of defendant.
ISSUE: Whether or not defendant is guilty of fraud delay and negligence?
PETITIONER’S  CONTENTION:  plaintiff-appellant should not be faulted why
he chose to disembark from the vessel with the other passengers when it
returned back to Cebu City.
Page 33 of 151
RESPONDENT’S  CONTENTION: the private respondent offered no evidence
to prove that his contract of carriage with the petitioner provided for
liability in case of delay in departure, nor that a designation of the time of
departure was the controlling motive for the establishment of the contract.
RULING:
TRIAL COURT: DISMISSED. Defendant did not hide the fact that the cylinder
head cracked. Plaintiff even saw during its repair. If he had doubts as to the
vessel’s  capacity  to  sail,  he  had  time  yet  to  take  another  boat.  The  ticket  
could be returned to defendant and corresponding cash [would] be
returned to him.Neither could negligence, bad faith or malice on the part of
defendant be inferred from the evidence of the parties. When the boat
arrived at [the] Port of Cebu after it returned from Kawit Island, there was
an announcement that passengers who would like to disembark were given
ten (10) minutes only to do so. By this announcement, it could be inferred
that the boat will proceed to Cagayan de Oro City. If plaintiff entertained
doubts, he should have asked a member of the crew of the boat or better
still, the captain of the boat.
APPELATE COURT: REVERSED.
Under Article 1733 of the Civil Code, the petitioner was bound to observe
extraordinary diligence in ensuring the safety of the private respondent.
That meant that the petitioner was, pursuant to Article 1755 of the said
Code, bound to carry the private respondent safely as far as human care
and foresight could provide, using the utmost diligence of very cautious
persons, with due regard for all the circumstances.
Award  of  damages  for  moral,  exemplary,  attorney’s  fee  and  cost  of  suit was
given. It did not, however, allow the grant of damages for the delay in the
performance  of  the  petitioner’s  obligation  as  the  requirement  of  demand  
set forth in Article 1169 of the Civil Code had not been met by the private
respondent. Besides, it found that the private respondent offered no
evidence to prove that his contract of carriage with the petitioner provided
for liability in case of delay in departure, nor that a designation of the time
of departure was the controlling motive for the establishment of the
contract.
Hence the appeal for actual or compensatory damages.
SUPREME COURT:
In his complaint, the private respondent claims actual or compensatory,
moral, and exemplary damages.Actual or compensatory damages represent
the adequate compensation for pecuniary loss suffered and for profits the
obligee failed to obtain.
The Court of Appeals did not grant the private respondent actual or
compensatory damages, reasoning that no delay was incurred since there
was no demand, as required by Article 1169 of the Civil Code. This article,
however, finds no application in this case because, as found by the
respondent Court, there was in fact no delay in the commencement of the
contracted voyage. If any delay was incurred, it was after the
commencement of such voyage, more specifically, when the voyage was
subsequently interrupted when the vessel had to stop near Kawit Island
after the only functioning engine conked out. For the private respondent,
such would be the loss of income if unable to report to his office on the day
he was supposed to arrive were it not for the delay. This, however, assumes
that he stayed on the vessel and was with it when it thereafter resumed its
voyage; but he did not. As he and some passengers resolved not to
complete the voyage, the vessel had to return to its port of origin and allow
them  to  disembark.  The  private  respondent  then  took  the  petitioner’s  other   limitations of liability provided for in the bill of lading and other pertinent laws.
vessel the following day, using the ticket he had purchased for the previous
day’s  voyage.
Any further delay then in the private  respondent’s  arrival  at  the  port  of   RULING:
destination was caused by his decision to disembark. Had he remained on
the first vessel, he would have reached his destination at noon of 13
November 1991, thus been able to report to his office in the afternoon. He,
therefore, would have lost only the salary for half of a day. But actual or
compensatory damages must be proved,[30] which the private respondent
failed to do. There is no convincing evidence that he did not receive his
salary for 13 November 1991 nor that his absence was not excused.
#SANTOS,N.
3. Duty to Exercise Extraordinary Diligence
i. Presumption of Negligence
a. Carriage of Goods
CASE TITLE: Belgian Overseas Chartering vs. Philippine First Insurance CO.
KEYWORD: PRESUMPTION OF NEGLIGENCE; CARRIAGE OF GOODS
Page 34 of 151
DOCTRINE: Mere proof of delivery of the goods in good order to a common carrier
and of their arrival in bad order at their destination constitutes a prima facie case of
fault or negligence against the carrier.
FACTS: CMC Trading A.G shipped on board the M/V Anangel Sky at Hamburg,
Germany, 242 coils of various Prime Cold Steel sheets for transportation to Manila
consigned to the Philippine Steel Trading Corp. The vessel arrived at the port of
Manila and. Within the subsequent days, discharged the said cargo; Four (4) coils
are said to be in bad order BO tally sheet #154974. Finding the four (4) coils in their
damaged state to be unfit for the intended purpose, the consignee Philippine Steel
trading Corporation declared the same as total loss. Despite receipt of formal
demand, defendants-appellees  refused  to  submit  to  the  consignee’s  claim.  
Consequently,  plaintiff  paid  php503,086.50  and  was  subrogated  to  the  latter’s  
rights and causes of action against defendants.
Subsequently, plaintiff instituted this complaint for recovery of the amount paid by
them, to the consignee as insured. Impugning the propriety of the suit exercised
against due diligence and foresight required by law to prevent any damage/loss to
said shipment, and that their liability, if there be any, should not exceed the
ISSUE: Whether or not petitioners have overcome the presumption of negligence of
a common carrier
TRIAL COURT: The RTC dismissed the complaint because respondent had failed to
prove its claims with the quantum of proof required by law.
COURT OF APPEALS: Reversed. CA ruled that petitioners are liable for the loss or
damage of the goods shipped, because they had failed to overcome the
presumption of negligence imposed on common carriers.
SUPREME COURT: No. Well-settled is the rule that common carriers from the
nature of their business and for reasons of public policy, are bound to observe
extraordinary diligence and vigilance with respect to the safety of the goods and the
passengers they transport. This strict requirement is justified by the fact that,
without a hand or a voice in the preparation of such contract, the riding public
enters into a contract of transportation with common carriers. Owing to this high
degree of diligence required of them, common carrier, as a general rule, are
presumed to have been at fault or negligent if the goods they transported
deteriorated or got lost or destroyed.
In the instant case, petitioners failed to prove that they observed extraordinary
diligence and precaution which the law requires a common carrier to know and to
follow to avoid damage to or destruction of the goods entrusted to it for safe
carriage and delivery. #SUBIJANO
a. As stated in the bill of lading, petitioners received the subject shipment in good
order and condition in Hamburg, Germany.
b. Prior to the unloading of the cargo, an inspection report prepared and signed by
the representatives of both parties showed the steel bands broken, the metal
envelopes rust-stained and heavily buckled, and the contents thereof exposed and
rusty.
c. Bad Order tally sheet number 154979 issued by Jardine Davies transport Services,
Inc (the other petitioner), stated that the four (4) coils were in bad order and
condition. Normally, a request for bad order survey is made in case there is an
apparent or a presumed loss or damage.
d. The certificate of Analysis stated that, based on the sample submitted and
tested, the steel sheets found in bad order were wet with fresh water.
e. Petitioners in a letter addressed to the Philippine Steel Coating Corporation and
dated October 12, 1990. Admitted that they were aware of the condition of the
four coils found in bad order and condition.
CASE TITLE:TABACALERA INSURANCE CO. vs. NORTH FRONT SHIPPING SERVICES,
INC
KEYWORD:SACKSOF CORN GRAINS
PONENTE:BELLOSILLO, J.:
DOCTRINE: Common carrier is presumed negligent in case of loss, destruction, or
deterioration of goods
FACTS: Sacks of corn grains were loaded on board North Front 77, vessel owned ny
North Fronth Shipping and was consigned to Republic Flour Mills Corp.It was
insured to several insurance companies. It turned out that there was shortage of
the cargoes and the remaining merchandise was already moldy, rancid and
deteriorating. The insurance companies paid the consignee and later claimed
damages against respondent by way of subrogation.
ISSUE: Whether or not respondent exercised extraordinary diligence in transporting
the sacks of corns.
PETITIONER’S  CONTENTION: The loss was exclusively attributable to the fault and
negligence of the carrier. The Marine Cargo Adjusters hired by the insurance
companies conducted a survey and found cracks in the bodega of the barge and
heavy concentration of molds on the tarpaulins and wooden boards. They did not
notice any seals in the hatches. The tarpaulins were not brand new as there were
patches on them. They also discovered that the bulkhead of the barge was rusty.
Page 35 of 151
RESPONDENT’S  CONTENTION: North Front Shipping Services, Inc., averred in
refutation that it could not be made culpable for the loss and deterioration of the
cargo as it was never negligent. Captain Solomon Villanueva, master of the vessel,
reiterated that the barge was inspected prior to the actual loading and was found
adequate and seaworthy. In addition, they were issued a permit to sail by the Coast
Guard. The tarpaulins were doubled and brand new and the hatches were properly
sealed. They did not encounter big waves hence it was not possible for water to
seep in. He further averred that the corn grains were farm wet and not properly
dried when loaded.
RULING:
TRIAL COURT: In favor of respondent.The contract entered into between North
Front Shipping Services, Inc., and Republic Flour Mills Corporation was a charter-
party agreement. As such, only ordinary diligence in the care of goods was required
of North Front Shipping Services, Inc.
COURT OF APPEALS: In favor of respondent. As a common carrier required to
observe a higher degree of diligence North Front 777 satisfactorily complied with all
the requirements
SUPREME COURT: NO. Notwithstanding the charter agreement, respondent
remains a common carrier hence bound to observe extraordinary diligence in the
vigilance of the goods it tranports.When goods placed in its care are lost or
damaged, the carrier is presumed to have been at fault or to have acted negligently.
North Front Shipping Services, Inc., therefore has the burden of proving that it
observed extraordinary diligence in order to avoid responsibility for the lost cargo.
In this case the proofs presented by North Front Shipping Services, Inc., were
insufficient to rebut the prima facie presumption of private respondent's
negligence.
It is not denied by the insurance companies that the vessel was indeed inspected
before actual loading and that North Front 777 was issued a Permit to Sail. They
proved the fact of shipment and its consequent loss or damage while in the actual
possession of the carrier. Notably, the carrier failed to volunteer any explanation
why there was spoilage and how it occurred. On the other hand, it was shown
during the trial that the vessel had rusty bulkheads and the wooden boards and
tarpaulins bore heavy concentration of molds. The tarpaulins used were not new,
contrary to the claim of North Front Shipping Services, Inc., as there were already
several patches on them, hence, making it highly probable for water to enter.
Nonetheless, Republic Flour Mills is found guilty of contributory negligence because
while it was seasonably informed about the arrival of goods it did not immediately
start the unloading hence it should share at least 40% of the loss. #TA-A
CASE TITLE: FGU INSURANCE CORPORATION VS. G.P. SARMIENTO TRUCKING
CORPORATION
KEYWORD: refrigerators, truck
PONENTE: VITUG, J.
DOCTRINE: Res  ipsa  loquitur  (“the  thing  speaks  for  itself”;  one  is  presumed  to  be   GPS cannot be considered a common carrier as it is an exclusive contractor and
negligent if he/she/it had exclusive control of whatever caused the injury even
though there is no specific evidence of an act of negligence, and without negligence
the accident would not have happened) 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.
FACTS:G.P. Sarmiento Trucking Corporation (GPS) undertook to deliver 30 units of
Condura S.D. white refrigerators aboard one of its Isuzu trucks, driven by Lambert
Eroles from the plant site of Concepcion Industries, Inc. In Alabang to the Central
Luzon Appliances in Dagupan City. The truck collided with an unidentified truck
along McArthur highway in Bamban, Tarlac, causing it to fall into a deep canal and
resulting in damage to the cargoes. As insurer, FGU Insurance Corporation (FGU)
paid to Concepcion Industries , Inc. the value of the cargoes, and sought
reimbursement from GPS. When GPS failed to heed the claim, FGU filed a complaint
for damages and breach of contract of carriage against GPS and Lambert Eroles.
ISSUE: Whether or not 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.
PETITIONER’S  CONTENTION: GPS and Lambert Eroles are liable for damages. FGU
only presented evidence to establish the extent of the damage and the amount to
be paid.
RESPONDENT’S  CONTENTION: GPS was the exclusive hauler only of Concepcion
Industries, Inc., and it was not engaged in business as a common carrier. GPS also
claimed that the cause of damage was purely accidental.
RULING:
TRIAL COURT: DENIED  FGU’s  complaint  for  damages.  FGU  did  not  present  any   CASE TITLE:Vda. deAbeto vs. Phil. Air Lines, Incorporated, 115 SCRA 489(1982)
evidence to prove that GPS is a common carrier. Therfore, the application of the
law on common carriers is not warranted and the presumption of fault or
negligence in case of loss, damage or deterioration of goods during transport is not
availing. Law on obligations and contracts governs, so negligence is not presumed.
(Trial court  granted  GPS’  motion  to  dismiss.)
Page 36 of 151
APPELLATE COURT:AFFIRMED  the  trial  court’s  ruling  in  favor  of  GPS.  Before  there  
can be presumption of negligence, the appellant must first prove that appellee is a
common carrier. GPS is a private carrier.
SUPREME COURT:AFFIRMED the ruling of the RTC and the CA only insofar as
Lambert Eroles is concerned, but REVERSED as regards GPS. GPS was ordered to
reimburse FGU.
hauler of Concepcion Industries, Inc., but still, it cannot escape liability. GPS
recognizes the existence of a contract of carriage between it and Concepcion
Industries, Inc. and admits that the cargoes were lost while in its custody. In this
case, failure of compliance with the obligation gives rise to a presumption of lack of
care and corresponding liability on the part of the contractual obligor.
In culpa contractual, the mere proof of the existence of the contract & the failure of
its compliance justify, prima facie, a corresponding right of relief. The law 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.
Meanwhile, Lambert Eroles, not being a party to the contract of carriage between
Concepcion Industries, Inc. and GPS, and without concrete proof of negligence, may
not be held liable. #TAN
b. Carriage of Passengers
KEYWORD: plane crash
PONENTE: RELOVA, J..
DOCTRINE: By the contract of carriage, the carrier assumes the express obligation
to transport the passenger to his destination safely and to observe extraordinary
diligence with a due regard for all the circumstances, and any injury that might be
suffered by the passenger is right away attributable to the fault or negligence of the
carrier.
SHORT FACTS: Judge QuiricoAbeto, with the necessary tickets, boarded the
Philippine Air Lines' PI-C133 plane at the Mandurriao Airport, Iloilo City for Manila.
After three weeks, it was ascertained that the plane crashed at Mt. Baco, Province
of Mindoro. Plaintiff-appellee ConradaVda.deAbeto was appointed administratrix of
the estate of Judge Abeto.
ISSUE: whether or not the defendant is liable for violation of its contract of carriage
(YES)
RESPONDENT’S  CONTENTION: Defendant-appellant tried to prove that the plane
crash at Mt. Baco was beyond the control of the pilot. The plane at the time of the
crash was airworthy for the purpose of conveying passengers across the country as
shown by the certificate of airworthiness issued by the Civil Aeronautics
Administration (CAA). There was navigational error but no negligence or
malfeasance on the part of the pilot. The plane had undergone 1,822 pre- flight
checks, 364 thorough checks, 957 terminating checks and 501 after maintenance
checks. Further, deviation from its prescribed route was due to the bad weather
conditions between Mt. Baco and Romblon and strong winds which caused the
plane to drift to Mt. Baco. Appellant argues that the crash was a fortuitous event
and, therefore, defendant-appellant cannot be held liable under the provisions of
Article 1174 of the New Civil Code. Appellant tried to prove that it had exercised all
the cares, skill and diligence required by law on that particular flight in question.
RULING:
CFI OF ILOILO: the defendant-appellant did not exercise extraordinary diligence or
prudence as far as human foresight can provide but on the contrary showed
negligence and indifference for the safety of the passengers that it was bound to
transport.
SUPREME COURT:
The prescribed airway of plane PI-C133 that afternoon of November 23, 1960, with
Capt. de Mesa, as the pilot, was Iloilo-Romblon-Manila, denominated as airway
"Amber l," and the prescribed elevation of the flight was 6,000 ft. The fact is, the
plane did not take the designated route because it was some 30 miles to the west
when it crashed at Mt. Baco. According to defendant's witness, Ramon A. Pedroza,
Administrative Assistant of the Philippine Air Lines, Inc., this tragic crash would have
not happened had the pilot continued on the route indicated. Assistant Director
Cesar Mijares of the Civil Aeronautics Administration testified that the pilot of said
plane was "off course". It is clear that the pilot did not follow the designated route
for his flight between Romblon and Manila. The weather was clear and he was
Page 37 of 151
supposed to cross airway "Amber I" over Romblon; instead, he made a straight
flight to Manila in violation of air traffic rules.
At any rate, in the absence of a satisfactory explanation by appellant as to how the
accident occurred, the presumption is, it is at fault. In an action based on a contract
of carriage, the court need not make an express finding of fault or negligence on the
part of the carrier in order to hold it responsible to pay the damages sought for by
the passenger. By the contract of carriage, the carrier assumes the express
obligation to transport the passenger to his destination safely and to observe
extraordinary diligence with a due regard for all the circumstances, and any injury
that might be suffered by the passenger is right away attributable to the fault or
negligence of the carrier (Art. 1756, New Civil Code). This is an exception to the
general rule that negligence must be proved. #TENORIO
CASE TITLE: BATANGAS LAGUNA TAYABAS BUS COMPANY & ARMANDO PON,
petitioners, vs. INTERMEDIA TE APPELLA TE COURT, THE HEIRS OF P AZ VDA. DE
PAMFILO, THE HEIRS OF NORMA NERI, and BAYLON SALES and NENA VDA. DE
ROSALES, respondents.
KEYWORD: Overtaking of a bus on an ascending curved highway ; Needs
Extraordinary Diligence
PONENTE: PARAS, J.
DOCTRINE: A driver of a motor vehicle is presumed negligent if he was violating any
traffic regulation at the time of the mishap, unless there is proof to the contrary.
The common carrier's liability for death or injury to its passengers is based on its
contractual obligation to carry its passengers safely to their destination; Utmost
diligence of very cautious persons is required of them.
SHORT FACTS: On August 11, 1978, as BLTB Bus No. 1046 was negotiating the bend
of the highway (traversing Barangay Isabong, Tayabas, Quezon), it tried to overtake
a Ford Fiera car just as Bus No. 404 of Superlines (driven by Ruben Dasco) was
coming from the opposite direction. Seeing thus, Armando Pon (driver of the BLTB
Bus) made a belated attempt to slacken the speed of his bus and tried to return to
his proper lane. It was an unsuccessful try as the two (2) buses collided with each
other. Collision resulted in the death of Aniceto Rosales, Francisco Pamfilo and
Romeo Neri and in several injuries to Nena Rosales (wife of Anecito) and Baylon
Sales, all passengers of the BLTB Bus. NenaVda. de Rosales and Baylon Sales and the
surviving heirs of the deceased passengers instituted separate cases in the Court of
First Instance of Marinduque against BLTB and Superlines together with their
respective drivers praying for damages, attorney's fees and litigation expenses plus
costs. Criminal cases against the drivers of the two buses were filed in the Court of
First Instance of Quezon.
ISSUE: Whether or not the action of the respondents is based on culpa contractual.
PETITIONER’S  CONTENTION:
1. Defendants BLTB and Superlines, together with their drivers Pon and Dasco,
denied liability by claiming that they exercised due care and diligence and shifted
the fault, against each other. They all interposed counterclaims against the plaintiffs
and cross claims against each other.
2. Petitioners also contend that "a common carrier is not an absolute insurer
against all risks of travel and are not liable for acts or accidents which cannot
be foreseen or inevitable and that responsibility of a common carrier for the safety
of its passenger prescribed in Articles 1733 and 1755 of the New Civil Code is not
susceptible of a precise and definite formulation."
RESPONDENT’S  CONTENTION: There was a breach of contract resulting to three
deaths and injury to two passengers.
RULING:
TRIAL COURT: The lower court exonerated defendants Superlines and its driver
Dasco from liability and attributed sole responsibility to defendants BLTB and its
driver Pon, and ordered them jointly and severally to pay damages to the plaintiffs.
APPELLATE COURT:Defendants BLTB and Armando Pon appealed from the decision
of the lower court to respondent appellate court which affirmed with modification
the judgment of the lower court as earlier stated.
SUPREME COURT:
1. The common carrier's liability for the death of or injuries to its passengers is
based on its contractual obligation to carry its passengers safely to their
destination. That obligation is so serious that the Civil Code requires "utmost
diligence of very cautious person (Article 1755, Civil Code). They are presumed to
have been at fault or to have acted negligently unless they prove that they have
observed extraordinary diligence" (Article 1756, Civil Code). It must follow that both
the driver and the owner must answer for injuries or death to its passengers. "The
liability of BLTB is also solidarily with its driver (Viluan v. Court of Appeals, 16 SCRA
742, 747) even though the liability of the driver springs from quasi delict while that
of the bus company from contract." pp. 17-19, Rollo)
2. For the defense of force majeure or act of God to prosper the accident must be
due to natural causes and exclusively without human intervention. #TORRES
ii. Duration of Duty
a. Carriage of Goods
CASE TITLE:Saludovs Court of Appeals
KEYWORD: corpse flight, billl of lading
PONENTE: REGALADO, J.:
Page 38 of 151
DOCTRINE: there is delivery to the carrier when the goods are ready for and have
been placed in the exclusive possession, custody and control of the carrier for the
purpose of their immediate transportation and the carrier has accepted them.
Where such a delivery has thus been accepted by the carrier, the liability of the
common carrier commences eoinstanti.
SHORT FACTS: The  petitioners’  mother,  CrispinaGaldoSaludo,  died  in  Chicago,  
Illinois. Pomierski and Son Funeral Home of Chicago (Pomierski), after embalming
and securing  a  permit  for  the  body’s  disposition,  and  making  the  necessary  
preparations and arrangements for the shipment of the remains from Chicago to
the  Philippines,  had  booked  the  shipment  with  PAL  thru  the  carrier’s  agent  Air  Care  
International, with Pomierski F.H. as the shipper and Maria Saludo as the consignee.
The requested routing was from Chicago to San Francisco on board Trans World
Airlines (TWA) Flight 131 on October 27, 1976, and from San Francisco to Manila on
board PAL Flight No. 107 of the same date, and from Manila to Cebu on board PAL
Flight 149 of October 29, 1976. To confirm the said booking, PAL Airway Bill No.
079-ORD-01180454 was issued on Oct 26, 1976. On the same day, Pomierski
brought the remains to C.M.A.S (Continental Mortuary Air Services) at the airport
which made the necessary arrangements for the flight, transfer, etc. of the body.
Maria SalvacionSaludo and SaturninoSaludo (petitioners) took the TWA flight 131,
however, upon arrival at San Francisco, it was found out that the body was not in
the said flight, instead it is in a plane to Mexico City, as there were two bodies at
the terminal, and somehow were switched; It also turned out that TWA, under the
same airway bill, had carried the shipment in a flight earlier than TWA Flight 131.
Upon arriving at mexico the body was sent to San Francisco and arrived on October
28, 1976, and was subsequently sent to the Philippines, arriving on Oct 30, 1976, a
day after its expected arrival. Petitioners filed a damage suit against both TWA and
PAL for the delay.
ISSUE: Whether  or  not  the  delay  in  the  delivery  of  the  remains  of  petitioners’  
mother was due to the fault of respondent airline companies
PETITIONER’S  CONTENTION: Relying on the jurisprudencial dictum that a bill of
lading is a prima facie evidence of the receipt of goods by the carrier, with an air
way bill a bill of lading, Petitioners allege that private respondents upon receipt of
the remains (as evidenced by the issuance of PAL Air Waybill No. 079- 01180454,
dated Oct 26, 1967, by Air  Care  International  as  carrier’s  agent)  a  delivery  was  made  
and therefore are charged with the responsibility to exercise extraordinary
diligence, and their failure to exercise such resulted in the switching and/or
misdelivery of the remains of CrispinaSaludo to Mexico causing gross delay in its
shipment to the Philippines, and consequently, damages to petitioners
RESPONDENT’S  CONTENTION:
PAL: They are not liable for the switching on Oct 27, 1976 as it was not until
October 28, 1976, that delivery to them was made.
TWA: (not relevant to the topic) they followed the Airway bill despite of the earlier
flight and such was not the cause of the misdelivery but
RULING: Not Liable
TRIAL COURT(Court of First Instance, Branch III, Leyte) : denied, lack of evidence to
prove liability
APPELLATE COURT:denied, affirmed the decision of the lower court in toto; denied
petitioners’  motion  for  reconsideration  for  lack  of  merit.
SUPREME COURT
A bill of lading is a written acknowledgment of the receipt of the goods and an
agreement to transport and deliver them at a specified place to a person named or
on  his  order.  Such  instrument  may  be  called  a  shipping  receipt,  forwarder’s  receipt   physical delivery of the body at San Francisco, as duly evidenced by the Interline
and receipt for transportation. Under the Tariff and Customs Code, a bill of lading
includes airway bills of lading. The two-fold character of a bill of lading is all too
familiar; 1)it is a receipt as to the quantity and description of the goods shipped and
2) a contract to transport the goods to the consignee or other person therein
designated, on the terms specified in such instrument. Ordinarily, a receipt is not
essential to a complete delivery of goods to the carrier for transportation but, when
issued, is competent and prima facie, but not conclusive, evidence of delivery to the
carrier. It may be explained, varied or contradicted by parol or other evidence. (a)
bill of lading may contain constituent elements of estoppel and thus become
something more than a contract between the shipper and the carrier. x xx
(However), as between the shipper and the carrier, when no goods have been
delivered for shipment no recitals in the bill can estop the carrier from showing the
true facts x xx. Between the consignor of goods and a receiving carrier, recitals in a
bill of lading as to the goods shipped raise only a rebuttable presumption that such
goods were delivered for shipment. As between the consignor and a receiving
carrier,  the  fact  must  outweigh  the  recital.”
Explicit is the rule under Article 1736 of the Civil Code that the extraordinary
responsibility of the common carrier begins from the time the goods are delivered
to the carrier. This responsibility remains in full force and effect even when they are
temporarily unloaded or stored in transit, unless the shipper or owner exercises the
right of stoppage in transitu, and terminates only after the lapse of a reasonable
time for the acceptance of the goods by the consignee or such other person entitled
to receive them. And, there is delivery to the carrier when the goods are ready for
and have been placed in the exclusive possession, custody and control of the carrier
for the purpose of their immediate transportation and the carrier has accepted
them. Where such a delivery has thus been accepted by the carrier, the liability of
the common carrier commences eoinstanti. Hence, while we agree with petitioners
Page 39 of 151
that the extraordinary diligence statutorily required to be observed by the carrier
instantaneously commences upon delivery of the goods thereto, for such duty to
commence there must in fact have been delivery of the cargo subject of the
contract of carriage. Only when such fact of delivery has been unequivocally
established can the liability for loss, destruction or deterioration of goods in the
custody of the carrier, absent the excepting causes under Article 1734, attach and
the presumption of fault of the carrier under Article 1735 be invoked.
The facts in the case at bar belie the averment that there was delivery of the cargo
to the carrier on October 26, 1976. PAL Airway Bill No. 079-01180454 was issued,
not as evidence of receipt of delivery of the cargo on October 26, 1976, but merely
as a confirmation of the booking thus made for the San Francisco-Manila flight
scheduled on October 27, 1976.It was not until October 28, 1976 that PAL received
Freight Transfer Manifest of the American Airline Freight System. The body
intended to be shipped as agreed upon was really placed in the possession and
control of PAL on October 28, 1976 and it was from that date that private
respondents became responsible for the agreed cargo under their undertakings in
PAL Airway Bill No. 079-01180454.
*The entire fault or negligence being exclusively with C.M.A.S. #YOROBE
CASE TITLE:Benito Macam vs. Court of Appeals
KEYWORD: Bill of Lading – Delivery  of  goods  to  holder  of  BOL  or  “to  the  person  who  
has  a  right  to  receive  them.”
DOCTRINE: TRANSPORTATION; COMMON CARRIERS; DURATION OF
EXTRAORDINARY RESPONSIBILITY -Article 1736 of the Civil Code provides -Art. 1736.
The extraordinary responsibility of the common carriers 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, without
prejudice to the provisions of Article 1738.
FACTS: Petitioner is doing business as exporter of fresh fruits. In one transaction,
respondent Wallem (carrier) delivered the shipment (3,500 boxes of watermelon
covered by Bill of Lading No. HKG 99012, and 1,611 boxes of fresh mangoes covered
by Bill of Lading No.HKG 99013.)directly to Great Prospect Company (GPC) - the
notify party, and not to Pakistan Bank, which is the consignee bank and without the
required bill of lading having been surrendered. Subsequently, GPC failed to pay
Pakistan Bank such that the latter, still in possession of the original bills of lading,
refused to pay petitioner through, Solidbank. Since Solidbank already prepaid
petitioner the value of the shipment, it demanded payment from respondent
Wallem but was refused. Petitioner was thus constrained to return the amount
involved to Solidbank, then demanded payment from Wallem in writing, but to no
avail.
Wallem submitted in evidence a telex dated 5 April 1989 as basis for delivering the
cargoes to GPC without the bills of lading and bank guarantee. The telex instructed
delivery of various shipments to the respective consignees without need of
presenting  the  bill  of  lading  and  bank  guarantee  per  the  respective  shipper’s   court in ruling against him. The petition was denied.
request  since  “for  prepaid  shiptofrt  charges  already  fully  paid.”  Macam,  however,   The Court emphasizes that the extraordinary responsibility of the common carriers
argued that, assuming there was such an instruction, the consignee referred to was
Pakistan Bank and not GPC.
ISSUE: Whether the respondents liable to the petitioner for releasing the goods to
GPC without the bills of lading or bank guarantee?
PETITIONER’S  CONTENTION: Petitioner sought collection of the value of the
shipment of P546,033.42 from respondents before the Regional Trial Court of
Manila, based on delivery of the shipment to GPC without presentation of the bills
of lading and bank guarantee.
RESPONDENT’S  CONTENTION: Respondents contended that the shipment was
delivered to GPC without presentation of the bills of lading and bank guarantee per
request of petitioner himself because the shipment consisted of perishable goods.
Respondents explained that it is a standard maritime practice, when immediate
delivery is of the essence, for the shipper to request or instruct the carrier to deliver
the goods to the buyer upon arrival at the port of destination without requiring
presentation of the bill of lading as that usually takes time. As proof thereof,
respondents apprised the trial court that for the duration of their two-year business
relationship with petitioner concerning similar shipments to GPC deliveries were
effected without presentation of the bills of lading.
RULING:
TRIAL COURT: Ordered respondents to pay, jointly and severally, the value of the
shipment  plus  attorney’s  fees  in  favour  of  petitioner  Macam.
COURT OF APPEALS: Ruling otherwise, the CA set aside the decision of the trial
court and dismissed the complaint together with the counterclaims. It alleged that
as established by previous similar transactions between the parties, shipped
cargoes were sometimes actually delivered not to the consignee but to notify party
GPC without need of the bills of lading or bank guarantee. Moreover, the bills of
lading were viewed by respondent court to have been properly superseded by the
telex instruction to effect the delivery to GPC.
SUPREME COURT – ruling in favour of the Respondents, since the subject shipment
consisted of perishable goods and Solidbank pre-paid the full amount of the value
thereof, it is not hard to believe the claim of respondent Wallem that petitioner
indeed requested the release of the goods to GPC without presentation of the bills
Page 40 of 151
of lading and bank guarantee. Respondent Court analyzed the telex of petitioner in
its entirety and correctly arrived at the conclusion that the
Consignee referred to was not Pakistan Bank but GPC. Petitioner also failed to
substantiate his claim that he returned to Solidbank the full amount of the value of
the  cargoes.  In  view  of  petitioner’s  utter  failure to establish the liability of
respondents over the cargoes, no reversible error was committed by respondent
lasts until actual or constructive delivery of the cargoes to the consignee or to the
person who has a right to receive them. Pakistan Bank was indicated in the bills of
lading as consignee whereas Great Prospect Company (GPC) was the notify party.
However, in the export invoices GPC was clearly named as buyer/importer.
Petitioner also referred to GPC as such in his demand letter to respondent Wallem
and in his complaint before the trial court. This premise draws the Court to
conclude that the delivery of the cargoes to GPC as buyer/importer which,
conformably with Art. 1736 had, other than the consignee, the right to receive
them was proper. #ABILO
CASE TITLE: SAMAR MINING COMPANY, INC. vs. NORDEUTSCHER LLOYD and C.F.
SHARP & COMPANY, INC
KEYWORD: welded wedge wire
PONENTE: Cuevas, J
DOCTRINE: The carrier may be relieved of the responsibility for loss or damage to
the goods upon actual or constructive delivery of the same by the carrier to the
consignee, or to the person who has a right to receive them
SHORT FACTS:
1) Plaintiff, now appellee, SAMAR MINING COMPANY, INC. made an importation of
one (1) crate Optima welded wedge wire sieves through the M/S SCHWABENSTEIN
a vessel owned by defendant-appellant NORDEUTSCHER LLOYD, (represented in the
Philippines by its agent, C.F. SHARP & CO., INC.), which shipment is covered by Bill
of Lading No. 18 duly issued to consignee SAMAR MINING COMPANY, INC.
2) Bill of Lading No. 18 sets forth that the carrier undertook to transport the goods
in its vessel, M/S SCHWABENSTEIN only up to the "port of discharge from ship-
Manila and thereafter, the goods were to be transshipped by the carrier to the port
of  destination  or  "port  of  discharge  of  goods”
3) Upon arrival of the aforesaid vessel at the port of Manila, the aforementioned
importation was unloaded and delivered in good order and condition to the bonded
warehouse of AMCYL.
4) The goods were however never delivered to, nor received by, the consignee at
the port of destination — Davao.
5) Appellee Samar Mining sent letters of complaint, and later filed a formal claim
for P1,691.93,the equivalent of $424.00 at that time, against defendants, but
neither paid; hence, the instant suit was filed with AMCYL being brought as third
party defendant.
ISSUE: W/N defendants-appellants incur liability for the loss of the goods in
question
PETITIONER’s  CONTENTION:
Defendants-appellants are liable for the value of goods never delivered to plaintiff
consignee under the bill of lading covering the subject shipment.
RESPONDENT’S  CONTENTION:
1) Appellant carrier contends that the extent of its responsibility and/or liability in
the transshipment of the goods in question are spelled out and delineated under
Section 1, paragraph 3 of Bill of Lading No. 18, to wit:
“The  carrier  shall  not  be  liable  in  any  capacity whatsoever for any delay, loss or
damage occurring before the goods enter ship's tackle to be loaded or after the
goods  leave  ship's  tackle  to  be  discharged,  transshipped  or  forwarded  ...”
and in Section 11 of the same Bill, which provides:
“...  Pending or during forwarding or transshipping the carrier may store the goods
ashore or afloat solely as agent of the shipper and at risk and expense of the goods
and the carrier shall not be liable for detention nor responsible for the acts, neglect,
delay or failure to act of anyone to whom the goods are entrusted or delivered for
storage,  handling  or  any  service  incidental  thereto”
2) They now shirk liability for the loss, claiming that they have discharged the same
in full and good condition unto the custody of AMCYL at the port of discharge from
ship — Manila, and therefore, pursuant to the aforequoted stipulation (Sec. 11) in
the bill of lading, their responsibility for the cargo had ceased.
RULING:
TRIAL COURT : GRANTED
The Court stated that defendants may recoup whatever they may pay plaintiff by
enforcing the judgment against third party defendant AMCYL which had earlier
been declared in default.
SUPREME COURT (PETITION FOR CERTIORARI): DENIED
Under ART 1736, the carrier may be relieved of the responsibility for loss or damage
to the goods upon actual or constructive delivery of the same by the carrier to the
consignee, or to the person who has a right to receive them.
Two undertakings appeared embodied and/or provided for in the Bill of Lading in
question. The first is FOR THE TRANSPORT OF GOODS from Bremen, Germany to
Manila. The second, THE TRANSSHIPMENT OF THE SAME GOODS from Manila to
Page 41 of 151
Davao, with appellant acting as agent of the consignee. At the hiatus between these
two undertakings of appellant which is the moment when the subject goods are
discharged in Manila, its personality changes from that of carrier to that of agent of
the consignee. Thus, the character of appellant's possession also changes, from
possession in its own name as carrier, into possession in the name of consignee as
the latter's agent. Such being the case, there was, in effect, actual delivery of the
goods from appellant as carrier to the same appellant as agent of the consignee.
Upon such delivery, the appellant, as erstwhile carrier, ceases to be responsible for
any loss or damage that may befall the goods from that point onwards. #AFAN
CASE TITLE: LU DO & LU YM CORPORATION vs. I. V. BINAMIRA
KEYWORD: missing films
PONENTE: BAUTISTA ANGELO, J
DOCTRINE: While the goods are in its possession, it is but fair that it exercise
extraordinary diligence in protecting them from damage, and if loss occurs, the law
presumes that it was due to its fault or negligence. This is necessary to protect the
interest the interest of the owner who is at its mercy. The situation changes after
the goods are delivered to the consignee.
SHORT FACTS:Delta Photo Supply Company of New York shipped on board the M/S
“FERNSIDE”  at  New  York,  U.S.A.,  6  cases  of  films  and/or  photographic  supplies  
consigned to the order of I. V. Binamira. A Bill of Lading was issued where the
carrier and the consignee have stipulated to limit the responsibility of the carrier for
the loss or damage that may be caused to the goods before they are actually
delivered. The films were discharged at the port of Cebu by the stevedoring
company hired by petitioner as agent of the carrier. The cargo was received by the
Visayan Cebu Terminal Company, Inc., the arrastre operator appointed by the
Bureau of Customs. During the discharge, the cargo was inspected by both the
stevedoring company and the arrastre operator, and the films were found to be in
good condition. But after it was delivered to respondent after 3 days, the same was
examined by a surveyor and found out that some films and supplies were missing.
ISSUE:Whether or not the carrier is responsible for the loss considering that the
same occurred after the shipment was discharged from the ship and placed in the
possession and custody of the customs authorities?
PETITIONER’S  CONTENTION: (not mentioned in the case)
RESPONDENT’S  CONTENTION: (not mentioned in the case)
RULING:
TRIAL COURT: AFFIRMED. The court rendered judgment ordering defendant to pay
plaintiff the sum of P216.84, with legal interest
APPELLATE COURT: AFFIRMED. In this jurisdiction, a common carrier has the legal
duty to deliver goods to a consignee in the same condition in which it received
them. Except where the loss, destruction or deterioration of the merchandise was
due to any of the cases enumerated in Article 1734 of the new Civil Code, a carrier
is presumed to have been at fault and to have acted negligently, unless it could
prove that it observed extraordinary diligence in the care and handling of the goods
(Article 1735, supra). Such presumption and the liability of the carrier attach until
the goods are delivered actually or constructively, to the consignee, or to the
person who has a right to receive them (Article 1736, supra), and we believe
delivery to the customs authorities is not the delivery contemplated by Article 1736,
supra, in connection with second paragraph of Article 1498, supra, because, in such
a case, the goods are then still in the hands of the Government and their owner
could not exercise dominion whatever over them until the duties are paid. In the
case at bar, the presumption against the carrier, represented appellant as its agent,
has not been successfully rebutted.
SUPREME COURT:REVERSED.
It is now contended that the Court of Appeals erred in its finding not only because it
made wrong interpretation of the law on the matter, but also because it ignored
the provisions of the bill of lading covering the shipment wherein it was stipulated
that the responsibility of the carrier is limited only to losses that may occur while
the cargo is still under its custody and control.
It is true that, as a rule, a common carrier is responsible for the loss, destruction or
deterioration of the goods it assumes to carry from one place to another unless the
same is due to any to any of the causes mentioned in Article 1734 on the new Civil
Code. But this shall only apply when the loss, destruction or deterioration takes
place while the goods are in the possession of the carrier, and not after it has lost
control of them.
The parties may agree to limit the liability of the carrier considering that the goods
have still to go through the inspection of the customs authorities before they are
actually turned over to the consignee. This is a situation where we may say that the
carrier losses control of the goods because of a custom regulation and it is unfair
that it be made responsible for what may happen during the interregnum. And this
is precisely what was done by the parties herein. In the bill of lading that was issued
covering the shipment in question, both the carrier and the consignee have
stipulated to limit the responsibility of the carrier for the loss or damage that may
be caused to the goods before they are actually delivered. #AGUILA
CASE TITLE: NATIONAL TRUCKING AND FORWARDING CORPORATION, vs. LORENZO
SHIPPING CORPORATION,
KEYWORD: CARE (Cooperative for American Relief Everywhere)
Page 42 of 151
PONENTE:Davide, Jr.
DOCTRINE: In case the consignee, upon receiving the goods, cannot return the bill
of lading subscribed by the carrier, because of its loss or of any other cause, he
must give the latter a receipt for the goods delivered, this receipt producing the
same effects as the return of the bill of lading.
SHORT FACTS: On June 5, 1987, the Republic of the Philippines, through the
Department of Health (DOH), and the Cooperative for American Relief Everywhere,
Inc. (CARE) signed an agreement wherein CARE would acquire from the United
States government donations of non-fat dried milk and other food products from
January 1, 1987 to December 31, 1989. In turn, the Philippines would transport and
distribute the donated commodities to the intended beneficiaries in the country.
The government entered into a contract of carriage of goods with herein petitioner
National Trucking and Forwarding Corporation (NTFC). Thus, the latter shipped
4,868 bags of non-fat dried milk through herein respondent Lorenzo Shipping
Corporation (LSC) from September to December 1988. The consignee named in the
bills  of  lading  issued  by  the  respondent  was  AbdurahmanJama,  petitioner’s  branch  
supervisor in Zamboanga City. On reaching the port of Zamboanga City,
respondent’s  agent,  Efren  Ruste4  Shipping  Agency,  unloaded  the  4,868  bags  of  non-
fat  dried  milk  and  delivered  the  goods  to  petitioner’s  warehouse.  Before  each  
delivery, Rogelio Rizada and Ismael Zamora, both delivery checkers of EfrenRuste
Shipping Agency, requested Abdurahman to surrender the original bills of lading,
but the latter merely presented certified true copies thereof. Upon completion of
each delivery, Rogelio and Ismael asked Abdurahman to sign the delivery receipts.
However, at times when Abdurahman had to attend to other business before a
delivery was completed, he instructed his subordinates to sign the delivery receipts
for him. Notwithstanding the precautions taken, the petitioner allegedly did not
receive the subject goods. Thus, in a letter dated March 11, 1989, petitioner NTFC
filed a formal claim for non-delivery of the goods shipped through respondent.In its
letter of April 26, 1989, the respondent explained that the cargo had already been
delivered to AbdurahmanJama. The petitioner then decided to investigate the loss
of the goods. But before the investigation was over, AbdurahmanJama resigned as
branch  supervisor  of  petitioner.  Noting  but  disbelieving  respondent’s  insistence  
that the goods were delivered, the government through the DOH, CARE, and NTFC
as plaintiffs filed an action for breach of contract of carriage, against respondent as
defendant, with the RTC of Manila.
ISSUES: (1) Is respondent presumed at fault or negligent as common carrier for the
loss  or  deterioration  of  the  goods?  and  (2)  Are  damages  and  attorney’s  fees  due  
respondent?
PETITIONER’S  CONTENTION: Petitioner contends that the respondent is presumed
negligent and liable for failure to abide by the terms and conditions of the bills of
lading;  that  AbdurahmanJama’s  failure  to  testify  should  not  be  held  against  
petitioner; and that the testimonies of Rogelio Rizada and Ismael Zamora, as
employees  of  respondent’s  agent,  Efren
Ruste Shipping Agency, were biased and could not overturn the legal presumption
of  respondent’s  fault  or  negligence.
RESPONDENT’S  CONTENTION: Respondent avers that it observed extraordinary
diligence in the delivery of the goods. Prior to releasing the goods to Abdurahman,
Rogelio and Ismael required the surrender of the original bills of lading, and in their
absence, the certified true copies showing that Abdurahman was indeed the
consignee of the goods. In addition, they required Abdurahman or his designated
subordinates to sign the delivery receipts upon completion of each delivery.
RULING:
TRIAL COURT:DENIED. The RTC ruled in favor of Lorenzo Shipping Corporation and
ordered  the  plaintiffs,  pursuant  to  the  defendant’s  counterclaim,  to  pay,  jointly  and  
solidarily, to the defendant, actual damages in the amount of P50,000.00, and
attorney’s  fees  in  the  amount  ofP70,000.00,  plus  the  costs  of  suit.
APPELLATE COURT:DENIED. The CA affirmed the decision of the RTC in toto.
SUPREME COURT:PARTIALLY GRANTED. The Supreme Court ruled in favor of
Lorenzo Shipping Corporation on the issue on whether it is at fault or negligent as
common carrier for the loss or deterioration of the goods. The SC stated that the
respondent adequately proved that it exercised extraordinary diligence. Although
the original bills of lading  remained  with  petitioner,  respondent’s  agents  demanded   indicate how the fight started or who, between the two, delivered the first blow or
from Abdurahman the certified true copies of the bills of lading. They also asked the
latter and in his absence, his designated subordinates, to sign the cargo delivery
receipts. Citing Article 353 of the Code of Commerce which states: After the
contract has been complied with, the bill of lading which the carrier has issued shall
be returned to him, and by virtue of the exchange of this title with the thing
transported, the respective obligations and actions shall be considered cancelled,
….  In  case  the  consignee,  upon  receiving  the  goods,  cannot  return  the  bill  of  lading   TRIAL COURT:
subscribed by the carrier, because of its loss or of any other cause, he must give the
latter a receipt for the goods delivered, this receipt producing the same effects as
the return of the bill of lading.
On  the  issue  on  whether  damages  and  attorney’s  fees  are  due  respondent,  The  SC  
ruled in favor of the petitioners. It stated that respondent failed to show proof of
actual pecuniary loss, hence, no actual damages are due in favor of respondent and
that  an  adverse  decision  does  not  ipso  facto  justify  an  award  of  attorney’s  fees  to   the death of NicanorNavidad, Jr. Instead, appellees Rodolfo Roman and the Light
the  winning  party.  An  award  of  attorney’s  fees,  in  the  concept  of  damages  requires   Rail Transit Authority (LRTA) are held liable for his death and are hereby directed to
factual and legal justifications  and  the  court  did  not  find  anything  in  petitioner’s  suit  
that  justifies  the  award  of  attorney’s  fees.  #AGUILAR
b. Carriage of Passengers
CASE TITLE: LRTA vsNavidad, G.R. No. 145804. February 6, 2003
KEYWORD: LRT
PONENTE:Vitug, J.
DOCTRINE:
Such duty of a common carrier to provide safety to its passengers so obligates it not
only during the course of the trip but for so long as the passengers are within its
premises and where they ought to be in pursuance to the contract of carriage.
FACTS:
On  14  October  1993,  about  half  an  hour  past  seven  o’clock  in  the  evening,  
NicanorNavidad, then drunk, entered the EDSA LRT station after purchasing a
“token”  (representing  payment  of  the  fare).  While  Navidad  was  standing  on  the  
platform near the LRT tracks, JunelitoEscartin, the security guard assigned to the
area approached Navidad. A misunderstanding or an altercation between the two
apparently ensued that led to a fist fight. No evidence, however, was adduced to
how Navidad later fell on the LRT tracks. At the exact moment that Navidad fell, an
LRT train, operated by petitioner Rodolfo Roman, was coming in. Navidad was
struck by the moving train, and he was killed instantaneously.
ISSUE: Whether or not LRTA is liable for the death of Navidad
judgment is hereby rendered in favor of the plaintiffs and against the defendants
Prudent Security and JunelitoEscartin ordering the latter to pay jointly and severally
the plaintiffs.
COURT OF APPEALS:
judgment is hereby MODIFIED, by exonerating the appellants from any liability for
pay jointly and severally to the plaintiffs-appellees

Page 43 of 151
SUPREME COURT:
YES.
the assailed decision of the appellate court is AFFIRMED with MODIFICATION but
only in that (a) the award of nominal damages is DELETED and (b) petitioner
Rodolfo Roman is absolved from liability.
The law requires common carriers to carry passengers safely using the utmost
diligence of very cautious persons with due regard for all circumstances. Such duty
of a common carrier to provide safety to its passengers so obligates it not only
during the course of the trip but for so long as the passengers are within its
premises and where they ought to be in pursuance to the contract of carriage. The
statutory provisions render a common carrier liable for death of or injury to
passengers (a) through the negligence or wilful acts of its employees or b) on
account of willful acts or negligence of other passengers or of strangers if the
common  carrier’s  employees  through  the  exercise  of  due  diligence  could  have   goods and for the safety of the passengers.
prevented or stopped the act or omission. In case of such death or injury, a carrier
is presumed to have been at fault or been negligent, and by simple proof of injury,
the passenger is relieved of the duty to still establish the fault or negligence of the
carrier or of its employees and the burden shifts upon the carrier to prove that the
injury is due to an unforeseen event or to force majeure. In the absence of
satisfactory explanation by the carrier on how the accident occurred, which
petitioners, according to the appellate court, have failed to show, the presumption
would be that it has been at fault, an exception from the general rule that
negligence must be proved.
CASE TITLE: DANGWA TRANSPORTATION CO., INC. V. CA
KEYWORD: Umbrella; Bus
PONENTE: REGALADO, J
DOCTRINE: It is the duty of common carriers of passengers, including common
carriers by railroad train, streetcar, or motorbus, to stop their conveyances a
reasonable length of time in order to afford passengers an opportunity to board
and enter, and they are liable for injuries suffered by boarding passengers resulting
from the sudden starting up or jerking of their conveyances while they are doing so.
SHORT FACTS: Private respondents (Heirs of the late PedritoCudiamat) filed a
complaint for damages against petitioners for the death of PedritoCudiamat as a
result of a vehicular accident which occurred in 1985 at Benguet. Among others, it
was alleged that while petitioner Theodore M. Lardizabal was driving a passenger
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bus belonging to petitioner corporation in a reckless and imprudent manner, it ran
over its passenger, Pedrito. Instead of bringing Pedrito immediately to the nearest
hospital, the said driver, in utter bad faith and without regard to the welfare of the
victim, first brought his other passengers and cargo to their respective destinations
before bringing said victim to the Lepanto Hospital where he died.
ISSUE: WON there was breach of contract of carriage. –YES.
PETITIONERS’  CONTENTION: They alleged that they had observed and continued to
observe the extraordinary diligence required in the operation of the transportation
company and the supervision of the employees, even as they add that they are not
absolute insurers of the safety of the public at large. It was the victim's own
carelessness and negligence which gave rise to the subject incident.
RESPONDENTS’  CONTENTION: The incident took place due to the gross negligence
of the driver and as such, petitioners failed to observe their duty and obligation as
common carrier in not observing extra-ordinary diligence in the vigilance over the
RULING:
TRIAL COURT: RULED IN FAVOR OF PETITIONERS. This Court is satisfied that Pedrito
was negligent in trying to board a moving vehicle, especially with one of his hands
holding an umbrella and without having given the driver or the conductor any
indication that he wishes to board the bus. Equity demands however that there
must be something given to the heirs of the victim.
COURT OF APPEALS: RULED FOR PRIVATE RESPONDENTS. The victim did indicate his
intention to board the bus as declared by the witness to the effect that Pedrito was
no longer walking and made a sign to board the bus when the latter was still at a
distance from him. The petitioners utterly failed to observe their duty and
obligation as common carrier to the end that they should observe extra-ordinary
diligence in the vigilance over the goods and for the safety of the passengers
transported by them according to the circumstances of each case.
SUPREME COURT: RULED FOR PRIVATE RESPONDENTS. When the bus is not in
motion, there is no necessity for a person who wants to ride the same to signal his
intention to board. A public utility bus, once it stops, is in effect making a
continuous offer to bus riders. Hence, it becomes the duty of the driver and the
conductor, every time the bus stops, to do no act that would have the effect of
increasing the peril to a passenger while he was attempting to board the same. The
premature acceleration of the bus in this case was a breach of such duty.
#ASUNCION
CASE TITLE: La Mallorca vs. CA, GR L-20761, 27 July 1966
KEYWORD: LA MALLORCA
PONENTE: Barrera, J.
DOCTRINE: The relation of carrier and passenger does not cease at the moment the
passenger  alights  from  the  carrier’s  vehicle at a place selected by the carrier at the
point of destination, but continues until the passenger has had a reasonable time or
reasonable opportunity to leave the current premises
SHORT FACTS: Robert De Alban and his family rode a bus owned by Joeben Bus
Company. Upon reaching their desired destination, they alighted from the bus but
Robert returned to get their baggage. However, his youngest daughter followed
him without his knowledge. When he stepped into the bus again, the bus
accelerated that resulting  to  Robert’s  daughter  death.  The  bus  ran  over  her.
ISSUE: Is the bus company liable?
PETITIONER’S  CONTENTION: La Mallorco contended that when the child was killed,
she was no longer a passenger and therefore the contract of carriage terminated
RESPONDENT’S  CONTENTION: that the carrier's agent had NOT exercised the
"utmost diligence" of a "very cautions person" required by Article 1755 of the Civil
Code to be observed by a common carrier in the discharge of its obligation to
transport safely its passengers. In the first place, the driver, although stopping the
bus, nevertheless did not put off the engine. Secondly, he started to run the bus
even before the bus conductor gave him the signal to go and while the latter was
still unloading part of the baggages of the passengers Mariano Beltran and family.
The presence of said passengers near the bus was not unreasonable and they are,
therefore, to be considered still as passengers of the carrier, entitled to the
protection under their contract of carriage.
RULING:
TRIAL COURT: Lower court rendered judgment against the plaintiff
APPELLATE COURT:Trial Court decision affirmed by CA, holding La Mallorca liable
for quasi-delict and ordering it to pay P6,000 plus P400. La Mallorco contended that
when the child was killed, she was no longer a passenger and therefore the contract
of carriage terminated.
SUPREME COURT:On the question whether the liability of the carrier, as to the child
who was already led a place 5 meters from the bus under the contract of carrier,
still persists, we rule in the affirmative. It is a recognized rules that the relation
between carrier and passengers does not cease at the moment the passenger
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alights  from  the  carrier’s  premises,  to  be  determined  from  the  circumstances.  In  
this case, there was no utmost diligence. Decision of CA is MODIFIED, damages
reduced from 6k down to 3k. #  BRILLANTES    
CASE TITLE:ABOITIZ SHIPPING vs. CA
KEYWORD: carrier and passenger relationship
PONENTE:Regalado, J.
DOCTRINE:Relationshp of carrier and passenger continues until the passenger has
been landed at the port of destination and has left the vessel owner's dock or
premises
FACTS:AnacletoViana boarded the vessel M/V Antonia, owned by Aboitiz Shipping
Corporation, at the port at San Jose, Occidental Mindoro, bound for Manila. After
said vessel had landed, the Pioneer Stevedoring Corporation took over the exclusive
control of the cargoes loaded on said vessel pursuant to the Memorandum of
Agreement between Pioneer and petitioner Aboitiz. The crane owned by Pioneer
was placed alongside the vessel and one (1) hour after the passengers of said vessel
had disembarked, it started operation by unloading the cargoes from said vessel.
While the crane was being operated, AnacletoViana who had already disembarked
from said vessel obviously remembering that some of his cargoes were still loaded
in the vessel, went back to the vessel, and it was while he was pointing to the crew
of the said vessel to the place where his cargoes were loaded that the crane hit him,
pinning him between the side of the vessel and the crane. He was thereafter
brought to the hospital where he later died.
RESPONDENT’S  CONTENTON: Private respondents Vianas filed a complaint for
damages against petitioner for breach of contract of carriage.
PETITIONER’S  CONTENTION:Aboitiz denied responsibility contending that at the
time of the accident, the vessel was completely under the control of respondent
Pioneer Stevedoring Corporation as the exclusive stevedoring contractor of Aboitiz,
which handled the unloading of cargoes from the vessel of Aboitiz.
ISSUE: Whether  or  not  Aboitiz  is  negligent  and  is  thus  liable  for  Vianas’  death.
HELD: Yes. The victim AnacletoViana guilty of contributory negligence, but it was
the negligence of Aboitiz in prematurely turning over the vessel to the arrastre
operator for the unloading of cargoes which was the direct, immediate and
proximate cause of the victim's death. The rule is that the relation of carrier and
passenger continues until the passenger has been landed at the port of destination
and has left the vessel owner's dock or premises. Once created, the relationship will
not ordinarily terminate until the passenger has, after reaching his destination,
safely alighted from the carrier's conveyance or had a reasonable opportunity to
leave the carrier's premises. All persons who remain on the premises a reasonable
time after leaving the conveyance are to be deemed passengers, and what is a
reasonable time or a reasonable delay within this rule is to be determined from all
the circumstances, and includes a reasonable time to see after his baggage and
prepare for his departure.
TRIAL COURT:Aboitiz was ordered to pay the Vianas for damages incurred, and
Pioneer was ordered to reimburse Aboitiz for whatever amount the latter paid the
Vianas.
COURT OF APPEALS:Affired the decision of the Trial Court except as to the amount
of damages awarded to the Vianas since CA found the victim Viana guilty of
contributory negligence, but holding that it was the negligence of Aboitiz in
prematurely turning over the vessel to the arrastre operator for the unloading of
cargoes  which  was  the  direct,  immediate  and  proximate  cause  of  the  victim’s  death.
SUPREME COURT: Denied the petition of Aboitiz. It is of common knowledge that,
by the very nature of petitioner's business as a shipper, the passengers of vessels
are allotted a longer period of time to disembark from the ship than other common
carriers such as a passenger bus. With respect to the bulk of cargoes and the
number of passengers it can load, such vessels are capable of accommodating a
bigger volume of both as compared to the capacity of a regular commuter bus.
Consequently, a ship passenger will need at least an hour as is the usual practice, to
disembark from the vessel and claim his baggage whereas a bus passenger can
easily get off the bus and retrieve his luggage in a very short period of time. When
the accident occurred, the victim was in the act of unloading his cargoes, which he
had every right to do, from petitioner's vessel. As earlier stated, a carrier is duty
bound not only to bring its passengers safely to their destination but also to afford
them a reasonable time to claim their baggage.#CAPCO
4. Defenses of Common Carriers
i. Fortuitous Event
a. Requisites
Schmitz Transport vs. Transport Venture
G.R. No. 150255; April 22, 2005
Keyword: No tugboat towed back the barge to the pier
Ponente:Carpio-Morales, J.
Doctrine: When a fortuitous event occurs, Article 1174 of the Civil Code absolves
any party from any and all liability arising therefrom.
Facts: The M/V "Alexander Saveliev" containing cargoes of rolled steel sheets
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. Schmitz
Transport, whose services the consignee engaged to secure the requisite
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clearances, to receive the cargoes from the shipside, and to deliver them to its (the
consignee’s)  warehouse, in turn engaged the services of TVI to send a barge ("Erika
V") and tugboat ("Lailani") at shipside. 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, no tugboat pulled the barge back to the
pier. Due to strong waves, the barge capsized, washing the 37 coils into the sea;
thus a complaint was instituted by Industrial Insurance
Industrial Insurance faulted the defendants for undertaking the unloading
of the cargoes while typhoon signal No. 1 was raised in Metro Manila.
The RTC held all the defendants negligent for unloading the cargoes
outside of the breakwater notwithstanding the storm signal.
To  the  trial  court’s  decision,  the  defendants  Schmitz Transport and TVI
filed a joint motion for reconsideration arguing that they were not motivated by
gross or evident bad faith and that the incident was caused by a fortuitous event.
Eventually, all the defendants appealed to the Court of Appeals. In
discrediting the defense of fortuitous event, the appellate court held that "although
defendants obviously had nothing to do with the force of nature, they however had
control of where to anchor the vessel, where discharge will take place and even
when the discharging will commence."
Issue: Whether or not the loss of the cargoes was due to a fortuitous event,
independent of any act of negligence on the part of petitioner Black Sea and TVI.
Held: When a fortuitous event occurs, Article 1174 of the Civil Code absolves any
party from any and all liability arising therefrom.
In order, to be considered a fortuitous event, however, (1) the cause of the
unforeseen and unexpected occurrence, or the failure of the debtor to comply with
his obligation, must be independent of human will; (2) it must be impossible to
foresee the event which constitute the casofortuito, or if it can be foreseen it must
be impossible to avoid; (3) the occurrence must be such as to render it impossible
for the debtor to fulfill his obligation in any manner; and (4) the obligor must be
free from any participation in the aggravation of the injury resulting to the creditor.
In the case at bar, from a review of the records of the case, there is no
indication that there was greater risk in loading the cargoes outside the breakwater.
The weather data report of PAG-ASA states that while typhoon signal No. 1
was hoisted over Metro Manila, the sea condition at the port of Manila at 5:00 p.m.
- 11:00 p.m. of October 26, 1991 was moderate. It cannot, therefore, be said that
the defendants were negligent in not unloading the cargoes upon the barge on
October 26, 1991 inside the breakwater.
That no tugboat towed back the barge to the pier after the cargoes were
completely loaded is the proximate cause of the loss of the cargoes. Had the barge
been towed back promptly to the pier, the deteriorating sea conditions
notwithstanding, the loss could have been avoided. But the barge was left floating
in open sea until big waves set in, causing it to sink along with the cargoes. The loss
thus falls outside the "act of God doctrine." #DELMUNDO
CASE TITLE: YOBIDO VS. COURT OF APPEALS
KEYWORD: TIRE BLOWOUT
PONENTE: ROMERO, J.
DOCTRINE: REQUISITES OF FORTUITOUS EVENT
FACTS:
On April 26, 1988, spouses Tito and LenyTumboy and their minor children named
Ardee and Jasmin, boarded at Mangagoy, Surigao del Sur, a Yobido Liner bus bound
for Davao City. Along Picop Road in Km. 17, Sta. Maria, Agusan del Sur, the left front
tire of the bus exploded. The bus fell into a ravine around three feet from the road
and struck a tree. The incident resulted in the death of 28-year-old Tito Tumboy and
physical injuries to other passengers. On November 21, 1988, a complaint for
breach  of  contract  of  carriage,  damages  and  attorney’s  fees was filed by Leny and
her children against Alberta Yobido, the owner of the bus, and CresencioYobido, its
driver, before the Regional Trial Court of Davao City.
The plaintiffs asserted that violation of the contract of carriage between them and
the defendants  was  brought  about  by  the  driver’s  failure  to  exercise  the  diligence   unforeseen and unexpected occurrence, or the failure of the debtor to comply with
required of the carrier in transporting passengers safely to their place of
destination. For their part, the defendants tried to establish that the accident was
due to a fortuitous event
ISSUE:
Whether or not a tire blowout is a fortuitous event.
RULING:
TRIAL COURT:
The lower court rendered a decision dismissing the action for lack of merit. On the
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issue  of  whether  or  not  the  tire  blowout  was  a  casofortuito,  it  found  that  “the
falling of the bus to the cliff was a result of no other outside factor than the tire
blow-out.
It held that the ruling in the La Mallorca and Pampanga Bus Co. v. De Jesus that a
tire  blowout  is  “a  mechanical  defect  of  the  conveyance  or  a  fault  in  its  equipment
which was easily discoverable if the bus had been subjected to a more thorough or
rigid check-up  before  it  took  to  the  road  that  morning”  is  inapplicable  to  this  case.  
In  this  case,  “the  cause  of  the  explosion  remains  a  mystery  until  at  present.”  As
such,  the  court  added,  the  tire  blowout  was  “a  casofortuito  which  is  completely  an  
extraordinary  circumstance  independent  of  the  will”  of  the  defendants  who  should  
be  relieved  of  “whatever  liability  the  plaintiffs  may  have  suffered  by  reason  of  the  
explosion pursuant to Article 1174,of the Civil Code.
APPELLATE COURT:
The explosion of the tire is not in itself a fortuitous event. The cause of the blow-
out, if due to a factory defect, improper mounting, excessive tire pressure, is not an
unavoidable event. On the other hand, there may have been adverse conditions on
the road that were unforeseeable and/or inevitable, which could make the blow-
out a casofortuito. The fact that the cause of the blow-out was not known does not
relieve the carrier of liability. Owing to the statutory presumption of negligence
against the carrier and its obligation to exercise the utmost diligence of very
cautious persons to carry the passenger safely as far as human care and foresight
can provide, it is the burden of the defendants to prove that the cause of the blow-
out was a fortuitous event. It is not incumbent upon the plaintiff to prove that the
cause of the blow-out is not casofortuito.
SUPREME COURT:
A fortuitous event is possessed of the following characteristics: (a) the cause of the
his obligations, must be independent of human will; (b) it must be impossible to
foresee the event which constitutes the casofortuito, or if it can be foreseen, it
must be impossible to avoid; (c) the occurrence must be such as to render it
impossible for the debtor to fulfill his obligation in a normal manner; and (d) the
obligor must be free from any participation in the aggravation of the injury resulting
to the creditor. As Article 1174 provides, no person shall be responsible for a
fortuitous event which could not be foreseen, or which, though foreseen, was
inevitable. In other words, there must be an entire exclusion of human agency from
the cause of injury or loss.
Under the circumstances of this case, the explosion of the new tire may not be
considered a fortuitous event. There are human factors involved in the situation.
The fact that the tire was new did not imply that it was entirely free from
manufacturing defects or that it was properly mounted on the vehicle. Neither may
the fact that the tire bought and used in the vehicle is of a brand name noted for
quality,  resulting  in  the  conclusion  that  it  could  not  explode  within  five  days’  use.  Be   liability?
that as it may, it is settled that an accident caused either by defects in the
automobile or through the negligence of its driver is not a casofortuito that would
exempt the carrier from liability for damages. Moreover, a common carrier may not
be absolved from liability in case of force majeure or fortuitous event alone.
#  DUGEÑA     insurance.
b. Fire
CASE TITLE: Eastern Shipping Lines, Inc. vs. Intermediate Appellate Court
KEYWORD: Fire; Natural Disaster or Calamity; Acts of Man; Acts of God
PONENTE: MELENCIO-HERRERA, J.
DOCTRINE: Fire may not be considered a natural disaster or calamity. It does not fall
within the category of an act of God unless caused by lightning or by other natural
disaster or calamity.
FACTS: Eastern Shipping Lines, Inc., loaded at Kobe, Japan for transportation to
Manila, calorized lance pipes consigned to Philippine Blooming Mills Co., Inc., and 7
cases of spare parts valued at P92,361.75, consigned to Central Textile Mills, Inc.
The same vessel took on board garment fabrics and accessories consigned to
Mariveles Apparel Corporation and surveying instruments consigned to Aman
Enterprises and General Merchandise.
Enroute for Kobe, Japan, to Manila, the vessel caught fire and sank, resulting in the
total loss of ship and cargo. The respective respondent Insurers paid the
corresponding marine insurance values to the consignees concerned. Thus, the
insurances having been subrogated unto the rights of the consignees, filed suit
against petitioner Carrier for the recovery of the amounts it had paid
PETITIONER’S  CONTENTION:  Carrier  denied  liability  on  the  principal grounds that
the fire which caused the sinking of the ship is an exempting circumstance under
Carriage of Goods by Sea Act (COGSA) and that when the loss of fire is established,
the burden of proving negligence of the vessel is shifted to the cargo shipper. The
loss was due to an extraordinary fortuitous event, hence, it is not liable under the
law.
Page 48 of 151
REPONDENT’S  CONTENTION:  (not  clearly  mentioned)
ISSUE: WON the FIRE, which caused the sinking ship, exempts the carrier from
RULING:
TRIAL COURT: In favor of the insurance. Petitioner was ordered to pay the
COURT OF APPEALS: Affirmed
SUPREME COURT: NO.
Under the Civil Code, common carriers, from the nature of their business and for
reasons of public policy, are bound to observe extraordinary diligence in the
vigilance over goods, according to all the circumstances of each case.
Fire may not be considered a natural disaster or calamity. This arises almost
invariably from some act of man or by human means. It does not fall within the
category of an act of God unless caused by lightning or by other natural disaster or
calamity. It may even be caused by the actual fault or privity of the carrier.
Article 1680 of the Civil Code, which considers fire as an extraordinary fortuitous
event, refers to leases of rural lands.
As the peril of fire is not comprehended within the exceptions in Article 1734,
supra, Article 1735 of the Civil Code provides that in all cases other than those
mentioned in Article 1734, the common carrier shall be presumed to have been at
fault or to have acted negligently, unless it proves that it has observed the
extraordinary diligence required by law.
And even if fire were to be considered a "natural disaster" within the meaning of
Article 1734 of the Civil Code, it is required under Article 1739 of the same Code
that the "natural disaster" must have been the "proximate and only cause of the
loss," and that the carrier has "exercised due diligence to prevent or minimize the
loss before, during or after the occurrence of the disaster." This Petitioner Carrier
has also failed to establish satisfactorily.#  Encarnacion    
c. Hijacking
Case title: Gacalvs PAL

Keyword/s: hijacking, Libya- Sabah- Zamboanga
Ponente: Paras, J
Doctrine: It is the duty of a common carrier to overcome the presumption of
negligence and it must be shown that the carrier had observed the required
extraordinary diligence of a very cautious person as far as human care and foresight
can provide or that the accident was caused by a fortuitous event. Thus, as ruled by
this Court, no person shall be responsible for those "events which could not be
foreseen or which though foreseen were inevitable. (Article 1174, Civil Code). The
term is synonymous with casofortuito which is of the same sense as "force
majeure" .
Facts:
Plaintiffs Franklin G. Gacal and his wife, Corazon M. Gacal along with three others
were then passengers boarding PAL's BAC 1-11 at Davao Airport for a flight to
Manila, not knowing that on the same flight that Commander Zapata and others
who were members of the MNLF armed with grenades and pistols were their co-
passengers.
Ten minutes after takeoff, the MNLF announced the hijacking of the aircraft and
directed its pilot to fly to Libya. With the pilot explaining to them of the fuel
limitations of the plane, the hijackers directed the pilot to fly to Sabah. So they
landed in Zamboanga Airport to refuel. It was met by two armored cars of the
military with machine guns pointed at the plane. The said rebels demanded that a
DC-aircraft take them to Libya with the president of PAL as their hostage and that
they be given $375,000 and six armalites otherwise they will blow up the plane.
After the relatives of the hijackers were allowed to board the plane and after they
alighted, an armored car bumped the stairs. Commencing the battle between the
military and the hijackers which led to the liberation of the surviving passengers and
the arrest of the hijackers. As a result of such faceoff, the wives of city Fiscal Gacal
and Anislag suffered injuries.
Now, plaintiffs are claiming for damages because of PAL's negligence, finding basis
on its breach of contract of carriage. There was a failure to frisk the passengers
adequately in order to discover hidden weapons in the bodies of the hijackers.
Despite the prevalence of skyjacking, PAL did not use a metal detector which is the
Page 49 of 151
most effective means of discovering potential skyjackers among the passengers.
PAL invokes the defense of force majeure or casofortuito.
Issue: WHETHER OR NOT THE HIJACKING OR AIR PIRACY DURING MARTIAL LAW
AND UNDER THE CIRCUMSTANCES OBTAINING IN THIS CASE A CASO FORTUITO OR
FORCE MAJEURE
RULING:
TC- the trial court dismissed the case finding that all damages sustained in the
premises were attributed to force majeure
CA- concluded that the accident that befell RP-C1161 was caused by fortuitous
event, force majeure and other causes beyond the control of the respondent
Airline.
SC- In order to constitute a casofortuito or force majeure that would exempt a
person from liability under Article 1174 of the Civil Code, it is necessary that the
following elements must concur: (a) the cause of the breach of the obligation must
be independent of the human will (the will of the debtor or the obligor); (b) the
event must be either unforeseeable or unavoidable; (c) the event must be such as
to render it impossible for the debtor to fulfill his obligation in a normal manner;
and (d) the debtor must be free from any participation in, or aggravation of the
injury to the creditor. Casofortuito or force majeure, by definition, are
extraordinary events not foreseeable or avoidable, events that could not be
foreseen, or which, though foreseen, are inevitable. It is, therefore, not enough that
the event should not have been foreseen or anticipated, as is commonly believed,
but it must be one impossible to foresee or to avoid. The mere difficulty to foresee
the happening is not impossibility to foresee the same.
Applying the above guidelines to the case at bar, the failure to transport petitioners
safely from Davao to Manila was due to the skyjacking incident staged by six (6)
passengers of the same plane, all members of the Moro National Liberation Front
(MNLF), without any connection with private respondent, hence, independent of
the will of either the PAL or of its passengers.
Under normal circumstances, PAL might have foreseen the skyjacking incident
which could have been avoided had there been a more thorough frisking of
passengers and inspection of baggages as authorized by R.A. No. 6235. But the
incident in question occurred during Martial Law where there was a military take-
over of airport security including the frisking of passengers and the inspection of
their luggage preparatory to boarding domestic and international flights. In fact
military take-over was specifically announced on October 20, 1973 by General Jose
L. Rancudo, Commanding General of the Philippine Air Force in a letter to Brig. Gen.
Jesus Singson, then Director of the Civil Aeronautics Administration later confirmed
shortly before the hijacking incident of May 21, 1976 by Letter of Instruction No.
399 issued on April 28, 1976
Otherwise stated, these events rendered it impossible for PAL to perform its
obligations in a nominal manner and obviously it cannot be faulted with negligence
in the performance of duty taken over by the Armed Forces of the Philippines to the
exclusion of the former.
Finally, there is no dispute that the fourth element has also been satisfied.
Consequently the existence of force majeure has been established exempting
respondent PAL from the payment of damages to its passengers who suffered
death or injuries in their persons and for loss of their baggages. #ESGUERRA
d. Mechanical Defects
CASE TITLE: Necesito v. Paras
Key words: manufacturing defect
Ponente: Reyes, J.B.L., J.
FACTS: SeverinaGarces and her one-year old son PrecillanoNecesito boarded a
passenger truck of the Philippine Rabbit Bus Lines (PBRL) at Agno, Pangasinan. The
passenger truck, driven by Francisco Bandonell then proceeded on its regular run
from Agno to Manila.
After passing Mangatarem, Pangasinan the truck entered a wooden bridge, but the
front wheels swerved to the right; the driver lost control, and after wrecking the
bridge's wooden rails, the truck fell on its right side into a creek where water was
breast deep. SeverinaGarces, was drowned while PrecillanoNecesito, was injured.
Consequently, two actions for damages and attorney's fees were filed by Necesito
and the heirs of other passengers in the Court of First Instance of Tarlac against the
carrier.
The trial court found that the incident was an accident/fortuitous event caused by
Page 50 of 151
the fracture of the bus' steering knuckle due to a manufacturing defect, in that, its
center or core was not compact but "bubbled and cellulous" contrary to regular
standards.
In view of such finding, the trial court dismissed both actions, ruling that the carrier
exercised extraordinary diligence when it conducted regular 30 day visual
inspections of the steering knuckle despite the fact that it could not have
discovered the manufacturing defect through such inspection because the steering
knuckle had a thick steel exterior.
The complainants directly appealed to the Supreme Court.
ISSUE:
Whether or not the carrier is liable for the manufacturing defect of the steering
knuckle.
RULING: YES.
The rule on the liability of carriers for defects of equipment is thus expressed:
"A passenger is entitled to recover damages from a carrier for an injury resulting
from a defect in an appliance purchased from a manufacturer, whenever it appears
that the defect would have been discovered by the carrier if it had exercised the
degree of care which under the circumstances was incumbent upon it, with regard
to inspection and application of the necessary tests.
For the purposes of this doctrine, the manufacturer is considered as being in law
the agent or servant of the carrier, as far as regards the work of constructing the
appliance.
According to this theory, the good repute of the manufacturer will not relieve the
carrier from liability."
The rationale of the carrier's liability is the fact that the passenger has neither
choice nor control over the carrier in the selection and use of the equipment and
appliances in use by the carrier. Having no privity whatever with the manufacturer
or vendor of the defective equipment, the passenger has no remedy against him,
while the carrier usually has.
It is but logical, therefore, that the carrier, while not in insurer of the safety of his
passengers, should nevertheless be held to answer for the flaws of his equipment if
such flaws were at all discoverable.
The carrier has the duty to provide itself with suitable and safe cars and vehicles in
which to carry the traveling public. When the carrier elects to have another
(manufacturer) build its cars, it ought not to be absolved from its duty to the public
to furnish safe cars. Verily, the carrier cannot lessen its responsibility by shifting its
undertaking to another's shoulders.
In such case, the manufacturer should be deemed the agent of the carrier as
respects its duty to select the material out of which its cars and locomotive are
built, as well as, in inspecting each step of their construction. If there be tests
known to the crafts of car builders, or iron moulders, by which defects might be
discovered before a part is incorporated into a car, then the failure of the
manufacturer to make the test will be deemed a failure by the carrier to make it.
Here, the only test applied to the steering knuckle in question was a purely visual
inspection every thirty days, to see if any cracks developed.
It nowhere appears that either the manufacturer or the carrier at any time tested
the steering knuckle to ascertain whether its strength was up to standard, or that it
had no hidden flaws would impair that strength.
Given the critical importance of the knuckle's resistance, in that, its failure or
breakage would result in loss of balance and steering control of the bus, the mere
periodical visual inspection of the steering knuckle as practiced by the carrier's
agents did not measure up to the required legal standard of "utmost diligence of
very cautious persons as far as human care and foresight can provide", and
therefore that the knuckle's failure can not be considered a fortuitous event that
exempts the carrier from responsibility, especially since it has not been shown that
the weakening of the knuckle was impossible to detect by any known test; on the
contrary, there is testimony that it could be detected.
It may be impracticable to require of carriers to test the strength of each and every
part of its vehicles before each trip; but a due regard for the carrier's obligations
toward the traveling public demands adequate periodical tests to determine the
condition and strength of those vehicle portions the failure of which may endanger
the safe of the passengers. #FALLER
ii. Order of Public Authority
Page 51 of 151
CASE TITLE: GANZON V CA
KEYWORD: Batman
PONENTE: Sarmiento, J.
DOCTRINE: Before a common carrier could be absolved from responsibility on the
ground that he was ordered by competent public authority, it must be shown that
same public authority had the power to issue the disputed order, or that it was
lawful, or that it was issued under legal process of authority.
FACTS:
GelacioTumambing contracted the services of Mauro B. Ganzon to haul 305 tons of
scrap iron from Mariveles, Bataan, to the port of Manila on board the lighter LCT
"Batman". Mauro B. Ganzon sent his lighter "Batman" to Mariveles where it docked
in three feet of water. GelacioTumambing delivered the scrap iron to defendant
FilomenoNiza, captain of the lighter, for loading which was actually begun on the
same date by the crew of the lighter under the captain's supervision. When about
half of the scrap iron was already loaded, Mayor Jose Advincula of Mariveles,
Bataan, arrived and demanded P5,000.00 from GelacioTumambing. The latter
resisted the shakedown and after a heated argument between them, Mayor Jose
Advincula drew his gun and fired at GelacioTumambing. The gunshot was not fatal
but Tumambing had to be taken to a hospital in Balanga, Bataan, for treatment.
After sometime, the loading of the scrap iron was resumed. But on December 4,
1956, Acting Mayor Basilio Rub, accompanied by three policemen, ordered captain
FilomenoNiza and his crew to dump the scrap iron where the lighter was docked.
The rest was brought to the compound of NASSCO. Later on Acting Mayor Rub
issued a receipt stating that the Municipality of Mariveles had taken custody of the
scrap iron
ISSUE:
WON petitioner is exempt from any liability because the loss of the scraps was due
mainly to the intervention of the municipal officials of Mariveles which constitutes a
casofortuito as defined in Article 1174 of the Civil Code
RULING:
TRIAL COURT:
Mauro Ganzon is not guilty
APPELLATE COURT:
Mauro Ganzon was ordered to pay plaintiff-appellant Gelacio E. Tumambing actual
damages, exemplary damages, and attorney's fees.
SUPREME COURT:
We cannot sustain the theory of casofortuito.Ganzon should pay Tumambing.
Before the appellee Ganzon could be absolved from responsibility on the ground
that he was ordered by competent public authority to unload the scrap iron, it must
be shown that Acting Mayor Basilio Rub had the power to issue the disputed order,
or that it was lawful, or that it was issued under legal process of authority. The
appellee failed to establish this. Indeed, no authority or power of the acting mayor
to issue such an order was given in evidence. Neither has it been shown that the
cargo of scrap iron belonged to the Municipality of Mariveles. The order given by
the acting mayor to dump the scrap iron into the sea was part of the pressure
applied by Mayor Jose Advincula to shakedown the appellant for P5,000.00. The
order of the acting mayor did not constitute valid authority for appellee Mauro
Ganzon and his representatives to carry out.
The petitioner was not duty bound to obey the illegal order to dump into the sea
the scrap iron. Moreover, there is absence of sufficient proof that the issuance of
the same order was attended with such force or intimidation as to completely
overpower the will of the petitioner's employees. The mere difficulty in the
fullfilment of the obligation is not considered force majeure. We agree with the
private respondent that the scraps could have been properly unloaded at the shore
or at the NASSCO compound, so that after the dispute with the local officials
concerned was settled, the scraps could then be delivered in accordance with the
contract of carriage. #FLORANDA
iii. Defenses in Carriage of Passenger
a. Employees
CASE TITLE: Maranan vs. Perez (ANTONIA MARANAN vs. PASCUAL PEREZ)
KEYWORD: Sinaksak mo ako? sasaksakin din kita ( Taxi Driver stabbed and killed his
Passenger)
PONENTE: BENGZON, J.P., J.:
DOCTRINE: Common Carriers; Liability for intentional assaults committed by its
employees on passengers; Difference between old and New Civil Code provisions.—
Unlike the old Civil Code, the New Civil Code expressly makes the common carrier
Page 52 of 151
liable for intentional assaults committed by its employees upon its passengers (Art.
1759).
Carrier is liable to the heir of a passenger killed by its driver
SHORT FACTS: Rogelio Corachea, on October 18, 1960, was a passenger in a taxicab
owned and operated by Pascual Perez when he was stabbed and killed by the
driver, Simeon Valenzuela. Valenzuela was prosecuted for homicide in the Court of
First Instance of Batangas. Found guilty, he was sentenced to suffer imprisonment
and to indemnify the heirs of the deceased in the sum of P6,000. Appeal f rom said
conviction was taken to the Court of Appeals. On December 6, 1961, while appeal
was pending in the Court of Appeals, Antonia Maranan, Rogelio's mother, filed an
action in the Court of First Instance of Batangas to recover damages from Perez and
Valenzuela for the death of her son. Defendants asserted
that the deceased was killed in self-defense, since he first assaulted the driver by
stabbing him from behind. Defendant Perez further claimed that the death was a
caso fortuito for which the carrier was not liable.
ISSUE: Whether or not the common carrier is liable for the acts of his employee
PETITIONER’S  CONTENTION:  
Simeon Valenzuela, the driver, as well as Pascual Perez, the common
carrier are both liable for damages against the death of Rogelio Corachea.
RESPONDENT’S  CONTENTION:  
Defendant-appellant relies solely on the ruling enunciated in Gillaco v.
Manila Railroad Co., 97 Phil. 884, that the carrier is under no absolute liability for
assaults of its employees upon the passengers.
RULING:
1. TRIAL COURT:
The court a quo, after trial, found for the plaintiff and awarded
her P3,000 as damages against defendant Perez. The claim against
defendant Valenzuela was dismissed.
2. APPELLATE COURT
Court of Appeals affirmed the judgment of Conviction against
Valenzuela in the criminal case for homicide.
3. SUPREME COURT
 A common carrier is liable for the acts of his employee . In this case, the
killing was perpetrated by the driver of the very cab transporting the passenger, in
whose hands the carrier had entrusted the duty of executing the contract of
carriage.
In the Gillaco case, the crime of killing Gillaco took place when the guard
Devesa had no duties to discharge in connection with the transportation of the
deceased from Calamba to Manila. Moreover, the Gillaco case was decided under
the provisions of the Civil Code of 1889 which, unlike the present Civil Code, did not
impose upon common carriers absolute liability for the safety of passengers against
willful assaults or negligent acts committed by their employees.
Unlike the old Civil Code, the new Civil Code of the Philippines expressly
makes the common carrier liable for intentional assaults committed by its
employees upon its passengers, by the wording of Art. 1759 which categorically
states that:
"Common carriers are liable for the death of or injuries to passengers through the
negligence or willful 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."
The Civil Code provisions on the subject of Common Carriersare new and
were taken from Anglo-American Law.There, the basis of the carrier's liability for
assaults on passengers committed by its drivers rests either on (1) the doctrine of
respondeat superior or (2) the principle that it is the carrier's implied duty to
transport the passenger safely.
Under the first, which is the minority view, the carrier is liable only when
the act of the employee is within the scope of his authority and duty. It is not
sufficient that the act be within the course of employment only.
Under the second view, upheld by the majority and also by the later cases,
it is enough that the assault happens within the course of the employee's duty. It is
no defense for the carrier that the act was done in excess of authority or in
disobedience of the carrier's orders.The carrier's liability here is absolute in the
sense that it practically secures the passengers from assaults committed by its own
employees.
As can be gleaned from Art. 1759, the Civil Code of the Philippines
evidently follows the rule based on the second view. At least three very cogent
Page 53 of 151
reasons underlie this rule. As explained in Texas Midland R.R. v, Monroe, 110 Tex.
97, 216 S.W. 388, 389- 390, and Haver v. Central Railroad Co,, 43 LRA 84, 85:
(1) the special undertaking of the carrier' requires that it furnish its passenger that
full measure of protection afforded by the exercise of the high degree of care
prescribed by the law, inter alia from violence and insults at the hands of strangers
and other passengers, but above all, from the acts of the carrier's own servants
charged with the passenger's safety;
(2) said liability of the carrier for the servant's violation of duty to passengers, is the
result of the former's confiding in the servant's hands the performance of his
contract to safely transport the passenger, delegating therewith the duty of
protecting the passenger with the utmost care prescribed by law; and
(3) as between the carrier and the passenger, the former must bear the risk of
wrongful acts or negligence of the carrier's employees against passengers, since it,
and not the passengers, has power to select and remove them. #GUETA
CASE TITLE:GILLACO vs. MANILA RAILROAD COMPANY
KEYWORDS: Paco Station; PG since Japanese occupation
TOPIC: Defenses in Carriage of Passengers
PONENTE: REYES, J. B. L., J.:
DOCTRINE:
"CASO FORTUITO" RELIEVES CARRIER OF LIABILITY FOR BREACH OF
TRANSPORTATION CONTRACT.—In the present case, the act of the train guard of
the Manila Railroad Company in shooting the passenger (because of a personal
grudge nurtured against the latter since the Japanese occupation) was entirely
unforseeable by the Manila Railroad Co. The latter had no means to ascertain or
anticipate that the two would meet, nor could it reasonably foresee every personal
rancor that might exist between each one of its many employees and any one of
the thousands of eventual passengers riding in its trains. The shooting in question
was therefore "casofortuito" within the definition of Art. 1105 of the old Civil Code
(which is the law applicable), being both unforeseeable and inevitable under the
given circumstances; and pursuant to established doctrine, the resulting breach of
the company's contract of safe carriage with the deceased was excused thereby.
FACTS:
APPEAL from judgment of CFI of Laguna
 At about 7:30 in the morning of April 1, 1946 - Lieut. Tomas Gillaco
(husband of petitioner) was a passenger in the train of Manila Railroad
Company (MRC) from CALAMBA, LAGUNA to MANILA.
When the train reached the PACO railroad station, Emilio Devesa, a train
guard of the MRC assigned in Manila-San Fernando, La Union Line,
happened to be in the said station waiting for the same train, which would
take him to Tutuban Station, where he was going to report for duty and to
start at 9:00am.
Devesa, upon seeing Gillaco inside the train coach, shot him with the
carbine furnished to him by the MRC for his use as such train guard.
(because Devesa had a long standing personal grudge against Gillaco back
during the Japanese occupation); Gillaco died as a result of the wound
PETITIONER’S  CONTENTION:
MRC is liable; based on American jurisprudence, carriers are insurers of the safety
of their passengers against willful assault and intentional ill-treatment on the part
of their servants, it being immaterial that the act should be one of private
retribution on the part of the servant, impelled by personal malice toward the
passenger.
RESPONDENT’S  CONTENTIONS:
No liability attaches to it as employer of the killer, Emilio Devesa; it is not
responsible subsidiary ex delicto, under Art. 103 of the Revised Penal Code, because
the crime was not committed while the slayer was in the actual performance of his
ordinary duties and service; nor is it responsible ex contractu, since the complaint
did not aver sufficient facts to establish such liability, and no negligence on MRC’s   b. Other Passengers and Third Persons
part was shown.
ISSUE: W/N Manila Railroad Company is liable
TRIAL COURT OF LAGUNA: MRC liable as employer of Devesa, sentenced to pay P 4,
000 to the widow and children of Tomas Gillaco.
SUPREME COURT: MRC is NOT LIABLE
There can be no quarrel with the principle that a passenger is entitled to
protection from personal violence by the carrier or its agents or employees, since
the contract of transportation obligates the carrier to transport a passenger safely
to his destination. But under the law of the case, this responsibility extends only to
those that the carrier could foresee or avoid through the exercise of the degree of
care and diligence required of it.
Page 54 of 151
The act of guard Devesa in shooting passenger Gillaco was entirely
unforeseeable by the MRC. The latter had no means to ascertain or anticipate that
the two would meet, nor could it reasonably foresee every personal rancor that
might exist between each one of its many employees and any one of the thousands
of eventual passengers riding in its trains. The shooting in question was therefore
"casofortuito" within the definition of article 1105 of the old Civil Code, being
both unforeseeable and inevitable under the given circumstances; and pursuant to
established doctrine, the resulting breach of appellant's contract of safe carriage
with the late Tomas Gillaco was excused thereby.
When the crime took place, the guard Devesa had no duties to discharge in
connection with the transportation of the deceased from Calamba to Manila. The
stipulation of facts is clear that when Devesa shot and killed Gillaco, Devesa was
assigned to guard the Manila San Fernando trains, and he was at Paco Station
awaiting transportation to Tutuban, the starting point of the train that he was
engaged to guard. In fact, his tour of duty was to start at 9:00 a.m., two hours after
the commission of the crime. Devesa was therefore under no obligation to
safeguard the passengers of the Calamba-Manila train, where the deceased was
riding; and the killing of Gillaco was not done in line of duty. The position of
Devesa at the time was that of another would be passenger, a stranger also
awaiting transportation, and not that of an employee assigned to discharge any of
the duties that the Railroad had assumed by its contract with the deceased. As a
result, Devesa's assault cannot be deemed in law a breach of Gillaco's contract of
transportation by a servant or employee of the carrier. #LEANO
CASE TITLE : BACHELOR EXPRESS, INCORPORATED, and CRESENCIO RIVERA
(vs) THE HONORABLE COURT OF APPEALS (Sixth Division), et. al.
KEYWORD : Bus Stampede (due to stabbing of a passenger)\
PONENTE : Gutierrez, Jr., J.
DOCTRINE : While petitioners "are not insurers of their passengers", it
deserves no merit in view of the failure of the petitioners to prove that the deaths
of the two passengers were exclusively due to force majeure and not to the failure
of the petitioners to observe extraordinary diligence in transporting safely the
passengers to their destinations as warranted by law.
SHORT FACTS:
 Bus No. 800 (owned by Bachelor Express, Inc. and driven by Cresencio
Rivera) came from Davao City on its way to Cagayan de Oro City passing Butuan City
picked up a passenger while at Tabon-Tabon, Butuan City. Fifteen minutes later, a
passenger at the rear portion suddenly stabbed a PC soldier which caused
commotion and panic among the passengers. Some passengers jumped from the
window and when the bus stopped, passengers OrnominioBeter and
NarcisaRautraut were found lying down the road, the former already dead as a
result of head injuries and the latter also suffering from severe injuries which
caused her death later. The passenger assailant alighted from the bus and ran
toward the bushes but was killed by the police.
Private respondents, parents of deceased OrnominioBeter and NarcisaRautraut,
filed a complaint for "sum of money" against Bachelor Express, Inc. its alleged
owner Samson Yasay and the driver Rivera.
ISSUE: Whether or not the petitioner's common carrier observed extraordinary
diligence to safeguard the lives of its passengers.
PETITIONER’S  CONTENTION:   for under the Land Transportation and Traffic Code.
Petitioners denied liability for the death of OrnominioBeter and NarcisaRautraut
alleging that:
1. the driver was able to transport his passengers safely to their respective places
of destination except OrnominioBeter and NarcisaRautraut who jumped off the
bus without the knowledge and consent, much less, the fault of the driver and
conductor and the defendants in this case;
2. the defendant corporation had exercised due diligence in the choice of its
employees to avoid as much as possible accidents;
3. the incident was very much beyond the control of the defendants;
4. defendants were not parties to the incident complained of as it was an act of a
third party who is not in any way connected with the defendants and of which
the latter have no control and supervision; and
5. they are not insurers of their passengers as ruled by the trial court and the
driver of the bus, before, during and after the incident was driving cautiously
giving due regard to traffic rules, laws and regulations.
RULING:
4. TRIAL COURT – dismissed the complaint
The evidence on record does not show that defendants' personnel were
negligent in their duties. The defendants' personnel have every right to accept
passengers absent any manifestation of violence or drunkenness. If and when such
Page 55 of 151
passengers harm other passengers without the knowledge of the transportation
company's personnel, the latter should not be faulted.
5. APPELLATE COURT – trial court decision is reversed and set aside
The bus driver did not immediately stop the bus at the height of the
commotion; the bus was speeding from a full stop; the victims fell from the bus
door when it was opened or gave way while the bus was still running; the conductor
panicked and blew his whistle after people had already fallen off the bus; and the
bus was not properly equipped with doors in accordance with law.
The negligence of the common carrier, through its employees, consisted of the
lack of extraordinary diligence required of common carriers, in exercising vigilance
and utmost care of the safety of its passengers, exemplified by the driver's belated
stop and the reckless opening of the doors of the bus while the same was travelling
at an appreciably fast speed. The common carrier itself acknowledged, through its
administrative officer, that the bus was commissioned to travel and take on
passengers and the public at large, while equipped with only a solitary door for a
bus its size and loading capacity, in contravention of rules and regulations provided
6. SUPREME COURT – petition for review is dismissed and the CA decision is
affirmed
a. Considering the factual findings of the Court of Appeals it is clear that the
petitioners have failed to overcome the presumption of fault and negligence
found in the law governing common carriers.
b. The petitioners' argument that the petitioners "are not insurers of their
passengers" deserves no merit in view of the failure of the petitioners to prove
that the deaths of the two passengers were exclusively due to force majeure
and not to the failure of the petitioners to observe extraordinary diligence in
transporting safely the passengers to their destinations as warranted by law.
c. The amount of damages awarded to the heirs of Beter and Rautraut by the
appellate court is in harmony with Art. 1764 in conjunction with Art. 2206 of
the Civil Code and supported by the evidence: OrnominioBeter was 32 years of
age at the time of his death, single, in good health and rendering support and
service to his mother while NarcisaRautraut was 23 years of age, in good health
and without visible means of support.
#LUALHATIMARQUEZ

CASE TITLE: Jose Pilapilvs CA and Alatco Transportation Company
Keywords: Stone throwing
Ponente: Justice Padilla
Doctrine: While the law requires the highest degree of diligence from common
carriers in the safe transport of their passengers and creates a presumption of
negligence against them, it does not, however, make the carrier an insurer of the
absolute safety of its passengers.
Facts:
Petitioner  Pilapil,  while  on  board  respondent’s  bus  was  hit  above  his  eye  by  a  stone   the same provision, it is to be noted that when the violation of the contract is due
hurled  by  an  unidentified  bystander.  Respondent’s  personnel  lost  no  time  in   to the willful acts of strangers, as in the instant case, the degree of care essential to
bringing him to a hospital,  but  eventually  petitioner  partially  lost  his  left  eye’s  vision   be exercised by the common carrier for the protection of its passenger is only that
and sustained a permanent scar. Thus, Petitioner lodged an action for recovery of
damages before the Court of First Instance of Camarines Sur which the latter
granted. On appeal, the Court of Appeals reversed said decision.
Issue: Whether or not common carriers assume risks to passengers such as the
stoning in this case?
Petitioner’s  Contention:  Petitioner  argues  that  the  nature  of  the  business  of  a  
transportation company requires the assumption of certain risks, and the stoning of
the bus by a stranger resulting in injury to petitioner-passenger is one such risk
from which the common carrier may not exempt itself from liability.
Ruling:
Trial Court: The Trial Court ruled in favor of plaintiff Jose Pilapil and ordered the bus
company to pay actual, moral and exemplary damages plus medical expenses and
attorney’s  fees,  with  costs.
Court  of  Appeals:  Reversed  and  set  aside  the  trial  court’s  ruling.
Supreme Court: The court affirmed the appellate  court’s  decision.
In consideration of the right granted to it by the public to engage in the business of
transporting passengers and goods, a common carrier does not give its consent to
become an insurer of any and all risks to passengers and goods. It merely
undertakes to perform certain duties to the public as the law imposes, and holds
Page 56 of 151
itself liable for any breach thereof. While the law requires the highest degree of
diligence from common carriers in the safe transport of their passengers and
creates a presumption of negligence against them, it does not, however, make the
carrier an insurer of the absolute safety of its passengers.
Under Article 1763. A common carrier is responsible for injuries suffered by a
passenger on account of the wilful acts or negligence of other passengers or of
strangers, if the common carrier's employees through the exercise of the diligence
of a good father of a family could have prevented or stopped the act or omission.
Clearly under the above provision, a tort committed by a stranger which causes
injury to a passenger does not accord the latter a cause of action against the carrier.
The negligence for which a common carrier is held responsible is the negligent
omission by the carrier's employees to prevent the tort from being committed
when the same could have been foreseen and prevented by them. Further, under
of a good father of a family.#  Luzadio    
Case title: Fortune Express v. Court of Appeals
Keyword/s: Maranaos
Ponente: Justice Mendoza
Doctrine:Art. 1763 of the Civil Code provides that a common carrier is responsible
for injuries suffered by a passenger on account of the wilful acts of other
passengers, if the employees of the common carrier could have prevented the act
the exercise of the diligence of a good father of a family. In the present case, it is
clear  that  because  of  the  negligence  of  petitioner’s  employees,  the  seizure  of  the  
bus by Mananggolo and his men was made possible
Facts:
One of the buses of Fortune Express, Inc. collided with a jeepney owned by a
Maranao which resulted in the death of several passengers of the jeepney including
two Maranos. In relation thereto, the Philippine Constabulary of Cagayan de Oro
warned the petitioner through its operations manager Diosdado Bravo that
Maranos were planning to take revenge on the petitioner by burning some of its
buses. Bravo assured them the necessary precautions to ensure the safety of the
lives and properties of the passengers.
On November 22, 1989 three armed Maranos who pretended to be passengers,
seized and burned the bus of the petitioner at Linamon, Lanao del norte while on its
way to Iligan City which resulted in the death of one of its passengers, Atty.
Caorong. Thus the heirs of Atty. Caorong filed a complaint for damages for breach of
contract of carriage against the petitioner.
Issue: 1. Whether or not petitioner breached the contract of carriage by its failure to
exercise the required degree of diligence.
2. whether or not the acts of the Maranos should be regarded as a case of
force majeure.
RULING:
TC: ruled against petitioner
CA: Affirmed  the  Trial  court’s  ruling.  Hence,  petition  for  review  by  certiorari
SC: 1. Yes. It is because of the negligence of  the  petitioner’s  employees  that  the   returned to their seats as well. After a few minutes, they moved back to the rear
seizure of the bus by the Maranos was made possible. Despite the warning of the
Philippine Constabulary that the Maranos were planning to take revenge on the
petitioner by burning some of its buses and the assurance of  the  petitioner’s   it was a holdup and they divested the passengers of their belongings. Norberto
operations manager, Bravo, that the necessary precautions would be taken,
petitioner did nothing to protect the safety of its passengers. Had the petitioner and
its employees been vigilant, they would not have failed to see that the malefactors
had a large quantity of gasoline with them. Under the circumstances, simple
precautionary measures to protect the safety of the passengers, such as frisking
passengers and inspecting their baggage, preferably with non-intrusive gadgets
such as metal detectors, before allowing them on board could have been employed
without  violating  the  passenger’s  constitutional  rights.
2. No. in the present case, unforeseeability (the second
requisite for an event to be considered force majeure) is lacking.
As already stated, despite the report of the PC agent that the
Maranos were planning some of its busses and the assurance of
petitioners operation manager be taken, nothing was really done
by the petitioner. #MACALINO
iv.  Passenger’s  Baggages
CASE TITLE: Norberto Quisumbing, Sr. vs CA
Page 57 of 151
KEYWORD: Holdup/Plane
PONENTE: Narvasa, J.
DOCTRINE:Failure to take certain steps that a passenger in hindsight believes
should have been taken is not the negligence or misconduct which mingles with
force majeure as an active and cooperative cause
FACTS: Norberto Quisimbing, Sr. and Senior NBI Agent Florencio Villarin were
passengers  of  PAL’s  Fokker  Friendship  PIC-536 plane from Mactan city to Manila.
After  the  take  off,  Villarin  noticed  certain  “Zaldy,”  a  suspect  in  the  killing  of Judge
Valdez seated at the front near the door leading the cockpit of the plane. When
Villarin checked with the flight stewardess the ticket of Zaldy, it was revealed that
he  used  the  name  “Cardente”  and  had  three  companions  on  board.  Villarin  wrote  a  
note addressed to the Capt. Bonnevie, the pilot of the plane, requesting the latter
to contact NBI agents in Manila to meet the plane because Zaldy was on board. This
was handed to the stewardess who in turn gave the same to the pilot. However, the
pilot came out of the cockpit and sat beside Villarin explaining that he could not
send the message because it would be heard by all ground aircraft stations. When
they were talking, Zaldy and one of his companions walked near them and stood
behind them. Capt. Bonnevie returned to the cockpit and Zaldy and his companion
throwing ugly looks at Villarin who in turn stood up and went back to his original
seat. Soon thereafter, Villarin and Zaldy exchanged gunshots. Zaldy announced that
Quisumbing, Sr. was divested of jewelries and cash in the total amount of
P18,650.00 and suffered shock because a gun had been pointed at him by one of
the holduppers. Upon landing, Zaldy and his companions escaped.
PETITIONER’S  CONTENTION: Quisumbing contended that PAL indemnify them on
their  aforesaid  loss  because  such  is  a  result  of  breach  of  PAL’s  contractual  obligation  
to carry them and their belongings and effects to their Manila destination without
loss  or  damage  and  constitutes  a  serious  dereliction  of  PAL’s  legal  duty  to  exercise  
extraordinary diligence in the vigilance over the same.
RESPONDENT’S  CONTENTION: PAL alleged that the robbery constitutes force
majeure and neither of the plaintiffs had notified PAL or its crew or employees that
they were in possession of cash, German marks and valuable jewelries and watches
or surrendered said items to the crew or personnel on board the aircraft.
ISSUE: Whether or not PAL is liable.
RULING CFI: DISMISSED. Since the plaintiffs did not notify defendant or its
employees that they were in possession of the cash, jewelries and wallet they are
now claiming, Article 1998 of the Civil Code denies them any recourse against PAL.
CA:  AFFIRMED  CFI’s  judgment.  It  ruled  that  highjacking-robbery was force majeure.
SC: PETITION DENIED. The SC upheld the correctness of the essential conclusion of
both the trial and appellate courts that the evidence does indeed fail to prove any
want of diligence on the part of PAL, more specifically, it had failed to comply with
applicable regulations or universally accepted and observed procedures to preclude
hijacking; and that the particular acts singled out by the petitioners as supposedly
demonstrative of negligence were, in the light of the circumstances of the case, not
in truth negligent acts "sufficient to overcome the force majeure nature of the
armed robbery." It quite agrees, too, with the Appellate Tribunal's wry observation
that PAL's "failure to take certain steps that a passenger in hindsight believes should
have been taken is not the negligence or misconduct which mingles with force
majeure as an active and cooperative cause." #MAGALIT
CASE TITLE: Pan Am vsRapadas
KEYWORD: Lost Baggage
PONENTE: Justice Gutierrez, Jr.
DOCTRINE: The reason behind the limitation of liability for arise from the difficulty,
if not the impossibility, of establishing with clear preponderance of evidence of
evidence the contents of a lost suitcase. The limitation is binding on the passenger
who fails to declare a higher value and failed to exercise proper prudence.
FACTS:
On January 16, 1975, Jose Rapadas was boarding a flight of Pan American
World Airways, Inc. from Guam to Manila. However, Rapadas was ordered by a
handcarry control agent to check in his Samsonite attaché case. Respondent
protested and went to the back of another line in an attempt to get through
without registering his attaché case; but he was stopped by the same handcarry
agent. This caused the respondent to check the baggage in in fear of missing his
flight. When he got to Manila, all his baggage except the Samsonite attaché case
was claimed causing a request to search for the lost luggage made through his son
Jorge as Jose was not feeling well.
On January 30, 1975, a Baggage claim was filled by the respondent as the
request of petitioner. Several demands followed but the attaché case was no longer
found. Respondent thereafter received a letter from the petitioner offering to settle
the  claim  for  $160  representing  the  petitioner’s  limit  of  liability  under  the  contract   ratified or adhered to the Convention or has not effectively renounced) or within
of carriage. Rapadas refused causing judicial action for damages for neglect in
handling and safekeeping of his attaché case and claims its contents at $42, 403.90.
Petitioner  answered  that  their  liability  was  subject  to  the  “Notice  of  Baggage   vigilant insofar as his luggage is concerned. It must be stressed that the respondent
Liability  Limitations”  found  part  of  the  passenger  ticket.
Issue:
Page 58 of 151
Whether or not a passenger is bound by the terms of a passenger ticket
declaring the limitations of liability set for the in the Warsaw Convention.
Petitioner’s  Contention:
- liability of for the lost baggage was limited to $160 because the
respondent failed to declare a higher value and did not pay the corresponding
additional charges
Respondent’s  Contention:
- insists that he is entitled to his claimed value of the baggage lost
(consisting of money, contracts and records of employment, letters of
commendation, testimonials and newspaper clippings of his achievements for his
13 years in  New  Zealand  and  Australia,  manuscripts,  photographs,  driver’s  license,  a  
polaroid camera and films, calculators, memorabilia and autographs of Charles
Lindberg, Lawrence Rockefeller, and Ryoichi Sasakawa, among other things)
Ruling:
Trial Court: Ruled in favor of Rapadas but scruitinized his claimed valuation.
Court of Appeals: Affirmed
Supreme Court:
The court finds sufficient grounds to apply the limitation of liabilities under
the Warsaw Convention. There was sufficient notice found on the airline ticket
stating that the said convention governs cases of death or injury to passengers, or
loss  or  damage  to  passenger’s  luggage.  Under  the  notice  of  baggage  limitation,  
checked baggage is valued at approximately $8.16 per pound ($18 per kilo; not $20
per kilo. The Warsaw Convention specifically provide its applicability over
international carriage which is defined as any carriage in which, according to the
agreement between the parties, the place of departure and the place of
destination, whether or not there be a breach in the carriage or transshipment, are
situated either within the territories of two High Contracting Parties (a State that
the territory of a single High Contracting Party if there is an agreed stopping place
within the territory of another State. Furthermore, a passenger is expected to be
refused to abide by the orders of the handcarry agent of the petitioner and instead
insisted on carrying his attaché case with him. The court must emphasize that
prudence of a reasonably careful person dictates that cash and jewelry should be
removed from the check-in-luggage. The wisdom behind the limitation of the lack of knowledge thereof or assent thereto. This doctrine is recognized in this
liability is due to the difficulty, if not impossibility of establishing a clear jurisdiction. The inescapable conclusion that BA had waived the defense of limited
preponderance of evidence the contents of a lost suitcase. liability when it allowed Mahtani to testify as to the actual damages he incurred due
However, the court decided to fix the liability at $400 which is the amount to misplacement of his luggage, without any objection. It is a well-settled doctrine
allowed per passenger for unchecked luggage. Since respondent was rushed and that where the proponent offers evidence deemed by counsel of the adverse party
forced to check-in his luggage, its status as an unchecked luggage continues. to be inadmissible for any reason, the latter has the right to object. However, such
#MANALANG right is a mere privilege which can be waived. Necessarily, the objection must be
made at the earliest opportunity, in case of silence when there is opportunity to
CASE TITLE: British Airways vs. Court of Appeals speak may operate as a waiver of objections. #MANRIQUE
KEYWORD: luggage
PONENTE: ROMERO, J.: CASE TITLE: PRISCILLA L. TAN vs. NORTHWEST AIRLINES, INC.,
DOCTRINE: American jurisprudence provides that an air carrier is not liable for the KEYWORD: failure to deliver luggage on time / missing baggage
loss of baggage in an amount in excess of the limits specified in the tariff which was PONENTE: Pardo, J.
filed with the proper authorities, such tariff being binding on the passenger DOCTRINE: Where in breaching the contract of carriage the defendant airline is not
regardless of the passenger’s  lack  of  knowledge  thereof  or  assent  thereto.  This   shown to have acted fraudulently or in bad faith, liability for damages is limited to
doctrine is recognized in this jurisdiction. the natural and probable consequences of the breach of obligation which the
SHORT FACTS: On April 16, 1989, Mahtani is on his way to Bombay, India from parties had foreseen or could have reasonably foreseen. In that case, such liability
Manila. His trip was Manila-Hong Kong via PAL and then Hong Kong-India via British does not include moral and exemplary damages.
Airways (BA). Prior to his departure, he checked in two pieces of luggage containing FACTS: On May 31, 1994, Priscilla L. Tan and Connie Tan boarded Northwest Airlines
his clothing and other personal effects, confident that the same would be Flight 29 in Chicago, U. S. A. bound for the Philippines and arrived at the NAIA on
transferred to his BA flight. However, when he arrived in India, he discovered that June 1, 1994 at about 10:40 in the evening. Upon their arrival, petitioner and her
his luggage was missing. companion found that their baggages were missing. They returned to the airport in
PETITIONER’S  CONTENTION:  BA  asserts  that  the  award  of  compensatory  damages   the evening of the following day and they were informed that their baggages might
for  the  loss  of  Mahtani’s  two  pieces  of    luggage  was  without  basis  since  Mahtani   still be in another plane in Tokyo, Japan. On June 3, 1994, they recovered their
failed to declare a higher valuation with respect to his luggage, a condition provided baggages and discovered that some of its contents were destroyed and soiled.
for in the ticket. PETITIONER’S  CONTENTION: Claiming that they "suffered mental anguish, sleepless
RESPONDENT’S  CONTENTION: nights and great damage" because of Northwest's failure to inform them in advance
ISSUE: Whether or not in a contract of air carriage a declaration by the passenger is that their baggages would not be loaded on the same flight they boarded and
needed to recover a greater amount? because of their delayed arrival, they demanded from Northwest Airlines
RULING: compensation for the damages they suffered. Petitioner sent demand letter to
1.RTC: The trial court rendered its decision in favor of Mahtani ordering BA to pay Northwest Airlines, but the latter did not respond.
the defendant, among others, the value of the suit cases, the contents of the RESPONDENT’S  CONTENTION: Northwest Airlines did not deny that the baggages of
luggage petitioners were not loaded, interposing as defense that they could not be carried
2.  COURT  OF  APPEALS:  The  Court  of  Appeals  affirmed  the  trial  court’s  findings  in   on the same flight because of "weight and balance restrictions." However, the
toto. baggages were loaded in another flight, which arrived in the evening of June 2,
3. SUPREME COURT: Admittedly, in a contract of air carriage a declaration by the 1994. When petitioner received her baggages in damaged condition, Northwest
passenger of a higher value is needed to recover a greater amount. American offered to either (1) reimburse the cost or repair of the bags; or (2) reimburse the
jurisprudence provides that an air carrier is not liable for the loss of baggage in an cost for the purchase of new bags, upon submission of receipts. Furthermore, they
amount in excess of the limits specified in the tariff which was filed with the proper deny the presence of bad faith or malice in dealing with the missing luggage so as to
authorities,  such  tariff  being  binding  on  the  passenger  regardless  of  the  passenger’s   warrant the award of moral and exemplary damages.

Page 59 of 151
ISSUE: Whether respondent is liable for moral and exemplary damages for willful
misconduct and breach of the contract of air carriage.
RULING:
TRIAL COURT: GRANTED. The trial court found the respondent guilty of breach of
contract of carriage and willful misconduct, hence ordering Northwest to pay
actual,  moral  and  exemplary  damages,  as  well  as  attorney’s  fees  and  other  costs.   by the Court of Appeals awarding P30,000.00 for the lost items and P30,000.00 for
CA: PARTIALLY GRANTED. On appeal by Northwest, the Court of Appeals declared
that respondent was not guilty of willful misconduct in the absence of showing that
the acts complained of were impelled by an intention to violate the law, or were in
persistent disregard of one's rights. Award for moral and exemplary damages were
deleted.  Attorney’s  fees  were  equitably  reduced.     none was declared at the start of the trip.
SC: DENIED. The Supreme Court affirms the CA ruling. Respondent indeed failed to
deliver petitioner's luggages on time, however, there was no showing of malice in
such failure. Bad faith does not simply connnote bad judgment or negligence, it
imports a dishonest purpose or some moral obliquity and conscious doing of a
wrong, a breach of known duty through some motive or interest or ill-will that
partakes of the nature of fraud. In this case, due to weight and balance restrictions
(e.g. aircraft used for the flight gas input, passenger and crew load, baggage
weight, all in relation to the wind factor anticipated on the flight), as a safety
measure, respondent airline had to transport the baggages on a different flight, but
with the same expected date and time of arrival in the Philippines.
Where in breaching the contract of carriage the defendant airline is not shown to
have acted fraudulently or in bad faith, liability for damages is limited to the natural
and probable consequences of the breach of obligation which the parties had
foreseen or could have reasonably foreseen. In that case, such liability does not
include moral and exemplary damages. #MAQUILING
CASE TITLE: Sarkies Tours Phils. V. IAC
KEYWORD: DAMAGES
PONENTE: ROMERO, J
DOCTRINE: Kinds of damages to be awarded
Facts:
On August 31, 1984,  Fatima  boarded  petitioner’s  bus  from  Manila  to  Legazpi.  Her  
belongings consisting of 3 bags were kept at the baggage compartment of the bus,
but during the stopover in Daet, it was discovered that only one remained. The
others might have dropped along the way. Other passengers suggested having the
route traced, but the driver ignored it. Fatima immediately told the incident to her
mother,  who  went  to  petitioner’s  office  in  Legazpi  and  later  in  Manila.  Petitioner  
offered P1,000 for each bag, but she turned it down. Disapointed, she sought help
Page 60 of 151
from Philtranco bus drivers and radio stations. One of the bags was recovered. She
was told by petitioner that a team is looking for the lost luggage. After nine months
of fruitless waiting, respondents filed a case to recover the lost items, as well as
moral  and  exemplary  damages,  attorney’s  fees  and  expenses  of  litigation.  The  trial  
court ruled in favor of respondents, which decision was affirmed with modification
the transportation expenses, moral and exemplary damages in the amount of
P20,000.00 and P5,000.00, respectively.
PETITIONERS CONTENTIONS:
1) Fatima did not bring any piece of luggage with her, and even if she did,
2) petitioner questions the award of actual damages to respondent
RESPONDENT’S  CONTENTION:  Extraordinary  diligence  on  the  part  of  petitioner;  
Issues:
(1) Whether petitioner is liable for the loss of the luggage
(2) Whether the damages sought should be recovered
RULING:
(1) The cause of the loss in the case at bar was petitioner's negligence in not
ensuring that the doors of the baggage compartment of its bus were securely
fastened. As a result of this lack of care, almost all of the luggage was lost, to the
prejudice of the paying passengers.
(2) There is no dispute that of the three pieces of luggage of Fatima, only one was
recovered. Respondents had to shuttle between Bicol and Manila in their efforts to
be compensated for the loss. During the trial, Fatima and Marisol had to travel from
the United States just to be able to testify. Expenses were also incurred in
reconstituting their lost documents. Under these circumstances, the Court agrees
with the Court of Appeals in awarding P30,000.00 for the lost items and P30,000.00
for the transportation expenses, but disagrees with the deletion of the award of
moral and exemplary damages which, in view of the foregoing proven facts, with
negligence and bad faith on the fault of petitioner having been duly established,
should be granted to respondents in the amount of P20,000.00 and P5,000.00,
respectively. #MARIANO
B. Obligations of the Shipper, Consignee and Passenger
1. Negligence of Shipper or Passenger
i. Last Clear Chance
CASE TITLE: PHILIPPINE RABBIT BUS LINES, INC., petitioner,
vs.
THE HONORABLE INTERMEDIATE APPELLATE COURT AND CASIANO PASCUA, ET AL.,
respondents.
KEYWORD:
PONENTE: MEDIALDEA, J.
DOCTRINE:  The  principle  about  the  ‘last  clear  chance’  would  call  for  application in a
suit between the owners and drivers of the two colliding vehicles. It does not arise
where a passenger demands responsibility from the carrier to enforce its
contractual obligations. For it would be inequitable to exempt the negligent driver
of the jeepney and its owners on the ground that the other driver was likewise
guilty of negligence.
FACTS: About 11:00 o'clock in the morning on December 24, 1966, Catalina Pascua,
Caridad Pascua, AdelaidaEstomo, ErlindaMeriales, Mercedes Lorenzo, Alejandro
Morales and ZenaidaParejas boarded the jeepney owned by spouses Isidro
Mangune and GuillermaCarreon and driven by TranquilinoManalo at Dau,
Mabalacat, Pampanga bound for Carmen, Rosales, Pangasinan. Upon reaching
barrio Sinayoan, San Manuel, Tarlac, the right rear wheel of the jeepney was
detached, so it was running in an unbalanced position. Manalo stepped on the
brake, as a result of which, the jeepney which was then running on the eastern lane
(its right of way) made a U-turn, invading and eventually stopping on the western
lane of the road in such a manner that the jeepney's front faced the south (from
where it came) and its rear faced the north (towards where it was going). The
jeepney practically occupied and blocked the greater portion of the western lane,
which is the right of way of vehicles coming from the north, among which was Bus
No. 753 of petitioner Philippine Rabbit Bus Lines, Inc. (Rabbit) driven by Tomas
delos Reyes. Almost at the time when the jeepney made a sudden U-turn and
encroached on the western lane of the highway as claimed by Rabbit and delos
Reyes, or after stopping for a couple of minutes as claimed by Mangune, Carreon
and Manalo, the bus bumped from behind the right rear portion of the jeepney. As
a result of the collision, three passengers of the jeepney (Catalina Pascua,
ErlindaMeriales and AdelaidaEstomo) died while the other jeepney passengers
Page 61 of 151
sustained physical injuries.
Three complaints for recovery of damages were then filed before the CFI of
Pangasinan and spouses Mangune and Carreon, Manalo, and delos Reyes were
impleaded.
TRIAL COURT:
The Trial Court found Mangune, Carreon, and Manalo guilty of breach of contract
with their passengers and ordered them, jointly and severally, to pay damages.
COURT OF APPEALS:
On appeal, the IAC reversed the decision of the trial court. Applying primarily (1) the
doctrine of last clear chance, (2) the presumption that drivers who bump the rear of
another vehicle guilty and the cause of the accident unless contradicted by other
evidence, and (3) the substantial factor test. concluded that delos Reyes was
negligent.
ISSUE: Whether or not the IAC erred in finding delos Reyes negligent through the
application of the doctrine of last clear chance.
RULING: YES.
SUPREME COURT:
The principle  about  the  ‘last  clear  chance’  would  call  for  application  in  a  suit  
between the owners and drivers of the two colliding vehicles. It does not arise
where a passenger demands responsibility from the carrier to enforce its
contractual obligations. For it would be inequitable to exempt the negligent driver
of the jeepney and its owners on the ground that the other driver was likewise
guilty of negligence.
The trial court was therefore right in finding that Manalo and spouses Mangune and
Carreon were negligent. However, its ruling that spouses Mangune and Carreon are
jointly and severally liable with Manalo is erroneous The driver cannot be held
jointly and severally liable with the carrier in case of breach of the contract of
carriage. The rationale behind this is readily discernible. Firstly, the contract of
carriage is between the carrier and the passenger, and in the event of contractual
liability, the carrier is exclusively responsible therefore to the passenger, even if
such breach be due to the negligence of his driver. In other words, the carrier can
neither shift his liability on the contract to his driver nor share it with him, for his
driver's negligence is his. Secondly, if We make the driver jointly and severally liable
with the carrier, that would make the carrier's liability personal instead of merely
vicarious and consequently, entitled to recover only the share which corresponds to
the driver, contradictory to the explicit provision of Article 2181 of the New Civil
Code. #MEDINA

Page 62 of 151
CASE TITLE: BUSTAMANTE vs CA
KEYWORD: Truck and passenger bus
PONENTE: MEDIALDEA, J.
DOCTRINE: The doctrine of last clear chance, stated broadly, is that the negligence
of the plaintiff does not preclude a recovery for the negligence of the defendant
where it appears that the defendant, by exercising reasonable care and prudence,
might have avoided injurious consequences to the plaintiff notwithstanding the
plaintiff's negligence.The principle of "last clear chance" applies "in a suit between
the owners and drivers of colliding vehicles. It does not arise where a passenger
demands responsibility from the carrier to enforce its contractual obligations. For it
would be inequitable to exempt the negligent driver of the jeepney and its owners
on the ground that the other driver was likewise guilty of negligence.
FACTS:
At about 6:30 in the morning of April 20, 1983, a collision occurred between a
gravel and sand truck, with Plate No. DAP 717, and a Mazda passenger bus with
Motor No. Y2231 and Plate No. DVT 259 along the national road at Calibuyo, Tanza,
Cavite. The front left side portion (barandilla) of the body of the truck sideswiped
the left side wall of the passenger bus, ripping off the said wall from the driver's
seat to the last rear seat. Due to the impact, several passengers of the bus were
thrown out and died as a result of the injuries they sustained. Among those killed
were the relatives of the herein petitioners.
Immediately before the collision, the cargo truck and the passenger bus were
approaching each other, coming from the opposite directions of the highway. While
the truck was still about 30 meters away, Susulin, the bus driver, saw the front
wheels of the vehicle wiggling. He also observed that the truck was heading
towards his lane. Not minding this circumstance due to his belief that the driver of
the truck was merely joking, Susulin shifted from fourth to third gear in order to
give more power and speed to the bus, which was ascending the inclined part of the
road, in order to overtake or pass a Kubota hand tractor being pushed by a person
along the shoulder of the highway. While the bus was in the process of overtaking
or passing the hand tractor and the truck was approaching the bus, the two vehicles
sideswiped each other at each other's left side. After the impact, the truck skidded
towards the other side of the road and landed on a nearby residential lot, hitting a
coconut tree and felling it."
PETITIONER'S CONTENTION:
Page 63 of 151
RESPONDENT'S CONTENTION:
ISSUE: Whether or not the doctrine of last clear chance is applicable in the present
case.
RULING:
TRIAL COURT - The negligent acts of both drivers contributed to or combined with
each other in directly causing the accident which led to the death of the
aforementioned persons. It was negligent on the part of driver Montesiano to have
driven his truck fast, considering that it was an old vehicle, being a 1947 model as
admitted by its owner, defendant Del Pilar; that its front wheels were wiggling; that
the road was descending; and that there was a passenger bus approaching it.
Likewise, driver Susulin was also guilty of negligence in not taking the necessary
precaution to avoid the collision, in the light of his admission that, at a distance of
30 meters, he already saw the front wheels of the truck wiggling and that the
vehicle was usurping his lane coming towards his direction.
CA - REVERSED and SET ASIDE and the complaint dismissed insofar as defendants-
appellants Federico del Pilar and EdilbertoMontesiano, owner and driver of the
truck, are concerned. (They were the only ones who appealed the trial court's
decision).
The bus driver had the last clear chance to avoid the collision and his reckless
negligence in proceeding to overtake the hand tractor was the proximate cause of
the collision."
SC - The respondent court adopted the doctrine of "last clear chance." The doctrine,
stated broadly, is that the negligence of the plaintiff does not preclude a recovery
for the negligence of the defendant where it appears that the defendant, by
exercising reasonable care and prudence, might have avoided injurious
consequences to the plaintiff notwithstanding the plaintiff's negligence.
In the recent case of Philippine Rabbit Bus Lines, Inc. v. Intermediate Appellate
Court, et al. (G.R. Nos. 66102-04, August 30, 1990), the Court citing the landmark
decision held in the case of Anuran, et al. v. Buno, et al. (123 Phil. 1073) ruled that
the principle of "last clear chance" applies "in a suit between the owners and
drivers of colliding vehicles. It does not arise where a passenger demands
responsibility from the carrier to enforce its contractual obligations. For it would be
inequitable to exempt the negligent driver of the jeepney and its owners on the
ground that the other driver was likewise guilty of negligence."

Furthermore, "as between defendants: The doctrine cannot be extended into the
field of joint tortfeasors as a test of whether only one of them should be held liable
to the injured person by reason of his discovery of the latter's peril, and it cannot be
invoked as between defendants concurrently negligent. As against third persons, a
negligent actor cannot defend by pleading that another had negligently failed to
take action which could have avoided the injury."
All premises considered, the Court is convinced that the respondent Court
committed an error of law in applying the doctrine of last clear chance as between
the defendants, since the case at bar is not a suit between the owners and drivers
of the colliding vehicles but a suit brought by the heirs of the deceased passengers
against both owners and drivers of the colliding vehicles. Therefore, the respondent
court erred in absolving the owner and driver of the cargo truck from liability.
Pursuant to the new policy of this Court to grant an increased death indemnity to
the heirs of the deceased, their respective awards of P30,000.00 are hereby
increased to P50,000.00. #NERI
ii. Assumption of Risk
Case Title: Japan Airlines v. CA
Ponente: Romero, J.
Keyword: Narita
Doctrine: Airline passengers must take such risks incident to the mode of travel.
Adverse weather conditions or extreme climatic changes are some of the perils
involved in air travel, the consequences of which the passenger must assume or
expect. After all, common carriers are not the insurer of all risks.
Facts: On June 13, 1991, respondent Jose Miranda boarded JAL Flight No. JL001 in
San Francisco, California bound for Manila. As an incentive for travelling on the said
airline, both flights were to make an overnight stopover at Narita, Japan at the
airlines’  expense,  thereafter  proceeding  to  Manila  the  following  day.  Upon  arrival  at   regard, adverse weather conditions or extreme climatic changes are some of the
Narita, Japan on June 14, 1991, respondents were billeted at Hotel Nikko Narita for
the night. However, due to the Mt. Pinatubo eruption unrelenting ashfall blanketed
Ninoy Aquino International Airport rendering inaccessible to airplane traffic. Hence,
respondent’s  trip  to  Manila  was  cancelled  indefinitely.  To  accommodate  the  needs   on account of the fortuitous event, JAL had the duty to make necessary
of its stranded passengers, JAL rebooked all the Manila bound passengers on flight
no. 741 due to deport on June 16,1991 and also paid for their hotel expenses for
their unexpected overnight stay. On June 16, 1991, much to dismay of the
respondents, their long anticipated flight to Manila was again cancelled due to
NAIA’s  indefinite  closure. At this point, JAL informed the respondents that it would
Page 64 of 151
no longer pay their hotel and accommodation expense during their stay in Narita
since NAIA was only reopened to airline traffic on June 22, 1991, respondents were
forced to pay for their accommodations and meal expenses from their personal
funds from June 16-21, 1991.
Issue: Whether JAL, as a common carrier, has the obligation to shoulder the hotel
and meal expenses of its stranded passengers until they have reached their final
destination, even if  the  delay  was  caused  by  “force  majeure.”
Petitioner’s  contention:  Passengers  have  no  vested  right  to  the  amenities  in  case  a  
flight was cancelled due to force majeure.
Respondent’s  contention:  JAL  failed  to  live  to  its  duty  to  provide  care  and  comfort
to its stranded passengers when it refused to defray for their hotel and
accommodation expenses from June 16-21,1991 at Narita, Japan. While JAL cannot
be held responsible for the delayed arrival in Manila, it was nevertheless liable for
their living expenses during their unexpected stay in Narita since airlines have the
obligation to ensure the comfort and convenience of its passengers.
Ruling:
TC: In favour of respondents---ordering JAL to pay respondents for damages
CA: Affirmed with the exception of lowering the damages
SC: Common carriers are NOT absolutely responsible for all injuries or damages
even if the same were caused by a fortuitous event. To rule otherwise would render
the defense of force majeure as an exception from any liability, illusory, and
ineffective. When JAL was prevented from resuming its flight to Manila due to the
effects of Mt. Pinatubo eruption whatever losses or damages in the form of hotel
and meal expense the stranded passengers incurred, cannot be charged to JAL.
Airline passengers must take such risks incident to the mode of travel. In this
perils involved in air travel, the consequences of which the passenger must assume
or expect. Common carriers are not insurer of all risks. Nonetheless, while JAL was
no  longer  required  to  defray  respondents’  living  expenses  during  their  stay  in  Narita  
arrangements to transport respondents on the first available connecting flight to
Manila. Petitioner JAL reneged on its obligation to look after the comfort and
convenience  of  its  passengers  when  it  declassified  respondents  from  “transit  
passengers”  to  “new  passengers”  as  a  result  of  which  respondents were obliged to
make necessary arrangements themselves for the next flight to Manila.
Respondents were placed in the waiting list from June 20-24, 1991. JAL is not
excused from its obligation to make necessary arrangements to transport
respondents on its first available flight to Manila.
#PASCUA
CASE TITLE: VICENTE CALALAS, petitioner, vs. COURT OF APPEALS, ELIZA JUJEURCHE
SUNGA and FRANCISCO SALVA, respondents.
KEYWORD: Jeepney; Siliman University college freshman student.
PONENTE: MENDOZA, J.
DOCTRINE:In quasi-delict, the negligence or fault should be clearly established
because it is the basis of the action, whereas in breach of contract, the action can
be prosecuted merely by proving the existence of the contract and the fact that the
obligor, in this case the common carrier, failed to transport his passenger safely to
his destination.In case of death or injuries to passengers, Art. 1756 of the Civil Code
provides that common carriers are presumed to have been at fault or to have acted
negligently unless they prove that they observed extraordinary diligence as defined
in Arts. 1733 and 1755 of the Code. This provision necessarily shifts to the common
carrier the burden of proof.
It is immaterial that the proximate cause of the collision between the jeepney and
the truck was the negligence of the truck driver. The doctrine of proximate cause is
applicable only in actions for quasi-delict, not in actions involving breach of
contract. The doctrine is a device for imputing liability to a person where there is no
relation between him and another party.
FACTS: At  10  o’clock  in  the  morning  of  August  23,  1989,  private  respondent  Eliza   truck who was responsible for the accident. It took cognizance of another
Jujeurche G. Sunga, then a college freshman majoring in Physical Education at the
Siliman University, took a passenger jeepney owned and operated by petitioner
Vicente Calalas. As the jeepney was filled to capacity of about 24 passengers, Sunga
was given by the conductor an "extension seat," a wooden stool at the back of the
door at the rear end of the vehicle.
On the way to PoblacionSibulan, Negros Occidental, the jeepney stopped to let a
passenger off. As she was seated at the rear of the vehicle, Sunga gave way to the
outgoing passenger. Just as she was doing so, an Isuzu truck driven by
IglecerioVerena and owned by Francisco Salva bumped the left rear portion of the
jeepney. As a result, Sunga was injured. She sustained a fracture of the "distal third
of the left tibia-fibula with severe necrosis of the underlying skin." Closed reduction
of the fracture, long leg circular casting, and case wedging were done under
sedation. Her confinement in the hospital lasted from August 23 to September 7,
1989. Her attending physician, Dr. Danilo V. Oligario, an orthopedic surgeon,
Page 65 of 151
certified she would remain on a cast for a period of three months and would have
to ambulate in crutches during said period.
ISSUE: Whether or not Vicente Calalas, the owner and operator of the passenger
jeepney, liable for damages.
PETITIONER’S  CONTENTION:  Petitioner contends that the ruling in Civil Case No.
3490(filed by Calalas against Salva and Verena, for quasi-delict) that the negligence
of Verena was the proximate cause of the accident negates his liability and that to
rule otherwise would be to make the common carrier an insurer of the safety of its
passengers. He contends that the bumping of the jeepney by the truck owned by
Salva was a casofortuito.
RESPONDENT’S  CONTENTION:  On October 9, 1989, Sunga filed a complaint for
damages against Calalas, alleging violation of the contract of carriage by the former
in failing to exercise the diligence required of him as a common carrier. Calalas, on
the other hand, filed a third-party complaint against Francisco Salva, the owner of
the Isuzu truck.
RULING:
1. TRIAL COURT
The lower court rendered judgment against Salva as third-party defendant
and absolved Calalas of liability, holding that it was the driver of the Isuzu
case (Civil Case No. 3490), filed by Calalas against Salva and Verena, for
quasi-delict, in which Branch 37 of the same court held Salva and his driver
Verena jointly liable to Calalas for the damage to his jeepney.
2. APPELLATE COURT
On appeal, the ruling of the lower court was reversed on the ground that
Sunga’s  cause  of  action was based on a contract of carriage, not quasi-
delict, and that the common carrier failed to exercise the diligence
required under the Civil Code. The appellate court dismissed the third-
party complaint against Salva and adjudged Calalas liable for damages to
Sunga.
3. SUPREME COURT
In the case at bar, upon the happening of the accident, the presumption of
 negligence at once arose, and it became the duty of petitioner to prove
that he had to observe extraordinary diligence in the care of his
passengers.
Petitioner Vicente Calalas did not carry Sunga "safely as far as human care
and foresight could provide, using the utmost diligence of very cautious
persons, with due regard for all the circumstances" as required by Art.
1755.
First, as found by the Court of Appeals, the jeepney was not properly
parked, its rear portion being exposed about two meters from the broad
shoulders of the highway, and facing the middle of the highway in a
diagonal angle.
Second,  it  is  undisputed  that  petitioner’s  driver  took  in more passengers
than the allowed seating capacity of the jeepney, a violation of the same
law.
The fact that Sunga was seated in an "extension seat" placed her in a peril
greater than that to which the other passengers were exposed. Therefore,
not only was petitioner unable to overcome the presumption of negligence
imposed on him for the injury sustained by Sunga, but also, the evidence
shows he was actually negligent in transporting passengers.
We  find  it  hard  to  give  serious  thought  to  petitioner’s  contention that
Sunga’s  taking  an  "extension  seat"  amounted  to  an  implied  assumption  of   moral damages, and P2,000.00 as attorney
risk. It is akin to arguing that the injuries to the many victims of the
tragedies in our seas should not be compensated merely because those
passengers assumed a greater risk of drowning by boarding an overloaded
ferry.The decision of the Court of Appeals, dated March 31, 1995, and its
resolution, dated September 11, 1995, are AFFIRMED, with the
MODIFICATION that the award of moral damages is DELETED. #QUINTOS
CASE TITLE:PNR vs CA
KEYWORD: Iyam Bridge
PONENTE: ESCOLIN, J
DOCTRINE:A passenger is guilty of contributory negligence where he chose to ride
on the open platform of a train and failed to hold tightly on the vertical grab bar.
SHORT FACTS:WinifredoTupang boarded Train No, 516 of Philippine National
Railways at Libmanan, Camarines Sur, as a paying passenger bound for Manila. Due
Page 66 of 151
to some mechanical defect, the train stopped for repairs, taking some two hours
before the train could resume its trip to Manila. Unfortunately, upon passing lyam
Bridge at Lucena, Quezon, Tupang fell off the train resulting in his death. The train
did not stop despite the alarm raised by the other passengers that somebody fell
from the train. Instead, the train conductor, Perfecto Abrazado, called the station
agent at Candelaria, Quezon, and requested for verification of the information.
Police authorities of Lucena City were dispatched to the lyam Bridge where they
found the lifeless body of Tupang.
ISSUE: Whether or not PNR is liable for the death of WinidredoTupang
PC: N/A
DC:N/A
RULING:
RTC:
PNR is liable for damages for breach of contract of carriage and ordered it and to
pay the wife of Tupang the sum of P12,000.00 for the death of her husband, plus
P20,000.00 for loss of' his earning capacity, and the further sum of P10,000.00 as
CA:
Sustained the holding of the trial court that the PNR did not exercise the utmost
diligence required by law of a common carrier. It further increased the amount
adjudicated by the trial court by ordering PNR to pay the plaintiff an additional sum
of P5,000.00 as exemplary damages
SC
Yes. The petitioner has the obligation to transport its passengers to their
destinations and to observe extraordinary diligence in doing so. Death or any injury
suffered by any of its passengers gives rise to the presumption that it was negligent
in the performance of its obligation under the contract of carriage. But while
petitioner failed to exercise extraordinary diligence as required by law it appears
that the deceased was chargeable with contributory negligence. Since he opted to
sit on the open platform between the coaches of the train, he should have held
tightly and tenaciously on the upright metal bar found at the side of said platform
to avoid falling off from the speeding train. Such contributory negligence, while not
exempting the PNR from liability, nevertheless justified the deletion of the amount
adjudicated as moral and exemplary damages. #SANTOS, A
Case Title: Isaac vs Al ammen Transportation Co.
Keyword: Dismembered arm
Ponente: BAUTISTA ANGELO, J
Doctrine: It is the prevailing rule that it is negligence per se for a passenger on a
railroad voluntarily or inadvertently to protrude his arm, hand, elbow, or any other
part of his body through the window of a moving car beyond the outer edge of the
window or outer surface of the car, so as to come in contact with objects or
obstacles near the track, and that no recovery can be had for an injury which but for
such negligence would not have been sustained.
Facts: One of the buses which defendant was operating is Bus No. 31. On May 31,
1951, plaintiff boarded said bus as a passenger paying the required fare from Ligao,
Albay bound for Pili, Camarines Sur, but before reaching his destination, the bus
collided with a motor vehicle of the pick-up type coming from the opposite
direction, as a result of which plaintiff's left arm was completely severed and the
severed portion fell inside the bus. Plaintiff was rushed to a hospital in Iriga,
Camarines Sur where he was given blood transfusion to save his life.
Issue: Whether or not there was a contributory negligence on the part of the
passenger.
Held:
Trial court: Dismissed, collision occurred due to the negligence of the driver of the
pick-up car and not to that of the driver of the bus.
Appellate court: AFFIRMED. One who is placed in such a predicament cannot
exercise such coolness or accuracy of judgment as is required of him under ordinary
circumstances and he cannot therefore be expected to observe the same judgment,
care and precaution as in the latter. Thus, it was held that "where a carrier's
employee is confronted with a sudden emergency, the fact that he is obliged to act
quickly and without a chance for deliberation must be taken into account, and he is
held to the some degree of care that he would otherwise be required to exercise in
the absence of such emergency but must exercise only such care as any ordinary
prudent person would exercise under like circumstances and conditions, and the
failure on his part to exercise the best judgement the case renders possible does
Page 67 of 151
not establish lack of care and skill on his part which renders the company, liable.
Considering all the circumstances, we are persuaded to conclude that the driver of
the bus has done what a prudent man could have done to avoid the collision and in
our opinion this relieves appellee from legibility under our law.
A circumstances which miliates against the stand of appellant is the fact borne out
by the evidence that when he boarded the bus in question, he seated himself on
the left side thereof resting his left arm on the window sill but with his left elbow
outside the window, this being his position in the bus when the collision took place.
It is for this reason that the collision resulted in the severance of said left arm from
the body of appellant thus doing him a great damage. It is therefore apparent that
appellant is guilty of contributory negligence. Had he not placed his left arm on the
window sill with a portion thereof protruding outside, perhaps the injury would
have been avoided as is the case with the other passenger. It is to be noted that
appellant was the only victim of the collision.
It is true that such contributory negligence cannot relieve appellee of its liability but
will only entitle it to a reduction of the amount of damage caused (Article 1762,
new Civil Code), but this is a circumstance which further militates against the
position taken by appellant in this case.
SC: affirmed with cost against appellant. #santos, n.
III. EXTRAORDINARY DILIGENCE
A. Effect of Stipulation
1. Gratuitous Passengers
CASE TITLE: LARA Vs. VALENCIA
KEYWORD: MALARIA
PONENTE:
DOCTRINE: Deceased and coompany are not considered as passengers but merely
accomodation passengers. Carrier is not bound to exercise extraordinary diligence
but ordinary diligence only, since they are only accomodation passengers.
SHORT FACTS: Lara was an inspector for the Bureau of Forestry. The defendant is
engaged in the business of exporting logs from his lumber concession in Cotabato.
Lara went to said concession upon instructions of his chief to classify the logs of
defendant which were about to be loaded on a ship anchored in the port of Parang.
The work of Lara lasted for six days during which he contracted malaria fever. On a
later date, Lara who then in a hurry to return to Davao asked defendant if he could
if he could take him in his pick-up as there was then no other means of
transportation, to which defendant agree, and in that same morning the pick-up left
Parang bound for Davao taking along six passengers, including Lara.
The pick-up has a front seat where the driver and two passengers can be
accommodated and the back has a steel flooring enclosed with a steel walling of 16
to 17 inches tall on the sides and with a 19 inches tall walling at the back. In the
middle Lara sat on a bag. Before leaving, Parang, defendant invited Lara to sit with
him on the front seat but Lara declined. It was their understanding that upon
reaching barrio Samoay, Cotabato, the passengers would alight and take a
passenger bus bound for Davao, but when they arrived at that place, only one
alighted and the other passengers requested defendant to allow them to ride with
him up to Davao because there was then no available bus that they could take in
going to that place. Defendant again accommodated the passengers.
When they continued their trip, the sitting arrangement of the passengers
remained the same, Lara being seated on a bag in the middle with his arms on a
suitcase and his head covered by a jacket. Upon reaching Km. 96, barrio Catidtuan,
Lara accidentally fell from the pick-up and as a result he suffered serious injuries.
Valencia stopped the pick-up to see what happened to Lara. He sought the help of
the residents of that place and applied water to Lara but to no avail. They brought
Lara to the nearest place where they could find a doctor and not having found any
they  took  him  to  St.  Joseph’s  clinic  of  Kidapwan.    But  when  Lara arrived, he was
already dead. From there they proceeded to Davao City and immediately notified
the local authorities.
ISSUE: W/N defendant is duty bound to exercise extraordinary diligence as required
of a common carrier by our law?
PETITIONER’S  CONTENTION: They should be considered as passengers and
defendant should exercise extraodrinary diligence.
RESPONDENT’S  CONTENTION:  Defendants  are  only  duty  bound  to  exercise  ordinary  
diligence because of the fact that the passengers are merely accomodation
passengers.
RULING:
TRIAL COURT. Complainants denied.
Page 68 of 151
APPELLATE COURT. RTC AFFIRMED.
RULING SUPREME COURT:
HOLDING & RATIO DECIDENDI
No. Defendant is only required to observe ordinary care, and is not in duty bound
to exercise extraordinary diligence
It therefore appears that the deceased, as well his companions, who rode in
the pick-up of defendant, were merely accommodation passengers who paid
nothing for the service and so they can be considered as invited guests within
the meaning of the law. As accommodation passengers or invited guests,
defendant as owner and driver of the pick-up owes to them merely the duty to
exercise reasonable care so that they may be transported safely to their
destination.
Thus, "The rule is established by the weight of authority that the owner or
operator of an automobile owes the duty to an invited guest to exercise
reasonable care in its operation, and not unreasonably to expose him to danger
and injury by increasing the hazard of travel.
This rule, as frequently stated by the courts, is that an owner of an automobile
owes a guest the duty to exercise ordinary or reasonable care to avoid injuring
him. Since one riding in an automobile is no less a guest because he asked for
the privilege of doing so, the same obligation of care is imposed upon the
driver as in the case of one expressly invited to ride" (5 Am. Jur., 626-627).
Defendant, therefore, is only required to observe ordinary care, and is not in
duty bound to exercise extraordinary diligence as required of a common carrier
by our law (Articles 1755 and 1756, new Civil Code). #SUBIJANO
B. Extraordinary Diligence in Carriage by Sea
1. Seaworthiness
Case Title: DELSAN TRANSPORT VS. CA
Keyword: Fuel oil
Ponente: De Leon, J.R., J.
Doctrine: Presenting in evidence certificates that tend to show that at the time of Presenting in evidence certificates that tend to show that at the time of dry-docking
dry-docking and inspection by the Philippine Coast Guard, the vessel MT Maysun, and inspection by the Philippine Coast Guard, the vessel MT Maysun, was fit for
was fit for voyage does not negate the presumption of unseaworthiness. voyage does not negate the presumption of unseaworthiness. Seaworthiness
Seaworthiness  relates  to  a  vessel’s  actual  condition relates  to  a  vessel’s  actual  condition  #  TA-A

Facts: Caltex Philippines entered into a contract of affreightment with the

petitioner, Delsan Transport Lines, Inc., for a period of one year whereby the said
common  carrier  agreed  to  transport  Caltex’s  industrial  fuel  oil  from  the  Batangas-
Bataan Refinery to different parts of the country. Under the contract, petitioner
took on board its vessel, MT Maysun, 2,277.314 kiloliters of industrial fuel oil of
Caltex to be delivered to the Caltex Oil Terminal in Zamboanga City. The shipment
was insured with the private respondent, American Home Assurance Corporation.
However, the said vessel sank near Panay Gulf. American Home paid Caltex and by
right of subrogation the latter claimed from petitioner.

Issue: Whether or not the sinking of MT Maysun is caused by fortuitous event.

Petitioner's Contention: The cause of the sinking is a fortuitous event.

Ruling:

Trial Court: The vessel is seaworthy and the sinking thereof is caused by fortuitous
event.

Court of Appeals: No fortuitous event.

Supreme Court: NO. From the nature of their business and for reasons of public
policy, common carriers are bound to observe extraordinary diligence in the
vigilance over the goods and for the safety of passengers transported by them,
according to all the circumstances of each case. In the event of loss, destruction or
deterioration of the insured goods, common carriers shall be responsible unless the
same is brought about, among others, by flood, storm, earthquake, lightning or
other natural disaster or calamity. In all other cases, 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 observed extraordinary diligence.

In this case, MT Maysun, sank with its entire cargo for the reason that it was not
seaworthy. There was no squall or bad weather or extremely poor sea condition in
the vicinity when the vessel.

Page 69 of 151
CASE TITLE: CALTEX (PHILIPPINES) INC. vs. SULPICIO LINES, INC. PETITIONER’S  CONTENTION:  That  it  is  not  liable  for  damages  as  it  was  only  a  
KEYWORD:vessel collision charterer.
PONENTE: PARDO, J.
RESPONDENT’S  CONTENTION:    That  Caltex  is  liable  because  it  proceeded  to  ship  its  
DOCTRINE/S: cargo despite the defects in and deficiencies of the vessel.
(1)For a vessel to be seaworthy it must be adequately equipped for the voyage and
manned with a sufficient number of competent officers and crew. RULING:
(2) Because of the implied warranty of seaworthiness, shippers of goods, when 1. TRIAL COURT
transacting  with  common  carriers,  are  not  expected  to  inquire  into  the  vessel’s   DISMISSED the third party complaint against Caltex for want of
seaworthiness. substantiation.

SHORT FACTS: 2. APPELLATE COURT

On December 19, 1987, motor tanker MT Vector (owned and operated by Vector
Shipping Corporation and engaged in the business of transporting fuel products),
left Limay, Bataan, at about 8:00 p.m., enroute to Masbate, loaded with petroleum
products shipped by petitioner Caltex by virtue of a charter contract. On December
20, 1987, at about 6:30 a.m., the passenger ship MV Doña Paz, (owned and
operated by Sulpicio Lines, Inc.), left the port of Tacloban for Manila with a
complement of 59 crew members and passengers totaling 1,493.
At about 10:30 p.m. of December 20, 1987, the two vessels collided in the open sea
within the vicinity of Dumali Point between Marinduque and Oriental Mindoro. All
the crewmembers of MV Doña Paz died, while the two survivors from MT Vector
claimed that they were sleeping at the time of the incident. The MV Doña Paz
carried an estimated 4,000 passengers; many were not in the passenger manifest.
Only 24 survived the tragedy after having been rescued from the burning waters by
vessels that responded to distress calls.
The Board of Marine Inquiry found that the MT Vector were at fault and responsible
for its collision with MV Doña Paz. Private respondents herein, relatives of some of
the  casualties,  filed  a  complaint  for  “Damages  Arising  from  Breach  of  Contract  of   seaworthiness,shippers of goods, when transacting with common carriers,
Carriage”  against  Sulpicio.  Sulpicio,  in  turn,  filed  a  third  party  complaint  against   are not expected to  inquire  into  the  vessel’s  seaworthiness,  genuineness  of
Vector Shipping and Caltex alleging that the latter chartered the vessel with gross
and evident bad faith knowing that the vessel was improperly manned, ill-equipped,
unseaworthy and a hazard to navigation.
ISSUE: Whether or not Caltex is liable for damages for allegedly chartering an
unseaworthy vessel. - NO
MODIFIED  the  trial  court’s  ruling  and  included  Caltex  as  one  of  those  liable  
for damages. The CA ruled that Caltex ,as charterer, negligently caused the
shipping of combustible cargo aboard an unseaworthy vessel.
3. SUPREME COURT
GRANTED the petition. Ruled in favor of Caltex.
Carriers are deemed to warrant impliedly the seaworthiness of the ship.
For a vessel to be seaworthy, it must be adequately equipped for the
voyage and manned with a sufficient number of competent officers and
crew. The failure of a common carrier to maintain in seaworthy condition
the vessel involved in its contract of carriage is a clear breach of its duty
prescribed in Article 1755 of the Civil Code.
The charterer of a vessel has no obligation before transporting its cargo to
ensure that the vessel it chartered complied with all legal requirements.
The duty rests upon the common carrier simply for being engaged in
“public  service”.  Because  of  the  implied  warranty  of  
 
its licenses and compliance with all maritime laws.
Considering the nature of transportation business, passengers and
shippers alike customarily presume that common carriers possess all the
legal requisites in its operation. As a mere voyage charterer, Caltex had the
right to presume that the ship was seaworthy as even the Philippine Coast
Guard itself was convinced of its seaworthiness.#TAN

Page 70 of 151

2. Overloading
CASE TITLE: Negros Navigation v CA
KEYWORD: Extraordinary diligence in carriage by sea: overloading,
PONENTE: MENDOZA, J.:
DOCTRINE:
SHORT FACTS:Private respondent Ramon Miranda purchased from the Negros
Navigation Co., Inc. 4 special cabin tickets for his wife, daughter, son and niece who
were going to Bacolod City to attend a family reunion. Don Juan collided off the
Tablas Strait in Mindoro, with the M/T Tacloban City, an oil tanker owned by the
Philippine National Oil Company (PNOC) and the PNOC Shipping and Transport
Corporation (PNOC/STC). As a result, the M/V Don Juan sank. The4 members of
private respondents' families were never found.
ISSUE: whether the crew members of petitioner were grossly negligent (YES)
PETITIONER’S  CONTENTION:  Petitionerdenied that the 4 relatives of private
respondents actually boarded the vessel as shown by the fact that their bodies
were never recovered. Petitioner further averred that the Don Juan was seaworthy
and manned by a full and competent crew, and that the collision was entirely due
to the fault of the crew of the M/T Tacloban City.
Petitioner also criticizes the lower court's reliance on the Mecenas case, arguing
that, although this case arose out of the same incident as that involved in Mecenas,
the parties are different and trial was conducted separately. Petitioner contends
that the decision in this case should be based on the allegations and defenses
pleaded and evidence adduced in it or, in short, on the record of this case.
RULING:
RTC: awarded damages to private respondents for the death of relatives as a result
of the sinking of petitioner's vessel
CA: affirmed with modification
Page 71 of 151
SUPREME COURT:
In finding petitioner guilty of negligence and in failing to exercise the extraordinary
diligence required of it in the carriage of passengers, both the trial court and the
appellate court relied on the findings of this Court in Mecenas v. Intermediate
Appellate Court,which case was brought for the death of other passengers. In that
case it was found that although the proximate cause of the mishap was the
negligence of the crew of the M/T Tacloban City, the crew of the Don Juan was
equally negligent as it found that the latter's master, Capt. Rogelio Santisteban, was
playing mahjong at the time of collision, and the officer on watch, Senior Third
Mate Rogelio De Vera, admitted that he failed to call the attention of Santisteban to
the imminent danger facing them. Petitioner Negros Navigation was found equally
negligent in tolerating the playing of mahjong by the ship captain and other crew
members while on board the ship and failing to keep the M/V Don Juan seaworthy
so much so that the ship sank within 10 to 15 minutes of its impact with the M/T
Tacloban City.
In addition, the Court found that the Don Juan was overloaded. The Certificate of
Inspection, dated August 27, 1979, issued by the Philippine Coast Guard
Commander at Iloilo City stated that the total number of persons allowed on the
ship was 864, of whom 810 are passengers, but there were actually 1,004 on board
the vessel when it sank, 140 persons more than the maximum number that could
be safely carried by it.
Taking these circumstances together, and the fact that the M/V Don Juan, as the
faster and better-equipped vessel, could have avoided a collision with the PNOC
tanker, this Court held that even if the Tacloban City had been at fault for failing to
observe an internationally-recognized rule of navigation, the Don Juan was guilty of
contributory negligence. Through Justice Feliciano, this Court held:In the total set of
circumstances which existed in the instant case, the "Don Juan," had it taken
seriously its duty of extraordinary diligence, could have easily avoided the collision
with the "Tacloban City." Indeed, the "Don Juan" might well have avoided the
collision even if it had exercised ordinary diligence merely.
Adherence to the Mecenas case is dictated by this Court's policy of maintaining
stability in jurisprudence in accordance with the legal maxim "stare decisis et non
quietamovere" (Follow past precedents and do not disturb what has been settled.)
Where, as in this case, the same questions relating to the same event have been
put forward by parties similarly situated as in a previous case litigated and decided
by a competent court, the rule of stare decisis is a bar to any attempt to relitigate
the same issue.#TENORIO
3. Proper Storage
CASE TITLE: BELGIAN OVERSEAS CHARTERING AND SHIPPING N.V. and JARDINE DA
VIES TRANSPORT SERVICES, INC., petitioners, vs. PHILIPPINE FIRST INSURANCE CO.,
INC., respondent.
KEYWORD: Coils
PONENTE: PANGANIBAN, J.
DOCTRINE:Well-settled is the rule that common carriers, from the nature of their
business and for reasons of public policy, are bound to observe extraordinary
diligence and vigilance with respect to the safety of the goods and the passengers
they transport. Equipped with the proper knowledge of the nature of steel sheets in
coils and of the proper way of transporting them, the master of the vessel and his
crew should have undertaken precautionary measures to avoid possible
deterioration of the cargo.
FACTS: On  June  13,  1990,  CMC  Trading  A.G.  shipped  on  board  the  M/V  ‘Anangel   passengers they transport. Thus, common carriers are required to render service
Sky’  at  Hamburg,  Germany  242 coils of various Prime Cold Rolled Steel sheets for
transportation to Manila consigned to the Philippine Steel Trading Corporation. On
July 28, 1990, M/V Anangel Sky arrived at the port of Manila and, within the
subsequent days, discharged the subject cargo. Four (4) coils were found to be in
bad order B.O. Tally sheet No. 154974. Finding the four (4) coils in their damaged
state to be unfit for the intended purpose, the consignee Philippine Steel Trading
Corporation declared the same as total loss.
ISSUE: Whether or not a notation in the bill of lading at the time of loading is
sufficient to show pre-shipment damage and to exempt herein defendants from
liability
CONTENTION: Impugning the propriety of the suit against them, defendants-
appellees imputed that the damage and/or loss was due to pre-shipment damage,
to the inherent nature, vice or defect of the goods, or to perils, danger and
accidents of the sea, or to insufficiency of packing thereof, or to the act or omission
of the shipper of the goods or their representatives. In addition thereto,
defendants-appellees argued that their liability, if there be any, should not exceed
the limitations of liability provided for in the bill of lading and other pertinent laws.
Finally, defendants-appellees averred that, in any event, they exercised due
diligence and foresight required by law to prevent any damage/loss to said
shipment.
RULING:
Page 72 of 151
TRIAL COURT: The RTC dismissed the complaint because respondent had failed to
prove its claims with the quantum of proof required by law.
COURT OF APPEALS: Reversed. CA ruled that petitioners are liable for the loss or
damage of the goods shipped, because they had failed to overcome the
presumption of negligence imposed on common carriers. The CA further held as
inadequately  proven  petitioners’  claim  that  the  loss  or  the  deterioration  of  the  
goods  was  due  to  preshipment  damage.  It  likewise  opined  that  the  notation  “metal  
envelopes  rust  stained  and  slightly  dented”  placed  on  the  Bill  of  Lading  had  not  
been the proximate cause of the damage to the four (4) coils.
SUPREME COURT: No. Well-settled is the rule that common carriers, from the
nature of their business and for reasons of public policy, are bound to observe
extraordinary diligence and vigilance with respect to the safety of the goods and the
with  the  greatest  skill  and  foresight  and  “to  use  all  reasonable  means  to  ascertain  
the nature and characteristics of the goods tendered for shipment, and to exercise
due care in the handling and stowage, including such methods as their nature
requires.”  The  extraordinary  responsibility  lasts  from  the  time  the  goods  are  
unconditionally placed in the possession of and received for transportation by the
carrier until they are delivered, actually or constructively, to the consignee or to the
person who has a right to receive them.
Owing to this high degree of diligence required of them, common carriers,
as a general rule, are presumed to have been at fault or negligent if the goods they
transported deteriorated or got lost or destroyed. That is, unless they prove that
they exercised extraordinary diligence in transporting the goods. In order to avoid
responsibility for any loss or damage, therefore, they have the burden of proving
that they observed such diligence.
Mere proof of delivery of the goods in good order to a common carrier and
of their arrival in bad order at their destination constitutes a prima facie case of
fault or negligence against the carrier. If no adequate explanation is given as to how
the deterioration, the loss or the destruction of the goods happened, the
transporter shall be held responsible.
True,  the  words  “metal  envelopes  rust  stained  and  slightly  dented”  were  
noted on the Bill of Lading; however, there is no showing that petitioners exercised
due diligence to forestall or lessen the loss. Having been in the service for several
years, the master of the vessel should have known at the outset that metal
envelopes in the said state would eventually deteriorate when not properly stored
while in transit. Equipped with the proper knowledge of the nature of steel sheets
in coils and of the proper way of transporting them, the master of the vessel and his
crew should have undertaken precautionary measures to avoid possible
deterioration of the cargo. But none of these measures was taken. Having failed to
discharge the burden of proving that they have exercised the extraordinary
diligence required by law, petitioners cannot escape liability for the damage to the
four coils.
Further, even if the fact of improper packing was known to the carrier or
its crew or was apparent upon ordinary observation, it is not relieved of liability for
loss or injury resulting therefrom, once it accepts the goods notwithstanding such
condition. Thus, petitioners have not successfully proven the application of any of
the aforecited exceptions in the present case. #TORRES
4. Negligence of Captain and Crew
CASE TITLE: Mecenas vs Court of Appeals
KEYWORD: mahjong
PONENTE: FELICIANO, J.:
DOCTRINE: Whether or not the captain was "off-duty" or "on-duty" at or around
the time of actual collision is quite immaterial; there is, both realistically speaking
and in contemplation of law, no such thing as "off-duty" hours for the master of a
vessel at sea that is a common carrier upon whom the law imposes the duty of
extraordinary diligence- the duty to 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.
SHORT FACTS:
On 22 April 1980 in the vicinity of the island of Mindoro, the M/T "Tacloban City," -
a barge-type oil tanker of Philippine registry, owned by the Philippine National Oil
Company (PNOC) and operated by the PNOC Shipping and Transport Corporation
(PNOC Shipping), collided with and M/V "Don Juan," - an interisland vessel, also of
Philippine registry, owned and operated by the Negros Navigation Co., Inc. (Negros
Navigation), this resulted to the sinking  of  M/V  “Don  Juan”  and  death  of  hundreds  
of its passengers. When the collision occurred, the sea was calm, with the weather
fair  and  visibility  good.    In  a  report  by  the  Coast  Guard  Commandant,  “Tacloban   “before  and  up  to  the  time  of  collision”—constitutes behaviour that is simply
City" was held as "primarily and solely at fault and responsible for the collision," but
was reversed by the minister of national defense holding both (tacloban& don Juan)
liable  as  it  was  found  that  the  Captain  of  M/V  “Don  Juan”,  Capt.  Roger  Santisteban,   Whether  or  not  Capt.  Santisteban  was  “off-duty”  or  “onduty”  at  or  around  the  time
was playing mahjong before and up to the time of collision. Among the ill-fated
passengers whose bodies were never found were the parents of petitioners, the
spouses Perfecto Mecenas and Sofia Mecenas.
Page 73 of 151
ISSUE:
Whether or not Negros Navigation and Capt. Santisteban negligent along with
PNOC?
PETITIONER’S  CONTENTION:  
Negros Navigation and Capt. Roger Santisteban were grossly negligent
RESPONDENT’S  CONTENTION:
Negros Navigation: Don Juan first sighted Tacloban City 4 miles away, as shown by
Radar. Don Juan executed hard starboard, in conformity with the  rule  that  ‘when  
both vessels are head on or nearly head on, each vessel must turn to the right in
order to avoid each other. It had observed the International Rules of the Road, thus
it must not be held liable.
RULING:
TRIAL COURT: defendants are equally negligent and are liable for damages. M/ V
Don Juan and Tacloban City became aware of each other's presence in the area by
visual contact at a distance of something like 6 miles from each other. They were
fully aware that if they continued on their course, they will meet head on. Don Juan -
steered to the right; Tacloban City continued its course to the left. There can be no
excuse for them not to realize that, with such maneuvers, they will collide. They
executed maneuvers inadequate, and too late, to avoid collision.
APPELLATE COURT: affirmed the decision of the lower court with modification,
reducing the actual and compensatory damages from P400,000 to P100,000.
SUPREME COURT
Route observance of the International Rules of the Road will not relieve a vessel
from responsibility if the collision could have been avoided by proper care and skill
on her part or even by departure from the rules.
The  behaviour  of  the  captain  of  the  “Don  Juan”  in  this  instance—playing mahjong
unacceptable on the part of the master of a vessel to whose hands the lives and
welfare of at least seven hundred fifty (750) passengers had been entrusted.
 
of actual collision is quite immaterial; there is, both realistically speaking and in
contemplation  of  law,  no  such  thing  as  “off-duty”  hours  for  the  master  of  a  vessel  at  
sea that is a common carrier upon whom the law imposes the duty of extraordinary
diligence—”[t]he  duty  to  carry  the  passengers  safely  as far as human care and FACTS: On the morning of August 15, 1963, SaturninoBayasen, the Rural Health
foresight can provide, using the utmost diligence of very cautious persons, with a Physician in Sagada, Mountain Province, went to barrio Ambasing to visit a patient.
due  regard  for  all  the  circumstances.”  The  record  does  not show that that was the Two nurses from the Saint Theodore's Hospital in Sagada, viz., Elena Awichen and
first or only time that Capt. Santisteban had entertained himself during a voyage by Dolores Balcita, rode with him in the jeep assigned for the use of the Rural Health
playing mahjong with his officers and passengers; Negros Navigation in permitting, Unit as they had requested for a ride to Ambasing. Later, at Ambasing, the girls,
or in failing to discover and correct such behaviour, must be deemed grossly who wanted to gather flowers, again asked if they could ride with him up to a
negligent. certain place on the way to barrio Suyo which he intended to visit anyway. Dr.
Additional facts: Bayasen again allowed them to ride, Elena sitting herself between him and Dolores.
*Capt. Santisteban was also faulted in the Philippine Coast Guard decision for failing On the way, at barrio Langtiw, the jeep went over a precipice About 8 feet below
after  the  collision,  “to  institute  appropriate  measures  to  delay  the  sinking  of  M/V   the road, it was blocked by a pine tree. The three were thrown out of the jeep.
Don  Juan.”  The  record  shows  that  the  “Don  Juan”  sank  within ten (10) to fifteen Elena was found lying in a creek further below. Among other injuries, she suffered a
(15)  minutes  after  initial  contact  with  the  “Tacloban  City.”While  the  failure  of  Capt.   skull fracture which caused her death.
Santisteban to supervise his officers and crew in the process of abandoning the ship ISSUE: Whether or not the reckless driving of Bayasen was the proximate cause of
and his failure to avail of measures to prevent the too rapid sinking of his vessel the death of the victim?
after collision, did not cause the collision by themselves, such failures doubtless PETITIONER’S  CONTENTION:Bayasen testified that before reaching the portion of
contributed materially to the consequent loss of life and, moreover, were indicative the road where the jeep fell he noticed that the rear wheel skidded, while driving
of the kind and level of diligence exercised by Capt. Santisteban in respect of his from 8 to 10 kilometers per hour; that as a precautionary measure, he directed the
vessel and his officers and men prior to actual contact between the two (2) vessels. jeep towards the side of the mountain, along the side of the mountain, but not
touching the mountain; that while doing so, the late Elena Awichen suddenly held
*The officer-on-watch  in  the  “Don  Juan”  admitted  that  he  had  failed  to  inform  Capt.   the steering wheel and he felt that her foot stepped on his right foot which was
Santisteban not  only  of  the  “imminent  danger  of  collision”  but  even  of  “the  actual   pressed then on the accelerator; and that immediately after, the jeep suddenly
collision  itself.” swerved to the right and went off.
RESPONDENT’S  CONTENTION: A careful examination of the evidence introduced
*There  is  also  evidence  that  the  “Don  Juan”  was  carrying  more  passengers  than  she   by the prosecution shows no "legally sufficient" proof that the accused was
had been certified as allowed to carry. #YOROBE negligent in driving his jeep. The star witness of the prosecution, Dolores Balcita
who was one of the passengers in the jeep, testified that the accused-petitioner,
SaturninoBayasen was driving his jeep moderately just before the accident and
C. Extraordinary Diligence in Carriage by Land categorically stated that she did not know what caused the jeep to fall into the
1. Condition of Vehicle precipice.
RULING:
TRIAL COURT: The petitioner was found guilty of the charge and was sentenced to
CASE TITLE:SaturninoBayasen vs. Court of Appeals an indeterminate penalty of Four (4) Months and One (1) Day of arresto mayor as
KEYWORD: JEEPNEY – REAR WHEELS minimum. to One (1) Year, Seven (7) Months and Ten (10) Days of
PONENTE: FERNANDEZ, J. prisioncorreccional as maximum, to indemnify the heirs of the deceased Elena
DOCTRINE: Under the particular circumstances of the instant case, the petitioner- Awichen.
driver who skidded could not be regarded as negligent, the skidding being an APPELLATE COURT: Affirming the trial court, it held that it is not therefore
unforeseen event, so that the petitioner had a valid excuse for his departure from improbable that due to lack of sufficient skin and confidence in driving, he lost his
his regular course. The negligence of the petitioner not having been sufficiently nerve when confronted by an emergency due to his negligence in driving at an
established, his guilt of the crime charged has not been proven beyond reasonable unreasonable speed on a narrow and slippery road and was at a loss what to do —
doubt. He is, therefore, entitled to acquittal. indeed, at no time did he step on the brakes — he failed to control the jeep after it

Page 74 of 151
skidded. On the whole, we are, satisfied that the fatal and unfortunate accident was
due to appellant's failure to exercise due diligence under the circumstances.
SC:Bayasen was not negligent. It is obvious that the proximate cause of the tragedy
was the skidding of the rear wheels of the jeep and not the "unreasonable speed"
of the petitioner because there is no evidence on record to prove or support the
finding that the petitioner was driving at "an unreasonable speed". It is a known
physical tact that cars may skid on greasy or slippery roads, as in the instant case,
without fault on account of the manner of handling the car. Skidding means partial
or complete loss of control of the car under circumstances not necessarily implying
negligence. It may occur without fault. No negligence as a matter of law can,
therefore, be charged to the petitioner. In fact, the moment he felt that the rear
wheels of the jeep skidded, he promptly drove it to the left hand side of the road,
parallel to the slope of the mountain, because as he said, he wanted to play safe
and avoid the embankment.
#ABILO
2. Traffic Rules
CASE TITLE:MALLARI vs. CA
KEYWORD: collision due to overtaking
PONENTE:Bellosillo, J
DOCTRINE:Under Art. 2185 of the Civil Code, 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 a traffic regulation.
SHORT FACTS:
On October 14, 1987, at about 5:00 o'clock in the morning, the passenger
jeepney driven by petitioner Alfredo Mallari Jr. and owned by his co-petitioner
Alfredo Mallari Sr. collided with the delivery van of respondent Bulletin Publishing
Corp. (BULLETIN) along the National Highway in Barangay San Pablo, Dinalupihan,
Bataan. Petitioner Mallari Jr. testified that he went to the left lane of the highway
and overtook a Fiera which had stopped on the right lane. Before he passed by the
Fiera, he saw the van of respondent BULLETIN, driven by one Felix Angeles, coming
from the opposite direction. The sketch of the accident showed that the collision
occurred after Mallari Jr. overtook the Fiera while negotiating a curve in the
highway. The impact caused the jeepney to turn around and fall on its left side
resulting in injuries to its passengers one of whom was Israel Reyes who eventually
died due to the gravity of his injuries. Claudia G. Reyes, the widow of Israel M.
Reyes, then filed a complaint for damages against Alfredo Mallari Sr. and Alfredo
Mallari Jr., and also against BULLETIN, its driver Felix Angeles, and the N.V.
Netherlands Insurance Company.
Page 75 of 151
ISSUE:W/N the proximate cause of the collision was the sole negligence of
petitioner Alfredo Mallari Jr., driver of the jeepney, thus, making him and his co-
petitioner liable
PETITIONER’s  CONTENTION:
Petitioners contend that there is no evidence to show that petitioner
Mallari Jr. overtook a vehicle at a curve on the road at the time of the accident and
that the testimony of Angeles (Bulletin’s  driver)  on  the  overtaking  made  by  Mallari  
Jr. was not credible and unreliable. Petitioner also submits that the trial court was
in a better position than the Court of Appeals to assess the evidence and observe
the witnesses as well as determine their credibility.
RESPONDENT’S  CONTENTION:
Contrary to their allegation that there was no evidence whatsoever that
petitioner Mallari Jr. overtook a vehicle at a curve on the road at the time of or
before the accident, the same petitioner himself testified that such fact indeed did
occur
RULING:
1) TRIAL COURT: GRANTED
The trial court found that the proximate cause of the collision was the
negligence of Felix Angeles, driver of the Bulletin delivery van, considering the fact
that the left front portion of the delivery truck driven by Felix Angeles hit and
bumped the left rear portion of the passenger jeepney driven by Alfredo Mallari Jr.
Hence, it ordered BULLETIN and Felix Angeles to pay jointly and severally Claudia G.
Reyes, widow of the deceased victim.
2) APPELLATE COURT: DENIED
The CA found no negligence on the part of Angeles and consequently of his
employer, respondent BULLETIN. Instead, the appellate court ruled that the
collision was caused by the sole negligence of petitioner Alfredo Mallari Jr. who
admitted that immediately before the collision and after he rounded a curve on the
highway, he overtook a Fiera which had stopped on his lane and that he had seen
the van driven by Angeles before overtaking the Fiera.
3) SUPREME COURT: DENIED
The CA correctly found that the collision occurred immediately after
petitioner Mallari Jr. overtook a vehicle in front of it while traversing a curve on the
highway. This act of overtaking was in clear violation of Sec. 41, pars. (a) and (b), of
RA 4136 as amended, otherwise known as The Land Transportation and Traffic
Code. The rule is settled that a driver abandoning his proper lane for the purpose of
overtaking another vehicle in an ordinary situation has the duty to see to it that the
road is clear and not to proceed if he cannot do so in safety.When a motor vehicle is
approaching or rounding a curve, there is special necessity for keeping to the right
side of the road and the driver does not have the right to drive on the left hand side
relying upon having time to turn to the right if a car approaching from the opposite
direction comes into view
Clearly, the proximate cause of the collision resulting in the death of Israel
Reyes, a passenger of the jeepney, was the sole negligence of the driver of the
passenger jeepney, petitioner Alfredo Mallari Jr., who recklessly operated and
drove his jeepney in a lane where overtaking was not allowed by traffic rules. Under
Art. 2185 of the Civil Code, 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 a traffic regulation. As found by the appellate court, petitioners failed
to present satisfactory evidence to overcome this legal presumption. #AFAN
CASE TITLE: GREGORIO PESTAÑO and METRO CEBU AUTOBUS CORPORATION
vs. Spouses TEOTIMO SUMAYANG and PAZ C. SUMAYANG
KEYWORD:faulty speedometer
PONENTE: PANGANIBAN, J
DOCTRINE:When an injury is caused by the negligence of a servant or an employee,
the master or employer is presumed to be negligent either in the selection or in the
supervision of that employee. This presumption may be overcome only by
satisfactorily showing that the employer exercised the care and the diligence of a
good father of a family in the selection and the supervision of its employee.
SHORT FACTS:
It  appears  from  the  records  that  at  around  2:00  o’clock  [o]n  the  afternoon  of  August  
9, 1986, Ananias Sumayang was riding a motorcycle along the national highway in
Ilihan, Tabagon, Cebu. Riding with him was his friend Manuel Romagos. As they
came upon a junction where the highway connected with the road leading to
Tabagon, they were hit by a passenger bus driven by [Petitioner] Gregorio Pestaño
and owned by [Petitioner] Metro Cebu Autobus Corporation (Metro Cebu, for
brevity), which had tried to overtake them, sending the motorcycle and its
passengers hurtling upon the pavement. Both Ananias Sumayang and Manuel
Romagos were rushed to the hospital in Sogod, where Sumayang was pronounced
dead on arrival. Romagos  was  transferred  to  the  Cebu  Doctors’  Hospital,  but  he   latter’s  employer  under  Article  2180  of  the  Civil  Code,  as  [Petitioner]
succumbed to his injuries the day after.
ISSUE:
Whether or not CA was wrong in attributing the accident to a faulty speedometer
and in implying that the accident could have been avoided had this instrument been
properly functioning.
PETITIONER’S  CONTENTION:
Page 76 of 151
Petitioners contend that Pestaño was not under any obligation to slow down
when he overtook the motorcycle, because the deceased had given way to him
upon hearing the bus horn. Seeing that the left side of the road was clearly visible
and free of oncoming traffic, Pestaño accelerated his speed to pass the
motorcycle. Having given way to the bus, the motorcycle driver should have slowed
down until he had been overtaken.
They further contend that the motorcycle was not in the middle of the road
nearest to the junction as found by the trial and the appellate courts, but was on
the inner lane. This explains why the damage on the bus were all on the right side –
the right end of the bumper and the right portion of the radiator grill were bent and
dented. Hence, they insist that it was the victim who was negligent.
RESPONDENT’S  CONTENTION:  
Respondents rely mainly on the testimonies of Ignacio Neis, Pat.
AquilinoDinoy and TeotimoSumayang, father of the deceased. Neis declared that
he saw the incident while he was sitting on a bench beside the highway; that both
vehicles c[a]me from the North; that as the motorcycle approached the junction to
Tab[a]gon, the driver Ananias Sumayangsignalled with his left arm to indicate that
he was taking the Tab[a]gon Road; that the motorcycle did turn left but as it did so,
it was bumped by an overspeeding bus; that the force of the impact threw Ananias
Sumayang and his companion Manuel Romagos about 14 meters away. The
motorcycle, Neis continued, was badly damaged as it was dragged by the bus.
RULING:
1. TRIAL COURT
The lower court found [Petitioner] Pestaño to have been negligent in
driving the passenger bus that hit the deceased. It was shown that
Pestaño negligently attempted to overtake the motorcycle at a dangerous
speed as they were coming upon a junction in the road, and as the
motorcycle was about to turn left towards Tabagon. The court likewise
found Metro Cebu directly and primarily liable, along with Pestaño, the
 
Metro Cebu failed to present evidence to prove that it had observed x xx
[the] diligence of a good father of a family to prevent damage. Nor has
Metro Cebu proven that it had exercised due diligence in the supervision
of its employees and in the maintenance of vehicles.
2. APPELLATE COURT
The  CA  affirmed  respondent’s  liability  for  the  accident  and  for  Sumayang’s  
death. Pestaño  was  negligent  when  he  tried  to  overtake  the  victim’s
 motorcycle at the Tabagon junction. As a professional driver operating a
public transport vehicle, he should have taken extra precaution to avoid
accidents, knowing that it was perilous to overtake at a junction, where
adjoining roads had brought about merging and diverging traffic.
The appellate court opined that Metro Cebu had shown laxity in the
conduct of its operations and in the supervision of its employees. By
allowing the bus to ply its route despite the defective speedometer, said
petitioner showed its indifference towards the proper maintenance of its
vehicles. Having failed to observe the extraordinary diligence required of
public transportation companies, it was held vicariously liable to the
victims of the vehicular accident.
3. SUPREME COURT
DENIED.
Petitioners  are  raising  a  question  of  fact  based  on  Pestaño’s   explosions caused by articles brought into its conveyances by other passengers, in
testimony contradicting that of Eyewitness Ignacio Neis and on the
location of the dents on the bumper and the grill. Neis testified that as the
two vehicles approached the junction, the victim raised his left arm to
signal that he was turning left to Tabagon, but that the latter and his
companion were thrown off the motorcycle after it was bumped by the
overspeeding bus.
As a professional driver operating a public transport bus, he
should have anticipated that overtaking at a junction was a perilous
maneuver and should thus have exercised extreme caution.
Petitioners failed to demonstrate that this case falls under any of
the recognized exceptions to this rule. Indeed, the issue of negligence is
basically factual and, in quasi-delicts, crucial in the award of damages.
This contention has no factual basis. Under Articles 2180 and
2176 of the Civil Code, owners and managers are responsible for damages
caused by their employees.
The CA said that allowing Pestaño to ply his route with a defective
speedometer showed laxity on the part of Metro Cebu in the operation of
its business and in the supervision of its employees. The negligence
alluded to here is in its supervision over its driver, not in that which directly
caused the accident. The fact that Pestaño was able to use a bus with a
faulty speedometer shows that Metro Cebu was remiss in the supervision
of its employees and in the proper care of its vehicles. It had thus failed to
conduct its business with the diligence required by law. #AGUILA
Page 77 of 151
3. Duty to Inspect
CASE TITLE: HERMINIO L. NOCUM vs. LAGUNA TAYABAS BUS COMPANY
KEYWORD: FIRECRACKERS
PONENTE: BARREDO
DOCTRINE: A carrier is ordinarily not liable for injuries to passengers from fires or
the absence of any evidence that the carrier, through its employees, was aware of
the nature of the article or had any reason to anticipate danger therefrom.
SHORT FACTS: a man with a box went up the baggage compartment of the bus
where he already was and said box was placed under the seat. They left Azcarraga
at about 11:30 in the morning and when the explosion occurred, he was thrown
out. PC investigation report states that thirty seven (37) passengers were injured.
The bus conductor, Sancho Mendoza, testified that the box belonged to a passenger
whose name he does not know and who told him that it contained miscellaneous
items and clothes. He helped the owner in loading the baggage which weighed
about twelve (12) kilos. From its appearance there was no indication at all that the
contents were explosives or firecrackers. Neither did he open the box because he
just relied on the word of the owner.
ISSUE: Whether or not Laguna Tayabas Bus Company is liable for damages for not
having exerted extraordinary diligence for the safety of the passengers.
PETITIONER’S  CONTENTION  (Laguna  Tayabas  Bus  Company):  That  its  employees  
observed the extraordinary dilligence required when it made an inquiry as to the
contents of the said box.
RESPONDENT’S  CONTENTION(HerminioNocum):  -Apellee did not file a brief- As
inferred from the case, Nocum asserts that Laguna Tayabas Bus Company did not
observe the diligence required for it did not inspect the contents of the said box
and merely relied on what the passenger said on what the box contained.
RULING:
1. TRIAL COURT
GUILTY. The RTC ruled in favor of Nocum. The court said that an inspection of the
contents of the box was necessary in order to consider Laguna Tayabas Bus
Company as having compied with the diligence required for the safety of the
passengers.
2. APPELLATE COURT
DENIED. The CA affirmed the decidion of the RTC.
3. SUPREME COURT
REVERSED. The Supreme Court ruled that there is need for evidence of
circumstances indicating cause or causes for apprehension that the passenger's
baggage is dangerous and that it is failure of the common carrier's employee to act
in the face of such evidence that constitutes the cornerstone of the common
carrier's liability. Without the said evidence of danger and reason to suspect that
the  contents  of  a  passenger’s  baggage  might  be  hazardous  or  dangerous,  The   within the stipulated 2-week period and so lost his employment.
common carrier need not inspect the said baggage for the right to privacy to which
each passenger is entitledmust be considered. He cannot be subjected to any
unusual search. inquiry may be verbally made as to the nature of a passenger's
baggage when such is not outwardly perceptible, but beyond this, constitutional
boundaries are already in danger of being transgressed. A carrier is ordinarily not
liable for injuries to passengers from fires or explosions caused by articles brought
into its conveyances by other passengers, in the absence of any evidence that the
carrier, through its employees, was aware of the nature of the article or had any
reason to anticipate danger therefrom. #AGUILAR
D. Extraordinary Diligence in Carriage by Air
CASE TITLE: KOREAN AIRLINES CO., LTD., petitioner, vs. COURT OF
APPEALS and JUANITO C. LAPUZ, respondents
KEYWORD: DOWN!
PONENTE: CRUZ, J.:
DOCTRINE: The contract of air carriage generates a relation attended with a public
duty  and  any  discourteous  conduct  on  the  part  of  the  carrier’s  employees  toward  a   COURT OF APPEALS: Affirmed the decision of the Trial Court with the following
passenger gives the latter an action for damages against the carrier.
FACTS: Sometime in 1980, Juanito C. Lapuz, an automotive electrician, was
contracted for employment in Jeddah, Saudi Arabia, for a period of one year
through Pan Pacific Overseas Recruiting Services, Inc. Lapuz was supposed to leave
on November  8,  1980,  via  Korean  Airlines.  Initially,  he  was  “wait-listed,”  which   paid.
meant that he could only be accommodated if any of the confirmed passengers
failed to show up at the airport before departure. When two of such passengers did
not appear, Lapuz and another person by the name of Perico were given the two
unclaimed seats.
Page 78 of 151
PETITIONER’S  CONTENTION:  According  to  Lapuz,  he  was  allowed  to  check  in  with  
one suitcase
and one shoulder bag at the check-in counter of KAL. He passed through the
customs and immigration sections for routine check-up and was cleared for
departure as Passenger No. 157 of KAL Flight No. KE 903. Together with the other
passengers, he rode in the shuttle bus and proceeded to the ramp of the KAL
aircraft for boarding. However, when he was at the third or fourth rung of the
stairs,  a  KAL  officer  pointed  to  him  and  shouted  “Down!  Down!”  He  was  thus  barred  
from taking the flight. When he later asked for another booking, his ticket was
canceled by KAL. Consequently, he was unable to report for his work in Saudi Arabia
RESPONDENT’S  CONTENTION:  KAL,  on  the  other  hand,  alleged  that  on  November  8,  
1980, Pan Pacific Recruiting Services Inc. coordinated with KAL for the departure of
30 contract workers, of whom only 21 were confirmed and 9 were wait-listed
passengers. The agent of Pan Pacific, Jimmie Joseph, after being informed that
there was a possibility of having one or two seats becoming available, gave priority
to Perico, who was one of the supervisors of the hiring company in Saudi Arabia.
The other seat was won through lottery by Lapuz. However, only one seat became
available and so, pursuant to the earlier agreement that Perico was to be given
priority, he alone was allowed to board.
ISSUE: Whether or not there was a breach of contract of air carriage
RULING:
TRIAL COURT: Regional Trial Court of Manila, Branch 30,adjudged KAL liable for
damages. KAL is ordered to pay actual/compensatory damages of 272,160,
attorney’s  fees  of  25,000, and the cost of suit.
modifications: the amount of actual damages and compensatory damages is
reduced to P60,000.00 and
defendant-appellant is hereby ordered to pay plaintiff-appellant the sum of One
Hundred Thousand Pesos (P100,000.00) by way of moral and exemplary damages,
at 6% interest per annum from the date of the filing of the Complaint until fully
SUPREME COURT: YES. Judgment is AFFIRMED, but withthe modification that the
legal interest on the damages awarded toprivate respondent should commence
from the date of the decisionof the trial court on November 14, 1990. The parties
shall bear their own costs. The status of Lapuz as standby passenger was changed to
thatof a confirmed passenger when his name was entered in thepassenger manifest
of KAL for its Flight No. KE 903. His clearance through immigration and customs
clearly shows that he had indeed been confirmed as a passenger of KAL in that
flight. KAL thus committed a breach of the contract of carriage between them when
it failed to bring Lapuz to his destination. This Court has held that a contract to
transport passengers is different in kind and degree from any other contractual
relation.The business of the carrier is mainly with the traveling public. It invites
people to avail themselves of the comforts and advantages it offers. The contract of
air carriage generates a relation attended with a public duty. Passengers have the
right to be treated by the carrier’s  employees  with  kindness,  respect,  courtesy  and   Bustamante much less to PAL for the occurrence in 1951, hence PAL cannot be held
due consideration. They are entitled to be protected against personal misconduct,
injurious language, indignities and abuses from such employees.So it is that any
discourteous conduct on the part of these employees toward a passenger gives the
latter an action for damages against the carrier.The breach of contract was
aggravated in this case when,instead of courteously informing Lapuz of his being a
“wait-listed”passenger,  a  KAL  officer  rudely  shouted  “Down!  Down!”  whilepointing  
at him, thus causing him embarrassment and publichumiliation. #ARITCHETA
CASE TITLE:PHILIPPINE AIRLINES (PAL ) V. COURT OF APPEALS AND JESUS
SAMSON
KEYWORD/S: Co-pilot; crash-landing; brain concussions
PONENTE:GUERRERO, J
DOCTRINE: The duty to exercise the utmost diligence on the part of common
carriers is for the safety of passengers as well as for the members of the crew or the
complement operating the carrier, the airplane in the case at bar. And this must be
so for any omission, lapse or neglect thereof will certainly result to the damage,
prejudice, nay injuries and even death to all aboard the plane, passengers and crew
members alike.
SHORT FACTS: Jesus Samson, a licensee aviator, was employed by PAL as a regular
co-pilot. He was assigned to and/or paired with pilot Bustamante.Sometime in
1950, he complained to PAL about the slow reaction and poor judgment of pilot
Bustamante but despite the same, defendant PAL allowed the pilot to continue
flying.In 1951, the two manned the afternoon flight from Manila to Legaspi, with
stops at Daet, Camarines Norte, and Pili, Camarines Sur. Upon making a landing at
Daet, Bustamante, with his slow reaction and poor judgment, overshot the airfield
and, as a result of and notwithstanding diligent efforts of Samson to avert an
accident, the airplane crash-landed beyond the runway into a mangrove causing
Samson to hit his head upon the front windshield of the plane thereby causing his
brain concussions and wounds on the forehead. He, however, was not given proper
Page 79 of 151
medical attention. On top of that negligence, PAL recalled plaintiff to active duty as
a co-pilot, ignoring his plea for expert medical assistance.To make matters worse
for Samson, PAL discharged him from his employment on the ground of physical
disability in 1953.
PETITIONER’S  CONTENTIONS:  PAL claims that the injuries suffered by Samson were
superficial  in  nature;  that  the  “periodic  spells,  headache,  and  general  debility”  
complaint of every now and then by Samson subsequent to the incident were due
to emotional disturbances and that no negligence can be attributed to Capt. Delfin
liable for damages.
RESPONDENT’S  CONTENTIONS:  There  was  gross  negligence  on  the  part of PAL for
having allowed Capt. Delfin Bustamante to fly on that fateful day of the accident on
January 8, 1951 despite the fact that the latter was sick.
ISSUE: Whether or not PAL exercised extraordinary diligence in the discharge of its
duty?-NO
TRIAL COURT: RULED FOR PRIVATE RESPONDENT. It awarded damages in favor of
Samson.The trial court arrived at the sum of P198,000.00 as unearned income by
considering that respondent Samson could have continued to work as airline pilot
for fifteen more years, he being only 38 years at the time the services were
terminated by the defendant PAL.
CA: RULED FOR PRIVATE RESPONDENT, declaring that there is no question about
the employment of Samson by PAL, his age and salary, the overshooting and
crashlanding in a mangrove by Bustamante, his hitting his head on the front
windshield of the plane, his intermittent dizzy spells, headache and general debility
for which he was discharged from his employment in 1953. The award for damages
was however modified.
RULING: PETITION DENIED. Petitioner is a common carrier 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, as defined in Art. 1732, New
Civil Code. The law is clear in requiring a common carrier to exercise the highest
degree of care in the discharge of its duty and business of carriage and
transportation.As established by evidence, the pilot (Bustamante) used to get
treatments. He used to complain of pain in the face more particularly in the nose
which  caused  him  to  have  sleepless  nights.  Samson’s  observation  of  the  pilot  was  
reported to the Chief Pilot who did nothing about it. Assuming that the pilot was
not sick or that the tumor did not affect the pilot in managing the plane, evidence
shows that the overshooting of the runway and crash-landing at the mangrove was
caused by the pilot for which acts PAL must answer for damages caused thereby.
And  for  this  negligence  of  defendant’s  employee,  it  is  liable.  The law presumes the
employer negligent imposing upon it the burden of proving that it exercised the
diligence of a good father of a family in the supervision of its employees.
#ASUNCION
Case Title: Zalameavs CA &TWA
Keyword: wait-list, US law
Ponente: Nocon, J.
Doctrine: Foreign laws do not prove themselves nor can the court take judicial
notice of them. Like any other fact, they must be alleged and proved.
Court of Appeals: The CA, however, reversed this, holding that moral damages are
recoverable in a damage suit predicated upon a breach of contract of carriage only
where there is fraud or bad faith. Since it is a matter of record that overbooking of
flights is a common and accepted practice of airlines in the United States, no fraud
nor bad faith could be imputed on respondent TransWorld Airlines.
Supreme Court: .The CA was in error. There was fraud or bad faith on the part of
TWA when it did not allow Mrs. Zalamea and her daughter to board their flight for
Los Angeles in spite of confirmed tickets. The US law or regulation allegedly
authorizing overbooking has never been proved. #BRILLANTES

Short Facts: SpsZalamea and their daughter purchased 3 airline tickets from TWA
from its Manila agent for a flight to New York to LA. Two tickets were purchased at
a discounted rate of 75% while one was purchased in its full value. All three tickets
were confirmed and reconfirmed. However, of the appointed date, they were
placed on the wait-list because the number of passengers who had checked in
before them had already taken all of the seats. Those having full fare tickets were
given priority among those in the wait-list. Thus, Cesar Zalamea was able to board
such flight because he was holding the full fare ticket.

Issue: Whether or not said policies (that overbooking of flights is a common and
accepted practice in the US, thus does not amount to bad faith) were incorporated
or  deemed  written  on  petitioners’  contracts  of  carriage.

Petitioner's Contention: Zalamea filed an action for damages based on breach of

contract of air carriage IV. BILL OF LADING AND OTHER FORMALITIES
A. Concepts
Respondent's Contention: it is a matter of record that overbooking of flights is a 1. Definition
common and accepted practice of airlines in the United States and is specifically
allowed under the Code of Federal Regulations by the Civil Aeronautics Board,
neither fraud nor bad faith could be imputed on TWA. Case Title: Macondray and Co, Inc. vs. Acting Commissioner of Customs
Keyword: Unmanifested cargoes
Ruling: Ponente: Esguerra, J.
Doctrine: Bill of Lading
Trial Court: Trial court awarded the Zalameas moral damages, among others, based Facts:  On  November  2,  1962,  the  vessel  S/S  “TAI  PING”,  of  which  petitioner  is  the  
on breach of contract of carriage. local agent, arrived at the port of Manila from San Francisco, California, U.S.A.,
conveying various shipments of merchandise, among which was a shipment of one
Page 80 of 151
(1) coil carbon steel, one (1 bundle carbon steel flat and one (1) carbon containing
carbon tool holders carbide cutters, ground, all of which appeared in the Bill of
Lading No. 22, consigned to Bogo Medellin Millings Co., Inc. The shipment, except
the one (1) coil carbon steel was not reflected in the Inward Cargo Manifest as
required by Section 1005 in relation to Section 2521 of the Tariff and Custom Code
of the Philippines. Allied Brokerage Corporation, acting for and in behalf of Bogo
Medellin Milling Co. requested petitioner Macondray & Co., agent of the vessel S/S
“TAI  PING”,  to  correct  the  manifest  of  the  steamer so that it may take delivery of
the goods at Customs House. Collector of Custom required petitioner to explain and
show cause why no administrative fine should be imposed upon said vessel. The
fine of ₱ 1,000.00 was paid by petitioner under protest. Hearing of the protest
proceeded thereafter.
Collector of Customs of the Port of Manila ordered the dismissal of said protest for
lack of merit. On appeal to the Commissioner of Customs the latter sustained the
Collector of Customs. Petitioner filed a petition for review with the Court of Tax
Appeals. The CTA affirmed the decision of the Collector of Customs as affirmed by
the Commissioner of Customs.
Issue: Whether or not the Collector of Customs erred in imposing a fine on vessel,
S/S TAI PING, for alleged violation of Section 1005 in relation to Section 2521 of the
Tariff and Customs Code for landing unmanifested cargo at the port of Manila.
Ruling:
Collector of Customs: Held petitioner liable and imposed fine of P1000 upon
petitioner violation of Sec. 1005 in relation to Sec. 2521 of the Tariff and Customs
Code on unmanifested cargoes.
Court of Tax Appeal: affirmed the decision of Commissioner
SC: The inclusion of the unmanifested cargoes in the Bill of Lading does not satisfy
the requirement of the aforequoted sections of the Tariff and Customs Code. It is to
be noted that nowhere in the said sections is the presentation of a Bill of Lading
required required, but only the presentation of a Manifest containing a true and
accurate description of the cargoes. This is for the simple reason that while a
manifest is a declaration of the entire cargo, a bill of lading is but a declaration of a
specific part of the cargo and is a matter of business convenience based exclusively
on a contract. The Court cannot accept or place an implied imprimatur on the
contention of petitioner that the entries in the bill of lading adequately supplied the
deficiency of the manifest and cured its infirmity. The mandate of the law is clear
and Court cannot settle for less. The law imposes the absolute obligation, under
penalty for failure, upon every vessel from a foreign port to have on board
complete written or typewritten manifests of all her cargo, signed by the master.
Where the law requires a manifest to be kept or delivered, it is not complied with
unless the manifest is true and accurate.
Page 81 of 151
Amendment of cargo manifest even if later approved by customs authorities does
not relieve carrying vessel of liability of fine incurred prior to its correction. The
philosophy and purpose behind the law authorizing amendment, under paragraph 3
of Section 1005 of the Tariff and Customs Code, is to protect innocent importers or
consignees from the mistake or unlawful acts of the master. #Capco
2. Kinds
CASE TITLE: MAGELLAN MANUFACTURING MARKETING CORPORATION vs. COURT
OF APPEALS, ORIENT OVERSEAS CONTAINER LINES and F.E. ZUELLIG, INC
Keyword: Anahaw
PONENTE: J. Regalado
DOCTRINE: An on board bill of lading is one in which it is stated that the goods have
been received on board the vessel which is to carry the goods, whereas a received
for shipment bill of lading is one in which it is stated that the goods have been
received for shipment with or without specifying the vessel by which the goods are
to be shipped. Received for shipment bills of lading are issued whenever conditions
are not normal and there is insufficiency of shipping space.
FACTS: On May 20, 1980, plaintiff-appellant Magellan Manufacturers Marketing
Corp. (MMMC) entered into a contract with Choju Co. of Yokohama, Japan to
export 136,000 anahaw fans for and in consideration of $23,220.00. As payment
thereof, a letter of credit was issued to plaintiff MMMC by the buyer. Through its
president, James Cu, MMMC then contracted F.E. Zuellig, a shipping agent, through
its solicitor, one Mr. King, to ship the anahaw fans through the other appellee,
Orient Overseas Container Lines, Inc., (OOCL) specifying that he needed an on-
board bill of lading and that transhipment is not allowed under the letter of credit .
On June 30, 1980, appellant MMMC paid F.E. Zuellig the freight charges and
secured a copy of the bill of lading which was presented to Allied Bank. The bank
then credited the amount of US$23,220.00 covered by the letter of credit to
appellant's account. However, when appellant's president James Cu, went back to
the bank later, he was informed that the payment was refused by the buyer
allegedly because there was no on-board bill of lading, and there was a
transhipment of goods. As a result of the refusal of the buyer to accept, upon
appellant's request, the anahaw fans were shipped back to Manila by appellees, for
which the latter demanded from appellant payment of P246,043.43. Appellant
abandoned the whole cargo and asked appellees for damages.
PETITIONER’S  CONTENTION:  When petitioner informed private respondents about
what happened, the latter issued a certificate stating that its bill of lading it issued is
an on board bill of lading and that there was no actual transhipment of the fans
RESPONDENT’S  CONTENTION:  In  answer  thereto  the  private  respondents  alleged   (which means that the bill of lading is an on- board-bill of lading or 'shipped' bill of
that the bill of lading clearly shows that there will be a transhipment and that
petitioner was well aware that MV (Pacific) Despatcher was only up to Hongkong
where the subject cargo will be transferred to another vessel for Japan.
ISSUE: Whether or not there is transhipment
TRIAL COURT: Decided in favor of the Private Respondents. It dismissed the
complaint on the ground that petitioner had given its consent to the contents of the
bill of lading where it is clearly indicated that there will be transhipment. The
petitioner is liable to pay to private respondent the freight charges from Japan to
Manila and demurrages amounting to P298, 150.93
CA: AFFIRMED the decision of the lower court. Reduced to P52,102.45 which
represents the freight charges and demurrages incurred in Japan but not for the
demurrages incurred in Manila.
SC: YES. Transhipment, in maritime law, is defined as "the act of taking cargo out of
one ship and loading it in another," or "the transfer of goods from the vessel
stipulated in the contract of affreightment to another vessel before the place of
destination named in the contract has been reached," or "the transfer for further
transportation from one ship or conveyance to another." The fact of transhipment
is not dependent upon the ownership of the transporting ships or conveyances or in
the change of carriers, as the petitioner seems to suggest, but rather on the fact of
actual physical transfer of cargo from one vessel to another.
The holding in most jurisdictions has been that a shipper who receives a bill of
lading without objection after an opportunity to inspect it, and permits the carrier
to act on it by proceeding with the shipment is presumed to have accepted it as
correctly stating the contract and to have assented to its terms. In other words, the
acceptance of the bill without dissent raises the presumption that all the terms
therein were brought to the knowledge of the shipper and agreed to by him and, in
the absence of fraud or mistake, he is estopped from thereafter denying that he
assented to such terms.
Another ground for the refusal of acceptance of the cargo of anahaw fans by Choju
Co., Ltd. was that the bill of lading that was issued was not an on board bill of
lading, in clear violation of the terms of the letter of credit issued in favor of
petitioner.
Herein petitioner cannot feign ignorance of the distinction between an "on board"
and a "received for shipment" bill of lading, as manifested by James Cu's testimony.
It is only to be expected that those long engaged in the export industry should be
familiar with business usages and customs.
In its petition, MMMC avers that "when petitioner teamed of what happened, it
saw private respondent F.E. Zuellig which, in turn, issued a certification that as of
June 30, 1980, the Anahaw fans were already on board MV Pacific Despatcher
Page 82 of 151
lading as distinguished from a 'received for shipment 'bill of lading as governed by
Sec. 3, par. 7, Carriage of Goods by Sea Act) ...." What the petitioner would suggest
is that said certification dated July 19, 1980, had the effect of converting the
original "received for shipment only" bill of lading into an "on board" bill of lading
as required by the buyer and was, therefore, by substantial compliance, not
violative of the contract.
An on board bill of lading is one in which it is stated that the goods have been
received on board the vessel which is to carry the goods, whereas a received for
shipment bill of lading is one in which it is stated that the goods have been received
for shipment with or without specifying the vessel by which the goods are to be
shipped. Received for shipment bills of lading are issued whenever conditions are
not normal and there is insufficiency of shipping space.
It cannot plausibly be said that the aforestated certification of F.E. Zuellig, Inc. can
qualify the bill of lading, as originally issued, into an on board bill of lading as
required by the terms of the letter of credit issued in favor of petitioner. For one,
the certification was issued only on July 19, 1980, way beyond the expiry date of
June 30, 1980 specified in the letter of credit for the presentation of an on board
bill of lading.
The fact remains, though, that on the crucial date of June 30, 1980 no on board bill
of lading was presented by petitioner in compliance with the terms of the letter of
credit and this default consequently negates its entitlement to the proceeds
thereof. Said certification, if allowed to operate retroactively, would render illusory
the guaranty afforded by an on board bill of lading, that is, reasonable certainty of
shipping the loaded cargo aboard the vessel specified
#Castillo
B. Bill of Lading as Contract
1. Prohibited and Limiting Stipulations
Ysmael vs. Barretto
G.R. No. L-28028; November 25, 1927
Keyword: Defendants (carrier) stipulate that it is not liable for loss or damage to an
amount exceeding P300 per package of silk
Ponente: JOHNS, J.
Doctrine: A common carrier cannot lawfully stipulate for exemption from liability,
unless such exemption is just and reasonable and the contract is freely and fairly
made.
Facts: In this action plaintiff, a domestic corporation, seeks to recover from the
defendants P9,940.95 the alleged value of four cases of merchandise which it
delivered to the steamship Andres, at Manila to be shipped to Surigao, but which
were never delivered to Salomon Sharuff, the consignee, or returned to the
plaintiff.
The defendants alleged that under provision 12 of the bill of lading, the carrier shall
not be liable for loss or damage from any cause or for any reason to an amount
exceeding three hundred pesos (P300) Philippine currency for any single package of
silk or other valuable cargo. Thus, the defendants alleged that they are not liable in
excess of three hundred pesos (P300) for any package of silk.
The lower court points out that the conditions (provision) in question "are not
printed on the triplicate copies which were delivered to the plaintiff," and that by
reason thereof they "are not binding upon the plaintiff" and thus rendered
judgment for the plaintiff for the full amount of its claim.
Issue: Whether or not provision 12 in the bill of lading is reasonable.
Held: No. A common carrier cannot lawfully stipulate for exemption from liability,
unless such exemption is just and reasonable and the contract is freely and fairly
made.
In the case at bar, the ship in question was a common carrier and, as such,
must have been operated as a public utility. It is a matter of common knowledge
that large quantities of silk are imported in the Philippine Islands, and that after
being imported, they are sold by the merchants in Manila and other large seaports,
and then shipped to different points and places in the Islands. Hence, there is
nothing unusual about the shipment of silk. In truth and in fact, it is a matter of
usual and ordinary business. There was no fraud or concealment in the shipment in
question. Clause 12 above quoted places a limit of P300 "for any single package of
silk." The evidence shows that 164 "cases" were shipped, and that the value of each
case was very near P2,500. In this situation, the limit of defendants' liability for each
case of silk "for loss or damage from any cause or for any reason" would put it in
the power of the defendants to have taken the whole cargo of 164 cases of silk at a
valuation of P300 for each case, or less than one-eight of its actual value. If that rule
of law should be sustained, no silk would ever be shipped from one island to
another in the Philippines. Such a limitation of value is unconscionable and void as
against public policy.
#Del Mundo
Page 83 of 151
CASE TITLE: SHEWARAM VS. PHILIPPINE AIRLINES
DOCTRINE: The carrier cannot limit its liability for injury to or loss of goods shipped
where such injury or loss was caused by its own negligence.
KEYWORD: MISTAGGED SUITCASE
PONENTE: ZALDIVAR,J.
FACTS:
Parmanand Shewaram,  was  on  defendant’s  aircraft  flight  from  Zamboanga  City  
bound for Manila. He checked in three (3) pieces of baggages—a suitcase and two
(2)  other  pieces;  that  the  suitcase  was  mistagged  by  defendant’s  personnel  in  
Zamboanga City, as I.G.N. (for Iligan), instead of MNL (for Manila). When plaintiff
arrived in Manila his suitcase did not arrive with his flight because it was sent to
Iligan.  So,  he  made  a  claim  with  defendant’s  personnel  in  Manila  airport  and  
another suitcase similar to his own which was the only baggage left for that flight
was given to the plaintiff for him to take delivery but he did not and refused to take
delivery of the same on the ground that it was not his, alleging that all his clothes
were white and the National transistor and a Rollflex camera were not found inside
the suitcase. Moreover, it contained a pistol which he did not have nor placed
inside  his  suitcase.  After  inquiries  made  by  defendant’s  personnel  in  Manila  from  
different airports where the suitcase in question must have been sent, it was found
to have reached Iligan and the station agent of the PAL in Iligan caused the same to
be sent to Manila for delivery to Mr. Shewaram and which suitcase belonging to the
plaintiff herein arrived in Manila airport. It was also found out that the suitcase
shown to and given to the plaintiff for delivery which he refused to take delivery
belonged to a certain Del Rosario who was bound for Iligan in the same flight with
Mr.  Shewaram.  When  the  plaintiff’s  suitcase  arrived  in  Manila  as  stated, he was
informed by Mr. Tomas Blanco, Jr., the acting station agent of the Manila airport of
the arrival of his suitcase but of course minus his Transistor Radio 7 and the Rollflex
Camera. Shewaram made demand for these two (2) items or for the value thereof
but the same was not complied with by defendant.
Before the municipal court of Zamboanga City, Shewaram instituted an action to
recover damages suffered by him due to the alleged failure of Philippines Air Lines,
Inc, to observe extraordinary diligence in the vigilance and carriage of his luggage.
It is contended by the appellant that its liability should be limited to the amount
stated in the conditions of carriage printed at the back of the plane ticket stub
which was issued to the appellee, which conditions are embodied in Domestic Tariff
Regulations No. 2 which was filed with the Civil Aeronautics Board. One of those
conditions, which is pertinent to the issue raised by the appellant in this case
provides  as  follows:  “The  liability,  if  any,  for  loss or damage to checked baggage or
for delay in the delivery thereof is limited to its value and, unless the passenger
declares in advance a higher valuation and pay an additional charge therefor, the The undertaking is to carry the goods, and to relieve the shipper from all liability for
value shall be conclusively deemed not to exceed P100.00 for each ticket. loss or damage arising from negligence in performing its contract is to ignore the
TRIAL COURT: contract itself. The natural effect of a limitation of liability against negligence is to
The tampering of the suitcase is more apparent when the suitcase arrived in induce want of care on the part of the carrier in the performance of its duty. The
Manila,  defendant’s  personnel  could  open  the  same  in  spite  of  the  fact  that  plaintiff   shipper and the common carrier are not on equal terms; the shipper must send his
had  it  under  key  when  he  delivered  the  suitcase  to  defendant’s  personnel in freight by the common carrier, or not at all; he is therefore entirely at the mercy of
Zamboanga City. Moreover, it was established during the hearing that there was the carrier unless protected by the higher power of the law against being forced
space in the suitcase where the two items in question could have been placed. It into  contracts  limiting  the  carrier’s  liability.  Such  contracts  are  wanting  in  the  
was also shown that as early as when plaintiff was notified by phone of the arrival element of voluntary assent.
of the suitcase, plaintiff asked that check of the things inside his suitcase be made #Dugeña
and defendant admitted that the two items could not be found inside the suitcase.
Defendant  had  presented  evidence  that  it  had  authority  to  open  passengers’  
baggage to verify and find its ownership or identity.
APPELLATE COURT:
Decision of the trial court appealed to SC. CASE TITLE: Ong Yiu vs. Court of Appeals
ISSUE: Can the common carrier limit its liability for loss of goods shipped where PONENTE: MELENCIO-HERRERA, J.
such was caused by its own negligence? KEYWORDS:  “MALETA”  nawawala  
DOCTRINE: Provisions in the ticket have been held to be a part of the contract of
RULING: carriage,  and  valid  and  binding  upon  the  passenger  regardless  of  the  latter’s  lack  of  
No. Article 1750 of the New Civil Code provides that the pecuniary liability of a knowledge or assent to the regulation
common carrier may, by contract, be limited to a fixed amount. It is required, FACTS: On August 26, 1967, Ong Yui was a Philippine Air Lines, Inc. (PAL), on board
however,  that  the  contract  must  be  “reasonable  and  just  under  the  circumstances   for a flight from Mactan, Cebu, bound for Butuan City. He was scheduled to attend
and has been fairly and freely agreed upon.”  The  requirements  provided  in  Article   a trial on August 28-31,  1967.  He  checked  in  one  piece  of  luggage,  a  blue  “maleta”  
1750 must be complied with before a common carrier can claim a limitation of its for which he was issued Claim Check No. 2106-R.
pecuniary liability in case of loss, destruction or deterioration of the goods it has Upon arrival, petitioner claimed his luggage but it could not be found. The luggage
undertaken to transport. In the case before us we believe that the requirements of had been carried to Manila. Instructions were given that the luggage will be
said article have not been met. It cannot be said that the appellee had actually forwarded to Butuan City on the first available flight from Cebu. However, PAL
entered into a contract with the appellant, embodying the conditions as printed at Butuan did not receive the message.
the back of the ticket stub that was issued by the appellant to the appellee. The fact When the morning flight arrived, which carried the missing luggage, petitioner
that those conditions are printed at the back of the ticket stub in letters so small already left after inquiring about it. (Note: He was not informed that his baggage
that they are hard to read would not warrant the presumption that the appellee would be carried by such flight). Thus, Emilio Dagorro, who used to drive for
was  aware  of  those  conditions  such  that  he  had  “fairly  and freely  agreed”  to  those   petitioner and who the porter clerk knew, volunteered to take the luggage to
conditions. petitioner.
The  validity  of  stipulations  limiting  the  carrier’s  liability  is  to  be  determined  by  their   Dagorro examined the lock, pressed it, and it opened. Dagorro delivered the
reasonableness and their conformity to the sound public policy, in accordance with “maleta”  to  petitioner,  with  the  information  that the lock was open. Upon
which the obligations of the carrier to the public are settled. It cannot lawfully inspection, petitioner found that some items are missing. Petitioner refused to
stipulate for exemption from liability, unless such exemption is just and reasonable, accept the luggage. Dagorro returned it to the porter clerk who sealed it and
and unless the contract is freely and fairly made. No contractual limitation is forwarded the same to PAL Cebu.
reasonable which is subversive of public policy. In a letter addressed to PAL, Cebu, petitioner demanded that his luggage be
produced intact, and that he be compensated. PAL, it its letter, replied that it failed

Page 84 of 151
to find the missing items as it had no inventory was taken of the cargo upon loading cannot be permitted a recovery in excess of P100.00. Besides, passengers are
them on any plane, thus, they have no way of knowing the real contents of the advised  not  to  place  valuable  items  inside  their  baggage  but  “to  avail  of  our  V- cargo
baggage when same was loaded. service”.  It  is  likewise  to  be  noted  that  there  is  nothing  in  the  evidence  to  show  the  
ISSUE: WON PAL should only pay the plaintiff the sum of P100.00, under the actual value of the goods allegedly lost by petitioner.
baggage liability printed at the back of the ticket? #Encarnacion
TRIAL COURT: Court found PAL is liable.
CA: PAL was guilty only of simple negligence, reversed the judgment of the trial CASE TITLE: Aboitiz vs CA (August 6, 1990)
Court granting petitioner moral and exemplary damages, but ordered PAL to pay Keyword/s: shipment- goods for apparel, TYPHOON YONING (no force majeure),
plaintiff the sum of P100.00, the baggage liability assumed by it under the condition basis of liability =actual loss (P278,530) and not $500.
of carriage printed at the back of the ticket. (Italics emphasized) Doctrine: a stipulation, limiting the common carrier's liability to the value of the
SC: As  a  general  proposition,  the  plaintiff’s  maleta  having  been  pilfered  while  in  the   goods appearing in the bill of lading, unless the shipper or owner DECLARES A
custody of the defendant, it is presumed that the defendanthad been negligent. GREATER VALUE, is valid.
The liability, however, of PAL for the loss, in accordance with the stipulation written Facts: On October 28, 1980, the vessel owned and operated by Aboitiz Shipping
on the back of the ticket is limited to P100.00 per baggage plaintiff not having Company M/V "P. Aboitiz" took on board in Hongkong for shipment to Manila some
declared a greater value, and not having called the attention of the defendant on its cargo consisting of one (1) twenty (20)-footer container holding 271 rolls of goods
true value and paid the tariff therefor. The validity of this stipulation is not for apparel covered by Bill of Lading No. 515-M and one (1) forty (40)-footer
questioned by the plaintiff. They are printed in reasonably and fairly big letters, and container holding four hundred forty- seven (447) rolls, ten (10) bulk and ninety-five
are easily readable. Moreover, plaintiff had been a frequent passenger of PAL from (95) cartons of goods for apparel covered by Bill of Lading No. 505-M. The total
Cebu to Butuan City and back, and he, being a lawyer and businessman, must be value, including invoice value, freightage, customs duties, taxes and similar imports
fully aware of these conditions. amounts to US$39,885.85 for the first shipment while that of the second shipment
TICKET READS: amounts to US$94,190.55. Both shipments were consigned to the Philippine
“8.  BAGGAGE  LIABILITY  .  .  .  The  total  liability  of  the  Carrier  for  lost  or   Apparel, Inc. and insured with the General Accident Fire and Life Assurance
damaged baggage of the passenger is LIMITED TO P100.00 for each ticket Corporation, Ltd. (GAFLAC)
unless a passenger declares a higher valuation in excess of P100.00, but not On October 31, 1980 on its way to Manila the vessel sunk and it was declared lost
in excess, however, of a total valuation of P 1,000.00 and additional charges with all its cargoes. GAFLAC paid the consignee the amounts US$39,885.85 or
are  paid  pursuant  to  Carrier’s  tariffs.” P319,086.80 and US$94,190.55 or P753,524.40 for the lost cargo. As GAFLAC was
There is no dispute that petitioner did not declare any higher value for his luggage, subrogated to all the rights, interests and actions of the consignee against Aboitiz, it
much less did he pay any additional transportation charge. filed an action for damages against Aboitiz in the Regional Trial Court of Manila
While it may be true that petitioner had not signed the plane ticket, he is alleging that the loss was due to the fault and negligence of Aboitiz and the master
nevertheless  bound  by  the  provisions  thereof.  “Such  provisions  have  been  held  to   and crew of its vessel in that they did not observe the extraordinary diligence
be a part of the contract of carriage, and valid and binding upon the passenger required by law as regards common carriers.
regardless  of  the  latter’s  lack  of  knowledge  or  assent  to  the  regulation”.  It  is  what  is   TC Ruling: it ruled against Aboitiz
known  as  a  contract  of  “adhesion”,  in  regards  which  it  has  been  said  that  contracts   CA Ruling: affirmed TC's ruling in toto
of adhesion wherein one party imposes a ready made form of contract on the Aboitiz's contentions:
other, as the plane ticket in the case at bar, are contracts not entirely prohibited. (1) the said sinking was subject to an investigation by Board of Marine Inquiry
The one who adheres to the contract is in reality free to reject it entirely; if he wherein it ruled that the said sinking was due to force majeure
adheres,  he  gives  his  consent.  “A  contract  limiting  liability  upon  an  agreed valuation (2) the said liability of Aboitiz should be fixed at US $500 per
does not offend against the policy of the law forbidding one from contracting package/container
against  his  own  negligence.” SC ruling: affirmed the ruling of the CA
Therefore, that petitioner had failed to declare a higher value for his baggage, he

Page 85 of 151
(1) the administrative findings of BMI that the said sinking was due to force majeure
is without merit. The case was brought to court on Octobee 28, 1981, the trial court
was never informed of the said parallel investigation and it was only in the year
1985 when Aboitiz revealed to the court about the said decision of BMI. The said
investigation was conducted unilaterally, GAFLAC was not notified or given
opportunity to participate.
The sinking was not due to the waves caused by tropical storm "YONING" but due
to the fault and negligence of Aboitiz, it's master and crew. It shows that during that
time the wind force was 10-15 knots which according to Beaufort Scale is classified
as scale no. 4 and was described as "moderate breeze , small waves, becoming
longer and fairly frequent white horses" meaning it was USUAL AND FORSEEABLE
and that the said depression was far from their route since it took a NORTHERN
APPROACH AND ABOITIZ WAS HEADING SOUTH.
(2) While it is true that in the bill of lading there is such stipulation that the liability
of the carrier is US$500.00 per package/container/customary freight, there is an
exception, that is, when the nature and value of such goods have been declared by
the shipper before shipment and inserted in the bill of lading. This is provided for in
Section 4(5) of the Carriage of Goods by Sea Act to wit —
(5) Neither the carrier nor the ship shall in any event be or become liable for any
loss or damage to or in connection with the transportation of goods in an amount
exceeding $500 per package of lawful money of the United States, or in case of
goods not shipped in packages, per customary freight unit, or the equivalent of that
sum in other currency, unless the nature and value of such goods have been
inserted in the bill of lading. This declaration, if embodied in the bill of lading, shall
be prima facie evidence, but shall not be conclusive on the carrier.
By agreement between the carrier, master or agent of the carrier, and the shipper
another maximum amount than that mentioned in this paragraph may be fixed:
Provided, that such maximum shall not be less than the figure above named. In no
event shall the carrier be liable for more than the amount of damage actually
sustained.
Neither the carrier nor the ship shall be responsible in any event for loss or damage
to or in connection with the transportation of the goods if the nature or value
thereof has been knowingly and fraudulently mis-stated by the shipper in the bill of
lading.
In the case at bar, the description of the nature and the value of the goods shipped
are declared and reflected in the bills of lading. Thus, it is the basis of the liability of
Page 86 of 151
the carrier as actual value of the loss. The term "CONTAINER" must be given the
same meaning and classification as a "PACKAGE" and "CUSTOMARY FREIGHT UNIT".
Generally speaking a stipulation, limiting the common carrier's liability to the value
of the goods appearing in the bill of lading, unless the shipper or owner DECLARES A
GREATER VALUE, is valid. Such stipulation must be REASONABLE AND JUST and
under circumstances and must have been fairly and and freely agreed upon. In the
case at bar, the goods shipped were insured for P278, 530.50, which may be taken
as their value. To limit the liability of the carrier to $500 would obviously put in its
power to have taken the whole cargo.
MOREOVER, BY THE WEIGHT OF MODERN AUTHORITY, A CARRIER CANNOT LIMIT
ITS LIABILITY FOR INJURY OR LOSS OF THE GOODS SHIPPED WHERE SUCH INJURY OR
LOSS WAS CAUSED BY ITS OWN NEGLIGENCE. TO LIMIT THE LIABILITY OF ABOITIZ
TO $500 WOULD NULLIFY THE POLICY OF THE LAW IMPOSING ON COMMON
CARRIERS THE DUTY TO OBSERVE EXTRAORDINARY DILIGENCE IN THE CARRIAGE OF
THE GOODS.
#Esguerra
SEA-LAND SERVICE, INC VS. IAC
Keyword: Package Limitation Clause
FACTS: The Seaborne Trading Company of California delivered a shipment to Sea-
land Service Inc. which the latter loaded in its vessel  “MS  Patriot”  for  delivery  to  
consignee to Sen Hiap Hing – a business owned by Paulino Cue, in Cebu City.
The shipper did not declare the value of the shipment in the bill of lading; the bill
merely  described  the  shipment  as  “8  CARTONS  on  2  SKIDS-FILES.” The bill however
contained  a  “package  limitation  clause,”  a  stipulation  which  limited  the  liability  of  
the carrier-Sealand for any loss or damage to the cargo to the amount of $500 per
package.
When the shipment arrived in Manila it was thereafter placed in a container and
discharged into the custody of the arrastre contractor and the customs and port
authorities. Unfortunately, while awaiting trans-shipment to Cebu, the shipment
was stolen by pilferers and has never been recovered.
Consequently, the consignee made formal claim upon Sea-Land for the value of the
lost shipment allegedly amounting to P179,643.48. Sea-Land offered to settle the
claim for $4,000.00 (8 Cartons/packages*$500) pursuant to the above mentioned
package limitation clause.
The consignee rejected the offer and thereafter brought suit for damages against
Sea-Land in the CFI of Cebu. CFI ruled in favor of the consignee and ordered Sealand
to pay him, among others, the amount of P186048 representing the value of the
lost cargo.
Sealand appealed to the IAC which affirmed the decision of the CFI in toto.
Hence, this petition.
ISSUE: Whether  or  not  the  “package  limitation  clause”  a  stipulation  limiting  the   another maximum amount than that mentioned in this paragraph may be fixed:
liability of the carrier for loss and damage to the shipment to the amount fixed in
the bill of lading is valid and binding against the shipper and the consignee in view
of  the  shipper’s  failure  to  declare  the  actual  value  of  the  shipment.
RULING: YES. There is nothing in the Civil Code which absolutely prohibits
agreements between shipper and carrier limiting the latter's liability for loss of or
damage to cargo shipped under contracts of carriage.
The Civil Code in fact has agreements of such character in contemplation in
providing, in its Articles 1749 and 1750, that:
ART. 1749 A stipulation that the common carrier's liability is limited to the value of
the goods appearing in the bill of lading, unless the shipper or owner declares a
greater value, is binding.
ART. 1750. A contract fixing the sum that may be recovered by the owner or shipper
for the loss, destruction, or deterioration of the goods is valid, if it is reasonable and
just under the circumstances, and has been fairly and freely agreed upon.
Here, the just and reasonable character of the questioned stipulation is implicit
from the fact that the shipper or owner is given the option under Article 1749 of
avoiding accrual of liability limitation by simply declaring the nature and value of
the shipment in the bill of lading. Also, the shipper here did not complain of having
been "rushed," imposed upon or deceived in any significant way into agreeing to
ship the cargo under a bill of lading carrying such a stipulation; therefore, there is
no ground to assume that its agreement to the said stipulation was not freely and
fairly sought and given.
Furthermore, since the liability of a common carrier for loss of or damage to goods
transported by it under a contract of carriage is governed by the laws of the country
of destination and the goods in question were shipped from the United States to
the Philippines, the liability of petitioner Sea-Land to the respondent consignee
while governed primarily by the Civil Code may suppletorily be governed, in all
matters not determined thereby, by the Code of Commerce and special laws.
One of these suppletory special laws is the Carriage of Goods by Sea Act (COGSA)
and Sec. 4(5) of the said act provides that:
“Neither  the  carrier  nor  the  ship  shall  in  any  event  be  or  become  liable  for  any  loss  
or damage to or in connection with the transportation of goods in an amount
exceeding $500 per package lawful money of the United States, or in case of goods
not shipped in packages, per customary freight unit, or the equivalent of that sum
in other currency, unless the nature and value of such goods have been declared by
Page 87 of 151
the shipper before shipment and inserted in the bill of lading. This declaration, if
embodied in the bill of lading, shall be prima facie evidence, but shall not be
conclusive on the carrier.
By agreement between the carrier, master, or agent of the carrier, and the shipper
Provided That such maximum shall not be less than the figure above named. In no
event shall the carrier be liable for more than the amount of damage actually
sustained.
The package limitation clause of the bill of lading in question is a virtual copy of the
first paragraph of the foregoing provision. Therefore, there can be no question as to
the validity of such clause for it is in conformity with the said provision of law.
Verily, nothing contained in section 4(5) of the Carriage of Goods by Sea Act is
repugnant to or inconsistent with any of the just-cited provisions of the Civil Code.
Said section merely gives more flesh and greater specificity to the rather general
terms of Article 1749 (without doing any violence to the plain intent thereof) and of
Article 1750, to give effect to just agreements limiting carriers' liability for loss or
damage which are freely and fairly entered into.
It seems clear that even if said section 4(5) of the Carriage of Goods by Sea Act did
not exist, the validity and binding effect of the liability limitation clause in the bill of
lading here are nevertheless fully sustainable on the basis alone of the cited Civil
Code provisions.
____________________________________________________________________
__________________
NB: May also be relevant under the heading of Prohibited and Limiting Stipulations
Clause 13 of the bill of lading in question expressly authorizes the carrier or master
to transship or forward the goods or any part thereof, by any means, at the risk and
expense of the goods, at any time, by any route and without notice to the shipper
or consignee.
This is because Sea-Land only directly serves the Port of Manila from abroad in the
usual course of voyage of its carriers thus it maintains arrangements with a local
forwarder – Aboitiz and Company – for delivery of its imported cargo to the agreed
final point of destination within the Philippines.
According to the Supreme Court, such arrangements are not prohibited, but in fact
recognized by law. #FALLER
CASE TITLE: Citadel Lines v CA and Manila Wine Merchants
KEYWORD: cigarettes;
PONENTE: Regalado, J.
DOCTRINE:
FACTS:
Petitioner Citadel Lines, Inc. is the general agent of the vessel "Cardigan
Bay/Strait Enterprise," while respondent Manila Wine Merchants, Inc. (consignee) is
the importer of the subject shipment of Dunhill cigarettes from England. The vessel
“Cardigan  Bay/Strait  Enterprise"  loaded  on  board  at  Southampton, England, for
carriage to Manila, 180 Filbrite cartons of mixed British manufactured cigarettes
called  "Dunhill  International  Filter"  and  "Dunhill  International  Menthol.”  The   this the private respondent does not pretend to do. But over and above
shipment arrived at the Port of Manila Pier 13, on April 18, 1979 in container van.
The container van, which contained two shipments was stripped. One
shipment was delivered and the other shipment consisting of the imported British
manufactured cigarettes was palletized. Due to lack of space at the Special Cargo
Coral, the aforesaid cigarettes were placed in two containers with two pallets in
container No. BENU 204850-9, the original container, and four pallets in container
No. BENU 201009-9, with both containers duly padlocked and sealed by the
representative of the Citadel Lines.
Citadel  Lines’  headchecker  discovered  that  container  van  No.  BENU   dispute is concerned — there is simply no ground for assuming that its
201009-9 had a different padlock and the seal was tampered with. The matter was
reported to Jose G. Sibucao, Pier Superintendent, Pier 13, and upon verification, it
was found that 90 cases of imported British manufactured cigarettes were missing.
Per investigation conducted by the ARRASTRE, it was revealed that the cargo in
question was not formally turned over to it by the Citadel Lines but was kept inside
container van No. BENU 201009-9 which was padlocked and sealed by the
representatives of the Citadel Lines without any participation of the ARRASTRE
When the consignee learned that 90 cases were missing, it filed a formal
claim dated May 21, 1979, with the Citadel Lines, demanding the payment of
P315,000.00 representing the market value of the missing cargoes. Citadel Lines, in
its reply letter dated May 23, 1979, admitted the loss but alleged that the same
occurred at Pier 13, an area absolutely under the control of the ARRASTRE.
ISSUES:
Whether the stipulation limiting the liability of the carrier contained in the
bill of lading is binding on the consignee
RULING:
SUPREME COURT:
Page 88 of 151
The CONSIGNEE itself admits in its memorandum that the value of the
goods shipped does not appear in the bills of lading. Hence, the stipulation
on the carrier's limited liability applies. There is no question that the
stipulation is just and reasonable under the circumstances and have been
fairly and freely agreed upon.
That said stipulation is just and reasonable arguable from the fact that it
echoes Art. 1750 itself in providing a limit to liability only if a greater value
is not declared for the shipment in the bill of lading. To hold otherwise
would amount to questioning the justice and fairness of that law itself, and
that consideration the just and reasonable character of such stipulation is
implicit in it giving the shipper or owner the option of avoiding accrual of
liability limitation by the simple and surely far from onerous expedient of
declaring the nature and value of the shipment in the bill of lading. And
since the shipper here has not been heard to complain of having been
"rushed," imposed upon or deceived in any significant way into agreeing to
ship the cargo under a bill of lading carrying such a stipulation — in fact, it
does not appear, that said party has been heard from at all insofar as this
agreement thereto was not as the law would require, freely and fairly
sought and well.
#FLORANDA
CASE TITLE: Everett Steamship Corporation vs. Court of Appeals and Hernandez
Trading Co., Inc
KEYWORD:    Marco  Polo  (missing  crate  “MARCO  C/No.  14”),  Bus  Spare  Parts
PONENTE: MARTINEZ, J.:
DOCTRINE:
Prohibited and Limiting Stipulations
Common Carriers; Contracts; Bills of Lading; A stipulation in the bill of
lading  limiting  the  common  carrier’s  liability  for  loss  or  destruction  of  a  
cargo to a certain sum, unless the shipper or owner declares a greater
value, is sanctioned by law particularly Articles 1749 and 1750 of the Civil
Code.
SHORT FACTS: Private respondent imported 3 crates of bus spare parts marked as
MARCO C/No. 12, 13, 14 from its supplier, Maruman Trading Company, Ltd.
(Maruman Trading), a foreign corporation based in Inazawa, Aichi, Japan. The crates
were  shipped  from  Nagoya,  Japan  to  Manila  on  board  “ADELFA  EVERETTE,”  a  vessel   conditions  such  that  he  had  “fairly  and  freely  agreed”  to  these  conditions.
owned  by  petitioner’s  principal,  Everett  Orient  Lines.  The  said  crates  were covered
by Bill of Lading No. NGO53MN. Upon arrival of the port of Manila, it was
discovered that the crate marked MARCO C/No. 14 was missing. This was confirmed
and admitted by petitioner in its letter of January 13, 1992 addressed to private
respondent, which thereafter made a formal claim upon petitioner for the value of
the lost cargo amounting to One Million Five Hundred Fifty Two Thousand Five
Hundred (¥1,552,500.00) Yen, the amount shown in an Invoice No. MTM-941,
dated November 14, 1991. However, petitioner offered to pay only One Hundred
Thousand (¥100,000.00) Yen, the maximum amount stipulated under Clause 18 of
the covering bill of lading which limits the liability of petitioner. Private respondent
rejected the offer and thereafter instituted a suit for collection docketed as Civil
Case No. C-15532, against petitioner before the Regional Trial Court of Caloocan
City, Branch 126.
ISSUE: Whether or not the stipulation in the bill of lading limiting the common
carriers liability is valid
PETITIONER’S  CONTENTION:   stipulation limiting the common carrier’s  liability  for  loss  must  be  “reasonable  and
Defendant merely admitted that it lost the shipment but shall be liable
only up to the amount of ¥100,000.00.
RESPONDENT’S  CONTENTION:
Plaintiff contends that defendant should be held liable for the whole value
for the loss of the goods in the amount of ¥1,552,500.00 because the terms
appearing at the back of the bill of lading was so written in fine prints and that the
same was not signed by plaintiff or shipper thus, they are not bound by the clause
stated in paragraph 18 of the bill of lading
RULING:
PRE-Trial Conference: Both parties manifested that they have no
testimonial evidence to offer and agreed instead to file their respective
memoranda.
7. TRIAL COURT:
In  favor  of  private  respondent.    “In  the  case  at  bar,  the  Court  is  of
the view that the requirements of Art. 1750 of the New Civil Code have not
Page 89 of 151
been met. The fact that those conditions are printed at the back of the bill
of lading in letters so small that they are hard to read would not warrant
the presumption that the plaintiff or its supplier was aware of these
 
8. APPELLATE COURT
Affirmed TC.
9. SUPREME COURT
Reversed  and  Set  Aside  CA’s  decision.
“ART.  1749.  A  stipulation  that  the  common  carrier’s  liability  is  limited  to  
the value of the goods appearing in the bill of lading,unless the shipper or owner
declares  a  greater  value,  is  binding.”
“ART.  1750.  A  contract  fixing  the  sum  that  may  be  recovered  by  the  owner  
or shipper for the loss, destruction, or deterioration of the goods is valid, if it is
reasonable and just under the circumstances, and has been freely and fairly agreed
upon.”
Pursuant to the afore-quoted provisions of law, it is required that the
 
just  under  the  circumstances,  and  has  been  freely  and  fairly  agreed  upon.”  
The bill of lading subject of the present controversy specifically provides, among
others:
“18.  All  claims  for  which  the  carrier may be liable shall be adjusted
and  settled  on  the  basis  of  the  shipper’s  net  invoice  cost  plus  freight  and  
insurance premiums, if paid, and in no event shall the carrier be liable for
any loss of possible profits or any consequential loss.
“The  carrier shall not be liable for any loss of or any damage to or
in any connection with, goods in an amount exceeding One Hundred
Thousand Yen in Japanese Currency (¥100,000.00) or its equivalent in any
other currency per package or customary freight unit (whichever is least)
unless the value of the goods higher than this amount is declared in writing
by the shipper before receipt of the goods by the carrier and inserted in
the  Bill  of  Lading  and  extra  freight  is  paid  as  required.”
 The above stipulations are, to our mind, reasonable and just. In the bill of
lading, the carrier made it clear that its liability would only be up to One Hundred
Thousand (¥100,000.00) Yen. However, the shipper, Maruman Trading, had the
option to declare a higher valuation if the value of its cargo was higher than the
limited liability of the carrier. Considering that the shipper did not declare a higher
valuation, it had itself to blame for not complying with the stipulations.
The  trial  court’s  ratiocination  does  not  make  the  bill of lading invalid.
Contracts of adhesion are not invalid per se. The shipper, Maruman Trading, we
assume, has been extensively engaged in the trading business. It can not be said to
be ignorant of the business transactions it entered into involving the shipment of
its goods to its customers. The shipper could not have known, or should know the
stipulations in the bill of lading and there it should have declared a higher valuation
of the goods shipped.
#GUETA
CASE TITLE: BRITISH AIRWAYS vs. COURT OF APPEALS
KEYWORDS: Waley sa Bombay, baka nandon sa London
TOPIC:
rd
Prohibited and Limiting Stipulations [3 kind of limiting stipulation:
limiting the liability of the carrier to an agreed valuation UNLESS the shipper
declares a higher value and pays a higher rate of freight; such stipulation is valid
st nd
and enforceable unlike the 1 and 2 kind]
PONENTE: Romero, J.
DOCTRINES:
In a contract of air carriage, a declaration by the passenger of a higher value is
needed to recover a greater amount.— Article 22(1) of the Warsaw Convention,
provides  as  follows:  “x  x  x  x  x  x  x  x  x  (2)  In  the  transportation  of  checked  baggage   even failed to show receipts of the alleged gifts for the members of his
and goods, the liability of the carrier shall be limited to a sum of 250 francs per
kilogram, unless the consignor has made, at the time the packages was handed over
to the carrier, a special declaration of the value at delivery and has paid a
supplementary sum if the case so requires. In that case the carrier will be liable to
pay a sum not exceeding the declared sum, unless he proves that the sum is greater
than  the  actual  value  to  the  consignor  at  delivery.”
An air carrier is not liable for the loss of baggage in an amount in excess of the limits
specified in the tariff which was filed with the proper authorities, such tariff being
binding on the passenger  regardless  of  the  passenger’s  lack  of  knowledge  thereof  or   There should have been no separate award for the luggage and the contents
assent thereto.
Page 90 of 151
Benefits of limited liability are subject to waiver such as when the air carrier failed
to raise timely objections during the trial when questions and answers regarding
the actual claims and damages sustained by the passenger were asked.
FACTS:
PETITION for review on certiorari of a decision of CA
April 16, 1989 - Mahtani decided to visit his relatives in Bombay, India; he
obtained the services of Mr. Gumar to prepare his travel plans, and the
latter, in turn, purchased a ticket from British Airways (BA)
BA  had  no  direct  flights  from  Manila  to  Bombay,  so  Mahtani’s  itinerary  
would be: MNL to HK via PAL
HK to BOMBAY via BA
Prior to his departure, Mahtani checked in at the PAL counter in Manila his
two pieces of luggage containing his clothings and personal effects
Unfortunately, when Mahtani arrived in Bombay he discovered that his
luggage was missing and that upon inquiry from the BA representatives, he
was told that the same might have been diverted to London
Back in the PH, on June 11, 1990, Mahtani filed his complaint for damages
and  attorney’s  fees  against  BA  and  Mr.  Gumar  before  the  RTC  of  Cebu;  BA  
in turn filed a third-party complaint against PAL
ISSUES:
1. W/N British Airways can invoke limited liability to that amount stated in
the ticket
2. W/N the Third-Party Complaint should prosper [not so related to the topic]
TRIAL COURT: in favor of Mahtani; BA ordered to pay P7,000 for the value of the 2
suit case and $400 representing the  value  of  the  contents  of  Mahtani’s  luggage;  the  
Third-Party Complaint against PAL was dismissed for lack of cause of action.
[“Since  plaintiff  did  not  declare  the  value  of  the  contents  in  his  luggage  and  
family in Bombay, the most that can be expected for compensation of his
lost luggage (2 suit cases) is $20.00 per kilo, or a combined value of
$400.00 for 20 kg representing the contents plus P7,000 representing the
purchase price of  the  2  suit  cases.”]
APPELLATE COURT: affirmed in toto
BRITISH  AIRWAYS’  CONTENTIONS:
1. The award of compensatory damages in the separate sum of P7,000 for the loss
of  Mahtani’s  two  pieces  of  luggage  was  without  basis
thereof since Mahtani failed to declare a separate higher valuation with respect to
his luggage which is a condition provided for in the ticket which reads:
 “Liability  for  loss,  delay,  or  damage  to  baggage  is  limited  unless a higher
value is declared in advance and additional charges are paid:
1. For most international travel (including domestic corporations of
international journeys) the liability limit is approximately U.S. $9.07 per
pound (U.S. $20.00) per kilo for checked baggage and U.S. $400 per
passenger  for  unchecked  baggage.”
2. The Third-Party Complaint should prosper – the reason for the non- transfer of
the  luggage  was  due  to  PAL’s  late  arrival  in  HK,  thus  leaving  hardly  any  time  for  the   Note: Mabuti ng mahaba kesa kulang. #LEANO
proper transfer of Mahtani’s  luggage  to  the  BA  aircraft  bound  for  Bombay
PAL’S  CONTENTION:
The Third-Party Complaint was properly dismissed – there was adequate time to
transfer the luggage to BA facilities in HK and the transfer of the luggage to HK
authorities should be considered as transfer to BA, so it is the latter who is liable
SUPREME COURT:
1. NO, the Court cannot assent to such specious argument of British Airways with
regard to its limited liability. Admittedly, in a contract of air carriage a declaration
by the passenger of a higher value is needed to recover a greater amount.
American jurisprudence also provides that an air carrier is not liable for the loss of
baggage in an amount in excess of the limits specified in the tariff. Notwithstanding
the foregoing, the Court nevertheless, ruled against blind reliance on adhesion
contracts where the facts and circumstances justify that they should be
disregarded.
In addition, the Court ruled that the benefits of limited liability are subject
to waiver such as when the air carrier failed to raise timely objections during the
trial when questions and answers regarding the actual claims and damages
sustained by the passenger were asked. Given the foregoing postulates, the
inescapable conclusion is that BA had waived the defense of limited liability when it
allowed Mahtani to testify as to the actual damages he incurred due to the
misplacement of his luggage, without any objection.
Needless to say, factual findings of the RTC, as affirmed by the CA, are
entitled to great respect. Since the actual value of the luggage involved appreciation
of evidence, a task within the competence of the CA, its ruling regarding the
amount is assuredly a question of fact, thus, a finding not reviewable by this Court.
2. YES. The contract of air transportation was exclusively between Mahtani and BA,
the  latter  merely  endorsing  the  MNL  to  HK  leg  of  the  former’s  journey  to  PAL,  as  its  
subcontractor  or  agent.  In  fact,  the  par.4  of  the  “Conditions  of  Contracts”  of  the  
ticket issued by BA to Mahtani confirms that the contract was one of continuous air
transportation from Manila to Bombay. It is undisputed that PAL is an agent of BA,
so the former is responsible for any negligence in the performance of its functions
and is liable for damages, which the BA may suffer by reason of its negligent act.
Page 91 of 151
Since the instant petition was based on breach of contract of carriage,
Mahtani can only sue BA alone, and not PAL, since the latter was not a party to the
contract. However, this is not to say that PAL is relieved from any liability due to any
of its negligent acts. It is but logical, fair and equitable to allow BA to sue PAL for
indemnification,  if  it  is  proven  that  the  latter’  s  negligence  was  the  proximate  cause  
of  Mahtani’  s  unfortunate  experience,  instead of totally absolving PAL from any
liability.
CASE TITLE : H.E. Heacock Company (v) Macondray & Company, Inc.
KEYWORD : Twelve 8-day Edmond clocks
PONENTE : Johnson, J.
DOCTRINE : A stipulation limiting the liability of the carrier to an agreed
valuation unless the shipper declares a higher value and pays a
higher rate of freight invalid and enforceable.
FACTS:
1. June 5, 1919: Plaintiff caused to be delivered on board steamship Bolton
Castle 4 cases of merchandise (one of which contained twelve 8-day Edmond
clocks properly boxed and marked for transportation to Manila) and paid
freight on said clocks from New York to Manila in advance.
2. Sep 10, 1919: When the steamship arrived in the port of Manila, it consigned
to the defendant herein as agent and representative of said vessel in said port
but neither he master of said vessel nor the defendant herein, as its agent,
delivered to the plaintiff the aforesaid twelve 8-day Edmond clocks, although
demand was made upon them for their delivery.
3. Bill of lading issued and delivered to the plaintiff by the master of steamship
Bolton Castle contained, among others, the following clauses:
Clause#1: Value of the goods receipted: not exceed $500 per freight ton, or,
in proportion for any part of a ton UNLESS the value be expressly
stated herein and ad valorem freight paid thereon
Clause#9: Claims for short delivery or damage to cargo shall not be more
than (net invoice price + freight + insurance - all charges saved)
AND any loss or damage for which the carrier may be liable shall
be adjusted pro rata on the said basis
4. 12 pcs of 8-day Edmond clocks
Invoice value (in NY) of the said =P22
Market value when they should have been delivered to the
plaintiff(Manila) =P420.
Case containing twelve 8-day Edmond clocks
freight ton value= $1,480
 declared freight ton by plaintiff = No greater value than $500
no ad valorem freight was paid thereon
5. October 9, 1919: in payment of plaintiff's claim, defendant tendered P76.36,
the proportionate freight ton value of the aforesaid twelve 8-day Edmond
clocks but this was rejected by the plaintiff and an action to recover the sum
of P240 together with interest thereon was filed against defendant.
ISSUES:
1. Whether or not a common carrier, by stipulations inserted in the bill of lading,
limit its liability for the loss of or damage to the cargo to an agreed valuation
of the latter.
2. Whether clause 1 or clause 9 of the bill of lading here in question is to be
adopted as the measure of defendant's liability.
Plaintiff
- The two clause in the bill of lading limiting the liability of the carrier are contrary
to public order and therefore, null and void THUS it is entitled to recover from
the defendant the market value of the clocks =P420.
Defendant
Both clauses are valid and clause 1 should have been applied by the lower court
instead of clause 9. The two clauses, if construed together, mean that the shipper
and the carrier stipulate and agree that the value of the goods receipted for does
not exceed $500 per freight ton, but should the invoice value of the goods be less
than $500 per freight ton, then the invoice value governs. Since the invoice value in
this case is more than $500 per freight ton, the latter valuation should be adopted
and that according to that valuation, the proportionate value of the clocks is
P76.36.
RULING:
Court of First Instance of the City of Manila - judgement in favour of plaintiff
In accordance with clause#9 of the bill of lading, defendant is ordered to pay
P226.02
P226.02 = invoice value of the clocks in question + the freight + insurance
thereon + legal interest from November 20, 1919 until date of the complaint +
costs of suit
Supreme Court - judgment appealed from should be affirmed
Page 92 of 151
I. A stipulation limiting the liability of the carrier to an agreed valuation unless
the shipper declares a higher value and pays a higher rate of freight is valid
thus Clauses 1 and 9 of the bill of lading are not contrary to public order.
* Where a contract of carriage (signed by the shipper) is fairly made, agreeing
on a valuation of the property carried, with the rate of freight based on the
condition that the carrier assumes liability only to the extent of the agreed
valuation, even in case of loss or damage by the negligence of the carrier,
the contract will be upheld as proper and lawful mode of securing a due
proportion between the amount for which the carrier may be responsible
and the freight he receives, and protecting himself against extravagant and
fanciful valuations.
* As a matter of legal distinction, estoppel is made the basis of this ruling, —
that, having accepted the benefit of the lower rate, in common honesty the
shipper may not repudiate the conditions on which it was obtained, — but
the rule and the effect of it are clearly established.
II. There is an irreconcilable conflict between the two clauses with regard to the
measure of defendant's liability and it is difficult to reconcile them without
doing violence to the language used and reading exceptions and conditions
into the undertaking contained in clause 9 that are not there thus the
ambiguity or uncertainty in the agreement must be construed most strongly
against the party causing it therefore the bill of lading in question should be
interpreted against the defendant carrier, which drew said contract.
* The whereas clause 1 contains only an implied undertaking to settle in case
of loss on the basis of not exceeding $500 per freight ton while clause 9
contains an express undertaking to settle on the basis of the net invoice
price plus freight and insurance less all charges saved (Clause 9: "Any loss or
damage for which the carrier may be liable shall be adjusted pro rata on the
said  basis”)
#LualhatiMarquez
CASE TITLE: SWEET LINES, INC vs. COURT OF APPEALS, MICAELA B. QUINTOS, FR.
JOSE BACATAN, S.J., MARCIANO CABRAS and ANDREA VELOSO
Keywords: the vessel by-passed the port of arrival
Ponente: Justice Melencio – Herrera
Doctrine: Owners of vessels and ship agents shall be liable for the act of the captain.
Facts:
The respondents bought first class tickets and boarded the M/V Sweet Grace going
to Catbalogan. The vessel had some engine problems which led to a change of
schedule and they were thus delayed for a substantial amount of time.
Furthermore, the vessel bought the respondents to Tacloban City instead of
Catbalogan. This led the respondents to purchase another set of tickets and to ride
another ferryboat going to Catbalogan. The respondents then sued the petitioner
carrier for damages for the breach of contract of carriage.
Issue:
Whether or not the petitioner is liable for damages.
Petitioner’s  Contention:
Petitioner relied on the condition at printed at the back of the ticket stating:
"The passenger's acceptance of this ticket shall be considered as an acceptance of
the following conditions:
3. In case the vessel cannot continue or complete the trip for any cause whatsoever,
the carrier reserves the right to bring the passenger to his/her destination at the
expense of the carrier or to cancel the ticket and refund the passenger the value of
his/her ticket;
xxx xxx xxx
11. The sailing schedule of the vessel for which this ticket was issued is subject to
change without previous notice. (Exhibit "l -A") "
Ruling:
Trial Court and SC: Ruled in favor of respondent. (No explanation was given)
Supreme Court: AFFIRMED
The court ruled that the petitioner is liable to pay damages to the respondents
citing the following provisions:
ART. 614. A captain who, having agreed to make a voyage, fails to fulfill his
undertaking, without being prevented by fortuitous event or force majeure, shall
indemnify all the losses which his failure may cause, without prejudice to criminal
penalties which may be proper.
and
ART. 698. In case of interruption of a voyage already begun, the passengers shall
only be obliged to pay the fare in proportion to the distance covered, without right
to recover damages if the interruption is due to fortuitous event or force majeure,
but with a right to indemnity, if the interruption should have been caused by the
captain exclusively. If the interruption should be caused by the disability of the
vessel, and the passenger should agree to wait for her repairs, he may not be
Page 93 of 151
required to pay any increased fare of passage, but his living expenses during the
delay shall be for his own account.
The crucial factor then is the existence of a fortuitous event or force majeure.
Without it, the right to damages and indemnity exists against a captain who fails to
fulfill his undertaking or where the interruption has been caused by the captain
exclusively.
The court found that there is no fortuitous event because engine failure can be
prevented by proper maintenance. Even arguing in arguendo that the engine failure
is indeed a fortuitous event, it accounts only for the delay in departure and not the
by-passing of the vessel. It was proven that the by-passing of the vessel was done to
prevent too much loss for the company.
The Court also found the petitioner in bad faith as shown by the following:
1. Petitioner did not give any notice to the respondents as to the change of
schedule of the vessel.
2. The petitioner knew fully that it would take no less than fifteen (15) hours to
effect the repairs of the damaged engine. The petitioner also assured that the
vessel will leave within a short period of time and when the defendants wanted to
leave  the  trip  petitioner  stated  that  the  “the  vessel  is  already  leaving.”
3. The petitioner did not even offer to refund the tickets and provide for their
transportation from Tacloban to Catbalogan.
Furthermore, the conditions relied upon by petitioner cannot prevail over Articles
614 and 698 of the Code of Commerce heretofore quoted.
The voyage to Catbalogan was "interrupted" by the captain upon instruction of
management. The "interruption" was not due to fortuitous event or for majeure
nor to disability of the vessel. Having been caused by the captain upon instruction
of management, the passengers' right to indemnity is evident. The owner of a
vessel and the ship agent shall be civilly liable for the acts of the captain.
#Luzadio

i. International Air Transportation
CASE TITLE: ALITALIA VS IAV
Keyword: UP Professor
PONETE: NARVASA, J.
DOCTRINE: The Warsaw Convention's provisions do not "regulate or exclude liability
for other breaches of contract by the carrier" or misconduct of its officers and
employees, or for some particular or exceptional type of damage. Otherwise, "an
air carrier would be exempt from any liability for damages in the event of its
absolute refusal, in bad faith, to comply with a contract of carriage, which is
absurd." Nor may it for a moment be supposed that if a member of the aircraft
complement should inflict some physical injury on a passenger, or maliciously
destroy or damage the latter's property, the Convention might successfully be
pleaded as the sole gauge to determine the carrier's liability to the passenger.
Neither may the Convention be invoked to justify the disregard of some
extraordinary sort of damage resulting to a passenger and preclude recovery
therefor beyond the limits set by said Convention. It is in this sense that the
Convention has been applied, or ignored, depending on the peculiar facts presented
by each case.
Facts: Dr. Felipa Pablo, a professor from UP was invited to attend a meeting by the
United Nations in Ispra, Italy. She was to read a paper regarding foreign substances
in food and the agriculture environment which she had specialized knowledge of.
She booked a flight to Italy with Alitalia airlines, petitioner herein. She had arrived
in Milan the day before the meeting in accordance with the itinerary and time table
set for her by ALITALIA. She was however told by the ALITALIA personnel there at
Milan that her luggage was "delayed inasmuch as the same . . . (was) in one of the
succeeding flights from Rome to Milan." Her luggage consisted of two (2) suitcases:
one contained her clothing and other personal items; the other, her scientific
papers, slides and other research material. But the other flights arriving from Rome
did not have her baggage on board. The airline informed her that her luggage was
delayed because it was placed in one of the succeeding flights to Italy. She never
got her luggage.
By then feeling desperate, she went to Rome to try to locate her bags herself.
There, she inquired about her suitcases in the domestic and international airports,
and filled out the forms prescribed by ALITALIA for people in her predicament.
Page 94 of 151
However, her baggage could not be found. Completely distraught and discouraged,
she returned to Manila without attending the meeting in Ispra, Italy.
Once back in Manila she demanded that ALITALIA make reparation for the damages
thus suffered by her. ALITALIA offered her "free airline tickets to compensate her
for any alleged damages. . . ." She rejected the offer, and forthwith commenced the
action which has given rise to the present appellate proceedings.
As it turned out, Prof. Pablo's suitcases were in fact located and forwarded to Ispra,
Italy, but only on the day after her scheduled appearance and participation at the
U.N. meeting there. Of course Dr. Pablo was no longer there to accept delivery; she
was already on her way home to Manila. And for some reason or other, the
suitcases were not actually restored to Prof. Pablo by ALITALIA until eleven (11)
months later, and four (4) months after institution of her action.
The lower court rendered a decision in favor of Dr. Pablo and ordered plaintiff to
pay damages. On appeal, the Court of Appeals affirmed the decision and even
increased the amount of damages to be awarded to Dr. Pablo. Hence this petition
for certiorari.
Issue: Whether or not Alitalia is liable for damages incurred by Dr. Pablo.
Held: The Court held that Alitalia is liable to pay Dr. Pablo for nominal damages. The
Warsaw Convention provides that an air carrier is made liable for damages when:
(1) the death, wounding or other bodily injury of a passenger if the accident causing
it took place on board the aircraft or in the course of its operations of embarking or
disembarking; (2) the destruction or loss of, or damage to, any registered luggage or
goods, if the occurrence causing it took place during the carriage by air"; and (3)
delay in the transportation by air of passengers, luggage or goods. However, the
claim for damages may be brought subject to limitations provided in the said
convention.
In the case at bar, no bad faith or otherwise improper conduct may be ascribed to
the employees of petitioner airline; and Dr. Pablo's luggage was eventually returned
to her, belatedly, it is true, but without appreciable damage. The fact is,
nevertheless, that some special species of injury was caused to Dr. Pablo because
petitioner ALITALIA misplaced her baggage and failed to deliver it to her at the time
appointed — a breach of its contract of carriage, to be sure — with the result that
she was unable to read the paper and make the scientific presentation (consisting
of slides, autoradiograms or films, tables and tabulations) that she had painstakingly
labored over, at the prestigious international conference, to attend which she had
traveled hundreds of miles, to her chagrin and embarrassment and the
disappointment and annoyance of the organizers. She felt, not unreasonably, that
the invitation for her to participate at the conference, extended by the Joint
FAO/IAEA Division of Atomic Energy in Food and Agriculture of the United Nations,
was a singular honor not only to herself, but to the University of the Philippines and
the country as well, an opportunity to make some sort of impression among her
colleagues in that field of scientific activity. The opportunity to claim this honor or
distinction was irretrievably lost to her because of Alitalia's breach of its contract.
Apart from this, there can be no doubt that Dr. Pablo underwent profound distress
and anxiety, which gradually turned to panic and finally despair, from the time she
learned that her suitcases were missing up to the time when, having gone to Rome,
she finally realized that she would no longer be able to take part in the conference.
As she herself put it, she "was really shocked and distraught and confused."
Certainly, the compensation for the injury suffered by Dr. Pablo cannot under the
circumstances be restricted to that prescribed by the Warsaw Convention for delay
in the transport of baggage.
In this case, Dr. Pablo did not suffer any other injury other than not being able to
read her paper in Italy. This was due to the fact that Alitalia misplaced her luggage.
There was no bad faith or malice on the part of Alitalia in the said delay in the
arrival of her luggage. Dr. Pablo received all her things which were returned to her
in good condition although 11 months late. Therefore she shall receive nominal
damages for the special injury caused.
# Macalino
CASE TITLE: PAN AMERICAN WORLD AIRWAYS, INC. vs. IAC
KEYWORDS:  “Ang  Mabait,  Masungit  at  ang  Pangit,”  “Big  Happening  with  Chikiting   additional charges.
and  Iking”  and  “Kambal  Dragon”  films.
PONENTE: CORTES, J.
DOCTRINES: 1. A contract of adhesion is valid -- Such provisions have been held to
be a part of the contract of carriage, and valid and binding upon the passenger
regardless of the latter's lack of knowledge or assent to the regulation.
2. The common carrier is held liable only for damages that were
foreseen or might have been foreseen at the time the contract of transportation
was entered into.
FACTS:
Rene Pangan (president and general manager of Sotang Bastos and Archer
Production) and Primo Quesada (of Prime Films) entered into an agreement in San
Francisco, California whereby Pangan bound himself to supply Prime Films with
three  films.  “Ang  Mabait,  Masungit  at  ang  Pangit,”  “Big  Happening  with  Chikiting  
and  Iking”  and  “Kambal  Dragon”  for  exhibition  in  the  US.  On  his  way  home  to  the   RESPONDENT’S  CONTENTION:  Pangan  contended  that  he  is  entitled  to  the  actual
Philippines, Pangan visited Guam and contacted Leo Slutchnick (of Hafa Adai
Page 95 of 151
Organization). They also entered into a verbal agreement for the exhibition of 2
films at Hafa Adai Theater.
Pangan prepared the requisite promotional handbills and still pictures. He
also purchased 14 clutch bags, 4 capiz lamps and 4 barong tagalong. On May 18,
1978,  Pangan  obtained  from  Pan  Am’s  Manila  Office,  through  Your  Travel  Guide,  an  
economy class airplane for passage from Manila to Guam of May 27,1978.
On May 27, 1978, two hours before departure time Pangan was at the Pan
Am’s  ticket  counter at the Manila International Airport and presented his ticket and
checked in his two luggages. The two luggages contained the promotional and
advertising materials, the clutch bags, barong tagalog and his personal belongings.
Subsequently, Pangan was informed that his name was not in the manifest and so
he could not take the flight in the economy class. Since there was no space in the
economy class, Pangan took the first class because he wanted to be on time in
Guam paying an additional sum of $112.00.
When Pangan arrived in Guam, his two luggages did not arrive with his
flight and thus, the agreements with Prime Films and Hafa Adai Organiztion were
cancelled.
PETITIONER’S  CONTENTION:  Petitioner  contends  that  its  liability  for  the  lost  
baggage of private respondent Pangan is limited to $600.00 ($20.00 x 30 kilos) as
the latter did not declare a higher value for his baggage and pay the corresponding
***The airline ticket had the following condition:
NOTICE OF BAGGAGE LIABILITY LIMITATIONS
Liability for loss, delay, or damage to baggage is limited as follows
unless a higher value is declared in advance and additional
charges are paid: (1)for most international travel (including
domestic portions of international journeys) to approximately
$9.07 per pound ($20.00 per kilo) for checked baggageand $400
per passenger for unchecked baggage: (2) for travel wholly
between U.S. points, to $750 per passenger on most carriers (a
few have lower limits). Excess valuation may not be declared on
certain types of valuable articles. Carriers assume no liability for
fragile or perishable articles. Further information may be obtained
from the carrier.***
 
damages amounting to P 83,000.00.

ISSUE: Whether or not Pan Am is liable to pay the plaintiffs the amount stated in
the ticket which is $20.00 per kilo.
RULING:
CFI: CFI found Pan Am liable and ordered Pan Am to pay the plaintiffs P83,000.00,
for actual damages, with interest thereon at the rate of 14% per annum.
IAC: Affirmed the decision of CFI.
SC: The Court granted the petition.
The Court found the ruling in Ong Yiu case applicable to the instant case. It
said:
“While  it  may  be  true  that  petitioner  had  not  signed  the  plane
ticket, he is nevertheless bound by the provisions thereof. "Such provisions
have been held to be a part of the contract of carriage, and valid and
binding upon the passenger regardless of the latter's lack of knowledge or
assent to the regulation. It is what is known as a contract of "adhesion," in
regards which it has been said that contracts of adhesion wherein one
party imposes a ready made form of contract on the other, as the plane
ticket in the case at bar, are contracts not entirely prohibited. The one who
adheres to the contract is in reality free to reject it entirely; if he adheres,
he gives his consen. A contract limiting liability upon an agreed valuation
does not offend against the policy of the law forbidding one from
contracting against his  own  negligence.”
The Court also held that Pan Am is not liable for lost profits when their
contracts to show the films in Guam and San Francisco, California were
cancelled.
“Under  Art.1107  of  the  Civil  Code,  a  debtor  in  good  faith  like  the   China Airlines (CAL) for transportation covering Manila-Taipei-HongKong-Manila,
defendant herein, may be held liable only for damages that were foreseen
or might have been foreseen at the time the contract of transportation
was  entered  into.”
“But  before  defendant  could  be  held  to  special  damages,  such  as   to manila confirmed. The ticket was confirmed and a sticker was also attached to it
the present alleged loss of profits on account of delay or failure of delivery,
Page 96 of 151
it must have appeared that he had notice at the time of delivery to him of
the particular circumstances attending the shipment, and which probably
would lead to such special loss if he defaulted. Or, as the rule has been
stated in another form, in order to purpose on the defaulting party further
liability than for damages naturally and directly, i.e., in the ordinary course
of things, arising from a breach of contract, such unusual or extraordinary
damages must have been brought within the contemplation of the parties
as the probable result of breach at the time of or prior to contracting.
Generally, notice then of any special circumstances which will show that
the damages to be anticipated from a breach would be enhanced has been
held  sufficient  for  this  effect.”
In the absence of a showing that petitioner's attention was called to the
special circumstances requiring prompt delivery of Pangan's luggages, Pan Am
cannot  be  held  liable  for  the  cancellation  of  Pangan’s contracts as it could not have
foreseen such an eventuality when it accepted the luggages for transit. The
evidence reveals that the proximate cause of the cancellation of the contracts was
Pangan's failure to deliver the promotional and advertising materials on the dates
agreed upon. For this, Pan Am cannot be held liable. Pangan had not declared the
value of the two luggages he had checked in and paid additional charges. Neither
was petitioner privy to Pangan's contracts nor was its attention called to the
condition therein requiring delivery of the promotional and advertising materials on
or before a certain date.
#Magalit
Case Title: China Airlines vs. Daniel Chiok
Keyword: Successive air carrier
Ponente: Panganiban, J,
Doctrine: Carriage to be performed by several successive carriers under one ticket,
or under a ticket and any conjunction ticket issued therewith, is regarded as a single
operation
Facts:
On September 18, 1981, Daniel Chiok purchased a passenger ticket from
which ticket was endorsed to Philippine Airlines(PAL). When he arrived in Taipe, he
went to the office of China and had his HongKong-Manila ticket confirmed on which
CAL attached a yellow sticker indicating  that  his  flight  status  was  “OK.”  
When Chiok was in Hong Kong, he went to the PAL office to have his ticket
indicating his flight status. On November 24, 1981, at Hong Kong International
Airport, Chiok saw a poster indicating that the flight to Manila was cancelled due to
a typhoon in Manila. He was then informed that all ticketholders from his flight are
rescheduled the next day. At this point he informed the PAL personal that he had to
be in Manila on November 25, 1981 because he was the director of Philippine
Polyester Paper Corporation and had a business option that had to be executed on
the said date. The next day, Cathay Pacific Stewardess Lok Chan had took and
received his luggage and called the attention of PAL terminal supervisor, Carmen
Chan, who informed him that his name was not in the list of passengers and that he
could not be allowed to board the plane. During this event, he lost his Samsonate
luggage containing cosmetics worth HK$14,128,80.
Chiok  went  to  PAL’s  office  and  was  met  by  reservation  officer,  Carie  Chao,   “Transportation  to  be  performed  by  several  successive
who was the one who confirmed his flight ticket back to Manila. Chiok decided to
use another CAL ticket and asked Chao if it could be used to board the same flight.
He was the booked for the same trip. When Chiok went to the PAL check-in
counter, he was attended by Carmen and placed his travel documents and clutch
bag on the counter. It was at this point that he lost the clutch bag containing: (a)
$2,000, (b) HK$2,000, (c) Taipei $8,000, (d) P2,000, (e) three-piece set of gold cross
pens (P3,500), (f) Cartie watch (P7,500), (g) tie clip with a garnet and diamond
(P1,800), and (h) a pair of Christian Dior reading glasses.
Issue: Whether or not the ticket-issuing airline should be held liable for the losses
that the respondent has suffered.
Trial Court
The RTC ruled that PAL and CAL are jointly liable to the respondent for
damages. HK$14,128.80 as actual damages, US$2,000 for the loss of the clutch bag,
P200,000 as moral damages, P50,000 exemplary damages, 10% of the amount due
as  attorney’s  fee,  and  cost.
Court of Appeals
The  CA  affirmed  the  RTC’s  decision  debunking  the  claim  of  PAL  that  it  was   Furthermore, Members of the IATA are under a general pool partnership agreement
only an agent for the ticket covering the Hong Kong Manila portion of the journey.
The ruling was based on the case of KLM Royal Dutch Airlines vs Court of Appeals
citing Article 30 of the Warsaw Convention providing that the rule that passengers
can only take action against the carrier who performed the transportation during
which the accident or the delay occurred in cases of transportation to be performed
by various carriers does not apply when the damage is caused by the willful
misconduct  on  the  part  of  the  carrier’s  employee  or  agent  acting  within  the  scope
of his employment. It further ruled that it would be unfair to charge a passenger
automatic knowledge of circumstances that excuse carrier from liability when
notice is written at the back of the ticket in letter that are so small – the carrier
must inform the passenger to bind the latter.
Page 97 of 151
Furthermore,  despite  confirmation  and  promise  of  the  carrier,  Chiok’s  
name did not appear in the computerized list of passengers. The negligence of the
airlines being the proximate cause of the damages and inconvenience, the CA
affirmed the award for moral and exemplary damages. However, the actual
damages were deleted because the luggage and clutch bag was not actually
checked-in.
Supreme Court
The Supreme Court denied the petition. In ruling that the tickets, although
split into separate journeys, are considered to be one operation, the court cited
Warsaw Convention Article 1, Section 3:
 
air carriers shall be deemed, for the purpose of this
Convention, to be one undivided transportation, if it has
been regarded by the parties as a single operation,
whether it has been agreed upon under the form of a
single contract or of a series of contracts, and it shall
not lose its international character merely because one
contract or a series of contracts is to be performed
entirely within a territory subject to the sovereignty,
suzerainty, mandate, or authority of the same High
Contracting  Party.”
and Article 15 of the International Air Transport Association(IATA)-Recommended
Practice:
“Carriage  to  be  performed  by  several  successive  carriers  
under one ticket, or under a ticket and any conjunction
ticket issued therewith, is regarded as a single
operation.”
wherein they are agents of each other in the issuing of tickets. Thus when the
petitioner accepted the unused portion of the conjunction tickets and undertook to
transport the respondent over the route covered by the unused portion of the
ticket, it acted as the agent of the principal contracting airline, therefore, it is taken
as part of a single operation under the contract of carriage.
With respect to the award of moral damages, the court does not award
such damage in case of breach of contract unless it results to death (Art. 1764 NCC)
or  under  Article  2220  which  provides  “willful  injury  to  property  may  be  legal  ground  
for awarding moral damages if the court should find that, under the circumstance,
such damage are justly due. The same rules applies to breaches of contracts where
the  defendant  acted  fraudulently  or  in  bad  faith.”  In  the  case  at  bar,  the  respondent  
has every reason to expect that he would be put on the replacement flight after the
cancellation due to the typhoon because he was a confirmed passenger. Instead
however, he was inconvenienced and prevented from boarding the flights.
Although he expressed the urgency of his trip to Manila, the employees of PAL were
negligent in placing him in his confirmed flight despite having a ticket that contains
a  validation  sticker  indicating  that  the  glitch  was  the  airline’s  fault.  The  acts  of  the   RULING:
PAL employees were clearly short of the extraordinary diligence that is required of
common carriers. By these findings, the Court found that moral and exemplary
damages are proper.
#Manalang
CASE TITLE: Augusto Benedicto Santos III vs. Northwest Orient Airlines (NOA)
KEYWORD: Warsaw Convention
PONENTE: CRUZ, J.
DOCTRINE: International transportation" shall mean any transportation in which,
according to the contract made by the parties, the place of departure and the place
of destination, whether or not there be a break in the transportation or a
transshipment, are situated [either] within the territories of two High Contracting
Parties . . . Since the flight involved in the case at bar is international, the same
being from the United States to the Philippines and back to the United States, it is
subject to the provisions of the Warsaw Convention, including Article 28(1), which
enumerates the four places where an action for damages may be brought
SHORT FACTS: On October 21, 1986, Santos III purchased from NOA a round-trip
ticket in San Francisco. U.S.A., for his flight from San Francisco to Manila via Tokyo
and back. The scheduled departure date from Tokyo was December 20, 1986. No
date was specified for his return to San Francisco. On December 19, 1986, the
petitioner checked in at the NOA counter in the San Francisco airport for his
scheduled departure to Manila. Despite a previous confirmation and re-
confirmation, he was informed that he had no reservation for his flight from Tokyo
to Manila. He therefore had to be wait-listed. On March 12, 1987, the petitioner
sued NOA for damages in the Regional Trial Court of Makati. On April 13, 1987, NOA
moved to dismiss the complaint on the ground of lack of jurisdiction
PETITIONER’S  CONTENTION:  The  petitioner  claims  that  the  lower  court  erred  in  not   jurisdiction an action shall be deemed commenced upon the filing of a complaint.
ruling that Article 28(1) of the Warsaw Convention violates the constitutional
guarantees of due process and equal protection.
RESPONDENT’S  CONTENTION:  Respondent  contended  that  the  complaint  could  be   FACTS: Willie J. Uy, a revenue passenger on United Airlines Flight for the San
instituted only in the territory of one of the High Contracting Parties, before: (1) the
court of the domicile of the carrier; (2) the court of its principal place of business;
(3) the court where it has a place of business through which the contract had been
made; or (4) the court of the place of destination. it claims that the Philippines was
not its domicile nor was this its principal place of business. Neither was the
Page 98 of 151
petitioner's ticket issued in this country nor was his destination Manila but San
Francisco in the United States.
ISSUES: (1) whether Article 28(1) of the Warsaw Convention is constitutional
(2) whether Philippine courts have jurisdiction over the case.
RTC: The lower court granted the motion and dismissed the case.
COURT OF APPEALS: The appellate court affirmed the ruling of the lower court.
SUPREME COURT: Petition denied.
(1) The Convention is thus a treaty commitment voluntarily assumed by the
Philippine government and, as such, has the force and effect of law in this country.
The treaty which is the subject matter of this petition was a joint legislative-
executive act. The presumption is that it was first carefully studied and determined
to be constitutional before it was adopted and given the force of law in this
country.
The petitioner's allegations are not convincing enough to overcome this
presumption.
(2) Since the flight involved in the case at bar is international, the same being from
the United States to the Philippines and back to the United States, it is subject to
the provisions of the Warsaw Convention, including Article 28(1), which
enumerates the four places where an action for damages may be brought. The
petitioner will have to file his complaint only in any of the four places designated by
Article 28(1) of the Warsaw Convention.
#Manrique
CASE TITLE: UNITED AIRLINES vs. WILLIE J. UY
KEYWORD: delaying tactics
PONENTE: BELLOSILLO, J.
DOCTRINE: Warsaw Convention intended the two (2)-year limitation incorporated
in Art. 29 as an absolute bar to suit and not to be made subject to the various tolling
provisions of the laws of the forum. It only allows local laws determine whether an
action had been commenced within the two (2)-year period, and within our
However, such rule shall not be applied in the instant case because of the delaying
tactics employed by petitioner airline itself.
Francisco - Manila route, checked in together with his luggage, one piece of which
was found to be overweight at the airline counter. To his utter humiliation, an
employee of petitioner rebuked him saying that he should have known the
maximum weight allowance to be 70 kgs. per bag and that he should have packed
his things accordingly. Not wishing to create further scene, respondent repacked his
things only to find his luggage still overweight for which the airline then billed him
overweight charges. His payment via a miscellaneous charge order (MCO) was
refused  by  the  airline’s  employee,  pointing  out  that  there  were  conflicting  figures   limitation,"  the  same  does  not  refer  to  the  local  forum’s  rules  in  interrupting  the
listed on it. Faced with the prospect of leaving without his luggage, respondent paid
the overweight charges with his American Express credit card. Upon arrival in
Manila, he discovered that one of his bags had been slashed and its contents stolen,
his losses amounting to around US $5,310.00. In a letter dated 16 October 1989
respondent bewailed the insult, embarrassment and humiliating treatment he
suffered in the hands of United Airlines employees, notified petitioner of his loss
and requested reimbursement thereof. Petitioner did not refute any of
respondent’s  allegations  and  mailed a check representing the payment of his loss
based on the maximum liability of US $9.70 per pound. Respondent, thinking the
amount to be grossly inadequate to compensate him for his losses sent two (2)
more letters to petitioner airline, one dated 4 January 1990 through a certain Atty.
Pesigan, and another dated 28 October 1991 demanding an out-of-court settlement
of P1,000,000.00.
PETITIONER’S  CONTENTION:  United  Airlines  moved  to  dismiss  the  complaint  on  the   prescriptive period was in effect suspended.
ground  that  respondent’s  cause  of  action had prescribed, invoking Art. 29 of the
Warsaw Convention which provides -
Art. 29 (1) The right to damages shall be extinguished if an action is not brought
within two (2) years, reckoned from the date of arrival at the destination, or from
the date on which the aircraft ought to have arrived, or from the date on which the
transportation stopped. (2) The method of calculating the period of limitation shall
be determined by the law of the court to which the case is submitted.
RESPONDENT’S  CONTENTION:  Respondent countered that par. (1) of Art. 29 of the
Warsaw Convention must be reconciled with par. (2) thereof which states that "the
method of calculating the period of limitation shall be determined by the law of the
court to which the case is submitted." Interpreting thus, respondent noted that
according to Philippine laws the prescription of actions is interrupted "when they
are filed before the court, when there is a written extrajudicial demand by the
creditors, and when there is any written acknowledgment of the debt by the
debtor."[4] Since he made several demands upon United Airlines: first, through his
personal letter dated 16 October 1989; second, through a letter dated 4 January
1990 from Atty. Pesigan; and, finally, through a letter dated 28 October 1991
written for him by Atty. Ampil, the two (2)-year period of limitation had not yet
been exhausted.
ISSUE: Whether Art. 29 of the Warsaw Convention should apply to the case at bar
RULING:
TRIAL COURT: TC ordered the dismissal of the action holding that the language of
Art. 29 is clear that the action must be brought within two (2) years from the date
Page 99 of 151
of arrival at the destination. It held that although the second paragraph of Art. 29
speaks of deference to the law of the local court in "calculating the period of
 
prescriptive period but only to the rules of determining the time in which the action
may be deemed commenced, and within our jurisdiction the action shall be deemed
"brought" or commenced by the filing of a complaint. Hence, the trial court
concluded that Art. 29 excludes the application of our interruption rules.
CA: On the applicability of the Warsaw Convention, the appellate court ruled that
the Warsaw Convention did not preclude the operation of the Civil Code and other
pertinent laws. Respondent’s  failure  to  file  his  complaint  within  the  two  (2)-year
limitation provided in the Warsaw Convention did not bar his action since he could
still hold petitioner liable for breach of other provisions of the Civil Code which
prescribe a different period or procedure for instituting an action. Further, under
Philippine laws, prescription of actions is interrupted where, among others, there is
a written extrajudicial demand by the creditors, and since respondent Uy sent
several demand letters to petitioner United Airlines, the running of the two (2)-year
SC: DENIED. Respondent's complaint reveals that he is suing on two (2) causes of
action: (a) the shabby and humiliating treatment he received from petitioner's
employees at the San Francisco Airport which caused him extreme embarrassment
and social humiliation; and, (b) the slashing of his luggage and the loss of his
personal effects amounting to US $5,310.00. Respondent's failure to file his
complaint within the two (2)-year limitation of the Warsaw Convention does not
bar his first cause of action since petitioner airline may still be held liable for breach
of other provisions of the Civil Code (e.g. four years for filing an action based on
torts).
As for respondent's second cause of action, the Warsaw Convention intended the
two (2)-year limitation incorporated in Art. 29 as an absolute bar to suit and not to
be made subject to the various tolling provisions of the laws of the forum. Article
29, par. (2), was intended only to let local laws determine whether an action had
been commenced within the two (2)-year period, and within our jurisdiction an
action shall be deemed commenced upon the filing of a complaint. Since it is
indisputable that respondent filed the present action beyond the two (2)-year time
frame his second cause of action must be barred. However, it is obvious that
respondent was forestalled from immediately filing an action because petitioner
airline gave him the run around, answering his letters but not giving in to his
demands. Respondent exerted efforts to immediately convey his loss, even
employed the services of two (2) lawyers to follow up his claims, and that the filing
of the action itself was delayed because of petitioner's evasion. Hence, despite the
express mandate of the Warsaw Convention that an action for damages should be
filed within 2 years from arrival at the place of destination, such rule shall not be
applied due to the delaying tactics employed by petitioner.
NOTE: Philippine Airlines, Inc. v. Court of Appeals - private respondent filed an
action for damages against petitioner airline for the breakage of the front glass of
the microwave oven which she shipped under PAL Air Waybill .Petitioner averred
that, the action having been filed seven (7) months after her arrival at her port of
destination, she failed to comply with par. 12, subpar. (a) (1), of the Air Waybill
which expressly provided that the person entitled to delivery must make a
complaint to the carrier in writing in case of visible damage to the goods,
immediately after discovery of the damage and at the latest within 14 days from
receipt of the goods. Despite non-compliance therewith the Court held that by
private respondent's immediate submission of a formal claim to petitioner, which
however was not immediately entertained as it was referred from one employee to
another, she was deemed to have substantially complied with the
requirement. The Court noted that with private respondent's own zealous efforts
in pursuing her claim it was clearly not her fault that the letter of demand for
damages could only be filed, after months of exasperating follow-up of the claim,
on 13 August 1990, and that if there was any failure at all to file the formal claim
within the prescriptive period contemplated in the Air Waybill, this was largely
because of the carrier's own doing, the consequences of which could not in all
fairness be attributed to private respondent.
#Maquiling
C. Bill of Lading as Receipt
CASE TITLE: Saludo v CA
KEYWORD: NOMINAL DAMAGES
PONENTE: REGALADO, J
DOCTRINE: Articles 2221 and 2222 of the Civil Code make it clear that nominal
damages are not intended for indemnification of loss suffered but for the
vindication or recognition of a right violated or invaded. They are recoverable
where some injury has been done but the amount of which the evidence fails to
show, the assessment of damages being left to the discretion of the court according
to the circumstances of the case.
Facts:
After  the  death  of  plaintiff’s  mother,  Crispina  Saludo,  Pomierski  and  Son  Funeral   and expected of them.
Home of Chicago brought the remains to Continental Mortuary Air Services which
booked the shipment of the remains from Chicago to San Francisco by TWA and
Page 100 of 151
from San Francisco to Manila with PAL. The remains were taken to the Chicago
Airport, but it turned out that there were two bodies in the said airport. Somehow
the  two  bodies  were  switched;  the  casket  bearing  the  remains  of  plaintiff’s  mother  
was mistakenly sent to Mexico and was opened there. The shipment was
immediately loaded on PAL flight and arrived on Manila a day after it expected
arrival on October 29, 1976.
Plaintiff filed a damage suit with CFI of Leyte, contending that Trans World
Airlines and PAL were liable for misshipment, the eventual delay on the delivery of
the cargo containing the remains, and of the discourtesy of its employees to them.
The court absolve the two airline companies of any liability. The CA
affirmed such decision.
PETITIONER’S  CONTENTION:
Right to be treated with due courtesy in accordance with the degree of diligence
required by law to be exercised by every common carrier was violated by the TWA
and this entitles them, atleast to nominal damages from TWA alone
RESPONDENT’S  CONTENTION:  (not  specified  in  topic  re  damages)  
Issue: Whether or not the carrier is liable for damages.
RULING: The records reveal that petitioners, particularly Maria and Saturnino
Saludo,  agonised  for  nearly  five  hours,  over  the  possibility  of  losing  their  mother’s  
mortal remains, unattended to and without any assurance from the employees of
TWA that they were doing anything about the situation. They were entitled to the
understanding and humane consideration called of by and commensurate with the
extraordinary diligence required for common carriers, and not the cold insensitivity
to their predicament. Common sense could and should have dictated that they
exert a little effort in making a more extensive inquiry by themselves or through
their superiors, rather than just shrug off the problem with a callous and uncaring
remark that they had no knowledge about it. With all the modern communications
equipment readily available to them, it could have easily facilitated said inquiry.
TWA’s  apathetic  stance  while  not  legally  reprehensible  is  morally  deplorable.
Losing  a  loved  one,  especially  one’s  parent,  is  a  painful  experience. Our
culture accords utmost tenderness human feelings toward and in reverence to the
dead. That the remains of the deceased were subsequently delivered, albeit,
belatedly and eventually laid in her final resting place is of little consolation. The
imperviousness  displayed  by  TWA’s  personnel,  even  for  just  that  fraction  of  time,  
was especially condemnable particularly in the hours of bereavement of the family
of Crispina Saludo, intensified by anguish due to the uncertainty of the
whereabouts of their  mother’s  remains.  TWA’s  personnel  were  remiss  in  the  
observance of that genuine human concern and professional attentiveness required
 The foregoing observations, however, do not appear to be applicable to
respondent PAL. No attribution of discourtesy or indifference has been made
against PAL by petitioners and, in fact, petitioner Maria Saludo testified that it was
to PAL they repaired after failing to receive proper attention from TWA. It was from
PAL that they received confirmation  that  their  mother’s  remains  would  be  on  the   and landed on its left side, coming to a full stop only after a series of impacts. The
same flight with them.
Petitioner’s  right  to  be  treated  with  due  courtesy  in  accordance  with  the   its front portion. Because of the mishap, several passengers were injured
degree of diligence required by law to be exercised by every common carrier was
violated by the TWA and this entitles them, atleast to nominal damages from TWA
alone. Articles 2221 and 2222 of the Civil Code make it clear that nominal damages
are not intended for indemnification of loss suffered but for the vindication or
recognition of a right violated or invaded. They are recoverable where some injury
has been done but the amount of which the evidence fails to show, the assessment
of damages being left to the discretion of the court according to the circumstances
of the case. #Mariano
V. ACTIONS AND DAMAGES IN CASE OF BREACH
A. Concurrent Causes of Action
CASE TITLE: FABRE V. COURT OF APPEALS
Keyword: Pangasinan, Alternative Causes of Action
Doctrine: It is permissible for the plaintiff to allege in the Complaint alternative
causes of action and join as many parties as may be liable on such causes of action
so long as the plaintiff does not recover twice.
Ponente: Mendoza, J.
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 PorfirioCabil.
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
Page 101 of 151
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
bus came to rest off the road. A coconut tree which it had hit fell on it and smashed
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 or not the spouses sued, and be made jointly and severally liable
with the driver.
Held: YES. As in the case of BLTB, private respondents in this case and her co-
plaintiffs did not stake out their claim against the carrier and the driver exclusively
on one theory, much less on that of breach of contract alone. After all, it was
permitted for them to allege alternative causes of action and join as many parties as
may be liable on such causes of action so long as private respondent and her co-
plaintiffs do not recover twice for the same injury. What is clear from the cases is
the intent of the plaintiff there to recover from both the carrier and the driver, thus
justifying the holding that the carrier and the driver were jointly and severally liable
because their separate and distinct acts concurred to produce the same injury.
Thus, the carrier may be sued on the alternative causes of action of breach of
contract and quasi-delict. #MEDINA
CASE TITLE: AIR FRANCE VS. CARRASCOSO
KEYWORD: First class seat; White man
PONENTE: Sanchez, J.
DOCTRINE: A contract to transport passengers is quite different in kind and degree
from any other contractual relation. And this, because of the relation which an air-
carrier sustains with the public. Its business is mainly with the travelling public. It
invites people to avail of the comforts and advantages it offers. The contract of air
carriage, therefore, generates a relation attended with a public duty. Neglect or
malfeasance of the carrier's employees, naturally, could give ground for an action
for damages.

FACTS: Rafael Carrascoso, a civil engineer, was a member of a group of 48 Filipino
pilgrims that left Manila for Lourdes on March 30, 1958. On March 28, 1958, Air
France, through its authorized agent, Philippine Air Lines, Inc., issued to respondent
a "first class" round trip airplane ticket from Manila to Rome. From Manila to
Bangkok, respondent travelled in "first class", but at Bangkok, the Manager of the
petitioner airline forced him to vacate the "first class" seat that he was occupying
because, in the words of the witness Ernesto G. Cuento, there was a "white man",
who, the Manager alleged, had a "better right" to the seat. When asked to vacate
his "first class" seat respondent refused, and told defendant's Manager that his seat
would be taken over his dead body; a commotion ensued, and, according to said
Ernesto G. Cuento, "many of the Filipino passengers got nervous in the tourist class;
when they found out that Mr. Carrascoso was having a hot discussion with the
white man [manager], they came all across to Mr. Carrascoso and pacified Mr.
Carrascoso to give his seat to the white man"; and respondent reluctantly gave his
"first class" seat in the plane.
PETITIONER’S  CLAIM:  Petitioner  assails  respondent  court's  award  of  moral  
damages. Petitioner's trenchant claim is that Carrascoso's action is planted upon
breach of contract; that to authorize an award for moral damages there must be an
averment of fraud or bad faith;31 and that the decision of the Court of Appeals fails
to make a finding of bad faith.
ISSUE: Whether or not payment for damages may be properly rewarded to
Carrascoso.
RULING:
TRIAL COURT – The Court of First Instance of Manila 1 sentenced petitioner to pay
respondent Rafael Carrascoso P25,000.00 by way of moral damages; P10,000.00 as
exemplary damages; P393.20 representing the difference in fare between first class
and tourist class for the portion of the trip Bangkok-Rome, these various amounts
with interest at the legal rate, from the date of the filing of the complaint until paid;
plus P3,000.00 for attorneys' fees; and the costs of suit.CA – On appeal,2 the Court
of Appeals slightly reduced the amount of refund on Carrascoso's plane ticket from
P393.20 to P383.10, and voted to affirm the appealed decision "in all other
respects", with costs against petitioner.
SC – A contract to transport passengers is quite different in kind and degree from
any other contractual relation. 43And this, because of the relation which an air-
Page 102 of 151
carrier sustains with the public. Its business is mainly with the travelling public. It
invites people to avail of the comforts and advantages it offers. The contract of air
carriage, therefore, generates a relation attended with a public duty. Neglect or
malfeasance of the carrier's employees, naturally, could give ground for an action
for damages.
Passengers do not contract merely for transportation. They have a right to be
treated by the carrier's employees with kindness, respect, courtesy and due
consideration. They are entitled to be protected against personal misconduct,
injurious language, indignities and abuses from such employees. So it is, that any
rule or discourteous conduct on the part of employees towards a passenger gives
the latter an action for damages against the carrier.
Petitioner's contract with Carrascoso is one attended with public duty. The stress of
Carrascoso's action as we have said, is placed upon his wrongful expulsion. This is a
violation of public duty by the petitioner air carrier — a case of quasi-delict.
Damages are proper. #NERI
CASE TITLE: TIU VS. ARRIESGADO
Ponente: Callejo Sr., J.
Keywords: Rough Rider
Doctrine: While the immediate beneficiaries of the standard of extraordinary
diligence are, of course, the passengers, and owners of the cargo carried by a
common carrier, they are not the only persons that the law seeks to benefit. For if
common carriers carefully observed the statutory standard of extraordinary
diligence in respect of their own passengers, they cannot help but simultaneously
benefit pedestrians and the passengers of other vehicles who are equally entitled to
the safe and convenient use of our roads and highways. The law seeks to stop and
prevent the slaughter and maiming of the people (whether passengers or not) on
our highways and buses, the very size and power of which seem to inflame the
minds of their drivers. Article 2231 of the Civil Code explicitly authorizes the
imposition of exemplary damages in cases of quasi-delicts  “if  the  defendant  acted  
with  gross  negligence...”
Facts: At about 10 PM of March 15, 1987, the cargo truck was loaded with Firewood
in Bogo, Cebu and left for Cebu City. Upon reaching Sitio Aggies, Compostela, Cebu,
just as the truck passed over bridge, one of its rear tires exploded. The driver Sergio
Pedrano, then parked along the right side of the national highway and removed the
damaged tire to have it vulcanized at a nearby shop, about 700 meters away.
Pedramo left his helper to keep watch over the stalled vehicle, and instructed the
latter to place a spare tire six fathoms away behind the stalled truck to serve as a
warning  for  oncoming  vehicles.  The  truck’s  tail  lights  were  also  left  on.
At  about  4:45  AM,  D’  Rough  Riders  passenger  bus  driven  by   34 buses. If petitioner Laspinas had not been driving at a fast pace, he could have
VirgilioTeLaspinas was cruising along the national highway of Compostela, Cebu.
The passenger bus was also bound for Cebu City. Among its passengers were the
Spouses Pedro Arriesgado and FelisaArriesgado.
As the bus was approaching the bridge, Laspinas saw the stalled truck,
which was then about 25 meters away. He applied the brakes and tried to swerve
to the left to avoid hitting the truck. But it was too late; the bus rammed into the
truck’s  left  rear.  The  impact  damaged  the  right  side  of  the  bus  and  left  several   liable for the  respondent’s  claim.
passengers injured. Pedro Arriesgado lost consciousness and suffered a fracture in
his right colles while his wife, Felisa, was brought to the hospital where she died
shortly thereafter.
Issue:
Petitioner’s  Contention:  The  petitioners  alleged  that  Laspinas  was  negotiating  the  
uphill climb along the national highway of Sitio Aggies, Compostela in a moderate
and normal speed. It was further alleged that the truck was parked in a slanted
manner, its rear portion almost in the middle of the highway, and that no early
warning device was displayed. Furthermore, they alleged that Laspinas promptly
applied the brakes and swerved to the left to avoid hitting the truck head-on, but
despite his efforts to avoid damage to property and physical injuries to the
passengers.
Trial Court: There was no dispute that petitioner Tiu was engaged in the business as
a  common  carrier,  in  view  of  his  admission  that  D’  Rough Rider passenger bus which
figured in the accident was owned by him; that he had been engaged in the
transportation business for 25 years with a sole proprietorship; and that he owned
easily swerved to the left to avoid hitting the truck, thus averting the unfortunate
incident. The trial court then concluded that Laspinas was NEGLIGENT.
CA: The action of the respondent Arriesgado was based not on quasi-delict but on
breach of contract of carriage. As a common carrier, it was incumbent upon the
petitioner to prove that extraordinary diligence was observed in ensuring the safety
of passengers during transportation. Since the latter failed to do so, he should be
Held: VirgilioTeLaspinas failed to observe extraordinary diligence as a driver of the
common carrier in this case. It is quite hard to accept his version of the incident that
he did not see at a reasonable distance ahead the cargo truck that was parked
when the Rough Rider Bus just came out of the bridge which is on an elevated
position than the place where the cargo truck was parked.
By his own admission, he had just passed a bridge and was traversing the highway
at a speed of 40-50 km/hr before the collision occurred. The maximum speed
allowed by law on a bridge is only 30 km/hr. And as correctly pointed out by the
trial court, Laspinas also violated the Land Transportation and Traffic Code.
Under Article 2185 of the Civil Code, a person driving a vehicle is presumed
negligent if at the time of the mishap, he was violating any traffic regulation.

Moreover, according to the petitioners, the appellate court erred in failing As  the  Court  ratiocinated  in  Kapalaran  Bus  v.  Coronado:  “While  the  immediate  
to appreciate the absence of an early warning device and or built in reflectors beneficiaries of the standard of extraordinary diligence are, of course, the
passengers and owners of cargo carried by a common carrier, they are not the only
Respondent’s  Contention:  The  passenger  bus  in  question  was  cruising  at  a  fast  and   persons that the law seeks to benefit. For if common carriers carefully observed the
high speed along the national road, and that petitioner Laspinas did not take statutory standard of extraordinary diligence in respect of their own passengers,
precautionary measures to avoid the accident.That due to the reckless and they cannot help but simultaneously benefit pedestrians and the passengers of
imprudent driving by defendant VirgilioLaspinas of the said Rough Riders passenger other vehicles who are equally entitled to the safe and convenient use of our roads
bus, plaintiff and his wife, Felisa, failed to safely reach their destination which was and highways. The law seeks to stop and prevent the slaughter and maiming of
Cebu City, the proximate cause of which was the defendant-driver’s  failure  to   people on our highways and buses, the very size and power of which seem to
observe utmost diligence required of a very cautious person under all inflame the minds of their drivers. Article 2231 of the Civil Code explicitly authorizes
circumstances. the imposition of exemplary damages in cases of quasi-delicts  “if  the  defendant  
acted with gross negligence.”  #PASCUA

Page 103 of 151


B. Notice of Claim and Prescriptive Period
1. Overland Transportation of Goods and Coastwise Shipping
CASE TITLE: PHILIPPINE AMERICAN GENERAL INSURANCE CO., INC. and TAGUM
PLASTICS, INC., petitioners, vs. SWEET LINES, INC., DAVAO VETERANS ARRASTRE
AND PORT SERVICES, INC. and HON. COURT OF APPEALS, respondents
KEYWORD: Prescriptive period, 7,000 bags of low density polyethylene shipped
from Los Angeles to Manila
PONENTE: REGALADO, J.
DOCTRINE:  “where  the  contract  of  shipment  contains  a  reasonable requirement of
giving notice of loss of or injury to the goods, the giving of such notice is a condition
precedent to the action for loss or injury or the right to enforce the carrier's liability.
Such requirement is not an empty formalism. The fundamental reason or purpose
of such a stipulation is not to relieve the carrier from just liability, but reasonably to
inform it that the shipment has been damaged and that it is charged with liability
therefor, and to give it an opportunity to examine the nature and extent of the
injury. This protects the carrier by affording it an opportunity to make an
investigation of a claim while the matter is fresh and easily investigated so as to
safeguard  itself  from  false  and  fraudulent  claims.”
FACTS: A total 7,000 bags of low density polyethylene (600 bags of polyethylene
641 and 6,400 bags of polyethylene 647) were shipped from Baton Rouge, LA to
Manila on board SS VishvaYash, a vessel belonging to the Shipping Corporation of
India (SCI). From Manila, the cargoes were shipped to Davao on board MV Sweet
Love, a vessel owned by Sweet Lines. The consignee was Far East Bank with arrival
notice to Tagum Plastics, Inc., Tagum, Davao City. The cargoes were insured by Far
East Bank with the Philippine American General Insurance Co (Philamgen) and were
covered by bills of lading which contained the following stipulation in paragraph 5:
Claims for shortage, damage, must be made at the time of delivery to
consignee or agent, if container shows exterior signs of damage or
shortage. Claims for non-delivery, misdelivery, loss or damage must be
filed within 30 days from accrual. Suits arising from shortage, damage or
loss, non-delivery or misdelivery shall be instituted within 60 days from
date of accrual of right of action. Failure to file claims or institute judicial
proceedings as herein provided constitutes waiver of claim or right of
action. In no case shall carrier be liable for any delay, non-delivery,
Page 104 of 151
misdelivery, loss of damage to cargo while cargo is not in actual custody of
carrier.
On May 15, 1977, the shipment(s) were discharged from the interisland
carrier into the custody of the consignee. A survey conducted on July 8, 1977
showed that of the shipment totalling 7,000 bags, originally contained in 175
pallets, only a total of 5,820 bags were delivered to the consignee in good order
condition, leaving a balance of 1,080 bags. Some of the 1,080 bags were either
MISSING OR DAMAGED beyond the point of being useful for the intended purpose.
Before trial, a compromise agreement was entered into between the
complainants and SCI and F.E. Zuellig, thus, only Sweet Lines and Davao Arrastre
remained as defendants.
ISSUE/S: 1. Whether or not there was a prescriptive period
2. Assuming the said prescriptive period exist and are thus legal
and valid, did the petitioners (PhilAmGen) act within the
prescriptive period
PETITIONER’S  CONTENTION:  Herein  petitioners,  by  their  own  assertions  that  — In
connection with Pars. 14 and 15 of defendant Sweet Lines, Inc.'s Answer, plaintiffs
state that such agreements are what the Supreme Court considers as contracts of
adhesion (see Sweet Lines, Inc. vs. Hon. Bernardo Teves, et al., G.R. No. L-37750,
May 19, 1978) and, consequently, the provisions therein which are contrary to law
and public policy cannot be availed of by answering defendant as valid defenses.
RESPONDENT’S  CONTENTION:  In  the  present  case  and  under  the  aforestated  
assumption that the time limit involved is a prescriptive period, respondent carrier
duly raised prescription as an affirmative defense in its answer setting forth
paragraph 5 of the pertinent bills of lading which comprised the stipulation thereon
by parties.
RULING:
1. TRIAL COURT
The Trial Court ruled in favor of Philamgen and Tagum Plastics.
2. APPELLATE COURT
The Court of Appeals reversed on the ground of prescription and denied the motion
for reconsideration.
3. SUPREME COURT
The decision of respondent Court of Appeals is hereby affirmed. In the case at bar,
there is neither any showing of compliance by petitioners with the requirement for
the filing of a notice of claim within the prescribed period nor any allegation to that
effect. It may then be said that while petitioners may possibly have a cause of
action, for failure to comply with the above condition precedent they lost whatever
right of action they may have in their favor or, token in another sense, that
remedial right or right to relief had prescribed. #QUINTOS
2. COGSA
CASE TITLE: DOLE PHILIPPINES, INC VS MARITIME COMPANY OF THE PHILIPPINES
Keyword: dole
Ponente:NARVASA, J.:
Doctrine:The period is not suspended by an extra judicial demand. Article 1155 of
the civil code cannot be applied because matters affecting transportation of goods
by sea should be decided in as short time as possible.
Short Facts:The case relates to a claim for loss and/or damage to a shipment of
machine parts sought to be enforced by the consignee Dole against the carrier. The
cargo subject of the instant case was discharged in Dadiangas unto the custody of
the consignee, DOLE on December 18, 1971. The corresponding claim for the
damages sustained by the cargo was filed by DOLE with the Maritime Co. on May 4,
1972. On June 11, 1973 DOLE filed a complaint in the Court of First Instance
embodying three (3) causes of action involving three (3) separate and different
shipments. The third cause of action therein involved the cargo now subject of this
present litigation but on December 11, 1974 Justice Serafin Cuevas issued an Order
in Civil Case No. 91043 dismissing the first two causes of action. Because of the
dismissal such to the third cause of action without prejudice, DOLE instituted this
present complaint on January 6, 1975.
Issue:
Whether or not Article 1155 of the Civil Code providing that the prescription of
actions is interrupted by the making of an extrajudicial written demand by the
creditor is applicable to actions brought under the Carriage of Goods by Sea Act
PC:
Provisions of the Civil Code are, by express mandate of said Code, suppletory of
deficiencies in the Code of Commerce and special laws in matters governed by the
latter, prescription under said Act is subject to the provisions of Article 1155 of the
Page 105 of 151
Civil Code on tolling. Dole's claim for loss or damage made on May 4, 1972
amounted to a written extrajudicial demand which would toll or interrupt
prescription under Article 1155, it operated to toll prescription also in actions under
the Carriage of Goods by Sea Act.
RC:
Maritime filed an answer pleading inter alia the affirmative defense of prescription
under the provisions of the Carriage of Goods by Sea Act which provides:
"the carrier and the ship shall be discharged from all liability in respect of loss or
damage unless suit is brought within one year after delivery of the goods or the
date when the goods should have been delivered; Provided, That, if a notice of loss
or damage, either apparent or conceded, is not given as provided for in this section,
that fact shall not affect or prejudice the right of the shipper to bring suit within one
year after the delivery of the goods or the date when the goods should have been
delivered"
Ruling:
RTC:Trial Court, after due consideration, resolved the matter in favor of Maritime
and dismissed the complaint
CA: Denied
SC: No. As held in the case of The Yek Tong Lin Fire & Marine Insurance Co., Ltd. vs.
American President Lines, Inc, general provisions of the new Civil Code (Art. 1155)
cannot be made to apply, as such application would have the effect of extending
the one-year period of prescription fixed in the law. It is desirable that matters
affecting transportation of goods by sea be decided in as short a time as possible;
the application of the provisions of Article 1155 of the new Civil Code would
unnecessarily extend the period and permit delays in the settlement of questions
affecting transportation, contrary to the clear intent and purpose of the law.
Moreover, no new result would be obtain because despite the interruption of the
one-year prescriptive period, Dole let the new period lapse without filing action. It
instituted Civil Case No. 91043 only on June 11, 1973, more than one month after
that period has expired and its right of action had prescribed.#SANTOS, A.

CASE TITLE: MARITIME AGENCIES VS. CA
Keyword: UREA SHORTAGE, Delayed filing of notice of claim.
Ponente: J. Cruz
Doctrine: It is a well-settled principle that the agent shall be liable for the act or
omission of the principal only if the latter is undisclosed.
Facts: Transcontinental Fertilizer Company of London chartered from Hongkong the
motor  vessel  named  “Hongkong  Island”  for  the  shipment  of  8073.35  MT  (gross)  
bagged urea from Novorossisk, Odessa, USSR, to the Philippines, the parties signing
for this purpose a Uniform General Charter dated 9 August 1979. Of the total
shipment, 5,400.04 MT was for the account of Atlas Fertilizer Company as
consignee, 3,400.04 to be discharged in Manila and the remaining 2,000 MT in
Cebu. The goods were insured by the consignee with the Union Insurance Society of
Canton, Ltd. for P6,779,214.00 against all risks. Maritime Agencies & Services, Inc.
was  appointed  as  the  charterer’s  agent  and  Macondray  Company,  Inc.  as  the   after the delivery of the goods or the date when the goods should have
owner’s  agent.  The  vessel  arrived  in  Manila  on  3  October  1979,  and  unloaded  part   been delivered.
of  the  consignee’s  goods,  then  proceeded  to  Cebu  on  19  October 1979, to discharge
the rest of the cargo. On 31 October 1979, the consignee filed a formal claim
against Maritime, copy furnished Macondray, for the amount of P87,163.54,
representing C & F value of the 1,383 shortlanded bags. On 12 January 1980, the
consignee filed another formal claim, this time against Viva Customs Brokerage, for
the amount of P36,030.23, representing the value of 574 bags of net unrecovered
spillage. These claims having been rejected, the consignee then went to Union,
which on demand paid the total indemnity of P113,123.86 pursuant to the
insurance contract.
As subrogee of the consignee, Union then filed on 19 September 1980, a complaint
for  reimbursement  of  this  amount,  with  legal  interest  and  attorney’s  fees,  against   which, as a mere agent, is not answerable for injury caused by its principal. It is a
Hongkong Island Company, Ltd., Maritime Agencies & Services, Inc. and/or Viva
Customs Brokerage.
Issue: Whether or not the filing for notice of claim had prescribed
Held:
Supreme Court: In the cases at bar, the trial court found that 1,383 bags were
shortlanded, which could only mean that they were damaged or lost on board the
Page 106 of 151
vessel before unloading of the shipment. It is not denied that the entire cargo
shipped by the charterer in Odessa was covered by a clean bill of lading. As the bags
were in good order when received in the vessel, the presumption is that they were
damaged or lost during the voyage as a result of their negligent improper stowage.
For this the ship owner should be held liable.
But we do agree that the period for filing the claim is one year, in accordance with
the Carriage of Goods by Sea Act. This was adopted and embodied by our
legislature in Com. Act No. 65 which, as a special law, prevails over the general
provisions of the Civil Code on prescription of actions. Section 3(6) of that Act
provides as follows:
In any event, the carrier and the ship shall be discharged from all liability in
respect of loss or damage unless suit is brought within one year after
delivery of the goods or the date when the goods should have been
delivered; Provided, that if a notice of loss for damage; either apparent or
concealed, is not given as provided for in this section, that fact shall not
effect or prejudice the right of the shipper to bring suit within one year
The one-year period in the cases at bar should commence on October 20,
1979, when the last item was delivered to the consignee. Union's complaint was
filed against Hongkong on September 19, 1980, but tardily against Macondray on
April 20, 1981. The consequence is that the action is considered prescribed as far as
Macondray is concerned but not against its principal, which is what matters
anyway.
As regards the goods damaged or lost during unloading, the charterer is
liable therefor, having assumed this activity under the charter party "free of
expense to the vessel." The liability imposable upon it cannot be borne by Maritime
well-settled principle that the agent shall be liable for the act or omission of the
principal only if the latter is undisclosed.
The liability of Macondray can no longer be enforced because the claim
against it has prescribed; and as for Maritime, it cannot be held liable for the acts of
its known principal resulting in injury to Union. #SANTOS, N.

C. Recoverable Damages
1. Kinds of Damages
i. Actual/Compensatory Damages
CASE TITLE: ZULUETA vs. PAN AM (4 SCRA 397)
KEYWORD: defective announcing system, Honolulu
PONENTE: CONCEPCION, CJ
DOCTRINE:
FACTS:  Plaintiff  Zulueta,  his  wife  and  daughter  were  passengers  aboard  defendant’s   were subjected, and their being cordoned by men in uniform as if they were
plane from Honolulu Hawaii, to Manila. Upon Reaching the Wake Island, the
passengers were advised that they could disembark for a stopover for about 30
minutes. Plaintiff went to the toilet at the terminal building but finding it full,
walked 200 yards away. Upon returning, he told an employee of the defendant that
they almost made him miss the flight because of a defective announcing system.
He had a heated discussion with either the Plane Captain or the Terminal Manager.
He was told that they would open his bags which he refused and he warned them of
the consequences. Just the same they opened his bags and found nothing
prohibited. They forced him to go out of the plane and left him at Wake Island. His
Wife had to send him money and he was able to leave Wake Island and return to
Manila thru Honolulu and Tokyo after two (2) days.
This Action was to recover damages from the defendant.
ISSUE: Whether or not Moral Damages may be recovered
RULING:
Page 107 of 151
RTC: Damages should not be paid by the Defendant. Petitioner is not treated that
way.
CA: Damages should be recovered from the defendant. Petitioner is put to shame
by disrespectful officers.
SC:  SC  sustained  CA’s  decision.  The  record  amply  established  plaintiff’s  right  to  
recover both moral and exemplary damages. Indeed, the rude and rough reception
plaintiff received at the hands of Sitton r Captain Zentner when the latter met him
at the ramp (what in the hell do you think you are? Get on that plane!);
- the menacing attitude of Zentner or Sitton and the supercilious manner in which
he had asked plaintiff to open his bags (Open your Bag!), and when told that bag
was  missing  (I  don’t give a damn!)
- the abusive language and highly scornful reference to plaintiffs as monkeys by one
of  PAN  AM’s  employees  (who  turning  to  Mrs.  Zulueta  remarked  “  will  you  pull  these  
three monkeys out of here?)
- and unfriendly attitude, the ugly stares and unkind remarks to which plaintiffs
criminals, while plaintiff was arguing with sitton,- the  airline  officials’  refusal  to  
allow plaintiff to board the plane on the pretext that he was hiding a bomb in his
luggage and their arbitrary and high-handed decision to leave him in Wake Island.
-Mrs.  Zulueta’s  having  suffered  a  nervous  breakdown  for  which  she  was  
hospitalized as a result of the embarrassments, insults, and humiliations to which
plaintiffs  were  exposed  by  the  conduct  of  PAN  AM’s  employees.
- all these justify an award for moral damages resulting from mental anguish,
wounded feelings, serious anxiety, moral shock and social humiliation thereby
suffered by plaintiffs. They were awarded Php 500,000.00 for moral damages,
Php200,000.00  for  exemplary  damages,  and  Php75,000.00  attorney’s  fees,  and  
Php5502.85 actual damages. #SUBIJANO
CASE TITLE: GATCHALIAN VS. DELIM
Keyword: Plastic Surgery
Ponente: Feliciano, J.
Doctrine: Actual or compensatory damages must be substantiated and may not be
awarded on the basis of speculation or conjecture. Moral damages may be awarded
where gross negligence on the part of the common carrier is shown.
Petitioner boarded a minibus owned by respondent bound to Aringay La Union.
Suddenly a 'snapping sound' emerged and the bus turned turtle which caused the
injuries of the passengers including petitioner. The wife of respondent visited the
victims in the hospital and made them signed a Joint Affidavit stating they will no
longer file a civil or criminal case against the respondent on the ground that it was
an accident caused by mechanical defects. However, petitioner still filed a civil case
claiming damages.
Issue: Can petitioner claim compensatory and moral damages?
Petitioners' Contention: She alleged in the complaint that her injuries sustained
from the vehicular mishap had left her with a conspicuous white scar measuring 1
by 1/2 inches on the forehead, generating mental suffering and an inferiority
complex on her part; and that as a result, she had to retire in seclusion and stay
away from her friends. She also alleged that the scar diminished her facial beauty
and deprived her of opportunities for employment. She prayed for an award of:
P10,000.00 for loss of employment and other opportunities; P10,000.00 for the cost
of plastic surgery for removal of the scar on her forehead; P30,000.00 for moral
damages; and P1,000.00 as attorney's fees.
Respondents' Contention: The vehicular mishap was due to force majeure, and that
petitioner had already been paid and moreover had waived any right to institute
any action against him (private respondent) and his driver, when petitioner
Gatchalian signed the Joint Affidavit on 14 July 1973.
Trial Court: No. when petitioner Gatchalian signed the Joint Affidavit, she
relinquished any right of action (whether criminal or civil) that she may have had
against respondent and the driver of the
Court of Appeals: Reversed the trial court's conclusion that there had been a valid
waiver, but affirmed the dismissal of the case by denying petitioner's claim for
damages:
Supreme Court: Partly granted.
First, Compensation as casual employee- DENIED
Page 108 of 151
Petitioner maintains that on the day that the mini-bus went off the road, she was
supposed to confer with the district supervisor of public schools for a substitute
teacher's job, a job which she had held off and on as a "casual employee." The
Court of Appeals, however, found that at the time of the accident, she was no
longer employed in a public school since, being a casual employee and not a Civil
Service eligible, she had been laid off.
Second, claim for the cost of plastic surgery for removal of the scar on her
forehead- GRANTED
A person is entitled to the physical integrity of his or her body; if that integrity is
violated or diminished, actual injury is suffered for which actual or compensatory
damages are due and assessable.. A scar, especially one on the face of the woman,
resulting from the infliction of injury upon her, is a violation of bodily integrity,
giving raise to a legitimate claim for restoration to her conditio ante.
Third, Moral Damages- GRANTED
Moral damages may be awarded where gross negligence on the part of the
common carrier is shown. Since we have earlier concluded that respondent
common carrier and his driver had been grossly negligent in connection with the
bus mishap which had injured petitioner and other passengers, and recalling the
aggressive maneuvers of respondent, through his wife, to get the victims to waive
their right to recover damages even as they were still hospitalized for their injuries,
petitioner must be held entitled to such moral damages.
Note: Other Issues
1. Whether or not the waiver is valid.
Invalid. It was signed by petitioner while in the state of dizziness. Hence, not clear
and equivocal as required by law.
2. Whether or not the cause of accident is fortuitous event.
No. Shortly before the vehicle went off the road and into a ditch, a "snapping
sound" was suddenly heard at one part of the bus. One of the passengers, an old
woman, cried out, "What happened?" ("Apayaddansametnadadaelen?"). The driver
replied, nonchalantly, "That is only normal" ("Ugalitimakinadayta"). The driver did
not stop to check if anything had gone wrong with the bus. Moreover, the driver's
reply necessarily indicated that the same "snapping sound" had been heard in the
bus on previous occasions. This could only mean that the bus had not been checked
physically or mechanically to determine what was causing the "snapping sound"
which had occurred so frequently that the driver had gotten accustomed to it. # TA-
A petitioner bus firm and respondents. As there was no contract, there should be no
CASE TITLE: MARCHAN vs. MENDOZA
KEYWORD: bus fell into a ditch
PONENTE: FERNANDO, J.
DOCTRINE/S:
1. The award of actual/compensatory damages is well within the discretion of the
CA.
2. Exemplary damages may be imposed by way of example or correction only in
addition to compensatory damages, but that they cannot be recovered as a matter
of right.
SHORT FACTS:
On February 22, 1954, between 9:00 and 9:30 o'clock, Passenger Bus No.
141 of petitioner Philippine Rabbit Bus Lines, driven by petitioner SilverioMarchan
fell into a ditch somewhere in Barrio Malanday, Polo, Bulacan, while on its way to
Manila. Arsenio Mendoza, his wife Leonarda and child Zenaida, who were
passengers of the bus, were thrown out to the ground resulting in their multiple
injuries. Mendoza suffered the most serious injuries which damaged his vertebrae
causing the paralysis of his lower extremities which he continued to suffer even up
to trial of this case. His physician opined that he may never walk again.
Marchan was prosecuted for serious, less serious and slight physical
injuries through reckless imprudence before the Justice of the Peace Court of Polo
Bulacan, and was thereafter convicted. The judgment of conviction was affirmed by
the Court of First Instance. Mendoza, his wife and child went to the CA to recover
damages against Marchan, the driver of the bus, and from Bienvenido P. Buan and
Natividad Paras in their capacity as administrator and administratix, respectively of
the estate of the late Florencio P. Buan, doing business under the style name of the
Philippine Rabbit Bus Lines. The complaint for damages is predicated not only on a
breach of contract of carriage for failure of the bus operator and driver to safely
convey them to their destination, but also on account of a criminal negligence on
the  part  of  Marchan  resulting  to  Mendoza’s  multiple  physical  damages.
ISSUE: Whether or not the CA was correct in imposing a liability in the amount of
P40,000 for compensatory damages and P30,000 for exemplary damages. – YES
PETITIONER’S  CONTENTION:
Page 109 of 151
Petitioners argued that there was no implied contract of carriage between the
breach which was said to be the occasion for their liability for compensatory and
exemplary  damages  as  well  as  attorney’s  fees.
RESPONDENT’S  CONTENTION:
Respondents averred that they were treated as passengers for they paid their
corresponding fares. They argued that the bus was traveling at a high rate of speed
without due regard to the safety of the passengers. So much so that one of the
passengers had to call the attention of Marchan to lessen the speed or to slow
down, but then Marchan did not heed the request of said passenger; neither did he
slacken his speed. Marchan even increased his speed while approaching a six-by-six
truck which was then parked ahead, apparently for the purpose of passing the said
parked truck and to avoid collision with the incoming vehicle from the opposite
direction. But, when Marchan veered the bus to resume
position over the right lane, the rear tires of the bus skidded because of his high
rate of speed, thereby causing it to fall into a ditch.
RULING:
APPELLATE COURT
The CA affirmed the amount of P40,000.00 awarded by the lower court as
compensatory damages. However, it modified the lower court decision by holding
petitioners to pay the amount of P30,000.00 as exemplary damages and sustained
the award of attorney's fees in the amount of P5,000.00.
SUPREME COURT
Affirmed the ruling of the CA, and the award of damages.
The amount of P40,000.00 awarded by the court as compensatory
damages is quite reasonable and fair, considering that Mendoza had suffered
paralysis on the lower extremities, which will incapacitate him to engage in his
customary occupation throughout the remaining years of his life, especially so if the
fact that he was only 26 years old when he met an accident would be taken into
account. Considering that Mendoza was only in his middle twenties when, thru the
negligence of petitioners, he lost the use of his limbs, being condemned for the
remainder of his life to be a paralytic, in effect leading a maimed, well-nigh useless
existence, the fixing of such liability in the amount of P40,000.00 as compensatory
damages was well within the discretion of the Court of Appeals.
In  the  case  of  Singson  v.  Aragon,  the  court  held  that  "…exemplary  damages  
may be imposed by way of example or correction only in addition, among others, to
compensatory damages, but that they cannot be recovered as a matter of right,
their determination depending upon the discretion of the court. It further appears
that the amount of exemplary damages need not be proved, because its
determination depends upon the amount of compensatory damages that may be
awarded to the claimant. If the amount of exemplary damages need not be proved,
it need not also be alleged, and the reason is obvious because it is merely incidental
or dependent upon what the court may award as compensatory damages. Unless
and until this premise is determined and established, what may be claimed as
exemplary damages would amount to a mere surmise or speculation. It follows as a
necessary consequence that the amount of exemplary damages need not be
pleaded in the complaint because the same cannot be predetermined. One can
merely ask that it be determined by the court if in the use of its discretion the same
is  warranted  by  the  evidence.”
Respondents are entitled to interest for the amount of compensatory
damages from the date of the decision of the lower court and legal interest on the
exemplary damages from the date of the decision of the Court of Appeals. #TAN
CASE TITLE: GLORIA DARROCHA DE CALISTON vs. CA (G.R. No. L-63135 June 24,
1983)
KEYWORD: pension
PONENTE: PLANA, J.:
DOCTRINE: Civil Law; Common Carriers; Award of pension to deceased accident
victim which was lost by his death, justified.·The pension of the decedent being a
sure income that was cut short by her death for which Dalmacio was responsible,
the surviving heir of the former is entitled to the award of P10,000.00 which is just
equivalent to the pension the decedent would have received for one year if she did
not die.
FACTS: While driving a passenger bus in Bacolod City, private respondent Geronimo
Dalmacio ran over Juana SonzaVda. deDarrocha (a USVA pensioner) who died
instantly, survived by her only child, Gloria Darrocha de Caliston, the herein
petitioner.
ISSUE: whether the award for loss of pension is justified (NO)
RULING:
CFI: Prosecuted for homicide thru reckless imprudence, Dalmacio was convicted,
sentenced to imprisonment and ordered to pay the herein petitioner P15,000.00 for
Page 110 of 151
the death of the victim, P5,000.00 as moral damages, P5,000.00 for burial expenses
and P10,000.00 for loss of pension which the deceased had failed to receive.
CA: modified the CFI decision by absolving Dalmacio from the payment of the
P10,000.00 for loss of pension and credited him for the amount of P5,000.00
previously paid to the herein petitioner under a vehicular insurance policy obtained
by the bus owner.
SC: The deletion of the P10,000.00 awarded for loss of pension is unjustified. Under
Article 2206 of the Civil Code: The amount of damages for death caused by a crime
or quasi-delict shall be at least three thousand pesos, even though there may have
been mitigating circumstances. In addition: (1) The defendant shall be liable for the
loss of the earning capacity of the deceased, and the indemnity shag be paid to the
heirs of the latter. . .
The pension of the decedent being a sure income that was cut short by her death
for which Dalmacio was responsible, the surviving heir of the former is entitled to
the award of P 10,000.00 which is just equivalent to the pension the decedent
would have received for one year if she did not die.
On the other hand, the P5,000.00 paid to the herein petitioner by the insurer of the
passenger bus which figured in the accident may be deemed to have come from the
bus owner who procured the insurance. Since the civil liability (ex-delicto) of the
latter for the death caused by his driver is subsidiary and, at bottom, arises from the
same culpa, the insurance proceeds should be credited in favor of the errant driver.
WHEREFORE, the petition is hereby granted partially in that the P10,000.00 award
for loss of pension deleted in the appealed Court of Appeals decision is hereby
reinstated. Costs against private respondent. #TENORIO
ii. Moral Damages
CASE TITLE: TRANS WORLD AIRLINES, petitioner, vs. COURT OF APPEALS and
ROGELIO A. VINLUAN, respondents
KEYWORD: First class to economy.
PONENTE: GANCAYCO, J.
DOCTRINE: Such inattention and lack of care for the interest of its passengers who
are entitled to its utmost consideration, particularly as to their convenience,
amount to bad faith which entitles the passenger to the award of moral damages.
FACTS: Atty. Vinluan purchased a first class ticket from Trans World Airlines (TWA),
New York to San Francisco flight. Such ticket was twice confirmed and yet he was
informed that there was no first class seat available for him on the flight and that he
will be downgraded to the economy class. When he protested an employee of the
petitioner, Mr. Braam, arrogantly threatened the respondent. Later he noticed that
that other passengers who were white Caucasians and who had checked-in later
than him were given preference in some first class seats which became available
due to "no show" passengers. The respondent then sued the petitioner for
damages.
ISSUE: Whether or not the petitioner is liable for damages.
PETITIONER’S  CONTENTION:  Petitioner  contends  that  it  was  because  of   angrily rebuffed by an employee of petitioner. At the time of this unfortunate
maintenance problems of the aircraft on the day of the flight, TWA Flight No. 41
was cancelled and a special Flight No. 6041 was organized to operate in lieu of
Flight No. 41. Hence, passengers who had first class reservations on Flight No. 41
had to be accommodated on Flight No. 6041 on a first-come, first-served basis. An
announcement was allegedly made to all passengers in the entire terminal of the
airport advising them to get boarding cards for Flight No. 6041 to San Francisco and
that the first ones getting them would get first preference as to seats in the aircraft.
It denied declining to give any explanation for the downgrading of private
respondent as well as the discourteous attitude of Mr. Braam.
RESPONDENT’S  CONTENTION:  Respondent  contends  that  there  was  breach  of   acts. #TORRES
contract and bad faith. Private respondent also asserts that he did not hear such
announcement at the terminal and that he was among the early passengers to
present his ticket for check-in only to be informed that there was no first class seat
available for him and that he had to be downgraded.
RULING:
TRIAL COURT: In favor of the respondent. Holding the petitioner liable for the
amount representing the difference in fare between first class and economy class
accommodations on board Flight No. 6041 from New York to San Francisco, the
amount of P500,000.00 as moral damages, the amount of P300,000.00 as
exemplary damages, and the amount of P100,000.00 as and for attorney's fees, all
such amounts to earn interest at the rate of twelve (12%) percent per annum from
Page 111 of 151
February 15, 1980 when the complainant was filed until fully paid. Costs against the
defendant.
COURT  OF  APPEALS:  Modified  TC’s  ruling  by  (1)  fixing  the  interest  which  appellant  
must pay on the awards of moral and exemplary damages at six per cent (6%) per
annum from the date of the decision a quo, March 8, 1984 until date of full
payment and (2) reducing the attorney's fees to P50,000.00 without interest, the
rest of the decision is affirmed. Cost against appellant.
SUPREME COURT: Affirmed. The discrimination is obvious and the humiliation to
which private respondent was subjected is undeniable. Consequently, the award of
moral and exemplary damages by the respondent court is in order. Petitioner
sacrificed the comfort of its first class passengers including private respondent
Vinluan for the sake of economy. Such inattention and lack of care for the interest
of its passengers who are entitled to its utmost consideration, particularly as to
their convenience, amount to bad faith which entitles the passenger to the award
of moral damages. More so in this case where instead of courteously informing
private respondent of his being downgraded under the circumstances, he was
incident, the private respondent was a practicing lawyer, a senior partner of a big
law firm in Manila. He was a director of several companies and was active in civic
and social organizations in the Philippines. Considering the circumstances of this
case and the social standing of private respondent in the community, he is entitled
to the award of moral and exemplary damages. However, the moral damages
should be reduced to P300,000.00, and the exemplary damages should be reduced
to P200,000.00. This award should be reasonably sufficient to indemnify private
respondent for the humiliation and embarrassment that he suffered and to serve as
an example to discourage the repetition of similar oppressive and discriminatory
iii. Exemplary Damages
CASE TITLE: PRUDENCIADO vs ALLIANCE TRANSPORT SYSTEM INC.
KEYWORDS: chevy brain concussion
PONENTE: Paras J.
DOCTRINE: Article 2231 of the Civil Code: In quasi-delicts, exemplary damages may
be granted if the defendant acted with grave negligence.
FACTS:
On a rainy day in May 1960, Dra. Sofia L. Prudenciado was driving her Chevrolet Bel
Air car along Arroceros Street with the intention of crossing Taft Avenue in order to
turn left, to go to the Philippine Normal College Compound where she would hold
classes. She was driving her car at the rate of 10 kmph and before crossing Taft Ave.
She stopped her car and looked to the right and to the left, not noticing any on-
coming vehicle on either side, she slowly proceeded on first gear to cross the same.
But when she was almost at the center, near the island thereof, Jose Leyson who
was driving People's Taxicab owned and operated by Alliance Transport System,
Inc., suddenly bumped and struck Dra. Prudenciado's car, thereby causing physical
injuries in different parts of her body, suffering more particularly brain concussion
which subjected her to several physical examinations and to an encephalograph
test while her car was damaged to the extent of P2,451.27. The damage to the
taxicab amounted to P190.00.
ISSUES: Whether or not Alliance and Leyson liable for exemplary damages to
Prudenciado?
TRIAL COURT: The CFI of Rizal, Quezon City, found Jose Leyson guilty of negligence
in the performance of his duties as taxicab driver which is the proximate cause of
the accident in question. Alliance Transport System, Inc. failed to prove that it had
exercised the required diligence of a good father of the family in the selection,
supervision and control of its employees including defendant Leyson. Both
defendants were held jointly and severally liable to pay the sum of P2,451.27 for
actual damages representing the cost for the repair of the car of plaintiff;
P25,000.00 as moral damages; P5,000.00 as exemplary damages; and the further
sum of P3,000.00 as attorney's fees, with costs against the defendants.
turning to the right along Taft Ave. coming from Ayala Boulevard, considering that
the traffic was clear. Failing to notice petitioner's car, he failed to apply his brakes
and did not even swerve to the right to avoid the collision. The Court of Appeals
conforms with aforesaid findings of the trial court but is not prepared to accept that
there was gross negligence on the part of the driver to justify the imposition of
exemplary damages. A driver running at full speed on a rainy day, on a slippery road
in complete disregard of the hazards to life and limb of other people cannot be said
to be acting in anything less than gross negligence. The frequent incidence of
accidents of this nature caused by taxi drivers indeed demands corrective
measures.
From the records, it is apparent that the injuries sustained by Dra.
Prudenciado are not as serious or extensive as they were claimed to be (concussion
was merely a mild concussion), to warrant the moral damages awarded by the trial
court. On the other hand, the reduction made by the Court of Appeals is too drastic
and unrealistic, to pass the test of reasonableness. Thus, moral damages was
increased to P15,000, and P5,000 exemplary damages was awarded to Prudenciado
along  with  the  actual  damages  and  attorney’s  fees.  #YOROBE

APPELLATE COURT: affirmed decision with modification, reducing the award for
moral damages to 2000, and eliminated the reward for exemplary damages.

SUPREME COURT:
Article 2231 of the Civil Code provides: In quasi-delicts, exemplary damages may be
granted if the defendant acted with grave negligence.

The rationale behind exemplary or corrective damages is, as the name

implies, to provide an example or correction for the public good (Lopez, et al. v. Pan
American World Airways, 16 SCRA 431). The findings of the trial court in the case at
bar which became the basis of the award of exemplary damages are to the effect
that it is more apparent from the facts, conditions and circumstances obtaining in
the record of the case that respondent driver was running at high speed after

Page 112 of 151

 MARITIME LAW
I. GENERAL CONCEPTS
A. Real and Hypothecary Nature

TEODORO YANGCO, ETC. VS. MANUEL LASERNA G.R. No. L-47447-47449

October 29, 1941

KEYWORD: S.S. NEGROS/ BOAT OVERLOADED

DOCTRINE: Assuming that petitioner is liable for a breach of contract of carriage,
the exclusively "real and hypothecary nature" of maritime law operates to limit
such liability to the value of the vessel, or to the insurance thereon, if any. In the
instant case it does not appear that the vessel was insured. Whether the
abandonment of the vessel sought by the petitioner in the instant case was in
accordance with law of not, is immaterial. The vessel having totally perished, any
act of abandonment would be an idle ceremony.

PONENTE: MORAN, J.

FACTS: the steamer S.S. Negros, belonging Yangco, left the port of Romblon on its
retun trip to Manila. Typhoon signal No. 2 was then up, of which fact the captain
was duly advised and his attention thereto called by the passengers themselves
before the vessel set sail. The boat was overloaded as indicated by the loadline
which was 6 to 7 inches below the surface of the water. In addition, the vessel
carried thirty sacks of crushed marble and about one hundred sacks of copra and
some lumber. The passengers, numbering about 180, were overcrowded, the
vessel's capacity being limited to only 123 passengers. After two hours of sailing,

Page 113 of 151

the boat encountered strong winds and rough seas between the islands of Banton
and Simara, and as the sea became increasingly violent, the captain ordered the
vessel to turn left, evidently to return to port, but in the manuever, the vessel was
caught sidewise by a big wave which caused it to capsize and sink. Many of the
passengers died in the mishap, among them being AntolinAldaña,Victorioso,
CasianaLaserna,GenaroBasaña – all of whom were relatives of the respondents in
separate civil actions. These respondents instituted in the Court of First Instance of
Capiz separate civil actions against petitioner here to recover damages for the
death of the passengers aforementioned.
PETITIONER’S  CONTENTION:  After  the  rendition  of  the  judgment  against  him,   operates to limit such liability to the value of the vessel, or to the insurance
Yangco, by a verified pleading, sought to abandon the vessel to the plainitffs in the
three cases, together with all its equipments, without prejudice to his right to
appeal.
RTC: The court awarded the heirs damages for the death of the victims.The
abandonment having been denied, an appeal was taken to the Court of Appeals,
wherein all the judgmnets were affirmed except that which sums was increased to
P4,000.
CA: Affirmed the trial court.
ISSUE: May the shipowner or agent, notwithstanding the total loss of the vessel as a
result of the negligence of its captain, be properly held liable in damages for the
consequent death of its passengers?
SC: NO. This question is controlled by the provisions of article 587 of the Code of
Commerce. Said article reads:
“The  agent  shall  also  be  civilly  liable  for  the  indemnities  in  favor  of  third  persons   DOCTRINE: Under Art.  587  of  the  Code  of  Commerce,  “The  ship  agent  shall  also  be
which arise from the conduct of the captain in the care of the goods which the vessel
carried; but he may exempt himself therefrom by abandoning the vessel with all her
equipments  and  the  freight  he  may  have  earned  during  the  voyage.”
The provisions accords a shipowner or agent the right of abandonment; and by
necessary implication, his liability is confined to that which he is entitled as of right
to abandon — "the vessel with all her equipment and the freight it may have
earned during the voyage."
Lawful acts and obligations of the captain beneficial to the vessel may be enforced
as against the agent for the reason that such obligations arise from the contract of
agency while as to any liability incurred by the captain through his unlawful acts,
the ship agent is simply subsidiarily civilly liable. This liability of the agent is limited
to the vessel and it does not extend further. For this reason the Code of Commerce
makes the agent liable to the extent of the value of the vessel, as the codes of the
principal maritime nations provide with the vessel, and not individually.
Page 114 of 151
If the shipowner or agent may in any way be held civilly liable at all for injury to or
death of passengers arising from the negligence of the captain in cases of collisions
or shipwrecks, his liability is merely co-extensive with his interest in the vessel such
that a total loss thereof results in its extinction.
In the light of all the foregoing, we therefore hold that if the shipowner or agent
may in any way be held civilly liable at all for injury to or death of passengers arising
from the negligence of the captain in cases of collisions or shipwrecks, his liability is
merely co-extensive with his interest in the vessel such that a total loss thereof
results in its extinction. But assuming that petitioner is liable for a breach of
contract of carriage, the exclusively "real and hypothecary nature" of maritime law
thereon, if any. In the instant case it does not appear that the vessel was
insured.Whether the abandonment of the vessel sought by the petitioner in the
instant case was in accordance with law of not, is immaterial. The vessel having
totally perished, any act of abandonment would be an idle ceremony.
Judgement is reversed and petitioner is hereby absolved of all the
complaints.#ABILO
CASE TITLE: CHUA YEK HONG vs. INTERMEDIATE APPELLATE COURT
KEYWORD: Luzviminda, doctrine of limited liability
PONENTE: Melencio-Herrera, J.
 
civilly liable for the indemnities in favor of third persons which may arise from the
conduct of the captain in the care of the goods which he loaded on the vessel; but
he may exempt himself therefrom by abandoning the vessel with all the
equipments and the freight  it  may  have  earned  during  the  voyage.”  (Doctrine  of  
Limited Liability)
FACTS:
Petitioner is a duly licensed copra dealer based at Puerta Galera, Oriental
Mindoro, while private respondents are the owners of the vessel, "M/V Luzviminda
I," a common carrier engaged in coastwise trade from the different ports of Oriental
Mindoro to the Port of Manila.
In October 1977, petitioner loaded 1,000 sacks of copra, valued at
P101,227.40, on board the vessel "M/V Luzviminda I" for shipment from Puerta
Galera, Oriental Mindoro, to Manila. Said cargo, however, did not reach Manila
because somewhere between Cape Santiago and Calatagan, Batangas, the vessel
capsized and sank with all its cargo.
Petitioner then instituted before the then CFI of Oriental Mindoro, a
Complaint for damages based on breach of contract of carriage against private
respondents
PETITIONER’S  CONTENTION:   owner, or to the concurring negligence of the ship owner and the captain; (2) where
Private respondents as shipowners should be held liable for breach of
contract of carriage
RESPONDENT’S  CONTENTION:   the private respondent as shipowners, or to their concurrent negligence with the
In their answer, private respondents averred that even assuming that the
alleged cargo was truly loaded aboard their vessel, their liability had been
extinguished by reason of the total loss of said vessel.
ISSUE: Whether or not the Doctrine of Limited Liability under Article 587 of the
Code of Commerce as expounded in Yangco vs. Laserna applies in the case at bar
RULING:
1) TRIAL COURT: GRANTED
Defendants are jointly and severally liable to pay the plaintiff the sum of
P101,227.40 representing the value of the cargo belonging to the plaintiff which
was lost while in the custody of the defendants and other miscellaneous expenses
2) CA: DENIED
Under Art. 587 of the Code of Commerce and the doctrine in Yangco vs.
Lasema, private respondents' liability, as ship owners, for the loss of the cargo is
merely co-extensive with their interest in the vessel such that a total loss thereof
results in its extinction.
3) SC: DENIED
The term "ship agent" as used in Art. 587 is broad enough to include the
ship owner. Pursuant to said provision, therefore, both the ship owner and ship
agent are civilly and directly liable for the indemnities in favor of third persons,
which may arise from the conduct of the captain in the care of goods transported,
as well as for the safety of passengers transported. However, under the same
Article, this direct liability is moderated and limited by the ship agent's or ship
owner's right of abandonment of the vessel and earned freight. This expresses the
universal principle of limited liability under maritime law. The most fundamental
effect of abandonment is the cessation of the responsibility of the ship
agent/owner. It has thus been held that by necessary implication, the ship agent's
or ship owner's liability is confined to that which he is entitled as of right to
abandon the vessel with all her equipment and the freight it may have earned
during the voyage," and "to the insurance thereof if any" (Yangco vs.
Page 115 of 151
Lasema, supra). In other words, the ship owner's or agent's liability is merely co-
extensive with his interest in the vessel such that a total loss thereof results in its
extinction. "No vessel, no liability" expresses in a nutshell the limited liability rule.
The limited liability rule, however, is not without exceptions, namely: (1)
where the injury or death to a passenger is due either to the fault of the ship
the vessel is insured; and (3) in workmen's compensation claims. In this case, there
is nothing in the records to show that the loss of the cargo was due to the fault of
captain of the vessel.
In sum, it will have to be held that since the ship agent's or ship owner's
liability is merely co-extensive with his interest in the vessel such that a total loss
thereof results in its extinction (Yangco vs. Laserna, supra), and none of the
exceptions to the rule on limited liability being present, the liability of private
respondents for the loss of the cargo of copra must be deemed to have been
extinguished. There is no showing that the vessel was insured in this case. #AFAN
B. Limited Liability Rule
CASE TITLE:HEIRS OF AMPARO DE LOS SANTOS vs. HONORABLE COURT OF APPEALS
AND COMPANIA MARITIMA
KEYWORD: overwhelming typhoon WELMING
PONENTE: MEDIALDEA, J
DOCTRINE:
The limited liability doctrine applies not only to the goods but also in all cases like
death or injury topassengers wherein the shipowner or agent may properly be held
liable for the negligent or illicit acts of thecaptain (Yangco v. Laserna, ibid).
Article 587 speaks only of situations where the fault or negligence
iscommitted solely by the captain. In cases where the shipowner is likewise to be
blamed, Article 587 does notapply (see Manila Steamship Co., Inc. v.
Abdulhanan, et al., 100 Phil. 32, 38). Such a situation will becovered by
the provisions of the New Civil Code on Common Carriers.
SHORT FACTS:
M/V 'Mindoro' sailed from pier 8 North Harbor, Manila, on November 2,1967 at
about 2:00 (should have been 6:00 p.m.) in the afternoon bound for New
Washington, Aklan, with many passengers aboard. It appears that said vessel met
typhoon 'Welming' on the Sibuyan Sea, Aklan, at about 5:00 in the morning of
November 4, 1967 causing the death of many of its passengers, although about 136
survived.As already stated, the boat met typhoon 'Welming' and due to the strong
waves it sank causing the drowning of many passengers among whom were
Amparodelos Santos and all the aforesaid children. The case is pending for almost
23 years.
ISSUE:
Whether there was negligence on the part of Maritima and whether of Article 587
of the Code of Commerce should apply.
PETITIONER’S  CONTENTION:   stressed at this point that Article 587 speaks only of situations where the fault or
Negligence on the part of the shipowner.
RESPONDENT’S  CONTENTION:
The defendant alleges that no negligence was ever established and, in fact, the
shipowners and their officers took all the necessary precautions in operating the
vessel. Furthermore, the loss of lives as a result of the drowning of some
passengers, including the relatives of the herein plaintiff, was due to force majeure
because of the strong typhoon 'Welming.'
RULING:
1. TRIAL COURT
Sustained the position of private respondent CompaniaMaritimaand issued
a decision on March 27, 1974, to wit:the Court finds that in view of lack of
sufficient evidence, the case be, as it is hereby DISMISSED.For lack of
evidence, the counterclaim is also hereby
2. APPELLATE COURT
Affirmed the decision on appeal. While it found that there was concurring
negligence on the part of the captain which must be imputable to
Maritima, the Court of Appeals ruled that Maritima cannot be held liable in
damages based on the principle of limited liability of the shipowner or ship
agent under Article 587 of the Code of Commerce.
3. SUPREME COURT
Under this provision, a shipowner or agent has the right of abandonment; and by
necessary implication, his liability is confined to that which he is entitled as of right
to abandon-"the vessel with all her equipments and the freight it may have earned
during the voyage" (Yangco v. Laserna, et al., 73 Phil. 330, 332). Notwithstanding
the passage of the New Civil Code, Article 587 of the Code of Commerce is still good
law. The reason lies in the peculiar nature of maritime law which is 94 exclusively
Page 116 of 151
real and hypothecary that operates to limit such liability to the value of the vessel,
or to the insurance thereon, if any (Yangco v. Laserna, Ibid). As correctly stated by
the appellate court, "(t)his rule is found necessary to offset against the innumerable
hazards and perils of a sea voyage and to encourage shipbuilding and marine
commerce. (Decision, Rollo, p. 29). Contrary to the petitioners' supposition, the
limited liability doctrine applies not only to the goods but also in all cases like death
or injury to passengers wherein the shipowner or agent may properly be held liable
for the negligent or illicit acts of the captain (Yangco v. Laserna, Ibid). It must be
negligence is committed solely by the captain. In cases where the shipowner is
likewise to be blamed, Article 587 does not apply (see Manila Steamship Co., Inc. v.
Abdulhanan, et al., 100 Phil. 32, 38). Such a situation will be covered by the
provisions of the New Civil Code on Common Carriers. Owing to the nature of their
business and for reasons of public policy, common carriers are tasked to observe
extraordinary diligence in the vigilance over the goods and for the safety of its
passengers (Article 1733, New Civil Code). Further, 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 a due regard for all the circumstances
(Article 1755, New Civil Code). Whenever death or injury to a passenger occurs,
common carriers are presumed to have been at fault or to have acted negligently
unless they prove that they observed extraordinary diligence as prescribed by
Articles 1733 and 1755 (Article 1756, New Civil Code). #AGUILA
II. VESSELS
CASE TITLE: PHILIPPINE REFINING CO. INC. vs. FRANCISCO JARQUE, JOSE
COROMINAS, and ABOITIZ &
KEYWORD: Vessels PANDAN and ZARAGOZA
PONENTE: MALCOLM
DOCTRINE: Vessels are considered personal property under the civil law. The only
difference between a chattel mortgage of a vessel and a chattel mortgage of other
personalty is that it is not now necessary for a chattel mortgage of a vessel to be
noted n the registry of the register of deeds, but it is essential that a record of
documents affecting the title to a vessel be entered in the record of the Collector of
Customs at the port of entry.
SHORT FACTS: Francisco Jarque executed three mortgages on the motor
vessels Pandan and Zaragoza. These documents were recorded in the record of
transfers and incumbrances of vessels for the port of Cebu and each was therein
denominated a "chattel mortgage". Neither of the first two mortgages had
appended an affidavit of good faith. The third mortgage contained such an affidavit,
but this mortgage was not registered in the customs house until May 17, 1932, or
within the period of thirty days prior to the commencement of insolvency
proceedings against Francisco Jarque; also, while the last mentioned mortgage was
subscribed by Francisco Jarque and M. N. Brink, there was nothing to disclose in
what capacity the said M. N. Brink signed. A fourth mortgage was executed by
Francisco Jarque and Ramon Aboitiz on the motorship Zaragoza and was entered in
the chattel mortgage registry of the register of deeds on May 12, 1932, or again
within the thirty-day period before the institution of insolvency proceedings. These
proceedings were begun on June 2, 1932, when a petition was filed with the Court
of First Instance of Cebu in which it was prayed that Francisco Jarque be declared
an insolvent debtor, which soon thereafter was granted, with the result that an
assignment of all the properties of the insolvent was executed in favor of Jose
Corominas. Judge Jose M. Hontiveros declined to order the foreclosure of the
mortgages, but on the contrary sustained the special defenses of fatal defectiveness
of the mortgages.
ISSUE: Whether or not the foreclosure of the mortgages should be approved.
PETITIONER’S  CONTENTION  (PHILIPPINE REFINING CO. INC.): The foreclosure of the
mortgages should be approved
RESPONDENT’S  CONTENTION  :  foreclosure of the mortgages should be declined.
RULING:
1. TRIAL COURT: DECLINED.
2. APPELLATE COURT: AFFIRMED.
3. SUPREME COURT: AFFIRMED. Vessels are considered personal property under
the civil law. Similarly under the common law, vessels are personal property
although occasionally referred to as a peculiar kind of personal property. Since the
term "personal property" includes vessels, they are subject to mortgage agreeably
to the provisions of the Chattel Mortgage Law. Indeed, it has heretofore been
accepted without discussion that a mortgage on a vessel is in nature a chattel
mortgage. The only difference between a chattel mortgage of a vessel and a chattel
mortgage of other personalty is that it is not now necessary for a chattel mortgage
of a vessel to be noted n the registry of the register of deeds, but it is essential that
a record of documents affecting the title to a vessel be entered in the record of the
Collector of Customs at the port of entry. Otherwise a mortgage on a vessel is
generally like other chattel mortgages as to its requisites and validity. The Chattell
Mortgage Law in its section 5, in describing what shall be deemed sufficient to
Page 117 of 151
constitute a good chattel mortgage, includes the requirement of an affidavit of
good faith appended to the mortgage and recorded therewith. The absence of the
affidavit vitiates a mortgage as against creditors and subsequent encumbrancers. As
a consequence a chattel mortgage of a vessel wherein the affidavit of good faith
required by the Chattel Mortgage Law is lacking, is unenforceable against third
persons.#AGUILAR
III. PERSONS WHO TAKE PART IN MARITIME COMMERCE
A. Ship Owners and Ship Agents; Captains and Masters of Vessels;
Officers and Crew, Supercargoes
CASE TITLE: CHUA YEK HONG vs. INTERMEDIATE APPELLATE COURT
KEYWORD: copra
PONENTE: Melencio-Herrera, J.
DOCTRINE:
Art. 587. The ship agent shall also be civilly liable for the indemnities in favor of
third persons which may arise from the conduct of the captain in the care of the
goods which he loaded on the vessel; but he may exempt himself therefrom by
abandoning the vessel with all the equipments and the freight it may have earned
during the voyage.
FACTS:
Petitioner is a duly licensed copra dealer based at Puerta Galera, Oriental Mindoro,
while private respondents are the owners of the vessel, "M/V Luzviminda I," a
common carrier engaged in coastwise trade from the different ports of Oriental
Mindoro to the Port of Manila.
In October 1977, petitioner loaded 1,000 sacks of copra, valued at P101,227.40, on
board the vessel "M/V Luzviminda I" for shipment from Puerta Galera, Oriental
Mindoro, to Manila. Said cargo, however, did not reach Manila because somewhere
between Cape Santiago and Calatagan, Batangas, the vessel capsized and sank with
all its cargo.
Petitioner then instituted before the then CFI of Oriental Mindoro, a Complaint for
damages based on breach of contract of carriage against private respondents
PETITIONER’S  CONTENTION:
Private respondents as shipowners should be held liable for breach of contract of
carriage
RESPONDENT’S  CONTENTION:
In their answer, private respondents averred that even assuming that the alleged
cargo was truly loaded aboard their vessel, their liability had been extinguished by
reason of the total loss of said vessel.
ISSUE: whether or not private respondents are liable for the loss of 1000 sacks of
copra
RULING:
TRIAL COURT: GRANTED
Defendants are jointly and severally liable to pay the plaintiff the sum of
P101,227.40 representing the value of the cargo belonging to the plaintiff which
was lost while in the custody of the defendants and other miscellaneous expenses
CA: DENIED
Under Art. 587 of the Code of Commerce and the doctrine in Yangco vs. Lasema,
private respondents' liability, as ship owners, for the loss of the cargo is merely co-
extensive with their interest in the vessel such that a total loss thereof results in its
extinction.
SC: DENIED
Article 587 of the Code of Commerce provides:
Art. 587. The ship agent shall also be civilly liable for the indemnities in favor of
third persons which may arise from the conduct of the captain in the care of the
goods which he loaded on the vessel; but he may exempt himself therefrom by
abandoning the vessel with all the equipments and the freight it may have earned
during the voyage.
The term "ship agent" as used in Art. 587 is broad enough to include the ship
owner. Pursuant to said provision, therefore, both the ship owner and ship agent
are civilly and directly liable for the indemnities in favor of third persons, which may
arise from the conduct of the captain in the care of goods transported, as well as for
the safety of passengers transported. However, under the same Article, this direct
liability is moderated and limited by the ship agent's or ship owner's right of
abandonment of the vessel and earned freight. This expresses the universal
principle of limited liability under maritime law. The most fundamental effect of
abandonment is the cessation of the responsibility of the ship agent/owner. It has
thus been held that by necessary implication, the ship agent's or ship owner's
Page 118 of 151
liability is confined to that which he is entitled as of right to abandon the vessel with
all her equipment and the freight it may have earned during the voyage," and "to
the insurance thereof if any" (Yangco vs. Lasema, supra). In other words, the ship
owner's or agent's liability is merely co-extensive with his interest in the vessel such
that a total loss thereof results in its extinction. "No vessel, no liability" expresses in
a nutshell the limited liability rule.
In sum, it will have to be held that since the ship agent's or ship owner's liability is
merely co-extensive with his interest in the vessel such that a total loss thereof
results in its extinction (Yangco vs. Laserna, supra), and none of the exceptions to
the rule on limited liability being present, the liability of private respondents for the
loss of the cargo of copra must be deemed to have been extinguished. There is no
showing that the vessel was insured in this case.
CASE TITLE: THE PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY, INC., vs.
CA and FELMAN SHIPPING LINES
PONENTE: BELLOSILLO, J
KEYWORD/S: Coca-cola bottles; unseaworthy
DOCTRINE:The ship agent is liable for the negligent acts of the captain in the care of
goods loaded on the vessel. This liability however can be limited through
abandonment of the vessel, its equipment and freightage as provided in Art.
587. Nonetheless, there are exceptional circumstances wherein the ship agent could
still be held answerable despite the abandonment, as where the loss or injury was
due to the fault of the shipowner and the captain.
SHORT FACTS:In 1983, Coca-Cola Bottlers Philippines, Inc., loaded on board “MV  
Asilda,” a vessel owned and operated by Felman Shipping Lines, 7,500 cases of 1-
liter Coca-Cola softdrink bottles to be transported from
Zamboanga toCebu for consignee Coca-Cola Bottlers Philippines, Inc., Cebu.
The shipment was insured with petitioner Philippine American General Insurance
Co., Inc. (PHILAMGEN)MV   Asilda” . The vessel left the port of Zamboanga in fine
weather at 8 in the evening of the same day. At around 8:45 the following morning,
the vessel sank in the waters of Zamboanga delNorte bringing down her entire
cargo with her including the subject 7,500 cases Coca-Cola bottles. Hence, Coca-
Cola Bottlers, Cebu plant, filed a claim with FELMAN for recovery of damages.
FELMAN denied the claim thus prompting the consignee to file an insurance claim
with PHILAMGEN which paid its claim of P755,250.00.Claiming its right of
subrogation, PHILAMGEN sought recourse against respondent FELMAN which
disclaimed any liability for the loss. Consequently, PHILAMGEN sued the shipowner
for sum of money and damages.
PETITIONER’S  CONTENTION:  The  sinking  and  total  loss  of “MV  Asilda” and its cargo
were   due   to   the   vessel’s   unseaworthiness   as   she   was   put   to   sea   in   an   unstable   not have been overloaded, yet the distribution or stowage of the cargo on board
condition. It further alleged that the vessel was improperly manned and that its
officers were grossly negligent in failing to take appropriate measures to proceed to
a nearby port or beach after the vessel started to list.
RESPONDENT’S  CONTENTION:  No  right  of  subrogation  in  favor  of  PHILAMGEN  was   extraordinary diligence in the vigilance over the goods and for the safety of the
transmitted by the shipper, and that, in any event, FELMAN had abandoned all its
rights, interests and ownership over “MV   Asilda” together with her freight and
appurtenances for the purpose of limiting and extinguishing its liability under Art.
587 of the Code of Commerce.
ISSUES: (a) whether or not FELMAN is liable for the loss of the cargo –YES
(b) whether the limited liability under Art.
587 of the Code of Commerce should apply-NO
RULING:
TC: IN FAVOR OF FELMAN.It ruled that “MV  Asilda” was seaworthy when it left the
port of Zamboanga as confirmed by certificates issued by the Philippine Coast
Guard  and  the  shipowner’s  surveyor  attesting  to  its  seaworthiness.
CA:  MODIFIED  TC’S  RULING.  It  found “MV  Asilda” unseaworthy for being top- heavy
as 2,500 cases of Coca-Cola softdrink bottles were improperly stowed on deck. In
other words, while the vessel possessed the necessary Coast Guard certification
indicating its seaworthiness with respect to the structure of the ship itself, it was
not seaworthy with respect to the cargo. Nonetheless, the appellate court denied
the   claim   of   PHILAMGEN   on   the   ground   that   the   assured’s   implied   warranty   of  
seaworthiness was not complied with. Furthermore, respondent court held that the
filing of notice of abandonment had absolved the shipowner/agent from liability
under the limited liability rule.
SC: RULED FOR PETITIONER
A) YES. MV  Asilda” was unseaworthy when it left the port of Zamboanga. In a
joint statement, the captain as well as the chief mate of the vessel confirmed that
the weather was fine when they left the port of Zamboanga. The Elite Adjusters,
Page 119 of 151
Inc., submitted a report regarding the sinking of “MV   Asilda.” The report states
that they found in the course of investigation that a reasonable explanation for the
series of lists experienced by the vessel that eventually led to her capsizing and
sinking, was that the vessel was top-heavy which is to say that while the vessel may
was done in such a manner that the vessel was in top-heavy condition at the time of
her departure and which condition rendered her unstable and unseaworthy for that
particular   voyage.Under   Art   1733   of   the   Civil   Code,   “(c)ommon   carriers,   from   the  
nature of their business and for reasons of public policy, are bound to observe
passengers transported by them, according to all the circumstances of each
case x xxx" In the event of loss of goods, common carriers are presumed to have
acted negligently. FELMAN, the shipowner, was not able to rebut this presumption.
B) NO. Art. 587 of the Code of Commerce is not applicable to the case at bar.
Simply put, the ship agent is liable for the negligent acts of the captain in the care
of goods loaded on the vessel. This liability however can be limited through
abandonment of the vessel, its equipment and freightage as provided in Art.
587. Nonetheless, there are exceptional circumstances wherein the ship agent
could still be held answerable despite the abandonment, as where the loss or injury
was due to the fault of the shipowner and the captain. The international rule is to
the effect that the right of abandonment of vessels, as a legal limitation of a
shipowner’s   liability,   does   not apply to cases where the injury or average was
occasioned  by  the  shipowner’s  own  fault.It  must  be  stressed  at  this  point  that  Art.  
587 speaks only of situations where the fault or negligence is committed solely by
the captain. Where the shipowner is likewise to be blamed, Art. 587 will not apply,
and such situation will be covered by the provisions of the Civil Code on common
carrier. As such, FELMAN was equally negligent. It cannot therefore escape liability
through the expedient of filing a notice of abandonment of the vessel by virtue of
Art. 587 of the Code of Commerce.#ASUNCION
Title: Sweet Lines v CA
Keyword: Super delay, engine repair, dropped at Tacloban instead of Catbalogan
Doctrine: Mechanical defects in the carrier are not considered a caso fortuito that
exempts the carrier from responsibility.
Ponente: Melencio-Herrera, J.
Facts: The respondents, having first class tickets, boarded the M/V Sweet Grace to
Catbalogan. The vessel had some engine problems which led to a change of
schedule and they were thus delayed for a substantial amount of time.
Furthermore, the vessel brought the respondents to Tacloban instead of
Catbalogan. This led the respondents to purchase another set of tickets and to ride
another ferryboat going to Catbalogan.
Petitioner's contention: there was casa fortuiso by reason of engine break that
needs repair
Respondent's contention: sued the petitioner carrier for damages for the breach of
contract of carriage.
Issue: Whether or not the petitioner is liable for damages.
Ruling:
Trial Court: Carrier In bad faith
CA: Affirmed that carrier is in bad faith
SC: The Court held that the petitioner is liable for damages specifically moral
damages because there was bad faith on its part. The Court found that such bad
faith is present based on three circumstances namely:
1. Petitioner did not give any notice to the respondents as to the change of
schedule of the vessel.
2. The petitioner knew fully that it would take no less than fifteen (15) hours to
effect the repairs of the damaged engine. The petitioner also assured that the
vessel will leave within a short period of time and when the defendants wanted to
leave  the  trip  petitioner  stated  that  the  “the  vessel  is  already  leaving.”
3. The petitioner did not even offer to refund the tickets and provide for their
transportation from Tacloban to Catbalogan. #BRILLANTES
B. Arrastre Operator
Case  Title:  Fireman’s  Fund  Insurance  Co.  vs  Metro  Port  Services
Keyword:
Ponente: Gutierrez, Jr. J.
Doctrine:
Facts:Vulcan Industrial and Mining Corporation imported from theUnited States
several machineries and equipment which were loaded on board the SIS Albert
Maersk at the port of Philadelphia, U.S.A., and transhipped for Manila through the
vessel S/S Maersk Tempo. The cargo which was covered by a clean bill of lading
issued by Maersk Line and consisted of core drills and steel tubings. The shipment
was turned over complete and in good condition to the arrastre operator E. Razon
(Metro Port Service Inc). DaniloLibrando, tractor operator and employee of E. Razon
was ordered to transport the shipment to the Equipment Yard at Pier 3. While
Librando was maneuvering the tractor (owned and provided by Maersk Line) to the
Page 120 of 151
left, the cargo fell from the chassis and hit one of the container vans of American
President Lines. It was discovered that there were no twist lock at the rear end of
the chassis where the cargo was loaded. There was heavy damage to the cargo as
the parts of the machineries were broken, denied, cracked and no longer useful for
their purposes.  Fireman’s  Fund  Insurance  paid  the  value  of  the  damages  to  Vulcan  
Industrial and Mining Corporation. The former now filed a suit against Maersk Line,
Compania General de Tabacos de Filipinas and E. Razon for the coverage of the
insurance policy.
Issue:May E. Razon/Metro Port Service be held liable for the damage of the Cargo
since the damage was caused while it was in their custody and that the tractor
operator was their employee.
Ruling:
RTC:  Judgment  is  rendered  in  favor  of  Fireman’s  Fund  Insurance against Maersk
Line, Compania General de Tabacos de Filipinas and E. Razon ordering them to pay
in  solidary  the  amount  of  damages,  attorney’s  fee  and  costs  of  suit.  
CA Ruling: E. Razon/Metro Port Service appealed, and the CA reversed the decision
of the trial court.
SC: The legal relationship between the consignee and the arrastre operator is akin
to that of a depositor and warehouseman. The relationship between the consignee
and the common carrier is similar to that of the consignee and the arrastre
operator. Since it is the duty of the ARRASTRE to take good care of the goods that
are in its custody and to deliver them in good condition to the consignee, such
responsibility also devolves upon the CARRIER. Both the ARRASTRE and the CARRIER
are therefore charged with and obligated to deliver the goods in good condition to
the consignee. To carry out its duties, the ARRASTRE is required to provide cargo
handling equipment which includes among others trailers, chassis for containers. In
some cases, however, the shipping line has its own cargo handling equipment. The
records reveal that Maersk Line provided the chassisand the tractor which carried
the carried the subject shipment. It merely requested the ARRASTRE to dispatch a
tractor operator to drive the tractor inasmuch as the foreign shipping line did not
have any truck operator in its employ. Such arrangement is allowed between the
ARRASTRE and the CARRIER pursuant to the Management Contract. It was clearly
one of the services offered by the ARRASTRE. It was the arrastre that had the sole
discretion and prerogative to hire and assign Librando to operate the tractor. Since
the arrastre offered its delivery for the operation drivers for the operation of
tractors in the handling of cargo and equipment, then the ARRASTRE should see to
it that the drivers under its employ must exercise due diligence in the performance
of their work. Whether or not the twist lock can be seen by the naked eye when the
cargo has been loaded on the chassis, an efficient and diligent tractor operator
must nevertheless check if the cargo is securely loaded on the chassis.Therefore,
Metro Port Service Inc. is solidarily liable in the instant case for the negligence of its
employee. #CAPCO
CASE TITLE: INTERNATIONAL CONTAINER TERMINAL SERVICES, INC vs. PRUDENTIAL
GUARANTEE & ASSURANCE CO., INC.
KEYWORD: Canned food stuff, Arrastre
PONENTE: Panganiban, J.
DOCTRINE:When  cargo  is  placed  on  a  vessel  at  the  “shipper’s  load  and  count,”  the   CA: The appellate court found ICTSI negligent in its duty to exercise due diligence
arrastre operator is required only to deliver to the consignee the container van
received from the shipper, not to verify or to compare the contents thereof with
those declared by the shipper. A claim for reimbursement for the loss, damage or
misdelivery of goods must be filed within 15 days from the date the consignee
learns of such problem
FACTS: On  April  25,  1990,  mother  vessel  ‘Tao  He’  loaded  and  received  on  board  in  
San Francisco, California, a shipment of five (5) lots of canned foodstuff complete
and in good order and condition for transport to Manila in favor of Duel Food
Enterprises (consignee). China Ocean Shipping Company issued the corresponding
bill of lading therefor.
Consignee insured the shipment with Prudential Guarantee and Assurance, Inc.
against all risks for P1,921,827.00 under Marine Insurance Policy No. 20RN-
3011/90.
On May 30, 1990, the shipment arrived at the Port of Manila and discharged by
[the]  vessel  MS  ‘Wei  He’  in  favor  of  International  Container  Terminal  Services,  Inc.   within its knowledge, it must prove that the losses were not due to its negligence or
for safekeeping.
“On  June  1,  1990,  A.  D.  Reyna  Customs  Brokerage (defendant brokerage) withdrew
the shipment and delivered the same to the consignee. An inspection thereof
revealed that 161 cartons were missing valued at P85,984.40.
PETITIONER’S  CONTENTION: ICTSI counters that it observed extraordinary diligence
over the subject shipment while under its custody; that the loss is not attributable
to its fault or its agent, representative or employee; that consignee failed to file a
formal claim against it in accordance with PPA Administrative Order No. 10-81; and
that the complaint states no cause of action.
RESPONDENT’S  CONTENTION:   facts are still fresh in the minds of the persons who took part in the transaction, and
ISSUE:1. Whether or not the petitioner is negligentin its duty to exercise due
diligence over the shipment, 2. Whether or notthe appellate court misconstrued
Page 121 of 151
the liability clause printed on the dorsal side of the Arrastre and Wharfage
Bill/Receipt.
RULING:
TRIAL COURT: The trial court rendered  a  Decision  dismissing  Prudential’s  Complaint  
against ICTSI.
over the shipment.It also ruled that the filing of a claim depended on the issuance
of a certificate of loss by ICTSI based on the liability clause printed on the back of
the arrastre and wharfage receipt. Since ICTSI did not issue such a certificate
despite being informed of the shortage, the 15-day period given to the consignee
for filing a formal claim never began. By subrogation, Prudential, as insurer of the
consignee, was entitled to hold the ICTSI liable for the shortage.
SC:1. The legal relationship between an arrastre operator and a consignee is akin to
that between a warehouseman and a depositor. As to both the nature of the
functions   and   the   place   of   their   performance,   an   arrastre   operator’s   services   are  
clearly not maritime in character.
In a claim for loss filed by a consignee, the burden of proof to show
compliance with the obligation to deliver the goods to the appropriate party
devolves upon the arrastre operator. Since the safekeeping of the goods rests
that of its employees.
2. In order to hold the arrastre operator liable for lost or damaged goods, the
claimant   should   file   with   the   operator   a   claim   for   the   value   of   said   goods   “within  
fifteen (15) days from the date of discharge of the last package from the carrying
vessel.” The filing of the claim for loss within the 15-day period is in the nature of a
prescriptive period for bringing an action and is a condition precedent to holding
the arrastre operator liable. This requirement is a defense made available to the
arrastre operator, who may use or waive it as a matter of personal discretion.
The said requirement is not an empty formality. It gives the arrastre
contractor a reasonable opportunity to check the validity of the claim, while the
while the pertinent documents are still available. Such period is sufficient for the
consignee to file a provisional claim after the discharge of the goods from the
vessel. For this reason, we believe that the 15-day limit is reasonable.
 In the case at bar, the consignee had all the time to make a formal claim from
the day it discovered the shortage in the shipment, which was June 4, 1990, as
shown by the records. According to the independent adjuster, the stripping or
opening of the sea vans containing the shipped canned goods was made at the
consignee’s   place   upon   receipt   of   the   shipment. After discovering the loss, the
consignee asked the adjuster to investigate the reason for the short-landing of the
shipment. By the time the claim for loss was filed on October 2, 1990, four months
had already elapsed from the date of delivery, June 4, 1990.#CASTILLO
C. Pilots
Far Eastern Shipping vs. CA G.R. No. 130068; October 1, 1998
Keyword: Vessel rammed into the apron of the pier wherein Capt. Gavino was the
PILOT.
Ponente: REGALADO, J.
Doctrine: A pilot, in maritime law, is a person duly qualified, and licensed, to
conduct a vessel into or out of ports, or in certain waters
Facts: The M/V PAVLODAR, owned and operated by the Far Eastern Shipping
Company (FESC), arrived at the Port of Manila from Vancouver, British Columbia.
Appellant Senen Gavino was assigned by the Appellant Manila Pilots' Association
(MPA) to conduct docking maneuvers for the safe berthing of the vessel to Berth
No. 4. Gavino boarded the vessel at the quarantine anchorage and stationed
himself in the bridge, with the master of the vessel, Victor Kavankov, beside him.
When the vessel proceeded to the Manila International Port and eventually reached
the landmark (the big church by the Tondo North Harbor) one-half mile from the
pier, Gavino ordered the engine stopped. When the vessel was already about 2,000
feet from the pier, Gavino ordered the anchor dropped. However, the anchor did
not take hold as expected. The speed of the vessel did not slacken. The bow of the
vessel rammed into the apron of the pier causing considerable damage to the pier.
The vessel sustained damage too. Consequently, the Philippine Ports Authority
(PPA) filed a complaint FESC, Capt. Gavino, and the MPA.
The trial court ordered the defendants therein jointly and severally to pay PPA.
Page 122 of 151
Respondent appellate court affirmed the findings of the court a quo except that if
found no employer-employee relationship existing between herein private
respondents Manila Pilots' Association (MPA, for short) and Capt. Gavino.
Petitioner FESC asserts that since the MV PAVLODAR was under compulsory
pilotage at the time of the incident, it was the compulsory pilot, Capt. Gavino, who
was in command and had complete control in the navigation and docking of the
vessel. It is the pilot who supersedes the master for the time being in the command
and navigation of a ship and his orders must be obeyed in all respects connected
with her navigation. Consequently, he was solely responsible for the damage
caused upon the pier apron, and not the owners of the vessel. It claims that the
master of the boat did not commit any act of negligence when he failed to
countermand or overrule the orders of the pilot because he did not see any
justifiable reason to do so. In other words, the master cannot be faulted for relying
absolutely on the competence of the compulsory pilot. If the master does not
observe that a compulsory pilot is incompetent or physically incapacitated, the
master is justified in relying on the pilot.
Issue: Whether or not the pilot of a commercial vessel, under compulsory pilotage,
is solely liable for the damage caused by the vessel to the pier, at the port of
destination, for his negligence.
Held: No.
(Doctrine on Pilot)
A pilot, in maritime law, is a person duly qualified, and licensed, to conduct
a vessel into or out of ports, or in certain waters. In a broad sense, the term "pilot"
includes both (1) those whose duty it is to guide vessels into or out of ports, or in
particular waters and (2) those entrusted with the navigation of vessels on the high
seas. However, the term "pilot" is more generally understood as a person taken on
board at a particular place for the purpose of conducting a ship through a river,
road or channel, or from a port.
Under English and American authorities, generally speaking, the pilot
supersedes the master for the time being in the command and navigation of the
ship, and his orders must be obeyed in all matters connected with her navigation.
He becomes the master pro hac vice and should give all directions as to speed,
course, stopping and reversing anchoring, towing and the like. And when a licensed
pilot is employed in a place where pilotage is compulsory, it is his duty to insist on
having effective control of the vessel, or to decline to act as pilot. Under certain
systems of foreign law, the pilot does not take entire charge of the vessel, but is
deemed merely the adviser of the master, who retains command and control of the
navigation even in localities where pilotage is compulsory.
(Doctrine on Master)
While it is indubitable that in exercising his functions a pilot is in sole
command of the ship and supersedes the master for the time being in the
command and navigation of a ship and that he becomes master pro hac vice of a
vessel piloted by him, there is overwhelming authority to the effect that the master
does not surrender his vessel to the pilot and the pilot is not the master. The master
is still in command of the vessel notwithstanding the presence of a pilot. There are
occasions when the master may and should interfere and even displace the pilot, as
when the pilot is obviously incompetent or intoxicated and the circumstances may
require the master to displace a compulsory pilot because of incompetency or
physical incapacity. If, however, the master does nor observe that a compulsory
pilot is incompetent or physically incapacitated, the master is justified in relying on
the pilot, but not blindly.
The master is not wholly absolved from his duties while a pilot is on board
his vessel, and may advise with or offer suggestions to him. He is still in command
of the vessel, except so far as her navigation is concerned, and must cause the
ordinary work of the vessel to be properly carried on and the usual precaution
taken. Thus, in particular, he is bound to see that there is sufficient watch on deck,
and that the men are attentive to their duties, also that engines are stopped,
towlines cast off, and the anchors clear and ready to go at the pilot's order.
(Doctrine on Shipowner)
The owners of the vessel are responsible to the injured party for the acts of
the pilot, and they must be left to recover the amount as well as they can against
him. It cannot be maintained that the circumstance of having a pilot on board, and
acting in conformity to his directions operate as a discharge of responsibility of the
owners. Except insofar as their liability is limited or exempted by statute, the vessel
or her owner are liable for all damages caused by the negligence or other wrongs of
the owners or those in charge of the vessel. Where the pilot of a vessel is not a
compulsory one in the sense that the owner or master of the vessel are bound to
accept him, but is employed voluntarily, the owners of the vessel are, all the more,
liable for his negligent act. And as a general rule, the owners or those in possession
and control of a vessel and the vessel are liable for all natural and proximate
damages caused to persons or property by reason of her negligent management or
navigation.
Page 123 of 151
In the case at bar, it was found that Capt. Gavino as pilot, Capt. Kabancov
as master are liable due to their negligence. Petitioner FESC is also liable.
Upon assuming such office as compulsory pilot, Capt. Gavino is held to the
universally accepted high standards of care and diligence required of a pilot,
whereby he assumes to have skill and knowledge in respect to navigation in the
particular waters over which his license extends superior to and more to be trusted
than that of the master. A pilot should have a thorough knowledge of general and
local regulations and physical conditions affecting the vessel in his charge and the
waters for which he is licensed, such as a particular harbor or river. He is not held to
the highest possible degree of skill and care, but must have and exercise the
ordinary skill and care demanded by the circumstances, and usually shown by an
expert in his profession. Under extraordinary circumstances, a pilot must exercise
extraordinary care. Here, Capt. Gavino failed to measure up to such strict standard
of care and diligence required of pilots. He was an experienced pilot and by this
time should have long familiarized himself with the depth of the port and the
distance he could keep between the vessel and port in order to berth safely.
And a perusal of Capt. Kabankov's testimony makes it apparent that he
was remiss in the discharge of his duties as master of the ship, leaving the entire
docking procedure up to the pilot, instead of maintaining watchful vigilance over
the risky maneuver. #DELMUNDO
IV. CHARTER PARTIES (ARTICLES 652-718)
A. Different Kinds of Charter Parties
CASE TITLE: LITONJUA SHIPPING VS. NATIONAL SEAMEN BOARD
DOCTRINE: Kinds of Charter Parties
KEYWORD: bareboat, time and voyage charter
PONENTE: FELICIANO, J.
FACTS:
Petitioner Litonjua is the duly appointed local crewing Managing Office of the
Fairwind Shipping Corporation ('Fairwind). The M/V Dufton Bay is an ocean-going
vessel of foreign registry owned by the R.D. Mullion Ship Broking Agency Ltd.
("Mullion"). While the Dufton Bay was in the port of Cebu and while under charter
by Fairwind, the vessel's master contracted the services of, among others, private
respondent Gregorio Candongo to serve as Third Engineer for a period of twelve
(12) months with a monthly wage of US$500.00. This agreement was executed
before the Cebu Area Manning Unit of the NSB. Thereafter, private respondent
boarded the vessel. Before expiration of his contract, private respondent was
required to disembark at Port Kelang, Malaysia, and was returned to the
Philippines. The cause of the discharge was described in his Seaman's Book as 'by
owner's arrange".
Shortly after returning to the Philippines, private respondent filed a complaint
before public respondent NSB, for violation of contract, against Mullion as the
shipping company and petitioner Litonjua as agent of the shipowner and of the
charterer of the vessel.
At the initial hearing, the NSB hearing officer held a conference with the parties, at
which conference petitioner Litonjua was represented by one of its supercargos,
Edmond Cruz. Edmond Cruz asked, in writing, that the hearing be postponed for a
month upon the ground that the employee of Litonjua in charge of the case was out
of town. The hearing officer denied this request and then declared petitioner
Litonjua in default. At the hearing, private respondent testified that when he was
recruited by the Captain of the Dufton Bay, the latter was accompanied to the NSB
Cebu Area Manning Unit by two (2) supercargos sent by petitioner Litonjua to Cebu,
and that the two (2) supercargos Edmond Cruz and Renato Litonjua assisted private
respondent in the procurement of his National Investigation and Security Agency
(NISA) clearance. Messrs. Cruz and Litonjua were also present during private
respondent's interview by Captain Ho King Yiu of the Dufton Bay.
NSB HEARING OFFICER:
From the evidence on record it clearly appears that there was no sufficient or valid
cause for the respondents to terminate the services of complainant prior to the
expiry date of the contract. For this reason the respondents have violated the
conditions of the contract of employment which is a sufficient justification for this
Board to render award in favor of the complainant of the unpaid salaries due the
latter as damages corresponding to the unexpired portion of the contract including
the accrued leave pay.
NSB CENTRAL OFFICE:
While it appears that in the preparation of the employment papers of the
complainant, what was indicated therein was R.D. Mullion Co. (HK) Ltd. as
thecompany whom Captain Ho King Yiu, the Master of the vessel Dufton Bay, was
representing to be the shipowner, the fact remains that at the time of the
recruitment of the complainant, as duly verified by the National Seamen Board,
Cebu Area Manning Unit, the Litonjua Shipping Company was the authorized agent
of the vessel's charterer, the Fairwind Shipping Corporation, and that in the
recruitment process, the Litonjua Shipping Company through its supercargos in the
Page 124 of 151
persons of Edmund Cruz and Renato Litonjua, had knowledge thereof and in fact
assisted in the interviews conducted by the Master of the crew applicants as
admitted by Renato Litonjua including the acts of facilitating the crew's NISA
clearances as testified to by complainant. Moreover, the participation of the
Litonjua Shipping Corporation in the recruitment of complainant, together with the
other crewmembers, in Cebu can be traced to the contents of the letter by the
Fairwind Shipping Limited, thru its Director David H.L. Wu addressed to the National
Seamen Board.
The NSB then lifted the suspension of the hearing officer's decision.
Petitioner Litonjua once more moved for reconsideration.
On public respondent NSB rendered a decision which affirmed its hearing offices
decision:
The master of the vessel acted for and in behalf of Fairwind Shipping Corporation
who had the obligation to pay the salary of the complainant. It necessarily follows
that Fairwind Shipping Corporation is the employer of said complainant. Moreover,
it had been established by complainant that Litonjua Shipping Company, Inc., had
knowledge of and participated, through its employee, in the recruitment of herein
complainant.
ISSUE:
Whether or not the charterer Fairwind was properly regarded as the employer of
private respondent Candongo.
PETITIONER'S CONTENTION:
Litonjua contends that the shipowner, not the charterer, was the employer of
private respondent; and that liability for damages cannot be imposed upon
petitioner which was a mere agent of the charterer. It is insisted that private
respondent's contract of employment and affidavit of undertaking clearly showed
that the party with whom he had contracted was none other than Mullion, the
shipowner, represented by the ship's master. Petitioner also argues that its
supercargos merely assisted Captain Ho King Yiu of the Dufton Bay in being private
respondent as Third Engineer. Petitioner also points to the circumstance that the
discharge and the repatriation of private respondent was specified in his Seaman's
Book as having been "by owner's arrange." Litonjua thus argues that being the
agent of the charterer and not of the shipowner, it accordingly should not have
been held liable on the contract of employment of private respondent.
SUPREME COURT:
In modern maritime law and usage, there are three (3) distinguishable types of
charter parties: (a) the "bareboat" or "demise" charter; (b) the "time" charter; and
(c) the "voyage" or "trip" charter.
A bareboat or demise charter is a demise of a vessel, much as a lease of an
unfurnished house is a demise of real property. The shipowner turns over
possession of his vessel to the charterer, who then undertakes to provide a crew
and victuals and supplies and fuel for her during the term of the charter. The
shipowner is not normally required by the terms of a demise charter to provide a
crew, and so the charterer gets the "bare boat", i.e., without a crew. Sometimes, of
course, the demise charter might provide that the shipowner is to furnish a master
and crew to man the vessel under the charterer's direction, such that the master
and crew provided by the shipowner become the agents and servants or employees
of the charterer, and the charterer (and not the owner) through the agency of the
master, has possession and control of the vessel during the charter period.
A time charter, upon the other hand, like a demise charter, is a contract for the use
of a vessel for a specified period of time or for the duration of one or more
specified voyages. In this case, however, the owner of a time-chartered vessel
(unlike the owner of a vessel under a demise or bare-boat charter), retains
possession and control through the master and crew who remain his employees.
What the time charterer acquires is the right to utilize the carrying capacity and
facilities of the vessel and to designate her destinations during the term of the
charter.
A voyage charter, or trip charter, is simply a contract of affreightment, that is, a
contract for the carriage of goods, from one or more ports of loading to one or
more ports of unloading, on one or on a series of voyages. In a voyage charter,
master and crew remain in the employ of the owner of the vessel.
It is well settled that in a demise or bare boat charter, the charterer is treated as
owner pro hac vice of the vessel, the charterer assuming in large measure the
customary rights and liabilities of the shipowner in relation to third persons who
have dealt with him or with the vessel. In such case, the Master of the vessel is the
agent of the charterer and not of the shipowner. The charterer or owner pro hac
vice, and not the general owner of the vessel, is held liable for the expenses of the
voyage including the wages of the seamen.
It is important to note that petitioner Litonjua did not place into the record of this
case a copy of the charter party covering the M/V Dufton Bay. We must assume
Page 125 of 151
that petitioner Litonjua was aware of the nature of a bareboat or demise charter
and that if petitioner did not see fit to include in the record a copy of the charter
party, which had been entered into by its principal, it was because the charter party
and the provisions thereof were not supportive of the position adopted by
petitioner Litonjua in the present case, a position diametrically opposed to the legal
consequence of a bareboat charter. Treating Fairwind as owner pro hac vice,
petitioner Litonjua having failed to show that it was not such, we believe and so
hold that petitioner Litonjua, as Philippine agent of the charterer, may be held liable
on the contract of employment between the ship captain and the private
respondent.
There is a ethically more compelling basis for holding petitioner Litonjua liable on
the contract of employment of private respondent. The charterer of the vessel,
Fairwind, clearly benefitted from the employment of private respondent as Third
Engineer of the Dufton Bay, along with the ten other Filipino crewmembers
recruited by Captain Ho in Cebu at the same occasion. If private respondent had not
agreed to serve as such Third Engineer, the ship would not have been able to
proceed with its voyage. Secondly, the scope of authority or the responsibility of
petitioner Litonjua was not clearly delimited.
There is the circumstance that extreme hardship would result for the private
respondent if petitioner Litonjua, as Philippine agent of the charterer, is not held
liable to private respondent upon the contract of employment. Clearly, the private
respondent, and the other Filipino crew members of the vessel, would be
defenseless against a breach of their respective contracts. While wages of crew
members constitute a maritime lien upon the vessel, private respondent is in no
position to enforce that lien. If only because the vessel, being one of foreign registry
and not ordinarily doing business in the Philippines or making regular calls on
Philippine ports cannot be effectively held to answer for such claims in a Philippine
forum. Upon the other hand, it seems quite clear that petitioner Litonjua, should it
be held liable to private respondent for the latter's claims, would be better placed
to secure reimbursement from its principal Fairwind. In turn, Fairwind would be in
an indefinitely better position (than private respondent) to seek and obtain
recourse from Mullion, the foreign shipowner, should Fairwind feel entitled to
reimbursement of the amounts paid to private respondent through petitioner
Litonjua. #Dugena
B. Effect of Charter on Character of Carrier
CASE TITLE: Planters Products, Inc. vs. Court of Appeals
KEYWORDS: Charter-Party; UREA FERTILIZER
DOCTRINE: A public carrier shall remain as such, notwithstanding the charter of the
whole or portion of a vessel by one or more persons, provided the charter is limited
to the ship only, as in the case of a time-charter or voyage-charter. It is only when
the charter includes both the vessel and its crew, as in a bareboat or demise that a
common carrier becomes private, at least insofar as the particular voyage covering
the charter-party is concerned. Indubitably, a shipowner in a time or voyage charter
retains possession and control of the ship, although her holds may, for the moment,
be the property of the charterer.
ISSUE: WON the charter party changed the character of the public carrier to a
private carrier?
LOWER COURT: IN FAVOR OF PETITIONER. Lower Court held the carrier liable. A
common carrier is presumed negligent in case of loss or damage of the goods it
contracts to transport
CA:   REVERSED.   The   cargo   vessel   M/V   “Sun   Plum”   owned   by   private   respondent  
KKKK was a private carrier and not a common carrier by reason of the time charter-
party.

FACTS: Planters Products, Inc. (PPI), purchased from Mitsubishi International SC:  NO.  A  “charter-party”  is  defined  as  a  contract  by  which  an  entireship,  or  some  
Corporation (MITSUBISHI) of New York, U.S.A., Urea 46% fertilizer which the latter principal part thereof, is let by the owner toanother person for a specified time or
shipped   in   bulk   aboard   the   cargo   vessel   M/V   “Sun   Plum”   owned   by   private   use. A contract ofaffreightment by which the owner of a ship or other vessel lets
respondent Kyosei Kisen Kabushiki Kaisha (KKKK) from Alaska, U.S.A., to Port Point, the whole or a part of her to a merchant or other person for the conveyance of
San Fernando, La Union, Philippines. goods, on a particular voyage, in consideration of the payment of freight.

Prior to its voyage, a time charter-party  on  the  vessel  M/V  “Sun  Plum”  pursuant  to   Charter parties are of two types: (a) contract of affreightment which involves the
the Uniform General Charterwas entered into between Mitsubishi as use of shipping space on vessels leased by the owner in part or as a whole, to carry
shipper/charterer and KKKK as shipowner. goods for others; and, (b) charter by demise or bareboat charter, by the terms of
which the whole vessel is let to the charterer with a transfer to him of its entire
Before loading the fertilizer aboard the vessel, four (4) of herholdswere all command and possession and consequent control over its navigation, including the
presumably  inspected  by  the  charterer’s  representative  and  found  fit  to  take  a  load   master and the crew, who are his servants.
of   urea   in   bulk.   “The   vessel’s   hold   to   be   properly swept, cleaned and dried at the
vessel’s   expense   and   the   vessel   to   be   presented   clean   for   use   in   bulk   to   the   Contract of affreightment may either be time charter, wherein the vessel is leased
satisfaction of the inspector before daytime commences.” 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
After the Urea fertilizer was loaded in bulk by stevedores hired by and under the the vessel only, either for a determinate period of time or for a single or
supervision of the shipper, the steel hatches were closed with heavy iron lids, consecutive voyage,  the  shipowner  to  supply  the  ship’s  stores,  pay  for  the  wages  of  
covered with three (3) layers of tarpaulin, then tied with steel bonds. The hatches the master and the crew, and defray the expenses for the maintenance of the ship.
remained closed and tightly sealed throughout the entire voyage.
When  petitioner  chartered  the  vessel  M/V  “Sun  Plum”,  the  ship  captain,  its  officers  
Upon arrival of the vessel at her port of call, the steel pontoon hatches were and compliment were under the employ of the shipowner and therefore continued
opened  with  the  use  of  the  vessel’s  boom.  The  hatches  remained  open  throughout   to be under its direct supervision and control. Hardly then can we charge the
the duration of the discharge. charterer, a stranger to the crew and to the ship, with the duty of caring for his
cargo when the charterer did not have any control of the means in doing so. This is
It took eleven (11) days for PPI to unload the cargo. The survey report submitted by evident in the present case considering that the steering of the ship, the manning of
CSCI (Cargo SuperintendentsCompany Inc.) to the consignee (PPI) dated 19 July the decks, the determination of the course of the voyage and other technical
1974 revealed a shortage in the approximating 18 M/T was contaminated with dirt. incidents of maritime navigation were all consigned to the officers and crew who
were screened, chosen and hired by the shipowner.

Page 126 of 151


It is therefore imperative that a public carrier shall remain as such, notwithstanding
the charter of the whole or portion of a vessel by one or more persons, provided
the charter is limited to the ship only, as in the case of a time-charter or voyage-
charter.
HOWEVER, the presumption of negligence on the part of the respondent carrier has
been efficaciously overcome by the showing of extraordinary zeal and assiduity
exercised by the carrier in the care of the cargo. The period during which private
respondent was to observe the degree of diligence required of it as a public carrier
began from the time the cargo was unconditionally placed in its charge after the
vessel’s holds were duly inspected and passed scrutiny by the shipper, up to and
until the vessel reached its destination and its hull was re-examined by the
consignee, but prior to unloading. #ENCARNACION
TITLE: CALTEX VS SULPICIO
KEYWORD/S: MT VECTOR AND DOÑA PAZ COLLISION, DUMALI POINT, CONTRACT
OF AFFREIGHTMENT--VOYAGE CHARTER
PONENTE: PARDO, J
FACTS:
MT VECTOR owned and operated by Vector Shipping left Limay, Bataan at about
8:00pm on Dec 19, 1987 eon route to Masbate, loaded with petroleum products
shipped by CALTEX. On the other hand, on Dec 20, 1987 at about 6:30 am
passenger ship owned by SULPICIO LINES MV DOÑA PAZ left the port of Tacloban
headed for Manila with a complement of 59 crew members including the master
and his officers and passengers totaling 1,493 as indicated in the coastguard
clearance.
At about 10:30 pm of Dec 20, 1987 the two vessels collided in the open sea within
the vicinity of Dumali Point between MARINDUQUE AND ORIENTAL MINDORO. All
crew members of MV DOÑA PAZ died, while 2 survivors from MT VECTOR claimed
that they were sleeping at the time of the incident.
THE MV DOÑA PAZ carried an estimated 4,000 passengers; many were not in the
manifest. Only 24 survived the tragedy. The BUREAU OF MARINE INQUIRY(BMI)
after investigation found that MT VECTOR, it's registered owner and operator were
Page 127 of 151
at fault. SULPICIO alleged that CALTEX chartered MT VECTOR with gross and evident
bad faith knowing fully well that MT VECTOR WAS IMPROPERLY MANNED, ILL-
EQUIPPED, UNSEAWORTHY AND A HAZARD TO SAFE NAVIGATION.
ISSUE: WHETHER OR NOT THE CALTEX IS LIABLE
RULING :
No, the charterer of a vessel has no obligation before transporting its cargo to
ensure that the vessel it chartered complied with all legal requirements. The duty
rests upon the common carrier simply being engaged in "public service". The civil
code demands diligence which is required by the nature of the obligation and that
which corresponds with the circumstances of the persons, time and of the place.
In the case at bar, CALTEX AND VECTOR entered into a contract of affreightment,
also known as voyage charter wherein the ship is leased for a single voyage. The
charter party provides for the hire of the VESSEL ONLY, the ship owner to supply the
ship's store, pay for wages of the master of the crew and defray expenses for the
maintenance of the ship. If the charterer is a contract of affreightment, which
leaves the general owner in possession of the ship as owner for the voyage, THE
RIGHTS AND RESPONSIBILITIES OF OWNERSHIP REST ON THE OWNER. THE
CHARTERER IS FREE FROM LIABILITY TO THIRD PERSONS IN RESPECT OF THE SHIP.
THE SUPREME COURT CHARACTERIZED THE SAID SPECIE OF CHARTER PARTY AS
ONE WHICH DOES NOT AFFECT THE AT ALL THE NATURE OF THE BUSINESS OF
SULPICIO LINES AS A COMMON CARRIER.#ESGUERRA
V. COLLISIONS
CASE TITLE: Williams v Yangco
KEYWORD: Subic
PONENTE: Carson, J.
 DOCTRINE: Since it does NOT appear from the evidence that the perilous situation "ART. 827. If both vessels may be blamed for the collision, each one shall be liable
of the launch in time to avoid the accident by the exercise of ordinary care, it is very for its own damages, and both shall be jointly responsible for the loss and damage
clear that the plaintiff cannot escape the legal consequences of the contributory suffered by their cargoes."
negligence of his launch, even were we to hold that the doctrine is applicable in this
jurisdiction. FACTS: CA

The steamer Subic, owned by the defendant, collided with the launch Euclid owned
by the plaintiff, in the Bay of Manila at an early hour on the morning of January 9,
1911, and the Euclid sank five minutes thereafter. The findings of record disclosed
that the officers on both boats were negligent in the performance of their duties at
the time of the accident, and that both vessels were to blame for the disaster. (Yes,
ito lang ang facts na nasa full text ng case)
Plaintiff’s  defense
Based his contentions upon the theory of the facts as contended for by him, insists
that under the doctrine of "the last clear chance," the defendant should be held
liable  because,  as  he  insists,  even  if  the  officers  on  board  the  plaintiff’s  launch  were   In cases of a disaster arising from mutual negligence of two parties, the party who
negligent in failing to exhibit proper lights and in failing to take the proper steps to
keep  out  of  the  path  of  the  defendant’s  vessel,  nevertheless  the  officers  on   negligence of his opponent, is considered wholly responsible for it under the
defendant’s  vessel,  by  the  exercise  of  due  precautions  might  have  avoided  the   common-law rule of liability as applied in the courts of common law in the United
collision by a very simple maneuver.
ISSUES:
WON plaintiff (Elucid) has a cause of action against defendant. RULING:
Trial court
Euclid was worth at a fair valuation P10,000; that both vessels were responsible for
the collision; and that the loss should be divided equally between the respective
owners, P5,000 to be paid to the plaintiff by the defendant, and P5,000 to be borne
by the plaintiff himself.
The trial judge was of opinion that the vessels were jointly responsible for the
collision and should be held jointly liable for the loss resulting from the sinking of
the launch. But actions for damages resulting from maritime collisions are governed
in this jurisdiction by the provisions of section 3, title 4, Book III of the Code of
Commerce, and among these provisions we find the following:
We are all agreed with the trial judge in his holding that the responsible officers on
both vessels were negligent in the performance of their duties at the time when the
accident occurred, and that both vessels were to blame for the collision.
SUPREME COURT:
None. In disposing of this case the trial judge apparently had in mind that portion of
the section which treats of the joint liability of both vessels for loss or damage
suffered by their cargoes. In the case at bar, however, the only loss incurred was
that of the launch Euclid itself, which went to the bottom soon after the collision.
has a last clear opportunity of avoiding the accident, notwithstanding the
States. But this, is limited in its application by the further rule, that where the
previous act of negligence of one vessel has created a position of danger, the other
vessel is not necessarily liable for the mere failure to recognize the perilous
situation; and it is only when in fact it does discover it in time to avoid the casualty
by the use of ordinary care, that it becomes liable for the failure to make use of this
last clear opportunity to avoid the accident
In the case  at  bar,  the  most  that  can  be  said  in  support  of  plaintiff’s  contention  is  
that  there  was  negligence  on  the  part  of  the  officers  on  defendant’s  vessel  in  failing  
to recognize the perilous situation created by the negligence of those in charge of
plaintiff’s  launch,  and  that  had  they  recognized  it  in  time,  they  might  have  avoided  
the accident. But since it does NOT appear from the evidence that they did, in fact,
discover the perilous situation of the launch in time to avoid the accident by the
exercise of ordinary care, it is very clear that under the above set out limitation to
the rule, the plaintiff cannot escape the legal consequences of the contributory
negligence of his launch, even were we to hold that the doctrine is applicable in this
jurisdiction, upon which point we expressly reserve our decision at this time.
#FLORANDA

Page 128 of 151

CASE TITLE: Smith Bell And Company Inc. And Tokyo Marine And Fire Insurance Co., the  “Yotai  Maru”  the  parties  in  both  cases  having  agreed  that  the  evidence  on  the  
Inc Vs. Court Of Appeals And Carlos A. Go Thong And Co., collision presented in one case would be simply adopted in the other.

KEYWORD: #DonCarlos #YotaiMaru #Banggaantayu...then selfie after XD ISSUE: Whether or not M/V Don Carlos was negligent and thus shall be held liable
for the collision
BONUS Key: Justice (herein CFI Judge) Bernardo P. Fernandez ^_^
PETITIONER’S  CONTENTION:
PONENTE: En Banc, Feliciano (J): 14 concur
In their Petition for Review, petitioners assail the finding and conclusion of the
DOCTRINE: CIVIL LAW; QUASI-DELICT; NEGLIGENCE; FACTORS CONSTITUTIVE Sison Decision, that the "Yotai Maru" was negligent and at fault in the collision,
THEREOF WHICH NEGLIGENCE WAS THE PROXIMATE CAUSE OF THE COLLISION; 3 rather than the "Don Carlos."
Principal Factors
RESPONDENT’S  CONTENTION:
SHORT FACTS: On 3 May 1970, 3:50 a.m., on the approaches to the port of Manila
near  Caballo  Island,  a  collision  took  place  between  the  M/V  “Don  Carlos,”  an  inter- Private respondent Go Thong, upon the other hand, argues that the Supreme Court,
island vessel owned and operated by Carlos A. Go Thong and Company  (”Go   in rendering its minute Resolution in G.R. No. L-48839, had merely dismissed Go
Thong”),  and  the  M/S  “Yotai  Maru,”  a  merchant  vessel  of  Japanese  registry.  The   Thong’s  Petition  for  Review  of  the  Reyes,  L.B.,  J.  Decision  for  lack  of  merit  but  had  
“Don  Carlos”  was  then  sailing  south  bound  leaving  the  port  of  Manila  for  Cebu,   not affirmed in toto that Decision. Thus, Go Thong concludes, this Court did not
while  the  “Yotai  Maru”  was  approaching  the  port  of  Manila,  coming  in  from  Kobe,   hold that the "Don Carlos" had been negligent in the collision.
Japan. The  bow  of  the  “Don  Carlos”  rammed  the  portside  (left  side)  of  the  “Yotai  
Maru”  inflicting  a  3  cm.  gaping  hole  on  her  portside  near  Hatch  3,  through  which   RULING:
seawater rushed in and flooded that hatch and her bottom tanks, damaging all the
cargo stowed therein. The consignees of the damaged cargo got paid by their 1. TRIAL COURT: In favor of petitioner. In both cases, the Manila CFI held that the
insurance companies. officers  and  crew  of  the  “Don  Carlos”  had  been  negligent,  that  such  negligence  was  
the proximate cause of the collision and accordingly held Go Thong liable for
The insurance companies in turn, having been subrogated to the interests of the damages to the insurance companies.
consignees of the damaged cargo, commenced actions against Go Thong for
damages sustained by the various shipments in the then CFI of Manila. 2 cases were 2. APPELLATE COURT
filed in the CFI of Manila.
a) In CA-GR 61320-R, the Court of Appeals through Reyes, L.B., J., rendered affirmed
The first case was commenced by Smith Bell and Sumitomo Marine and Fire the Decision of Judge Fernandez. Go Thong moved for reconsideration, without
Insurance Company Ltd., against Go Thong, in Branch 3, which was presided over by success.
Judge Bernardo P. Fernandez.
b) In CA-GR 61206-R, the Court of Appeals through Sison, P.V., J., reversed the
The second case was filed by Smith Bell and Company, Inc. and Tokyo Marine and Cuevas  Decision  and  held  the  officers  of  the  “Yotai  Maru”  at  fault  in  the  collision  
Fire Insurance Company, Inc. against Go Thong in Branch 4, which was presided with  the  “Don  Carlos,”  and  dismissed  the  insurance  companies’  complaint.  Smith  
over by then Judge, later Associate Justice of this Court, Serafin R. Cuevas. Civil Bell & Co. and the Tokyo Marine & Fire Insurance Co. Inc. asked for reconsideration,
Cases 82567 (Judge Fernandez) and 82556 (Judge Cuevas) were tried under the to no avail. Hence, the petition for review on certiorari.
same  issues  and  evidence  relating  to  the  collision  between  the  “Don  Carlos”  and  

Page 129 of 151

3. SUPREME COURT: M/V Don Carlos was negligent. Article 633 of the Code of Commerce provides:  “The  second  mate  shall  take  
command of the vessel in case of the inability or disqualification of the captain and
(a)  Reyes  (  √  )  J.  Fernandez  decision:  Go  Thong  then  went  to  the  Supreme  Court  on   sailing  mate,  assuming,  in  such  case,  their  powers  and  liability.”  #GUETA
Petition for Review. Supreme Court denied the Petition for lack of merit. Go Thong
filed a Motion for Reconsideration; the Motion was denied by the Supreme Court .

(b) Sison ( X )Cuevas decision: The Supreme Court reversed and set aside the TITLE: National Development Company vs. Court of Appeals
Decision of the Court of Appeals in CA-GR 61206-R, and reinstated and affirmed the
decision of the trial court in its entirety; with costs against Go Thong. TOPIC: Collisions

The SC ruled that M/V Don Carlos was negligent and its negligence was the sole KEYWORD/s: Doña Nati <3 Yasushima Maru
proximate cause of the collision and of the resulting damages. The Court believes
that there are three (3) principal factors which are constitutive of negligence on the PONENTE: PARAS, J.
part of the "Don Carlos," which negligence was the proximate cause of the collision.
DOCTRINES:
1) The failure of the "Don Carlos" to comply with the requirements of Rule 18 (a) of
the International Rules of the Road. (page 499 footnote in Aquino transpo book
The laws of the Philippines will apply in case at bar and it is immaterial whether the
2011 ed)
collision actually occurred in foreign waters.

2) "Don Carlos" was its failure to have on board that might a "proper look-out" as
Liability of owner and agent of vessel; The agent even though he was not the owner
required by Rule I (B). Under Rule 29 of the same set of Rules, all consequences
of the vessel, is liable to the shippers and owners of cargo transported by it, for
arising from the failure of the "Don Carlos" to keep a "proper look-out" must be
losses and damages to the cargo without prejudice to his rights against the owner
borne by the "Don Carlos.
of the ship.— It is well settled that both the owner and agent of the offending
vessel are liable for the damage done where both are impleaded; that in case of
A "proper look-out" is one who has been trained as such and who is given no other collision, both the owner and the agent are civilly responsible for the acts of the
duty save to act as a look-out and who is stationed where he can see and hear best captain
and maintain good communication with the officer in charge of the vessel, and who
must, of course, be vigilant.
FACTS:

3) The third factor constitutive of negligence on the part of the "Don Carlos" relates
* A memorandum was entered into between defendants National Development
to the fact that Second Mate Benito German was, immediately before and during
Company (NDC) and Maritime Company of the Philippines (MCP) on September 13,
the collision, in command of the "Don Carlos." Second Mate German simply did not
1962:
have the level of experience, judgment and skill essential for recognizing and coping
with the risk of collision as it presented itself that early morning when the "Don
* Defendant NDC as the first preferred mortgagee of 3 ocean-going vessels
Carlos," running at maximum speed and having just overtaken the "Don Francisco"
including  vessel  “Doña  Nati”  appointed  defendant  MCP  as  its  agent  to  manage and
then approximately one mile behind to the starboard side of the "Don Carlos,"
operate said vessels in its behalf.
found itself head-on or nearly head-on vis-a-vis the "Yotai Maru." It is essential to
point out that this situation was created by the "Don Carlos" itself.

Page 130 of 151

* February 28, 1964 - The E. Phillipp Corporation of the New York loaded on board
the  vessel  “Doña  Nati”  at  San  Francisco,  California,  a  total  of  1,200  bales  of  
American raw cotton
* consigned to the order of Manila  Banking  Corporation  and  the  People’s  Bank  and   NDC and MCP are liable to DISC; COGSA was not applied in determining the liability
Trust Company, acting for and in behalf of the Pan Asiatic Commercial Company,
Inc., who represents Riverside Mills Corporation
* At 6:04 a.m. on April 15, 1964 at Ise Bay, Japan - the vessel figured in a collision
with  a  Japanese  vessel  (‘SS  Yasushima  Maru’)
* as a result of which 550 bales of aforesaid cargo were lost and/or destroyed
* The damage and lost cargo was worth P344,977.86 which amount, the
Development Insurance and Surety Corporation as insurer, paid to the Riverside
Mills Corporation as holder of the negotiable bills of lading duly endorsed. The
insurer filed before the CFI of Manila an action for the recovery of said amount
from NDC and MCP.
PETITIONERS’  CONTENTION:
The Carriage of Goods by Sea Act should apply to the case at bar and not the Civil
Code or the Code of Commerce, in determining the liability for loss of cargos
resulting from the collision outside the territorial jurisdiction of the PH
Under Section 4 (2) of said Act, the carrier is NOT responsible for the loss or damage
resulting from the "act, neglect or default of the master, mariner, pilot or the
servants of the carrier in the navigation or in the management of the ship."
Petitioners insist that based on the findings of the trial court which were adopted
by the Court of Appeals, both pilots of the colliding vessels were at fault and
negligent.
PRIVATE  RESPONDENT’S  CONTENTION:
DISC had paid as insurer the total amount of P364,915.86 to the consignees or their
successors-in-interest, for the said lost or damaged cargoes., and thus entitled to
recovery from the ship owner or carrier.
ISSUE: W/N the COGSA will apply to collision of vessels in foreign waters
Page 131 of 151
RULING:
TRIAL COURT
of NDC and MCP
COURT OF APPEALS: affirmed in toto
SUPREME COURT: NO. The Code of Commerce is applicable in the case. It was held
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”.  
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 special laws.
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  court’s  
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.
More specifically, Article 826 of the Code of Commerce provides that where
collision is imputable to the personnel of a vessel, the owner of the vessel at fault,
shall indemnify the losses and damages incurred after an expert appraisal. But more
in point to the instant case is Article 827 of the same Code, which provides that if
the collision is imputable to both vessels, each one shall suffer its own damages and
both shall be solidarily responsible for the losses and damages suffered by their
cargoes.
Significantly, under the provisions of the Code of Commerce, particularly Articles
826 to 839, the ship owner or carrier, is not exempt from liability for damages
arising from collision due to the fault or negligence of the captain.
Primary liability is imposed on the shipowner or carrier in recognition of the
universally accepted doctrine that the shipmaster or captain is merely the
representative of the owner who has the actual or constructive control over the
conduct of the voyage.
MCP’s  claim  that  the  fault  or  negligence  can  only  be  attributed  to  the  pilot  of  the   · Don Juan was on the starboard (right) side of Tacloban City and as it approached,
vessel SS Yasushima Maru and not to the Japanese Coast pilot navigating the vessel
Dona Nati, need not be discussed lengthily as said claim is not only at variance with
NDC’s  posture,  but  also  contrary  to  the  factual  findings  of  the  trial  court  affirmed  no  
less by the Court of Appeals, that both pilots were at fault for not changing their
excessive speed despite the thick fog obstructing their visibility. #LEANO
Case Title : Mecenas (v) CA, Capt. Santisteban and Negros Navigation Co. Inc.
Key Phrase : Green Light Starboard (Chap3 keyword : mahjong)Ponente : Feliciano,
J.
Doctrine :"Route observance" of the International Rules of the Road (Rule18) will
not relieve a vessel from responsibility if the collision could have been avoided by
proper care and skill on her part or even by a departure from the rules.
FACTS:
1. "M/V Don Juan" sank within 10-15 min from impact causing the death of
hundreds of its passengers (the collision incident happened around 10:30pm of
April 22, 1980 when the sea was calm, the weather fair and the visibility was good)
a. Defendant PNOC's version - An interisland vessel (M/V Don Juan) owned and
operated by Negros Navigation was first sighted at about 5 or 6 miles from a barge-
type oil tanker (M/T Tacloban City) owned by the Philippine National Oil Company
(PNOC) and operated PNOC Shipping
Page 132 of 151
Tacloban City gave a leeway of 10° to the left to enable Tacloban to see the
direction of Don Juan.
· Don Juan switched to green light, signifying that it will pass Tacloban City's right
side; it will be a starboard to starboard passing and Tacloban City's purpose in giving
a leeway of 10° at this point, is to give Don Juan more space for her passage (this
leeway was increased by Tacloban City to an additional 15° towards the left) at this
time the way was clear and Don Juan has not changed its course.When Tacloban
City altered its course the second time, from 300° to 285°, Don Juan was about 4.5
miles away and despite executing a hardport maneuver, the collision nonetheless
occurred as Don Juan rammed the Tacloban City near the starboard bow
b. Negros Navigations version
· Don Juan first sighted Tacloban City 4 miles away and Tacloban City showed its red
and green lights twice; it proceeded to, and will cross, the path of Don Juan
(Tacloban was on the left side of Don Juan)
· Upon seeing Tacloban's red and green lights, Don Juan executed hard starboard
(Tacloban was about 1,500 feet away) in conformity with the rule that "when both
vessels are head on or nearly head on, each vessel must turn to the right in order to
avoid each other"; nonetheless, Tacloban appeared to be heading towards Don
Juan.
· Don Juan, after execution of hard starboard, will move forward 200 meters before
the vessel will respond to such maneuver; Between 9 to 15 seconds from execution
of hard starboard, collision occurred.
2. Alleging negligence of defendants, the 7 legitimate children of Sps. Mecenas file a
complaint against Negros Navigation and the captain of the "Don Juan" (Capt. Roger
Santisteban).
ISSUES: Whether or not private respondents acted recklessly (with gross
negligence).
RULING:
Regional Trial Court of QC – defendants are equally negligent and liable
M/ V Don Juan and Tacloban City became aware of each other's presence in the
area by visual contact at a distance of something like 6 miles from each other and
they were fully aware that if they continued on their course, they will meet head
on. They executed maneuvers inadequate, and too late, to avoid collision thus the
defendants are equally negligent and are liable for damages.
Court of Appeals
"Don Juan" was at least as negligent as the M/T "Tacloban City" in the events
leading up to the collision and the sinking of the "Don Juan."
Supreme Court – petition for review on certiorari is granted (CA = reversed & set
aside)
1. Grossness of the negligence of "Don Juan" underscored in the context of the
following facts:
a) "Don Juan" was more than twice as fast as the "Tacloban City" because The "Don
Juan's" top speed was 17 knots while that of the "Tacloban City" was 6.3. knots
b) "Don Juan" carried the full complement of officers and crew members specified
for a passenger vessel of her class
c) "Don Juan" was equipped with radar which was functioning that night
d) "Don Juan's" officer on-watch had sighted the "Tacloban City" on his radar screen
while the latter was still four (4) nautical miles away and visual confirmation of
radar contact was established by the "Don Juan" while the "Tacloban City" was still
2.7 miles away
2. Had "Don Juan" taken seriously its duty of extraordinary diligence, it could have
easily avoided the collision with the "Tacloban City," and indeed, the "Don Juan"
might well have avoided the collision even if it had exercised ordinary diligence
merely.
3. In ordinary circumstances, a vessel discharges her duty to another by a faithful
and literal observance of the Rules of Navigation, and she cannot be held at fault for
so doing even though a different course would have prevented the collision BUT
this rule is not to be applied where it is apparent, as in the instant case, that her
Page 133 of 151
captain was guilty of negligence or of a want of seamanship in not perceiving the
necessity for, or in so acting as to create such necessity for, a departure from the
rule and acting accordingly.
4. "Don Juan" having sighted the "Tacloban City" when it was still a long way off was
negligent in failing to take early preventive action and in allowing the 2 vessels to
come to such close quarters as to render the collision inevitable when there was no
necessity for passing so near to the "Tacloban City" as to create that hazard or
inevitability, for the "Don Juan" could choose its own distance AND it is noteworthy
that the "Tacloban City," upon turning hard to port shortly before the moment of
collision, signaled its intention to do so by giving two (2) short blasts with horn
while the "Don Juan " gave no answering horn blast to signal its own intention and
proceeded to turn hard to starboard.
5. We conclude that Capt. Santisteban and Negros Navigation are properly held
liable for gross negligence in connection with the collision of the "Don Juan" and
"Tacloban City" and the sinking of the "Don Juan" leading to the death of hundreds
of passengers and we find no necessity for passing upon the degree of negligence
or culpability properly attributable to PNOC and PNOC Shipping or the master of the
"Tacloban City," since they were never impleaded here. #LUALHATIMARQUEZ
CASE TITLE: Aboitiz Shipping vs General Accident Fire and Life Insurance Corp
Keyword: sinking ship, varying decisions of the TC and CA
Ponente: Justice Melo
Facts: Aboitiz Shipping is the owner and operator of M/V P. Aboitiz. The vessel sank
while on a voyage from Hongkong to the Philippines. Several suits for recovery of
the lost cargo either by the shippers, their successors-in-interest, or the cargo
insurers like General Accident (GAFLAC) were filed. The Board of Marine Inquiry
(BMI), on its initial investigation found that such sinking was due to force majeure
and that subject vessel, at the time of the sinking was seaworthy. The trial court
ruled against the carrier on the ground that the loss did not occur as a result of
force majeure. This was affirmed by the CA and ordered the immediate execution
of the full judgment award. However, other cases have resulted in the finding that
vessel was seaworthy at the time of the sinking, and that such sinking was due to
force majeure. Due to these different rulings, Aboitiz seeks a pronouncement as to
the applicability of the doctrine of limited liability on the totality of the claims vis a
vis the losses brought about by the sinking of the vessel M/V P. ABOITIZ, as based
on the real and hypothecary nature of maritime law. Aboitiz argued that the Limited
Liability Rule warrants immediate stay of execution of judgment to prevent
impairment of other creditors' shares.
Issue: Whether the Limited Liability Rule arising out of the real and hypothecary
nature of maritime law should apply in this and related cases.
Petitioner’s  Contention:
1. The Limited Liability Rule warrants immediate stay of execution of judgment to
prevent impairment of other creditors' shares;
2. The finding of unseaworthiness of a vessel is not necessarily attributable to the
shipowner; and
3 The principle of "Law of the Case" is not applicable to the present petition.
Respondent’s  Contention:
1. There is no limited liability to speak of or applicable real and hypothecary rule
under Article 587, 590, and 837 of the Code of Commerce in the face of the facts
found by the lower court (Civil Case No. 144425), upheld by the Appellate Court (CA
G.R. No. 10609), and affirmed in toto by the Supreme Court in G.R. No. 89757 which
cited G.R. No. 88159 as the Law of the Case; and
2. Under the doctrine of the Law of the Case, cases involving the same incident,
parties similarly situated and the same issues litigated should be decided in
conformity therewith following the maxim stare decisis et non quieta movere.
Ruling:
Trial Court and CA: The rulings vary which prompted petitioner to file the present
action.
Supreme Court:
The real and hypothecary nature of maritime law simply means that the liability of
the carrier in connection with losses related to maritime contracts is confined to the
vessel, which is hypothecated for such obligations or which stands as the guaranty
for their settlement. It has its origin by reason of the conditions and risks attending
maritime trade in its earliest years when such trade was replete with innumerable
and unknown hazards since vessels had to go through largely uncharted waters to
ply their trade. It was designed to offset such adverse conditions and to encourage
people and entities to venture into maritime commerce despite the risks and the
prohibitive cost of shipbuilding.
Thus, the liability of the vessel owner and agent arising from the operation of such
vessel were confined to the vessel itself, its equipment, freight, and insurance, if
any, which limitation served to induce capitalists into effectively wagering their
Page 134 of 151
resources against the consideration of the large profits attainable in the trade. The
Limited Liability Rule in the Philippines is taken up in Book III of the Code of
Commerce, particularly in Articles 587,590, and 837, hereunder quoted in toto :
Art. 587. The ship agent shall also be civilly liable for the indemnities in favor of
third persons which may arise from the conduct of the captain in the care of the
goods which he loaded on the vessel; but he may exempt himself therefrom by
abandoning the vessel with all her equipment and the freight it may have earned
during the voyage.
Art. 590. The co-owners of a vessel shall be civilly liable in the proportion of their
interests in the common fund for the results of the acts of the captain referred to in
Art. 587. Each co-owner may exempt himself from this liability by the
abandonment, before a notary, of the part of the vessel belonging to him.
Art. 837. The civil liability incurred by shipowners in the case prescribed in this
section (on collisions), shall be understood as limited to the value of the vessel with
all its appurtenances and freightage served during the voyage.
The only time the Limited Liability Rule does not apply is when there is an actual
finding of negligence on the part of the vessel owner or agent.
In the instant case, there is, therefore, a need to collate all claims preparatory to
their satisfaction from the insurance proceeds on the vessel M/V P. Aboitiz and its
pending freightage at the time of its loss. No claimant can be given precedence over
the others by the simple expedience of having filed or completed its action earlier
than the rest. Thus, execution of judgment in earlier completed cases, even those
already final and executory, must be stayed pending completion of all cases
occasioned by the subject sinking. Then and only then can all such claims be
simultaneously settled, either completely or pro-rata should the insurance proceeds
and freightage be not enough to satisfy all claims.
The petition was granted. #LUZADIO
Title: The Philippine American General Insurance Company v. Court of Appeals
Ponente: Justice Bellosillo
Doctrine: The right of abandonment of vessels, as a legal limitation of  a  shipowner’s  
liability, does not apply to cases where the injury or average was occasioned by the
shipowner’s  own  fault.  It  must  be  stressed  at  this  point  that  Art.  587  speaks  only  of  
situations where the fault or negligence is committed solely by the captain.
Keyword: Cocacola
Facts:
Coca-Cola  Bottlers  Philippines,  Inc.,  loaded  on  board  “MV  Asilda,”  a  vessel  owned   attributed to either a fortuitous event, in which case, no liability should attach
and operated by respondent Felman Shipping Lines (FELMAN for brevity), 7,500 unless there was a stipulation to the contrary, or to the negligence of the captain
cases of 1-liter Coca-Cola softdrink bottles to be transported from Zamboanga City and his crew.
to Cebu City for consignee Coca-Cola Bottlers Philippines, Inc., Cebu.[1] The
shipment was insured with petitioner Philippine American General Insurance Co., Appellate  Court:  Rendered  judgment  finding  “MV  Asilda”  unseaworthy  for  being  
Inc. (PHILAMGEN for brevity). top- heavy as 2,500 cases of Coca-Cola softdrink bottles were improperly stowed on
deck. In other words, while the vessel possessed the necessary Coast Guard
“MV  Asilda”  left  the  port  of  Zamboanga  in  fine  weather  at  eight  o’clock  in  the   certification indicating its seaworthiness with respect to the structure of the ship
evening of the same day. At around eight forty-five the following morning, the itself, it was not seaworthy with respect to the cargo.
vessel sank in the waters of Zamboanga del Norte bringing down her entire cargo
with her including the subject 7,500 cases of 1-liter Coca-Cola softdrink bottles. The Supreme Court:
consignee Coca-Cola Bottlers Philippines, Inc. filed a claim with respondent FELMAN
for recovery of damages. Respondent denied the claim thus prompting the a.  “MV  Asilda”  was  unseaworthy  when  it  left  the  port  of  Zamboanga.  The  vessel  was  
consignee to file an insurance claim with PHILAMGEN. designed as a fishing vessel x x x x and it was not designed to carry a substantial
amount or quantity of cargo on deck. Therefore, the cargo had been confined to
Claiming its right of subrogation PHILAMGEN sought recourse against respondent those that could have been accommodated under deck, her stability would not
FELMAN which disclaimed any liability for the loss. Consequently, PHILAMGEN sued have been affected and the vessel would not have been in any danger of capsizing,
the shipowner for sum of money and damages. PHILAMGEN alleged that the sinking even given the prevailing weather conditions at that time of sinking. But from the
and  total  loss  of  “MV  Asilda”  and  its  cargo  were  due  to  the  vessel’s   moment that the vessel was utilized to load heavy cargo on its deck, the vessel was
unseaworthiness as she was put to sea in an unstable condition. It further alleged rendered unseaworthy for the purpose of carrying the type of cargo because the
that the vessel was improperly manned and that its officers were grossly negligent weight  of  the  deck  cargo  so  decreased  the  vessel’s  metacentric  height  as  to  cause  it  
in failing to take appropriate measures to proceed to a nearby port or beach after to  become  unstable.  Considering  that  the  ship’s  hatches  were  properly  secured,  the  
the vessel started to list. empty Coca-Cola cases recovered could have  come  only  from  the  vessel’s  deck  
cargo. It is settled that carrying a deck cargo raises the presumption of
FELMAN filed a motion to dismiss based on the affirmative defense that no right of unseaworthiness unless it can be shown that the deck cargo will not interfere with
subrogation in favor of PHILAMGEN was transmitted by the shipper, because it had the proper management of the ship. However, in this case it was established that
abandoned all its rights, interests and ownership  over  “MV  Asilda”  together  with   “MV  Asilda”  was  not  designed  to  carry  substantial  amount  of  cargo  on  deck.  The  
her freight and appurtenances for the purpose of limiting and extinguishing its inordinate  loading  of  cargo  deck  resulted  in  the  decrease  of  the  vessel’s  
liability. metacentric height thus making it unstable. The strong winds and waves
encountered by the vessel are but the ordinary vicissitudes of a sea voyage and as
Issues:  a)  whether  “MV  Asilda”  was  seaworthy  when  it  left  the  port  of  Zamboanga;   such merely contributed to its already unstable and unseaworthy condition.
(b) whether the limited liability under Art. 587 of the Code of Commerce should
apply. b. On the second issue, Art. 587 of the Code of Commerce is not applicable to the
case at bar. Simply put, the ship agent is liable for the negligent acts of the captain
Ruling in the care of goods loaded on the vessel. This liability however can be limited
through abandonment of the vessel, its equipment and freightage as provided in
Trial  Court:  Rendered  judgment  in  favor  of  FELMAN.  It  ruled  that  “MV  Asilda”  was   Art. 587. Nonetheless, there are exceptional circumstances wherein the ship agent
seaworthy when it left the port of Zamboanga as confirmed by certificates issued by could still be held answerable despite the abandonment, as where the loss or injury
the  Philippine  Coast  Guard  and  the  shipowner’s surveyor attesting to its was due to the fault of the shipowner and the captain. The international rule is to
seaworthiness. Thus the loss of the vessel and its entire shipment could only be
Page 135 of 151
the effect that the right of abandonment of vessels, as a legal limitation of a
shipowner’s  liability,  does
not  apply  to  cases  where  the  injury  or  average  was  occasioned  by  the  shipowner’s   crew and captain were on board and proceeding to Hongkong. Captain of
own fault. It must be stressed at this point that Art. 587 speaks only of situations
where the fault or negligence is committed solely by the captain. Where the
shipowner is likewise to be blamed, Art. 587 will not apply, and such situation will
be covered by the provisions of the Civil Code on common carrier. #MACALINO
VI. SALVAGE
TITLE: ERLANGER & GALINGER vs. THE SWEDISH EAST ASIATIC CO.
DOCTRINE: Three elements are necessary to a valid salvage claim: (1) A marine
peril. (2) Service voluntarily rendered when not required as an existing duty or from
a special contract. (3) Success, in whole or in part, or that the service rendered
contributed to such success.
FACTS:
May 7, 1913: Steamship NIPPON loaded with copra and other general merchandise
sailed from Manila to Singapore.
May 8, 1914 -- 4:30PM: It went aground Scarborough Reef.
May 9, 1913: Chief officer Weston and 9 other members of crew left NIPPON.
May 12, 1913 -- Morning: They reached Santa Cruz, Zambales and Weston sent a
telegram to Helm, Director of Bureau of Navigation, Manila stating that NIPPON
was stranded on Scarborough Reef and wants immediate assistance for saving
crew.
1:30PM: Government of the Phil Islands orderd coast guard cutter
MINDORO with life-saving appliances to the scene of the wreck.
3:00PM: Steamship MANCHURIA sailed from Manila to Hongkong
was requested to pass by Scarborough Reef.
Page 136 of 151
May 13, 1912: MANCHURIA arrived before MINDORO and took on board the
captain and remainder of crew. MANCHURIA was still near Scarborough Reef when
MINDORO arrived. Captain of MANCHURIA informed captain of MINDORO that the
MINDORO offered assistance but MANCHURIA declined. MINDORO proceeded to
NIPPON and removed balance of baggage found on deck. MINDORO proceeded to
Santa Cruz, Zambales, took Weston and 9 crew members on board and brought to
Manila.
Captain Dixon of MANCHURIA sent a message that all were rescued from
NIPPON and that it was stranded on the extreme north end of shoal. It also stated
that the streamer was full of water fore and fat and is badly ashore and it was
abandoned. Captain of NIPPON saw said message before it was sent. The crew
boarding  MANCHURIA  took  with  them  the  chronometer,  ship’s  register,  ship’s  
articles,  ship’s  logs  and  much  of  crew’s  baggage  amounting  to  P  156,  231.73.
May 14, 1913: Erlanger & Galinger applied to Director of Navigation for a charter of
a coast guard cutter for the purpose of proceeding to the stranded steamer
NIPPON. The coast guard cutter MINDORO was chartered to Erlanger & Galinger.
May 17, 1913: Erlanger & Galinger took possession of NIPPON and continued in
possession until about July 1 when the last cargo was shipped to Manila. NIPPON
was floated and towed to Olongapo and temporary repairs were made. It was then
brought to Manila.
The ship was valued at P 250, 000.00. Erlanger & Galinger’s  claim  was  settled  for  P  
145, 800.00. they filed this action against the insurance companies who
represented the cargo salved from NIPPON, to have the amount of salvage they
were entitled, determined.
THE RESPONDENTS: The Oelwerke Teutonia is a corporation as claimant of copra.
New Zealand Insurance Company as insurer and assignee of ownders of 33
crates of agar-agar.
Tokio Marine Insurance Company as insurer and assigne of 1, 000 cases of
bean oil and 2 cases of bamboo lacquer work.
 The Thames and Mersey Marine Insurance Company as a reinsurer to the 1.
extent of P6,500 on the cargo of copra
PETITIONER’S  CONTENTION:  They are entitled to a reimbursement of their
expenses, out of the gross value of the salved property. They also contended that
the cargo and vessel are equally chargeable with the expense of the salvage. They
also claim that that the NIPPON was a derelict or quasi-derelict.
RESPONDENT’S  CONTENTION:  They contended that Erlanger & Galinger were not
salvors of the copra and that the latter were not entitled to recover one-half of the
proceeds of copra. They also contended that the captain and the crew did not leave
the ship sine animo revertendi, but that it was their intention to go to Hongkong
and procure assistance with which to save the ship and her cargo.
ISSUE: 1. Whether or not the ship was abandoned.
2. Whether or not the salvage was conducted with skill, diligence and
2.
efficiency.
RULING:
Honorable A. S. Crossfield: The court found that the plaintiffs were "entitled to
recover one-half of the net proceeds from the property salved and sold (which has
nothing to do with the steamship itself), and one-half the value of the property
delivered to the claimants."
Supreme Court:
The question whether or not a particular ship and her cargo is a fit object of salvage
depends upon her condition at the time the salvage services are performed.
Three elements are necessary to a valid salvage claim: (1) A marine peril. (2) Service
voluntarily rendered when not required as an existing duty or from a special
contract. (3) Success, in whole or in part, or that the service rendered contributed
to such success.
Page 137 of 151
The ship was abandoned.
At the time the plaintiff commenced the attempt to salve what was
possible of the S. S. Nippon and cargo, it was justified, from all the
conditions existing, in believing that it had been abandoned and in taking
possession, even though the master of the vessel intended when he left it,
to return and attempt salvage. Captain Dixon also sent telegrams stating
that NIPPON was stranded.
The evidence also proves that the Nippon was in peril; that the captain left
in order to protect his life and the lives of the crew; that the animo
revertendi was slight. The argument of the defendant-appellant to the
effect that the ship was in no danger is a bit out of place in view of the
statement of the captain that she would sink with the first gale, coupled
with the fact that a typhoon was the cause of her stranding.
The plaintiffs were diligent in commencing the work and were careful and
efficient in its pursuit and conclusion.
While the plaintiff entered upon the salvage proceedings without proper
means and not being adapted by their business to conduct their work, and
while it may appear that possibly the salvage might have been conducted
in a better manner and have accomplished somewhat better results in the
saving of the copra cargo, yet it appears that they quickly remedied their
lack of means and corrected the conduct of the work so that it
accomplished fairly good results. It does not appear from the evidence that
anyone then or subsequently suggested or found any other course which
might have been pursued and which would have brought better results.
The plaintiffs commenced the actual work of salving the ship and cargo on
May 18, 1913. The last of the cargo was a brought to Manila the latter part
of June. The last of the dry copra was brought to Manila on June 5. The
estimates of the experts with regard to the time necessary to remove the
cargo ranged from eight to twenty days. The greater portion of the cargo
was brought in by the plaintiffs within fifteen days. The delay after June 5
was due to the difficulty in inducing laborers to work with wet copra. This
difficulty would have arisen with any set of salvors and cannot be
attributed to a lack of care or diligence on the part of the
plaintiffs.#MAGALIT
TITLE: Honorio Barrios vs. Carlos A. Go Thong
KEYWORD: Salvage vs Towage
DOCTRINE: When the ship stranded is not in a perilous condition, the services
rendered by another ship in attaching it in tow is merely towage and not salvage.
PONENTE: Barrera, J.
FACTS:
Honorio Barrios, the captain of MV Henry I of William Lines Incorporated, received
an SOS signal by blinkers from the MV Don Alfredo, owned and operated by Carlos
A. Go Thong & Company,  causing  the  former  to  alter  it’s  course  to  render  aid.  MV   Salvage,  has  been  defined  as  the  “compensation  allowed  to  persons  by  whose
Don Alfredo was found to be in trouble due to engine failure and the loss of a
propeller. With the consent of Captain Loresto of the distressed vessel, the plaintiff
tied MV Don Alfredo to MV Henry I and had it in tow towards the direction of
Dumaguete City. The next morning they came across MV Lux, a sister ship of MV
Don Alfredo. And Upon the request of Captain Lorseto, the tow lines were released.
ISSUE: Whether the services rendered by the petitioner to the respondent
constituted salvage or towage.
PETITIONER’S  CONTNETION:
- claims salvage of the distressed ship amounting to P100,000
RESPONDENT’S  CONTENTION:
- the petitioner cannot claim separate compensation from that they own from the
shipping company
DECISION:
COURT OF FIRST INSTANCE
Dismissed. The MV Don Alfredo was not in a perilous condition, therefore cannot be
considered quasi-derelict and the Salvage Law (Act 2616) is not applicable.
Page 138 of 151
INTERMEDIATE APPELLATE COURT: **case silent
SUPREME COURT
The Court ruled that the service was towage.
Section 1 of the Salvage Law (Act 2616) provides that:
Section 1. When in case of shipwreck, the vessel or its cargo shall be beyond the
control of the crew, or shall have been abandoned by them, and picked up and
conveyed to a safe place by other persons, the latter shall be entitled to reward for
the salvage.
 
assistance a ship or her cargo has been saved, in whole or in part, from impending
peril on the sea, or in recovering such property from actual loss, as in case of
shipwreck,
derelict, or recapture. It has three elements, namely: (1) a marine peril; (2) service
voluntarily rendered when not required as an existing duty or from a special
contract; and (3) success in whole or in part, or that the service rendered
contributed to such success. The court opined that there was no sea peril to begin
with to warrant the claim for salvage. Although it is true that the ship was in a
helpless condition due to engine failure, there was no peril. The weather was fair
and clear, the waves were small, there was no risk in floundering, and in case the
ship were to drift, the anchor could easily be lowered. The crew did not even find it
necessary to lower the motor boats and evacuate its passengers, neither was there
a necessity to jettison the cargo for safety measures. The vessel was crew were only
prevented from moving the vessel, such case did not make the vessel a quasi-
derelict.
Instead, what constituted was a towage. By the consent of the respondent from the
petitioner’s  offer  to  tow  the  vessel,  they  impliedly  entered  into  a  juridical  
relationship of towage.
***the material distinction between TOWAGE and SALVAGE is that a reward ought
to sometimes be given to the crew of the salvage vessel and other participants in
the salvage service; no such reward is given in case of towage. In towage, the
master and crew are not entitled to remuneration pursuant to the contract of
towage.#MANALANG
VII. CARRIAGE OF GOODS BY SEA ACT (COGSA)
CASE TITLE: ELSER, INC., vs. COURT OF APPEALS
KEYWORD: COGSA
PONENTE: BAUTISTA ANGELO, J.:
DOCTRINE: A carrier cannot limit its liability in a manner contrary to what is
provided for in the COGSA.
SHORT FACTS:
In December 1945 the goods specified in the Bill of Lading, were shipped on the
'S.S. Sea Hydra,' of Isthmian Steamship Company, from New York to Manila, and
were received by the consignee 'Udharam Bazar and Co.', except one case of
vanishing cream valued at P159.78. The goods were insured against damage or loss
by the 'Atlantic Mutual Insurance Co.'; `Udharam Bazar and Co.' Inc., who denied
having received the goods for custody; and the 'International Harvester Co. of the
Philippines,' as agent for the shipping company, who answer that the goods were
landed and delivered to the Customs authorities. Finally, 'Udaharam Bazar and Co.'
claimed for indemnity of the loss from the insurer, 'Atlantic Mutual Insurance Co.',
and was paid by the latter's agent 'E. E. Elser Inc.' the amount involved, that is,
P159.78.
PETITIONER’S  CONTENTION:  Petitioners  contend  that  the  finding  of  the  appellate   9,  1963  plus  attorney’s  fees  and  damages.  Ang  alleged  that  Yau  Yue  Commercial
court is erroneous in the light of the provisions of the Carriage of Goods by Sea Act
of 1936, which apply to this case, the same having been made an integral part of
the covenants agreed upon in the bill of lading.
ISSUE: Whether clause 18 of the bill of lading shall prevail over the provisions in the
Carriage of Goods by Sea Act.
RULING:
1. COURT OF APPEALS: the Court of Appeals held that petitioners have already lost
their right to press their claim against respondent because of their failure to serve
notice thereof upon the carrier within 30 days after receipt of the notice of loss or
damage as required by clause 18 of the bill of lading
2. SUPREME COURT: That clause 18 must of necessity yields to the provisions of the
Carriage of Goods by Sea Act in view of the proviso contained in the same Act which
says: "any clause, covenant, or agreement in a contract of carriage relieving the
Page 139 of 151
carrier or the ship from liability for loss or damage to or in connection with the
goods . . . or lessening such liability otherwise than as provided in this Act, shall be
null and void and of no effect." (section 3.) This means that a carrier cannot limit its
liability in a manner contrary to what is provided for in said act and so clause 18 of
the bill of lading must of necessity be null and void.
CASE TITLE: DOMINGO ANG v. COMPAÑIA MARITIMA, MARITIME COMPANY OF THE
PHILIPPINES and C.L. DIOKNO
KEYWORD: misdelivery versus loss (galvanized steel)
PONENTE: Aquino
DOCTRINE: In the American Steamship Agencies cases, it was held that the action of
Ang is based on misdelivery of the cargo which should be distinguished from loss
thereof. The one-year period provided for in Section 3 (6) of the Carriage of Goods
by Sea Act refers to loss of the cargo. What is applicable is the four-year period of
prescription for quasi-delicts prescribed in Article 1146 (2) of the Civil Code or ten
years for violation of a written contract as provided for in Article 1144 (1) of the
same Code.
FACTS: Ang on September 26, 1963, as the assignee of a bill of lading held by Yau
Yue Commercial Bank, Ltd. of Hongkong, sued Compañia Maritima, Maritime
Company of the Philippines and C.L. Diokno. He prayed that the defendants be
ordered to pay him solidarily the sum of US$130,539.68 with interest from February
 
Bank agreed to sell to Herminio G. Teves under certain conditions 559 packages of
galvanized steel, Durzinc sheets. The merchandise was loaded on May 25, 1961 at
Yawata, Japan in the M/S Luzon, a vessel owned and operated by the defendants,
to be transported to Manila and consigned "to order" of the shipper, Tokyo Boeki,
Ltd., which indorsed the bill of lading issued by Compañia Maritima to the order of
Yau Yue Commercial Bank. Ang further alleged that the defendants, by means of a
permit to deliver imported articles, authorized the delivery of the cargo to Teves
who obtained delivery from the Bureau of Customs without the surrender of the bill
of lading and in violation of the terms thereof. Teves dishonored the draft drawn by
Yau Yue against him. The Hongkong and Shanghai Banking Corporation made the
corresponding protest  for  the  draft’s  dishonor  and  returned  the  bill  of  lading  to  Yau  
Yue. The bill of lading was indorsed to Ang.
RESPONDENT’S  CONTENTION:  That  petitioner  Ang’s  complaint  must  be  on  the   machine parts
ground of lack of cause of action.
PETITIONER’S  CONTENTION:  Action  was not barred by prescription under the Civil
Code. The provision of COGSA for one-year prescription of action arising from loss
of cargo does not apply.
ISSUE:  Whether  petitioner’s  cause  of  action  for  damages  has  been  barred  by  
prescription
RULING:
TRIAL COURT: The trial court on May 22, 1964 dismissed the complaint on the
grounds of lack of cause of action and prescription since the action was filed
beyond the one-year period provided in the Carriage of Goods by Sea Act.
SC: GRANTED. (It should be noted that that legal point is already res judicata. In
1967 it was decided in favor of plaintiff-appellant Domingo Ang in Ang vs. American
Steamship Agencies, where it was held that Ang has a cause of action against the
carrier which has not prescribed)
In the American Steamship Agencies cases, it was held that the action of Ang is
based on misdelivery of the cargo which should be distinguished from loss thereof.
The one-year period provided for in section 3 (6) of the Carriage of Goods by Sea
Act refers to loss of the cargo. What is applicable is the four-year period of
prescription for quasi-delicts prescribed in article 1146 (2) of the Civil Code or ten
years for violation of a written contract as provided for in article 1144 (1) of the
same Code.
As Ang filed the action less than three years from the date of the alleged
misdelivery of the cargo, it has not yet prescribed. Ang, as indorsee of the bill of
lading, is a real party in interest with a cause of action for damages.#MAQUILING
CASE TITLE: Dole v Maritime Company of the Phil
Keywords: Cogsa's one year prescriptive period for claims
Ponente: Narvasa, J
Facts:
Subject matter of action against Maritime: loss and/or damage to a shipment of
Page 140 of 151
1. The cargo subject of the instant case was discharged in Dadiangas unto the
custody of the consignee on December 18, 1971;
2. The corresponding claim for the damages sustained by the cargo was filed by the
plaintiff with the defendant vessel on May 4, 1972;
3. On June 11, 1973 the plaintiff filed a complaint in the Court of First Instance of
Manila having three causes of action, the third one is the claim for loss and/damage
upon the said cargo shipment
4. The complaints for two causes of action were dismissed but the third cause of
action was dismissed without prejudiced, hence the petitioner filed again a
complaint on January 6, 1975.
Issue
whether or not Article 1155 of the Civil Code providing that the prescription of
actions is interrupted by the making of an extrajudicial written demand by the
creditor is applicable to actions brought under the Carriage of Goods by Sea Act
Petitioner's contention:
It concedes that its action is subject to the one-year period of limitation prescribe.
Dole's contention that the prescriptive period "*** remained tolled as of May 4,
1972 and that in legal contemplation the case (Civil Case No. 96353) was filed on
January 6, 1975 , well within the one-year prescriptive period in Sec. 3(6) of the
Carriage of Goods by Sea Actand because Dole's claim for loss or damage made on
May 4, 1972 amounted to a written extrajudicial demand which would toll or
interrupt prescription under Article 1155, it operated to toll prescription also in
actions under the Carriage of Goods by Sea Act.
Defendant's contention:
Prescribed action
Ruling
Court rejected the contention that an extrajudicial demand toiled the prescriptive
period provided for in the Carriage of Goods by Sea Act. Similarly, we now hold that
in such a case the general provisions of the new Civil Code (Art. 1155) cannot be
made to apply, as such application would have the effect of extending the one-year
period of prescription fixed in the law. It is desirable that matters affecting
transportation of goods by sea be decided in as short a time as possible; the
application of the provisions of Article 1155 of the new Civil Code would RULING: YES. Since the liability of a common carrier for loss of or damage to goods
unnecessarily extend the period and permit delays in the settlement of questions transported by it under a contract of carriage is governed by the laws of the country
affecting transportation, contrary to the clear intent and purpose of the law. It is of destination and the goods in question were shipped from the United States to
clearly fallacious and merits no consideration. #MARIANO
the Philippines, the liability of Sea-Land has Cue is governed primarily by the Civil
Code, and as ordained by the said Code, supplementary, in all matters not cluttered
CASE TITLE: SEA-LAND SERVICE, INC., vs. INTERMEDIATE APPELLATE COURT and
thereby, by the Code of Commerce and special laws. One of these supplementary
PAULINO CUE, doing business under the name and style of "SEN HIAP HING"
special laws is the Carriage of goods by Sea Act (COGSA), made applicable to all
KEYWORD: no value declared; stolen
contracts for the carriage by sea to and from the Philippines Ports in Foreign Trade
PONENTE: NARVASA, J.
by Commonwealth Act. 65.
DOCTRINE: Even if Section 4(5) of COGSA did not exist, the validity and binding
effect of the liability limitation clause in the bill of lading here are fully sustainable
Even if Section 4(5) of COGSA did not exist, the validity and binding effect of the
on the basis alone of Article 1749 and 1750 of the Civil Code. That said stipulation is
liability limitation clause in the bill of lading here are fully sustainable on the basis
just and reasonable is arguable from the fact that it echoes Art. 1750 itself in
alone of Article 1749 and 1750 of the Civil Code. That said stipulation is just and
providing a limit to liability only if a greater value is not declared for the shipment in
reasonable is arguable from the fact that it echoes Art. 1750 itself in providing a
the bill of lading. To hold otherwise would amount to questioning the justice and
limit to liability only if a greater value is not declared for the shipment in the bill of
fairness of that law itself.
lading. To hold otherwise would amount to questioning the justice and fairness of
that law itself, and this the private respondent does not pretend to do.
FACTS: Sea-Land Service, Inc., a foreign shipping and forwarding company licensed
to do business in the Philippines, received from Seaborne Trading Company in But over and above that consideration, the lust and reasonable character of such
Oakland, California a shipment consigned to Sen Hiap Hing the business name used stipulation is implicit in it giving the shipper or owner the option of avoiding acrrual
by Paulino Cue. The shipper not having declared the value of the shipment, no value of liability limitation by the simple and surely far from onerous expedient of
was indicated in the bill of lading. The bill described the shipment only as "8 CTNS declaring the nature and value of the shipment in the bill of lading.
on 2 SKIDS-FILES." The shipment arrived in Manila, and while awaiting
transshipment to Cebu,the cargo was stolen by pilferers and has never been The stipulation in the bill of lading limiting the liability of Sea-Land for loss or
recovered. damages to the shipment covered by Section 4(5) of COGSA to US$500 per package
Paulino Cue, the consignee, made formal claim upon Sea-Land for the value of the unless the shipper declares the value of the shipment and pays additional charges is
lost shipment allegedly amounting to P179,643.48. 5 Sea-Land offered to settle for valid and binding on Cue. #MEDINA
US$4,000.00, or its then Philippine peso equivalent of P30,600.00. asserting that
said amount represented its maximum liability for the loss of the shipment under
the package limitation clause in the covering bill of lading. Cue rejected the offer
and thereafter brought suit for damages against Sea-Land in the then Court of First
Instance of Cebu, Branch X.
CASE TITLE: Maritime Agencies and Services, Inc. vs CA
ISSUE: Whether or not the consignee of seaborne freight is bound by stipulations in
the covering bill of lading limiting to a fixed amount the liability of the carrier for KEYWORD: Urea; Prescription period for filing claim
loss or damage to the cargo where its value is not declared in the bill.
Page 141 of 151
PONENTE: Cruz, J.
DOCTRINE:
In any event, the carrier and the ship shall be discharged from all liability in respect
of loss or damage unless suit is brought within one year after delivery of the goods
or the date when the goods should have been delivered; Provided, that if a notice
of loss for damage; either apparent or concealed, is not given as provided for in this
section, that fact shall not effect or prejudice the right of the shipper to bring suit
within one year after the delivery of the goods or the date when the goods should
have been delivered.
FACTS:
Transcontinental Fertilizer Company of London chartered from Hongkong Island
Shipping Company of Hongkong the motor vessel named "Hongkong Island" for the
shipment of 8073.35 MT (gross) bagged urea from Novorossisk, Odessa, USSR to the
Philippines, the parties signing for this purpose a Uniform General Charter. Of the
total shipment, 5,400.04 MT was for the account of Atlas Fertilizer Company as
consignee, 3,400.04 to be discharged in Manila and the remaining 2,000 MT in
Cebu. The goods were insured by the consignee with the Union Insurance Society of
Canton, Ltd. for P6,779,214.00 against all risks. Maritime Agencies & Services, Inc.
was appointed as the charterer's agent and Macondray Company, Inc. as the
owner's agent. The vessel arrived in Manila on October 3, 1979, and unloaded part
of the consignee's goods, then proceeded to Cebu on October 19, 1979, to
discharge the rest of the cargo. On October 31, 1979, the consignee filed a formal
claim against Maritime, copy furnished Macondray, for the amount of P87,163.54,
representing C & F value of the 1,383 shortlanded bags. On January 12, 1980, the
consignee filed another formal claim, this time against Viva Customs Brokerage, for
the amount of P36,030.23, representing the value of 574 bags of net unrecovered
spillage. These claims having been rejected, the consignee then went to Union,
which on demand paid the total indemnity of P113,123.86 pursuant to the
insurance contract. As subrogee of the consignee, Union then filed on September
19, 1980, a complaint for reimbursement of this amount, with legal interest and
attorney's fees, against Hongkong Island Company, Ltd., Maritime Agencies &
Services, Inc. and/or Viva Customs Brokerage. On April 20, 1981, the complaint was
amended to drop Viva and implead Macondray Company, Inc. as a new defendant.
The trial court rendered judgment holding the defendants liable. The CA modified
said decision.
Page 142 of 151
ISSUE:
Whether or not the period for filing the claim had already prescribed.
RULING:
SC – We do agree that the period for filing the claim is one year, in accordance with
the Carriage of Goods by Sea Act. This was adopted and embodied by our
legislature in Com. Act No. 65 which, as a special law, prevails over the general
provisions of the Civil Code on prescription of actions. Section 3(6) of that Act
provides as follows:
In any event, the carrier and the ship shall be discharged from all liability in respect
of loss or damage unless suit is brought within one year after delivery of the goods
or the date when the goods should have been delivered; Provided, that if a notice
of loss for damage; either apparent or concealed, is not given as provided for in this
section, that fact shall not effect or prejudice the right of the shipper to bring suit
within one year after the delivery of the goods or the date when the goods should
have been delivered.
The one-year period in the cases at bar should commence on October 20, 1979,
when the last item was delivered to the consignee. 18 Union's complaint was filed
against Hongkong on September 19, 1980, but tardily against Macondray on April
20, 1981. The consequence is that the action is considered prescribed as far as
Macondray is concerned but not against its principal, which is what matters
anyway. #NERI
Case name: Mayer Steel Pipe Corporation vs. Court of Appeals
Keyword/s:
Ponente: Puno, J.
Doctine: Section 3(6) of the Carriage of Goods by Sea Act states that the carrier and
the ship shall be discharged from all liability for loss or damage to the goods if no
suit is filed within one year after delivery of the goods or the date when they should
have  been  delivered.  Under  this  provision,  only  the  carrier’s  liability  is  extinguished  
if no suit is brought within one year. But the liability of the insurer is not
extinguished  because  the  insurer’s  liability  is  based  not  on  the  contract  of  carriage  
but on the contract of insurance. A close reading of the law reveals that the
Carriage of Goods by Sea Act governs the relationship between the carrier on the
one hand and the shipper, the consignee and or insurer on the other hand. It
defines the obligations of the carrier under the contract of carriage. It does not,
however, affect the relationship between the shipper and the insurer. The latter
case is governed by the Insurance Code.
Facts:
In 1983, petitioner Hong Kong Government Supplies Department (Hongkong)
contracted petitioner Mayer Steel Pipe Corporation (Mayer) to manufacture and
supply various steel pipes and fittings. From August to October 1983, Mayer
shipped the pipes and fittings to Hongkong.
Prior to the shipping, petitioner Mayer insured pipes and fittings against all risks
with private respondents South Sea Surety and Insurance Co. Inc. (South Sea) and
Charter Insurance Corp. (Charter).
Petitioners Mayer and Hongkong jointly appointed Industrial Inspection
(International) Inc. as third-party inspector to examine whether the pipes and
fittings are manufactured in accordance with the specifications in the contract.
Industrial Inspection certified all the pipes and fittings to be in good order condition
before they were loaded in the vessel. Nonetheless, when the goods reached
Hongkong, it was discovered that a substantial portion thereof was damaged.
Issue: Whether or not Section 3 (6) of COGSA will apply in the case at bar
Respondent’s  claim:  Private  respondents  averred  that  they  have  no  obligation  to  
pay the amount claimed by petitioners because the damage to the goods is due to
the factory defects which are not covered by the insurance policies.
Trial Court: Damage to the goods is not due to the manufacturing defects. Insurance
contracts  executed  by  petitioner  Mayer  and  private  respondents  are  “all-risks”   considered as a public carrier
policies which insure against all causes of conceivable loss or damage.
CA: Affirmed  TC’s  ruling.  However,  it  set  aside  the  decision  of  the  trial  court  and   DOCTRINE: Section 13 (b) of the Public Service Law (Commonwealth Act No. 146)
dismissed the complaint on the ground of prescription. It held that the action is
barred under Sec. 3 (6) of the COGSA since it was filed only on April 17, 1986, more
than two years from the time the goods were unloaded from the vessel. Sec. 3 (6)
Page 143 of 151
of  the  COGSA  provides  that  “the  carrier  and  the  ship  will  be  discharged  from  all  
liability in respect of loss or damage unless suit is brought within one year after
delivery of the goods  or  the  date  when  the  goods  should  have  been  delivered.”  
Respondent court ruled that this provision applies not only to the carrier but also to
the insurer, citing Filipino Merchants Insurance Co. V. Alejandro.
SC: Under Sec 3 (6) of COGSA, only the carrier’s  liability  is  extinguished  if  no  suit  is  
brought within one year. But the liability of the insurer is not extinguished because
the  insurer’s  liability  is  based  not  on  the  contract  of  carriage  but  on  the  contract  of  
insurance. COGSA governs the relationship between the carrier on the one hand
and the shipper, the consignee and/or the insurer on the other hand. It defines the
obligations of the carrier under the contract of carriage. It does not, however, affect
the relationship between the shipper and the insurer. The latter case is governed by
the Insurance Code.
The Filipino Merchants case is different from the case at bar. In Filipino Merchants,
it was the insurer which filed a claim against the carrier for reimbursement of the
amount it paid to the shipper. In the case at bar, it was the shipper which filed a
claim  against  the  insurer.  The  basis  of  the  shipper’s  claim  is  the  “all-risks”  insurance  
policies issued by the private respondents to petitioner Mayer.
When the Court said in Filipino Merchants that Section 3 (6) of the COGSA applied
to the insurer, it meant that the insurer, like the shipper, may no longer file a claim
against the carrier beyond the one year period provided in the law. #PASCUA
PUBLIC UTILITIES
I. PUBLIC SERVICE REGULATIONS
CASE TITLE: LUZON STEVEDORING CO., INC., and VISAYAN STEVEDORE
TRANSPORTATION CO., Petitioners, vs. THE PUBLIC SERVICE COMMISSION and THE
PHILIPPINE SHIPOWNERS ASSOCIATION, Respondents.
KEYWORD:
PONENTE: TUASON, J.
defines public service thus: "The term 'public service' includes 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  small  water  craft…”
FACTS: Petitioners are engaged in the stevedoring or lighterage and harbor towage
business. They are also engaged in interisland service which consist of hauling
cargoes such as sugar, oil, fertilizer and other commercial commodities. There is no
fixed route in the transportation of these cargoes, the same being left at the
indication of the owner or shipper of the goods. Petitioners, in their hauling
business, serve only a limited portion of the public. During the period from January,
1949 and up to the present, respondent Luzon Stevedoring Co. Inc., has been
rendering to PRATRA regularly and on many occasions such service by carrying
fertilizer from Manila to various points in the provinces, and on the return trip sugar
was loaded from said provinces to Manila. For these services, respondent Luzon
Stevedoring Company, Inc., charged PRATRA at the rate of P0.60 per picul or bag of
sugar and, according to Mr. Mauricio Rodriguez, chief of the division in charge of
sugar and fertilizer of the PRATRA, for the transportation of fertilizer, this
respondent charged P12 per metric ton.
The  Philippine  Shipowners’  Association  complained  to  the  Public  Service   business is a public utility depends upon whether or not the service rendered by it is
Commission that petitioners were engaged in the transportation of cargo in the
Philippines for hire or compensation without authority or approval of the
Commission. The rates petitioners charged resulted in ruinous competition. The
Public Service Commission restrained petitioners from further operating their
watercraft to transport goods for hire or compensation between points in the
Philippines until the commission approves the rates they propose to charge.
ISSUE: Whether or not the petitioners fall under the definition in Section 13 (b) of
the Public Service Law
PETITIONER’S  CONTENTION:  Luzon  Stevedoring  asserts  that  it  is  a  private  carrier   for hire or compensation even if the operator deals only with a portion of the public
and not a public carrier. Being so, it is not subject to CA 146 which regulates
common carriers.
RESPONDENT’S  CONTENTION:  It  was  upon  these  findings  that  the  Commission   Keyword: black double
made the order now sought to be reviewed, upon complaint of the Philippine
Shipowners' Association charging that the then respondents were engaged in the
transportation of cargo in the Philippines for hire or compensation without
Page 144 of 151
authority or approval of the Commission, having adopted, filed and collected freight
charges at the rate of P0.60 per bag or picul, particularly sugar, loaded and
transported in their lighters and towed by their tugboats between different points
in the Province of Negros Occidental and Manila, which said rates resulted in
ruinous competition with complainant.
RULING: Upon the foregoing considerations, the appealed order of the Public
Service Commission is affirmed, with costs against the petitioners. It is not
necessary, under this definition, that one holds himself out as serving or willing to
serve the public in order to be considered public service.
In that case, the Luzon Brokerage Company, a customs broker, had been receiving,
depositing and delivering goods discharged from ships at the pier to its customers.
As here, the Luzon Brokerage was then rendering transportation service for
compensation to a limited clientele, not to the public at large.
In the United States where, it is said, there is no fixed definition of what constitutes
public service or public utility, it is also held that it is not always necessary, in order
to be a public service, that an organization be dedicated to public use, i.e., ready
and willing to serve the public as a class. It is only necessary that it must in some
way be impressed with a public interest; and whether the operation of a given
of a public character and of public consequence and concern. (51 C. J. 5.) Thus, a
business may be affected with public interest and regulated for public good
although not under any duty to serve the public. (43 Am. Jur., 572.)
It has been already shown that the petitioners' lighters and tugboats were not
leased, but used to carry goods for compensation at a fixed rate for a fixed weight.
At the very least, they were hired, hired in the sense that the shippers did not have
direction, control, and maintenance thereof, which is a characteristic feature of
lease. Commonwealth Act No. 146 declares in unequivocal language that an
enterprise of any of the kinds therein enumerated is a public service if conducted
or limited clientele. #QUINTOS
Case Title: Epitancio San Pablo vs. Pantranco South Express Inc
Ponente:GANCAYCO, J
Doctrine: Ferry implies the crossing of open seas, thus the service is not merely a
ferry service but is actually a coastwise shipping which requires the application of
separate CPC.
Facts: PANTRANCO is engaged in the land transportation business with PUB service
for passengers and freight and various certificates for public conveniences CPC to
operate passenger buses from Metro Manila to Bicol Region and Eastern Samar.
PANTRANCO twrote to Maritime Industry Authority (MARINA) requesting authority
to lease/purchase a vessel named M/V "Black Double" "to be used for its project to
operate a ferryboat service from Matnog, Sorsogon and Allen, Samar that will
provide service to company buses and freight trucks that have to cross San
Bernardo Strait. Despite the refusal or the Marina to give due course to the request,
Pantranco nevertheless acquired the MV Double . It wrote the Chairman of the
Board of Transportation (BOT) that it proposes to operate a ferry service to carry its
passenger buses and freight trucks between Allen and Matnog in connection with
its trips to Tacloban City.Without awaiting action on its request PANTRANCO started
to operate said ferry service. Acting Chairman Jose C. Campos, Jr. of BOT ordered
PANTRANCO not to operate its vessel until the application for hearing. BOT
rendered its decision holding that the ferry boat service is part of its CPC to operate
from Pasay to Samar/Leyte by amending PANTRANCO's CPC. Epitacio San Pablo and
Cardinal Shipping Corporation who are franchise holders of the ferry service in this
area interposed their opposition.
RC: It claims that it can operate a ferry service in connection with its franchise for
bus operation in the highway from Pasay City to Tacloban City "for the purpose of
continuing the highway, which is interrupted by a small body of water, the said
proposed ferry operation is merely a necessary and incidental service to its main
service and obligation of transporting its passengers from Pasay City to Tacloban
City. Such being the case, there is no need to obtain a separate certificate for public
convenience to operate a ferry service between Allen and Matnog to cater
exclusively to its passenger buses and freight trucks.
PC: They claim they adequately service the PANTRANCO by ferrying its buses, trucks
and passengers.
Issue: Whether or not Pantranco is authorized to operate a ferry service or
coastwise or interisland shipping service along its authorized route as an incident to
its franchise without the need of filing a separate application for the sam
Ruling:
No. The term "ferry" implied the continuation by means of boats, barges, or rafts,
of a highway or the connection of highways located on the opposite banks of a
Page 145 of 151
stream or other body of water. The term necessarily implies transportation for a
short distance, almost invariably between two points, which is unrelated to other
transportation while steamboat or motorboat service is between the different
islands, involving more or less great distance and over more or less turbulent and
dangerous waters of the open sea, to be coastwise or inter-island service. The
conveyance of passengers, trucks and cargo from Matnog to Allen is certainly not a
ferry boat service but a coastwise or interisland shipping service. Under no
circumstance can the sea between Matnog and Allen be considered a continuation
of the highway. While a ferry boat service has been considered as a continuation of
the highway when crossing rivers or even lakes, which are small body of waters -
separating the land, however, when as in this case the two terminals, Matnog and
Allen are separated by an open sea it can not be considered as a continuation of the
highway.
Respondent PANTRANCO should secure a separate CPC for the operation of an
interisland or coastwise shipping service in accordance with the provisions of law.
Its CPC as a bus transportation cannot be merely amended to include this water
service under the guise that it is a mere private ferry service. #SANTOS, A.
Case Title: Mansanal vs Ausejo
Keyword: Holp-up incident thinking that driver has direct participation to the crime.
Ponente: MEDIALDEA, J.
Doctrine: The power of the Commission to suspend or revoke any certificate
received under the provisions of the Act may only be exercised whenever the
holder thereof has violated or willfully and contumaciously refused to comply with
any order, rule or regulation of the Commission or any provision of the Act. In the
absence of showing that there is willful and contumacious violation on the part of
petitioner, no certificate of public convenience may be validly revoked.
Facts: Mr. Ausejo and Mr. Caballes, strolling along the seasided embankment of
Dewey or Roxas Boulevard at about 6:00 o'clock in the morning of March 13, 1966
towards the direction of Pasay City. As they were in front of the L & S Building, they
noticed that the three (3) men alighted from a vehicle behind them. Immediately
thereafter, these men accosted and held-up both of them. Since the two offered
some resistance, they attracted the attention of other promenaders as well as the
attention of about twelve passing motorists who stopped to watch the spectacle,
Two of the hold-uppers went after Mr. Caballes and the other one took care of Mr.
Ausejo who fought back and succeeded in disarming the hold-uppers of his knife.
He then drew his pistol and tried to shoot him but it jammed. As the two other
hold-uppers ran towards his direction, presumably to assist their companion, they
were warned that Mr. Ausejo had a gun and so they stopped and rushed instead to
a waiting taxi bearing Plate No. 6100.
Issue: Whether or not the certificate of public convenience issued should be
cancelled for not rendering safe, adequate and proper service by employing a driver
with criminal tendencies, in violation of the Public Service Law
Held: All that was proved during the investigation was the hold-up incident of
March 13, 1966. But proof of the hold-up incident is not proof of the charges under
Section 19 (a) of the Public Service Law and Sec. 47 of the Revised Order No. 17.
Most importantly, even the precise Identity of the taxicab boarded by the hold-
uppers as they escaped had not been established. The only testimony linking the
taxicab of petitioner was that of the companion of private respondent Ausejo that
he saw the malefactors scamper away and seize a taxi whose plate number was
"6100". With respect to the description of the alleged taxi, he said that the taxi was
red in the entire body while private respondent Ausejo said that the taxi was red
and it had parts painted blue. Both confirmed each other that the plate color was
orange.
We find that petitioner has successfully refuted the alleged participation of her taxi.
Even on the assumption that it was petitioner's taxicab that was used by the
escaping hold-uppers, there is no evidence that the driver is a co-conspirator in the
commission of the offense of robbery. Conspiracy must be proved by clear and
convincing evidence. The mere claim that the taxicab was there and probably
waiting is not proof of conspiracy in this case as it should be recalled that there
were about twelve vehicles that stopped to view the spectacle. Further, it is
possible that the driver did not act voluntarily as no person in his right senses would
defy the wishes of armed passengers. Even on the assumption that the driver had
participated voluntarily in the incident, his culpability should not be made a ground
for the cancellation of the certificate of petitioner.
While an employer may be subsidiarily liable for the employee's civil liability in a
criminal action, subsidiary liability presupposes that there was a criminal action.
Besides, in order that an employer may be subsidiarily liable, it should be shown
that the employee committed the offense in the discharge of his duties. While it is
true also that an employer may be primarily liable under Article 2180 of the Civil
Page 146 of 151
Code for the acts or omissions of persons for whom one is responsible, this liability
extends only to damages caused by his employees acting within the scope of their
assigned tasks. Clearly, the act in question is totally alien to the business of
petitioner as an operator and hence, the driver's illicit act is not within the scope of
the functions entrusted to him. Moreover, the action before respondent
Commission is neither a criminal prosecution nor an action for quasi-delict. Hence,
there is absolutely no ground to hold petitioner liable for the driver's act. #SANTOS,
N.
CASE TITLE: COGEO-CUBAO OPERATORS AND DRIVERS ASSOCIATION V. COURT OF
APPEALS
KEYWORD: Jeepney, Certificate of Public Convenience
PONENTE: MEDIALDEA, J.:
DOCTRINE: Under the Public Service Law, a certificate of public convenience is an
authorization issued by the Public Service Commission for the operation of public
services from which no franchise is required by law. It is included in the term
"property" in the broad sense of term. It can be sold by the holder thereof because
it has considerable market value and is considered a valuable asset. And although it
is considered a private property, it is affected with public interest and must be
submitted to the control of the government for the common good.
FACTS: A Certificate of Public Convenience to operate a jeepney service was
ordered to be issued im favor of the Lungsod Silangan to ply the Cogeo-Cubao route
sometime in 1983 on the justification that public necessity and convenience will be
served. On the other hand, the defendant Association was registered as non-stock,
non-profit organization with the SEC with the main purpose of representing the
plaintiff-appellee for whatever contract and/or agreement it will have regarding the
ownership of units, and the like of the members of the Association. Plaintiffs
however adopted a "Bandera System" wherein a member of the cooperative id
permitted to queue for passengers at the disputed pathway in exchange for a ticket
worth P20.00. The funds derived therefrom are alleged to be used for Christmas
programs of the drivers and other benefits.
On the strength of the defendant's registration as a collective body with the SEC,
defendants, led by Romeo Oliva, decided to form a human barricade and assumed
the dispatching of passenger jeepneys, and thus gave rise to a suit for damages.
The trial court ruled in favor of Lungsod Silangan, herein respondent. Upon appeal,
the Court of Appeals affirmed lower court's decision with modifications as to the
damages awarded.
ISSUE: Whether the petitioner usurped the property right of the respondent.
RULING:
RTC: RTC held that the petitioner usurped the property right of the respondent.
CA:  CA  Reversed  RTC’s  decision  citing  that  the  petitioner  has  not  made  any  
usurpation with the property right of the respondent.
SC:  SC  reversed  CA’s  contention.  Yes.  Insofar  as  the  interest  of  the  State is involved,
a certificate of public convenience does not confer upon the holder any proprietary
right or interest or franchise in the route covered thereby and in the public
highways. However, with respect to other persons and other public utilities, a
certificate of public convenience as property which represents the right and
authority to operate its facilities for public service, cannot be taken or interferred
with without due process of
law. Appropriate actions may be maintained by the holder of the certificate against
those who have not been authorized to operate in competition with the former and
those who invade the rights which the former has pursuant to the authority granted
by the Public Service Law.
It is clear from the facts that the petitioner formed a barricade and forcibly took
over the motor units and personnel of the respondent corporation. This paralyzed
the usual activities and earnings of the latter during the period of 10days and
violated the rights of the respondent Lungsod Corp. to conduct its operations thru
its authorized officers. Therefore, the respondent is legally entitled for the award of
damages pursuant to Arts. 21 and 2222 of the Civil Code. #SUBIJANO
CASE TITLE: Kilusang Mayo Uno (KMU) Labor Center vs. Hon. Jesus Garcia, Jr.
KEYWORD: Fare Range Scheme
PONENTE: Kapunan, J.
DOCTRINE: An administrative body and in this case, the LTFRB, may implement
broad policies laid down in a statute by "filling in" the details which the Legislature
Page 147 of 151
may neither have time or competence to provid
FACTS:
1. The DOTC and the LTFRB issued the following memoranda, circulars and/or
orders:
a. DOTC Memorandum Order 90-395 (June 26, 1990)
- implementation of a fare range scheme for provincial bus services in the country;
(+15% -15% of the LTFRB official rate for a period of 1yr)
b. DOTC Department Order No.92-587 (March 30, 1992)
-defining the policy framework on the regulation of transport services;
c. DOTC Memorandum (October 8, 1992)
-laying down rules and procedures to implement Department Order No. 92-587;
d. LTFRB Memorandum Circular No. 92-009 (February 17, 1993)
-providing implementing guidelines on the DOTC Department Order No. 92-587
-Challenged Portions:
i. The presumption of public need for a service shall be deemed in favor of the
applicant, while burden of proving that there is no need for the proposed service
shall be the oppositor'(s).
ii. The existing authorized fare range system of plus or minus 15 per cent for
provincial buses and jeepneys shall be widened to 20% and -25% limit in 1994 with
the authorized fare to be replaced by an indicative or reference rate as the basis for
the expanded fare range ;
e. LTFRB Order (March 24, 1994)
-dismissing KMU's petition opposing the upward adjustment of bus fare
2. Sometime in March, 1994, Provincial Bus Operators Association of the
Philippines, Inc. (PBOAP) PBOAP, availing itself of the deregulation policy of the
DOTC allowing provincial bus operators to collect plus 20% and minus 25% of the
prescribed fare without first having filed a petition for the purpose and without the
benefit of a public hearing, announced a fare increase of twenty (20%) percent of
the existing fares.
3. On the date the said increased fares were to be made effective KMU, opposing
the upward adjustment of bus fares, filed a petition seeking to nullify all 5
memoranda, circulars and/or orders (mentioned in #1).
PETITIONER’S  CONTENTION:
Petitioner KMU anchors its claim on two (2) grounds.
First: the authority given by respondent LTFRB to provincial bus operators to set a
fare range of plus or minus fifteen (15%) percent, later increased to plus twenty
(20%) and minus twenty-five (-25%) percent, over and above the existing
authorized fare without having to file a petition for the purpose, is unconstitutional,
invalid and illegal.
Second: the establishment of a presumption of public need in favor of an applicant
for a proposed transport service without having to prove public necessity, is illegal
for being violative of the Public Service Act and the Rules of Court.
RESPONDNENT’S  CONTENTION:
PBOAP
-asserts that the petitioner has no legal standing to sue or has no real interest in the
case at bench and in obtaining the reliefs prayed for.
DOTC Secretary Jesus B. Garcia, Jr. and the LTFRB
-asserts that the petitioner does not have the standing to maintain the instant suit.
-they further claim that it is within DOTC and LTFRB's authority to set a fare range
scheme and establish a presumption of public need in applications for certificates of
public convenience.
Issue: Whether or not LTFRB can delegate to bus operators the fixing of new
scheme rate.
RULING:
LTFRB:
Petition of KMU is dismissed for lack of merit hence, the instant petition for
certiorari with an urgent prayer for the issuance of a TRO (Straight to SC. No RTC or
CA involved)
SC:
No. The Legislature delegated to the defunct Public Service Commission the power
of fixing the rates of public services. Respondent LTFRB, the existing regulatory
body today, is likewise vested with the same under Executive Order No. 202 dated
June 19, 1987. Section 5(c) of the said executive order authorizes LTFRB "to
determine, prescribe, approve and periodically review and adjust, reasonable fares,
rates and other related charges, relative to the operation of public land
transportation services provided by motorized vehicles.
Such delegation of legislative power to an administrative agency is permitted in
order to
route-fixing and rate-making for the transport sector, the responsible regulatory
Page 148 of 151
body is entrusted with the power of subordinate legislation. With this authority, an
administrative body and in this case, the LTFRB, may implement broad policies laid
down in a statute by "filling in" the details which the Legislature may neither have
time or competence to provide. However, nowhere under the aforesaid provisions
of law are the regulatory bodies, the PSC and LTFRB alike, authorized to delegate
that power to a common carrier, a transport operator, or other public service.
The policy of allowing the provincial bus operators to change and increase their
fares at will would result not only to a chaotic situation but to an anarchic state of
affairs. This would leave the riding public at the mercy of transport operators who
may increase fares every hour, every day, every month or every year, whenever it
pleases them or whenever they deem it "necessary" to do so.#TA-A
CASE TITLE: FRANCISCO S. TATAD vs. HON. JESUS B. GARCIA
KEYWORD: EDSA LRT III
PONENTE: QUIASON, J.
DOCTRINE:
The right to operate a public utility may exist independently and separately from
the ownership of the facilities thereof. One can own said facilities without operating
them as a public utility, or conversely, one may operate a public utility without
owning the facilities used to serve the public. The devotion of property to serve the
public may be done by the owner or by the person in control thereof who may not
necessarily be the owner thereof.
FACTS:
Petitioners are members of the Philippine Senate, suing in their capacities as
Senators and as taxpayers. Respondent Jesus B. Garcia, Jr. is the incumbent
Secretary of the Department of Transportation and Communications (DOTC), while
private respondent EDSA LRT Corporation, Ltd. is a private corporation organized
under the laws of Hongkong.
In 1989, DOTC planned to construct a light railway transit line along EDSA, referred
to as EDSA Light Rail Transit III (EDSA LRT III). On July 9, 1990, R. A. No. 6957 entitled
"An Act Authorizing the Financing, Construction, Operation and Maintenance of
Infrastructure Projects by the Private Sector, and For Other Purposes," was signed Maintenance of Infrastructure Projects by the Private Sector, and for Other
by President Corazon C. Aquino. It was referred to as the Build-Operate-Transfer Purposes" was signed into law by the President.
(BOT) Law and it provides for two schemes for the financing, construction and
operation of government projects through private initiative and investment: Build- PETITIONER’S  CONTENTION:
Operate-Transfer (BOT) or Build-Transfer (BT).
* That the Agreements violated the Constitution as it granted the ownership of
The DOTC created the Prequalification Bids and Awards Committee (PBAC) and the EDSA LRT III to a foreign corporation
Technical Committee. The PBAC issued guidelines for the prequalification of
contractors for the financing and implementation of the project. The notice, RESPONDENT’S  CONTENTION:
advertising the prequalification of bidders, was published and five groups
responded to the invitation, one of which was EDSA LRT Consortium.
* The nationality requirement for public utilities mandated by the Constitution does
not apply to private respondent;
After evaluation, the PBAC issued a Resolution declaring that, of the five applicants,
only the EDSA LRT Consortium met the requirements. Secretary Nicomedes Prado,
ISSUE:
who replaced Secretary Orbos as the latter was appointed Executive Secretary of
the President, sent to President Aquino two letters recommending the award of the
Whether or not the Revised and Restated Agreement and the Supplemental
EDSA LRT III project to the EDSA LRT Consortium, and requesting for authority to
Agreement are unconstitutional and invalid - NO
negotiate with the said firm for the contract. EDSA LRT Consortium submitted its
bid proposal to DOTC.
RULING:
DOTC and EDSA LRT Corporation, Ltd., in substitution of the EDSA LRT Consortium,
entered into an "Agreement to Build, Lease and Transfer a Light Rail Transit System Petition was filed directly with the Supreme Court. It was DISMISSED.
for EDSA" under the terms of the BOT Law. Secretary Prado requested presidential
approval of the contract. Executive Secretary Franklin Drilon, who replaced What private respondent owns are the rail tracks, rolling stocks like the coaches, rail
Executive Secretary Orbos, informed Secretary Prado that the President could not stations, terminals and the power plant, not a public utility. What constitutes a
grant the requested approval for several reasons. As a result, Executive Secretary public utility is not their ownership but their use to serve the public. The
Drilon, the DOTC and private respondents re-negotiated the agreement. 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
They entered into a "Revised and Restated Agreement to Build, Lease and Transfer facilities needed to operate a public utility so long as it does not operate them to
a Light Rail Transit System for EDSA" on April 22, 1992. DOTC and private serve the public.
respondent entered into a Supplemental Agreement on May 6, 1993 to clarify their
respective rights and responsibilities and to submit the Supplemental Agreement to Section 11 of Article XII of the Constitution provides:
the President for his approval.
No franchise, certificate or any other form of authorization for the operation of a
Secretary Jesus Garcia submitted the two Agreements to President Fidel V. Ramos public utility shall be granted except to citizens of the Philippines or to corporations
for his consideration and approval. The same was approved by the President or associations organized under the laws of the Philippines at least sixty per centum
through a Memorandum. of whose capital is owned by such citizens, nor shall such franchise, certificate or
authorization be exclusive character or for a longer period than fifty years . . .
On May 5, 1994, R.A. No. 7718, an "Act Amending Certain Sections of Republic Act
No. 6957, Entitled "An Act Authorizing the Financing, Construction, Operation and
Page 149 of 151
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. While private
respondent is the owner of the facilities necessary to operate the EDSA. LRT III, it
admits that it is not enfranchised to operate a public utility.
In view of this incapacity, private respondent and DOTC agreed that on completion
date, private respondent will immediately deliver possession of the LRT system by
way of lease for 25 years, during which period DOTC shall operate the same as a
common carrier and private respondent shall provide technical maintenance and
repair services to DOTC. Private respondent shall also train DOTC personnel for
familiarization with the operation, use, maintenance and repair of equipment.
Personnel of DOTC will work under the direction and control of private respondent
only during training. By the end of the three-year construction period and upon
commencement of normal revenue operation, DOTC shall be able to operate the
EDSA LRT III on its own and train all new personnel by itself. 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.
NOTES:
* The BOT scheme is expressly defined as one where the contractor undertakes the
construction and financing in infrastructure facility, and operates and maintains the
same. The contractor operates the facility for a fixed period during which it may
recover its expenses and investment in the project plus a reasonable rate of return
thereon. After the expiration of the agreed term, the contractor transfers the
ownership and operation of the project to the government. The burden on the
government in raising funds to pay for the project is made lighter by allowing it to
amortize payments out of the income from the operation of the LRT System.
* Where there is a lack of qualified bidders or contractors, the award of
government infrastructure contracts may be made by negotiation. The challenged
agreements have been approved by President Ramos himself.
* The agreements have been entered into by DOTC in the exercise of its
governmental function. It is the Executive department, DOTC in particular that has
the power, authority and technical expertise to determine whether or not a specific
transportation or communication project is necessary, viable and beneficial to the
Page 150 of 151
people. The discretion to award a contract is vested in the government agencies
entrusted with that function.
* Content of the Agreements:
o The EDSA LRT III will use light rail vehicles from the Czech and Slovak Federal
Republics and will have a maximum carrying capacity of 450,000 passengers a day,
or 150 million a year to be achieved-through 54 such vehicles operating
simultaneously. The EDSA LRT III will run at grade, or street level, on the mid-
section of EDSA for a distance of 17.8 kilometers from F.B. Harrison, Pasay City to
North Avenue, Quezon City. The system will have its own power facility. It will also
have thirteen (13) passenger stations and one depot in 16-hectare government
property at North Avenue.
o Private respondents shall undertake and finance the entire project required for a
complete operational light rail transit systemUpon full or partial completion and
viability thereof, private respondent shall deliver the use and possession of the
completed portion to DOTC which shall operate the same. DOTC shall pay private
respondent rentals on a monthly basis through an Irrevocable Letter of Credit. The
rentals shall be determined by an independent and internationally accredited
inspection firm to be appointed by the parties.
As agreed upon, private respondent's capital shall be recovered from the rentals to
be paid by the DOTC which, in turn, shall come from the earnings of the EDSA LRT
III. After 25 years and DOTC shall have completed payment of the rentals,
ownership of the project shall be transferred to the latter for a consideration of
only U.S. $1.00. #TAN
CASE TITLE: PAL v CAB G.R. No. 119528 March 26, 1997
KEYWORDS: GrandAir, franchise
PONENTE: TORRES, JR., J.:
DOCTRINE: There is nothing in the law nor in the Constitution, which indicates that
a legislative franchise is an indispensable requirement for an entity to operate as a
domestic air transport operator. Although Section 11 of Article XII recognizes
Congress' control over any franchise, certificate or authority to operate a public
utility, it does not mean Congress has exclusive authority to issue the same.
FACTS: Grand International Airways (GrandAir) applied for a Certificate of Public
Convenience and Necessity (CPCN) with the Civil Aeronautics Board (CAB).
Petitioner, itself the holder of a legislative franchise to operate air transport
services, filed an Opposition to the application raising among other things the issue
of lack of jurisdiction of the Board to hear the application because GrandAir did not
possess a legislative franchise. Chief Hearing Officer of CAB issued an Order denying
petitioner's Opposition. The Board promulgated Resolution No. 119(92) approving
the issuance of a Temporary Operating Permit (TOP) in favor of Grand Air for a
period of three months. This was extended for a period of six (6) months.
PETITIONER’S  CONTENTION:  GrandAir  does  not  possess a legislative franchise
authorizing it to engage in air transportation service within the Philippines or
elsewhere. Such franchise is, allegedly, a requisite for the issuance of a Certificate of
Public Convenience or Necessity by the respondent Board, as mandated under
Section  11,  Article  XII  of  the  Constitution.  RESPONDENT’S  CONTENTION:   application of respondent Grand International Airways, Inc. for the issuance of a
Respondent GrandAir, on the other hand, posits that a legislative franchise is no
longer a requirement for the issuance of a Certificate of Public Convenience and
Necessity or a Temporary Operating Permit.
Franchises issued by Congress are not required before each and every public utility
may operate. In many instances, Congress has seen it fit to delegate this function to
government agencies, specialized particularly in their respective areas of public
service.
Congress, by giving the respondent Board the power to issue permits for the
operation of domestic transport services, has delegated to the said body the
authority to determine the capability and competence of a prospective domestic air
transport operator to engage in such venture. This is not an instance of
transforming the respondent Board into a mini-legislative body, with unbridled
authority to choose who should be given authority to operate domestic air
transport services.
The respondent Civil Aeronautics Board is DIRECTED to CONTINUE hearing the
Certificate of Public Convenience and Necessity. #TENORIO

ISSUE: Does the CAB have the authority to issue a CPCN or TOP to a domestic air
transport operator who does not possess a legislative franchise (YES)

RULING:

Congress has granted certain administrative agencies the power to grant licenses
for, or to authorize the operation of certain public utilities. It is generally recognized
that a franchise may be derived indirectly from the state through a duly designated
agency, and to this extent, the power to grant franchises has frequently been
delegated, even to agencies other than those of a legislative nature.

The Civil Aeronautics Board has the authority to issue a Certificate of Public
Convenience and Necessity, or Temporary Operating Permit to a domestic air
transport operator, who, though not

possessing a legislative franchise, meets all the other requirements prescribed by

the law. There is nothing in the law nor in the Constitution, which indicates that a
legislative franchise is an indispensable requirement for an entity to operate as a
domestic air transport operator. Although Section 11 of Article XII recognizes
Congress' control over any franchise, certificate or authority to operate a public
utility, it does not mean Congress has exclusive authority to issue the same.
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