UNIVERSITY OF SAN CARLOS

SCHOOL OF LAW AND GOVERNANCE

College of Law

RELEVANT LAWS AND JURISPRUDENCE

(Transportation Laws)

for
Mar Darby G. Parayday

“I believe in you.” - ♥ Paolo

 Contents
Concepts in Transportation Laws................................................................................................................................1
Everett Steamship Corp. v. CA, G.R. No. 122494, Oct. 8, 1998..............................................................................1
FACTS:..................................................................................................................................................................1
ISSUE(S):..............................................................................................................................................................1
RULING:................................................................................................................................................................1
MOF COMPANY v. SHIN YANG BROKERAGE G.R. No. 172822 | 18 December 2009 Bill of Lading...................3
DOCTRINE:........................................................................................................................................................3
FACTS:..................................................................................................................................................................3
ISSUE:..................................................................................................................................................................3
HELD:....................................................................................................................................................................3
Dangwa Transportation Co. v. CA, 202 SCRA 574 (1991).....................................................................................4
FACTS:..................................................................................................................................................................4
ISSUE:...................................................................................................................................................................4
Korean Airlines Co. v. CA, 234 SCRA 717 (1994)...................................................................................................5
FACTS:..................................................................................................................................................................5
ISSUE:...................................................................................................................................................................5
HELD:....................................................................................................................................................................5
CATHAY PACIFIC AIRWAYS, Petitioner, v. JUANITA REYES, WILFI EDO REYES, MICHAEL ROY REYES,
SIXTA LAPUZ, AND SAMPAGUITA TRAVEL CORP................................................................................................7
TOPIC:..................................................................................................................................................................7
FACTS:..................................................................................................................................................................7
ISSUE:...................................................................................................................................................................7
HELD:....................................................................................................................................................................7
LRTA v. Navidad, G.R. No. 145804, Feb. 6, 2003....................................................................................................8
FACTS:..................................................................................................................................................................8
ISSUE:...................................................................................................................................................................8
HELD:....................................................................................................................................................................8
Alfredo S. Ramos, Conchita S. Ramos, Benjamin B. Ramos, Nelson T. Ramos and Robinson T. Ramos vs
China Southern Airlines Co. Ltd.............................................................................................................................10
FACTS:................................................................................................................................................................10
ISSUE:.................................................................................................................................................................10
RULING:..............................................................................................................................................................10
Spouses Fernando v. Northwest Airlines.............................................................................................................12
FACTS:................................................................................................................................................................12
ISSUE:.................................................................................................................................................................12
HELD:..................................................................................................................................................................12
Air France V. Charles Auguste Raymond M. Zani.................................................................................................14

ii
 FACTS:................................................................................................................................................................14
ISSUE:.................................................................................................................................................................14
HELD:..................................................................................................................................................................14
Common Carriers (Arts. 1731 to 1766, NCC)............................................................................................................16
1. Concepts.............................................................................................................................................................16
Domestic Shipping (R.A. 9295, Sec 3)...................................................................................................................16
Public Service (Commonwealth Act No. 146 or the Public Service Act)...........................................................16
2. Common Carriages............................................................................................................................................17
PEDRO DE GUZMAN, Petitioner, v. COURT OF APPEALS and ERNESTO CENDANA, Respondents.................17
FACTS:................................................................................................................................................................17
ISSUES:...............................................................................................................................................................18
RULING:..............................................................................................................................................................18
Planters Products, Inc. v. CA, 226 SCRA 476 (1993)...........................................................................................20
FACTS:................................................................................................................................................................20
ISSUE:.................................................................................................................................................................20
HELD:..................................................................................................................................................................20
Bascos v. CA, G.R. No. 101089, April 7, 1993........................................................................................................22
PRINCIPLE:........................................................................................................................................................22
FACTS:................................................................................................................................................................22
ISSUES:...............................................................................................................................................................22
RULING:..............................................................................................................................................................22
ENGRACIO FABRE, JR. and PORFIRIO CABIL vs. COURT OF APPEALS..............................................................24
FACTS:................................................................................................................................................................24
ISSUE:.................................................................................................................................................................24
RULING:..............................................................................................................................................................24
FIRST PHILIPPINE INDUSTRIAL CORPORATION, Petitioner, -versus- COURT OF APPEALS, HONORABLE
PATERNO V. TAC-AN, BATANGAS CITY and ADORACION C. ARELLANO, in her official capacity as City
Treasurer of Batangas, Respondents....................................................................................................................26
FACTS:................................................................................................................................................................26
ISSUE:.................................................................................................................................................................26
RULING:..............................................................................................................................................................26
LOADSTAR SHIPPING CO., INC.,Petitioner v. COURT OF APPEALS and THE MANILA INSURANCE CO.,
INC.,Respondents....................................................................................................................................................28
FACTS:................................................................................................................................................................28
ISSUES:...............................................................................................................................................................28
RULING:..............................................................................................................................................................29
VIRGINES CALVO doing business under the name and style TRANSORIENT CONTAINER TERMINAL
SERVICES, INC., Petitioner v. UCPB GENERAL INSURANCE CO., INC. (formerly Allied Guarantee Ins. Co.,
Inc.) Respondent.....................................................................................................................................................31
FACTS:................................................................................................................................................................31

iii
 ISSUE:.................................................................................................................................................................31
RULING:..............................................................................................................................................................31
Asia Lighterage and Shipping, Inc. v. CA, et al......................................................................................................33
FACTS:................................................................................................................................................................33
ISSUE:.................................................................................................................................................................33
RULING:..............................................................................................................................................................33
A.F. SANCHEZ BROKERAGE INC., Petitioner, -versus –THE HON. COURT OF APPEALS and FGU INSURANCE
CORPORATION, Respondents................................................................................................................................34
FACTS:................................................................................................................................................................34
ISSUE:.................................................................................................................................................................35
RULING:..............................................................................................................................................................35
SCHMITZ TRANSPORT & BROKERAGE CORPORATION v. TRANSPORT VENTURE, INC., INDUSTRIAL
INSURANCE COMPANY, LTD., et al........................................................................................................................37
FACTS:................................................................................................................................................................37
ISSUES:...............................................................................................................................................................37
HELD:..................................................................................................................................................................37
PHILIPPINE CHARTER INSURANCE CORPORATION vs. UNKNOWN OWNER OF THE VESSEL M/V
“NATIONAL HONOR,” NATIONAL SHIPPING CORPORATION OF THE PHILIPPINES and INTERNATIONAL
CONTAINER SERVICES, INC...................................................................................................................................39
FACTS:................................................................................................................................................................39
ISSUE:.................................................................................................................................................................39
HELD:..................................................................................................................................................................39
Lea Mer Industries v. Malayan Insurance Co. Inc.................................................................................................41
Facts:..................................................................................................................................................................41
Issue:..................................................................................................................................................................41
Held:...................................................................................................................................................................41
Loadstar Shipping Co., Inc vs Pioneer Asia Insurance Corp................................................................................43
FACTS:................................................................................................................................................................43
ISSUE:.................................................................................................................................................................43
RULING:..............................................................................................................................................................43
CEBU SALVAGE CORPORATION, Petitioner, v. PHILIPPINE HOME ASSURANCE CORPORATION, Respondent
..................................................................................................................................................................................44
FACTS:................................................................................................................................................................44
ISSUE:.................................................................................................................................................................44
RULING:..............................................................................................................................................................44
FACTS:................................................................................................................................................................46
ISSUE:.................................................................................................................................................................46
RULING:..............................................................................................................................................................46
SPOUSES DANTE CRUZ and LEONORA CRUZ, Petitioners, vs. SUN HOLIDAYS, INC., Respondent.................48
Facts:..................................................................................................................................................................48

iv
 Issue:..................................................................................................................................................................48
Held:...................................................................................................................................................................48
UNSWORTH TRANSPORT INTERNATIONAL (PHILS.), INC., Petitioner, vs. COURT OF APPEALS and
PIONEER INSURANCE AND SURETY CORPORATION, Respondents..................................................................50
Facts:..................................................................................................................................................................50
Issue:..................................................................................................................................................................50
Held:...................................................................................................................................................................50
SPOUSES TEODORO and NANETTE PERENA., Petitioners, -versus – SPOUSES TERESITA PHILIPPINE
NICOLAS and L. ZARATE, NATIONAL RAILWAYS, and the COURT OF APPEALS, Respondents......................52
FACTS:................................................................................................................................................................52
ISSUE:.................................................................................................................................................................52
RULING:..............................................................................................................................................................52
WESTWIND SHIPPING CORPORATION, Petitioner, -versus -UCPB GENERAL INSURANCE CO., INC. and
ASIAN TERMINALS INC., Respondents.................................................................................................................55
FACTS:................................................................................................................................................................55
ISSUES:...............................................................................................................................................................55
RULING:..............................................................................................................................................................55
Federal Phoenix Assurance Co., Ltd. v. Fortune Sea Carrier, Inc.,......................................................................57
FACTS:................................................................................................................................................................57
ISSUE:.................................................................................................................................................................57
TORRES-MADRID BROKERAGE,INC., Petitioner –versus- FEB MITSUI MARINE INSURANCE CO., INC. and
BENJAMIN P. MANALAST AS, doing business under the name of BMT TRUCKING SERVICES, Respondents.
..................................................................................................................................................................................59
FACTS:................................................................................................................................................................59
ISSUES:...............................................................................................................................................................59
3. Private Carriage.................................................................................................................................................61
Home Insurance Co. v. American Steamship Agencies, Inc. et. al.......................................................................61
FACTS:................................................................................................................................................................61
ISSUE:.................................................................................................................................................................61
RULING:..............................................................................................................................................................61
National Steel Corp vs. CA and Vlasons Shipping, Inc..........................................................................................63
FACTS:................................................................................................................................................................63
ISSUE:.................................................................................................................................................................64
HELD:..................................................................................................................................................................64
Valenzuela Hardwood and Industrial Supply, Inc. v. CA, et al.............................................................................65
FACTS:................................................................................................................................................................65
MAIN ISSUE 1:...................................................................................................................................................65
RULING:..............................................................................................................................................................65
ISSUE 2:..............................................................................................................................................................66
RULING:..............................................................................................................................................................66

v
 ISSUE 3:..............................................................................................................................................................66
RULING:..............................................................................................................................................................66
ISSUE 4:..............................................................................................................................................................66
RULING:..............................................................................................................................................................66
FGU Insurance Corp. v. G.P. Sarmiento Trucking Corp. and Lambert Eroles....................................................67
FACTS:................................................................................................................................................................67
ISSUES:...............................................................................................................................................................67
HELD:..................................................................................................................................................................67
4. Foreign vessels (RA 10668)..............................................................................................................................69
5. Classification of TNVS and TNCs......................................................................................................................73
Transportation Network Vehicle Service (TNVS)................................................................................................73
Transportation Network Company (TNCs)..........................................................................................................73
6. Distinction from towage, arrastre, stevedoring, and contract of services....................................................74
Marina Port Services, Inc. v. American Home Assurance Corp.,.........................................................................74
FACTS:................................................................................................................................................................74
ISSUE:.................................................................................................................................................................74
HELD:..................................................................................................................................................................74
Asian Terminals, Inc. v. Allied Guarantee Insurance Co., Inc.,............................................................................76
FACTS:................................................................................................................................................................76
ISSUE:.................................................................................................................................................................76
RULING:..............................................................................................................................................................76
Crisostomo v. CA,....................................................................................................................................................77
FACTS:................................................................................................................................................................77
ISSUE:.................................................................................................................................................................77
HELD:..................................................................................................................................................................77
7. Governing Laws.................................................................................................................................................79
8. Registered Owner Rule, Kabit System and Boundary System.......................................................................79
Lim, et al. v. CA, et al.,.............................................................................................................................................79
FACTS:...............................................................................................................................................................79
ISSUES:...............................................................................................................................................................80
RULING:.............................................................................................................................................................80
Spouses Hernandez v.  Spouses Dolor..................................................................................................................83
FACTS:................................................................................................................................................................83
ISSUE:.................................................................................................................................................................83
HELD:..................................................................................................................................................................83
FEB Leasing and Finance Corp. (Now BPI Leasing Corp.) v. Sps. Baylon, et al.,................................................84
FACTS:................................................................................................................................................................84
ISSUE:.................................................................................................................................................................84

vi
 RULING:..............................................................................................................................................................84
FILCAR TRANSPORT SERVICES V. ESPINAS........................................................................................................85
FACTS:................................................................................................................................................................85
ISSUE:.................................................................................................................................................................85
HELD:..................................................................................................................................................................85
Metro Manila Transit Corp. v. Cuevas, et al.,........................................................................................................88
FACTS:................................................................................................................................................................88
ISSUE 1:..............................................................................................................................................................88
HELD 1:..............................................................................................................................................................88
ISSUE 2:..............................................................................................................................................................88
HELD 2:..............................................................................................................................................................88

vii
 Concepts in Transportation Laws

Everett Steamship Corp. v. CA, G.R. No. 122494, Oct. 8, 1998

FACTS:
Hernandez Trading Co., Inc. (Hernandez) imported 3 crates of bus spare parts (MARCO C/No. 12, MARCO
C/No. 13 and MARCO C/No. 14), from Maruman Trading Company, Ltd. (Maruman), a foreign corporation
based in Japan. The crates (covered by Bill of Lading No. NGO53MN) were shipped on board
“ADELFAEVERETTE,” a vessel owned by Everett Orient Lines. Upon arrival at the port of Manila, it was
discovered that the crate marked MARCO C/No. 14 was missing. Hernandez made a formal claim for
Y1,552,500.00, as shown in an Invoice No. MTM-941, dated November 14, 1991. Everett Steamship Corp.
offered to pay only Y100,000.00 the maximum amount stipulated under Clause 18 of the covering bill of
lading. Hernandez rejected the offer and thereafter instituted a suit for collection. The Trial Court decided in
favor of Hernandez. The Court of Appeals Affirmed but deleted the award of attorney’s fees.

ISSUE(S):
1. Whether or not the limited liability clause in the Bill of Lading is valid
2. Whether or not Hernandez as consignee, who is not a signatory to the bill of lading is bound by the
stipulations thereof

RULING:
1. YES.

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 which provide:

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.

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 that private respondent
could not have “fairly and freely” agreed to the limited liability clause in the bill of lading because the said
conditions were printed in small letters does not make the bill of lading invalid. Contracts of adhesion are
valid and binding. Greater vigilance, however, is required of the courts when dealing with contracts of
adhesion in that the said contracts must be carefully scrutinized “in order to shield the unwary (or weaker
party) from deceptive schemes contained in ready-made covenant. Article 24 of the Civil Code which
mandates that “(i)n all contractual, property or other relations, when one of the parties is at a disadvantage
on account of his moral dependence, ignorance, indigence, mental weakness, tender age or other handicap,
the courts must be vigilant for his protection. Maruman Trading, we assume, has been extensively engaged in
the trading business. It cannot 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. Moreover,
Maruman Trading has not been heard to complain that it has been deceived or rushed into agreeing to ship
the cargo in petitioner’s vessel. In fact, it was not even impleaded in this case.

1
2. YES.

The right of a party in the same situation as Hernandez, to recover for loss of a shipment consigned to him
under a bill of lading drawn up only by and between the shipper and the carrier, springs from either a
relation of agency that may exist between him and the shipper or consignor, or his status as stranger in
whose favor some stipulation is made in said contract, and who becomes a party thereto when he demands
fulfillment of that stipulation, in this case the delivery of the goods or cargo shipped. When Hernandez
formally claimed reimbursement for the missing goods from Everett and subsequently filed a case against the
it based on the very same bill of lading, it accepted the provisions of the contract and thereby made itself a
party thereto, or at least has come to court to enforce it. The commercial Invoice No. MTM-941 does not in
itself sufficiently and convincingly show that Everett has knowledge of the value of the cargo as contended by
Hernandez.

2
 MOF COMPANY v. SHIN YANG BROKERAGE
G.R. No. 172822 | 18 December 2009 Bill of Lading

DOCTRINE:
As a general rule, a consignee is not privy to the Bill of Lading unless any of the following
instances occur:
a) There is an agency relationship between the shipper and the consignee
b) When the consignee demands the fulfillment of the stipulation of the bill drawn
up in its favor
c) Unequivocal acceptance of the bill of lading delivered to the consignee with full
knowledge of its contents
FACTS:
 Shin Yang is named the consignee of secondhand cars to be shipped in Manila through
Hanjin
Busan’s Vessel. The goods then arrived in Manila.
 MOF Company, being Hanjin’s exclusive general agent in Manila, demanded from Shin
Yang the payment of ocean freight, documentation fee, and terminal handling
charges.
 Shin Yang refused payment saying that it was not privy to the contract of affreightment.
It argued being merely a consolidator and not the ultimate consignee. Also forwarded
by Shin Yang is that the bill of lading named under it was prepared without its consent.
If any, the freight charges are born by the shipper and not the consignee.
 Hence a complaint for collection of sums of money.
 MeTC favored MOF.
 RTC affirmed.
 CA reversed and dismissed MOF’s case because no other evidence were presented but
the Bill of Lading. Only when the bill of lading is accepted can the contract between
parties be perfected. In this case, Shin Yang did not accept the Bill of Lading and
disowned the shipment.

ISSUE:

Whether or not a consignee who is not a signatory to the bill of lading is bound by the
stipulations thereof

HELD:
No, because MOF was unable to prove the instances where Shin Yang may be bound.
 Bill of lading is drawn up by the shipper/consignor and the carrier without
intervention of consignee. However, it does not necessarily mean that the
consignee could not be bound thereof.
 In this case, Shin Yang denied in all its pleadings that it is the consignee of the goods
and the instances mentioned were not present. Therefore, the burden to prove that
Shin Yang is bound by the Bill of Lading is upon MOF. However, MOF failed to prove the
same. Hence, Shin Yang could not be ordered to pay the obligation of a consignee as
required in the Bill.

3
 Dangwa Transportation Co. v. CA, 202 SCRA 574 (1991)

FACTS:
 May 13, 1985: Theodore M. Lardizabal was driving a passenger bus belonging to Dangwa
Transportation Co. Inc. (Dangwa)  
 The bus was at full stop bet. Bunkhouses 53 and 54 when Pedro alighted
 Pedro Cudiamat fell from the platform of the bus when it suddenly
accelerated forward
 Pedro was ran over by the rear right tires of the vehicle
 Theodore first brought his other passengers and cargo to their respective
destinations before bringing Pedro to Lepanto Hospital where he expired
 Private respondents filed a complaint for damages against Dangwa for the death of Pedro
Cudiamat
 Dangwa: observed and continued to observe the extraordinary diligence required in
the operation of the co. and the supervision of the employees even as they are not
absolute insurers of the public at large
 RTC: in favour of Dangwa holding Pedrito as negligent and his negligence was the cause of
his death but still ordered to pay in equity P 10,000 to the heirs of Pedrito
 CA: reversed and ordered to pay Pedrito indemnity, moral damages, actual and
compensatory damages and cost of the suit

ISSUE:
W/N Dangwa should be held liable for the negligence of its driver Theodore

HELD: YES. CA affirmed.

 A public utility once it stops, is in effect making a continuous offer to bus riders (EVEN when
moving as long as it is still slow in motion)
 Duty of the driver: do NOT make acts that would have the effect of increasing peril
to a passenger while he is attempting to board the same
 Premature acceleration of the bus in this case = breach of duty
 Stepping and standing on the platform of the bus is already considered a passenger and is
entitled all the rights and protection pertaining to such a contractual relation
 Duty extends to boarding and alighting
 GR: By contract of carriage, the carrier assumes the express obligation to transport the
passenger to his destination safely and observe extraordinary diligence with a due regard
for all the circumstances, and any injury that might be suffered by the passenger is right
away attributable to the fault or negligence of the carrier
 EX: carrier to prove that it has exercised extraordinary diligence as prescribed in Art. 1733
and 1755 of the Civil Code
 Failure to immediately bring Pedrito to the hospital despite his serious condition = patent
and incontrovertible proof of their negligence
 Hospital was in Bunk 56
 1st proceeded to Bunk 70 to allow a passenger (who later called the family of Pedrito
on his own will) to alight and deliver a refrigerator
 In tort, actual damages is based on net earnings

4
 Korean Airlines Co. v. CA, 234 SCRA 717 (1994)
Lessons Applicable: Actionable Document (Transportation)

FACTS:
 1980: Juanito C. Lapuz, an automotive electrician, was contracted for employment in Jeddah,
Saudi Arabia, for a period of 1 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," (accommodated if any of the confirmed passengers
failed to show up)
 When 2 passengers did not appear, Lapuz and another person by the name
of Perico were given the seats.
 Lapuz: he was allowed to check in with 1 suitcase and 1 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 within the stipulated 2-
week period and so lost his employment.
 KAL: 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.
 RTC: KAL to pay Lapuz
 CA: Affirmed with modifications - the amount of actual damages and compensatory damages
is reduced to P60K and P100,000.00 moral and exemplary damages, at 6% interest per
annum from the date of the filing of the Complaint until fully paid

ISSUE:
W/N there was a contract of carriage 

HELD:
YES. Affirmed
 The status of Lapuz as standby passenger was changed to that of a confirmed passenger
when his name was entered in the passenger 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. his baggage had already been loaded in KAL's
aircraft, to be flown with him to Jeddah. KAL thus committed a breach of the contract of
carriage between them when it failed to bring Lapuz to his destination.
 contract to transport passengers is different in kind and degree from any other contractual
relation
 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 due consideration
 They are entitled to be protected against personal misconduct, injurious language,
indignities and abuses from such employees

5
  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!"
while pointing at him, thus causing him embarrassment and public humiliation
 Korean Air Lines acted in a wanton, fraudulent, reckless, oppressive or malevolent manner
when it "bumped off" plaintiff-appellant on November 8, 1980, and in addition treated him
rudely and arrogantly as a "patay gutom na contract worker fighting Korean Air Lines,"
which clearly shows malice and bad faith, thus entitling plaintiff-appellant to moral
damages.amount 
 awarded should not be palpably and scandalously excessive
 A perusal of the plaintiff-appellant's contract of employment shows that the effectivity of the
contract is for only one year, renewable every year for five years. Although plaintiff-
appellant intends to renew his contract, such renewal will still be subject to his foreign
employer. Plaintiff-appellant had not yet started working with his foreign employer, hence,
there can be no basis as to whether his contract will be renewed by his foreign employer or
not. Thus, the damages representing the loss of earnings of plaintiff-appellant in the renewal
of the contract of employment is at most speculative
 CA did not err in sustaining the trial court's dismissal of KAL's counterclaim against Pan
Pacific Overseas Recruiting Services Inc., whose responsibility ended with the confirmation
by KAL of Lapuz as its passenger in its Flight No. 903.

6
 CATHAY PACIFIC AIRWAYS, Petitioner, v. JUANITA REYES, WILFI EDO REYES, MICHAEL ROY REYES,
SIXTA LAPUZ, AND SAMPAGUITA TRAVEL CORP.

G.R. No. 185891, June 26, 2013

TOPIC:
Diligence of a good father of a family

FACTS:
Wilfredo made a travel reservation with Sampaguita Travel for his family’s trip to Adelaide, Australia.
Upon confirmation of their flight schedule, Wilfredo paid for the airfare and was issued 4 Cathay Pacific
roundtrip airplane tickets for Manila-Hong Kong-Adelaide-Hong Kong- Manila. One week before they
were scheduled to fly back home, Wilfredo re-confirmed his family’s return flight with the Cathay Pacific
office in Adelaide. They were advised that the reservation was still okay as scheduled.

On the day of their scheduled departure from Adelaide, Wilfredo and his family arrived at the airport on
time. When the airport check-in opened, Wilfredo was informed by a staff from Cathay Pacific that
Wilfredo s family did not have confirmed reservations, and only Sixta’s flight booking was confirmed.
Although, they were allowed to board the flight to Hong Kong, not all of them were allowed to board the
flight to Manila as it was fully booked. Only Wilfredo’s mother-in-law, Sixta, was allowed to proceed to
Manila from Hong Kong.

On the following day, the Reyeses were finally allowed to board the next flight bound for Manila. Upon
arriving in the Philippines, Wilfredo went Sampaguita Travel to report the incident. He was informed by
Sampaguita Travel that it was actually Cathay Pacific which cancelled their bookings.

ISSUE:
 Whether Cathay Pacific breached its contract of carriage with the Wilfredo ‘s family? Yes
 Whether Sampaguita breached its contract of services with Wilfredo s family? Yes

HELD:
Cathay Pacific breached its contract of carriage with the Reyeses when it disallowed them to board the
plane in Hong Kong going to Manila on the date reflected on their tickets. Thus, Cathay Pacific opened
itself to claims for compensatory, actual, moral and exemplary damages, attorney’s fees and costs of
suit.

In contrast, the contractual relation between Sampaguita Travel and respondents is a contract for
services. The object of the contract is arranging and facilitating the latter’s booking and ticketing. It was
even Sampaguita Travel which issued the tickets.

Since the contract between the parties is an ordinary one for services, 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. The test to determine whether negligence attended the performance
of an obligation is: did the defendant in doing the alleged negligent act use that reasonable care and
caution which an ordinarily prudent person would have used in the same situation? If not, then he is
guilty of negligence. There was indeed failure on the part of Sampaguita Travel to exercise due diligence
in performing its obligations under the contract of services. It was established by Cathay Pacific, through
the generation of the PNRs, that Sampaguita Travel failed to input the correct ticket number for
Wilfredo’s ticket. Cathay Pacific even asserted that Sampaguita Travel made two fictitious bookings for
Juanita and Michael. The negligence of Sampaguita Travel renders it also liable for damages

7
 LRTA v. Navidad, G.R. No. 145804, Feb. 6, 2003

Lessons Applicable: Actionable Document (transportation)

Laws Cited: Art. 1755, Art. 1756,Art. 1759,Art. 1763

FACTS:
 October 14, 1993, 7:30 p.m.: Drunk Nicanor Navidad (Nicanor) entered the EDSA LRT
station after purchasing a “token”. 
 While Nicanor was standing at the platform near the LRT tracks, the guard Junelito
Escartin approached him.
 Due to misunderstanding, they had a fist fight
 Nicanor fell on the tracks and killed instantaneously upon being hit by a
moving train operated by Rodolfo Roman
 December 8, 1994: The widow of Nicanor, along with her children, filed a complaint for
damages against Escartin, Roman, LRTA, Metro Transit Org. Inc. and Prudent (agency of
security guards) for the death of her husband. 
 LRTA and Roman filed a counter-claim against Nicanor and a cross-claim against
Escartin and Prudent
 Prudent: denied liability – averred that it had exercised due diligence in the
selection and surpervision of its security guards
 LRTA and Roman: presented evidence
 Prudent and Escartin: demurrer contending that Navidad had failed to
prove that Escartin was negligent in his assigned task
 RTC: In favour of widow and against Prudent and Escartin, complaint against LRT and
Roman were dismissed for lack of merit
 CA: reversed by exonerating Prudent and held LRTA and Roman liable

ISSUE:
W/N LRTA and Roman should be liable according to the contract of carriage

HELD:
NO.  Affirmed with Modification:
a) nominal damages are DELETED (CANNOT co-exist w/compensatory damages)
b) Roman is absolved.

 Law and jurisprudence dictate that a common carrier, both from the nature of its business
and for reasons of public policy, is burdened with the duty off exercising utmost diligence in
ensuring the safety of passengers
 Civil Code:
 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
 Art. 1756.  In case of death or injuries to passengers, common carriers are presumed
to have been at fault or to have acted negligently, unless they prove that they
observed extraordinary diligence as prescribed in articles 1733 and 1755
 Art. 1759.  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

This liability of the common carriers does NOT cease upon proof that they

8
                   Exercised all the diligence of a good father of a family in the selection and supervision of their
employees

o Art. 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.
 Carriers presumed to be 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
 Where it hires its own employees or avail itself of the services of an outsider or an
independent firm to undertake the task, the common carrier is NOT relieved of its
responsibilities under the contract of carriage
 GR: Prudent can be liable only for tort under Art. 2176 and related provisions in conjunction
with Art. 2180 of the Civil Code. (Tort may arise even under a contract, where tort [quasi-
delict liability] is that which breaches the contract)
 EX: if employer’s liability is negligence or fault on the part of the employee,
employer  can be made liable on the basis of the presumption juris tantum that the
employer failed to exercise diligentissimi patris families in the selection and
supervision of its employees. 
 EX to the EX: Upon showing due diligence in the selection and supervision of the
employee 
 Factual finding of the CA: NO link bet. Prudent and the death of Nicanor for the reason that
the negligence of Escartin was NOT proven
 NO showing that Roman himself is guilty of any culpable act or omission, he must also be
absolved from liability
 Contractual tie bet. LRT and Nicanor is NOT itself a juridical relation bet. Nicanor
and Roman
 Roman can be liable only for his own fault or negligence

9
 Alfredo S. Ramos, Conchita S. Ramos, Benjamin B. Ramos, Nelson T. Ramos and Robinson T. Ramos
vs China Southern Airlines Co. Ltd.

G.R. No. 213418 September 21, 2016

TOPIC: Damages

FACTS:
On 7 August 2003, petitioners purchased five China Southern Airlines from Active Travel Agency for
a roundtrip plane tickets from Manila to Xiamen, China. On their way back to the Manila, however, petitioners
were prevented from taking their designated flight despite the fact that earlier that day an agent from Active
Tours informed them that their bookings for China Southern Airlines flight are confirmed. The refusal came
after petitioners already checked in all their baggages and were given the corresponding claim stubs and after
they had paid the terminal fees. According to the airlines’ agent with whom they spoke at the airport,
petitioners were merely chance passengers, but they may be allowed to join the flight if they are willing to
pay an additional 500 Renminbi (RMB) per person. Then petitioners refused to defray the additional cost,
their baggages were offloaded from the plane and China Southern Airlines flight then left Xiamen
International Airport without them.

Petitioners were able to fly back to Manila and upon arrival, they went to China Southern Airlines to
demand for the reimbursement of their airfare and travel expenses in the amount of P87,375.00. When the
airline refused to accede to their demand, petitioners initiated an action for damages before the RTC of Manila
and sought for the payment of actual, moral and exemplary damages.

In their answer, China Southern Airlines denied liability by alleging that petitioners were not
confirmed passengers of the airlines but were merely chance passengers.

RTC ruled in favor of the petitioner and grated the award of actual, moral, and exemplary damages.

CA modified the decision. Deleting the award of moral and exemplary damages.

ISSUE:
Whether or not the award of moral and exemplary damages should be granted.

RULING:
Yes. A contract of carriage, in this case, air transport, is intended to serve the travelling public and
thus, imbued with public interest. The law governing common carriers consequently imposes the exacting
standard of conduct as provided in Article 1755 of the Civil Code.

With respect to moral damages, the following provision of the New Civil Code is instructive: Article
2220. Willful injury to property may be a legal ground for awarding moral damages if the court should find
that, under the circumstances, such damages are justly due. The same rule applies to breaches of contract
where the defendant acted fraudulently or in bad faith.

Bad faith does not simply connote bad judgement or negligence. It imports dishonest purpose or
some moral obliquity and conscious doing of a wrong. It means breach of a known duty through some motive,
interest or ill will that partakes the nature of fraud. Bad faith is in essence a question of intention.

We find that the airline company acted in bad faith in insolently bumping the petitioners off the flight
after they have completed all the pre-departure routine. Bad faith is evident when the ground personnel of
the airline company unjustly and unreasonably refused to board petitioners to the plane which compelled
them to rent a car and take the train to the nearest airport where they bought new sets of plane tickets from
another airline that could fly them home. Petitioners have every reason to expect that they would be
transported to their intended destination after they had checked in their luggage and had gone through all the

10
security checks. Instead, China Southern Airlines offered to allow them to join the flight if they are willing to
pay the additional cost; this amount is on top of the purchase price of the plane tickets. The requirement to
pay an additional fare was insult upon injury. It is an aggravation of the breach of contract. Undoubtedly,
petitioners are entitled to the award of moral damages.

China Southern Airlines is also liable for exemplary damages as it acted in a wantonly oppressive
manner as succinctly discussed above against the petitioners. Exemplary damages which are awarded by way
of example or correction for the public good, may be recovered in contractual obligations, as in this case, if
defendant acted in wanton, fraudulent, reckless, oppressive or malevolent manner.

11
 Spouses Fernando v. Northwest Airlines
G.R. No. 212038, February 8, 2017

DOCTRINE:
When an airline issues a ticket to a passenger confirmed for a particular flight on a certain date, a contract of
carriage arises. The passenger then has every right to expect that he would fly on that flight and on that date.
If he does not, then the carrier opens itself to a suit for breach of contract of carriage.

FACTS:
The Spouses Fernando, owners of JB Music and JB Sports, are frequent flyers of Northwest
Airlines and holders of its Elite Platinum World Perks Card. The instant case arose from two incidents.

On December 20, 2001, Jesus Fernando arrived at the LA Airport via a Northwest Airlines flight to
join his family who flew earlier to the said place for a reunion for the Christmas holidays. He was asked by the
Immigration Officer to have his return ticket verified and validated since the date reflected thereon is August
2001. So he approached a Northwest personnel, but the latter merely glanced at his ticket without
checking its status with the computer and peremptorily said that the ticket has been used and could not
be considered as valid. He presented his Elite Platinum World Perks Card but the personnel refused to
check the validity of the ticket in the computer but, instead, looked at Jesus Fernando with contempt, then
informed the Immigration Officer that the ticket is not valid

The Immigration Officer brought Jesus Fernando to the interrogation room where he was asked
humiliating questions for more than 2 hours. When he was finally cleared, he was granted only a 12-day stay
in the US, instead of the usual 6 months. Hence, he had to spend additional expenses for plane fares and other
related expenses, and missed the chance to be with his family for the whole duration of the Christmas
holidays.

On January 29, 2002, the Fernandos were on their way back to the Philippines. When they reached
the gate area where boarding passes need to be presented, the Northwest supervisor stopped them and
demanded for the presentation of their paper tickets. They failed to present the same since,
according to them, Northwest issued electronic tickets which they showed to the supervisor. In the
presence of the other passengers, the supervisor rudely pulled them out of the queue. Elizabeth
Fernando explained that the matter could be sorted out by simply verifying their electronic tickets in the
computer. But the supervisor arrogantly told them that if they wanted to board the plane, they should
produce their credit cards and pay for new tickets, otherwise Northwest would order their luggage off-loaded
from the plane. They rushed to the ticket counter to have their coupon tickets printed. But when they reached
the boarding gate, the plane had already departed. They were able to depart, instead, the day after.

A complaint for damages was instituted by the Fernandos against Northwest before the RTC. The
RTC ruled in their favor and ordered Northwest to pay moral damages, actual or compensatory damages,
attorney's fees and costs of suit. The CA affirmed.

ISSUE:
WHETHER OR NOT THERE IS A BREACH OF THE CONTRACT OF CARRIAGE BETWEEN NORTHWEST
AIRLINES AND THE FERNANDOS

HELD:
Yes. Undoubtedly, a contract of carriage existed between Northwest and the Fernandos. They
voluntarily and freely gave their consent to an agreement whose object was the transportation of the
Fernandos from LA to Manila, and whose cause or consideration was the fare paid by the Fernandos to
Northwest.

12
 When an airline issues a ticket to a passenger confirmed for a particular flight on a certain date, a
contract of carriage arises. The passenger then has every right to expect that he would fly on that flight and on
that date. If he does not, then the carrier opens itself to a suit for breach of contract of carriage.

When Northwest confirmed the reservations of the Fernandos, it bound itself to transport the
Fernandos on their flight on January 29, 2002.

In an action based on a breach of contract of carriage, the aggrieved party does not have to prove that
the common carrier was at fault or was negligent. All that he has to prove is the existence of the contract
and the fact of its non-performance by the carrier. As the aggrieved party, the Fernandos only had to prove
the existence of the contract and the fact of its non-performance by Northwest, as carrier, in order to be
awarded compensatory and actual damages.

Therefore, having proven the existence of a contract of carriage between Northwest and the
Fernandos, and the fact of non-performance by Northwest of its obligation as a common carrier, it is clear that
Northwest breached its contract of carriage with the Fernandos. Thus, Northwest opened itself to claims for
compensatory, actual, moral and exemplary damages, attorney's fees and costs of suit.

Northwest committed a breach of contract in failing to provide the spouses with the proper
assistance to avoid any inconvenience. The actuations of Northwest in both incidents fall short of the
utmost diligence of a very cautious person expected of it. Considering that the Fernandos are not just
ordinary passengers but, in fact, frequent flyers of Northwest, the latter should have been more courteous
and accommodating to their needs so that the delay and inconveniences they suffered could have been
avoided. Northwest was remiss in its duty to provide the proper and adequate assistance to them.

13
 Air France V. Charles Auguste Raymond M. Zani
G.R. No. 199767. March 13, 2019

FACTS:
Petitioner and respondent executed a credit agreement allowing respondent to purchase airline
tickets on credit and at a fixed price from petitioner. Their agreement contained the following payment terms:
a) Tickets purchased from the 1st to the 15th of the month is [sic] due and payable to Air
France Manila at the end of the month.
b) Tickets purchased from the 16 th of the month to the end of the month is [sic] due
and payable to Air France Manila on the 15th of the following month.
Respondent purchased several airline tickets from petitioner under this agreement. Despite the
payment terms, however, respondent had an outstanding balance of P1,738,180.00, prompting petitioner to
send a demand letter to respondent. Attached to petitioner’s demand letter is respondent’s statement of
account indicating the latter’s purchases and payments to petitioner.

Petitioner, through its counsel, wrote respondent informing him that he will be refused carriage on
any of petitioner’s network or flights until respondent settles his outstanding balance.

Due to respondent’s failure to pay, petitioner filed in the RTC a collection case against respondent.
The RTC ruled in favor of petitioner, which the CA affirmed.

ISSUE:
Won petitioner was liable for breach of contract of carriage

HELD:
Yes. The Court held that a contract of carriage is defined as one whereby a certain person or
association of persons obligate themselves to transport persons, things, or news from one place to another for
a fixed price. Thus, an airline’s issuance of confirmed tickets is a guarantee to the passenger that the airline
would honor the tickets, assure him of a space in the flight, and transport him for that segment of his trip
corresponding to the confirmed ticket.

Meanwhile, breach of contract is defined as the failure, without legal reason, to comply with the
terms of a contract, or the failure, without legal excuse, to perform any promise which forms the whole or
part of the contract. For contracts of air carriage, Philippine Airlines, Incorporated v. Court of Appeals is
instructive: When an airline issues a ticket to a passenger, confirmed for a particular flight on a certain date, a
contract of carriage arises. The passenger has every right to expect to be transported on that flight and on
that date, and it becomes the airline’s obligation to carry him and his luggage safely to the agreed destination
without delay. If the passenger is not so transported or if in the process of transporting, he dies or is injured,
the carrier may be held liable for a breach of contract of carriage.

The contract of air carriage is a peculiar one. Imbued with public interest, the law requires common
carriers to carry the passengers safely as far as human care and foresight can provide, using the utmost
diligence of very cautious persons with due regard for all the circumstances. In an action for breach of
contract of carriage, the aggrieved party does not have to prove that the common carrier was at fault or was
negligent. All that is necessary to prove is the existence of the contract and the fact of its non-performance by
the carrier.

Undoubtedly, a contract of carriage existed between petitioner and respondent. Respondent carried
confirmed tickets covering several flights with petitioner:
1. Mahe Island to Paris (scheduled on July 18, 2000 and rebooked to July 16, 2000);
2. Paris to Nice (schedule on July 19, 200);
3. Nice to Paris on July 23, 2000).

14
 Further to their contract, respondent had the right to expect the he would fly from Mahe Island to
Paris on July 16, 2000. Since petitioner refused to transport him, petitioner evidently breached their contract
of carriage and respondent had every right to sue petitioner for this breach.

Petitioner argues that respondent’s previous unpaid purchases violated the General Conditions of
Carriage, Passenger, and Baggage to which his ticket for the July 16, 2000 flight is subjected, and consequently
justified petitioner’s exercise of its right to refuse carriage.

We agree with petitioner that the General Conditions of Carriage, Passenger, and Baggage, as well as
the IAT A conditions of carriage, are part of the contract of carriage between petitioner and respondent as
they set forth the terms and conditions of the contract between petitioner and its passengers, including
respondent. Thus, when respondent purchased his tickers, he was instantaneously bound by the terms and
conditions of the contract of carriage which include petitioner’s right to refuse to carry respondent when the
applicable fare or charge has not been paid or a credit arrangement between petitioner and respondent has
not bee complied with. It is unclear however, whether this condition applies to previous ticket purchases
respondent made or is limited to the July 16, 200 flight.

We hold that petitioner can only refuse carriage due to nonpayment of the fare or credit arrangement
when what remains unpaid, or the credit arrangement remains unsettled, is the fare for that particular ticket
or flight, in this case, the July 16, 2000 flight from Mahe Island to Paris.

15
 Common Carriers
(Arts. 1731 to 1766, NCC)

1. Concepts
Domestic Shipping (R.A. 9295, Sec 3)
 shall mean the transport of passengers or cargo, or both, by ships duly registered and
licensed under Philippine law to engage in trade and commerce between Philippine ports
and within Philippine territorial or internal waters, for hire or compensation, with general
or limited clientele, whether permanent, occasional or incidental, with or without fixed
routes, and done for contractual or commercial purposes;
Public Service (Commonwealth Act No. 146 or the Public Service Act)
 (Sec 13, paragraph B) 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, sub-way motor vehicle, either for freight or
passenger, or both with or without fixed route and whether may be its classification, freight or
carrier service of any class, express service, steamboat or steamship line, pontines, ferries, and water
craft, engaged in the transportation of passengers or freight or both, shipyard, marine railways,
marine repair shop, [warehouse] wharf or dock, ice plant, ice-refrigeration plant, canal, irrigation
system, gas, electric light, heat and power water supply and power, petroleum, sewerage
system, wire or wireless communications system, wire or wireless broadcasting stations and
other similar public services: Provided, however, That a person engaged in agriculture, not
otherwise a public service, who owns a motor vehicle and uses it personally and/or enters into a
special contract whereby said motor vehicle is offered for hire or compensation to a third party
or third parties engaged in agriculture, not itself or themselves a public service, for operation by the
latter for a limited time and for a specific purpose directly connected with the cultivation of his or
their farm, the transportation, processing, and marketing of agricultural products of such third party
or third parties shall not be considered as operating a public service for the purposes of this Act
 Amended last 2017: Public Service Commission powers and duties transferred to various
administrative agencies of the government (refer to attachment)
 READ: IRR of RA 9295
 READ: Revised IRR of RA 9295
 READ: 2014 Amendments to the Revised IRR

16
 2. Common Carriages

PEDRO DE GUZMAN, Petitioner, v. COURT OF APPEALS and ERNESTO CENDANA, Respondents

G.R. No. L-47822, THIRD DIVISION, December 22, 1988, FELICIANO, J.

Carrying of persons or goods or both may be the principal or ancillary activity

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

Here, Ernesto Cendana is deemed a common carrier. He is a junk dealer who was engaged in buying
up used bottles and scrap metal in Pangasinan. Upon gathering sufficient quantities of such scrap
material, respondent would bring such material to Manila for resale. He utilized two (2) six-wheeler
trucks which he owned for hauling the material to Manila. On the return trip to Pangasinan,
respondent would load his vehicles with cargo which various merchants wanted delivered to differing
establishments in Pangasinan. For that service, respondent charged freight rates which were
commonly lower than regular commercial rates.

FACTS:
Respondent Ernesto Cendana, a junk dealer, was engaged in buying up used bottles and scrap metal
in Pangasinan. Upon gathering sufficient quantities of such scrap material, respondent would bring such
material to Manila for resale. He utilized two (2) six-wheeler trucks which he owned for hauling the material
to Manila. On the return trip to Pangasinan, respondent would load his vehicles with cargo which various
merchants wanted delivered to differing establishments in Pangasinan. For that service, respondent
charged freight rates which were commonly lower than regular commercial rates.

Sometime in November 1970, petitioner Pedro de Guzman a merchant and authorized dealer
of General Milk Company (Philippines), Inc. in Urdaneta, Pangasinan, contracted with respondent for the
hauling of 750 cartons of Liberty filled milk from a warehouse of General Milk in Makati, Rizal, to petitioner's
establishment in Urdaneta on or before 4 December 1970. Accordingly, on 1 December 1970,
respondent loaded in Makati the merchandise on to his trucks: 150 cartons were loaded on a truck
driven by respondent himself, while 600 cartons were placed on board the other truck which was driven by
Manuel Estrada, respondent's driver and employee.

Only 150 boxes of Liberty filled milk were delivered to petitioner. The other 600 boxes never
reached petitioner, since the truck which carried these boxes was hijacked somewhere along the
MacArthur Highway in Paniqui, Tarlac, by armed men who took with them the truck, its driver, his helper and
the cargo.

On 6 January 1971, petitioner commenced action against private respondent in the Court of
First Instance of Pangasinan, demanding payment of P 22,150.00, the claimed value of the lost
merchandise, plus damages and attorney's fees. Petitioner argued that private respondent, being a common
carrier, and having failed to exercise the extraordinary diligence required of him by the law, should be
held liable for the value of the undelivered goods.

In his Answer, private respondent denied that he was a common carrier and argued that he
could not be held responsible for the value of the lost goods, such loss having been due to force majeure.

17
ISSUES:
I. Whether respondent is a common carrier (YES)
II. Whether respondent is liable (NO)

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

So understood, the concept of "common carrier" under Article 1732 may be seen to coincide neatly
with the notion of "public service," under the Public Service Act (Commonwealth Act No. 1416, as amended)
which at least partially supplements the law on common carriers set forth in the Civil Code. Under Section 13,
paragraph (b) of the Public Service Act, "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 water craft, engaged in the transportation of passengers or freight or both, shipyard,
marine repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal, irrigation system,
gas, electric light, heat and power, water supply and power petroleum, sewerage system,
wire or wireless communications systems, wire or wireless broadcasting stations and other
similar public services.

It appears to the Court that private respondent is properly characterized as a common carrier even
though he merely "back-hauled" goods for other merchants from Manila to Pangasinan, although such back-
hauling was done on a periodic or occasional rather than regular or scheduled manner, and even
though private respondent's principal occupation was not the carriage of goods for others. There is no
dispute that private respondent charged his customers a fee for hauling their goods; that fee frequently
fell below commercial freight rates is not relevant here.

The Court of Appeals referred to the fact that private respondent held no certificate of public
convenience, and concluded he was not a common carrier. This is palpable error. A certificate of
public convenience is not a requisite for the incurring of liability under the Civil Code provisions
governing common carriers. That liability arises the moment a person or firm acts as a common
carrier, without regard to whether or not such carrier has also complied with the requirements of the
applicable regulatory statute and implementing regulations and has been granted a certificate of public
convenience or other franchise. To exempt private respondent from the liabilities of a common carrier
because he has not secured the necessary certificate of public convenience, would be offensive to sound
public policy; that would be to reward private respondent precisely for failing to comply with applicable
statutory requirements. The business of a common carrier impinges directly and intimately upon the
safety and well being and property of those members of the general community who happen to deal
with such carrier. The law imposes duties and liabilities upon common carriers for the safety and
protection of those who utilize their services and the law cannot allow a common carrier to render such
duties and liabilities merely facultative by simply failing to obtain the necessary permits and
authorizations.

18
 II.
The precise issue that we address here relates to the specific requirements of the duty of
extraordinary diligence in the vigilance over the goods carried in the specific context of hijacking or armed
robbery.

Under Article 1745 (6) above, 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 irresistible threat, violence or force."
We believe and so hold that the limits of the duty of extraordinary diligence in the vigilance over the
goods carried are reached where the goods are lost as a result of a robbery which is attended by "grave
or irresistible threat, violence or force. "

In the instant case, armed men held up the second truck owned by private respondent which
carried petitioner's cargo. The record shows that an information for robbery in band was filed in the
Court of First Instance of Tarlac, Branch 2, in Criminal Case No. 198 entitled "People of the Philippines v.
Felipe Boncorno, Napoleon Presno, Armando Mesina, Oscar Oria and one John Doe." There, the accused were
charged with willfully and unlawfully taking and carrying away with them the second truck, driven by Manuel
Estrada and loaded with the 600 cartons of Liberty filled milk destined for delivery at petitioner's store
in Urdaneta, Pangasinan. The decision of the trial court shows that the accused acted with grave, if not
irresistible, threat, violence or force. Three (3) of the five (5) hold-uppers were armed with firearms. The
robbers not only took away the truck and its cargo but also kidnapped the driver and his helper,
detaining them for several days and later releasing them in another province (in Zambales). The
hijacked truck was subsequently found by the police in Quezon City. The Court of First Instance
convicted all the accused of robbery, though not of robbery in band.

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. It is
necessary to recall that even common carriers are not made absolute insurers against all risks of
travel and of transport of goods, and are not held liable for acts or events which cannot be foreseen or are
inevitable, provided that they shall have complied with the rigorous standard of extraordinary
diligence. We, therefore, agree with the result reached by the Court of Appeals that private respondent
Cendana is not liable for the value of the undelivered merchandise which was lost because of an event
entirely beyond private respondent's control.

19
 Planters Products, Inc. v. CA, 226 SCRA 476 (1993)
G.R. No. 101503 September 15, 1993

Lessons Applicable: Charter Party (Transportation)

FACTS:
 June 16 1974: Mitsubishi International Corporation (Mitsubishi) of New York, U.S.A., 9,329.7069 M/T
of Urea 46% fertilizer bought by Planters Products, Inc. (PPI) on aboard the cargo vessel M/V "Sun
Plum" owned by private Kyosei Kisen Kabushiki Kaisha (KKKK) from Kenai, Alaska, U.S.A., to Poro
Point, San Fernando, La Union, Philippines, as evidenced by Bill of Lading 
 May 17, 1974: a time charter-party on the vessel M/V "Sun Plum" pursuant to the Uniform General
Charter was entered into between Mitsubishi as shipper/charterer and KKKK as shipowner, in
Tokyo, Japan
 Before loading the fertilizer aboard the vessel, 4 of her holds were all presumably inspected by the
charterer's representative and found fit
 The hatches remained closed and tightly sealed throughout the entire voyage
 July 3, 1974: PPI 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-partly 
o hatches remained open throughout the duration of the discharge
o 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 50 meters from the wharf
o Midway to the warehouse, the trucks were made to pass through a weighing scale where
they were individually weighed for the purpose of ascertaining the net weight of the cargo. 
o 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.
o Tarpaulins and GI sheets were placed in-between and alongside the trucks to contain
spillages of the fertilizer
o It took 11 days for PPI to unload the cargo
 Cargo Superintendents Company Inc. (CSCI), private marine and cargo surveyor, was hired by PPI to
determine the "outturn" of the cargo shipped, by taking draft readings of the vessel prior to and after
discharge
o shortage in the cargo of 106.726 M/T and that a portion of the Urea fertilizer approximating
18 M/T was contaminated with dirt
 Certificate of Shortage/Damaged Cargo prepared by PPI 
o short of 94.839 M/T and about 23 M/T were rendered unfit for commerce, having been
polluted with sand, rust and dirt 
 PPI sent a claim letter 1974 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
o SSA: what they received was just a request for short landed certificate and not a formal
claim, and that they "had nothing to do with the discharge of the shipment 
 RTC: failure to destroy the presumption of negligence against them, SSA are liable
 CA: REVERSED - failed to prove the basis of its cause of action

ISSUE:
W/N a time charter between a shipowner and a charterer transforms a common carrier into a private
one as to negate the civil law presumption of negligence in case of loss or damage to its cargo

HELD:
NO. petition is DISMISSED

20
 When PPI chartered the vessel M/V "Sun Plum", the ship captain, its officers and compliment were
under the employ of the shipowner and therefore continued to be under its direct supervision and
control. 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
 carrier has sufficiently overcome, by clear and convincing proof, the prima facie presumption of
negligence. 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.
 bulk shipment of highly soluble goods like fertilizer carries with it the risk of loss or damage. More
so, with a variable weather condition prevalent during its unloading
o This is a risk the shipper or the owner of the goods has to face. Clearly, KKKK has sufficiently
proved the inherent character of the goods which makes it highly vulnerable to
deterioration; as well as the inadequacy of its packaging which further contributed to the
loss. 
o On the other hand, no proof was adduced by the petitioner showing that the carrier was
remise in the exercise of due diligence in order to minimize the loss or damage to the goods
it carried.

21
 Bascos v. CA,
G.R. No. 101089, April 7, 1993
PRINCIPLE:
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.”

FACTS:
Rodolfo A. Cipriano representing Cipriano Trading Enterprise (CIPTRADE) entered into a hauling
contract with Jibfair Shipping Agency Corp whereby CIPTRADE bound itself to haul JIBFAIR’s 2,000 m/tons of
soya bean meal to the warehouse in Calamba, Laguna. To carry out its obligation, CIPTRADE, through
Cipriano, subcontracted with Bascos to transport and to deliver 400 sacks of soya bean meal from the Manila
Port Area to Calamba, Laguna. BASCOS failed to deliver the said cargo. As a consequence of that failure,
Cipriano paid Jibfair Shipping Agency the amount of the lost goods in accordance with their contract.

Cipriano demanded reimbursement from BASCOS but the latter refused to pay. Eventually, Cipriano
filed a complaint for a sum of money and damages with writ of preliminary attachment for breach of a
contract of carriage. The trial court granted the writ of preliminary attachment.

In her answer, Bascos interposed the defense that there was no contract of carriage since CIPTRADE
leased her cargo truck to load the cargo from Manila Port Area to Laguna and that the truck carrying the cargo
was hijacked and being a force majeure, exculpated petitioner from any liability

After trial, the trial court rendered a decision in favor of Cipriano and against Bascos ordering the
latter to pay the former for actual damages for attorney’s fees and cost of suit. 

Bascos appealed to the Court of Appeals but respondent Court affirmed the trial court’s judgment. 

ISSUES:
1) WON petitioner Bascos, was a common carrier
2) WON the hijacking referred to a force majeure

RULING:

The petition is DISMISSED, and the decision of the Court of Appeals is hereby AFFIRMED.

1) YES. 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 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 those with cargo to move. Judicial admissions are conclusive, and no evidence is
required to prove the same.

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

2) NO. Common carriers are obliged to observe extraordinary diligence in the vigilance over the goods

22
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 (Bascos). 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.

In this case, petitioner alleged that hijacking constituted force majeure which exculpated her from
liability for the loss of the cargo. In De Guzman vs. Court of Appeals, the Court held that hijacking, not
being included in the provisions of Article 1734, must be dealt with under the provisions of Article 1735
and thus, the common carrier is presumed to have been at fault or negligent. To exculpate the carrier
from liability arising from hijacking, he must prove that the robbers or the hijackers acted with grave or
irresistible threat, violence, or force.

23
 ENGRACIO FABRE, JR. and PORFIRIO CABIL vs. COURT OF APPEALS
G.R. no. 111127, July 26, 1996
Mendoza, J.

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

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

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

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

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

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

Whether the spouses Fabre are common carriers?

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

The Court ruled that damages should be awarded based on the theory that petitioners are liable for breach of
contract of carriage or culpa contractual or on the theory of quasi delict or culpa aquiliana holding that the
relation of passenger and carrier is “contractual both in origin and nature,” nevertheless “the act that breaks
the contract may be also a tort. In both sources of obligation, the existence of negligence of petitioners must
be determined. In this case, Cabil drove his bus negligently, while his employer, the Fabres, who owned the
bus, failed to exercise the diligence of a good father of the family in the selection and supervision of their
employee is fully supported by the evidence on record. Pursuant to Arts. 2176 and 2180 of the Civil Code his
negligence gave rise to the presumption that his employers, the Fabres, were themselves negligent in the
selection and supervision of their employee. Thus, the finding of the Court that petitioners are liable under

24
Arts. 2176 and 2180 for quasi delict fully justify that they are guilty of breach of contract of carriage under
Arts. 1733, 1755 and 1759 of the Civil Code.

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

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

25
 FIRST PHILIPPINE INDUSTRIAL CORPORATION, Petitioner, -versus- COURT OF APPEALS,
HONORABLE PATERNO V. TAC-AN, BATANGAS CITY and ADORACION C. ARELLANO, in her official
capacity as City Treasurer of Batangas, Respondents
G.R. No. 125948, SECOND DIVISION, December 29, 1998, MARTINEZ, J

Examples of Common Carrier: Pipeline Operator

As correctly pointed outby petitioner, the definition of "common carriers" in the Civil Code makes no
distinction as to the means of transporting, as long as it is by land, water or air. It does not provide
that the transportation of the passengers or goods should be by motor vehicle. In fact, in the United
States, oil pipe line operators are considered common carriers.

FACTS:
Petitioner is a grantee of a pipeline concession under Republic Act No. 387, as amended, to contract,
install and operate oil pipelines.

Sometime in January 1995, petitioner applied for a mayor's permit with the Office of the Mayor of
Batangas City. However, before the mayor's permit could be issued, the respondent City Treasurer required
petitioner to pay a local tax based on its gross receipts for the fiscal year 1993 pursuant to the Local
Government Code. The respondent City Treasurer assessed a business tax on the petitioner. In order not
to hamper its operations, petitioner paid the tax under protest. On January 20, 1994, petitioner filed a
letter-protest addressed to the respondent City Treasurer claiming that it is exempt from said tax because
if is a transportation contractor.

Respondent City Treasurer denied the protest contending that petitioner cannot be considered
engaged in transportation business, thus it cannot claim exemption under Section 133 (j) of the Local
Government Code.

Petitioner filed with the Regional Trial Court of Batangas City a complaint6 for tax refund with
prayer for writ of preliminary injunction against respondents City of Batangas and Adoracion Arellano
in her capacity as City Treasurer. In its complaint, petitioner alleged, inter alia, that: (1) the imposition and
collection of the business tax on its gross receipts violates Section 133 of the Local Government Code; (2)the
authority of cities to impose and collect a tax on the gross receipts of "contractors and independent
contractors" under Sec. 141 (e) and 151 does not include the authority to collect such taxes on
transportation contractors for, as defined under Sec.131 (h), the term "contractors" excludes transportation
contractors; and, (3) the City Treasurer illegally and erroneously imposed and collected the said tax, thus
meriting the immediate refund of the tax paid.

ISSUE:
Whether the petitioner is a common carrier (YES)

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

Art. 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;

26
 2. He must undertake to carry goods of the kind to which his business is confined;
3. He must undertake to carry by the method by which his business is conducted and over his
established roads; and
4. The transportation must be for hire.

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

Also, respondent's argument that the term "common carrier" as used in Section 133 (j) of the Local
Government Code refers only to common carriers transporting goods and passengers through moving
vehicles or vessels either by land, sea or water, is erroneous.

As correctly pointed out by petitioner, the definition of "common carriers" in the Civil Code makes no
distinction as to the means of transporting, as long as it is by land, water or air. It does not provide
that the transportation of the passengers or goods should be by motor vehicle. In fact, in the United
States, oil pipe line operators are considered common carriers.

Under the Petroleum Act of the Philippines (Republic Act 387), petitioner is considered a "common
carrier."

The Bureau of Internal Revenue likewise considers the petitioner a "common carrier." In BIR Ruling
No. 069-83, it declared:

. . . since [petitioner] is a pipeline concessionaire that is engaged only in transporting

petroleum products, it is considered a common carrier under Republic Act No. 387 . . .. Such
being the case, it is not subject to withholding tax prescribed by Revenue Regulations No. 13-
78, as amended.

From the foregoing disquisition, there is no doubt that petitioner is a "common carrier" and,
therefore, exempt from the business tax as provided for in Section 133 (j), of the Local Government Code.

It is clear that the legislative intent in excluding from the taxing power of the local government unit
the imposition of business tax against common carriers is to prevent a duplication of the so-called "common
carrier's tax."

Petitioner is already paying three (3%) percent common carrier's tax on its gross
sales/earnings under the National Internal Revenue Code. To tax petitioner again on its gross receipts in
its transportation of petroleum business would defeat the purpose of the Local Government Code.

27
 LOADSTAR SHIPPING CO., INC.,Petitioner v. COURT OF APPEALS and THE MANILA INSURANCE CO.,
INC.,Respondents.
G.R. No. 131621, FIRST DIVISION, September 28, 1999, DAVIDE, JR., C.J

Liabilities of Common Carriers

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 its vessel involved in a contract of carriage is a clear breach of its duty prescribed in
Article 1755 of the Civil Code.

LOADSTAR was at fault or negligent in not maintaining a seaworthy vessel and in having allowed its vessel to
sail despite knowledge of an approaching typhoon. The doctrine of limited liability does not apply where
there was negligence on the part of the vessel owner or agent.

FACTS:
On 19 November 1984, LOADSTAR received on board its M/V "Cherokee" (hereafter, the
vessel) goods for shipment. The goods, amounting to P6,067,178, were insured for the same amount with
MIC against various risks including "TOTAL LOSS BY TOTAL OF THE LOSS THE VESSEL." The vessel, in turn,
was insured by Prudential Guarantee & Assurance, Inc. (hereafter PGAI) for P4 million. on its way to Manila
from the port of Nasipit, Agusan del Norte, the vessel, along with its cargo, sank off Limasawa Island. As a
result of the total loss of its shipment, the consignee made a claim with LOADSTAR which, however,
ignored the same. As the insurer, MIC paid P6,075,000 to the insured in full settlement of its claim, and
the latter executed a subrogation receipt therefor.

MIC filed a complaint against LOADSTAR and PGAI, alleging that the sinking of the vessel was due to
the fault and negligence of LOADSTAR and its employees. It also prayed that PGAI be ordered to pay the
insurance proceeds from the loss the vessel directly to MIC, said amount to be deducted from MIC's
claim from LOADSTAR.

In its answer, LOADSTAR denied any liability for the loss of the shipper's goods and claimed
that sinking of its vessel was due to force majeure. PGAI, on the other hand, averred that MIC had no
cause of action against it, LOADSTAR being the party insured. In any event, PGAI was later dropped as a party
defendant after it paid the insurance proceeds to LOADSTAR.

As stated at the outset, the courta quorendered judgment in favor of MIC, prompting LOADSTAR to
elevate the matter to the court of Appeals, which, however, agreed with the trial court and affirmed its
decision in toto.

LOADSTAR submits that the vessel was a private carrier because it was not issued certificate
of public convenience, it did not have a regular trip or schedule nor a fixed route, and there was only "one
shipper, one consignee for a special cargo." LOADSTAR argues that as a private carrier, it cannot be
presumed to have been negligent, and the burden of proving otherwise devolved upon MIC.

In refutation, MIC argues that While it is true that the vessel had on board only the cargo of
wood products for delivery to one consignee, it was also carrying passengers as part of its regular
business. Moreover, the bills of lading in this case made no mention of any charter party but only a statement
that the vessel was a "general cargo carrier." Neither was there any "special arrangement"
between LOADSTAR and the shipper regarding the shipment of the cargo. The singular fact that the
vessel was carrying a particular type of cargo for one shipper is not sufficient to convert the vessel into a
private carrier.

ISSUES:
1. W/N the M/V "Cherokee" is a common carrier? (YES)

28
 2. Did LOADSTAR observe due and/or ordinary diligence in these premises. (YES)
RULING:
1. We hold that LOADSTAR is a common carrier. It is not necessary that the carrier be issued a
certificate of public convenience, and this public character is not altered by the fact that the carriage of the
goods in question was periodic, occasional, episodic or unscheduled.

In support of its position, LOADSTAR relied on the 1968 case of Home Insurance Co. v.
American Steamship Agencies, Inc., where this Court held that a common carrier transporting special cargo or
chartering the vessel to a special person becomes a private carrier that is not subject to the
provisions of the Civil Code. Any stipulation in the charter party absolving the owner from liability for loss
due to the negligence of its agent is void only if the strict policy governing common carriers is upheld. Such
policy has no force where the public at is not involved, as in the case of a ship totally chartered for the use
of a single party. LOADSTAR also cited Valenzuela Hardwood and Industrial Supply, Inc. v. Court of Appeals
and National Steel Corp. v. Court of Appeals, both of which upheld the Home Insurance doctrine.

These cases invoked by LOADSTAR are not applicable in the case at bar for the simple reason that the
factual settings are different. The records do not disclose that the M/V "Cherokee," on the date in question,
undertook to carry a special cargo or was chartered to a special person only. There was no charter party.
The bills of lading failed to show any special arrangement, but only a general provision to the effect
that the M/V "Cherokee" was a "general cargo carrier. "Further, the bare fact that the vessel was carrying a
particular type of cargo for one shipper, which appears to be purely coincidental, is not reason enough to
convert the vessel from a common to a private carrier, especially where, as in this case, it was shown that
the vessel was also carrying passengers.

Under the facts and circumstances obtaining in this case, LOADSTAR fits the definition of a common
carrier under Article 1732 of the Civil Code. In the case of De Guzman v. Court of Appeals, the Court
juxtaposed the statutory definition of "common carriers" with the peculiar circumstances of that case,
viz.:

The Civil Code defines "common carriers" in the following terms:

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

The above article makes no distinction between one whose principal business activity is
the carrying of persons or goods or both, and one who does such carrying only as ancillary
activity (in local idiom, as "a sideline". Article 1732 also carefully avoids making any
distinction between a person or enterprise offering transportation service on a regular or
scheduled basis and one offering such service on an occasional, episodic or unscheduled
basis. Neither does Article 1732 distinguish between a carrier offering its services to
the "general public," i.e., the general community or population, and one who offers
services or solicits business only from a narrow segment of the general population. We
think that Article 1733 deliberately refrained from making such distinctions.
xxx xxx xxx

It appears to the Court that private respondent is properly characterized as a common carrier even
though he merely "back-hauled" goods for other merchants from Manila to Pangasinan, although such
backhauling was done on a periodic or occasional rather than regular or scheduled manner, and even
though private respondent's principal occupation was not the carriage of goods for others. There is no
dispute that private respondent charged his customers a fee for hauling their goods; that fee frequently
fell below commercial freight rates is not relevant here.

The Court of Appeals referred to the fact that private respondent held no certificate of public
convenience, and concluded he was not a common carrier. This is palpable error. A certificate of

29
public convenience is not a requisite for the incurring of liability under the Civil Code provisions
governing common carriers. That liability arises the moment a person or firm acts as a common
carrier, without regard to whether or not such carrier has also complied with the requirements of the
applicable regulatory statute and implementing regulations and has been granted a certificate of public
convenience or other franchise. To exempt private respondent from the liabilities of a common carrier
because he has not secured the necessary certificate of public convenience, would be offensive to sound
public policy; that would be to reward private respondent precisely for failing to comply with applicable
statutory requirements The business of a common carrier impinges directly and intimately upon the
safety and well being and property of those members of the general community who happen to deal
with such carrier. The law imposes duties and liabilities upon common carriers for the safety and
protection of those who utilize their services and the law cannot allow a common carrier to render such
duties and liabilities merely facultative by simply failing to obtain the necessary permits and
authorizations.

2. YES. We find that the M/V "Cherokee" was not seaworthy when it embarked on its voyage on 19 November
1984. The vessel was not even sufficiently manned at the time. "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 its vessel involved in a
contract of carriage is a clear breach of its duty prescribed in Article 1755 of the Civil Code.

Neither do we agree with LOADSTAR's argument that the "limited liability" theory should be
applied in this case. The doctrine of limited liability does not apply where there was negligence on the part
of the vessel owner or agent. LOADSTAR was at fault or negligent in not maintaining a seaworthy
vessel and in having allowed its vessel to sail despite knowledge of an approaching typhoon. In any
event, it did not sink because of any storm that may be deemed as force majeure, inasmuch as the
wind condition in the performance of its duties, LOADSTAR cannot hide behind the "limited liability" doctrine
to escape responsibility for the loss of the vessel and its cargo.

30
 VIRGINES CALVO doing business under the name and style TRANSORIENT CONTAINER TERMINAL
SERVICES, INC., Petitioner v. UCPB GENERAL INSURANCE CO., INC. (formerly Allied Guarantee Ins. Co.,
Inc.) Respondent.
G.R. No. 148496, SECOND DIVISION, March 19, 2002, MENDOZA, J.

Diligence Required of Common Carriers: Extra-ordinary diligence required/ Presumption of fault in case of loss
or damage to goods or death or injury to passengers

The rule is that if the improper packing or, in this case, the defect/s in the container, is/are known to the
carrier or his employees or apparent upon ordinary observation, but he nevertheless accepts the same
without protest or exception notwithstanding such condition, he is not relieved of liability for damage
resulting there from. In this case, petitioner accepted the cargo without exception despite the apparent
defects in some of the container vans. Hence, for failure of petitioner to prove that she exercised
extraordinary diligence in the carriage of goods in this case or that she is exempt from liability, the
presumption of negligence as provided under Art. 1735 holds.

FACTS:
Petitioner Virgines Calvo is the owner of Transorient Container Terminal Services, Inc. (TCTSI),
a sole proprietorship customs broker. At the time material to this case, petitioner entered into a
contract with San Miguel Corporation (SMC) for the transfer of 114 reels of semi-chemical fluting
paper and 124 reels of kraft liner board from the Port Area in Manila to SMC's warehouse. The cargo
was insured by respondent UCPB General Insurance Co., Inc.

The shipment in question, contained in 30 metal vans, arrived in Manila on board "M/V Hayakawa
Maru". Petitioner, pursuant to her contract with SMC, withdrew the cargo from the arrastre operator
and delivered it to SMC's warehouse in Ermita, Manila. The goods were inspected by Marine Cargo
Surveyors, who found that 15 reels of the semi-chemical fluting paper were "wet/stained/torn"
and 3 reels of kraft liner board were likewise torn. The damage was placed atP93,112.00.

SMC collected payment from respondent UCPB under its insurance contract for the aforementioned
amount. In turn, respondent, as subrogee of SMC, brought suit against petitioner in the Regional Trial
Court, Branch 148, Makati City, which rendered judgment finding petitioner liable to respondent
for the damage to the shipment.

The decision was affirmed by the Court of Appeals.

Petitioner contends that she is not a common carrier but a private carrier because, as a
customs 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.

ISSUE:
W/N THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR IN
CLASSIFYING THE PETITIONER AS A COMMON CARRIER AND NOT AS PRIVATE OR SPECIAL CARRIER WHO
DID NOT HOLD ITS SERVICES TO THE PUBLIC. (NO)

RULING:
It is a common carrier because the transportation of goods is an integral part of her business.
To uphold petitioner's contention would be to deprive those with whom she contracts the protection
which the law affords them notwithstanding the fact that the obligation to carry goods for her
customers, as already noted, is part and parcel of petitioner's business.

Now, as to petitioner's liability, Art. 1733 of the Civil Code provides:

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

31
 safety of the passengers transported by them, according to all the circumstances of each
case. . . .

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

Petitioner's insist that the cargo could not have been damaged while in her custody as she
immediately delivered the containers to SMC's compound, suffice it to say that to prove the exercise of
extraordinary diligence, petitioner must do more than merely show the possibility that some other
party could be responsible for the damage. It must prove that it used "all reasonable means to ascertain the
nature and characteristic of goods tendered for transport and that it exercised due care in the handling
thereof." Petitioner failed to do this.

Nor is there basis to exempt petitioner from liability under Art. 1734(4), which provides –

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

....

(4) The character of the goods or defects in the packing or in the containers.

....

For this provision to apply, the rule is that if the improper packing or, in this case, the
defect/s in the container, is/are known to the carrier or his employees or apparent upon ordinary
observation, but he nevertheless accepts the same without protest or exception notwithstanding such
condition, he is not relieved of liability for damage resulting therefrom. In this case, petitioner accepted
the cargo without exception despite the apparent defects in some of the container vans. Hence, for
failure of petitioner to prove that she exercised extraordinary diligence in the carriage of goods in this case or
that she is exempt from liability, the presumption of negligence as provided under Art. 1735 holds.

32
 Asia Lighterage and Shipping, Inc. v. CA, et al.
G.R. No. 147246, Aug. 19, 2003

FACTS:
Petitioner was contracted as carrier by a corporation from Portland, Oregon to deliver a cargo to the
consignee’s warehouse at Pasig City. The cargo, however, never reached the consignee as the barge that
carried the cargo sank completely, resulting in damage to the cargo.

Private respondent, as insurer, indemnified the consignee for the lost cargo and thus, as subrogee,
sought recovery from petitioner. Both the trial court and the appellate court ruled in favor of private
respondent. The Court ruled in favor of private respondent. Whether or not petitioner is a common carrier,
the Court ruled in the affirmative. The principal business of petitioner is that lighterage and drayage, offering
its barges to the public, although for limited clientele, for carrying or transporting goods by water for
compensation.

Whether or not petitioner failed to exercise extraordinary diligence in its care and custody of the
consignee’s goods, the Court also ruled in affirmative. The barge completely sank after its towing broke,
resulting in the loss of the cargo. Petitioner failed to prove that the typhoon was the proximate and only cause
of the loss and that it has exercised due diligence before, during and after the occurrence.

ISSUE:
Whether or Not the petitioner is a common carrier.

RULING:
YES. Petitioner is a common carrier whether its carrying of goods is done on an irregular rather than
scheduled manner, and with only limited clientele.

A common carrier need not have fixed and publicly known routes. Neither does it have to maintain
terminals or issue tickets. To be sure, petitioner fits the test of a common carrier is:

“whether the given undertaking is a part of the business engaged in by the carrier which he
has held out to the general public as his occupation rather than the quantity or extent of the
business transacted.”

In the case at bar, the petitioner admitted that it is engaged in the business of shipping and
lighterage, offering its barges to the public, despite its limited clientele for carrying or transporting goods by
water for compensation. Article 1732 of the Civil Code defines common carriers as persons, corporations,
firms or associations engaged in the business of carrying or transporting passengers or goods or both, by
land, water, or air, for compensation … offering their services to the public.

33
 A.F. SANCHEZ BROKERAGE INC., Petitioner, -versus –THE HON. COURT OF APPEALS and FGU
INSURANCE CORPORATION, Respondents.
G.R. No. 147079, THIRD DIVISION, December 21, 2004, CARPIO MORALES, J

Examples of Common Carrier: Customs Broker

Article 1732 does not distinguish between one whose principal business activity is the carrying of
goods and one who does such carrying only as an ancillary activity. The contention, therefore, of
petitioner that it is not a common carrier but a customs broker whose principal function is to prepare the
correct customs declaration and proper shipping documents as required by law is bereft of merit. It suffices
that petitioner undertakes to deliver the goods for pecuniary consideration.

In this light, petitioner as a common carrier is
Code, extraordinary diligence in the vigilance
circumstances of each case. In the event that
presumed to have been at fault or to have
extraordinary diligence.
mandated to observe, under Article 1733 of the Civil
over the goods it transports according to all the
the goods are lost, destroyed or deteriorated, it is
acted negligently, unless it proves that it observed

FACTS:
On July 8, 1992, Wyeth-Pharma GMBH shipped on board an aircraft of KLM Royal Dutch Airlines at
Dusseldorf, Germany oral contraceptives consisting of 86,800 Blisters Femenal tablets, 14,000 Blisters
Nordiol tablets and 42,000 Blisters Trinordiol tablets for delivery to Manila in favor of the consignee, Wyeth-
Suaco Laboratories, Inc. Wyeth-Suaco insured the shipment against all risks with FGU Insurance.

Upon arrival of the shipment, it was discharged "without exception" and delivered to the
warehouse of the Philippine Skylanders, Inc. (PSI) located also at the NAIA for safekeeping.

In order to secure the release of the cargoes, Wyeth-Suaco engaged the services of Sanchez
Brokerage.

Wyeth-Suaco being a regular importer, the customs examiner did not inspect the cargoes
which were thereupon stripped from the aluminum containers and loaded inside two transport
vehicles hired by Sanchez Brokerage.

Upon instructions of Wyeth-Suaco, the cargoes were delivered to Hizon Laboratories Inc. in
Antipolo City for quality control check. Upon inspection, it was discovered that 44 cartons
containing Femenal and Nordiol tablets were in bad order. The remaining 160 cartons of oral
contraceptives were accepted as complete and in good order.

Wyeth-Suaco later demanded, by letter from Sanchez Brokerage the payment of P191,384.25
representing the value of its loss arising from the damaged tablets. As the Sanchez Brokerage refused
to heed the demand, Wyeth-Suaco filed an insurance claim against FGU Insurance which paid Wyeth-
Suaco the amount of P181,431.49 in settlement of its claim. Wyeth-Suaco thus issued Subrogation
Receipt30 in favor of FGU Insurance.

On demand by FGU Insurance for payment of the amount of P181,431.49 it paid Wyeth-Suaco,
Sanchez Brokerage, by letter of January 7, 1993, disclaimed liability for the damaged goods, positing that the
damage was due to improper and insufficient export packaging; that when the sealed containers were
opened outside the PSI warehouse.

Hence, FGU Insurance of a complaint for damages before the Regional Trial Court of Makati
City against the Sanchez Brokerage. The trial court dismissed the complaint. On appeal, the appellate
court reversed the decision of the trial court, it holding that the Sanchez Brokerage engaged not only

34
in the business of customs brokerage but also in the transportation and delivery of the cargo of its clients,
hence, a common carrier within the context of Article 1732 of the New Civil Code.
ISSUE:
Whether petitioner is a "common carrier" within the context of Article 1732 of the New Civil Code. (YES)

RULING:
The appellate court did not err in finding petitioner, a customs broker, to be also a common carrier,
as defined under Article 1732 of the Civil Code, to wit:

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.

Anacleto F. Sanchez, Jr., the Manager and Principal Broker of Sanchez Brokerage himself
testified that the services the firm offers include the delivery of goods to the warehouse of the consignee or
importer, stating:
“As customs broker, we calculate the taxes that has to be paid in cargos, and those upon
approval of the importer, we prepare the entry together for processing and claims
from customs and finally deliver the goods to the warehouse of the importer.”

Article 1732 does not distinguish between one whose principal business activity is the carrying of
goods and one who does such carrying only as an ancillary activity. The contention, therefore, of
petitioner that it is not a common carrier but a customs broker whose principal function is to prepare
the correct customs declaration and proper shipping documents as required by law is bereft of merit.
It suffices that petitioner undertakes to deliver the goods for pecuniary consideration.

In this light, petitioner as a common carrier is mandated to observe, under Article 1733 of the Civil
Code, extraordinary diligence in the vigilance over the goods it transports according to all the
circumstances of each case. In the event that the goods are lost, destroyed or deteriorated, it is
presumed to have been at fault or to have acted negligently, unless it proves that it observed
extraordinary diligence.

The concept of "extra-ordinary diligence" was explained in Compania Maritima v. Court of Appeals:

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

In the case at bar, it was established that petitioner received the cargoes from the PSI warehouse in
NAIA in good order and condition; and that upon delivery by petitioner to Hizon Laboratories Inc., some of
the cargoes were found to be in bad order, as noted in the Delivery Receipt issued by petitioner, and
as indicated in the Survey Report of Elite Surveyors and the Destruction Report of Hizon Laboratories,
Inc.

In an attempt to free itself from responsibility for the damage to the goods, petitioner posits
that they were damaged due to the fault or negligence of the shipper for failing to properly pack them
and to the inherent characteristics of the goods; and that it should not be faulted for following the
instructions of Calicdan of Wyeth-Suaco to proceed with the delivery despite information conveyed to the
latter that some of the cartons, on examination outside the PSI warehouse, were found to be wet.

35
 While paragraph No. 4 of Article 1734 of the Civil Code exempts a common carrier from liability if the
loss or damage is due to the character of the goods or defects in the packing or in the containers, the rule is
that if the improper packing is known to the carrier or his employees or is apparent upon ordinary
observation, but he nevertheless accepts the same without protest or exception notwithstanding
such condition, he is not relieved of liability for the resulting damage.
Since petitioner received all the cargoes in good order and condition at the time they were turned
over by the PSI warehouseman, and upon their delivery to Hizon Laboratories, Inc. a portion thereof
was found to be in bad order, it was incumbent on petitioner to prove that it exercised extraordinary
diligence in the carriage of the goods. It did not, however. Hence, its presumed negligence under Article
1735 of the Civil Code remains unrebutted.

36
 SCHMITZ TRANSPORT & BROKERAGE CORPORATION v. TRANSPORT VENTURE, INC., INDUSTRIAL
INSURANCE COMPANY, LTD., et al.
456 SCRA 557 (2005)

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

FACTS:

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

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

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

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

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

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

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

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

37
 The Court holds then that Schmitz and TVI are solidarily liable for the loss of the cargoes. As for Black
Sea, its duty as a common carrier extended only from the time the goods were surrendered or unconditionally
placed in its possession and received for transportation until they were delivered actually or constructively to
consignee Little Giant

Parties to a contract of carriage may, however, agree upon a definition of delivery that extends the
services rendered by the carrier. In the case at bar, Bill of Lading No. 2 covering the shipment provides that
delivery be made ―to the port of discharge or so near thereto as she may safely get, always afloat. The
delivery of the goods to the consignee was not from ―pier to pier‖ but from the shipside of ―M/V Alexander
Savelievand into barges, for which reason the consignee contracted the services of petitioner. Since Black Sea
had constructively delivered the cargoes to Little Giant, through Schmitz, it had discharged its duty.

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

38
 PHILIPPINE CHARTER INSURANCE CORPORATION vs. UNKNOWN OWNER OF THE VESSEL M/V
“NATIONAL HONOR,” NATIONAL SHIPPING CORPORATION OF THE PHILIPPINES and
INTERNATIONAL CONTAINER SERVICES, INC.
G.R. No. 161833. July 8, 2005
FACTS:

Petitioner Philippine Charter Insurance Corporation (PCIC) is the insurer of a shipment on board the
vessel M/V “National Honor,” represented in the Philippines by its agent, National Shipping Corporation of
the Philippines (NSCP).

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

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

PCIC paid the damage, and as subrogee, filed a case against M/V National Honor, NSCP and ICTSI.
Both RTC and CA dismissed the complaint.

ISSUE:
Whether or not the presumption of negligence is applicable in the instant case.

HELD:
No.

We agree with the contention of the petitioner that common carriers, from the nature of their
business and for reasons of public policy, are mandated to observe extraordinary diligence in the vigilance
over the goods and for the safety of the passengers transported by them, according to all the circumstances of
each case. he Court has defined extraordinary diligence in the vigilance over the goods as follows:

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

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

39
diligence.

However, under Article 1734 of the New Civil Code, the presumption of negligence does not apply to
any of the following causes:
1. Flood, storm, earthquake, lightning or other natural disaster or calamity;
2. Act of the public enemy in war, whether international or civil;
3. Act or omission of the shipper or owner of the goods;
4. The character of the goods or defects in the packing or in the containers;
5. Order or act of competent public authority.

It bears stressing that the enumeration in Article 1734 of the New Civil Code which exempts the
common carrier for the loss or damage to the cargo is a closed list. To exculpate itself from liability for the
loss/damage to the cargo under any of the causes, the common carrier is burdened to prove any of the
aforecited causes claimed by it by a preponderance of evidence. If the carrier succeeds, the burden of
evidence is shifted to the shipper to prove that the carrier is negligent.

“Defect” is the want or absence of something necessary for completeness or perfection; a lack or
absence of something essential to completeness; a deficiency in something essential to the proper use for the
purpose for which a thing is to be used. On the other hand, inferior means of poor quality, mediocre, or
second rate. A thing may be of inferior quality but not necessarily defective. In other words, “defectiveness” is
not synonymous with “inferiority.”
xxx

In the present case, the trial court declared that based on the record, the loss of the shipment was
caused by the negligence of the petitioner as the shipper:

The same may be said with respect to defendant ICTSI. The breakage and collapse of Crate No. 1 and
the total destruction of its contents were not imputable to any fault or negligence on the part of said
defendant in handling the unloading of the cargoes from the carrying vessel, but was due solely to the
inherent defect and weakness of the materials used in the fabrication of said crate.

The crate should have three solid and strong wooden batten placed side by side underneath or on the
flooring of the crate to support the weight of its contents.
xxx

40
 Lea Mer Industries v. Malayan Insurance Co. Inc.
G.R. No. 161745, September 30, 2005, Panganiban

Topic: Hearsay Rule

Doctrine/s: A report made by a person is admissible if it is intended to prove the tenor, not the truth, of the
statements. Independent of the truth or the falsity of the statement given in the report, the fact that it has
been made is relevant. Here, the hearsay rule does not apply.

Facts:
 Ilian Silica Mining entered into a contract of carriage with Lea Mer Industries, Inc., for the
shipment of 900 metric tons of silica sand valued at ₱565,000. Consigned to Vulcan Industrial and
Mining Corporation, the cargo was to be transported from Palawan to Manila. On October 25, 1991,
the silica sand was placed on board Judy VII, a barge leased by Lea Mer. During the voyage, the vessel
sank, resulting in the loss of the cargo.
 Malayan Insurance Co., Inc., as insurer, paid Vulcan the value of the lost cargo. To recover the amount
paid and in the exercise of its right of subrogation, Malayan demanded reimbursement from Lea Mer,
which refused to comply. Consequently, Malayan instituted a Complaint with the RTC of Manila on
September 4, 1992, for the collection of ₱565,000 representing the amount that respondent had paid
Vulcan.
 On October 7, 1999, the RTC dismissed the Complaint, upon finding that the cause of the loss
was a fortuitous event. The RTC noted that the vessel had sunk because of the bad weather condition
brought about by Typhoon Trining. The court ruled that petitioner had no advance knowledge of the
incoming typhoon, and that the vessel had been cleared by the Philippine Coast Guard to travel from
Palawan to Manila.
 CA: Reversed RTC; CA held that the vessel was not seaworthy when it sailed for Manila. Thus, the loss
of the cargo was occasioned by petitioner’s fault, not by a fortuitous event.

Issue:
WON the survey report of the cargo surveyor, Jesus Cortez, who had not been presented as a witness
of the said report during the trial of this case before the lower court, can be admitted in evidence to prove the
alleged facts cited in the said report. – Partly NO, as per the court

Held:
Firstly, the Contract in the present case was one of affreightment, as shown by the fact that it was
petitionerʼs crew that manned the tugboat M/V Ayalit and controlled the barge Judy VII. Necessarily,
petitioner was a common carrier, and the pertinent law governs the present factual circumstances. Evidence
was presented to show that petitioner had not been informed of the incoming typhoon, and that the
Philippine Coast Guard had given it clearance to begin the voyage. On October 25, 1991, the date on which the
voyage commenced and the barge sank, Typhoon Trining was allegedly far from Palawan, where the storm
warning was only "Signal No. 1." The evidence presented by petitioner in support of its defense of fortuitous
event was sorely insufficient. As required by the pertinent law, it was not enough for the common carrier to
show that there was an unforeseen or unexpected occurrence. It had to show that it was free from any fault --
a fact it miserably failed to prove.

First, petitioner presented no evidence that it had attempted to minimize or prevent the loss before,
during or after the alleged fortuitous event.

Second, the alleged fortuitous event was not the sole and proximate cause of the loss. There is a
preponderance of evidence that the barge was not seaworthy when it sailed for Manila. Respondent was able
to prove that, in the hull of the barge, there were holes that might have caused or aggravated the sinking.
Because the presumption of negligence or fault applied to petitioner, it was incumbent upon it to show that
there were no holes; or, if there were, that they did not aggravate the sinking. Petitioner offered no evidence
to rebut the existence of the holes.

41
 The submission of the Philippine Coast Guardʼs Certificate of Inspection of Judy VII did not
conclusively prove that the barge was seaworthy. The regularity of the issuance of the Certificate is
disputably presumed. It could be contradicted by competent evidence, which respondent offered. Moreover,
this evidence did not necessarily take into account the actual condition of the vessel at the time of the
commencement of the voyage.

TOPIC (Issue):

Petitioner claims that the Survey Report prepared by Jesus Cortez, the cargo surveyor, should not
have been admitted in evidence. The Court PARTLY agrees (PARTLY agree that the survey report should not
be admitted. Because he did not testify during the trial, then the Report that he had prepared was hearsay and
therefore inadmissible for the purpose of proving the truth of its contents).

The facts reveal that Cortezʼs Survey Report was used in the testimonies of respondent’s witnesses --
Charlie M. Soriano; and Federico S. Manlapig, a cargo marine surveyor and the vice-president of Toplis and
Harding Company. Soriano testified that the Survey Report had been used in preparing the final Adjustment
Report conducted by their company. The final Report showed that the barge was not seaworthy because of
the existence of the holes. Manlapig testified that he had prepared that Report after taking into account the
findings of the surveyor, as well as the pictures and the sketches of the place where the sinking occurred.
Evidently, the existence of the holes was proved by the testimonies of the witnesses, not merely by Cortezʼ
Survey Report.

That witnesses must be examined and presented during the trial, and that their testimonies must be
confined to personal knowledge is required by the rules on evidence, from which we quote:

"Section 36. Testimony generally confined to personal knowledge; hearsay excluded. –A

witness can testify only to those facts which he knows of his personal knowledge; that is,
which are derived from his own perception, except as otherwise provided in these rules.”

On this basis, the trial court correctly refused to admit Jesus Cortezʼs Affidavit, which respondent had offered
as evidence. Well-settled is the rule that, unless the affiant is presented as a witness, an affidavit is considered
hearsay. An exception to the foregoing rule is that on "independently relevant statements." A report made by
a person is admissible if it is intended to prove the tenor, not the truth, of the statements. Independent of the
truth or the falsity of the statement given in the report, the fact that it has been made is relevant. Here, the
hearsay rule does not apply.

WHY it should be Admitted:

In the instant case, the challenged Survey Report prepared by Cortez was admitted only as part of the
testimonies of respondent’s witnesses. The referral to Cortezʼs Report was in relation to Manlapigʼs final
Adjustment Report. Evidently, it was the existence of the Survey Report that was testified to. The
admissibility of that Report as part of the testimonies of the witnesses was correctly ruled upon by the trial
court. At any rate, even without the Survey Report, petitioner has already failed to overcome the
presumption of fault that applies to common carriers.

*In summary: Petitioner argues that it falls under hearsay rule to admit the Cortez Report given that Cortez
did not testify on it. The SC basically said that as a general rule, the Survey report should not be admitted, but
in this case, the existence of the survey report was testified to, not its contents. So, since other witnesses
testified as to the Report’s existence even if Cortez did not testify on it, because the contents of the report was
not in issue, the Report as evidence is admissible but only as to its existence and not its contents.

Dispositive Portion: Petition denied, affirm CA.

42
 Loadstar Shipping Co., Inc vs Pioneer Asia Insurance Corp
G.R. NO. 157481, January 24, 2006

FACTS:
Petitioner Loadstar Shipping Co., Inc. is the registered owner and operator of the vessel M/V Weasel.
It entered into a voyage-charter with Northern Mindanao Transport Company, Inc. for the carriage of 65,000
bags of cement from Iligan City to Manila. The shipper was Iligan Cement Corporation, while the consignee in
Manila was Market Developers, Inc.

The cement were loaded on board M/V Weasel and stowed in the cargo holds for delivery to the
consignee. Prior to the voyage, the consignee insured the shipment of cement with respondent Pioneer Asia
Insurance Corporation.

The weather was good when they left but the following morning the captain ordered the vessel to be
forced aground and the entire shipment of cement was exposed to sea water. Petitioner thus failed to deliver
the goods to the consignee in Manila.

The consignee demanded from petitioner full reimbursement of the cost of the lost shipment.
Petitioner, however, refused to reimburse the consignee despite repeated demands.

Respondent insurance company paid the consignee for the value of the lost shipment of cement. In
return, the consignee executed a Loss and Subrogation Receipt in favor of respondent concerning the latter’s
subrogation rights against petitioner.

ISSUE:
Had the voyage-charter entered into by Loadstar with the Northern Mindanao Transport Company,
Inc. converted the former into a private carrier?

RULING:
No. The voyage-charter agreement between petitioner and Northern Mindanao Transport Company,
Inc. did not in any way convert the common carrier into a private carrier since the said charter is limited to
the ship only and does not involve both the vessel and its crew.

As a common carrier, petitioner is required to observe extraordinary diligence in the vigilance over
the goods it transports. When the goods placed in its care are lost, petitioner is presumed to have been at fault
or to have acted negligently. Petitioner therefore has the burden of proving that it observed extraordinary
diligence in order to avoid responsibility for the lost cargo. However, petitioner failed to substantiate its claim
that the loss of the goods was due to a fortuitous event. Records show that the sea and weather conditions in
the vicinity of Negros Occidental were calm.

NOTES:

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

43
 CEBU SALVAGE CORPORATION, Petitioner, v. PHILIPPINE HOME ASSURANCE CORPORATION,
Respondent
G.R. No. 150403, FIRST DIVISION, January 25, 2007, CORONA, J

Definition of Common Carrier: The common carrier need not be the owner ( of the vessel ) used to consummate
contract of carriage

The idea proposed by petitioner is not only preposterous, it is also dangerous. It says that a carrier
that enters into a contract of carriage is not liable to the charterer or shipper if it does not own the
vessel it chooses to use. MCCII never dealt with ALS and yet petitioner insists that MCCII should sue ALS for
reimbursement for its loss. Certainly, to permit a common carrier to escape its responsibility for the goods it
agreed to transport (by the expedient of alleging non-ownership of the vessel it employed) would
radically derogate from the carrier's duty of extraordinary diligence. It would also open the door to
collusion between the carrier and the supposed owner and to the possible shifting of liability from the
carrier to one without any financial capability to answer for the resulting damages.

FACTS:
Petitioner Cebu Salvage Corporation (as carrier) and Maria Cristina Chemicals Industries, Inc.
[MCCII] (as charterer) entered into a voyage charter wherein petitioner was to load 800 to 1,100
metric tons of silica quartz on board the M/T Espiritu Santo7at Ayungon, Negros Occidental for
transport to and discharge at Tagoloan, Misamis Oriental to consignee Ferrochrome Phils., Inc.

Pursuant to the contract, petitioner received and loaded 1,100 metric tons of silica quartz on board
the M/T Espiritu Santo which left Ayungon for Tagoloan the next day. The shipment never reached its
destination, however, because the M/T Espiritu Santo sank in the afternoon of December 24, 1984 off
the beach of Opol, Misamis Oriental, resulting in the total loss of the cargo.

MCCII filed a claim for the loss of the shipment with its insurer, respondent Philippine Home
Assurance Corporation. Respondent paid the claim in the amount ofP211,500 and was subrogated to the
rights of MCCII. Thereafter, it filed a case in the RTC against petitioner for reimbursement of the amount it
paid MCCII.

RTC rendered judgment in favor of respondent. CA affirmed.

ISSUE:
Whether the carrier can be held liable for the loss of cargo resulting from the sinking of a
ship it does not own (YES)

RULING:
Based on the agreement signed by the parties and the testimony of petitioner’s operations manager,
it is clear that it was a contract of carriage petitioner signed with MCCII. It actively negotiated and solicited
MCCII’s account, offered its services to ship the silica quartz and proposed to utilize the M/T Espiritu Santo in
lieu of the M/T Seebees or the M/T Shirley (as previously agreed upon in the voyage charter) since these
vessels had broken down.

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

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

44
common carriers are presumed to be at fault or to have acted negligently, unless they prove that they
observed extraordinary diligence.

Petitioner was the one which contracted with MCCII for the transport of the cargo. It had
control over what vessel it would use. All throughout its dealings with MCCII, it represented itself as a
common carrier. The fact that it did not own the vessel it decided to use to consummate the contract
of carriage did not negate its character and duties as a common carrier. The MCCII (respondent’s
subrogor) could not be reasonably expected to inquire about the ownership of the vessels which petitioner
carrier offered to utilize. As a practical matter, it is very difficult and often impossible for the general public
to enforce its rights of action under a contract of carriage if it should be required to know who the
actual owner of the vessel is. In fact, in this case, the voyage charter itself denominated petitioner as the
"owner/operator" of the vessel.

Petitioner next contends that if there was a contract of carriage, then it was between MCCII and ALS
as evidenced by the bill of lading ALS issued.

Again, we disagree.

The bill of lading was merely a receipt issued by ALS to evidence the fact that the goods had
been received for transportation. It was not signed by MCCII, as in fact it was simply signed by the
supercargo of ALS. This is consistent with the fact that MCCII did not contract directly with ALS. While
it is true that a bill of lading may serve as the contract of carriage between the parties, it cannot
prevail over the express provision of the voyage charter that MCCII and petitioner executed:[I]n cases where
a Bill of Lading has been issued by a carrier covering goods shipped aboard a vessel under a charter
party, and the charterer is also the holder of the bill of lading, "the bill of lading operates as the
receipt for the goods, and as document of title passing the property of the goods, but not as varying the
contract between the charterer and the shipowner." The Bill of Lading becomes, therefore, only a receipt and
not the contract of carriage in a charter of the entire vessel, for the contract is the Charter Party, and is the
law between the parties who are bound by its terms and condition provided that these are not contrary to
law, morals, good customs, public order and public policy.

Finally, petitioner asserts that MCCII should be held liable for its own loss since the voyage charter
stipulated that cargo insurance was for the charterer’s account. This deserves scant consideration. This
simply meant that the charterer would take care of having the goods insured. It could not exculpate
the carrier from liability for the breach of its contract of carriage. The law, in fact, prohibits it and
condemns it as unjust and contrary to public policy.

To summarize, a contract of carriage of goods was shown to exist; the cargo was loaded on
board the vessel; loss or non-delivery of the cargo was proven; and petitioner failed to prove that it
exercised extraordinary diligence to prevent such loss or that it was due to some casualty or force
majeure. The voyage charter here being a contract of affreightment, the carrier was answerable for the loss of
the goods received for transportation.

The idea proposed by petitioner is not only preposterous, it is also dangerous. It says that a carrier
that enters into a contract of carriage is not liable to the charterer or shipper if it does not own the vessel it
chooses to use. MCCII never dealt with ALS and yet petitioner insists that MCCII should sue ALS for
reimbursement for its loss. Certainly, to permit a common carrier to escape its responsibility for
the goods it agreed to transport (by the expedient of alleging non-ownership of the vessel it employed)
would radically derogate from the carrier's duty of extraordinary diligence. It would also open the door to
collusion between the carrier and the supposed owner and to the possible shifting of liability from the
carrier to one without any financial capability to answer for the resulting damages.

xxx
(same case)

45
 Maritime Commerce: Voyage/Trip Charter

Under a voyage charter, the shipowner retains the possession, command and navigation of the ship, the
charterer or freighter merely having use of the space in the vessel in return for his payment of freight. An
owner who retains possession of the ship remains liable as carrier and must answer for loss or non-delivery
of the goods received for transportation.

FACTS:
Petitioner Cebu Salvage Corporation (as carrier) and Maria Cristina Chemicals Industries, Inc.
[MCCII] (as charterer) entered into a voyage charter wherein petitioner was to load 800 to 1,100
metric tons of silica quartz on board the M/T Espiritu Santo at Ayungon, Negros Occidental for
transport to and discharge at Tagoloan, Misamis Oriental to consignee Ferrochrome Phils., Inc. The
shipment never reached its destination, however, because the M/T Espiritu Santo sank in the afternoon
of December 24, 1984 off the beach of Opol, Misamis Oriental, resulting in the total loss of the cargo.

MCCII filed a claim for the loss of the shipment with its insurer, respondent Philippine Home
Assurance Corporation. Respondent paid the claim in the amount of P211,500 and was subrogated to
the rights of MCCII. Thereafter, it filed a case against petitioner for reimbursement of the amount it paid
MCCII.

ISSUE:
Whether or not the petitioner can be held liable?

RULING:
YES, petitioner can be held liable. Petitioner and MCCII entered into a "voyage charter," also
known as a contract of affreightment wherein the ship was leased for a single voyage for the
conveyance of goods, in consideration of the payment of freight.

Under a voyage charter, the shipowner retains the possession, command and navigation of the ship,
the charterer or freighter merely having use of the space in the vessel in return for his payment of
freight. An owner who retains possession of the ship remains liable as carrier and must answer for loss or
non-delivery of the goods received for transportation.

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

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

Petitioner was the one which contracted with MCCII for the transport of the cargo. It had
control over what vessel it would use. All throughout its dealings with MCCII, it represented itself as a
common carrier. The fact that it did not own the vessel it decided to use to consummate the contract
of carriage did not negate its character and duties as a common carrier. The MCCII (respondent’s
subrogor) could not be reasonably expected to inquire about the ownership of the vessels which
petitioner carrier offered to utilize. As a practical matter, it is very difficult and often impossible for the
general public to enforce its rights of action under a contract of carriage if it should be required to
know who the actual owner of the vessel is. In fact, in this case, the voyage charter itself denominated
petitioner as the "owner/operator" of the vessel.

46
 While it is true that a bill of lading may serve as the contract of carriage between the parties, it
cannot prevail over the express provision of the voyage charter that MCCII and petitioner executed.
The Bill of Lading becomes, therefore, only a receipt and not the contract of carriage in a
charter of the entire vessel, for the contract is the Charter Party, and is the law between the parties who are
bound by its terms and condition provided that these are not contrary to law, morals, good customs, public
order and public policy.

To summarize, a contract of carriage of goods was shown to exist; the cargo was loaded on board the
vessel; loss or non-delivery of the cargo was proven; and petitioner failed to prove that it exercised
extraordinary diligence to prevent such loss or that it was due to some casualty or force majeure. The voyage
charter here being a contract of affreightment, the carrier was answerable for the loss of the goods received
for transportation.

47
 SPOUSES DANTE CRUZ and LEONORA CRUZ, Petitioners, vs. SUN HOLIDAYS, INC., Respondent.
G.R. No. 186312 June 29, 2010

Facts:
Spouses Dante and Leonora Cruz (petitioners) lodged a Complaint on January 25, 2001 against Sun
Holidays, Inc. (respondent) with the Regional Trial Court (RTC) of Pasig City for damages arising from the
death of their son Ruelito C. Cruz (Ruelito) who perished with his wife on September 11, 2000 on board the
boat M/B Coco Beach III that capsized en route to Batangas from Puerto Galera, Oriental Mindoro where the
couple had stayed at Coco Beach Island Resort (Resort) owned and operated by respondent.

On September 11, 2000, as it was still windy, Matute and 25 other Resort guests including
petitioners’ son and his wife trekked to the other side of the Coco Beach mountain that was sheltered from
the wind where they boarded M/B Coco Beach III, which was to ferry them to Batangas.

Shortly after the boat sailed, it started to rain. As it moved farther away from Puerto Galera and into
the open seas, the rain and wind got stronger, causing the boat to tilt from side to side and the captain to step
forward to the front, leaving the wheel to one of the crew members.

The waves got more unwieldy. After getting hit by two big waves which came one after the other,
M/B Coco Beach III capsized putting all passengers underwater. The passengers, who had put on their life
jackets, struggled to get out of the boat. Upon seeing the captain, Matute and the other passengers who
reached the surface asked him what they could do to save the people who were still trapped under the boat.
The captain replied "Iligtas niyo na lang ang sarili niyo" (Just save yourselves).

Help came after about 45 minutes when two boats owned by Asia Divers in Sabang, Puerto Galera
passed by the capsized M/B Coco Beach III. Boarded on those two boats were 22 persons, consisting of 18
passengers and four crew members, who were brought to Pisa Island. Eight passengers, including petitioners’
son and his wife, died during the incident.

Issue:
Whether or not respondent is a common carrier. YES

Held:
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 above article makes no distinction between one whose principal business activity is the
carrying of persons or goods or both, and one who does such carrying only as an ancillary activity (in local
idiom, as "a sideline"). Article 1732 also carefully avoids making any distinction between a person or
enterprise offering transportation service on a regular or scheduled basis and one offering such service on an
occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its
services to the "general public," i.e., the general community or population, and one who offers services or
solicits business only from a narrow segment of the general population. We think that Article 1733
deliberately refrained from making such distinctions.

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

48
 That respondent does not charge a separate fee or fare for its ferry services is of no moment. It would
be imprudent to suppose that it provides said services at a loss. The Court is aware of the practice of beach
resort operators offering tour packages to factor the transportation fee in arriving at the tour package price.
That guests who opt not to avail of respondent’s ferry services pay the same amount is likewise
inconsequential. These guests may only be deemed to have overpaid.

49
 UNSWORTH TRANSPORT INTERNATIONAL (PHILS.), INC., Petitioner, vs. COURT OF APPEALS and
PIONEER INSURANCE AND SURETY CORPORATION, Respondents.
G.R. No. 166250               July 26, 2010

Facts:
On August 31, 1992, the shipper Sylvex Purchasing Corporation delivered to UTI a shipment of 27
drums of various raw materials for pharmaceutical manufacturing, consisting of: "1) 3 drums (of) extracts,
flavoring liquid, flammable liquid x x x banana flavoring; 2) 2 drums (of) flammable liquids x x x turpentine
oil; 2 pallets. STC: 40 bags dried yeast; and 3) 20 drums (of) Vitabs: Vitamin B Complex Extract."  UTI issued
Bill of Lading No. C320/C15991-2, covering the aforesaid shipment. The subject shipment was insured with
private respondent Pioneer Insurance and Surety Corporation in favor of Unilab against all risks in the
amount of P1,779,664.77 under and by virtue of Marine Risk Note Number MC RM UL 0627 92 and Open
Cargo Policy No. HO-022-RIU.

On the same day that the bill of lading was issued, the shipment was loaded in a sealed 1x40
container van, with no. APLU-982012, boarded on APL’s vessel M/V "Pres. Jackson," Voyage 42, and
transshipped to APL’s M/V "Pres. Taft" for delivery to petitioner in favor of the consignee United
Laboratories, Inc. (Unilab).

On September 30, 1992, the shipment arrived at the port of Manila. On October 6, 1992, petitioner
received the said shipment in its warehouse after it stamped the Permit to Deliver Imported Goods  procured
by the Champs Customs Brokerage. Three days thereafter, or on October 9, 1992, Oceanica Cargo Marine
Surveyors Corporation (OCMSC) conducted a stripping survey of the shipment located in petitioner’s
warehouse. 

Consequently, Unilab’s quality control representative rejected one paper bag containing dried yeast
and one steel drum containing Vitamin B Complex as unfit for the intended purpose. On November 7, 1992,
Unilab filed a formal claim for the damage against private respondent and UTI. On November 20, 1992, UTI
denied liability on the basis of the gate pass issued by Jardine that the goods were in complete and good
condition; while private respondent paid the claimed amount on March 23, 1993. By virtue of the Loss and
Subrogation Receipt issued by Unilab in favor of private respondent, the latter filed a complaint for Damages
against APL, UTI and petitioner with the RTC of Makati.

Issue:
Whether or not petitioner is a common carrier. YES

Held:
Admittedly, petitioner is a freight forwarder. The term "freight forwarder" refers to a firm holding
itself out to the general public (other than as a pipeline, rail, motor, or water carrier) to provide
transportation of property for compensation and, in the ordinary course of its business, (1) to assemble and
consolidate, or to provide for assembling and consolidating, shipments, and to perform or provide for break-
bulk and distribution operations of the shipments; (2) to assume responsibility for the transportation of
goods from the place of receipt to the place of destination; and (3) to use for any part of the transportation a
carrier subject to the federal law pertaining to common carriers.

A freight forwarder’s liability is limited to damages arising from its own negligence, including
negligence in choosing the carrier; however, where the forwarder contracts to deliver goods to their
destination instead of merely arranging for their transportation, it becomes liable as a common carrier for
loss or damage to goods. A freight forwarder assumes the responsibility of a carrier, which actually executes
the transport, even though the forwarder does not carry the merchandise itself.

Undoubtedly, UTI is liable as a common carrier. 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

50
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, loss, or destruction of the goods happened, the
transporter shall be held responsible.

51
 SPOUSES TEODORO and NANETTE PERENA., Petitioners, -versus – SPOUSES TERESITA PHILIPPINE
NICOLAS and L. ZARATE, NATIONAL RAILWAYS, and the COURT OF APPEALS, Respondents.
G.R. No. 157917, FIRST DIVISION, August 29, 2012, BERSAMIN, J.

Examples of Common Carrier: School bus operator despite limited clientele

The true test for a common carrier is not the quantity or extent of the business actually transacted, or the
number and character of the conveyances used in the activity, but whether the undertaking is a part
of the activity engaged in by the carrier that he has held out to the general public as his business or
occupation.

Despite catering to a limited clientèle, the Pereñ as operated as a common carrier because they held
themselves out as a ready transportation indiscriminately to the students of a particular school living within
or near where they operated the service and for a fee.

FACTS:
The Pereñ as were engaged in the business of transporting students from their respective
residences in Parañ aque City to Don Bosco in Pasong Tamo, Makati City, and back. They employed Clemente
Alfaro (Alfaro) as driver of the van.

In June 1996, the Zarates contracted the Pereñ as to transport Aaron to and from Don Bosco.
Considering that the students were due at Don Bosco by 7:15 a.m., and that they were already
running late because of the heavy vehicular traffic on the South Superhighway, Alfaro took the van to an
alternate route. At about the time the van was to traverse the railroad crossing, PNR Commuter No.
302 (train) was in the vicinity of the Magallanes Interchange travelling northbound. The train hit the rear
end of the van, and the impact threw nine of the 12 students in the rear, including Aaron, out of the
van. Aaron landed in the path of the train, which dragged his body and severed his head, instantaneously
killing him.

Devastated, the Zarates commenced an action for damages against Alfaro, the Pereñ as, PNR
and Alano. The RTC ruled in favor of the Zarates and held that the cooperative gross negligence of
the Pereñ as and PNR had caused the collision that led to the death of Aaron.

Upon appeal, the Court of Appeals promulgated its decision, affirming the findings of the RTC.

ISSUE:
Whether defendant spouses Pereñ a are liable for breach of the contract of carriage with
plaintiff-spouses in failing to provide adequate and safe transportation for the latter's son. (YES)

RULING:
Although in this jurisdiction the operator of a school bus service has been usually regarded as
a private carrier, primarily because he only caters to some specific or privileged individuals, and his
operation is neither open to the indefinite public nor for public use, the exact nature of the operation
of a school bus service has not been finally settled. This is the occasion to lay the matter to rest.

A carrier is a person or corporation who undertakes to transport or convey goods or persons from
one place to another, gratuitously or for hire. The carrier is classified either as a private/special
carrier or as a common/public carrier. A private carrier is one who, without making the activity a
vocation, or without holding himself or itself out to the public as ready to act for all who may desire his or its
services, undertakes, by special agreement in a particular instance only, to transport goods or persons
from one place to another either gratuitously or for hire. The provisions on ordinary contracts of the
Civil Code govern the contract of private carriage. The diligence required of a private carrier is only ordinary,
that is, the diligence of a good father of the family. In contrast, a common carrier is a person, corporation, firm
or association engaged in the business of carrying or transporting passengers or goods or both, by land,

52
water, or air, for compensation, offering such services to the public. Contracts of common carriage are
governed by the provisions on common carriers of the Civil Code, the Public Service Act, and other special
laws relating to transportation. A common carrier is required to observe extraordinary diligence, and is
presumed to be at fault or to have acted negligently in case of the loss of the effects of passengers, or
the death or injuries to passengers.

In relation to common carriers, the Court defined public use in the following terms in United States v.
Tan Piaco, viz:

"Public use" is the same as "use by the public". The essential feature of the public use is not confined
to privileged individuals, but is open to the indefinite public. It is this indefinite or unrestricted quality
that gives it its public character. In determining whether a use is public, we must look not only to the
character of the business to be done, but also to the proposed mode of doing it. If the use is merely optional
with the owners, or the public benefit is merely incidental, it is not a public use, authorizing the exercise of
the jurisdiction of the public utility commission. There must be, in general, a right which the law compels
the owner to give to the general public. It is not enough that the general prosperity of the public is promoted.
Public use is not synonymous with public interest. The true criterion by which to judge the character of the
use is whether the public may enjoy it by right or only by permission.

In De Guzman v. Court of Appeals, the Court noted that Article 1732 of the Civil Code avoided
any distinction between a person or an enterprise offering transportation on a regular or an isolated
basis; and has not distinguished a carrier offering his services to the general public, that is, the general
community or population, from one offering his services only to a narrow segment of the general
population.

Nonetheless, the concept of a common carrier embodied in Article 1732 of the Civil Code coincides
neatly with the notion of public service under the Public Service Act, which supplements the law on common
carriers found in the Civil Code. Public service, according to Section 13, paragraph (b) of the Public
Service Act, includes:

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

Given the breadth of the aforequoted characterization of a common carrier, the Court
has considered as common carriers pipeline operators, custom brokers and warehousemen, and barge
operators even if they had limited clientèle.

As all the foregoing indicate, the true test for a common carrier is not the quantity or extent of the
business actually transacted, or the number and character of the conveyances used in the activity, but
whether the undertaking is a part of the activity engaged in by the carrier that he has held out to the general
public as his business or occupation. If the undertaking is a single transaction, not a part of the general
business or occupation engaged in, as advertised and held out to the general public, the individual or
the entity rendering such service is a private, not a common, carrier. The question must be determined
by the character of the business actually carried on by the carrier, not by any secret intention or mental
reservation it may entertain or assert when charged with the duties and obligations that the law
imposes.

53
 Applying these considerations to the case before us, there is no question that the Pereñ as as
the operators of a school bus service were: (a) engaged in transporting passengers generally as a
business, not just as a casual occupation; (b) undertaking to carry passengers over established roads
by the method by which the business was conducted; and (c) transporting students for a fee. Despite catering
to a limited clientèle, the Pereñ as operated as a common carrier because they held themselves out as a
ready transportation indiscriminately to the students of a particular school living within or near where
they operated the service and for a fee.

54
 WESTWIND SHIPPING CORPORATION, Petitioner, -versus -UCPB GENERAL INSURANCE CO., INC. and
ASIAN TERMINALS INC., Respondents.
G.R. No. 200289, THIRD DIVISION, November 25, 2013, PERALTA, J.

Vigilance over goods: Duration of Liability – Actual or Constructive Delivery

What Westwind failed to realize is that its extraordinary responsibility as a common carrier lasts until the
time the goods are actually or constructively delivered 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
for him to remove the goods. As such, since the discharging of the containers/skids had not yet been
completed at the time the damage occurred, there is no reason to imply that there was already
delivery, actual or constructive, of the cargoes to ATI.

FACTS:
Kinsho-Mataichi Corporation shipped from the port of Kobe, Japan 197 metal containers/skids
of tin-free steel to the consignee, San Miguel Corporation (SMC). The shipment was loaded and
received clean on board M/V Golden Harvest Voyage, a vessel owned and operated by Westwind
Shipping Corporation (Westwind). The goods are insured with UCPB General Insurance Co., Inc.
(UCPB).

When the shipment arrived in Manila, it was discharged in the custody of the arrastre
operator, Asian Terminals, Inc. (ATI). During the unloading operation, 6 containers/skids sustained dents and
punctures from the forklift used by the stevedores of Ocean Terminal Services, Inc. (OTSI).
Subsequently, Orient Freight International Inc. (OFII), the customs broker of SMC, withdrew from ATI
the 197 containers/skits, including the 6 in damaged condition and delivered the same at SMC’s warehouse.
Upon discharged, it was discovered that 9 additional containers/skids were damaged.

Almost a year after, SMC filed a claim against UCPB, Westwind, ATI and OFII to recover the amount
corresponding to the 15 damaged containers/skids. UCPB then paid SMC. In the exercise of its right of
subrogation, UCPB instituted a complaint for damages against Westwind, ATI and OFII. Westwind
argues that it no longer had actual or constructive custody of the containers/skids at the time they were
damaged by ATI’s forklift operator. Its responsibility ceased from the moment the cargoes were delivered to
ATI. OFII, on the other hand, maintains that it is not a common carrier but a customs broker.

ISSUES:
A. Whether the liability of a common carrier ceased from the time the cargoes were discharged to
the custody of the arrastre operator. (NO)
B. Whether a customs carrier may be regarded as a common carrier. (YES)

RULING:

(A) It was previously ruled in a case decided by a U.S. Circuit Court that like the duty of
seaworthiness, the duty to care for the cargo is non-delegable and the carrier is accordingly
responsible for the acts of the master, the crew, the stevedore, and his other agents. It is ordinarily the duty
of the master of a vessel to unload the cargo and place it in readiness for delivery to the consignee
and there is an implied obligation that this shall be accomplished with sound machinery and competent
hands in such manner that no unnecessary injury shall be done thereto. The fact that a consignee is
required to furnish persons to assist in unloading a shipment may not relieve the carrier of its duty as to
such unloading. It is settled in maritime law jurisprudence that cargoes while being unloaded generally
remain under the custody of the carrier.

In the case at bar, what Westwind failed to realize is that its extraordinary responsibility as a
common carrier lasts until the time the goods are actually or constructively delivered carrier to the consignee

55
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 for him to remove the goods. As such, since the discharging of the
containers/skids had not yet been completed at the time the damage occurred, there is no reason to
imply that there was already delivery, actual or constructive, of the cargoes to ATI.

It must be noted that common carriers, from the nature of their business and for reasons of public
policy, are bound to observe extraordinary diligence in vigilance over the goods and over the safety of the
passengers transported by them according to all the circumstances of each case. The mere proof of
delivery of goods in good order to the carrier and their arrival in the place of destination in bad order make
out a prima facie case against it so that if no explanation is given as to how the injury occurred, it
must be held responsible.

(B) A customs broker has been regarded as a common carrier because transportation of goods is an integral
part of its business. Article 1732 does not distinguish between one whose principal business activity is
the carrying of goods and one who does such carrying only as an ancillary activity. The idea that one is
not a common carrier but a customs broker whose principal function is to prepare the correct customs
declaration and proper shipping documents is bereft of merit.

As a common carrier, OFII is mandated to observe extraordinary diligence in the vigilance over the
goods it transports according to the peculiar circumstances of each case. In the event that the goods are lost,
destroyed or deteriorated, it is presumed to have been at fault or to have acted negligently unless it proves
that it observed extraordinary diligence. As such, considering that additional 9 containers/skids were
found to be in bad order after it got hold of the shipment, instead of merely excusing itself from liability, it
is incumbent upon OFII to prove that it actively took care of the goods by exercising extraordinary
diligence in the carriage thereof. It failed to do so. Hence, its presumed negligent.

56
 Federal Phoenix Assurance Co., Ltd. v. Fortune Sea Carrier, Inc.,
G.R. NO. 188118, NOVEMBER 23, 2015

FACTS:
Fortune agreed to lease its vessel to Northern Mindanao Transport (Northern Transport). The
parties agreed (Time Charter Party Agreement) that the vessel (M/V Ricky Rey) shall be leased to Northern
Transport for 90 days to carry cement bags to different ports. Later on, the parties extended the period of
lease for another 90 days.

Thereafter, Northern Transport ordered 2,069 bales of abaca fibers to be shipped on board M/V
Ricky Rey by shipper Manila Hemp Trading Corp, for delivery to Newtech, the consignee in Iligan. This was
covered by Bill of Lading No. 1, and was insured by Federal Phoenix.

When M/V Ricky Rey arrived at Iligan, the stevedores started to discharge the abaca shipment.
However later that day, the stevedores noticed smoke coming out of the cargo haul where the bales of abaca
were located. It was then discovered that the 60 bales of abaca were damaged.

As a result, Newtech filed an insurance claim with Federal Phoenix. Thus, Federal Phoenix paid
Newtech for the losses it incurred due to the damaged and undelivered bales of abaca. Upon payment, Federal
Phoenix was subrogated to the rights of Newtech and pursued its claim against Fortune Sea. Despite several
demands to the latter, Federal Phoenix’s claims were not settled. Thus, it filed complaint for sum of money.

Fortune Sea argued that it was acting as a private sea carrier at the time incident occurred. It alleged
that the agreement executed by the parties expressly provided that M/V Ricky Rey shall be under the orders
and complete control of Northern Transport.

RTC Ruling:
In favor of Federal Phoenix.
Ordered Fortune Sea to pay actual damages, attorney’s fees and suit costs as well. Fortune Sea appealed to CA.

CA Ruling:
Reversed the RTC Decision, and dismissed the complaint for sum of money filed by Federal Phoenix.
Ruled that although the agreement between Fortune Sea and Northern Transport was denominated as Time
Charter Party, it found compelling reasons to hold that the contract was one of bareboat or demise.

ISSUE:
WON Fortune Sea was converted into a private carrier by virtue of the charter party agreement it
entered into Northern Transport.

HELD: YES

RATIO:
Fortune Sea is a corporation engaged in the business of transporting cargo by water, and for
compensation, offering its services to the public. Thus, no doubt it is a common carrier.

However, it entered into a time-chatter with Northern Transport. Did this agreement convert
Fortune Sea into a private carrier? Yes.

In determining the nature of the contract, courts are not bound by the title or name given by the
parties. The decisive factors are not necessarily the terminology used in the contract, but by their conduct,
actions, and deeds prior to, during and immediately after executing the agreement.

57
 In this case the Time Charter Agreement executed by Fortune Sea and Northern Transport clearly
shows that the charter includes both vessel and its crew, thus making the Northern Transport the owner pro
hac vice (for this occasion only) of M/V Ricky Rey during the period of the voyage.

The contract stated:

o Upon delivery of the vessel(s) and during the period of the charter, SECOND PARTY
(Northern Transport) assumes operational control for the dispatch and direction of voyage
of the vessel(s).

o H. The Master to prosecute all voyages with the utmost despatch and to render customary
assistance with the vessel(s) crew. The Master to be under the orders of the SECOND PARTY
(Northern Transport) as regards employment of the other arrangements.

o N. The SECOND PARTY (Northern Transport) to furnish MASTER with all instructions and
sailing directions and the Master and Engineer to keep full and correct logs accessible to the
SECOND PARTY (Northern Transport) or their Supercargo.

It is clear then that the Time Charter Party agreement established that Fortune Sea had completely
and exclusively relinquished, possession, command, and navigation of M/V Ricky Rey to Northern Transport.

M/V Ricky Rey was converted into a private carrier notwithstanding the existence of the Time
Charter Party agreement, since the said agreement was not limited to the ship but even extends to the control
of its crew.

Also, the testimony of Capt. Alfredo Canon of M/V Ricky Rey confirmed that the whole vessel was
leased to Northern Transport, the entire command and control over its navigation was likewise transferred to
it.

The master, and all the crew of the ship were all made subject to direct control and supervision of the
charterer. The CA correctly ruled that the nature of the vessel’s charter is one of bareboat or demise charter.

Thus SC affirmed the decision of the CA, in dismissing the complaint for sum of money filed by
Federal Phoenix.

58
 TORRES-MADRID BROKERAGE,INC., Petitioner –versus- FEB MITSUI MARINE INSURANCE CO., INC.
and BENJAMIN P. MANALAST AS, doing business under the name of BMT TRUCKING SERVICES,
Respondents.
G.R. No. 194121, July 11, 2016, SECOND DIVISION, BRION, J.

A brokerage may be considered a common carrier if it also undertakes to deliver the goods for its
customers. The law does not distinguish between one whose principal business activity is the carrying of
goods and one who undertakes this task only as an ancillary activity. Theft or the robbery of the goods is not
considered a fortuitous event or a force majeure. Nevertheless, a common carrier may absolve itself of
liability for a resulting loss: (1) if it proves that it exercised extraordinary diligence in transporting
and safekeeping the goods; or (2) if it stipulated with the shipper/owner of the goods to limit its liability
for the loss, destruction, or deterioration of the goods to a degree less than extraordinary diligence.

FACTS:
A shipment of various electronic goods arrived at the Port of Manila for Sony Philippines, Inc.
(Sony). Previous to the arrival, Sony had engaged the services of TMBI to facilitate, process, withdraw,
and deliver the shipment from the port to its warehouse in Biñ an, Laguna. TMBI –who did not own
any delivery trucks –subcontracted the services of Benjamin Manalastas’ company, BMT Trucking Services
(BMT), to transport the shipment from the port to the Biñ an warehouse.

Four BMT trucks picked up the shipment from the port. However, only three trucks arrived at
Sony’s Biñ an warehouse. The fourth truck driven by Rufo Reynaldo Lapesura was found abandoned.
Sony filed an insurance claim with the Mitsui, the insurer of the goods. After evaluating the merits of the
claim, Mitsui paid Sony the value of the lost goods. After being subrogated to Sony’s rights, Mitsui sent TMBI a
demand letter for payment of the lost goods. TMBI refused to pay Mitsui’s claim. As a result, Mitsui filed a
complaint against TMBI. TMBI, in turn, impleaded Benjamin Manalastas, the proprietor of BMT, as a
third-party defendant. TMBI prayed that in the event it is held liable to Mitsui for the loss, it should be
reimbursed by BMT.

RTC found TMBI and Benjamin Manalastas jointly and solidarily liable to pay Mitsui. CA
affirmed the RTC’s decision. TMBI denies being a common carrier because it does not own a single
truck to transport its shipment and it does not offer transport services to the public for compensation and
hence, it is not bound to observe extra-ordinary diligence. Furthermore, TMBI insists that the hijacking of the
truck was a fortuitous event which should exonerate its liability.

ISSUES:
1. Whether TMBI is a common carrier. (YES)
2. Whether TMBI should be held liable for the hijacking of the truck. (YES)
3. Whether BMT should be held liable with TMBI. (NO)

RULING:
1. TMBI is a common carrier. A brokerage may be considered a common carrier if it also undertakes to deliver
the goods for its customers.

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

In A.F. Sanchez Brokerage Inc. v. Court of Appeals, we held that a customs broker – whose principal
business is the preparation of the correct customs declaration and the proper shipping documents – is still
considered a common carrier if it also undertakes to deliver the goods for its customers. The law does not
distinguish between one whose principal business activity is the carrying of goods and one who undertakes
this task only as an ancillary activity. Despite TMBI’s present denials, we find that the delivery of the goods is
an integral, albeit ancillary, part of its brokerage services. TMBI admitted that it was contracted to facilitate,

59
process, and clear the shipments from the customs authorities, withdraw them from the pier, then
transport and deliver them to Sony’s warehouse in Laguna.

That TMBI does not own trucks and has to subcontract the delivery of its clients’ goods, is
immaterial. As long as an entity holds itself to the public for the transport of goods as a business, it is
considered a common carrier regardless of whether it owns the vehicle used or has to actually hire
one.

Lastly, TMBI’s customs brokerage services –including the transport/delivery of the cargo –are
available to anyone willing to pay its fees. Given these circumstances, we find it undeniable that TMBI
is a common carrier.

2. TMBI is liable for the hijacking of the truck.

Theft or the robbery of the goods is not considered a fortuitous event or a force majeure.
Nevertheless, a common carrier may absolve itself of liability for a resulting loss: (1) if it proves that
it exercised extraordinary diligence in transporting and safekeeping the goods; or (2) if it stipulated
with the shipper/owner of the goods to limit its liability for the loss, destruction, or deterioration of
the goods to a degree less than extraordinary diligence.

Instead of showing that it had acted with extraordinary diligence, TMBI simply argued that it
was not a common carrier bound to observe extraordinary diligence. Its failure to successfully establish this
premise carries with it the presumption of fault or negligence, thus rendering it liable to Sony/Mitsui
for breach of contract.

3. TMBI and BMT are not solidarily liable to Mitsui.

TMBI’s liability to Mitsui does not stem from a quasi-delict (culpa aquiliana) but from its breach of
contract (culpa contractual). The tie that binds TMBI with Mitsui is contractual, albeitone that passed
on to Mitsui as a result of TMBI’s contract of carriage with Sony to which Mitsui had been subrogated as an
insurer who had paid Sony’s insurance claim. The legal reality that results from this contractual tie
precludes the application of Article 2194 on solidary liability of the parties based on quasi-delict.

The Court likewise disagree with the finding that BMT is directly liable to Sony/Mitsui for the loss of
the cargo. While it is undisputed that the cargo was lost under the actual custody of BMT (whose employee is
the primary suspect in the hijacking or robbery of the shipment), no direct contractual relationship existed
between Sony/Mitsui and BMT. If at all, Sony/Mitsui’s cause of action against BMT could only arise from
quasi-delict, as a third party suffering damage from the action of another due to the latter’s fault or
negligence, pursuant to Article 2176 of the Civil Code. In the present case, Mitsui’s action is solely premised
on TMBI’s breach of contract. Mitsui did not even sue BMT, much less prove any negligence on its part. If BMT
has entered the picture at all, it is because TMBI sued it for reimbursement for the liability that TMBI
might incur from its contract of carriage with Sony/Mitsui. Accordingly, there is no basis to directly hold
BMT liable to Mitsui for quasi-delict.

The Court, however, do not say that TMBI must absorb the loss. By subcontracting the cargo
delivery to BMT, TMBI entered into its own contract of carriage with a fellow common carrier. Since BMT
failed to prove that it observed extraordinary diligence in the performance of its obligation to TMBI, it is liable
to TMBI for breach of their contract of carriage.

60
 3. Private Carriage

Home Insurance Co. v. American Steamship Agencies, Inc. et. al.

G.R. No. L-25599, 23 SCRA 24, April 4, 1968

PARTIES
Shipper: Consorcio Pesquero del Peru of South America
Consignee – San Miguel Brewery, Inc., now San Miguel Corporation
Owner and operator of the ship – American Steamship Agencies
Insurer – Home Insurance Company

FACTS:
The shipper transported through SS Crowborough 21,740 jute bags of Peruvian fish meal from
Chimbate, Peru to Manila. The shipment was covered by the bills of lading which provides at the back thereof
that the bills of lading shall be governed by and subject to the terms and conditions of the charter party, if
any, otherwise, the bills of lading prevail over all the agreements. On the face of the bills are stamped “Freight
prepaid as per charter party. Subject to all terms, conditions and exceptions of charter party dated London,
Dec. 13, 1962”.

The cargo arrived in Manila and it was discharged into the lighters of Luzon Stevedoring Company.
When the cargo was delivered to consignee there were shortages causing the consignee to lay claims against
Luzon Stevedoring Corporation, the insurer and the owner and operator of the ship. The insurer paid the
consignee to settle the claim as the others denied liability. As subrogee to the consignee, the insurer filed a
complaint for recovery against Luzon Stevedoring Corporation and American Steamship Agencies.

Luzon Stevedoring Corporation’s allegation in its Answer: – It delivered with due diligence.
– Plaintiff’s claim had prescribed under Article 366 of the Code of Commerce stating that the claim must be
made within 24 hours from receipt of the cargo.

American Steamship Agencies’ allegation: 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.
– It claimed to have exercised due diligence in stowing the goods and that as a mere forwarding agent, it was
not responsible for losses or damages to the cargo.

Trial Court’s decision: absolved Luzon Stevedoring Corporation but found American Steamship
Agencies liable.

American Steamship Agencies filed a direct appeal to the SC.

ISSUE:
Whether or not the stipulation in the charter party of the owner’s non-liability valid so as to absolve
the American Steamship Agencies from liability for loss.

RULING:
Yes, American Steamship Agencies is absolved from liability to plaintiff.
Upon perusal of the agreement, the charter party contract shows that it is one of affreightment over the whole
vessel rather than a demise. As such, the liability of the shipowner for acts or negligence of its captain and
crew, would remain in the absence of stipulation. However, Section 2, paragraph 2 of the charter party,
exempts the owner of the vessel from any loss or damage or delay arising from any other source, even from
the neglect or fault of the captain or crew or some other person employed by the owner on board, for whose
acts the owner would ordinarily be liable except for said paragraph.

61
 The release from liability in this case is not against public policy and is valid. This policy has no force
where the public at large is not involved, as in the case of a ship totally chartered for the use of a single party.

NOTES:

Charter Party; Effect where contract is one of affreightment

Where the charter party contract shows that although possession and control of the ship were not entirely
transferred to the charterer, the vessel was chartered to its full and complete capacity and the charterer had
the option to go north or south or vice-versa, loading, stowing and discharging at its risk and expense, said
contract is one of affreightment rather than a demise. As such, in the absence of stipulation, the liability of the
shipowner for acts or negligence of its captain and crew would remain.

Stipulation absolving the owner from liability for loss due to the negligence of its agent is valid
The Civil Code provisions on common carriers, taken from Anglo-American law, should, following American
jurisprudence on the matter, not be applied where the carrier is not acting as such but as a private carrier.
The stipulation in the charter party absolving the owner from liability for loss due to the negligence of its
agent would be void only if the strict public policy governing common carriers is applied. Such policy has no
force where the public at large is not involved, as in the case of a ship totally chartered for the use of a single
party.

62
 National Steel Corp vs. CA and Vlasons Shipping, Inc.
G.R. No. 112287. 283 SCRA 45 December 12, 1997

FACTS:
The MV Vlasons I is a vessel which renders tramping service and, as such, 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. It is undisputed that the ship is a private carrier. And it is in this
capacity that its owner, Vlasons Shipping, Inc., entered into a contract of affreightment or contract of voyage
charter hire with National Steel Corporation.

On July 17, 1974, plaintiff National Steel Corporation (NSC) as Charterer and defendant Vlasons
Shipping, Inc. (VSI) as Owner, entered into a Contract of Voyage Charter Hire whereby NSC hired VSI‟s vessel,
the MV “VLASONS I” to make one (1) voyage to load steel products at Iligan City and discharge them at North
Harbor, Manila.

On August 6, 7 and 8, 1974, in accordance with the Contract of Voyage Charter Hire, the MV
“VLASONS I‟ loaded at plaintiff’s pier at Iligan City, the NSC‟s shipment of 1,677 skids of tinplates and 92
packages of hot rolled sheets or a total of 1,769 packages with a total weight of about 2,481.19 metric tons 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, August 13, 1974, when the vessel‟s three (3) hatches containing the shipment were opened by plaintiff’s
agents, nearly all the skids of tinplates and hot rolled sheets were allegedly found to be wet and rusty. The
cargo was discharged and unloaded by stevedores hired by the Charterer. Unloading was completed only on
August 24, 1974 after incurring a delay of eleven (11) days due to the heavy rain which interrupted the
unloading operations.

To determine the nature and extent of the wetting and rusting, NSC called for a survey of the
shipment
by the Manila Adjusters and Surveyors Company (MASCO). In a letter to the NSC dated March 17, 1975
(Exhibit ‘G’), MASCO made a report of its ocular inspection conducted on the cargo, both while it was still on
board the vessel and later at the NDC warehouse in Pureza St., Sta. Mesa, Manila where the cargo was taken
and stored. MASCO reported that it found wetting and rusting of the packages of hot rolled sheets and metal
covers of the tinplates; that tarpaulin hatch covers were noted torn at various extents; that container/metal
casings of the skids were rusting all over. MASCO ventured the opinion that „rusting of the tinplates was
caused by contact with SEA WATER sustained while still on board the vessel as a consequence of the heavy
weather and rough seas encountered while en route to destination. It was also reported that MASCO‟s
surveyors drew at random samples of bad order packing materials of the tinplates and delivered the same to
the M.I.T. Testing Laboratories for analysis. On August 31, 1974, the M.I.T. Testing Laboratories issued Report
No. 1770 which in part, states, “The analysis of bad order samples of packing materials xxx shows that
wetting was caused by contact with SEA WATER”.

On September 6, 1974, on the basis of the aforesaid Report No. 1770, plaintiff filed with the
defendant its claim for damages suffered due to the downgrading of the damaged tinplates in the amount
of P941,145.18.

NSC demanded damages of P941,145.18 as a result of the act, neglect and default of the master and
crew in the management of the vessel as well as the want of due diligence on the part of the defendant to
make the vessel seaworthy and 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 Charter Hire.

Vlasons Shipping denied liability for the alleged damages; claiming that the MV ‘VLASONS I’ was
seaworthy in all respects for the carriage of plaintiff’s cargo; that said vessel was not a “common carrier”

63
inasmuch as she was under voyage charter contract with the plaintiff as charterer under the charter party;
that in the course of the voyage from Iligan City to Manila, the MV ‘VLASONS I’ encountered very rough seas,
strong winds and adverse weather condition, causing strong winds and big waves to continuously pound
against the vessel and seawater to overflow on its deck and hatch covers; that under the Contract of Voyage
Charter Hire, Vlasons shall not be responsible for losses/damages except on proven willful negligence of the
officers of the vessel, that the officers of said MV ‘VLASONS I’ exercised due diligence and proper
seamanship and were not willfully negligent; that furthermore the Voyage Charter Party provides that
loading and discharging of the
cargo was on FIOST terms which means that the vessel was free of risk and expense in connection with the
loading and discharging of the cargo

RTC rendered decision in favor of Vlasons Shipping; that the vessel is seaworthy, properly manned,
equipped and supplied, and that there is no proof of willful negligence of the vessel’s officers

CA modified the decision of RTC regarding the awards of damages.

ISSUE:
1) Whether or not the provisions of the Civil Code of the Philippines on common carriers pursuant to
which there exist[s] a presumption of negligence against the common carrier in case of loss or
damage to the cargo are applicable to a private carrier.
2) Whether or not Vlasons is a private carrier

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

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

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

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

64
which the charterer, a party other than the shipowner, obtains the use and service of all or some part
of a ship for a period of time or a voyage or voyages.”

65
 Valenzuela Hardwood and Industrial Supply, Inc. v. CA, et al.
GR 102316, 30 June 1997

Topic: Private Carriage

FACTS:
1. Plaintiff Valenzuela Hardwood entered into an agreement with Seven Brothers Shipping Corp.
whereby the latter undertook to load on board its vessel M/V Seven Ambassador the former’s lauan
round logs at the port of Isabela for shipment to Manila.

2. Plaintiff insured the logs against loss or damage with defendant South Sea Surety and Insurance Co.
for 2 million and the latter issued its Marine Cargo Insurance Policy on said date. In payment of the
premium on the insurance policy, plaintiff gave a check to Mr. Chua.

3. On January 25, 1984, M/V Seven Ambassador sank resulting in the loss of the insured logs. A check to
cover payment of the premium and documentary stamps due on the policy was tendered due to the
South Sea Surety but was not accepted. Instead, the insurer cancelled the insurance policy for non-
payment on the premium due.

4. Valenzuela Hardwood demanded payment of the proceeds of the policy from South Sea Surety and
likewise filed a formal claim with Seven Brothers Shipping but both were denied for it appears that
there is a stipulation in the charter party that the ship owner would be exempted from liability in
case of loss.

MAIN ISSUE 1:
WON South Sea Surety is exempted from liability pursuant to the stipulation in the charter party

RULING:
Yes. Being a contrary of private carriage which does not involve the general public, the parties may freely
make such stipulations, provided it is not contrary to law, morals, good customs, public order and public
policy.

1. The lis mota of the case is that the charter party between the petitioner and private respondent
stipulated that the owners shall not be responsible for loss, split, short-landing, breakages and any
kind of damages to the cargo. The proximate cause of the sinking of M/V Seven Ambassadors was not
due to a fortuitous event but the snapping of iron chains and rolling of the logs due to the negligence
of the captain in stowing and securing the logs.
2. Undisputed is the fact that Seven Brothers Shipping is a private carrier when it contracted to
transport the cargo of Valenzuela. Being a private carrier, Article 1745 of the Civil Code may not be
applied unless expressly stipulated by the parties in their charter party. Hence, petition Valenzuela’s
contention that the stipulation is void does not hold water. Seven Brothers Shipping has a duty to
observe the diligence of a good father of a family in transporting the cargo.
3. In a contract of private carriage, the parties may validly stipulate that responsibility for the cargo
rests solely on the charterer, exempting the ship owner from liability for loss caused by the
negligence of the ship captain. Pursuant to Article 1306 of the Civil Code, such stipulation is valid
because it is freely entered into by the parties and is not contrary to law, morals, good customs,
public order, or public policy.
4. Here, being a contract of private carriage, the parties may freely stipulate their duties and obligations
which perforce would be binding on them. Unlike in a contract involving a common carrier, private
carriage does not involve the general public. Hence, the stringent provisions of the Civil Code on
common carriers protecting the general public cannot justifiably be applied to private carrier.
5. The provisions of our Civil Code on common carriers were taken from Anglo-American law. Under
American jurisprudence, a common carrier undertaking to carry a special cargo or chartered to a
special person only, becomes a private carrier. As a private carrier, a stipulation exempting the

66
 owner from liability for the negligence of its agent is not against public policy, and is deemed valid.

ISSUE 2:
Is the charter party stipulation contrary to Articles 586 and 587 of the Code of Commerce which confer the
right to recover damages from the ship owner and ship agent for the acts of the captain?

RULING:
No. Whatever rights Valenzuela Hardwood may have under the aforementioned statutory provisions were
waived when it entered into the charter party.

Article 6 of the Civil Code provides that rights may be waived, unless the waiver is contrary to law,
public order, public policy, morals, or good customs. As a general rule, patrimonial rights may be waived as
opposed to rights to personality and family rights. Petitioner waived such by acceding to the contractual
stipulation that it is solely responsible for any damage to the cargo, thereby exempting the private carrier
from any responsibility for Furthermore, the contract of private carriage binds Valenzuela Hardwood and
South Sea Shipping alone; it is not imbued with public policy considerations for the general public or third
persons are not affected thereby.

ISSUE 3:
Whether or not the charter party stipulation is void for being contrary to Article 1170 and 1173 of the Civil
Code?

RULING:
No. The shifting of the responsibility is not void because the foregoing articles apply only to the obligor. Seven
Brothers is not an obligor with respect to the cargo for the obligation to bear the loss was shifted to
Valenzuela Hardwood by virtue of the charter party.

Provisions:

Art. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay,
and those who in any manner contravene the tenor thereof, are liable for damages

Art. 1173. The fault or negligence of the obligor consists in the omission of that diligence which is
required by the nature of the obligation and corresponds with the circumstances of the persons, of
the time and of the place. When negligence shows bad faith, the provisions of articles 1171 and 2201,
shall apply.

ISSUE 4:
What is the effect of the South Sea Resolution where the Supreme Court affirmed the liability of the South Sea
for the loss suffered by Valenzuela Hardwood with respect to latter’s action for damages against Seven
Brothers?

RULING:
The Resolution affirming liability does not, by itself, preclude Valenzuela Hardwood from proceeding against
Seven Brothers. An aggrieved party may still recover the deficiency from the person causing the loss in the
event the amount paid by the insurance company does not fully cover the loss.

ART. 2207 of the Civil Code provides that if the plaintiffs property has been insured, and he has
received indemnity from the insurance company for the injury or loss arising out of the wrong or
breach of contract complained of, the insurance company shall be subrogated to the rights of the
insured against the wrongdoer or the person who has violated the contract. If the amount paid by the
insurance company does not fully cover the injury or loss, the aggrieved party shall be entitled to
recover the deficiency from the person causing the loss or injury.

67
 FGU Insurance Corp. v. G.P. Sarmiento Trucking Corp. and Lambert Eroles
G.R. No. 141910, August 06, 2002

FACTS:
G.P. Sarmiento Trucking Corporation (GPS) undertook to deliver on June 18, 1994, 30 units of
Condura S.D. white refrigerators aboard its Isuzu truck driven by Lambert Eroles, to the Central Luzon
Appliances in Dagupan City. While traversing the North Diversion Road along McArthur highway in Barangay
Anupol, Bamban Tarlac, it collided with an unidentified truck, causing it to fall into a deep canal, resulting in
damage to the cargoes.

FGU, an insurer of the shipment, paid the value of the covered cargoes (P204,450.00) to Concepcion
Industries, Inc.,. Being subrogee of CII’s rights & interests, FGU, in turn, sought reimbursement from GPS.
Since GPS failed to heed the claim, FGU filed a complaint for damages and breach of contract of carriage
against GPS and Eroles with the RTC. In its answer, respondents asserted that GPS was only the exclusive
hauler of CII 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.

GPS filed a motion to dismiss the complaint by way of demurrer to evidence on the ground that
petitioner had failed to prove that it was a common carrier.

The RTC granted the motion to dismiss on April 30, 1996. It subsequently dismissed the complaint
holding that GPS was not a common carrier defined under the law & existing jurisprudence. The subsequent
motion for reconsideration having been denied, FGU interposed an appeal to the CA. The CA rejected the
FGU’s appeal & ruled in favor of GPS. It also denied petitioner’s motion for reconsideration.

ISSUES:
1. WON GPS may be considered a common carrier as defined under the law & existing jurisprudence NO
2. WON 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 & possession. YES
3. Whether the doctrine of Res ipsa loquitor is applicable in the instant case.

HELD:

1. The SC finds the conclusion of the RTC and the CA to be amply justified. GPS, being an exclusive
contractor & hauler of Concepcion Industries, Inc., rendering/offering its services to no other
individual or entity, cannot be considered a common carrier. Common carriers are persons,
corporations, firms, or associations engaged in the business of carrying or transporting passengers or
goods or both, by land, water, or air, for hire or compensation, offering their services to the public,
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 passenger/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”.

2. GPS cannot escape from liability. 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. A breach upon the contract confers upon the
injured party a valid cause for recovering that which may have been lost/suffered. The remedy
serves to preserve the interests of the promise that may include his:
(1) Expectation interest – interest in having the benefit of his bargain by being put in
as good a position as he would have been in had the contract been performed;
(2) Reliance interest – interest in being reimbursed for loss caused by reliance on the
contract by being put in as good a position as he would have been in had the

68
 contract not been made;
(3) Restitution interest – interest in having restored to him any benefit that he has
conferred on the other party.

Agreements can accomplish little unless they are made the basis for action. The effect of every
infraction is to create a new duty, or to make recompense to the one who has been injured by the
failure of another to observe his contractual obligation unless he can show extenuating
circumstances, like proof of his exercises of due diligence (normally that of the diligence of a good
father of a family or, exceptionally by stipulation or by law such as in the case of common carriers,
that of extraordinary diligence) or of the attendance of fortuitous event, to excuse him from his
ensuing liability.

A default on, or failure of compliance with, the obligation give rise to a presumption of lack of care &
corresponding liability on the part of the contractual obligor the burden being on him to establish
otherwise. GPS has failed to do so.

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

3. Res ipsa loquitur holds a defendant liable where the thing which caused the injury complained of is
shown to be under the latter’s management and the accident is such that, in the ordinary course of
things, cannot be expected to happen if those who have its management/control use proper care. In
the absence of the defendant’s explanation, it affords reasonable evidence that the accident arose
from want of care. It is not a rule of substantive law and does not create an independent ground of
liability. Instead, it is regarded as a mode of proof, or a mere procedural convenience since it
furnishes a substitute for, and relieves the plaintiff of, the burden of producing specific proof of
negligence. The maxim simply places the burden of going forward with the proof on the defendant.

However, resort to the doctrine may only be allowed when:

(a) The event is of a kind which does not ordinarily occur in the absence of negligence;
(b) Other responsible causes are sufficiently eliminated by the evidence (includes the conduct of
the plaintiff and third persons); and
(c) The indicated negligence is within the scope of the defendant’s duty to the plaintiff.

Thus, it is not applicable when an unexplained accident may be attributable to one of several causes,
for some of which the defendant could not be responsible.

Res ipsa loquitor 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. Nevertheless, for the
doctrine to apply, the requirement that responsible causes (other than those due to defendant’s
conduct) must first be eliminated should be understood as being confined only to cases of pure (non-
contractual) tort since obviously the presumption of negligence in culpa contractual immediately
attaches by a failure of the covenant or its tenor.

On the other hand, while the truck driver, whose civil liability is predicated on culpa acquiliana, can
be said to have been in control & management of the vehicle, it is not equally shown that the accident

69
 has been exclusively due to his negligence. If it were so, the negligence could allow res ipsa loquitor
to properly work against him. However, clearly, this is not the case.

4. Foreign vessels (RA 10668)

Sixteenth Congress
Second Regular Session

Begun and held in Metro Manila, on Monday, the twenty-eighth day of July, two thousand fourteen.

REPUBLIC ACT NO. 10668

AN ACT ALLOWING FOREIGN VESSELS TO TRANSPORT AND CO-LOAD FOREIGN CARGOES FOR
DOMESTIC TRANSSHIPMENT AND FOR OTHER PURPOSES

Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

Section 1. Declaration of Policy. – It is the policy of the State:

(a) To assist importers and exporters in enhancing their competitiveness in light of intensifying
international trade; and

(b) To lower the cost of shipping export cargoes from Philippine ports to international ports and
import cargoes from international ports for the benefit of the consumers.

Section 2. Definition of Terms. – As used in this Act:

(a) Co-loading refers to agreements between two (2) or more international or domestic sea carriers
whereby a sea carrier bound for a specified destination agrees to load, transport, and unload the
container van or cargo of another carrier bound for the same destination;

(b) Container van refers to a standardized reusable steel box used for the safe, efficient and secure
storage and movement of materials and products within an intermodal freight transport system
where the cargo carried in the container van can be moved from one (1) mode of transport to
another without having to unload or reload the contents of such container van;

(c) Domestic cargo refers to goods, articles, commodities or merchandise which are intended to be
shipped from one (1) Philippine port to another Philippine port, even if, in the carriage of such cargo,
there may be an intervening foreign port;

(d) Export cargo refers to goods, articles, commodities or merchandise carried in foreign vessels and
duly declared before the Bureau of Customs at the port of origin as cargoes for shipment to a port
outside the jurisdiction of the Philippines;

(e) Foreign cargo refers to import or export cargo carried by a foreign vessel;

(f) Foreign container van refers to a container van, whether empty or loaded with foreign cargo,
which belongs to a foreign vessel;

(g) Foreign port refers to any seaport outside the jurisdiction of the Philippines;

70
 (h) Foreign ship operator refers to a citizen, partnership, or corporation, whether foreign or local,
owning or chartering a foreign vessel;

(i) Foreign vessel refers to a ship registered or documented in a flag registry other than that of the
Philippines;

(j) Import cargo refers to goods, articles, commodities or merchandise of foreign origin carried in a
foreign vessel which are intended to be cleared before the Bureau of Customs for delivery to the port
of final destination within the jurisdiction of the Philippines;

(k) Philippine port refers to any port within the Philippines authorized by a government contract to
handle domestic import or export cargo;

(l) Port Authorities refer to entities engaged in the development and operation of seaports including,
but not limited to, Philippine Ports Authority, Cebu Port Authority, PHIVIDEC Industrial Authority,
Cagayan Special Economic Zone Authority, Aurora Special Economic Zone Authority, Bases
Conversion and Development Authority, Authority of the Free Port Area of Bataan and Subic Bay
Metropolitan Authority; and

(m) Transshipment refers to the transfer of cargo from one (1) vessel or conveyance to another vessel
for further transit to complete the voyage and carry the cargo to its final destination.

Section 3. Scope. – This Act shall apply exclusively to foreign vessels carrying foreign container vans or
foreign cargoes.

Section 4. Carriage of a Foreign Cargo by a Foreign Vessel. – A foreign vessel:

(a) Arriving from a foreign port, shall be allowed to carry a foreign cargo to its Philippine port of final
destination, after being cleared at its port of entry;

(b) Arriving from a foreign port, shall be allowed to carry a foreign cargo by another foreign vessel
calling at the same port of entry to the Philippine port of final destination of such foreign cargo;

(c) Departing from a Philippine port of origin through another Philippine port to its foreign port of
final destination, shall be allowed to carry a foreign cargo intended for export; and

(d) Departing from a Philippine port of origin, shall be allowed to carry a foreign cargo by another
foreign vessel through a domestic transshipment port and transferred at such domestic
transshipment port to its foreign port of final destination.

For purposes of this Act, an empty foreign container van going to or coming from any Philippine port, or going
to or coming from a foreign port, and being transshipped between two (2) Philippine ports shall be allowed.

Section 5. Authority of the Commissioner of Customs. – The Commissioner of Customs, upon such reasonable
conditions as may be imposed, may do the following acts:

(a) Authorize the conveyance of foreign cargo brought from abroad by a foreign vessel;

(b) Allow a foreign vessel to take cargo intended for export at any Philippine port and convey the
same upon such foreign vessel to a foreign port; and

71
 (c) Authorize the transshipment of such foreign cargo intended for import or export through another
Philippine port by another foreign vessel to the cargo’s port of final destination.1âwphi1

Provided, That such acts shall not diminish or impair any existing and valid government contract covering the
handling of import and export cargo: Provided, further, That the Commissioner of Customs shall have the
authority to impose penalties to foreign ship operators found to have violated any provision of this Act and to
take measures to address illegal activities, including smuggling.

Section 6. Application of the Carriage of Goods by Sea Act. – Carriage conducted in accordance with this Act
shall be governed by Commonwealth Act No. 65, otherwise known as the "Carriage of Goods by Sea Act" with
respect to the liability of the carrier for the loss of, or damage to, goods carried.

Section 7. Carriage by Foreign Vessels Not a Public Service, Foreign Vessels Not Common Carriers. – Foreign
vessels engaging in carriage conducted in accordance with this Act shall not be considered common carriers
as provided in Republic Act No. 386, otherwise known as the "Civil Code of the Philippines"; neither shall such
foreign vessels be considered as offering a public service and thus shall fall outside the coverage of Republic
Act No. 9295, otherwise known as the "Domestic Shipping Development Act of 2004".

Section 8. Prohibitions. – Foreign ship operators shall submit their cargo manifest to the Port Authorities to
ensure that no domestic cargoes are carried by the foreign ship. No foreign vessel shall be allowed to carry
any domestic cargo or domestic container van, whether loaded or empty, even if such domestic container van
may contain foreign cargo.

Section 9. Fines and Penalties. – The Bureau of Customs, upon due notice, hearing and determination of the
existence of any breach or violation of the provisions of this Act or any rule and regulation issued pursuant
thereto, shall impose a penalty or fine on any erring foreign ship operator in accordance with applicable
provisions of the Tariff and Customs Code of the Philippines and other related laws.

Section 10. Implementing Rules and Regulations. – Within sixty (60) days from the approval of this Act, the
Department of Finance, the Bureau of Customs, the Department of Trade and Industry, the Bureau of
Immigration, and all Port Authorities, shall promulgate such rules and regulations necessary for the effective
implementation of this Act.

Section 11. Separability Clause. – If any provision of this Act is subsequently declared invalid or
unconstitutional, other provisions hereof which are not affected thereby shall remain in full force and effect.

Section 12. Repealing Clause. – Section 1009 of Presidential Decree No. 1464, otherwise known as the "Tariff
and Customs Code of 1978" and all laws, decrees, orders, rules and regulations, and other issuances, or parts
thereof, inconsistent with the provisions of this Act are hereby repealed or modified accordingly.

Section 13. Effectivity. – This Act shall take effect fifteen (15) days after its publication in the Official Gazette
or in a newspaper of general circulation.

Approved,

(Sgd.) FELICIANO BELMONTE JR. (Sgd.) FRANKLIN M. DRILON

Speaker of the House President of the Senate
of Representatives

This Act which is a consolidation of Senate Bill No. 2486 and House Bill No. 5610 was finally passed by the
Senate and the House of Representatives on June 9, 2015.

72
 (Sgd.) MARILYN B. BARUA-YAP (Sgd.) OSCAR G. YABES
Secretary General Secretary of the Senate
House of Representatives

Approved: JUL 21 2015

(Sgd.) BENIGNO S. AQUINO III

President of the Philippines

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5. Classification of TNVS and TNCs

Transportation Network Vehicle Service (TNVS)

(LTFRB Memo Circular No. 2015--‐018--‐A, Oct. 23, 2017)

Refer to attached PDF Darb.

Transportation Network Company (TNCs)

(LTFRB Memo Circular Nos. 2015--‐015--‐A & 2015--‐016--‐A, Oct. 23, 2017)

Refer to attached PDF1 and PDF2 Darb

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 6. Distinction from towage, arrastre, stevedoring, and contract of services

Marina Port Services, Inc. v. American Home Assurance Corp.,

G.R. No. 201822, August 12, 2015

FACTS:
Countercorp Trading PTE., Ltd. Shipped from Singapore to the Philippines 10 container vans of soft
wheat flour with seals intact on board the vessel M/V/ Uni Fortune. The shipment was insured against all
risks by AHAC and consigned to MSC Distributor (MSC). Upon arrival at the Manila South Harbor, the
shipment was discharged in good and complete order condition and with safety seals in place to the custody
of the arrastre operator, Marina Port Services, Inc. (MPSI).

After unloading and prior to hauling, agents of the Bureau of Customs officially broke the seals,
opened the container cans, and examined the shipment for tax evaluation in the presence of MSC’s broker and
checker. Thereafter, the customs inspector closed the container vans and refastened them with safety wire
seals while MSC’s broker padlocked the same. MPSI then placed the said container vans in a back-to-back
arrangement at the delivery area of the harbor’s container yard where they were watched over by the
security guards of MPSI and of the Philippine Ports Authority. AD’s Customs Services (ACS) took out five
container vans for delivery to MSC. At the compound’s exit, MPSI issued to ACS the corresponding gate passes
for the vans indicating its turn-over of the subject shipment to MSC. However, upon receipt of the container
vans at its warehouse, MSC discovered substantial shortages in the number of bags of flour delivered.
Thereafter, it filed a formal claim for loss with MPSI.

ISSUE:
Whether MPSI is liable for the loss of the bags of flour. NO

HELD:
No. MPSI is not liable for the loss of the bags of flour. The relationship between an arrastre operator
and a consignee is similar to that between a warehouseman and a depositor, or to that between a common
carrier and the consignee and /or the owner of the shipped goods. Thus, an arrastre operator should adhere
to the same degree of diligence as that legally expected of a warehouseman or a common carrier as set forth
in Section 3 [b] of the Warehouse Receipts [Act] and Article 1733 of the Civil Code.

As custodian of the shipment discharged from the vessel, the arrastre operator must take good care
of the same and turn it over to the party entitled to its possession. In case of claim for loss filed by a consignee
or the insurer as subrogee, it is the arrastre operator that carries the burden of proving compliance with the
obligation to deliver the goods to the appropriate party. It must show that the losses were not due to its
negligence of that of its employees. It must establish that it observed the required diligence in handling the
shipment. Otherwise, it shall e presumed that the loss as due to its fault. In the same manner, an arrastre
operator shall be liable for damages if the seal and lock of the goods deposited and delivered to it as closed
and sealed, be broken through its fault. Such fault on the part of the arrastre operator is likewise presumed
unless there is proof to the contrary. MPSI was able to prove delivery of shipment to MSC in good and
complete condition and with locks and seal intact.

It is significant to note that MSC, present 10 gate passes marked as Exhibits 4 to 13. Each of these
gate passes bore the duly identified signature of MSC’s representative, which serves, among others, as an
acknowledgement. The signature of the consignee’s representative on the gate pass is evidence of receipt of
the shipment in good order and condition. Verily, the testimonies of the aforementioned employees of MPSI
confirm that the container vans, together with their padlocks and wirings, were in order at the time the gate
passes were issued up to the time the said container vans were turned over to ACS. There being no exception
as to bad order, the subject shipment therefore, appears to have been accepted by MSC, through ACS, in good

75
order. It logically follows that the case at bar presents no occasion for the necessity of discussing the diligence
required of an [arrastre operator] or of the theory of [its] prima facie liability

“…, for from all indications, the shipment did not suffer loss or damage while it was under
the care … of the arrastre operator …”

Lastly, even in the light of Article 1981, no presumption of fault on the part of MPSI arises since it was
not sufficiently shown that the container vans were re-opened or that their locks and seals were broken for
the second time.

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 Asian Terminals, Inc. v. Allied Guarantee Insurance Co., Inc.,
G.R. No. 182208, October 14, 2015

FACTS:
 A shipment 72lbs of kraft linear board were offloaded by the arrastre, Marina Port Services Inc, the
predecessor of petitioner Asian Terminals Inc. said goods were shipped on board the vessel M/V
Nicole, which was operated by Transocean, represented in the Philippines by Philippine Transmarine
Carrier Inc.
 After offloading, a total of 158 rolls of goods were damages during shipping.
 Additional 54 rolls were found to have been damaged while in the custody of Marina and San
Miguel’s broker, Dynamic Brokerage Co.
 The insurer, Allied Guarantee Insurance paid the consignee, San Miguel the value of the damaged
goods
 Allied sued Transocean, Philippine Transmarine, Dynamic and Marina for damages
 RTC held Transocean liable for the 158 rolls of damages goods for failure to observe the necessary
precautions and extraordinary diligence as a common carrier to prevent such damage.
 Marina and Dynamic were also held liable for the additional 54 rolls of the goods that were damaged
while in their respective possessions
 CA: affirmed RTC
 ATI as successor of Marina, elevated the foregoing matter to the SC
o Insisted that it is not liable for the damaged 54 rolls
o Claims that the CA failed to appreciate the Turn Over Survey of Bad Order Cargoes and the
Requests for Bad Order Survey which, in essence, showed that the goods were received by
Dynamic, “in good order and condition without exception”
o And that only 158 rolls were damaged

ISSUE:
W/N ATI as an arrastre operator should be liable, YES

RULING:
SC reiterated the hornbrook doctrine that in the performance of its obligations, an arrastre operator
should observe the same degree of diligence as that required of a common carrier and warehouseman.

An arrastre operator must prove that the losses were not due to its negligence or of its employees,
and must prove that it exercised due care in handling the goods – this burden was not established by ATI and
it was found that the additional damage of the 54 rolls occurred: (Dynamic cannot alone be held liable)
 While the goods were in the custody of the arrastre
 When they were in transition from ATIs custody to that of Dynamic
 During Dynamic’s custody

ATI's reliance on the Turn Over Survey of Bad Order Cargoes as well as the Requests for Bad Order
Survey is misplaced. An examination of the documents would even reveal that the first set of documents, the
Turn Over Survey of Bad Order Cargoes, pertain to the 158 rolls of damaged goods which occurred during
shipment and prior to ATI's custody. But responsibility for the 158 rolls was already established to be that of
the common carrier and is no longer disputed by the parties. Thus, this fact has little or no more relevance to
the issue of liability over the additional 54 rolls of damaged goods.

Legal relationship between arrastre and consignee:

Legal relationship between the consignee and the arrastre operator is akin to that of a depositor and
the 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 developed upon

77
the carrier. Both the arrastre and the carrier are, therefore, charged with and obligated to deliver the goods in
good condition to the consignee.

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 Crisostomo v. CA,
G.R. No. 138334, Aug. 25, 2003

TOPIC: DISTINCTION BETWEEN COMMON CARRIERS AND OTHER TYPES OF CONTRACTS (TRAVEL
AGENCY)

FACTS:

1.Petitioner Estela L. Crisostomo (Crisostomo) contracted the services of respondent Caravan Travel and
Tours International, Inc. (Caravan) to arrange and facilitate her booking, ticketing and accommodation in a
tour dubbed “Jewels of Europe”.
2.Pursuant to said contract, Meriam Menor (MENOR) who is also the niece of Crisostomo, went to the
latter’s residence to deliver the travel documents and plane tickets. Crisostomo, in turn, gave Menor the
full payment for the package tour.
3. Without checking her travel documents, Crisostomo went to NAIA. However, she discovered that the
flight she was supposed to take had already departed the previous day. She thus called up Menor to
complain.
4. Subsequently, Menor prevailed upon Crisostomo to take another tour – the “British Pageant” to which
Crisostomo was asked to pay once again.
5. Upon Crisostomo’s return from Europe, she demanded from Caravan the reimbursement of P61,421.70,
representing the difference between the sum she paid for “Jewels of Europe” and the amount she owed
Caravan for the “British Pageant” tour. Despite several demands, Caravan refused to reimburse the
amount, contending that the same was non-refundable. Crisostomo thus filed a case.
6. Crisostomo alleged that her failure to join “Jewels of Europe” was due to Caravan’s fault since it did not
clearly indicate the departure date on the plane ticket. Caravan was also negligent in informing her of the
wrong flight schedule through its employee Menor.
7. Caravan insisted that Crisostomo was informed of the correct departure date, which was clearly and
legibly printed on the plane ticket. The travel documents were given two days ahead of the scheduled trip.
Crisostomo had only herself to blame for missing the flight, as she did not bother to read or confirm her
flight schedule as printed on the ticket.
8. RTC: Caravan was negligent in erroneously advising Crisostomo of the wrong date. Crisostomo incurred
contributory negligence for not checking her travel documents. Caravan should reimburse Crisostomo but
with deductions due to her contributory negligence.
9.CA: Both parties were at fault. However, Crisostomo is more negligent because as a lawyer and well-
traveled person, she should have known better than to simply rely on what was told to her. This being so,
she is not entitled to any form of damages.
10. Crisostomo appealed to SC. She contended that Caravan did not observe the standard of care
required of a common carrier when it informed her wrongly of the flight schedule. She could not be
deemed more negligent than Caravan since the latter is required by law to exercise extraordinary
diligence in the fulfillment of its obligation. If she were negligent at all, the same is merely contributory
and not the proximate cause of the damage she suffered.

ISSUE:
Whether or not a travel agency is a common carrier and is therefore required to exercise
extraordinary diligence.

HELD:
No, a travel agency is not an entity engaged in the business of transporting either passengers or
goods and is therefore, neither a private nor a common carrier.

RATIO:
By definition, a contract of carriage or transportation is one whereby a certain person or association
of persons obligate themselves to transport persons, things, or news from one place to another for a fixed
price. Such person or association of persons are regarded as carriers and are classified as private or special

79
carriers and common or public carriers. A common carrier is defined under Article 1732 of the Civil Code as
persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or
goods or both, by land, water or air, for compensation, offering their services to the public.

It is obvious from the above definition that respondent is not an entity engaged in the business of
transporting either passengers or goods. 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.

The object of petitioner’s contractual relation with respondent is the latter’s service of arranging
and facilitating petitioner’s booking, ticketing and accommodation in the package tour. In contrast, the
object of a contract of carriage is the transportation of passengers or goods. It is in this sense that the
contract between the parties in this case was an ordinary one for services and not one of carriage.

CASE LAW/ DOCTRINE: a travel agency is not an entity engaged in the business of transporting either
passengers or goods and is therefore, neither a private nor a common carrier. It goes without saying that a
travel agency is not required by law to exercise extra ordinary diligence.

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 7. Governing Laws
8. Registered Owner Rule, Kabit System and Boundary System

Lim, et al. v. CA, et al.,

G.R. No. 125817, January 16, 2002

PETITIONERS:
o ABELARDO LIM (Owner of the 10-‐wheeler truck)
o ESMADITO GUNNABAN (Truck driver)

RESPONDENTS:
o DONATO H. GONZALES (buyer/new owner of the jeep)

CASE: Gonzales bought a jeep from Vallarta. However, he did not have the registration of the vehicle
transferred to him nor did he secure for himself a certificate of public convenience. He continued to operate it
as a passenger jeep, however, and was involved in an accident later on after a truck owned by Lim and
driven by Gunnaban hit his jeep. The petitioners admitted responsibility and Lim negotiated with Gonzales
for the repair of the former’s jeep. However, Lim refused Gonzales offer to repair and the two money
compensations offered by Lim. Gonzales demanded a brand new jeep AND P236,000. Hence, they went to
Court. Here, Lim argues that Gonzales was not a real party-‐in-‐interest since the registered owner was still
Vallarta.

The Supreme Court ruled in favor of Gonzales stating that the danger posed by the kabit system was not
present here, and as such Gonzales may sue for damages owed him. The court gave the following
reasons:
1) it is neither Gonzales nor Vallarta (the parties of the kabit system) being held liable for damages,
2) the case didn’t arise from a scenario whereby liability arose by either Gonzales or Vallarta
leading the public to believe that jeepney belonged to the registered owner, and
3) the riding public was not bothered nor inconvenienced at the very least by the illegal
arrangement. On the contrary, it was private respondent himself who had been wronged and
was seeking compensation for the damage done to him. The Supreme Court ruled that the
amount of damages demanded by Gonzales was fair compensation taking into consideration
the amount of profits lost due to the accident. Also, legal interest CANNOT yet be awarded to
Gonzales because there was no liquidated and demandable obligation on the part of Lim since
they were still negotiating. Finally, the damages due to Gonzales could have been mitigated if
Lim had proved that such amount would have been less had Gonzales not left the jeep to decay
and rot at the roadside of the scene of the accident. Unfortunately, Lim failed to present proof.

DOCTRINE: It would seem then that the thrust of the law in enjoining the kabit system is not so much as
to penalize the parties but to identify the person upon whom responsibility may be fixed in case of an
accident with the end view of protecting the riding public. The policy, therefore, loses its force if the
public at large is not deceived, much less involved.

FACTS:
 1982 - Donato Gonzales purchased an Isuzu passenger jeepney from Gomercino Vallarta, holder
of a certificate of public convenience for the operation of public utility vehicles plying the
Monumento-‐Bulacan route.
o While private respondent Gonzales continued offering the jeepney for public
transport services, he did not have the registration of the vehicle transferred in his
name nor did he secure for himself a certificate of public convenience for its operation.

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 Thus, Vallarta remained on record as its registered owner and operator.
 July 22, 1990 - while the jeepney was running northbound along the North Diversion Road
somewhere in Meycauayan, Bulacan, it collided with a ten-‐wheeler truck of herein petitioners
Lim and Gunnaban.
o Gunnaban owned responsibility for the accident, explaining that while he was
traveling towards Manila the truck suddenly lost its brakes. To avoid collision, he
swerved the truck to the center island and veered to the left until he smashed into a
Ferroza automobile, and later, into private respondent’s passenger jeepney driven by
one Virgilio Gonzales. The impact caused damage to both the Ferroza and the
passenger jeepney and left one passenger dead and others wounded.
 Lim shouldered the medical treatment of the injured and compensated the heirs of the
deceased passenger. He also restored the damage vehicles and negotiated with Gonzales by
offering to repair Gonzales’ jeep at Lim’s shop. In the alternative, Lim offered P20,000 as
compensation for the vehicular damage. However, Gonzales did not accept the offer and
demanded a brand-new jeep and the amount of P236,000. Gonzales thereafter denied Lim’s
increased offer of P40,000.
 Gonzales then filed a complaint for damages against herein petitioners.
o Lim denied liability contending that he exercised due diligence in the selection and
supervision of his employees. Also, Lim alleged that Vallarta (original owner), and not
Gonzales, was the real party-‐in-‐interest because Gonzales was working under the kabit
system which is against public policy.
o Gunnaban averred that the accident was a fortuitous event which was beyond his
control.
 During trial, the damaged jeepney was left by the roadside to corrode and decay. Private
respondent explained that although he wanted to take his jeepney home he had no capability,
financial or otherwise, to tow the damaged vehicle.
 October 1, 1993 - the Trial Court ruled in favor of Gonzales ratiocinating that as vendee and current
owner of the passenger jeepney, private respondent stood for all intents and purposes as the real
party-in-interest.
 July 17, 1996  the Court of Appeals affirmed the decision of the trial court concluding that
while an operator under the kabit system could not sue without joining the registered owner
of the vehicle as his principal, equity demanded that the present case be made an exception.
Hence this petition.

ISSUES:
1. Whether or not Donato Gonzales is a real party in interest given that he is working under
the kabit system. YES
2. Whether or not the amount of the damages was proper. YES
3. Whether or not legal interest should be awarded. NO

RULING:
ISSUE 1 – Whether or not Donato Gonzales is a real party-‐in-‐interest given that he is working under the
kabit system – YES. The evil sought to be prevented by the prohibition against the kabit system is not
present in this case! (See 3rd bullet point.)

MAJOR POINT 1: The purpose of the liability under the kabit system is to identify the person to
be held liable by passengers who are injured by those operating under such system. This is
absent in the case at hand.
 What is the kabit system?
o The kabit system is an arrangement whereby a person who has been granted a
certificate of public convenience allows other persons who own motor vehicles to

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 operate them under his license, sometimes for a fee or percentage of the earnings.
Although the parties to such an agreement are not outrightly penalized by law, the kabit
system is invariably recognized as being contrary to public policy and therefore void
and inexistent under Art. 1409 of the Civil Code.
o Dizon v. Octavio – the Court explained that one of the primary factors considered in the
granting of a certificate of public convenience for the business of public transportation is
the financial capacity of the holder of the license, so that liabilities arising from accidents
may be duly compensated. The kabit system renders illusory such purpose and, worse,
may still be availed of by the grantee to escape civil liability caused by a negligent use
of a vehicle owned by another and operated under his license. If a registered owner is
allowed to escape liability by proving who the supposed owner of the vehicle is, it would
be easy for him to transfer the subject vehicle to another who possesses no property
with which to respond financially for the damage done. Thus, for the safety of
passengers and the public who may have been wronged and deceived through the
baneful kabit system, the registered owner of the vehicle is not allowed to prove that
another person has become the owner so that he may be thereby relieved of
responsibility. Subsequent cases affirm such basic doctrine.
 It would seem then that the thrust of the law in enjoining the kabit system is not so much as to
penalize the parties but to identify the person upon whom responsibility may be fixed in case
of an accident with the end view of protecting the riding public. The policy, therefore, loses its
force if the public at large is not deceived, much less involved.
 The evil sought to be prevented is not present here because:
o First, neither of the parties to the pernicious kabit system is being held liable for
damages.
o Second, the case arose from the negligence of another vehicle in using the public road
to whom no representation, or misrepresentation, as regards the ownership and
operation of the passenger jeepney was made and to whom no such representation, or
misrepresentation, was necessary. Thus it cannot be said that private respondent
Gonzales and the registered owner of the jeepney were in estoppel for leading the
public to believe that the jeepney belonged to the registered owner.
o Third, the riding public was not bothered nor inconvenienced at the very least by the
illegal arrangement. On the contrary, it was private respondent himself who had been
wronged and was seeking compensation for the damage done to him. Certainly, it
would be the height of inequity to deny him his right.

ISSUE 2 – Whether or not the amount of the damages was proper – YES. Petitioners are not only liable
for the damage done on the vehicle of Gonzales, but also for the profits he lost because of the accident.

MAJOR POINT 1: It is a fundamental principle in the law on damages that a defendant cannot be
held liable in damages for more than the actual loss which he has inflicted and that a plaintiff is
entitled to no more than the just and adequate compensation for the injury suffered. His
recovery is, in the absence of circumstances giving rise to an allowance of punitive damages,
limited to a fair compensation.
 Indemnification for damages is not limited to damnum emergens or actual loss but extends to
lucrum cessans or the amount of profit lost.
 Had private respondent’s jeepney not met an accident it could reasonably be expected that it
would have continued earning from the business in which it was engaged. Private
respondent avers that he derives an average income of P300.00 per day from his passenger
jeepney and this earning was included in the award of damages made by the trial court and
upheld by the appeals court. The award therefore of P236,000.00 as compensatory damages
is not beyond reason nor speculative as it is based on a reasonable estimate of the total
damage suffered by private respondent, i.e. damage wrought upon his jeepney and the

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 income lost from his transportation business. Petitioners for their part did not offer any
substantive evidence to refute the estimate made by the courts a quo.

ISSUE 3 – Whether or not legal interest should be awarded – NO. The amount due from Lim was not
demandable yet.

MAJOR POINT 1: Legal interest “cannot be recovered upon unliquidated claims or damages,
except when the demand can be established with reasonable certainty.” In addition, interest at
the rate of six percent (6%) per annum should be from the date the judgment of the court is
made (at which time the quantification of damages may be deemed to be reasonably
ascertained).
 In this case, the matter was not a liquidated obligation as the assessment of the damage on the
vehicle was heavily debated upon by the parties with private respondent’s demand for
P236,000.00 being refuted by petitioners who argue that they could have the vehicle repaired
easily for P20,000.00. In fine, the amount due private respondent was not a liquidated account
that was already demandable and payable.

MAJOR POINT 2: One who is injured then by the wrongful or negligent act of another should
exercise reasonable care and diligence to minimize the resulting damage. Anyway, he can
recover from the wrongdoer money lost in reasonable efforts to preserve the property injured
and for injuries incurred in attempting to prevent damage to it.
 We have observed that private respondent left his passenger jeepney by the roadside at the
mercy of the elements. Article 2203 of the Civil Code exhorts parties suffering from loss or
injury to exercise the diligence of a good father of a family to minimize the damages resulting
from the act or omission in question. However, we sadly note that in the present case
petitioners failed to offer in evidence the estimated amount of the damage caused by private
respondent’s unconcern towards the damaged vehicle. It is the burden of petitioners to show
satisfactorily not only that the injured party could have mitigated his damages but also the
amount thereof; failing in this regard, the amount of damages awarded cannot be
proportionately reduced.

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 Spouses Hernandez v.  Spouses Dolor
G.R. No. 160286. July 30, 2004

FACTS:
Lorenzo Menard Boyet Dolor, Jr. was driving an owner-type jeepney owned by her mother,
Margarita, towards Anilao, Batangas. As he was traversing the road, his vehicle collided with a passenger
jeepney driven by petitioner Juan Gonzales and owned by his co-petitioner Francisco Hernandez. Boyet and
his passenger died. Passengers also on board the owner-type jeep, which was totally wrecked, suffered
physical injuries. The collision also damaged the passenger jeepney of Francisco Hernandez and caused
physical injuries to its passengers. Respondents commenced an action for damages alleging that driver Juan
Gonzales was guilty of negligence and lack of care and that the Hernandez spouses were guilty of negligence
in the selection and supervision of their employees. Petitioners countered that the proximate cause of the
death and injuries sustained by the passengers of both vehicles was the recklessness of Boyet who was
driving in a zigzagging manner under the influence of alcohol. Petitioners also alleged that Gonzales was not
the driver-employee of the Hernandez spouses as the former only leased the jeepney on a daily basis.
Hernandez spouses further claimed that even if an employer-employee relationship is found to exist between
them, they cannot be held liable because as employers they exercised due care in the selection and
supervision of their employee. The trial court rendered a decision in favor of respondents.

CA affirmed with modifications. Hence, the present petition.

ISSUE:
W/N Hernandez spouses are solidarily liable with Juan Gonzales, although it is of record that they
were not in the passenger jeepney when the accident occurred.

HELD:
YES. They are still answerable under several provisions of the Civil Code namely Article 2180 and
Article 2176. While the above provisions do not expressly provide for the solidary liability, they should be
read in consonance with Article 2180 – one can be liable for the acts or omission of another whom he is
responsible for, meaning that an employer is accountable for the actions of his employees. Article 2194
categorically states that responsibility of two or more persons who are liable for quasi-delict is solidary. The
Hernandez spouses maintained that Julian Gonzales is not their employee because the latter pays them daily
for the use of the jeepney. They argued that they are practicing a lease agreement using the “boundary
system”. SC  held that there exists an employer- employee relationship because by agreeing with spouses
Hernandez, there would be a violation of the Public Service Law and the riding public is placed at the mercy of
reckless and irresponsible drivers because most drivers are in no position to pay for damages when accidents
occur.

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 FEB Leasing and Finance Corp. (Now BPI Leasing Corp.) v. Sps. Baylon, et al.,
G.R. No. 181398, June 29, 2011

FACTS:
An Isuzu oil tanker, registered in the name of petitioner FEB Leasing and Finance Corporation and
leased to BG Hauler, Inc., was running along Del Monte Avenue in Quezon City. While executing a left turn
upon reaching an intersection, the oil tanker hit Loretta Baylon, daughter of respondent spouses Sergio and
Maritess Baylon, who was then crossing the Del Monte Avenue. Due to the strong impact, Loretta was
violently thrown away resulting to her death.

ISSUE:
Whether or not FEB Leasing and Finance Corp. (now BPI Leasing Corp.) should be held liable

RULING:
Yes. In accordance with the law on compulsory motor vehicle registration, with respect to the public
and third persons, the registered owner of a motor vehicle is directly and primarily responsible for the
consequence of its operation regardless of who the actual vehicle owner might be. Well-settled is the rule that
the registered owner of the vehicle is liable for quasi-delicts resulting from its use. Thus, even if the vehicle
has already been sold, leased or transferred to another person at the time the vehicle figured in an accident,
the registered vehicle owner would still be liable for damages caused by the accident. The sale, transfer or
lease of the vehicle, which is not registered with the Land Transportation Office, will not bind third persons
aggrieved in an accident involving the vehicle.

86
 FILCAR TRANSPORT SERVICES V. ESPINAS
GR. No. 174156, 20 June 2012
FACTS:
Respondent Jose A. Espinas was driving his car along Leon Guinto Street in Manila when he was
suddenly hit by another car. Upon verifying with the LTO, Espinas learned that the owner of the other car is
Filcar. This car was assigned to Filcar’s Corporate Secretary Atty. Candido Flor and, at the time of the incident,
was driven by Atty. Flor’s personal driver, Timoteo Floresca.

Espinas sued Filcar for damages. Filcar denied liability, claiming that the incident was not due to its
fault or negligence since Floresca was not its employee but that of Atty. Flor.

ISSUE:
Whether or not Filcar, as registered owner of the motor vehicle which figured in an accident, may be
held liable for the damages caused to the Espinas

HELD:
Filcar, as registered owner, is deemed the employer of the driver, Floresca, and is thus vicariously liable
under Article 2176 in relation with Article 2180 of the Civil Code

It is undisputed that Filcar is the registered owner of the motor vehicle which hit and caused damage
to Espinas’ car. It is on this basis that Filcar is primarily and directly liable to Espinas for damages.

As a general rule, one is only responsible for his own act or omission. Thus, a person will generally be
held liable only for the torts committed by himself and not by another. This general rule is laid down in
Article 2176 of the Civil Code, which provides to wit:

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

Based on the above-cited article, the obligation to indemnify another for damage caused by one’s act
or omission is imposed upon the tortfeasor himself, i.e., the person who committed the negligent act or
omission. The law, however, provides for exceptions when it makes certain persons liable for the act or
omission of another.

One exception is an employer who is made vicariously liable for the tort committed by his employee.
Article 2180 of the Civil Code states:

Article 2180. The obligation imposed by Article 2176 is demandable not only for one’s own acts or
omissions, but also for those of persons for whom one is responsible.

xxxx

Employers shall be liable for the damages caused by their employees and household helpers
acting within the scope of their assigned tasks, even though the former are not engaged in
any business or industry.

xxxx

The responsibility treated of in this article shall cease when the persons herein mentioned prove that they
observed all the diligence of a good father of a family to prevent damage.

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 Under Article 2176, in relation with Article 2180, of the Civil Code, an action predicated on an
employee’s act or omission may be instituted against the employer who is held liable for the negligent act or
omission committed by his employee.

Although the employer is not the actual tortfeasor, the law makes him vicariously liable on the basis
of the civil law principle of pater familias for failure to exercise due care and vigilance over the acts of one’s
subordinates to prevent damage to another. In the last paragraph of Article 2180 of the Civil Code, the
employer may invoke the defense that he observed all the diligence of a good father of a family to prevent
damage.

It is well settled that in case of motor vehicle mishaps, the registered owner of the motor vehicle
is considered as the employer of the tortfeasor-driver, and is made primarily liable for the tort committed
by the latter under Article 2176, in relation with Article 2180, of the Civil Code.

In so far as third persons are concerned, the registered owner of the motor vehicle is the
employer of the negligent driver, and the actual employer is considered merely as an agent of such
owner.

Thus, it is clear that for the purpose of holding the registered owner of the motor vehicle primarily
and directly liable for damages under Article 2176, in relation with Article 2180, of the Civil Code, the
existence of an employer-employee relationship, as it is understood in labor relations law, is not required. It
is sufficient to establish that Filcar is the registered owner of the motor vehicle causing damage in order that
it may be held vicariously liable under Article 2180 of the Civil Code.

Rationale for holding the registered owner vicariously liable

The rationale for the rule that a registered owner is vicariously liable for damages caused by the
operation of his motor vehicle is explained by the principle behind motor vehicle registration, viz:

The main aim of motor vehicle registration is to identify the owner so that if any accident
happens, or that any damage or injury is caused by the vehicle on the public highways, responsibility
therefor can be fixed on a definite individual, the registered owner. Instances are numerous where
vehicles running on public highways caused accidents or injuries to pedestrians or other vehicles without
positive identification of the owner or drivers, or with very scant means of identification. It is to forestall
these circumstances, so inconvenient or prejudicial to the public, that the motor vehicle registration is
primarily ordained, in the interest of the determination of persons responsible for damages or injuries caused
on public highways.

Employer-employee relationship between registered owner and driver is irrelevant

Thus, whether there is an employer-employee relationship between the registered owner and the
driver is irrelevant in determining the liability of the registered owner who the law holds primarily and
directly responsible for any accident, injury or death caused by the operation of the vehicle in the streets and
highways.

The general public policy involved in motor vehicle registration is the protection of innocent third
persons who may have no means of identifying public road malefactors and, therefore, would find it difficult if
not impossible to seek redress for damages they may sustain in accidents resulting in deaths, injuries and
other damages; by fixing the person held primarily and directly liable for the damages sustained by victims of
road mishaps, the law ensures that relief will always be available to them.

To identify the person primarily and directly responsible for the damages would also prevent a
situation where a registered owner of a motor vehicle can easily escape liability by passing on the blame to
anther who may have no means to answer for the damages caused, thereby defeating the claims of victims of

88
road accidents. We take note that some motor vehicles running on our roads are driven not by their
registered owners, but by employed drivers who, in most instances, do not have the financial means to pay
for the damages caused in case of accidents.

Filcar cannot pass on the liability to another party

The agreement between Filcar and Atty. Flor to assign the motor vehicle to the latter does not bind
Espinas who was not a party to and has no knowledge of the agreement, and whose only recourse is to the
motor vehicle registration.

Filcar cannot use the defense that the employee acted beyond the scope of his assigned task or that it exercised
the due diligence of a good father of a family to prevent damage

Neither can Filcar use the defenses available under Article 2180 of the Civil Code – that the employee
acts beyond the scope of his assigned task or that it exercised the due diligence of a good father of a family to
prevent damage – because the motor vehicle registration law, to a certain extent, modified Article 2180 of the
Civil Code by making these defenses unavailable to the registered owner of the motor vehicle. Thus, for as
long as Filcar is the registered owner of the car involved in the vehicular accident, it could not escape primary
liability for the damages caused to Espinas.

Filcar’s recourse is against the actual employer of the driver and the driver himself

This does not mean, however, that Filcar is left without any recourse against the actual employer of the driver
and the driver himself. Under the civil law principle of unjust enrichment, the registered owner of the motor
vehicle has a right to be indemnified by the actual employer of the driver of the amount that he may be
required to pay as damages for the injury caused to another.

 Registered owner is deemed employer of the driver and is thus vicariously liable under Article 2176
in relation with Article 2180 of the Civil Code
 The main aim of motor vehicle registration is to identify the owner so that if any accident happens, or
that any damage or injury is caused by the vehicle on public highways, responsibility therefor can be
fixed on a definite individual, the registered owner.
 The motor vehicle registration law modified Article 2180 to a certain extent so that the defense
available thereunder cannot be used by the registered owner
 The registered owner can recover from the actual owner and the driver under the doctrine of unjust
enrichment

89
 Metro Manila Transit Corp. v. Cuevas, et al.,
G.R. No. 167797, June 15, 2015
FACTS:
Metro Manila Transit Corporation (MMTC) and Mina’s Transit Corporation (Mina’s Transit) entered
into an agreement to sell dated August 31, 1990, whereby the latter bought several bus units from the former
at a stipulated price. They agreed that MMTC would retain the ownership of the buses until certain conditions
were met, but in the meantime Mina’s Transit could operate the buses within Metro Manila.

On October 14, 1994, one of the buses subject of the agreement to sell hit and damaged a Honda
Motorcycle owned by Reynaldo and driven by Junnel. Reynaldo and Junnel sued MMTC and Mina’s Transit for
damages in the Regional Trial Court (RTC).

MMTC denied liability claiming that although it retained the ownership of the bus, the actual
operator and employer of the bus driver was Mina’s Transit; and that, in support of its cross-claim against
Mina’s Transit, a provision in the agreement to sell mandated Mina’s Transport to hold it free from liability
arising from the use and operation of the bus units.

ISSUE 1:
Whether or not MMTC is liable considering that it was not the actual operator and employer of the
bus driver

HELD 1:
YES. In view of MMTC’s admission in its pleadings that it had remained the registered owner of the
bus at the time of the incident, it could not escape liability for the personal injuries and property damage
suffered by the Cuevases. This is because of the registered-owner rule, whereby the registered owner of the
motor vehicle involved in a vehicular accident could be held liable for the consequences.

The Court has reiterated the registered-owner rule in other rulings, like in Filcar Transport Services v.
Espinas, to wit:

x x x It is well settled that in case of motor vehicle mishaps, the registered owner of the
motor vehicle is considered as the employer of the tortfeasor-driver, and is made primarily
liable for the tort committed by the latter under Article 2176, in relation with Article 2180, of
the Civil Code.

In Equitable Leasing Corporation v. Suyom, we ruled that in so far as third persons are concerned, the
registered owner of the motor vehicle is the employer of the negligent driver, and the actual employer is
considered merely as an agent of such owner.

MMTC could not evade liability by passing the buck to Mina’s Transit. The stipulation in the
agreement to sell did not bind third parties like the Cuevases, who were expected to simply rely on the data
contained in the registration certificate of the erring bus.

ISSUE 2:
May MMTC recover from Mina’s Transit (the actual employer of the negligent driver)?

HELD 2:
YES. Although the registered-owner rule might seem to be unjust towards MMTC, the law did not
leave it without any remedy or recourse. According to Filcar Transport Services v. Espinas, MMTC could
recover from Mina’s Transit, the actual employer of the negligent driver, under the principle of unjust
enrichment, by means of a cross-claim seeking reimbursement of all the amounts that it could be required to
pay as damages arising from the driver’s negligence. A cross-claim is a claim by one party against a co-party
arising out of the transaction or occurrence that is the subject matter either of the original action or of a

90
counterclaim therein, and may include a claim that the party against whom it is asserted is or may be liable to
the cross-claimant for all or part of a claim asserted in the action against the cross-claimant.

Principles:

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

It is to forestall these circumstances, so inconvenient or prejudicial to the public, that the motor
vehicle registration is primarily ordained, in... the interest of the determination of persons responsible for
damages or injuries caused on public highways. another is that the knowledge that means of detection are
always available may act as a deterrent from lax observance of the... law and of the rules of conservative and
safe operation … for the purpose of holding the registered owner of the motor vehicle primarily and directly
liable for damages under Article 2176, in relation with Article 2180, of the Civil Code, the existence of an
employer-employee relationship, as it is understood in... labor relations law, is not required.

91