COMMERCIAL LAW REVIEW – 4C

UNDER ATTY. TIMOTEO AQUINO

DAVID, NORIANNE D.
2015400027

ASSIGNMENT NO. 1 – DRAFT – March 27, 2020

1. a) No, the motion to dismiss will not prosper on the ground that there is a breach of
contract based on negligence of B only, as the owner and operator of the common
carriage, and such claim does not prescribe yet.

Art. 1733 and the New Civil Code requires common carriers to observe extraordinary
diligence in safely transporting their passengers according to all the circumstances of
each case. Art. 1144 of NCC states that actions based on written contract must be within
10 years from the time the right of action accrued.

Here, B, being an operator and owner of a common carrier is required to observe

extraordinary diligence in safely transporting C and D. When C's leg was injured, she
was a passenger in B’s jeepney, the presumption of fault or negligence on B's part arose
and he had the burden to prove that he exercised the extraordinary diligence required of
him and B failed to do this. Moreover, the action has not prescribed yet because the
claim was filed by C and D only in February 2020, four years from the accrual of cause of
action, December 25, 2016, hence, it is clearly within the ten years prescriptive period
under the NCC.

Therefore, B contravened the tenor of his obligation to safely transport C and D from the
place of departure to the place of destination as far as human care and foresight can
provide, using the utmost diligence of very cautious persons, and with due regard for all
the circumstances.

b) No, the defenses of A and B such as absence of allegation of breach of contract, C’s
fault as the proximate cause, fortuitous event and Affidavit of Quitclaim are without
merit.

In Sanico and Castro vs. Colipano reiterates that in case of death of or injury to their
passengers, Article 1756 of the Civil Code provides that common carriers are presumed
to have been at fault or negligent, and this presumption can be overcome only by proof
of the extraordinary diligence exercised to ensure the safety of the passengers.

Here, it is not necessary for C and D to prove contract of carriage so long as it is

shown that there exists a contract between the passenger and the common carrier, which
was proved by the Affidavit of Quitclaim; and that they are not the proximate cause of
the said mishap, as the presumption of the doctrine of proximate cause is inapplicable to
contract of carriage.

B’s attempt to evade liability by arguing fortuitous event is misplaced, mechanical defect
such as loss of power/control of the jeep is not considered a fortuitous event. The Civil
Code provides for exclusive list of extraordinary events that may preclude common
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UNDER ATTY. TIMOTEO AQUINO
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carriers from liability, however mechanical defect is not one of those, hence B’s defense
will not prosper.

Moreover, the Affidavit of Quitclaim is also invalid, for it to be valid it must comply
with the following; that the person making the waiver possesses the right, (2) that he
has the capacity and power to dispose of the right, that the waiver must be clear and
unequivocal although it may be made expressly or impliedly, and (4) that the waiver is
not contrary to law, public policy, public order, morals, good customs or prejudicial to a
third person with a right recognized by law. It does not comply with the 4 th requisite, it
is against public policy because to uphold a supposed waiver of any right to claim
damages by an injured passenger, under circumstances like those exhibited in this case,
would be to dilute and weaken the standard of extraordinary diligence exacted by the
law from common carriers and hence to render that standard unenforceable.

2) Yes, all the essential requisites of a contract to be perfected are present in this case, such as
consent of the contracting parties, object certain, which is the subject matter of the contract and
the cause of the obligation which is established.

Art. 1315 of the New Civil Code states that the perfection of contract signifies its birth if all the
essential elements mentioned above concur. A contract of carriage is consensual which is
perfected by mere consent or upon meeting of minds upon the object and consideration of the
contract.

Here, there is no perfected contract yet between the common carrier and C and D at 4:00 pm, a
public utility, once its stops, is in effect making a continuous offer to riders, the contract of
carriage is perfected as to C  and D only at the time they boarded the jeepney around 4:07 p.m.
There is mutual consent between the common carrier when the jeepney alighted and when C
and D boarded therefrom, by paying a fee, it becomes the object certain of the contract and the
cause of obligation also commences for the common carrier’s duty to transport its passengers to
the latter’s destination.

Therefore, there is a valid contract of carriage herein, for all the essential elements concur;
however, it was perfected only around 4:07 p.m.

3).a) Romeo, Samuel, Teresita, Jose and Pedro cannot sue for breach of contract of carriage
against CTC. Stated differently, Uriel may sue CTC for breach of contract of carriage.

Under Art. 1755 of the NCC, 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. The elements in the definition of a passenger are:
undertaking of a person to travel in the conveyance provided by the carrier and an acceptance
by the carrier of the person as a passenger.
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UNDER ATTY. TIMOTEO AQUINO
DAVID, NORIANNE D.
2015400027

Here, Romeo is not considered as a passenger for he is a stowaway who secures passage by
fraudulent act.

Samuel as a pickpocket fails to be a passenger within the definition of the law, as there is no
valid undertaking of a person to travel in the conveyance provided by the carrier, his intention
is to rob another passenger not to board such bus. Teresita also fails to be a passenger because
she did not board the bus to be transported but to accompany the driver while he was
performing his job. Pedro and Jose cannot also sue CTC for breach of contract of carriage, there
is no contractual relation between them, however they may sue the driver for quasi-delict or
culpa aquilana, should he prove that the latter is negligent.

Uriel can sue for breach of contract. He was a passenger although he was being transported
gratuitously, because he won a free riding pass in a raffle held by CTC

b) Romeo, Samuel, Teresita, Uriel, Jose and Pedro may sue UTI on the basis of quasi-delict since
they have no pre-existing contractual relationship with UTI.

Stated differently for Uriel, he may file a case against the driver based on culpa aquiliana or
quasi-delict or culpa criminal, and culpa contractual against CTC as the owner of the bus.
Provided that there is no double recovery for civil damages in case Uriel opts to file a criminal
case against the driver and damages for contractual breach against CTC.

In the case of Dionisio vs. Philippine Rabbit, the driver may not be held liable under the
contract of carriage, not being a party to the same. The basis of a cause of action of a passenger
against the driver is either culpa criminal or culpa aquiliana. A passenger may file a criminal
case based on culpa criminal punishable under the Revised Penal Code or a civil case based on
culpa aquiliana under Articles 2176 and 2177 of the Civil Code. A cause of action based on culpa
contractual is also separate and distinct from a cause of action based on culpa aquiliana.

c) With respect to Romeo, Samuel and Teresita, since there was no pre-existing contractual
relationship between them and CTC, CTC can raise the defense that it exercised the due
diligence of a good father of a family in the selection and supervision of its driver (Article 2180,
New Civil Code). It can raise the same defense against Uriel if there is a stipulation that exempts
it from liability for simple negligence. CTC can also raise against all the plaintiffs the defense
that the collision was due exclusively to the negligence of the driver of UTI, and this constitutes
a fortuitous event, because there was no concurrent negligence on the part of its own driver
(Ampang v.Guinoo Transportation Company, G.R. No. L5044, April 30, 1953). CTC can also
raise against Samuel the defense that he was engaged in a seriously illegal act at the time of the
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UNDER ATTY. TIMOTEO AQUINO
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collision, which can render him liable for damages on the basis of quasi-delict (Dobbs, the Law
of Torts, pp.524-525). Since UTI had no pre-existing contractual relationship with any of the
plaintiffs, it can raise the defense that it exercised due diligence in the selection and supervision
of its driver that the collision was due exclusively to the negligence of the driver of CTC, and
that Samuel was committing a serious illegal act at the time of the collision. negligence, but not
for willful acts or gross negligence (Article 1758, New Civil Code). 

4) Yes. 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, the Court 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.

Here, 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,
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. Hence, it is considered as a
common carrier.

Therefore, 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. Common
carriers, as a general rule, are presumed to have been at fault or negligent if the goods they
transported deteriorated or got lost or destroyed. That is, unless they prove that they exercised
extraordinary diligence in transporting the goods. In order to avoid responsibility for any loss
or damage, therefore, they have the burden of proving that they observed such diligence."
Further, under Article 1742 of the Civil Code, even if the loss, destruction, or deterioration of
the goods should be caused by the faulty nature of the containers, the common carrier must
exercise due diligence to forestall or lessen the loss.
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UNDER ATTY. TIMOTEO AQUINO
DAVID, NORIANNE D.
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5) a) I disagree with X because the latter’s undertaking is considered as an activity engaged in

by the common carried available to the general public.

ART. 1733. Common carriers, due to the nature of their business and for reasons of public
policy, are bound to observe extraordinary diligence in the vigilance over the goods and for the
safety of the passengers transported by them, according to all the circumstances of each case.

Here, X’s act of picking up his friends along the way for a fee is considered as business engaged
to be available or held out for public which must adhere to extra-ordinary diligence required for
common carriers.

Therefore, the 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.

b) No, even all the passengers of X verbally agreed to exempt him from liability is untenable.

The New Civil Code states that the common carrier holds himself out in common, that is, to all
persons who choose to employ him, ready to carry for hire; the private carrier agrees in some
special case with some private individual to carry for hire.

Here, X cannot stipulate that it is exempt from liability for the latter’s negligence as a common
carrier, unless it gratuitously transport the said passengers, which is not the case herein, X
asked for a fee in exchange of their transportation to the destination agreed between them.

Stated differently, if X’s argument that he is engaged as a private carrier is correct, my answer
would still be the same.

In the case of Planters Product Inc, defines a private carrier such as; if the business or single
transaction is not part of a general business or occupation, although involving the carriage of
the goods for a fee, the prson or corporation offering such service is a private carrier. In effect, it
may stipulate in writing to mitigate its liability in case of accident, but it is still required to
observe good diligence of a good father, not to exonerate absolutely the said private carrier.

c) Yes, should it be proven that the friends of X has contributed negligence or fault in case of
loss or destruction of their goods, both X and his friends/passengers will be equitably liable.

Southern Lines vs. CA states that the carrier knowing the fact of goods which are illegal or
suspicious upon ordinary observation and still accepts the goods in such condition will not be
relieved of liability or loss or injury resulting therefrom.
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UNDER ATTY. TIMOTEO AQUINO
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Here, X must prove that it exercises extra-ordinary diligence over the passengers and the latter’s
goods, while the latter must also notify X of its goods, failure of such will result to assumption
of risk.

6) No, I will not sustain Alejandro’s contention. The common carrier is presumed to be at fault
or to have acted negligently unless there is proof of extraordinary diligence on the part of the
common carrier.

ART. 1733. Common carriers, due to the nature of their business and for reasons of public
policy, are bound to observe extraordinary diligence in the vigilance over the goods and for the
safety of the passengers transported by them, according to all the circumstances of each case.

Here, although the common carrier is hijacked it does not fall among the list of categories under
fortuitous event to exempt the latter from liability.

Stated differently, should Alejandro qualify as a private carrier, he is exempted from liability for
loss or damages against Pedro.

7) a) A is liable and not exempted from liability because he remains to be the registered owner
and the boundary system will not allow the circumvention of the law to avoid liability.

The registered owner rule is applicable whenever the persons involved are engaged in what is
known as the kabit system, an arrangement whereby a person who has been granted a
certificate of public convenience allows other person who own motor vehicles to operate them
under his license, sometimes for a fee or percentage of the earnings, although it is not
specifically penalized under the law, it is contrary to public policy and therefore void under
Art. 1409 of the NCC.

Here, A as a registered owner of the jeepney shall remain to be liable.

Therefore, jurisprudence provides that it is the registered owner of the common carrier who
may be held liable for any damage or injury caused as in the instant case.

b) Yes. Santos vs. Sibug provides that levy is proper and in contemplation of law as regards the
public and third persons, the vehicle should be considered the property of the registered owner
under the registered owner rule.

Here, the subjected jeepney is owned by A and as the registered owner of which, may be levied
under the kabit system.

8) The claim of U insurance will prosper against W.S. Corporation only as the shipowner.
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UNDER ATTY. TIMOTEO AQUINO
DAVID, NORIANNE D.
2015400027

Eastern Shippin Lines vs. BPI, states that cargoes while being unloaded generally remain under
the custody of the carrier.

Here, the negligent acts of BS, OF, O Inc., A and W.S. which both mishandled the goods during
the discharging operations. Thus, it bears stressing unto that 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 transported by them. Subject to certain exceptions enumerated
under Article 1734 of the Civil Code, common carriers are responsible for the loss, destruction,
or deterioration of the goods.

Therefore, the extraordinary responsibility of the common carrier lasts from the time the goods
are unconditionally placed in the possession of, and received by the carrier for transportation
until the same are delivered, actually or constructively, by the carrier to the consignee, or to the
person who has a right to receive them. Owing to this high degree of diligence required of
them.

9) The answer will depend if the charter party enters into bareboat/demise or Time Charter
with the shipowner.

Under Maritime Law, if the owner of the goods entered into a bareboat charter with the
shipowner, the shipper will be liable for the loss, destruction or deterioration of such goods
because under a demise or bareboat charter, the charterer becomes a private carrier at least
insofar as the particular voyage concerning the charter-party is concerned. However if it is for
affreightment charter, then the shipowner will still be liable as it remains to be a common
carrier.

Here, the agreement between WS Corp. and KMS is a bareboat charter, in the absence of
agreement, the presumption is that the charter is a bareboat charter.

Therefore the shipowner shall bear the loss or damages and be held liable to such against the
owner of the goods.

10) No, the answer will still be the same with number 9.

In the case of Federal Phoenix Assurance vs. Fortune Sea, Time Charter Party unequivocally
established that appellant Fortune Sea had completely and exclusively relinquished possession,
command and navigation of M/V Ricky Rey to Northern Transport. Despite the denomination
as Time Charter by the parties, their agreement undoubtedly reflected that their intention was
to enter into a Bareboat Charter Agreement.

Conformably, M/V Harvest was converted into a private carrier notwithstanding the existence
of the Time Charter Party agreement with WS since the said agreement was not limited to the
ship only but extends even to the control of its crew.
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UNDER ATTY. TIMOTEO AQUINO
DAVID, NORIANNE D.
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Moreover, determining the nature of a contract, courts are not bound by the title or name given
by the parties. The decisive factor in evaluating an agreement is the intention of the parties, as
shown, not necessarily by the terminology used in the contract but by their conduct, words,
actions and deeds prior to, during and immediately alter executing the agreement.

11) No, the consignee is not barred from recovering damages against the arrastre operator.

In the case of Asian Terminal Guarantee vs. Allied Guarantee Insurance, the arrastre operator
was not able to overcome the presumption of negligence. The Bad Order Cargo Receipts, the
Turn Over Survey of Bad Order Cargoes as well as the Request for Bad Order Survey did not
establish that the additional 54 rolls were in good condition while in the custody of the arrastre.
Said documents proved only that indeed the 158 rolls were already damaged when they were
discharged to the arrastre operator and when it was subsequently withdrawn from the arrastre
operator by the customs broker.

Here, the customs broker OF noted in the bill of lading that the “receipt was in good order, the
arrastre operator clearly accepts the cargoes in good condition and and as evidenced through
bill of lading, it gives implied warranty to the consignee that the said goods are in good
condition.

Hence, the "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 develops upon the carrier. Both the arrastre
and the carrier are, therefore, charged with and obligated to deliver the goods in good condition
to the consignee."

12) KMC’s contention is untenable.

In Republic vs. Lorenzo Shipping, the obligation of the carrier is also terminated if the goods are
delivered even if the bill of lading was not surrendered. The surrender of the bill of lading is not
necessary for the discharge of the obligation of the carrier. Moreover, Art. 353 of the Code of
Commerce states that the consignee must give a receipt of the goods to the carrier in case of loss
of the bill. This has the effect of surrender of the bill of lading.

Here, WS released the goods to S, which was discharged to the latter. Therefore, the obligation
of WS as a common carrier also terminated.

13) Yes, A can held MS Corp, Mr. S and CS Corporation liable.

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UNDER ATTY. TIMOTEO AQUINO
DAVID, NORIANNE D.
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ARTICLE 1734. Common carriers are responsible for the loss, destruction, or deterioration of
the goods, unless the same is due to any of the following causes only such as act or omission
of the shipper or owner of the goods.
Here, the fault is attributable to the shipper’s omission of ensuring the goods we’re packed in
suitable condition.
Therefore, the shipowner may claim the above-mentioned provision to set up the defense of a
common carrier against the cargo owner and exempt him from liability for damages.

14) a) No, Art. 1756 exacts from common carriers the highest degree of diligence in ensuring the
safety of its passengers and are presumed to have been at fault or to have acted negligently,
unless they prove that they observed extraordinary diligence. This disputable presumption may
also be overcome by a showing that the accident was caused by a fortuitous event

In Pilapil v. CA,the Court clarified that where the injury sustained by the passenger was in no
way due to any defect in the means of transport or in the method of transporting, or to the
negligent or willful acts of the common carrier's employees with respect to the foregoing - such
as when the injury arises wholly from causes created by strangers which the carrier had no control of or
prior knowledge to prevent — there would be no issue regarding the common carrier's negligence
in its duty to provide safe and suitable care, as well as competent employees in relation to its
transport business; as such, the presumption of fault/negligence.

Here, an unidentified man standing along the highway hurled a huge rock at the left side of the
bus and hit Ysidro between his eyes, which is not attributed to the fault of the common carrier.

Hence, common carriers doing the business of transporting passengers and goods, does not
give its consent to become an insurer of any and all risks to passengers and goods. It merely
undertakes to perform certain duties to the public as the law imposes, and holds itself liable for
any breach thereof.

b) Case law states that the concept of diligence of a good father of a family "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.

c) No, the situation here is different from question a), the applicable case here is in Nocum v.
Laguna Tayabas Bus Company, SC held that common carriers should be given sufficient leeway in
assuming that the passengers they take in will not bring anything that would prove dangerous
to himself, as well as his co-passengers, unless there is something that will indicate that a more
stringent inspection should be made.
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Here, if the lawless violator is one of the passengers of the common carrier, then the latter will
be held liable for failure to inspect dangerous objects brought by its passengers.

Therefore, what must be importantly considered here is not so much the infringement of the
fundamental sacred rights of the particular passenger herein involved, but the constant threat
any contrary ruling would pose on the right of privacy of all passengers of all common carriers,
considering how easily the duty to inspect can be made an excuse for mischief and abuse.

15) Only C can recover moral, exemplary damages and for loss of earning capacity.

In Sanico and Castro vs. Colipano, provides that as a general rule, documentary evidence is
required to prove loss of earning capacity, Colipano's testimony on her annual earnings of
P12,000.00 is an allowed exception. There are two exceptions to the general rule and Colipano's
testimonial evidence falls under the second exception, viz.:

By way of exception, damages for loss of earning capacity may be awarded despite the absence
of documentary evidence when (1) the deceased is self-employed earning less than the
minimum wage under current labor laws, and judicial notice may be taken of the fact that in the
deceased's line of work no documentary evidence is available; or (2) the deceased is employed
as a daily wage worker earning less than the minimum wage under current labor laws.

Here, D who suffered no injury cannot seek for damages for loss of earning capacity, stated
differently for C who may recover. In addition, the latter may also seek interest as a form of
actual or compensatory damages. Under Article 2210 of the Civil Code, "interest may, in the
discretion of the court, be allowed upon damages awarded for breach of contract." Therefore,
given the gravity of the breach of the contract of carriage causing the serious injury to the arm
of C that resulted in its amputation, the Court deems it just and equitable to award interest from
the court’s decision.