No.

:____________
Date:____________

Asian Terminals, Inc v First Lepanto – Taisho Insurance

Corporation
GR No. 185964, 16 June 2014

Facts: 3,000 bags of sodium tripolyphosphate contained

in 100 plain jumbo bags complete and in good condition
were loaded and received on board MV "Da Feng"
owned by COSCO in favor of consignee, Grand Asian
Sales, Inc.. It appears that the shipment was insured
against all risks by GASI with FIRST LEPANTO. It
was discharged into custody of ATI, a domestic
corporation engaged in arrastre business and then
withdrawn by broker PROVEN for delivery to GASI.

Upon inspection by GASI, there was shortage and

damage amounting to Php 166,772.41. It pursued
indemnification from insurer First Lepanto. Insurer paid
GASI paid GASI and became the subrogee of GASI. It
demnded from COSCO, Smith Bell, Proven,
and ATI but demands went unheeded. A complaint for
sum of money before MeTC of Manila was filed by First
Lepanto.

MeTC absolved ATI and Proven from any liability and

dismissed the complaint. RTC, on the other hand,
reversed MeTCs findings and found ATI unable to
 No.:____________
Date:____________

prove that It exercised due diligence while in custody of

the shipment and hence, negligent and should be held
liable for the damages caused to GASI which, in turn, is
subrogated by First Lepanto. ATI sought recourse with
the CA but it dismissed the appeal and affirmed RTC
ruling.

Issue:Whhether or not ATI should be held liable for the

loss damage sustained by GASI

Ruling YES. ATI failed to prove that it exercised due

care and diligence while shipment was under its custody,
control, and possession as arrastre operator.
The relationship between the consignee and the arrastre
operator is akin to that existing between the consignee
and the owner of the shipped goods and the common
carrier, or that between a depositor and a warehouseman.
Hence, in the performance of its obligations, an arrastre
operator should observe the same degree of diligence as
that required of a common carrier and a warehouseman.
Being the custodian of the goods discharged from a
vessel, an arrastre operator's duty is to take good care of
the goods and to turn them over to the party entitled to
their possession.
In a claim for loss led by the consignee or the insurer, the
burden of proof to show compliance with the obligation
to deliver the goods to the appropriate party devolves
 No.:____________
Date:____________

upon the arrastre operator. Since the safekeeping of the

goods is its
responsibility, it must prove that the losses were not due
to its negligence or to that of its employees. To avoid
liability, the arrastre operator must prove that it exercised
diligence and due care in handling the shipment.

ATI failed to discharge its burden of proof. Instead, it

insisted on shifting the blame to COSCO on the basis of
the Request for Bad Order Survey dated August 9, 1996
purportedly showing that when ATI received the
shipment, one jumbo bag thereof was already in
damaged condition.
 No.:____________
Date:____________

Asian Terminal v Simon

GR No.177116 February 27, 2013

Facts: October 25, 1995Contiquincybunge Export

Company loaded 6,843.700 metric tons of U.S. Soybean
Meal in Bulk on board the vessel MV Sea Dream at the
Port of Darrow, Louisiana, U.S.A., for delivery to the
Port of Manila to respondent Simon Enterprises, Inc., as
consignee. When the vessel arrived at the South Harbor
in Manila, the shipment was discharged to the receiving
barges of petitioner Asian Terminals, Inc., the arrastre
operator. Respondent later received the shipment but
claimed having received only 6,825.144 metric tons of
U.S. Soybean Meal, or short by 18.556 metric tons, which
is estimated to be worth US 7,100.16 or P186,743.20.

November 25, 1995 Contiquincybunge Export Company

made another shipment to respondent and allegedly
loaded on board the vessel MV Tern at the Port of
Darrow, Louisiana, U.S.A. 3,300.000 metric tons of U.S.
Soybean Meal in Bulk for delivery to respondent at the
Port of Manila. The carrier issued its clean Berth Term
Grain Bill of Lading.

January 25, 1996 the carrier docked at the inner

Anchorage, South Harbor, Manila. The subject shipment
was discharged to the receiving barges of petitioner ATI
 No.:____________
Date:____________

and received by respondent which, however, reported

receiving only 3,100.137 metric tons instead of the
manifested 3,300.000 metric tons of shipment. Respondent
filed against petitioner ATI and the carrier a claim for the
shortage of 199.863 metric tons, estimated to be worth
US 79,848.86 or P2,100,025.00, but its claim was denied.

December 3, 1996 respondent filed with the Regional Trial

Court of Manila an action for damages against the
unknown owner of the vessels MV Sea Dream and MV
Tern, its local agent InterAsia Marine Transport, Inc.,
and petitioner ATI alleging that it suffered the losses
through the fault or negligence of the said defendants.
Respondent sought to claim damages plus attorneys fees
and costs of suit. Its claim against the unknown owner of
the vessel MV Sea Dream, however, was later settled in
a Release and Quitclaim dated June 9, 1998, and only
the claims against the unknown owner of the MV Tern,
Inter-Asia Marine Transport, Inc., and petitioner ATI
remained.

Issue: Whether Asian Terminals, Inc is solidarily liable

with his codefendants for the shortage incurred in the
shipment of the goods to the respondent

Ruling: No, the respondent failed to prove that the

subject shipment suffered actual shortage as there was no
 No.:____________
Date:____________

competent evidence to prove that it actually weighed

3,300 metric toms at the point of origin

Though it is true that common carriers are presumed to

have been at fault or to have acted negligently if the
goods transported by them are lost, destroyed, or
deteriorated, and that the common carrier must prove
that it exercised extraordinary diligence in order to
overcome the presumption, 21 the plaintiff must
still, before the burden is shifted to the defendant, prove
that the subject shipment suffered actual shortage. This
can only be done if the weight of the shipment at the port
of origin and its subsequent weight at the port of arrival
have been proven by a preponderance of evidence, and it
can be seen that the former weight is considerably
greater than the latter weight, taking into consideration
the exceptions provided in Article 1734 of the Civil
Code.

The weight of the shipment as indicated in the bill of

lading is not conclusive as to the actual weight of the
goods. Consequently, the respondent must still prove the
actual weight of the subject shipment at the time it was
loaded at the port of origin so that a conclusion may be
made as to whether there was indeed a shortage for
which petitioner must be liable. This, the respondent
failed to do.
 No.:____________
Date:____________

The respondent having failed to present evidence to

prove the actual weight of the subject shipment when it
was loaded onto the MV Tern, its cause of action must
then fail because it cannot prove the shortage that it was
alleging. Indeed, if the claimant cannot definitively
establish the weight of the subject shipment at the point
of origin, the fact of shortage or loss cannot be
ascertained. The claimant then has no basis for claiming
damages resulting from an alleged shortage.
 No.:____________
Date:____________

Westwind Shipping v. UCPB

710 SCRA 544 (2013)

Facts: On August 1993, Kinsho Mataichi Corporation

shipped from the port of Kobe, Japan, 197 metal
containers skids of tin free steel for delivery to the
consignee, San Miguel Corporation The shipment,
covered by Bill of Lading was loaded and received
clean on board MV Golden Harvest Voyage No. 66, a
vessel owned and operated by Westwind Shipping
Corporation SMC insured the cargoes against all risks
with UCPB General Insurance Co., Inc. for US Dollars:
184,798.97, which, at the time, 6,209,245.28 persos. The
shipment arrived in Manila, Philippines on August 31,
1993 and was discharged in the custody of the arrastre
operator, Asian Terminals, Inc. formerly Marina Port
Services, Inc. During the unloading operation, however,
six containers skids worth 117,093.12 pesos sustained dents
and punctures from the forklift used by
the stevedores of Ocean Terminal Services, Inc. in
centering and shuttling the containers skids. It was
discovered upon discharge that additional nine
containers skids valued at 175,639.68 pesos were also
damaged due to the forklift operations; thus, making the
total number of 15 containers skids in bad order. Almost
a year
 No.:____________
Date:____________

after, SMC filed a claim against UCPB, Westwind, ATI,

and OFII to recover the amount corresponding to the
damaged 15 containers skids. When UCPB paid the total
sum of P 292,732.80, SMC signed the subrogation receipt.
Thereafter, in the exercise of its right of subrogation,
UCPB instituted on August 30, 1994 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 ATIs forklift operator during the
unloading operations. In accordance with the stipulation
of the bill of lading, which allegedly conforms to Article
1736 of the NCC, it contends that its responsibility
already ceased from the moment the cargoes were
delivered to ATI.
As for OFII, it maintains that it is not a common carrier,
but only a customs broker whose participation is limited
to facilitating withdrawal of the shipment in the custody
of ATI.

Issues:
Whether the shipping industry remains liable for the
damages sustained despite the fact that they have no
custody.
 No.:____________
Date:____________

Whether a customs broker is considered a common

carrier in charge of transportation of goods.

Ruling: Section 3 (2) of the Carriage of Goods by Sea Act

states that among the carriers responsibilities are to
properly and carefully load, care for and discharge the
goods carried. The bill of lading covering the subject
shipment likewise stipulates that the carriers liability for
loss or damage to the goods ceases after its discharge
from the vessel. Article 619 of the Code of Commerce
holds a ship captain liable for the cargo from the time it
is turned over to him until its delivery at the port of
unloading.

A customs broker has been regarded as a common

carrier because transportation of goods is an integral part
of its business. In Schmitz Transport Brokerage
Corporation v. Transport Venture, Inc., the Court
already reiterated: It is settled that under a given set of
facts, a customs broker may be regarded as a common
carrier. Thus, this Court, in A.F. Sanchez Brokerage, Inc.
v. The Honorable Court of Appeals held:

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.
 No.:____________
Date:____________

Common carriers are persons, corporations, firms or

associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water,
or air, for compensation, offering their services to the
public.

Article 1732 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.
 No.:____________
Date:____________

ASIAN TERMINALS, INC. vs. PHILAM

INSURANCE CO., INC
G.R. Nos. 181163, 181262, and 181319, July 24, 2013

Facts: On April 15, 1995, Nichimen Corporation shipped

to Universal Motors Corporation 219 packages
containing 120 units of brand new Nissan Pickup Truck
Double Cab 4×2 model, without engine, tires and
batteries, on board the vessel SS Calayan Iris from Japan
to Manila. The shipment, which had a declared value of
US dollars 81,368 or P29,400,000, was insured with Philam
against all risks under the marine Policy no. 708-8006717-4.

The carrying vessel arrived at the port of manila on April

20, 1995, and when the shipment was unloaded by the
staff of ATI, it was found that the package marked as 03-
245-42K/1 was in bad order. The Turn Over Survey of bad
order cargoes
dated April 21, 1995 identified two packages, labelled 03-
245-42K/1 and 03/237/7CK/2, as being dented and broken.
Thereafter, the cargoes were stored for temporary
safekeeping inside CFS Warehouse in Pier No. 5.

On May 11, 1995, the shipment was withdrawn by R.F.

Revilla Customs Brokerage, Inc., the authorized broker
of Universal Motors, and delivered to the latters
 No.:____________
Date:____________

warehouse in Mandaluyong City. Upon the request of

Universal Motors, a bad order survey was conducted on
the cargoes and it was found that one Frame Axle Sub
without LWR was deeply dented on the buffle plate
while six Frame Assembly with Bush were deformed
and misaligned. Owing to the extent of the damage to
said cargoes, Universal Motors declared them a total
loss.

On August 4, 1995, Universal Motors filed a formal claim

for damages in the amount of P643,963.84 against
Westwind, ATI and R.F. Revilla Customs Brokerage,
Inc. When Universal Motors demands remained
unheeded, it sought reparation from and was
compensated in the sum of P633,957.15 by Philam.
Accordingly, Universal Motors issued a Subrogation
Receipt dated November 15, 1995 in favor of Philam.

On January 18, 1996, Philam, as subrogee of Universal

Motors, filed a Complaint for damages against
Westwind, ATI and R.F. Revilla Customs Brokerage,
Inc. before the Regional Trial Court of Makati City. The
trial court rendered judgment in favour of Philam which
ruling was affirmed by the Court of Appeals modifying
the amount to be paid by Westwind and ATI.
 No.:____________
Date:____________

Issue: Whether or not Philam may claim against

Westwind and ATI as a subrogee

Ruling: Yes. The Court holds that petitioner Philam has

adequately established the basis of its claim against
petitioners ATI and Westwind. Philam, as insurer, was
subrogated to the rights of the consignee, Universal
Motors Corporation, pursuant to the Subrogation receipt
executed by the latter in favor of the former. The right of
subrogation accrues simply upon payment by the
insurance company of the insurance claim.

Petitioner Philams action finds support in Article 2207 of

the Civil Code which 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.

In Malayan Insurance Co., Inc. vs. Alberto, the Court

explained the effect of payment by the insurer of the
insurance claim in this wise:

We have held that payment by the insurer to the insured

operates as an equitable assignment to the insurer of all
 No.:____________
Date:____________

the remedies that the insured may have against the third
party whose negligence or wrongful act caused the loss.
The right of subrogation is not dependent upon, nor does
it grow out of, any privity of contract. It accrues simply
upon payment by the insurance company of the
insurance claim. The doctrine of subrogation has its roots
in equity. It is designed to promote and accomplish
justice; and is the mode that equity adopts to compel the
ultimate payment of a debt by one who, in justice,
equity, and good conscience, ought to pay.
 No.:____________
Date:____________

SPOUSES FERNANDO and LOURDES VILORIA v.

CONTINENTAL AIRLINES, INC.
663 SCRA 57, G.R. No. 188288, January 16, 2012

FACTS: While in the United States, Fernando purchased

for himself and his wife, Lourdes, two (2) round trip
airline tickets from San Diego, California to Newark,
New Jersey on board Continental Airlines (CAI).
Fernando purchased the tickets from a travel agency
called “Holiday Travel” attended to by Margaret Mager.

According to Spouses Viloria, Fernando agreed to buy

the said tickets after Mager informed them that there
were no available seats at Amtrak, an intercity passenger
train service provider in the United States. Spouses
Viloria were scheduled to leave for Newark on August
13, 1997 and return to San Diego on August 21, 1997.

Fernando requested Mager to reschedule their flight to

Newark to an earlier date or August 6, 1997. Mager
informed him that flights to Newark were already fully
booked and offered the alternative of a round trip
flight via Frontier Air, which was more expensive.

Fernando opted to request for a refund. Mager, however,

denied his request as the subject tickets are non-
 No.:____________
Date:____________

refundable and the only option that Continental Airlines

can offer is the re-issuance of new tickets within one (1)
year from the date the subject tickets were issued.
Fernando decided to reserve two (2) seats with Frontier
Air.

Having doubts, Fernando went to the Greyhound Station

where he saw an Amtrak station nearby and made
inquiries where he was told that there are seats available
and he can travel on Amtrak anytime and any day he
pleased. Fernando then purchased two (2) tickets for
Washington, D.C.

He then went to Holiday Travel and confronted Mager

with the Amtrak tickets, telling her that she had misled
them into buying the Continental Airlines tickets by
misrepresenting that Amtrak was already fully booked.
However, Mager was firm in her position that the subject
tickets are non-refundable.

Upon returning to the Philippines, Fernando sent a letter

to CAI demanding a refund. In a letter dated March 24,
1998 Continental Micronesia informed Fernando that the
subject tickets may be used as a form of payment for the
purchase of another Continental ticket, albeit with a re-
issuance fee.
 No.:____________
Date:____________

A year after, Fernando went to Continental’s ticketing

office at Makati City to have the subject tickets replaced
by a single round trip ticket to Los Angeles, California
under his name but was informed that Lourdes’ ticket
was non-transferable, thus, cannot be used for the
purchase of a ticket in his favor. He was also informed
that a round trip ticket to Los Angeles will not be
covered by the value of his San Diego to Newark round
trip ticket.

Fernando demanded for the refund of the subject tickets

as he no longer wished to have them replaced.
Furthermore, he claimed that the acts of CIA overpricing
his ticket and the refusal to allow him to use Lourdes’
ticket breached the undertaking in the March 24, 1998
letter.

According to CAI, one of the conditions attached to their

contract of carriage is the non-transferability and non-
refundability of the subject tickets.

RTC rendered its Decision, holding that Spouses Viloria

are entitled to a refund in view of Mager’s
misrepresentation in obtaining their consent in the
purchase of the subject tickets and ruled that CAI acted
in bad faith.
 No.:____________
Date:____________

CA reversed the decision holding that CAI cannot be

held liable for Mager’s act in the absence of any proof
that a principal-agent relationship existed between CAI
and Holiday Travel and stated that CAI did not act in
bad faith.

ISSUE: Whether CAI is liable for the misrepresentation

of Mager.

HELD: NO

In actions based on quasi-delict, a principal can only be

held liable for the tort committed by its agent’s
employees if it has been established by preponderance of
evidence that the principal was also at fault or negligent
or that the principal exercise control and supervision
over them.

If the passenger’s cause of action against the airline

company is premised on culpa aquiliana or quasi-delict
for a tort committed by the employee of the airline
company’s agent, there must be an independent showing
that the airline company was at fault or negligent or has
contributed to the negligence or tortuous conduct
committed by the employee of its agent. The mere fact
that the employee of the airline company’s agent has
committed a tort is not sufficient to hold the airline
 No.:____________
Date:____________

company liable. There is no vinculum juris between the

airline company and its agent’s employees and the
contractual relationship between the airline company and
its agent does not operate to create a juridical tie between
the airline company and its agent’s employees. Article
2180 of the Civil Code does not make the principal
vicariously liable for the tort committed by its agent’s
employees and the principal-agency relationship per
se does not make the principal a party to such tort;
hence, the need to prove the principal’s own fault or
negligence.

On the other hand, if the passenger’s cause of action for

damages against the airline company is based on
contractual breach or culpa contractual, it is not
necessary that there be evidence of the airline
company’s fault or negligence. 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.

In this case, Spouses Viloria’s cause of action on the

basis of Mager’s alleged fraudulent misrepresentation is
clearly one of tort or quasi-delict, there being no pre-
existing contractual relationship between them.
 No.:____________
Date:____________

Apart from their claim that CAI must be held liable for
Mager’s supposed fraud because Holiday Travel is
CAI’s agent, Spouses Viloria did not present evidence
that CAI was a party or had contributed to Mager’s
complained act either by instructing or authorizing
Holiday Travel and Mager to issue the said
misrepresentation.

Therefore, without a modicum of evidence that CAI

exercised control over Holiday Travel’s employees or
that CAI was equally at fault, no liability can be imposed
on CAI for Mager’s supposed misrepresentation.
 No.:____________
Date:____________

INSURANCE COMPANY OF NORTH AMERICA

vs. ASIAN TERMINALs, INC.
G.R. No. 180784, February 15, 2012
PERALTA, J.
Facts:
On November 9, 2002, Macro-Lito Corporation, through
M/V “DIMI P” vessel, 185 packages of electrolytic tin
free steel, complete and in good condition. The goods
are covered by a bill of lading, had a declared value of
$169,850.35 and was insured with the Insurance
Company of North America against all risk.
The carrying vessel arrived at the port of Manila on
November 19, 2002, and when the shipment was
discharged therefrom, it was noted that 7 of the packages
were damaged and in bad condition. On November 21,
2002, the shipment was then turned over to the custody
of Asian Terminals. Inc. for storage and safekeeping
pending its withdrawal by the consignee.

On November 29, 2002, prior to the withdrawal of the

shipment, a joint inspection of the said cargo was
conducted. The examination report showed that an
additional 5 packages were found to be damaged and in
bad order. On January 6, 2003, the consignee, San
Miguel Corporation filed separate claims against both
the Petitioner and the Respondent for the damage caused
 No.:____________
Date:____________

to the packages.
The Petitioner then paid San Miguel Corporation the
amount of Php 431,592.14 which is based on a report of
its independent adjuster and formally demanded
reparation against the Respondent for the amount it paid
San Miguel Corporation. For the failure of the
Respondent to satisfy the demand of the Petitioner, the
Petitioner filed for an action for damages with the RTC
of Makati.
Respondent invoked the Contract for Cargo Handling
Services executed between the Philippine Ports
Authority and the Respondent. Under the contract, the
Respondent’s liability for damage to cargoes in its
custody is limited to PhP5,000 for each package, unless
the value of the cargo shipment is otherwise specified or
manifested in writing together with the declared Bill of
Lading.

However, the trial court dismissed the complaint on the

ground that the Petitioner’s claim was barred by the
statute of limitations. It held that the Carriage of Goods
by Sea Act (COGSA), embodied in Commonwealth Act
No. 65 is applicable. The trial court held that under the
said law, the shipper has the right to bring a suit within
one year after the delivery of the goods or the date when
the goods should have been delivered, in respect of loss
or damage thereto. Petitioner then filed before the
 No.:____________
Date:____________

Supreme Court a petition for review on certiorari

assailing the trial court’s order of dismissal.

Issue:
Whether the one-year prescriptive period for filing a suit
under the COGSA applies to this action for damages
against respondent arrastre operator
Whether the Petitioner is entitled to recover actual
damages against the Respondent

Ruling:
The term “carriage of goods” covers the period from the
time when the goods are loaded to the time when they
are discharged from the ship. Thus, it can be inferred that
the period of time when the goods have been discharged
from the ship and given to the custody of the arrastre
operator is not covered by the COGSA.
Yes. Petitioner is entitled to actual damages in the
amount of P164,428.76 for the four (4) skids damaged
while in the custody of respondent. The Petitioner, who
filed the present action for the 5 packages that were
damaged while in the custody of the respondent was not
forthright in its claim, as it knew that the damages it
sought, based on the report of its adjuster covered 9
packages. Based on the report, only four of the nine
packages were damaged in the custody of the
 No.:____________
Date:____________

Respondent. The Petitioner can be granted only the

amount of damages that is due to it.
 No.:____________
Date:____________

Bano vs Bachelor Express

G.R. No. 191703 March 12, 2012
Perlas-Bernabe, J.

Facts:

On November 6, 1993, Salvana was driving the bus

owned by Bachelor Express, Inc. with plate number
LVD-273 and body number 4042 along the national
highway at Magdum, Tagum City bound for Davao
City. He overtook a PUJ jeepney while negotiating a
blind curve which caused him to intrude the opposite
lane and bump the 10-wheeler truck of Bano. The
collision resulted in damage to both vehicles, the
subsequent death of the truck driver, Asumbrado , and
serious physical injuries to bus driver Salvaña. Hence,
Bano and the heirs of Asumbrado filed a complaint for
quasi-delict, damages and attorney's fees against
respondents, accusing Salvaña of negligently driving
Bus 4042 causing it to collide with the dump truck.
However, Bachelor Express Inc. denied liability
claiming that the bus was already out of control due to a
steering wheel problem even prior the collision which
could not have been avoided even with maintenance.
They further claimed that it was Asumbrado who had
the last clear chance to avoid the collision. The RTC
ruled the proximate cause of the accident was Salvana
 No.:____________
Date:____________

due to the attempt to overtake the jeepney which also

established the negligence of their employee. The CA
affirmed the decision of the lower court.

Issue:
Whether or not Salvaña was grossly negligent in
continuing to drive the bus even after he had discovered
the malfunction in its steering wheel.

Held:
Yes. The Court has defined gross negligence as "one that
is characterized by the want of even slight care, acting or
omitting to act in a situation where there is a duty to act,
not inadvertently but willfully and intentionally with a
conscious indifference to consequences insofar as other
persons may be affected." In this case, it was shown that
when bus driver, Salvaña, overtook the jeepney in front
of him, he was rounding a blind curve along a
descending road. Considering the road condition, and
that there was only one lane on each side of the center
line for the movement of traffic in opposite directions, it
would have been more prudent for him to confine his
bus to its proper place. Having thus encroached on the
opposite lane in the process of overtaking the jeepney,
without ascertaining that it was clear of oncoming traffic
that resulted in the collision with the approaching dump
truck driven by deceased Asumbrado, Salvaña was
 No.:____________
Date:____________

grossly negligent in driving his bus. He was remiss in his

duty to determine that the road was clear and not to
proceed if he could not do so in safety.
 No.:____________
Date:____________

Benjamin Cua vs. Wallem Philippines Shipping Inc. and

Advance Shipping Corporation
G.R. No. 171337, July 11, 2012
Brion ,J.

Facts:
Petitioner Benjamin Cua (Cua) consigned the
delivery of Brazilian Soyabean with respondents
Wallem Philippines Shipping Inc. (Wallem) and
Advance Shipping Corporation (Advance). Advance is
the owner and manager of the ship M/V Argo Trader
which carried the cargo, while Wallen was its local
agent. Cua filed for damages alleging that there was a
shortage of 50 Tons of cargo and a damage to 218 tons
which he stated was due to the failure to observe
extraordinary diligence by the respondents.

Advance filed a motion to dismiss the complaint

alleging that the RTC has no jurisdiction since the case
should be first brought to arbitration. Wallem also filed a
motion to dismiss alleging that the Cua can no longer file
the said case since the action has already prescribed. His
argument is based on Sec. 3 (6) of the Carriage of Goods
by Sea Act (COGSA) which states that the carrier shall
be discharged from liability if the suit is not brought
within one year after the delivery of the goods. Cua in
his answer first states that the defense of Advance is not
 No.:____________
Date:____________

tenable since only Advance and Willem is the signatory

to the arbitration clause of the Charter Party Agreement.
Also, Cua contends that the action has not yet prescribed
and presented a telex message sent by Advance on
August 10, 1990 agreeing to extend the method of
payment rom August 14, 1990 to November 12, 1990.

The RTC ruled in favor of Cua which rendered a

decision, making Advance and Wallem solidarily liable
for the amount of damages he is entitled to. However,
Willem appealed to the CA which reversed the findings
of the RTC. Cua filed a motion for reconsideration but it
was denied by the CA.

Issue:
Whether or not Wallem’s defense of prescription is
valid?

Ruling:
The Court held that Wallem’s defense of
prescription is not valid. The court held that Cua was
able to allege in his complaint that he was granted an
extension by the respondents. The respondents failed to
specifically deny the claim of Cua that he was provided
with an extension. The court held that the failure of the
respondents to specifically deny an issue raised by the
plaintiff will lead to such issue being deemed admitted.
No.:____________
Date:____________
 No.:____________
Date:____________

27. MALAYAN VS PHIL FIRST INSURANCE

G.R. NO. 184300 - July 11, 2012

FACTS:
Since 1989, Wyeth Philippines, Inc. (Wyeth) and
respondent Reputable Forwarder Services, Inc.
(Reputable) had been annually executing a contract of
carriage, whereby the latter undertook to transport and
deliver the former’s products to its customers, dealers or
salesmen.
Wyeth procured a Marine Policy from respondent
Philippines First Insurance Co., Inc.
Under the contract, Reputable undertook to answer for
“all risks with respect to the goods and shall be liable to
Wyeth, for the loss, destruction, or damage of the
goods/products due to any and all causes whatsoever,
including theft, robbery, flood, storm, earthquakes,
lightning, and other force majeure while the
goods/products are in transit and until actual delivery to
the customers, salesmen, and dealers of Wyeth”.
Reputable signed a Special Risk Insurance Policy (SR
Policy) with petitioner Malayan for the amount of
P1,000,000.00.
During the effectivity of the Marine Policy and SR
Policy, Reputable received 1,000 boxes of Promil infant
formula worth P2,357,582.70 to be delivered by
Reputable to Mercury Drug in Libis, Quezon City.
 No.:____________
Date:____________

Unfortunately, the truck carrying Wyeth s products was

hijacked by about 10 armed men. The hijacked truck
was recovered two weeks later without its cargo.
Philippines First, pursuant to the Marine Policy, paid
Wyeth P2,133,257.00 as indemnity. Philippines First
then demanded reimbursement from Reputable, having
been subrogated to the rights of Wyeth by virtue of the
payment. The latter, however, ignored the demand.
Philippines First instituted an action for sum of money
against Reputable and alleged that Reputable is a
“private corporation engaged in the business of a
common carrier.”
In its answer, Reputable claimed that it is a private
carrier.
The RTC rendered its Decision finding Reputable liable
to Philippines First for the amount of indemnity it paid to
Wyeth, among others. In turn, Malayan was found to be
liable to Reputable to the extent of the policy coverage.
Dissatisfied, both Reputable and Malayan filed their
respective appeals. The CA sustained the ruling of the
RTC. Malayan’s MR was denied by the CA. Hence, this
petition.
ISSUE:
Whether or not Reputable is a common carrier?

RULING:
 No.:____________
Date:____________

The Court agrees with the RTC and CA that Reputable

is a private carrier.
Under Article 1732 of the Civil Code, common carriers
are persons, corporations, firms, or associations engaged
in the business of carrying or transporting passenger or
goods, or both by land, water or air for compensation,
offering their services to the public. On the other hand, a
private carrier is one wherein the carriage is generally
undertaken by special agreement and it does not hold
itself out to carry goods for the general public. A
common carrier becomes a private carrier when it
undertakes to carry a special cargo or chartered to a
special person only. For all intents and purposes,
therefore, Reputable operated as a private/special carrier
with regard to its contract of carriage with Wyeth.
The extent of a private carrier’s obligation is dictated by
the stipulations of a contract it entered into, provided its
stipulations, clauses, terms and conditions are not
contrary to law, morals, good customs, public order, or
public policy. “The Civil Code provisions on common
carriers should not be applied where the carrier is not
acting as such but as a private carrier. Public policy
governing common carriers has no force where the
public at large is not involved.”
 No.:____________
Date:____________

PERENA VS. ZARATE G.R. NO. 157917 August 29,

2012 Bersamin, J.

FACTS: Perenas were engaged in the business of

transporting students to Don Bosco. The Zarates
engaged Perenas services to transport their son, Aaron, to
school. While on the way to school, the van’s air-
conditioned unit was turned on and the stereo playing
loudly. The driver took a detour because they were
running late due to the traffic in SLEX. The detour was
through a narrow path underneath the Magallanes
Interchange used as short cut into Makati. When the van
was to traverse the PNR railroad crossing, the van was
tailing a large passenger bus so the driver’s view of the
oncoming train was blocked. The train hit the van at the
rear end and the impact threw 9 students 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. The Zarates filed for
damages against Alfaro, Perenas, PNR, and the train
driver. The cause of action against Perena was for
contract of carriage while for PNR, quasi delict. Perena
posited the defense of diligence of a good father in the
selection and supervision of their driver

ISSUE/S: Were Perenas and PNR jointly and severally

liable for damages? Is the petitioner a common carrier?
 No.:____________
Date:____________

RULING: YES. A school bus operator is a common

carrier. Perena’s defense of diligence of a good father in
the selection and supervision of their driver is
unavailable for breach of contract of carriage. Perenas
operated as a common carrier; and their standard of care
was extraordinary diligence, not only diligence of a good
father. A carrier is a person or corporation who
undertakes to transport or convey goods from one place
to another, gratuitously or for hire. They may be private
or common

Private carrier is one who, 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 diligence required of a
private carrier is only ordinary

Common Carrier is a person, corporation, firm or

association engaged in the business of carrying or
transporting passengers or goods or both, by land, water,
or air, for compensation, offering such services to the
public.
 No.:____________
Date:____________

Diligence required is to observe extraordinary diligence,

and is presumed to be at fault or to have acted
negligently in case of the loss of effects of passengers, or
death or injuries to passengers The true test for a
common carrier is not the quantity or extent of business
actually transacted, or the number of conveyances, BUT
WHETHER the undertaking is a part of the activity that
he has held out to the general public as his business or
occupation.

The Perenas 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. Perena, being a
common carrier, was already presumed to be negligent
at the time of the accident because death occurred to
their passenger. The omissions of care on the part of the
driver constituted negligence.
 No.:____________
Date:____________

KEPPEL CEBU SHIPYARD, INC., vs. PIONEER

INSURANCE AND SURETY CORPORATION
G.R. Nos. 180880-81
September 25, 2009
NACHURA

FACTS:

WG& A Jebsens Shipment, owner of M/V Superferry 3

and Keppel Cebu Shipyard, Inc entered into an
agreement that the Drydocking and repair of the above-
named vessel ordered by the owner’s authorized
representative shall be carried out under the keppel cebu
shipyard standard conditions of contract for ship repair,
guidelines and regulations on safety and security issued
by Keppel Cebu Shipyard. In the course of its repair,
M/V “Superferry 3” was gutted by fire. Claiming that
the extent of the damage was pervasive, WG&A
declared the vessel’s damage as a total constructive loss
and, hence, filed an insurance claim with Pioneer.
Pioneer paid the insurance claim of WG&A, which in
turn, executed a loss and subrogation receipt in favor of
Pioneer. Pioneer tried to collect from KCSI, but the latter
denied any responsibility for the loss of the subject
vessel.

ISSUE:
 No.:____________
Date:____________

To whom may negligence over the fire that broke out on

board M/V “Superferry 3” be imputed?

RULING:

Undeniably, the immediate cause of the fire was the hot

work done by Angelino Sevillejo on the accommodation
area of the vessel, specifically on deck A. As established
before the CIAC - Pioneer contends that KCSI should be
held liable because Sevillejo was its employee who, at
the time the fire broke out, was doing his assigned task,
and that KCSI was solely responsible for all the hot
works, done on board the vessel. We rule in favor of
Pioneer.
At the time of the fire. Sevillejo was an employee of
KCSI and was subject to the latter’s direct control and
supervision. There was a lapse in KCSI’s supervision of
Sevillejo’s work at the time the fire broke out. KCSI
failed to exercise the necessary degree of caution and
foresight called for by the circumstances.
The circumstances, taken collectively, yield the
inevitable conclusion that Sevillejo was negligent in the
performance of his assigned task. His negligence was the
proximate cause of the fire on board M/V “Superferry
3”. As he was then definitely engaged in the
performance of his assigned tasks as an employee of
 No.:____________
Date:____________

KCSI, his negligence gave rise to the vicarious liability

of his employer under Art. 2180 of the Civil Code.
 No.:____________
Date:____________

RCJ BUS LINES VS STANDARD INSURANCE CO.

G.R. NO. 193629, AUGUST 17, 2011
CARPIO, J.

FACTS:

Standard Insurance Co., Inc. (STANDARD) filed a

complaint against the petitioners Flor Mangoba and RCJ
Bus Lines, Inc. The complaint was predicated upon an
accident which involves the Mitsubishi Lancer and the
RCJ Bus Lines. Upon seeing a pile of gravel and sand
on the road, the Toyota Corolla, which is ahead of the
Mitsubishi Lancer, stopped on its tracks. The Mitsubishi
Lancer followed suit and also halted. At this point, the
bus hit and bumped the rear portion of the Mitsubishi
Lancer causing it to move forward and hit the Toyota
Corolla in front of it. As a result of the incident, the
Mitsubishi Lancer sustained damages amounting to
P162,151.22, representing the costs of its repairs. Under
the comprehensive insurance policy secured by
Rodelene Valentino, owner of the Mitsubishi Lancer,
STANDARD reimbursed to the former the amount she
expended for the repairs of her vehicle. Rodelene then
executed a Release of Claim and Subrogation Receipt,
subrogating STANDARD to all rights, claims and
actions she may have against RCJ Bus Lines, Inc. and its
driver, Flor Bola Mangoba. In its answer, RCJ Bus
 No.:____________
Date:____________

Lines, Inc. maintained, among others, that the direct,

immediate and proximate cause of the accident was the
negligence of the driver of the Mitsubishi Lancer when,
for no reason at all, it made a sudden stop along the
National Highway, as if to initiate and/or create an
accident. The MeTC rendered its decision in favor of
Standard. The RTC affirmed with modification the
MeTC’s Decision deleting the award for exemplary
damages. The appellate court found that the RTC
committed no reversible error in affirming RCJ’s
liability as registered owner of the bus and employer of
Mangoba.

ISSUE:

W/N the Court of Appeals erroneously disregarded the

point that petitioner RCJ’s defense of extraordinary
diligence in the selection and supervision of its driver
was made as an alternative defense.

HELD:

The petition has no merit. RCJ, by presenting witnesses

to testify on its exercise of diligence of a good father of a
family in the selection and supervision of its bus drivers,
admitted that Mangoba is its employee. Article 2180 of
the Civil Code, in relation to Article 2176, makes the
 No.:____________
Date:____________

employer vicariously liable for the acts of its employees.

When the employee cause damage due to his own
negligence while performing his own duties, there arises
the juris tantum presumption that the employer is
negligent, rebuttable only by proof of observance of the
diligence of a good father of a family. For failure to
rebut such legal presumption of negligence in the
selection and supervision of employees, the employer is
likewise responsible for damages, the basis of the
liability being the relationshop of pater faimlias or on the
employer’s own negligence. Mangoba, per testimony of
his conductor, was ten meters away from the Mitsubishi
Lancer before the collision and was driving 60 to 75
kilometers per hour when the speed limit was 50
kilometers per hour. The resumption under Article 2185
of the Civil Code was this proven true. Mangoba, as
driver of the bus which collided with the Mitsubishi
Lancer, was negligent since he violated a traffic
regulation at the time of the mishap. We see no reason
to depart from the findings of the MeTC, RTC and
appellate court that Mangoba was negligent.
 No.:____________
Date:____________

LOADMASTERS CUSTOMS SERVICES, INC., vs.

GLODEL BROKERAGE CORPORATION and R&B
INSURANCE CORPORATION
G.R.No. 179446, January 10, 2011
MENDOZA, J.:

FACTS:
R&B Insurance issued Marine Policy No. MN-
00105/2001 in favor of Columbia to insure the shipment
of 132 bundles of electric copper cathodes against All
Risks. The cargoes were shipped on board the vessel
“Richard Rey” from Isabela, Leyte, to Pier 10, North
Harbor, Manila.

Columbia engaged the services of Glodel for the release

and withdrawal of the cargoes from the pier and the
subsequent delivery to its warehouse/plants. Glodel, in
turn, engaged the services of Load masters for the use of
its delivery trucks to transport the same to Columbia’s
warehouses/plants in Bulacan and Valenzuela City.

The goods were loaded on board twelve trucks owned

by Laodmasters However, of the six trucks en route to
Balagtas, Bulacan, only five reached the destination
while one truck, loaded with 11 bundles or 232 pieces of
copper cathodes, failed to deliver its cargo.
 No.:____________
Date:____________

Because of the incident, Columbia filed with R&B

Insurance a claim for insurance which was paid to the
former. Thereafter, R&B Insurance filed a complaint for
damages against both Loadmasters and Glodel before
RTC. It sought reimbursement of the amount it paid to
Columbia for the loss of subject cargo.

ISSUE:
WON Loadmasters and Glodel are common carriers.

RULING:
YES, both are common carriers. Under Article 1732 of
the Civil Code, common carriers are persons,
corporations, firms, or associations engaged in the
business of carrying or transporting passenger or goods,
or both by land, water or air for compensation, offering
their services to the public.

Based on the aforecited definition, Loadmasters is a

common carrier because it is engaged in the business of
transporting goods by land, through its trucking service.
In the present case, there is no indication that the
undertaking in the contract between Loadmasters and
Glodel was private in character. There is no showing that
Loadmasters solely and exclusively rendered services to
Glodel.
 No.:____________
Date:____________

In the same vein, Glodel is also considered a common

carrier within the context of Article 1732. In its
memorandum, it states that is engaged in the business of
customs brokering. A customs broker, as held in
Schmitz Transport v. Transport Venture, is also regarded
as a common carrier, the transportation of goods being
an integral part of its business.
 No.:____________
Date:____________

Ochoa, Petitioner v. GS Transport, Respondent

GR: 170071, March 9, 2011
GS Transport, Petitioner v. Ochoa, Respondent
GR: 170125
Del Castillo, J.

FACTS:
An accident which claimed the life of a passenger is the
root of these two petitions. Jose Marcial K. Ochoa (Jose
Marcial) died on the night of March 10, 1995 while on
board an Avis taxicab owned and operated by G & S
Transport Corporation. Sometime in the evening at the
Manila Domestic Airport, the late Jose Marcial K.
Ochoa boarded and rode a taxicab owned and operated
by "Avis Coupon Taxi" (Avis) and driven by its
employee and authorized driver Bibiano Padilla, Jr.. The
taxicab was cruising along EDSA at high speed. While
going up the Boni Serrano (Santolan) fly-over, it
overtook another cab driven by Pablo Clave and tried to
pass another vehicle, a ten-wheeler cargo truck. Avis cab
was unable to pass and because of its speed, Padilla was
unable to control it. To avoid colliding with the truck,
Padilla turned the wheel to the left causing his taxicab to
ram the railing throwing itself off the fly-over and fell on
the middle surface of EDSA below. The forceful drop of
the vehicle on the floor of the road broke and split it into
 No.:____________
Date:____________

two parts. Both driver Padilla and passenger Jose

Marcial K. Ochoa were injured and rushed to the
hospital. At the East Avenue Medical Center, Ochoa was
not as lucky as Padilla who was alive. Jose Marcial’s
wife, Ruby Bueno Ochoa, and his two minor children
through counsel, sent G & S a letter demanding that the
latter indemnify them for Jose Marcial’s death, his loss
of earning capacity, and funeral expenses. As G & S
failed to heed the same, the heirs filed a Complaint for
Damages before the Regional Trial Court (RTC) of
Pasig City. The heirs alleged that G & S, as a common
carrier, is under legal obligation to observe and exercise
extraordinary diligence in transporting its passengers to
their destination safely and securely. They averred that G
& S is liable to them for having breached the contract of
common carriage. G & S posited that the proximate
cause of Jose Marcial’s death is a fortuitous event and/or
the fault or negligence of the driver of the delivery van
that hit the taxicab. It likewise claimed that it exercised
the diligence required of a good father of a family in the
selection and supervision of its employees. The trial
court rendered a Decision finding the vehicular mishap
not caused by a fortuitous event but by the negligence of
Padilla. It likewise found the evidence adduced by G &
S to show that it exercised the diligence of a good father
of a family in the selection and supervision of its
employees as insufficient. The CA ruled in favor of the
 No.:____________
Date:____________

heirs. The appellate court gave weight to their argument

that in order for a fortuitous event to exempt one from
liability, it is necessary that he committed no negligence
or misconduct that may have occasioned the loss. In this
case, the CA noted that Padilla failed to employ
reasonable foresight, diligence and care needed to
exempt G & S from liability for Jose Marcial’s death.

ISSUE:
Whether or not GS Transport is liable for damages from
breach of contract of carriage?

RULING:
Yes, GS Transport is liable for damages from breach of
contract of carriage. There is a contract of carriage
between G & S and Jose Marcial. What is clear from the
records is that there existed a contract of carriage
between G & S, as the owner and operator of the Avis
taxicab, and Jose Marcial, as the passenger of said
vehicle.

As a common carrier, G & S "is bound to carry [Jose

Marcial] 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."
However, Jose Marcial was not able to reach his
destination safely as he died during the course of the
 No.:____________
Date:____________

travel. "In a contract of carriage, it is presumed that the

common carrier is at fault or is negligent when a
passenger dies or is injured. In fact, there is even no need
for the court to make an express finding of fault or
negligence on the part of the common carrier. This
statutory presumption may only be overcome by
evidence that the carrier exercised extraordinary
diligence." Unfortunately, G & S miserably failed to
overcome this presumption. Both the trial court and the
CA found that the accident which led to Jose Marcial’s
death was due to the reckless driving and gross
negligence of G & S’ driver, Padilla, thereby holding G
& S liable to the heirs of Jose Marcial for breach of
contract of carriage.
 No.:____________
Date:____________

New World International Philippines Inc. vs Nyk-

FilJapan Shipping Corp.
G.R. No. 171468 August 24, 2011 (656 SCRA 129)

FACTS:
Petitioner New World International Development
(Phils.), Inc. (New World) bought from DMT
Corporation (DMT) through its agent, Advatech
Industries, Inc. (Advatech) three emergency generator
sets worth US$721,500.00. DMT shipped the generator
sets by truck from Wisconsin, United States, to LEP
Profit International, Inc. (LEP Profit) in Chicago, Illinois.
From there, the shipment went by train to Oakland,
California, where it was loaded on S/S California Luna
V59, owned and operated by NYK Fil-Japan Shipping
Corporation (NYK) for delivery to petitioner New
World in Manila. NYK issued a bill of lading, declaring
that it received the goods in good condition. NYK
unloaded the shipment in Hong Kong and transshipped it
to S/S ACX Ruby V/72 that it also owned and operated.
On its journey to Manila, however, ACX Ruby
encountered typhoon Kadiang whose captain filed a sea
protest on arrival at the Manila South Harbor on October
5, 1993 respecting the loss and damage that the goods on
board his vessel suffered.
Marina Port Services, Inc. (Marina), the Manila South
Harbor arrastre or cargo-handling operator, received the
 No.:____________
Date:____________

shipment on October 7, 1993. Upon inspection of the

three container vans separately carrying the generator
sets, two vans bore signs of external damage while the
third van appeared unscathed. The shipment remained at
Pier 3s Container Yard under Marinas care pending
clearance from the Bureau of Customs. Eventually, on
October 20, 1993 customs authorities allowed petitioners
customs broker, Serbros Carrier Corporation (Serbros),
to withdraw the shipment and deliver the same to
petitioner New Worlds job site in Makati City. An
examination of the three generator sets in the presence of
petitioner New Worlds representatives, Federal Builders
(the project contractor) and surveyors of petitioner New
Worlds insurer, Seaboard Eastern Insurance Company
(Seaboard), revealed that all three sets suffered extensive
damage and could no longer be repaired. For these
reasons, New World demanded recompense for its loss
from respondents NYK, DMT, Advatech, LEP Profit,
LEP International Philippines, Inc. (LEP), Marina, and
Serbros. While LEP and NYK acknowledged receipt of
the demand, both denied liability for the loss.
ISSUE:
Whether or not petitioner is entitled to the claim based
from the insurance policy including interests in the delay
of the release of such claim.
RULING:
 No.:____________
Date:____________

Yes. The marine open policy that Seaboard issued to

New World was an all-risk policy. Such a policy insured
against all causes of conceivable loss or damage except
when otherwise excluded or when the loss or damage
was due to fraud or intentional misconduct committed
by the insured. The policy covered all losses during the
voyage whether or not arising from a marine peril.
Here, the policy enumerated certain exceptions like
unsuitable packaging, inherent vice, delay in voyage, or
vessels unseaworthiness, among others. But Seaboard
had been unable to show that petitioner New Worlds loss
or damage fell within some or one of the enumerated
exceptions.
Seaboard cannot pretend that the above documents are
inadequate since they were precisely the documents
listed in its insurance policy. Being a contract of
adhesion, an insurance policy is construed strongly
against the insurer who prepared it. The Court cannot
read a requirement in the policy that was not there.
Section 241 of the Insurance Code provides that no
insurance company doing business in the Philippines
shall refuse without just cause to pay or settle claims
arising under coverages provided by its policies. And,
under Section 243, the insurer has 30 days after proof of
loss is received and ascertainment of the loss or damage
within which to pay the claim. If such ascertainment is
not had within 60 days from receipt of evidence of loss,
 No.:____________
Date:____________

the insurer has 90 days to pay or settle the claim. And, in

case the insurer refuses or fails to pay within the
prescribed time, the insured shall be entitled to interest
on the proceeds of the policy for the duration of delay at
the rate of twice the ceiling prescribed by the Monetary
Board.
Notably, Seaboard already incurred delay when it failed
to settle petitioner New Worlds claim as Section 243
required. Under Section 244, a prima facie evidence of
unreasonable delay in payment of the claim is created by
the failure of the insurer to pay the claim within the time
fixed in Section 243.
Consequently, Seaboard should pay interest on the
proceeds of the policy for the duration of the delay until
the claim is fully satisfied at the rate of twice the ceiling
prescribed by the Monetary Board. The term ceiling
prescribed by the Monetary Board means the legal rate
of interest of 12% per annum provided in Central Bank
Circular 416, pursuant to Presidential Decree 116.
Section 244 of the Insurance Code also provides for an
award of attorney’s fees and other expenses incurred by
the assured due to the unreasonable withholding of
payment of his claim.
 No.:____________
Date:____________

ROY III v. HERBOSA

G.R. No. 207246
April 18, 2017

Facts:

Before the Court is the Motion for Reconsideration dated

January 19, 2017 (the Motion) filed by petitioner Jose
M. Roy III (movant) seeking the reversal and setting
aside of the Decision dated November 22, 2016 (the
Decision) which denied the movant's petition, and
declared that the Securities and Exchange Commission
(SEC) did not commit grave abuse of discretion in
issuing Memorandum Circular No. 8, Series of 2013
(SEC-MC No. 8) as the same was in compliance with,
and in fealty to, the decision of the Court in Gamboa v.
Finance Secretary Teves (Gamboa Decision) and the
resolution denying the Motion for Reconsideration
therein (Gamboa Resolution).
The Motion presents no compelling and new arguments
to justify the reconsideration of the Decision.
The Decision has already exhaustively discussed and
directly passed upon these grounds. Movant's petition
was dismissed based on both procedural and substantive
grounds.

Issue:
 No.:____________
Date:____________

Whether or not SEC committed grave abuse of

discretion amounting to lack or excess of jurisdiction
when it issued SEC-MC No. 8.

Held:

SEC did not commit grave abuse of discretion

amounting to lack or excess of jurisdiction when it
issued SEC-MC No. 8. The Court finds SEC-MC No. 8
to have been issued in fealty to the Gamboa Decision
and Resolution.
Pursuant to the Court's constitutional duty to exercise
judicial review, the Court has conclusively found no
grave abuse of discretion on the part of SEC in issuing
SEC-MC No. 8.
The Decision has painstakingly explained why it
considered as obiter dictum that pronouncement in the
Gamboa Resolution that the constitutional requirement
on Filipino ownership should "apply uniformly and
across the board to all classes of shares, regardless of
nomenclature and category, comprising the capital of a
corporation." The Court stated that:
The fallo or decretal/dispositive portions of both the
Gamboa Decision and Resolution are definite, clear and
unequivocal. While there is a passage in the body of the
Gamboa Resolution that might have appeared contrary
 No.:____________
Date:____________

to the fallo of the Gamboa Decision, the definiteness and

clarity of the fallo of the Gamboa Decision must control
over the obiter dictum in the Gamboa Resolution
regarding the application of the 60-40 Filipino-foreign
ownership requirement to "each class of shares,
regardless of differences in voting rights, privileges and
restrictions."
To the Court's mind and, as exhaustively demonstrated
in the Decision, the dispositive portion of the Gamboa
Decision was in no way modified by the Gamboa
Resolution.
The heart of the controversy is the interpretation of
Section 11, Article XII of the Constitution, which
provides: "No franchise, certificate, or any other form of
authorization for the operation of a public utility shall be
granted except to citizens of the Philippines or to
corporations or associations organized under the laws of
the Philippines at least sixty per centum of whose capital
is owned by such citizens."
The Gamboa Decision already held, in no uncertain
terms, that what the Constitution requires is full and legal
beneficial ownership of 60 percent of the outstanding
capital stock, coupled with 60 percent of the voting
rights must rest in the hands of Filipino nationals. And,
precisely that is what SEC-MC No. 8 provides; For
purposes of determining compliance with the
constitutional or statutory ownership, the required
 No.:____________
Date:____________

percentage of Filipino ownership shall be applied to both

the total number of outstanding shares of stock entitled to
vote in the election of directors; and (b) the total number
of outstanding shares of stock, whether or not entitled to
vote.
In conclusion, the basic issues raised in the Motion
having been duly considered and passed upon by the
Court in the Decision and no substantial argument
having been adduced to warrant the reconsideration
sought, the Court resolves to deny the Motion with
finality.
 No.:____________
Date:____________

35. LTFRB vs. Florida Transport (828 SCRA 331)

Facts:

An accident occurred at the Mountain Province,

involving a public utility bus from Manila bound for
Bontoc and bearing a “G.V. Florida” body mark with
License Plate No. TXT-872, where 15 passengers died
and 32 others were injured. The bus involved was found
to be registered under the name of a certain Noberto
Cue, Sr. and that it is not duly authorized to operate as a
public transportation. On the same day of the accident,
the LTFRB issued an order preventively suspending the
operation of 10 buses of Cue as well as the entire fleet of
228 buses of Florida Transport. Cue and Florida
Transport were also ordered to show cause why their
Certificates of Public Convenience should not be
suspended, canceled or revoked due to the said accident.

After considering their position papers and further

investigation, LTFRB rendered a Decision cancelling
Cue’s CPC for the 10 buses and suspending the
operation of all 228 buses Florida Transport, under 28
CPCs, for a period of 6 months. Florida Transport filed a
petition for certiorari before the CA assailing the LTFRB
decision, arguing that the suspension of its 28 CPCs is
tantamount to an outright confiscation of private
 No.:____________
Date:____________

property without due process of law. The CA partially

granted the petition, affirming the cancellation of Cue’s
CPC but reversing the penalty of suspension for 6
months against the 28 CPCs of Florida Transport.

Issue:

Whether or not the LTFRB has the power to impose the

penalty of suspension and imposition of such penalty to
Florida Transport was reasonable under the
circumstances

Ruling:

Yes, the LTFRB acted within its discretion when it

imposed the penalty of suspension.

Section 16(n) of the Public Service Act and Section 5(b)

of E.O. 202 gives LTFRB the power to suspend CPCs.
Florida Transport was found to have been guilty of
several violations of the law: failure to secure approval of
the sale and transfer of the CPC which it bought from
Cue; operating the ill-fated bus under its name when the
same is registered under the name of another operator;
attaching a vehicle license plate to the ill-fated bus when
such plate belongs to a different bus owned by Cue; and
operating the subject bus under the authority of a
 No.:____________
Date:____________

different CPC. The suspension was brought about by

Florida Transport’s wanton disregard and obstinate
defiance of the regulations issued by the LTFRB. In
matters within its competence and so long as its action is
justified, the discretion of the regulatory agency will not
be substituted by that of the Court.

The Decision of the CA was reversed and set aside and

the Decision of the LTFRB was reinstated.
 No.:____________
Date:____________

Visayan Electric vs. Alfeche (847 SCRA 209)

NATURE OF THE ACTION

This resolves a Petition for Review on Certiorari under

Rule 45 of the 1997 Rules of Civil Procedure praying
that the assailed Court of Appeal October 25, 2012
Decision and October 8, 2013 Resolution in CA-G.R.
CV No. 02583 be reversed and set aside.

FACTS:

Respondent M. Lhuiller has a branch in San

Fernando, Pampanga and had installed its signage free
from any obstacle. On the other hand, petitioner Visayan
Electric Company is the only electric distribution
company in San Fernando, Pampanga. When the
Municipality of San Fernando, Pampanga commenced
its road widening project, the Municipal engineer asked
the petitioner to relocate its post as this will be affected
by the said project. Petitioner relocated its post closer to
the signage of M.Lhuiller with a distance of only inches
between them. Because of the constant rubbing of the
sagging wires of the petitioner with M. Lhuiller signage
a fire broke out. As a result, the fire destroyed the
properties of respondents Emilio Alfeche, Gilbert
 No.:____________
Date:____________

Alfeche, Emmanuel Manugas. When the respondents

demands payment of indemnity for damages, the
petitioner refused to pay. It denied its liability, arguing
that the cause of fire was attributable to respondent
M.Lhuiller, because by placing their signage near their
pole, it caused abrasion and the fire.

ISSUE:

Whether or not the proximate cause of fire was

attributable to the negligence of the petitioner and not by
the respondent M.Lhuiller?

Ruling:

Yes. The proximate cause of fire was attributable to the

negligence of the petitioner and not by the respondent
M.Lhuiller.

Thus, the Court of Appeals was correct in ruling that

VECO's negligence was the proximate cause of the
injury suffered by respondents Emilio, Gilbert, and
Manugas. All the elements for liability for a quasi-delict
under Article 2176 of the Civil Codehave been shown to
be attendant on VECO's part. The elements of a quasi-
delict are:
 No.:____________
Date:____________

1) the damages suffered by the plaintiff; (2) the fault or

negligence of the defendant or some other person for
whose act he must respond; and (3) the connection of
cause and effect between the fault or negligence and the
damages incurred.

On the first element, it is undisputed that the Alfeches

and Manugas suffered damage because of the fire. What
has hitherto remained unresolved is which between
VECO and M. Lhuillier is liable to indemnify them.
Fault is "a voluntary act or omission which causes
damage to the right of another giving rise to an
obligation on the part of [another]."On the other hand,
"[n]egligence is the failure to observe for the protection
of the interest of another person that degree of care,
precaution and vigilance which the circumstances justly
demand. "
Between VECO and M. Lhuillier, it is VECO which this
Court finds to have been negligent.
M. Lhuillier was not negligent in installing its signage. It
installed its signage in 1995 well before the road-
widening and drainage projects commenced and ahead
of VECO's relocation of its posts. Solon and Camuta
both emphasized that the signage was installed free of
any obstacle. Other than VECO's evasive accusations,
there is no proof to the contrary.
 No.:____________
Date:____________

It was VECO that was negligent. It is apparent that it

transferred its posts and wires without regard for the
hazards that the transfer entailed, particularly with
respect to the installations which had previously been
distant from the wires and posts but which had since
come into close proximity.
VECO is a public utility tasked with distributing
electricity to consumers. It is its duty to ensure that its
posts are properly and safely installed. As the holder of a
public franchise, it is to be presumed that it has the
necessary resources and expertise to enable a safe and
effective installation of its facilities. By installing its
posts and wires haphazardly, without regard to how its
wires could come in contact with a previously installed
signage, VECO failed to act in keeping with the
diligence required of it.
Proximate cause is defined as "that cause which, in
natural and continuous sequence, unbroken by any
efficient intervening cause, produces the injury and
without which the result would not have occurred."
VECO' s negligence was the proximate cause of the
damage suffered by the Alfeches and Manugas. It is
settled that the confluence of proximity, abrasion, and
short-circuiting led to the fire. The first of these-
proximityarose because of VECO's relocation of posts
and wires. Installed in such a manner that its wires
constantly touched M. Lhuillier' s signage, this "led to
 No.:____________
Date:____________

the failure of the insulation thereby causing a short

circuit which eventuallyled to the breaking and burning
of the wire."It was this burning wire that fell on the
Alfeches' residence's roof and burned down their house
and store, as well as Manugas' adjacent shop.
VECO would have this Court sustain a flimsy excuse for
evading liability. Attempting to break the all too apparent
causal connection between its negligence and the injury
suffered by the plaintiffs, it would insist on absurdities
that strain common sense and vainly attempt to discredit
even its own witness. This Court finds no merit in
VECO's pretenses and sustains the Court of Appeals
decision.
 No.:____________
Date:____________

Luna vs. CA
GR 100374-75
November 27, 1992

Facts: On 19 May 1989, at around 8:00 a.m.,

Rufino Luna, Rodolfo Alonso and Porfirio
Rodriguez boarded Flight 020 of Northwest Airlines
bound for Seoul, South Korea, to attend the 4-day
Rotary International Convention from the 21st to the
24th of May 1992. They checked in 1 piece of
luggage each. After boarding, however, due to engine
trouble, they were asked to disembark and transfer
to a Korean Airlines plane scheduled to depart 4
hours later. They were assured that their baggage
would be with them in the same flight. When they
arrived in Seoul, they discovered that their personal
belongings were nowhere to be found; instead, they
were allegedly flown to Seattle, USA. It was not
until 4 days later, and only after repeated
representations with Northwest Airlines personnel at
the airport in Korea were they able to retrieve their
luggage. By then the Convention, which they were
hardly able to attend, was almost over. Rufino Y.
Luna and Rodolfo J. Alonso assert that on 6 June
1989, or 13 days after they recovered their luggage,
they sent a written claim to the carrier’s office along
Roxas Blvd., Ermita, Manila. Porfirio Rodriguez, on
 No.:____________
Date:____________

his part, asseverates that he filed his claim on 13

June 1989. However, the carrier, in a letter of 21
June 1989, disowned any liability for the delay and
averred that it exerted “its best efforts to carry the
passenger and baggage with reasonable dispatch.”

On 14 July 1989, Luna and Alonso jointly filed a

complaint for breach of contract with damages
before the RTC of Pasig, Metro Manila (Civil Case
58390, Branch 69), while Rodriguez filed his own
complaint with the RTC of Valenzuela, Metro
Manila (Civil Case 3194-V-89, Branch 172).
However, upon motion of the carrier, both
complaints were dismissed for lack of cause of
action due to Luna, et.al.’s failure to state in their
respective complaints that they filed a prior claim
with the carrier within the prescribed period.

Luna and Alonso then filed a petition for certiorari

before the Court of Appeals to set aside the order
of Judge Cristina M. Estrada granting the carrier’s
motion to dismiss, while Rodriguez proceeded
directly to the Supreme Court on Certiorari for the
same purpose. However, in the Court’s resolution of
26 February 1990, the Supreme Court referred
Rodriguez’ petition to the Court of Appeals. On 26
March 1991, the Third Division of the Court of
 No.:____________
Date:____________

Appeals, applying the provisions of the Warsaw

Convention and ruling that certiorari was not a
substitute for a lost appeal, dismissed the petition of
Luna and Alonso, and on 7 June 1991 denied their
motion for reconsideration. Meanwhile, on 28
February 1991 the Seventh Division of the Court of
Appeals, ruling that the questioned order of the trial
court had already become final, similarly rejected the
petition of Rodriguez, and on 6 June 1991 denied
his motion for reconsideration. Hence, the joint
petition for review on certiorari.

Issue: Whether or not the carrier is still liable for breach

of other relative laws which provide a different
period of filing of claim.

Held: Yes. The alleged failure of Luna, Alonzo and

Rodriguez to file a claim with the common carrier
as mandated by the provisions of the Warsaw
Convention should not be a ground for the summary
dismissal of their complaints since the carrier may
still be held liable for breach of other relevant laws
which may provide a different period or procedure
for filing a claim. Considering that Luna, et. al.
indeed filed a claim which the carrier admitted
having received on 21 June 1989, their demand may
 No.:____________
Date:____________

have very well been filed within the period

prescribed by those applicable laws.

The Supreme Court reversed and set aside the

assailed decisions and resolutions of the Court of
Appeals; and reinstated given due course until
terminated the complaints for breach of contract of
carriage with damages in Civil Case 3194-V-89 and
Civil Case 58390 dismissed by Judges Teresita D.
Capulong and Cristina M. Estrada, respectively;
without costs.
 No.:____________
Date:____________

Sabena Belgian World Airlines v Court of Appeals

255 SCRA 38
VITUG

FACTS

Ma. Paula San Agustin, private respondent, was a

passenger on board Flight SN 284 of petitioner airline
originating from Casablanca to Brussels, Belgium on her
way back to Manila. She checked in her luggage which
contained her valuables, namely: jewelries valued at
$2,350.00; clothes $1,500.00; shoes/bag $150;
accessories $75; luggage itself $10.00; or a total of
$4,265.00, for which she was issued Tag No. 71423. She
stayed overnight in Brussels and her luggage was left on
board Flight SN 284.

She arrived at Manila International Airport and

immediately submitted her Tag No. 71423 but her
luggage was missing.  She was advised to accomplish
and submit a property Irregularity Report which she
submitted and filed on the same day but when
her luggage could not be found, she filed a formal
complaint with airline’s Local Manager. Subsequently,
she was furnished copies of telexes of airline’s Brussel’s
Office that the latter found her luggage and that they
have broken the locks for identification. She was assured
 No.:____________
Date:____________

by the airline that it has notified its Manila Office that the
luggage will be shipped to Manila. But unfortunately she
was informed that the luggage was lost for the second
time.

Private respondent, San Agustin demanded from the

airline the money value of the luggage and its contents or
its exchange value, but herein petitioner refused to settle
the claim. The latter asserts in its Answer and its
evidence tends to show that while it admits that the
respondent was a passenger with a piece of checked in
luggage, the loss of the luggage was due to airline’s sole
if not contributory negligence.

Petitioner airline company, in contending that the alleged

negligence of private respondent should be considered
the primary cause for the loss of her luggage, avers that,
despite her awareness that the flight ticket had been
confirmed only for Casablanca and Brussels, and that her
flight from Brussels to Manila had yet to be confirmed,
she did not retrieve the luggage upon arrival in
Brussels. Petitioner insists that private respondent, being
a seasoned international traveller, must have likewise
been familiar with the standard provisions contained in
her flight ticket that items of value are required to be
hand-carried by the passenger and that the liability of the
airline or loss, delay or damage to baggage would be
 No.:____________
Date:____________

limited, in any event, to only US$20.00 per kilo unless a

higher value is declared in advance and corresponding
additional charges are paid thereon.  At the Casablanca
International Airport, private respondent, in checking in
her luggage, evidently did not declare its contents or
value, pursuant to Section 5(c), Article IX, of the
General Conditions of Carriage, which states
that: “Passengers shall not include in his checked
baggage, and the carrier may refuse to carry as checked
baggage, fragile or perishable articles, money, jewelry,
precious metals, negotiable papers, securities or other
valuables.”

The trial court rendered judgment ordering Sabena

Belgian World Airlines to pay private
respondent. Sabena appealed but the CA affirmed in
toto the trial court’s judgment, hence the present petition
for review.
 
ISSUE

Whether or not the airline is liable for the lost luggage

 RULING

Fault or negligence consists in the omission of that

diligence which is demanded by the nature of an
obligation and corresponds with the circumstances of the
 No.:____________
Date:____________

person, of the time, and of the place.  When the source

of an obligation is derived from a contract, the mere
breach or nonfulfillment of the prestation gives rise to the
presumption of fault on the part of the obligor.  This rule
is not different in the case of common carriers in the
carriage of goods which, indeed, are bound to observe
not just the due diligence of a good father of a family but
that of “extraordinary” care in the vigilance over the
goods.

The only exception to the foregoing extraordinary

responsibility of the common carrier is when the loss,
destruction, or deterioration of the goods is due 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.
The airline cannot invoke the tort doctrine of proximate
cause because the private respondent’s luggage was lost
while it was in the custody of petitioner. The “loss of
said baggage not only once by twice,” said the appellate
court, “underscores the wanton negligence and lack of
 No.:____________
Date:____________

care” on the part of the carrier. The above findings

foreclose whatever rights petitioner might have had to
the possible limitation of liabilities enjoyed by
international air carriers under the Warsaw Convention.
In Alitalia vs. Intermediate Appellate Court, the Court
held that “the Warsaw Convention however denies to
the carrier availment’ of the provisions which exclude or
limit his liability, if the damage is caused by his wilful
misconduct or by such default on his part as, in
accordance with the law of the court seized of the case, is
considered to be equivalent to wilful misconduct,’ or ‘if
the damage is (similarly) caused x x x by any agent of
the carrier acting within the scope of his employment.’

The Hague Protocol amended the Warsaw Convention

by removing the provision that if the airline took all
necessary steps to avoid the damage, it could exculpate
itself completely, and declaring the stated limits of
liability not applicable ‘if it is proved that the damage
resulted from an act or omission of the carrier, its
servants or agents, done with intent to cause damage or
recklessly and with knowledge that damage would
probably result.’ The same deletion was effected by the
Montreal Agreement of 1966, with the result that a
passenger could recover unlimited damages upon proof
of wilful misconduct.
 No.:____________
Date:____________

The Convention does not thus operate as an exclusive

enumeration of the instances of an airline’s liability, or
as an absolute limit of the extent of that liability. It
should be deemed a limit of liability only in those cases
where the cause of the death or injury to person, or
destruction, loss or damage to property or delay in its
transport is not attributable to or attended by any wilful
misconduct, bad faith, recklessness or otherwise
improper conduct on the part of any official or employee
for which the carrier is responsible, and there is
otherwise no special or extraordinary form of
resulting injury. Decision appealed from AFFIRMED.
 No.:____________
Date:____________

Mapa vs. CA (275 SCRA 286)

FACTS: Cornelio Mapa and Purita Mapa entered into
contract of air transportation with Trans-World Airlines
(TWA) as evidenced by tickets purchased in Bangkok,
Thailand. Said TWA tickets are for Los Angeles-New
York-Boston-St. Louis-Chicago.
On August 10, 1990, Carmina (daughter of Purita and
Cornelio) and Purita left Manila on board PAL for Los
Angeles. They arrived Los Angeles on the same date and
stayed there until August 14, 1990 when they left for
New York City. On August 14, 1990, Purita and
Carmina arrived at the JFK Airport. On August 27,
1990, Purita and Carmina S. Mapa departed for Boston,
taking a connecting flight on TWA's carrier from JFK
Airport, New York, to Boston's Logan Airport, checking
in seven (7) pieces of luggage at the TWA counter in the
JFK Airport. The seven baggages were received by a
porter who issued seven TWA baggage receipts.
Later, they proceeded to the gate for boarding when a
TWA ground stewardess informed them that they were
at the wrong gate. They rushed to the proper gate where
they were informed that the flight has just departed.
However, they were consoled that another TWA flight
was leaving for Boston after 30 minutes and they could
use the same boarding pass for the next flight. At around
3:15 p.m., Purita and Carmina were able to board the
next flight. However, the plane was not immediately
 No.:____________
Date:____________

cleared for take-off on account of a thunderstorm. The

passengers were instructed to stay inside the aircraft until
6:00 p.m. when the plane finally left for Boston.
Upon arriving in Boston, Purita and Carmina proceeded
to the carousel to claim their baggages and found only
three out of the seven they checked in. They
immediately reported the loss of their four baggages to
the TWA Baggage Office. Later, they received a letter
from TWA apologizing for its failure to locate the
missing luggage and requesting plaintiffs to accomplish
a passenger property questionnaire to facilitate a further
intensive and computerized search for the lost luggage.
They later demanded indemnification for the grave
damage and injury suffered.
Purita S. Mapa, Carmina S. Mapa, and Cornelio P. Mapa
then filed with the trial court a complaint for damages. In
its answer, TWA raised as defense the lack of
jurisdiction of Philippine courts over the action for
damages in the pursuant to Article 28(1) of the Warsaw
Convention, the action could only be brought either in
Bangkok where the contract was entered into, or in
Boston which was the place of destination, or in Kansas
City which is the carrier's domicile and principal place of
business.
ISSUE: Whether the Warsaw Convention is applicable
in this case.
 No.:____________
Date:____________

HELD: There are two categories of international

transportation, viz., (1) that where the place of departure
and the place of destination are situated within the
territories of two High Contracting Parties regardless of
whether or not there be a break in the transportation or a
transshipment; and (2) that where the place of departure
and the place of destination are within the territory of a
single High Contracting Party if there is an agreed
stopping place within a territory subject to the
sovereignty, mandate, or authority of another power,
even though the power is not a party of the Convention.
The contracts of transportation in this case are evidenced
by the two TWA tickets both purchased and issued in
Bangkok, Thailand. On the basis alone of the provisions
therein, it is obvious that the place of departure and the
place of destination are all in the territory of the United
States, or of a single High Contracting Party. The
contracts, therefore, cannot come within the purview of
the first category of international transportation. Neither
can it be under the second category since there was NO
agreed stopping place within a territory subject to the
sovereignty, mandate, or authority of another power.
The alleged "international tickets" mentioned in the
notations in conjunction with which the two TWA
tickets were issued were not presented. Clearly then,
there is at all no factual basis of the finding that the TWA
tickets were issued in conjunction with the international
 No.:____________
Date:____________

tickets, which are even, at least as of now, non-existent.

It must be underscored that the first category
of international transportation under the Warsaw
Convention is based on "the contract made by the
parties." TWA does not claim that the Manila-Los
Angeles contracts of transportation which brought Purita
and Carmina to Los Angeles were also its contracts. It
does not deny the assertion of the petitioners that those
contracts were independent of the TWA tickets issued in
Bangkok, Thailand. No evidence was offered that TWA
and PAL had an agreement concerning transportation of
passengers from points of departures not served with
aircrafts of one or the other.
It also points to Article 15 of the IATA Recommend
Practice 1724, which provides: Carriage to be performed
by a several successive carriers under one ticket, or
under a ticket and any conjunction ticket issued in
connection therewith, is regarded as a single operation."
The flaw of respondent's position is the presumption that
the parties have "regarded" as an "undivided carriage" or
as a "single operation" the carriage from Manila to Los
Angeles through PAL then to New York-Boston-
St. Louis-Chicago through TWA. The dismissal then of
the second Amended Complaint by the trial court and
the Court of Appeals' affirmance of the dismissal were
not based on indubitable facts or grounds, but no
inferences without established factual basis.
No.:____________
Date:____________
 No.:____________
Date:____________

British Airways vs. CA (285 SCRA 450)

G.R. No. 121824, 29 January 1998
ROMERO, J.
Facts:
On April 16, 1989, Gop Mahtani decided to visit his
relatives in Bombay, India. In anticipation of his visit, he
obtained the services of a certain Mr. Gumar to prepare
his travel plans. The latter, in turn, purchased a ticket
from BA.
Since BA had no direct flights from Manila to Bombay,
Mahtani had to take a flight to Hongkong via PAL, and
upon arrival in Hongkong he had to take a connecting
flight to Bombay on board BA.
Prior to his departure, Mahtani checked in at the PAL
counter in Manila his two pieces of luggage containing
his clothing and personal effects, confident that upon
reaching Hongkong, the same would be transferred to
the BA flight bound for Bombay.
Unfortunately, when Mahtani arrived in Bombay he
discovered that his luggage was missing and that upon
inquiry from the BA representatives, he was told that the
same might have been diverted to London. After
patiently waiting for his luggage for one week, BA
finally advised him to file a claim by accomplishing the
Property Irregularity Report
Mahtani filed his complaint for damages and attorneys
fees against BA and Mr. Gumar before the trial court.
 No.:____________
Date:____________

BA filed its answer with counter claim to the complaint

raising, as special and affirmative defenses, that Mahtani
did not have a cause of action against it.
After appropriate proceedings and trial, on March 4,
1993, the trial court rendered its decision in favor of
Mahtani. Defendant is ordered to pay plaintiff the sum of
Seven Thousand (P7,000.00) Pesos for the value of the
two (2) suit cases; Four Hundred U.S. ($400.00) Dollars
representing the value of the contents of plaintiffs
luggage; Fifty Thousand (P50,000.00) Pesos for moral
and actual damages and twenty percent (20%) of the
total amount imposed against the defendant for attorneys
fees and costs of the action.
CA affirmed the decision of the trial court in toto. Hence,
this petition asserting that that the award of
compensatory damages and attorneys fees for the loss of
Mahtani’s two pieces of luggage was without basis since
Mahtani failed to declare a higher valuation with respect
to his luggage, a condition provided for in the ticket,
which reads “Liability for loss, delay, or damage to
baggage is limited unless a higher value is declared in
advance and additional charges are paid.”
Since Mahtani failed to declare a separate higher
valuation for the luggage, and therefore, its liability is
limited, at most, only to the amount stated in the ticket.
ISSUE:
 No.:____________
Date:____________

Whether or not in a contract of air carriage a declaration

by the passenger is needed to recover a greater amount?
RULING:
American jurisprudence provides that an air carrier is not
liable for the loss of baggage in an amount in excess of
the limits specified in the tariff which was filed with the
proper authorities, such tariff being binding on the
passenger regardless of the passenger’s lack of
knowledge thereof or assent thereto. This doctrine is
recognized in this jurisdiction.
However, the benefits of limited liability are subject to
waiver such as when the air carrier failed to raise timely
objections during the trial when questions and answers
regarding the actual claims and damages sustained by
the passenger were asked.
The inescapable conclusion that BA had waived the
defense of limited liability when it allowed Mahtani to
testify as to the actual damages, he incurred due to
misplacement of his luggage, was without any objection.
It is a well-settled doctrine that where the proponent
offers evidence deemed by counsel of the adverse party
to be inadmissible for any reason, the latter has the right
to object. However, such right is a mere privilege which
can be waived. Necessarily, the objection must be made
at the earliest opportunity, in case of silence when there
is opportunity to speak may operate as a waiver of
objections.
No.:____________
Date:____________
 No.:____________
Date:____________

American Airlines vs. Court of Appeals

327 SCRA 482, March 9, 2000

GONZAGA-REYES, J.:

FACTS:

It is undisputed that the private respondent purchased

from Singapore Airlines in Manila conjunction tickets
for Manila-Singapore-Athens-Larnaca-Rome-Turin-
Zurich-Geneva-Copenhagen-New York. The petitioner
was not a participating airline in any of the segments in
the itinerary under the said conjunction tickets. In
Geneva the petitioner decided to forego his trip to
Copenhagen and to go straight to New York and in the
absence of a direct flight under his conjunction tickets
from Geneva to New York, the private respondent on
June 7, 1989 exchanged the unused portion of the
conjunction ticket for a one-way ticket from Geneva to
New York from the petitioner airline. Petitioner issued
its own ticket to the private respondent in Geneva and
claimed the value of the unused portion of the
conjunction ticket from the IATA clearing house in
Geneva.

In September 1989, private respondent filed an action for

damages before the Regional Trial Court of Cebu for the
 No.:____________
Date:____________

alleged embarrassment and mental anguish he suffered

at the Geneva Airport when the petitioner’s security
officers prevented him from boarding the plane, detained
him for about an hour and allowed him to board the
plane only after all the other passengers have boarded.
The petitioner filed a motion to dismiss for lack of
jurisdiction of Philippine courts to entertain the said
proceedings under Art. 28 (1) of the Warsaw
Convention. The trial court denied the motion. The order
of denial was elevated to the Court of Appeals which
affirmed the ruling of the trial court. Both the trial and
the appellate courts held that the suit may be brought in
the Philippines under the pool partnership agreement
among the IATA members, which include Singapore
Airlines and American Airlines, wherein the members
act as agents of each other in the issuance of tickets to
those who may need their services. The contract of
carriage perfected in Manila between the private
respondent and Singapore Airlines binds the petitioner as
an agent of Singapore Airlines and considering that the
petitioner has a place of business in Manila, the third
option of the plaintiff under the Warsaw Convention i.e.,
the action may be brought in the place where the contract
was perfected and where the airline has a place of
business, is applicable. Hence this petition assailing the
order upholding the jurisdiction of Philippine courts over
the instant action.
 No.:____________
Date:____________

ISSUE:

Whether the contract of transportation between the

petitioner and the private respondent would be
considered as a single operation and part of the contract
of transportation entered into by the latter with Singapore
Airlines in Manila.

RULING:

Yes. The contract of carriage between the private

respondent and Singapore Airlines although performed
by different carriers under a series of airline tickets,
including that issued by the petitioner, constitutes a
single operation. Members of the IATA are under a
general pool partnership agreement wherein they act as
agent of each other in the issuance of tickets to
contracted passengers to boost ticket sales worldwide
and at the same time provide passengers easy access to
airlines which are otherwise inaccessible in some parts of
the world. Booking and reservation among airline
members are allowed even by telephone and it has
become an accepted practice among them. A member
airline which enters into a contract of carriage consisting
of a series of trips to be performed by different carriers is
authorized to receive the fare for the whole trip and
 No.:____________
Date:____________

through the required process of interline settlement of

accounts by way of the IATA clearing house an airline is
duly compensated for the segment of the trip serviced.
Thus, when the petitioner accepted the unused portion of
the conjunction tickets, entered it in the IATA clearing
house and undertook to transport the private respondent
over the route covered by the unused portion of the
conjunction tickets, i.e., Geneva to New York, the
petitioner tacitly recognized its commitment under the
IATA pool arrangement to act as agent of the principal
contracting airline, Singapore Airlines, as to the segment
of the trip the petitioner agreed to undertake.

Under Art. 1(3) of the Warsaw Convention, it clearly

states that a contract of air transportation is taken as a
single operation whether it is founded on a single
contract or a series of contracts. The number of tickets
issued does not detract from the oneness of the contract
of carriage as long as the parties regard the contract as a
single operation. The evident purpose underlying this
Article is to promote international air travel by
facilitating the procurement of a series of contracts for air
transportation through a single principal and obligating
different airlines to be bound by one contract of
transportation. Petitioner’s acquiescence to take the
place of the original designated carrier binds it under the
 No.:____________
Date:____________

contract of carriage entered into by the private

respondent and Singapore Airlines in Manila.
 No.:____________
Date:____________

G.R. No. L-57339 December 29, 1983

AIR FRANCE vs. HONORABLE COURT OF
APPEALS, JOSE G. GANA, et. al
FACTS: in February, 1970, the late Jose G. Gana and his
family, numbering nine (the GANAS), purchased from
AIR FRANCE through Imperial Travels 9 nine (9)
"open-dated" air passage tickets for the
Manila/Osaka/Tokyo/Manila route. AIR FRANCE
exchanged or substituted the aforementioned tickets with
other ticket sfor the same route. The aforesaid tickets
were valid until 8 May 1971, the date written under the
printed words "Non valable apres de" (meaning, "not
valid after the"). The GANAS did not depart on 8 May
1970.
On January 1971, Jose Gana sought the assistance for
the extension of the validity of their tickets, which were
due to expire on 8 May 1971. However, the tickets were
returned and their agent was informed that the extension
was not possible unless the fare differentials resulting
from the increase in fares triggered by an increase of the
exchange rate of the US dollar to the Philippine peso and
the increased travel tax were first paid.
In the meantime, the GANAS had scheduled theird
eparture on 7 May 1971 or one day before the expiry
date. They were warned that although the tickets could
be used by the GANAS if they left on 7 May1971, the
tickets would no longer be valid for the rest of their trip
 No.:____________
Date:____________

because the tickets would then have expired on 8May

1971. Notwithstanding the warnings, the GANAS
departed from Manila in the afternoon of 7 May 1971 on
board AIRFRANCE Flight 184 for Osaka, Japan.
However, for the Osaka/Tokyo flight on 17 May 1971,
Japan Airlines refused to honor the tickets because of
their expiration, and the G ANAS had to purchase new
tickets. They encountered the same difficulty with
respect to their return trip to Manila as AIR FRANCE
also refused to honor their tickets.
On 25 August 1971, the GANAS commenced before
the then Court of First Instance of Manila a case for
damages arising from breach of contract of carriage.
AIR FRANCE traversed the material allegations of the
Complaint and alleged that the GANAS brought upon
themselves the predicament they found themselves in
and assumed the consequential risks; AIR FRANCE
was not guilty of any fraudulent conduct or bad faith.
Trial Court dismissed the Complaint and upon appeal,
the CA reversed and set aside the ruling of the lower
court.
ISSUE: Whether or not GANAS have made out a case
for breach of contract of carriage entitling them to an
award of damages
HELD: No, Pursuant to tariff rules and regulations of the
International Air Transportation Association (IATA),
 No.:____________
Date:____________

the passenger must undertake the final portion of his

journey by departing from the last point at which he has
made a voluntary stop before the expiry of this limit x x
x That is the time allowed a passenger to begin and to
complete his trip x x x A ticket can no longer be used for
travel if its validity has expired before the passenger
completes his trip x x x To complete the trip, the
passenger must purchase a new ticket for the remaining
portion of the journey".
It is clear that AIRFRANCE cannot be faulted for breach
of contract when it dishonored the tickets of the GANAS
after 8 May 1971 since those tickets expired on said date.
Moreover, the GANAS cannot defend by contending
lack of knowledge of those rules since the evidence
bears out that Teresita, who handled travel arrangements
for the GANAS, was duly informed by travel agent Ella
of the advice of Rillo, the Office Manager of Air France,
that the tickets in question could not be extended beyond
the period of their validity without paying the fare
differentials and additional travel taxes brought about by
the increased fare rate and travel taxes.
The circumstance that AIR FRANCE personnel at the
ticket counter in the airport allowed the GANAS to leave
is not tantamount to an implied ratification of travel
agent Ella's irregular actuations. It should be recalled
that the GANAS left Manila the day before the expiry
date of their tickets and that "other arrangements" were
 No.:____________
Date:____________

to be made with respect to the remaining segments.

Besides, the validating stickers that Ella affixed on his
own merely reflect the status of reservations on the
specified flight and could not legally serve to extend the
validity of a ticket or revive an expired one.
 No.:____________
Date:____________

G.R. No. 104235 November 18, 1993

SPOUSES CESAR & SUTHIRA ZALAMEA and
LIANA ZALAMEA, petitioners,
vs.
HONORABLE COURT OF APPEALS and
TRANSWORLD AIRLINES, INC., respondents.
FACTS:
Petitioners-spouses Cesar C. Zalamea and Suthira
Zalamea, and their daughter, Liana Zalamea, purchased
three (3) airline tickets from the Manila agent of
respondent TransWorld Airlines, Inc. for a flight to New
York to Los Angeles on June 6, 1984. The tickets of
petitioners-spouses were purchased at a discount of 75%
while that of their daughter was a full fare ticket. All
three tickets represented confirmed reservations.
While in New York, on June 4, 1984, petitioners
received notice of the reconfirmation of their
reservations for said flight. On the appointed date,
however, petitioners checked in at 10:00 a.m., an hour
earlier than the scheduled flight at 11:00 a.m. but were
placed on the wait-list because the number of passengers
who had checked in before them had already taken all
the seats available on the flight. Liana Zalamea appeared
as the No. 13 on the waitlist while the two other
Zalameas were listed as "No. 34, showing a party of
two." Out of the 42 names on the waitlist, the first 22
names were eventually allowed to board the flight to Los
 No.:____________
Date:____________

Angeles, including petitioner Cesar Zalamea. The two

others, on the other hand, at No. 34, being ranked lower
than 22, were not able to fly. As it were, those holding
full-fare tickets were given first priority among the wait-
listed passengers. Mr. Zalamea, who was holding the
full-fare ticket of his daughter, was allowed to board the
plane; while his wife and daughter, who presented the
discounted tickets, were denied boarding. According to
Mr. Zalamea, it was only later when he discovered he
was holding his daughter's full-fare ticket.
Even in the next TWA flight to Los Angeles Mrs.
Zalamea and her daughter could not be accommodated
because it was also fully booked. Thus, they were
constrained to book another flight and purchased two
tickets from American Airlines at a cost of Nine
Hundred Eighteen ($918.00) Dollars.
Upon their arrival in the Philippines, petitioners filed an
action for damages based on breach of contract of air
carriage.
ISSUE:
WON THERE WAS NO FRAUD OR BAD FAITH
ON THE PART OF RESPONDENT TWA BECAUSE
IT HAS A RIGHT TO OVERBOOK FLIGHTS.
HELD:
YES
There was fraud or bad faith on the part of the
respondent airline when it did not allow petitioners to
 No.:____________
Date:____________

board their flight for Los Angeles in spite of confirmed

tickets cannot be disputed. The U.S. law or regulation
allegedly authorizing overbooking has never been
proved. Foreign laws do not prove themselves nor can
the courts take judicial notice of them. Like any other
fact, they must be alleged and proved. Written law may
be evidenced by an official publication thereof or by a
copy attested by the officer having the legal custody of
the record, or by his deputy, and accompanied with a
certificate that such officer has custody. The certificate
may be made by a secretary of an embassy or legation,
consul general, consul, vice-consul, or consular agent or
by any officer in the foreign service of the Philippines
stationed in the foreign country in which the record is
kept, and authenticated by the seal of his office.
Respondent TWA relied solely on the statement of Ms.
Gwendolyn Lather, its customer service agent, in her
deposition dated January 27, 1986 that the Code of
Federal Regulations of the Civil Aeronautics Board
allows overbooking. Aside from said statement, no
official publication of said code was presented as
evidence. Thus, respondent court's finding that
overbooking is specifically allowed by the US Code of
Federal Regulations has no basis in fact.
Even if the claimed U.S. Code of Federal Regulations
does exist, the same is not applicable to the case at bar in
accordance with the principle of lex loci
 No.:____________
Date:____________

contractus which require that the law of the place where

the airline ticket was issued should be applied by the
court where the passengers are residents and nationals of
the forum and the ticket is issued in such State by the
defendant airline. Since the tickets were sold and issued
in the Philippines, the applicable law in this case would
be Philippine law.
 No.:____________
Date:____________

Keng Hua Paper Products Co., Inc. vs. Court of Appeals,

286 SCRA 257, February 12, 1998
G.R. No. 116863 February 12, 1998
PANGANIBAN, J.:

Facts:
Plaintiff (herein private respondent), a shipping
company, is a foreign corporation licensed to do
business in the Philippines. On June 29, 1982, plaintiff
received at its Hong Kong terminal a sealed container,
Container No. SEAU 67523, containing seventy-six
bales of "unsorted waste paper" for shipment to
defendant (herein petitioner), Keng Hua Paper Products,
Co. in Manila. A bill of lading (Exh. A) to cover the
shipment was issued by the plaintiff.

On July 9, 1982, the shipment was discharged at the

Manila International Container Port. Notices of arrival
were transmitted to the defendant but the latter failed to
discharge the shipment from the container during the
"free time" period or grace period. The said shipment
remained inside the plaintiff's container from the
moment the free time period expired on July 29, 1982
until the time when the shipment was unloaded from the
container on November 22, 1983, or a total of four
hundred eighty-one (481) days. During the 481-day
period, demurrage charges accrued. Within the same
 No.:____________
Date:____________

period, letters demanding payment were sent by the

plaintiff to the defendant who, however, refused to settle
its obligation which eventually amounted to P67,340.00.
Numerous demands were made on the defendant but the
obligation remained unpaid. Plaintiff thereafter
commenced this civil action for collection and damages.

In its answer, defendant, by way of special and

affirmative defense, alleged that it purchased fifty (50)
tons of waste paper from the shipper in Hong Kong, Ho
Kee Waste Paper, as manifested in Letter of Credit No.
824858 (Exh. 7. p. 110. Original Record) issued by
Equitable Banking Corporation, with partial shipment
permitted; that under the letter of credit, the remaining
balance of the shipment was only ten (10) metric tons as
shown in Invoice No. H-15/82 (Exh. 8, p. 111, Original
Record); that the shipment plaintiff was asking
defendant to accept was twenty (20) metric tons which is
ten (10) metric tons more than the remaining balance;
that if defendant were to accept the shipment, it would be
violating Central Bank rules and regulations and custom
and tariff laws; that plaintiff had no cause of action
against the defendant because the latter did not hire the
former to carry the merchandise; that the cause of action
should be against the shipper which contracted the
plaintiff's services and not against defendant; and that the
defendant duly notified the plaintiff about the wrong
 No.:____________
Date:____________

shipment through a letter dated January 24, 1983 (Exh.

D for plaintiff, Exh. 4 for defendant, p. 5. Folder of
Exhibits).

As previously mentioned, the RTC found petitioner

liable for demurrage; attorney's fees and expenses of
litigation. The petitioner appealed to the Court of
Appeals, arguing that the lower court erred in (1)
awarding the sum of P67,340 in favor of the private
respondent, (2) rejecting petitioner's contention that there
was overshipment, (3) ruling that petitioner's recourse
was against the shipper, and (4) computing legal interest
from date of extrajudicial demand.5

Respondent Court of Appeals denied the appeal and

affirmed the lower court's decision in toto. In a
subsequent resolution,6 it also denied the petitioner's
motion for reconsideration.

Issue: Whether petitioner is bound by the bill of lading.

Held: Yes.

A bill of lading serves two functions. First, it is a receipt

for the goods shipped. Second, it is a contract by which
three parties, namely, the shipper, the carrier, and the
consignee undertake specific responsibilities and assume
 No.:____________
Date:____________

stipulated obligations. 9 A "bill of lading delivered and

accepted constitutes the contract of carriage even though
not signed," 10 because the "(a)cceptance of a paper
containing the terms of a proposed contract generally
constitutes an acceptance of the contract and of all of its
terms and conditions of which the acceptor has actual or
constructive notice." 11 In a nutshell, the acceptance of a
bill of lading by the shipper and the consignee, with full
knowledge of its contents, gives rise to the presumption
that the same was a perfected and binding contract. 12

In the case at bar, both lower courts held that the bill of
lading was a valid and perfected contract between the
shipper (Ho Kee), the consignee (Petitioner Keng Hua),
and the carrier (Private Respondent Sea-Land). Section
17 of the bill of lading provided that the shipper and the
consignee were liable for the payment of demurrage
charges for the failure to discharge the containerized
shipment beyond the grace period allowed by tariff rules.
Applying said stipulation, both lower courts found
petitioner liable.

Petitioner admits that it "received the bill of lading

immediately after the arrival of the shipment" 16 on July
8, 1982. 17 Having been afforded an opportunity to
examine the said document, petitioner did not
immediately object to or dissent from any term or
 No.:____________
Date:____________

stipulation therein. It was only six months later, on

January 24, 1983, that petitioner sent a letter to private
respondent saying that it could not accept the shipment.
Petitioner's inaction for such a long period conveys the
clear inference that it accepted the terms and conditions
of the bill of lading. Moreover, said letter spoke only of
petitioner's inability to use the delivery permit, i.e. to pick
up the cargo, due to the shipper's failure to comply with
the terms and conditions of the letter of credit, for which
reason the bill of lading and other shipping documents
were returned by the "banks" to the shipper. 18 The letter
merely proved petitioner's refusal to pick up the cargo,
not its rejection of the bill of lading.

Petitioner's attempt to evade its obligation to receive the

shipment on the pretext that this may cause it to violate
customs, tariff and central bank laws must likewise fail.
Mere apprehension of violating said laws, without a
clear demonstration that taking delivery of the shipment
has become legally impossible, 20 cannot defeat the
petitioner's contractual obligation and liability under the
bill of lading.
 No.:____________
Date:____________

AMERICAN PRESIDENT LINES, LTD vs. COURT

OF APPEALS, JUDGE CLEMENTE SORIANO OF
and FGU INSURANCE CORPORATION
G.R. No. 110853. July 31, 2000
QUISUMBING, J.

FACTS:

On July 30, 1987, defendant American President Lines’

(APL) vessel ‘President Washington’ (CARRIER for
short) received and loaded on board at Los Angeles,
California, the subject shipment of one (1) unit of
Submersible Jocky Pump, contained in (3) boxes,
complete and in good order condition, covered by
Commercial Invoice No. 602956 (Exh. B), and Packing
List. It was for transport to Manila in favor of Lindale
Development Corporation, the consignee. For said
shipment, defendant CARRIER, thru Forwarders Direct
Container Lines, Inc., issued its clean Bill of Lading No.
CHI-MNL-120, dated July 17, 1987. The defendant
CARRIER transshipped the shipment in Hongkong on
board the vessel MS ‘Partas’, which arrived at the Port
of Manila, on September 6, 1987. On the same date,
(September 6, 1987) the shipment was discharged from
the vessel ‘Partas’, and turned over to the custody of
Marina Port Services, Inc. (Arrastre for brevity), with
one (1) box in bad order condition, showing signs of
 No.:____________
Date:____________

having been previously tampered; hence, covered by a

Turn over Survey Cargoes No. A-08851 (Exh. E). The
cargo remained in the custody of the defendant,
ARRASTRE for ten (10) days until it was withdrawn on
April 16, 1987 by the defendant broker which delivered
the same to the consignee, afore-mentioned, at its
warehouse, where the said shipment was examined and
inventoried.

ISSUE:
Whether or not the loss took place in the first carrier’s
custody.

RULINGS:

Petitioner asserts, to the contrary, that the freight

forwarder Direct Container Lines, Inc., issued the bill of
lading on its own. Petitioner argues that because of this,
the freight forwarder should, under the law, bear liability
for the damage to the shipment. Apparently, a prior
finding is necessary as to who really issued the bill of
lading for the shipment. Citing Article 373 of the Code
of Commerce, petitioner asserts that liability for the
damaged shipment should be borne by the MS "Partas",
the carrier that brought the shipment from Hong Kong to
Manila. Petitioner points out that no evidence was
 No.:____________
Date:____________

adduced to show that the shipment was unloaded in bad

condition from APL’s vessel. The nature of a through
Bill of Lading is that the carrier undertakes to be
responsible for the carriage of goods by successive ocean
carriers from the point of loading to the final destination;
the first carrier is responsible for the whole carriage and
claimant may call upon the first carrier for
indemnification for any loss along the route.

WHEREFORE, the instant petition is DENIED. The

assailed decision of the respondent appellate court,
which upheld the ruling of the trial court, is
AFFIRMED. Costs against petitioner.
 No.:____________
Date:____________

American Insurance Co. vs. Compañia Maritima,

21 SCRA 998, No. L-24515 November 18, 1967
FACTS: A certain cargo insured with plaintiff
corporation was shipped in New York, U.S. aboard
"M/S TOREADOR", of which the general agent in the
Philippines is appellee Macondray. The cargo, with an
invoice value of $3,539.61 CIF Cebu, was consigned to
the order of the importer Atlas Consolidated Mining and
Development Corporation. The carrier, in accepting the
cargo at the point of shipment, agreed to transship the
same, after its discharge in Manila, aboard an inter-island
vessel to its destination in Cebu. On September 18, 1962
the said carrier arrived at the port of Manila and on the
same date discharged the cargo in question. Pursuant to
the arrangement the cargo was subsequently loaded
aboard the "SS SIQUIJOR", an inter-island vessel. The
shipment was finally discharged in Cebu on September
24, 1962.
When the consignee took delivery of the shipment it was
found to be short of two (2) pieces of tractor parts worth
$2,834.88, or P11,063.12. Plaintiff paid the insured value
of the lost merchandise to the consignee. To recover the
said sum of P11,063.12 plaintiff, as subrogee of the
consignee rights, filed a complaint against the Compañia
Maritima and the Visayan Cebu Terminal Co., Inc. as
alternative defendants. The former was sued as operator
and owner of "SS SIQUIJOR" and the latter as operator
 No.:____________
Date:____________

of the arrastre service at the port of Cebu charged with

the care and custody of all cargo discharged there.
On Nov 6, 1964, Maritima's in its answer that the lost
merchandise had not actually been delivered to it,
plaintiff filed a motion to admit its amended complaint
impleading Macondray and Luzon Brokerage
Corporation as additional defendants and eliminating the
Visayan Cebu Terminal Co., Inc. According to plaintiff,
"the amended complaint is necessary in view of
defendant Maritima's assertion and records tending to
show that the lost merchandise was not delivered to it,
contrary to Macondray's representation, even after the
filing of the original complaint, that the cargo was
delivered to Maritima." The amended complaint was
admitted on November 14, 1964
Macondray moved to dismiss the amended complaint
against it on the ground that plaintiff's action had already
prescribed under the provisions of the Carriage of Goods
by Sea Act. While Plaintiff avers that the one year
prescriptive period provided for in the Carriage of Goods
by Sea Act does not apply in this case, which should be
governed by the statute of limitations in the Civil Code.
ISSUE: Whether or not plaintiff’s action had already
prescribed under the Carriage of Goods by Sea Act.
HELD: Yes. Sec 3 of Carriage of Goods by Sea Act
provides that in any event, the carrier and the ship shall
be discharged from all liability in respect of loss or
 No.:____________
Date:____________

damage unless suit is brought within one year after

delivery of the goods or the date when the goods shall
have been delivered. The action is based on the contract
of carriage up to the final port of destination, which was
Cebu City, for which the corresponding freight had been
prepaid. The transshipment of the cargo from Manila to
Cebu was not a separate transaction from that originally
entered into by Macondray, as general agent for the
“M/S TOREADOR”. It was part of Macondray’s
obligation under the contract of carriage and the fact that
the transshipment was made via an inter-island vessel
did not operate to remove the transaction from the
operation of the Carriage of Goods by Sea Act.
 No.:____________
Date:____________

Union Carbide Philippines, Inc. v Manila Railroad Co.

GR. No. L-27798, 15 June 1977
Aquino, J.

FACTS:
The vessel Daishin Maru arrived in Manila with a cargo
of 1,000 bags of synthetic resin consigned to General
Base Metals, Inc. which later sold the cargo to Union
Carbide Philippines, Inc. Cargo was delivered to Manila
Port Service on December 19, 1961. Only 898 bags of
resin were delivered to consignee. 50 of these were
damaged and 25 of the bags were damaged while in
custody of arrastre operator. Aggregate amount of
damage is Php 7, 402.78.
Claims were not paid hence a complaint was filed on
December 21, 1962 against Manila Railroad Company,
the Manila Port Service and the American Steamship
Agencies, Inc. for the recovery of damages. Trial court
dismissed the case as to the carrier's agent on the ground
that the action had already prescribed because it was not
"brought within one year after delivery of the goods"

ISSUE/S: 1. WON action against carrier is barred by

the statute of limitations
2.WON the arrastre operator is liable for the value of the
undelivered and damaged cargo.
 No.:____________
Date:____________

RULING:
1. YES. The sensible and practical interpretation is that
delivery within the meaning of Section 3(6) of the
Carriage of Goods by Sea Law means delivery to the
arrastre operator. That delivery is evidenced by tally
sheets which show whether the goods were landed in
good order or in bad order, a fact which the consignee or
shipper can easily ascertain through the customs broker.
Under the facts of this case, we held that the one-year
period was correctly reckoned by the trial court from
December 19, 1961, when, as agreed upon by the parties
and as shown in the tally sheets, the cargo was
discharged from the carrying vessel and delivered to the
Manila Port Service. That one-year period expired on
December 19, 1962. Inasmuch as the action was led on
December 21, 1962, it was barred by the statute of
limitations. Defendant American Steamship Agencies,
Inc., as agent of the carrier, has no more liability to the
consignee's assignee, Union Carbide Philippines, Inc., in
connection with the damaged twenty-five bags of resin.
2. YES. An action against the arrastre operator to enforce
liability for loss of the cargo or damage thereto should be
filed within one year from the date of the discharge of
the goods or from the date when the claim for the value
of such goods has been rejected or denied by the arrastre
operator. However, before such action can be led a
condition precedent should be complied with and that is,
 No.:____________
Date:____________

that a claim (provisional or final) shall have been

previously filed with the arrastre operator within fifteen
days from the date of the discharge of the last package
from the carrying vessel.
In this case, the provisional claim was never formally
rejected by Manila Ports Service. Having complied with
the condition precedent for the ling of a claim within the
fifteen-day period, Union Carbide could file the court
action within one year, either from December 19, 1961
or from December 19, 1962. This second date is
regarded as the expiration of the period within which the
Manila Port Service should have acted on the claim. As
shown in the statement of facts, the arrastre operator is
responsible for the value of 102 bags of resin, which
were not delivered, and twenty-five bags, which were
damaged, or a total of one hundred twenty-seven bags
valued at P6,185.22
 No.:____________
Date:____________

G.R. No. L-37604 October 23, 1981

EASTERN AND AUSTRALIAN STEAMSHIP CO.,
LTD. AND F. E. ZUELLIG, INC., petitioners,
vs.
GREAT AMERICAN INSURANCE CO. and COURT
OF FIRST INSTANCE OF MANILA, BRANCH XIII,
respondents.

DE CASTRO, * J.:
On December 10, 1971, the Jackson and Spring
(Sydney) Pty. Ltd. shipped from Sydney, Australia, one
(1) case of impellers for warman pump on board the SS
"Chitral," a vessel owned and operated in the Philippines
by Eastern & Australian Steamship Co., Ltd., thru its
agent F.E. Zuellig, Inc. under Bill of Lading No. 31, for
delivery to Manila, Philippines in favor of consignee
Benguet Consolidated, Inc. The shipment was insured
with Great American Insurance, Co. for P 35,921.81
against all risks. On December 22, 1971 the SS "Chitral"
arrived in Manila but failed to discharge the shipment or
any part thereof. Demand was made on herein
petitioners for the delivery of said shipment, but having
failed to make delivery, a claim was presented against
them for the value of the shipment. Petitioners, likewise,
failed to make good the claim. As a consequence of the
loss of the shipment, private respondent Great American
Insurance Co. was compelled to pay the consignee P
 No.:____________
Date:____________

35,921,81. As subrogee, said private respondent filed a

complaint dated Nov. 20, 1972 against herein petitioners
for recovery of the said amount with legal interest and
attorney's fees.
In the answer dated Nov. 27, 1972 petitioners alleged
that their liability for the loss of the shipment is only
limited to L100 Sterling or its peso equivalent of
P1,544.40 as per stipulation in the Bill of Lading and that
even before the filing of the complaint, petitioners have
signified their willingness to pay the claim up to their
limit of liability as stipulated in the Bill of Lading.
ISSUE: whether petitioner's liability is limited to L100
Sterling or its peso equivalent of P1,544.40 as stipulated
in Clause 17 of the Bill of Lading or whether petitioner's
liability should be $500 or its peso equivalent in the sum
of P3,217.50 pursuant to Sec. 4 (5) of the Carriage of
Goods by Sea Act.
HELD:
Petitioners' stand that the condition imposed in Clause 17
of the Bill of Lading should not be read in the light of
second paragraph of Section 4 (5) of the Carriage of
Goods by Sea Act, is well taken. Indeed, it would be to
render ineffective the very intent of the law setting the
sum of $500.00 as the maximum liability of the
vessel/carrier, per package, in the, absence of a higher
valuation of the goods as indicated in the Bill of Lading.
By providing that $500.00 is the maximum liability, the
 No.:____________
Date:____________

law does not disallow an agreement for liability at a

lesser amount.
Significantly, Article 1749 of the New Civil Code
expressly allow the limitation of the carrier's liability.
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.
The right of the carrier to limit its liability has been
recognized not only in Our jurisdiction but also in
American jurisprudence:
In view of the above findings, it is no longer necessary to
discuss the second assignment of error.
WHEREFORE, the decision of the court a quo is hereby
reversed and another one is entered finding petitioners
liable to private respondent in the amount of L100
Sterling or its peso equivalent of P1,544.40. Without
pronouncement as to costs.
SO ORDERED.
 No.:____________
Date:____________

DOMINGO ANG vs. COMPANIA MARITIMA,

MARITIME COMPANY OF THE PHILIPPINES and
C.L. DIOKNO
G.R. NO. L-30805, SECOND DIVISION,
DECEMBER 26, 1984,
AQUINO, J.:

FACTS:

As Ang filed the action less than three years from the
date of the alleged misdelivery of the cargo, it has not yet
prescribed. Ang, as indorsee of the bill of lading, is a real
party in interest with a cause of action for damages.
FACTS: Domingo Ang on September 26, 1963, as the
assignee of a bill of lading held by Yau Yue Commercial
Bank, Ltd. of Hongkong, sued Compania Maritima,
Maritime Company of the Philippines and C.L. Diokno.
He prayed that the defendants be ordered to pay him
solidarily the sum with interest from February 9, 1963
plus attorney's fees and damages. Ang alleged that Yau
Yue Commercial Bank agreed to sell to Herminio G.
Teves under certain conditions 559 packages of
galvanized steel, Durzinc sheets. The merchandise was
loaded on May 25, 1961 at Yawata, Japan in the M/S
Luzon a vessel owned and operated by the defendants, to
be transported to Manila and consigned "to order" of the
shipper, Tokyo Boeki, Ltd., which indorsed the bill of
 No.:____________
Date:____________

lading issued by Compania Maritima to the order of Yau

Yue Commercial Bank. Ang further alleged that the
defendants, by means of a permit to deliver imported
articles, authorized the delivery of the cargo to Teves
who obtained delivery from the Bureau of Customs
without the surrender of the bill of lading and in violation
of the terms thereof. Teves dishonored the draft drawn
by Yau Yue against him.

The Hongkong and Shanghai Banking Corporation

made the corresponding protest for the draft's dishonor
and returned the bill of lading to Yau Yue. The bill of
lading was indorsed to Ang. The defendants filed a
motion to dismiss Ang's complaint on the ground of lack
of cause of action. Ang opposed the motion. As already
stated, the trial court on May 22, 1964 dismissed the
complaint on the grounds of lack of cause of action and
prescription since the action was filed beyond the one-
year period provided in the Carriage of Goods by Sea
Act.

ISSUE:

Whether or not the action has prescribed.

RULING:
 No.:____________
Date:____________

NO. The action has not yet prescribed. As Ang filed the
action less than three years from the date of the alleged
misdelivery of the cargo, it has not yet prescribed. Ang,
as indorsee of the bill of lading, is a real party in interest
with a cause of action for damages. In the American
Steamship Agencies cases, it was held that the action of
Ang is based on misdelivery of the cargo which should
be distinguished from loss thereof. The one-year period
provided for in section 3 (6) of the Carriage of Goods by
Sea Act refers to loss of the cargo. What is applicable is
the four-year period of prescription for quasi-delicts
prescribed in article 1146 (2) of the Civil Code or ten
years for violation of a written contract as provided for in
article 1144 (1) of the same Code.
 No.:____________
Date:____________

UNIVERSAL SHIPPING LINES v. IAC,

188 SCRA 170, June 31
Facts:
On or about March 22, 1974, SEVALCO, Limited,
owned and operated by the petitioner, shipped from
Rotterdam, Netherlands, to Bangkok, Thailand, aboard
its M/V "TAIWAN", two (2) cargoes of 50 palletized
cartons consisting of 2,000 units of 25-kilogram bags of
Statex R Brand carton black, with a declared gross
weight of 53,000 kilos each.
They were respectively consigned to S. Lersen
Company, Ltd. and Muang Ngarm Retreads, Ltd., per
Bills of Lading Nos. RB-15 (Exh. A) and RB-16 (Exh.
B).  Both shipments were insured with the private
respondent, Alliance Assurance Company, Ltd., a
foreign insurance company domiciled in London,
England, which had withdrawn from the Philippine
market on June 30, 1951 yet.
Despite the arrival of the vessel on June 28, 1974 at
Bangkok, the cargo covered by Bill of Lading No. RB-
15 was not unloaded nor delivered to the consignee, S.
Lersen Company, Ltd.  The shipment under Bill of
Lading No. RB-16 was delivered to Muang Ngarm
Retreads, Ltd. with a total weight shortage of 11,070
kilos because the cargoes had been either totally or
partially dissolved in saltwater which flooded Hatch No.
2 of the vessel where they had been stored
 No.:____________
Date:____________

Upon arrival in Manila on July 4, 1974, Arturo C.

Saavedra, master of M/V "TAIWAN," filed a marine
protest "By investigation, the source of the water could
not be definitely ascertained where it comes from. 
However, the bilge pump was employed to pump out
continue working for almost 12 hours No. 2.  The bilge
pump was employed every other day to pump out the
water, but it was suspecting of some leakage of suction
pipes.
That the hold No. 2 cannot be inspected on account of
the full cargoes inside the hold, rendering it to be
inaccessible. Suspecting that the water comes from
outside passing through some loosen rivets on starboard
side of the ship.
That the pumping out the water from the hold was done
by shore help upon arrival at Bangkok. The consignees,
S. Lersen Co., Ltd. and Muang Ngarm Retreads, Inc.,
filed their respective formal claims for loss and damage
to their cargoes on August 7, 1974 and on November 12,
1974.
The insurer paid both claims in the amounts of L12,180
and L2,547.18 for the loss and damage to their cargoes.
On June 25, 1976, private respondent, as insurer-
subrogee, filed an action in the Court of First Instance of
Manila to recover from the petitioner and its Manila
agent, Carlos Go Thong & Company, what it paid the
consignees of the cargo.
 No.:____________
Date:____________

Issues:
1.  WON respondent court erred in holding petitioner
liable for the damage/loss suffered by the subject
shipments
2. WON respondent court erred in holding that private
respondent has capacity to sue in this jurisdiction
Ruling:
The first assignment of error raises a factual issue which
we decline to review as this Court may review only legal
issues which must be distinctly set forth in the petition
(Sec. 2, Rule 45, Rules of Court). In any event, the Court
of Appeals committed no reversible error in holding, as
the trial court did, that:
"It was incumbent upon the defendants to prove that the
losses and damages were due to causes other than the
negligence or fault of their... employees.  Said
defendants have not adduced proof on this point.  It
having been shown that the losses and damages were
incurred while the shipments were in the custody of the
M/V 'Taiwan' the liability of its owner/operator and...
shipping agent is clear -- they must pay for the losses and
damages sustained by the consignees as a consequence
of the breach of contract of water transportation."
On the issue of jurisdiction, we uphold the appellate
court's ruling that the private respondent may sue in
Philippine courts upon the marine insurance policies
issued by it abroad to cover international-bound cargoes
 No.:____________
Date:____________

shipped by a Philippine carrier, even if it... has no license

to do business in this country, for it is not the lack of the
prescribed license (to do business in the Philippines) but
doing business without such license, which bars a
foreign corporation from access to our courts.
 No.:____________
Date:____________

51. REYMA BROKERAGE VS PHIL HOME

ASSURANCE
G.R. NO. 184300 - July 11, 2012

FACTS:
On Oct 2, 1979, “MS Malmros Monsoon” (THE
VESSEL) received onboard at Queensland, Australia
from the shipper Craig Mostlyn & Co. (of Queensland) a
shipment of 2,680 cartons of hard frozen boneless beef
contained in 5 containers complete and in good order
and condition for transport to Manila. This is in favor of
the[ eventual consignee RFM Corp. (RFM) under a Bill
of Lading.
On Oct 13, 1979, the vessel arrived at Pier 3, Port of
Manila and discharged the shipment into the possession
and custody of the arrastre operator, Reyma Brokerage
(REYMA). From pier 3, the shipment was transferred to
the Reefer Van Area of pier 13.
On Oct 22, 1979, Reyma loaded the containers in 2
trucks and delivered them to Grech Food Industries Cold
Storage in Pasig, Rizal. Arrived there at 1am of Oct 23. 4
Reyma personnel delivered the containers: a driver and
helper in each truck. On around 9am the next day (Oct
23), the containers were stripped and the representative
of Reyma and RFM counted the contents of the 5
containers. After an inventory of one of the containers
(container no. BROU-430656[1]), it was discovered that
 No.:____________
Date:____________

203 cartons were found short out of the loaded 2,680

cartons of hard frozen boneless beef. According to RFM,
the shortage was attributable to Reyma such shortage
occurred while the latter has custody and responsibility
over the said containers. RFM filed a claim for recovery
of the missing 203 cartons but it was denied.
Consequently, RFM filed the claim with Phil. Home
Assurance Corp. (PHIL. HOME) under its Marine
Cargo insurance policy. Phil. Home paid RFM
P88,658.22. The payment of RFM’s claim by Phil.
Home had subrogated the latter to file this claim for the
recovery of the amount paid.
The Lower Courts ruled against Reyma. Reyma’s
arguments.
ISSUE:
1) W/N Reyma is liable for the short delivery of 203
cartons from the containerized shipments under the bill
of lading?
2) W/N action is barred by prescription in accordance to
COGSA?
RULING:
Evidently, the carrier, by signifying in the bill of lading
that "it is a receipt x x x for the number of packages
shown above," had explicitly admitted that the
containerized shipments had actually the number of
packages declared by the shipper in the bill of lading.
And this conclusion is bolstered by the stipulation
 No.:____________
Date:____________

printed in the bill of lading, "unless expressly

acknowledged and agreed to." Therefore, the phrase
"said to contain" also appearing in the bill of lading must
give way to this reality.
Hence, this express acknowledgment of the carrier
makes the case at bar an exception to the doctrine
enunciated in United States Lines. The rule enunciated
by United States Lines applies to a situation where the
carrier of the containerized cargo simply admits the
information furnished by the shipper with regard to the
goods it shipped as reflected in the bill of lading ("said to
contain") but not where the carrier of the containerized
cargo makes an explicit admission as to the weight,
measurement marks, numbers, quality contents, and
value, and more so, inscribed these admissions as
stipulations in the bill of lading itself, or made them an
addendum thereto, to which the carrier affixed its
express acknowledgment as what happened in this case.
In its stead, the dictum that the bill of lading shall be
prima facie evidence of the receipt by the carrier of the
goods as therein described governs.
A bill of lading operates both as a receipt and as a
contract. It is a receipt for the goods shipped and a
contract to transport and deliver the same as therein
stipulated. As a receipt, it recites the date and place of
shipment, describes the goods as to quantity, weight,
dimensions, identification marks and condition, quality,
 No.:____________
Date:____________

and value. As a contract it names the contracting parties,

which include the consignee, fixes the route, destination,
and freight rates or charges, and stipulates the rights and
obligations assumed by the parties.
As the petitioner prima facie received all the shipments
in the sealed containers, it has the burden to rebut the
conclusion that it received the same without shortage.
We have gone over the records and we find that the
petitioner had not overthrown this presumption by
contrary evidence. Therefore, the respondent court did
not commit any reversible error in agreeing with the trial
court that the loss of the 203 cartons is attributable to the
petitioner.
This defense had been waived and/or abandoned by the
petitioner. Other than the allegation of prescription in the
answer, the petitioner never pursued this matter either in
the later proceedings of the trial court or in the Court of
Appeals. The petitioner cannot now be allowed to raise
this issue to this Court after such waiver or
abandonment.