Transportation Law

2nd meeting

Prepare for the following cases

From 24 February 2022 Class:

1. Lita Enterprises v. Second Civil Cases Division, GR No. L-64693, April 27, 1984

2. Abelardo Lim and Esmadito Gunnaban v. CA, GR No. 125817, January 16, 2002

For 03 March 2022 Class:

1. Loadstar Shipping Co. Inc. vs. CA and the Manila Insurance Co. Inc., GR No. 131621, September 28, 1999

2. Sabena Belgian World Airlines v. CA, GR No. 104685, March 14, 1996

3. Spouses Cruz v. Sun Holidays Inc., GR No. 186312, June 29, 2010

4. Sarkies Tours Philippines, Inc. v. CA, GR No. 108897, October 2, 1997

5. Coastwise Lighterage Corp. v. CA, GR No. 114167, July 12, 1995

6. Asian Terminals Inc. v. Simon Enterprises, Inc., GR No. 177116, February 27, 2013

7. Benito Macam v. CA, GR No. 125524, August 25, 1999

8. Amparo Servando, Clara Uy Bico v. Philippine Steam Navigation Co., GR Nos. 36481-2, October 23, 1982

9. Maersk Line v. CA, GR No. 94761, May 17, 1993

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Lita Enterprises v. Second Civil Cases Division, GR No. L-64693, April 27, 1984

DOCTRINE:

The “kabit system" is whereby a person who has been granted a certificate of convenience allows another person who
owns motors vehicles to operate under such franchise for a fee. A certificate of public convenience is a special privilege
conferred by the government. Abuse of this privilege by the grantees thereof cannot be countenanced. Although not
outrightly penalized as a criminal offense, the "kabit system" is invariably recognized as being contrary to
public policy and, therefore, void and inexistent under Article 1409 of the Civil Code. It is a fundamental
principle that the court will not aid either party to enforce an illegal contract, but will leave them both where it finds
them.

FACTS:

Sometime in 1966, the spouses Nicasio M. Ocampo and Francisca Garcia, herein private respondents,
purchased in installment from the Delta Motor Sales Corporation five (5) Toyota Corona Standard cars to be
used as taxicabs. Since they had no franchise to operate taxicabs, they contracted with petitioner Lita
Enterprises, Inc., through its representative, Manuel Concordia, for the use of the latter's certificate of public
convenience in consideration of an initial payment of P1,000.00 and a monthly rental of P200.00 per
taxicab unit. To effectuate Id agreement, the aforesaid cars were registered in the name of petitioner Lita
Enterprises, Inc. Possession, however, remained with tile spouses Ocampo who operated and maintained the
same under the name Acme Taxi, petitioner's trade name.

About a year later one of said taxicabs driven by their employee, Emeterio Martin, collided with a motorcycle
whose driver, one Florante Galvez, died from the head injuries sustained therefrom. A criminal case was
eventually filed against the driver Emeterio Martin, while a civil case for damages was instituted by Rosita
Sebastian Vda. de Galvez, heir of the victim, against Lita Enterprises, Inc., as registered owner of the taxicab in
the latter case. Petitioner Lita Enterprises, Inc. was adjudged liable for damages by the CFI.

Two of the vehicles of respondent spouses were levied upon and sold at public auction.

Thereafter, Nicasio Ocampo decided to register his taxicabs in his name. He requested the manager of petitioner
Lita Enterprises, Inc. to turn over the registration papers to him, but the latter allegedly refused. Hence, he and
his wife filed a complaint against Lita Enterprises, Inc., Mrs. de Galvez and the Sheriff of Manila for
reconveyance of motor vehicles with damages.

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ISSUE:

Whether or not petitioner has a cause of action against defendants.

RULING:

No. Unquestionably, the parties herein operated under an arrangement, commonly known as the "kabit
system", whereby a person who has been granted a certificate of convenience allows another person who owns
motors vehicles to operate under such franchise for a fee. A certificate of public convenience is a special privilege
conferred by the government . Abuse of this privilege by the grantees thereof cannot be countenanced. The
"kabit system" has been Identified as one of the root causes of the prevalence of graft and corruption in the
government transportation offices. In the words of Chief Justice Makalintal, "this is a pernicious system that
cannot be too severely condemned. It constitutes an imposition upon the good faith of the government.

Although not outrightly penalized as a criminal offense, the "kabit system" is invariably recognized as being
contrary to public policy and, therefore, void and inexistent under Article 1409 of the Civil Code, It is a
fundamental principle that the court will not aid either party to enforce an illegal contract, but will leave them
both where it finds them. Upon this premise, it was flagrant error on the part of both the trial and appellate
courts to have accorded the parties relief from their predicament. Article 1412 of the Civil Code denies them
such aid. It provides:

ART. 1412. if the act in which the unlawful or forbidden cause consists does not constitute a criminal
offense, the following rules shall be observed:

(1) when the fault, is on the part of both contracting parties, neither may recover what he has given by
virtue of the contract, or demand the performance of the other's undertaking.

Having entered into an illegal contract, neither can seek relief from the courts, and each must bear the
consequences of his acts.

The defect of inexistence of a contract is permanent and incurable, and cannot be cured by ratification or by
prescription. As this Court said in Eugenio v. Perdido, "the mere lapse of time cannot give efficacy to contracts
that are null void."

The principle of in pari delicto is well known not only in this jurisdiction but also in the United States where
common law prevails. Under American jurisdiction, the doctrine is stated thus: "The proposition is universal

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that no action arises, in equity or at law, from an illegal contract; no suit can be maintained for its specific
performance, or to recover the property agreed to be sold or delivered, or damages for its property agreed to be
sold or delivered, or damages for its violation. The rule has sometimes been laid down as though it was equally
universal, that where the parties are in pari delicto, no affirmative relief of any kind will be given to one against
the other." Although certain exceptions to the rule are provided by law, We see no cogent reason why the full
force of the rule should not be applied in the instant case.

Abelardo Lim and Esmadito Gunnaban v. CA, GR No. 125817, January 16, 2002

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DOCTRINE:

FACTS:

Private respondent herein purchased an Isuzu passenger jeepney from Vallarta, a holder of a certificate
of public convenience for the operation of a public utility vehicle. He continued to operate the public
transport business without transferring the registration of the vehicle to his name. Thus, the original
owner remained to be the registered owner and operator of the vehicle. Unfortunately, the
vehicle got involved in a road mishap which caused it severe damage. The ten-wheeler-truck which
caused the accident was owned by petitioner Lim and was driven by co-petitioner Gunnaban.
Gunnaban admitted responsibility for the accident, so that petitioner Lim shouldered the costs of
hospitalization of those wounded, compensation for the heirs of the deceased passenger and the
restoration of the other vehicle involved. He also negotiated for the repair of the private respondent's
jeepney but the latter refused and demandedTextfor its replacement. Hence, private respondent filed a
complaint for damages against petitioners. Meanwhile, the jeepney was left by the roadside to corrode
and decay. The trial court decided in favor of private respondent and awarded him his claim. On appeal,
the Court of Appeals affirmed the decision of the trial court. Hence, petitioner filed this petition.

ISSUE:

Whether the new owner of a passenger jeepney who continued to operate the same under the so-called
kabit system and in the course thereof met an accident has the legal personality to bring the action for
damages against the erring vehicle.

RULING:

YES. According to the Court, the thrust of the law in enjoining the kabit system is not much as to penalize the
parties but to identify the person upon whom responsibility may be fixed in case of an accident with the end
view of protecting the riding public. In the present case, it is once apparent that the evil sought to be prevented
in enjoining the kabit system does not exist. First, neither of the parties to the pernicious kabit system is
being held liable for damages. Second, the case arose from the negligence of another vehicle in using the
public road to whom no representation, or misrepresentation, as regards the ownership and operation
of the passenger jeepney was made and to whom no such representation, or misrepresentation, was
necessary. Thus it cannot be said that private respondent Gonzales and the registered owner of the jeepney were
in estoppel for leading the public to believe that the jeepney belonged to the registered owner. Third, the riding

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public was not bothered nor inconvenienced at the very least by the illegal arrangement. On the
contrary, it was private respondent himself who had been wronged and was seeking compensation for the
damage done to him. Certainly, it would be the height of inequity to deny him his right. Hence, the private
respondent has the right to proceed against petitioners for the damage caused on his passenger jeepney as well as
on his business

Loadstar Shipping Co. Inc. vs. CA and the Manila Insurance Co. Inc., GR No. 131621, September 28,
1999

DOCTRINE:

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For a vessel to be seaworthy, it must be adequately equipped for the voyage and manned with a sufficient number of
competent officers and crew. The failure of a common carrier to maintain in seaworthy condition its vessel involved
in a contract of carriage is a clear breach of its duty prescribed in Article 1755 of the Civil Code.

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

FACTS:

Loadstar Shipping Co. Inc. received on board its M/V “Cherokee” goods, amounting to P6,067,178,
which were insured for the same amount with the respondent Manila Insurance Co. (MIC) against
various risks including “total loss by total loss of the vessel.” The vessel, in turn, was insured by
Prudential Guarantee & Assurance, Inc. (PGAI) for P4 million. On its way to Manila from the port of
Nasipit, Agusan del Norte, the vessel, along with its cargo, sank off Limasawa Island. As a result of the
total loss of its shipment, the consignee made a claim with Loadstar which, however, ignored the
same. As the insurer, MIC paid P6,075,000 to the insured in full settlement of its claim, and the latter
executed a subrogation receipt therefore.

MIC filed a complaint against Loadstar and PGAI, alleging that the sinking of the vessel was due to the
fault and negligence of Loadstar and its employees. PGAI was later dropped as a party defendant after it
paid the insurance proceeds to Loadstar. Loadstar submits that the vessel was a private carrier because it
was not issued a certificate of public convenience, it did not have a regular trip or schedule nor a fixed
route, and there was only "one shipper, one consignee for a special cargo. The trial court rendered
judgment in favor of MIC. Loadstar elevated the matter to the Court of Appeals, which affirmed the
RTC’s decision in toto.

ISSUE:

Whether or not Loadstar is a common carrier.

RULING:

Yes. [W]e hold that LOADSTAR is a common carrier. It is not necessary that the carrier be issued a
certificate of public convenience, and this public character is not altered by the fact that the carriage of
the goods in question was periodic, occasional, episodic or unscheduled.

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

These cases invoked by LOADSTAR are not applicable in the case at bar for simple reason that the
factual settings are different. The records do not disclose that the M/V "Cherokee," on the date in
question, undertook to carry a special cargo or was chartered to a special person only. There was no
charter party. The bills of lading failed to show any special arrangement, but only a general provision to
the effect that the M/V "Cherokee" was a "general cargo carrier."14 ["A general ship carrying goods for
hire, whether employed in internal, in coasting, or in foreign commerce is a common carrier." (Baer,
Senior & Co.’s Successors v. La Compania Maritima, 6 Phil. 215, 217-218, quoting Liverpool
Steamship Co. v. Phoenix Ins. Co., 129 U.S. 397, 437), cited in 3 TEODORICO C. MARTIN,
PHILIPPINE COMMERCIAL LAWS 118 (Rev. Ed. 1989).] Further, the bare fact that the vessel was
carrying a particular type of cargo for one shipper, which appears to be purely coincidental, is not
reason enough to convert the vessel from a common to a private carrier, especially where, as in this case,
it was shown that the vessel was also carrying passengers.

Sabena Belgian World Airlines v. CA, GR No. 104685, March 14, 1996

DOCTRINE:

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The examination of the provisions of the document in question revealed that while it may have been a quitclaim,
Mrs. Fule did not know that she was made to sign a quitclaim. This was considered by the Court as a misconduct on
the part of the carrier's employees toward a passenger giving the latter an action for damages against the carrier.

As to moral damages awarded to the Fule Family, it is settled that the same is recoverable in a damage suit
predicated upon a breach of contract of carriage only where (1) the mishap results in the death a of passenger and
(2) it is proved that the carrier was guilty of fraud and bad faith, even if death does not result. In the case at bar, the
petitioner is guilty of bad faith in letting Mrs. Fule sign a quitclaim without her knowledge or understanding and
contrary to what she was planning to do.

FACTS:

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

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

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

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

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

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

ISSUE:

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

RULING:

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

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

The above rules remain basically unchanged even when the contract is breached by tort although
noncontradictory principles on quasi-delict may then be assimilated as also forming part of the
governing law. Petitioner is not thus entirely off track when it has likewise raised in its defense the tort
doctrine of proximate cause. Unfortunately for petitioner, however, the doctrine cannot, in this
particular instance, support its case. Proximate cause is that which, in natural and continuous sequence,

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 unbroken by any efficient intervening cause, produces injury and without which the result would not
have occurred.

The above findings, which certainly cannot be said to be without basis, foreclose whatever rights
petitioner might have had to the possible limitation of liabilities enjoyed by international air carriers
under the Warsaw Convention .

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

The Convention does not thus operate as an exclusive enumeration of the instances of an airline’s
liability, or as an absolute limit of the extent of that liability.( Loss of baggage twice shows gross
negligence)

Spouses Cruz v. Sun Holidays Inc., GR No. 186312, June 29, 2010

DOCTRINE:

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

FACTS:

Petitioner lodged a Complaint against Sun Holidays, Inc. for damages arising from the death of their
son Ruelito who perished with his wife on board the boat M/B Coco Beach III that capsized en route
to Batangas from Puerto Galera, Oriental Mindoro where the couple had stayed at Coco Beach Island
Resort owned and operated by respondent.

Petitioners alleged that respondent, as a common carrier, was guilty of negligence in allowing
M/B Coco Beach III to sail notwithstanding storm warning bulletins issued by PAGASA.

ISSUE:

Whether or not Sun Holidays, Inc, is a common carrier since by its tour package, the transporting of its
guests is an integral part of its resort business.

RULING:

Yes. The Civil Code defines “common carriers” in the following terms:

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

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

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Sarkies Tours Philippines, Inc. v. CA, GR No. 108897, October 2, 1997

DOCTRINE:

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The cause of the loss in the case at bar was petitioner's negligence in not ensuring that the doors of the baggage compartment of
its bus were securely fastened. As a result of this lack of care, almost all of the luggage was lost, to the prejudice of the paying
passengers.

Where a common carrier accepted its passengers’ baggage for transportation and even had it placed in the vehicle, it is
responsible for the consequent loss of the baggage.

FACTS:

Fatima Fortades boarded petitioner Sarkies Tours’ De Luxe Bus in Manila on her way to Legazpi City.
Her three luggages were loaded in the baggage compartment of the bus. However, during a stopover
at Daet, it was discovered that only one bag remained in the open compartment. Fatima and her
family went to great lengths to recover the luggages but only one bag was returned to them. They
reported to the police, the NBI, and the regional and head offices of petitioner. Her mother even sought
the assistance of Philtranco bus drivers and the radio stations.

After more than nine months of fruitless waiting, respondents filed a case to recover the value of
the remaining lost items, as well as moral and exemplary damages, attorney’s fees and expenses
of litigation.

RTC rendered a favorable judgment. On appeal, the appellate court affirmed the trial court’s judgment,
but deleted the award of moral and exemplary damages.

ISSUES:

1. Whether or not the carrier was responsible for the loss.

RULING:

1. It has been established that the carrier received the luggages.

From the nature of their business and for reasons of public policy, common carriers are bound to
observe extraordinary diligence in the vigilance over the goods transported by them, and this liability
“lasts from the time the goods are unconditionally placed in the possession of, and received by the
carrier for transportation until the same are delivered, actually or constructively, by the carrier to the
person who has a right to receive them,” unless the loss is due to any of the excepted causes under
Article 1734 thereof.

The cause of the loss was petitioner’s negligence in not ensuring that the doors of the baggage
compartment of its bus were securely fastened. As a result of this lack of care, almost all of the luggage
was lost, to the prejudice of the paying passengers.

Coastwise Lighterage Corp. v. CA, GR No. 114167, July 12, 1995

DOCTRINE:

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Two kinds of charter parties—charter by demise or bareboat charter, and contract of affreightment. Although a charter
party may transform a common carrier into a private one, the same however is not true in a contract of affreightment.

Common carriers, as a general rule, are presumed to have been at fault or negligent if the goods they transported deteriorated or
got lost or destroyed. It may also logically, follow that a person without license to navigate, lacks not just the skill to do so, but also
the utmost familiarity with the usual and safe routes taken by seasoned and legally authorized ones

FACTS:

The consignee entered into a contract of affreightment which is to transport molasses from the
province of Negros to Manila with the carrier using the latter’s barges. The barges were towed in
tandem by the tugboat MT Marica, also owned by the carrier. While approaching the pier of
destination, one of the barges, “Coastwise 9” was struck and as a result, the molasses at the cargo tanks
were contaminated and rendered unfit for the use it was intended. The consignee rejected the shipment
of molasses as a total loss. The insurer paid the consignee the amount representing the value of the
damaged cargo of molasses.

ISSUES:

1. WON Coastwise Lighterage was transformed into a private carrier, by virtue of the contract of
affreightment which it entered into with the consignee, Pag-asa Sales, Inc. What is the extent of its
liability over the lost, damaged and deteriorated cargo?

2. WON the insurer was subrogated into the rights of the consignee against the carrier, upon payment
by the insurer of the value of the consignee’s goods lost while on board one of the carrier’s vessels.

RULING:

1. No. The contract of affreightment entered into between the consignee and the carrier did not
convert the latter into a private carrier, but remained a common carrier and was still liable as such. The
consignee only leased three of the petitioner's vessels, in order to carry cargo from one point to another,
but the possession, command and navigation of the vessels remained with petitioner carrier.

As a common carrier, the presumption of negligence attaches to it when the goods it transports are lost,
destroyed or deteriorated. This presumption may be overcame only by proof of the exercise of
extraordinary diligence such as placing a person with navigational skills. However, the carrier failed to
overcome this presumption of negligence as the patron did not possess the necessary license to navigate.

2. Petitioner carrier was liable for breach of the contract of carriage it entered into with the consignee.
In accordance with Art. 2207, payment by the insurer to the assured operated as an equitable
assignment to the former of all remedies which the latter may have against the third party whose

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 negligence or wrongful act caused the loss. If the insured property is destroyed or damaged through the
fault or negligence of a party other than the assured, then the insurer, upon payment to the assured will
be subrogated to the rights of the assured to recover from the wrongdoer to the extent that the insurer
has been obligated to pay.

NOTES:

The distinction between the two kinds of charter parties (i.e. bareboat or demise and contract of
affreightment) –

Under the demise or bareboat charter of the vessel, the charterer will generally be regarded as the
owner for the voyage or service stipulated. The charterer mans the vessel with his own people and
becomes the owner pro hac vice, subject to liability to others for damages caused by negligence. To
create a demise, the owner of a vessel must completely and exclusively relinquish possession, command
and navigation thereof to the charterer, anything short of such a complete transfer is a contract of
affreightment (time or voyage charter party) or not a charter party at all.

On the other hand a contract of affreightment is one in which the owner of the vessel leases part or
all of its space to haul goods for others. It is a contract for special service to be rendered by the owner of
the vessel and under such contract the general owner retains the possession, command and navigation
of the ship, the charterer or freighter merely having use of the space in the vessel in return for his
payment of the charter hire. . . . . . . . . An owner who retains possession of the ship though the hold is
the property of the charterer, remains liable as carrier and must answer for any breach of duty as to the
care, loading and unloading of the cargo. . . . – Puromines, Inc. vs. Court of Appeals,

Asian Terminals Inc. v. Simon Enterprises, Inc., GR No. 177116, February 27, 2013

DOCTRINE:

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, the plaintiff must still,

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 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

In this case, respondent failed to prove that the subject shipment suffered shortage, for it was not able to
establish that the subject shipment was weighed at the port of origin at Darrow, Louisiana, U.S.A. and that
the actual weight of the said shipment was 3,300 metric tons.

FACTS:

Simon Enterprise Inc. Respondent (Simon) has entered into contract with Contiquincybunge Export
Company (Contiquincybunge) as its consignee of the shipped Soybean Meal. For the first shipment,
Contiquincybunge made a shipment of 6,825.144 metric tons of U.S. Soybean Meal which when the
M/V Sea Dream arrived at the Port of Manila the bulk of soybean meal was received by the Asian
Terminals, Inc. (ATI), for shipment to Simon. However, when it reached its receiver Simon, it was
already short by 18.556 metric tons.

For the second shipment, Contiquincybunge made shipment, through M/V Tern, of 3,300.000 metric
tons of U.S. Soybean Meal in Bulk for delivery to Simon at the Port of Manila. The shipment was
received by ATI again for delivery to Simon. However, the shipped cargos were found lacking 199.863
metric tons. Simon filed an action for damages against the unknown owner of the vessels M/V Sea
Dream and M/V Tern, its local agent Inter-Asia Marine Transport, Inc., and petitioner ATI alleging
that it suffered the losses through the fault or negligence of the said defendants.

The case of the unknown owner of the vessel M/V Sea Dream has been settled in release and quitclaim
and therefore has been stricken out of the case, leaving M/V Tern, its local agent Inter-Asia Marine
Transport, Inc., and petitioner ATI’s case remaining. The RTC has ruled that the defendants be
solidarily liable for the damages incurred by Simon.

ISSUE:

Whether or not petitioner Asia Terminal Inc is solidarily liable with its co- defendants for the shortage
incurred in the shipment of the goods to the respondent.

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RULING:

The SC agreed to ATI’s claim that the CA erred in affirming the decision of the trial court holding
petitioner ATI solidarily liable with its co- defendants for the shortage incurred in the shipment of the
goods to respondent. Petitioner ATI is correct in arguing that the respondent failed to prove that the
subject shipment suffered actual shortage, as there was no competent evidence to prove that it
actually weighed 3,300 metric tons at the port of origin.

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. It was not able to
establish that the subject shipment was weighed at the port of origin at Darrow, Louisiana, U.S.A. and
that the actual weight of the said shipment was 3,300 metric tons.

The subject shipment was carried with the qualification "Shipper’s weight, quantity and quality
unknown," meaning that it was transported with the carrier having been oblivious of the weight,
quantity, and quality of the cargo. Indeed, as the bill of lading indicated that the contract of carriage
was under a "said to weigh" clause, the shipper is solely responsible for the loading while the carrier is
oblivious of the contents of the shipment Hence, 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.

Second, as correctly asserted by petitioner ATI, the shortage, if any, may have been due to the inherent
nature of the subject shipment or its packaging since the subject cargo was shipped in bulk and had a
moisture content of 12.5%.Third, SC agreed with the petitioner ATI that respondent has not proven
any negligence on the part of the former.

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Benito Macam v. CA, GR No. 125524, August 25, 1999

DOCTRINE:

Extraordinary responsibility of the common carriers lasts until actual or constructive delivery of the
cargoes to the consignee or to the person who has a right to receive them.

PAKISTAN BANK was indicated in the bills of lading as consignee whereas GPC was the notify party.
However, in the export invoices GPC was clearly named as buyer/importer. Petitioner also referred to GPC as
such in his demand letter to respondent WALLEM and in his complaint before the trial court. This premise

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draws us to conclude that the delivery of the cargoes to GPC as buyer/importer which, conformably with Art.
1736 had, other than the consignee, the right to receive them was proper.

FACTS:

On 6 April 1989, petitioner Macam shipped on board the vessel Nen Jiang, owned and operated by
respondent China Ocean Shipping Co., through local agent respondent Wallem Philippines Shipping, Inc.
boxes of watermelons and mangoes which were covered by bill of ladings and exported through letters of credit
issued by National Bank of Pakistan, Hongkong (Pakistan Bank). The Bills of Lading contained the following
pertinent provision: “One of the Bills of Lading must be surrendered duly endorsed in exchange for the goods or
delivery order.” The shipment was bound for Hongkong with Pakistan Bank as consignee and Great Prospect
Company of Kowloon, Hongkong (GPC) as notify party.

On 6 April 1989, copies of the bills of lading and commercial invoices were submitted to petitioner’s depository
bank, Consolidated Banking Corporation (Solidbank), which paid petitioner in advance the total value of the
shipment.

Upon arrival in Hongkong and after receiving a telex instruction, the shipment was delivered by respondent
Wallem directly to GPC, not to Pakistan Bank, and without the required bill of lading having been
surrendered. Subsequently, GPC failed to pay Pakistan Bank such that the latter, still in possession of the
original bills of lading, refused to pay petitioner through Solidbank.

ISSUE:

Is Wallem liable for the goods it delivered to GPC without presentation of the bills of lading and bank
guarantee?

RULING:

NO. Wallem is not liable for the following reasons:

1. It delivered the goods to the person who has the right to receive them. This is in accordance with Art. 1736
which states that: The extraordinary responsibility of the common carriers lasts from the time the goods are
unconditionally placed in the possession of, and received by the carrier for transportation until the same are
delivered, actually or constructively, by the carrier to the consignee, or to the person who has a right to receive
them, without prejudice to the provisions of article 1738. GPC, even though designated as the notify party in
the bills of lading, was clearly named as buyer/importer in the export invoices.

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2. The petitioner sent instructions through telex to deliver various shipments to the respective consignees
without need of presenting the bill of lading and bank guarantee per the respective shipper’s request since “for
prepaid shipt ofrt charges already fully paid.” GPC is listed as one among the several consignees in the telex.

Amparo Servando, Clara Uy Bico v. Philippine Steam Navigation Co., GR Nos. 36481-2, October 23,
1982

FACTS:

Petitioner loaded on board a vessel of Respondent Philippine Steam Navigation Co. for
carriage from Manila to Negros Occidental 1,528 cavans of rice and 44 cartons of colored
paper, toys and general merchandise. The contract of carriage of cargo was evidenced by a Bill
of Lading (B/L). There was a stipulation limiting the responsibility of the carrier for

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 loss or damage that may be caused to the shipment. The stipulation states: a.“carrier shall
not be responsible for loss or damage to shipments billed ‘owner’s risk’ unless such loss or
damage is due to the negligence of the carrier. Nor shall the carrier be responsible for loss or
damage caused by force majeure, dangers or accidents of the sea, war, public enemies, fire”.
Upon arrival of the vessel at its destination, the cargoes were discharged in good condition
and placed inside the warehouse of the Bureau of Customs. Unfortunately, the warehouse was
razed by fire of unknown origin later that same day destroying the remaining cargoes.
Petitioner filed a claim for the value of the goods against the carrier. The lower court ruled in
their favor. It held that the delivery of the shipment to the warehouse is not the delivery
contemplated by Art. 1736 of the CC. And since the burning of the warehouse occurred
prior to the actual or constructive delivery of the goods, the loss is chargeable against the
vessel.

ISSUE:

Whether or not the carrier is liable for the loss of the goods? NO

RULING:

Article 1736 of the CC imposes upon common carriers the duty to observe extraordinary
diligence from the moment the goods are unconditionally placed in their possession "until
the same are delivered, actually or constructively, by the carrier to the consignee or to the
person who has a right to receive them, without prejudice to the provisions of Article 1738.”
The court a quo held that the delivery of the shipment in question to the warehouse of
the Bureau of Customs is not the delivery contemplated by Article 1736; and since the
burning of the warehouse occurred before actual or constructive delivery of the goods to the
appellees, the loss is chargeable against the appellant (the steamship). It should be pointed out,
however, that in the bills of lading issued for the cargoes in question, the parties agreed to limit
the responsibility of the carrier. The stipulation is valid not being contrary to law, morals or
public policy.

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 The petitioners however, contend that the stipulation does not bind them since it was
printed at the back of the B/L and that they did not sign the same. However, as the Court held
in Ong Yiu vs. CA, while it may be true that a passenger had not signed the plane ticket, he is
nevertheless bound by the provisions thereof. Such provisions have been held to be a part of
the contract of carriage, and valid and binding upon the passenger regardless of the latter's lack
of knowledge or assent to the regulation. Also, where fortuitous event is the immediate and
proximate cause of the loss, the obligor is exempt from liability for non-performance. In the
case at bar, the burning of the customs warehouse was an extraordinary event which
happened independently of the will of the appellant. The latter could not have foreseen the
event. There is nothing in the record to show that the carrier incurred in delay in the
performance of its obligation. It appears that it had not only notified Uy Bico and Servando of
the arrival of their shipment, but had demanded that the same be withdrawn. In fact, pursuant
to such demand, Uy Bico had taken delivery of 907 cavans of rice before the burning of the
warehouse. Nor can the carrier or its employees be charged with negligence. The storage of the
goods in the Customs warehouse pending withdrawal thereof by petitioners was undoubtedly
made with their knowledge and consent. Since the warehouse belonged to and was maintained
by the government, it would be unfair to impute negligence to the carrier, the latter having no
control whatsoever over the same. *Bonus* Essential Characteristics for one to become a
fortuitous event: (1) the cause of the unforeseen and unexpected occurrence, or of the failure
of the debtor to comply with his obligation, must be independent of the human will; (2) it
must be impossible to foresee the event which constitutes the 'caso fortuito', or if it can be
fore-seen, it must be impossible to avoid; (3) the occur-rence must be such as to render it
impossible for the debtor to fulfill his obligation in a normal manner; and (4) the obligor must
be free from any participation in the aggravation of the injury resulting to the creditor.

Maersk Line v. CA, GR No. 94761, May 17, 1993

DOCTRINE:

While it is true that common carriers are not obligated by law to carry and to deliver merchandise, and persons
are not vested with the right to prompt delivery, unless such common carriers previously assume the obligation

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to deliver at a given date or time, delivery of shipment or cargo should at least be made within reasonable
time.

FACTS:

Consignee imported from Eli Lilly. Inc. Puerto Rico 600,000 empty gelatin capsules for the manufacture of his
pharmaceutical products. The capsules were placed in six (6) drums of 100,000 capsules each valued at US
$1,668.71. The capsules were shipped on board by the herein petitioner MV Anders Maerskline for shipment to
the Philippines via Oakland, California. For unknown reasons, said cargo of capsules were misshipped and
diverted to Richmond, Virginia, USA and then transported back Oakland, Califorinia. It finally arrived after
two months from the intended date of arrival. Consignee refused to receive the goods due to its failure to arrive
on time.

Consignee filed an action for rescission of contract with damages against the carrier and the shipper due to gross
negligence and undue delay in the delivery of the goods.

Carrier’s allegation: The shipment was transported in accordance with the provisions of the covering bill of
lading and that its liability under the law on transportation of good attaches only in case of loss, destruction
or deterioration of the goods as provided for in Article 1734 of Civil Code

Shipper’s allegation (Answer with compulsory and cross-claim): The delay in the arrival of the subject
merchandise was due solely to the gross negligence of petitioner Maersk Line. The complaint against Eli Lilly,
Inc. was dismissed.

Trial court’s decision: Carrier liable.

CA’s decision: affirmed with modification the lower court’s decision.

ISSUE:

Whether or not the carrier is liable for the delay in the delivery of the shipment.

RULING:

Yes. While it is true that common carriers are not obligated by law to carry and to deliver merchandise, and
persons are not vested with the right to prompt delivery, unless such common carriers previously assume the
obligation to deliver at a given date or time, delivery of shipment or cargo should at least be made within a
reasonable time. A delay in delivery of gelatin capsules for use in pharmaceutical products for a period of two

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months and sevens days is considered beyond the realm of reasonableness. Moreover, failure of the carrier
to explain cause of delay in the delivery of the shipment makes it liable for breach of contract of carriage through
gross negligence amounting to bad faith, entitling consignee's recovery of moral damages.

The unexplained misshipment of the goods by the common carrier constitutes gross carelessness or negligence
amounting to wanton misconduct which justifies an award of exemplary damages to the aggrieved party.
Moreover, attorney’s fees are generally not recoverable, but in this case since carrier acted with gross negligence
amounting to bad faith consignee is entitled to reasonable attorney’s fees.

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