1. Estela Crisostomo v. CA, GR 138334, August 25, 2003, Ynares-Santiago, J.

(Definition of
Contract of Transportation; distinguish contract of transpo with travel agency)
FACTS:
Crisostomo contracted the services of respondent Caravan Travel and Tours International, Inc. to
arrange and facilitate her booking, ticketing, and accommodation in a tour dubbed Jewels of
Europe. The package tour had a total cost of P74,322.70. The booking fee was waived because
Crisostomo’s niece, Meriam Menor, was Caravan’s ticketing manager.

Pursuant to the contract, Menor went to Crisostomo’s residence to deliver her travel documents
and plane tickets. Crisostomo in turn gave Menor the full payment. Menor told Crisostomo to be
at the NAIA on Saturday, 2 hours before her flight. Without checking her travel documents,
Crisostomo went to NAIA on Saturday, June 15, 1991 to take the flight to HK.but she discovered
that the flight she was supposed to take had already departed the previous day. Her plane ticket
was for the flight scheduled on June 14. She complained to Menor.

Menor prevailed upon Crisostomo to take another tour, the British Pageant. Crisostomo was asked
anew to pay P20,881. She gave respondent P7,980 as partial payment and commenced the trip in
July 1991. Upon Crisostomo’s return, she demanded from respondent the reimbursement of
P61,421.70, representing the difference between the sum she paid for Jewels of Europe and the
amount she owed respondent for the British Pageant tour. Caravan refused to reimburse, saying
that the amount was non-refundable. Crisostomo filed a complaint for breach of contract of
carriage and damages with RTC.

Crisostomo claims that her failure to join Jewels of Europe was due to respondent’s fault since it
did not clearly indicate the departure date on the plane ticket. Respondent was negligent in
informing her of the wrong flight schedule thru Menor. Caravan claims that Crisostomo was
informed of the correct departure date which was clearly printed on the plane ticket.

The RTC ordered Caravan to refund Crisostomo with attorneys fees, reducing the amount by 10%
due to contributory negligence of Crisostomo. The CA also found both parties at fault, but held
that Crisostomo was not entitled to any damages, being a well-traveled person and lawyer. Hence
this petition.

ISSUE:
Whether Caravan is liable for damages and refund of the tour package cost which tour Crisostomo
missed because she did not read the travel documents delivered to her two days prior, claiming but
without proving that Caravan’s employee and her niece, Menor, told her to go to the airport at a
wrong date.
HELD: NO.
Crisostomo claims that as common carrier, respondent is required to exercise extraordinary
diligence in fulfilling its obligation. If she were negligent at all, it is merely contributory. This has
no merit.

A contract of carriage or transportation is one whereby a certain person or association of persons

obligate themselves to transport persons, things, or news from one place to another for a fixed
price. Such person or association of persons are regarded as carriers and are classified as private
or special carriers and common or public carriers. A common carrier is defined under Art. 1732 as
persons, corporations, firms, or associations engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air, for compensation, offering their services to
the public.

Caravan is not an entity engaged in said business and is thus neither a private nor common carrier.
It did not undertake to transport Crisostomo from one place to another since its covenant with its
customers is simply to make travel arrangements in their behalf. While Crisostomo bought her
plane ticket thru the efforts of Caravan, this does not mean that the latter is ipso facto a common
carrier. At most, it acted merely as an agent of the airline with whom petitioner ultimate
contracted for her carriage to Europe. Crisostomo’s transport pertained directly to the airline.

The object of Crisostomo’s contract with Caravan is its service of arranging and facilitating her
booking, ticketing, and accommodation in the package tour. In contrast, the object of a contract
of carriage is the transportation of passengers or goods. Here, the contract is an ordinary one for
services and not one of carriage. Thus, Caravan is not bound under the law to observe extraordinary
diligence as it is not a common carrier. The standard of care is that of a good father of a family
under Art. 1173 of NCC. This connotes reasonable care consistent with that which an ordinary
prudent person would have observed when confronted with a similar situation. The test to
determine if there is negligence in the performance of an obligation is: did the defendant in doing
the alleged negligent act use that reasonable care and caution which an ordinarily prudent
person would have used in the same situation? If not, then he is guilty of negligence.

Here, Menor’s negligence was not sufficiently proved, since the only evidence on this score was
Crisostomo’s uncorroborated narration of events. Contrary to Crisostomo’s claim, the evidence
shows that Caravan exercised due diligence in performing its obligations under the contract and
followed standard procedure in rendering its services. The plane ticket clearly reflected the
departure date and time. The travel documents were also delivered to Crisostomo two days
prior to the trip. Caravan also properly booked Crisostomo for the tour, prepared the necessary
documents, and procured the plane tickets. It arranged her hotel accommodation and food and land
transfers, sightseeing excursions, in accordance with its undertaking.

Thus, Caravan performed its prestation under the contract. Had Crisostomo exercised due
diligence in the conduct of her affairs, there would have been no reason for her to miss the flight.
After the travel papers were delivered to her, it became incumbent upon her to take ordinary care
of her concerns. This would require that she at least read the documents to assure herself of the
important details of her trip.

2. Pedro de Guzman v. CA, GR L-47822, December 22, 1988, Feliciano, J. (Tests and
Characteristics of contract of transportation)
FACTS:
Respondent Ernesto Cendana, a junk dealer, was engaged in buying used up bottles and scrap
metal in Pangasinan. Upon gathering sufficient quantities of scrap metal, he would bring such
material to Manila for resale. He used 2 six-wheeler trucks which he owned for hauling them to
manila. On the return trip to Pangasinan, he would load his vehicles with cargo which various
merchants wanted delivered to differing establishments in Pangasinan. For that service, Ernesto
charged freight rates which were commonly lower than regular commercial rates.

Petitioner de Guzman, a merchant and authorized dealer of General Milk Company Inc.,
Pangasinan, contracted with Ernesto for the hauling of 750 cartons of Liberty filled milk from a
warehouse of General Milk in Makati, Rizal, to de Guzman’s establishment in Urdaneta on or
before December 4, 1970. On December 1, Ernesto loaded in Makati the merchandise to his trucks.
150 cartons were loaded on a truck driven by Ernesto himself, while 600 cartons were placed
on board the other truck driven by Manuel Estrada, Ernesto’s driver and employee.

Only 150 boxes of Liberty filled milk were delivered to de Guzman. The other 600 boxes never
reached him, since the truck which carried these boxes was hijacked somewhere along
MacArthur Highway in Tarlac by armed men who took with them the truck, his helper, and the
cargo. De Guzman sued Ernesto, demanding P22,150, claimed value of the lost boxes, plus
damages and attorney’s fees. He argues that Ernesto, being a common carrier, failed to exercise
the extraordinary diligence required of him by law and should be liable for the undelivered goods.

Ernesto denied that he was a common carrier and argued that he cannot be liable because the loss
was due to force majeure. CFI ruled that Ernesto is a common carrier and held him liable for
P22,150, P4k damages, and P2k attorney’s fees. On appeal, CA reversed CFI and held that Ernesto
was engaged in transporting return loads of freight as a casual occupation- a sideline to his scrap
iron business and not as common carrier (CC). Hence, de Guzman came to this Court.

ISSUE:
1. Whether Ernesto is a common carrier.
2. Whether the hijacking was force majeure, and thus he is not liable for the undelivered goods.
HELD:
1. YES.
NCC defines common carriers thus:
"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."
This 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( as a “sideline”). Art. 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 it
distinguish between a carrier offering its services to the “general public” (general community or
population) and one who offers services only from a narrow segment of the general population.
We think that Art. 1733 deliberately refrained from making such distinctions.

The concept of CC under Art. 1732 coincides neatly with the notion of “public service” under the
Public Service Act (CA 1416) which at least partially supplements the law on CC in NCC. Under
S13, (b) of the Public Service Act, “public service” includes:
every person that now or hereafter may own, operate, manage, or control in the Philippines,
for hire or compensation, with general or limited clientele, whether permanent,
 occasional or accidental, and done for general business purposes, any common
carrier, railroad, street railway, traction xxx.

Ernesto is properly characterized as a CC even though he merely “back-hauled” goods for other
merchants, although such backhauling was done on a periodic or occasional rather than regular
or scheduled manner, and even though his principal occupation was not the carriage of goods
for others. Ernesto charged his customers a fee for hauling their goods. That the fee frequently
fell below commercial freight rates is not relevant.

CA referred to the fact that Ernesto held no certificate of public convenience and concluded that
he is not a CC. This is wrong. Said certificate is NOT a requisite for the incurring of liability
under NCC governing CCs. That liability arises the moment a person or firm acts as a CC,
regardless of whether such carrier has complied with the requirements of the regulatory statute and
implementing regulations and has been grated said certificate. To exempt Ernesto from the
liabilities of a CC because he did not secure the certificate of public convenience would be
offensive to sound public policy as it would reward him for failing to comply with applicable
statutory requirements.

2. YES.
As to Ernesto’s liability, CCs, by the nature of their business and for reasons of public policy, are
held to a very high degree of care and diligence (extraordinary diligence) in the carriage of
goods and passengers. Art. 1734 establishes the general rule that CCs are responsible for the loss,
destruction, or deterioration of the goods they carry, UNLESS the same is due to any of the
following causes ONLY:
(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;
and
(5) Order or act of competent public authority."
The above list is a closed list. Causes falling outside the foregoing, even if they appear to be a
species of force majeur, fall within Art. 1735:
"In all cases other than those mentioned in numbers 1, 2, 3, 4 and 5 of the preceding article,
if the goods are lost, destroyed or deteriorated, common carriers are presumed to have
been at fault or to have acted negligently, unless they prove that they observed
extraordinary diligence as required in Article 1733."
The hijacking does not fall within any of the 5 in Art. 1734. Thus, it falls under Art. 1735.
Ernesto is presumed at fault which presumption may be overthrown by proof of extraordinary
diligence.

De Guzman claims that Ernesto did not observe extraordinary diligence. He should have hired a
security guard to ride with the truck. But We do not believe that the standard of extraordinary
diligence required Ernesto to retain such guard and to engage brigands in a fire fight at the risk of
his own life and of his driver and helper. The duty of extraordinary diligence in Art. 1733 is given
additional specification not only in Arts. 1734 and 1735 but also by 1745:
 Any of the following or similar stipulations shall be considered unreasonable, unjust and
contrary to public policy:
xxx xxx xxx
(5) that the common carrier shall not be responsible for the acts or omissions of his or its
employees;
(6) that the common carrier's liability for acts committed by thieves, or of robbers who do
not act with grave or irresistible threat, violence or force, is dispensed with or
diminished; and
(7) that the common carrier shall not responsible for the loss, destruction or deterioration
of goods on account of the defective condition of the car vehicle, ship, airplane or other
equipment used in the contract of carriage.
Under #6, a CC is held responsible and will not be allowed to divest responsibility even for acts
of strangers like robbers, except where such robbers acted with “grave or irresistible threat,
violence, or force.” We believe that the limits of the duty of extraordinary diligence in the
vigilance over the goods carried are reached where the goods are lost as a result of robbery which
is attended by grave or irresistible threat, violence, or force. Here, armed men held up
Ernesto’s second truck carrying de Guzman’s cargo. An information for robbery in band was filed
in CFI. The decision therein shows that the accused acted with grave, if not irresistible, threat,
violence, or force. 3 of the 5 hold-uppers were armed with firearms. They not only took the truck
and cargo but also kidnapped the driver and his helper, detaining them for days and releasing them
in another provinze. CFI convicted all of them of robbery.

Thus, the loss must reasonably be regarded as quite beyond the control of the CC and properly
regarded as a fortuitous event. Even CCs are not made absolute insurers against all risks of
travel and of transport of goods and are not liable for events which cannot be foreseen or are
inevitable, provided they complied with extraordinary diligence.

3. Virgines Calvo v. UCPB General Insurance Co., Inc. GR 148496, March 19, 2002,
Mendoza, J. (Tests and Characteristics)
FACTS:
Calvo is the owner of Transorient Container Terminal Services (TCTSI), a sole proprietorship
customs broker. Calvo entered into a contract with San Miguel Corporation (SMC) for the
transfer of 114 reels of semi-chemical fluting paper and 124 reels of kraft liner board from the
Port Area in Manila to SMC’s warehouse in Ermita. The cargo was insured by UCPB. The
shipment, contained in 30 metal vans, arrived in Manila and, after 24 hours, were unloaded from
the vessel to the custody of the arrastre operator, Manila Port Services, Inc. Calvo, pursuant to her
contract with SMC, withdrew the cargo from the arrastre operator and delivered it to SMC’s
warehouse. The goods were inspected by Marine Cargo Surveyors, who found that 15 reels of the
semi chemical fluting paper were “wet/stained/torn” and 3 reels of kraft liner board were torn.
The damage was P93,112.

SMC collected payment from UCPB under the insurance contract. As subrogee of SMC, UCPB
sued Calvo in RTC, which found Calvo liable for the damage to the shipment. RTC held that the
cargoes sustained damage while in the custody of Calvo, due to improper handling in transit. CA
affirmed. Hence this appeal on certiorari.
ISSUE:
Whether Calvo is liable for the damage to the cargoes.
HELD: YES.
Calvo claims that she is not a common carrier but a private carrier because, as customs broker, she
does not indiscriminately hold her services out to the public but only offers the same to select
parties with whom she may contract in the conduct of her business. This has no merit.

As discussed in De Guzman v. CA, Art. 1732 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. Art. 1732 carefully avoids making a 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 Art. 1732 distinguish
between a carrier offering its services to the “general public” and one who offers such only from
a narrow segment of the general population. “Public service” in S13(b) of CA 1416, Public Service
Act, includes every person who operates for hire or compensation with “general or limited
clientele, whether permanent, occasional, or accidental, and done for general business purposes,
any common carrier xxx.”

There is greater reason to hold Calvo as CC because the transportation of goods is an integral
part of her business. (*In Guzman, only ancillary)

As to Calvo’s liability, Art. 1733 of NCC provides:

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

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

Here, Calvo claims that the spoilage or wastage took place while the goods were in the custody of
either the carrying vessel “MV Hayakawa Maru” or the arrastre operator who kept the goods in
open air for 9 days notwithstanding that some goods were deformed or cracked. She claims that
Marine Cargo Survyor Tolentino testified that he has no personal knowledge on whether the
container vans were first stored in Calvo’s warehouse prior to delivery to the consignee. After
withdrawing the cargo from the arrastre operator, her driver immediately delivered the cargo to
SMC’s warehouse, which is a mere 30minute drive. Thus, the damage could not have taken place
while the cargo were in her custody.

Contrary to Calvo’s assertion, Survey Report of the surveyors indicates that when the shipper
transferred the cargo to the arrastre operator, these were covered by clean Equipment Interchange
Report and, when Calvo’s employees withdrew the cargo from the arrastre operator, they did so
without exception or protest as to the condition of the container vans or their contents. The
cargoes were withdrawn by Calvo from the arrastre still in good order as they were received by
Calvo without exception or report of damage or loss. Surely, if the container vans were distorted
or dented, Calvo would report it immediately to the consignee. Thus, Calvo received the shipment
in good order and delivered them to SMS damaged. We can only conclude that the damages to the
cargo occurred while it was in the possession of Calvo. Whenever a thing is lost or damaged in the
possession of the debtor, it shall be presumed that such was due to his fault unless there is contrary
proof.

To prove the exercise of extraordinary diligence, Calvo must do more than merely show the
possibility that some other party could be responsible for the damage. Nor is there basis to
exempt Calvo under Art. 1734(4). For this to apply, if the improper packing or defect in the
container is known to the carrier or his employees or apparent upon ordinary observation, but he
nevertheless accepts the same without protest notwithstanding such condition, he is not relieved
of liability. Calvo accepted the cargo without exception despite the apparent defects in some of
the container vans.

4. Loadstar Shipping Co., Inc. v. CA, GR 131621, September 28, 1999, Davide, Jr., CJ. (Tests
and Characteristics)
FACTS:
Loadstar received on board its MV Cherokee 705 bales of hardwood, 27 boxes of tilewood
assemblies, and 49 bundles of mouldings all worth P6M. The goods were insured by Manila
Insurance Co. (MIC). On its way to Manila from the port of Nasipit, Agusan del Norte, the vessel
Cherokee and its cargo sank. As a result of the total loss of its shipment, the consignee made a
claim with Loadstar which it ignored. MIC, as insurer, paid P6m to the insured.

MIC filed a complaint against Loadstar, alleging that the sinking of the vessel was due to the
negligence of Loadstar. Loadstar denied liability and claimed that the sinking was due to force
majeure. RTC ruled in favor of MIC. CA affirmed RTC. Hence this petition.

ISSUE:
1. Whether Cherokee is a common carrier.
2. Whether Loadstar observed due diligence.
HELD:
Loadstar claims that Cherokee is 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. Thus, it cannot be presumed negligent and the
burden of proving otherwise devolved upon MIC. It claims that Cherokee sank due to force
majeure. There were two typhoons, Welfring and Yoling, inside PAR. Also, since it is a private
carrier, any agreement limiting its liability is valid. Since the cargo was being shipped at “owner’s
risk”, Loadstar is not liable for any loss to the same.

1. YES.
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 here was periodic, occasional,
episodic, or unscheduled.
Loadstar cites Home Insurance Co. v. American Steamship Agencies, Inc. where it was held that a
common carrier transporting special cargo or chartering the vessel to a special person becomes a
private carrier not subject to NCC. Any stipulation in the charter party absolving the owner from
liability for loss due to negligence is thus valid. But this is not applicable as the facts are different.
The records do not show that Cherokee 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 that Cherokee was a “general cargo carrier.” Also, the
bare fact that Cherokee was carrying a particular type of cargo for one shipper, which appears to
be purely coincidental, is not reason enough to convert it from a common to a private carrier,
especially where, as in this case, the vessel was also carrying passengers.

2. NO.
MV Cherokee was not seaworthy when it embarked on its voyage. The vessel was not sufficiently
manned at the time. For a vessel to be seaworthy, it must be adequately equipped for the voyage
and manned with a sufficient number of competent officers and crew. The failure of a CC to
maintain in seaworthy condition its vessel involved in a contract of carriage is a clear breach of its
duty in Art. 1755.

Also, the limited liability doctrine does not apply where there was negligence on the part of the
vessel owner or agent. Loadstar was at fault or negligent in not maintaining a seaworthy vessel
and in allowing the vessel to sail despite knowledge of an approaching typhoon. In any event,
it did not sink because of any storm that may be deemed force majeure as the wind condition in
the area where it sank was moderate.

The stipulation in the bill of lading to the effect that it effectively reduces the CC’s liability for
loss of the goods to a degree less than extraordinary (1744 & 1745), i.e. the carrier is not liable for
any loss or damage to shipments made at “owner’s risk”, is void for being contrary to public
policy.

5. First Philippine Industrial Corporation v. CA, GR 125948, December 29, 1998, Martinez,
J. (Tests and Characteristics of contract of transportation)
FACTS:
Petitioner FPIC is a grantee of a pipeline concession under RA 387 to contract, install, and operate
oil pipelines. FPIC applied for a mayor’s permit with the mayor in Batangas city. But before the
permit could be issued, respondent city treasurer required FPIC to pay a local tax based on its
gross receipts for 1993 pursuant to LGC. The treasurer assessed a business tax on FPIC of P956k
payable in 4 installments for products pumped at GPS-1 in 1993 amounting to P181,681,151. FPIC
paid P239k in protest.

FPIC filed a letter protest to the city treasurer. But the treasurer denied the protest, saying that
FPIC cannot be considered engaged in transportation business.

FPIC filed with RTC for tax refund with prayer for preliminary injunction against Batangas City
and the treasurer. Respondents argue that FPIC is not exempt from taxes in S133(j) of LGC as it
only applies to “transportation contractors and persons engaged in the transportation by hire and
common carriers by air, land, and water.” Pipelines are not included in “common carrier.” RTC
dismissed the complaint. CA affirmed the dismissal. Hence this petition.

ISSUE:
Whether FPIC is a transportation contractor or common carrier.
HELD: YES.
Art. 1732 defines a CC as “any person, corporation, firm, or association, engaged in the business
of carrying or transporting passengers or goods or both, by land, water, or air, for compensation,
offering their services to the public.” The test for determining whether a party is a CC of goods is:
1) He must be engaged in the business of carrying goods for others as a public
employment, and must hold himself out as ready to engage in the transportation of goods
for persons generally as a business and not as a casual occupation;
2) He must undertake to carry goods of the kind to which his business is confined;
3) He must undertake to carry by the method by which his business is conducted and over
his established roads; and
4) The transportation must be for hire.
Based on this, there is no doubt that FPIC is a common carrier. It is engaged in the business of
transporting or carrying goods, i.e. petroleum products, for hire as a public employment. It
undertakes to carry for all persons indifferent, that is, to all persons who choose to employ its
services, and transports the goods by land and for compensation. The fact that FPIC has a limited
clientele does not exclude it from the definition of a CC. In De Guzman v. CA, We ruled that Art.
1732 makes no distinction between a person or enterprise offering transpo service on a regular or
scheduled basis and one offering such service on an occasional, episodic, or unscheduled basis.
Neither does it distinguish between a carrier offering its services to the general public and one who
offers only from a narrow segment of the general population.

The argument that “common carrier” as used in S133(j) of LGC refers only to CCs transporting
goods or passengers through moving vehicles or vessels either by land, sea, or water is
erroneous. The definition of CC in NCC makes NO DISTINCTION as to the MEANS of
transporting, as long as it is by land, water, or air. It does not provide that the transpo of
passengers or goods should be by motor vehicle. In US, oil pipe line operators are considered CCs.

Under RA 387, FPIC is considered a CC:

"Art. 86. Pipe line concessionaire as common carrier. — A pipe line shall have the
preferential right to utilize installations for the transportation of petroleum owned by him,
xxx.
RA 387 also regards petroleum operation as a public utility. BIR Ruling 069-83 also considered
FPIC a common carrier. Thus, it is exempt from the business tax as provided in S133(j) of LGC.

6. Asia Lighterage and Shipping, Inc. v. CA, GR 147246, August 19, 2003, Puno, J. (Tests
and Characteristics of Contract of Transpo)
FACTS:
3,150 metric tons of Better Western White Wheat in bulk, valued at $423,192, was shipped by
Marubeni American Corporation of Portland, Oregon on board the vessel MV Neo Cymbidium
for delivery to the consignee, General Milling Corporation in Manila. The shipment was insured
by private respondent Prudential Guarantee and Assurance, Inc. (PGA) against loss or damage for
P14M. The carrying vessel arrived in Manila and the cargo was transferred to the custody of
petitioner ALS. ALS was contracted by the consignee as carrier to deliver the cargo to consignee’s
warehouse in Pasig.

900 metric tons of the shipment was loaded on barge PSTSI III for delivery to consignee. But the
cargo did not reach its destination. The transport of said cargo was suspended due to a warning
of an incoming typhoon. ALS pulled the barge to Engineering Island off Baseco to seek shelter
from the typhoon. PSTSI III was tied down to other barges which arrived ahead of it while
weathering out the storm that night. A few days later, the barge developed a list because of a hole
it sustained after hitting an unseen protruberance under the water. ALS filed a Marine Protest,
secured the services of Gaspar Salvaging Corporation which refloated the barge. The hole was
then patched with clay and cement.

The barge then headed to consignee’s wharf. Upon reaching Sta. Mesa spillways, it ran aground
due to strong current. A portion of the goods was transferred to 3 other barges. The next day, the
towing bits of the barge broke. It sank completely, resulting in the total loss of the remaining
cargo.

Private respondent PGA indemnified consignee for P4M. As subrogee, it sought recovery of said
amount from ALS but to no avail. Thus, PGA filed a complaint. RTC ruled in favor of PGA. CA
affirmed. Hence this petition.

ISSUE:
1. Whether ALS is a common carrier.
2. Whether as common carrier, it exercised extraordinary diligence in its care of consignee’s cargo.
HELD:
1. YES.
Art. 1732 defines CCs as xxx. ALS claims that it is a private carrier as it has no fixed and publicly
known route, maintains no terminals, and issues no tickets. It is not obliged to carry
indiscriminately for any person. It does not hold out its services to the general public.

But in De Guzman v. CA, we ruled that a CC as defined in Art. 1732 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 (also regular or scheduled basis vs occasional,
episodic, or unscheduled basic; offers service to the general public vs only to narrow segment of
the general population).

The principal business of ALS is that of lighterage and drayage and it offers its barges to the
public for carrying or transporting goods by water for compensation. It is a CC regardless of
whether its carrying of goods is done on an irregular rather than scheduled manner, and with
only a limited clientele. A CC need not have fixed and publicly known routes. Neither does it
had to maintain terminals or issue tickets.

ALS also fits the test of a CC in Bascos v. CA- “whether the given undertaking is a part of the
business engaged in by the carrier which he has held out to the general public as his occupation
rather than the quantity or extent of the business transacted.” ALS admitted that it is engaged in
the business of shipping and lighterage, offering its barges to the public, despite its limited clientele
for carrying or transporting goods by water for compensation.

2. NO.
CCs are presumed to have been at fault or to have acted negligently if the goods are lost, destroyed,
or deteriorated. To overcome the presumption, the CC must prove that it exercised extraordinary
diligence. Art. 1734 enumerates the exceptions where the presumption of negligence does not
attach xxx. Here, the barge completely sank after its towing bits broke, resulting in the total loss
of its cargo. ALS claims that this was caused by a typhoon. But it failed to prove that the
typhoon is the PROXIMATE and ONLY cause of the loss of the goods, and that it has
exercised due diligence before, during, and after the occurrence of the typhoon to prevent or
minimize the loss. The barge had previously suffered a hole. Thus, this could not be SOLELY
attributed to the typhoon. The partly-submerged vessel was refloated but its hole was patched
with only clay and cement. This was only a provisional remedy not enough for the barge to sail
saifely. Thus, when ALS persisted to proceed with the voyage, it recklessly exposed the cargo to
further damage.

ALS also still headed to the consginee’s wharf despite knowledge of an incoming typhoon. It
cannot invoke the typhoon as force majeure. Surely, meeting a typhoon head-on falls short of due
diligence required from a CC.

7. FGU Insurance Corporation v. GP Sarmiento Trucking Corporation, GR 141910, August

6, 2002, Vitug, J. (Tests and Characteristics of Contract of Transpo)
FACTS:
Respondent GP Sarmiento Trucking Corporation (GPS) undertook to deliver 30 units of Condura
white refrigerators aborad one of its Isuzu truck driven by respondent Lambert Eroles from the
plant site of Concepcion Industries, Inc. along South Superhighway in Alabang to Central Luzon
Appliances in Dagupan City. It collided with an unidentified truck along McArthur highway
Tarlac, causing it to fall into a deep canal, damaging the cargoes.

FGU, insurer of the shipment, paid Concepcion Industries the value of the cargoes worth P204k.
As subrogee of Concepcion, it sought reimbursement of the amount it paid from GPS. Since GPS
failed to heed the claim, FGU filed a complaint for damages and breach of contract of carriage
against GPS and its driver Lambert with RTC. GPS claims that it was the exclusive hauler only
of Concepcion since 1988 and it was not a common carrier.

FGU presented evidence of the damage to the cargoes and the amount it paid to Concepcion. GPS,
instead of submitting evidence, filed a motion to dismiss by demurrer of evidence on the ground
that FGU failed to prove that it was a common carrier. RTC granted the motion to dismiss, ruling
that GPS is not a CC and thus the law on quasi delicts applies, but FGU failed to show evidence
that Lambert was negligent and that GPS was violating any traffic regulation, thus no presumption
of negligence applied. CA rejected FGU’s appeal. Hence this petition.

ISSUE:
1. Whether GPS is a common carrier.
2. Whether GPS is liable for damages.
HELD:
1. NO.
GPS, being an EXCLUSIVE contractor and hauler of Concepcion Industries, Inc., rendering
its services to no other individual or entity, cannot be considered a CC. CCs are persons,
corporations, firms, or associations engaged in the business of carrying or transporting passengers
or goods or both, by land, water, or air, for hire or compensation, offering their services to the
PUBLIC, whether to the public in general or to a limited clientele, but never on an exclusive
basis.

2. YES.
But GPS cannot escape liability. In culpa contractual upon which FGU’s action rests, the mere
proof of the existence of the contract and the failure of its compliance justify, prima facie, a
corresponding right of relief. A breach upon the contract confers upon the injured party a valid
cause for recovering that which may have been lost or suffered. The remedy serves to preserve the
interests of the promisee that may include his expectation interest (in having the benefit of his
bargain by being put in as good a position as he would have been in had the contract been
performed), reliance interest (in being reimbursed for loss caused by reliance on the contract by
being put in as good a position as he would have been in had the contract not been made, or his
restitution interest (in having restored to him any benefit that he has conferred on the other party).
The effect of every infraction is to create a new duty to make recompense.

GPS recognizes the existence of a contract of carriage between it and Concepcion and admits
that the cargoes it assumed to deliver have been lost or damaged while in its custody. A default or
failure of compliance with the obligation to deliver the goods to its destination gives rise to a
presumption of lack of care and corresponding liability on the contractual obligor the burden being
on him to establish otherwise. GPS failed to do so.

Lambert, on the other hand, without proof of his negligence, may not be ordered to pay FGU. The
driver, not being a party to the contract of carriage between GPS and Concepcion, may not be
held liable under the agreement. A contract can only bind the parties who have entered into it or
their successors. FGU’s civil action against the driver can only be based on culpa acquiliana
which, unlike culpa contractual, would require the claimant for damages to prove negligence.

If a demurrer is granted but on appeal reversed, the movant is deemed to have waived the right to
present evidence. Thus, GPS may no longer offer proof that it exercised due care to warrant remand
of the case to RTC.

8. Estrellita Bascos v. CA, GR 101089, April 7, 1993, Campos, Jr., J. (Tests and
Characteristics of Contract of Transpo)
FACTS:
Rodolfo Cipriano, representing Cipriano Trading Enterprise (CIPTRADE), entered into a hauling
contract with Jibfair Shipping Agency Corporation whereby CIPTRADE bound itself to haul
Jibfair’s 2000m/tons of soya bean meal from Magallanes Drive Manila to the warehouse of
Purefoods Corporation in Calamba, Laguna. To carry out its obligation, CIPTRADE, thru
Cipriano, subcontracted with Estrellita Bascos to transport 400 sacks of soya bean meal worth
P156k from the Manila Port to Calamba Laguna for P50/metric ton. Bascos failed to deliver the
cargo. Thus, Cipriano paid Jibfair the amount of the lost goods in accordance with their contract
holding CIPTRADE liable for any loss due to theft, hijacking, and non-delivery. Cipriano
demanded reimbursement from Bascos, but she refused to pay. Cipriano filed a complaint for
sum of money and damages against her.

Bascos claims that the truck carrying the cargo was hijacked along Paco Manila and that this was
immediately reported to CIPTRADE. Since hijacking is a force majeure, she is not liable. The
trial court ordered Bascos to pay P156k to Cipriano. CA affirmed. Hence this petition.

ISSUE:
1. Whether Bascos is a CC.
2. Whether the hijacking is force majeure.
HELD:
1. YES.
Art. 1732 defines a CC as xxx. The test to determine a CC is whether the given undertaking is
a part of the business engaged in by the carrier which he has held out to the general public as
his occupation rather than the quantity or extent of the business transacted. Here, Bascos admitted
that she was in the trucking business, offering her trucks to those with cargo to move.

Bascos argues that there was only a contract of lease because they offer their services only to a
select group of people. But the holding in De Guzman is instructive. Art. 1732 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 (regular/scheduled vs occasional/episodic/
unscheduled; general public vs narrow segment of the general population).

2. NO.
We also affirm the holding that the hijacking is not due to force majeure. CCs are obliged to
observe extraordinary diligence in the vigilance over the goods transported by them. They are
presumed to have been at fault or to have acted negligently if the goods are lost, destroyed, or
deteriorated. The very few exceptions are those in Art. 1734.

In De Guzman, it was held that hijacking, not being included in Art. 1734, must be dealt with in
Art. 1735, and thus, the CC is presumed to have been at fault or negligent. To exculpate the carrier
from liability arising from hijacking, he must prove that the robbers or hijackers acted with
GRAVE or IRRESISTIBLE threat, violence, or force in accordance with Art. 1745 (6):
"Art. 1745. Any of the following or similar stipulations shall be considered unreasonable,
unjust and contrary to public policy;
xxx xxx xxx

(6) That the common carrier's liability for acts committed by thieves, or of robbers who do
not act with grave or irresistible threat, violences or force, is dispensed with or diminished;"
It was held that the limits of the duty of extraordinary diligence are reached where the goods are
lost as a result of robbery attended by grave or irresistible threat, violence, or force. To establish
grave and irresistible force, Bascos presented her accusatory affidavit, Jesus Bascos’ affidavit, and
Juanito Morden’s (truck helper) Salaysay. But both the trial court and CA held that these were not
enough to overcome the presumption. Bascos’ affidavit was based on what she had been told by
Morden. It was not a first-hand account. We are bound by the conclusion of the appellate court. In
a petition for review on certiorari, we are not to determine the probative value of evidence but to
resolve questions of law.

Also, Jesus’ affidavit did not dwell on how the hijacking took place. The filing of the information
for carnapping and robbery against the accused in the affidavits did not necessarily mean that the
contents thereof were true since they were yet to be determined in the trial of the criminal cases.
The presumption of negligence was raised against Bascos. Her failure to adduce sufficient proof
of extraordinary diligence made the presumption conclusive against her. CIPTRADE did not need
to introduce any evidence to prove her negligence.

9. Spouses Engracio Fabre, Jr. v. CA, GR 111127, July 26, 1996, Mendoza, J. (Tests and
Characteristics of Contract of Transpo)
FACTS:
Petitioners Sps. Fabre (Fabre) were owners of a 1982 model Mazda minibus. They used the bus
principally in connection with a bus service for school children which they operated in Manila.
They had a driver, Porfirio Cabil, whom they hired in 1981 after trying him out for 2 weeks. His
job was to take school children to and from St. Scholastica’s College in Malate Manila.

Private respondent Word for the World Christian Fellowship Inc. (WWCF) arranged with Fabre
for the transportation of 33 members of its Young Adults Ministry from Manila to La Union and
back for P3k. The group was scheduled to leave on Nov. 2, 1984 at 5pm. But as several members
were late, the bus did not leave until 8pm. Petitioner Cabil drove the minibus.

The usual route to Caba La Union was through Carmen, Pangasinan. But the bridge at Carmen
was under repair, so Cabil, who was unfamiliar with the are (it being his first trip to La Union),
was forced to take a detour thru the town of Ba-ay in Lingayen, Pangasinan. At 11:30pm, Cabil
came upon a sharp curve on the highway. The road was slippery as it was raining, causing the
bus, running at 50kph, to skid to the left road shoulder. The bus hit the left traffic steel brace and
sign along the road and rammed the fence of one Jesus Escano, then turned over and landed on
its left side, coming to a full stop only after a series of impacts. A coconut tree which it hit fell on
it and smashed its front portion.

Several passengers were injured. Private respondent Amyline Antonio was thrown on the floor of
the bus and pinned down by a wooden seat which came off after being unscrewed. Cabil claimed
that he did not see the curve until it was too late since he was not familiar with the area and it was
dark and there was no sign on the road. He saw the curve when he was 15-30 meters from it. He
allegedly slowed down to 30kph, but it was too late.

Amyline brought this case in RTC. As a result of the accident, she is permanently paralyzed
from the waist down. During trial, she described the costs of her treatment. After the accident, she
was taken to the Nazareth hospital in Lingayen. As it was not adequately equipped, she was
transferred. She was brought then to PGH and later to Makati Medical Center where she underwent
an operation to correct the dislocation of her spine.
RTC held that no evidence was shown that the minibus was properly checked for a long distance
trip or that the driver was properly screened. Defendants were negligent. It ordered Fabre to pay
damages. CA affirmed with respect to Amyline. Hence this petition.

ISSUE:
Whether Fabre and Cabil are liable for damages.
HELD: YES.
Fabre claims that the award of P600k compensatory damages is unconscionable.

It is unnecessary to decide whether Fabre are liable for culpa contractual or quasi delict/culpa
acquiliana. In either case, the question is whether the bus driver Cabil was negligent. The finding
that Cabil drove negligently while his employer, the Fabres, failed to exercise the diligence of a
good father of a family in the selection and supervision of their employee is fully supported by
evidence. Cabil drove his bus at 50kph and only slowed down when he noticed the curve some 15-
30 meters ahead. Given that it was raining, the road was slippery, and it was dark, and that it was
his first trip outside Manila, Cabil should have driven his vehicle at a moderate speed. There is
testimony that vehicles passing that portion of the road should only be running 20kph. Thus, Cabil
was grossly negligent and should be held liable.

Pursuant to Arts. 2176 and 2180, his negligence gave rise to the presumption that his employers,
Fabre, were themselves negligent in the selection and supervision of their employee. Due diligence
in selection of employees is not satisfied by finding that the applicant possessed a professional
driver’s license. The employer should also examine the applicant for his qualifications,
experience, and record of service. Due diligence in supervision, on the other hand, requires
formulation of rules and regulations for the guidance of employees and issuance of proper
instructions and actual monitoring of consistent compliance with the rules.

Here, Fabre’s allowing Cabil to drive to La Union did not consider that Cabil had been driving
for school children only from their homes to St. Scho. They hired him only after a 2-week
apprenticeship. They tested whether he could remember the names of the children, which were
irrelevant to his qualification to drive long distance.

This case involves a contract of carriage. Fabre did not have to be engaged in the business of
public transportation for the provisions of NCC on CC to apply. As held in De Guzman: Art.
1732 defines CCs as xxx. This article makes no distinction xxx. As CCs, the Fabres were bound
to exercise extraordinary diligence for the safe transportation of the passengers to their
destination. This duty of care is not excused by proof that they exercised the diligence of a good
father of a family in the selection and supervision of their employee. As Art. 1759 provides:
Common carriers are liable for the death of or injuries to passengers through the negligence
or willful acts of the former's employees, although such employees may have acted beyond
the scope of their authority or in violation of the orders of the common carriers.
This liability of the common carriers does not cease upon proof that they exercised all the
diligence of a good father of a family in the selection and supervision of their employees.
The compensatory damages was reduced to P500k since the CA increased the RTC’s P500k award
to P600k even though respondents did not question the award as inadequate.
10. Home Insurance Company v. American Steamship Agencies, Inc., GR L-25599, April 4,
1968, Bengzon, JP., J. (Distinguish CC from private carrier)
FACTS:
Consorcio Pesquero del Peru of South America shipped freight pre-paid at Chimbate, Peru, 21740
Jute bags of Peruvian fish meal covered by clean bill of lading numbers 1 and 2. The cargo,
consigned to San Miguel Corporation (SMC) and insured by Home Insurance Company (HIC) for
$202k, arrived in Manila and was discharged into the lighters of respondent Luzon Stevedoring
Company. When the cargo was delivered to SMC, there were shortages of P12k. HIC paid SMC
P14k. Since Luzon Stevedoring and American Steamship refused to reimburse HIC, HIC as
subrogee sued them in CFI for recovery of the P14k.

Luzon Stevedoring claims that it delivered with due diligence the goods in the same quantity and
quality that it had received from the carrier. American Steamship claims that under the provisions
of the Charter party in the bills of lading, the charterer, not the shipowner, was responsible
for any loss or damage of the cargo. It claims that it exercised due diligence in stowing the goods
and as mere forwarding agent, it was not liable. CFI absolved Luzon Stevedoring of liability,
finding that it merely delivered what it received from the carrier, but ordered American Steamship
to pay P14k. Hence, American Steamship appealed directly to SC.

ISSUE:
Whether the stipulation in the charter party of the owner’s non-liability is valid as to absolve
American Steamship from liability for loss.
HELD:
The bills of lading covering the shipment of Peruvian fish meal provide at the back that it shall be
governed by the terms of the charter party if any.

A perusal of the charter party shows that while the possession and control of the ship were not
entirely transferred to the charterer, the vessel was chartered to its full and complete capacity. The
charterer had the option to go north or south or vice versa, loading, stowing, and discharging at its
risk and expense. Thus, the charter party contract is one of affreightment over the whole vessel
rather than a demise. The liability of the shipowner for negligence of its captain and crew would
thus remain in the absence of stipulation.

S2, par. 2 of the charter party provides that the owner is liable for loss or damage of the goods
caused by want of due diligence of its manager to make the vessel seaworthy in all respects and to
secure that she be properly manned etc. But it exempts the owner of the vessel from any loss or
damage or delay arising from any other source, even from the neglect of the captain or crew, for
whose acts the owner would normally be liable except for said paragraph.

CFI held that the contract is contrary to Art. 587 of the Code of Commerce and Art. 1744 of NCC
under which a stipulation between the common carrier and shipper or owner limiting liability of
the CC for loss of the goods to a degree less than extraordinary diligence is valid provided it be
reasonable, just, and not contrary to public policy. CFI held that the release from liability here was
unreasonable and contrary to public policy on common carriers.
But under American jurisprudence, a CC undertaking to carry a SPECIAL cargo or chartered to
a special person only becomes a private carrier. As private carrier, a stipulation exempting the
owner from liability for the negligence of its agent is valid and not against public policy. This
doctrine we find reasonable. The NCC provisions on CC should not be applied where the carrier
is not acting as such but as private carrier. The stipulation in the charter party absolving the
owner from liability for loss due to negligence of its agent would be void only if the strict public
policy governing common carriers is applied. Such policy has no force where the public at large
is not involved, as in the case of a ship totally chartered for the use of a single party.

11. Planters Products, Inc. v. CA, GR 101503, September 15, 1993, Bellosillo, J. (Distinguish
CC from private carrier)
FACTS:
Planters Products Inc. (PPI) purchased from Mitsubishi of US 9,329 metric tons (M/T) of Urea
46% fertilizer which Mitsubishi shipped in bulk aboard MV Sun Plum owned by private
respondent Kyosei Kisen Kabushiki Kaisha (KKKK) from Alaska US to La Union, PH. Prior to
its voyage, a time charter-party was entered into between Mitsubishi as shipper/charterer and
KKKK as shipowner in Japan. Before loading the fertilizer on the vessel, 4 of her holds were all
presumably inspected by the charterer’s representative and found fit to take a load of urea in bulk
pursuant to par.16 of the charter-party: ”The vessel's hold to be properly swept, cleaned and dried
at the vessel's expense and the vessel to be presented clean for use in bulk to the satisfaction of the
inspector before daytime commences"

The urea fertilizer was loaded and the steel hatches were closed with heavy iron lids covered with
3 layers of tarpaulin tied with steel bonds. Upon arrival of the vessel at her port of call, the steel
hatches were opened. PPPI unloaded the cargo into its dump trucks. Each time a dump truck was
filled up, its urea was covered with tarpaulin before it was transported to the consignee’s
warehouse 50meters from the wharf. Midway to the warehouse, the trucks passed thru a weighing
scale where they were weighed. The port area was windy, portions of the route to the warehouse
were sandy, and the weather was variable, raining occasionally during the discharge. PPI’s
warehouse was made of galvanized iron (GI) sheets with an opening in front for entrance. The
fertilizer were unloaded on the warehouse floor. Tarpaulins and GI sheets were placed in-between
the trucks to contain spillages of the fertilizer.

PPI unloaded the cargo in 11 days. It hired a private cargo surveyor, Cargo Superintendents
Company Inc. (CSCI) to determine the outturn of the cargo shipped by taking draft readings of the
vessel before and after discharge. CSCI reported a shortage in the cargo of 106.726 M/T and that
18 M/T of the fertilizer was contaminated with dirt. PPI’s prepared certificate of shortage cargo
also showed that the cargo was short of 94.839 M/T and about 23M/T was contaminated.

PPI sent a claim letter to respondent Soriamont Steamship Agencies (SSA), resident agent of the
carrier KKKK, for P245k, cost of the shortage and contamination. SSA denied because they “had
nothing to do with the discharge of the shipment.” PPI filed an action for damages with CFI. SSA
argued that the strict public policy on CC does not apply to them because they became private
carriers by the provisions of the charter-party. CFI ruled in favor of PPI, holding that the
presumption of negligence for CCs applied to private carriers. CA reversed and absolved SSA
and ruled that, according to Home Insurance Co. v. American Steamship Agencies, MV Sun Plum
owned by KKKK was a private carrier. Hence this petition.

ISSUE:
1. Whether a common carrier becomes a private carrier by reason of a charter-party.
2. If not, whether the shipowner here proved that he exercised the diligence required under the
law.
HELD:
1. NO.
PPI claims that Home Insurance does not apply because the issue there is the validity of a
stipulation in the charter-party delimiting the liability of the shipowner for damage to goods by
want of due diligence on its or its manager’s part to make the vessel seaworthy and not whether
the presumption of negligence in NCC applies only to CCs and not to private carriers.

A “charter-party” is defined as a contract by which an entire ship, or some principal part thereof,
is let by the owner to another person for a specified time or use; a contract of affreightment by
which the owner of a ship or vessel lets the whole or part of her to a merchant or other person for
conveyance of goods, on a particular voyage, in consideration of payment of freight. Charter
parties are of two types: 1) contract of affreightment which involves the use of shipping space
on vessels leased by the owner in part or as a whole to carry goods for others, and 2) charter by
demise or bareboat charter, by the terms of which the whole vessel is let to the charterer with a
transfer to him of its entire command and possession and consequent control over its navigation,
including the master and crew, who are his servants. Affreightment may either be time charter,
where the vessel is leased to the charterer for a fixed period of time, or voyage charter, where the
ship is leased for a single voyage. In both cases, the charter party provides for the hire of the vessel
only, the shipowner to pay for the wages of the master and crew and defray the expenses for the
maintenance of the ship.

“Common carrier” is defined in Art. 1732 of NCC. This definition extends to carriers either by
land, air, or water which hold themselves out as ready to engage in carrying goods or passengers
or both for compensation as a public employment and not as a casual occupation. The distinction
between a common or public carrier and a private or special carrier lies in the character of the
business such that if the undertaking is a single transaction, not a part of the general business,
although involving the carriage of goods for a fee, the person or corporation offering such service
is a private carrier.

Art. 1733 mandates that CCs observe extraordinary diligence. But for private carriers, ordinary
diligence suffices. In case of loss etc. to the goods, CCs are presumed negligent. No such
presumption applies to private carriers.

It is undisputed that respondent carrier, in the ordinary course of business, operates as a CC,
transporting goods indiscriminately for all persons. When PPI chartered the vessel Sun Plum, the
ship captain, its officers, and compliment were under the employ of the shipowner and continued
to be under its direct control and supervision. Hardly then can we charge the charterer, a stranger
to the crew and the ship, with the duty of caring for his cargo when it did not have any control of
the means in doing so. The shipowner screened and hired the crew who steered the ship, manned
the decks, etc.

Thus, a CC shall remain as such notwithstanding the charter of the whole or portion of a vessel
by one or more persons, provided the charter is limited to the ship only, as in a time or voyage
charter. It is only when the charter includes BOTH the vessel and its crew, as in a bareboat or
demise, that a CC becomes private at least insofar as the particular voyage covering the charter
party is concerned. A shipowner retains possession and control of the ship, although her holds
may, for the moment, be the property of the charterer.

Respondent carrier’s reliance in Home Insurance is misplaced since the issue there was the validity
of a stipulation in the charter party exempting the shipowner from liability for loss due to
negligence of its agent and not the effects of a special charter on CCs.

2. YES.
In an action for damages against a CC, the consignee must prove the fact of shipment and its loss
while the same was in the possession, actual or constructive, of the carrier. Thereafter, the burden
of proof shifts to respondent to prove that he exercised extraordinary diligence. Here, SSA
sufficiently overcame the prima facie presumption of negligence. The ship captain, in his
deposition, testified that before the fertilizer was loaded, the 4 hatches of the vessel were cleaned
and fumigated. After loading, the steel hatches were closed and sealed with iron lids then covered
with 3 layers of tarpaulins then tied. During trial, it was shown that the hull of the vessel was in
good condition, foreclosing spillage into the sea.

The period during which KKKK/SSA was to observe the diligence required as CC began from
when the cargo was unconditionally placed in its charge after the vessel’s hold were inspected up
to until the vessel reached its destination and its hull re-examined, but prior to unloading. This
is clear from the limitation clause the parties agreed upon in the time charter party which provided
for an F.I.O.S., meaning the loading, discharge, etc. was to be done by the charterer free from all
risk to the carrier. If there was loss or contamination, it was more likely to have occurred while
they were being transported from the ship to the dump trucks and finally to consignee’s warehouse.

12. National Steel Corporation v. CA, GR 112287, December 12, 1997, Panganiban, J.
(Distinguish CC from Private carrier)
FACTS:
MV Vlasons I is a vessel which renders tramping service and does not transport cargo or shipment
for the general public. Its services are available only to specific persons who enter into a special
contract of charter party with its owner. It is undisputed that the ship is a private carrier. In
this capacity, its owner, respondent Vlasons Shipping Inc. (VSI), entered into a contract of
affreightment or voyage charter hire with National Steel Corporation (NSC) to load steel products
at Illigan and discharge them at North Harbor Manila. The contract contained F.I.O.S.T., meaning
“freight in and out including stevedoring and trading”, that the handling, loading, and unloading
of the cargoes are the responsibility of the charterer.

MV Vlasons I loaded at NSC’s pier in Illigan NSC’s shipment of 1,677 skids of tinplates and 92
packages of hot rolled sheets for carriage to Manila. The vessel arrived with the cargo at North
Harbor. When the vessel’s three hatches containing the shipment were opened by NSC, however,
nearly all the skids and sheets were allegedly found to be wet and rusty. Unloading was completed
after incurring delay of 11 days due to heavy rain. Upon survey, Manila Adjusters and Surveyors
Company hired by NSC opined that the rusting was caused by contact with seawater sustained
while still on board the vessel.

Thus, NSC filed with VSI a claim for damages worth P941k. VSI refused. NSC filed its complaint
against VSI. VSI denied liability claiming that MV Vlasons I was not a common carrier. During
its voyage, MV Vlasons I encountered very rough seas, strong winds, and adverse weather, causing
seawater to overflow on its deck. In their contract for voyage charter hire, VSI shall not be
responsible for losses except on proven willful negligence of the officers of the vessel, but said
officers of MV Vlasons I exercised due diligence. VSI counterclaimed for the agreed charter hire
of P75k which NSC refused to pay and demurrage. RTC ruled in favor of VSI. CA only modified,
reducing demurrage from P88k to P44k and deleting atty’s fees and expenses of litigation. Hence,
NSC and VSI appealed to SC.

ISSUES:
1. Whether MV Vlasons I is a common carrier.
2. Whether VSI is liable to NSC for the damage to cargo.
HELD:
1. NO.
Art. 1732 defines a CC as xxx. The true test of a CC is the carriage of passengers or goods, provided
it has space for all who opt to avail themselves of its transportation service for a fee. A carrier who
does not qualify under this test is private. Generally, private carriage is undertaken by special
agreement and the carrier does not hold himself out to carry goods for the general public.

Here, VSI did not offer its services to the general public. It carried passengers or goods only for
those it chose under a special contract of charter party. Thus, the rights and obligations of VSI
and NSC are determined primarily by stipulations in their contract. In Valenzuela Hardwood and
Industrial Supply Inc. v. CA, it was held that unlike in a contract involving a CC, private carriage
does not involve the general public. Thus, the stringent provisions of NCC on CCs protecting the
general public cannot be applied.

2. NO.
From the parties’ contract of voyage charter hire, VSI shall “not be responsible for losses except
on proven willful negligence of the officers of the vessel.” Thus, NSC must prove that the damage
to its shipment was caused by VSI’s willful negligence. The burden of proof was placed on NSC
by the agreement. This finds further support in the Code of Commerce:
"Art. 361. Merchandise shall be transported at the risk and venture of the shipper, if the
contrary has not been expressly stipulated.
"Art. 362. The carrier, however, shall be liable for damages arising from the cause
mentioned in the preceding article if proofs against him show that they occurred on account
of his negligence or his omission to take the precautions usually adopted by careful persons,
xxx.
Since MV Vlasons I was a private carrier, the shipowner’s obligations are governed by the
foregoing provisions of the Code of Commerce and not by NCC which places the prima facie
presumption of negligence on a CC. Thus, NSC had the burden of proving that the damage to the
cargo was by negligence of the officers and crew of MV Vlasons I. It failed to discharge this
burden.

VSO exercised due diligence to make the ship seaworthy. The PH Coast Guard station in Cebu
cleared it as seaworthy. NSC claims that VSI used an old and torn tarpaulin to cover the hatches.
But VSI used the old tarpaulin only in addition to the new one used primarily to make the ship’s
hatches watertight. Despite encountering rough weather twice, the new tarpaulin did not give way
and the ship’s hatches and cargo remained waterproof. The records reveal that it was the
stevedores of NSC who were negligent in unloading the cargo from the ship. They used only a
tent-like material to cover the hatches when strong rains disrupted the loading of the cargo. This
covering was clearly inadequate for keeping rain and seawater away from the hatches of the ship.

The fact that NSC removed the cargo during unfavorable weather will not make VSI liable. NSC
may seek indemnification from the stevedoring company at fault in the discharge operations.

13. Valenzuela Hardwood and Industrial Supply, Inc. v. CA, GR 102316, June 30, 1997,
Panganiban, J. (Distinguish CC from private carrier)
FACTS:
Valenzuela Hardwood (VHIS) entered into an agreement with respondent Seven Brothers
Shipping Corporation (SBSC) where SBSC undertook to load on its MV Seven Ambassador
VHIS’s 940 lauan round logs at the port of Isabela for shipment to Manila. Meanwhile, MV Seven
Ambassor sank, resulting in the loss of VHIS’s logs. VHIS filed a formal claim with SBSC for
the lost logs but SBSC denied the claim. VHIS also filed a claim with South Sea Surety Company,
insurer of the logs, which denied the claim. After hearing, RTC ruled in favor of VHIS. SBSC
appealed to CA, which affirmed in part the RTC by sustaining liability of South Sea Surety, but
modified it by holding that SBSC was not liable for the lost logs.

CA held that there is a stipulation in the charter party that the ship owner would be exempted from
liability in case of loss. It said that NCC is not applicable as the carrier SBSC was acting as private
carrier. Hence this petition. SC held South Sea liable in a separate resolution.

ISSUE:
Whether the stipulation in the charter party that SBSC, carrier, is exempted from liability for the
loss of VHIS’s logs arising from the negligence of SBSC’s captain is valid.
HELD: YES.
The charter party stipulated that the “owners shall not be responsible for loss, split, short-landing,
breakages and any kind of damages to the cargo." There is no dispute that the proximate cause of
the sinking of MV Seven Ambassadors was the snapping of the iron chains and the subsequent
rolling of the logs to the portside due to negligence of the captain in stowing and securing the logs
on board the vessel. Undisputed also is the status of SBSC as private carrier.

RTC deemed the provision void for being contrary to public policy, citing Art. 1745 of NCC.
VHIS adds that the stipulation is void for being contrary to Arts. 586 and 587 of the Code of
Commers, and Arts. 1170 and 1173 of NCC.
But since SBSC acted as private carrier, Art. 1745 and other NCC provisions on CCs may not
be applied unless expressly stipulated by the parties in their charter party. In a contract of private
carriage, the parties may validly stipulate that responsibility for the cargo rests solely on the
charterer, exempting the shipowner from liability for loss of or damage to the cargo caused even
by the negligence of the ship captain. Pursuant to Article 1306 of NCC, such stipulation is valid
as it is freely entered into by the parties and is not contrary to law etc. Unlike in a contract
involving a common carrier, private carriage does not involve the general public. Hence, the
stringent provisions of NCC on CCs protecting the general public cannot be applied. Thus, the
public policy embodied therein is not violated by stipulations in a charter party that lessen or
remove the protection given by law in contracts involving CCs.

The arguments of VHIS are not novel and resolved long ago in Home Insurance Co. v. American
Steamship Agencis, Inc. Indeed, where the reason for the rule ceases, the rule itself does not apply.
The general public enters into a contract of transportation with CCs without a hand or voice in its
preparation. The riding public merely adheres to the contract. It cannot submit its own stipulations
for approval of the CC. Thus, the law on CCs protects against one-sided stipulations inserted in
tickets, invoices, or other documents which the riding public has no understanding or no choice
over. But a charterer in a contract of private carriage, unlike the public, is not similarly situated. It
can enter into a free and voluntary agreement.

Whatever rights VHIS may have under Arts. 586 and 587 of the Code of Commerce (recover
damages from the shipowner for the acts of the captain) were waived when it entered into the
charter party. Art. 6 of NCC provides that rights may be waived, unless the waiver is contrary to
law etc. or prejudicial to a person with a right recognized by law. generally, patrimonial rights may
be waived as opposed to rights to personality and family rights. Being undoubtedly patrimonial,
VHIS’s right under said articles may be waived. Art. 1170 and 1173 ar inapplicable as they refer
to the obligor. SBSC is not an obligor with respect to the cargo as the obligation to bear the loss
was shifted to VHIS in the charter party. The second paragraph of Art. 1173 (if law does not state
the diligence to be observed, good father of a family) is inapplicable. Art. 362 of the Code of
Commerce provides the standard of ordinary diligence for the carriage of goods by a carrier. This
may be modified by a contract as VHIS and SBSC had done in their charter party.

14. See case #1

15. Samar Mining Company, Inc. v. Nordeutscher Lloyd, GR L-28673, October 23, 1984,
Cuevas, J. (Governing Laws: Bill of Lading)
FACTS:
The case arose from an importation made by Samar Mining Company (SMC) of one crate of
Optima welded wedge wire sieves thru MS Schwabenstein owned by defendant Nordeutscher
Lloyd, represented in PH by its agent CF Sharp, which shipment is covered by Bill of Lading 18
duly issued to consignee SMC. Upon arrival of the vessel at the port of Manila, the importation
was unloaded and delivered to the bonded warehouse of Amcyl. But the goods were never
delivered to nor received by the consignee at the port of destination, Davao.

When letters of complaint sent to defendants failed to elicit the desired response, SMC filed a
formal claim for P1.6k against Lloyd. CFI ruled that Lloyd may recoup whatever they may pay
SMC by enforcing judgment against third party defendant Amcyl, who was declared in default.
Lloyd appealed to SC.

ISSUE:
Whether Lloyd/CF Sharp is liable for the lost goods
HELD: NO.
The issue requires close scrutiny of Bill of Lading (BoL) 18 because of the nature of the bill of
lading which operates both as a receipt for the goods and, more importantly, as a contract to
transport and deliver. Being a contract, it is the law between the parties thereto who are bound by
its terms and conditions.

BoL 18 sets forth in page 2 that 1 crate of Optima welded wire sieves was received by Lloyd at
the port of loading in Bremen Germany, while the freight had been prepaid up to the port of
destination or discharge of goods, Davao. The carrier undertook to transport the goods in its
vessel MV Schwabenstein only up to the port of discharge from ship- Manila. Thus, the goods
were to be transshipped by the carrier to the port of destination or discharge in Davao. The
stipulation in the face of the bill is plain:
"if goods are to be transshipped at port of discharge, show destination under the column
for `description of contents'"
As instructed above, the following words appeared typewritten under the column for “description
of contents”: “PORT OF DISCHARGE OF GOODS: DAVAO, FREIGHT PREPAID.”

Thus, in discharging the goods from the ship at the port of Manila and delivering the same to
Amcyl, the bonded warehouse, Lloyd/CF Sharp were acting in full accord with their contractual
stipulations in BoL 18. The delivery to Amcyl was part of their duty to transship the goods from
Manila to Davao. “Transship” means “to transfer for further transportation from one ship or
conveyance to another.

S11 of BoL reads:

Whenever the carrier or master may deem it advisable or in any case where the goods are
placed at carrier's disposal at or consigned to a point where the ship does not expect to load
or discharge, the carrier or master may, without notice, forward the whole or any part of
the goods before or after loading at the original port of shipment, ... This carrier, in
making arrangements for any transshipping or forwarding vessels or means of
transportation not operated by this carrier shall be considered solely the forwarding
agent of the shipper and without any other responsibility whatsoever even though the
freight for the whole transport has been collected by him. ... Pending or during
forwarding or transshipping the carrier may store the goods ashore or afloat solely
as agent of the shipper and at risk and expense of the goods and the carrier shall not be
liable for detention nor responsible for the acts, neglect, delay or failure to act of anyone
to whom the goods are entrusted or delivered for storage, handling or any service incidental
thereto
Defendants claim that they have discharged the cargo in full and good condition to Amcyl at the
port of discharge from ship- Manila and pursuant to S11, their responsibility for the cargo had
ceased. There is merit to this stand. The validity of stipulations in BoL exempting the carrier from
liability for loss or damage to goods when the same are not in its actual custody has been upheld
in Phoenix Assurance Co. Ltd v. United States Lines. The stipulation was found not contrary to
law etc. and upheld. Thus, S11 of BoL is valid insofar as it exempts the carrier from liability for
loss or damage to goods while the same are not in the latter’s actual custody.

The liability of CCs for the loss or deterioration of goods transported from a foreign country to PH
is governed primarily by NCC, and in matters not regulate therein, by Code of Commerce and
special laws. Art. 1736 of NCC provides:
Article 1736. The extraordinary responsibility of the common carrier lasts from the time the
goods are unconditionally placed in the possession of, and received by the carrier for
transportation until the same are delivered, actually or constructively, by the carrier to the
consignee, or to the person who has a right to receive them, without prejudice to the provisions
of article 1738.
Art. 1738 is inapplicable as it contemplates a situation where the goods had already reached their
place of destination and are stored in the warehouse of the carrier. The goods were still awaiting
transshipment. But Art. 1736 is applicable. CFI found that there was actual delivery to the
consignee thru its duly authorized agent, the carrier (*Lloyd).

Two undertakings were provided for in BoL: 1) transport of goods from Bremen Germany to
Manila and 2) transshipment of the goods from Manila to Davao, with Lloyd/CF Sharp acting as
agent of the consignee. At the hiatus between the two undertakings when the goods are discharged
in Manila, its personality changes from carrier to agent of the consignee. Thus, its possession
became in the name of the consignee. There was in effect actual delivery of the goods from
Lloyd/CF Sharp to SMC. Upon such delivery, Lloyd/CF Sharp ceases to be responsible for any
loss or damage that may befall the goods from that point onwards.

Even as agent, Lloyd/CF Sharp cannot be made liable for the missing goods. It commenced the
transshipment the completion of which was aborted by circumstances beyond its control. An agent
who carries out the orders of the principal without being guilty of negligence, deceit, or fraud,
cannot be held responsible for the failure of the principal to accomplish the object of agency. There
is no proof of negligence, deceit, or fraud.

16. Eastern Shipping Lines, Inc. v. IAC, GR L-69044, May 29, 1987, Melencio-Herrera, J.
(Governing Laws)
FACTS:
These are two cases.

GR 69044- MS Asiatica, a vessel operated by Eastern Shipping Lines (ESL), loaded at Kobe Japan
for transportation to Manila 5000 lance pipes worth P256k consigned to PH Blooming Mills Co.
and 7 cases of spare parts worth P92k consigned to Central Textile Mills. Both sets of goods were
insured with respondent Development Insurance and Surety Corporation. (DISC)

GR 71478- The same vessel also took 128 cartons of garment fabrics and accessories consigned
to Mariveles Apparel Corporation and 2 cases of surveying instruments consigned to Aman
Enterprises and General Merchandise. The fabrics were insured by respondent Nisshin Fire &
Marine Insurance Co. (Nisshin) and the 2 cases by respondent Dowa Fire & Marine Insurance Co.
(Dowa)
Enroute for Kobe Japan to Manila, the vessel caught fire and sank, resulting in the total loss of
the ship and cargo. Respondent insurers paid the insurance to the consignees and were subrogated
unto their rights.

DISC filed suit in CFI against ESL to recover the amounts it paid to the consignee. ESL claims
that the loss was due to extraordinary fortuitous event. CFI ruled in favor of DISC. Hence this
petition for review on certiorari.

Nisshin and Dowa also sued ESL. ESL claimed that the sinking is an exempting circumstance
under S4(2)(b) of the Carriage of Goods by Sea Act (COGSA). CFI ruled in favor of Nisshin
and Dowa. Hence this petition for review on certiorari.

ISSUE:
Which law governs? NCC or the Carriage of Goods by Sea Act?
HELD: Carriage of Goods by Sea Act, suppletory to NCC.
The law of the country to which the goods are to be transported governs the liability of the
CC in case of their loss, destruction, or deterioration. As the cargoes were transported from
Japan to PH, the liability of carrier ESL is governed primarily by NCC. But in all matters not
regulated by NCC, the rights and obligations of CC shall be governed by the Code of Commerce
and special laws. Thus, the Carriage of Goods by Sea Act, a special law, is suppletory to NCC.

Under NCC, CCs are bound to observe extraordinary diligence. In the vigilance over goods. CCs
are responsible for loss or deterioration of the goods unless the same is due to any of the following
causes only:
"(1)Flood, storm, earthquake, lightning or other natural disaster or calamity;
ESL claims that the loss by fire exempts it from liability under “natural disaster or calamity.” But
fire may not be considered a natural disaster or calamity. It arises from some act of man or by
human means. It does not fall within the category of an act of God unless caused by lightning or
other natural disaster or calamity. It may even be caused by the fault of the carrier. Art. 1680,
referring to fire as an extraordinary fortuitous event, refers to leases of rural lands.

Since fire is not within the exceptions in Art. 1734, the CC shall be presumed at fault or negligent
under Art. 1735 unless it proves that it observed the extraordinary diligence required. The evidence
of ESL did not show that extraordinary vigilance was observed to prevent the fire. What appears
is that after the cargoes were stored in the hatches, no regular inspection was made as to their
condition during the voyage. The crew could not even explain what could have caused the fire.
Thus, ESL is liable for the loss.

Even if fire was considered a natural disaster under Art. 1734, it is required under Art. 1739 that
the natural disaster must have been “the proximate and only cause of the loss” and that the carrier
exercised due diligence to prevent or minimize the loss before, during, or after the disaster. ESL
failed also to establish this.

ESL cannot seek refuge under S4(2)(b) of Carriage of Goods by Sea Act:
"Sec. 4(2).Neither the carrier nor the ship shall be responsible for loss or damage arising
or resulting from.
 '(b)Fire, unless caused by the actual fault or privity of the carrier.
Both CFI and CA found that there was “actual fault” of the carrier shown by lack of diligence in
that when the smoke was noticed, the fire was already big and that the fire must have started 24
hours before it was noticed. After the cargoes were stored in the hatches, no regular inspection
was made as to their condition during the voyage. These show that ESL or its servants were
negligent. Thus, the complete defense under COGSA when loss results from fire is unavailing.

ESL also claims that its liability, if any, should not exceed $500 per package as provided in S4(5)
of COGSA:
"(5)Neither the carrier nor the ship shall in any event be or become liable for any loss or
damage to or in connection with the transportation of goods in an amount exceeding $500
per package lawful money of the United States, xxx.
By agreement between the carrier, master, or agent of the carrier, and the shipper another
maximum amount than that mentioned in this paragraph may be fixed: provided, that such
maximum shall not be less than the figure above named. In no event shall the carrier be
liable for more than the amount of damage actually sustained.

Art. 1749 also allows limitations of liability in this wise:

"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."
NCC does not of itself limit the liability of CC to a fixed amount per package although it
expressly permits a stipulation limiting such liability. Thus, COGSA, which is suppletory to
NCC, supplements the NCC by establishing a statutory provision limiting the carrier’s liability
in the absence of a declaration of a higher value of the goods by the shipper in the BoL. The
provisions of COGSA on limited liability are as much a part of a BoL as though physically in
it.

In GR 69044, there is no stipulation in the BoLs limiting the carrier’s liability for the
loss/destruction of goods nor is there a declaration of a higher value of the goods. Thus, ESL’s
liability should not exceed $500 per package at the time of payment but “in no case more than
the amount of damage actually sustained.” Since there were 28 packages in which the 5000 lance
pipes were in, multiplying this by $500 would by $14000 which, at the current exchange rate of
P20.44 to $1, is P286,160, which is more than the damage actually sustained of P256k. thus, the
P256k must be upheld. As to the 7 cases of spare parts, the actual value of which is P92k,
multiplying 7 by $500 would yield P71,540. Thus, this is the only amount to be paid by ESL and
not P92k.

In GR 71478, as to the 2 cases of surveying instruments, the amount awarded to Dowa of $1000
is in order. As to the 128 cartons of garment fabrics in 2 containers of Nisshin, CA also limited
ESL’s liability to $500 per package and affirmed the $46,583 award to Nisshin. This is correct
since it is the 128 cartons and not the 2 containers which should be considered as the shipping unit.

17. National Development Company v. CA, GR L-49407, August 19, 1988, Paras, J.
(Governing Laws)
FACTS:
In accordance with a MOA entered into between defendants National Development Company
(NDC) and Maritime Company of PH (MCP), NDC as the first preferred mortgagee of 3 ocean
going vessels, including one with the name of Doña Nati, appointed MCP as its agent to manage
and operate Doña in its behalf. E. Philipp Corporation of NY loaded on board the vessel Doña
1200 bales of American raw cotton consigned to the order of Manila Banking Corporation and
Riverside Mills Corporation. Also loaded on the vessel in Tokyo Japan were the cargo of Kyokuto
Boekui, Kaisa, Ltd. Consigned to the order of Manila Banking Corporation consisting of 200
cartons of sodium lauryl sulfate and 10 cases of aluminum foil.

En route to Manila, Doña figured in a collision at Ise Bay, Japan, with a Japanese vessel. 550 bales
of the American raw cotton were lost/destroyed, of which 535 bales as damaged were landed and
sold. The lost and damaged cargoes were worth P344k which amount was paid by Development
Insurance and Surety Corporation (DISC) as insurer to Riverside Mills Corporation. Kyokuto’s
shipment worth P19k was also lost. DISC paid Kyokuto’s loss. DISC paid a total of P364,915.86
as insurer. Thus, DISC filed a complaint in CFI to recover this amount from NDC and MCP as
owner and ship agent respectively of Doña.

CFI ordered MCP and NDC to pay jointly and severally to DISC P364k. CA affirmed the decision
in toto. Hence these appeals by certiorari.

ISSUE:
Whether COGSA, NCC, or the Code of Commerce applies.
HELD: Code of Commerce.
NDC claims that COGSA should apply to this case and not the NCC or Code of Commerce. Under
S4(2) of COGSA, the carrier is not responsible for the loss or damage resulting from the “act,
neglect, or default of the master, mariner, pilot or the servants of the carrier in the navigation or in
the management of the ship.” Thus, NDC claims that both pilots of the colliding vessels were at
fault and negligent and NDCwould have been relieved of liability. Instead, Art. 287 of the Code
of Commerce was applied and both NDC and MCP were ordered to reimburse DISC.

This issue has been laid to rest in Eastern Shipping Lines Inc. v. IAC where it was held that the
law of the country to which the goods are to be transported governs the liability of the CC in case
of their loss, destruction, or deterioration (Art. 1753, NCC). The rule is that the liability of the
carrier is governed primarily by NCC and in all matters not regulated by NCC, such would be
governed by Code of Commerce and special laws. Hence, COGSA, a special law, is merely
suppletory to NCC.

Here, the goods were transported from California and Tokyo to PH and they were lost due to a
collision found to have been caused by the negligence of both captains of the colliding vessels.
Under Eastern Shipping Lines, PH laws apply, and it is immaterial that the collision actually
occurred in foreign waters, here in Ise Bay, Japan.

Collision is among those matters not specifically regulated by NCC. Thus, CA’s application of
Arts. 826-839 of Code of Commerce, which deal exclusively with collision of vessels is correct.
Art. 826 of Code of Commerce provides that where collision is imputable to the personnel of a
vessel, the owner of the vessel at fault shall indemnify the losses incurred after an expert appraisal.
But under Art. 827, if the collision is imputable to both vessels, each one shall suffer its own
damages and both shall be solidarily responsible for the losses and damages suffered by their
cargoes.

Also, under Arts. 826 to 839, the shipowner or carrier is not exempt from liability from collision
due to fault of the captain. Primary liability is imposed on the shipowner in recognition of the
doctrine that the shipmaster or captain is merely the representative of the owner who has actual
or constructive control over the conduct of the voyage.

There is no room for NDC’s interpretation that the Code of Commerce should apply only to
domestic and not foreign trade. Aside from the fact that the COGSA (CA 65) does not specifically
provide for the subject of collision, it restricts its application to all contracts for carriage of goods
by sea to and from PH ports in foreign trade. Under S1, it is explicitly provided that nothing “in
this Act shall be construed as repealing any existing provision of the Code of Commerce” or
as limiting its application.

18. F.C. Fisher v. Yangco Steamship Company, GR 8095, Carson, J. (Nature of Business)
FACTS:
Fisher is a stockholder in Yangco, owner of a large number of steam vessels, duly licensed to
engage in the coastwise trade of PH. The directors of Yangco adopted a resolution thereafter
ratified by the company’s shareholders. It declared that the merchandise to be carried by the
company in its business as CC do not include dynamite, powder, or other explosives, and
prohibited its officers and agents from offering to carry or accepting for carriage said dynamites
etc. Acting Collector of Customs Stanley demanded and required Yangco to accept and
carriage these explosives, and he refused and suspended the issuance of clearance documents of
the vessels of Yangco until it consents to accept such explosives for carriage.

Fisher is advised and believes that should Yangco decline to accept the explosives for carriage,
respondent attorney general of PH and respondent prosecuting attorney of Manila intend to
institute proceedings under the penal provisions of Act 98 against Yangco. Notwithstanding
Fisher’s demands, the managers etc. of the company refuse to cease carriage of such explosives
by reason of the severity of the penalties they are threatened with. Fisher believes that if Act 98
does indeed require the company to carry such explosives, it is unconstitutional to that extent.

Respondents demurred to the complaint.

ISSUE:
Whether Act 98 is valid and constitutional.
HELD: YES.
The demurrer must be sustained as the complaint does not set forth facts sufficient to constitute a
cause of action. Fisher seeks to enjoin Yangco from accepting for carriage dynamites etc. and to
prohibit the collector of customs and prosecuting officers of the government from all attempts to
compel the company to accept such explosives for carriage. S2-4 of Act 98 read:
SEC. 2. It shall be unlawful for any common carrier engaged in the transportation of
passengers or property as above set forth to make or give any unnecessary or unreasonable
preference or advantage to any particular person, company, firm, corporation or locality,
 or any particular kind of traffic in any respect whatsoever, or to subject any particular
person, company, firm, corporation or locality, or any particular kind of traffic, to undue
or unreasonable prejudice or discrimination whatsoever, and such unjust preference or
discrimination is also hereby prohibited and declared to be unlawful.
SEC. 3. No common carrier engaged in the carriage of passengers or property as aforesaid
shall, under any pretense whatsoever, fail or refuse to receive for carriage, and as
promptly as it is able to do so without discrimination, to carry any person or property
offering for carriage, and in the order in which such persons or property are offered for
carriage, nor shall any such common carrier enter into any arrangement, contract or
agreement with any other person or corporation whereby the latter is given an exclusive or
preferential or monopolize the carriage any class or kind of property to the exclusion or
partial exclusion of any other person or persons, and the entering into any such
arrangement, contract or agreement, under any form or pretense whatsoever, is hereby
prohibited and declared to be unlawful.
SEC. 4. Any willful violation of the provisions of this Act by any common carrier engaged
in the transportation of passengers or property as hereinbefore set forth is hereby declared
to be punishable by a fine not exceeding five thousand dollars money of the United States,
or by imprisonment not exceeding two years, or both, within the discretion of the court.
The provision that “No common carrier xxx shall, under any pretense whatsoever, fail or refuse to
receive for carriage, and xxx to carry any person or property offering for carriage,” is not to be
construed in its literal sense and without regard to the context so as to impose an imperative duty
on all CCs to accept for carriage and to carry all and any kind of freight which may be offered for
carriage without regard to the facilities which they may have at their disposal. The legislator could
not have intended that a CC running passenger automobiles must transport coal in his machines;
nor that any CC must accept contraband articles.

Read with context, the mandatory and prohibitory provisions of the law was clearly intended to
merely forbid failures or refusals to receive persons or property for carriage involving any
“unnecessary or unreasonable preference or advantage to any particular person, company,
firm, corporation, or locality, or any particular kind of traffic” or would subject such to any undue
or unreasonable prejudice or discrimination whatsoever. Thus, in applying the statute, a
consideration of whether the acts complained of give “unreasonable or unnecessary preference or
advantage” is involved.

It is contended that the statute is invalid, citing Ex Parte Young etc. But the principles therein is
inapplicable. Therein, it was said that when the legislature, in an effort to prevent any inquiry of
the validity of a statute, so burdens any challenge thereof in courts that the party affected is
necessarily constrained to submit rather than take the chances of the penalties imposed, then it
becomes a serious question whether the party is not deprived of equal protection. When the
penalties for disobedience are by fines so enormous and imprisonment so severe as to intimidate
the company from resorting to courts to test the validity of legislation, it is as if the law prohibited
the company from seeking judicial construction of laws which affect its rights.

But an examination of the statute, of the circumstances under which it was enacted, the mischief
which it sought to remedy, and the nature of the penalties, convinces us that, unlike the statues in
the above cases, there is here no attempt to prevent CCs from resorting to courts to “test the validity
of the legislation”. It imposes no arbitrary obligation on the company to do or refrain from doing
anything. Its penalties can be imposed only upon proof of unreasonable, unnecessary, and unjust
discriminations and range from a maximum penalty which is not excessive for willful violations
of its provisions by a powerful corporation, to a minimum which may be merely a nominal fine.
With so wide a range of discretion on the courts as to the penalty, there is no basis to contend that
the CC is intimidated from resorting to courts to test the validity of the law.

It is also contended that the statute, if construed to deny the right of Yangco to elect at will whether
it will engage in a particular business, like of carrying explosives, is unconstitutional because it is
a confiscation of property without due process and deprives him of liberty by compelling him to
engage in business against his will. But this is directed against a construction of the statute which,
as we have said, is not warranted by its terms. It merely forbids failures or refusals to receive
persons or property for carriage which give an unreasonable or unnecessary preference or
advantage to any person, locality, or particular kind of traffic, etc.

There is nothing in the law which would deprive any person of his liberty by requiring him to
engage in busiess “against his will.” The prohibitions of the law against undue preferences and
discriminations are merely the reasonable regulations which the legislator has seen fit to
prescribe for the conduct of the business in which the carrier is engaged of his own free will and
accord. A public carrier of passengers would not be permitted to refuse to carry a Chinaman,
Spaniard, American, Filipino, or a mestizo by mere whim or caprice or personal scruple or to
suit his convenience or in the hope of increasing his profits.

The nature of the business of a CC as a PUBLIC EMPLOYMENT is such that it is clearly within
the power of the state to impose such just and reasonable regulations thereon in the interest
of the public as the legislator may deem proper. Of course such regulations must not deprive an
owner of property without due process, nor confiscate private property without just compensation
etc. But aside from such constitutional limitations, the determination of the nature and extent of
the regulations which should be prescribed rests in the hands of the legislator.

CCs exercise a sort of public office, and have duties to perform in which the public is interested.
Their business is thus affected with a public interest and is subject of PUBLIC
REGULATION. Regulations limiting the number of passengers that may be carried in a particular
vehicle or vessel, or forbidding the loading of a vessel beyond a certain point, or prescribing the
number and qualifications of the personnel in the employ of a CC, or forbidding unjust
discrimination as to rates, all tend to limit his liberty and control to some degree the free exercise
of his discretion in the conduct of his business. But the right to enter the public employment as
CC and to offer one’s services to the public for hire does not carry with it the right to conduct
that business as one pleases, without regard to the interests of the public and free from such
reasonable and just regulations to protect the public from the careless indifference of the
carrier as to public welfare.

Certain businesses, including that of a CC, holds such a peculiar relation to the public interest that
there is induced upon it the right of public regulation. When private property is affected with a
public interest when used in a manner to make it of public consequence and affect the
community at large, when one devotes his property to a use in which the public has an interest,
he, in effect, grants to the public an interest in that use and must submit to be controlled by the
public for the common good. Of course, this power to regulate is not a power to destroy, and
limitation is not confiscation. The state cannot require a railroad corporation to carry persons
without reward or fare.

Thus, CCs in this jurisdiction cannot lawfully decline to accept a particular class of goods for
carriage to the prejudice of the traffic in those goods, unless it appears that for some sufficient
reason the discrimination against the traffic in such goods is reasonable and necessary. Mere
whim or prejudice will not suffice.

We cannot grant Fisher’s prayer as it is not alleged that the explosives can in no event be
transported with reasonable safety in the steam vessels. It is not alleged that Yangco’s steamship
vessels are unsuited to carry the explosives or that the nature of the business of Yangco is as such
that not to accept the explosives would not give an undue and unreasonable prejudice and
discrimination. This is a question of fact to be determined by the particular circumstances of each
case.

The mere fact that violent and destructive explosions can be obtained by the use of dynamite under
certain conditions would not be sufficient in itself to justify the refusal of a vessel as CC to accept
it, if it can be proven that in the condition in which it is offered for carriage there is no real danger
to the carrier nor reasonable ground to fear that his vessel or those on board his vessel will be
exposed to unnecessary and unreasonable risk in transporting it, having in mind the nature of his
business as CC engaged in the coastwise trade in PH, and his duty as servant of the public
engaged in a public employment. The demurrer is sustained.

19. Kilusang Mayo Uno Labor Center v. Hon. Garcia, Jr., GR 115381, December 23, 1994,
Kapunan, J. (Nature of Business)
FACTS:
Then Sec. of DOTC Orbos issued Memo Circular 90-395 to then LTFRB chairman Fernando
allowing provincial bus operators to charge passengers rates within a range of 15% above and
below the LTFRB official rate for 1 year. Fernando replied that this is not legally feasible because
S16(c) of the Public Service Act.

Private respondent Provincial Bus Operators Association of PH, Inc. (PBOAP) applied for fare
rate increase of P0.065 per km. This was opposed by PH Consumers Foundation. Public
respondent LTFRB approved the increase.

Then Sec. of DOTC Prado issued DO 92-587, defining the policy framework on the regulation of
transport services. This discontinued the use of “prior operator” and “priority of filing” rules. In
determining public need, the presumption of need for a service shall be deemed in favor of the
applicant. The oppositor must prove that there is no need for the proposed service. It also provided
that:
2. Rate and Fare Setting. Freight rates shall be freed gradually from government controls.
Passenger fares shall also be deregulated, except for the lowest class of passenger service
(normally third class passenger transport) for which the government will fix indicative or
 reference fares. Operators of particular services may fix their own fares within a range
15% above and below the indicative or reference rate.

LTFRB issued Memo Circular 92-009, promulgating the guidelines to implement DOTC DO 92-
587. This also provided that the presumption of public need for applicants for CPCs shall be
deemed in favor of applicant, while oppositor must prove that there is no such need. It also
provided:
1. The existing authorized fare range system of plus or minus 15 per cent for provincial
buses and jeepneys shall be widened to 20% and -25% limit in 1994 with the authorized
fare to be replaced by an indicative or reference rate as the basis for the expanded fare
range.
PBOAP, availing itself of the deregulation policy of DOTC allowing provincial bus operators to
collect +20% and -25% of the prescribed fare without public hearing, announced a fare increase
of 20%. KMU assailed this increase, which LTFRB dismissed. Hence this petition for certiorari.

ISSUE:
Whether the issuances are valid.
HELD: NO.
KMU claims that the authority given by LTFRB to set a fare of +20% and -25% beyond or below
the authorized fare without having to file a petition is unconstitutional. The presumption of public
need in favor of an applicant without having to prove public necessity is also illegal for violating
the Public Service Act. OSG, DOTC, and LTFRB claim that it is within DOTC and LTFRB’s
authority to set a fare range scheme and establish such presumption of public need.

KMU has standing. KMU members who avail of the buses, trains, jeeps daily are directly affected
by the burdensome cost of arbitrary increase in passenger fares. They are part of the millions of
commuters who comprise the riding public. The case is also of transcendental importance.

S16(c) of Public Service Act provides that the defunct Public Service Commission has the power:
(c) To fix and determine individual or joint rates, tolls, charges, classifications, or schedules
thereof, as well as commutation, mileage kilometrage, and other special rates which shall
be imposed, observed, and followed thereafter by any public service: Provided, That the
Commission may, in its discretion, approve rates proposed by public services provisionally
and without necessity of any hearing; but it shall call a hearing thereon within thirty days
thereafter, upon publication and notice to the concerns operating in the territory
affected: Provided, further, That in case the public service equipment of an operator is used
principally or secondarily for the promotion of a private business, the net profits of said
private business shall be considered in relation with the public service of such operator for
the purpose of fixing the rates.
Under this, the legislature delegated to the Public Service Commission the power of fixing rates
for public services. LTFRB, the existing regulatory body today, is also vested with the same under
EO 202. Such delegation of legislative power to an administrative agency is permitted to adapt to
the increasing complexity of modern life. An administrative body, LTFRB, may implement broad
policies laid down in a statute by “filling in” the details. But nowhere under S16(c) are the
regulatory bodies authorized to delegate that power to a common carrier or other public
service.
Here, the authority given by LTFRB to the bus operators is illegal as it is tantamount ot an undue
delegation of legislative authority. Potestas delegate non delegari potest. This is based on the
principal that delegated power is not only a right but a duty to be performed by the delegate thru
his own judgment and not thru the intervening mind of another.

Allowing bus operators to change and increase their fares at will would result to a chaotic and
anarchic state of affairs. This would leave the riding public at the mercy of transport operators
who may increase fares every hour, day, month, or year whenever it pleases them. Rate fixing
is not an easy task. It is a sensitive government function that requires dexterity of judgment and
sound discretion with the goal of arriving at a just and reasonable rate acceptable to both the public
utility and the public. Several factors have to be taken into consideration. A rate should not be
confiscatory nor too high to be discriminatory. A rate must be reasonable and fair and must be
affordable to the end user. Given the complexity of this function and its far-reaching effects on
millions of commuters, government must not relinquish this important function. The people,
represented by reputable oppositors, deserve to be given full opportunity to be heard in their
opposition to any fare increase. Discarding the hearing is inimical to public interest.

As to the presumption of public need, a CPC is an authorization granted by LTFRB for the
operation of land transportation services for public use as required by law. Pursuant to S16(a) of
Public Service Act, the following requirements must be met before a CPC may be granted: 1) the
applicant must be a citizen of PH or a corporation organized under PH law 60 percentum of whose
stock or paid-up capital belong to PH citizens, 2) the applicant must be financially capable of
undertaking the proposed service, and 3) the applicant must prove that the operation of the
public service proposed and the authorization to do business will promote public interest in a
proper and suitable manner.

The presumption of public need in favor of applicant is entirely incompatible and inconsistent with
S16(c)(iii) of the public service act requiring that the applicant must prove by proper notice and
hearing that the operation of the public service will promote public interest before a CPC may
be issued. A statute prevails over an AO. Public necessity exists when the proposed facility meets
a reasonable want of the public which the existing facilities do not adequately supply. The
existence of public necessity is thus a question of fact that must be established by evidence.

The presumption of public need in favor of the applicant reverses well-settled judicial, quasi-
judicial, and administrative procedures. It allows the party who initiates the proceedings to prove,
by mere application, his affirmative allegations. It would also amend the RoC by adding another
disputable presumption in the enumeration of 37 presumptions under Rule 131, S5. Such
usurpation of this Court’s authority cannot be countenanced. Thus, DOTC and LTFRB committed
grave abuse of discretion.

Public utilities are privately owned and operated businesses whose service are essential to the
public. Thus, their services are impressed with public interest and concern. The same is true with
CCs which holds such a peculiar relation to the public interest that there is superinduced
upon it the right of public regulation when private properties are affected with public
interest, hence, they cease to be juris private only. When one devotes his property to a use in
which the public has an interest, he in effect grants to the public an interest in that use and
must submit to the control by the public for the common good to the extent of the interest he
has thus created.

20. Bienvenido Gelisan v. Benito Alday, GR L-30212, September 30, 1987, Padilla, J.
(Registered Owner Rule)
FACTS:
Gelisan is the owner of a freight truck. Gelisan and Roberto Espiritu entered into a contract under
which Espiritu hired Gelisan’s truck to haul rice, sugar, flour, and fertilizer at P18 per trip within
the Manila provided the loads shall not exceed 200 sacks. The truck was taken by a driver of
Espiritu. Alday, a trucking operator, who owns 15 freight trucks, had known Espiritu since 1948
as a truck operator. Alday had a contract to haul fertilizers of Atlas Fertilizer corporation from Pier
4, North Harbor to its warehouse in Mandaluyong. Alday met Espiritu who offered the use of his
truck with the driver at 9cents per bag. Alday accepted and he instructed his checker to let Espiritu
haul the fertilizer. However, Espiritu did not deliver the fertilizer to the bodega in Mandaluyong.
Alday reported the loss to police. Espiritu was later arrested and booked for theft.

Alday was compelled to pay the value of the 400 bags of fertilizer worth P5.3k to Atlas. He filed
a complaint against Espiritu and Gelisan with CFI for recovery of damages. Espiritu was declared
in default. Gelisan disowned responsibility, claiming that he had no contractual relations with
Alday and that the non-delivery was by Espiritu and beyong Gelisan’s control and knowledge. CFI
ruled that Espiritu alone was responsible. On appeal, CA also found Gelisan liable for being the
registered owner of the truck. Hence this petition.

ISSUE:
Whether Gelisan is also liable for the theft of Espiritu.
HELD: YES.
It has been held in several decisions that the registered owner of a public service vehicle is
responsible for damages that may arise from consequences incident to its operation or that
may be caused to any of the passengers therein. The claim of Gelisan that he is not liable in
view of the lease contract executed between him and Espiritu which exempts him from liability to
third persons cannot be sustained because the lease contract had not been approved by the Public
Service Commission. If the property covered by a franchise is transferred or leased to another
without obtaining the requisite approval, the transfer is not binding upon the public and third
persons.

The rule requiring approval of the transfer or lease applies even if there is positive identification
person responsible for damages. The reason is that the law requires approval by the Commission
so that a franchise may be sold or leased without infringing the certificate issued to the grantee.
Since a franchise is personal in nature, any transfer or lease thereof should be notified to the
Commission so that it may take proper safeguards to protect the interest of the public. In fact,
the law requires that, before the approval is granted, there should be public hearing with notice to
all interested parties so that the Commission may determine if there are good grounds to justify
the transfer or lease of the property or if the sale or lease is detrimental to public interest. Thus,
the sale or transfer without approval is not binding on the Commission and in contemplation of
law, the grantee continues to be responsible under the franchise in relation to the
Commission and the public.

Gelisan may seek indemnification from Espiritu of the amount he may be required to pay for the
injury to Alday since the lease contract, although not effective against the public for lack of
approval, is binding between the parties.

There is no merit in Gelisan’s contention that his liability is only subsidiary. The registered
owner/operator of a public service vehicle is jointly and severally liable with the driver for
damages incurred by passengers or third persons as a consequence of injuries sustained in the
operation of said vehicles.

21. Ma. Luisa Benedicto v. IAC, GR 70876, July 19, 1990, Feliciano, J. (Registered Owner
Rule)
FACTS:
Private respondent Greenhills, a lumber manufacturing firm, operates a sawmill in Maddela
Quirino. Greenhills bound itself to sell and deliver to Blue Star Mahogany, Inc. (“Blue Star) 100k
board feet of sawn lumber, with initial delivery on May 15, 1980. To effect the first delivery,
Greenhills’ manager Cruz contracted Virgilio Licuden, driver of a cargo truck, to transport its
sawn lumber to Blue Star. The truck was registered in the name of petitioner Benedicto,
proprietor of Macoven Trucking, a business engaged in hauling freight.

Cruz, in the presence and with consent of Licuden, supervised the loading of 7,690 board feet
worth P16.9k aboard the truck. Before the truck left Maddela for Valenzuela, Bulacan, Cruz issued
Licuden 2 invoices initialed by Licuden.

Manager of Blue Star called Greenhills’ president, Henry Lee Chuy, informing him that the sawn
lumber on the truck had not yet arrived in Valenzuela. Henry informed Cruz. On May 18, Blue
Star informed Henry that it still had not received the lumber which was supposed to arrive on May
15 and because of the delay, they were “constrained to look for other suppliers.” Greenhills filed
a criminal case against Licuden for estafa. It also sued Benedicto for recovery of the value of the
lost sawn lumber in RTC. Benedicto denied liability, claiming that she was a complete stranger to
the contract of carriage, the truck having been earlier sold by her to Benjamin Tee as evidenced
by a deed of sale.

She claimed that the truck remained registered in her name because Tee only paid P50k out of the
P68k agreed upon. She claims that Tee had been operating the truck in Luzon from that date
onwards and thus, Licuden was Tee’s employee and not hers. RTC ruled that Benedicto was liable
and that Licuden was her employee. IAC affirmed in toto. Hence this petition.

ISSUE:
Whether Benedicto is liable.
HELD: YES.
Benedicto has been holding herself out to the public as engaged in the business of hauling or
transporting goods for hire or compensation. Benedicto is a CC. The prevailing doctrine on
CCs makes the registered owner liable for consequences flowing from the operations of the
carrier, even though the specific vehicle involved may already have been transferred to another
person. This doctrine rests upon the principle that in dealing with vehicles registered under the
Public Service Law, the public has the right to assume that the registered owner is the actual
or lawful owner thereof. It would be difficult and often practically impossible for the public to
enforce rights of action that they may have for injuries inflicted by vehicles negligently operated
if they be required to prove who the actual owner is. The registered owner is not allowed to deny
liability by proving the identity of the alleged transferee. Thus, Greenhills is not required to go
beyond the vehicle’s certificate of registration to ascertain the owner of the carrier.

Benedicto claims that the principle should apply only to cases of negligence resulting to injury or
death of passengers and not to cases involving merely carriage of goods. We believe otherwise. A
CC, from the nature of its business and for reasons of public policy, is burdened by the law with
the duty of exercising extraordinary diligence not only in ensuring the safety of passengers but
also in caring for goods transported by it. Damage to goods turned over to the CC for conveyance
raises a presumption of negligence on the part of the CC save only for extreme circumstances in
Art. 1734. This presumption may be overcome only by proof of extraordinary diligence. To allow
a CC to escape responsibility for the passengers or goods transported by it proving a prior sale of
the vehicle or means of transportation would be to attenuate drastically the carrier’s duty of
extraordinary diligence.

Benedicto also insists that there was no perfected contract of carriage since there was no proof that
her consent or that of Tee was obtained and that Licuden was authorized to bind the registered
owner. But driver Licuden was entrusted with possession and control of the freight truck by the
registered owner. Licuden, under the circumstances, was clothed with at least implied authority
to contract to carry goods and to accept delivery of such goods for carriage to a specified
destination. Licuden is in law regarded as employee and agent of Benedicto, for whose acts
Benedicto must respond. She did not prove that she exercised extraordinary diligence to prevent
the loss or non-delivery of the lumber to Blue Star. Hence, her liability to Greenhills was fixed and
complete without prejudice to Benedicto’s right to proceed against her putative transferee
Benjamin Tee and Licuden for reimbursement.

22. Philtranco Service Enterprises, Inc. v. CA, GR 120553, June 17, 1997, Davide, Jr., J.
(Registered Owner Rule)
FACTS:
Civil Case 373 was an action against Philtranco for damages instituted by heirs of Ramon Acuesta
namely Gregorio, Julio, Ramon (Jr.), Baltazar, Rufino, Maximo, Neri, Iluminada, Rosario, and
Pamfilo Acuesta. They claim that Philtranco was guilty of gross negligence, violation of traffic
rules and regulations, abandonment of victim, and attempt to escape from a crime. Private
respondent heirs’ evidence is summarized as follows:

Ramon Acuesta was riding in his bicycle along Gomez St. which is along the side of Nijaga Park.
Philtranco’s bus 4025 driven by Rogasiones Manilhig was being pushed on Magsaysay Blvd. by
some persons to start its engine. Magsaysay Blvd runs perpendicular to Gomez St. and bus 4025
was heading in the general direction of Gomez St. Some of the persons pushing the bus were on
its back, while others were on the sides. As the bus was pushed, its engine started, so the bus
continued on its running motion. This occurred when Ramon was in front of the bus. As the engine
of the bus started abruptly, its running motion was also enhanced by the functioning engine. The
bus bumped Ramon, who fell from the bike, and was run over by the bus. The bus did not stop
although it already ran over the victim. P/Sgt. Yabao saw this. he approached bus driver Manilhig
and signaled him to stop, but Manilhig did not listen. So Yabao jumped into the bus, introduced
himself as a policeman, and ordered the latter to stop. Yabao told Manilhig to go to police
headquarters. From where the victim was bumped, the bus still ran to a distance of 15m away.

Philtranco claimed that while the bus was slowly cruising along Gomez St., Ramon, biking towards
the same direction as the bus, suddenly overtook two tricycles and swerved left to the center of the
road. The swerving was so abrupt that even as Manilhig applied the brakes, the victim was bumped
and run over. He proceeded with his trip as there were people crowding the victim and he feared
that he might be mobbed. He surrendered to a policeman who boarded his bus. It was Ramon’s
negligence of overtaking two tricycles which caused his death. But they were unable to present
evidence as they were deemed to have waived that right by failure of their counsel to appear at the
scheduled hearings.

RTC ordered Philtranco to pay the heirs damages etc. CA affirmed. Hence this petition.

ISSUE:
Whether Philtranco is liable.
HELD: YES.
Civil case 373 is an action for damages based on quasi-delict under Art. 2176 and 2180 of NCC:
Art. 2180. The obligation imposed by Article 2176 is demandable not only for one's own
acts or omissions, but also for those of persons for whom one is responsible.
xxx xxx xxx
The owners and managers of an establishment or enterprise are likewise responsible for
damages caused by their employees in the service of the branches in which the latter are
employed or on the occasion of their functions.
Employers shall be liable for the damages caused by their employees and household helpers
acting within the scope of their assigned tasks even though the former are not engaged in
any business or industry.
xxx xxx xxx
The responsibility treated of in this article shall cease when the persons herein mentioned
prove that they observed all the diligence of a good father of a family to prevent damage.
It has been consistently held that the liability of the registered owner of a public service vehicle,
like Philtranco, for damages arising from the tortious acts of the driver, is primary, direct, and
joint and several or solidary with the driver. Art. 2194 expressly provides that “the
responsibility of two or more persons who are liable for a quasi-delict is solidary.” Its only recourse
if the judgment for damages is satisfied by it is to recover what it paid from its employee who
committed the fault which gave rise to the action based on quasi delict as provided in Art. 2181.

23. Adolfo Santos v. Abraham Sibug, GR L-26815, May 26, 1981, Melencio-Herrera, J.
(Kabit System)
FACTS:
Prior to April 26, 1963 (Accident date), Vicente Vidad was a duly authorized passenger jeepney
operator. Also prior to April 26, Adolfo Santos was the owner of a passenger jeep, but he had no
CPC to operate the jeep as a public passenger jeep. Santos then transferred his jeep to the name
of Vidad so that it could be operated under Vidad’s CPC. In other words, Santos became a kabit
operator. For the protection of Santos, Vidad executed a re-transfer document to Santos which
was to be registered if it was decided that the jeep of Santos was to be withdrawn from the kabit
arrangement.

On April 26, private respondent Sibug was bumped by a passenger jeepney operated by Vidad
and driven by Gragas. Sibug filed a complaint for damages against Vidad and Gragas with CFI in
Branch XVII. It sentenced Vidad and Gragas jointly and severally to pay Sibug P506, P3k as moral
damages, P500 as attorney’s fees and costs.

The sheriff levied on a motor vehicle registered in Vidad’s name and scheduled the public auction
sale thereof. Santos presented a third-party claim with the sheriff alleging that he was the actual
owner, and stating that registration thereof in Vidad’s name was merely to enable Santos to use
Vidad’s CPC. Santos then filed in CFI Branch X an action for damages against Sibug, Vidad, and
the sheriff. He claims that he is the actual owner of the jeepney subject of levy and that a fictitious
deed of sale was executed by him in Vidad’s favor to operate under Vidad’s franchise. He prayed
that the jeepney be restored to him.

Branch X affirmed Santos’ ownership. There was no public sale. The complaint against Vidad was
dismissed. Sibug appealed to CA. CA nullified the judgment of branch X and permanently
restrained Branch X from taking cognizance of the case field by Santos.

ISSUE:
Whether Santos may recover his jeepney from the levy.
HELD: NO.
The judgment against Sibug was inequitable. In asserting his ownership, Santos admitted his
participation in the illegal practice of kabit system. S20(g) of the Public Service Act, then the
applicable law, provided that it is unlawful for any public service or for the owner or operator
thereof, without approval of the Commission, to “sell, alienate, mortgage, encumber, or lease its
property, franchise, certificates, privileges, or rights, or any part thereof.”

Here, Santos fictitiously sold the jeep to Vidad, who became the registered owner and operator of
record at the time of the accident. Vidad’s resale to Santos was not registered. Although Santos,
as the kabit, was the true owner as against Vidad, Vidad, as the registered owner/operator and
grantee of the franchise, is directly and primarily responsible and liable for the damages
caused to Sibug as a consequence of the negligent operation of the jeep. The ruling is based on
the principle that the operator of record is considered the operator of the vehicle in
contemplation of law as regards the public and third persons, even if the vehicle involved in
the accident had been sold to another where such sale had not been approved by the then Public
Service Commission.

Thus, since the vehicle was registered in Vidad’s name, the levy on execution against said vehicle
should be enforced notwithstanding that the secret ownership of the vehicle belonged to
another. Santos, as the kabit, should not be allowed to defeat the levy on his vehicle and to
avoid his responsibilities as a kabit owner for he had led the public to believe that the vehicle
belonged to Vidad. This is one way of curbing the pernicious kabit system that facilitates the
commission of fraud against the travelling public.

Santos’ remedy, as real owner, is to go against Vidad, the actual operator responsible for the
accident, for the recovery of whatever damages he may suffer by reason of the levy. In fact, had
Santos been impleaded as party defendant in Branch XVII, he should be held jointly and severally
liable with Vidad and the driver for damages to Sibug.

24. Lita Enterprises, Inc. v. Second Civil Cases Division, GR 64693, April 27, 1984, Escolin,
J. (Kabit System)
FACTS:
Spouses Nicasio Ocampo and Francisca Garcia, private respondents, purchased in installment from
Delta Motor Sales Corporation five Toyota Corona standard cars to be used as taxis. Since they
had no franchise to operate as taxicabs, they contracted with Lita Enterprises through its
representative Manuel Concordia for the use of the latter’s CPC for P1k and a monthly rental of
P200 per taxi. The cars were registered in Lita’s name. But possession remained with spouses
Ocampo who operated the same under Acme Taxi, Lita’s trade name.

One of the taxis driven by their employee Martin collided with a motorcycle whose driver, one
Florante Galvez, died from head injuries. A criminal case was filed against Martin and a civil case
for damages was instituted by Rosita, heir, against Lita as registered owner of the taxi. Lita was
adjudged liable for P25k and P7k. This decision became final.

One of the vehicles of respondent spouses Ocampo was levied upon and sold at public auction
for P2,150. Another car was also sold for P8k.

Thereafter, Nicasio decided to register his taxis in his name and requested the manager of Lita to
turn over the registration papers to him, but the latter refused. Thus, he and his wife filed a
complaint against Lita and Manila sheriff for reconveyance of motor vehicles with damages in
CFI. CFI ordered Lita to transfer the registration certificate of the three cars not levied upon. But
it ordered Spouses Ocampo to pay rentals for the CPC. IAC modified only. Hence this petition.

ISSUE:
Whether Sps. Ocampo may recover their motor vehicle.
HELD: NO.
The parties operated under the “kabit system” whereby a person who has been granted a CPC
allows another person who owns motor vehicles to operate under such franchise for a fee. A CPC
is a special privilege conferred by the government. Abuse of this privilege cannot be
countenanced. Although not outrightly penalized as a crime, the kabit system is recognized as
contrary to public policy and, thus, void and inexistent under Art. 1409 of NCC. The court will
not aid either party to enforce an illegal contract, but will leave them both where it finds
them. Thus, it was error for the CFI and IAC to have accorded the parties relief from their
predicament. Art. 1412 of NCC denies them such aid:
"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."
The defect of inexistence of a contract is permanent and incurable. 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 violation.

25. Teja Marketing v. IAC, GR L-65510, March 09, 1987, Paras, J. (Kabit System)
FACTS:
Respondent Pedro Nale bought from plaintiff a motorcycle with sidecar for P8k. He paid P1.7k
down payment with promise that he would pay the balance within 60 days. but Pedro failed to
comply. Upon his request, the period of paying the balance was extended to 1 year in monthly
installments until January 1976 when he stopped paying anymore. Plaintiff made demands but
Pedro failed to comply.

There was a chattel mortgage constituted as security. The practice of financing firms is that where
there is a balance of the purchase price, the registration papers of the vehicle are not given to the
buyer. The motorcycle sold to Pedro was first mortgaged to Teja by Angel Jaucian though Teja
and Angel are one and the same, because it was made to appear that way as Pedro had no
franchise of his own and he attached the unit to plaintiff’s MCH Line. Plaintiff was to register
the motorcycle yearly with the Land Transportation Commission, but plaintiff failed to register the
motorcycle in 1976 claiming that defendant failed to comply with some requirements like payment
of insurance premiums and the bringing of the motor to LTC for stenciling, and that Pedro was
hiding the motor from him.

Pedro did not dispute the balance of P1.7k. He was persuaded to buy from plaintiff the motor with
the side car because of the condition that plaintiff would register the motor every year with LTC.
But in 1976, plaintiff did not register the chattel mortgage and motor with LTC notwithstanding
that Pedro gave him P90 as mortgage fee and registration fee and had the motor insured. Because
of this failure to register, Pedro claims to have suffered damages when he failed to claim the
insurance indemnity aside from the loss of daily income of P15 as boundary fee since Oct. 1976
when the motor was impounded by LTC for being unregistered. He claims that he did not hide the
motor as it was used to transport passengers. He puts the blame on plaintiff for not registering the
motor and for not giving him the registration papers despite demands.

Pedro purchased the motor to engage in the transportation business and it was attached to
plaintiff’s transportation line who had the franchise, so much so that in the registration
certificate, plaintiff appears to be the owner of the unit.

Teja filed an action for sum of money with damages against Pedro in City Court. City court ordered
Pedro to pay the balance of P1.7k and damages. CFI affirmed in toto. IAC dismissed both claims
of Teja and Pedro because they were under kabit system, an illegal contract, applying pari delicto.
Hence this petition for review.

ISSUE:
Whether the claims of the parties may be granted.
HELD: NO.
The parties operated under an arrangement commonly known as “kabit system” whereby a person
granted a CPC allows another person who owns motor vehicles to operate under such
franchise for a fee. A CPC is a special privilege conferred by the government. Abuse of this
privilege cannot be countenanced. Although not outrightly penalized as a crime, the kabit system
is recognized as being contrary to public policy and thus, void and inexistent under Art. 1409
of NCC. The court will not aid either party to enforce an illegal contract but will leave both where
it finds them. Art. 1412 of NCC denies them relief. The defect of inexistence of a contract is
permanent and cannot be cured by ratification or prescription.

26. Abelardo Lim v. Cam GR 125817, January 16, 2002, Bellosillo, J. (Kabit System)
FACTS:
Private respondent Donato Gonzales purchased an Isuzu passenger jeepney from Gomercino
Vallarta, holder of CPC, for the operation of public utility vehicle. While Gonzales continued
offering the jeep for public transport services, he did not register the vehicle in his name nor did
he source himself for a CPC. So Vallarta remained on record as its registered owner and
operator.

The jeep collided with a ten-wheeler truck owned by Lim and driven by co-petitioner Esmadito
Gunnaban. Gunnaban owned responsibility for the accident, explaining that the truck suddenly
lost its brakes. To avoid colliding with another vehicle, he swerved eft until he smashed into a
Ferroza car and then into Gonzales’ jeep driven by one Virgilio Gonzales. The impact caused
severe damage to the Ferroza and the jeep. One passenger died and many were wounded.

Lim shouldered the costs for hospitalization of the wounded and compensated the heirs of the
deceased passenger, and had the Ferroza restored to good condition. He offered to have Gonzales’
jeep repaired, but Gonzales rejected and demanded a brand-new jeep worth P236k. Negotiations
were abandoned. Hence, the filing of a complaint for damages by Gonzales against Lim and
Gunnaban.

Lim claims that as the jeep was registered in Vallarta’s name, it was Vallarta and not Gonzales
who was the real party in interest. Meanwhile, the jeep was left by the roadside to corrode.
Gonzales had no financial capability to tow the jeep home. Gonzales wanted P236k, petitioners
claim that they could repair the jeep for P20k.

Trial court upheld Ginzales’ claim and awarded him P236k and damages. Gunnaban was found to
have caused the accident since he panicked in the face of an emergency. Lim’s liability was
premised on want of diligence in supervising his employees since Gunnaban doubled as mechanic
of the truck despite not being trained to handle such task. CA affirmed. Hence this petition.

ISSUE:
Whether Gonzales may recover damages.
HELD: YES.
Petitioner claim that to recognize an operator under kabit system as the real party in interest is
subversive of public policy.
The kabit system is an arrangement where a person who has been granted a CPC allows other
persons who own motor vehicles to operate them under his license, sometimes for a fee or
percentage of the earnings. Although not penalized as a crime, it is contrary to public policy and
thus void under Art. 1409. One of the primary factors in granting CPCs for the business of public
transportation is the financial capacity of the holder of the license so that liabilities from accidents
may be duly compensated. The kabit system renders illusory such purpose. If a registered owner
is allowed to escape liability by proving who the supposed owner of the vehicle is, it would be
easy for him to transfer the vehicle to another who possesses no property with which to respondend
financially for the damage. Thus, the registered owner is not allowed to prove that another person
has become the owner to relieve himself of liability.

The thrust of the law in enjoining kabit system is not so much as to penalize the parties but to
IDENTIFY the person upon whom responsibility may be fixed in case of an accident to
protect the riding public. The policy thus loses its force if the public at large is not deceived,
much less involved.

Here, the evil sought to be prevented in enjoining kabit does not exist. Neither of the parties to
the kabit is being held liable for damages. Second, the case arose from the negligence of another
vehicle in using the public road to whom no misrepresentation as to ownership and operation of
the jeep was made and to whom no such misrepresentation was necessary. Thus, it cannot be said
that Gonzales and the registered owner of the jeep were in estoppel for leading the public to believe
that the jeep belonged to the registered owner. Third, the riding public was not bothered nor
inconvenienced by the illegal arrangement. On the contrary, it was Gonzales himself who had
been wronged and was seeking compensation for the damage to him. It would be the height of
inequity to deny him his right.

Thus, Gonzales has the right to proceed against petitioners for the damage to his jeep and business.
The grant of P236k was affirmed since it is not only the purchase price of the jeep that is considered
but also its loss of earning capacity of P300/day.

27. Urbano Magboo v. Delfin Bernardo, GR L-16790, April 30, 1963, Makalintal, J.
(Boundary System)
FACTS:
Plaintiffs spouses Urbano and Emilia Magboo are the parents of Cesar Magboo, a child of 8yo,
who died when he was killed in a motor vehicle accident, the fatal vehicle being a passenger jeep
owned by Bernardo. The jeep was driven by Conrado Roque. The contract between Roque and
Bernardo was that Roque was to pay Bernardo P8 which he paid to Bernardo for the privilege of
driving the jeep. Their agreement was that whatever earnings Roque could make out of the use
of the jeep in transporting passengers would belong to Roque. Roque was convicted of homicide
thru reckless imprudence and served his sentence. He was unable to indemnify Sps. Magboo since
he was insolvent. So CFI ordered Bernardo to pay them P3k as subsidiary liability under Art. 103
of RPC as employer of Roque.

Bernardo appeals, claiming that his relationship with Roque is not of employer-employee, but of
lessor-lessee.
ISSUE:
Whether Bernardo is Roque’s lessor.
HELD: NO.
A similar contention has been rejected by this Court in several cases. The features which
characterize the “boundary system”- the fact that the driver does not receive a fixed wage but
gets only the excess of the amount of fares collected by him over the amount he pays to the
jeep-owner, and that the gas consumed by the jeep is for the driver’s account- are not sufficient
to withdraw the relationship between them from that of employer and employee. This principle
applies with greater reason in negligence cases concerning the right of third parties to recover
damages.

In Montoya v. Ignacio, the owner and operator of a jeep leased it to another but without approval
of the Public Service Commission. In a collision where a passenger died, we ruled that since the
lease was without approval which was required by law, the owner continued to be the operator
of the vehicle in legal contemplation and was responsible for the consequences incident to its
operation. The same responsibility exists where the injured party is not a passenger but a third
person under culpa aquiliana. There is no reason why a different rule should be applied in a
subsidiary liability case under Art. 103 of RPC.

To exempt from liability the owner of a public vehicle who operates it under the boundary system
on the ground that he is a mere lessor would be not only to abet flagrant violations of the Public
Service Law but also to place the riding public at the mercy of reckless and irresponsible drivers-
reckless because the measure of their earnings depends largely upon the number of their trips and
hence the speed at which they drive, and irresponsible because most, if not all of them, are in no
position to pay the damages they might cause.

28. Fisher v. Yangco Steamship Co. (Duty to Accept) (See case #18)

29. Maersk Line v. CA, GR 94761, May 17, 1993, Bidin, J. (Duty to Deliver: Time of Delivery)
FACTS:
Maersk Line is engaged in the transport of goods by sea, doing business in PH thru its agent
Compania General de Tabacos de Filipinas. Private respondent Efren Castillo is the proprietor of
Ethegal Laboratories, a firm engaged in the manufacture of pharmaceutical products.

Castillo ordered from Eli Lilly Inc. of Puerto Rico thru Eli’s agent in PH, Elanco Products, 600k
empty gelatin capsules for pharmaceutical products. Shipper Eli Lilly advised Castillo, thru a
memorandum of shipment, that the gelatin were already shipped on board MV Anders
Maerskline to PH via Oakland California. The date of arrival was specified in the memo as April
3, 1977. But for unknown reasons, the capsules were mis shipped and diverted to Richmond,
Virginia USA then transported back to Oakland.

The goods arrived in PH on June 10, 1977, 2 months from the date specified in the memo. Castillo
thus refused to take delivery of the goods and filed an action in court a quo for rescission of
contract with damages against Maersk and Eli Lilly. But Castillo moved to dismiss the complaint
against Eli since evidence shows that the delay was attributable to Maersk only. So Eli also
withdrew its cross-claim against Maersk.
Court a quo held that Maersk breached its obligation consisting of negligence to ship the 6 drums
of empty gelatin capsules on April 3, 1977. Under Art. 1170, they are liable. CA affirmed and
modified only the damages. Hence this petition.

ISSUE:
Whether Maersk Line is liable for the delay.
HELD: YES.
Maersk claims that it is not liable for the delay since it acted in GF and there was no special contract
under which the carrier undertook to deliver the shipment on or before a specific date. Castillo
claims that before the arrival of the goods, he made commitments and contracts with his customers
for the production of drugs which were all cancelled due to the delay. Castillo also claims that the
provision in fine print at the back of the bill of lading issued by Maersk is void, being a contract
of adhesion. Thus, Maersk can be held liable for the damages he suffered.

Trial court and CA’s decisions, in finding Maersk liable, relied upon its finding that contracts of
adhesion are void. The lower court also said that exemption for liability for delay is against public
policy and thus void. The BoL reads:
"6. GENERAL "(1) The Carrier does not undertake that the Goods shall arrive at the port
of discharge or the place of delivery at any particular time or to meet any particular
market or use and save as is provided in clause 4 the Carrier shall in no circumstances be
liable for any direct, indirect or consequential loss or damage caused by delay. If the
Carrier should nevertheless be held legally liable for any such direct or indirect or
consequential loss or damage caused by delay, such liability shall in no event exceed the
freight paid for the transport covered by this Bill of Lading."

It is not disputed that this provision at the back of BoL is a contract of adhesion. Generally,
contracts of adhesion are void since almost all the provisions are prepared only be one party,
usually the carrier. The only participation of the other party is to affix his signature, hence the
term “adhesion.” But also, one who adheres to the contract is free to reject it entirely. If he
adheres, he gives his consent.

A BoL is both a receipt for goods shipped and a contract to transport and deliver the same as
stipulated. As contract, it is the law between the parties who are bound by its terms provided these
are not contrary to law etc. It is presumed that the stipulations of BoL were, in the absence of fraud,
concealment, or improper conduct, known to the shipper, and he is generally bound by his
acceptance whether he reads the bill or not. -Magellan Manufacturing Marketing Corporation v.
CA

But the ruling in Magellan only applies if such contracts will not create an absurd situation as
in this case. The provision in the BoL here practically leaves the date of arrival of the shipment
on the sole determination and will of the carrier. While it is true that CCs are not obligated by
law to carry merchandise, and persons are without right to prompt delivery unless the CCs
previously assume the obligation to deliver at a given time, delivery of shipment or cargo should
AT LEAST be made within a REASONABLE TIME.
In the absence of a special contract, a carrier is not an insurer against delay in transportation of
goods. But when a CC undertakes to convey goods, the law implies a contract that they shall be
delivered at destination within a reasonable time in the absence of agreement as to time of
delivery. But where a carrier has made an express contract to transport and deliver property
within a specified time, it is bound to fulfill its contract and is liable for delay.

The BoL shows that the shipment was estimated to arrive in Manila on April 3, 1977. While there
was no special contract entered into indicating the date of arrival, Maersk was nonetheless aware
of the specific date when the goods were expected to arrive as indicated in BoL. Here, the delay
of 2m7d is beyond the realm of reasonableness. Thru Maersk’s negligence, the gelatin capsules
were misshipped to Richmond Virginia.

There was gross negligence amounting to bad faith since Maersk never even bothered to explain
the cause of delay. The award of moral damages is proper. Exemplary damages is also proper as
there was gross carelessness which constitutes wanton misconduct. Exemplary damages may be
awarded if defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner.
Castillo is also entitled to reasonable attorney’s fees, which is generally not recoverable except if
exemplary damages are awarded, since Maersk acted with gross negligence amounting to BF.

30. Magellan Manufacturing Marketing Corporation v. CA, GR 95529, August 22, 1991,
Regalado, J. (Duty to Deliver: Consequences of Delay: Abandonment)
FACTS:
Magellan entered into a contract with Choju Co. (*buyer si Choju) of Yokohama Japan to export
136k anahaw fans for $23,220. A letter of credit was issued to Magellan by Choju. Magellan
contracted private respondent F.E. Zuellig, shipping agent, to ship the anahaw fans through the
other private respondent Orient Overseas Container Lines, Inc. (OOCL) specifying that he needed
an on-board BoL and that transshipment is not allowed under the letter of credit. Magellan paid
Zuellig the freight charges and secured a copy of BoL which was presented to Allied Bank. The
bank credited $23,220 to Magellan’s account.

But later, Magellan was informed that payment was refused by Choju because there was no on-
board BoL and there was transshipment of goods. Magellan informed private respondents. The
latter issued a certificate saying that its BoL is an on board BoL and there is no transshipment
when goods are transferred from one vessel to another which belong to the same owner. But Choju
still refused.

Respondents billed Magellan for the shipment and demurrage in Japan for P51k. Magellan was
given the option to pay the P51k or to abandon the fans to let private respondents sell them at
public auction to cover costs of shipmend and demurrages. Magellan opted to abandon the goods.

But later, private respondents demanded P298k for the freight charges from Japan to Manila, from
when Magellan requested the fans to be shipped back to Manila after Choju refused them, for
demurrage, and for stripping the container van of the fans.

Magellan filed a complaint praying that private respondents be ordered to pay it whatever it was
not able to earn from Choju worth P174k and damages since they are to blame for Choju’s refusal
to accept. Private respondents claim that the BoL clearly shows that there will be a transshipment
and that Magellan was aware that MV Pacific Despatcher was up to HK only where the cargo will
be transferred to another vessel for Japan. They filed counterclaim for P298k.

The lower court ruled in favor of private respondents, saying that Magellan consented to the BoL
where it is clearly indicated that there will be transshipment. Magellan is liable for the freight from
Japan to Manila and demurrage since it was the one who ordered the reshipment from Japan to
Manila. CA affirmed, but reducing the liability to P52k, freight and demurrage incurred in Japan
but not demurrage in Manila. Hence this petition.

ISSUE:
Whether Magellan is still liable for freight and demurrage after exercising its option to abandon
the anahaw fans to private respondents.
HELD: NO.
Magellan faults private respondents for the refusal of its buyer Choju to take delivery of the anahaw
fans resulting in a loss of P174k, purchase price, because of violation of the terms of the letter of
credit. We find no fault on private respondents’ part.

Transshipment, in maritime law, is defined as “the act of taking cargo out of one ship and loading
it in another” or the “transfer for further transportation from one ship or conveyance to another.”
Thus, there is transshipment whether or not the same person, firm, or entity owns the vessels.
The fact of transshipment is not dependent upon the ownership of the transporting ships but rather
on the fact of actual physical transfer of cargo from one vessel to another. Transshipment
occurred in this case.

Magellan claims that there was a mistake in documentation by private respondents since it stated
in BoL that there was transshipment when there was actually none. Thus, the mistake militates
against the conclusiveness of the BoL as an exception to the parol evidence rule and would permit
it to present evidence to vary the terms of the written agreement or BoL.

A BoL operates both as a receipt for the goods shipped and contract to transport and deliver the
same. As a contract, it names the parties, which includes the consignee, fixes the route, destination,
and freight rates or charges, and stipulates the rights and obligations assumed by the parties. Being
a contract, it is the law between the parties who are bound by its terms provided these are not
contrary to law etc. A BoL usually becomes effective upon its delivery to and acceptance by the
shipper. It is presumed that the stipulations of the bill were, in the absence of fraud, concealment,
or improper conduct, known to the shipper, and he is generally bound by his acceptance whether
he reads the bill or not.

A shipper who receives a BoL without objection after an opportunity to inspect it and permits the
carrier to act on it by proceeding with the shipment is presumed to have accepted it as correctly
stating the contract and to have assented to its terms. In the absence of fraud or mistake, he is
estopped form thereafter denying that he assented to such terms.

Magellan had full knowledge of and consented to the terms and conditions of BoL thereby
making the same conclusive as to it. James Cu, president of Magellan, personally received and
signed the BoL. Practically, there is no better way to signify consent than by voluntarily signing
the document containing the agreement.

Magellan argues that assuming there was transshipment, it cannot be deemed to have agreed
thereto even if it signedthe BoL since it had made known from the start to private respondents that
transshipment was prohibited under the letter of credit. It relies on Art. 1370 of NCC (if the words
appear to be contrary to the evident intention of the parties, the latter shall prevail over the former).

But Art. 1370 also provides that “if the terms of the contract are clear and leave no doubt upon
the intention of the contracting parties, the literal meaning of the stipulations shall control.” Art.
1371 also provides that in judging the intention of the parties, their contemporaneous and
subsequent acts shall be principally considered. The terms of BoL are clear and obviates from the
need for interpretation. The intent of the parties, the carriage of cargo, and the wordings of BoL
do not contradict. From the contemporaneous and subsequent acts of Magellan of signing the BoL
and paying the freight charges, Magellan must necessarily be charged with full knowledge and
unqualified acceptance of the terms of BoL and that it intended to be bound thereby.

Also, it is a well-known commercial usage that transshipment of freight without legal excuse,
however competent and safe the vessel into which the transfer is made, is a violation of the
contract and infringement of the shipper’s right and subjects the carrier to liability if the freight
is lost even by a cause otherwise excepted. It is improbable that private respondents would be
unaware of such custom and to have undertaken the transshipment without Magellan’s consent.

Upon cross examination of James Cu, it was established that Magellan, thru its president James
Cu, was aware that the BoL issued was not an on board BoL. An on board BoL is one in which
it is stated that the goods have been received on board the vessel which is to carry the goods,
whereas a received for shipment BoL is one in which it is stated that the goods have been received
for shipment with or without specifying the vessel by which the goods are to be shipped. Received
for shipment BoLs are issued whenever conditions are not normal and there is insufficiency of
shipping space. An on board BoL is issued when the goods have been actually placed aboard the
ship with every reasonable expectation that the shipment is as good as on its way. Thus, it is
understandable that a party to a maritime contract would require an on board BoL because of its
apparent guaranty of certainty of shipping and seaworthiness of the vessel which is to carry
the goods.

Magellan claims that when Zuellig issued a certification saying that the BoL was an on board BoL,
the received for shipment only BoL was converted into an on board BoL as required by Choju.
But even if the certification converted the BoL, it was issued only on July 19, 1980, beyond the
expiry date of June 30, 1980 in the letter of credit to present an on board BoL. The fact remains
that on June 30, no on board BoL was presented in compliance with the terms of the letter of
credit and this default negates Magellan’s entitlement to the proceeds thereof.

Even if the BoL is a contract of adhesion, as Magellan claims, warranting a more liberal
interpretation in favor of Magellan as to ambiguities, the BoL is clear on its face. There is no
ambiguity. Plane tickets and BoLs are contracts not entirely prohibited. The one who adheres to
the contract is in reality free to reject it entirely. If he adheres, he gives his consent. Thus, in
sum, Magellan had full knowledge that the BoL issued to it contained terms clearly violative
of the requirements of the letter of credit. The question of whether there was violation of the
terms of the letter of credit should not affect private respondents since they are not privies thereto.

-Magellan claims that CA erred in holding it liable to private respondents for P52k despite its
exercise of its option to abandon the cargo.

Demurrage is the compensation provided for in the contract of affreightment for the detention of
the vessel beyond the time agreed on for loading and unloading. It is the claim for damages for
failure to accept delivery. Notice of arrival of vessels or conveyances or of their placement for
purposes of unloading is often a condition precedent to the right to collect demurrage charges.

CA ruled that Magellan is not liable for demurrage when the goods arrived in October 1980 in
Manila since it was notified only in March 1981. Magellan assails only the award of CA of P52k
to private respondents, P51k as freight and demurrage charges in Japan and P831 for charges at
Manila International Port Terminal. It claims that since it exercised its option to abandon the
goods to let private respondents sell them at public auction and apply the proceeds as payment, it
was released from liability of the P52k. The liability to which it is released from the abandonment
cannot refer to the demurrage in Manila as CA ruled that these were not chargeable to it.

On this, we agree with Magellan. Ordinarily, the shipper is liable for freightage due to the fact that
the shipment was made for its benefit or under its direction and correspondingly, the carrier is
entitled to collect charges for its shipping services. This is especially true here as the reshipment
was made at the instance of Magellan. But in private respondents’ letter on March 20, 1981, they
offered Magellan the OPTION of paying the shipping and demurrage to take the goods or of
ABANDONING them so that private respondents could sell them at public auction and apply
the proceeds in payment of the shipping and other charges. In response, Magellan
communicated its decision to abandon the goods. Notwithstanding this, private respondents sent a
demand letter that they will not accept the abandonment and that Magellan pay the P298k.

Since private respondents of their own volition granted Magellan with the option, especially since
it was accepted by Magellan, they are ESTOPPED from reneging thereon. Magellan, in
exercising the option, and private respondents, in giving the option, are concluded by their
respective actions. To let any of them unilaterally back out would countenance abuse of rights.

31. Trans-Asia Shipping Lines, Inc. v. CA, GR 118126, March 04, 1996, Davide, Jr., J. (Duty
to Deliver: Consequences of Delay: Right of Passengers in Case of Delay)
FACTS:
Private respondent Atty. Renato Arroyo bought a ticket from Trans Asia, a corporation engaged
in inter-island shipping, for the voyage of MV Asia Thailand vessel to Cagayan de Oro City from
Cebu. Atty. Arroyo boarded the vessel. He noticed that some repair works were being undertaken
on the vessel’s engine. The vessel departed with only one engine running. After an hour of slow
voyage, the vessel stopped near Kawit Island and dropped anchor. After 30 mins of stillness, some
passengers demanded that they be allowed to return to Cebu for they were no longer willing to
continue their voyage to Cagayan. The captain acceded. Thus, the vessel headed back to Cebu.
At Cebu, Atty. Arroyo, with the other passengers, were allowed to disembark. The vessel then
went to Cagayan. The next day on Nov. 13, 1991, Arroyo board MV Asia Japan to Cagayan, also
Trans Asia’s vessel. On account of the failure of Trans Asia to transport him to the place of
destination on November 12, Arroyo filed a complaint for damages against Trans Asia.

Arroyo claims that MV Asia Thailand’s engine conked out in open sea and for more than an hour
was stalled at the mercy of the waves, causing fear in the passengers. When the vessel sailed
back to Cebu after regaining power, for unexplained reasons, the passengers, including Arroyo,
were arrogantly told to disembark without precautions against possible injury to them.

The trial court ruled that the action was only for breach of contract with Arts. 1170, 1172, and
1173 of NCC, not Art. 2180, as applicable. It believed the story of Trans Asia that the boat returned
to Cebu because of the passengers’ requests. It found that Arroyo was negligent when he
disembarked after an announcement that those who wish to disembark has 10 minutes to do so. He
thought that the boat would not go to Cagayan anymore. Thus, he should have asked the crew.

CA reversed and awarded damages. but it did not allow damages for delay in the performance of
Trans Asia’s obligations as the required demand in Art. 1169 was not met. It held that Trans Asia
knew that the vessel was not yet in sailing condition because the second engine was still being
repaired. Despite this, it still proceeded with only one engine running. As expected, engine
trouble occurred. No wonder why some passengers requested to be brought back to Cebu. Arroyo
should not be faulted for choosing to disembark. Hence this petition.

ISSUE:
Whether Trans Asia is liable for damages.
HELD: YES.
There was undoubtedly a contract of common carriage. The laws of primary application are the
provisions on CCs under S4, Chp3, Title VIII, Book IV of NCC, while all other matters not
regulated thereby, the Code of Commerce and special laws. Under Art. 1733, Trans Asia was
bound to observe extraordinary diligence in ensuring the safety of Arroyo. Pursuant to Art. 1755,
this means that it was bound to carry Arroyo safely as far as human care and foresight could
provide, using the utmost diligence of very cautious persons, with due regard for all the
circumstances. Here, Trans Asia failed to discharge this obligation.

Before the voyage, Trans Asia repaired the cylinder head of one of the engines. But even before it
could finish these repairs, it allowed the vessel to leave the port of origin on only one functioning
engine instead of two. Even the lone functioning engine was not in perfect condition as it conked
out before it had run its course. This caused the vessel to remain adrift at sea. To prevent capsize,
it had to drop anchor. Thus, the vessel was unseaworthy even before the voyage began. To be
seaworthy, a vessel must be adequately equipped for the voyage and manned with a sufficient
number of competent officers and crew. Failing to keep the vessel seaworthy is a breach of its
duty in Art. 1755.

As to liability for damages, Art. 1764 provides that “Damages in cases comprised in this Section
shall be awarded in accordance with Title XVIII of this Book, concerning Damages. xxx”. The
damages in Title XVIII are actual or compensatory, moral, nominal, temperate, or moderate,
liquidated, and exemplary. Arroyo claims actual or compensatory, moral, and exemplary damages.
Actual damages represent the adequate compensation for pecuniary loss and for profits the oblige
failed to obtain. In contracts or quasi contracts, the obligor is liable for all damages which may be
reasonably attributed to the non-performance of the obligation if he is guilty of fraud, BF, malice,
or wanton attitude.

Moral damages include moral suffering, mental anguish, fright, etc. They may be recovered in
cases under Art. 2219 if they are the proximate result of, as here, petitioner’s breach of contract of
carriage. Exemplary damages are imposed by way of example or correction for the public good,
in addition to moral, temperate, liquidated, or compensatory damages.

Art. 1169 is inapplicable as there was no delay in the commencement of the contracted voyage. If
any delay was incurred, it was after the commencement when the voyage was interrupted when
the engine conked out. As to the rights and duties of the parties strictly arising out of such delay,
NCC is silent. Art. 698 of the Code of Commerce, however, specifically provides for such a
situation:
In case a voyage already begun should be interrupted, the passengers shall be obliged
to pay the fare in proportion to the distance covered, without right to recover for losses
and damages if the interruption is due to fortuitous event or force majeure, but with a right
to indemnity if the interruption should have been caused by the captain exclusively. If the
interruption should be caused by the disability of the vessel and a passenger should agree
to await the repairs, he may not be required to pay any increased price of passage, but his
living expenses during the stay shall be for his own account.
This applies suppletorily pursuant to Art. 1766 of NCC. But this does not solve the controversy
since the cause of delay was failure to observe extraordinary diligence. Art. 698 must be read
together with Arts. 2199, 2200, 2201, and 2208 in relation to Art. 21 of NCC. So read, it means
that Trans Asia is liable for any pecuniary loss or loss of profits which Arroyo may have
suffered by reason thereof. For Arroyo, such would be the loss of income if unable to report to
his office on the day he was supposed to arrive were it not for the delay. This, however,
assumes that he stayed on the vessel and was with it when it thereafter resumed its voyage. But he
did not. As he and some passengers resolved not to complete the voyage, the vessel had to return
and let them disembark. Arroyo then took Trans Asia’s other vessel the next day.

Thus, any further delay in Arroyo’s arrival at his destination was caused by his decision to
disembark. Had he remained on the first vessel, he would have reached his destination at noon of
Nov. 13 and able to report to his office in the afternoon. He would have lost only the salary for
half of a day. But actual damages must be proved. Arroyo failed to do so. There is no evidence
that he did not receive his salary for Nov. 13 nor that his absence was not excused.

Trans Asia is liable for moral and exemplary damages as it deliberately disregarded its solemn
duty to exercise extraordinary diligence and acted in BF and in a wanton and reckless manner.
Trans Asia claims that Arroyo was “overreacting” since the sea was calm. But this only shows its
lack of concern for the safety of its passengers.

Attorney’s fees may be recovered only in the concept of actual damages; thus, it must be proven.
It was not.
32. Belgian Overseas Chartering and Shipping NV v. Philippine First Insurance Co., Inc.,
GR 143133, June 5, 2002, Panganiban, J. (Duty to exercise Extraordinary Diligence:
Presumption of Negligence: Carriage of Goods)
FACTS:
CMC Trading AG shipped on board MV Anangel Sky at Hamburg Germany 242 coils of various
prime cold rolled steel sheets for transportation to Manila consigned to PH Steel Trading
Corporation. MV Anangel arrived at the port of Manila and the cargo was discharged. Four (4)
coils were found to be in bad order and unfit for the intended purpose. PH Steel declared them as
total loss.

Despite demand, Belgian refused to submit to the consignee’s claim. PH First Insurance
Corporation paid the consignee P506k and was subrogated to its rights. So PH First Insurance filed
a complaint for recovery of the P506k they paid. Belgian claims that the damage was due to pre-
shipment damage, to the inherent nature, vice, or defect of the goods, or to perils, danger,
and accidents of the sea, or insufficiency of packing, or to the act or omission of the shipper.
They also argued that their liability should not exceed the limitations of liability in the Bill of
Lading (BoL) and laws.

RTC dismissed the complaint, saying that PH First Insurance failed to prove its claims with the
quantum of proof required by law. CA reversed, saying that Belgian failed to overcome the
presumption of negligence of CCs. It failed to prove that the loss was due to pre-shipment damage.
Hence this petition.

ISSUE:
Whether Belgian is liable for the loss of the 4 coils.
HELD: YES.
1. CC’s extraordinary diligence, presumption of negligence.
Belgian claims that the presumption of fault of CCs should not be applied based only on the lone
testimony of private respondent. But CCs, from the nature of their business and for reasons of
public policy, are bound to observe extraordinary diligence and vigilance with respect to the
safety of the goods and passengers they transport. The extraordinary responsibility lasts from the
time the goods are unconditionally placed in the possession of and received for transportation
by the carrier until they are delivered actually or constructively to the consignee or to the
person who has a right to receive them. (Art. 1736)

The strict requirement is justified by the fact that, without a hand in the preparation of the contract,
the riding public enters into a contract of transportation with CCs. Even if it wants to, it cannot
submit its own stipulations for their approval. It merely adheres to the agreement prepared by them.

Owing to this high degree of diligence required, CCs are, as a general rule, presumed to have
been at fault or negligent if the goods they transported deteriorated or got lost or destroyed
UNLESS they PROVE that they EXERCISED EXTRAORDINARY DILIGENCE in
transporting the goods. But the presumption will not arise if the loss is due to those enumerated
in Art. 1734, which is a closed list. Corollarily, mere proof of delivery of the goods in good order
to a CC and of their arrival in bad order at destination constitutes a prima facie case of negligence
against the carrier. If no adequate explanation is given as to how the deterioration or loss
happened, the transporter shall be held responsible.

Belgian failed to rebut this presumption of negligence. 1) As stated in the BoL, they received the
shipment in good order and condition in Hamburg Germany. 2) Prior to unloading, an inspection
report prepared by representatives of both parties showed the steel bands broken, the metal
envelopes rust-stained and hevily buckled, and the contents thereof exposed and rusty. 3) The
Certificate of Analysis stated that, based on the sample submitted and tested, the steel sheets found
in bad order were wet with fresh water. 4) Belgian, in a letter, admitted that they were aware of
the condition of the four coils in bad order. All these prove the fact of shipment in good order
and consequent damage to the four coils while in the possession of Belgian, who failed to explain
why. Belgian also failed to prove that they observed extraordinary diligence.

Although the BoL stated “metal envelopes rust stained and slightly dented”, Belgian did not
exercise due diligence to forestall or lessen the loss. They claim that under Art. 1734(4), the
notation in BoL is evidence that the character of the goods or defect in the packing or containers
was the proximate cause of damage. But from the evidence, it cannot be concluded that the damage
to the four coils was due to the condition noted in the BoL. Art. 1734(4) refers to cases when goods
are lost or damaged while in transit as a result of the natural decay of perishable goods or
fermentation or evaporation of substances liable therefor, the natural wear of goods in
transport, defects in packages in which they are shipped, or natural propensities of animals. None
of these are present here. Also, even if the improper packing was known to the carrier upon
ordinary observation, it is not relieved of liability for loss resulting therefrom once it accepts the
goods notwithstanding such condition.

2. Notice of claim.
Belgian claims that pursuant to S3, par.6 of COGSA, respondent should have filed its notice of
loss within 3 days from delivery. The cargo was discharged on July 31, 1990, but notice was filed
on September 18. But the COGSA states that there is no need to give notice of claim if the goods,
at receipt, was subject of a joint inspection or survey. As stated earlier, an inspection report was
prepared by both parties’ representatives prior to unloading. Also, the provision says that failure
to file notice within 3 days will not bar recovery if it is nonetheless filed within 1 year.

3. $500 liability limitation in COGSA.

Belgian claims that the COGSA liability limit of US$500 per package in S4(5) and in their BoL
should apply. Respondent claims that S4(5) is inapplicable because the value of the shipment was
declared by Belgian beforehand.

A BoL is a receipt of goods shipped and a contract by which 3 parties, shipper, carrier, and
consignee, assume stipulated obligations. The acceptance of the BoL by the shipper and consignee
with full knowledge of its contents give rise to the presumption that it constituted a perfected
contract. Also, a stipulation in the BoL limiting to a certain sum the CC’s liability for loss of cargo,
unless the shipper or owner declares a greater value, is sanctioned by law. But there are 2
conditions: 1) the contract is reasonable and just under the circumstances, and 2) it has been
fairly and freely agreed upon by the parties.
NCC does not limit the liability of a CC to a fixed amount per package. In all matters not regulated
by NCC, the Code of Commers and special laws apply. Thus, COGSA supplements NCC by
establishing a statutory provision limiting the carrier’s liability in the absence of a shipper’s
declaration of a higher value in the BoL. Here, there is no stipulation in BoL limiting the carrier’s
liability nor did the shipper declare a higher valuation of the goods. Thus, liability is limited to
$500 per package.

As ruled in Eastern Shipping Lines v. IAC, “when what would ordinarily be considered packages
are shipped in a container supplied by the carrier and the number of such units is disclosed in the
shipping documents, each of those units and not the container constitutes the “package” referred
to in the liability limitation provision of COGSA.” Since the BoL disclosed the contents of the
containers, the number of units, and nature of the steel sheets, the four damaged coils should be
considered as the shipping unit subject of the $500 limit. Belgian’s liability was reduced to $2000.

33. Tabacalera Insurance Co. v. North Front Shipping Services, Inc., GR 119197, May 16,
1997, Bellosillo, J. (Duty to Exercise Extraordinary Diligence: Presumption of Negligence:
Carriage of Goods)
FACTS:
20,234 sacks of corn grains worth P3.5M were shipped on board North Front 777, a vessel owned
by North Front. The cargo was consigned to Republic Flour Mills Corporation in Manila and
insured by Tabaclera, Prudential Guarantee & Assurance Inc., and New Zealand Insurance Co.,
petitioners. The vessel was inspected prior to loading by representatives of the shipper and was
found fit to carry the merchandise. The cargo was covered with tarpaulins and wooden boards.

The vessel left Cagayan de Oro and arrived in Manila. Republic Flour was advised of the arrival
but did not immediately commence unloading. There were days when unloading had to stop due
to weather and sometimes for no apparent reason at all. When the cargo was all unloaded, there
was a shortage of 26.333 metric tons. The remaining merchandise was already moldy, rancid, and
deteriorating. The unloading was completed 20 days after arrival of the barge at Republic Flour’s
wharf in Pasig.

A certificate of analysis was issued by Precision Analytical Service, hired to examine the grains,
indicating that the grains had 18.56 moisture content and the wetting was due to contact with salt
water. The mold did not make the grains unfit to consume and could still be arrested by drying.
Republic Flour rejected the entire cargo and demanded North Front to pay damages, which were
unheeded. The insurance companies were forced to pay Republic Flour P2.1M.

Petitioners thus filed a complaint against North Front claiming that the loss was due to negligence
of the carrier. They hired Marine Cargo Adjusters to survey and found cracks in the bodega of the
barge. The tarps were not brand new and there were patches on them. North Front claims that it is
not liable as it was never negligent. The barge was inspected prior to loading and found seaworthy.
The tarps were doubled and brand new and the hatches were properly sealed. The grains were farm
wet and not properly dried when loaded.

The trial court dismissed the complaint holding that the contract between North Front and Republic
Flour was a charter-party agreement. Thus, only ordinary diligence was required. The inspection
of the barge sufficed. CA held that North Front was a CC and it observed the requirement of the
higher degree of diligence since a permit to sail was issued after inspection. The complaint was
dismissed. Hence this petition.

ISSUE:
Whether North Front is liable for the damage to the corn grains.
HELD: YES.
The charter-party agreement between North Front and Republic Flour did not convert the CC into
a private carrier. This was resolved in Planters Products Inc. v. CA. “A public carrier shall remain
as such, notwithstanding the charter of the whole or portion of a vessel by one or more persons,
provided the charter is limited to the ship only.” North Front is engaged in the business of
transporting cargo and offers its services indiscriminately to the public. It is a CC required to
observe extraordinary diligence in its vigilance over the goods it transports. When goods placed
in its care are lost or damaged, the carrier is presumed to be negligent. North Front must thus
prove that it observed extraordinary diligence.

North Front proved that the vessel was inspected prior to actual loading by representatives of
the shipper and was found fit to take a load of corn grains. They were issued a permit to sail by
the coast guard. The master of the vessel testified that the grains were farm wet when loaded. But
this was disproved by the clean BoL issued by North Front which did not contain a notation that
the grains were wet. Having been in the service since 1968, the master would have known that
farm wet grains would deteriorate when stored in sealed and hot compartments like ship hatches.
Knowing this, the master and his crew should have undertaken precautionary measures to
avoid or lessen the cargo’s possible deterioration as they were presumed knowledgeable about
the nature of such cargo. But no such measures were taken.

The extraordinary diligence in the vigilance over the goods tendered for shipment requires the CC
to know and follow the required precaution to avoid damage or destruction of goods
entrusted to it for safe carriage and delivery. Thus, we find that the carrier failed to observe
extraordinary diligence. North Front’s proofs were insufficient to rebut the presumption of
negligence.

While the vessel was inspected and issued a permit to sail, petitioners proved the fact of shipment
and its damage or loss while in the possession of North Front. North Front failed to explain why
there was spoilage and how it occurred. On the other hand, it was proved that the vessel had rusty
bulkheads and wooden boards and the tarps had molds and were not new with patches, making it
highly probable for water to enter. Laboratory analysis showed that the grains were contaminated
with salt water. North front failed to rebut all these arguments.

But we find Republic Flour guilty of contributory negligence since it did not immediately start
unloading operations even when it was seasonably notified of the arrival of the barge. It did not
explain the delay of 6 days. had unloading commenced immediately, the loss could have been
completely avoided or minimized. Thus, it shares at least 40% of the loss. North Front was held
liable for P1,313,660, 60% of the amount paid by petitioners to Republic Flour.

34. FGU Insurance v. GP Sarmiento, see case #7

35. Conrada Vda. de Abeto v. Philippine Air Lines, GR L-28692, July 30, 1982, Relova, J.
(Duty to Exercise Extraordinary Diligence: Presumption of Negligence: Carriage of
Passengers)
FACTS:
Judge Abeto, boarded PAL’s C133 plane at the Mandurriao airport in Iloilo city for Manila. The
plane did not reach its destination and the next day there was news that the plane was missing.
After 3 weeks, it was ascertained that the plane crashed at Mt. Baco, Mindoro. All passengers,
including Judge Abeto, must have been killed and their remains scattered all over the area. A
leather bag with the name “Judge Quirico Abeto” was recovered from the crash site. Judge Abeto
had been a technical assistant in the OP with P7.2k annual compensation. He was in good health
even if he was 79 yo already.

Plaintiff Conrada was appointed administratrix of Judge Abeto’s estate. The other plaintiffs are
Judge Abeto’s children. When PAL would not hear demands for settlement of damages, plaintiffs
were compelled to file this case.

PAL tried to prove that the crash was beyond the control of the pilot. The plane was at the time of
the crash airworthy as shown by the certificate of airworthiness issued by the Civil Aeronautics
Administration (CAA). There was navigational error but no negligence of the pilot. The plane had
undergone 1822 pre-flight checks, 364 thorough checks, 957 terminating checks, and 501 after
maintenance checks. Deviation from the prescribed route was due to bad weather between Mt.
Baco and Romblon and strong winds which caused the plane to drift to Mt. Baco. PAL argues that
the crash was a fortuitous event.

The trial court found that the pilot disobeyed instruction in not following the route prescribed by
CAA and failed to perform preflight test on C133 before the flight in question. Thus, PAL did not
exercise extraordinary diligence, but on the contrary showed negligence. Hence this appeal.

ISSUE:
Whether PAL exercised extraordinary diligence.
HELD:
Art. 1733 of NCC binds CCs “from the nature of their business and by reasons of public policy …
to observe extraordinary diligence in the vigilance… for the safety of the passengers transported
by them according to all the circumstances of each case.” Art. 1755 establishes the standard of
care required of a CC- “to carry the passengers safely as far as human care and foresight can
provide, using the utmost diligence of very cautious persons, with due regard for all the
circumstances.” Art. 1756 fixes the burden of proof by providing that in case of death or injury of
passengers, CCs are presumed negligent unless they prove that they exercised extraordinary
diligence as prescribed in Arts. 1733 and 1755. Art. 1757 states that the responsibility of a CC for
the safety of passengers cannot be dispensed with or lessened by stipulation, by the posting of
notices, by statements on tickets, or otherwise.

The prescribed airway of C133 that afternoon of November 23, 1960 was Iloilo-Romblon-Manila
(Airway “Amber I”) with prescribed elevation of 6,000 ft. But the plane did not take the
designated route as it was some 30 miles to the west when it crashed. According to defendant’s
witness Ramon Pedroza, administrative assistant of PAL, the crash would not have happened if
the pilot continued on the route indicated. Assistant director Cesar Mijares of CAA testified
that the pilot of C133 was off course (did not follow the route prescribed for him).

The weather was clear and he was supposed to cross airway Amber I over Romblon. Instead, he
made a straight flight to Manila in violation of air traffic rules. At any rate, in the absence of
satisfactory explanation by PAL as to how the accident occurred, the PRESUMPTION is
that it is AT FAULT. In an action based on contract of carriage, the court need not make an
express finding of fault or negligence of the carrier to hold it responsible for the damages sought
by the passenger.

36. Batangas Laguna Tayabas Bus Company v. IAC, GR 74387-90, November 14, 1988,
Paras, J. (Duty to Exercise Extraordinary Diligence: Presumption of Negligence: Carriage
of Passengers)
FACTS:
BLTB Bus 1046 was negotiating the bend of the highway traversing Barangay Isabong, Tayabas,
Quezon when it tried to overtake Ford Fiera car just as Bus 404 of Superlines (driven by Ruben
Dasco) was coming from the opposite direction. Seeing this, Armando Pon, driver of the BLTB
bus, made a belated and unsuccessful attempt to slacken his speed and return to the proper lane.
The 2 buses collided. This resulted in the death of Aniceto Rosales, Francisco Pamfilo, and Romeo
Neri and injuries to Nena Rosales (wife of Aniceto) and Baylon Sales, all passengers of BLTB bus
1046.

Nena Vda. de Rosales and Baylon Sales and the surviving heirs of the deceased instituted separate
cases in CFI against BLTB and Superlines and their drivers for damages. BLTB and Superlines
with their drivers denied liability claiming that they exercised due diligence and shifted fault
against each other.

CFI exonerated Superlines and Dasco and attributed liability solely on BLTB and Pon. IAC
affirmed. Hence this petition to review by certiorari of BLTB.

ISSUE:
Whether BLTB and Pon is liable for damages for the collision.
HELD: YES.
BLTB claims that IAC erred in holding that private respondents’ actions were based on culpa
contractual, arguing that if the intent were to file an action based on culpa contractual or breach of
contract of carriage, they could have done so by merely impleading BLTB and Pon. But private
respondents filed an action against all defendants, including Superlines. Thus, their action is based
on culpa acquiliana.

This has no merit. IAC’s decision anchored BLTB’s liability on both culpa contractual and
culpa acquiliana. It held that the proximate cause of the collision was the negligence of Pon who
recklessly operated the bus. The highway was divided into two lanes by a continuous yellow strip,
which signifies that it is a no-overtaking zone. It held that a driver abandoning his proper lane to
overtake another vehicle in ordinary situation has the duty to see that the road is clear and not to
proceed if he cannot do so in safety. It held Pon primarily liable in recklessly driving the truck
owned by his employer BLTB. It held BLTB also primarily liable since the death was thru the
negligence of its employee and such liability does not cease even upon proof that BLTB exercised
all the diligence of a good father of a family in selecting and supervising its employees.

Thus, it is settled that the proximate cause of collision was the sole negligence of Pon who
recklessly operated and drove the bus in a lane where overtaking was not allowed by Traffic
Rules and Regulations. Such negligence is binding upon BLTB, more so when we consider that in
an action based on a contract of carriage, the court need NOT make an express finding of
negligence on the part of the carrier to hold it responsible for payment of damages to the
passenger. By the contract of carriage, BLTB assumed the express obligation to transport the
passengers to their destination safely and to observe extraordinary diligence with a due
regard for all the circumstances.

BLTB claims that a CC is not an absolute insurer against all risks of travel and is not liable for
accidents which cannot be foreseen or inevitable. But it failed to point out any factual basis for
this defense of force majeur in light of the undisputed fact that the cause of the collision was the
sole negligence and recklessness of petitioner Pon.

37. Aniceto Saludo, Jr. v. CA, GR 95536, March 23, 1992, Regalado, J. (Duty to Exercise
Extraordinary Diligence: Duration of Duty: Carriage of Goods)
FACTS:
The mother of petitioners, Crispina Saludo, died in Chicago Illinois. Pomierski and Son Funeral
Home of Chicago made the necessary arrangements for the shipment of the remains to PH. It had
the body embalmed and secured a permit for disposition of dead human body. Pomierski brought
the body to Continental Mortuary Air Services (CMAS) at the Chicago airport which made the
necessary arrangements like flights, transfers, etc. CMAS is a national service used by undertakers
throughout USA. They furnish the air pouch which the casket is enclosed in and see to it that the
remains are taken to the proper air freight terminal. CMAS booked the shipment with PAL, with
Pomierski as shipper, and Maria Saludo (one of the petitioners) as consignee.

Maria and Saturnino Saludo booked with United Airlines from Chicago to California and PAL
from California to Manila. But Pomierski informed them that Crispina’s body was booked with
Trans World Airlines (TWA) flight to California. So they transferred reservations. But they saw
no body on that flight. Upon arrival, they went to a TWA counter to ask about Crispina’s body.
They were told that they did not know anything about it.

Maria informed Pomierski, who immediately called CMAS. CMAS informed them that they body
was sent to Mexico because it was switched. Crispina’s body had been taken to CMAS at the
airport. There had been two bodies in Chicago airport and these were switched. Thus, Crispina
was sent to Mexico.

On Oct. 28, 1976, Crispina’s body arrived in San Francisco from Mexico. The casket was opened
and resealed for shipment to PH. The body was loaded on a PAL flight for Manila and arrived in
Manila on October 30, 1976, a day after its expected arrival on October 29, 1976.
Petitioners informed TWA of the misshipment and delay and of the discourtesy of its employees
to Maria and Saturnino. They also informed PAL saying that it would be held liable for the delay
if no favorable explanation is given. Both private respondents TWA and PAL denied liability.
Thus, a damage suit was filed by petitioners.

The trial court absolved TWA and PAL. CA affirmed. Hence this petition.

ISSUE:
Whether PAL and TWA were liable for the delay of 1 day.
HELD: NO.
Only questions of law may be raised in a petition to review on certiorari of the decision of CA.
The factual findings of CA are conclusive and cannot be reviewed by the SC. But the rule admits
of exceptions. A question of law is one which involves a doubt or controversy on what the law is
on a certain state of facts. A question of fact is one in which there is a doubt or difference as to
the truth or falsehood of the alleged facts. One test is whether the appellate court can determine
the issue raised without reviewing or evaluating the evidence, in which case it is a question of law.
Otherwise, it is of fact. PAL and TWA claim that the petition raises only factual questions while
petitioners maintain otherwise or, alternatively, even if it only raises factual questions, the same
are within the exceptions.

1. Petitioners claim that PAL received the remains on October 26 as shown by PAL Air Way bill
079. From said date, PAL was charged with extraordinary diligence so that for the alleged
switching of the caskets or the one day delay, it must be liable. Petitioner relies on the holding that
“the issuance of a bill of lading carries the presumption that the goods were delivered to the carrier
issuing the bill.”

A BoL is a written acknowledgment of the receipt of goods and an agreement to transport and
deliver them at a specified place to a person named or on his order. It has been held that freight
tickets of bus companies and receipts of cargo transported by all forms of transportation, whether
by sea or land, fall within the definition. Under the Tariff and Customs Code, a BoL includes
airway BoLs. A BoL is a receipt and contract. Thus, normally, delivery of the goods to the carrier
precedes the issuance of the BoL or they may be simultaneous. But, except as prohibited by law,
there is nothing to prevent an inverse order of events. A receipt is not essential for complete
delivery of goods to the carrier. But when issued, it is a prima facie, but not conclusive, evidence
of delivery to the carrier. The recital in the BoL that goods were received is not conclusive but
may be explained, varied, or contradicted by parol or other evidence.

While we agree that “an airway bill estops the carrier from denying receipt of goods”, as between
the shipper and carrier, when no goods have been delivered for shipment, no recitals in the bill
can estop the carrier from showing the true facts. Between the consignor of goods and a
receiving carrier, recitals in a BoL as to goods shipped raise only a rebuttable presumption that
such goods were delivered for shipment. As between them, the fact must outweigh the recital.
Thus, we must allow PAL to explain why, despite issuing the airway bill, they deny receipt of
Crispina’s body on October 26.
CMAS booked the shipment with PAL with Pomierski as shipper and Maria as consignee. PAL
Airway Bill 079 was issued. Thus, PAL Airway Bill 079 was issued not as evidence of receipt of
delivery of the cargo, but merely as confirmation of the booking for San Francisco-Manila
flight scheduled on Oct. 27. It was not until Oct. 28 that PAL received physical delivery of
Crispina’s body at San Francisco.

Art. 1736 provides that the extraordinary responsibility of a CC begins from the time the goods
are DELIVERED to the carrier. This responsibility remains even when they are temporarily
unloaded or stored in transit, unless the shipper or owner exercises the right of stoppage in
transitu, and TERMINATES only AFTER THE LAPSE OF A REASONABLE TIME for
the ACCEPTANCE of the goods by the CONSIGNEE or such other person entitled to
receive them. There is delivery to the carrier when the goods are ready for and have been placed
in the exclusive possession, custody, and control of the carrier for the purpose of their
immediate transportation and the carrier has accepted them. Where the delivery has been accepted,
the liability of the CC commences eo instanti.

Thus, while we agree with petitioners that the extraordinary diligence required commences upon
delivery, there must in fact have been delivery of the cargo. It was from Oct 28 that PAL became
responsible for the cargo under their undertakings in PAL Airway Bill 079. Consequently, for the
switching of caskets prior thereto was not caused by them, PAL is not liable.

2. Proceeding on the premise that there was delivery, petitioners claim that since there is no
evidence showing CMAS’ fault, private respondents are presumed negligent pursuant to Art.
1735; or even if CMAS was at fault, this does not absolve private respondents because whoever
brought the cargo to the airport acted as their agent.

This has no merit. The cargo was received from CMAS at Chicago airport for shipment which was
supposed to contain Crispina. TWA had no way of determining its actual contents since the
casket was hermetically sealed by PH Vice-Consul in Chicago, and in an air pouch of CMAS.
TWA had to rely on the information furnished by the shipper as to the cargo’s content. Nether
could TWA open the casket as they were prohibited. The switching was discovered on Oct. 27 and
while the cargo was still with CMAS.

Petitioner claims that TWA’s statement that it had to rely on the info furnished by the shipper is a
lame excuse and that its failure to prove that its personnel verified the contents of the casket before
loading was negligence on the part of TWA. But it was not to TWA, but to CMAS that Pomierski
delivered the casket containing Crispina. TWA would not know that Crispina was not inside the
casket being presented for shipment. TWA would have to rely on the representations of CMAS.
TWA then transferred to PAL a shipment covered by PAL Airway Bill 079, the bill for shipment
of Crispina. Only it turned out later that what was inside the casket was not Crispina so that it had
to be withdrawn by CMAS from PAL. Any airline would not have opened the hermetically
sealed casket just to ascertain whose body was inside. This points at CMAS, not TWA much less
PAL, as the one responsible for the switching, and it started a chain reaction of misshipment and
resulted in a one day delay.
No amount of inspection by PAL or TWA could have guarded against the switching that had
already taken place. Or even if they could open the casket, they had no means of ascertaining
whether the body was that of Crispina, except possibly if the body was a male. But they had no
authority to open the same.

The carrier has the right to require good faith on the part of those persons who deliver goods to be
carrier or enter contracts with it and, inasmuch as the freight may depend on the value of the
article to be carried, it has the right to inquire as to its value. It is also ordinarily the duty of the
carrier to inquire as to the general nature of the articles shipped and of their value before it consents
to carry them. In the absence of a more definite information, the carrier has the right to accept
shipper’s marks as to the contents of the package offered for transportation. It is not bound to
inquire particularly about them and where a shipper expressly represents the contents of a package
to be of a designated character, it is not the duty of the carrier to ask for a repetition of the statement
nor disbelieve it and open the box and see for itself. But if the CC has reasonable ground to
suspect that the goods offered are dangerous or illegal, it has the right to know the character of the
goods and to insist inspection if reasonable and practicable under the circumstances as
condition for transporting the goods.

A CC is entitled to fair representation of the nature and value of the goods with the right to rely
thereon. It has no obligation to inquire into the correctness or sufficiency of such information. The
duty to inspect arises when there is reason to doubt the veracity of such representations. Thus,
there must be proof that would justify cause for apprehension that the baggage is dangerous as to
warrant exhaustive inspection or even refusal to accept carriage. It is the failure to act of the carrier
in the face of such proof that is the basis of its liability.

Here, PAL and TWA had no reason whatsoever to doubt the truth of the shipper’s
representations. The airway bill providing that the cargo contained “casketed human remains of
rispina” was issued on the basis of such representations. The reliance thereon of PAL and TWA
was reasonable and they cannot be said to have acted negligently. There is no evidence to suggest
suspicion that the cargo might be anything other than what it was declared to be as to require more
than routine inspection.

To hold that CMAS acted as agent of PAL and TWA would be an inaccurate appraisal of the legal
position it held in the transaction. CMAS was hired to handle all shipping arrangements. Thus,
Pomierski brought the remains to CMAS for shipment. CMAS booked the shipment with PAL
thru PAL’s agent, Air Care International. With these functions, CMAS may be classified as a
forwarder which is regarded as agent of the shipper and not of the carrier. It merely contracts
for transportation of goods by carriers and has no interest in the freight but receives compensation
from the shipper as his agent.

Petitioners’ letter to CMAS demanding an explanation as to the statements of PAL and TWA that
“the two airlines pinpoint the responsibility upon your agents” clearly allude to CMAS as the party
at fault. This is tantamount to an admission by petitioners that they consider PAL and TWA
without fault or at least showed that they entertained serious doubts as to PAL and TWA’s
responsibility.
3. Petitioners claim that TWA, by agreeing to ship Crispina on Flight 131, violated the agreement
in the airway bill when it shipped the remains on its flight 603 10 hours earlier. This supposedly
compounded or, if not, directly caused the switching. TWA claims that under the airway bill, it
did not undertake to carry the cargo on any specified aircraft in view of the condition #5 on the
back of the airway bill (“It is agreed that no time is fixed for the completion of carriage xxx. Carrier
assumed no obligation to carry the goods by any specified aircraft xxx.”). Hence, TWA claims it
was acting within its rights when it shipped the body on an earlier flight. This is tenable.

Petitioners claim that there was contractual breach as there was ambiguities in the terms of the
airway bill. But there is no such ambiguity. When the terms of the agreement are clear, they are to
be understood literally just as they appear. The contract clearly sanctions the use by TWA of a
substitute aircraft even without notice.

The rule regarding a carrier’s delay is that in the absence of a special contract, a carrier is not
an insurer against delay in transportation of goods. When a CC undertakes to convey goods,
the law implies a contract that they shall be delivered at destination within a reasonable time, in
the absence of any agreement as to the time of delivery. But where a carrier has made an express
contract to transport and deliver within a specified time, it is bound to fulfill its contract and is
liable for delay no matter from what cause it may have arisen. Where the law creates a duty or
charge and the party is disabled from performing it without default in himself, the law will excuse
him. But where the party by his own contract creates a duty or charge upon himself, he is bound
to make it good notwithstanding any accident or delay by inevitable necessity because he might
have provided against it by contract. There is no showing that a special contract was entered
into here.

Even if the condition was printed at the back of the airway bill, it is still binding. There is sufficient
indication on the face of the bill to alert petitioners of the additional condition at the back. The
acceptance of a BoL without dissent raises a presumption that all terms therein were brought to
the knowledge of the shipper and agreed to by him. Without fraud or mistake, he is estopped from
denying that he assented to such terms. A stipulation printed on the back of a BoL or on papers
attached will be as effective as if printed on its face if the consignor knew of its terms. Thus, where
a shipper accepts a receipt which states that its conditions are to be found on the back, such receipt
comes within the general rule and the shipper is held to have accepted the conditions.

Even if the condition was a contract of adhesion, this is not entirely prohibited. One who adheres
to the contract is in reality free to reject it entirely. If he adheres, he gives his consent. Thus,
petitioners signified their presumed assent to all the terms of the contract thru their acceptance of
the airway bill and are thus bound thereby. Petitioners had several choices of carriers.

But it does not mean that CCs can at all times whimsically seek refuge from liability in the
exculpatory provision of condition #5 or arbitrarily vary flights and schedules to the prejudice of
their customers. This condition insulates CCs from liability only when the changes in routes,
flights, and schedules are clearly justified by the peculiar circumstances of a particular case
or by general transportation practices, or by contingencies or emergencies in aviation like
weather turbulence etc. CCs must exercise its rights with due deference to the rights, interests,
and convenience of its customers.
When TWA opted to ship Crispina on an earlier flight, it did so in the exercise of sound discretion
and with reasonable prudence. This was to assure that the shipment would be received in San
Francisco in sufficient time for transfer to PAL.

4. Petitioners claim that PAL and TWA are liable for tort because of the humiliating, arrogant, and
indifferent acts of their officers and personnel. But Maria Saludo testified that when they asked
the TWA counter, they were told that the TWA counter did not know. They waited from 5pm-9pm
but TWA counter could not tell them anything. This does not show any humiliating or arrogant
manner by which Maria and Saturnino were treated. But airlines are sternly admonished that it is
their duty to require their personnel to be more accommodating to customers.

But as to PAL, no attribution of discourtesy or indifference was made. petitioners are entitled to
nominal damages at least from TWA alone of P40k.

38. Benito Macam v. CA, GR 125524, August 25, 1999, Bellosillo, J. (Duty to Exercise
Extraordinary Diligence: Duration of Duty: Carriage of Goods)
FACTS:
Benito Macam, doing business under Ben-Mac Enterprises, shipped on board vessel Nen Jiang,
owned by respondent China Ocean Shipping Co., thru local agent respondent Wallem PH
Shipping, Inc., 3500 boxes of watermelons worth $5,950 covered by BoL 99012 and exported thru
letter of credit HK 1031 issued by Pakistan Bank, and 1,611 boxes of mangoes worth $14,273
covered by BoL 99013 exported thru letter of credit 1032 also by Pakistan Bank. The BoL
contained this provision: “One of the BoLs must be surrendered duly endorsed in exchange for
the goods or delivery order.” The shipment was bound for HK with Pakistan Bank as consignee
and Great Prospect Company of HK (GPC) as notify party.

Per letter of credit requirement, copies of the BoL were submitted to Macam’s depository bank,
Consolidated Banking Corporation (Solidbank) which paid Macam in advance the total value of
the shipment of $20,223. But upon arrival in HK, the shipment was delivered by Wallem directly
to GPC, not to Pakistan Bank and without the required BoL being surrendered. GPC failed to
pay Pakistan Bank such that, it being in possession of the original BoLs, refused to pay Macam
thru Solidbank. Solidbank demanded payment from Wallem but was refused. Thus, Macam was
allegedly contrained to return the amount to Solidbank, then demanded payment from Wallem to
no avail.

Macam sought collection of the value of the shipment of $20,223 or P546k from respondents
Wallem and China Ocean in RTC based on delivery to GPC without presentation of the BoL and
bank guarantee. Respondents claim that the shipment was delivered to GPC without presentation
of BoLs per request of Macam himself because the shipment consisted of perishable goods.

RTC ordered respondents to pay, holding that there was breach of the provision in the BoL when
the goods were released without presentation of the BoLs and bank guarantee. CA reversed,
finding that as established by previous similar transactions between Macam and respondents,
cargoes were sometimes delivered not to consignee but to notify party GPC without need of BoLs
or bank guarantee. The BoLs were also superseded by the telex instruction of Macam to “delivery
of A/M SHIPT TO RESPECTIVE CNEES WITHOUT PRESENTATION OF OB/L and bank
guarantee since for prepaid ship ofrt charges already fully paid our end”. Macam’s claim of
repaying Solidbank was unsubstantiated. Hence this appeal.

ISSUE:
Whether respondents are liable to Macam for releasing the goods to GPC without the BoLs or
bank guarantee.
HELD: NO.
Macam claims that the fact that the shipment was not delivered to the consignee as stated in the
BoL is misdelivery. Even from the text of the telex, assuming there was such instruction, the
delivery of the shipment without the required BoL and bank guarantee should be made only to
consignee Pakistan Bank.

Art. 1736 of NCC provides:

ARTICLE 1736. The extraordinary responsibility of the common carriers lasts from the
time the goods are unconditionally placed in the possession of, and received by the carrier
for transportation until the same are delivered, actually or constructively, by the carrier
to the consignee, or to the person who has a right to receive them, without prejudice to
the provisions of article 1738.
The extraordinary responsibility of CCs 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 BoLs as consignee while GPC was the notify party. But in the export invoices, GPC was
named as buyer/importer. Thus, GPC, as buyer/importer had, other than consignee, the right to
receive them.

Respondents submitted in evidence a telex instructing delivery of the shipments to the consignees
without need of presenting the BoL and bank guarantee as per shipper’s request. Macam was
named as shipper and GPC consignee with respect to BoLs 99012 and 99013. Macam disputes the
existence of this telex.

Macam has been transacting with GPC as buyer/importer for 2-3 years already. When mangoes
and watermelons are in season, his shipment to GPC using the facilities of respondents is 2-3 times
a week. The goods are released to GPC. It has been the practice of Macam to request the
shipping lines to immediately release perishable cargoes thru telephone calls by himself or
his “people.” In his several years of business relationship with GPC and respondents, there was
not a single instances when the BoL was first presented before the release of cargoes. Macam
testified that he no longer required presentation of a BoL or bank guarantee in case he was already
fully paid. Since the goods are perishable and Solidbank prepaid the value thereof, it is not hard
to belive Wallem’s claim that Macam indeed requested the release of the goods to GPC without
the presentation of BoL and bank guarantee.

Macam claims that the telex instructed the cargoes to be released to “consignee”, which is Pakistan
Bank. But this is too simplistic. The consignee referred to was GPC. Otherwise, it will no longer
be proper to require a bank guarantee as substitute for the BoL. Pakistan Bank could also very
well present the original BoLs in its possession.
Macam also failed to substantiate his claim that he returned to Solidbank the full amount of the
value of the cargoes.

39. Samar Mining Company v. Nordeutcher Lloyd, see case 15

40. Lu Do v. IV Binamira, GR L-9840, April 22, 1957, Bautista Angelo, J. (Duty to Exercise
Extraordinary Diligence: Duration of Duty: Carriage of Goods)
FACTS:
Delta Photo Supply Company of NY shipped on board MS Fernside at NY USA 6 cases of film
and/or photographic supplies consigned to the order of respondent IV Binamira. BoL 29 was
issued. The ship arrived at the port of Cebu and the cargo was discharged and placed in the
possession of the arrastre operator of said port, Visayan Cebu Terminal Company Inc.

Ludo, as agent of the carrier, hired Cebu Stevedoring Company to unload its cargo. During
discharge, good order cargo was separated from the bad order cargo. A list of bad order cargo was
prepared by Villamor, checker of the stevedoring company. All cargo was unloaded at the pier by
Visayan Cebu. Quijano, checker of Visayan, also recorded the good and bad cargo. The shipment
in question was not included in the report of bad order cargo of both checkers, indicating that it
was discharged from the ship in good order and condition.

3 days after the goods were unloaded, Binamira took delivery of his 6 cases of photo supplies from
the arrastre operator. The cases showed signs of pilferage. He hired marine surveyors to examine
them who made a physical count of their contens in the presence of representatives of Ludo,
Binamira, and the stevedoring company. The finding showed that films worth P324 were missing.

The 6 cases of photo supplies were discharged from the ship at Cebu port by the stevedoring
company hired by Ludo as agent of the carrier. All unloaded cargo, including the photo
supplies, was received by Visayan. The cargo was checked by both stevedoring company Ludo
hired and arrastre operator of the port and the shipment, when discharged, was found in good
order and condition. After it was delivered to Binamira 3 days later, some films were missing
worth P324.

ISSUE:
Whether the carrier is responsible for the loss considering that it occurred after the shipment was
discharged from the ship and placed in possession of customs authorities.

HELD:
CA held yes. It held that the presumption of negligence attaches until the goods are delivered
actually or constructively to the consignee or person with a right to receive them, and it believed
that delivery to customs authorities is not the delivery contemplated in Art. 1736 because their
owner could not exercise dominion over them until duties are paid.

It is argued that CA erred not only because it interpreted the law wrong, but because it ignored the
BoL provision stipulating that the responsibility of the carrier is limited only to losses that may
occur while the cargo is still under its custody and control.
This is well-taken. It is true that CCs are responsible for loss of goods unless due to any of the
causes in Art. 1734 and that it is presumed negligent unless it proves extraordinary diligence, and
that this extraordinary liability lasts from when the goods are placed in the possession of the carrier
until delivered to the consignee or to the person who has the right to receive them. But these
provisions apply only when the loss, destruction, or deterioration takes place while the goods are
in the POSSESSION of the CARRIER and NOT after it has lost control of them. The reason
is obvious. While the goods are in its possession, it is but fair that it exercise extraordinary
diligence in protecting them and the law presumes them negligent for loss to protect the interest
of the owner who is at its mercy. But the situation changes after the goods are delivered to the
consignee.

While we agree with CA that delivery to customs authorities is not delivery to consignee or one
with a right to receive them as contemplated in Art. 1736 because the goods are still in the hands
of the government and the owner cannot exercise dominion over them, we believe that the parties
may agree to limit the liability of the carrier considering that the goods still have to go thru
customs inspection before being turned over to consignee. The carrier loses control of the goods
because of custom regulation and it is unfair that it be made responsible for what may happen
during the interregnum.

And this is what precisely was done by the parties. In the BoL, they stipulated that carrier is not
liable “while the goods are not in the actual custody of the carrier” and “when taken into custody
of customs or other authorities. We find nothing that is contrary to morals or public policy that
may justify their nullification.

41. National Trucking and Forwarding Corporation v. Lorenzo Shipping Corporation, GR

153563, February 07, 2005, Quisumbing, J. (Duration of Duty to exercise Extraordinary
Diligence: Carriage of Goods)
FACTS:
Republic of PH, thru DOH and Cooperative for American Relief Everywhere Inc. (CARE) signed
an agreement wherein CARE would acquire from the US government donations of nonfat dried
milk and other food products. In turn, PH would transport and distribute the donated commodities
to the intended beneficiaries in PH. PH entered into a contract of carriage of goods with petitioner
National Trucking (NTFC). NTFC shipped 4868 bags of nonfat dried milk thru respondent
Lorenzo Shipping (LRC). The consignee in the BoLs was Abdurahman Jama, NTFC’s branch
supervisor in Zamboanga.

On reaching Zamboanga port, LSC’s agent, Efren Ruste Shipping Agency, unloaded the bags of
milk and delivered it to NTFC’s warehouse. before each delivery, Rogelio and Ismael, delivery
checkers of Efren, requested Abdurahman to surrender the original BoLs, but Abdurahman only
presented certified true copies. Upon completion of each delivery, Rogelio and Ismael asked
Abdurahman to sign delivery receipts. But at times, Abdurahman had other business to attend to,
so he instructed his subordinates to sign instead.

NTFC allegedly did not receive the goods. It filed a formal claim of non-delivery thru LSC. LSC
explained that the cargo was delivered to Abdurahman. NTFC investigated, but before the
investigation was over, Abdurahman resigned. Noting but disbelieving LSC’s insistence that the
goods were delivered, the government, thru DOH, CARE, and NTFC as plaintiffs, filed an action
for breach of contract of carriage against LSC with RTC.

RTC ruled in favor of LSC, dismissing the complaint and upholding LSC’s counterclaim of
damages. CA affirmed. Hence this petition.

ISSUE:
Whether LSC is liable for the loss of the goods.
HELD: NO.
NTFC contends that LSC is presumed negligent for failing to abide by the terms of the BoL. LSC
claims that it observed extraordinary diligence in the delivery. Rogelio and Ismael, before releasing
the goods to Abdurahman, required him to surrender the original BoLs and, in their absence, the
certified true copies showing that Abdurahman was indeed the consignee. They also required
Abdurahman or his subordinates to sign the delivery receipts upon completion of each delivery.

Art. 1733 of NCC demands that a CC observe extraordinary diligence. In case of loss of goods in
transit, the CC is presumed negligent. But this may be overturned by showing that the CC observed
extraordinary diligence. Here, LSC adequately proved that it exercised extraordinary diligence.
Although the original BoLs remained with NTFC, LSC’s agents demanded from Abdurahman the
certified true copies. They asked him also to sign the delivery receipts.

This practice, which LSC’s agents testified to be their SOP, finds support in Art. 353 of the Code
of Commerce:
After the contract has been complied with, the bill of lading which the carrier has issued
shall be returned to him, and by virtue of the exchange of this title with the thing
transported, the respective obligations and actions shall be considered cancelled, ….
In case the consignee, upon receiving the goods, cannot return the bill of lading
subscribed by the carrier, because of its loss or of any other cause, he must give the
latter a receipt for the goods delivered, this receipt producing the same effects as the
return of the bill of lading.
Thus, the surrender of the original BoL is not a condition precedent for a CC to be discharged of
its contractual obligation. If surrender of the original is not possible, acknowledgment of the
delivery by signing the delivery receipt suffices. This is what LSC did.

Rogelio and Ismael testified that Abdurahman was always present at the initial phase of each
delivery, although on the few occasions when he could not stay to witness the complete delivery,
he authorized his subordinates to sign the delivery receipts for him. This is sufficient and
substantial compliance with the requirements.

Strangely, NTFC made no effort to disapprove Abdurahman’s resignation until after the
investigation and after he was cleared of responsibility for the loss of goods. With him outside
NTFC’s reach, NTFC cannot now pass to LSC what could be Abdurahman’s negligence if he were
indeed responsible.
As to damages, NTFC was compelled to sue to protect the credibility of the government with
international organizations. We find no ill motive, only an erroneous belief in the righteousness
of its claim. Thus, the award of damages is deleted, but the ruling was affirmed.

42. Light Rail Transit Authority v. Marjorie Navidad, GR 145804, February 6, 2003, Vitug,
J. (Duration of Duty to exercise Extraordinary Diligence: Carriage of Passengers)
FACTS:
About 7:30PM, Nicanor Navidad, drunk, entered the EDSA LRT station after purchasing a token
representing payment of the fare. While Nicanor was standing on the platform near the LRT tracks,
Junelito Escartin, security guard assigned to the area, approached Nicanor. A misunderstanding or
altercation ensued that led to a fist fight. There is no evidence as to how the fight started and how
Nicanor later fell on the LRT tracks. When Nicanor fell, at that exact moment, an LRT train
operated by petitioner Rodolfo Roman was coming in. Nicanor was struck and killed.

Nicanor’s widow, respondent Marjorie Navidad, and her children, filed a complaint for damages
against Junelito Escartin, Rodolfo Roman, LRTA, Metro Transit Organization Inc., and Prudent
Security Agency for the death of Nicanor. Trial court ruled for plaintiffs, ordering Prudent and
Escartin to pay damages, but dismissed the complaint against LRTA and Roman. Prudent appealed
to CA, exonerating Prudent from liability, instead holding LRTA and Roman jointly and severally
liable for damages. CA held that while Nicanor did not yet board the train, a contract of carriage
had already existed when Nicanor entered the place where passengers were supposed to be after
paying the fare and getting the token therefor. There was nothing to link Prudent to Nicanor’s
death.

ISSUE:
Whether LRTA is liable for breach of contract of carriage.
HELD: YES.
LRTA claims that Escartin’s assault on Nicanor was an act of a stranger that could not have been
foreseen or prevented. Roman was not an employee of LRTA but of Metro Transit. Navidad claims
that a contract of carriage was created from the moment Nicanor paid the fare and entered the
premises of the station.

NCC, governing liability of a CC for death of injury to its passengers, provides:

Article 1755. A common carrier is bound to carry the passengers safely as far as human
care and foresight can provide, using the utmost diligence of very cautious persons, with a
due regard for all the circumstances.
Article 1756. In case of death of or injuries to passengers, common carriers are presumed
to have been at fault or to have acted negligently, unless they prove that they observed
extraordinary diligence as prescribed in articles 1733 and 1755.
Article 1759. Common carriers are liable for the death of or injuries to passengers through
the negligence or willful acts of the formers employees, although such employees may
have acted beyond the scope of their authority or in violation of the orders of the common
carriers.
This liability of the common carriers does not cease upon proof that they exercised all the
diligence of a good father of a family in the selection and supervision of their employees.
 Article 1763. A common carrier is responsible for injuries suffered by a passenger on
account of the willful acts or negligence of other passengers or of strangers, if the common
carriers employees through the exercise of the diligence of a good father of a family could
have prevented or stopped the act or omission.

The duty of CCs to carry passengers safely using the utmost diligence of very cautious persons so
obligates it not only during the course of the trip but for so long as the passengers are
WITHIN ITS PREMISES and where they ought to be in pursuance to the contract of
carriage. The provisions render a CC liable for death or injury to passengers 1) thru negligence or
willful acts of its employees or 2) of other passengers or of strangers if the CC’s employees
thru exercise of due diligence could have prevented or stopped the act or omission. In case of
such death or injury, a CC is presumed to be negligent and by simple proof of injury, the
passenger is relieved of the duty to still establish negligence of the CC or its employees and
the burden shifts to the carrier to prove that the injury is due to an unforeseen event or force
majeure.

LRTA’s liability is founded on the contract of carriage and its obligation to indemnify the victim
arises from the breach of that contract by reason of its failure to exercise the high diligence
required of CCs. In the discharge of its commitment to ensure safety of passengers, a carrier may
choose to hire its own employees or avail itself of the service of an independent firm. In either
case, the CC is not relieved of its responsibilities under the contract of carriage.

Should Prudent be liable also? If at all, that liability could only be for tort under Art. 2176 and
related provisions in conjunction with Art. 2180. The premise, however, of employer’s liability is
negligence of the employee. Once such fault is established, the employer can be made liable based
on the presumption that the employer failed to exercise diligentissimi patris families in the
selection and supervision of its employees. This liability is primary and can be negated only by
showing due diligence in the selection and supervision of the employee, a factual matter that
was not shown.

Absent such showing, one may ask how the liability of a CC and an independent contractor be
described. it would be SOLIDARY. A contractual obligation can be breached by tort and when
the same act or omission causes the injury, one resulting in culpa contractual and the other in culpa
acquiliana, Art. 2194 (The responsibility of two or more persons who are liable for a quasi-delict
is solidary.) can well apply. Where an act which constitutes breach of contract would have itself
constituted the source of quasi-delictual liability had no contract existed between the parties, the
contract can be said to have been breached by tort, allowing the rules on tort to apply.

Regrettably for LRTA and heirs of Nicanor Navidad, SC is concluded by the factual finding of
CA that there is nothing to link Prudent to Nicanor’s death since the negligence of Escartin was
not proven. there is also no showing that Roman is guilty of any culpable act of omission and is
thus not liable. The contractual tie between LRTA and Nicanor is not a juridical relation between
the latter and Roman. Thus, Roman can be liable only for his own fault or negligence.

43. Dangwa Transportation Co., Inc. v. CA, GR 95582, October 07, 1991, Regalado, J.
(Duration of Duty to Exercise Extraordinary Diligence: Carriage of Passengers)
FACTS:
Private respondents Inocencia Cudiamat et al. (all heirs of Pedrito Cudiamat) filed a complaint for
damages against petitioners Dangwa and its bus driver Theodore Lardizabal for the death of
Pedrito Cudiamat due to a vehicular accident at Mankayan, Benguet. It was alleged that while
Lardizabal was driving a passenger bus belonging to Dangwa in a reckless manner without due
regard to traffic rules and regulations and safety to persons and property, it ran over its passenger
Pedrito Cudiamat. But instead of bring Pedrito immediately to the nearest hospital, Lardizabal
first brought his other passengers and cargo to their respective destinations before bringing
Pedrito to Lepanto Hospital where he expired. Dangwa alleged that they observed extraordinary
diligence in the operation of the transportation company and supervision of its employees. They
claim that it was Pedrito’s own negligence which gave rise to the incident.

Trial court ruled that the death was proximately caused by Pedrito’s negligence but nonetheless,
in equity, ordered Dangwa to pay private respondents P10k. Private respondents appealed. CA
ordered Dangwa to pay P288k actual damages etc., setting aside trial court’s ruling. Hence this
petition.

ISSUE:
Whether Dangwa was negligent and thus liable for damages.
HELD: YES.
The factual findings of CA are as a rule final and may not be reviewed. But there are exceptions,
like when the findings of CA are contrary to those of the trial court. Here, the trial court and CA
have discordant positions as to who between Dangwa and Pedrito was negligent. Trial court held
that Pedrito was negligent in trying to board a moving vehicle especially with one of his hands
holding an umbrella and without giving the driver any indication that he wishes to board the bus.
CA differed in holding that the bus was at full stop when Pedrito boarded it. Pedrito indicated his
intent to board the bus. The driver was negligent in prematurely stepping on the accelerator and in
not waiting for the passenger to first secure his seat.

After review of evidence, we find that there is no reason to disturb the CA findings. The
testimonies of Dangwa’s own witnesses show that the place of accident and place where one of
the passengers alighted were both between bunkhouses 53 and 54, hence CA’s finding that the bus
was at full stop when the victim boarded the same is correct. The conclusion that the victim fell
from the platform of the bus when it suddenly accelerated forward and was run over by the rear
right tires is confirmed. Thus, Pedrito cannot be said to be negligent.

The contention that the driver and conductor did not know that the victim would ride the bus since
Pedrito did not manifest his intention to do so does not merit consideration. When the bus is not
in motion, there is no necessity for a person who wants to ride the same to signal his intention
to board. A public utility bus, once it stops, is in effect making a CONTINUOUS OFFER to
bus riders. Thus, it becomes the duty of the driver and conductor, every time the bus stops, to do
no act that would increase peril to a passenger while he was attempting to board. The premature
acceleration here was a breach of such duty. It is the duty of CCs of passengers, including CCs by
railroad, train, streetcar, or motorbus, to stop their conveyances a reasonable length of time to
afford passengers an opportunity to board and enter. They are liable for injuries resulting to
boarding passengers from the sudden starting up or jerking of their conveyances while they are
doing so.

Even if the bus was moving, Pedrito’s boarding the same cannot be considered negligent as the
bus had “just started” and “was still in slow motion” when Pedrito boarded. It is not negligent per
se for one to attempt to board a train or streetcar which is moving slowly. The fact that passengers
board and alight from slowly moving vehicles is a matter of common experience both the driver
and conductor here could not have been unaware of.

Pedrito, by stepping and standing on the platform of the bus, is already CONSIDERED A
PASSENGER and is entitled to all the rights and protection pertaining to such contractual relation.
The duty of carriers of passengers extends to persons boarding and alighting.

Also, the fact that the driver and conductor falied to bring the gravely injured Pedrito immediately
to the hospital is patent proof of negligence. It defies understanding and can even be stigmatized
as callous indifference. After the accident, the bus could have forthwith turned at Bunk 56 to the
hospital, but the driver instead opted to go to Bunk 70 to let a passenger alight and deliver a
refrigerator.

44. La Mallorca v. CA, GR L-20761, July 27, 1966, Barrera, J. (Duration of Duty to exercise
Extraordinary Diligence: Carriage of Passengers)
FACTS:
At about noontime, private respondents Mariano Beltran et al., husband and wife, together with
their minor daughters Milagros (13yo), Raquel (4.5yo), and Fe (over 2yo) boarded the Pambusco
Bus owned and operated by La Mallorca at San Fernando Pampanga bound for Anao, Mexico
Pampanga. They carried 4 baggages. After about an hour’s trip, the bus reached Anao where it
stopped to let passengers, among whom were Beltran et al., alight. Mariano Beltran, carrying some
baggage, was first to get down, followed by his wife and children. Mariano led his companions to
a shaded spot on the left pedestrians side of the road about 4-5 meters from the bus. After, he
returned to the bus to get his other bayong which he left behind. But Raquel followed him
unnoticed by her father.

When Mariano was on the running board of the bus waiting for the conductor to hand him his
bayong which he left under one of the seats near the door, the bus suddenly started moving forward
to resume its trip notwithstanding that the conductor had not yet given the driver the customary
signal to start since he was still finding Mariano’s baggage. The bus stopped after it travelled about
10 meters.

When the bus started, Mariano immediately jumped from the running board without getting his
bayong and landed in front of the shaded place where his wife and children were. He saw people
gathering around the body of Raquel lying prostrate on the ground, her skull crushed. Thus,
Mariano et al. filed suit seeking moral and actual damages against La Mallorca.

Trial court found La Mallorca liable for breach of contract of carriage and sentenced it to pay
damages. On appeal to CA, La Mallorca claimed that there could not be breach as when the child
died, she was no longer a passenger of the bus. The contract of carriage had already terminated.
But although CA sustained this theory, it held La Mallorca liablt for quasi delict. Hence this
petition.

ISSUE:
Whether Raquel may still be considered a passenger.
HELD: YES.
Although Mariano Beltran et al. had alighted form the bus at a place designated for
disembarking, the father had to return to the vehicle to get one of his bags or bayong. There
is no controversy as to Mariano that, when he returned to the bus, the relation of passenger and
carrier between him and La Mallorca remained subsisting. Said relation does not necessarily
cease where the passenger, after alighting from the car, aids the carrier’s servant or
employee in removing his baggage from the car. The issue is as to the child Raquel.

The relation of carrier and passenger does not cease at the moment the passenger alights fmor
the carrier’s vehicle, but continues until the passenger has had a REASONABLE TIME or
reasonable OPPORTUNITY to LEAVE THE CARRIER’s PREMISES. What is a reasonable
time or delay is to be determined from all the circumstances. Thus, a person who, after alighting
from a train, walks along the station platform is still considered a passenger. So also, where a
passenger has alighted at his destination and is proceeding by the usual way to leave the company’s
premises, but before doing so is halted by the report that his brother, a fellow passenger, has been
shot, and he in GF returns to relieve his brother, he is deemed reasonable and necessarily delayed
and continues to be passenger entitled to protection of the company.

Here, Mariano returned to the bus to get one of his baggage which was not unloaded. Raquel must
have followed the father. The bus started to run while he was still on the running board waiting for
the conductor to hand him his bag or bayong, so he jumped down from the moving vehicle. It was
at this instance that Raquel was killed. Under the circumstances, it cannot be claimed that the
carrier’s agent exercised the “utmost diligence” of a “very cautious person” required by Art. 1755.

The driver, in stopping the bus, did not put off the engine. He started to run the bus even before
the conductor gave him the go signal. The presence of the passengers near the bus was not
unreasonable and they are thus to be considered still as passengers.

But even assuming that the contract of carriage had terminated already, La Mallorca is liable for
the negligence of its driver under Art. 2180 of NCC. There was an allegation of quasi-delict which,
although incompatible with the other claim under the contract of carriage, is permissible under the
rules allowing allegation of causes of action in the alternative whether compatible or not.

45. Aboitiz Shipping Corporation v. CA, GR 84458, November 06, 1989, Regalado, J.
(Duration of Duty to Exercise Extraordinary Diligence: Carriage of Passengers)
FACTS:
Anacleto Viana boarded MV Antonia, owned by Aboitiz, at the port of San Jose Occidental
Mindoro bound for Manila. It arrived in Manila. The passengers disembarked. After the vessel had
landed, Pioneer Stevedoring Corporation, one of the private respondents, took over the exclusive
control of the cargoes loaded on the vessel. The crane owned by Pioneer and operated by crane
operator Alejo Figueroa was placed alongside the vessel and 1 hour after the passengers of the
vessel had disembarked, it started operation by unloading the cargoes from the vessel. Anacleto,
who had already disembarked, remembering that some of his cargoes were still loaded in the
vessel, went back to the vessel. While pointing to the crew of the vessel to the place where his
cargoes were loaded, the crane hit him, pinning him between the side of the vessel and the crane.
He died 3 days later in the hospital due to hypostatic pneumonia from fracture of the pubic bone
lacerating the urinary bladder.

Private respondents Lucila Viana et al. filed a complaint for damages against Aboitiz for breach
of contract of carriage. Aboitiz claims that the vessel was completely under the control of Pioneer
and that the crane operator was not its employee. Aboitiz then filed a third-party complaint against
Pioneer imputing liability thereto. Pioneer claims that Aboitiz has no cause of action since Viana
et al. were suing it for breach of contract of carriage to which Pioneer is not a party.

Trial court, upon MR, absolved Pioneer from liability for failure of Vianas to preponderantly
establish a case of negligence against the crane operator which it said is never presumed. Only
Aboitiz was ordered to pay damages. CA affirmed except as to amount of damages. Hence this
petition.

ISSUE:
Whether Anacleto was still a passenger at the time of the accident.
HELD: YES.
Both trial court and CA found Anacleto guilty of contributory negligence, but holding that it was
Aboitiz’s negligence in prematurely turning over the vessel to the arrastre operator for unloading
of cargoes which was the direct and proximate cause of death.

Aboitiz claims that since 1 hour had already elapsed from when Anacleto disembarked fmor the
vessel and that he was given more than ample opportunity to unload his cargoes prior to the
operation of the crane, his presence on the vessel was no longer reasonable and he ceased to be a
passenger. La Mallorca v. CA is thus not applicab.e

The rule is that the relation of carrier and passenger continues until the passenger has been landed
at the port of destination and has left the vessel owner’s dock or premises. The relation will not
ordinarily terminate until the passenger has, after reaching his destination, safely alighted form
the carrier’s conveyance or had a reasonable opportunity to leave the carrier’s premises. All
persons who stay on the premises a reasonable time after leaving the conveyance are passengers.
What is a reasonable time or delay is determined from all the circumstances, and includes a
reasonable time to see after his baggage and prepare for his departure. It is in accordance
with this rationale that the doctrine in La Mallorca was enunciated.

What prompted the SC to rule as it did in La Mallorca is the fact of the passenger’s
REASONABLE PRESENCE within the carrier’s premises. That reasonableness of time
depends on the circumstances like the kind of CC, nature of its business, customs of the place, etc.
and precludes a consideration of the time element PER SE without taking into account such
OTHER FACTORS. It is thus of no moment whether in La Mallorca there was no appreciable
interregnum for the passenger to leave the carrier’s premises whereas here, an interval of 1 hour
had elapsed. The primary factor is the existence of a reasonable CAUSE to justify the presence
of the victim on or near the petitioner’s vessel. Here, there is such justifiable cause.

By the very nature of Aboitiz’s business as shipper, the passengers of vessels are allotted a longer
period of time to disembark from the ship than other CCs like buses. Such vessels can
accommodate a bigger volume of cargoes and passengers. Thus, a ship passenger will need at least
an hour as is the usual practice to disembark from the vessel and claim his baggage whereas
a bus passenger can easily get off the bus and retrieve his luggage in a very short period of
time. Aboitiz cannot claim, thru merely comparing the period of time, that La Mallorca is
inapplicable. Contrarily, if we apply La Mallorca, Anacleto was still a passenger at the time of the
incident. He was still in the act of unloading his cargoes, which he had every right to do, when the
accident occurred. A carrier is duty bound not only to bring its passengers safely to their destination
but also to afford them a reasonable time to claim their baggage.

Aboitiz failed to rebut the presumption of negligence against it. It inadequately complied with the
required degree of diligence to prevent the accident from happening. The evidence does not show
that there was a cordon of drums around the perimeter of the crane as claimed by Aboitiz. The
alleged presence of visible warning signs was not indubitable established. Thus, we are not
inclined to accept Aboitiz’s explanation that the passengers were sufficiently warned that merely
venturing into the area in question was fraught with serious peril. Even with the drums and the
guard’s admonitions against entry, these were at most insufficient precautions when considered
vis-à-vis the gravity of the danger to which the deceased was exposed.

Pioneer is not within the ambit of the rule on extraordinary diligence and the presumption of
negligence imposed on CCs does not apply. But no negligence can be imputed to Pioneer.

46. Schmitz Transport & Brokerage Corporation v. Transport Venture, Inc. , GR 150255,
April 22, 2005, Carpio-Morales, J. (Defense of CCs: Requisites of fortuitous event)
FACTS:
SYTCO Pte Ltd. Singapore shipped from the port of Ilyichevsk, Russia on board MV Alexander
Saveliev 545 hot rolled steel sheets in coil. The cargoes, to be discharged at the port of Manila to
consignee Little Giant Steel Pipe Corporation, were insured by Industrial Insurance Company Ltd.
The vessel arrived in Manila.

Schmitz Transport, whose services Little Giant engaged to secure the needed clearances to receive
the cargoes and deliver them to Little Giant’s warehouse, in turn engaged Transport Venture Inc.
(TVI) to send a barge and tugboat at shipside. TVI’s tugboat towed the barge to shipside. Arrastre
operator Ocean Terminal unloaded 37 of the 545 coils from the vessel to the barge.

By 12:30am Oct. 27, 1991, when the weather became inclement due to an approaching storm, the
unloading of the 37 coils to the barge was done. But no tugboat pulled the barge back to the pier.
At 5:30am, due to strong waves, the crew of the barge abandoned it and went to the vessel. The
barge capsized with the 37 coils. At 7am, a tugboat arrived to pull the already empty and damaged
barge back to the pier.
Industrial Insurance paid Little Giant P5M and filed a complaint against Schmitz Transport, TVI,
and Black Sea in RTC to recover the P5M. Industrial Insurance faulted them for undertaking the
unloading while typhoon signal #1 was raised in Manila.

RTC held all of them, Schmitz, TVI, and Black Sea negligent and liable. CA affirmed, holding
them solidarily liable. Hence, Schmitz filed this petition against TVI, Industrial Insurance, and
Black Sea.

Schmitz claims that in chartering the barge and tugboat of TVI, it was acting for its principal,
Little Giant. The transportation contract was thus between Little Giant and TVI. TVI claims that
it acted as a passive party as it merely received the cargoes and transferred them unto the barge
upon Schmitz’s instruction.

ISSUE:
Whether the loss was due to fortuitous event.
HELD: NO.
When a fortuitous event occurs, Art. 1174 of NCC absolves any party from liability. To be a
fortuitous event, 1) the cause of the unforeseen and unexpected occurrence, or the failure of the
debtor to comply with his obligation, must be independent of human will; (2) it must be
impossible to foresee the event which constitute the caso fortuito, or if it can be foreseen it must
be impossible to avoid; (3) the occurrence must be such as to render it impossible for the debtor
to fulfill his obligation in any manner; and (4) the obligor must be free from any participation
in the aggravation of the injury resulting to the creditor.

The act of god doctrine strictly requires that the act must be occasioned solely by violence of
nature. Human intervention is to be excluded. If the effect is found in part the result of the
participation of man, whether due to his active intervention or neglect or failure to act, the
occurrence is humanized.

That no tugboat towed the barge back to the pier after the cargoes were completely loaded by
12:30am is the proximate cause of the loss. Had the barge been towed back promptly to the pier,
the loss could have been avoided. But the barge was left floating in open sea until big waves set in
at 5:30am, causing it to sink with the cargoes. The loss thus falls outside “act of god” doctrine.

Who are liable? Schmitz is a CC. Art. 1732 does not distinguish between one whose principal
business is carrying of goods and one who does such merely as an ancillary activity. Schmitz’s
claim that it is merely a customs broker whose principal function is to prepare the correct customs
declaration and proper shipping documents is without merit. It suffices that it undertakes to deliver
goods for pecuniary consideration.

It argues that since it is Little Giant’s Agent, its negligence is also the principal’s negligence. But
in effecting the transportation of cargoes from shipside into Little Giant’s warehouse, it was
discharging its own personal obligation under a contract of carriage. Schmitz, which did not have
any barge or tugboat, engaged TVI as handler. While in their service contract Little Giant is
consignee, Schmitz did not disclose that it was acting on commission and charting the vessel for
Little Giant. Thus, Little Giant did not automatically become a party to the service contract. Little
Giant cannot directly sue TVI based on the contract but only for a cause of action for negligence.

Schmitz, to be relieved of liability, must prove extraordinary diligence. While it sent checkers and
a supervisor on board the vessel, it failed to take all available and reasonable precautions to avoid
the loss. After noting that TVI did not arrange for the prompt towage of the barge, it should have
summoned the same or another tugboat, but it did not.

For TVI, while it acted as private carrier, it still needed to observe ordinary diligence under Arts.
1170 and 1173. TVI’s failure to promptly provide a tugboat not only increased the risk but was the
proximate cause of the loss. A man of ordinary prudence would not leave a heavily loaded barge
floating for hours at such a precarious time in the open sea.

Schmitz and TVI are solidarily liable, citing LRTA v. Navidad, under Art. 2180.

47. Alberta Yobido v. CA, GR 113003, October 17, 1997, Romero, J. (Defenses of CCs:
Requisits of Fortuitous Event)
FACTS:
Sps. Tito and Leny Tumboy and their minor children Ardee and Jasmin boarded at Mangagoy
Surigao del Sure a Yobido Liner bus bound for Davao city. along Picop Road, the left front tire of
the bus exploded. The bus fell into a ravine 3 feet from the road and struck a tree, resulting in Tito
Tumboy’s death and physical injuries to other passengers.

A complaint for breach of contract of carriage was filed by Leny and her children against Alberta
Yobido, owner of the bus, and Cresencio Yobido, its driver, in RTC. Defendants therein claimed
fortuitous event. Leny claims that the violation of contract was due to failure to exercise the
diligence required in transporting passengers.

Leny claims that the road was wet due to rain and rough with crushed rocks. The bus had cargoes
on top and was full of passengers, It was running fast, so she cautioned the driver to slow down
but he merely stared at her thru the mirror. The bus conductor, Abundio Salce, claims that the bus
ran at a 60 to 50 speed. The tire that exploded was a brand new tire he had mounted 5 days before.

RTC dismissed the action. CA reversed, holding that the tire explosion is not a fortuitous event.
Hence this petition.

ISSUE:
Whether the tire blow-out is a fortuitous event.
HELD: NO.
As a rule, when a passenger boards a CC, he takes the risks incidental to the mode of travel he has
taken. A carrier is not an insurer of the safety of its passengers and is not bound absolutely at all
events to carry them without injury. But when a passenger is injured or dies while travelling, the
law presumes that the CC is negligent. NCC provides in Art. 1756 xxx. Art. 1755 provides xxx.
Accordingly, in culpa contractual, once a passenger dies or is injured, the carrier is presumed
negligent. This presumption may be overcome only by evidence that the carrier observed
extraordinary diligence or that the death or injury was due to a fortuitous event.
A fortuitous event has the following characteristics: (a) the cause of the unforeseen and unexpected
occurrence, or the failure of the debtor to comply with his obligations, must be independent of
human will; (b) it must be impossible to foresee the event which constitutes the caso fortuito, or
if it can be foreseen, it must be impossible to avoid; (c) the occurrence must be such as to render
it impossible for the debtor to fulfill his obligation in a normal manner; and (d) the obligor
must be free from any participation in the aggravation of the injury resulting to the creditor.

Here, there are human factors involved. That the tire was new did not imply that it was entirely
free from manufacturing defects or properly mounted. Neither may the fact that the tire bought
and used in the vehicle is of a brand name (Goodyear tire) noted for quality result in the conclusion
that it could not explode within 5 days of use. At any rate, an accident caused either by defects in
the automobile or thru negligence of its driver is not fortuitous event.

Also, a CC may not be absolved in case of fortuitous event alone. The CC must still prove that it
was not negligent.

Although the bus ran at 60-50 kmph within the lawful speed limit, they failed to rebut Leny’s
testimony that the bus was running so fast she cautioned the driver to slow down. These
contradictory facts must be resolved in favor of liability due to the presumption of negligence of
the carrier in law. coupled with this is the condition of the road rough, winding, and wet due to
rain. It was incumbent on the defense to show that it took precautionary measures. Proof that the
tire was new and of good quality is not sufficient proof that it was not negligent.

48. Eastern Shipping Lines v. IAC (Fire as Fortuitous Event) See case 16

49. Franklin Gacal v. PAL, GR 55300, March 15, 1990, Paras, J. (Defense of CCs: Fortuitous
Event: Hijacking)
FACTS:
Sps. Franklin and Corazon Gacal, Sps. Bonifacio and Mansueta Anislag, and the late Elma de
Guzman were then passengers boarding PAL’s BAC 111 at Davao Airport for flight to Manila,
not knowing that on the same flight, Macalinog et al, all of Marawi City and members of MNLF,
were their co-passengers. 3 were armed with grenades, 2 with .45 caliber pistols, and one with .22
caliber pistol. 10 minutes after takeoff at 2:30pm, the hijackers announced the hijacking and
directed its pilot to fly to Libya, then after being explained to about the plane’s fuel limitations, to
Zamboanga Airport for refueling. It landed at May 21, 1976, 3pm there, met with 2 armored
military cars with machine guns pointed at the plane.

They demanded that a DC aircraft take them to Libya with the president of PAL as hostage and
that they be given $375k and 6 armalites, else they will blow up the plane. Relatives of the hijackers
were allowed to board but immediately after they alighted from the plane, an armored car bumped
the stairs which commenced the battle between military and the hijackers. 10 passengers and 3
hijackers died on the spot and 3 other hijackers were captured.
City fiscal Gacal was unhurt while Corazon suffered injuries when she jumped out of the plane
when it was peppered with bullets. Asst. City fiscal Bonifacio was unhurt, but Mansueta suffered
a fracture. Elma died.

Sps. Gacal filed an action for damages against PAL. Trial court dismissed, finding that there was
fortuitous event. Hence this petition on pure questions of law. Sps. Gacal claims that the cause of
the incident is due to PAL’s gross negligence in failing to frisk passengers adequately to discover
hidden weapons in the bodies of the 6 hijackers. PAL did not use a metal detector. PAL claims
that the inspection of baggages and cargo and frisking were done by military personnel who had
assumed exclusive jurisdiction over all airports in PH. The negotiations with the hijackers were
purely a government matter and military operation. Thus, there is fortuitous event.

ISSUE:
Whether the hijacking during military take-over of airports during martial law is a fortuitous event.
HELD: YES.
Is hijacking during martial law and under the circumstances fortuitous event to exempt PAL? To
constitute fortuitous event (caso fortuito or force majeure) that would exempt a person from
liability under Art. 1174 of NCC, it is necessary that these elements concur: : (a) the cause of the
breach of the obligation must be independent of the human will (the will of the debtor or the
obligor); (b) the event must be either unforeseeable or unavoidable; (c) the event must be such as
to render it impossible for the debtor to fulfill his obligation in a normal manner; and (d) the debtor
must be free from any participation in, or aggravation of the injury to the creditor.

It is not enough that the event should not have been foreseen, but it must be one impossible to
foresee or avoid. Mere difficulty to foresee the happening is not impossibility to foresee the same.

Applying these, the failure to transport the passengers safely from Davao to Manila due to the
hijacking by 6 MNLF members who are without connection with PAL is independent of the will
of either PAL or its passengers. Under normal circumstances, PAL might have foreseen the
hijacking which could have been avoided had there been a more thorough frisking of passengers
and inspection of baggages. But the incident occurred during Martial Law where there was a
military take-over of airport security including frisking of passengers and the inspection of their
luggage. These rendered it impossible for PAL to perform its obligations in a normal manner
and obviously it cannot be faulted with negligence in the performance of a duty taken over by
AFP.

Finally, there is no dispute that the fourth element is satisfied also. Thus, there was fortuitous
event. The petition is dismissed.

50. Precillano Necesito, etc. v. Natividad Paras, et al., GR L-10605, June 30, 1958, Reyes,
JBL, J. (Defenses of CCs: Mechanical Defects as Fortuitous Event)
FACTS:
Severina Garces and her 1yo son Precillano Necesito, carrying vegetables, boarded bus 199 of PH
Rabbit Bus Lines at Agno Pangasinan. The bus was driven by Francisco Bandonell. The bus
entered a wooden bridge, but the front wheels swerved to the right. The driver lost control and
after wrecking the bridges’ wooden rails, the truck fell on its right side into a creek where water
was breast deep. Severina Garces drowned. Precillano Necesito was injured. The money, wrist
watch, and vegetables were lost.

Two actions for damages were filed in CFI against PH Rabbit Lines. It pleaded that the accident
was due to engine or mechanical trouble beyond its control or that of Bandonell. CFI found that
the bus proceeded slowly due to the bad condition of the road. The accident was caused by the
fracture of the right steering knuckle which was defective in that its center was not compact but
“bubbled and cellulous”, a condition that could not be known or ascertained by the carrier
despite regular 30-day inspections made on the steering knuckle. When the bus broke down on
January 28, 1954, it was last inspected on January 5, 1954 and was due to be inspected again on
Feb. 5. Thus, CFI held that the accident was due to fortuitous event. Hence this direct appeal.

ISSUE:
Whether PH Rabbit Bus Lines is liable for the manufacturing defect of the steering knuckle.
HELD: YES.
The proximate cause of the accident was the reduced strength of the steering knuckle due to defects
in casting it.

Art. 1755 provides xxx. A CC is not an insurer of the passenger’s safety. His liability rests upon
negligence, his failure to exercise the “utmost” degree of diligence the law requires. In American
law, the rule on liability of carriers for defects of equipment is thus expressed:
"The preponderance of authority is in favor of the doctrine that a passenger is entitled to
recover damages from a carrier for an injury resulting from a defect in an appliance
purchased from a manufacturer, whenever it appears that the defect would have been
discovered by the carrier if it had exercised the degree of care which under the
circumstances was incumbent upon it, with regard to inspection and application of the
necessary tests. For the purposes of this doctrine, the manufacturer is considered as being
in law the agent or servant of the carrier, as far as regards the work of constructing the
appliance. According to this theory, the good repute of the manufacturer will not relieve
the carrier from liability."

The rationale of the carrier’s liability is the fact that the passenger has neither choice nor control
over the carrier in the selection and use of equipment and appliances in use by the carrier. Having
no privity with the manufacturer or vendor of the defective equipment, the passenger has no
remedy against him while the carrier usually has. It is but logical thus that the carrier be held
to answer for the flaws of his equipment if such flaws were at all DISCOVERABLE.

The carrier selects the manufacturer of its cars if it does not itself construct them. That it does not
exercise control over the former is because it elects to place that matter in the hands of the
manufacturer instead of retaining the supervising control itself. The manufacturer should be
deemed the agent of the carrier as to its duty to select the material out of which its cars and
locomotive are built. This is not vicarious responsibility. It extends, as the necessity of this
business demands, the rule of respondeat superior to a situation which clearly falls within its scope
and spirit. Where a passenger is injured by the breaking of part of the train he is riding, it is
presumably the result of negligence at some point by the carrier.
“If the passenger has proved his injury due to breakage in the car, whether the defect was in the
car or not, the burden is on the carrier to show that it was due to causes which the exercise of the
utmost human skill and foresight could not prevent. The carrier must show, if the accident was
due to a latent defect in the material or construction of the car, that not only could it not have
discovered the defect by the exercise of such care, but that the builders could not by the exercise
of the same care have discovered the defect or foreseen the result. This applies whether the
defective car belonged to the carrier or not.”

Here, the only test applied to the steering knuckle was a purely visual inspection every thirty
days, to see if any cracks developed. It does not appear that either the manufacturer or carrier at
any time tested the steering knuckle to ascertain whether its strength was up to standard or that it
had no hidden flaws that would impair that strength. And yet the carrier must have been aware of
the critical importance of the knuckle’s resistance; that its breakage would result in loss of balance
and steering control of the bus.

It has not been shown that the weakening of the knuckle was impossible to detect by any known
test. There is even testimony that it could be detected. Thus, the periodical visual inspection of
the steering knuckle did not measure up to the required legal standard of “utmost diligence of
very cautious persons” “as far as human care and foresight can provide”. Thus, the knucle’s failure
is not a fortuitous event.

It may be impracticable to require carriers to test the strength of each and every part of its vehicles.
But a due regard for the carrier’s obligations to the travelling public demands adequate periodical
tests to determine the condition and strength of those parts.

51. Mauro Ganzon v. CA, GR L-48757, May 30, 1988, Sarmiento, J. (Defenses of CCs: Order
of Public Authority)
FACTS:
Private respondent Gelacio Tumambing contracted the services of Mauro Ganzon to haul 305 tons
of scrap iron from Mariveles, Bataan to the port of Manila on board the lighter LCT “Batman”.
Ganzon thus sent his lighter Batman to Mariveles. Tumambing delivered the scrap iron to
Filomena Niza, captain of the lighter, for loading. When about half of the scrap iron was already
loaded, Mayor Jose Advincula of Mariveles arrived and demanded P5k from Tumambing. After
a heated argument, Advincula drew a gun and shot Tumambing. This was not fatal.

After sometime, loading resumed. But later, Acting Mayor Basilio Rub with 3 policemen ordered
Niza to dump the scrap iron where the lighter was docked. The rest was taken to the compound of
NASSCO. Rub issued a receipt stating that the municipality of Mariveles had taken custody of the
scrap iron.

Tumambing filed suit in CFI. CA reversed CFI and ordered Ganzon to pay Tumambing damages.
hence this petition.

ISSUE:
Whether Ganzon is liable for the loss of scrap iron.
HELD: YES.
Ganzon claims that the scrap iron were not unconditionally placed under his custody to make him
liable. But Ganzon actually received the scraps thru his employees. Upon receipt by the carrier for
transportation, the contract of carriage was perfected. Ganzon’s extraordinary responsibility
commenced. That part of the shipment had not been loaded on the lighter did not impair the
contract as the goods remained in the custody and control of Ganzon, albeit still unloaded.

Ganzon failed to show that the loss was due to any of these causes in Art. 1734:
(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.
Thus, Ganzon is presumed negligent and the court is not even required to make an express finding
of negligence to hold Ganzon liable for breach.

Ganzon claims that the loss was due to the intervention of municipal officials of Mariveles which
is a fortuitous event under Art. 1174 of NCC.

But in CA, his defense was that the loss was due to “order or act of competent public authority.”
CA correctly ruled that it must be first shown that Acting Mayor Rub HAD THE POWER to
issue the disputed order, or that it was LAWFUL, or that it was issued under LEGAL
PROCESS OF AUTHORITY. Ganzon failed to establish this. The order given by Rub to dump
the scrap into the sea was part of the pressure applied by Mayor Advincula to shakedown
Tumambing for P5k. Rub’s order did not constitute valid authority for Ganzon to carry out.

Ganzon’s change of theory on appeal is not allowed. But in any case, the intervention of municipal
officials was not of a character that would render impossible the fulfillment by the carrier of
its obligation. Ganzon was not duty bound to obey the illegal order to dump into the sea the
scrap iron. There is absence of proof that the order was attended with such force or intimidation as
to completely overpower the will of Ganzon’s employees. Mere difficulty in fulfilling the
obligation is not fortuitous event. The scraps could have been unloaded at the shore or at NASSCO
compound so that after the dispute with the officials was settled, the scraps could then be delivered.

52. Antonia Maranan v. Pascual Perez, et al., GR L-22272, June 26, 1967, Defenses of CCs:
carriage of passenger: Employees)
FACTS:
Rogelio Corachea was a passenger in a taxicab owned and operated by Pascual Perez when he was
stabbed and killed by the driver Simeon Valenzuela. Valenzuela was convicted of homicide and
while appeal of the conviction was pending, Antonia Maranan, Rogelio’s mother, filed an action
in CFI to recover damages from Perez and Valenzuela for the death of her son. Perez claims that
Rogelio was killed in self-defense since he first assaulted the driver by stabbing him from behind.
Perez also claims fortuitous event.

CFI ordered Perez to pay P3k damages. It dismissed the complaint against Valenzuela. Perez and
Maranan appealed to SC, the latter asking for more damages and Perez insisting on non-liability.
CA meanwhile affirmed conviction of Valenzuela. Final judgment therein was entered.
ISSUE:
Whether Perez is liable for damages for the acts of Valenzuela.
HELD: YES.
Perez relies on Gillaco v. Manila Railroad Co. where it was held that the carrier is not liable for
assaults of its employees. But the passenger there was killed outside the scope and course of duty
of the guilty employee. The position of Devesa therein was also a passenger, a stranger also
awaiting transportation, and not that of an employee assigned to discharge any of the duties that
the railroad assumed by its contract with the deceased.

Here, the killing was done by the driver of the very cab transporting the passenger in whose
hands the carrier had entrusted the duty of executing the contract of carriage. Unlike in
Gillaco, the killing took place in the course of duty of the guilty employee and when he was
acting within the scope of his duties. Also, Gillaco was decided under the 1889 Civil Code which,
unlike the NCC, did not impose upon CCs absolute liability for safety of passengers against willful
assaults or negligent acts committed by their employees.

Also, unlike the old Civil Code, the NCC expressly makes the CC liable for intentional assaults
by its employees upon its passengers, by the wording of Art .1759:
"Common carriers are liable for the death of or injuries to passengers through the
negligence or wilful acts of the former's employees, although such employees may have
acted beyond the scope of their authority or in violation of the orders of the common
carriers."

Under Anglo-American Law, the basis of the carrier’s liability for assaults on passengers by its
drivers rests on 1) doctrine of respondent superior or 2) principle that it is the carrier’s implied
duty to transport the passenger safely. Under the first minority view, the carrier is liable only when
the act of the employee is within the scope of his authority and duty. In the second, which is upheld
by the majority and by later cases, it is enough that the assault happens within the course of the
employee’s duty. It is no defense that the act was in excess of authority or in disobedience of the
carrier’s orders.

Art. 1759 evidently follows the second view. Three reasons underlie this rule: 1) the special
undertaking of the carrier requires that it furnish its passenger that full measure of protection
afforded by the exercise of the high degree of care prescribed by the law, inter alia, from violence
of strangers and other passengers but, above all, from the acts of the carrier’s own servants, 2) the
carrier’s liability for the servant’s violation of duty to passengers is the result of its confiding in
the servant’s hands the performance of its contract to safely transport the passenger, delegating
the duty of protecting the passenger with the utmost care prescribed by law, and 3) as between the
carrier and passenger, the carrier must bear the risk for its employees’ wrongful acts or negligence
against passengers since it, and not the passengers, had the power to select and remove them.

Thus, it is the carriers strict obligation to select its drivers and employees with due regard not
only to their technical competence and physical ability, but also to their to tal personality,
including moral fibers and social attitude. Applying this stringent norm here, Perez is liable. The
dismissal of the claim against Valenzuela was correct since the action was based on breach of
contract of carriage, Valenzuela not being a party thereto.
53. Cornelia de Gillaco, et al. v. Manila Railroad Company, GR L-8034, November 18, 1955,
Reyes, JBL, J. (Defenses of CCs in carriage of passenger: Employees)
FACTS:
At about 730am Lt. Tomas Gillaco, husband of Cornelia, was a passenger in the morning train of
Manila Railroad Company from Calamba Laguna to Manila. when the train reached Paco station,
Emilio Devesa, a train guard of the Manila Railroad assigned in the Manila-San Fernando, La
Union Line, happened to be in said station waiting for the same train to take him to Tutuban
station where he was going to report for duty. Devesa’s tour of duty on that day was from 9am
to 7pm.

Devesa had a long standing personal grudge against Gillaco dating back during the Japanese
occupation. So, Devesa shot Gillaco with the carbine furnished him by Manila Railroad for his use
as train guard upon seeing Gillaco inside the train coach. Gillaco died. Gillaco was convicted by
homicide.

Manila Railroad claims that it is not subsidiarily liable as employer of Devesa under Art. 103 of
RPC since the crime was not committed while the slayer was in the actual performance of his
ordinary duties and service. CFI held it responsible.

ISSUE:
Whether Manila Railroad is liable for the crime of Devesa.
HELD: NO.
Under the law of the case, the liability extends only to hose personal violence of the carrier’s
employees that the carrier could foresee or avoid thru exercising the degree of care and diligence
required of it. Since the incident happened in 1946, the carrier’s liability is governed under the old
Civil Code of 1889.

Devesa’s shooting of Gillaco because of a personal grudge was entirely unforeseeable by Manila
Railroad. The latter had no means to anticipate that the two would meet nor could it reasonable
foresee every personal rancor that might exist between each of its many employees and the
thousands of passengers riding its trains. Thus, the shooting was a fortuitous event within the
definition of Art 1105 of old CC (1174 in NCC), being both unforeseeable and inevitable under
the circumstances. The breach of Manila Railroad’s contract of carriage with Gillaco was excused
thereby.

Also, when the crime took place, Devesa had no duties to discharge in connection with the
transportation of the deceased from Calamba to Manila. when Devesa shot Gillaco, Devesa was
assigned to guard the La Union trains, and he was at Paco Station awaiting transportation to
Tutuban, the starting point of the train he was engaged to guard. In fact, his duty was to start at
9am, two hours after the crime. Devesa was thus under no obligation to safeguard the
passengers at the time. The killing of Gillaco was not done in line of duty. The position of Devesa
at the time was that of another would be passenger, a stranger also awaiting transportation,
and not that of an employee assigned to discharge any of the duties Manila Railroad assumed by
its contract with Gillaco. Thus, Devesa’s assault is not in law a breach of Gillaco’s contract of
carriage by a servant or employee of the carrier.
54. Bachelor Express Incorporated v. CA, GR 85691, July 31, 1990, Gutierrez, Jr., J.
(Defenses in carriage of passengers, other passengers and third persons)
FACTS:
Bus 800 of Bachelor Express and Driven by Cresencio Rivera came from Davao City on its way
to Cagayan de Oro City passing Butuan City. while at Tabon-Tabon, the bus picked up a passenger.
15 minutes later, a passenger at the rear portion suddenly stabbed a PC soldier which caused
commotion and panic among passengers. When the bus stopped, passengers Ornominio Beter and
Narcia Rautraut were found lying down the road, Beter already dead due to head injuries and
Rautraut suffering from severe injuries which later caused her death. The passenger-assailant
alighted the bus, ran to the bushes, and was killed by police. Heirs of Beter and Rautraut, private
respondents, filed a complaint for sum of money against Bachelor Express, its owner Yasay, and
Rivera.

Bachelor claims that the driver was able to transport the passengers safely to their destinations
except Beter and Rautraut who jumped off the bus without the knowledge and consent or fault of
Rivera and Bachelor. Bachelor exercised due diligence in its choice of employees. It claims that
the deaths were caused by a third person beyond its control.

Trial court dismissed the complaint. CA reversed. Hence this petition.

ISSUE:
Whether Bachelor is liable for the incident.
HELD: YES.
Bachelor is a CC. Under Art. 1756 of NCC, Bachelor is presumed negligent unless it proves
extraordinary diligence. The running amuck of the passenger was the proximate cause of the
incident as it triggered panic among the passengers such that they started running to the sole exit,
shoving each other resulting in the falling off the bus by Beter and Rautraut. The sudden stabbing
of the passenger is within the context of force majeure.

But for a CC to be absolved from liability in case of force majeure, it must still prove that it was
not negligent. Here, Pedro Collango, as conductor, testified that he shut the door after the last
passenger boared. But when the passengers panicked, he himself panicked and opened the door.
The bus was running at 58-65kph and had just come from a full stop after picking a passenger.
The bus was also not properly equipped with doors in accordance with law.

Bachelor’s argument that it is not “insurers of their passengers” has no merit for its failure to prove
that the deaths were exclusively due to force majeure and not to failure of Bachelor to observe
extraordinary diligence.

55. Jose Pilapil v. CA, GR 52159, December 22, 1989, Padilla, J. (Defenses in carriage of
passenger, other passengers and third persons)
FACTS:
Jose Pilapil was a passenger of respondent Alatco Transportation Company’s bus. While bus 409
was between Iriga City and Naga City, upon reaching the vicinity of the cemetery of municipality
of Baao, an unidentified man, a bystander along said national highway, hurled a stone at the left
side of the bus which hit Pilapil above his left eye. Alatco lost no time in bringing him to the
hospital in Naga where he was treated. Despite treatment, he partially lost his left eye’s vision and
sustained a permanent scar above the left eye.

Pilapil filed in CFI an action for damages. CFI ordered Alatco to pay damages. CA reversed. Hence
this petition.

ISSUE:
Whether Alatco is liable for the incident.
HELD: NO.
Pilapil claims that the nature of the business of a transportation company requires the assumption
of certain risks, and the stoning is one such risk which a CC cannot exempt itself from liability and
that Alatco falied to rebut the presumption of negligence.

But a CC does not give its consent to become an insurer of any and all risks to passengers and
goods. It merely undertakes to perform certain duties to the public as the law imposes. While the
law requires extraordinary diligence and imposes a presumption of negligence against a CC, it
does not make the carrier an insurer of the absolute safety of its passengers.

Art. 1755 qualifies the duty of extraordinary care etc. to only such as human care and foresight
can provide. Art. 1756, in creating a presumption of negligence against a CC when a passenger is
injured, merely relieves the passenger for the time being from introducing evidence to fasten
negligence to the CC. But this is rebuttable by proof of extraordinary diligence by the CC. thus,
the intention of the code commission and congress is only to curb recklessness of drivers and
operators of CCs.

Here, the injury to Pilapil was not due to any defect in the means of transport or to the negligent
or willful acts of Alatco’s employees, therefore involving no issue of negligence in its duty to
provice safe cars and competent employees, with the injury arising wholly from causes created
by strangers over which the CC had no control or even knowledge. The presumption of
negligence is rebutted, otherwise the CC would be an insurer of the absolute safety of its
passengers which is not the intention of the lawmakers.

Also, while generally CCs are bound to observe extraordinary diligence, it seems that this is not
the standard by which its liability is to be determined when intervening acts of strangers
directly cause injury while the contract of carriage exists. Art. 1763 provides:
"Article 1763. A common carrier is responsible for injuries suffered by a passenger on
account of the wilful acts or negligence of other passengers or of strangers, if the common
carrier's employees through the exercise of the diligence of a good father of a family could
have prevented or stopped the act or omission."

Thus, the negligence for which a CC is liable is the negligent omission by the carrier’s employees
to prevent the tort of a stranger from being committed while the same could have been foreseen
and prevented by them. If the violation of contract is due to strangers, the degree of care is only
that of a good father of a family.
Pilapil claims that Alatco could have prevented the injury if there were mesh-like grills on its
windows. But the carrier is not charged to provide vehicles as to absolutely prevent all injuries to
passengers. Where the CC uses cars of the most approved type, in general used by others engaged
in the same occupation, and exercises a high degree of care in maintaining them in suitable
condition, it is not negligent.

56. Fortune Express Inc. v. CA, GR 119756, March 18, 1999, Mendoza, J. (Defenses in
carriage of passenger, other passengers and third persons)
FACTS:
On November 18, 1989, Fortune’s bus figured in an accident with a jeepney in Lanao del Norte,
resulting in the death of several passengers of the jeepney including two Maranaos. The owner of
the jeepney was a Maranao. Generalao, a field agent of the constabulary investigated and found
that certain Maranaos were planning to take revenge on Fortune by burning some of its buses.
Generalao informed Diosdado Bravo, operations manager of Fortune, who assured him that the
necessary precautions to insure the safety of lives and property would be taken.

On November 22, 1989, 3 armed Maranaos who pretended to be passengers seized a bus of Fortune
at Lanao while on its way to Illigan. Among the passengers was Atty. Caorong. The leader of the
Maranaos, Mananggolo, ordered the driver Cabatuan to stop the bus on the side of the highway,
then shot Cabatuan on the arm. One of them started pouring gasoline inside the bus as the other
held the passengers at bay with a gun. Mananggolo ordered the passengers to get off the bus.

Atty. Caorong returned to the bus and pleaded with the one pouring gas to spare the driver, but
they were adamant that they will burn the bus with its driver. Cabatuan, who regained
consciousness, climbed out of the window. Atty. Caorong was shot. The bus was set on fire.
Caorong was rushed to hospital but died.

Private respondents heirs of Atty. Caorong filed a suit for breach of contract in RTC. RTC
dismissed. CA reversed. Hence this petition.

ISSUE:
Whether Fortune is liable for the incident.
HELD: YES.
Art. 1763 provudes xxx. Here, because of the negligence of Fortune’s employees, the seizure of
the bus by Mananggolo and his men was made possible. Despite warning from the constabulary,
Fortune did nothing to protect the safety of its passengers. Had Fortune and its employees been
vigilant, they would have seen that the malefactors had a large quantity of gasoline with them.
Under the circumstances, simple precautionary measures like frisking passengers and inspecting
their baggages could have been employed. Thus, the employees did not exercise the diligence of a
good father of a family.

Fortune claims that the seizure of the bus is a fortuitous event. The requisites of fortuitous event
are xxx. The cases of Pilapil and De Guzman v. CA do not apply. We held in Pilapil and De
Guzman that respondents were not negligent in not taking special precautions against threats to
passengers which could not be foreseen. Here, this factor of unforeseeability (2nd requisite of
fortuitous event) is lacking.
Atty. Caorong is not guilty of contributory negligence as claimed by Fortune. He was playing the
role of the good Samaritan. Certainly, this act cannot be considered an act of negligence.

57. Norberto Quisumbing Sr. v. CA, GR 50076, September 14, 1990, Narvasa, J. (Passenger’s
Baggages)
FACTS:
Quisumbing and Gunther Loeffler were among the passengers of PAL’s Fokker Friendship plane
in its flight which left Mactan City at about 730pm towards Manila. Senior NBI Agent Villarin,
also a passenger, noticed Zaldy, a suspect in the killing of Judge Valdez, seated at the front seat
near the door leading to the cockpit. Villarin checked his ticket with a flight stewardress and found
that Zaldy used the name “Cardente”. Villarin sent a scribbled note to the pilot requesting him to
contact NBI agents in Manila to send 6 NBI agents to meet the plane. The pilot sat beside Villarin
at the rear portion of the plane and explained that he could not send the message as it would be
heard by all ground aircraft stations. Villarin told the pilot of the danger of commission of violent
acts by Zaldy and his 3 companions.

While they were talking, Zaldy and one of his companions walked and stood behind them. Capt.
Bonnevie then went back to the cockpit. Zaldy and his companions returned to their seats. They
moved back to the rear throwing ugly looks at Villarin. Gunshots ensued between Villarin and
Zaldy and his companions. Zaldy announced a holdup and ordered the pilot not to send any SOS.
The holduppers divested the passengers of their belonging. Quisumbing was divested of jewelries
worth P18k and Loeffler of a wrist watch, cash, and wallet all worth P1.7k. Quisumbing suffered
shock because a gun was pointed at him.

Upon landing, Zaldy and his 3 companions succeeded in escaping.

Quisumbing and Loeffler filed suit against PAL in CFI to recover the value of their property and
damages. PAL claimed that there was force majeure and neither Quisumbing or Loeffler notified
PAL or its employees that they were in possession of cash and valuable jewelries or surrendered
said things to the air crew.

CFI dismissed the complaint, saying that plaintiffs did not notify PAL or its employees that they
possessed cash, jewelries, and wallet they are now claiming. CA affirmed, saying that the hijacking
was force majeure. Hence this petition.

ISSUE:
Whether PAL is liable for the armed robbery in flight.
HELD: NO.
CA ruled that PAL could not be faulted for want of diligence particularly for failing “to take
positive measures to implement Civil Aeronautics Administration regulations prohibiting civilians
from carrying firearms on board aircrafts” and that the “absence of coded transmissions, the
amateurish behavior of the pilot in dealing with the NBI agent, the allegedly open cockpit door,
and the failure to return to Mactan, in light of the circumstances of the case, were not negligent
acts sufficient to overcome the force majeure nature of the armed robbery. If a group of armed
hijackers want to take over a plane in flight, they can elude even the latest combined government
and airline industry measures.

The evidence fails to prove any want of diligence of PAL or that it failed to comply with applicable
regulations or universally accepted and observed procedures to preclude hijacking. The particular
acts singled out by petitioners as supposedly demonstrative of negligence were, in light of the
circumstances, not in truth negligent acts sufficient to overcome the forece majeire nature of the
armed robbery. Failure to take certain steps that a passenger in hindsight believes should have
been taken is not the negligence which mingles with force majeure as an active and
cooperative cause.

58. Pan American World Airways, Inc. v. Jose Rapadas, GR 60673, May 19, 1992,
Passenger’s Baggages)
FACTS:
Private respondent Jose Rapadas held a passenger ticket and baggage claim check for his flight
from Guam to Manila. while in line to board, Rapadas was ordered by Pan’s handcarry control
agent to check in his Samsonite attache case. He protested, claiming that other passengers were
allowed to handcarry bulkier baggages. He went to the back of the line to see if he can get through
without having to check in his attache case. But the same handcarry control still noticed him and
ordered him again to register his baggage. He checked in the baggage for fear that he might miss
the plane if he argued. He gave his case to his brother who checked it in for him but without
declaring its contents.

Upon arriving in Manila, Rapadas got all his checked in baggages except the attache case. Rapadas
filed a baggage claim blank form, then sent letters demanding and reminding Pan of his claim.
Rapadas received a letter from Pan’s counsel offering to settle the claim for $160 representing
Pan’s limit of liability for loss to passenger’s personal property. Rapadas refused and filed an
action for damages, claiming that the attache case’s value was $42,403. Pan acknowledged
responsibility for the loss but asserted that the claim was subject to the “notice of baggage liability
limitations” which allegedly is part of the passenger ticket.

The trial court ruled for Rapadas. CA affirmed. Hence this petition.

ISSUE:
Whether a passenger is bound by the terms of a passenger ticket declaring that the limitations of
liability set forth in the Warsaw Convention shall apply in case of loss to a registered luggage of a
passenger.
HELD: YES. (If sufficient notice?)
Pan claims that its liability is limited to $160 since Rapadas did not declare a higher value nor pay
the additional charges.

The notice of liability limitation states:

"If the passenger's journey involves an ultimate destination or stop in a country other than
the country of departure the Warsaw Convention may be applicable and the Convention
governs and in most cases limits the liability of carriers for death or personal injury and in
respect of loss of or damage to baggage.
Also, par. 2 of the “conditions of contracts” appearing on page 2 of the ticket states:
"2. Carriage hereunder is subject to the rules and limitations relating to liability established
by the Warsaw Convention unless such carriage is not 'international carriage' as defined by
that Convention."

Pan also offered as evidence showing page 2 of the passenger ticket:

"NOTICE OF BAGGAGE LIABILITY LIMITATIONS — Liability for loss, delay, or
damage to baggage is limited as follows unless a higher value is declared in advance and
additional charges are paid: xxx
The notice and par. 2 of the “conditions of contract” should be sufficient notice showing the
applicability of the Warsaw limitations. The Warsaw Convention specifically provides that it is
applicable to international carriage which it defines in Art. 1, par. 2:
"(2) For the purposes of this Convention, the expression 'international carriage' means any
carriage in which, xxx, the place of departure and the place of destination, xxx, are situated
either within the territories of two High Contracting Parties or within the territory of a
single High Contracting Party if there is an agreed stopping place within the territory of
another State, even if that State is not a High Contracting Party. Carriage between two
points within the territory of a single High Contracting Party without an agreed stopping
place within the territory of another State is not international carriage for the purposes of
this Convention." ("High Contracting Party" refers to a state which has ratified or adhered
to the Convention, or which has not effectively denounced the Convention)

Nowhere in the convention is such a detailed notice of baggage liability limitations required.
Nonetheless, it should become a common and safe custom among air carriers to indicate
beforehand the precise sums equivalent to those fixed by Art. 22(2) of the convention.

While contracts of adhesion are not entirely prohibited, neither is blind reliance on them
encouraged. The passenger, upon contracting with the airline and receiving the plan ticket, was
expected to be vigilant insofar as his luggage is concerned. If the passenger fails to adduce
evidence to overcome the stipulations, he cannot avoid the application of the liability limitations.
Rapadas refused to register his case. The alleged lack of time to make a declaration of higher value
and to pay the additional charges, because he at first refused to check in the case, cannot justify
his failure to comply with the requirement that will exclude the application of limited liability.

We do not suggest that passengers are always bound to the stipulated amounts printed on a ticket
or found in a contract of adhesion. We simply recognize that the reasons behind such stipulations
on liability limitations arise from the difficulty or impossibility of establishing with a clear
preponderance of evidence the contents of a lost valise or suitcase. Unless the contents are
declared, it will be the word of a passenger as against that of the airline.

59. British Airways v. Cam GR 121824, January 29, 1998, Romero, J. (Passenger’s Baggages)
FACTS:
Mahtani decided to visit relatives in Bombay India. His flight was from Manila to HK via PAL,
and HK-India via British Airways (BA). Mahtani checked in his 2 luggages with his clothing and
personal effects, confident that upon reaching HK, these would be transferred to the BA flight for
Bombay. But when he arrived in Bombay, his luggage was missing. Upon inquiry with BA
representatives, he was told that the luggages might have been diverted to London. After 1 week,
BA told him to file a claim with the “property irregularity report.”

Back in PH, he filed a complaint against BA for damages. BA filed a third party complaint against
PAL, claiming that due to PAL’s late arrival in HK, there was hardly any time for the proper
transfer of Mahtani’s luggage to the BA plane.

Trial court ruled for Mahtani. CA affirmed. Hence this petition.

ISSUE:
Whether the limited liability stipulation of BA applies.
HELD: NO.
BA asserts that the award of compensatory damages of P7k was without basis since Mahtani stated
in the complaint that the luggage contained 1) personal belonging of P10k and 2) gifts for relatives
of $5k. He also failed to declare a higher valuation of his luggage, a condition provided in the
ticket:
"Liability for loss, delay, or damage to baggage is limited unless a higher value is declared
in advance and additional charges are paid: xxx.
In determining compensatory damages in these kinds of cases, the claimant must prove during trial
the existence of factual basis of damages and its causal connection to defendant’s acts.

In a contract of air carriage, a declaration by the passenger of a higher value is needed to

recover a greater amount. Art. 22(1) of the Warsaw Convention provides:
(2) In the transportation of checked baggage and goods, the liability of the carrier shall be
limited to a sum of 250 francs per kilogram, unless the consignor has made, at the time the
package was handed over to the carrier, a special declaration of the value at delivery and
has paid a supplementary sum if the case so requires. In that case the carrier will be liable
to pay a sum not exceeding the declared sum, unless he proves that the sum is greater than
the actual value to the consignor at delivery."

But 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 actual
claims and damages sustained by the passenger were asked. 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 without any objection.

Where the proponent offers evidence deemed by counsel of the adverse party inadmissible for any
reason, the latter has the right to object. But such right is a mere privilege which can be waived.
The objection must be made at the earliest opportunity. Not only did BA’s counsel fail to object,
he also conducted cross-examination.

The dismissal of the third party complaint against PAL was erroneous as PAL, in transporting
Mahtani from Manila to HK, acted as agent of BA. An agent is liable for damages which the
principal may suffer by reason of its negligent act.
60. Priscilla Tan v. Northwest Airlines, GR 135802, March 3, 2000, Pardo, J. (Passenger’s
Baggages)
FACTS:
Priscilla and Connie Tan boarded Northwest Airlines flight in Chicago USA bound for PH. They
arrived in NAIA on June 1, 1994 at about 10:40pm. Upon arrival, they found that their baggages
were missing. They returned to the airport in the evening of the next day and were informed that
their baggages might still be in another plan in Tokyo. On June 3, 1994, they recovered their
baggages and discovered that some of its contents were destroyed and soiled. Northwest did not
respond to their demand letters. Hence they filed a case in RTC.

Northwest claims that Priscilla and Connie’s baggages had to be carried on another flight due to
weight and balance restrictions. Northwest also offered to reimburse the repair of the bags or for
the cost of new bags.

RTC held Northwest liable for damages. CA deleted moral and exemplary damages and reduced
attorney’s fees. Hence this petition.

ISSUE:
Whether Northwest is liable for moral and exemplary damages for willful misconduct and breach
of contract of air carriage.
HELD: NO.
Northwest is not guilty of willful misconduct. For willful misconduct to exist, there must be
showing that the acts were impelled by an intention to violate the law, or were in persistent
disregard of one’s rights. There is nothing in the conduct of Northwest to show that they were
motivated by malice or BF in loading her baggages on another plane. Due to weight and balance
restrictions, as a safety measure, Northwest had to transport the baggages on a different flight, but
with the same expected date and time of arrival in PH. There was no showing of malice in failing
to deliver petitioner’s luggages on time. Hence, there was no BF.

Where in breaching the contract of carriage, the airline is not shown to have acted fraudulently or
in BF, liability for damages is limited to the natural and probable consequences of the breach
of obligation which the parties had foreseen or could have reasonable foreseen. In that case,
such liability does not include moral and exemplary damages.

61. Sarkies Tours PH, Inc. v. CA, GR 108897, October 02, 1997, Romero, J. (Passenger’s
Baggages)
FACTS:
Fatima oarded Sarkies’ bus 5 in Manila on her way to Legazpi city. she loaded 3 luggages
containing all her optometry review books and equipment, passport and visa, and her mother’s US
US immigration green card and other important belongings. These were kept in the baggage
compartment. During a stopover at Daet, it was discovered that only one bag remained. The others
might have dropped along the way. Some passengers suggested retracing the route of the bus to
recover the lost items, but the driver ignored them and proceeded to Legazpi.

Fatima reported the loss to her mother who in turn went to Sarkies’ office in Legazpi and manila.
Sarkies offered P1k for each luggage which was turned down. Mother and daughter asked
assistance from radio stations and even from Philtranco bus drivers who plied the same route. One
of Fatima’s bags was recovered.

After 9 months of waiting for Sarkies’ investigation of the incident, respondents Fatima and
Marisol (*mother ata) filed a case to recover the value of the remaining lost items and damages.
Sarkies disclaims liability saying that Fatima did not declare any excess baggage upon boarding
its bus.

Court a quo ruled for respondents. CA affirmed, but deleted moral and exemplary damages. hence
this petition.

ISSUE:
Whether Sarkies is liable for the loss.
HELD: YES.
CCs are bound to observe extraordinary diligence. This responsibility lasts from the time the goods
are unconditionally placed in the possession of, and received by, the carrier for transportation until
the same are delivered, actually or constructively, by the carrier to the person who has a right to
receive them. The cause of the loss here is Sarkies’ negligence in not ensuring that the doors of
the baggage compartment of its bus were securely fastened. As a result, almost all of the
luggage was lost. Where the CC accepted its passenger’s baggage for transportation and even
placed it in the vehicle, it is responsible for the consequent loss of the baggage.

As to the award of actual damages, only one of the luggage was recovered. Respondents had to
shuttle between Bicol and Manila. during trial, Fatima and Marisol had to travel from US just to
be able to testify. Expenses were incurred in reconstituting their lost documents. Thus, the award
of P30k for the lost items and P30k for transportation expenses and, due to negligence and BF of
Sarkis, P20k moral damages and P5k exemplary damages.

62. PH Rabbit Bus Lines, Inc. v. IAC, GR 66102-04, August 30, 1990, Medialdea, J.
(Obligation of Shipper, Consignee, Passenger: Negligence of shipper/passenger: Last Clear
Chance)
FACTS:
Catalina Pascua, Caridad Pascua, Adelaida Estomo, Erlinda Meriales, Mercedes Lorenzo,
Alejandro Morales, and Zenaida Parejas boarded the jeepney owned by Sps. Isidro Mangune and
Guillerma Carreon and driven by Tranquilino Manalo at Mabalacat Pampanga bound for Carmen
Pangasinan to spend Christmas at their respective homes. They will pay P24 for the trip.

Upon reaching Sinayoan Tarlac, the right rear wheel of the jeep was detached, so it was running
in an unbalanced position. Manalo stepped on the brake, as a result of which, the jeepney which
was then running on the eastern lane (its right of way) made a U-turn, invading and eventually
stopping on the western lane of the road in such a manner that the jeepney's front faced the south
(from where it came) and its rear faced the north (towards where it was going). The jeepney
practically occupied and blocked the greater portion of the western lane, which is the right of way
of vehicles coming from the north, among which was Bus No. 753 of petitioner Philippine Rabbit
Bus Lines, Inc. (Rabbit) driven by Tomas delos Reyes. Almost at the time when the jeepney made
a sudden U-turn and encroached on the western lane of the highway as claimed by Rabbit and
delos Reyes, or after stopping for a couple of minutes as claimed by Mangune, Carreon and
Manalo, the bus bumped from behind the right rear portion of the jeepney. As a result of the
collision, three passengers of the jeepney (Catalina Pascua, Erlinda Meriales and Adelaida
Estomo) died while the other jeepney passengers sustained physical injuries.

Complaints for recovery of damages were filed in CFI by heirs of Catalina Pascua, Caridad Pascua
in her behalf, heirs of Erlinda Meriales, and heirs of Adelaida Estomo. Sps. Mangune and Carreon,
Manalo, Rabbit, and delos Reyes were all impleaded as defendants.

Trial court found Mangune, Carreon, and Manalo negligent thus breaching their contract of
carriage. IAC reversed, finding delos Reyes negligent, applying primarily last clear chance, the
presumption that drivers who bump the rear of another vehicle guilty, and the substantial factor
test. Hence this petition.

ISSUE:
Whether the last clear chance doctrine applies.
HELD: NO.
The “last clear chance” doctrine would apply in a suit between the owners and drivers of two
colliding vehicles. It does NOT arise where a PASSENGER demands responsibility from the
carrier to enforce contractual obligations. For it would be inequitable to exempt the negligent
driver of the jeepney and its owners on the ground that the other driver was likewise guilty of
negligence. IAC erred in applying this doctrine.

The u-turn was abrupt. Delos Reyes could not have anticipated the sudden U-turn of Manalo. The
presumption on drivers who bump the rear of another vehicle guilty is rebutted.

As to substantial factor test, this provides that if the actor's conduct is a substantial factor in
bringing about harm to another, the fact that the actor neither foresaw nor should have foreseen
the extent of the harm or the manner in which it occurred does not prevent him from being liable.
But the speed of the bus, even if 80-90kph, is within the speed limit allowed in highways. He
covered the distance of 45 meters, from when the wheel was detached up to the point of collision,
in just 2.025 seconds. He had little time to react. To require delos Reyes to avoid the collision is
to ask too much. The proximate cause of the accident was the negligence of Manalo and Sps.
Mangune and Carreon.

Sps. Mangune and Carreon tried to show thru their witness, a mechanic, that he periodically
maintains the jeepney. But this notwithstanding, the right rear wheel detached while in transit.
There is no evidence of the cause. They did not even attempt to exlpaint.

But the trial court’s ruling that Manalo and Sps. Mangune are jointly and severally liable with
Manalo is erroneous. The driver cannot be held jointly and severally liable with the carrier in case
of breach of contract of carriage. The contract is between the carrier and passenger. In case of
breach, the carrier is exclusively liable to the passenger even if the breach is due to negligence of
his driver. the carrier can netiher shift his liability on the contract to his driver nor share it with
him for his driver’s negligence. Also, if the driver is jointly and severally liable with the carrier,
that would make the carrier’s liability personal instead of merely vicarious and, consequently,
entitled to recover only the share which corresponds to the driver, contrary to Art. 2181 of NCC.

63. Emma Bustamante v. CA, GR 89880, February 06, 1991, Medialdea, J. (Negligence of
Shipper or Passenger: Last Clear Chance)
FACTS:
A gravel and sand truck was driven by Montesiano and owned by del Pilar. A Mazda passenger
bus was driven by defendant Susulin. A collision occurred between the two along the national road
at Calibuyo Cavite. The front left side (barandilla) portion of the body of the truck sideswiped the
left side wall of the bus, ripping off said wall from the driver’s seat to the last rear seat. Due to the
impact, several passengers of the bus were thrown out and died as a result of the injuries they
sustained.

Before the collision, the two were approaching each other coming from opposite directions of the
highway. While the truck was still about 30 meters away, Susulin, the bus driver, saw the front
wheels of the vehicle wiggling. He also observed that the truck was heading towards his lane. Not
minding this circumstance due to his belief that the driver of the truck was merely joking, Susulin
shifted from fourth to third gear in order to give more power and speed to the bus, which was
ascending the inclined part of the road, in order to overtake or pass a Kubota hand tractor being
pushed by a person along the shoulder of the highway. While the bus was in the process of
overtaking or passing the hand tractor and the truck was approaching the bus, the two vehicles
sideswiped each other at each other's left side. After the impact, the truck skidded towards the
other side of the road and landed on a nearby residential lot, hitting a coconut tree and felling it.

The truck was owned by del Pilar driven by Montesiano. The bus was registered to Novelo but
operated as passenger bus jointly by Magtibay and Serrado under a franchise. It was driven by
Susulin.

Trial court held that the negligence of both drivers contributed to or combined in directly causing
the accident. The liability of the two drivers is solidary. CA reversed, saying that the bus driver
had the last clear chance to avoid the collision and his negligence in proceeding to overtake the
hand tractor was the proximate cause of the accident. Hence this petition.

ISSUE:
Whether the last clear chance doctrine applies.
HELD: NO.
The doctrine of last clear chance, stated broadly, is that the negligence of the plaintiff does not
preclude a recovery for the negligence of the defendant where it appears that the defendant, by
exercising reasonable care and prudence, might have avoided injurious consequences to the
plaintiff notwithstanding the plaintiff's negligence. In other words, even though a person's own
acts may have placed him in a position of peril, and an injury results, the injured person is entitled
to recovery. A person who has the last clear chance or opportunity of avoiding an accident,
notwithstanding the negligent acts of his opponent or that of a third person imputed to the opponent
is considered in law solely responsible for the consequences of the accident.
In PH Rabbit Bus Lines v. IAC, citing the landmark Anuran v. Buno, we ruled that the principle of
last clear chance applies in a suit between the owners and drivers of colliding vehicles. It does
not arise where a passenger demands responsibility from the carrier to enforce contractual
obligations. For it would be inequitable to exempt the negligent driver of the jeepney and its
owners on the ground that the other driver was likewise negligent.

The Court is convinced that the CA committed an error of law in applying the doctrine of last clear
chance as between the defendants, since the case at bar is not a suit between the owners and drivers
of the colliding vehicles but a suit brought by the heirs of the deceased passengers against both
owners and drivers of the colliding vehicles. Therefore, the CA erred in absolving the owner and
driver of the cargo truck from liability. Damages of P50k for death indemnity was granted.

64. Japan Airlines v. CA, GR 118664, August 07, 1998, Romero, J. (Negligence of Shipper or
Passenger: Assumption of Risk)
FACTS:
Private respondent Jose Miranda boarded JAL flight 1 in California bound for Manila. private
respondents Enrique and Maria Agana and Adelia also left California for Manila via JAL flight
61. As incentive for traveling said airline, both flights were to make an overnight stopover at Narita
Japan at the airlines’ expense, thereafter proceeding to Manila the next day. Upon arrival at Narita
Japan on June 14, 1991, private respondents were billeted at Hotel Nikko Narita for the night. But
the next day, due to the Mt. Pinatubo eruption, ashfall blanketed NAIA rendering it inaccessible
to airline traffic. Thus, private respondents’ trip to Manila was cancelled.

JAL rebooked all Manila-bound passengers on flight 741 on June 16, but this was cancelled again
due to NAIA’s indefinite closure. JAL then informed them that it would no longer defray their
hotel and accommodation expenses. NAIA reopened only on June 22. Private respondents were
forced to pay for their accommodations and meal expenses from their own funds from June 16-21.
They arrived in Manila on June 22.

Private respondents filed an action for damages against JAL in RTC, claiming that JAL was
obliged to shoulder their expenses as long as they are stranded in Narita since they are obliged to
ensure the comfort and convenience of its passengers. JAL denied, claiming that airline passengers
have no vested right to these amenities in case a flight is cancelled due to force majeure.

RTC ruled for private respondents, holding JAL liable. CA lowered damages only. Hence this
appeal.

ISSUE:
Whether JAL had the obligation to shoulder the expenses from June 16-21.
HELD: NO.
CCs are not absolutely responsible for all injuries or damages even if the same were caused by a
fortuitous event. To rule otherwise would render the defense of force majeure as an exception from
any liability, illusory and ineffective. The general rule is that when a party is unable to fulfill his
obligation due to force majeure, he is not liable for damages. When JAL was prevented from
resuming its flight due to the eruption, whatever losses or damages in the form of hotel and meal
expenses the stranded passengers incurred cannot be charged to JAL. But JAL assumed such
expenses until June 15.

The stranded passenger’s predicament was not due to the fault or negligence of JAL. To hold JAL,
in the absence of BF or negligence, liable for the amenities of the passengers due to fortuitous
event is too much a burden to assume.

Airline passengers must take such risks incident to the mode of travel. Adverse weather
conditions or extreme climatic changes are some of the perils involved in air travel, the
consequences of which the passenger must assume or expect. After all, CCs are NOT the
INSURER OF ALL RISKS.

But JAL had the duty to make the necessary arrangements to transport private respondents on the
first available connecting flight to Manila. JAL reneged on this obligation when it declassified
private respondents from “Transit passengers” to “New passengers” as a result of which they were
obliged to make the necessary arrangements themselves for the next flight to Manila. JAL had a
contract to transport private respondents from US to Manila as their final destination. Nominal
damages were awarded (P100k).

65. Vicente Calalas v. CA, GR 122039, May 31, 2000, Mendoza, J. (Assumption of Risk)
FACTS:
Private respondent Eliza Sunga, then a college freshman majoring in Physical Education at Siliman
University, took a passenger jeepney owned and operated by petitioner Vicente Calalas. As the
jeep was filled to capacity of about 24 passengers, Sunga was given by the conductor an
“extension seat”, a wooden stool at the back of the door at the rear end of the vehicle. On the way
to Negros Occidental, the jeep stopped to let a passenger off. Sunga gave way to the outgoind
passenger. Just as she was doing so, an Isuzu truck driven by Verena owned by Salva bumped the
left rear portion of the jeep. Sunga was injured. She sustained a fracture of the distal third of the
left tibia-fibula with severe necrosis of the underlying skin. She remained on a cast for 3 months
and would have to ambulate in crutches during said period.

Sunga filed a complaint for damages against Calalas alleging violation of contract of carriage.
Calalas filed a third party complaint against Salva.

Trial court ruled against Salva, absolving Calalas of liability. CA reversed, holding that Sunga’s
cause of action was based on contract of carriage, not quasi delict, and the CC failed to exercise
the required diligence. The third party complaint against Salva was dismissed. Hence this petition.

ISSUE:
Whether the taking of extension seat is an implied assumption of risk.
HELD: NO.
Upon the happening of the accident, the presumption of negligence at once arose, and it became
the duty of Calalas to prove that he observed extraordinary diligence in the care of his passengers.
The jeep driver did not carry Sunga “safely as far as human care and foresight could provide, using
the utmost diligence of very cautious persons, with due regard for all circumstances” under Art.
1755.
The jeep was not properly parked. Its rear portion was exposed about 2 meters from the broad
shoulders of the highway and faced the middle of the highway in a diagonal angle. This is a
violation of RA 4136, Land Transportation and Traffic Code. Second, Calalas’ driver took in more
passengers than the allowed seating capacity of the jeepney in violation also of RA 4136. The fact
that Sunga was seated in an “extension seat” placed her in a peril greater than that to which the
other passengers were exposed. Thus, Calalas was negligent in transporting passengers.

We find it hard to give serious thought to Calalas’ contention that Sunga’s taking an extension
seat amounted to an implied assumption of risk. It is akin to arguing that the injuries to the many
victims of tragedies in our seas should not be compensated merely because those passengers
assumed a greater risk of drowning by boarding an overloaded ferry. This is also not a fortuitous
event as Calals should have foreseen the danger of parking his jeepney with its body protruding
two meters into the highway.

66. PNR v. CA, GR L-55347, October 04, 1985, Escolin, J. (Assumption of Risk)
FACTS:
Winifredo Tupang boared train 516 of PNR at Camarines Sur as a paying passenger bound for
Manila. Due to some mechanical defect, the train stopped for repairs. Upon passing Iyam Bridge
at Lucena Quezon, Tupang fell off the train resulting in his death. The train did not stop despite
the alarm raised by other passengers that somebody fell. The train conducted instead called the
station agent at Quezon and requested verification of the information. Police were dispatched
where they found the body of Tupang.

The deceased’s widow, Rosario Tupang, filed a complaint in CFI. CFI held PNR liable for breach
of contract of carriage. CA sustained holding PNR did not exercise the utmost diligence required
of a CC. Hence this petition.

ISSUE:
Whether PNR is liable for damages.
HELD: YES.
PNR claims state immunity. But when the government enters into commercial business, it
abandons its sovereign capacity and is to be treated like any other corporation.

PNR does not deny that the train was so overcrowded that Tupang and many other passengers had
no choice but to sit on the open platforms between the coaches of the train. The train did not slow
down when it approached Iyam Bridge which was under repair at that time. Neither did the train
stop despite the alarm raised by other passengers. PNR has the obligation to transport its passengers
to its destinations and to observe extraordinary diligence in doing so. Death or injury of its
passengers gives rise to the presumption that it was negligent. PNR failed to overthrow the
presumption of negligence with clear and convincing evidence.

But Tupang was chargeable with contributory negligence. Since he opted to sit on the open
platform between the coaches of the train, he should have held tightly on the upright metal
bar found at the side of the platform to avoid falling off from the speeding train. Such
contributory negligence, while not exempting PNR, justifies the deletion of moral damages. Also,
the award of exemplary damages must be set aside since there is no evidence of fraud, malice, or
BF.

67. Cesar Isaac v. AL Ammen Transportation Co., Inc. GR L-9671, August 23, 1957,
Bengzon, J. (Assumption of Risk)
FACTS:
Isaac boarded one of the buses of Al Ammen, paying the fare, bound for Pili Camarines Sur. Before
reaching his destination, the bus collided with a motor vehicle of the pick-up type coming from
the opposite direction. As a result, Isaac’s left arm was completely severed and the severed portion
fell inside the bus. He was rushed to hospital where he was given blood transfusion to save his life.
He was treated for 5 months. His medical expenses amounted to P623.

Isaac filed an action for damages alleging that the collision was due to the recklessness of Al
Ammen’s driver. Al Ammen claims that the injury of Isaac was due entirely to the fault or
negligence of the driver of the pick-up car and the contributory negligence of Isaac.

Trial court ruled that the accident occurred due to negligence of the driver of the pick-up and
dismissed the complaint. Hence this appeal.

ISSUE:
Whether Al Ammen is liable for damages.
HELD: NO.
Isaac invokes the rule that when an action is based on contract of carriage, all that is necessary to
recover is proof of the existence of the contract and of breach thereof by act or omission. Al
Ammen claims that this applies only if there was negligence on the CC’s part.

Did Al Ammen observe extraordinary diligence? The bus, immediately prior to the collision, was
running at a moderate speed. The pick-up was at full speed and running outside its proper lane.
The bus driver, upon seeing the pick-up’s manner of running, swerved the bus to the very extreme
right of the road until its front and rear wheels have gone over the pule of stones or gravel on the
rampart of the road. Notwithstanding all these efforts, the rear left side of the bus was hit by the
pick-up car.

Isaac claims that the bus should have stopped and waited for the vehicle to pass. But this is a matter
of appreciation of the situation on the part of the driver. While stopping might appeal more to the
sense of caution, such cannot always be expected from one who is placed suddenly in a
predicament where he is not given enough time to take the proper course of action as he should
under ordinary circumstances. When a carrier’s employee is confronted with a sudden emergency,
the fact that he is obliged to act quickly and without a chance for deliberation must be taken into
account and he is not held to the same degree of care that he would otherwise be required to
exercise in the absence of such emergency but must exercise only such care as any ordinary prudent
person would exercise under like circumstances. Thus, the bus driver has done what a prudent man
could have done to avoid the collision.

Also, Isaac seated himself on the left side of the bus, resting his left arm on the window sill but
with his left elbow outside the window, this being his position in the bus when the collision
took place. It is for this reason that the collision resulted in the severance of said left arm from
his body. It is apparent that Isaac is guilty of contributory negligence. Had he not placed his left
arm on the window sill with a portion protruding outside, perhaps the injury would have been
avoided as is the case with the other passengers.

It is true that contributory negligence cannot relieve Al Ammen of liability but will only entitle it
to a reduction of damages, but this is a circumstance which further militates against the position
of Isaac. “it is the prevailing rule that it is negligence per se for a passenger on a railroad xxx to
protrude his arm xxx through the window of a moving car beyond the outer edge of the window
xxx so as to come in contact with objects xxx. No recovery can be had for an injury which but for
such negligence would not have been sustained.” Trial court affirmed. Costs against Isaac.

68. Lourdes Lara et al. v. Brigido Valencia, GR L-9907, June 30, 1958, Bautista Angelo, J.
(ED-Effect of Stipulation-Gratuitous Passenger)
FACTS:
Demetrio Lara Sr. was an inspector of the Bureau of Forestry in Davao. Valencia is engaged in the
business of exporting logs from his lumber concession in Cotabato. Lara went to said concession
upon instructions of his chief to classify the logs which were about to be loaded on a ship anchored
in the port of Parang. Lara’s work lasted 6 days during which he contracted malaria fever. Later,
Lara, in a hurry to return to Davao, asked Valencia if he could take him in his pick-up as there was
then no other means of transportation, to which Valencia agreed. They left Parang for Davao with
6 passengers, including Lara.

The pick up has a front seat here the driver and 2 passengers can sit and the back has a steel flooring
enclosed with a steel walling of 16-17 inches tall on the sides and with a 19 inches tall walling at
the back. Valencia was at the wheel. On the back of the pick up were 2 improvised benches placed
on each side. Seated on the right bench were Ricardo and Antoino, on the left one Bernardo and
Pastor. Leoning sat on a box on the left side while in the middle Lara sat on a bag. It was their
understanding that upon reaching barrio Samoay, Cotabato, the passengers would alight and take
a bus to Davao. But only Bernardo alighted and the others requested Valencia to let them ride with
him to Davao because there was no available bus. Valencia accommodated them again.

When the trip resumed, Lara sat again on a bag in the middle with his arms on a suitcase and his
head covered by a jacket. Upon reaching KM 96 barrio Catidtuan, Lara accidentally fell from the
pick-up and suffered serious injuries. Valencia sought help from the residents there and applied
water to Lara but to no avail. They took him to St. Joseph’s Clinic of Kidapawan, but Lara was
dead already. From there they went to Davao and informed the local authorities.

Valencia did not charge the passengers any fees and merely accommodated them. Lourdes Lara
filed an action for damages in CFI for Demetrio’s death allegedly due to the negligent act of
Valencia.

ISSUE:
Whether Valencia is liable for the death of Demetrio Lara.
HELD: NO.
The deceased and other passengers were merely accommodation passengers who paid nothing
for the service, so they can be considered as invited guests within the meaning of the law. as
such, Valencia as owner and driver of the pick-up owes to them merely the duty to exercise
reasonable care so that they may be transported safely to their destination. The rule is that the
owner or operator of an automobile owes the duty to an invited guest to exercise reasonable care
in its operation and not unreasonably to expose him to danger and injury by increasing the
hazard of travel. An owner of an automobile owes a guest the duty to exercise ordinary or
reasonable care to avoid injuring him. Valencia thus only has to observe ordinary care and is not
in duty bound to exercise extraordinary diligence as required of a CC.

The facts are not sufficient to show that Valencia failed to take the precaution necessary. There is
nothing to indicate that Valencia has acted with negligence or without taking the precaution that
an ordinary prudent man would have taken under similar circumstances. Valencia was not in duty
bound to take the deceased in his pick up to Davao because from Parang to Cotabato, there was a
line of transportation that regularly makes trips for the public. He only accommodated Lara
considering his feverish condition and his request that he be so accommodated. Valencia even
invited Lara to sit with him in the front seat but Lara declined. Thus, Valencia had done what a
reasonable prudent man would have under the circumstances. The happening was only due to an
unforeseen accident caused by the fact that Lara was half asleep and must have fallen from the
pick-up when it ran into some stones causing it to jerk.

69. Delsan Transport Lines, Inc. v. CA, GR 127897, November 15, 2001, De Leon, Jr., J. (ED
in carriage by sea- Seaworthiness)
FACTS:
Caltex PH entered into a contract of affreightment with Delsan for 1 year where Delsan agreed to
transport Caltex’s industrial fuel oil from the Batangas-Bataan Refinery to different parts of the
country. Under the contract, Delsan took on board MT Maysun 2,277.314 kiloliters of industrial
fuel oil of Caltex to be delivered to the Caltex Oil Terminal in Zamboanga City. This was insured
with private respondent American Home Assurance Corporation.

MT Maysun set sail from Batangas for Zamboanga. It sank near Panay Gulf in Visayas with all
the fuel oil. American Home paid Caltex P5M and then demanded from Delsan reimbursement.
Due to failure to collect, American Home filed a complaint for collection of a sum of money in
RTC against Delsan. RTC dismissed, finding MT Maysun seaworthy as determined by PH Coast
Guard per Survey Certificate Report upon inspection during its annual dry-docking and that the
incident was due to fortuitous event.

CA reversed. Hence this appeal.

ISSUE:
Whether Delsan is liable for the claim.
HELD: YES.
The payment made by American Home to Caltex operates as an equitable assignment to American
of all the remedies which Caltex may have against Delsan.
From the nature of their business and for reasons of public policy, CCs are bound to observe ED
in the vigilance over the goods and for the safety of passengers transported by them according to
all the circumstances of each case. They are presumed negligent for loss of goods.

Delsan claims that the loss was due to force majeure. It claims that there was an unexpected change
of weather condition carrying strong winds and big waves averaging 18-20 feet high, buffeting
MT Maysun causing it to sink. But this was rebutted by the weather report from PAGASA showing
that the wind speed remained at 10-20 knots per hour while the waves were only 0.7 to 2meters
high. Thus, MT Maysun sank for the reason that it was not seaworthy. There was no bad weather
or extremely poor sea condition in the vicinity when the vessel sank.

Neither may Delsan escape liability by presenting in evidence certificates that tend to show that at
the time of dry-docking and inspection by PH Coast Guard, MT Maysun was fit for voyage. These
pieces of evidence do not necessarily take into account the actual condition of the vessel at the
time of commencement of the voyage. Diligence in securing certificates of seaworthiness does
not satisfy the vessel owner’s obligation. The certificates do not negate the presumption of
unworthiness triggered by an unexplained sinking.

The exoneration of MT Maysun’s crew by the Board of Marine Inquiry merely concerns their
administrative liabilities and does not absolve Delsan from its civil liability arising from its failure
to observe ED in the vigilance over the goods it was transporting and for the negligence of its
employees.

70. Caltex PH Inc. v. Sulpicio Lines, Inc., GR 131166, September 30, 1999, Pardo, J. (ED in
Carriage by Sea- Seaworthiness)
FACTS:
MT Vector left Limay Bataan at 8pm enroute to Masbate loaded with 8800 barrels of petroleum
products shipped by Caltex by virtue of a charter contract between them. MT Vector is operated
by Vector Shipping Corporation engaged in the business of transporting fuel products. At about
630am the next day on Dec. 20, MV Doña Paz left Tacloban enroute to Manila with 59 crew
members and 4000 passengers. Doña Paz is a passenger and cargo vessel owned and operated by
Sulpicio Lines.

At 10:30pm of Dec. 20, the two vessels collided in the open sea within the vicinity of Dumali
Point between Marinduque and Oriental Mindoro. All the crewmembers of Doña Paz died, while
the two survivors from MT Vector claimed that they were sleeping at the time of the incident.
Many of Doña Paz’s 4000 passengers were not in the passenger manifest. Only 24 survived the
tragedy after being rescued from the burning waters. Among those who died were Sebastian
Cañezal and his dauther Corazon.

The board of marine inquiry found MT Vector and Vector Shipping responsible. Cañezal’s mother
and wife (Sotera and Teresita) filed in RTC a complaint for damages arising from breach of
contract of carriage against Sulpicio Lines. Sulpicio filed a third party complaint against Vector
Shipping and Caltex. It alleged that Caltex chartered MT Vector knowing fully well that MT
Vector was improperly manned and unseaworthy.
RTC dismissed the third-party complaint. CA included Caltex as one of those liable. Hence this
petition.

ISSUE:
Whether Caltex is also liable.
HELD: NO.
1. The charterer has no liability for damages under PH Maritime laws.
Caltex and Vector entered into a contract of affreightment or voyage charter. A charter party is a
contract by which an entire ship or some principal part thereof is let by the owner to another person
for a specified time or use. A contract of affreightment is one by which the owner of a ship lets the
whole or part of her to a merchant or other person for the conveyance of goods on a particular
voyage in consideration of payment of freight. A contract of affreightment may be a time charter
(leased for a fixed period) or voyage charter (single voyage). In both cases, the charter-party
provides for the hire of the vessel only, the ship owner to supply the ship’s store, pay the wages
of the crew, and defray expenses for maintenance of the ship.

On the other hand, under a demise or bareboat charter, the charterer mans the vessel with his own
people and, in effect, becomes the owner for the voyage subject to liability for damages caused
by negligence.

If the charter is for affreightment, leaving the owner in possession of the ship, the
responsibilities of ownership rest on the owner. The charterer is free from liability to third
persons in respect of the ship.

2. MT Vector is a CC. The parties entered into a voyage charter which retains the character of the
vessel as a CC.

Under COGSA:
SECTION 3. (1) The carrier shall be bound before and at the beginning of the voyage to
exercise due diligence to — (a) Make the ship seaworthy; (b) Properly man, equip, and
supply the ship;

Thus, carriers are deemed to warrant impliedly the seaworthiness of the ship. For a vessel to be
seaworthy, it must be adequately equipped for the voyage and manned with a sufficient
number of competent officers and crew. Failure of a CC to maintain in seaworthy condition the
vessel is a breach of duty prescribed in Art. 1755. A passenger or shipper of goods is under no
obligation to inspect the ship and its crew, the carrier being obliged by law to impliedly
warrant its seaworthiness.

3. Caltex is not liable under NCC.

Sulpicio claims that Caltex negligently shipped its highly combustible fuel cargo aboard an
unseaworthy vessel despite MT Vector’s defective main engine, chief engineer not having a
license to operate the engine of the vessel, etc.

CA ruled that Caltex is liable under Arts. 20 and 2176 of NCC (Art. 20: Every person who contrary
to law, willfully or negligently causes damage to another, shall indemnify the latter for the same.).
Negligence is defined under Art. 1173 (omission of that diligence required by the nature of the
obligation and corresponds with the circumstances of persons, time, and place.).

The charterer of a vessel has no obligation before transporting its cargo to ensure that the vessel
it chartered complied with all legal requirements. The duty rests upon the CC simply for being
engaged in public service. Because of the implied warranty of seaworthiness, shippers of goods,
when transacting with CCs, are not expected to inquire into the vessel’s seaworthiness,
genuineness of its licenses, and compliance with maritime laws. By the same token, we cannot
expect passengers to inquire every time they board a CC, whether the CC has the necessary papers
or that all its employees are qualified. Such practice would be an absurdity in a business where
time is always of the essence. Considering the nature of the transportation business, passengers
and shippers customarily presume that CCs possess all the legal requisites in its operation.

Thus, the nature of the obligation of Caltex demands ordinary diligence like any other shipper in
shipping his cargoes. Caltex had reasons to believe that MT Vector could legally transport cargo
that time of the year. Caltex and Vector had been doing business since 1985 or for 2 years before
the incident. Past services rendered showed no reason for Caltex to observe a higher degree of
diligence. As voyage charterer, Caltex had the right to presume that the ship was seaworthy as
even the PH Coast Guard was convinced of its seaworthiness.

71. Negros Navigation Co., Inc. v. CA, GR 110398, November 07, 1997, Mendoza, J. (ED in
Carriage by Sea: Overloading)
FACTS:
Private respondent Ramon Miranda purchased from Negros Navigation 4 special cabin tickets for
his wife, daughter, son, and niece who were going to Bacolod City to attend a family reunion. The
tickets were for MV Don Juan leaving at Manila. Don Juan collided off the Tablas strait in
Mindoro with MT Tacloban City, an oil tanker owned by PH National Oil Company (PNOC) and
PNOC Shipping and Transport Corporation (PNOC STC). As a result, Don Juan sank. Several of
her passengers perished. The four members of private respondents’ families were never found.

Private respondents filed a complaint in RTC against Negros, PNOC, and PNOC STC for damages
for the deaths. Negros admitted that private respondents purchased tickets. But Negros denied that
the four relatives of private respondents actually boarded the vessel since their bodies were never
recovered. Negros claims that Don Juan was seaworthy and manned by a competent crew, and that
the collision was due entirely to the fault of MT Tacloban City.

PNOC and Negros entered into a compromise agreement where Negros assumed full responsibility
for the satisfaction of all claims and releasing PNOC from any liability to it. Private respondents
did not join the agreement.

RTC ruled for respondents. CA affirmed. Hence this petition.

ISSUE:
Whether Negros was negligent.
HELD: YES.
Negros claims that the purchase of the tickets does not necessarily mean that the alleged victims
actually took the trip. Respondents must prove the presence of the victims on the ship. But Miranda
testified that he personally took his family and niece to the vessel on the day of the voyage. There
is no reason he should claim members of his family to have perished in the accident just to maintain
an action. It would be more difficult for respondents to keep the existence of their relatives if
indeed they are alive than it is for Negros to show the contrary.

In Mecenas v. IAC, the case brought for the deaths of the other passengers, it was found that
although the proximate cause of the mishap was the negligence of the crew of MT Tacloban City,
the crew of Don Juan was equally negligent as the latter’s master, Capt. Santisteban, was playing
mahjong at the time of collision, and the officer on watch, Senior Third Mate Rogelio de Vera,
admitted that he failed to call the attention of Santisteban to the imminent danger facing them.
They failed to take steps to prevent the collision or at least delay the sinking of the ship and
supervise the abandoning of the ship.

Negros Navigation was found equally negligent in tolerating the playing of mahjong by the
ship captain and crew while on board the ship and failing to keep Don Juan seaworthy so much
so that the ship sank within 10-15mins of its impact with MT Tacloban City.

Also, it was found that Don Juan was OVERLOADED. The certificate of inspection issued by
PH Coast Guard Commander at Iloilo stated that the total number of persons allowed on the ship
was 864, 810 of whom are passengers, but there were actually 1,004 on board the vessel when it
sank, 140 persons more than the maximum number that could safely be carried by it.

Taking these circumstances together and the fact that Don Juan, as the facter and better-equipped
vessel (more than twice as fast), could have avoided a collision with the PNOC tanker, it was held
that even if the Tacloban City had been at fault for failing to observe an internationally-recognized
rule of navigation, Don Juan was guilty of CONTRIBUTORY NEGLIGENCE.

It is true that MT Tacloban City failed to follow Rule 18 of International Rules of the Road
requiring 2 power-driven vessels meeting end on or nearly end on each to alter her course to the
right so that each vessel may pass on the left of the other. Don Juan was equipped with radio
equipment and sighted Tacloban City on the radar screen while the latter was still 4 nautical miles
away. Had Don Juan taken seriously its duty of ED, it could have easily avoided the collision. Don
Juan might well have avoided the collision even if it had exercised ordinary diligence merely.
Don Juan was negligent in failing to take early preventive action and in allowing the 2 vessels to
come to such close quarters. Tacloban signaled by 2 short blasts of its horn its intention to turn
left. Don Juan gave no answering horn blast and proceeded to turn hard to starboard (right).

Adherence to the Mecenas case (*kasi cinite yung facts ng collision from that case) is dictated by
stare decisis et non quieta movere (follow past precedents and do not disturb what has been settled).

Negros was ordered to pay damages.

72. Belgian Overseas Chartering and Shipping NV v. Philippine First Insurance Co., Inc.,
GR 143133, June 5, 2002, Panganiban, J. (ED in Carriage by Sea: Proper Storage) *Case 32
73. Jose Mecenas v. CA, GR 88052, December 14, 1989, Feliciano, J. (ED in Carriage by Sea:
Negligence of Captain and Crew)
FACTS:
MT Tacloban City, a barge-type oil tanker owned by PNOC and operated by PNOC STC, having
unloaded its cargo, left Amlan Negros Occidental and headed to Bataan. MV Don Juan, owned
and operated by Negros Navigation Co., Inc., left Manila bound for Bacolod.

On that evening, Tacloban City and Don Juan collided at the Talbas Strait in the vicinity of
Mindoro. The sea was then calm, weather fair and visibility good. Don Juan sank and hundreds of
its passengers perished. Among the dead passengers were the parents of petitioners, Sps. Perfecto
and Sofia Mecenas, whose bodies were never found.

Petitioners filed a complaint in CFI against private respondents Negros Navigation and Capt.
Santisteban, Don Juan’s captain, without impleading PNOC or PNOC STC. Now RTC ruled that
Negros and Capt. Santisteban are jointly and severally liable for damages. CA affirmed. Hence
this petition.

ISSUE:
Whether Negros is liable for damages.
HELD: YES.
The action is grounded on the contract of carriage between the Mecenas spouses and Negros. The
surviving children, while not themselves passengers, are in effect suing the carrier in representation
of their deceased parents.

The minister of national defense held that both vessels had been at fault. RTC also found that both
were at fault. RTC held that both Don Juan and Tacloban City became aware of each other’s
presence in the area by visual contact at 6 miles from each other. They were aware that if they
continued on their course, they will meet head on. Don Juan steered to the right. Tacloban
continued its course to the left. They executed maneuvers too late to avoid collision.

Thus, Don Juan was at least as negligent as Tacloban. Is this negligence that level of recklessness
that the NCC requires imposition of exemplary damages? Yes.

The decision of the PH Coast Guard Ochoco found that Capt. Santisteban was playing mahjong
before and up to the time of collision. After the collision, he failed to institute appropriate measures
to delay the sinking of Don Juan and to supervise properly the execution of his order of abandon
ship. Senior 3rd Mate Rogelio Devera admitted that he failed to inform Capt. Santisteban of the
imminent danger of collision and of the actual collision. He also failed to assist his master to
prevent the fast sinking of the ship.

The behavior of Capt. Santisteban to whose hands the lives of at least 750 passengers had been
entrusted is unacceptable. That he was “off-duty” or “on-duty” at or around the time of actual
collision is immaterial. There is no such thing as “off-duty” hours for the master of a vessel at sea
that is a common carrier upon whom the law imposes ED. The record does not show that this was
the first or only time that Santisteban entertained himself during a voyage by playing mahjong
with his officers and passengers. Negros, in failing to discover and correct such behavior, must be
deemed grossly negligent.

Santisteban was also faulted for failing to take measures to delay the sinking of Don Juan. This
appears to us to be a euphemism for failure to maintain the seaworthiness or water-tight integrity
of Don Juan. Don Juan sank 10-15 mins after initial contact with Tacloban. While Santisteban’s
failure to supervise his crew in abandoning the ship and failure to take measures to prevent the too
rapid sinking did not cause the collision by themselves, such failures doubtless contributed
materially to the consequent loss of life and were indicative of the level of diligence exercised
by Santisteban.

There is also evidence that Don Juan was carrying more passengers than she had been certified as
allowed to carry. The total number of persons on board was 1,004 or 140 more than the maximum
number that could be safely carried by Don Juan per its own Certificate of Inspection. Don Juan
carried life boat and life raft accommodations for only 864 persons, the maximum number of
persons she was permitted to carry.

Thus, under these circumstances, a presumption of gross negligence on the part of the vessel
(officers and crew) and of its shipowner arises. This was never rebutted by Negros. The grossness
is underscored when one considers that 1) Don Juan was more than twice as fast as Tacloban. 2)
it had radar and sighted Tacloban while still 4 nautical miles away. Had it taken its duty of ED
seriously, it could have easily avoided the collision with Tacloban. Indeed, Don Juan might well
have avoided the collision even if it had exercised ordinary diligence merely.

It is true that Tacloban failed to follow Rule 18 of the International Rules of the Road which
requires 2 power-driven vessels meeting end on or nearly end on each to alter her course to
starboard (right) so that each vessel may pass on the port side (left) of the other. When the 2
vessels were only 0.3 miles away, Tacloban turned to port side while Don Juan veered hard to
starboard. But Rule 18, like all other international rules of the road, are not to be obeyed without
regard to all the circumstances of a particular encounter. In other words, “route observance” of the
International Rules of the Road will not relieve a vessel from responsibility if the collision could
have been avoided by proper care and skill on her part or even by a departure from the
rules.

Here, Don Juan, having sighted Tacloban when it was still a long way off, was negligent in failing
to take early preventive action. Tacloban, upon turning to port before the collision, signaled its
intention to do so by giving 2 short blasts of its horn. Don Juan gave no answering horn blast to
signal its own intention and proceeded to turn hard to starboard. Thus, Santisteban and Negros are
liable for Gross Negligence.

P307k moral damages and P307k exemplary damages was awarded.

74. Saturnino Bayasen v. CA, GR 25785, February 26, 1981, Fernandez, J. (ED in Carriage
by Land: Condition of Vehicle)
FACTS:
Bayasen, Rural Health Physician in Sagada, Mountain Province, went to barrio Ambasing to visit
a patient. Two nurses from the Saint Theodore's Hospital in Sagada, viz., Elena Awichen and
Dolores Balcita, rode with him in the jeep assigned for the use of the Rural Health Unit as they
had requested for a ride to Ambasing. Later, at Ambasing, the girls, who wanted to gather flowers,
again asked if they could ride with him up to a certain place on the way to barrio Suyo which he
intended to visit anyway. Dr. Bayasen again allowed them to ride, Elena sitting herself between
him and Dolores. On the way, at barrio Langtiw, the jeep went over a precipice. About 8 feet
below the road, it was blocked by a pine tree. The three, were thrown out of the jeep. Elena was
found lying in a creek further below. Among other injuries, she suffered a skull fracture which
caused her death."

Bayasen was charged of Homicide thru Reckless Imprudence. He was convicted by the trial court.
CA affirmed, holding that he was negligent for driving at an “unreasonable speed.”

ISSUE:
Whether Bayasen is liable for the death.
HELD: NO.
There is no legally sufficient proof that Bayasen was negligent in driving his jeep. The star witness
of the prosecution, Dolores Balcita who was one of the passengers, testified that Bayasen was
driving his jeep moderately just before the accident and said that she did not know what caused
the jeep to fall into the precipice. When asked whether the jeep hit anything before it fell, she said
that she did not feel any bump or jolt. There was no conversation between the passengers that
could have distracted Baysen while driving.

As to the condition of the jeep itself, Dolores said that she “did not notice anything wrong” with
it from the time they drove from Sagada to Ambasing and from there to where the jeep fell. As
to the road, she said that it was fair enough to drive on, but that it was wet. The weather was fair.
Bayasen was not under the influence of liquor. Thus, there is absolutely no evidence to show that
Bayasen was negligent in driving his jeep.

Bayasen also testified that before reaching the road where the jeep fell, he noticed that the rear
wheel skidded while at 8-10kph. As precaution, he directed the jeep to the side of the mountain to
avoid the side of the road and the embankment.. While doing so, Elena suddenly held the steering
wheel and stepped on his right foot pressed on the accelerator. The jeep then suddenly swerved to
the right and went off. This is more credible thant Dolores’ negative statement that she “did not
see” what Elena did.

The jeep was also found at second gear when examined after the incident, bolstering the fact that
Bayasen was driving at moderate speed.

The proximate cause of the tragedy was the skidding of the rear wheels of the jeep and not the
“unreasonable speed” of Bayasen. Cars may skid on slippery roads, as in this case, without the
fault on account of the manner of handling the car. Skidding means partial or complete loss of
control of the car under circumstances not necessarily implying negligence. It may occur without
fault. Thus, Bayasen is not negligent, the skidding being an unforeseen event. Bayasen was
acquitted.
75. Alfredo Mallari Sr. v. CA, GR 128607, January 31, 2000, Bellosillo, J.(ED in Carriage by
Land: Traffic Rules)
FACTS:
The jeep of Alfredo Mallari Jr. and owned by Mallari Sr. collided with the delivery van of
respondent Bulletin Publishing Corp along the national highway in Bataan. Mallari Jr testified that
he went to the left lane of the highway and overtook a Fiera which stopped on the right lane. Before
he passed the Fiera, he saw Bulletin’s van coming from the opposite direction. The collision
occurred after Mallari Jr. overtook the Fiera while negotiating a curve in the highway. The impact
caused the jeep to turn around and fall on its left side, resulting in injuries to its passengers one of
whom was Israel Reyes who eventually died due to the gravity of his injuries.

Israel’s widow Claudia Reyes filed a complaint for damages in RTC against Mallari Sr. and Jr.
and Bulletin. RTC found that the proximate cause of the collision was the negligence of Felix
Angeles, driver of Bulletin’s van. CA found no negligence on Felix’s part and thus on Bulletin’s
also. Instead, CA ruled that the collision was cause solely by Mallari Jr. Hence this petition.

ISSUE:
Whether Mallari Jr. and Sr. are liable for the accident.
HELD: YES.
Petitioners allege that there is no evidence that Mallari Jr. overtook a vehicle at the time of the
accident. But contrarily, Mallari Jr. himself testified that he overtook the Ford Fiera. The collision
occurred immediately after Mallari Jr. overtook a vehicle in front of it while traversing a curve on
the highway. This act of overtaking was in clear violation of S41 (a) and (b) of RA 4136, Land
Transportation and Traffic Code. A driver abandoning his proper lane to overtake another
vehicle in an ordinary situation has the duty to see to it that the road is clear and not to proceed if
he cannot do so in safety. When a motor vehicle is approaching or rounding a curve, there is special
necessity for keeping to the right side of the road and the driver has no right to drive on the left
side relying upon having time to turn to the right if a car approaching from the opposite direction
comes into view.

By his own admission, Mallaro Jr. already saw that Bulletin’s van was coming from the opposite
direction and failing to consider the speed thereof since it was still dark at 5am mindlessly occupied
the left lane and overtook 2 vehicles. Thus, the proximate cause of the collision was the sole
negligence of the jeep driver, Mallari Jr. Under Art. 2185 of NCC, unless there is proof to the
contrary, it is PRESUMED that a person driving a motor vehicle has been negligent if at the
time of the mishap he was VIOLATING a TRAFFIC REGULATION.

The negligence of the jeep driver is binding against Mallari Sr., owner of the jeep engaged as a
CC, since in an action based on contract of carriage, the court need not make an express finding of
fault or negligence on the part of the carrier to hold it responsible.

76. Gregorio Pestaño v. Sps. Sumayang, GR 139875, December 04, 2000, Panganiban, J. (ED
in Carriage by Land: Traffic Rules)
FACTS:
Ananias Sumayang was riding a motorcycle along the national highway in Cebu. Riding with him
was his friend Manuel Romagos. As they came upon a junction, they were hit by a passenger bus
driven by petitioner Pestaño and owned by petitioner Metro Cebu Autobus Corporation which had
tried to overtake them, sending the motor and its passengers hurtling upon the pavement. Both
Ananias and Manuel were rushed to the hospital where they eventually died.

Heirs of Ananias, Sps. Sumayang, filed an action for damages against Pestaño and Metro Cebu.
To substantiate its defense of diligence of a good father, Metro Cebu called Pestaño to testify who
explained how his driving experience were tested by Metro Cebu before he was hired and how
Metro would give regular lectures to its drivers and conductors on various topics like speeding,
parking, treatment of passengers etc.

The trial court found petitioners liable. CA affirmed. Hence this petition.

ISSUE:
Whether petitioners are liable.
HELD: YES.
As a professional driver operating a public transport bus, Pestaño should have anticipated that
overtaking at a junction was a perilous maneuver and should thus have exercised extreme caution.

Petitioners claim that CA erred in attributing the accident to a faulty speedometer and in implying
that the accident could have been avoided had this been properly functioning. But this has no
factual basis. Under Arts. 2180 and 2176 of NCC, owners and managers are responsible for
damages caused by their employees. When an injury is caused by the negligence of a servant or
employee, the master or employer is presumed negligent either in the selection or in the
supervision of that employee. This presumption may be overcome only by satisfactorily showing
that the employer exercised the care and diligence of a good father of a family in the selection and
supervision of its employee.

CA said that allowing Pestaño to ply his route with a defective speedometer showed laxity on
Metro Cebu in the operation of its business and supervision of employees. The negligence alluded
to here is in its supervision over its driver, not in that which directly caused the accident. That
Pestaño was able to use a bus with a faulty speedometer shows that Metro Cebu was remiss in the
supervision of its employees and in the proper care of its vehicles. It thus failed to conduct its
business with the diligence required by law.

77. Herminio Nocum v. Laguna Tayabas Bus Company, GR L-23733, October 31, 1969,
Barredo, J. (ED in Carriage by Land: Traffic Rules)
FACTS:
A man with a box went up the baggage compartment of the bus and the box was placed under the
seat. The bus left at 1130am when the explosion occurred. 37 passengers were injured. The box
belonged to a passenger whose name is not known and who told the conductor that it contained
miscellaneous items and clothes. Conductor Sancho Mendoza helped the owner in loading the
baggage which weighed about 12 kg. From its appearance, there was no indication that the contents
were explosives or firecrackers. Neither did he open the box because he just relied on the word of
the owner. The company dispatcher Nicolas of Laguna Tayabas adds that they were not authorized
to open baggages of passengers because instruction from management was to call the police if
there were packages containing articles which were against regulations.

The bus was roadworthy. The injuries were caused by the explosion of firecrackers loaded into the
bus by a co-passenger.

Nocum, a passenger, filed a civil case against Laguna Tayabas. CFI ruled that Tayabas is liable as
it did not observe ED. If proper inspection was done, the contents of the box could have been
discovered and the accident avoided. CFI held that if proper inspection was done, the accident
could have been avoided. Refusal by the passenger to have the package opened was no excuse
because employees should call the police if there were packages with articles against company
regulations.

ISSUE:
Whether Laguna Tayabas is liable.
HELD: NO.
But the law does not require as much. Art. 1733 is not as unbending as CFI has held for it qualifies
the ED required of CCs to be “according to all the circumstances of each case.” This is repeated
in Art. 1755: "A common carrier is bound to carry the passengers safely as far as human care and
foresight can provide, using the utmost diligence of very cautious persons, with due regard for all
the circumstances."

Here, fairness demands that in measuring a CC’s duty to its passengers, allowance must be given
to the reliance reposed on the sense of responsibility of the passengers as to their common safety.
It is presumed that a passenger will not take with him anything dangerous to the lives and limbs
of his co-passengers, not to speak of his own. Not to be lightly considered is the right to privacy
of each passenger. He cannot be subjected to any unusual search, when he protests the
innocuousness of his baggage and nothing appears to indicate the contrary, as in this case.
Inquiry may be made verbally as to the nature of a passenger’s baggage when such is not
outwardly perceptible, but beyond this, constitutional boundaries are already in danger of being
transgressed.

Calling a police to aid in compelling the passenger to submit to more rigid inspection after the
passenger already declared that the box contained mere clothes and other miscellaneous could not
have justified invasion of a constitutionally protected domain. What must be considered is not so
much the infringement of the fundamental rights of the passenger, but the constant threat any
contrary ruling would have on the right of privacy of all passengers of all CCs considering how
easily the duty to inspect can be made an excuse for mischief and abuse. Of course, when there
are sufficient indications that the representations of the passenger as to the nature of his
baggage may not be true, in the interest of the common safety of all, the assistance of the
police authorities may be solicited, not necessarily to force the passenger to open his baggage,
but to conduct the needed investigation consistent with the constitutional rights of the passenger.
It is in this sense that the service manual of Tayabas to its conductors must be understood.

Tayabas rebutted the presumption of negligence by showing that it exercised extraordinary

diligence for the safety of its passengers.
78. Korean Airlines Co., Ltd. V. CA, GR 114061, August 03, 1994, Cruz, J. (ED in Carriage
by Air)
FACTS:
Juanito Lapuz, an automotive electrician, was contracted for employment in Jeddah, Saudi Arabia
thru Pan Pacific Overseas Recruiting Services, Inc. Lapuz was supposed to leave on Nov. 08, 1980
via KAL. Initially, he was waitlisted, meaning he could only be accommodated if any of the
confirmed passengers failed to show up at the airport before departure. When 2 passengers did not
show up, Lapuz and another, Perico, were given the 2 unclaimed seats.

Acc. To Lapuz: He was allowed to check in with one suitcase and one shoulder bag. He passed
thru the customs and immigration sections for routine check-up and was cleared for departure as
passenger #157 of KAL Flight 903. He rode the shuttle bus with other passengers toward the ramp
of the KAL aircraft for boarding. But when he was at the third or fourth rung of the stairs, a KAL
officer pointed to him and shouted “Down! Down!” He was thus barred from taking the flight.
When he asked for another booking, his ticket was cancelled by KAL. He was unable to report for
his work in Saudi within the stipulated 2-wekk period and lost his employment.

KAL claims that Pan Pacific coordinated with KAL for the departure of 30 contract workers of
whom only 21 were confirmed and 9 were wait-listed. After there was a possibility of one or two
seats becoming available, priority was given to Perico, one of the supervisors of the hiring
company in Saudi. The other seat was won by lottery by Lapuz. But only one seat became
available. So only Perico was allowed to board.

RTC held KAL liable for damages. CA modified the damages by lowering them. Hence these
petitions for review.

ISSUE:
Whether KAL is liable for damages.
HELD: YES.
The status of Lapuz as standby passenger was changed to that of a confirmed passenger when
his name was entered in the passenger manifest of KAL. His clearance thru immigration and
customs clearly shows that he had indeed been confirmed as passenger of KAL in that flight. KAL
thus breached the contract of carriage between them when it failed to bring Lapuz to his
destination.

The contract of air carriage generates a relation attended by a public duty. Passengers have the
right to be treated by the carrier’s employees with kindness, respect, courtesy, and due
consideration. They are entitled to be protected against personal misconduct, injurious
language, indignities, and abuses from such employees. So it is that any discourteous conduct
of these employees toward a passenger gives the latter an action for damages against the carrier.

The breach of contract was aggravated when, instead of courteously informing Lapuz of his
being a waitlisted passenger, a KAL officer rudely shouted “Down! Down!” while pointing at
him, thus causing him embarrassment and public humiliation.
KAL claims that the evidence of confirmation of a chance passenger status is not thru the entry of
the name of a chance passenger in the passenger manifest nor clearance from the commission on
immigration because they are merely means of facilitating the boarding of the chance passenger
in case his status is confirmed.

But Lapuz had checked in at the departure counter, passed thru customs and immigration, boarded
the shuttle bus, and proceeded to the ramp of KAL’s aircraft. His baggage had already been loaded
in KAL’s aircraft to be flown with him to Jeddah. The contract of carriage between him and KAL
had already been perfected when he was summarily and insolently prevented from boarding the
aircraft.

79. PAL v. CA, GR L-46558, July 31, 1981, Guerrero, J. (ED in Carriage by Air)
FACTS:
Jesus Samson, private respondent and licensed aviator, was paired with pilot Bustamante. He
complained in December 1950 to PAL about the slow reaction and poor judgment of Bustamante.
Despite this, PAL allowed Bustamante to continue flying. Samson claims that on January 8, 1951,
he flew as co-pilot on a regular flight from Manila to Legaspi with stops at Daet etc. with Captain
Bustamante as commanding pilot of a C-47 plane belonging to PAL. On attempting to land the
plane at Daet airport, Captain Bustamante, due to his very slow reaction and poor judgment,
overshot the airfield and as a result, notwithstanding the diligent efforts of Samson to avert an
accident, the airplane crashlanded beyond the runway. The jolt caused the head of Samson to hit
and break through the thick front windshield of the airplane causing severe brain concussion,
wounds on his forehead with intense pain. Samson suffered periodic dizzy spells and general
debility.

Instead of giving Samson proper medical treatment, PAL merely referred him to a company
physician, a general medical practitioner, who limited treatment to exterior injuries. Days after the
accident, PAL called Samson back to active duty as co-pilot. Despite his request for expert medical
assistance, PAL did not give him any. Instead, in 1953, PAL discharged him from employment
due to physical disability.

PAL claims that the accident was due exclusively to inevitable unforeseen circumstances and
Samson sustained only superficial wounds. As CC, PAL must employ only proficient and mentally
and physically good pilots. Captain Bustamante was a competent pilot although afflicted with a
tumor of the nasopharynx before the accident.

CFI ruled that PAL was liable for damages. CA added legal interest. Hence this petition.

ISSUE:
Whether PAL is liable to Samson for damages.
HELD: YES.
PAL claims that there is no causal connection between Samson’s superficial injuries and his
alleged periodic spells and general debility, as these were found by competent physician, including
an expert neuro-surgeon, to be due to emotional disturbances.
But we agree with CA that the dizzy spells etc. was an after-effect of the crash-landing. Samson’s
condition as psychosomatic rather than organic is allegedly confirmed by the fact that on 6 separate
occasions after the accident, he passed the required physical examination for airman’s certificate.
But there were other physical examinations on Samson which were not presented in evidence.
Obviously, only those which suited PAL’s cause were offered in evidence. We are more prone to
believe the testimony of Samson’s doctors who found cerebral concussion and abnormality in the
frontal area of Samson’s head.

We also find the imputation of gross negligence by CA to PAL for allowing Capt. Bustamante to
fly on January 8 as correct. Bustamante was sick and had a tumor of the nose. This spot is very
near the brain and eyes. Tumor on the spot will affect the sinus, the breathing, the eyes which are
very near it. Samson’s observation of Bustamante was reported to the chief pilot who did nothing
about it.

Assuming that Bustamante was not sick or that the tumor did not affect him in managing the plane,
evidence shows that the overshooting of the runway and crash-landing at the mangrove was caused
by the pilot for which acts PAL must answer for damages caused thereby. And for this negligence
of PAL’s employee, it is liable. At least, the law presumes the employer negligent imposing upon
it the burden of proving that it exercised the diligence of a good father of a family in the
supervision of its employees.

PAL is a CC required to exercise the highest degree of care in the discharge of its duty under Arts.
1733, 1755, and 1756 of NCC. The duty is for the safety of passengers and for the members of the
crew operating the carrier, the airplane in this case.

80. Sps. Zalamea v. CA, GR 104235, November 18, 1993, Nocon, J. (ED in Carriage by Air)
FACTS:
Sps. Cesar and Suthira Zalamea and their dauther Liana purchased 3 tickets from the Manila agent
of respondent TransWorld Airlines (TWA) for a flight from NY to Los Angeles on June 6, 1984.
The tickets of Sps. Zalamea were purchased at 75% discount while that of their daughter was a
full fare ticket. All three tickets represented confirmed and reconfirmed reservations. But on
June 6, they arrived an hour earlier than the flight but were placed on the waitlist because the
number of passengers who checked in before them had already taken all the available seats. Liana
appeared #13 on the waitlist while Sps. Zalameas were listed as #34. Of the 42 names on the
waitlist, the first 22 names were allowed to board, including Cesar only. Those holding full-fare
tickets were given first priority. Cesar, holding the full-fare ticket of his daughter, was allowed to
board. His wife and daughter, with their discounted tickets, were denied boarding.

Upon arrival in PH, they filed for damages for breach of contract of air carriage in RTC. RTC
ruled for Sps. Zalamea. CA only ordered TWA to pay back the price of the 2 discounted tickets of
$159.49 each and P50k attorney’s fees. It held that there was no fraud or BF. Hence this petition
for review.

ISSUE:
Whether TWA is liable.
HELD: YES.
There was fraud or BF on TWA’s part when it did not allow petitioners to board their flight inspite
of confirmed tickets. The US 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. 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 etc. or by any officer in the foreign service of PH
stationed in the foreign country in which the record is kept, and authenticated by the seal of his
office.

Aside from the statement of Lather, its customer service agent, that the Code of Federal
Regulations of the Civil Aeronautics Board in US allows overbooking, no official publication of
said code was presented as evidence. Thus, CA’s finding that overbooking is allowed by US Code
of Federal Regulations has no basis in fact.

Even if said US Code does exist, it is not applicable here in accordance with lex loci contractus
which requires 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 PH, the
applicable law is PH law.

Jurisprudence states that overbooking is BF, entitling passengers to moral damages. when an
airline issues a ticket to a passenger confirmed on a particular flight, on a certain date, a contract
of carriage arises. The passenger has the right to expect that he would fly on that flight and date.
If he does not, the carrier opens itself to a suit for breach of contract. Where an airline deliberately
overbooked, it took the risk of having to deprive some passengers of their seats in case all of
them would show up for check in. For the indignity and inconvenience of being refused a
confirmed seat on the last minute, the passenger is entitled to moral damages.

Even assuming that overbooking is allowed, TWA is still guilty of BF in not informing its
passengers that it could breach the contract of carriage even if they have confirmed tickets
if there was overbooking. TWA should have incorporated stipulations on overbooking on the
tickets issued or to properly inform its passengers about these policies so that they would be
prepared for such eventuality. TWA was also guilty of not informing its passengers of its alleged
policy of giving less priority to discounted tickets.

The issue is not the reasonableness of the overbooking and boarding priorities but whether said
policies were incorporated or deemed written on petitioners’ contracts of carriage. TWA failed to
show that there are provisions to that effect. Petitioners had the right to rely upon the assurance of
TWA thru its Manila agent that their tickets represented confirmed seats without any qualification.
The failure of TWA to inform them is BF.

81. Macondray and Company Inc. v. Acting Commissioner of Customs, GR L-25783,

February 25, 1975, Esguerra, J. (Bill of Lading: Definition)
FACTS:
The vessel Tai Ping, of which Macondray is the local agent, arrived at Manila port from California
USA conveying various shipments among which was 1 coil carbon steel, 1 bundle carbon steel
flat, and 1 carton containing carbon tool holders, all of which appeared in Bill of Lading (BoL)
22 consigned to Bogo Medellin Millings Co. The shipment, except the 1 carbon steel, was not
reflected in the inward cargo manifest as required by S1005 in relation to S2521 of Tariff and
Customs Code of PH.

Allied Brokerage Corporation requested Macondray to correct the manifest of the steamer so that
it may take delivery of the goods at customs house. Macondray was fined P1k which it paid under
protest.

Collector of Customs dismissed the protest. The Commissioner of Customs sustained. CTA
affirmed. Hence this petition.

ISSUE:
Whether the fine imposed due to alleged violation of S1005 for landing unmanifested cargo at
Manila port is valid.
HELD: YES.
Macondray claims that since the whole shipment was indicated in the BoL, the deficiency of the
original vessel’s manifest was adequately supplied by the BoL. Thus, there is no violation. But
this is untenable. S1004, 1005 in relation to S2521 of Tariff and Customs Code explicitly provide:
"Section 1004. Documents to be produced by master upon entry of vessel — For the
purpose of making entry of a vessel engaged in foreign trade, the master thereof shall
present the following documents, duly certi;ed by him, to the customs boarding official:
a. The original manifest of all cargo destined for the port, to be returned with the
indorsement of the boarding official;xxx
"Section 1005. Manifest required of vessel from foreign port. — Every vessel from a
foreign port must have on board a complete manifest of all her cargo. xxx
*S2521 yung penal provi
The inclusion of the unmanifested cargoes in BoL does not satisfy the requirement of S1004 and
1005. Nowhere in these sections is the presentation of a BoL required but only the presentation of
a manifest containing a true and accurate description of the cargoes. This is because while a
manifest is a declaration of the entire cargo, a BoL is but a declaration of a specific part of the
cargo and is a matter of business convenience based exclusively on a contract.

The object of a manifest is to furnish the customs officers with a list to check against, to inform
our revenue officers what goods are being brought into the country, and to provide a safeguard
against goods being brought into the country on a vessel and then smuggled ashore. While a BoL
is merely a convenient commercial instrument designed to protect the importer or consignee,
a manifest is absolutely essential to the exportation or importation of property in all vessels,
the object of which is to impose upon the owners and officers of such vessel an imperative
obligation to submit lists of the entire loading of the ship in the prescribed form and to defeat any
attempt to use the vessels to secure the unlawful entry of persons or things into the country.

Since the purpose of a manifest is far different from that of a BoL, we cannot accept petitioner’s
contention.
Petitioner claims that an amendment was made on the manifest to reflect the accurate description
of the shipment. But there is no evidence of such allegation. Even if the amendment was approved
and valid, it does not relieve the vessel from the liability which she had already incurred prior to
the amendment.

82. Magellan Manufacturing Marketing Corporation v. CA, GR 95529, August 22, 1991,
Regalado, J. (Kinds of BoL) (See case 30)

83. Juan Ysmael & Co. v. Gabino Barretto & Co. et al., GR 28028, November 25, 1927, Johns,
J. (BoL as a contract: prohibited stipulations)
FACTS:
A domestic corporation seeks to recover from defendants P9,940.95, alleged value of 4 cases of
merchandise which it delivered to the steamship Andres at Manila to be shipped to Surigao, but
which were never delivered to Salomon Sharuff, consignee, or returned to plaintiff.

Gabino et al. claims that the 4 cases of merchandise were never delivered to them and that under
the provisions of the printed conditions at the back of the BoL, the complaint is barred for not
being brought within 60 days from when the cause of action accrued and that the BoL states that
defendants are not liable in excess of P300 for any package of silk unless the value and contents
of such packages are correctly declared in the BoL at the time of shipment.

Trial court ruled for plaintiff Juan. Hence this petition.

ISSUE:
Whether the stipulation limiting liability to only P300 per case of silk is valid.
HELD: NO.
There is ample preponderance of evidence to support the finding that 164 cases were delivered.

1. The BoL states: Suits based upon claims arising from shortage, damage, or nondelivery of
shipment shall be instituted within sixty days from date of accrual of the right of action. Failure
to make claims or to institute judicial proceedings as herein provided shall constitute a waiver of
the claim or right of action."

Defendants cite the Corpus Juris which states that without express statutory prohibition, the parties
to a contract of shipment may agree on a limitation of time shorter than statutory limitation within
which action for breach of contract shall be brought. The only limitation is that such must be
reasonable.

Plaintiff made its claim of loss within 7 days after receipt of information that only 160 cases were
delivered. On Jan. 03, 1923, Gabino advised plaintiff that it would not pay the claim. On April 17,
plaintiff filed its complaint. We are of the opinion that the action was brought within a
“reasonable time”. While both parties are residents of Manila, Surigao is one of the most distant
places from Manila. plaintiff would not want to file an action until it has made a full investigation
of the material facts and law of the case to determine if defendants were liable for its loss. In
Aguinaldo v. Daza, we held that the BoL stipulations the same as here, considering the slowness
of communication between Manila and Catbalogan, gave an insufficient time for presentation of
the written claim.

2. Defendants then rely on clause 12 of the BoL:

"It is expressly understood that carrier shall not be liable for loss or damage from any
cause or for any reason to an amount exceeding three hundred pesos (P300) Philippine
currency for any single package of silk or other valuable cargo, nor for an amount
exceeding one hundred pesos (P100) Philippine currency for any single package of other
cargo, unless the value and contents of such packages are correctly declared in this bill of
lading at the time of shipment and freight paid in accord with the actual measurement or
weight of the cargo shipped."
The ship here was a common carrier and must have been operated as a public utility. It is common
knowledge that large quantities of silk are imported in PH and after being imported are sold by
merchants in Manila and then shipped to different places in PH. Thus, there is nothing unusual
about the shipment of silk. It is a matter of usual and ordinary business. There was no fraud or
concealment in the shipment in question.

The evidence shows that 164 “cases” were shipped and that the value for each case of silk was
very near P2.5k. the limit of defendant’s liability for each case of silk for loss or damage “from
any cause or for any reason” would put it in the power of defendants to have taken the whole
cargo of 164 cases of silk at P300 per case, or less than 1/8 of its value. If this is sustained, no
silk would ever be shipped from one island to another in PH. Such a limitation of value is
unconscionable and void as against public policy.

Corpus Juris states that the validity of stipulations limiting the carrier’s liability is determined by
their reasonableness and conformity to public policy. The carrier cannot limit its liability for injury
to or loss of goods shipped where such is caused by its own negligence. This is the common law
doctrine.

84. Parmanand Shewaram v. PAL, GR L-20099, July 07, 1966, Zaldivar, J. (BoL prohibited
and limiting stipulations)
FACTS:
Shewaram was a passenger on PAL’s flight from Zamboanga to Manila. Shewaram checked in 3
baggages: a suitcase and 2 other pieces. The suitcase was mistagged by PAL’s personnel as IGN
(for Illigan) instead of MNL (for Manila). When Shewaram arrived in Manila, his suitcase did not
arrive with him as it was sent to Illigan. He made a claim and was given another suitcase similar
to his own which was the only baggage left for that flight. Shewaram refused to take it alleging
that it was not his and that all his clothes were white and the national transistor 7 and rollflex
camera were not inside the suitcase. It also had a pistol which is not his. After inquiries by PAL’s
personnel, they found that the suitcase reached Iligan. The station agent in Iligan sent these to
Manila for delivery to Shewaram. Shewaram was informed by station agent Blanco of the arrival
in Manila but minus his transistor radio 7 and rollflex camera. He demanded for these 2 items but
which demand was not complied with.

Shewaram filed an action to recover damages. trial court ordered PAL to pay P373 and damages.
The trial court found that the suitcase was tampered and the transistor and camera were lost due to
PAL’s negligence. Their total value was P373. CFI also ordered payment of the P373. Hence this
appeal on questions of law.

ISSUE:
Whether PAL is liable for the value of the items beyond the P100 limit in the conditions printed at
the back of the ticket stub of the passenger.
HELD: YES.
PAL, as CC, is liable for the loss. PAL claims that its liability should be limited to the amount
stated in the conditions of carriage printed at the back of the plane ticket stub issued to
Shewaram which conditions are embodied in Domestic Tariff Regulations 2 which was filed with
the Civil Aeronautics Board. One of those conditions state:
"The liability, if any, for loss or damage to checked baggage or for delay in the delivery
thereof is limited to its value and, unless the passenger declares in advance a higher
valuation and pay an additional charge therefor, the value shall be conclusively deemed
not to exceed P100.00 for each ticket."
PAL claims that since Shewaram failed to declare a higher value for his luggage , he cannot
demand more than P100.

But Art. 1750 provides:

"A contract fixing the sum that may be recovered by the owner or shipper for the loss,
destruction, or deterioration of the goods is valid, if it is reasonable and just under the
circumstances, and has been fairly and freely agreed upon."
The pecuniary liability of a CC may, by contract, be limited to a fixed amount but the contract
must be “reasonable and just under the circumstances and has been fairly and freely agreed
upon.”

Here, the requirements are not met. It cannot be said that Shewaran had actually entered into a
contract with PAL embodying the conditions as printed at the back of the ticket stub. The fact that
those conditions are printed at the back of the ticket stub in letters so SMALL that they are hard
to read would not warrant the presumption that Shewaram was aware of those conditions such that
he had “fairly and freely agreed” to those conditions. Thus, Shewaram cannot be bound by the
conditions.

PAL’s liability is governed by Arts. 1734 and 1735. Since the transistor and camera were lost due
to negligence of PAL as a CC, it must pay the value of those two articles.

In Ysmael and Co. v. Barretto cited by trial court, it was laid down that the carrier cannot limit its
liability to injury or loss of goods shipped caused by its own negligence.

85. Augusto Ong Yiu v. CA, GR L-40597, June 29, 1979, Melencio-Herrera, J. (BoL
prohibited and limiting stipulations)
FACTS:
Ong was a passenger of PAL flight from Cebu to Butuan. He was scheduled to attend a hearing.
He checked in one piece of luggage, a blue “maleta”. Upon arrival at Butuan, Ong claimed his
luggage but it could not be found. PAL Manila wired PAL Cebu advising that the luggage had
been overcarried to Manila and that it would be forwarded to Cebu on the same day. PAL Cebu
then sent a message to PAL Butuan that the luggage would be forwarded the following day on
August 27, 1967, but this was not received by PAL Butuan as all personnel had already left.

PAL Cebu supervisor felt no need to wire Ong that his luggage had already been forwarded to
Butuan assuming that by the time the message reached Butuan, the luggage would have arrived.

Ong inquired on Aug. 27 about his luggage but did not wait for the flight which arrived at 10am
carrying his missing luggage (*since hindi niya alam?). one Dagorro who used to drive for Ong
volunteered to take Ong’s luggage. Dagorro examined the lock, pressed it, and it opened. Dagorro
delivered the maleta to Ong with the information that the lock was open. Atty. Ong found that a
folder containing certain exhibits and private documents for his hearing at Aug. 28-31 were
missing. He refused to accept the luggage. Dagorro returned it to the porter clerk Maximo who
sealed it and forwarded it to PAL Cebu.

Ong demanded that his luggage be produced intact and that he be compensated P250k for damages.
otherwise, he will file suit. Ong filed a complaint against PAL for damages and breach of contract
of transportation in CFI. CFI granted damages. CA reversed, ordering PAL to pay only P100, the
baggage liability assumed by it under the condition of carriage printed at the back of the ticket.
Hence this petition for review.

ISSUE:
Whether Ong is bound by the condition limiting PAL’s liability printed at the back of his plane
ticket.
HELD: YES.
PAL did not act in BF. Thus, Ong is not entitled to moral damages or exemplary damages.

Ong claims that CA erred when it limited PAL’s carriage liability to only P100 stipulated at the
back of the ticket.

The condition of carriage printed at the back of the plane ticket reads:
"8. BAGGAGE LIABILITY . . . The total liability of the Carrier for lost or damaged
baggage of the passenger is LIMITED TO P100.00 for each ticket unless a passenger
declares a higher valuation in excess of P100.00, but not in excess, however, of a total
valuation of P1,000.00 and additional charges are paid pursuant to Carrier's tariffs."

Since the maleta was pilfered while in PAL’s custody, it is presumed that PAL had been negligent.
The liability of PAL however is limited to P100 per baggage. Ong did not declare any higher value
much less did he pay any additional transportation charge. The validity of the stipulation is not
questioned by Ong. They are printed in reasonably and fairly BIG letters and are easily
readable. Ong had also been a frequent passenger of PAL from Cebu to Butuan and he, being a
lawyer, must be fully aware of these conditions

Ong claims that Art. 1750 of NCC was not complied with and that he did not enter into a contract
with PAL limiting PAL’s liability for loss of baggage.
While Ong did not sign the plane ticket, he is nonetheless bound by its provisions. It is a contract
of “adhesion” wherein one party imposes a ready made form of contract on the other, as the plane
ticket here. It is not entirely prohibited. One who adheres to the contract is in reality free to reject
it entirely. If he adheres, he gives his consent. Thus, since Ong failed to declare a higher value, he
cannot be allowed to recover in excess of P100. Besides, passengers are advised not to place
valuable items inside their baggage but to “avail of our V-cargo service.”

86. Aboitiz Shipping Corporation v. CA, GR 89757, August 06, 1990, Gaycayco, J. (BoL
prohibited and limiting stipulations)
FACTS:
M/V “P. Aboitiz” took on board in HK for shipment to Manila some cargo consisting of one 20-
footer container with 271 rolls of goods foe apparel covered by BoL 515-M and one 40-footer
container with 447 rolls, 10 bulk and 95 cartons of goods for apparel covered by BoL 505-M. their
total value for the first shipment is $39,885 and for the second $94,190.55. These were consigned
to PH Apparel Inc. and insured with General Accident Fire and Life Assurance Corporation
(GAFLAC). The vessel is owned by Aboitiz.

The vessel, on its way to Manila, sunk and declared lost with its cargoes. GAFLAC paid PH
Apparel $39,885 and $94,190.55. GAFLAC filed an action for damages in CFI against Aboitiz.

CFI ruled for GAFLAC. CA affirmed. Hence this petition.

ISSUE:
Whether Aboitiz may limit its liability to $500 pursuant to the BoL stipulation.
HELD: NO.
Aboitiz claims that the sinking of MV P Aboitiz was subject of an administrative investigation by
the Board of Marine Inquiry (BMI) where in a decision in Dec. 26, 1984, they found that the
sinking was due to force majeure due to a typhoon. But CFI was never informed of a parallel
investigation by BMI. The case was filed on Oct. 28, 1981 and only on March 22, 1985 did Aboitiz
inform CFI of BMI’s decision on Dec. 26, 1984. The decision was rendered 3 years after the case
was filed. It was also conducted unilaterally since GAFLAC was not given opportunity to
participate. GAFLAC thus cannot be bound by the findings of BMI.

The sinking was not due to the waves caused by typhoon “Yoning” but due to the fault and
negligence of Aboitiz, its master and crew. The wind when the ship foundered was 10-15 knots .
This is classified in Beaufort scale as a moderate breeze, small waves. The whether prevailing
under said wind force is usual and forseeable. Thus, the sinking was not due to force majeure.

Aboitiz claims that its liability should be fixed at $500 per package as stipulated in BoL. But while
there is such a stipulation in the BoL, there is an exception, that is, when the nature and value of
such goods have been DECLARED by the shipper before shipment and inserted in BoL. This is
provided in S4(5) of COGSA:
"(5) Neither the carrier nor the ship shall in any event be or become liable for any loss or
damage to or in connection with the transportation of goods in an amount exceeding $500
per package of lawful money of the United States, or in case of goods not shipped in
packages, per customary freight unit, or the equivalent of that sum in other currency, unless
 the nature and value of such goods have been inserted in the bill of lading. This
declaration, if embodied in the bill of lading, shall be prima facie evidence, but shall not
be conclusive on the carrier.
Here, the description of the nature and value of the goods are declared and reflected in the BoL.
Thus, it is the basis of liability of the carrier as the actual value of the loss.

It is also absurd to interpret “container” in the BoL to refer to the container which is the modern
substitute for the hold of the vessel. The package/container contemplated by law to limit the
liability of the carrier should be related to the unit in which the shipper packed the goods and
described them, not a large metal object, functionally part of the ship, in which the carrier
contained them.

By the weight of modern authority, a carrier cannot limit its liability for injury or loss of goods
shipped caused by its own negligence. Here, to limit Aboitiz’s liability to $500 would nullify the
policy of law imposing on CCs the duty to observe ED in carriage of goods. To limit the liability
to $500 would put in its power to have taken the whole cargo.

87. Sea-Land Service Inc. v. IAC, GR 75118, August 31, 1987, Narvasa, J. (BoL prohibited
and limiting stipulations)
FACTS:
Sea Land Service Inc. received from Seaborn Trading Company in California a shipment
consigned to Sen Hiap Hing, business name of Paulino Cue. The shipper did not declare the value
of shipment. No value was indicated in BoL. The BoL described the shipment only as “8CTNS on
2 SKIDS-FILES.” This was loaded on MS Patriot, Sealand’s vessel.

The shipment arrived in Manila and discharged into the custody of the arrastre contractor and
customs authorities. While awaiting transshipment to Cebu, it was stolen by pilferers and has never
been recovered.

Consignee Cue made a formal claim upon Sealand for the lost shipment allegedly amounting to
P179k. Sealand offered to settle for $4000 or P30,600, claiming that this is its maximum liability
under the package limitation clause in BoL. Cue rejected and filed suit for damages against Sealand
in CFI.

CFI ruled for Cue. IAC affirmed. Hence this petition. Hence this petition for review.

ISSUE:
Whether the liability limitation provision binds Cue.
HELD: YES.
Since the liability of a CC for loss or damage to goods transported by it is governed by the laws of
the country of destination, and the goods were shipped from US to PH, liability of Sealand to Cue
is governed primary by NCC and suppletorily, in all matters not determined thereby, by Code of
Commerce and special laws. One of these special laws is COGSA, made applicable to all contracts
of carriage of goods by sea to and from PH ports in foreign trade by CA 65. S4(5) of COGSA
state:
 "(5) Neither the carrier nor the ship shall in any event be or become liable for any loss or
damage to or in connection with the transportation of goods in an amount exceeding $500
per package lawful money of the United States, or in case of goods not shipped in packages,
per customary freight unit, or the equivalent of that sum in other currency, unless the
nature and value of such goods have been declared by the shipper before shipment
and inserted in the bill of lading. This declaration, if embodied in the bill of lading, shall
be prima facie evidence, but shall not be conclusive on the carrier.

Clause 22, first par. of the BoL customarily issued by Sealand to its clients is a virtual copy of the
first par. of S4(5).

NCC has provisions like in COGSA in Arts. 1749 and 1750:

"ART. 1749. A stipulation that the common carrier's liability is limited to the value of the
goods appearing in the bill of lading, unless the shipper or owner declares a greater value,
is binding."
"ART. 1750. A contract fixing the sum that may be recovered by the owner or shipper for
the loss, destruction, or deterioration of the goods is valid, if it is reasonable and just under
the circumstances, and has been fairly and freely agreed upon."

Nothing in S4(5) of COGSA is inconsistent with these. Said section merely gives more flesh and
greater specificity to the rather general terms of Arts. 1749 and 1750 (without doing violence to
the plain intent thereof). even if S4(5) of COGSA did not exist, the validity and binding effect of
the liability limitation clause in the BoL here are fully sustainable based alone on these NCC
provisions. That said stipulation is just and reasonable is arguable from the fact that it echoes
Art. 1750 in providing a limit to liability only if a greater value is not declared. To hold otherwise
would amount to questioning the justice and fairness of the law itself.

Also, the stipulation is just and reasonable as it gives the shipper or owner the option of avoiding
accrual of liability limitation by the simple and far from onerous expedient of declaring the
nature and value of the shipment in the BoL.

And since the shipper has not been heard to complain of having been rushed, imposed upon, or
deceived into agreeing to ship the cargo under a BoL with such stipulation, there is no ground for
assuming that its agreement was not freely and fairly sought and given.

While Que may have no direct part or intervention in executing the contract of carriage between
the shipper and carrier in the BoL, his right to recover for loss of a shipment consigned to him
under a BoL springs either from a relation of agency that may exist between him and the
shipper/consignor, or his status as a stranger in whose favor some stipulation is made in the
contract and who becomes a party thereto when he demands fulfillment of that stipulation.
Malagarriga, in Codigo de Comercio Comentado, states that in case of conflict between shipper
and consignee, the right of the shipper to countermand the shipment terminates when the consignee
or legitimate holder of the BoL appears with such bill before the carrier and makes himself a
party to the contract.
The issue of deviation is settled by Clause 13 of the BoL expressly authorizing transshipment of
goods at any point in the voyage at the risk of the goods. This obviates the need to offer any other
justification for off loading the shipment in Manila for transshipment to Cebu, port of destination.

Cue, by making claim for loss based on the BoL, to all intents and purposes accepted said bill.
Thus, he is bound by all stipulations therein whether on the front or back. Thus, Sealand is liable
for only $4000.

88. Citadel Lines, Inc. v. CA, GR 88092, April 25, 1990, Regalado, J. (BoL limiting and
prohibited stipiulations)
FACTS:
Citadel, carrier, is the general agent of the vessel Cardigan Bay/ Strait Enterprise. Respondent
Manila Wine Merchants, consignee, is the importer of the subject shipment of Dunhill cigarettes
from England. The vessel loaded at England for carriage to Manila 180 Filbrite cartons of Dunhill
cigarettes under BoL 1374 and 8680. The shipment arrived in Manila, Pier 13, in container van
BENU 50-9. It was received by Arrastre Metro Port Service.

The container van with the 2 shipments was stripped. One shipment was delivered and the other
shipment palletized. Due to lack of space at the special cargo coral, the cigarettes were placed in
2 container vans, BENU 50-9 and four pallets in BENU 09-9. Both containers were padlocked
and sealed by representative of Citadel.

Citadel’s headchecker later discovered that BENU 09-9 had a different padlock and the seal was
tampered with. Upon verification, it was found that 90 cases of imported British manufactured
cigarettes were missing. The cargo was not formally turned over to arrastre Manila Port by Citadel
but was kept inside BENU 09-9 which was padlocked and sealed by representatives of Citadel
without participation of Manila Port.

When Manila Wine learned that 90 cases were missing, it filed a formal claim with Citadel,
demanding P315k, market value of the missing cargoes. Citadel admitted the loss but alleged that
it occurred at Pier 13, an area absolutely under the control of arrastre Manila Port. Manila Wine
filed a claim with Manila Port which was denied.

Trial court exonerated the arrastre from liability adjudging Citadel liable. CA affirmed. Hence this
petition.

ISSUE:
Whether the stipulation limiting liability binds Manila Wine.
HELD: YES.
The loss occurred while the van was still in Citadel’s possession and control, there having been no
formal turnover of the cargo to the arrastre. Since the shipment was lost while still in the custody
of Citadel, carrier, and since it failed to prove that the loss was due to an excepted cause, it is
presumed negligent and should be liable.

But the damages of P312k awarded by trial court based on the alleged market value is erroneous.
It is clearly provided under clause 6 of the BoLs issued by Citadel that its liability is limited to
$2/kg. A stipulation limiting the liability of the carrier to the value of the goods appearing in the
BoL, unless the shipper or owner declares a greater value, is binding. Also, a contract fixing the
sum that may be recovered by the owner or shipper for the loss or deterioration of goods is valid
if it is reasonable and just under the circumstances and has been fairly and freely agreed
upon (Art.1750 NCC).

The value of the goods shipped does not appear in the BoLs. Thus, the stipulation on the carrier’s
limited liability applies. The stipulation is just and reasonable under the circumstances and have
been fairly and freely agreed upon. In Sealand Service v. IAC, what is just and reasonable and a
fair and free stipulation was explained thus:
That said stipulation is just and reasonable is arguable from the fact that it echoes Art.
1750 itself in providing a limit to liability only if a greater value is not declared for the
shipment in the bill of lading. To hold otherwise would amount to questioning the justice
and fairness of that law itself, and this the private respondent does not pretend to do. But
over and above that consideration, the just and reasonable character of such stipulation is
implicit in it giving the shipper or owner the option of avoiding accrual of liability
limitation by the simple and surely far from onerous expedient of declaring the nature and
value of the shipment in the bill of lading. And since the shipper here has not been heard
to complain of having been 'rushed,' imposed upon or deceived in any significant way into
agreeing to ship the cargo under a bill of lading carrying such a stipulation, there is simply
no ground for assuming that its agreement thereto was not as the law would require, freely
and fairly sought and given."
The BoL shows that 120 cartons weigh 2,978 kg or 24.82kg per carton. Since 90 cartons were lost
and the weight is 2,233.8kg, at $2/kg, Citadel’s liability amounts only to $4,467.6.

89. Everett Steamship Corporation v. CA, GR 122494, October 08, 1998, Martinez, J. (BoL
prohibited and limiting stipulations)
FACTS:
Private respondent Hernandez Trading imported 3 crates of bus spare parts marked MARCO 12,
13, and 14 from its supplier, Maruman Trading based in Japan. The crates were shipped from Japan
to Manila on board ADELFAEVERETTE, a vessel owned by petitioner’s principal Everett Orient
Lines. The crates were covered by BoL NGO53MN.

Upon arrival in Manila, it was discovered that MARCO 14 was missing. Hernandez made a formal
claim upon petitioner Everett for Y1,552,500 (Yen). But Everett offered to pay only Y100k, the
maximum amount stipulated under Clause 18 of BoL which limits Everett’s liability. Hernandez
rejected the offer and filed a suit for collection in RTC.

RTC ruled for Hernandez, ordering Everett to pay the Y1,552,500 and attorney’s fees. It said that
the contract limiting liability must be reasonable under Art. 1750 and fairly and freely agreed upon,
which conditions were unmet. CA affirmed, saying that Hernandez is not bound by the stipulation
limiting liability. Hence this petition.

ISSUE:
Whether Hernandez Trading is bound by the limited liability stipulation in the BoL.
HELD: YES.
A stipulation in the bill of lading limiting the common carrier's liability for loss or destruction of
a cargo to a certain sum, unless the shipper or owner declares a greater value, is sanctioned by law,
particularly Articles 1749 and 1750 of the Civil Code which provide xxx. Such a clause was also
upheld in Sealand Service v. IAC. It is required that the stipulation limiting the CC’s liability for
loss must be reasonable and just under the circumstances and has been freely and fairly
agreed upon.

The BoL here provides:

"The carrier shall not be liable for any loss of or any damage to or in any connection with,
goods in an amount exceeding One Hundred Thousand Yen in Japanese Currency
(Y100,000.00) or its equivalent in any other currency per package or customary freight
unit (whichever is least) unless the value of the goods higher than this amount is declared
in writing by the shipper before receipt of the goods by the carrier and inserted in the Bill
of Lading and extra freight is paid as required."
This stipulation is reasonable and just. The carrier made it clear in the BoL that its liability would
only be up to Y100k. The shipper, Maruman Trading, had the option to declare a higher
valuation if the value of its cargo was higher than the limited liability of the carrier. Since the
shipper did not declare a higher valuation, it had itself to blame for not complying with the
stipulations.

RTC’s ratiocination that Hernandez could not have fairly and freely agreed to this because the
conditions were printed in small letters does not make the BoL invalid. Contracts of adhesion are
not invalid per se. The one who adheres to the contract is in reality free to reject it entirely. If he
adheres, he gives his consent. Not even an allegation of ignorance of a party excuses non-
compliance with the stipulations since the responsibility for ensuring full comprehension of the
provisions of a contract of carriage devolves not on the carrier but on the owner, shipper, or
consignee as the case may be.

A contract limiting liability upon an agreed valuation does not offend againt the policy of the law
forbidding one from contracting against his own negligence. (Ong Yiu v. CA).

Greater vigilance is required of courts when dealing with contracts of adhesion in that such must
be carefully scrutinized to shield the unwary or weaker party from deceptive schemes contained
in ready-made covenants, like the BoL here. This is pursuant to Art. 24 of NCC: “In all contractual,
property, or other relations, when one of the parties is at a disadvantage on account of his moral
dependence, ignorance, xxx, the courts must be vigilant for his protection.”

The shipper Maruman, we assume, has been extensively engaged in the trading business. It cannot
be said to be ignorant of the business transactions it entered into. It should have declared a higher
valuation. Also, it has not been heard to complain that it has been deceived or rushed into
agreeing to ship the cargo in Everett’s vessel. Maruman was not even impleaded in this case.

Is the consignee, not a signatory to BoL, bound by its stipulations? In Sealand Service v. IAC, we
held that even if the consignee was not a signatory to the contract of carriage between the shipper
and carrier, he can still be bound by the contract. The right of consignee to recover for loss of
shipment consigned to him under a BoL drawn up only by the shipper and carrier springs from
either a relation of agency that may exist between him and the shipper/consignor, or his status as
a stranger in whose favor some stipulation is made in said contract, and who becomes a party
thereto when he demands fulfillment of that stipulation (the delivery of the goods or cargo
shipped). In neither capacity can he assert personally the alleged circumstance that fair and
free agreement to such provision was vitiated by its being in such fine print as to be hardly
readable. (*cannot assert this)

When Hernandez claimed reimbursement from and filed a case against Everett on the BoL, it
accepted the contract and made itself a party thereto, or at least has come to court to enforce it.
Thus, Hernanez cannot now reject or disregard Everett’s limited liability stipulation in the
BoL. He is bound by the whole stipulations in the BoL.

90. British Airways v. CA, GR 121824, January 29, 1998, Romero, J. (BoL prohibited and
limiting stipulations) *See case 59

91. HE Heacock Company v. Macondray & Company, Inc. , GR 16598, October 03, 1921,
Johnson, J. (BoL prohibited and limiting stipulations)
FACTS:
Heacock caused to be delivered on board steamship Bolton Castle, then in NY, twelve 8-day
Edmond clocks for transportation to Manila. It arrived in Manila consigned to Macondray as agent
and representative of said vessel in said port. Neither the master of the vessel nor Macondray as
its agent delivered to Heacock the twelve 8-day Edmond clocks although demand was made for
their delivery.

The invoice value of the clocks in NY was P22 while the market value in Manila when they should
have been delivered to Heacock was P420. The BoL delivered to Heacock by the master of Bolton
Castle contained:
"1. It is mutually agreed that the value of the goods receipted for above does not exceed
$500 per freight ton, or, in proportion for any part of a ton, unless the value be expressly
stated herein and ad valorem freight paid thereon."
"9. Also, that in the event of claims for short delivery of, or damage to, cargo being made,
the carrier shall not be liable for more than the net invoice price plus freight and
insurance less all charges saved, and any loss or damage for which the carrier may be liable
shall be adjusted pro rata on the said basis."

The case containing the clocks was $1,480. No greater value than $500 per freight ton was
declared by Heacock on the clocks and no ad valorem freight was paid thereon.

Macondray tendered to Heacock P76.36, the proportionate freight ton value of the clocks. Heacock
rejected and filed suit in CFI to recover P420.

CFI ruled in favor of Heacock in accordance with clause 9, awarding P226.02, invoice value. Both
parties appealed to this Court.

ISSUE:
Whether clauses 1 and 9 are valid.
HELD: YES.
Heacock insists that it is entitled to recover P420 while Macondray claims that Heacock may
recover only P76.36 in accordance with clause 1 of BoL.

Three kinds of stipulations have often been made in a BoL: 1) one exempting the carrier from any
and all liability for loss or damage occasioned by its negligence; 2) one providing for an
unqualified limitation of such liability to an agreed valuation; and 3) limiting the liability of the
carrier to an agreed valuation unless the shipper declares a higher value and pays a higher rate
of freight. The first and second kinds of stipulations are invalid as being contrary to public policy,
but the third is valid.

Clauses 1 and 9 of BoL fall within the third stipulation. “Where a contract of carriage, signed by
the shipper, is fairly made with a railroad company, agreeing on a valuation of the property carried,
with the rate of freight based on the condition that the carrier assumes liability only to the
extent of the agreed valuation even in case of loss or damage by the negligence of the carrier,
the contract will be upheld as a lawful mode of recurring a due proportion between the amount for
which the carrier may be responsible and the freight he receives, protecting himself against
extravagant and fanciful valuations.”

If a CC gives to the shipper the choice of 2 rates, the lower of them conditioned upon his agreeing
to a stipulated valuation of his property in case of loss even by the CC’s negligence, if the shipper
makes such a choice understandingly and freely and names his valuation, he cannot thereafter
recover more than the value which he places upon his property. As a matter of legal distinction,
the basis of this ruling is estoppel- having accepted the benefit of a lower rate, the shipper may
not repudiate the conditions on which it was obtained.

Thus, clauses 1 and 9 of BoL here are not contrary to public order and binding upon the parties.
Art. 1255 of old Civil Code provides that the contracting parties may establish any agreements,
terms, and conditions they may deem advisable, provided they are not contrary to law, morals, or
public order.

It will be noted, however, that whereas clause 1 contains only an implied undertaking to settle in
case of 1085 on the basis of not exceeding $500 per freight ton, clause 9 contains an express
undertaking to settle on the basis of the net invoice price plus freight and insurance less all charges
saved. There is thus irreconcilable conflict between the two clauses. A written contract should, in
case of doubt, be interpreted against the party who has drawn the contract. Thus, the judgment
appealed from is affirmed. (*so invoice pa rin dahil sa conflict ng clauses)

92. Sweet Line Inc. v. Hon. Teves, GR L-37750, May 19, 1978, Santos, J. (BoL prohibited
and limiting stipulations)
FACTS:
Private respondents Atty. Tandog and Rogelio Tiro bought tickets for voyage 90 at the branch
office of Sweet Line, a shipping company transporting inter-island passengers and cargoes at
Cagayan de Oro City. They were supposed to board MS Sweet Hope bound for Tagbilaran City
but upon learning that the vessel was not going to Bohol since many passengers were bound for
Surigao, respondents went to the branch office for proper relocation to MS Sweet Town. Because
Sweet Town was filled to capacity, they were forced to agree to hide at the cargo section to avoid
inspection of the officers of the PH Coastguard.

Respondents claim that during the tripe, they were exposed to the scorching heat of the sun and
dust coming from the ship;s cargo of corn grits. The tickets they bought at Cagayan for Tagbilaran
were not honored and they were constrained to pay for other tickets. They thus sued Sweet Line
for damages and breach of contract of carriage for P110k in CFI of Misamis Oriental.

Sweet moved to dismissed on the ground of improper venue premised on the condition printed
at the back of the tickets, Condition #14:
"14. It is hereby agreed and understood that any and all actions arising out of the conditions
and provisions of this ticket, irrespective of where it is issued, shall be filed in the
competent courts in the City of Cebu."

CFI denied the motion. Hence this petition for prohibition.

ISSUE:
Whether Condition 14 is valid and enforceable.
HELD: NO.
Sweet claims that it is valid since respondents acceded to it when they purchased tickets at its
Cagayan de Oro branch office and took Sweet Town for passage to Tagbilaran Bohol. Venue may
be validly waived. It is printed in bold and capital letters.

There is no question that there was a valid contract of carriage and the tickets are the best evidence
thereof. All essential elements of a contract, consent, cause, and object, are present.

But as to the 14 conditions including condition #14 printed at the back of the ticket, these are
known as contracts of adhesion, the validity of which will have to be determined by the peculiar
circumstances of each case and the nature of the conditions sought to be enforced. Such contracts
call for greater strictness and vigilance on courts to protecting the weaker part from abuses and
imposition and prevent their becoming traps for the unwary. This is also provided in Art. 24 of
NCC. In light of this, condition 14 is void.

There is an acute shortage of interisland vessels plying the country’s several islands. Even under
ordinary circumstances, piers are congested. This was the experience of respondents when they
were relocated to MS Sweet Hope because even this vessel was filled to capacity. Under these
circumstances, it is hardly just and proper to expect passengers to examine their tickets received
from crowded/congested counters for conditions printed thereon, much less charge them with
having consented to such conditions. Unlike the small print provisiosn of insurance contracts
which are entered into by the insured in full awareness of said conditions since the insured has
opportunity to examine them, passengers of interisland vessels do not have the same chance since
their alleged adhesion is presumed only from the fact that they purchased the passage tickets.
Shipping companies are franchise holders of CPCs and possess a virtual monopoly over
transporting passengers between the ports covered by their franchise. Thus passengers have no
choice but to buy their tickets.
Also, condition 14 is subversive of public policy on transfers of venue of actions. Although venue
may be changed from one province to another by agreement of the parties pursuant to Rule 4, S4
of RoC, such agreement is invalid where it practically negates the action of the claimants like
respondents herein. The philosophy underlying the provisions on transfer of venue of actions is
the convenience of plaintiffs as well as his witnesses and to promote the ends of justice.
Considering the trouble a passenger residing outside Cebu would incur to prosecute a claim in
Cebu, he would most probably decide not to file the action at all. The condition will thus defeat,
instead of enhance, the ends of justice. On the other hand, Sweet has branches in the respective
ports of call of its vessels and can afford to litigate in any of these places. Thus, the filing in CFI
Misamis Oriental will not inconvenience or prejudice Sweet.

93. Alitalia v. IAC, GR 71929, December 04, 1990, Narvasa J. (BoL prohibited and limiting
stipulations: International Air Transportation)
FACTS:
Dr. Felipa Pablo, a professor in UP, was invited to take part at a meeting by the UN in Ispra Italy.
She was invited to read a paper due to her specialized knowledge in foreign substances in food and
the agriculture environment. The program announced that she would be the second speaker on the
first day of the meeting there. Thus, Pablo booked passage on Alitalia airline.

She arrived in Milan on the day before the meeting in accordance with the time table set for her
by Alitalia. But she was told that her luggage was delayed since it was in one of the succeeding
flights from Rome to Milan. Her luggage consisted of 2 suitcases, one for her personal items and
the other for her scientific papers, slides, and other research material. But the flights arriving from
Rome did not have her baggage on board.

Desperate, Pablo went to Rome to locate the bags herself. She inquired about her suitcases in the
airports and filled out the forms prescribed by Alitalia. But her baggage could not be found. So
she returned to Manila without attending the meeting.

Once back in Manila, she demanded that Alitalia make reparation for the damages she suffered.
Alitalia offered free airline tickets “to compensate her for any alleged damages.” She rejected and
commenced action.

It turned out that Pablo’s suitcases were forwarded to Italy but only on the day after her scheduled
appearance in the UN meeting. Pablo was no longer there to accept delivery as she was on her way
home to Manila. And for some reason, the suitcases were not restored to Pablo by Alitalia until 11
months later, and 4 months after she instituted action.

CFI ruled for Pablo. IAC affirmed and even increased the nominal damages. Hence this certiorari.

ISSUE:
Whether the Warsaw Convention limitation on liability for delay in transporting luggage applies.
HELD: NO.
Alitalia claims that the Warsaw convention should have been applied to limit its liability and that
there is no warrant in fact or law to award nominal damages.
Under Warsaw convention, an air carrier is liable for damages for:
1) the death, wounding or other bodily injury of a passenger if the accident causing it took
place on board the aircraft or in the course of its operations of embarking or disembarking;
2) the destruction or loss of, or damage to, any registered luggage or goods, if the
occurrence causing it took place during the carriage by air;" and 3) delay in the
transportation by air of passengers, luggage or goods.
The action for damages therein can only be brought subject to the conditions and limits set out
therein. The Convention also purports to limit liability of carriers:
1. In the carriage of passengers the liability of the carrier for each passenger is limited to
the sum of 250,000 francs . . . Nevertheless, by special contract, the carrier and the
passenger may agree to a higher limit of liability.
2. a) In the carriage of registered baggage and of cargo, the liability of the carrier is limited
to a sum of 250 francs per kilogramme, unless the passenger or consignor has made, at the
time when the package was handed over to the carrier, a special declaration of interest in
delivery at destination and has paid a supplementary sum if the case so requires. In that
case the carrier will be liable to pay a sum not exceeding the declared sum, unless he proves
that sum is greater than the actual value to the consignor at delivery.
b) In the case of loss, damage or delay of part of registered baggage or cargo, or of any
object contained therein, the weight to be taken into consideration in determining the
amount to which the carrier's liability is limited shall be only the total weight of the package
or packages concerned. Nevertheless, when the loss, damage or delay of a part of the
registered baggage or cargo, or of an object contained therein, affects the value of other
packages covered by the same baggage check or the same air way bill, the total weight of
such package or packages shall also be taken into consideration in determining the limit of
liability.
3. As regards objects of which the passenger takes charge himself the liability of the carrier
is limited to 5000 francs per passenger.
4. The limits prescribed . . shall not prevent the court from awarding, in accordance with
its own law, in addition, the whole or part of the court costs and of the other expenses of
litigation incurred by the plaintiff. The foregoing provision shall not apply if the amount
of the damages awarded, excluding court costs and other expenses of the litigation, does
not exceed the sum which the carrier has offered in writing to the plaintiff within a period
of six months from the date of the occurrence
But the Convention denies to the carrier availment “of the provisions which exclude or limit his
liability if the damage is caused by his willful misconduct or by such default on his part as
equivalent to willful misconduct.”

The convention thus does not 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 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 willful misconduct,
bad faith etc. on the part of any official or employee for which the carrier is responsible, and there
is no special or extraordinary form of resulting injury. Otherwise, an air carrier would be
exempt from liability for damages in the event of its absolute refusal, in BF, to comply with a
contract of carriage, which is absurd. Neither may the Convention be invoked to justify the
disregard of some extraordinary sort of damage and to preclude recovery beyond the limits set by
the Convention. In this sense, the Convention has been applied or ignored depending on the
peculiar facts of each case.

In Pan Am World Airways v. IAC, for example, the Convention was applied as to limitation of the
carrier’s liability, there being a simple loss of baggage without improper conduct on the
employees of the airline or other special injury sustained by the passenger.

The Convention has been held inapplicable where there is evidence of bad faith or malice. Thus,
an air carrier was sentenced to pay not only compensatory but also moral and exemplary damages,
and attorney's fees, for instance, where its employees rudely put a passenger holding a first -class
ticket in the tourist or economy section, or ousted a brown Asiatic from the plane to give his seat
to a white man, or gave the seat of a passenger with a confirmed reservation to another, or subjected
a passenger to extremely rude, even barbaric treatment, as by calling him a "monkey."

Here, no bad faith or improper conduct can be ascribed to Alitalia’s employees and Pablo’s
luggage was eventually returned to her, belatedly as it is true, but without appreciable damage. But
the fact is that some SPECIAL species of injury was caused to Pablo since she was unable to
read the paper and make the scientific presentation that she had painstakingly labored over at the
prestigious international conference, to attend which she had traveled hundreds of miles, to her
embarrassment and the disappointment and annoyance of the organizers. She felt that the invitation
to her was not only a singular honor to herself, but to UP and the country as well, and an
opportunity to make some sort of impression among her colleagues in that field of scientific
activity. The opportunity to claim this honor was lost because of Alitalia’s breach of contract. She
was also “really shocked and distraught and confused.”

Thus, the compensation for injury of Pablo cannot be restricted to that prescribed by the Warsaw
Convention for delay in transport of baggage. P40k nominal damages and P5k attorney’s fees were
awarded.

94. Pan American World Airways, Inc. v. IAC, GR 70462, August 11, 1988, Cortes, J. (BoL
prohibited and limiting stipulations: International air transportation)
FACTS:
Rene Pangan, president of Sotang Bastos Productions, while in California, and Primo Quesada of
Prime Films entered into an agreement where Pangan, for $2500 per picture, bound himself to
supply Primo with three films, “Ang Mabait, Masungit, at ang Pangit”, “Big Happening with
Chikiting and Iking”, and “Kambal Dragon” for exhibition in US. Pangan would also provide the
necessary promotional and advertising materials for said films.

Pangan visited Guam and contacted Leo Slutchnick of the Hafa Adai Organization for the
exhibition of two of the films in the Hafa Adai Theater.

By virtue of these agreements, Pangan prepared promotional handbills and still pictures for which
he paid P12,900. He also purchased 14 clutch bags, 4 capiz lamps, and 4 barongs all worth P4,400,
for his trip abroad.
Pangan obtained from Pan Am’s Manila office, thru Your Travel Guide, an economy class airplane
ticket for passage from Manila to Guam. 2 hours before departure, Pangan was at Pan Am’s ticket
counter in MIA and presented his ticket and checked in his 2 luggages containing the
promotional and advertising materials, the clutch bags, barongs, and personal belongings. But
Pangan was informed that his name was not in the manifest so he could not take the flight in
economy class. Pangan thus took the first class by paying an additional $112.

When Pangan arrived in Guam, his two luggages did not arrive with his flight. His agreements
with Slutchnick and Quesada for exhibition of the films in Guam and US were thus cancelled.
Pangan’s lawyer protested the treatment Pangan received from PanAm and the loss of the 2
luggages. Due to PanAm’s failure to communicate with Pangan the action taken on his protest,
Pangan filed suit against PanAm.

CFI ruled against PanAm. IAC affirmed. Hence this petition.

ISSUE:
1. Whether PanAm can limit its liability under the liability limitation clause in the ticket.
2. Whether PanAm is liable for the cancellation of the contracts of Pangan.
HELD:
The airline ticket contains these conditions:
(*Notice that Warsaw Convention may be applicable)
2. Carriage hereunder is subject to the rules and limitations relating to liability established
by the Warsaw Convention unless such carriage is not "international carriage" as defined
by that Convention.
NOTICE OF BAGGAGE LIABILITY LIMITATIONS Liability for loss, delay, or
damage to baggage is limited as follows unless a higher value is declared in advance
and additional charges are paid: (1) for most international travel (including domestic
portions of international journeys) to approximately $9.70 per pound ($20.00 per kilo) for
checked baggage and $400 per passenger for unchecked baggage
Thus, PanAm claims that its liability for the lost baggage of Pangan is limited to $600 ($20x30kg)
as he did not declare a higher value. It cites Ong Yiu v. CA.

1. YES.
Ong Yiu is squarely applicable here. It was held therein that the petitioner did not declare any
higher value for his luggage much less pay any additional transportation charge. Thus, the
condition of carriage limiting the liability of the carrier to P100 “unless he declares a higher
valuation in excess of P100” was applied. While petitioner did not sign the plane ticket, it is
nevertheless bound regardless of the passenger’s lack of knowledge or assent to the regulation. It
is a contract of adhesion. The one who adheres is in reality free to reject it entirely. If he adheres,
he gives his consent.

But the ruling in Shewaram v. PAL, where the stipulation limiting the carrier’s liability to a
specified amount was invalid, does not apply since the ruling therein was premised on the finding
that the conditions printed at the back of the ticket were so small and hard to read that they would
not warrant the presumption that the passenger was aware of the conditions and that he had freely
and fairly agreed thereto. Similar facts have not been alleged much less shown here.
Thus, PanAm’s liability for the baggage is limited to $20 per kilo or $600 as stipulated at the back
of the ticket.

2. NO.
We cannot agree on the award of damages for lost profits when the contracts to show the films in
Guam and California US were cancelled. Under Art. 1107 of Civil Code, a debtor in GF may be
held liable only for damages that were foreseen or might have been foreseen at the time the
contract of transportation was entered into.

In Chapman v. Fargo (US case), a case very similar to here, it was held that before defendant could
be held to special damages, it must have appeared that he had NOTICE at the time of delivery
to him of the particular circumstances attending the shipment and which probably would
lead to such special loss if he defaulted. Or in other words, “in order to impose on the defaulting
party further liability than for damages naturally and directly- in the ordinary course of things
arising from a breach of contract, such unusual or extraordinary damages must have been
brought within the contemplation of the parties as the probable results of breach at the time of
or prior to contracting.”

Applying this to the facts here, in the absence of showing that PanAm’s attention was called to the
special circumstances requiring prompt delivery of Pangan’s luggages, PanAm cannot be held
liable for the cancellation of Pangan’s contracts as it could not have foreseen such an eventuality
when it accepted the luggages for transit.

The award of attorney’s fees was set aside and damages was limited to $600 only.

95. China Airlines v. Daniel Chiok, GR 152122, July 30, 2003, Panganiban, J. (BoL
prohibited and limiting stipulations: International air transportation)
FACTS:
Daniel Chiok purchased from China Airlines Ltd. (CAL) a passenger ticket for air transportation
covering Manila-Taipei-HK-Manila. Chiok took his trip on November 21, 1981 from Manila to
Taipei using the CAL ticket. He went to CAL office and confirmed his HK to Manila trip on board
PAL flight PR311. CAL office attached a yellow sticker indicating that his flight status was OK.

When Chiok reached HK, he went to PAL office and sought to reconfirm his flight back to Manila.
PAL confirmed his return trip on flight PR311 and attached its own sticker. On November 24,
1981, Chiok went to HKIA for his return trip to Manila. But when he went to the PAL counter,
Chiok saw that flight PR311 was cancelled because of a typhoon in Manila. He was informed that
all confirmed ticket holders of flight PR311 were automatically booked for its next flight which
was to leave the next day. He informed PAL personnel that, being the founding director of PH
Polysterene Paper Corporation, he had to reach Manila on November 25, 1981 because of a
business option which he had to execute on said date.

On November 25, Chiok went to the airport. Cathay Pacific stewardress Lok Chan received
Chiok’s plane ticket and luggage. Lok called the attention of Carmen Chan, PAL’s terminal
supervisor, and informed Carmen that Chiok’s name was not in the computer list of passengers.
Carmen informed Chiok that his name did not appear and thus he could not be permitted to board
PAL flight PR307.

Chiok requested Carmen to put into writing the reason he was not allowed to take his flight. Chiok
then sought to recover his luggage but found only 2 which were placed at the end of the passengers
line. His new Samsonite luggage was missing which contained cosmetics worth HK$14k. he
complained to Carmen. Chiok went to PAL’s HK office and confronted PAL reservation officer
Chao who confirmed his flight back to Manila who showed Chiok that his name was on the list in
his computer.

Chiok used another CAL ticket which was again confirmed by Chao. He went to the airport PAL
check-in counter and was assisted by Carmen. Carmen directed PAL personnel to transfer
counters. In the commotion, Chiok lost his clutch bag containing $2k, HK$2k, Taipei $8k, P2k, a
3-piece gold cross pens worth P3.5k, a watch worth P7.5k, a tie clip worth P1.8k, and a pair of
Christian Dior reading glasses.

Chiok filed a complaint for damages against PAL and CAL in RTC.

RTC held CAL and PAL jointly and severally liable but did not rule on their cross-claims. CA
affirmed. But CA deleted RTC’s award of actual damages of HK$14k and US2k because the lost
luggage and clutch bag was not actually “checked in” or delivered to PAL for transportation to
Manila. Hence this petition. (PAL’s appeal was dismissed as it failed to give a copy of its petition
to CA as required by RoC)

ISSUE:
Whether CAL is liable.
HELD: YES.
The contract of air transportation was between China Airlines and Chiok, with China endorsing to
PAL the HK to Manila segment of the journey. Such contract of carriage has always been treated
in this jurisdiction as a single operation. This jurisprudential rule is supported by the Warsaw
Convention to which PH is a party, and by the existing practices of the International Air Transport
Association (IATA). Art. 1, S3 of the Convention states:
"Transportation to be performed by several successive air carriers shall be deemed, for
the purposes of this Convention, to be one undivided transportation, if it has been
regarded by the parties as a single operation, whether it has been agreed upon under the
form of a single contract or of a series of contracts, and it shall not lose its international
character merely because one contract or a series of contracts is to be performed entirely
within a territory subject to the sovereignty, suzerainty, mandate, or authority of the same
High Contracting Party."
Art. 15 of IATA-Recommended Practice similarly provides:
"Carriage to be performed by several successive carriers under one ticket, or under a ticket
and any conjunction ticket issued therewith, is regarded as a single operation."
In American Airlines v. CA, we noted that under a general pool partnership agreement, the ticket-
issuing airline is the principal in a contract of carriage, while the endorsee-airline is the agent.
Members of IATA are under a general pool partnership agreement where they act as agent of each
other in the issuance of tickets to contracted passengers to boost ticket sales worldwide and also
provide passengers easy access to airlines otherwise inaccessible in some parts of the world.
Booking among airline members are allowed even by telephone and has become accepted practice
among them. A member airline entering 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 thru
the required process of interline settlement of accounts by way of IATA clearing house.

As principal in the contract of carriage, petitioner in British Airways v. CA was held liable even
when the breach of contract occurred not on its own flight but on that of another airline. Here, PAL
acted as carrying AGENT of CAL. We also rule that CAL cannot evade liability to Chiok even
though it may have been only a ticket issuer for the HK-Manila sector.

Also, BF is a breach of a known duty thru some motive of interest or ill will. The duty of PAL was
to transport Chiok from HK-Manila. that duty arose when its agent confirmed his reservation for
flight PR 311 and it became demandable when he presented himself for the trip on Nov. 24. While
there was a typhoon and thus PAL was unable to transport Chiok on flight PR311, this did not
terminate the carrier’s responsibility. PAL voluntarily obligated itself to automatically transfer all
confirmed passengers of PR 311 to the next available flight, PR 307 on the next day. Chiok secured
repeated confirmations of his PR 311 flight and had every reason to expect that he would be put
on the replacement flight as confirmed passenger. Instead, he was harangued and prevented from
boarding the original and replacement flights. Thus, PAL breached its duty to transport him.

PAL’s employees were utterly insensitive to Chiok’s need to be in Manila on Nov. 25. A mistake
caused the omission of Chiok’s name from the passenger list. The glitch was the airline’s fault.
PAL made no serious attempt to secure the transportation of Chiok to Manila on the next day. The
acts of PAL’s employees, particularly Chan, fell short of the extraordinary standard of care the law
requires of CCs. That Chiok was not included in the passenger list was due to PAL’s negligence.
This negligence was so gross and reckless that it amounted to BF.

Thus, moral and exemplary damages were properly awarded.

96. Augusto Santos III v. Northwest Orient Airlines, GR 101538, June 23, 1992, Cruz, J.
(BoL prohibited and limiting stipulations: International Air Transportation)
FACTS:
Santos, minor, purchased from Northwest (NOA) a roundtrip ticket in San Francisco USA for his
flight from San Francisco to Manila via Tokyo and back. The departure date was Dec. 20, 1986.
On Dec. 19, he checked in at the NOA counter in San Francisco airport. Despite previous
confirmation and reconfirmation, he was informed that he had no reservation for his flight from
Tokyo to Manila. He had to be wait-listed.

Santos sued NOA for damages in RTC. NOA moved to dismiss on the ground of lack of
jurisdiction. Citing Art. 28(1) of the Warsaw Convention:
Art. 28. (1) An action for damage must be brought at the option of the plaintiff, in the
territory of one of the High Contracting Parties, either before the court of the domicile
of the carrier or of his principal place of business, or where he has a place of business
through which the contract has been made, or before the court at the place of
destination.
Thus, the complaint could be instituted: 1) the court of the carrier’s domicile, 2) its principal place
of business, 3) where it has a place of business thru which the contract had been made, or 4) of the
place of destination.

NOA claims that PH was not its domicile nor place of business or that Santos’ ticket was issued
in PH or destination in Manila but San Francisco USA.

RTC granted the motion to dismiss. CA affirmed. Hence this petition.

ISSUE:
1. Whether Art.28(1) is constitutional.
2. Whether Art. 28(1) applies in this case.
HELD:
1. YES.
Santos claims that Art. 28(1) is unconstitutional as violating due process and equal protection.

PH is a treaty commitment voluntarily assumed by the PH government and thus has the force and
effect of law in this country. Courts will assume jurisdiction over a constitutional question only if
the requisites of a judicial inquiry into such a question are first satisfied. The treaty was a joint
legislative-executive act. The presumption is that it was first carefully studied and determined to
be constitutional before it was adopted and given the force of law in PH. Santos’ allegations are
not convincing enough to overcome this presumption.

He also claims that due to significant developments in the airline industry thru the years, the treaty
has become irrelevant. Santos invokes rebus sic stantibus. It is true that at the time the Convention
was drafted, the airline industry was still in its infancy. But this circumstance alone is not sufficient
justification to reject the treaty at this time. And the more important consideration is that the treaty
has not been rejected by the PH government. Rebus sic stantibus does not operate automatically.
There is need for a formal act of rejection. Rejection of a treaty is not a function of courts but of
the other branches of government. It is a political act.

2. YES.
The convention applies to all international transportation of persons performed by aircraft for
hire. International transportation is defined in par.(2) of Art. 1:
(2) For the purposes of this convention, the expression "international transportation" shall
mean any transportation in which, according to the contract made by the parties, the place
of departure and the place of destination, whether or not there be a break in the
transportation or a transshipment, are situated [either] within the territories of two High
Contracting Parties . . .
Whether the transportation is international is determined by the contract of the parties, which in
case of passengers is the ticket. Since the flight here is international being from US to PH and
back to US, it is subject to the Warsaw Convention including Art. 28(1) which enumerates the
four places where an action for damages may be brought.
-Whether Art. 28(1) refers to jurisdiction or venue, authorities are sharply divided. Jurisdiction
may not be conferred by consent or waiver while venue as fixed by statute may be changed by
consent of the parties.

These reasons support the characterization of Art. 28(1) as jurisdiction and not a venue
provision: 1) the wording of Art. 32, which indicates the places where the action for damage
“must” be brought, underscores the mandatory nature of Art. 28(1). 2) this characterization is
consistent with one of the objectives of the Convention “to regulate in a uniform manner the
conditions of international transportation by air.” 3) the Convention does not contain any provision
prescribing rules of jurisdiction other than Art. 28(1), which means that the phrase “rules as to
jurisdiction used in Art. 32 specifically deals with the exclusive enumeration in Art. 28(1).
Article 32. Any clause contained in the contract and all special agreements entered into
before the damage occurred by which the parties purport to infringe the rules laid down by
this convention, whether by deciding the law to be applied, or by altering the rules as to
jurisdiction, shall be null and void. Nevertheless for the transportation of goods, arbitration
clauses shall be allowed, subject to this convention, if the arbitration is to take place within
one of the jurisdictions referred to in the first paragraph of Article 28.
In any event, even if it is a venue provisoin, NOA did not waive venue as in its motion to dismiss,
the proper ground of the motion, improper venue, was discussed. Waiver cannot be lightly inferred.

-Santos claims that in Aanestad v. Air Canada, it was held that for a round-trip ticket from Montreal
to Los Angeles and back to Montreal, since the time of the trip back from Los Angeles to Montreal
was within the power of the passenger to determine and she had not yet determined when she
would go back, the place of destination is still Los Angeles and the second trip back to Montreal
is only a continuing offer by Air Canada. Thus, he claims that Manila, and not San Francisco,
should be considered his destination.

But we agree with Butz v. British Airways cited by NOA that it is the ultimate destination that is
accorded treaty jurisdiction. Whether the return portion of the ticket is characterized as an option
or a contrat, the carrier was legally bound to transport the passenger back to the place of origin
within the prescribed time.

The place of destination within the meaning of the Convention is determined by the terms of the
contract of carriage, the ticket. Santos’ ultimate destination is San Francisco. Although the
return date of the flight was left open, the contract indicates that NOA was bound to transport
Santos from Manila to San Francisco. Manila should thus be considered merely an agreed
stopping place and not the destination. Art 1(2) also distinguishes between a “destination” and
an “agreed stopping place.” It is the destination that controls for purposes of ascertaining
jurisdiction under the convention.

97. United Airlines v. Willie Uy, GR 127768, November 19, 1999, Bellosillo, J.
FACTS:
On Oct. 13, 1989, Willie Uy, a revenue passenger on UA flight 819 for the San Francisco-Manila
route, checked in with his one luggage found to be overweight. To his utter humiliation, an
employee of UA rebuked him saying that he should have known the maximum weight allowance
to be 70kgs per bag and that he should have packed his things accordingly. In a loud voice in front
of the crowd, she told Uy to repack his things. Not wishing to create further scene, Uy acceded
only to find his luggage still overweight. UA billed him overweight charges. Uy offered a
miscellaneous charge order (MCO) or an airline pre-paid credit. UA’s employee and also its
supervisor refused pointing out that there were conflicting figures on it. Faced with the prospect
of leaving without his luggage, Uy paid the overweight charges with his American Express credit
card.

Upon arrival in Manila, he discovered that one of his bags had been slashed and its contents stolen.
In a letter, Uy bewailed the humiliating treatment he suffered in UA’s employees’ hands and
notified UA of his loss and requested reimbursement. Uy was mailed a check representing payment
of his loss based on the maximum liability of $9.7 per pound. Uy, thinking this to be grossly
inadequate, sent 2 more letters thru his lawyers demanding an out of court settlement of P1M. UA
did not accede.

Uy filed a complaint for damages against UA on June 9, 1992. UA moved to dismiss alleging that
the cause of action had prescribed, invoking Art. 29 of the Warsaw Convention:
Art. 29 (1) The right to damages shall be extinguished if an action is not brought within
two (2) years, reckoned from the date of arrival at the destination, or from the date on
which the aircraft ought to have arrived, or from the date on which the transportation
stopped.
(2) The method of calculating the period of limitation shall be determined by the law of the
court to which the case is submitted.
Uy claims that since he sent demand letters, this period of prescription was interrupted.

Trial court dismissed the case. CA gave due course to the appeal even with the delay of 2 days in
filing his notice to appeal. CA reversed trial court. Hence this petition.

ISSUE:
Whether Uy’s action for damages is barred by the 2 year prescriptive period in the Warsaw
Convention.
HELD: NO.
Wihle Uy filed his notice of appeal 2 days later than the prescribed period, we are inclined to give
due course to his appeal due to the unique and peculiar facts of the case and the serious question
of law it poses.

We have held that the Warsaw Convention can be applied or ignored depending on the peculiar
facts of each case. It does not exclude liability for other breaches of contract by the carrier or
misconduct of its officers or for some exceptional type of damage. It also does not preclude
operation of the NCC and other laws.

Uy’s second cause of action, the slashing of his luggage and theft of its contents, is within the
bounds of the Convention. But his first cause of action based on the humiliating treatment he
received fron UA’s employees in violation of his rights as passenger clearly is not.

Thus, as to the first cause of action, Uy’s failure to file his complaint within the 2-year limitation
of the Convention does not bar. His action since UA can still be held liable for breach of other
provisions of the NCC which prescribe a different period or procedure for instituting the action,
specifically Art. 1146 prescribing 4 years for filing an action based on torts.

As to the second cause of action, the delegates to the Convention intended the 2 year limitation as
an absolute bar to suit and not to be made subject to the various tolling provisions of the laws of
the forum. This forecloses the application of our own rules on interruption of prescriptive periods.
Thus, the second cause of action must be barred. BUT although Uy filed his complaint more than
2 years later, it is obvious that Uy was forestalled from immediately filing an action because UA
gave him the runaround, answering his letters but not giving in to his demands. Thus, despite
the express mandate of Art. 29 of the Convention that an action for damages should be filed within
2 years from the arrival of the place of destination, such rule shall not be applied here because of
the delaying tactics by UA.

98. Aniceto Saludo, Jr. v. CA, GR 95536, March 23, 1992, Regalado, J. (BoL as Receipt) *See
case 37

99. Spouses Engracio Fabre, Jr. v. CA, GR 111127, July 26, 1996, Mendoza, J (Concurrent
Causes of Action) (See Case 9)

100. Air France v. Rafael Carrascoso, GR L-21438, September 28, 1966, Sanchez, J.
(Concurrent Causes of Action)
FACTS:
Carrascoso was a member of 48 Filipino pilgrims that left Manila for Lourdes. Air France, thru its
agent PAL, issued to Carrascoso a first class round trip ticket from Manila to Rome. From Manila
to Bangkok, he travelled first class. But at Bangkok, the manager of Air France forced him to
vacate his first class seat because there was a “white man” who, the manager alleged, had a “better
right to the seat. Carrascoso refused to vacate and told the manager that his seat would be taken
over his dead body. A commotion ensued and, according to witness Cuento, many of the Filipino
passengers got nervous when they found out that Carrascoso was having a hot discussion with the
manager. They came to Carrascoso and pacified him to give his seat to the “white man,” and
Carrascoso reluctantly gave his first class seat.

CFI sentenced Air France to pay Carrascoso moral, exemplary damages, the difference in fare
between the first class and tourist class, attorney’s fees, and costs. CA affirmed. Hence this
petition.

ISSUE:
Whether Air France is liable for damages.
HELD: YES.
Air France assails the grant of moral damages and claims that Carrascoso’s action is based on
breach of contract. To authorize moral damages, there must be an averment of fraud or bad faith.
CA failed to make a finding of BF.

The complaint of Carrascoso substantially aver: 1) there was a contract to furnish him first class
passage covering Bangkok-Tehran; 2) the contract was breached when Air France failed to furnish
first class transportation at Bangkok; 3) there was bad faith when Air France’s employee
compelled Carrascoso to leave his first class accommodation after he was already seated and to
take a seat in the tourist class, making him suffer inconvenience, embarrassments and causing him
mental anguish etc. resulting in moral damages. While “bad faith” was not specifically mentioned
in the complaint, the inference of BF is there and may be drawn from the facts set forth therein.

Why did the “white man” have a better right to the seat than Carrascoso? The record is silent. Air
France did not prove any right of the white man to the first class seat of Carrascoso. If there was a
justified reason for the action of the manager in Bangkok, Air France could have easily proven it
by taking his testimony. But Air France did not do so. The presumption is that evidence willfully
suppressed would be adverse if produced.

The contract of air carriage generates a relation attended with a public duty. Neglect by the carrier’s
employees could give ground for an action for damages.

Passengers do not contract merely for transportation. They have a right to be treated by the
carrier’s employees with kindness, respect, courtesy, and due consideration. Thus, any rude
or discourteous conduct of the employees to a passenger gives the latter an action for damages
against the carrier. Air France’s contract with Carrascoso is one attended with public duty. The
stress of Carrascoso’s action is placed upon his wrongful expulsion. This is a violation of public
duty by Air France, a case of QUASI-DELICT. Damages are proper.

The manner of ejectment of Carrascoso fits into the legal precept of exemplary damages. the only
condition is that defendant should have acted “in a wanton, fraudulent, reckless, oppressive, or
malevolent manner.” The grant of exemplary damages justifies judgment for attorney’s fees.

101. William Tiu v. Pedro Arriesgado, GR 138060, September 01, 2004, Callejo, Sr., J.
(Concurrent Causes of Action)
FACTS:
At 10pm, the cargo truck “Condor Hollow Blocks”, registered in Benjamin Condor’s name, was
loaded with firewood in Bogo Cebu and left for Cebu City. Upon reaching Compostela, Cebu, just
as the truck passed over a bridge, one of its rear tires exploded. The driver, Sergio Pedrano, parked
along the right side of the national highway and removed the damaged tire to have it vulcanized at
a nearby shop 700m away. Sergio left his helper, Jose, to keep watch and instructed Jose to place
a spare tire six fathoms away behind the stalled truck to warn oncoming vehicles. The truck’s tail
lights were left on. It was 12am.

At about 4:45am, D’Rough Riders bus driven by Virgilio was cruising along the national highway
of Compostela Cebu. As it was approaching the bridge, Virgilio saw the stalled truck about 25
meters away. He applied the breaks and tried to swerve left, but it was too late. The bus rammed
into the truck’s left rear. The impact damaged the right side of the bus and left several passengers
injured. Pedro Arriesgado lost consciousness and suffered a fracture in his right Colles. His wife
Felisa was transferred to hospital where she died.

Pedro Arriesgado filed a complaint for breach of contract of carriage in RTC against D’Rough
Riders bus operator William Tiu and his driver Virgilio Laspiñas. Pedro prayed for damages. Tiu
filed a third party complaint against, among others, respondent Sergio. They allege that the truck
was parked in a slanted manner, its rear portion almost in the middle of the highway and no early
warning device was displayed.

RTC ruled for Arriesgado and awarded damages against William Tiu. But the lack of an early
warning device near the truck was not sufficient to impute negligence on Sergio as the tail lights
of the truck were on and the vicinity was well lighted by street lamps. CA affirmed, saying that
Arriesgado’s action was not based on quasi-delict, but on breach of contract of carriage. Hence
this petition.

ISSUE:
Whether Sergio and Condor, and Tiu and Virgilio, are liable to Pedro.
HELD: YES.
Tiu alleges that Sergio was negligent in view of the absence of an early warning device at the front
and back of the truck, violating S34(g) of Land Transportation and Traffic Code. The truck was
also parked in an oblique manner.

Even in the absence of expert evidence, the damage of the truck itself shows that the D Rough bus
driven by Virgilio was travelling at a fast pace. Thus, Virgilio was negligent. He also violated S35
of the Land Transportation and Traffic Code (RA 4136). Under Art. 2185, a person driving a
vehicle is presumed negligent if at the time of the mishap, he was violating any traffic regulation.

-Tiu failed to overcome the presumption of negligence against him as one engaged in business as
CC. Upon happening of the accident, the presumption of negligence at once arises, and the CC
must prove that he observed extraordinary diligence in the care of his passengers. The negligence
of petitioner Virgilio Laspiñas as driver of the bus is thus binding against Tiu as owner of the bus
engaged as CC.

-The doctrine of last clear chance is inapplicable as it applies only in a suit between the owners
and drivers of two colliding vehicles. It does not arise where a passenger demands responsibility
from the carrier to enforce its contractual obligations, for it would be inequitable to exempt the
negligence driver and its owner on the ground that the other driver was likewise negligent.

-Sergio and Benjamin Condor were likewise negligent. Both lower courts failed to consider that
Sergio was negligent in leaving the truck parked askew without any warning lights or reflector
devices to alert oncoming vehicles, and such failure created a presumption of negligence on the
part of his employer, respondent Condor, in supervising his employees. The negligence of the
employee gives rise to the presumed negligence of the employer in the selection and supervision
of the employee under Art. 2180.

Sergio violated S34(g) of RA 4136 requiring parking lights visible 100m aaway whenever a
vehicle is parked on highways.

---The award of moral and exemplary damages was proper. As held in Kapalaran Bus Line v.
Coronado, while the immediate beneficiaries of the standard of extraordinary diligence are the
passengers and cargo owners carried by the CC, they are not the only persons the law seeks to
benefit. For if CCs carefully observed the standard of ED as to their passengers, they cannot help
but simultaneously benefit pedestrians and passengers of other vehicles who are equally
entitled to the safe use of our roads and highways. Art. 2231 of NCC explicitly authorizes the
imposition of exemplary damages in cases of quasi-delicts if defendant acted with gross
negligence.

Pedro is entitled to P50k as surviving spouse of Felisa. Tiu and respondents Benjamin Condor and
Sergio are jointly and severally liable for said amount. As held in Fabre v. CA, “Nor should it
make difference that the liability of [bus owner] springs from contract while that of [owner and
driver of other vehicle] arises from quasi delict. In case of injury to a passenger due to the
negligence of the driver of the bus on which he was riding and of the driver of another vehicle,
the drivers and owners of the two vehicles are jointly and severally liable for damages.

102. Philippine American General Insurance Co., Inc. v. Sweet Lines Inc., GR 87434, August
05, 1992, Regalado, J. (Notice of Claim and Prescriptive period: Overland transportation of
goods and coastwise shipping)
FACTS:
Vessel SS Vishva Yash, operated by Shipping Corporation of India (SCI), took on board at Rouge
LA 2 shipments to Manila for transshipment to Davao 600 bags low density polyethylene 631 and
6400 bags low density polyethylene 647 both consigned to FEBTC, with arrival notice to Tagum
Plastics.

The vessel arrived in Manila and discharged its cargoes in Manila Port for transshipment to Davao.
For this purpose, SCI made use of the services of MV Sweet Love, owned by Sweet Lines. On
May 15, 1977, the shipments were discharged into the custody of consignee. A survey shows that
of the 6400 bags of polyethylene 647, only 5413 bags were in good condition. Of the 600 bags of
polyethylene 631, only 507 were in good condition. Of the total 7000 bags, only 5820 were
delivered in good order, leaving a balance of 1080 bags.

The BoL here contains the following:

"5. Claims for shortage, damage, must be made at the time of delivery to consignee or
agent, if container shows exterior signs of damage or shortage. Claims for non-delivery,
misdelivery, loss or damage must be filed within 30 days from accrual. Suits arising from
shortage, damage or loss, non-delivery or misdelivery shall be instituted within 60 days
from date of accrual of right of action. Failure to file claims or institute judicial proceedings
as herein provided constitutes waiver of claim or right of action. In no case shall carrier be
liable for any delay, non-delivery, misdelivery, loss of damage to cargo while cargo is not
in actual custody of carrier."

A maritime suit was filed by Philamgen and Tagum Plastics Inc. (TPI) against private respondents
Davao Veterans Arrastre and Port Services (DVAPSI), Sweet Lines Inc. (SLI), SCI, and FE
Zuellig seeking recovery of the cost of lost shipment etc. Philamgen compromised with SCI and
FE Zuellig.

Trial court ruled for Philamgen and against SLI and DVAPSI. CA reversed on the ground of
prescription. Hence this petition for review.
ISSUE:
Whether the action of Philamgen has prescribed under the BoL.
HELD: YES.
As petitioners are suing on SLI’s contractual obligation under the contract of carriage as contained
in the BoLs, such BoLs can be categorized as actionable documents which under the RoC must be
properly pleaded either as causes of action or defenses, and the genuineness of which are deemed
admitted unless specifically denied under oath by the adverse party. Petitoiners’ failure to
specifically deny the existence of the BoL is an admission.

Petitioners claim that the 30day limit for filing a claim is unreasonable and SLI has the burden of
proving otherwise. And since this is a contract of adhesion, it is void, being contrary to public
policy. Also, to bar petitioners’ recovery would amount to unjust enrichment.

Art. 366 of Code of Commerce reads:

'Art. 366. Within the twenty-four hours following the receipt of the merchandise,
the claim against the carrier for damage or average which may be found therein
upon opening the packages, may be made, provided that the indications of the
damage or average which gives rise to the claim cannot be ascertained from the
outside part of the packages, in which case the claims shall be admitted only at the
time of the receipt.
'After the periods mentioned have elapsed, or the transportation charges have been
paid, no claim shall be admitted against the carrier with regard to the condition in
which the goods transported were delivered.'

Art. 366 of Code of Commerce applies not only to overland and river transportation but also to
maritime transportation. The filing of a claim with the carrier within the time limitation under Art.
366 is a condition precedent to the accrual of a right of action against a carrier for damages caused
to merchandise. As the requirements in Art. 366, restated with slight modification in par. 5 of
BoL, are reasonable conditions precedent, they are not limitations of action. being conditions
precedent, their performance must precede a suit for enforcement, and the vesting of the right
to file suit does not take place until the happening of these conditions. Before an action can be
commenced, all the essential elements of the cause of action must be in existence- the cause of
action must be complete. All conditions precedent must be complied with.

More particularly, where the contract of shipment contains a reasonable requirement of giving
notice of loss of or injury to goods, the giving of such notice is a condition precedent to the action
for loss or injury or right to enforce the carrier’s liability. The reason of such stipulation is not to
relieve the carrier from just liability, but reasonably to inform it that the shipment has been
damaged and that it is charged with liability therefor, and to give it an opportunity to examine
the nature and extent of the injury.

Stipulations in BoLs requiring notice of claim for loss of or damage to goods shipped in order to
impose liability on the carrier operate to prevent enforcement of the contract when not
complied with. Notice is a condition precedent and the carrier is not liable if notice is not given
according to the stipulation. Also, the validity of a contractual limitation of time for filing the suit
against a carrier shorter than the statutory period has been upheld as such stipulation merely
affects the shipper’s remedy and does not affect the liability of the carrie subject only to
reasonableness of the limitation period.

Here, there is no showing of compliance by petitioners with the requirement of filing notice
of claim within the period. While petitioners may possibly have a cause of action, for failure to
comply with the above condition precedent, they LOST whatever right of action they may have
in their favor. The remedial right had PRESCRIBED. The shipment was discharged into the
custody of consignee on May 15, 1977 and it was from this date that petitioners’ cause of action
accrued, with 30 days therefrom within which to file claim. But the claim here was filed only on
April 28, 1978, way beyond the period provided in the BoLs.

The BoL stipulation even lengthened the period for presentation of claims under Art. 366. There
is no constitutional prohibition infirming par.5 of BoL.

The 60 days stipulated is reasonable enough for appellees to ascertain the facts and to sue if need
be. The shortening of the period for filing suit is not unreasonable

As to DVAPSI and considering that any right of action against the carrier was lost due to failure
to seasonably file the requisite claim, it would be awkward that by some process of elimination
DVAPSI should be left holding the bag. Unlike a CC, an arrastre operator does not labor under
a presumption of negligence. To hold it liable for damage to goods entrusted to it, there must be
preponderant evidence that it did not exercise due diligence in the care of the goods.

103.DOLE PH Inc. v. Maritime Company of the Philippines, GR L-61352, February 27,

1987, Narvasa, J. (Notice of Claim and Prescriptive Period: COGSA)
FACTS:
The cargo subject of the case was discharged in Dadiangas into the custody of consignee on Dec.
18, 1971. The claim for damages of cargo was filed by DOLE on May 4, 1972. On June 11, 1973,
DOLE filed a complaint in CFI with 3 causes of action. The parties settled on the 2 causes of action
and these were thus dismissed. But as to the third cause of action, it was not covered by the
settlement but was also dismissed. Thus, DOLE filed this complaint on January 6, 1975 on the
third cause of action.

Maritime claimed prescription under COGSA.

ISSUE:
Whether Art. 1155 of NCC providing that prescription of actions is interrupted by the making of
an extrajudicial written demand by the creditor is applicable to COGSA S3, par.6.
HELD: NO.
COGSA S3, par.6 provides:
The carrier and the ship shall be discharged from all liability in respect of loss or damage
unless suit is brought within one year after delivery of the goods or the date when the
goods should have been delivered; Provided, That, if a notice of loss or damage, either
apparent or conceded, is not given as provided for in this section, that fact shall not affect
or prejudice the right of the shipper to bring suit within one year after the delivery of the
goods or the date when the goods should have been delivered.
DOLE claims that NCC provisions are, by express mandate thereof, suppletory of deficiencies in
Code of Commerce and special laws. Since there is a deficiency in COGSA as to tolling of the
prescriptive period, it is subject to Art. 1155.

But in The Yek Tong Lin Fire v. American President Lines Inc., in a parallel factual situation where
suit to recover for damage to cargo was filed more than 2 years after the consignee’s receipt, the
Court rejected the contention that an extrajudicial demand tolled the prescriptive period in
COGSA:
“We have already decided that in a case governed by the COGSA, the general provisions
of the Code of Civil Procedure on prescription should not be made to apply. Similarly, we
now hold that in such a case the general provisions of the NCC cannot be made to apply,
as such application would have the effect of extending the1-year period of prescription
fixed in the law. It is desirable that matters affecting transportation of goods by sea be
decided in as short a time as possible. The application of Art. 1155 of NCC would
unnecessarily extend the period and permit delays in the settlement of questions
affecting transportation, contrary to the clear intent and purpose of the law.”

Thus, DOLE’s claim was dismissed.

104. Maritime Agencies & Services Inc. v. CA, GR 77638, July 12, 1990, Cruz, J. (Notice of
Claim and Prescriptive Period: COGSA)
FACTS:
Transcontinental Fertilizer Company of London chartered from HK the vessel named “Hongkong
Island” for shipment of 8073MT bagged urea from Novorossisk USSR to PH. 5400MT was for
the account of Atlas Fertilizer as consignee. 3400MT was to be discharged in Manila and the
2000MT in Cebu. Maritime Agencies & Serivices (MAS) was appointed as the charterer’s agent
and Macondray Company as the owner’s agent.

The vessel unloaded part of the goods in Manila on Oct. 03, 1979, then discharged in Cebu on
Oct. 19, 1979 the rest of the cargo. On Oct. 31, 1979, Atlas filed a formal claim against MAS for
P87k for the value of 1,383 shortlanded bags. On January 12, 1980, Atlas filed another claim
against Viva Customs Brokerage for P36k representing 574 bags of net unrecovered spillage.
These claims were rejected.

Atlas demanded from Union Insurance Society of Canton P113k pursuant to the insurance
contract. Union, being subrogated to Atlas’ rights, filed on September 19, 1980 a complaint for
reimbursement against HK Island Company, MAS, and Macondray.

Trial court held defendants/petitioners liable. CA exempted HK ISsland and Macondray from
liability but affirmed the liability of Transcontinental. Hence this petition.

Union wants modification of CA’s decision to make MAS solidarily and solely liable since its
principal Transcontinental was not impleaded and not subject to jurisdiction. MAS claims it is not
liable since it was only the charterer’s agent.

ISSUE:
Whether 1) MAS and 2) Macondray are liable.
HELD: 1) NO. 2) NO.
There are 3 general categories of charters- demise or bareboat, time, and voyage charter. A demise
involves transfer of full possession and control of the vessel. A time charter is a contract to use a
vessel for a particular period of time, although the owner retains possession and control. A voyage
charter is a contract for the hire of a vessel for one or a series of voyages and is considered a private
carriage and contract of affreightment.

Since a voyage charter is a private carriage, the parties may freely contract as to liability for
damage to goods and other matters. The responsibility for cargo loss falls on the one who agreed
to perform the duty involved. The charterer here was responsible for loading, stowage, and
discharging at the ports while the owner for the care of the cargo during the voyage.

Par. 2 of the Uniform General Charter reads: And the Owners are responsible for no loss or damage
or delay arising from any other cause whatsoever, even from the neglect or default of the Captain
or crew or some other person employed by the Owners xxx.

In Home Insurance v. American Steamship, it was held that as private carrier, a stipulation
exempting the owner from liability for negligence of its agent is valid. But this ruling cannot
benefit HK because there is no showing in that case that the vessel was at fault. Here, the 1383
bags were shortlanded, meaning they were damaged or lost on board the vessel before
unloading.

But we do agree that the period for filing the claim is one year in accordance with COGSA.
S3(6) thereof reads:
In any event, the carrier and the ship shall be discharged from all liability in respect of loss
or damage unless suit is brought within one year after delivery of the goods or the date
when the goods should have been delivered; Provided, that if a notice of loss for damage,
either apparent or concealed, is not given as provided for in this section, that fact shall not
affect or prejudice the right of the shipper to bring suit within one year after the delivery
of the goods or the date when the goods should have been delivered.
The 1-year period here should commence on October 20, 1979 when the last item was delivered
to consignee. Union filed the complaint against HK on September 19, 1980 but tardily against
Macondray on April 20, 1981. Thus, the action has prescribed as far as Macondray is concerned
but not against its principal.

As to the goods damaged during unloading, the charterer is liable having assumed this activity.
But Transcontinental has not been impleaded. Its liability cannot be borne by Maritime which, as
mere agent, is not answerable for injury caused by its principal.

Thus, Macondray is not liable because the claim against it has prescribed. Maritime is not liable
for the acts of its known principal resulting in injury to Union.

105. Rafael Zulueta et al., v. Pan American World Airways, GR L-28589, February 29, 1972,
Concepcion, J. (Recoverable Damages, Kinds of Damages: Actual/Compensatory)
FACTS:
Sps. Rafael and Telly Zulueta and their daughter Carolinda Zulueta were passengers on a Panam
plane from Honolulu to Manila, the first leg of which was Wake Island. As the plane landed on
Wake Island, the passengers were advised that they could disembark for a stopover of 30 minutes.
Rafael went to the comroft room at the terminal building but found it full of soldiers, so he walked
down the beach some 100 yards away.

When the flight was called, the absence of Rafael was noticed. Telly and Carolinda and other
persons searched for him. Minutes later, he was seen walking back from the beach to the terminal.
Heading towards the plane ramp, Rafael remarked “You people almost made me miss your flight.
You have a defective announcing system and I was not paged.

Mr. Sitton, airport manager, demanded that petitioners open their bags and allow inspection. Rafael
refused and warned that they could open the bags only by force and at peril of a law suit. Sitton
told Rafael that he would not be allowed to board the plane. Rafael was offloaded and left at Wake
Island. Rafael requested that Telly and Carolinda be allowed to leave. All this happened within
earshot of other passengers, many of whom knew petitioners. The flight was delayed for 2 hours.

Upon arrival in Manila, Telly demanded of Panam’s Manila office that it reroute Rafael to Manila
at its expense. Panam refused. So petitioners paid his ticket and sent him money as he was without
funds.

Rafael finally arrived in Manila after 2 nights at Wake. Petitioners demanded damages. Panam
refused. Hence this action.

CFI ruled that Panam pay petitioners damages. Hence this appeal.

ISSUE:
Whether Panam is liable for damages.
HELD: YES.
Panam claims that at most, Rafael is entitled only to actual damages because he was the first to
commit a breach of contract for having gone over 200 yards from the terminal where he could not
expect to be paged. But the award of damages was not due to Panam’s failure to page Rafael, but
due to its deliberate act of leaving him at Wake Island, and the embarrassment and humiliation
caused to him and his family in the presence of many persons.

Panam claims that Rafael is guilty of contributory negligence for failing to reboard within the 30
minutes announced. This might have justified reduction of the damages had plaintiff been
unwittingly left by the plane or perhaps even wittingly if he could not be found before the plane’s
departure. But it cannot justify the case here where Rafael showed up before take off and he
having been off-loaded intentionally and with malice aforethought, for his “belligerent attitude
according to Captain Zentner, for having dared, despite being one of “three monkeys”, the term
used by Zentner to refer to them, to answer him back.

Art. 2201 of NCC reads:

"In contracts and quasi-contracts, the damages for which the obligor who acted in good
faith is liable shall be those that are the natural and probable consequences of the breach
 of the obligation, and which the parties have foreseen or could have reasonably foreseen at
the time the obligation was constituted.
"In case of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible for
all damages which may be reasonably attributed to the non-performance of the
obligation."
This applies to CCs pursuant to Art. 1759

As to moral and exemplary damages, NCC provides in Art.21, 2217, 2229, and 2232 xxx. The
records establish petitioners’ right to recover both moral and exemplary damages. The rude and
rough reception of Rafael at the hands of Sitton or Zentner when the latter met him at the ramp
(“What in the hell do you think you are? Get on that plane!”), the menacing attitude of Zentner or
Sitton and the supercilious manner in which he asked Rafael to open his bags (“Open your bag”
and when told that a fourth bag was missing, “I don’t give a damn!”), the abusive language and
highly scornful reference to plaintiffs as monkeys by one of PANAM's employees (who turning to
Telly and Carolinda remarked, "will you pull these three monkeys out of here?"); the unfriendly
attitude, the ugly stares and unkind remarks to which plaintiffs were subjected, and their being
cordoned by men in uniform as if they were criminals, while plaintiff was arguing with Sitton; the
airline officials' refusal to allow plaintiff to board the plane on the pretext that he was hiding a
bomb in his luggage and their arbitrary and high-handed decision to leave him in Wake; Telly’s
having suffered a nervous breakdown for which she was hospitalized as a result of the
embarrassment, insults and humiliations to which plaintiffs were exposed by the conduct of
PANAM's employees; Carolinda’s having suffered shame, humiliation and embarrassment for the
treatment received by her parents at the airport — all these justify an award for moral damages
resulting from mental anguish, serious anxiety, wounded feelings, moral shock, and social
humiliation thereby suffered by plaintiffs.

Passengers do not contract merely for transportation. They have a right to be treated by the carrier’s
employees with kindness, respect etc. Any rude or discourteous conduct of employees to a
passenger gives the latter an action for damages against the carrier. The contract of carriage
impliedly stipulates for decent, courteous, and respectful treatment at the hands of the
carrier’s employees.

To some extent, however, Rafael contributed to the gravity of the situation because of the extreme
belligerence with which he reacted to the occasion. Things would not have turned out as bad as
they became had he not allowed himself to the level on which Panam’s personnel had placed
themselves.

Thus, the moral and exemplary damages awarded by trial court should be reduced to ½ or P500k
for moral and P200k for exemplary damages. Attorney’s fees are also reduced to P75k.

106. Reynalda Gatchalian v. Arsenio Delim, GR 56487, October 21, 1991, (Kinds of
Damages: Actual/Compensatory Damages)
FACTS:
Reynalda Gatchalian boarded respondent’s Thames mini-bus in La Union bound for Bauang. On
the way, a “snapping sound” was heard and shortly thereafter, the vehicle went off the road,
turned turtle, and fell into a ditch. Passengers, including Gatchalian, were injured. They were taken
to hospital. While they were in hospital, Mrs. Delin, wife of Arsenio Delim, visited them and paid
for their hospitalization and medical expenses. But before she left, she had the injured passengers,
including Gatchalian, sign an already prepared joint affidavit that they were “no longer
interested to file a complaint against the bus driver/owner because it was an accident”.

But Gatchalian still sued them in CFI to recover compensatory and moral damages. She claims
that she was left with a conspicuous scar on her forehead and had plastic surgery to remove it.
Delim claims that the accident was due to force majeure and that Gatchalian was already paid and
had waived her right to sue Delim when she signed the joint affidavit.

Trial court dismissed, saying that Gatchalian waived her right to sue when she signed the affidavit.
CA affirmed the dismissal, although saying that there was no valid waiver. Hence this petition.

ISSUE:
1. Whether there was valid waiver.
2. Whether Delim was negligent.
3. What damages may be awarded?
HELD:
1. NO. A waiver, to be valid, must be in clear and unequivocal terms which leave no doubt as to
the intention of a person to give up a right or benefit. The terms of the affidavit are not “clear and
unequivocal” terms. Also, Gatchalian testified that she was still reeling from the effects of the
accident when the waiver was presented to her for signing. While reading, she experienced
dizziness but that, seeing the other passengers sign without reading it, she also signed without
reading the affidavit in its entirety. There is thus doubt whether she understood fully the import of
the joint affidavit she signed and whether she intended to waive her right of action. Also, since a
CC must exercise ED, we must construe any purported waiver strictly against the CC. To uphold
the waiver under these circumstances would weaken the standard of ED. This is offensive to public
policy.

2. YES. The records do not show that Delim exercised the ED required but merely alleged that the
accident was due to fortuitous event. The records on the other hand reveal evidence of negligence.
Gatchalian testified that when there was a snapping sound, one of the passengers, an old woman,
cried out “What happened?” The driver said that “that is only normal.” He did not check if there
was anything wrong. The reply indicated that the snapping sound had been heard in the bus on
previous occasions, which means that the bus had not been checked to determine the cause of the
sound which occurred so frequently that the driver had gotten accustomed to it.

3. a. Revenue which Gatchalian said she failed to realize due to the accident. -NO.
On the day of the accident, she claims that she was supposed to confer with the district supervisor
of public schools for a substitute teacher’s job which she held off and on as “casual employee.”
But the CA found that at the time of accident, she was no longer employed in a public school
since, being a casual employee and not a civil service eligible, she had been laid off. Thus, she
could not be said to have lost any employment due to the accident.

b. Plastic surgery. -YES.

A person is entitled to the physical integrity of his body. If that integrity is violated, actual injury
is suffered for which actual or compensatory damages are due. Gatchalian is entitled to be placed
as nearly as possible in the condition that she was before the mishap. The amount of P15k to
cover the cost of plastic surgery is reasonable.

c. Moral damages.- YES.

moral damages may be awarded where gross negligence of the CC is shown. Since Delim and his
driver had been grossly negligent, and recalling the aggressive maneuvers of Delim, thru his
wife, to get the victims to waive their right to recover damages even as they were still
hospitalized, Gatchalian is entitled to moral damages. considering the extent of pain and anxiety
which Gatchalian must have suffered due to her physical injuries including the permanent scar on
her forehead, P30k is a reasonable award. P1k attorney’s fees, as claimed by Gatchalian, is even
modest.

107. Silverio Marchan v. Arsenio Mendoza, GR L-24471, August 30, 1968, Fernando, J.
(Kinds of Damages: Actual/Compensatory Damages)
FACTS:
A passenger bus of PH Rabbit Bus Lines, driven by Silverio Marchan, fell into a ditch in Bulacan
while travelling to Manila. as a result, Arsenio Mendoza, his wife and child (respondents) who
were passengers were thrown out to the ground resulting in their injuries. Mendoza suffered the
most serious injuries which damaged his vertebrae causing the paralysis of his lower extremities.
The physician who treated Mendoza opined that he may never walk again. Marchan was
prosecuted for serious, less serious, and slight physical injuries thru reckless imprudence and
convicted.

In this action, Mendoza, his wife and child seek to recover damages against Marchan and PH
Rabbit Bus Lines based on breach of contract of carriage and criminal negligence.

CA foundt hat the bus was travelling at a high speed so much so that one passenger had to call the
attention of Marchan to slow down, but Marchan did not heed the request of the passenger.
Marchan even increased his speed while approaching a 6x6 truck parked ahead to pass the parked
truck and avoid collision with the incoming vehicle from the opposite direction. But when Marchan
veered his truck back to the right lane, the rear tires skidded because of the high rate of speed,
causing the truck to fall into a ditch. So CA awarded P40k compensatory and P30k exemplary
damages and attorney’s fees.

Hence this petition.

ISSUE:
Whether Marchan is liable for compensatory and exemplary damages.
HELD: YES.
Pursuant to Art. 1759, CCs cannot escape liability for injuries to passengers thru the negligence or
willful acts of its employees although they may have acted beyond their authority or in violation
of orders.
CA explained that the P40k compensatory damages is reasonable and fair considering that
Mendoza suffered paralysis, incapacitating him to engage in his customary occupation throughout
the remaining years of his life, especially if we take into account that he was only 26 yo during the
accident. He may be expected to live 30 years more. He derived a P100/month income from the
business of his father-in-law and P100/month as professional boxer.

Thru the negligence of Marchan, he lost the use of his limbs, being condemned for the remainder
of his life to be a paralytic. Thus, the P40k was well within the CA’s discretion.

As to exemplary damages, CA said that the complaint prayed for “such other and further relief as
this court may deem just and equitable.” Thus, the court is called upon to exercise discretion on
whether to impose exemplary damages even though not expressly prayed or pleaded in the
complaint.

Exemplary damages may be imposed by way of example or correction only in addition, among
others, to compensatory damages, but they cannot be recovered as a matter of right. Their
determination depends on discretion of the court. The amount of exemplary damages need NOT
be PROVED because its determination depends on the amount of compensatory damages
awarded. If the amount need not be proved, then it also need NOT be ALLEGED because it is
merely incidental or dependent on what the court may award as compensatory damages. until this
premise is established, what may be claimed as exemplary damages would amount to a mere
surmise or speculation. Thus, the amount of exemplary damages need NOT be PLEADED since
it cannot be predetermined. One can merely ask that it be determined by the court if in its
discretion it may be warranted by evidence.

Thus, the P40k compensatory damages, P30k exemplary damages, and P5k attorney’s fees were
granted all with interest.

108. Gloria de Caliston v. CA, GR L-63135, June 24, 1983, Plana, J. (Kinds of Damages:
Actual/Compensatory Damages)
FACTS:
While driving a passenger bus in Bacolod, private respondent Geronimo Dalmacio ran over Juana
Darrocha who instantly died. she is survived by her only child Gloria Caliston. Dalmacio was
convicted of homicide thru reckless imprudence and sentenced to pay P15k for the death, P5k as
moral, P5k as burial expenses, P10k for loss of pension which Juana failed to receive.

CA absolved Dalmacio from P10k previously paid under a vehicular insurance policy obtained by
Dalmacio. This is assailed here.

ISSUE:
Whether the deletion was proper.
HELD: NO.
The deletion of the P10k for loss of pension is unjustified. Under Art. 2206 of NCC:
"The amount of damages for death caused by a crime or quasi-delict shall be at least three
thousand pesos, even though there may have been mitigating circumstances. In addition:
 (1) The defendant shall be liable for the loss of the earning capacity of the deceased, and
the indemnity shall be paid to the heirs of the latter . . ."
The pension being a sure income that was cut short by her death which Dalmacio was
responsible for, Caliston is entitled to P10k which is the pension Juana would have received for
one year had she not died.

The P5k paid to Caliston by the insurer of the bus may be deemed to have come from the bus
owner who procured the insurance. Since his civil liability for the death caused by his driver is
subsidiary and rises from the same culpa, the insurance proceeds should be credited in favor of
Dalmacio.

109. Trans World Airlines v. CA, GR 78656, August 30, 1988, Gancayco, J. (Kinds of
Damages: Moral)
FACTS:
Rogelio Vinluan is a practicing lawyer who had to travel in April 1979 to several cities in Europe
and US to attend to some matters involving several clients. He booked with Japan Airlines from
Manila to Tokyo, Moscow, Paris, Hamburg, etc etc. and back to Manila. While in Paris, he went
to the office of Trans World Airlines (TWA) and secured therefrom confirmed reservation for
first class accommodation from NY to San Francisco. A validated stub was attached to the NY-
LA portion of his ticket with the mark “OK.” Vinluan reconfirmed his reservation for first class
accommodation.

He presented his ticket for check-in at 9:45am, the departure being 11am. He was informed that
there was no first class seat available for him on the flight. When he began to protest, one of
TWA employees, one Braam, rudely threatened him with “Don’t argue with me, I have a very bad
temper.”

He was compelled to take the economy seat offered to him and he was issued a “refund
application.” While waiting for departure, he noticed that other passengers who were white
Caucasians and who checked in later than him were given preference in some first class seats
which became available due to “no show” passengers.

He filed an action for damages against TWA in CFI, alleging breach of contract and BF. CFI ruled
for Vinluan, awarding P500k moral, P300k exemplary, and P100k attorney’s fees. CA affirmed,
adding interest and reducing attorney’s fees to P50k. Hence this petition for review.

ISSUE:
Whether TWA is liable for moral and exemplary damages.
HELD: YES.
TWA claims that because of maintenance problems of the aircraft, TWA flight 41 was cancelled
and flight 6041 was organized. Flight 41 was to use a Lockheed 1011 with 34 first class seats but
instead, a smaller Boeing 707 with only 16 first class seats was substituted for flight 6041. Thus,
the first class passengers had to be accommodated on a first come first served basis and this was
allegedly announced.
The discrimination is obvious and the humiliation to which Vinluan was subjected is undeniable.
Thus, the award of moral and exemplary damages is proper. Vinluan showed the alleged switch of
planes from a Lockheed 1011 to a smaller Boeing 707 was because there were only 138
confirmed economy class who could be accommodated in the smaller plane and not because
of maintenance problems. TWA sacrificed the comfort of its first class passengers including
Vinluan for the sake of economy. Such lack of care for the interest of its passengers who are
entitled to its utmost consideration amount to BAD FAITH which entitled the passenger to the
award of MORAL damages. More so here where instead of courteously informing Vinluan of
his being downgraded, he was angrily rebuffed by an employee of TWA.

At the time of the incident, Vinluan was a practicing lawyer, a senior partner of a big law firm in
Manila, director of several companies, and active in civic and social organizations in PH.
Considering the circumstances of this case and the social standing of Vinluan in the community,
he is entitled to moral and exemplary damages. But the moral damages were reduced to P300k
and exemplary to P200k. this is sufficient for the humiliation he suffered and to serve as example
to discourage repetition of similar oppressive and discriminatory acts.

110. Sofia Prudenciado v. Alliance Transport System, Inc., GR 33836, March 16, 1987, Paras,
J. (Kinds of damages: Exemplary or Corrective)
FACTS:
Dra. Sofia Prudenciado was driving her Chevrolet car along Arroceros St. on a rainy day with the
intention of crossing Taft Avenue to turn left, to go to PH Normal College where she would hold
classes. She was driving at 10kpmh. She looked to the left and right and, not noticing any oncoming
car, slowly proceeded to cross. But when she was almost at the center, Jose Leyson, driving
People’s Taxicab operated by Alliance, suddenly bumped and struck Prudenciado’s car, causing
injuries. Prudenciado suffered brain concussion which subjected her to physical examinations and
to an encephalograph test while her car was damaged to the extent of P2.4k. The taxicab’s damage
was P190.

Prudenciado filed a complaint for damages in CFI against Alliance and Jose Leyson. CFI found
Leyson guilty of negligence. Alliance failed to prove diligence of a good father in selecting and
supervising its employees. They were held jointly and severally liable for the injuries of
Prudenciado and the damage to her car. CA reduced the moral damages of P25k to P2k and
eliminated the exemplary damages and attorney’s fees, but granting actual damages of P2.4k.
Hence this petition.

ISSUE:
Whether respondents Alliance and Leyson are liable for moral and exemplary damages.
HELD: YES.
The lower courts are in accord in finding that the accident was due to negligence of Leyson. The
bone of contention is the award of damages.

CA found that Prudenciado’s claim that due to the concussion, she lost her usual liveliness, self-
confidence to the extent that she now feels insecure and has serious anxiety and apprehension of
losing her life etc etc., was not supported by the deposition of Dr. Aramil who attended to her. She
tried to show the symptoms of brain concussion like headache, dizziness, vomiting etc., but her
proof merely consisted of her uncorroborated testimony. Her statements that she is almost
completely losing her voice, lost her sense of taste, has a terrible headache when her head is pressed
etc. are belied by Dr. Aramil’s deposition that her EEG was already normal and said that she was
clinically symptomless when discharged from the hospital.

Moral damages include physical suffering, mental anguish, serious anxiety, besmirched reputation,
etc. Trial courts have discretion to determine the amount of moral damages and CA can only
change the award when they are scandalously excessive as to indicate that it was the result of
passion, prejudice, or corruption on the part of trial court.

Moral damages are not intended to enrich a complainant at the expense of defendant. They
are awarded only to enable the injured party to obtain means, diversion, or amusements to alleviate
the moral suffering he has undergone due to defendants’ culpable action. It must be proportionate
to the suffering inflicted.

The records show that the injuries of Prudenciado are not as serious or extensive as they were
claimed to be to warrant the award of trial court. But also, the reduction of CA is too drastic and
unrealistic to pass the test of reasonableness. While the damages were not satisfactorily
established to the extent Prudenciado desired, it was still not disputed that an accident occurred
due to the negligence of Leyson and Alliance. That Prudenciado suffered brain concussion which
although mild can produce the effects she complained of.

Being a doctor by profession, her fears can be more real and intense than an ordinary person.

As to exemplary damages, Art. 2231 states that in quasi-delicts, exemplary damages may be
granted if defendant acted with grave negligence. The rational is to provide an example or
correction for the public good.

Leyson was driving at high speed after turning right along Taft coming from Ayala since traffic
was clear. Failing to notice Prudenciado’s car, he failed to apply breaks and did not even swerve
right to avoid collision. A driver running at full speed on a rainy day on a slippery road in
complete disregard of the hazards to life and limb of other people acts with gross negligence.
The frequent incidence of accidents of this nature caused by taxi drivers demands corrective
measures.

P2.4k actual, P15k moral, P5k exemplary, and P3k attorney’s fees were awarded.
CHAPTER 6
111. Yangco v. Laserna, GR 47447-47449, October 29, 1941, Moran, J. (Maritime Law: Real
and Hypothecary nature)
FACTS:
The steamer SS Negros of Yangco left the port of Romblon on its return trip to Manila. Typhoon
signal #2 was then up of which fact the captain was duly advised and his attention called thereto
by the passengers before the vessel sailed. The boat was overloaded with 180 passengers, its
capacity being 123 passengers. Baggage and other equipment were heaped on the upper deck.
After 2 hours of sailing, the boat encountered strong winds and rough seas between the islands of
Banton and Simara. As the sea became increasingly violent, the captain ordered the vessel to turn
left to return to port, but in the maneuver, the vessel was caught sidewise by a bigwave which
caused it to capsize and sink. Many passengers died including: 1) Aldaña and his son Victorioso,
husband and son of respondent Bienvenida in case 47447; 2) Casiana Laserna, daughter of
respondents Laserna in case 48; and 3) Genaro Basaña, son of respondent Basaña in case 49.

These respondents filed in CFI separate suits to recover damages against Yangco. CFI awarded
Aldaña P2k, Laserna P590, Basaña P590. After this judgment, Yangco, in a pleading, sought to
abandon the vessel to respondents with all its eqiupments. The abandonment was denied. CA
affirmed and even increased the damages. Hence this appeal.

ISSUE:
Whether the shipowner or agent, notwithstanding total loss of the vessel due to negligence of its
captain, can be held liable for damages due to death of its passengers.
HELD: NO.
Art. 587 of Code of Commerce provides:
"The agent shall also be civilly liable for the indemnities in favor of third persons which
arise from the conduct of the captain in the care of the goods which the vessel carried; but
he may exempt himself therefrom by abandoning the vessel with all her equipments and
the freight he may have earned during the voyage."
This gives the shipowner or agent the right of abandonment, and thus his liability is confined to
that which he is entitled to abandon- the vessel with all her equipments and the freight it may
have earned. It is true that the article appears to deal only with the limited liability of shipowners
or agents in the care of goods the vessel carries, but this is a mere deficiency of language and
does not indicate the true extent of such liability. The consensus of authorities say that
notwithstanding the language of Art. 587, the benefit of limited liability therein applies in ALL
cases wherein the shipowner or agent may properly be held liable for the negligent or illicit
acts of the captain.

Only 3 articles deal with limited liability of shipowners or agents: Arts. 587, 590, and 837. Art.
590 merely reiterates the principle in Art. 587 where the vessel is owned by several persons. Art.
837 applies the principle in cases of collision, and it is said that Art. 837 is but a necessary
consequence of the right to abandon in Art. 587 and is a mere superfluity. In effect, only Arts. 587
and 590 are the provisions on the matter.

By “agent” it is to be understood as the person intrusted with the provisioning of the vessel, or the
one who represents her in the port in which she happens to be. The agent is the only one who
represents the interests of the owner of the vessel.

The lawful acts and obligations of the captain may be enforced against the agent due to the contract
of agency. But the ship agent is only subsidiarily civilly liable for liability incurred by the captain
thru his unlawful acts. This liability of the agent is limited to the vessel. The Code of Commerce
makes the agent liable with the vessel and not individually.

What distinguishes maritime from civil law and even from mercantile law is the real and
hypothecary nature of maritime law and the many securities of a real nature that maritime customs
from time immemorial, the laws, codes, and later jurisprudence, have provided for the protection
of the various and conflicting interests risked in maritime expeditions, like the interests of the
vessel and of the agent, those of the owners of the cargo and consignees, those who salvage the
ship, those who make loans upon the cargo, etc.

As evidence of this real nature, we have 1) limitation of liability of agents to the actual value of
the vessel and freight money and 2) the right to retain the cargo and the embargo and detention of
the vessel even in cases where ordinary civil law would not allow more than a personal action
against the person liable. This repeals civil law to such extent that where mortgaged property is
lost, no personal action lies against the owner or agent of the vessel (*kasi limited liability niya
to value of vessel eh nawala na). Thus, where the vessel is lost, the sailors and crew cannot recover
their wages; in collisions, the liability of the agent is limited; in case of shipwrecks, those who
loan their money on the vessel and cargo lose all their rights and cannot claim reimbursement.

There are 2 reasons why it is impossible to do away with these privileges: 1) the risk to which the
thing is exposed, and 2) the real nature of maritime law, exclusively real, according to which
the liability of the parties is limited to a thing which is at the mercy of the waves.

The policy which the rule is designed to promote is the encouragement of shipbuilding and
investment in maritime commerce.

Thus, it was held that if the shipowner or agent may in any way be held civilly liable at all for
injury/death of passengers arising from negligence of the captain in cases of collisions or
shipwrecks, his liability is merely co-extensive with his interest in the vessel such that a total loss
thereof results in its extinction. We are not unmindful that the steamship here is a common carrier
and that the relationship between Yangco and the dead passengers rests on a contract of carriage.
But assuming Yangco is liable for breach of contract of carriage, the exclusively real and
hypothecary nature of maritime law limits such liability to the value of the vessel or to the
insurance thereon. The vessel here was not insured. The vessel having totally perished, any act
of abandonment would be an idle ceremony.

112. Chua Yek Hong v. IAC, GR 74811, September 30, 1988, Melencio-Herrera, J. (Maritime
Law: Limited Liability Rule)
FACTS:
Chua is a copra dealer based in Puerta Galera while private respondents Guno and Olit are owners
of MV Luzviminda, a common carrier engaged in coastwise trade. Chua loaded 1000 sacks of
copra worth P101k on board MV Luzviminda for shipment from Puerta Galera to Manila. But the
vessel capsized and sank with all its cargo between Cape Santiago and Calatagan Batangas.

Chua field suit in CFI for damages based on breach of contract of carriage against private
respondents. Private respondents claim that their liability had been extinguished due to the total
loss of the vessel.

CFI ruled for Chua and ordered private respondents to pay P101k jointly and severally and other
expenses. IAC reversed and applied Art. 587 and the doctrine in Yangco v. Laserna. Hence this
petition.
ISSUE:
Whether Art. 587 is applicable and thus private respondents liabilities are extinguished.
HELD: YES.
Art. 587 reads:
Art. 587. The shipagent shall also be civilly liable for the indemnities in favor of third
persons which may arise from the conduct of the captain in the care of the goods which he
loaded on the vessel; but he may exempt himself therefrom by abandoning the vessel with
all the equipments and the freight it may have earned during the voyage."
“Shipagent” is broad enough to include the shipowner. Thus, both shipowner and shipagent are
civilly liable for indemnities to third persons arising from the captain’s conduct in the care of goods
and safety of passengers. But this liability is limited by their right of abandonment of the vessel
and earned freight. Their liability is confined to that which they are entitled as of right to
abandon- “the vessel with all her equipment and the freight it may have earned xxx” and “to the
insurance thereof if any.” Thus, their liability is mrerely co-extensive with their interest in the
vessel such that a total loss thereof results in its extinction.

“No vessel, no liability” expresses in a nutshell the limited liability rule. the total destruction of
the vessel extinguishes maritime liens as there is no longer any res to which it can attach. The
rationale therefor has been explained in Yangco v. Laserna as due to the real and hypothecary
nature of the liability of the shipowner or agent in the Code of Commerce.

But the limited liability rule has exceptions: 1) where the injury or death to a passenger is due
either to the fault of the shipowner, or to the concurring negligence of the shipowner and
captain; 2) where the vessel is insured; 3) in workmen’s compensation claims. But there is
nothing here to show the fault of private respondents as shipowners.

As to the provisions of NCC on CCs, considering the real and hypothecary nature of liability under
maritime law, these provisions would not have any effect on the principle of limited liability. In
Yangco v. Laserna, it was expounded that even if Yangco were liable for breach of contract of
carriage, the exclusively real and hypothecary nature of maritime law limits such liability to the
value of the vessel.

Art. 1766 also provides that: “In all matters not regulated by this Code, the rights and obligations
of common carriers shall be governed by the Code of Commerce and by special laws." Since the
NCC has no provisions regulating liability of shipowners or agents in the event of total loss of the
vessel, Code of Commerce governs here.

Thus, since the shipagent/owner’s liability is merely co-extensive with their interest in the vessel
such that total loss thereof results in its extinction and none of the exceptions on the rule of limited
liability are present, the liability of private respondents must be deemed extinguished.

113. Heirs of de los Santos v. CA, GR 51165, June 21, 1990, Medialdea, J. (Maritime Law:
Limited Liability Rule)
FACTS:
MV Mindoro owned by private respondent Compania Maritima sailed from Manila to Aklan. It
met typhoon Welming on the Sibuyan Sea, Aklan, and sank, causing the death of many passengers.
Mauricio delos Santos declared that he accompanied his common-law wife Amparo and children
to MV Mindoro who brought all their belonging with the intention of living in Aklan permanently.
Cousin of Mauricio Eliadora corroborated Mauricio’s testimony. She was not in the manifest but
was accommodated in the third deck of the vessel. She was able to board a balsa before the vessel
sank.

Dominador Salim declared that Teresa his aunt and Diego his father drowned in the sinking,
claiming that he accompanied both persons to board the boat.

A board of marine inquiry decision found the captain and some crew negligent in operating the
vessel and suspended/revoked their license. But the captain also died.

Compania claims that no negligence was established. It claims that the board of marine inquiry
found the ship’s complement and crew were complete and the vessel seaworthy. Thus, the sinking
due to typhoon Welming was force majeure.

Trial court dismissed the complaints. CA affirmed, applying Art. 587. Hence this petition.

ISSUE:
Whether Art. 587 is applicable.
HELD: NO. Shipowner was also negligent.
There is no dispute that the captain was negligent. Art. 587 of Code of Commerce reads xxx. Under
this, the shipowner/agent has the right of abandonment and by necessary implication, his liability
is confined to that which he is entitled as of right to abandon- the vessel with all her equipments
and the freight it may have earned. Notwtishstanding the passage of NCC, Art. 587 is still good
law. The reason lies in the exclusively real and hypothecary nature of maritime law. This rule is
found necessary to offset against the innumerable hazards and perils of a sea voyage and to
encourage shipbuilding and marine commerce. This applies both to goods and passengers.

Art. 587 speaks only of situations where the fault or negligence is committed solely by the captain.
If the shipowner is also to be blamed, Art. 587 does not apply. Such a situation would be covered
by NCC provisions on CCs (Arts. 1733, 1755, 1756).

Here, Compania was also negligent. It claims that it did not have any information about
typhoon Welming until after the boat was already at sea. Modern technology belie such
contention. The weather bureau director stated that it issued 17 warnings of typhoon Welming
to shipping companies.

Considering the director’s report that at 11am of Nov. 1, 1967the storm intensified into a typhoon
and by 11am, Nov. 2, it further intensified, and considering that the vessel here left at 6pm Nov. 2
instead of its scheduled 2pm departure, we find it highly improbable that the Weather Bureau had
not yet issued any typhoon bulletin at any time during the day to the shipping companies.
Compania did not show convincing evidence of this omission. Also, the captain through his action
showed prior knowledge of the typhoon, thus it is inconceivable for Compania to be totally in the
dark of Welming.
In allowing the ship to depart late from Manila despite the typhoon advisories, Compania
displayed lack of foresight and minimum concern for the safety of its passengers taking into
account the surrounding circumstances of the case.

During the 4 hour delay, there is great probability that unmanifested cargo and passengers (241
more than the authorized 193 passengers) were loaded. Had it not delayed departure, the vessel
would have arrived safely.

Compania presents evidence that MV Mindoro was seaworthy as it had life saving equipment etc.
But Compania could not present evidence that it specifically installed a radar which could have
allowed the vessel to navigate safely for shelter during a storm. Thus, Compania’s lack of ED
coupled with the captain’s negligence were the proximate causes of the sinking. Compania is
liable.

P30k for each death, P10 moral, P6.8k actual divided among petitioners, and P10k attorney’s fees
were awarded.

CHAPTER 7- VESSELS
114. Philippine Refining Co. Inc. v. Francisco Jarque, GR 41506, March 25, 1935, Malcolm,
J., (Vessels: General Concepts)
FACTS:
PH Refining Co and Francisco Jarque executed 3 mortgages on the vessels Pandan and Zaragoza.
The first two mortgages were were not appended with an affidavit of good faith. The third
mortgage had such affidavit but was not registered in customs house until May 17, 1932 or within
30 days prior to commencement of insolvency proceedings against Jarque.A fourth mortgage was
executed by Francisco Jarque and Ramon Aboitiz on Zaragoza which was entered in the chattel
mortgage registry of the register of deeds on May 12, 1932, within 30 days from institution of
insolvency proceedings.

These proceedings were begun on June 2, 1932 when a petition was filed with CFI praying that
Jarque be declared an insolvent debtor. This was granted, resulting in an assignment of all the
propertires of the insolvent to Jose Carominas. Judge Hontiveros declined to order foreclosure of
the mortgage but sustained the defenses of fatal defectiveness of the mortgages.

ISSUE:
Whether the mortgages are fatally defective.
HELD: YES.
Vessels are considered personal property under the civil law. Under common law, vessels are
personal property although occasionally referred to as a peculiar kind of personal property.
Since “personal property” includes vessels, they are subject to mortgage under the Chattel
Mortgage Law. A mortgage on a vessel is in nature a chattel mortgage. The only difference
between a chattel mortgage of a vessel and of other personalty is that it is not necessary for a
mortgage of a vessel to be noted in the register of deeds, but it is essential that a record of
documents affecting title of a vessel be entered in the record of Collector of Customs at the port
of entry.
The Chattel Mortgage Law in S5 describes the requirement of an affidavit of GF appended to the
mortgage. The absence of the affidavit vitiates a mortgage as against creditors and subsequent
encumbrancers. Thus, a mortgage without such affidavit is unenforceable against third persons.

CHAPTER 9- PERSONS WHO TAKE PART IN MARITIME COMMERCE

115. Chua Yek Hong v. IAC, GR 74811, September 30, 1988, Melencio-Herrera, J.
(Shipowners and shipagents; captains, masters of vessels, officers and crew, supercargoes)
(*Case 112)

116. Philippine American General Insurance Company, Inc. v. CA, GR 116940, June 11,
1997, Bellosillo, J. (Shipowners and Shipagents, etc.)
FACTS:
Coca-Cola Bottlers PH Inc. loaded on board MV Asilda, a vessel owned by respondent Felman
Shipping Lines, 7,500 cases of 1liter Coca-Cola softdrink bottles to be transported from
Zamboanga to Cebu for consignee Coca-Cola Bottlers PH, Inc., Cebu. This was insured with
Philamgen.

Asilda left at 8pm. At 8:45am the following morning, it sank in the waters of Zamboanga del Norte
with all the cargo. Coca-cola filed a claim with Felman for recovery of damages due to the sinking.
Felman denied. Philamgen paid Coca-Cola’s claim of P755k. Philamgen sought recourse against
Felman and sued it for sum of money and damages.

Philamgen claims that the sinking of Asilda was due to the vessel’s unseaworthiness and that its
officers were grossly negligent in failing to proceed to a nearby port or beach after the vessel
started to list. Felman moved to dismiss on the ground that no right of subrogation was transmitted
to Philamgen and that Felman had abandoned all its rights over MV Asilda together with her
freight and appurtenances to limit its liability under Art. 587 of Code of Commerce.

Trial court ruled for Felman, holding that Asilda was seaworthy when it left the port of Zamboanga.
Thus, the loss was due to fortuitous event and also, Art. 587 applies. Philamgen was also not
subrogated to Coca-Cola’s rights since Coca-Cola breached its implied warranty on the vessel’s
seaworthiness. CA found Asilda unseaworthy, but denied Philamgen’s claim since the implied
warranty of Coca-Cola of the vessel’s seaworthiness was not complied with, so there was no
subrogation. CA also applied limited liability rule. Hence this petition.

ISSUE:
1. Whether Asilda was seaworthy.
2. Whether Art. 587 is applicable.
HELD:
1. NO. MV Asilda was unseaworthy. In a joint statement, the captain and chief mate of the vessel
confirmed that the weather was fine when they left Zamboanga port. A report by Elite Adjusters
Inc. found that MV Asilda was top-heavy, meaning that while it was not overloaded, the
distribution or stowage of the cargo was done in such a manner that the vessel was in top-heavy
condition which rendered her unstable and unseaworthy. The vessel was designed as a fishing
vessel and not designed to carry a substantial amount of cargo. The report found the proximate
cause of the sinking was due to her unseaworthiness from being top-heavy.

We subscribe to the report. Approximately 2500 cases of softdrink bottles were stowed on deck.
Carrying a deck cargo raises the presumption of unseaworthiness unless it is shown that the deck
cargo will not interfere with the proper management of the ship. But it was shown that Asilda was
not designed to carry substantial amount of cargo on deck, making it unstable. The strong winds
and waves encountered by the vessel are but the ordinary vicissitudes of a sea voyage and merely
contributed to its already unstable and unseaworthy condition.

2. NO. The ship agent is liable for the negligent acts of the captain in the care of goods loaded on
the vessel. This liability can be limited thru abandonment of the vessel, its equipment, and
freightage as provided in Art. 587. But there are exceptions as where the loss was due to the fault
of the shipowner and the captain. The limited liability does not apply if the injury was due to
the shipowner’s fault. Art. 587 only speaks of situations where the fault or negligence is committed
solely by the captain. If the shipowner is also to be blamed, Art. 587 does not apply, and the
provisions of NCC on CCs will apply.

Closer supervision on the part of the shipowner could have prevented this miscalculation. Thus,
Felman was equally negligent. Art. 587 does not apply.

Art. 1733 of NCC provides xxx. In the event of loss of goods, CCs are presumed negligent. Felman
was unable to rebut this presumption.

-S113 of the Insurance Code provides that in every marine insurance upon a ship or freightage, a
warranty is implied that the ship is seaworthy. Under S114, a ship is seaworthy when reasonably
fit to perform the service, and to encounter the ordinary perils of the voyage. Thus, it is the
obligation of the cargo owner to look for a reliable CC which keeps its vessels in seaworthy
condition. He may have no control over the vessel but he has full control in the selection of the CC
that will transport his goods.

But the marine policy issued by Philamgen to Coca-Cola has dispensed with the usual warranty of
worthiness. Par. 15 of the policy reads “the seaworthiness of the vessel as between the assured and
assurers is hereby admitted.” This clause is also in par.8 of Institute Cargo Clauses of the policy.
thus, Philamgen has accepted the risk of unseaworthiness so that if the ship should sink by
unseaworthiness, Philamgen is liable. Thus, Philamgen was subrogaget to Coca-Cola’s rights.

Felman was ordered to pay Philamgen P755k plus interest.

117. Sweet Lines Inc. v. CA, GR L-46340, April 28, 1983, Melencio-Herrera, J. (Shipowners
and Shipagents, etc.)
FACTS:
Private respondents Micaela Quintos et al. purchased first-class tickets from Sweet Lines. They
were to board MV Sweet Grace of Sweet Lines bound for Catbalogan, Samar. Instead of departing
at the scheduled hour of midnight on July 8, 1972, the vessel sailed at 3am July 9 only to be towed
back to Cebu due to engine trouble, arriving at 4pm. After repairs, the vessel lifted anchor on July
10, 8am.

Instead of docking at Catbalogan, first port of call, the vessel proceeded direct to Tacloban at
9pm of July 10. Private respondents had to board a ferryboat to Catbalogan.

Thus, they filed this suit for damages for breach of contract of carriage which trial court and CA
affirmed. Moral and exemplary damages were awarded. Hence this petition.

ISSUE:
Whether Sweet Lines is liable for by-passing a port of call.
HELD: YES.
The governing provisions in the Code of Commerce are:
"ART. 614. A captain who, having agreed to make a voyage, fails to fulfill his undertaking,
without being prevented by fortuitous event or force majeure, shall indemnify all the
losses which his failure may cause, without prejudice to criminal penalties which may be
proper.
"ART. 698. In case of interruption of a voyage already begun, the passengers shall only be
obliged to pay the fare in proportion to the distance covered, without right to recover
damages if the interruption is due to fortuitous event or force majeure, but with a right to
indemnity, if the interruption should have been caused by the captain exclusively. If the
interruption should be caused by the disability of the vessel, and the passenger should agree
to wait for her repairs, he may not be required to pay any increased fare of passage, but his
living expenses during the delay shall be for his own account."
The crucial factor is existence of a fortuitous event. But there was no fortuitous event which
prevented the vessel from fulfilling its undertaking of taking private respondents to Catbalogan.
Mechanical defects in the carrier are not considered fortuitous event that exempts the carrier
from responsibility.

Even if the engine failure was fortuitous event, it accounted only for the delay in departure. When
the vessel left Cebu port on July 10, there was no longer any force majeure that justified by-
passing a port of call. The vessel was completely repaired after it was towed back to Cebu. The
reason for the bypassing was to let the vessel catch up with its schedule for the next week. There
were 50 passengers for Tacloban and only 20 for Catbalogan so that the Catbalogan phase could
be scrapped without too much loss for the company.

Sweet Lines cannot rely on the conditions in small bold print at the back of the ticket:
3. In case the vessel cannot continue or complete the trip for any cause, the carrier reserves
the right to xxx cancel the ticket and refund the passenger xxx.
11. The sailing schedule of the vessel for which this ticket was issued is subject to change
without previous notice."
These cannot prevail over Arts. 614 and 698.

The voyage to Catbalogan was “interrupted” by the captain upon instruction of the management.
Since the interruption was not due to force majeure nor to disability of the vessel, the passengers
have right to indemnity. The owner of a vessel and the ship agent shall be civilly liable for the
acts of the captain.

Sweet Lines was found in BF. Moral damages were awarded and atty’s fees, but not exemplary.

118. Fireman’s Fund Insurance Co., v. Metro Port Service, Inc. GR 83613, February 21,
1990, Gutierrez, Jr., J. (Arrastre Operator)
FACTS:
Vulcan Industrial and Mining Corp. imported from US several machineries loaded at Philadelphia
port, USA and transshipped for Manila thru SS Maersk Tempo. The cargo was covered by a clean
BoL issued by Maersk Line and Compañia General de Tabacos de Filipinas and consisted of 1
truck mounted core drill, 1 trailer mounted core drill, 1 container of 321 steel tubings, 1 container
of 170 steel tubings, and 1 container of 13 cases, 3 crates, 2 pallets, and 26 mining machinery
parts.

The shipment arrived in Manila Port on June 3, 1979 and was turned over in good order to the
arrastre operator Metro Port. On June 8, tractor operator Danilo Librando, employed by Metro
Port, was ordered to transfer the shipment to Equipment Yard at Pier 3. While he was maneuvering
the tractor to the left, the cargo fell from the chassis and hit one of the container vans of American
President Lines. There were no twist lock at the rear end of the chassis. The machineries were
broken and no longer useful for their purposes. The value of the damage was P187k which was
paid by Fireman insurance to the consignee Vulcan.

Fireman then sued Maersk Line, Compañia, and Metro Port for reimbursement. Trial court ordered
them to pay jointly and severally the P187k to Fireman. Maersk Line and Compañia settled with
Fireman. As to Metro Port, CA dismissed the complaint. Hence this petition.

ISSUE:
Whether Metro Port is liable for the negligence of Librando.
HELD: YES.
CA ruled that although Librando was an employee of Metro Port, he was technically an employee
of Maersk Line in this particular instance since the tractor he was driving was owned by Maersk,
he received instructions from Maersk, and was performing a duty that pertained to Maersk.
Librando was not remiss as the cause of the damage was the lack of twist locks which Maersk
failed to provide. CA thus held only Maersk liable.

The legal relationship between consignee and arrastre operator is like that of a depositor and
warehouseman. The relationship between consignee and CC is similar to that of the consignee
and arrastre. Both arrastre and the carrier are obligated to deliver the goods in good condition to
the consignee.

Generally, the nature of the work of an arrastre operator covers handling of cargoes at piers and
wharves. In this instance, Maersk provided the chassis and tractor which carried the shipment. It
merely requested Metro Port to dispatch a tractor operator to drive the tractor since it did not have
any in its employ. Such arrangement is allowed under their Management Contract. It was one of
the services offered by Metro Port. Metro Port had the sole discretion and prerogative to hire
and assign Librando to operate the tractor. It was its decision to choose Librando from its pool
of tractor operators. It is thus inaccurate to say that Librando was Maersk’s employee on that
occasion.

Handling cargo is an arrastre’s principal work, so its drivers/ “cargadors”/employees should

ovserve measures to prevent damage to shipments in its custody. Since Metro Port offered its
drivers for the operation of tractors in handling cargo, then it should see to it that the drivers in its
employ exercise due diligence in their work.

Librando was remiss in his duty. He should have first inspected the chassis. Librando admitted
that it was usually his practice to inspect but that he failed to do so in this particular instance as he
thought it had already its twist locks.

Thus, Metro Port was found solidarily liable for the negligence of its employee.

119. International Container Terminal Services, Inc. (ICTSI) v. Prudential Guarantee &
Assurance Co., Inc., GR 134514, December 08, 1999, Panganiban, J. (Arrastre Operator)
FACTS:
Mother vessel Tao He loaded in California a shipment of 5 lots of canned foodstuff in good order
for transport to Manila in favor of Duel Food Enterprises, consignee. China Ocean Shipping
Company issued a BoL The shipment was insured with Prudential against all risks. The shipment
arrived in Manila Port and discharged by MS Wei He to ICTSI for safekeeping.

Reyna Customs Brokerage withdrew the shipment and delivered it to Duel. An inspection showed
that 161 cartons were missing worth P85k. The claim for indemnification was denied by ICTSI
and the brokerage. Prudential paid a compromised sum of P66k. Prudential then sued ICTSI and
Reyna brokerage.

Trial court dismissed the complaint. CA reversed and ordered ICTSI to pay P66k to Prudential.
Hence this petition.

ISSUE:
Whether ICTSI is liable for the missing cartons.
HELD: NO.
-The legal relationship between an arrastre and consignee is akin to that between a warehouseman
and depositor. An arrastre’s services are not maritime in character. The arrastre, since the
safekeeping of goods rests within its knowledge, must prove that the losses were not due to its or
its employees’ negligence in a claim for loss by a consignee.

By its signature on the container yard gate passes and failure to protest on time, Duel is deemed to
have acknowledged receipt of the goods in good order and condition.

More important, the consigned goods were shipped under “shipper’s load and count.” This
means that the shipper was solely responsible for the loading of the container, while the carrier
was oblivious to the contents of the shipment. Protection against pilferage of the shipment was the
consignee’s lookout. the arrastre operator was, like any ordinary depositary, duty-bound to take
good care of the goods received from the vessel and to turn them over to the party entitled to
possession, subject to such qualifications validly imposed in the contract between the parties.
The arrastre was not required to verify the contents of the container received and to compare
them with those declared by the shipper because the cargo was at shipper’s load and count. The
arrastre was expected to deliver to the consignee only the container received from the carrier.
Thus, CA erred in concluding that the shortage was due to the arrastre’s negligence.

-ICTSI claims that the liability clause at the back of the arrastre and wharfage bill requires filing
of formal claim within 15 days from issuance of a bad order certificate etc. The 15-day limit for
filing a claim against the arrastre should run from the time of delivery to the consignee, and the
consignee’s failure to file within the period is sufficient ground to deny its claim for loss.

We agree. To hold the arrastre liable for lost/damaged goods, claimant shold file a claim for the
value of said goods within 15 days from date of discharge of the last package. This is in the nature
of a prescriptive period for bringing an action and is a condition precedent to holding the
arrastre operator liable. This gives the arrastre a reasonable opportunity to check the validity of
the claim while the facts are still fresh in the minds of persons who took part in the transaction and
while the pertinent documents are still available. Such period is sufficient for consignee to file a
provisional claim. Thus, the 15-day limit is reasonable.

Here, Duel had all the time to make a formal claim from the day it discovered the shortage on June
4, 1990. But it filed a claim for loss only on Oct. 2, 1990. Prudential did not explain the delay.
Within 15 days, the consignee could have filed a provisional claim which would have been
substantial compliance with the rule. Its failure relieved the arrastre of any liability for nondelivery
of the goods. The rational is without the time limit, a consignee could too easily fabricate claims
and deprive the arrastre of the best opportunity to probe immediately their veracity.

120. Far Eastern Shipping Company v. CA, GR 130068, October 01, 1998, Regalado, J.
(Pilots)
FACTS:
MV Pavlodar, operated and owned by Far Eastern Shipping Company (FESC), arrived at Manila
Port from Vancouver British Columbia. Captain Roberto Abellana was tasked by PH Port
Authority (PPA) to supervise the berthing of the vessel. Senen Gavino was assigned by the Manila
Pilot’s Association (MPA) to conduct docking maneuvers for safe berthing of the vessel.

Gavino boarded the vessel with the master of the vessel, Victor Kavankov, beside him. The vessel
proceeded to Manila International Port. When the vessel reached the landmark, big church by
Tondo harbor, ½ mile from the pier, Gavino ordered the engine stopped. When the vessel was at
about 2000 feet from the pier, Gavino ordered the anchor dropped. But the anchor did not take
hold as expected. The vessel’s speed did not slacken. The bow of the vessel rammed into the apron
of the pier causing considerable damage to the pier. The vessel also sustained damage. This cost
PPA P1.1M.

PPA filed in RTC a complaint for sum of money against FESC, Gavino and MPA. RTC ordered
them to pay PPA jointly and severally P1M. CA affirmed. Hence these petitions.
ISSUE:
Whether Gavino and MPA, and Kabankov are liable for damages.
HELD: YES.
FESC claims that MV Pavlodar was under compulsory pilotage at the time of the incident. It was
the compulsory pilot Gavino who was in command and had complete control of the vessel. The
pilot supersedes the master and his orders must be obeyed in all respects. Thus, Gavino is solely
responsible for the damage and not the vessel’s owners. The master cannot be faulted for relying
absolutely on the competence of the compulsory pilot.

Manila port is within the Manila Pilotage District which is under compulsory pilotage pursuant to
the PPA AO 3-85.

In American jurisprudence, there is a presumption of fault against a moving vessel that strikes a
stationary object. The moving vessel must show that it was without fault or the collision was the
fault of the stationary object or due to accident. The task thus is to determine who was negligent-
the master of the ship, the harbor pilot, or both.

-A pilot, in maritime law, is a person duly qualified and licensed to conduct a vessel into or out of
ports or in certain waters. In a broad sense, “pilot” includes both: 1) those whose duty it is to guide
vessels into or out of ports or in particular waters and 2) those entrusted with the navigation of
vessels on the high seas. However, “pilot” is more generally understood as a person taken on
board at a particular place for the purpose of conducting a ship through a river, road, or channel,
or from a port.

Under English and American authorities, the pilot supersedes the master for the time being in
the command and navigation of the ship, and his orders must be obeyed in all matters connected
with her navigation. He becomes the master pro hac vice and should give all directions as to
speed, course, stopping, and reversing, anchoring, towing etc. When a licensed pilot is employed
in a place where pilotage is compulsory, it is his duty to insist on having effective control of the
vessel or to decline to act as pilot. Under certain systems of foreign law, the pilot does not take
entire charge of the vessel, but is merely the adviser of the master, who retains command even in
localities where pilotage is compulsory.

The purpose of laws providing for compulsory pilotage is to create a body of seamen thoroughly
acquainted with the harbor, to pilot vessels seeking to enter or depart, and thus protect life and
property from the dangers of navigation.

Gavino was assigned to pilot MV Pavlodar into Berth 4 of Manila International Port. Upon
assuming such office as compulsory pilot, Gavino is held to the universally accepted standards of
care and diligence required of a pilot whereby he assumes to have skill and knowledge in the
navigation of the particular waters over which his license extends superior to and to be trusted
more than that of the master. A pilot should have a thorough knowledge of general and local
regulations and physical conditions affecting the vessel and the waters for which he is licensed.
Under extraordinary circumstances, a pilot must exercise extraordinary care.
Gavino failed to measure up to such strict standard of care and diligence required of pilots. Gavino
ordered anchor dropped at 830am and ordered engine stopped at 831am. By then, he must have
realized that the anchor did not hit a hard object and was not clawed since the vessel’s speed did
not reduce. Gavino failed to react. It was only at 834am that he reacted, but he ordered only half
astern. It took him another minute to order full astern. By then, it was too late. Gavino
miscalculated.

-But Capt. Kabankov is also responsible. His unconcerned lethargy as master of the ship is
negligence. While a pilot is in sole command of the ship and supersedes the master for the time
being and that he becomes master pro hac vice of a vessel piloted by him, the master does not
surrender his vessel to the pilot and the pilot is not the master. The master is still in command
of the vessel notwithstanding. There are occasions when the master may and should interfere
and even displace the pilot, as when the pilot is obviously incompetent or intoxicated and the
circumstances may require the master to displace a compulsory pilot because of incompetence or
physical incapacity. But if the master does not observe that a compulsory pilot is incompetent or
physically incapacitated, the master is justified in relying on the pilot, but not blindly.

The master is not wholly absolved from his duties and may advise with or offer suggestions to
him. He is still in command of the vessel except as to her navigation, and must cause the ordinary
work of the vessel to be properly carried and the usual precaution taken. Thus, he is bound to see
that there is sufficient watch on deck, that the men are attentive to their duties, the engines are
stopped, towlines cast off, and the anchors ready to go at the pilot’s order.

His testimony shows that he was remiss as master, leaving the entire docking procedure up to the
pilot instead of maintaining watchful vigilance over the risky maneuver. The master must exercise
a degree of vigilance commensurate with the circumstances. Thus, Kabankov’s shared liability is
due mainly to his failure to act when the perilous situation should have spurred him into quick and
decisive action as master.

-In general, a pilot is personally liable for damages caused by his own negligence to the owners of
the vessel and to third parties. A shipowner is not liable for injuries inflicted exclusively by
negligence of a compulsory pilot. The party claiming exemption must show that it was only the
pilot at fault, not the officers or crew.

Even though the pilot is compulsory, if his negligence was not the sole cause of injury, but
the negligence of the master or crew contributed thereto, the owners are liable.

-MPA’s liability is not based on employer-employee relationship but on Customs AO 15-65. There
is no employer-employee relationship. Art. 2180 is inapplicable. Pilot associations are immune to
vicarious liability for the tort of their members. A reading of Customs AO 15-65 leads to the
conclusion that MPA is solidarily liable for the negligence of its member pilots without prejudice
to reimbursement from the pilot at fault.

CHAPTER 10- CHARTER PARTIES

121. Litonjua Shipping Inc. v. National Seamen Board, GR 51910, August 10, 1989, Feliciano,
J. (Different Kinds of Charter Parties)
FACTS:
Litonjua is the local crewing managing office of Fairwind Shipping Corporation. MV Dufton Bay
is an ocean-going vessel of foreign registry owned by RD Mullion Ship Broking Agency. While
Dufton was in Cebu port on Sept. 11, 1976 and under charter by Fairwind, the vessel’s master
contracted the services of private respondent Gregorio Candongo to serve as third engineer for 12
months with a wage of $500/mo. Gregorio boarded the vessel. On Dec. 28, 1976, before expiration
of his contract, Gregorio was required to disembark at Port Kelang Malaysia and was returned to
the PH on January 5, 1977. The cause of discharge was described in his seaman’s book as “by
owner’s arrange.”

Gregorio filed a complaint before National Seamen’s Board (NSB) for violation of contract against
Mullion and Litonjua as agent of the shipowner and charterer. NSB hearing officer ordered
Mullion and Litonjua jointly and solidarily to pay Gregorio $4,657, saying there was no valid cause
to terminate Gregorio’s services prior to its expiry in violation of the contract of employment. NSB
affirmed its hearing officer’s decision, saying that Litonjua is the PH agent of Fairwind, charterer
of Dufton. The vessel master acted in behalf of Fairwind who had the obligation to pay Gregorio’s
salary.

Hence this petition for certiorari. Litonjua claims that it was error to declare Fairwind as employer
of Gregorio and to rule that it was liable for Fairwind’s liability.

ISSUE:
Whether Fairwind was the employer of Gregorio Candongo.
HELD:
Litonjua claims that the shipowner, not the charterer, was Gregorio’s employer and that Litonjua
is not liable since it is a mere agent of the charterer. Gregorio’s contract of employment was with
Mullion, shipowner. Thus, since Litonjua is the agent of the charterer and not the shipowner, it is
not liable on the contract of employment.

We are not persuaded. There are 2 bases to hold Litonjua liable on the contract of employment.

The first is the charter party which existed between Mullion, shipowner, and Fairwind, charterer.
There are 3 types of charter parties: 1) bareboat or demise, 2) time charter, 3) voyage or trip
charter. A bareboat or demise charter is a demise of a vessel. The shipowner turns over
possession of his vessel to the charterer who then undertakes to provide a crew and victuals
and supplies and fuel for her during the term of the charter. The shipowner is not normally
required to provide a crew, so the charterer gets the “bare boat,” i.e., without a crew.
Sometimes, the demise may provide that the shipowner is to furnish a master and crew to man the
vessel under the charterer’s direction, such that the crew of the shipowner become the agents
and servants or employees of the charterer, and the charterer thru the agency of the master has
possession and control of the vessel during the charter period.

A time charter, like a demise, is a contract for the use of the vessel for a specified period of time
or for the duration of one or more specified voyages. But the shipowner retains possession and
control thru the master and crew who remain his employees. What the time charterer acquires is
the right to utilize the carrying facilities of the vessel and to designate her designations.
A voyage charter or trip charter is simply a contract of affreightment, that is, a contract for
carriage of goods from one or more ports of loading to one or more ports of unloading, on one or
on a series of voyages. The master and crew remain in the employ of the owner of the vessel.

In a demise, the charterer is treated as the owner pro hac vice of the vessel. In such case, the
master of the vessel is the agent of the charterer and not of the shipowner. The charterer and
not the general owner of the vessel is liable for expenses of the voyage including the wages of
the seamen.

Litonjua did not place into record a copy of the charter party covering Dufton Bay. We must
assume that Litonjua was aware of the nature of a demise charter and it did not show it in evidence
because the charter party provisions were not supportive of its position. Thus, treating Fairwind as
owner pro hac vice, Litonjua having failed to show that it was not such, Litonjua, as PH agent of
the charterer, is liable on the contract of employment between the ship captain and Gregorio.

Lastly, extreme hardship would result if Litonjua would not be held liable. Gregorio and other
Filipino crews would be defenseless against a breach of their contracts. While their wages
constitute a maritime lien on the vessel, Gregorio is in no position to enforce that lien. The vessel,
being of foreign registry and not ordinarily doing business in PH, cannot be effectively held to
answer for such claims in a PH forum. On the other hand, Litonjua would be better placed to secure
reimbursement from its principal Fairwind. In turn, Fairwind would be in a better position than
Gregorio to seek recourse from Mullion.

122. Planters Products, Inc. v. CA, GR 101503, September 15, 1993, Bellosillo, J. (Effect of
Charter on Character of Carrier) *Case 11

123. Caltex PH, Inc. v. Sulpicio Lines, Inc., GR 131166, September 30, 1999, (Effect of
Charter on Character of Carrier) *Case 70

CHAPTER 13- COLLISIONS

124. Williams v. Yangco, GR 8325, March 10, 1914, Carson, J. (Collisions)
FACTS:
The steamer Subic, owned by Yangco, collided with the launch Euclid, owned by Williams, in the
Bay of Manila early in the morning of January 9, 1911. Euclid sank. This action was brought to
recover the value of Euclid.

Trial court held that Euclid was worth P10k. Since both vessels were negligent and responsible for
the collision, they share the loss P5k each jointly or equally. Both appealed.

ISSUE:
What are the liabilities of the parties?
HELD: Each shall bear his own loss.
Both vessels were negligent. Trial court ruled that since both were jointly responsible, both are
jointly liable for the loss. But actions for damages resulting from maritime collisions are governed
by S3, Title 4, Book III of the Code of Commerce, among which provisions is:
 "ART. 827. If both vessels may be blamed for the collision, each one shall be liable for its
own damages, and both shall be jointly responsible for the loss and damage suffered by
their cargoes."
The trial judge apparently had in mind that part treating of the joint liability for damage suffered
by the cargoes of both vessels. But here, the only loss incurred was that of Euclid itself. Thus,
under Art. 827, each one must be held liable for its own damages, and neither one can recover
from the other.

Counsel for plaintiff Williams, invoking “last clear chance”, claims that Yangco should be liable
because even if the officers on board Euclid were negligent in failing to exhibit proper lights and
taking the proper steps to keep out of the path of Subic, Subic’s officers, by exercise of due
precautions, might have avoided the collision by a very simple maneuver.

In cases of disaster from mutual negligence of two parties, the party who has a last clear
opportunity of avoiding the accident notwithstanding the negligence of his opponent is wholly
responsible. But this rule is limited by the further rule that where the previous act of negligence of
one vessel has created a position of danger, the other vessel is not liable for the mere failure to
recognize the perilous situation; and it is only when in fact it does discover it in time to avoid
the casualty by the use of ordinary care that it becomes liable for the failure to make use of
this last clear opportunity to avoid the accident. Here, the most that can be said to support
William’s contention is that there was negligence of Subic’s officers in failing to recognize the
perilous situation created by the negligence of those in charge of Euclid, and that had they
recognized it in time, they might have avoided the accident. But it does not appear that they
discovered the perilous situation of Euclid in time to avoid the accident by ordinary care.

125. Smith Bell and Company v. CA GR 56294, May 20, 1991 (Collisions)
FACTS:
On May 3, 1970 at 3:50am, MV Don Carlos owned by private respondent Go Thong and MS Yotai
Maru, a merchant vessel of Japanese registry, collided. Don Carlos was sailing from Manila Port
to Cebu while Yotai came from Kobe Japan approaching Manila Port. The Bow of Don Carlos
rammed the portside/leftside of Yotai Maru, inflicting a 3cm hole thru which seawater rushed in
and flooded its Hatch No.3, damaging all the cargo stowed therein.

The consignees of the cargo were paid by their insurance companies. The insurance companies
sued Go Thong.

1) Smith Bell and Sumitomo Marine sued Go Thong. The trial court ruled that Go Thong was
liable for damages. This was affirmed by CA thru Judge Fernandez. The SC dismissed Go Thong’s
appeal thru a minute resolution.

2) Smith Bell and Tokyo Marine , petitioners, sued Go Thong. Trial court also ruled that Go Thong
was liable for damages. But CA, thru Judge Sison, ruled that Yotai Maru is the one liable, not Go
Thong. Hence this petition.

ISSUE:
Whether Go Thong is liable for the damages to the cargo.
HELD: YES.
There are 3 factors constituting the negligence on the part of Don Carlos which negligence was
the proximate cause of the collision:

1) Don Carlos failed to comply with Rule 18(a) of the International Rules of the Road:
"(a) When two power-driven vessels are meeting end on, or nearly end on, so as to involve
risk of collision, each shall alter her course to starboard, so that each may pass on the port
side of the other.
This rule applies where vessels are meeting end on or nearly end on as to involve risk of collision.
Here, both vessels were sailing on exactly opposite paths. Yet, Second Mate German of Don Carlos
altered Don Carlos’ course by 5 degrees to the left instead of to the right (starboard) which
maneuver was the error that caused the collision. This was because German overtaking another
vessel, Don Francisco. It was in the process of overtaking that Don Carlos was brought into a
situation where he was meeting end-on or nearly end-on Yotai Maru. Yotai Maru complied with
Rule 18(a) and gave the required signal of one short horn blast.

Don Carlos also violated Rule 28 (c) for failing to give the required signal of 2 short horn blasts
meaning “I am altering my course to port.”

2) Don Carlos failed to have on board that night a “proper look-out” as required by Rule I(B).
Under Rule 29, all consequences arising from failure of Don Carlos to keep a “proper look-out”
must be borne by Don Carlos. A “proper look-out” is one who has been trained as such and who
is given no other duty save to act as a look-out and who is stationed where he can see and hear
best and maintain good communication with the officer in charge of the vessel. German does not
qualify as a “look-out”. The failure of Don Carlos to recognize the risk of collision was at least in
part due to the failure to maintain a proper look-out.

3) Second Mate Benito German was, immediately before and during the collision, in command of
Don Carlos although its captain Rivera was in the vessel and who did not appear to be under any
disability. Art. 633 of the Code of Commerce provides:
Art. 633 — The second mate shall take command of the vessel in case of the inability or
disqualification of the captain and sailing mate, assuming, in such case, their powers and
liability.
But worst still is German’s lack of sufficient knowledge of the basic rules of navigation. He
appeared unaware of the necessity of employing a look-out. Thus, his inability to grasp the actual
situation and the implication brought about by inadequacy of experience was mainly responsible
for the collision.

4) Judge Sison of CA found a duty on Yotai Maru alone to avoid collision and ended up
overlooking the facts constitutive of negligence of Don Carlos and using such negligence to
absolve it from responsibility. He held that Yotai Maru should have observed the movements of
Don Carlos to prevent a collision. The case of Urrutia v. Baco River he invoked is inapplicable
since involved there was a sailing vessel and a power-driven vessel. The rules imposed a special
duty on the power-driven vessel to watch the movements of a sailing vessel which is much slower
and less maneuverable than the power-driven one.
But here, both Don Carlos and Yotai Maru were power-driven and equipped with radar.

126. National Development Company v. CA, GR L-49407, August 19, 1988, Paras, J.
(Collisions, case 17)

127. Jose Mecenas v. CA, GR 88052, December 14, 1989, Feliciano, J., (Collisions, case 73)

128. Aboitiz Shipping Corporation v. General Accident Fire and Life Assurance
Corporation, GR 100446, January 21, 1993, Melo, J. (Collisions)
FACTS:
Aboitiz owned MV P Aboitiz, a CC which sank on a voyage from HK to PH. GAFLAC is a foreign
insurance company pursuing its remedies as subrogee of several cargo consignees whose cargo
sank with the vessel. The sinking gave rise to the filing of suits to recover lost cargo. The trial
court in Civil Case 425 ruled against Aboitiz ruling that the loss was not due to force majeure.
GAFLAC was therein awarded its claim. This case was elevated to SC in Aboitiz v. CA, GR 89757.
The attempted execution of the judgment award in said case of P1M gave rise to this petition.

Another ruling is GR 100373, Country Bankers v. CA where the sinking was found to be due to
force majeure.

The instant petition seeks a pronouncement as to the applicability of the doctrine of limited liability
on the totality of the claims vis-à-vis the losses from the sinking of MV P Aboitiz. About 110 suits
still pend on the sinking. Aboitiz argues that the limited liability rule warrants the immediate
stay of execution of judgment to prevent impairment of other creditors’ shares.

ISSUE:
Whether the execution of the judgment holding Aboitiz liable for the sinking of its vessel with all
the cargo should be stayed.
HELD: YES.
CA held that the decision in GR 89757 upholding private respondent’s claims in effect necessarily
negated the application of the limited liability principle. But this is not accurate. The limited
liability rule was never in issue in all prior cases including those in RTCs and CA. The only time
it could come into play is when any of the cases involving the mishap were to be executed as in
this case. Then, and only then, could the matter have been raised.

The real and hypothecary nature of maritime law simply means that the liability of the carrier in
connection with losses related to maritime contracts is confined to the vessel, which is
hypothecated for such obligations. This rule is, in this jurisdiction, is taken up in Book III of the
Code of Commerce:
"ARTICLE 587. The ship agent shall also be civilly liable for the indemnities in favor of
third persons which may arise from the conduct of the captain in the care of the goods
which he loaded on the vessel; but he may exempt himself therefrom by abandoning the
vessel with all her equipment and the freight it may have earned during the voyage.
"ARTICLE 590. The co-owners of a vessel shall be civilly liable in the proportion of their
interests in the common fund for the results of the acts of the captain referred to in Art.
587.
 "Each co-owner may exempt himself from this liability by the abandonment, before a
notary, of the part of the vessel belonging to him"
"ARTICLE 837. The civil liability incurred by shipowners in the case prescribed in this
section (on collisions), shall be understood as limited to the value of the vessel with all
its appurtenances and freightage served during the voyage."
As exception, the Limited Liability rule does not apply when there is a finding of negligence on
the part of the vessel owner or agent. But here, there is no such finding of negligence on the part
of Aboitiz.

The rights of a vessel owner or agent under the limited liability rule are akin to those of the rights
of shareholders to limited liability under corporation law. The rights of parties to claim against an
agent or owner of a vessel may be compared to those of creditors against an insolvent corporation
whose assets are not enough to satisfy the totality of claims against it. While each individual
creditor shall be allowed to prove the amounts of their respective claims, this does not mean that
they shall be allowed to recover fully as to favor those who filed and proved their claims sooner
to the prejudice of those who come later.

In insolvency of a corporation and the sinking of a vessel, the creditors are limited in their recovery
to the remaining value of accessible assets. In the case of a lost vessel, these are the insurance
proceeds and pending freightage for the particular voyage.

Thus, no claimant can be given precedence over the others just because they filed or completed
their action earlier than the rest. Thus, the execution of judgment in earlier completed cases, even
those already final and executory, must be stayed pending completion of ALL cases occasioned
by the subject sinking. Then and only then can all such claims be simultaneously settled should
the insurance proceeds and freightage be not enough to satisfy all claims. There are cases still in
the trial courts undergoing trial and some in CA. The pro-rated share of each claim can only be
found after all cases shall have been decided.

129. Philppine American General Insurance Company v. CA, GR 116940, June 11, 1997,
Bellosillo, J. (Collisions, case 116)

CHAPTER 15- SALVAGE

130. Erlanger & Galinger v. Swedish East Asiatic, Co. et al., GR L-10051, March 09, 1916,
Per Curiam, (Salvage)
FACTS:
The steamship Nippon, loaded principally with copra and other merchandise, sailed from Manila
bound for Singapore. But it went aground on Scarborough Reef which is about 120-130 miles fron
Luzon. The Chief officer Weston and 9 crew succeeded in reaching the coast of Luzon at
Zambales. Weston sent a telegram to the Bureau of Navigation requesting assistance for saving
crew.

Steamship Manchuria, bound for Hongkong, was requested to pass by Scarborough. The PH
government also ordered the coast guard cutter Mindoro to go to the scene of the wreck. When
they arrived, the captain of Manchuria informed the captain of Mindoro that the captain and crew
of Nippon were on board Manchuria and were proceeding to Hongkong. Mindoro then went to
Nippon and took some of the crew’s baggage. Mindoro went to Zambales, took on board Weston
and the 9 crew, and brought them to Manila. Dixon, captain of Manchuria, sent a message saying
that all the crew of Nippon were rescued and the “ship abandoned.” Nippon’s captain saw this
message.

Later, Erlander and Galinger, plaintiff, applied to charter a coast guard cutter to go to Nippon. The
cutter Mindoro was chartered to plaintiffs. Plaintiffs took possession of Nippon until all the cargo
was shipped to Manila. Nippon was also floated to Manila. plaintiff’s claim against Nippon,
valued at P250k, was fixed at P145,800.

Plaintiffs filed an action against the insurance companies representing the cargoes salved from
Nippon to have the amount of the salvage, to which plaintiffs were entitled, determined. Oelwerke
Teutonia, a corporation, appeared as claimant for the copra. New Zealand Insurance, Tokyo
Marine Insurance et al. also appeared. The trial court allowed plaintiff to recover one-half (1/2) of
the proceeds from the property salvaged.

Both parties appealed. Plaintiff Erlanger claims that the trial court erred in not ruling that it is
entitled to reimbursement of their expenses out of the gross value of the salved property, so that
the expenses must first be deducted from the gross value and then divided as to the remainder.

ISSUES:
1) Whether the ship was abandoned.
2) Whether the salvage was conducted with skill and diligence.
3) Whether the award was justified.
HELD:
1) YES.
Salvage may be defined as a service which one person renders to the owner of a ship or goods, by
his own labor, preserving the goods or the ship which the owner or those entrusted with the care
of them have either abandoned in distress at sea, or are unable to protect and secure. It is a
compensation for actual services rendered to the property charged with it. Three elements are
necessary to a valid salvage claim: 1) a marine peril; 2) service voluntarily rendered when not
required as an existing duty or from a special contract; 3) success, in whole or in part, or that the
service rendered contributed to such success.

Plaintiff claims that Nippon was a derelict. A derelict is defined as a “ship or her cargo which is
abandoned and deserted at sea by those who were in charged of it, without any hope of recovering
it (sine spe recuperandi) or without any intention of returning to it (sine animo revetendi). If
those in charge left with the intention of returning or of procuring assistance, the property is
not derelict. But if they quitted the property with the intention of finally leaving it, it is derelict,
and a change of their intention and attempt to return will not change its nature.

Here, the trial court held that Nippon had been abandoned. If there was intent to return and salvage,
this does not appear to have been firmly fixed considering the leisurely manner in which the master
of Nippon proceeded after he reached Hongkong. This finding is supported by evidence. Weston,
Nippon’s chief officer, sent a telegram on the evening of May 12, 1913, that there is little hope of
saving ship. Dixon, Manchuria’s captain, after rescuing the remainder of the crew, sent a telegram
on May 13, 1913 to the director of navigation that the “ship abandoned.” After the crew members
and Weston reached manila, they made a signed statement that Weston immediately wired the
director of navigation for assistance to rescue the crew as their lives were in danger and the ship a
wreck.

Captain Eggert, Nippon’s captain, did not make any determined effort to arrange for the salvage
of Nippon. He had 2 days, he did nothing, while plaintiffs who were strangers sent out a salvage
expedition in 24 hours after they discovered that the ship was wrecked.

The evidence shows that Nippon was in peril. The captain left to protect his life and that of his
crew. Animo revertendi was slight.

2) YES.
There were disputes whether Manila or Hongkong should be used as base for operations. But
Captain robinson, who was the only one of the experts who had experience in handling wet copra,
unqualified approved Manila as a base for operations. Plaintiff use Manila as base. Thus, plaintiffs
were diligent in commencing the work.

3) Compensation as salvage is not based on the principle of quantum meruit or as remuneration

pro opera et labore, but as reward given for perilous services, voluntarily rendered, and as
inducement to mariners to embark in dangerous enterprises to save life and property.

Plaintiff’s contention that the expenses should be reimbursed and the remainder divided has no
basis. The expenses must be borne by them. A part of the risk that they incurred was that the
goods salved would not pay them for the amount expended in salving them. The libelant
(*yung nag salvage) and the owners must mutually bear their share of the loss in value by the
sale. If the libelant has been unfortunate and spent his time and money in saving property not worth
the expense he made, it is a misfortune not uncommon to all who seek gain by adventurous
speculations in values. The libelant cannot rely on the common law idea of an implied contract
to pay for work on and about one’s property nor upon any notion of an implied maritime contract
with a maritime lien as in the case of repairs furnished a vessel. In such case, the owner would
lose all if his property did not satisfy the debt. This doctrine has no place in maritime law of
salvage. If the libelant gets the whole, the property had as well been lost entirely so far as the
owner is concerned.

As to the award, the courts have a wide discretion determined by the facts and the degree of merit.
There is no fixed rule for salvage allowance. The old hard and fast rule of 50% of a derelict was
abandoned. The property salved include dry copra and agar-agar which were salved with more
ease than the wet copra. Courts in past cases make a distinction in this regard. In The America, the
award was 25% on dry cargo salved, 50% on damaged, 60% on those salved by diving.

Here, there is no question as to the amount of salvage of the ship at P145,800. As to the copra and
agar-agar, in equity and justice, the award should be: 40% of the net value of the wet copra
salved; 25% of the dry copra; and 20% of the agar-agar.
(*additional note: SC cited old case defining quasi-derelict: abandoned, helpless, her sails gone,
entirely without power in herself to save herself from a situation not of imminent, but of
considerable peril)

131. Barrios v. Go Thong, GR L-17192, March 30, 1963, Barrera, J. (Salvage)

FACTS:
Plaintiff Honorio Barrios was the captain and master of MV Henry I of William Lines Incorporated
plying to and from Cebu and other sities and ports, like Dumaguete city etc. At 8pm on the evening
of May 1, 1958, Barrios received an SOS disress signal by blinkers from MV Don Alfredo, owned
by Carlos Go Thong & Company. Barrios went to MV Alfredo and found the vessel in trouble due
to engine failure and loss of propeller. So, with the consent of the captain of MV Alfredo, Barrios
tied with tow lines from MV Henry the MV Alfredo. MV Henry towed MV Alfredo towards
Dumaguete city. 9 hours later, while approaching Dumaguete, a sister ship of MV Alfredo
approached the two vessels and the tow lines to MV Henry was released.

William Lines has waived its claim for compensation for the towage service. Barrios claims that
there was salvage of a ship worth P100k. Trial court dismissed the case.

ISSUE:
Whether there was salvage.
HELD: NO.
Salvage Law or Act 2616 provides:
"SECTION 1. When in case of shipwreck, the vessel or its cargo shall be beyond the control
of the crew, or shall have been abandoned by them, and picked up and conveyed to a safe
place by other persons, the latter shall be entitled to a reward for the salvage.
"Those who, not being included in the above paragraph, assist in saving a vessel or its cargo
from shipwreck, shall be entitled to a like reward."
According to this, those who assist in saving a vessel or cargo from shipwreck is entitled to a
reward (salvage). In Erlanger & Galinger, the three elements for a valid salvage claim are: (1) a
marine peril, (2) service voluntarily rendered when not required as an existing duty or from a
special contract, and (3) success in whole or in part, or that the service rendered contributed to
such success.

1) There was no marine peril here. Although the vessel was in a helpless condition due to engine
failure, it did not drift too far from the place where it was. The weather was fair, clear, and
good. Although the vessel was drifting to the open sea, there was no danger of its foundering or
being stranded as it was far from any island or rocks. There was no danger that the vessel would
sink as the sea was smooth. Neither the passengers nor cargo were in danger of perishing. All that
the vessel’s crew members could not do was to move the vessel on its own power. That did not
make the vessel a quasi-derelict considering that even before MV Henry helped the ship, a sister
vessel was known to be on its way to succor it.

2) But there was a quasi-contract of towage. In consenting to Barrios’ offer to tow the vessel, Go,
thru its captain, impliedly entered into a juridical relation of “towage” with the owner of MV
Henry, William Lines. If the contract is one for towage, then only the owner of the towing vessel,
to the exclusion of the crew, may be entitled to remuneration. If the contract is for towage, the
crew does not have any interest or rights in the remuneration. But if for salvage, the crew of the
salvaging ship is entitled to salvage.

Here, as owner of the towing vessel, William Lines had expressly waived its claim for
compensation for the towage service. Thus, Barrios, whose right if at all depends upon the interest
of his employer, is not entitled to payment for such towage service.

CHAPTER 16- COGSA

132. Elser Inc. v. CA, GR L-6517, November 29, 1954, Bautista Angelo, J.
FACTS:
On December, 1945, goods were shipped on SS Sea Hydra of respondent Isthmian Steamship
Company from NY to Manila and were received by consignee Udharam Bazar & Co. except 1
case of vanishing cream. Udharam claimed for the loss from the insurer Atlantic Mutual Insurance
Co. and was paid by the latter’s agent petitioner Elser.

Trial court dismissed the complaint. CA held that Elser had lost their right to claim against
Isthmian because of their failure to serve notice upon the carrier within 30 days after receipt of the
notice of loss or damage as required in clause 18 of the BoL. Petitioners filed the claim on April
25, 1946, more than 30 days after they were aware of the loss. Hence this petition.

Petitioners claim that COGSA is applicable and thus, CA’s ruling is wrong.

ISSUE:
Whether COGSA is applicable.
HELD: YES.
1) If the case were to be governed by clause 18 of the BoL regardless of COGSA, CA’s ruling
would indeed be correct. But COGSA applies since it was made an integral part of the BOL by
EXPRESS STIPULATION. COGSA was adopted by our government thru CA 65, making this
Act “applicable to all contracts for the carriage of goods by sea to and from PH ports.” S3 (6)
thereof states:
"6. Unless notice of loss or damage and the general nature of such loss or damage be given
in writing to the carrier or his agent at the port of discharge or at the time of the removal
of the goods into the custody of the person entitled to delivery thereof under the contract
of carriage, such removal shall be prima facie evidence of the delivery by the carrier of the
goods as described in the bill of lading. If the loss or damage is not apparent, the notice
must be given within three days of the delivery.
"In any event the carrier and the ship shall be discharged from all liability in respect of loss
or damage unless suit is brought within one year after delivery of the goods or the date
when the goods should have been delivered: PROVIDED, That if a notice of loss or
damage, either apparent or concealed, is not given as provided for in this section, that fact
shall not affect or prejudice the right of the shipper to bring suit within one year after
the delivery of the goods or the date when the goods should have been delivered.
Thus, regardless of whether the notice of loss or damage was given, the shipper can still bring an
action to recover said loss or damage within 1 year after delivery of the goods.

2) This is contrary to clause 18. Which of the two must prevail?

Clause 18 must yield. COGSA states that: "Any clause, covenant, or agreement in a contract of
carriage relieving the carrier or the ship from liability for loss or damage to or in connection with
the goods . . . or lessening such liability otherwise than as provided in this Act, shall be null and
void and of no effect." This means that a carrier cannot limit its liability in a manner contrary
to what is provided in COGSA. Thus, clause 18 is void.

3) Isthmian contends that COGSA does not apply since the shipment was made in December 1945,
when the PH was still a territory or possession of US. Thus, the trade was not between a “foreign
trade.” And COGSA applies only to carriage of goods by sea to and from PH ports in foreign
trade.

But granting that there was no foreign trade, COGSA still applies since the parties expressly agreed
to incorporate COGSA in the contract of carriage. This is expressly recognized in S13 thereof:
"Nothing in this Act shall be held to apply to contracts for carriage of goods by sea between
any port of the United States or its possessions, and any other port of the United States or
its possessions: Provided, however, That any bill of lading or similar document of title
which is evidence of a contract for the carriage of goods by sea between each ports,
containing an express statement that it shall be subject to the provisions of this Act,
shall be subjected hereto as fully as if subject hereto by the express provisions of this
Act."

133. Ang v. Compañia Maritima, GR L-30805, December 26, 1984, Aquino, J. (COGSA)
FACTS:
Yau Yue Commercial Bank agreed to sell to Herminio Teves 559 packages of galvanized steel,
Durzinc sheets. The merchandise was loaded on May 25, 1961 in Japan in MS Luzon, a vessel
owned by Compañia, to be transported to Manila and consigned to the order of the shipper Tokyo
Boeki, which indorsed the BoL to the order of Yau Yue. Compañia authorized delivery of the
cargo to Teves who obtained delivery from the Bureau of Customs without surrender of the BoL
in violation of the terms thereof. Teves dishonored the draft drawn by Yau Yue against him.

Ang, as assignee of the BoL held by Yau Yue of Hongkong, sued Compañia Maritima. Compañia
moved to dismiss on the ground of lack of cause of action. Trial court dismissed the complaint due
to prescription of the 1-year period in the COGSA.

ISSUE:
Whether the action has prescribed.
HELD: NO.
This is already res judicata in Ang v. American Steamship Agencies. Therein, 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.
Since Ang filed the action less than 3 years from the alleged misdelivery, it has not yet prescribed.
As indorsee of the BoL, Ang is a real party in interest with a cause of action for damages.

134. DOLE PH Inc. v. Maritime Company of the Philippines, GR L-61352, February 27,
1987, Narvasa, J. (Notice of Claim and Prescriptive Period: COGSA, Case 103)

135. Sea-Land Service Inc. v. IAC, GR 75118, August 31, 1987, Narvasa, J. (COGSA; BoL
prohibited and limiting stipulations, Case 87)

136. Maritime Agencies & Services Inc. v. CA, GR 77638, July 12, 1990, Cruz, J. (COGSA)
FACTS:
Transcontinental Fertilizer Company (TFC) chartered from Hongkong Island Company the vessel
“Hongkong Island” for shipment of 8073 MT of bagged urea from USSR to PH. They signed a
Uniform General Charter. 5400MT was for consignee Atlas Fertilizer Company. These were
insured with Union Insurance Society of Canton. Maritime Agencies & Services Inc. was
appointed as TFC’s or charterer’s agent and Macondray as Hongkong Island Inc.’s or owner’s
agent.

The vessel arrived and partially unloaded the goods at Manila, then finally at Cebu on Oct. 20,
1979. Atlas filed a formal claim against Maritime for 1383 shortlanded bags. This was rejected.
Union as insurer paid the total indemnity. Union then filed a complaint for reimbursement against
Hongkong Island Company, Maritime Agencies, and Macondray.

RTC held the three of them liable. CA held TFC and its agent Maritime liable and exempted
Hongkong Island from liability. Hence this petition.

ISSUE:
Which of the parties are liable?
HELD: Only HK Island Company.
1) There are 3 general categories of charters. A demise transfers full control of the vessel. A time
charter is a contract to use a vessel for a particular period of time. A voyage charter is a contract
for the hire of a vessel for one or a series of voyages.

The voyage charter is a contract of affreightment and is considered a private carriage. Thus, the
parties may freely contract as to their liability for damage to the goods. Here, the charterer was
responsible for loading, stowage, and discharging at the ports while the owner for the care of
the cargo during the voyage.

The trial court found that 1383 bags were shortlanded, meaning that they were damaged or lost on
board before unloading. The shipowner is liable for this.

2) But the period for filing the claim is one year under COGSA. This was adopted thru CA 65 and,
as a special law, prevails over the general provisions of NCC on prescription of actions. S3(6)
provides:
Provided, that if a notice of loss for damage, either apparent or concealed, is not given as
provided for in this section, that fact shall not affect or prejudice the right of the shipper to
 bring suit within one year after the delivery of the goods or the date when the goods should
have been delivered.

The one-year period should commence on Oct. 20, 1979 when the last item was delivered to Atlas
Fertilizer. Union’s complaint against HK Island was filed on September 19, 1980, but tardily
against Macondray on April 20, 1981. The action has prescribed as to Macondray but not against
its principal, which is what matters anyway.

As to the goods damaged during unloading, the charterer is liable having assumed this activity
under the charter party. But TFC has not been impleaded. The liability imposable upon it cannot
be borne by Maritime which, as mere agent, is not answerable for injury caused by its principal.
The agent shall be liable for the act or omission of the principal only if the latter is undisclosed.

Thus the SC held that Macondray is not liable. Maritime is not liable for the acts of its known
principal resulting in injury to Union. It affirmed the trial court finding that HK Island is liable.

137. Mayer Steel Pipe Corporation v. CA, GR 124050, June 19, 1997, Puno, J.(COGSA)
FACTS:
Petitioner HK Government Supplies Department contracted with petitioner Mayer to manufacture
and supply steel pipes. Mayer shipped the pipes to HK. Mayer insured the pipes against all risks
with private respondents South Sea Surety and Insurance and Charter Insurance Corp. The steel
pipes were certified in good order before loading in the vessel. But when the goods reached HK, a
substantial portion thereof was damaged.

Petitioners filed a claim against private respondents for indemnity under the insurance contract.
Charter Insurance paid HK$64k but refused to pay the balance of HK$299k because, respondents
claim, these were due to factory defect.

Petitioners filed an action against private respondents. Trial court ruled for petitioners. But CA
held that the action was barred under S3(6) of COGSA since it was filed only on April 17, 1986,
more than 2 years from when the goods were unloaded. Hence this petition.

ISSUE:
Whether S3(6) of COGSA is applicable.
HELD: NO.
S3(6) of COGSA states that the carrier and ship agent shall be discharged from liability for
damage to goods if no suit is filed within 1 year from delivery of the goods. Under this, only the
CARRIER’s liability is extinguished if no suit is brought within 1 year. But the liability of the
INSURER is NOT extinguished because the insurer’s liability is based not on the contract of
carriage but on the contract of insurance. COGSA governs the relationship between the carrier
on one hand, and the shipper, consignee, and/or insurer on the other. But it does not affect the
relationship between the shipper and insurer. The latter case is governed by the Insurance Code.

The ruling in Filipino Merchants Insurance Co. v. Alejandro is not applicable because therein, it
was the insurer which filed a claim against the carrier. Here, it is the shipper which filed a claim
against the insurer. The basis of the shipper’s claim is the “all risks” insurance policies issued by
private respondents to Mayer. The ruling in Filipino Merchants should apply only to suits against
the carrier filed either by the shipper, consignee, or insurer. When it was said that COGSA S3(6)
applies to the insurer, it was meant that the insurer also, like the shipper, may no longer file a claim
against the carrier beyond the 1-year period in COGSA. But the shipper may still file a claim
against the insurer.

CHAPTER 19- PUBLIC SERVICE REGULATIONS

138. Luzon Stevedoring Co. v. Public Service Commission, GR L-5458, September 16, 1953,
Tuason, J. (Public Service Regulations)
FACTS:
Petitioners Luzon Stevedoring and Visayan Stevedore Transportation Co. are corporations mainly
engaged in the stevedoring or lighterage and harbor towage business. They are also engaged in
interisland service of hauling cargoes like sugar etc. which are loaded in their barges and towed
by their tugboats from Manila to various points in Visayas. They charge freightage. There is no
fixed route in the transportation, this being left at the indication of the owner or shipper. The barge
and tugboats are manned by the crew of petitioners.

In the hauling business, they serve a limited portion of the public. Luzon Stevedoring has among
its regular customers San Miguel Glass Factory, PRATRA, Shell Co., etc. while Visayan
Stevedore has Shell Company, PRATRA, etc.

Respondent Philippine Shipowners’ Association filed a complaint against petitioners, charging

that they were engaged in transport of cargo for hire without authority from the Public Service
Commission. The PSC restrained petitioners from further operating their watercraft to transport
goods for hire until the rates they propose are approved by PSC. Hence this petition for review.

ISSUE:
Whether petitioners are engaged in public service.
HELD: YES.
S13(b) of the Public Service Law, CA 146, defines public service:
"The term 'public service' includes every person that now or hereafter may own, operate,
manage, or control in the Philippines, for hire or compensation, with general or limited
clientele, whether permanent, occasional or accidental, and done for general business
purposes any common carrier, railroad, street railway, traction railway, subway, motor
vehicle, either for freight or passenger, or both, with or without fixed route and whatever
may be its classification, freight or carrier service of any class, express service, steamboat,
or steamship line, xxx.

Under this definition, it is not necessary to hold himself out as serving the public in order to be
considered public service. It includes a public service rendered for compensation “although limited
exclusively to the customers of petitioner.” Here, petitioners were rendering transportation service
for compensation to a limited clientele, not to the public at large.

It is only necessary that an organization must in some way be impressed with a public interest.
Whether the operation of a business is a public utility depends on whether its service is of a public
character, consequence and concern.
Petitioners claim that their contracts were of a private lease. But their watercraft was manned
entirely by crews in their employ and payroll, and the operation thereof was under their control.

Petitioners claim that CA 146’s definition includes only those offering to serve indiscriminately
the public. But CA 146 declares in unequivocal language that an enterprise of any of the kinds
therein enumerated is a public service if conducted for hire or compensation even if the operator
deals only with a portion of the public or limited clientele. Public utility is not defined by the
number of people actually served.

The transportation service of petitioners was not casual or incidental. It has been carried on
regularly for years. They did not have the same customers all the time and there was no reason to
believe that they would not accept, and there was nothing to prevent them from accepting,
new customers. Thus, the PSC’s order does not invade private rights.

The main purpose of CA 146 is not only to protect the public against unreasonable charges and
poor, inefficient service, but also to prevent ruinous competition.

139. San Pablo v. Pantranco South Express, Inc., GR L-61461, August 21, 1987, Gancayco,
J. (Public Service Regulations; ferry vs interisland)
FACTS:
Pantranco has a certificate of public convenience (CPC) for land transportation by buses from
Manila to Bicol and eastern Samar. Pantranco wrote MARINA requesting for authority to
lease/purchase MV Black Double to be used to operate a ferryboat service from Matnog,
Sorsogon to Allen, Samar. This was denied by Marina because the line is adequately serviced.

Nonetheless, Pantranco purchased MV Black Double for P3M. It wrote the chairman of the Board
of Transportation (BOT) that it wants to operate a ferry service to carry its bus passengers between
Allen and Matnog in connection with its trips to Tacloban. It claims that it does not need to obtain
a separate CPC because the ferry service is only for the purpose of continuing the highway
which is interrupted by a small body of water, invoking Javellana v. PSC.

The secretary of justice rendered an opinion that there is no need to get a separate CPC. So BOT
allowed Pantranco to operate its ferryboat service as part of its CPC. Petitioners Epitacio San Pablo
and Cardinal Shipping Corporation, franchise holders of the ferry service in the area, moved for
reconsideration, which BOT denied. Hence these petitions for review.

ISSUE:
Whether there is a need for Pantranco to obtain a separate CPC.
HELD: YES.
1) In Javellana, we distinguished between a ferry service and coastwise/interisland service. We
held that the legislature intended ferry to mean the service either by barges or rafts, even by motor
or steam vessels, between the banks of a river or stream to continue the highway which is
interrupted by the body of water, or in some cases, to connect two points on opposite shores of an
arm of the sea such as bay or lake which does not involve too great a distance or too long a time
to navigate. But where the line of service involves crossing the open sea, the service is an
interisland or coastwise trade.

Here, Matnog and Allen is traversed by the San Bernardino Strait which leads towards the Pacific
Ocean. The distance is 23km which may be negotiated by vessel at about 1.5 hours to 2 hours. As
the San Bernardo Strait leads to the ocean, it must at times be choppy and rough so that it will
not be safe to navigate by small boats but only by steamboats like MV Black Double.

Thus, the conveyance of passengers or cargo from Matnog to Allen is not a ferryboat service but
a coastwise or interisland shipping service. The sea between them cannot be considered a
continuation of the highway. While a ferryboat service has been considered a continuation of the
highway when crossing rivers or even lakes, which are small bodies of water separating the
land, but when, as here, the two terminals are separated by an open sea, it is not a continuation of
the highway. Pantranco should secure a separate CPC to operate an interisland or coastwise
shipping service. Its CPC as a bus transportation cannot be merely amended to include this water
service.

2) Pantranco’s claim that its ferry service operation is a private carrier is absurd. It charges
passengers separately from the charges for bus trips and issues separate tickets whenever they
board MV Black Double. We see no reason why it cannot accept walk-in passengers just for the
purpose of crossing the sea between Matnog and Allen.

140. Manzanal v. Ausejo, GR L-31056, August 04, 1988, Medialdea, J. (Public Service
Utilities)
FACTS:
Mauro Ausejo filed an affidavit with the Complaint, Investigation, and Enforcement Office
(CIEO) narrating a hold-up incident involving a taxicab with plate number 6100. PSC issued a
show-cause order to Manzanal as to why her CPC should not be cancelled.

At trial, Ausejo and companion Caballes narrated that they were strolling along the seaside
embankment of Roxas Boulevard. When they were in front of L&S Building, 3 men alighted from
a vehicle behind them and held-up both of them. The two resisted and attracted the attention of
promenaders and about 12 passing motorists who watched the spectacle. Ausejo tried to shoot one
of the men with his pistol but it jammed. The two companions were warned that Ausejo was armed,
and the 3 men rushed to a waiting taxi with plate no. 6100. Caballes testified that the taxi was red
and Ausejo said that it was red with parts blue. Both said that the plate color was orange.

Manzanal submitted documents that her taxis’ color was a red top with emerald green body and
certifications that the color of plates in 1965 was white with a maroon background.

PSC cancelled Manzanal’s CPC based on S19(a) of the Public Service Law and S47 of its Revised
Order 1and considered the charges proven. Hence this petition for review.

ISSUE:
Whether the cancellation was proper.
HELD: NO.
1) S19 of the public service Act provides:
"Section 19. Unlawful acts. — It shall be unlawful for any public service: (a) to provide or
maintain any service that is unsafe, improper, or inadequate, or withhold or refuse any
service which can reasonably be demanded and furnished, as found and determined by the
Commission in a final order which shall be conclusive and shall take effect in accordance
with this Act upon appeal or otherwise.
S19(a) contemplates the failure to provide a service that is safe or adequate and refusal to render
any service which can be reasonably demanded. It refers specifically to the operator’s inability to
provide reliable vehicles to transport the riding public to their places of destination and to
failure to provide an adequate number of units authorized under his franchise at all times to
secure the public of sustained service. “Unsafe, inadequate, and improper” is broad enough to
cover a lot of things, but they must be interpreted in consonance with the purpose of the law, which
is to protect the public against unreasonable charges and poor inefficient service.

Here, there is no evidence that Manzanal rendered a service that is unsafe etc. There is no testimony
that her vehicles may endanger the lives of passengers. While the provision does not require a
passenger-operator relationship, a single hold-up incident not clearly linking Manzanal’s taxicab
is not within its meaning.

2) S47 of Revised Order 1 refers to the kind of persons the operator must employ: courteous, of
good moral character, and no record of criminal conviction. This applies to those already employed
and those merely seeking admission. Here, there is no proof that Manzanal hired a driver with a
criminal record or bad moral character.

All that was proved was the hold-up incident. Manzanal successfully refuted the alleged
participation of her taxi from the decision of PSC granting her petition to color her 5 taxis with
emerald green and the certificate of the Land Transportation Commission that the plates for taxis
in 1965 have a maroon background, and the certification of the maker of vehicle plates for said
Commission that orange plates are given to privately owned vehicles and that the number 6100
was given to both taxis and privately owned vehicles.

3) Under S16(n) of the Public Service Act, the power of PSC to suspend/revoke any CPC may
only be exercised whenever the holder has violated or willfully and contumaciously refused to
comply with any order, rule or regulation of PSC. Some instances where a cancellation of a CPC
was upheld are: 1) where the holder is a mere dummy, 2) where the operator ceased operation
and placed his buses on storage, and 3) where the operator totally abandons the service. But
none of the willful acts in patent violation of the Public Service Law can be attributed to Manzanal.

141. Cogeo-Cubao Operators and Drivers Association v. CA, GR 100727, March 18, 1992,
Medialdea, J. (Public Service Regulations)
FACTS:
Lungsod Silangan, respondent, has a CPC to operate a jeepney service thru the route of Cogeo-
Cubao. Petitioner is an association registered with SEC. When Lungsod Silangan adopted a
Bandera system, by which a member of the cooperative is permitted to queu for passengers at the
disputed pathway in exchange for a ticket worth P20, the proceeds of which would be used for
Christmas programs of the drivers and other benefits, petitioners formed a human barricade for
10 days and assumed the dispatching of passenger jeepneys. Lungsod Silangan sued them for
damages.

Trial court awarded P50k actual damages and P10k attorney’s fees. CA awarded only nominal
damages of P10k. Hence this petition.

ISSUE:
Whether Lungsod Silangan is entitled to damages.
HELD: YES.
Under the Public Service Law, a CPC is an authorization issued by PSC for the operation of public
services for which no franchise is required by law. a CPC is included in the term “PROPERTY”
in the broad sense. Under the PS Law, a CPC can be sold by the holder because it is considered a
valuable asset. Even if it is private property, it is affected with public interest and must submit to
government control.

Thus, as to the government, a CPC does not confer upon the holder any proprietary right or
interest or franchise in the route covered. But with respect to other persons, a CPC as property
cannot be interfered with without due process of law. actions may be maintained in courts by
the holder of a CPC against those who have not been authorized to operate in competition with the
holder.

Petitioner association forcibly took over the operation of the jeepney service without authorization
from PSC and in violation of Lungsod Silangan’s right to operate its services under the CPC.
Art. 21 of NCC provides that any person who willfully causes loss or injury to another in a manner
contrary to morals, good customs, or public policy shall compensate the latter for damages. This
covers a situation where a legal right is violated by another in a manner contrary to morals etc.
Here, Lungsod Silangan’s activities and earnings for 10 days were paralyzed. Thus, petitioner
violated Lungsod’s right to conduct its operations.

But since there is no proof of the damage, only nominal damages of P10k was awarded.

142. ilusang Mayo Uno Labor Center v. Hon. Garcia, Jr., GR 115381, December 23, 1994,
Kapunan, J. (Public Service Regulations, Case 19)

143. Tatad v. Hon. Garcia, GR 114222, April 06, 1995, Quiason, J. (Public Service
Regulations)
FACTS:
DOTC planned to construct the EDSA LRT III under the Build-Operate Transfer (BOT) Law.
Pursuant to the law, DOTC issued orders creating the Prequalification Bids and Awards
Committee (PBAC). It issued guidelines for prequalification of contractors. The notice, advertising
the prequalification of bidders, was published in 3 newspapers once a week for 3 weeks. 5 groups
respondent, but only EDSA LRT Corporation, private respondent, was found by PBAC to meet
the requirements based on the prequalification criteria of PBAC.
At first, an agreement thru negotiatoin was made between DOTC and EDSA LRT Corporation
which was disapproved by the president. Later, president ramos approved a renegotiated
agreement (Revised and Restated Agreement to BLT a LRT System for Edsa).

According thereto, EDSA LRT Corporation shall finance and undertake the entire project. Target
completion is 1,080 days. Upon completion, respondent shall deliver the use and possession of
the completed portion to DOTC which shall operate the same. DOTC shall pay respondent a
monthly rental. After 25 years, DOTC and after DOTC shall have completed payment of rentals,
ownership of the project shall be transferred to DOTC for only $1.

Petitioners senators argue that EDSA LRT Corporation, being a foreign corporation, cannot own
EDSA LRT III, a public utility.

ISSUE:
Whether EDSA LRT Corporation would be granted ownership of a public utility under the revised
agreement.
HELD: NO.
EDSA LRT III is a corporation existing under the laws of Hongkong. As lessor, it will turn over
to DOTC, as lessee, for the latter to operate the system and pay rentals for the use.

But what EDSA Corp. will own are the rail tracks, rolling stocks like the coaches, rail stations,
terminals, and the power plant, NOT a PUBLIC UTILITY. These by themselves do not
constitute a public utlity. What constitutes a public utility is not their ownership, but their USE
to serve the public.

Art. XII, S11 of the Constitution 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, nor shall such franchise, certificate or authorization be
exclusive in character or for a longer period than fifty years . . ."
There is a clear distinction between “operation” of a public utility and the ownership of the
facilities used.

Ownership is defined as a relation in law by virtue of which a thing pertaining to one person is
completely subjected to his will in everything not prohibited by law or the concurrence with the
rights of another. The right to operate a public utility may exist independently from the ownership
of the facilities thereof. One can own the facilities without operating them as public utility and
vice versa.

Here, while EDSA Corp. owns the facilities necessary to operate EDSA LRT III, it is not
enfranchised to operate as public utility. Thus, it agreed with DOTC that on completion, it will
deliver possession by lease for 25 years to DOTC, during which period DOTC shall operate the
same as a CC and EDSA Corp. shall provide technical maintenance. EDSA Corp. shall also train
DOTC personnel for the operation of the equipment. But the agreement’s objective is that by the
end of the 3-year construction period, DOTC shall be able to operate EDSA LRT III on its own
and train all new personnel by itself.

Since DOTC shall operate EDSA LRT III, it shall assume the obligations of a CC. EDSA Corp.
will not run the light rail vehicles and collect fees from the public. It will have no dealings with
the public and the public will have no right to demand any services from it. Indeed, a mere
owner and lessor of the facilities used by a public utility is not a public utility. Even the mere
formation of a public utlility corporation does not ipso facto characterize the corporation as
operating a public utility. The moment to determine the requisite Filipino nationality is when the
entity applies for a franchise, certificate, or other authorization for such purpose.

144. PAL v. Civil Aeronautics Board, GR 119528, March 26, 1997, Torres, Jr., J. (Public
Service Regulations)
FACTS:
Respondent GrandAir applied for a Certificate of Public Convenience and Necessity with CAB.
PAL, holder of a legislative franchise to operate air transport services, opposed. It claims that CAB
has no jurisdiction to hear GrandAir’s application unless the latter first obtain a franchise to
operate from Congress. CAB’s hearing officer denied the opposition.

GrandAir also applied for a temporary operating permit (TOP) which PAL also opposed. CAB
approved the issuance of a TOP to GrandAir for 3 months. This was extended for 6 months. Hence
this petition.

ISSUE:
Whether CAB has the power to issue Certificates of public convenience and necessity to air
transport operators without a legislative franchise.
HELD: YES.
1) CAB has jurisdiction over GrandAir’s application for a TOP. CAB is expressly authorized by
RA 776 and nothing in the said law negates the power to issue a TOP before completion of the
applicant’s evidence and of the oppositor. CAB’s’ authority to grant a TOP “upon its own
initiative” strongly suggests that it can do so even before presentation of evidence.

2) The power to authorize and control the operation of a public utility is admittedly a prerogative
of the legislature. Congress has granted administrative agencies to grant licenses for operation of
certain public utilities. A franchise may be derived indirectly from the state thru a duly designated
agency.

CAB thus has the authority to issue a CPCN or TOP to a domestic air transport operator who,
though not possessing a legislative franchise, meets all the other requirements prescribed by
law enumerated in S21 of RA 776. There is nothing in the law or constitution requiring a
legislative franchise for an entity to operate as a domestic air transport operator. Although S11,
Art. XII recognizes Congress’ control over any franchise or authority to operate a public utility, it
does not mean that Congress has exclusive authority to issue the same. In many instances,
Congress has delegated this function to government agencies specialized in their respective areas.
S10 of RA 776 reveals the intent of Congress to DELEGATE the authority to regulate the issuance
of a license to operate domestic air transport services:
SEC. 10. Powers and Duties of the Board. (A) Except as otherwise provided herein, the
Board shall have the power to regulate the economic aspect of air transportation, and shall
have general supervision and regulation of, the jurisdiction and control over air carriers,
general sales agents, cargo sales agents, and air freight forwarders as well as their property
rights, equipment, facilities and franchise, insofar as may be necessary for the purpose of
carrying out the provision of this Act.
The CAB is given the following specific powers and duties:
(C) The Board shall have the following specific powers and duties: (1) In accordance with
the provisions of Chapter IV of this Act, to issue, deny, amend, revise, alter, modify, cancel,
suspend or revoke in whole or in part upon petition or complaint or upon its own initiative
any Temporary Operating Permit or Certificate of Public Convenience and Necessity
xxx.

To be valid, the delegation must be circumscribed by legislative restrictions. Here, Congress has
set specific limitations on how such authority should be exercised. S4 of RA 776 sets out certain
guidelines. More importantly, S12(citizenship requirement) and S21(applicant is fit and willing to
perform the service properly, and the service is required by public convenience and necessity)
enumerated the requirements to determine the competency of a prospective operator to engage in
the public service of air transport.

3) PAL argues that since RA 776 gives the Board authority to issue Certificates of Public
Convenience and Necessity, this means that there is a need for legislative franchise, citing a
number of authorities that a CPCN is issued to a public service for which a franchise is required
by law as distinguished from a Certificate of Public Convenience which is an authorization for
operation of public services that do not need franchise. This presumes that the authority to issue
a CPCN is a regulatory measure distinct from the authority to grant a franchise.

The terms “convenience and necessity”, if used together in a statute, are not separable and are
construed together. Both word modify each other. Public convenience and necessity exists when
the proposed facility will meet a reasonable want of the public and supply a need which existing
facilities do not adequately afford. But the use of “necessity” in conjunction with “public
convenience” in a certificate of authorization does not in any way modify the nature of such
certification or the requirements for issuance of the same. It is the law which determines the
requisites for issuance of such certification, and not the title indicating the certificate.

CAB was ordered to continue hearing the application of GrandAir.