TRANSPORTATION LAW

Basically the law which governs in transportation

law are the civil code provisions on common
carriers. This does not mean, however, that the civil
code solely governs the law on transportation. In
fact, in the civil code itself more particularly in
Article 1766, it is provided 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.
When we say special laws, what particular laws are
we referring to? Are they all domestic laws? What
about in international transportation? What law shall
we apply?
The civil code provision previously cited made
mention of the Code of Commerce and other special
laws. When we refer to special laws, we refer to
those laws which have domestic application but are
not necessarily domestic laws. One such law used in
transportation law is the Warsaw Convention for air
transportation.
Dean Jose R. Sundiang, in his book Reviewer on
Commercial Law made mention of rules on what
law should be applied in transportation law. Said
rules are as follows:

c.

Carriage from Philippine Ports to Foreign

Ports:
1.

d.

e.

The laws of the country to which

the goods are to be transported
(Article 1753 of the Civil Code)

Overland Transportation:
1.

Civil Code primary law

2.

Code of Commerce suppletorily

Air Transportation:
1.

Civil Code

2.

Code of Commerce

3.

For International Carriage

Convention for the Unification of
Certain Rules relating to the
International Carriage by Air or
Warsaw Convention with its
amendments.

Distinguish a Common Carrier from a Private

Carrier.
Particulars

Common carriers shall be governed by the

following laws:
a.

b.

Coastwise Shipping:
1.

New Civil Code (Articles 1732

1766) this is the primary law

2.

Code of Commerce governs

suppletorily in the absence of Civil
Code provisions

Carriage from Foreign Ports to Philippine

Ports:
1.

New Civil Code primary law

2.

Code of Commerce all matters not

regulated by the Civil Code

Common
Carrier
1. Character of Regardless if
the business
undertaking is
a
single
transaction
only.

2. Employment

Holding out to
the public.

3.
Binding Not bound to
contract
to carry unless it
carry
enters a special
agreement.
4. Regulation
Subject
to
regulation.
5. Diligence
Extraordinary
diligence.
6. Stipulation Cannot
against liability stipulate. It is

Private Carrier
Undertaking is
a
single
transaction, not
part
of
a
general
business
or
occupation.
Special
case
for a private
individual.
Bound to carry
for all who
offer
such
goods.
Not subject to
regulation.
Diligence of a
good father of
a family.
May
validly
enter
into

void
and stipulation.
against public
policy.

SECTION 4. - Common Carriers (n)

SUBSECTION 1. - General Provisions
Art. 1732. Common carriers are persons,
corporations, firms or associations engaged in the
business of carrying or transporting passengers or
goods or both, by land, water, or air, for
compensation, offering their services to the public.
Common carriers do not refer to the jeepneys,
buses, taxis to name a few, which we see
everyday. Under the civil code, common carriers are
in fact PERSONS, CORPORATIONS, FIRMS OR
ASSOCIATIONS engaged in the business of
carrying or transporting passengers or goods or
both, by land, water, or air for compensation,
offering their services to the public.
The oft-cited case in bar examinations which
defines what common carriers really are, is De
Guzman vs. Court of Appeals, which provides:
"The above article (Art. 1732, Civil Code) makes no
distinction between one whose principal business
activity is the carrying of persons or goods or both,
and one who does such carrying only as an
ancillary activity (in local idiom, as a 'sideline').
Article 1732 x x x avoids making any distinction
between a person or enterprise offering
transportation service on a regular or scheduled
basis and one offering such service on an
occasional, episodic or unscheduled basis. Neither
does Article 1732 distinguish between a carrier
offering its services to the 'general public,' i.e., the
general community or population, and one who
offers services or solicits business only from a
narrow segment of the general population. We think
that Article 1877 deliberately refrained from
making such distinctions.
Another often cited case is First Philippine
Industrial Corporation vs. Court of Appeals, which
provides:
Based on the above definitions and requirements,
there is no doubt that petitioner is a common

carrier. It is engaged in the business of transporting

or carrying goods, i.e. petroleum products, for hire
as a public employment. It undertakes to carry for
all persons indifferently, that is, to all persons who
choose to employ its services, and transports the
goods by land and for compensation. The fact that
petitioner has a limited clientele does not exclude it
from the definition of a common carrier.
May a common carrier be converted to a private
carrier? The answer is yes. In the case of Caltex
Phils. vs. Sulpicio Lines, it was ruled:
Charter parties fall into three main categories: (1)
Demise or bareboat, (2) time charter, (3) voyage
charter. Does a charter party agreement turn the
common carrier into a private one? We need to
answer this question in order to shed light on the
responsibilities of the parties.
In this case, the charter party agreement did not
convert the common carrier into a private carrier.
The parties entered into a voyage charter, which
retains the character of the vessel as a common
carrier.
In Planters Products, Inc. vs. Court of Appeals, we
said:
It is therefore imperative that a public carrier
shall remain as such, notwithstanding the charter of
the whole or portion of a vessel by one or more
persons, provided the charter is limited to the ship
only, as in the case of a time-charter or voyage
charter. It is only when the charter includes both the
vessel and its crew, as in a bareboat or demise that
a common carrier becomes private, at least insofar
as the particular voyage covering the charter-party
is concerned. Indubitably, a ship-owner in a time or
voyage charter retains possession and control of the
ship, although her holds may, for the moment, be
the property of the charterer.
Later, we ruled in Coastwise
Corporation vs. Court of Appeals:

Lighterage

Although a charter party may transform a

common carrier into a private one, the same
however is not true in a contract of affreightment
xxx

The provisions of our Civil Code on common

carriers were taken from Anglo-American law.
Under American jurisprudence, a common carrier
undertaking to carry a special cargo or chartered to
a special person only, becomes a private carrier. As
a private carrier, a stipulation exempting the owner
from liability for the negligence of its agent is not
against public policy, and is deemed valid.

passengers transported by them, according to all the

circumstances of each case.
Such extraordinary diligence in the vigilance over
the goods is further expressed in Articles 1734
Art. 1734. Common carriers are responsible
for the loss, destruction, or deterioration of
the goods, unless the same is due to any of
the following causes only:
(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 of 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.

Such doctrine We find reasonable. The Civil Code

provisions on common carriers should not be
applied where the carrier is not acting as such but
as a private carrier. The stipulation in the charter
party absolving the owner from liability for loss due
to the negligence of its agent would be void only if
the strict public policy governing common carriers
is applied. Such policy has no force where the
public at large is not involved, as in this case of a
ship totally chartered for the use of a single party.
(Underscoring supplied.)
Indeed, where the reason for the rule ceases, the
rule itself does not apply. The general public enters
into a contract of transportation with common
carriers without a hand or a voice in the
preparation thereof. The riding public merely
adheres to the contract; even if the public wants to,
it cannot submit its own stipulations for the
approval of the common carrier. Thus, the law on
common carriers extends its protective mantle
against one-sided stipulations inserted in tickets,
invoices or other documents over which the riding
public has no understanding or, worse, no choice.
Compared to the general public, a charterer in a
contract of private carriage is not similarly situated.
It can -- and in fact it usually does -- enter into a
free and voluntary agreement. In practice, the
parties in a contract of private carriage can
stipulate the carriers obligations and liabilities
over the shipment which, in turn, determine the
price or consideration of the charter. Thus, a
charterer, in exchange for convenience and
economy, may opt to set aside the protection of the
law on common carriers. When the charterer
decides to exercise this option, he takes a normal
business risk.
Art. 1733. 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

, 1735,
Art. 1735. In all cases other than those
mentioned in Nos. 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.
and 1745, Nos. 5, 6, and 7,
Art. 1745. Any of the following or similar
stipulations
shall
be
considered
unreasonable, unjust and contrary to public
policy:
xxx
(5) That the common carrier shall
not be responsible for the acts or
omission 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;

(7) That the common carrier is 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.
while the extraordinary diligence for the safety of
the passengers is further set forth in Articles 1755
Art. 1755. A common carrier is bound to
carry the passengers safely as far as human
care and foresight can provide, using the
utmost diligence of very cautious persons,
with a due regard for all the circumstances.
and 1756.
Art. 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.

SUBSECTION 2. - Vigilance Over Goods

Art. 1734. Common carriers are responsible for the
loss, destruction, or deterioration of the goods,
unless the same is due to any of the following
causes only:
(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 of 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.
In Eastern Shipping Lines, Inc. vs. Intermediate
Appellate Court, we ruled that since the peril of fire
is not comprehended within the exceptions in Article
1734, then the common carrier shall be presumed to
have been at fault or to have acted negligently,
unless it proves that it has observed the
extraordinary diligence required by law.

Even if fire were to be considered a natural disaster

within the purview of Article 1734, it is required
under Article 1739 of the same Code that the
natural disaster must have been the proximate and
only cause of the loss, and that the carrier has
exercised due diligence to prevent or minimize the
loss before, during or after the occurrence of the
disaster.
We have held that a common carrier's duty to
observe the requisite diligence in the shipment of
goods lasts from the time the articles are
surrendered to or unconditionally placed in the
possession of, and received by, the carrier for
transportation until delivered to or until the lapse of
a reasonable time for their acceptance by the
person entitled to receive them. When the goods
shipped either are lost or arrive in damaged
condition, a presumption arises against the carrier
of its failure to observe that diligence, and there
need not be an express finding of negligence to hold
it liable.
Common carriers are obliged to observe
extraordinary diligence in the vigilance over the
goods transported by them. Accordingly, they are
presumed to have been at fault or to have acted
negligently if the goods are lost, destroyed or
deteriorated. There are very few instances when the
presumption of negligence does not attach and these
instances are enumerated in Article 1734. In those
cases where the presumption is applied, the
common carrier must prove that it exercised
extraordinary diligence in order to overcome the
presumption.
Art. 1735. In all cases other than those mentioned in
Nos. 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.
1. Proof of the delivery of goods in good
order to a common carrier and of their
arrival in bad order at their destination
constitutes prima facie fault or negligence
on the part of the carrier. If no adequate
explanation is given as to how the loss, the
destruction or the deterioration of the goods

happened, the carrier shall be held liable

therefor.
2. From the nature of their business and for
reasons of public policy, common carriers
are bound to observe extraordinary
diligence over the goods they transport
according to all the circumstances of each
case. In the event of loss, destruction or
deterioration of the insured goods, common
carriers are responsible, unless they can
prove that the loss, destruction or
deterioration was brought about by the
causes specified in Article 1734 of the Civil
Code. In all other cases, common carriers
are presumed to have been at fault or to
have acted negligently, unless they prove
that they observed extraordinary diligence.
Moreover, where the vessel is found
unseaworthy, the shipowner is also
presumed to be negligent since it is tasked
with the maintenance of its vessel. Though
this duty can be delegated, still, the
shipowner must exercise close supervision
over its men.
3. A common carrier is presumed to be at
fault or negligent. It shall be liable for the
loss, destruction or deterioration of its
cargo, unless it can prove that the sole and
proximate cause of such event is one of the
causes enumerated in Article 1734 of the
Civil Code, or that it exercised
extraordinary diligence to prevent or
minimize the loss. In the present case, the
weather
condition
encountered
by
petitioners vessel was not a storm or a
natural disaster comprehended in the law.
Given the known weather condition
prevailing during the voyage, the manner of
stowage employed by the carrier was
insufficient to secure the cargo from the
rolling action of the sea. The carrier took a
calculated risk in improperly securing the
cargo. Having lost that risk, it cannot now
disclaim any liability for the loss.
Art. 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. 1737. The common carrier's duty to observe
extraordinary diligence over the goods remains in
full force and effect even when they are temporarily
unloaded or stored in transit, unless the shipper or
owner has made use of the right of stoppage in
transitu.
What is stoppage in transitu? Article 1526 provides
that this is the remedy of an unpaid seller. Hence:
Art. 1526. Subject to the provisions of this
Title, notwithstanding that the ownership in
the goods may have passed to the buyer, the
unpaid seller of goods, as such, has:
(1) A lien on the goods or right to
retain them for the price while he is
in possession of them;
(2) In case of the insolvency of the
buyer, a right of stopping the goods
in transitu after he has parted with
the possession of them;
(3) A right of resale as limited by
this Title;
(4) A right to rescind the sale as
likewise limited by this Title.
Where the ownership of the goods has not
passed to the buyer, the unpaid seller has,
in addition to his other remedies, a right of
withholding delivery similar to and
coextensive with his rights of lien and
stoppage in transitu where the ownership
has passed to the buyer.
Art. 1738. The extraordinary liability of the
common carrier continues to be operative even
during the time the goods are stored in a warehouse
of the carrier at the place of destination, until the
consignee has been advised of the arrival of the
goods and has had reasonable opportunity thereafter
to remove them or otherwise dispose of them.
Art. 1739. In order that the common carrier may be
exempted from responsibility, the natural disaster

must have been the proximate and only cause of the

loss. However, the common carrier must exercise
due diligence to prevent or minimize loss before,
during and after the occurrence of flood, storm or
other natural disaster in order that the common
carrier may be exempted from liability for the loss,
destruction, or deterioration of the goods. The same
duty is incumbent upon the common carrier in case
of an act of the public enemy referred to in Article
1734, No. 2.
Art. 1740. If the common carrier negligently incurs
in delay in transporting the goods, a natural disaster
shall not free such carrier from responsibility.
Art. 1741. If the shipper or owner merely
contributed to the loss, destruction or deterioration
of the goods, the proximate cause thereof being the
negligence of the common carrier, the latter shall be
liable in damages, which however, shall be
equitably reduced.
Art. 1742. Even if the loss, destruction, or
deterioration of the goods should be caused by the
character of the goods, or the faulty nature of the
packing or of the containers, the common carrier
must exercise due diligence to forestall or lessen the
loss.
Art. 1743. If through the order of public authority
the goods are seized or destroyed, the common
carrier is not responsible, provided said public
authority had power to issue the order.
Art. 1744. A stipulation between the common
carrier and the shipper or owner limiting the liability
of the former for the loss, destruction, or
deterioration of the goods to a degree less than
extraordinary diligence shall be valid, provided it
be:
(1) In writing, signed by the shipper or
owner;
(2) Supported by a valuable consideration
other than the service rendered by the
common carrier; and
(3) Reasonable, just and not contrary to
public policy.
Art. 1745. Any of the following or similar
stipulations shall be considered unreasonable, unjust
and contrary to public policy:

(1) That the goods are transported at the risk

of the owner or shipper;
(2) That the common carrier will not be
liable for any loss, destruction, or
deterioration of the goods;
(3) That the common carrier need not
observe any diligence in the custody of the
goods;
(4) That the common carrier shall exercise a
degree of diligence less than that of a good
father of a family, or of a man of ordinary
prudence in the vigilance over the movables
transported;
(5) That the common carrier shall not be
responsible for the acts or omission 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;
(7) That the common carrier is 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.
Art. 1746. An agreement limiting the common
carrier's liability may be annulled by the shipper or
owner if the common carrier refused to carry the
goods unless the former agreed to such stipulation.
Art. 1747. If the common carrier, without just cause,
delays the transportation of the goods or changes the
stipulated or usual route, the contract limiting the
common carrier's liability cannot be availed of in
case of the loss, destruction, or deterioration of the
goods.
Art. 1748. An agreement limiting the common
carrier's liability for delay on account of strikes or
riots is valid.
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.
Art. 1751. The fact that the common carrier has no
competitor along the line or route, or a part thereof,
to which the contract refers shall be taken into
consideration on the question of whether or not a
stipulation limiting the common carrier's liability is
reasonable, just and in consonance with public
policy.
Art. 1752. Even when there is an agreement limiting
the liability of the common carrier in the vigilance
over the goods, the common carrier is disputably
presumed to have been negligent in case of their
loss, destruction or deterioration.
Art. 1753. The law of the country to which the
goods are to be transported shall govern the liability
of the common carrier for their loss, destruction or
deterioration.
Art. 1754. The provisions of Articles 1733 to 1753
shall apply to the passenger's baggage which is not
in his personal custody or in that of his employee.
As to other baggage, the rules in Articles 1998 and
2000 to 2003 concerning the responsibility of hotelkeepers shall be applicable.
SUBSECTION 3. - Safety of Passengers
Art. 1755. A common carrier is bound to carry the
passengers safely as far as human care and foresight
can provide, using the utmost diligence of very
cautious persons, with a due regard for all the
circumstances.
Art. 1756. In case of death 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.
1. Consequently,
in
quasi-delict,
the
negligence or fault should be clearly
established because it is the basis of the
action, whereas in breach of contract, the
action can be prosecuted merely by proving
the existence of the contract and the fact
that the obligor, in this case the common
carrier, failed to transport his passenger

safely to his destination. In case of death or

injuries to passengers, Art. 1756 of the Civil
Code provides that common carriers are
presumed to have been at fault or to have
acted negligently unless they prove that they
observed extraordinary diligence as defined
in Arts. 1733 and 1755 of the Code. This
provision necessarily shifts to the common
carrier the burden of proof.
2. It is immaterial that the proximate cause of
the collision between the jeepney and the
truck was the negligence of the truck driver.
The doctrine of proximate cause is
applicable only in actions for quasi-delict,
not in actions involving breach of contract.
The doctrine is a device for imputing
liability to a person where there is no
relation between him and another party. In
such a case, the obligation is created by law
itself. But, where there is a pre-existing
contractual relation between the parties, it
is the parties themselves who create the
obligation, and the function of the law is
merely to regulate the relation thus created.
Insofar as contracts of carriage are
concerned, some aspects regulated by the
Civil Code are those respecting the
diligence required of common carriers with
regard to the safety of passengers as well as
the presumption of negligence in cases of
death or injury to passengers.
3. Contrary to the petitioners contention, the
principle of last clear chance is
inapplicable in the instant case, as it only
applies 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 negligent driver
and its owner on the ground that the other
driver was likewise guilty of negligence.
The common law notion of last clear chance
permitted courts to grant recovery to a
plaintiff who has also been negligent
provided that the defendant had the last
clear chance to avoid the casualty and
failed to do so. Accordingly, it is difficult to
see what role, if any, the common law of

last clear chance doctrine has to play in a

jurisdiction where the common law concept
of contributory negligence as an absolute
bar to recovery by the plaintiff, has itself
been rejected, as it has been in Article 2179
of the Civil Code.

through the exercise of the diligence of a good

father of a family could have prevented or stopped
the act or omission.

Art. 1757. The responsibility of a common carrier

for the safety of passengers as required in Articles
1733 and 1755 cannot be dispensed with or lessened
by stipulation, by the posting of notices, by
statements on tickets, or otherwise.

Art. 1764. Damages in cases comprised in this

Section shall be awarded in accordance with Title
XVIII of this Book, concerning Damages. Article
2206 shall also apply to the death of a passenger
caused by the breach of contract by a common
carrier.

Art. 1758. When a passenger is carried gratuitously,

a stipulation limiting the common carrier's liability
for negligence is valid, but not for willful acts or
gross negligence.
The reduction of fare does not justify any limitation
of the common carrier's liability.
Art. 1759. Common carriers are liable for the death
of or injuries to passengers through the negligence
or willful acts of the former's employees, although
such employees may have acted beyond the scope
of their authority or in violation of the orders of the
common carriers.
This liability of the common carriers does not cease
upon proof that they exercised all the diligence of a
good father of a family in the selection and
supervision of their employees.
Art. 1760. The common carrier's responsibility
prescribed in the preceding article cannot be
eliminated or limited by stipulation, by the posting
of notices, by statements on the tickets or otherwise.

SUBSECTION 4. - Common Provisions

1. Res ipsa loquitur, a doctrine being invoked

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

Art. 1762. The contributory negligence of the

passenger does not bar recovery of damages for his
death or injuries, if the proximate cause thereof is
the negligence of the common carrier, but the
amount of damages shall be equitably reduced.

(a) the event is of a kind which does

not ordinarily occur in the absence
of negligence;
(b) other responsible causes,
including the conduct of the plaintiff
and third persons, are sufficiently
eliminated by the evidence; and
(c) the indicated negligence is
within the scope of the defendant's
duty to the plaintiff.

Art. 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 carrier's employees

Thus, it is not applicable when an unexplained

accident may be attributable to one of several
causes, for some of which the defendant could
not be responsible.

Art. 1761. The passenger must observe the diligence

of a good father of a family to avoid injury to
himself.

Res ipsa loquitur generally finds relevance

whether or not a contractual relationship
exists between the plaintiff and the
defendant, for the inference of negligence
arises from the circumstances and nature of
the occurrence and not from the nature of
the relation of the parties. Nevertheless, the
requirement that responsible causes other
than those due to defendants conduct must
first be eliminated, for the doctrine to apply,
should be understood as being confined
only to cases of pure (non-contractual) tort
since obviously the presumption of
negligence in culpa contractual, as
previously so pointed out, immediately
attaches by a failure of the covenant or its
tenor. In the case of the truck driver, whose
liability in a civil action is predicated on
culpa acquiliana, while he admittedly can
be said to have been in control and
management of the vehicle which figured in
the accident, it is not equally shown,
however, that the accident could have been
exclusively due to his negligence, a matter
that can allow, forthwith, res ipsa loquitur
to work against him.

A stipulation that limits liability is valid as

long as it is not against public policy. In
Everett Steamship Corporation v. Court of
Appeals, the Court stated:
"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 provides:
Art. 1749. A stipulation that the common
carrier's liability is limited to the value of
the goods appearing in the bill of lading,
unless the shipper or owner declares a
greater value, is binding.'
Art. 1750. A contract fixing the sum that
may be recovered by the owner or shipper
for the loss, destruction, or deterioration of
the goods is valid, if it is reasonable and
just under the circumstances, and has been
freely and fairly agreed upon.'
xxx

2. Respondent contends that petitioner's

liability should be based on the actual
insured value of the goods, subject of this
case. On the other hand, petitioner claims
that its liability should be limited to the
value declared by the shipper/consignee in
the Bill of Lading.
The records show that the Bills of Lading
covering the lost goods contain the
stipulation that in case of claim for loss or
for damage to the shipped merchandise or
property, "[t]he liability of the common
carrier x x x shall not exceed the value of
the goods as appearing in the bill of
lading." The attempt by respondent to make
light of this stipulation is unconvincing. As
it had the consignees' copies of the Bills of
Lading, it could have easily produced those
copies, instead of relying on mere
allegations and suppositions. However, it
presented mere photocopies thereof to
disprove petitioner's evidence showing the
existence of the above stipulation.

In the present case, the stipulation limiting

petitioner's liability is not contrary to public
policy. In fact, its just and reasonable
character
is
evident.
The
shippers/consignees may recover the full
value of the goods by the simple expedient
of declaring the true value of the shipment
in the Bill of Lading. Other than the
payment of a higher freight, there was
nothing to stop them from placing the
actual value of the goods therein. In fact,
they committed fraud against the common
carrier by deliberately undervaluing the
goods in their Bill of Lading, thus depriving
the carrier of its proper and just transport
fare.
Concededly, the purpose of the limiting
stipulation in the Bill of Lading is to protect
the common carrier. Such stipulation
obliges the shipper/consignee to notify the
common carrier of the amount that the
latter may be liable for in case of loss of the

goods. The common carrier can then take

appropriate measures getting insurance,
if needed, to cover or protect itself. This
precaution on the part of the carrier is
reasonable and prudent. Hence, a
shipper/consignee that undervalues the real
worth of the goods it seeks to transport does
not only violate a valid contractual
stipulation, but commits a fraudulent act
when it seeks to make the common carrier
liable for more than the amount it declared
in the bill of lading.
3. Article 1764 vis--vis Article 2206 of the
Civil Code holds the common carrier in
breach of its contract of carriage that
results in the death of a passenger liable to
pay the following:
(1) indemnity for death,
(2) indemnity for loss of earning
capacity and
(3) moral damages.
Petitioners are entitled to indemnity for the
death of Ruelito which is fixed at P50,000.

creation of such earnings or income and

less living and other incidental expenses.
The loss is not equivalent to the entire
earnings of the deceased, but only such
portion as he would have used to support
his dependents or heirs. Hence, to be
deducted from his gross earnings are the
necessary expenses supposed to be used by
the deceased for his own needs.
In computing the third factor - necessary
living expense, Smith Bell Dodwell Shipping
Agency Corp. v. Borja teaches that when, as
in this case, there is no showing that the
living expenses constituted the smaller
percentage of the gross income, the living
expenses are fixed at half of the gross
income.
Applying the above guidelines, the Court
determines Ruelito's life expectancy as
follows:
Life expectancy = 2/3 x [80 - age of
deceased at the time of death]
2/3 x [80 - 28]

As for damages representing unearned

income, the formula for its computation is:
Net Earning Capacity
= life
expectancy x (gross annual income
- reasonable and necessary living
expenses).
Life expectancy is determined
accordance with the formula:

in

2 / 3 x [80 -- age of deceased at the time of

death]
The first factor, i.e., life expectancy, is
computed by applying the formula (2/3 x
[80 -- age at death]) adopted in the
American Expectancy Table of Mortality or
the Actuarial of Combined Experience
Table of Mortality.

2/3 x [52]
Life expectancy = 35
Documentary evidence shows that Ruelito
was earning a basic monthly salary of $900
which, when converted to Philippine peso
applying the annual average exchange rate
of $1 = P44 in 2000, amounts to P39,600.
Ruelito's net earning capacity is thus
computed as follows:
Net Earning Capacity = life
expectancy x (gross annual income
- reasonable and necessary living
expenses).
= 35 x (P475,200 - P237,600)
= 35 x (P237,600)

The second factor is computed by

multiplying the life expectancy by the net
earnings of the deceased, i.e., the total
earnings less expenses necessary in the

Net Earning Capacity = P8,316,000

Respecting the award of moral damages,

since respondent common carrier's breach
of contract of carriage resulted in the death
of petitioners' son, following Article 1764
vis--vis Article 2206 of the Civil Code,
petitioners are entitled to moral damages.
Since respondent failed to prove that it
exercised the extraordinary diligence
required of common carriers, it is presumed
to have acted recklessly, thus warranting
the award too of exemplary damages, which
are granted in contractual obligations if the
defendant acted in a wanton, fraudulent,
reckless, oppressive or malevolent manner.
Under the circumstances, it is reasonable to
award petitioners the amount of P100,000
as moral damages and P100,000 as
exemplary damages.
Pursuant to Article 2208 of the Civil Code,
attorney's fees may also be awarded where
exemplary damages are awarded. The
Court finds that 10% of the total amount
adjudged against respondent is reasonable
for the purpose.
Finally, Eastern Shipping Lines, Inc. v.
Court of Appeals teaches that when an
obligation, regardless of its source, i.e.,
law, contracts, quasi-contracts, delicts or
quasi-delicts is breached, the contravenor
can be held liable for payment of interest in
the concept of actual and compensatory
damages, subject to the following rules, to
wit -1.
When the obligation is
breached, and it consists in the
payment of a sum of money, i.e., a
loan or forbearance of money, the
interest due should be that which
may have been stipulated in writing.
Furthermore, the interest due shall
itself earn legal interest from the
time it is judicially demanded. In
the absence of stipulation, the rate
of interest shall be 12% per annum
to be computed from default, i.e.,
from judicial or extrajudicial
demand under and subject to the

provisions of Article 1169 of the

Civil Code.
2.
When an obligation, not
constituting a loan or forbearance
of money, is breached, an interest
on the amount of damages awarded
may be imposed at the discretion of
the court at the rate of 6% per
annum. No interest, however, shall
be adjudged on unliquidated claims
or damages except when or until the
demand can be established with
reasonable certainty. Accordingly,
where the demand is established
with reasonable certainty, the
interest shall begin to run from the
time the claim is made judicially or
extrajudicially (Art. 1169, Civil
Code) but when such certainty
cannot be so reasonably established
at the time the demand is made, the
interest shall begin to run only from
the date the judgment of the court is
made
(at
which time
the
quantification of damages may be
deemed to have been reasonably
ascertained). The actual base for
the computation of legal interest
shall, in any case, be on the amount
finally adjudged.
3. When the judgment of the court
awarding a sum of money becomes
final and executory, the rate of legal
interest, whether the case falls
under paragraph 1 or paragraph 2,
above, shall be 12% per annum
from such finality until its
satisfaction, this interim period
being deemed to be by then an
equivalent to a forbearance of
credit. (emphasis supplied).
Since the amounts payable by respondent
have been determined with certainty only in
the present petition, the interest due shall be
computed upon the finality of this decision
at the rate of 12% per annum until
satisfaction, in accordance with paragraph
number 3 of the immediately cited guideline
in Easter Shipping Lines, Inc.

Art. 1765. The Public Service Commission may, on

its own motion or on petition of any interested
party, after due hearing, cancel the certificate of
public convenience granted to any common carrier
that repeatedly fails to comply with his or its duty to
observe extraordinary diligence as prescribed in this
Section.
Art. 1766. 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.

COGSA(Carriage of Goods by Sea Act)

The Carriage of Goods by Sea Act (COGSA),
Public Act No. 521 of the 74th US Congress, was
accepted to be made applicable to all contracts for
the carriage of goods by sea to and from Philippine
ports in foreign trade by virtue of CA No. 65.
Section 1 of CA No. 65 states:
Section 1. That the provisions of Public Act
Numbered Five hundred and twenty-one of
the Seventy-fourth Congress of the United
States, approved on April sixteenth,
nineteen hundred and thirty-six, be
accepted, as it is hereby accepted to be
made applicable to all contracts for the
carriage of goods by sea to and from
Philippine ports in foreign trade: Provided,
That nothing in the Act shall be construed
as repealing any existing provision of the
Code of Commerce which is now in force,
or as limiting its application.
Section 1, Title I of CA No. 65 defines the relevant
terms in Carriage of Goods by Sea, thus:
Section 1. When used in this Act (a) The term "carrier" includes the owner or
the charterer who enters into a contract of
carriage with a shipper.
(b) The term "contract of carriage" applies
only to contracts of carriage covered by a
bill of lading or any similar document of

title, insofar as such document relates to the

carriage of goods by sea, including any bill
of lading or any similar document as
aforesaid issued under or pursuant to a
charter party from the moment at which
such bill of lading or similar document of
title regulates the relations between a carrier
and a holder of the same.
(c) The term "goods" includes goods, wares,
merchandise, and articles of every kind
whatsoever, except live animals and cargo
which by the contract of carriage is stated as
being carried on deck and is so carried.
(d) The term "ship" means any vessel used
for the carriage of goods by sea.
(e) The term "carriage of goods" covers the
period from the time when the goods are
loaded to the time when they are discharged
from the ship.
It is noted that the term carriage of goods covers
the period from the time when the goods are loaded
to the time when they are discharged from the ship;
thus, it can be inferred that the period of time when
the goods have been discharged from the ship and
given to the custody of the arrastre operator is not
covered by the COGSA.
The prescriptive period for filing an action for the
loss or damage of the goods under the COGSA is
found in paragraph (6), Section 3, thus:
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 before 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.
Said notice of loss or damage maybe
endorsed upon the receipt for the goods
given by the person taking delivery thereof.

The notice in writing need not be given if

the state of the goods has at the time of their
receipt been the subject of joint survey or
inspection.
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.
From the provision above, the carrier and the ship
may put up the defense of prescription if the action
for damages is not brought within one year after the
delivery of the goods or the date when the goods
should have been delivered. It has been held that
not only the shipper, but also the consignee or legal
holder of the bill may invoke the prescriptive
period. However, the COGSA does not mention
that an arrastre operator may invoke the prescriptive
period of one year; hence, it does not cover the
arrastre operator.

Prescriptive Period for filing of claims under the

COGSA
Petitioners claim that pursuant to Section 3,
paragraph 6 of the Carriage of Goods by Sea
Act[44] (COGSA), respondent should have filed its
Notice of Loss within three days from delivery.
They assert that the cargo was discharged on July
31, 1990, but that respondent filed its Notice of
Claim only on September 18, 1990.
We are not persuaded. First, the above-cited
provision of COGSA provides that the notice of
claim need not be given if the state of the goods, at
the time of their receipt, has been the subject of a
joint inspection or survey. As stated earlier, prior to
unloading the cargo, an Inspection Report as to the
condition of the goods was prepared and signed by
representatives of both parties.

Second, as stated in the same provision, a failure to

file a notice of claim within three days will not bar
recovery if it is nonetheless filed within one year.
This one-year prescriptive period also applies to the
shipper, the consignee, the insurer of the goods or
any legal holder of the bill of lading.
In Loadstar Shipping Co., Inc. v. Court of Appeals,
we ruled that a claim is not barred by prescription as
long as the one-year period has not lapsed. Thus, in
the words of the ponente, Chief Justice Hilario G.
Davide Jr.:
Inasmuch as the neither the Civil Code nor
the Code of Commerce states a specific
prescriptive period on the matter, the
Carriage of Goods by Sea Act (COGSA)-which provides for a one-year period of
limitation on claims for loss of, or damage
to, cargoes sustained during transit--may be
applied suppletorily to the case at bar.
In the present case, the cargo was discharged on
July 31, 1990, while the Complaint was filed by
respondent on July 25, 1991, within the one-year
prescriptive period.
xxx
There should be a loss or damage to the goods
within the contemplation of Section 3(6) of the
COGSA, in order for the one-year prescriptive
period under the COGSA to apply. But if the goods
did not suffer loss or damage within the
contemplation of Section3 (6) of COGSA, but there
exists between the parties a written contract, the
prescriptive period under Article 1144 of the Civil
Code which provides for a prescriptive period of ten
years, shall govern.

Package Limitation under the COGSA

Assuming arguendo they are liable for respondents
claims, petitioners contend that their liability should
be limited to US$500 per package as provided in the
Bill of Lading and by Section 4(5) of COGSA.
On the other hand, respondent argues that Section
4(5) of COGSA is inapplicable, because the value
of the subject shipment was declared by petitioners
beforehand, as evidenced by the reference to and the

insertion of the Letter of Credit or L/C No.

90/02447 in the said Bill of Lading.
A bill of lading serves two functions. First, it is a
receipt for the goods shipped. Second, it is a
contract by which three parties -- namely, the
shipper, the carrier, and the consignee -- undertake
specific responsibilities and assume stipulated
obligations. In a nutshell, the acceptance of the bill
of lading by the shipper and the consignee, with full
knowledge of its contents, gives rise to the
presumption that it constituted a perfected and
binding contract.
Further, a stipulation in the bill of lading limiting to
a certain sum the common carriers liability for loss
or destruction of a cargo -- unless the shipper or
owner declares a greater value -- is sanctioned by
law. There are, however, two conditions to be
satisfied:
(1) the contract is reasonable and just under
the circumstances, and
(2) it has been fairly and freely agreed upon
by the parties.
The rationale for, this rule is to bind the shippers by
their agreement to the value (maximum valuation)
of their goods.
It is to be noted, however, that the Civil Code does
not limit the liability of the common carrier to a
fixed amount per package. In all matters not
regulated by the Civil Code, the right and the
obligations of common carriers shall be governed
by the Code of Commerce and special laws. Thus,
the COGSA, which is suppletory to the provisions
of the Civil Code, supplements the latter by
establishing a statutory provision limiting the
carriers liability in the absence of a shippers
declaration of a higher value in the bill of lading.
The provisions on limited liability are as much a
part of the bill of lading as though physically in it
and as though placed there by agreement of the
parties.
In the case before us, there was no stipulation in the
Bill of Lading limiting the carriers liability.
Neither did the shipper declare a higher valuation of
the goods to be shipped. This fact notwithstanding,
the insertion of the words L/C No. 90/02447
cannot be the basis for petitioners liability.

First, a notation in the Bill of Lading which

indicated the amount of the Letter of Credit
obtained by the shipper for the importation of steel
sheets did not effect a declaration of the value of the
goods as required by the bill. That notation was
made only for the convenience of the shipper and
the bank processing the Letter of Credit.
Second, in Keng Hua Paper Products v. Court of
Appeals, we held that a bill of lading was separate
from the Other Letter of Credit arrangements. We
ruled thus:
(T)he contract of carriage, as stipulated in the bill
of lading in the present case, must be treated
independently of the contract of sale between the
seller and the buyer, and the contract of issuance of
a letter of credit between the amount of goods
described in the commercial invoice in the contract
of sale and the amount allowed in the letter of credit
will not affect the validity and enforceability of the
contract of carriage as embodied in the bill of
lading. As the bank cannot be expected to look
beyond the documents presented to it by the seller
pursuant to the letter of credit, neither can the
carrier be expected to go beyond the representations
of the shipper in the bill of lading and to verify their
accuracy vis--vis the commercial invoice and the
letter of credit. Thus, the discrepancy between the
amount of goods indicated in the invoice and the
amount in the bill of lading cannot negate
petitioners obligation to private respondent arising
from the contract of transportation.
In the light of the foregoing, petitioners liability
should be computed based on US$500 per package
and not on the per metric ton price declared in the
Letter of Credit. In Eastern Shipping Lines, Inc. v.
Intermediate Appellate Court we explained the
meaning of package:
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 Carriage of
Goods by Sea Act.

Considering, therefore, the ruling in Eastern

Shipping Lines and the fact that the Bill of Lading
clearly disclosed the contents of the containers, the
number of units, as well as the nature of the steel
sheets, the four damaged coils should be considered
as the shipping unit subject to the US$500
limitation.

Registered Owner Rule

1. Presumption that the tortfeasor-driver is the
employee of the registered owner
Simply stated, the issue for the consideration of
this Court is: whether Filcar, as registered owner of
the motor vehicle which figured in an accident, may
be held liable for the damages caused to Espinas.
The petition is without merit.
Filcar, as registered owner, is deemed the employer
of the driver, Floresca, and is thus vicariously liable
under Article 2176 in relation with Article 2180 of
the Civil Code
It is undisputed that Filcar is the registered owner of
the motor vehicle which hit and caused damage to
Espinas car; and it is on the basis of this fact that
we hold Filcar primarily and directly liable to
Espinas for damages.
As a general rule, one is only responsible for his
own act or omission. Thus, a person will generally
be held liable only for the torts committed by
himself and not by another. This general rule is laid
down in Article 2176 of the Civil Code, which
provides to wit:

i.e., the person who committed the negligent act or

omission. The law, however, provides for
exceptions when it makes certain persons liable for
the act or omission of another.
One exception is an employer who is made
vicariously liable for the tort committed by his
employee. Article 2180 of the Civil Code states:
Article 2180. The obligation imposed by
Article 2176 is demandable not only for
ones own acts or omissions, but also for
those of persons for whom one is
responsible.
xxxx
Employers shall be liable for the damages
caused by their employees and household
helpers acting within the scope of their
assigned tasks, even though the former are
not engaged in any business or industry.
xxxx

The responsibility treated of in this article

shall cease when the persons herein
mentioned prove that they observed all the
diligence of a good father of a family to
prevent damage.
Under Article 2176, in relation with Article 2180, of
the Civil Code, an action predicated on an
employees act or omission may be instituted
against the employer who is held liable for the
negligent act or omission committed by his
employee.

Article 2176. Whoever by act or omission

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

Although the employer is not the actual tortfeasor,

the law makes him vicariously liable on the basis of
the civil law principle of pater familias for failure to
exercise due care and vigilance over the acts of
ones subordinates to prevent damage to another. In
the last paragraph of Article 2180 of the Civil Code,
the employer may invoke the defense that he
observed all the diligence of a good father of a
family to prevent damage.

Based on the above-cited article, the obligation to

indemnify another for damage caused by ones act
or omission is imposed upon the tortfeasor himself,

As its core defense, Filcar contends that Article

2176, in relation with Article 2180, of the Civil
Code is inapplicable because it presupposes the

existence of an employer-employee relationship.

According to Filcar, it cannot be held liable under
the subject provisions because the driver of its
vehicle at the time of the accident, Floresca, is not
its employee but that of its Corporate Secretary,
Atty. Flor.
We cannot agree. It is well settled that in case of
motor vehicle mishaps, the registered owner of the
motor vehicle is considered as the employer of the
tortfeasor-driver, and is made primarily liable for
the tort committed by the latter under Article 2176,
in relation with Article 2180, of the Civil Code.

Thus, it is clear that for the purpose of holding the

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

the

registered

owner

In Equitable Leasing Corporation v. Suyom, we

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

The rationale for the rule that a registered owner is

vicariously liable for damages caused by the
operation of his motor vehicle is explained by the
principle behind motor vehicle registration, which
has been discussed by this Court in Erezo, and cited
by the CA in its decision:

In that case, a tractor registered in the name of

Equitable Leasing Corporation (Equitable) figured
in an accident, killing and seriously injuring several
persons. As part of its defense, Equitable claimed
that the tractor was initially leased to Mr. Edwin
Lim under a Lease Agreement, which agreement
has been overtaken by a Deed of Sale entered into
by Equitable and Ecatine Corporation (Ecatine).
Equitable argued that it cannot be held liable for
damages because the tractor had already been sold
to Ecatine at the time of the accident and the
negligent driver was not its employee but of
Ecatine.

The main aim of motor vehicle registration is to

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

In upholding the liability of Equitable, as registered

owner of the tractor, this Court said that regardless
of sales made of a motor vehicle, the registered
owner is the lawful operator insofar as the public
and third persons are concerned; consequently, it is
directly and primarily responsible for the
consequences of its operation. The Court further
stated that [i]n contemplation of law, the
owner/operator of record is the employer of the
driver, the actual operator and employer being
considered as merely its agent. Thus, Equitable, as
the registered owner of the tractor, was considered
under the law on quasi delict to be the employer of
the driver, Raul Tutor; Ecatine, Tutors actual
employer, was deemed merely as an agent of
Equitable.

Thus, whether there is an employer-employee

relationship between the registered owner and the
driver is irrelevant in determining the liability of the
registered owner who the law holds primarily and
directly responsible for any accident, injury or death
caused by the operation of the vehicle in the streets
and highways.
As explained by this Court in Erezo, the general
public policy involved in motor vehicle registration
is the protection of innocent third persons who may
have no means of identifying public road
malefactors and, therefore, would find it difficult
if not impossible to seek redress for damages they

may sustain in accidents resulting in deaths, injuries

and other damages; by fixing the person held
primarily and directly liable for the damages
sustained by victims of road mishaps, the law
ensures that relief will always be available to them.
To identify the person primarily and directly
responsible for the damages would also prevent a
situation where a registered owner of a motor
vehicle can easily escape liability by passing on the
blame to another who may have no means to answer
for the damages caused, thereby defeating the
claims of victims of road accidents. We take note
that some motor vehicles running on our roads are
driven not by their registered owners, but by
employed drivers who, in most instances, do not
have the financial means to pay for the damages
caused in case of accidents.
These same principles apply by analogy to the case
at bar. Filcar should not be permitted to evade its
liability for damages by conveniently passing on the
blame to another party; in this case, its Corporate
Secretary, Atty. Flor and his alleged driver,
Floresca. Following our reasoning in Equitable, the
agreement between Filcar and Atty. Flor to assign
the motor vehicle to the latter does not bind Espinas
who was not a party to and has no knowledge of the
agreement, and whose only recourse is to the motor
vehicle registration.
Neither can Filcar use the defenses available under
Article 2180 of the Civil Code - that the employee
acts beyond the scope of his assigned task or that it
exercised the due diligence of a good father of a
family to prevent damage - because the motor
vehicle registration law, to a certain extent,
modified Article 2180 of the Civil Code by making
these defenses unavailable to the registered owner
of the motor vehicle. Thus, for as long as Filcar is
the registered owner of the car involved in the
vehicular accident, it could not escape primary
liability for the damages caused to Espinas.
The public interest involved in this case must not be
underestimated. Road safety is one of the most
common problems that must be addressed in this
country. We are not unaware of news of road
accidents involving reckless drivers victimizing our
citizens. Just recently, such pervasive recklessness
among most drivers took the life of a professor of
our state university. What is most disturbing is that

our existing laws do not seem to deter these road

malefactors from committing acts of recklessness.
We understand that the solution to the problem does
not stop with legislation. An effective
administration and enforcement of the laws must be
ensured to reinforce discipline among drivers and to
remind owners of motor vehicles to exercise due
diligence and vigilance over the acts of their drivers
to prevent damage to others.
Thus, whether the driver of the motor vehicle,
Floresca, is an employee of Filcar is irrelevant in
arriving at the conclusion that Filcar is primarily
and directly liable for the damages sustained by
Espinas. While Republic Act No. 4136 or the Land
Transportation and Traffic Code does not contain
any provision on the liability of registered owners in
case of motor vehicle mishaps, Article 2176, in
relation with Article 2180, of the Civil Code
imposes an obligation upon Filcar, as registered
owner, to answer for the damages caused to
Espinas car. This interpretation is consistent with
the strong public policy of maintaining road safety,
thereby reinforcing the aim of the State to promote
the responsible operation of motor vehicles by its
citizens.
This does not mean, however, that Filcar is left
without any recourse against the actual employer of
the driver and the driver himself. Under the civil
law principle of unjust enrichment, the registered
owner of the motor vehicle has a right to be
indemnified by the actual employer of the driver of
the amount that he may be required to pay as
damages for the injury caused to another.
The set-up may be inconvenient for the registered
owner of the motor vehicle, but the inconvenience
cannot outweigh the more important public policy
being advanced by the law in this case which is the
protection of innocent persons who may be victims
of reckless drivers and irresponsible motor vehicle
owners.
2. Lease of Vehicles
The sole issue submitted for resolution is whether
the registered owner of a financially leased vehicle
remains liable for loss, damage, or injury caused by
the vehicle notwithstanding an exemption provision
in the financial lease contract.

Petitioner contends that the lease contract between

BG Hauler and petitioner specifically provides that
BG Hauler shall be liable for any loss, damage, or
injury the leased oil tanker may cause even if
petitioner is the registered owner of the said oil
tanker. Petitioner claims that the Court of Appeals
erred in holding petitioner solidarily liable with BG
Hauler despite having found the latter liable under
the lease contract.

arising, as well as any liability resulting

from the ownership, operation and/or
possession thereof, over and above those
actually compensated by insurance, are
hereby transferred to and assumed by the
LESSEE hereunder which shall continue in
full force and effect.

For their part, the spouses Baylon counter that the

lease contract between petitioner and BG Hauler
cannot bind third parties like them. The spouses
Baylon maintain that the existence of the lease
contract does not relieve petitioner of direct
responsibility as the registered owner of the oil
tanker that caused the death of their daughter.

If it so wishes, petitioner may proceed against BG

Hauler to seek enforcement of the latter's
contractual obligation under Section 5.1 of the lease
contract. In the present case, petitioner did not file a
cross-claim against BG Hauler. Hence, this Court
cannot require BG Hauler to reimburse petitioner
for the latter's liability to the spouses Baylon.
However, as the registered owner of the oil tanker,
petitioner may not escape its liability to third
persons.

On the other hand, BG Hauler and the driver argue

that at the time petitioner and BG Hauler entered
into the lease contract, Republic Act No. 5980 was
still in effect. They point out that the amendatory
law, Republic Act No. 8556, which exempts from
liability in case of any loss, damage, or injury to
third persons the registered owners of vehicles
financially leased to another, was not yet enacted at
that time.

Under Section 5 of Republic Act No. 4136, as

amended, all motor vehicles used or operated on or
upon any highway of the Philippines must be
registered with the Bureau of Land Transportation
(now Land Transportation Office) for the current
year. Furthermore, any encumbrances of motor
vehicles must be recorded with the Land
Transportation Office in order to be valid against
third parties.

In point is the 2008 case of PCI Leasing and

Finance, Inc. v. UCPB General Insurance Co.,
Inc.[16] There, we held liable PCI Leasing and
Finance, Inc., the registered owner of an 18-wheeler
Fuso Tanker Truck leased to Superior Gas &
Equitable Co., Inc. (SUGECO) and being driven by
the latter's driver, for damages arising from a
collision. This despite an express provision in the
lease contract to the effect that the lessee,
SUGECO, shall indemnify and hold the registered
owner free from any liabilities, damages, suits,
claims, or judgments arising from SUGECO's use of
the leased motor vehicle.

In accordance with the law on compulsory motor

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

In the instant case, Section 5.1 of the lease contract

between petitioner and BG Hauler provides:
Sec. 5.1. It is the principle of this Lease that
while the title or ownership of the
EQUIPMENT, with all the rights
consequent thereof, are retained by the
LESSOR, the risk of loss or damage of the
EQUIPMENT from whatever source

The policy behind the rule is to enable the victim to

find redress by the expedient recourse of identifying

the registered vehicle owner in the records of the

Land Transportation Office. The registered owner
can be reimbursed by the actual owner, lessee or
transferee who is known to him. Unlike the
registered owner, the innocent victim is not privy to
the lease, sale, transfer or encumbrance of the
vehicle. Hence, the victim should not be prejudiced
by the failure to register such transaction or
encumbrance. As the Court held in PCI Leasing:
The burden of registration of the lease contract is
minuscule compared to the chaos that may result if
registered owners or operators of vehicles are freed
from such responsibility. Petitioner pays the price
for its failure to obey the law on compulsory
registration of motor vehicles for registration is a
pre-requisite for any person to even enjoy the
privilege of putting a vehicle on public roads.
In the landmark case of Erezo v. Jepte, the Court
succinctly laid down the public policy behind the
rule, thus:
The main aim of motor vehicle registration
is to identify the owner so that if any
accident happens, or that any damage or
injury is caused by the vehicle on the public
highways, responsibility therefor can be
fixed on a definite individual, the registered
owner. Instances are numerous where
vehicles running on public highways caused
accidents or injuries to pedestrians or other
vehicles without positive identification of
the owner or drivers, or with very scant
means of identification. It is to forestall
these circumstances, so inconvenient or
prejudicial to the public, that the motor
vehicle registration is primarily ordained, in
the interest of the determination of persons
responsible for damages or injuries caused
on public highways.
xxx
Were a registered owner allowed to evade
responsibility by proving who the supposed
transferee or owner is, it would be easy for
him, by collusion with others or, or
otherwise, to escape said responsibility and
transfer the same to an indefinite person, or
to one who possesses no property with
which to respond financially for the damage

or injury done. A victim of recklessness on

the public highways is usually without
means to discover or identify the person
actually causing the injury or damage. He
has no means other than by a recourse to the
registration in the Motor Vehicles Office to
determine who is the owner. The protection
that the law aims to extend to him would
become illusory were the registered owner
given the opportunity to escape liability by
disproving his ownership. If the policy of
the law is to be enforced and carried out, the
registered owner should not be allowed to
prove the contrary to the prejudice of the
person injured, that is to prove that a third
person or another has become the owner, so
that he may be thereby be relieved of the
responsibility to the injured person.
In this case, petitioner admits that it is the registered
owner of the oil tanker that figured in an accident
causing the death of Loretta. As the registered
owner, it cannot escape liability for the loss arising
out of negligence in the operation of the oil tanker.
Its liability remains even if at the time of the
accident, the oil tanker was leased to BG Hauler and
was being driven by the latter's driver, and despite a
provision in the lease contract exonerating the
registered owner from liability.
3. Stolen Vehicles
The registered owner is not liable if the vehicle
was taken from his garage without his knowledge
and consent. To hold the registered owner liable
would be absurd as it would be holding liable the
owner of a stolen vehicle for an accident caused by
the person who stole such vehicle.
Kabit System
When a passenger jeepney covered by a certificate
of public convenience is sold to another who
continues to operate it under the same certificate of
public convenience under the so-called kabit
system, and in the course thereof the vehicle meets
an accident through the fault of another vehicle,
may the new owner sue for damages against the
erring vehicle? Otherwise stated, does the new
owner have any legal personality to bring the action,
or is he the real party in interest in the suit, despite

the fact that he is not the registered owner under the

certificate of public convenience?
xxx
The kabit system is an arrangement whereby a
person who has been granted a certificate of public
convenience allows other persons who own motor
vehicles to operate them under his license,
sometimes for a fee or percentage of the earnings.
Although the parties to such an agreement are not
outrightly penalized by law, the kabit system is
invariably recognized as being contrary to public
policy and therefore void and inexistent under Art.
1409 of the Civil Code.
In the early case of Dizon v. Octavio the Court
explained that one of the primary factors considered
in the granting of a certificate of public convenience
for the business of public transportation is the
financial capacity of the holder of the license, so
that liabilities arising from accidents may be duly
compensated. The kabit system renders illusory
such purpose and, worse, may still be availed of by
the grantee to escape civil liability caused by a
negligent use of a vehicle owned by another and
operated under his license. If a registered owner is
allowed to escape liability by proving who the
supposed owner of the vehicle is, it would be easy
for him to transfer the subject vehicle to another
who possesses no property with which to respond
financially for the damage done. Thus, for the
safety of passengers and the public who may have
been wronged and deceived through the baneful
kabit system, the registered owner of the vehicle is
not allowed to prove that another person has
become the owner so that he may be thereby
relieved of responsibility. Subsequent cases affirm
such basic doctrine.
It would seem then that the thrust of the law in
enjoining the kabit system is not so much as to
penalize the parties but to identify the person upon
whom responsibility may be fixed in case of an
accident with the end view of protecting the riding
public. The policy therefore loses its force if the
public at large is not deceived, much less involved.
In the present case it is at once apparent that the evil
sought to be prevented in enjoining the kabit
system does not exist. First, neither of the parties to
the pernicious kabit system is being held liable for

damages.
Second, the case arose from the
negligence of another vehicle in using the public
road
to
whom
no
representation,
or
misrepresentation, as regards the ownership and
operation of the passenger jeepney was made and to
whom no such representation, or misrepresentation,
was necessary. Thus it cannot be said that private
respondent Gonzales and the registered owner of the
jeepney were in estoppel for leading the public to
believe that the jeepney belonged to the registered
owner. Third, the riding public was not bothered
nor inconvenienced at the very least by the illegal
arrangement. On the contrary, it was private
respondent himself who had been wronged and was
seeking compensation for the damage done to him.
Certainly, it would be the height of inequity to deny
him his right.
In light of the foregoing, it is evident that private
respondent has the right to proceed against
petitioners for the damage caused on his passenger
jeepney as well as on his business. Any effort then
to frustrate his claim of damages by the ingenuity
with which petitioners framed the issue should be
discouraged, if not repelled.
In awarding damages for tortuous injury, it becomes
the sole design of the courts to provide for adequate
compensation by putting the plaintiff in the same
financial position he was in prior to the tort. It is a
fundamental principle in the law on damages that a
defendant cannot be held liable in damages for more
than the actual loss which he has inflicted and that a
plaintiff is entitled to no more than the just and
adequate compensation for the injury suffered. His
recovery is, in the absence of circumstances giving
rise to an allowance of punitive damages, limited to
a fair compensation for the harm done. The law
will not put him in a position better than where he
should be in had not the wrong happened.
In the present case, petitioners insist that as the
passenger jeepney was purchased in 1982 for only
P30,000.00 to award damages considerably greater
than this amount would be improper and unjustified.
Petitioners are at best reminded that indemnification
for damages comprehends not only the value of the
loss suffered but also that of the profits which the
obligee failed to obtain.
In other words,
indemnification for damages is not limited to
damnum emergens or actual loss but extends to
lucrum cessans or the amount of profit lost.

Had private respondent's jeepney not met an

accident it could reasonably be expected that it
would have continued earning from the business in
which it was engaged. Private respondent avers that
he derives an average income of P300.00 per day
from his passenger jeepney and this earning was
included in the award of damages made by the trial
court and upheld by the appeals court. The award
therefore of P236,000.00 as compensatory damages
is not beyond reason nor speculative as it is based
on a reasonable estimate of the total damage
suffered by private respondent, i.e. damage wrought
upon his jeepney and the income lost from his
transportation business. Petitioners for their part did
not offer any substantive evidence to refute the
estimate made by the courts a quo.

Arrastre Operator
Is an arrastre operator legally liable for the loss of a
shipment in its custody? If so, what is the extent of
its liability?
The relationship therefore between the consignee
and the arrastre operator must be examined. This
relationship is much akin to that existing between
the consignee or owner of shipped goods and the
common carrier, or that between a depositor and a
warehouseman. In the performance of its
obligations, an arrastre operator should observe the
same degree of diligence as that required of a
common carrier and a warehouseman as enunciated
under Article 1733 of the Civil Code and Section
3(b) of the Warehouse Receipts Law, respectively.
Being the custodian of the goods discharged from a
vessel, an arrastre operators duty is to take good
care of the goods and to turn them over to the party
entitled to their possession.
In the performance of its job, an arrastre operator is
bound by the management contract it had executed
with the Bureau of Customs.
However, a
management contract, which is a sort of a
stipulation pour autrui within the meaning of Article
1311 of the Civil Code, is also binding on a
consignee because it is incorporated in the gate pass
and delivery receipt which must be presented by the
consignee before delivery can be effected to it. The
insurer, as successor-in-interest of the consignee, is

likewise bound by the management contract.

Indeed, upon taking delivery of the cargo, a
consignee (and necessarily its successor-in- interest)
tacitly accepts the provisions of the management
contract, including those which are intended to limit
the liability of one of the contracting parties, the
arrastre operator.
However, a consignee who does not avail of the
services of the arrastre operator is not bound by the
management contract.
"Indeed, the provision in the management contract
regarding the declaration of the actual invoice value
before the arrival of the goods must be understood
to mean a declaration before the arrival of the goods
in the custody of the arrastre operator, whether it be
done long before the landing of the shipment at port,
or immediately before turn-over thereof to the
arrastre operators custody. What is essential is
knowledge beforehand of the extent of the risk to be
undertaken by the arrastre operator, as determined
by the value of the property committed to its care
that it may define its responsibility for loss or
damage to such cargo and to ascertain compensation
commensurate to such risk assumed x x x."
In the same case, the Court added that the advance
notice of the actual invoice of the goods entrusted to
the arrastre operator is "for the purpose of
determining its liability, that it may obtain
compensation commensurable to the risk it assumes,
(and) not for the purpose of determining the degree
of care or diligence it must exercise as a depository
or warehouseman" since the arrastre operator should
not discriminate between cargoes of substantial and
small values, nor exercise care and caution only for
the handling of goods announced to it beforehand to
be of sizeable value, for that would be spurning the
public service nature of its business.
On the same provision limiting the arrastre
operators liability, the Court held in Northern
Motors, Inc. v. Prince Line:
"Appellant claims that the above quoted provision is
null and void, as it limits the liability of appellee for
the loss, destruction or damage of any merchandise,
to P500.00 per package, contending that to sustain
the validity of the limitation would be to encourage
acts of conversion and unjust enrichment on the part
of the arrastre operator. Appellant, however,

overlooks the fact that the limitation of appellees

liability under said provision, is not absolute or
unqualified, for if the value of the merchandise is
specified or manifested by the consignee, and the
corresponding arrastre charges are paid on the basis
of the declared value, the limitation does not apply.
Consequently, the questioned provision is neither
unfair nor abitrary, as contended, because the
consignee has it in his hands to hold, if he so
wishes, the arrastre operator responsible for the full
value of his merchandise by merely specifying it in
any of the various documents required of him, in
clearing the merchandise from the customs. For
then, the appellee arrastre operator, by reasons of
the payment to it of a commensurate charge based
on the higher declared value of the merchandise,
could and should take extraordinary care of the
special or valuable cargo. In this manner, there
would be mutuality. What would, indeed, be unfair
and arbitrary is to hold the arrastre operator liable
for the full value of the merchandise after the
consignee has paid the arrastre charges only (on) a
basis much lower than the true value of the goods."

Passengers Baggages
1. Baggage in the custody of the passenger or
their employee treated as a necessary deposit.
2. Baggage in the custody of the carrier Articles
1733 to 1753 of the Civil Code shall apply. Take
note of presumption of negligence and the
extraordinary diligence on the part of the common
carrier.

Successive Carriers

2. Air Carriers
It is significant to note that the contract of air
transportation was between petitioner and
respondent, with the former endorsing to PAL the
Hong Kong-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 the Philippines is a party, and
by the existing practices of the International Air
Transport Association (IATA).
Article 1, Section 3 of the Warsaw 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."
Article 15 of IATA-Recommended
similarly provides:

Practice

"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."

1. In Maritime Law
Article 373 Code of Commerce. The carrier who
makes the delivery of the merchandise to the
consignee by virtue of combined agreements or
services with other carriers shall assume the
obligations of those who proceeded him in the
conveyance, reserving his right to proceed against
the latter if he was not the party directly responsible
for the fault which gave rise to the claim of the
shipper or consignee.

Maritime Law
Limited Liability Rule
The Limited Liability Rule has been explained to be
that of the real and hypothecary doctrine in
maritime law where the shipowner or ship agent's

liability is held as merely co-extensive with his

interest in the vessel such that a total loss thereof
results in its extinction. In this jurisdiction, this rule
is provided in three articles of the Code of
Commerce. These are:
Art. 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.
--Art. 590. The co-owners of the 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.

the liability to third persons who may have dealt

with the shipowner, the agent or even the charterer
in case of demise or bareboat charter.
Later, in the case of Monarch Insurance Co., Inc. v.
CA, this Court, this time through Justice Sabino R.
De Leon, Jr., again explained:
`No vessel, no liability,' expresses in a
nutshell the limited liability rule. The
shipowner's or agent's liability is merely
coextensive with his interest in the vessel
such that a total loss thereof results in its
extinction. The total destruction of the
vessel extinguishes maritime liens because
there is no longer any res to which it can
attach. This doctrine is based on the real and
hypothecary nature of maritime law which
has its origin in the prevailing conditions of
the maritime trade and sea voyages during
the medieval ages, attended by innumerable
hazards and perils. To offset against these
adverse conditions and to encourage
shipbuilding and maritime commerce, it was
deemed necessary to confine the liability of
the owner or agent arising from the
operation of a ship to the vessel, equipment,
and freight, or insurance, if any.

--Art. 837. The civil liability incurred by

shipowners in the case prescribed in this
section, shall be understood as limited to the
value of the vessel with all its
appurtenances and freightage served during
the voyage.
Article 837 specifically applies to cases involving
collision which is a necessary consequence of the
right to abandon the vessel given to the shipowner
or ship agent under the first provision - Article 587.
Similarly, Article 590 is a reiteration of Article 587,
only this time the situation is that the vessel is coowned by several persons. Obviously, the
forerunner of the Limited Liability Rule under the
Code of Commerce is Article 587. Now, the latter is
quite clear on which indemnities may be confined or
restricted to the value of the vessel pursuant to the
said Rule, and these are 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." Thus, what is contemplated is

Therefore, even if the contract is for a bareboat or

demise
charter
where
possession,
free
administration and even navigation are temporarily
surrendered to the charterer, dominion over the
vessel remains with the shipowner. Ergo, the
charterer or the sub-charterer, whose rights cannot
rise above that of the former, can never set up the
Limited Liability Rule against the very owner of the
vessel. Borrowing the words of Chief Justice
Artemio V. Panganiban, "Indeed, where the reason
for the rule ceases, the rule itself does not apply."
In Yangco v. Laserna, this Court elucidated on the
import of Art. 587 as follows:
"The provision accords a shipowner or agent 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
during the voyage.' It is true that the article appears
to deal only with the limited liability of the
shipowners or agents for damages arising from the

misconduct of the captain in the care of the goods

which the vessel carries, but this is a mere
deficiency of language and in no way indicates the
true extent of such liability. The consensus of
authorities is to the effect that notwithstanding the
language of the aforequoted provision, the benefit of
limited liability therein provided for, applies in all
cases wherein the shipowner or agent may properly
be held liable for the negligent or illicit acts of the
captain."

When applicable
1. Article 587 Code of Commerce
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.
2. Article 837 Code of Commerce
The civil liability incurred by shipowners in the case
prescribed in this section, shall be understood as
limited to the value of the vessel with all its
appurtenances and freightage served during the
voyage.
3. Article 643 Code of Commerce
If the vessel and her cargo should be totally lost, by
reason of capture or wreck, all rights of the crew to
demand any wages whatsoever shall be
extinguished, as well as that of the ship agent for the
recovery of the advances made.
If a portion of the vessel or cargo, should be saved,
or part of either, the crew engaged in wages,
including the captain, shall retain their rights on the
salvage, so far as they go, the remainder of the
vessel as well as the value of the freightage or the
cargo saved; but the sailors who are engaged on
shares shall not have any right whatsoever to the
salvage of the hull, but only on the portion of the
freightage saved.

Exceptions to Limited Liability Rule

This is not to say, however, that the limited liability
rule is without exceptions, namely:
(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 the
captain;
(2) where the vessel is insured (to the
extent of the insurance proceeds); and
(3) in workmen's compensation claims
Note: Where the shipowner fails to overcome the
presumption of negligence, the doctrine of limited
liability cannot be applied.
As a general rule, a ship owner's liability is merely
co-extensive with his interest in the vessel, except
where actual fault is attributable to the shipowner.
Thus, as an exception to the limited liability
doctrine, a shipowner or ship agent may be held
liable for damages when the sinking of the vessel is
attributable to the actual fault or negligence of the
shipowner or its failure to ensure the seaworthiness
of the vessel.

Abandonment
1. Article 587 Code of Commerce. 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.
2. Article 590 Code of Commerce. The coowners of the 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.

3. Section 131 Insurance Code. A constructive

total loss is one which gives to a person
insured a right to abandon under Section
one hundred thirty-nine.
4. Simply put, the ship agent is liable for the
negligent acts of the captain in the care of
goods loaded on the vessel. This liability
however
can
be
limited
through
abandonment of the vessel, its equipment
and freightage as provided in Art. 587.
Nonetheless,
there
are
exceptional
circumstances wherein the ship agent could
still be held answerable despite the
abandonment, as where the loss or injury
was due to the fault of the shipowner and
the captain. The international rule is to the
effect that the right of abandonment of
vessels, as a legal limitation of a
shipowners liability, does not apply to
cases where the injury or average was
occasioned by the shipowners own fault. It
must be stressed at this point that Art. 587
speaks only of situations where the fault or
negligence is committed solely by the
captain. Where the shipowner is likewise to
be blamed, Art. 587 will not apply, and
such situation will be covered by the
provisions of the Civil Code on common
carrier. xxx Under Art 1733 of the Civil
Code, (c)ommon 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 x x x x" In the
event of loss of goods, common carriers are
presumed to have acted negligently.

Maritime Protest
Protest is required in the following cases:
1. When the vessel makes an arrival under
stress
2. Where the vessel is shipwrecked
3. Where the vessel has gone through a
hurricane or the captain believes that the
cargo has suffered damages or averages
4. Maritime collissions

Collision
1. Doctrine of Inscrutable Fault
Where fault is established but it cannot be
determined which of the two vessels were at fault,
both shall be deemed to have been at fault.
Basis Articles 827 to 828 Code of Commerce:
Article 826 Code of Commerce. If a vessel should
collide with another, through the fault, negligence,
or lack of skill of the captain, sailing mate, or any
other member of the complement, the owner of the
vessel at fault shall indemnify the losses and
damages suffered, after an expert appraisal.
Article 827 Code of Commerce. If both vessels may
be blamed for the collision, each one shall suffer its
own damages, and both shall be solidarily
responsible for the losses and damages suffered by
their cargoes.
Article 828 Code of Commerce (Doubtful
collision). The provisions of the foregoing Article
(Article 827) are applicable to the case in which it
cannot be decided which of the two vessels had
caused the collision.
2. Rules of Collision
In maritime law, collision happens when there is an
impact between two moving vessels. Under the
Code of Commerce, there is also this type where
two or more stationary vessels collide with each
other which is known as allusion.
Article 826 Code of Commerce (Culpable
collision). If a vessel should collide with another,
through the fault, negligence, or lack of skill of the
captain, sailing mate, or any other member of the
complement, the owner of the vessel at fault shall
indemnify the losses and damages suffered, after an
expert appraisal.
Article 827 Code of Commerce (Culpable
collision). If both vessels may be blamed for the
collision, each one shall suffer its own damages, and
both shall be solidarily responsible for the losses
and damages suffered by their cargoes.

Article 828 Code of Commerce (Doubtful

collision). The provisions of the foregoing Article
(Article 827) are applicable to the case in which it
cannot be decided which of the two vessels had
caused the collision.

responsibility on the part of said vessel with the

right of way.
4. Arrival under stress
a. Causes

Article 830 Code of Commerce (Fortuitous

collision). If a vessel should collide with another
through fortuitous event or force majeure, each
vessel and its cargo shall be liable for its own
damage.
Article 831 Code of Commerce. If a vessel should
be forced to collide with another one by a third
vessel, the owner of the third vessel shall indemnify
the losses and damages caused, the captain thereof
being civilly liable to said owner.
Article 832 Code of Commerce (Fortuitous
collision). If, by reason of a storm or other cause of
force majeure, a vessel which is properly anchored
and moored should collide with those nearby,
causing them damage, the injury occasioned shall be
considered as particular average of the vessel run
into.
3. Doctrine of Error in Extremis
Three zones of collision:
1. First zone:
Time up to the moment when risk of
collision begins
2. Second zone:
Time between moment when risk of
collision begins up to the moment it
becomes practical certainty
3. Third zone:
Time when collision is certain up to the
time of impact

If a vessel having a right of way suddenly changes

its course during the third zone, in an effort to avoid
an imminent collision due to the fault of another
vessel, such act may be said to be done in
EXTREMIS and even if wrong cannot create

Article 819 Code of Commerce. If the

captain during the navigation should believe
that the vessel cannot continue the voyage
to the port of destination on account of the
i.
lack of provisions,
ii.
well-founded
fear
of
seizure,
iii.
privateers or pirates, or
iv.
by reason of accident of the
sea disabling her to
navigate,
he shall assemble the officers and shall call
the persons interested in the cargo who may
be present, and who may attend the meeting
without the right to vote; and if, after
examining the circumstances of the case,
the reason should be considered wellfounded, the arrival at the nearest and most
convenient port shall be agreed upon,
drafting and entering in the log book the
proper minutes, which shall be signed by
all.
The captain shall have the deciding vote
and the persons interested in the cargo may
make the objections and protests they may
deem proper, which shall be entered in the
minutes in order that they make use thereof
in the manner they may consider advisable.
b. Persons involved in maritime commerce
i.

Shipowners and ship agents

Article 586 Code of Commerce.
The owner of a vessel and the ship
agent shall be civilly liable for the
acts of the captain and for the
obligations contracted by the latter
to repair, equip, and provision the
vessel, provided the creditor proves
that the amount claimed was
invested for the benefit of the same.

By ship agent is understood the

person entrusted with provisioning
of a vessel, or who represents her in
the port in which she happens to be.
Article 587 Code of Commerce.
The ship agents shall 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
freightage it may have earned
during the voyage.
Article 588 Code of Commerce.
Neither the owner of the vessel nor
the ship agent shall be liable for the
obligations contracted by the
captain if the latter exceeds his
powers and privileges pertaining to
him by reason of his position or
conferred upon him by the former.
However, if the amount claimed
were made use of for the benefit of
the vessel, the owner or agent shall
be liable.
Article 589 Code of Commerce. If
two or more persons should be part
owners of a merchant vessel, an
association shall be presumed as
established by the part owners.
This partnership shall be governed
by the resolutions of the majority of
the members.
A majority shall be the relatives
majority of the voting members.
If there should be only two part
owners, in case of disagreement,
the vote of the member having the
largest interest shall be decided by
lot.
The representation of the smallest
part in the ownership shall have one

vote; and proportionately the other

part owners as many votes as they
have parts equal to the smallest one.
A vessel cannot be detained.
Attached or levied upon execution
in her entirety for the private debts
of a part owner, but the proceedings
shall be limited to the interest the
debtor may have in the vessel,
without interfering with her
navigation.
ii.

Captains and masters of the vessel

Article 602 Code of Commerce.
The ship agent shall indemnify the
captain for all the expenses he may
have incurred from his own funds
or from those of other persons, for
the benefit of the vessel.
Article 603 Code of Commerce.
Before a vessel goes out to sea, the
ship agent may at his discretion,
discharge the captain and the
members of the crew hose contract
did not state a definite period nor a
definite voyage, paying them the
salaries earned according to their
contracts,
and
without
any
indemnity whatsoever, unless there
is a special and specific agreement
in respect thereto.
Article 606 Code of Commerce. If
the captain should be part owner in
the vessel, he cannot be discharged
without the ship agent returning to
him the amount of his interest
therein, which, in the absence of an
agreement between the parties,
shall be appraised by experts
appointed in the manner established
in the law of civil procedure.
Article 607 Code of Commerce. If
the captain who is a part owner
should have obtained the command
of the vessel by virtue of a special
agreement contained in the articles
of co-partnership, he cannot be

deprived of his office except for the

reasons mentioned in Article 605.
Article 608 Code of Commerce. In
case of the voluntary sale of the
vessel, all contracts between the
ship agent and captain shall
terminate, the right to proper
indemnity being reserved in favor
of the captain, according to the
agreement made with the ship
agent.
The vessel sold shall remain subject
to the security of the payment of
said indemnity if, after the action
against the vendor has been
instituted, the latter should be
insolvent.
Article 609 Code of Commerce.
Captains and the masters of vessels
must be Filipinos, having legal
capacity to bind themselves in
accordance with this Code, and
must prove that they have the skill,
capacity, and a qualifications
required to command and direct the
vessel, as established by marine
laws, ordinances or regulations, or
by those of navigation, and that
they are not disqualified according
to the same for the discharge of the
duties of that position.
If the owner of a vessel desires to
be the captain thereof and does not
have the legal qualifications
therefor, he shall limit himself to
the financial administration of the
vessel, and shall intrust her
navigation to the person possessing
the qualifications required by said
ordinance and regulations.
iii.
iv.

c.

Officers and crew of the vessel

Supercargoes