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Second Batch

2. Characteristics
FISHER VS. YANGCO STEAMSHIP CO
G.R. NO. L-8095. MARCH 31, 1915
CARSON, J.
FACTS:
1.) plaintiff is a stockholder in the Yangco Steamship Company, the owner of a large
number of steam vessels, duly licensed to engage in the coastwise trade of the
Philippine Islands.
2.) on or about June 10, 1912, the directors of the company adopted a resolution
which was thereafter ratified and affirmed by the shareholders of the company,
"expressly declaring and providing that the classes of merchandise to be carried by
the company in its business as a common carrier do not include dynamite, powder
or other explosives, and expressly prohibiting the officers, agents and servants of
the company from offering to carry, accepting for carriage said dynamite, powder
or other explosives;
3.) Acting Collector of Customs demanded and required of the company the
acceptance and carriage of such explosives; that he has refused and suspended the
issuance of the necessary clearance documents of the vessels of the company
unless and until the company consents to accept such explosives for carriage.
4.) Petitioner contends that a common carrier in the Philippine Islands may decline
to accept for carriage any shipment of merchandise of a class which it expressly or
impliedly declines to accept from all shippers alike, because as he contends "the
duty of a common carrier to carry for all who offer arises from the public profession
he has made, and limited by it."
5.) Counsel expressly admits that the statute, "as a prohibition against
discrimination is a fair, reasonable and valid exercise of government," and that "it is
necessary and proper that such discrimination be prohibited and prevented," but
he contends that "on the other hand there is no reasonable warrant nor valid
excuse for depriving a person of his liberty by requiring him to engage in business
against his will.
ISSUE: Whether or not petitioner may validly refuse the acceptance and carriage of
such explosives.

particular kind of traffic or subjecting any particular kind of traffic to any undue or
unreasonable prejudice or discrimination whatsoever, it is clear that whatever may
have been the rule at the common law, common carriers in this jurisdiction cannot
lawfully decline to accept a particular class of goods for carriage, to the prejudice
of the traffic in those goods, unless it appears that for some sufficient reason the
discrimination against the traffic in such goods is reasonable and necessary. Mere
whim or prejudice will not suffice. The grounds for the discrimination must be
substantial ones, such as will justify the courts in holding the discrimination to have
been reasonable and necessary under all circumstances of the case.
we are of the opinion that the facts alleged in the complaint are not sufficient to
sustain a finding in favor of the contentions of the petitioner. It is not alleged in the
complaint that "dynamite, gunpowder and other explosives" can in no event be
transported with reasonable safety on board steam vessels engaged in the business
of common carriers. It is not alleged that all, or indeed any of the defendant
steamship company's vessels are unsuited for the carriage of such explosives. It is
not alleged that the nature of the business in which the steamship company is
engaged is such as to preclude a finding that a refusal to accept such explosives on
any of its vessels would subject the traffic in such explosives to an undue and
unreasonable prejudice and discrimination.
It would be going too far to say that a refusal by a steam vessel engaged in the
business of transporting general merchandise as a common carrier to accept for
carriage a shipment of matches, solely on the ground of the dangers incident to the
explosive quality of this class of merchandise, would not subject the traffic in
matches to an unnecessary, undue or unreasonable prejudice and discrimination
without proof that for some special reason the particular vessel is not fitted to carry
articles of that nature. xxx The making of such a finding would involve a
consideration of the suitability of the vessel for the transportation of such
products ; the reasonable possibility of danger or disaster resulting from their
transportation in the form and under the conditions in which they are offered for
carriage; the general nature of the business done by the carrier and, in a word, all
the attendant circumstances which might affect the question of the reasonable
necessity for the refusal by the carrier to undertake the transportation of this class
of merchandise.
The complaint in the case at bar lacking the necessary allegations under this ruling,
the demurrer must be sustained on the ground that the facts alleged do not
constitute a cause of action.

HELD: NO. The legislator having enacted a regulation prohibiting common carriers
from giving unnecessary or unreasonable preferences or advantages to any

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[NB: In short, as a general rule common carriers in this jurisdiction cannot lawfully
decline to accept a particular class of goods for carriage. BUT there are
EXCEPTIONS to this rule. HOWEVER, petitioner failed to allege in its complaint the
facts that would constitute the exceptions and thats why they are NOT ALLOWED
to refuse carriage of the explosives.]

carry passengers or property for all persons who may choose to employ and
renumerate him. A common carrier is a person or corporation who undertakes to
carry goods or persons for hire.
The appellants admit that they are common carriers. They were found guilty and
sentenced to pay a fine of P200 and costs, and to return to the provincial

U.S. v. Quinajon and Quitoriano


G.R. No. L-8686, July 30, 1915

government of the Province of Ilocos Norte the sum of P359.16.


From that sentence each of the defendants appealed to this court.

Johnson, J.:

ISSUE: Whether or not the defendants and appellants have violated Act No. 98.

FACTS:

HELD: YES.

Defendants PascualQuinajon and Eugenio Quitoriano have been engaged for more

It will be noted that the law requires common carriers to carry for all persons,

than four years in the transportation of passengers and merchandise in the port of

either passengers or property, for exactly the same charge for a like or

Currimao by means of virayes. They, by means of their virayes and employees,

contemporaneous service in the transportation of like kind of traffic under

unloaded 5,986 sacks of rice belonging to the provincial government of Ilocos Norte

substantially similar circumstances or conditions. The law prohibits common

from Manila and demanded from the provincial treasurer for the unloading of each

carriers from subjecting any person, etc., or locality, or any particular kind of traffic,

one 10 centavos which amounted to P598.60.

to any undue or unreasonable prejudice or discrimination whatsoever.

The prosecuting attorney of the Province of Ilocos Norte filed a complaint against

The law does not require that the same charge shall be made for the carrying of

the defendants stating that the provincial government of Ilocos Norte suffered

passengers or property, unless all the conditions are alike and contemporaneous. It

damaged in the sum of 359.16, inasmuch as it should have paid only 239.44, in

is not believed that the law prohibits the charging of a different rate for the carrying

accordance with the said normal rate of 6 centavos for each package.

of passengers or property when the actual cost of handling and transporting the

The provincial fiscal presented witnesses to prove that defendants entered into a

same is different. It is not believed that the law intended to require common

special contract with certain merchants, under and by virtue of the terms of which

carriers to carry the same kind of merchandise, even at the same price, under

they charged and collected, for loading merchandise in said port, the sum of 6

different and unlike conditions and where the actual cost is different. It is when the

centavos for each package, without reference to its size or weight.

price charged is for the purpose of favoring persons or localities or particular kinds

Defendants were charged of violating Act No. 98 of the Civil Commission.

of merchandise, that the law intervenes and prohibits. It is favoritism and


discrimination which the law prohibits. The difference in charge must not be made

Said Act No. 98 is "An Act to regulate commerce in the Philippine Islands." Its

to favor one merchant, or shipper, or locality, to the disadvantage of another

purpose, so far as it is possible, is to compel common carriers to render to all

merchant, or shipper, or locality. If the services are alike and contemporaneous,

persons exactly the same or analogous service for exactly the same price, to the

discrimination in the price charged is prohibited.

end that there may be no unjust advantage or unreasonable discrimination. It


applies to persons or corporation engaged as common carriers of passengers or
property. A common carrier is a person or corporation whose regular business is to

In the case at bar, there is no proof that the conditions were different. There is no
proof that the services rendered by the defendants for the different parties were
unlike or even not contemporaneous. There is no pretense that it actually cost

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more to handle the rice for the province than it did for the merchants with whom
the special contracts were made. From the evidence it would seem that there was a
clear discrimination made against the province. Discrimination is the thing which is
specifically prohibited and punished under the law.

LOADSTAR SHIPPING CO., INC. VS COURT OF APPEALS


Facts:
On 19 November 1984, LOADSTAR received on board a) 705 bales of lawanit
hardwood; b) 27 boxes and crates of tilewood assemblies and the others ;and c) 49
bundles of mouldings R & W (3) Apitong Bolidenized. On its way to Manila from the
port of Nasipit, Agusan del Norte, the vessel, along with its cargo, sank off Limasawa
Island. As a result of the total loss of its shipment, the consignee made a claim with
LOADSTAR which, however, ignored the same. MIC filed a complaint against
LOADSTAR and PGAI, alleging that the sinking of the vessel was due to the fault and
negligence of LOADSTAR and its employees. LOADSTAR denied any liability for the
loss of the shippers goods and claimed that sinking of its vessel was due to force
majeure. LOADSTAR submits that the vessel was a private carrier because it was not
issued certificate of public convenience, it did not have a regular trip or schedule
nor a fixed route, and there was only one shipper, one consignee for a special
cargo.
Issues:
1. Is the M/V Cherokee a private or a common carrier? *common+
2.Did LOADSTAR observe due and/or ordinary diligence in these premises. [No]
Held:
Petition is dismissed:
1. SC hold that LOADSTAR is a common carrier. It is not necessary that the carrier be
issued a certificate of public convenience, and this public character is not altered by
the fact that the carriage of the goods in question was periodic, occasional, episodic
or unscheduled. The bills of lading failed to show any special arrangement, but only
a general provision to the effect that the M/VCherokee was a general cargo
carrier. 14 Further, the bare fact that the vessel was carrying a particular type of
cargo for one shipper, which appears to be purely coincidental, is not reason
enough to convert the vessel from a common to a private carrier, especially where,

as in this case, it was shown that the vessel was also carrying passengers. Under
Article 1732 of the Civil Code the Civil Code defines common carriers in the
following terms:
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.
2. We find that the M/V Cherokee was not seaworthy when it embarked on its
voyage on 19 November 1984. The vessel was not even sufficiently manned at the
time. For a vessel to be seaworthy, it must be adequately equipped for the voyage
and manned with a sufficient number of competent officers and crew. The failure of
a common carrier to maintain in seaworthy condition its vessel involved in a
contract of carriage is a clear breach of its duty.

3. Distinguished from Private Carrier


Home Insurance Co. v. American Steamship
G.R. No. L-25599

Facts:
"ConsorcioPesquero del Peru of South America" shipped from Peru 21,740 jute bags
of Peruvian fish meal through SS Crowborough (covered by clean bills of landing
numbers 1 and 2). The cargo was consigned to San Miguel Corporation, insured by
Home Insurance Company. When it arrived to Manila, it was discharged into the
lighters of Luzon Stevedoring Company. When it was delivered to SMC, there were
shortages amounting to P12,033.85.
Home Insurance Company paid the consignee P14,870.71 the insurance value of
the loss, as full settlement of the claim. Having been refused to be reimbursed by
the defendants, Home Insurance filed a complaint beore the CFI.
Luzon Stevedoring Corporation alleged that it delivered with due diligence the
goods in the same quantity and quality that it had received the same from the
carrier. American Steamship Agencies denied liability by alleging that under the
provisions of the Charter party referred to in the bills of lading, the charterer, not
the shipowner, was responsible for any loss or damage of the cargo.

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The CFI absolved Luzon Stevedoring from liability and ordered American Steamship
to pay the plaintiff.

Issue:
Whether or not the stipulation in the charter party of the owner's non-liability is
valid so as to absolve the American Steamship Agencies from liability for loss

Ruling:
It is valid. The bills of lading, covering the shipment of Peruvian fish meal provide at
the back thereof that the bills of lading shall be governed by and subject to the
terms and conditions of the charter party, if any, otherwise, the bills of lading
prevail over all the agreements. On the of the bills are stamped "Freight prepaid as
per charter party. Subject to all terms, conditions and exceptions of charter party
dated London, Dec. 13, 1962."
Section 2, paragraph 2 of the charter party, provides that the owner is liable for loss
or damage to the goods caused by personal want of due diligence on its part or its
manager to make the vessel in all respects seaworthy and to secure that she be
properly manned, equipped and supplied or by the personal act or default of the
owner or its manager. Said paragraph, however, exempts the owner of the vessel
from any loss or damage or delay arising from any other source, even from the
neglect or fault of the captain or crew or some other person employed by the
owner on board, for whose acts the owner would ordinarily be liable except for said
paragraph..
The provisions of our Civil Code on common carriers were taken from AngloAmerican 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.

San Pablo v. Pantranco , G.R. No. L-61461, 21 August 1987


Facts: The Pantranco South Express, Inc., hereinafter referred to as PANTRANCO is a
domestic corporation engaged in the land transportation business with PUB service
for passengers and freight and various certificates for public conveniences (CPC) to

operate passenger buses from Metro Manila to Bicol Region and Eastern Samar. On
March 27,1980 PANTRANCO through its counsel wrote to Maritime Industry
Authority (MARINA) requesting authority to lease/purchase a vessel named MN
"Black Double" "to be used for its project to operate a ferryboat service from
Matnog, Sorsogon and Allen, Samar that will provide service to company buses and
freight trucks that have to cross San Bernardo Strait. In a reply of April 29,1981
PANTRANCO was informed by MARINA that it cannot give due course to the
request.

PANTRANCO nevertheless acquired the vessel MN "Black Double" on May


27, 1981 for P3 Million pesos. It wrote the Chairman of the Board of Transportation
(BOT) through its counsel, that it proposes to operate a ferry service to carry its
passenger buses and freight trucks between Allen and Matnog in connection with
its trips to Tacloban City. PANTRANCO claims that it can operate a ferry service in
connection with its franchise for bus operation in the highway from Pasay City to
Tacloban City "for the purpose of continuing the highway, which is interrupted by a
small body of water, the said proposed ferry operation is merely a necessary and
incidental service to its main service and obligation of transporting its passengers
from Pasay City to Tacloban City. Such being the case there is no need to obtain a
separate certificate for public convenience to operate a ferry service between Allen
and Matnog to cater exclusively to its passenger buses and freight trucks.
Without awaiting action on its request PANTRANCO started to operate said
ferry service. Acting Chairman Jose C. Campos, Jr. of BOT ordered PANTRANCO not
to operate its vessel until the application for hearing on Oct. 1, 1981. In another
order BOT enjoined PANTRANCO from operating the MN "Black Double" otherwise
it will be cited to show cause why its CPC should not be suspended or the pending
application denied.
Epitacio San Pablo (now represented by his heirs) and Cardinal Shipping
Corporation who are franchise holders of the ferry service in this area interposed
their opposition. They claim they adequately service the PANTRANCO by ferrying its
buses, trucks and passengers. BOT then asked the legal opinion from the Minister of
Justice whether or not a bus company with an existing CPC between Pasay City and
Tacloban City may still be required to secure another certificate in order to operate
a ferry service between two terminals of a small body of water. On October 20,
1981 then Minister of Justice Ricardo Puno rendered an opinion to the effect that
there is no need for bus operators to secure a separate CPC to operate a ferryboat
service.

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Thus on October 23, 1981 the BOT rendered its decision holding that the
ferryboat service is part of its CPC to operate from Pasay to Samar/Leyte by
amending PANTRANCO's CPC so as to reflect the same.

hearing and affording the oppositors the opportunity to be heard, among others, as
provided by law.

PLANTERS PRODUCTS INC. V. CA


Facts:
Cardinal Shipping Corporation and the heirs of San Pablo filed separate
motions for reconsideration of said decision and San Pablo filed a supplemental
motion for reconsideration that were denied by the BOT on July 21, 1981. Hence,
San Pablo filed the herein petition for review on certiorari with prayer for
preliminary injunction seeking the revocation of said decision, and pending
consideration of the petition the issuance of a restraining order or preliminary
injunction against the operation by PANTRANCO of said ferry service

Planters Products (Planters) purchased from Mitsubishi International Corporation of

Issue: Whether or not the ferry boat is a common carrier?

were closed with heavy iron lids which remained closed during the entire journey.

Held: Considering the environmental circumstances of the case, the conveyance of


passengers, trucks and cargo from Matnog to Allen is certainly not a ferryboat
service but a coastwise or interisland shipping service. Under no circumstance can
the sea between Matnog and Allen be considered a continuation of the highway.
While a ferryboat service has been considered as a continuation of the highway
when crossing rivers or even lakes, which are small body of waters separating the
land, however, when as in this case the two terminals, Matnog and Allen are
separated by an open sea it cannot be considered as a continuation of the highway.
The contention of private respondent PANTRANCO that its ferry service
operation is as a private carrier, not as a common carrier for its exclusive use in the
ferrying of its passenger buses and cargo trucks is absurd. PANTRANCO does not
deny that it charges its passengers separately from the charges for the bus trips and
issues separate tickets whenever they board the MN "Black Double" that crosses
Matnog to Allen. Nevertheless, considering that the authority granted to
PANTRANCO is to operate a private ferry, it can still assert that it cannot be held to
account as a common carrier towards its passengers and cargo. Such an anomalous
situation that will jeopardize the safety and interests of its passengers and the cargo
owners cannot be allowed.
Thus the Court holds that the water transport service between Matnog
and Allen is not a ferryboat service but a coastwise or interisland shipping service.
Before private respondent may be issued a franchise or CPC for the operation of the
said service as a common carrier, it must comply with the usual requirements of
filing an application, payment of the fees, publication, adducing evidence at a

USA of 9,000 metric tons of urea fertilizer which the latter shipped aboard the cargo
vessel owned by private respondent KyoseiKisin Kabushiki Kaisha (KKKK) from
America to La Union. Prior to its voyage, a time charter party was entered into
between Mitusbishi as shipper/charterer and KKKK as ship-owner. After the Urea
fertilizer was loaded in bulk by stevedores hired by the shipper, the steel hatches

Upon arrival of the vessel, the hatches were opened with the use of the vessel
boom. Planters unloaded the cargo from the holders into the steel bodied dump
trucks. Each time the dump trucks were filled up, its load of urea was covered with
tarpaulin before it was transported to the consignees warehouse located some (50)
fifty meters from the wharf. It took (11) eleven days from planters to unload the
cargo. The report submitted by private marine and cargo surveyors revealed a
shortage in the cargo, and some portion in the cargo was contaminated with dirt,
rendering the same unfit for commerce.
PPI filed an action for damages with the CFI Manila. The defendant carrier argued
that the strict public policy governing common carriers does not apply to them
because they have become private carriers by reason of the provisions of the
charter-party. The court a quo however sustained the claim of the plaintiff against
the defendant carrier for the value of the goods lost or damaged.
On appeal, respondent Court of Appeals reversed the lower court and absolved the
carrier from liability for the value of the cargo that was lost or damaged. Relying on
the 1968 case of Home Insurance Co.v. American Steamship Agencies, Inc., the
appellate court ruled that the cargo vessel M/V Sun Plum owned by private

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respondent KKKK was a private carrier and not a common carrier by reason of the

in a time or voyage charter retains possession and control of the ship, although her

time charterer-party and that the Civil Code provisions on common carriers which

holds may, for the moment, be the property of the charterer.

set forth a presumption of negligence do not find application in the case at bar.
2. Respondent is a common carrier. The term common carrier is defined in Article
Issues:

1732 of the Civil Code. The definition refers to carriers either by land, water, or air

1. Whether a common carrier becomes a private carrier by reason of a charter-

which holds themselves out as ready to engage in carrying goods on transporting

party.

passengers or both for compensation as a public employment and not as a casual

2. Whether or not the respondent is a common carrier.

occupation; if the undertaking is a single transaction, not a part of the general

3. Whether or not the respondent is liable for damages.

business or corporation, although involving the carriage of goods for a fee, then the

Held:

person or corporation offering such services is a private carrier. In the case at bar

1. The distinction between a common or public carrier and a private or special

respondent carrier transports goods indiscriminately for all persons. Being such, he

carrier lies in the character of the business, such that if the undertaking is a single

is a common carrier.

transaction, not a part of the general business or occupation, although involving the
carriage of goods for a fee, the person or corporation offering such service is a

3. The court ruled in the negative. While respondent is a common carrier, he has

private carrier.

sufficiently overcome by clear and convincing proof the prima facie presumption of

It is not disputed that respondent carrier, in the ordinary course of business,

negligence, due to the manner of storage of the goods during the voyage. The

operates as a common carrier, transporting goods indiscriminately for all persons.

presumption of negligence on the part of the respondent carrier has been

When petitioner chartered the vessel M/V Sun Plum, the ship captain, its officers

efficaciously overcome by the showing of extraordinary zeal and assiduity exercised

and compliment were under the employ of the shipowner and therefore continued

by the carrier in the care of the cargo.

to be under its direct supervision and control. Hardly then can we charge the
charterer, a stranger to the crew and to the ship, with the duty of caring for his

Article 1734 of the New Civil Code provides that common carriers are not

cargo when the charterer did not have any control of the means in doing so. This is

responsible for the loss, destruction or deterioration of the goods if caused by the

evident in the present case considering that the steering of the ship, the manning of

charterer of the goods or defects in the packaging or in the containers. The Code of

the decks, the determination of the course of the voyage and other technical

Commerce also provides that all losses and deterioration which the goods may

incidents of maritime navigation were all consigned to the officers and crew who

suffer during the transportation by reason of fortuitous event, force majeure, or the

were screened, chosen and hired by the shipowner.

inherent defect of the goods, shall be for the account and risk of the shipper, and
that proof of these accidents is incumbent upon the carrier.

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

4. Government Regulation of Common Carriers Business

the charter is limited to the ship only, as in the case of a time-charter or voyagecharter. It is only when the charter includes both the vessel and its crew, as in a

G.R. No. 115381 December 23, 1994

bareboat or demise that a common carrier becomes private, at least insofar as the
particular voyage covering the charter-party is concerned. Indubitably, a shipowner

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KILUSANG MAYO UNO LABOR CENTER vs. HON. JESUS B. GARCIA, JR., the LAND
TRANSPORTATION FRANCHISING AND REGULATORY BOARD, and the PROVINCIAL
BUS OPERATORS ASSOCIATION OF THE PHILIPPINES

applicant for a proposed transport service without having to prove public necessity,
is illegal for being violative of the Public Service Act and the ROC.
Issue: Does the authority given unconstitutional, invalid and illegal?

Facts: Then Secretary of DOTC, Orbos, issued MC No. 90-395 to then LTFRB
Chairman, Fernando allowing provincial bus operators to charge passengers rates
within a range of 15% above and 15% below the LTFRB official rate for a period of 1
year.Finding the implementation of the fare range scheme "not legally feasible,"
Fernando submitted a memorandum to Sec. Orbos
Provincial Bus Operators Association of the Philippines, Inc. (PBOAP) filed an
application for fare rate increase. The application was opposed by the Philippine
Consumers Foundation, Inc. and Perla C. Bautista alleging that the proposed rates
were exorbitant and unreasonable and that the application contained no allegation
on the rate of return of the proposed increase in rates.LTFRB rendered a decision
granting the fare rate increase
Then Secretary of the DTC Prado issued DO No.92-587 defining the policy
framework on the regulation of transport services.Secretary of the DOTC Garcia
issued a memorandum to the Acting Chairman of the LTFRB suggesting swift action
on the adoption of rules and procedures to implement above-quoted DO No. 92587 that laid down deregulation and other liberalization policies for the transport
sector. The LTFRB issued MC No. 92-009 promulgating the guidelines for the
implementation of DOTC DO No. 92-587.
PBOAP, availing itself of the deregulation policy of the DOTC allowing provincial bus
operators to collect plus 20% and minus 25% of the prescribed fare without first
having filed a petition for the purpose and without the benefit of a public hearing,
announced a fare increase of 20% of the existing fares. KMU filed a petition before
the LTFRB opposing the upward adjustment of bus fares; but the LTFRB dismissed
the petition for lack of merit
Hence, the instant petition for certiorari with an urgent prayer for issuance of a
TRO; which the SC did enjoining, prohibiting and preventing respondents from
implementing the bus fare rate increase as well as the questioned orders and
memorandum circulars.

Held: Yes. In the case at bench, the authority given by the LTFRB to the provincial
bus operators to set a fare range over and above the authorized existing fare, is
illegal and invalid as it is tantamount to an undue delegation of legislative
authority. Potestasdelegata non delegaripotest. What has been delegated cannot
be delegated. This doctrine is based on the ethical principle that such a delegated
power constitutes not only a right but a duty to be performed by the delegate
through the instrumentality of his own judgment and not through the intervening
mind of another. A further delegation of such power would indeed constitute a
negation of the duty in violation of the trust reposed in the delegate mandated to
discharge it directly. The policy of allowing the provincial bus operators to change
and increase their fares at will would result not only to a chaotic situation but to an
anarchic state of affairs. This would leave the riding public at the mercy of transport
operators who may increase fares every hour, every day, every month or every
year, whenever it pleases them or whenever they deem it "necessary" to do so.
While we recognize the authority of the DOTC and the LTFRB to issue administrative
orders to regulate the transport sector, we find that they committed grave abuse of
discretion in issuing DOTC DO No. 92-587 defining the policy framework on the
regulation of transport services and LTFRB MC No. 92-009 promulgating the
implementing guidelines on DOTC DO No. 92-587, the said administrative issuances
being amendatory and violative of the Public Service Act and the ROC.
Consequently, we rule that the 20% fare increase imposed by respondent PBOAP on
without the benefit of a petition and a public hearing is null and void and of no
force and effect. No grave abuse of discretion however was committed in the
issuance of DOTC MC No. 90-395 and DOTC Memorandum, the same being merely
internal communications between administrative officers.
The TRO issued is hereby MADE PERMANENT insofar as it enjoined the bus fare rate
increase granted under the provisions of the aforementioned administrative
circulars, memoranda and/or orders declared invalid.
G.R. No. 114222 April 6, 1995

KMU anchors its claim on 2 grounds. First, the authority given by LTFRB to
provincial bus operators to set a fare range of plus or minus 15% percent, later
increased to plus 20% and -25% percent, over and above the existing authorized
fare without having to file a petition for the purpose, is unconstitutional, invalid and
illegal. Second, the establishment of a presumption of public need in favor of an

FRANCISCO S. TATAD, JOHN H. OSMENA and RODOLFO G. BIAZON


vs.
HON. JESUS B. GARCIA, JR., in his capacity as the Secretary of the Department of

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

Transportation and Communications, and EDSA LRT CORPORATION, LTD.

Secretary Prado, thereafter, requested presidential approval of the contract.

QUIASON, J.:

However, Executive Secretary Franklin Drilon, who replaced Executive Secretary

FACTS:

Orbos, informed Secretary Prado that the President could not grant the requested

DOTC planned to construct a light railway transit (LRT) line along EDSA referred to
as EDSA Light Rail Transit III (EDSA LRT III). Eli Levin Enterprises, Inc., represented by
Elijahu Levin to DOTC Secretary Oscar Orbos, sent a letter proposing to construct
the EDSA LRT III on a Build-Operate-Transfer (BOT) basis.
RA 6957 entitled "An Act Authorizing the Financing, Construction, Operation and
Maintenance of Infrastructure Projects by the Private Sector, and For Other
Purposes," or the Build-Operate-Transfer (BOT) Law was signed into law. It provides
two schemes for the financing, construction and operation of government projects
through private initiative and investment: Build-Operate-Transfer (BOT) or BuildTransfer (BT).

approval. The parties entered into a "Revised and Restated Agreement to Build,
Lease and Transfer a Light Rail Transit System for EDSA". DOTC, represented by
Secretary Jesus Garcia vice Secretary Prado, and EDSA LRT Corporation, Ltd. entered
into a "Supplemental Agreement to the 22 April 1992 Revised and Restated
Agreement to Build, Lease and Transfer a Light Rail Transit System for EDSA".
According to the agreements, EDSA LRT Corporation, Ltd. shall undertake and
finance the entire project required for a complete operational light rail transit
system. Target completion date is 1,080 days or approximately 3 years from the
implementation date of the contract inclusive of mobilization, site works, initial and
final testing of the system. Upon full or partial completion and viability thereof,
EDSA LRT Corporation, Ltd. shall deliver the use and possession of the completed

Pursuant to RA 6957, the Prequalification Bids and Awards Committee (PBAC) and

portion to DOTC which shall operate the same. DOTC shall pay EDSA LRT

the Technical Committee were created. Five groups responded to the invitation

Corporation, Ltd. rentals on a monthly basis through an Irrevocable Letter of Credit.

namely, ABB Trazione of Italy, Hopewell Holdings Ltd. of Hongkong, Mansteel

As agreed upon, EDSA LRT Corporation, Ltd.'s capital shall be recovered from the

International of Mandaue, Cebu, Mitsui & Co., Ltd. of Japan, and EDSA LRT

rentals to be paid by the DOTC which, in turn, shall come from the earnings of the

Consortium, composed of ten foreign and domestic corporations: namely, Kaiser

EDSA LRT III. After 25 years and DOTC shall have completed payment of the rentals,

Engineers International, Inc., ACER Consultants (Far East) Ltd. and Freeman Fox,

ownership of the project shall be transferred to the latter for a consideration of

Tradeinvest/CKD Tatra of the Czech and Slovak Federal Republics, TCGI Engineering

only U.S. $1.00. (CONTRACT OF LEASE)

All Asia Capital and Leasing Corporation, The Salim Group of Jakarta, E. L.
Enterprises, Inc., A.M. Oreta& Co. Capitol Industrial Construction Group, Inc, and F.
F. Cruz & co., Inc.

RA 7718, an "Act Amending Certain Sections of Republic Act No. 6957, Entitled "An
Act Authorizing the Financing, Construction, Operation and Maintenance of
Infrastructure Projects by the Private Sector, and for Other Purposes" was signed

After evaluating the prequalification, bids, the PBAC issued a Resolution declaring

into law by the President. It expressly recognizes BLT scheme and allows direct

that of the five applicants, only the EDSA LRT Consortium "met the requirements of

negotiation of BLT contracts.

garnering at least 21 points per criteria, except for Legal Aspects, and obtaining an
over-all passing mark of at least 82 points". The EDSA LRT Consortium submitted its
bid proposal to DOTC. For compliance of requirements, DOTC and EDSA LRT
Corporation, Ltd., in substitution of the EDSA LRT Consortium, entered into an
"Agreement to Build, Lease and Transfer a Light Rail Transit System for EDSA" under
the terms of the BOT Law.

Tatad, Osmena and Biazon, suing as Senators and taxpayers, asserted that the
Revised and Restated Agreement of April 22, 1992 and the Supplemental
Agreement of May 6, 1993 are unconstitutional and invalid, among others, for this
reason: the EDSA LRT III is a public utility, and the ownership and operation thereof
is limited by the Constitution to Filipino citizens and domestic corporations, not
foreign corporations like EDSA LRT Corporation, Ltd.

8
TRANSPO CASE DIGESTS, 2ND BATCH, 2E

EDSA LRT Corporation, Ltd. to whom the contract to construct the EDSA LRT III was

public may be done by the owner or by the person in control thereof who may not

awarded by public respondent, is admittedly a foreign corporation "duly

necessarily be the owner thereof.

incorporated and existing under the laws of Hongkong". There is also no dispute

In sum, EDSA LRT Corporation, Ltd. will not run the light rail vehicles and collect fees

that once the EDSA LRT III is constructed, EDSA LRT Corporation, Ltd., as lessor, will

from the riding public. It will have no dealings with the public and the public will

turn it over to DOTC, as lessee, for the latter to operate the system and pay rentals

have no right to demand any services from it.

for said use.


ISSUE: Whether or not EDSA LRT Corporation, Ltd., a foreign corporation, can own

*EDSA LRT Corporation, Ltd. merely owns the facilities necessary to operate EDSA
LRT III.

EDSA LRT III, a public utility?


HELD: YES, EDSA LRT Corporation, Ltd. can own EDSA LRT III.

5. Governing Law

What EDSA LRT Corporation, Ltd. owns are the rail tracks, rolling stocks like the

SAMAR MINING CO., INC. VS. NORDEUTSCHER LLOYD

coaches, rail stations, terminals and the power plant, not a public utility. While a

No. L-28673. October 23, 1984

franchise is needed to operate these facilities to serve the public, they do not by
themselves constitute a public utility. What constitutes a public utility is not their
ownership but their use to serve the public (Iloilo Ice & Cold Storage Co. v. Public
Service Board, 44 Phil. 551, 557 558 [1923]).
The Constitution, in no uncertain terms, requires a franchise for the operation of a
public utility. However, it does not require a franchise before one can own the
facilities needed to operate a public utility so long as it does not operate them to
serve the public.
Section 11 of Article XII of the Constitution provides: No franchise, certificate or any
other form of authorization for the operation of a public utility shall be granted
except to citizens of the Philippines or to corporations or associations organized
under the laws of the Philippines at least sixty per centum of whose capital is
owned by such citizens, nor shall such franchise, certificate or authorization be
exclusive character or for a longer period than fifty years . . . (Emphasis supplied).

Facts: The case arose from an importation made by SAMAR MINING COMPANY,
INC., of one (1) crate Optima welded wedge wire sieves through the M/S
SCHWABENSTEIN, a vessel owned NORDEUTSCHER LLOYD, which shipment is
covered by Bill of Lading No. 18 duly issued to consignee SAMAR MINING
COMPANY, INC.. Upon arrival of the aforesaid vessel at the port of Manila, the
aforementioned importation was unloaded and delivered in good order and
condition to the bonded warehouse of AMCYL. The goods were however never
delivered to, nor received by, the consignee at the port of destinationDavao.
When the letters of complaint sent to defendants failed to elicit the desired
response, consignee filed a formal claim against the former, but neither paid.
Hence, the filing of the instant suit to enforce payment. Defendants-appellants
brought in AMCYL as third party defendant. The trial court rendered judgment in
favor of plaintiff, ordering defendants to pay the amount of P1,691.93 plus
attorneys fees and costs. Only the defendants appealed from said decision.
The extent of appellant carriers responsibility and/or liability in the transshipment
of the goods in question are spelled out and delineated under Section 1, paragraph
3 of Bill of Lading No. 18, to wit:

In law, there is a clear distinction between the "operation" of a public utility and the
ownership of the facilities and equipment used to serve the public.
The right to operate a public utility may exist independently and separately from
the ownership of the facilities thereof. One can own said facilities without operating
them as a public utility, or conversely, one may operate a public utility without

The carrier shall not be liable in any capacity whatsoever for any delay,
loss or damage occurring before the goods enter ships tackle to be loaded or after
the goods leave ships tackle
to be discharged, transshipped or forwarded x
xx.
and in Section 11 of the same Bill, which provides:

owning the facilities used to serve the public. The devotion of property to serve the

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

Whenever the carrier or master may deem it advisable or in any case


where the goods are
placed at carriers disposal at or consigned to a point
where the ship does not expect to load or discharge, the carrier or master may,
without notice, forward the whole or any part of the goods before
or
after
loading at the original port of shipment. x xx This carrier, in making
arrangements for any transshipping or forwarding vessels or means of
transportation not
operated by this carrier shall be considered solely the
forwarding agent of the shipper and
without any other responsibility
whatsoever even though the freight for the whole transport has
been
collected by him. x xx Pending or during forwarding or transshipping the carrier may
store
the goods ashore or afloat solely as agent of the shipper and at risk and
expense of the goods
and the carrier shall not be liable for detention nor
responsible for the acts, neglect, delay or failure to act of anyone to whom the
goods are entrusted or delivered for storage, handling or
any service incidental
thereto

delivery, the appellant, as erstwhile carrier, ceases to be responsible for any loss or
damage that may befall the goods from that point onwards. This is the full import of
Article 1736, as applied to the case before Us.

Issue: Is the stipulation in the bill of lading exempting the carrier from liability for
loss of goods not in its actual custody valid?

In G.R. No. 69044, the M/S ASIATICA, a vessel operated by petitioner


Eastern Shipping Lines, Inc., loaded at Kobe, Japan for transportation to Manila,
5,000 pieces of calorized lance pipes consigned to Philippine Blooming Mills Co.,
Inc., and 7 cases of spare parts, consigned to Central Textile Mills, Inc. Both sets of
goods were insured against marine risk for their stated value with respondent
Development Insurance and Surety Corporation.

Held: Yes. Being a contract, it is the law between the parties thereto, who are
bound by its terms and conditions provided that these are not contrary to law,
morals, good customs, public order and public policy. NCC Article 1736 is applicable
to the instant suit. Under said article, the carrier may be relieved of the
responsibility for loss or damage to the goods upon actual or constructive delivery
of the same by the carrier to the consignee, or to the person who has a right to
receive them.
Appellants liability as a common carrier was effective only for the transport of
goods from Germany to Manila, the point of discharge. From Manila to Davao, upon
transshipment of the same goods the carrier is transformed into an agent of the
consignee and ceases to be liable as a carrier for loss or damage to goods
transshipped. Two undertakings appeared embodied and/or provided for in the Bill
of Lading in question. The first is FOR THE TRANSPORT OF GOODS from Bremen,
Germany to Manila. The second, THE TRANSSHIPMENT OF THE SAME GOODS from
Manila to Davao, with appellant acting as agent of the consignee. At the hiatus
between these two undertakings of appellant which is the moment when the
subject goods are discharged in Manila, its personality changes from that of carrier
to that of agent of the consignee.
Such being the case, there was, in effect, actual delivery of the goods from
appellant as carrier to the same appellant as agent of the consignee. Upon such

EASTERN SHIPPING LINES, INC., petitioner, vs. INTERMEDIATE APPELLATE COURT


and DEVELOPMENT INSURANCE & SURETY CORPORATION, respondents.
G.R. No. L-69044 May 29, 1987
EASTERN SHIPPING LINES, INC., petitioner, vs.THE NISSHIN FIRE AND MARINE
INSURANCE CO., and DOWA FIRE & MARINE INSURANCE CO., LTD., respondents.
G.R. No. 71478

May 29, 1987

TOPIC: Governing Law


FACTS:

In G.R. No. 71478, during the same period, the same vessel took on board
128 cartons of garment fabrics and accessories, consigned to Mariveles Apparel
Corporation, and two cases of surveying instruments consigned to Aman
Enterprises and General Merchandise. The 128 cartons were insured for their stated
value by respondent Nisshin Fire & Marine Insurance Co. and the 2 cases by
respondent Dowa Fire & Marine Insurance Co., Ltd.
Enroute for Kobe, Japan, to Manila, the vessel caught fire and sank,
resulting in the total loss of ship and cargo. The respective respondent Insurers paid
the corresponding marine insurance values to the consignees concerned.

G.R. NO. 69044


Respondent Development Insurance & Surety Corporation having been
subrogated unto the rights of the two insured companies, filed suit against
petitioner Carrier for the recovery of the amounts it had paid to the insured before
the CFI.

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

Petitioner-Carrier denied liability mainly on the ground that the loss was
due to an extraordinary fortuitous event, hence, it is not liable under the law. The
CFI ruled in favor Development Insurance. The CA affirmed the CFIs decision.
G.R. NO. 71478
Respondents Nisshin Fire & Marine Insurance Co. and Dowa Fire & Marine
Insurance Co., Ltd. filed suit against Petitioner Carrier for the recovery of the
insured value of the cargo lost before the CFI, imputing unseaworthiness of the ship
and non-observance of extraordinary diligence by petitioner Carrier.
Petitioner Carrier denied liability on the principal grounds that the fire
which caused the sinking of the ship is an exempting circumstance under Section
4(2) (b) of the Carriage of Goods by Sea Act (COGSA); and that when the loss of fire
is established, the burden of proving negligence of the vessel is shifted to the cargo
shipper. The RTC ruled in favor of the insurance companies. The CA affirmed the
decision.

ISSUE: 1. Whether the Civil Code provisions on common carriers or the carriage of
goods by sea act should govern
2. Whether the burden of proof rests on the party imputing negligence
HELD:
1.

2.

The law of the country to which the goods are to be transported governs the
liability of the common carrier in case of their loss, destruction or
deterioration. As the cargoes in question were transported from Japan to the
Philippines, the liability of Petitioner Carrier is governed primarily by the Civil
Code. However, in all matters not regulated by said Code, the rights and
obligations of common carrier shall be governed by the Code of Commerce and
by special laws. Thus, the Carriage of Goods by Sea Act, a special law, is
suppletory to the provisions of the Civil Code.
Under the Civil Code, common carriers, from the nature of their business and
for reasons of public policy, are bound to observe extraordinary diligence in the
vigilance over goods, according to all the circumstances of each case. 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;
Petitioner Carrier claims that the loss of the vessel by fire exempts it from
liability under the phrase "natural disaster or calamity. " However, we are of the
opinion that fire may not be considered a natural disaster or calamity. This must be
so as it arises almost invariably from some act of man or by human means. It does
not fall within the category of an act of God unless caused by lightning or by other
natural disaster or calamity. 12 It may even be caused by the actual fault or privity
of the carrier.
As the peril of the fire is not comprehended within the exception in Article
1734, supra, Article 1735 of the Civil Code provides that all cases than those
mention in Article 1734, 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 deligence required by law.

In this case, the respective Insurers. assubrogees of the cargo shippers,


have proven that the transported goods have been lost. Petitioner Carrier has also
proved that the loss was caused by fire. The burden then is upon Petitioner Carrier
to proved that it has exercised the extraordinary diligence required by law.
Having failed to discharge the burden of proving that it had exercised the
extraordinary diligence required by law, Petitioner Carrier cannot escape liability for
the loss of the cargo. And even if fire were to be considered a "natural disaster"
within the meaning of Article 1734 of the Civil Code, 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. "
This Petitioner Carrier has also failed to establish satisfactorily.
Nor may Petitioner Carrier seek refuge from liability under the Carriage of
Goods by Sea Act, It is provided therein that:
Sec. 4(2). Neither the carrier nor the ship shall be responsible for loss or
damage arising or resulting from
(b)

Fire, unless caused by the actual fault or privity of the carrier.

In this case, both the Trial Court and the Appellate Court, in effect, found,
as a fact, that there was "actual fault" of the carrier shown by "lack of diligence" in

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

that "when the smoke was noticed, the fire was already big; that the fire must have
started twenty-four (24) hours before the same was noticed; " and that "after the
cargoes were stored in the hatches, no regular inspection was made as to their
condition during the voyage." The foregoing suffices to show that the circumstances
under which the fire originated and spread are such as to show that Petitioner
Carrier or its servants were negligent in connection therewith. Consequently, the
complete defense afforded by the COGSA when loss results from fire is unavailing
to Petitioner Carrier.
Petitioner Carrier avers that its liability if any, should not exceed US $500
per package as provided in section 4(5) of the COGSA. Article 1749 of the New Civil
Code also allows the limitations of liability in this wise:
Art. 1749.A stipulation that the common carrier's liability as limited to the
value of the goods appearing in the bill of lading, unless the shipper or
owner declares a greater value, is binding.
It is to be noted that the Civil Code does not of itself limit the liability of the
common carrier to a fixed amount per package although the Code expressly permits
a stipulation limiting such liability. Thus, the COGSA which is suppletory to the
provisions of the Civil Code, steps in and supplements the Code by establishing a
statutory provision limiting the carrier's liability in the absence of a declaration of a
higher value of the goods by the shipper in the bill of lading. The provisions of the
Carriage of Goods by Sea Act on limited liability are as much a part of a bill of lading
as though physically in it and as much a part thereof as though placed therein by
agreement of the parties.
In G.R. No. 69044, there is no stipulation in the respective Bills of Lading
(Exhibits "C-2" and "I-3") 1 7 limiting the carrier's liability for the loss or destruction
of the goods. Nor is there a declaration of a higher value of the goods. Hence,
Petitioner Carrier's liability should not exceed US $500 per package,
In G.R. No. 71478, in so far as the two (2) cases of surveying instruments
are concerned, the amount awarded to DOWA which was already reduced to
$1,000 by the Appellate Court following the statutory $500 liability per package, is
in order.

G.R. No. L-49407 August 19, 1988


NATIONAL DEVELOPMENT COMPANY, petitioner-appellant, vs. THE COURT OF
APPEALS and DEVELOPMENT INSURANCE & SURETY CORPORATION, respondentsappellees.

No. L-49469
August 19, 1988
MARITIME COMPANY OF THE PHILIPPINES, petitioner-appellant, vs. THE COURT
OF APPEALS and DEVELOPMENT INSURANCE & SURETY CORPORATION,
respondents- appellees.
FACTS: NDC and MCP entered into a memorandum agreementwherein NDC as the
first preferred mortgagee of 3 ocean going vessels( including 'Dona Nati') appointed
MCP as its agent to manage and operate said vessel for and in its behalf and
account. E. Philipp Corp. loaded on board "Dona Nati" at San Francisco, California,
1,200 bales of American raw cotton consigned to the order of Manila Banking
Corporation and the People's Bank and Trust Company. Also loaded on the same
vessel at Tokyo, Japan, were the cargo of Kyokuto Boekui, Kaisa, Ltd., consigned to
the order of Manila Banking Corp. consisting of 200 cartons of sodium lauryl sulfate
and 10 cases of aluminum foil.
En route to Manila Dona Naticollided with 'SS YasushimaMaru' at Ise Bay, Japan and
as a result, 550 bales of raw cotton were lost and/or destroyed; 535 bales as
damaged were landed and sold on the authority of the General Average Surveyor;
15 bales were not landed and deemed lost. Also considered totally lost were the
aforesaid shipment of Kyokuto, BoekuiKaisa Ltd. Development Insurance and Surety
Corporation, as insurer, paid the total amount of loss. DISC filed before the then CFI
an action for the recovery of the sum of P364,915.86.
CFIrendered a decision ordering MCP and NDC to pay jointly and solidarity to DISC.
CA promulgated its decision affirming in toto the decision of the trial court. Hence
these appeals by certiorari.
NDC argues that the Carriage of Goods by Sea Act should apply and not the Civil
Code or the Code of Commerce. Under Section 4 (2) of said Act, the carrier is not
responsible for the loss or damage resulting from the "act, neglect or default of the
master, mariner, pilot or the servants of the carrier in the navigation or in the
management of the ship." Thus, NDC insists that based on the findings of the trial
court which were adopted by the Court of Appeals, both pilots of the colliding
vessels were at fault and negligent, NDC would have been relieved of liability under
the Carriage of Goods by Sea Act. Instead, Article 287 of the Code of Commerce was
applied and both NDC and MCP were ordered to reimburse the insurance company
for the amount the latter paid to the consignee as earlier stated.
ISSUE: Whether or not the court erred in applying the Civil Code and the Code of
Commerce in the case at bar.

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

HELD:NO, Civil Code and Code of Commerce are laws that govern loss or
destruction of goods due to collision of vessels outside Philippine waters as well as
the extent of liability. In Eastern Shipping Lines Inc. v. IAC, it was held under similar
circumstance "that the law of the country to which the goods are to be transported
governs the liability of the common carrier in case of their loss, destruction or
deterioration" (Article 1753, Civil Code). Thus, the rule was specifically laid down
that for cargoes transported from Japan to the Philippines, the liability of the carrier
is governed primarily by the Civil Code and in all matters not regulated by said
Code, the rights and obligations of common carrier shall be governed by the Code
of commerce and by laws (Article 1766, Civil Code). Hence, the Carriage of Goods by
Sea Act, a special law, is merely suppletory to the provision of the Civil Code.
In the case at bar, it has been established that the goods in question are
transported from San Francisco, California and Tokyo, Japan to the Philippines and
that they were lost or due to a collision which was found to have been caused by
the negligence or fault of both captains of the colliding vessels. Under the above
ruling, it is evident that the laws of the Philippines will apply, and it is immaterial
that the collision actually occurred in foreign waters, such as Ise Bay, Japan.
It appears, however, that collision falls among matters not specifically regulated by
the Civil Code, so that no reversible error can be found in respondent courses
application to the case at bar of Articles 826 to 839, Book Three of the Code of
Commerce, which deal exclusively with collision of vessels.
Underthe Code of Commerce, particularly Arts. 826-839, the shipowner or carrier, is
not exempt from liability for damages arising from collision due to the fault or
negligence of the captain. Primary liability is imposed on the shipowner or carrier in
recognition of the universally accepted doctrine that the shipmaster or captain is
merely the representative of the owner who has the actual or constructive control
over the conduct of the voyage.
There is, therefore, no room for NDC's interpretation that the Code of Commerce
should apply only to domestic trade and not to foreign trade. Aside from the fact
that the Carriage of Goods by Sea Act does not specifically provide for the subject of
collision, said Act in no uncertain terms, restricts its application "to all contracts for
the carriage of goods by sea to and from Philippine ports in foreign trade."

BIENVENIDO GELISAN vs. BENITO ALDAY


G.R. No. L-30212 September 30, 1987
PADILLA, J.:
FACTS:
Defendant BienvenidoGelisan and Roberto Espiritu entered into a contract under
which Espiritu hired the freight truck of Gelisan for the purpose of hauling rice,
sugar, flour and fertilizer. It is also agreed that Espiritu shall bear and pay all losses
and damages attending the carriage of the goods to be hauled by him.
Petitioner Benito Alday, a trucking operator and had known the Roberto Espiritu
since 1948 as a truck operator. Alday had a contract to haul the fertilizers of the
Atlas Fertilizer Corporation from Pier 4, North Harbor, to its Warehouse in
Mandaluyong. Alday met Espiritu at the gate of Pier 4 and the latter offered the use
of his truck with the driver and helper at 9 centavos per bag of fertilizer. The offer
was accepted by Alday and he instructed his checker to let Roberto Espiritu haul the
fertilizer. Espiritu made two hauls of 200 bags of fertilizer per trip. The fertilizer was
delivered to the driver and helper of Espiritu with the necessary way bill receipts.
Espiritu, however, did not deliver the fertilizer to the Atlas Fertolizer bodega at
Mandaluyong. Roberto Espiritu was later arrested and booked for theft.
Benito Alday was compelled to pay the value of the 400 bags of fertilizer, in the
amount of P5,397.33, to Atlas Fertilizer Corporation so that, on 12 February 1962,
he (Alday) filed a complaint against Roberto Espiritu and BienvenidoGelisan for the
recovery of damages suffered by him thru the criminal acts committed by the
defendants.
BienvenidoGelisan claimed that he had no contractual relations with the plaintiff
Benito Alday as regards the hauling and/or delivery of the 400 bags of fertilizer
mentioned in the complaint; that the alleged misappropriation or nondelivery by
defendant Roberto Espiritu of plaintiff's 400 bags of fertilizer, was entirely beyond
his (Gelisan's) control and knowledge, and which fact became known to him when
his truck was impounded by the Manila Police Department and that in his written
contract of hire with Roberto Espiritu, it was expressly provided that the latter will

a.Registered Owner Rule

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

bear and pay all loss and damages attending the carriage of goods to be hauled by

property covered by the franchise is transferred, or leased to another without

said Roberto Espiritu.

obtaining the requisite approval, the transfer is not binding against the Public

After trial, the Court of First Instance of Manila ruled that Roberto Espiritu alone

Service Commission and in contemplation of law the grantee continues to be

was liable to Benito Alday, since BienvenidoGelisan was not privy to the contract

responsible under the franchise in relation to the Commission and to the Public.

between Espiritu and Alday. On appeal, however, the Court of Appeals, citing the

Since the lease of the truck in question was made without such approval the only

case of Montoya vs. Ignacio, found that BienvenidoGelisan is likewise liable for

conclusion that can be drawn is that Gelisan still continues to be its operator in

being the registered owner of the truck; and that the lease contract, executed by

contemplation of law, and as such is responsible for the consequences incident to

and between BienvenidoGelisan and Roberto Espiritu, is not binding upon Benito

its operation, one of them being the collision under consideration.

Alday for not having been previously approved by the Public Service Commission.

BienvenidoGelisan, the registered owner, is not however without recourse. He has

Hence, the present recourse by BienvenidoGelisan.

a right to be indemnified by Roberto Espiritu for the amount titat he may be

required to pay as damages for the injury caused to Benito Alday, since the lease

SSUE: Whether or norGelisan is liable for the act committed by Espiritu

contract in question, although not effective against the public for not having been

HELD: YES.

approved by the Public Service Commission, is valid and binding between the

The Court has invariably held in several decisions that the registered owner of a

contracting parties.

public service vehicle is responsible for damages that may arise from consequences
incident to its operation or that may be caused to any of the passengers therein.
The claim of the petitioner that he is not hable in view of the lease contract
executed by and between him and Roberto Espiritu which exempts him from
liability to third persons, cannot be sustained because it appears that the lease
contract, adverted to, had not been approved by the Public Service Commission. It
is settled in our jurisprudence that if the property covered by a franchise is
transferred or leased to another without obtaining the requisite approval, the
transfer is not binding upon the public and third persons.
The reason is obvious. Since a franchise is personal in nature any transfer or lease
thereof should be notified to the Public Service Commission so that the latter may
take proper safeguards to protect the interest of the public. In fact, the law requires
that, before the approval is granted, there should be a public hearing, with notice to
all interested parties, in order that the Commission may determine if there are
good and reasonable grounds justifying the transfer or lease of the property
covered by the franchise, or if the sale or lease is detrimental to public interest.
Such being the reason and philosophy behind this requirement, it follows that if the

MA. LUISA BENEDICTO VS. IAC & GREENHILLS WOOD INDUSTRIES COMPANY INC
Facts:
Greenhills, a lumber manufacturing firm, operates a sawmill. It bound itself to
deliver to Blue Star Mahogany Inc. Greenhills contracted the services of Virgilio
Licuden, driver of a cargo truck registered in the name of Petitioner Benedicto. The
cargo did not arrive on the scheduled delivery date which forced Blue Star to look
for other suppliers. Greenhills tried in vain to convince Blue Star to continue with
their contract. Greenhills filed a criminal case against Licuden and a civil case
against petitioner Benedicto.
Petitioner urges that she could not be held answerable for the loss of the cargo,
because the doctrine which makes the registered owner of a common carrier
vehicle answerable to the public for the negligence of the driver despite the sale of
the vehicle to another person, applies only to cases involving death of or injury to
passengers. What applies in the present case, according to petitioner, is the rule
that a contract of carriage requires proper delivery of the goods to and acceptance
by the carrier. Thus, petitioner contends that the delivery to a person falsely
representing himself to be an agent of the carrier prevents liability from attaching
to the registered owner.

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

Issue:
WON the petitioner, being the registered owner of the carrier, should be held liable
for the value of the undelivered or lost sawn lumber. [YES]

A case was filed by the heirs of Ramon Acuesta against Philtranco for alleged gross
negligence, recklessness, violation of traffic rules and regulations, abandonment of
victim, and attempt to escape from a crime.

Held:
There is no dispute that petitioner Benedicto has been holding herself out to the
public as engaged in the business of hauling or transporting goods for hire or
compensation. Petitioner Benedicto is, in brief, a common carrier.

According to the witnesseso the private respondent, at around 6:00am, Ramon A.


Acuesta was riding in his easy rider bicycle along the Gomez Street of Calbayog City.
On the Magsaysay Blvd., also in Calbayog City, defendant Philtranco Service
Enterprises, Inc.s bus, driven by defendant RogasionesManilhig was being pushed
by some persons in order to start its engine. The Magsaysay Blvd. runs
perpendicular to Gomez St. and bus was heading in the general direction of the said
Gomez Street. As the bus was pushed, its engine started thereby the bus continued
on its running motion and it occurred at the time when Ramon A. Acuesta who was
still riding on his bicycle was directly in front of the said bus. The bus then started
moving and bumped Acuesta, resulting for him to fall and he has been ran over by
the bus. A police officer nearby then stopped the bus and told the driver to proceed
to the police station.

The prevailing doctrine on common carriers makes the registered owner liable for
consequences flowing from the operations of the carrier, even though the specific
vehicle involved may already have been transferred to another person. This
doctrine rests upon the principle that in dealing with vehicles registered under the
Public Service Law, the public has the right to assume that the registered owner is
the actual or lawful owner thereof It would be very difficult and often impossible as
a practical matter, for members of the general public to enforce the rights of action
that they may have for injuries inflicted by the vehicles being negligently operated if
they should be required to prove who the actual owner is. 11 The registered owner
is not allowed to deny liability by proving the identity of the alleged transferee.
A common carrier, both from the nature of its business and for insistent reasons of
public policy, is burdened by the law with the duty of exercising extraordinary
diligence not only in ensuring the safety of passengers but also in caring for goods
transported by it. The loss or destruction or deterioration of goods turned over to
the common carrier for conveyance to a designated destination, raises instantly a
presumption of fault or negligence on the part of the carrier, save only where such
loss, destruction or damage arises from extreme circumstances such as a natural
disaster or calamity or act of the public enemy in time of war, or from an act or
omission of the shipper himself or from the character of the goods or their
packaging or container.This presumption may be overcome only by proof of
extraordinary diligence on the part of the carrier.
PHILTRANCO SERVICE ENTERPRISES, INC. V. CA
G.R. NO. 120553
Facts:

Petitioners alleged that it exercised the diligence of a good father of a family in the
selection and supervision of its employees, including Manilhig.
The petitioners had a different version of the incident. The petitioner claimed that
the accident occurred because the victim suddenly overtook two tricycles and
swerved left to the center of the road. The swerving was abrupt and so sudden that
even as Manilhig applied the brakes and blew the bus horn, the victim was bumped
from behind and run over by the bus.
The trial court ruled in favor of the respondents. On appeal, the CA affirmed the
decision o the trial court.

Issue:
Whether or not Philtranco is to be held liable for the damaged caused by its
employees
Ruling:
Philtranco is liable for the acts of Manihig. The case is an action for damages based
on quasi-delictunder Article 2176 and 2180 of the Civil Code against petitioner
Manilhig and his employer, petitioner Philtranco, respectively. These articles
pertinently provide:

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

Art. 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 quasidelict and is governed by the provisions of this Chapter.
Art. 2180. The obligation imposed by Article 2176 is demandable not only for one's
own acts or omissions, but also for those of persons for whom one is responsible.
xxxxxxxxx
The owners and managers of an establishment or enterprise are likewise
responsible for damages caused by their employees in the service of the branches
in which the latter are employed or on the occasion of their functions.
Employers shall be liable for the damages caused by their employees and household
helpers acting within the scope of their assigned tasks even though the former are
not engaged in any business or industry.
xxxxxxxxx
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.
The court have consistently held that the liability of the registered owner of a public
service vehicle, like petitioner Philtranco, for damages arising from the tortious acts
of the driver is primary, direct, and joint and several or solidary with the driver.
*Purotungolsa damages un dinidiscuss ca case na to. Ung pinakatranspo issue ay
ung diligence sa selection and supervision of employees.

EQUITABLE LEASING CORPORATION V. LUCITA SUYON, ET AL.,

Trial Court ruled against Equitable and ordered it to pay damages to the victims
relatives. Upon Equitables appeal, the Court of Appeals sustained the RTC.
Equitable filed a petition for review with the Supreme Court.
Issue:
Whether Equitable Leasing is liable for damages for they are the registered owner
of the truck.
Held/Ratio:
Yes, Equitable Leasing is liable. The petition is denied and the CAdecision is
affirmed.As the registered owner of the tractor, Equitable Leasing is liable for the
actsof Raul Tutor even if he was actually the employee of Equitablesformer lessee,
Ecatine Corporation, who became the actual owner of the tractor by virtue of a
deed of sale not registered with the LTO.Regardless of sales made of a motor
vehicle, the registered owner is thelawful operator insofar as the public and third
persons are concerned;consequently, it is directly and primarily responsible for
theconsequences of its operation. In the eyes of the law, theowner/operator of
record is the employer of the driver, the actualowner/operator being considered as
merely the agent of the registeredowner/operator. The principle applies even if the
registered owner of any vehicle does not use it for public service. The main aim of
motor vehicle registration is to identify the owner so that if any accident happens,
or any damage or injury is caused by thevehicle, responsibility can be fixed on a
definite individual, theregistered owner.Failure to register the deed of sale should
not prejudice victims, who havethe right to rely on the principle that the registered
owner is liable fordamages caused by the negligence of the driver.Equitable Leasing
cant hide behind the allegation that Tutor was EcatineCorps employee, because it
will prevent victims from recovering theirloss on the basis of Equitables inaction in
failing to register the sale. The non-registration is Equitables fault, which should
face the legalconsequences thereof

G.R. NO. 143360, 05 SEPTEMBER 2002


Facts:
A tractor driven by Raul Tutor rammed into a house-cum-store in Tondo, Manila.
Part of the house was destroyed. Two people died and four were injured. Tutor was
convicted of reckless imprudence resulting in multiple homicide and multiple
physical injuries. Verification with the Land Transportation Office revealed that the
registered owner of the tractor was Equitable Leasing Corporation who leased it to
Edwin Lim. The relatives of the victims filed a civil case for damages. The Regional

b. Kabit System
SANTOS VS. SIBUG
Facts:
Vicente Vidad was a duly authorized passenger jeepney operator. Petitioner Adolfo
Santos was the owner of a passenger jeep without a certificate of public
convenience. Santos transferred his jeepney to Vidad in an agreement called the

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

kabit system, and Vidad executed a re-transfer document presumably to be


registered when they decide that the jeepney be withdrawn from the arrangement.
On April 26, 1963, private respondent Abraham Sibug was bumped by the jeepney
driven by SeveroGragas. Sibug filed a complaint against Vidad and Gragas with
Branch XVII of the Court of First Instance in Manila. Judgment was rendered
sentencing the defendants to pay P506.20 as actual damages, P3,000 as moral
damages, and P500 as attorneys fees and costs. On April 10, 1964, the sheriff
levied on the motor vehicle and scheduled an auction sale. On April 11, petitioner
submitted a third-party complaint, alleging that he was the real owner of the
jeepney. Sibug submitted a bond to the sheriff to save the latter from liability if he
were to proceed with the sale and the third-party complaint would be ultimately
upheld. On April 22, petitioner instituted with CFI Branch X an action for Damages
and Injunction, with Preliminary Mandatory Injunction against Sibug, Vidad and the
sheriff. The complaint was amended to include the bonding company. On May 11,
Branch X issued a restraining order enjoining the sheriff from conducting the
auction sale. On October 14, 1965, Branch X upheld petitioners ownership. Sibug
appealed from the decision of Branch X. The Court of Appeals nullified the appealed
decision.

Issues:
(1) Whether the CFI has jurisdiction to issue an injunction restraining the execution
sale of the jeepney levied upon by a judgment creditor in another CFI
(2) Whether the third-party claimant has a right to vindicate his claim to the vehicle
levied upon through a separate action

Held:
In asserting his rights of ownership to the vehicle in question, SANTOS candidly
admitted his participation in the illegal and pernicious practice in the transportation
business known as the kabit system. Although SANTOS, as the kabit, was the true
owner as against VIDAD, the latter, as the registered owner/operator and grantee
of the franchise, is directly and primarily responsible and liable for the damages
caused to SIBUG, the injured party, as a consequence of the negligent or careless
operation of the vehicle. This ruling is based on the principle that the operator of
record is considered the operator of the vehicle in contemplation of law as regards
the public and third persons even if the vehicle involved in the accident had been

sold to another where such sale had not been approved by the then Public Service
Commission.
The levy on execution against said vehicle should be enforced so that the judgment
in the BRANCH XVII CASE may be satisfied, notwithstanding the fact that the secret
ownership of the vehicle belonged to another. SANTOS, as the kabit, should not be
allowed to defeat the levy on his vehicle and to avoid his responsibilities as a kabit
owner for he had led the public to believe that the vehicle belonged to VIDAD. This
is one way of curbing the pernicious kabit system that facilitates the commission of
fraud against the travelling public. SANTOS' remedy, as the real owner of the
vehicle, is to go against VIDAD, the actual operator who was responsible for the
accident, for the recovery of whatever damages SANTOS may suffer by reason of
the execution. In fact, if SANTOS, as the kabit, had been impleaded as a party
defendant in the BRANCH XVII CASE, he should be held jointly and severally liable
with VIDAD and the driver for damages suffered by SIBUG, as well as for exemplary
damages.
Contrary to the rationale in the Decision of respondent Court, it was appropriate, as
a matter of procedure, for SANTOS, as an ordinary third-party claimant, to vindicate
his claim of ownership in a separate action under Section 17 of Rule 39. And the
judgment rendered in his favor by Branch X, declaring him to be the owner of the
property, did not as a basic proposition, constitute interference with the powers or
processes of Branch XVII which rendered the judgment, to enforce which the
jeepney was levied upon. And this is so because property belonging to a stranger is
not ordinarily subject to levy. While it is true that the vehicle in question was in
custodialegis, and should not be interfered with without the permission of the
proper Court, the property must be one in which the defendant has proprietary
interest. Where the Sheriff seizes a stranger's property, the rule does not apply and
interference with his custody is not interference with another Court's Order of
attachment.
However, as a matter of substance and on the merits, the ultimate conclusion of
respondent Court nullifying the Decision of Branch X permanently enjoining the
auction sale, should be upheld. Legally speaking, it was not a "stranger's property"
that was levied upon by the Sheriff pursuant to the judgment rendered by Branch
XVII. The vehicle was, in fact, registered in the name of VIDAD, one of the judgment
debtors. And what is more, the aspect of public service, with its effects on the riding
public, is involved. Whatever legal technicalities may be invoked, we find the
judgment of respondent Court of Appeals to be in consonance with justice.

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

G.R. No. L-64693 April 27, 1984


LITA ENTERPRISES, INC.vs.SECOND CIVIL CASES DIVISION, INTERMEDIATE
APPELLATE COURT, NICASIO M. OCAMPO and FRANCISCA P. GARCIA,
ESCOLIN, J.:
"Ex pactoillicito non orituractio" [No action arises out of an illicit bargain] is the
tune-honored maxim that must be applied to the parties in the case at bar. Having
entered into an illegal contract, neither can seek relief from the courts, and each
must bear the consequences of his acts.
Facts: In 1966, the spouses Ocampo and Garcia purchased in installment from the
Delta Motor Sales Corporation 5 Toyota Corona Standard cars to be used as
taxicabs. Since they had no franchise to operate taxicabs, they contracted with
petitioner Lita Enterprises, Inc., through its representative, Concordia, for the use of
the latter's certificate of public convenience in consideration of an initial payment
of P1,000.00 and a monthly rental of P200.00 per taxicab unit. To effectuate the
agreement, the aforesaid cars were registered in the name of petitioner;
possession, however, remained with the spouses Ocampo who operated and
maintained the same under the name Acme Taxi, petitioner's trade name.
A year later, one of said taxicabs driven by their employee, Martin, collided with a
motorcycle whose driver, Galvez, died from the head injuries sustained therefrom.
A criminal case was eventually filed against the driver Martin, while a civil case for
damages was instituted by Rosita Galvez, heir of the victim, against Lita Enterprises,
Inc. CFI of Manila adjudged petitioner liable for damages in the amount of
P25,000.00 and P7,000.00 for attorney's fees.This decision having become final, a
writ of execution was issued. One of the vehicles of respondent spouses was levied
upon and sold at public auction for 12,150.00 to Cortez. Another car was likewise
levied upon and sold at public auction for P8,000.00 to Mr. Lopez.
In 1973, respondent decided to register his taxicabs in his name. He requested the
manager of petitioner Lita Enterprises, Inc. to turn over the registration papers to
him, but the latter allegedly refused. Hence, he and his wife filed a complaint
against Lita Enterprises, Inc., Rosita Galvez, Visayan Surety & Insurance Co. and the
Sheriff of Manila for reconveyance of motor vehicles with damages. CFI of Manila
dismissed the complaint as far as Rosita Galvez, Visayan Surety & Insurance
Company and the Sheriff of Manila are concerned.Defendant is ordered to transfer
the registration certificate of the 3 Toyota cars not levied upon by executing a deed
of conveyance in favor of the plaintiff.Plaintiff is also ordered to pay Lita
Enterprises, Inc., the rentals in arrears for the certificate of convenience from
March 1973 up to May 1973 at the rate of P200 a month per unit for the three cars.

Petitioner moved for reconsideration of the decision, but the same was denied. On
appeal by petitioner, the IAC modified the decision that in the event the condition
of the 3 Toyota rears will no longer serve the purpose of the deed of conveyance
because of their deterioration, or because they are no longer serviceable, or
because they are no longer available, then Lita Enterprises, Inc. is ordered to pay
the plaintiffs their fair market value as of 1975.
Issue: Are the parties entitled to any relief from the court?
Held: No.Unquestionably, the parties herein operated under an arrangement,
comonly known as the "kabit system", whereby a person who has been granted a
certificate of convenience allows another person who owns motors vehicles to
operate under such franchise for a fee. A certificate of public convenience is a
special privilege conferred by the government . Abuse of this privilege by the
grantees thereof cannot be countenanced. The "kabit system" has been Identified
as one of the root causes of the prevalence of graft and corruption in the
government transportation offices.
Although not outrightly penalized as a criminal offense, the "kabit system" is
invariably recognized as being contrary to public policy and, therefore, void and
inexistent under Article 1409 of the Civil Code, It is a fundamental principle that the
court will not aid either party to enforce an illegal contract, but will leave them both
where it finds them. Upon this premise, it was flagrant error on the part of both the
trial and appellate courts to have accorded the parties relief from their
predicament. Article 1412 of the Civil Code denies them such aid. It
provides:t.hqw
ART. 1412. if the act in which the unlawful or forbidden cause
consists does not constitute a criminal offense, the following rules
shall be observed;
(1) when the fault, is on the part of both contracting parties,
neither may recover what he has given by virtue of the contract,
or demand the performance of the other's undertaking.
Also, where the parties are in pari delicto, no affirmative relief of any kind will be
given to one against the other." Although certain exceptions to the rule are
provided by law, We see no cogent reason why the full force of the rule should not
be applied in the instant case.

G.R. No. L-65510 March 9, 1987


TEJA MARKETING AND/OR ANGEL JAUCIAN

18
TRANSPO CASE DIGESTS, 2ND BATCH, 2E

vs.

motorcycle, Nale suffered damages when he failed to claim any insurance

HONORABLE INTERMEDIATE APPELLATE COURT * AND PEDRO N. NALE

indemnity for two motorcycle accidents.

PARAS, J.:

The lower court ruled in favor of Teja ordering Nale to pay the unpaid balance of

"'Ex pactoillicito' non orituractio" (No action arises out of illicit bargain) is the time-

the purchase price. The court found that Nale purchased the motorcycle,

honored maxim that must be applied to the parties in the case at bar. Having

particularly for the purpose of engaging and using the same in the transportation

entered into an illegal contract, neither can seek relief from the courts, and each

business and for this purpose said trimobile unit was attached to the Teja's

must bear the consequences of his acts." (Lita Enterprises vs. IAC, 129 SCRA 81.)

transportation line who had the franchise, so much so that in the registration

FACTS:

certificate, Teja appears to be the owner of the unit.

Nale bought from Teja a motorcycle with complete accessories and a sidecar for

On appeal, the decision was affirmed. Nale filed a petition for review with IAC

P8,000.00. He gave a downpayment of P1,700.00 with a promise that he would pay

which dismissed the complaint arguing that the parties engaged in the illegal

Teja the balance within 60 days. Nale, however, failed to comply with his promise

transaction of kabit system. The parties, being in pari delicto, neither of them may

and requested for an extension to 1 year in monthly installments until January 1976

bring an action against the other to enforce their illegal contract Hence, this

when he stopped paying anymore. Teja made demands but Nale failed to comply

petition.

with the same. Teja was forced to file a suit against Nale.

ISSUE: Whether or not IAC erred in applying the doctrine of "pari delicto"?

In this particular transaction a chattel mortgage was constituted as a security for

HELD: NO, IAC did not err in applying the doctrine of pair delicto.

the payment of the balance of the purchase price. It has been the practice of

The parties operated under an arrangement, commonly known as the "kabit

financing firms that whenever there is a balance of the purchase price the

system" whereby a person who has been granted a certificate of public

registration papers of the motor vehicle subject of the sale are not given to the

convenience allows another person who owns motor vehicles to operate under

buyer. The records of the LTC show that the motorcycle sold to Nale was first

such franchise for a fee. A certificate of public convenience is a special privilege

mortgaged to the Teja Marketing by Angel Jaucian though the Teja Marketing and

conferred by the government. Abuse of this privilege by the grantees thereof

Angel Jaucian are one and the same, because it was made to appear that way only

cannot be countenanced. The "kabit system" has been Identified as one of the root

as Nale had no franchise of his own and he attached the unit to the Teja's MCH

causes of the prevalence of graft and corruption in the government transportation

Line.

offices.

Nale did not dispute the sale and the outstanding balance of P1,700. 00 still payable

Although not outrightly penalized as a criminal offense, the kabit system is

to the Teja. He claimed that he was only persuaded to buy from Teja the motorcycle

invariably recognized as being contrary to public policy and, therefore, void and in

with the side car because of the condition that Teja would be the one to register

existent under Article 1409 of the Civil Code. It is a fundamental principle that the

every year the motorcycle with the Land Transportation Commission. In 1976,

court will not aid either party to enforce an illegal contract, but will leave both

however, Teja failed to register both the chattel mortgage and the motorcycle with

where it finds then. Upon this premise it would be error to accord the parties relief

the LTC notwithstanding the fact that Nale gave him P90.00 for mortgage fee and

from their predicament. Article 1412 of the Civil Code denies them such aid. It

registration fee and had the motorcycle insured with La PerlaCompana de Seguros.

provides:

Because of this failure of the Teja to comply with his obligation to register the

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

Art. 1412. If the act in which the unlawful or forbidden cause consists does not
constitute a criminal offense, the following rules shall be observed:
1. When the fault is on the part of both contracting parties, neither may recover
that he has given by virtue of the contract, or demand, the performance of the

relationship exists between a jeepney-owner and a driver under a "boundary


system" arrangement. Appellant contends that the relationship is essentially that of
lessor and lessee.
Issue: Is therean employer-employee relationship between a jeepneyowner and adriver under a boundary system arrangement

other's undertaking.
The defect of in existence of a contract is permanent and cannot be cured by
ratification or by prescription. The mere lapse of time cannot give efficacy to
contracts that are null and void.
c. Boundary System
MAGBOO VS. BERNARDO
G.R. NO. L-16790
APRIL 30, 1963
Facts: That plaintiffs are the parents of Cesar Magboo, a child of 8 years old, who
lived with them and was under their custody until his death on October 24,1956
when he was killed in a motor vehicle accident, the fatal vehicle being a passenger
jeepney with Plate No, AC-1963 (56) owned by the defendant; That at the time of
the accident, said passenger jeepney was driven by Conrado Roque. The contract
between Conrado Roque and defendant Delfin Bernardo was that Roque was to pay
to defendant the sum of P8.00, which he paid to said defendant, for privilege of
driving the jeepney on October 24, 1956, it being their agreement that whatever
earnings Roque could make out of the use of the jeepney in transporting
passengers from one point to another in the City of Manila would belong entirely to
Conrado Roque. As a consequence of the accident and as a result of the death of
Cesar Magboo in said accident, Conrado Roque was prosecuted for homicide thru
reckless imprudence before the Court of First Instance of Manila, the information
having been docketed as Criminal Case No. 37736, and that upon arraignment
Conrado Roque pleaded guilty to the information and was sentenced to six (6)
months of arresto mayor, with the accessory penalties of the law; to indemnify the
heirs of the deceased in the sum of P3,000.00, with subsidiary imprisonment in case
of insolvency, and to pay the costs. Pursuant to said judgment Conrado Roque
served his sentence but he was not able to pay the indemnity because he was
insolvent.
The spouses Magboo filed an action against Bernardo for the
enforcement of his subsidiaryliability as employer in accordance with Article
103, Revised Penal Code.Appellant assails said decision, assigning three errors
which boil down to the question of whether or not an employer-employee

Held: Yes. An employer- employee relationship exists between a jeepney-owner and a driver
under a boundary system arrangement. The features which characterize the boundary
system namely, the fact that the driver does not receive a fixed wage but gets only the excess
of the amount of fares collected by him over the amount he pays to the jeep-owner, and that the
gasoline consumed by the jeep is for the account of the driver are not sufficient to withdraw
the relationship between them from that of employer and employee.
Indeed to exempt from liability the owner of a public vehicle who operates it under
the "boundary system" on the ground that he is a mere lessor would be not only to
abet flagrant violations of the Public Service law but also to place the riding public
at the mercy of reckless and irresponsible drivers - reckless because the measure of
their earnings depends largely upon the number of trips they make and, hence, the
speed at which they drive; and irresponsible because most if not all of them are in
no position to pay the damages they might cause.

3rd Batch
II. TRANSPORTATION OF GOODS
1. Extraordinary Diligence
EASTERN SHIPPING LINES, INC., petitioner, vs. THE COURT OF APPEALS and THE
FIRST NATIONWIDE ASSURANCE CORPORATION, respondents.
G.R. No. 94151

April 30, 1991

Topic: Extraordinary Diligence


FACTS:
13 coils of uncoated 7-wire stress relieved wire strand for prestressed
concrete were shipped on board the vessel "Japri Venture," owned and operated by
the defendant Eastern Shipping Lines, Inc., at Kobe, Japan, for delivery to Stresstek
Post-Tensioning Phils., Inc. in Manila, which were insured by the plaintiff First
Nationwide Assurance Corporation.

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

The carrying vessel arrived in Manila and discharged the cargo to the
custody of the defendant E. Razon, Inc., from whom the consignee's customs broker
received it for delivery to the consignee's warehouse. The respondent indemnified
the consignee for damage and loss to the insured cargo, whereupon the former
was subrogated for the latter.
Respondent now seeks to recover from the petitioner what it has
indemnified the consignee.It appears that while enroute from Kobe to Manila, the
carrying vessel "encountered very rough seas and stormy weather" for three days,
more or less, which caused it to roll and pound heavily, moving its master to
execute a marine note of protest upon arrival at the port of Manila; that the coils
wrapped in burlap cloth and cardboard paper were stored in the lower hold of the
hatch of the vessel which was flooded with water about one foot deep; that the
water entered the hatch when the vessel encountered heavy weather enroute to
Manila; that upon request, a survey of bad order cargo was conducted at the pier in
the presence of the representatives of the consignee and the defendant E. Razon,
Inc. and it was found that seven coils were rusty on one side each; that upon survey
conducted at the consignee's warehouse it was found that the "wetting (of the
cargo) was caused by fresh water" that entered the hatch when the vessel
encountered heavy weather enroute to Manila ; and that all thirteen coils were
extremely rusty and totally unsuitable for the intended purpose.
Petitioner claims it should not be held liable as the shipment was
discharged and delivered complete into the custody of the arrastre operator under
clean tally sheets.

ISSUE: WON petitioner should be held liable for not exercising extraordinary
diligence
HELD:
YES.
Based on the facts, the appellate court made the following findings and
conclusions:
Plainly, the heavy seas and rains referred to in the master's report were
not casofortuito, but normal occurrences that an ocean-going vessel, particularly in
the month of September which, in our area, is a month of rains and heavy seas
would encounter as a matter of routine. They are not unforeseen nor
unforeseeable. These are conditions that ocean-going vessels would encounter and

provide for, in the ordinary course of a voyage. That rain water (not sea water)
found its way into the holds of the Jupri Venture is a clear indication that care and
foresight did not attend the closing of the ship's hatches so that rain water would
not find its way into the cargo holds of the ship.
Moreover, under Article 1733 of the Civil Code, common carriers are
bound to observe "extra-ordinary vigilance over goods . . . .according to all
circumstances of each case," and Article 1735 of the same Code states, to wit:
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.
Since the carrier has failed to establish any casofortuito, the presumption
by law of fault or negligence on the part of the carrier applies; and the carrier must
present evidence that it has observed the extraordinary diligence required by
Article 1733 of the Civil Code in order to escape liability for damage or destruction
to the goods that it had admittedly carried in this case. No such evidence exists of
record. Thus, the carrier cannot escape liability.
The Court agrees with and is bound by the foregoing findings of fact made
by the appellate court. The presumption, therefore, that the cargo was in apparent
good condition when it was delivered by the vessel to the arrastre operator by the
clean tally sheets has been overturned and traversed. The evidence is clear to the
effect that the damage to the cargo was suffered while aboard petitioner's vessel.

DELSAN TRANSPORT LINES, INC. vs. THE HON. COURT OF APPEALS and AMERICAN
HOME ASSURANCE CORPORATION
G.R. No. 127897. November 15, 2001
DE LEON, JR., J.
FACTS: Caltex entered into a contract of affreightment withDelsan for a period of
1year whereby the said common carrier agreed to transport Caltexs industrial fuel
oil from the Batangas-Bataan Refinery to different parts of the country. Under the
contract, petitioner took on board its vessel, MT Maysun, 2,277.314 kl of industrial
fuel oil to be delivered to the Caltex Oil Terminal in Zamboanga City. The shipment
was insured with the private respondent, American Home Assurance Corporation.

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

MT Maysun set sail from Batangas for Zamboanga City. Unfortunately, the vessel
sank in the early morning of August 16, 1986 near Panay Gulf in the Visayas taking
with it the entire cargo of fuel oil. AHAC paid Caltex the sum of P5,096,635.57. Due
to its failure to collect from the petitioner, AHAC filed a complaint with the RTC for
collection of a sum of money.

Neither may petitioner escape liability by presenting in evidence certificates that


tend to show that at the time of dry-docking and inspection by the Philippine Coast
Guard, MT Maysun, was fit for voyage. These pieces of evidence do not necessarily
take into account the actual condition of the vessel at the time of the
commencement of the voyage.

RTC ruled that Delsan shall be free from liability due to force majeure. The decision
of the trial court, however, was reversed, by CA. In the absence of any explanation
as to what may have caused the sinking of the vessel coupled with the finding that
the same was improperly manned, CA ruled that the petitioner is liable on its
obligation as common carrier. Thus, this instant petition.

Additionally, the exoneration of MT Maysuns officers and crew by the Board of


Marine Inquiry merely concerns their respective administrative liabilities. It does
not in any way operate to absolve the petitioner common carrier from its civil
liability arising from its failure to observe extraordinary diligence in the vigilance
over the goods it was transporting and for the negligent acts or omissions of its
employees, the determination of which properly belongs to the courts. In the case
at bar, petitioner is liable for the insured value of the lost cargo of industrial fuel oil
belonging to Caltex for its failure to rebut the presumption of fault or negligence as
common carrier occasioned by the unexplained sinking of its vessel, MT Maysun,
while in transit.

ISSUE: Whether or not petitioner failed to exercise extraordinary diligence.


HELD:YES, thus petitioner shall be held liable. From the nature of their business and
for reasons of public policy, common carriers are bound to observe extraordinary
diligence in the vigilance over the goods and for the safety of passengers
transported by them, according to all the circumstances of each case. In the event
of loss, destruction or deterioration of the insured goods, common carriers shall be
responsible unless the same is brought about, among others, by flood, storm,
earthquake, lightning or other natural disaster or calamity. In all other cases, 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.
In order to escape liability for the loss of its cargo of industrial fuel oil belonging to
Caltex, petitioner attributes the sinking of MT Maysun to fortuitous event. From
the testimonies of Jarabe and Berina, captain and chief mate, respectively of the illfated vessel, it appears that a sudden and unexpected change of weather condition
occurred in the early morning of August 16, 1986; that at around 3:15a.m. a squall
(unos) carrying strong winds with an approximate velocity of 30 knots per hour
and big waves averaging eighteen 18-20ft. high, repeatedly buffeted MT Maysun
causing it to tilt, take in water and eventually sink with its cargo. This tale of strong
winds and big waves by the said officers of the petitioner however, was effectively
rebutted and belied by the weather report from PAGASA showing that from 2:00
oclock to 8:00 oclock in the morning on August 16, 1986, the wind speed remained
at 10-20 knots per hour while the height of the waves ranged from .7 -2 meters in
the vicinity of Cuyo East Pass and Panay Gulf where the subject vessel sank. Thus,
as the appellate court correctly ruled, petitioners vessel, MT Maysun, sank with its
entire cargo for the reason that it was not seaworthy. There was no squall or bad
weather or extremely poor sea condition in the vicinity when the said vessel sank.

PHILIPPINE CHARTER INSURANCE CORPORATION, petitioner, vs. UNKNOWN


OWNER OF THE VESSEL M/V NATIONAL HONOR, NATIONAL SHIPPING
CORPORATION OF THE PHILIPPINES and INTERNATIONAL CONTAINER SERVICES,
INC., respondents.
[G.R. No. 161833. July 8, 2005]
CALLEJO, SR., J.:
FACTS:
Petitioner PCIC (Philippine Charter Insurance Corporation) is the insurer of a
shipment containing four units of parts and accessories of machines from J.
Trading Co.of Seoul, Korea, on board the vessel M/V National Honor,represented
by NSCP (National Shipping Corporation of the Philippines).
The shipment was contained in two wooden crates (Crate 1 and 2) complete and in
good order condition. There were no markings on the outer portion of the crates
except the name of the consignee, BMICI (Blue Mono International Company
Incorporated). On the flooring of the wooden crates were three wooden battens
placed side by side to support the weight of the cargo
The International Container Terminal Services, Incorporated (ICTSI) was furnished
with a copy of the crate cargo list and bill of lading, and it knew the contents of the
crate. Claudio Cansino, the stevedore of the ICTSI, placed two sling cables on each
end of Crate No. 1. No sling cable was fastened on the mid-portion of the crate. In

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

their experience, this was a normal procedure. As the crate was being hoisted from
the vessels hatch, the mid-portion of the wooden flooring suddenly snapped in the
air, about five feet high from the vessels twin deck, sending all its contents crashing
down hard, resulting in extensive damage to the shipment.

and delivery. It requires common carriers to render service with the greatest skill
and foresight and to use all reasonable means to ascertain the nature and
characteristic of goods tendered for shipment, and to exercise due care in the
handling and stowage, including such methods as their nature requires.

Upon receipt of the damaged shipment, BMICI found that the same could no longer
be used for the intended purpose. The Mariners Adjustment Corporation hired by
PCIC conducted a survey and declared that the packing of the shipment was
considered insufficient. It ruled out the possibility of taxes due to insufficiency of
packing. It opined that three to four pieces of cable or wire rope slings, held in all
equal setting, never by-passing the center of the crate, should have been used,
considering that the crate contained heavy machinery.

The common carriers 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 are either 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. To overcome the presumption of negligence in the case of loss, destruction
or deterioration of the goods, the common carrier must prove that it exercised
extraordinary diligence.

BMICI subsequently filed separate claims against the NSCP, the ICTSI, and its
insurer, the PCIC, for US$61,500.00. When the other companies denied liability,
PCIC paid the claim and was issued a Subrogation Receipt for P1,740,634.50. PCIC,
as subrogee, filed a Complaint for Damages against the Unknown owner of the
vessel M/V National Honor, NSCP and ICTSI.

However, under Article 1734 of the New Civil Code, the presumption of negligence
does not apply to any of the following causes:

The ICTSI adduced in evidence the report of the R.J. Del Pan & Co., Inc. that the
damage to the cargo could be attributed to insufficient packing and unbalanced
weight distribution of the cargo inside the crate as evidenced by the types and
shapes of items found.

1. Flood, storm, earthquake, lightning or other natural disaster or calamity;

Both RTC and CA dismissed the complaint.

3. Act or omission of the shipper or owner of the goods;

ISSUE: Whether or not THE STATUTORY PRESUMPTION OF FAULT AND NEGLIGENCE


is applicable in the case at bar.

4. The character of the goods or defects in the packing or in the containers;

2. Act of the public enemy in war, whether international or civil;

5. Order or act of competent public authority.


HELD: NO.
We agree with the contention of the petitioner that common carriers, from the
nature of their business and for reasons of public policy, are mandated to observe
extraordinary diligence in the vigilance over the goods and for the safety of the
passengers transported by them, according to all the circumstances of each case.
The Court has defined extraordinary diligence in the vigilance over the goods as
follows:
The extraordinary diligence in the vigilance over the goods tendered for shipment
requires the common carrier to know and to follow the required precaution for
avoiding damage to, or destruction of the goods entrusted to it for sale, carriage

It bears stressing that the enumeration in Article 1734 of the New Civil Code which
exempts the common carrier for the loss or damage to the cargo is a closed list. To
exculpate itself from liability for the loss/damage to the cargo under any of the
causes, the common carrier is burdened to prove any of the aforecited causes
claimed by it by a preponderance of evidence. If the carrier succeeds, the burden of
evidence is shifted to the shipper to prove that the carrier is negligent.
Defect is the want or absence of something necessary for completeness or
perfection; a lack or absence of something essential to completeness; a deficiency
in something essential to the proper use for the purpose for which a thing is to be
used. On the other hand, inferior means of poor quality, mediocre, or second rate.
A thing may be of inferior quality but not necessarily defective. In other words,
defectiveness is not synonymous with inferiority.

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

x xx
In the present case, the trial court declared that based on the record, the loss of the
shipment was caused by the negligence of the petitioner as the shipper:
The same may be said with respect to defendant ICTSI. The breakage and collapse
of Crate No. 1 and the total destruction of its contents were not imputable to any
fault or negligence on the part of said defendant in handling the unloading of the
cargoes from the carrying vessel, but was due solely to the inherent defect and
weakness of the materials used in the fabrication of said crate.

The crate should have three solid and strong wooden batten placed side by side
underneath or on the flooring of the crate to support the weight of its contents. x xx

SALUDO JR. V. CA
Facts:
Crispina Galdo Saludo, mother of the petitioners, died in Chicago, Illinois. Pomierski
and Son Funeral Home of Chicago, made the necessary preparations and
arrangements for the shipment of the remains from Chicago to the Philippines.
Pomierski brought the remains to Continental Mortuary Air Services (CMAS) at the
Chicago Airport which made the necessary arrangements such as flights, transfers,
etc. CMAS booked the shipment with PAL thru the carriers agent Air Care
International. PAL Airway Bill Ordinary was issued wherein the requested routing
was from Chicago to San Francisco on board Trans World Airline (TWA) and from
San Francisco to Manila on board PAL.
Salvacion (one of the petitioners), upon arrival at San Francisco, went to the TWA to
inquire about her mothers remains. But she was told they did not know anything
about it. She then called Pomierski that her mothers remains were not at the West
Coast terminal. Pomierski immediately called CMAS which informed that the
remains were on a plane to Mexico City, that there were two bodies at the
terminal, and somehow they were switched. CMAS called and told Pomierski that
they were sending the remains back to California via Texas.
Petitioners filed a complaint against TWA and PAL fir the misshipment and delay in
the delay of the cargo containing the remains of the late Crispina Saludo.
Petitioners alleged that private respondents received the casketed remains of
Crispina on October 26, 1976, as evidenced by the issuance of PAL Airway Bill by Air

Care and from said date, private respondents were charged with the responsibility
to exercise extraordinary diligence so much so that the alleged switching of the
caskets on October 27, 1976, or one day after the private respondents received the
cargo, the latter must necessarily be liable.
Issue:
Whether or not the delay in the delivery of the casketed remains of petitioners
mother was due to the fault of respondent airline companies
Held:
NO, but TWA was held to pay petitioners nominal damages of P40,000 for its
violation of the degree of diligence required by law to be exercised by every
common carrier
As already demonstrated, the facts in the case at bar belie the averment that there
was delivery of the cargo to the carrier on October 26, 1976. Rather, as earlier
explained, the body intended to be shipped as agreed upon was really placed in the
possession and control of PAL on October 28, 1976 and it was from that date that
private respondents became responsible for the agreed cargo under their
undertakings in PAL Airway Bill No. 079-01180454. Consequently, for the switching
of caskets prior thereto which was not caused by them, and subsequent events
caused thereby, private respondents cannot be held liable.
The oft-repeated rule regarding a carrier's liability for delay is that in the absence of
a special contract, a carrier is not an insurer against delay in transportation of
goods. When a common carrier undertakes to convey goods, the law implies a
contract that they shall be delivered at destination within a reasonable time, in the
absence, of any agreement as to the time of delivery. But where a carrier has made
an express contract to transport and deliver property within a specified time, it is
bound to fulfill its contract and is liable for any delay, no matter from what cause it
may have arisen. This result logically follows from the well-settled rule that where
the law creates a duty or charge, and the party is disabled from performing it
without any default in himself, and has no remedy over, then the law will excuse
him, but where the party by his own contract creates a duty or charge upon himself,
he is bound to make it good notwithstanding any accident or delay by inevitable
necessity because he might have provided against it by contract. Whether or not
there has been such an undertaking on the part of the carrier to be determined
from the circumstances surrounding the case and by application of the ordinary
rules for the interpretation of contracts.

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

Echoing the findings of the trial court, the respondent court correctly declared that

In a similar case of delayed delivery of air cargo under a very similar stipulation
contained in the airway bill which reads: "The carrier does not obligate itself to
carry the goods by any specified aircraft or on a specified time. Said carrier being
hereby authorized to deviate from the route of the shipment without any liability
therefor", our Supreme Court ruled that common carriers are not obligated by law
to carry and to deliver merchandise, and persons are not vested with the right to
prompt delivery, unless such common carriers previously assume the obligation.
Said rights and obligations are created by a specific contract entered into by the
parties (Mendoza vs. PAL, 90 Phil. 836).
There is no showing by plaintiffs that such a special or specific contract had been
entered into between them and the defendant airline companies.
And this special contract for prompt delivery should call the attention of the carrier
to the circumstances surrounding the case and the approximate amount of
damages to be suffered in case of delay (See Mendoza vs. PAL, supra). There was no
such contract entered into in the instant case.
A common carrier undertaking to transport property has the implicit duty to carry
and deliver it within reasonable time, absent any particular stipulation regarding
time of delivery, and to guard against delay. In case of any unreasonable delay, the
carrier shall be liable for damages immediately and proximately resulting from such
neglect of duty. As found by the trial court, the delay in the delivery of the remains
of Crispina Saludo, undeniable and regrettable as it was, cannot be attributed to the
fault, negligence or malice of private respondents, a conclusion concurred in by
respondent court and which we are not inclined to disturb.
LORENZO SHIPPING V. BJ MARTHEL
G.R. NO. 145483
Facts:
Lorenzo Shipping Corporation is a domestic corporation engaged in coastwise
shipping. BJ Marthel International, Inc. is an importer and distributor of different
brands of engines and spare parts.
Since 1987, Respondent supplied petitioner with spare parts for the latter's marine
engines. Sometime in 1989, petitioner asked respondent for a quotation for various

machine parts. According to the quotation it sent, deliveries of such items are
within 2 months after receipt of firm order. Petitioner thereafter issued a
Purchase Order for the procurement of one set of cylinder liner, valued at P477,000
Instead of paying the 25% down payment as indicated in the purchase order, for the
first cylinder liner, petitioner issued in favor of respondent ten postdated checks.
The checks were supposed to represent the full payment of the aforementioned
cylinder liner. Subsequently, petitioner issued another Purchase for another unit of
cylinder liner. This purchase order stated the term of payment to be "25% upon
delivery, balance payable in 5 bi-monthly equal installments." Like the first purchase
order, the second purchase order did not state the date of the cylinder liner's
delivery.
The petitioner then deposited the check, which was dishonored for insufficiency of
funds. The remaining nine postdated checks were eventually returned by
respondent to petitioner.
Petitioner claimed that it replaced said check with a good one, the proceeds of
which were applied to its other obligation to respondent. For its part, respondent
insisted that it returned said postdated check to petitioner.
The respondent delivered the two cylinder liners at petitioner's warehouse in
Manila. The respondent then demanded payment from the petitioner. The
petitioner offered to pay P150,000 only claiming that as the cylinder liners were
delivered late and due to the scrapping of its vessel, it would have to sell the
cylinder liners in Singapore and pay the balance from the proceeds of said sale.
The respondent filed an action before the RTC. The petitioner filed its Answer
alleging therein that time was of the essence in the delivery of the cylinder liners
and that date of delivery of the said items was late as respondent committed to
deliver said items "within two (2) months after receipt of firm order."
The RTC dismissed the complaint. It held respondent bound to the quotation it
submitted to petitioner particularly with respect to the terms of payment and
delivery of the cylinder liners. It also declared that respondent had agreed to the
cancellation of the contract of sale when it returned the postdated checks issued by
petitioner. On appeal, the CA reversed the decision of the RTC.
Issue:
Whether or not there was late delivery of the subjects of the contract of sale to
justify petitioner to disregard the terms of the contract considering that time was of
the essence thereof

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

Ruling:
There was no delay on the part of the respondent, hence, the petitioner is not
justified in disregarding the terms o the contract. In determining whether time is of
the essence in a contract, the ultimate criterion is the actual or apparent intention
of the parties and before time may be so regarded by a court, there must be a
sufficient manifestation, either in the contract itself or the surrounding
circumstances of that intention. Petitioner insists that although its purchase orders
did not specify the dates when the cylinder liners were supposed to be delivered,
nevertheless, respondent should abide by the term of delivery appearing on the
quotation it submitted to petitioner. Petitioner theorizes that the quotation
embodied the offer from respondent while the purchase order represented its
(petitioner's) acceptance of the proposed terms of the contract of sale. Thus,
petitioner is of the view that these two documents "cannot be taken separately as if
there were two distinct contracts." The court does not agree.
In order to ascertain the intention of the parties, their contemporaneous and
subsequent acts should be considered. While the Court recognizes the principle
that contracts are respected as the law between the contracting parties, this
principle is tempered by the rule that the intention of the parties is primordial and
"once the intention of the parties has been ascertained, that element is deemed as
an integral part of the contract as though it has been originally expressed in
unequivocal terms.

Whether Equitable Leasing is liable for damages for they are the registered owner
of the truck.
Held/Ratio:
Yes, Equitable Leasing is liable. The petition is denied and the CA decision is
affirmed. As the registered owner of the tractor, Equitable Leasing is liable for the
acts of Raul Tutor even if he was actually the employee of Equitables former lessee,
Ecatine Corporation, who became the actual owner of the tractor by virtue of a
deed of sale not registered with the LTO. 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. In the eyes of the law, the owner/operator of record
is the employer of the driver, the actual owner/operator being considered as
merely the agent of the registered owner/operator. The principle applies even if the
registered owner of any vehicle does not use it for public service. The main aim of
motor vehicle registration is to identify the owner so that if any accident happens,
or any damage or injury is caused by the vehicle, responsibility can be fixed on a
definite individual, the registered owner. Failure to register the deed of sale should
not prejudice victims, who have the right to rely on the principle that the registered
owner is liable for damages caused by the negligence of the driver. Equitable
Leasing cant hide behind the allegation that Tutor was Ecatine Corps employee,
because it will prevent victims from recovering their loss on the basis of Equitables
inaction in failing to register the sale. The non-registration is Equitables fault, which
should face the legal consequences thereof

EQUITABLE LEASING CORPORATION V. LUCITASUYON, ET AL., G.R. NO. 143360, 05


SEPTEMBER 2002
Facts:
A tractor driven by Raul Tutor rammed into a house-cum-store in Tondo, Manila.
Part of the house was destroyed. Two people died and four were injured. Tutor was
convicted of reckless imprudence resulting in multiple homicide and multiple
physical injuries. Verification with the Land Transportation Office revealed that the
registered owner of the tractor was Equitable Leasing Corporation who leased it to
Edwin Lim. The relatives of the victims filed a civil case for damages. The Regional
Trial Court ruled against Equitable and ordered it to pay damages to the victims
relatives. Upon Equitables appeal, the Court of Appeals sustained the RTC.
Equitable filed a petition for review with the Supreme Court.
Issue:

II. TRANSPORTATION OF GOODS


1. Extraordinary Diligence
EASTERN SHIPPING LINES, INC., petitioner, vs. THE COURT OF APPEALS and THE
FIRST NATIONWIDE ASSURANCE CORPORATION, respondents.
G.R. No. 94151

April 30, 1991

Topic: Extraordinary Diligence


FACTS:
13 coils of uncoated 7-wire stress relieved wire strand for prestressed
concrete were shipped on board the vessel "Japri Venture," owned and operated by
the defendant Eastern Shipping Lines, Inc., at Kobe, Japan, for delivery to Stresstek
Post-Tensioning Phils., Inc. in Manila, which were insured by the plaintiff First
Nationwide Assurance Corporation.

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

The carrying vessel arrived in Manila and discharged the cargo to the
custody of the defendant E. Razon, Inc., from whom the consignee's customs broker
received it for delivery to the consignee's warehouse. The respondent indemnified
the consignee for damage and loss to the insured cargo, whereupon the former
was subrogated for the latter.
Respondent now seeks to recover from the petitioner what it has
indemnified the consignee.It appears that while enroute from Kobe to Manila, the
carrying vessel "encountered very rough seas and stormy weather" for three days,
more or less, which caused it to roll and pound heavily, moving its master to
execute a marine note of protest upon arrival at the port of Manila; that the coils
wrapped in burlap cloth and cardboard paper were stored in the lower hold of the
hatch of the vessel which was flooded with water about one foot deep; that the
water entered the hatch when the vessel encountered heavy weather enroute to
Manila; that upon request, a survey of bad order cargo was conducted at the pier in
the presence of the representatives of the consignee and the defendant E. Razon,
Inc. and it was found that seven coils were rusty on one side each; that upon survey
conducted at the consignee's warehouse it was found that the "wetting (of the
cargo) was caused by fresh water" that entered the hatch when the vessel
encountered heavy weather enroute to Manila ; and that all thirteen coils were
extremely rusty and totally unsuitable for the intended purpose.
Petitioner claims it should not be held liable as the shipment was
discharged and delivered complete into the custody of the arrastre operator under
clean tally sheets.

ISSUE: WON petitioner should be held liable for not exercising extraordinary
diligence
HELD:

foresight did not attend the closing of the ship's hatches so that rain water would
not find its way into the cargo holds of the ship.
Moreover, under Article 1733 of the Civil Code, common carriers are
bound to observe "extra-ordinary vigilance over goods . . . .according to all
circumstances of each case," and Article 1735 of the same Code states, to wit:
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.
Since the carrier has failed to establish any casofortuito, the presumption
by law of fault or negligence on the part of the carrier applies; and the carrier must
present evidence that it has observed the extraordinary diligence required by
Article 1733 of the Civil Code in order to escape liability for damage or destruction
to the goods that it had admittedly carried in this case. No such evidence exists of
record. Thus, the carrier cannot escape liability.
The Court agrees with and is bound by the foregoing findings of fact made
by the appellate court. The presumption, therefore, that the cargo was in apparent
good condition when it was delivered by the vessel to the arrastre operator by the
clean tally sheets has been overturned and traversed. The evidence is clear to the
effect that the damage to the cargo was suffered while aboard petitioner's vessel.

DELSAN TRANSPORT LINES, INC. vs. THE HON. COURT OF APPEALS and AMERICAN
HOME ASSURANCE CORPORATION
G.R. No. 127897. November 15, 2001
DE LEON, JR., J.

YES.
Based on the facts, the appellate court made the following findings and
conclusions:
Plainly, the heavy seas and rains referred to in the master's report were
not casofortuito, but normal occurrences that an ocean-going vessel, particularly in
the month of September which, in our area, is a month of rains and heavy seas
would encounter as a matter of routine. They are not unforeseen nor
unforeseeable. These are conditions that ocean-going vessels would encounter and
provide for, in the ordinary course of a voyage. That rain water (not sea water)
found its way into the holds of the Jupri Venture is a clear indication that care and

FACTS: Caltex entered into a contract of affreightment withDelsan for a period of


1year whereby the said common carrier agreed to transport Caltexs industrial fuel
oil from the Batangas-Bataan Refinery to different parts of the country. Under the
contract, petitioner took on board its vessel, MT Maysun, 2,277.314 kl of industrial
fuel oil to be delivered to the Caltex Oil Terminal in Zamboanga City. The shipment
was insured with the private respondent, American Home Assurance Corporation.
MT Maysun set sail from Batangas for Zamboanga City. Unfortunately, the vessel
sank in the early morning of August 16, 1986 near Panay Gulf in the Visayas taking
with it the entire cargo of fuel oil. AHAC paid Caltex the sum of P5,096,635.57. Due

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

to its failure to collect from the petitioner, AHAC filed a complaint with the RTC for
collection of a sum of money.

take into account the actual condition of the vessel at the time of the
commencement of the voyage.

RTC ruled that Delsan shall be free from liability due to force majeure. The decision
of the trial court, however, was reversed, by CA. In the absence of any explanation
as to what may have caused the sinking of the vessel coupled with the finding that
the same was improperly manned, CA ruled that the petitioner is liable on its
obligation as common carrier. Thus, this instant petition.

Additionally, the exoneration of MT Maysuns officers and crew by the Board of


Marine Inquiry merely concerns their respective administrative liabilities. It does
not in any way operate to absolve the petitioner common carrier from its civil
liability arising from its failure to observe extraordinary diligence in the vigilance
over the goods it was transporting and for the negligent acts or omissions of its
employees, the determination of which properly belongs to the courts. In the case
at bar, petitioner is liable for the insured value of the lost cargo of industrial fuel oil
belonging to Caltex for its failure to rebut the presumption of fault or negligence as
common carrier occasioned by the unexplained sinking of its vessel, MT Maysun,
while in transit.

ISSUE: Whether or not petitioner failed to exercise extraordinary diligence.


HELD:YES, thus petitioner shall be held liable. From the nature of their business and
for reasons of public policy, common carriers are bound to observe extraordinary
diligence in the vigilance over the goods and for the safety of passengers
transported by them, according to all the circumstances of each case. In the event
of loss, destruction or deterioration of the insured goods, common carriers shall be
responsible unless the same is brought about, among others, by flood, storm,
earthquake, lightning or other natural disaster or calamity. In all other cases, 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.
In order to escape liability for the loss of its cargo of industrial fuel oil belonging to
Caltex, petitioner attributes the sinking of MT Maysun to fortuitous event. From
the testimonies of Jarabe and Berina, captain and chief mate, respectively of the illfated vessel, it appears that a sudden and unexpected change of weather condition
occurred in the early morning of August 16, 1986; that at around 3:15a.m. a squall
(unos) carrying strong winds with an approximate velocity of 30 knots per hour
and big waves averaging eighteen 18-20ft. high, repeatedly buffeted MT Maysun
causing it to tilt, take in water and eventually sink with its cargo. This tale of strong
winds and big waves by the said officers of the petitioner however, was effectively
rebutted and belied by the weather report from PAGASA showing that from 2:00
oclock to 8:00 oclock in the morning on August 16, 1986, the wind speed remained
at 10-20 knots per hour while the height of the waves ranged from .7 -2 meters in
the vicinity of Cuyo East Pass and Panay Gulf where the subject vessel sank. Thus,
as the appellate court correctly ruled, petitioners vessel, MT Maysun, sank with its
entire cargo for the reason that it was not seaworthy. There was no squall or bad
weather or extremely poor sea condition in the vicinity when the said vessel sank.
Neither may petitioner escape liability by presenting in evidence certificates that
tend to show that at the time of dry-docking and inspection by the Philippine Coast
Guard, MT Maysun, was fit for voyage. These pieces of evidence do not necessarily

PHILIPPINE CHARTER INSURANCE CORPORATION, petitioner, vs. UNKNOWN


OWNER OF THE VESSEL M/V NATIONAL HONOR, NATIONAL SHIPPING
CORPORATION OF THE PHILIPPINES and INTERNATIONAL CONTAINER SERVICES,
INC., respondents.
[G.R. No. 161833. July 8, 2005]
CALLEJO, SR., J.:
FACTS:
Petitioner PCIC (Philippine Charter Insurance Corporation) is the insurer of a
shipment containing four units of parts and accessories of machines from J.
Trading Co.of Seoul, Korea, on board the vessel M/V National Honor,represented
by NSCP (National Shipping Corporation of the Philippines).
The shipment was contained in two wooden crates (Crate 1 and 2) complete and in
good order condition. There were no markings on the outer portion of the crates
except the name of the consignee, BMICI (Blue Mono International Company
Incorporated). On the flooring of the wooden crates were three wooden battens
placed side by side to support the weight of the cargo
The International Container Terminal Services, Incorporated (ICTSI) was furnished
with a copy of the crate cargo list and bill of lading, and it knew the contents of the
crate. Claudio Cansino, the stevedore of the ICTSI, placed two sling cables on each
end of Crate No. 1. No sling cable was fastened on the mid-portion of the crate. In
their experience, this was a normal procedure. As the crate was being hoisted from
the vessels hatch, the mid-portion of the wooden flooring suddenly snapped in the
air, about five feet high from the vessels twin deck, sending all its contents crashing
down hard, resulting in extensive damage to the shipment.

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

Upon receipt of the damaged shipment, BMICI found that the same could no longer
be used for the intended purpose. The Mariners Adjustment Corporation hired by
PCIC conducted a survey and declared that the packing of the shipment was
considered insufficient. It ruled out the possibility of taxes due to insufficiency of
packing. It opined that three to four pieces of cable or wire rope slings, held in all
equal setting, never by-passing the center of the crate, should have been used,
considering that the crate contained heavy machinery.
BMICI subsequently filed separate claims against the NSCP, the ICTSI, and its
insurer, the PCIC, for US$61,500.00. When the other companies denied liability,
PCIC paid the claim and was issued a Subrogation Receipt for P1,740,634.50. PCIC,
as subrogee, filed a Complaint for Damages against the Unknown owner of the
vessel M/V National Honor, NSCP and ICTSI.
The ICTSI adduced in evidence the report of the R.J. Del Pan & Co., Inc. that the
damage to the cargo could be attributed to insufficient packing and unbalanced
weight distribution of the cargo inside the crate as evidenced by the types and
shapes of items found.
Both RTC and CA dismissed the complaint.
ISSUE: Whether or not THE STATUTORY PRESUMPTION OF FAULT AND NEGLIGENCE
is applicable in the case at bar.

HELD: NO.
We agree with the contention of the petitioner that common carriers, from the
nature of their business and for reasons of public policy, are mandated to observe
extraordinary diligence in the vigilance over the goods and for the safety of the
passengers transported by them, according to all the circumstances of each case.
The Court has defined extraordinary diligence in the vigilance over the goods as
follows:
The extraordinary diligence in the vigilance over the goods tendered for shipment
requires the common carrier to know and to follow the required precaution for
avoiding damage to, or destruction of the goods entrusted to it for sale, carriage
and delivery. It requires common carriers to render service with the greatest skill
and foresight and to use all reasonable means to ascertain the nature and
characteristic of goods tendered for shipment, and to exercise due care in the
handling and stowage, including such methods as their nature requires.
The common carriers 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 are either 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. To overcome the presumption of negligence in the case of loss, destruction
or deterioration of the goods, the common carrier must prove that it exercised
extraordinary diligence.
However, under Article 1734 of the New Civil Code, the presumption of negligence
does not apply to any of the following causes:

1. Flood, storm, earthquake, lightning or other natural disaster or calamity;


2. Act of the public enemy in war, whether international or civil;
3. Act or omission of the shipper or owner of the goods;
4. The character of the goods or defects in the packing or in the containers;
5. Order or act of competent public authority.
It bears stressing that the enumeration in Article 1734 of the New Civil Code which
exempts the common carrier for the loss or damage to the cargo is a closed list. To
exculpate itself from liability for the loss/damage to the cargo under any of the
causes, the common carrier is burdened to prove any of the aforecited causes
claimed by it by a preponderance of evidence. If the carrier succeeds, the burden of
evidence is shifted to the shipper to prove that the carrier is negligent.
Defect is the want or absence of something necessary for completeness or
perfection; a lack or absence of something essential to completeness; a deficiency
in something essential to the proper use for the purpose for which a thing is to be
used. On the other hand, inferior means of poor quality, mediocre, or second rate.
A thing may be of inferior quality but not necessarily defective. In other words,
defectiveness is not synonymous with inferiority.
x xx
In the present case, the trial court declared that based on the record, the loss of the
shipment was caused by the negligence of the petitioner as the shipper:
The same may be said with respect to defendant ICTSI. The breakage and collapse
of Crate No. 1 and the total destruction of its contents were not imputable to any
fault or negligence on the part of said defendant in handling the unloading of the

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

cargoes from the carrying vessel, but was due solely to the inherent defect and
weakness of the materials used in the fabrication of said crate.

Issue:
Whether or not the delay in the delivery of the casketed remains of petitioners
mother was due to the fault of respondent airline companies

The crate should have three solid and strong wooden batten placed side by side
underneath or on the flooring of the crate to support the weight of its contents. x xx

Held:
NO, but TWA was held to pay petitioners nominal damages of P40,000 for its
violation of the degree of diligence required by law to be exercised by every
common carrier

SALUDO JR. V. CA
Facts:
Crispina Galdo Saludo, mother of the petitioners, died in Chicago, Illinois. Pomierski
and Son Funeral Home of Chicago, made the necessary preparations and
arrangements for the shipment of the remains from Chicago to the Philippines.
Pomierski brought the remains to Continental Mortuary Air Services (CMAS) at the
Chicago Airport which made the necessary arrangements such as flights, transfers,
etc. CMAS booked the shipment with PAL thru the carriers agent Air Care
International. PAL Airway Bill Ordinary was issued wherein the requested routing
was from Chicago to San Francisco on board Trans World Airline (TWA) and from
San Francisco to Manila on board PAL.
Salvacion (one of the petitioners), upon arrival at San Francisco, went to the TWA to
inquire about her mothers remains. But she was told they did not know anything
about it. She then called Pomierski that her mothers remains were not at the West
Coast terminal. Pomierski immediately called CMAS which informed that the
remains were on a plane to Mexico City, that there were two bodies at the
terminal, and somehow they were switched. CMAS called and told Pomierski that
they were sending the remains back to California via Texas.
Petitioners filed a complaint against TWA and PAL fir the misshipment and delay in
the delay of the cargo containing the remains of the late Crispina Saludo.
Petitioners alleged that private respondents received the casketed remains of
Crispina on October 26, 1976, as evidenced by the issuance of PAL Airway Bill by Air
Care and from said date, private respondents were charged with the responsibility
to exercise extraordinary diligence so much so that the alleged switching of the
caskets on October 27, 1976, or one day after the private respondents received the
cargo, the latter must necessarily be liable.

As already demonstrated, the facts in the case at bar belie the averment that there
was delivery of the cargo to the carrier on October 26, 1976. Rather, as earlier
explained, the body intended to be shipped as agreed upon was really placed in the
possession and control of PAL on October 28, 1976 and it was from that date that
private respondents became responsible for the agreed cargo under their
undertakings in PAL Airway Bill No. 079-01180454. Consequently, for the switching
of caskets prior thereto which was not caused by them, and subsequent events
caused thereby, private respondents cannot be held liable.
The oft-repeated rule regarding a carrier's liability for delay is that in the absence of
a special contract, a carrier is not an insurer against delay in transportation of
goods. When a common carrier undertakes to convey goods, the law implies a
contract that they shall be delivered at destination within a reasonable time, in the
absence, of any agreement as to the time of delivery. But where a carrier has made
an express contract to transport and deliver property within a specified time, it is
bound to fulfill its contract and is liable for any delay, no matter from what cause it
may have arisen. This result logically follows from the well-settled rule that where
the law creates a duty or charge, and the party is disabled from performing it
without any default in himself, and has no remedy over, then the law will excuse
him, but where the party by his own contract creates a duty or charge upon himself,
he is bound to make it good notwithstanding any accident or delay by inevitable
necessity because he might have provided against it by contract. Whether or not
there has been such an undertaking on the part of the carrier to be determined
from the circumstances surrounding the case and by application of the ordinary
rules for the interpretation of contracts.
Echoing the findings of the trial court, the respondent court correctly declared that

In a similar case of delayed delivery of air cargo under a very similar stipulation
contained in the airway bill which reads: "The carrier does not obligate itself to

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

carry the goods by any specified aircraft or on a specified time. Said carrier being
hereby authorized to deviate from the route of the shipment without any liability
therefor", our Supreme Court ruled that common carriers are not obligated by law
to carry and to deliver merchandise, and persons are not vested with the right to
prompt delivery, unless such common carriers previously assume the obligation.
Said rights and obligations are created by a specific contract entered into by the
parties (Mendoza vs. PAL, 90 Phil. 836).
There is no showing by plaintiffs that such a special or specific contract had been
entered into between them and the defendant airline companies.
And this special contract for prompt delivery should call the attention of the carrier
to the circumstances surrounding the case and the approximate amount of
damages to be suffered in case of delay (See Mendoza vs. PAL, supra). There was no
such contract entered into in the instant case.
A common carrier undertaking to transport property has the implicit duty to carry
and deliver it within reasonable time, absent any particular stipulation regarding
time of delivery, and to guard against delay. In case of any unreasonable delay, the
carrier shall be liable for damages immediately and proximately resulting from such
neglect of duty. As found by the trial court, the delay in the delivery of the remains
of Crispina Saludo, undeniable and regrettable as it was, cannot be attributed to the
fault, negligence or malice of private respondents, a conclusion concurred in by
respondent court and which we are not inclined to disturb.

LORENZO SHIPPING V. BJ MARTHEL


G.R. NO. 145483
Facts:
Lorenzo Shipping Corporation is a domestic corporation engaged in coastwise
shipping. BJ Marthel International, Inc. is an importer and distributor of different
brands of engines and spare parts.
Since 1987, Respondent supplied petitioner with spare parts for the latter's marine
engines. Sometime in 1989, petitioner asked respondent for a quotation for various
machine parts. According to the quotation it sent, deliveries of such items are
within 2 months after receipt of firm order. Petitioner thereafter issued a
Purchase Order for the procurement of one set of cylinder liner, valued at P477,000
Instead of paying the 25% down payment as indicated in the purchase order, for the
first cylinder liner, petitioner issued in favor of respondent ten postdated checks.

The checks were supposed to represent the full payment of the aforementioned
cylinder liner. Subsequently, petitioner issued another Purchase for another unit of
cylinder liner. This purchase order stated the term of payment to be "25% upon
delivery, balance payable in 5 bi-monthly equal installments." Like the first purchase
order, the second purchase order did not state the date of the cylinder liner's
delivery.
The petitioner then deposited the check, which was dishonored for insufficiency of
funds. The remaining nine postdated checks were eventually returned by
respondent to petitioner.
Petitioner claimed that it replaced said check with a good one, the proceeds of
which were applied to its other obligation to respondent. For its part, respondent
insisted that it returned said postdated check to petitioner.
The respondent delivered the two cylinder liners at petitioner's warehouse in
Manila. The respondent then demanded payment from the petitioner. The
petitioner offered to pay P150,000 only claiming that as the cylinder liners were
delivered late and due to the scrapping of its vessel, it would have to sell the
cylinder liners in Singapore and pay the balance from the proceeds of said sale.
The respondent filed an action before the RTC. The petitioner filed its Answer
alleging therein that time was of the essence in the delivery of the cylinder liners
and that date of delivery of the said items was late as respondent committed to
deliver said items "within two (2) months after receipt of firm order."
The RTC dismissed the complaint. It held respondent bound to the quotation it
submitted to petitioner particularly with respect to the terms of payment and
delivery of the cylinder liners. It also declared that respondent had agreed to the
cancellation of the contract of sale when it returned the postdated checks issued by
petitioner. On appeal, the CA reversed the decision of the RTC.
Issue:
Whether or not there was late delivery of the subjects of the contract of sale to
justify petitioner to disregard the terms of the contract considering that time was of
the essence thereof
Ruling:
There was no delay on the part of the respondent, hence, the petitioner is not
justified in disregarding the terms o the contract. In determining whether time is of
the essence in a contract, the ultimate criterion is the actual or apparent intention
of the parties and before time may be so regarded by a court, there must be a
sufficient manifestation, either in the contract itself or the surrounding

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

circumstances of that intention. Petitioner insists that although its purchase orders
did not specify the dates when the cylinder liners were supposed to be delivered,
nevertheless, respondent should abide by the term of delivery appearing on the
quotation it submitted to petitioner. Petitioner theorizes that the quotation
embodied the offer from respondent while the purchase order represented its
(petitioner's) acceptance of the proposed terms of the contract of sale. Thus,
petitioner is of the view that these two documents "cannot be taken separately as if
there were two distinct contracts." The court does not agree.
In order to ascertain the intention of the parties, their contemporaneous and
subsequent acts should be considered. While the Court recognizes the principle
that contracts are respected as the law between the contracting parties, this
principle is tempered by the rule that the intention of the parties is primordial and
"once the intention of the parties has been ascertained, that element is deemed as
an integral part of the contract as though it has been originally expressed in
unequivocal terms.

deed of sale not registered with the LTO. 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. In the eyes of the law, the owner/operator of record
is the employer of the driver, the actual owner/operator being considered as
merely the agent of the registered owner/operator. The principle applies even if the
registered owner of any vehicle does not use it for public service. The main aim of
motor vehicle registration is to identify the owner so that if any accident happens,
or any damage or injury is caused by the vehicle, responsibility can be fixed on a
definite individual, the registered owner. Failure to register the deed of sale should
not prejudice victims, who have the right to rely on the principle that the registered
owner is liable for damages caused by the negligence of the driver. Equitable
Leasing cant hide behind the allegation that Tutor was Ecatine Corps employee,
because it will prevent victims from recovering their loss on the basis of Equitables
inaction in failing to register the sale. The non-registration is Equitables fault, which
should face the legal consequences thereof

EQUITABLE LEASING CORPORATION V. LUCITASUYON, ET AL., G.R. NO. 143360, 05


SEPTEMBER 2002

[G.R. No. 167363 December 15, 2010]

Facts:

SEALOADER SHIPPING CORPORATION, Petitioner,

A tractor driven by Raul Tutor rammed into a house-cum-store in Tondo, Manila.


Part of the house was destroyed. Two people died and four were injured. Tutor was
convicted of reckless imprudence resulting in multiple homicide and multiple
physical injuries. Verification with the Land Transportation Office revealed that the
registered owner of the tractor was Equitable Leasing Corporation who leased it to
Edwin Lim. The relatives of the victims filed a civil case for damages. The Regional
Trial Court ruled against Equitable and ordered it to pay damages to the victims
relatives. Upon Equitables appeal, the Court of Appeals sustained the RTC.
Equitable filed a petition for review with the Supreme Court.

vs.

Issue:
Whether Equitable Leasing is liable for damages for they are the registered owner
of the truck.
Held/Ratio:
Yes, Equitable Leasing is liable. The petition is denied and the CA decision is
affirmed. As the registered owner of the tractor, Equitable Leasing is liable for the
acts of Raul Tutor even if he was actually the employee of Equitables former lessee,
Ecatine Corporation, who became the actual owner of the tractor by virtue of a

GRAND CEMENT MANUFACTURING CORPORATION, JOYCE LAUNCH & TUG CO.,


INC., ROMULO DIANTAN & JOHNNY PONCE, Respondents.

Facts:
Sealoader Shipping Corporation (Sealoader) is a domestic corporation engaged in
the business of shipping and hauling cargo from one point to another using seagoing inter-island barges.Grand Cement Manufacturing Corporation (now Taiheiyo
Cement Philippines, Inc.), on the other hand, is a domestic corporation engaged in
the business of manufacturing and selling cement through its authorized
distributors and, for which purposes, it maintains its own private wharf in San
Fernando, Cebu, Philippines

Sealoader executed a Time Charter Party Agreement with Joyce Launch for the
chartering of MT Viper in order to tow its unpropelled barges for a minimum of 15
days.

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

Sealoder entered into a contract with Grand Cement for the loading of cement
clinkers and the delivery thereof to Manila. On March 31, 1994, Sealoders barge
arrived at the wharf of Grand Cement tugged by MT Viper. It was not immediately
loaded as the employees of Grand Cement were loading another vessel.

On April 4, typhoon Bising struck Cebu area. The barge was still docked at the wharf
of Grand Cement. As it became stronger, MT Viper tried to tow the barge away but
it was unsuccessful because the towing lines connecting the vessels snapped since
the mooring lines were not cast off, which is the ultimate cause. Hence, the barge
rammed the wharf causing significant damage.

Grand Cement filed a complaint for damages (P2.4M) since Sealoader ignored its
demands. They allege that Sealoader was negligent when it ignored its employees
advice to move the vessels after it had received weather updates. Sealoader filed a
motion to dismiss on the ground that Joyce Launch is the one liable since it was the
owner of MT Viper, whos employees were manning the vessel. Sealoader filed a
cross-claim against Joyce Launch. Joyce maintains that the damages were due to
force majeure and faulted Grand Cements employees for abandoning the wharf
leaving them helpless and for not warning them early on.

Upon testimonies, the RTC rendered judgment in favor of Grand Cement holding
the two companies liable since there was complete disregard of the storm signal,
the captain of the vessel was not present and the vessel was not equipped with a
radio or any navigational facility, which is mandatory. Joyce launch did not appeal.

On appeal, the CA affirmed the decision but on MR, it partly reversed its decision
finding Grand Cement to be guilty of contributory negligence since it was found that
it was still loading the other vessel at the last minute just before the storm hit,
hence Sealoders vessel did not move. Damages were reduced to 50%. Hence,
petition for review to SC.

Issue:
Whether or not Sealoader should be liable for damage sustained by the wharf of
Grand Cement

Ruling:
YES. Sealoader is liable for its negligence. First because it was not equipped with a
radio or a navigational facility and it failed to monitor the prevailing weather
conditions. Second, it cannot pass the responsibility of casting off the mooring lines
because the people at the wharf could not just cast off the mooring lines without
any instructions from the crew of the vessel. It should have taken the initiative to
cast off the mooring lines early on.

With regard to Grand Cements contributory negligence, the court found that it was
not guilty thereof. It had timely informed the barge of the impending typhoon and
directed the vessels to move to a safer place. Sealoader had the responsibility to
inform itself of the prevailing weather conditions in the areas where its vessel was
to sail. It cannot merely rely on other vessels for weather updates and warnings on
approaching storms. For to do so would be to gamble with the safety of its own
vessel, putting the lives of its crew under the mercy of the sea, as well as running
the risk of causing damage to property of third parties for which it would
necessarily be liable.

2. Presumption of Negligence

Delsan Transport v. American Home G.R. No. 149019, 15 August 2006


Facts:
Delsan is a domestic corporation which owns and operates the vessel MT
Larusan. On the other hand, respondent American Home Assurance Corporation
(AHAC for brevity) is a foreign insurance company duly licensed to do business in
the Philippines.
On 1984, Delsan received on board MT Larusan a shipment consisting of
1,986.627 k/l Automotive Diesel Oil (diesel oil) at the Bataan Refinery Corporation
for transportation and delivery to the bulk depot in Bacolod City of Caltex Phils., Inc.
(Caltex), pursuant to a Contract of Afreightment. The shipment was insured by
respondent AHAC against all risks.
The shipment arrived in Bacolod City. Immediately thereafter, unloading
operations commenced. The discharging of the diesel oil started at about 1:30 PM
of the same day. However, at about 10:30 PM, the discharging had to be stopped

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

on account of the discovery that the port bow mooring of the vessel was
intentionally cut or stolen by unknown persons. Because there was nothing holding
it, the vessel drifted westward, dragged and stretched the flexible rubber hose
attached to the riser, broke the elbow into pieces, severed completely the rubber
hose connected to the tanker from the main delivery line at sea bed level and
ultimately caused the diesel oil to spill into the sea. To avoid further spillage, the
vessels crew tried water flushing to clear the line of the diesel oil but to no avail. In
the meantime, the shore tender, who was waiting for the completion of the water
flushing, was surprised when the tanker signaled a red light which meant stop
pumping. Unaware of what happened, the shore tender, thinking that the vessel
would, at any time, resume pumping, did not shut the storage tank gate valve. As all
the gate valves remained open, the diesel oil that was earlier discharged from the
vessel into the shore tank backflowed. Due to non-availability of a pump boat, the
vessel could not send somebody ashore to inform the people at the depot about
what happened. After almost an hour, a gauger and an assistant surveyor from the
Caltexs Bulk Depot Office boarded the vessel. It was only then that they found out
what had happened. Thereafter, the duo immediately went ashore to see to it that
the shore tank gate valve was closed. The loss of diesel oil due to spillage was
placed at 113.788 k/l while some 435,081 k/l thereof backflowed from the shore
tank.
As a result of spillage and backflow of diesel oil, Caltex sought recovery of the
loss from Delsan, but the latter refused to pay. As insurer, AHAC paid Caltex.
AHAC instituted a civil action to recover the value of the amount paid to Caltex plus
damages. RTC and CA finds the case in favor of AHAC, hence this petition.
Issue:
Is Delsan liable for the loss of the cargo for its negligence in its duty as a common
carrier?
Held:
Yes. Common carriers are bound to observe extraordinary diligence in the
vigilance over the goods transported by them. They are presumed to have been at
fault or to have acted negligently if the goods are lost, destroyed or deteriorated.
To overcome the presumption of negligence in case of loss, destruction or
deterioration of the goods, the common carrier must prove that it exercised
extraordinary diligence. There are, however, exceptions to this rule. Article 1734 of
the Civil Code enumerates the instances when the presumption of negligence does
not attach:

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

2)

Act of the public enemy in war, whether international or civil;

3)
4)

Act or omission of the shipper or owner of the goods;


The character of the goods or defects in the packing or in the

5)

Order or act of competent public authority.

calamity;

containers;

It had been established that the proximate cause of the spillage and
backflow of the diesel oil was due to the severance of the port bow mooring line of
the vessel and the failure of the shore tender to close the storage tank gate valve
even as a check on the drain cock showed that there was still a product on the
pipeline.
As we see it, the crew of the vessel should have promptly informed the
shore tender that the port mooring line was cut off. However, Delsan did not do so
on the lame excuse that there was no available banca. As it is, Delsans personnel
signaled a red light which was not a sufficient warning because such signal only
meant that the pumping of diesel oil had been finished. Neither did the blowing of
whistle suffice considering the distance of more than 2 kilometers between the
vessel and the Caltex Bulk Depot, aside from the fact that it was not the agreed
signal. The crew of the vessel should have exerted utmost effort to immediately
inform the shore tender that the port bow mooring line was severed.
To be sure, Delsan, as the owner of the vessel, was obliged to prove that the
loss was caused by one of the excepted causes if it were to seek exemption from
responsibility.[7] Unfortunately, it miserably failed to discharge this burden by the
required quantum of proof.
DELSAN TRANSPORT LINES, INC. vs. THE HON. COURT OF APPEALS and AMERICAN
HOME ASSURANCE CORPORATION
DE LEON, JR., J.:
Before us is a petition for review on certiorari of the Decision of the Court of
Appeals promulgated on June 17, 1996, reversing the decision of the Regional Trial
Court of Makati City, Branch 137, ordering petitioner to pay private respondent the

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

sum of P5,096,635.57 and costs and the Resolution dated January 21, 1997 which
denied the subsequent motion for reconsideration.
Facts:Caltex Philippines (Caltex for brevity) entered into a contract of affreightment
with the petitioner, Delsan Transport Lines, Inc., for a period of one year whereby
the said common carrier agreed to transport Caltexs industrial fuel oil from the
Batangas-Bataan Refinery to different parts of the country. Under the contract,
petitioner took on board its vessel, MT Maysun, 2,277.314 kiloliters of industrial
fuel oil of Caltex to be delivered to the Caltex Oil Terminal in Zamboanga City. The
shipment was insured with the private respondent, American Home Assurance
Corporation. On August 14, 1986, MT Maysun set sail from Batangas for Zamboanga
City. Unfortunately, the vessel sank in the early morning of August 16, 1986 near
Panay Gulf in the Visayas taking with it the entire cargo of fuel oil.
Subsequently, private respondent paid Caltex the sum of P5,096,635.57
representing the insured value of the lost cargo. Exercising its right of subrogation
under Article 2207 of the New Civil Code, the private respondent demanded of the
petitioner the same amount it paid to Caltex. Due to its failure to collect from the
petitioner despite prior demand, private respondent filed a complaint with the
Regional Trial Court of Makati City, Branch 137, for collection of a sum of
money. After the trial and upon analyzing the evidence adduced, the trial court
rendered a decision on November 29, 1990 dismissing the complaint against herein
petitioner without pronouncement as to cost. The trial court found that the vessel,
MT Maysun, was seaworthy to undertake the voyage as determined by the
Philippine Coast Guard per Survey Certificate Report upon inspection during its
annual dry-docking and that the incident was caused by unexpected inclement
weather condition or force majeure, thus exempting the common carrier from
liability for the loss of its cargo.
The decision of the trial court, however, was reversed, on appeal, by the Court of
Appeals. The appellate court gave credence to the weather report issued by the
PAGASA which showed that from 2:00 oclock to 8:00 oclock in the morning on
August 16, 1986, the wind speed remained at 10 to 20 knots per hour while the
waves measured from .7 to 2 meters in height only in the vicinity of the Panay Gulf
where the subject vessel sank, in contrast to herein petitioners allegation that the
waves were 20 feet high. In the absence of any explanation as to what may have
caused the sinking of the vessel coupled with the finding that the same was
improperly manned, the appellate court ruled that the petitioner is liable on its
obligation as common carrier to herein private respondent insurance company as
subrogee of Caltex. The subsequent motion for reconsideration of herein petitioner
was denied by the appellate court.

Petitioner invokes the provision of Section 113 of the Insurance Code of the
Philippines, which states that in every marine insurance upon a ship or freight, or
freightage, or upon any thing which is the subject of marine insurance there is an
implied warranty by the shipper that the ship is seaworthy. Consequently, the
insurer will not be liable to the assured for any loss under the policy in case the
vessel would later on be found as not seaworthy at the inception of the
insurance. It theorized that when private respondent paid Caltex the value of its
lost cargo, the act of the private respondent is equivalent to a tacit recognition that
the ill-fated vessel was seaworthy; otherwise, private respondent was not legally
liable to Caltex due to the latters breach of implied warranty under the marine
insurance policy that the vessel was seaworthy.
Issue 1: Whether or not the payment made by the private respondent to Caltex for
the insured value of the lost cargo amounted to an admission that the vessel was
seaworthy, thus precluding any action for recovery against the petitioner?
Issue 2: Whether or not the non-presentation of the marine insurance policy bars
the complaint for recovery of sum of money for lack of cause of action?
Held 1: No.The payment made by the private respondent for the insured value of
the lost cargo operates as waiver of its right to enforce the term of the implied
warranty against Caltex under the marine insurance policy. However, the same
cannot be validly interpreted as an automatic admission of the vessels
seaworthiness by the private respondent as to foreclose recourse against the
petitioner for any liability under its contractual obligation as a common carrier. The
fact of payment grants the private respondent subrogatory right which enables it to
exercise legal remedies that would otherwise be available to Caltex as owner of the
lost cargo against the petitioner common carrier. Article 2207 of the New Civil Code
provides that:
Art. 2207. If the plaintiffs property has been insured, and he has received
indemnity from the insurance company for the injury or loss arising out of the
wrong or breach of contract complained of, the insurance company shall be
subrogated to the rights of the insured against the wrongdoer or the person who
has violated the contract. If the amount paid by the insurance company does not
fully cover the injury or loss, the aggrieved party shall be entitled to recover the
deficiency from the person causing the loss or injury.
Additionally, the exoneration of MT Maysuns officers and crew by the Board of
Marine Inquiry merely concerns their respective administrative liabilities. It does

35
TRANSPO CASE DIGESTS, 2ND BATCH, 2E

not in any way operate to absolve the petitioner common carrier from its civil
liability arising from its failure to observe extraordinary diligence in the vigilance
over the goods it was transporting and for the negligent acts or omissions of its
employees, the determination of which properly belongs to the courts. In the case
at bar, petitioner is liable for the insured value of the lost cargo of industrial fuel oil
belonging to Caltex for its failure to rebut the presumption of fault or negligence as
common carrier occasioned by the unexplained sinking of its vessel, MT Maysun,
while in transit.

Through a Memorandum of Shipment, the shipper Eli Lilly, Inc. of Puerto Rico
advised Castillo as consignee that the 600,000 empty gelatin capsules in six (6)
drums of 100,000 capsules each, were already shipped on board MV "Anders
Maerskline" under Voyage No. 7703 for shipment to the Philippines via Oakland,
California. In said Memorandum, shipper Eli Lilly, Inc. specified the date of arrival to
be April 3, 1977.
For reasons unknown, said cargo of capsules were mishipped and diverted to

Held 2: No. It is our view and so hold that the presentation in evidence of the
marine insurance policy is not indispensable in this case before the insurer may
recover from the common carrier the insured value of the lost cargo in the exercise
of its subrogatory right. The subrogation receipt, by itself, is sufficient to establish
not only the relationship of herein private respondent as insurer and Caltex, as the
assured shipper of the lost cargo of industrial fuel oil, but also the amount paid to
settle the insurance claim. The right of subrogation accrues simply upon payment
by the insurance company of the insurance claim.

Richmond, Virginia, USA and then transported back Oakland, Califorilia. The goods
finally arrived in the Philippines on June 10, 1977 or after two (2) months from the
date specified in the memorandum. As a consequence, Castillo as consignee refused
to take delivery of the goods on account of its failure to arrive on time.
Castillo, alleging gross negligence and undue delay in the delivery of the goods, filed
an action before the court a quo for rescission of contract with damages against
petitioner and Eli Lilly, Inc. Denying that it committed breach of contract, Maersk

G.R. No. 94761 May 17, 1993


MAERSK LINE, petitioner,
vs.
COURT OF APPEALS AND EFREN V. CASTILLO, doing business under the name and

Line alleged in its that answer that the subject shipment was transported in
accordance with the provisions of the covering bill of lading and that its liability
under the law on transportation of good attaches only in case of loss, destruction or
deterioration of the goods as provided for in Article 1734 of Civil Code.

style of Ethegal Laboratories, respondents.

Eli Lilly, Inc., on the other hand, filed its answer with compulsory and cross-claim. In

BIDIN, J.:

its cross-claim, it alleged that the delay in the arrival of the the subject merchandise

FACTS:
Maersk Line is engaged in the transportation of goods by sea, doing business in the
Philippines through its general agent Compania General de Tabacos de Filipinas.
Efren Castillo, on the other hand, is the proprietor of Ethegal Laboratories, a firm
engaged in the manufacture of pharmaceutical products.
On November 12, 1976, Castillo ordered from Eli Lilly. Inc. of Puerto Rico through its
(Eli Lilly, Inc.'s) agent in the Philippines, Elanco Products, 600,000 empty gelatin
capsules for the manufacture of his pharmaceutical products. The capsules were
placed in six (6) drums of 100,000 capsules each valued at US $1,668.71.

was due solely to the gross negligence of petitioner Maersk Line. The issues having
been joined, Castillo moved for the dismissal of the complaint against Eli Lilly, Inc.
on the ground that the evidence on record shows that the delay in the delivery of
the shipment was attributable solely to petitioner.
The trial court dismissed the complaint against Eli Lilly, Inc. Correspondingly, the
latter withdraw its cross-claim against petitioner in a joint motion dated December
3, 1979. As between Castillo and Maersk, the trial court ruled in favor if the former
ruling that there was a breach in the performance of the obligation of Maersk Line
consisting of their negligence to ship the 6 drums of empty Gelatin Capsules which
under their own memorandum shipment would arrive in the Philippines on April 3,
1977 which under Art. 1170 of the New Civil Code, they stood liable for damages.

36
TRANSPO CASE DIGESTS, 2ND BATCH, 2E

On appeal, CA affirmed the lower court's but with modifications as to amount of

petitioner's negligence was mishipped to Richmond, Virginia. Petitioner's insitence

damages.

that it cannot be held liable for the delay finds no merit.

ISSUE: Whether or not Castillo is entitled to damages resulting from delay in the

-In the case before us, the only evidence presented by petitioner was the testimony

delivery of the shipment in the absence in the bill of lading of a stipulation on the

of Mr. Rolando Ramirez, a claims manager of its agent Compania General de

period of delivery?

Tabacos de Filipinas, who merely testified on Exhs. '1' to '5' (AC-GR CV No. 10340, p.

HELD: YES, since Maersk is liable for breach of contract of carriage through gross

2) and nothing else. Petitioner never even bothered to explain the course for the

negligence amounting to bad faith, Castillo is entitled to moral damages, exemplary

delay, i.e. more than two (2) months, in the delivery of subject shipment. Under the

damages and reasonable attorney's fees.

circumstances of the case, we hold that petitioner is liable for breach of contract of

The bill of lading covering the subject shipment among others, reads:
6. GENERAL

carriage through gross negligence amounting to bad faith. Thus, the award of moral
damages if therefore proper in this case.
-In line with this pronouncement, we hold that exemplary damages may be

(1) The Carrier does not undertake that the goods shall arive at the port of

awarded to the private respondent. In contracts, exemplary damages may be

discharge or the place of delivery at any particular time or to meet any particular

awarded if the defendant acted in a wanton, fraudulent, reckless, oppresive or

market or use and save as is provided in clause 4 the Carrier shall in no

malevolent manner. There was gross negligence on the part of the petitioner in

circumstances be liable for any direct, indirect or consequential loss or damage

mishiping the subject goods destined for Manila but was inexplicably shipped to

caused by delay. If the Carrier should nevertheless be held legally liable for any such

Richmond, Virginia, U.S.A. Gross carelessness or negligence contitutes wanton

direct or indirect or consequential loss or damage caused by delay, such liability

misconduct, hence, exemplary damages may be awarded to the aggrieved party

shall in no event exceed the freight paid for the transport covered by this Bill of

(Radio Communication of the Phils., Inc. v. Court of Appeals, 195 SCRA 147 [1991]).

Lading.

Although attorney's fees are generally not recoverable, a party can be held lible for

-An examination of the subject bill of lading shows that the subject shipment was

such if exemplary damages are awarded (Artice 2208, New Civil Code). In the case

estimated to arrive in Manila on April 3, 1977. While there was no special contract

at bar, we hold that private respondent is entitled to reasonable attorney`s fees

entered into by the parties indicating the date of arrival of the subject shipment,

since petitioner acted with gross negligence amounting to bad faith.

petitioner nevertheless, was very well aware of the specific date when the goods
were expected to arrive as indicated in the bill of lading itself. In this regard, there
arises no need to execute another contract for the purpose as it would be a mere
superfluity.
-In the case before us, we find that a delay in the delivery of the goods spanning a

FGU Insurance v. Court of Appeals


G.R. No. 137775. March 31, 2005
CHICO-NAZARIO, J.:

period of two (2) months and seven (7) days falls was beyond the realm of
reasonableness. Described as gelatin capsules for use in pharmaceutical products,
subject shipment was delivered to, and left in, the possession and custody of
petitioner-carrier for transport to Manila via Oakland, California. But through

Facts: On September 23, San Miguel Corporation entered into contract with Anco
Enterprises to ship from Mandaue City, Cebu to Antique (Bill of Lading 1) and
another to Ilo-ilo (Bill of Lading 2) on board the D/B Lucio, for towage by M/T ANCO
various beer products. Since the D/B Lucio had no engine of its own, it could not

37
TRANSPO CASE DIGESTS, 2ND BATCH, 2E

maneuver by itself and had to be towed by M/T ANCO, a tugboat for it to move
from one place to another.
When the barge and tugboat arrived at Antique, the clouds over the area were dark
and the waves were already big. SMCS representative requested them to transfer
the barge to a safer place because the vessel might not be able to withstand the big
waves. This request was not heeded. This, notwithstanding the fact that at that
time, only the M/T ANCO was left at the wharf of San Jose, Antique, as all other
vessels already left the wharf to seek shelter. With the waves growing bigger and
bigger, only Ten Thousand Seven Hundred Ninety (10,790) cases of beer were
discharged into the custody of the arrastre operator. On October 1, the crew of D/B
Lucio abandoned the vessel because the barges rope attached to the wharf was cut
off by the big waves. At around midnight, the barge run aground and was broken
and the cargoes of beer in the barge were swept away. As a consequence of the
incident, SMC filed a complaint for Breach of Contract of Carriage and Damages
against ANCO.

Held: YES. ANCOs representatives failed to exercise the extraordinary degree of


diligence required by the law to exculpate them from liability for the loss of the
cargoes. It is borne out in the testimony of the witnesses on record that the barge
D/B Lucio had no engine of its own and could not maneuver by itself. Yet, the
patron of ANCOs tugboat M/T ANCO left it to fend for itself notwithstanding the
fact that as the two vessels arrived at the port of San Jose, Antique, signs of the
impending storm were already manifest. As stated by the lower court, witness Mr.
Anastacio Manilag testified that the captain or patron of the tugboat M/T ANCO left
the barge D/B Lucio immediately after it reached San Jose, Antique, despite the fact
that there were already big waves and the area was already dark. The records show
that the D/B Lucio was the only vessel left at San Jose, Antique, during the time in
question. The other vessels were transferred and temporarily moved to
Malandong, 5 kilometers from wharf where the barge remained. Clearly, the
transferred vessels were definitely safer in Malandong than at the port of San Jose,
Antique, at that particular time, a fact which petitioners failed to dispute. In this
case, the calamity which caused the loss of the cargoes was not unforeseen nor
was it unavoidable.

Ancos defense:
Since the cases of beer Pale Pilsen and Cerveza Negra were lost by reason
of a storm, a fortuitous event which battered and sunk the vessel in which
they were loaded, they should not be held liable.
The loss of said cargoes occurred as a result of risks insured against in the
insurance policy and during the existence and lifetime of said insurance
policy (FGU) And that in case the court will order ANCO to pay SMC, they
can reimburse from FGU.
FGU alleged that the Third-Party Plaintiff ANCO and Plaintiff SMC failed to exercise
ordinary diligence or the diligence of a good father of the family in the care and
supervision of the cargoes insured to prevent its loss and/or destruction.
The trial court found that while the cargoes were indeed lost due to fortuitous
event, there was failure on ANCOs part, through their representatives, to observe
the degree of diligence required that would exonerate them from liability. The trial
court thus held the Estate of Ang Gui and Co To liable to SMC for the amount of the
lost shipment. With respect to the Third-Party complaint, the court a quo found
FGU liable to bear Fifty-Three Percent (53%) of the amount of the lost cargoes
Issue: WON the negligence of the crewmembers of the D/B Lucio was the
proximate cause of the loss of the cargoes

*FGU was exonerated from liability to ANCO because of blatant negligence on the
part of the employees of defendants-appellants when the patron (operator) of the
tug boat immediately left the barge at the San Jose, Antique wharf despite the
looming bad weather. Negligence was likewise exhibited by the defendantsappellants representative who did not heed the request that the barge be moved to
a more secure place.

DSR-SENATOR LINES AND C.F. SHARP AND COMPANY, INC., petitioners, vs.
FEDERAL PHOENIX ASSURANCE CO., INC., respondent.
FACTS:
Berde Plants, Inc. (Berde Plants) delivered 632 units of artificial trees to
C.F. Sharp and Company, Inc. (C.F. Sharp), the General Ship Agent of DSR-Senator
Lines, a foreign shipping corporation, for transportation and delivery to the
consignee, Al-Mohr International Group, in Riyadh, Saudi Arabia. C.F. Sharp issued
a Bill of Lading for the cargo. Under the Bill of Lading, the port of discharge for the
cargo was at the Khor Fakkan port and the port of delivery was Riyadh, Saudi
Arabia, via Port Dammam. The cargo was loaded in M/S Arabian Senator. Federal
Phoenix Assurance Company, Inc. (Federal Phoenix Assurance) insured the cargo
against all risks. On July 3, 1993 M/S Arabian Senator left the Manila South
Harbor for Saudi Arabia with the cargo on board. When the vessel arrived in Khor

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

Fakkan Port, the cargo was reloaded on board DSR-Senator Lines feeder vessel,
M/V Kapitan Sakharov, bound for Port Dammam, Saudi Arabia. However, while in
transit, the vessel and all its cargo caught fire. On July 5, 1993, DSR-Senator Lines
informed Berde Plants that M/V Kapitan Sakharov with its cargo was gutted by
fire and sank on or about July 4, 1993. Consequently, Federal Phoenix Assurance
paid Berde Plants corresponding to the amount of insurance for the cargo. Federal
Phoenix Assurance sent a letter to C.F. Sharp demanding payment from C.F. Sharp.
C.F. Sharp denied any liability on the ground that such liability was extinguished
when the vessel carrying the cargo was gutted by fire. Thus, Federal Phoenix
Assurance filed with the RTC a complaint for damages against DSR-Senator Lines
and C.F. Sharp.

ISSUE: WON C.F. Sharps liability is extinguished by reason of the fire


HELD:
No. Fire is not one of those enumerated under Art. 1734 of the Civil Code
which exempts a carrier from liability for loss or destruction of the cargo. 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[10] 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. 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. Respondent Federal Phoenix Assurance raised the
presumption of negligence against petitioners. However, they failed to overcome it
by sufficient proof of extraordinary diligence
PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY, INC.
APPEALS and TRANSPACIFIC TOWAGE, INC.
G.R. No. 101426. May 17, 1993

vs. COURT OF

PADILLA, J.
FACTS: Davao Union Marketing Corporation shipped on board the vessel M/V
"Crazy Horse" operated by the Transpacific Towage, Inc. cargo consisting of sheets
of union brand GI sheets and bags of union Pozzolan and union Portland Cement.
The cargo was consigned to the Bicol Union Center of Pasacao, Camarines Sur, with
a certain Pedro Olivan as the "Notify-Party."This was insured by PhilAmGen.
Crazy Horse arrived as scheduled at the port of Pasacao. Shipmaster then notified
the consignee's "Notify-Party" that the vessel was already (sic) to discharge the
cargo. The discharging could not be affected immediately and continuously because
of certain reasons: (1) the buoys were installed only on September 11, 1985; (2)
dischrage permit was secured by the consignee only on September 13, 1985; (3) a
wooden catwalk had to be installed and extension of the wharf had to be made,
which was completed only on September 26, 1985; (4) discharging was not
continuous because there were intermittent rains and the stevedores supplied by
the consignee did not work during the town fiesta.
A super typhoon "Saling" entered the Philippines. Thus, the discharging of the cargo
had to be suspended on October 17, 1985 due to the heavy downpour, strong
winds, and turbulent sea. To prevent damage to the cargo all hatches of the vessel
were closed and secured. At the time the discharging of the cargo was suspended,
some bags of cement and crates of GI sheets had already been discharged.
According to the shipmaster who was plotting the typhoon's path in a chart, the
radius was so wide that there was no way the typhoon could be evaded. The
typhoon raged in the area and the shipmaster ordered the maneuvering of the
vessel but it could not be steered due to strong winds and rough seas. The vessel
sustained holes in the engine room and there was a power failure in the vessel.
Water started to fill the engine room and the engine broke down.
The shipmaster had no choice but to order the ship to be abandoned but he
ordered the crew to secure the vessel while he sought for assistance. He was unable
to get any assistance and upon returning, he found that it was being continuously
pounded by the strong sea waves against the rocks. This caused the vessel to break
into 2 parts and to sink partially. The shipmaster reported the incident to the
Philippine Coast Guard but inspite the presence of 3 coast guards, nothing could be
done about the pilferage done on the vessel and its cargo. As a result of the
incident the cargo of cement was damaged while the GI sheets were looted and
nothing was left of the undischarged pieces.
PhilAmGen then paid Davao Union Marketing Corp. And because, Transpacific
Towage, Inc. refused to pay despite demands, PhilAmGen filed the present
complaint.

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

The lower court found that although the immediate cause of the loss may have
been due to an act of God, the defendant carrier had exposed the property to the
accident. The court also found plaintiff guilty of contributory negligence and
mitigated the plaintiff's claim. CA reversed the decision of the trial court, ruling that
private respondent, as a common carrier, is not responsible for the loss of the
insured cargo involved, as said loss was due solely to a fortituous event.
ISSUE: Whether or not TRANSPACIFIC TOWAGE, INC. has been negligent thus liable.
HELD: NO, CAs decision is affirmed. The appellate court in exempting private
respondent from liability applied Article 1739 of the Civil Code which provides: 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.
Considering the disputed fact that there really was delay in completing the
unloading of the goods from the vessel, the Court believes that the real issue at bar
centers on the application of Article 1740 of the Civil Code. In short, the principal
question, in determining which of the parties in the present case should bear the
loss of the goods, is whether the delay involved in the unloading of the goods is
deemed negligently incurred in, so as not to free private respondent from liability,
notwithstanding the fact that the ultimate cause of the loss of the goods was the
sinking of the vessel brought about by typhoon "Saling."
Indeed, from the time the vessel arrived at port Pasacao on 7 September 1985 up to
17 October 1985 when the Pasacao area was placed under storm signal No. 3 due
to typhoon "Saling", 40 days had passed. Under normal conditions, a period of 40
days is undoubtedly more than enough time within which the unloading of the
cargo (given its nature) from the vessel could be completed. Hence, the question
boils down further to which party should be faulted for this delay.
While it is true that there was indeed delay in discharging the cargo from the vessel,
we agree with the Court of Appeals that neither of the parties herein could be
faulted for such delay, for the same (delay) was due not to negligence, but to
several factors earlier discussed. (See facts, par.2) The cargo having been lost due to
typhoon "Saling", and the delay incurred in its unloading not being due to
negligence, private respondent is exempt from liability for the loss of the cargo,
pursuant to Article 1740 of the Civil Code.
The diligence exercised by the shipmaster further supports the exemption of
private respondent from liability for the loss of the cargo, in accordance with Article

1739 of the Civil Code. All told, we find private respondent not legally liable for the
loss of the insured cargo involved in the present case.
BELGIAN OVERSEAS CHARTERING AND SHIPPING N.V. and JARDINE DAVIES
TRANSPORT SERVICES, INC., petitioners, vs. PHILIPPINE FIRST INSURANCE CO.,
INC., respondents.
G.R. No. 143133

June 5, 2002

PANGANIBAN, J.
This is a Petition for Review assailing the Decision and Resolution of the CA
reversing the Makati RTCs Decision in dismissing the complaint and counterclaim of
Philippine First Insurance Co., Inc.
FACTS

CMC Trading A.G. (CMC)

- shipper

Philippine Steel Trading Corporation (PSTC)

- consignee

Belgian Overseas Chartering and Shipping N.V. (Belgian)

- carrier

Jardine Davies Transport Services, Inc. (Jardine)

- carrier

Philippine First Insurance Co., Inc. (PFIC)

- insurer

On June 13, 1990, CMC shipped on board the M/V 'Anangel Sky' at
Hamburg, Germany 242 coils of various Prime Cold Rolled Steel sheets for
transportation to Manila consigned to the Philippine Steel Trading Corporation. On
July 28, 1990, M/V Anangel Sky arrived at the port of Manila and, within the
subsequent days, discharged the subject cargo. Four (4) coils were found to be in
bad order. It was noted on the Bill of Lading that metal envelopes rust stained and
slightly dented. Finding the four (4) coils in their damaged state to be unfit for the
intended purpose, PSTC declared them to be a total loss.

PFIC paid the insurance for the damaged goods (Php 506,086.50) to PSTC.
It formally demanded Belgian and Jardine for recovery of the said amount but both
refused to submit to PFICs claim which then instituted a complaint for recovery.
Belgian and Jardine contend the following:
that damage and/or loss was due to pre-shipment damage, to the
inherent nature, vice or defect of the goods, or to perils, danger
and accidents of the sea, or to insufficiency of packing thereof, or

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

to the act or omission of the shipper of the goods or their


representatives;
that their liability, if there be any, should not exceed the
limitations of liability provided for in the bill of lading and other
pertinent laws;

that, in any event, they exercised due diligence and foresight


required by law to prevent any damage/loss to said shipment.
RTC Makati Decision
The complaint was dismissed due to PFICs failure to prove its claims with
quantum of proof required by law. It also debunked Belgian and Jardines
counterclaim because PFICs suit was not manifestly frivolous or primarily intended
to harass them.
CA Decision
RTCs Decision was reversed. Belgian and Jardine were liable for the loss or
the damage of the goods shipped. They had failed to overcome the presumption of
negligence imposed on common carriers. The damage was not clearly shown to be
due to pre-shipment damage or that the damage noted in the Bill of Lading was the
proximate cause. Also, the the package limitation under COGSA was not applicable,
because the words "L/C No. 90/02447" indicated that a higher valuation of the
cargo had been declared by the shipper.

means to ascertain the nature and characteristics of the goods tendered


for shipment, and to exercise due care in the handling and stowage,
including such methods as their nature requires." The extraordinary
responsibility lasts from the time the goods are unconditionally placed in
the possession of and received for transportation by the carrier until they
are delivered, actually or constructively, to the consignee or to the person
who has a right to receive them.
However, the presumption of fault or negligence will not arise if
the loss is due to any of the following causes: (1) flood, storm, earthquake,
lightning, or other natural disaster or calamity; (2) an act of the public
enemy in war, whether international or civil; (3) an act or omission of the
shipper or owner of the goods; (4) the character of the goods or defects in
the packing or the container; or (5) an order or act of competent public
authority. If the cause of destruction, loss or deterioration is other than the
enumerated circumstances, then the carrier is liable therefor.
Mere proof of delivery of the goods in good order to a common
carrier and of their arrival in bad order at their destination constitutes a
prima facie case of fault or negligence against the carrier. If no adequate
explanation is given as to how the deterioration, the loss or the
destruction of the goods happened, the transporter shall be held
responsible.

ISSUES
1.
2.
3.

WON petitioners have overcome the presumption of negligence of a


common carrier.
WON the notice of loss was timely filed.
WON the package limitation of liability is applicable.

HELD
1.

NO. Common carriers, as a general rule, are presumed to have been at


fault or negligent if the goods they transported deteriorated or got lost or
destroyed. That is, unless they prove that they exercised extraordinary
diligence in transporting the goods. (Art. 1735, NCC) In order to avoid
responsibility for any loss or damage, therefore, they have the burden of
proving that they observed such diligence.
Extraordinary diligence requires common carriers to render
service with the greatest skill and foresight and "to use all reason[a]ble

In the case, petitioners failed to overcome the presumption of


negligence and to prove the exercise of extraordinary diligence evidenced
as follows:
as stated in the Bill of Lading, petitioners received the subject
shipment in good order and condition in Hamburg, Germany
as stated in the Inspection Report prepared and signed by the
representatives of both parties that prior to the unloading of the
cargo, the steel bands broken, the metal envelopes rust-stained
and heavily buckled, and the contents thereof exposed and rusty;
as stated in the Bad Order Tally Sheet issued by Jardine, the four
coils were in bad order and condition; (Note: a request for a bad
order survey is made in case there is an apparent or a presumed
loss or damage)

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

as stated in the Certificate of Analysis, based on the sample


submitted and tested, the steel sheets found in bad order were
wet with fresh water; and
as stated in the letter addressed to the Philippine Steel Coating
Corporation (dated October 12, 1990), petitioners admitted that
they were aware of the condition of the four coils found in bad
order and condition.
These were confirmed by Ruperto Esmerio, head checker of BM
Santos Checkers Agency.
Morevoer, having been in the service for several years, the master
of the vessel should have known at the outset that metal envelopes in the
said state would eventually deteriorate when not properly stored while in
transit. Equipped with the proper knowledge of the nature of steel sheets
in coils and of the proper way of transporting them, the master of the
vessel and his crew should have undertaken precautionary measures to
avoid possible deterioration of the cargo. But none of these measures was
taken.
Invoking Art. 1734(4) of the NCC by the petitioners cannot
prosper. From the evidence on record, it cannot be reasonably concluded
that the damage to the four coils was due to the condition noted on the
Bill of Lading. The aforecited exception refers to cases when goods are lost
or damaged while in transit as a result of the natural decay of perishable
goods or the fermentation or evaporation of substances liable therefor,
the necessary and natural wear of goods in transport, defects in packages
in which they are shipped, or the natural propensities of animals. None of
these is present in the instant case.

2.

Further, even if the fact of improper packing was known to the


carrier or its crew or was apparent upon ordinary observation, it is not
relieved of liability for loss or injury resulting therefrom, once it accepts
the goods notwithstanding such condition. Thus, petitioners have not
successfully proven the application of any of the aforecited exceptions in
the present case.
YES. The cargo was discharged on July 31, 1990, while the complaint was
filed by PFIC on July 25, 1991. Petitioners claim that pursuant to Section 3,
paragraph 6 of the Carriage of Goods by Sea Act (COGSA), respondent
should have filed its Notice of Loss within three days from delivery. This is
not the case.

3.

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.
Moreover, 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.
Hence, the filing of the complaint was within the one-year
prescriptive period.
NO. 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 but
respondent asserts otherwise. 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.
First and foremost, a bill of lading serves two functions:
a.
b.

it is a receipt for the goods shipped; and


it is a contract by which three parties -- namely, the
shipper, the carrier, and the consignee -- undertake
specific responsibilities and assume stipulated
obligations.

Further, a stipulation in the bill of lading limiting to a certain sum


the common carrier's 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.
However, the Civil Code does not limit the liability of the common
carrier to a fixed amount per package. The COGSA, meanwhile, which is
suppletory to the provisions of the Civil Code, supplements the latter by

42
TRANSPO CASE DIGESTS, 2ND BATCH, 2E

establishing a statutory provision limiting the carrier's liability in the


absence of a shipper's declaration of a higher value in the bill of lading.
In the case, there was no stipulation in the Bill of Lading limiting
the carrier's 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, a bill of lading was separate from the Other Letter of
Credit arrangements. 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.
Therefore, 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. By package, in accordance with COGSA, it means the
number of units disclosed in the shipping documents.
WHEREFORE, the Petition is partly granted and the assailed Decision MODIFIED.
Petitioners' liability is reduced to US$2,000 plus interest at the legal rate of six
percent from the time of the filing of the Complaint on July 25, 1991 until the
finality of this Decision, and 12 percent thereafter until fully paid. No
pronouncement as to costs.
[G.R. No. 146018. June 25, 2003]
EDGAR COKALIONG SHIPPING LINES, INC., petitioner, vs. UCPB GENERAL
INSURANCE COMPANY, INC., respondent.
PANGANIBAN, J.:
FACTS:
Sometime on December 11, 1991, Nestor Angelia delivered to the Edgar Cokaliong
Shipping Lines [petitioner], cargo consisting of one (1) carton of Christmas dcor
and two (2) sacks of plastic toys, to be transported on board the M/V Tandag from
Cebu City to Tandag, Surigao del Sur. [Petitioner] issued Bill of Lading No. 58

covering the cargo. Nestor Angelia was both the shipper and consignee of the cargo
valued, on the face thereof, in the amount of P6,500.00.
Zosimo Mercado likewise delivered cargo to [petitioner], consisting of two (2)
cartons of plastic toys and Christmas decor, one (1) roll of floor mat and one (1)
bundle of various or assorted goods for transportation from Cebu City to Tandag,
Surigao del Sur, on board the said vessel, and said voyage. [Petitioner] issued Bill of
Lading No. 59 covering the cargo which, on the face thereof, was valued in the
amount of P14,000.00. Under the Bill of Lading, Zosimo Mercado was both the
shipper and consignee of the cargo.
On December 12, 1991, Feliciana Legaspi insured the cargo, covered by Bill of
Lading No. 59 (P100,000) and BOL58 (P50,000) with the UCPB General Insurance
[reposndent]
After the vessel had passed by the Mandaue-Mactan Bridge, fire ensued in the
engine room, and, despite earnest efforts of the officers and crew of the vessel,
the fire engulfed and destroyed the entire vessel resulting in the loss of the vessel
and the cargoes therein.
Shortly thereafter, Feliciana Legaspi filed a claim, with [respondent], for the value of
the cargo insured valued in the amount of P110,056.00 (BOL 29) and P60,338.00
(BOL 58). [Respondent] approved the claim of Feliciana Legaspi and drew and
issued UCPB in the net amount of P99,000.00 (BOL 59) and P49,500.00 (BOL 58).
On July 14, 1992, [respondent], as subrogee of Feliciana Legaspi, filed a complaint
anchored on torts against [petitioner] for the collection of the total principal
amount of P148,500.00, which it paid to Feliciana Legaspi for the loss of the cargo.
[Respondent] alleged that the loss of the cargo was due to the negligence of the
[petitioner. In its Answer to the complaint, [petitioner] alleged that: (a) [petitioner]
was cleared by the Board of Marine Inquiry of any negligence in the burning of the
vessel; (b) the complaint stated no cause of action against [petitioner]; and (c) the
shippers/consignee had already been paid the value of the goods as stated in the
Bill of Lading and, hence, [petitioner] cannot be held liable for the loss of the cargo
beyond the value thereof declared in the Bill of Lading.
Respondent contends that petitioners 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. CA ruled in favor of respondent bank.
ISSUES: (1) Is petitioner liable for the loss of the goods? (2) If it is liable, what is the
extent of its liability?

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

1.

YES.

Broadly speaking, force majeure generally applies to a natural accident, such as that
caused by a lightning, an earthquake, a tempest or a public enemy. Hence, fire is
not considered a natural disaster or calamity. As explained in Eastern Shipping
Lines vs IAC case:
x x x. This must be so as it arises almost invariably from some act of
man or by human means. It does not fall within the category of an act of
God unless caused by lighting or by other natural disaster or calamity. It
may even be caused by the actual fault or privity of the carrier.
The uncontroverted findings of the Philippine Coast Guard show that the M/V
Tandag sank due to a fire, which resulted from a crack in the auxiliary engine fuel oil
service tank. The crack was located on the side of the fuel oil tank, which had a
mere two-inch gap from the engine room walling, thus precluding constant
inspection and care by the crew. Having originated from an unchecked crack in the
fuel oil service tank, the fire could not have been caused by force majeure.
The law provides that a common carrier is presumed to have been negligent if it
fails to prove that it exercised extraordinary vigilance over the goods it
transported (Art. 1735). Ensuring the seaworthiness of the vessel is the first step in
exercising the required vigilance. Petitioner did not present sufficient evidence
showing what measures or acts it had undertaken to ensure the seaworthiness of
the vessel. It failed to show when the last inspection and care of the auxiliary
engine fuel oil service tank was made, what the normal practice was for its
maintenance, or some other evidence to establish that it had exercised
extraordinary diligence. It merely stated that constant inspection and care were
not possible, and that the last time the vessel was dry-docked was in November
1990. Necessarily, in accordance with Article 1735of the Civil Code, we hold
petitioner responsible for the loss of the goods covered by Bills of Lading Nos. 58
and 59.
2. The liability of a common carrier for the loss of goods may, by stipulation in the
bill of lading, be limited to the value declared by the shipper.

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.

In the present case, the stipulation limiting petitioners 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.
Indeed, Zosimo Mercado and Nestor Angelia misled petitioner by undervaluing the
goods in their respective Bills of Lading. Hence, petitioner was exposed to a risk
that was deliberately hidden from it, and from which it could not protect itself.
P.S.
Legaspi Marketing filed with petitioner a claim for the lost goods under Bill of
Lading No. 59, for which the latter subsequently paid P14,000. But nothing in the
records convincingly shows that the former was the owner of the goods.
Respondent was, however, able to prove that it was Feliciana Legaspi who owned
those goods, and who was thus entitled to payment for their loss. Hence, the claim
for the goods under Bill of Lading No. 59 cannot be deemed to have been
extinguished, because payment was made to a person who was not entitled
thereto. With regard to the claim for the goods that were covered by Bill of Lading
No. 58 and valued at P6,500, the parties have not convinced us to disturb the
findings of the CA that compensation could not validly take place. Thus, we uphold
the appellate courts ruling on this point.
SARKIES TOURS PHILIPPINES, INC. vs CA

Art. 1749. A stipulation that the common carriers 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.

Facts: Fatima Fortades boarded the petitioner's bus in Manila on her way to Legaspi

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.

as her mother Marisols U.S. immigration (green) card, among other important

City. With her was 3 pieces of luggage containing all of her optometry review books,
materials and equipment, trial lenses, trial contact lenses, passport and visa, as well
documents and personal belongings. Her belongings were kept in the baggage
compartment of the bus, but during a stopover at Daet it was discovered that only

44
TRANSPO CASE DIGESTS, 2ND BATCH, 2E

one bag remained in the open compartment. All others, including Fatima's things,
were missing and could have dropped along the way. Some of the passengers
suggested retracing the route to try to recover the lost items but the driver ignored
them and proceeded to Legaspi City. Fatima immediately reported the loss to her
mother who then went to petitioner's office in Legaspi City, and later in Manila. The
petitioner werely however offered her 1000 pesos for each piece of luggage lost
which she turned down. One of Fatima's bags was recovered thru their own efforts.
Fatima and others, thru counsel, formally demanded satisfaction of their claim from
petitioner. After months of fruitless waiting, they decided to file a case to recover
the value of the lost items. They claimed that the loss was due to petitioners failure
to observe extraordinary diligence in the care of Fatimas luggage and that
petitioner dealt with them in bad faith from the start. Petitioner, on the other hand,
disowned any liability for the loss on the ground that Fatima allegedly did not
declare any excess baggage upon boarding its bus. The trial court and the CA rules
against the petitioner, hence this appeal.
Issue: WON is liable for the loss of the baggage
Held: YES!
Under the Civil Code, 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 x x x transported by them, and this liability lasts from the
time the goods are unconditionally placed in the possession of, and received by the
carrier for transportation until the same are delivered, actually or constructively, by
the carrier for transportation until the same are delivered, actually or
constructively, by the carrier to x x x the person who has a right to receive them,

VALENZUELA HARDWOOD AND INDUSTRIAL SUPPLY INC., petitioner,


vs.
COURT OF APPEALS AND SEVEN BROTHERS SHIPPING CORPORATION, respondents.
Facts:
Plaintiff entered into an agreement with Seven Brothers (Shipping Corporation) to
load on board its vessel (M/V Seven Ambassador) lauan round logs at the port of
Maconacon, Isabela for shipment to Manila. The logs are insured against loss
and/or damage with defendant South Sea Surety and Insurance Co., Inc.
The plaintiff gave the check in payment of the premium on the insurance policy.
The next day, the vessel sank resulting to the loss of the logs. A check was then
tendered to cover payment of the premium and documentary stamps due on the
policy was tendered due but was not accepted, instead, the insurer cancelled the
insurance policy.
The plaintiff demanded from the insurance company but it denied liability. Plaintiff
likewise filed a formal claim against the Shipping Corporation which also denied
liability. After due hearing and trial, the court ruled in favor of the plaintiff. Both the
shipping corporation and the surety company appealed.
The Shipping Corporation argued that the lower court erred in holding that the
proximate cause of the sinking of the vessel was not due to fortuitous event but to
the negligence of the captain and that the non-liability clause of the Shipping
Corporation was void for being contrary to public policy. The surety company
argued that the lower court erred in not applying Sec. 77 of the insurance Code and
the disregard of the fact of cancellation of the policy.
The CA sustained the liability of South Sea Surety and Insurance Company and held
that Seven Brothers Shipping Corporation was not liable for the lost cargo.
On a petition for review, the plaintiff assails the CA Decision which exempted Seven
Brothers from any liability for the lost cargo.

unless the loss is due to any of the excepted causes under Article 1734 thereof. The

Issue:

cause of the loss in the case at bar was petitioners negligence in not ensuring that

Whether or not stipulation in the charter party exempting the shipping company
from liability arising from the negligence of its captain is valid

the doors of the baggage compartment of its bus were securely fastened. As a
result of this lack of care, almost all of the luggage was lost, to the prejudice of the

Ruling:

paying passengers.

The stipulation is valid. The validity of this stipulation is the lis mota of this case (di
ko alam kung ano ung lis mota ). It should be noted at the outset that there is no
dispute between the parties that the proximate cause of the sinking of the vessel
was the "snapping of the iron chains and the subsequent rolling of the logs to the
portside due to the negligence of the captain in stowing and securing the logs on

G.R. No. 102316 June 30, 1997

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

board the vessel and not due to fortuitous event." Likewise undisputed is the status
of Private Respondent Seven Brothers as a private carrier when it contracted to
transport the cargo of Petitioner Valenzuela. Even the latter admits this in its
petition. Thus, Article 1745 and other Civil Code provisions on common carriers
which were cited by petitioner may not be applied unless expressly stipulated by
the parties in their charter party.
In a contract of private carriage, the parties may validly stipulate that responsibility
for the cargo rests solely on the charterer, exempting the shipowner from liability
for loss of or damage to the cargo caused even by the negligence of the ship
captain. Such stipulation is valid because it is freely entered into by the parties and
the same is not contrary to law, morals, good customs, public order, or public
policy. In a contract of private carriage, the parties may freely stipulate their duties
and obligations which perforce would be binding on them. Unlike in a contract
involving a common carrier, private carriage does not involve the general public.
Hence, the stringent provisions of the Civil Code on common carriers protecting the
general public cannot justifiably be applied to a ship transporting commercial goods
as a private carrier. Consequently, the public policy embodied therein is not
contravened by stipulations in a charter party that lessen or remove the protection
given by law in contracts involving common carriers.
[G.R. No. 113003. October 17, 1997]
ALBERTA YOBIDO and CRESENCIO YOBIDO, petitioners, vs. COURT OF APPEALS,
LENY TUMBOY, ARDEE TUMBOY and JASMIN TUMBOY,respondents.
FACTS:
Spouses Tito and Leny Tumboy and their minor children boarded at
Mangagoy, Surigao del Sur a Yobido Liner bus bound for Davao City. Along Picop
Road in, the left front tire of the bus exploded. The bus fell into a ravine and struck
a tree. The incident resulted in the death of Tito Tumboy and physical injuries to
other passengers.
The winding road was not cemented and was wet due to the rain; it was
rough with crushed rocks. The bus which was full of passengers had cargoes on top.
Leny testified that it was running fast and she cautioned the driver to slow down
but he merely stared at her through the mirror. However, Salce, the bus conductor,
testified that the bus was running speed for only 50-60 kmh. The left front tire that
exploded was a brand new Goodyear tire that he mounted on the bus only 5 days
before the incident. She stated that all driver applicants in Yobido Liner underwent

actual driving tests before they were employed. The defendant is invoking that
the tire blowout was a caso fortuito.
ISSUE/S:
1. WON the tire blowout was purely caso fotuito?
2. WON the defendant bus liner is liable for damages resulting from the death of
Tito?
HELD:
1.

NO.

The explosion of the tire is not in itself a fortuitous event. The cause of the
blow-out, if due to a factory defect, improper mounting, excessive tire pressure, is
not an unavoidable event. On the other hand, there may have been adverse
conditions on the road that were unforeseeable and/or inevitable, which could
make the blow-out a caso fortuito. The fact that the cause of the blow-out was not
known does not relieve the carrier of liability.
There are human factors involved in the situation. The fact that the tire was
new did not imply that it was entirely free from manufacturing defects or that it
was properly mounted on the vehicle. Neither may the fact that the tire bought and
used in the vehicle is of a brand name noted for quality, resulting in the conclusion
that it could not explode within five days use. Be that as it may, it is settled that an
accident caused either by defects in the automobile or through the negligence of its
driver is not a caso fortuito that would exempt the carrier from liability for
damages.
2.

YES.

A common carrier may not be absolved from liability in case of force majeure
or fortuitous event alone. The common carrier must still prove that it was not
negligent in causing the death or injury resulting from an accident. Having failed to
discharge its duty to overthrow the presumption of negligence with clear and
convincing evidence, petitioners are hereby held liable for damages.
Moral damages are generally not recoverable in culpa contractual except when
bad faith had been proven. However, the same damages may be recovered
when breach of contract of carriage results in the death of a passenger. Because
petitioners failed to exercise the extraordinary diligence required of a common
carrier, which resulted in the death of Tito Tumboy, it is deemed to have acted
recklessly (Article 1756).

46
TRANSPO CASE DIGESTS, 2ND BATCH, 2E

NOTE:
Art. 1756. In case of death or injuries to passengers, common carriers are
presumed to have been at fault or to have acted negligently, unless they prove that
they observed extraordinary diligence as prescribed in articles 1733 and 1755.
Article 1755 provides that (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.
Accordingly, in culpa contractual, once a passenger dies or is injured, the carrier is
presumed to have been at fault or to have acted negligently. This disputable
presumption may only be overcome by evidence that the carrier had observed
extraordinary diligence as prescribed by Articles 1733,1755 and 1756 of the Civil
Code or that the death or injury of the passenger was due to a fortuitous
event. Consequently, the court need not make an express finding of fault or
negligence on the part of the carrier to hold it responsible for damages sought by
the passenger
3. Defenses and Conditions
CENTRAL SHIPPING COMPANY, INC., petitioner, vs. INSURANCE COMPANY OF
NORTH AMERICA, respondent.

Facts:
At Puerto Princesa, Palawan, CENTRAL SHIPPING COMPANY, INC received on board
its vessel, the M/V Central Bohol, 376 pieces *of+ Philippine Apitong Round Logs
and undertook to transport said shipment to Manila for delivery to Alaska Lumber
Co., Inc. Upon completion of loading of the cargo, the vessel left Palawan and
commenced the voyage to Manila. The vessel encountered two weather
disturbances, one at around 10 oclock to 11 oclock in the evening and the other at
around 12 oclock midnight. Both disturbances were coupled with waves and heavy
rains. During the 12 oclock midnight, the ship captain ordered his men to abandon
ship because seawater has already seeped in and the logs were already out of
place. Nevertheless, the vessel completely sank. Due to the sinking of the vessel,
the cargo was totally lost.
*Respondent+ alleged that the total loss of the shipment was caused by the fault
and negligence of the [petitioner] and its captain and as direct consequence thereof
the consignee suffered damage.
Insurer paid the lost acquired by the consignee Alaska Lumber Co. Inc.

*Petitioner+, while admitting the sinking of the vessel, interposed the defense that
the vessel was fully manned, fully equipped and in all respects seaworthy; that all
the logs were properly loaded and secured; that the vessels master exercised due
diligence to prevent or minimize the loss before, during and after the occurrence of
the storm. It raised as its main defense that the proximate and only cause of the
sinking of its vessel and the loss of its cargo was a natural disaster, a tropical storm
which neither *petitioner+ nor the captain of its vessel could have foreseen.
The RTC was unconvinced that the sinking of M/V Central Bohol had been caused by
the weather or any other caso fortuito. It noted that monsoons, which were
common occurrences during the months of July to December, could have been
foreseen and provided for by an ocean-going vessel.
C.A. affirmed the decision of the RTC holding that the storm was not unforeseeable.
The CA also found no merit in petitioners assertion of the vessels seaworthiness.
Issue: 1. Whether the carrier is liable for the loss of the cargo; and 2 whether the
doctrine of limited liability is applicable.
Held:
1. Yes. Carrier is liable for the loss of the cargo. The vessel was not seaworthy. The
fact that the vessel proceeded through the first southwestern monsoon without any
mishap, and that it began to list only during the second monsoon immediately after
the logs had shifted and seawater had entered the vessel shows that the vessel was
not seaworthy. In fact the logs were stored in the lower hold not secured by cable
wire, because they fitted exactly from floor to ceiling.
The Storm here cannot be considered a fortuitous event since the monsoons winds,
according to PAGASA, was an ordinary vicissitudes of a sea voyage which can be
avoided with due care. In fact, there was another motor launch that had been
buffeted by the same weather condition within the same area, yet it was able to
arrive safely at El Nido
2. No. Doctrine of Limited Liability is not applicable. The doctrine of limited liability
under Article 587 of the Code of Commerce[36] is not applicable to the present
case. This rule does not apply to situations in which the loss or the injury is due to
the concurrent negligence of the shipowner and the captain.[37] It has already been
established that the sinking of M/V Central Bohol had been caused by the fault or
negligence of the ship captain and the crew, as shown by the improper stowage of
the cargo of logs. Closer supervision on the part of the shipowner could have
prevented this fatal miscalculation.*38+ As such, the shipowner was equally
negligent. It cannot escape liability by virtue of the limited liability rule.
[G.R. No. 122494. October 8, 1998]

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

EVERETT STEAMSHIP CORPORATION vs. COURT OF APPEALS and HERNANDEZ


TRADING CO. INC.
MARTINEZ, J.:
Petitioner through this petition for review, seeks the reversal of the decision of the
Court of Appeals, dated June 14, 1995 which affirmed the decision of the Regional
Trial Court of Kalookan City, Branch 126 finding petitioner liable to private
respondent
Facts:Private respondent imported three crates of bus spare parts marked as
MARCO C/No. 12, MARCO C/No. 13 and MARCO C/No. 14, from its supplier,
Maruman Trading Company, Ltd. (Maruman Trading), a foreign corporation based
in Inazawa, Aichi, Japan. The crates were shipped from Nagoya, Japan to Manila on
board ADELFAEVERETTE, a vessel owned by petitioners principal, Everett Orient
Lines. The said crates were covered by Bill of Lading. Upon arrival at the port of
Manila, it was discovered that the crate marked MARCO C/No. 14 was missing. This
was confirmed and admitted by petitioner in its letter of January 13, 1992
addressed to private respondent, which thereafter made a formal claim upon
petitioner for the value of the lost cargo amounting to Y1,552,500.00 the amount
shown in an Invoice dated November 14, 1991. However, petitioner offered to pay
only Y100,000.00, the maximum amount stipulated under Clause 18 of the covering
bill of lading which limits the liability of petitioner. Private respondent rejected the
offer and thereafter instituted a suit for collection, against petitioner before the
Regional Trial Court of Caloocan City, Branch 126.
On July 16, 1993, the trial court rendered judgment in favor of private respondent,
ordering petitioner to pay: (a) Y1,552,500.00; (b) Y20,000.00 or its peso equivalent
representing the actual value of the lost cargo and the material and packaging cost;
(c) 10% of the total amount as an award for and as contingent attorneys fees; and
(d) to pay the cost of the suit. On appeal, the Court of Appeals deleted the award of
attorneys fees but affirmed the trial courts findings with the additional
observation that private respondent can not be bound by the terms and conditions
of the bill of lading because it was not privy to the contract of carriage.
Issue 1: WON the limited liability clause in the bill of lading is valid?
Held 1: Yes. A stipulation in the bill of lading limiting the common carriers liability
for loss or destruction of a cargo to a certain sum, unless the shipper or owner

declares a greater value, is sanctioned by law, particularly Articles 1749 and 1750 of
the Civil Code which provide:
ART. 1749. A stipulation that the common carriers 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.
The bill of lading subject of the present controversy specifically provides,
among others:
18. All claims for which the carrier may be liable shall be adjusted and
settled on the basis of the shippers net invoice cost plus freight and
insurance premiums, if paid, and in no event shall the carrier be liable for
any loss of possible profits or any consequential loss.
The carrier shall not be liable for any loss of or any damage to or in any
connection with, goods in an amount exceeding Y100,000.00 or its
equivalent in any other currency per package or customary freight unit
(whichever is least) unless the value of the goods higher than this amount
is declared in writing by the shipper before receipt of the goods by the
carrier and inserted in the Bill of Lading and extra freight is paid as
required.
The above stipulations are, to our mind, reasonable and just. In the bill of lading,
the carrier made it clear that its liability would only be up to
Y100,000.00. However, the shipper, Maruman Trading, had the option to declare a
higher valuation if the value of its cargo was higher than the limited liability of the
carrier. Considering that the shipper did not declare a higher valuation, it had
itself to blame for not complying with the stipulations. The trial courts
ratiocination that private respondent could not have fairly and freely agreed to
the limited liability clause in the bill of lading because the said conditions were
printed in small letters does not make the bill of lading invalid.
Greater vigilance, however, is required of the courts when dealing with contracts of
adhesion in that the said contracts must be carefully scrutinized in order to shield
the unwary (or weaker party) from deceptive schemes contained in ready-made
covenants, such as the bill of lading in question. The stringent requirement which
the courts are enjoined to observe is in recognition of Article 24 of the Civil Code

48
TRANSPO CASE DIGESTS, 2ND BATCH, 2E

which mandates that (i)n all contractual, property or other relations, when one of
the parties is at a disadvantage on account of his moral dependence, ignorance,
indigence, mental weakness, tender age or other handicap, the courts must be
vigilant for his protection. The shipper, Maruman Trading, we assume, has been
extensively engaged in the trading business. It can not be said to be ignorant of the
business transactions it entered into involving the shipment of its goods to its
customers. The shipper could not have known, or should know the stipulations in
the bill of lading and there it should have declared a higher valuation of the goods
shipped. Moreover, Maruman Trading has not been heard to complain that it has
been deceived or rushed into agreeing to ship the cargo in petitioners vessel. In
fact, it was not even impleaded in this case.

vs.
SUN HOLIDAYS, INC., Respondent.
CARPIO MORALES, J.:
FACTS:
The newly-weds Ruelito and his wife stayed in the Coco Beach Island Resort.
Scheduled for trekking to the other side of Coco Beach Mountain, they boarded
M/B Coco beach III. Upon sailing, there were strong winds and heavy rain poured.
The boat capsized and among the victims were Ruelito and his wife.
At the time of Ruelitos death, he was 28 years old and employed as a contractual

Issue 2: Whether or not private respondent, as consignee, who is not a signatory to


the bill of lading is bound by the stipulations thereof?

worker for Mitsui Engineering & Shipbuilding Arabia, Ltd. in Saudi Arabia, with a
basic monthly salary of $900. Sps. Cruz demanded indemnification from Sun
Holidays for the death of their son in the amount of at least P4,000,000. Sun

Held 2: Yes. When private respondent formally claimed reimbursement for the
missing goods from petitioner and subsequently filed a case against the latter based
on the very same bill of lading, it accepted the provisions of the contract and
thereby made itself a party thereto, or at least has come to court to enforce
it. Thus, private respondent cannot now reject or disregard the carriers limited
liability stipulation in the bill of lading. In other words, private respondent is bound
by the whole stipulations in the bill of lading and must respect the same.

Holidays denied any responsibility for the incident which it considered to be a


fortuitous event. It nevertheless offered, as an act of commiseration, the amount of
P10,000 to petitioners upon their signing of a waiver.
As Sps. Cruz declined Sun Holiday's offer, they filed the Complaint alleging that Sun
Holidays, as a common carrier, was guilty of negligence in allowing M/B Coco Beach
III to sail notwithstanding storm warning bulletins issued by the Philippine

The bill of lading in question confirms petitioners contention. To defeat the


carriers limited liability, the aforecited Clause 18 of the bill of lading requires that
the shipper should have declared in writing a higher valuation of its goods before
receipt thereof by the carrier and insert the said declaration in the bill of lading,
with the extra freight paid. These requirements in the bill of lading were never
complied with by the shipper, hence, the liability of the carrier under the limited
liability clause stands. The commercial Invoice does not in itself sufficiently and
convincingly show that petitioner has knowledge of the value of the cargo as
contended by private respondent. No other evidence was proffered by private
respondent to support is contention. Thus, we are convinced that petitioner should
be liable for the full value of the lost cargo. In fine, the liability of petitioner for the
loss of the cargo is limited to Y100,000.00, pursuant to Clause 18 of the bill of
lading.

Atmospheric, Geophysical and Astronomical Services Administration (PAGASA) as


early as 5:00 a.m. of September 11, 2000.
Sun Holidays denied being a common carrier, alleging that its boats are not
available to the general public as they only ferry Resort guests and crew members.
Nonetheless, it claimed that it exercised the utmost diligence in ensuring the safety
of its passengers; contrary to petitioners allegation, there was no storm on
September 11, 2000 as the Coast Guard in fact cleared the voyage; and M/B Coco
Beach III was not filled to capacity and had sufficient life jackets for its passengers.
By way of Counterclaim, Sun Holidays alleged that it is entitled to an award for
attorneys fees and litigation expenses amounting to not less than P300,000.
Carlos Bonquin, captain of M/B Coco Beach III, averred that the Resort customarily

G.R. No. 186312 June 29, 2010

requires four conditions to be met before a boat is allowed to sail, to wit: (1) the

SPOUSES DANTE CRUZ and LEONORA CRUZ, Petitioners,

sea is calm, (2) there is clearance from the Coast Guard, (3) there is clearance from

49
TRANSPO CASE DIGESTS, 2ND BATCH, 2E

the captain and (4) there is clearance from the Resorts assistant manager. He

Mindoro. By the testimony of Dr. Frisco Nilo, supervising weather specialist of

added that M/B Coco Beach III met all four conditions on September 11, 2000,9 but

PAGASA, squalls are to be expected under such weather condition.

a subasco or squall, characterized by strong winds and big waves, suddenly

A very cautious person exercising the utmost diligence would thus not brave such

occurred, causing the boat to capsize.

stormy weather and put other peoples lives at risk. The extraordinary diligence

RTC dismissed Sps. Cruz's Complaint and Sun Holiday's Counterclaim. Sps. Cruz filed

required of common carriers demands that they take care of the goods or lives

a Motion for Reconsideration, but it was denied. On appeal, CA denied their appeal

entrusted to their hands as if they were their own. This respondent failed to do.

holding that Sun Holidays is a private carrier which is only required to observe

The elements of a "fortuitous event" are: (a) the cause of the unforeseen and

ordinary diligence; that respondent in fact observed extraordinary diligence in

unexpected occurrence, or the failure of the debtors to comply with their

transporting its guests on board M/B Coco Beach III; and that the proximate cause

obligations, must have been independent of human will; (b) the event that

of the incident was a squall, a fortuitous event. Sps. Cruz filed again its MR, but it

constituted the caso fortuito must have been impossible to foresee or, if

was again denied. Hence, this petition for review.

foreseeable, impossible to avoid; (c) the occurrence must have been such as to

ISSUES:

render it impossible for the debtors to fulfill their obligation in a normal manner;

Whether or not Sun Holidays is at fault or negligent as a common carrier?

and (d) the obligor must have been free from any participation in the aggravation of

Whether or not Spouses Cruz are entitled to indemnity for the death of their son?

the resulting injury to the creditor.24

HELD:

To fully free a common carrier from any liability, the fortuitous event must have

YES, Sun Holidays is at fault or negligent as a common carrier.

been the proximate and only cause of the loss. And it should have exercised due

Under the Civil Code, common carriers, from the nature of their business and for

diligence to prevent or minimize the loss before, during and after the occurrence of

reasons of public policy, are bound to observe extraordinary diligence for the safety

the fortuitous event.

of the passengers transported by them, according to all the circumstances of each

2. YES, the Spouses Cruz are entitled to indemnity for the death of their son.

case. They are bound to carry the passengers safely as far as human care and

-Article 1764 vis--vis Article 2206 of the Civil Code holds the common carrier in

foresight can provide, using the utmost diligence of very cautious persons, with due

breach of its contract of carriage that results in the death of a passenger liable to

regard for all the circumstances.

pay the following: (1) indemnity for death, (2) indemnity for loss of earning capacity

When a passenger dies or is injured in the discharge of a contract of carriage, it is

and (3) moral damages.

presumed that the common carrier is at fault or negligent. In fact, there is even no

-The indemnity for the death of their son is fixed at P50, 000. 29.

need for the court to make an express finding of fault or negligence on the part of

-As for damages representing unearned income, the formula for its computation is:

the common carrier. This statutory presumption may only be overcome by evidence
that the carrier exercised extraordinary diligence.

Net Earning Capacity = life expectancy x (gross annual income - reasonable and
necessary living expenses).

The evidence shows that PAGASA issued 24-hour public weather forecasts and
tropical cyclone warnings for shipping on September 10 and 11, 2000 advising of
tropical depressions in Northern Luzon which would also affect the province of

Life expectancy is determined in accordance with the formula:


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

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

The first factor, i.e., life expectancy, is computed by applying the formula (2/3 x [80

Pursuant to Article 2208 of the Civil Code, attorney's fees may also be awarded

age at death]) adopted in the American Expectancy Table of Mortality or the

where exemplary damages are awarded. The Court finds that 10% of the total

Actuarial of Combined Experience Table of Mortality.

amount adjudged against Sun Holidays is reasonable for the purpose.

The second factor is computed by multiplying the life expectancy by the net

Finally, Eastern Shipping Lines, Inc. v. Court of Appeals teaches that when an

earnings of the deceased, i.e., the total earnings less expenses necessary in the

obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or

creation of such earnings or income and less living and other incidental expenses.

quasi-delicts is breached, the contravenor can be held liable for payment of interest

The loss is not equivalent to the entire earnings of the deceased, but only such

in the concept of actual and compensatory damages, subject to the following rules,

portion as he would have used to support his dependents or heirs. Hence, to be

to wit

deducted from his gross earnings are the necessary expenses supposed to be used

1. When the obligation is breached, and it consists in the payment of a sum of

by the deceased for his own needs.

money, i.e., a loan or forbearance of money, the interest due should be that which

In computing the third factor necessary living expense, Smith Bell Dodwell

may have been stipulated in writing. Furthermore, the interest due shall itself earn

Shipping Agency Corp. v. Borja teaches that when, as in this case, there is no

legal interest from the time it is judicially demanded. In the absence of stipulation,

showing that the living expenses constituted the smaller percentage of the gross

the rate of interest shall be 12% per annum to be computed from default, i.e., from

income, the living expenses are fixed at half of the gross income.

judicial or extrajudicial demand under and subject to the provisions of Article 1169

Applying the above guidelines, the Court determines Ruelito's life expectancy as

of the Civil Code.

follows:

2. When an obligation, not constituting a loan or forbearance of money, is

Life expectancy = 2/3 x [80 - age of deceased at the time of death]

breached, an interest on the amount of damages awarded may be imposed at the

2/3 x [80 - 28]

discretion of the court at the rate of 6% per annum. No interest, however, shall be

2/3 x [52]

adjudged on unliquidated claims or damages except when or until the demand can

Life expectancy = 35

be established with reasonable certainty. Accordingly, where the demand is

Documentary evidence shows that Ruelito was earning a basic monthly salary of

established with reasonable certainty, the interest shall begin to run from the time

$90035 which, when converted to Philippine peso applying the annual average

the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such

exchange rate of $1 = P44 in 2000,36 amounts to P39,600. Ruelitos net earning

certainty cannot be so reasonably established at the time the demand is made, the

capacity is thus computed as follows:

interest shall begin to run only from the date the judgment of the court is made (at

Net Earning Capacity = life expectancy x (gross annual income - reasonable and
necessary living expenses).
= 35 x (P475,200 - P237,600)
= 35 x (P237,600)
Net Earning Capacity = P8,316,000
Under the circumstances, it is reasonable to award Sps. Cruz the amount of

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,
P100,000 as moral damages and P100,000 as exemplary damages.

51
TRANSPO CASE DIGESTS, 2ND BATCH, 2E

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

Held: Yes. Under the provisions of Article 361, the defendant-carrier in order to free
itself from liability, was only obliged to prove that the damages suffered by the
goods were "by virtue of the nature or defect of the articles."
Article 361 of the Code of Commerce provides: .

this decision at the rate of 12% per annum until satisfaction, in accordance with

ART. 361. The merchandise shall be transported at the risk and venture
of the shipper, if the contrary has not been expressly stipulated.

paragraph number 3 of the immediately cited guideline in Easter Shipping Lines, Inc.

As a consequence, all the losses and deteriorations which the goods may
suffer during the transportation by reason of fortuitous event, force
majeure, or the inherent nature and defect of the goods, shall be for the
account and risk of the shipper.

SOUTHERN LINES, INC., v COURT OF APPEALS and CITY OF ILOILO


G.R. No. L-16629

January 31, 1962

DE LEON, J.:
Defense and Conditions
Facts: City of Iloilo requisitioned for rice from the National Rice and Corn
Corporation (hereafter referred to as NARIC) in Manila. NARIC, pursuant to the
order, shipped rice consigned to the City of Iloilo on board the SS "General Wright"
belonging to the Southern Lines, Inc.
On September 3, 1948, the City of Iloilo received the shipment and paid the amount
of P63,115.50. However, it was noted that the foot of the bill of lading that the City
of Iloilo 'Received the above mentioned merchandise apparently in same condition
as when shipped, save as noted below: actually received 1685 sacks with a gross
weight of 116,131 kilos upon actual weighing. Total shortage ascertained 13,319
kilos." The shortage was equivalent to 41 sacks of rice with a net weight of 13,319
kilos, the proportionate value of which was P6,486.35.
On February 14, 1951 the City of Iloilo filed a complaint in the Court of First
Instance of Iloilo against NARIC and the Southern Lines, Inc. for the recovery of the
amount of P6,486.35 representing the value of the shortage of the shipment of rice.
After trial, the lower court absolved NARIC from the complaint, but sentenced the
Southern Lines, Inc. to pay the amount of P4,931.41 which is the difference
between the sum of P6,486.35 and P1,554.94 representing the latter's counterclaim
for handling and freight.
Issue: Whether or not the petitioner is liable for the loss or shortage of the rice
shipped.

Petitioner claims exemption from liability by contending that the shortage in the
shipment of rice was due to such factors as the shrinkage, leakage or spillage of the
rice on account of the bad condition of the sacks at the time it received the same
and the negligence of the agents of respondent City of Iloilo in receiving the
shipment. The contention is untenable, for, if the fact of improper packing is known
to the carrier or his servants, or apparent upon ordinary observation, but it accepts
the goods notwithstanding such condition, it is not relieved of liability for loss or
injury resulting thereform. (9 Am Jur. 869.) Furthermore, according to the Court of
Appeals, "appellant (petitioner) itself frankly admitted that the strings that tied the
bags of rice were broken; some bags were with holes and plenty of rice were spilled
inside the hull of the boat, and that the personnel of the boat collected no less than
26 sacks of rice which they had distributed among themselves." This finding, which
is binding upon this Court, shows that the shortage resulted from the negligence of
petitioner.
5. Duration of Responsibility
MITSUI O.S.K. LINES LTD., represented by MAGSAYSAY AGENCIES, INC., petitioner,
vs. COURT OF APPEALS and LAVINE LOUNGEWEAR MFG. CORP., respondents.
FACTS:
Petitioner Mitsui O.S.K. Lines Ltd. is a foreign corporation represented in
the Philippines by its agent, Magsaysay Agencies. It entered into a contract of
carriage through Meister Transport, Inc., an international freight forwarder, with
private respondent Lavine Loungewear Manufacturing Corporation to transport
goods of the latter from Manila to Le Havre, France. Petitioner undertook to deliver
the goods to France 28 days from initial loading. On July 24, 1991, petitioner's

52
TRANSPO CASE DIGESTS, 2ND BATCH, 2E

vessel loaded private respondent's container van for carriage at the said port of
origin.

value of the goods is not due to their deterioration or disappearance because they
had been damaged in transit.

However, in Kaoshiung, Taiwan the goods were not transshipped


immediately, with the result that the shipment arrived in Le Havre only on
November 14, 1991. The consignee allegedly paid only half the value of the said
goods on the ground that they did not arrive in France until the "off season" in that
country. The remaining half was allegedly charged to the account of private
respondent which in turn demanded payment from petitioner through its agent. As
petitioner denied private respondent's claim, the latter filed a case in the RTC.
Petitioner filed a motion to dismiss alleging that the claim against it had prescribed
under the Carriage of Goods by Sea Act. The RTC denied petitioner's motion as well
as its subsequent motion for reconsideration. On petition for certiorari, the CA
sustained the RTCs orders.

SULPICIO LINES, INC. vs. FIRST LEPANTO-TAISHO INSURANCE CORPORATION

ISSUE: Whether private respondent's action is for "loss or damage" to goods


shipped, within the meaning of 3(6) of the Carriage of Goods by Sea Act (COGSA).
HELD:
No. The suit is not for "loss or damage" to goods contemplated in 3(6),
the question of prescription of action is governed not by the COGSA but by Art.
1144 of the Civil Code which provides for a prescriptive period of ten years. As
defined in the Civil Code and as applied to Section 3(6), paragraph 4 of the Carriage
of Goods by Sea Act, "loss" contemplates merely a situation where no delivery at all
was made by the shipper of the goods because the same had perished, gone out of
commerce, or disappeared in such a way that their existence is unknown or they
cannot be recovered. There would be some merit in appellant's insistence that the
damages suffered by him as a result of the delay in the shipment of his cargo are
not covered by the prescriptive provision of the Carriage of Goods by Sea Act above
referred to, if such damages were due, not to the deterioration and decay of the
goods while in transit, but to other causes independent of the condition of the
cargo upon arrival, like a drop in their market value. Said one-year period of
limitation is designed to meet the exigencies of maritime hazards. In a case where
the goods shipped were neither lost nor damaged in transit but were, on the
contrary, delivered in port to someone who claimed to be entitled thereto, the
situation is different, and the special need for the short period of limitation in cases
of loss or damage caused by maritime perils does not obtain. In the case at bar,
there is neither deterioration nor disappearance nor destruction of goods caused by
the carrier's breach of contract. Whatever reduction there may have been in the

G.R. No. 140349. June 29, 2005


CHICO-NAZARIO, J.
FACTS: Taiyo Yuden Philippines, Inc. (owner of the goods) and Delbros, Inc.
(shipper) entered into a contract, evidenced by Bill of Lading issued by the latter in
favor of the owner of the goods, for Delbros, Inc. to transport a shipment of goods
consisting of 3 wooden crates containing 136 cartons of inductors and LC
compound on board the V Singapore V20 from Cebu City to Singapore in favor of
the consignee, Taiyo Yuden Singapore Pte, Ltd. For the carriage of said shipment
from Cebu to Manila, Delbros, Inc. engaged the services of the vessel M/V
Philippine Princess, owned and operated by petitioner Sulpicio Lines, Inc. (carrier).
The vessel arrived at the North Harbor, Manila, on 24 February 1992.
While unloading, one crate containing 42 cartons dropped from the cargo hatch to
the pier apron. Upon examination, owner of the goods found that the contents of
the crate were no longer usable for their intended purpose, they were rejected as a
total loss and returned to Cebu City.
The owner of the goods filed a claim with Sulpicio for the recovery of the value of
the rejected cargo which was refused by the latter. Thereafter, the owner of the
goods sought payment from respondent First Lepanto-Taisho Insurance
Corporation (insurer) and the latter paid the same.
Respondent-insurer then filed claims for reimbursement from Delbros, Inc. and
Sulpicio Lines, Inc. which were subsequently denied. Thus, it filed a suit for damages
with the trial court against Delbros, Inc. and herein petitioner-carrier. RTC dismissed
the claim. CA reversed the dismissal of the complaint by RTC and ordered Delbros
and Sulpicio jointly and severally liable. Thus, this instant petition.
Delbros Inc. is no longer a party in this case because its appeal was dismissed for
being filed out of time. As a consequence, it paid in full the amount of the damages
awarded by CA to the respondent-insurer. Before this Court, Delbros, Inc. prays for
reimbursement, contribution, or indemnity from Sulpicio Lines.
ISSUE: Whether or not petitioner should be liable for the damages of goods.
HELD: Yes. It cannot be denied that the shipment sustained damage while in the
custody of petitioner-carrier. Petitioner-carrier contends that its liability, if any, is
only to the extent of the cargo damage or loss and should not include the lack of
fitness of the shipment for transport to Singapore due to the damaged packing.

53
TRANSPO CASE DIGESTS, 2ND BATCH, 2E

This is erroneous. It must be stressed that in the case at bar, the damage sustained
by the packaging of the cargo while in petitioner-carriers custody resulted in its
unfitness to be transported to its consignee in Singapore. Such failure to ship the
cargo to its final destination because of the ruined packaging, indeed, resulted in
damages on the part of the owner of the goods.
The falling of the crate during the unloading is evidence of petitioner-carriers
negligence in handling the cargo. As a common carrier, it is expected to observe
extraordinary diligence in the handling of goods placed in its possession for
transport. The standard of extraordinary diligence imposed upon common carriers
is considerably more demanding than the standard of ordinary diligence, i.e., the
diligence of a goodpaterfamilias established in respect of the ordinary relations
between members of society. A common carrier is bound to transport its cargo and
its passengers safely "as far as human care and foresight can provide, using the
utmost diligence of a very cautious person, with due regard to all circumstances.
The extraordinary diligence in the vigilance over the goods tendered for shipment
requires the common carrier to know and to follow the required precaution for
avoiding the damage to, or destruction of, the goods entrusted to it for safe
carriage and delivery. It requires common carriers to render service with the
greatest skill and foresight and to use all reasonable means to ascertain the nature
and characteristic of goods tendered for shipment, and to exercise due care in the
handling and stowage, including such methods as their nature requires.
Thus, when the shipment suffered damages as it was being unloaded, petitionercarrier is presumed to have been negligent in the handling of the damaged cargo.
Under Articles 1735 and 1752 of the NCC, common carriers are presumed to have
been at fault or to have acted negligently in case the goods transported by them are
lost, destroyed or had deteriorated. To overcome the presumption of liability for
loss, destruction or deterioration of goods under Article 1735, the common carrier
must prove that they observed extraordinary diligence as required in Article 1733 of
the Civil Code. This, petitioner failed to do.
Hence, we uphold the ruling of the appellate court that herein petitioner-carrier is
liable to pay the amount paid by respondent-insurer for the damages sustained by
the owner of the goods. HOWEVER, since Delbros Inc. already paid the full amount
it will be tantamount to unjust enrichment for respondent-insurer to again recover
damages from Sulpicio Lines.
With respect to Delbros, Inc.s prayer that in case the decision in the instant case be
adverse to petitioner-carrier, a pronouncement as to the matter of reimbursement,
indemnification or contribution in favor of Delbros, Inc. be included in the decision,
this Court will not pass upon said issue since Delbros, Inc. has no personality before

this Court, it not being a party to the instant case. Notwithstanding, this shall not
bar any action Delbros, Inc. may institute against Sulpicio Lines, Inc. with respect to
the damages the latter is liable to pay.
COASTWISE LIGHTERAGE CORPORATION, petitioner, vs. COURT OF APPEALS and
the PHILIPPINE GENERAL INSURANCE COMPANY, respondents.
G.R. No. 114167 July 12, 1995
FRANCISCO, R., J.
This is a petition for review on the CA Decision affirming the RTC Manila
Decision in holding that herein petitioner is liable to pay herein private respondent
the amount of P700,000.00, plus legal interest thereon, another sum of
P100,000.00 as attorney's fees and the cost of the suit.
FACTS

Pag-asa Sales, Inc. (Pag-asa)

- consignee

Coastwise Lighterage Corporation (Coastwise)

- carrier

Philippine General Insurance Company (PhilGen)

- insurer

Pag-asa contracted with Coastwise for the transportation of molasses from


the province of Negros to Manila using the latter's dumb barges. The barges were
towed in tandem by the tugboat MT Marica, which is likewise owned by Coastwise.
The patron of the vessel Coastwise 9 was Jesus R. Constantino who was
unlicensed.

Upon reaching Manila Bay, while approaching Pier 18, one of the barges,
"Coastwise 9", struck an unknown sunken object. The object turned out to be a
submerged derelict vessel. The forward buoyancy compartment was damaged, and
water gushed in through a hole "two inches wide and twenty-two inches long." As a
consequence, the molasses at the cargo tanks were contaminated and rendered
unfit for the use it was intended. This prompted the Pag-asa to reject the shipment
of molasses as a total loss. Thereafter, Pag-asa filed a formal claim with PhilGen of
its lost cargo and against Coastwise. The latter denied the claim which prompted
PhilGen to pay Php 700,000.00 as the value of the damaged cargo of molasses.

54
TRANSPO CASE DIGESTS, 2ND BATCH, 2E

PhilGen filed an action to recover the said amount against Coastwise


before RTC Manila.

with his own people and becomes the owner pro hac vice, subject
to liability to others for damages caused by negligence. To create
a demise, the owner of a vessel must completely and exclusively
relinquish possession, command and navigation thereof to the
charterer.

RTC Manila Decision

It awarded the amount prayed for by PhilGen.

CA Decision

The award was affirmed.

Hence, Coastwise filed a petition for review before the SC.

b.

contract of affreightment
A contract where the owner of the vessel leases part or
all of its space to haul goods for others. It is a contract for special
service to be rendered by the owner of the vessel and under such
contract the general owner retains the possession, command and
navigation of the ship, the charterer or freighter merely having
use of the space in the vessel in return for his payment of the
charter hire. Hence, it remains liable as carrier and must answer
for any breach of duty as to the care, loading and unloading of the
cargo.

ISSUES

1.

2.

WON Coastwise was transformed into a private carrier, by virtue of the


contract of affreightment which it entered into with the consignee, Pag-asa
Sales, Inc. Corollarily, if it were in fact transformed into a private carrier,
did it exercise the ordinary diligence to which a private carrier is in turn
bound?
WON PhilGen was subrogated into the rights of the consignee against the
carrier, upon payment by the insurer of the value of the consignee's goods
lost while on board one of the carrier's vessels.

HELD

1.

NO. There are two kinds of charter parties:


a.

charter by demise or bareboat charter


The charterer will generally be regarded as the owner for
the voyage or service stipulated. The charterer mans the vessel

Although a charter party may transform a common carrier into a


private one, the same however is not true in a contract of affreightment.

In the case, Pag-asa only leased three of petitioner's vessels, in


order to carry cargo from one point to another, but the possession,
command and navigation of the vessels remained with Coastwise.
Therefore, Coastwise, by the contract of affreightment, was not converted
into a private carrier, but remained a common carrier and was still liable as
such.

Moreover, common carriers, as a general rule, are presumed to


have been at fault or negligent if the goods they transported deteriorated
or got lost or destroyed. That is, unless they prove that they exercised
extraordinary diligence in transporting the goods. (Art. 1735, NCC) In order
to avoid responsibility for any loss or damage, therefore, they have the
burden of proving that they observed such diligence.

In the case, the patron of the vessel Coastwise 9 was


unlicensed. According to Art. 609 of the Code of Commerce:

55
TRANSPO CASE DIGESTS, 2ND BATCH, 2E

Art. 609. Captains, masters, or patrons of vessels must be


Filipinos, have legal capacity to contract in accordance with this
code, and prove the skill capacity and qualifications necessary to
command and direct the vessel, as established by marine and
navigation laws, ordinances or regulations, and must not be
disqualified according to the same for the discharge of the duties
of the position. . . .
Coastwise cannot safely claim to have exercised extraordinary
diligence, by placing a person whose navigational skills are questionable, at
the helm of the vessel which eventually met the fateful accident. It may
also logically, follow that a person without license to navigate, lacks not
just the skill to do so, but also the utmost familiarity with the usual and
safe routes taken by seasoned and legally authorized ones. Had the patron
been licensed, he could be presumed to have both the skill and the
knowledge that would have prevented the vessel's hitting the sunken
derelict ship that lay on their way to Pier 18.
Therefore, as a common carrier, Coastwise is liable for breach of
the contract of carriage, having failed to overcome the presumption of
negligence with the loss and destruction of goods it transported, by proof
of its exercise of extraordinary diligence.
2.

YES. The payment by PhilGen of Php 700,000.00 to Pag-asa was a clear


indication that PhilGen was subrogated into all the rights which Pag-asa
Sales, Inc. may have had against Coastwise. Art. 2207 of the NCC states:
Art. 2207. If the plaintiffs property has been insured, and he has
received indemnity from the insurance company for the injury or
loss arising out of the wrong or breach of contract complained of,
the insurance company shall be subrogated to the rights of the
insured against the wrongdoer or the person who violated the
contract. . . .
Payment by the insurer to the assured operated as an equitable
assignment to the former of all remedies which the latter may have against
the third party whose negligence or wrongful act caused the loss. The right
of subrogation is not dependent upon, nor does it grow out of, any privity
of contract or upon written assignment of claim. It accrues simply upon
payment of the insurance claim by the insurer.

WHEREFORE, premises considered, this petition is DENIED and the appealed

decision affirming the order of Branch 35 of the Regional Trial Court of Manila for
petitioner Coastwise Lighterage to pay respondent Philippine General Insurance
Company the "principal amount of P700,000.00 plus interest thereon at the legal
rate computed from March 29, 1989, the date the complaint was filed until fully
paid and another sum of P100,000.00 as attorney's fees and costs" 10 is likewise
hereby AFFIRMED.
G.R. No. 165647
PHILIPPINES FIRST INSURANCE CO., INC., vs WALLEM PHILS. SHIPPING, INC.
TINGA, J.:
FACTS:
On or about October 1995, Anhui Chemicals Import & Export Corporation loaded
on board M/S Offshore Master a shipment consisting of 10,000 bags of sodium
sulphate anhydrous, complete and in good order for transportation to and delivery
at the port of Manila for L.G. Atkimson Import-Export, Inc. (consignee), covered by
a Clean Bill of Lading. The Bill of Lading reflects the gross weight of the total cargo
at 500,200 kilograms. The Owner and/or Charterer of M/V Offshore Master is
unknown while the shipper of the shipment is Shanghai Fareast Ship Business
Company. Both are foreign firms doing business in the Philippines, thru its local ship
agent, respondent Wallem Philippines Shipping, Inc. (Wallem).
It was disclosed during the discharge of the shipment from the carrier that 2,426
poly bags (bags) were in bad order and condition, having sustained various degrees
of spillages and losses. This is evidenced by the Turn Over Survey of Bad Order
Cargoes (turn-over survey) of the arrastre operator, Asian Terminals, Inc. (arrastre
operator).
Asia Star Freight Services, Inc. undertook the delivery of the subject shipment from
the pier to the consignees warehouse in Quezon City, while the final inspection was
conducted jointly by the consignees representative and the cargo surveyor. During
the unloading, it was found and noted that the bags had been discharged in
damaged and bad order condition. Upon inspection, it was discovered that
63,065.00 kilograms of the shipment had sustained unrecovered spillages, while
58,235.00 kilograms had been exposed and contaminated, resulting in losses due to
depreciation and downgrading.
On 29 April 1996, the consignee filed a formal claim with Wallem for the value of
the damaged shipment, to no avail. Since the shipment was insured with petitioner
Philippines First Insurance Co., Inc. against all risks, the consignee filed a formal
claim with petitioner for the damage and losses sustained by the shipment.

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

Consequently, petitioner paid the consignee the sum of P397,879.69 and the latter
signed a subrogation receipt.

interpreted the ship captains liability as ultimately that of the shipowner


by regarding the captain as the representative of the ship owner.

Petitioner, in the exercise of its right of subrogation, sent a demand letter to


Wallem for the recovery of the amount paid by petitioner to the consignee.
However, despite receipt of the letter, Wallem did not settle nor even send a
response to petitioners claim. Consequently, petitioner instituted an action before
the RTC for damages against respondents.

Section 2 of the COGSA provides that under every contract of carriage of


goods by sea, the carrier in relation to the loading, handling, stowage,
carriage, custody, care, and discharge of such goods, shall be subject to the
responsibilities and liabilities and entitled to the rights and immunities set
forth in the Act. Section 3 (2) thereof then states that among the carriers
responsibilities are to properly and carefully load, handle, stow, carry,
keep, care for, and discharge the goods carried.

RTC ruled in favor of the reposndents. It attributed the damage and losses
sustained by the shipment to the arrastre operators mishandling in the discharge
of the shipment. The Court of Appeals reversed and set aside the RTCs decision.
the arrastre operator was held solely liable to the consignee.
ISSUE: Whether or not the carriers duties extend up to the safely discharge the
cargo from the vessel.
HELD: YES.
As the shipment was an exercise of international trade, the provisions of the
Carriage of Goods by Sea Act (COGSA), together with the Civil Code and the Code
of Commerce, shall apply.
While it is established that damage or losses were incurred by the shipment
during the unloading, it is disputed who should be liable for the damage incurred
at that point of transport. To address this issue, the pertinent laws and
jurisprudence are examined.
NCC: Common carriers, from the nature of their business and for reasons
of public policy, are bound to observe extraordinary diligence in the
vigilance over the goods transported by them. Subject to certain
exceptions enumerated under Article 1734 of the Civil Code, common
carriers are responsible for the loss, destruction, or deterioration of the
goods. 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.
Article 619 of the Code of Commerce provides that the ship captain is
liable for the cargo from the time it is turned over to him at the dock or
afloat alongside the vessel at the port of loading, until he delivers it on the
shore or on the discharging wharf at the port of unloading, unless agreed
otherwise. In Standard Oil Co. of New York v. Lopez Castelo, the Court

The aforementioned Section 3(2) of the COGSA states that among the carriers
responsibilities are to properly and carefully load, care for and discharge the
goods carried. The bill of lading covering the subject shipment likewise stipulates
that the carriers liability for loss or damage to the goods ceases after its discharge
from the vessel. Article 619 of the Code of Commerce holds a ship captain liable
for the cargo from the time it is turned over to him until its delivery at the port of
unloading.
The records are replete with evidence which show that the damage to the bags
happened before and after their discharge and it was caused by the stevedores of
the arrastre operator who were then under the supervision of Wallem.
It is settled in maritime law jurisprudence that cargoes while being unloaded
generally remain under the custody of the carrier. In the instant case, the damage
or losses were incurred during the discharge of the shipment while under the
supervision of the carrier. Consequently, the carrier is liable for the damage or
losses caused to the shipment. As the cost of the actual damage to the subject
shipment has long been settled, the trial courts finding of actual damages in the
amount of P397,879.69 has to be sustained.
Samar Mining Co., Inc. vs Nordeutscher Lloyd
FACTS: The case arose from an importation made by Samar Mining Co. Inc. of 1
crate Optima welded wedge wire sieves through the M/S Schwabenstein, a vessel
owned by Nordeutscher Lloyd, (represented in the Philippines by its agent, C.F.
Sharp & Co., Inc.), which shipment is covered by Bill of Lading No. 18 duly issued to
consignee Samar Mining. Upon arrival of the vessel at the port of Manila, the
importation was unloaded and delivered in good order and condition to the bonded
warehouse of AMCYL. The goods were however never delivered to, nor received by,
the consignee at the port of destination Davao. When the letters of complaint

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

sent to Nordeutscher Lloyd failed to elicit the desired response, Samar Mining filed

3 of Bill of Lading No. 18, to wit: the carrier shall not be liable in any capacity

a formal claim for P1,691.93, the equivalent of $424.00 at the prevailing rate of

whatsoever for any delay, loss or damage occurring before the goods enter ship's

exchange at that time, against the former, but neither paid.

tackle to be loaded or after the goods leave ship's tackle to be discharged,

Samar Mining filed a suit to enforce payment. Nordeutscher Lloyd and CF Sharp &

transshipped or forwarded. Further, in Section 11 of the same bill, it was provided

Co. brought in AMCYL as third party defendant. The trial court rendered judgment

that this carrier, in making arrangements for any transshipping or forwarding

in favor of Samar Mining, ordering Nordeutscher Lloyd, et. al. to pay the amount of

vessels or means of transportation not operated by this carrier shall be considered

P1,691.93 plus attorneys fees and costs. However, the Court stated that

solely the forwarding agent of the shipper and without any other responsibility

Nordeutscher Lloyd, et. al. may recoup whatever they may pay Samar Mining by

whatsoever even though the freight for the whole transport has been collected by

enforcing the judgment against third party defendant AMCYL, which had earlier

him Pending or during forwarding or transshipping the carrier may store the

been declared in default. Nordeutscher Lloyd and C.F. Sharp & Co. appealed from

goods ashore or afloat solely as agent of the shipper

said decision.

We find merits in Nordeutschers contention that they are not liable for the loss of

Notes

the subject goods by claiming that they have discharged the same in full and good

The following are the pertinent ports, as provided in the bill of lading:
Port of Loading: Bremen, Germany
Port of discharge from ship: Manila
Port of destination/Port of discharge of the goods: Davao

condition unto the custody of AMCYL at the port of discharge from ship Manila,
and therefore, pursuant to the aforequoted stipulation (Sec. 11) in the bill of lading,
their responsibility for the cargo had ceased.The validity of stipulations in bills of
lading exempting the carrier from liability for loss or damage to the goods when the
same are not in its actual custody has been upheld by Us in PHOENIX ASSURANCE

As plainly indicated on the face of the bill, the vessel M/S Schwabenstein is to

CO., LTD. vs. UNITED STATES LINES, 22 SCRA 674 (1968), ruling that pursuant to the

transport the goods only up to Manila. Thereafter, the goods are to be transshipped

terms of the Bill of Lading, appellee's responsibility as a common carrier ceased the

by the carrier to the port of destination.

moment the goods were unloaded in Manila and in the matter of transshipment,

ISSUE: Whether or not a stipulation in the bill of lading exempting the carrier from

appellee acted merely as an agent of the shipper and consignee

liability for loss of goods not in its actual custody (i.e., after their discharge from the
ship) is valid.

G.R. No. L-48757 May 30, 1988

HELD: YES! It is clear that in discharging the goods from the ship at the port of

MAURO GANZON, petitioner,


vs.
COURT OF APPEALS and GELACIO E. TUMAMBING, respondents.

Manila, and delivering the same into the custody of AMCYL, the bonded warehouse,
appellants were acting in full accord with the contractual stipulations contained in
Bill of Lading No. 18. The delivery of the goods to AMCYL was part of appellants'
duty to transship (meaning to transfer for further transportation from one ship or
conveyance to another) the goods from Manila to their port of destination-Davao.
The extent of appellant carrier's responsibility and/or liability in the transshipment
of the goods in question are spelled out and delineated under Section 1, paragraph

Facts:
Gelacio Tumambing contracted the services of Mauro B. Ganzon to haul 305 tons of
scrap iron from Mariveles, Bataan, to the port of Manila on board the lighter LCT
"Batman". Ganzon sent his lighter to Mariveles. Tumambing delivered the scrap
iron to Filomeno Niza, captain of the lighter, for loading and on the same day, the
loading commenced. When about half of the scrap iron was already loaded, Mayor

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

Jose Advincula of Mariveles, Bataan, arrived and demanded P5,000.00 from


Tumambing. The latter resisted the shakedown and after a heated argument
between them, Mayor Advincula drew his gun and fired at Tumambing. The
gunshot was not fatal. Tumambing was taken to the hospital for treatment.
After sometime, the loading of the scrap iron was resumed. But sometime later,
Acting Mayor Basilio Rub, accompanied by three policemen, ordered captain Niza
and his crew to dump the scrap iron. Acting Mayor Rub issued a receipt stating that
the Municipality of Mariveles had taken custody of the scrap iron.
Tumambing an instituted an action against Ganzon for damages based on culpa
contractual before the CFI which did not rule in its favor. On appeal, the CA
reversed and set aside the decision of the CFI, ordering that Ganzon should pay
Tumambing for damages.
The petitioner, in a Petition for Review, alleged that the CA erred in finding that
there was breach of contract (commencing from the scrap iron was placed into the
petitioners custody and control), that it condemned the petitioner despite the fact
the dumping of the scrap iron into the sea was due to the order of a local
government official, and that it did not consider the such loss was due to a
fortuitous event.

Issue:
Whether or not the scrap iron was placed unconditionally under the custody and
control of the petitioner to make him liable

Ruling:
The private respondent delivered the scraps to Captain Niza for loading in the
lighter and the petitioner, thru his employees, actually received the scraps. By the
said act of delivery, the scraps were unconditionally placed in the possession and
control of the common carrier, and upon their receipt by the carrier for
transportation, the contract of carriage was deemed perfected. Consequently, the
petitioner-carrier's extraordinary responsibility for the loss, destruction or
deterioration of the goods commenced. Pursuant to Art. 1736, such extraordinary
responsibility would cease only upon the delivery, actual or constructive, by the
carrier to the consignee, or to the person who has a right to receive them. The fact
that part of the shipment had not been loaded on board the lighter did not impair
the said contract of transportation as the goods remained in the custody and
control of the carrier, albeit still unloaded.

Hence, the petitioner is presumed to have been at fault or to have acted


negligently. By reason of this presumption, the court is not even required to make
an express finding of fault or negligence before it could hold the petitioner
answerable for the breach of the contract of carriage. Still, the petitioner could
have been exempted from any liability had he been able to prove that he observed
extraordinary diligence in the vigilance over the goods in his custody, according to
all the circumstances of the case, or that the loss was due to an unforeseen event
or to force majeure. As it was, there was hardly any attempt on the part of the
petitioner to prove that he exercised such extraordinary diligence.

*Ung ibang issues:


We cannot sustain the theory of caso fortuito. before the appellee Ganzon could be
absolved from responsibility on the ground that he was ordered by competent
public authority to unload the scrap iron, it must be shown that Acting Mayor
Basilio Rub had the power to issue the disputed order, or that it was lawful, or that
it was issued under legal process of authority. The appellee failed to establish this.
Indeed, no authority or power of the acting mayor to issue such an order was given
in evidence. Neither has it been shown that the cargo of scrap iron belonged to the
Municipality of Mariveles. What we have in the record is the stipulation of the
parties that the cargo of scrap iron was accilmillated by the appellant through
separate purchases here and there from private individuals. The fact remains that
the order given by the acting mayor to dump the scrap iron into the sea was part of
the pressure applied by Mayor Jose Advincula to shakedown the appellant for
P5,000.00. The order of the acting mayor did not constitute valid authority for
appellee Mauro Ganzon and his representatives to carry out.
[G.R. No. 95536 March 23, 1992]
ANICETO G. SALUDO, JR., MARIA SALVACION SALUDO, LEOPOLDO G. SALUDO and
SATURNINO G. SALUDO, petitioners,
vs.
HON. COURT OF APPEALS, TRANS WORLD AIRLINES, INC., and PHILIPPINE
AIRLINES, INC., respondents.

Facts:
Mother of the petitioners, Crispina Galdo Saludo died in Chicago, Illinois.
Pomierski and Son Funeral Home of Chicago, made the necessary preparations and
arrangements for the shipment of the remains from Chicago to the Philippines.

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

Pomierski brought the remains to Continental Mortuary Air Services (CMAS) at the
Chicago Airport which made the necessary arrangements such as flights, transfers,
they see to it that the remains are taken to the proper air freight terminal. CMAS
booked the shipment with PAL thru the carriers agent Air Care International. PAL
Airway Bill Ordinary was issued wherein the requested routing was from Chicago to
San Francisco on board Trans World Airline (TWA) and from San Francisco to Manila
on board PAL.
Upon arrival at San Francisco, petitioner Salvacion Saludo, went to the
TWA to inquire about her mothers remains. But she was told they did not know
anything about it. She then told Pomierski that her mothers remains were not at
the West Coast terminal. Immediately, Pomierski called CMAS which in a matter of
10 minutes informed him that the remains were on a plane to Mexico City, that
there were two bodies at the terminal, and somehow they were switched. CMAS
called and told Pomierski that they were sending the remains back to California via
Texas.
Petitioners filed a damage suit against TWA and PAL for the misshipment,
delay of the cargo containing the remains of the late Crispina Saludo and for the
discourtesy of its employees to the petitioners. It was alleged that private
respondents received the casketed remains of Crispina on October 26, 1976, as
evidenced by the issuance of PAL Airway Bill by Air Care and from said date, private
respondents are responsible for the alleged switching of the caskets on October 27,
1976.
Issues:
1.

2.

Whether or not a delivery of cargo was made upon the issuance of airway
bill
Whether or not the delay in the delivery of the casketed remains of
petitioners mother was due to the fault of respondent airline companies

October 27, 1976. Actually, it was not until October 28, 1976 that PAL received
physical delivery of the body at San Francisco, as duly evidenced by the
Interline Freight Transfer Manifest of the American Airline Freight System and
signed for by Virgilio Rosales at 1945H, or 7:45 P.M. on said date.
2.

NO. Explicit is the rule under Article 1736 of the Civil Code that the
extraordinary responsibility of the common carrier begins from the time the
goods are delivered to the carrier. This responsibility remains in full force and
effect even when they are temporarily unloaded or stored in transit, unless the
shipper or owner exercises the right of stoppage in transitu, and terminates
only after the lapse of a reasonable time for the acceptance, of the goods by
the consignee or such other person entitled to receive them. And, there is
delivery to the carrier when the goods are ready for and have been placed in
the exclusive possession, custody and control of the carrier for the purpose of
their immediate transportation and the carrier has accepted them. Where such
a delivery has thus been accepted by the carrier, the liability of the common
carrier commences eoinstanti.

As already demonstrated, the facts in the case at bar belie the averment that
there was delivery of the cargo to the carrier on October 26, 1976. Rather, as earlier
explained, the body intended to be shipped as agreed upon was really placed in the
possession and control of PAL on October 28, 1976 and it was from that date that
private respondents became responsible for the agreed cargo under their
undertakings in PAL Airway Bill No. 079-01180454. Consequently, for the switching
of caskets prior thereto which was not caused by them, and subsequent events
caused thereby, private respondents cannot be held liable.
TWA was held to pay petitioners nominal damages of P40,000 for its violation of the
degree of diligence required by law to be exercised by every common carrier.
MACAM vs. COURT OF APPEALS

Held:
1.

NO. The cargo containing the casketed remains of Crispina Saludo was booked
for PAL Flight Number PR-107 leaving San Francisco for Manila on October 27,
1976, PAL Airway Bill No. 079-01180454 was issued, not as evidence of receipt
of delivery of the cargo on October 26, 1976, but merely as a confirmation of
the booking thus made for the San Francisco-Manila flight scheduled on

GR No. 125524; August 25, 1999


Facts: Benito Macam, doing business under name Ben-Mac Enterprises, shipped on
board vessel Nen-Jiang, owned and operated by respondent China Ocean Shipping
Co. through local agent Wallem Philippines Shipping Inc., 3,500 boxes of
watermelon covered by Bill of Lading No. HKG 99012, and 1,611 boxes of fresh
mangoes covered by Bill of Lading No. HKG 99013. The shipment was bound for

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

Hongkong with PAKISTAN BANK as consignee and Great Prospect Company of


Rowloon (GPC) as notify party.
Upon arrival in Hongkong, shipment was delivered by respondent WALLEM directly
to GPC, not to PAKISTAN BANK and without the required bill of lading having been
surrendered. Subsequently, GPC failed to pay PAKISTAN BANK, such that the latter,
still in possession of original bill of lading, refused to pay petitioner thru
SOLIDBANK. Since SOLIDBANK already pre-paid the value of shipment, it demanded
payment from respondent WALLEM but was refused. MACAM constrained to return
the amount paid by SOLIDBANK and demanded payment from WALLEM but to no
avail.
WALLEM submitted in evidence a telex dated 5 April 1989 as basis for delivering the
cargoes to GPC without the bills of lading and bank guarantee. The telex instructed
delivery of various shipments to the respective consignees without need of
presenting the bill of lading and bank guarantee per the respective shippers
request since for prepaid shipt ofrt charges already fully paid. MACAM, however,
argued that, assuming there was such an instruction, the consignee referred to was
PAKISTAN BANK and not GPC.

perishable goods and SOLIDBANK pre-paid the full amount of value thereof, it is not
hard to believe the claim of respondent WALLEM that petitioner indeed requested
the release of the goods to GPC without presentation of the bills of lading and bank
guarantee.

To implement the said telex instruction, the delivery of the shipment must be to
GPC, the notify party or real importer/buyer of the goods and not the PAKISTANI
BANK since the latter can very well present the original Bills of Lading in its
possession. Likewise, if it were the PAKISTANI BANK to whom the cargoes were to
be strictly delivered, it will no longer be proper to require a bank guarantee as a
substitute for the Bill of Lading. To construe otherwise will render meaningless the
telex instruction. After all, the cargoes consist of perishable fresh fruits and
immediate delivery thereof the buyer/importer is essentially a factor to reckon
with.

Stipulation Limiting Carriers Liability

The RTC ruled for MACAM and ordered value of shipment. CA reversed RTCs
decision.

[G.R. No. 119641. May 17, 1996]

Issue: Are the respondents liable to the petitioner for releasing the goods to GPC
without the bills of lading or bank guarantee?

PHILIPPINE AIRLINES, INC. vs. COURT OF APPEALS, DR. JOSEFINO MIRANDA and
LUISA MIRANDA

Held: No. WE EMPHASIZE THAT THE EXTRAORDINARY RESPONSIBILITY OF THE


COMMON CARRIERS LASTS UNTIL ACTUAL OR CONSTRUCTIVE DELIVERY OF THE
CARGOES TO THE CONSIGNEE OR TO THE PERSON WHO HAS A RIGHT TO RECEIVE
THEM. PAKISTAN BANK was indicated in the bills of lading as consignee whereas
GPC was the notify party. However, in the export invoices GPC was clearly named as
buyer/importer. Petitioner also referred to GPC as such in his demand letter to
respondent WALLEM and in his complaint before the trial court. This premise draws
us to conclude that the delivery of the cargoes to GPC as buyer/importer which,
conformably with Art. 1736 had, other than the consignee, the right to receive
them was proper.

REGALADO, J.:

It is a standard maritime practice when immediate delivery is of the essence, for


shipper to request or instruct the carrier to deliver the goods to the buyer upon
arrival at the port of destination without requiring presentation of bill of lading as
that usually takes time. Thus, taking into account that subject shipment consisted of

In this appeal by certiorari, petitioner Philippine Airlines, Inc. (PAL) assails the
decision of respondent Court of Appeals which affirmed the judgment of the trial
court finding herein petitioner liable

Facts:In May, 1988, Dr. Josefino Miranda and his wife, Luisa, who were residents of
Surigao City, went to the United States of America on a regular flight of Philippine
Airlines, Inc. (PAL). On June 19, 1988, after a stay of over a month there, they
obtained confirmed bookings from PALs San Francisco Office for PAL Flight PR 101
from San Francisco to Manila via Honolulu on June 21, 1988; PAL Flight PR 851 from
Manila to Cebu on June 24, 1988; and PAL Flight PR 905 from Cebu to Surigao also
on June 24, 1988. On June 21, 1988, private respondents boarded PAL Flight PR 101
in San Francisco with 5 pieces of baggage. After a stopover at Honolulu, and upon
arrival in Manila on June 23, 1988, they were told by the PAL personnel that their

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

baggage consisting of two balikbayan boxes, two pieces of luggage and one fishing
rod case were off-loaded at Honolulu, Hawaii due to weight limitations.
Consequently, private respondents missed their connecting flight from Manila to
Cebu City, as originally scheduled, since they had to wait for their baggage which
arrived the following day, June 24, 1988, after their pre-scheduled connecting flight
had left. They consequently also missed their other scheduled connecting flight
from Cebu City to Surigao City.

On June 25, 1988, they departed for Cebu City and therefrom private respondents
had to transfer to PAL Flight 471 for Surigao City. On the way to Surigao City, the
pilot announced that they had to return to Mactan Airport due to some mechanical
problem. While at Mactan Airport, the passengers were provided by PAL with lunch
and were booked for the afternoon flight to Surigao City. However, said flight was
also canceled. Since there were no more flights for Surigao City that day, private
respondents asked to be billeted at the Cebu Plaza Hotel where they usually stay
whenever they happen to be in Cebu City. They were, however, told by the PAL
employees that they could not be accommodated at said hotel supposedly because
it was fully booked. Contrarily, when Dr. Miranda called the hotel, he was informed
that he and his wife could be accommodated there. Although reluctant at first, PAL
eventually agreed to private respondents overnight stay at said hotel.

Inasmuch as the shuttle bus had already left by the time private respondents were
ready to go to the hotel, PAL offered them P 150.00 to include the fare for the
return trip to the airport. Dr. Miranda asked for P 150.00 more as he and his wife,
along with all of their baggages, could not be accommodated in just one taxi, aside
from the need for tipping money for hotel boys. Upon refusal of this simple request,
Dr. Miranda then declared that he would forego the amenities offered by PAL. Thus,
the voucher for P 150.00 and the authority for the hotel accommodations prepared
by PAL were voided due to private respondents decision not to avail themselves
thereof.

To aggravate the muddled situation, when private respondents tried to retrieve


their baggage, they were told this time that the same were loaded on another
earlier PAL flight to Surigao City. Thus, private respondents proceeded to the hotel
sans their baggage and of which they were deprived for the remainder of their trip.
Private respondents were finally able to leave on board the first PAL flight to
Surigao City only on June 26, 1988. Thereafter, they instituted an action for
damages which, after trial as well as on appeal, was decided in their favor.

Petitioner PAL has come to us via the instant petition for review on certiorari,
wherein it challenges the affirmatory decision of respondent Court of Appeals (1)
for applying Articles 2220, 2232 and 2208 of the Civil Code when it sustained the
award of the court a quo for moral and exemplary damages and attorneys fees
despite absence of bad faith on its part; and (2) for not applying the express
provisions of the contract of carriage and pertinent provisions of the Warsaw
Convention limiting its liability to US$20.00 per kilo of baggage.

Issue:WON there was bad faith on the part of the petitioner?

Held: Yes. The situation was aggravated by the following incidents: the poor
treatment of the Mirandas by the PAL employees during the stopover at Mactan
Airport in Cebu; the cavalier and dubious response of petitioners personnel to the
Miranda spouses request to be billeted at the Cebu Plaza Hotel by denying the
same allegedly because it was fully booked, which claim was belied by the fact that
Dr. Miranda was easily able to arrange for accommodations thereat; and, the PAL
employees negligent, almost malicious, act of sending off the baggage of private
respondents to Surigao City, while they were still in Cebu, without any explanation
for this gross oversight.

The Court has time and again ruled, and it cannot be over-emphasized, that a
contract of air carriage generates a relation attended with a public duty and any
discourteous conduct on the part of a carriers employee toward a passenger gives
the latter an action for damages and, more so, where there is bad faith. It is settled
that bad faith must be duly proved and not merely presumed. The existence of bad
faith, being a factual question, and the Supreme Court not being a trier of facts, the
findings thereon of the trial court as well as of the Court of Appeals shall not be
disturbed on appeal and are entitled to great weight and respect. Said findings are
final and conclusive upon the Supreme Court except, inter alia, where the findings
of the Court of Appeals and the trial court are contrary to each other.

While it may be true that there was no direct evidence on record of blatant
rudeness on the part of PAL employees towards the Mirandas, the fact that private
respondents were practically compelled to haggle for accommodations, a situation
unbefitting persons of their stature, is rather demeaning and it partakes of

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

discourtesy magnified by PALs condescending attitude. Moreover, it cannot be


denied that the PAL employees herein concerned were definitely less than candid,
to put it mildly, when they withheld information from private respondents that they
could actually be accommodated in a hotel of their choice.
We agree with the findings of the lower court that the request of private
respondents for monetary assistance of P300.00 for taxi fare was indeed justified,
considering that there were two of them and they had several pieces of luggage
which had to be ferried between the airport and the hotel. Also, the request for a
small additional sum for tips is equally reasonable since tipping, especially in a firstrate hotel, is an accepted practice, of which the Court can take judicial notice. This
is aside from the fact that private respondents, having just arrived from an
extended trip abroad, had already run out of Philippine currency, which
predicament was exacerbated by their additional stay in Manila due to the offloading of their baggage. All these inconveniences should have warranted a
commonsensical and more understanding treatment from PAL, considering that
private respondents found themselves in this unpleasant situation through no fault
of theirs.

Upon his arrival in Jakarta, respondent discovered that his luggage was missing.
When he inquired about his luggage from CATHAY's representative in Jakarta,
Alcantara was told that his luggage was left behind in Hongkong. For this, he was
offered $20.00 as "inconvenience money" to buy his immediate personal needs
until the luggage could be delivered to him. His luggage finally reached Jakarta
more than twenty four (24) hours after his arrival. However, it was not delivered to
him at his hotel but was required by CATHAY to be picked up by an official of the
Philippine Embassy.
Alcantara filed his complaint against CATHAY with the CFI of Lanao del Norte
praying for temperate, moral and exemplary damages, plus attorney's fees. The trial
court rendered its decision ordering CATHAY to pay Plaintiff P20,000.00 for moral
damages, P5,000.00 for temperate damages, P10,000.00 for exemplary damages,
and P25,000.00 for attorney's fees, and the costs.
Both parties appealed to the CA. CATHAY assailed the conclusion of the trial court
that it was accountable for breach of contract and questioned the non-application
by the court of the Warsaw Convention as well as the excessive damages awarded
on the basis of its finding that respondent Alcantara was rudely treated by
petitioner's employees during the time that his luggage could not be found. For his
part, Alcantara assigned as error the failure of the trial court to grant the full
amount of damages sought in his complaint.

CATHAY PACIFIC AIRWAYS, LTD, petitioner, vs. COURT OF APPEALS and TOMAS L.
ALCANTARA, respondents.

CA rendered its decision affirming the findings of fact of the trial court but
modifying its award by increasing the moral damages to P80,000.00, exemplary
damages to P20,000.00 and temperate or moderate damages to P10,000.00. The
award of P25,000.00 for attorney's fees was maintained. Hence, this petition.

BELLOSILLO, J p:

ISSUES:

FACTS:

Whether or not Cathay is liable to Alcantara for moral, exemplary and temperate
damages as well as attorney's fees?

G.R. No. 60501. March 5, 1993.

On 19 October 1975, Tomas L. Alcantara was a first class passenger of Cathay Pacific
Airways, Ltd. (CATHAY for brevity) on its Flight No. CX-900 from Manila to Hongkong
and onward from Hongkong to Jakarta on Flight No. CX-711. The purpose of his trip
was to attend the following day, 20 October 1975, a conference with the Director
General of Trade of Indonesia, Alcantara being the Executive Vice-President and
General Manager of Iligan Cement Corporation, Chairman of the Export Committee
of the Philippine Cement Corporation, and representative of the Cement Industry
Authority and the Philippine Cement Corporation. He checked in his luggage which
contained not only his clothing and articles for personal use but also papers and
documents he needed for the conference.

Whether or not the Warsaw Convention on the libility of a carrier to its passngers is
applicable in the instant case?
HELD:
1. YES, Cathay is liable to Alcantara for damages except for temperate damages.
A. Moral Damages
Moral damages predicated upon a breach of contract of carriage may only be
recoverable in instances where the mishap results in death of a passenger, or where
the carrier is guilty of fraud or bad faith.

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

In the case at bar, both the CFI and CA found that CATHAY was grossly negligent and
reckless when it failed to deliver the luggage of Alcantara at the appointed place
and time. CATHAY alleges that as a result of mechanical trouble, all pieces of
luggage on board the first aircraft bound for Jakarta were unloaded and transferred
to the second aircraft which departed an hour and a half later. Yet, as the CA noted,
CATHAY was not even aware that it left behind Alcantara's luggage until its
attention was called by the Hongkong Customs authorities. More, bad faith or
otherwise improper conduct may be attributed to the employees of CATHAY. While
the mere failure of CATHAY to deliver respondent's luggage at the agreed place and
time did not ipso facto amount to willful misconduct since the luggage was
eventually delivered to private respondent, albeit belatedly, We are persuaded that
the employees of CATHAY acted in bad faith.
-The duty officer told Alcantara: 'What can we do, the baggage is missing. I cannot
do anything.' something like it. 'Anyhow you can buy anything you need, charged to
Cathay Pacific.' 'You can buy anything chargeable to Cathay Pacific'. The duty officer
would like to dismiss the affair as soon as possible by saying indifferently 'Don't
worry. It can be found.'
Indeed, the aforequoted testimony shows that the language and conduct of
CATHAY's representative towards Alcantara was discourteous or arbitrary to justify
the grant of moral damages. The CATHAY representative was not only indifferent
and impatient; he was also rude and insulting. He simply advised Alcantara to buy
anything he wanted. But even that was not sincere because the representative
knew that the passenger was limited only to $20.00 which, certainly, was not
enough to purchase comfortable clothings appropriate for an executive conference.
Considering that Alcantara was not only a revenue passenger but even paid for a
first class airline accommodation and accompanied at the time by the Commercial
Attache of the Philippine Embassy who was assisting him in his problem, CATHAY or
its agents should have been more courteous and accommodating to private
respondent, instead of giving him a curt reply, "What can we do, the baggage is
missing. I cannot do anything . . . Anyhow, you can buy anything you need, charged
to Cathay Pacific." CATHAY's employees should have been more solicitous to a
passenger in distress and assuaged his anxieties and apprehensions. To compound
matters, CATHAY refused to have the luggage of Alcantara delivered to him at his
hotel; instead, he was required to pick it up himself and an official of the Philippine
Embassy. Under the circumstances, it is evident that petitioner was remiss in its
duty to provide proper and adequate assistance to a paying passenger, more so one
with first class accommodation.
B. Temperate Damages

However, Alcantara is not entitled to temperate damages, contrary to the ruling of


the court a quo, in the absence of any showing that he sustained some pecuniary
loss. It cannot be gainsaid that Alcantara's luggage was ultimately delivered to him
without serious or appreciable damage.
2. NO, the Warsaw Convention is not applicable in the instant case.
Although the Warsaw Convention has the force and effect of law in this country,
being a treaty commitment assumed by the Philippine government, said convention
does not operate as an exclusive enumeration of the instances for declaring a
carrier liable for breach of contract of carriage or as an absolute limit of the extent
of that liability. The Warsaw Convention declares the carrier liable for damages in
the enumerated cases and under certain limitations. However, it must not be
construed to preclude the operation of the Civil Code and other pertinent laws. It
does not regulate, much less exempt, the carrier from liability for damages for
violating the rights of its passengers under the contract of carriage, especially if
wilfull misconduct on the part of the carrier's employees is found or established,
which is clearly the case before Us. For, the Warsaw Convention itself provides in
Art. 25 that
"(1) The carrier shall not be entitled to avail himself of the provisions of this
convention which exclude or limit his liability, if the damage is caused by his wilfull
misconduct or by such default on his part as, in accordance with the law of the
court to which the case is submitted, is considered to be equivalent to wilfull
misconduct."
(2) Similarly the carrier shall not be entitled to avail himself of the said provisions, if
the damage is caused under the same circumstances by any agent of the carrier
acting within the scope of his employment."
When petitioner airline misplaced Alcantara's luggage and failed to deliver it to its
passenger at the appointed place and time, some special species of injury must
have been caused to him. For sure, the latter underwent profound distress and
anxiety, and the fear of losing the opportunity to fulfill the purpose of his trip. In
fact, for want of appropriate clothings for the occasion brought about by the delay
of the arrival of his luggage, to his embarrassment and consternation respondent
Alcantara had to seek postponement of his pre-arranged conference with the
Director General of Trade of the host country.
In one case, this Court observed that a traveller would naturally suffer mental
anguish, anxiety and shock when he finds that his luggage did not travel with him
and he finds himself in a foreign land without any article of clothing other than
what he has on.

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TRANS-ASIA SHIPPING LINES v COURT OF APPEALS and ATTY. RENATO T. ARROYO


G.R. No. 118126 March 4, 1996
DAVIDE, JR., J.
Facts: Atty. Renato Arroyo, a public attorney, bought a ticket from petitioner a
corporation engaged in inter-island shipping, for the voyage of M/V Asia Thailand
vessel to Cagayan de Oro City from Cebu City. Upon boarding, he noticed that some
repair works [sic] were being undertaken on the engine of the vessel. The vessel
departed at around 11:00 in the evening with only one (1) engine running. After an
hour of slow voyage, the vessel stopped near Kawit Island and dropped its anchor
thereat. After half an hour of stillness, some passengers demanded that they should
be allowed to return to Cebu City for they were no longer willing to continue their
voyage to, Cagayan de Oro City. The captain acceeded [sic] to their request and thus
the vessel headed back to Cebu City. At Cebu City, plaintiff together with the other
passengers who requested to be brought back to Cebu City, were allowed to
disembark. Thereafter, the vessel proceeded to Cagayan de Oro City. Plaintiff, the
next day, boarded the M/V Asia Japan for its voyage to Cagayan de Oro City,
likewise a vessel of defendant. On account of this failure of defendant to transport
him to the place of destination on November 12, 1991, plaintiff filed before the trial
court a complaint for damages against defendant.
After due trial, the trial court rendered its decision and ruled that the action was
only for breach of contract, with Articles 1170, 1172, and 1173 of the Civil Code as
applicable law not Article 2180 of the same Code.
On appeal, the Court of Appeals reversed the trial court's decision by applying
Article 1755 in relation to Articles 2201, 2208, 2217, and 2232 of the Civil Code and,
accordingly, awarded compensatory, moral, and exemplary damages. Petitioner
knew from the very start of the voyage knew for a fact that the vessel was not yet
in its sailing condition because the second engine was still being repaired. He may
call him a very "panicky passenger" or a "nervous person", but this will not relieve it
from the liability it incurred for its failure to exercise utmost diligence. As discussed,
petitioner in sailing to Cagayan de Oro City with only one engine and with full
knowledge of the true condition of the vessel, acted. in bad faith with malice, in
complete disregard for the safety of the passengers and only for its own personal
advancement/interest. Moral damages are recoverable in a damage suit predicated
upon a breach of contract of carriage where it is proved that the carrier was guilty
of fraud or bad faith even if death does not result. When entitlement to moral
damages has been established, the award of exemplary damages is proper.

Issue: WON Petitioner observed extraordinary diligence in ensuring the safety of its
passengers
Held: NO. The failure of a common carrier to maintain in seaworthy condition its
vessel involved in a contract of carriage is a clear breach of its duty prescribed in
Article 1755 of the Civil Code. Before commencing the contracted voyage, the
petitioner undertook some repairs on the cylinder head of one of the vessel's
engines. But even before it could finish these repairs, it allowed the vessel to leave
the port of origin on only one functioning engine, instead of two. Moreover, even
the lone functioning engine was not in perfect condition as sometime after it had
run its course, it conked out. This caused the vessel to stop and remain a drift at
sea, thus in order to prevent the ship from capsizing, it had to drop anchor. Plainly,
the vessel was unseaworthy even before the voyage began. For a vessel to be
seaworthy, it must be adequately equipped for the voyage and manned with a
sufficient number of competent officers and crew.
*On issue of damages: Affirmed. (No actual damages since no evidence of delay.
Any further delay then in the private respondent's arrival at the port of destination
was caused by his decision to disembark. Had he remained on the first vessel, he
would have reached his destination at noon of 13 November 1991, thus been able
to report to his office in the afternoon. He, therefore, would have lost only the
salary for half of a day. But actual or compensatory damages must be proved, which
the private respondent failed to do. There is no convincing evidence that he did not
receive his salary for 13 November 1991 nor that his absence was not excused.)

SWEET LINES, INC., petitioner, vs.HON. BERNARDO TEVES, Presiding Judge, CFI of
Misamis Oriental Branch VII, LEOVIGILDO TANDOG, JR., and ROGELIO TIRO,
respondents.
TOPIC: Stipulation Limiting Carriers Liability

FACTS:
Private respondents Atty. Tandog and Tiro bought tickets for Voyage at the branch
office of petitioner, a shipping company transporting inter-island passengers and
cargoes, at Cagayan de Oro City. Respondents were to board petitioner's vessel
bound for Tagbilaran City via the port of Cebu. Upon learning that the vessel was
not proceeding to Bohol, since many passengers were bound for Surigao, private
respondents per advice, went to the branch office for proper relocation to another
vessel. Because the said vessel was already filled to capacity, they were forced to
agree "to hide at the cargo section to avoid inspection of the officers of the

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

Philippine Coastguard." Private respondents alleged that they were, during the
trip," "exposed to the scorching heat of the sun and the dust coming from the ship's
cargo of corn grits," and that the tickets they bought at Cagayan de Oro City for
Tagbilaran were not honored and they were constrained to pay for other tickets. In
view thereof, private respondents sued petitioner for damages and for breach of
contract of carriage before Court of First Instance of Misamis Oriental. Petitioner
moved to dismiss the complaint on the ground of improper venue. This motion was
premised on the condition printed at the back of the tickets, Condition No. 14,
which reads: It is hereby agreed and understood that any and all actions arising
out of the conditions and provisions of this ticket, irrespective of where it is issued,
shall be filed in the competent courts in the City of Cebu. The motion was denied
hence the instant petition.

ISSUE: WON Condition No. 14 printed at the back of the petitioner's passage tickets
purchased by private respondents, which limits the venue of actions arising from
the contract of carriage to the Court of First Instance of Cebu, valid and enforceable

HELD:
No. Considered in the light of circumstances prevailing in the inter-island shipping
industry in the country today, the SC held that Condition No. 14 printed at the back
of the passage tickets should be held as void and unenforceable for the following
reasons: First, under circumstances obligation in the inter-island shipping industry,
it is not just and fair to bind passengers to the terms of the conditions printed at the
back of the passage tickets, on which Condition No. 14 is Printed in fine letters, and
Second, Condition No. 14 subverts the public policy on transfer of venue of
proceedings of this nature, since the same will prejudice rights and interests of
innumerable passengers located in different places of the country who, under
Condition No. 14, will have to file suits against petitioner only in the City of Cebu.
Considering the expense and trouble a passenger residing outside of Cebu City
would incur to prosecute a claim in the City of Cebu, he would most probably
decide not to file the action at all. The condition will thus defeat, instead of
enhance, the ends of justice. Upon the other hand, petitioner has branches or
offices in the respective ports of call of its vessels and can afford to litigate in any of
these places. Hence, the filing of the suit in the CFI of Misamis Oriental, as was done
in the instant case, will not cause inconvenience to, much less prejudice, petitioner.

AMOUNT OF LIABILITY

JUAN YSMAEL & CO., INC. vs. GABINO BARRETTO & CO., LTD., ET AL., defendants.
ANDRES H. LIMGENGCO and VICENTE JAVIER
G.R. No. L-28028. November 25, 1927
JOHNS, J.
FACTS: Plaintiff, a domestic corporation, seeks to recover from the defendants
P9,940.95 the alleged value of four cases of merchandise which it delivered to the
steamship Andres on October 25, 1922, at Manila to be shipped to Surigao, but
which were never delivered to Salomon Sharuff, the consignee, or returned to the
plaintiff.
Defendants make a specific denial of all of the material allegations of the complaint,
and as special defense allege that the four cases of merchandise in question were
never delivered to them. They further invoke clause 12 of the Bill of Lading for their
limited liability which reads: It is expressly understood that carrier shall not be
liable for loss or damage from any cause or for any reason to an amount exceeding
P300 for any single package of silk or other valuable cargo, nor for an amount
exceeding P100 for any single package of other cargo, unless the value and contents
of such packages are correctly declared in this bill of lading at the time of shipment
and freight paid in accord with the actual measurement or weight of the cargo
shipped.
Lower court rendered judgment for the plaintiff for the full amount of its claim.
ISSUE: Whether or not the provision in the bill of lading limiting the liability of the
carrier not to exceed P300 is valid.
HELD: NO. A common carrier cannot lawfully stipulate for the exemption from
liability, unless such exemption is just and reasonable. The carrier cannot limit its
liability for injury to or loss of goods shipped if such was caused by its own
negligence.
The ship in question was a common carrier and, as such, must have been operated
as a public utility. It is a matter of common knowledge that large quantities of silk
are imported in the Philippine Islands, and that after being imported, they are sold
by the merchants in Manila and other large seaports, and then shipped to different
points and places in the Islands. Hence, there is nothing unusual about the
shipment of silk. In truth and in fact, it is a matter of usual and ordinary business.
There was no fraud or concealment in the shipment in question. Clause 12 above
quoted places a limit of P300 "for any single package of silk." The evidence shows
that 164 "cases" were shipped, and that the value of each case was very near
P2,500. In this situation, the limit of defendants' liability for each case of silk "for
loss or damage from any cause or for any reason" would put it in the power of the

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

defendants to have taken the whole cargo of 164 cases of silk at a valuation of P300
for each case, or less than one-eight of its actual value. If that rule of law should be
sustained, no silk would ever be shipped from one island to another in the
Philippines. Such a limitation of value is unconscionable and void as against public
policy.
Corpus Juris, volume 10, p. 154, says:
PAR. 194. 6. Reasonable of Limitation. The validity of stipulations limiting the
carriers liability is to be determined by their reasonableness and their conformity to
the sound public policy, in accordance with which the obligations of the carrier to
the public are settled. It cannot lawfully stipulate for exemption from liability,
unless such exemption is just and reasonable, and unless the contract is freely and
fairly made. No contractual limitation is reasonable which is subversive of public
policy.

FACTS

Parmanand Shewaram

- passenger

Philippine Air Lines, Inc. (PAL)

- carrier

On November 23, 1959, Parmanand Shewaram, was a paying passenger on


PALs aircraft from Zamboanga City bound for Manila. On the same day, he checked
in 3 baggages a suitcase and 2 other pieces. The suitcase was mistagged with
I.G.N. (for Iligan) instead of MNL (for Manila) by PAL personnel in Zamboanga. The
suitcase was then sent to Iligan and thus did not arrive with Shewaram. The PAL
station agent in Iligan caused to send the suitcase for delivery to Manila which
arrived on November 24, 1959.

PAR. 195. 7. What Limitations of Liability Permissible. a.


Negligence (1) Rule in America (a) In Absence of Organic or Statutory
Provisions Regulating Subject aa. Majority Rule. In the absence of statute, it is
settled by the weight of authority in the United States, that whatever limitations
against its common-law liability are permissible to a carrier, it cannot limit its
liability for injury to or loss of goods shipped, where such injury or loss is caused by
its own negligence. This is the common-law doctrine and it makes no difference
that there is no statutory prohibition against contracts of this character.
There is no merit in the appeal. The judgment of the lower court is affirmed, with
costs.

PARMANAND SHEWARAM, plaintiff and appellee, vs. PHILIPPINE AIR LINES,


INC., defendant and appellant.
G.R. No. L-20099

Prior to having his suitcase returned, Shewaram was offered another similar
suitcase which was the only baggage left for the flight on November 23, 1959. This
apparently belonged to a certain Del Rosario who was bound for Iligan in the same
flight with Shewaram. The said suitcase was nevertheless opened to ascertain if
such belonged to Shewaram without the permission and presence of Mr. Del
Rosario. Shewaram rejected the suitcase as it contained a pistol instead of his
Transistor Radio 7 (Php 176.00) and Rollflex Camera (Php 373.00). Moreover, there
was a space in the suitcase where the two items in question could have been
placed. PAL admitted that the two items could not be found inside the suitcase.
There was no evidence on record sufficient to show that Shewarams suitcase was
never opened during the time it was placed in PALs possession and prior to its
recovery by the Shewaram. However, PAL had presented evidence that it had
authority to open passengers' baggage to verify and find its ownership or identity.

July 7, 1966

ZALDIVAR, J.
Amount of Liability

Shewaram instituted an action to recover damages suffered by him due to PALs


failure to observe extraordinary diligence in the vigilance and carriage of his
luggage. This was lodged before the MTC Zamboanga.

This is an appeal from the CFI Zamboanga Decision eliminating exemplary


damages and modifying MTC Zamboangas Decision ordering PAL to pay actual
damages, exemplary damages, attorneys fees and cost of suit to Shewaram.

MTC Zamboanga Decision

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

It ordered PAL to pay Shewaram Php 373.00 as actual damages, Php


100.00 as exemplary damages, Php 150.00 as attorney's fees, and the costs of the
action.

This was printed in small letters at the back of the ticket. PAL even admits
that passengers do not sign the ticket, much less did Shewaram herein sign his
ticket when he made the flight on November 23, 1959.

PAL appealed to CFI Zamboanga.

CFI Zamboanga Decision

It modified the judgment of the inferior court by ordering the PAL to pay
the Shewaram only the sum of P373.00 as actual damages, with legal interest from
May 6, 1960 and the sum of P150.00 as attorney's fees, eliminating the award of
exemplary damages.

Shewaram appealed to the SC on a question of law.

ISSUE

WON Shewaram was bound by the provisions of the tariff regulations filed by PAL
with the civil aeronautics board and the conditions of carriage printed at the back of
the plane ticket stub.
HELD

NO. One of the focal conditions in the Domestic Tariff Regulations No. 2 filed with
the Civil Aeronautics Board which is vital in the case provides:

The liability, if any, for loss or damage to checked baggage or for delay in the
delivery thereof is limited to its value and, unless the passenger declares in advance
a higher valuation and pay an additional charge therefor, the value shall be
conclusively deemed not to exceed P100.00 for each ticket.

Corollary with the abovementioned condition is Art. 1750 of the NCC:

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.

Pecuniary liability of a common carrier may, by contract, be limited to a


fixed amount. It is required, however, that the contract must be "reasonable and
just under the circumstances and has been fairly and freely agreed upon. However,
requirements in Art. 1750 have not been met. The fact that those conditions are
printed at the back of the ticket stub in letters so small that they are hard to read
would not warrant the presumption that the appellee was aware of those
conditions such that he had "fairly and freely agreed" to those conditions. Also, it
was clear by the admission of PAL that Shewaram did not sign his ticket. Therefore,
he is not, and can not be, bound by the conditions of carriage found at the back of
the ticket stub issued to him when he made the flight on appellant's plane on
November 23, 1959.

Moreover, the carrier cannot limit its liability for injury to or loss of goods
shipped where such injury or loss was caused by its own negligence. PAL is
undoubtedly and undisputedly a common carrier. It was accused of being negligent
because it admittedly mistagged Shewarams suitcase and the some of the contents
of the said suitcase were missing under its custody. Also, with the manner in which
Mr. Del Rosarios suitcase was inspected without his necessary authorization and
presence may and could be applied to Shewarams suitcase as well. PAL is had been
remiss of its duty to observe extraordinary diligence and is therefore liable subject
to the provisions of Arts. 1734 and 1735 of the NCC:

ART. 1734. Common carries 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, or other natural disaster or calamity;

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

(2)

Act of the public enemy in war, whether international or civil;

(3)

Act or omission of the shipper or owner of the goods;

(4)

The character of the goods or defects in the packing or in the containers;

(5)

Order or act of competent public authority.

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.
The validity of stipulations limiting the carrier's liability is to be determined
by their reasonableness and their conformity to the sound public policy, in
accordance with which the obligations of the carrier to the public are settled. It
cannot lawfully stipulate for exemption from liability, unless such exemption is just
and reasonable, and unless the contract is freely and fairly made. No contractual
limitation is reasonable which is subversive of public policy.
The shipper and the common carrier are not on equal terms; the shipper
must send his freight by the common carrier, or not at all; he is therefore entirely at
the mercy of the carrier unless protected by the higher power of the law against
being forced into contracts limiting the carrier's liability. Such contracts are wanting
in the element of voluntary assent.

In view of the foregoing, the decision appealed from is affirmed, with costs against
the appellant.

G.R. No. L-40597 June 29, 1979


AGUSTINO B. ONG YIU, petitioner, vs.
HONORABLE COURT OF APPEALS and PHILIPPINE AIR LINES, INC., respondents.
MELENCIO-HERRERA, J.:
1.
Petitioner Ong (practicing lawyer) was a fare paying passenger of
respondent PAL, on board Flight No. 463-R, from Mactan Cebu to Butuan City. He
was scheduled to attend the trial of civil case in the Court of First Instance set for
hearing on August 28-31, 1967. He checked in a blue "maleta" (containing vital
documents needed for trial) for which he was issued Claim Check No. 2106-R. Upon
arrival, petitioner claimed his luggage but it could not be found.

2.
At about 3:00 o'clock P.M., PAL Butuan, sent a message to PAL Cebu,
inquiring about the missing luggage hich message was relayed in full to the Mactan
Airport teletype operator at 3:45 P.M. It must have been transmitted to Manila
immediately at 3:59.
3.
PAL Manila wired PAL Cebu advising that the luggage had been over
carried to Manila and that it would be forwarded to Cebu on the same day.
Instructions were also given that the luggage be immediately forwarded to Butuan
City on the first available flight.
4.
At 5:00 P.M. of the same afternoon, PAL Cebu sent a message to PAL
Butuan that the luggage would be forwarded the following day, August 27. At 10:00
o'clock that evening, petitioner wired PAL Cebu demanding the delivery of his
baggage before noon the next day, otherwise, he would hold PAL liable for
damages. This telegram was received by the Cebu PAL supervisor but the latter felt
no need to wire petitioner that his luggage had already been forwarded on the
assumption that by the time the message reached Butuan City, the luggage would
have arrived.
5.
Early in the morning of the next day, August 27 petitioner went to the
Bancasi Airport to inquire about his luggage. He did not wait, however, for the
morning flight which arrived at 10:00 o'clock that morning. This flight carried the
missing luggage. A certain Emilio Dagorro a driver of a "colorum" car, who also used
to drive for petitioner, volunteered to take the luggage to petitioner. Dagorro then
delivered the "maleta" to petitioner, with the information that the lock was open.
6.
Upon inspection, petitioner found that a folder containing certain exhibits,
transcripts and private documents in Civil Case No. 1005 and Sp. Procs. No. 1126
were missing, aside from two gift items for his parents-in-law. Petitioner refused to
accept the luggage. Meanwhile, petitioner asked for postponement of the hearing
of Civil Case No. 1005 due to loss of his documents, which was granted by the
Court. Petitioner returned to Cebu City on August 28, 1967.
7.
On September 13, 1967, petitioner filed a Complaint against PAL for
damages for breach of contract of transportation with the Court of First Instance of
Cebu. After due trial, the lower Court found PAL to have acted in bad faith and with
malice and declared petitioner entitled to moral damages in the sum of P80,000.00,
exemplary damages of P30,000.00, attorney's fees of P5,000.00, and costs.
8.
Both parties appealed to the Court of Appeals petitioner in so far as he
was awarded only the sum of P80,000.00 as moral damages; and defendant
because of the unfavorable judgment rendered against it.

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9.
The Court of Appeals, finding that PAL was guilty only of simple negligence,
reversed the judgment of the trial Court, but ordered PAL to pay plaintiff the sum of
P100.00, the baggage liability assumed by it under the condition of carriage printed
at the back of the ticket.
ISSUES:
1.

Whether or not PAL is guilty of only simple negligence?

2.
case?

Whether the doctrine of limited liability doctrine applies in the instant

HELD:
1.
YES. From the facts of the case, we agree with respondent Court that PAL
had not acted in bad faith. Bad faith means a breach of a known duty through some
motive of interest or ill will. It was the duty of PAL to look for petitioner's luggage
which had been miscarried. PAL exerted due diligence in complying with such duty.

Cebu office immediately wired Manila inquiring about the missing baggage of the
plaintiff. At 3:59 P.M., Manila station agent at the domestic airport wired Cebu that
the baggage was over carried to Manila. And this message was received in Cebu one
minute thereafter, or at 4:00 P.M. The baggage was in fact sent back to Cebu City
that same afternoon. His Honor stated that the fact that the message was sent at
3:59 P.M. from Manila and completely relayed to Mactan at 4:00 P.M., or within
one minute, made the message appear spurious. Neither was the failure of PAL
Cebu to reply to petitioner's rush telegram indicative of bad faith, The telegram was
dispatched by petitioner at around 10:00 P.M. of August 26, 1967. The PAL
supervisor at Mactan Airport was notified of it only in the morning of the following
day. At that time the luggage was already to be forwarded to Butuan City. There
was no bad faith, therefore, in the assumption made by said supervisor that the
plane carrying the bag would arrive at Butuan earlier than a reply telegram. Had
petitioner waited or caused someone to wait at the Bancasi airport for the arrival of
the morning flight, he would have been able to retrieve his luggage sooner.
2.
YES. While it may be true that petitioner had not signed the plane ticket,
he is nevertheless bound by the provisions thereof. "Such provisions have been
held to be a part of the contract of carriage, and valid and binding upon the
passenger regardless of the latter's lack of knowledge or assent to the regulation".
It is what is known as a contract of "adhesion", in regards which it has been said
that contracts of adhesion wherein one party imposes a ready made form of
contract on the other, as the plane ticket in the case at bar, are contracts not

entirely prohibited. The one who adheres to the contract is in reality free to reject it
entirely; if he adheres, he gives his consent.
The pertinent Condition of Carriage printed at the back of the plane ticket reads:
BAGGAGE LIABILITY ... The total liability of the Carrier for lost or damaged baggage
of the passenger is LIMITED TO P100.00 for each ticket unless a passenger declares
a higher valuation in excess of P100.00, but not in excess, however, of a total
valuation of P1,000.00 and additional charges are paid pursuant to Carrier's tariffs.
Considering, therefore, that petitioner had failed to declare a higher value for his
baggage, he cannot be permitted a recovery in excess of P100.00. Besides,
passengers are advised not to place valuable items inside their baggage but "to avail
of our V-cargo service ". It is likewise to be noted that there is nothing in the
evidence to show the actual value of the goods allegedly lost by petitioner.

Sea-Land Service, Inc. v. Intermediate Appellate Court


Facts: Sea-Land, a foreign shipping and forwarding company licensed to do business
in the Philippines, received from Seaborne Trading Company in California, a
shipment consigned to Sen Hiap Hing, the business name used by Paulino Cue in the
wholesale and retail trade which he operated. The shipper not having declared the
value of the shipment, NO VALUE WAS INDICATED IN THE BILL OF LADING. The
shipment was discharged in Manila, and while awaiting transshipment to Cebu, the
cargo was stolen by pilferers and never recovered.
Paulino Cue, the consignee, made formal claim upon Sea-Land for the value of the
lost shipment allegedly amounting to P179,643.48. Sea-Land offered to settle for
US$4,000.00, or its then Philippine peso equivalent of P30,600.00. asserting that
said amount represented its maximum liability for the loss of the shipment under
the package limitation clause in the covering bill of lading. Cue rejected the offer
and thereafter brought suit for damages against Sea-Land in the then Court of First
Instance of Cebu
The trial court sentenced Sea-Land to pay Cue P186,048 representing the Philippine
currency value of the lost cargo, P55, 814 for unrealized profit and P25,000 for
attorneys fees. CA affirmed the trial courts decision.
Issue: Whether or not Sea-Land is liable to pay Cue.
Held: There is no question of the right of a consignee in a bill of lading to recover
from the carrier or shipper for loss of, or damage to, goods being transported under
said bill, although that document may have been drawn up only by the consignor
and the carrier without the intervention of the consignee.

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

Since the liability of a common carrier for loss of or damage to goods transported
by it under a contract of carriage is governed by the laws of the country of
destination and the goods in question were shipped from the United States to the
Philippines, the liability of Sea-Land has Cue is governed primarily by the Civil Code,
and as ordained by the said Code, supplementary, in all matters not cluttered
thereby, by the Code of Commerce and special laws. One of these supplementary
special laws is the Carriage of goods by Sea Act (COGSA), made applicable to all
contracts for the carriage by sea to and from the Philippines Ports in Foreign Trade
by Comm. Act. 65. Sec. 4(5) of said Act in part reads:

limitation by the simple expedient of declaring the value of the shipment in the bill
of lading.

(5) Neither the carrier nor the ship shall in any event be or become liable for any
loss or damage to or in connection with the transportation of goods in an amount
exceeding $500 per package lawful money of the United States, or in case of goods
not shipped in packages, per customary freight unit, or the equivalent of that sum
in other currency, unless the nature and value of such goods have been declared by
the shipper before shipment and inserted in the bill of lading. This declaration, if
embodied in the bill of lading, shall be prima facie evidence, but shall not be
conclusive on the carrier.

vs.

By agreement between the carrier, master, or agent of the carrier, and the shipper
another maximum amount than that mentioned in this paragraph may be fixed:
Provided, That such maximum shall not be less than the figure above named. In no
event shall the carrier be liable for more than the amount of damage actually
sustained.
Not only is there nothing in the Civil Code which absolutely prohibits agreements
between shipper and carrier limiting the latter's liability for loss of or damage to
cargo shipped under contracts of carriage; it is also quite clear that said Code in fact
has agreements of such character in contemplation in providing, in its Articles 1749
and 1750, that:
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.
Even if Section 4(5) of COGSA did not list the validity and binding effect of the
liability limitation clause in the bill of lading here are fully substantial on the basis
alone of Article 1749 and 1750 of the Civil Code. The justices of such stipulation is
implicit in its giving the owner or shipper the option of avoiding accrual of liability

The stipulation in the bill of lading limiting the liability of Sea-Land for loss or
damages to the shipment covered by said rule to US$500 per package unless the
shipper declares the value of the shipment and pays additional charges is valid and
binding on Cue.
Citadel Lines, Inc. v. CA G.R. No. 88092 April 25, 1990
CITADEL LINES, INC., petitioner,

COURT OF APPEALS * and MANILA WINE MERCHANTS, INC., respondents.

Facts:
Petitioner Citadel Lines, Inc. (CARRIER) is the general agent of the vessel "Cardigan
Bay/Strait Enterprise," while respondent Manila Wine Merchants, Inc.(CONSIGNEE)
is the importer of the subject shipment of Dunhill cigarettes from England.
The vessel loaded on board at Southampton, England, for carriage to Manila, 180
Filbrite cartons of mixed British manufactured cigarettes called "Dunhill
International Filter" and "Dunhill International Menthol. The shipment arrived at
the Port of Manila in a container van which was received by E. Razon, Inc. (later
known as Metro Port Service, Inc.)(ARRASTRE)
The container van, which contained two shipments was stripped. One shipment was
delivered and the other shipment consisting of the imported British manufactured
cigarettes was palletized. Due to lack of space at the Special Cargo Coral, the
aforesaid cigarettes were placed in two containers with two pallets in one
container, and four pallets in another container, with both containers duly
padlocked and sealed by the representative of the CARRIER.
The CARRIERs headchecker discovered that the second container had a different
padlock and the seal was tampered with. The matter was reported to Sibucao (Pier
Superintendent) and upon verification, it was found that 90 cases of imported
British manufactured cigarettes were missing. In an investigation conducted by the
ARRASTRE it was revealed that the cargo in question was not formally turned over
to it by the CARRIER but was kept inside the said container van which was
padlocked and sealed by the representatives of the CARRIER without any
participation of the ARRASTRE.

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

When the CONSIGNEE learned that 90 cases were missing, it filed a formal claim
with the CARRIER. In its reply, it alleged that the goods were under the absolute
control ARRASTRE. A formal claim was then filed with the ARRASTRE which denied
liability.
The trial court rendered a decision exonerating the ARRASTRE from any liability on
the ground that the subject container van was not formally turned over to its
custody, adjudging the CARRIER liable for the lost shipment. The CA affirmed the
decision of the RTC.

Issue:
1.
Whether the loss occurred while the cargo in question was in the custody
of E. Razon, Inc. or of Citadel Lines, Inc
2.
Whether the stipulation limiting the liability of the carrier contained in the
bill of lading is binding on the consignee.

Ruling:
1.
The subject cargo which was placed in a container van, padlocked and
sealed by the representative of the CARRIER was still in its possession and control
when the loss occurred, there having been no formal turnover of the cargo to the
ARRASTRE.
Common carriers, from the nature of their business and for reasons of public policy,
are bound to observe extraordinary diligence in the vigilance over the goods and for
the safety of the passengers transported by them, according to all the
circumstances of each case. 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 extra ordinary diligence as required in Article
1733 of the Civil Code. The duty of the consignee is to prove merely that the goods
were lost Thereafter; the burden is shifted to the carrier to prove that it has
exercised the extraordinary diligence required by law. And, its extraordinary
responsibility lasts from the time the goods are unconditionally placed in the
possession of, and received by the carrier for transportation until the same are
delivered, actually or constructively, by the carrier to the consignee or to the person
who has the right to receive them.
Considering, therefore, that the subject shipment was lost while it was still in the
custody of herein petitioner CARRIER, and considering further that it failed to prove

that the loss was occasioned by an excepted cause, the inescapable conclusion is
that the CARRIER was negligent and should be held liable therefor.
2.
The award of damages in the amount of P312,800.00 for the value of the
goods lost, based on the alleged market value thereof, to be erroneous. It is clearly
and expressly provided under Clause 6 of the aforementioned bills of lading issued
by the CARRIER that its liability is limited to $2.00 per kilo. Basic is the rule, long
since enshrined as a statutory provision that a stipulation limiting the liability of the
carrier to the value of the goods appearing in the bill of lading, unless the shipper or
owner declares a greater value, is binding. Further, a contract fixing the sum that
may be recovered by the owner or shipper for the loss, destruction or deterioration
of the goods is valid, if it is reasonable and just under the circumstances, and has
been fairly and freely agreed upon
The CONSIGNEE itself admits in its memorandum that the value of the goods
shipped does not appear in the bills of lading. Hence, the stipulation on the carrier's
limited liability applies. There is no question that the stipulation is just and
reasonable under the circumstances and has been fairly and freely agreed upon.
The bill of lading shows that 120 cartons weigh 2,978 kilos or 24.82 kilos per carton.
Since 90 cartons were lost and the weight of said cartons is 2,233.80 kilos, at $2.00
per kilo the CARRIER's liability amounts to only US$4,467.60.

Stipulation limiting carriers liability

[G.R. No. 121824 January 29, 1998]


BRITISH AIRWAYS, petitioner,
vs.
COURT OF APPEALS, GOP MAHTANI, and PHILIPPINE AIRLINES, respondents.

Facts:
On April 16, 1989, Mahtani decided to visit his relatives in Bombay, India. He asked
Mr. Gumar to prepare his travel plans. Mr. Gumar purchased a ticket from British
Airways (BA).Since BA had no direct flights from Manila to Bombay, Mahtani had to
take a flight to Hongkong via PAL, and upon arrival in Hongkong he had to take a
connecting flight to Bombay on board BA. Before departure, Mahtani checked in at
PAL counter his two pieces of luggage containing his clothings and personal effects,

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

confident that upon reaching Hongkong, the same would be transferred to the BA
flight bound for Bombay. When Mahtani arrived in Bombay he discovered that his
luggage was missing and that upon inquiry from the BA representatives, he was told
that the same might have been diverted to London. After waiting for 1 week, BA
finally advised him to file a claim by accomplishing the "Property Irregularity Report.
In the Philippines, on June 11, 1990 Mahtani filed his complaint for damages and
attorney's fees against BA and Mr.Gumar before the RTC. On September 4, 1990,
BA filed its answer with counter claim to the complaint raising, as special and
affirmative defenses, that Mahtani did not have a cause of action against it.
Likewise, on November 9, 1990, BA filed a third-party complaint against PAL
alleging that the reason for the non-transfer of the luggage was due to the latter's
late arrival in Hongkong, thus leaving hardly any time for the proper transfer of
Mahtani's luggage to the BA aircraft bound for Bombay.
On February 25, 1991, PAL filed its answer to the third-party complaint, wherein it
disclaimed any liability, arguing that there was, in fact, adequate time to transfer
the luggage to BA facilities in Hongkong. Furthermore, the transfer of the luggage to
Hongkong authorities should be considered as transfer to BA.
After appropriate proceedings and trial, on March 4, 1993, the trial court rendered
its decision in favor of Mahtani.BA is ordered to pay Mahtani P7,000 for the value of
the 2 suitcases$400 for the value of the contents of the luggageP50,000 for moral
and exemplary damages and 20% for attorneys fees and cost of the action. This
decision was affirmed by CA.
ISSUE:
Whether or not the award of the damages was without basis since Mahtani failed
to declare a higher valuation with respect to his luggage

RULING:

NO. The nature of an airline's contract of carriage partakes of two types, namely: a
contract to deliver a cargo or merchandise to its destination and a contract to
transport passengers to their destination. A business intended to serve the traveling
public primarily, it is imbued with public interest, hence, the law governing common
carriers imposes an exacting standard.

Admittedly, in a contract of air carriage a declaration by the passenger of a higher


value is needed to recover a greater amount. Article 22(1) of the Warsaw
Convention However, we have held that benefits of limited liability are subject to
waiver such as when the air carrier failed to raise timely objections during the trial
when questions and answers regarding the actual claims and damages sustained by
the passenger were asked.

Given the foregoing postulates, the inescapable conclusion is that BA had waived
the defense of limited liability when it allowed Mahtani to testify as to the actual
damages he incurred due to the misplacement of his luggage, without any
objection. Indeed, it is a well-settled doctrine that where the proponent offers
evidence deemed by counsel of the adverse party to be inadmissible for any reason,
the latter has the right to object. However, such right is a mere privilege which can
be waived. Necessarily, the objection must be made at the earliest opportunity, lest
silence when there is opportunity to speak may operate as a waiver of objections.

BA has precisely failed in this regard. It failed, not only to interpose a timely
objection, but even conducted his own cross-examination as well.

LOADSTAR SHIPPING CO., INC. VS COURT OF APPEALS


Facts: On 19 November 1984, LOADSTAR received on board a) 705 bales of lawanit
hardwood; b) 27 boxes and crates of tilewood assemblies and the others ;and c) 49
bundles of mouldings R & W (3) Apitong Bolidenized. On its way to Manila from the
port of Nasipit, Agusan del Norte, the vessel, along with its cargo, sank off Limasawa
Island. As a result of the total loss of its shipment, the consignee made a claim with
LOADSTAR which, however, ignored the same. MIC filed a complaint against
LOADSTAR and PGAI, alleging that the sinking of the vessel was due to the fault and
negligence of LOADSTAR and its employees. LOADSTAR denied any liability for the
loss of the shippers goods and claimed that sinking of its vessel was due to force
majeure. And if presuming that they were liable, they were liable on the amount
fixed in the bill of lading.
Issues:
1. Is the Doctrine of Limited Liability applies?

Neglect or malfeasance by the carrier's employees could predictably furnish bases


for an action for damages.

2. Is limitation on the carriers liability to an amount fixed in the bill of lading valid?

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

Held:
1. No. The doctrine of limited liability does not apply where there was negligence
on the part of the vessel owner or agent.[17] LOADSTAR was at fault or negligent in
not maintaining a seaworthy vessel and in having allowed its vessel to sail despite
knowledge of an approaching typhoon. In any event, it did not sink because of any
storm that may be deemed as force majeure, inasmuch as the wind condition in the
area where it sank was determined to be moderate. Since it was remiss in the
performance of its duties, LOADSTAR cannot hide behind the limited liability
doctrine to escape responsibility for the loss of the vessel and its cargo.

2. No. Such stipulation is obviously null and void for being contrary to public policy.
Three kinds of stipulations have often been made in a bill of lading. The first is one
exempting the carrier from any and all liability for loss or damage occasioned by its
own negligence. The second is one providing for an unqualified limitation of such
liability to an agreed valuation. And the third is one limiting the liability of the
carrier to an agreed valuation unless the shipper declares a higher value and pays a
higher rate of freight. According to an almost uniform weight of authority, the first
and second kinds of stipulations are invalid as being contrary to public policy, but
the third is valid and enforceable. In the case at bar, the stipulation effectively
reduces the common carriers liability for the loss or destruction of the goods to a
degree less than extraordinary, hence invalid.

QUISUMBING VS. CA
(Amount of Liability)
G.R. No. L-50076 September 14, 1990
NORBERTO QUISUMBING, SR., and GUNTHER LOEFFLER petitioners,
vs.
COURT OF APPEALS and PHILIPPINE AIR LINES, INC., respondents.
NARVASA, J.:
FACTS:
Norberto Quisumbing, Sr. and Gunther Leoffler were among the (passengers) of ...
(PAL's) Fokker 'Friendship' PIC-536 plane in its flight of November 6,1968 which left
Mactan City at about 7:30 in the evening with Manila for its destination. After the
plane had taken off, Florencio O. Villarin, a Senior NBI Agent who was also a
passenger of the said plane, noticed a certain 'Zaldy,' a suspect in the killing of

Judge Valdez, seated at the front seat near the door leading to the cockpit of the
plane.
A check by Villarin with the passenger's ticket in the possession of flight Stewardess
Annie Bontigao, who was seated at the last seat right row, revealed that 'Zaldy' had
used the name 'Cardente,' one of his aliases known to Villarin. Villarin also came to
know from the stewardess that 'Zaldy' had three companions on board the plane."
Villarin then scribbled a note addressed to the pilot of the plane requesting the
latter to contact NBI duty agents in Manila for the said agents to ask the Director of
the NBI to send about six NBI agents to meet the plane because the suspect in the
killing of Judge Valdez was on board. The said note was handed by Villarin to the
stewardess who in turn gave the same to the pilot.
After receiving the note, which was about 15 minutes after take off, the pilot of the
plane, Capt. Luis Bonnevie, Jr., came out of the cockpit and sat beside Villarin at the
rear portion of the plane and explained that he could not send the message
because it would be heard by all ground aircraft stations. Villarin, however, told the
pilot of the danger of commission of violent acts on board the plane by the
notorious 'Zaldy' and his three companions.
While the pilot and Villarin were talking, 'Zaldy' and one of his companions walked
to the rear and stood behind them. Capt. Bonnevie then stood up and went back to
the cockpit. 'Zaldy' and his companions returned to their seats, but after a few
minutes they moved back to the rear throwing ugly looks at Villarin who, sensing
danger, stood up and went back to his original seat across the aisle on the second
to the last seat near the window. 'Zaldy and his companion likewise went back to
their respective seats in front.
Soon thereafter an exchange of gunshots ensued between Villarin and 'Zaldy' and
the latter's companions. 'Zaldy' announced to the passengers and the pilots in the
cockpit that it was a hold-up and ordered the pilot not to send any SOS. The holduppers divested passengers of their belongings. Specifically, ... Norberto
Quisumbing, Sr. was divested of jewelries and cash in the total amount of
P18,650.00 out of which recoveries were made amounting to P4,550.00. . . Gunther
Leoffler was divested of a wrist watch, cash and a wallet in the total of P1,700.00.
As a result of the incident ... Quisumbing, Sr.suffered shock, because a gun had
been pointed at him by one of the holduppers. Upon landing at the Manila
International Airport. 'Zaldy' and his three companions succeeded in escaping
Demands were thereafter made on PAL by Quisumbing and Loeffler "to indemnify
... (them) on their aforesaid loss, but ... (PAL) refused ... (averring that) it is not
liable to (them) in law or in fact." Contending that the "aforesaid loss is a result of
breach of ... (PAL's) contractual obligation to carry ... (them) and their belongings

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

and effects to their Manila destination without loss or damage, and constitutes a
serious dereliction of ... (PAL's) legal duty to exercise extraordinary diligence in the
vigilance over the same." , Quisumbing and Loeffler brought suit against PAL in the
CFI of Rizal to recover the value of the property lost by them to the robbers as well
as moral and exemplary damages, attorney's fees and expenses of litigation. The
plaintiffs declared that their suit was instituted "... pursuant to Civil Code articles
1754, 998, 2000 and 2001 and on the ground that in relation to said Civil Code
article 2001 the complained-of act of the armed robbers is not a force majeure, as
the 'use of arms' or 'irresistible force' was not taken advantage of by said armed
robbers in gaining entrance to defendant's ill-fated plane in questions. And, with
respect to said Civil Code article 1998, it is not essential that the lost effects and
belongings of plaintiffs were actually delivered to defendant's plane personnel or
that the latter were notified thereof (De los Santos v. Tamn Khey, [CA] 58 O.G.
7693).
PAL filed answer denying liability, alleging inter alia that the robbery during the
flight and after the aircraft was forcibly landed at the Manila Airport did indeed
constitute force majeure, and neither of the plaintiffs had notified PAL "or its crew
or employees that they were in possession of cash, German marks and valuable
jewelries and watches" or surrendered said items to "the crew or personnel on
board the aircraft."
After trial, the CFI Dismissed the complaint of Quisumbing and Loeffler with costs
against ... (them)." The Court opined that since the plaintiffs "did not notify
defendant or its employees that they were in possession of the cash, jewelries, and
the wallet they are now claiming," the very provision of law invoked by them,
Article 1998 of the Civil Code, denies them any recourse against PAL. The armed
robbery that took place constitutes force majeure for which defendant is not liable
because the robbers were able to gain entrance to the plane with the guns they
used already in their possession, which fact could not have been prevented nor
avoided by the defendant since it was not authorized to search its passengers for
firearms and deadly weapons. As its robbery constitutes force majeure, defendant
is not liable.
The plaintiffs appealed to the Court of Appeals. The Court affirmed the trial court's
judgment. 8 It rejected the argument that "the use of arms or ... irresistible force"
referred to in Article 2001 constitutes force majeure only if resorted to gain entry
into the airplane, and not if it attends "the robbery itself." The Court ruled that
under the facts, "the highjacking-robbery was force majeure." Hence, this petition.
ISSUE: Whether or not PAL is liable to Quisumbing and Loeffler?
HELD: NO, PAL is not liable to Quisumbing and Loeffler.

Under the circumstance of the instant case, the acts of the airline and its crew
cannot be faulted as negligence. The hijackers had already shown their willingness
to kill. One passenger was in fact killed and another survived gunshot wounds. The
lives of the rest of the passengers and crew were more important than their
properties. Cooperation with the hijackers until they released their hostages at the
runway end near the South Superhighway was dictated by the circumstances.
Insisting that the evidence demonstrates negligence on the part of the PAL crew
"occurring before and exposing them to hijacking," Quisumbing and Loeffler have
come up to this Court praying that the judgments of the trial Court and the Court of
Appeals be reversed and another rendered in their favor. Once again, the issue will
be resolved against them.
A careful analysis of the record in relation to the memoranda and other pleadings of
the parties, convinces this Court of the correctness of the essential conclusion of
both the trial and appellate courts that the evidence does indeed fail to prove any
want of diligence on the part of PAL, or that, more specifically, it had failed to
comply with applicable regulations or universally accepted and observed
procedures to preclude hijacking; and that the particular acts singled out by the
petitioners as supposedly demonstrative of negligence were, in the light of the
circumstances of the case, not in truth negligent acts "sufficient to overcome the
force majeure nature of the armed robbery." The Court quite agrees, too, with the
Appellate Tribunal's wry observation that PAL's "failure to take certain steps that a
passenger in hindsight believes should have been taken is not the negligence or
misconduct which mingles with force majeure as an active and cooperative cause.

PAN AMERICAN WORLD AIRWAYS, INC., vs. JOSE K. RAPADAS and THE COURT OF
APPEALS
G.R. No. 60673 May 19, 1992
GUTIERREZ, JR., J.:

Facts: Jose K. Rapadas held Passenger Ticket and Baggage Claim Check No. 026394830084-5 for petitioner's Flight No. 841 with the route from Guam to Manila.
While standing in line to board the flight at the Guam airport, Rapadas was ordered
by petitioner's handcarry control agent to check-in his Samsonite attache case.
Rapadas protested pointing to the fact that other co-passengers were permitted to
handcarry bulkier baggages. He stepped out of the line only to go back again at the
end of it to try if he can get through without having to register his attache case.
However, the same man in charge of handcarry control did not fail to notice him

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

and ordered him again to register his baggage. For fear that he would miss the
plane if he insisted and argued on personally taking the valise with him, he acceded
to checking it in. He then gave his attache case to his brother who happened to be
around and who checked it in for him, but without declaring its contents or the
value of its contents. He was given a Baggage Claim Tag.
Upon arriving in Manila on the same date, Rapadas claimed and was given all his
checked-in baggages except the attache case. He sent letters demanding and
reminding the petitioner of his claim. Rapadas received a letter from the
petitioner's counsel dated August 2, 1975 offering to settle the claim for the sum of
one hundred sixty dollars ($160.00) representing the petitioner's alleged limit of
liability for loss or damage to a passenger's personal property under the contract of
carriage between Rapadas and PAN AM. Refusing to accept this kind of settlement,
Rapadas filed the instant action for damages.
Rapadas alleged that PAN AM discriminated or singled him out in ordering that his
luggage be checked in. He also alleged that PAN AM neglected its duty in the
handling and safekeeping of his attache case from the point of embarkation in
Guam to his destination in Manila. He placed the value of the lost attache case and
its contents at US$42,403.90. According to him, the loss resulted in his failure to
pay certain monetary obligations, failure to remit money sent through him to
relatives, inability to enjoy the fruits of his retirement and vacation pay earned from
working in Tonga Construction Company (he retired in August 1974) and inability to
return to Tonga to comply with then existing contracts. In its answer, petitionerdefendant PAN AM acknowledged responsibility for the loss of the attache case but
asserted that the claim was subject to the "Notice of Baggage Liability Limitations"
allegedly attached to and forming part of the passenger ticket. The lower court
ruled in favor of complainant Rapadas after finding no stipulation giving notice to
the baggage liability limitation.
The court rejected the claim of defendant PANAM that its liability under the terms
of the passenger ticket is only up to $160.00. However, it scrutinized all the claims
of the plaintiff. It discredited insufficient evidence to show discriminatory acts or
bad faith on the part of petitioner PANAM.
On appeal, the Court of Appeals affirmed the trial court decision. Hence, this
petition.
Issue: WON a passenger is bound by the terms of a passenger ticket declaring that
the limitations of liability set forth in the Warsaw Convention
Held: YES. There is no dispute, and the courts below admit, that there was such a
Notice appearing on page two (2) of the airline ticket stating that the Warsaw

Convention governs in case of death or injury to a passenger or of loss, damage or


destruction to a passenger's luggage.
The Notice states:
If the passenger's journey involves an ultimate destination or stop in a country
other than the country of departure the Warsaw Convention may be applicable and
the Convention governs and in most cases limits the liability of carriers for death or
personal injury and in respect of loss of or damage to baggage. See also notice
headed "Advice to International Passengers on Limitation of Liability." (The latter
notice refers to limited liability for death or personal injury to passengers with
proven damages not exceeding US $75,000 per passenger; Exhibit "K" for plaintiff
respondent, Table of Exhibits, p. 19)
Furthermore, paragraph 2 of the "Conditions of Contract" also appearing on page 2
of the ticket states:
2. Carriage hereunder is subject to the rules and limitations relating to liability
established by the Warsaw Convention unless such carriage is not "international
carriage" as defined by that Convention.
As earlier stated, the Court finds the provisions in the plane ticket sufficient to
govern the limitations of liabilities of the airline for loss of luggage. The passenger,
upon contracting with the airline and receiving the plane ticket, was expected to be
vigilant insofar as his luggage is concerned. If the passenger fails to adduce evidence
to overcome the stipulations, he cannot avoid the application of the liability
limitations. Passengers are also allowed one handcarried bag each provided it
conforms to certain prescribed dimensions. If Mr. Rapadas was not allowed to
handcarry the lost attache case, it can only mean that he was carrying more than
the allowable weight for all his luggages or more than the allowable number of
handcarried items or more than the prescribed dimensions for the bag or valise.
The evidence on any arbitrary behavior of a Pan Am employee or inexcusable
negligence on the part of the carrier is not clear from the petition. Absent such
proof, we cannot hold the carrier liable because of arbitrariness, discrimination, or
mistreatment.
The alleged lack of enough time for him to make a declaration of a higher value and
to pay the corresponding supplementary charges cannot justify his failure to comply
with the requirement that will exclude the application of limited liability. Had he
not wavered in his decision to register his luggage, he could have had enough time
to disclose the true worth of the articles in it and to pay the extra charges or
remove them from the checked-in-luggage. Moreover, an airplane will not depart
meantime that its own employee is asking a passenger to comply with a safety
regulation.

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

BRITISH AIRWAYS, petitioner, vs. COURT OF APPEALS, GOP MAHTANI, and


PHILIPPINE AIRLINES, respondents.
TOPIC: Amount of Liability
FACTS:
Mahtani obtained the services of a certain Mr. Gemar to prepare his travel plan to
Bombay, India. Mr. Gemar purchased a ticket from British Airways, however since
it had no ticket flights from Manila to Bombay, Mahtani had to take a connecting
flight to Bombay. Prior to his departure, Mahtani checked in the PAL counter in
Manila his two pieces of luggage containing his clothing and personal effects,
confident that upon reaching Hong Kong, the same would be transferred to the
British Airways flight bound for Bombay. Unfortunately, when Mahtani arrived in
Bombay, he discovered that his luggage was missing and that upon inquiry from the
British Airways representatives, he was told that the same might have been
diverted to London. After plaintiff waited for his luggage for one week, BA finally
advised him to file a claim. Mahtani filed his complaint for damages. British Airways
filed a third-party complaint against PAL alleging that the reason for the nontransfer of the luggage was due to the latter's late arrival in Hongkong, thus leaving
hardly any time for the proper transfer of Mahtani's luggage to the BA aircraft
bound for Bombay. RTC rendered its decision in favor of Mahtani, which CA
affirmed, hence the instant petition. British Airways alleged that there should have
been no separate award for the luggage and the contents thereof since Mahtani
failed to declare a separate higher valuation for the luggage and therefore, its
liability is limited, at most, only to the amount stated in the ticket.

ISSUE: WON Mahtani is entitled to compensatory damages and attorneys fees


HELD:
Yes. The contract of transportation was exclusively between Mahtani and British
Airways. The latter merely endorsing the Manila to Hong Kong log of the formers
journey to PAL, as its subcontractor or agent. Conditions of contacts were one of
continuous air transportation from Manila to Bombay. The Court of Appeals should
have been cognizant of the well-settled rule that an agent is also responsible for
any negligence in the performance of its function and is liable for damages which
the principal may suffer by reason of its negligent act. The third-party complaint
was therefore reinstated. Since the instant petition was based on breach of contract
of carriage, Mahtani can only sue British Airways and not PAL, since the latter was
not a party in the contract. In addition, we have held that benefits of limited liability

are subject to waiver such as when the air carrier failed to raise timely objections
during the trial when questions and answers regarding the actual claims and
damages sustained by the passenger were asked. The contention of British Airways
with respect to limited liability was overruled although it is recognized in the
Philippines, stating that British Airways had waived the defense of limited liability
when it allowed Mahtani to testify as to the actual damages he incurred due to the
misplacement of his luggage, without any objection.

4th Batch
HERMINIO L. NOCUM vs. LAGUNA TAYABAS BUS COMPANY
G.R. No. L-23733. October 31, 1969 BARREDO, J.
FACTS: Appellee (Nocum), who was a passenger in appellant's (Laguna Tayabas
Bus Co.) Bus No. 120 then making a trip within the barrio of Dita, Municipality of
Bay, Laguna, was injured as a consequence of the explosion of firecrackers,
contained in a box, loaded in said bus. A total of 37 passengers were injured.
The bus conductor testified that the box belonged to a passenger whose name he
does not know and who told him that it contained miscellaneous items and clothes.
He also said that from its appearance there was no indication at all that the
contents were explosives or firecrackers. Neither did he open the box because he
just relied on the word of the owner.
Dispatcher Nicolas Cornista added that they were not authorized to open the
baggages of passengers because instruction from the management was to call the
police if there were packages containing articles which were against regulations.
The trial court's decision is that appellant(LTBC) did not observe the extraordinary
or utmost diligence of a very cautious person as required by the articles 1733, 1755,
& 1756 of the Civil Code. Hence, this case.
ISSUE: Whether or not Laguna Tayabas Bus Co. failed to exercise extraordinary
diligence.
HELD: NO. We are not convinced that the exacting criterion of said provisions has
not been met by appellant in the circumstances of this particular case.
Article 1755 provides: "A common carrier is bound to carry the passengers safely as
far as human care and foresight can provide, using the utmost diligence of very
cautious persons, with due regard for all the circumstances."
In this particular case before Us, it must be considered that while it is true the
passengers of appellant's bus should not be made to suffer for something over
which they had no control, as enunciated in the decision of this Court cited by His
Honor, fairness demands that in measuring a common carrier's duty towards its
passengers, allowance must be given to the reliance that should be reposed on the
sense of responsibility of all the passengers in regard to their common safety. It is
to be presumed that a passenger will not take with him anything dangerous to the
lives and limbs of his co-passengers, not to speak of his own. Not to be lightly
considered must be the right to privacy to which each passenger is entitled. He

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

cannot be subjected to any unusual search, when he protests the innocuousness of


his baggage and nothing appears to indicate the contrary, as in the case at bar. In
other words, inquiry may be verbally made as to the nature of a passenger's
baggage when such is not outwardly perceptible, but beyond this, constitutional
boundaries are already in danger of being transgressed.
Since We hold that appellant has succeeded in rebutting the presumption of
negligence by showing that it has exercised extraordinary diligence for the safety of
its passengers, "according to the circumstances of the (each) case", We deem it
unnecessary to rule whether or not there was any fortuitous event in this case.
The appealed judgment of the trial court is reversed and the case is dismissed.
JOSE P. MECENAS, ROMEO P. MECENAS, LILIA P. MECENAS, ORLANDO P.
MECENAS, VIOLETA M. ACERVO, LUZVIMINDA P. MECENAS; and OFELIA M.
JAVIER, vs. HON. COURT OF APPEALS, CAPT. ROGER SANTISTEBAN and NEGROS
NAVIGATION CO., INC.,
Philippine National Oil Company (PNOC)
- owner of cargo
Shipping and Transport Corporation (PNOC Shipping) - common carrier
M/T Tacloban City
- vessel of PNOC
Shipping
Negros Navigation Co., Inc. (Negros Navigation)
M/T Don Juan
Navigation
(Petitioners Herein)
victims of the sunken

- common carrier
- vessel of Negros
- relatives of the
M/T Don Juan

At 6:20 o'clock in the morning of 22 April 1980


M/T "Tacloban City," a barge-type oil tanker of Philippine registry, with a gross
tonnage of 1,241,68 tons, owned by the Philippine National Oil Company (PNOC)
and operated by the PNOC Shipping and Transport Corporation (PNOC Shipping),
having unloaded its cargo of petroleum products, left Amlan, Negros Occidental,
and headed towards Bataan. At about 1:00 o'clock in the afternoon of that same
day, the M/V "Don Juan," an interisland vessel, also of Philippine registry, of
2,391.31 tons gross weight, owned and operated by the Negros Navigation Co., Inc.
(Negros Navigation) left Manila bound for Bacolod with 750 passengers listed in its
manifest, and a complete set of officers and crew members.
However, the Certificate of Inspection, as per the Philippine Coast Guard
report, shows that Tacloban City only allowed a total of 810 passengers or 864
persons. The 750 passengers excluded the 126 crew members, children below 3 y/o

and 2 half-paying passengers which had been counted as one adult passenger.
Thus, the total number of persons on board was 1,004 or 140 persons more than
the maximum number that could be safely carried by Don Juan. Further, in its
manifest for its final voyage, 128 passengers on board had not even been entered
into the Don Juans manifest. Its Certificate of Inspection also showed that she
carried life boat and life raft accommodations for only 864 persons, the maximum
number of persons she was permitted to carry.
On the evening of that same day, 22 April 1980, at about 10:30 o'clock
"Tacloban City" and the "Don Juan" collided at the Talbas Strait near Maestra de
Ocampo Island in the vicinity of the island of Mindoro. Tacloban City was on the
left, while Don Juan was on the right. The "Don Juan" was more than twice as fast
as the "Tacloban City." The "Don Juan's" top speed was 17 knots; while that of the
"Tacloban City" was 6.3. knots. The "Don Juan's" officer on-watch had sighted the
"Tacloban City" on his radar screen while the latter was still 4 nautical miles away.
Visual confirmation of radar contact was established by the "Don Juan" while the
"Tacloban City" was still 2.7 miles away. The "Tacloban City," when the 2 vessels
were 0.3 mile apart, turned (for the second time) 150 to port (left) side while the
"Don Juan" veered hard to starboard (right). The "Tacloban City," upon turning hard
to port shortly before the moment of collision, signaled its intention to do so by
giving 2 short blasts with horn. The "Don Juan " gave no answering horn blast to
signal its own intention and proceeded to turn hard to starboard (right).
When the collision occurred, the sea was calm, the weather fair and
visibility good. As a result of this collision, the M/V "Don Juan" sank within 10-15
minutes after initial contact with the "Tacloban City. Further, Capt. Roger
Santisteban, the captain of the "Don Juan, failed to to supervise his officers and
crew in the process of abandoning the ship and to avail of measures to prevent the
too rapid sinking of his vessel after collision. Also, the officer-on-watch in the "Don
Juan" admitted that he had failed to inform Capt. Santisteban not only of the
"imminent danger of collision" but even of "the actual collision itself .
Hundreds of its passengers perished. Among the ill-fated passengers were
the parents of petitioners, the spouses Perfecto Mecenas and Sofia Mecenas,
whose bodies were never found despite intensive search by petitioners.
On 29 December 1980
Petitioners filed a complaint in the then Court- of First Instance of Quezon City
against private respondents Negros Navigation and Capt. Santisteban without,
however, impleading either PNOC or PNOC Shipping. In their complaint, petitioners
alleged that they were the seven (7) surviving legitimate children of Perfecto

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

Mecenas and Sofia Mecenas and that the latter spouses perished in the collision
which had resulted from the negligence of Negros Navigation and Capt.
Santisteban. Petitioners prayed for actual damages of not less than P100,000.00 as
well as moral and exemplary damages in such amount as the Court may deem
reasonable to award to them.
Another complaint was filed in the same court by Lilia Ciocon claiming
damages against Negros Navigation, PNOC and PNOC Shipping for the death of her
husband Manuel Ciocon, another of the luckless passengers of the "Don Juan."
Manuel Ciocon's body, too, was never found.
The two (2) cases were consolidated and heard jointly by the Regional Trial
Court of Quezon City.
RTC Quezon City Findings & Decision
The findings of the RTC is the same with that of the Minister of National Defense
which upheld the decision of Commodore Ochoco, Commandant of the Philippine
Coast Guard, in its decision dated 2 March 1981. It held that the "Tacloban City"
was "primarily and solely [sic] at fault and responsible for the collision." However
on Motion for Reconsideration, however, the Minister of National Defense reversed
himself and held that both vessels had been at fault.
M/ V Don Juan and Tacloban City became aware of each other's presence
in the area by visual contact at a distance of something like 6 miles from each other.
They were fully aware that if they continued on their course, they will meet head on.
Don Juan - steered to the right (Starboard); Tacloban City continued its course to
the left (Port). There can be no excuse for them not to realize that, with such
maneuvers, they will collide. They executed maneuvers inadequate, and too late, to
avoid collision. Therefore, the defendants are equally negligent and are liable for
damages:
a)

Negros Navigation Co., Inc. and Capt. Roger Santisteban jointly and
severally liable to pay the petitioners Mecenas:
P400,000.00 for the death of plaintiffs' parents, Perfecto A.
Mecenas and Sofia P. Mecenas
P15.000,00 as and for attorney's fees
costs of the suit
b) Negros Navigation Co Inc. and Philippine National Oil Company/PNOC
Shipping and Transportation Company, to pay Lilia Ciocon
P100,000.00 for the death of Manuel Ciocon
P15,000.00 as attorney's fees
costs of suit

Negros Navigation, Capt. Santisteban, PNOC and PNOC Shipping appealed


the trial court's decision to the Court of Appeals. However, PNOC and PNOC
Shipping withdrew their appeal citing a compromise agreement reached by them
with Negros Navigation.
CA Decision
Granted the motion subject to the reservation made by Lilia Ciocon that she could
not be bound by the compromise agreement and would enforce the award granted
her by the trial court.
CA recognized that Don Juan was at least as negligent as M/T Tacloban
City. M/S Don Juan's Master, Capt. Rogelio Santisteban, was playing mahjong
before and up to the time of collision. Moreover, after the collision, he failed to
institute appropriate measures to delay the sinking MS Don Juan and to supervise
properly the execution of his order of abandonship. As regards the officer on watch,
Senior 3rd Mate Rogelio Devera, he admitted that he failed or did not call or inform
Capt. Santisteban of the imminent danger of collision and of the actual collision
itself Also, he failed to assist his master to prevent the fast sinking of the ship. The
record also indicates that Auxiliary Chief Mate Antonio Labordo displayed laxity in
maintaining order among the passengers after the collision.
This behaviour that is simply unacceptable on the part of the master of a
vessel to whose hands the lives and welfare of at 750 passengers had been
entrusted. Therefore, Negros Navigation Co. Inc. and Capt. Roger Santisteban are
held jointly and severally liable to pay the plaintiffs the amount of P100,000. 00 as
actual and compensatory damages and P15,000.00 as attorney's fees and the cost
of the suit.
Hence, petitioners filed a Petition for Review before the SC.
ISSUE
1.

WON Negros Navigation and Capt. Santisteban were grossly negligent


during the events which culminated in the collision with "Tacloban City"
and the sinking of the "Don Juan" and the resulting heavy loss of lives
indicating their gross negligence and thus entitling the petitioners to
exemplary damages.

2.

WON the CA erred in reducing the actual and compensatory damages from
P400,000 to P100,000.

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

HELD
1.

starboard (right) so that each vessel may pass on the port side (left) of
the other.
YES. Gross negligence can be deduced from the following circumstances:
a)

The "Don Juan" having sighted the "Tacloban City" when it


was still a long way off was negligent in failing to take early preventive
action and in allowing the two (2) vessels to come to such close
quarters as to render the collision inevitable when there was no
necessity for passing so near to the "Tacloban City" as to create that
hazard or inevitability, for the "Don Juan" could choose its own
distance.

The record does not show that was the first or only time that Capt.
Santisteban had entertained himself during a voyage by playing
mahjong with his officers and passengers; Negros Navigation in
permitting, or in failing to discover and correct such behaviour, must
be deemed grossly negligent.

b) Capt. Santisteban was also faulted in the Philippine Coast Guard


decision for failing after the collision, "to institute appropriate
measures to delay the sinking of M/V Don Juan." This means that he
also failed to maintain the seaworthiness or the water-tight integrity
of the Don Juan when sank within 10-15 minutes after initial contact
with the "Tacloban City.
c)

i)

Tacloban City did not carry enough boats and life rafts for all the
persons actually on board that tragic night of 22 April 1980 because of
overloading.

Therefore, Capt. Santisteban and Negros Navigation are properly held


liable for gross negligence in connection with the collision of the "Don
Juan" and "Tacloban City" and the sinking of the "Don Juan" leading to the
death of hundreds of passengers. There is no necessity for passing upon
the degree of negligence or culpability properly attributable to PNOC and
PNOC Shipping or the master of the "Tacloban City," since they were never
impleaded in the petition.

d) Don Juan was as twice as fact as the Tacloban City. The "Don
Juan's" top speed was 17 knots; while that of the "Tacloban City" was
6.3. knots.
e) The Don Juan carried the full complement of officers and crew
members specified for a passenger vessel of her class.
f)

The "Don Juan" was equipped with radar which was functioning that
night.

g)

The "Don Juan's" officer on-watch had sighted the "Tacloban City" on
his radar screen while the latter was still four (4) nautical miles away.
Visual confirmation of radar contact was established by the "Don
Juan" while the "Tacloban City" was still 2.7 miles away.

h) The "Tacloban City," when the 2 vessels were 0.3 mile apart, turned
(for the second time) 150 to port (left) side while the "Don Juan"
veered hard to starboard (right) which is in contravention with Rule 18
of the International Rules of the Road requiring 2 power- driven
vessels meeting end on or nearly end on each to alter her course to

The "Tacloban City," upon turning hard to port shortly before the
moment of collision, signaled its intention to do so by giving 2 short
blasts with horn. The "Don Juan " gave no answering horn blast to
signal its own intention and proceeded to turn hard to starboard
(right).

2.

YES. Both the demands of sustantial justice and the imperious


requirements of public policy compel us to the conclusion that the trial
court's implicit award of moral and exemplary damages was erronoeusly
deledted and must be restored and augmented and brought more nearely
to the level required by public policy and substantial justice. Further, the
Manchester doctrine should be applied in the case as clarified and
amplified by Sun Insurance Office Ltd. (SIOL) by by holding that the
petitioners shall pay the additional filing fee that is properly payable given
the award specified below, and that such additional filing fee shall
constitute a lien upon the judgment. The Manchester doctrine cannot be
applied alone since it would be done retroactively in contravention to the
law. Therefore, the following breakdown of damages must be awarded:
actual or compensatory damages proved in the course of
trial consisting of actual expenses incurred by petitioners in
their search for their parents' bodies

P126,000.0
0

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

actual or compensatory damages in case of wrongful death


(P30,000.00 x 2)
moral damages

P60,000.00
P107,000.0
0*

exemplary damages**

P107,000.0
0

TOTAL

P400,000.0
0

*Considering that petitioners, legitimate children of the deceased spouses


Mecenas, are seven (7) in number and that they lost both father and
mothe in one fell blow of fate, and considering the pain and anxiety they
doubtless experienced while searching for their parents among the
survivors and the corpses recovered from the sea or washed ashore, we
believe that an additional amount of P200,000.00 for moral damages,
making a total of P307,000.00 for moral damages which is reasonable.
** Exemplary damages are designed by our civil law to permit the courts to
reshape behaviour that is socially deleterious in its consequence by
creating negative incentives or deterrents against such behaviour. In
requiring compliance with the standard which is in fact that of the highest
possible degree of diligence, from common carriers and in creating a
presumption of negligence against them, the law seels to compel them to
control their employees, to tame their reckless instincts and to force them
to take adequate care of human beings and their property.
The bulk of our population is too poor to afford domestic air
transportation. So it is that notwithstanding the frequent sinking of
passenger vessels in our waters, crowds of people continue to travel by
sea. This Court is prepared to use the instruments given to it by the law for
securing the ends of law and public policy. One of those instruments is the
institution of exemplary damages; an additional award in the amount of
P200,000.00 as exmplary damages, is quite modest.

WHEREFORE, the Petition for Review on certiorari is hereby GRANTED and the

Decision of the Court of Appeals insofar as it redurce the amount of damages


awarded to petitioners to P100,000.00 is hereby REVERSED and SET ASIDE. The
award granted by the trial court is hereby RESTORED and AUGMENTED as follows:
(a)
(b)
(c)
(d)
(e)

P 126,000.00 for actual damages;


P 60,000.00 as compensatory damages for wrongful death;
P 307,000.00 as moral damages;
P 307,000.00 as exemplary damages making a total of P 800,000.00; and
P 15,000.00 as attorney's fees.

Petitioners shall pay the additional filing fees properly due and payable in view of
the award here made, which fees shall be computed by the Clerks of Court of the
trial court, and shall constitute a lien upon the judgment here awarded. Cost
against private respondents.
NEGROS NAVIGATION CO., INC., petitioner, vs. THE COURT OF APPEALS, RAMON
MIRANDA, SPS. RICARDO and VIRGINIA DE LA VICTORIA, respondents.
G.R. No. 110398 November 7, 199 MENDOZA, J.
FACTS: In April of 1980, private respondent Ramon Miranda purchased from the
Negros Navigation Co., Inc. four special cabin tickets for his wife, daughter, son and
niece who were going to Bacolod City to attend a family reunion. The tickets were
for Voyage No. 457-A of the M/V Don Juan, leaving Manila at 1:00 p.m. on April 22,
1980. The ship sailed from the port of Manila on schedule. At about 10:30 in the
evening, the Don Juan collided off the Tablas Strait in Mindoro, with the M/T
Tacloban City, an oil tanker owned by the Philippine National Oil Company (PNOC)
and the PNOC Shipping and Transport Corporation (PNOC/STC). As a result, the
M/V Don Juan sank. The bodies of some of the victims were found and brought to
shore, but the four members of private respondents' families were never found.
Private respondents filed a complaint on July 16, 1980 the RTC Manila against the
Negros Navigation, PNOC, and PNOC/STC seeking damages for the death of Ardita
de la Victoria Miranda, 48, Rosario V. Miranda, 19, Ramon V. Miranda, Jr., 16, and
Elfreda de la Victoria, 26.
In its answer, petitioner admitted that private respondents purchased tickets and
their ticket numbers (#74411, 74412, 74413 and 74414) were listed in the
passenger manifest. Petitioner, however, denied that the four relatives of private
respondents actually boarded the vessel as shown by the fact that their bodies
were never recovered. Petitioner further averred that the Don Juan was
seaworthy and manned by a full and competent crew, and that the collision was
entirely due to the fault of the crew of the M/T Tacloban City.
PNOC and petitioner Negros Navigation Co., Inc. entered into a compromise
agreement whereby petitioner assumed full responsibility for the payment and
satisfaction of all claims arising out of or in connection with the collision and
releasing the PNOC and the PNOC/STC from any liability to it. The agreement was

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

subsequently held by the trial court to be binding upon petitioner, PNOC and
PNOC/STC. Private respondents did not join in the agreement.
RTC ruled in favor of respondents. CA affirmed with modification on amount of
liability.
ISSUES: 1. Whether the members of private respondents' families were actually
passengers of the Don Juan; 2. Whether or not petitioner exercised extraordinary
diligence.
HELD: 1. YES. Private respondent Ramon Miranda testified that he personally took
his family and his niece to the vessel on the day of the voyage and stayed with them
on the ship until it was time for it to leave. There is no reason he should claim
members of his family to have perished in the accident just to maintain an action.
People do not normally lie about so grave a matter as the loss of dear ones. It
would be more difficult for private respondents to keep the existence of their
relatives if indeed they are alive than it is for petitioner to show the contrary.
Petitioner's only proof is that the bodies of the supposed victims were not among
those recovered from the site of the mishap. But so were the bodies of the other
passengers reported missing not recovered, as this Court noted in the Mecenas
case. Private respondent Miranda's testimony was corroborated by Edgardo
Ramirez. Ramirez was a seminarian and one of the survivors of the collision. He
testified that he saw Mrs. Miranda and Elfreda de la Victoria on the ship and that he
talked with them.
2. NO. In finding petitioner guilty of negligence and in failing to exercise the
extraordinary diligence required of it in the carriage of passengers, both the trial
court and the appellate court relied on the findings of this Court in Mecenas v.
Intermediate Appellate Court, which case was brought for the death of other
passengers. In that case it was found that although the proximate cause of the
mishap was the negligence of the crew of the M/T Tacloban City, the crew of the
Don Juan was equally negligent as it found that the latter's master, Capt. Rogelio
Santisteban, was playing mahjong at the time of collision, and the officer on watch,
Senior Third Mate Rogelio De Vera, admitted that he failed to call the attention of
Santisteban to the imminent danger facing them. This Court found that Capt.
Santisteban and the crew of the M/V Don Juan failed to take steps to prevent the
collision or at least delay the sinking of the ship and supervise the abandoning of
the ship.
Petitioner Negros Navigation was found equally negligent in tolerating the playing
of mahjong by the ship captain and other crew members while on board the ship
and failing to keep the M/V Don Juan seaworthy so much so that the ship sank
within 10 to 15 minutes of its impact with the M/T Tacloban City.
In addition, the Court found that the Don Juan was overloaded. The Certificate of
Inspection, dated August 27, 1979, issued by the Philippine Coast Guard
Commander at Iloilo City stated that the total number of persons allowed on the
ship was 864, of whom 810 are passengers, but there were actually 1,004 on board

the vessel when it sank, 140 persons more than the maximum number that could
be safely carried by it.
Taking these circumstances together, and the fact that the M/V Don Juan, as the
faster and better-equipped vessel, could have avoided a collision with the PNOC
tanker, this Court held that even if the Tacloban City had been at fault for failing to
observe an internationally-recognized rule of navigation, the Don Juan was guilty of
contributory negligence.
It is true that the "Tacloban City" failed to follow Rule 18 of the International Rules
of the Road which requires two (2) power-driven vessels meeting end on or nearly
end on each to alter her course to starboard (right) so that each vessel may pass on
the port side (left) of the other. The "Tacloban City," when the two (2) vessels were
only three-tenths (0.3) of a mile apart, turned (for the second time) 15 to port side
while the "Don Juan" veered hard to starboard. . . . [But] "route observance" of the
International Rules of the Road will not relieve a vessel from responsibility if the
collision could have been avoided by proper care and skill on her part or even by a
departure from the rules.
In the petition at bar, the "Don Juan" having sighted the "Tacloban City" when it
was still a long way off was negligent in failing to take early preventive action and in
allowing the two (2) vessels to come to such close quarters as to render the collision
inevitable when there was no necessity for passing so near to the "Tacloban City" as
to create that hazard or inevitability, for the "Don Juan" could choose its own
distance. It is noteworthy that the "Tacloban City," upon turning hard to port
shortly before the moment of collision, signalled its intention to do so by giving two
(2) short blasts with its horn. The "Don Juan" gave no answering horn blast to signal
its own intention and proceeded to turn hard to starboard.
We conclude that Capt. Santisteban and Negros Navigation are properly held liable
for gross negligence in connection with the collision of the "Don Juan" and
"Tacloban City" and the sinking of the "Don Juan" leading to the death of hundreds
of passengers.
Korean Airlines v. CA
Facts: Juanito Lapuz was contracted for employment in Saudi Arabia through Pan
Pacific Recruiting Services, Inc. He was supposed to leave via Korean Airlines, but
was initially listed as a chance passenger. According to Lapuz, he was allowed to
check in and was cleared for departure. When he was on the stairs going to the
airplane, a KAL officer pointed at him and shouted, Down! Down! and he was
barred from taking the flight. When he asked for another booking, his ticket was
cancelled. He was unable to report for work and so he lost his employment. KAL
alleged that the agent of Pan Pacific was informed that there are 2 seats possibly
available. He gave priority to Perico, while the other seat was won by Lapuz through
lottery. But because only 1 seat became available, it was given to Perico. The trial
court adjudged KAL liable for damages. The decision was affirmed by the Court of
Appeals, with modification on the damages awarded.

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Issues: Whether there is already a contract of carriage between KAL and Lapuz to
hold KAL liable for breach of contract
Held: The status of Lapuz as standby passenger was changed to that of a confirmed
passenger when his name was entered in the passenger manifest of KAL for its
Flight No. KE 903. His clearance through immigration and customs clearly shows
that he had indeed been confirmed as a passenger of KAL in that flight. KAL thus
committed a breach of the contract of carriage between them when it failed to
bring Lapuz to his destination. A contract to transport passengers is different in kind
and degree from any other contractual relation. The business of the carrier is
mainly with the traveling public. It invites people to avail themselves of the
comforts and advantages it offers. The contract of air carriage generates a relation
attended with a public duty. Passengers have the right to be treated by the carrier's
employees with kindness, respect, courtesy and due consideration. They are
entitled to be protected against personal misconduct, injurious language, indignities
and abuses from such employees. So it is that any discourteous conduct on the part
of these employees toward a passenger gives the latter an action for damages
against the carrier. The breach of contract was aggravated in this case when,
instead of courteously informing Lapuz of his being a "wait-listed" passenger, a KAL
officer rudely shouted "Down! Down!" while pointing at him, thus causing him
embarrassment and public humiliation. The evidence presented by Lapuz shows
that he had indeed checked in at the departure counter, passed through customs
and immigration, boarded the shuttle bus and proceeded to the ramp of KAL's
aircraft. In fact, his baggage had already been loaded in KAL's aircraft, to be flown
with him to Jeddah. The contract of carriage between him and KAL had already
been perfected when he was summarily and insolently prevented from boarding
the aircraft.
PAL vs CA
Facts: Pantejo, then City Fiscal of Surigao City, boarded a PAL plane in Manila and
disembarked in Cebu City where he was supposed to take his connecting flight to
Surigao City. However, due to typhoon Osang, the connecting flight to Surigao City
was cancelled.
To accommodate the needs of its stranded passengers, PAL initially gave out cash
assistance of P100.00 and, the next day, P200.00, for their expected stay of two
days in Cebu. Respondent Pantejo requested instead that he be billeted in a hotel at
PALs expense because he did not have cash with him at that time, but PAL refused.
Thus, respondent Pantejo was forced to seek and accept the generosity of a copassenger, an engineer named Andoni Dumlao, and he shared a room with the
latter at Sky View Hotel with the promise to pay his share of the expenses upon
reaching Surigao.
When the flight for Surigao was resumed, respondent Pantejo came to know that
the hotel expenses of his co-passengers, one Superintendent Gonzales and a certain
Mrs. Rocha, an auditor of the Philippine National Bank, were reimbursed by PAL. At

this point, respondent Pantejo informed Jezera, PALs Manager for Departure
Services and who was in charge of cancelled flights, that he was going to sue the
airline for discriminating against him. It was only then that Jereza offered to pay
respondent Pantejo P300.00 which, due to the ordeal and anguish he had
undergone, the latter declined.
Afterwards, Respondent Pantejo filed an action for damaged with the RTC which
rendered a decision ordering PAL to pay actual, moral and exemplary damages, and
attorney's fees plus cost of suit. On appeal, respondent court affirmed the decision
of the court a quo, but with the exclusion of the award of attorneys fees and
litigation expenses.
Issue:
Whether or not petitioner airlines acted in bad faith when it failed and refused to
provide hotel accommodations for respondent Pantejo or to reimburse him for
hotel expenses incurred by reason of the cancellation of its flight
Ruling:
The petitioner acted in bad faith.
It must be emphasized that a contract to transport passengers is quite different in
kind and degree from any other contractual relation, and this is because of the
relation which an air carrier sustains with the public. Its business is mainly with the
travelling public. It invites people to avail of the comforts and advantages it offers.
The contract of air carriage, therefore, generates a relation attended with a public
duty. Neglect or malfeasance of the carriers employees naturally could give ground
for an action for damages.
The RTC and CA ruled that the petitioner acted in bad faith in refusing to provide
hotel accommodations for respondent Pantejo or to reimburse him for hotel
expenses incurred despite and in contrast to the fact that other passengers were so
favored.
Petitioner theorizes that the hotel accommodations or cash assistance given in case
a flight is cancelled is in the nature of an amenity and is merely a privilege that may
be extended at its own discretion, but never a right that may be demanded by its
passengers. Thus, when respondent Pantejo was offered cash assistance and he
refused it, petitioner cannot be held liable for whatever befell respondent Pantejo
on that fateful day, because it was merely exercising its discretion when it opted to
just give cash assistance to its passengers.
Assuming arguendo that the airline passengers have no vested right to these
amenities in case a flight is cancelled due to force majeure, what makes petitioner
liable for damages in this particular case and under the facts obtaining herein is its
blatant refusal to accord the so-called amenities equally to all its stranded
passengers who were bound for Surigao City. No compelling or justifying reason
was advanced for such discriminatory and prejudicial conduct.
More importantly, it has been sufficiently established that it is petitioners standard
company policy, whenever a flight has been cancelled, to extend to its hapless
passengers cash assistance or to provide them accommodations in hotels with

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which it has existing tie-ups. In fact, petitioners Mactan Airport Manager for
departure services, Oscar Jereza, admitted that PAL has an existing arrangement
with hotels to accommodate stranded passengers, and that the hotel bills of
Ernesto Gonzales were reimbursed obviously pursuant to that policy.
Respondent Court of Appeals thus correctly concluded that the refund of hotel
expenses was surreptitiously and discriminatorily made by herein petitioner since
the same was not made known to everyone, except through word of mouth to a
handful of passengers. This is a sad commentary on the quality of service and
professionalism of an airline company, which is the countrys flag carrier at that.
On the bases of all the foregoing, the inescapable conclusion is that petitioner acted
in bad faith in disregarding its duties as a common carrier to its passengers and in
discriminating against herein respondent Pantejo. It was even oblivious to the fact
that this respondent was exposed to humiliation and embarrassment especially
because of his government position and social prominence, which altogether
necessarily subjected him to ridicule, shame and anguish. It remains
uncontroverted that at the time of the incident, herein respondent was then the
City Prosecutor of Surigao City, and that he is a member of the Philippine Jaycee
Senate, past Lt. Governor of the Kiwanis Club of Surigao, a past Master of the
Mount Diwata Lodge of Free Masons of the Philippines, member of the Philippine
National Red Cross, Surigao Chapter, and past Chairman of the Boy Scouts of the
Philippines, Surigao del Norte Chapter.
VICENTE CALALAS, petitioner, vs.
COURT OF APPEALS, ELIZA JUJEURCHE SUNGA and FRANCISCO
SALVA, respondents.
Facts: At 10 o'clock in the morning of August 23, 1989, Sunga, then a college
freshman, took a passenger jeepney owned and operated by Calalas. As the jeepney
was filled to capacity of about 24 passengers, Sunga was given by the conductor an
"extension seat," a wooden stool at the back of the door at the rear end of the
vehicle. On the way to Poblacion Sibulan, Negros Occidental, the jeepney stopped
to let a passenger off. As she was seated at the rear of the vehicle, Sunga gave way
to the outgoing passenger" Just as she was doing so, an Isuzu truck driven by
Verena and owned by Salva bumped the left rear portion of the jeepney, injuring
Sunga necessitating her confinement and to ambulate in crutches for 3 months"
Sunga filed a complaint for damages against Calalas, alleging violation of the
contract of carriage, to which Calalas in turn filed a third-party complaint against
Salva, the owner of the Isuzu truck" The lower court rendered judgment against
Salva as third-party defendant and absolved Calalas of liability, holding that it was
the driver of the Isuzu truck who was responsible for the accident, taking
cognizance of another case (Civil Case No. 3490), filed by Calalas against Salva and
Verena, for quasi-delict, in which Branch 37 of the same court held Salva and his
driver Verena jointly liable to Calalas for the damage to his jeepney " On appeal, the
CA reversed on the ground that Sunga's cause of action was based on a contract of

carriage, not quasi-delict, and that the common carrier failed to exercise the
diligence required under the Civil Code, and dismissed the third-party complaint
against Salva and adjudged Calalas liable for damages to Sunga
Issue: WON Calalas is liable for damages
Held: Yes. The fact that Sunga was seated in an "extension seat" placed her in a
peril greater than that to which the other passengers were exposed. Therefore, not
only was Calalas unable to overcome the presumption of negligence imposed on
him for the injury sustained by Sunga, but also, the evidence shows he was actually
negligent in transporting passengers.
Pilalpil vs. CA, Alatco Transportation Company Inc.
Facts: Petitioner-plaintiff Jose Pilapil, a paying passenger, boarded respondentdefendant's bus in Iriga City on 16 September 1971 at about 6:00 P.M. While said
bus No. 409 was in due course negotiating the distance between Iriga City and Naga
City, upon reaching the vicinity of the cemetery of the Municipality of Baao,
Camarines Sur, on the way to Naga City, an unidentified man, a bystander along
said national highway, hurled a stone at the left side of the bus, which hit petitioner
above his left eye. Private respondent's personnel lost no time in bringing the
petitioner to the provincial hospital in Naga City where he was confined and
treated.
Eventually, petitioner partially lost his left eyes vision and sustained a permanent
scar.
Thus, Petitioner lodged an action for recovery of damages before the Court of First
Instance of Camarines Sur which the latter granted. On appeal, the Court of Appeals
reversed said decision. Petitioner argues that the nature of the business of a
transportation company requires the assumption of certain risks, and the stoning of
the bus by a stranger resulting in injury to petitioner-passenger is one such risk
from which the common carrier may not exempt itself from liability.
Issue: Whether or not Alatco Transportation Company, Inc. is liable?
No. While as a general rule, common carriers are bound to exercise extraordinary
diligence in the safe transport of their passengers, it would seem that this is not the
standard by which its liability is to be determined when intervening acts of
strangers is to be determined directly cause the injury, while the contract of
carriage Article 1763 governs:
Article 1763.
A common carrier is responsible for injuries suffered by a
passenger on account of the wilful acts or negligence of other passengers or of
strangers, if the common carrier's employees through the exercise of the diligence
of a good father of a family could have prevented or stopped the act or omission.

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Clearly under the above provision, a tort committed by a stranger which causes
injury to a passenger does not accord the latter a cause of action against the carrier.
The negligence for which a common carrier is held responsible is the negligent
omission by the carrier's employees to prevent the tort from being committed
when the same could have been foreseen and prevented by them. Further, under
the same provision, it is to be noted that when the violation of the contract is due
to the willful acts of strangers, as in the instant case, the degree of care essential to
be exercised by the common carrier for the protection of its passenger is only that
of a good father of a family.
FORTUNE EXPRESS, INC., petitioner, vs. COURT OF APPEALS, PAULIE U. CAORONG,
and minor children YASSER KING CAORONG, ROSE HEINNI and PRINCE
ALEXANDER,
all surnamed CAORONG, and represented by their mother PAULIE U.
CAORONG, respondents. MENDOZA, J.:
This is an appeal by petition for review on certiorari of the decision, dated July 29,
1994, of the Court of Appeals, which reversed the decision of the Regional Trial
Court, Branch VI, Iligan City.
Facts: On November 18, 1989, a bus of petitioner figured in an accident with a
jeepney in Kauswagan, Lanao del Norte, resulting in the death of several passengers
of the jeepney, including two Maranaos. Crisanto Generalao, a volunteer field
agent of the Constabulary Regional Security Unit No. X, conducted an investigation
of the accident. He found that the owner of the jeepney was a Maranao residing in
Delabayan, Lanao del Norte and that certain Maranaos were planning to take
revenge on the petitioner by burning some of its buses. Generalao rendered a
report on his findings to Sgt. Reynaldo Bastasa of the Philippine Constabulary
Regional Hearquarters at Cagayan de Oro. Upon the instruction of Sgt. Bastasa, he
went to see Diosdado Bravo, operations manager of petitioner, at its main office in
Cagayan de Oro City. Bravo assured him that the necessary precautions to insure
the safety of lives and property would be taken.
At about 6:45 P.M. on November 22, 1989, three armed Maranaos who pretended
to be passengers, seized a bus of petitioner at Linamon, Lanao del Norte while on its
way to Iligan City. Among the passengers of the bus was Atty. Caorong. The leader
of the Maranaos, identified as one Bashier Mananggolo, ordered the driver,
Godofredo Cabatuan, to stop the bus on the side of the highway. Mananggolo then
shot Cabatuan on the arm, which caused him to slump on the steering wheel. Then
one of the companions of Mananggolo started pouring gasoline inside the bus, as
the other held the passengers at bay with a handgun. Mananggolo then ordered
the passengers to get off the bus. The passengers, including Atty. Caorong, stepped
out of the bus and went behind the bushes in a field some distance from the
highway.

However, Atty. Caorong returned to the bus to retrieve something from the
overhead rack. At that time, one of the armed men was pouring gasoline on the
head of the driver. Cabatuan, who had meantime regained consciousness, heard
Atty. Caorong pleading with the armed men to spare the driver as he was innocent
of any wrong doing and was only trying to make a living. The armed men were,
however, adamant as they repeated their warning that they were going to burn the
bus along with its driver. During this exchange between Atty. Caorong and the
assailants, Cabatuan climbed out of the left window of the bus and crawled to the
canal on the opposite side of the highway. He heard shots from inside the
bus. Larry de la Cruz, one of the passengers, saw that Atty. Caorong was hit. Then
the bus was set on fire. Some of the passengers were able to pull Atty. Caorong out
of the burning bus and rush him to the Mercy Community Hospital in Iligan City, but
he died while undergoing operation
The private respondents brought this suit for breach of contract of carriage in the
Regional Trial Court, Branch VI, Iligan City which was dismissed but reversed by the
CA on appeal. Hence, this appeal.
Issue: WON there was breach of contract of carriage?
Held: Yes. Art. 1763 of the Civil Code provides that a common carrier is responsible
for injuries suffered by a passenger on account of the wilful acts of other
passengers, if the employees of the common carrier could have prevented the act
the exercise of the diligence of a good father of a family. In the present case, it is
clear that because of the negligence of petitioners employees, the seizure of the
bus by Mananggolo and his men was made possible.
Despite warning by the Philippine Constabulary at Cagayan de Oro that the
Maranaos were planning to take revenge on the petitioner by burning some of its
buses and the assurance of petitioners operation manager, Diosdado Bravo, that
the necessary precautions would be taken, petitioner did nothing to protect the
safety of its passengers.
Had petitioner and its employees been vigilant they would not have failed to see
that the malefactors had a large quantity of gasoline with them. Under the
circumstances, simple precautionary measures to protect the safety of passengers,
such as frisking passengers and inspecting their baggages, preferably with nonintrusive gadgets such as metal detectors, before allowing them on board could
have been employed without violating the passengers constitutional rights.
From the foregoing, it is evident that petitioners employees failed to prevent the
attack on one of petitioners buses because they did not exercise the diligence of a
good father of a family. Hence, petitioner should be held liable for the death of
Atty. Caorong.

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G.R. Nos. 66102-04 August 30, 1990


PHILIPPINE RABBIT BUS LINES, INC., petitioner, vs.
THE HONORABLE INTERMEDIATE APPELLATE COURT AND CASIANO PASCUA, ET
AL., respondents. MEDIALDEA, J.:

Manalo was convicted and served his sentence. As to civil cases filed by private
respondents for recovery of damages, they anchored their suits against spouses
Mangune and Carreon and Manalo on their contractual liability. As against Rabbit
and delos Reyes, plaintiffs based their suits on their culpability for a quasi-delict.

FACTS:
On Dec. 24, 1966 (11am), the private respondents boarded the jeepney owned by
Spouses Isidro Mangune and Guillerma Carreon and driven by Tranquilino Manalo
at Dau, Mabalacat, Pampanga bound for Carmen, Rosales, Pangasinan to spend
Christmas at their respective homes. Although they usually ride in buses, they had
to ride in a jeepney that day because the buses were full.

Trial court found Manalo nagligent. On appeal, IAC reversed the decision finding
Delos Reyes negligent. The motion for reconsideration was denied. Hence, the
present petition.

Upon reaching barrio Sinayoan, San Manuel, Tarlac, the right rear wheel of the
jeepney was detached, so it was running in an unbalanced position. Manalo
stepped on the brake, as a result of which, the jeepney which was then running on
the eastern lane (its right of way) made a U-turn, invading and eventually stopping
on the western lane of the road in such a manner that the jeepney's front faced the
south (from where it came) and its rear faced the north (towards where it was
going). The jeepney practically occupied and blocked the greater portion of the
western lane, which is the right of way of vehicles coming from the north, among
which was Bus No. 753 of Philippine Rabbit Bus Lines, Inc. (Rabbit) driven by Tomas
delos Reyes. Almost at the time when the jeepney made a sudden U-turn and
encroached on the western lane of the highway as claimed by Rabbit and delos
Reyes, or after stopping for a couple of minutes as claimed by Mangune, Carreon
and Manalo, the bus bumped from behind the right rear portion of the jeepney. As
a result of the collision, three passengers of the jeepney (Catalina Pascua, Erlinda
Meriales and Adelaida Estomo) died while the other jeepney passengers sustained
physical injuries. What could have been a festive Christmas turned out to be tragic.
The point of collision was a cement pave-portion of the Highway, about six (6)
meters wide, with narrow shoulders with grasses beyond which are canals on both
sides. The road was straight and points 200 meters north and south of the point of
collision are visible and unobstructed. Pictures taken by witness Bisquera in the
course of the investigation showed the relative positions of the point of impact and
center line the back of the Rabbit bus, the lifeless body of Catalina Pascua, and the
damaged front part of the Rabbit bus. No skid marks of the Rabbit bus was found in
the vicinity of the collision, before or after the point of impact. On the other hand,
there was a skid mark about 45 meters long purportedly of the jeepney from the
eastern shoulder of the road south of, and extending up to the point of impact.
At the time and in the vicinity of the accident, there were no vehicles following the
jeepney, neither were there oncoming vehicles except the bus. The weather
condition of that day was fair.

ISSUES:
Whether or not the doctrine of last clear chance is applicable in the instant case?
Who is liable for the death and physical injuries suffered by the passengers of the
jeepney?
HELD:
1) NO, the doctrine of last clear chance is not applicable in the instant case.
We reiterate that "[t]he principle about "the last clear" chance, would call for
application in a suit between the owners and drivers of the 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 of the jeepney and its owners on the ground that the other driver
was likewise guilty of negligence." (Anuran, et al. v. Buo et al.)
2) Only Isidro Mangune, Guillerma Carreon and Filriters Guaranty Assurance
Corporation, Inc. (Insurer of jeepney) are liable to the victims or their heirs and that
the amount of indemnity for loss of life is increased to P30,000.00.
It cannot be said that the bus was travelling at a fast speed when the accident
occurred because the speed of 80 to 90 kilometers per hour, assuming such
calculation to be correct, is yet within the speed limit allowed in highways. We
cannot even fault delos Reyes for not having avoided the collision. As aforestated,
the jeepney left a skid mark of about 45 meters, measured from the time its right
rear wheel was detached up to the point of collision. Delos Reyes must have
noticed the perilous condition of the jeepney from the time its right rear wheel was
detached or some 90 meters away, considering that the road was straight and
points 200 meters north and south of the point of collision, visible and
unobstructed. Delos Reyes admitted that he was running more or less 50 kilometers
per hour at the time of the accident. Using this speed, delos Reyes covered the
distance of 45 meters in 3.24 seconds. If We adopt the speed of 80 kilometers per
hour, delos Reyes would have covered that distance in only 2.025 seconds. Verily,
he had little time to react to the situation. To require delos Reyes to avoid the
collision is to ask too much from him. Aside from the time element involved, there
were no options available to him.

A criminal complaint against the two drivers for Multiple Homicide was filed. The
complaint against Delos Reyes was dismissed for lack of probable cause, while

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We find that the proximate cause of the accident was the negligence of Manalo and
spouses Mangune and Carreon. They all failed to exercise the precautions that are
needed precisely pro hac vice.
In culpa contractual, the moment a passenger dies or is injured, the carrier is
presumed to have been at fault or to have acted negligently, and this disputable
presumption may only be overcome by evidence that he had observed extraordinary diligence as prescribed in Articles 1733, 1755 and 1756 of the New Civil
Code or that the death or injury of the passenger was due to a fortuitous event 3
(Lasam v. Smith, Jr.).
The trial court was therefore right in finding that Manalo and spouses Mangune and
Carreon were negligent. However, its ruling that spouses Mangune and Carreon are
jointly and severally liable with Manalo is erroneous. The driver cannot be held
jointly and severally liable with the carrier in case of breach of the contract of
carriage. The rationale behind this is readily discernible. Firstly, the contract of
carriage is between the carrier and the passenger, and in the event of contractual
liability, the carrier is exclusively responsible therefore to the passenger, even if
such breach be due to the negligence of his driver (Viluan v. CA). In other words, the
carrier can neither shift his liability on the contract to his driver nor share it with
him, for his driver's negligence is his. Secondly, if We make the driver jointly and
severally liable with the carrier, that would make the carrier's liability personal
instead of merely vicarious and consequently, entitled to recover only the share
which corresponds to the driver, contradictory to the explicit provision of Article
2181 of the New Civil Code.
BUSMANTE V CA
FACTS: At about 6:30 in the morning of April 20, 1983, a collision occurred between
a gravel and sand truck(described as old), and a Mazda passenger bus along the
national road at Calibuyo, Tanza, Cavite. The front left side portion (barandilla) of
the body of the truck sideswiped the left side wall of the passenger bus, ripping off
the said wall from the driver's seat to the last rear seat. Due to the impact, several
passengers of the bus were thrown out and died as a result of the injuries they
sustained. During the incident, the cargo truck was driven by defendant Montesiano
and owned by defendant Del Pilar; while the passenger bus was driven by
defendant Susulin. Immediately before the collision, the cargo truck and the
passenger bus were approaching each other, coming from the opposite directions
of the highway. While the truck was still about 30 meters away, Susulin, the bus
driver, saw the front wheels of the vehicle wiggling. He also observed that the truck
was heading towards his lane. Not minding this circumstance due to his belief that
the driver of the truck was merely joking, Susulin shifted from fourth to third gear in
order to give more power and speed to the bus, which was ascending the inclined
part of the road, in order to overtake or pass a Kubota hand tractor being pushed
by a person along the shoulder of the highway. While the bus was in the process of

overtaking or passing the hand tractor and the truck was approaching the bus, the
two vehicles sideswiped each other at each other's left side. After the impact, the
truck skidded towards the other side of the road and landed on a nearby residential
lot, hitting a coconut tree and felling it.
RTC- declared that the negligent acts of both drivers directly caused the accident
It was negligent on the part of driver Montesiano to have driven his truck
fast, considering that it was an old vehicle, that its front wheels were
wiggling; that the road was descending; and that there was a passenger
bus approaching it.
Likewise, driver Susulin was also guilty of negligence in not taking the
necessary precaution to avoid the collision.
(Only the owner and the truck driver appealed)
l
CA- Reversed the RTCs decision in so far as the liability of the owner and truck
driver
Issue: WON CA erred in applying the last clear chance rule
Held: NO. The principle of "last clear chance" applies "in a suit between the owners
and drivers of colliding vehicles. It does not arise where a passenger demands
responsibility from the carrier to enforce its contractual obligations. For it would be
inequitable to exempt the negligent driver of the jeepney and its owners on the
ground that the other driver was likewise guilty of negligence.
All premises considered, the Court is convinced that the respondent Court
committed an error of law in applying the doctrine of last clear chance as between
the defendants, since the case at bar is not a suit between the owners and drivers
of the colliding vehicles but a suit brought by the heirs of the deceased passengers
against both owners and drivers of the colliding vehicles. Therefore, the respondent
court erred in absolving the owner and driver of the cargo truck from liability.
*Judgment of the lower court is REINSTATED
LOURDES J. LARA, ET AL vs. BRIGIDO R. VALENCIA
G.R. No. L-9907
June 30, 1958
Facts: The deceased was an inspector of the Bureau of Forestry stationed in Davao.
Defendant is engaged in the business of exporting logs from his lumber concession
in Cotabato. Lara went to said concession upon instructions of his chief to classify
the logs of defendant which were about to be loaded on a ship anchored in the port
of Parang. The work Lara of lasted for six days during which he contracted malaria
fever. In the morning of January 9, 1954, Lara who then in a hurry to return to
Davao asked defendant if he could take him in his pick-up as there was then no
other means of transportation, to which defendant agreed, and in that same
morning the pick-up left Parang bound for Davao taking along six passengers,
including Lara. The pick-up has a front seat where the driver and two passengers
can be accommodated and the back has a steel flooring enclosed with a steel
walling of 16 to 17 inches tall on the sides and with a 19 inches tall walling at the
back. Lara was in the middle sitting on a bag. Before leaving Parang, defendant

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invited Lara to sit with him on the front seat but Lara declined. It was their
understanding that upon reaching barrio Samoay, Cotabato, the passengers were to
alight and take a bus bound for Davao, but when they arrived at that place, only 1
of the passengers alighted and the other passengers requested defendant to allow
them to ride with him up to Davao because there was then no available bus that
they could take in going to that place. Defendant again accommodated the
passengers. When they continued their trip, the sitting arrangement of the
passengers remained the same, Lara being seated on a bag in the middle with his
arms on a suitcase and his head covered by a jacket. Lara accidentally fell from the
pick-up and as a result he suffered serious injuries. Valencia stopped the pick-up to
see what happened to Lara. He sought the help of the residents of that place and
applied water to Lara but to no avail. They brought Lara to the nearest place where
they could find a doctor and not having found any they took him to St. Joseph's
Clinic of Kidapawan. But when Lara arrived he was already dead. From there they
proceeded to Davao City and immediately notified the local authorities. An
investigation was made regarding the circumstances surrounding the death of Lara
but no criminal action was taken against defendant.
It must be noted that defendant merely accommodated them and did not charge
them any fee for the service. It was also their understanding that upon reaching
barrio Samoay, the passengers would alight and transfer to a bus that regularly
makes the trip to Davao but unfortunately there was none available at the time and
so the same passengers, including Lara, again requested the defendant to drive
them to Davao.
It therefore appears that the deceased, as well his companions who rode in the
pick-up of defendant, were merely accommodation passengers who paid nothing
for the service and so they can be considered as invited guests within the meaning
of the law. As accommodation passengers or invited guests, defendant as owner
and driver of the pick-up owes to them merely the duty to exercise reasonable care
so that they may be transported safely to their destination. Defendant is not duty
bound to exercise extraordinary diligence as required of a common carrier by our
law.
Issue: WON defendant failed to observe ordinary care or diligence in transporting
the deceased
Held:
No. There is every reason to believe that the unfortunate happening was
only due to an unforeseen accident accused by the fact that at the time the
deceased was half asleep and must have fallen from the pick-up when it ran into
some stones causing it to jerk considering that the road was then bumpy, rough and
full of stones. The finding of the trial court that the pick-up was running at more
than 40 kilometers per hour is not supported by the evidence. This is a mere
surmise made by the trial court considering the time the pick-up left barrio Samoay
and the time the accident occured in relation to the distance covered by the pick-

up. And even if this is correct, still we say that such speed is not unreasonable
considering that they were traveling on a national road and the traffic then was not
heavy. We may rather attribute the incident to lack of care on the part of the
deceased considering that the pick-up was open and he was then in a crouching
position. Indeed, the law provides that "A passenger must observe the diligence of a
good father of a family to avoid injury to himself" (Article 1761, new Civil Code),
which means that if the injury to the passenger has been proximately caused by his
own negligence, the carrier cannot be held liable.
LUDO AND LUYM CORPORATION, petitioner, vs. COURT OF APPEALS, GABISAN
SHIPPING LINES, INC. and/or ANSELMO OLASIMAN respondents.
[G.R. No. 125483. February 1, 2001]
TOPIC: Presumption of negligence
Facts:
Petitioner Ludo & Luym Corporation is a domestic corporation engaged in
copra processing with plant and business offices in Cebu City. It owns and operates
a private wharf used by vessels for loading and unloading of copra and other
processed products. Among its wharfs facilities are fender pile clusters for docking
and mooring. Private Respondent Gabisan Shipping Lines was the registered owner
and operator of the motor vessel MV Miguela, while the other private respondent,
Anselmo Olasiman, was its captain While MV Miguela was docking at petitioners
wharf, it rammed and destroyed a fender pile cluster. Petitioner demanded
damages from private respondents. The latter refused. Hence, petitioner filed a
complaint for damages before the Regional Trial Court of Cebu.
The trial court disposed the case in favor of petitioner finding that the
respondents are solidarily liable for damages for negligence. The Court of Appeals
reversed the trial court.
Issue: WON the doctrine of res ipsa loquitur applies in this case as to warrant
presumption of negligence
Held:
Yes.
Res ipsa loquitur Where the thing which causes injury is shown to be under
the management of the defendant, and the accident is such as in the ordinary
course of things does not happen if those who have the management use proper
care, it affords reasonable evidence, in the absence of an explanation by the
defendant, that the accident arose from want of care.
The doctrine recognizes that parties may establish prima facie negligence
without direct proof and allows the principle to substitute for specific proof of
negligence. This is invoked when under the circumstances, direct evidence is absent
and not readily available.
In our view, all the requisites for recourse to this doctrine exist. First, MV
Miguela was under the exclusive control of its officers and crew. Petitioner did not
have direct evidence on what transpired within as the officers and crew

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maneuvered the vessel to its berthing place. We note the Court of Appeals finding
that Naval and Espina were not knowledgeable on the vessels maneuverings, and
could not testify on the negligence of the officers and crew. Second, aside from the
testimony that MV Miguela rammed the cluster pile, private respondent did not
show persuasively other possible causes of the damage.
Applying now the above, there exists a presumption of negligence against
private respondents which we opine the latter failed to overcome. Additionally,
petitioner presented tangible proof that demonstrated private respondents
negligence. As testified by Capt. Olasiman, from command of slow ahead to stop
engine, the vessel will still travel 100 meters before it finally stops. However, he
ordered stop engine when the vessel was only 50 meters from the pier. Further,
he testified that before the vessel is put to slow astern, the engine has to be
restarted. However, Olasiman cannot estimate how long it takes before the engine
goes to slow astern after the engine is restarted. From these declarations, the
conclusion is that it was already too late when the captain ordered reverse. By
then, the vessel was only 4 meters from the pier, and thus rammed it. Respondent
companys negligence consists in allowing incompetent crew to man its vessel. As
shown also by petitioner, both Captain Olasiman and Chief Mate Gabisan did not
have a formal training in marine navigation. The former was a mere elementary
graduate while the latter is a high school graduate. Their experience in navigation
was only as a watchman and a quartermaster, respectively.
LOURDES J. LARA, ET AL., plaintiffs-appellants,-versus- BRIGIDO R. VALENCIA,
defendant-appellant. G.R. No. L-9907 June 30, 1958
Facts:
The deceased was an inspector of the Bureau of Forestry stationed in Davao.
Defendant is engaged in the business of exporting logs from his lumber concession
in Cotabato. Lara went to said concession upon instructions of his chief to classify
the logs of defendant which were about to be loaded on a ship anchored in the port
of Parang. The work Lara of lasted for six days during which he contracted malaria
fever. In the morning of January 9, 1954, Lara who then in a hurry to return to
Davao asked defendant if he could take him in his pick-up as there was then no
other means of transportation, to which defendant agreed, and in that same
morning the pick-up left Parang bound for Davao taking along six passengers,
including Lara. The pick-up has a front seat where the driver and two passengers
can be accommodated and the back has a steel flooring enclosed with a steel
walling of 16 to 17 inches tall on the sides and with a 19 inches tall walling at the
back. Lara was in the middle sitting on a bag. Before leaving Parang, defendant
invited Lara to sit with him on the front seat but Lara declined. It was their
understanding that upon reaching barrio Samoay, Cotabato, the passengers were to
alight and take a bus bound for Davao, but when they arrived at that place, only 1
of the passengers alighted and the other passengers requested defendant to allow

them to ride with him up to Davao because there was then no available bus that
they could take in going to that place. Defendant again accommodated the
passengers. When they continued their trip, the sitting arrangement of the
passengers remained the same, Lara being seated on a bag in the middle with his
arms on a suitcase and his head covered by a jacket. Lara accidentally fell from the
pick-up and as a result he suffered serious injuries. Valencia stopped the pick-up to
see what happened to Lara. He sought the help of the residents of that place and
applied water to Lara but to no avail. They brought Lara to the nearest place where
they could find a doctor and not having found any they took him to St. Joseph's
Clinic of Kidapawan. But when Lara arrived he was already dead. From there they
proceeded to Davao City and immediately notified the local authorities. An
investigation was made regarding the circumstances surrounding the death of Lara
but no criminal action was taken against defendant.
It must be noted that defendant merely accommodated them and did not charge
them any fee for the service. It was also their understanding that upon reaching
barrio Samoay, the passengers would alight and transfer to a bus that regularly
makes the trip to Davao but unfortunately there was none available at the time and
so the same passengers, including Lara, again requested the defendant to drive
them to Davao.
It therefore appears that the deceased, as well his companions who rode in the
pick-up of defendant, were merely accommodation passengers who paid nothing
for the service and so they can be considered as invited guests within the meaning
of the law. As accommodation passengers or invited guests, defendant as owner
and driver of the pick-up owes to them merely the duty to exercise reasonable care
so that they may be transported safely to their destination. Defendant is not duty
bound to exercise extraordinary diligence as required of a common carrier by our
law.
Issue: WON defendant failed to observe ordinary care or diligence in transporting
the deceased
Held:
No. There is every reason to believe that the unfortunate happening was only due
to an unforeseen accident accused by the fact that at the time the deceased was
half asleep and must have fallen from the pick-up when it ran into some stones
causing it to jerk considering that the road was then bumpy, rough and full of
stones. The finding of the trial court that the pick-up was running at more than 40
kilometers per hour is not supported by the evidence. This is a mere surmise made
by the trial court considering the time the pick-up left barrio Samoay and the time
the accident occured in relation to the distance covered by the pick-up. And even if
this is correct, still we say that such speed is not unreasonable considering that they
were traveling on a national road and the traffic then was not heavy. We may

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rather attribute the incident to lack of care on the part of the deceased considering
that the pick-up was open and he was then in a crouching position. Indeed, the law
provides that "A passenger must observe the diligence of a good father of a family
to avoid injury to himself" (Article 1761, new Civil Code), which means that if the
injury to the passenger has been proximately caused by his own negligence, the
carrier cannot be held liable.
PRECILLANO NECESITO, ETC. v. NATIVIDAD PARAS, ET AL.
G.R. No. L-10605. June 30, 1958
REYES, J.B.L., J.
FACTS: In the morning of January 28, 1954, Severina Garces and her 1yr. old son,
Precillano Necesito, carrying vegetables, boarded passenger auto truck or bus No.
199 of the Philippine Rabbit Bus Lines at Agno, Pangasinan. The passenger truck,
driven by Francisco Bandonell, then proceeded on its regular run from Agno to
Manila. After passing Mangatarem, Pangasinan, truck No. 199 entered a wooden
bridge, but the front wheels swerved to the right; the driver lost control, and after
wrecking the bridges wooden rails, the truck fell on its right side into a creek where
water was breast deep. The mother, Severina, was drowned; the son, Necesito, was
injured.
After joint trial, the CFI found that the bus was proceeding slowly due to the bad
condition of the road; that the accident was caused by the fracture of the right
steering knuckle, which was defective in that its center or core was not compact but
"bubbled and cellulous", a condition that could not be known or ascertained by the
carrier despite the fact that regular thirty-day inspections were made of the
steering knuckle, since the steel exterior was smooth and shiny to the depth of 3/16
of an inch all around; that the knuckles are designed and manufactured for heavy
duty and may last up to ten years; that the knuckle of bus No. 199 that broke on
January 28, 1954, was last inspected on January 5, 1954, and was due to be
inspected again on February 5th.
Trial Court holding that the accident was exclusively due to fortuitous event,
dismissed both actions. Hence, this case.
ISSUE: Whether or not the carrier is liable for the mechanical defect.
HELD: YES. It is clear that the carrier is not an insurer of the passengers safety.
His liability rests upon negligence, his failure to exercise the "utmost" degree of
diligence that the law requires, and by Art. 1756, in case of a passengers death or
injury the carrier bears the burden of satisfying the court that he has duly
discharged the duty of prudence required. In the American law, where the carrier is
held to the same degree of diligence as under the new Civil Code, the rule on the

liability of carriers for defects of equipment is thus expressed: "The preponderance


of authority is in favor of the doctrine that a passenger is entitled to recover
damages from a carrier for an injury resulting from a defect in an appliance
purchased from a manufacturer, whenever it appears that the defect would have
been discovered by the carrier if it had exercised the degree of care which under
the circumstances was incumbent upon it, with regard to inspection and application
of the necessary tests. For the purposes of this doctrine, the manufacturer is
considered as being in law the agent or servant of the carrier, as far as regards the
work of constructing the appliance. According to this theory, the good repute of the
manufacturer will not relieve the carrier from liability.
The rationale of the carriers liability is the fact that the passenger has neither
choice nor control over the carrier in the selection and use of the equipment and
appliances in use by the carrier. Having, no privity whatever with the manufacturer
or vendor of the defective equipment, the passenger has no remedy against him,
while the carrier usually has. It is but logical, therefore, that the carrier, while not
an insurer of the safety of his passengers, should nevertheless be held to answer for
the flaws of his equipment if such flaws were at all discoverable.
In the case now before us, the record is to the effect that the only test applied to
the steering knuckle in question was a purely visual inspection every thirty days, to
see if any cracks developed. It nowhere appears that either the manufacturer or the
carrier at any time tested the steering knuckle to ascertain whether its strength was
up to standard, or that it had no hidden flaws that would impair that strength. And
yet the carrier must have been aware of the critical importance of the knuckles
resistance; that its failure or breakage would result in loss of balance and steering
control of the bus, with disastrous effects upon the passengers. No argument is
required to establish that a visual inspection could not directly determine whether
the resistance of this critically important part was not impaired. Nor has it been
shown that the weakening of the knuckle was impossible to detect by any known
test; on the contrary, there is testimony that it could be detected. We are satisfied
that the periodical visual inspection of the steering knuckle as practiced by the
carriers agents did not measure up to the required legal standard of "utmost
diligence of very cautious persons" "as far as human care and foresight can
provide", and therefore that the knuckles failure can not be considered a fortuitous
event that exempts the carrier from responsibility.
The decision appealed from is reversed, and the defendants-appellees are
sentenced to indemnify the plaintiffs-appellants.

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JAPAN AIRLINES, petitioner, vs. JESUS SIMANGAN, respondent.


G.R. No. 170141 April 22, 2008
REYES, R.T., J.
DOCTRINE
Not An Insurer Against All Risks. WHEN an airline issues a ticket to a passenger
confirmed on a particular flight on a certain date, a contract of carriage arises, and
the passenger has every right to expect that he would fly on that flight and on that
date. If he does not, then the carrier opens itself to a suit for breach of contract of
carriage.
The power to admit or not an alien into the country is a sovereign act
which cannot be interfered with even by Japan Airlines (JAL).
NATURE OF PETITION
This is a petition for Review on certiorari on the Decision of the CA ordering it to
pay Simangan moral and exemplary damages and denying JALs motion for
reconsideration.

Simangan went to NAIA with his several relatives and friends. He went through rigid
immigration and security routines and was allowed by JAL to enter its airplane.
While inside the airplane, JALs airline crew suspected Simangan of
carrying a falsified travel document and imputed that he would only use the trip to
the United States as a pretext to stay and work in Japan. The stewardess asked him
to show his travel documents. Shortly after, the stewardess along with a Japanese
and a Filipino haughtily ordered him to stand up and leave the plane. Simangan
protested, explaining that he was issued a U.S. visa. Just to allow him to board the
plane, he pleaded with JAL to closely monitor his movements when the aircraft
stops over in Narita. His pleas were ignored. He was then constrained to go out of
the plane. In a nutshell, Simangan was bumped off the flight.
Simangan went to JALs ground office and waited there for three
hours. He was informed that his travel documents were, indeed, in order. He was
refunded the cost of his plane ticket less the sum of US$500.00 which was deducted
by JAL. Subsequently, Simangans U.S. visa was cancelled.
Simangan filed an action for damages with the RTC Valenzuela City.
Simangans Contentions

FACTS
In 1991, respondent Jesus Simangan decided to donate a kidney to his ailing cousin,
Loreto Simangan, in UCLA School of Medicine in Los Angeles, California, U.S.A.
Upon request of UCLA, he undertook a series of laboratory tests at the National
Kidney Institute in Quezon City to verify whether his blood and tissue type are
compatible with Loretos. Fortunately, said tests proved that his blood and tissue
type were well-matched with Loretos.
Simangan needed to go to the United States to complete his preliminary
work-up and donation surgery. Hence, to facilitate his travel to the United States,
UCLA wrote a letter to the American Consulate in Manila to arrange for his visa. In
due time, he was issued an emergency U.S. visa by the American Embassy in
Manila.
Having obtained an emergency U.S. visa, Simangan purchased a round trip
plane ticket from petitioner JAL for US$1,485.00 and was issued the corresponding
boarding pass. He was scheduled to a particular flight on July 29, 1992 bound for
Los Angeles, California, U.S.A. via Narita, Japan.

He claimed he was not able to donate his kidney to Loreto; and that he suffered
terrible embarrassment and mental anguish. He prayed that he be awarded P3
million as moral damages, P1.5 million as exemplary damages and P500,000.00 as
attorneys fees.
JALs Contentions
JAL denied the material allegations of the complaint. It argued, among others, that
its failure to allow respondent to fly on his scheduled departure was due to a need
for his travel documents to be authenticated by the United States Embassy
because no one from JALs airport staff had encountered a parole visa before. It
posited that the authentication required additional time; that respondent was
advised to take the flight the following day, July 30, 1992. JAL alleged that
respondent agreed to be rebooked on July 30, 1992.
JAL lodged a counterclaim.
RTC Valenzuela City Decision

July 29, 1992

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It rendered a decision in favor of Simangan. JAL violated the contract of carriage in


ordering the plaintiff to deplane while already settled in his assigned seat; that
when Simangan was ordered out of the plane under the pretext that the
genuineness of his travel documents would be verified it had caused him
embarrassment and besmirched reputation; and that when the Simangan was
finally not allowed to take the flight, he suffered more wounded feelings and social
humiliation for which the he was asking to be awarded moral and exemplary
damages as well as attorneys fees.

appellee will instead take appellants flight to Narita on the following day, July 30,
1992, deserves little attention. It is inappropriate at bar. Questions not taken up
during the trial cannot be raised for the first time on appeal.

JAL was to pay him P1,000,000.00 as moral damages, the amount of


P500,000.00 as exemplary damages and the amount of P250,000.00 as attorneys
fees, plus the cost of suit.

Here, the trial courts award of P1,000,000.00 as moral damages appears


to be overblown. No other proof of appellees social standing, profession, financial
capabilities was presented except that he was single and a businessman. The sum
of 500,000.00 is just and fair. Moral damages are emphatically not intended to
enrich a complainant at the expense of the defendant. They are awarded only to
enable the injured party to obtain means, diversion or amusements that will serve
to alleviate the moral suffering he has undergone, by reason of the defendants
culpable action.

CA Ruling
It affirmed the RTC decision with modification in that it lowered the amount of
moral and exemplary damages and deleted the award of attorneys fee to
P500,000.00 and P250,000.00 respectively.
The CA elucidated that since JAL issued to respondent a round trip plane
ticket for a lawful consideration, there arose a perfected contract between them.
It found that respondent was haughtily ejected by JAL and that he was certainly
embarrassed and humiliated when, in the presence of other passengers, JALs
airline staff shouted at him to stand up and arrogantly asked him to produce his
travel papers, without the least courtesy every human being is entitled to; and that
he was compelled to deplane on the grounds that his papers were fake.
While the protection of passengers must take precedence over
convenience, the implementation of security measures must be attended by basic
courtesies.
In fact, breach of the contract of carriage creates against the carrier a
presumption of liability, by a simple proof of injury, relieving the injured passenger
of the duty to establish the fault of the carrier or of his employees; and placing on
the carrier the burden to prove that it was due to an unforeseen event or to force
majeure.

The modification of damages is based on a fair and just compensation of


the one who was injured by a breach of contract which is commensurate to the loss
sustained as consequence of the defendants act. Being discretionary on the court,
the amount, however, should not be palpably and scandalously excessive.

Moreover, the grant of P500,000.00 as exemplary damages needs to be


reduced to a reasonable level. The award of exemplary damages is designed to
permit the courts to mould behavior that has socially deleterious consequences and
its imposition is required by public policy to suppress the wanton acts of the
offender. Hence, the sum of P250,000.00 is adequate under the circumstances.
The award of P250,000.00 as attorneys fees lacks factual basis. Record is
devoid of evidence to show the cost of the services of his counsel and/or the actual
expenses incurred in prosecuting his action.
ISSUE
1.
2.
3.
HELD
1.

That appellee possessed bogus travel documents and that he might stay
illegally in Japan are allegations without substantiation. Also, appellants attempt to
rebook appellee the following day was too late and did not relieve it from liability.
The damage had been done. Besides, its belated theory of novation, i.e., that
appellants original obligation to carry appellee to Narita and Los Angeles on July 29,
1992 was extinguished by novation when appellant and appellant agreed that

WON JAL is guilty of breach of contract of carriage;


WON respondent is entitled to moral and exemplary damages; and
WON JAL is entitled to its counterclaim for damages.

YES. In an action for breach of contract of carriage, all that is required of


plaintiff is to prove the existence of such contract and its non-performance
by the carrier through the latters failure to carry the passenger safely to
his destination.
There was a contract of carriage between JAL and respondent.
Nevertheless, JAL made respondent get off the plane on his scheduled

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departure on July 29, 1992. He was not allowed by JAL to fly. JAL thus
failed to comply with its obligation under the contract of carriage. Further,
by informing Simangan that there was a need to first check the
authenthicity of his travel documents with the U.S. Embassy, the flight
could not wait for him, as declared by JAL itself. It gave respondent no
choice but to be left behind. The latter was unceremoniously bumped off
despite his protestations and valid travel documents and notwithstanding
his contract of carriage with JAL. Damage had already been done when
respondent was offered to fly the next day on July 30, 1992. Said offer did
not cure JALs default. Considering that respondent was forced to get out
of the plane and left behind against his will, he could not have freely
consented to be rebooked the next day. In short, he did not agree to the
alleged novation. Since novation implies a waiver of the right the creditor
had before the novation, such waiver must be express. It cannot be
supposed, without clear proof, that respondent had willingly done away
with his right to fly on July 29, 1992.
Moreover, JAL personnel imputed that respondent would only use
the trip to the United States as a pretext to stay and work in Japan
considering that Simangans plane ticket, boarding pass, travel authority
and personal articles already passed the rigid immigration and security
routines. JAL, as a common carrier, ought to know the kind of valid travel
documents respondent carried. As provided in Article 1755 of the New
Civil Code: 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. Thus, it
is JALs defense of verification of Simangans documents in its breach of
contract of carriage is untenable.
Further, It bears repeating that the power to admit or not an alien
into the country is a sovereign act which cannot be interfered with even by
JAL.
2.

YES. Aside from moral and exemplary damages, Simangan is entitled to


attorneys fees plus legal interest. As a general rule, moral damages are
not recoverable in actions for damages predicated on a breach of contract
for it is not one of the items enumerated under Article 2219 of the Civil
Code. As an exception, such damages are recoverable:

a)

in cases in which the mishap results in the death of a passenger,


as provided in Article 1764, in relation to Article 2206(3) of the
Civil Code; and
b) in the cases in which the carrier is guilty of fraud or bad faith, as
provided in Article 2220.
The acts committed by JAL against respondent amounts to bad faith.
As found by the RTC, JAL breached its contract of carriage with respondent
in bad faith. JAL personnel summarily and insolently ordered respondent
to disembark while the latter was already settled in his assigned seat. He
was ordered out of the plane under the alleged reason that the
genuineness of his travel documents should be verified. More specifically,
he was haughtily ejected by appellant. He was certainly embarrassed and
humiliated when, in the presence of other passengers, the appellants
airline staff shouted at him to stand up and arrogantly asked him to
produce his travel papers, without the least courtesy every human being is
entitled to. Then, he was compelled to deplane on the grounds that his
papers were fake. His protestation of having been issued a U.S. visa
coupled with his plea to appellant to closely monitor his movements when
the aircraft stops over in Narita, were ignored. Worse, he was made to
wait for many hours at the office of appellant only to be told later that he
has valid travel documents.
JAL is also liable for exemplary damages as its above-mentioned acts
constitute wanton, oppressive and malevolent acts against respondent.
Exemplary damages, which are awarded by way of example or correction
for the public good, may be recovered in contractual obligations, as in this
case, if defendant acted in wanton, fraudulent, reckless, oppressive, or
malevolent manner. It is designed by our civil law to permit the courts to
reshape behaviour that is socially deleterious in its consequence by
creating negative incentives or deterrents against such behaviour. In
requiring compliance with the standard of extraordinary diligence, a
standard which is, in fact, that of the highest possible degree of diligence,
from common carriers and in creating a presumption of negligence against
them, the law seeks to compel them to control their employees, to tame
their reckless instincts and to force them to take adequate care of human
beings and their property.

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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.

Neglect or malfeasance of the carriers employees could give ground


for an action for damages. Passengers have a right to be treated by the
carriers employees with kindness, respect, courtesy and due consideration
and are entitled to be protected against personal misconduct, injurious
language, indignities and abuses from such employees.
The assessment of P500,000.00 as moral damages and P100,000.00 as
exemplary damages in respondents favor is, in Our view, reasonable and
realistic. This award is reasonably sufficient to indemnify him for the
humiliation and embarrassment he suffered. This also serves as an
example to discourage the repetition of similar oppressive acts.

JAL is liable to pay respondent legal interest at the rate of 6% and it


shall be reckoned from September 21, 2000 when the RTC rendered its
judgment. From the time this Decision becomes final and executory, the
interest rate shall be 12% until its satisfaction.

With respect to attorney's fees, they may be awarded when


defendants act or omission has compelled plaintiff to litigate with third
persons or to incur expenses to protect his interest.
It was therefore erroneous for the CA to delete the award of
attorneys fees on the ground that the record is devoid of evidence to
show the cost of the services of respondents counsel. The amount is
actually discretionary upon the Court so long as it passes the test of
reasonableness. They may be recovered as actual or compensatory
damages when exemplary damages are awarded and whenever the court
deems it just and equitable, as in this case. Attorneys fees in the amount
of P200,000.00 is reasonably modest.
The above liabilities of JAL in the total amount of P800,000.00 earn
legal interest. Legal interest are determined as follows:
a)

b)

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. 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.
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

3.

NO. The commencement of an action does not per se make the action
wrongful and subject the action to damages, for the law could not have
meant to impose a penalty on the right to litigate (damnum absque
injuria). Lawful acts give rise to no injury. Walang perhuwisyong maaring
idulot ang paggamit sa sariling karapatan.
JAL presented a witness who testified that JAL suffered further
damages. Allegedly, respondent caused the publications of his subject
complaint against JAL in the newspaper for which JAL suffered damages.
The publications involved matters about which the public has the
right to be informed because they relate to a public issue. This public issue
or concern is a legitimate topic of a public comment that may be validly
published. JAL is a common carrier whose business is mainly with the
traveling public. It invites people to avail themselves of the comforts and
advantages it offers. Since JAL deals with the public, its bumping off of
respondent without a valid reason naturally drew public attention and
generated a public issue.
Further, the constitutional guarantee of freedom of the speech
and of the press includes fair commentaries on matters of public interest.

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Fair commentaries on matters of public interest are privileged and


constitute a valid defense in an action for libel or slander unless it there is
actual malice which would make it actionable. The doctrine of fair
comment means that while in general every discreditable imputation
publicly made is deemed false, because every man is presumed innocent
until his guilt is judicially proved, and every false imputation is deemed
malicious, nevertheless, when the discreditable imputation is directed
against a public person in his public capacity, it is not necessarily
actionable. In order that such discreditable imputation to a public official
may be actionable, it must either be a false allegation of fact or a comment
based on a false supposition. If the comment is an expression of opinion,
based on established facts, then it is immaterial that the opinion happens
to be mistaken, as long as it might reasonably be inferred from the facts.
Even though JAL is not a public official, the rule on privileged
commentaries on matters of public interest applies to it. The privilege
applies not only to public officials but extends to a great variety of
subjects, and includes matters of public concern, public men, and
candidates for office.
Therefore, that the published articles involve matters of public
interest and that its expressed opinion is not malicious but based on
established facts, the imputations against JAL are not actionable.
Therefore, JAL may not claim damages for them.

ALBERTA YOBIDO and CRESENCIO YOBIDO, petitioners, vs. COURT OF APPEALS,


LENY TUMBOY, ARDEE TUMBOY and JASMIN TUMBOY, respondents.
ROMERO, J.: G.R. No. 113003 October 17, 1997
FACTS: On April 26, 1988, spouses Tito and Leny Tumboy and their minor children
named Ardee and Jasmin, boarded at Mangagoy, Surigao del Sur, a Yobido Liner bus
bound for Davao City. Along Picop Road in Km. 17, Sta. Maria, Agusan del Sur, the
left front tire of the bus exploded. The bus fell into a ravine around three (3) feet
from the road and struck a tree. The incident resulted in the death of 28-year-old
Tito Tumboy and physical injuries to other passengers.

On November 21, 1988, a complaint for breach of contract of carriage, damages


and attorney's fees was filed by Leny and her children against Alberta Yobido, the
owner of the bus, and Cresencio Yobido, its driver, before the Regional Trial Court
of Davao City. When the defendants therein filed their answer to the complaint,
they raised the affirmative defense of caso fortuito. They also filed a third-party
complaint against Philippine Phoenix Surety and Insurance, Inc. This third-party
defendant filed an answer with compulsory counterclaim. At the pre-trial
conference, the parties agreed to a stipulation of facts.
The plaintiffs asserted that violation of the contract of carriage between them and
the defendants was brought about by the driver's failure to exercise the diligence
required of the carrier in transporting passengers safely to their place of
destination. According to Leny Tumboy, the bus left Mangagoy at 3:00 o'clock in the
afternoon. The winding road it traversed was not cemented and was wet due to the
rain; it was rough with crushed rocks. The bus which was full of passengers had
cargoes on top. Since it was "running fast," she cautioned the driver to slow down
but he merely stared at her through the mirror. At around 3:30 p.m., in Trento, she
heard something explode and immediately, the bus fell into a ravine.
For their part, the defendants tried to establish that the accident was due to a
fortuitous event. Abundio Salce, who was the bus conductor when the incident
happened, testified that the 42-seater bus was not full as there were only 32
passengers, such that he himself managed to get a seat. He added that the bus was
running at a speed of "60 to 50" and that it was going slow because of the zigzag
road. He affirmed that the left front tire that exploded was a "brand new tire" that
he mounted on the bus on April 21, 1988 or only five (5) days before the incident.
The Yobido Liner secretary, Minerva Fernando, bought the new Goodyear tire from
Davao Toyo Parts on April 20, 1988 and she was present when it was mounted on
the bus by Salce. She stated that all driver applicants in Yobido Liner underwent
actual driving tests before they were employed. Defendant Cresencio Yobido
underwent such test and submitted his professional driver's license and clearances
from the barangay, the fiscal and the police.
The lower court dismissed the action for lack of merit. On the issue of whether or
not the tire blowout was a caso fortuito, it found that "the falling of the bus to the
cliff was a result of no other outside factor than the tire blow-out. CA reversed the
decision.
ISSUE: 1) Whether or not a carrier is an insurer against all risk. 2) Limited liability
and defenses.
NO, but he is presumed to be negligent when a passenger is injured or dies while
travelling.
As a rule, when a passenger boards a common carrier, he takes the risks
incidental to the mode of travel he has taken. After all, a carrier is not an insurer
of the safety of its passengers and is not bound absolutely and at all events to
carry them safely and without injury. However, when a passenger is injured or

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dies while travelling, the law presumes that the common carrier is negligent.
Thus, the Civil Code provides:
Art. 1756. In case of death or injuries to passengers, common carriers are presumed
to have been at fault or to have acted negligently, unless they prove that they
observed extraordinary diligence as prescribed in articles 1733 and 1755.
Article 1755 provides that "(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." Accordingly, in
culpa contractual, once a passenger dies or is injured, the carrier is presumed to
have been at fault or to have acted negligently. This disputable presumption may
only be overcome by evidence that the carrier had observed extraordinary diligence
as prescribed by Articles 1733, 10 1755 and 1756 of the Civil Code or that the death
or injury of the passenger was due to a fortuitous event. 11 Consequently, the court
need not make an express finding of fault or negligence on the part of the carrier to
hold it responsible for damages sought by the passenger.
In view of the foregoing, petitioners' contention that they should be exempt from
liability because the tire blowout was no more than a fortuitous event that could
not have been foreseen, must fail. A fortuitous event is possessed of the following
characteristics: (a) the cause of the unforeseen and unexpected occurrence, or the
failure of the debtor to comply with his obligations, must be independent of human
will; (b) it must be impossible to foresee the event which constitutes the caso
fortuito, or if it can be foreseen, it must be impossible to avoid; (c) the occurrence
must be such as to render it impossible for the debtor to fulfill his obligation in a
normal manner; and (d) the obliger must be free from any participation in the
aggravation of the injury resulting to the creditor. 13 As Article 1174 provides, no
person shall be responsible for a fortuitous event which could not be foreseen, or
which, though foreseen, was inevitable. In other words, there must be an entire
exclusion of human agency from the cause of injury or loss.
Under the circumstances of this case, the explosion of the new tire may not be
considered a fortuitous event. There are human factors involved in the situation.
The fact that the tire was new did not imply that it was entirely free from
manufacturing defects or that it was properly mounted on the vehicle. Neither may
the fact that the tire bought and used in the vehicle is of a brand name noted for
quality, resulting in the conclusion that it could not explode within five days' use. Be
that as it may, it is settled that an accident caused either by defects in the
automobile or through the negligence of its driver is not a caso fortuito that would
exempt the carrier from liability for damages.
Moreover, a common carrier may not be absolved from liability in case of force
majeure or fortuitous event alone. The common carrier must still prove that it
was not negligent in causing the death or injury resulting from an accident.
Jesusa Vda. De Nueca, v. The Manila Railroad Company, Court of Appeals C.A.
No. 31731, January 30, 1968.

Jesusa Vda. De Nueca, v. The Manila Railroad Company, Court of Appeals C.A. No.
31731, January 30, 1968.
VDA DE NUECA VS. MNL RAILROAD CO, CA
Facts:
-At 3 p.m. on Dec. 22, 1958, Fermin Nueca brought 7 sacks of palay to Manila
Railroad Co. (MRC) at its station in Barrio del Rosario, Camarines Sur, tobe shipped
to the municipality of Libmanan of the same province.
-He paid P 0.70 as freight charge and was issued Way Bill No. 56515.
-The cargo was loaded on the freight wagon of Train 537. Passengers boarded the
train and shunting operations started to hook a wagon thereto.
-Before the train reached the turnoff switch, its passenger coach fell on its side
some 40 m from the station. The wagon pinned Nueca, killing himinstantly.
-Nuecas widow and children bring this claim for damages, alleging that the Nueca
was a passenger and his death was caused by MRCs negligence.
-MRC disclaimed liability stating:
(1) it exercised due care in safeguarding the passengers during the shunting
operation,
(2) Nueca was not a passenger but a trespasser,
(3) even if Nuecawere a passenger, he illegally boarded the train without
permission by not paying the fare,
(4) the mishap was not attributable to any defect in MRC equipment,
(5) that the accident happened due to force majeur.
-MRC presented evidence showing there was no mechanical defect, but it did not
explain why the accident occurred or show that force majeur caused the mishap.
-The lower court absolved MRC of liability and held that Nueca was a trespasser
since he did not buy any ticket, and in any case, was not in a proper place for
passengers.
Issue:
1.WON Nueca was a passenger? -- NO
2.WON MRC is liable? --YES
3.WON accident was due to MRCs negligence or force majeur?
4.WON Nueca liable for contributory negligence?
Held:1.No, Nueca was not a passenger thus, MRC did not owe him extraordinary
diligence.A passenger is one who travels in a public conveyance by virtue of a
contract, express or implied, with the carrier as to the payment of the fare, or that
which isaccepted as an equivalent. The relation of passenger and carrier
commences when one puts himself in the care of the carrier, or directly under its
control, with the bona fide intention of becoming a passenger, and is accepted as
such by the carrier as where he makes a contract for transportation and presents
himself at the proper place and in a proper manner to be transported.
Even disregarding the matter of tickets, and assuming Nueca intended to be a

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passenger, he was never accepted as such by MRC as he did not present himself at
the proper place and in a proper manner to betransported.
2.Yes, the liability of railroad companies to persons upon their premises is
determined by the general rules of negligence relating to duties of
owners/occupiers of property.While railroad companies are not bound to the same
degree of care in regard to strangers who are unlawfully upon the premises of its
passengers, it may still be liable to such strangers for negligent or tortious acts.
Here, Nueca was not on the track, but either unlawfully inside the baggage car or
beside the track. It is normal for people to walk on the track or roadbed when there
is no oncoming train and to walk beside the track when a train passes. This practice
is tolerated by MRC. Generally, MRCs stations are not enclosed, and is easily
accessible to the public.

On the other hand, petitioners alleged that they had observed and continued to
observe the extraordinary diligence required in the operation of the transportation
company and the supervision of the employees, even as they add that they are not
absolute insurers of the safety of the public at large. Further, it was alleged that it
was the victim's own carelessness and negligence which gave rise to the subject
incident, hence they prayed for the dismissal of the complaint plus an award of
damages in their favor by way of a counterclaim.

3.MRC is negligent; doctrine of res ipsa loquitur applied. The train was under the
complete control of the railroad company at the time of the accident. The baggage
car would not have been derailed if the train had been properly operated. Res ipsa
loquitur is a rule of evidence peculiar to the law of negligence which recognizes that
prima facie negligence may be established without direct proof and furnishes a
substitute for specific proof of negligence.

Issue:
Whether or not the petitioners are negligent and liable for the damages claimed

4. No. An invitation to stay in the premises is implied from the lack of prohibition to
outsiders to keep off the premises,hence, a stranger who is injured by a derailed
train while staying beside a railroad track is not guilty of contributory negligence.
Note: Our law on common carriers is lifted from Anglo-American statutes
Dangwa v. CA
G.R. No. 95582 October 7, 1991
DANGWA TRANSPORTATION CO., INC. and THEODORE LARDIZABAL y MALECDAN,
petitioners,
vs.
COURT OF APPEALS, INOCENCIA CUDIAMAT, EMILIA CUDIAMAT BANDOY,
FERNANDO CUDLAMAT, MARRIETA CUDIAMAT, NORMA CUDIAMAT, DANTE
CUDIAMAT, SAMUEL CUDIAMAT and LIGAYA CUDIAMAT, all Heirs of the late
Pedrito Cudiamat represented by Inocencia Cudiamat, respondents.
Facts:
Private respondents filed a complaint for damages against petitioners for the death
of Pedrito Cudiamat as a result of a vehicular accident. Among others, it was alleged
that while petitioner Lardizabal was driving a passenger bus belonging to petitioner
corporation, it ran over its passenger, Pedrito Cudiamat. However, instead of
bringing Pedrito immediately to the nearest hospital, the said driver, first brought
his other passengers and cargo to their respective destinations before banging said
victim to the hospital where he expired.

The trial court then rendered a decision in favor of petitioners ruling that Pedrito
was negligent which was the proximate cause of his death.
On appeal, the CA set aside the decision of the lower court. Petitioners' motion for
reconsideration was denied by the CA, hence this petition.

Ruling:
The petitioner was negligent and should be liable for the damages claimed.
The lower court, in declaring that the victim was negligent, made the following
findings:
This Court is satisfied that Pedrito Cudiamat was negligent in trying to board a
moving vehicle, especially with one of his hands holding an umbrella. And, without
having given the driver or the conductor any indication that he wishes to board the
bus. But defendants can also be found wanting of the necessary diligence. In this
connection, it is safe to assume that when the deceased Cudiamat attempted to
board defendants' bus, the vehicle's door was open instead of being closed. This
should be so, for it is hard to believe that one would even attempt to board a
vehicle (i)n motion if the door of said vehicle is closed. Here lies the defendant's
lack of diligence. Under such circumstances, equity demands that there must be
something given to the heirs of the victim to assuage their feelings. This, also
considering that initially, defendant common carrier had made overtures to
amicably settle the case. It did offer a certain monetary consideration to the
victim's heirs.
However, respondent court, in arriving at a different opinion, declares that:
From the testimony of appellees'own witness in the person of Vitaliano Safarita, it
is evident that the subject bus was at full stop when the victim Pedrito Cudiamat
boarded the same as it was precisely on this instance where a certain Miss Abenoja
alighted from the bus. Moreover, contrary to the assertion of the appellees, the
victim did indicate his intention to board the bus as can be seen from the testimony
of the said witness when he declared that Pedrito Cudiamat was no longer walking
and made a sign to board the bus when the latter was still at a distance from him. It
was at the instance when Pedrito Cudiamat was closing his umbrella at the platform
of the bus when the latter made a sudden jerk movement (as) the driver
commenced to accelerate the bus.

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After a careful review of the evidence on record, we find no reason to disturb the
above holding of the Court of Appeals.
Evidently, the incident took place due to the gross negligence of the appellee-driver
in prematurely stepping on the accelerator and in not waiting for the passenger to
first secure his seat especially so when we take into account that the platform of
the bus was at the time slippery and wet because of a drizzle. The defendantsappellees utterly failed to observe their duty and obligation as common carrier to
the end that they should observe extra-ordinary diligence in the vigilance over the
goods and for the safety of the passengers transported by them according to the
circumstances of each case.
The contention of petitioners that the driver and the conductor had no knowledge
that the victim would ride on the bus, since the latter had supposedly not
manifested his intention to board the same, does not merit consideration. When
the bus is not in motion there is no necessity for a person who wants to ride the
same to signal his intention to board. A public utility bus, once it stops, is in effect
making a continuous offer to bus riders. Hence, it becomes the duty of the driver
and the conductor, every time the bus stops, to do no act that would have the
effect of increasing the peril to a passenger while he was attempting to board the
same. The premature acceleration of the bus in this case was a breach of such duty.
It is the duty of common carriers of passengers, including common carriers by
railroad train, streetcar, or motorbus, to stop their conveyances a reasonable length
of time in order to afford passengers an opportunity to board and enter, and they
are liable for injuries suffered by boarding passengers resulting from the sudden
starting up or jerking of their conveyances while they are doing so.
Further, even assuming that the bus was moving, the act of the victim in boarding
the same cannot be considered negligent under the circumstances. As clearly
explained in the testimony of the aforestated witness for petitioners, Virginia
Abalos, th bus had "just started" and "was still in slow motion" at the point where
the victim had boarded and was on its platform.
It is not negligence per se, or as a matter of law, for one attempt to board a train or
streetcar which is moving slowly. An ordinarily prudent person would have made
the attempt board the moving conveyance under the same or similar
circumstances. The fact that passengers board and alight from slowly moving
vehicle is a matter of common experience both the driver and conductor in this
case could not have been unaware of such an ordinary practice.
The victim herein, by stepping and standing on the platform of the bus, is already
considered a passenger and is entitled all the rights and protection pertaining to
such a contractual relation. Hence, it has been held that the duty which the carrier
passengers owes to its patrons extends to persons boarding cars as well as to those
alighting therefrom.

Common carriers, from the nature of their business and reasons of public policy,
are bound to observe extraordinary diligence for the safety of the passengers
transported by the according to all the circumstances of each case. A common
carrier is bound to carry the passengers safely as far as human care and foresight
can provide, using the utmost diligence very cautious persons, with a due regard for
all the circumstances.
It has also been repeatedly held that in an action based on a contract of carriage,
the court need not make an express finding of fault or negligence on the part of the
carrier in order to hold it responsible to pay the damages sought by the passenger.
By contract of carriage, the carrier assumes the express obligation to transport the
passenger to his destination safely and observe extraordinary diligence with a due
regard for all the circumstances, and any injury that might be suffered by the
passenger is right away attributable to the fault or negligence of the carrier. This is
an exception to the general rule that negligence must be proved, and it is therefore
incumbent upon the carrier to prove that it has exercised extraordinary diligence as
prescribed in Articles 1733 and 1755 of the Civil Code.
Moreover, the circumstances under which the driver and the conductor failed to
bring the gravely injured victim immediately to the hospital for medical treatment is
a patent and incontrovertible proof of their negligence. It defies understanding and
can even be stigmatized as callous indifference.

(G.R. NO. L-20761, 27 JULY 1966, 17 SCRA 739)


LA MALLORCA VS. CA
Facts:
Plaintiffs, husband and wife, together with their three minor daughters
(Milagros, 13 years old, Raquel, about 4 years old and Fe, 2 years old) boarded the
Pambusco at San Fernando Pampanga, bound for Anao, Mexico, Pampanga. Such
bus is owned and operated by the defendant.
They were carrying with them four pieces of baggage containing their personal
belonging. The conductor of the bus issued three tickets covering the full fares of
the plaintiff and their eldest child Milagros. No fare was charged on Raquel and Fe,
since both were below the height which fare is charged in accordance with
plaintiffs rules and regulations.
After about an hours trip, the bus reached Anao where it stopped to allow
the passengers bound therefore, among whom were the plaintiffs and their
children to get off. Mariano Beltran, carrying some of their baggage was the first to
get down the bus, followed by his wife and children. Mariano led his companion to
a shaded spot on the left pedestrian side of the road about four or five meters away
from the vehicle. Afterwards he returned to the bus in controversy to get his
paying, which he had left behind, but in so doing, his daughter followed him

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unnoticed by his father. While said Mariano Beltran was on the running board of
the bus waiting for the conductor to hand him his bayong which he left under one
its seats near the door, the bus, whose motor was not shut off while unloading
suddenly started moving forward, evidently to resume its trip, notwithstanding the
fact that the conductor was still attending to the baggage left behind by Mariano
Beltran. Incidentally, when the bus was again placed in a complete stop, it had
travelled about 10 meters from point where plaintiffs had gotten off.
Sensing the bus was again in motion; Mariano immediately jumped from
the running board without getting this bayong from conductor. He landed on the
side of the road almost board in from the shaded place where he left his wife and
his children. At that time, he saw people beginning to gather around the body of a
child lying prostrate on the ground, her skull crushed, and without life. The child
was none other than his daughter Raquel, who was run over by the bus in which
she rode earlier together with her parent.
For the death of the said child, plaintiffs comment the suit against the defendant to
recover from the latter damages.
Issue:
Whether or not the child was no longer the passenger of the bus involved
in the incident, and therefore, the contract of carriage was already terminated?
Held:
There can be no controversy that as far as the father is concerned, when
he returned to the bus for his bayong which was not unloaded, the relation of
passenger and carrier between him and the petitioner remained subsisting. The
relation of carrier and passenger does not necessarily cease where the latter, after
alighting from the car aids the carriers servant or employee in removing his
baggage from the car.
It is a rule that the relation of carrier and passenger does not cease the
moment the passenger alights from the carriers vehicle at a place selected by the
carrier at the point of destination but continues until the passenger has had a
reasonable time or a reasonable opportunity to leave the carriers premises.
The father returned to the bus to get one of his baggages which was not
unloaded when they alighted from the bus. Raquel must have followed her father.
However, although the father was still on the running board of the bus awaiting for
the conductor to hand him the bag or bayong, the bus started to run, so that even
he had jumped down from the moving vehicle. It was that this instance that the
child, who must be near the bus, was run over and killed. In the circumstances, it
cannot be claimed that the carriers agent had exercised the utmost diligence of a
very cautious person required by Article 1755 of the Civil Code to be observed by
a comm. On carrier in the discharge of its obligation to transport safely its
passenger. The driver, although stopping the bus, nevertheless did not put off the
engine. He started to run the bus even before the conductor gave him the signal to

go and while the latter was still unloading part of the baggage of the passengers
Beltran and family. The presence of the said passengers near the bus was not
unreasonable and they are, therefore, to be considered still as passengers of the
carrier, entitled to the protection under their contract of carriage.
ABOITIZ SHIPPING CORPORATION vs. CA
ABOITIZ SHIPPING CORPORATION, petitioner,
vs.
HON. COURT OF APPEALS, ELEVENTH DIVISION, LUCILA C. VIANA, SPS. ANTONIO
VIANA and GORGONIA VIANA, and PIONEER STEVEDORING
CORPORATION, respondents.
Facts:
Anacleto Viana boarded the vessel M/V Antonia, owned by defendant, at the port
at San Jose, Occidental Mindoro, bound for Manila, having purchased a ticket, said
vessel arrived at Pier 4, North Harbor, Manila, and the passengers therein
disembarked, a gangplank having been provided connecting the side of the vessel
to the pier. Instead of using said gangplank Anacleto Viana disembarked on the
third deck which was on the level with the pier. After said vessel had landed, the
Pioneer Stevedoring Corporation took over the exclusive control of the cargoes
loaded on said vessel.
The crane owned by the third party defendant and operated by its crane operator
Alejo Figueroa was placed alongside the vessel and one (1) hour after the
passengers of said vessel had disembarked, it started operation by unloading the
cargoes from said vessel. While the crane was being operated, Anacleto Viana who
had already disembarked from said vessel obviously remembering that some of his
cargoes were still loaded in the vessel, went back to the vessel, and it was while he
was pointing to the crew of the said vessel to the place where his cargoes were
loaded that the crane hit him, pinning him between the side of the vessel and the
crane. He was thereafter brought to the hospital where he later died.
Private respondents Vianas filed a complaint 3 for damages against petitioner
corporation (Aboitiz, for brevity) for breach of contract of carriage.
Aboitiz denied responsibility contending that since one (1) hour had already elapsed
from the time Anacleto Viana disembarked from the vessel and that he was given
more than ample opportunity to unload his cargoes prior to the operation of the
crane, his presence on the vessel was no longer reasonable e and he consequently
ceased to be a passenger. Furthermore, at the time of the accident, the vessel was
completely under the control of respondent Pioneer Stevedoring Corporation as the
exclusive stevedoring contractor of Aboitiz, which handled the unloading of cargoes
from the vessel of Aboitiz. It is also averred that since the crane operator was not
an employee of Aboitiz, the latter cannot be held liable under the fellow-servant
rule.
Pioneer raised the defenses that Aboitiz had no cause of action against Pioneer
considering that Aboitiz is being sued by the Vianas for breach of contract of

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carriage to which Pioneer is not a party; that Pioneer had observed the diligence of
a good father of a family both in the selection and supervision of its employees as
well as in the prevention of damage or injury to anyone including the victim
Anacleto Viana; that Anacleto Viana's gross negligence was the direct and
proximate cause of his death.
Issue: Did Anacleto Viana cease to be a passenger when she went back to the ship
to get his cargoes after disembarking?
Held:
No.The rule is that the relation of carrier and passenger continues until the
passenger has been landed at the port of destination and has left the vessel owner's
dock or premises. 11 Once created, the relationship will not ordinarily terminate
until the passenger has, after reaching his destination, safely alighted from the
carrier's conveyance or had a reasonable opportunity to leave the carrier's
premises. All persons who remain on the premises a reasonable time after leaving
the conveyance are to be deemed passengers, and what is a reasonable time or a
reasonable delay within this rule is to be determined from all the circumstances,
and includes a reasonable time to see after his baggage and prepare for his
departure. 12 The carrier-passenger relationship is not terminated merely by the fact
that the person transported has been carried to his destination if, for example, such
person remains in the carrier's premises to claim his baggage.
It is not definitely shown that one (1) hour prior to the incident, the victim had
already disembarked from the vessel. Petitioner failed to prove this. What is clear
to us is that at the time the victim was taking his cargoes, the vessel had already
docked an hour earlier. In consonance with common shipping procedure as to the
minimum time of one (1) hour allowed for the passengers to disembark, it may be
presumed that the victim had just gotten off the vessel when he went to retrieve
his baggage. Yet, even if he had already disembarked an hour earlier, his presence
in petitioner's premises was not without cause. The victim had to claim his baggage
which was possible only one (1) hour after the vessel arrived since it was admittedly
standard procedure in the case of petitioner's vessels that the unloading operations
shall start only after that time. Consequently, under the foregoing circumstances,
the victim Anacleto Viana is still deemed a passenger of said carrier at the time of
his tragic death.

ALFREDO MALLARI SR. and ALFREDO MALLARI JR. in this petition for review
on certiorari seek to set aside the Decision of the Court of Appeals which reversed
the court a quo and adjudged petitioners to be liable for damages due to negligence
as a common carrier resulting in the death of a passenger.
Facts: On 14 October 1987, at about 5:00 o'clock in the morning, the passenger
jeepney driven by petitioner Alfredo Mallari Jr. and owned by his co-petitioner
Alfredo Mallari Sr. collided with the delivery van of respondent Bulletin Publishing
Corp. along the National Highway in Barangay San Pablo, Dinalupihan, Bataan.
Petitioner Mallari Jr. testified that he went to the left lane of the highway and
overtook a Fiera which had stopped on the right lane. Before he passed by the
Fiera, he saw the van of respondent BULLETIN coming from the opposite direction.
It was driven by one Felix Angeles. The sketch of the accident showed that the
collision occurred after Mallari Jr. overtook the Fiera while negotiating a curve in
the highway. The points of collision were the left rear portion of the passenger
jeepney and the left front side of the delivery van of BULLETIN. The two right
wheels of the delivery van were on the right shoulder of the road and pieces of
debris from the accident were found scattered along the shoulder of the road up to
a certain portion of the lane travelled by the passenger jeepney. The impact caused
the jeepney to turn around and fall on its left side resulting in injuries to its
passengers one of whom was Israel Reyes who eventually died due to the gravity of
his injuries. Manikan
On 16 December 1987 Claudia G. Reyes, the widow of Israel M. Reyes, filed a
complaint for damages with the Regional Trial Court of Olongapo City against
Alfredo Mallari Sr. and Alfredo Mallari Jr., and also against BULLETIN, its driver Felix
Angeles, and the N.V. Netherlands Insurance Company. The complaint alleged that
the collision which resulted in the death of Israel Reyes was caused by the fault and
negligence of both drivers of the passenger jeepney and the Bulletin Isuzu delivery
van. The trial court found that the proximate cause of the collision was the
negligence of Felix Angeles, driver of the Bulletin delivery van, considering the fact
that the left front portion of the delivery truck driven by Felix Angeles hit and
bumped the left rear portion of the passenger jeepney driven by Alfredo Mallari Jr.

ALFREDO MALLARI SR. and ALFREDO MALLARI JR. vs. COURT OF APPEALS and
BULLETIN PUBLISHING CORPORATION

On appeal, the appellate court ruled that the collision was caused by the sole
negligence of petitioner Alfredo Mallari Jr. who admitted that immediately before
the collision and after he rounded a curve on the highway, he overtook a Fiera
which had stopped on his lane and that he had seen the van driven by Angeles
before overtaking the Fiera. It absolved from any liability respondent BULLETIN,
Felix Angeles and N.V. Netherlands Insurance Company. Hence this petition.

BELLOSILLO, J.:

Issue: WON the collision was caused by the sole negligence of Mallari Jr.

G.R. No. 128607. January 31, 2000]

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

Held: Yes. The Court of Appeals correctly found, based on the sketch and spot
report of the police authorities which were not disputed by petitioners, that the
collision occurred immediately after petitioner Mallari Jr. overtook a vehicle in front
of it while traversing a curve on the highway. This act of overtaking was in clear
violation of Sec. 41, pars. (a) and (b), of RA 4136 as amended, otherwise known
as The Land Transportation and Traffic Code which provides:
Sec. 41. Restrictions on overtaking and passing. - (a) The driver of a vehicle shall not
drive to the left side of the center line of a highway in overtaking or passing another
vehicle proceeding in the same direction, unless such left side is clearly visible and is
free of oncoming traffic for a sufficient distance ahead to permit such overtaking or
passing to be made in safety.
(b) The driver of a vehicle shall not overtake or pass another vehicle proceeding in
the same direction when approaching the crest of a grade, nor upon a curve in the
highway, where the drivers view along the highway is obstructed within a distance
of five hundred feet ahead except on a highway having two or more lanes for
movement of traffic in one direction where the driver of a vehicle may overtake or
pass another vehicle:
Provided That on a highway, within a business or residential district, having two or
more lanes for movement of traffic in one direction, the driver of a vehicle may
overtake or pass another vehicle on the right.
The rule is settled that a driver abandoning his proper lane for the purpose of
overtaking another vehicle in an ordinary situation has the duty to see to it that the
road is clear and not to proceed if he cannot do so in safety. When a motor vehicle
is approaching or rounding a curve, there is special necessity for keeping to the
right side of the road and the driver does not have the right to drive on the left
hand side relying upon having time to turn to the right if a car approaching from the
opposite direction comes into view.
In the instant case, by his own admission, petitioner Mallari Jr. already saw that the
BULLETIN delivery van was coming from the opposite direction and failing to
consider the speed thereof since it was still dark at 5:00 o'clock in the morning
mindlessly occupied the left lane and overtook two vehicles in front of it at a curve
in the highway. Clearly, the proximate cause of the collision resulting in the death of
Israel Reyes, a passenger of the jeepney, was the sole negligence of the driver of
the passenger jeepney, petitioner Alfredo Mallari Jr., who recklessly operated and
drove his jeepney in a lane where overtaking was not allowed by traffic rules. Under
Art. 2185 of the Civil Code, unless there is proof to the contrary, it is presumed that
a person driving a motor vehicle has been negligent if at the time of the mishap he

was violating a traffic regulation. As found by the appellate court, petitioners failed
to present satisfactory evidence to overcome this legal presumption.
The negligence and recklessness of the driver of the passenger jeepney is binding
against petitioner Mallari Sr., who admittedly was the owner of the passenger
jeepney engaged as a common carrier, considering the fact that in an action based
on contract of carriage, the court need not make an express finding of fault or
negligence on the part of the carrier in order to hold it responsible for the payment
of damages sought by the passenger. Under Art. 1755 of the Civil Code, a common
carrier is bound to carry the passengers safely as far as human care and foresight
can provide using the utmost diligence of very cautious persons with due regard for
all the circumstances. Moreover, under Art. 1756 of the Civil Code, in case of death
or injuries to passengers, a common carrier is presumed to have been at fault or to
have acted negligently, unless it proves that it observed extraordinary diligence.
Further, pursuant to Art. 1759 of the same Code, it is liable for the death of or
injuries to passengers through the negligence or willful acts of the formers
employees. This liability of the common carrier does not cease upon proof that it
exercised all the diligence of a good father of a family in the selection of its
employees. Clearly, by the contract of carriage, the carrier jeepney owned by
Mallari Sr. assumed the express obligation to transport the passengers to their
destination safely and to observe extraordinary diligence with due regard for all the
circumstances, and any injury or death that might be suffered by its passengers is
right away attributable to the fault or negligence of the carrier. Scnc m

G.R. No. 145804 February 6, 2003


LIGHT RAIL TRANSIT AUTHORITY & RODOLFO ROMAN, petitioners, vs. MARJORIE
NAVIDAD, Heirs of the Late NICANOR NAVIDAD & PRUDENT SECURITY AGENCY,
respondents
VITUG, J.:
FACTS: On 14 October 1993, about 7:30 pm, Nicanor Navidad, then drunk, entered
the EDSA LRT station after purchasing a "token" (representing payment of the fare).
While Navidad was standing on the platform near the LRT tracks, Junelito Escartin,
the security guard assigned to the area approached Navidad. A misunderstanding or
an altercation between the two apparently ensued that led to a fist fight. No
evidence, however, was adduced to indicate how the fight started or who, between
the two, delivered the first blow or how Navidad later fell on the LRT tracks. At the
exact moment that Navidad fell, an LRT train, operated by petitioner Rodolfo
Roman, was coming in. Navidad was struck by the moving train, and he was killed
instantaneously.
The widow of Nicanor, Marjorie Navidad, along with her children, filed a complaint
for damages against Junelito Escartin, Rodolfo Roman, the LRTA, the Metro Transit
Organization, Inc. (Metro Transit), and Prudent for the death of her husband. LRTA

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

and Roman filed a counterclaim against Navidad and a cross-claim against Escartin
and Prudent. Prudent, in its answer, denied liability and averred that it had
exercised due diligence in the selection and supervision of its security guards.
The court ruled in favor of the heirs of late Navidad and against Prudent Security
and Escartin ordering the latter to pay jointly and severally the Navidads. Prudent
appealed to the CA. It exonerated Prudent from any liability for the death of
Nicanor Navidad and, instead, holding the LRTA and Roman jointly and severally
liable.
CA ratiocinated that while the deceased might not have then as yet boarded the
train, a contract of carriage theretofore had already existed when the victim
entered the place where passengers were supposed to be after paying the fare and
getting the corresponding token therefor. In exempting Prudent from liability, the
court stressed that there was nothing to link the security agency to the death of
Navidad. It said that Navidad failed to show that Escartin inflicted fist blows upon
the victim and the evidence merely established the fact of death of Navidad by
reason of his having been hit by the train owned and managed by the LRTA and
operated at the time by Roman. The appellate court faulted petitioners for their
failure to present expert evidence to establish the fact that the application of
emergency brakes could not have stopped the train.
MR was denied. Hence, this petition.
ISSUE: Whether or not LRTA and Roman is liable according to the contract of
carriage?
HELD: Raizas comment:
LRTA case ruling: LRTA is liable (contract of carriage) while Roman is absolved from
liability for failure of the private respondents to establish that he is guilty of any
culpable act or omission.
Cited Articles: 1755, 1756, 1759, 1763
The law requires common carriers to carry passengers safely using the utmost
diligence of very cautious persons with due regard for all circumstances. Such duty
of a common carrier to provide safety to its passengers so obligates it not only
during the course of the trip but for so long as the passengers are within its
premises and where they ought to be in pursuance to the contract of carriage. The
statutory provisions render a common carrier liable for death of or injury to
passengers (a) through the negligence or wilful acts of its employees or b) on
account of wilful acts or negligence of other passengers or of strangers if the
common carriers employees through the exercise of due diligence could have
prevented or stopped the act or omission. In case of such death or injury, a carrier
is presumed to have been at fault or been negligent, and by simple proof of injury,
the passenger is relieved of the duty to still establish the fault or negligence of the
carrier or of its employees and the burden shifts upon the carrier to prove that the
injury is due to an unforeseen event or to force majeure. In the absence of

satisfactory explanation by the carrier on how the accident occurred, which


petitioners, according to the appellate court, have failed to show, the presumption
would be that it has been at fault, an exception from the general rule that
negligence must be proved.
The foundation of LRTAs liability is the contract of carriage and its obligation to
indemnify the victim arises from the breach of that contract by reason of its failure
to exercise the high diligence required of the common carrier. In the discharge of its
commitment to ensure the safety of passengers, a carrier may choose to hire its
own employees or avail itself of the services of an outsider or an independent firm
to undertake the task. In either case, the common carrier is not relieved of its
responsibilities under the contract of carriage.
Should Prudent be made likewise liable? If at all, that liability could only be for
tort under the provisions of Article 2176 and related provisions, in conjunction
with Article 2180, of the Civil Code. The premise, however, for the employers
liability is negligence or fault on the part of the employee. Once such fault is
established, the employer can then be made liable on the basis of the presumption
juris tantum that the employer failed to exercise diligentissimi patris families in the
selection and supervision of its employees. The liability is primary and can only be
negated by showing due diligence in the selection and supervision of the employee,
a factual matter that has not been shown. Absent such a showing, one might ask
further, how then must the liability of the common carrier, on the one hand, and an
independent contractor, on the other hand, be described? It would be solidary. A
contractual obligation can be breached by tort and when the same act or omission
causes the injury, one resulting in culpa contractual and the other in culpa
aquiliana, Article 2194of the Civil Code can well apply. In fine, a liability for tort may
arise even under a contract, where tort is that which breaches the contract. Stated
differently, when an act which constitutes a breach of contract would have itself
constituted the source of a quasi-delictual liability had no contract existed between
the parties, the contract can be said to have been breached by tort, thereby
allowing the rules on tort to apply.
Regrettably for LRT, as well as perhaps the surviving spouse and heirs of the late
Nicanor Navidad, this Court is concluded by the factual finding of the Court of
Appeals that "there is nothing to link (Prudent) to the death of Nicanor (Navidad),
for the reason that the negligence of its employee, Escartin, has not been duly
proven x x x." This finding of the appellate court is not without substantial
justification in our own review of the records of the case.
There being, similarly, no showing that petitioner Rodolfo Roman himself is guilty
of any culpable act or omission, he must also be absolved from liability. Needless
to say, the contractual tie between the LRT and Navidad is not itself a juridical
relation between the latter and Roman; thus, Roman can be made liable only for
his own fault or negligence.

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LUDO AND LUYM CORPORATION, petitioner, vs. COURT OF APPEALS, GABISAN


SHIPPING LINES, INC. and/or ANSELMO OLASIMAN respondents.
[G.R. No. 125483. February 1, 2001]
Facts:
Petitioner Ludo & Luym Corporation is a domestic corporation engaged in
copra processing with plant and business offices in Cebu City. It owns and operates
a private wharf used by vessels for loading and unloading of copra and other
processed products. Among its wharfs facilities are fender pile clusters for docking
and mooring. Private Respondent Gabisan Shipping Lines was the registered owner
and operator of the motor vessel MV Miguela, while the other private respondent,
Anselmo Olasiman, was its captain While MV Miguela was docking at petitioners
wharf, it rammed and destroyed a fender pile cluster. Petitioner demanded
damages from private respondents. The latter refused. Hence, petitioner filed a
complaint for damages before the Regional Trial Court of Cebu.
The trial court disposed the case in favor of petitioner finding that the
respondents are solidarily liable for damages for negligence. The Court of Appeals
reversed the trial court.
Issue: WON the doctrine of res ipsa loquitur applies in this case as to warrant
presumption of negligence
Held:
Yes.
Res ipsa loquitur Where the thing which causes injury is shown to be under
the management of the defendant, and the accident is such as in the ordinary
course of things does not happen if those who have the management use proper
care, it affords reasonable evidence, in the absence of an explanation by the
defendant, that the accident arose from want of care.
The doctrine recognizes that parties may establish prima facie negligence
without direct proof and allows the principle to substitute for specific proof of
negligence. This is invoked when under the circumstances, direct evidence is absent
and not readily available.
In our view, all the requisites for recourse to this doctrine exist. First, MV
Miguela was under the exclusive control of its officers and crew. Petitioner did not
have direct evidence on what transpired within as the officers and crew
maneuvered the vessel to its berthing place. We note the Court of Appeals finding
that Naval and Espina were not knowledgeable on the vessels maneuverings, and
could not testify on the negligence of the officers and crew. Second, aside from the
testimony that MV Miguela rammed the cluster pile, private respondent did not
show persuasively other possible causes of the damage.
Applying now the above, there exists a presumption of negligence against
private respondents which we opine the latter failed to overcome. Additionally,
petitioner presented tangible proof that demonstrated private respondents
negligence. As testified by Capt. Olasiman, from command of slow ahead to stop

engine, the vessel will still travel 100 meters before it finally stops. However, he
ordered stop engine when the vessel was only 50 meters from the pier. Further,
he testified that before the vessel is put to slow astern, the engine has to be
restarted. However, Olasiman cannot estimate how long it takes before the engine
goes to slow astern after the engine is restarted. From these declarations, the
conclusion is that it was already too late when the captain ordered reverse. By
then, the vessel was only 4 meters from the pier, and thus rammed it. Respondent
companys negligence consists in allowing incompetent crew to man its vessel. As
shown also by petitioner, both Captain Olasiman and Chief Mate Gabisan did not
have a formal training in marine navigation. The former was a mere elementary
graduate while the latter is a high school graduate. Their experience in navigation
was only as a watchman and a quartermaster, respectively.
PESTANO V SUMAYANG
Facts: Ananias Sumayang, together with his friend Manuel Romagos, was riding a
motorcycle along the national highway Riding with him when they were hit by a
passenger bus along the highway driven by [Petitioner] Gregorio Pestao and
owned by [Petitioner] Metro Cebu Autobus Corporation (Metro Cebu, for brevity),
which had tried to overtake them, sending the motorcycle and its passengers
hurtling upon the pavement. Both of them died as a result of the accident.
Pestao blamed Sumayang for the accident. He testified that:
* when he first blew the horn the motorcycle which was about 15 or 20 meters
ahead went to the right side of the highway that he again blew the horn and
accelerated in order to overtake the motorcycle;
* that when he was just one meter behind, the motorcycle suddenly turned left
without any signal towards the Tab[a]gon [R]oad and was bumped by his bus;
RTC- It was shown that Pestao negligently attempted to overtake the motorcycle
at a dangerous speed as they were coming upon a junction in the road, and as the
motorcycle was about to turn left towards Tabagon.
CA- The CA affirmed respondent's liability for the accident and for Sumayang's
death. Pestao was negligent when he tried to overtake the victim's motorcycle at
the Tabagon junction and due to a faulty speedometer
Issue: WON negligence in driving was the proximate cause of the accident
Held: YES. As a professional driver operating a public transport bus, he should have
anticipated that overtaking at a junction was a perilous maneuver and should thus
have exercised extreme caution.

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

Petitioners contend that Pestao was not under any obligation to slow down when
he overtook the motorcycle, because the deceased had given way to him upon
hearing the bus horn. They further contend that the motorcycle was not in the
middle of the road nearest to the junction as found by the trial and the appellate
courts, but was on the inner lane. This explains why the damage on the bus were all
on the right side - the right end of the bumper and the right portion of the radiator
grill were bent and dented. Hence, they insist that it was the victim who was
negligent.

Anselmo Olasiman, was its captain While MV Miguela was docking at petitioners
wharf, it rammed and destroyed a fender pile cluster. Petitioner demanded
damages from private respondents. The latter refused. Hence, petitioner filed a
complaint for damages before the Regional Trial Court of Cebu.

We disagree. Petitioners are raising a question of fact based on Pestao's testimony


contradicting that of Eyewitness that testified that as the two vehicles approached
the junction, the victim raised his left arm to signal that he was turning left to
Tabagon, but that the latter and his companion were thrown off the motorcycle
after it was bumped by the overspeeding bus.

Issue: WON the doctrine of res ipsa loquitur applies in this case as to warrant
presumption of negligence

Under Articles 2180 and 2176 of the Civil Code, owners and managers are
responsible for damages caused by their employees. When an injury is caused by
the negligence of a servant or an employee, the master or employer is presumed to
be negligent either in the selection or in the supervision of that employee. This
presumption may be overcome only by satisfactorily showing that the employer
exercised the care and the diligence of a good father of a family in the selection and
the supervision of its employee. The CA said that allowing Pestao to ply his route
with a defective speedometer showed laxity on the part of Metro Cebu in the
operation of its business and in the supervision of its employees. The negligence
alluded to here is in its supervision over its driver, not in that which directly caused
the accident. The fact that Pestao was able to use a bus with a faulty speedometer
shows that Metro Cebu was remiss in the supervision of its employees and in the
proper care of its vehicles. It had thus failed to conduct its business with the
diligence required by law

Res ipsa loquitur Where the thing which causes injury is shown to be under the
management of the defendant, and the accident is such as in the ordinary course of
things does not happen if those who have the management use proper care, it
affords reasonable evidence, in the absence of an explanation by the defendant,
that the accident arose from want of care.

LUDO AND LUYM CORPORATION, petitioner, vs. COURT OF APPEALS, GABISAN


SHIPPING LINES, INC. and/or ANSELMO OLASIMAN respondents.
[G.R. No. 125483. February 1, 2001]
TOPIC: Presumption of negligence
Facts:
Petitioner Ludo & Luym Corporation is a domestic corporation engaged in copra
processing with plant and business offices in Cebu City. It owns and operates a
private wharf used by vessels for loading and unloading of copra and other
processed products. Among its wharfs facilities are fender pile clusters for docking
and mooring. Private Respondent Gabisan Shipping Lines was the registered owner
and operator of the motor vessel MV Miguela, while the other private respondent,

The trial court disposed the case in favor of petitioner finding that the respondents
are solidarily liable for damages for negligence. The Court of Appeals reversed the
trial court.

Held:
Yes.

The doctrine recognizes that parties may establish prima facie negligence without
direct proof and allows the principle to substitute for specific proof of negligence.
This is invoked when under the circumstances, direct evidence is absent and not
readily available.
In our view, all the requisites for recourse to this doctrine exist. First, MV Miguela
was under the exclusive control of its officers and crew. Petitioner did not have
direct evidence on what transpired within as the officers and crew maneuvered the
vessel to its berthing place. We note the Court of Appeals finding that Naval and
Espina were not knowledgeable on the vessels maneuverings, and could not testify
on the negligence of the officers and crew. Second, aside from the testimony that
MV Miguela rammed the cluster pile, private respondent did not show persuasively
other possible causes of the damage.
Applying now the above, there exists a presumption of negligence against private
respondents which we opine the latter failed to overcome. Additionally, petitioner
presented tangible proof that demonstrated private respondents negligence. As
testified by Capt. Olasiman, from command of slow ahead to stop engine, the
vessel will still travel 100 meters before it finally stops. However, he ordered stop
engine when the vessel was only 50 meters from the pier. Further, he testified that
before the vessel is put to slow astern, the engine has to be restarted. However,
Olasiman cannot estimate how long it takes before the engine goes to slow astern
after the engine is restarted. From these declarations, the conclusion is that it was
already too late when the captain ordered reverse. By then, the vessel was only 4

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

meters from the pier, and thus rammed it. Respondent companys negligence
consists in allowing incompetent crew to man its vessel. As shown also by
petitioner, both Captain Olasiman and Chief Mate Gabisan did not have a formal
training in marine navigation. The former was a mere elementary graduate while
the latter is a high school graduate. Their experience in navigation was only as a
watchman and a quartermaster, respectively.

PHILIPPINE RABBIT BUS LINES, INC. vs. THE HONORABLE INTERMEDIATE


APPELLATE COURT AND CASIANO PASCUA, ET AL.
G.R. Nos. 66102-04. August 30, 1990
MEDIALDEA, J.
FACTS: About 11:00 o'clock in the morning on December 24, 1966, Catalina
Pascua, Caridad Pascua, Adelaida Estomo, Erlinda Meriales, Mercedes Lorenzo,
Alejandro Morales and Zenaida Parejas boarded the jeepney owned by spouses
Isidro Mangune and Guillerma Carreon and driven by Tranquilino Manalo at Dau,
Mabalacat, Pampanga bound for Carmen, Rosales, Pangasinan to spend Christmas
at their respective homes. Their contract with Manalo was for them to pay P24.00
for the trip.
Upon reaching barrio Sinayoan, San Manuel, Tarlac, the right rear wheel of the
jeepney was detached, so it was running in an unbalanced position. Manalo
stepped on the brake, as a result of which, the jeepney which was then running on
the eastern lane (its right of way) made a U-turn, invading and eventually stopping
on the western lane of the road in such a manner that the jeepney's front faced the
south (from where it came) and its rear faced the north (towards where it was
going). The jeepney practically occupied and blocked the greater portion of the
western lane, which is the right of way of vehicles coming from the north, among
which was Bus No. 753 of petitioner Philippine Rabbit Bus Lines, Inc. (Rabbit) driven
by Tomas delos Reyes. Almost at the time when the jeepney made a sudden U-turn
and encroached on the western lane of the highway as claimed by Rabbit and delos
Reyes, or after stopping for a couple of minutes as claimed by Mangune, Carreon
and Manalo, the bus bumped from behind the right rear portion of the jeepney. As
a result of the collision, three passengers of the jeepney (Catalina Pascua, Erlinda
Meriales and Adelaida Estomo) died while the other jeepney passengers sustained
physical injuries. What could have been a festive Christmas turned out to be tragic.
Trial court rendered its decision finding Manalo (jeepney driver) negligent and thus
held him jointly and severally liable with Sps. Isidro Mangune, Guillerma Carreon
(jeepney owners). On appeal, The respondent court had a contrary opinion.
Applying primarily (1) the doctrine of last clear chance, (2) the presumption that
drivers who bump the rear of another vehicle guilty and the cause of the accident
unless contradicted by other evidence, and (3) the substantial factor test,
concluded that delos Reyes (bus driver) was negligent.

ISSUE: Who is liable for the death and injuries of the passengers?
HELD: SPS. MANGUNE AND CARREON because of the negligence of Manalo
(jeepney driver). We find that the proximate cause of the accident was the
negligence of Manalo and spouses Mangune and Carreon. They all failed to exercise
the precautions that are needed precisely pro hac vice.
In culpa contractual, the moment a passenger dies or is injured, the carrier is
presumed to have been at fault or to have acted negligently, and this disputable
presumption may only be overcome by evidence that he had observed extraordinary diligence as prescribed in Articles 1733, 1755 and 1756 of the New Civil
Code or that the death or injury of the passenger was due to a fortuitous event.
To escape liability, defendants Mangune and Carreon offered to show thru their
witness Natalio Navarro, an alleged mechanic, that he periodically checks and
maintains the jeepney of said defendants, the last on Dec. 23, the day before the
collision, which included the tightening of the bolts. This notwithstanding the right
rear wheel of the vehicle was detached while in transit. As to the cause thereof no
evidence was offered. Said defendant did not even attempt to explain, much less
establish, it to be one caused by a caso fortuito. xxx In any event, "[i]n an action for
damages against the carrier for his failure to safely carry his passenger to his
destination, an accident caused either by defects in the automobile or through the
negligence of its driver, is not a caso fortuito which would avoid the carriers liability
for damages.
The trial court was therefore right in finding that Manalo and spouses Mangune and
Carreon were negligent. However, its ruling that spouses Mangune and Carreon are
jointly and severally liable with Manalo is erroneous. The driver cannot be held
jointly and severally liable with the carrier in case of breach of the contract of
carriage. The rationale behind this is readily discernible. Firstly, the contract of
carriage is between the carrier and the passenger, and in the event of contractual
liability, the carrier is exclusively responsible therefore to the passenger, even if
such breach be due to the negligence of his driver. In other words, the carrier can
neither shift his liability on the contract to his driver nor share it with him, for his
driver's negligence is his. Secondly, if We make the driver jointly and severally liable
with the carrier, that would make the carrier's liability personal instead of merely
vicarious and consequently, entitled to recover only the share which corresponds to
the driver, contradictory to the explicit provision of Article 2181 of the New Civil
Code.
ROBERTO JUNTILLA, petitioner, vs. CLEMENTE FONTANAR, FERNANDO BANZON
and BERFOL CAMORO, respondents.
Valentin A. Zozobrado for petitioner.
Ruperto N. Alfarara for respondents.
G.R. No. L-45637 May 31, 1985
GUTIERREZ, JR., J.

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

DOCTRINE
Presumption of Negligence.
NATURE OF PETITION

Judge Romulo R. Senining rendered judgment in favor of Juntilla and against the
respondents. The latter are ordered to pay, jointly and severally, Juntilla P750.00 as
reimbursement for the lost Omega wrist watch, P246.64 as unrealized salary of
Juntilla, P100.00 for the doctors fees and medicine, additional P300.00 for
attorneys fees and the costs.

This is a petition for Review on certiorari on the decision of the CFI of Cebu which
reversed the decision of the City Court of Cebu and exonerated the respondents
from any liability arising from a vehicular accident.

The respondents appeal to the Court of First Instance of Cebu.


Court of First Instance of Cebu Decision

FACTS
Clemente Fontanar
Fernando Banzon
Berfol Camoro

Judge Leonardo B. Canares reversed the decision of the City Court of Cebu finding
that the accident in question was due to a fortuitous event.
- franchisee of the jeep
- owner of the jeep
- driver of the jeep

A motion for reconsideration was filed but was denied by said court.
ISSUE

Roberto Juntilla was a passenger of the public utility jeepney on the course of the
trip from Danao City to Cebu City. The jeepney was driven by defendant Berfol
Camoro. It was registered under the franchise of defendant Clemente Fontanar but
was actually owned by defendant Fernando Banzon.

WON a tire-blowout, by itself alone and without showing as to the causative


factors, would generate liability.

When the jeepney reached Mandaue City, the right rear tire exploded
causing the vehicle to turn turtle. In the process, the plaintiff who was sitting at the
front seat was thrown out of the vehicle. Upon landing on the ground, the plaintiff
momentarily lost consciousness. When he came to his senses, he found that he had
a lacerated wound on his right palm. Aside from this, he suffered injuries on his left
arm, right thigh and on his back. Because of his shock and injuries, he went back to
Danao City but on the way, he discovered that his "Omega" wrist watch was lost.
Upon his arrival in Danao City, he immediately entered the Danao City Hospital to
attend to his injuries, and also requested his father-in-law to proceed immediately
to the place of the accident and look for the watch. In spite of the efforts of his
father-in-law, the wrist watch, which he bought for P 852.70 could no longer be
found.

YES. There are specific acts of negligence on the part of the respondents. The
records show that the passenger jeepney turned turtle and jumped into a ditch
immediately after its right rear tire exploded. The evidence shows that the
passenger jeepney was running at a very fast speed before the accident. We agree
with the observation of the petitioner that a public utility jeep running at a regular
and safe speed will not jump into a ditch when its right rear tire blows up. There is
also evidence to show that the passenger jeepney was overloaded at the time of
the accident. The petitioner stated that there were 3 passengers in the front seat
and 14 passengers in the rear.

Juntilla filed for breach of contract with damages before the City Court of
Cebu City. The respondents alleged that the accident that caused losses to the
petitioner was beyond the control of the respondents taking into account that the
tire that exploded was newly bought and was only slightly used at the time it blew
up.

HELD

While it may be true that the tire that blew-up was still good because the
grooves of the tire were still visible, this fact alone does not make the explosion of
the tire a fortuitous event. No evidence was presented to show that the accident
was due to adverse road conditions or that precautions were taken by the jeepney
driver to compensate for any conditions liable to cause accidents. The sudden
blowing-up, therefore, could have been caused by too much air pressure injected
into the tire coupled by the fact that the jeepney was overloaded and speeding at
the time of the accident.

City Court of Cebu Decision

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To be considered as a fortuitous event, the following requisites must


concur:
a)

The cause of the unforeseen and unexpected occurrence, or


of the failure of the debtor to comply with his obligation,
must be independent of the human will;
b) It must be impossible to foresee the event which constitutes
the caso fortuito, or if it can be foreseen, it must be
impossible to avoid;
c) The occurrence must be such as to render it impossible for
the debtor to fulfill his obligation in a normal manner; and
d) The obligor (debtor) must be free from any participation in
the aggravation of the injury resulting to the creditor.
In the case at bar, the cause of the unforeseen and unexpected occurrence
was not independent of the human will. The accident was caused either through
the negligence of the driver or because of mechanical defects in the tire. Common
carriers should teach their drivers not to overload their vehicles, not to exceed safe
and legal speed limits, and to know the correct measures to take when a tire blows
up thus insuring the safety of passengers at all times.
The rationale of the carrier's liability is the fact that the passenger has
neither choice nor control over the carrier in the selection and use of the
equipment and appliances in use by the carrier. Having no privity whatever with the
manufacturer or vendor of the defective equipment, the passenger has no remedy
against him, while the carrier usually has. It is but logical, therefore, that the carrier,
while not an insurer of the safety of his passengers, should nevertheless be held to
answer for the flaws of his equipment if such flaws were at all discoverable. ...
It is sufficient to reiterate that the source of a common carrier's legal
liability is the contract of carriage, and by entering into the said contract, it binds
itself to carry the passengers safely as far as human care and foresight can provide,
using the utmost diligence of a very cautious person, with a due regard for all the
circumstances. The records show that this obligation was not met by the
respondents.
G.R. No. L-25785 February 26, 1981 FERNANDEZ, J.:
SATURNINO BAYASEN, petitioner, vs. COURT OF APPEALS, respondent.
FACTS:
On the morning of August 15, 1963, Saturnino Bayasen, the Rural Health Physician
in Sagada, Mountain Province, went to barrio Ambasing to visit a patient. Two
nurses from the Saint Theodore's Hospital in Sagada, Elena Awichen and Dolores
Balcita, rode with him in the jeep assigned for the use of the Rural Health Unit as
they had requested for a ride to Ambasing. Later, at Ambasing, the girls, who
wanted to gather flowers, again asked if they could ride with him up to a certain

place on the way to barrio Suyo which he intended to visit anyway. Dr. Bayasen
again allowed them to ride, Elena sitting herself between him and Dolores. On the
way, at barrio Langtiw, the jeep went over a precipice about 8 feet below the road,
it was blocked by a pine tree. The three were thrown out of the jeep. Elena was
found lying in a creek further below. Among other injuries, she suffered a skull
fracture which caused her death.
After trial, the petitioner was found guilty of the charge. The petitioner appealed to
the Court of Appeals which affirmed the decision of the trial court with
modifications raising the penalty and indemnity. The majority opinion of the Court
of Appeals is that the accused- petitioner was negligent in driving his jeep because
he was driving at "an unreasonable speed".
ISSUE: WHETHER OR NOT BAYASEN WAS NEGLIGENT IN DRIVING HIS JEEP.
HELD: NO. A careful examination of 'he evidence introduced by the prosecution
shows no "legally sufficient" proof that the accused was negligent in driving his
jeep. The star witness of the prosecution, Dolores Balcita who was one of the
passengers in the jeep, testified that the accused-petitioner, Saturnino Bayasen was
driving his jeep moderately just before the accident and categorically stated that
she did not know what caused the jeep to fall into the precipice.
When asked whether the jeep hit anything before it fell into the precipice, the
witness answered that she did not feel any bump or jolt. That there was no
conversation between the passengers in the jeep that could have distracted the
attention of the accused while driving the jeep. As to the condition of the jeep
itself, she "did not notice anything wrong" with it from the time they drove from
Sagada to Ambasing, and from there to the place where the jeep fell off the road.
Regarding the road, she said that it was fair enough to drive on, but that it was
moist or wet, and the weather was fair, too. As to whether the accused-petitioner
was under the influence of liquor at the time of the accident, she testified that he
was not. In the light of the testimony of Dolores Balcita, the eyewitness of the
accident presented by the prosecution, there is absolutely no evidence on record
to show that the accused was negligent in driving his jeep.
The petitioner testified that before reaching the portion of the road where the jeep
fell he noticed that the rear wheel skidded, while driving from 8 to 10 kilometers
per hour; that as a precautionary measure, he directed the jeep towards the side of
the mountain, along the side of the mountain, but not touching the mountain; that
while doing so, the late Elena Awichen suddenly held the steering wheel and he felt
that her foot stepped on his right foot which was pressed then on the accelerator;
and that immediately after, the jeep suddenly swerved to the right and went off.
From the testimony of Dolores Balcita, it is apparent that she "did not see" what
Elena Awichen suddenly did, and she "did not feel any movement from (her) side".
These answers of Dolores Balcita are all in the negative and equivocal. They do not
deny or preclude the truth of the positive testimony of the accused.

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Furthermore, the statement of Dolores Balcita that the accused was driving at
moderate speed and not "an unreasonable, speed' is bolstered by the testimony, of
Pablo Lizardo. then mayor of Sagada, Mountain Province, who found the jeep at
second gear when he examined it not long after the incident. Such fact shows that
the accused-petitioner could not have been driving the jeep at a fast rate of speed.
It is obvious that the proximate cause of the tragedy was the skidding of the rear
wheels of the jeep and not the "unreasonable speed" of the petitioner because
there is no evidence on record to prove or support the finding that the petitioner
was driving at "an unreasonable speed".
It is a well-known physical tact that cars may skid on greasy or slippery roads, as in
the instant case, without fault on account of the manner of handling the car.
Skidding means partial or complete loss of control of the car under circumstances
not necessarily implying negligence. It may occur without fault.
Under the particular circumstances of the instant case, the petitioner- driver who
skidded could not be regarded as negligent, the skidding being an unforeseen
event, so that the petitioner had a valid excuse for his departure from his regular
course. The negligence of the petitioner not having been sufficiently established, his
guilt of the crime charged has not been proven beyond reasonable doubt. He is,
therefore, entitled to acquittal.

appellant persisted to use the ticket in question. It can be gleaned that the
petitioner was fully aware that there was a need to send a letter to the legal
counsel of PAL for the extension of the period of validity of his ticket.
2. An award of damages is improper because petitioner failed to show that PAL
acted in bad faith in refusing to allow him to board its plane in San Francisco. In
awarding moral damages for breach of contract of carriage, the breach must be
wanton and deliberately injurious or the one responsible acted fraudulently or with
malice or bad faith. Petitioner knew there was a strong possibility that he could not
use the subject ticket, so much so that he bought a back-up ticket to ensure his
departure. Should there be a finding of bad faith, we are of the opinion that it
should be on the petitioner. What the employees of PAL did was one of simple
negligence. No injury resulted on the part of petitioner because he had a back-up
ticket should PAL refuse to accommodate him with the use of subject ticket.
Neither can the claim for exemplary damages be upheld. Such kind of damages is
imposed by way of example or correction for the public good, and the existence of
bad faith is established. The wrongful act must be accompanied by bad faith, and an
award of damages would be allowed only if the guilty party acted in a wanton,
fraudulent, reckless or malevolent manner. Here, there is no showing that PAL
acted in such a manner. An award for attorney's fees is also improper.

CERVANTES vs CA
FACTS: [Private respondent] PAL issued to [petitioner] Nicholas Cervantes a
roundtrip plane ticket for Manila-Honolulu-Los Angeles-Honolulu-Manila. Ticket
expressly provided an expiry date of one year from issuance. [Expiry: March 27,
1990] March 23, or 4 days before the expiry date, the petitioner used it. Upon his
arrival in LA on the same day, he booked his LA-Manila return ticket with PAL; flight
confirmed for April 2. Upon learning that the same PAL plane would make a stopover in San Francisco, since he would be in SF on that day, he made arrangements
for him to board the plane in SF instead of in LA. On April 2, when petitioner
checked in at PAL counter in SF, he was not allowed to board. The PAL personnel
marked the notation on his ticket, "Ticket not accepted due expiration of validity."
Cervantes filed a complaint for damages but was dismissed for lack of merit. CA
upheld dismissal.
ISSUE:
1. WON PAL was correct in refusing the ticket due to its expiry
2. WON the denial of the award for damages was proper
HELD:
1. YES. Petitioner knew this from the very start when he called up the Legal
Department of appellee in the Philippines before he left for the United States of
America. He had first hand knowledge that the ticket in question would expire on
March 27,1990 and that to secure an extension, he would have to file a written
request for extension at the PALs office in the Philippines. Despite this knowledge,

Calalas v. CA
[G.R. No. 122039. May 31, 2000]
VICENTE CALALAS, petitioner, vs. COURT OF APPEALS, ELIZA JUJEURCHE SUNGA and
FRANCISCO SALVA, respondents.
Facts:
At 10 oclock in the morning, private respondent Eliza Jujeurche G. Sunga took a
passenger jeepney owned and operated by petitioner Vicente Calalas. As the
jeepney was filled to capacity of about 24 passengers, Sunga was given by the
conductor an "extension seat," a wooden stool at the back of the door at the rear
end of the vehicle.
On the way to Poblacion Sibulan, Negros Occidental, the jeepney stopped to let a
passenger off. As she was seated at the rear of the vehicle, Sunga gave way to the
outgoing passenger. Just as she was doing so, an Isuzu truck driven by Iglecerio
Verena and owned by Francisco Salva bumped the left rear portion of the jeepney.
As a result, Sunga was injured. She was hospitalized and the surgeon certified that
she would remain on a cast for a period of three months and would have to
ambulate in crutches during said period.
Sunga filed a complaint for damages against Calalas, alleging violation of the
contract of carriage by the former in failing to exercise the diligence required of him

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as a common carrier. Calalas, on the other hand, filed a third-party complaint


against Francisco Salva, the owner of the Isuzu truck.
The lower court rendered judgment against Salva as third-party defendant and
absolved Calalas of liability, holding that it was the driver of the Isuzu truck who was
responsible for the accident. It took cognizance of another case (Civil Case No.
3490) filed by Calalas against Salva and Verena, for quasi-delict, in which it was held
that Salva and his driver Verena jointly liable to Calalas for the damage to his
jeepney.
On appeal to the Court of Appeals, the ruling of the lower court was reversed on
the ground that Sungas cause of action was based on a contract of carriage, not
quasi-delict, and that the common carrier failed to exercise the diligence required
under the Civil Code. The appellate court dismissed the third-party complaint
against Salva and adjudged Calalas liable for damages to Sunga.
Issue:
Whether or not the negligence of Verena was the proximate cause of the accident
and in effect negates the liability of the petitioner
Whether or not the bumping of the jeepney by the truck owned by Salva was a caso
fortuito
Ruling:
The petitioner is negligent and should not be allowed to negate liability.
In the case at bar, upon the happening of the accident, the presumption of
negligence at once arose, and it became the duty of petitioner to prove that he had
to observe extraordinary diligence in the care of his passengers.
Now, did the driver of jeepney carry Sunga "safely as far as human care and
foresight could provide, using the utmost diligence of very cautious persons, with
due regard for all the circumstances" as required by Art. 1755? We do not think so.
Several factors militate against petitioners contention.
First, as found by the Court of Appeals, the jeepney was not properly parked, its
rear portion being exposed about two meters from the broad shoulders of the
highway, and facing the middle of the highway in a diagonal angle. This is a violation
of the R.A. No. 4136, as amended, or the Land Transportation and Traffic Code.
Second, it is undisputed that petitioners driver took in more passengers than the
allowed seating capacity of the jeepney, a violation of 32(a) of the same law.
The fact that Sunga was seated in an "extension seat" placed her in a peril greater
than that to which the other passengers were exposed. Therefore, not only was
petitioner unable to overcome the presumption of negligence imposed on him for
the injury sustained by Sunga, but also, the evidence shows he was actually
negligent in transporting passengers.

We find it hard to give serious thought to petitioners contention that Sungas


taking an "extension seat" amounted to an implied assumption of risk. It is akin to
arguing that the injuries to the many victims of the tragedies in our seas should not
be compensated merely because those passengers assumed a greater risk of
drowning by boarding an overloaded ferry.
This is also true of petitioners contention that the jeepney being bumped while it
was improperly parked constitutes caso fortuito. A caso fortuito is an event which
could not be foreseen, or which, though foreseen, was inevitable.This requires that
the following requirements be present: (a) the cause of the breach is independent
of the debtors will; (b) the event is unforeseeable or unavoidable; (c) the event is
such as to render it impossible for the debtor to fulfill his obligation in a normal
manner, and (d) the debtor did not take part in causing the injury to the creditor.
Petitioner should have foreseen the danger of parking his jeepney with its body
protruding two meters into the highway.

Negligence or intentional assault by carriers employee


G.R. No. L-8034 November 18, 1955
CORNELIA A. DE GILLACO, ET AL., plaintiffs-appellees, vs. MANILA RAILROAD
COMPANY, defendant-appellant.
FACTS:
Lieut. Gillaco, husband of plaintiff, was a passenger in the early morning train of
MRR from Calamba, Laguna to Manila, at about 7:30 a.m. When the train reached
the Paco, Railroad Station, a train guard (Devesa) of MRR assigned in the ManilaSan Fernando, La Union Line, was in the station waiting for the same train to take
him to Tutuban Station, to report for duty which was to start from 9:00 a.m. to 7:00
a.m. of the same day. Devesa, having a long standing personal grudge with Gillaco,
killed the latter with a carbine furnished by respondent, upon seeing him inside the
train coach. Gillaco died. Devesa was convicted with homicide by final judgment of
the CA. Court of First Instance awarded damages to the plaintiff.
Defense by MRR - no liability attaches to it as employer of the killer; that it is not
responsible subsidiary ex delicto, under Art. 103 of the Revised Penal Code, because
the crime was not committed while the slayer was in the actual performance of his
ordinary duties and service; nor is it responsible excontractu, since the complaint
did not aver sufficient facts to establish such liability, and no negligence on
appellant's party was shown.

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Court below - Railroad company responsible on the ground that a contract of


transportation implies protection of the passengers against acts of personal
violence by the agents or employees of the carrier.

Maranan vs. Perez

ISSUE:

ANTONIA MARANAN, plaintiff-appellant, vs. PASCUAL PEREZ, ET AL., defendants.


PASCUAL PEREZ, defendant appellant.

Whether or not MRR is liable for the damages for the death of Gillaco caused by
Devesa.

Facts:

RULING:
While a passenger is entitled to protection from personal violence by the Civil Code
or its agents or employees since the contract of transportation obligates the carrier
to transport a passenger safely to his destination, the responsibility of the Civil Code
extends only to those acts that the Civil Code could foresee or avoid through the
exercise of the degree of care and diligence required of it. The Old Civil Code did
not impose upon Civil Code the absolute liability for assaults of their employees
upon the passengers.
It is sufficient to reiterate that the source of the defendant's legal liability is the
contract of carriage; that by entering into that contract he bound himself to carry
the plaintiff safely and securely to their destination; and that having failed to do so
he is liable in damages unless he shows that the failure to fulfill his obligation was
due to causes mentioned in article 1105 of the Civil Code, which reads as follows:
"No one shall be liable for events which could not be foreseen or which, even if
foreseen, were inevitable, with the exception of the cases in which the law
expressly provides otherwise and those in which the obligation itself imposes such
liability."
The act of the guard was entirely unforeseeable by MRR which had no means to
ascertain or anticipate that the two would meet nor could it foresee every personal
rancor that might exist between its employees and its passengers. The shooting was
a caso fortuito within the definition of article 105 of the OCC and was both being
unforeseeable and inevitable under the circumstances. Hence, resulting breach of
appellant's contract of safe carriage with the late Tomas Gillaco was excused
thereby.
When the crime took place, the guard had no duties to discharge. Devesa was
therefore under no obligation to safeguard the passenger of the Calamba-Manila
train, where the deceased was riding; and the killing of Gillaco was not done in line
of duty. His position would be that of a passenger also waiting transportation and
not of an employee assigned to discharge duties that the Railroad had assumed by
its contract with the deceased. As a result, Devesa's
assault cannot be deemed in law a breach of Gillaco's contract of transportation by
a servant or employee of the carrier.

R. No. L-22272 June 26, 1967

Rogelio Corachea, a passenger in a taxicab owned and operated by Pascual Perez,


was stabbed and killed by the driver, Simeon Valenzuela. Valenzuela was found
guilty for homicide by the Court of First Instance and was sentenced to suffer
Imprisonment and to indemnify the heirs of the deceased in the sum of P6000.
While pending appeal, mother of deceased filed an action in the Court of First
Instance of Batangas to recover damages from Perez and Valenzuela. Defendant
Perez claimed that the death was a caso fortuito for which the carrier was not
liable. The court a quo, after trial, found for the plaintiff and awarded her P3,000 as
damages against defendant Perez. The claim against defendant Valenzuela was
dismissed. From this ruling, both plaintiff and defendant Perez appealed to this
Court, the former asking for more damages and the latter insisting on non-liability.
Defendant-appellant relied solely on the ruling enunciated in Gillaco vs. Manila
Railroad Co. that the carrier is under no absolute liability for assaults of its
employees upon the passengers.
Issue: Whether or not Perez should be held liable for the death of the passenger?
Held: Yes. The basis of the carrier's liability for assaults on passengers committed by
its drivers rests on the principle that it is the carrier's implied duty to transport the
passenger safely. As between the carrier and the passenger, the former must bear
the risk of wrongful acts or negligence of the carrier's employees against
passengers, since it, and not the passengers, has power to select and remove them.
Common carriers are liable for the death of or injuries to passengers through the
negligence or willful acts of the formers employees, although such employees may
have acted beyond the scope of their authority or in violation of the orders of the
common carriers. The 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. 1759)
Defendant-appellant relies solely on the ruling enunciated in Gillaco v. Manila
Railroad Co., 97 Phil. 884, that the carrier is under no absolute liability for assaults
of its employees upon the passengers. The attendant facts and controlling law of
that case and the one at bar are very different however. In the Gillaco case, the
passenger was killed outside the scope and the course of duty of the guilty
employee. As this Court there found:

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x x x when the crime took place, the guard Devesa had no duties to discharge in
connection with the transportation of the deceased from Calamba to Manila. The
stipulation of facts is clear that when Devesa shot and killed Gillaco, Devesa was
assigned to guard the Manila-San Fernando (La Union) trains, and he was at Paco
Station awaiting transportation to Tutuban, the starting point of the train that he
was engaged to guard. In fact, his tour of duty was to start at 9:00 two hours after
the commission of the crime. Devesa was therefore under no obligation to
safeguard the passengers of the CalambaManila train, where the deceased was riding; and the killing of Gillaco was not done
in line of duty. The position of Devesa at the time was that of another would be
passenger, a stranger also awaiting transportation, and not that of an employee
assigned to discharge any of the duties that the Railroad had assumed by its
contract with the deceased. As a result, Devesa's assault can not be deemed in law
a breach of Gillaco's contract of transportation by a servant or employee of the
carrier. . . . (Emphasis supplied)

assaults on passengers committed by its drivers rests either on (1) the doctrine of
respondeat superior or (2) the principle that it is the carrier's implied duty to
transport the passenger safely.
Under the first, which is the minority view, the carrier is liable only when the act of
the employee is within the scope of his authority and duty. It is not sufficient that
the act be within the course of employment only.
Under the second view, upheld by the majority and also by the later cases, it is
enough that the assault happens within the course of the employee's duty. It is no
defense for the carrier that the act was done in excess of authority or in
disobedience of the carrier's orders. The carrier's liability here is absolute in the
sense that it practically secures the passengers from assaults committed by its own
employees
G.R. No. L-55347 October 4, 1985

Now here, the killing was perpetrated by the driver of the very cab transporting the
passenger, in whose hands the carrier had entrusted the duty of executing the
contract of carriage. In other words, unlike the Gillaco case, the killing of the
passenger here took place in the course of duty of the guilty employee and when
the employee was acting within the scope of his duties.

PHILIPPINE NATIONAL RAILWAYS vs. THE HONORABLE COURT OF APPEALS and


ROSARIO TUPANG

Moreover, the Gillaco case was decided under the provisions of the Civil Code of
1889 which, unlike the present Civil Code, did not impose upon common carriers
absolute liability for the safety of passengers against wilful assaults or negligent acts
committed by their employees. The death of the passenger in the Gillaco case was
truly a fortuitous event which exempted the carrier from liability. It is true that Art.
1105 of the old Civil Code on fortuitous events has been substantially reproduced in
Art. 1174 of the Civil Code of the Philippines but both articles clearly remove from
their exempting effect the case where the law expressly provides for liability in spite
of the occurrence of force majeure. And herein significantly lies the statutory
difference between the old and present Civil Codes, in the backdrop of the factual
situation before Us, which further accounts for a different result in the Gillaco case.
Unlike the old Civil Code, the new Civil Code of the Philippines expressly makes the
common carrier liable for intentional assaults committed by its employees upon its
passengers, by the wording of Art. 1759 which categorically states that 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.

Invoking the principle of state immunity from suit, the Philippine National Railways,
instituted this petition for review on certiorari to set aside the decision of the
respondent Appellate Court which held petitioner PNR liable for damages for the
death of Winifredo Tupang, a paying passenger who fell off a train operated by the
petitioner.

The Civil Code provisions on the subject of Common Carriers1 are new and were
taken from Anglo-American Law.2 There, the basis of the carrier's liability for

ESCOLIN, J.:

Facts: On September 10, 1972, at about 9:00 o'clock in the evening, Winifredo
Tupang, husband of plaintiff Rosario Tupang, boarded 'Train No. 516 of appellant at
Libmanan, Camarines Sur, as a paying passenger bound for Manila. Due to some
mechanical defect, the train stopped at Sipocot, Camarines Sur, for repairs, taking
some two hours before the train could resume its trip to Manila. Unfortunately,
upon passing Iyam Bridge at Lucena, Quezon, Winifredo Tupang fell off the train
resulting in his death. The train did not stop despite the alarm raised by the other
passengers that somebody fell from the train. Instead, the train conductor Perfecto
Abrazado, called the station agent at Candelaria, Quezon, and requested for
verification of the information. Police authorities of Lucena City were dispatched to
the Iyam Bridge where they found the lifeless body of Winifredo Tupang.
Upon complaint filed by the deceased's widow, Rosario Tupang, the then Court of
First Instance of Rizal, after trial, held the petitioner PNR liable for damages for
breach of contract of carriage On appeal, the Appellate Court sustained the holding

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

of the trial court that the PNR did not exercise the utmost diligence required by law
of a common carrier.

by the respondent court, the petitioner failed to overthrow such presumption of


negligence with clear and convincing evidence.

Moving for reconsideration of the above decision, the PNR raised for the first time,
as a defense, the doctrine of state immunity from suit. It alleged that it is a mere
agency of the Philippine government without distinct or separate personality of its
own, and that its funds are governmental in character and, therefore, not subject to
garnishment or execution. The motion was denied; the respondent court ruled that
the ground advanced could not be raised for the first time on appeal. Hence, this
petition for review.

But while petitioner failed to exercise extraordinary diligence as required by law, it


appears that the deceased was chargeable with contributory negligence. Since he
opted to sit on the open platform between the coaches of the train, he should have
held tightly and tenaciously on the upright metal bar found at the side of said
platform to avoid falling off from the speeding train.

Issue: WON the doctrine of state immunity from suit is applicable in the present
case?

CESAR L. ISAAC, plaintiff-appellant, vs. A. L. AMMEN TRANSPORTATION CO., INC.,


defendant-appellee.

G.R. No. L-9671 August 23, 1957

BAUTISTA ANGELO, J.:


Held: No. The petition is devoid of merit. The PNR was created under Rep. Act 4156,
as amended. Section 4 of the said Act provides:
The Philippine national Railways shall have the following powers:
a. To do all such other things and to transact all such business directly or indirectly
necessary, incidental or conducive to the attainment of the purpose of the
corporation; and
b. Generally, to exercise all powers of a corporation under the Corporation Law.
Under the foregoing section, the PNR has all the powers, the characteristics and
attributes of a corporation under the Corporation Law. There can be no question
then that the PNR may sue and be sued and may be subjected to court processes
just like any other corporation.
The appellate court found, the petitioner does not deny, that the train boarded by
the deceased Winifredo Tupang was so over-crowded that he and many other
passengers had no choice but to sit on the open platforms between the coaches of
the train. It is likewise undisputed that the train did not even slow down when it
approached the Iyam Bridge which was under repair at the time, Neither did the
train stop, despite the alarm raised by other passengers that a person had fallen off
the train at lyam Bridge.
The petitioner has the obligation to transport its passengers to their destinations
and to observe extraordinary diligence in doing so. Death or any injury suffered by
any of its passengers gives rise to the presumption that it was negligent in the
performance of its obligation under the contract of carriage. Thus, as correctly ruled

FACTS: A. L. Ammen Transportation Co., Inc. is a corporation engaged in the


business of transporting passengers by land for compensation in the Bicol provinces
and one of the lines it operates is the one connecting Legaspi City, Albay with Naga
City, Camarines Sur. One of the buses which defendant was operating is Bus No. 31.
On May 31, 1951, plaintiff boarded said bus as a passenger paying the required fare
from Ligao, Albay bound for Pili, Camarines Sur, but before reaching his destination,
the bus collided with a motor vehicle of the pick-up type coming from the opposite
direction, as a result of which plaintiff's left arm was completely severed and the
severed portion fell inside the bus.
As an aftermath, plaintiff brought this action against defendants for damages
alleging that the collision which resulted in the loss of his left arm was mainly due to
the gross incompetence and recklessness of the driver of the bus operated by
defendant and that defendant incurred in culpa contractual arising from its noncompliance with its obligation to transport plaintiff safely to his, destination.
Defendant set up as special defense that the injury suffered by plaintiff was due
entirely to the fault or negligence of the driver of the pick-up car which collided
with the bus driven by its driver and to the contributory negligence of plaintiff
himself. Defendant further claims that the accident which resulted in the injury of
plaintiff is one which defendant could not foresee or, though foreseen, was
inevitable.
The after trial found that the collision occurred due to the negligence of the driver
of the pick-up car and not to that of the driver of the bus it appearing that the latter
did everything he could to avoid the same but that notwithstanding his efforts, he
was not able to avoid it. As a consequence, the court dismissed complaint, with
costs against plaintiff. This is an appeal from said decision.

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ISSUE: Has defendant observed extraordinary diligence or the utmost diligence of


every cautious person, having due regard for all circumstances, in avoiding the
collision which resulted in the injury caused to the plaintiff?
HELD: YES., the defendant exercised extraordinary diligence to avoid the collision.
Cited Articles: 1733, 1755, 1756
From the above legal provisions, we can make the following restatement of the
principles governing the liability of a common carrier: (1) the liability of a carrier is
contractual and arises upon breach of its obligation. There is breach if it fails to
exert extraordinary diligence according to all circumstances of each case; (2) a
carrier is obliged to carry its passenger with the utmost diligence of a very cautious
person, having due regard for all the circumstances; (3) a carrier is presumed to be
at fault or to have acted negligently in case of death of, or injury to, passengers, it
being its duty to prove that it exercised extraordinary diligence; and (4) the carrier
is not an insurer against all risks of travel.
It appears that Bus No. 31, immediately prior to the collision, was running at a
moderate speed because it had just stopped at the school zone of Matacong,
Polangui, Albay. The pick-up car was at full speed and was running outside of its
proper lane. The driver of the bus, upon seeing the manner in which the pick-up
was then running, swerved the bus to the very extreme right of the road until its
front and rear wheels have gone over the pile of stones or gravel situated on the
rampart of the road. Said driver could not move the bus farther right and run over a
greater portion of the pile, the peak of which was about 3 feet high, without
endangering the safety of his passengers. And notwithstanding all these efforts, the
rear left side of the bus was hit by the pick-up car.
It was held that "where a carrier's employee is confronted with a sudden
emergency, the fact that he is obliged to act quickly and without a chance for
deliberation must be taken into account, and he is held to the some degree of care
that he would otherwise be required to exercise in the absence of such emergency
but must exercise only such care as any ordinary prudent person would exercise
under like circumstances and conditions, and the failure on his part to exercise the
best judgement the case renders possible does not establish lack of care and skill on
his part which renders the company, liable. . . . (13 C. J. S., 1412; 10
C. J.,970). Considering all the circumstances, we are persuaded to conclude that the
driver of the bus has done what a prudent man could have done to avoid the
collision and in our opinion this relieves appellee from legibility under our law.
A circumstances which militates against the stand of appellant is the fact borne out
by the evidence that when he boarded the bus in question, he seated himself on
the left side thereof resting his left arm on the window sill but with his left elbow

outside the window, this being his position in the bus when the collision took place.
It is for this reason that the collision resulted in the severance of said left arm from
the body of appellant thus doing him a great damage. It is therefore apparent that
appellant is guilty of contributory negligence. Had he not placed his left arm on the
window sill with a portion thereof protruding outside, perhaps the injury would
have been avoided as is the case with the other passenger. It is to be noted that
appellant was the only victim of the collision.
It is true that such contributory negligence cannot relieve appellee of its liability but
will only entitle it to a reduction of the amount of damage caused (Article 1762,
new Civil Code), but this is a circumstance which further militates against the
position taken by appellant in this case.

Injury to passenger due to acts of co-passenger or stranger


BACHELOR EXPRESS V CA
Facts: The evidence shows that the bus came from Davao City on its way to Cagayan
de Oro City passing Butuan City; that while at Tabon-Tabon, Butuan City, the bus
picked up a passenger; that about fifteen (15) minutes later, a passenger at the rear
portion suddenly stabbed a PC soldier which caused commotion and panic among
the passengers; that when the bus stopped, passengers Ornominio Beter and
Narcisa Rautraut were found lying down the road, the former already dead as a
result of head injuries and the latter also suffering from severe injuries which
caused her death later. The passenger assailant alighted from the bus and ran
toward the bushes but was killed by the police. Thereafter, the heirs of Ornominio
Beter and Narcisa Rautraut, private respondents herein (Ricardo Beter and Sergia
Beter are the parents of Ornominio while Teofilo Rautraut and Zoetera [should be
Zotera] Rautraut are the parents of Narcisa) filed a complaint for "sum of money"
against Bachelor Express, Inc. its alleged owner Samson Yasay and the driver Rivera.
The petitioners denied liability for the death because as the driver was able to
transport his passengers safely to their respective places of destination except the
two who jumped off the bus without the knowledge and consent.
RTC- dismissed the complaint
CA- trial court's decision was reversed and set aside.
They contend that the proximate cause of the death was the act of the passenger
who ran amuck and stabbed another passenger of the bus. They contend that the
stabbing incident triggered off the commotion and panic among the passengers
who pushed one another and that presumably out of fear and moved by that
human instinct of self-preservation. Also petitioners maintain that the driver of the

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bus, before, during and after the incident was driving cautiously giving due regard
to traffic rules, laws and regulations. The petitioners also argue that they are not
insurers of their passengers as ruled by the trial court.
Issue: Whether or not the petitioner's common carrier observed extraordinary
diligence to safeguard the lives of its passengers
Held: NO.
There is nothing in the record to support the conclusion that the solitary door of the
bus was locked as to prevent the passengers from passing through. The running
amuck of the passenger was the proximate cause of the incident as it triggered off a
commotion and panic among the passengers such that the passengers started
running to the sole exit shoving each other resulting in the falling off the bus by
passengers Beter and Rautraut causing them fatal injuries. The sudden act of the
passenger who stabbed another passenger in the bus is within the context of force
majeure.
Considering the factual findings of the Court of Appeals-the bus driver did not
immediately stop the bus at the height of the commotion; the bus was speeding
from a full stop; the victims fell from the bus door when it was opened or gave way
while the bus was still running; the conductor panicked and blew his whistle after
people had already fallen off the bus; and the bus was not properly equipped with
doors in accordance with law-it is clear that the petitioners have failed to overcome
the presumption of fault and negligence found in the law governing common
carriers.
* The running amuck of the passenger was the proximate cause of the incident,
however, in order that a common carrier may be absolved from liability in case of
force majeure, the common carrier must still prove that it was not negligent in
causing the injuries resulting from such accident.
FORTUNE EXPRESS, INC., Petitioner, v. COURT OF APPEALS, PAULIE U. CAORONG,
and minor children YASSER KING CAORONG, ROSE HEINNI and PRINCE
ALEXANDER, all surnamed CAORONG, and represented by their mother PAULIE U.
CAORONG, Respondents.
[G.R. No. 119756. March 18, 1999]
Topic: Injury to passenger due to acts of co-passenger or stranger
Facts:
Petitioner is a bus company in northern Mindanao. Private respondent Paulie
Caorong is the widow of Atty. Caorong, while private respondents Yasser King, Rose
Heinni, and Prince Alexander are their minor children.

A bus of petitioner figured in an accident with a jeepney in Kauswagan, Lanao del


Norte, resulting in the death of several passengers of the jeepney, including two
Maranaos. Crisanto Generalao, a volunteer field agent of the Constabulary Regional
Security Unit No. X, conducted an investigation of the accident. He found that the
owner of the jeepney was a Maranao residing in Delabayan, Lanao del Norte and
that certain Maranaos were planning to take revenge on the petitioner by burning
some of its buses. Generalao rendered a report on his findings to Sgt. Reynaldo
Bastasa of the Philippine Constabulary Regional Hearquarters at Cagayan de Oro.
Upon the instruction of Sgt. Bastasa, he went to see Diosdado Bravo, operations
manager of petitioner, at its main office in Cagayan de Oro City. Bravo assured him
that the necessary precautions to insure the safety of lives and property would be
taken.
Subsequently, three armed Maranaos who pretended to be passengers, seized a
bus of petitioner at Linamon, Lanao del Norte while on its way to Iligan City. Among
the passengers of the bus was Atty. Caorong. The leader of the Maranaos, identified
as one Bashier Mananggolo, ordered the driver, Godofredo Cabatuan, to stop the
bus on the side of the highway. Mananggolo then shot Cabatuan on the arm, which
caused him to slump on the steering wheel. Then one of the companions of
Mananggolo started pouring gasoline inside the bus, as the other held the
passengers at bay with a handgun. Mananggolo then ordered the passengers to get
off the bus. The passengers, including Atty. Caorong, stepped out of the bus and
went behind the bushes in a field some distance from the highway.However, Atty.
Caorong returned to the bus to retrieve something from the overhead rack. At that
time, one of the armed men was pouring gasoline on the head of the driver.
Cabatuan, who had meantime regained consciousness, heard Atty. Caorong
pleading with the armed men to spare the driver as he was innocent of any wrong
doing and was only trying to make a living. The armed men were, however,
adamant as they repeated their warning that they were going to burn the bus along
with its driver. During this exchange between Atty. Caorong and the assailants,
Cabatuan climbed out of the left window of the bus and crawled to the canal on the
opposite side of the highway. He heard shots from inside the bus. Larry de la Cruz,
one of the passengers, saw that Atty. Caorong was hit. Then the bus was set on fire.
Some of the passengers were able to pull Atty. Caorong out of the burning bus and
rush him to the Mercy Community Hospital in Iligan City, but he died while
undergoing operation. The private respondents brought this suit for breach of
contract of carriage in the RTC.
RTC: Dismissed. The fact that defendant, through Operations Manager Diosdado
Bravo, was informed of the rumors that the Moslems intended to take revenge by
burning five buses of defendant is established since the latter also utilized Crisanto
Generalaos as a witness. Yet despite this information, the plaintiffs charge,
defendant did not take proper precautions. . . . Consequently, plaintiffs now fault
the defendant for ignoring the report. Their position is that the defendant should

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have provided its buses with security guards. Does the law require common carriers
to install security guards in its buses for the protection and safety of its passengers?
Is the failure to post guards an omission of the duty to exercise the diligence of a
good father of the family which could have prevented the killing of Atty. Caorong?
To our mind, the diligence demanded by law does not include the posting of
security guards in buses. It is an obligation that properly belongs to the State.
Besides, will the presence of one or two security guards suffice to deter a
determined assault of the lawless and thus prevent the injury complained of?
Maybe so, but again, perhaps not. In other words, the presence of a security guard
is not a guarantee that the killing of Atty. Caorong would have been definitely
avoided.
CA: Reversed. Appellees argument that there is no law requiring it to provide
guards on its buses and that the safety of citizens is the duty of the government, is
not well taken. To be sure, appellee is not expected to assign security guards on all
of its buses; if at all, it has the duty to post guards only on its buses plying
predominantly Maranao areas. As discussed in the next preceding paragraph, the
least appellee could have done in response to the report was to adopt a system of
verification such as frisking of passengers boarding its buses. Nothing, and to
repeat, nothing at all, was done by defendant-appellee to protect its innocent
passengers from the danger arising from the Maranao threats.
Issue: 1. WON petitioner is liable for the death of Atty. Caorong
2. WON seizure of Petitioners Bus a Case of Force Majeure
3. WON deceased not guilty of contributory negligence
Held:
1. Yes. Art. 1763 of the Civil Code provides that a common carrier is responsible for
injuries suffered by a passenger on account of the wilful acts of other passengers, if
the employees of the common carrier could have prevented the act the exercise of
the diligence of a good father of a family. In the present case, it is clear that
because of the negligence of petitioners employees, the seizure of the bus by
Mananggolo and his men was made possible. Despite warning by the Philippine
Constabulary at Cagayan de Oro that the Maranaos were planning to take revenge
on the petitioner by burning some of its buses and the assurance of petitioners
operation manager, Diosdado Bravo, that the necessary precautions would be
taken, petitioner did nothing to protect the safety of its passengers. Had petitioner
and its employees been vigilant they would not have failed to see that the
malefactors had a large quantity of gasoline with them. Under the circumstances,
simple precautionary measures to protect the safety of passengers, such as frisking
passengers and inspecting their baggages, preferably with non-

intrusive gadgets such as metal detectors, before allowing them on board could
have been employed without violating the passengers constitutional rights.
From the foregoing, it is evident that petitioners employees failed to prevent the
attack on one of petitioners buses because they did not exercise the diligence of a
good father of a family. Hence, petitioner should be held liable for the death of
Atty. Caorong.
2. No. Art. 1755 of the Civil Code provides that a common carrier is bound to carry
the passengers as far as human care and foresight can provide, using the utmost
diligence of very cautious person, with due regard for all the circumstances. In the
present case, the factor of unforeseeablility is lacking. As already stated, despite the
report of PC agent Generalao that the Maranaos were planning to burn some of
petitioners buses and the assurance of petitioners operations manager (Diosdado
Bravo) that the necessary precautions would be taken, nothing was really done by
petitioner to protect the safety of passengers.
3. No. Atty. Caorong did not act recklessly. It should be pointed out that the
intended targets of the violence were petitioner and its employees, not its
passengers. The assailants motive was to retaliate for the loss of life of two
Maranaos as a result of the collision between petitioners bus and the jeepney in
which the two Maranaos were riding. Mananggolo, the leader of the group which
had hijacked the bus, ordered the passengers to get off the bus as they intended to
burn it and its driver. The armed men actually allowed Atty. Caorong to retrieve
something from the bus. What apparently angered them was his attempt to help
the driver of the bus by pleading for his life. He was playing the role of the good
Samaritan. Certainly, this act cannot be considered an act of negligence, let alone
recklessness.
MANILA RAILROAD COMPANY vs. MACARIA BALLESTEROS, TIMOTEO CAMAYO,
JOSE REYES and JULIAN MAIMBAN, JR.
G.R. No. L-19161. April 29, 1966
MAKALINTAL, J.
FACTS: Private respondents here (Ballesteros, Camayo, Reyes, Maimban) were
passengers on petitioner's (Manila Railroad Co.) bus, the driver of which was Jose
Anastacio. In Bayombong, Nueva Vizcaya, Anastacio stopped the bus and got off to
replace a defective spark plug. While he was thus engaged, one Dionisio Abello, an
auditor assigned to defendant company by the General Auditing Office, took the
wheel and told the driver to sit somewhere else. With Abello driving, the bus
proceeded on its way, from time to time stopping to pick up passengers. Anastacio
tried twice to take the wheel back but Abello would not relinquish it. Then, in the
language of the trial court, "while the bus was negotiating between Km. posts 328

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and 329 (in Isabela) a freight truck ... driven by Marcial Nocum ... bound for Manila,
was also negotiating the same place; when these two vehicles were about to meet
at the bend of the road Marcial Nocum, in trying to evade several holes on the right
lane, where his truck was running, swerved his truck towards the middle part of the
road and in so doing, the left front fender and left side of the freight truck smashed
the left side of the bus resulting in extensive damages to the body of the bus and
injuries to seventeen of its passengers, ... including the plaintiffs herein."
Trial court found that Dionisio Abello "was likewise reckless when he was driving
the bus at the rate of from 40 to 50 kilometers per hour on a bumpy road at the
moment of the collision." Petitioner argue, among others, that since Abello was not
its employee it should not be held responsible for his acts. Trial court held
petitioner liable and ordered it to pay damages to the respondents. Hence, this
instant petition.
ISSUE: Whether or not petitioner may be held liable for the acts of its passenger in
the case at bar.
HELD: YES. This defense was correctly overruled by the trial court, considering the
provisions of Article 1763 of the Civil Code and section 48 (b) of the Motor Vehicle
Law, which respectively provide as follows:
Art. 1763. A common carrier is responsible for injuries suffered by a passenger on
account of the wilfull acts or negligence of other passengers or of strangers, if the
common carrier's employees through the exercise of the diligence of a good father
of a family could have prevented or stopped the act or omission.
Sec. 48(b). No professional chauffeur shall permit any unlicensed person to drive
the motor vehicle under his control, or permit a person, sitting beside him or in any
other part of the car, to interfere with him in the operation of the motor vehicle, by
allowing said person to take hold of the steering wheel, or in any other manner take
part in the manipulation or control of the car.
The issues proposed to be taken up on appeal, as set forth in the petition, are
whether or not Dionisio Abello acted with reckless negligence while driving
petitioner's bus at the time of the accident, and whether or not petitioner may be
held liable on account of such negligence, considering that he was not its employee.
These are no longer justiciable questions which would justify our issuing the
peremptory writ prayed for. The first is a question of fact on which the affirmative
finding of respondent court is not reviewable by Us; and the second is one as to
which there can be no possible doubt in view of the provisions of the Civil Code and
of the Motor Vehicle Law hereinbefore cited. There would be no point in giving the
appeal due course.

SMITH BELL DODWELL SHIPPING AGENCY CORPORATION, petitioner,


vs. CATALINO BORJA and INTERNATIONAL TO WAGE AND TRANSPORT
CORPORATION, respondents.
G.R. No. 143008 June 10, 2002
PANGANIBAN, J.
DOCTRINE
Injury to Passenger Due to Acts of Co-Passenger or Stranger. The owner or the
person in possession and control of a vessel is liable for all natural and proximate
damages caused to persons and property by reason of negligence in its
management or navigation. The liability for the loss of the earning capacity of the
deceased is fixed by taking into account the net income of the victim at the time of
death -- of the incident in this case -- and that person's probable life expectancy.
NATURE OF PETITION
This is a Petition for Review on Certiorari challenging the CA Decisions affirming the
RTC Decision and denying the motion to appeal.
FACTS
Smith Bell Dodwell Shipping Agency Corporation (Smith Bell) - common carrier
International to Wage and Transport Corporation (ITTC) - owner of the barge
September 23, 1987
Smith Bell filed a written request with the Bureau of Customs for the attendance of
the latter's inspection team on vessel M/T King Family which was due to arrive at
the port of Manila on September 24, 1987. M/T King Family contained 750 metric
tons of alkyl benzene and methyl methacrylate monomer.
Supervising Customs Inspector Manuel Ma. D. Nalgan instructed respondent
Catalino Borja to board said vessel and perform his duties as inspector upon the
vessel's arrival until its departure. At that time, Borja was a customs inspector of
the Bureau of Customs receiving a salary of P31,188.25 per annum.
At About 11 a.m., September 24, 1987
While M/T King Family was unloading chemicals unto 2 barges owned by ITTC, a
sudden explosion occurred setting the vessels afire. Upon hearing the explosion,
[Borja], who was at that time inside the cabin preparing reports, ran outside to
check what happened. Again, another explosion was heard.

The writ prayed for is denied, with costs against petitioner.

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Seeing the fire and fearing for his life, Borja hurriedly jumped over board to save
himself. However, the water was likewise on fire due mainly to the spilled
chemicals. Despite the tremendous heat, Borja swam his way for 1 hour until he
was rescued by the people living in the squatters' area and sent to San Juan De Dios
Hospital.
After weeks of intensive care at the hospital, his attending physician diagnosed
Borja to be permanently disabled due to the incident. Borja suffered the following
damage: and injuries: "(1) chemical burns of the face and arms; (2) inhalation of
fumes from burning chemicals; (3) exposure to the elements [while] floating in sea
water for about three (3) hours; (4) homonymous hemianopsia or blurring of the
right eye [which was of] possible toxic origin; and (5) [c]erebral
infract with neo-vascularization, left occipital region with right sided headache and
the blurring of vision of right eye."

2. What is the proper amount of liability?


HELD
1. Smith Bell is liable. First, the testimony of its alleged eyewitness was stricken off
the record for his failure to appear for cross-examination. Second, the documents
offered to prove that the fire originated from barge. Thus, there is nothing in the
record to support [petitioner's] contention that the fire and explosion originated
from barge. The findings of the CA contain substantial evidence already.
Further, Smith Bell is liable on the ground of quasi-delict. The elements of quasidelict are as follows:
a) damages suffered by the plaintiff;
b) fault or negligence of the defendant; and

Borja made demands against Smith Bell and ITTC for the damages caused by the
explosion. However, both denied liabilities and attributed to each other negligence

c) the connection of cause and effect between the fault or negligence of the
defendant and the damages inflicted on the plaintiff.

RTC Decision

Negligence is conduct that creates undue risk of harm to another. It is the failure to
observe that degree of care, precaution and vigilance that the circumstances justly
demand, whereby that other person suffers injury. Petitioner's vessel was carrying
chemical cargo -- alkyl benzene and methyl methacrylate monomer. While knowing
that their vessel was carrying dangerous inflammable chemicals, its officers and
crew failed to take all the necessary precautions to prevent an accident. Petitioner
was, therefore, negligent.

It ruled in favor of Borja and ordered Smith Bell liable for damages and loss of
income:
a) P495,360.00 as actual damages for loss of earning capacity
b) P100,000.00 for moral damages; and
c) P50,000.00 for and as reasonable attorney's fees.
Smith Bell appealed to the CA.
CA Decision
The court rejected Smith Bells appeal to exonerate it from liability and sustained
the decision of the RTC. It held that the fire had originated from M/T King Family as
supported by the testimonies of Borja and Eulogio Laurente, eyewitness of ITTC as
well as the investigation conducted by the Special Board of Marine Inquiry and
affirmed by the secretary of the Department of National Defenses. The CA had not
given probative value to the evidence of petitioner, whose sole eyewitness had not
shown up for cross-examination.
Hence, this Petition.
ISSUE
1. Who, if any, is liable for Borja's injuries?

Hence, the owner or the person in possession and control of a vessel and the vessel
are liable for all natural and proximate damage caused to persons and property by
reason of negligent management or navigation.
2. In determining the reasonableness of the damages awarded under Article 1764 in
conjunction with Article 2206 of the Civil Code, the factors to be considered are:
a) life expectancy (considering the health of the victim and the mortality table
which is deemed conclusive) and loss of earning capacity;
b) pecuniary loss, loss of support and service; and
c) moral and mental sufferings.
The loss of earning capacity is based mainly on the number of years remaining in
the person's expected life span. In turn, this number is the basis of the damages
that shall be computed and the rate at which the loss sustained by the heirs shall be
fixed.
The formula for the computation of loss of earning capacity is as follows:

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Net earning capacity = Life expectancy x [Gross Annual Income - Living Expenses
(50% of gross annual income)]

victim damages in the amount of P320,240 as loss of earning capacity, moral


damages in the amount of P100,000, plus another P50,000 as attorney's fees. Costs
against petitioner.

where,

SO ORDERED.

Life expectancy = 2/3 (80 - the age of the deceased).

ALBERTA YOBIDO and CRESENCIO YOBIDO, petitioners, vs. COURT OF APPEALS,


LENY TUMBOY, ARDEE TUMBOY and JASMIN TUMBOY, respondents.

Petitioner is correct in arguing that it is net income (or gross income less living
expenses) which is to be used in the computation of the award for loss of income.
The amount recoverable is not the loss of the entire earning, but rather the loss of
that portion of the earnings which the beneficiary would have received."
In other words, only net earnings, not gross earnings, are to be considered; that is,
the total of the earnings less expenses necessary in the creation of such earnings or
income, less living and other incidental expenses.
Counsel for Respondent Borja is also correct in saying that life expectancy should
not be based on the retirement age of government employees, which is pegged at
65. Under Article 2206(1) of the Civil Code, it is assumed that the deceased would
have earned income even after retirement from a particular job.
Respondent Borja should not be situated differently just because he was a
government employee. Private employees, given the retirement packages provided
by their companies, usually retire earlier than government employees; yet, the life
expectancy of the former is not pegged at 65 years.
The Court uses the American Experience/Expectancy Table of Mortality or the
Actuarial or Combined Experience Table of Mortality, which consistently pegs the
life span of the average Filipino at 80 years, from which it extrapolates the
estimated income to be earned by the deceased had he or she not been killed.
For purposes of determining loss of earning capacity, life expectancy remains at 80.
Otherwise, the computation of loss of earning capacity will never become final,
being always subject to the eventuality of the victim's death. The computation
should not change even if Borja lived beyond 80 years. Fair is fair.
Loss of earning capacity = [2 (80-50)] x [(P2,752x12)-16,512] 3
= P330,240
Having been duly proven, the moral damages and attorney's fees awarded are
justified under the Civil Code's Article 2219, paragraph 2; and Article 2208,
paragraph 11, respectively.
WHEREFORE, the Petition is PARTLY GRANTED. The assailed Decision is AFFIRMED
with the following MODIFICATIONS: petitioner is ordered to pay the heirs of the

ROMERO, J.: G.R. No. 113003 October 17, 1997


FACTS: On April 26, 1988, spouses Tito and Leny Tumboy and their minor children
named Ardee and Jasmin, boarded at Mangagoy, Surigao del Sur, a Yobido Liner bus
bound for Davao City. Along Picop Road in Km. 17, Sta. Maria, Agusan del Sur, the
left front tire of the bus exploded. The bus fell into a ravine around three (3) feet
from the road and struck a tree. The incident resulted in the death of 28-year-old
Tito Tumboy and physical injuries to other passengers.
On November 21, 1988, a complaint for breach of contract of carriage, damages
and attorney's fees was filed by Leny and her children against Alberta Yobido, the
owner of the bus, and Cresencio Yobido, its driver, before the Regional Trial Court
of Davao City. When the defendants therein filed their answer to the complaint,
they raised the affirmative defense of caso fortuito. They also filed a third-party
complaint against Philippine Phoenix Surety and Insurance, Inc. This third-party
defendant filed an answer with compulsory counterclaim. At the pre-trial
conference, the parties agreed to a stipulation of facts.
The plaintiffs asserted that violation of the contract of carriage between them and
the defendants was brought about by the driver's failure to exercise the diligence
required of the carrier in transporting passengers safely to their place of
destination. According to Leny Tumboy, the bus left Mangagoy at 3:00 o'clock in the
afternoon. The winding road it traversed was not cemented and was wet due to the
rain; it was rough with crushed rocks. The bus which was full of passengers had
cargoes on top. Since it was "running fast," she cautioned the driver to slow down
but he merely stared at her through the mirror. At around 3:30 p.m., in Trento, she
heard something explode and immediately, the bus fell into a ravine.
For their part, the defendants tried to establish that the accident was due to a
fortuitous event. Abundio Salce, who was the bus conductor when the incident
happened, testified that the 42-seater bus was not full as there were only 32
passengers, such that he himself managed to get a seat. He added that the bus was
running at a speed of "60 to 50" and that it was going slow because of the zigzag
road. He affirmed that the left front tire that exploded was a "brand new tire" that
he mounted on the bus on April 21, 1988 or only five (5) days before the incident.
The Yobido Liner secretary, Minerva Fernando, bought the new Goodyear tire from

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Davao Toyo Parts on April 20, 1988 and she was present when it was mounted on
the bus by Salce. She stated that all driver applicants in Yobido Liner underwent
actual driving tests before they were employed. Defendant Cresencio Yobido
underwent such test and submitted his professional driver's license and clearances
from the barangay, the fiscal and the police.
The lower court dismissed the action for lack of merit. On the issue of whether or
not the tire blowout was a caso fortuito, it found that "the falling of the bus to the
cliff was a result of no other outside factor than the tire blow-out. CA reversed the
decision.
ISSUE: 1) Whether or not a carrier is an insurer against all risk. 2) Limited liability
and defenses.
NO, but he is presumed to be negligent when a passenger is injured or dies while
travelling.
As a rule, when a passenger boards a common carrier, he takes the risks incidental
to the mode of travel he has taken. After all, a carrier is not an insurer of the safety
of its passengers and is not bound
absolutely and at all events to carry them safely and without injury. However, when
a passenger is injured or dies while travelling, the law presumes that the common
carrier is negligent. Thus, the Civil Code provides:
Art. 1756. In case of death or injuries to passengers, common carriers are presumed
to have been at fault or to have acted negligently, unless they prove that they
observed extraordinary diligence as prescribed in articles 1733 and 1755.
Article 1755 provides that "(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." Accordingly, in
culpa contractual, once a passenger dies or is injured, the carrier is presumed to
have been at fault or to have acted negligently. This disputable presumption may
only be overcome by evidence that the carrier had observed extraordinary diligence
as prescribed by Articles 1733, 10 1755 and 1756 of the Civil Code or that the death
or injury of the passenger was due to a fortuitous event. 11 Consequently, the court
need not make an express finding of fault or negligence on the part of the carrier to
hold it responsible for damages sought by the passenger.
In view of the foregoing, petitioners' contention that they should be exempt from
liability because the tire blowout was no more than a fortuitous event that could
not have been foreseen, must fail. A fortuitous event is possessed of the following
characteristics: (a) the cause of the unforeseen and unexpected occurrence, or the
failure of the debtor to comply with his obligations, must be independent of human
will; (b) it must be impossible to foresee the event which constitutes the caso

fortuito, or if it can be foreseen, it must be impossible to avoid; (c) the occurrence


must be such as to render it impossible for the debtor to fulfill his obligation in a
normal manner; and (d) the obliger must be free from any participation in the
aggravation of the injury resulting to the creditor. 13 As Article 1174 provides, no
person shall be responsible for a fortuitous event which could not be foreseen, or
which, though foreseen, was inevitable. In other words, there must be an entire
exclusion of human agency from the cause of injury or loss.
Under the circumstances of this case, the explosion of the new tire may not be
considered a fortuitous event. There are human factors involved in the situation.
The fact that the tire was new did not imply that it was entirely free from
manufacturing defects or that it was properly mounted on the vehicle. Neither may
the fact that the tire bought and used in the vehicle is of a brand name noted for
quality, resulting in the conclusion that it could not explode within five days' use. Be
that as it may, it is settled that an accident caused either by defects in the
automobile or through the negligence of its driver is not a caso fortuito that would
exempt the carrier from liability for damages.
Moreover, a common carrier may not be absolved from liability in case of force
majeure or fortuitous event alone. The common carrier must still prove that it was
not negligent in causing the death or injury resulting from an accident.
Bayasen v. CA, G.R. No. L-25785, 26 February 1981
FACTS: On the morning of August 15, 1963, Saturnino Bayasen, the Rural Health
Physician in Sagada, Mountain Province, went to barrio Ambasing to visit a patient.
Two nurses from the Saint Theodore's Hospital in Sagada, viz., Elena Awichen and
Dolores Balcita, rode with him in the jeep assigned for the use of the Rural Health
Unit as they had requested for a ride to Ambasing. Later, at Ambasing, the girls,
who wanted to gather flowers, again asked if they could ride with him up to a
certain place on the way to barrio Suyo which he intended to visit anyway. Dr.
Bayasen again allowed them to ride, Elena sitting herself between him and Dolores.
On the way, at barrio Langtiw, the jeep went over a precipice About 8 feet below
the road, it was blocked by a pine tree. The three were thrown out of the jeep.
Elena was found lying in a creek further below. Among other injuries, she suffered a
skull fracture which caused her death. Bayasen was later charged and convicted of
Homicide thru Reckless Imprudence.
Despite contrary findings by the prosecution, the CA was of the opinion that
accused was negligent in driving his jeep because he was driving at an unreasonable
speed. Testimonial evidence by witness passenger established that the accused was
not driving at an unreasonable speed, not was he distracted or intoxicated. Further,
the municipal mayor observed that the jeep was only in its second gear upon
inspection of the wreck.

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ISSUE: WON accused-petitioner's negligence is the proximate cause of the death of


the victim.
HELD: The proximate cause of the tragedy was the skidding of the rear wheels of
the jeep and not the unreasonable speed of the petitioner because there was no
evidence on record to prove or support the finding that the petitioner was driving
at an unreasonable speed. The star witness of the prosecution, Dolores Balcita
who was one of the passengers in the jeep, testified that Saturnino Bayasen was
driving his jeep moderately just before the accident and categorically stated that
she did not know what caused the jeep to fall into the precipice. It is a well-known
physical fact that cars may skid on greasy or slippery roads, as in the instant case,
without fault on account of the manner of handling the car. Skidding means partial
or complete loss of control of the car under circumstances not necessarily implying
negligence. It may occur without fault. Herein, under the particular circumstances,
Bayasen who skidded could not be regarded as negligent, the skidding being an
unforeseen event, so that Bayasen had a valid excuse for his departure from his
regular course.
The negligence of Bayasen has not having been sufficiently established, his guilt of
the crime charged has not been proven beyond reasonable doubt. He is, therefore,
entitled to acquittal. The Supreme Court set aside the decision of the Court of
Appeals sought to be reviewed, and acquitted Bayasen of the crime charged.

Gatchalian v. Delim
G.R. No. L-56487 October 21, 1991
REYNALDA GATCHALIAN, petitioner, vs.ARSENIO DELIM and the HON. COURT OF
APPEALS,respondents.
At noon time on 11 July 1973, petitioner Reynalda Gatchalian boarded, as a paying
passenger, respondent's "Thames" mini bus. On the way, while the bus was running
, "a snapping sound" was suddenly heard at one part of the bus and, shortly
thereafter, the vehicle bumped a cement flower pot on the side of the road, went
off the road, turned turtle and fell into a ditch. Several passengers, including
petitioner Gatchalian, were injured. They were promptly taken to the hospital for
medical treatment. Upon medical examination, petitioner was found to have
sustained several physical injuries.
While injured, passengers were confined in the hospital, Mrs. Adela Delim, wife of
respondent, visited them and later paid for their hospitalization and medical
expenses. She also gave petitioner P12.00 with which to pay her transportation
expense in going home from the hospital. However, before Mrs. Delim left, she had
the injured passengers, including petitioner, sign an already prepared Joint Affidavit
which stated, among other things:
That we were passengers of Thames with Plate No. 52-222 PUJ Phil. 73 and victims

after the said Thames met an accident at Barrio Payocpoc Norte, Bauang, La Union
while passing through the National Highway No. 3;
That after a thorough investigation the said Thames met the accident due to
mechanical defect and went off the road and turned turtle to the east canal of the
road into a creek causing physical injuries to us;
xxx xxx xxx
That we are no longer interested to file a complaint, criminal or civil against the said
driver and owner of the said Thames, because it was an accident and the said driver
and owner of the said Thames have gone to the extent of helping us to be treated
upon our injuries.
xxx xxx xxx
Notwithstanding this document, petitioner Gathalian filed with the then CFI an
action extra contractu to recover compensatory and moral damages. She alleged in
the complaint that her injuries sustained from the vehicular mishap had left her
with a conspicuous white scar on the forehead, generating mental suffering and an
inferiority complex on her part; and that as a result, she had to retire in seclusion
and stay away from her friends. She also alleged that the scar diminished her facial
beauty and deprived her of opportunities for employment.
In defense, respondent averred that the vehicular mishap was due toforce majeure,
and that petitioner had already been paid and moreover had waived any right to
institute any action against him (private respondent) and his driver, when petitioner
Gatchalian signed the Joint Affidavit .
After trial, the trial court dismissed the complaint upon the ground that when
petitioner Gatchalian signed the Joint Affidavit, she relinquished any right of action
(whether criminal or civil) that she may have had against respondent and the driver
of the mini-bus.
On appeal by petitioner, the Court of Appeals reversed the trial court's conclusion
that there had been a valid waiver, but affirmed the dismissal of the case by
denying petitioner's claim for damages.
In the present Petition for Review filed in forma pauperis, petitioner assails the
decision of the Court of Appeals and ask this Court to award her actual or
compensatory damages as well as moral damages.
Issue:
Whether or not the waiver was valid
Whether or not exercised extraordinary diligence
Ruling:
The waiver was not valid. A waiver, to be valid and effective, must in the first place
be couched in clear and unequivocal terms which leave no doubt as to the intention
of a person to give up a right or benefit which legally pertains to him. A waiver may
not casually be attributed to a person when the terms thereof do not explicitly and
clearly evidence an intent to abandon a right vested in such person.

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Also, because what is involved here is the liability of a common carrier for injuries
sustained by passengers in respect of whose safety a common carrier must exercise
extraordinary diligence, we must construe any such purported waiver most strictly
against the common carrier. For a waiver to be valid and effective, it must not be
contrary to law, morals, public policy or good customs. To uphold a supposed
waiver of any right to claim damages by an injured passenger, under circumstances
like those exhibited in this case, would be to dilute and weaken the standard of
extraordinary diligence exacted by the law from common carriers and hence to
render that standard unenforceable. We believe such a purported waiver is
offensive to public policy.
Thus, the question which must be addressed is whether or not private respondent
has successfully proved that he had exercised extraordinary diligence to prevent the
mishap involving his mini-bus. The records before the Court are bereft of any
evidence showing that respondent had exercised the extraordinary diligence
required by law. Curiously, respondent did not even attempt, during the trial before
the court a quo, to prove that he had indeed exercised the requisite extraordinary
diligence. Respondent did try to exculpate himself from liability by alleging that the
mishap was the result of force majeure. But allegation is not proof and here again,
respondent utterly failed to substantiate his defense of force majeure. To exempt a
common carrier from liability for death or physical injuries to passengers upon the
ground of force majeure, the carrier must clearly show not only that the efficient
cause of the casualty was entirely independent of the human will, but also that it
was impossible to avoid. Any participation by the common carrier in the occurrence
of the injury will defeat the defense of force majeure.
Upon the other hand, the record yields affirmative evidence of fault or negligence
on the part of respondent common carrier. In her direct examination, petitioner
Gatchalian narrated that shortly before the vehicle went off the road and into a
ditch, a "snapping sound" was suddenly heard at one part of the bus. One of the
passengers, an old woman, cried out, "What happened?" ("Apay addan samet
nadadaelen?"). The driver replied, nonchalantly, "That is only normal"("Ugali ti
makina dayta"). The driver did not stop to check if anything had gone wrong with
the bus. Moreover, the driver's reply necessarily indicated that the same "snapping
sound" had been heard in the bus on previous occasions. This could only mean that
the bus had not been checked physically or mechanically to determine what was
causing the "snapping sound" which had occurred so frequently that the driver had
gotten accustomed to it. Such a sound is obviously alien to a motor vehicle in good
operating condition, and even a modicum of concern for life and limb of passengers
dictated that the bus be checked and repaired. The obvious continued failure of
respondent to look after the roadworthiness and safety of the bus, coupled with
the driver's refusal or neglect to stop the mini-bus after he had heard once again
the "snapping sound" and the cry of alarm from one of the passengers, constituted
wanton disregard of the physical safety of the passengers, and hence gross
negligence on the part of respondent and his driver.

[G.R. No. 119756. March 18, 1999]


FORTUNE EXPRESS, INC., petitioner, vs. COURT OF APPEALS, PAULIE U. CAORONG,
and minor children YASSER KING CAORONG, ROSE HEINNI and PRINCE
ALEXANDER, all surnamed CAORONG, and represented by their mother PAULIE U.
CAORONG, respondents.
Facts:
Fortune Express, the petitioner, is a bus company in northern Mindanao. Private
respondent Paulie Caorong is the widow of Atty. Caorong, while private
respondents Yasser King, Rose Heinni, and Prince Alexander are their minor
children. A bus of petitioner figured in an accident with a jeepney in Lanao del
Norte, resulting in the death of several passengers of the jeepney, including two
Maranaos. A volunteer field agent of the Constabulary conducted an investigation
of the accident. He found that the owner of the jeepney was a Maranao residing in
Delabayan, Lanao del Norte and that certain Maranaos were planning to take
revenge on the petitioner by burning some of its buses. The field agent went to see
Diosdado Bravo, operations manager of petitioner, in its main office in Cagayan de
Oro City. Bravo assured him that the necessary precautions to insure the safety of
lives and property would be taken.
Three armed Maranaos who pretended to be passengers, seized a bus of petitioner
on its way to Iligan City. Among the passengers of the bus was Atty. Caorong. They
ordered the passengers to get off the bus. The passengers, including Atty. Caorong,
stepped out of the bus and went behind the bushes in a field some distance from
the highway.
However, Atty. Caorong returned to the bus to retrieve something from the
overhead rack. at that time, one of the armed men was pouring gasoline on the
head of the driver. Atty. Caorong pleaded with the armed men to spare the driver
as he was innocent of any wrong doing and was only trying to make a living. Atty.
Caorong was shot by the Maranaos. Then the bus was set on fire. Some of the
passengers were able to pull Atty. Caorong out of the burning bus and rush him to
the Mercy Community Hospital in Iligan City, but he died while undergoing
operation.
The private respondents brought this suit for breach of contract of carriage in the
Regional Trial Court on the ground that company was informed of the plans of
revenge and should have taken proper precautions and failed to provide the buses
with security guards. The Trial Court ruled in favor of Fortune Express but this was
reversed by the Court of Appeals. Thus, this petition.
Issues:
1. Whether there was breach in the contract of carriage through its negligence

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2. Whether the seizure of the bus was a fortuitous event


Held:
1. Yes. In the present case, it is clear that because of the negligence of petitioner's
employees, the seizure of the bus by Mananggolo and his men was made possible.
Despite warning by the Philippine Constabulary at Cagayan de Oro that the
Maranaos were planning to take revenge on the petitioner by burning some of its
buses and the assurance of petitioner's operation manager, Diosdado Bravo, that
the necessary precautions would be taken, petitioner did nothing to protect the
safety of its passengers.
2. No. In the present case, the factor of unforeseeability (the second requisite for an
event to be considered force majeure) is lacking. As already stated, despite the
report of PC agent Generalao that the Maranaos were planning to burn some of
petitioner's buses and the assurance of petitioner's operation manager (Diosdado
Bravo) that the necessary precautions would be taken, nothing was really done by
petitioner to protect the safety of passengers.

5th Batch

The invoice value of the said twelve 8-day Edmond clocks in New York was P22.
Market value in Manila at the time when they should have been delivered to the
plaintiff was P420

The bill of lading issued and delivered to the plaintiff by the master of the said
steamship Bolton Castle contained, among others, the following clauses:

Clause 1 It is mutually agreed that the value of the goods receipted for above does
not exceed $500 per freight ton, or, in proportion for any part of a ton, unless the
value be expressly stated herein and ad valorem freight paid thereon.

Clause 9 Also, that in the event of claims for short delivery of, or damage to, cargo
being made, the carrier shall not be liable for more than the net invoice price plus
freight and insurance less all charges saved, and any loss or damage for which the
carrier may be liable shall be adjusted pro rata on the said basis.

H. E. HEACOCK COMPANY, plaintiff-appellant, vs. MACONDRAY & COMPANY,


INC., defendant-appellant.
G.R. No. L-16598 October 3, 1921

FACTS:

On June 5, 1919, the plaintiff caused to be delivered on board of steamship Bolton


Castle, then in the harbor of New York, four cases of merchandise one of which
contained twelve (12) 8-day Edmond clocks properly boxed and marked for
transportation to Manila, and paid freight on said clocks from New York to Manila in
advance. The said steamship arrived in the port of Manila on or about the 10th day
of September, 1919, consigned to the defendant herein as agent and representative
of said vessel in said port. Neither the master of said vessel nor the defendant
herein, as its agent, delivered to the plaintiff the aforesaid twelve 8-day Edmond
clocks, although demand was made upon them for their delivery.

The case containing the aforesaid twelve 8-day Edmond clocks measured 3 cubic
feet, and the freight ton value thereof was $1,480.
No greater value than $500, per freight ton was declared by the plaintiff on the
aforesaid clocks, and no ad valorem freight was paid thereon.
On or about October 9, 1919, the defendant tendered to the plaintiff P76.36, the
proportionate freight ton value of the aforesaid twelve 8-day Edmond clocks(in
accordance with Clause 1), in payment of plaintiff's claim, which tender plaintiff
rejected.

The lower court


In accordance with clause 9 of the bill of lading above quoted, rendered judgment
in favor of the plaintiff against the defendant for the sum of P226.02, this being the
invoice value of the clocks in question plus the freight and insurance thereon, with
legal interest thereon from November 20, 1919, the date of the complaint, together
with costs.

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From that judgment both parties appealed to this court.

The plaintiff-appellants contentions:


* That it is entitled to recover from the defendant the market value of the clocks in
question, to wit: the sum of P420.
* Its claim is based upon the argument that the two clause in the bill of lading
above quoted, limiting the liability of the carrier, are contrary to public order and,
therefore, null and void
The defendant-appellants contentions:
* In accordance with clause 1 of the bill of lading, the plaintiff is entitled to recover
only the sum of P76.36, the proportionate freight ton value of the said clocks.
* Contends that both of said clauses are valid, and the clause 1 should have been
applied by the lower court instead of clause 9.
* Contends that these two clauses, if construed together, mean that the shipper
and the carrier stipulate and agree that the value of the goods receipted for does
not exceed $500 per freight ton, but should the invoice value of the goods be less
than $500 per freight ton, then the invoice value governs;
* That since in this case the invoice value is more than $500 per freight ton, the
latter valuation should be adopted and that according to that valuation.

ISSUE:
May a common carrier, by stipulations inserted in the bill of lading, limit its liability
for the loss of or damage to the cargo to an agreed valuation of the latter?

HELD:
It depends.
Three kinds of stipulations have often been made in a bill of lading.

1. One exempting the carrier from any and all liability for loss or damage occasioned
by its own negligence. Contrary to public policy
2. One providing for an unqualified limitation of such liability to an agreed
valuation. Contrary to public policy
3. One limiting the liability of the carrier to an agreed valuation unless the shipper
declares a higher value and pays a higher rate of freight. Valid and enforceable.
The present case falls within the third stipulation.

* Where a contract of carriage, signed by the shipper, is fairly made, agreeing on a


valuation of the property carried, with the rate of freight based on the condition
that the carrier assumes liability only to the extent of the agreed valuation, even in
case of loss or damage by the negligence of the carrier, the contract will be upheld
as proper and lawful mode of securing a due proportion between the amount for
which the carrier may be responsible and the freight he receives, and protecting
himself against extravagant and fanciful valuations."
* A limitation of liability based upon an agreed value to obtain a lower rate does not
conflict with any sound principle of public policy; and it is not conformable to plain
principles of justice that a shipper may understate value in order to reduce the rate
and then recover a larger value in case of loss.
* Clauses (1 and 9) of the bill of lading here in question are not contrary to public
order.
* Article 1255 of the Civil Code provides that "the contracting parties may establish
any agreements, terms and conditions they may deem advisable, provided they are
not contrary to law, morals or public order."
However, there is an irreconcilable conflict between the two clauses with regard to
the measure of defendant's liability
* Clause 1 contains only an implied undertaking to settle in case of loss on the basis
of not exceeding $500 per freight ton
* Clause 9 contains an express undertaking to settle on the basis of the net invoice
price plus freight and insurance less all charges saved. "Any loss or damage for
which the carrier may be liable shall be adjusted pro rata on the said basis," clause
9 expressly provides.

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* It is difficult to reconcile them without doing violence to the language used and
reading exceptions and conditions into the undertaking contained in clause 9 that
are not there.
* This being the case, the bill of lading in question should be interpreted against the
defendant carrier, which drew said contract. "A written contract should, in case of
doubt, be interpreted against the party who has drawn the contract.
* These rules as applicable to contracts contained in bills of lading. "In construing a
bill of lading given by the carrier for the safe transportation and delivery of goods
shipped by a consignor, the contract will be construed most strongly against the
carrier, and favorably to the consignor, in case of doubt in any matter of
construction." (Alabama, etc. R. R. Co. vs. Thomas, 89 Ala., 294; 18 Am. St. Rep.,
119.)
Lower courts judgment is affirmed. Against defendant.
G.R. No. L-25783 February 25, 1975
MACONDRAY AND COMPANY INC., in its capacity as ship agent of the S/S "TAI
PING" vs. ACTING COMMISSIONER OF CUSTOMS
ESGUERRA, J.:
FACTS: S/S TAI PING, of which Macondray is the local agent, arrived at the port of
Manila from San Francisco, CA, USA conveying, among others, a shipment of 1 coil
carbon steel, 1 bundle carbon steel flat and 1 carton containing carbon tool
holders carbide cutters ground, all of which appeared in the Bill of Lading No. 22,
consigned to Bogo Medellin Millings Co., Inc. The shipment, except 1 coil carbon
steel, was not reflected in the Inward Cargo Manifest as required by Sec. 1005 in
relation to Sec. 2521 of the Tariff and Customs Code of the Philippines (TCCP).
Allied Brokerage Corporation, acting for and in behalf of Bogo Medellin Milling Co.
requested Macondray to correct the manifest of the steamer so that it may take
delivery of the goods at Customs House.

Meanwhile, the Collector of Customs required Macondray to explain and show


cause why no administrative fine should be imposed upon said vessel. Through its
counsel, Macondray wrote to the Collector Customs that it is true that only 1 coil
carbon steel was described in the ships manifest but the bill of lading called for the
delivery of 1 coil carbon steel, 1 bundle carbon steel flat and 1 carbon containing
tool holders carbide cutters ground. Further, Macondray applied with the Bureau of
Customs for the appropriate amendment on an approved customs form to reflect

the true correct description of the shipment and to effect its release from the
customs house.
Collector of Customs replied: this Office would like to inform you that under
Section 2308, in relation to Section 2312, TCCP, you are free to contest by
appropriate protest the action of this Office in imposing the fine, but you have to
pay the fine first.
The records of this Office show that the vesels under your agency have
oftentimes failed to declare correctly the cargoes they convey as covered by the
pertinent bill of lading. Intentionally, or otherwise, such incorrect preparation of
cargo manifests cannot be tolerated for it does not only enhance the commission of
fraud but also makes smuggling suspicious since it renders difficult tracing of the
source of contraband goods. In passing, it may be stated that your vessels have
been found committing the same violations despite the warnings heretofore given
and which your company has not given any concern. As a matter of fact, your vessel
have oftentimes been reported committing the same violations, which conduct is
tantamount to willful and deliberate defiance of constituted authority.

Macondray paid the P1000 fine under protest. Hearing on the protest proceeded.
The Collector of Customs of the Port of Manila ordered the dismissal of said protest
for lack of merit. On appeal to the Commissioner of Customs, the latter sustained
the Collector of Customs. Macondray filed a petition for review with the Court
of Tax Appeals. CTA affirmed the decision of the Collector of Customs as affirmed by
the Commissioner of Customs. Hence, this petition for review.

ISSUE: Whether or not S/S TAI PING violated Sec. 1005 in relation to Sec. 2521 of
TCC for landing unmanifested cargo at the port of Manila, and thus, should pay
the fine?

HELD: YES.
Section 1004. Documents to be produced by master upon entry of a vessel For the
purpose of making entry of a vessel engaged in foreign trade, the master thereof
shall present the following documents, duly certified by him, to the customs
boarding official:.

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a. The original manifest of all cargo destined for the port, to be returned with the
indorsement of the boarding official;
b. Three copies of the same manifest, one of which upon certification by the
boarding official as to the correctness of the copy, shall be returned to the master;
c. ...

Section 1005. Manifest required of vessel from foreign port. Every vessel from a
foreign port must have on board a complete manifest of all her cargo.
All of the cargo intended to be landed at a port, in the Philippines, must be described
in separate manifests for each port of call therein. Each manifest shall include the
port of departure and the port of delivery with the marks, numbers, quantity and
description of the packages and the names of the consignees thereof. Every vessel
from a foreign port must have on board complete manifests of passengers and their
baggage, in the prescribed form, setting forth their destination and all particulars
required by the immigration laws; ...
Section 2521. Failure to supply requisite manifests. If any vessel or aircraft enters
or departs from a port of entry without submitting the proper manifests to the
customs authorities, or shall enter or depart conveying unmanifested cargo other
than as stated in the next proceeding section hereof, such vessel or aircraft shall be
fined in a sum not exceeding ten thousand pesos.

safeguard against goods being brought into this country on a vessel and then
smuggled ashore. In short, while a bill of lading is ordinarily merely a convenient
commercial instrument designed to protect the importer or consignee, a manifest
of the cargo is absolutely essential to the exportation or importation of property in
all vessels, the evident intent and object of which is to impose upon the owners and
officers of such vessel an imperative obligation to submit lists of the entire loading
of the ship in the prescribed form, to facilitate the labors of the customs and
immigration officers and to defeat any attempt to make use of such vessels to
secure the unlawful entry of persons or things into the country. Since therefore,
the purpose served by the manifest is far different from that of the bill of lading,
We cannot acceptor place an imprimatur on the contention of Macondray that the
entries in the bill of lading adequately supplied the deficiency of the manifest and
cured it of its infirmity. The mandate of the law is clear and We cannot settle for
less. The law imposes the absolute obligation, under penalty for failure, upon every
vessel from a foreign port to have "on board complete written or typewritten
manifests of all her cargo, signed by the master". Where the law requires a manifest
to be kept or delivered, it is not complied with unless the manifest is true and
accurate.

G.R. No. 95529 August 22, 1991


MAGELLAN MANUFACTURING MARKETING CORPORATION, * petitioner,
vs.

The same fine shall be imposed upon any arriving or departing vessel or aircraft if
the master or pilot in command shall fail to deliver or mail to the Auditor General a
true copy of the manifest of the incoming or outgoing cargo, as required by law.

The inclusion of the unmanifested cargoes in the Bill of Lading does not satisfy the
requirement of the aforequoted sections of the TCC. It is to be noted that nowhere
in the said section is the presentation of a Bill of Lading required, but only the
presentation of a Manifest containing a true and accurate description of the
cargoes. This is for the simple reason that while a manifest is a declaration of the
entire cargo, a bill of lading is but a declaration of a specific part of the cargo and is
a matter of business convenience based exclusively on a contract. The object of a
manifest is to furnish the customs officers with a list to check against, to inform our
revenue officers what goods are being brought into the country, and to provide a

COURT OF APPEALS, ORIENT OVERSEAS CONTAINER LINES and F.E. ZUELLIG, INC.
respondents.

FACTS:
Magellan Manufacturers Marketing Corp. (MMMC) entered into a contract with
Choju Co.(CHOJU) of Yokohama, Japan to export 136,000 anahaw fans for and in
consideration of $23,220.00. As payment thereof, a letter of credit was issued to
plaintiff MMMC by the buyer. The letter of credit required an on board bill of lading
and that there should be no transshipment. Through its president, James Cu,
MMMC then contracted F.E. Zuellig to ship the anahaw fans through, Orient
Overseas Container Lines, Inc., (OOCL) specifying that he needed an on-board bill of

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lading and that transhipment is not allowed under the letter of credit. On June 30,
1980, appellant MMMC paid F.E. Zuellig the freight charges and secured a copy of
the bill of lading which was presented to Allied Bank. The bank then credited the
amount of US$23,220.00 covered by the letter of credit to appellant's account.
However, MMMCs president (Cu) was later informed by the bank that payment
was refused by CHOJU because there was no on-board bill of lading, and there was
a transhipment of goods. As a result of the refusal of the buyer to accept, MMMC
requested that the anahaw be shipped back to Manila by, for which ZUELLIG
demanded from former payment of P246,043.43. ZUELLIG, in its letter, gave
MMMC an option to pay such amount or to abandon, for which, MMC chose the
latter. However, after such abandonment, ZUELLIG still demanded payment from
MMMC. Trial thereafter ensued.

Trial Court ruled in favor of ZUELLIG. It dismissed the complaint on the ground
that petitioner had given its consent to the contents of the bill of lading where it is
clearly indicated that there will be transhipment.
CA- affirmed Trial Courts ruling but modified the amount (reduced it from
298,150.93 to 52,102.45) which represents the freight charges and demurrages
incurred in Japan but not for the demurrages incurred in Manila. It held that
MMMC is not liable for the demurrage in Manila because ZUELLIG did not timely
inform MMMC that the goods were already in Manila.

ISSUE:
Whether or not the bill of lading which reflected the transshipment and that the
same was a received for shipment bill of lading contrary to what was required in
the letter of credit was accepted/consented by MMMC and thereby binds the
same?
SC RULING:

The Court ruled in the affirmative. It held that it is a long standing jurisprudential
rule that a bill of lading operates both as a receipt and as a contract. It is a receipt
for the goods shipped and a contract to transport and deliver the same as therein
stipulated. As a contract, it names the parties, which includes the consignee, fixes
the route, destination, and freight rates or charges, and stipulates the rights and

obligations assumed by the parties. Being a contract, it is the law between the
parties who are bound by its terms and conditions provided that these are not
contrary to law, morals, good customs, public order and public policy. A bill of
lading usually becomes effective upon its delivery to and acceptance by the shipper.
It is presumed that the stipulations of the bill were, in the absence of fraud,
concealment or improper conduct, known to the shipper, and he is generally bound
by his acceptance whether he reads the bill or not.

A shipper who receives a bill of lading without objection after an opportunity to


inspect it, and permits the carrier to act on it by proceeding with the shipment is
presumed to have accepted it as correctly stating the contract and to have assented
to its terms. In other words, the acceptance of the bill without dissent raises the
presumption that all the terms therein were brought to the knowledge of the
shipper and agreed to by him and, in the absence of fraud or mistake, he is
estopped from thereafter denying that he assented to such terms. This rule applies
with particular force where a shipper accepts a bill of lading with full knowledge of
its contents and acceptance under such circumstances makes it a binding contract.
(AS TO THE ISSUE OF TRANSHIPMENT) :

Based from the facts of the case, the court ruled that MMMC, through its president,
CU who personally received and signed the bill of lading signified consent. Also,
MMMC consented to the transshipment since Cu received such document at
ZUELLIGs office and there clearly appears on the face of the bill of lading under
column "PORT OF TRANSHIPMENT" an entry "HONGKONG'. Lastly, Cu in his
testimony on cross examination, categorically stated that he knew for a fact that
the shipment was to be unloaded in Hong Kong from the MV Pacific Despatcher to
be transferred to a mother vessel, the MV Oriental Researcher.
(AS TO THE ISSUE OF THE BILL NOT BEING AN ON BOARD BILL OF LADING)
MMMC knew at the time it accepted the document that it was a received for
shipment bill of lading but contends that ZUELLIG issued him a certificate which in
effect converted the previous document to an on board bill of lading. On this
issue, the Court ruled that such certification cannot qualify the bill of lading, as
originally issued, into an on board bill of lading as required by the terms of the
letter of credit issued in favor of petitioner. Moreover, the certification was issued
was issued only on July 19, 1980, way beyond the expiry date of June 30, 1980
specified in the letter of credit for the presentation of an on board bill of lading.

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

Thus even assuming that the certification could have converted the received for
shipment bill of lading to on board bill of lading such an effect may be achieved
only as of the date of its issuance, that is, on July 19, 1980 and onwards, which was
way beyond the expiry date specified in the letter of credit.

not normal and there is insufficiency of shipping space. 29 An on board bill of lading
is issued when the goods have been actually placed aboard the ship with every
reasonable expectation that the shipment is as good as on its way. 30 It is,
therefore, understandable that a party to a maritime contract would require an on
board bill of lading because of its apparent guaranty of certainty of shipping as well
as the seaworthiness of the vessel which is to carry the goods.

(AS TO THE AMOUNT PAYABLE BY MMMC CAS RULING)


The Court absolved MMMC from liability because it held that the latter cannot be
held liable for the demurrage since ZUELLIG in its letter, offered MMMC the option
of paying the shipping and demurrage charges in order to take delivery of the goods
or of abandoning the same so that ZUELLIG could sell them at public auction and
thereafter apply the proceeds in payment of the shipping and other charges.
MMMC chose the latter, and communicated such choice to ZUELLIG. To allow either
of them to unilaterally back out on the offer and on the exercise of the option
would be to countenance abuse of rights as an order of the day, doing violence to
the long entrenched principle of mutuality of contracts.

Side Notes:
TRANSHIPMENT:
MMMCs reliance on ZUELLIGs certification that there was no transshipment since
the goods were transferred from one vessel to another which both belong to the
same owner was misplaced. Transhipment, in maritime law, is defined as "the act of
taking cargo out of one ship and loading it in another," 9 or "the transfer of goods
from the vessel stipulated in the contract of affreightment to another vessel before
the place of destination named in the contract has been reached," 10 or "the
transfer for further transportation from one ship or conveyance to another." 11
Clearly, either in its ordinary or its strictly legal acceptation, there is transhipment
whether or not the same person, firm or entity owns the vessels.

DIFFERENCE BETWEEN ON BOARD & RECEIVED FOR SHIPMENT BILLS OF LADING


An on board bill of lading is one in which it is stated that the goods have been
received on board the vessel which is to carry the goods, whereas a received for
shipment bill of lading is one in which it is stated that the goods have been received
for shipment with or without specifying the vessel by which the goods are to be
shipped. Received for shipment bills of lading are issued whenever conditions are

Saludo Jr. v. CA

Facts:
Crispina Galdo Saludo, mother of the petitioners, died in Chicago, Illinois. Pomierski
and Son Funeral Home of Chicago, made the necessary preparations and
arrangements for the shipment of the remains from Chicago to the Philippines.
Pomierski brought the remains to Continental Mortuary Air Services (CMAS) at the
Chicago Airport which made the necessary arrangements such as flights, transfers,
etc. CMAS booked the shipment with PAL thru the carriers agent Air Care
International. PAL Airway Bill Ordinary was issued wherein the requested routing
was from Chicago to San Francisco on board Trans World Airline (TWA) and from
San Francisco to Manila on board PAL.

Salvacion (one of the petitioners), upon arrival at San Francisco, went to the TWA to
inquire about her mothers remains. But she was told they did not know anything
about it. She then called Pomierski that her mothers remains were not at the West
Coast terminal. Pomierski immediately called CMAS which informed that the
remains were on a plane to Mexico City, that there were two bodies at the
terminal, and somehow they were switched. CMAS called and told Pomierski that
they were sending the remains back to California via Texas.
Petitioners filed a complaint against TWA and PAL fir the misshipment and delay in
the delay of the cargo containing the remains of the late Crispina Saludo.
Petitioners alleged that private respondents received the casketed remains of
Crispina on October 26, 1976, as evidenced by the issuance of PAL Airway Bill by Air
Care and from said date, private respondents were charged with the responsibility
to exercise extraordinary diligence so much so that the alleged switching of the
caskets on October 27, 1976, or one day after the private respondents received the
cargo, the latter must necessarily be liable.

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

Issues:
Whether or not there was delivery of the cargo upon mere issuance of the airway
bill lading
Whether or not the delay in the delivery of the casketed remains of petitioners
mother was due to the fault of respondent airline companies

Held:
NO to both, but TWA was held to pay petitioners nominal damages of P40,000 for
its violation of the degree of diligence required by law to be exercised by every
common carrier

Ordinarily, a receipt is not essential to a complete delivery of goods to the carrier


for transportation but, when issued, is competent and prima facie, but not
conclusive, evidence of delivery to the carrier. A bill of lading, when properly
executed and delivered to a shipper, is evidence that the carrier has received the
goods described therein for shipment. Except as modified by statute, it is a general
rule as to the parties to a contract of carriage of goods in connection with which a
bill of lading is issued reciting that goods have been received for transportation,
that the recital being in essence a receipt alone, is not conclusive, but may be
explained, varied or contradicted by parol or other evidence.

In other words, on October 26, 1976 the cargo containing the casketed remains of
Crispina Saludo was booked for PAL Flight Number PR-107 leaving San Francisco for
Manila on October 27, 1976, PAL Airway Bill No. 079-01180454 was issued, not as
evidence of receipt of delivery of the cargo on October 26, 1976, but merely as a
confirmation of the booking thus made for the San Francisco-Manila flight
scheduled on October 27, 1976. Actually, it was not until October 28, 1976 that PAL
received physical delivery of the body at San Francisco, as duly evidenced by the
Interline Freight Transfer Manifest of the American Airline Freight System and
signed for by Virgilio Rosales at 1945H, or 7:45 P.M. on said date.

Explicit is the rule under Article 1736 of the Civil Code that the extraordinary
responsibility of the common carrier begins from the time the goods are delivered
to the carrier. This responsibility remains in full force and effect even when they are
temporarily unloaded or stored in transit, unless the shipper or owner exercises the
right of stoppage in transitu, and terminates only after the lapse of a reasonable
time for the acceptance, of the goods by the consignee or such other person
entitled to receive them. And, there is delivery to the carrier when the goods are
ready for and have been placed in the exclusive possession, custody and control of
the carrier for the purpose of their immediate transportation and the carrier has
accepted them. Where such a delivery has thus been accepted by the carrier, the
liability of the common carrier commences eo instanti.

Hence, while we agree with petitioners that the extraordinary diligence statutorily
required to be observed by the carrier instantaneously commences upon delivery of
the goods thereto, for such duty to commence there must in fact have been
delivery of the cargo subject of the contract of carriage. Only when such fact of
delivery has been unequivocally established can the liability for loss, destruction or
deterioration of goods in the custody of the carrier, absent the excepting causes
under Article 1734, attach and the presumption of fault of the carrier under Article
1735 be invoked.
As already demonstrated, the facts in the case at bar belie the averment that there
was delivery of the cargo to the carrier on October 26, 1976. Rather, as earlier
explained, the body intended to be shipped as agreed upon was really placed in the
possession and control of PAL on October 28, 1976 and it was from that date that
private respondents became responsible for the agreed cargo under their
undertakings in PAL Airway Bill No. 079-01180454. Consequently, for the switching
of caskets prior thereto which was not caused by them, and subsequent events
caused thereby, private respondents cannot be held liable.

The oft-repeated rule regarding a carrier's liability for delay is that in the absence of
a special contract, a carrier is not an insurer against delay in transportation of
goods. When a common carrier undertakes to convey goods, the law implies a
contract that they shall be delivered at destination within a reasonable time, in the
absence, of any agreement as to the time of delivery. But where a carrier has made
an express contract to transport and deliver property within a specified time, it is
bound to fulfill its contract and is liable for any delay, no matter from what cause it
may have arisen. This result logically follows from the well-settled rule that where

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

the law creates a duty or charge, and the party is disabled from performing it
without any default in himself, and has no remedy over, then the law will excuse
him, but where the party by his own contract creates a duty or charge upon himself,
he is bound to make it good notwithstanding any accident or delay by inevitable
necessity because he might have provided against it by contract. Whether or not
there has been such an undertaking on the part of the carrier to be determined
from the circumstances surrounding the case and by application of the ordinary
rules for the interpretation of contracts.
Echoing the findings of the trial court, the respondent court correctly declared that

In a similar case of delayed delivery of air cargo under a very similar stipulation
contained in the airway bill which reads: "The carrier does not obligate itself to
carry the goods by any specified aircraft or on a specified time. Said carrier being
hereby authorized to deviate from the route of the shipment without any liability
therefor", our Supreme Court ruled that common carriers are not obligated by law
to carry and to deliver merchandise, and persons are not vested with the right to
prompt delivery, unless such common carriers previously assume the obligation.
Said rights and obligations are created by a specific contract entered into by the
parties (Mendoza vs. PAL, 90 Phil. 836).

There is no showing by plaintiffs that such a special or specific contract had been
entered into between them and the defendant airline companies.
And this special contract for prompt delivery should call the attention of the carrier
to the circumstances surrounding the case and the approximate amount of
damages to be suffered in case of delay (See Mendoza vs. PAL, supra). There was no
such contract entered into in the instant case.
A common carrier undertaking to transport property has the implicit duty to carry
and deliver it within reasonable time, absent any particular stipulation regarding
time of delivery, and to guard against delay. In case of any unreasonable delay, the
carrier shall be liable for damages immediately and proximately resulting from such
neglect of duty. As found by the trial court, the delay in the delivery of the remains
of Crispina Saludo, undeniable and regrettable as it was, cannot be attributed to the
fault, negligence or malice of private respondents, a conclusion concurred in by
respondent court and which we are not inclined to disturb.

JUAN YSMAEL & CO., INC. vs. GABINO BARRETTO & CO., LTD., ET AL., defendants.
ANDRES H. LIMGENGCO and VICENTE JAVIER
G.R. No. L-28028. November 25, 1927
JOHNS, J.

FACTS: Plaintiff, a domestic corporation, seeks to recover from the defendants


P9,940.95 the alleged value of four cases of merchandise which it delivered to the
steamship Andres on October 25, 1922, at Manila to be shipped to Surigao, but
which were never delivered to Salomon Sharuff, the consignee, or returned to the
plaintiff.

Defendants make a specific denial of all of the material allegations of the complaint,
and as special defense allege that the four cases of merchandise in question were
never delivered to them. They further invoke clause 12 of the Bill of Lading for their
limited liability which reads: It is expressly understood that carrier shall not be
liable for loss or damage from any cause or for any reason to an amount exceeding
P300 for any single package of silk or other valuable cargo, nor for an amount
exceeding P100 for any single package of other cargo, unless the value and contents
of such packages are correctly declared in this bill of lading at the time of shipment
and freight paid in accord with the actual measurement or weight of the cargo
shipped.

Lower court rendered judgment for the plaintiff for the full amount of its claim.
ISSUE: Whether or not the provision in the bill of lading limiting the liability of the
carrier not to exceed P300 is valid.
HELD: NO. A common carrier cannot lawfully stipulate for the exemption from
liability, unless such exemption is just and reasonable. The carrier cannot limit its
liability for injury to or loss of goods shipped if such was caused by its own
negligence.

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

The ship in question was a common carrier and, as such, must have been operated
as a public utility. It is a matter of common knowledge that large quantities of silk
are imported in the Philippine Islands, and that after being imported, they are sold
by the merchants in Manila and other large seaports, and then shipped to different
points and places in the Islands. Hence, there is nothing unusual about the
shipment of silk. In truth and in fact, it is a matter of usual and ordinary business.
There was no fraud or concealment in the shipment in question. Clause 12 above
quoted places a limit of P300 "for any single package of silk." The evidence shows
that 164 "cases" were shipped, and that the value of each case was very near
P2,500. In this situation, the limit of defendants' liability for each case of silk "for
loss or damage from any cause or for any reason" would put it in the power of the
defendants to have taken the whole cargo of 164 cases of silk at a valuation of P300
for each case, or less than one-eight of its actual value. If that rule of law should be
sustained, no silk would ever be shipped from one island to another in the
Philippines. Such a limitation of value is unconscionable and void as against public
policy.

PARMANAND SHEWARAM, plaintiff and appellee, vs. PHILIPPINE AIR LINES, INC.,
defendant and appellant.
G.R. No. L-20099

July 7, 1966

ZALDIVAR, J.

This is an appeal from the CFI Zamboanga Decision eliminating exemplary


damages and modifying MTC Zamboangas Decision ordering PAL to pay actual
damages, exemplary damages, attorneys fees and cost of suit to Shewaram.

FACTS
Corpus Juris, volume 10, p. 154, says:
PAR. 194. 6. Reasonable of Limitation. The validity of stipulations limiting the
carriers liability is to be determined by their reasonableness and their conformity to
the sound public policy, in accordance with which the obligations of the carrier to
the public are settled. It cannot lawfully stipulate for exemption from liability,
unless such exemption is just and reasonable, and unless the contract is freely and
fairly made. No contractual limitation is reasonable which is subversive of public
policy.
PAR. 195. 7. What Limitations of Liability Permissible. a.
Negligence (1) Rule in America (a) In Absence of Organic or Statutory
Provisions Regulating Subject aa. Majority Rule. In the absence of statute, it is
settled by the weight of authority in the United States, that whatever limitations
against its common-law liability are permissible to a carrier, it cannot limit its
liability for injury to or loss of goods shipped, where such injury or loss is caused by
its own negligence. This is the common-law doctrine and it makes no difference
that there is no statutory prohibition against contracts of this character.

There is no merit in the appeal. The judgment of the lower court is affirmed, with
costs.

Parmanand Shewaram

- passenger

Philippine Air Lines, Inc. (PAL)

- carrier

On November 23, 1959, Parmanand Shewaram, was a paying passenger on


PALs aircraft from Zamboanga City bound for Manila. On the same day, he checked
in 3 baggages a suitcase and 2 other pieces. The suitcase was mistagged with
I.G.N. (for Iligan) instead of MNL (for Manila) by PAL personnel in Zamboanga. The
suitcase was then sent to Iligan and thus did not arrive with Shewaram. The PAL
station agent in Iligan caused to send the suitcase for delivery to Manila which
arrived on November 24, 1959.

Prior to having his suitcase returned, Shewaram was offered another


similar suitcase which was the only baggage left for the flight on November 23,
1959. This apparently belonged to a certain Del Rosario who was bound for Iligan in
the same flight with Shewaram. The said suitcase was nevertheless opened to
ascertain if such belonged to Shewaram without the permission and presence of

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

Mr. Del Rosario. Shewaram rejected the suitcase as it contained a pistol instead of
his Transistor Radio 7 (Php 176.00) and Rollflex Camera (Php 373.00). Moreover,
there was a space in the suitcase where the two items in question could have been
placed. PAL admitted that the two items could not be found inside the suitcase.
There was no evidence on record sufficient to show that Shewarams suitcase was
never opened during the time it was placed in PALs possession and prior to its
recovery by the Shewaram. However, PAL had presented evidence that it had
authority to open passengers' baggage to verify and find its ownership or identity.

Shewaram instituted an action to recover damages suffered by him due to PALs


failure to observe extraordinary diligence in the vigilance and carriage of his
luggage. This was lodged before the MTC Zamboanga which rendered a decision in
favor of Shewaram. PAL appealed to CFI Zamboanga. It modified the judgment of
the MTC by removing exemplary damages.

ISSUE

WON Shewaram was bound by the provisions of the tariff regulations filed by PAL
with the civil aeronautics board and the conditions of carriage printed at the back of
the plane ticket stub.

This was printed in small letters at the back of the ticket. PAL even admits
that passengers do not sign the ticket, much less did Shewaram herein sign his
ticket when he made the flight on November 23, 1959.

Corollary with the abovementioned condition is Art. 1750 of the NCC:

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.

Pecuniary liability of a common carrier may, by contract, be limited to a


fixed amount. It is required, however, that the contract must be "reasonable and
just under the circumstances and has been fairly and freely agreed upon. However,
requirements in Art. 1750 have not been met. The fact that those conditions are
printed at the back of the ticket stub in letters so small that they are hard to read
would not warrant the presumption that the appellee was aware of those
conditions such that he had "fairly and freely agreed" to those conditions. Also, it
was clear by the admission of PAL that Shewaram did not sign his ticket. Therefore,
he is not, and can not be, bound by the conditions of carriage found at the back of
the ticket stub issued to him when he made the flight on appellant's plane on
November 23, 1959.

HELD

NO. One of the focal conditions in the Domestic Tariff Regulations No. 2 filed with
the Civil Aeronautics Board which is vital in the case provides:

The liability, if any, for loss or damage to checked baggage or for delay in
the delivery thereof is limited to its value and, unless the passenger
declares in advance a higher valuation and pay an additional charge
therefor, the value shall be conclusively deemed not to exceed P100.00 for
each ticket.

Moreover, the carrier cannot limit its liability for injury to or loss of goods
shipped where such injury or loss was caused by its own negligence. PAL is
undoubtedly and undisputedly a common carrier. It was accused of being negligent
because it admittedly mistagged Shewarams suitcase and the some of the contents
of the said suitcase were missing under its custody. Also, with the manner in which
Mr. Del Rosarios suitcase was inspected without his necessary authorization and
presence may and could be applied to Shewarams suitcase as well.

The validity of stipulations limiting the carrier's liability is to be determined

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

by their reasonableness and their conformity to the sound public policy, in


accordance with which the obligations of the carrier to the public are settled. It
cannot lawfully stipulate for exemption from liability, unless such exemption is just
and reasonable, and unless the contract is freely and fairly made. No contractual
limitation is reasonable which is subversive of public policy.

4.

The shipper and the common carrier are not on equal terms; the shipper
must send his freight by the common carrier, or not at all; he is therefore entirely at
the mercy of the carrier unless protected by the higher power of the law against
being forced into contracts limiting the carrier's liability. Such contracts are wanting
in the element of voluntary assent.

5.

In view of the foregoing, the decision appealed from is affirmed, with costs against
the appellant.

6.

ONG YIU vs CA REINA


AGUSTINO B. ONG YIU vs. HONORABLE COURT OF APPEALS and PHILIPPINE AIR
LINES, INC.
G.R. No. L-40597 June 29, 1979
1.

2.

3.

MELENCIO-HERRERA, J.:

Petitioner Ong (practicing lawyer) was a fare paying passenger of


respondent PAL, on board Flight No. 463-R, from Mactan Cebu to Butuan
City. He was scheduled to attend the trial of civil case in the Court of First
Instance set for hearing on August 28-31, 1967. He checked in a blue
"maleta" (containing vital documents needed for trial) for which he was
issued Claim Check No. 2106-R. Upon arrival, petitioner claimed his
luggage but it could not be found.
At about 3:00 o'clock P.M., PAL Butuan, sent a message to PAL Cebu,
inquiring about the missing luggage hich message was relayed in full to the
Mactan Airport teletype operator at 3:45 P.M. It must have been
transmitted to Manila immediately at 3:59.
PAL Manila wired PAL Cebu advising that the luggage had been over
carried to Manila and that it would be forwarded to Cebu on the same day.
Instructions were also given that the luggage be immediately forwarded to
Butuan City on the first available flight.

7.

8.

9.

At 5:00 P.M. of the same afternoon, PAL Cebu sent a message to PAL
Butuan that the luggage would be forwarded the following day, August 27.
At 10:00 o'clock that evening, petitioner wired PAL Cebu demanding the
delivery of his baggage before noon the next day, otherwise, he would
hold PAL liable for damages. This telegram was received by the Cebu PAL
supervisor but the latter felt no need to wire petitioner that his luggage
had already been forwarded on the assumption that by the time the
message reached Butuan City, the luggage would have arrived.
Early in the morning of the next day, August 27 petitioner went to the
Bancasi Airport to inquire about his luggage. He did not wait, however, for
the morning flight which arrived at 10:00 o'clock that morning. This flight
carried the missing luggage. A certain Emilio Dagorro a driver of a
"colorum" car, who also used to drive for petitioner, volunteered to take
the luggage to petitioner. Dagorro then delivered the "maleta" to
petitioner, with the information that the lock was open.
Upon inspection, petitioner found that a folder containing certain exhibits,
transcripts and private documents in Civil Case No. 1005 and Sp. Procs. No.
1126 were missing, aside from two gift items for his parents-in-law.
Petitioner refused to accept the luggage. Meanwhile, petitioner asked for
postponement of the hearing of Civil Case No. 1005 due to loss of his
documents, which was granted by the Court. Petitioner returned to Cebu
City on August 28, 1967.
On September 13, 1967, petitioner filed a Complaint against PAL for
damages for breach of contract of transportation with the Court of First
Instance of Cebu. After due trial, the lower Court found PAL to have acted
in bad faith and with malice and declared petitioner entitled to moral
damages in the sum of P80,000.00, exemplary damages of P30,000.00,
attorney's fees of P5,000.00, and costs.
Both parties appealed to the Court of Appeals petitioner in so far as he
was awarded only the sum of P80,000.00 as moral damages; and
defendant because of the unfavorable judgment rendered against it.
The Court of Appeals, finding that PAL was guilty only of simple negligence,
reversed the judgment of the trial Court, but ordered PAL to pay plaintiff
the sum of P100.00, the baggage liability assumed by it under the
condition of carriage printed at the back of the ticket.

ISSUES:
1.
2.

Whether or not PAL is guilty of only simple negligence?


Whether the doctrine of limited liability doctrine applies in the instant
case?

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

HELD:
1.

2.

YES. From the facts of the case, we agree with respondent Court that PAL
had not acted in bad faith. Bad faith means a breach of a known duty
through some motive of interest or ill will. It was the duty of PAL to look
for petitioner's luggage which had been miscarried. PAL exerted due
diligence in complying with such duty.
Cebu office immediately wired Manila inquiring about the missing baggage
of the plaintiff. At 3:59 P.M., Manila station agent at the domestic airport
wired Cebu that the baggage was over carried to Manila. And this message
was received in Cebu one minute thereafter, or at 4:00 P.M. The baggage
was in fact sent back to Cebu City that same afternoon. His Honor stated
that the fact that the message was sent at 3:59 P.M. from Manila and
completely relayed to Mactan at 4:00 P.M., or within one minute, made
the message appear spurious. Neither was the failure of PAL Cebu to reply
to petitioner's rush telegram indicative of bad faith, The telegram was
dispatched by petitioner at around 10:00 P.M. of August 26, 1967. The PAL
supervisor at Mactan Airport was notified of it only in the morning of the
following day. At that time the luggage was already to be forwarded to
Butuan City. There was no bad faith, therefore, in the assumption made by
said supervisor that the plane carrying the bag would arrive at Butuan
earlier than a reply telegram. Had petitioner waited or caused someone to
wait at the Bancasi airport for the arrival of the morning flight, he would
have been able to retrieve his luggage sooner.
YES. While it may be true that petitioner had not signed the plane ticket,
he is nevertheless bound by the provisions thereof. "Such provisions have
been held to be a part of the contract of carriage, and valid and binding
upon the passenger regardless of the latter's lack of knowledge or assent
to the regulation". It is what is known as a contract of "adhesion", in
regards which it has been said that contracts of adhesion wherein one
party imposes a ready made form of contract on the other, as the plane
ticket in the case at bar, are contracts not entirely prohibited. The one
who adheres to the contract is in reality free to reject it entirely; if he
adheres, he gives his consent. x x, a contract limiting liability upon an
agreed valuation does not offend against the policy of the law forbidding
one from contracting against his own negligence.

The pertinent Condition of Carriage printed at the back of the plane ticket reads:
BAGGAGE LIABILITY ... The total liability of the Carrier for lost or damaged baggage
of the passenger is LIMITED TO P100.00 for each ticket unless a passenger declares
a higher valuation in excess of P100.00, but not in excess, however, of a total
valuation of P1,000.00 and additional charges are paid pursuant to Carrier's tariffs.
Considering, therefore, that petitioner had failed to declare a higher value for his
baggage, he cannot be permitted a recovery in excess of P100.00. Besides,
passengers are advised not to place valuable items inside their baggage but "to avail
of our V-cargo service ". It is likewise to be noted that there is nothing in the
evidence to show the actual value of the goods allegedly lost by petitioner.

G.R. No. 89757 August 6, 1990


ABOITIZ SHIPPING CORPORATION, petitioner,
vs.
COURT OF APPEALS AND GENERAL ACCIDENT FIRE AND LIFE ASSURANCE
CORPORATION, LTD.,respondents.
Facts:
The vessel M/V "P. Aboitiz" took on board in Hongkong for shipment to Manila
some cargo consisting of one (1) twenty (20)-footer container holding 271 rolls of
goods for apparel covered by Bill of Lading No. 515-M and one (1) forty (40)-footer
container holding four hundred forty- seven (447) rolls, ten (10) bulk and ninety-five
(95) cartons of goods for apparel covered by Bill of Lading No. 505-M. Both
shipments were consigned to the Philippine Apparel, Inc. and insured with the
General Accident Fire and Life Assurance Corporation, Ltd. (GAFLAC for short). The
vessel is owned and operated by Aboitiz Shipping Corporation (Aboitiz for short).
On its way to Manila, the vessel sunk and it was declared lost with all its cargoes.
GAFLAC paid the consignee the amounts for the lost cargo. As GAFLAC was
subrogated to all the rights, interests and actions of the consignee against Aboitiz, it
filed an action for damages against Aboitiz in the Regional Trial Court of Manila
alleging that the loss was due to the fault and negligence of Aboitiz and the master
and crew of its vessel in that they did not observe the extraordinary diligence
required by law as regards common carriers.
Nevertheless, trial court held that the vessel M/V "Aboitiz" and its cargo were not
lost due to fortuitous event or force majeure (storm in this case).

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Gaflac is now contending that Aboitiz is liable not only US$500.00 but for the total
amount it paid as an insurer. Petitioner Aboitiz however argued the stipulation in
the Bill of lading that they are only liable for US$500.00 for each container. Here
there are only two containers.
Issue: Whether or not the liability of the petitioner should be fixed at US$500.00
per package/container, as stipulated in the bill of lading and not at the actual value
of the cargo?
Held: No. The stipulation in Bill of Lading that carrier would be liable for US$500.00
per package is an unreasonable limitation on liability of cargo.
Generally speaking a stipulation, limiting the common carrier's liability to the value
of the goods appearing in the bill of lading, unless the shipper or owner declares a
greater value, is valid. Such stipulation, however, must be reasonable and just
under the circumstances and must have been fairly and freely agreed upon. In the
case at bar, the goods shipped on the M/V "P. Aboitiz" were insured for
P278,530.50, which may be taken as their value. To limit the liability of the carrier
to $500.00 would obviously put it in its power to have taken the whole cargo. In
Juan Ysmael & Co. vs. Gabino Barreto & Co., 51 Phil. 90 (1927), it was held that a
stipulation limiting the carrier's liability to $500.00 per package of silk when the
value of such package was P2,500.00 unless the true value had been declared and
the corresponding freight paid was "void as against public policy." That ruling
applies to this case.
Moreover, by the weight of modern authority, a carrier cannot limit its liability for
injury or loss of goods shipped where such injury or loss was caused by its own
negligence. Here to limit the liability of Aboitiz Shipping to $500.00 would nullify the
policy of the law imposing on common carriers the duty to observe extraordinary
diligence in the carriage of goods.
Indeed, it is even doubtful whether the word "container" in section 8 of the Bill of
Lading includes containers which are a substitute for the hold of a vessel. This
provision limits the carrier's liability to "the sum of US$500.00 per package
/container customary freight unit." By the rule of noscitur a sociis the word
"container" must be given the same meaning as package and customary freight
unit. Dito, ung container in question na ay 20 footer at 40 footer ang laki. Iyong laki
ng container ay different sa package and customary unit na tinutukoy ng Bill of
lading.

Sea-Land Service, Inc. v. Intermediate Appellate Court

Facts: Sea-Land, a foreign shipping and forwarding company licensed to do business


in the Philippines, received from Seaborne Trading Company in California, a
shipment consigned to Sen Hiap Hing, the business name used by Paulino Cue in the
wholesale and retail trade which he operated. The shipper not having declared the
value of the shipment, NO VALUE WAS INDICATED IN THE BILL OF LADING. The
shipment was discharged in Manila, and while awaiting transshipment to Cebu, the
cargo was stolen by pilferers and never recovered.
Paulino Cue, the consignee, made formal claim upon Sea-Land for the value of the
lost shipment allegedly amounting to P179,643.48. Sea-Land offered to settle for
US$4,000.00, or its then Philippine peso equivalent of P30,600.00. asserting that
said amount represented its maximum liability for the loss of the shipment under
the package limitation clause in the covering bill of lading. Cue rejected the offer
and thereafter brought suit for damages against Sea-Land in the then Court of First
Instance of Cebu
The trial court sentenced Sea-Land to pay Cue P186,048 representing the Philippine
currency value of the lost cargo, P55, 814 for unrealized profit and P25,000 for
attorneys fees. CA affirmed the trial courts decision.
Issue: Whether or not the stipulation in the Bill of Lading limiting the liability of Sea
Land is valid.
Held: YES! There is no question of the right of a consignee in a bill of lading to
recover from the carrier or shipper for loss of, or damage to, goods being
transported under said bill, although that document may have been drawn up only
by the consignor and the carrier without the intervention of the consignee.
Since the liability of a common carrier for loss of or damage to goods transported
by it under a contract of carriage is governed by the laws of the country of
destination and the goods in question were shipped from the United States to the
Philippines, the liability of Sea-Land has to Cue is governed primarily by the Civil
Code, and as ordained by the said Code, supplementary, in all matters not cluttered
thereby, by the Code of Commerce and special laws. One of these supplementary
special laws is the Carriage of goods by Sea Act (COGSA), made applicable to all
contracts for the carriage by sea to and from the Philippines Ports in Foreign Trade
by Comm. Act. 65. Sec. 4(5) of said Act in part reads:
(5) Neither the carrier nor the ship shall in any event be or become liable for any
loss or damage to or in connection with the transportation of goods in an amount

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exceeding $500 per package lawful money of the United States, or in case of goods
not shipped in packages, per customary freight unit, or the equivalent of that sum
in other currency, unless the nature and value of such goods have been declared by
the shipper before shipment and inserted in the bill of lading. This declaration, if
embodied in the bill of lading, shall be prima facie evidence, but shall not be
conclusive on the carrier.
By agreement between the carrier, master, or agent of the carrier, and the shipper
another maximum amount than that mentioned in this paragraph may be fixed:
Provided, That such maximum shall not be less than the figure above named. In no
event shall the carrier be liable for more than the amount of damage actually
sustained.
Not only is there nothing in the Civil Code which absolutely prohibits agreements
between shipper and carrier limiting the latter's liability for loss of or damage to
cargo shipped under contracts of carriage; it is also quite clear that said Code in fact
has agreements of such character in contemplation in providing, in its Articles 1749
and 1750, that:
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.
Even if Section 4(5) of COGSA did not list the validity and binding effect of the
liability limitation clause in the bill of lading here are fully substantial on the basis
alone of Article 1749 and 1750 of the Civil Code. The justices of such stipulation is
implicit in its giving the owner or shipper the option of avoiding accrual of liability
limitation by the simple expedient of declaring the value of the shipment in the bill
of lading.
The stipulation in the bill of lading limiting the liability of Sea-Land for loss or
damages to the shipment covered by said rule to US$500 per package unless the
shipper declares the value of the shipment and pays additional charges is valid and
binding on Cue.

Citadel Lines, Inc. v. CA

G.R. No. 88092 April 25, 1990


CITADEL LINES, INC., petitioner,
vs.
COURT OF APPEALS * and MANILA WINE MERCHANTS, INC., respondents.

Facts:
Petitioner Citadel Lines, Inc. (CARRIER) is the general agent of the vessel "Cardigan
Bay/Strait Enterprise," while respondent Manila Wine Merchants, Inc.(CONSIGNEE)
is the importer of the subject shipment of Dunhill cigarettes from England.

The vessel loaded on board at Southampton, England, for carriage to Manila, 180
Filbrite cartons of mixed British manufactured cigarettes called "Dunhill
International Filter" and "Dunhill International Menthol as evidenced by 2 bills of
lading. The shipment arrived at the Port of Manila in a container van which was
received by E. Razon, Inc. (later known as Metro Port Service, Inc.)(ARRASTRE)

The container van, which contained two shipments was stripped. One shipment was
delivered and the other shipment consisting of the imported British manufactured
cigarettes was palletized. Due to lack of space at the Special Cargo Coral, the
aforesaid cigarettes were placed in two containers with two pallets in one
container, and four pallets in another container, with both containers duly
padlocked and sealed by the representative of the CARRIER.

The CARRIERs headchecker discovered that the second container had a different
padlock and the seal was tampered with. The matter was reported to Sibucao (Pier
Superintendent) and upon verification, it was found that 90 cases of imported
British manufactured cigarettes were missing. In an investigation conducted by the
ARRASTRE it was revealed that the cargo in question was not formally turned over
to it by the CARRIER but was kept inside the said container van which was

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padlocked and sealed by the representatives of the CARRIER without any


participation of the ARRASTRE.

When the CONSIGNEE learned that 90 cases were missing, it filed a formal claim
with the CARRIER. In its reply, it alleged that the goods were under the absolute
control ARRASTRE. A formal claim was then filed with the ARRASTRE which denied
liability.

The trial court rendered a decision exonerating the ARRASTRE from any liability on
the ground that the subject container van was not formally turned over to its
custody, adjudging the CARRIER liable for the lost shipment. The CA affirmed the
decision of the RTC.

Issue:
1.
2.

Whether the loss occurred while the cargo in question was in the custody of
E. Razon, Inc. or of Citadel Lines, Inc
Whether the stipulation limiting the liability of the carrier contained in the
bill of lading is binding on the consignee.

Ruling:
1.
The subject cargo which was placed in a container van, padlocked and
sealed by the representative of the CARRIER was still in its possession and control
when the loss occurred, there having been no formal turnover of the cargo to the
ARRASTRE.
Common carriers, from the nature of their business and for reasons of public
policy, are bound to observe extraordinary diligence in the vigilance over the
goods and for the safety of the passengers transported by them, according to all
the circumstances of each case. 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 extra ordinary diligence as required in Article
1733 of the Civil Code. The duty of the consignee is to prove merely that the goods
were lost Thereafter; the burden is shifted to the carrier to prove that it has
exercised the extraordinary diligence required by law. And, its extraordinary
responsibility lasts from the time the goods are unconditionally placed in the
possession of, and received by the carrier for transportation until the same are

delivered, actually or constructively, by the carrier to the consignee or to the


person who has the right to receive them.
Considering, therefore, that the subject shipment was lost while it was still in the
custody of herein petitioner CARRIER, and considering further that it failed to
prove that the loss was occasioned by an excepted cause, the inescapable
conclusion is that the CARRIER was negligent and should be held liable therefor.

2.
The stipulation is valid. The award of damages in the amount of
P312,800.00 for the value of the goods lost, based on the alleged market value
thereof, to be erroneous. It is clearly and expressly provided under Clause 6 of
the aforementioned bills of lading issued by the CARRIER that its liability is
limited to $2.00 per kilo. Basic is the rule, long since enshrined as a statutory
provision that a stipulation limiting the liability of the carrier to the value of the
goods appearing in the bill of lading, unless the shipper or owner declares a
greater value, is binding. Further, 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. In Sea-land Service, Inc. vs. Intermediate
Appellate Court, et al., the court explained what is a just and reasonable, and a
fair and free, stipulation, in this wise:
. . . That said stipulation is just and reasonable arguable from the fact that it
echoes Art. 1750 itself in providing a limit to liability only if a greater value is not
declared for the shipment in the bill of lading. To hold otherwise would amount
to questioning the justice and fairness of that law itself, and this the private
respondent does not pretend to do. But over and above that consideration the
just and reasonable character of such stipulation is implicit in it giving the
shipper or owner the option of avoiding accrual of liability limitation by the
simple and surely far from onerous expedient of declaring the nature and value
of the shipment in the bill of lading. And since the shipper here has not been
heard to complain of having been "rushed," imposed upon or deceived in any
significant way into agreeing to ship the cargo under a bill of lading carrying such
a stipulation in fact, it does not appear, that said party has been heard from
at all insofar as this dispute is concerned there is simply no ground for
assuming that its agreement thereto was not as the law would require, freely
and fairly sought and well.
The CONSIGNEE itself admits in its memorandum that the value of the goods
shipped does not appear in the bills of lading. Hence, the stipulation on the

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carrier's limited liability applies. There is no question that the stipulation is just and
reasonable under the circumstances and has been fairly and freely agreed upon.
The bill of lading shows that 120 cartons weigh 2,978 kilos or 24.82 kilos per
carton. Since 90 cartons were lost and the weight of said cartons is 2,233.80 kilos,
at $2.00 per kilo the CARRIER's liability amounts to only US$4,467.60.

[G.R. No. 122494. October 8, 1998]


EVERETT STEAMSHIP CORPORATION vs. COURT OF APPEALS and HERNANDEZ
TRADING CO. INC.
MARTINEZ, J.:
Petitioner through this petition for review, seeks the reversal of the decision of the
Court of Appeals, dated June 14, 1995 which affirmed the decision of the Regional
Trial Court of Kalookan City, Branch 126 finding petitioner liable to private
respondent
Facts:Private respondent imported three crates of bus spare parts marked as
MARCO C/No. 12, MARCO C/No. 13 and MARCO C/No. 14, from its supplier,
Maruman Trading Company, Ltd. (Maruman Trading), a foreign corporation based
in Inazawa, Aichi, Japan. The crates were shipped from Nagoya, Japan to Manila on
board ADELFAEVERETTE, a vessel owned by petitioners principal, Everett Orient
Lines. The said crates were covered by Bill of Lading. Upon arrival at the port of
Manila, it was discovered that the crate marked MARCO C/No. 14 was missing. This
was confirmed and admitted by petitioner in its letter of January 13, 1992
addressed to private respondent, which thereafter made a formal claim upon
petitioner for the value of the lost cargo amounting to Y1,552,500.00 the amount
shown in an Invoice dated November 14, 1991. However, petitioner offered to pay
only Y100,000.00, the maximum amount stipulated under Clause 18 of the covering
bill of lading which limits the liability of petitioner. Private respondent rejected the
offer and thereafter instituted a suit for collection, against petitioner before the
Regional Trial Court of Caloocan City, Branch 126.
On July 16, 1993, the trial court rendered judgment in favor of private respondent,
ordering petitioner to pay: (a) Y1,552,500.00; (b) Y20,000.00 or its peso equivalent
representing the actual value of the lost cargo and the material and packaging cost;
(c) 10% of the total amount as an award for and as contingent attorneys fees; and
(d) to pay the cost of the suit. On appeal, the Court of Appeals deleted the award of
attorneys fees but affirmed the trial courts findings with the additional
observation that private respondent can not be bound by the terms and conditions
of the bill of lading because it was not privy to the contract of carriage.

Issue 1: WON the limited liability clause in the bill of lading is valid?
Held 1: Yes. A stipulation in the bill of lading limiting the common carriers liability
for loss or destruction of a cargo to a certain sum, unless the shipper or owner
declares a greater value, is sanctioned by law, particularly Articles 1749 and 1750 of
the Civil Code which provide:
ART. 1749. A stipulation that the common carriers 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.
The bill of lading subject of the present controversy specifically provides,
among others:
18. All claims for which the carrier may be liable shall be adjusted and
settled on the basis of the shippers net invoice cost plus freight and
insurance premiums, if paid, and in no event shall the carrier be liable for
any loss of possible profits or any consequential loss.
The carrier shall not be liable for any loss of or any damage to or in any
connection with, goods in an amount exceeding Y100,000.00 or its
equivalent in any other currency per package or customary freight unit
(whichever is least) unless the value of the goods higher than this amount
is declared in writing by the shipper before receipt of the goods by the
carrier and inserted in the Bill of Lading and extra freight is paid as
required.
The above stipulations are, to our mind, reasonable and just. In the bill of lading,
the carrier made it clear that its liability would only be up to
Y100,000.00. However, the shipper, Maruman Trading, had the option to declare a
higher valuation if the value of its cargo was higher than the limited liability of the
carrier. Considering that the shipper did not declare a higher valuation, it had
itself to blame for not complying with the stipulations. The trial courts
ratiocination that private respondent could not have fairly and freely agreed to
the limited liability clause in the bill of lading because the said conditions were
printed in small letters does not make the bill of lading invalid.
Greater vigilance, however, is required of the courts when dealing with contracts of
adhesion in that the said contracts must be carefully scrutinized in order to shield
the unwary (or weaker party) from deceptive schemes contained in ready-made
covenants, such as the bill of lading in question. The stringent requirement which
the courts are enjoined to observe is in recognition of Article 24 of the Civil Code

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which mandates that (i)n all contractual, property or other relations, when one of
the parties is at a disadvantage on account of his moral dependence, ignorance,
indigence, mental weakness, tender age or other handicap, the courts must be
vigilant for his protection. The shipper, Maruman Trading, we assume, has been
extensively engaged in the trading business. It can not be said to be ignorant of the
business transactions it entered into involving the shipment of its goods to its
customers. The shipper could not have known, or should know the stipulations in
the bill of lading and there it should have declared a higher valuation of the goods
shipped. Moreover, Maruman Trading has not been heard to complain that it has
been deceived or rushed into agreeing to ship the cargo in petitioners vessel. In
fact, it was not even impleaded in this case.
Issue 2: Whether or not private respondent, as consignee, who is not a signatory to
the bill of lading is bound by the stipulations thereof?
Held 2: Yes. When private respondent formally claimed reimbursement for the
missing goods from petitioner and subsequently filed a case against the latter based
on the very same bill of lading, it accepted the provisions of the contract and
thereby made itself a party thereto, or at least has come to court to enforce
it. Thus, private respondent cannot now reject or disregard the carriers limited
liability stipulation in the bill of lading. In other words, private respondent is bound
by the whole stipulations in the bill of lading and must respect the same.
The bill of lading in question confirms petitioners contention. To defeat the
carriers limited liability, the aforecited Clause 18 of the bill of lading requires that
the shipper should have declared in writing a higher valuation of its goods before
receipt thereof by the carrier and insert the said declaration in the bill of lading,
with the extra freight paid. These requirements in the bill of lading were never
complied with by the shipper, hence, the liability of the carrier under the limited
liability clause stands. The commercial Invoice does not in itself sufficiently and
convincingly show that petitioner has knowledge of the value of the cargo as
contended by private respondent. No other evidence was proffered by private
respondent to support is contention. Thus, we are convinced that petitioner should
be liable for the full value of the lost cargo. In fine, the liability of petitioner for the
loss of the cargo is limited to Y100,000.00, pursuant to Clause 18 of the bill of
lading.
BRITISH AIRWAYS, petitioner, vs. COURT OF APPEALS, GOP MAHTANI, and
PHILIPPINE AIRLINES, respondents.
TOPIC: Amount of Liability
FACTS:

Mahtani obtained the services of a certain Mr. Gemar to prepare his travel
plan to Bombay, India. Mr. Gemar purchased a ticket from British Airways, however
since it had no ticket flights from Manila to Bombay, Mahtani had to take a
connecting flight to Bombay. Prior to his departure, Mahtani checked in the PAL
counter in Manila his two pieces of luggage containing his clothing and personal
effects, confident that upon reaching Hong Kong, the same would be transferred to
the British Airways flight bound for Bombay. Unfortunately, when Mahtani arrived
in Bombay, he discovered that his luggage was missing and that upon inquiry from
the British Airways representatives, he was told that the same might have been
diverted to London. After plaintiff waited for his luggage for one week, BA finally
advised him to file a claim. Mahtani filed his complaint for damages. British Airways
filed a third-party complaint against PAL alleging that the reason for the nontransfer of the luggage was due to the latter's late arrival in Hongkong, thus leaving
hardly any time for the proper transfer of Mahtani's luggage to the BA aircraft
bound for Bombay. RTC rendered its decision in favor of Mahtani, which CA
affirmed, hence the instant petition. British Airways alleged that there should have
been no separate award for the luggage and the contents thereof since Mahtani
failed to declare a separate higher valuation for the luggage and therefore, its
liability is limited, at most, only to the amount stated in the ticket.

ISSUE: WON Mahtani is entitled to compensatory damages and attorneys fees


HELD:
Yes. The contract of transportation was exclusively between Mahtani and
British Airways. The latter merely endorsing the Manila to Hong Kong log of the
formers journey to PAL, as its subcontractor or agent. Conditions of contacts were
one of continuous air transportation from Manila to Bombay. The Court of Appeals
should have been cognizant of the well-settled rule that an agent is also responsible
for any negligence in the performance of its function and is liable for damages
which the principal may suffer by reason of its negligent act. The third-party
complaint was therefore reinstated. Since the instant petition was based on breach
of contract of carriage, Mahtani can only sue British Airways and not PAL, since the
latter was not a party in the contract. In addition, we have held that benefits of
limited liability are subject to waiver such as when the air carrier failed to raise
timely objections during the trial when questions and answers regarding the actual
claims and damages sustained by the passenger were asked. The contention of
British Airways with respect to limited liability was overruled although it is
recognized in the Philippines, stating that British Airways had waived the defense of

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limited liability when it allowed Mahtani to testify as to the actual damages he


incurred due to the misplacement of his luggage, without any objection.

SWEET LINES, INC., petitioner, vs.HON. BERNARDO TEVES, Presiding Judge, CFI of
Misamis Oriental Branch VII, LEOVIGILDO TANDOG, JR., and ROGELIO TIRO,
respondents

FACTS:
Private respondents Atty. Tandog and Tiro bought tickets for Voyage at the branch
office of petitioner, a shipping company transporting inter-island passengers and
cargoes, at Cagayan de Oro City. Respondents were to board petitioner's vessel
bound for Tagbilaran City via the port of Cebu. Upon learning that the vessel was
not proceeding to Bohol, since many passengers were bound for Surigao, private
respondents per advice, went to the branch office for proper relocation to another
vessel. Because the said vessel was already filled to capacity, they were forced to
agree "to hide at the cargo section to avoid inspection of the officers of the
Philippine Coastguard." Private respondents alleged that they were, during the
trip," "exposed to the scorching heat of the sun and the dust coming from the ship's
cargo of corn grits," and that the tickets they bought at Cagayan de Oro City for
Tagbilaran were not honored and they were constrained to pay for other tickets. In
view thereof, private respondents sued petitioner for damages and for breach of
contract of carriage before Court of First Instance of Misamis Oriental. Petitioner
moved to dismiss the complaint on the ground of improper venue. This motion was
premised on the condition printed at the back of the tickets, Condition No. 14,
which reads: It is hereby agreed and understood that any and all actions arising
out of the conditions and provisions of this ticket, irrespective of where it is issued,
shall be filed in the competent courts in the City of Cebu. The motion was denied
hence the instant petition.

ISSUE: WON Condition No. 14 printed at the back of the petitioner's passage tickets
purchased by private respondents, which limits the venue of actions arising from
the contract of carriage to the Court of First Instance of Cebu, valid and enforceable
HELD:
No. Considered in the light of circumstances prevailing in the inter-island shipping

industry in the country today, the SC held that Condition No. 14 printed at the back
of the passage tickets should be held as void and unenforceable for the following
reasons: First, under circumstances obligation in the inter-island shipping industry,
it is not just and fair to bind passengers to the terms of the conditions printed at the
back of the passage tickets, on which Condition No. 14 is Printed in fine letters, and
Second, Condition No. 14 subverts the public policy on transfer of venue of
proceedings of this nature, since the same will prejudice rights and interests of
innumerable passengers located in different places of the country who, under
Condition No. 14, will have to file suits against petitioner only in the City of Cebu.
Considering the expense and trouble a passenger residing outside of Cebu City
would incur to prosecute a claim in the City of Cebu, he would most probably
decide not to file the action at all. The condition will thus defeat, instead of
enhance, the ends of justice. Upon the other hand, petitioner has branches or
offices in the respective ports of call of its vessels and can afford to litigate in any of
these places. Hence, the filing of the suit in the CFI of Misamis Oriental, as was done
in the instant case, will not cause inconvenience to, much less prejudice, petitioner.

G.R. No. 71929 December 4, 1990


ALITALIA vs. IAC and FELIPA E. PABLO
NARVASA, J.:
FACTS:
Dr. Felipa Pablo, an Assoc. Prof in UP and a research grantee of the Philippine
Atomic Energy Agency, was invited to take part at a meeting of the Department of
Research and Isotopes of the Joint FAO-IAEA Division of Atomic Energy in Food and
Agriculture of UN in Ispra, Italy. She accepted the invitation. To fulfill this
engagement, Dr. Pablo booked passage on ALITALIA (airline).
She arrived in Milan on the day before the meeting in accordance with the itinerary
and time table set for her by ALITALIA. She was however told by the ALITALIA
personnel there at Milan that her luggage was "delayed inasmuch as the
same(was) in one of the succeeding flights from Rome to Milan." Her luggage
consisted of two (2) suitcases: one contained her clothing and other personal items;
the other, her scientific papers, slides and other research material. But the other
flights arriving from Rome did not have her baggage on board.
By then feeling desperate, she went to Rome to try to locate her bags herself.
There, she inquired about her suitcases in the domestic and international airports,

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and filled out the forms prescribed by ALITALIA for people in her predicament.
However, her baggage could not be found. Completely distraught and discouraged,
she returned to Manila without attending the meeting in Ispra, Italy.
Once back in Manila she demanded that ALITALIA make reparation for the damages
thus suffered by her. ALITALIA offered her "free airline tickets to compensate her
for any alleged damages, but she rejected the offer, and commenced an action.
As it turned out, Prof. Pablo's suitcases were in fact located and forwarded to Ispra,
Italy, but only on the day after her scheduled appearance and participation at the
UN meeting there. Of course Dr. Pablo was no longer there to accept delivery; she
was already on her way home to Manila. And for some reason or other, the
suitcases were not actually restored to Prof. Pablo by ALITALIA until eleven (11)
months later, and four (4) months after institution of her action.
CFI ruled in favor of Dr. Pablo. On appeal, IAC not only affirmed CFIs ruling but also
increased the award of damages from P20,000 to P40,000.
ISSUE: Whether or not the Warsaw Convention should be applied in the instant
case.
HELD: NO.
The Warsaw Convention does not operate as an exclusive enumeration of the
instances of an airline's liability, or as an absolute limit of the extent of that
liability. Moreover, slight reflection readily leads to the conclusion that it should be
deemed a limit of liability only in those cases where the cause of the death
or injury to person, or destruction, loss or damage to property or delay in its
transport is not attributable to or attended by any wilful misconduct, bad faith,
recklessness, or otherwise improper conduct on the part of any official or employee
for which the carrier is responsible, and there is otherwise no special or
extraordinary form of resulting injury. The Convention's provisions, in short, do not
"regulate or exclude liability for other breaches of contract by the carrier" or
misconduct of its officers and employees, or for some particular or exceptional
type of damage. Otherwise, "an air carrier would be exempt from any liability for
damages in the event of its absolute refusal, in bad faith, to comply with a contract
of carriage, which is absurd." Nor may it for a moment be supposed that if a
member of the aircraft complement should inflict some physical injury on a
passenger, or maliciously destroy or damage the latter's property, the Convention
might successfully be pleaded as the sole gauge to determine the carrier's liability
to the passenger. Neither may the Convention be invoked to justify the disregard of
some extraordinary sort of damage resulting to a passenger and preclude recovery
therefor beyond the limits set by said Convention. It is in this sense that the

Convention has been applied, or ignored, depending on the peculiar facts presented
by each case.
In the case at bar, no bad faith or otherwise improper conduct may be ascribed to
the employees of ALITALIA and Dr. Pablo's luggage was eventually returned to
her, belatedly, it is true, but without appreciable damage. The fact is,
nevertheless, that some special species of injury was caused to Dr. Pablo because
ALITALIA misplaced her baggage and failed to deliver it to her at the time appointed
a breach of its contract of carriage, to be sure with the result that she was
unable to read the paper and make the scientific presentation (consisting of slides,
autoradiograms or films, tables and tabulations) that she had painstakingly labored
over, at the prestigious international conference, to attend which she had traveled
hundreds of miles, to her chagrin and embarrassment and the disappointment and
annoyance of the organizers. She felt, not unreasonably, that the invitation for her
to participate at the conference, extended by the Joint FAO/IAEA Division of Atomic
Energy in Food and Agriculture of the United Nations, was a singular honor not only
to herself, but to the UP and the country as well, an opportunity to make some sort
of impression among her colleagues in that field of scientific activity. The
opportunity to claim this honor or distinction was irretrievably lost to her because
of Alitalia's breach of its contract.
Apart from this, there can be no doubt that Dr. Pablo underwent profound distress
and anxiety, which gradually turned to panic and finally despair, from the time she
learned that her suitcases were missing up to the time when, having gone to Rome,
she finally realized that she would no longer be able to take part in the conference.
As she herself put it, she "was really shocked and distraught and confused."
Certainly, the compensation for the injury suffered by Dr. Pablo cannot under the
circumstances be restricted to that prescribed by the Warsaw Convention for
delay in the transport of baggage.
She is not, of course, entitled to be compensated for loss or damage to her
luggage. As already mentioned, her baggage was ultimately delivered to her in
Manila, tardily but safely. She is however entitled to nominal damages which, as
the law says, is adjudicated in order that a right of the plaintiff, which has been
violated or invaded by the defendant, may be vindicated and recognized, and not
for the purpose of indemnifying the plaintiff for any loss suffered and this Court
agrees that the CA correctly set the amount thereof at P40,000.00.
PAN AMERICAN WORLD AIRWAYS, INC vs. INTERMEDIATE APPELLATE COURT
G.R. No. 70462

August 11, 1988

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CASE DOCTRINES: 1. A contract of adhesion is valid -- Such provisions have been


held to be a part of the contract of carriage, and valid and binding upon the
passenger regardless of the latter's lack of knowledge or assent to the regulation. 2.
The common carrier is held liable only for damages that were foreseen or might
have been foreseen at the time the contract of transportation was entered into.

***The airline ticket had the following condition: NOTICE OF BAGGAGE LIABILITY
LIMITATIONS Liability for loss, delay, or damage to baggage is limited as follows
unless a higher value is declared in advance and additional charges are paid: (1)for
most international travel (including domestic portions of international journeys) to
approximately $9.07 per pound ($20.00 per kilo) for checked baggagexxx

FACTS: Rene Pangan (president and general manager of Sotang Bastos and Archer
Production) and Primo Quesada (of Prime Films) entered into an agreement in San
Francisco, California whereby Pangan bound himself to supply Prime Films with
three films. Ang Mabait, Masungit at ang Pangit, Big Happening with Chikiting
and Iking and Kambal Dragon for exhibition in the US. On his way home to the
Philippines, Pangan visited Guam and contacted Leo Slutchnick (of Hafa Adai
Organization). They also entered into a verbal agreement for the exhibition of 2
films at Hafa Adai Theater. Pangan prepared the requisite promotional handbills
and still pictures. He also purchased 14 clutch bags, 4 capiz lamps and 4 barong
tagalong.

RESPONDENTS CONTENTION: Pangan contended that he is entitled to the actual


damages amounting to P83,000.00.

On May 18, 1978, Pangan obtained from Pan Ams Manila Office, through Your
Travel Guide, an economy class airplane for passage from Manila to Guam of May
27,1978. On May 27, 1978, two hours before departure time Pangan was at the Pan
Ams ticket counter at the Manila International Airport and presented his ticket and
checked in his two luggages. The two luggages contained the promotional and
advertising materials, the clutch bags, barong tagalog and his personal belongings.
Subsequently, Pangan was informed that his name was not in the manifest and so
he could not take the flight in the economy class. Since there was no space in the
economy class, Pangan took the first class because he wanted to be on time in
Guam paying an additional sum of $112.00. When Pangan arrived in Guam, his two
luggages did not arrive with his flight and thus, the agreements with Prime Films
and Hafa Adai Organiztion were cancelled.

PETITIONERS CONTENTION: Petitioner contends that its liability for the lost
baggage of private respondent Pangan is limited to $600.00 ($20.00 x 30 kilos) as
the latter did not declare a higher value for his baggage and pay the corresponding
additional charges.

CFI: CFI found Pan Am liable and ordered Pan Am to pay the plaintiffs P83,000.00,
for actual damages, with interest thereon at the rate of 14% per annum. IAC:
Affirmed the decision of CFI. SC:

ISSUE: Whether or not Pan Am is liable to pay the plaintiffs the amount stated in
the ticket which is $20.00 per kilo.

RULING: YES. The Court granted the petition.

The Court found the ruling in Ong Yiu case applicable to the instant case.

It said: While it may be true that petitioner had not signed the plane ticket, he is
nevertheless bound by the provisions thereof. "Such provisions have been held to
be a part of the contract of carriage, and valid and binding upon the passenger
regardless of the latter's lack of knowledge or assent to the regulation. It is what is
known as a contract of "adhesion," in regards which it has been said that contracts
of adhesion wherein one party imposes a ready made form of contract on the
other, as the plane ticket in the case at bar, are contracts not entirely prohibited.
The one who adheres to the contract is in reality free to reject it entirely; if he
adheres, he gives his consent. A contract limiting liability upon an agreed valuation
does not offend against the policy of the law forbidding one from contracting
against his own negligence.

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

The Court also held that Pan Am is not liable for lost profits when their contracts to
show the films in Guam and San Francisco, California were cancelled. Under
Art.1107 of the Civil Code, a debtor in good faith like the defendant herein, may be
held liable only for damages that were foreseen or might have been foreseen at the
time the contract of transportation was entered into. But before defendant could
be held to special damages, such as the present alleged loss of profits on account of
delay or failure of delivery, it must have appeared that he had notice at the time of
delivery to him of the particular circumstances attending the shipment, and which
probably would lead to such special loss if he defaulted. Or, as the rule has been
stated in another form, in order to purpose on the defaulting party further liability
than for damages naturally and directly, i.e., in the ordinary course of things, arising
from a breach of contract, such unusual or extraordinary damages must have been
brought within the contemplation of the parties as the probable result of breach at
the time of or prior to contracting. Generally, notice then of any special
circumstances which will show that the damages to be anticipated from a breach
would be enhanced has been held sufficient for this effect.

In the absence of a showing that petitioner's attention was called to the special
circumstances requiring prompt delivery of Pangan's luggages, Pan Am cannot be
held liable for the cancellation of Pangans contracts as it could not have foreseen
such an eventuality when it accepted the luggages for transit. The evidence reveals
that the proximate cause of the cancellation of the contracts was Pangan's failure
to deliver the promotional and advertising materials on the dates agreed upon. For
this, Pan Am cannot be held liable. Pangan had not declared the value of the two
luggages he had checked in and paid additional charges. Neither was petitioner
privy to Pangan's contracts nor was its attention called to the condition therein
requiring delivery of the promotional and advertising materials on or before a
certain date.

CHINA AIRLINES vs. DANIEL CHIOK


G.R. No. 152122. July 30, 2003

which ticket was endorsed to Philippine Airlines(PAL). When he arrived in Taipe, he


went to the office of China and had his HongKong-Manila ticket confirmed on which
CAL attached a yellow sticker indicating that his flight status was OK. When Chiok
was in Hong Kong, he went to the PAL office to have his ticket to manila confirmed.
The ticket was confirmed and a sticker was also attached to it indicating his flight
status. On November 24, 1981, at Hong Kong International Airport, Chiok saw a
poster indicating that the flight to Manila was cancelled due to a typhoon in Manila.
He was then informed that all ticketholders from his flight are rescheduled the next
day. At this point he informed the PAL personal that he had to be in Manila on
November 25, 1981 because he was the director of Philippine Polyester Paper
Corporation and had a business option that had to be executed on the said date.
The next day, Cathay Pacific Stewardess Lok Chan had took and received his luggage
and called the attention of PAL terminal supervisor, Carmen Chan, who informed
him that his name was not in the list of passengers and that he could not be
allowed to board the plane. During this event, he lost his Samsonate luggage
containing cosmetics worth HK$14,128,80. Chiok went to PALs office and was met
by reservation officer, Carie Chao, who was the one who confirmed his flight ticket
back to Manila. Chiok decided to use another CAL ticket and asked Chao if it could
be used to board the same flight. He was the booked for the same trip. When Chiok
went to the PAL check-in counter, he was attended by Carmen and placed his travel
documents and clutch bag on the counter. It was at this point that he lost the clutch
bag containing: (a) $2,000, (b) HK$2,000, (c) Taipei $8,000, (d) P2,000, (e) threepiece set of gold cross pens (P3,500), (f) Cartier watch (P7,500), (g) tie clip with a
garnet and diamond (P1,800), and (h) a pair of Christian Dior reading glasses.

The RTC ruled that PAL and CAL are jointly liable to the respondent for damages.
HK$14,128.80 as actual damages, US$2,000 for the loss of the clutch bag, P200,000
as moral damages, P50,000 exemplary damages, 10% of the amount due as
attorneys fee, and cost. The CA affirmed the RTCs decision debunking the claim of
PAL that it was only an agent for the ticket covering the Hong Kong Manila portion
of the journey. The negligence(Chioks name did not appear in the computerized list
of passengers) of the airlines being the proximate cause of the damages and
inconvenience, the CA affirmed the award for moral and exemplary damages.
However, the actual damages were deleted because the luggage and clutch bag was
not actually checked-in.

Facts: On September 18, 1981, Daniel Chiok purchased a passenger ticket from
China Airlines (CAL) for transportation covering Manila-Taipei-HongKong-Manila,

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Issue: Whether or not the ticket-issuing airline should be held liable for the losses
that the respondent has suffered.

Held: YES. The Supreme Court denied the petition. In ruling that the tickets,
although split into separate journeys, are considered to be one operation, the court
cited Warsaw Convention Article 1, Section 3: Transportation to be performed by
several successive air carriers shall be deemed, for the purpose 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. and Article 15 of the International Air Transport
Association(IATA)-Recommended 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. Furthermore, Members of the
IATA are under a general pool partnership agreement wherein they are agents of
each other in the issuing of tickets.

Thus when the petitioner accepted the unused portion of the conjunction tickets
and undertook to transport the respondent over the route covered by the unused
portion of the ticket, it acted as the agent of the principal contracting airline,
therefore, it is taken as part of a single operation under the contract of carriage.

the employees of PAL were negligent in placing him in his confirmed flight despite
having a ticket that contains a validation sticker indicating that the glitch was the
airlines fault. The acts of the PAL employees were clearly short of the extraordinary
diligence that is required of common carriers. By these findings, the Court found
that moral and exemplary damages are proper.

G.R. No. 101538


June 23, 1992
AUGUSTO BENEDICTO SANTOS III, represented by his father and legal guardian,
Augusto Benedicto Santos, petitioner,
vs.
NORTHWEST ORIENT AIRLINES and COURT OF APPEALS, respondents.
FACTS:
On October 21, 1986, the petitioner, a minor purchased from Northwest Orient
Arlines (NOA) a round-trip ticket in San Francisco, U.S.A., for his flight from San
Francisco to Manila via Tokyo and back. The scheduled departure date from Tokyo
was December 20, 1986. No date was specified for his return to San Francisco.
On December 19, 1986, the petitioner checked in at the NOA counter in the San
Francisco airport for his scheduled departure to Manila. Despite a previous
confirmation and re-confirmation, he was informed that he had no reservation for
his flight from Tokyo to Manila. He therefore had to be wait-listed.
On March 12, 1987, the petitioner sued NOA for damages in the Regional Trial
Court of Makati. On April 13, 1987, NOA moved to dismiss the complaint on the
ground of lack of jurisdiction pursuant to Article 28(1) of the Warsaw Convention
Art. 28. (1) An action for damage must be brought at the option of the
plaintiff, in the territory of one of the High Contracting Parties, either
before the court of the domicile of the carrier or of his principal place of
business, or where he has a place of business through which the contract
has been made, or before the court at the place of destination.

With respect to the award of moral damages, the court does not award such
damage in case of breach of contract unless it results to death (Art. 1764 NCC) or
under Article 2220 which provides willful injury to property may be legal ground
for awarding moral damages if the court should find that, under the circumstance,
such damage are justly due. The same rules applies to breaches of contracts where
the defendant acted fraudulently or in bad faith.

NOAs Contentions:

In the case at bar, the respondent has every reason to expect that he would be put
on the replacement flight after the cancellation due to the typhoon because he was
a confirmed passenger. Instead however, he was inconvenienced and prevented
from boarding the flights. Although he expressed the urgency of his trip to Manila,

1. the court of the domicile of the carrier (NOAs domicile is in the USA);
2. the court of its principal place of business (which is San Francisco, USA);
3. the court where it has a place of business through which the contract had been
made (ticket was purchased in San Francisco so thats where the contract was
made);

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

4. the court of the place of destination (Santos bought a round trip ticket which
final destination is San Francisco).
ISSUE:

As held in Compagnie Nationale Air France vs. Giliberto, The domicile of a


corporation is customarily regarded as the place where it is incorporated, and the
courts have given the meaning to the term as it is used in article 28(1) of the
Convention.

WON the Philippine courts have jurisdiction over the issue?


SC RULING:
The Court ruled in the negative. It held that the Warsaw Convention applies to all
international transportation of persons performed by aircraft for hire. Whether the
transportation is international is determined by the contract of the parties, which
in the case of passengers is the ticket. When the contract of carriage provides for
the transportation of the passenger between certain designated terminals within
the territories of two High Contracting Parties, the provisions of the Convention
automatically apply and exclusively govern the rights and liabilities of the airline
and its passenger.
Since the flight involved in the case at bar is international, the same being from the
United States to the Philippines and back to the United States, it is subject to the
provisions of the Warsaw Convention, including Article 28(1), which enumerates
the four places where an action for damages may be brought.
It also held that where the matter is governed by the Warsaw Convention,
jurisdiction takes on a dual concept. Jurisdiction in the international sense must be
established in accordance with Article 28(1) of the Warsaw Convention, following
which the jurisdiction of a particular court must be established pursuant to the
applicable domestic law. Only after the question of which court has jurisdiction is
determined will the issue of venue be taken up. This second question shall be
governed by the law of the court to which the case is submitted.

Side Notes:
JURISDICTION vs. VENUE
Venue and jurisdiction are entirely distinct matters. Jurisdiction may not be
conferred by consent or waiver upon d court which otherwise would have no
jurisdiction over the subject-matter of an action; but the venue of an action as fixed
by statute may be changed by the consent of the parties and an objection that the
plaintiff brought his suit in the wrong county may be waived by the failure of the
defendant to make a timely objection. In either case, the court may render a valid
judgment. Rules as to jurisdiction can never be left to the consent or agreement of
the parties, whether or not a prohibition exists against their alteration.

UNITED AIRLINES, petitioner, vs. WILLIE J. UY, respondent.


[G.R. No. 127768. November 19, 1999]
BELLOSILLO, J.:

Parties:
Respondent-Willie Uy is a passenger of petitioner United Airlines

AS TO THE ISSUE OF PLACE OF DESTINATION:

Petitioner- UNITED AIRLINES

The place of destination, within the meaning of the Warsaw Convention, is


determined by the terms of the contract of carriage or, specifically in this case, the
ticket between the passenger and the carrier. Examination of the petitioners ticket
shows that his ultimate destination is San Francisco. Although the date of the return
flight was left open, the contract of carriage between the parties indicates that NOA
was bound to transport the petitioner to San Francisco from Manila. Manila should
therefore be considered merely an agreed stopping place and not the destination.

Case Doctrine:
When will ones right to damages be extinguished?
The right to damages shall be extinguished if an action is not brought within two
years, reckoned from the date of arrival at the destination, or from the date on
which the aircraft ought to have arrived, or from the date on which the carriage
stopped.

AS TO THE ISSUE OF DOMICILE REQUIREMENT:

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

Despite the express mandate that an action for damages should be filed within 2
years from the arrival at the place of destination, such rule shall not be applied
where delaying tactics were employed by airline itself in a case where a passenger
wishes to settle his complaint out-of-court but the airline gave him the runaround,
answering the passengers letters but not giving in to his demands, hence, giving
the passenger no time to institute the complaint within the reglamentary period.
FACTS:
October 13, 1989 Respondent Willie Uy is a passenger of petitioner United
Airlines, bound from San Francisco to Manila. While in San Francisco, it was found
that one piece of his luggage was over the maximum weight allowance of 70 kg. per
bag. A United Airlines employee rebuked him and in a loud voice, in front of the
milling crowd, ordered him to repack his things accordingly. Wishing not to create a
scene, Willie did as asked. Unfortunately, his luggage was still overweight so the
airline billed him overweight charges. Willie offered to pay the charges with a
Miscellaneous Charge Order (MCO) or an airline pre-paid credit but the same
employee, and an airline supervisor, refused to honor it, contending that there
were discrepancies in the figures. Thus, Willie was forced to pay the charges with
his American Express credit card. Upon arrival in Manila, Willie discovered that one
of his bags had been slashed and its contents, amounting to US$5,310.00, stolen.
October 16, 1989 he sent his first letter of demand to United Airlines. The airline
did not refute Willies allegations and mailed a check representing payment of his
loss based on the maximum liability of US$9.70 per pound. Willie, thinking the
amount to be grossly inadequate to compensate him for his losses as well as for the
indignities he was subjected to, sent two more letters to petitioner airline, one
dated January 4, 1990 and the other dated October 28, 1991, demanding out-ofcourt settlement of P1,000,000.00.
June 9, 1992 Willie filed a complaint for damages before the Philippine courts. He
had two causes of action: (1) the shabby and humiliating treatment he received
from petitioners employees at the San Francisco Airport which caused him extreme
embarrassment and social humiliation; and (2) the slashing of his luggage and the
loss of personal effects amounting to US$5,310.00
ISSUES:
1.) Does the Warsaw Convention preclude the operation of the Civil Code and other
pertinent laws?
2) Has the respondents cause of action prescribed?

HELD:
1.)
No. Within our jurisdiction we have held that the Warsaw Convention can
be applied, or ignored, depending on the peculiar facts presented by each case.
Convention provisions do not regulate or exclude liabilities for other breaches of
contract by the carrier or misconduct of its officers and employees, or for some
particular or exceptional type of damage. Neither may the Convention be invoked
to justify the disregard of some extraordinary type of damage. Neither may the
Convention be invoked to justify the disregard of some extraordinary sort of
damage resulting to a passenger and preclude recovery therefore beyond the limits
by said convention. Likewise, we have held that the Convention does not preclude
the operation of the Civil Code and other pertinent laws. It does not regulate, much
less exempt, the carrier from liability for damages for violating the rights of its
passengers under the contract of carriage, especially if willful misconduct on the
part of the carriers employees is found or established.

2.)
No. While his 2nd cause of action (an action for damages arising from theft
or damage to property or goods) is well within the bounds of the Warsaw
convention, his 1st cause of action (an action for damages arising from the
misconduct of the airline employees and the violation of respondents rights as
passengers) clearly is not.

The 2-yr limitation incorporated in Art. 29 of the Warsaw Convention as an absolute


bar to suit and not to be made subject to the various tolling provisions of the laws
of the forum, forecloses the application of our own rules on interruption of
prescriptive periods. (Art. 29, par. 2 was indented only to let local laws determine
whether an action shall be deemed commenced upon the filing of a complaint.)
Since, it is indisputable that respondent filed the present action beyond the 2-yr
time frame his 2nd cause of action must be barred.

However, it is obvious that respondent was forestalled from immediately filing an


action because petitioner gave him the runaround, answering his letters but not
giving in to his demands. True, respondent should have already filed an action at
the first instance when petitioner denied his claims but the same could only be due
to his desire to make an out-of-court settlement for which he cannot be faulted.
Hence, despite the express mandate of Article 29 of the Warsaw Convention that an
action for damages should be filed within 2 years from the arrival at the place of

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

destination, such rule shall not be applied in the instant case because of the
delaying tactics employed by petitioner airlines itself. Thus, respondents 2nd cause
of action cannot be considered as time barred.

7th Batch
Transpo
Yangco v. Lasema - BULATAO
Yangco v Laserna
G.R. No. L-47447-47449, October 29, 1941
MORAN, J.:
Facts: At about one o'clock in the afternoon of May 26, 1927, the steamer S.S.
Negros, belonging to petitioner here, Teodoro R. Yangco, left the port of Romblon
on its retun trip to Manila. Typhoon signal No. 2 was then up, of which fact the
captain was duly advised and his attention thereto called by the passengers
themselves before the vessel set sail. The boat was overloaded as indicated by the
loadline which was 6 to 7 inches below the surface of the water. Baggage, trunks
and other equipments were heaped on the upper deck, the hold being packed to
capacity. In addition, the vessel carried thirty sacks of crushed marble and about
one hundred sacks of copra and some lumber. The passengers, numbering about
180, were overcrowded, the vessel's capacity being limited to only 123 passengers.
After two hours of sailing, the boat encountered strong winds and rough seas
between the islands of Banton and Simara, and as the waves splashed the ladies'
dresses, the awnings were lowered. As the sea became increasingly violent, the
captain ordered the vessel to turn left, evidently to return to port, but in the
manuever, the vessel was caught sidewise by a big wave which caused it to capsize
and sink. Many of the passengers died in the mishap. Respondents instituted in the
Court of First Instance of Capiz separate civil actions against petitioner here to
recover damages for the death of the passengers which the court awarded. After
the rendition of the judgment to this effect, petitioner, by a verified pleading,
sought to abandon the vessel to the plaintiffs in the three cases, together with all its
equipments, without prejudice to his right to appeal. RTC and CA both denied the
abandonment.
Issue: Is the shipowner or agent, notwithstanding the total loss of the vessel as a
result of the negligence of its captain, be properly held liable in damages for the
consequent death of its passengers?
Held: Yes. Under Art 587 Code of Commerce, it 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 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
This is the difference which exists between the lawful acts and lawful obligations of
the captain and the liability which he incurs on account of any unlawful act
committed by him. In the first case, the lawful acts and obligations of the captain
beneficial to the vessel may be enforced as against the agent for the reason that
such obligations arise from te the contract of agency (provided, however, that the
captain does not exceed his authority), while as to any liability incurred by the
captain through his unlawful acts, the ship agent is simply subsidiarily civilly liable.
This liability of the agent is limited to the vessel and it does not extend further.
In the light of all the foregoing, we therefore hold that if the shipowner or agent
may in any way be held civilly liable at all for injury to or death of passengers arising
from the negligence of the captain in cases of collisions or shipwrecks, his liability is
merely co-extensive with his interest in the vessel such that a total loss thereof
results in its extinction. In arriving at this conclusion, we have not been unmindful
of the fact that the ill-fated steamship Negros, as a vessel engaged in interisland
trade, is a common carrier (De Villata v. Stanely, 32 Phil., 541), and that the as a
vessel between the petitioner and the passengers who died in the mishap rests on a
contract of carriage. But assuming that petitioner is liable for a breach of contract of
carriage, the exclusively "real and hypothecary nature" of maritime law operates to
limit such liability to the value of the vessel, or to the insurance thereon, if any. In
the instant case it does not appear that the vessel was insured.
Whether the abandonment of the vessel sought by the petitioner in the instant case
was in accordance with law of not, is immaterial. The vessel having totally perished,
any act of abandonment would be an idle ceremony.
Judgement is reversed and petitioner is hereby absolved of all the complaints,
without costs.
Chua Yek Hong v. IAC DE VERA
G.R. No. 74811 September 30, 1988

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CHUA
YEK
HONG,
petitioner,
vs.
INTERMEDIATE APPELLATE COURT, MARIANO GUNO, and DOMINADOR OLIT,
respondents.
FACTS: Petitioner is a duly licensed copra dealer based at Puerta Galera, Oriental
Mindoro, while private respondents are the owners of the vessel, "M/V Luzviminda
I," a common carrier engaged in coastwise trade from the different ports of Oriental
Mindoro to the Port of Manila.
Petitioner loaded 1,000 sacks of copra, valued at P101,227.40, on board the vessel
for shipment from Puerta Galera, Oriental Mindoro, to Manila. Said cargo, however,
did not reach Manila because somewhere between Cape Santiago and Calatagan,
Batangas, the vessel capsized and sank with all its cargo.
Petitioner instituted before the CFI a Complaint for damages based on breach of
contract of carriage against private respondents.
Private Respondent's contention: Their liability had been extinguished by reason of
the total loss of said vessel.
RTC Decision: In favor plaintiff. Private respondents should pay the value of the
cargo.
CA: Reversed RTC. It applied Art. 587 of the Code of Commerce and the doctrine in
Yangco vs. Lasem. It held that private respondents' liability, as ship owners, for the
loss of the cargo is merely co-extensive with their interest in the vessel such that a
total loss thereof results in its extinction.
ISSUE: WON Art. 587 as expounded in the Yangco case should apply
HELD:
Yes.
Art. 587 of the Code of Commerce provides: "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 the
equipments and the freight it may have earned during the voyage."
The term "ship agent" as used in the foregoing provision is broad enough to include
the ship owner. Pursuant to said provision, therefore, both the ship owner and ship
agent are civilly and directly liable for the indemnities in favor of third persons,
which may arise from the conduct of the captain in the care of goods transported,

as well as for the safety of passengers transported. However, under the same
Article, this direct liability is moderated and limited by the ship agent's or ship
owner's right of abandonment of the vessel and earned freight. This expresses the
universal principle of limited liability under maritime law. The most fundamental
effect of abandonment is the cessation of the responsibility of the ship
agent/owner. It has thus been held that by necessary implication, the ship agent's
or ship owner's liability is confined to that which he is entitled as of right to
abandon the vessel with all her equipment and the freight it may have earned
during the voyage," and "to the insurance thereof if any" (Yangco vs. Lasema,
supra).
"No vessel, no liability" expresses in a nutshell the limited liability rule. The total
destruction of the vessel extinguishes maritime liens as there is no longer any res to
which it can attach.
The real and hypothecary nature of the liability of the ship owner or agent
embodied in the provisions of the Maritime Law, Book III, Code of Commerce, had
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 ship building 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, so
that if the ship owner or agent abandoned the ship, equipment, and freight, his
liability was extinguished. Without the principle of limited liability, a ship owner and
investor in maritime commerce would run the risk of being ruined by the bad faith
or negligence of his captain, and the apprehension of this would be fatal to the
interest of navigation.
The limited liability rule, however, is not without exceptions, namely: (1) where the
injury or death to a passenger is due either to the fault of the ship owner, or to the
concurring negligence of the ship owner and the captain; 2) where the vessel is
insured; and (3) in workmen's compensation claims.
In this case, there is nothing in the records to show that the loss of the cargo was
due to the fault of the private respondent as shipowners, or to their concurrent
negligence with the captain of the vessel. The ship agent's or ship owner's liability is
merely co-extensive with his interest in the vessel such that a total loss thereof
results in its extinction (Yangco vs. Laserna, supra), and none of the exceptions to
the rule on limited liability being present, the liability of private respondents for the

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loss of the cargo of copra must be deemed to have been extinguished. There is no
showing that the vessel in this case is insured.

passengers, including the relatives of the herein plaintiff, was due to force majeure
because of the strong typhoon 'Welming.' It appears that five other vessels left the
pier at Manila on the same date aside from the M/V Mindoro'.

What about the provisions of the Civil Code on common carriers?Considering the
"real and hypothecary nature" of liability under maritime law, these provisions
would not have any effect on the principle of limited liability for ship owners or ship
agents. The exclusively 'real and hypothecary nature of maritime law operates to
limit such liability to the value of the vessel, or to the insurance thereon, if any.

Trial court sustained the position of private respondent Compania Maritima. CA


affirmed such judgment. While it found that there was concurring negligence on the
part of the captain which must be imputable to Maritima, CA ruled that Maritima
cannot be held liable in damages based on the principle of limited liability of the
shipowner or ship agent under Article 587 of the Code of Commerce.

Moreover, Article 1766 of the Civil Code provides:


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.
In other words, the primary law is the Civil Code and in default thereof, the Code of
Commerce and other special laws are applied. Since the Civil Code contains no
provisions regulating liability of ship owners or agents in the event of total loss or
destruction of the vessel, it is the provisions of the Code of Commerce, more
particularly Article 587, that govern in this case.

Heirs of Amparo de los Santos v. CA - ENRIQUEZ


HEIRS OF AMPARO DE LOS SANTOS, HEIRS OF ERNANIE DELOS SANTOS, HEIRS OF
AMABELLA DELOS SANTOS, HEIRS OF LENNY DELOS SANTOS, HEIRS OF MELANY
DELOS SANTOS, HEIRS OF TERESA PAMATIAN, HEIRS OF DIEGO SALEM, AND
RUBEN REYES vs.HONORABLE COURT OF APPEALS AND COMPANIA MARITIMA
G.R. No. L-51165 June 21, 1990
FACTS: M/V 'Mindoro' sailed from Manila, on November 2,1967 at about 2:00
(should have been 6:00 p.m.) in the afternoon bound for New Washington, Aklan,
with many passengers aboard. It appears that said vessel met typhoon 'Welming'
on the Sibuyan Sea, Aklan, at about 5:00 in the morning of November 4, 1967
causing the death of many of its passengers, although about 136 survived.
It appears that in a decision of the Board of Marine Inquiry, it was found that the
captain and some officers of the crew were negligent in operating the vessel and
imposed upon them a suspension and/or revocation of their license certificates. It
appears, however, that this decision cannot be executed against the captain who
perished with the vessel.
The defendant alleges that no negligence was ever established and, in fact, the
shipowners and their officers took all the necessary precautions in operating the
vessel. Furthermore, the loss of lives as a result of the drowning of some

In this appeal, plaintiffs argue, among others, that CA erred to note, observe and
comprehend that art. 587 of the code of commerce is only for the goods which the
vessel carried and do not include persons.
ISSUES: (1) Whether or not private respondent is negligent. - YES
(2) Whether or not limited liability doctrine, under Art. 587, applies only to
goods. - NO
HELD: Under this provision, a shipowner or agent has the right of abandonment;
and by necessary implication, his liability is confined to that which he is entitled as
of right to abandon-"the vessel with all her equipments and the freight it may have
earned during the voyage. Notwithstanding the passage of the NCC, Art.587 of the
Code of Commerce is still good law. The reason lies in the peculiar nature of
maritime law which is exclusively real and hypothecary that operates to limit such
liability to the value of the vessel, or to the insurance thereon, if any. As correctly
stated by the appellate court, "(t)his rule is found necessary to offset against the
innumerable hazards and perils of a sea voyage and to encourage shipbuilding and
marine commerce. Contrary to the petitioners' supposition, the limited liability
doctrine applies not only to the goods but also in all cases like death or injury to
passengers wherein the shipowner or agent may properly be held liable for the
negligent or illicit acts of the captain. BUT, it must be stressed at this point that
Article 587 speaks only of situations where the fault or negligence is committed
solely by the captain. In cases where the shipowner is likewise to be blamed,
Article 587 does not apply . a situation will be covered by the provisions of the NCC
on Common Carriers (partirularly Articles 1733, 1755 and 1756 of NCC).
Maritima claims that it did not have any information about typhoon 'Welming' until
after the boat was already at sea. Modem technology belie such contention. The
Weather Bureau is now equipped with modern apparatus which enables it to detect
any incoming atmospheric disturbances. Considering the report and the evidence
on record showing the late departure of the ship at 6:00 p.m. (instead of the
scheduled 2:00 p.m. departure) on November 2, 1967, We find it highly improbable
that the Weather Bureau had not yet issued any typhoon bulletin at any time during
the day to the shipping companies. Significantly, the appellate court found that the

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ship's captain through his action showed prior knowledge of the typhoon. ' Also, in
allowing the ship to depart late from Manila despite the typhoon advisories,
Maritima displayed lack of foresight and minimum concern for the safety of its
passengers taking into account the surrounding circumstances of the case.
While We agree with the appellate court that the captain was negligent for
overloading the ship, We, however, rule that Maritima shares equally in his
negligence.
the appealed decision is hereby REVERSED and judgment is hereby rendered
sentencing the private respondent to pay the following: (1) P30,000.00 as
indemnity for death to the heirs of each of the victims; (2) P10,000.00 as moral
damages to the heirs of each of the victims; (3) P6,805.00 as actual damages
divided among the petitioners as follows: heirs of Amparo Delos Santos and her
deceased children, P2,000.00; heirs of Teresa Pamatian, P450.00; heirs of Diego
Salem, P400.00; and Ruben Reyes, P2,955.00; (4) P10,000.00 as attorney's fees; and
(5) the costs.

Philippines Refining Corporation v. Jarque - FERNANDEZ


Doctrine: It is essential that a record of documents affecting the title to a vessel
be entered in the record of the Collector of Customs at the port of entry.
Otherwise a mortgage on a vessel is generally like other chattel mortgages as to
its requisites and validity

Issue: Whether or not the mortgages were defective.

Held:
Yes. Vessels are considered personal property under the civil law. Similarly under
the common law, vessels are personal property although occasionally referred to as
a peculiar kind of personal property. They are subject to mortgage agreeably to the
provisions
of
the
Chattel
Mortgage
Law.
The only difference between a chattel mortgage of a vessel and a chattel mortgage
of other personalty is that it is not now necessary for a chattel mortgage of a vessel
to be noted in the registry of the register of deeds, but it is essential that a record of
documents affecting the title to a vessel be entered in the record of the Collector of
Customs at the port of entry. Otherwise a mortgage on a vessel is generally like
other
chattel
mortgages
as
to
its
requisites
and
validity.
In the case, the absence of the affidavit vitiates a mortgage as against creditors and
subsequent encumbrancers. As a consequence a chattel mortgage of a vessel
wherein the affidavit of good faith required by the Chattel Mortgage Law is lacking,
is unenforceable against third persons.
Short Glossary:
Mortgage- noun

Facts:
Philippine Refining Co., Inc., and Francisco Jarque executed three mortgages on the
motor vessels Pandan and Zaragoza. These documents were recorded in the record
of transfers and incumbrances of vessels for the port of Cebu and each was therein
denominated a "chattel mortgage". Neither of the first two mortgages had
appended an affidavit of good faith. The third mortgage contained such an affidavit,
but this mortgage was not registered in the customs house until the period of thirty
days prior to the commencement of insolvency proceedings against Francisco
Jarque.

-the charging of real (or personal) property by a debtor to a creditor as security for
a debt (especially one incurred by the purchase of the property), on the condition
that it shall be returned on payment of the debt within a certain period.

A fourth mortgage was executed by Francisco Jarque and Ramon Aboitiz on the
motorship Zaragoza and was entered in the chattel mortgage registry of the register
of deeds on within the thirty-day period before the institution of insolvency
proceedings. Francisco was declared an insolvent with the result that an assignment
of all the properties of the insolvent was executed in favor of Jose Corominas. Judge
Jose M. Hontiveros declined to order the foreclosure of the mortgages, but on the
contrary sustained the special defenses of fatal defectiveness of the mortgages.

-to convey (a property) to a creditor as security on a loan.

a deed effecting the conditions of a mortgage.


a loan obtained through the conveyance of property as security.
"I put down a hundred thousand in cash and took out a mortgage for the rest"
verb

"the estate was mortgaged up to the hilt"


expose to future risk or constraint for the sake of immediate advantage.
some people worry that selling off federal assets mortgages the country's future"

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Philippine American General Insurance v. CA - GARBO

In policies where the law will generally imply a warranty of seaworthiness,


it can only be excluded by terms in writing in the policy in the clearest
language. And where the policy stipulates that the seaworthiness of the
vessel as between the assured and the assurer is admitted, the question of
seaworthiness cannot be raised by the assurer without showing
concealment or misrepresentation by the assured.

THE PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY, INC., petitioner,


vs. COURT OF APPEALS and FELMAN SHIPPING LINES, respondents.
G.R. No. 116940 June 11, 1997
BELLOSILLO, J.

Payment by the assurer to the assured operates as an equitable


assignment to the assurer of all the remedies which the assured may have
against the third party whose negligence or wrongful act caused the loss.
The right of subrogation is not dependent upon, nor does it grow out of
any privity of contract or upon payment by the insurance company of the
insurance claim. It accrues simply upon payment by the insurance
company of the insurance claim. (Pan Malayan Insurance Corporation v.
Court of Appeals)

DOCTRINE
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 shipowner's liability,
does not apply to cases where the injury or average was occasioned by the
shipowner's 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.
In every marine insurance upon a ship or freight, or freightage, or upon
anything which is the subject of marine insurance, a warranty is implied
that the ship is seaworthy. (Sec. 113, Insurance Code) It is generally held
that in every marine insurance policy the assured impliedly warrants to the
assurer that the vessel is seaworthy and such warranty is as much a term
of the contract as if expressly written on the face of the policy.
A ship is "seaworthy when reasonably fit to perform the service, and to
encounter the ordinary perils of the voyage, contemplated by the parties
to the policy." (Sec. 114, Insurance Code)

The legal basis for subrogation is under Art. 2207 of the Civil Code: If the
plaintiff's property has been insured, and he has received indemnity from
the insurance company for the injury or loss arising out of the wrong or
breach of contract complained of, the insurance company shall be
subrogated to the rights of the insured against the wrongdoer or the
person who has violated the contract. If the amount paid by the insurance
company does not fully cover the injury or loss, the aggrieved party shall
be entitled to recover the deficiency from the person causing the loss or
injury.

FACTS
On 6 July 1983 Coca-Cola Bottlers Philippines, Inc. (Coca-Cola Bottlers),
loaded on board "MV Asilda," a vessel owned and operated by respondent Felman
Shipping Lines (FELMAN for brevity), 7,500 cases of 1-liter Coca-Cola softdrink
bottles to be transported from Zamboanga City to Cebu City for consignee CocaCola Bottlers Philippines, Inc., Cebu. The shipment was insured with petitioner

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Philippine American General Insurance Co., Inc. (PHILAMGEN for brevity.


"MV Asilda" left the port of Zamboanga in fine weather at 8 p.m. of the
same day. The ship captain stated that around 4 a.m. of 7 July 1983 he was
awakened by the officer on duty to inform him that the vessel had hit a floating log.
At that time he noticed that the weather had deteriorated with strong southeast
winds inducing big waves. At 4:30 a.m., he observed that the vessel was listing
slightly to starboard and would not correct itself despite the heavy rolling and
pitching. He then ordered his crew to shift the cargo from starboard to portside
until the vessel was balanced. At about 7 a.m., the master of the vessel stopped the
engine because the vessel was listing dangerously to portside. He ordered his crew
to shift the cargo back to starboard (right). The shifting of cargo took about an hour
afterwhich he rang the engine room to resume full speed.
At around 8:45 a.m., the vessel suddenly listed to portside (left) and before
the captain could decide on his next move, some of the cargo on deck were thrown
overboard and seawater entered the engine room and cargo holds of the vessel. At
that instance, the master of the vessel ordered his crew to abandon ship. Shortly
thereafter, "MV Asilda" capsized and sank in the waters of Zamboanga del Norte
bringing down her entire cargo with her including the subject 7,500 cases of 1-liter
Coca-Cola softdrink bottles. He ascribed the sinking to the entry of seawater
through a hole in the hull caused by the vessel's collision with a partially submerged
log.
On 15 July 1983 the consignee Coca-Cola Bottlers Philippines, Inc., Cebu
plant, filed a claim with respondent FELMAN for recovery of damages it sustained as
a result of the loss of its softdrink bottles that sank with "MV Asilda." Respondent
denied the claim thus prompting the consignee to file an insurance claim with
PHILAMGEN which paid its claim of P755,250.00.
Claiming its right of subrogation PHILAMGEN sought recourse against
respondent FELMAN which disclaimed any liability for the loss. Consequently, on 29
November 1983 PHILAMGEN sued the shipowner for sum of money and damages.

PHILAMGEN contended that the total loss of cargo was due to the vessels
unseaworthiness as she was put to sea in an unstable condition. FELMAN, on the
other hand, contended that there was no right of subrogation in favor of
PHILAMGEN since it had abandoned all its rights, interests and ownership over the

vessel together with her freight and appurtenances for the purpose of limiting and
extinguishing its liability under Art. 587 of the Code of Commerce.

The RTC dismissed PHILAMGENs complaint and appealed to the CA which


remanded the case and denied its motion for reconsideration. The RTC then ruled
that the vessel was seaworthy. Even assuming it was unseaworthy, PHILAMGEN
could not still recover from FELMAN since Coca-Cola Bottlers had breached its
implied warranty on the vessels seaworthiness. On appeal, the CA ruled that the
vessel was unseaworthy for being top-heavy as 2,500 cases of Coca-Cola softdrink
bottles were improperly stowed on deck. Even though the vessel possessed the
necessary Coast Guard certification indicating its seaworthiness with respect to the
structure of the ship itself, it was not seaworthy with respect to the cargo. Therfore,
it denied the money claim of PHILAMGEN because of the implied breach of
warranty of seaworthiness by Coca-Cola Bottlers. Further, the filing of notice of
abandonment had absolved FELMAN from liability under the limited liability rule.

ISSUES

1.
2.
3.

WON MV Asilda was seaworthy when it left the port of Zamboanga.


WON the limited liability under Art. 587 of the Code of Commerce should
apply.
WON PHILAMGEN was properly subrogated to the rights and legal actions
which the shipper had against FELMAN.

HELD
1.

NO. "MV Asilda" was unseaworthy when it left the port of Zamboanga. In a
joint statement, the captain as well as the chief mate of the vessel
confirmed that the weather was fine when they left the port of
Zamboanga. According to them, the vessel was carrying 7,500 cases of 1liter Coca-Cola softdrink bottles, 300 sacks of seaweeds, 200 empty CO2
cylinders and an undetermined quantity of empty boxes for fresh eggs.
They loaded the empty boxes for eggs and about 500 cases of Coca-Cola

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

bottles on deck. Moreover, the report by The Elite Adjusters, Inc. noted
that the vessel was top-heavy which is to say that while the vessel may
not have been overloaded, yet the distribution or stowage of the cargo on
board was done in such a manner that the vessel was in top-heavy
condition at the time of her departure and which condition rendered her
unstable and unseaworthy for that particular voyage.

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 shipowner's liability,
does not apply to cases where the injury or average was occasioned by the
shipowner's 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.

More importantly, the vessel was designed as a fishing vessel and


it was not designed to carry a substantial amount or quantity of cargo on
deck. Therefore, the weight of the deck cargo so decreased the vessel's
metacentric height as to cause it to become unstable.
It is settled that carrying a deck cargo raises the presumption of
unseaworthiness unless it can be shown that the deck cargo will not
interfere with the proper management of the ship. However, in this case it
was established that "MV Asilda" was not designed to carry substantial
amount of cargo on deck. The inordinate loading of cargo deck resulted in
the decrease of the vessel's metacentric height thus making it unstable.
The strong winds and waves encountered by the vessel are but the
ordinary vicissitudes of a sea voyage and as such merely contributed to its
already unstable and unseaworthy condition. Therefore, the proximate
cause of the sinking of the M/V "Asilda" was her condition of
unseaworthiness arising from her having been top-heavy when she
departed from the Port of Zamboanga. Her having capsized and eventually
sunk was bound to happen and was therefore in the category of an
inevitable occurrence.
It is noted that ships are precisely designed to be able to navigate
safely even during heavy weather and have successfully weathering
encounters with typhoons. Although they may sustain some amount of
damage, the sinking of ship during heavy weather is not a frequent
occurrence and is not likely to occur unless they are inherently unstable
and unseaworthy.
2.

NO. Art. 587 of the Code of Commerce is not applicable to the case at bar.
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

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 . . ." In the event of loss of goods, common
carriers are presumed to have acted negligently. FELMAN, the shipowner,
was not able to rebut this presumption.
3.

YES. It is generally held that in every marine insurance policy the assured
impliedly warrants to the assurer that the vessel is seaworthy and such
warranty is as much a term of the contract as if expressly written on the
face of the policy. Thus Sec. 113 of the Insurance Code provides that "(i)n
every marine insurance upon a ship or freight, or freightage, or upon
anything which is the subject of marine insurance, a warranty is implied
that the ship is seaworthy1." Thus it becomes the obligation of the cargo
owner to look for a reliable common carrier which keeps its vessels in
seaworthy condition. He may have no control over the vessel but he has
full control in the selection of the common carrier that will transport his
goods. He also has full discretion in the choice of assurer that will
underwrite a particular venture. When respondent appellate court found
"MV Asilda" unseaworthy with reference to the cargo and therefore ruled

1 A ship is "seaworthy when reasonably fit to perform the service, and to encounter the ordinary
perils of the voyage, contemplated by the parties to the policy." (Sec. 114, Insurance Code)

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

that there was breach of warranty of seaworthiness that rendered the


assured not entitled to the payment of is claim under the policy. Hence,
when PHILAMGEN paid the claim of the bottling firm there was in effect a
"voluntary payment" and no right of subrogation accrued in its favor. In
other words, when PHILAMGEN paid it did so at its own risk.

In policies where the law will generally imply a warranty of


seaworthiness, it can only be excluded by terms in writing in the policy in
the clearest language. And where the policy stipulates that the
seaworthiness of the vessel as between the assured and the assurer is
admitted, the question of seaworthiness cannot be raised by the assurer
without showing concealment or misrepresentation by the assured.
The marine policy issued by PHILAMGEN to the Coca-Cola bottling
firm in at least two (2) instances has dispensed with the usual warranty of
worthiness. Paragraph 15 of the Marine Open Policy No. 100367-PAG
reads "(t)he liberties as per Contract of Affreightment the presence of the
Negligence Clause and/or Latent Defect Clause in the Bill of Lading and/or
Charter Party and/or Contract of Affreightment as between the Assured
and the Company shall not prejudice the insurance. The seaworthiness of
the vessel as between the Assured and the Assurers is hereby admitted."
The insertion of such waiver clauses in cargo policies is in
recognition of the realistic fact that cargo owners cannot control the state
of the vessel. Thus it can be said that with such categorical waiver,
PHILAMGEN has accepted the risk of unseaworthiness so that if the ship
should sink by unseaworthiness, as what occurred in this case, PHILAMGEN
is liable.
However, right of subrogation is not dependent upon, nor does it
grow out of any privity of contract or upon payment by the insurance
company of the insurance claim. It accrues simply upon payment by the
insurance company of the insurance claim. The doctrine of subrogation has
its roots in equity. It is designed to promote and to accomplish justice and
is the mode which equity adopts to compel the ultimate payment of a debt
by one who in justice, equity and good conscience ought to pay. Therefore,
the payment made by PHILAMGEN to Coca-Cola Bottlers Philippines, Inc.,

gave the former the right to bring an action as subrogee against FELMAN.
Having failed to rebut the presumption of fault, the liability of FELMAN for
the loss of the 7,500 cases of 1-liter Coca-Cola softdrink bottles is
inevitable.

WHEREFORE, the petition is GRANTED. Respondent FELMAN SHIPPING LINES is


ordered to pay petitioner PHILIPPINE AMERICAN GENERAL INSURANCE CO., INC.,
Seven Hundred Fifty-five Thousand Two Hundred and Fifty Pesos (P755,250.00) plus
legal interest thereon counted from 29 November 1983, the date of judicial
demand, pursuant to Arts. 2212 and 2213 of the Civil Code. 20
SO ORDERED.

Sweet Lines v. CA - HABIJAN


SWEET LINES, INC., petitioner, vs. THE HONORABLE COURT OF APPEALS, MICAELA
B. QUINTOS, FR. JOSE BACATAN, S.J., MARCIANO CABRAS and ANDREA VELOSO,
respondents.
G.R. No. L-46340 April 28, 1983

MELENCIO-HERRERA, J.:

FACTS: For having by-passed a port of call without previous notice, petitioner
shipping company and the ship captain were sued for damages by four of its
passengers, private respondents herein, before the then Court of First Instance of
Cebu, Branch VIII.
Briefly, the facts of record show that private respondents purchased first- class
tickets from petitioner at the latter's office in Cebu City. They were to board
petitioner's vessel, M/V Sweet Grace, bound for Catbalogan, Western Samar.
Instead of departing at the scheduled hour of about midnight on July 8, 1972, the
vessel set sail at 3:00 A.M. of July 9, 1972 only to be towed back to Cebu due to
engine trouble, arriving there at about 4:00 P.M. on the same day. Repairs having
been accomplished, the vessel lifted anchor again on July 10, 1972 at around 8:00
A.M.
Instead of docking at Catbalogan, which was the first port of call, the vessel
proceeded direct to Tacloban at around 9:00 P.M. of July 10, 1972. Private
respondents had no recourse but to disembark and board a ferryboat to
Catbalogan.

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Hence, this suit for damages for breach of contract of carriage which the Trial Court,
affirmed by respondent Appellate Court.
ISSUE: Whether or not Sweet Lines is liable for damages.
Held: YES.
The governing provisions are found in the Code of Commerce and read as follows:
ART. 614. A captain who, having agreed to make a voyage, fails to fulfill his
undertaking, without being prevented by fortuitous event or force majeure, shall
indemnify all the losses which his failure may cause, without prejudice to criminal
penalties which may be proper.
and
ART. 698. In case of interruption of a voyage already begun, the passengers shall
only be obliged to pay the fare in proportion to the distance covered, without right
to recover damages if the interruption is due to fortuitous event or force majeure,
but with a right to indemnity, if the interruption should have been caused by the
captain exclusively. If the interruption should be caused by the disability of the
vessel, and the passenger should agree to wait for her repairs, he may not be
required to pay any increased fare of passage, but his living expenses during the
delay shall be for his own account.
The crucial factor then is the existence of a fortuitous event or force majeure.
Without it, the right to damages and indemnity exists against a captain who fails to
fulfill his undertaking or where the interruption has been caused by the captain
exclusively.
As found by both Courts below, there was no fortuitous event or force majeure
which prevented the vessel from fulfilling its undertaking of taking private
respondents to Catbalogan. In the first place, mechanical defects in the carrier are
not considered a caso fortuito that exempts the carrier from responsibility. In the
second place, even granting arguendo that the engine failure was a fortuitous
event, it accounted only for the delay in departure. When the vessel finally left the
port of Cebu on July 10, 1972, there was no longer any force majeure that justified
by-passing a port of call. The vessel was completely repaired the following day after
it was towed back to Cebu. In fact, after docking at Tacloban City, it left the next day
for Manila to complete its voyage.
The reason for by-passing the port of Catbalogan, as admitted by petitioner's
General Manager, was to enable the vessel to catch up with its schedule for the

next week. The record also discloses that there were 50 passengers for Tacloban
compared to 20 passengers for Catbalogan, so that the Catbalogan phase could be
scrapped without too much loss for the company.
In defense, petitioner cannot rely on the conditions in small bold print at the back
of the ticket reading.
The passenger's acceptance of this ticket shall be considered as an
acceptance of the following conditions:
3.
In case the vessel cannot continue or complete the trip for any
cause whatsoever, the carrier reserves the right to bring the passenger to
his/her destination at the expense of the carrier or to cancel the ticket and
refund the passenger the value of his/her ticket;
xxx

xxx

xxx

11.
The sailing schedule of the vessel for which this ticket was issued is
subject to change without previous notice. (Exhibit "l -A")
Even assuming that those conditions are squarely applicable to the case at bar,
petitioner did not comply with the same. It did not cancel the ticket nor did it
refund the value of the tickets to private respondents. Besides, it was not the
vessel's sailing schedule that was involved. Private respondents' complaint is
directed not at the delayed departure the next day but at the by- passing of
Catbalogan, their destination. Had petitioner notified them previously, and offered
to bring them to their destination at its expense, or refunded the value of the
tickets purchased, perhaps, this controversy would not have arisen.
Furthermore, the conditions relied upon by petitioner cannot prevail over Articles
614 and 698 of the Code of Commerce heretofore quoted.
NOTE (if damages and issue): WON liable for Moral Damages. YES.
Under Article 2220 of the Civil Code, moral damages are justly due in breaches of
contract where the defendant acted fraudulently or in bad faith. Both the Trial
Court and the Appellate Court found that there was bad faith on the part of
petitioner in that:
(1)
Defendants- Appellants did not give notice to plaintiffs-appellates as to the
change of scheduled of the vessel;
(2)
Knowing fully well that it would take no less than fifteen hours to effect
the repairs of the damaged engine, defendants- appellants instead made announce

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

ment of assurance that the vessel would leave within a short period of time, and
when plaintiff-appellees wanted to leave the port and gave up the trip, defendantsappellants employees would come and say, we are leaving already.
(3)
Defendants- appellants did not offer to refund plaintiffs-appellees tickets
nor provide them with transportation form Tacloban to Catbalogan.

That the finding of bad faith is binding on us, since it is not the function of
the court to analyze and review evidence on this point all over again, aside from the
fact that we find it faithful to the meaning of bad faith enunciated thus:
Bad faith means a breach of a known duty through some motive or
interest or ill will. Self enrichment or fraternal interest, and not personal ill will, may
have been the motive, but it is malice nevertheless.
Under the circumstances, however, we find the award of moral damages excessive
and accordingly reduce them from P75,000.00 to P3,000.00 respectively for each of
the private respondents. Judgment MODIFIED .
Insofar as exemplary damages are concerned, although there was bad faith, we are
not inclined to grant them in addition to moral damages. The objective to meet its
schedule might have been called for, but petitioner should have taken the
necessary steps for the protection of its passengers under its contract of carriage.
Article 2215(2) of the Civil Code invoked by petitioner is inapplicable herein. The
harm done to private respondents outweighs any benefits they may have derived
from being transported to Tacloban instead of being taken to Catbalogan, their
destination and the vessel's first port of call, pursuant to its normal schedule.

Firemans Fund Insurance Co. v. Metro Port Services - LACANDALO


FIREMAN'S FUND INSURANCE CO. VS METRO PORT SERVICE, INC.
FACTS:
Vulcan Industrial and Mining Corporation (VIMC) imported from the US several
machineries and equipment. They were loaded on the vessel S/S Maersk Tempo on
its route from Philadelphia to Manila. The bill of lading issued by Maersk Line and
Compania General de Tabacos de Filipinas indicated the following cargo: 1 piece
truck mounted core drill, 1 piece trailer mounted core drill, 1 (40') container of 321
pieces steel tubings, 1 (40') container of 170 pieces steel tubings, and 1 (40')

container of 13 cases, 3 crates, 2 pallets and 26 mining machinery parts. The


shipment arrived at the port of Manila on June 3, 1979 and was turned over
complete and in good order to the arrastre operator Metro Port (formerly E. Razon
Inc.). At about 10:20 in the morning of June 8, 1979, a tractor operator named
Danilo Librando (employee of the arrastre) was ordered to transfer the shipment to
the equipment yard at Pier 3. While Librando was maneuvering the tractor (owned
and provided by Maersk), the cargo fell from the chassis and hit one of the
container vans of American President Lines. It was discovered that there was no
twist lock at the rear end of the chassis where the cargo was loaded. The
machineries were heavily damaged and was deemed no longer useful for their
purposes. The value of the damage was estimated at P187,500, which was paid by
the Fireman's Fund Insurance to VIMC. Fireman then filed a suit against Maersk
Line, Compania General de Tabacos (as agent) and Metro Port. The trial court ruled
in favor of Fireman, ordering them to pay the value of the damage, solidarily. The
defendants appealed the decision but Maersk and Compania dropped out by
negotiating with petitioner. As to the appeal of Metro Port, judgement was
rendered in their favor by dismissing the complaint. MR was denied.

ISSUE:
WON Metro Port (arrastre) can be exonerated from liability, contrary to the findings
of the trial court where defendants were held jointly liable in solidum

HELD: NO.
In absolving the ARRASTRE, the respondent Court ruled that although Librando was
an employee of the ARRASTRE, since he was included in its payroll, he was
technically and strictly an employee of Maersk Line in this particular instance when
he drove the tractor admittedly owned by the foreign shipping line. The Court ruled
that he received instructions not from Metro Port but from Maersk Line relative to
this job. He was performing a duty that properly pertained to Maersk Line which,
for lack of a tractor operator, had to get or hire from the ARRASTRE as per their
management contract. Nevertheless, Librando was not remiss in his duty as tractordriver considering that the proximate and direct cause of the damage was the
absence of twist locks in the rear end of the chassis which Maersk Line failed to
provide. The respondent court thereby placed the entire burden of liability on the

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

owner of the Chassis which in this case was the foreign shipping company, Maersk
Line.

The foregoing conclusion disregarded the pertinent findings of facts made by the
lower court which are supported by the evidence on record, to wit:
1.
The accident occurred while the cargoes were in the custody of the
arrastre operator.
2.

The tractor operator was an employee of the arrastre operator.

4.
By the management contract inasmuch as the foreign shipping company
has no tractor operator in its employ, the arrastre provided the operator.
8.
It was likewise the responsibility of the tractor operator, an employee of
the arrastre operator to inspect the chassis and tractor before driving the same, but
which obligation the operator failed to do.
9.
It was also the responsibility of the supervisor in the employ of the arrastre
operator to see that their men complied with their respective tasks, which included
the examination if the chassis has twist lock.
The legal relationship between the consignee and the arrastre operator is akin to
that of a depositor and warehouseman. The relationship between the consignee
and the common carrier is similar to that of the consignee and the arrastre
operator. Since it is the duty of the ARRASTRE to take good care of the goods that
are in its custody and to deliver them in good condition to the consignee, such
responsibility also devolves upon the CARRIER. Both the ARRASTRE and the CARRIER
are therefore charged with and obligated to deliver the goods in good condition to
the consignee.
In general, the nature of the work of an arrastre operator covers the handling of
cargoes at piers and wharves.
In this particular instance, the records reveal that Maersk Line provided the chassis
and the tractor which carried the carried the subject shipment. It merely requested
the ARRASTRE to dispatch a tractor operator to drive the tractor inasmuch as the
foreign shipping line did not have any truck operator in its employ. Such
arrangement is allowed between the ARRASTRE and the CARRIER pursuant to the
Management Contract. It was clearly one of the services offered by the ARRASTRE.
We agree with the petitioner that it is the ARRASTRE which had the sole discretion

and prerogative to hire and assign Librando to operate the tractor. It was also the
ARRASTRE's sole decision to detail and deploy Librando for the particular task from
among its pool of tractor operators or drivers. It is, therefore, inacurrate to state
that Librando should be considered an employee of Maersk Line on that specific
occasion.
ICTSI v. Prudential - MAGDAMO
G.R. No. 134514 December 8, 1999
INTERNATIONAL
CONTAINER
TERMINAL
SERVICES,
INC.,
vs.
PRUDENTIAL GUARANTEE & ASSURANCE CO., INC., respondent.

petitioner,

Doctrine:
When cargo is placed on a vessel at the "shipper's load and count," the arrastre
operator is required only to deliver to the consignee the container van received
from the shipper, not to verify or to compare the contents thereof with those
declared by the shipper. A claim for reimbursement for the loss, damage or
misdelivery of goods must be filed within 15 days from the date the consignee
learns of such problem(s).
Facts:
On April 25, 1990, mother vessel "Tao He" loaded and received on board in San
Francisco, California, a shipment of five (5) lots of canned foodstuff for transport to
Manila in favor of Duel Food Enterprises ("consignee"). China Ocean Shipping
Company issued the corresponding bill of lading therefor.
Consignee insured the shipment with Prudential Guarantee and Assurance, Inc.
("Prudential")
On May 30, 1990, the shipment arrived at the Port of Manila and discharged by
vessel MS "Wei He" in favor of International Container Terminal Services, Inc.
("ICTSI") for safekeeping.
On June 1, 1990, A. D. Reyna Customs Brokerage ("defendant brokerage") withdrew
the shipment and delivered the same to the consignee. An inspection thereof
revealed that 161 cartons were missing.
Claim for indemnification of the loss having been denied by [ICTSI] and the
brokerage, consignee sought payment from [Prudential], which paid it. As subrogee,

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

[Prudential] instituted the instant complaint against said defendants [ICTSI and
brokerage].
Traversing the complaint, [ICTSI] counters that it observed extraordinary diligence
over the subject shipment while under its custody; that the loss is not attributable
to its fault or its agent, representative or employee; that consignee failed to file a
formal claim against it in accordance with PPA Administrative Order No. 10-81; and
that the complaint states no cause of action.

To discharge this burden, petitioner presented five Arrastre and Wharfage


Bill/Receipts, which also doubled as container yard gate passes, covering the whole
shipment in question. The short-landed shipment was covered by the gate pass. The
latter bore the signature of a representative of the consignee, acknowledging
receipt of the shipment in good order and condition. Thus, we see no reason to
dispute the finding of the trial court that "the evidence adduced by the parties will
show that the consignee received the container vans . . . in good condition.

The court a quo rendered a decision dismissing the complaint against defendant
brokerage for lack of evidence.

By its signature on the gate pass and by its failure to protest on time, the consignee
is deemed to have acknowledged receipt of the goods in good order and condition.

The RTC rendered a Decision dismissing Prudential's Complaint against ICTSI.


Reconsideration was denied.

More important, the cosigned goods were shipped under "Shipper's Load and
Count." This means that the shipper was solely responsible for the loading of the
container, while the carrier was oblivious to the contents of the
shipment. Protection against pilferage of the shipment was the consignee's lookout.
The arrastre operator was, like any ordinary depositary, duty-bound to take good
care of the goods received from the vessel and to turn the same over to the party
entitled to their possession, subject to such qualifications as may have validly been
imposed in the contract between the parties. The arrastre operator was not
required to verify the contents of the container received and to compare them with
those declared by the shipper because, as earlier stated, the cargo was at the
shipper's load and count. The arrastre operator was expected to deliver to the
consignee only the container received from the carrier.

The CA reversed and set aside the ruling of the RTC, ordering ICTSI to pay
Prudential. It ruled that ICTSI was negligent in its duty to exercise due diligence over
the shipment. It concluded that the shortage was due to pilferage of the shipment
while the sea vans were stored at the container yard of ICTSI. It also ruled that the
filing of a claim depended on the issuance of a certificate of loss by ICTSI based on
the liability clause printed on the back of the arrastre and wharfage receipt. Since
ICTSI did not issue such a certificate despite being informed of the shortage, the 15day period given to the consignee for filing a formal claim never began.
Reconsideration was denied.
Issues:
Whether
or
not
petitioner
is
negligent
Whether or not the complaint was filed within the period stated on the dorsal side
of the arrastre and wharfage receipt
Ruling:
The petitioner is not negligent. The legal relationship between an arrastre operator
and a consignee is akin to that between a warehouseman and a depositor. As to
both the nature of the functions and the place of their performance, an arrastre
operator's services are clearly not maritime in character.
In a claim for loss filed by a consignee, the burden of proof to show compliance with
the obligation to deliver the goods to the appropriate party devolves upon the
arrastre operator. Since the safekeeping of the goods rests within its knowledge, it
must prove that the losses were not due to its negligence or that of its employees.

The appellate court misconstrued the liability clause printed on the dorsal side of
the Arrastre and Wharfage Bill/Receipt. The contentious provision of this document
reads:
"Liability Clause"
The duly authorized representative of herein named CONSIGNEE, and ICTSI hereby
certify to the correctness of the description of the containerized cargo covered by
this CY GATEPASS, the issuance of which constitutes delivery to and receipt by
Consignee of the containerized cargo as described in this CY GATEPASS, in good
order and condition, unless otherwise indicated. This CY GATEPASS is subject to all
terms and conditions defined in the Existing Management Contract between the
PPA & ICTSI[;] PPA Administrative Order No. 10-81, ICTSI shall, however, be liable to
the extent of the local invoice value of each package but not to exceed P3,500
Philippine currency for imported cargoes and P1,000 for domestic cargoes
(consistent with Administrative Order 10-81 unless revised), unless the value

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

thereof is otherwise specified or manifested or communicated in writing together


with the invoice value and supported by a certified packing list to ICTSI by any
interested party/ies before the discharge of the cargo and corresponding port
charges ha[ve] been fully paid. This provision shall only apply upon filing of a formal
claim within 15 days from the date of issuance of the Bad Order Certificate or
certificate of loss, damage or non-delivery by ICTSI.

liability for the nondelivery of the goods. More specifically, the failure to file a
provisional claim bars a subsequent action in court. The rationale behind the time
limit is that, without it, a consignee could too easily concoct or fabricate claims and
deprive the arrastre operator of the best opportunity to probe immediately their
veracity.

In order to hold the arrastre operator liable for lost or damaged goods, the claimant
should file with the operator a claim for the value of said goods "within fifteen (15)
days from the date of discharge of the last package from the carrying vessel . . . ."
The filing of the claim for loss within the 15-day period is in the nature of a
prescriptive period for bringing an action and is a condition precedent to holding
the arrastre operator liable. This requirement is a defense made available to the
arrastre operator, who may use or waive it as a matter of personal discretion.

Far Eastern Shipping v. Court of Appeals - ONG

The said requirement is not an empty formality. It gives the arrastre contractor a
reasonable opportunity to check the validity of the claim, while the facts are still
fresh in the minds of the persons who took part in the transaction, and while the
pertinent documents are still available. Such period is sufficient for the consignee to
file a provisional claim after the discharge of the goods from the vessel. For this
reason, we believe that the 15-day limit is reasonable.
In the case at bar, the consignee had all the time to make a formal claim from the
day it discovered the shortage in the shipment, which was June 4, 1990, as shown
by the records. According to the independent adjuster, the stripping or opening of
the sea vans containing the shipped canned goods was made at the consignee's
place upon receipt of the shipment. After discovering the loss, the consignee asked
the adjuster to investigate the reason for the short-landing of the shipment. By the
time the claim for loss was filed on October 2, 1990, four months had already
elapsed from the date of delivery, June 4, 1990.
Prudential did not explain the delay. It did not even allege or prove that the
discovery of the shortage was made by the consignee only 15-days before October
2, 1990. The latter had to wait for the independent adjuster's survey report dated
September 7, 1990, before filing the claim with the former. By that time, however,
it was clearly too late, as the 15-day period had expired.
In any event, within 15 days from the time the loss was discovered, the consignee
could have filed a provisional claim, which would have constituted substantial
compliance with the rule. Its failure to do so relieved the arrastre operator of any

G.R. No. 130068 October 1, 1998


FAR
EASTERN
SHIPPING
COMPANY, petitioner,
vs.
COURT OF APPEALS and PHILIPPINE PORTS AUTHORITY, respondents.
G.R. No. 130150 October, 1998
MANILA
PILOTS
ASSOCIATION, petitioner,
vs.
PHILIPPINE
PORTS
AUTHORITY
and
FAR
EASTERN
SHIPPING
COMPANY, respondents.

Facts: When the vessel reached the landmark (the big church by the Tondo North
Harbor) one-half mile from the pier, Gavino ordered the engine stopped. When the
vessel was already about 2,000 feet from the pier, Gavino ordered the anchor
dropped. Kavankov relayed the orders to the crew of the vessel on the bow. The left
anchor, with two (2) shackles were dropped. However, the anchor did not take hold
as expected. The speed of the vessel did not slacken. A commotion ensued between
the crew members.
After Gavino noticed that the anchor did not take hold, he ordered the
engines half-astern. Abellana, who was then on the pier apron, noticed that the
vessel was approaching the pier fast. Kavankov likewise noticed that the anchor did
not take hold. Gavino thereafter gave the full-astern code. Before the right
anchor and additional shackles could be dropped, the bow of the vessel rammed
into the apron of the pier causing considerable damage to the pier. The vessel
sustained damage too.
Issue: Whether the compulsory pilot or the master is liable for the damage caused
Held: YES.
Where a compulsory pilot is in charge of a ship, the master being required to
permit him to navigate it, if the master observes that the pilot is incompetent or
physically incapable, then it is the duty of the master to refuse to permit the pilot to
act. But if no such reasons are present, then the master is justified in relying upon
the pilot, but not blindly. Under the circumstances of this case, if a situation arose

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

where the master, exercising that reasonable vigilance which the master of a ship
should exercise, observed, or should have observed, that the pilot was so navigating
the vessel that she was going, or was likely to go, into danger, and there was in the
exercise of reasonable care and vigilance an opportunity for the master to intervene
so as to save the ship from danger, the master should have acted accordingly. The
master of a vessel must exercise a degree of vigilance commensurate with the
circumstances.
In general, a pilot is personally liable for damages caused by his own
negligence or default to the owners of the vessel, and to third parties for damages
sustained in a collision. Such negligence of the pilot in the performance of duty
constitutes a maritime tort. At common law, a shipowner is not liable for injuries
inflicted exclusively by the negligence of a pilot accepted by a vessel compulsorily.
The exemption from liability for such negligence shall apply if the pilot is actually in
charge and solely in fault. Since, a pilot is responsible only for his own personal
negligence, he cannot be held accountable for damages proximately caused by the
default of others, or, if there be anything which concurred with the fault of the pilot
in producing the accident, the vessel master and owners are liable.
The pilot in the case at bar having deviated from the usual and ordinary
course followed by navigators in passing through the strait in question, without a
substantial reason, was guilty of negligence, and that negligence having been the
proximate cause of the damages, he is liable for such damages as usually and
naturally flow therefrom.
As a general rule, negligence in order to render a person liable need not be
the sole cause of an injury. It is sufficient that his negligence, concurring with one or
more efficient causes other than plaintiffs, is the proximate cause of the injury.
Accordingly, where several causes combine to produce injuries, a person is not
relieved from liability because he is responsible for only one of them, it being
sufficient that the negligence of the person charged with injury is an efficient cause
without which the injury would not have resulted to as great an extent, and that
such cause is not attributable to the person injured.
Litonjua Shipping Co. v. NSB - PEDROZO
Litonjua Shipping Co. v. National Seamen Board and Gregorio Candongo
FACTS:
Petitioner Litonjua is the duly appointed local crewing Managing Office of
the Fairwind Shipping Corporation ('Fairwind). The M/V Dufton Bay is an oceangoing vessel of foreign registry owned by the R.D. Mullion Ship Broking Agency Ltd.
("Mullion"). On 11 September 1976, while the Dufton Bay was in the port of Cebu
and while under charter by Fairwind, the vessel's master contracted the services of,
among others, private respondent Gregorio Candongo to serve as Third Engineer
for a period of 12 months. This agreement was executed before the Cebu Area

Manning Unit of the NSB. Thereafter, private respondent boarded the vessel.
Before expiration of his contract, private respondent was required to disembark at
Port Kelang, Malaysia, and was returned to the Philippines on 5 January 1977. The
cause of the discharge was described in his Seaman's Book as 'by owner's arrange".
Shortly after returning to the Philippines, private respondent filed a complaint
before public respondent NSB, for violation of contract, against Mullion as the
shipping company and petitioner Litonjua as agent of the shipowner and of the
charterer of the vessel. At the initial hearing, Litonjua was represented by one of its
supercargos, Edmond Cruz who asked, that the hearing be postponed for a month
upon the ground that the employee of Litonjua in charge of the case was out of
town. The hearing officer of the NSB rendered a judgment by default.
Petitioner Litonjua contends 1. That the shipowner, not the charterer, was the
employer of private respondent; 2. That liability for damages cannot be imposed
upon petitioner which was a mere agent of the charterer. 3. It is insisted that
private respondent's contract of employment and affidavit of undertaking clearly
showed that the party with whom he had contracted was none other than Mullion,
the shipowner. 4. That its supercargos merely assisted Captain Ho King Yiu of the
Dufton Bay in being private respondent as Third Engineer. 5. That the discharge and
the repatriation of private respondent was specified in his Seaman's Book as having
been "by owner's arrange.
ISSUE: Whether or not the charterer Fairwind was properly regarded as the
employer of private respondent Candongo.
HELD:
NO. There are two grounds upon which petitioner Litonjua may be held
liable to the private respondent on the contract of employment:
1. The charter party which existed between Mullion, the shipowner, and
Fairwind, the charterer. 3 types of charter parties:
a. The "bareboat" or "demise" charter;
The shipowner turns over possession of his vessel to the
charterer, who then undertakes to provide a crew and victuals
and supplies and fuel for her during the term of the charter. The
shipowner is not normally required by the terms of a demise
charter to provide a crew, and so the charterer gets the "bare
boat", i.e., without a crew. The master and crew provided by the
shipowner become the agents and servants or employees of the
charterer, and the charterer (and not the owner) through the
agency of the master, has possession and control of the vessel
during the charter period.
b. The "time" charter;
It is a contract for the use of a vessel for a specified period of time
or for the duration of one or more specified voyages. The owner

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

of a time-chartered vessel (unlike the owner of a vessel under a


demise or bare-boat charter), retains possession and control
through the master and crew who remain his employees. What
the time charterer acquires is the right to utilize the carrying
capacity and facilities of the vessel and to designate her
destinations during the term of the charter
c. The "voyage" or "trip" charter
It is a contract of affreightment, that is, a contract for the carriage
of goods, from one or more ports of loading to one or more ports
of unloading, on one or on a series of voyages. In a voyage
charter, master and crew remain in the employ of the owner of
the vessel.
It is important to note that petitioner Litonjua did not place into the record
of this case a copy of the charter party covering the M/V Dufton Bay. We
must assume that petitioner Litonjua was aware of the nature of a
bareboat or demise charter and that if petitioner did not see fit to include
in the record a copy of the charter party, which had been entered into by
its principal, it was because the charter party and the provisions thereof
were not supportive of the position adopted by petitioner Litonjua.
2.

Fairwind, clearly benefitted from the employment of private respondent as


Third Engineer of the Dufton Bay, along with the ten (10) other Filipino
crewmembers recruited by Captain Ho in Cebu at the same occasion.
If private respondent had not agreed to serve as such Third Engineer, the
ship would not have been able to proceed with its voyage.
The equitable consequence of this benefit to the charterer is, moreover,
reinforced by convergence of other circumstances of which the Court must
take account.
The scope of authority or the responsibility of petitioner Litonjua was not
clearly delimited.

wages of crew members constitute a maritime lien upon the vessel, private
respondent is in no position to enforce that lien.
We conclude that private respondent was properly regarded as an
employee of the charterer Fairwind and that petitioner Litonjua may be
held to answer to private respondent for the latter's claims as the agent in
the Philippines of Fairwind.

Planters Products v. CA - TAMONDONG


Planters Products Inc. v. CA
Facts:
Planters Products (Planters) purchased from Mitsubishi International Corporation of
USA of 9,000 metric tons of urea fertilizer which the latter shipped aboard the cargo
vessel owned by private respondent Kyosei Kisin Kabushiki Kaisha (KKKK) from
America to La Union. Prior to its voyage, a time charter party was entered into
between Mitusbishi as shipper/charterer and KKKK as ship-owner. After the Urea
fertilizer was loaded in bulk by stevedores hired by the shipper, the steel hatches
were closed with heavy iron lids which remained closed during the entire journey.
Upon arrival of the vessel, the hatches were opened with the use of the vessel
boom. Planters unloaded the cargo from the holders into the steel bodied dump
trucks. Each time the dump trucks were filled up, its load of urea was covered with
tarpaulin before it was transported to the consignees warehouse located some (50)
fifty meters from the wharf. It took (11) eleven days from planters to unload the
cargo. The report submitted by private marine and cargo surveyors revealed a

Ruling
There is no question that petitioner Litonjua did assist the Master of the
vessel in locating and recruiting private respondent as Third Engineer of
the vessel as well as ten (10) other Filipino seamen as crew members.
In so doing, petitioner Litonjua certainly in effect represented that it was
taking care of the crewing and other requirements of a vessel chartered by
its principal, Fairwind.
If petitioner Litonjua, as Philippine agent of the charterer, is not held liable
to private respondent upon the contract of employment. Clearly, the
private respondent, and the other Filipino crew members of the vessel,
would be defenseless against a breach of their respective contracts. While

shortage in the cargo, and some portion in the cargo was contaminated with dirt,
rendering the same unfit for commerce.
PPI filed an action for damages with the CFI Manila. The defendant carrier argued
that the strict public policy governing common carriers does not apply to them
because they have become private carriers by reason of the provisions of the
charter-party. The court a quo however sustained the claim of the plaintiff against
the defendant carrier for the value of the goods lost or damaged.

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On appeal, respondent Court of Appeals reversed the lower court and absolved the

the charter is limited to the ship only, as in the case of a time-charter or voyage-

carrier from liability for the value of the cargo that was lost or damaged. Relying on

charter. It is only when the charter includes both the vessel and its crew, as in a

the 1968 case of Home Insurance Co.v. American Steamship Agencies, Inc., the

bareboat or demise that a common carrier becomes private, at least insofar as the

appellate court ruled that the cargo vessel M/V Sun Plum owned by private

particular voyage covering the charter-party is concerned. Indubitably, a shipowner

respondent KKKK was a private carrier and not a common carrier by reason of the

in a time or voyage charter retains possession and control of the ship, although her

time charterer-party and that the Civil Code provisions on common carriers which

holds may, for the moment, be the property of the charterer.

set forth a presumption of negligence do not find application in the case at bar.
2. Respondent is a common carrier. The term common carrier is defined in Article
Issues:

1732 of the Civil Code. The definition refers to carriers either by land, water, or air

1. Whether a common carrier becomes a private carrier by reason of a charter-

which holds themselves out as ready to engage in carrying goods on transporting

party.

passengers or both for compensation as a public employment and not as a casual

2.

Whether

or

not

the

respondent

is

common

carrier.

occupation; if the undertaking is a single transaction, not a part of the general

3. Whether or not the respondent is liable for damages.

business or corporation, although involving the carriage of goods for a fee, then the

Held:

person or corporation offering such services is a private carrier. In the case at bar

1. The distinction between a common or public carrier and a private or special

respondent carrier transports goods indiscriminately for all persons. Being such, he

carrier lies in the character of the business, such that if the undertaking is a single

is a common carrier.

transaction, not a part of the general business or occupation, although involving the
carriage of goods for a fee, the person or corporation offering such service is a

3. The court ruled in the negative. While respondent is a common carrier, he has

private carrier.

sufficiently overcome by clear and convincing proof the prima facie presumption of

It is not disputed that respondent carrier, in the ordinary course of business,

negligence, due to the manner of storage of the goods during the voyage. The

operates as a common carrier, transporting goods indiscriminately for all persons.

presumption of negligence on the part of the respondent carrier has been

When petitioner chartered the vessel M/V Sun Plum, the ship captain, its officers

efficaciously overcome by the showing of extraordinary zeal and assiduity exercised

and compliment were under the employ of the shipowner and therefore continued

by the carrier in the care of the cargo.

to be under its direct supervision and control. Hardly then can we charge the
charterer, a stranger to the crew and to the ship, with the duty of caring for his

Article 1734 of the New Civil Code provides that common carriers are not

cargo when the charterer did not have any control of the means in doing so. This is

responsible for the loss, destruction or deterioration of the goods if caused by the

evident in the present case considering that the steering of the ship, the manning of

charterer of the goods or defects in the packaging or in the containers. The Code of

the decks, the determination of the course of the voyage and other technical

Commerce also provides that all losses and deterioration which the goods may

incidents of maritime navigation were all consigned to the officers and crew who

suffer during the transportation by reason of fortuitous event, force majeure, or the

were screened, chosen and hired by the shipowner.

inherent defect of the goods, shall be for the account and risk of the shipper, and
that proof of these accidents is incumbent upon the carrier.

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

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

Caltex v. Sulpicio Lines - TUQUERO


[G.R. No. 131166. September 30, 1999]
CALTEX (PHILIPPINES), INC. vs. SULPICIO LINES, INC., GO SIOC SO, ENRIQUE S. GO,
EUSEBIO S. GO, CARLOS S. GO, VICTORIANO S. GO, DOMINADOR S. GO, RICARDO S.
GO, EDWARD S. GO, ARTURO S. GO, EDGAR S. GO, EDMUND S. GO, FRANCISCO
SORIANO, VECTOR SHIPPING CORPORATION, TERESITA G. CAEZAL AND SOTERA E.
CAEZAL
PARDO, J.:
Facts: On December 19, 1987, motor tanker MT Vector left Limay, Bataan, at about
8:00 p.m., enroute to Masbate, loaded with 8,800 barrels of petroleum products
shipped by petitioner Caltex. MT Vector is a tramping motor tanker owned and
operated by Vector Shipping Corporation, engaged in the business of transporting
fuel products such as gasoline, kerosene, diesel and crude oil. During that particular
voyage, the MT Vector carried on board gasoline and other oil products owned by
Caltex by virtue of a charter contract between them.
On December 20, 1987, at about 6:30 a.m., the passenger ship MV Doa Paz left the
port of Tacloban headed for Manila with a complement of 59 crew members
including the master and his officers, and passengers totaling 1,493 as indicated in
the Coast Guard Clearance. The MV Doa Paz is a passenger and cargo vessel
owned and operated by Sulpicio Lines, Inc. plying the route of Manila/ Tacloban/
Catbalogan/ Manila/ Catbalogan/ Tacloban/ Manila, making trips twice a week.
At about 10:30 p.m. of December 20, 1987, the two vessels collided in the open sea
within the vicinity of Dumali Point between Marinduque and Oriental Mindoro. All
the crewmembers of MV Doa Paz died, while the two survivors from MT Vector
claimed that they were sleeping at the time of the incident.
The MV Doa Paz carried an estimated 4,000 passengers; many indeed, were not in
the passenger manifest. Only 24 survived the tragedy after having been rescued
from the burning waters by vessels that responded to distress calls. Among those
who perished were public school teacher Sebastian Caezal (47 years old) and his
daughter Corazon Caezal (11 years old), both unmanifested passengers but proved
to be on board the vessel.
On March 22, 1988, the board of marine inquiry in BMI Case No. 653-87 after
investigation found that the MT Vector, its registered operator Francisco Soriano,
and its owner and actual operator Vector Shipping Corporation, were at fault and
responsible for its collision with MV Doa Paz.

On February 13, 1989, Teresita Caezal and Sotera E. Caezal, Sebastian Caezals
wife and mother respectively, filed with the Regional Trial Court, Branch 8, Manila,
a complaint for Damages Arising from Breach of Contract of Carriage against
Sulpicio Lines, Inc. (hereafter Sulpicio). Sulpicio, in turn, filed a third party
complaint against Francisco Soriano, Vector Shipping Corporation and Caltex
(Philippines), Inc. Sulpicio alleged that Caltex chartered MT Vector with gross and
evident bad faith knowing fully well that MT Vector was improperly manned, illequipped, unseaworthy and a hazard to safe navigation; as a result, it rammed
against MV Doa Paz in the open sea setting MT Vectors highly flammable cargo
ablaze. The trial court dismissed the third party complaint against petitioner. On
appeal, the CA modified the trial courts ruling and included petitioner Caltex as one
of those liable for damages. Hence, this petition.
Issue: Whether Caltex is liable for damages under the Civil Code?
Held: No.
First: The charterer has no liability for damages under Philippine Maritime laws.
The respective rights and duties of a shipper and the carrier depends not on
whether the carrier is public or private, but on whether the contract of carriage is a
bill of lading or equivalent shipping documents on the one hand, or a charter party
or similar contract on the other.
Petitioner and Vector entered into a contract of affreightment, also known as a
voyage charter.
A charter party is a contract by which an entire ship, or some principal part thereof,
is let by the owner to another person for a specified time or use; a contract of
affreightment is one by which the owner of a ship or other vessel lets the whole or
part of her to a merchant or other person for the conveyance of goods, on a
particular voyage, in consideration of the payment of freight.
A contract of affreightment may be either time charter, wherein the leased vessel is
leased to the charterer for a fixed period of time, or voyage charter, wherein the
ship is leased for a single voyage. In both cases, the charter-party provides for the
hire of the vessel only, either for a determinate period of time or for a single or
consecutive voyage, the ship owner to supply the ships store, pay for the wages of
the master of the crew, and defray the expenses for the maintenance of the ship.
Under a demise or bareboat charter on the other hand, the charterer mans the
vessel with his own people and becomes, in effect, the owner for the voyage or
service stipulated, subject to liability for damages caused by negligence.
If the charter is a contract of affreightment, which leaves the general owner in
possession of the ship as owner for the voyage, the rights and the responsibilities of

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

ownership rest on the owner. The charterer is free from liability to third persons in
respect of the ship.
Second : MT Vector is a common carrier
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.
Under the Carriage of Goods by Sea Act :
Sec. 3. (1) The carrier shall be bound before and at the beginning of the voyage to
exercise due diligence to (a) Make the ship seaworthy;
(b) Properly man, equip, and supply the ship;
Thus, the carriers are deemed to warrant impliedly the seaworthiness of the ship.
For a vessel to be seaworthy, it must be adequately equipped for the voyage and
manned with a sufficient number of competent officers and crew. The failure of a
common carrier to maintain in seaworthy condition the vessel involved in its
contract of carriage is a clear breach of its duty prescribed in Article 1755 of the
Civil Code.
Third: Is Caltex liable for damages under the Civil Code?
No. The charterer of a vessel has no obligation before transporting its cargo to
ensure that the vessel it chartered complied with all legal requirements. The duty
rests upon the common carrier simply for being engaged in public service. The
Civil Code demands diligence which is required by the nature of the obligation and
that which corresponds with the circumstances of the persons, the time and the
place. Hence, considering the nature of the obligation between Caltex and MT
Vector, the liability as found by the Court of Appeals is without basis.
The relationship between the parties in this case is governed by special laws.
Because of the implied warranty of seaworthiness, shippers of goods, when
transacting with common carriers, are not expected to inquire into the vessels
seaworthiness, genuineness of its licenses and compliance with all maritime laws.
To demand more from shippers and hold them liable in case of failure exhibits
nothing but the futility of our maritime laws insofar as the protection of the public
in general is concerned. By the same token, we cannot expect passengers to
inquire every time they board a common carrier, whether the carrier possesses the
necessary papers or that all the carriers employees are qualified.
Such a practice would be an absurdity in a business where time is always of the
essence. Considering the nature of transportation business, passengers and
shippers alike customarily presume that common carriers possess all the legal
requisites in its operation.

Thus, the nature of the obligation of Caltex demands ordinary diligence like any
other shipper in shipping his cargoes.

8th Batch
CHAPTER 13
G.R. No. L-8325 March 10, 1914
C. B. WILLIAMS vs. TEODORO R. YANGCO
CARSON, J.:
FACTS: The steamer Subic, owned by Yangco collided with the lunch Euclid owned
by Williams, in the Bay of Manila at an early hour on the morning of January 9,
1911, and the Euclid sank five minutes thereafter. This action was brought to
recover the value of the Euclid.
The trial court held from the evidence submitted that the Euclid was worth at a fair
valuation P10,000; that both vessels were responsible for the collision; and that the
loss should be divided equally between the respective owners, P5,000 to be paid
the plaintiff by the defendant, and P5,000 to be borne by the plaintiff himself. From
this judgment both appealed.
There is proven, therefore, the negligence of which the patron of the Euclid has
been guilty. If the negligence by which the patron of the launch Euclid has
contributed to the cause of the accident and to the resulting damages is patent,
none the less so is the negligence of the patron of the steamer Subic, Hilarion
Millonario by name, as may be seen from his own testimony which is here copied
for the better appreciation thereof.
It will be seen that the trial judge was of opinion that the vessels were jointly liable
for the loss resulting from the sinking of the launch. But actions for damages
resulting from maritime collisions are governed in this jurisdiction by the provisions
of section 3, title 4, Book III of the Code of Commerce, and among these provisions
we find the following:
ART. 827. If both vessels may be blamed for the collision, each one shall be liable
for its own damages, and both shall be jointly responsible for the loss and damages
suffered by their cargoes.
Counsel for the plaintiff, basing his contention upon the theory of the facts as
contended for by him, insisted that under he doctrine of "the last clear chance," the
defendant should be held liable because, as he insists, even if the officers on board

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

the plaintiff's launch were negligence in failing to exhibit proper lights and in failing
to take the proper steps to keep out of the path of the defendant's vessel,
nevertheless the officers on defendant's vessel, by the exercise of due precautions
might have avoided the collision by a very simple manuever. But it is sufficient
answer to this contention to point out that the rule of liability in this jurisdiction for
maritime accidents such as that now under consideration is clearly, definitely, and
unequivocally laid down in the above-cited article 827 of the Code of Commerce;
and under that rule, the evidence disclosing that both vessels were blameworthy,
the owners of either can successfully maintain an action against the other for the
loss or injury of his vessel.
ISSUE: Whether or not the doctrine of last clear chance is applicable?
HELD: NO. In cases of a disaster arising from the mutual negligence of two parties,
the party who has a last clear opportunity of avoiding the accident, notwithstanding
the negligence of his opponent, is considered wholly responsible for it under the
common-law rule of liability as applied in the courts of common law of the United
States. But this rule (which is not recognized in the courts of admiralty in the United
States, wherein the loss is divided in cases of mutual and concurring negligence, as
also where the error of one vessel has exposed her to danger of collision which was
consummated by he further rule, that where the previous application by the further
rule, that where the previous act of negligence of one vessel has created a position
of danger, the other vessel is not necessarily liable for the mere failure to recognize
the perilous situation; and it is only when in fact it does discover it in time to avoid
the casualty by the use of ordinary care, that it becomes liable for the failure to
make use of this last clear opportunity to avoid the accident.
So, under the English rule which conforms very nearly to the common-law rule as
applied in the American courts, it has been held that the fault of the first vessel in
failing to exhibit proper lights or to take the proper side of the channel will relieve
from liability one who negligently runs into such vessels before he sees it; although
it will not be a defense to one who, having timely warning of the danger of collision,
fails to use proper care to avoid it.
In the case at bar, the most that can be said in support of plaintiff's contention is
that there was negligence on the part of the officers on defendant's vessel in failing
to recognize the perilous situation created by the negligence of those in charge of
plaintiff's launch, and that had they recognized it in time, they might have avoided
the accident. But since it does not appear from the evidence that they did, in fact,
discover the perilous situation of the launch in time to avoid the accident by the

exercise of ordinary care, it is very clear that under the above set out limitation to
the rule, the plaintiff cannot escape the legal consequences of the contributory
negligence of his launch, even were we to hold that the doctrine is applicable in the
jurisdiction, upon which point we expressly reserve our decision at this time.

SMITH BELL AND COMPANY (PHILIPPINES), INC. and TOKYO MARINE AND FIRE
INSURANCE CO., INC. vs. THE COURT OF APPEALS and CARLOS A. GO THONG AND
CO - BERNABE
FACTS:
In the early morning of 3 May 1970at exactly 0350 hours, on the approaches to
the port of Manila near Caballo Island, a collision took place between the M/V "Don
Carlos," an inter-island vessel owned and operated by private respondent Carlos A.
Go Thong and Company ("Go Thong"), and the M/S "YotaiMaru," a merchant vessel
of Japanese registry. The "Don Carlos" was then sailing south bound leaving the
port of Manila for Cebu, while the "YotaiMaru" was approaching the port of Manila,
coming in from Kobe, Japan. The bow of the "Don Carlos" rammed the portside (left
side) of the "YotaiMaru" inflicting a three (3) cm. gaping hole on her portside near
Hatch No. 3, through which seawater rushed in and flooded that hatch and her
bottom tanks, damaging all the cargo stowed therein.
The consignees of the damaged cargo got paid by their insurance companies. The
insurance companies in turn, having been subrogated to the interests of the
consignees of the damaged cargo, commenced actions against private respondent
Go Thong for damages sustained by the various shipments in the then Court of First
Instance of Manila.
Two civil cases (1st civil case = Fernandez; 2nd civil case = Cuevas) were filed against
Go Thong, and in both cases, the Manila Court of First Instance held that the
officers and crew of the "Don Carlos" had been negligent that such negligence was
the proximate cause of the collision and accordingly held respondent Go Thong
liable for damages to the plaintiff insurance companies.In the first civil case,
(Fernandez) the CA through Reyes, L.B.,J affirmed the decision of the CFI which was
later on affirmed by the SC.Two years later, the CA through Sison, reversed the
ruling of the CFI on the second case(Cuevas) and held that YotaiMaru was at fault.
Hence, this petition.
ISSUE:

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

WON the CA ruling on the second case (Cuevas) to the effect that YotaiMaru was
negligent was erroneous?
SC RULING:
The Court ruled in the affirmative. It held that the CFIs ruling on the case at bar
(Cuevas ruling) still stands, that M/V Don Carlos was negligent. The Court believes
that there are three (3) principal factors which are constitutive of negligence on the
part of the "Don Carlos," which negligence was the proximate cause of the collision.
The first of these factors was the failure of the "Don Carlos" to comply with the
requirements of Rule 18 (a) of the International Rules of the Road:
(a) When two power-driven vessels are meeting end on, or nearly end
on, so as to involve risk of collision, each shall alter her course to
starboard, so that each may pass on the port side of the other.xxxx
For her part, the "YotaiMaru" did comply with its obligations under Rule 18
(a). As the "YotaiMaru" found herself on an "end-on" or a "nearly end-on"
situation vis-a-vis the "Don Carlos, " and as the distance between them
was rapidly shrinking, the "YotaiMaru" turned starboard (to its right) and
at the same time gave the required signal consisting of one short horn
blast. The "Don Carlos" turned to portside (to its left), instead of turning to
starboard as demanded by Rule 18 (a). The "Don Carlos" also violated Rule
28 (c) for it failed to give the required signal of two (2) short horn blasts
meaning "I am altering my course to port
The second circumstance constitutive of negligence on the part of the "Don Carlos"
was its failure to have on board that night a "proper look-out" as required by Rule I
(B) Under Rule 29 of the same set of Rules, all consequences arising from the failure
of the "Don Carlos" to keep a "proper look-out" must be borne by the "Don Carlos."
NOTE:
A "proper look-out" is one who has been trained as such and who is given
no other duty save to act as a look-out and who is stationed where he can
see and hear best and maintain good communication with the officer in
charge of the vessel, and who must, of course, be vigilant.
The third factor constitutive of negligence on the part of the "Don Carlos" relates to
the fact that Second Mate Benito German was, immediately before and during the
collision, in command of the "Don Carlos."

The fact that second mate German was allowed to be in command of "Don Carlos"
and not the chief or the sailing mate in the absence of Captain Rivera, gives rise to
no other conclusion except that said vessel [had] no chief mate.Second Mate
German simply did not have the level of experience, judgment and skill essential for
recognizing and coping with the risk of collision

G.R. No. L-49407 August 19, 1988


NATIONAL DEVELOPMENT COMPANY, petitioner-appellant, vs.THE COURT OF
APPEALS and DEVELOPMENT INSURANCE & SURETY CORPORATION, respondentsappellees.
No. L-49469 August 19, 1988
MARITIME COMPANY OF THE PHILIPPINES, petitioner-appellant, vs. THE COURT
OF APPEALS and DEVELOPMENT INSURANCE & SURETY CORPORATION,
respondents- appellees.
FACTS:
In accordance with a memorandum agreement entered into between defendants
NDC and MCP, defendant NDC as the first preferred mortgagee of three ocean
going vessels including one with the name 'Dona Nati' appointed defendant MCP as
its agent to manage and operate said vessel for and in its behalf and account. Thus,
the E. Philipp Corporation of New York loaded on board the vessel "Dona Nati" at
San Francisco, California, a total of 1,200 bales of American raw cotton consigned to
the order of Manila Banking Corporation, Manila and the People's Bank and Trust
Company acting for and in behalf of the Pan Asiatic Commercial Company, Inc., who
represents Riverside Mills Corporation. Also loaded on the same vessel at Tokyo,
Japan, were the cargo of Kyokuto Boekui, Kaisa, Ltd., consigned to the order of
Manila Banking Corporation consisting of 200 cartons of sodium lauryl sulfate and
10 cases of aluminum foil. En route to Manila the vessel Dofia Nati figured in a
collision at 6:04 a.m. at Ise Bay, Japan with a Japanese vessel 'SS Yasushima Maru'
as a result of which 550 bales of aforesaid cargo of American raw cotton were lost
and/or destroyed, of which 535 bales as damaged were landed and sold on the
authority of the General Average Surveyor and 15 bales were not landed and
deemed lost .
The damaged and lost cargoes was worth P344,977.86 which amount, the plaintiff
as insurer, paid to the Riverside Mills Corporation as holder of the negotiable bills of
lading duly endorsed.

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

Also considered totally lost were the aforesaid shipment of Kyokuto, Boekui Kaisa
Ltd., consigned to the order of Manila Banking Corporation, Manila, acting for
Guilcon, Manila, The total loss was P19,938.00 which the plaintiff as insurer paid to
Guilcon as holder of the duly endorsed bill of lading. Thus, the plaintiff had paid as
insurer the total amount of P364,915.86 to the consignees or their successors-ininterest, for the said lost or damaged cargoes. Hence, plaintiff filed this complaint
to recover said amount from the defendants-NDC and MCP as owner and ship agent
respectively, of the said 'Dofia Nati' vessel.
The Development Insurance and Surety Corporation filed before the then Court of
First Instance of Manila an action for the recovery of the sum of P364,915.86 plus
attorney's fees of P10,000.00 against NDC and MCP.
RTC: Ordered the defendants MCP and NDC to pay jointly and solidarity to DISC the
sum of P364,915.86 plus the legal rate of interest to be computed from the filing of
the complaint on April 22, 1965, until fully paid and attorney's fees of P10,000.00.
CA: Affirmed in toto.
(The main thrust of NDC's argument is to the effect that the Carriage of Goods by
Sea Act should apply to the case at bar and not the Civil Code or the Code of
Commerce. Under Section 4 (2) of said Act, the carrier is not responsible for the loss
or damage resulting from the "act, neglect or default of the master, mariner, pilot
or the servants of the carrier in the navigation or in the management of the ship."
Thus, NDC insists that based on the findings of the trial court which were adopted
by the Court of Appeals, both pilots of the colliding vessels were at fault and
negligent, NDC would have been relieved of liability under the Carriage of Goods by
Sea Act. Instead, Article 287 of the Code of Commerce was applied and both NDC
and MCP were ordered to reimburse the insurance company for the amount the
latter paid to the consignee as earlier stated.)
(MCP contends that it can not be liable solidarity with NDC because it is merely the
manager and operator of the vessel Dona Nati not a ship agent. As the general
managing agent, according to MCP, it can only be liable if it acted in excess of its
authority.)
ISSUE:
1.WON the COGSA or the Civil Code/Code of Commerce should apply in this case
2. WON MCP can be held solidarily with NDC
HELD:
1.Civil Code/Code of Commerce.

This issue has already been laid to rest by this Court of Eastern Shipping Lines Inc. v.
IAC where it was held under similar circumstance "that the law of the country to
which the goods are to be transported governs the liability of the common carrier in
case of their loss, destruction or deterioration" (Article 1753, Civil Code). Thus, the
rule was specifically laid down that for cargoes transported from Japan to the
Philippines, the liability of the carrier is governed primarily by the Civil Code and in
all matters not regulated by said Code, the rights and obligations of common carrier
shall be governed by the Code of commerce and by laws (Article 1766, Civil Code).
Hence, the Carriage of Goods by Sea Act, a special law, is merely suppletory to the
provision of the Civil Code.
In the case at bar, it has been established that the goods in question are
transported from San Francisco, California and Tokyo, Japan to the Philippines and
that they were lost or due to a collision which was found to have been caused by
the negligence or fault of both captains of the colliding vessels. Under the above
ruling, it is evident that the laws of the Philippines will apply, and it is immaterial
that the collision actually occurred in foreign waters, such as Ise Bay, Japan.
It appears, however, that collision falls among matters not specifically regulated by
the Civil Code, so that no reversible error can be found in respondent courses
application to the case at bar of Articles 826 to 839, Book Three of the Code of
Commerce, which deal exclusively with collision of vessels.
More specifically, Article 826 of the Code of Commerce provides that where
collision is imputable to the personnel of a vessel, the owner of the vessel at fault,
shall indemnify the losses and damages incurred after an expert appraisal. But more
in point to the instant case is Article 827 of the same Code, which provides that if
the collision is imputable to both vessels, each one shall suffer its own damages and
both shall be solidarily responsible for the losses and damages suffered by their
cargoes.
Significantly, under the provisions of the Code of Commerce, particularly Articles
826 to 839, the shipowner or carrier, is not exempt from liability for damages
arising from collision due to the fault or negligence of the captain. Primary liability is
imposed on the shipowner or carrier in recognition of the universally accepted
doctrine that the shipmaster or captain is merely the representative of the owner
who has the actual or constructive control over the conduct of the voyage (
There is, therefore, no room for NDC's interpretation that the Code of Commerce
should apply only to domestic trade and not to foreign trade. Aside from the fact
that the Carriage of Goods by Sea Act does not specifically provide for the subject of

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collision, said Act in no uncertain terms, restricts its application "to all contracts for
the carriage of goods by sea to and from Philippine ports in foreign trade." Under
Section I thereof, it is explicitly provided that "nothing in this Act shall be construed
as repealing any existing provision of the Code of Commerce which is now in force,
or as limiting its application." By such incorporation, it is obvious that said law not
only recognizes the existence of the Code of Commerce, but more importantly does
not repeal nor limit its application.
2. Yes. It is well settled that both the owner and agent of the offending vessel are
liable for the damage done where both are impleaded; that in case of collision, both
the owner and the agent are civilly responsible for the acts of the captain; that
while it is true that the liability of the naviero in the sense of charterer or agent, is
not expressly provided in Article 826 of the Code of Commerce, it is clearly
deducible from the general doctrine of jurisprudence under the Civil Code but more
specially as regards contractual obligations in Article 586 of the Code of Commerce.
Moreover, the Court held that both the owner and agent (Naviero) should be
declared jointly and severally liable, since the obligation which is the subject of the
action had its origin in a tortious act and did not arise from contract. Consequently,
the agent, even though he may not be the owner of the vessel, is liable to the
shippers and owners of the cargo transported by it, for losses and damages
occasioned to such cargo, without prejudice, however, to his rights against the
owner of the ship, to the extent of the value of the vessel, its equipment, and the
freight.
MCP's claim that the fault or negligence can only be attributed to the pilot of the
vessel SS Yasushima Maru and not to the Japanese Coast pilot navigating the vessel
Dona Nati need not be discussed lengthily as said claim is not only at variance with
NDC's posture, but also contrary to the factual findings of the trial court affirmed no
less by the Court of Appeals, that both pilots were at fault for not changing their
excessive speed despite the thick fog obstructing their visibility.

DOCTRINE

Rule 18. (a) When two power-driven vessels are meeting end on, or nearly
end on, so as to involve risk of collision, each shall alter her course to
starboard, so that each may pass on the port side of the other. This Rule
only applies to cases where vessels are meeting end on or nearly end on, in
such a manner as to involve risk of collision, and does not apply to two
vessels which must, if both keep on their respective course, pass clear of
each other. The only cases to which it does apply are when each of two
vessels is end on, or nearly end on, to the other; in other words, to cases in
which, by day, each vessel sees the masts of the other in a line or nearly in
a line with her own; and by night to cases in which each vessel is in such a
position as to see both the sidelights of the other. It does not apply, by
day, to cases in which a vessel sees another ahead crossing her own
course; or by right, to cases where the red light of one vessel is opposed to
the red light of the other or where the green light of one vessel is opposed
to the green light of the other or where a red light without a green light or
a green light without a red light is seen ahead, or where both green and
red lights are seen anywhere but ahead.
(b) For the purposes of this Rule and Rules 19 to 29 inclusive,
except Rule 20
(c) and Rule 28, a seaplane on the water shall be deemed to be a
vessel, and the expression 'power-driven vessel' shall be construed
accordingly." (Philippine Merchant Marine Rules and Regulations
[published by the Philippine Coast Guard]).

JOSE P. MECENAS, ROMEO P. MECENAS, LILIA P. MECENAS, ORLANDO P.


MECENAS, VIOLETA M. ACERVO, LUZVIMINDA P. MECENAS; and OFELIA M.
JAVIER, petitioners, vs. HON. COURT OF APPEALS, CAPT. ROGER SANTISTEBAN
and NEGROS NAVIGATION CO., INC., respondents.

Rule 19. When two-power driven vessels are crossing, so as to involve risk
of collision, the vessel which has the other on her own starboard side shall
keep out of the way of their hand.

G.R. No. 88052 December 14, 1989

Rule 22. Every vessel which is directed by these Rules to keep out of the
way of another vessel shall, so far as possible, take positive early action to

FELICIANO, J.

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

comply with this obligation, and shall, if the circumstances of the case
admit, avoid crossing ahead of the other.

Rule 27. In obeying and construing these Rules, due regard shall be had to
all dangers of navigation and collision, and to any special circumstances,
including the limitations of the craft involved, which may render a
departure from the above Rules necessary in order to avoid immediate
danger."
Rule 29. Nothing in these Rules shall exonerate any vessel, or the owner,
master or crew thereof, from the consequences of any neglect to carry
rights or signals, or of any neglect to keep a proper look-out, or of the
neglect of any precaution which may be required by the ordinary practice
of seamen, or by the special circumstances of the case." (Italics supplied)
shortly before the moment of collision, signalled its intention to do so by
giving two (2) short blasts with its horn. The "Don Juan" gave no answering
horn blast to signal its own intention and proceeded to turn hard to
starboard.
FACTS

At 6:20 o'clock in the morning of 22 April 1980


M/T "Tacloban City," a barge-type oil tanker of Philippine registry, with a gross
tonnage of 1,241,68 tons, owned by the Philippine National Oil Company (PNOC)
and operated by the PNOC Shipping and Transport Corporation (PNOC Shipping),
having unloaded its cargo of petroleum products, left Amlan, Negros Occidental,
and headed towards Bataan. At about 1:00 o'clock in the afternoon of that same
day, the M/V "Don Juan," an interisland vessel, also of Philippine registry, of
2,391.31 tons gross weight, owned and operated by the Negros Navigation Co., Inc.
(Negros Navigation) left Manila bound for Bacolod with 750 passengers listed in its
manifest, and a complete set of officers and crew members.
However, the Certificate of Inspection, as per the Philippine Coast Guard
report, shows that Don Juan only allowed a total of 810 passengers or 864
persons. The 750 passengers excluded the 126 crew members, children below 3 y/o
and 2 half-paying passengers which had been counted as one adult passenger.
Thus, the total number of persons on board was 1,004 or 140 persons more than
the maximum number that could be safely carried by Don Juan. Further, in its
manifest for its final voyage, 128 passengers on board had not even been entered
into the Don Juans manifest. Its Certificate of Inspection also showed that she
carried life boat and life raft accommodations for only 864 persons, the maximum
number of persons she was permitted to carry.
On the evening of that same day, 22 April 1980, at about 10:30 o'clock

Philippine National Oil Company (PNOC)

- owner of cargo

Shipping and Transport Corporation (PNOC Shipping) - common carrier


M/T Tacloban City
PNOC

cargo

vessel

Negros Navigation Co., Inc. (Negros Navigation)

- common carrier

M/T Don Juan


Negros

- passenger vessel of

(Petitioners Herein)
victims of the sunken

relatives

of

of

the

"Tacloban City" and the "Don Juan" collided at the Talbas Strait near
Maestra de Ocampo Island in the vicinity of the island of Mindoro. Tacloban City
was on the left, while Don Juan was on the right. The "Don Juan" was more than
twice as fast as the "Tacloban City." The "Don Juan's" top speed was 17 knots; while
that of the "Tacloban City" was 6.3. knots.The "Don Juan's" officer on-watch had
sighted the "Tacloban City" on his radar screen while the latter was still 4 nautical
miles away. Visual confirmation of radar contact was established by the "Don Juan"
while the "Tacloban City" was still 2.7 miles away.The "Tacloban City," when the 2
vessels were 0.3 mile apart, turned (for the second time) 150 to port (left) side
while the "Don Juan" veered hard to starboard (right). The "Tacloban City," upon
turning hard to port shortly before the moment of collision, signaled its intention to
do so by giving 2 short blasts with horn.The "Don Juan " gave no answering horn
blast to signal its own intention and proceeded to turn hard to starboard (right).

M/T Don Juan

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

When the collision occurred, the sea was calm, the weather fair and
visibility good. As a result of this collision, the M/V "Don Juan" sank within 10-15
minutes after initial contact with the "Tacloban City. Further, Capt. Roger
Santisteban, the captain of the "Don Juan, failed to to supervise his officers and
crew in the process of abandoning the ship andto avail of measures to prevent the
too rapid sinking of his vessel after collision. Also, the officer-on-watch in the "Don
Juan" admitted that he had failed to inform Capt. Santistebannot only of the
"imminent danger of collision" but even of "the actual collision itself .
Hundreds of its passengers perished. Among the ill-fated passengers were
the parents of petitioners, the spouses Perfecto Mecenas and Sofia Mecenas,
whose bodies were never found despite intensive search by petitioners.

On 29 December 1980
Petitioners filed a complaint in the then Court- of First Instance of Quezon
Cityagainst private respondents Negros Navigation and Capt. Santistebanwithout,
however, impleading either PNOC or PNOC Shipping. In their complaint, petitioners
alleged that they were the seven (7) surviving legitimate children of Perfecto
Mecenas and Sofia Mecenas and that the latter spouses perished in the collision
which had resulted from the negligence of Negros Navigation and Capt.
Santisteban. Petitioners prayed for actual damages of not less than P100,000.00 as
well as moral and exemplary damages in such amount as the Court may deem
reasonable to award to them.

Another complaintwas filed in the same court by Lilia Ciocon claiming


damages against Negros Navigation, PNOC and PNOC Shipping for the death of her
husband Manuel Ciocon, another of the luckless passengers of the "Don Juan."
Manuel Ciocon's body, too, was never found.

The two (2) cases were consolidated and heard jointly by the Regional Trial
Court of Quezon City.

RTC Quezon City Findings & Decision

The findings of the RTC is the same with that of the Minister of National Defense
which upheld the decision of Commodore Ochoco, Commandant of the Philippine
Coast Guard, in its decision dated 2 March 1981. It held that the "Tacloban City"
was "primarily and solely [sic] at fault and responsible for the collision." However
on Motion for Reconsideration, however, the Minister of National Defense reversed
himself and held that both vessels had been at fault.
M/ V Don Juan and Tacloban City became aware of each other's presence
in the area by visual contact at a distance of something like 6 miles from each other.
They were fully aware that if they continued on their course, they will meet head on.
Don Juan - steered to the right (Starboard); Tacloban City continued its course to
the left (Port). There can be no excuse for them not to realize that, with such
maneuvers, they will collide. They executed maneuvers inadequate, and too late, to
avoid collision. Therefore, the defendants are equally negligent and are liable for
damages:

a)

Negros Navigation Co., Inc. and Capt. Roger Santisteban jointly and
severally liable to pay the petitioners Mecenas:
P400,000.00 for the death of plaintiffs' parents, Perfecto A.
Mecenas and Sofia P. Mecenas
P15.000,00 as and for attorney's fees
costs of the suit
b) Negros Navigation Co Inc. and Philippine National Oil Company/PNOC
Shipping and Transportation Company, to pay Lilia Ciocon
P100,000.00 for the death of Manuel Ciocon
P15,000.00 as attorney's fees
costs of suit

Negros Navigation, Capt. Santisteban, PNOC and PNOC Shipping appealed


the trial court's decision to the Court of Appeals. However, PNOC and PNOC
Shipping withdrew their appeal citing a compromise agreement reached by them
with Negros Navigation.

CA Decision

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

Granted the motion subject to the reservation made by Lilia Ciocon that she could
not be bound by the compromise agreement and would enforce the award granted
her by the trial court.

CA recognized that Don Juan was at least as negligent as M/T Tacloban


City. M/S Don Juan's Master, Capt. Rogelio Santisteban, was playing mahjong
before and up to the time of collision. Moreover, after the collision, he failed to
institute appropriate measures to delay the sinking MS Don Juan and to supervise
properly the execution of his order of abandonship. As regards the officer on watch,
Senior 3rd Mate Rogelio Devera, he admitted that he failed or did not call or inform
Capt. Santisteban of the imminent danger of collision and of the actual collision
itself Also, he failed to assist his master to prevent the fast sinking of the ship. The
record also indicates that Auxiliary Chief Mate Antonio Labordo displayed laxity in
maintaining order among the passengers after the collision.

This behaviour that is simply unacceptable on the part of the master of a


vessel to whose hands the lives and welfare of at 750 passengers had been
entrusted. Therefore, Negros Navigation Co. Inc. and Capt. Roger Santisteban are
held jointly and severally liable to pay the plaintiffs the amount of P100,000. 00 as
actual and compensatory damages and P15,000.00 as attorney's fees and the cost
of the suit.
Hence, petitioners filed a Petition for Review before the SC.

ISSUES
1.

2.

WON Negros Navigation and Capt. Santisteban were grossly negligent


during the events which culminated in the collision with "Tacloban City"
and the sinking of the "Don Juan" and the resulting heavy loss of lives
indicating their gross negligence and thus entitling the petitioners to
exemplary damages.
WON the CA erred in reducing the actual and compensatory damages from
P400,000 to P100,000.

1.

YES. Gross negligence can be deduced from the following circumstances:

a)

The record does not show that was the first or only time that Capt.
Santisteban had entertained himself during a voyage by playing
mahjong with his officers and passengers; Negros Navigation in
permitting, or in failing to discover and correct such behaviour, must
be deemed grossly negligent.
b) Capt. Santisteban was also faulted in the Philippine Coast Guard
decision for failing after the collision, "to institute appropriate
measures to delay the sinking of M/V Don Juan." This means that he
also failed to maintain the seaworthiness or the water-tight integrity
of the Don Juan when sank within 10-15 minutes after initial contact
with the "Tacloban City.
c) Tacloban City did not carry enough boats and life rafts for all the
persons actually on board that tragic night of 22 April 1980 because of
overloading.
d) Don Juan was as twice as fast as the Tacloban City. The "Don
Juan's" top speed was 17 knots; while that of the "Tacloban City" was
6.3. knots.
e) The Don Juan carried the full complement of officers and crew
members specified for a passenger vessel of her class.
f) The "Don Juan" was equipped with radar which was functioning that
night.
g) The "Don Juan's" officer on-watch had sighted the "Tacloban City" on
his radar screen while the latter was still four (4) nautical miles away.
Visual confirmation of radar contact was established by the "Don
Juan" while the "Tacloban City" was still 2.7 miles away.
h) The "Tacloban City," when the 2 vessels were 0.3 mile apart, turned
(for the second time) 150 to port (left) side while the "Don Juan"
veered hard to starboard (right) which is in contravention with Rule 18
of the International Rules of the Road requiring 2 power- driven
vessels meeting end on or nearly end on each to alter her course to
starboard (right) so that each vessel may pass on the port side (left) of
the other.

HELD

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The "Don Juan" having sighted the "Tacloban City" when it


was still a long way off was negligent in failing to take early
preventive action and in allowing the two (2) vessels to come to such
close quarters as to render the collision inevitable when there was
no necessity for passing so near to the "Tacloban City" as to create
that hazard or inevitability, for the "Don Juan" could choose its own
distance.2
i)

The "Tacloban City," upon turning hard to port shortly before the
moment of collision, signaled its intention to do so by giving 2 short
blasts with horn. The "Don Juan " gave no answering horn blast to
signal its own intention and proceeded to turn hard to starboard
(right).3

2According to Philippine Merchant Marine Rules and Regulations [published by the Philippine
Coast Guard]:
Rule 18. (a) When two power-driven vessels are meeting end on, or nearly end on, so
as to involve risk of collision, each shall alter her course to starboard, so that each
may pass on the port side of the other. This Rule only applies to cases where vessels
are meeting end on or nearly end on, in such a manner as to involve risk of collision,
and does not apply to two vessels which must, if both keep on their respective course,
pass clear of each other. The only cases to which it does apply are when each of two
vessels is end on, or nearly end on, to the other; in other words, to cases in which, by
day, each vessel sees the masts of the other in a line or nearly in a line with her own;
and by night to cases in which each vessel is in such a position as to see both the
sidelights of the other. It does not apply, by day, to cases in which a vessel sees
another ahead crossing her own course; or by right, to cases where the red light of
one vessel is opposed to the red light of the other or where the green light of one
vessel is opposed to the green light of the other or where a red light without a green
light or a green light without a red light is seen ahead, or where both green and red
lights are seen anywhere but ahead.
(b) For the purposes of this Rule and Rules 19 to 29 inclusive, except Rule
20
(c) and Rule 28, a seaplane on the water shall be deemed to be a vessel,
and the expression 'power-driven vessel' shall be construed accordingly.
3According to the International Rules of the Road:

Therefore, Capt. Santisteban and Negros Navigation are properly held


liable for gross negligence in connection with the collision of the "Don
Juan" and "Tacloban City" and the sinking of the "Don Juan" leading to the
death of hundreds of passengers. There is no necessity for passing upon
the degree of negligence or culpability properly attributable to PNOC and
PNOC Shipping or the master of the "Tacloban City," since they were never
impleaded in the petition.

2.

YES. Both the demands of sustantial justice and the imperious


requirements of public policy compel us to the conclusion that the trial
court's implicit award of moral and exemplary damages was
erronoeuslydeledted and must be restored and augmented and brought
more nearely to the level required by public policy and substantial justice.
Further, the Manchester doctrine should be applied in the case as clarified
and amplified by Sun Insurance Office Ltd. (SIOL) by by holding that the
petitioners shall pay the additional filing fee that is properly payable given
the award specified below, and that such additional filing fee shall
constitute a lien upon the judgment. The Manchester doctrine cannot be
applied alone since it would be done retroactively in contravention to the
law. Therefore, the following breakdown of damages must be awarded:
actual or compensatory damages proved in the course of
trial consisting of actual expensesincurred by
petitioners in their search for their parents' bodies
actual or compensatory damages in case of wrongful
death (P30,000.00 x 2)
moral damages

P126,000.00

P60,000.00
P107,000.00*

exemplary damages**

P107,000.00

TOTAL

P400,000.00

Rule 19. When two-power driven vessels are crossing, so as to involve risk of
collision, the vessel which has the other on her own starboard side shall keep out of
the way of their hand.
Rule 22. Every vessel which is directed by these Rules to keep out of the way of
another vessel shall, so far as possible, take positive early action to comply with this

obligation, and shall, if the circumstances of the case admit, avoid crossing ahead of
the other.

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*Considering that petitioners, legitimate children of the deceased spouses


Mecenas, are seven (7) in number and that they lost both father and
mothe in one fell blow of fate, and considering the pain and anxiety they
doubtless experienced while searching for their parents among the
survivors and the corpses recovered from the sea or washed ashore, we
believe that an additional amount of P200,000.00 for moral damages,
making a total of P307,000.00 for moral damages which is reasonable.
** Exemplary damages are designed by our civil law to permit the courts to
reshape behaviour that is socially deleterious in its consequence by
creating negative incentives or deterrents against such behaviour. In
requiring compliance with the standard which is in fact that of the highest
possible degree of diligence, from common carriers and in creating a
presumption of negligence against them, the law seels to compel them to
control their employees, to tame their reckless instincts and to force them
to take adequate care of human beings and their property.
The bulk of our population is too poor to afford domestic air
transportation. So it is that notwithstanding the frequent sinking of
passenger vessels in our waters, crowds of people continue to travel by
sea. This Court is prepared to use the instruments given to it by the law for
securing the ends of law and public policy. One of those instruments is the
institution of exemplary damages;an additional award in the amount of
P200,000.00 as exmplary damages, is quite modest.

WHEREFORE, the Petition for Review on certiorari is hereby GRANTED and the
Decision of the Court of Appeals insofar as it redurce the amount of damages
awarded to petitioners to P100,000.00 is hereby REVERSED and SET ASIDE. The
award granted by the trial court is hereby RESTORED and AUGMENTED as follows:

Petitioners shall pay the additional filing fees properly due and payable in view of
the award here made, which fees shall be computed by the Clerks of Court of the
trial court, and shall constitute a lien upon the judgment here awarded. Cost
against private respondents.
SO ORDERED.
ABOITIZ SHIPPING CORPORATION, petitioner, vs.GENERAL ACCIDENT FIRE AND
LIFE ASSURANCE CORPORATION, LTD., respondent
G.R. No. 100446 January 21, 1993
FACTS: Petitioner owned and operated the ill-fated "M/V P. ABOITIZ," a common
carrier which sank on a voyage from Hongkong to the Philippines on October 31,
1980. Private respondent GAFLAC is a foreign insurance company pursuing its
remedies as a subrogee of several cargo consignees whose respective cargo sank
with the said vessel and for which it has priorly paid.
The incident gave rise to the filing of suits for recovery of lost cargo either by the
shippers, their successor-in-interest, or the cargo insurers like GAFLAC as subrogees
[NB: Super daming cases/claims. May 110 pending cases pa]. In one administrative
case (BMI case), it was found that such sinking was due to force majeure and that
subject vessel, at the time of the sinking was seaworthy. This administrative finding
notwithstanding, the trial court in one case ruled against the carrier on the basis
that the loss subject matter therein did not occur as a result of force majeure. On
the other hand, other cases have resulted in findings upholding the conclusion of
the BMI that the vessel was seaworthy at the time of the sinking, and that such
sinking was due to force majeure. There is therefore a need to reconcile the
resulting apparent contrary findings in cases originating out of a single set of facts.
It is in this factual milieu that the instant petition seeks a pronouncement as to the
applicability of the doctrine of limited liability on the totality of the claims vis a vis
the losses brought about by the sinking of the vessel M/V P. ABOITIZ, as based on
the real and hypothecary nature of maritime law.
ISSUE 1:

(a)
(b)
(c)
(d)
(e)

P 126,000.00 for actual damages;


P 60,000.00 as compensatory damages for wrongful death;
P 307,000.00 as moral damages;
P 307,000.00 as exemplary damages making a total of P 800,000.00; and
P 15,000.00 as attorney's fees.

Whether the Limited Liability Rule arising out of the real and
hypothecary nature of maritime law should apply in this and
related cases.

RULING 1:
YES. The real and hypothecary nature of maritime law simply
means that the liability of the carrier in connection with losses related to maritime
contracts is confined to the vessel, which is hypothecated for such obligations or
which stands as the guaranty for their settlement. xxx Thus, the liability of the

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

vessel owner and agent arising from the operation of such vessel were confined to
the vessel itself, its equipment, freight, and insurance, if any, which limitation
served to induce capitalists into effectively wagering their resources against the
consideration of the large profits attainable in the trade.
The Limited Liability Rule in the Philippines is taken up in Book III of the Code of
Commerce, particularly in Articles 587, 590, and 837. xxx As to its applicability in the
instant case. The Court have been consistent in this jurisdiction in holding that the
only time the Limited Liability Rule does not apply is when there is an actual finding
of negligence on the part of the vessel owner or agent. THUS..

In the instant case, there is, therefore, a need to collate all claims preparatory to
their satisfaction from the insurance proceeds on the vessel M/V P. Aboitiz and its
pending freightage at the time of its loss. No claimant can be given precedence over
the others by the simple expedience of having filed or completed its action earlier
than the rest. Thus, execution of judgment in earlier completed cases, even those
already final and executory, must be stayed pending completion of all cases
occasioned by the subject sinking. Then and only then can all such claims be
simultaneously settled, either completely or pro-rata should the insurance proceeds
and freightage be not enough to satisfy all claims.
THE PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY, INC., petitioner,
vs. COURT OF APPEALS and FELMAN SHIPPING LINES, respondents.

ISSUE 2: Whether or not petitioner was negligent.


RULING 2:
NO. there appears to have been no evidence presented sufficient
to form a conclusion that petitioner shipowner itself was negligent, and no tribunal,
including this Court will add or subtract to such evidence to justify a conclusion to
the contrary. It should be stressed that unseaworthiness is not a fault that can be
laid squarely on petitioner's lap, absent a factual basis for such a conclusion. The
unseaworthiness found in some cases where the same has been ruled to exist is
directly attributable to the vessel's crew and captain, more so on the part of the
latter since Article 612 of the Code of Commerce provides that among the inherent
duties of a captain is to examine a vessel before sailing and to comply with the laws
of navigation.
The finding in BMI case contained to the effect that the vessel was seaworthy
deserves merit. Despite appearances, it is not totally incompatible with the findings
of the trial court and the Court of Appeals, whose finding of "unseaworthiness"
clearly did not pertain to the structural condition of the vessel which is the basis of
the BMI's findings, but to the condition it was in at the time of the sinking, which
condition was a result of the acts of the captain and the crew.
The rights of a vessel owner or agent under the Limited Liability Rule are akin to
those of the rights of shareholders to limited liability under our corporation law.
Both are privileges granted by statute, and while not absolute, must be swept aside
only in the established existence of the most compelling of reasons.
In both insolvency of a corporation and the sinking of a vessel, the claimants or
creditors are limited in their recovery to the remaining value of accessible assets. In
the case of a lost vessel, these are the insurance proceeds and pending freightage
for the particular voyage.

G.R. No. 116940 June 11, 1997


BELLOSILLO, J.
DOCTRINE
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 shipowner's liability,
does not apply to cases where the injury or average was occasioned by the
shipowner's 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.
In every marine insurance upon a ship or freight, or freightage, or upon
anything which is the subject of marine insurance, a warranty is implied
that the ship is seaworthy. (Sec. 113, Insurance Code) It is generally held
that in every marine insurance policy the assured impliedly warrants to the
assurer that the vessel is seaworthy and such warranty is as much a term
of the contract as if expressly written on the face of the policy.

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

A ship is "seaworthy when reasonably fit to perform the service, and to


encounter the ordinary perils of the voyage, contemplated by the parties
to the policy." (Sec. 114, Insurance Code)

In policies where the law will generally imply a warranty of seaworthiness,


it can only be excluded by terms in writing in the policy in the clearest
language. And where the policy stipulates that the seaworthiness of the
vessel as between the assured and the assurer is admitted, the question of
seaworthiness cannot be raised by the assurer without showing
concealment or misrepresentation by the assured.

Payment by the assurer to the assured operates as an equitable


assignment to the assurer of all the remedies which the assured may have
against the third party whose negligence or wrongful act caused the loss.
The right of subrogation is not dependent upon, nor does it grow out of
any privity of contract or upon payment by the insurance company of the
insurance claim. It accrues simply upon payment by the insurance
company of the insurance claim. (Pan Malayan Insurance Corporation v.
Court of Appeals)

The legal basis for subrogation is under Art. 2207 of the Civil Code: If the
plaintiff's property has been insured, and he has received indemnity from
the insurance company for the injury or loss arising out of the wrong or
breach of contract complained of, the insurance company shall be
subrogated to the rights of the insured against the wrongdoer or the
person who has violated the contract. If the amount paid by the insurance
company does not fully cover the injury or loss, the aggrieved party shall
be entitled to recover the deficiency from the person causing the loss or
injury.

FACTS

On 6 July 1983 Coca-Cola Bottlers Philippines, Inc. (Coca-Cola Bottlers),


loaded on board "MV Asilda," a vessel owned and operated by respondent Felman
Shipping Lines (FELMAN for brevity), 7,500 cases of 1-liter Coca-Cola softdrink
bottles to be transported from Zamboanga City to Cebu City for consignee CocaCola Bottlers Philippines, Inc., Cebu.The shipment was insured with petitioner
Philippine American General Insurance Co., Inc. (PHILAMGEN for brevity.
"MV Asilda" left the port of Zamboanga in fine weather at 8 p.m. of the
same day. The ship captain stated that around 4 a.m. of 7 July 1983 he was
awakened by the officer on duty to inform him that the vessel had hit a floating log.
At that time he noticed that the weather had deteriorated with strong southeast
winds inducing big waves. At 4:30 a.m., he observed that the vessel was listing
slightly to starboard and would not correct itself despite the heavy rolling and
pitching. He then ordered his crew to shift the cargo from starboard to portside
until the vessel was balanced. At about 7 a.m., the master of the vessel stopped the
engine because the vessel was listing dangerously to portside. He ordered his crew
to shift the cargo back to starboard (right). The shifting of cargo took about an hour
afterwhich he rang the engine room to resume full speed.
At around 8:45 a.m., the vessel suddenly listed to portside (left) and before
the captain could decide on his next move, some of the cargo on deck were thrown
overboard and seawater entered the engine room and cargo holds of the vessel. At
that instance, the master of the vessel ordered his crew to abandon ship. Shortly
thereafter, "MV Asilda" capsized and sank in the waters of Zamboanga del Norte
bringing down her entire cargo with her including the subject 7,500 cases of 1-liter
Coca-Cola softdrink bottles. He ascribed the sinking to the entry of seawater
through a hole in the hull caused by the vessel's collision with a partially submerged
log.
On 15 July 1983 the consignee Coca-Cola Bottlers Philippines, Inc., Cebu
plant, filed a claim with respondent FELMAN for recovery of damages it sustained as
a result of the loss of its softdrink bottles that sank with "MV Asilda." Respondent
denied the claim thus prompting the consignee to file an insurance claim with
PHILAMGEN which paid its claim of P755,250.00.
Claiming its right of subrogation PHILAMGEN sought recourse against
respondent FELMAN which disclaimed any liability for the loss. Consequently, on 29
November 1983 PHILAMGEN sued the shipowner for sum of money and damages.

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PHILAMGEN contended that the total loss of cargo was due to the vessels
unseaworthiness as she was put to sea in an unstable condition. FELMAN, on the
other hand, contended that there was no right of subrogation in favor of
PHILAMGEN since it had abandoned all its rights, interests and ownership over the
vessel together with her freight and appurtenances for the purpose of limiting and
extinguishing its liability under Art. 587 of the Code of Commerce.

The RTC dismissed PHILAMGENs complaint and appealed to the CA which


remanded the case and denied its motion for reconsideration. The RTC then ruled
that the vessel was seaworthy. Even assuming it was unseaworthy, PHILAMGEN
could not still recover from FELMAN since Coca-Cola Bottlers had breached its
implied warranty on the vessels seaworthiness. On appeal, the CA ruled that the
vessel was unseaworthy for being top-heavy as 2,500 cases of Coca-Cola softdrink
bottles were improperly stowed on deck. Even though the vessel possessed the
necessary Coast Guard certification indicating its seaworthiness with respect to the
structure of the ship itself, it was not seaworthy with respect to the cargo. Therfore,
it denied the money claim of PHILAMGEN because of the implied breach of
warranty of seaworthiness by Coca-Cola Bottlers. Further, the filing of notice of
abandonment had absolved FELMAN from liability under the limited liability rule.

ISSUES

4.
5.
6.

WON MV Asilda was seaworthy when it left the port of Zamboanga.


WON the limited liability under Art. 587 of the Code of Commerce should
apply.
WON PHILAMGEN was properly subrogated to the rights and legal actions
which the shipper had against FELMAN.

HELD

4.

NO. "MV Asilda" was unseaworthy when it left the port of Zamboanga. In a
joint statement, the captain as well as the chief mate of the vessel
confirmed that the weather was fine when they left the port of
Zamboanga. According to them, the vessel was carrying 7,500 cases of 1-

liter Coca-Cola softdrink bottles, 300 sacks of seaweeds, 200 empty CO2
cylinders and an undetermined quantity of empty boxes for fresh eggs.
They loaded the empty boxes for eggs and about 500 cases of Coca-Cola
bottles on deck. Moreover, the report by The Elite Adjusters, Inc. noted
that the vessel was top-heavy which is to say that while the vessel may
not have been overloaded, yet the distribution or stowage of the cargo on
board was done in such a manner that the vessel was in top-heavy
condition at the time of her departure and which condition rendered her
unstable and unseaworthy for that particular voyage.
More importantly, the vessel was designed as a fishing vessel and
it was not designed to carry a substantial amount or quantity of cargo on
deck. Therefore, the weight of the deck cargo so decreased the vessel's
metacentric height as to cause it to become unstable.
It is settled that carrying a deck cargo raises the presumption of
unseaworthiness unless it can be shown that the deck cargo will not
interfere with the proper management of the ship. However, in this case it
was established that "MV Asilda" was not designed to carry substantial
amount of cargo on deck. The inordinate loading of cargo deck resulted in
the decrease of the vessel's metacentric height thus making it unstable.
The strong winds and waves encountered by the vessel are but the
ordinary vicissitudes of a sea voyage and as such merely contributed to its
already unstable and unseaworthy condition. Therefore, the proximate
cause of the sinking of the M/V "Asilda" was her condition of
unseaworthiness arising from her having been top-heavy when she
departed from the Port of Zamboanga. Her having capsized and eventually
sunk was bound to happen and was therefore in the category of an
inevitable occurrence.
It is noted that ships are precisely designed to be able to navigate
safely even during heavy weather and have successfully weathering
encounters with typhoons. Although they may sustain some amount of
damage, the sinking of ship during heavy weather is not a frequent
occurrence and is not likely to occur unless they are inherently unstable
and unseaworthy.

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5.

6.

NO. Art. 587 of the Code of Commerce is not applicable to the case at
bar.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 shipowner's liability,
does not apply to cases where the injury or average was occasioned by the
shipowner's 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.

goods. He also has full discretion in the choice of assurer that will
underwrite a particular venture. When respondent appellate court found
"MV Asilda" unseaworthy with reference to the cargo and therefore ruled
that there was breach of warranty of seaworthiness that rendered the
assured not entitled to the payment of is claim under the policy. Hence,
when PHILAMGEN paid the claim of the bottling firm there was in effect a
"voluntary payment" and no right of subrogation accrued in its favor. In
other words, when PHILAMGEN paid it did so at its own risk.

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 . . ." In the event of loss of goods, common
carriers are presumed to have acted negligently. FELMAN, the shipowner,
was not able to rebut this presumption.

The marine policy issued by PHILAMGEN to the Coca-Cola bottling


firm in at least two (2) instances has dispensed with the usual warranty of
worthiness. Paragraph 15 of the Marine Open Policy No. 100367-PAG
reads "(t)he liberties as per Contract of Affreightment the presence of the
Negligence Clause and/or Latent Defect Clause in the Bill of Lading and/or
Charter Party and/or Contract of Affreightment as between the Assured
and the Company shall not prejudice the insurance. The seaworthiness of
the vessel as between the Assured and the Assurers is hereby admitted."

YES. It is generally held that in every marine insurance policy the assured
impliedly warrants to the assurer that the vessel is seaworthy and such
warranty is as much a term of the contract as if expressly written on the
face of the policy. Thus Sec. 113 of the Insurance Code provides that "(i)n
every marine insurance upon a ship or freight, or freightage, or upon
anything which is the subject of marine insurance, a warranty is implied
that the ship is seaworthy4." Thus it becomes the obligation of the cargo
owner to look for a reliable common carrier which keeps its vessels in
seaworthy condition. He may have no control over the vessel but he has
full control in the selection of the common carrier that will transport his

4A ship is "seaworthy when reasonably fit to perform the service, and to encounter the ordinary
perils of the voyage, contemplated by the parties to the policy." (Sec. 114, Insurance Code)

In policies where the law will generally imply a warranty of


seaworthiness, it can only be excluded by terms in writing in the policy in
the clearest language. And where the policy stipulates that the
seaworthiness of the vessel as between the assured and the assurer is
admitted, the question of seaworthiness cannot be raised by the assurer
without showing concealment or misrepresentation by the assured.

The insertion of such waiver clauses in cargo policies is in


recognition of the realistic fact that cargo owners cannot control the state
of the vessel. Thus it can be said that with such categorical waiver,
PHILAMGEN has accepted the risk of unseaworthiness so that if the ship
should sink by unseaworthiness, as what occurred in this case, PHILAMGEN
is liable.
However, right of subrogation is not dependent upon, nor does it
grow out of any privity of contract or upon payment by the insurance
company of the insurance claim. It accrues simply upon payment by the
insurance company of the insurance claim.The doctrine of subrogation has
its roots in equity. It is designed to promote and to accomplish justice and

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

is the mode which equity adopts to compel the ultimate payment of a debt
by one who in justice, equity and good conscience ought to pay. Therefore,
the payment made by PHILAMGEN to Coca-Cola Bottlers Philippines, Inc.,
gave the former the right to bring an action as subrogee against FELMAN.
Having failed to rebut the presumption of fault, the liability of FELMAN for
the loss of the 7,500 cases of 1-liter Coca-Cola softdrink bottles is
inevitable.

the arrival of the Mindoroon May 13, 1913, and took on board the captain and the
remainder of the crew. The captain of the Mindoro offered to render assistance to
the captain and crew of the Nippon, which assistance was declined.
The Mindoro proceeded to the Nippon and removed the balance of the baggage of
the officers and crew, which was found upon the deck.

WHEREFORE, the petition is GRANTED. Respondent FELMAN SHIPPING LINES is


ordered to pay petitioner PHILIPPINE AMERICAN GENERAL INSURANCE CO., INC.,
Seven Hundred Fifty-five Thousand Two Hundred and Fifty Pesos (P755,250.00) plus
legal interest thereon counted from 29 November 1983, the date of judicial
demand, pursuant to Arts. 2212 and 2213 of the Civil Code.20

The case came on for trial before the Honorable A. S. Crossfield. The
OelwerkeTeutonia, a corporation, appeared as claimant of the copra. The New
Zealand Insurance Company appeared as insurer and assignee of the owners of 33
crates of agar-agar; The Tokio Marine Insurance Company appeared as the insurer
and assignee of 1,000 cases of bean oil and two cases of bamboo lacquer work; and
The Thames and Mersey Marine Insurance Company appeared as a reinsurer to the
extent of P6,500 on the cargo of copra. The court found that the plaintiffs were
"entitled to recover one-half of the net proceeds from the property salved and sold
(which has nothing to do with the steamship itself), and one-half the value of the
property delivered to the claimants."

SO ORDERED.

CHAPTER 15
G.R. No. L-10051

March 9, 1916

ERLANGER & GALINGER, plaintiffs-appellants, vs. THE SWEDISH EAST ASIATIC CO.,
(LTD.) ET AL., defendants. THE "OELWERKE TEUTONIA" and NEW ZEALAND
INSURANCE CO. (LTD.), appellants.
FACTS:The steamship Nippon loaded principally with copra and with some other
general merchandise sailed from Manila on May 7, 1913, bound for Singapore. On
May 12, 1913, the chief officer sent a telegram to Helm, the Director of the Bureau
of Navigation, at Manila, which was as follows:
Nippon stranded on Scarborough Reef, wants immediate assistance for
saving crew boats gone. 12.15 p. m.
The Government of the Philippine Islands ordered the coast guard
cutter Mindoro with life-saving appliances to the scene of the wreck of the Nippon.
Seventh. However, The Manchuria arrived at Scarborough Reef some time before

The cargo was brought to the port of Manila. The plaintiffs brought the present
action against the insurance companies and underwriters, who represented the
cargo salved from the Nippon, to have the amount of salvage, to which the plaintiffs
were entitled, determined.

The OelwerkeTeutonia, The New Zealand Insurance Company (Ltd.), and Erlanger
&Galinger appealed from this decision.
ISSUES:(1) Was the ship abandoned? YES
(2) Was the salvage conducted with skill, diligence, and efficiency? YES
(3) Was the award justified? NO
HELD:
(1) At the time the plaintiff commenced the attempt to salve what was
possible of the S. S. Nippon and cargo, it was justified, from all the
conditions existing, in believing that it had been abandoned and in taking
possession, even though the master of the vessel intended when he left it,
to return and attempt salvage.

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

Such intention, if it existed, does not appear to have been very firmly fixed,
considering the leisurely manner in which the master proceeded after he
reached the Port of Hongkong.
Capt. Eggert had over two days in which to arrange for salvage operations
and he did nothing, while the plaintiffs, who were strangers and had no
interest, sent out a salvage expedition in twenty-four hours after they
discovered that the ship was wrecked.
The evidence proves that the Nippon was in peril; that the captain left in
order to protect his life and the lives of the crew; that
the animorevertendi was slight. The argument of the defendant-appellant
to the effect that the ship was in no danger is a bit out of place in view of
the statement of the captain that she would sink with the first gale,
coupled with the fact that a typhoon was the cause of her stranding.
(2) While the plaintiff entered upon the salvage proceedings without proper
means and not being adapted by their business to conduct their work, and
while it may appear that possibly the salvage might have been conducted
in a better manner and have accomplished somewhat better results in the
saving of the copra cargo, yet it appears that they quickly remedied their
lack of means and corrected the conduct of the work so that it
accomplished fairly good results.
It does not appear from the evidence that anyone then or subsequently
suggested or found any other course which might have been pursued and
which would have brought better results.
There was some dispute whether Manila or Hongkong should be used as a
base for operations. Lebreton, a stevedore, testified that he would have
gotten some of his materials from Hongkong but that he would have
freighted the salved cargo to Manila. All other things being equal, the fact
that Hongkong is forty sailing hours from Scarborough Reef while Manila is
less than twenty-four sailing hours would make Manila by far the more
logical base.
The plaintiffs commenced the actual work of salving the ship and cargo on
May 18, 1913. The last of the cargo was a brought to Manila the latter part
of June. The last of the dry copra was brought to Manila on June 5. The

estimates of the experts with regard to the time necessary to remove the
cargo ranged from eight to twenty days. The greater portion of the cargo
was brought in by the plaintiffs within fifteen days. The delay after June 5
was due to the difficulty in inducing laborers to work with wet copra. This
difficulty would have arisen with any set of salvors and cannot be
attributed to a lack of care or diligence on the part of the plaintiffs.
(3) Was the award justified?
The plaintiff-appellant contends that the expenses incurred should be
deducted from the entire amount of the salved property and the
remainder be divided as a reward for the services rendered. This
contention has no basis in the law of salvage compensation. The expenses
incurred by the plaintiffs must be borne by them. It is true that the award
should be liberal enough to cover the expenses and give an extra amount
as a reward for the services rendered but the expenses are used in no
other way as a basis for the final award. A part of the risk that the plaintiffs
incurred was that the goods salved would not pay them for the amount
expended in salving them. The plaintiffs knew this risk and they should not
have spent more money than their reasonable share of the proceeds
would amount to under any circumstances.
There is no fixed rule for salvage allowance. The old rule in cases of a
derelict was 50 per cent of the property salved; but under modern
decisions and practice, it may be less, or it may be more. The allowance
rests in the sound discretion of the court or judge, who hears the case,
hears the witnesses testify, looks into their eyes, and is acquainted with
the environments of the rescue. . . . An allowance for salvage should not be
weighed in golden scales, but should be made as a reward for meritorious
voluntary services, rendered at a time when danger of loss is imminent, as
a reward for such services so rendered, and for the for the purpose of
encouraging others in like services.
After a careful study of the entire record and taking into account the
amount which the plaintiffs has heretofore received, we have arrived at
the conclusion that in equity and justice the plaintiff-appellants should
receive for their services the following amounts:
(a) 40 per cent of the net value of the wet copra salved.

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(b) 25 per cent of the net value of the dry copra salved.
(c) 20 per cent of the net value of the agar-agar salved.
NOTE:In general, salvage may be defined as a service which one person renders to
the owner of a ship or goods, by his own labor, preserving the goods or the ship
which the owner or those entrusted with the care of them have either abandoned
in distress at sea, or are unable to protect and secure.
Three elements are necessary to a valid salvage claim: (1) A marine peril. (2) Service
voluntarily rendered when not required as an existing duty or from a special
contract. (3) Success, in whole or in part, or that the service rendered contributed
to such success.
The question whether or not a particular ship and her cargo is a fit object of salvage
depends upon her condition at the time the salvage services are performed. In the
present case the plaintiff-appellant claims that the Nippon was a derelict or quasiderelict and that their claim should be adjudged upon this cases. A derelict is
defined as "A ship or her cargo which is abandoned and deserted at sea by those
who were in charge of it, without any hope of recovering it (sine sperecuperandi), or
without any intention of returning to it (sine animorevertendi). Whether property is
to be adjudged derelict is determimed by ascertaining what was the intention and
expectation of those in charge of it when they quitted it. If those in charge left with
the intention of returning, or of procuring assistance, the property is not derelict,
but if they quitted the property with the intention of finally leaving it, it is derelict,
and a change of their intention and an attempt to return will not change its nature."

BARRIOS VS. GO THONG


GR L-17192, 30 MARCH 1963)
FACTS:
Petitioner Honorio Barrios, captain and/or master of the MV Henry I, received or
otherwise intercepted an S.O.S. distress signal by blinkers from the MV Alfredo,
owned and/or operated by respondent Carlos Go Thong & Company. Thereafter, he
altered the course of said vessel, and steered and headed towards the beckoning
MV Don Alfredo, which Barrios found to be in trouble, due to engine failure and the
loss of her propeller. Upon getting close to the MV Don Alfreco, with the consent

and knowledge of the captain and/or master of the MV Don Alfredo, Barrios caused
the latter vessel to be tied to, or well-secured and connected with tow lines from
the MV Henry, and proceeded moving until such time that a sister ship of MV Don
Alfredo was sighted so that the tow lines were also released.
Brought to the CFI of Manila, the court therein dismissed the case; with cost against
Barrios. Barrios interposed an appeal.
ISSUE:
Whether under the facts of the case, the service rendered by plaintiff to defendant
constituted "salvage" or "towage", and if so, whether plaintiff may recover from
defendant compensation for such service.
HELD:
It is not a salvage service.
Salvage defined
Salvage has been defined as the compensation allowed to persons by whose
assistance a ship or her cargo has been saved, in whole or in part, from impending
peril on the sea, or in recovering such property from actual loss, as in case of
shipwreck, derelict, or recapture.
Elements for a valid salvage claim; Erlanger &Galinger case
In the Erlanger &Galinger case, it was held that three elements are necessary to a
valid salvage claim, namely, (1) a marine peril, (2) service voluntarily rendered when
not required as an existing duty or from a special contract, and (3) success in whole
or in part, or that the service rendered contributed to such success.
No marine peril to justify valid salvage claim
There was no marine peril to justify a valid salvage claim by Barrios against Go
Thong. It appears that although Go Thongs vessel in question was, on the night of 1
May 1958, in a helpless condition due to engine failure, it did not drift too far from
the place where it was. The weather was fair, clear, and good. The waves were
small and too slight, so much so, that there were only ripples on the sea, which was
quite smooth. During the towing of the vessel on the same night, there was
moonlight. Although said vessel was drifting towards the open sea, there was no
danger of its foundering or being stranded, as it was far from any island or rocks. In
case of danger of stranding, its anchor could be released, to prevent such
occurrence. There was no danger that Go Thongs vessel would sink in view of the
smoothness of the sea and the fairness of the weather. That there was absence of

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

danger is shown by the fact that said vessel or its crew did not even find it
necessary to lower its launch and two motor boats, in order to evacuate its
passengers aboard. Neither did they find occasion to jettison the vessels cargo as a
safety measure. Neither the passengers nor the cargo were in danger of perishing.
All that the vessels crew members could not do was to move the vessel on its own
power. That did not make the vessel a quasi-derelict.
Contract of towage perfected even without written agreement
Herein, in consenting to Barrios offer to tow the vessel, Go Thong (through the
captain of its vessel MV Don Alfredo) thereby impliedly entered into a juridical
relation of towage with the owner of the vessel MV Henry I, captained by Barrios,
the William Lines.
Only owner entitled to remuneration in towage
If the contract thus created is one for towage, then only the owner of the towing
vessel, to the exclusion of the crew of the said vessel, may be entitled to
remuneration. The courts have to draw a distinct line between salvage and towage;
for the reason that a reward ought sometimes to be given to the crew of the
salvage vessel and to other participants in salvage services, and such reward should
not be given if the services were held to be merely towage. The master and
members of the crew of a tug were not entitled to participate in payment by liberty
ship for services rendered by tug which were towage services and not salvage
services. The distinction between salvage and towage is of importance to the crew
of the salvaging ship, for the following reasons: If the contract for towage is in fact
towage, then the crew does not have any interest or rights in the remuneration
pursuant to the contract. But if the owners of the respective vessels are of a salvage
nature, the crew of the salvaging ship is entitled to salvage, and can look to the
salved vessel for its share.
Equity cannot be resorted if there is an express provision of law
Barrios cannot invoke equity in support of his claim for compensation against Go
Thong. There being an express provision of law (Art. 2142, Civil Code) applicable to
the relationship created in the case, i.e. that of a quasi-contract of towage where
the crew is not entitled to compensation separate from that of the vessel, there is
no occasion to resort to equitable considerations.

9th Batch
CHAPTER 16
1.

ELSER INC V CA

FACTS:
In December 1945 the goods specified in the Bill of Lading, were shipped
on the 'S.S. Sea Hydra,' of Isthmian Steamship Company, from New York to Manila,
and were received by the consignee 'Udharam Bazar and Co.', except one case of
vanishing cream valued at P159.78. The goods were insured against damage or loss
by the 'Atlantic Mutual Insurance Co.'; `Udharam Bazar and Co.' Inc., who denied
having received the goods for custody; and the 'International Harvester Co. of the
Philippines,' as agent for the shipping company, who answer that the goods were
landed and delivered to the Customs authorities. Finally, 'Udaharam Bazar and Co.'
claimed for indemnity of the loss from the insurer, 'Atlantic Mutual Insurance Co.',
and was paid by the latter's agent 'E. E. Elser Inc.' the amount involved, that is,
P159.78.
CA: Held that petitioners have already lost their right to press their claim
against respondent because of their failure to serve notice thereof upon the carrier
within 30 days after receipt of the notice of loss or damage as required by clause 18
of the bill of lading
PETITIONERS CONTENTION: Petitioners contend that the finding of CA is
erroneous in the light of the provisions of the Carriage of Goods by Sea Act of 1936,
which apply to this case, the same having been made an integral part of the
covenants agreed upon in the bill of lading.
RESPONDENTS CONTENTION: While the United States Carriage of Goods
by Sea Act of 1936 was accepted and adopted by our government by virtue of
Commonwealth Act No. 65, however, said Act does not have any application to the
present case because the shipment in question was made in December, 1945, and
arrived in Manila in February, 1946 and at that time the Philippines was still a
territory or possession of the United States and, therefore it may be said that the
trade then between the Philippines and the United States was not a "foreign trade".
In other words, it is contended that the Carriage of Goods by Sea Act as adopted by
our government is only applicable "to all contracts for the carriage of goods by sea
to and from Philippine ports in foreign trade," and, therefore, it does not apply to
the shipment in question
ISSUE: Which of these two provisions should prevail? Is it that contained in clause
18 of the bill of lading, or that appearing in the Carriage of Goods by Sea Act?.
RULING:
COGSA should prevail. That clause 18 must of necessity yields to the
provisions of the Carriage of Goods by Sea Act in view of the proviso contained in

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

the same Act which says: "any clause, covenant, or agreement in a contract of
carriage relieving the carrier or the ship from liability for loss or damage to or in
connection with the goods . . . or lessening such liability otherwise than as provided
in this Act, shall be null and void and of no effect." (section 3.) This means that a
carrier cannot limit its liability in a manner contrary to what is provided for in said
act and so clause 18 of the bill of lading must of necessity be null and void.
Carriage of Goods by Sea Act of 1936 may have application to the
present case it appearing that the parties have expressly agreed to make and
incorporate the provisions of said Act as integral part of their contract of carriage.
This is an exception to the rule regarding the applicability of said Act. This is
expressly recognized by section 13 of said Act Having reached the foregoing
conclusion, it would appear clear that action of petitioners has not yet lapsed or
prescribed, as erroneously held by the Court of Appeals, it appearing that the
present action was brought within one year after the delivery of the shipment in
question.
2.

Ang v. Compania Maritima

Facts:
Ang on September 26, 1963, as the assignee of a bill of lading held by Yau Yue
Commercial Bank, Ltd. of Hongkong, sued Compaia Maritima, Maritime Company
of the Philippines and C.L. Diokno. He prayed that the defendants be ordered to pay
him solidarily the sum of US$130,539.68 with interest from February 9, 1963 plus
attorneys fees and damages. Ang alleged that Yau Yue Commercial Bank agreed to
sell to Herminio G. Teves under certain conditions 559 packages of galvanized steel,
Durzinc sheets. The merchandise was loaded on May 25, 1961 at Yawata, Japan in
the M/S Luzon, a vessel owned and operated by the defendants, to be transported
to Manila and consigned "to order" of the shipper, Tokyo Boeki, Ltd., which
indorsed the bill of lading issued by Compaia Maritima to the order of Yau Yue
Commercial Bank.
Ang further alleged that the defendants, by means of a permit to deliver imported
articles, authorized the delivery of the cargo to Teves who obtained delivery from
the Bureau of Customs without the surrender of the bill of lading and in violation of
the terms thereof. Teves dishonored the draft drawn by Yau Yue against him.
The Hongkong and Shanghai Banking Corporation made the corresponding protest
for the drafts dishonor and returned the bill of lading to Yau Yue. The bill of lading
was indorsed to Ang.

The defendants filed a motion to dismiss Angs complaint on the ground of lack of
cause of action. Ang opposed the motion. The trial court on May 22, 1964
dismissed the complaint on the grounds of lack of cause of action and prescription
since the action was filed beyond the one-year period provided in the Carriage of
Goods by Sea Act.
Issue:
Does the action of Ang already prescribed?
Held:
No. In the American Steamship Agencies cases, it was held that the action of Ang is
based on misdelivery of the cargo which should be distinguished from loss thereof.
The one-year period provided for in section 3 (6) of the Carriage of Goods by Sea
Act refers to loss of the cargo. What is applicable is the four-year period of
prescription for quasi-delicts prescribed in article 1146 (2) of the Civil Code or ten
years for violation of a written contract as provided for in article 1144 (1) of the
same Code.chanrobles law library : red
As Ang filed the action less than three years from the date of the alleged
misdelivery of the cargo, it has not yet prescribed. Ang, as indorsee of the bill of
lading, is a real party in interest with a cause of action for damages.
3.

Dole Philippines v. Maritime Co. of the Phil

Facts:
Good: Machine parts
Consignee: DOLE Philippines
Carrier: Maritime Company
The cargo subject of the instant case was discharged in Dadiangas unto the custody
of the consignee on December 18, 1971;
The corresponding claim for the damages sustained by the cargo was filed by the
plaintiff with the defendant vessel on May 4, 1972;
On June 11, 1973 the plaintiff filed a complaint embodying three (3) causes of
action involving three (3) separate and different shipments. The third cause of
action therein involved the cargo now subject of this present litigation;
On December 11, 1974, Judge Serafin Cuevas issued an Order dismissing the first
two causes of action in the aforesaid case with prejudice and without

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

pronouncement as to costs because the parties had settled or compromised the


claims involved therein. The third cause of action which covered the cargo subject
of this case now was likewise dismissed but without prejudice as it was not covered
by the settlement. The dismissal of that complaint containing the three causes of
action was upon a joint motion to dismiss filed by the parties;
Because of the dismissal with respect to the third cause of action without prejudice,
plaintiff instituted this present complaint on January 6, 1975.
Maritime filed as an answer the affirmative defense of prescription under the
COGSA (Carriage of Good by Sea Act). Maritime filed a formal motion to dismiss
invoking once more the ground of prescription. The motion was opposed by DOLE;
resolved in favor of Maritime (complaint dismissed). DOLE sought MR but was also
denied, hence present action for appeal.
ART 1155 of the Civil Code provides that prescription of actions is interrupted by
the making of an extrajudicial written demand by the creditor.
COGSA, Sec 3, Par 5:
the carrier and the ship shall be discharged from all liability in respect of loss or
damage unless suit is brought within one year after delivery of the goods or the
date when the goods should have been delivered; Provided, That, if a notice of loss
or damage, either apparent or conceded, is not given as provided for in this section,
that fact shall not affect or prejudice the right of the shipper to bring suit within one
year after the delivery of the goods or the date when the goods should have been
delivered.
Dole concedes that its action is subject to the one-year period of limitation
prescribe in the above-cited provision. The substance of its argument is that since
the provisions of the Civil Code are, by express mandate of said Code, suppletory of
deficiencies in the Code of Commerce and special laws in matters governed by the
latter, and there being "*** a patent deficiency *** with respect to the tolling of
the prescriptive period ***" provided for in the Carriage of Goods by Sea Act,
prescription under said Act is subject to the provisions of Article 1155 of the Civil
Code on tolling and because Dole's claim for loss or damage made on May 4, 1972
amounted to a written extrajudicial demand which would toll or interrupt
prescription under Article 1155, it operated to toll prescription also in actions under
the Carriage of Goods by Sea Act. To much the same effect is the further argument
based on Article 1176 of the Civil Code which provides that the rights and
obligations of common carriers shag be governed by the Code of Commerce and by
special laws in all matters not regulated by the Civil Code.
Issue:
WON Art 114 of the CC applies to actions brought under the COGSA

Was the prescriptive period interrupted?


Held: NO.
The Court decided that in a case governed by the Carriage of Goods by Sea Act, the
general provisions of the Code of Civil Procedure on prescription should not be
made to apply. (Chua Kuy vs. Everett Steamship Corp., G.R. No. L-5554, May 27,
1953.) Similarly, the Court held that in such a case the general provisions of the new
Civil Code (Art. 1155) cannot be made to apply, as such application would have the
effect of extending the one-year period of prescription fixed in the law. It is
desirable that matters affecting transportation of goods by sea be decided in as
short a time as possible; the application of the provisions of Article 1155 of the new
Civil Code would unnecessarily extend the period and permit delays in the
settlement of questions affecting transportation, contrary to the clear intent and
purpose of the law.
Moreover, if the contention of DOLE were to be given merit thereby extending the
period of prescription, it still let the new period lapse without filing an action. It
filed its action 1 month after expiry of supposed new prescriptive period.
Dole's contention that the prescriptive period remained tolled/interrupted and it
filed its action well within the one-year prescriptive period in Sec. 3(6) of the
Carriage of Goods by Sea Act equates to tolling with indefinite suspension. It is
clearly fallacious and merits no consideration
4.

Sea Land Service Inc. v. IAC

5.

Maritime Agencies & Services, Inc. v. Court of Appeals

G.R. No. 77638 July 12, 1990


MARITIME AGENCIES & SERVICES, INC., petitioner,
vs.
COURT OF APPEALS, and UNION INSURANCE SOCIETY OF CANTON,
LTD., respondents.
G.R. No. 77674 July 12, 1990
UNION INSURANCE SOCIETY OF CANTON, LTD., petitioner,
vs.

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

COURT OF APPEALS, HONGKONG ISLAND CO., LTD., MARITIME AGENCIES &


SERVICES, INC., and/or VIVA CUSTOMS BROKERAGE, respondents.

finding the CHARTERER, represented by its AGENT, to be liable. The CARRIER and its
AGENT are accordingly exempted from any liability.

Facts:

Issue:

Transcontinental Fertilizer Company of London Charterer

Whether or not the action has prescribed against Macondray (CARRIERS AGENT)

Hongkong Island Shipping Company Carrier


Atlas Fertilizer Company Consignee

Ruling:

Union Insurance Society of Canton, Ltd. Insurer

Action has prescribed against the CARRIERS AGENT

Maritime Agencies & Services, Inc. - Charterer's agent


Macondray Company, Inc. Carriers agent

The period for filing the claim is one year, in accordance with the Carriage of Goods
by Sea Act. This was adopted and embodied by our legislature in Com. Act No. 65
which, as a special law, prevails over the general provisions of the Civil Code on
prescription of actions. Section 3(6) of that Act provides as follows:

The CHARTERER chartered from the CARRIER the motor vessel named "Hongkong
Island" for the shipment of 8073.35 MT (gross) bagged urea from Novorossisk,
Odessa, USSR to the Philippines, the parties signing for this purpose a Uniform
General Charter dated Aug. 9, 1979.

Of the total shipment, 5,400.04 MT was for the account of the CONSIGNEE,
3,400.04 to be discharged in Manila and the remaining 2,000 MT in Cebu. The
vessel arrived in Manila on Oct. 3 and unloaded part of the consignee's goods, then
proceeded to Cebu on Oct. 19 to discharge the rest of the cargo. On Oct. 31, the
CONSIGNEE filed a formal claim against CHARTERERS AGENT, copy furnished
CARRIERS AGENT, for the C & F value of the 1,383 shortlanded bags. On Jan. 12,
1980, the CONSIGNEE filed another formal claim against Viva Customs Brokerage
for the value of 574 bags of net unrecovered spillage
These claims having been rejected, the CONSIGNEE then went to the INSURER,
which on demand paid the total indemnity. The INSURER then filed on Sept. 19,
1980, a complaint for reimbursement against the CARRIER, CHARTERERS AGENT
and Viva. On April 20, 1981, the complaint was amended to drop Viva and implead
the CARRIERS AGENT as a new defendant.

The RTC ruled in favor of the INSURER, making the CARRIER, its AGENT, and the
CHARTERERS AGENT liable. On appeal, the CA modified the decision of the RTC

In any event, the carrier and the ship shall be discharged from all
liability in respect of loss or damage unless suit is brought within
one year after delivery of the goods or the date when the goods
should have been delivered; Provided, that if a notice of loss for
damage; either apparent or concealed, is not given as provided
for in this section, that fact shall not effect or prejudice the right
of the shipper to bring suit within one year after the delivery of
the goods or the date when the goods should have been
delivered.
The one-year period in the cases at bar should commence on October 20, 1979,
when the last item was delivered to the consignee. Union's complaint was filed
against Hongkong on September 19, 1980, but tardily against Macondray on April
20, 1981. The consequence is that the action is considered prescribed as far as
Macondray is concerned but not against its principal, which is what matters
anyway.
6.

MAYER STEEL PIPE CORP V CA

FACTS:
Hongkong Government Supplies Department (Hongkong) contracted petitioner
Mayer Steel Pipe Corporation (Mayer) to manufacture and supply various steel
pipes and fittings. Mayer insured the pipes and fittings against all risks with private
respondents South Sea Surety and Insurance Co., Inc. (South Sea) and Charter

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

Insurance Corp. (Charter). Mayer & Hongkong also appointed a third party inspector
to examine whether the pipes and fittings are manufactured in accordance with the
specifications in the contract, and accordingly, the pipes and fittings were properly
certified. However, upon reaching Hongkong, it was discovered that a substantial
portion thereof was damaged. The petitioners filed a case against the private
respondents after the latter refused to pay the formers demand allegedly due to
the insurance surveyor's report which showed that the damage is a factory defect.
The trial court ruled in favor of petitioners and held that the damage was not due to
factory defect. The CA upheld the Trial Courts findings but dismissed the complaint
on the ground of prescription. It held that the action is barred under Section 3(6) of
the Carriage of Goods by Sea Act since it was filed only on April 17, 1986, more than
two years from the time the goods were unloaded from the vessel. Section 3(6) of
the Carriage of Goods by Sea Act provides that "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."
ISSUE:
WON the suit filed by the petitioners is barred by prescription?
SC RULING:
The Court ruled in the negative. It held that the prescriptive period laid down in
Section 3(6) of the COGSA governs the relationship between the carrier on the one
hand and the shipper, the consignee and/or the insurer on the other hand. It
defines the obligations of the carrier under the contract of carriage. It does not,
however, affect the relationship between the shipper and the insurer. The latter
case is governed by the Insurance Code. The liability of the insurer is not
extinguished because the insurer's liability is based not on the contract of carriage
but on the contract of insurance.The CAs reliance on the Filipino Merchants case is
erroneous since in that case, it was the insurer which filed a claim against the
carrier for reimbursement of the amount it paid to the shipper beyond the period
prescribed in COGSA. Thus, the court ruled in that case that "the coverage of the
Act includes the insurer of the goods." In the case at bar, it was the shipper which
filed a claim against the insurer

.CHAPTER 19

1.

LUZON STEVEDORING CO., INC., and VISAYAN STEVEDORE


TRANSPORTATION CO., Petitioners, vs. THE PUBLIC SERVICE COMMISSION
and THE PHILIPPINE SHIPOWNERS ASSOCIATION, Respondents.

FACTS: Respondents are corporations mainly engaged in the stevedoring or


lighterage and harbor towage business. At the same time, they are engaged in
interisland service which consists of hauling cargoes such as sugar, oil, fertilizer and
other commercial commodities which are loaded in their barges and towed by their
tugboats from Manila to various points in the Visayan Islands, particularly in the
Provinces of Negros Occidental and Capiz, and from said places to Manila. For this
service respondents charge freightage. There is no fixed route in the transportation
of these cargoes, the same being left at the indication of the owner or shipper of
the goods. The barge and the tugboats are manned by the crew of respondents
and, in case of damage to the goods in transit caused by the negligence of said
crews, respondents are liable therefor. The service for which respondents charge
freightage covers the hauling or carriage of the goods from the point of
embarkation to the point of disembarkation either in Manila or in any point in the
Visayan Islands, as the case may be.
It was upon these findings that the Commission made the order now sought to be
reviewed, upon complaint of the Philippine Shipowners' Association charging that
the then respondents were engaged in the transportation of cargo in the
Philippines for hire or compensation without authority or approval of the
Commission, having adopted, filed and collected freight charges at the rate of P0.60
per bag or picul, particularly sugar, loaded and transported in their lighters and
towed by their tugboats between different points in the Province of Negros
Occidental and Manila, which said rates resulted in ruinous competition with
complainant.
ISSUE: WON petitioner is engaged in public service
HELD:
Section 13 (b) of the Public Service Law (Commonwealth Act No. 146) defines public
service thus:
"The term 'public service' includes every person that now or hereafter may own,
operate, manage, or control in the Philippines, for hire or compensation, with
general or limited clientele, whether permanent, occasional or accidental, and done
for general business purposes any common carrier, railroad, street railway, traction

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

railway, subway, motor vehicle, either for freight or passenger, or both, with or
without fixed route and whatever may be its classification, freight or carrier service
of any class, express service, steamboat, or steamship line, pontines, ferries, and
small water craft, engaged in the transportation of passengers and freight, shipyard,
marine railway, marine repair shop, warehouse, wharf or dock, ice plant, icerefrigeretion plant, canal, irrigation system, sewerage, gas, electric light, heat and
power, water supply and power, petroleum, sewerage system, telephone, wire or
wireless telegraph system and broadcasting radio stations."
It is not necessary, under this definition, that one holds himself out as serving or
willing to serve the public in order to be considered public service.
In Luzon Brokerage Company vs. Public Service Commission (40 Off. Gaz., 7th
Supplement, p. 271), this court declared that "Act 454 is clear in including in the
definition of a public service that which is rendered for compensation, although
limited exclusively to the customers of the petitioner."
It can scarcely be denied that the contracts between the owners of the barges and
the owners of the cargo at bar were ordinary contracts of transportation and not of
lease. Petitioners' watercraft was manned entirely by crews in their employ and
payroll, and the operation of the said craft was under their direction and control,
the customers assuming no responsibility for the goods handled on the barges. The
great preponderance of the evidence contradicts the assertion that there was any
physical or symbolic conveyance of the possession of the tugboats and barges to
the shippers. Whether the agreements were written or verbal, the manner of
payment of freight charges, the question who loaded and unloaded the cargo, the
propriety of the admission of certain receipts in evidence, etc., to all of which the
parties have given much attention these are matters of form which do not alter the
essential nature of the relationship of the parties to the transactions as revealed by
the fundamental facts of record.
It has been already shown that the petitioners' lighters and tugboats were not
leased, but used to carry goods for compensation at a fixed rate for a fixed weight.
At the very least, they were hired, hired in the sense that the shippers did not have
direction, control, and maintenance thereof, which is a characteristic feature of
lease.
It has been seen that public utility, even where the term is not defined by statute, is
not determined by the number of people actually served. Nor does the mere fact
that service is rendered only under contract prevent a company from being a public

utility. On the other hand, casual or incidental service devoid of public character
and interest, it must be admitted, is not brought within the category of public
utility. The demarkation line is not susceptible of exact description or definitions,
each case being governed by its peculiar circumstances.
The transportation service which was the subject of complaint was not casual or
incidental. It had been carried on regularly for years at almost uniform rates of
charges. Although the number of the petitioners' customers was limited, the value
of goods transported was not inconsiderable. Petitioners did not have the same
customers all the time embraced in the complaint, and there was no reason to
believe that they would not accept, and there was nothing to prevent them from
accepting, new customers that might be willing to avail of their service to the extent
of their capacity. Upon the well-established facts as applied to the plain letter of
Commonwealth Act No. 146, we are of the opinion that the Public Service
Commission's order does not invade private rights of property or contract.
In at least one respect, the business complained of was a matter of public concern.
The Public Service Law was enacted not only to protect the public against
unreasonable charges and poor, inefficient service, but also to prevent ruinous
competition. That, we venture to say, is the main purpose in bringing under the
jurisdiction of the Public Service Commission motor vehicles, other means of
transportation, ice plants, etc., which cater to a limited portion of the public under
private agreements. To the extent that such agreements may tend to wreck or
impair the financial stability and efficiency of public utilities who do offer service to
the public in general, they are affected with public interest and come within the
police power of the state to regulate.
2.

San Pablo v. Pantranco , G.R. No. L-61461, 21 August 1987

Facts: The Pantranco South Express, Inc., hereinafter referred to as PANTRANCO is a


domestic corporation engaged in the land transportation business with PUB service
for passengers and freight and various certificates for public conveniences (CPC) to
operate passenger buses from Metro Manila to Bicol Region and Eastern Samar. On
March 27,1980 PANTRANCO through its counsel wrote to Maritime Industry
Authority (MARINA) requesting authority to lease/purchase a vessel named MN
"Black Double" "to be used for its project to operate a ferryboat service from
Matnog, Sorsogon and Allen, Samar that will provide service to company buses and

185
TRANSPO CASE DIGESTS, 2ND BATCH, 2E

freight trucks that have to cross San Bernardo Strait. In a reply of April 29,1981
PANTRANCO was informed by MARINA that it cannot give due course to the
request.

PANTRANCO nevertheless acquired the vessel MN "Black Double" on May


27, 1981 for P3 Million pesos. It wrote the Chairman of the Board of Transportation
(BOT) through its counsel, that it proposes to operate a ferry service to carry its
passenger buses and freight trucks between Allen and Matnog in connection with
its trips to Tacloban City. PANTRANCO claims that it can operate a ferry service in
connection with its franchise for bus operation in the highway from Pasay City to
Tacloban City "for the purpose of continuing the highway, which is interrupted by a
small body of water, the said proposed ferry operation is merely a necessary and
incidental service to its main service and obligation of transporting its passengers
from Pasay City to Tacloban City. Such being the case there is no need to obtain a
separate certificate for public convenience to operate a ferry service between Allen
and Matnog to cater exclusively to its passenger buses and freight trucks.
Without awaiting action on its request PANTRANCO started to operate said
ferry service. Acting Chairman Jose C. Campos, Jr. of BOT ordered PANTRANCO not
to operate its vessel until the application for hearing on Oct. 1, 1981. In another
order BOT enjoined PANTRANCO from operating the MN "Black Double" otherwise
it will be cited to show cause why its CPC should not be suspended or the pending
application denied.
Epitacio San Pablo (now represented by his heirs) and Cardinal Shipping
Corporation who are franchise holders of the ferry service in this area interposed
their opposition. They claim they adequately service the PANTRANCO by ferrying its
buses, trucks and passengers. BOT then asked the legal opinion from the Minister
of Justice whether or not a bus company with an existing CPC between Pasay City
and Tacloban City may still be required to secure another certificate in order to
operate a ferry service between two terminals of a small body of water. On
October 20, 1981 then Minister of Justice Ricardo Puno rendered an opinion to
the effect that there is no need for bus operators to secure a separate CPC to
operate a ferryboat service.

Thus on October 23, 1981 the BOT rendered its decision holding that the
ferryboat service is part of its CPC to operate from Pasay to Samar/Leyte by
amending PANTRANCO's CPC so as to reflect the same.

Cardinal Shipping Corporation and the heirs of San Pablo filed separate
motions for reconsideration of said decision and San Pablo filed a supplemental
motion for reconsideration that were denied by the BOT on July 21, 1981. Hence,
San Pablo filed the herein petition for review on certiorari with prayer for
preliminary injunction seeking the revocation of said decision, and pending
consideration of the petition the issuance of a restraining order or preliminary
injunction against the operation by PANTRANCO of said ferry service

Issue: Whether or not respondent should secure a separate CPC.

Held: YES. Considering the environmental circumstances of the case, the


conveyance of passengers, trucks and cargo from Matnog to Allen is certainly not a
ferryboat service but a coastwise or interisland shipping service. Under no
circumstance can the sea between Matnog and Allen be considered a continuation
of the highway. While a ferryboat service has been considered as a continuation of
the highway when crossing rivers or even lakes, which are small body of waters
separating the land, however, when as in this case the two terminals, Matnog and
Allen are separated by an open sea it cannot be considered as a continuation of the
highway.
What appears clear from the record is that at the beginning PANTRANCO
planned to operate such ferry boat service between Matnog and Alien as a common
carrier so it requested authority from MARINA to purchase the vessel M/V "Black
Double in accordance with the procedure provided for by law for such application
for a certificate of public convenience. However when its request was denied as the
said routes "are adequately serviced by existing/authorized operators, it
nevertheless purchased the vessel and started operating the same. Obviously to go
about this obstacle to its operation, it then contrived a novel theory that what it
proposes to operate is a private ferryboat service across a small body of water for
the exclusive use of its buses, trucks and passengers as an incident to its franchise
to convey passengers and cargo on land from Pasay City to Tacloban so that it
believes it need not secure a separate certificate of public convenience. Based on
this representation, no less than the Secretary of Justice was led to render an
affirmative opinion on October 20, 1981, 26 followed a few days later by the
questioned decision of public respondent of October 23, 1981. 27 Certainly the
Court cannot give its imprimatur to such a situation.

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TRANSPO CASE DIGESTS, 2ND BATCH, 2E

Thus the Court holds that the water transport service between Matnog and Allen is
not a ferry boat service but a coastwise or interisland shipping service. Before
private respondent may be issued a franchise or CPC for the operation of the said
service as a common carrier, it must comply with the usual requirements of filing an
application, payment of the fees, publication, adducing evidence at a hearing and
affording the oppositors the opportunity to be heard, among others, as provided by
law.

3.

Manzanal v. Ausejo

FACTS:
The case stemmed from the affidavit of Mauro A. Ausejo, with the Complaint,
Investigation and Enforcement Office (CIEO) of the Public Service Commission
narrating a hold up incident on March 13, 1966. In this affidavit, he implicated a
taxicab unit whose plate number was said to be "6100" and which was allegedly
boarded by three (3) robbers as they escaped from Roxas Boulevard in front of the L
& S Building at about 6:00 a.m. of March 13, 1966, after affiant and a companion,
Mr. Jose Caballes were accosted and held-up. On the basis of this affidavit,
respondent Commission issued a "Show-Cause Order" dated May 25, 1966 upon
petitioner, to wit:
... respondent (Petitioner Manzanal) is hereby ordered to appeal before
this Commission, on this 24th day of June, 1966, at 9:00 o'clock in the
morning to show cause why her certificate of public convenience issued
under Case No. 62-4503 should not be cancelled for not rendering safe,
adequate and proper service by employing a driver with criminal
tendencies, in violation of Section 19 (a) of the Public Service Law and
Section 47 of the Revised Order No. 1 of this Commission.
Failure on the part of the respondent to appear at the hearing set will be
considered as a waiver of her right to be heard and this Commission will
decide the case on its merits
At the trial, Mr. Caballes testified that the taxi was red in the entire body while
private respondent Ausejo said that the taxi was red and it had parts painted blue.
Both however said that the plate color was orange.
On the part of petitioner, Manzanal, she submitted documents disputing the
possibility that the taxicab in question was hers. She submitted the decision of the

PSC in Case No. 65-2149 where it appears that the commercial name of the taxi is
Crisman Taxi and that the color is "red top with emerald green body" and two
certifications to the effect that the color of the plate in 1965 was white with
maroon background.
On June 30, 1967, the Public Service Commissioner Enrique Medina issued an order
deploring the fact that the respondent did not file a formal answer or explanation.
The Commission found that (a) there was no motive on the part of the said
witnesses for the complainant to testify against the operator or against the driver of
taxi with Plate No. 61 00; (b) the attention of the witnesses was concentrated on
the number of the registration plate and it is understandable that they paid little or
no attention at all to the colors; and (c) the conduct of the operator gave the
impression that instead of applying a strong arm against the erring driver, she has
tried to protect and shield him.
Accordingly, respondent Commission considered the charges proven since the holdup incident was duly established and ordered the certificate of public convenience
issued in Case No. 62-4503, for five units revoked and cancelled.
ISSUE: W/N the cancellation of CPC is valid.
HELD: NO.
Even on the assumption that it was petitioner's taxicab that was used by the
escaping hold-uppers, there is no evidence that the driver is a co-conspirator in the
commission of the offense of robbery. Conspiracy must be proved by clear and
convincing evidence. The mere claim that the taxicab was there and probably
waiting is not proof of conspiracy in this case as it should be recalled that there
were about twelve vehicles that stopped to view the spectacle. Further, it is
possible that the driver did not act voluntarily as no person in his right senses would
defy the wishes of armed passengers. Even on the assumption that the driver had
participated voluntarily in the incident, his culpability should not be made a ground
for the cancellation of the certificate of petitioner. While an employer may be
subsidiarily liable for the employee's civil liability in a criminal action, subsidiary
liability presupposes that there was a criminal action. Besides, in order that an
employer may be subsidiarily liable, it should be shown that the employee
committed the offense in the discharge of his duties. While it is true also that an
employer may be primarily liable under Article 2180 of the Civil Code for the acts or
omissions of persons for whom one is responsible, this liability extends only to
damages caused by his employees acting within the scope of their assigned tasks.
Clearly, the act in question is totally alien to the business of petitioner as an
operator and hence, the driver's illicit act is not within the scope of the functions

187
TRANSPO CASE DIGESTS, 2ND BATCH, 2E

entrusted to him. Moreover, the action before respondent Commission is neither a


criminal prosecution nor an action for quasi-delict. Hence, there is absolutely no
ground to hold petitioner liable for the driver's act.
Finally, under Section 16 (n) of the Public Service Act, the power of the Commission
to suspend or revoke any certificate received under the provisions of the Act may
only be exercised whenever the holder thereof has violated or willfully and
contumaciously refused to comply with any order, rule or regulation of the
Commission or any provision of the Act. In the absence of showing that there is
willful and contumacious violation on the part of petitioner, no certificate of public
convenience may be validly revoked.
The following are some instances where the cancellation of a certificate of public
convenience where held valid: (1) where the holder is a mere dummy (Pecson vs.
Pecson, 78 Phil. 522); (2) where the operator ceased operation and placed his buses
on storage (Parades vs. Public Service Commission, L-7111, May 30, 1955); and (3)
where the operator abandons, totally the service (Collector vs. Buan, L-11438, July
31, 1958; Regodon vs. Public Service Commission, L-11899, Sept. 23, 1958; Paez vs.
Marcelo, L-1530, March 30, 1962). None of the willful acts in patent violation of the
Public Service Law can be attributed to petitioner herein.

Lungsod Corp issued a resolution adopting a Bandera' System under which a


member of the cooperative is permitted to queue for passenger at the disputed
pathway in exchange for the ticket worth P20, the proceeds of which shall be
utilized for Christmas programs of the drivers and other benefits, and on the
strength of defendants' registration as a collective body with the SEC. Not happy
about the resolution, the Association decided to form a human barricade and
assumed the dispatching of passenger jeepneys.

A suit for damages was then files against the Association. Its answer contained
vehement denials to the insinuation of take over and at the same time raised as a
defense the circumstance that the organization was formed not to compete with
respondents. It, however, admitted that it is not authorized to transport
passengers.

The trial court rendered a decision in favor of respondent Lungsod Corp. The CA
affirmed the decision of the trial court with modification to the amount of damages.
Issue:

4.

Cogeo-Cubao Operators and Drivers Association v. CA

G.R. No. 100727 March 18, 1992


COGEO-CUBAO
OPERATORS
AND
DRIVERS
ASSOCIATION, petitioner,
vs.
THE COURT OF APPEALS, LUNGSOD SILANGAN TRANSPORT SERVICES, CORP.,
INC., respondents.

Whether or not the petitioner usurped the property right of the respondent
Ruling:
Yes. Under the Public Service Law, a certificate of public convenience is an
authorization issued by the Public Service Commission for the operation of public
services for which no franchise is required by law. In the instant case, a certificate of
public convenience was issued to respondent corporation on January 24, 1983 to
operate a public utility jeepney service on the Cogeo-Cubao route. As found by the
trial court, the certificate was issued pursuant to a decision passed by the Board of
Transportation in BOT Case No. 82-565.

Facts:
A certificate of public convenience to operate a jeepney service was ordered to be
issued in favor of Lungsod Silangan to ply the Cogeo-Cubao route. The petitioner
Association was registered as a non-stock, non-profit organization with the main
purpose of representing the Lungsond Corp. for whatever contract and/or
agreement it will have regarding the ownership of units, and the like, of the
members of the Association.

A certification of public convenience is included in the term "property" in the broad


sense of the term. Under the Public Service Law, a certificate of public convenience
can be sold by the holder thereof because it has considerable material value and is
considered as valuable asset (Raymundo v. Luneta Motor Co., et al., 58 Phil. 889).
Although there is no doubt that it is private property, it is affected with a public
interest and must be submitted to the control of the government for the common
good (Pangasinan Transportation Co. v. PSC, 70 Phil 221). Hence, insofar as the

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interest of the State is involved, a certificate of public convenience does not confer
upon the holder any proprietary right or interest or franchise in the route covered
thereby and in the public highways (Lugue v. Villegas, L-22545, Nov . 28, 1969, 30
SCRA 409). However, with respect to other persons and other public utilities, a
certificate of public convenience as property, which represents the right and
authority to operate its facilities for public service, cannot be taken or interfered
with without due process of law. Appropriate actions may be maintained in courts
by the holder of the certificate against those who have not been authorized to
operate in competition with the former and those who invade the rights which the
former has pursuant to the authority granted by the Public Service Commission
(A.L. Ammen Transportation Co. v. Golingco. 43 Phil. 280).
In the case at bar, the trial court found that petitioner association forcibly took over
the operation of the jeepney service in the Cogeo-Cubao route without any
authorization from the Public Service Commission and in violation of the right of
respondent corporation to operate its services in the said route under its certificate
of public convenience.
5.

KMU Labor Center v. Garcia

6.

TATAD vs. GARCIA

G.R. No. 114222 April 6, 1995


FRANCISCO S. TATAD, JOHN H. OSMENA and RODOLFO G. BIAZON
vs.
HON. JESUS B. GARCIA, JR., in his capacity as the Secretary of the Department of
Transportation and Communications, and EDSA LRT CORPORATION, LTD.
QUIASON, J.:
FACTS:
DOTC planned to construct a light railway transit (LRT) line along EDSA referred to
as EDSA Light Rail Transit III (EDSA LRT III). Eli Levin Enterprises, Inc., represented by
Elijahu Levin to DOTC Secretary Oscar Orbos, sent a letter proposing to construct
the EDSA LRT III on a Build-Operate-Transfer (BOT) basis.
RA 6957 entitled "An Act Authorizing the Financing, Construction, Operation and
Maintenance of Infrastructure Projects by the Private Sector, and For Other
Purposes," or the Build-Operate-Transfer (BOT) Law was signed into law. It provides
two schemes for the financing, construction and operation of government projects
through private initiative and investment: Build-Operate-Transfer (BOT) or BuildTransfer (BT).

Pursuant to RA 6957, the Prequalification Bids and Awards Committee (PBAC) and
the Technical Committee were created. Five groups responded to the invitation
namely, ABB Trazione of Italy, Hopewell Holdings Ltd. of Hongkong, Mansteel
International of Mandaue, Cebu, Mitsui & Co., Ltd. of Japan, and EDSA LRT
Consortium, composed of ten foreign and domestic corporations: namely, Kaiser
Engineers International, Inc., ACER Consultants (Far East) Ltd. and Freeman Fox,
Tradeinvest/CKD Tatra of the Czech and Slovak Federal Republics, TCGI Engineering
All Asia Capital and Leasing Corporation, The Salim Group of Jakarta, E. L.
Enterprises, Inc., A.M. Oreta & Co. Capitol Industrial Construction Group, Inc, and F.
F. Cruz & co., Inc.
After evaluating the prequalification, bids, the PBAC issued a Resolution declaring
that of the five applicants, only the EDSA LRT Consortium "met the requirements of
garnering at least 21 points per criteria, except for Legal Aspects, and obtaining an
over-all passing mark of at least 82 points". The EDSA LRT Consortium submitted its
bid proposal to DOTC. For compliance of requirements, DOTC and EDSA LRT
Corporation, Ltd., in substitution of the EDSA LRT Consortium, entered into an
"Agreement to Build, Lease and Transfer a Light Rail Transit System for EDSA" under
the terms of the BOT Law.
Secretary Prado, thereafter, requested presidential approval of the contract.
However, Executive Secretary Franklin Drilon, who replaced Executive Secretary
Orbos, informed Secretary Prado that the President could not grant the requested
approval. The parties entered into a "Revised and Restated Agreement to Build,
Lease and Transfer a Light Rail Transit System for EDSA". DOTC, represented by
Secretary Jesus Garcia vice Secretary Prado, and EDSA LRT Corporation, Ltd. entered
into a "Supplemental Agreement to the 22 April 1992 Revised and Restated
Agreement to Build, Lease and Transfer a Light Rail Transit System for EDSA".
According to the agreements, EDSA LRT Corporation, Ltd. shall undertake and
finance the entire project required for a complete operational light rail transit
system. Target completion date is 1,080 days or approximately 3 years from the
implementation date of the contract inclusive of mobilization, site works, initial and
final testing of the system. Upon full or partial completion and viability thereof,
EDSA LRT Corporation, Ltd. shall deliver the use and possession of the completed
portion to DOTC which shall operate the same. DOTC shall pay EDSA LRT
Corporation, Ltd. rentals on a monthly basis through an Irrevocable Letter of Credit.
As agreed upon, EDSA LRT Corporation, Ltd.'s capital shall be recovered from the
rentals to be paid by the DOTC which, in turn, shall come from the earnings of the

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EDSA LRT III. After 25 years and DOTC shall have completed payment of the rentals,
ownership of the project shall be transferred to the latter for a consideration of
only U.S. $1.00. (CONTRACT OF LEASE)
RA 7718, an "Act Amending Certain Sections of Republic Act No. 6957, Entitled "An
Act Authorizing the Financing, Construction, Operation and Maintenance of
Infrastructure Projects by the Private Sector, and for Other Purposes" was signed
into law by the President. It expressly recognizes BLT scheme and allows direct
negotiation of BLT contracts.
Tatad, Osmena and Biazon, suing as Senators and taxpayers, asserted that the
Revised and Restated Agreement of April 22, 1992 and the Supplemental
Agreement of May 6, 1993 are unconstitutional and invalid, among others, for this
reason: the EDSA LRT III is a public utility, and the ownership and operation thereof
is limited by the Constitution to Filipino citizens and domestic corporations, not
foreign corporations like EDSA LRT Corporation, Ltd.
EDSA LRT Corporation, Ltd. to whom the contract to construct the EDSA LRT III was
awarded by public respondent, is admittedly a foreign corporation "duly
incorporated and existing under the laws of Hongkong". There is also no dispute
that once the EDSA LRT III is constructed, EDSA LRT Corporation, Ltd., as lessor, will
turn it over to DOTC, as lessee, for the latter to operate the system and pay rentals
for said use.
ISSUE: Whether or not EDSA LRT Corporation, Ltd., a foreign corporation, can own
EDSA LRT III, a public utility?
HELD: YES, EDSA LRT Corporation, Ltd. can own EDSA LRT III.
What EDSA LRT Corporation, Ltd. owns are the rail tracks, rolling stocks like the
coaches, rail stations, terminals and the power plant, not a public utility. While a
franchise is needed to operate these facilities to serve the public, they do not by
themselves constitute a public utility. What constitutes a public utility is not their
ownership but their use to serve the public (Iloilo Ice & Cold Storage Co. v. Public
Service Board, 44 Phil. 551, 557 558 [1923]).
The Constitution, in no uncertain terms, requires a franchise for the operation of a
public utility. However, it does not require a franchise before one can own the
facilities needed to operate a public utility so long as it does not operate them to
serve the public.
Section 11 of Article XII of the Constitution provides: No franchise, certificate or any
other form of authorization for the operation of a public utility shall be granted
except to citizens of the Philippines or to corporations or associations organized

under the laws of the Philippines at least sixty per centum of whose capital is
owned by such citizens, nor shall such franchise, certificate or authorization be
exclusive character or for a longer period than fifty years . . . (Emphasis supplied).
In law, there is a clear distinction between the "operation" of a public utility and the
ownership of the facilities and equipment used to serve the public.
The right to operate a public utility may exist independently and separately from
the ownership of the facilities thereof. One can own said facilities without operating
them as a public utility, or conversely, one may operate a public utility without
owning the facilities used to serve the public. The devotion of property to serve the
public may be done by the owner or by the person in control thereof who may not
necessarily be the owner thereof.
In sum, EDSA LRT Corporation, Ltd. will not run the light rail vehicles and collect fees
from the riding public. It will have no dealings with the public and the public will
have no right to demand any services from it.
*EDSA LRT Corporation, Ltd. merely owns the facilities necessary to operate EDSA
LRT III.

7.

Philippine Airlines, Inc. vs. Civil Aeronautics Board

Facts: Grand Air applied for a Certificate of Public Convenience and Necessity with
the Civil Aeronautics Board (CAB). The Chief Hearing Officer issued a notice of
hearing directing Grand Air to serve a copy of the application and notice to all
scheduled Philippine Domestic operators. Grand Air filed its compliance and
requested for a Temporary Operating Permit (TOP). PAL filed an opposition to the
application on the ground that the CAB had no jurisdiction to hear the application
until Grand Air first obtains a franchise to operate from Congress. The Chief
Hearing Officer denied the opposition and the CAB approved the issuance of the
TOP for a period of 3 months. The opposition for the TOP was likewise denied. The
CAB justified its assumption of jurisdiction over Grand Airs application on the basis
of Republic Act 776 which gives it the specific power to issue any TOP or Certificate
of Public Convenience and Necessity.

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Issue: Whether or not the CAB can issue a Certificate of Public Convenience and
Necessity or TOP even though the prospective operator does not have a legislative
franchise?

Held: Yes, as mentioned by the CAB, it is duly authorized to do so under Republic


Act 776 and a legislative franchise is not necessary before it may do so, since
Congress has delegated the authority to authorize the operation of domestic air
transport services to the CAB, an administrative agency. The delegation of such
authority is not without limits since Congress had set specific standard and
limitations on how such authority should be exercised.

Public convenience and necessity exists when the proposed facility will meet a
reasonable want of the public and supply a need which the existing facilities do not
adequately afford.

Thus, the Board should be allowed to continue hearing the application, since it has
jurisdiction over it provided that the applicant meets all the requirements of the
law.

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