Case #1
PEDRO DE GUZMAN, petitioner, vs. COURT OF APPEALS
and ERNESTO CENDANA, respondent
FACTS
- Respondent Ernesto Cendana, a junk dealer, was engaged in buying
up used bottles and scrap metal in Pangasinan. He would bring such
material to Manila for resale. He utilized two (2) six- wheeler trucks
which he owned for hauling the material to Manila. On the return trip to
Pangasinan, respondent would load his vehicles with cargo which
various merchants wanted delivered to different establishments in
Pangasinan. For that service, respondent charged freight rates.
- Petitioner Pedro de Guzman a merchant and authorized dealer of
General Milk Company (Philippines), Inc. in Urdaneta, Pangasinan,
contracted with respondent for the hauling of 750 cartons of Liberty
filled milk from a warehouse of General Milk in Makati to petitioner's
establishment in Urdaneta
- Respondent loaded in Makati the merchandise on to his trucks: 150
cartons were loaded on a truck driven by respondent himself, while 600
cartons were placed on board the other truck which was driven by
Manuel Estrada, respondent's driver and employee.
- Only 150 boxes of Liberty filled milk were delivered to petitioner. The
other 600 boxes never reached petitioner, since the truck was hijacked
somewhere along MacArthur Highway in Tarlac, by armed men
- Petitioner commenced action against private respondent demanding
payment of P 22,150.00, the claimed value of the lost merchandise
- Petitioner argued that private respondent, being common carrier, and
should be held liable for the value of the undelivered goods-- respondent
denied that he was a common carrier
- The trial court rendered a Decision finding private respondent to be a
common carrier and holding him liable
-- The Court of Appeals reversed the judgment of the trial court and held
that respondent had been engaged in transporting return loads of freight
"as a casual occupation a sideline to his scrap iron business" and not
as a common carrier.
ISSUE
1. Whether or not private respondent Ernesto Cendana may be properly
characterized as a common carrier (Yes)
2. Whether or not
private respondent is
liable
(No)
HELD
First issue
-The Civil Code defines "common carriers" in the following terms:
Article 1732. Common carriers are persons, corporations, firms or
associations engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air for compensation,
offering their services to the public.
The above article makes no distinction between one whose principal
business activity is the carrying of persons or goods or both, and one
who does such carrying only as an ancillary activity (in local Idiom as "a
sideline"). Article 1732 also carefully avoids making any distinction
between a person or enterprise offering transportation service on a
regular or scheduled basis and one offering such service on an
occasional, episodic or unscheduled basis. Neither does Article 1732
distinguish between a carrier offering its services to the "general public,"
i.e., the general community or population, and one who offers services
or solicits business only from a narrow segment of the general
population.
-So understood, the concept of "common carrier" under Article 1732
may be seen to coincide neatly with the notion of "public service,"
under the Public Service Act (Co
1416, as amended) which at least partially supplements the law on
common carriers set forth in the Civil Code. Under Section 13,
paragraph (b) of the Public Service Act, "public service" includes: ...
every person that now or hereafter may own, operate, manage, or
control in the Philippines, for hire or compensation, with general or
limited clientele, whether permanent, occasional or accidental, and
done for general business purposes, any common carrier, railroad,
street railway, traction railway, subway motor vehicle, either for freight
or passenger, or both, with or without fixed route and whatever may be
its classification...
- We do not believe, however, that in the instant case, the standard of
extraordinary diligence required private respondent to retain a security
guard to ride with the truck and to engage brigands in a firelight at the
risk of his own life and the lives of the driver and his helper.
- Under Article 1745 (6), a common carrier is held responsible and will
not be allowed to divest or to diminish such responsibility even for acts
of strangers like thieves or robbers, except where such thieves or robbers
in fact acted "with grave or irresistible threat, violence or force."

-it appears to the Court that private respondent is properly characterized
as a common carrier even hough he merely "back-hauled" goods for
other merchants from Manila to Pangasinan, although such back-hauling
was done on a periodic or occasional rather than regular or scheduled
manner, and even though private respondent's principal occupation was
not the carriage of goods for others.
- The armed men acted with grave, if not irresistible, threat, violence
or force. 3 Three (3) of the five (5) hold-uppers were armed with
firearms. The robbers not only took away the truck and its cargo but
also kidnapped the driver and his helper, detaining them for several
days.

Second issue:

- Common carriers, "by the nature of their business and for reasons of
public policy" 2 are held to a very high degree of care and diligence
("extraordinary diligence") in the carriage of goods as well as of
passengers. The specific import of extraordinary diligence in the care of
goods transported by a common carrier is, according to Article 1733,
"further expressed in Articles 1734,1735 and 1745, numbers 5, 6 and 7"
of the Civil Code.

- It is important to point out that the above list of causes of loss,

destruction or deterioration which exempt the common carrier for
responsibility therefor, is a closed list (Art. 1734). Causes falling outside
the foregoing list, even if they appear to constitute a species of force
majeure fall within the scope of Art 1735

- It would follow, therefore, that the hijacking of the carrier's vehicle

must be dealt with under the provisions of Article 1735, in other words,
that the private respondent as common carrier is presumed to have
been at fault or to have acted negligently. This presumption, however,
may be overthrown by proof of extraordinary diligence on the part of
private respondent.
Case #2
NATIONAL STEEL CORPORATION, petitioner, vs. COURT OF
APPEALS AND VLASONS SHIPPING, INC., respondents.
FACTS
-The MV Vlasons I is a vessel which renders tramping service and, as
such, does not transport cargo or shipment for the general public. It is
undisputed that the ship is a private carrier. And it is in this capacity that
its owner, Vlasons Shipping, Inc., entered into a contract of
affreightment or contract of voyage charter hire with National Steel
Corporation.
- Plaintiff National Steel Corporation (NSC) as Charterer and defendant
Vlasons Shipping, Inc. (VSI) as Owner, entered into a Contract of
Voyage Charter Hire whereby NSC hired VSIs vessel, the MV
VLASONS I to make one (1) voyage to load steel products at Iligan
City and discharge them at North Harbor, Manila
- Under paragraph 10 of the contract, it is provided that owners shall
exercise due diligence to make the vessel seaworthy and properly
manned, equipped and supplied. Owners shall not be liable for loss of or
damage o the cargo arising or resulting from unseaworthiness unless
caused by want of due diligence on the part of the owners; also provides
that owners shall not be responsible for any damage unless caused by
the negligence or default of the master and crew.
- MV VLASONS I loaded at plaintiffs pier at Iligan City, the NSCs
shipment of 1,677 skids of tinplates and 92 packages of hot rolled
sheets or a total of 1,769 packages-- shipment was placed in the three
(3) hatches of the ship.
-The vessel arrived with the cargo when the vessels three (3) hatches
containing the shipment were opened by plaintiffs agents, nearly all
the skids of tinplates and hot rolled sheets were allegedly found to be
wet and rusty. Unloading was completed after incurring a delay of 11
days due to the heavy rain
- It was reported that the rusting of the tinplates was caused by contact
with SEA WATER sustained while still on board the vessel as a
consequence of the heavy weather and rough seas encountered
- Plaintiff filed a complaint and claimed that it sustained losses because of
the neglect and default of the master and crew in the management of the
vessel well as the want of due diligence on the part of the defendant to
make the vessel seaworthy
- Defendant denied liability for the alleged damage claiming that the MV
VLASONS was seaworthy in all respects for the carriage of plaintiffs
cargo; that said vessel was not a common carrier; that MVLASONS I
exercised due diligence and proper seamanship and were not willfully
negligent; that the stevedores of plaintiff who discharged the cargo in
Manila were negligent and did not exercise due care in the discharge of
the cargo
-Trial court's decision: that the MV VLASONS I was seaworthy and
properly that tinplates sweat by themselves when packed even without
being in contract (sic) with water from outside especially when the
weather is bad or raining; defendant cannot be held liable for it
pursuant to Article 1734 of the Civil Code; The stevedores hired by the
plaintiff to discharge the cargo of tinplates were negligent in not osing
the hatch openings of the MV VLASONS I when rains occurred
ISSUES AND RULING
A. Preliminary Matter: Common Carrier or Private Carrier?
-It has been held that the true test of a common carrier is the carriage of
passengers or goods, provided it has space, for all who opt to avail
themselves of its transportation service for a fee. A carrier which does
not qualify under the above test is deemed a private carrier. Generally,
private carriage is undertaken by special agreement and the carrier does
not hold himself out to carry goods for the general public. The most
typical, although not the only form of private carriage, is the charter party,
a maritime contract by which the charterer, a party other than the
shipowner, obtains the use and service of all or some part of a ship for a
period of time or a voyage or voyages.
-MV Vlasons I was not a common but a private carrier.
[14] Consequently, the rights and obligations of VSI an
NSC, including their respective liability for damage to the
cargo, are determined primarily by stipulations in their
contract of private carriage or charter party.
used an old and torn tarpaulin or canvas to cover the hatches
through which the cargo was loaded into the cargo hold of the ship.
The records sufficiently support VSIs contention that the ship used
the old tarpaulin, only in addition to the new one used primarily to
make the ships hatches watertight.

B. Burden of proof
- NSC must prove that the damage to its shipment was caused by
VSIs willful negligence or failure to exercise due diligence in making
MV Vlasons I seaworthy. This view finds further support in the
Code of Commerce (Art 361 and 362).
- Because the MV Vlasons I was a private carrier, the shipowners
obligations are governed by the foregoing provisions of the Code of
Commerce and not by the Civil Code which, as a general rule,
places the prima facie presumption of negligence on a common
carrier.
-The stevedores employed only a tent-like material to cover the
hatches when strong rains occasioned by a passing typhoon
disrupted the unloading of the cargo. This tent-like covering,
however, was clearly inadequate for keeping rain and seawater
away from the hatches of the ship.
*additional note: The Court defined demurrage in its strict sense as
the compensation provided for in the contract of affreightment for
the detention of the vessel beyond the laytime or that period of time
agreed on for loading and unloading of cargo. It is given to
compensate the shipowner for the nonuse of the vessel.

First issue: whether VSI exercised due diligence in making MV

Vlasons I seaworthy

-records reveal that VSI exercised due diligence to make the ship
seaworthy an fit for the carriage of NSCs cargo of steel and
tinplates. This is shown by the fact that it was drydocked and
inspected by the Philippine Coast Guard before it proceeded to
Iligan City-- cleared it as seaworthy, fitted and equipped

Second issue: whether the damage to the cargo should be

attributed to t willful negligence of the officers and crew of the
vessel or of the stevedores hired by NSC

-As noted earlier, the NSC had the burden of proving that the
damage to the cargo was caused by the negligence of the officers
and the crew of MV Vlasons I in making their vessel seaworthy and
fit for the carriage of tinplates. NSC failed to discharge this burden.

-Before us, NSC relies heavily on its claim that MV Vlasons I had
Transportation Law | Page 4 of 54
Philippine Industrial Corporation vs CA
CASE # 3 - Definition of Common Carrier
FACTS
Petitioner is a grantee of a pipeline concession under Republic Act
No. 387 to contract, install and operate oil pipelines
In 1995, petitioner applied for a mayor's permit. However, before it
could be issued, the respondent City Treasurer required petitioner
to pay a local tax based on its gross receipts for the fiscal year
1993 pursuant to the Local Government Code.
Not to hamper its operations, petitioner paid the tax under protest.
Petitioner wrote a letter addressed to the City Treasurer stating
that their company is a pipeline operator with a government
concession granted under the Petroleum Act. It is engaged in the
business of transporting petroleum products from the Batangas
refineries, via pipeline, to Sucat and JTF Pandacan Terminals.
Thus, their company is exempt from paying tax on gross receipts
under Section 133 of the Local Government Code of 1991
Petitioner filed with the RTC a complaint for tax refund.
Respondents contention: exemption applies only to
"transportation contractors and persons engaged in the
transportation by hire and common carriers by air, land and
water." Pipelines are not included in the term "common carrier"
which refers solely to ordinary carriers such as trucks, trains, ships
and the like. And the term "common carrier" under the said code
pertains to the mode or manner by which a product is delivered to
its destination.
RTC dismissed petitioners complaint. CA affirmed.
ISSUE
W/N the petitioner is a common carrier
RULE - YES
A "common carrier" may be defined, broadly, as one who holds
himself out to the public as engaged in the business of
transporting persons or property from place to place, for
compensation, offering his services to the public generally.
Art. 1732 of the Civil Code defines a "common carrier" as "any
person, corporation, firm or association engaged in the business of
carrying or transporting passengers or goods or both, by land, water,
or air, for compensation, offering their services to the public."
The test for determining whether a party is a common carrier of
goods is:
1. He must be engaged in the business of carrying goods for others
as a public employment, and must hold himself out as ready to
engage in the transportation of goods for person generally as a
business and not as a casual occupation;
2. He must undertake to carry goods of the kind to which his
business is confined;
3. He must undertake to carry by the method by which his business
is conducted and over his established roads; and
4. The transportation must be for hire.
Based on the above definitions and requirements, there is no doubt
that petitioner is a common carrier. It is engaged in the business of
transporting or carrying goods, i.e. petroleum products, for hire as a
public employment. It undertakes to carry for all persons indifferently,
that is, to all persons who choose to employ its services, and
transports the goods by land and for compensation. The fact that
petitioner has a limited clientele does not exclude it from the definition
of a common carrier. In De Guzman vs. Court of Appeals 16 we ruled
that:
The above article (Art. 1732, Civil Code) makes no distinction
between one whose principal business activity is the carrying of
persons or goods or both, and one who does such carrying only as an
ancillary activity (in local idiom, as a "sideline"). Article 1732 . . .
Transportation Law | Page 5 of 54
avoids making any distinction between a person or enterprise offering
transportation service on a regular or scheduled basis and one
offering such service on an occasional, episodic or unscheduled
basis. Neither does Article 1732 distinguish between a carrier offering
its services to the "general public," i.e., the general community or
population, and one who offers services or solicits business only from
a narrow segment of the general population. We think that Article
1877 deliberately refrained from making such distinctions.
Also, respondent's argument that the term "common carrier" as used
in Section 133 (j) of the Local Government Code refers only to
common carriers transporting goods and passengers through moving
vehicles or vessels either by land, sea or water, is erroneous.
As correctly pointed out by petitioner, the definition of "common
carriers" in the Civil Code makes no distinction as to the means
of transporting, as long as it is by land, water or air. It does not
provide that the transportation of the passengers or goods should be
by motor vehicle. In fact, in the United States, oil pipe line operators
are considered common carriers.
From the foregoing disquisition, there is no doubt that petitioner is a
"common carrier" and, therefore, exempt from the business tax as
provided for in Section 133 (j), of the Local Government Code.

Transportation Law | Page 6 of 54

Virgines Calvo vs UCPB Insurance Co.
CASE # 4 - Definition of Common Carrier
FACTS
Petitioner Virgines Calvo is the owner of Transorient Container
Terminal Services, Inc. (TCTSI), a sole proprietorship customs
broker. Petitioner entered into a contract with San Miguel
Corporation (SMC) for the transfer of 114 reels of semi-chemical
fluting paper and 124 reels of kraft liner board from the Port Area
in Manila to SMC's warehouse in Ermita, Manila. The cargo was
insured by respondent UCPB General Insurance Co., Inc.
Pursuant to her contract with SMC, petitioner withdrew the cargo
from the arrastre operator and delivered it to SMC's warehouse in
Ermita. When the goods were inspected by Marine Cargo
Surveyors, it was found out that 15 reels of the semi-chemical
fluting paper were "wet/stained/torn" and 3 reels of kraft liner
board were likewise torn. The damage was placed at P93,112.00.
SMC collected payment from respondent UCPB under its
insurance contract for the aforementioned amount. In turn,
respondent, as subrogee of SMC, brought suit against petitioner in
the RTC. RTC found petitioner liable to respondent for the
damage to the shipment. CA affirmed.
From RTCs decision: Generally speaking under Article 1735
of the Civil Code, if the goods are proved to have been lost,
destroyed or deteriorated, common carriers are presumed to
have been at fault or to have acted negligently, unless they
prove that they have observed the extraordinary diligence
required by law.
Petitioner contends that the CA erred in classifying them as a
common carrier and not as a private or special carrier who did not
hold its services to the public. She contends that she only offers
the same to select parties with whom she may contract in the
conduct of her business.
ISSUE
W/N petitioner is a common carrier
RULE - YES
The Civil Code defines "common carriers" in the following terms:
"Article 1732. Common carriers are persons, corporations, firms or
associations engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air for compensation,
offering their services to the public."
The above article makes no distinction between one whose principal
business activity is the carrying of persons or goods or both, and one
who does such carrying only as an ancillary activity . . . Article 1732
also carefully avoids making any distinction between a person or
enterprise offering transportation service on a regular or scheduled
basis and one offering such service on an occasional, episodic or
unscheduled basis. Neither does Article 1732 distinguish between
a carrier offering its services to the "general public," i.e., the
general community or population, and one who offers services
or solicits business only from a narrow segment of the general
population. We think that Article 1732 deliberately refrained from
making such distinctions.
Now, as to petitioner's liability, Art. 1733 of the Civil Code provides:
Common carriers, from the nature of their business and for reasons of
public policy, are bound to observe extraordinary diligence in the
vigilance over the goods and for the safety of the passengers
transported by them, according to all the circumstances of each case.
...
As found by the Court of Appeals:
From the [Survey Report], it [is] clear that the shipment was
discharged from the vessel to the arrastre, Marina Port Services Inc.,
in good order and condition as evidenced by clean Equipment
Interchange Reports (EIRs). Had there been any damage to the
shipment, there would have been a report to that effect made by the
arrastre operator. xxx
Transportation Law | Page 7 of 54
To put it simply, the defendant- appellant received the shipment in
good order and condition and delivered the same to the consignee
damaged. We can only conclude that the damages to the cargo
occurred while it was in the possession of the defendant-appellant.
Whenever the thing is lost (or damaged) in the possession of the
debtor (or obligor), it shall be presumed that the loss (or damage) was
due to his fault, unless there is proof to the contrary. No proof was
proffered to rebut this legal presumption and the presumption of
negligence attached to a common carrier in case of loss or damage to
the goods.

Transportation Law | Page 8 of 54

Case #5
FGU INSURANCE CORPORATION, petitioner, vs. G.P. SARMIENTO
TRUCKING CORPORATION and LAMBERT M. EROLES,
respondents.
Facts:
G. P. S. Sarmiento Trucking Corporation (GPS) undertook to
deliver on June 18, 1994 30 units of Condura white
refrigerators aboard its Isuzu truck
The truck while traversing the north diversion road collided
with an unidentified truck, causing it to fall into a deep canal,
resulting in damage to the cargoes
FGU Insurance Corporation (FGU), an insurer paid to
Concepcion Industries the value of the covered caroges in the
sum of P204,450.
FGU sought reimbursement of the amouth it had paid to the
latter from GPS and filed a complaint against GPS and the
truck driver
GPS asserted that it was the exclusive hauler of Concepcion
Industries, Inc. since 1988 and it was not so engaged in
business ad common carrier and what caused the damage
was purely accidental.
Trial court dismissed complaint on the ground that FGU failed
to prove that GPS is a common carrier. Cour of Appeals also
rejected appeal of FG
Issues:
Whether GPS may be considered a common carrier as
defined under the law and existing jurisprudence
Whether GPS, either as common carrier or private carrier, may
be presumed to have been negligent when the goods it
undertook to transport safely were subsequently damaged
while in its protective custody and possession
Ruling:
On the first issue, the Court finds the conclusion of the trial court and
the Court of Appeals to be amply justified. GPS, being an exclusive
contractor and hauler of Concepcion Industries, Inc., rendering or
offering its services to no other individual or entity, cannot be
considered a common carrier. 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 hire or compensation, offering their services to the public,[8]
whether to the public in general or to a limited clientele in particular,
but never on an exclusive basis.[9] The true test of a common carrier
is the carriage of passengers or goods, providing space for those who
opt to avail themselves of its transportation service for a fee.[10]
Given accepted standards, GPS scarcely falls within the term
common carrier.
Respondent trucking corporation recognizes the existence of a
contract of carriage between it and petitioners assured, and admits
that the cargoes it has assumed to deliver have been lost or damaged
while in its custody. In such a situation, a default on, or failure of
compliance with, the obligation in this case, the delivery of the goods
in its custody to the place of destination - gives rise to a presumption
of lack of care and corresponding liability on the part of the contractual
obligor the burden being on him to establish otherwise. GPS has
failed to do so.
Respondent driver, on the other hand, without concrete proof of his
negligence or fault, may not himself be ordered to pay petitioner. The
driver, not being a party to the contract of carriage between petitioners
principal and defendant, may not be held liable under the agreement.
A contract can only bind the parties who have entered into it or their
successors who have assumed their personality or their juridical
position.[17] Consonantly with the axiom res inter alios acta aliis
neque nocet prodest, such contract can neither favor nor prejudice a
third person. Petitioners civil action against the driver can only be
based on culpa aquiliana, which, unlike culpa contractual, would
Transportation Law | Page 9 of 54
require the claimant for damages to prove negligence or fault on the
part of the defendant.[18]
Res ipsa loquitur, a doctrine being invoked by petitioner, holds a
defendant liable where the thing which caused the injury complained
of is shown to be under the latters management and the accident is
such that, in the ordinary course of things, cannot be expected to
happen if those who have its management or control use proper care.
It affords reasonable evidence, in the absence of explanation by the
defendant, that the accident arose from want of care
Res ipsa loquitur generally finds relevance whether or not a
contractual relationship exists between the plaintiff and the defendant,
for the inference of negligence arises from the circumstances and
nature of the occurrence and not from the nature of the relation of the
parties.[23] Nevertheless, the requirement that responsible causes
other than those due to defendants conduct must first be eliminated,
for the doctrine to apply, should be understood as being confined only
to cases of pure (non-contractual) tort since obviously the
presumption of negligence in culpa contractual, as previously so
pointed out, immediately attaches by a failure of the covenant or its
tenor. In the case of the truck driver, whose liability in a civil action is
predicated on culpa acquiliana, while he admittedly can be said to
have been in control and management of the vehicle which figured in
the accident, it is not equally shown, however, that the accident could
have been exclusively due to his negligence, a matter that can allow,
forthwith, res ipsa loquitur to work against him.

Transportation Law | Page 10 of 54

Case #6
PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY,
petitioner, vs. PKS SHIPPING COMPANY, respondent.
Facts:
Davao Union Marketing Corporation (DUMC) contracted the
services of respondent PKS Shipping Company (PKS
Shipping) for the shipment to Tacloban City of 75,000 bags of
cement worth P3,375,000.00.
DUMC insured the goods for its full value with petitioner
Philippine American General Insurance Company
(Philamgen).
The goods were loaded aboard the dumb barge Limar I
belonging to PKS Shipping. On the evening of 22 December
1988, about nine oclock, while Limar I was being towed by
respondents tugboat, MT Iron Eagle, the barge sank a couple
of miles off the coast of Dumagasa Point, in Zamboanga del
Sur, bringing down with it the entire cargo of 75,000 bags of
cement.
DUMC was able to claim the full amount from Philamgen.
Philamgen sought reimbursement from PKS Shipping but the
latter refused to pay.
Philamgen filed a suit against PKS
RTC dimissed the complaint after finding that the total loss of
the cargo could have been caused by a fortutious event
Court of Appeals ruled that petitioner failed to prove that PKS
was a common carrier at the time it undertook to transport the
cargo since the peculiar method of shipping companys
carrying goods for others was a casual occupation
Issues:
Whether it is a private carrier or a common carrier
Whether it has observed the proper diligence (ordinary, if
private carrier, or extraordinary, if a common carrier) required
of it given the circumstances
Ruling:
The prevailing doctrine on the question is that enunciated in the
leading case of De Guzman vs. Court of Appeals.[2] Applying Article
1732 of the Code, in conjunction with Section 13(b) of the Public
Service Act, this Court has held:
The above article makes no distinction between one whose principal
business activity is the carrying of persons or goods or both, and one
who does such carrying only as an ancillary activity (in local idiom, as
`a sideline). Article 1732 also carefully avoids making any distinction
between a person or enterprise offering transportation service on a
regular or scheduled basis and one offering such service on an
occasional, episodic or unscheduled basis. Neither does Article 1732
distinguish between a carrier offering its services to the `general
public, i.e., the general community or population, and one who offers
services or solicits business only from a narrow segment of the
general population. We think that Article 1732 deliberately refrained
from making such distinctions.
So understood, the concept of `common carrier under Article 1732
may be seen to coincide neatly with the notion of `public service,
under the Public Service Act (Commonwealth Act No. 1416, as
amended) which at least partially supplements the law on common
carriers set forth in the Civil Code.
Much of the distinction between a common or public carrier and a
private or special carrier lies in the character of the business, such
that if the undertaking is an isolated transaction, not a part of the
business or occupation, and the carrier does not hold itself out to
carry the goods for the general public or to a limited clientele,
although involving the carriage of goods for a fee,[3] the person or
corporation providing such service could very well be just a private
carrier. A typical case is that of a charter party which includes both the
vessel and its crew, such as in a bareboat or demise, where the
charterer obtains the use and service of all or some part of a ship for a
period of time or a voyage or voyages[4] and gets the control of the
vessel and its crew.[5] Contrary to the conclusion made by the
appellate court, its factual findings indicate that PKS Shipping has
engaged itself in the business of carrying goods for others, although
Transportation Law | Page 11 of 54
for a limited clientele, undertaking to carry such goods for a fee. The
regularity of its activities in this area indicates more than just a casual
activity on its part.[6] Neither can the concept of a common carrier
change merely because individual contracts are executed or entered
into with patrons of the carrier. Such restrictive interpretation would
make it easy for a common carrier to escape liability by the simple
expedient of entering into those distinct agreements with clients.
Addressing now the issue of whether or not PKS Shipping has
exercised the proper diligence demanded of common carriers, Article
1733 of the Civil Code requires common carriers to observe
extraordinary diligence in the vigilance over the goods they carry. In
case of loss, destruction or deterioration of goods, common carriers
are presumed to have been at fault or to have acted negligently, and
the burden of proving otherwise rests on them.[7] The provisions of
Article 1733, notwithstanding, common carriers are exempt from
liability for loss, destruction, or deterioration of the goods due to any of
the following causes:
(1) Flood, storm, earthquake, lightning, or other natural
disaster or calamity;
(2) Act of the public enemy in war, whether international or
civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in
the containers; and
(5) Order or act of competent public authority.[8]
The appellate court ruled, gathered from the testimonies and sworn
marine protests of the respective vessel masters of Limar I and MT
Iron Eagle, that there was no way by which the barges or the tugboats
crew could have prevented the sinking of Limar I. The vessel was
suddenly tossed by waves of extraordinary height of six (6) to eight (8)
feet and buffeted by strong winds of 1.5 knots resulting in the entry of
water into the barges hatches. The official Certificate of Inspection of
the barge issued by the Philippine Coastguard and the Coastwise
Load Line Certificate would attest to the seaworthiness of Limar I and
should strengthen the factual findings of the appellate court.

Transportation Law | Page 12 of 54

Case #7
ASIA LIGHTERAGE AND SHIPPING, INC., petitioner, vs. COURT OF
APPEALS and PRUDENTIAL GUARANTEE AND ASSURANCE,
INC., respondents.
Facts:
- Petitioner was contracted by General Milling Corporation
(consignee) as carrier to deliver 3,150 metric tons of Better Western
White Wheat in bulk to its warehouse in Pasig City. The shipment was
insured by the private respondent Prudential Guarantee and
Assurance, Inc. against loss or damage.
- The cargo was transferred to petitioner's custody on July 25, 1990. -
On August 15, 1990, 900 metric tons of the shipment was loaded on
barge PSTSI IIl for delivery. The cargo did not reach its destination.
- It appears that on August 17, 1990, the transport of said cargo was
suspended due to a warning of an incoming typhoon. On August 22,
1990, the petitioner proceeded to pull the barge to Engineering Island
off Baseco to seek shelter from the approaching typhoon. A few days
after, the barge developed a list because of a hole it sustained after
hitting an unseen protuberance underneath the water. Petitioner
secured the services of Gaspar Salvaging Corporation which refloated
the barge. The hole was then patched with clay and cement.
- Upon reaching the Sta. Mesa spillways, the barge again ran
aground due to strong current. To avoid the complete sinking of the
barge, a portion of the goods was transferred to 3 other barges. The
next day, the towing bits of the barge broke. It sank completely,
resulting in the total loss of the remaining cargo.
- A bidding was conducted to dispose of the damaged wheat retrieved
& loaded on the 3 other barges. Consignee sent a claim letter to the
petitioner, and another letter to the private respondent for the value of
the lost cargo.
- Private respondent indemnified the consignee. Thereafter, as
subrogee, it sought recovery of said amount from the petitioner, but to
no avail.
- The Regional Trial Court ruled in favor of the private respondent.
Petitioner appealed to the Court of Appeals insisting that it is not a
common carrier. The appellate court affirmed the decision of the trial
court with modification.
- Petitioners Motion for Reconsideration was denied by the appellate
court. Hence, this petition.
Issue: Whether or not petitioner is a common carrier
Ruling:
- Yes. Article 1732 of the Civil Code defines common carriers as
persons, corporations, firms or associations engaged in the business
of carrying or transporting passengers or goods or both, by land,
water, or air, for compensation, offering their services to the public.
Petitioner contends that it is not a common carrier but a private
carrier. Allegedly, it has no fixed and publicly known route, maintains
no terminals, and issues no tickets. It points out that it is not obliged to
carry indiscriminately for any person. It is not bound to carry goods
unless it consents. In short, it does not hold out its services to the
general public.
- In De Guzman vs. Court of Appeals, we held that the definition of
common carriers in Article 1732 of the Civil Code makes no distinction
between one whose principal business activity is the carrying of
persons or goods or both, and one who does such carrying only as an
ancillary activity. We also did not distinguish between a person or
enterprise offering transportation service on a regular or scheduled
basis and one offering such service on an occasional, episodic or
unscheduled basis. Further, we ruled that Article 1732 does not
distinguish between a carrier offering its services to the general
public, and one who offers services or solicits business only from a
narrow segment of the general population.
Transportation Law | Page 13 of 54
- In the case at bar, the principal business of the petitioner is that of
lighterage and drayage and it offers its barges to the public for
carrying or transporting goods by water for compensation. In De
Guzman, we considered private respondent Ernesto Cendaa to be a
common carrier even if his principal occupation was not the carriage
of goods for others, but that of buying used bottles and scrap metal in
Pangasinan and selling these items in Manila.

- We therefore hold that petitioner is a common carrier whether its

carrying of goods is done on an irregular rather than scheduled
manner, and with an only limited clientele. A common carrier need not
have fixed and publicly known routes. Neither does it have to maintain
terminals or issue tickets.

- The test to determine a common carrier is whether the given

undertaking is a part of the business engaged in by the carrier which
he has held out to the general public as his occupation rather than the
quantity or extent of the business transacted. In the case at bar, the
petitioner admitted that it is engaged in the business of shipping and
lighterage, offering its barges to the public, despite its limited clientele
for carrying or transporting goods by water for compensation.

Transportation Law | Page 14 of 54


Case #8
SPOUSES DANTE CRUZ and LEONORA CRUZ, Petitioners, vs.
SUN HOLIDAYS, INC., Respondent.
Facts:
- Spouses Dante and Leonora Cruz lodged a Complaint against Sun
Holidays, Inc. for damages arising from the death of their son Ruelito
C. Cruz (Ruelito) who perished with his wife on board the boat M/B
Coco Beach III that capsized en route to Batangas from Puerto
Galera, Oriental Mindoro where the couple had stayed at Coco Beach
Island Resort owned and operated by respondent.
- Matute, a scuba diver instructor, and 25 other Resort guests
including petitioners son and his wife trekked to the other side of the
Coco Beach mountain that was sheltered from the wind where they
boarded M/B Coco Beach III, which was to ferry them to Batangas.
- Shortly after the boat sailed, it started to rain. As it moved farther
away from Puerto Galera and into the open seas, the rain and wind
got stronger, causing the boat to tilt from side to side and the captain
to step forward to the front, leaving the wheel to one of the crew
members. The waves got more unwieldy. After getting hit by two big
waves which came one after the other, M/B Coco Beach III capsized
putting all passengers underwater.
- The passengers, who had put on their life jackets, struggled to get
out of the boat and reached the surface. Help came after about 45
minutes. Boarded on those two boats were 22 persons, consisting of
18 passengers and four crew members, who were brought to Pisa
Island. Eight passengers, including petitioners son and his wife, died
during the incident.
- Petitioners demanded indemnification from respondent for the death
of their son but denied any liability on the ground of fortuitous event.
- Petitioners then filed a complaint alleging that respondent, as a
common carrier, was guilty of negligence in allowing M/B Coco Beach
III to sail notwithstanding storm warning bulletins issued by PAGASA.
They added that respondent is a common carrier since by its tour
package, the transporting of its guests is an integral part of its resort
business.
- On the other hand, respondent contends that petitioners failed to
present evidence to prove that it is a common carrier alleging that its
boats are not available to the general public as they only ferry Resort
guests and crew members, that the Resorts ferry services for guests
cannot be considered as ancillary to its business as no income is
derived therefrom; that it exercised extraordinary diligence; that the
incident was caused by a fortuitous event without any contributory
negligence on its part.
Issue: Whether or not respondent is a common carrier
Ruling:
- Yes. Petitioners correctly rely on De Guzman v. Court of Appeals in
characterizing respondent as a common carrier.
- Its ferry services are so intertwined with its main business as to be
properly considered ancillary thereto. The constancy of respondents
ferry services in its resort operations is underscored by its having its
own Coco Beach boats. And the tour packages it offers, which include
the ferry services, may be availed of by anyone who can afford to pay
the same. These services are thus available to the public.
- That respondent does not charge a separate fee or fare for its ferry
services is of no moment. It would be imprudent to suppose that it
provides said services at a loss. The Court is aware of the practice of
beach resort operators offering tour packages to factor the
transportation fee in arriving at the tour package price. That guests
who opt not to avail of respondents ferry services pay the same
amount is likewise inconsequential. These guests may only be
deemed to have overpaid.
Transportation Law | Page 15 of 54
Case #9
Bascos vs. CA
Doctrine: Common carriers are obliged to observe extraordinary
diligence in the vigilance over the goods transported by them.
Facts:
Rodolfo Cipriano, representing CIPTRADE, entered into a hauling
contract with Jibfair Shipping Agency Corporation whereby the former
bound itself to haul the latters 2000m/tons of soya bean meal from
Manila to Calamba. CIPTRADE subcontracted with petitioner
EstrellitaBascos to transport and deliver the 400 sacks of soya beans.
Petitioner failed to deliver the cargo, and as a consequence, Cipriano
paid Jibfair the amount of goods lost in accordance with their contract.
PETITIONERS CONTENTION:
Petitioner denied that there was no contract of carriage since
CIPTRADE leased her cargo truck, and that the hijacking was a force
majeure. The trial court ruled against petitioner.
RESPONDENTS CONTENTION:
Cipriano demanded reimbursement from petitioner but the latter
refused to pay. Cipriano filed a complaint for breach of contract of
carriage.
Issue: Whether or not petitioner is a common carrier.
Ruling:
TRIAL COURT:
The trial court ruled against petitioner and granted the writ of
preliminary attachment for breach of contract of carriage.
CA:
The Court of Appeals affirmed the decision of the trial court, holding
that petitioner was a common carrier, found that she admitted in her
answer that she did business under the name A.M. Bascos Trucking
and that said admission dispensed with the presentation by private
respondent, Rodolfo Cipriano, of evidence that petitioner was a
common carrier.
SC:
Yes. Petitioner is a common carrier. SC ruled if favor of respondent.
(1) Article 1732 of the Civil Code defines a common carrier as "(a)
person, corporation or firm, or association engaged in the business of
carrying or transporting passengers or goods or both, by land, water
or air, for compensation, offering their services to the public." The test
to determine a common carrier is "whether the given undertaking is a
part of the business engaged in by the carrier which he has held out
to the general public as his occupation rather than the quantity or
extent of the business transacted." In this case, petitioner herself has
made the admission that she was in the trucking business, offering
her trucks to those with cargo to move. Judicial admissions are
conclusive and no evidence is required to prove the same.
(2) 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. The presumption of negligence was raised against
petitioner. It was petitioner's burden to overcome it. Thus, contrary to
her assertion, private respondent need not introduce any evidence to
prove her negligence. Her own failure to adduce sufficient proof of
extraordinary diligence made the presumption conclusive against her.
Transportation Law | Page 16 of 54
Case #10 Issue: Whether or not Sanchez Brokerage is liable for the damaged
goods.
A. F. Sanchez Brokerage Inc. vs. CA & FGU Insurance Corp.
Ruling:
Doctrine:
Yes.
A common carrier is liable to the resulting damage to the goods if the
As defined under Article 1732, common carriers are persons,
improper packaging is known to the carrier or his employees or is
corporations, firms or associations engaged in the business of
apparent upon ordinary observation, but he nevertheless accepts the
carrying or transporting passengers or goods or both, by land, water,
same without protest or exception.
or air, for compensation, offering their services to the public. Article
1732 does not distinguish between one whose principal business
Facts:
activity is the carrying of goods and one who does such carrying only
On July 8, 1992, Wyeth-Pharma GMBH shipped on board an aircraft
as an ancillary activity. The contention, therefore, of petitioner that it is
of KLM Royal Dutch Airlines Dusseldorf, Germany oral contraceptives
not a common carrier but a customs broker whose principal function is
for delivery to Manila in favor of the consignee, Wyeth-Suaco
to prepare the correct customs declaration and proper shipping
Laboratories, Inc. The latter insured the shipment against all risks with
documents as required by law is bereft of merit. It suffices that
FGU Insurance.
petitioner undertakes to deliver the goods for pecuniary consideration.
Upon arrival at NAIA, it was discharged without exception and
delivered to the warehouse of Philippine Skylanders Inc. (PSI) for
Petitioner as a common carrier is mandated to observe, under Article
safekeeping. In order to release of the cargoes from the PSI and the
1733 of the Civil Code, extraordinary diligence in the vigilance over
Bureau of Customs, Wyeth-Suaco engaged the services of A. F.
the goods it transports according to all the circumstances of each
Sanchez Brokerage which had been its licensed broker since 1984.
case. In the event that the goods are lost, destroyed or deteriorated, it
As its customs broker, Sanchez Brokerage calculates and pays the
is presumed to have been at fault or to have acted negligently, unless
customs duties, taxes and storage fees for the cargo and thereafter
it proves that it observed extraordinary diligence.
delivers it to Wyeth-Suaco.
The concept of extra-ordinary diligence was explained in Compania
Unfortunately, several cartons were heavily damaged with water and
Maritima v. Court of Appeals:
emitted foul smell. Respondent FGU Insurance Corp. brought an
The extraordinary diligence in the vigilance over the goods tendered
action for reimbursement against petitioner A. F Sanchez Brokerage
for shipment requires the common carrier to know and to follow the
to collect the amount paid by the former Wyeth-Suaco as insurance
required precaution for avoiding damage to, or destruction of the
payment for the goods delivered in bad condition.
goods entrusted to it for sale, carriage and delivery. It requires
common carriers to render service with the greatest skill and foresight
Sanchez Brokerage refused to admit liability for the damaged goods
and to use all reasonable means to ascertain the nature and
which it delivered from PSI to Wyeth-Suaco. It maintained that the
characteristics of goods tendered for shipment, and to exercise due
damage was due to improper and insufficient export packaging.
care in the handling and stowage, including such methods as their
nature requires.
RTC of Makati dismissed said complaint. However, the CA reversed
and set aside the same, finding that Sanchez Brokerage is liable for
While paragraph No. 4 of Article 1734 of the Civil Code exempts a
the carriage of cargo as a common carrier.
common carrier from liability if the loss or damage is due to the

Transportation Law | Page 17 of 54

character of the goods or defects in the packing or in the containers,
the rule is that if the improper packing is known to the carrier or his
employees or is apparent upon ordinary observation, but he
nevertheless accepts the same without protest or exception
notwithstanding such condition, he is not relieved of liability for the
resulting damage.

Transportation Law | Page 18 of 54

Case #11
Crisostomo vs CA
August 25, 2003
FACTS:
May 1991 Petitioner Estela L. Crisostomo contracted the services
of respondent Caravan Travel and Tours International, Inc. to
arrange and facilitate her booking, ticketing and accommodation in
a tour dubbed Jewels of Europe.
The package tour included the countries of England, Holland,
Germany, Austria, Liechstenstein, Switzerland and France at a
total cost of P74,322.70.
Petitioner was given a 5% discount on the amount, and the booking
fee was also waived because petitioners niece, Meriam Menor,
was respondent companys ticketing manager.
June 12, 1991 (Wed) Menor went to her aunts home to deliver
petitioners travel documents and plane tickets. Menor paid the full
payment for the package tour. Menor then told Crisostomo to be at
the NAIA on Saturday.
Without checking her travel documents, petitioner went to NAIA on
Saturday, June 15, 1991, to take the flight for the first leg of her
journey from Manila to Hongkong.
She learned that her plane ticket was for the flight scheduled on
June 14, 1991. She thus called up Menor to complain.
Menor prevailed upon petitioner to take another tour the British
Pageant which included England, Scotland and Wales in its
itinerary. For this tour package, petitioner was asked anew to pay
US$785.00 or P20,881.00.
Upon petitioners return from Europe, she demanded from
respondent the reimbursement of P61,421.70, representing the
difference between the sum she paid for Jewels of Europe and the
amount she owed respondent for the British Pageant tour.
Despite several demands, respondent company refused to
reimburse.
PETITIONERS CONTENTION:
Petitioner alleged that her failure to join Jewels of Europe was due
to respondents fault since it did not clearly indicate the departure
date on the plane ticket.
She could not be deemed more negligent than respondent since
the latter is required by law to exercise extraordinary diligence in
the fulfillment of its obligation (as a common carrier).
RESPONDENTS CONTENTION:
Petitioner was informed of the correct departure date, which was
clearly and legibly printed on the plane ticket.
ISSUE:
W/N Caravan Travel did not observe the standard of care required
of a common carrier when it informed the petitioner wrongly of the
flight schedule
RULING:
NO. Petition has no merit.
By definition, a contract of carriage or transportation is one
whereby a certain person or association of persons obligate
themselves to transport persons, things, or news from one place to
another for a fixed price. Such person or association of persons are
regarded as carriers and are classified as private or special carriers
and common or public carriers. A common carrier is defined under
Article 1732 of the Civil Code as persons, corporations, firms or
associations engaged in the business of carrying or transporting
passengers or goods or both, by land, water or air, for
compensation, offering their services to the public.
It is obvious from the above definition that respondent is not an
entity engaged in the business of transporting either passengers or
goods and is therefore, neither a private nor a common carrier.
Respondent did not undertake to transport petitioner from one
place to another since its covenant with its customers is simply to
make travel arrangements in their behalf. Respondents services as
a travel agency include procuring tickets and facilitating travel
permits or visas as well as booking customers for tours.
While petitioner concededly bought her plane ticket through the
efforts of respondent company, this does not mean that the latter
Transportation Law | Page 19 of 54
ipso facto is a common carrier. At most, respondent acted merely
as an agent of the airline, with whom petitioner ultimately
contracted for her carriage to Europe. Respondents obligation to
petitioner in this regard was simply to see to it that petitioner was
properly booked with the airline for the appointed date and time.
Her transport to the place of destination, meanwhile, pertained
directly to the airline.
The object of petitioners contractual relation with respondent is the
latters service of arranging and facilitating petitioners booking,
ticketing and accommodation in the package tour. In contrast, the
object of a contract of carriage is the transportation of passengers
or goods. It is in this sense that the contract between the parties in
this case was an ordinary one for services and not one of carriage.
The nature of the contractual relation between petitioner and
respondent is determinative of the degree of care required in the
performance of the latters obligation under the contract. For
reasons of public policy, a common carrier in a contract of carriage
is bound by law to carry passengers as far as human care and
foresight can provide using the utmost diligence of very cautious
persons and with due regard for all the circumstances
Since the contract between the parties is an ordinary one for
services, the standard of care required of respondent is that of a
good father of a family under Article 1173 of the Civil Code.
Since the contract between the parties is an ordinary one for
services, the standard of care required of respondent is that of a
good father of a family under Article 1173 of the Civil Code.

Transportation Law | Page 20 of 54

Case #12
Asian Terminals, Inc. vs. Daehan Fire and Marine Insurance Co., Ltd.
February 4, 2004
FACTS:
On July 8, 2000, Doosan Corporation (Doosan) shipped twenty-six
(26) boxes of printed aluminum sheets on board the vessel Heung-A
Dragon owned by Dongnama Shipping Co., Ltd. (Dongnama) and
consigned to Access International.
Doosan insured the subject shipment with respondent Daehan Fire
and Marine Insurance Co., Ltd. under an all-risk marine cargo
insurance policy, payable to its settling agent in the Philippines, the
Smith Bell & Co., Inc. (Smith Bell).
On July 12, 2000, the vessel arrived in Manila and the containerized
van was discharged and unloaded in apparent good condition, as no
survey and exceptions were noted in the Equipment Interchange
Receipt (EIR) issued by Asian Terminals as arrastre operator. The
container van was stored in the Container Yard of the Port. On July
18, 2000, Access International requested from petitioner and the
licensed Customs Broker, Victoria Reyes Lazo (V. Reyes Lazo), a
joint survey of the shipment at the place of storage in the Container
Yard, but no such inspection was conducted.
On July 19, 2000, V. Reyes Lazo withdrew, and petitioner released,
the shipment and delivered it to Access Internationals warehouse in
Binondo, Manila.
While the shipment was at Access Internationals warehouse, the
latter, together with its surveyor, Lloyds Agency, conducted an
inspection and noted that only twelve (12) boxes were accounted
for, while fourteen (14) boxes were missing.
Access International thus filed a claim against petitioner and V.
Reyes Lazo for the missing shipment amounting to $34,993.28.
On July 10, 2001, respondent, represented by Smith Bell, instituted
the present case against Dongnama, Uni-ship, Inc. (Uni-ship),
petitioner, and V. Reyes Lazo before the RTC
Respondent alleged that the losses, shortages and short deliveries
sustained by the shipment were caused by the joint fault and
negligence of Dongnama, petitioner and V. Reyes Lazo.
PETITIONERS CONTENTION:
Petitioner denies liability for the loss of the subject shipment,
considering that the consignees representative signified receipt of
the goods in good order without exception. This being the case,
respondent, as subrogee, is bound by such acknowledgment.
RESPONDENTS CONTENTION:
Respondent alleged that the losses, shortages and short deliveries
sustained by the shipment were caused by the joint fault and
negligence of Dongnama, petitioner and V. Reyes Lazo.
ISSUE:
W/N Asian Terminals, Inc. should be liable for the loss of the
shipment notwithstanding consignee brokers acknowledgement
that the shipment was in good order
RULING:
YES. Respondent, as insurer, was subrogated to the rights of the
consignee, pursuant to the subrogation receipt executed by the
latter in favor of the former. The relationship, therefore, between the
consignee and the arrastre operator must be examined. This
relationship is akin to that existing between the consignee and/or
the owner of the shipped goods and the common carrier, or that
between a depositor and a warehouseman.
In the performance of its obligations, an arrastre operator should
observe the same degree of diligence as that required of a common
carrier and a warehouseman. Being the custodian of the goods
discharged from a vessel, an arrastre operators duty is to take good
care of the goods and to turn them over to the party entitled to their
possession.
The loss of 14 out of 26 boxes of printed aluminum sheets is
undisputed. It is also settled that Dongnama (the shipping company)
and Uni-ship were absolved from liability because respondent
realized that they had no liability based on the EIR issued by
Transportation Law | Page 21 of 54
Dongnama. This resulted in the withdrawal of the complaint against
them. What remained was the complaint against petitioner as the
arrastre operator and V. Reyes Lazo as the customs broker.
Records show that the subject shipment was discharged from the
vessel and placed under the custody of petitioner for a period of
seven (7) days. Thereafter, the same was withdrawn from the
container yard by the customs broker, then delivered to the
consignee. It was after such delivery that the loss of 14 boxes was
discovered. Hence, the complaint against both the arrastre operator
and the customs broker.

In a claim for loss filed by the consignee (or the insurer), the burden
of proof to show compliance with the obligation to deliver the goods
to the appropriate party devolves upon the arrastre operator. Since
the safekeeping of the goods is its responsibility, it must prove that
the losses were not due to its negligence or to that of its employees.

The signature of the person/broker representative merely signifies

that said person thereby frees the ATI from any liability for loss or
damage to the cargo so withdrawn while the same was in the
custody of such representative to whom the cargo was released. It
does not foreclose any remedy or right of the consignee to prove
that any loss or damage to the subject shipment occurred while the
same was under the custody, control and possession of the arrastre
operator

Transportation Law | Page 22 of 54

Case #13
Sps. Perenas v. Sps. Zarate, PNR and CA
Facts:
1. Sps. Pereas were engaged in the business of transporting
students from their respective residences in Paraaque City to Don
Bosco in Pasong Tamo, Makati City. They used a KIA Ceres Van with
the capacity to transport 14 students at a time. Clemente Alfaro was
employed as the driver of the van. Meanwhile, Sps. Zarate contracted
Sps. Pereas to transport their son, Aaron, to and from Don Bosco.
2. Since the students are running late, Alfaro took the van to an
alternate route by traversing the narrow path underneath the
Magallanes Interchange that was used as a short cut into Makati.At
about the time the van was to traverse the railroad crossing,the train
PNR Commuter No. 302 , operated by Jhonny Alano, was in the
vicinity of the Magallanes Interchange travelling northbound. As the
train neared the railroad crossing, Alfaro drove the van eastward
across the railroad tracks, closely tailing a large passenger bus. His
view of the oncoming train was blocked because he overtook the
passenger bus on its left side.
3. When the train was near from the bus and van, Alano applied the
ordinary brakes of the train. He applied the emergency brakes only
when he saw that a collision was imminent. The passenger bus
successfully crossed the railroad tracks, but the van driven by Alfaro
did not.
4. The impact of the collision threw 9 of the 12 students in the rear,
including Aaron, out of the van. Aaron landed in the path of the train,
which dragged his body and severed his head, instantaneously killing
him. Alano (the train operator) fled the scene on board the train.
5. Sps. Zarate commenced an action for damages against Sps.
Perena and PNR on the grounds that, Sps Perea are liable for
breach of the contract of carriage with plaintiff-spouses in failing to
provide adequate and safe transportation for the latter's son. They
also filed an action against the PNR based on quasi-delict under
Article 2176, Civil Code
6. In their defense, Sps. Pereas assailed that they had exercised the
diligence of a good father of the family in the selection and
supervision of Alfaro, by making sure that Alfaro had been issued a
drivers license and had not been involved in any vehicular accident
prior to the collision. For its part, PNR showed that the proximate
cause of the collision had been the reckless crossing of the van
whose driver had not first stopped, looked and listened; and that the
narrow path traversed by the van had not been intended to be a
railroad crossing for motorists.
7. The RTC ruled in favor of the Zarates on the grounds that the
cooperative gross negligence of the Pereas and PNR had caused
the collision that led to the death of Aaron. The CA concurred with the
RTCs decision.
Issues:
1. Whether or not Sps. Pereas operated as a common carrier
2. Whether or not the indemnity for loss of Aarons earning capacity is
proper
Ruling:
1. Yes. We find no adequate cause to differ from the conclusions of
the lower courts that the Pereas operated as a common carrier; and
that their standard of care was extraordinary diligence, not the
ordinary diligence of a good father of a family.
The provisions on ordinary contracts of the Civil Code govern the
contract of private carriage.The diligence required of a private carrier
is only ordinary, that is, the diligence of a good father of the family. In
contrast, a common carrier is a person, corporation, firm or
association engaged in the business of carrying or transporting
Transportation Law | Page 23 of 54
passengers or goods or both, by land, water, or air, for compensation, wanted to be if not for his untimely death, but the minimum wage in
offering such services to the public. Contracts of common carriage are effect at the time of his death.
governed by the provisions on common carriers of the Civil Code, the
Public Service Act, and other special laws relating to transportation. A
common carrier is required to observe extraordinary diligence, and is
presumed to be at fault or to have acted negligently in case of the loss
of the effects of passengers, or the death or injuries to passengers.

The concept of a common carrier embodied in Article 1732 of the Civil

Code coincides neatly with the notion of public service under the
Public Service Act, which supplements the law on common carriers
Despite catering to a limited clientle, the Pereas operated as a
common carrier because they held themselves out as a ready
transportation indiscriminately to the students of a particular school
living within or near where they operated the service and for a fee

Article 1755 of the Civil Code specifies that the common carrier
should "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."

Meanwhile, the RTC also held the PNR guilty of negligence despite
the school van of the Pereas traversing the railroad tracks because
the PNR did not ensure the safety of others through the placing of
crossbars, signal lights, warning signs, and other permanent safety
barriers to prevent vehicles or pedestrians from crossing there.

*The true test of a common carrier: whether the undertaking is a part

of the activity engaged in by the carrier that he has held out to the
general public as his business or occupation

2. The fact that Aaron was then without a history of earnings should
not be taken against his parents and in favor of the defendants whose
negligence not only cost Aaron his life and his right to work and earn
money, but also deprived his parents of their right to his presence and
his services as well. The basis for the computation of Aarons earning
capacity was not what he would have become or what he would have

Transportation Law | Page 24 of 54

Case #14
Fisher vs. Yangco Steamship Co.
Facts:
1. Petitioner F.C. Fisher is a stockholder in the Yangco Steamship
Company, the owner of a large number of steam vessels in the
coastwise trade of the Philippines. The directors of the company
adopted a resolution which was ratified and affirmed by the
shareholders of the company adopted a resolution to exclude
dynamite, powder and other explosives as the classes of merchandise
to be carried by their steam vessels.
2. Respondent Acting Collector of Customs required the company to
accept and carry these explosives, and if not, the Attorney-General of
the Philippines and the respondent prosecuting attorney intend to
institute proceedings under the penal provisions of Act No. 98 of the
Philippine Commission.
3. Act No. 98 of the Philippine Commission states that:
SEC. 2. It shall be unlawful for any common carrier
engaged in the transportation of passengers or
property as above set forth to make or give any
unnecessary or unreasonable preference or
advantage to any particular person, company, firm,
corporation or locality. . .
SEC. 3. No common carrier engaged in the
carriage of passengers or property as aforesaid
shall, under any pretense whatsoever, fail or
refuse to receive for carriage, and as promptly as it
is able to do so without discrimination, to carry any
person or property offering for carriage . . .
4.Yangco Co. and its officers stood firm on their ground to decline and
refuse to the carriage of such explosives. The contention of petitioner
is 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."
Issue:
1. Whether or not Act No. 98 is unconstitutional
Ruling:
No. The statute does not "require of a carrier, as a condition to his
continuing in said business, that he must carry anything and
everything," and thereby "render useless the facilities he may have for
the carriage of certain lines of freight." It merely forbids failures or
refusals to receive persons or property for carriage which have the
effect of giving an "unreasonable or unnecessary preference or
advantage" to any person, locality or particular kind of traffic, or of
subjecting any person, locality or particular kind of traffic to any undue
or unreasonable prejudice or discrimination.
Common carriers exercise a sort of public office, and have duties to
perform in which the public is interested. Their business is, therefore,
affected with a public interest, and is subject of public regulation. The
right to enter the public employment as a common carrier and to offer
one's services to the public for hire does not carry with it the right to
conduct that business as one pleases, without regard to the interest of
the public and free from such reasonable and just regulations as may
be prescribed for the protection of the public from the reckless or
careless indifference of the carrier as to the public welfare and for the
prevention of unjust and unreasonable discrimination of any kind
whatsoever in the performance of the carrier's duties as a servant of
the public.
Transportation Law | Page 25 of 54
Case #15
U.S. vs. Quinajon
Facts:
Quinajon and Quitariano unloaded in the port of Currimao
sacks of rice belonging to the provincial government of Ilocos
Norte from Manila b means of their virayes.
They charged 10 cents per sack when their normal rate was
only 6 cents.
Thereafter, defendants were found guilty, thus they appealed.
They were found guilty of violating Act 98 otherwise known as
An Act to Regulate Commerce in the Philippine Islands,
whose purpose is to compel common carriers to render to all
persons exactly the same or analogous service for exactly the
same price, to the end that there may be no unjust advantage
or unreasonable discrimination.
Issue:
The issue in this case is whether or not defendants violated
Act No. 98
Ruling:
The Court ruled that defendants did not violated Act No. 98.
It is only unjust, undue and unreasonable discrimination which
the law forbids.
The law of equality is in force only where the services
performed in the different cases are substantially the same,
and the circumstances and conditions are similar.

Transportation Law | Page 26 of 54

Case #16

Loadstar Shipping Co. Inc. vs. CA

Facts:
Loadstar received on board its M/V/ Cherokee, goods insured
with the condition against various risks including total loss by
total loss of the vessel.
Unfrotunately, the vessel sank off Limawa Island.
The consignee made a claim against Loadstar, which refused
to pay.
Issues:
Whether or not M/V Cherokee is a private or a common
carrier?
Did Loadstar observe due and/or ordinary diligence in these
premises?
Ruling:
Yes. While it is true that the vessel had on board only the
cargo of wood products for delivery to one consignee, it was
also carrying passengers as part of its regular business.
No. the vessel was not seaworthy nor was it sufficiently
manned. This is a breach of a common carriers duty.

Transportation Law | Page 27 of 54


Case # 17
G.R. No. L-25599 April 4, 1968
HOME INSURANCE COMPANY vs.
AMERICAN STEAMSHIP AGENCIES, INC.
FACTS:
"Consorcio Pesquero del Peru of South America" shipped freight pre-
paid at Chimbate, Peru, 21,740 jute bags of Peruvian fish meal
through SS Crowborough, covered by clean bills of lading dated
January 17, 1963. The cargo, consigned to San Miguel Brewery, Inc.
(SMB for brevity), and insured by Home Insurance Company for
$202,505, arrived in Manila and was discharged into the lighters of
Luzon Stevedoring Company.
When the cargo was delivered to consignee SMB, there were
shortages amounting to P12,033.85, causing the SMB to lay claims
against Luzon Stevedoring Corporation, Home Insurance Company
and the American Steamship Agencies, owner and operator of SS
Crowborough. Because the others denied liability, Home Insurance
Company paid the consignee P14,870.71. Having been refused
reimbursement by both the Luzon Stevedoring Corporation and
American Steamship Agencies. Home Insurance Company, as
subrogee to the consignee, filed against them a complaint for
recovery of said amount.
The Court of First Instance absolved Luzon Stevedoring and
American Steamship Agencies to pay the loss.
ISSUE:
Is the stipulation in the charter party of the owner's non-liability valid
so as to absolve the American Steamship Agencies from liability for
loss?
RULING:
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 Civil Code provisions on common carriers should not be applied
where the carrier is not acting as such but as 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.
Furthermore, in a charter of the entire vessel, the bill of lading issued
by the master to the charterer, as shipper, is in fact and legal
contemplation merely a receipt and a document of title not a contract,
for the contract is the charter party. The consignee may not claim
ignorance of said charter party because the bills of lading expressly
referred to the same. Accordingly, the consignees under the bills of
lading must likewise abide by the terms of the charter party. And as
stated, recovery cannot be had thereunder, for loss or damage to the
cargo, against the shipowners, unless the same is due to personal
acts or negligence of said owner or its manager, as distinguished from
its other agents or employees. In this case, no such personal act or
negligence has been proved.
Transportation Law | Page 28 of 54

Case # 18
G.R. No. L-61461 August 21, 1987
EPITACIO SAN PABLO vs. PANTRANCO SOUTH EXPRESS, INC.
FACTS:
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) for its project to operate a
ferryboat service.
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, Samar and
Matnog, Sorsogon in connection with its trips to Tacloban City
(crossing San Bernardo Strait). 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.
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. On October 23, 1981 the BOT rendered its decision
holding that the ferry boat service is part of its CPC to operate from
Pasay to Samar/Leyte by amending PANTRANCO's CPC
ISSUE:
whether a land transportation company can be authorized to operate
a ferry service or coastwise or interisland shipping service along its
authorized route as an incident to its franchise without the need of
filing a separate application for the same.
RULING:
Considering the environmental circumstances of the case, the
conveyance of passengers, trucks and cargo from Matnog to Allen is
certainly not a ferry boat 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.
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 MV "Black Double" that
crosses Matnog to Allen.
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.
Transportation Law | Page 29 of 54

Case # 19
National Steel Corporation v Vlasons Shipping Inc (VSI) and CA
FACTS
- The Court finds occasion to apply the rules on the
seaworthiness of private carrier, its owner's responsibility for
damage to the cargo and its liability for demurrage and
attorney's fees
- two separate petitions for review filed by National Steel
Corporation (NSC) and Vlasons Shipping, Inc. (VSI), both of
which assail the August 12, 1993 Decision of the Court of
Appeals.
- The MV Vlasons I is a vessel which renders tramping service
and, as such, does not transport cargo or shipment for the
general public. Its services are available only to specific
persons who enter into a special contract of charter party with
its owner.
- The ships owner, Vlasons Shipping, Inc., entered into a
contract of affreightment or contract of voyage charter hire with
National Steel Corporation:
o 10. Other terms: (a) All terms/conditions of
NONYAZAI C/P [sic] or other internationally recognized
Charter Party Agreement shall form part of this
Contract.
- The terms "F.I.O.S.T." which is used in the shipping business
is a standard provision in the NANYOZAI Charter Party which
stands for "Freight In and Out including Stevedoring and
Trading", which means that the handling, loading and
unloading of the cargoes are the responsibility of the
Charterer.
o "Charterers to load, stow and discharge the cargo free
of risk and expenses to owners. . . . (Emphasis
supplied).
o Under paragraph 10 thereof, it is provided that
"(o)wners shall, before and at the beginning of the
voyage, exercise due diligence to make the vessel
seaworthy and properly manned, equipped and
supplied and to make the holds and all other parts of
the vessel in which cargo is carried, fit and safe for its
reception, carriage and preservation. Owners shall not
be liable for loss of or damage of the cargo
o Paragraph 12 of said NANYOZAI Charter Party also
provides that "(o)wners shall not be responsible for
split, chafing and/or any damage unless caused by the
negligence or default of the master and crew."
- On August 6, 7 and 8, 1974, in accordance with the Contract
of Voyage Charter Hire, the MV "VLASONS I" loaded at
plaintiffs pier at Iligan City, the NSC's shipment of 1,677 skids
of tinplates and 92 packages of hot rolled sheets or a total of
1,769 packages with a total weight of about 2,481.19 metric
tons for carriage to Manila.
- The vessel arrived with the cargo at Pier 12, North Harbor,
Manila, on August 12, 1974. The following day, August 13,
1974, when the vessel's three (3) hatches containing the
shipment were opened by plaintiff's agents, nearly all the
skids of tinplates and hot rolled sheets were allegedly
found to be wet and rusty
o Unloading was completed only on August 24, 1974
after incurring a delay of eleven (11) days due to the
heavy rain which interrupted the unloading operations
- To determine the nature and extent of the wetting and rusting,
NSC called for a survey of the shipment by the Manila
Adjusters and Surveyors Company (MASCO).
o MASCO ventured the opinion that "rusting of the
tinplates was caused by contact with SEA WATER
sustained while still on board the vessel as a
consequence of the heavy weather and rough seas
encountered while en route to destination
o MASCO, through MIT Testing Laboratories, issued
Report No. 1770 (Exhibit "I") which in part, states, "The
analysis of bad order samples of packing materials . . .
shows that wetting was caused by contact with SEA
WATER".
Transportation Law | Page 30 of 54
- On September 6, 1974, on the basis of the aforesaid Report
No. 1770, plaintiff filed with the defendant its claim for
damages suffered due to the downgrading of the damaged
tinplates in the amount of P941,145.18. Then on October 3,
1974, plaintiff formally demanded payment of said claim but
defendant VSI refused and failed to pay.
- plaintiff claimed that it sustained losses in the aforesaid
amount of P941,145.18 as a result of the act, neglect and
default of the master and crew in the management of the
vessel as well as the want of due diligence on the part of the
defendant to make the vessel seaworthy and to make the
holds and all other parts of the vessel
- defendant denied liability for the alleged damage claiming that
the MV "VLASONS I" was seaworthy in all respects for the
carriage of plaintiff's cargo; that said vessel was not a
"common carrier" inasmuch as she was under voyage charter
contract with the plaintiff as charterer under the charter party
- Finally, defendant claimed that it had complied with all its
duties and obligations under the Voyage Charter Hire Contract
and had no responsibility whatsoever to plaintiff.
- The trial court rendered judgment in favor of the defendant,
VSI:
o The claim of the plaintiff that defendant violated the
contract of carriage is not supported by evidence. The
provisions of the Civil Code on common carriers
pursuant to which there exists a presumption of
negligence in case of loss or damage to the cargo are
not applicable.
o As to the damage to the tinplates which was allegedly
due to the wetting and rusting thereof, there is
unrebutted testimony of witness Vicente Angliongto
that tinplates "sweat" by themselves when packed
even without being in contract (sic) with water from
outside especially when the weather is bad or raining.
The trust caused by sweat or moisture on the tinplates
may be considered as a loss or damage but then,
defendant cannot be held liable for it pursuant to Article
1734 of the Civil Case which exempts the carrier from
responsibility for loss or damage arising from the
"character of the goods . . ." All the 1,769 skids of the
tinplates could not have been damaged by water as
claimed by plaintiff. It was shown as claimed by plaintiff
that the tinplates themselves were wrapped in kraft
paper lining and corrugated cardboards could not be
affected by water from outside.
- The CA affirmed the decision with modifications as to
damages, and deleted the attorneys fees.
ISSUE:
Whether or not the provisions of the Civil Code of the Philippines on
common carriers pursuant to which there exist[s] a presumption of
negligence against the common carrier in case of loss or damage to
the cargo are applicable to a private carrier.
HELD: SC affirms CAs decision, in favor of VSI.
- At the outset, it is essential to establish whether VSI
contracted with NSC as a common carrier or as a private
carrier. The resolution of this preliminary question determines
the law, standard of diligence and burden of proof applicable
to the present case.
- Article 1732 of the Civil Code defines a common carrier as
"persons, corporations, firms or associations engaged in the
business of carrying or transporting passengers or goods or
both, by land, water, or air, for compensation, offering their
services to the public." It has been held that the true test of a
common carrier is the carriage of passengers or goods,
provided it has space, for all who opt to avail themselves
of its transportation service for a fee.
- A carrier which does not qualify under the above test is
deemed a private carrier.
o "Generally, private carriage is undertaken by special
agreement and the carrier does not hold himself out to
carry goods for the general public. The most typical,
although not the only form of private carriage, is the
charter party, a maritime contract by which the
Transportation Law | Page 31 of 54
 charterer, a party other than the shipowner, obtains the
use and service of all or some part of a ship for a
period of time or a voyage or voyages."
- In the instant case, it is undisputed that VSI did not offer its
services to the general public. As found by the Regional Trial
Court, it carried passengers or goods only for those it chose
under a "special contract of charter party."
o As correctly concluded by the Court of Appeals, the MV
Vlasons I "was not a common but a private carrier.
o Consequently, the rights and obligations of VSI and
NSC, including their respective liability for damage to
the cargo, are determined primarily by stipulations in
their contract of private carriage or charter party.
o in Valenzuela Hardwood and Industrial Supply, Inc., vs.
Court of Appeals and Seven Brothers Shipping
Corporation
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.
Extent of Responsibiliy and Liability Over NSCs Cargo
- It is clear from the parties' Contract of Voyage Charter Hire,
dated July 17, 1974, that VSI "shall not be responsible for
losses except on proven willful negligence of the officers of the
vessel."
- hipowner shall not be liable for loss of or a damage to the
cargo arising or resulting from unseaworthiness, unless the
same was caused by its lack of due diligence to make the
vessel seaworthy or to ensure that the same was "properly
manned, equipped and supplied," and to "make the holds and
all other parts of the vessel in which cargo [was] carried, fit
and safe for its reception, carriage and preservation."
- [o]wners shall not be responsible for split, chafing and/or any
damage unless caused by the negligence or default of the
master or crew."
Burden of Proof
- NSC must prove that the damage to its shipment was caused
by VSI's willful negligence or failure to exercise due diligence
in making MV Vlasons I seaworthy and fit for holding, carrying
and safekeeping the cargo. Ineluctably, the burden of proof
was placed on NSC by the parties' agreement.
- This finds proof in the Code of Commercse, Art. 361
o Art. 361. Merchandise shall be transported at the
risk and venture of the shipper, if the contrary has not
been expressly stipulated.
- Because the MV Vlasons I was a private carrier, the
shipowner's obligations are governed by the foregoing
provisions of the Code of Commerce and not by the Civil Code
which, as a general rule, places the prima facie presumption of
negligence on a common carrier.
- In an action against a private carrier for loss of, or injury to,
cargo, the burden is on the plaintiff to prove that the carrier
was negligent or unseaworthy, and the fact that the goods
were lost or damaged while in the carrier's custody does not
put the burden of proof on the carrier.
- Since . . . a private carrier is not an insurer but undertakes only
to exercise due care in the protection of the goods committed
to its care, the burden of proving negligence or a breach of
that duty rests on plaintiff and proof of loss of, or damage to,
cargo while in the carrier's possession does not cast on it the
burden of proving proper care and diligence on its part or that
the loss occurred from an excepted cause in the contract or bill
of lading. since the carrier is in a better position to know the
cause of the loss and that it was not one involving its liability,
the law requires that it come forward with the information
available to it, and its failure to do so warrants an inference or
presumption of its liability.
Transportation Law | Page 32 of 54
- In the instant case, the Court of Appeals correctly found the
NSC "has not taken the correct position in relation to the
question of who has the burden of proof. CA argues that 'a
careful examination of the evidence will show that VSI
miserably failed to comply with any of these obligation's as if
defendant-appellee [VSI] had the burden of
- proof."

Transportation Law | Page 33 of 54


Case # 20
Planters Products Inc (PPI) v Soriamont Steamship Agencies
& Kyosei Kisen Kabushiki Kaisha and CA
FACTS
- Planters Products, Inc. (PPI), purchased from Mitsubishi
International Corporation (MITSUBISHI) of New York, U.S.A.,
Urea fertilizer which the latter shipped in bulk on 16 June 1974
aboard the cargo vessel M/V "Sun Plum" owned by private
respondent (KKKK) to Poro Point, San Fernando La Union,
PH.
- prior to its voyage, a time charter-party on the vessel M/V "Sun
Plum" pursuant to the Uniform General Charter 2 was entered
into between Mitsubishi as shipper/charterer and KKKK as
shipowner, in Tokyo, Japan.
- Before loading the fertilizer aboard the vessel, four (4) of her
holds 4 were all presumably inspected by the charterer's
representative and found fit to take a load of urea in bulk
- After the Urea fertilizer was loaded in bulk by stevedores hired
by and under the supervision of the shipper, the steel hatches
were closed with heavy iron lids, covered with three (3) layers
of tarpaulin, then tied with steel bonds. The hatches remained
closed and tightly sealed throughout the entire voyage.
- Upon arrival of the vessel at her port of call on 3 July 1974, the
steel pontoon hatches were opened with the use of the
vessel's boom. Petitioner unloaded the cargo from the holds
into its steelbodied dump trucks
- It took eleven (11) days for PPI to unload the cargo, from 5
July to 18 July 1974 (except July 12th, 14th and 18th). A
private marine and cargo surveyor, Cargo Superintendents
Company Inc. (CSCI), was hired by PPI to determine the
"outturn" of the cargo shipped, by taking draft readings of the
vessel prior to and after discharge.
o The report revealed a shortage in the cargo of 106.726
M/T and that a portion of the Urea fertilizer
approximating 18 M/T was contaminated with dirt. The
same results were contained in a Certificate of
Shortage/Damaged Cargo dated 18 July 1974
prepared by PPI which showed that the cargo delivered
was indeed short of 94.839 M/T and about 23 M/T
were rendered unfit for commerce, having been
polluted with sand, rust and dirt.
- PPI filed with the CFI of 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.
- CFI rendered judgment in favor of PPI
- CA reversed CFIs decision in favor of KKKK
o appellate court ruled that the cargo vessel M/V "Sun
Plum" owned by private respondent KKKK was a
private carrier and not a common carrier by reason of
the time charterer-party. Accordingly, the Civil Code
provisions on common carriers which set forth a
presumption of negligence do not find application in the
case at bar.
o it was incumbent upon the plaintiff-appellee to adduce
sufficient evidence to prove the negligence of the
defendant carrier as alleged in its complaint. It is an old
and well settled rule that if the plaintiff, upon whom
rests the burden of proving his cause of action, fails to
show in a satisfactory manner the facts upon which he
bases his claim, the defendant is under no obligation to
prove his exception or defense
ISSUE
whether a common carrier becomes a private carrier by reason of a
charter-party;
in the negative, whether the shipowner in the instant case was able to
prove that he had exercised that degree of diligence required of him
under the law.
HELD:
Transportation Law | Page 34 of 54
First Issue: No, it does not become a common carrier
Second Issue: Yes, due diligence was exercised
- A "charter-party" is defined as a contract by which an entire
ship, or some principal part thereof, is let by the owner to
another person for a specified time or use; 20 a contract of
affreightment by which the owner of a ship or other vessel lets
the whole or a 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;
- Charter parties are of two types: (a) contract of affreightment
which involves the use of shipping space on vessels leased by
the owner in part or as a whole, to carry goods for others; and,
(b) charter by demise or bareboat charter, by the terms of
which the whole vessel is let to the charterer with a transfer to
him of its entire command and possession and consequent
control over its navigation, including the master and the crew,
who are his servants.
- the charter-party provides for the hire of vessel only, either for
a determinate period of time or for a single or consecutive
voyage, the shipowner to supply the ship's stores, pay for the
wages of the master and the crew, and defray the expenses
for the maintenance of the ship.
- Upon the other hand, the term "common or public carrier" is
defined in Art. 1732 of the Civil Code. The definition extends
to carriers either by land, air or water which hold themselves
out as ready to engage in carrying goods or transporting
passengers or both for compensation as a public employment
and not as a casual occupation.
- Article 1733 of the New Civil Code mandates that common
carriers, by reason of the nature of their business, should
observe extraordinary diligence in the vigilance over the goods
they carry
First Issue:
- It is not disputed that respondent carrier, in the ordinary course
of business, operates as a common carrier, transporting goods
indiscriminately for all persons. When petitioner chartered the
vessel M/V "Sun Plum", the ship captain, its officers and
compliment were under the employ of the shipowner and
therefore continued to be under its direct supervision and
control.
o Hardly then can we charge the charterer, a stranger to
the crew and to the ship, with the duty of caring for his
cargo when the charterer did not have any control of
the means in doing so. This is evident in the present
case considering that the steering of the ship, the
manning of the decks, the determination of the course
of the voyage and other technical incidents of maritime
navigation were all consigned to the officers and crew
who were screened, chosen and hired by the
shipowner.
- It is therefore imperative that a public carrier shall remain as
such, notwithstanding the charter of the whole or portion of a
vessel by one or more persons, provided the charter is limited
to the ship only, as in the case of a time-charter or voyage-
charter.
o It is only when the charter includes both the vessel and
its crew, as in a bareboat or demise that a common
carrier becomes private, at least insofar as the
particular voyage covering the charter-party is
concerned.
Second Issue:
- To our mind, respondent carrier has sufficiently overcome, by
clear and convincing proof, the prima facie presumption of
negligence.
- The master of the carrying vessel, Captain Lee Tae Bo, in his
deposition taken on 19 April 1977 before the Philippine Consul
and Legal Attache in the Philippine Embassy in Tokyo, Japan,
testified that before the fertilizer was loaded, the four (4)
hatches of the vessel were cleaned, dried and fumigated.
- It was also shown during the trial that the hull of the vessel
was in good condition, foreclosing the possibility of spillage of
the cargo into the sea or seepage of water inside the hull of
the vessel.
o Article 1734 of the New Civil Code provides that
common carriers are not responsible for the loss,
Transportation Law | Page 35 of 54
 destruction or deterioration of the goods if caused by
the charterer of the goods or defects in the packaging
or in the containers. The Code of Commerce also
provides that all losses and deterioration which the
goods may suffer during the transportation by reason
of fortuitous event, force majeure, or the 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.
o The carrier, nonetheless, shall be liable for the loss and
damage resulting from the preceding causes if it is
proved, as against him, that they arose through his
negligence or by reason of his having failed to take the
precautions which usage has established among
careful persons.
- The dissipation of quantities of fertilizer, or its daterioration in
value, is caused either by an extremely high temperature in its
place of storage, or when it comes in contact with water.
o When Urea is drenched in water, either fresh or saline,
some of its particles dissolve. But the salvaged portion
which is in liquid form still remains potent and usable
although no longer saleable in its original market value.
- The evidence of respondent carrier also showed that it was
highly improbable for sea water to seep into the vessel's holds
during the voyage since the hull of the vessel was in good
condition and her hatches were tightly closed and firmly
sealed, making the M/V "Sun Plum" in all respects seaworthy
to carry the cargo she was chartered for.
- The Court notes that it was in the month of July when the
vessel arrived port and unloaded her cargo. It rained from time
to time at the harbor area while the cargo was being
discharged according to the supply officer of PPI, who also
testified that it was windy at the waterfront and along the
shoreline where the dump trucks passed enroute to the
consignee's warehouse.
- Petition dismissed.

Transportation Law | Page 36 of 54

Case # 21
GOVERNMENT REGULATION OF COMMON CARRIERS
BUSINESS
KMU Labor Center v. Garcia, Jr. (G.R. No. 115381)
FACTS:
Then DOTC Sec. Oscar M. Orbos, issued Memorandum
Circular to then LTFRB Chairman, Remedios A.S. 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 one (1) year.
Private respondent Provincial Bus Operators Association of
the Philippines, Inc. (PBOAP) filed an application for fare rate
increase. An across-the-board increase of P0.085 per
kilometer for all types of provincial buses with a minimum-
maximum fare range of fifteen (15%) percent over and below
the proposed basic per kilometer fare rate, with the said
minimum-maximum fare range applying only to ordinary, first
class and premium class buses and P0.50 minimum per
kilometer fare for aircon buses, was sought. Due to the drop in
the price of diesel, PBOAP later reduced its applied proposed
fare to an across-the-board increase of P0.065 centavos per
kilometer for ordinary buses.
Public respondent LTFRB rendered a decision granting the
fare rate increase.
Then DOTC Sec. Pete Nicomedes Prado issued a Department
Order defining the policy framework on the regulation of
transport services which provided that Passenger fares shall
also be deregulated, except for the lowest class of passenger
service (normally third class passenger transport) for which the
government will fix indicative or reference fares. Operators of
particular services may fix their own fares within a range 15%
above and below the indicative or reference rate.
The LTFRB issued a Memorandum Circular promulgating the
guidelines for the implementation of the DOTC Department
Order which provided that:
o The issuance of a Certificate of Public Convenience is
determined by public need. The presumption of public
need for a service shall be deemed in favor of the
applicant, while burden of proving that there is no need
for the proposed service shall be the oppositor'(s).
o The existing authorized fare range system of plus or
minus 15 per cent for provincial buses and jeepneys
shall be widened to 20% and -25% limit in 1994 with
the authorized fare to be replaced by an indicative or
reference rate as the basis for the expanded fare
range.
PBOAP, availing itself of the deregulation policy of 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.
ISSUE: Whether or not it is within DOTC and LTFRB's authority to set
a fare range scheme and to establish a presumption of public need in
applications for certificates of public convenience
HELD: No.
On the fare range scheme
Given the task of determining sensitive and delicate matters as route-
fixing and rate-making for the transport sector, the responsible
regulatory body is entrusted with the power of subordinate legislation.
Transportation Law | Page 37 of 54
With this authority, an administrative body and in this case, the
LTFRB, may implement broad policies laid down in a statute by "filling
in" the details which the Legislature may neither have time or
competence to provide. However, nowhere under the aforesaid
provisions of law are the regulatory bodies, the PSC and LTFRB alike,
authorized to delegate that power to a common carrier, a transport
operator, or other public service.

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. 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.

On the presumption of public need

The LTFRB Memorandum Circular is inconsistent with the Public

Service Act which requires that before a CPC will be issued, the
applicant must prove by proper notice and hearing that the operation
of the public service proposed will promote public interest in a proper
and suitable manner. On the contrary, the policy guideline states that
the presumption of public need for a public service shall be deemed in
favor of the applicant. In case of conflict between a statute and an
administrative order, the former must prevail. By its terms, public
convenience or necessity generally means something fitting or suited
to the public need.

Verily, the power of a regulatory body to issue a CPC is founded on

the condition that after full-dress hearing and investigation, it shall
find, as a fact that the proposed operation is for the convenience of
the public. Basic convenience is the primary consideration for which a
CPC is issued, and that fact alone must be consistently borne in mind.

Transportation Law | Page 38 of 54

Case # 22
Tatad v. Garcia, Jr. (G.R. No. 114222)
FACTS:
DOTC planned to construct a light railway transit line along
EDSA, a major thoroughfare in Metropolitan Manila, which
shall traverse the cities of Pasay, Quezon, Mandaluyong and
Makati. The plan was referred to as EDSA LRT III.
Pres. Corazon Aquino signed the Build-Operate-Transfer
(BOT) Law which provided for two schemes for the financing,
construction and operation of government projects through
private initiative and investment: Build-Operate-Transfer (BOT)
or Build-Transfer (BT).
In accordance with the BOT law and the EDSA LRT III, the
DOTC issued Department Orders which created the
Prequalification Bids and Awards Committee (PBAC) and the
Technical Committee.
Of the five applicants, only the EDSA LRT Corp. Ltd., a private
corporation organized under the laws of Hong Kong, met the
requirements of the prequalification bids set by the PBAC.
Executive Secretary Franklin Drilon informed DOTC Secretary
Prado that the President could not grant the requested
approval because the DOTC failed to conduct actual public
bidding in compliance with Section 5 of the BOT Law. The
agreement was then re-negotiated.
Under the agreement, upon full or partial completion and
viability thereof, private respondent shall deliver the use and
possession of the completed portion to DOTC which shall
operate the same. DOTC shall pay private respondent rentals
on a monthly basis through an Irrevocable Letter of Credit.
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.
Petitioners opposed the implementation of the agreement on
the ground that 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 private respondent.
ISSUE: Whether or not a foreign corporation can own EDSA III, a
public utility
HELD: Yes.
What private respondent 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.
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. Ownership is defined as a relation in law by virtue of which
a thing pertaining to one person is completely subjected to his will in
everything not prohibited by law or the concurrence with the rights of
another. The operation of a rail system as a public utility includes the
transportation of passengers from one point to another point, their
loading and unloading at designated places and the movement of the
trains at pre-scheduled times.
The right to operate a public utility may exist independently and
separately from the ownership of the facilities thereof. While private
respondent is the owner of the facilities necessary to operate the
EDSA LRT III, it admits that it is not enfranchised to operate a public
utility.
Transportation Law | Page 39 of 54
Since DOTC shall operate the EDSA LRT III, it shall assume all the
obligations and liabilities of a common carrier. Hence, EDSA LRT III
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.

Transportation Law | Page 40 of 54


Case # 23
SAMAR MINING COMPANY, INC. vs. NORDEUTSCHER LLOYD ,
C.F. SHARP & COMPANY, INC.
(G.R. No. L-28673 October 23, 1984)
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 sent to Nordeutscher Lloyd
failed to elicit the desired response, Samar Mining filed a
formal claim for P1,691.93, the equivalent of $424.00 at the
prevailing rate of exchange at that time, against the former, but
neither paid.
- Samar Mining filed a suit to enforce payment. Nordeutscher
Lloyd and CF Sharp & Co. brought in AMCYL as third party
defendant.
- The trial court rendered judgment in favor of Samar Mining,
ordering Nordeutscher Lloyd, et. al. to pay the amount of
P1,691.93 plus attorneys fees and costs.
- However, the Court stated that Nordeutscher Lloyd, et. al. may
recoup whatever they may pay Samar Mining by enforcing the
judgment against third party defendant AMCYL, which had
earlier been declared in default.
- Nordeutscher Lloyd and C.F. Sharp & Co. appealed from said
decision.
ISSUE:
Whether or not a stipulation in the bill of lading exempting the carrier
from liability for loss of goods not in its actual custody (i.e., after their
discharge from the ship) is valid.
HELD:
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 3 of Bill of Lading No. 18, to wit: the
carrier shall not be liable in any capacity whatsoever for any delay,
loss or damage occurring before the goods enter ship's tackle to be
loaded or after the goods leave ship's tackle to be discharged,
transshipped or forwarded. Further, in Section 11 of the same bill, it
was provided that this carrier, in making arrangements for any
transshipping or forwarding vessels or means of transportation not
operated by this carrier shall be considered solely the forwarding
agent of the shipper and without any other responsibility whatsoever
even though the freight for the whole transport has been collected by
him Pending or during forwarding or transshipping the carrier may
store the goods ashore or afloat solely as agent of the shipper
We find merits in Nordeutschers contention that they are not liable for
the loss of the subject goods by claiming that they have discharged
the same in full and good 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.
A careful perusal of the provisions of the New Civil Code on common
carriers directs our attention to Article 1736, which reads: The
extraordinary responsibility of the common carrier lasts from the time
the goods are unconditionally placed in the possession of, and
Transportation Law | Page 41 of 54
received by the carrier for transportation until the same are delivered,
actually or constructively, by the carrier to the consignee, or to the
person who has a right to receive them, without prejudice to the
provisions of article 1738.

Art. 1738 finds no applicability to the instant case. However, 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. There is
actual delivery in contracts for the transport of goods when
possession has been turned over to the consignee or to his duly
authorized agent and a reasonable time is given him to remove the
goods. In the present case, there was actual delivery to the consignee
through its duly authorized agent, the carrier.

Lastly, two undertakings are embodied in the bill of lading: the

transport of goods from Germany to Manila, and the transshipment of
the same goods from Manila to Davao, with Samar Mining acting as
the agent of the consignee. The moment the subject goods are
discharged in Manila, Samar Minings 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 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.

But even as agent of the consignee, the appellant cannot be made

answerable for the value of the missing goods. It is true that the
transshipment of the goods, which was the object of the agency, was
not fully performed. However, appellant had commenced said
performance, the completion of which was aborted by circumstances
beyond its control. An agent who carries out the orders and
instructions of the principal without being guilty of negligence, deceit
or fraud, cannot be held responsible for the failure of the principal to
accomplish the object of the agency.

Transportation Law | Page 42 of 54

Case # 24
EASTERN SHIPPING LINES, INC. vs. INTERMEDIATE
APPELLATE COURT
(G.R. No. L-69044 May 29, 1987)
FACTS:
- Sometime in or prior to June, 1977, the M/S ASIATICA, a
vessel operated by petitioner Eastern Shipping Lines, Inc.,
(referred to hereinafter as Petitioner Carrier) loaded at Kobe,
Japan for transportation to Manila, 5,000 pieces of calorized
lance pipes in 28 packages valued at P256,039.00 consigned
to Philippine Blooming Mills Co., Inc., and 7 cases of spare
parts valued at P92,361.75, 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.
- 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 and
were thus subrogated unto the rights of the latter as the
insured.
- On May 11, 1978, 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.
- 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.
- On August 31, 1979, the Trial Court rendered judgment in
favor of Development Insurance. Petitioner Carrier took an
appeal to the then Court of Appeals which, on August 14,
1984, affirmed.
- Petitioner Carrier is now before us on a Petition for Review on
Certiorari.
ISSUE:
(1) Which law should govern the Civil Code provisions on
Common carriers or the Carriage of Goods by Sea Act?
(2) Who has the burden of proof to show negligence of the
carrier?
RULING:
On the Law Applicable
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.
On the Burden of Proof
Under the Civil Code, particularly Article 1733, common carriers, from
the nature of their business and for reasons of public policy, are
bound to observe extraordinary diligence in the vigilance over 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;
xxx xxx xxx
Petitioner Carrier claims that the loss of the vessel by fire exempts it
from liability under the phrase "natural disaster or calamity. "
Transportation Law | Page 43 of 54
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. 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, which is abovementioned, Article 1735 of the Civil Code
provides that all cases than those mentioned 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, 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 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.

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.

Transportation Law | Page 44 of 54


Case # 25
National Development Company vs CA
FACTS
-National Development Company (NDC) and Maritime Company of
the Philippines (MCP) entered into a memorandum agreement. NDC
appointed MCP as its agent in managing and operating the Dona
Nati vessel
-E. Philipp Corporation loaded on board the vessel 1200 bales of
American raw cotton consigned to the order of Manila Banking
Corporation, Manila and the Peoples 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 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
- On its way to Manila from San Francisco, the vessel figured in a
collision with a Japanese vessel on Japanese waters. As a result of
which, 550 bales that were loaded in the Dona Nati vessel were
destroyed as well as cargo of the Lyokuto Boekui, Kaisa, Ltd.
-The damages and lost cargoes were all covered by the companys
insurer Development Insurance and Surety Corp.
- Development Insurance & Surety Corp, who paid for the insurance
filed an action for recovery of money against NDC and MCP
ISSUE: W/N the law of country or port of destination shall apply. (In
this case, Manila)
HELD: In jurisprudence the Supreme Court held under similar
circumstances 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. 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
especial laws (Article 1766, Civil Code). Hence, the carriage of Goods
by Sea Act, a special law, is merely suppletory to the provisions of the
Civil Code. The goods in question were being transported from San
Francisco, California and Tokyo, Japan to the Philippines and that
they were lost or damaged due to a collision which was found to have
been caused by negligence or fault of both captains of the colliding
vessels. Under the above ruling, it is evident that 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 courts 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. 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 in 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.There is, therefore, no room for
NDCs interpretation that the Code of Commerce should apply only to
domestic trade and not to foreign trade.
Transportation Law | Page 45 of 54
 and between him and Espiritu which exemptshim from liability to third
Case # 26 persons, cannot be sustained because it appears that the lease
contract had not been approved by the Public Service Commission.
GELISAN VS ALDAY Since the lease is without approval Gelisan still continued to be the
operator in contemplation of law and thus should be jointly and
FACTS: severally liable with the drive for damages incurred. Gelisan, on his
part, may claim against Espiritu after settling their liabilities to Alday.
-Robert Espiritu entered into a contract with Gelisan for the use of
Gelisans freight truck for the purpose of hauling rice, sugar, rice and
fertilizer. They had an agreement that the number total number of
sacks to be loaded should not exceed 200 sacks. Espiritu should also
bear all losses and damages that would arise from such carriage. The
truck was then used by Espiritu.

- Benito Alday is a trucking operator involved with delivery of fertilizers

made by Altas Fertilizers Corp. Espiritu offered the use of his truck to
Alday and Alday agreed. Alday then delivered all the fertilizers to
Espiritu. Espiritu failed to deliver such fertilizers to the bodega of Altas
Fertilizers Corporation as what was originally agreed upon.

-Alday then saw Espiritus truck and notified the MPD who
consequently impounded Espiritus truck

-Alday was also compelled by Altas Fertilizers Corp to pay for the loss
of the fertilizers. Thus, he filed for a complaint against Gelisan and
Espiritu

-Gelisan, on his part claimed that he had no part in the contractual

relations of Alday and Espiritu thus should be exempted from liability
as he had a valid contract lease with Espiritu.

ISSUE: W/N Gelisan as the registered owner of the freight truck is still
lliable

HELD: As the registered owner of a public service vehicle, Gelisan

should be responsible for all damages that may arise as
consequences of the operation of their service. The claim of the
petitioner that he is not liable in view of the lease contract executed by

Transportation Law | Page 46 of 54


Case # 27
G.R. No. 70876 July 19, 1990
BENEDICTO vs. IAC
FELICIANO, J.:
Facts:
Private respondent Greenhills, a lumber manufacturing firm with
business address at Dagupan City, operates sawmill in Maddela,
Quirino.
Sometime in May 1980, private respondent bound itself to sell and
deliver to Blue Star, a company with business operations in
Valenzuela, Bulacan 100,000 board feet of sawn lumber with the
understanding that an initial delivery would be made on 15 May
1980.
To effect its first delivery, private respondent's resident manager in
Maddela, Dominador Cruz, contracted Virgilio Licuden, the driver of
a cargo truck bearing Plate No. 225 GA TH to transport its sawn
lumber to the consignee Blue Star in Valenzuela, Bulacan. This
cargo truck was registered in the name of petitioner Ma. Luisa
Benedicto, the proprietor of Macoven Trucking, a business
enterprise engaged in hauling freight, with main office in B.F.
Homes, Paraaque.
On 16 May 1980, the Manager of Blue Star called up by long
distance telephone Greenhills' president, Henry Lee Chuy, informing
him that the sawn lumber on board the subject cargo truck had not
yet arrived in Valenzuela, Bulacan. The latter in turn informed
Greenhills' resident manager in its Maddela saw-mill of what had
happened.
In a letter 5 dated 18 May 1980, Blue Star's administrative and
personnel manager, Manuel R. Bautista, formally informed
Greenhills' president and general manager that Blue Star still had
not received the sawn lumber which was supposed to arrive on 15
May 1980 and because of this delay, "they were constrained to look
for other suppliers."
On 25 June 1980, after confirming the above with Blue Star and
after trying vainly to persuade it to continue with their contract,
private respondent Greenhill's filed Criminal Case No. 668 against
driver Licuden for estafa. Greenhills also filed against petitioner
Benedicto Civil Case No. D-5206 for recovery of the value of the lost
sawn lumber plus damages before the RTC of Dagupan City.
In her answer, petitioner Benedicto denied liability alleging that she
was a complete stranger to the contract of carriage, the subject
truck having been earlier sold by her to Benjamin Tee, on 28
February 1980 as evidenced by a deed of sale. She claimed that the
truck had remained registered in her name notwithstanding its
earlier sale to Tee because the latter had paid her only P50,000.00
out of the total agreed price of P68,000.00 However, she averred
that Tee had been operating the said truck in Central Luzon from
that date (28 February 1980) onwards, and that, therefore, Licuden
was Tee's employee and not hers.
Issue: Whether or not the petitioner, being the registered owner of the
carrier, should be held liable for the value of the undelivered or lost
sawn lumber.
Held: 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. The registered owner is not
allowed to deny liability by proving the identity of the alleged
transferee. Thus, contrary to petitioner's claim, private respondent is
not required to go beyond the vehicle's certificate of registration to
ascertain the owner of the carrier.
Transportation Law | Page 47 of 54
Case # 28
Since the employer's liability is primary, direct and solidary, its only
[G.R. No. 120553. June 17, 1997] recourse if the judgment for damages is satisfied by it is to recover
PHILTRANCO SERVICE ENTERPRISES vs. COURT OF APPEALS what it has paid from its employee who committed the fault or
DAVIDE, JR., J.: negligence which gave rise to the action based on quasi-delict. Article
2181 of the Civil Code provides:
Facts: ART. 2181. Whoever pays for the damage caused by his dependents
or employees may recover from the latter what he has paid or
In the early morning of March 24, 1990, about 6:00 o'clock, the delivered in satisfaction of the claim.
victim Ramon A. Acuesta was riding in his easy rider bicycle, along
the Gomez Street of Calbayog City. The Gomez Street is along the
side of Nijaga Park.
On the Magsaysay Blvd., also in Calbayog City, defendant
Philtranco, Bus No. 4025 with plate No. EVA-725 driven by
defendant Rogasiones Manilhig y Dolira was being pushed by some
persons in order to start its engine. The Magsaysay Blvd. runs
perpendicular to Gomez St. and the said Philtranco bus 4025 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. As the engine of the Philtranco bus started
abruptly and suddenly, its running motion was also enhanced by the
said functioning engine, thereby the subject bus bumped on the
victim Ramon A. Acuesta who, as a result thereof fell and,
thereafter, was run over by the said bus.

Issue: Whether or not Philtranco can be held liable.

Held: Yes.

We 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. As to solidarity, Article 2194
expressly provides:
ART. 2194. The responsibility of two or more persons who are liable
for a quasi-delict is solidary.
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Case # 29
Equitable Leasing Corporation vs. Lucita Suyom, Marissa Enano,
Myrna Tamayo and Felix Oledan
GR No. 143360, September 05, 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.
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.

ISSUE: Whether Equitable Leasing is liable for damages

RULING:
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

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Case # 30
Santos vs. Sibug Case Digest
Santos vs. Sibug
(104 SCRA 520)

Facts: Petitioner Adolfo Santos was the owner of a passenger jeep,

but he had no certificate of public conveyance for the operation of the
vehicle as a public passenger jeep. Santos then transferred his jeep
to the name of Vidad so that it could be operated under the latters
certificate of public convenience. In other words, Santos became what
is known as kabit operator. Vidad executed a re-transfer document
presumably to be registered it and when it was decided that the
passenger jeep of Santos was to be withdrawn from kabit
arrangement.

On the accident date, Abraham Sibug was bumped by the said

passenger jeep.

Issue: Whether the Vidad is liable being the registered owner of the
jeepney?

Held: As the jeep in question was registered in the name of Vidad, the
government or any person affected by the representation that said
vehicle is registered under the name of the particular person had the
right to rely on his declaration of his ownership and registration. And
the registered owner or any other person for that matter cannot be
permitted to repudiate said declaration with the objective of proving
that the said registered vehicle is owned by another person and not by
the registered owner.

Santos, as the kabit, should not be allowed to defeat the levy in his
vehicle and to avoid his responsibility as a kabit owner for he had led
the public to believe that the vehicle belongs to Vidad. This is one way
of curbing the pernicious kabit system that facilitates the commissions
of fraud against the traveling public.

Transportation Law | Page 50 of 54


Case # 31
LITA ENTERPRISES, INC., vs.SECOND CIVIL CASES DIVISION,
INTERMEDIATE APPELLATE COURT, NICASIO M. OCAMPO and
FRANCISCA P. GARCIA,
1. Spouses Nicasio M. Ocampo and Francisca Garcia, purchased in
installment from the Delta Motor Sales Corporation five (5) Toyota
Corona Standard cars to be used as taxicabs.
2. Since they had no franchise to operate taxicabs, they contracted
with petitioner Lita Enterprises, Inc.,for the use of the latter's
certificate of public convenience in consideration payment and rent of
P200.00 per taxicab unit.
3. To effectuate the agreement, the aforesaid cars were registered to
Lita Enterprises, Inc, Possession, however, remained with tile
spouses Ocampo who operated and maintained the same
4. About a year later, one of said taxicabs driven by their employee,
Emeterio Martin, collided with a motorcycle whose driver, one
Florante Galvez, died from the head injuries sustained therefrom. A
civil case for damages was instituted by Rosita Sebastian Vda. de
Galvez, heir of the victim, against Lita Enterprises, Inc., as registered
owner of the taxicab in the latter case
5. Thereafter, in March 1973, respondent Nicasio Ocampo decided to
register his taxicabs in his name. He requested the manager of
petitioner Lita Enterprises, Inc. to turn over the registration papers to
him, but the latter allegedly refused. Hence, he and his wife filed a
complaint against Lita Enterprises, Inc., for reconveyance of motor
vehicles
6. The Court of First Instance of Manila rendered a decision,
Defendant Lita Enterprises, Inc., is ordered to transfer the registration
certificate of the three Toyota cars
7. Petitioner Lita Enterprises, Inc. moved for reconsideration of the
decision, but the same was denied by the court . Petitioner prayed to
reverse the decisions and to make private respondents liable to them
for the amount they paid or are liable to give the victim of the accident.
ISSUE: Whether or not the the courts erred in giving the parties relief,
not recognizing that the kabit system is against public policy?
Held: Unquestionably, the parties herein operated under an
arrangement, commonly known as the "kabit system", whereby a
person who has been granted a certificate of convenience allows
another person who owns motors vehicles to operate under such
franchise for a fee. A certificate of public convenience is a special
privilege conferred by the government . Abuse of this privilege by the
grantees thereof cannot be countenanced. The "kabit system" has
been Identified as one of the root causes of the prevalence of graft
and corruption in the government transportation offices.
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.
WHEREFORE, decisions rendered therein are hereby annulled and
set aside.
Transportation Law | Page 51 of 54

Case # 32
TEJA MARKETING AND/OR ANGEL JAUCIA
v.
HONORABLE INTERMEDIATE APPELLATE COURT (AND PEDRO
N. NALE)
FACTS:
The defendant, Pedro N. Nale, bought from the plaintiff, Teja
Marketing, a motorcycle with complete accessories and a
sidecar in the total consideration of P8,000.00;
The defendant gave a downpayment of P1,700.00 with a
promise that he would pay plaintiff the balance within 60 days;
The defendant, however, failed to comply with his promise
despite plaintiffs repeated demands ;
A chattel mortgage was constituted as a security for the
payment of the balance of the purchase price;
The records of the Land Transportation Communication (LTC)
show that the motorcycle sold to the defendant was first
mortgaged to the Teja Marketing by Angel Jaucian though
the Teja Marketing and Angel Jaucian are one and the same,
because it was made to appear that way only as the defendant
had no franchise of his own and he attached the unit to the
plaintiff's MCH Line;
The agreement also of the parties here was for the plaintiff to
undertake the yearly registration of the motorcycle with the
Land Transportation Commission. Pursuant to this agreement
the defendant on February 22, 1976 gave the plaintiff P90.00,
the P8.00 would be for the mortgage fee and the P82.00 for
the registration fee of the motorcycle.
The plaintiff, however failed to register the motorcycle on the
ground that the defendant failed to comply with some
requirements such as the payment of the insurance premiums
and the bringing of the motorcycle to the LTC for stenciling,
the plaintiff saying that the defendant was hiding the
motorcycle from him;
Lastly, the plaintiff explained also that though the ownership of
the motorcycle was already transferred to the defendant the
vehicle was still mortgaged with the consent of the defendant
to the Rural Bank of Camaligan for the reason that all
motorcycle purchased from the plaintiff on credit was
rediscounted with the bank;
Because of this failure of the plaintiff to comply with his
obligation to register the motorcycle the defendant suffered
damages when he failed to claim any insurance indemnity;
Petitioner Teja Marketing and/or Angel Jaucian filed an action
for "Sum of Money with Damages" against private respondent
Pedro N. Nale
**City court: rendered judgment in favor of petitioner**
Private respondent filed a petition for review with the
Intermediate Appellate Court
*IAC: set aside the decision under review on the basis
of park delicto
Hence, this petition for review.
ISSUE:
WON respondent court erred in applying the doctrine of "pari delicto."
HELD:
The Supreme Court through Justice Paras ASSAILED the decision of
the Intermediate Appellate Court (now the Court of Appeals).
RATIO:
Unquestionably, the parties herein operated under an
arrangement, commonly known as the "kabit system"
whereby a person who has been granted a certificate of public
convenience allows another person who owns motor 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
Transportation Law | Page 52 of 54
public policy and, therefore, void and in existent 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 both where it finds then. Upon this premise it would
be error to accord the parties relief from their predicament.
Article 1412 of the Civil Code denies them such aid.

Transportation Law | Page 53 of 54

 Ruling: YES. There is an employer-employee relationship under a
boundary system arrangement.
Case # 33
a. The fact that the driver does not receive a fixed wage but gets
URBANO MAGBOO and EMILIA MAGBOO vs. DELFIN only the excess of the receipt of fares collected by him over
BERNARDO the amount he pays to the jeep-owner and that the gasoline
April 30, 1963 consumed by the jeep is for the account of the driver are not
sufficient to withdraw the relationship between them from that
Facts: of employer and employee.
1. Spouses Urbano Magboo and Emilia C. Magboo are the
parents of Cesar Magboo, a child of 8 years old, who was b. To exempt from liability the owner of a public vehicle who
killed a motor vehicle accident. The vehicle is a passenger operates it under the "boundary system" on the ground that he
jeepney owned by Delfin Bernardo, the defendant. At the time is a mere lessor would be not only to abet flagrant violations of
of the accident, said jeepney was driven by Conrado Roque. the Public Service law but also to place the riding public at the
mercy of reckless and irresponsible drivers
2. The contract of Roque and Bernardo is that of the boundary
system where they both agreed that Roque will pay the sum
of P8.00 to defendant for letting him drive the jeepney; and
that whatever earnings Roque could make out of the use of
the jeepney would belong to Roque.

3. Conrado Roque was prosecuted for homicide thru reckless

imprudence before the CFI of Manila. Upon arraignment, he
pleaded guilty and was sentenced arresto mayor with
indemnification with subsidiary imprisonment in case of
insolvency.

4. Roque was insolvent so the trial court ordered the defendant

to pay plaintiffs P3,000. Bernardo assails decision and
contends that there is no employer-employee relationship
under a boundary system.

Issue: Whether or not an employer-employee relationship exists

between a jeepney-owner and a driver under a "boundary system"
arrangement?

Transportation Law | Page 54 of 54